<PAGE>
TABLE OF CONTENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Policyholders.............................. 1
Performance Results.................................. 3
Portfolio Management Review.......................... 5
Portfolio of Investments
Asset Allocation Fund.............................. 20
Domestic Income Fund............................... 28
Emerging Growth Fund............................... 33
Enterprise Fund.................................... 42
Global Equity Fund................................. 49
Government Fund.................................... 58
Money Market Fund.................................. 62
Real Estate Fund................................... 66
Statement of Assets and Liabilities
Asset Allocation Fund.............................. 25
Domestic Income Fund............................... 30
Emerging Growth Fund............................... 39
Enterprise Fund.................................... 46
Global Equity Fund................................. 55
Government Fund.................................... 59
Money Market Fund.................................. 63
Real Estate Fund................................... 68
Statements of Operations and Changes in Net Assets
Asset Allocation Fund.............................. 26
Domestic Income Fund............................... 31
Emerging Growth Fund............................... 40
Enterprise Fund.................................... 47
Global Equity Fund................................. 56
Government Fund.................................... 60
Money Market Fund.................................. 64
Real Estate Fund................................... 69
Financial Highlights
Asset Allocation Fund.............................. 27
Domestic Income Fund............................... 32
Emerging Growth Fund............................... 41
Enterprise Fund.................................... 48
Global Equity Fund................................. 57
Government Fund.................................... 61
Money Market Fund.................................. 65
Real Estate Fund................................... 70
Notes to Financial Statements........................ 71
</TABLE>
LIT SAR 8/96
<PAGE>
LETTER TO POLICYHOLDERS
[PHOTO OF DENNIS J. MCDONNELL AND DON G. POWELL]
August 6, 1996
Dear Policyholder,
As you may be aware, an agreement was reached in late June for VK/AC Holdings,
Inc., the parent company of Van Kampen American Capital, Inc., to be acquired
by the Morgan Stanley Group Inc. While this announcement may appear common-
place in an ever-changing financial industry, we believe it represents an ex-
citing opportunity for shareholders of our investment products.
With Morgan Stanley's global leadership in investment banking and asset
management and Van Kampen American Capital's reputation for outstanding long-
term performance and superior investor services, together we will offer a
broader range of investment opportunities and expertise.
The new ownership will not affect our commitment to pursuing excellence in all
aspects of our business. And, we expect very little change in the way your mu-
tual fund account is maintained and serviced.
A proxy will be mailed to you shortly explaining the acquisition and asking
for your vote of approval. Please read it carefully and return your response
for inclusion in the shareholder vote. We value our relationship with you and
look forward to communicating more details of this transaction, which is an-
ticipated to be completed in November.
ECONOMIC REVIEW
The economy demonstrated an acceleration in growth during the six-month re-
porting period. After a nominal 0.3 percent growth rate in the last quarter of
1995, GDP (the nation's gross domestic product adjusted for inflation) rose by
2.0 percent in this year's first quarter. And, as anticipated, the economy
grew 4.2 percent in the second quarter, partly reflecting a recovery from the
effects of labor strikes earlier in the year and extreme weather conditions
across the country. Upward momentum has been assisted by consumer spending, as
indicated by a 5.6 percent rise in retail sales in the first five months of
this year versus the comparable 1995 period.
In the manufacturing sector, economic reports, such as the National Associa-
tion of Purchasing Managers Index, suggested a continued rebound in production
from last winter's lower levels. In June, this index reached its highest lev-
els since early 1995. Strong level of exports and a replenishing of invento-
ries have helped support this momentum.
Surprisingly healthy economic activity led to concerns that inflation may rise
and the Federal Reserve Board might tighten monetary policy. Inflation remains
modest, however, with consumer prices rising at about a 3 percent annual rate
over the past year. Meanwhile, the closely watched "core" Consumer Price In-
dex, which excludes volatile food and energy components, has risen year over
year at rates between 2.7 and 3.0 percent per year, with mid-1996 readings at
a moderate 2.7 percent. In general, recent reports have suggested an upward
creep in labor-related costs, while indicating that prices of many commodities
have begun to decline.
1 Continued on page two
<PAGE>
OUTLOOK
We anticipate that reasonably strong economic growth will continue during the
balance of 1996, albeit at more moderate rates than the second quarter's swift
pace. While we expect rates of inflation to remain near current levels, the Fed
may begin to lean toward greater restraint in its monetary policy in the coming
months. That suggests an upward bias for short-term interest rates and for
yields on long-term bonds to remain steady at current levels. In particular, we
expect 10-year Treasury yields to remain within a trading range of 6.50 and
7.25 percent.
Additional details about your Fund, including a question and answer section
with your portfolio management team, is provided in this report. We appreciate
your continued confidence in your Life Investment Trust with Van Kampen Ameri-
can 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 JUNE 30, 1996
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
ASSET ALLOCATION FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 5.07%
One-year total return based on NAV/1/.................................. 17.41%
Five-year average annual total return based on NAV/1/.................. 12.54%
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
DOMESTIC INCOME FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................ (0.70%)
One-year total return based on NAV/1/................................. 6.11%
Five-year average annual total return based on NAV/1/................. 10.96%
Life-of-Fund average annual total return based on NAV/1/.............. 7.51%
Commencement date..................................................... 11/04/87
SEC YIELD
SEC Yield/3/.......................................................... 7.65%
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
EMERGING GROWTH FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 16.91%
Life-of-Fund average annual total return based on NAV/1/............... 36.90%
Commencement Date...................................................... 07/03/95
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
ENTERPRISE FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 12.89%
One-year total return based on NAV/1/.................................. 28.55%
Five-year average annual total return based on NAV/1/.................. 16.11%
Ten-year total return based on NAV/1/.................................. 10.72%
Life-of-Fund average annual total return based on NAV/1/............... 10.64%
Commencement date...................................................... 04/07/86
</TABLE>
/1/Total return based on net asset value (NAV) assumes an investment at the be-
ginning of the period indicated, reinvestment of all distributions for the pe-
riod, and sale of all shares at the end of the period, all at NAV.
/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 JUNE 30, 1996 (CONTINUED)
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GLOBAL EQUITY FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 11.41%
Life-of-Fund average annual total return based on NAV/1/............... 15.20%
Commencement Date...................................................... 07/03/95
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
GOVERNMENT FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................ (2.16%)
One-year total return based on NAV/1/................................. 4.07%
Five-year average annual total return based on NAV/1/................. 6.78%
Ten-year total return based on NAV/1/................................. 7.04%
Life-of-Fund average annual total return based on NAV/1/.............. 6.78%
Commencement date..................................................... 04/07/86
DISTRIBUTION RATE AND YIELD
Distribution rate/2/.................................................. 6.65%
SEC Yield/3/.......................................................... 6.35%
</TABLE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
REAL ESTATE FUND
TOTAL RETURNS
<TABLE>
<S> <C>
Six-month total return based on NAV/1/................................. 8.46%
Life-of-Fund average annual total return based on NAV/1/............... 17.51%
Commencement date...................................................... 07/03/95
</TABLE>
/1/Total return based on net asset value (NAV) assumes an investment at the be-
ginning of the period indicated, reinvestment of all distributions for the pe-
riod, and sale of all shares at the end of the period, all at NAV.
/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.
4
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--ASSET ALLOCATION FUND
The following is an interview with the portfolio management team of Van Kampen
American Capital Life Investment Trust--Asset Allocation Fund. The team is led
by B. Robert Baker, Jr., and Thomas Copper, co-portfolio managers and Alan T.
Sachtleben, executive vice president for equity investments.
WHAT MARKET FACTORS HAD THE GREATEST INFLUENCE ON THE FUND'S PERFORMANCE
Q DURING THE SIX MONTHS ENDED JUNE 30, 1996?
Expectations at the beginning of the year for a sluggish economy led to
significant undervaluation in cyclical stocks--securities of companies
that are very sensitive to economic activity. However, economic strength in the
first and second quarters allowed cyclical stocks to outperform the market
early in the year. Additionally, relatively low oil and gas prices created
undervaluations in the energy sector, more specifically to gas transmission,
exploration and production company stocks.
A
Q WHAT ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO IN ACCORDANCE WITH THESE
MARKET CONDITIONS?
During the first half of the year, the characteristics of the bonds in the
portfolio remained consistent, with duration at approximately 8 years and
most securities rated A or better.
A
The equity portion of the portfolio benefited from our value-oriented
approach to stock selection, in which we identify stocks that are inexpensive
but have potential for appreciation. It was our emphasis on stock-picking,
rather than a focus on particular industries or market sectors, that provided
most of the equity portion's positive return for the period.
In January, the portfolio contained stocks of companies in industries that
are highly dependent on economic activity. Among the Fund's greatest exposures
were paper and forest products, chemicals, autos and retail. Throughout March
and April, stocks in these industries generally performed very well. As
valuations rose to more accurately reflect each company's prospects, several
holdings were either reduced or eliminated in order to realize some attractive
gains.
In the energy sector, the portfolio had broad exposure to each industry
grouping, including large international companies, producers, pipelines and oil
service companies. Unlike cyclical stocks, which were reduced in the first
half, energy stocks were generally retained, because they have yet to fully
reflect strengthening industry conditions. The portfolio's diversification at
the end of June is illustrated by the chart below.
[PIE CHART APPEARS HERE]
HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
Government 19.9%
Utilities 13.5%
Energy 13.4%
Finance 10.1%
Technology 7.2%
Producer Manufacturing 7.0%
Consumer Non-Durables 6.8%
Health Care 5.7%
Consumer Services 4.7%
Raw Materials/Processing Industries 4.6%
Other 7.1%
5
<PAGE>
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED JUNE 30,
1996?
A The Fund achieved a total return at net asset value of 5.07 percent/1/. By
comparison, the Standard & Poor's 500-Stock Index achieved a total return
of 10.08 percent for the period. The S&P 500 Index is a broad-based, unmanaged
index that reflects the general performance of the stock market and does not
reflect any commissions or fees that would be paid by an investor purchasing
the securities it represents. Please refer to the chart on page three for
additional Fund performance results.
Q CAN YOU GIVE A FEW EXAMPLES OF SPECIFIC STOCKS THAT AIDED THE PORTFOLIO'S
PERFORMANCE DURING THE PAST SIX MONTHS?
A Retail stocks were extremely undervalued at the end of 1995. When retail
sales improved, stock prices rose sharply. Significant contributors within
the energy sector were related to natural gas, including pipeline companies
such as Sonat and Panenergy, production companies such as Pogo Producing,
Louisiana Land and Exploration, and oil service companies such as Schlumberger.
The portfolio's bond allocation also benefited from strong performance in the
energy sector. For instance, Burlington Resources saw improved pricing for its
natural gas output. In the retail sector, Sears enjoyed a debt-rating upgrade
due to improved business, within a competitive retail environment.
Q WHAT IS THE OUTLOOK FOR THE STOCK MARKET AND, MORE SPECIFICALLY, FOR THE
FUND THROUGH THE NEXT SIX MONTHS?
A We feel the stock market is overvalued based on historical measures of
valuation (such as price/earnings ratio). However, stock prices may
continue to climb if corporate profit growth continues without a meaningful
acceleration in inflation or interest rates.
After the market's extended run-up, we expect some volatility going forward.
For this reason, the Fund will continue to monitor key economic indicators
during this uncertain environment.
The Fund is continuing to focus sharply on valuation in this uneasy
environment and should continue to participate in a rising market, while the
portfolio's undervalued stocks provide a cushion in the event of a market
decline. Additionally, our outlook for moderate growth and non-threatening
inflation should a support our higher-quality bond holdings.
/s/ Alan T. Sachtleben /s/ B. Robert Baker, Jr. /s/ Thomas Copper
Alan T. Sachtleben B. Robert Baker, Jr. Thomas Copper
Executive Vice President Co-Portfolio Manager Co-Portfolio Manager
Equity Investments Asset Allocation Fund Asset Allocation Fund
Please see footnotes on page three
6
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--DOMESTIC INCOME FUND
The following is an interview with the portfolio management team of Van Kampen
American Capital Life Investment Trust--Domestic Income Fund. The team is led
by Walter W. Stabell, portfolio manager, and Robert C. Peck, Jr., executive
vice president for fixed income investments.
Q WHAT OCCURRED IN THE MARKET DURING THE PERIOD AND HOW WAS THE PORTFOLIO
POSITIONED?
A Many market watchers anticipated an economic slowdown in 1996, but just
the opposite occurred. Early in the year, a strengthening economy
catalyzed unexpected corporate earnings. In order to take advantage of this
unexpected strength, we maintained an above-average percentage of high-yield
corporate bonds--which have tended to do well in a strong economy.
Strengthening growth led to expectations of higher inflation and a reversal
in monetary policy from accomodative to restrictive. In view of recent interest
rate volativity, we decreased the portfolio's holdings in long-term bonds and
increased its intermediate-term holdings. This lowered the Fund's duration,
which helped reduce its sensitivity to interest rate fluctuations.
Q HOW IS THE PORTFOLIO STRUCTURED?
A The Fund is invested in most major bond sectors including, investment-
grade corporate bonds, high-yield corporate bonds, U.S. Treasuries, and
U.S. Government agencies. We believe that remaining well-diversifed is an
effective way to manage risk and still produce attractive returns.
Q CAN YOU GIVE A FEW EXAMPLES OF HOLDINGS THAT PERFORMED WELL DURING THE
REPORTING PERIOD?
A The portfolio currently holds several "cross-over" bonds. These are bonds
that are rated below investment grade by one rating agency but investment
grade by another. These bonds have provided a higher yield than straight
investment-grade bonds but involve less credit risk than a straight high-yield
bond. The Fund also benefited from bonds that were upgraded during the
reporting period, due to improving fundamentals. These included securities of
Noram (BB to BBB), Continental Cable (BB to BBB), Public Service of Colorado
(BBB to A) and Delta Airlines (BB to BBB). The portfolio's asset
diversification at the end of June is illustrated by the chart below.
[CHART APPEARS HERE]
ASSET ALLOCATION AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
Stocks 3.5%
Government Agencies 10.0%
High-Yield Bonds 16.3%
Investment-Grade
Corporate Bonds 70.2%
7
<PAGE>
Q HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 1996?
A The Fund's six-month total return was -0.70 percent/1/. The Fund's
performance reflects the market volatitily experienced in the first half
of the year. By comparison, the Lehman Brothers Corporate Bond Index total
return of -1.89 percent was less favorable. This index is a broad-based,
unmanaged index that reflects the general performance of investment-grade
corporate bonds. It does not reflect any commissions or fees that would be paid
by an investor purchasing the securities it represents. Please refer to the
chart on page three for additional Fund performance results.
Q WHAT IS THE OUTLOOK FOR THE BOND MARKET AND, MORE SPECIFICALLY, FOR THE
FUND THROUGH THE NEXT SIX MONTHS?
A We are looking for a slower economy in the second half of the year.
Therefore, we will decrease our exposure to high-yield bonds and begin to
focus on higher-rated, less credit-sensitive investment-grade bonds as a
defensive maneuver. Our duration will remain neutral in anticipation of a
possible Fed tightening before the end of the year and because long-term rates
are not attractive enough to warrant their additional risk. In summary, we
believe the Fund is well-structured to weather an economic slowdown.
/S/ Robert C. Peck, Jr. /S/ Walter W. Stabell
Robert C. Peck, Jr. Walter W. Stabell
Executive Vice President Portfolio Manager
Fixed Income Investments Domestic Income Fund
Please see footnotes on page three
8
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--EMERGING GROWTH FUND
The following is an interview with the portfolio management team of Van Kampen
American Capital Life Investment Trust--Emerging Growth Fund. The team is led
by Gary Lewis, portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments.
Q WHAT MARKET FACTORS HAD THE GREATEST IMPACT ON THE FUND'S PERFORMANCE
DURING THE SIX MONTHS ENDED JUNE 30, 1996?
A The market set new highs in the first six months of 1996, driven by a
surprisingly strong economy. This strength led to better-than-expected
corporate profits, which fueled appreciation of stock prices. Additionally,
there was much enthusiasm for small cap growth stocks, which helped the Fund
return 16.91 percent/1/ for the period. By comparison, the Standard & Poor's
500-Stock Index returned 10.08 percent while the Russell 2000 Index returned
10.36 percent. These indices are unmanaged statistical composites and do not
reflect any commissions or fees that would be incurred by an investor
purchasing the securities they represent. Please refer to the chart on page
three for additional Fund performance results.
Q WHAT ADJUSTMENTS DID YOU MAKE TO THE PORTFOLIO IN ACCORDANCE WITH THESE
MARKET CONDITIONS?
A At the close of 1995, expectations were for a slowing economy. However, by
February, evidence of an improving economy and unexpectedly positive
corporate earnings pushed the market to new highs, and provided strong
performance through the second quarter.
Throughout the first half of the year, the market's leading sectors rotated
from month to month. In January, health care was the top performing sector.
Health care, retail, energy and technology, respectively, enjoyed a brief run
as the top performing sector during this period. Because most of the Fund's top
ten holdings have positions in each of these sectors, we were well-situated to
take advantage of a dynamic market. This lends credence to the Fund's
investment discipline of broad diversification.
Q CAN YOU GIVE A FEW EXAMPLES OF STOCKS THAT THE PORTFOLIO OWNED DURING THE
REPORTING PERIOD THAT PERFORMED PARTICULARLY WELL?
A Some top performers in the portfolio based on stock price appreciation
were Chesapeake Energy (oil & gas), whose concentrations are in
exploration and production. Their performance was the result of an increase in
production, a rise in energy prices, and inclement weather throughout the
northeast. USA Detergent's appreciation, reflected the popularity of its
products, namely lower priced detergents and cleaners. Mini Med's (health care)
appreciation was due to increased marketing and new product releases geared
toward the treatment of diabetes. Cascade Communication's appreciation can be
attributed to the growth of the Internet. The portfolio's diversification at
the end of June is illustrated by the chart below.
[CHART APPEARS HERE]
HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
Producer Manufacturing 5.2%
Energy 5.3%
Finance 6.5%
Consumer Non-Durables 7.1%
Consumer Distribution 8.6%
Consumer Services 13.9%
Health Care 17.6%
Technology 30.1%
Other 5.7%
9
<PAGE>
Q WHAT IS THE OUTLOOK FOR THE STOCK MARKET AND, MORE SPECIFICALLY, FOR THE
FUND THROUGHOUT THE NEXT SIX MONTHS?
A The two key forces that determine the value of the stock market are
interest rates and corporate profits. Interest rates are affected most
substantially by anticipated inflation. During the first part of this year, the
economy strengthened and fueled concern of potentially higher inflation. This
resulted in a steep increase in interest rates. The second key force in
determining the value of the market, corporate profits, more than overcame the
dampening effect of higher rates.
With inflation seemingly in check and corporate profits steady, we are not
overly concerned about the valuation of the market. We would expect that
quality companies that benefit from moderate economic growth and low inflation
will continue to do well.
/S/ Alan T. Sachtleben /S/ Gary Lewis
Alan T. Sachtleben Gary Lewis
Executive Vice President Portfolio Manager
Equity Investments Emerging Growth Fund
Please see footnotes on page three
10
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--ENTERPRISE FUND
The following is an interview with the portfolio management team of Van Kampen
American Capital Life Investment Trust--Enterprise Fund. The team is led by
Jeff D. New, portfolio manager, and Alan T. Sachtleben, executive vice
president for equity investments.
Q WHAT MARKET FACTORS HAD A SIGNIFICANT INFLUENCE ON THE FUND DURING THE
PERIOD?
A As has been the case for the past several years, the market environment
continued to demonstrate positive fundamentals, specifically solid
corporate earnings growth and controlled inflation.
In the early part of 1996, many market followers expected the slow economic
growth of 1995 to carry through into the new year. Anticipating slow growth,
we structured the Fund's portfolio to focus on individual companies that had
strong earnings growth expectations. In a slow economy, corporate earnings
expectations are examined more closely. As always, we carefully analyzed stock
valuations in order to avoid overpaying for growth potential.
