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SEMI-ANNUAL REPORT
___________________
April 30, 1997
(Unaudited)
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[LOGO OF COMMON SENSE TRUST]
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Shareholders' Message
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May 20, 1997
Dear Shareholder,
Following is an economic and market review for the six-month reporting period.
And, on the following pages, you will find additional information about each of
the seven investment options comprising the Common Sense Trust Funds. During the
six-month reporting period, inflation remained subdued despite a sharp
acceleration of economic growth. Gross domestic product, the nation's total
output of goods and services, increased by a robust 5.6 percent annualized rate
in the first quarter of 1997, the largest quarterly gain in nine years. Other
relevant indicators signaled continuing economic growth as well. For example,
retail sales and consumer confidence posted solid increases, and the housing and
manufacturing sectors each rebounded after a slowdown in late 1996. Unemployment
fell to 4.9 percent, the lowest level in 23 years.
Despite the quickening pace of economic activity, there was little cause for
worry about inflation: wholesale prices fell during the first quarter of 1997,
and the producer price index grew by a modest 1.6 percent over the 12 months
ended in March. In addition, a rise in the value of the U.S. dollar dampened
inflationary pressures by moderating price increases for imported goods.
As the reporting period ended, there were indications that the pace of
economic growth was moderating. Inventories increased during the first quarter,
and orders for big-ticket durable goods fell in March, calming fears that the
nation's factories might soon be operating at full capacity. As a result of
higher interest rates, the housing sector also slowed, although new home sales
for the first quarter were still the highest in 19 years.
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Market Review
Fears that the economy was growing too rapidly increased volatility in stock
prices. After climbing to a series of record highs, the Dow Jones Industrial
Average (DJIA) fell by 9.8 percent over a one-month period beginning in mid-
March. After the release of data showing negligible inflation and hints of a
slowdown in growth, stocks bounced back to close the reporting period within one
percent of their all-time high, as measured by the DJIA. Also, investors were
encouraged by progress toward a capital gains tax cut and balanced budget.
In the equity market, large-capitalization stocks continued to outperform
smaller issues. Over the 12 months ended April 30, the Standard & Poor's 500-
Stock Index, which is comprised primarily of large-cap stocks, produced a total
return of 25.11 percent, while the Russell 2000 Stock Index of small-
capitalization stocks produced a total return of 0.05 percent. Investors favored
large-cap stocks during the reporting period because they were inexpensive
relative to the overall market. Small-cap growth stocks became costly amid the
speculative fervor of mid-1996; the sector's underperformance since that time
has pierced the valuation bubble and brought prices in line with historical
norms.
Reflecting concerns about inflation, returns from the fixed-income market have
been lackluster since the beginning of the year. The strong economy put mild
downward pressure on bond prices, which move inversely to interest rates. At the
peak of concerns over inflation and Fed rate hikes in March, the yield on the
Treasury's benchmark 30-year bond reached 7.17 percent, up from 6.64 percent at
the beginning of the year. Subsequent indications of benign inflation and a
slowdown in economic growth allowed the yield on long-term Treasury bonds to
fall back to 6.95 percent by the end of the reporting period. Lower-rated
corporate bonds outperformed other fixed-income investments, as investors felt
comfortable enough to stretch for yield given the overall strength of the
economy.
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Outlook
We expect that momentum in the U.S. economy will lead to additional but minor
interest-rate hikes by the Fed. While we do not believe that inflation is a
serious concern, some warning signs are present, including strong job growth,
high consumer confidence, and a mild upturn in wages. In this environment, at
least one additional Fed tightening is likely.
Currently, the equity market is assuming a continuation of the best of all
possible environments: low inflation, moderate economic growth, and solid
earnings gains. The rally in stock prices during the last weeks of the reporting
period indicates that investors believe the Fed will successfully engineer a
slowdown in growth without tipping the economy into recession. While we also
believe that an economic soft landing is likely, volatility may remain high
until the risk of a restrictive monetary policy is eliminated and economic
growth moderates.
We believe a defensive posture is warranted in the fixed-income market.
Optimism about the economy has driven up prices of high-yield and emerging-
market debt to historically elevated levels relative to Treasuries. We believe
that Treasury securities are best positioned to benefit from a likely slowdown
in the pace of economic activity.
Common Sense Trust Funds
Included in the report are performance results for the six-month period ended
April 30, 1997, and interviews with portfolio managers from the equity and
fixed-income sectors. As always, we appreciate your continued confidence in your
investment.
Sincerely,
/s/ Don G. Powell
Don G. Powell
Chairman
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Portfolio Perspective
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The following is an interview with the portfolio management team of the
Common Sense Trust stock funds. The team includes: Stephen L. Boyd, Common
Sense Growth Fund; Gary M. Lewis, Common Sense Emerging Growth Fund; James A.
Gilligan, Common Sense Growth and Income Fund; James B. Conheady and Jeffrey
Russell, Common Sense International Equity Fund; and Alan T. Sachtleben, chief
investment officer for equity investments at Van Kampen American Capital.
Q. WHAT WERE THE KEY FACTORS IN THE PERFORMANCE OF THE STOCK FUNDS DURING THE
SIX-MONTH PERIOD ENDED APRIL 30, 1997?
A. To date, the surprising combination of moderate economic growth with
historically low inflation has been a driving force behind the market's
success, providing a near-ideal environment for equity investments. Economic
conditions have been favorable, the dollar has been strong, and real interest
rates (adjusted for inflation) have been too low to siphon investment money
away from the stock market.
Against this backdrop, stocks continued their seemingly relentless surge,
albeit with a substantial dose of volatility. We saw a modest sell-off in
mid-December and again in February, following a significant correction--a
drop of around 10 percent, as measured by the Dow Jones Industrial Average--
that lingered from mid-March through mid-April. But since then, the market
averages have roared back and retrenched from earlier losses.
Through the period, concerns over rising interest rates set the tone, as
investors worried that the Federal Reserve Board's commitment to controlling
inflation--by raising short-term interest rates--might slow the economy and
cut into corporate earnings. With nervous investors searching for direction,
we have not seen any one market sector or group of stocks emerge to provide
clear leadership. If we had to characterize the market's recent rallies, we
would point out a bias toward large-cap companies, although investors have
been quick to punish the stocks of companies that reported disappointing
earnings, regardless of their size.
At various times over the past six months, the performance of certain
sectors stood out briefly, though not always in a positive light. The
performance of technology issues, for example, was mixed, with very narrow
leadership from large-cap stocks such as Intel and Microsoft. Uncertainty
over interest rates took its toll on large bank stocks, which had been
surprisingly strong until the Fed's most recent hike in short-term interest
rates robbed them of some momentum.
In short, it has been next to impossible to be complacent in these jittery,
unpredictable markets. The ability to identify individual companies with
solid fundamentals, strong earnings, and untapped potential has been the key
to success.
Q. HOW DID YOU REACT TO THESE CONDITIONS IN MANAGING THE PORTFOLIOS?
A. The Common Sense Growth and Income Fund has followed a value-oriented
strategy, seeking out stocks that meet our criteria to qualify as solid
holdings over the long run. Because of our concerns about the short-term
market environment, we expect that we may have to wait longer for our
investments to reach their full potential, but we are confident that our
selection process has positioned the portfolio favorably for whatever
conditions we encounter.
We continue to take advantage of opportunities that arise as certain
industries strive to remake themselves. Deregulation in the utility industry,
for example, is spurring greater competition as these companies struggle to
improve operations and come out ahead. The rede-
[PIE CHART APPEARS HERE]
Common Sense Growth & Income Fund
Holdings by Sector
Percentage of Long-Term Holdings
4/30/97
Other 6.2%
Energy 9.2%
Raw Materials/Processing Industries 5.1%
Producer Manufacturing 8.7%
Technology 12.7%
Consumer Non-Durables 7.3%
Transportation 1.5%
Consumer Durables 2.4%
Consumer Distribution 4.4%
Consumer Services 3.2%
Finance 17.7%
Utilities 8.6%
Health Care 13.0%
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ployment of capital in the financial industry--evident in the growing number
of stock buybacks and initiatives to increase shareholder value--has had a
positive impact on the valuations of selected companies. And, consolidation
in the insurance industry has created greater efficiencies and, in turn, more
attractive investment alternatives. Solid performers in these categories have
been BankAmerica Corp. and Sallie Mae.
Also, we are optimistic about the potential performance of sectors that we
believe will benefit from long-term business and demographic trends. Health-
care products and services, for instance, have performed well and will be in
demand as the population ages. The demand for increasingly sophisticated
communication tools, such as the integration of voice, data, and video, will
likely be a catalyst for continued expansion in the telecommunications
industry. We like our key holdings in these sectors, such as Warner-Lambert,
Aetna, Lucent Technologies, Nokia, and Ericsson.
The Common Sense Growth Fund has also benefited from restructuring with key
industries. Companies that have sold divisions to focus on core markets,
strengthened their balance sheets, or installed new management teams have
figured prominently in the portfolio's gains of the past six months.
The stocks of financial companies, pipeline companies, and selected
technology providers--such as BMC Software and Microsoft, as well as Intel in
the semiconductor group--have performed well, and we continue to hold
significant positions in these areas. Computer networking companies, on the
other hand, suffered as a whole when indications of slowing growth convinced
investors to begin trimming their positions. The Fund reduced its holdings in
this sector earlier in the year, but lower valuations have enabled us to
resume making selective purchases.
[PIE CHART APPEARS HERE]
Common Sense Growth Fund
Holdings by Sector
Percentage of Long-Term Holdings
4/30/97
Transportation 0.6%
Consumer Durables 1.9%
Utilities 2.0%
Raw Materials/Processing Industries 3.2%
U.S. Government Obligations 3.4%
Consumer Services 3.9%
Health Care 7.8%
Energy 8.2%
Producer Manufacturing 9.4%
Consumer Non-Durables 9.7%
Consumer Distribution 10.7%
Technology 19.1%
Finance 20.1%
Large-cap growth stocks were very strong throughout the period, providing
some healthy gains. For example, the producer goods (Corning and United
Technologies), non-durables (Avon Products and Gillette), energy (Williams
Companies and Pan Energy), health-care (Bristol-Myers and Abbott) sectors
have been solid performers.
While large-cap stocks have surged, the performance of small-cap issues has
been more erratic, posing challenges for the Common Sense Emerging Growth
Fund. Under these circumstances, discipline is highly important. We continue
to apply our strict selection criteria to the investments we choose for the
portfolio, focusing on stocks with rising earnings expectations and rising
valuations.
[PIE CHART APPEARS HERE]
Common Sense Emerging Growth Fund
Holdings by Sector
Percentage of Net Assets
4/30/97
Transportation 1.4%
Utilities 1.4%
Energy 8.3%
Consumer Services 8.7%
Finance 8.9%
Health Care 9.6%
Technology 38.7%
Consumer Durables 0.3%
Raw Materials/Processing Industries 1.1%
Consumer Distribution 10.9%
Producer Manufacturing 4.3%
Consumer Non-Durables 6.4%
A greater number of rapidly growing companies are fitting our selection
criteria. Names like Intel and Microsoft have been big winners for the Fund
in the last six months, and Dell Computer was our best performer, gaining
approximately 106 percent during the reporting period. Other standouts
include Wolverine World Wide Inc., Universal Health Services Inc., and
Vitesse Semiconductor Corp., with gains of approximately 63 percent, 52
percent, and 48 percent, respectively.
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Among the small-caps, semiconductor companies have been a bright spot
lately, rebounding now that capacity has caught up with demand and usage in
autos, electrical gear, cell phones, and other applications continues to
grow. As of April 30, technology issues represented about one-third of the
Fund's portfolio, but we remain diversified across a range of industries,
with no other sector accounting for more than 11 percent of long-term
investments. Our largest concentrations are in consumer distribution (10.9
percent), health care (9.6 percent), financial services (8.9 percent),
consumer services (8.7 percent), and energy (8.3 percent).
The Common Sense International Equity Fund is operating in a market
environment that contrasts rather sharply with that of the domestic market.
While the U.S. economy has been in a healthy growth pattern for years,
economic growth overseas has been far more lethargic. In many European
markets, for example, policy-makers have been struggling to balance the
effects of stubbornly slow growth rates, high unemployment rates, and the
demanding requirements set forth for participation in the planned European
economic union.
The portfolio remains broadly diversified across a wide range of countries
and industries, but with particular emphasis on European growth stocks. This
level of diversification is especially appropriate in a portfolio consisting
primarily of foreign securities, which involve certain risks specific to
investing outside the United States, such as currency fluctuation and
economic volatility. The most notable changes in the portfolio over the past
six months include a current underweighted position in the Far East with only
1.3 percent in Japan. We also underweighted Latin America with only one
position in Gruma, a Mexican food company. Conversely, we have overweighted
Europe by an approximate 75 percent representation with a heavy concentration
in rapidly growing companies as evidenced by our ten largest holdings.
[PIE CHART APPEARS HERE]
Common Sense International Equity Fund
Holdings by Country
Percentage of Long-Term Holdings
4/30/97
Finland 1.2%
Singapore 1.0%
Thailand 0.5%
Netherlands 18.9%
United Kingdom 14.4%
Norway 9.8%
Malaysia 7.8%
Germany 6.8%
Italy 6.5%
Hong Kong 5.5%
Sweden 5.3%
Ireland 4.8%
Australia 4.5%
Austria 4.0%
Switzerland 2.7%
Mexico 2.0%
Philippines 1.6%
France 1.4%
Japan 1.3%
Q. HOW DID THE PORTFOLIOS PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A. Common Sense Growth and Income Fund Class 1 shares achieved a total return at
net asset value (NAV) of 10.76 percent, including reinvestment of dividends
and capital gains totaling $2.342 per share. Class 1 shares of the Common
Sense Growth Fund generated a total return at NAV of 8.38 percent, including
reinvestment of dividends and capital gains totaling $1.534 per share. In
comparison, the S&P 500-Stock Index, an unmanaged index that reflects general
stock market performance, returned 14.75 percent, including reinvestment of
all dividends for the same period.
The total return at NAV of Common Sense Emerging Growth Fund Class 1 shares
was -5.70 percent. Over the same period, the Russell 2000 Index, an unmanaged
index that reflects the performance of small-company stocks, posted a total
return of 1.61 percent, including reinvestment of all distributions for the
same period.
The Common Sense International Equity Fund Class 1 shares achieved a total
return at NAV of 2.78 percent. In comparison, the Morgan Stanley Capital
International EAFE Index, an unmanaged index that reflects the general
performance of major international stock markets, posted a total return of
0.77 percent.
Please keep in mind that the indices mentioned above are unmanaged
statistical composites and do not reflect any commissions or fees that would
be paid by an investor purchasing the securities they represent. For more
complete performance information on each fund, please refer to pages 10
through 12.
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Q. WHAT IS YOUR OUTLOOK FOR THE MARKET IN THE MONTHS AHEAD?
A. As we have seen, a market that continues to reach record highs on a
consistent basis is always vulnerable to a correction. However, there are no
proven methods of determining when and by how much the market might retrace
its path.
Our intent is to maintain a disciplined stock selection process, remain
true to our strategy, avoid weighting the portfolio too heavily in any one
sector, and keep the portfolios as close to fully invested as is practicable.
We believe that this philosophy of portfolio management will, on a relative
basis, insulate us somewhat from market turbulence. Of course, we are not
immune to market declines, but our portfolio characteristics might provide a
buffer that more aggressive portfolios may lack.
In keeping with the expectations of our shareholders, we continue to
refrain from taking extreme positions that we believe will expose the
portfolios to unwarranted risk. As always, we will search for the best
companies at the best price, diversify broadly, and maintain a long-term
investment horizon.
/s/ Alan T. Sachtleben /s/ Stephen L. Boyd /s/ James A. Gilligan
Alan T. Sachtleben Stephen L. Boyd James A. Gilligan
Chief Investment Officer Portfolio Manager Portfolio Manager
Equity Investments Common Sense Growth Fun Common Sense Growth
and Income Fund
/s/ Gary M. Lewis /s/ James B. Conheady /s/ Jeffrey Russell
Gary M. Lewis James B. Conheady Jeffrey Russell
Portfolio Manager Portfolio Co-Manager Portfolio Co-Manager
Common Sense Common Sense Common Sense
Emerging Growth Fund International Equity Fund International Equity Fund
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Portfolio Perspective
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The following is an interview with the portfolio management team of the
Common Sense Trust fixed-income funds. The team includes: Timothy D. Haney,
Common Sense Municipal Bond Fund; John R. Reynoldson, Common Sense Government
Fund; David R. Troth, Common Sense Money Market Fund; and Peter W. Hegel, chief
investment officer for fixed-income investments at Van Kampen American Capital.
Q. WHAT WERE THE KEY FACTORS IN THE PERFORMANCE OF THE FIXED-INCOME FUNDS OVER
THE SIX-MONTH PERIOD ENDED APRIL 30, 1997?
A. We have seen a generally defensive market psychology in recent months. Yields
were driven higher as market participants gradually bid down prices on fixed-
income securities over the reporting period. The yield on the 10-year
Treasury, for example, rose from 6.34 percent at the start of the period to
6.72 percent at the end, peaking at 6.97 percent in early April. Rates at the
short end of the maturity spectrum rose faster than those at the long end,
with two-year Treasury rates increasing by 53 basis points during the period
versus the 32 basis point gain at the 30-year maturity.
Rates rose in response to faster-than-expected economic growth, as
investors suspected that the Federal Reserve Board would begin tightening
short-term interest rates. This suspicion wasn't entirely unfounded, as the
Fed boosted the key federal funds rate by 0.25 percent on March 25.
Throughout the period, economic indicators hinted that robust economic
growth might spur inflation. In particular, strong manufacturing numbers
(such as durable goods orders) combined with strong employment statistics to
suggest that inflationary pressures were mounting--the Fed's primary concern.
Still, questions remain as to whether the Fed's tightening was simply a
"fine-tuning" of short-term rates or the first in a series of increases aimed
at tempering the economy's growth in order to control inflation.
These concerns were heightened as the economy continued to grow at a
healthy pace. The GDP growth numbers for the fourth quarter of 1996 and the
first quarter of 1997 were higher than expected. This was especially true of
the first-quarter growth rate, which was over 5.0 percent. Nevertheless, we
still have not seen any hard evidence of inflation, which remains at a fairly
tame level (based on the Consumer Price Index of approximately 0.0625 percent
in April).
Q. HOW DID YOU REACT TO THESE CONDITIONS IN MANAGING THE PORTFOLIOS?
A. The Common Sense Municipal Bond Fund portfolio has maintained its relatively
defensive structure throughout the reporting period. As of April 30,
approximately 56 percent of the Fund was invested in municipal securities
rated AAA, the highest rating for investment safety issued by Standard &
Poor's Ratings Group. Approximately 27 percent of the portfolio was allocated
to securities rated BBB or below, in order to take advantage of opportunities
to enhance the portfolio's income component, but the overall average credit
quality for the portfolio is at the AA-rated level.
Most of our trading activity was geared toward capitalizing on relative
values in the new-issue market, especially where we were able to anticipate
specific pockets of demand for state credits, including those of Tennessee,
Ohio, and Arizona. We continue to hold a position in multi-family housing
bonds, a sector that tends to hold up reasonably well in uncertain markets.
We also saw some of our BBB-rated issues convert to AAA as a result of pre-
refundings, which gave the Fund a small boost in net asset value.
[PIE CHART APPEARS HERE]
Common Sense Municipal Bond Fund
Quality Rating
Percentage of Long-Term Holdings
As of 4/30/97
BB 0.7%
BBB 16.7%
A 10.5%
AA 6.1%
AAA 56.2%
Non-Rated 9.8%
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The duration of the portfolio has been shortened, from 7.63 years on
October 31, 1996 to 7.35 years on April 30, 1997, as we seek to dampen
volatility. We had a strong fourth quarter in 1996, and our preference is to
forego a bit of potential on the upside in favor of preserving gains in an
uncertain market.
At the other end of the barbell, we had a significant holding in lower-
coupon mortgage securities that were purchased at a discount to their par
value. These securities are pools of recently issued mortgages, which tend to
have a faster prepayment rate, especially in a declining interest rate
environment (when homeowners are more likely to refinance their mortgages).
If any of the mortgages we purchased at a discount are paid down early, they
will be paid at par value, which would result in a gain for the portfolio.
Consistent with our defensive posture at this time, we have underweighted
the "belly" of the yield curve--securities in the two- to 10-year maturity
range--as this segment of the market is most likely to be hit first during
periods of rapid economic growth and Fed tightenings.
The Common Sense Government Fund was positioned defensively as it became
clear that the market was reacting to expected rate increases. The
portfolio's duration (a measure of its sensitivity to changes in interest
rates) was shortened to below-average levels in early January, and it has
remained below the benchmark since then. This was a timely strategy, as rates
moved downward during the first few months of the year and then reacted
sharply to the Fed tightening in late March.
This trend reinforced our impression that a significant upward move was not
likely, so we continued to shift assets into the mortgage-backed securities
portion of the market. In a sluggish, downward market, investors tend to
drift toward mortgage-backed securities in search of somewhat higher yields--
a migration that lends support to prices in the mortgage sector. As of April
30, approximately 59 percent of the portfolio was invested in this sector.
At the same time, we were sensitive to the characteristics of each security
we selected for the portfolio. Specifically, we established a "barbell"
approach to our investments. One end of the barbell was represented by high-
coupon securities with longer maturities, particularly 30-year GNMA issues
with 8.5 percent or 9.0 percent coupons. We were attracted to these seasoned
securities, most of which were issued in 1986 and 1987, because they tend to
have lower prepayment rates, which means they are more likely to remain in
the portfolio and contribute to the Fund's income stream.
The Common Sense Money Market Fund continues to pursue a predominantly
conservative strategy, concentrating its assets in short-term money market
instruments of the highest quality (those rated A1/P1). In the present market
environment, the Fund provides an alternative for fixed-income investors who
wish to postpone their investment allocation decisions until the direction of
interest rates becomes more clear. In the meantime, we believe the portfolio
is poised to benefit in the event of rising interest rates and to provide
relative stability in volatile markets.
Q. HOW DID THE PORTFOLIOS PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A. The total return at NAV of Common Sense Municipal Bond Fund Class 1 shares
was 1.43 percent, including reinvestment of dividends and capital gains
totaling $0.3675 per share. Over the same period, the Lehman Brothers
Municipal Bond Index generated a total return of 1.63 percent.
Common Sense Government Fund Class 1 shares generated a total return of
1.17 percent, based on net asset value (NAV), with all dividends reinvested.
By comparison, the Lehman Brothers General U.S. Government Index posted a
total return of 1.32 percent for the same period.
The Common Sense Money Market Fund Class 1 shares provided a six-month
total return at net asset value of 2.21 percent.
Please keep in mind that the indices referenced above are unmanaged
statistical composites used as benchmarks for many government and municipal
funds. They do not reflect any commissions or fees that would be
8
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paid by an investor purchasing the securities they represent. For more
complete performance information on each fund, please refer to pages 10
through 12.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET IN THE MONTHS AHEAD?
A. We expect economic growth rates to remain strong through the second quarter
of the year, which is likely to exert upward pressure on interest rates as
the Fed edges short-term lending rates to higher levels throughout the
summer.
However, despite the economy's strong growth, we have seen little
indication that inflation is accelerating. In all likelihood, inflation
should remain below 3 percent in the near future. Low inflation, combined
with the slow economic activity that high rates usually bring, sets the stage
for what should be more favorable conditions for bonds during the second half
of the year.
In our opinion, the Common Sense fixed-income funds are well-positioned for
the anticipated market environment in the months ahead. We will, as always,
remain watchful for changes that might warrant significant adjustments within
these portfolios, but we are confident that the fixed-income market has
excellent prospects for the long term.
/s/ Peter W. Hegel /s John R. Reynoldson
Peter W. Hegel John R. Reynoldson
Chief Investment Officer Portfolio Manager
Fixed Income Investments Common Sense Government Fund
/s/ Timothy D. Haney /s/ David R. Troth
Timothy D. Haney David R. Troth
Portfolio Manager Portfolio Manager
Common Sense Municipal Bond Fund Common Sense Money Market Fund
9
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Performance Results for the Period Ended April 30, 1997
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COMMON SENSE TRUST
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<TABLE>
<CAPTION>
1 Shares A Shares B Shares
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<S> <C> <C> <C>
COMMON SENSE EMERGING GROWTH FUND
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 8.50% 5.50% 5.00%
Six-month total returns:
Cumulative at net asset value............................................. (5.70%) (5.82%) (6.16%)
Cumulative with maximum sales charge or CDSC.............................. (13.73%) (10.94%) (10.85%)
One-year total returns:
Average annual at net asset value......................................... N/A (3.53%) (4.28%)
Average annual with maximum sales charge or CDSC.......................... N/A (8.86%) (9.07%)
Inception total returns:*
Cumulative at net asset value**........................................... (2.01%) 48.18% 45.72%
Average annual at net asset value......................................... N/A 19.67% 18.76%
Average annual with maximum sales charge or CDSC.......................... N/A 16.61% 17.64%
</TABLE>
*Class 1 shares inception of August 8, 1996, Class A and Class B inception of
February 21, 1995.
