<PAGE>
[LOGO POWER PORTFOLIO VARIABLE ANNUITY APPEARS HERE]
- ---------------------------------------------------------
POWER PORTFOLIO
VARIABLE ANNUITY
ANNUAL REPORT
December 31, 1995
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GNA Variable Series Trust
Variable Investment Trust
---------------------------------------------------------
GREAT NORTHERN INSURED ANNUITY CORPORATION
Corporate Office: Two Union Square
P.O. Box 490 . Seattle, Washington 98111-0490
(206) 625-1755
VARIABLE ANNUITY SERVICE CENTER:
300 Berwyn Park . Berwyn, PA 19312-0031
(800) 455-0870
<PAGE>
POWER PORTFOLIO VARIABLE ANNUITY
TABLE OF CONTENTS
<TABLE>
<S> <C>
LETTER FROM THE PRESIDENT................................................... 2
GNA VARIABLE SERIES TRUST
Financial Market Review................................................... 3
GNA Adjustable Rate Portfolio............................................. 3
GNA Government Portfolio.................................................. 5
GNA Growth Portfolio...................................................... 6
GNA Value Portfolio....................................................... 7
Notes to Performance...................................................... 9
Financial Statements and Notes............................................ 10
Report of Independent Accountants......................................... 39
VARIABLE INVESTMENT TRUST
GE U.S. Equity Portfolio.................................................. 40
GE International Equity Portfolio......................................... 41
GE Fixed Income Portfolio................................................. 42
GE Money Market Portfolio................................................. 43
Notes to Performance...................................................... 44
Financial Statements and Notes............................................ 46
Report of Independent Accountants......................................... 76
</TABLE>
This report is prepared for Certificateholders of the Power Portfolio variable
annuity. It is not authorized for use as an offer of sale or a solicitation of
an offer to buy the Power Portfolio variable annuity unless accompanied or pre-
ceded by the annuity's current prospectus and the current prospectuses of the
portfolios available for investment thereunder.
<PAGE>
LETTER FROM THE PRESIDENT
2 --------------------------------------------------------------------------
----------------
Dear Valued Customer: [ART]
I am pleased to present the first combined annual
report for the portfolios which are available through the
Power Portfolio variable annuity. In this report, you will ----------------
find
a discussion from each portfolio manager of recent activity in the stock, bond
and money markets, the impact of recent developments on investment returns and
their particular market perspective and outlook. The report also contains fi-
nancial statements and financial highlights for each of the portfolios.
I encourage you to periodically review your variable annuity to ensure your
investment allocation meets your objectives. The investment professionals who
represent the Power Portfolio are available to help you make those evaluations.
If you have questions about this report, please call the GNA Variable Annuity
Service Center at 1-800-455-0870.
Thank you for investing with GNA.
Sincerely,
/s/ Patrick E. Welch
Patrick E. Welch
President and CEO
<PAGE>
- --------------------------------------------------------------------------3
GNA VARIABLE SERIES TRUST
GNA CAPITAL MANAGEMENT, INC., ADVISER
FINANCIAL MARKET REVIEW BY GNA CAPITAL MANAGEMENT, INC.
The dominant theme in the domestic financial markets over the last twelve
months was an increasing acceptance of the so-called "Fed engineered soft
landing". This refers to the idea that the Federal Reserve's management of
short-term interest rates via monetary policy decisions has slowed the growth
rate of the economy to a more sustainable, low-inflation level, without push-
ing the economy into a recession. Year-over-year growth rates available as of
this writing show Gross Domestic Product (GDP) at +3.3%, and the Consumer
Price Index (CPI) at +2.6%, both down from a year ago. These rates lagged
somewhat due to the Federal Government shutdown and the Blizzard of 1996.
This economic environment produced a banner year for financial securities.
Reduced inflationary fears helped push interest rates sharply lower, boosting
bond prices. Lower interest rates combined with robust growth of corporate
profits pushed stock prices up. In this environment, the bond market, as mea-
sured by the Lehman Brothers Aggregate Bond Index, had a total return of
+18.5%, and the stock market, as measured by the Standard & Poor's 500 Stock
Index, returned +37.6%. Both of these total returns were well above their
long-term averages.
GNA ADJUSTABLE RATE PORTFOLIO
REPORT FROM PORTFOLIO MANAGER LORI DRISCOLL
STANDISH, AYER & WOOD, INC., SUB-ADVISER
For the year ended December 31, 1995, bond yields declined substantially.
The momentum of the bond rally was particularly strong in the first half of
the year, as market expectations favored the "soft landing" scenario--i.e.,
slower economic growth with low inflation. In this environment, the unmanaged
Lehman Brothers ARM Index had a total return of +11.7%.
<PAGE>
GNA VARIABLE SERIES TRUST
4 --------------------------------------------------------------------------
For the year, the Portfolio's total return was +11.5%. In comparison, the
Morningstar Government Bond--ARM fund average of 57 funds posted an average to-
tal return of +4.1%. (See graph below.) Adjustable rate mortgages, in particu-
lar GNMA ARMs, produced very favorable returns. The ARMs sector benefited from
several market trends throughout the year, most importantly, the decline in in-
terest rates. With declining supply and reduced interest rate cap risk, ARM
spreads narrowed versus Treasuries, and this contributed favorably to the Port-
folio's performance.
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GNA Adjustable
- ---------------------
Rate Portfolio--
- ----------------
(1/3/95)
- -------
<TABLE>
<CAPTION>
GNA Adjustable Lehman Brothers Morningstar Government
MONTH Rate Properties ARM Index Bond--ARM Fund Average
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dec 1994 $10,000 $10,000 $10,000
Jan 1995 $10,120 $10,166 $10,001
Feb 1995 $10,270 $10,370 $10,083
Mar 1995 $10,429 $10,420 $10,143
Apr 1995 $10,490 $10,531 $10,187
May 1995 $10,713 $10,701 $10,289
Jun 1995 $10,761 $10,745 $10,276
Jul 1995 $10,754 $10,784 $10,289
Aug 1995 $10,843 $10,850 $10,341
Sep 1995 $10,919 $10,927 $10,352
Oct 1995 $10,999 $10,994 $10,305
Nov 1995 $11,083 $11,088 $10,371
Dec 1995 $11,149 $11,172 $10,406
</TABLE>
Past performance is not indicative of future results.
See Notes to Performance Graph (page 9).
Looking forward, we feel that the underlying economic fundamentals are mod-
estly improving. With the U. S. economy close to full utilization of resources,
relatively high consumer confidence and higher employment, it would seem un-
likely that current low bond yields could be sustained for an extended period
of time. With a positive inflation outlook and moderate economic growth, we ex-
pect the Fed could lower short-term rates further in 1996, and the yield curve
will likely steepen. In the interim, the bond market remains vulnerable without
a Federal budget resolution. In the event of a prolonged delay, and heightened
concern over default risk, bond yields could temporarily drift higher, particu-
larly for longer maturities.
The Portfolio is positioned to benefit from current market conditions as we
have primarily invested in agency adjustable rate mortgages, favoring GNMA
ARMs. In a stable to moderately higher interest rate environment, these ARMs
tend to perform well as they provide a rising income advantage. Conversely,
when interest rates decline, the coupon adjustment downward of GNMA ARMs is
limited to 1% per year. In many cases, these securities were originated with
"teaser rates" and will still reset upward in a falling rate environment. We
believe that the attractive yield advantage of GNMA ARMs and favorable market
supply and demand technicals will work to the Portfolio's benefit in the months
ahead.
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GNA VARIABLE SERIES TRUST
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GNA GOVERNMENT PORTFOLIO
REPORT FROM PORTFOLIO MANAGER CHARLES A. KAMINSKI
GNA CAPITAL MANAGEMENT, INC., ADVISER
In general, just about everything that could go right for bond investors in
1995, did go right. Federal Reserve monetary policy successfully guided the
economy to a so-called "soft landing"--moderate economic growth with low infla-
tion--while avoiding recession. Major foreign economies showed restrained
growth and lower inflation as well. With this economic backdrop, interest rates
fell sharply and bond prices, which move in the opposite direction of rates,
rose to higher levels. In this environment, the bond market, as measured by the
unmanaged Lehman Brothers Government Bond Index, had a total return of +18.3%,
which was well above its long-term average.