[CHART APPEARS HERE]
HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
Technology 23.2%
Health Care 11.1%
Consumer Services 8.8%
Producer Manufacturing 6.0%
Other 8.1%
Finance 14.7%
Consumer Distribution 10.6%
Consumer Non-Durables 8.0%
Energy 4.8%
Raw Materials/Processing
Industries 4.7%
Q HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1996?
A We continued to focus on stocks with positive earnings outlooks and
attractive valuations. The Fund's sector weightings reflect where we
found the best combination of individual company fundamentals and valuations.
The Fund achieved a total return, at net asset value, of 12.89 percent/1/.
By comparison, the Standard & Poor's 500-Stock Index generated a total return
of 10.08 percent and the Lipper Growth Fund Index returned 7.99 percent for
the same period. Keep in mind that the S&P 500 Index is a broad-based,
unmanaged index that reflects the general performance of the stock market and
does not reflect any commissions or fees that would be paid by an investor
purchasing the securities it represents. The Lipper Growth Fund Index reflects
the average performance of the largest growth funds and does not reflect any
sales charges that would be paid by an investor purchasing the funds it
represents. Please refer to the chart on page three for additional Fund
performance results.
11
<PAGE>
Q WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET DURING THE NEXT SIX MONTHS AND,
MORE SPECIFICALLY, FOR THE FUND?
A We anticipate slower economic growth and low inflation for the remainder
of the year--most likely leading to moderate growth in the stock market.
However, it is unlikely that we will see returns on stocks like those
experienced in 1995. With the expectation of moderate earnings growth and low
inflation, investors will want to focus on companies demonstrating higher
growth and/or consistent earnings growth. The mid-cap stocks that comprise the
Fund offer higher growth-potential than large-cap stocks, with less risk than
emerging companies. For this reason, we see a favorable environment for the
stocks in the Fund.
In the current market, stocks appear to be fairly valued. Therefore,
individual companies and their specific attributes will dictate portfolio
selection. The Fund will continue to hold stocks with what we feel are strong
future fundamentals and attractive earnings but only at an acceptable price.
For the long-term, we are optimistic about the Fund's performance, given
our focus on positive fundamentals and attractive valuations.
/S/ Alan T. Sachtleben /s/ Jeff D. New
Alan T. Sachtleben Jeff D. New
Executive Vice President Portfolio Manager
Equity Investments Enterprise Fund
Please see footnotes on page three
12
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--GLOBAL EQUITY FUND
The following is an interview with the portfolio management team of 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 TRENDS AFFECTED THE WORLD'S EQUITY MARKETS DURING THE REPORTING
PERIOD?
A The U.S. stock market was fueled by steady economic growth and low
inflation, and it outperformed most foreign equity markets during the
period. As a result, we saw strong demand for U.S. stocks. Also, the
resurgence of the U.S. dollar versus most major currencies, particularly the
German mark and the Japanese yen, helped the U.S. market to outpace most
foreign equity markets in dollar terms.
In an effort to stimulate economic growth, Japan maintained accommodative
monetary and fiscal policies throughout the period. It appears these policies
are working, as both market sentiment and economic fundamentals have been
improving, as evidenced by the Nikkei 225 Index's strong stock price
appreciation during the six-month period.
Most major European countries experienced weak economic growth during the
period. Consequently, many European central banks have begun, and may
continue, to cut interest rates in an effort to stimulate growth.
After experiencing a two-year decline, most Eastern European markets began
to stabilize in December of 1995. These markets have subsequently performed
remarkably and currently dominate most other global equity markets.
Q WHAT ADJUSTMENTS DID YOU MAKE TO THE
Top 5 Countries Represented PORTFOLIO IN ACCORDANCE WITH THESE
in the Portfolio WORLDWIDE ECONOMIC EVENTS?
as of June 30, 1996
A During the period, the Fund benefited from
United States appreciation in the U.S. stock market. For
Japan the most part, the domestic portion of the
United Kingdom portfolio was a mixture of mid- and large-
Netherlands capitalized companies, with a focus on those
Hong Kong with a strong earnings outlook. Three issues
that showed strong performance were: United
Waste Systems, Safeway and Worldcom.
We gradually increased the Fund's exposure to the Japanese stock market, at
the same time hedging the yen to the U.S. dollar. This enhanced the Fund's
performance, which benefited from a rise in the Japanese stock market without
being adversely affected by a decline in Japanese currency.
Many medium-sized European companies we held performed well, including
Adidas, Gucci and Cieba Geigy. Late in December 1995, we made the Fund's first
investment in the Czech Republic and have since increased the portfolio's
exposure to Eastern European stocks which, as previously mentioned, have shown
signs of strong performance.
13
<PAGE>
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED JUNE 30, 1996?
A The Fund achieved a total return at net asset value of 11.41 percent/1/.
By comparison, the Morgan Stanley Capital International World Index +
Dividends, a broad-based, unmanaged index used as a benchmark for general
global equity funds, achieved a total return of 7.53 percent for the period.
The index does not reflect any commissions or fees that would be paid by an
investor purchasing the securities it represents. Please refer to the chart on
page four for additional Fund performance results.
Q WHAT IS THE OUTLOOK FOR THE GLOBAL EQUITY MARKET AND, MORE SPECIFICALLY,
FOR THE FUND THROUGHOUT THE NEXT SIX MONTHS?
A Outside the U.S., we anticipate a global economic recovery beginning late
in 1996 and continuing into 1997. In the U.S., we believe that relatively
low inflation and modest economic growth will help growth stocks outperform
cyclical stocks in the coming months.
Going forward, we expect to alter the Fund's weightings in geographical
regions depending on the attractiveness of individual countries and companies.
For instance, after comparing market valuations, we believe the U.S. stock
market is at the high end; therefore, we have begun to decrease the Fund's
exposure to U.S. holdings.
/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
14
<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 HOW HAS THE FIXED-INCOME MARKET CHANGED OVER THE PAST SIX MONTHS?
A Investors began the period with a very positive outlook for the fixed-
income market, as last year's rally appeared to be extending into 1996.
Expectations were high that the economy would continue to show signs of
weakness, resulting in a less restrictive monetary policy and lower interest
rates. In late January, investors were rewarded as the Federal Reserve lowered
the fed funds rate from 5.50 percent to 5.25 percent (bonds appreciate in
value as yields decline).
Then in February, the market reversed course. February's economic reports
showed significant strength in employment, indicating that growth was stronger
than expected. In response, the bond market rally ended and yields began to
climb. As 1996 progressed, the economy continued to gain momentum--GDP grew
from a benign 0.3 percent in the fourth quarter of 1995 to 2.0 percent in the
first quarter of 1996 and more recently, to 4.2 percent in the second quarter.
This led to fears of inflation and a possibility of a tighter monetary policy
by the Fed: earlier market optimism was replaced by extreme caution.
Q HOW WERE FIXED-INCOME SECURITIES AFFECTED AND HOW DID YOU POSITION THE
FUND?
A In January, as interest rates declined and bond prices increased,
Treasuries outperformed mortgage-backed securities. Mortgage-backed
securities tend to be less attractive in a declining interest rate environment
because homeowner refinancing and mortgage prepayments increase. This can
cause higher-yielding mortgage securities to be redeemed early. However, as
inflation fears grew over the period, prices of Treasury securities began to
decline and mortgage-backed issues began to outperform. Benchmark 10-year
Treasury notes declined in value by approximately 7.8 percent from January to
June.
In mid-March, we began selectively purchasing GNMA securities with 8.5 and
9 percent coupons that were first issued in 1986-87. Buying these types of
securities made the portfolio more defensive, because older mortgage-backed
securities typically have more stable prepayment characteristics and tend to
perform better in a declining market environment. We also purchased lower
coupon 6.5 and 7 percent mortgage securities for the Fund. We believe interest
rates likely will stabilize or decline by year-end, and these securities
should become more valuable.
Q HOW DID THE FUND PERFORM DURING THE PAST SIX MONTHS?
A The Fund achieved a six-month total return at net asset value of -2.16
percent/1/. Over the same six-month period, the Lehman Brothers Mutual
Fund U.S. Government/Mortgage Index* total return was -1.04 percent. The Index
is a broad-based, unmanaged index that reflects the general performance of
U.S. government and mortgage-backed securities. It does not reflect any
commissions or fees that would be paid by an investor purchasing the
securities it represents. Please refer to the chart on page four for
additional Fund performance results.
15
<PAGE>
Q HOW ARE THE FUND'S ASSETS ALLOCATED?
A At the end of this reporting period, the Fund's Treasury holdings
consisted primarily of longer- and shorter-term securities, a "barbell"
maturity structure that should benefit the Fund if the yield curve flattens.
We have underweighted the Fund's position in intermediate-term Treasuries in
favor of mortgage-backed securities with similar durations (a measure of a
bond's sensitivity to changes in interest rates, measured in years). The
portfolio's asset diversification at the end of the period is illustrated by
the chart below.
[CHART APPEARS HERE]
ASSET ALLOCATION AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
GNMAs 18.5%
FHLMCs 12.6%
SLMA 3.0%
FNMAs 34.5%
U.S Treasuries 30.1%
Other 1.3%
Q WHAT IS YOUR OUTLOOK FOR THE FIXED-INCOME MARKET AND, MORE SPECIFICALLY,
FOR THE FUND IN THE MONTHS AHEAD?
A We believe there is value in the marketplace at current levels and that
Treasury prices already reflect an anticipated tightening in monetary
policy by the Federal Reserve. We expect Treasury yields to remain within a
current trading range of 6.50 to 7.25 percent. We look for inflation to remain
stable and economic growth to moderate somewhat, as higher interest rates
should act to slow the current strong rate of growth. Finally, we expect
interest rates to trend lower later in 1996.
As we receive indications that investors are beginning to recognize the
value in the marketplace, and if these indicators are further supported by
improving fundamentals, we will look to extend the Fund's duration. This would
be accomplished by increasing the Fund's Treasury holdings. Specifically, we
would seek to increase the Fund's current underweighting in intermediate-term
Treasury notes.
/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
*The Lehman Brothers Mutual Fund U.S. Government Index is no longer in
existence and was replaced with the Lehman Brothers Mutual Fund U.S.
Government/Mortgage Index by Lehman.
Please see footnotes on page four
16
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--MONEY MARKET FUND
The following is an interview with the portfolio management team of 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 HAS THE FIXED-INCOME MARKET CHANGED OVER THE PAST SIX MONTHS, AND HOW
WAS THE FUND POSITIONED?
A Investors began this year with a very positive outlook for the fixed-
income market, as last year's rally appeared to be extending into 1996.
The economy was expected to continue growing at a slow rate which would result
in a less restrictive monetary policy and lower interest rates. In late
January the Federal Reserve Board lowered the federal funds rate from 5.50
percent to 5.25 percent.
However, the market reversed course in February when economic reports
showed significant strength in employment, indicating that growth was stronger
than expected. In response, the bond market rally ended and yields began to
climb. This led to fears of inflation and tighter monetary policy, and market
optimism was replaced by extreme caution.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD ENDED JUNE 30, 1996?
A The Fund achieved a total return at net asset value of 2.39 percent for
the period. In comparison, the average total return performance for money
market funds, as calculated by Lipper Analytical Services, Inc., was 2.35
percent for the same six-month period. The average portfolio maturity at the
end of the reporting period was shifted from a 30- to 40-day range. Finally,
the Fund's management team continues to incorporate a disciplined investment
approach that focuses on high-quality securities.
/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 be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
17
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST--REAL ESTATE FUND
The following is an interview with the portfolio management team of 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 OVER THE PAST SIX MONTHS, WHAT MARKET FACTORS HAD THE GREATEST IMPACT ON
THE PORTFOLIO?
A It is fair to describe the stock market of the last six months as
volatile, particularly in the high growth, technology sectors where
earnings disappointment led to underperformance in many of those stocks.
REIT stocks currently have an average yield in excess of 7 percent and given
that the companies met or exceeded investor expectations of 8 to 10 percent
growth in cash flow, these stocks acted as a defensive investment in a choppy
market. It is also important to note that the stocks performed well despite a
rising interest rate environment. In our opinion, the consistency and growth in
cash flow for this group of REIT stocks was appealing to investors compared to
the negative earnings surprises occurring in other segments of the market.
Our property sector weightings were critical to the Fund's performance
during the past six months. For example, an overweighted position in the
office/industrial and hotel sectors produced attractive gains. Also, avoiding
factory-outlet centers and underweighting the multi-family dwelling sector
further aided the Fund's performance. The diversification of the portfolio
among the REIT sectors at the end of the period is illustrated by the chart
below.
[PIE CHART APPEARS HERE]
HOLDINGS BY SECTOR AS A PERCENTAGE OF LONG-TERM INVESTMENTS AS OF JUNE 30, 1996
Office/Industrial 23.2%
Apartment 17.7%
Shopping Malls 14.5%
Shopping Centers 12.1%
Hotels 11.2%
Net Lease 6.2%
Self-Storage 5.3%
Health Care Facilities 4.7%
Other 5.1%
Q WHICH HOLDINGS HAD THE MOST SIGNIFICANT IMPACT ON THE PORTFOLIO'S
PERFORMANCE DURING THE PERIOD?
A One of the Fund's better performing stocks was Regency Realty Corp. (NYSE:
REG), an owner, developer and manager of community and neighborhood
shopping centers in Florida and the Southeast. Regency possessed all the
positive attributes we look for when choosing stocks for the portfolio, namely
strong current and future cash flow with an inexpensive valuation. As more
investors began to recognize Regency's growth potential, its stock price
appreciated because of increased demand. In addition, late in the second
quarter, capital infusion into Regency was the catalyst for the stock's
escalating performance.
Two regional mall REITs held in the Fund's portfolio recently reached a
merger agreement. Debartolo Realty (NYSE: EJD) and Simon Property Group (NYSE:
SPG), will join to become the largest holder of regional mall assets in the
U.S. This important merger will allow the combined company greater negotiating
power with major, national retail tenants.
18
<PAGE>
Q HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED JUNE 30, 1996?
A The Fund achieved a total return at net asset value of 8.46 percent/1/ for
the six month period. During the same period, the NAREIT (National
Association of Real Estate Investment Trusts) Equity REIT Index produced a
total return of 6.82 percent. The NAREIT is an unmanaged index that reflects
the performance of a broad range of equity REITs of all property types. The
Standard & Poor's 500-Stock Index, a broad based, unmanaged index that reflects
the general performance of the stock market, achieved a total return of 10.08
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.
Please refer to the chart on page four for additional fund performance results.
Q DO YOU ANTICIPATE MAKING ANY CHANGES TO THE PORTFOLIO?
A Relative to the NAREIT Index, the Fund is currently overweighted in the
office/industrial and hotel sectors due to our belief that demand
fundamentals are very positive. As long as fundamentals remain positive for
these sectors--which allow companies to improve their occupancies and raise
rents--we will maintain our current portfolio weightings.
We remain market-weighted in the retail sector and are underweighted in
multi-family/apartments sector. Looking ahead, we do not foresee significant
changes in our property sector weightings. However, we may reduce the Fund's
retail holdings by taking some of the profits resulting from their strong
performance.
Our current outlook for the REIT group is generally positive because of
realistic valuations and positive fundamentals--even if the market should
correct within the next three to six months. Real estate stocks historically
tend to act as a defensive hedge in a weakening market due to an attractive
level of income, which should protect these stocks during a market downturn.