**The cumulative total return with maximum 8.50% sales charge for Class 1 shares
is (10.33%).
COMMON SENSE GOVERNMENT FUND
<TABLE>
<S> <C> <C> <C>
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 6.75% 4.75% 4.00%
Six-month total returns:
Cumulative at net asset value............................................. 1.17% 1.04% 0.82%
Cumulative with maximum sales charge or CDSC.............................. (5.63%) (3.77%) (3.10%)
One-year total returns:
Average annual at net asset value......................................... 6.04% 4.80% 4.16%
Average annual with maximum sales charge or CDSC.......................... (1.08%) (.22%) .23%
Five-year total returns:
Cumulative at net asset value............................................. 33.45% N/A N/A
Average annual at net asset value......................................... 5.94% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 4.48% N/A N/A
Ten-year total returns:
Cumulative at net asset value............................................. 103.61% N/A N/A
Average annual at net asset value......................................... 7.37% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 6.62% N/A N/A
Inception total returns:*
Cumulative at net asset value............................................. 102.57% 13.98% 11.63%
Average annual at net asset value......................................... 7.28% 4.46% 3.74%
Average annual with maximum sales charge or CDSC.......................... 6.54% 2.76% 2.82%
</TABLE>
*Class 1 shares inception of April 14, 1987, Class A and Class B inception
of May 3, 1994.
COMMON SENSE GROWTH FUND
<TABLE>
<S> <C> <C> <C>
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 8.50% 5.50% 5.00%
Six-month total returns:
Cumulative at net asset value............................................. 8.38% 8.22% 7.80%
Cumulative with maximum sales charge or CDSC.............................. (.82%) 2.24% 2.83%
One-year total returns:
Average annual at net asset value......................................... 15.72% 14.58% 13.99%
Average annual with maximum sales charge or CDSC.......................... 5.91% 8.31% 8.99%
Five-year total returns:
Cumulative at net asset value............................................. 95.27% N/A N/A
Average annual at net asset value......................................... 14.32% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 12.31% N/A N/A
Ten-year total returns:
Cumulative at net asset value............................................. 209.67% N/A N/A
Average annual at net asset value......................................... 11.97% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 10.98% N/A N/A
</TABLE>
*Class 1 shares inception of April 14, 1987, Class A and Class B inception of
May 3, 1994.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Performance Results for the Period Ended April 30, 1997 (Continued)
- --------------------------------------------------------------------------------
COMMON SENSE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Shares A Shares B Shares
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Sense Growth Fund (CONTINUED)
Inception total returns:*
Cumulative at net asset value............................................. 209.12% 57.67% 54.63%
Average annual at net asset value......................................... 11.88% 16.39% 15.64%
Average annual with maximum sales charge or CDSC.......................... 10.90% 14.22% 14.88%
</TABLE>
*Class 1 shares inception of April 14, 1987, Class A and Class B inception of
May 3, 1994.
COMMON SENSE GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C> <C>
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 8.50% 5.50% 5.00%
Six-month total returns:
Cumulative at net asset value............................................. 10.76% 10.62% 10.26%
Cumulative with maximum sales charge or CDSC.............................. 1.36% 4.56% 5.40%
One-year total returns:
Average annual at net asset value......................................... 17.52% 16.87% 16.04%
Average annual with maximum sales charge or CDSC.......................... 7.52% 10.42% 11.06%
Five-year total returns:
Cumulative at net asset value............................................. 95.44% N/A N/A
Average annual at net asset value......................................... 14.34% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 12.33% N/A N/A
Ten-year total returns:
Cumulative at net asset value............................................. 196.83% N/A N/A
Average annual at net asset value......................................... 11.49% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 10.50% N/A N/A
Inception total returns:*
Cumulative at net asset value............................................. 197.61% 59.01% 55.61%
Average annual at net asset value......................................... 11.46% 16.72% 15.88%
Average annual with maximum sales charge or CDSC.......................... 10.48% 14.53% 15.13%
</TABLE>
*Class 1 shares inception of April 14, 1987, Class A and Class B inception of
May 3, 1994.
COMMON SENSE INTERNATIONAL EQUITY FUND
<TABLE>
<S> <C> <C> <C>
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 8.50% 5.50% 5.00%
Six-month total returns:
Cumulative at net asset value............................................. 2.78% 2.72% 2.32%
Cumulative with maximum sales charge or CDSC.............................. (5.93%) (2.91%) (2.68%)
One-year total returns:
Average annual at net asset value......................................... N/A 3.98% 3.20%
Average annual with maximum sales charge or CDSC.......................... N/A (1.74%) (1.80%)
Inception total returns:*
Cumulative at net asset value**........................................... 6.12% 42.53% 40.44%
Average annual at net asset value......................................... N/A 18.20% 17.37%
Average annual with maximum sales charge or CDSC.......................... N/A 15.10% 16.18%
</TABLE>
*Class 1 shares inception of August 8, 1996, Class A and Class B inception of
March 17, 1995 (date the Fund's investment strategy was implemented).
**The cumulative total return with maximum 8.50% sales charge for Class 1
shares is (2.92%).
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Performance Results for the Period Ended April 30, 1997 (Continued)
- --------------------------------------------------------------------------------
COMMON SENSE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Shares A Shares B Shares
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON SENSE MONEY MARKET FUND
Six-month total returns:
Cumulative at net asset value............................................. 2.21% 2.18% 1.89%
One-year total returns:
Average annual at net asset value......................................... 4.50% N/A N/A
Five-year total returns:
Cumulative at net asset value............................................. 19.82% N/A N/A
Average annual at net asset value......................................... 3.68% N/A N/A
Inception total returns:*
Cumulative at net asset value............................................. 59.78% 3.21% 2.62%
Average annual at net asset value......................................... 5.12% N/A N/A
</TABLE>
*Class 1 shares inception of December 15, 1987, Class A and Class B inception of
August 8, 1996.
An investment in the Common Sense Money Market Fund 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. There is a
one-time $15 set-up fee for the Money Market Fund.
COMMON SENSE MUNICIPAL BOND FUND
<TABLE>
<S> <C> <C> <C>
Maximum Sales Charge or Contingent Deferred Sales Charge (CDSC)................... 4.75% 4.50% 4.00%
Six-month total returns:
Cumulative at net asset value............................................. 1.43% 1.30% 0.93%
Cumulative with maximum sales charge or CDSC.............................. (3.39%) (3.24%) (3.02%)
One-year total returns:
Average annual at net asset value......................................... 6.59% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 1.55% N/A N/A
Five-year total returns:
Cumulative at net asset value............................................. 38.58% N/A N/A
Average annual at net asset value......................................... 6.74% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 5.71% N/A N/A
Inception total returns:*
Cumulative at net asset value**........................................... 88.06% 2.44% 1.86%
Average annual at net asset value......................................... 7.44% N/A N/A
Average annual with maximum sales charge or CDSC.......................... 6.85% N/A N/A
</TABLE>
*Class 1 shares inception of July 13, 1988, Class A and Class B inception of
August 8, 1996.
**The cumulative total return with maximum sales charge of 4.50% for Class A
shares and maximum contingent deferred sales charge of 4.00% for Class B shares
are (2.17%) and (2.10%), respectively.
N/A=Not Applicable
Performance data quoted represents past performance, which is not indicative of
future performance. The investment return and principal value may fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original value.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 87.1%
CONSUMER DISTRIBUTION 9.5%
Bed, Bath & Beyond, Inc. (b)............................ 17,000 $ 465,375
Cardinal Health, Inc.................................... 6,000 319,500
Consolidated Stores Corp. (b)........................... 21,000 840,000
Costco Cos., Inc. (b)................................... 42,000 1,212,750
CVS Corp................................................ 10,000 496,250
Dollar General Corp..................................... 17,000 537,625
Eagle Hardware & Garden, Inc. (b)....................... 9,000 168,750
Family Dlr. Stores, Inc................................. 12,000 313,500
Inacom Corp. (b)........................................ 6,000 132,750
Ingram Micro, Inc., Class A (b)......................... 10,000 227,500
Interstate Bakeries Corp................................ 13,000 674,375
Kroger Co. (b).......................................... 27,000 742,500
Meyer Fred, Inc. (b).................................... 7,000 287,875
Miller Herman, Inc...................................... 21,000 679,875
Pacific Sunwear of California (b)....................... 10,000 312,500
Pier 1 Imports, Inc..................................... 10,000 197,500
Ross Stores, Inc........................................ 37,000 1,040,625
Safeway, Inc. (b)....................................... 38,525 1,719,178
Stein Mart, Inc. (b).................................... 6,000 174,000
Tiffany & Co............................................ 13,000 515,125
TJX Cos., Inc........................................... 17,000 803,250
Wet Seal, Inc. (b)...................................... 6,000 148,500
-----------
12,009,303
-----------
CONSUMER DURABLES 0.3%
Ethan Allen Interiors, Inc.............................. 8,000 354,000
-----------
CONSUMER NON-DURABLES 5.6%
Borders Group, Inc. (b)................................. 28,000 595,000
Coca-Cola Enterprises, Inc.............................. 12,500 754,688
Gadzooks, Inc. (b)...................................... 9,000 250,875
Gucci Group NV.......................................... 12,500 867,187
Jones Apparel Group, Inc. (b)........................... 15,000 626,250
Liz Claiborne, Inc...................................... 10,500 475,125
Nautica Enterprises, Inc. (b)........................... 24,500 542,063
Nu Skin Asia Pacific, Inc. (b).......................... 2,000 52,000
Smithfield Foods, Inc. (b).............................. 12,000 553,500
St. John Knits, Inc..................................... 12,000 460,500
Starbucks Corp. (b)..................................... 6,000 179,250
Tommy Hilfiger, Corp. (b)............................... 17,500 695,625
Westpoint Stevens, Inc. (b)............................. 11,000 430,375
Wolverine World Wide, Inc............................... 14,000 563,500
-----------
7,045,938
-----------
CONSUMER SERVICES 7.6%
AccuStaff, Inc (b)...................................... 8,915 162,699
Apollo Group, Inc., Class A (b)......................... 10,000 268,750
Boston Chicken, Inc. (b)................................ 6,000 143,250
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Capstar Hotel Co. (b)..................................... 8,000 $ 227,000
Caribiner International, Inc. (b)......................... 4,000 212,000
Clear Channel Communications, Inc. (b).................... 7,500 363,750
Consolidated Graphics, Inc. (b)........................... 12,000 292,500
Corrections Corp. of America (b).......................... 22,000 717,750
Doubletree Corp. (b)...................................... 12,000 504,000
Evergreen Media Corp., Class A (b)........................ 17,000 550,375
Firstplus Financial Group, Inc. (b)....................... 26,000 575,250
HFS, Inc.(b).............................................. 25,000 1,481,250
Imperial Credit Industries, Inc. (b)...................... 9,000 131,062
Interpublic Group of Cos., Inc............................ 13,000 736,125
Meredith Corp............................................. 27,000 634,500
National Data Corp........................................ 10,000 375,000
Omnicom Group, Inc........................................ 10,500 556,500
Prime Hospitality Corp. (b)............................... 8,000 133,000
Promus Hotel Corp. (b).................................... 10,000 352,500
Regal Cinemas, Inc. (b)................................... 12,000 327,000
Reynolds & Reynolds Co., Class A.......................... 10,000 207,500
Robert Half International, Inc. (b)....................... 10,500 412,125
Sitel Corp. (b)........................................... 12,000 118,500
Univision Communications, Inc., Class A (b)............... 2,000 68,000
Whittman-Hart, Inc. (b)................................... 2,000 38,000
-----------
9,588,386
-----------
ENERGY 7.2%
Baker Hughes, Inc......................................... 6,000 207,000
BJ Services Cos., including Warrants (exp. 04/13/00) (b).. 10,000 472,645
Chesapeake Energy Corp. (b)............................... 10,000 151,250
Cliffs Drilling Co. (b)................................... 6,000 366,000
Cooper Cameron Corp. (b).................................. 10,000 712,500
Diamond Offshore Drilling, Inc. (b)....................... 17,000 1,094,375
Energy Ventures, Inc.(b).................................. 8,000 535,000
ENSCO International, Inc.(b).............................. 18,000 855,000
Falcon Drilling, Inc.(b).................................. 17,500 669,375
Flores & Rucks, Inc. (b).................................. 7,000 305,375
Forcenergy, Inc. (b)...................................... 10,000 310,000
Global Marine, Inc. (b)................................... 42,000 845,250
Marine Drilling Cos., Inc. (b)............................ 21,500 338,625
Reading & Bates Corp. (b)................................. 18,000 402,750
Rowan Cos., Inc. (b)...................................... 11,500 207,000
Smith International, Inc. (b)............................. 20,000 947,500
Tidewater, Inc............................................ 15,000 601,875
Varco International, Inc. (b)............................. 5,000 115,000
-----------
9,136,520
-----------
FINANCE 7.8%
Ahmanson H.F. & Co........................................ 7,000 266,875
Astoria Financial Corp.................................... 10,000 391,250
Bank of Boston Corp....................................... 14,000 1,018,500
CMAC Investment Corp...................................... 17,000 646,000
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Coast Savings Financial Corp. (b)........................ 5,250 $ 211,312
ContiFinancial Corp. (b)................................. 4,000 115,000
Cullen Frost Bankers, Inc................................ 6,500 227,500
E Trade Group, Inc. (b).................................. 4,000 60,000
Finova Group, Inc........................................ 15,000 1,029,375
Glendale Federal Bank, FSB............................... 10,000 248,750
Greenpoint Financial Corp................................ 10,000 553,750
MGIC Investment Corp..................................... 15,000 1,218,750
North Fork Bancorp, Inc.................................. 10,000 396,250
Peoples Heritage Financial Group, Inc.................... 9,000 282,375
Sovereign Bancorp, Inc................................... 25,000 306,250
St. Paul Bancorp, Inc.................................... 10,000 273,750
Star Banc Corp........................................... 11,000 467,500
State Street Corp........................................ 6,000 472,500
Transatlantic Holdings, Inc.............................. 2,000 165,500
Washington Mutual, Inc................................... 30,000 1,481,250
-----------
9,832,437
-----------
HEALTHCARE 8.4%
Cardiothoracic Systems, Inc. (b)......................... 12,000 190,500
Curative Health Services, Inc. (b)....................... 6,000 141,750
Dura Pharmaceuticals, Inc. (b)........................... 30,000 870,000
ESC Medical Systems, Ltd. (b)............................ 4,500 120,938
FPA Medical Management, Inc. (b)......................... 10,000 162,500
Guidant Corp............................................. 15,000 1,023,310
HBO & Co................................................. 18,000 963,000
Health Management Assoc., Inc., Class A (b).............. 24,000 642,000
Healthsouth Corp. (b).................................... 60,000 1,185,000
Jones Medical Industries, Inc............................ 13,000 458,250
Medicis Pharmaceutical Corp., Class A (b)................ 13,000 318,500
MiniMed, Inc. (b)........................................ 7,000 173,250
Omnicare, Inc............................................ 34,000 828,750
Oxford Health Plans, Inc. (b)............................ 17,000 1,119,875
Parexel International Corp. (b).......................... 8,000 224,000
Quintiles Transnational Corp. (b)........................ 9,000 457,875
Renal Treatment Centers, Inc. (b)........................ 8,000 173,000
Rexall Sundown, Inc. (b)................................. 3,100 61,614
Teva Pharmaceutical Industries, Ltd. - ADR (Israel)...... 5,500 279,125
Total Renal Care Holdings, Inc. (b)...................... 6,000 192,750
Universal Health Services, Inc., Class B (b)............. 10,000 378,750
Vencor, Inc. (b)......................................... 8,100 337,031
Vivus, Inc. (b).......................................... 9,000 332,437
-----------
10,634,205
-----------
PRODUCER MANUFACTURING 3.7%
Danaher Corp............................................. 10,000 451,250
Mastec, Inc. (b)......................................... 6,750 195,750
Mueller Industries, Inc. (b)............................. 3,500 131,250
Newpark Resources, Inc. (b).............................. 6,000 269,250
Precision Castparts Corp................................. 9,000 481,500
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING (CONTINUED)
Tyco International, Ltd.......................................................... 10,000 $ 610,000
US Filter Corp. (b).............................................................. 28,000 850,500
United Waste Systems, Inc. (b)................................................... 21,000 708,750
USA Waste Services, Inc. (b)..................................................... 31,000 1,015,250
------------
4,713,500
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.9%
Betz Laboratories, Inc. including Common Callable Rights (exp. 09/19/98)......... 3,000 192,000
Cytec Industries, Inc. (b)....................................................... 4,000 150,500
Maverick Tube Corp. (b).......................................................... 3,000 65,625
Praxair, Inc..................................................................... 11,000 567,875
Sealed Air Corp. (b)............................................................. 4,500 208,125
------------
1,184,125
------------
TECHNOLOGY 33.7%
Acxiom Corp. (b)................................................................. 13,000 170,625
ADC Telecommunications, Inc. (b)................................................. 25,000 653,125
Advanced Micro Devices, Inc. (b)................................................. 6,000 255,000
Altera Corp. (b)................................................................. 40,000 1,982,500
Applied Materials, Inc. (b)...................................................... 29,000 1,591,375
Aspect Telecommunications Corp. (b).............................................. 13,000 230,750
Aspen Technology, Inc. (b)....................................................... 12,200 370,575
Baan Company NVF................................................................. 12,000 645,000
BMC Industries, Inc.............................................................. 7,000 203,000
BMC Software, Inc. (b)........................................................... 34,000 1,470,500
Cadence Design Systems, Inc. (b)................................................. 14,000 448,000
Cambridge Technology Partners (b)................................................ 13,000 346,125
Ciber, Inc. (b).................................................................. 8,000 286,000
Compuware Corp. (b).............................................................. 49,000 1,849,750
Comverse Technology, Inc. (b).................................................... 15,000 588,750
Dallas Semiconductor Corp........................................................ 6,000 219,000
Dell Computer Corp. (b).......................................................... 56,000 4,686,500
Dynatech Corp. (b)............................................................... 8,000 278,000
Gateway 2000, Inc. (b)........................................................... 20,000 1,097,500
Intel Corp....................................................................... 20,000 3,062,500
KLA Instruments Corp. (b)........................................................ 9,000 400,500
McAfee Associates, Inc. (b)...................................................... 40,000 2,230,000
Micron Technology, Inc........................................................... 6,000 211,500
Microsoft Corp. (b).............................................................. 40,000 4,860,164
National TechTeam, Inc. (b)...................................................... 5,000 77,500
PairGain Technologies, Inc. (b).................................................. 48,000 1,248,000
Parametric Technology Corp. (b).................................................. 19,000 859,750
Paychex, Inc..................................................................... 11,000 514,938
Peoplesoft, Inc. (b)............................................................. 44,000 1,826,000
Qualcomm, Inc. (b)............................................................... 14,000 654,500
Quantum Corp. (b)................................................................ 17,000 708,687
Read-Rite Corp. (b).............................................................. 7,500 194,063
Sanmina Corp. (b)................................................................ 11,500 575,000
Saville Systems PLC-ADR (Ireland) (b)............................................ 5,000 205,625
SCI Systems, Inc. (b)............................................................ 9,500 586,625
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (CONTINUED)
Sundstrand Corp............................................................................ 4,000 $ 195,000
SunGuard Data Systems, Inc. (b)............................................................ 16,000 710,000
Technology Solutions Co. (b)............................................................... 5,200 137,150
Tellabs, Inc. (b).......................................................................... 32,000 1,276,000
Teradyne, Inc. (b)......................................................................... 14,000 458,500
Texas Instruments, Inc..................................................................... 17,000 1,517,656
Viasoft, Inc (b)........................................................................... 20,000 850,000
Visio Corp. (b)............................................................................ 3,000 152,250
Vitesse Semiconductor Corp. (b)............................................................ 24,000 756,000
Western Digital Corp. (b).................................................................. 13,000 801,125
Wind River Systems, Inc. (b)............................................................... 10,000 230,000
------------
42,671,108
------------
TRANSPORTATION 1.2%
Airborne Freight Corp...................................................................... 8,000 281,000
Continental Airlines, Inc., Class B (b).................................................... 15,000 476,250
Tower Automotive, Inc. (b)................................................................. 6,500 240,500
Trico Marine Services, Inc. (b)............................................................ 5,000 177,500
US Airways Group, Inc. (b)................................................................. 13,000 420,875
------------
1,596,125
------------
UTILITIES 1.2%
AES Corp. (b).............................................................................. 11,000 717,750
Cincinnati Bell, Inc....................................................................... 15,000 840,000
------------
1,557,750
------------
TOTAL LONG-TERM INVESTMENTS 87.1% (Cost $96,288,644) (a)............................................ 110,323,397
============
Short-Term Investments 12.7%
REPURCHASE AGREEMENT 11.1%
DLJ Securities ($14,075,000 par collateralized by U.S. Government obligations in a
pooled cash account, dated 04/30/97, to be sold on 05/01/97 at $14,077,053) (c)................... 14,075,000
U.S. GOVERNMENT OBLIGATION 1.6%
Federal National Mortgage Association ($2,000,000 par, yielding 5.155%,
05/14/97 maturity)................................................................................ 1,995,991
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $16,070,991) (a)................................................. 16,070,991
------------
OTHER ASSETS IN EXCESS OF LIABILITIES 0.2%.......................................................... 211,738
------------
NET ASSETS 100.0%................................................................................... $126,606,126
============
</TABLE>
(a) At April 30, 1997, for federal income tax purposes, cost for long- and
short-term investments is $112,366,042; the aggregate gross unrealized
appreciation is $18,339,120, and the aggregate gross unrealized
depreciation is $4,212,861, resulting in net unrealized appreciation
including futures transactions of $14,126,259.
(b) Non-income producing security as this stock currently does not declare
dividends.
(c) Assets segregated for open futures transactions.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $96,288,644) (Note 1).................... $ 110,323,397
Repurchase Agreement (Cost $14,075,000) (Note 1)...................................... 14,075,000
Short-Term Investments (Cost $1,995,991) (Note 1)..................................... 1,995,991
Cash.................................................................................. 1,409
RECEIVABLES:
Fund Shares Sold................................................................ 1,406,446
Securities Sold................................................................. 346,372
Variation Margin on Futures (Note 5)............................................ 31,500
Dividends....................................................................... 22,927
Other........................................................................... 55,435
Unamortized Organizational Costs (Note 1)............................................. 11,837
-------------
Total Assets.................................................................... 128,270,314
-------------
LIABILITIES:
Payables:
Securities Purchased............................................................ 1,204,341
Distributor and Affiliates (Notes 2 and 6)...................................... 159,850
Investment Advisory Fee (Note 2)................................................ 112,733
Fund Shares Repurchased......................................................... 63,730
Accrued Expenses...................................................................... 121,289
Retirement Plan (Note 2).............................................................. 2,245
-------------
Total Liabilities....................................................... 1,664,188
-------------
NET ASSETS............................................................................ $ 126,606,126
=============
NET ASSETS CONSIST OF:
Capital (Note 3)...................................................................... $ 120,409,254
Net Unrealized Appreciation on Securities............................................. 14,132,666
Accumulated Net Investment Loss....................................................... (760,482)
Accumulated Net Realized Loss on Securities........................................... (7,175,312)
-------------
NET ASSETS............................................................................ $ 126,606,126
=============
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of
$3,387,097 and 193,230 shares of beneficial interest issued and
outstanding)............................................................ $ 17.53
Maximum sales charge (8.50%* of offering price)......................... 1.63
-------------
Maximum offering price to public........................................ $ 19.16
=============
Class A Shares:
Net assets value and redemption price per share (Based on net assets of
$70,394,811 and 4,023,817 shares of beneficial interest
and outstanding)........................................................ $ 17.49
Maximum sales charge (5.50%* of offering price)......................... 1.02
-------------
Maximum offering price to public........................................ $ 18.51
=============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$52,824,218 and 3,069,754 shares of beneficial interest issued and
outstanding)............................................................ $ 17.21
=============
</TABLE>
* On sales of $10,000 of more for Class 1 shares and $50,000 or more for
Class A shares, the sales charge will be reduced.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Interest............................................................... $ 303,479
Dividends.............................................................. 145,068
------------
Total Income..................................................... 448,547
------------
EXPENSES:
Shareholder Services (Note 2).......................................... 399,018
Investment Advisory Fee (Note 2)....................................... 357,558
Distribution (12b-1) and Service Fees (Attributed to Class A and B
of $77,947 and $230,180, respectively)(Note 6)......................... 308,127
Registration and Filing Fees........................................... 60,718
Trustees Fees and Expenses (Note 2).................................... 10,514
Amortization of Organizational Costs................................... 2,072
Custody................................................................ 301
Other.................................................................. 69,463
------------
Total Expenses................................................... 1,207,771
------------
NET INVESTMENT LOSS.................................................... $ (759,224)
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments...................................................... $ (3,207,768)
Futures.......................................................... (178,767)
------------
Net Realized Loss on Securities........................................ (3,386,535)
------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.......................................... 17,310,941
End of the Period:
Investments.............................................. 14,034,753
Futures.................................................. 97,913
------------
14,132,666
------------
Net Unrealized Depreciation on Securities During the Period............ (3,178,275)
------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES......................... $ (6,564,810)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS............................. $ (7,324,034)
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1997 1996
----------------- --------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss........................................ $ (759,224) $ (1,068,737)
Net Realized Loss on Securities............................ (3,386,535) (3,758,785)
Net Unrealized Appreciation/Depreciation on Securities
During the Period......................................... (3,178,275) 15,144,176
------------ --------------
Change in Net Assets from Operations....................... (7,324,034) 10,316,654
------------ --------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold.................................. 52,450,030 62,308,648
Cost of Shares Repurchased................................. (9,796,506) (8,092,239)
------------ --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS......... 42,653,524 54,216,409
------------ --------------
TOTAL INCREASE IN NET ASSETS............................... 35,329,490 64,533,063
NET ASSETS:
Beginning of the Period.................................... 91,276,636 26,743,573
------------ --------------
End of the Period (Including accumulated net investment
loss of $760,482 and $1,258, respectively).......... $126,606,126 $ 91,276,636
============ ==============
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
19
<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>
August 8, 1996
Six Months (Commencement
Ended April 30, of Distribution) to
Class 1 Shares 1997 October 31, 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period.................... $ 18.593 $ 17.890
--------- ------------
Net Investment Loss...................................... (.035) (.015)
Net Realized and Unrealized Gain/Loss on Securities...... (1.029) .718
--------- ------------
Total from Investment Operations............................ (1.064) .703
--------- ------------
Net Asset Value, End of the Period.......................... $ 17.529 $ 18.593
========= ============
Total Return (a)............................................ (5.70%)* 3.91%*
Net Assets at End of Period (In millions)................... $ 3.4 $ 0.7
Ratio of Expenses to Average Net Assets..................... 1.63% 1.74%
Ratio of Net Investment Loss to Average Net Assets.......... (.77%) (1.09%)
Portfolio Turnover.......................................... 49%* 80%
Average Commission Paid for Equity Share Traded (b)......... $ .0550 $ .0498
</TABLE>
* Non-Annualized
(a) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Represents the Average Brokerage Commissions Paid Per Equity Share Traded
during the period for trades where
commissions were applicable.