For the year, the Government Portfolio had a total return of +16.0%. In com-
parison, the Morningstar Government Bond--General fund average of 392 funds had
an average total return of +14.8%. (See graph below.) Outperformance relative
to the peer group can be primarily attributed to portfolio construction, secu-
rity selection and opportunistic trading. The Portfolio's duration can range
between 4.0 and 4.5 years--lower than the average fund in Morningstar's Govern-
ment Bond--General fund universe. Under normal circumstances, one would expect
this to have hurt the Portfolio's relative performance during a bull market
year like 1995. (Note: In a rising rate environment, the shorter duration would
give the Portfolio a natural advantage.) Two factors contributed greatly to
overcoming this handicap. First, we kept the Portfolio duration near 4.5 years
for most of 1995. And second, the Portfolio held U. S. Treasury zero coupon
bonds which benefited from a dramatic flattening of the yield curve.
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GNA Government
- ---------------------
Portfolio--
- -----------
(1/3/95)
- -------
<TABLE>
<CAPTION>
GNA Government Lehman Government Morningstar Government
Month Portfolio Bond Index Bond--General Fund Average
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dec 1994 $10,000 $10,000 $10,000
Jan 1995 $10,174 $10,186 $10,155
Feb 1995 $10,412 $10,405 $10,353
Mar 1995 $10,487 $10,471 $10,404
Apr 1995 $10,604 $10,608 $10,519
May 1995 $10,946 $11,035 $10,849
Jun 1995 $10,984 $11,120 $10,909
Jul 1995 $10,982 $11,079 $10,882
Aug 1995 $11,103 $11,209 $10,993
Sep 1995 $11,198 $11,316 $11,081
Oct 1995 $11,332 $11,488 $11,212
Nov 1995 $11,455 $11,667 $11,354
Dec 1995 $11,597 $11,833 $11,484
- ----------------------------------------------------------------------------------------
</TABLE>
Past performance is not indicative of future results.
See Notes to Performance (page 9).
<PAGE>
GNA VARIABLE SERIES TRUST
6 ----------------------------------------------------------------------------
The last three years have been characterized by bond markets moving primar-
ily in one direction each year--down in 1993, up in 1994, and rates down in
1995. Going forward we expect interest rates to stay in a trading range as
conflicting economic and market data pushes rates in both directions. Conse-
quently, the Portfolio is neutrally positioned at this time with a duration of
4.25 years. As rates move towards the bottom end of the range--5.75% on the
long bond--we expect to drop the Portfolio's duration to 4.0. Above 6.25% on
the long bond, we expect to move towards the upper duration limit. We do not
foresee a major restructuring in the sector weights at this time.
GNA GROWTH PORTFOLIO
REPORT FROM ALAN N. HOFFMAN, SR. PORTFOLIO MANAGER
VALUE LINE, INC., SUB-ADVISER
The broad stock-market averages performed quite well during 1995. The small-
er-cap NASDAQ composite and the Dow Jones Industrial Average total returns
were +39.9% and +36.8%, respectively. The Portfolio's unmanaged market index
benchmark, the Standard & Poor's 500 Index, had a total return of +37.6%.
During 1995, the Portfolio had a large exposure to the technology sector,
and while those stocks generally performed very well during most of the year,
profit-taking and concerns about semi-conductors dragged the sector down in
the fourth quarter. Financial and health-care stocks also contributed to the
Portfolio's performance. For the year, the Portfolio's total return was
+33.4%. In comparison, the Morningstar Growth fund average of 879 funds had an
average total return of +30.7%. (See graph below.)
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GNA Growth
- -----------------
Portfolio--
- -----------
(1/3/95)
- --------
GNA Growth S&P 500 Morningstar Growth
Month Portfolio Stock Index Fund Average
- --------------------------------------------------------------
Dec 1994 $10,000 $10,000 $10,000
Jan 1995 $10,120 $10,259 $10,063
Feb 1995 $10,564 $10,659 $10,445
Mar 1995 $10,819 $10,974 $10,737
Apr 1995 $11,001 $11,297 $10,949
May 1995 $11,317 $11,749 $11,255
Jun 1995 $12,110 $12,022 $11,741
Jul 1995 $12,951 $12,420 $12,323
Aug 1995 $13,006 $12,451 $12,423
Sep 1995 $13,451 $12,977 $12,766
Oct 1995 $13,259 $12,931 $12,558
Nov 1995 $13,579 $13,498 $13,019
Dec 1995 $13,336 $13,758 $13,074
Past performance is not indicative of future results.
See Notes to Performance (page 9)
=============================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ---------------------------------------------------------------------- 7
The stock market has been volatile recently, reflecting worries about the
outcome of the Federal budget negotiations, economic strength or weakness, and
the course of the bond market. However, we believe that the domestic economy
is in good shape, and that modest growth with negligible inflation should
drive interest rates lower during 1996. Stock market growth should also re-
sume, although not likely at the accelerated pace of 1995. We clearly do not
project a protracted bear market in the foreseeable future.
The Portfolio currently holds somewhat more cash than usual, both as a hedge
against downside volatility during the current period of market hesitance and
as a buying reserve to accumulate selected issues on market dips. The Portfo-
lio's overweighting of technology stocks remains intact, and we're looking
more closely at financial services issues.
GNA VALUE PORTFOLIO
REPORT FROM PORTFOLIO MANAGER CARL F. FAUST
DUFF & PHELPS INVESTMENT MANAGEMENT CO., SUB-ADVISER
For the year ended December 31, 1995, the unmanaged S&P 500 Index total re-
turn was +37.6%, and the market experienced an explosive rally into record
high territory. Stock prices were pushed higher primarily by two factors--
falling interest rates and strong corporate profits. Interest rates fell dra-
matically as the bond market rallied in response to a "soft landing" economic
scenario--slowing economic growth with low inflation.
For 1995, the Portfolio's total return was +27.7%. In comparison, the Morn-
ingstar Equity-Income fund average of 119 funds posted an average total return
of +29.4%. (See graph on page 8.) Upon receiving our initial funding at the
beginning of the year, we invested cash into the stock market over a period of
time using a conservative dollar cost averaging approach. As a result, we held
moderate cash reserves in the first half of the year during a rising market,
which served as a drag on the Portfolio's performance. With the benefit of
hindsight, returns would have been better if all of the cash had been invested
in stocks immediately. Also, lower quality stocks outpaced high quality stocks
over the year, hurting the Value Portfolio's relative performance because of
its high quality focus. However, during the last couple of months, there was a
noticeable shift toward higher quality issues due to expectations for slower
earnings growth going
forward.
===============================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
8 ----------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GNA Value
- ---------------------
Portfolio--
- -----------
(1/3/95)
- -------
<TABLE>
<CAPTION>
GNA Value S&P 500 Morningstar Equity--
Month Portfolio Stock Index Income Fund Average
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dec 1994 $10,000 $10,000 $10,000
Jan 1995 $10,193 $10,259 $10,199
Feb 1995 $10,457 $10,659 $10,524
Mar 1995 $10,624 $10,974 $10,760
Apr 1995 $10,925 $11,297 $10,996
May 1995 $11,244 $11,749 $11,335
Jun 1995 $11,355 $12,022 $11,455
Jul 1995 $11,655 $12,420 $11,739
Aug 1995 $11,639 $12,451 $11,852
Sep 1995 $12,153 $12,977 $12,243
Oct 1995 $12,171 $12,931 $12,118
Nov 1995 $12,579 $13,498 $12,635
Dec 1995 $12,766 $13,758 $12,938
</TABLE>
Past performance is not indicative of future results.
See Notes to Performance (page 9).
Looking forward to 1996, we anticipate a further deceleration of economic
growth to around +2.0%, down from an estimated +2.5% to +3.0% in 1995, with in-
flation expected to remain moderate at around +2.5%, down from an estimated
+2.8% rate in 1995. Corporate profit growth for the year is expected to slow
considerably to around +5%, down from an estimated +16% in 1995.
