<PAGE>
COMSTOCK PARTNERS
STRATEGY FUND
10 EXCHANGE PLACE
SUITE 2010
JERSEY CITY, NJ 07302-3913
[LOGO]
COMSTOCK PARTNERS
STRATEGY FUND
503/502 AR 964
ANNUAL REPORT
APRIL 30, 1996
<PAGE>
DEAR FELLOW SHAREHOLDER:
For the year ended April 30, 1996, the Fund's Class O, A, and C shares posted a
total return of 2.66%, 2.40%, and 1.96% respectively, based upon net asset value
per share (see below for a discussion of the calculation of performance
information), while the Standard & Poor's 500 Total Return Index (S&P 500) rose
30.20% and the Lehman Brothers Government/Corporate Bond Index rose 8.65%. The
main reason we lagged the indexes over the last year was due to our belief that
the stock market was close to reaching a dramatic climax followed by a sustained
bear market.
After going through a period during the second half of 1995 with minimal short
exposure, in February 1996 we became more confident that the market's rise may
be very near its end and substantially increased the short positions by buying
more puts on the S&P 500 Index. At this time we are maintaining near maximum
short positions in puts. During certain periods when it appeared that the stock
market might rise over the short term, the Fund purchased S&P 500 Futures in
order to lower the short exposure to the stock market.
We have believed that the general stock market has been overvalued for some time
now based on many valuation parameters. Just recently the market rose to levels
where it now appears expensive to us based on earnings. Additionally, the market
euphoria has reached what we see as dangerous levels as initial public offerings
have skyrocketed, mergers and acquisitions are at levels usually accompanied by
market peaks, and money flowing into mutual funds appears to have reached the
mania stage. Long-term interest rates have risen sharply and the case for low
inflation and lower interest rates is being reconsidered. The mood of the market
may be shifting.
Since October 31, 1995, the gold share position of the Fund has been reduced.
While we still believe that gold bullion may rise substantially, the risk/reward
ratio of holding gold shares has become less favorable. From January 1995
through February 1996 the gold shares have risen over 50% while the bullion has
gained less than 10% over that same time period. In early 1996, the Fund took
profits on some gold securities that were purchased in early 1995, reducing the
position to the prior level of 10% of assets.
In an effort to diversify the Fund's non-dollar exposure, during the six months
ended April 30, 1996 investments were made in a number of additional foreign
markets while the exposure to the German, Swiss, and South African currencies
was reduced. We have 30% of assets in debt securities denominated in German
Deutschemarks, Swiss Francs, Italian Lira, Swedish Krona, New Zealand dollars,
South African Rand, and Australian dollars. The new countries chosen appear to
offer favorable fundamental characteristics such as high real interest rates and
stronger economic growth than presently expected in the United States. We have
sought to hedge the Krona, Deutschemarks, and Swiss Francs while the Hong Kong
dollar short position was removed.
Profits on put options linked to the Japanese yen and bond market have been
realized. The profits were taken in order to purchase additional put options on
the US stock market.
At period-end, interest-only securities (IOs) represent approximately 3% of the
Fund's assets. As interest rates have risen, so has the value of IO securities.
It appears to us that leverage may have been overused in the fixed-income
markets similar to the experience in 1994.
In summary, the Fund manager has positioned the Fund to benefit from a US equity
market decline. In general, the Fund is also positioned to benefit if the dollar
declines, gold shares rise, and interest rates rise. Please note that,
consistent with the Fund's prospectus and our investment approach, we have the
flexibility to change these positions when we believe conditions warrant.
Sincerely,
Comstock Partners, Inc.
Investment Policy Committee
Jersey City, New Jersey
May 20, 1996
PERFORMANCE INFORMATION:
TOTAL RETURN ASSUMES THE REINVESTMENT OF DIVIDENDS AND EXCLUDES THE EFFECTS OF
SALES LOADS.
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX IS A WIDELY ACCEPTED
UNMANAGED INDEX OF BOND MARKET PERFORMANCE WHICH INCLUDES FIXED RATE DEBT ISSUES
RATED INVESTMENT GRADE OR HIGHER; ALL RETURNS ARE MARKET VALUE WEIGHTED
INCLUSIVE OF ACCRUED INTEREST. THE STANDARD & POOR'S 500 TOTAL RETURN INDEX IS A
WIDELY ACCEPTED UNMANAGED INDEX OF STOCK MARKET PERFORMANCE WHICH REFLECTS THE
REINVESTMENT OF INCOME DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN
DISTRIBUTIONS.
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT -- CLASS O SHARES*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 TOTAL RETURN LEHMAN BROTHERS GOVT./CORP. BOND
DATE COMSTOCK CLASS O INDEX INDEX BLENDED INDEX***
<S> <C> <C> <C> <C>
5/26/88** $9,550 $10,000 $10,000 $10,000
Apr-89 $10,824 $12,570 $10,858 $11,458
Apr-90 $12,242 $13,890 $11,767 $12,503
Apr-91 $13,302 $16,328 $13,513 $14,477
Apr-92 $14,578 $18,625 $14,968 $16,203
Apr-93 $15,409 $20,338 $17,139 $18,253
Apr-94 $16,970 $21,420 $17,336 $18,729
Apr-95 $17,375 $25,141 $18,536 $20,710
Apr-96 $17,837 $32,734 $20,139 $24,063
</TABLE>
* THE TOTAL RETURN FOR CLASS O SHARES IS BASED UPON A HYPOTHETICAL INVESTMENT
IN CLASS O SHARES AT THE FUND'S INCEPTION ON 5/26/88, RESTATED TO REFLECT THE
MAXIMUM INITIAL SALES LOAD CHARGED WHEN THE FUND LAST OFFERED CLASS O SHARES.
TOTAL RETURN FOR CLASS O SHARES PRIOR TO AUGUST 1, 1991 REFLECTS PERFORMANCE
OF THE FUND AS A CLOSED-END FUND; AS AN OPEN-END FUND THE FUND INCURS CERTAIN
ADDITIONAL EXPENSES AS A RESULT OF THE CONTINUOUS OFFERING AND REDEMPTION OF
ITS SHARES. TOTAL RETURN FOR CLASS O SHARES ASSUMES THE REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
** FUND'S INCEPTION.
*** THE BLENDED INDEX CONTAINS 65% LEHMAN BROTHERS GOVT./CORP. BOND INDEX AND
35% S&P 500 INDEX.
AVERAGE ANNUAL TOTAL RETURN+
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
SALES CHARGE SALES CHARGE
<S> <C> <C>
- --------------------------------------------------------
CLASS O SHARES
- --------------------------------------------------------
Year Ended 4/30/96 +2.66% (1.96)%
- --------------------------------------------------------
Five Years Ended
4/30/96 +6.04% +5.07%
- --------------------------------------------------------
Fund's inception
(5/26/88)
through 4/30/96 +8.19% +7.57%
- --------------------------------------------------------
+ SEE THE FOOTNOTES TO THE PRECEDING GRAPH FOR A
DISCUSSION OF THE PRESENTATION OF TOTAL RETURN.