/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
19
<PAGE>
ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS 54.2%
CONSUMER DISTRIBUTION 2.3%
3,500 Alco Standard Corp....................................... $ 158,355
1,100 Dayton Hudson Corp....................................... 113,438
8,600 Dillard Dept Stores, Inc................................. 313,900
4,700 Federated Dept Stores, Inc. (b).......................... 160,388
6,100 Kroger Co. (b)........................................... 240,950
5,200 Sears Roebuck & Co....................................... 252,850
3,800 Toys R Us, Inc. (b)...................................... 108,300
3,000 Wal-Mart Stores, Inc..................................... 76,125
-----------
1,424,306
-----------
CONSUMER DURABLES 2.3%
3,900 Chrysler Corp............................................ 241,800
6,200 Cooper Tire & Rubber Co.................................. 137,950
3,400 Daimler Benz AG--ADR (Germany) (b)....................... 183,175
6,800 Fiat SA--ADR (Italy)..................................... 115,600
2,800 General Motors Corp...................................... 146,650
3,500 Masco Corp............................................... 105,875
7,600 Maytag Co................................................ 158,650
6,700 Newell Co................................................ 205,188
9,400 Sunbeam-Oster, Inc....................................... 138,650
-----------
1,433,538
-----------
CONSUMER NON-DURABLES 4.5%
2,300 Anheuser Busch Cos., Inc................................. 172,500
2,800 Colgate Palmolive Co..................................... 237,300
1,100 CPC International, Inc................................... 79,200
5,900 Dial Corp................................................ 168,888
6,600 Heinz H J Co............................................. 200,475
1,400 Kimberly Clark Corp...................................... 108,150
4,300 Philip Morris Cos., Inc.................................. 447,200
2,100 Quaker Oats Co........................................... 71,663
3,400 RJR Nabisco Holdings Corp................................ 105,400
3,000 Sara Lee Corp............................................ 97,125
8,000 Tambrands, Inc........................................... 327,000
5,500 Unilever................................................. 798,188
-----------
2,813,089
-----------
CONSUMER SERVICES 2.7%
16,500 Cox Communications, Inc. (b)............................. 356,813
1,300 Gannett, Inc............................................. 91,975
5,800 Harcourt General, Inc.................................... 290,000
6,300 International Game Technology............................ 106,313
3,300 New York Times Co.-- Class A............................. 107,663
20,300 Tele Communications--Class B (b)......................... 367,938
7,300 Time Warner, Inc......................................... 286,525
4,400 Trump Hotels & Casino Resorts (b)........................ 125,400
-----------
1,732,627
-----------
ENERGY 8.7%
2,400 Amoco Corp............................................... 173,700
1,000 Atlantic Richfield Co.................................... 118,500
7,00 British Petroleum PLC--ADR (UK).......................... 74,813
3,100 Burlington Resources, Inc................................ 133,300
2,300 Chevron Corp............................................. 135,700
8,300 Coastal Corp............................................. 346,525
</TABLE>
See Notes to Financial Statements
20
<PAGE>
ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY (CONTINUED)
2,700 El Paso Natural Gas Co................................... $ 103,950
3,000 Enron Oil & Gas.......................................... 83,625
2,300 Exxon Corp............................................... 199,813
7,500 J Ray McDermott SA (b)................................... 187,500
1,700 Louisiana Land & Exploration............................. 97,963
1,700 Mobil Corp............................................... 190,613
3,600 Noble Affiliates, Inc.................................... 135,900
3,600 Norsk Hydro AS--ADR (Norway)............................. 175,950
7,200 Occidental Petroleum Corp................................ 178,200
6,000 Pacific Enterprises...................................... 177,750
16,700 Panhandle Eastern Corp................................... 549,013
2,500 Phillips Petroleum Co.................................... 104,688
4,500 Pogo Producing Co........................................ 171,563
7,200 Repsol SA--ADR (Spain)................................... 250,200
1,300 Royal Dutch Petroleum--ADR (Netherlands)................. 199,875
1,300 Schlumberger, Ltd........................................ 109,525
6,600 Seagull Energy Corp. (b)................................. 165,000
1,900 Shell Transport & Trading--ADR (UK)...................... 167,200
12,500 Sonat, Inc............................................... 562,500
2,900 Texaco, Inc.............................................. 243,238
5,900 Total SA--ADR (France)................................... 219,038
7,100 USX-Marathon Group....................................... 142,888
4,700 YPF Sociedad Anonima--ADR (Argentina).................... 105,750
-----------
5,504,280
-----------
FINANCE 7.4%
5,000 Aetna Life & Casualty Co................................. 357,500
5,100 AFLAC, Inc............................................... 152,363
2,500 Allmerica Financial Corp................................. 74,375
4,000 Allstate Corp............................................ 182,500
3,000 AMBAC, Inc............................................... 156,375
6,200 American Bankers Insurance Group......................... 270,475
3,000 American General Corp.................................... 109,125
15,300 Argenteria (Bancaria Espana)--ADR (Spain)................ 336,600
2,400 Bankamerica Corp......................................... 181,800
1,800 Bankers Trust Corp....................................... 132,975
11,865 Bear Stearns Cos., Inc................................... 280,311
7,600 Chase Manhattan Corp..................................... 536,750
1,000 Cigna Corp............................................... 117,875
3,800 Fleet Financial Group, Inc............................... 165,300
3,300 Franklin Resources, Inc.................................. 201,300
5,200 Great Western Financial Corp............................. 124,150
3,500 MBIA, Inc................................................ 272,563
4,300 Morgan J.P. & Co., Inc................................... 363,888
3,600 PNC Financial Corp....................................... 107,100
2,200 Providian Corp........................................... 94,325
3,600 St. Paul Cos., Inc....................................... 192,600
4,100 SunAmerica, Inc.......................................... 231,650
-----------
4,641,900
-----------
HEALTH CARE 5.1%
4,300 Abbott Labs.............................................. 187,050
5,600 American Home Products Corp.............................. 336,700
2,400 Astra Ab--ADR (Sweden)................................... 105,000
1,700 Bausch & Lomb, Inc....................................... 72,250
</TABLE>
See Notes to Financial Statements
21
<PAGE>
ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- -------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE (CONTINUED)
10,800 Bristol Myers Squibb Co................................. $ 972,000
3,800 Johnson & Johnson....................................... 188,100
13,400 Mallinckrodt Group, Inc................................. 520,925
2,900 Merck & Co., Inc........................................ 187,413
2,500 Schering Plough Corp.................................... 156,875
1,900 Smithkline Beecham--ADR (UK)............................ 103,313
6,700 Warner Lambert Co....................................... 368,500
-----------
3,198,126
-----------
PRODUCER MANUFACTURING 4.8%
19,800 Browning Ferris Industries, Inc. ....................... 574,200
1,500 Caterpillar, Inc........................................ 101,625
3,200 Cooper Industries, Inc.................................. 132,800
1,500 Dover Corp.............................................. 69,188
2,600 Fluor Corp.............................................. 169,975
3,700 Foster Wheeler Corp..................................... 166,038
3,900 General Elecric Co...................................... 337,350
2,100 Honeywell, Inc.......................................... 114,450
4,000 Ingersoll Rand Co....................................... 175,000
1,000 Johnson Controls, Inc................................... 69,500
3,200 Rockwell International Corp............................. 183,200
1,200 TRW, Inc................................................ 107,850
26,300 WMX Technologies, Inc................................... 861,325
-----------
3,062,501
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 4.1%
16,900 Bethlehem Steel Corp. (b)............................... 200,688
4,000 Betz Labs, Inc.......................................... 175,500
14,000 Boise Cascade Corp...................................... 512,750
2,600 Champion International Corp............................. 108,550
1,200 Consolidated Papers..................................... 62,400
3,200 Crown Cork & Seal, Inc.................................. 144,000
3,700 Dow Chemical Co......................................... 281,200
1,200 Du Pont de Nemours & Co................................. 94,950
2,000 Georgia Pacific Corp.................................... 142,000
6,000 International Paper Co.................................. 221,250
10,800 Lyondell Petrochemical Co............................... 260,550
2,100 Mead Corp............................................... 108,938
2,200 Temple Inland, Inc...................................... 102,850
3,500 Willamette Industries, Inc.............................. 208,250
-----------
2,623,876
-----------
TECHNOLOGY 3.1%
1,600 3Com Corp. (b).......................................... 73,200
4,000 Avnet, Inc.............................................. 168,500
1,600 BMC Software, Inc. (b).................................. 95,600
2,250 Cadence Design Systems, Inc. (b)........................ 75,938
2,100 Cisco Systems, Inc. (b)................................. 118,913
1,900 Computer Associates, Inc................................ 135,375
3,800 Ericsson LM--ADR (Sweden)............................... 81,700
3,000 Gateway 2000, Inc. (b).................................. 102,000
3,600 General Dynamics Corp................................... 223,200
1,600 Intel Corp.............................................. 117,500
4,700 International Rectifier Corp. (b)....................... 75,788
2,200 Lucent Technologies, Inc................................ 83,325
</TABLE>
See Notes to Financial Statements
22
<PAGE>
ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY (CONTINUED)
800 Microsoft Corp. (b)...................................... $ 96,100
2,500 Motorola, Inc............................................ 157,188
700 Newbridge Networks Corp. (b)............................. 45,850
2,300 SCI Systems, Inc. (b).................................... 93,438
5,800 Sunguard Data Systems, Inc. (b).......................... 232,725
-----------
1,976,340
-----------
TRANSPORTATION 0.3%
6,000 Illinois Central Corp.................................... 170,250
-----------
UTILITIES 8.9%
1,900 American Electric Power, Inc............................. 80,988
4,100 Ameritech Corp........................................... 243,438
3,000 Bellsouth Corp........................................... 127,125
2,200 Carolina Power & Light Co................................ 83,600
7,100 Central & South West Corp................................ 205,900
1,800 Cilcorp, Inc............................................. 76,950
20,500 DTE Energy Co............................................ 632,938
3,000 Florida Progress Corp.................................... 104,250
5,800 FPL Group, Inc........................................... 266,800
12,200 Houston Industries, Inc.................................. 300,425
8,200 Idaho Power Co........................................... 255,225
22,500 Illinova Corp............................................ 646,875
4,300 Minnesota Power & Light.................................. 124,700
1,600 Northern State Power Co.................................. 79,000
8,500 Nynex Corp............................................... 403,750
1,600 Ohio Edison Co........................................... 35,000
1,800 Oklahoma Gas & Elecric Co................................ 71,325
5,700 Pacificorp............................................... 126,825
4,100 Peco Energy Co........................................... 106,600
10,300 Portland General Corp.................................... 318,013
5,900 Southwestern Public Services Co.......................... 192,488
5,200 Sprint Corp.............................................. 218,400
14,800 Tele Denmark--ADR (Denmark).............................. 375,550
1,900 Telefonica de Espana--ADR (Spain)........................ 104,738
5,800 Texas Utilities Co....................................... 247,950
6,400 Unicom Corp.............................................. 178,400
-----------
5,607,253
-----------
TOTAL COMMON STOCK....................................... 34,188,086
-----------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
ASSET ALLOCATION FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE DEBT 17.9%
CONSUMER DISTRIBUTION 1.5%
$1,000 Sears Roebuck Acceptance Corp.......... 6.750% 09/15/05 $ 963,750
-----------
CONSUMER NON-DURABLES 1.6%
1,000 Anheuser Busch Cos..................... 7.000 09/01/05 983,800
-----------
CONSUMER SERVICES 1.5%
1,000 Cox Communications, Inc................ 6.875 06/15/05 967,900
-----------
ENERGY 3.4%
1,000 Burlington Resources, Inc.............. 9.125 10/01/21 1,142,300
1,000 Enron Corp............................. 6.875 10/15/07 961,580
-----------
2,103,880
-----------
FINANCE 1.7%
1,000 American General Corp.................. 9.625 02/01/18 1,068,300
-----------
PRODUCER MANUFACTURING 1.5%
1,000 Raytheon Co............................ 6.500 07/15/05 957,500
-----------
TECHNOLOGY 3.4%
1,000 Boeing Co.............................. 8.100 11/15/06 1,071,800
1,000 Philips Electronics--ADR (Netherlands). 8.375 09/15/06 1,067,600
-----------
2,139,400
-----------
UTILITIES 3.3%
1,000 Baltimore Gas & Electric............... 7.500 01/15/07 1,020,500
1,000 Texas Utilities Electric Co............ 8.250 04/01/04 1,054,230
-----------
2,074,730
-----------
TOTAL CORPORATE DEBT.................................... 11,259,260
-----------
U.S. GOVERNMENT OBLIGATIONS 16.5%
3,000 U.S. Treasury Bond..................... 7.250 05/15/16 3,068,430
4,700 U.S. Treasury Bond..................... 7.125 02/15/23 4,746,248
2,500 U.S. Treasury Note..................... 7.250 08/15/04 2,587,900
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS....................... 10,402,578
-----------
GOVERNMENT AND AGENCY FIXED-INCOME
OBLIGATIONS 1.5%
1,000 Province of Nova Scotia (Canada)....... 7.250 07/27/13 966,870
-----------
TOTAL GOVERNMENT AND AGENCY FIXED-INCOME OBLIGATIONS.... 966,870
-----------
TOTAL LONG-TERM INVESTMENTS 90.1%
(Cost $53,334,649) (a)........................................ 56,816,794
REPURCHASE AGREEMENT 9.2%
Lehman Government Securities, ($5,765,000 par-collateralized
by U.S. Government obligations in a pooled cash account, dated
06/28/96, to be sold on 07/01/96 at $5,767,570)............... 5,765,000
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%..................... 499,713
-----------
NET ASSETS 100%................................................ $63,081,507
-----------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes, cost of long-term
investments is $53,357,851, the aggregate gross unrealized appreciation is
$4,368,407 and the aggregate gross unrealized depreciation is $909,464,
resulting in net unrealized appreciation of $3,458,943.
(b) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
24
<PAGE>
ASSET ALLOCATION FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $53,334,649) (Note 1).......... $56,816,794
Repurchase Agreement (Note 1)..................................... 5,765,000
Receivables:
Securities Sold.................................................. 743,128
Interest......................................................... 496,274
Dividends........................................................ 77,150
Other............................................................. 20,411
-----------
Total Assets..................................................... 63,918,757
-----------
LIABILITIES:
Payables:
Securities Purchased............................................. 533,478
Fund Shares Purchased............................................ 212,185
Investment Advisory Fee (Note 2)................................. 18,059
Custodian Bank................................................... 15,208
Distributor and Affiliates (Note 2).............................. 6,093
Deferred Compensation and Retirement Plans (Note 2)............... 29,556
Accrued Expenses.................................................. 22,671
-----------
Total Liabilities................................................ 837,250
-----------
NET ASSETS........................................................ $63,081,507
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $54,101,862
Accumulated Net Realized Gain on Securities....................... 4,364,941
Net Unrealized Appreciation on Securities......................... 3,482,145
Accumulated Undistributed Net Investment Income................... 1,132,559
-----------
NET ASSETS........................................................ $63,081,507
-----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $63,081,507 and 5,262,623 shares of capital stock issued and
outstanding) (Note 3)............................................ $ 11.99
-----------
</TABLE>
See Notes to Financial Statements
25
<PAGE>
ASSET ALLOCATION FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 875,963
Dividends.......................................................... 465,652
-----------
Total Income...................................................... 1,341,615
-----------
EXPENSES:
Investment Advisory Fee (Note 2)................................... 159,420
Accounting (Note 2)................................................ 41,755
Trustees Fees and Expenses (Note 2)................................ 16,980
Custody............................................................ 11,503
Audit.............................................................. 10,850
Shareholder Services (Note 2)...................................... 7,664
Other ............................................................. 7,252
-----------
Total Expenses.................................................... 255,424
Less Fees Deferred................................................ 64,120
-----------
Net Expenses...................................................... 191,304
-----------
NET INVESTMENT INCOME.............................................. $ 1,150,311
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments................................... $ 4,498,157
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period........................................... 6,032,972
End of the Period:
Investments....................................................... 3,482,145
-----------
Net Unrealized Depreciation on Securities During the Period........ (2,550,827)
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES..................... $ 1,947,330
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......................... $ 3,097,641
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 1,150,311 $ 2,324,931
Net Realized Gain on Securities................... 4,498,157 6,122,759
Net Unrealized Appreciation/Depreciation on
Securities During the Period..................... (2,550,827) 7,920,361
----------- -----------
Change in Net Assets from Operations.............. 3,097,641 16,368,051
----------- -----------
Distributions from Net Investment Income.......... (37,294) (2,326,257)
Distributions from Net Realized Gain on
Securities....................................... (1,225,365) (4,841,441)
----------- -----------
Total Distributions............................... (1,262,659) (7,167,698)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 1,834,982 9,200,353
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold......................... 2,717,467 1,931,514
Net Asset Value of Shares Issued Through Dividend
Reinvestment...................................... 1,262,659 7,167,697
Cost of Shares Repurchased........................ (5,714,718) (11,954,380)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS...................................... (1,734,592) (2,855,169)
----------- -----------
TOTAL INCREASE IN NET ASSETS...................... 100,390 6,345,184
NET ASSETS:
Beginning of the Period........................... 62,981,117 56,635,933
----------- -----------
End of the Period (Including undistributed net
investment income of $1,132,559 and $19,542,
respectively).................................... $63,081,507 $62,981,117
----------- -----------
</TABLE>
See Notes to Financial Statements
26
<PAGE>
ASSET ALLOCATION FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ----------------------------
June 30, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $11.64 $9.99 $11.80 $11.92 $12.08
------- ------ ------ ------ ------
Net Investment Income.............. .218 .48 .45 .29 .37
Net Realized and Unrealized
Gain/Loss on Securities........... .366 2.6425 (.89) .6025 .493
------- ------ ------ ------ ------
Total from Investment Operations.... .584 3.1225 (.44) .8925 .863
------- ------ ------ ------ ------
Less:
Distributions from Net Investment
Income............................. .007 .4775 .45 .2925 .3689
Distributions from Net Realized
Gain on Securities................ .230 .995 .90 .63 .6541
Distributions in Excess of Net
Realized Gain on Securities....... -- -- .02 .09 --
------- ------ ------ ------ ------
Total Distributions................. .237 1.4725 1.37 1.0125 1.023
------- ------ ------ ------ ------
Net Asset Value, End of the Period.. $11.987 $11.64 $9.99 $11.80 $11.92
------- ------ ------ ------ ------
Total Return*....................... 5.07%** 31.36% (3.66%) 7.71% 7.28%
Net Assets at End of the Period (In
millions)........................... $63.1 $63.0 $56.6 $64.9 $59.6
Ratio of Expenses to Average Net
Assets*............................. .60% .60% .60% .60% .60%
Ratio of Net Investment Income to
Average Net Assets*................. 3.61% 3.85% 3.70% 2.34% 3.05%
Portfolio Turnover.................. 61%** 124% 163% 150% 126%
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets.............................. .80% .74% .72% .74% .77%
Ratio of Net Investment Income to
Average Net Assets.................. 3.41% 3.71% 3.58% 2.20% 2.88%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
27
<PAGE>
DOMESTIC INCOME FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS 81.7%
CONSUMER DISTRIBUTION 9.5%
$ 500 Borden, Inc............................ 7.875% 02/15/23 $ 424,150
500 CompUSA, Inc........................... 9.500 06/15/00 506,250
300 ConAgra, Inc........................... 9.750 03/01/21 359,040
500 Nabisco, Inc........................... 7.550 06/15/15 482,450
250 Specialty Retailers, Inc............... 11.000 08/15/03 257,500
---------
2,029,390
---------
CONSUMER NON-DURABLES 2.3%
500 Dimon, Inc............................. 8.875 06/01/06 502,040
---------
CONSUMER SERVICES 23.2%
500 Circus Circus.......................... 6.450 02/01/06 464,200
Continental Cablevision (private
500 placement, purchased on 12/08/95)...... 8.300 05/15/06 519,000
500 Cox Communications, Inc................ 7.250 11/15/15 476,050
500 ITT Corp New........................... 7.375 11/15/15 473,170
500 New York Times Co...................... 8.250 03/15/25 517,900
500 News America Holdings, Inc............. 10.125 10/15/12 568,750
500 Petro PSC Properties................... 12.500 06/01/02 487,500
500 TCI Communications, Inc................ 8.750 08/01/15 493,550
500 Valassis Communications, Inc........... 9.550 12/01/03 510,785
500 Viacom, Inc............................ 7.625 01/15/16 458,175
---------
4,969,080
---------
ENERGY 11.2%
455 Coastal Corp........................... 10.250 10/15/04 531,986
500 HS Resources, Inc...................... 9.875 12/01/03 482,500
300 Noram Energy Corp...................... 10.000 11/15/19 325,875
500 Occidental Petroleum Corp.............. 10.125 11/15/01 568,600
500 PDV America, Inc....................... 7.875 08/01/03 481,550
---------
2,390,511
---------
FINANCE 4.9%
450 First PV Funding Corp., Ser 1986-A..... 10.300 01/15/14 475,875
540 Phoenix RE Corp........................ 9.750 08/15/03 569,700
---------
1,045,575
---------
HEALTH CARE 4.9%
500 Manor Care, Inc........................ 7.500 06/15/06 503,100
500 Quorum Health Group.................... 11.875 12/15/02 554,375
---------
1,057,475
---------
RAW MATERIALS/PROCESSING
INDUSTRIES 5.0%
500 Georgia-Pacific Corp................... 9.950 06/15/02 567,900
500 IMC Fertilizer Group, Inc.............. 9.450 12/15/11 509,375
---------
1,077,275
---------
TECHNOLOGY 2.5%
500 Unisys Corp............................ 15.000 07/01/97 530,625
---------
TRANSPORTATION 12.6%
500 Delta Air Lines, Inc................... 9.750 05/15/21 576,850
500 International Shipholding Corp......... 9.000 07/01/03 475,000
350 Kansas City Southern Industries, Inc... 8.800 07/01/22 364,035
500 Southwest Airlines Co.................. 9.400 07/01/01 549,540
500 Union Pacific Co....................... 8.350 05/01/25 509,250
200 United Airlines, Inc., Ser 1991-A...... 10.020 03/22/14 231,998
---------
2,706,673
---------
</TABLE>
See Notes to Financial Statements
28
<PAGE>
DOMESTIC INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
UTILITIES 5.6%
$ 500 360 Communication Co........ 7.500% 03/01/06 $ 475,600
350 Monongahela Power Co........ 8.375 07/01/22 357,301
Public Service Co. of
350 Colorado.................... 8.750 03/01/22 369,254
-----------
1,202,155
-----------
U.S. GOVERNMENT
OBLIGATIONS 9.4%
943 FNMA, Pool.................. 10.000 04/01/21 1,021,658
1,000 U.S. Treasury Notes......... 6.250 08/31/00 992,970
-----------
2,014,628
-----------
<CAPTION>
Number
of Shares
- --------
<C> <S> <C> <C> <C> <C> <C>
COMMON AND PREFERRED STOCK 3.4%
2,226 Arcadian Corp................................ 43,964
FF Holdings Co. (private placement,
2,500 purchased 10/6/92) (b)....................... 2,500
Supermarkets General Holdings Corp., $3.52
6,889 preferred stock, Payment in Kind (b)......... 179,114
Time Warner, Inc., Ser K, preferred stock
511 (b).......................................... 493,251
-----------
718,829
-----------
TOTAL LONG-TERM INVESTMENTS 94.5%
(Cost $20,058,324) (a)................................ 20,244,256
REPURCHASE AGREEMENT 3.8%
Lehman Government Securities, Inc. ($805,000 par-
collateralized by U.S. Government obligations in a
pooled cash account, 5.35% coupon, dated 06/28/96, to
be sold on 07/01/96 at $805,359)...................... 805,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.7%............. 376,098
-----------
NET ASSETS 100%........................................ $21,425,354
-----------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes, cost of long-term
investments is $20,066,357, the aggregate gross unrealized appreciation is
$547,305 and the aggregate gross unrealized depreciation is $369,406,
resulting in net unrealized appreciation of $177,899.