The Value Portfolio should benefit as earnings growth for the market deceler-
ates. We believe that investors are likely to seek stocks with more stable and
consistent earnings growth--high quality stocks--in this environment. We are
modestly overweighted in the cyclical sector. Historically, cyclical stocks
tend to outperform the market when lower interest rates are anticipated and ex-
pected earnings are being revised downward. We remain underweighted in the de-
fensive sector, where we believe that valuation levels are generally full. And
our most significant overweighting is the technology sector, where fundamentals
for most companies remain bright.
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- -------------------------------------------------------------------------- 9
NOTES TO PERFORMANCE
Total returns assume changes in share price and reinvestment of dividends
and capital gains. Investment returns and principal values will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
Total returns include the effect of deducting each Portfolio's expenses, but
do not include charges and expenses attributable to the Power Portfolio vari-
able annuity. If total returns included the effects of these charges and ex-
penses, the performance figures for each Portfolio would have been lower.
Please review the Power Portfolio variable annuity prospectus for information
on the relevant charges and expenses. Additionally, the Adviser has agreed to
waive or limit certain expenses as described in detail in each Portfolio's
prospectus. Had the Adviser not absorbed a portion of expenses, total returns
would have been lower.
The Lehman Government Bond Index, S&P 500 Stock Index and the Lehman Broth-
ers ARM Index are unmanaged indices and do not reflect the actual cost of in-
vesting in the instruments that comprise each index. The results shown for the
foregoing indices assume reinvestment of net dividends.
The views expressed in this report reflect those of the portfolio manager only
through December 31, 1995, the end of the period of this report. The portfolio
manager's views are subject to change at any time based on market and other
conditions.
GNA VARIABLE SERIES TRUST
GNA CAPITAL MANAGEMENT, INC., ADVISER
Transfer Agent: State Street Bank and Trust Company
Custodian: State Street Bank and Trust Company
Independent Accountants: Coopers & Lybrand L.L.P.
Legal Counsel: Goodwin, Procter & Hoar
Sub-Advisers: Standish, Ayer & Wood, Inc.
GNA Adjustable Rate Portfolio
Value Line, Inc.
GNA Growth Portfolio
Duff & Phelps Investment Management, Co.
GNA Value Portfolio
<PAGE>
GNA VARIABLE SERIES TRUST - GNA ADJUSTABLE RATE PORTFOLIO
10 --------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C> <C> <C>
LONG-TERM GOVERNMENT SECURITIES 87.8
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (a)(b) - 36.4
5.000%, with various maturity dates to
October 20, 2024............................ 520,736 520,269
5.500%, with various maturity dates to August
20, 2025.................................... 859,926 867,958
6.000%, with various maturity dates to April
20, 2024.................................... 607,415 618,094
7.000%, with a maturity date of September 20,
2024........................................ 49,679 50,804
----------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $1,904,041).......................... 2,057,125
----------
UNITED STATES TREASURY NOTES - 14.8
6.875%, with a maturity date of
August 31, 1999 (d)......................... 725,000 761,931
7.500%, with a maturity date of November 15,
2001........................................ 65,000 71,592
----------
Total United States Treasury Notes
(Cost $824,254)............................ 833,523
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (a)(b) - 14.7
7.009%, with a maturity date of
July 1, 2024................................ 233,661 240,561
7.497%, with a maturity date of November 1,
2024........................................ 401,045 412,575
7.654%, with a maturity date of November 1,
2024........................................ 174,830 175,534
----------
Total Federal National Mortgage Association
Adjustable Rate Mortgages
(Cost $795,688)............................ 828,670
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA ADJUSTABLE RATE PORTFOLIO
- -------------------------------------------------------------------------- 11
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
ADJUSTABLE RATE MORTGAGES (a)(b) - 12.4
6.009%, with a maturity date of December 1,
1999........................................ 228,497 234,781
6.121%, with a maturity date of January 1,
2025........................................ 455,019 466,181
----------
Total Federal Home Loan Mortgage Corporation
Adjustable Rate Mortgages
(Cost $674,190)............................ 700,962
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (a)(b) -
8.1
8.000%, with a maturity date of January 1,
2000
(Cost $453,297)............................ 453,139 456,252
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(a)(b) - 1.4
9.000%, with a maturity date of January 15,
1999 (c)
(Cost $80,180)............................. 75,000 79,453
----------
Total Long-Term Government Securities
(Cost $4,731,650).......................... 4,955,985
----------
ASSET-BACKED SECURITIES 10.9
Contimortgage Home Equity Loan, 6.860%, July
15, 2010
[Series 1995-3 Class A]..................... 225,000 228,445
EQCC Home Equity Loan Trust,
5.725%, December 15, 2008
[Series 1993-4 Class A]..................... 111,723 109,418
Equicon Loan Trust,
5.850%, November 18, 2012
[Series 1993-1]............................. 16,138 15,979
UCFC Loan Trust,
8.250%, April 10, 2016
[Series 1995-A Class 4]..................... 250,000 261,563
----------
Total Asset-Backed Securities
(Cost $611,921)............................ 615,405
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA ADJUSTABLE RATE PORTFOLIO
12 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ----------
<S> <C> <C> <C>
MONEY MARKET MUTUAL FUNDS 2.5
The Seven Seas Series Money Market Fund [Class
A]........................................... 71,554 71,554
The Seven Seas Series US Government Money
Market Fund.................................. 70,521 70,521
----------
Total Money Market Mutual Funds
(Cost $142,075)............................. 142,075
----- ----------
SUMMARY
Total investment portfolio
(Cost $5,485,646) (Note 3).................. 101.2 5,713,465
Other assets and liabilities, net.............. (1.2) (65,487)
----- ----------
NET ASSETS...................................... 100.0 $5,647,978
===== ==========
</TABLE>
- ------------------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have similar coupon rates have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for these securities are expected to be shorter than
indicated due to prepayments.
(c) To be announced ("TBA" Forward Commitment Transactions) securities (see
Note 2).
(d) Segregated, in part, as collateral for TBA Securities (see Note 2).