See Notes Financial Statements
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Emerging Growth Fund Financial HighlightsE(Continued)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 21, 1995
(Commencement
Six Months of Investment
Ended Year Ended Operations) to
Class A Shares April 30, 1997 October 31, 1996 October 31, 1995 (a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period................. $ 18.574 $ 15.12 $ 11.81
-------------- ---------------- ----------------
Net Investment Loss................................... (.083) (.178) (.24)
Net Realized and Unrealized Gain/Loss on Securities... (.997) 3.632 3.55
-------------- ---------------- ----------------
Total from Investment Operations......................... (1.080) 3.454 3.31
-------------- ---------------- ----------------
Net Asset Value, End of the Period....................... $ 17.494 $ 18.574 $ 15.12
============== ================ ================
Total Return (b)......................................... (5.82%)* 22.82% 3.91%(c)
Net Assets at End of Period (In millions)................ $ 70.4 $ 51.5 $ 0.7
Ratio of Expenses to Average Net Assets (d).............. 1.88% 2.21% 2.75%
Ratio of Net Investment Loss to Average Net Assets (d)... (1.07%) (1.52%) (1.65%)
Portfolio Turnover....................................... 49%* 80% 83%*
Average Commission Paid for Equity Share Traded (e)...... $ .0550 $ .0498 $ -
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 21, 1995
(Commencement
Six Months of Investment
Ended Year Ended Operations) to
Class B Shares April 30, 1997 October 31, 1996 October 31, 1995 (a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period................. $ 18.339 $ 15.04 $ 11.81
-------------- ---------------- ----------------
Net Investment Loss................................... (.136) (.270) (.35)
Net Realized and Unrealized Gain/Loss on Securities... (.995) 3.569 3.58
-------------- ---------------- ----------------
Total from Investment Operations......................... (1.131) 3.299 3.23
-------------- ---------------- ----------------
Net Asset Value, End of the Period....................... $ 17.208 $ 18.339 $ 15.04
============== ================ ================
Total Return (b)......................................... (6.16%)* 21.94% 27.43%(c)
Net Assets at End of Period (In millions)................ $ 52.8 $ 39.1 $ 10.8
Ratio of Expenses to Average Net Assets (d).............. 2.63% 2.96% 3.49%
Ratio of Net Investment Loss to Average Net Assets (d)... (1.82%) (2.27%) (2.45%)
Portfolio Turnover....................................... 49%* 80% 83%*
Average Commission Paid for Equity Share Traded (e)...... $ .0550 $ .0498 $ -
</TABLE>
* Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total Return from March 17, 1995 (date the FundOs investment strategy was
implemented) through October 31, 1995
without annualization.
(d) If the Adviser had not waived fees for the period ended October 31, 1995,
the total return would have been lower and the Ratios of Expenses to
Average Net Assets and Net Investment Income to Average Net Assets would
have been 3.37% and (2.27%) for Class A shares and 4.11% and (3.07%) for
Class B shares, respectively.
(e) Represents the Average Brokerage Commisssions Paid per Equity Share Traded
during the period for trades where commissions were applicable. This
disclosure was not required in fiscal years prior to 1996.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Government Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS 60.7%
$ 4,142 Federal Home Loan Mortgage Corp. Gold 5 Year Balloon............... 6.500% 10/01/97-07/01/98 $ 4,100,518
446 Federal Home Loan Mortgage Corp. Gold 5 Year Balloon............... 7.000 06/01/97-08/01/97 446,745
4,575 Federal Home Loan Mortgage Corp. Gold 30 Year Pools................ 7.000 07/01/24-10/01/24 4,440,965
21,757 Federal Home Loan Mortgage Corp. Gold 30 Year Pools................ 7.500 04/01/24-09/01/26 21,634,691
354 Federal Home Loan Mortgage Corp. Gold 30 Year Pools................ 8.000 06/01/24-11/01/24 359,511
10,400 Federal National Mortgage Association Pools........................ 6.500 01/01/26-07/01/26 9,805,308
9,068 Federal National Mortgage Association Pools........................ 7.000 04/01/24-05/01/25 8,803,357
16,347 Federal National Mortgage Association Pools........................ 7.500 02/01/16-02/01/26 16,244,497
25 Federal National Mortgage Association Pools........................ 8.000 08/01/25 25,066
10,314 Governmental National Mortgage Association Pools................... 6.500 01/15/26-07/15/26 9,691,748
31,782 Governmental National Mortgage Association Pools................... 7.000 06/15/22-08/15/26 30,739,635
6,775 Governmental National Mortgage Association Pools................... 7.500 03/15/22-10/15/24 6,716,212
5,336 Governmental National Mortgage Association Pools................... 8.000 06/15/16-08/15/24 5,410,606
27,370 Governmental National Mortgage Association Pools................... 8.500 12/15/05-06/15/23 28,463,996
20,757 Governmental National Mortgage Association Pools................... 9.000 12/15/17 22,138,685
11 Governmental National Mortgage Association Pools................... 10.000 03/15/16 11,902
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS................................................ 169,033,442
------------
U.S. GOVERNMENT OBLIGATIONS 42.0%
1,000 U.S. Treasury Bonds................................................ 7.125 02/15/23 1,006,560
12,000 U.S. Treasury Bonds (b)............................................ 7.500 05/15/02 12,489,375
12,000 U.S. Treasury Bonds (b)............................................ 8.125 08/15/19 13,395,000
10,000 U.S. Treasury Bonds (b)............................................ 11.125 08/15/03 12,262,500
1,200 U.S. Treasury Notes................................................ 6.500 08/15/05 1,181,436
700 U.S. Treasury Notes................................................ 6.500 05/15/05 690,158
15,000 U.S. Treasury Notes (b)............................................ 7.875 01/15/98 15,203,850
600 U.S. Treasury Notes................................................ 8.000 08/15/99 620,718
22,000 U.S. Treasury Notes (b)............................................ 8.500 02/15/00 23,144,660
16,000 U.S. Treasury Notes................................................ 8.750 10/15/97 16,212,480
20,000 U.S. Treasury Notes (b)............................................ 9.000 05/15/98 20,587,600
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS....................................................... 116,794,337
-------------
TOTAL LONG-TERM INVESTMENTS 102.7%
(Cost $286,082,372) (a).................................................................................... 285,827,779
REPURCHASE AGREEMENT 0.9%
DLJ Securities ($2,400,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 04/30/97, to be sold on 05/01/97 at $2,400,350) (Cost $2,400,000) (a)...... 2,400,000
LIABILITIES IN EXCESS OF OTHER ASSETS (3.6%).................................................................... (9,818,220)
------------
NET ASSETS 100.0%............................................................................................... $278,409,559
============
</TABLE>
(a) At April 30, 1997, for federal income tax purposes, cost of long- and
short-term investments is $288,586,699, the aggregate gross unrealized
appreciation is $2,878,835 and the aggregate gross unrealized depreciation
is $4,133,862; resulting in net unrealized depreciation including open
futures contracts of $1,255,027.
(b) Assets segregated as collateral for open futures transactions.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
Government Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $286,082,372) (Note 1)....................................... $285,827,779
Repurchase Agreement (Cost $2,400,000) (Note 1)................................................. 2,400,000
Cash............................................................................................ 3,841
Receiveables:
Interest..................................................................................... 3,545,555
Fund Shares Sold............................................................................. 506,657
Variation Margin on Futures (Note 5)......................................................... 95,309
Other........................................................................................... 18,457
------------
Total Assets.................................................................................... 292,397,598
------------
LIABILITIES:
Payables:
Securities Purchased......................................................................... 12,904,569
Fund Shares Purchased........................................................................ 482,699
Income Distributions......................................................................... 216,627
Investment Advisory Fee (Note 2)............................................................. 137,671
Distributor and Affiliates (Notes 2 and 6)................................................... 126,395
Accrued Expenses................................................................................ 103,762
Retirement Plan (Note 2)........................................................................ 16,316
------------
Total Liabilities............................................................................... 13,988,039
------------
NET ASSETS...................................................................................... $278,409,559
============
NET ASSETS CONSIST OF:
Capital (Note 3)................................................................................ $316,235,597
Accumulated Undistributed Net Investment Income (Note 1)........................................ 30,239
Net Unrealized Depreciation on Securities....................................................... (1,150,700)
Accumulated Net Realized Loss on Securities..................................................... (36,705,577)
------------
NET ASSETS...................................................................................... $278,409,559
============
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets
of $253,904,400 and 24,914,570 shares of beneficial interest issued and outstanding)....... $ 10.19
Maximum sales charge (6.75%* of offering price)............................................ .74
------------
Maximum offering price to public............................................................. $ 10.93
============
Class A Shares:
Net asset value and redemption price per share (Based on net assets of
$11,658,285 and 1,144,115 shares of beneficial interest issued and outstanding)............ $ 10.19
Maximum sales charge (4.75%* of offering price)............................................ .51
------------
Maximum offering price to public........................................................... $ 10.70
============
Class B Shares:
Net asset value and offering price per share (Based on net assets of
$12,846,874 and 1,260,740 shares of beneficial interest issued and outstanding)............ $ 10.19
============
</TABLE>
* On sales of $25,000 or more for Class 1 shares and $100,000 or more for Class
A shares, the sales charge will be reduced.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Government Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended
INVESTMENT INCOME April 30, 1997
----------------
<S> <C>
Interest.............................................................................................. $ 11,374,654
------------
EXPENSES
Investment Advisory Fee (Note 2)...................................................................... 885,124
Shareholder Services (Note 2)......................................................................... 284,634
Distribution (12b-1) and Services Fees (Attributed to Classes A & B
of $14,481 and $66,165, respectively) (Note 6).................................................... 80,646
Trustees Fees and Expenses (Note 2)................................................................... 19,763
Custody............................................................................................... 15,376
Other................................................................................................. 190,859
------------
Total Expenses................................................................................... 1,476,402
------------
NET INVESTMENT INCOME................................................................................. $ 9,898,252
============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES
Net Realized Gain/Loss on
Securities
Investments...................................................................................... $ (343,057)
Futures.......................................................................................... 381,395
Forwards......................................................................................... 61,248
------------
Net Realized Gain on Securities....................................................................... 99,586
------------
Unrealized
Appreciation/Depreciation on Securities
Beginning of the Period.......................................................................... 5,358,494
------------
End of the Period:
Investments...................................................................................... (254,593)
Futures.......................................................................................... (896,107)
------------
(1,150,700)
------------
Net Unrealized Depreciation on Securities During the Period........................................... (6,509,194)
------------
Net Realized and Unrealized Loss on Securities........................................................ $ (6,409,608)
============
Net Increase in Net Assets From Operations............................................................ $ 3,488,644
============
</TABLE>
<TABLE>
<CAPTION>
Statement OF Changes in Net Assets
FROM INVESTMENT ACTIVITIES Six Months Ended Six Months Ended
OPERATIONS October 31, 1996 April 30, 1997
---------------- ----------------
<S> <C> <C>
Net Investment Income..................................................... $ 9,898,252 $ 21,280,840
Net Realized Gain/Loss on Securities...................................... 99,586 (3,976,596)
Net Unrealized Appreciation/Depreciation on Securities During
the Period............................................................. (6,509,194) (3,590,273)
------------ ------------
Change in Net Assets from Operations................................. 3,488,644 13,713,971
------------ ------------
Distributions from Net Investment Income....................................... (9,756,674) (21,657,232)
Distributions from and in Excess of Net Investment Income (Note 1)............. 0 (124,957)
Distributions from and in Excess of Net Investment Income (Note 1)........ (9,756,674) (21,782,189)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES............................ (6,268,030) (8,068,218)
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3)
Procees from Shares Sold.................................................. 11,904,724 56,574,484
Net Asset Value of Shares Issued Through Dividend Reinvestment............ 8,425,536 18,761,150
Cost of Shares Repurchased................................................ (48,000,775) (83,934,267)
------------ ------------
Net Change in Net Assets from Capital Transactions................... (27,670,515) (8,598,633)
------------ ------------
TOTAL DECREASE IN NET ASSETS................................................... (33,938,545) (16,666,851)
NET ASSETS
Beginning of the Period.................................................... 312,348,104 329,014,955
------------ ------------
End of the Period (Including accumulated undistributed net investment
income of $30,239 and $(6,653), respectively).......................... $278,409,559 $312,348,104
============ ============
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
Government 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 ENDED YEAR ENDED OCTOBER 31
---------------------------------------------
Class 1 Shares APRIL 30, 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......................... $ 10.406 $ 10.67 $ 9.99 $ 11.80 $ 11.56
-------- ------- ------- -------- --------
Net Investment Income....................................... .340 .701 .70 .69 .7616
Net Realized and Unrealized
Gain/Loss on Securities................................ (.217) (.247) .6779 (1.358) .4249
-------- ------- ------- -------- --------
Total from Investment Operations................................. .123 .454 1.3779 (.668) 1.1865
Less:
Distributions from and in Excess of Net
Investment Income (Note 1)............................. .338 .718 .6979 .6878 .7615
Distributions from and in Excess of Net
Realized Gain on Securities (Note 1)................... -0- -0- -0- .4542 .185
-------- ------- ------- -------- --------
Total Distributions.............................................. .338 .718 .6979 1.142 .9465
-------- ------- ------- -------- --------
Net Asset Value, End of the Period............................... $ 10.191 $ 10.406 $ 10.67 $ 9.99 $ 11.80
======== ======= ======= ======== ========
Total Return (a)................................................. 1.17%* 4.58% 14.27% (5.45%) 10.55%
Net Assets at End of the Period (In millions).................... $ 253.9 $ 287.4 $ 329.0 $ 335.0 $ 370.2
Ratio of Expenses to Average Net Assets.......................... .95% .84% .83% .89% .89%
Ratio of Net Investment Income to Average Net Assets............. 6.76% 6.79% 6.84% 7.06% 7.35%
Portfolio Turnover............................................... 33%* 276% 214% 256% 218%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------- ---------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1997 OCTOBER 31, 1996 (B) APRIL 30, 1997 OCTOBER 31, 1996 (B)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................. $ 10.411 $ 10.32 $ 10.411 $ 10.32
--------- -------- --------- ---------
Net Investment Income............................... .332 .152 .294 .137
Net Realized and Unrealized
Gain/Loss on Securities........................ (.221) .090 (.221) .090
--------- -------- --------- ---------
Total from Investment Operations......................... .111 .242 .073 .227
Less Distributions from and in Excess of Net Investment
Income (Note 1)..................................... .332 .151 .294 .136
--------- -------- --------- ---------
Net Asset Value, End of the Period....................... $ 10.190 $ 10.411 $ 10.190 $ 10.411
========= ======== ========= =========
Total Return (a)......................................... 1.04%* 2.36%* .82%* 2.18*
Net Assets at End of the Period (In millions)............ $ 11.7 $ 11.1 $ 12.8 $ 13.9
Ratio of Expenses to Average Net Assets.................. 1.19% 1.09% 1.94% 1.84%
Ratio of Net Investment Income to Average Net Assets..... 6.52% 6.50% 5.77% 5.74%
Portfolio Turnover....................................... 33%* 276% 33%* 276%
</TABLE>
* Non-Annualized
(a) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Class A and Class B shares commended distribution on August 8, 1995.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 86.1%
CONSUMER DISTRIBUTION 9.5%
American Stores Co....................................... 772,000 $ 35,126,000
Autozone, Inc. (b)....................................... 1,400,000 34,300,000
Cardinal Health, Inc..................................... 240,000 12,780,000
Dayton Hudson Corp....................................... 650,000 29,250,000
Dillard Department Stores, Inc., Class A................. 350,000 10,806,250
Dominick's Supermarkets, Inc. (b)........................ 400,000 8,200,000
Duckwall-Alco Stores, Inc. (b)........................... 200,000 2,675,000
Gap, Inc................................................. 280,000 8,925,000
Kroger Co. (b)........................................... 1,500,000 41,250,000
Lear Corp. (b)........................................... 750,000 26,812,500
May Department Stores Co................................. 250,000 11,562,500
Penney, (J.C.) Inc....................................... 500,000 23,875,000
Safeway, Inc. (b)........................................ 400,000 17,850,000
TJX Cos. Inc............................................. 350,000 16,537,500
Wal-Mart Stores, Inc..................................... 1,200,000 33,900,000
------------
313,849,750
------------
CONSUMER DURABLES 1.7%
General Motors Corp...................................... 600,000 34,725,000
Hasbro, Inc.............................................. 900,000 22,500,000
------------
57,225,000
------------
CONSUMER NON-DURABLES 8.6%
Avon Products, Inc....................................... 850,000 52,381,250
Colgate Palmolive Co..................................... 300,000 33,300,000
ConAgra, Inc............................................. 650,000 37,456,250
CPC International, Inc................................... 425,000 35,115,625
Gillette Co.............................................. 225,000 19,125,000
Kimberly Clark Corp...................................... 350,000 17,937,500
Liz Claiborne, Inc....................................... 600,000 27,150,000
Nabisco Holdings Corp., Class A.......................... 500,000 19,187,500
Tyson Foods, Inc., Class A............................... 920,000 18,400,000
Unilever NV - (Netherlands).............................. 125,000 24,531,250
------------
284,584,375
------------
CONSUMER SERVICES 3.5%
Cox Communications, Inc., Class A (b).................... 800,000 15,600,000
Host Marriott Corp. (b).................................. 675,000 11,728,125
Marriott International, Inc.............................. 300,000 16,575,000
Tele-Communications International, Inc., Class A (b)..... 1,250,000 17,265,625
Time Warner, Inc......................................... 1,200,000 54,000,000
------------
115,168,750
------------
</TABLE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
ENERGY 7.3%
Coastal Corp............................................. 500,000 $ 23,750,000
Exxon Corp............................................... 300,000 16,987,500
PanEnergy Corp........................................... 500,000 22,125,000
Phillips Petroleum Co.................................... 300,000 11,812,500
Texaco, Inc.............................................. 150,000 15,825,000
Unocal Corp.............................................. 350,000 13,343,750
USX Marathon Group....................................... 900,000 24,862,500
Western Atlas, Inc....................................... 500,000 31,000,000
Williams Cos., Inc....................................... 1,170,000 51,333,750
YPF Sociedad Anonima, Class D-ADR (Argentina)............ 1,100,000 30,387,500
------------
241,427,500
------------
FINANCE 17.9%
Aetna, Inc............................................... 500,000 45,562,500
American Express Co...................................... 250,000 16,468,750
American International Group, Inc........................ 125,000 16,062,500
Bank of Boston Corp...................................... 475,000 34,556,250
BankAmerica Corp......................................... 250,000 29,218,750
Capitol One Financial Corp............................... 200,000 7,225,000
Chase Manhattan Corp..................................... 440,000 40,755,000
CIGNA Corp............................................... 75,000 11,278,125
Corestates Financial Corp................................ 550,000 27,843,750
Federal National Mortgage Association.................... 1,190,000 48,938,750
First Bank System, Inc................................... 315,000 24,176,250
First Union Corp......................................... 400,000 33,600,000
Green Tree Financial Corp................................ 710,000 21,033,750
Greenpoint Financial Corp................................ 940,000 52,052,500
Hertz Corp., Class A (b)................................. 76,100 2,206,900
Merrill Lynch & Co., Inc................................. 130,000 12,382,500
MGIC Investment Corp..................................... 315,000 25,593,750
NationsBank Corp......................................... 360,000 21,735,000
Nationwide Financial Services, Inc., Class A (b)......... 460,000 12,190,000
Paine Webber Group, Inc.................................. 250,000 8,500,000
Van Kampen American Capital Small Capitalization Fund.... 7,581,259 99,921,000
------------
591,301,025
------------
HEALTHCARE 6.9%
Abbott Laboratories...................................... 500,000 30,500,000
American Home Products Corp.............................. 415,000 27,493,750
Bristol-Myers Squibb Co.................................. 650,000 42,575,000
Healthsouth Corp.(b)..................................... 458,800 9,061,300
Johnson & Johnson........................................ 300,000 18,375,000
Medpartners, Inc. (b).................................... 800,000 14,600,000
Pharmacia & Upjohn, Inc.................................. 550,000 16,293,750
Schering Plough Corp..................................... 340,000 27,200,000
United Healthcare Corp. (b).............................. 675,000 32,821,875
Warner Lambert Co........................................ 100,000 9,800,000
------------
228,720,675
------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
PRODUCER MANUFACTURING 8.4%
AlliedSignal, Inc......................................... 300,000 $ 21,675,000
Canadian Pacific Ltd...................................... 1,300,000 31,687,500
Coltec Industries, Inc. (b)............................... 500,000 10,125,000
Corning, Inc.............................................. 1,000,000 48,250,000
Covance, Inc. (b)......................................... 325,000 4,793,750
Deere & Co................................................ 500,000 23,000,000
Emerson Electric Co....................................... 600,000 30,450,000
Honeywell, Inc............................................ 350,000 24,718,750
ITT Corp. (b)............................................. 400,000 23,700,000
United Technologies Corp.................................. 300,000 22,687,500
USA Waste Services, Inc. (b).............................. 500,000 16,375,000
WMX Technologies, Inc..................................... 700,000 20,562,500
-------------
278,025,000
-------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.9%
Air Products & Chemicals, Inc............................. 200,000 14,350,000
DuPont (E.I.) De Nemours Co............................... 150,000 15,918,750
Mead Corp................................................. 250,000 14,031,250
Morton International, Inc................................. 250,000 10,468,750
Praxair, Inc.............................................. 370,000 19,101,250
Union Carbide Corp........................................ 420,000 20,947,500
-------------
94,817,500
-------------
TECHNOLOGY 17.0%
Adaptec, Inc. (b)......................................... 225,000 8,325,000
Advanced Micro Devices, Inc. (b).......................... 325,000 13,812,500
Altera Corp. (b).......................................... 350,000 17,346,875
America Online, Inc. (b).................................. 600,000 27,075,000
Analog Devices, Inc. (b).................................. 750,000 20,062,500
Ascend Communications, Inc. (b)........................... 200,000 9,150,000
BMC Software, Inc. (b).................................... 1,125,000 48,656,250
Boeing Co................................................. 150,000 14,793,750
Compaq Computer Corp. (b)................................. 225,000 19,209,375
Gateway 2000, Inc. (b).................................... 300,000 16,462,500
Intel Corp................................................ 275,000 42,109,375
International Business Machines Corp...................... 260,000 41,795,000
LSI Logic Corp. (b)....................................... 450,000 17,212,500
Lucent Technologies, Inc.................................. 600,000 35,475,000
Microsoft Corp. (b)....................................... 250,000 30,375,000
Nokia Corp. - ADR (Finland) (b)........................... 600,000 38,775,000
Read-Rite Corp. (b)....................................... 300,000 7,762,500
SCI Systems, Inc. (b)..................................... 350,000 21,612,500
Telecomunicacoes Brasileiras - Sponsored ADR (Brazil)(b).. 150,000 17,212,500
Texas Instruments, Inc.................................... 900,000 80,325,000
Xerox Corp................................................ 550,000 33,825,000
-------------
561,373,125
-------------
TRANSPORTATION 0.6%
Continental Airlines, Inc., Class B (b)................... 600,000 19,050,000
=============
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Portfolio of Investment (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Decription Shares Market Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 1.8%
GTE Corp.............................................................. 375,000 $ 17,203,125
Sprint Corp........................................................... 500,000 21,937,500
Telefonica de Espana-ADR (Spain)...................................... 240,000 18,480,000
--------------
57,620,625
--------------
TOTAL COMMON STOCK................................................................................... 2,843,163,325
--------------
U.S. TREASURY SECURITIES 3.1%
United States Treasury Bonds ($85,000,000 par, 8.50% coupon, 05/15/17 maturity) (c).................. 100,220,100
--------------
TOTAL LONG-TERM INVESTMENTS 89.2% (Cost of $2,440,655,455) (a)....................................... 2,943,383,425
--------------
Short-Term Investments 9.1%
REPURCHASE AGREEMENTS 3.6%
DLJ Mortgage Acceptance Corp. ($38,185,000 par collateralized by U.S. Government Obligations in
a pooled cash account, dated 04/30/97, to be sold on 05/01/97 at $38,190,622) (c).................. 38,185,000
Lehman Brothers, Inc. ($40,535,000 par collateralized by U.S. Government Obligations in a pooled
cash account, dated 04/30/97, to be sold on 05/01/97 at $40,541,024) (c)........................... 40,535,000
SBC Warburg Corp. ($40,880,000 par collateralized by U.S. Government Obligations in a pooled cash
account, dated 04/30/97, to be sold on 05/01/97 at $40,886,018) (c)................................ 40,880,000
--------------
TOTAL REPURCHASE AGREEMENTS.......................................................................... 119,600,000
--------------
UNITED STATES GOVERNMENT AGENCY OBLIGATIONS 5.5%
Federal Home Loan Mortgage Corp. ($37,823,000 par, yielding 5.29%, 05/02/97 maturity) (c)............ 37,812,058
Federal Home Loan Mortgage Corp. ($15,140,000 par, yielding 5.30%, 05/23/97 maturity) (c)............ 15,089,411
Federal National Mortgage Association ($25,000,000 par, yielding 5.27%, 05/05/97 maturity)........... 24,981,910
Federal National Mortgage Association ($13,000,000 par, yielding 5.28%, 05/14/97 maturity)........... 12,973,661
Federal National Mortgage Association ($25,000,000 par, yielding 5.35%, 06/06/97 maturity) (c)....... 24,865,618
Federal National Mortgage Association ($10,000,000 par, yielding 5.35%, 06/17/97 maturity)........... 9,930,267
Federal National Mortgage Association ($7,000,000 par, yielding 5.37%, 06/16/97 maturity)............ 6,951,929
Federal National Mortgage Association ($20,000,000 par, yielding 5.57%, 07/18/97 maturity)........... 19,763,000
Federal National Mortgage Association ($29,755,000 par, yielding 5.60%, 06/26/97 maturity) (c)....... 29,494,941
--------------
TOTAL UNITED STATES GOVERNMENT AGENCY OBLIGATIONS.................................................... 181,862,795
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost of $301,458,406)(a)............................................... 301,462,795
--------------
OTHER ASSETS IN EXCESS OF LIABILITIES 1.7%........................................................... 57,255,509
--------------
NET ASSETS 100.0%.................................................................................... $3,302,101,729
==============
</TABLE>
(a) At April 30, 1997, for federal income tax purposes cost of long- and short-
term investments is $2,744,491,612, the aggregate gross unrealized
appreciation is $538,018,998 and the aggregate gross unrealized
depreciation is $36,501,315, resulting in net unrealized appreciation
including open futures transactions of $501,517,683.