(b) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
29
<PAGE>
DOMESTIC INCOME FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $20,058,324) (Note 1).......... $20,244,256
Repurchase Agreement (Note 1)..................................... 805,000
Receivables:
Interest......................................................... 410,551
Fund Shares Sold................................................. 2,539
Other............................................................. 18,339
-----------
Total Assets..................................................... 21,480,685
-----------
LIABILITIES:
Payables:
Distributor and Affiliates (Note 2).............................. 3,484
Fund Shares Repurchased.......................................... 2,533
Custodian Bank................................................... 1,868
Deferred Compensation and Retirement Plans (Note 2)............... 29,357
Accrued Expenses.................................................. 18,089
-----------
Total Liabilities................................................ 55,331
-----------
NET ASSETS........................................................ $21,425,354
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $22,177,030
Accumulated Undistributed Net Investment Income................... 898,027
Net Unrealized Appreciation on Securities......................... 185,932
Accumulated Net Realized Loss on Securities....................... (1,835,635)
-----------
NET ASSETS........................................................ $21,425,354
-----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $21,425,354 and 2,630,690 shares of capital stock issued and
outstanding) (Note 3)............................................ $8.14
-----------
</TABLE>
See Notes to Financial Statements
30
<PAGE>
DOMESTIC INCOME FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $ 962,463
Dividends......................................................... 11,099
Other............................................................. 12,500
-----------
Total Income..................................................... 986,062
-----------
EXPENSES:
Investment Advisory Fee (Note 2).................................. 57,927
Accounting (Note 2)............................................... 37,022
Trustees Fees and Expenses (Note 2)............................... 19,334
Audit............................................................. 10,176
Shareholder Services (Note 2)..................................... 7,687
Custody........................................................... 4,792
Printing.......................................................... 3,947
Legal (Note 2).................................................... 1,606
Other ............................................................ 781
-----------
Total Expenses................................................... 143,272
Less Fees Deferred and Expenses Reimbursed ($57,927 and $15,833,
respectively).................................................... 73,760
-----------
Net Expenses..................................................... 69,512
-----------
NET INVESTMENT INCOME............................................. $ 916,550
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments...................................................... $ 215,069
Forwards......................................................... (22,031)
-----------
Net Realized Gain on Securities................................... 193,038
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.......................................... 1,508,520
End of the Period:
Investments...................................................... 185,932
-----------
Net Unrealized Depreciation on Securities During the Period....... (1,322,588)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.................... $(1,129,550)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS........................ $ (213,000)
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................... $ 916,550 $ 2,110,912
Net Realized Gain on Securities........... 193,038 222,049
Net Unrealized Appreciation/Depreciation
on Securities During the Period.......... (1,322,588) 2,671,771
----------- -----------
Change in Net Assets from Operations...... (213,000) 5,004,732
Distributions from Net Investment Income.. (35,054) (2,098,216)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ (248,054) 2,906,516
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 4,353,364 7,719,168
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... 35,054 2,098,217
Cost of Shares Repurchased................ (9,277,305) (7,435,575)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. (4,888,887) 2,381,810
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS..... (5,136,941) 5,288,326
NET ASSETS:
Beginning of the Period................... 26,562,295 21,273,969
----------- -----------
End of the Period (Including undistributed
net investment income of $898,027 and
$16,531, respectively)................... $21,425,354 $26,562,295
----------- -----------
</TABLE>
See Notes to Financial Statements
31
<PAGE>
DOMESTIC INCOME FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended -------------------------------
June 30, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period........................... $8.21 $7.35 $8.58 $8.00 $7.74
------ ------ -------- ------ -------
Net Investment Income........... .349 .71 .85 .72 .69
Net Realized and Unrealized
Gain/Loss on Securities........ (.402) .8525 (1.2275) .5825 .2725
------ ------ -------- ------ -------
Total from Investment Operations. (.053) 1.5625 (.3775) 1.3025 .9625
Less Distributions from Net
Investment Income................ .013 .7025 .8525 .7225 .7025
------ ------ -------- ------ -------
Net Asset Value, End of the
Period........................... $8.144 $8.21 $7.35 $8.58 $8.00
------ ------ -------- ------ -------
Total Return*.................... (0.70%)** 21.37% (4.33%) 16.32% 12.50%
Net Assets at End of the Period
(In millions).................... $21.4 $ 26.6 $21.3 $27.4 $21.1
Ratio of Expenses to Average Net
Assets*.......................... .60% .60% .60% .60% .60%
Ratio of Net Investment Income to
Average Net Assets*.............. 7.91% 8.11% 8.35% 7.80% 8.89%
Portfolio Turnover............... 42%** 54% 94% 130% 117%
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets........................... 1.24% .93% .95% .95% .95%
Ratio of Net Investment Income to
Average Net Assets............... 7.27% 7.78% 8.00% 7.40% 8.54%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
32
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 93.5%
CONSUMER DURABLES 0.5%
300 Harman International Industries Inc...................... $ 14,775
100 Lennar Corp.............................................. 2,500
200 Snap On Inc.............................................. 9,475
----------
26,750
----------
CONSUMER NON-DURABLES 6.6%
850 Borders Group Inc. (b)................................... 27,413
300 Coca Cola Enterprises Inc................................ 10,387
400 Fila Holdings -ADR (Italy)............................... 34,500
500 Gadzooks Inc. (b)........................................ 16,125
500 Liz Claiborne Inc........................................ 17,312
100 Mossimo Inc. (b)......................................... 3,987
800 Nautica Enterprises Inc. (b)............................. 23,000
500 Nike Inc.-Class B........................................ 51,375
850 Oakley Inc. (b).......................................... 38,675
400 St. John Knits Inc....................................... 17,850
1,150 Tommy Hilfiger Corp. (b)................................. 61,669
400 USA Detergents Inc. (b).................................. 15,950
500 Wolverine World Wide Inc................................. 16,250
----------
334,493
----------
CONSUMER SERVICES 13.0%
1,300 AccuStaff Inc............................................ 35,425
600 Anchor Gaming (b)........................................ 36,150
400 APAC Teleservices Inc. (b)............................... 14,400
550 Apollo Group Inc.-Class A (b)............................ 15,400
400 Career Horizons Inc. (b)................................. 14,000
100 CKS Group Inc. (b)....................................... 3,225
525 Clear Channel Communications (b)......................... 43,247
850 COREStaff Inc. (b)....................................... 38,037
900 Corrections Corp. of America (b)......................... 63,000
800 Doubletree Corp. (b)..................................... 28,400
450 Evergreen Media Corp.-Class A (b)........................ 19,238
1,050 Gartner Group Inc. (b)................................... 38,456
300 HA-LO Industries Inc. (b)................................ 7,800
700 Hospitality Franchise Systems Inc. (b)................... 49,000
900 Imperial Credit Industries (b)........................... 27,225
500 Infinity Broadcasting Corp. (b).......................... 15,000
300 Interpublic Group Cos. Inc. (b).......................... 14,062
300 Meredith Corp............................................ 12,525
500 Mirage Resorts Inc. (b).................................. 27,000
350 National Data Corp....................................... 11,988
350 Omnicom Group............................................ 16,275
400 Promus Hotel Corp. (b)................................... 11,850
200 RAC Financial Group Inc. (b)............................. 5,650
1,200 Regal Cinemas Inc. (b)................................... 54,900
400 Reynolds & Reynolds Co................................... 21,300
900 Sitel Corp............................................... 37,800
----------
661,353
----------
ENERGY 5.0%
200 B.J. Services Co. (b).................................... 7,025
500 Chesapeake Energy Corp. (b).............................. 44,937
750 Diamond Offshore Drilling (b)............................ 42,938
300 Flores & Rucks Inc. (b).................................. 10,350
</TABLE>
See Notes to Financial Statements
33
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY (CONTINUED)
1,100 Global Marine Inc. (b)................................... $ 15,262
1,000 Marine Drilling Co. Inc. (b)............................. 10,125
400 Noble Drilling Corp. (b)................................. 5,550
550 Pogo Producing Co........................................ 20,969
650 Pride Pete Services Inc. (b)............................. 9,262
100 Primark Corp. (b)........................................ 3,262
500 Reading & Bates Corp. (b)................................ 11,062
650 Rowan Cos. Inc. (b)...................................... 9,587
500 Smith International Inc. (b)............................. 15,062
500 Sonat Offshore Drilling Inc.............................. 25,250
500 Tidewater Inc............................................ 21,937
----------
252,578
----------
FINANCE 6.1%
550 Aames Financial Corp..................................... 19,731
225 American Bankers Insurance Group......................... 9,816
400 CMAC Investment Corp..................................... 23,000
200 Conseco Inc.............................................. 8,000
100 CRA Managed Care Inc. (b)................................ 4,475
200 Cullen Frost Bankers Inc................................. 5,550
450 Exel Ltd................................................. 31,725
550 Finova Group Inc......................................... 26,812
200 First Bank System Inc.................................... 11,600
400 Firstar Corp............................................. 18,450
300 Green Tree Financial Corp................................ 9,375
600 Money Store Inc.......................................... 13,275
200 North Fork Bancorp....................................... 5,225
250 Old Republic International Corp.......................... 5,375
500 Oxford Resources Corp.-Class A (b)....................... 11,625
400 Penncorp Financial Group Inc............................. 12,700
200 Peoples Heritage Financial............................... 4,075
200 Star Banc Corp........................................... 13,475
400 SunAmerica Inc........................................... 22,600
500 TCF Financial Corp. (b).................................. 16,625
200 TIG Holdings Inc......................................... 5,800
450 Vesta Insurance Group Inc................................ 15,019
500 Washington Mutual Inc.................................... 14,937
----------
309,265
----------
HEALTH CARE 16.5%
200 ABR Information Services Inc. (b)........................ 10,050
450 Access Health Inc. (b)................................... 21,262
300 Advanced Technology Laboratories Inc. (b)................ 10,950
300 Amisys Managed Care Systems (b).......................... 7,725
200 Arterial Vascular Engineering (b)........................ 7,250
600 ClinTrials Research Inc. (b)............................. 24,900
1,000 CNS Inc. (b)............................................. 24,250
200 Coherent Inc. (b)........................................ 10,400
400 Compdent Corp. (b)....................................... 18,600
200 CONMED Corp. (b)......................................... 5,325
400 Curative Technologies Inc. (b)........................... 10,500
650 Dura Pharmaceuticals Inc. (b)............................ 36,400
200 Elan -ADR (Ireland) (b).................................. 11,425
300 Enterprise Systems Inc. (b).............................. 8,250
500 ESC Medical Systems Ltd. (b)............................. 14,125
</TABLE>
See Notes to Financial Statements
34
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE (CONTINUED)
300 Genesis Health Ventures Inc. (b)......................... $ 9,413
300 Genetics Institute Inc. (b).............................. 19,050
900 Guidant Corp............................................. 44,325
200 Gulf South Medical Supply Inc. (b)....................... 7,800
1,700 HBO & Co................................................. 115,175
1,125 Health Management Association Inc.-Class A (b)........... 22,781
600 Health Management Systems Inc. (b)....................... 19,050
200 Healthcare Compare Corp. (b)............................. 9,750
950 Healthsouth Rehabilitation (b)........................... 34,200
850 Hologic Inc. (b)......................................... 37,612
200 HPR Inc. (b)............................................. 4,250
200 Invacare Corp............................................ 4,700
450 Jones Medical Industries Inc............................. 14,963
100 Lunar Corp. (b).......................................... 3,450
300 Medaphis Corp. (b)....................................... 11,925
500 Mentor Corp. (b)......................................... 12,750
400 MiniMed Inc. (b)......................................... 11,900
300 National Medical Enterprises Inc. (b).................... 6,413
1,500 Omnicare Inc............................................. 39,750
350 Orthodontic Centers of America (b)....................... 9,275
200 Parexel International Corp. (b).......................... 9,650
300 Phycor Inc. (b).......................................... 11,400
1,100 Physician Reliance Network (b)........................... 24,475
650 Physician Sales & Service Inc. (b)....................... 15,762
250 Quintiles Transnational (b).............................. 16,437
650 Renal Treatment Centers Inc. (b)......................... 18,688
300 Rexall Sundown Inc. (b).................................. 8,100
300 Spine-Tech Inc. (b)...................................... 8,700
300 Target Therapeutics Inc. (b)............................. 12,300
400 Thermedics Inc. (b)...................................... 10,000
350 Total Renal Care Holdings (b)............................ 14,788
200 United Dental Care Inc. (b).............................. 8,450
600 Universal Health Services Inc.-Class B (b)............... 15,675
250 Veterinary Centers of America (b)........................ 5,594
----------
839,963
----------
PRODUCER MANUFACTURING 4.9%
200 Cable Design Technologies (b)............................ 6,550
300 Camco International Inc.................................. 10,163
450 Danaher Corp............................................. 19,575
300 Foster Wheeler Corp...................................... 13,463
450 Granite Construction Inc................................. 10,350
300 Greenfield Industries Inc................................ 9,900
600 Kent Electronics Corp. (b)............................... 18,750
300 LSI Industries Inc....................................... 5,175
100 MEMC Electronic Materials (b)............................ 3,875
200 Mueller Industries Inc. (b).............................. 8,300
300 Precision Castparts Co................................... 12,900
500 Sanifill Inc. (b)........................................ 24,625
200 Thermo Instrument System Inc. (b)........................ 6,450
1,000 U.S. Filter Corp. (b).................................... 34,750
900 United Waste Systems Inc. (b)............................ 29,025
300 USA Waste Services Inc. (b).............................. 8,888
600 Zygo Corp. (b)........................................... 26,250
----------
248,989
----------
</TABLE>
See Notes to Financial Statements
35
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
RAW MATERIALS/PROCESSING INDUSTRIES 1.6%
500 Goodrich (B.F.) Co....................................... $ 18,688
450 Millipore Corp........................................... 18,844
350 Pentair Inc.............................................. 10,500
500 Praxair Inc.............................................. 21,125
200 Sealed Air Corp. (b)..................................... 6,725
200 Titanium Metals Corp. (b)................................ 5,175
----------
81,057
----------
RETAIL 8.0%
1,000 Bed Bath & Beyond Inc. (b)............................... 26,750
600 Boise Cascade Office Product Corp. (b)................... 20,775
350 Chronimed Inc. (b)....................................... 6,431
700 Claire's Stores Inc...................................... 19,337
400 CompUSA Inc. (b)......................................... 13,650
600 Consolidated Stores Corp. (b)............................ 22,050
1,100 Corporate Express Inc. (b)............................... 44,000
400 Eckerd Corp. (b)......................................... 9,050
300 Gap Inc.................................................. 9,637
200 Hughes Supply Inc........................................ 6,950
200 Jacor Communications-Class A (b)......................... 6,175
400 Just for Feet Inc. (b)................................... 21,150
400 Petco Animal Supplies (b)................................ 11,500
250 Planet Hollywood International Inc.-Class A (b).......... 6,750
300 Richfood Holdings Inc.................................... 9,750
900 Ross Stores Inc.......................................... 31,275
400 Safeway Inc. (b)......................................... 13,200
550 Staples Inc. (b)......................................... 10,725
250 Tiffany & Co............................................. 18,250
350 TJX Cos. Inc............................................. 11,812
950 U.S. Office Products Co. (b)............................. 39,900
500 Viking Office Products (b)............................... 15,687
700 Vons Cos. Inc. (b)....................................... 26,162
600 Zale Corp. (b)........................................... 10,125
----------
411,091
----------
TECHNOLOGY 28.1%
300 Adaptec Inc. (b)......................................... 14,213
350 Applix Inc. (b).......................................... 10,063
1,900 Ascend Communications Inc. (b)........................... 106,875
500 Aspect Telecommunications Corp. (b)...................... 24,750
300 Aspen Technology Inc. (b)................................ 16,500
200 Astea International Inc. (b)............................. 4,850
500 Auspex Systems Inc. (b).................................. 7,500
350 BMC Industries Inc....................................... 10,063
400 BMC Software Inc. (b).................................... 23,900
2,000 Cadence Design Systems Inc. (b).......................... 67,500
600 Cambridge Technology Partners Inc. (b)................... 18,300
1,000 Cascade Communications Corp. (b)......................... 68,000
200 CBT Group Ltd. -ADR (Ireland) (b)........................ 9,250
900 Checkpoint Systems Inc. (b).............................. 30,938
900 Cisco Systems Inc. (b)................................... 50,963
400 Citrix Systems Inc. (b).................................. 15,200
200 Clarify Inc. (b)......................................... 9,900
100 Computer Associates International Inc.................... 7,125
250 Concord EFS Inc. (b)..................................... 8,875
</TABLE>
See Notes to Financial Statements
36
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY (CONTINUED)
200 CyCare Systems Inc. (b).................................. $ 10,425
900 DSP Communications Inc................................... 46,238
600 ECI Telecommunications Limited Designs................... 13,950
200 GT Interactive Software Corp. (b)........................ 3,350
300 IDX Systems Corp. (b).................................... 11,700
800 Input/Output Inc. (b).................................... 25,900
300 Inso Corp. (b)........................................... 15,713
400 Integrated Systems Inc. (b).............................. 16,025
400 Lucent Technologies Inc.................................. 15,150
1,750 McAfee Associates Inc. (b)............................... 85,750
275 Medic Computer Systems Inc. (b).......................... 22,309
500 Mylex Corp. (b).......................................... 8,875
500 Network General Corp. (b)................................ 10,750
350 Newbridge Networks Corp. (b)............................. 22,925
600 Oracle Systems Corp. (b)................................. 23,662
1,500 PairGain Technologies Inc. (b)........................... 93,000
750 Parametric Technology Corp. (b).......................... 32,531
550 Paychex Inc.............................................. 26,469
500 Peoplesoft Inc. (b)...................................... 35,625
400 Picturetel Corp. (b)..................................... 15,750
300 Project Software & Development Inc. (b).................. 14,063
400 Proxim Inc. (b).......................................... 16,100
150 Remedy Corp. (b)......................................... 10,950
250 SCI Systems Inc. (b)..................................... 10,156
300 SDL Inc. (b)............................................. 8,325
400 Security Dynamics Technology Inc. (b).................... 32,900
350 Shiva Corp. (b).......................................... 28,000
200 Sterling Commerce Inc. (b)............................... 7,425
300 Structural Dynamics Research Corp. (b)................... 6,600
900 Sun Microsystems Inc. (b)................................ 52,988
500 SunGard Data Systems Inc. (b)............................ 20,063
800 TCSI Corp. (b)........................................... 19,300
350 Transition Systems Inc. (b).............................. 9,975
1,000 U.S. Robotics Corp. (b).................................. 85,500
200 U.S. Satellite Broadcasting Co. (b)...................... 7,550
700 Viasoft Inc. (b)......................................... 45,238
250 Visio Corp. (b).......................................... 9,000
350 Vitesse Semiconductor (b)................................ 8,400
----------
1,433,395
----------
TRANSPORTATION 1.4%
300 America West Airlines-Class B (b)........................ 6,600
200 Atlas Air Inc. (b)....................................... 11,500
400 Comair Holdings Inc...................................... 10,800
700 Continental Airlines Inc.-Class B (b).................... 43,225
----------
72,125
----------
UTILITIES 1.8%
300 ACC Corp. (b)............................................ 14,588
600 Cincinnati Bell Inc...................................... 31,275
600 Frontier Corp............................................ 18,375
900 LCI International Inc. (b)............................... 28,238
----------
92,476
----------
TOTAL LONG-TERM INVESTMENTS 93.5%
(Cost $4,102,456) (a)........................................... 4,763,535
</TABLE>
See Notes to Financial Statements
37
<PAGE>
EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- ----------------------------------
<C> <S> <C>
REPURCHASE
AGREEMENT 6.2%
Lehman Government
Securities
($315,000 par--
collateralized by
U.S. Government
obligations in a
pooled cash
account, dated
06/28/96, to be
sold on 07/01/96
at $315,143)...... $ 315,000
OTHER ASSETS IN
EXCESS OF
LIABILITIES 0.3%... 16,209
----------
NET ASSETS 100%.... $5,094,744
----------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes, cost is $4,102,456, the
aggregate gross unrealized appreciation is $835,763 and the aggregate gross
unrealized depreciation is $174,684, resulting in net unrealized
appreciation of $661,079.