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GOVERNMENT PORTFOLIO
- -------------------------------------------------------------------------- 13
INVESTMENT PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ---------
<S> <C> <C> <C>
LONG-TERM GOVERNMENT SECURITIES 96.7
FEDERAL HOME LOAN MORTGAGE CORPORATION (a)(b) -
38.6
7.000%, with various maturity dates to August
1, 2025 ..................................... 1,878,810 1,895,832
8.000%, with various maturity dates to April
1, 2017 ..................................... 489,907 505,862
8.500%, with a maturity date of
July 1, 2010 ................................ 354,878 370,897
---------
Total Federal Home Loan Mortgage Corporation
(Cost $2,661,822)........................... 2,772,591
---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (a)(b) - 9.8
6.000%, with a maturity date of December 20,
2024......................................... 192,582 197,156
6.125%, with a maturity date of November 20,
2022......................................... 86,272 87,567
6.500%, with various maturity dates to
November 20, 2023............................ 411,775 418,415
---------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $659,152)............................. 703,138
---------
UNITED STATES TREASURY BOND - 7.7
7.875%, with a maturity date of February 15,
2021
(Cost $476,235)............................. 450,000 554,134
---------
FEDERAL HOME LOAN BANK BONDS - 6.4
5.720%, with a maturity date of November 22,
2000 (d)..................................... 360,000 356,569
7.640%, with a maturity date of
May 8, 2002.................................. 100,000 104,625
---------
Total Federal Home Loan Bank Bonds
(Cost $426,681)............................. 461,194
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GOVERNMENT PORTFOLIO
14 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ---------
<S> <C> <C> <C>
FEDERAL FARM CREDIT BANK NOTE - 6.3
8.600%, with a maturity date of
May 30, 2006
(Cost $449,125).............................. 400,000 451,876
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION REAL ESTATE
MORTGAGE INVESTMENT CONDUITS [REMIC] (b)(c) - 6.1
6.000%, with a maturity date of
March 25, 2019
[Series 1993-136 Class PB].................... 86,400 85,914
6.500%, with a maturity date of September 25,
2018
[Series 1992-150 Class GA].................... 175,000 175,929
7.000%, with a maturity date of November 25,
2009
[Series 1992-14 Class D]...................... 175,000 177,898
-------
Total Federal National Mortgage Association Real
Estate Mortgage Investment Conduits [REMIC]
(Cost $431,584).............................. 439,741
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ADJUSTABLE
RATE MORTGAGE (a)(b) - 5.2
8.607%, with a maturity date of
July 1, 2019
(Cost $356,723).............................. 357,842 368,688
-------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (a)(b) -
4.7
6.500%, with a maturity date of
January 1, 2024............................... 205,006 202,570
7.500%, with a maturity date of
June 1, 2002.................................. 64,898 66,419
8.000%, with various maturity dates to July 1,
1998.......................................... 65,332 67,129
-------
Total Federal National Mortgage Association
(Cost $332,287).............................. 336,118
-------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GOVERNMENT PORTFOLIO
- ----------------------------------------------------------------------------- 15
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ---------
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(a)(b) - 4.6
6.500%, with a maturity date of
October 15, 2010............................. 96,674 97,580
8.500%, with various maturity dates to May 15,
2003......................................... 223,262 234,425
---------
Total Government National Mortgage Association
(Cost $320,033)............................. 332,005
---------
FEDERAL HOME LOAN MORTGAGE CORPORATION
MULTICLASS MORTGAGE PARTICIPATION CERTIFICATES
(b)(c) - 2.9
5.850%, with a maturity date of February 15,
2008
[Series 1678 Class PG]....................... 110,000 108,488
6.500%, with a maturity date of February 15,
2021
[Series 128 Class I]......................... 100,000 98,937
---------
Total Federal Home Loan Mortgage Corporation
Multiclass Mortgage Participation
Certificates
(Cost $199,445)............................. 207,425
---------
TENNESSEE VALLEY AUTHORITY NOTE - 1.9
6.125%, with a maturity date of
July 15, 2003
(Cost $131,356)............................. 133,000 133,249
---------
PRIVATE EXEMPT FUNDING
CORPORATION - 1.5
9.100%, with a maturity date of
October 30, 1998
(Cost $108,625)............................. 100,000 109,256
---------
UNITED STATES TREASURY STRIPS - 1.0
Zero Coupon, with a maturity date of February
15, 2018
(Cost $66,119).............................. 275,000 69,663
---------
Total Long-Term Government Securities
(Cost $6,619,187)........................... 6,939,078
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GOVERNMENT PORTFOLIO
16 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ----------
<S> <C> <C> <C>
MONEY MARKET MUTUAL FUNDS 2.1
The Seven Seas Series Money Market Fund [Class
A]............................................ 75,593 75,593
The Seven Seas Series US Government Money
Market Fund................................... 75,872 75,872
----------
Total Money Market Mutual Funds
(Cost $151,465).............................. 151,465
----------
OUTSTANDING OPTIONS PURCHASED ON FUTURES
CONTRACTS 0.1
Three contracts of call options purchased on
United States Treasury Bond at $120 expiring
6/22/96
(Cost $9,962)................................ 10,360
----- ----------
SUMMARY
Total investments
(Cost $6,780,614) (Note 3)................... 98.9 7,100,903
Other assets and liabilities, net............... 1.1 75,664
----- ----------
NET ASSETS....................................... 100.0 $7,176,567
===== ==========
</TABLE>
- ------------------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have similar coupon rates, have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for these securities are expected to be shorter than
indicated due to prepayments.
(c) Risks associated with Collateralized Mortgage Obligations ("CMO's") - The
net asset value of the Fund is sensitive to interest rate fluctuations as-
sociated with CMO's. CMO's are obligations collateralized by a portfolio
of mortgages or mortgage-related securities. Payments of principal and in-
terest on the mortgages are passed through to the holder of the CMO's on
the same schedule as they are received, although certain classes of CMO's
have priority over others with respect to the receipt of prepayments on
the mortgages. Therefore, an investment in CMO's may be subject to a
greater or lesser risk of prepayments than other types of mortgage-related
securities.
(d) Collateral for open futures and options contracts (see Note 3).
At December 31, 1995, open futures contracts purchased were as follows:
<TABLE>
<CAPTION>
EXPIRATION FACE UNREALIZED
PURCHASED DESCRIPTION DATE AMOUNT APPRECIATION
- --------- ------------------------ ---------- ------ ------------
<S> <C> <C> <C> <C>
4 US Treasury Note Futures Mar 96 $834,931 $3,882
======== ======
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GROWTH PORTFOLIO
- ----------------------------------------------------------------------------- 17
INVESTMENT PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
COMMON STOCKS
BASIC INDUSTRIES 9.3
Chemicals - 7.5%
Airgas, Incorporated (a).......................... 2,600 86,450
Cabot Corporation................................. 1,000 53,875
First Mississippi Corporation..................... 2,600 68,900
Great Lakes Chemical Corporation.................. 700 50,400
IMC Global, Incorporated.......................... 1,600 65,400
Millipore Corporation............................. 1,300 53,462
Praxair, Incorporated............................. 2,400 80,700
Union Carbide Corporation......................... 1,600 60,000
---------
519,187
---------
Containers & Glass - 1.0%
Sealed Air Corporation (a)........................ 2,400 67,500
---------
Paper - 0.8%
Alco Standard Corporation......................... 1,200 54,750
---------
641,437
---------
CAPITAL GOODS 4.8
Agricultural Machinery - 0.5%
Deere & Company................................... 900 31,725
---------
Construction & Mining Equipment - 0.8%
Dover Corporation................................. 1,600 59,000
---------
Electrical Equipment - 0.5%
Novellus Systems, Incorporated (a)................ 700 37,800
---------
Industrial Machinery - 3.0%
Applied Materials, Incorporated (a)............... 1,500 59,063
IDEX Corporation.................................. 1,500 61,125
Thermo Electron Corporation (a)................... 1,650 85,800
---------
205,988
---------
334,513
---------
CONGLOMERATES 1.6
Danaher Corporation............................... 1,800 57,150
Premark International, Incorporated............... 1,000 50,625
---------
107,775
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GROWTH PORTFOLIO
18 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
CONSUMER BASICS 15.3
Drugs & Health Care - 13.3%
Amgen, Incorporated (a)........................... 1,000 59,375
HealthCare COMPARE Corporation (a)................ 1,700 73,950
Invacare Corporation.............................. 1,800 45,450