Past performance is not predictive of future
performance.
Investors should note that the performance information
presented in the following tables and graphs for Class A
and Class C shares prior to the dates these classes were
introduced is based on historical expenses of a
predecessor class of the Fund and does not reflect how
Class A and Class C shares would have performed on a
relative basis. Accordingly, this information may be
used in assessing the Fund's performance history but
should not be utilized in evaluating whether Class A or
Class C shares would best suit an investor's needs.
</TABLE>
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT -- CLASS A SHARES*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 TOTAL RETURN LEHMAN BROTHERS GOVT./CORP. BOND
DATE COMSTOCK CLASS A* INDEX INDEX BLENDED INDEX***
<S> <C> <C> <C> <C>
5/26/88** $9,550 $10,000 $10,000 $10,000
Apr-89 $10,813 $12,570 $10,858 $11,458
Apr-90 $12,229 $13,890 $11,767 $12,503
Apr-91 $13,288 $16,328 $13,513 $14,477
Apr-92 $14,652 $18,625 $14,968 $16,203
Apr-93 $15,352 $20,338 $17,139 $18,253
Apr-94 $16,873 $21,420 $17,336 $18,729
Apr-95 $17,200 $25,141 $18,536 $20,710
Apr-96 $17,611 $32,734 $20,139 $24,063
</TABLE>
* THE TOTAL RETURN FOR CLASS A SHARES IS BASED UPON A HYPOTHETICAL INVESTMENT
IN CLASS A SHARES AT THE FUND'S INCEPTION ON 5/26/88, RESTATED TO REFLECT THE
CURRENT 4.5% MAXIMUM INITIAL SALES LOAD FOR CLASS A SHARES. TOTAL RETURN FOR
CLASS A SHARES PRIOR TO AUGUST 1, 1991 REFLECTS PERFORMANCE OF THE FUND AS A
CLOSED-END FUND; AS AN OPEN-END FUND THE FUND INCURS CERTAIN ADDITIONAL
EXPENSES AS A RESULT OF THE CONTINUOUS OFFERING AND REDEMPTION OF ITS SHARES.
BECAUSE CLASS A SHARES WERE NOT ACTUALLY INTRODUCED UNTIL JULY 15, 1992,
TOTAL RETURN FOR CLASS A SHARES FOR THE PERIOD PRIOR TO JULY 15, 1992 DOES
NOT REFLECT SERVICE AND DISTRIBUTION FEES BORNE BY CLASS A SHARES WHICH, IF
REFLECTED, WOULD REDUCE THE TOTAL RETURN PRESENTED. TOTAL RETURN FOR CLASS A
SHARES ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
** FUND'S INCEPTION.
*** THE BLENDED INDEX CONTAINS 65% LEHMAN BROTHERS GOVT./CORP. BOND INDEX AND
35% S&P 500 INDEX.
AVERAGE ANNUAL TOTAL RETURN+
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
SALES CHARGE SALES CHARGE
<S> <C> <C>
- --------------------------------------------------------
CLASS A SHARES+
- --------------------------------------------------------
Year Ended 4/30/96 +2.40% (2.21)%
- --------------------------------------------------------
Five Years Ended
4/30/96 +5.80% +4.83%
- --------------------------------------------------------
Fund's inception
(5/26/88) through
4/30/96 +8.02% +7.39%
- --------------------------------------------------------
+ SEE THE FOOTNOTES TO THE PRECEDING GRAPH FOR A
DISCUSSION OF THE PRESENTATION OF TOTAL RETURN.
Past performance is not predictive of future
performance.
</TABLE>
<PAGE>
TOTAL RETURN BASED ON A $10,000 INVESTMENT -- CLASS C SHARES*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 TOTAL RETURN LEHMAN BROTHERS GOVT./CORP. BOND
DATE COMSTOCK CLASS C* INDEX INDEX BLENDED INDEX***
<S> <C> <C> <C> <C>
5/26/88** $10,000 $10,000 $10,000 $10,000
Apr-89 $11,322 $12,570 $10,858 $11,458
Apr-90 $12,805 $13,890 $11,767 $12,503
Apr-91 $13,914 $16,328 $13,513 $14,477
Apr-92 $15,248 $18,625 $14,968 $16,203
Apr-93 $16,074 $20,338 $17,139 $18,253
Apr-94 $17,666 $21,420 $17,336 $18,729
Apr-95 $18,010 $25,141 $18,536 $20,710
Apr-96 $18,362 $32,734 $20,139 $24,063
</TABLE>
* THE TOTAL RETURN FOR CLASS C SHARES IS BASED UPON A HYPOTHETICAL INVESTMENT
IN CLASS C SHARES AT THE FUND'S INCEPTION ON 5/26/88, RESTATED TO REFLECT THE
APPLICABLE CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES. TOTAL RETURN
FOR CLASS C SHARES PRIOR TO AUGUST 1, 1991 REFLECTS PERFORMANCE OF THE FUND
AS A CLOSED-END FUND; AS AN OPEN-END FUND THE FUND INCURS CERTAIN ADDITIONAL
EXPENSES AS A RESULT OF THE CONTINUOUS OFFERING AND REDEMPTION OF ITS SHARES.
BECAUSE CLASS C SHARES WERE NOT ACTUALLY INTRODUCED UNTIL AUGUST 1, 1995,
TOTAL RETURN FOR CLASS C SHARES FOR THE PERIOD PRIOR TO AUGUST 1, 1995 DOES
NOT REFLECT HIGHER SERVICE AND DISTRIBUTION FEES AND CERTAIN ADMINISTRATIVE
EXPENSES BORNE BY CLASS C SHARES WHICH, IF REFLECTED, WOULD REDUCE THE TOTAL
RETURN PRESENTED. TOTAL RETURN FOR CLASS C SHARES ASSUMES THE REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
** FUND'S INCEPTION.
*** THE BLENDED INDEX CONTAINS 65% LEHMAN BROTHERS GOVT./CORP. BOND INDEX AND
35% S&P 500 INDEX.
AVERAGE ANNUAL TOTAL RETURN+
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN WITH
CDSC CDSC++
<S> <C> <C>
- --------------------------------------------------------
CLASS C SHARES+
- --------------------------------------------------------
Year Ended 4/30/96 +1.96% +0.99%
- --------------------------------------------------------
Five Years Ended
4/30/96 +5.70% +5.70%
- --------------------------------------------------------
Fund's inception
(5/26/88) through
4/30/96 +7.96% +7.96%
- --------------------------------------------------------
+ SEE THE FOOTNOTES TO THE PRECEDING GRAPH FOR A
DISCUSSION OF THE PRESENTATION OF TOTAL RETURN.
++ ASSUMING PAYMENT OF THE MAXIMUM CONTINGENT DEFERRED
SALES CHARGES. A CONTINGENT DEFERRED SALES CHARGE OF
1% IS IMPOSED ON REDEMPTIONS WITHIN ONE YEAR OF
PURCHASE.