(b) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
38
<PAGE>
EMERGING GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $4,102,456) (Note 1)............ $4,763,535
Repurchase Agreement (Note 1)...................................... 315,000
Cash............................................................... 5,275
Receivables:
Securities Sold................................................... 34,278
Dividends......................................................... 897
Unamortized Organizational Expenses (Note 1)....................... 5,462
Other.............................................................. 1,891
----------
Total Assets...................................................... 5,126,338
----------
LIABILITIES:
Payables:
Securities Purchased.............................................. 8,738
Distributor and Affiliates (Note 2)............................... 4,750
Fund Shares Repurchased........................................... 172
Accrued Expenses................................................... 14,359
Deferred Compensation and Retirement Plans (Note 2)................ 3,575
----------
Total Liabilities................................................. 31,594
----------
NET ASSETS......................................................... $5,094,744
----------
NET ASSETS CONSIST OF:
Capital (Note 3)................................................... $4,569,120
Net Unrealized Appreciation on Securities.......................... 661,079
Accumulated Net Investment Loss.................................... (2,919)
Accumulated Net Realized Loss on Securities........................ (132,536)
----------
NET ASSETS......................................................... $5,094,744
----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $5,094,744 and 372,158 shares of
capital stock issued and outstanding) (Note 3).................... $ 13.69
----------
</TABLE>
See Notes to Financial Statements
39
<PAGE>
EMERGING GROWTH FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 5,435
Dividends............................................................ 5,015
--------
Total Income........................................................ 10,450
--------
EXPENSES:
Accounting (Note 2).................................................. 34,753
Investment Advisory Fee (Note 2)..................................... 10,145
Shareholder Services (Note 2)........................................ 7,805
Trustees Fees and Expenses (Note 2).................................. 4,902
Audit................................................................ 4,750
Amortization of Organizational Expenses (Note 1)..................... 683
Other ............................................................... 670
--------
Total Expenses...................................................... 63,708
Less: Fees Deferred and Expenses Reimbursed ($10,145 and $41,092,
respectively)....................................................... 51,237
Earnings Credits on Cash Balances (Note 1)........................ 152
--------
Net Expenses........................................................ 12,319
--------
NET INVESTMENT LOSS.................................................. $ (1,869)
--------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Loss on Investments..................................... $(75,033)
--------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................. 244,665
End of the Period:
Investments......................................................... 661,079
--------
Net Unrealized Appreciation on Securities During the Period.......... 416,414
--------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES....................... $341,381
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................... $339,512
--------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Period July 3, 1995
(Commencement of Investment Operations) to December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Period Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss....................... $ (1,869) $ (9,942)
Net Realized Loss on Securities........... (75,033) (57,503)
Net Unrealized Appreciation
on Securities During the Period.......... 416,414 244,665
---------- ----------
Change in Net Assets from Operations...... 339,512 177,220
---------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 2,863,718 2,362,883
Cost of Shares Repurchased................ (398,143) (250,546)
---------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. 2,465,575 2,112,337
---------- ----------
TOTAL INCREASE IN NET ASSETS.............. 2,805,087 2,289,557
NET ASSETS:
Beginning of the Period................... 2,289,657 100
---------- ----------
End of the Period (Including undistributed
net investment income of
$(2,919) and $(1,050), respectively)..... $5,094,744 $2,289,657
---------- ----------
</TABLE>
See Notes to Financial Statements
40
<PAGE>
EMERGING GROWTH FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995
(Commencement
of Investment
Six Months Operations)
Ended to December
June 30, 1996 31, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period....... $11.72 $10.00
------- -------
Net Investment Loss........................... (.003) (.08)
Net Realized and Unrealized
Gain on Securities........................... 1.973 1.80
------- -------
Total from Investment Operations............... 1.970 1.72
------- -------
Net Asset Value, End of the Period............. $13.690 $11.72
------- -------
Total Return*.................................. 16.91%** 17.20%**
Net Assets at End of the Period (In millions).. $5.1 $2.3
Ratio of Expenses to Average Net Assets*....... .87% 2.50%
Ratio of Net Investment Income to Average Net
Assets*........................................ (.13)% (1.45)%
Portfolio Turnover............................. 41%** 41%**
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets........ 4.41% 5.40%
Ratio of Net Investment Income to Average Net
Assets......................................... (3.66)% (4.35)%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
41
<PAGE>
ENTERPRISE FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 96.4%
CONSUMER DISTRIBUTION 10.3%
7,000 Dayton Hudson Corp....................................... $ 721,875
43,800 Eckerd Corp. (b)......................................... 990,975
15,300 Gap Inc.................................................. 491,512
16,000 General Nutrition Cos. Inc. (b).......................... 280,000
8,400 Gymboree Corp. (b)....................................... 256,200
16,000 Kroger Co. (b)........................................... 632,000
8,100 Lear Seating Corp. (b)................................... 285,525
15,800 Officemax Inc. (b)....................................... 377,225
7,000 Pep Boys--Manny, Moe & Jack.............................. 238,000
34,800 Safeway Inc. (b)......................................... 1,148,400
16,200 Sears, Roebuck & Co...................................... 787,725
18,900 Staples Inc. (b)......................................... 368,550
6,500 Tiffany & Co............................................. 474,500
11,800 TJX Cos. Inc............................................. 398,250
12,100 U.S. Office Products Co. (b)............................. 508,200
10,000 Vons Cos. Inc. (b)....................................... 373,750
-----------
8,332,687
-----------
CONSUMER DURABLES 2.8%
8,500 Black & Decker Corp...................................... 328,312
14,300 Chrysler Corp............................................ 886,600
11,500 Ford Motor Co............................................ 372,312
8,700 Harley Davidson Inc...................................... 357,787
7,700 Snap On Inc.............................................. 364,788
-----------
2,309,799
-----------
CONSUMER NON-DURABLES 7.8%
6,100 Fila Holdings--ADR (Italy)............................... 526,125
11,300 Liz Claiborne Inc........................................ 391,262
15,800 Nautica Enterprises Inc. (b)............................. 454,250
6,300 Oakley Inc. (b).......................................... 286,650
29,800 Pepsico Inc.............................................. 1,054,175
31,400 Philip Morris Cos. Inc................................... 3,265,600
6,000 Tommy Hilfiger Corp. (b)................................. 321,750
-----------
6,299,812
-----------
CONSUMER SERVICES 8.5%
6,000 American Radio Systems Corp. (b)......................... 258,000
9,800 Career Horizons Inc. (b)................................. 343,000
9,600 Emmis Broadcasting Corp. (b)............................. 480,000
15,000 Equifax Inc.............................................. 393,750
13,800 Evergreen Media Corp. (b)................................ 589,950
3,000 Hilton Hotels Corp....................................... 337,500
9,000 La Quinta Inns Inc....................................... 301,500
12,200 Marriott International Inc............................... 655,750
9,000 Mirage Resorts Inc. (b).................................. 486,000
18,000 Omnicom Group............................................ 837,000
11,500 Outback Steakhouse Inc. (b).............................. 396,570
10,500 Promus Hotel Corp. (b)................................... 311,063
14,500 Service Corp. International.............................. 833,750
10,000 Sonic Corp. (b).......................................... 242,500
14,300 Trump Hotels & Casino Resorts (b)........................ 407,550
-----------
6,873,883
-----------
</TABLE>
See Notes to Financial Statements
42
<PAGE>
ENTERPRISE FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
ENERGY 4.6%
7,300 Baker Hughes Inc......................................... $ 239,987
7,600 Exxon Corp............................................... 660,250
12,000 Panhandle Eastern Corp................................... 394,500
8,200 Phillips Petroleum Co.................................... 343,375
19,500 Smith International Inc. (b)............................. 587,438
4,000 Sonat Offshore Drilling Inc.............................. 202,000
7,300 Texaco Inc............................................... 612,288
13,650 Williams Cos............................................. 675,675
-----------
3,715,513
-----------
FINANCE 14.1%
9,150 Aames Financial Corp..................................... 328,256
7,300 Alex Brown Inc........................................... 412,450
12,500 Bank of Boston Corp...................................... 618,750
8,700 BankAmerica Corp......................................... 659,025
13,300 Chase Manhattan Corp..................................... 939,312
6,600 Citicorp................................................. 545,325
6,700 CMAC Investment Corp..................................... 385,250
12,000 Conseco Inc.............................................. 480,000
41,000 Federal National Mortgage Association.................... 1,373,500
27,000 Green Tree Financial Corp................................ 843,750
8,145 Merrill Lynch & Co. Inc.................................. 530,443
7,200 MGIC Investment Corp..................................... 404,100
14,600 Money Store Inc.......................................... 323,025
8,200 Morgan Stanley Group Inc................................. 402,825
6,500 NationsBank Corp......................................... 537,063
11,300 Penncorp Financial Group Inc............................. 358,775
8,400 Student Loan Marketing Association....................... 621,600
15,900 SunAmerica Inc........................................... 898,350
10,500 Travelers Group Inc...................................... 479,063
1,500 Wells Fargo & Co......................................... 358,313
-----------
11,499,175
-----------
HEALTH CARE 10.7%
6,600 Amgen Inc. (b)........................................... 356,400
4,500 Bristol Myers Squibb Co.................................. 405,000
3,300 Coherent Inc. (b)........................................ 171,600
6,800 Elan PLC--ADR (Ireland) (b).............................. 388,450
7,600 Genzyme Corp. (b)........................................ 381,900
7,400 Guidant Corp............................................. 364,450
18,000 Health Management Association Inc. (b)................... 364,500
6,500 Healthcare Compare Corp.................................. 316,875
13,400 Healthsouth Rehabilitation (b)........................... 482,400
17,200 Johnson & Johnson........................................ 851,400
13,000 Lincare Holdings Inc. (b)................................ 510,250
6,800 Medtronic Inc............................................ 380,800
5,500 Mentor Corp.............................................. 140,250
8,900 Merck & Co. Inc.......................................... 575,163
8,500 Orthodontic Centers of America (b)....................... 225,250
8,400 Pfizer Inc............................................... 599,550
9,200 Physician Reliance Network (b)........................... 204,700
15,300 Renal Treatment Centers Inc. (b)......................... 439,875
11,700 Schering Plough Corp..................................... 734,175
6,800 Sofamor/Danek Group Inc. (b)............................. 188,700
9,000 Universal Health Services Inc. (b)....................... 235,125
9,300 Watson's Pharmaceuticals Inc. (b)........................ 352,238
-----------
8,669,051
-----------
</TABLE>
See Notes to Financial Statements
43
<PAGE>
ENTERPRISE FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
PRODUCER MANUFACTURING 5.8%
6,900 Belden Inc............................................... $ 207,000
9,100 Case Corp................................................ 436,800
10,000 Deere & Co............................................... 400,000
12,200 Dover Corp............................................... 562,725
9,600 Greenfield Industries Inc................................ 316,800
5,500 Illinois Tool Works Inc.................................. 371,937
2,800 Johnson Controls Inc..................................... 194,600
6,100 MSC Industrial Direct Co. (b)............................ 196,725
4,300 United Technologies Corp................................. 494,500
24,000 United Waste Systems Inc. (b)............................ 774,000
14,900 USA Waste Services Inc. (b).............................. 441,413
13,500 Wellman Inc.............................................. 315,563
-----------
4,712,063
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 4.5%
9,000 AK Steel Holding Corp.................................... 352,125
7,000 Bemis Inc................................................ 245,000
4,800 Boise Cascade Corp....................................... 175,800
3,700 Cytec Industries Inc. (b)................................ 316,350
9,100 Fort Howard Corp. New (b)................................ 180,862
2,900 Phelps Dodge Corp........................................ 180,888
21,200 Praxair Inc.............................................. 895,700
6,000 Raychem Corp............................................. 431,250
5,900 Sigma Aldrich Corp....................................... 315,650
9,200 Union Carbide Corp....................................... 365,700
3,400 Willamette Industries Inc................................ 202,300
-----------
3,661,625
-----------
TECHNOLOGY 22.3%
6,300 3Com Corp. (b)........................................... 288,225
5,700 Adaptec Inc. (b)......................................... 270,037
8,000 ADC Telecommunications Inc. (b).......................... 360,000
14,300 Analog Devices Inc. (b).................................. 364,650
8,700 Ascend Communications Inc. (b)........................... 489,375
9,200 Aspect Telecommunications Corp. (b)...................... 455,400
8,000 Atmel Corp. (b).......................................... 241,000
9,100 BMC Industries Inc....................................... 261,625
10,300 BMC Software Inc. (b).................................... 615,425
8,700 Boeing Co................................................ 757,987
13,500 Cadence Design Systems Inc. (b).......................... 455,625
4,700 Cascade Communications (b)............................... 319,600
13,100 Cisco Systems Inc. (b)................................... 741,787
15,300 Computer Association International Inc................... 1,090,125
13,900 DST Systems Inc. (b)..................................... 444,800
13,300 ECI Telecom Ltd.......................................... 309,225
19,000 Ericsson LM -ADR (Sweden)................................ 408,500
5,800 First Data Corp.......................................... 461,825
3,700 Hewlett Packard Co....................................... 368,612
6,800 Input/Output Inc. (b).................................... 220,150
9,900 Intel Corp............................................... 727,031
10,700 Linear Technology Corp................................... 321,000
7,000 Lucent Technologies Inc.................................. 265,125
6,600 Medic Computer Systems Inc. (b).......................... 535,425
9,000 Microsoft Corp. (b)...................................... 1,081,125
5,200 Newbridge Networks Corp. (b)............................. 340,600
</TABLE>
See Notes to Financial Statements
44
<PAGE>
ENTERPRISE FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY (CONTINUED)
16,000 Octel Communications (b)................................. $ 316,000
12,150 Oracle System Corp. (b).................................. 479,166
10,800 Pairgain Technologies Inc. (b)........................... 669,600
5,000 Peoplesoft Inc. (b)...................................... 356,250
9,500 Picturetel Corp. (b)..................................... 374,063
7,900 Proxim Inc. (b).......................................... 317,975
6,000 Sanmina Corp. (b)........................................ 162,000
12,500 SCI Systems Inc. (b)..................................... 507,813
17,700 Sun Microsystems Inc. (b)................................ 1,042,088
7,000 Synopsys Inc. (b)........................................ 278,250
7,800 Tellabs Inc. (b)......................................... 521,625
8,400 U.S. Robotics Corp. (b).................................. 718,200
6,600 Wind River System Inc. (b)............................... 227,700
-----------
18,165,009
-----------
TRANSPORTATION 1.2%
4,000 Continental Airlines Inc. (b)............................ 247,000
7,400 CSX Corp................................................. 357,050
10,500 Northwest Airlines Inc. (b).............................. 414,750
-----------
1,018,800
-----------
UTILITIES 3.8%
12,500 LCI International Inc. (b)............................... 392,187
31,600 MCI Communications Corp.................................. 809,750
17,200 Sprint Corp.............................................. 722,400
21,000 WorldCom Inc. (b)........................................ 1,162,875
-----------
3,087,212
-----------
TOTAL LONG-TERM INVESTMENTS 96.4%
(Cost $66,046,064) (a).......................................... 78,344,629
REPURCHASE AGREEMENT 2.4%
Lehman Government Securities ($1,950,000 par-collateralized by
U.S. Government obligations in a pooled cash account, dated
06/28/96, to be sold on 07/01/96 at $1,950,869)................. 1,950,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.2%....................... 948,174
-----------
NET ASSETS 100%.................................................. $81,242,803
-----------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes cost is $66,064,023, the
aggregate gross unrealized appreciation is $13,357,810 and the aggregate
gross unrealized depreciation is $1,077,204, resulting in net unrealized
appreciation of $12,280,606.