Johnson & Johnson................................. 800 68,500
Medtronic, Incorporated........................... 2,200 122,925
Merck & Company, Incorporated..................... 800 52,600
Omnicare, Incorporated............................ 1,400 62,650
Pfizer, Incorporated.............................. 1,600 100,800
Schering Plough Corporation....................... 1,600 87,600
St. Jude Medical, Incorporated (a)................ 1,500 64,500
Stryker Corporation (a)........................... 1,100 57,750
Summit Technology, Incorporated (a)............... 1,800 60,750
United Healthcare Corporation..................... 1,000 65,500
---------
922,350
---------
Food & Beverages - 0.9%
Coca-Cola Company................................. 800 59,400
---------
Retail Grocery - 1.1%
Casey's General Stores, Incorporated.............. 3,400 74,375
---------
1,056,125
---------
CONSUMER DURABLE GOODS 2.6
Household Appliances & Home Furnishings - 1.1%
Black & Decker Corporation........................ 2,200 77,550
---------
Mobile Homes - 1.5%
Clayton Homes, Incorporated....................... 2,000 42,750
Oakwood Homes Corporation......................... 1,600 61,400
---------
104,150
---------
181,700
---------
CONSUMER NON-DURABLE GOODS 2.4
Cosmetics & Toiletries - 1.2%
Gillette Company.................................. 1,600 83,400
---------
Retail Trade - 1.2%
Dollar General Corporation........................ 2,375 49,281
Kohl's Corporation (a)............................ 700 36,750
---------
86,031
---------
169,431
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GROWTH PORTFOLIO
- ----------------------------------------------------------------------------- 19
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
CONSUMER SERVICES 2.7
Hotels & Restaurants - 2.2%
La Quinta Inns, Incorporated...................... 1,700 46,538
McDonald's Corporation............................ 1,400 63,175
Wendys International, Incorporated................ 2,100 44,625
---------
154,338
---------
Leisure Time - 0.5%
Disney (Walt) Company............................. 600 35,400
---------
189,738
---------
FINANCE 8.0
Banks - 2.8%
Bank of Boston Corporation........................ 1,600 74,000
Fifth Third Bancorp............................... 800 58,600
Star Banc Corporation............................. 1,000 59,500
---------
192,100
---------
Financial Services - 2.1%
American Express Company.......................... 1,000 41,375
FINOVA Group, Incorporated........................ 1,300 62,725
Green Tree Financial Corporation.................. 1,600 42,200
---------
146,300
---------
Insurance - 3.1%
AFLAC, Incorporated............................... 1,000 43,375
American International Group, Incorporated........ 700 64,750
MGIC Investment Corporation....................... 1,200 65,100
SunAmerica, Incorporated.......................... 900 42,750
---------
215,975
---------
554,375
---------
GENERAL BUSINESS 8.2
Broadcasting - 1.2%
Capital Cities ABC, Incorporated.................. 700 86,363
---------
Business Services - 5.0%
America Online, Incorporated (a).................. 1,400 52,500
CUC International, Incorporated................... 1,500 51,187
First Data Corporation............................ 1,000 66,875
FIserv, Incorporated (a).......................... 1,800 54,000
Olsten Corporation................................ 1,300 51,350
Omnicom Group..................................... 2,000 74,500
---------
350,412
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GROWTH PORTFOLIO
20 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
Communication Services - 0.7%
Andrew Corporation (a)............................ 1,200 45,900
---------
Office Furnishings & Supplies - 1.3%
Danka Business Systems............................ 1,200 44,400
Staples, Incorporated (a)......................... 1,800 43,875
---------
88,275
---------
570,950
---------
TECHNOLOGY 24.1
Aerospace - 1.6%
McDonnell Douglas Corporation..................... 600 55,200
Watkins Johnson Company........................... 1,200 52,500
---------
107,700
---------
Computers & Business Equipment - 6.6%
3Com Corporation (a).............................. 1,600 74,600
Cabletron Systems, Incorporated (a)............... 500 40,500
Ceridian Corporation (a).......................... 2,000 82,500
Cisco Systems, Incorporated (a)................... 750 55,969
Dell Computer Corporation (a)..................... 1,600 55,400
EMC Corporation (a)............................... 3,600 55,350
Hewlett Packard Company........................... 600 50,250
International Business Machines................... 500 45,875
---------
460,444
---------
Electronics - 10.5%
ADC Telecommunications, Incorporated (a).......... 2,000 73,000
Arrow Electronics, Incorporated................... 800 34,500
Avnet, Incorporated............................... 800 35,800
DSC Communications Corporation (a)................ 1,300 47,937
Integrated Device Technology (a).................. 2,000 25,750
Intel Corporation................................. 1,000 56,750
KLA Instruments Corporation (a)................... 1,500 39,094
Kulicke & Soffa Industries, Incorporated.......... 1,800 41,850
Loral Corporation................................. 1,400 49,525
Micron Technology, Incorporated................... 1,300 51,512
Motorola, Incorporated............................ 800 45,600
Tellabs, Incorporated (a)......................... 1,000 37,000
Teradyne, Incorporated (a)........................ 1,600 40,000
Texas Industries, Incorporated.................... 1,100 58,300
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA GROWTH PORTFOLIO
- ----------------------------------------------------------------------------- 21
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- ----------
<S> <C> <C> <C>
Texas Instruments, Incorporated................ 800 41,400
Vishay Intertechnology, Incorporated (a)....... 1,680 52,920
----------
730,938
----------
Software - 5.4%
Broderbund Software, Incorporated (a).......... 1,000 60,750
Computer Associates International,
Incorporated................................. 1,200 68,250
HBO & Company.................................. 800 61,300
Microsoft Corporation (a)...................... 700 61,425
Oracle Systems Corporation (a)................. 1,650 69,919
Parametric Technology Corporation (a).......... 750 49,875
----------
371,519
----------
1,670,601
----- ----------
Total Common Stocks
(Cost $4,543,749)............................ 79.0 5,476,645
----------
<CAPTION>
PRINCIPAL
AMOUNT ($)
----------
<S> <C> <C> <C>
SHORT-TERM GOVERNMENT SECURITIES 14.4
Federal Home Loan Bank Consolidated Discount
Notes, 5.47%,
January 23, 1996 (b)
(Cost $996,675)............................... 1,000,000 996,675
----------
<CAPTION>
NUMBER
OF SHARES
----------
<S> <C> <C> <C>
MONEY MARKET MUTUAL FUNDS 4.9
The Seven Seas Series Money Market Fund [Class
A]........................................... 168,458 168,458
The Seven Seas Series US Government Money
Market Fund.................................. 170,297 170,297
----------
Total Money Market Mutual Funds
(Cost $338,755).............................. 338,755
----- ----------
SUMMARY
Total investment portfolio
(Cost $5,879,179) (Note 3)................... 98.3 6,812,075
Other assets and liabilities, net.............. 1.7 114,354
----- ----------
NET ASSETS...................................... 100.0 $6,926,429
===== ==========
</TABLE>
- ------------------------
NOTES:
(a) Non-income producing securities.
(b) Yield to maturity (unaudited).
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA VALUE PORTFOLIO
22 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ----------
<S> <C> <C> <C>
COMMON STOCKS
BASIC INDUSTRIES 6.7
Chemicals - 5.5%
duPont (EI) deNemours & Company.................. 800 55,900
Morton International, Incorporated............... 1,400 50,225
Nalco Chemical Company........................... 1,900 57,238
PPG Industries, Incorporated..................... 1,900 86,925
----------
250,288
----------
Plastics - 1.2%
Illinois Tool Works, Incorporated................ 900 53,100
----------
303,388
----------
CAPITAL GOODS 6.7
Construction & Mining Equipment - 1.2%
Caterpillar, Incorporated........................ 900 52,875
----------
Electrical Equipment - 4.4%
General Electric Company......................... 2,000 144,000
Premier Industrial Corporation................... 2,400 58,800
----------
202,800
----------
Pollution Control - 1.1%
Pall Corporation................................. 1,800 48,375
----------
304,050
----------
CONSUMER BASICS 15.5
Drugs & Health Care - 9.4%
Abbott Labs...................................... 1,900 79,325
American Home Products Corporation............... 1,100 106,700
Pfizer, Incorporated............................. 1,500 94,500
Schering-Plough Corporation...................... 1,800 98,550
US HealthCare, Incorporated...................... 1,000 46,500
----------
425,575
----------
Food & Beverages - 4.3%
Campbell Soup Company............................ 800 48,000
Coca-Cola Company................................ 700 51,975
CPC International, Incorporated.................. 1,400 96,075
----------
196,050
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA VALUE PORTFOLIO
- ----------------------------------------------------------------------------- 23
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
Household Products - 1.8%
Procter & Gamble Company......................... 1,000 83,000