(b) Non-income producing security as this stock currently does not declare
dividends.
(c) Assets segregated as collateral for open futures transactions.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Long-Term Investments, at Market Value (Cost $2,440,655,455) (Note 1)......... $ 2,943,383,425
Short-Term Investments (Cost of $301,458,406) (Note 1)........................ 301,462,795
Cash.......................................................................... 5,314
Receivables:
Securities Sold....................................................... 126,885,817
Interest.............................................................. 3,431,112
Dividends............................................................. 2,426,515
Variation Margin on Futures (Note 5).................................. 940,000
Other......................................................................... 125,155
---------------
Total Assets....................................................... 3,378,660,133
---------------
LIABILITIES:
Payables:
Securities Purchased.................................................. 68,998,944
Fund Shares Repurchased............................................... 3,940,284
Distributor and Affiliates (Note 2)................................... 1,621,390
Investment Advisory Fee (Note 2)...................................... 1,561,647
Accrued Expenses.............................................................. 326,684
Retirement Plan (Note 2)...................................................... 109,455
---------------
Total Liabilities.................................................. 76,558,404
---------------
NET ASSETS.................................................................... $ 3,302,101,729
===============
NET ASSETS CONSIST OF:
Capital (Note 3).............................................................. $ 2,522,943,206
Net Unrealized Appreciation on Securities..................................... 503,895,434
Accumulated Net Realized Gain on Securities................................... 267,159,698
Accumulated Undistributed Net Investment Income............................... 8,103,391
---------------
NET ASSETS.................................................................... $ 3,302,101,729
===============
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value and redemption price per share (Based on net
assets of $3,135,941,551 and 175,422,462 shares of beneficial
interest issued and outstanding)................................... $ 17.88
Maximum sales charge (8.50%* of offering price).................... 1.66
---------------
Maximum offering price to public................................... $ 19.54
===============
Class A Shares:
Net asset value and redemption price per share (Based on net
assets of $71,952,375 and 4,030,147 shares of beneficial
interest issued and outstanding)................................... 17.85
Maximum sales charge (5.50%* of offering price).................... 1.04
---------------
Maximum offering price to public................................... $ 18.89
===============
Class B Shares:
Net asset value and offering price per share (Based on net
assets of $94,207,803 and 5,291,107 shares of beneficial
interest issued and outstanding)................................... $ 17.80
===============
</TABLE>
* On sales of $10,000 or more on Class 1 shares and $50,000 or more on
Class A shares, the sales charge will be reduced.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
SIX MONTHS ENDED
INVESTMENT INCOME: APRIL 30, 1997
----------------
<S> <C>
Dividends................................................................... $ 20,348,697
Interest.................................................................... 9,661,457
---------------
Total Income................................................ 30,010,154
---------------
EXPENSES:
Investment Advisory Fee (Note 2)............................................ 9,603,263
Shareholder Services (Note 2)............................................... 4,103,592
Distribution (12b-1) and Service Fees (Attributed to Classes A
and B of $74,612 and $417,413, respectively)(Note 6)...................... 492,025
Custody..................................................................... 82,048
Trustees Fees and Expenses (Note 2)......................................... 75,314
Other....................................................................... 1,259,690
---------------
Total Expenses.............................................. 15,615,932
---------------
NET INVESTMENT INCOME....................................................... $ 14,394,222
===============
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments......................................................... $ 269,483,844
Futures............................................................. 5,416,991
---------------
Net Realized Gain on Securities............................................. 274,900,835
---------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period............................................. 532,627,910
---------------
End of the Period:
Investments................................................. 502,732,359
Futures..................................................... 1,163,075
---------------
503,895,434
---------------
Net Unrealized Depreciation on Securities During the Period................. (28,732,476)
---------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.............................. $ 246,168,359
===============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................................. $ 260,562,581
===============
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
FROM INVESTMENT ACTIVITIES: April 30, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
Operations:
Net Investment Income................................................ $ 14,394,222 $ 30,433,636
Net Realized Gain on Securities...................................... 274,900,835 233,324,224
Net Unrealized Appreciation/Depreciation on
Securities During the Period......................................... (28,732,476) 266,287,919
---------------- ----------------
Change in Net Assets from Operations................................. 260,562,581 530,045,779
---------------- ----------------
Distributions from Net Investment Income (Note 1).................... (30,428,386) (27,245,960)
Distributions from Net Realized Gain on Securities (Note 1).......... (234,553,478) (358,762,393)
---------------- ----------------
Total Distributions.................................. (264,981,864) (386,008,353)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.................. (4,419,283) 144,037,426
---------------- ----------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold............................................ 156,284,353 386,037,987
Net Asset Value of Shares Issued Through Dividend Reinvestment....... 263,451,399 383,855,779
Cost of Shares Repurchased........................................... (241,802,075) (396,848,766)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS................... 177,933,677 373,045,000
---------------- ----------------
TOTAL INCREASE IN NET ASSETS......................................... 173,514,394 517,082,426
NET ASSETS:
Beginning of the Period.............................................. 3,128,587,335 2,611,504,909
---------------- ----------------
End of the Period (Including accumulated undistributed net
investment income of $8,103,391
and $24,137,555, respectively)................................... $ 3,302,101,729 $ 3,128,587,335
================ ================
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
31
<PAGE>
- -------------------------------------------------------------------------------
Growth Fund Financial Highlights
- -------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 31
----------------------------------------------
Class 1 Shares April 30, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........ $17.977 $ 17.46 $15.31 $ 16.26 $ 16.02
------- ------- ------- ------- -------
Net Investment Income........................ .085 .187 .16 .13 .116
Net Realized and Unrealized
Gain/Loss on Securities.................. 1.349 2.916 3.18 .2075 2.0065
------- ------- ------ ------- -------
Total from Investment Operations................ 1.434 3.103 3.34 .3375 2.1225
------- ------- ------ ------- -------
Less:
Distributions from Net Investment Income..... .178 .183 .155 .1125 .115
Distributions from and in Excess of Net
Realized Gain on Securities.............. 1.356 2.403 1.035 1.175 1.7675
------- ------- ------ ------- -------
Total Distributions............................. 1.534 2.586 1.19 1.2875 1.8825
------- ------- ------ ------- -------
Net Asset Value, End of the Period.............. $17.877 $17.977 $17.46 $ 15.31 $ 16.26
======= ======= ====== ======= =======
Total Return (a)................................ 8.38%* 19.94% 24.01% 2.04% 14.27%
Net Assets at End of the Period (In millions)... $3,135.9 $3,005.2 $2,611.5 $2,169.9 $2,065.7
Ratio of Expenses to Average Net Assets......... .93% .93% 1.00% 1.09% 1.14%
Ratio of Net Investment Income to Average Net
Assets......................................... .92% 1.08% 1.04% .89% .80%
Portfolio Turnover.............................. 81%* 202% 230% 164% 166%
Average Commission Paid Per Equity Share
Traded (b)..................................... $ .0602 $ .0602 -- -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------- -----------------------------------------
Six Months Ended Period Ended Six Months Ended Period Ended
April 30, 1997 October 31, 1996 (c) April 30, 1997 October 31, 1996 (c)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $ 17.959 $ 16.630 $ 17.928 $ 16.630
---------- ---------- --------- ----------
Net Investment Income.......................... .083 .017 .014 (.011)
Net Realized and Unrealized
Gain/Loss on Securities........................ 1.329 1.312 1.326 1.309
---------- ---------- --------- ----------
Total from Investment Operations................. 1.412 1.329 1.340 1.298
---------- ---------- --------- ----------
Less:
Distributions from Net Investment Income....... .161 -0- .108 -0-
Distributions from Net Realized Gain on
Securities..................................... 1.356 -0- 1.356 -0-
---------- ---------- --------- ----------
Total Distributions.............................. 1.517 -0- 1.464 -0-
---------- ---------- --------- ----------
Net Asset Value, End of the Period............... $17.854 $17.959 $17.804 $17.928
========== ========== ========= ==========
Total Return (a)................................. 8.22%* 8.00%* 7.80%* 7.82%*
Net Assets at End of the Period (In millions).... $ 72.0 $ 49.3 $ 94.2 $ 74.1
Ratio of Expenses to Average Net Assets.......... 1.18% 1.17% 1.93% 1.93%
Ratio of Net Investment Income/Loss to Average
Net Assets....................................... .63% .46% (.10%) (.29%)
Portfolio Turnover............................... 81%* 202% 81%* 202%
Average Commission Paid Per Equity
Share Traded (b)................................. $.0602 $ .0602 $ .0602 $ .0602
* Non-Annualized
</TABLE>
(a) Total return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent
deferred sales charge.
(b) Presents the average brokerage commission paid on equity transactions
entered into during the period for trades where commissions were
applicable. This disclosure was not required in fiscal years prior to 1996.
(c) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock 89.3%
CONSUMER DISTRIBUTION 4.2%
Federated Department Stores, Inc. (b).................... 374,700 $ 12,739,800
Gap, Inc................................................. 451,000 14,375,625
Gymboree Corp. (b)....................................... 398,500 11,033,469
Revco D S, Inc. (b)...................................... 113,000 4,915,500
Safeway, Inc. (b)........................................ 85,427 3,812,180
------------
46,876,574
------------
CONSUMER DURABLES 2.3%
Black & Decker Corp...................................... 49,000 1,641,500
Eastman Kodak Co......................................... 133,000 11,105,500
Masco Corp............................................... 189,000 7,134,750
Newell Co................................................ 171,000 5,985,000
------------
25,866,750
------------
CONSUMER NON-DURABLES 6.9%
Adidas-ADR (Germany), 144A Private Placement (b)(d)...... 286,200 14,775,075
Campbell Soup Co......................................... 262,600 13,425,425
Colgate Palmolive Co..................................... 102,000 11,322,000
Nabisco Holdings Corp., Class A.......................... 430,400 16,516,600
Procter & Gamble Co...................................... 48,000 6,036,000
Quaker Oats Co........................................... 37,000 1,480,000
Ralston Purina Group..................................... 173,000 14,250,875
------------
77,805,975
------------
CONSUMER SERVICES 3.0%
Bell & Howell Co. (b).................................... 96,600 2,282,175
Cognizant Corp........................................... 332,300 10,841,287
H & R Block, Inc......................................... 241,100 7,775,475
Lone Star Steakhouse and Saloon (b)...................... 315,000 6,221,250
Walt Disney Co........................................... 78,500 6,437,000
------------
33,557,187
------------
ENERGY 8.8%
Apache Corp.............................................. 122,000 4,148,000
Coastal Corp............................................. 168,000 7,980,000
El Paso Natural Gas Co................................... 52,000 3,022,500
Equitable Resources, Inc................................. 130,000 3,851,250
Exxon Corp............................................... 270,000 15,288,750
McDermott International, Inc............................. 493,000 9,120,500
Royal Dutch Petroleum Co. - ADR (Netherlands)............ 103,000 18,565,750
Texaco, Inc.............................................. 244,000 25,742,000
Unocal Corp.............................................. 36,000 1,372,500
USX Marathon Group....................................... 323,000 8,922,875
------------
98,014,125
------------
FINANCE 16.8%
Aetna, Inc............................................... 177,000 16,129,125
Allstate Corp............................................ 228,800 14,986,400
Bank of Boston Corp...................................... 128,000 9,312,000
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Portfolio of Investments (continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (Continued)
Bankamerica Corp................................................................................. 213,000 $ 24,894,375
Bankers Trust New York Corp...................................................................... 80,000 6,510,000
Beacon Properties Corp........................................................................... 58,400 1,803,100
Chase Manhattan Corp............................................................................. 117,000 10,837,125
CIGNA Corp....................................................................................... 73,000 10,977,375
Conseco, Inc..................................................................................... 200,000 8,275,000
Everest Real Estate Holdings..................................................................... 316,800 9,108,000
First Union Corp................................................................................. 95,000 7,980,000
Great Western Financial Corp..................................................................... 70,000 2,940,000
Hertz Corp., Class A (b)......................................................................... 25,400 736,600
Nationwide Financial Services, Inc., Class A (b)................................................. 50,000 1,325,000
PMI Group, Inc................................................................................... 104,600 5,347,675
PNC Bank Corp.................................................................................... 460,000 18,917,500
Provident Companies, Inc......................................................................... 78,000 4,358,250
Simon DeBartolo Group, Inc....................................................................... 85,204 2,438,964
Student Loan Marketing Assn...................................................................... 129,000 15,254,250
Transamerica Corp................................................................................ 65,000 5,508,750
USF&G Corp....................................................................................... 178,000 3,560,000
Washington Mutual, Inc........................................................................... 115,000 5,678,125
Weingarten Realty Investors...................................................................... 35,800 1,525,975
------------
188,403,589
------------
HEALTHCARE 12.4%
Abbott Labs...................................................................................... 202,000 12,322,000
Alza Corp. (b)................................................................................... 172,000 5,031,000
Amgen, Inc. (b).................................................................................. 75,000 4,415,625
Bristol Myers Squibb Co.......................................................................... 224,000 14,672,000
Glaxo Wellcome PLC Sponsored ADR (United Kingdom)................................................ 323,000 12,718,125
Merck & Co., Inc................................................................................. 160,000 14,480,000
Mylan Labs, Inc.................................................................................. 80,000 960,000
Nellcor Puritan Bennett, Inc. (b)................................................................ 430,400 7,316,800
Novartis AG - ADR (Switzerland).................................................................. 220,000 14,465,000
Pacificare Health Systems, Inc., Class B (b)..................................................... 145,000 11,636,250
SmithKline Beecham PLC - Sponsored ADR (United Kingdom).......................................... 230,000 18,543,750
Teva Pharmaceutical Industries, Ltd. - Sponsored ADR (Israel)................................... 105,000 5,328,750
Warner Lambert Co................................................................................ 105,000 10,290,000
Watson Pharmaceuticals, Inc. (b)................................................................. 178,000 6,363,500
-----------
138,542,800
-----------
PRODUCER MANUFACTURING 8.3%
AlliedSignal, Inc................................................................................ 196,700 14,211,575
Canadian Pacific Ltd............................................................................. 598,200 14,581,125
Fluor Corp....................................................................................... 11,500 632,500
Honeywell, Inc................................................................................... 143,000 10,099,375
Ingersoll Rand Co................................................................................ 217,000 10,660,125
Johnson Controls, Inc............................................................................ 232,900 8,937,537
Keystone International, Inc...................................................................... 260,000 5,135,000
Philips Electronics N.V.......................................................................... 152,000 8,132,000
Stewart & Stevenson Services, Inc................................................................ 387,000 9,288,000
WMX Technologies, Inc............................................................................ 397,400 11,673,625
----------
93,350,862
----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------------------
Growth and Income Fund Portfolio of Investments (continued)
- -------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIEs 4.9%
Betzdearborn, Inc..................................................................................... 113,000 $ 7,232,000
Crown Cork & Seal, Inc................................................................................ 303,800 16,633,050
DuPont (E.I.) De Nemours & Co......................................................................... 80,000 8,490,000
James River Corp...................................................................................... 195,000 5,825,625
Morton International, Inc............................................................................. 132,000 5,527,500
Praxair, Inc.......................................................................................... 216,000 11,151,000
-----------
54,859,175
-----------
TECHNOLOGY 12.1%
3Com Corp. (b)........................................................................................ 30,000 870,000
Alcatel Alsthom Compagnie Generale d'Electricit _ Sponsored ADR (France).............................. 227,000 5,050,750
America Online, Inc. (b).............................................................................. 21,000 947,625
Ascend Communications, Inc. (b)....................................................................... 107,000 4,895,250
BMC Software, Inc. (b)................................................................................ 254,000 10,985,500
Boeing Co............................................................................................. 62,000 6,114,750
Computer Associates International, Inc................................................................ 168,000 8,736,000
Ericsson L M Telephone Co. _ Sponsored ADR (Sweden), Class B.......................................... 255,000 8,574,375
General Instrument Corp. (b).......................................................................... 357,000 8,344,875
General Signal Corp................................................................................... 223,000 8,752,750
Hewlett Packard Co.................................................................................... 34,000 1,785,000
LSI Logic Corp. (b)................................................................................... 248,000 9,486,000
Lucent Technologies, Inc.............................................................................. 177,000 10,465,125
Microsoft Corp. (b)................................................................................... 103,000 12,514,500
Motorola, Inc......................................................................................... 51,000 2,919,750
Newbridge Networks Corp. (b).......................................................................... 271,000 8,604,250
Nokia Corp. _ Sponsored ADR (Finland)................................................................. 155,400 10,042,725
Tellabs, Inc. (b)..................................................................................... 155,000 6,180,625
Varian Associates, Inc................................................................................ 73,000 3,513,125
Xerox Corp............................................................................................ 115,000 7,072,500
-----------
135,855,475
-----------
TRANSPORTATION 1.4%
Canadian National Railway Co.......................................................................... 242,700 9,343,950
Union Pacific Corp.................................................................................... 98,000 6,247,500
-----------
15,591,450
-----------
UTILITIES 8.2%
AT & T Corp........................................................................................... 295,000 9,882,500
Bellsouth Corp........................................................................................ 186,000 8,277,000
Boston Edison Co...................................................................................... 207,000 5,278,500
Cable & Wireless PLC _ Sponsored ADR (United Kingdom)................................................. 376,000 8,695,000
Cincinnati Bell, Inc.................................................................................. 150,400 8,422,400
CMS Energy Corp....................................................................................... 230,300 7,312,025
DTE Energy Co......................................................................................... 227,000 6,072,250
Edison International.................................................................................. 252,000 5,292,000
Houston Industries, Inc............................................................................... 361,000 7,220,000
Ohio Edison Co........................................................................................ 193,000 3,860,000
Pacificorp............................................................................................ 349,000 6,936,375
PG&E Corp............................................................................................. 247,000 5,928,000
Scana Corp............................................................................................ 339,000 8,178,375
-----------
91,354,425
-----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Portfolio of Investments (continued)
- --------------------------------------------------------------------------------
April 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL COMMON STOCK ................................................................................... $1,000,078,387
----------------
Preferred and Convertible Preferred Stock 2.1%
Fresenius National Med Care, Inc. (b) .............................................. 14,000 0
Kmart Financing, 7.75% (convertible into common stock) ............................... 78,900 4,546,613
Microsoft Corp., $2.196 dividend per share (convertible into common stock) ........... 78,500 6,721,563
Williams Cos., Inc., $3.50 dividend per share (convertible into common stock)......... 118,700 12,344,800
----------------
TOTAL PREFERRED AND CONVERTIBLE PREFERRED STOCK ....................................................... 23,612,976
----------------
Convertible Corporate Obligations 3.8%
ADT Operations, Inc., LYON ($15,600,000 par, 0% coupon, 07/06/10 maturity) ............................ 12,051,000
Deutsche Finance Netherlands 144A Private Placement ($23,000,000 par, 0% coupon,
02/12/17 maturity)(d) ............................................................................... 9,775,000
Merrill Lynch, STRYPES ($97,700 par, 6.00% coupon, 06/01/99 maturity) ................................. 1,906,922
News America Holdings, Inc., LYON ($12,300,000 par, 0% coupon, 03/11/13 maturity)...................... 5,350,500
Roche Holdings, Inc., LYON ($23,500,000 par, 0% coupon, 04/20/10 maturity) ............................ 10,751,250
Sandoz Ltd. ($2,600,000 par, 2.00% coupon, 10/06/02 maturity) ........................................ 3,256,500
----------------
TOTAL CONVERTIBLE CORPORATE OBLIGATIONS ............................................................. 43,091,172
----------------
TOTAL LONG-TERM INVESTMENTS 95.2% (COST $885,172,883)(A)............................................... 1,066,782,535
----------------
Short-Term Investments 5.0%
U.S. Government Agency Obligations 1.3%
Federal Home Loan Mortgage Corp. Discount Note
($5,205,000 par, yielding 5.18% 05/20/97 maturity) .................................................... 5,190,050
Federal National Mortgage Association Discount Note
($10,000,000 par, yielding 5.50%, 07/02/97 maturity)................................................... 9,904,600
----------------
15,094,650
REPURCHASE AGREEMENT 3.7%
DLJ Mortgage Acceptance Corp. ($40,950,000 par collateralized by U.S. Government obligations
in a pooled cash account, dated 04/30/97, to be sold on 05/01/97 at $40,955,972)(c) .............. 40,950,000
----------------
TOTAL SHORT-TERM INVESTMENTS (COST $56,043,450)(A) .................................................... 56,044,650
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%) .......................................................... (2,584,767)
----------------
NET ASSETS 100.0% ..................................................................................... $1,120,242,418
================
</TABLE>
(a) At April 30, 1997, for federal income tax purposes the cost of long- and
short-term investments is $942,063,630; the aggregate gross unrealized
appreciation is $201,088,597 and the aggregate gross unrealized
depreciation is $20,022,835, resulting in net unrealized appreciation
including futures transactions of $181,065,762.