(b) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
45
<PAGE>
ENTERPRISE FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $66,046,064) (Note 1).......... $78,344,629
Repurchase Agreement (Note 1)..................................... 1,950,000
Cash.............................................................. 701
Receivables:
Securities Sold.................................................. 1,289,773
Dividends........................................................ 63,216
Fund Shares Sold................................................. 16,876
Other............................................................. 22,103
-----------
Total Assets..................................................... 81,687,298
-----------
LIABILITIES:
Payables:
Securities Purchased............................................. 346,310
Investment Advisory Fee (Note 2)................................. 31,291
Fund Shares Repurchased.......................................... 7,639
Distributor and Affiliates (Note 2).............................. 6,375
Deferred Compensation and Retirement Plans (Note 2)............... 31,446
Accrued Expenses.................................................. 21,434
-----------
Total Liabilities................................................ 444,495
-----------
NET ASSETS........................................................ $81,242,803
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $62,410,751
Net Unrealized Appreciation on Securities......................... 12,298,565
Accumulated Net Realized Gain on Securities....................... 6,250,419
Accumulated Undistributed Net Investment Income................... 283,068
-----------
NET ASSETS........................................................ $81,242,803
-----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $81,242,803 and 5,069,219 shares of capital stock issued and
outstanding) (Note 3)............................................ $ 16.03
-----------
</TABLE>
See Notes to Financial Statements
46
<PAGE>
ENTERPRISE FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................... $ 500,892
Interest............................................................ 46,815
-----------
Total Income....................................................... 547,707
-----------
EXPENSES:
Investment Advisory Fee (Note 2).................................... 202,013
Accounting (Note 2)................................................. 43,165
Trustees Fees and Expenses (Note 2)................................. 18,787
Shareholder Services (Note 2)....................................... 7,763
Other .............................................................. 26,556
-----------
Total Expenses..................................................... 298,284
Less Fees Deferred................................................. 55,869
-----------
Net Expenses....................................................... 242,415
-----------
NET INVESTMENT INCOME............................................... $ 305,292
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments.................................... $ 6,357,358
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................ 9,274,444
End of the Period:
Investments........................................................ 12,298,565
-----------
Net Unrealized Appreciation on Securities During the Period......... 3,024,121
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES...................... $ 9,381,479
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................... $ 9,686,771
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................... $ 305,292 $ 1,464,956
Net Realized Gain on Securities........... 6,357,358 10,869,574
Net Unrealized Appreciation on Securities
During the Period........................ 3,024,121 9,837,636
----------- ------------
Change in Net Assets from Operations...... 9,686,771 22,172,166
----------- ------------
Distributions from Net Investment Income.. (55,409) (1,446,938)
Distributions from Net Realized Gain on
Securities............................... (2,639,122) (8,808,250)
----------- ------------
Total Distributions....................... (2,694,531) (10,255,188)
----------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ 6,992,240 11,916,978
----------- ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 4,233,023 6,340,082
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... 2,694,531 10,255,188
Cost of Shares Repurchased................ (8,686,851) (19,974,310)
----------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. (1,759,297) (3,379,040)
----------- ------------
TOTAL INCREASE IN NET ASSETS.............. 5,232,943 8,537,938
NET ASSETS:
Beginning of the Period................... 76,009,860 67,471,922
----------- ------------
End of the Period (Including undistributed
net investment income of $283,068 and
$33,185, respectively)................... $81,242,803 $ 76,009,860
----------- ------------
</TABLE>
See Notes to Financial Statements
47
<PAGE>
ENTERPRISE FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended -----------------------------
June 30, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................. $14.69 $12.39 $14.57 $14.21 $13.44
------- ------ ------- ------ ------
Net Investment Income............. .061 .32 .25 .21 .23
Net Realized and Unrealized
Gain/Loss on Securities.......... 1.812 4.22 (.7625) 1.0325 .77
------- ------ ------- ------ ------
Total from Investment Operations... 1.873 4.54 (.5125) 1.2425 1.00
------- ------ ------- ------ ------
Less:
Distributions from Net Investment
Income............................ .011 .3175 .25 .215 .23
Distributions from Net Realized
Gain on Securities............... .525 1.9225 1.4175 .6675 -0-
------- ------ ------- ------ ------
Total Distributions................ .536 2.24 1.6675 .8825 .23
------- ------ ------- ------ ------
Net Asset Value, End of the Period. $16.027 $14.69 $12.39 $14.57 $14.21
------- ------ ------- ------ ------
Total Return*...................... 12.89%** 36.98% (3.39)% 8.98% 7.48%
Net Assets at End of the Period (In
millions).......................... $81.2 $76.0 $67.5 $72.3 $65.6
Ratio of Expenses to Average Net
Assets*............................ .60% .60% .60% .60% .60%
Ratio of Net Investment Income to
Average Net Assets*................ .76% 2.06% 1.72% 1.41% 1.78%
Portfolio Turnover................. 112%** 145% 153% 139% 116%
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets............................. .74% .68% .68% .72% .74%
Ratio of Net Investment Income to
Average Net Assets................. .62% 1.98% 1.64% 1.29% 1.64%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
48
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 91.6%
AUSTRIA 2.3%
300 Flughafen Wien........................................... $ 20,613
100 Slovakofarma (b)......................................... 30,531
300 Wolford.................................................. 24,476
----------
75,620
----------
AUSTRALIA 0.8%
200 News Corp. (ADR)......................................... 4,700
3,000 WMC...................................................... 21,454
----------
26,154
----------
CROATIA 0.2%
168 Pliva (GDR).............................................. 6,678
----------
CZECH REPUBLIC 3.0%
500 Ceske Radiokomunikace.................................... 72,693
1,000 Komercni Banka (GDR)..................................... 27,000
----------
99,693
----------
DENMARK 0.7%
990 ISS International........................................ 22,137
----------
FINLAND 0.1%
100 Nokia Corp. (ADR)........................................ 3,700
----------
FRANCE 3.6%
280 Christian Dior........................................... 36,473
600 Compagnie Financiere (GDR)............................... 28,656
100 Ecco Ste................................................. 25,177
200 Societe Europeene de Propulsion.......................... 23,136
30 Sidel.................................................... 7,635
----------
121,077
----------
GERMANY 2.5%
500 Adidas................................................... 42,059
600 Berliner Elektro Holdings................................ 16,751
500 Veba..................................................... 26,593
----------
85,403
----------
HONG KONG 3.7%
10,000 First Pacific Co......................................... 15,373
3,000 Henderson Land Development............................... 22,479
6,000 Hutchison Whampoa........................................ 37,748
70,000 Jilin Chemical Industries, Class H....................... 12,389
4,000 Swire Pacific............................................ 34,234
----------
122,223
----------
HUNGARY 1.1%
1,000 Graboplast Textile....................................... 22,780
430 Primagaz Hungaria........................................ 15,752
----------
38,532
----------
INDONESIA 1.3%
30,000 BK Bira.................................................. 27,068
500 Perusahaan Persero Telekom (ADR)......................... 14,875
----------
41,943
----------
IRELAND 1.2%
2,000 Bank of Ireland.......................................... 13,690
20,000 Waterford Wedgewood...................................... 25,862
----------
39,552
----------
ISRAEL 0.5%
1,000 Tadiran Telecommunications............................... 16,000
----------
ITALY 2.3%
875 Gucci Group.............................................. 56,438
2,000 Mediolanum (b)........................................... 19,918
----------
76,356
----------
</TABLE>
See Notes to Financial Statements
49
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
JAPAN 18.9%
1,600 Bank of Tokyo............................................. $ 37,306
1,000 Daiichi Corp.............................................. 29,077
3,000 Daiwa Securities.......................................... 38,678
1,000 Fuji Photo Film Co........................................ 31,637
2,000 Fujitsu................................................... 18,287
2,000 Honda Motor Co............................................ 51,936
1,000 Japan Radio Corp.......................................... 14,356
2,000 Japan Securities Finance.................................. 32,369
1,000 Kurita Water Industries................................... 24,413
2,000 Mitsubishi Estate......................................... 27,614
1,000 Mitsubishi Trust & Banking................................ 16,916
7,000 Mitsubishi Chemical....................................... 32,387
3,000 Mitsubishi Heavy Industries............................... 26,142
2,000 Mitsukoshi................................................ 21,396
1,000 Natsushita Electric Industries............................ 18,653
2,000 Nichiei Construction...................................... 23,591
2,000 Nomura Securities......................................... 39,135
1 NTT Data Comms Systems.................................... 29,991
3,000 Ricoh Co.................................................. 31,820
1,000 Takashimaya Co............................................ 15,544
2,000 Tokyo Marine & Fire....................................... 26,700
3,000 Toshiba Corp.............................................. 21,396
1,000 Yamanouchi Pharmacy....................................... 21,762
----------
631,106
----------
KOREA 0.1%
300 LG Chemical Ltd. (GDR).................................... 4,950
----------
MALAYSIA 1.0%
2,000 Jaya Tiasa Holdings....................................... 11,706
7,000 Metacorp Berhad........................................... 20,204
----------
31,910
----------
MEXICO 1.1%
1,100 Cemex (ADR)............................................... 8,405
1,000 Empresas Ica Sociedad (ADR)............................... 13,875
400 Telefonos de Mexico (ADR)................................. 13,400
----------
35,680
----------
NETHERLANDS 3.7%
400 ASM Lithography HL........................................ 16,535
1,500 BE Semiconductor Industries............................... 22,219
1,000 Cap Volmac Group.......................................... 19,642
1,320 ING Group................................................. 32,971
2,000 Ver Ned Uitgevers......................................... 31,076
----------
122,443
----------
NORWAY 2.4%
1,000 Netcom (b)................................................ 10,556
857 Protector Forsikrg........................................ 21,527
5,500 Uni Storebrand............................................ 24,749
4,500 Visma..................................................... 24,271
----------
81,103
----------
POLAND 0.0%
409 Fabryki Mebell Forte (b).................................. 1,400
----------
</TABLE>
See Notes to Financial Statements
50
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
SINGAPORE 2.1%
2,400 Fraser & Neave........................................... $ 24,833
3,000 Keppel Corp.............................................. 25,089
3,000 Singapore Land........................................... 20,305
----------
70,227
----------
SWEDEN 2.6%
800 Astra, Series B.......................................... 34,924
1,600 Nobel Biocare............................................ 29,728
11,000 Rottneros................................................ 12,794
800 Stora Kopparbergs........................................ 10,574
----------
88,020
----------
SWITZERLAND 3.2%
100 Adia..................................................... 25,116
30 Ascom Holding............................................ 30,235
20 Ciba Geigy............................................... 24,396
140 Schweiz Bankverein....................................... 27,660
----------
107,407
----------
THAILAND 0.1%
1,100 Thai Military Bank....................................... 4,333
----------
UNITED KINGDOM 7.6%
10,000 Astec.................................................... 23,218
1,000 BOC Group................................................ 14,342
2,000 Boots Co................................................. 17,984
3,000 Carlton Communications................................... 24,134
4,000 Dixons Group............................................. 32,738
2,000 General Accident......................................... 20,267
2,800 Marks & Spencer.......................................... 20,460
2,000 National Westminster..................................... 19,071
2,000 Premier Farnell.......................................... 21,028
2,000 Reuters Holdings......................................... 24,196
5,000 Sun Life & Provinc (b)................................... 17,239
4,000 Tesco.................................................... 18,264
----------
252,941
----------
UNITED STATES 25.5%
100 3Com Corp................................................ 4,575
100 Aames Financial Corp..................................... 3,587
100 Adaptec, Inc. (b)........................................ 4,737
100 ADC Telecommunications, Inc.............................. 4,500
100 A.K. Steel Holding Corp.................................. 3,912
100 Alex Brown, Inc.......................................... 5,650
100 American Radio Systems Corp., Class A.................... 4,300
100 Amgen, Inc. (b).......................................... 5,400
150 Analog Devices, Inc. (b)................................. 3,825
200 Ascend Communications, Inc. (b).......................... 11,250
100 Aspect Telecommunications Corp. (b)...................... 4,950
100 Atmel Corp. (b).......................................... 3,012
120 Bank of Boston Corp...................................... 5,940
100 BankAmerica Corp......................................... 7,575
100 Belden, Inc.............................................. 3,000
100 Bemis Company, Inc....................................... 3,500
50 Black & Decker Corp...................................... 1,931
100 BMC Industries, Inc...................................... 2,875
100 BMC Software, Inc. (b)................................... 5,975
100 Boise Cascade Corp....................................... 3,662
50 Bristol-Myers Squibb Co.................................. 4,500
</TABLE>
See Notes to Financial Statements
<TABLE> 51
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
150 Cadence Design Systems, Inc. (b).......................... $ 5,062
100 Career Horizons, Inc. (b)................................. 3,500
100 Cascade Communications Corp. (b).......................... 6,800
100 Case Corp................................................. 4,800
100 Chase Manhattan Corp...................................... 7,062
100 Chrysler Corp............................................. 6,200
150 Cisco Systems, Inc. (b)................................... 8,494
100 Citicorp.................................................. 8,262
100 CMAC Investment Corp...................................... 5,750
200 Computer Associates International, Inc.................... 14,250
200 Conseco, Inc.............................................. 8,000
100 CSX Corp.................................................. 4,825
100 Cytec Industries, Inc. (b)................................ 8,550
50 Dayton Hudson Corp........................................ 5,156
100 Deere & Co................................................ 4,000
100 Dover Corp................................................ 4,612
100 DST Systems, Inc. (b)..................................... 3,200
400 Eckerd Corp. (b).......................................... 9,050
100 Emmis Broadcasting Corp., Class A (b)..................... 5,000
140 Equifax, Inc.............................................. 3,675
200 Evergreen Media Corp., Class A (b)........................ 8,550
80 Exxon Corp................................................ 6,950
500 Federal National Mortgage Association..................... 16,750
200 First Data Corp........................................... 15,925
100 Ford Motor Co............................................. 3,237
100 Fort Howard Corp. (b)..................................... 1,987
300 Frontier Corp............................................. 9,187
200 Gap, Inc.................................................. 6,425
200 General Nutrition Companies, Inc. (b)..................... 3,500
100 Genzyme Corp. (b)......................................... 5,025
250 Green Tree Financial Corp................................. 7,812
100 Greenfields Industries, Inc............................... 3,300
100 Guidant Corp.............................................. 4,925
100 Gymboree Corp. (b)........................................ 3,050
100 Harley Davidson, Inc...................................... 4,112
150 Health Management Associates, Inc., Class A (b)........... 3,037
200 Healthsouth Corp. (b)..................................... 7,200
40 Hewlett Packard Co........................................ 3,985
100 Illinois Tool Works, Inc.................................. 6,762
70 Intel Corp................................................ 5,141
200 Johnson & Johnson......................................... 9,900
100 Kroger Co................................................. 3,950
100 La Quinta Inns, Inc....................................... 3,350
100 LCI International, Inc. (b)............................... 3,137
100 Lear Corp. (b)............................................ 3,525
100 Lincare Holdings, Inc. (b)................................ 3,925
100 Linear Technology Corp.................................... 3,000
75 Liz Claiborne, Inc........................................ 2,597
100 Lucent Technologies, Inc.................................. 3,787
100 Marriott International, Inc............................... 5,375
310 MCI Communications Corp................................... 7,944
100 Medic Computer Systems, Inc. (b).......................... 8,112
</TABLE>
See Notes to Financial Statements
52
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
100 Medtronic, Inc............................................ $ 5,600
100 Mentor Corp............................................... 2,550
200 Merck & Co., Inc.......................................... 12,925
65 Merrill Lynch & Co., Inc.................................. 4,233
3,000 Metalclad Corp. (b)....................................... 9,188
100 MGIC Investment Corp...................................... 5,612
100 Microsoft Corp. (b)....................................... 12,012
100 Mirage Resorts, Inc. (b).................................. 5,400
100 Money Store, Inc.......................................... 2,213
100 Morgan Stanley Group, Inc................................. 4,913
100 MSC Industrial Direct, Inc., Class A...................... 3,225
50 Nationsbank Corp.......................................... 4,131
200 Nautica Enterprises, Inc. (b)............................. 5,750
100 Northwest Airlines Corp., Class A (b)..................... 3,950
100 Oakley, Inc. (b) ......................................... 4,550
200 Octel Communications Corp. (b)............................ 3,950
200 Office Max, Inc. (b)...................................... 4,775
200 Omnicom Group, Inc. ...................................... 9,300
150 Oracle System Corp. (b)................................... 5,916
110 Orthodontic Centers of America, Inc. (b).................. 2,915
100 Outback Steakhouse, Inc. (b).............................. 3,448
200 PairGain Technologies, Inc. (b)........................... 12,400
100 Panhandle Eastern Corp. .................................. 3,288
150 Penncorp Financial Group, Inc. ........................... 4,763
50 Peoplesoft, Inc. (b)...................................... 3,563
80 Pep Boys - Manny, Moe & Jack.............................. 2,720
400 PepsiCo, Inc. (c)......................................... 14,150
100 Pfizer, Inc. ............................................. 7,138
300 Philip Morris Companies, Inc. (c)......................... 31,200
100 Phillips Petroleum Co. ................................... 4,188
100 Picturetel Corp. (b) ..................................... 3,938
200 Praxair, Inc. ............................................ 8,450
100 Proxim, Inc. (b).......................................... 4,025
100 Raychem Corp. ............................................ 7,188
200 Renal Treatment Centers, Inc. (b)......................... 5,750
100 Ross Stores, Inc. ........................................ 3,475
340 Safeway, Inc. (b)......................................... 11,220
100 Sanmina Corp. (b)......................................... 2,700
140 Schering-Plough Corp. .................................... 8,785
100 SCI Systems, Inc. (b)..................................... 4,063
200 Sears, Roebuck & Co. ..................................... 9,725
200 Service Corp. International............................... 11,500
100 Sigma-Aldrich Corp. ...................................... 5,350
200 Smith International, Inc. ................................ 6,025
100 Sofamor Danek Group, Inc. (b)............................. 2,775
100 Sonic Corp. (b)........................................... 2,425
200 Sprint Corp. ............................................. 8,400
190 Staples, Inc. (b)......................................... 3,705
100 Student Loan Marketing Association........................ 7,400
100 Sun Microsystems, Inc. (b)................................ 5,888
200 SunAmerica, Inc. ......................................... 11,300
100 Synopsys, Inc. (b)........................................ 3,975
</TABLE>
See Notes to Financial Statements
53
<PAGE>
GLOBAL EQUITY FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONTINUED)
75 Tellabs, Inc. (b)........................................ $ 5,016
100 Texaco, Inc. ............................................ 8,388
50 Tiffany & Co. ........................................... 3,650
100 TJX Companies, Inc. ..................................... 3,375
80 Tommy Hilfiger Corp. (b)................................. 4,290
150 Travelers Group, Inc. ................................... 6,844
200 Trump Hotels & Casino Resorts, Inc. (b).................. 5,700
100 U. S. Office Products Co................................. 4,200
100 U. S. Robotics Corp...................................... 8,550
100 Union Carbide Corp....................................... 3,975
280 United Waste Systems, Inc. (b)........................... 9,030
100 Universal Health Services, Inc., Class B................. 2,613
150 USA Waste Services, Inc. (b)............................. 4,444
100 Vons Companies, Inc. (b)................................. 3,738
100 Watson Pharmaceuticals, Inc.............................. 3,788
140 Wellman, Inc............................................. 3,273
50 Willamette Industries, Inc............................... 2,975
100 Williams Companies, Inc.................................. 4,950
270 Worldcom, Inc. (b)....................................... 14,951
----------
852,144
----------
TOTAL COMMON STOCK 91.6%......................................... 3,058,732
----------
FIXED INCOME SECURITIES 0.6%
United Micro Electric ($16,000 par, 1.25% coupon, 06/08/04
maturity, convertible into 17,168 common shares)................. 20,980
----------
FOREIGN CURRENCY (VARIOUS DENOMINATIONS) 3.0%.................... 100,154
----------
TOTAL INVESTMENTS 95.2%
(Cost $2,838,195) (a)........................................... 3,179,866
OTHER ASSETS IN EXCESS OF LIABILITIES 4.8%....................... 160,459
----------
NET ASSETS 100.0%................................................ $3,340,325
----------
</TABLE>
(a) At June 30, 1996, cost for federal income tax purposes is $2,839,995; the
aggregate gross unrealized appreciation is $472,577 and the aggregate gross
unrealized depreciation is $96,407, resulting in net unrealized
appreciation including foreign currency translation of other assets and
liabilities and open forward contracts of $376,170.
(b) Non-income producing security as this stock currently does not declare
dividends.
(c) Assets segregated as collateral for open forward transactions.
See Notes to Financial Statements
54
<PAGE>
GLOBAL EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $2,838,195) (Note 1)........... $3,179,866
Receivables:
Fund Shares Sold................................................. 139,184
Securities Sold.................................................. 64,607
Dividends........................................................ 7,535
Interest......................................................... 172
Forward Currency Contracts (Note 5)............................... 36,096
Unamortized Organizational Expenses (Note 1)...................... 5,458
----------
Total Assets..................................................... 3,432,918
----------
LIABILITIES:
Payables:
Custodian Bank................................................... 43,564
Securities Purchased............................................. 18,248
Distributor and Affiliates (Note 2).............................. 3,615
Accrued Expenses.................................................. 23,632
Deferred Compensation and Retirement Plans (Note 2)............... 3,534
----------
Total Liabilities................................................ 92,593
----------
NET ASSETS........................................................ $3,340,325
----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $2,950,038
Net Unrealized Appreciation on Securities......................... 377,970
Accumulated Net Realized Gain on Securities....................... 17,677
Accumulated Net Investment Loss................................... (5,360)
----------
NET ASSETS........................................................ $3,340,325
----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $3,340,325 and 289,984 shares of capital stock issued and
outstanding) (Note 3)............................................ $ 11.52
----------
</TABLE>
See Notes to Financial Statements
55
<PAGE>
GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $2,819)................ $ 22,498
Interest.............................................................. 1,240
--------
Total Income......................................................... 23,738
--------
EXPENSES:
Custody............................................................... 38,192
Accounting (Note 2)................................................... 16,778
Investment Advisory Fee (Note 2)...................................... 14,104
Audit................................................................. 13,741
Shareholder Services (Note 2)......................................... 7,668
Trustees Fees and Expenses (Note 2)................................... 4,861
Printing.............................................................. 1,997
Legal................................................................. 1,178
Amortization of Organizational Expenses (Note 1)...................... 681
Other ................................................................ 175
--------
Total Expenses....................................................... 99,375
Less Fees Deferred and Expenses Reimbursed ($14,104 and $68,346,
respectively)........................................................ 82,450
--------
Net Expenses......................................................... 16,925
--------
NET INVESTMENT INCOME................................................. $ 6,813
--------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments.......................................................... $ 61,572
Forwards............................................................. (36,052)
--------
Net Realized Gain on Securities....................................... 25,520
--------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.............................................. 102,678
--------
End of the Period:
Investments.......................................................... 341,671
Forwards............................................................. 36,096
Foreign Currency Translation......................................... 203
--------
377,970
--------
Net Unrealized Appreciation on Securities During the Period........... 275,292
--------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES........................ $300,812
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ $307,625
--------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Period July 3, 1995
(Commencement of Investment Operations) to December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Period Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income/Loss................ $ 6,813 $ (30,335)
Net Realized Gain/Loss on Securities...... 25,520 (6,056)
Net Unrealized Appreciation on Securities
During the Period........................ 275,292 102,678
---------- ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ 307,625 66,287
---------- ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 737,397 2,319,291
Cost of Shares Repurchased................ (79,866) (10,509)
---------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. 657,531 2,308,782
---------- ------------
TOTAL INCREASE IN NET ASSETS.............. 965,156 2,375,069
NET ASSETS:
Beginning of the Period................... 2,375,169 100
---------- ------------
End of the Period (Including undistributed
net investment income of $(5,360) and
$(12,173), respectively)................. $3,340,325 $ 2,375,169
---------- ------------
</TABLE>
See Notes to Financial Statements
56
<PAGE>
GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the
Fundoutstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995
(Commencement
Six Months of Investment
Ended Operations)
June 30, to December
1996 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period.......... $10.30 $10.00
------- ------
Net Investment Income/Loss....................... .035 (.16)
Net Realized and Unrealized
Gain on Securities.............................. 1.184 .46
------- ------
Total from Investment Operations.................. 1.219 .30
------- ------
Net Asset Value, End of the Period................ $11.519 $10.30
------- ------
Total Return*..................................... 11.41%** 3.00%**
Net Assets at End of the Period (In millions)..... $3.3 $2.4
Ratio of Expenses to Average Net Assets*.......... 1.20% 4.35%
Ratio of Net Investment Income/Loss to Average Net
Assets*........................................... .48% (2.76%)
Portfolio Turnover................................ 47%** 42%**
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets........... 7.05% 8.27%
Ratio of Net Investment Loss to Average Net
Assets............................................ (5.36%) (6.68%)
</TABLE>
**Non-Annualized
See Notes to Financial Statements
57
<PAGE>
GOVERNMENT FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS 67.2%
$ 2,877 FHLMC, CMO.............. 5.838% 11/15/18 $ 2,882,016
2,718 FHLMC, Pools............ 7.000 05/01/24 to 06/01/24 2,617,085
1,596 FHLMC, Pools............ 7.500 06/01/24 to 10/01/24 1,575,192
1,609 FHLMC, Pools............ 8.000 09/01/24 to 10/01/24 1,622,935
2,225 FNMA.................... 5.868 03/25/09 2,228,579
2,050 FNMA.................... 5.674 08/25/20 2,014,761
2,005 FNMA 15 Yr DWARF, Pool.. 6.500 06/01/07 to 04/01/11 1,938,473
2,317 FNMA, CMO............... 5.888 03/25/09 2,322,439
1,272 FNMA, Pool.............. 11.000 11/01/20 1,405,748
1,867 FNMA, Pool.............. 7.000 12/21/23 to 06/01/24 1,795,488
1,687 FNMA, Pool.............. 7.500 05/01/24 to 10/01/24 1,663,535
2,398 FNMA, Pool (b).......... 8.000 06/01/24 to 10/01/24 2,416,078
1,009 FNMA, Pool.............. 6.500 03/01/26 to 05/01/26 943,468
280 GNMA, Pool.............. 11.000 09/15/10 to 08/15/20 312,057
748 GNMA, Pool.............. 8.500 04/15/17 to 07/15/17 768,523
2,320 GNMA, Pool (b).......... 7.500 04/15/22 to 06/15/24 2,284,872
3,063 GNMA, Pool (b).......... 8.000 05/15/22 to 11/15/24 3,088,949
6,584 GNMA, Pool (b).......... 7.000 04/15/23 to 10/15/24 6,310,944
2,000 SLMA (b)................ 7.500 03/08/00 2,060,620
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS............ 40,251,762
------------
OTHER MORTGAGE BACKED
SECURITIES 1.5%
FBC Mortgage Securities
885 Trust 7................. 5.900 01/25/17 883,984
------------
U.S. GOVERNMENT
OBLIGATIONS 31.6%
3,500 U.S. Treasury Notes (b). 7.250 11/15/96 3,521,875
4,000 U.S. Treasury Notes (b). 8.000 01/15/97 4,050,000
6,000 U.S. Treasury Notes (b). 7.875 01/15/98 6,159,360
2,000 U.S. Treasury Notes (b). 7.875 04/15/98 2,059,375
1,000 U.S. Treasury Notes..... 5.000 02/15/99 970,310
2,000 U.S. Treasury Notes (b). 8.000 05/15/01 2,127,180
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS................... 18,888,100
------------
FORWARD PURCHASE
COMMITMENTS 14.9%
2,000 FNMA.................... 8.500 12/31/23 2,043,360
2,000 FNMA.................... 9.000 12/31/23 2,081,260
3,000 FNMA 15 Yr DWARF........ 7.000 12/31/50 2,958,750
2,000 U.S. Treasury Notes..... 5.625 02/15/06 1,847,300
------------
TOTAL FORWARD PURCHASE COMMITMENTS.................. 8,930,670
------------
TOTAL LONG-TERM INVESTMENTS 115.2%
(Cost $68,870,253) (a)......................................... 68,954,516
REPURCHASE AGREEMENT 2.2%
Lehman Government Securities, Inc. ($1,300,000 par-
collateralized by U.S. Government obligations in a pooled cash
account, dated 06/28/96, to be sold on 07/01/96 at $1,300,580). 1,300,000
LIABILITIES IN EXCESS OF OTHER ASSETS (17.4%)................... (10,398,244)
------------
NET ASSETS 100%................................................. $ 59,856,272
------------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes, cost for long-term
investments is $68,870,722, the aggregate gross unrealized appreciation is
$762,271 and the aggregate gross unrealized depreciation is $493,333,
resulting in net unrealized appreciation including open futures
transactions of $268,938.