---------
704,625
---------
CONSUMER DURABLE GOODS 3.2
Automobiles - 2.0%
Ford Motor Company............................... 3,200 92,800
---------
Household Appliances & Home Furnishings - 1.2%
Whirlpool Corporation............................ 1,000 53,250
---------
146,050
---------
CONSUMER NON-DURABLE GOODS 6.8
Cosmetics & Toiletries - 1.9%
Gillette Company................................. 900 46,913
International Flavors............................ 800 38,400
---------
85,313
---------
Photography - 1.2%
Eastman Kodak Company............................ 800 53,600
---------
Retail Trade - 3.7%
May Department Stores Company.................... 1,900 80,275
Walgreen Company................................. 3,000 89,625
---------
169,900
---------
308,813
---------
CONSUMER SERVICES 2.0
Hotels & Restaurants - 1.0%
McDonald's Corporation........................... 1,000 45,125
---------
Leisure Time - 1.0%
Disney (Walt) Company............................ 800 47,200
---------
92,325
---------
ENERGY 7.5
Domestic Oil - 2.9%
Mobil Corporation................................ 1,200 134,400
---------
International Oil - 3.6%
Exxon Corporation................................ 1,500 120,187
Royal Dutch Petroleum Company.................... 300 42,338
---------
162,525
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA VALUE PORTFOLIO
24 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
Petroleum Services - 1.0%
Halliburton Company............................... 900 45,563
---------
342,488
---------
FINANCE 15.8
Banks - 8.8%
First Chicago Corporation......................... 2,100 82,950
MBNA Corporation.................................. 1,300 47,938
Morgan (J.P.) & Company, Incorporated............. 1,400 112,350
National City Corporation......................... 2,900 96,062
NationsBank Corporation........................... 900 62,662
---------
401,962
---------
Financial Services - 4.4%
American Express Company.......................... 3,000 124,125
Federal National Mortgage Association............. 600 74,475
---------
198,600
---------
Insurance - 2.6%
American International Group, Incorporated........ 1,300 120,250
---------
720,812
---------
GENERAL BUSINESS 9.4
Business Services - 6.9%
Automatic Data Processing, Incorporated........... 1,400 103,950
Donnelley (R.R.) & Sons Company................... 3,100 122,062
General Motors Corporation [Class E].............. 1,700 88,400
---------
314,412
---------
Communication Services - 1.5%
SBC Communications, Incorporated.................. 1,200 69,000
---------
Office Furnishings & Supplies - 1.0%
Alco Standard Corporation......................... 1,000 45,625
---------
429,037
---------
SHELTER 1.4
Construction Materials - 1.4%
Masco Corporation................................. 2,000 62,750
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA VALUE PORTFOLIO
- ----------------------------------------------------------------------------- 25
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ---------
<S> <C> <C> <C>
TECHNOLOGY 11.1
Computers & Business Equipment - 4.8%
Compaq Computer Corporation (a)................... 2,200 105,600
Hewlett Packard Company........................... 600 50,250
Pitney Bowes, Incorporated........................ 1,400 65,800
---------
221,650
---------
Electronics - 5.7%
AMP, Incorporated................................. 2,000 76,750
Intel Corporation................................. 1,200 68,100
Raytheon Company.................................. 2,400 113,400
---------
258,250
---------
Software - 0.6%
Microsoft Corporation (a)......................... 300 26,325
---------
506,225
---------
TRANSPORTATION 1.6
Railroads & Equipment - 1.6%
Union Pacific Corporation......................... 1,100 72,600
---------
UTILITIES 7.7
Electric Utilities - 1.5%
Duke Power Company................................ 1,400 66,325
---------
Gas & Pipeline Utilities - 1.0%
Enron Corporation................................. 1,200 45,750
---------
Telephone - 5.2%
Ameritech Corporation............................. 2,000 118,000
AT&T Corporation.................................. 700 45,325
Bell Atlantic Corporation......................... 1,100 73,562
---------
236,887
---------
348,962
---- ---------
Total Common Stocks
(Cost $3,861,766)............................... 95.4 4,342,125
---------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST - GNA VALUE PORTFOLIO
26 -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C> <C> <C>
SHORT-TERM GOVERNMENT SECURITIES 14.3
United States Treasury Bill, 3.10%, January
18, 1996 (b)
(Cost $649,049)............................. 650,000 649,049
----------
<CAPTION>
NUMBER
OF SHARES
----------
<S> <C> <C> <C>
MONEY MARKET MUTUAL FUNDS 2.4
The Seven Seas Series Money Market Fund [Class
A].......................................... 57,763 57,763
The Seven Seas Series US Government Money
Market Fund................................. 51,242 51,242
----------
Total Money Market Mutual Funds
(Cost $109,005)............................. 109,005
----- ----------
SUMMARY
Total investment portfolio
(Cost $4,619,820) (Note 3).................. 112.1 5,100,179
Other assets and liabilities, net............. (12.1) (551,434)
----- ----------
NET ASSETS..................................... 100.0 $4,548,745
===== ==========
</TABLE>
- ------------------------
NOTES:
(a) Non-income producing securities.
(b) Yield to maturity (unaudited).
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 27
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GNA
ADJUSTABLE GNA GNA GNA
RATE GOVERNMENT GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Investments at market value
(identified cost $5,485,646,
$6,780,614, $5,879,179 and
$4,619,820, respectively)
(Notes 2 and 3)................. $5,713,465 $7,100,903 $6,812,075 $5,100,179
Cash.............................. 48 978 94 296
Receivables:
Fund shares sold................. 3 48,309 167,959 99,282
Dividends........................ 295 1,193 6,894 7,412
Interest......................... 45,397 60,269 -- --
Investments sold................. -- -- 25,379 --
Adviser (Note 4)................. 5,868 7,061 9,029 9,016
Daily variation margin on open
futures contracts (Notes 2 and
3)............................. -- 562 -- --
Deferred organizational costs
(Note 2)........................ 9,319 9,319 9,319 9,319
Prepaid expenses (Note 2)......... 140 146 97 66
---------- ---------- ---------- ----------
Total assets...................... 5,774,535 7,228,740 7,030,846 5,225,570
---------- ---------- ---------- ----------
LIABILITIES
Payables:
Fund shares redeemed............. 37 819 106 72
Investments purchased............ -- -- 63,425 643,954
Investments purchased--delayed
delivery....................... 80,180 -- -- --
Dividends........................ 9,957 11,856 -- --
Accrued management fee (Note 4).. 1,907 3,199 4,375 2,543
Other accrued expenses and
payables....................... 34,476 36,299 36,511 30,256
---------- ---------- ---------- ----------
Total liabilities................. 126,557 52,173 104,417 676,825
---------- ---------- ---------- ----------
NET ASSETS........................ $5,647,978 $7,176,567 $6,926,429 $4,548,745
========== ========== ========== ==========
NET ASSETS
Net assets consist of (Note 2):
Undistributed net investment
income......................... $ 13,526 $ 8,138 $ -- $ 1,391
Accumulated net realized gains... 51,845 142,894 114,376 87,100
Unrealized appreciation on
investments (Note 3)........... 227,819 320,289 932,896 480,359
Unrealized appreciation on
futures contracts (Note 3)..... -- 3,882 -- --
Shares of beneficial interest.... 5,354,788 6,701,364 5,879,157 3,979,895
---------- ---------- ---------- ----------
NET ASSETS........................ $5,647,978 $7,176,567 $6,926,429 $4,548,745
========== ========== ========== ==========
Outstanding shares of beneficial
interest of no par value........ 213,611 263,928 208,387 145,215
========== ========== ========== ==========
Net asset value, offering and
redemption price per share...... $26.44 $27.19 $33.24 $31.32
========== ========== ========== ==========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST
28 -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1995
<TABLE>
<CAPTION>
GNA
ADJUSTABLE GNA GNA GNA
RATE GOVERNMENT GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................... $ 42,317 $ 21,631 $ 56,387 $ 68,891
Interest........................... 280,510 406,070 10,181 10,920
-------- -------- ---------- --------
Total income....................... 322,827 427,701 66,568 79,811
-------- -------- ---------- --------
EXPENSES:
Management fee (Note 4)........... 21,241 31,935 34,065 20,356
Transfer agent fee................ 9,168 9,169 9,168 9,169
Custodian fee..................... 27,958 27,211 35,160 32,421
Amortization for organizational
costs (Note 2).................. 2,312 2,312 2,312 2,312
Registration fees................. 152 152 152 152
Audit fee......................... 12,881 12,881 12,881 12,881
Legal fee......................... 23,396 25,107 18,332 11,975
Insurance......................... 515 524 399 329
Trustees' fees and expenses....... 4,986 5,481 4,107 2,681
Other............................. 5,984 5,985 6,013 6,253
-------- -------- ---------- --------
Total expenses before reimbursement
from Adviser..................... 108,593 120,757 122,589 98,529
Reimbursement for expenses from