(b) Non-income producing security as this stock currently does not declare
dividends.
(c) Assets segregated for open futures transactions.
(d) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
LYON -Liquid yield option note.
STRYPES -Structured yield product exchangeable for common stock.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $885,172,883) (Note 1) ...................................... $ 1,066,782,535
Short-Term Investments (Cost $56,043,450) (Note 1) ...................................................... 56,044,650
Cash...................................................................................................... 5,536
Receivables
Securities Sold ................................................................................. 4,444,440
Fund Shares Sold ................................................................................. 2,258,234
Dividends ........................................................................................ 1,503,752
Variation Margin on Futures (Note 5) ............................................................. 97,500
Interest ......................................................................................... 25,827
Other .................................................................................................... 42,345
-----------------
Total Assets ..................................................................................... 1,131,204,819
-----------------
LIABILITIES:
Payables
Securities Purchased ............................................................................ 8,503,624
Fund Shares Purchased ............................................................................ 1,350,930
Investment Advisory Fee (Note 2).................................................................. 574,002
Distributor and Affiliates (Notes 2 and 6) ....................................................... 417,387
Accrued Expenses ......................................................................................... 74,433
Retirement Plan (Note 2) ................................................................................ 42,025
-----------------
Total Liabilities ............................................................................... 10,962,401
-----------------
NET ASSETS .............................................................................................. $ 1,120,242,418
=================
NET ASSETS CONSIST OF:
Capital (Note 3) ......................................................................................... $ 861,232,995
Net Unrealized Appreciation on Securities ................................................................ 181,913,059
Accumulated Net Realized Gain on Securities .............................................................. 74,606,850
Accumulated Undistributed Net Investment Income .......................................................... 2,489,514
-----------------
NET ASSETS .............................................................................................. $ 1,120,242,418
=================
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares
Net asset value and redemption price per share (Based on net assets of $998,195,671 and 56,703,249
shares of beneficial interest issued and outstanding) .................................................. $ 17.60
Maximum sales charge (8.50%* of offering price) ........................................................ 1.63
-----------------
Maximum offering price to public ....................................................................... $ 19.23
=================
Class A Shares
Net asset value and redemption price per share (Based on net assets of $50,872,546 and 2,890,478
shares of beneficial interest issued and outstanding) ........................................ $ 17.60
Maximum sales charge (5.50%* of offering price) .............................................. 1.02
-----------------
Maximum offering price to public ......................................................... $ 18.62
=================
Class B Shares
Net asset value and redemption price per share (Based on net assets of $71,174,201 and 4,046,526
shares of beneficial interest issued and outstanding) ......................................... $ 17.59
=================
</TABLE>
* On sales of $10,000 or more for Class 1 shares and $50,000 or more for
Class A shares, the sales charge will be reduced.
See Notes to Financial Statement
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended
April 30,1997
-------------------
<S> <C>
INVESTMENT INCOME:
Dividends .............................................................................. $ 9,963,136
Interest .............................................................................. 2,431,368
-----------------
Total Income .................................................................... 12,394,504
-----------------
EXPENSES:
Investment Advisory Fee (Note 2) ....................................................... 3,493,398
Shareholder Services (Note 2) .......................................................... 889,816
Distribution (12b-1) and Services Fees (Attributed to Classes A & B of $50,909
and $303,184, respectively) (Note 6) ........................................... 354,093
Custody ............................................................................... 35,174
Trustees Fees and Expenses (Note 2) .................................................... 32,977
Other .................................................................................. 385,174
-----------------
Total Expenses ................................................................. 5,190,632
-----------------
NET INVESTMENT INCOME .................................................................. $ 7,203,872
=================
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Net Realized Gain/Loss on Securities:
Investments ................................................................... $ 74,446,446
Futures ....................................................................... 3,200,121
-----------------
NET REALIZED GAIN ON SECURITIES ....................................................... 77,646,567
-----------------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period ....................................................... 156,698,636
-----------------
End of the Period:
Investments ............................................................ 181,610,852
Futures ................................................................ 302,207
------------------
181,913,059
------------------
Net Unrealized Appreciation on Securities During the Period ............................ 25,214,423
------------------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES ........................................ $ 102,860,990
==================
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................................. $ 110,064,862
==================
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months Ended Year Ended
FROM INVESTMENT ACTIVITIES: APRIL 30, 1997 October 31,1996
------------------ ---------------
<S> <C> <C>
Operations:
Net Investment Income ........................................................ $ 7,203,872 $ 16,358,276
Net Realized Gain on Securities ............................................... 77,646,567 120,884,493
Net Unrealized Appreciation on Securities During the Period ................... 25,214,423 39,842,064
------------- --------------
Change in Net Assets from Operations .......................................... 110,064,862 177,084,833
------------- --------------
Distributions from Net Investment Income (Note 1) ............................. (9,135,358) (17,629,557)
Distributions from Net Realized Gain on Securities (Note 1) ................... (123,031,446) (85,264,726)
--------------
Total Distributions ................................................... (132,166,804) (102,894,283)
-------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES ........................... (22,101,942) 74,190,550
-------------- --------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold ..................................................... 72,002,039 168,779,871
Net Asset Value of Shares Issued Through Dividend Reinvestment ................ 130,197,725 101,272,424
Cost of Shares Repurchased (87,284,050) (145,132,999)
-------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS ............................ 114,915,714 124,919,296
-------------- --------------
TOTAL INCREASE IN NET ASSETS ................................................. 92,813,772 199,109,846
NET ASSETS:
Beginning of the Period ....................................................... 1,027,428,646 828,318,800
-------------- --------------
End of the Period (Including accumulated undistributed net investment income
of $2,489,514 and $4,421,000, respectively) .......................... $1,120,242,418 $1,027,428,646
============== ==============
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
Growth and Income Fund Financial Highlights
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31
--------------------------------------------
Class 1 Shares APRIL 30, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......................... $ 18.106 $ 16.95 $15.77 $17.13 $15.54
------ ------ ----- ------ ------
Net Investment Income....................................... .123 .308 .36 .29 .29
Net Realized and Unrealized
Gain/Loss on Securitites.................................. 1.717 2.943 2.715 (.2125) 1.8775
------ ------ ----- ------ ------
Total from Investment Operations................................. 1.840 3.251 3.075 .0775 2.1675
------ ------ ----- ------ ------
Less:
Distributions from Net Investment Income.................... .160 .340 .30 .275 .2775
Distributions from Net Realized Gain on Securities.......... 2.182 1.755 1.595 1.1625 .30
------ ------ ----- ------ ------
Total Distributions.............................................. 2.342 2.095 1.895 1.4375 .5775
------ ------ ----- ------ ------
Net Asset Value, End of the Period............................... $ 17.604 $ 18.106 $16.95 $15.77 $17.13
====== ====== ===== ====== ======
Total Return (a)................................................. 10.76%* 20.58% 22.45% .51% 14.13%
Net Assets at End of the Period (In millions).................... $ 998.2 $ 942.9 $828.3 $712.9 $712.4
Ratio of Expenses to Average Net Assets.......................... .89% .91% .96% 1.02% 1.05%
Ratio of Net Investment Income to Average Net Assets............. 1.39% 1.78% 2.27% 1.84% 1.76%
Portfolio Turnover............................................... 52%* 121% 117% 88% 51%
Average Commission Paid Per Equity Share Traded (b).............. $ .0600 $ .0564 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
---------------------------------------- ----------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1997 OCTOBER 31, 1996(C) APRIL 30, 1997 OCTOBER 31, 1996(C)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $ 18.105 $ 17.190 $ 18.087 $ 17.190
------------ ------------- ------------- ------------
Net Investment Income..................... .105 .071 .042 .042
Net Realized and Unrealized Gain
on Securities............................. 1.709 .906 1.711 .899
------------ ------------- ------------- ------------
Total from Investment Operations............... 1.814 1.329 1.753 .941
------------ ------------- ------------- ------------
Less:
Distributions from Net Investment
Income.................................... .137 .062 .069 .044
Distributions from Net Realized Gain
on Securities............................ 2.182 0 2.182 0
------------ ------------- ------------- ------------
Total Distributions............................ 2.319 .062 2.251 .044
------------ ------------- ------------- ------------
Net Asset Value, End of the Period............. $ 17.600 $ 18.105 $ 17.589 $ 18.087
============ ============= ============= ============
Total Return (a)............................... 10.62%* 5.72% 10.26%* 5.49%
Net Assets at End of the Period (In millions).. $ 50.9 $ 32.5 $ 71.2 $ 52.1
Ratio of Expenses to Average Net Assets........ 1.14% 1.16% 1.89% 1.91%
Ratio of Net Investment Income to Average
Net Assets................................ 1.14% 1.78% .39% 1.05%
Portfolio Turnover............................. 52%* 121% 52%* 121%
Average Commission Paid Per Equity Share
Traded (b)................................ $ .0600 $ .0564 $ .0600 $ .0564
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(b) Represents the Average Brokerage Commission Paid Per Equity Share Traded
during the period for trades where commissions were applicable.
(c) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK AND EQUIVALENTS 96.7%
AUSTRALIA 4.4%
Coca-Cola Amatil............................................... 100,781 $ 1,152,108
-----------
AUSTRIA 3.8%
VA Technologies, AG............................................ 2,500 391,695
Wolford, AG.................................................... 6,000 618,592
-----------
1,010,287
-----------
FINLAND 1.2%
Nokia (AB), Series A, Preferred Stock.......................... 4,600 286,947
Nokia (AB), Series K........................................... 400 24,691
-----------
311,638
-----------
FRANCE 1.4%
Sidel, SA...................................................... 5,000 359,119
-----------
GERMANY 6.6%
SAP AG......................................................... 500 91,033
SAP AG, Preferred Stock........................................ 2,500 460,359
SGL Carbon..................................................... 5,000 697,251
Volkswagen AG, Preferred Stock................................. 1,000 495,438
-----------
1,744,081
-----------
HONG KONG 5.3%
Cheung Kong Holdings........................................... 60,000 526,690
HSBC Holdings.................................................. 20,261 512,639
Hutchinson Whampoa............................................. 50,000 371,135
-----------
1,410,464
-----------
IRELAND 4.6%
Bank of Ireland................................................ 51,285 535,020
Independent News............................................... 61,080 316,310
Iona Technologies, PLC, ADR (a)................................ 25,000 362,500
-----------
1,213,830
-----------
ITALY 6.3%
Fila Holdings SPA, ADR......................................... 6,000 259,500
Gucci Group, NV, ADR........................................... 7,000 485,625
Luxottica Group SPA, ADR....................................... 6,000 362,250
Telecom Italia, Mobile......................................... 175,000 550,396
-----------
1,657,771
-----------
JAPAN 1.2%
Bank of Tokyo.................................................. 550 8,709
Noritsu Koki Co................................................ 7,200 306,866
Ohmoto Gumi Co................................................. 600 4,821
-----------
320,396
-----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
40
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
MALAYSIA E7.5%
Bandar Raya Devels............................................. 250,000 $ 368,408
Leiusure Management............................................ 100,000 434,124
Sungei Way Holdings............................................ 165,000 377,868
Sunway Building Technology..................................... 125,000 450,554
TA Enterprises BHD............................................. 300,000 350,088
-----------
1,981,042
-----------
MEXICO 1.9%
Gruma, Series B................................................ 105,102 506,563
-----------
Netherlands 18.3%
Baan Co., NV, ADR (a).......................................... 15,000 806,250
Hunter Douglas, NV............................................. 10,000 816,096
IHC Caland, NV................................................. 15,000 740,646
ING Groep, NV (common stock warrants expiring 03/15/01) (a).... 75,000 680,208
Getronics, NV.................................................. 25,132 761,068
Simac Techniek, NV............................................. 12,500 1,020,120
-----------
4,824,388
-----------
NORWAY 9.5%
Saevik Supply.................................................. 50,000 777,015
Smedvig........................................................ 5,000 119,362
Smedvig, Series B.............................................. 15,000 352,820
Tomra Systems, AS.............................................. 40,000 775,150
Transocean Offshore, Inc., ADR................................. 8,000 485,000
-----------
2,509,347
-----------
PHILIPPINES 1.5%
Music Semiconductors, Inc...................................... 750,000 405,290
-----------
SINGAPORE 1.0%
Singapore Technologies......................................... 100,000 258,377
-----------
SWEDEN 5.1%
Astra, AB, Series A............................................ 7,500 306,895
Autoliv, AB.................................................... 3,000 109,476
Autoliv, Inc., SDR............................................. 7,000 254,758
Ericsson (LM) Telephone, Series B.............................. 10,000 316,137
Nobel Biocare.................................................. 25,000 366,490
-----------
1,353,756
-----------
SWITZERLAND 2.7%
Novartis, AG................................................... 533 702,182
-----------
THAILAND 0.5%
Quality Houses Co.............................................. 45,000 18,519
Siam Makro..................................................... 50,000 110,058
-----------
128,577
-----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM 13.9%
Biocompatibles International (a)............................... 25,000 $ 573,339
Boxmore International.......................................... 132,000 614,004
British Biotech................................................ 123,750 487,378
Dr. Solomons Group, PLC, ADR (a)............................... 30,000 693,750
Powerscreen International...................................... 60,000 591,248
Serco Group.................................................... 65,000 705,835
-----------
3,665,554
-----------
TOTAL LONG-TERM INVESTMENTS 96.7%
(Cost $21,847,378) (b)............................................... 25,514,770
REPURCHASE AGREEMENT 5.1%
State Street Bank and Trust (U.S. Treasury Note,
$1,090,000 par, 9.125% coupon, due 05/15/18, dated
04/30/97, to be sold on 05/01/97 at $1,340,149)
(Cost $1,340,000)(b)................................................. 1,340,000
LIABILITIES IN EXCESS OF OTHER ASSETS (1.8%).............................. (483,220)
-----------
NET ASSETS 100.0%......................................................... $26,371,550
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) At April 30, 1997, the cost of long- and short-term investments for federal
income tax purposes is $23,187,378; the aggregate gross unrealized
appreciation is $4,577,438 and the aggregate gross unrealized depreciation
is $911,596, resulting in net unrealized appreciation on investments,
foreign currency contracts and foreign currency translation of other assets
and liabilities of $3,665,842.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $21,847,378) (Note 1)................................................... $25,514,770
Repurchase Agreement (Cost $1,340,000)(Note 1)....................................................................... 1,340,000
Receivables:
Securities Sold................................................................................................... 1,078,636
Dividends......................................................................................................... 54,191
Forward Currency Contracts (Note 5).................................................................................. 9,445
Unamortized Organizational Costs (Note 1)............................................................................ 11,849
Other................................................................................................................ 1,186
-----------
Total Assets...................................................................................................... 28,010,077
-----------
LIABILITIES:
Payables:
Securities Purchased.............................................................................................. 1,244,752
Fund Shares Repurchased........................................................................................... 156,920
Investment Advisory Fee (Note 2).................................................................................. 22,193
Custodian Bank....................................................................................................... 104,125
Accrued Expenses..................................................................................................... 87,312
Distributor and Affiliates (Notes 2 and 6)........................................................................... 23,161
Retirement Plan (Note 2)............................................................................................. 64
-----------
Total Liabilities............................................................................................. 1,638,527
-----------
NET ASSETS........................................................................................................... $26,371,550
===========
NET ASSETS CONSIST OF:
Capital (Note 3)..................................................................................................... $23,112,087
Net Unrealized Appreciation on Securities............................................................................ 3,665,842
Accumulated Net Realized Loss on Securities.......................................................................... (162,536)
Accumulated Net Investment Loss...................................................................................... (243,843)
-----------
NET ASSETS........................................................................................................... $26,371,550
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value and redemption price per share (Based on net assets of $945,654 and
55,682 shares of beneficial interest issured and outstanding)................................................. 16.98
Maximum sales charge (8.50% of offering price)................................................................ 1.58
-----------
Maximum offering price to public.............................................................................. $ 18.56
===========
Class A Shares:
Net asset value and redemption price per share (Based on net assets of $14,417,659
and 848,661 shares of beneficial interest issured and outstanding)............................................ $ 16.99
Maximum sales charge (5.50%* of offering price)............................................................... .99
-----------
Maximum offering price to public.............................................................................. $ 17.98
===========
Class B Shares:
Net asset value and offering price per share (Based on net assets of $11,008,237 and
657,662 shares of beneficial interest issued and outstanding)................................................. $ 16.74
===========
</TABLE>
*On sales of $10,000 or more for Class 1 shares and $50,000 or more for Class A
shares, the sales charge will be reduced.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
43
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
SIX MONTHS ENDED
APRIL 30, 1997
-------------------
<S> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $12,598)......................................................... $ 93,947
Interest........................................................................................................ 15,148
---------
Total Income................................................................................................. 109,095
---------
EXPENSES:
Investment Advisory Fee (Note 2)................................................................................ 115,006
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $15,978 and $48,633,
respectively)(Note 6).......................................................................................... 64,611
Registration and Filing Fees.................................................................................... 50,590
Custody......................................................................................................... 46,155
Shareholder Services (Note 2)................................................................................... 43,621
Accounting (Note 2)............................................................................................. 10,712
Trustees Fees and Expenses (Note 1)............................................................................. 8,726
Amortization of Organization Costs (Note 1)..................................................................... 2,072
Other........................................................................................................... 29,776
---------
Total Expenses........................................................................................... 371,269
Less Fees Waived (Note 2)................................................................................ 19,143
---------
Net Expenses............................................................................................. 352,126
---------
NET INVESTMENT LOSS............................................................................................. $(243,031)
=========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments.............................................................................................. $ (109,772)
Foreign Currency Transactions............................................................................ (19,477)
---------
Net Realized Loss on Securites.................................................................................. (129,249)
---------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period...................................................................................... 2,846,054
---------
End of the Period:
Investments.............................................................................................. 3,667,392
Forward Currency Contracts............................................................................... 9,445
Foreign Currency Translation of Other Assets and Liabilities............................................. (10,995)
---------
3,665,842
---------
Net Unrealized Appreciation on Securities During the Period..................................................... 819,788
---------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES.................................................................. $ 690,539
=========
NET INCREASED IN NET ASSETS FROM OPERATIONS..................................................................... $ 447,508
=========
</TABLE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED APRIL 30, 1997 OCTOBER 31, 1996
--------------------- ----------------
<S> <C> <C>
FROM INVESMENT ACTIVITIES:
Operations:
Net Investment Loss............................................................... $ (243,031) $ (243,652)
Net Realized Loss on Securities................................................... (129,249) (44,990)
Net Unrealized Appreciation on Securities During the Period....................... 819,788 2,240,564
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES............................... 447,508 1,951,922
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold......................................................... 9,311,550 11,512,611
Cost of Shares Repurchased........................................................ (1,960,920) (4,212,850)
----------- -----------
NET CHANGE IN THE NET ASSETS FROM CAPITAL TRANSACTIONS............................ 7,350,630 7,299,761
----------- -----------
TOTAL INCREASE IN NET ASSETS...................................................... 7,798,138 9,251,683
NET ASSETS:
Beginning of the Period........................................................... 18,573,412 9,321,729
----------- -----------
End of the Period (Including accumulated net investment loss of $243,843
and $812, respectively)........................................................ $26,371,550 $18,573,412
=========== ===========
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Financial Highlights
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 8, 1996
(Commencement of
Six Months Ended Distribution) to
Class 1 Shares April 30, 1997 (a) October 31, 1996 (a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of the Period................................................ $ 16.517 $ 16.00
-------- --------
Net Investment Loss.................................................................. (.107) (.028)
Net Realized and Unrealized Gain on Securities....................................... .573 .545
-------- --------
Total from Investment Operations........................................................ .466 .517
-------- --------
Net Asset Value, End of the Period...................................................... $ 16.983 $ 16.517
======== ========
Total Return* (b)....................................................................... 2.78%** 3.25%**
Net Assets at End of the Period (In millions)........................................... $ .9 $ .2
Ratio of Expenses to Average Net Assets*................................................ 2.53% 2.50%
Ratio of Net Investment Loss to Average Net Assets*..................................... (1.30%) (1.31%)
Portfolio Turnover...................................................................... 30%** 78%
Average Commission Paid Per Equity Share Traded (c)..................................... $ .0227 $ .0314
*If certain expenses had not been waived or reimbursed by VKAC, Total Return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets................................................. 2.70% 3.87%
Ratio of Net Investment Loss to Average Net Assets...................................... (1.48%) (2.67%)
</TABLE>
** Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Represents the average brokege commissions paid per equity share traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
International Equity Fund Financial Highlights (Continued)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 21, 1995
(Commencement
of Investment
Six Months Ended Year ended Operations) to
Class A Shares April 30, 1997 (a) October 31, 1996 October 31, 1995(a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period....................... $ 16.543 $ 13.86 $ 11.81
---------------- --------------- ----------------
Net Investment Loss......................................... (.155) (.189) (.14)
Net Realized and Unrealized Gain on Securities.............. .601 2.872 2.19
---------------- --------------- ----------------
Total from Investment Operations............................... .446 2.683 2.05
---------------- --------------- ----------------
Net Asset Value, End of the Period............................. $ 16.989 $ 16.543 $ 13.86
================ =============== ================
Total Return* (b).............................................. 2.72%** 19.34% 16.28%**(c)
Net Assets at End of Period (In millions)...................... $ 14.4 $ 10.4 $ 6.6
Ratio of Expenses to Average Net Assets*....................... 2.77% 2.75% 3.64%
Ratio of Net Investment Loss to Average Net Assets*............ (1.82%) (1.56%) (1.40%)
Portfolio Turnover............................................. 30%** 78% 17%**
Average Commission Paid per Equity Share Traded (d)............ $ .0227 $ .0314 --
*If certain expenses had not been waived or reimbursed by VKAC,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets........................ 2.94% 4.12% 5.97%
Ratio of Net Investment Loss to Average Net Assets............. (1.99%) (2.92%) (3.73%)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February 21, 1995
(Commencement
of Investment
Six Months Ended Year ended Operations) to
Class B Shares April 30, 1997 (a) October 31, 1996 October 31, 1995(a)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period....................... $ 16.364 $ 13.79 $ 11.81
------------------ ---------------- ---------------
Net Investment Loss......................................... (.216) (.254) (.21)
Net Realized and Unrealized Gain on Securities.............. .590 2.828 2.19
------------------ ---------------- ---------------
Total from Investment Operations............................... .374 2.574 1.98
------------------ ---------------- ---------------
Net Asset Value, End of the Period............................. $ 16.738 $ 16.364 $ 13.79
================== ================ ===============
Total Return* (b)............................................. 2.32%** 18.64% 15.69%**(c)
Net Assets at End of Period (In millions)...................... $ 11.0 $ 8.0 $ 2.7
Ratio of Expenses to Average Net Assets*....................... 3.53% 3.50% 4.33%
Ratio of Net Investment Loss to Average Net Assets*............ (2.58%) (2.31%) (2.80%)
Portfolio Turnover............................................. 30%** 78% 17%**
Average Commission Paid per Equity Share Traded (d)............ $ .0227 $ .0314 --
*If certain expenses had not been waived or reimbursed by VKAC,
Total Return would have been lower and the ratios would have
been as follows:
Ratio of Expenses to Average Net Assets........................ 3.70% 4.87% 6.67%
Ratio of Net Investment Loss to Average Net Assets............. (2.75%) (3.67%) (5.13%)
</TABLE>
**Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total return is based upon net asset value which does not include payment
of the maximum sales charge or contingent deferred sales charge.