(b) Assets segregated as collateral for open forward and open futures
transactions.
See Notes to Financial Statements
58
<PAGE>
GOVERNMENT FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $68,870,253) (Note 1)......... $68,954,516
Repurchase Agreement (Note 1).................................... 1,300,000
Cash............................................................. 3,609
Receivables:
Interest........................................................ 768,070
Variation Margin on Futures (Note 5)............................ 133,717
Fund Shares Sold................................................ 40
Other............................................................ 21,662
-----------
Total Assets.................................................... 71,181,614
-----------
LIABILITIES:
Payables:
Securities Purchased............................................ 11,175,237
Forward Sale Commitments (Note 5)............................... 62,040
Investment Advisory Fee (Note 2)................................ 21,818
Fund Shares Repurchased......................................... 12,017
Distributor and Affiliates (Note 2)............................. 6,400
Deferred Compensation and Retirement Plans (Note 2).............. 30,662
Accrued Expenses................................................. 17,168
-----------
Total Liabilities............................................... 11,325,342
-----------
NET ASSETS....................................................... $59,856,272
-----------
NET ASSETS CONSIST OF:
Capital (Note 3)................................................. $74,516,038
Net Unrealized Appreciation on Securities........................ 207,367
Accumulated Distributions in Excess of Net Investment Income
(Note 1)......................................................... (46,647)
Accumulated Net Realized Loss on Securities...................... (14,820,486)
-----------
NET ASSETS....................................................... $59,856,272
-----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $59,856,272 and 6,982,324 shares of capital stock issued and
outstanding) (Note 3)............................................ $ 8.57
-----------
</TABLE>
See Notes to Financial Statements
59
<PAGE>
GOVERNMENT FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $ 2,248,547
-----------
EXPENSES:
Investment Advisory Fee (Note 2)................................... 157,244
Accounting Services (Note 2)....................................... 43,999
Trustees Fees and Expenses (Note 2)................................ 15,717
Shareholder Services (Note 2)...................................... 7,500
Other ............................................................. 14,177
-----------
Total Expenses.................................................... 238,637
Less Fees Deferred................................................ 49,944
-----------
Net Expenses...................................................... 188,693
-----------
NET INVESTMENT INCOME.............................................. $ 2,059,854
-----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments....................................................... $ (745,152)
Futures........................................................... (722,424)
Forwards.......................................................... 191,719
-----------
Net Realized Loss on Securities.................................... (1,275,857)
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period........................................... 2,397,568
-----------
End of the Period:
Investments....................................................... 84,263
Futures........................................................... 185,144
Forwards.......................................................... (62,040)
-----------
207,367
-----------
Net Unrealized Depreciation on Securities During the Period........ (2,190,201)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES..................... $(3,466,058)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS......................... $(1,406,204)
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................... $ 2,059,854 $ 4,592,403
Net Realized Gain/Loss on Securities...... (1,275,857) 1,258,015
Net Unrealized Appreciation/Depreciation
on Securities During the Period.......... (2,190,201) 4,705,976
----------- -----------
Change in Net Assets from Operations...... (1,406,204) 10,556,394
----------- -----------
Distributions from Net Investment Income.. (2,075,269) (4,588,452)
Distributions in Excess of Net Investment
Income (Note 1).......................... (46,647) 0
----------- -----------
Distributions from and in Excess of Net
Investment Income........................ (2,121,916) (4,588,452)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ (3,528,120) 5,967,942
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 1,079,011 2,668,721
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... 2,121,916 4,588,452
Cost of Shares Repurchased................ (6,835,743) (11,719,168)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. (3,634,816) (4,461,995)
----------- -----------
TOTAL INCREASE/DECREASE IN NET ASSETS..... (7,162,936) 1,505,947
NET ASSETS:
Beginning of the Period................... 67,019,208 65,513,261
----------- -----------
End of the Period (Including undistributed
net investment income of $(46,647) and
$15,415, respectively)................... $59,856,272 $67,019,208
----------- -----------
</TABLE>
See Notes to Financial Statements
60
<PAGE>
GOVERNMENT FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the
Fundoutstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended ---------------------------
June 30, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.............................. $9.06 $8.28 $9.26 $9.13 $9.29
------ ------ ------ ----- ------
Net Investment Income.............. .286 .60 .56 .57 .665
Net Realized and Unrealized
Gain/Loss on Securities........... (.478) .78 (.985) .135 (.1575)
------ ------ ------ ----- ------
Total from Investment Operations.... (.192) 1.38 (.425) .705 .5075
------ ------ ------ ----- ------
Less Distributions from and in
Excess of Net Investment Income
(Note 1)............................ .295 .60 .555 .575 .6675
------ ------ ------ ----- ------
Net Asset Value, End of the Period.. $8.573 $9.06 $8.28 $9.26 $9.13
------ ------ ------ ----- ------
Total Return*....................... (2.16%)** 17.17% (4.63%) 7.86% 5.73%
Net Assets at End of the Period (In
millions)........................... $59.9 $67.0 $65.5 $80.6 $74.8
Ratio of Expenses to Average Net
Assets*............................. .60% .60% .60% .60% .60%
Ratio of Net Investment Income to
Average Net Assets*................. 6.55% 6.89% 6.71% 6.45% 7.29%
Portfolio Turnover.................. 22%** 164% 192% 91% 36%
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets.............................. .76% .72% .70% .70% .70%
Ratio of Net Investment Income to
Average Net Assets.................. 6.39% 6.77% 6.61% 6.35% 7.19%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
61
<PAGE>
MONEY MARKET FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Date of Amortized
(000) Description Maturity Purchase Cost
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. AGENCY AND GOVERNMENT OBLIGATIONS 82.4%
$1,000 Federal Farm Credit Bank................ 07/03/96 5.21% $ 999,577
1,000 Federal Home Loan Bank.................. 07/01/96 5.21 999,859
1,000 Federal Home Loan Bank.................. 07/08/96 5.20 998,873
2,000 Federal Home Loan Bank.................. 09/12/96 5.28 1,978,746
1,000 Federal Home Loan Bank.................. 09/19/96 5.27 988,390
2,440 Federal Home Loan Mortgage Corp......... 07/18/96 5.30 2,433,558
2,900 Federal National Mortgage Assn.......... 11/05/96 5.40 2,845,973
3,935 Student Loan Marketing Assn............. 07/01/96 5.45 3,933,213
2,445 Tennessee Valley Authority.............. 08/20/96 5.33 2,426,677
-----------
TOTAL U.S. AGENCY AND GOVERNMENT OBLIGATIONS............... 17,604,866
-----------
COMMERCIAL PAPER 17.8%
1,000 Chevron Oil Finance Corp................ 07/11/96 5.32 998,380
900 Associates Corp. of North America....... 07/15/96 5.34 898,016
900 General Electric Capital Corp........... 07/22/96 5.33 897,107
1,000 Pitney Bowes Credit Corp................ 07/29/96 5.31 995,763
-----------
TOTAL COMMERCIAL PAPER..................................... 3,789,266
-----------
TOTAL INVESTMENTS (A) 100.2%...................................... 21,394,132
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)...................... (32,696)
-----------
NET ASSETS 100%................................................... $21,361,436
-----------
</TABLE>
(a)At June 30, 1996, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
62
<PAGE>
MONEY MARKET FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market (Note 1). $21,394,132
Cash.............................................................. 1,384
Other............................................................. 18,243
-----------
Total Assets..................................................... 21,413,759
-----------
LIABILITIES:
Payables:
Distributor and Affiliates (Note 2).............................. 4,868
Investment Advisory Fee (Note 2)................................. 3,036
Fund Shares Repurchased.......................................... 1,834
Deferred Compensation and Retirement Plans (Note 2)............... 28,387
Accrued Expenses.................................................. 14,198
-----------
Total Liabilities................................................ 52,323
-----------
NET ASSETS........................................................ $21,361,436
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $21,357,320
Accumulated Undistributed Net Investment Income................... 4,116
-----------
NET ASSETS (Equivalent to $1.00 per share for 21,357,320 shares
outstanding) (Note 3)............................................. $21,361,436
-----------
</TABLE>
See Notes to Financial Statements
63
<PAGE>
MONEY MARKET FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................................................. $559,154
--------
EXPENSES:
Investment Advisory Fee (Note 2)...................................... 52,563
Accounting (Note 2)................................................... 39,452
Trustees Fees and Expenses (Note 2)................................... 14,995
Shareholder Services (Note 2)......................................... 7,823
Custody............................................................... 7,489
Audit................................................................. 7,100
Other................................................................. 5,357
--------
Total Expenses....................................................... 134,779
Less Fees Deferred and Expenses Reimbursed ($52,563 and $18,882,
respectively)........................................................ 71,445
--------
Net Expenses......................................................... 63,334
--------
NET INVESTMENT INCOME................................................. $495,820
--------
NET REALIZED GAIN ON SECURITIES....................................... $ 415
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................ $496,235
--------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30,1996 and the Year Ended December 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 495,820 $ 1,294,856
Net Realized Gain on Securities................... 415 -0-
------------ ------------
Change in Net Assets from Operations.............. 496,235 1,294,856
------------ ------------
Distributions from Net Investment Income.......... (491,004) (1,295,753)
Distributions from Net Realized Gain on
Securities....................................... (415) -0-
------------ ------------
Total Distributions............................... (491,419) (1,295,753)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES........................................ 4,816 (897)
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold......................... 9,408,609 10,862,643
Net Asset Value of Shares Issued Through Dividend
Reinvestment...................................... 491,419 1,295,753
Cost of Shares Repurchased........................ (10,118,325) (19,130,257)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS...................................... (218,297) (6,971,861)
------------ ------------
TOTAL DECREASE IN NET ASSETS...................... (213,481) (6,972,758)
NET ASSETS:
Beginning of the Period........................... 21,574,917 28,547,675
------------ ------------
End of the Period (Including undistributed net
investment income of $4,116 and $(700),
respectively).................................... $ 21,361,436 $ 21,574,917
------------ ------------
</TABLE>
See Notes to Financial Statements
64
<PAGE>
MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the
Fundoutstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended -----------------------
June 30, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period.................................. $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income................... .024 .0533 .0365 .0262 .0331
Less Distributions from Net Investment
Income.................................. .024 .0533 .0365 .0262 .0331
----- ----- ----- ----- -----
Net Asset Value, End of the Period...... $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Total Return*........................... 2.39%** 5.46% 3.71% 2.66% 3.36%
Net Assets at End of the Period (In
millions)............................... $21.4 $21.6 $28.5 $30.0 $32.9
Ratio of Expenses to Average Net
Assets*................................. .60% .60% .60% .60% .60%
Ratio of Net Investment Income to
Average Net Assets*..................... 4.72% 5.33% 3.63% 2.63% 3.32%
*If certain expenses had not been
assumed by VKAC, total return would have
been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets. 1.28% .93% .87% .95% .89%
Ratio of Net Investment Income to
Average Net Assets...................... 4.04% 5.00% 3.37% 2.28% 3.03%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
65
<PAGE>
REAL ESTATE FUND PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCK 92.1%
APARTMENT 16.3%
44,000 Ambassador Apartments, Inc. ............................. $ 740,813
24,000 Avalon Properties, Inc. ................................. 515,475
22,000 Bay Apartments Communities, Inc. ........................ 566,663
29,000 BRE Properties........................................... 569,400
21,000 Equity Residential Properties Trust...................... 690,375
33,000 Evans Withycombe Residential............................. 684,700
23,000 Gables Residential Trust................................. 538,150
26,000 Irvine Apartment Communities, Inc. ...................... 529,288
----------
4,834,864
----------
HEALTH CARE FACILITIES 4.3%
25,000 Meditrust................................................ 817,688
21,000 Nationwide Health Properties, Inc. ...................... 447,850
----------
1,265,538
----------
HOTELS 10.3%
27,000 Felcor Suite Hotels, Inc. ............................... 829,600
20,000 Hospitality Properties Trust............................. 526,975
28,000 Patriot American Hospitality............................. 823,575
24,000 Starwood Lodging Trust................................... 869,363
----------
3,049,513
----------
MANUFACTURED HOME COMMUNITIES 2.0%
22,000 Sun Communities, Inc. ................................... 583,184
----------
NET LEASE 5.7%
27,000 Excel Realty Trust, Inc. ................................ 555,550
27,000 Franchise Finance Corp. of America....................... 623,300
18,000 Trinet Corporate Realty Trust............................ 513,300
----------
1,692,150
----------
OFFICE/INDUSTRIAL 21.4%
21,000 Beacon Properties Corp. ................................. 548,375
44,000 Bedford Property Investors............................... 599,400
25,000 Cali Realty Corp. ....................................... 601,400
19,000 CenterPoint Properties Corp. ............................ 465,600
16,000 Crescent Real Estate..................................... 595,350
22,000 Duke Realty Investments, Inc. ........................... 656,425
19,000 Highwoods Properties, Inc. .............................. 524,875
36,000 Meridian Industrial Trust................................ 652,313
18,000 Reckson Associates Realty Co. ........................... 607,200
31,000 Security Capital Industrial Trust........................ 553,425
21,000 Spieker Properties, Inc. ................................ 561,350
----------
6,365,713
----------
SELF-STORAGE 4.9%
40,000 Public Storage, Inc. .................................... 829,125
31,000 Storage Trust Realty..................................... 637,550
----------
1,466,675
----------
SHOPPING CENTERS 11.2%
45,000 Bradley Real Estate, Inc. ............................... 646,700
30,000 JDN Realty Corp. ........................................ 662,300
21,000 Kimco Realty Corp. ...................................... 581,950
30,000 Regency Realty Corp. .................................... 638,400
19,000 Vornado Realty Trust..................................... 784,800
----------
3,314,150
----------
</TABLE>
See Notes to Financial Statements
66
<PAGE>
REAL ESTATE FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<C> <S> <C>
SHOPPING MALLS 13.4%
40,000 CBL & Assoc. Properties, Inc. ........................... $ 888,288
52,000 Debartolo Realty Corp. .................................. 838,500
40,000 JP Realty, Inc. ......................................... 855,000
40,000 Macerich Co. ............................................ 842,100
32,000 Mills Corp. ............................................. 551,250
-----------
3,975,138
-----------
OTHER 2.6%
28,000 Redwood Trust, Inc. ..................................... 786,800
-----------
TOTAL LONG-TERM INVESTMENTS 92.1%
(Cost $26,044,837) (a).......................................... 27,333,725
REPURCHASE AGREEMENT 8.0%
Lehman Government Securities, Inc., ($2,375,000 par-
collateralized by U.S. Government obligations in a pooled cash
account, 5.430% coupon, dated 06/28/96, to be sold on 07/01/96
at $2,376,075).................................................. 2,375,000
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)..................... (18,345)
-----------
NET ASSETS 100%.................................................. $29,690,380
-----------
</TABLE>
(a) At June 30, 1996, for federal income tax purposes, cost of long-term
investments is $26,055,599, the aggregate gross unrealized appreciation is
$1,426,221, and the aggregate gross unrealized depreciation is $148,095,
resulting in net unrealized appreciation of $1,278,126.