Past performance is not predictive of future
performance.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Schedule of Investments As of April 30, 1996
<TABLE>
<CAPTION>
S&P MOODY'S FACE AMOUNT/ VALUE
RATING* RATING* SHARES HELD ISSUE (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
BONDS
Corporate UNR UNR $ 3,850,000 Ashanti Capital, Ltd. 5.500% due 3/15/2003 $ 3,850,000
Convertible Bonds -- UNR UNR 2,000,000 Bema Gold Corp. 7.500% due 2/28/2000
4.1% 3,560,000
UNR UNR 1,500,000 Pegasus Gold Inc. 6.250% due 4/30/2002 1,676,250
UNR UNR 2,000,000 Pegasus Gold Inc. 6.250% due 4/30/2002 (a) 2,235,000
------------
11,321,250
------------
U.S. Government Agency Federal National Mortgage Association
Interest-Only Stripped Securities:
Obligations -- 3.2% AAA Aaa 28,438,275 Trust 267-2 8.500% due 10/25/2024 8,958,057
------------
U.S. Government United States Treasury Notes:
Obligations -- 45.2% UNR Aaa 5,005,000 7.875% due 7/31/1996 5,037,845
UNR Aaa 62,570,000 8.500% due 4/15/1997 64,202,686
UNR Aaa 54,155,000 8.875% due 11/15/1997 56,448,126
------------
125,688,657
------------
Foreign Government AAA UNR AUD 16,900,000 Commonwealth of Australia 12.000% due 7/15/1999 14,664,837
Obligations -- 26.1% UNR Aaa DEM 19,000,000 Republic of Deutschland 9.000% due 10/20/2000 14,251,859
New Zealand Government:
AAA Aaa NZD 7,500,000 10.000% due 7/15/1997 5,198,722
AAA Aaa NZD 7,500,000 10.000% due 3/15/2002 5,429,834
BBB+ Baa1 SAR 65,960,850 Republic of South Africa 13.000% due 8/31/2010 12,584,767
South African Escom Bonds:
BBB+ Baa3 SAR 29,679,400 11.000% due 6/01/2008 5,026,852
BBB+ Baa3 SAR 6,000,000 13.500% due 8/01/2020 1,167,701
UNR Aa1 SEK 88,600,000 Kingdom of Sweden 11.000% due 1/21/1999 14,323,145
------------
72,647,717
------------
Foreign Corporate European Investment Bank:
Obligations -- 5.0% AAA Aaa ITL 10,450,000,000 10.800% due 3/15/1999 7,083,863
AAA Aaa ITL 10,450,000,000 11.450% due 10/14/1997 6,925,628
------------
14,009,491
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BONDS (COST $234,457,467) -- 83.6% 232,625,172
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
Chemical -- 0.3% 65,000 PT Tri Polyta Indonesia, ADR- 812,500
------------
Country Funds -- 1.0% 5,000 Bankovni Investment Fund (b) 222,226
127,000 Fleming Russia Securities Fund (b) 889,000
20,000 Harvardsky Dividend Investment Fund (b) 313,096
77,600 Lazard Vietnam Fund, Ltd. (b) 824,500
9,665 Privatization Investment Fund 228,520
5,000 Rentiersky Investment Fund (b) 173,642
------------
2,650,984
------------
Mining -- 3.8% 108,100 Beatrix Mines, Ltd., ADR- 932,363
145,000 Driefontein Consolidated, Ltd., ADR- 2,301,875
315,000 East Rand Gold & Uranium Company, Ltd., ADR- 882,000
210,000 Elandsrand Gold Mining, Ltd., ADR- 1,391,250
113,000 Free State Consolidated Gold Mines, Ltd., ADR- 1,235,938
300,000 Hartebeestfontein Gold, ADR- 1,080,000
295,000 Vaal Reefs Exploration & Mining Company, Ltd.,
ADR- 2,876,250
------------
10,699,676
------------
Natural Gas -- 0.6% 70,000 UGI Corp. 1,566,250
------------
Real Estate Investment 40,000 Equity Inns, Inc. 475,000
Trusts -- 2.3% 56,200 Essex Property Trust, Inc. 1,159,125
105,000 G & L Realty Corp. 1,365,000
45,936 HGI Realty, Inc. 941,688
69,000 RFS Hotel Investors, Inc. 1,190,250
90,000 South West Property Trust 1,226,250
------------
6,357,313
------------
Retail -- 0.6% 45,000 Melville Corp. 1,749,375
------------
Telecommunications -- 0.9% 45,000 BCE, Inc. 1,771,875
25,000 US West, Inc. 818,750
------------
2,590,625
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN COMMON STOCKS (COST $22,691,959) -- 9.5% 26,426,723
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Schedule of Investments (concluded) As of
April 30, 1996
<TABLE>
<CAPTION>
S&P MOODY'S FACE AMOUNT/ VALUE
RATING* RATING* SHARES HELD ISSUE (NOTE 1A)
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK
Mining -- 1.1% 55,000 Amax Gold, Inc. $3.75 convertible pfd. $ 2,942,500
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT IN PREFERRED STOCK (COST $2,758,000) -- 1.1% 2,942,500
- -----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES**
U.S. Government United States Treasury Bills:
Obligations -- 0.0% UNR Aaa $ 10,000 5.00% due 7/18/96 9,896
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT IN SHORT-TERM SECURITIES (COST $9,895) -- 0.0% 9,896
- -----------------------------------------------------------------------------------------------------------------------------
Total investments (cost $259,917,321) -- 94.2% 262,004,291
Put options purchased (cost $17,744,040) -- 4.1%+ 11,293,969
Unrealized appreciation on foreign exchange contracts --
0.1%++ 163,363
Other assets less liabilities -- 1.6% 4,655,453
------------
Net Assets -- 100.0% $278,117,076
------------
------------
+ Put options purchased as of April 30, 1996 are as follows:
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
CONTRACTS ISSUE EXERCISE PRICE (NOTE 1A)
<S> <C> <C> <C> <C>
25 Nasdaq Index Jun. 96/550 $ 1,562
225 S&P 500 Index Jun. 96/450 2,813
665 S&P 500 Index Jun. 96/475 8,312
670 S&P 500 Index Jun. 96/500 12,562
715 S&P 500 Index Jun. 96/550 40,219
240 S&P 500 Index Sep. 96/550 60,000
170 S&P 500 Index Sep. 96/575 71,188
2,000 S&P 500 Index Sep. 96/600 1,350,000
135 S&P 500 Index Dec. 96/525 40,500
865 S&P 500 Index Dec. 96/550 400,062
230 S&P 500 Index Dec. 96/600 241,500
2,470 S&P 500 Index Jun. 97/600 3,982,875
580 S&P 500 Index Mar. 97/600 804,750
135 S&P Flex Index Dec. 96/525 38,813
2,795 S&P Flex Index Mar. 97/600 4,157,563
100 S&P Flex Index Jun. 97/550 81,250
------------
Total Put Options Purchased $ 11,293,969
------------
------------
</TABLE>
++Foreign exchange contracts as of April 30, 1996 are as follows:
<TABLE>
<CAPTION>
EXPIRATION CURRENCY CURRENCY VALUE
DATE PURCHASED COST SOLD (NOTE 1A)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
July 1996 U.S. Dollar $ 14,223,819 German Deutschemark $ 14,436,638
March 1997 U.S. Dollar 30,049,456 Hong Kong Dollar 30,000,000
- ---------------------------------------------------------------------------------------------------
Total Foreign Currency
Contracts $ 44,273,275 $ 44,436,638
------------- -------------
------------- -------------
</TABLE>
- - American Depositary Receipt (ADR).