(c) Total return from March 17, 1995 (date the Fund's investment strategy was
implemented) through October 31, 1995
without annualization
(d) Represents the average brokerage commissions paid per equity share traded
during the period for trades where commissions were applicable.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Discount
Par Yield on
Amount Maturity Date of Amortized
(000) Description Date Purchase Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 57.3%
$ 3,000 Federal Home Loan Bank............................... 06/06/97 5.40% $ 2,983,473
3,000 Federal Home Loan Bank............................... 09/23/97 5.70 2,932,475
3,000 Federal Home Loan Mortgage Corp. .................... 05/20/97 5.24 2,991,383
2,000 Federal Home Loan Mortgage Corp. .................... 06/12/97 5.44 1,987,100
3,000 Federal Home Loan Mortgage Corp. .................... 07/02/97 5.59 2,971,073
3,000 Federal National Mortgage Assn....................... 05/07/97 5.24 2,996,978
1,000 Federal National Mortgage Assn....................... 05/13/97 5.31 998,119
1,000 Federal National Mortgage Assn....................... 05/16/97 5.34 997,666
6,000 Federal National Mortgage Assn....................... 05/22/97 5.27 5,980,787
2,000 Federal National Mortgage Assn....................... 06/10/97 5.28 1,988,292
2,000 Federal National Mortgage Assn....................... 06/12/97 5.31 1,987,649
1,000 Federal National Mortgage Assn....................... 06/24/97 5.46 991,735
2,000 Federal National Mortgage Assn....................... 07/08/97 5.37 1,979,952
3,000 Tennessee Valley Authority........................... 06/26/97 5.49 2,974,208
------------
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS....................... 34,760,890
------------
COMMERCIAL PAPER 22.2%
3,000 Associates Corp. of North America.................... 05/28/97 5.53 2,987,167
3,000 Chevron Oil Finance Co............................... 05/06/97 5.49 2,997,260
2,900 General Electric Capital Corp........................ 06/12/97 5.52 2,881,295
3,000 General Electric Capital Corp........................ 07/22/97 5.70 2,961,128
1,687 Metlife Funding, Inc................................. 06/20/97 5.59 1,673,760
-----------
TOTAL COMMERCIAL PAPER........................................................ 13,500,610
-----------
REPURCHASE AGREEMENTS 20.4%
BA Securities, Inc. ($6,185,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 04/30/97, to be sold on
05/01/97 at $6,185,927) 6,185,000
Lehman Brothers, Inc. ($6,185,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 04/30/97, to be sold on
05/01/97 at $6,185,919) 6,185,000
-----------
TOTAL REPURCHASE AGREEMENTS 12,370,000
-----------
TOTAL INVESTMENTS (A) 99.9% 60,631,500
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1% 49,811
-----------
NET ASSETS 100.0% $60,681,311
===========
</TABLE>
(a) At April 30, 1997, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
47
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market (Note 1)....................... $48,261,500
Repurchase Agreements (Note 1).......................................................... 12,370,000
Cash.................................................................................... 5,280
Receivable for Fund Shares Sold......................................................... 775,367
Other................................................................................... 4,961
-----------
Total Assets....................................................................... 61,417,108
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased............................................................ 357,288
Income Distributions............................................................... 225,838
Distributor and Affiliates (Note 2)................................................ 117,328
Accrued Expenses........................................................................ 32,344
Retirement Plan (Note 2)................................................................ 2,999
-----------
Total Liabilities.................................................................. 735,797
-----------
NET ASSETS.............................................................................. $60,681,311
===========
NET ASSETS CONSIST OF:
Capital (Note 3)........................................................................ $60,681,981
Accumulated Distributions in Excess of Net Investment Income............................ (670)
-----------
NET ASSETS.............................................................................. $60,681,311
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value per share (Based on net assets of $56,486,941 and
56,487,814 shares of beneficial interest issued and outstanding).............. $ 1.00
===========
Class A Shares:
Net asset value per share (Based on net assets of $4,024,878 and
4,024,919 shares of beneficial interest issued and outstanding)............... $ 1.00
===========
Class B Shares:
Net asset value per share (Based on net assets of $169,492 and
169,496 shares of beneficial interest issued and outstanding)................. $ 1.00
===========
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
SIX MONTHS ENDED
APRIL 30, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Interest.......................................................................................................... $1,640,174
----------
EXPENSES:
Shareholder Services (Note 2)..................................................................................... 288,825
Investment Advisory Fee (Note 2).................................................................................. 151,196
Registration and Filing Fees...................................................................................... 29,444
Accounting Services (Note 2)...................................................................................... 14,280
Trustees Fees and Expenses (Note 2)............................................................................... 10,075
Custody........................................................................................................... 5,117
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $1,153 and $259,
respectively) (Note 6)........................................................................................... 1,412
Other............................................................................................................. 52,097
----------
Total Expenses................................................................................................. 552,446
Less Fees Deferred and Expenses Reimbursed ($151,196 and $94,687, respectively) (Note 2)....................... 245,883
----------
Net Expenses...................................................................................................... 306,563
----------
NET INVESTMENT INCOME............................................................................................. $1,333,611
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................................................ $1,333,611
==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................................................................... $ 1,333,611 $ 2,761,594
Distributions from Net Investment Income (Note 1) ............................................ (1,335,684) (2,761,337)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........................................... (2,073) 257
------------ ------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold..................................................................... 35,052,112 68,178,381
Net Asset Value of Shares Issued Through Dividend Reinvestment................................ 1,309,951 2,715,171
Cost of Shares Repurchased.................................................................... (36,334,503) (70,542,884)
------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS............................................ 27,560 350,668
------------ ------------
TOTAL INCREASE IN NET ASSETS.................................................................. 25,487 350,925
NET ASSETS:
Beginning of the Period....................................................................... 60,655,824 60,304,899
------------ ------------
End of the Period (Including accumulated undistributed net investment income of $(670)
and $1,403, respectively)................................................................... $ 60,681,311 $ 60,655,824
============ ============
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
49
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund Financial Statements
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31
-----------------------------------------------------
CLASS 1 SHARES APRIL 30, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<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..................................... .022 .045 .0492 .0288 .023
Less Distributions from Net Investment Income............. (.022) (.045) (.0492) (.0288) (.023)
-------- -------- -------- ------- ------
Net Asset Value, End of the Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======= ======
Total Return*............................................. 2.21%** 4.57% 5.01% 2.91% 2.31%
Net Assets at End of the Period (In millions)............. $ 56.5 $ 59.9 $ 60.3 $ 56.4 $ 59.2
Ratio of Expenses to Average Net Assets*.................. 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income to Average Net Assets*..... 4.41% 4.48% 4.89% 2.87% 2.30%
*If certain expenses had not been waived or reimbursed
by VKAC, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets................... 1.82% 1.86% 1.71% 1.84% 1.74%
Ratio of Net Investment Income to Average Net Assets...... 3.60% 3.62% 4.18% 2.03% 1.56%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------------- -----------------------------------------
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1997 OCTOBER 31, 1996(A) APRIL 30, 1997 OCTOBER 31, 1996(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------
Net Investment Income............................ .022 .010 .019 .007
Less Distributions from Net Investment
Income......................................... (.022) (.010) (.019) (.007)
-------- -------- -------- -------
Net Asset Value, End of the Period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== =======
Total Return*(b)................................. 2.18%** 1.00%** 1.89%** .73%**
Net Assets at End of the Period (In millions)... $ 4.0 $ .7 $ .2 $ .0
Ratio of Expenses to Average Net Assets*......... 1.11% 1.09% 1.77% 1.75%
Ratio of Net Investment Income to Average
Net Assets*................................... 4.32% 4.49% 3.70% 4.17%
*If certain expenses had not been waived
or reimbursed by VKAC, total return
would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net Assets.......... 1.92% 1.96% 2.60% 2.61%
Ratio of Net Investment Income to Average
Net Assets..................................... 3.51% 3.62% 2.88% 3.31%
</TABLE>
** Non-Annualized
(a) Class A and Class B Shares commenced distribution on August 8, 1996.
(b) Total Return is based upon net asset value which does not include
payment of the contingent deferred sales charge for Class B Shares.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
50
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
ALASKA 1.0%
$1,000 Valdez, AK Marine Term Rev Sohio Pipeline Rfdg...................................... 7.125% 12/01/25 $1,108,460
----------
ARIZONA 1.1%
400 Maricopa Cnty, AZ Indl Dev Auth Multi-Family Hsg Rev Rfdg........................... 6.500 07/01/09 414,192
575 Pima Cnty, AZ Indl Dev Auth Rev Insd Hlthpartners
Ser A Rfdg (MBIA Insd).............................................................. 5.625 04/01/14 570,636
225 Scottsdale, AZ Indl Dev Auth Rev First Mtg Westminster Vlg Ser A Rfdg............... 8.250 06/01/15 244,017
----------
1,228,845
----------
CALIFORNIA 4.4%
100 California Spl Dist Fin Auth Ctfs Partn Ser A....................................... 8.500 07/01/18 105,728
500 Compton, CA Ctfs Partn Ser B........................................................ 7.500 08/01/15 525,665
560 Del Mar, CA Racetrack Auth Rev Rfdg................................................. 6.000 08/15/01 567,745
1,000 Orange Cnty, CA Recovery Ctfs Ser A (MBIA Insd)..................................... 6.000 07/01/08 1,062,690
1,000 Orange Cnty, CA Recovery Ctfs Ser A Rfdg (MBIA Insd)................................ 6.000 06/01/09 1,066,900
2,000 San Bernardino Cnty, CA Ctfs Partn Med Cent Fin Proj (MBIA Insd).................... 5.000 08/01/28 1,782,000
----------
5,110,728
----------
COLORADO 5.2%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser B...................... 7.000 08/31/26 1,070,640
7,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470 Proj Ser C...................... * 08/31/26 860,440
500 Arvada, CO Sales & Use Tax Rev Rfdg Impt (FGIC Insd)................................ 6.250 12/01/12 522,805
250 Berry Creek Metro Dist CO Rfdg & Impt............................................... 8.250 12/01/11 274,305
400 Edgewater, CO Redev Auth Tax Increment Rev.......................................... 6.750 12/01/08 427,688
500 Highlands Ranch Metro Dist No 1 CO Rfdg & Impt Ser A
(Prerefunded @ 09/01/02)............................................................ 7.300 09/01/12 565,640
1,000 Highlands Ranch Metro Dist No 2 CO Rfdg (FSA Insd).................................. 6.500 06/15/10 1,111,880
100 Jefferson Cnty, CO Districtwide Sales Tax Rev (Prerefunded @ 12/01/98).............. 8.200 12/01/13 105,937
1,000 Larimer Cnty, CO Sch Dist No R 1 Poudre Ctfs Partn Lease (MBIA Insd)(b)............. 5.650 12/01/16 993,970
----------
5,933,305
----------
CONNECTICUT 0.9%
1,000 Mashantucket Western Pequot Tribe CT Ser A, 144A
Private Placement (d ).............................................................. 6.500 09/01/05 1,065,710
----------
DELAWARE 0.2%
250 Delaware St Econ Dev Auth Rev Osteopathic Hosp Assoc DE Ser A....................... 6.750 01/01/13 277,240
----------
DISTRICT OF COLUMBIA 0.9%
500 District of Columbia Rev Howard Univ Ser A (MBIA Insd).............................. 8.000 10/01/17 518,300
500 District of Columbia Ser A (Prerefunded @ 06/01/00) (AMBAC Insd).................... 7.500 06/01/10 548,345
----------
1,066,645
----------
FLORIDA 1.9%
410 Broward Cnty, FL Res Recovery Rev Waste Energy North Proj........................... 7.950 12/01/08 446,601
1,160 Dade Cnty, FL Professional Sports Franchise Fac Tax Rev (MBIA Insd)................. * 10/01/19 315,682
1,000 Florida St Correctional Privatization Comm Ctsf Partn (AMBAC Insd).................. 5.000 08/01/17 918,140
500 Saint Petersburg, FL Hlth Fac Auth Rev Allegany Hlth Sys Ser B
(Prerefunded @ 12/01/99)............................................................ 7.750 12/01/15 548,460
----------
2,228,883
----------
</TABLE>
See Notes to Financial Statements
- -------------------------------------------------------------------------------
51
<PAGE>
- -------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
April 30,1997 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII 0.9%
$ 1,000 Hawaii St Ser CD Rfdg........................................................... 5.000% 02/01/03 $1,002,150
----------
ILLINOIS 5.4%
500 Chicago, IL Metro Wtr Reclamation Dist Gtr Chicago.............................. 7.000 01/01/11 571,620
500 Chicago, IL Wastewtr Transmission Rev (Prerefunded @ 01/01/03)
(FGIC Insd)..................................................................... 6.300 01/01/12 541,975
500 Cook Cnty, IL (Prerefunded @ 11/01/00) (MBIA Insd).............................. 7.000 11/01/10 546,345
500 Cook Cnty, IL Cmnty College Dist No 508 Chicago Ctfs Partn
(FGIC) Insd).................................................................... 8.750 01/01/07 626,115
250 Crestwood, IL Tax Increment Rev Rfdg............................................ 7.250 12/01/08 255,848
500 DuPage Cnty, IL Alt Rev Stormwtr Proj (Prerefunded @ 01/01/02).................. 6.550 01/01/21 543,420
250 Illinois Dev Fin Auth Rev Columbus Cuneo Cabrini Med Cent Rfdg
(Prerefunded @ 02/01/00)........................................................ 8.500 02/01/15 278,460
500 Illinois Hlth Fac Auth Rev Delnor Cmnty Hosp Proj
(Prerefunded @ 05/15/99)........................................................ 8.000 05/15/19 543,455
500 Illinois Hlth Fac Auth Rev IL Masonic Med Cent Ser B
(Prerefunded @ 10/01/99)........................................................ 7.700 10/01/19 545,425
500 Illinois Hlth Fac Auth Rev Lutheran Hlth Sys Ser B Rfdg (MBIA Insd)............. 6.000 04/01/18 500,920
250 Illinois Hlth Fac Auth Rev Mem Hosp............................................. 7.250 05/01/24 262,532
300 Illinois Hlth Fac Auth Rev Mercy Cent for Hlthcare Svcs......................... 6.625 10/01/12 306,543
500 Illinois Hlth Fac Auth Rev Northwestern Mem Hosp................................ 6.750 08/15/11 530,980
94 Illinois Hlth Fac Auth Rev Ser A (MBIA Insd).................................... 7.900 08/15/03 96,178
40 Illinois Hlth Fac Auth Rev Ser A Rfdg (MBIA Insd)............................... 7.900 08/15/03 45,032
----------
6,194,848
----------
INDIANA 2.0%
100 Carmel, IN Retirement Rental Hsg Rev Beverly Enterprises
Inc Proj Rfdg................................................................... 8.750 12/01/08 112,138
1,000 Indiana Hlth Fac Fin Auth Hosp Rev Cmnty Hosp Proj (MBIA Insd).................. 6.850 07/01/22 1,083,740
500 Merrillville, IN Multi Sch Bldg Corp First Mtg
(Prerefunded @ 07/15/00)........................................................ 7.500 07/15/99 550,835
500 Saint Joseph Cnty, IN Hosp Auth Hosp Fac Rev Mem Hosp South Bend Proj
(MBIA Insd)..................................................................... 6.250 08/15/22 514,365
----------
2,261,078
----------
IOWA 0.9%
1,000 Des Moines, IA Pkg Fac Rev Ser A (FGIC Insd).................................... 7.250 07/01/15 1,071,620
----------
KANSAS 0.2%
250 Newton, KS Hosp Rev Newton Hlthcare Corp Ser A.................................. 7.375 11/15/14 263,600
----------
LOUISIANA 0.2%
220 Louisiana Pub Fac Auth Rev Indl Dev Beverly Enterprises, Inc. Rfdg.............. 8.250 09/01/08 241,054
----------
</TABLE>
See Notes to Financial Statement
- --------------------------------------------------------------------------------
52
<PAGE>
- -------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MAINE 0.5%
$ 250 Maine St Hsg Auth Mtg Pur Ser B.................................................. 7.900% 11/15/06 $ 259,508
250 Regional Waste Sys Inc M Solid Waste Res Recovery Rev............................ 7.950 07/01/10 269,582
---------
529,090
---------
MASSACHUSETTS 2.3%
500 Boston, MA Rev Boston City Hosp Ser A (FHA Gtd)
(Prerefunded @ 08/15/00)......................................................... 7.625 02/15/21 553,220
1,000 Holyoke, MA Ser B Rfdg (FSA Insd)................................................ 6.000 06/15/07 1,059,060
5 Massachusetts Muni Wholesale lec Co Pwr Supply Sys Rev Ser A..................... 8.750 07/01/18 6,048
250 Massachusetts St Hsg Fin Agy Hsg Rev Single Family Ser 31........................ 6.450 12/01/16 258,660
250 Massachusetts St Indl Fin Agy Indl Rev Beverly nterprises
Inc/Gloucester & Lexington Proj Rfdg............................................. 8.000 05/01/02 266,895
500 Massachusetts St Wtr Res Auth Ser A (Prerefunded @ 04/01/00)..................... 7.500 04/01/16 548,280
---------
2,692,163
---------
MICHIGAN 3.1%
500 Detroit, MI Area No 1 Ser A (Prerefunded @ 07/01/99)............................. 7.600 07/01/10 541,000
2,000 Detroit, MI Downtown Dev Auth Tax Increment Rev Dev Area No 1 Proj Ser C1....... 6.250 07/01/25 2,037,620
200 Huron Vly, MI Sch Dist (Prerefunded @ 05/01/01) (FGIC Insd)...................... 7.100 05/01/08 220,380
500 Kent Hosp Fin Auth MI Hosp Fac Rev Ser A (Prerefunded @ 01/15/00)................ 7.250 01/15/12 542,105
195 Michigan St Hosp Fin Auth Rev Detroit Med Cent Ser A Rfdg
(Prerefunded @ 08/15/98)......................................................... 8.125 08/15/12 208,276
---------
3,549,381
---------
MINNESOTA 0.1%
150 Minneapolis, MN Hlthcare Fac Rev benezer Society Proj Ser A...................... 7.000 07/01/12 154,830
---------
MISSISSIPPI 0.9%
500 Mississippi Hosp quip & Fac Auth Rev Magnolia Hosp Proj Ser A.................... 7.375 10/01/21 508,565
500 Ridgeland, MS Urban Renewal Rev the Orchard Ltd Proj Ser A Rfdg.................. 7.750 12/01/15 520,370
---------
1,028,935
---------
MISSOURI 5.2%
2,750 Kansas City, MO Muni Assistance Corp Rev Rfdg (MBIA Insd)........................ 5.000 04/15/20 2,513,335
500 Missouri St Hlth & dl Fac Auth Hlth Fac Rev Heartland Hlth Sys Proj............. 6.875 11/15/04 537,115
500 Missouri St Hlth & dl Fac Auth Hlth Fac Rev Lake of the Ozarks
Hosp (Prerefunded @ 02/15/99).................................................... 8.000 02/15/11 539,025
500 Missouri St Hlth & dl Fac Auth Hlth Fac Rev Lake of the Ozarks
Hosp Rfdg........................................................................ 6.000 02/15/06 510,835
250 Missouri St Hlth & dl Fac Auth Rfdg & Impt....................................... 8.125 10/01/10 274,272
1,615 Saint Charles Cnty, MO Indl Dev Auth Indl Rev Westchester Vlg Apt
Ser A Rfdg (FNMA Collateralized)................................................. 6.050 02/01/17 1,618,618
---------
5,993,200
---------
NEVADA 1.9%
2,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser C Rfdg (AMBAC Insd)............... 7.200 10/01/22 2,205,500
---------
NEW HAMPSHIRE 0.9%
370 New Hampshire Higher dl & Hlth Fac Auth Rev First Mtg Odd
Fellows Home Rfdg............................................................... 9.000 06/01/14 415,092
520 New Hampshire Higher dl & Hlth Fac Auth Rev New
London Hosp Assn Proj........................................................... 7.500 06/01/05 569,987
--------
985,079
--------
</TABLE>
See Notes to Financial Statements
- -------------------------------------------------------------------------------
53
<PAGE>
- -------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments (Continued)
- -------------------------------------------------------------------------------
April 30, 1997 (Unauditted)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW JERSEY 3.3%
$ 1,000 Jersey City, NJ Ser A Rfdg (AMBAC Insd)............................................. 6.000% 10/01/06 $ 1,063,150
1,500 Mercer Cnty, NJ Impt Auth Rev Cap Apprec Rfdg....................................... * 04/01/11 701,040
880 New Jersey con Dev Auth Holt Hauling & Warehsg Rev Ser G Rfdg....................... 8.400 12/15/15 922,126
1,000 New Jersey St Tpk Auth Tpk Rev Ser C Rfdg (MBIA Insd)............................... 6.500 01/01/16 1,107,620
---------
3,793,936
---------
NEW MEXICO 0.9%
1,000 Farmington, NM Pollutn Ctl Rev Southern CA
Edison Co Ser A Rfdg................................................................ 7.200 04/01/21 1,078,180
---------
NEW YORK 7.2%
350 New York City Indl Dev Agy Civic Fac Marymount Manhattan
College Proj........................................................................ 7.000 07/01/23 361,025
500 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser C
(Prerefunded @ 06/15/01)............................................................ 7.750 06/15/20 563,035
985 New York City Ser B................................................................. 7.000 08/15/16 1,050,867
15 New York City Ser B (Prerefunded @ 08/15/04)........................................ 7.000 08/15/16 16,952
1,000 New York City Ser I................................................................. 6.000 04/15/12 995,090
500 New York St Dorm Auth Rev City Univ Sys Ser C Rfdg.................................. 6.000 07/01/16 493,510
3,000 New York St Dorm Auth Rev Mental Health Svcs Fac Impt Ser B......................... 5.375 02/15/26 2,723,280
750 New York St Dorm Auth Rev St Univ Edl Fac Ser A
(Prerefunded @ 05/15/00)............................................................ 7.700 05/15/12 828,675
500 New York St Med Care Fac Fin Agy Rev Hosp & Nursing Home Ser A
(FHA Gtd) (Prerefunded @ 02/15/99).................................................. 7.250 02/15/24 533,675
500 Triborough Brdg & Tunnel Auth NY Rev Ser R
(Prerefunded @ 01/01/00)............................................................ 7.375 01/01/16 542,065
150 Triborough Bridge & Tunnel Auth NY Spl Oblig Mtg
Recording Tax Ser A (Prerefunded @ 01/01/98)........................................ 8.000 01/01/18 156,298
---------
8,264,472
---------
NORTH CAROLINA 1.2%
500 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser A Rfdg
(Prerefunded @ 01/01/22)............................................................ 4.500 01/01/24 424,705
400 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser A Rfdg
(Prerefunded @ 01//01/98)........................................................... 8.000 01/01/21 418,716
250 North Carolina Med Care Comnty Hlthcare Fac Rev
(Prerefunded @ 10/01/99)............................................................ 7.800 10/01/19 273,375
250 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg.............................. 7.875 01/01/19 261,502
---------
1,378,298
---------
OHIO 7.7%
1,840 Brecksville Broadview Heights, OH City Sch Dist (FGIC Insd)......................... 6.500 12/01/16 1,972,351
500 Cleveland, OH Pkg Fac Rev (Prerefunded @ 09/15/02).................................. 8.000 09/15/12 578,460
250 Coshocton Cnty, OH Solid Waste Disp Rev Stone Container
Corp Proj Rfdg...................................................................... 7.875 08/01/13 263,337
500 Cuyahoga Cnty, OH Hlthcare Fac Rev Judson Retirement
Cmnty Ser A Rfdg.................................................................... 7.000 11/15/10 505,895
660 Delaware Cnty, OH Hlthcare Fac Rev Mtg Centrum at Willow Brook
(FHA Gtd)........................................................................... 6.550 02/01/35 683,074
1,000 Dublin, OH City Sch Dist (FGIC Insd)................................................ 5.000 12/01/18 918,880
1,000 Greater Cincinnati OH Elderly Hsg Dev Corp Mtg Rev
Ser A Rfdg (FSA Insd)............................................................... 6.600 08/01/25 1,049,100
1,000 Miami Cnty, OH Hosp Fac Rev Upper Vly Med Cent Ser A Rfdg & Impt.................... 6.000 05/15/06 1,026,410
</TABLE>
See Notes to Financial Statements
- -------------------------------------------------------------------------------
54
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bonds Fund Portfolio of Investments(continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unadited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ohio (Continued)
$1,000 Ohio St Wtr Dev Auth Pollutn Ctl Fac Rev OH Edison Co Proj Rfdg...................... 5.950% 05/15/29 $ 957,050
1,000 University of Cincinnati OH Ctfs Univ of Cincinnati Cent Proj
(MBIA Insd).......................................................................... 5.125 06/01/24 920,440
-----------
8,874,997
-----------
OKLAHOMA 0.5%
500 Tulsa, OK Indl Auth Hosp Rev Tulsa Regl Med Cent
(Prerefunded @ 06/01/03)............................................................. 7.200 06/01/17 566,600
-----------
OREGON 5.1%
1,675 Emerald Peoples Util Dist OR Elec Sys Rfdg (FGIC Insd)............................... 7.350 11/01/13 1,979,431
1,920 Jackson Cnty, OR Sch Dist No 549C (FSA Insd)......................................... 6.000 06/01/04 2,033,875
2,000 Oregon Hlth Sciences Univ Rev Ser B (MBIA Insd)...................................... 5.250 07/01/28 1,873,460
-----------
5,886,766
-----------
PENNSYLVANIA 7.8%
250 Emmaus, PA Genl Auth Rev Ser A (BIGI Insd)........................................... 8.150 05/15/18 262,802
500 Erie Cnty, PA Higher Edl Bldg Auth College Rev Ser A
(Prerefunded @ 06/01/99)............................................................. 8.500 06/01/15 549,275
500 Lebanon Cnty, PA Hlth Fac Auth Hlth Cent Rev United
Church of Christ Homes Rfdg.......................................................... 6.750 10/01/10 505,900
280 Montgomery Cnty, PA Indl Dev Auth Rev Pennsburg Nursing &
Rehab Cent........................................................................... 7.625 07/01/18 289,705
100 Northeastern PA Hosp Auth Rev Nesbit Mem Hosp Ser A Rfdg
(Prerefunded @ 07/01/00)............................................................. 7.500 07/01/12 109,702
500 Northeastern PA Hosp Auth Rev Wilkes Barre Genl Hosp Ser B
(Prerefunded @ 07/01/97)............................................................. 8.375 07/01/06 513,710
1,550 Northeastern PA Hosp & Edl Auth (AMBAC Insd)......................................... 5.250 01/01/26 1,428,387
1,000 Pennsylvania St First Ser (AMBAC Insd)............................................... 5.125 03/15/16 936,720
1,000 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Bryn Mawr
College (MBIA Insd).................................................................. 5.625 12/01/27 975,720
500 Pennsylvania St Higher Edl Fac Auth College & Univ Rev Hahnemann
Univ Proj (Prerefunded @ 07/01/99) (MBIA Insd)....................................... 7.200 07/01/19 537,235