See Notes to Financial Statements
67
<PAGE>
REAL ESTATE FUND STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $26,044,837) (Note 1).......... $27,333,725
Repurchase Agreement (Note 1)..................................... 2,375,000
Cash.............................................................. 6,470
Receivables:
Securities Sold.................................................. 1,434,935
Fund Shares Sold................................................. 1,185,726
Dividends........................................................ 188,982
Unamortized Organizational Expenses (Note 1)...................... 5,462
-----------
Total Assets..................................................... 32,530,300
-----------
LIABILITIES:
Payables:
Securities Purchased............................................. 2,767,112
Fund Shares Repurchased.......................................... 24,024
Investment Advisory Fee (Note 2)................................. 16,229
Distributor and Affiliates (Note 2).............................. 5,725
Accrued Expenses.................................................. 22,935
Deferred Compensation and Retirement Plans (Note 2)............... 3,895
-----------
Total Liabilities................................................ 2,839,920
-----------
NET ASSETS........................................................ $29,690,380
-----------
NET ASSETS CONSIST OF:
Capital (Note 3).................................................. $27,833,227
Net Unrealized Appreciation on Securities......................... 1,288,888
Accumulated Undistributed Net Investment Income................... 390,567
Accumulated Net Realized Gain on Securities....................... 177,698
-----------
NET ASSETS........................................................ $29,690,380
-----------
NET ASSET VALUE AND OFFERING PRICE PER SHARE (Based on net assets
of $29,690,380 and 2,551,196 shares of capital stock issued and
outstanding) (Note 3)............................................. $11.64
-----------
</TABLE>
See Notes to Financial Statements
68
<PAGE>
REAL ESTATE FUND STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................................................ $ 444,097
Interest............................................................. 35,507
----------
Total Income........................................................ 479,604
----------
EXPENSES:
Investment Advisory Fee (Note 2)..................................... 79,600
Accounting (Note 2).................................................. 35,291
Shareholder Services (Note 2)........................................ 8,026
Registration......................................................... 6,135
Trustees Fees and Expenses (Note 2).................................. 5,333
Other ............................................................... 7,946
----------
Total Expenses...................................................... 142,331
Less Fees Deferred.................................................. 54,771
----------
Net Expenses........................................................ 87,560
----------
NET INVESTMENT INCOME................................................ $ 392,044
----------
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain on Investments..................................... $ 210,228
----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................. 332,105
End of the Period:
Investments......................................................... 1,288,888
----------
Net Unrealized Appreciation on Securities During the Period.......... 956,783
----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES....................... $1,167,011
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................... $1,559,055
----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 and the Period July 3, 1995
(Commencement of Investment Operations) to December 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Period Ended
June 30, 1996 December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................... $ 392,044 $ 68,091
Net Realized Gain/Loss on Securities...... 210,228 (32,530)
Net Unrealized Appreciation on Securities
During the Period........................ 956,783 332,105
----------- ----------
Change in Net Assets from Operations...... 1,559,055 367,666
Distributions from Net Investment Income.. (10,189) (60,786)
----------- ----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................ 1,548,866 306,880
----------- ----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................. 25,753,234 11,796,374
Net Asset Value of Shares Issued Through
Dividend Reinvestment..................... 9,987 60,786
Cost of Shares Repurchased................ (6,207,028) (3,578,819)
----------- ----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.............................. 19,556,193 8,278,341
----------- ----------
TOTAL INCREASE IN NET ASSETS.............. 21,105,059 8,585,221
NET ASSETS:
Beginning of the Period................... 8,585,321 100
----------- ----------
End of the Period (Including undistributed
net investment income of $390,567 and
$8,712, respectively).................... $29,690,380 $8,585,321
----------- ----------
</TABLE>
See Notes to Financial Statements
69
<PAGE>
REAL ESTATE FUND FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 3, 1995
Six Months (Commencement of
Ended Investment Operations)
June 30, 1996 to December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the
Period................................ $10.74 $10.00
------- ------
Net Investment Income................ .150 .20
Net Realized and Unrealized Gain on
Securities.......................... .756 .6325
------- ------
Total from Investment Operations...... .906 .8325
Less Distributions from Net Investment
Income................................ .008 .0925
------- ------
Net Asset Value, End of the Period.... $11.638 $10.74
------- ------
Total Return*......................... 8.46%** 8.35%**
Net Assets at End of the Period (In
millions)............................. $29.7 $8.6
Ratio of Expenses to Average Net
Assets*............................... .83% 2.50%
Ratio of Net Investment Income to
Average Net Assets*................... 3.71% 3.75%
Portfolio Turnover.................... 75%** 85%**
*If certain expenses had not been assumed by VKAC, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net
Assets................................ 1.35% 2.90%
Ratio of Net Investment Income to
Average Net Assets.................... 3.19% 3.36%
</TABLE>
**Non-Annualized
See Notes to Financial Statements
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Life Investment Trust (the "Trust") is registered
under the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company comprised of eight Funds: Asset Allocation Fund
("Asset Allocation"), Domestic Income Fund ("Domestic"), Emerging Growth Fund
("Emerging Growth"), Enterprise Fund ("Enterprise"), Global Equity Fund
("Global Equity"), Government Fund ("Government"), Money Market Fund ("Money
Market") and Real Estate Fund ("Real Estate") (collectively the "Funds"). Each
Fund is accounted for as a separate entity.
The goals of the Funds are as follows: Asset Allocation seeks a high total in-
vestment return consistent with prudent risk; Domestic seeks income as its pri-
mary objective and capital appreciation as a secondary objective; Emerging
Growth seeks capital appreciation by investing principally in common stocks of
small and medium sized companies; Enterprise seeks capital appreciation by in-
vesting principally in common stocks; Global Equity seeks long-term growth of
capital through an internationally diversified portfolio of equity securities
of any nation, including the United States; Government seeks high current re-
turn consistent with preservation of capital; Money Market seeks protection of
capital and high current income by investing in short-term money market instru-
ments; and Real estate seeks long-term growth of capital by investing princi-
pally in securities of companies operating in the real estate industry.
The following is a summary of significant accounting policies consistently fol-
lowed by the Trust in the preparation of its financial statements. The prepara-
tion of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent as-
sets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
A. SECURITY VALUATION-Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange. In-
vestments in securities not listed on a securities exchange are valued based on
their last quoted bid price or, if not available, their fair value as deter-
mined by the Board of Trustees. Fixed income investments are stated at values
using market quotations or, if such valuations are not available, estimates ob-
tained from yield data relating to instruments or securities with similar char-
acteristics in accordance with procedures established in good faith by the
Board of Trustees. Short-term securities with remaining maturities of less than
60 days are valued at amortized cost. For Money Market, all investments are
valued at amortized cost.
Domestic's investments include lower rated and unrated debt securities which
may be more susceptible to a decline in value due to adverse economic condi-
tions than other investment grade holdings. These securities are often subordi-
nated to the prior claims of other senior lenders and uncertainties exist as to
an issuer's ability to meet principal and interest payments. Debt securities
rated below investment grade and comparable unrated securities represented ap-
proximately 35% of Domestic's net assets at June 30, 1996.
B. SECURITY TRANSACTIONS-Security transactions are recorded on a trade date ba-
sis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggre-
gate value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
A repurchase agreement is a short-term investment in which the Fund acquires
ownership of a debt security and the seller agrees to repurchase the security
at a future time and specified price. The Fund may invest independently in re-
purchase 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 aggregate of
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
which is invested in repurchase agreements. Repurchase agreements are collater-
alized by the underlying debt security. The Fund will make payment for such se-
curities only upon physical delivery or evidence of book entry transfer to the
account of the custodian bank. The seller is required to maintain the value of
the underlying security at not less than the repurchase proceeds due the Fund.
C. INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Issuers of Payment-in-Kind se-
curities may make dividend or interest payments by issuing additional stocks or
bonds in lieu of cash payments.
The Funds account for discounts and premiums on the same basis as is used for
federal income tax reporting. Accordingly, original issue discounts on debt se-
curities 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 purpos-
es.
D. ORGANIZATIONAL EXPENSES-Emerging Growth, Global Equity and Real Estate have
reimbursed Van Kampen American Capital Distributors, Inc. or its affiliates
(collectively "VKAC") for costs incurred in connection with each Fund's organi-
zation in the amount of $6,828 per Fund. These costs are being amortized on a
straight line basis over the 60 month period ending July 2, 2001. The Adviser
has agreed that in the event any of the initial shares of the Funds originally
purchased by VKAC are redeemed during the amortization period, the Funds will
be reimbursed for any unamortized organizational expenses in the same propor-
tion as the number of shares redeemed bears to the number of initial shares
held at the time of redemption.
E. FEDERAL INCOME TAXES-It is each Fund's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Each Fund intends to utilize provisions of the Federal income tax laws which
allow each Fund to carry a realized capital loss forward for eight years fol-
lowing the year of the loss and offset such losses against any future realized
capital gains. The following table presents the realized capital loss
carryforward at December 31, 1995 with expiration dates.
<TABLE>
<CAPTION>
ASSET EMERGING GLOBAL MONEY REAL
ALLOCATION DOMESTIC GROWTH ENTERPRISE EQUITY GOVERNMENT MARKET ESTATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Realized capital loss
carryforward............ -- $2,020,640 $36,712 -- $6,043 $13,105,418 $ 2,059 $10,729
Expiration dates of
capital loss
carryforward............ -- 1998-2002 2003 -- 2003 1996-2002 2002-2003 2003
</TABLE>
Net realized gains or losses may differ for financial and tax reporting pur-
poses primarily as a result of post October 31 losses which are not recognized
for tax purposes until the first day of the following fiscal year and the de-
ferral of losses for tax purposes resulting from wash sales.
F. DISTRIBUTION OF INCOME AND GAINS-Government and Money Market declare divi-
dends from net investment income on each business day. Asset Allocation, Domes-
tic, Emerging Growth, Enterprise, Global Equity and Real Estate declare
dividends annually. Government declares distributions from short-term capital
gains, in any, monthly. Asset Allocation, Domestic, Emerging Growth, Enter-
prise, Global Equity, Money Market and Real Estate distribute net realized
gains, if any, annually. Distributions from net realized gains for book pur-
poses may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
G. FOREIGN CURRENCY TRANSLATION-The market values of foreign securities, for-
ward currency exchange contracts and other assets and liabilities denominated
in a 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.
H. 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.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly based on the average daily net assets of the Funds (Asset Allocation,
Domestic, Enterprise, Government and Money Market) as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- --------------------------------------------------------------------------------
<S> <C>
First $500 million.................................................. .50 of 1%
Next $500 million................................................... .45 of 1%
Over $1 billion..................................................... .40 of 1%
</TABLE>
The resulting fee is prorated to each Fund (Asset Allocation, Domestic, Enter-
prise, Government and Money Market) based on its average daily net assets.
Under the terms of the advisory agreement, if the total ordinary business ex-
penses, exclusive of taxes, distribution fees and interest, exceed .60% of av-
erage daily net assets, the Adviser will reimburse the Funds (Asset Allocation,
Domestic, Enterprise, Government, and Money Market) for the amount of the ex-
cess. The contractual expense reimbursement shall be made monthly.
For Emerging Growth, the Adviser will provide investment advice and facilities
to the Fund for an annual fee payable monthly of .70% of the average daily net
assets of the Fund.
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. Advisory 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 advisory fee to the Subadviser--Global Equity.
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. Advisory fees are calculated monthly,
based on the average daily net assets of Real Estate at the annual rate of
1.00%. The Adviser pays 50% of its advisory fee to the Subadviser--Real Estate.
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
For the period, the Adviser has volunteered to reimburse all expenses in excess
of .85% for Emerging Growth, 1.20% for Global Equity, and 1.10% for Real Es-
tate, of each of the Funds' average daily net assets.
Other transactions with affiliates during the period were as follows:
<TABLE>
<CAPTION>
ASSET EMERGING GLOBAL MONEY REAL
ALLOCATION DOMESTIC GROWTH ENTERPRISE EQUITY GOVERNMENT MARKET ESTATE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accounting.............. $41,800 $37,000 $34,800 $ 43,200 $16,800 $44,000 $39,500 $35,300
Shareholder servicing
agent's fees............ 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500
</TABLE>
For the six months ended June 30, 1996, the Funds incurred expenses as shown in
the table above representing VKAC's cost of providing accounting and cash man-
agement services to the Funds. These services are provided by VKAC at cost.
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser, serves
as the shareholder servicing agent for the Funds. For the six months ended June
30, 1996, the Funds incurred expenses as shown in the table above, representing
ACCESS' cost of providing transfer agency and shareholder services plus a prof-
it.
Certain officers and trustees of the Funds are also officers and directors of
VKAC. The Funds do not compensate their officers or trustees who are officers
of VKAC.
The Funds have implemented deferred compensation and retirement plans for their
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
At June 30, 1996, VKAC owned 50,010, 200,010, and 25,230 shares of Emerging
Growth, Global Equity and Real Estate, respectively.
3. CAPITAL TRANSACTIONS
The Funds have outstanding common shares with a par value of $.01 per share.
There are an unlimited number of shares authorized.
For the six months ended June 30, 1996, share transactions were as follows:
<TABLE>
<CAPTION>
ASSET EMERGING
ALLOCATION DOMESTIC GROWTH ENTERPRISE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Shares.............. 5,409,616 3,235,694 195,420 5,173,759
Sales......................... 220,846 536,592 209,169 273,129
Dividend Reinvestment......... 106,734 4,339 0 173,394
Repurchases................... (474,573) (1,145,935) (32,431) (551,063)
--------- ----------- ----------- ---------
Ending Shares................. 5,262,623 2,630,690 372,158 5,069,219
--------- ----------- ----------- ---------
<CAPTION>
GLOBAL MONEY REAL
EQUITY GOVERNMENT MARKET ESTATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Shares.............. 230,530 7,399,648 21,575,617 799,347
Sales......................... 66,576 123,279 9,408,609 2,312,311
Dividend Reinvestment......... 0 243,445 491,419 905
Repurchases................... (7,122) (784,048) (10,118,325) (561,367)
--------- ----------- ----------- ---------
Ending Shares................. 289,984 6,982,324 21,357,320 2,551,196
--------- ----------- ----------- ---------
</TABLE>
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
For the year ended December 31, 1995, share transactions were as follows:
<TABLE>
<CAPTION>
ASSET EMERGING
ALLOCATION DOMESTIC GROWTH ENTERPRISE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Shares............ 5,668,898 2,894,700 10 5,444,930
Sales....................... 166,906 997,934 217,875 438,275
Dividend Reinvestment....... 619,366 258,208 0 703,905
Repurchases................. (1,045,554) (915,148) (22,465) (1,413,351)
----------- ----------- ----------- -----------
Ending Shares............... 5,409,616 3,235,694 195,420 5,173,759
----------- ----------- ----------- -----------
Ending Capital.............. $55,836,454 $27,065,917 $2,103,545 $64,170,048
----------- ----------- ----------- -----------
<CAPTION>
GLOBAL MONEY REAL
EQUITY GOVERNMENT MARKET ESTATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Shares............ 10 7,914,930 28,547,478 10
Sales....................... 231,560 307,711 10,862,643 1,140,133
Dividend Reinvestment....... 0 524,601 1,295,753 5,789
Repurchases................. (1,040) (1,347,594) (19,130,257) (346,585)
----------- ----------- ----------- -----------
Ending Shares............... 230,530 7,399,648 21,575,617 799,347
----------- ----------- ----------- -----------
Ending Capital.............. $2,292,507 $78,150,854 $21,575,617 $8,277,034
----------- ----------- ----------- -----------
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investment
securities, excluding short-term investments and U.S. Government securities,
were:
<TABLE>
<CAPTION>
ASSET EMERGING GLOBAL
ALLOCATION DOMESTIC GROWTH ENTERPRISE EQUITY GOVERNMENT REAL ESTATE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $34,251,529 $ 9,695,715 $3,305,958 $88,521,777 $1,776,970 $39,532,336 $30,315,015
Sales................... 41,371,400 14,960,125 1,146,456 91,437,346 1,294,251 52,512,902 11,717,267
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Funds have a variety of reasons to use derivative instruments, such as to
attempt to protect the Funds against possible changes in the market value of
its portfolio, manage the portfolio's effective yield, foreign currency expo-
sure, maturity and duration or generate potential gain. All of the Funds' port-
folio holdings, including derivative instruments, are marked to market each day
with the change in value reflected in the unrealized appreciation/depreciation
on securities. Upon disposition, a realized gain or loss is recognized accord-
ingly, except for exercised option contracts where the recognition of gain or
loss is postponed until the disposal of the security underlying the option con-
tract.
Summarized below are the specific types of derivative financial instruments
used by the Funds.
A. FUTURES CONTRACTS--A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Funds generally invests in futures on U.S. Treasury Bonds and notes. Upon en-
tering into futures contracts, the Funds maintain, in a segregated account with
its custodian, securities with a value equal to its obligation under the
futures contracts. During the period the futures contract is open, payments are
received from or made to the broker based upon changes in the value of the con-
tract (the variation margin). The cost of securities acquired through delivery
under a contract is adjusted by the unrealized gain or loss on the contract.
Transactions in futures contracts for the six months ended June 30, 1996 for
Government, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1995..................................... 175
Futures Opened....................................................... 1,068
Futures Closed....................................................... (1,088)
------
Outstanding at June 30, 1996......................................... 155
------
</TABLE>
The futures contracts outstanding at June 30, 1996, and the descriptions and
unrealized appreciation for Government are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C>
Buys to Open:
U.S. Treasury Bonds..................................... 89 $131,161
U.S. Treasury Notes (Five Year)......................... 30 9,623
U.S. Treasury Notes (Ten Year).......................... 36 44,360
--- --------
155 $185,144
--- --------
</TABLE>
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
B. FORWARD CURRENCY CONTRACTS-A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recog-
nized and is included as a component of realized gain/loss on forwards.
The following forward currency contracts were outstanding in Global Equity as
of June 30, 1996:
<TABLE>
<CAPTION>
UNREALIZED
ORIGINAL CURRENT APPRECIATION/
DESCRIPTION VALUE VALUE DEPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BUYS TO OPEN
Japanese Yen, expiring 09/24/96-11/13/96....... $300,000 $295,741 $(4,259)
SELLS TO OPEN
British Pound Sterling, expiring 07/16/97...... $100,000 $103,584 (3,584)
Japanese Yen, expiring 09/24/96-01/24/97....... $516,076 $470,278 45,798
Swedish Krona, expiring 11/13/96............... $ 50,000 $ 51,859 (1,859)
-------
$36,096
-------
</TABLE>
C. FORWARD COMMITMENTS-The Government Fund trades certain securities under the
terms of forward commitments, whereby the settlement occurs at a specific
future date. Forward commitments are privately negotiated transactions between
the Fund and dealers. While forward commitments are outstanding, the Fund
maintains sufficient collateral of cash or securities in a segregated account
with its custodian. Forward purchase commitments are included in the portfolio
of investments, with changes in value reflected as a component of unrealized
appreciation/depreciation on investments. Forward sale commitments are listed
below with the changes in value reflected as a component of unrealized
appreciation/depreciation on forwards.
The following forward sale commitments were outstanding in Government Fund as
of June 30, 1996:
<TABLE>
<CAPTION>
PAR
AMOUNT SALES CURRENT UNREALIZED
(000) DESCRIPTION PRICE VALUE DEPRECIATION
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FHLMC Gold 30 Yr, 8.00%, 12/31/23
$1,500 maturity.......................... $1,503,750 $1,512,660 $8,910
1,000 FNMA, 8.00%, 12/31/23 maturity.... 1,001,875 1,007,500 5,625
2,000 GNMA, 7.00%, 12/31/23 maturity.... 1,892,500 1,916,880 24,380
2,000 GNMA, 7.50%, 12/31/23 maturity.... 1,946,875 1,970,000 23,125
---------- ---------- -------
$6,345,000 $6,407,040 $62,040
---------- ---------- -------
</TABLE>
77
<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 -- Co-Chairman
JACK E. NELSON
DON G. POWELL*
JEROME L. ROBINSON
FERNANDO SISTO -- Co-Chairman
WAYNE W. WHALEN*
WILLIAM S. WOODSIDE
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.
One Parkview Plaza
Oakbrook Terrace, IL 60181
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 SERVICING AGENT
ACCESS INVESTOR
SERVICES, INC.
P.O. Box 418256,
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street,
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1201 Louisiana
Houston, Texas 77002
* "Interested" persons of the Fund, as defined in the
Investment Company Act of 1940.
(C)Van Kampen American Capital Distributors, Inc., 1996
All rights reserved.
SMdenotes a service mark of
Van Kampen American Capital Dis-
tributors, Inc.
This report is submitted for the general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors
unless it has been preceded or is accompanied by an effective prospectus of
the Fund which contains additional information on how to purchase shares and
other pertinent data.
78
<PAGE>
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79
<PAGE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST FUND
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80