* UNR -- Unrated by Standard & Poor's or Moody's.
** These securities are traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the Fund.
(a) This security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration normally to qualified institutional buyers. At April 30, 1996,
the market value of the security was $2,235,000 or 0.8% of net assets.
(b) Non-income producing.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Statement of Assets and Liabilities As of
April 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments at value (cost, $259,917,321) (Note 1a)......... $262,004,291
Put options purchased (cost, $17,744,040) (Note 1a)......... 11,293,969
Receivables:
Interest............................................ $5,524,774
Capital stock sold.................................. 1,495,784
Securities sold..................................... 792,292
Dividends........................................... 101,096 7,913,946
----------
Unrealized appreciation on foreign exchange contracts....... 163,363
Other assets................................................ 85,359
------------
Total assets........................................ 281,460,928
------------
LIABILITIES:
Payables:
Dividends to Shareholders (Note 1f)................. 1,575,418
Capital stock redeemed.............................. 1,131,667
Investment advisory fees (Note 2)................... 139,338
Distributor fees (Note 2)........................... 82,138
Administrative fees (Note 2)........................ 52,594 2,981,155
----------
Accrued expenses and other liabilities...................... 362,697
------------
Total liabilities................................... 3,343,852
------------
Net Assets.................................................. $278,117,076
------------
------------
NET ASSETS CONSIST OF:
Class O Common Stock, $0.001 par value, 150,000,000
shares authorized.................................. $233,843,144
Class A Common Stock, $0.001 par value, 150,000,000
shares authorized.................................. 59,616,217
Class C Common Stock, $0.001 par value, 200,000,000
shares authorized.................................. 327,389
Undistributed investment income -- net.............. 7,472,754
Accumulated undistributed realized gain on foreign
currency transactions -- net....................... 5,554,446
Accumulated realized loss on investments -- net..... (24,397,812)
Unrealized depreciation on investments and put
options purchased -- net........................... (4,363,101)
Unrealized appreciation on foreign currency
transactions -- net................................ 64,039
------------
Net Assets.................................................. $278,117,076
------------
------------
NET ASSET VALUE:
Class O Shares -- Based on net assets of $224,147,506 and
25,519,901 shares outstanding.............................. $8.78
------------
------------
Class A Shares -- Based on net assets of $53,652,377 and
6,111,059 shares outstanding............................... $8.78
------------
------------
Class C Shares -- Based on net assets of $317,193 and 36,185
shares outstanding......................................... $8.77
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Statement of Operations for the Year Ended
April 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME (NOTE 1e):
Interest and discount earned (net of withholding tax of
$33,611)........................................................ $23,258,557
Dividends (net of withholding tax of $101,204)................... 2,435,361
-----------
Total investment income.................................. 25,693,918
-----------
EXPENSES:
Investment advisory fees (Note 2)................................ 1,977,868
Administrative fees (Note 2)..................................... 734,288
Shareholder servicing fees....................................... 551,870
Custodian fees................................................... 233,115
Legal fees....................................................... 221,051
Distributor fees (Note 2)........................................ 148,135
Insurance........................................................ 88,511
Printing and shareholder reports................................. 86,074
Registration fees................................................ 83,605
Directors' fees and expenses..................................... 58,939
Audit fees....................................................... 24,475
Service and distribution plan fees (Note 2)...................... 899
Other operating expenses......................................... 5,992
-----------
Total expenses........................................... 4,214,822
-----------
INVESTMENT INCOME -- NET......................................... 21,479,096
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (NOTES 1b, 1c, 1e & 3):
Realized gain on investments -- net.............................. 18,830,993
Realized loss on put options purchased -- net.................... (23,288,661)
Realized loss on futures transactions -- net..................... (2,430,306)
Realized gain on foreign currency transactions -- net............ 5,554,446
Change in unrealized appreciation (depreciation) on investments
-- net.......................................................... (24,512,012)
Change in unrealized apppreciation (depreciation) on put options
purchased -- net................................................ 13,061,612
Change in unrealized appreciation (depreciation) on foreign
currency transactions -- net.................................... (120,704)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 8,574,464
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
APRIL 30, 1996 APRIL 30, 1995
-------------- --------------
<S> <C> <C> <C>
OPERATIONS: Investment income -- net................ $ 21,479,096 $ 29,207,784
Realized gain on investments -- net..... 18,830,993 32,986,783
Realized loss on put options purchased
-- net................................. (23,288,661) (7,930,990)
Realized gain (loss) on futures
transactions -- net.................... (2,430,306) 11,976,046
Realized gain (loss) on foreign currency
transactions -- net.................... 5,554,446 (1,573,852)
Change in unrealized appreciation
(depreciation) on investments -- net... (24,512,012) (34,460,316)
Change in unrealized appreciation
(depreciation) on put options purchased
-- net................................. 13,061,612 (21,228,136)
Change in unrealized appreciation
(depreciation) on foreign currency
transactions -- net.................... (120,704) 224,710
-------------- --------------
Net increase in net assets resulting
from operations........................ 8,574,464 9,202,029
-------------- --------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS: Investment income -- net:
Class O............................... (16,495,114) (22,343,442)
Class A............................... (3,453,678) (4,289,556)
Class C............................... (6,837) --
-------------- --------------
Net decrease in net assets resulting
from dividends and distributions....... (19,955,629) (26,632,998)
-------------- --------------
CAPITAL STOCK
TRANSACTIONS
(NOTE 4): Net decrease in net assets resulting (105,999,799) (143,462,260)
from capital stock transactions........