Adviser (Note 4)................. (71,422) (68,821) (75,721) (70,275)
-------- -------- ---------- --------
Expenses, net...................... 37,171 51,936 46,868 28,254
-------- -------- ---------- --------
Net investment income.............. 285,656 375,765 19,700 51,557
-------- -------- ---------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain from investment
transactions (Notes 2 and 3).... 63,800 154,781 115,086 87,100
Net realized loss from futures
contracts....................... -- (3,947) -- --
Net increase in unrealized
appreciation of investments
during the year................. 227,819 320,289 932,896 480,359
Net increase in unrealized
appreciation of futures
contracts during the year....... -- 3,882 -- --
-------- -------- ---------- --------
Net realized and unrealized gain on
investments...................... 291,619 475,005 1,047,982 567,459
-------- -------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........ $577,275 $850,770 $1,067,682 $619,016
======== ======== ========== ========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 29
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1995
<TABLE>
<CAPTION>
GNA
ADJUSTABLE GNA GNA GNA
RATE GOVERNMENT GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income......... $ 285,656 $ 375,765 $ 19,700 $ 51,557
Net realized gain from
investment transactions..... 63,800 154,781 115,086 87,100
Net realized loss from futures
contracts................... -- (3,947) -- --
Net increase in unrealized
appreciation of investments
during the year............. 227,819 320,289 932,896 480,359
Net increase in unrealized
appreciation of futures
contracts during the year... -- 3,882 -- --
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations... 577,275 850,770 1,067,682 619,016
Distributions to shareholders
from:
Net investment income......... (284,085) (375,567) (20,410) (50,166)
Share transactions:
Proceeds from sales of shares. 5,141,909 6,361,451 5,851,980 3,925,119
Proceeds from shares issued in
reinvestment of
distributions............... 274,129 363,712 20,411 50,166
Cost of shares redeemed....... (86,275) (48,824) (18,259) (20,415)
---------- ---------- ---------- ----------
Increase in net assets from
Portfolio share transactions. 5,329,763 6,676,339 5,854,132 3,954,870
---------- ---------- ---------- ----------
INCREASE IN NET ASSETS......... 5,622,953 7,151,542 6,901,404 4,523,720
Net assets at beginning of year
(original capital)........... 25,025 25,025 25,025 25,025
---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR...... $5,647,978 $7,176,567 $6,926,429 $4,548,745
========== ========== ========== ==========
UNDISTRIBUTED NET INVESTMENT
INCOME....................... $ 13,526 $ 8,138 $ -- $ 1,391
========== ========== ========== ==========
PORTFOLIO SHARE INFORMATION:
Shares sold................... 205,376 250,976 207,331 143,157
Shares issued in reinvestment
of distributions............ 10,523 13,782 621 1,743
Shares redeemed............... (3,289) (1,831) (566) (686)
---------- ---------- ---------- ----------
Increase in Portfolio shares
outstanding................. 212,610 262,927 207,386 144,214
========== ========== ========== ==========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA VARIABLE SERIES TRUST
30 -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JANUARY 3, 1995 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1995
The financial highlights set forth below include selected data for a share
outstanding throughout the year and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
GNA
ADJUSTABLE GNA GNA GNA
RATE GOVERNMENT GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR... $25.00 $25.00 $25.00 $25.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)............ 1.38 1.70 0.10 0.55
Net realized and unrealized gains on
investments........................ 1.44 2.19 8.24 6.31
------ ------ ------ ------
Total from investment operations..... 2.82 3.89 8.34 6.86
------ ------ ------ ------
LESS DISTRIBUTIONS FROM
Net investment income................ (1.38) (1.70) (0.10) (0.54)
------ ------ ------ ------
NET ASSET VALUE, END OF YEAR......... $26.44 $27.19 $33.24 $31.32
====== ====== ====== ======
TOTAL RETURN (%)**................... 11.50 15.99 33.37 27.68
RATIOS/SUPPLEMENTAL DATA
Ratios (%):
Expenses, net, to average daily net
assets (a)........................ 0.70* 0.90* 1.10* 1.10*
Expenses, gross, excluding
reimbursement for expenses, to
average daily net assets.......... 2.05* 2.09* 2.89* 3.87*
Net investment income to average
daily net assets.................. 5.38* 6.51* 0.47* 2.03*
Portfolio turnover.................. 36.47 129.71 65.88 41.67
Net Assets, end of year (millions)... $5.6 $7.2 $6.9 $ 4.5
(a) Reimbursement for expenses from
Adviser.......................... $0.346 $0.311 $0.380 $0.747
</TABLE>
- ------------------------
* Annualized.
** Periods less than one year are not annualized.
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 31
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION OF THE PORTFOLIOS. GNA Variable Series Trust (the "Trust") is
organized as a Delaware Business Trust under a Declaration of Trust dated
March 25, 1994, amended and restated August 22, 1994 and is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trust is a series of funds, currently com-
prised of four investment portfolios (the "Portfolios") that commenced invest-
ment operations as of January 3, 1995. These financial statements report on
the GNA Adjustable Rate Portfolio, GNA Government Portfolio, GNA Growth Port-
folio and GNA Value Portfolio. Shares of the Trust are offered only to a sepa-
rate account of Great Northern Insured Annuity Corporation, an affiliated in-
surance company which funds certain variable annuity contracts. As of December
31, 1995, the affiliated insurance company controlled the Portfolios by virtue
of ownership of all of the Portfolios' shares of beneficial interest.
2. SIGNIFICANT ACCOUNTING POLICIES. The Portfolios' financial statements are
prepared in accordance with generally accepted accounting principles, which
require the use of management's estimates. The following is a summary of sig-
nificant accounting policies of the Portfolios.
Securities Valuation. Long-term debt securities for which market quotations
are readily available are stated at market value. A security (including an op-
tion) listed or traded on an exchange is valued at its last sale price prior
to the time when assets are valued. Lacking any sales on that day, the secu-
rity is valued at the mean between the current closing bid and asked prices.
Other securities are, in general, valued at the last bid quotation if there
are market quotations readily available, or in the absence of such market quo-
tations, then at the fair value thereof as determined by or under authority of
the Trustees of the Trust utilizing such pricing services as may be deemed ap-
propriate. Investments in certain long-term debt securities not traded in an
organized market are valued on the basis of valuations furnished by indepen-
dent pricing services or broker/dealers which utilize information with respect
to market transactions and other information in such securities or comparable
securities. Short-term investments maturing within 60 days are valued at orig-
inal cost plus accreted discount or accrued interest which approximates market
value.
Futures Contracts. The Portfolios may purchase and sell interest rate
futures contracts ("future contracts") as a hedge against changes in interest
rates. Upon the entering of a futures contract, the Portfolios are required to
deposit with a broker an amount ("initial margin") equal to a certain percent-
age of the purchase price indicated in the futures contract. Subsequent pay-
ments ("variation margin") are made or received by the Portfolios each day,
dependent on the daily fluctuations in the value of the unrealized gains and
losses by the Portfolios. If the Portfolios enter into a closing transaction,
the Portfolios will realize, for book purposes, a gain or loss equal to the
difference between the value of the futures contract to sell and the futures
contract to buy. The Portfolios may be subject to risk upon
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
32 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
entering into futures contracts resulting from the imperfect correlation of
prices between the futures and securities markets.
Options on Futures Contracts. The Portfolios may also purchase or write
call and put options on listed futures as a hedge against changes in interest
rates. Options are valued in accordance with the security valuation policies
described above. Transactions in options on futures contracts involve similar
risks to those on futures contracts.
Securities Transactions and Related Investment Income. Sales and purchases
are accounted for on trade date. Realized securities gains or losses are de-
termined using the identified cost method for both financial and tax reporting
purposes. Interest income is accrued pro rata to maturity. Original issue dis-
count is accreted for financial and tax accounting purposes.
Securities Purchased on a When-Issued Basis. The Portfolios may enter into
firm commitment agreements ("TBA" or "when-issued" purchases) for the purchase
of securities at an agreed-upon price on a specified future date. The Portfo-
lios will not enter into such agreements for the purpose of investment lever-
age.