150 Pennsylvania St Higher Edl Fac Auth Hosp Rev (Prerefunded @.......................... 8.000 01/01/18 156,968
01/01/98)
250 Pennsylvania St Higher Edl Fac Auth Rev Med College PA Ser A
(Prerefunded @ 03/01/99)............................................................. 8.375 03/01/11 271,830
500 Philadelphia, PA Hosps & Higher Edl Fac Auth Hosp Rev PA Hosp Rfdg................... 6.250 07/01/06 513,630
250 Scranton-Lackawanna, PA Hlth & Welfare Auth Rev Moses Taylor Hosp
Proj Ser B........................................................................... 8.500 07/01/20 269,877
500 Shenandoah Vly, PA Sch Dist Ser B.................................................... * 02/01/12 216,960
1,000 South Fork Muni Auth PA Hosp Good Samaritan Med Cent Ser B Rfdg
(MBIA Insd).......................................................................... 5.250 07/01/26 921,010
500 Warren Cnty, PA Hosp Auth Rev Warren Genl Hosp Proj Ser A............................ 6.900 04/01/11 519,785
-----------
8,979,216
-----------
RHODE ISLAND 0.5%
500 Rhode Island Depositors Econ Protection Corp Spl Oblig Ser A
(Prerefunded @ 08/01/02) (FSA Insd) (c)............................................... 6.625 08/01/19 548,815
-----------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
55
<PAGE>
- -------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTH DAKOTA 0.7%
$ 500 South Dakota St Hlth & Edl Fac Auth Rev Huron Regl Med Cent............... 7.250% 04/01/20 $ 528,785
20 South Dakota St Hlth & Edl Fac Auth Rev Sioux Vly Hosp.................... 7.625 11/01/13 21,667
230 South Dakota St Hlth & Edl Fac Auth Rev Sioux Vly Hosp
(Prerefunded @ 11/01/98).................................................. 7.625 11/01/13 245,629
-----------
796,081
-----------
TENNESSEE 3.0%
1,250 Franklin, TN Indl Dev Brd Mulit-Family Rev Hsg Landings Apt Proj
Ser A Rfdg (FSA Insd)..................................................... 5.900 10/01/16 1,248,500
1,000 Jackson, TN Elec Sys Rev Rfdg & Impt (MBIA Insd).......................... 5.000 08/01/18 914,870
400 Metro Nashville & Davidson Cnty, TN Meharry Med College
Hlth & Edl Fac Brd Rev Rfdg & Impt (AMBAC Insd)........................... 5.000 12/01/24 361,024
890 Tennessee Hsg Dev Agy Home Ownership Pgm.................................. 6.800 07/01/17 926,695
----------
3,451,089
----------
TEXAS 10.2%
685 Austin, TX Hsg Fin Corp Multi-Family Hsg Rev Stassney Woods
Apt Proj Rfdg............................................................. 6.500 10/01/10 699,344
500 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev Saint LukeOs Lutheran
Hosp (Prerefunded @ 05/01/03)............................................. 7.900 05/01/18 573,085
250 Brazoria Cnty, TX Muni Util Dist No 2..................................... 7.000 09/01/08 262,450
500 Brownsville, TX Util Sys Rev (Prerefunded @ 09/01/00) (AMBAC Insd)........ 6.500 09/01/17 537,220
500 Ector Cnty, TX Hosp Dist Hosp Rev Med Cent Hosp........................... 7.125 04/15/02 531,620
1,000 El Paso Cnty, TX Pkg Fac Rev Ctfs Oblig (Prerefunded @ 08/15/99).......... 6.500 08/15/11 1,060,950
500 Frenship, TX Indpt Sch Dist Rfdg.......................................... 5.500 02/15/03 511,670
500 Frenship, TX Indpt Sch Dist Rfdg.......................................... 5.500 02/15/04 510,600
250 Harris Cnty, TX Hlth Fac Dev Corp Mem Hosp Sys Proj Rfdg.................. 7.125 06/01/15 280,528
1,250 Harris Cnty, TX Hlth Fac Dev Corp Thermal Util Rev Teco Proj Ser A
(AMBAC Insd).............................................................. 7.250 02/15/15 1,340,187
500 Houston, TX Wtr Sys Rev (Prerefunded @ 12/01/97).......................... 7.250 12/01/07 519,685
1,500 Irving, TX Flood Ctl Dist Section 3 (AMBAC Insd).......................... * 09/01/08 812,700
250 Rusk Cnty, TX Hlth Fac Corp Hosp Rev Henderson
Mem Hosp Proj Rfdg........................................................ 7.750 04/01/13 262,050
250 Tarrant Cnty, TX Hlth Fac Dev Corp Hosp Rev Rfdg & Impt................... 7.000 05/15/28 261,910
250 Tarrant Cnty, TX Hlth Fac Dev Corp Hosp Rev Rfdg & Impt
(Prefunded @ 05/15/03).................................................... 7.000 05/15/28 279,430
1,370 Temple, TX Junior College Dist Hsg Sys & Use Fee Rev (MBIA Insd).......... 5.375 07/01/21 1,297,253
130 Texas Genl Svcs Comm Partn Interests Office Bldg & Land
Acquisition Proj.......................................................... 7.000 08/01/14 132,365
330 Texas Genl Svcs Comm Partn Interests Office Bldg & Land Acquisition Proj.. 7.000 08/01/24 336,003
485 Texas Hsg Agy Residential Dev Rev Ser A (GNMA Collateralized)............. 7.600 07/01/16 510,909
215 Texas Hsg Agy Single Family Mtg Rev Ser A Rfdg............................ 7.150 09/01/12 223,344
500 Texas Wtr Res Fin Auth Rev (AMBAC Insd)................................... 7.500 08/15/13 530,865
250 Winters, TX Wtrwks & Swr Sys Rev Rfdg (Prerefunded @ 08/01/03)............ 8.500 08/01/17 298,087
----------
11,772,255
----------
</TABLE>
See Notes to Financial Statements
- -------------------------------------------------------------------------------
56
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bond Fund Portfolio of Investments (continued)
- --------------------------------------------------------------------------------
April 30,1997 (unaudited)
<TABLE>
<CAPTION>
PER
AMOUNT
(000) DESCRIPTION COUPON MATURITY MARKET VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTAH 0.3%
$250 Utah St Bldg Ownership Auth Lease Rev Dept Employment Security Proj
(Prerefunded @ 08/15/98) ................................................. 7.800% 08/15/10 $ 261,595
70 Utah St Hsg Fin Agy Mtg Ser G ............................................ 8.100 07/01/16 56,177
------------
317,772
------------
VIRGINIA 5.9%
3,500 Chesapeake Bay Brdg & Tunnel Comm VA Dist Rev Rfdg(MBIA Insd)(c) ......... 5.000 07/01/22 3,159,240
200 Faifax Cnty, VA Multi-Family Hsg Paul Spring Cent Ser A Rfdg (FHA Gtd).... 5.900 06/15/17 200,164
750 Faifax Cnty, VA Multi-Family Hsg Paul Spring Cent Ser A Rfdg (FHA Gtd).... 6.000 12/15/28 748,882
1,000 Norfolk, VA Indl Dev Auth Rev Hosp Santara Hosp Ser A Rfdg ............... 6.500 11/01/13 1,057,700
1,000 Peninsula Ports Auth VA Coal Terminal Rev Rfdg............................ 7.375 06/01/20 1,061,170
500 Prince William Cnty, VA Indl Dev Auth Rev Potomac
Place Ser A Rfdg (GNMA Collateralized) ................................... 6.250 12/20/27 503,965
------------
6,731,121
------------
WASHINGTON 3.2%
1,120 King Cnty, WA Sch Dist No 412 Shoreline Ser A (FSA Insd) ................. 6.000 12/01/05 1,188,130
2,000 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (FGIC Insd)........ 5.375 07/01/15 1,905,140
250 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (FGIC Insd) ....... 7.125 07/01/16 291,675
250 Washington St Pub Pwr Supply Sys Nuclear Proj No 2 Rev
(Prerefunded @ 01/01/01) ................................................. 7.625 07/01/10 278,622
------------
3,663,567
------------
WISCONSIN 1.3%
250 Jefferson, WI Sewage Sys Wtrwks & Elec Sys Mtg Rev
(Prerefunded @ 07/01/01) ................................................. 7.400 07/01/16 274,917
150 Wisconsin Hsg & Econ Dev Auth Hsg Rev Ser B ............................. 8.000 11/01/18 156,353
1,000 Wisconsin St Hlth & Edl Fac Auth Rev Marquette Univ Proj (FGIC Insd)...... 6.450 12/01/19 1,046,790
------------
1,478,060
------------
TOTAL LONG-TERM INVESTMENTS 98.9%
(Cost $108,893,573)(a) ................................................... 113,773,569
SHORT-TERM INVESTMENTS 0.4% (COST $400,000)(A) ....................................... 400,000
OTHER ASSETS IN EXCESS OF LIABILITIESE 0.7% .......................................... 851,897
------------
NET ASSETS 100.0% .................................................................... $115,025,466
============
</TABLE>
* Zero coupon bond
(a) At April 30, 1997, for federal income tax purposes, cost for long- and
short-term investments is $109,293,573; the aggregate gross unrealized
appreciation is $5,170,688 and the aggregate gross unrealized depreciation
is $315,782, resulting in net unrealized appreciation including options
transactions of $4,854,906.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery
purchase commitments and open option transactions.
(d) 144A securities are those which are exempt from registration under Rule
144A of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
57
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bond Fund Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long-Term Investments, at Market Value (Cost $108,893,573) (Note 1)............................................. $ 113,773,569
Short-Term Investments (Cost $400,000)(Note 1)................................................................... 400,000
Cash............................................................................................................. 65,811
Receivables:
Interest.................................................................................................... 2,021,196
Fund Shares Sold............................................................................................ 696,220
Other............................................................................................................ 3,562
--------------
Total Assets................................................................................................ 116,960,358
--------------
LIABILITIES:
Payables:
Securities Purchased........................................................................................ 981,234
Income Distributions........................................................................................ 462,830
Fund Shares Repurchased..................................................................................... 246,042
Distributor and Affiliates (Notes 2 and 6).................................................................. 105,547
Investment Advisory Fee (Note 2)............................................................................ 56,661
Accrued Expenses................................................................................................. 59,615
Options at Market Value (Net premiums paid of $7,122) (Note 5)................................................... 17,968
Retirement Plan (Note 2)......................................................................................... 4,995
--------------
Total Liabilities........................................................................................... 1,934,892
--------------
NET ASSETS....................................................................................................... $ 115,025,466
==============
NET ASSETS CONSIST OF:
Capital (Note 3)................................................................................................. $ 110,040,968
Net Unrealized Appreciation on Securities........................................................................ 4,854,906
Accumulated Undistributed Net Investment Income.................................................................. 72,889
Accumulated Net Realized Gain on Securities...................................................................... 56,703
--------------
NET ASSETS....................................................................................................... $ 115,025,466
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class 1 Shares:
Net asset value per share (Based on net assets of $108,351,080 and 7,934,799 shares of
beneficial interest issued and outstanding).............................................................. $ 13.66
Maximum sale charge (4.75%* of offering price)........................................................... .68
--------------
Maximum offering price.......................................................................... $ 14.34
==============
Class A Shares:
Net asset value per share (Based on net assets of $5,246,419 and 384,229 shares of beneficial
interest issued and outstanding)......................................................................... $ 13.65
Maximum sales charge (4.50%* of offering price).......................................................... .64
--------------
Maximum offering price of public......................................................................... $ 14.29
==============
Class B Shares:
Net asset value per share (Based on net assets of $1,427,967 and 104,644 shares of beneficial
interest issued and outstanding)......................................................................... $ 13.65
==============
</TABLE>
*On sales of $10,000 or more for Class 1 shares and $50,000 or more for Class A
shares, the sales charge will be reduced.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
58
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bond Fund Financial Statements
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
Statement Of Operations
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1997
----------------
<S> <C>
INVESTMENT INCOME:
Interest.......................................................................................................... $ 3,458,705
----------------
EXPENSES:
Investment Advisory Fee (Note 2).................................................................................. 352,617
Shareholder Services (Note 2)..................................................................................... 113,163
Registration and Filing Fees...................................................................................... 50,705
Trustees Fees and Expenses (Note 2)............................................................................... 11,770
Distribution (12b-1) and Service Fees (Attributed to Classes A and B of $4,374 and $5,473, respectively)(Note 6).. 9,847
Custody........................................................................................................... 5,489
Other............................................................................................................. 105,921
----------------
Total Expenses............................................................................................ 649,512
----------------
NET INVESTMENT INCOME............................................................................................. $ 2,809,193
================
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments.................................................................................................. $ 5,908
Options...................................................................................................... 32,028
----------------
Net Realized Gain on Securities................................................................................... 37,936
================
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period...................................................................................... 6,030,189
----------------
End of the Period:
Investments............................................................................................... 4,879,996
Options................................................................................................... (25,090)
----------------
4,854,906
----------------
Net Unrealized Depreciation on Securities During the Period....................................................... (1,175,283)
----------------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.................................................................... $(1,137,347)
================
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................................................ $ 1,671,846
================
</TABLE>
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
------------------- ----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income...................................................................... $ 2,809,193 $ 6,220,668
Net Realized Gain on Securities............................................................ 37,936 350,316
Net Unrealized Appreciation/Depreciation on Securities During the Period................... (1,175,283) 491,252
------------------- ----------------
Change in Net Assets from Operations....................................................... 1,671,846 7,062,236
------------------- ----------------
Distributions from Net Investment Income (Note 1).......................................... (2,825,349) (6,299,276)
Distributions of Net Realized Gain on Securities (Note 1).................................. (322,924) (373,830)
-------------------- ----------------
Total Distributions................................................................ (3,148,273) (6,673,106)
------------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES........................................ (1,476,427) 389,130
------------------- ----------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold.................................................................. 11,101,657 29,491,790
Net Assets Value of Shares Issued Through Dividend Reinvestment............................ 2,706,041 5,768,806
Cost of Shares Repurchased................................................................. (18,771,435) (33,307,016)
------------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS......................................... (4,963,737) 1,953,580
------------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS...................................................... (6,440,164) 2,342,710
NET ASSETS:
Beginning of the Period............................................................ 121,465,630 119,122,920
------------------- ----------------
End of the Period (Including accumulated undistributed net investment income of
$72,889 and $89,045, respectively)......................................... $ 115,025,466 $ 121,465,630
=================== ================
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
59
<PAGE>
- --------------------------------------------------------------------------------
Municipal Bond Fund Financial Highlights
- --------------------------------------------------------------------------------
The following schedule presents financial hightlights for one share of the Fund
outstanding throughout the periods indicating. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 31
-------------------------------------
Class 1 Shares April 30, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........................... $ 13.829 $ 13.77 $12.89 $14.07 $13.03 $12.84
--------- -------- ------ ------ ------ ------
Net Investment Income......................................... .329 .704 .74 .71 .728 .725
Net Realized and Unrealized Gain/Loss
on Securitites................................................ (.135) .111 .867 (1.182) 1.038 .2175
--------- -------- ------ ------ ------ ------
Total from Investment Operations................................... .194 .815 1.607 (.472) 1.766 .9425
--------- -------- ------ ------ ------ ------
Less:
Distributions from and in Excess of Net
Investments Income (Note 1) ........................... .330 .713 .727 .708 .726 .7525
Distributions from and in Excess of Net
Realized Gain on Securities (Note 1)....................... .038 .043 .000 .000 .000 .000
--------- -------- ------ ------ ------ ------
Total Distributions................................................ .368 .756 .727 .708 .726 .7525
--------- -------- ------ ------ ------- ------
Net Asset Value, End of the Period................................. $ 13.655 $13.829 $13.77 $12.89 $14.07 $13.03
========= ======== ======= ====== ====== ======
Total Return (a)................................................... 1.43%* 6.09% 12.72% (3.38%) 13.84% 7.57%
Net Assets at End of the Period (In millions)...................... $ 108.4 $ 118.7 $119.1 $112.1 $95.9 $60.3
Ratio of Expenses to Average Net Assets............................ 1.09% 1.05% .96% .99% .96% 1.14%
Ratio of Net Investment Income to Average
Net Assets.................................................... 4.79% 5.13% 5.58% 5.27% 5.29% 5.56%
Portfolio Turnover................................................. 20%* 80% 49% 4% 4% 6%
- --------------------------------------------------------------------------------
<CAPTION>
Class A Shares Class B Shares
------------------------------------ ------------------------------------
Six Months Ended Period Ended Six Months Ended Period Ended
April 30, 1997 October 31, 1996(b) April 30, 1997 October 31, 1996(b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period........... $ 13.827 $ 13.780 $ 13.822 $ 13.780
------------- ------------- ------------- -------------
Net Investment Income......................... .317 .106 .263 .091
Net Realized and Unrealized
Gain/Loss on Securities.................... (.139) .045 (.140) .038
------------- ------------- ------------- -------------
Total from Investment Operations................... .178 .151 .123 .129
------------- ------------- ------------- -------------
Less:
Distributions from and in Excess of
Net Investments Income (Note 1)............ .313 .104 .261 .087
Distributions from Net Realized Gains
(Note 1)................................... .038 .000 .038 .000
------------- ------------- ------------- -------------
Total Distributions................................ .351 .104 .299 .087
------------- ------------- ------------- -------------
Net Asset Value, End of the Period................. $ 13.654 $ 13.827 $ 13.646 $ 13.822
============= ============= ============= =============
Total Return (a)................................... 1.30%* 1.12%* .93%* .93%*
Net Assets at End of the Period (In millions)...... $ 5.2 $ 2.1 $ 1.4 $ 0.7
Ratio of Expenses to Average Net Assets............ 1.33% 1.30% 2.08% 2.05%
Ratio of Net Investment Income to Average
Net Assets................................. 4.65% 4.82% 3.92% 4.06%
Portfolio Turnover................................. 20%* 80% 20%* 80%
</TABLE>
* Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include
payment of t he maximum sales charge or contingent deferred sales
charge.
(b) Class A and Class B shares commenced distribution on August 18, 1996.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Note 1-Significant Accounting Policies
Common Sense Trust (the "Trust"), is registered under the Investment Company
Act of 1940, as amended, as a diversified open-end management investment
company comprised of seven funds: Emerging Growth Fund ("Emerging Growth"),
Government Fund ("Government"), Growth Fund ("Growth"), Growth and Income Fund
("Growth and Income"), International Equity Fund ("International Equity"),
Money Market Fund ("Money Market") and Municipal Bond Fund ("Municipal Bond")
(collectively the "Funds"). Each Fund is accounted for as a separate entity and
currently offers three classes of shares, Class 1, Class A and Class B.
The investment goals of each Fund are as follows: Emerging Growth seeks
capital appreciation by primarily investing in common stock of small and medium-
sized companies. Government seeks high current return consistent with
preservation of capital by primarily investing in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. Growth
seeks capital appreciation by investing in common stocks. Growth & Income seeks
reasonable growth and income by primarily investing in equity securities that
provide dividend income and securities that are convertible into common or
preferred stocks. International Equity seeks growth and income by investing at
least 65% of its assets in non-United States equity securities. Money Market
seeks protection of capital and income through investments in short-term money
market instruments. Municipal Bond seeks as high a level of current income
exempt from federal income tax as is consistent with preservation of capital.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts may differ from the estimates.
A. Security Valuations
Investments in securities listed on a securities exchange are valued at
their sale price as of the close of such securities exchange. Fixed income
investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not
available are valued at the last bid price. For those securities where
quotations or prices are not available, valuations are determined in
accordance with procedures established in good faith by the Board of
Trustees. Short-term securities with remaining maturities of 60 days or
less are valued at amortized cost. For Money Market, all investments are
valued at amortized cost.
Investments in foreign securities involve certain risks not ordinarily
associated with investments in securities of domestic issuers, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other
foreign governmental laws or restrictions.
Municipal Bond investments include lower-rated debt securities which may be
more susceptible to adverse economic conditions than other investment grade
holdings. These securities are often subordinated to the prior claims of
other senior lenders and uncertainties exist as to an issuer's ability to
meet principal and interest payments. At the end of the period, debt
securities rated below investment grade and comparable unrated securities
represented approximately 10.5% of Municipal Bond's investment portfolio.
Issuers of certain securities owned by Municipal Bond have obtained
insurance guaranteeing their timely payment of principal at maturity and
interest. The insurance reduces financial risk but not market risk of these
securities.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis. Government and
Municipal Bond 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. Government and Municipal Bond will maintain, in a segregated
account with its custodian, assets having an aggregate value at least equal
to the amount of the when issued or delayed delivery purchase commitments
until payment is made.
The Funds may invest in repurchase agreements which are short-term
investments in which a Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified
price. Each fund may invest independently in repurchase agreements, or
transfer uninvested cash balances into a pooled cash account along
- --------------------------------------------------------------------------------
61
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
with certain other investment companies advised by Van Kampen American
Capital Asset Management, Inc. (the "Adviser")or its affiliates, the daily
aggregate of which is invested in repurchase agreements. Repurchase
agreements are fully collateralized by the underlying debt security. Each
fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The
seller is required to maintain the value of the underlying security at not
less than the repurchase proceeds due each 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 securities may
make dividend or interest payments by issuing additional stocks or bonds in
lieu of cash payments. Original issue discount is amortized over the
expected life of each applicable security. With the exception of Money
Market and Municipal Bond, premiums on debt securities are not amortized.
Market discounts are recognized at the time of sale as realized gains for
book purposes and ordinary income for tax purposes.
Under the applicable foreign tax laws, a tax may be imposed on interest,
dividends, and realized gains generated from foreign investments. Such
taxes are generally reflected on the Statement of Operations as a reduction
of the related income or gains.
D. Organizational Costs
Emerging Growth and International Equity have reimbursed PFS Distributors
or its affiliates (collectively "PFS") for costs incurred in connection
with each Fund's organization in the amount of $20,906 per Fund. These
costs for Emerging Growth and International Equity are being amortized on a
straight line basis over the 60 month period ending February, 2000 and
March, 2000, respectively. The Adviser has agreed that in the event any of
the initial shares of these funds originally purchased by Van Kampen
American Capital Distributors, Inc. or its affiliates (collectively "VKAC")
are redeemed during the amortization period, these funds will be reimbursed
for any unamortized organizational costs in the same proportion 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 requirements 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 it to carry a realized capital loss forward for eight years
following the year of the loss and offset such losses against any future
capital gains realized by such Fund. The following table presents the
realized capital loss carryforward at October 31, 1996, along with its
expiration period.
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
------------ ---------- ------- ---------- ------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Realized capital loss
carryforward $3,686,606 $34,520,669 -- -- $ 33,287 $ 4,136 --
Expiration dates of capital loss
carryforward 2003-2004 2002-2004 -- -- 2004 2002-2003 --
</TABLE>
F. Distribution of Incomes and Gains
Government, Money Market and Municipal Bond declare dividends from net
investment income on each business day. Growth and Income declares
dividends quarterly. Emerging Growth, Growth and International Equity
declare dividends annually. Dividends and distributions to shareholders are
recorded on the record date. Distributions from net realized gains for book
purposes 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.