-------------- --------------
Decrease in net assets.................. (117,380,964) (160,893,229)
NET ASSETS: Beginning of year....................... 395,498,040 556,391,269
-------------- --------------
End of year............................. $ 278,117,076 $ 395,498,040
-------------- --------------
-------------- --------------
Undistributed net investment income..... $ 7,472,754 $ 13,574,665
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund Financial Highlights
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994
---------------------------------- ------------------ -----------------
CLASS O CLASS A CLASS C++ CLASS O CLASS A CLASS O CLASS A
---------- ---------- ---------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR...... $ 9.10 $ 9.10 $ 9.00 $ 9.40 $ 9.41 $ 9.27 $ 9.27
---------- ---------- ----- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income -- net................ 0.76 0.57 0.37 0.66 0.52 0.77 0.68
Realized and unrealized gain(loss) on
investments, put options purchased and
foreign currency transactions -- net... (0.53) (0.36) (0.22) (0.44) (0.34) 0.15 0.22
---------- ---------- ----- -------- -------- ------- --------
Total from investment
operations....................... 0.23 0.21 0.15 0.22 0.18 0.92 0.90
---------- ---------- ----- -------- -------- ------- --------
LESS DIVIDENDS
Dividends from investment income --
net.................................... (0.55) (0.53) (0.38) (0.52) (0.49) (0.77 ) (0.74)
Dividends from realized transaction
gains.................................. -- -- -- -- -- (0.02 ) (0.02)
---------- ---------- ----- -------- -------- ------- --------
Total dividends................... (0.55) (0.53) (0.38) (0.52) (0.49) (0.79 ) (0.76)
---------- ---------- ----- -------- -------- ------- --------
NET ASSET VALUE, END OF YEAR............ $ 8.78 $ 8.78 $ 8.77 $ 9.10 $ 9.10 $ 9.40 $ 9.41
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
Total return (1)........................ 2.66% 2.40% 1.96%(3) 2.39% 1.94% 10.13 % 9.91%
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000)......... $224,148 $53,652 $ 317 $329,624 $65,874 $464,937 $91,454
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
Ratio of expenses to average net
assets................................. 1.23% 1.48% 2.28%(4) 1.14% 1.46% 1.07 % 1.40%
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
Ratio of expenses, excluding
distribution fees, to average net
assets................................. 1.23% 1.23% 1.28%(4) 1.14% 1.14% 1.07 % 1.08%
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
Ratio of investment income -- net to
average net assets..................... 6.56% 6.33% 5.79%(4) 6.19% 5.83% 7.57 % 6.85%
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
Portfolio turnover rate................. 96% 96% 96% 100% 100% 31 % 31%
---------- ---------- ----- -------- -------- ------- --------
---------- ---------- ----- -------- -------- ------- --------
<CAPTION>
FOR THE
YEAR
FOR THE YEAR ENDED
ENDED APRIL
APRIL 30, 1993 30, 1992
------------------ --------
CLASS O CLASS A+ CLASS O
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR...... $ 9.56 $ 9.55 $ 9.48
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income -- net................ 0.90 0.64 0.80
Realized and unrealized gain(loss) on
investments, put options purchased and
foreign currency transactions -- net... (0.39) (0.28) 0.08
-------- -------- --------
Total from investment
operations....................... 0.51 0.36 0.88
-------- -------- --------
LESS DIVIDENDS
Dividends from investment income --
net.................................... (0.75) (0.64) (0.76)
Dividends from realized transaction
gains.................................. (0.05) -- (0.04)
-------- -------- --------
Total dividends................... (0.80) (0.64) (0.80)
-------- -------- --------
NET ASSET VALUE, END OF YEAR............ $ 9.27 $ 9.27 $ 9.56
-------- -------- --------
-------- -------- --------
Total return (1)........................ 5.70% 5.42%(2) 9.59%
-------- -------- --------
-------- -------- --------
RATIOS/SUPPLEMENTARY DATA
Net assets, end of period (000)......... $548,514 $23,492 $810,700
-------- -------- --------
-------- -------- --------
Ratio of expenses to average net
assets................................. 1.06% 1.41%(4) 1.11%
-------- -------- --------
-------- -------- --------
Ratio of expenses, excluding
distribution fees, to average net
assets................................. 1.06% 1.07%(4) 1.11%
-------- -------- --------
-------- -------- --------
Ratio of investment income -- net to
average net assets..................... 8.95% 8.74%(4) 8.03%
-------- -------- --------
-------- -------- --------
Portfolio turnover rate................. 56% 56% 89%
-------- -------- --------
-------- -------- --------
</TABLE>
+ Class A shares were introduced on July 15, 1992.
++ Class C shares were introduced on August 1, 1995.
(1) Total investment returns exclude the effects of sales load and assume
reinvestment of dividends and distributions. Total investment returns prior
to August 1, 1991 reflect performance of the Fund as a closed-end fund
(assuming dividend reinvestment pursuant to the Fund's Dividend Reinvestment
Plan as then in effect); as an open-end fund the Fund incurs certain
additional expenses as a result of the continuous offering and redemption of
its shares.
(2) Total investment return is presented for the year ended April 30, 1993. For
the period prior to July 15, 1992, total investment return does not reflect
service and distribution fees because such fees were not paid during that
period.
(3) Total investment return is presented for the year ended April 30, 1996. For
the period prior to August 1, 1995, total investment return is based upon
the total investment return for Class A shares, and does not reflect the
greater service and distribution fees and certain other expenses borne by
Class C shares.
(4) Annualized.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS:
1. SIGNIFICANT ACCOUNTING POLICIES:
Comstock Partners Strategy Fund (the "Fund") is a separate, non-diversified
portfolio of Comstock Partners Funds, Inc. (the "Company"), an open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act"). The Fund's investment objective is to maximize total
return over the long-term investment horizon by investing primarily in a
portfolio of debt securities. The Company originally commenced operations in May
of 1988 as a closed-end investment company, with the Fund as its only portfolio.
At a special meeting of shareholders on June 14, 1991, holders of a majority of
the Company's outstanding shares voted to approve the conversion of the Company
to an open-end investment company. The Company converted to open-end status on
August 1, 1991. On July 15, 1992, a second class of shares of the Fund, Class A
("Class A") was created and on August 1, 1995, a third class of shares of the
Fund, Class C ("Class C"), was created. On February 8, 1996, (i) the Company
changed its name from Comstock Partners Strategy Fund, Inc., to Comstock
Partners Funds, Inc., (ii) the Fund, the Company's existing portfolio, became a
separate portfolio of the Company and (iii) the Comstock Partners Capital Value
Fund was organized as a new portfolio of the Company.
Class C shares are subject to a contingent deferred sales charge. Class O of the
Fund ("Class O"), A, and C have identical voting, dividend, liquidation and
other rights and the same terms and conditions except that Class A shares and
Class C shares bear fees and expenses on an ongoing basis pursuant to the
Amended and Restated Class A Service and Distribution Plan and the Amended and
Restated Class C Service and Distribution Plan, respectively. Class C shares
bear additional incremental shareholder administrative expenses resulting from
the deferred sales charge arrangements, and only the holders of Class A and
Class C shares have voting rights with respect to matters pertaining to the
Amended and Restated Class A Service and Distribution Plan and the Amended and
Restated Class C Service and Distribution Plan, respectively. Class O shares of
the Fund are no longer issued by the Company except in connection with the
reinvestment of dividends on outstanding Class O shares. The following is a
summary of significant accounting policies followed by the Company, with respect
to the Fund.
(a) Valuation of investments - Securities listed on national securities
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued, or lacking any sales, at the mean between
the closing bid and asked prices.
Securities traded in the over-the-counter market are valued on the basis of the
mean between the bid and asked prices at the close of trading on such day by
dealers that make markets in such securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
based on prices or quotes obtained from the broadest and most representative
market.
Options purchased by the Fund are valued at the last bid price in the case of
exchange-traded options, or in the case of options traded in the
over-the-counter market, the average of the last bid price as obtained by two or
more dealers.
Futures contracts are stated at market value or otherwise at the fair value at
which it is expected they may be resold, as determined in good faith by the
Board of Directors.
Short-term debt securities having a maturity of 60 days or less from the
valuation date are valued at amortized cost which approximates market value.
(b) Derivative financial instruments - The Fund may engage in various portfolio
strategies to seek to generate income or gains or as a hedge against its
portfolio against adverse movements in the equity, debt and currency markets.
Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
Forward foreign exchange contracts - The Fund is authorized to enter into
forward foreign exchange contracts to seek to generate income or gains or as a
hedge against either specific transactions or portfolio positions. Such
contracts are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of the contracts.
Financial futures contracts - The Fund may purchase or sell financial futures
contracts to seek to generate income or gains or as a hedge against adverse
changes in interest rates. A futures contract is an agreement between two
parties to buy or sell a security for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
(c) Foreign Currency Transactions - Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income Taxes - It is the 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 shareholders. Therefore,
no Federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest and capital gains at various
rates.
(e) Security transactions and investment income - Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend date. Interest income (including
amortization of discount) is recorded as earned. Realized gains and losses are
determined on the identified cost basis.
(f) Dividends and Distributions - Dividends and distributions payable by the
Fund are accrued on the ex-dividend date.
(g) Reclassifications - During the year ended April 30, 1996, net realized
losses on foreign currency related transactions relating to prior years of
$7,618,586 were reclassified from accumulated net realized loss on foreign
currency transactions to undistributed net investment income relating to prior
years. Net capital gains relating to prior years of $6,792 were reclassified
from accumulated realized capital gains to undistributed investment income. Net
assets were not affected by the reclassifications.
2. INVESTMENT ADVISORY, SUB-INVESTMENT ADVISORY, ADMINISTRATION AGREEMENTS AND
TRANSACTIONS WITH AFFILIATES:
The Company, on behalf of the Fund, has entered into an Investment Advisory
Agreement with Comstock Partners, Inc. ("Comstock"). Comstock is responsible for
the management of the Fund's portfolio and provides the necessary personnel,
facilities, equipment and certain other services necessary to the operations of
the Fund. For such services, the Fund pays a monthly fee at an annual rate of
0.60% of the Fund's average daily net assets.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED):
2. INVESTMENT ADVISORY, SUB-INVESTMENT ADVISORY, ADMINISTRATION AGREEMENTS AND
TRANSACTIONS WITH AFFILIATES (CONTINUED):
Comstock, on behalf of the Fund, has entered into a Sub-Investment Advisory
Agreement with The Dreyfus Corporation ("Dreyfus"). Under the terms of the
Agreement, Dreyfus manages the short-term cash and cash equivalents of the Fund
and provides investment research and other advice regarding the Fund's
portfolio. Dreyfus also provides general advice regarding economic factors and
trends, including statistical and other factual information. For such services,
Comstock will pay out of its advisory fee a monthly fee at an annual rate of
0.15% of the Fund's average daily net assets.
The Company, on behalf of the Fund, has entered into an Administration Agreement
with Princeton Administrators, L.P. ("the Administrator") , an affiliate of
Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Administrator performs
administrative services necessary for the operation of the Fund, including
maintaining the books and records of the Fund and preparing reports and other
documents required by Federal, state and other applicable laws and regulations,
and provides the Fund with administrative office facilities. For those services,
the Company, on behalf of the Fund, pays a monthly fee at an annual rate equal
to the greater of (i) $300,000 per annum ($25,000 per month), or (ii) at an
annual rate equal to 0.25% of the Fund's average daily net assets up to $100
million, 0.225% of the Fund's average daily net assets on the next $100 million,
0.20% of the Fund's average daily net assets on the next $400 million and 0.175%
of the Fund's average daily net assets in excess of $600 million.
Premier Mutual Fund Services, Inc. serves as the Fund's distributor
("Distributor") pursuant to an agreement. Under the Amended and Restated Class A
Service and Distribution Plan, adopted pursuant to Rule 12b-1 under the 1940
Act, the Class A shares bear the cost of (a) payment by the Company, on behalf
of the Fund, to the Distributor for advertising, marketing and distributing
Class A shares and for servicing Class A shareholders at an annual rate of
0.25%, payable monthly, of the value of the Fund's average daily net assets
attributable to Class A shares and (b) additional 12b-1 expenses incurred in
connection with the preparation, printing and distribution of the Fund's
prospectus and statement of additional information used for other than
regulatory purposes and distribution to existing shareholders and expenses of
implementing the Plan, the aggregate of such amounts under clause (b) not to
exceed in any fiscal year the greater of $100,000 or .005% of the value of the
Fund's average daily net assets attributable to the Class A shares. Under the
Amended and Restated Class C Service and Distribution Plan, adopted pursuant to
Rule 12b-1 under the 1940 Act, the Class C shares bear the cost of (a) payment
by the Company, on behalf of the Fund, to the Distributor for distributing the
Fund's Class C shares at an annual rate of .75%, payable monthly, of the value
of the Fund's average daily net assets attributable to Class C shares and (b)
payments by the Company, on behalf of the Fund, to the Distributor for the
provision of certain services to the holders of Class C shares at an annual rate
of 0.25% of the value of the average daily net assets of Class C shares.
Certain officers and/or directors of the Company are officers and/or directors
of Comstock.
3. PURCHASES AND SALES OF INVESTMENTS:
Purchases and sales of investments, excluding short-term and U.S. Government
securities, for the year ended April 30, 1996 were $125,669,656 and $214,291,968
respectively.
Realized and unrealized gains (losses) for the year ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
GAINS GAINS
(LOSSES) (LOSSES)
------------- -------------
<S> <C> <C>
Long-term investments............................. $ 18,837,697 $ 2,086,969
Short-term investments............................ (6,704) 1
Put options purchased............................. (23,288,661) (6,450,071)
Financial futures contracts....................... (2,430,306) --
Foreign currency transactions..................... 5,554,446 64,039
------------- -------------
$ (1,333,528) $ (4,299,062)
------------- -------------
------------- -------------
</TABLE>
As of April 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes;
accordingly, unrealized depreciation for Federal income tax purposes aggregated
$4,316,778 of which $9,719,757 related to appreciated securities and $14,036,535
related to depreciated securities. In addition, at April 30, 1996, the Fund had
a capital loss carryforward of $24,703,925 ($3,407,129 expiring April 30, 2000,
$8,776,949 expiring April 30, 2001 and $12,519,847 expiring April 30, 2004)
available as a reduction of any future net capital gains realized.