- --------------------------------------------------------------------------------
62
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, distributions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
---------- ----------- ------ ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Distributions From
and in Excess of
Net Investment Income:
Class 1 $ -0- $8,996,023 $29,480,435 $8,599,389 $ -0- $1,284,500 $2,724,385
Class A -0- 378,165 482,471 311,284 -0- 49,927 79,912
Class B -0- 382,486 465,480 224,685 -0- 1,257 21,052
====== ========== =========== ========== ====== ========== ==========
Total $ -0- $9,756,674 $30,428,386 $9,135,358 $ -0- $1,335,684 $2,825,349
====== ========== =========== ========== ====== ========== ==========
Distributions From
Net Realized Gain
on Securities:
Class 1 $ -0- $ -0- $224,653,558 $112,126,737 $ -0- $ -0- $ 312,015
Class A -0- -0- 4,062,306 4,330,927 -0- -0- 8,242
Class B -0- -0- 5,837,614 6,573,782 -0- -0- 2,667
====== ========== ============ ============ ====== ========== ==========
Total $ -0- $ -0- $234,553,478 $123,031,446 $ -0- $ -0- $ 322,924
====== ========== ============ ============ ====== ========== ==========
</TABLE>
For the year ended October 31, 1996, distributions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
--------- ----------- ----------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Distributions From
and in Excess of
Net Investment Income:
Class 1 $ -0- $21,453,795 $ 27,245,960 $17,403,926 $ -0- $2,758,939 $6,288,593
Class A -0- 153,693 -0- 103,649 -0- 2,375 7,781
Class B -0- 174,701 -0- 121,982 -0- 23 2,902
====== =========== ============ =========== ====== ========== ==========
Total $ -0- $21,782,189 $ 27,245,960 $17,629,557 $ -0- $2,761,337 $6,299,276
====== =========== ============ =========== ====== ========== ==========
Distributions From
Net Realized Gain
on Securities:
Class 1 $ -0- $ -0- $358,762,393 $85,264,726 $ -0- $ -0- $ 373,830
Class A -0- -0- -0- -0- -0- -0- -0-
Class B -0- -0- -0- -0- -0- -0- -0-
====== =========== ============ =========== ====== ========== ==========
Total $ -0- $ -0- $358,762,393 $85,264,726 $ -0- $ -0- $ 373,830
====== =========== ============ =========== ====== ========== ==========
</TABLE>
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
basis reporting for the six months ended April 30, 1997, have been
identified and appropriately reclassified in the Government Fund. Permanent
book and tax basis differences relating to the recognition of net realized
losses on paydowns of mortgage pool obligations totaling $104,686 were
reclassified from accumulated net realized loss on securities to
accumulated undistributed net investment income.
G. Foreign Currency Translation
The market values of foreign securities, forward 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.
- --------------------------------------------------------------------------------
63
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The cost of securities is determined using historical exchange rates.
Income and expenses are translated at prevailing exchange 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 includes
the net realized amount from the sale of currency and the amount realized
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
transaction 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 securities within specified time periods or increase
the interest paid on such securities.
Note 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 Fund as follows:
<TABLE>
<CAPTION>
Emerging Growth,
Growth and
Growth and Income Government Municipal Bond Money Market
- --------------------------- ------------------------ ------------------------- ---------------------------
Average Daily Annual Average Daily Annual Average Daily Annual Average Daily Annual
Net Assets Rate Net Assets Rate Net Assets Rate Net Assets Rate
- ---------------- ------ ------------- ------ ---------------- ------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
First $1 billion .65% First $1 billion .60% First $1 billion .60% First $2 billion .50%
Next $1 billion .60% Next $1 billion .55% Next $1 billion .55% Next $2 billion .475%
Next $1 billion .55% Next $1 billion .50% Next $1 billion .50% Over $4 billion .45%
Next $1 billion .50% Next $1 billion .45% Over $3 billion .45%
Over $4 billion .45% Next $1 billion .40%
Over $5 billion .35%
</TABLE>
The Adviser has entered into a subadvisory agreement with Smith Barney
Mutual Funds Management, Inc. (the "Subadviser"), who provides advisory
services to International Equity and the Adviser with respect to its
investments in foreign securities. Advisory fees for International Equity are
calculated monthly, based on the average daily net assets of the Fund at the
annual rate of 1.00%. The Adviser pays 50% of its advisory fee to the
Subadviser.
The Adviser has voluntarily elected to reimburse Money Market for any
ordinary business expenses in excess of 1.00% of its average daily net assets.
The Adviser may modify or terminate this election at any time without prior
notice. During the period, the adviser waived advisory fees of $151,196 and
reimbursed other expenses of $94,687.
The Adviser has agreed that it will reimburse the Funds for any expenses
(including the advisory fee, but excluding interest, brokerage commissions,
distribution and service fees, and other extraordinary expenses) in excess of
the most restrictive limitation imposed by state securities commissions. The
most restrictive expense limitation is presently believed to be 2.5% of the
Fund's average daily net assets up to $30 million, 2.0% of the next $70 million
of such net assets and 1.5% of the Fund's net assets in excess of $100 million.
The Trust received from California a waiver which allows each Fund to exclude
shareholder service costs from the calculation of the expense limitation. The
Adviser and, in the case of International Equity, the Subadviser may, from time
to time, agree to waive their respective investment advisory fees or any portion
thereof or elect to reimburse a Fund for ordinary business expenses in excess of
an agreed upon amount.
- --------------------------------------------------------------------------------
64
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Amounts paid by the Trust to affiliates during the period were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
--------- ---------- ---------- ---------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Accounting services........... $ 17,151 $ 25,056 $ 200,033 $ 73,671 $ 10,712 $ 14,280 $ 30,318
Shareholder servicing fees.... 329,316 212,745 3,261,238 772,229 36,200 224,985 87,387
</TABLE>
For the six months ended April 30, 1997, the Funds incurred expenses as
shown in the table above representing VKAC's cost of providing accounting and
cash management services to the Funds. These services are provided by VKAC at
cost.
PFS Shareholder Services ("PFSS"), an affiliate of the Distributor, serves
as the shareholder servicing agent for the Funds.
For the six months ended April 30, 1997, the Funds incurred expenses as
shown in the preceding table, representing PFSS' cost of providing transfer
agency and shareholder services plus a profit.
PFS Distributors (the "Distributor"), a wholly owned subsidiary of Travelers
Group, Inc. serves as Distributor of the Fund's shares. The Distributor has an
exclusive selling agreement with PFS Investments Inc. to sell shares of the
Trust. During the period, the Trust paid brokerage commissions of $4,500 to
companies which are deemed affiliates of the Distributor's parent because it
owns more than 5% of the companies' outstanding voting securities.
Certain officers and trustees of the Funds are also officers and directors
of PFS and VKAC. The Funds do not compensate their officers or trustees who are
officers of PFS and VKAC.
The Trustees of the Trust instituted a Retirement Plan effective April 1,
1996. The Plan is not funded, and obligations under the Plan will be paid
solely out of the Trust's general account. The Trust will not reserve or set
aside funds for the payment of its obligations under the Plan by any form of
trust or escrow. For the current Trustees not affiliated with the Adviser, the
annual retirement benefit payable per year for a ten-year period is based upon
the highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten
years of service at retirement will receive a proportionally reduced benefit.
Under the Plan, for those Trustees retiring with the effectiveness of the Plan,
the annual retirement benefit payable per year for a ten-year period is
equal to 75% of the total compensation received from the Trust during the 1995
calendar year.
Note 3-Capital Transactions
The Funds have three classes of shares of beneficial interest, Classes 1, A
and B, each with a par value of $.01 per share. There are an unlimited number
of shares authorized.
65
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, share transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
---------- ------------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1............ 159,887 668,560 6,294,833 1,956,360 46,819 29,890,165 463,479
Class A............ 1,603,843 347,257 1,312,833 1,079,724 291,064 4,969,335 273,964
Class B............ 1,122,046 139,314 1,109,044 1,019,964 211,115 192,612 68,396
---------- ----------- ----------- ----------- ------------ ---------- -----------
Total Sales........ 2,885,776 1,155,131 8,716,710 4,056,048 548,998 35,052,112 805,839
========== ============ =========== ============ ============ ========== ===========
Dividend
Reinvestment
Class 1............ -0- 747,167 14,808,213 7,065,225 -0- 1,259,886 188,742
Class A............ -0- 35,245 265,679 271,609 -0- 48,798 5,615
Class B............ -0- 35,903 368,843 401,578 -0- 1,267 1,698
---------- ------------- ----------- ------------ ------------ ---------- -----------
Total Dividend
Reinvestment....... -0- 818,315 15,442,735 7,738,412 -0- 1,309,951 196,055
========== ============ =========== ============ ============ ========== ===========
Repurchases
Class 1............ (4,762) (4,117,708) (12,852,297) (4,393,524) (950) (34,574,442) (1,299,724)
Class A............ (351,841) (306,789) (292,615) (255,308) (69,349) (1,722,024) (49,292)
Class B............ (183,452) (244,780) (322,224) (253,980) (44,747) (38,037) (12,661)
---------- ------------- ----------- ------------ ------------ ---------- -----------
Total Repurchases.. (540,055) (4,669,277) (13,467,136) (4,902,812) (115,046) (36,334,503) (1,361,677)
========== ============ =========== ============ ============ ========== ===========
</TABLE>
For the year ended October 31, 1996, share transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
---------- ------------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1........... 38,105 2,871,610 16,457,335 5,320,300 9,813 67,367,316 1,942,660
Class A........... 2,000,873 1,149,244 2,868,484 1,861,875 396,481 797,434 153,756
Class B........... 1,592,107 1,410,035 4,253,128 2,953,516 335,699 13,631 47,012
---------- ------------- ----------- ------------ ------------ ---------- -----------
Total Sales....... 3,631,085 5,430,889 23,578,947 10,135,691 741,993 68,178,381 2,143,428
========== ============= =========== ============ ============ ========== ===========
Dividend
Reinvestment
Class 1........... -0- 1,767,746 24,543,242 6,129,820 -0- 2,712,773 418,529
Class A........... -0- 14,411 -0- 5,681 -0- 2,375 561
Class B........... -0- 16,399 -0- 6,789 -0- 23 210
---------- ------------- ----------- ------------ ------------ ---------- -----------
Total Dividend
Reinvestment...... -0- 1,798,556 24,543,242 6,142,290 -0- 2,715,171 419,300
========== ============= =========== ============ ============ ========== ===========
Repurchases
Class 1........... -0- (7,862,750) (23,362,241) (8,236,939) -0- (70,471,885) (2,428,730)
Class A........... (283,852) (95,253) (124,234) (73,103) (243,560) (70,999) (375)
Class B........... (178,667) (96,131) (117,684) (81,341) (43,903) -0- (11)
---------- ------------- ----------- ------------ ------------ ---------- -----------
Total Repurchases. (462,519) (8,054,134) (23,604,159) (8,391,383) (287,463) (70,542,884) (2,429,116)
========== ============= =========== ============ ============ ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
66
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- -------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, capital transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
---------- ------------- ----------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1............ $ 2,896,654 $ 6,887,958 $ 112,950,820 $ 34,850,723 $ 803,896 $ 29,890,165 $ 6,383,787
Class A............ 29,402,547 3,580,959 23,522,530 19,149,814 4,957,170 4,969,335 3,773,805
Class B............ 20,150,829 1,435,807 19,811,003 18,001,502 3,550,484 192,612 944,065
------------ ------------ -------------- ------------ ----------- ------------ ------------
Total Sales........ $ 52,450,030 $ 11,904,724 $ 156,284,353 $ 72,002,039 $ 9,311,550 $ 35,052,112 $ 11,101,657
============ ============ ============== ============ ============ ============ ============
Dividend
Reinvestment
Class 1............ $ -0- $ 7,693,694 $ 252,630,148 $118,872,559 $ -0- $ 1,259,886 $ 2,605,340
Class A............ -0- 362,583 4,532,480 4,569,844 -0- 48,798 77,327
Class B............ -0- 369,259 6,288,771 6,755,322 -0- 1,267 23,374
------------ ------------ -------------- ------------ ----------- ------------ ------------
Total Dividend
Reinvestment....... $ -0- $ 8,425,536 $ 263,451,399 $130,197,725 $ -0- $ 1,309,951 $ 2,706,041
============ ============ ============== ============ ============ ============ ============
Repurchases
Class 1............ $ (85,705) $(42,331,635) $ (230,817,289) $(78,273,994) $ (16,021) $(34,574,442) $(17,920,143)
Class A............ (6,429,258) (3,147,327) (5,234,147) (4,513,382) (1,191,782) (1,722,024) (678,607)
Class B............ (3,281,543) (2,521,813) (5,750,639) (4,496,674) (753,117) (38,037) (172,685)
------------ ------------ -------------- ------------ ----------- ------------ ------------
Total Repurchases.. $ (9,796,506) $(48,000,775) $ (241,802,075) $(87,284,050) $(1,960,920) $(36,334,503) $(18,771,435)
============ ============ ============== ============ ============ ============ ============
Ending Capital
Class 1............ $ 3,535,265 $291,175,676 $2,373,924,905 $747,141,604 $ 950,371 $ 56,487,566 $103,318,856
Class A............ 66,690,960 11,879,986 65,165,800 47,772,936 12,329,246 4,024,919 5,284,432
Class B............ 50,183,029 13,179,935 83,852,501 66,318,455 9,832,470 169,496 1,437,680
------------ ------------ -------------- ------------ ----------- ------------ ------------
Total Capital...... $120,409,254 $316,235,597 $2,522,943,206 $861,232,995 $23,112,087 $ 60,681,981 $110,040,968
============ ============ ============== ============ ============ ============ ============n
</TABLE>
- --------------------------------------------------------------------------------
67
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the year ended October 31, 1996, capital transactions were as follows:
<TABLE>
<CAPTION>
Emerging Growth International Money Municipal
Growth Government Growth and Income Equity Market Bond
----------- ------------ -------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Class 1............. $ 724,896 $ 30,153,836 $ 276,405,770 $ 91,685,267 $ 163,259 $ 67,367,316 $ 26,742,300
Class A............. 34,657,451 11,822,387 44,341,185 29,746,398 6,181,070 797,434 2,109,316
Class B............. 26,926,301 14,598,261 65,291,032 47,348,206 5,168,282 13,631 640,174
----------- ------------ -------------- ------------- ------------ ------------ ------------
Total Sales......... $62,308,648 $ 56,574,484 $ 386,037,987 $ 168,779,871 $11,512,611 $ 68,178,381 $ 29,491,790
=========== ============ ============== ============= ============ ============ ============
Dividend
Reinvestment
Class 1............. $ -0- $ 18,444,465 $ 383,855,779 $ 101,050,427 $ -0- $ 2,712,773 $ 5,758,155
Class A............. -0- 148,139 -0- 101,172 -0- 2,375 7,749
Class B............. -0- 168,546 -0- 120,825 -0- 23 2,902
----------- ------------ -------------- ------------- ------------ ------------ ------------
Total Dividend
Reinvestment........ $ -0- $ 18,761,150 $ 383,855,779 $ 101,272,424 $ -0- $ 2,715,171 $ 5,768,806
=========== ============ ============== ============= ============ ============ ============
Repurchases
Class 1............. $ -0- $(81,974,033) $ (392,656,318) $(142,390,951) $ -0- $(70,471,885) $(33,301,708)
Class A............. (4,998,044) (977,331) (2,155,576) (1,300,278) (3,522,695) (70,999) (5,158)
Class B............. (3,094,195) (982,903) (2,036,872) (1,441,770) (690,155) -0- (150)
----------- ------------ -------------- ------------- ------------ ------------ ------------
Total Repurchases... $(8,092,239) $(83,934,267) $ (396,848,766) $(145,132,999) $(4,212,850) $(70,542,884) $(33,307,016)
=========== ============ ============== ============= ============ ============ ============
Ending Capital
Class 1............. $ 724,316 $318,925,659 $2,239,161,226 $ 671,692,316 $ 162,496 $ 59,911,957 $112,249,872
Class A............. 43,717,671 11,083,771 42,344,937 28,566,660 8,563,858 728,810 2,111,907
Class B............. 33,313,743 13,896,682 63,503,366 46,058,305 7,035,103 13,654 642,926
----------- ------------ -------------- ------------- ------------ ------------ ------------
Total Capital....... $77,755,730 $343,906,112 $2,345,009,529 $ 746,317,281 $15,761,457 $ 60,654,421 $115,004,705
=========== ============ ============== ============= ============ ============ ============
</TABLE>
Class B shares are offered without a front end sales charge, but are subject to
a contingent deferred sales charge (CDSC). The CDSC will be imposed on most
redemptions made within five years of the purchase as detailed in the following
schedule. Class B shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.
<TABLE>
<CAPTION>
Emerging Growth, Growth,
Class B Share Contingent Deferred Sales Charge Growth and Income & Government &
Year of Redemption International Equity Municipal Bond
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First................................................................. 5.00% 4.00%
Second................................................................ 4.00% 4.00%
Third................................................................. 3.00% 3.00%
Fourth................................................................ 2.50% 2.50%
Fifth................................................................. 1.50% 1.50%
Sixth and Thereafter.................................................. None None
</TABLE>
For the six months ended April 30, 1997, PFS, as Distributor for the Funds,
received commissions on sales of the Funds' Class 1 and Class A shares of
approximately $3,842,500 and CDSC on redeemed shares of approximately
$431,500. Sales charges do not represent expenses of the Funds.
- --------------------------------------------------------------------------------
68
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Note 4-Investment Transactions
During the period, the cost of purchases and proceeds from sales of investment
securities, excluding short-term investments and forward purchase commitments,
were:
<TABLE>
<CAPTION>
Emerging Growth International Municipal
Growth Government Growth and Income Equity Bond
----------- ------------ -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases......................... $81,694,460 $ 95,379,307 $2,411,614,388 $534,205,447 $13,880,121 $23,667,201
Sales............................. 48,541,956 119,368,327 2,560,350,703 538,608,525 6,749,513 26,455,219
</TABLE>
Note 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 exposure,
maturity and duration or generate potential gain. All of the Funds' portfolio
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 accordingly,
except when exercising an option contract or taking delivery of a security
underlying a futures contract. In these instances, the recognition of gain or
loss is postponed until the disposal of the security underlying the option or
futures contract.
Summarized below are the specific types of derivative financial instruments used
by the Funds.
A. Option Contracts
An option contract gives the buyer the right, but not the obligation to buy
(call) or sell (put) an underlying item at a fixed exercise price during a
specified period. Municipal Bond generally invests in options on U.S.
Treasury bonds which are generally used to manage the portfolio's effective
maturity and duration.
Transactions in options for Municipal Bond for the six months ended April
30, 1997, were as follows:
<TABLE>
<CAPTION> Contracts Premium
----------- ------------
<S> <C> <C>
Outstanding at October 31, 1996.............................. 17 $ (32,012)
Options Written and Purchased (Net).......................... 731 (117,006)
Options Expired.............................................. (211) 112,388
Options Terminated in Closing Transactions (Net)............. (187) 29,508
----------- -----------
Outstanding at April 30, 1997................................ 350 $ (7,122)
=========== ===========
</TABLE>
The related futures contracts of the outstanding option transactions for
Municipal Bond as of April 30, 1997, and the descriptions and market values
are as follows:
<TABLE>
<CAPTION>
Market
Exp. Month/ Value of
Contracts Exercise Price Options
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bond Futures June 1997-Purchased Puts............... 100 Jun / 104 $ 1,563
U.S. Treasury Bond Futures June 1997-Purchased Puts............... 50 Jun / 107 6,250
U.S. Treasury Bond Futures June 1997-Written Puts................. 150 Jun / 105 (2,343)
U.S. Treasury Bond Futures June 1997-Written Calls................ 50 Jun / 110 (23,438)
-------- --------
350 $(17,968)
======== ========
</TABLE>
- -------------------------------------------------------------------------------
69
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (CONTINUED)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
B. 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. Government
generally invests in exchange traded futures on U.S. Treasury bonds and
notes which are typically used to manage the portfolio's effective maturity
and duration. Growth and Growth and Income generally invest in futures on
the S&P 500 Index as a substitute for purchasing or selling specific
securities. Upon entering 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 contract (the variation margin).
For the six months ended April 30, 1997, futures transactions were as
follows:
<TABLE>
<CAPTION>
Emerging Growth and
Growth Government Growth Income
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at October 31, 1996................................ -0- 605 280 95
Futures Opened................................................. 57 2,824 3,040 130
Futures Closed................................................. (36) (2,874) (2,305) (160)
-------- -------- -------- --------
Outstanding at April 30, 1997.................................. 21 555 1,015 65
======== ======== ======== ========
</TABLE>
The futures contracts outstanding as of April 30, 1997, and the descriptions and
unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Contracts Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EMERGING GROWTH
S&P 500 Index Futures June 1997 Buy to Open (Current Notional Value of $401,400 per contract).......... 21 $ 97,913
======== ============
GOVERNMENT
U.S. Treasury Bond Futures June 1997 Buy to Open (Current Notional Value of $109,281 per contract)..... 425 $ (863,222)
Ten-year U.S. Treasury Note Futures June 1997 Buy to Open (Current Notional Value of
$106,969 per contract)................................................................................. 40 (83,003)
Five-year U.S. Treasury Note Futures June 1997 Sell to Open (Current Notional Value of
$105,281 per contract)................................................................................. 90 50,118
-------- ------------
Total Government....................................................................................... 555 $ (896,107)
======== ============
GROWTH
Russell 2000 Index Futures June 1997 Buy to Open (Current Notional Value of$172,450 per contract)...... 370 $ (4,006,177)
S&P 500 Index Futures June 1997 Buy to Open (Current Notional Value of $401,400 per contract).......... 645 5,169,252
-------- ------------
Total Growth........................................................................................... 1,015 $ 1,163,075
======== ============
GROWTH AND INCOME
S&P 500 Index Futures June 1997 Buy to Open (Current Notional Value of $401,400 per contract).......... 65 $ 302,207
======== ============
</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 securities.
D. Forward Currency Contracts
The International Equity Fund invests in forward currency contracts
generally as a hedge against currency fluctuations. 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 recognized and is included as a component of
realized gain/loss on securities.
- --------------------------------------------------------------------------------
70
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The following forward currency contracts were outstanding as of April 30, 1997:
<TABLE>
<CAPTION>
Unrealized
Original Current Appreciation/
Description Value Value Depreciation
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
BUYS TO OPEN
Austrian Schilling,
4,771,825 expiring 05/12/97...... $391,615 $391,982 $ 367
Irish Pound,
140,668 expiring 05/08/97........ 210,159 211,105 946
Italian Lira,
130,201,937 expiring 05/06/97.... 75,755 76,028 273
133,261,088 expiring 05/08/97.... 77,920 77,809 (111)
Swedish Krona,
858,810 expiring 05/06/97........ 109,514 109,502 (12)
SELLS TO OPEN
Irish Pound,
159,680 expiring 05/01/97........ 247,663 239,681 7,982
------
$9,445
======
</TABLE>
Note 6-Distribution and Service Plans
The Funds and their shareholders have adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940 and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
such Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.
Annual fees under the Plans of up to .25% (.10% for Money Market) of Class A net
assets and 1.00% (.75% for Money Market) of Class B net assets are accrued
daily.
- --------------------------------------------------------------------------------
71
<PAGE>
- --------------------------------------------------------------------------------
Common Sense Trust
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
Donald M. Carlton Steven Muller
A. Benton Cocanougher R. Richardson Pettit
Stephen Randolph Gross Don G. Powell*--Chairman
Jeffrey B. Lane* Alan B. Shepard, Jr.
Alan G. Merten
_______________________________________________________
OFFICERS
Don G. Powell* John L. Sullivan*
President and Chief Treasurer
Executive Officer
Tanya Loden*
Dennis J. McDonnell* Controller
Executive Vice President
Alan T. Sachtleben*
Ronald A. Nyberg* Paul R. Wolkenberg*
Vice President and D. Richard Williams*
Secretary Vice Presidents
Edward C. Wood III*
Vice President and
Chief Financial Officer
Curtis W. Morell*
Vice President and
Chief Accounting Officer
_______________________________________________________
INVESTMENT ADVISER
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza, Oakbrook Terrace, IL 60181
_______________________________________________________
INVESTMENT SUBADVISER
(INTERNATIONAL EQUITY FUND)
Smith Barney Mutual Funds Management, Inc.
388 Greenwich Street, New York, New York 10013
_______________________________________________________
DISTRIBUTOR
PFS Distributors
3100 Breckinridge Blvd., Duluth, Georgia 30199
_______________________________________________________
SHAREHOLDER SERVICE AGENT
PFS Shareholder Services
3100 Breckinridge Blvd., Duluth, Georgia 30199
_______________________________________________________
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, Massachusetts 02110
_______________________________________________________
LEGAL COUNSEL
Sullivan & Worcester LLP
1025 Connecticut Avenue N.W., Washington, D.C. 20036
_______________________________________________________
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
1221 McKinney Street, Suite 2400, Houston, Texas 77010
_______________________________________________________
________________________________________________________________________________
This report is submitted for the general information of the shareholders of the
Trust. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Trust
which contains additional information on how to purchase shares, the sales
charge, and other pertinent data.
________________________________________________________________________________
________________________________________________________________________________
Shareholder inquiries should be directed in writing to the Shareholder Service
Agent. PFS Shareholder Services, 3100 Breckinridge Blvd., Duluth, Georgia 30199-
0062, or by calling (800) 544-5445.
________________________________________________________________________________
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940.
72
<PAGE>
[LOGO OF COMMON SENSE TRUST]
PFS Shareholder Services
3120 Breckinridge Blvd.
Duluth, Georgia 30199-0001
If you have any questions, please contact
one of our Client Service Representatives.
1-800-544-5445