4. CAPITAL STOCK TRANSACTIONS:
Transactions in shares of Class O capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR DOLLAR
ENDED APRIL 30, 1996 SHARES AMOUNT
- -------------------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold....................................... -- --
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 273,782 $ 2,440,189
------------ --------------
Total issued...................................... 273,782 2,440,189
Shares redeemed................................... (10,995,465) (98,585,628)
------------ --------------
Net decrease...................................... (10,721,683) $ (96,145,439)
------------ --------------
------------ --------------
<CAPTION>
FOR THE YEAR DOLLAR
ENDED APRIL 30, 1995 SHARES AMOUNT
- -------------------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold....................................... -- --
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 973,756 $ 8,959,869
------------ --------------
Total issued...................................... 973,756 8,959,869
Shares redeemed................................... (14,184,069) (129,706,226)
------------ --------------
Net decrease...................................... (13,210,313) $ (120,746,357)
------------ --------------
------------ --------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED):
4. CAPITAL STOCK TRANSACTIONS (CONTINUED):
Transactions in shares of Class A capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR DOLLAR
ENDED APRIL 30, 1996 SHARES AMOUNT
- -------------------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold....................................... 1,245,317 $ 11,109,682
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 119,302 1,062,696
------------ --------------
Total issued...................................... 1,364,619 12,172,378
Shares redeemed................................... (2,495,609) (22,354,127)
------------ --------------
Net decrease...................................... (1,130,990) $ (10,181,749)
------------ --------------
------------ --------------
<CAPTION>
FOR THE YEAR DOLLAR
ENDED APRIL 30, 1995 SHARES AMOUNT
- -------------------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold....................................... 1,812,384 $ 16,493,949
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 239,773 2,221,042
------------ --------------
Total issued...................................... 2,052,157 18,714,991
Shares redeemed................................... (4,530,821) (41,430,894)
------------ --------------
Net decrease...................................... (2,478,664) $ (22,715,903)
------------ --------------
------------ --------------
</TABLE>
Transactions in shares of Class C capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR DOLLAR
ENDED APRIL 30, 1996* SHARES AMOUNT
- -------------------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold....................................... 40,733 $ 367,799
Shares issued to shareholders in reinvestment of
dividends and distributions...................... 99 875
------------ --------------
Total issued...................................... 40,831 368,674
Shares redeemed................................... (4,647) (41,285)
------------ --------------
Net increase...................................... 36,185 $ 327,389
------------ --------------
------------ --------------
</TABLE>
* Class C Shares were introduced on August 1, 1995.
5. DIVIDENDS:
In May and June 1996 the Company's Board of Directors declared ordinary income
dividends for Class O, Class A and Class C shares as follows:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
--------------------------------
CLASS O CLASS A CLASS C PAYABLE DATE RECORD DATE
-------- -------- -------- ------------------ ------------------
<S> <C> <C> <C> <C>
$0.05000 $0.04806 $0.04346 May 31, 1996 May 22, 1996
$0.05000 $0.04813 $0.04244 June 28, 1996 June 20, 1996
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors of Comstock Partners Funds, Inc.
and Shareholders of Comstock Partners Strategy Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Comstock Partners Strategy Fund (one of the
series constituting Comstock Partners Funds, Inc.) as of April 30, 1996, and the
related statements of operations and changes in net assets and financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit. The statement of changes in net assets for the year ended
April 30, 1995 and financial highlights for each of the four years in the period
then ended were audited by other auditors whose report dated May 31, 1995
expressed an unqualified opinion on such financial statement and financial
highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of April 30, 1996, by
correspondence with the custodians and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Comstock Partners Strategy Fund at April 30, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
[SIGNATURE]
New York, New York
June 5, 1996
<PAGE>
- --------------------------------------------------------------------------------
Comstock Partners Strategy Fund 1996
FEDERAL INCOME TAX INFORMATION (Unaudited)
The following information summarizes the components of all of the per share
distributions paid by the Fund to shareholders of record during the year ended
April 30, 1996:
<TABLE>
<CAPTION>
TOTAL
QUALIFYING DOMESTIC* INTEREST FROM FEDERAL NON-QUALIFYING DOMESTIC ORDINARY
ORDINARY INCOME OBLIGATIONS ORDINARY INCOME INCOME
------------------------------- ------------------------------- ------------------------------- ---------
RECORD DATE CLASS O CLASS A CLASS C CLASS O CLASS A CLASS C CLASS O CLASS A CLASS C CLASS O
- ------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/22/95...... $ 0.00386 $ 0.00362 $ 0.00000 $ 0.00805 $ 0.00793 $ 0.00000 $ 0.02809 $ 0.02595 $ 0.00000 $ 0.04000
6/22/95...... 0.00386 0.00366 0.00000 0.00865 0.00861 0.00000 0.02749 0.02565 0.00000 0.04000
7/21/95...... 0.00434 0.00416 0.00000 0.00813 0.00819 0.00000 0.03253 0.03077 0.00000 0.04500
8/23/95...... 0.00434 0.00416 0.00434 0.00738 0.00742 0.01693 0.03328 0.03148 0.02373 0.04500
9/21/95...... 0.00434 0.00416 0.00388 0.00529 0.00532 0.01086 0.03537 0.03356 0.02548 0.04500
10/23/95..... 0.00434 0.00416 0.00356 0.00482 0.00485 0.00906 0.03584 0.03412 0.02425 0.04500
11/21/95..... 0.00434 0.00416 0.00397 0.00493 0.00497 0.01034 0.03573 0.03397 0.02680 0.04500
12/20/95..... 0.00483 0.00465 0.00405 0.00583 0.00590 0.01123 0.03934 0.03758 0.02664 0.05000
1/23/96...... 0.00068 0.00067 0.00145 0.03630 0.03417 0.01973 0.01302 0.01324 0.02386 0.05000
2/21/96...... 0.00068 0.00067 0.00145 0.03630 0.03418 0.01974 0.01302 0.01320 0.02575 0.05000
3/21/96...... 0.00068 0.00067 0.00145 0.03631 0.03418 0.01974 0.01301 0.01332 0.02301 0.05000
4/22/96...... 0.00068 0.00067 0.00146 0.03631 0.03418 0.01974 0.01301 0.01333 0.02197 0.05000
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total........ $ 0.03697 $ 0.03641 $ 0.02561 $ 0.19830 $ 0.18990 $ 0.13737 $ 0.31973 $ 0.30617 $ 0.22149 $ 0.55500
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
RECORD DATE CLASS A CLASS C
- ------------- --------- ---------
<S> <C> <C>
5/22/95...... $ 0.03750 $ 0.00000
6/22/95...... 0.03792 0.00000
7/21/95...... 0.04312 0.00000
8/23/95...... 0.04306 0.04500
9/21/95...... 0.04304 0.04022
10/23/95..... 0.04313 0.03687
11/21/95..... 0.04310 0.04111
12/20/95..... 0.04813 0.04192
1/23/96...... 0.04808 0.04504
2/21/96...... 0.04805 0.04694
3/21/96...... 0.04817 0.04420
4/22/96...... 0.04818 0.04317
--------- ---------
Total........ $ 0.53148 $ 0.38447
--------- ---------
--------- ---------
</TABLE>
* Qualifies for the dividends received deduction for corporations.
During the year, the Fund invested in direct obligations of the United States
Treasury, including U.S. Treasury Notes, U.S. Treasury Bills and U.S. Treasury
Bonds (Federal Obligations). As a result, a portion of each of the Fund's
dividends is attributable to interest on such Federal Obligations.
Of the ordinary income dividends paid during the taxable year ended April 30,
1996, the following percentages are attributable to the above listed Federal
Obligations:
Class O - $0.19830 per share, or 35.73%
Class A - $0.18990 per share, or 35.73%
Class C - $0.13737 per share, or 35.73%
The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income tax. We
recommend that you consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
Listed below are the percentages of total assets of the Fund invested in Federal
Obligations as of the end of each quarter of the Fund's fiscal year:
<TABLE>
<CAPTION>
PERCENTAGE OF
FEDERAL
FUND QUARTER END OBLIGATIONS
- -------------------------------------------------------- ----------------
<S> <C>
7/31/95................................................. 27.71%
10/31/95................................................ 18.60%
1/31/96................................................. 23.90%
4/30/96................................................. 44.70%
</TABLE>
<PAGE>
[LOGO]
COMSTOCK PARTNERS STRATEGY FUND
10 Exchange Place
Suite 2010
Jersey City, NJ 07302-3913
INVESTMENT ADVISER
COMSTOCK PARTNERS, INC.
10 Exchange Place
Jersey City, NJ 07302-3913
SUB-INVESTMENT ADVISER
THE DREYFUS CORPORATION
200 Park Avenue
New York, NY 10166
CUSTODIAN--DOMESTIC
THE BANK OF NEW YORK
110 Washington Street
New York, NY 10286
CUSTODIAN--INTERNATIONAL
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
ADMINISTRATOR
PRINCETON ADMINISTRATORS, L.P.
P.O. Box 9095
Princeton, NJ 08540-9095
DISTRIBUTOR
PREMIER MUTUAL FUND SERVICES, INC.
One Exchange Place
Boston, MA 02109
Tel. 1-800-221-7930
1-617-248-6497 (Boston)
1-617-248-3789 (Boston)
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, AND
SHAREHOLDER SERVICING AGENT
DREYFUS TRANSFER, INC.
1 American Express Plaza
Providence, RI 02940-9671
Tel. 1-800-645-6561
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
SIMPSON THACHER & BARTLETT
(a partnership which includes
professional corporations)
425 Lexington Avenue
New York, NY 10017-3909
OFFICERS & DIRECTORS
Stanley D. Salvigsen, Chief Executive
Officer and Chairman of the Board
Charles L. Minter, President
and Director
M. Bruce Adelberg, Director
Sven B. Karlen, Jr., Director
E. W. Kelley, Director
Robert M. Smith, Director
W. Troy Hottenstein, Secretary
Robert C. Ringstad, Assistant Secretary
------------------------------------------------------------------------
General information regarding the Fund's portfolio, updated
semi-monthly, is available by calling the Fund's Distributor (see
above).
This report is not authorized for use in connection with an offer of
sale or a solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
<PAGE>
Total Return Based on a $10,000 Investment--Class O Shares*
A line graph depicting the growth of an investment in the Fund's Class O
Shares compared to growth of an investment in the S&P 500 Total Return Index,
the Lehman Brothers Govt./Corp. Bond Index and the Blended Index. Beginning
and ending values are:
5/26/88** 4/96
Comstock Class O* $ 9,500 $17,837
S&P 500 Total Return Index $10,000 $32,734
Lehman Brothers Govt./Corp.
Bond Index $10,000 $20,139
Blended Index*** $10,000 $24,063
*The total return for Class O shares is based upon a hypothetical investment
in Class O shares at the Fund's inception on 5/26/88, restated to reflect
the maximum initial sales load charged when the Fund last offered Class O
shares. Total return for Class O shares prior to August 1, 1991 reflects
performance of the Fund as a closed-end fund; as an open-end fund the Fund
incurs certain additional expenses as a result of the continuous offering and
redemption of its shares. Total return for Class O shares assumes the
reinvestment of dividends and capital gains distributions.
**Fund's inception.
***The blended index contains 65% Lehman Brothers Govt./Corp. Bond Index and
35% S&P 500 Index.
<PAGE>
Total Return Based on a $10,000 Investment--Class A Shares*
A line graph depicting the growth of an investment in the Fund's Class A
Shares compared to growth of an investment in the S&P 500 Total Return Index,
the Lehman Brothers Govt./Corp. Bond Index and the Blended Index. Beginning
and ending values are:
5/26/88** 4/96
Comstock Class A* $ 9,550 $17,611
S&P 500 Total Return Index $10,000 $32,734
Lehman Brothers Govt./Corp.
Bond Index $10,000 $20,139
Blended Index*** $10,000 $24,063
*The total return for Class A shares is based upon a hypothetical investment
in Class A shares at the Fund's inception on 5/26/88, restated to reflect
the current 4.5% maximum initial sales load for Class A shares. Total return
for Class A shares prior to August 1, 1991 reflects performance of the Fund
as a closed-end fund; as an open-end fund the Fund incurs certain additional
expenses as a result of the continuous offering and redemption of its shares.
Because Class A shares were not actually introduced until July 15, 1992,
total return for Class A shares for the period prior to July 15, 1992 does
not reflect service and distribution fees borne by Class A shares which, if
reflected, would reduce the total return presented. Total return for Class A
shares assumes the reinvestment of dividends and capital gains distributions.
**Fund's inception.
***The blended index contains 65% Lehman Brothers Govt./Corp. Bond Index and
35% S&P 500 Index.
<PAGE>
Total Return Based on a $10,000 Investment--Class C Shares*
A line graph depicting the growth of an investment in the Fund's Class C
Shares compared to growth of an investment in the S&P 500 Total Return Index,
the Lehman Brothers Govt./Corp. Bond Index and the Blended Index. Beginning
and ending values are:
5/26/88** 4/96
Comstock Class C* $10,000 $18,362
S&P 500 Total Return Index $10,000 $32,734
Lehman Brothers Govt./Corp.
Bond Index $10,000 $20,139
Blended Index*** $10,000 $24,063
*The total return for Class C shares is based upon a hypothetical investment
in Class C shares at the Fund's inception on 5/26/88, restated to reflect
the applicable contingent deferred sales charge for Class C shares. Total
return for Class C shares prior to August 1, 1991 reflects performance of the
Fund as a closed-end fund; as an open-end fund the Fund incurs certain
additional expenses as a result of the continuous offering and redemption of
its shares. Because Class C shares were not actually introduced until August
1, 1995, total return for Class C shares for the period prior to August 1,
1995 does not reflect higher service and distribution fees and certain
administrative expenses borne by Class C shares which, if reflected, would
reduce the total return presented. Total return for Class C shares assumes
the reinvestment of dividends and capital gains distributions.
**Fund's inception.
***The blended index contains 65% Lehman Brothers Govt./Corp. Bond Index and
35% S&P 500 Index.