Liability for the purchase price and all the rights and risks of ownership of
the securities accrue to the Portfolios at the time they become obligated to
purchase the securities, although delivery and payment occur at a later date,
generally within 45 days (but not to exceed 120 days) of the date of the com-
mitment to purchase. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolios to
purchase the security at the price above the current market price on the date
of delivery and payment. During the time the Portfolios are obligated to pur-
chase such securities, they will maintain with the Custodian a segregated ac-
count with U.S. government securities or cash or cash equivalents (or a re-
ceivable for investment sold in connection therewith) of an aggregate current
value sufficient to make payment for the securities. At December 31, 1995, TBA
securities in the GNA Adjustable Rate Portfolio totaled to $79,453.
Repurchase Agreements. The Portfolios may enter into repurchase agreements
in order to generate additional income. Each repurchase agreement entered into
by the Portfolios will provide that the value of the collateral underlying the
repurchase agreement will always be at least 102% of the repurchase price, in-
cluding accrued interest, except for repurchase agreements entered into with a
broker/dealer or bank whose unsecured debt is rated AAA or whose commercial
paper is rated A-1 by Standard and Poor's or P-1 by Moody's, in which case the
value of the collateral will always be at least 100% of the repurchase price,
including accrued interest. The Portfolios will not enter into a repurchase
agreement having more than seven days remaining to maturity if, as a result,
such agreements, together with any other securities which are not readily mar-
ketable, would exceed 10% of the net assets of each Portfolio. In addition,
not more than
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED
one-third of the current market value of each Portfolio's total assets shall
constitute secured "loans" by each Portfolio under repurchase agreements.
Federal Income Taxes. As a Delaware Business Trust, each Portfolio is a
separate corporate taxpayer and determines its net investment income and capital
gains (or losses) and the amounts to be distributed to the Portfolio's share-
holders without regard to the income and capital gains (or losses) of the other
portfolios. It is the intent of the Portfolios to comply with the re-quirements
of the Internal Revenue Code which are applicable to regulated in-vestment
companies and to distribute substantially all of their taxable income and
realized gains to its shareholders. Accordingly, the Portfolios paid no federal
income taxes and no federal income tax provisions were required. For Federal
income tax purposes, any futures contracts or options on futures which remain
open at year-end are marked-to-market and the resultant net gain or loss is
included in Federal taxable income.
Distribution of Income and Gains. Net investment income for the GNA Adjust-
able Rate and GNA Government Portfolios are declared as dividend to sharehold-
ers of record as of the close of business each day and is paid to shareholders
monthly. Net investment income for the GNA Value Portfolio is declared and
paid quarterly. Net investment income for the GNA Growth Portfolio is declared
and paid annually. Distributions from net short-term gains are declared and
paid annually. Long-term realized gains, in excess of any available capital
loss carryforward, would be taxable to the Portfolios if not distributed and,
therefore, will be declared and paid to their shareholders annually.
Capital Accounts. The Portfolios report the undistributed net investment
income (accumulated net investment loss) and accumulated net realized gain
(loss) accounts on a basis approximating amounts available for future tax dis-
tributions (or to offset future taxable realized gains when a capital loss
carryforward is available). Accordingly, the Portfolios may periodically make
reclassifications among certain capital accounts without impacting the net as-
set value of the Portfolios.
Prepaid Expenses. Costs incurred for registration of shares are amortized
on a straight-line basis over the lesser of, the duration of the registration
period or 12 months. Insurance costs are amortized on a straight-line basis over
the duration of the insurance period.
Deferred Organizational Costs. Costs incurred by the Trust in connection
with its organization of the Portfolios have been deferred ratably and are be-
ing amortized over a 60 month period on a straight-line basis beginning at the
commencement of operations of the Portfolios.
Expenses. Expenses such as management fees, custodian fees, transfer agent
fees, and registration fees are charged directly to the Portfolios, while in-
direct expenses, such as audit fees, legal fees, trustee fees and expenses,
and insurance are allocated among the Portfolios principally based on their
relative net assets.
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
34 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3.PURCHASES AND SALES OF SECURITIES. During the year ended December 31, 1995,
purchases, sales and paydowns of securities, excluding short-term securities
and repurchase agreements for the Portfolios were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES PAYDOWNS
----------- ---------- --------
<S> <C> <C> <C>
GNA Adjustable Rate Portfolio.................. $ 7,456,433 $1,721,888 $455,704
GNA Government Portfolio....................... 13,789,871 6,678,379 662,513
GNA Growth Portfolio........................... 6,764,973 2,336,330 --
GNA Value Portfolio............................ 4,707,492 932,828 --
</TABLE>
The aggregate cost for federal income tax purposes for each Portfolio was as
follows:
<TABLE>
<S> <C> <C> <C>
GNA Adjustable Rate Portfolio............................ $5,485,646
GNA Government Portfolio................................. 6,781,012
GNA Growth Portfolio..................................... 5,879,179
GNA Value Portfolio...................................... 4,619,820
</TABLE>
Aggregate gross unrealized appreciation (depreciation) of investments for
each Portfolio at December 31, 1995 was as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
GNA Adjustable Rate Portfolio............ $ 228,898 $ 1,079 $227,819
GNA Government Portfolio................. 321,044 1,153 319,891
GNA Growth Portfolio..................... 1,037,709 104,813 932,896
GNA Value Portfolio...................... 507,469 27,110 480,359
</TABLE>
At December 31, 1995, the security pledged by the GNA Government Portfolio to
cover margin requirements for open futures contracts on United States Treasury
notes and for open option contracts on United States Treasury bond futures is
as follows:
<TABLE>
<CAPTION>
DESCRIPTION FACE VALUE MARKET VALUE
----------- ---------- ------------
<S> <C> <C>
Federal Home Loan Bank Bonds, 5.720%, 11/22/00.......... $100,000 $99,047
======== =======
</TABLE>
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Transactions by the GNA Government Portfolio in U.S. Treasury note futures
sold short were as follows:
<TABLE>
<CAPTION>
FACE REALIZED
CONTRACTS VALUE COST LOSS
--------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994.... -- $ --
Sold................................ (12) (1,307,687)
Closed.............................. (12) (1,307,687) $1,322,442 $(14,755)
--- ----------- ========== ========
Outstanding at December 31, 1995.... -- $ --
=== ===========
</TABLE>
Transactions by the GNA Government Portfolio in U.S. Treasury note futures
purchased were as follows:
<TABLE>
<CAPTION>
FACE REALIZED
CONTRACTS VALUE PROCEEDS GAIN
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994....... -- $ --
Purchased.............................. 16 3,337,875
Closed................................. (12) 2,502,944 $2,513,752 $10,808
--- ---------- ========== =======
Outstanding at December 31, 1995....... 4 $ 834,931
=== ==========
</TABLE>
Transactions by the GNA Government Portfolio in options purchased on U.S.
Treasury bond futures were as follows:
<TABLE>
<CAPTION>
FACE VALUE
COVERED BY
PURCHASED
OPTIONS COST
---------- ------
<S> <C> <C>
Outstanding at December 31, 1994............................. $ -- $ --
Purchased.................................................... 360,000 9,962
-------- ------
Outstanding at December 31, 1995............................. $360,000 $9,962
======== ======
</TABLE>
4.MANAGEMENT AND TRUSTEES' FEES.
GNA Adjustable Rate Portfolio. Under an Advisory agreement between the Port-
folio and GNA Capital Management, Inc., the Portfolio's investment adviser
(the "Adviser"), the Portfolio agrees to pay the Adviser a fee calculated at
an annual rate of 0.40% of the average daily net assets. The Adviser had
agreed to reimburse the Portfolio for expenses incurred to the extent that
such expenses exceed 0.70% of average daily net assets during the year ended
December 31, 1995. The expense reimbursement may be extended or modified by
the Adviser. The expense reimbursement is currently extended to December 31,
1996 by the Adviser. The Advisory agreement also provides that if, in any
year, the total of certain specified expenses of the Portfolio exceed the ex-
pense limitations applicable to the Portfolio imposed by the securities regu-
lations of any state in which it is then
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
36 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
registered to sell shares, the Adviser will waive all or a portion of its man-
agement fee equal to such excess. The Adviser is only required to reimburse
the Portfolio for any expenses which exceed state expense limitations up to
the amount of management fee paid or payable by the Portfolio during such
year. The total management fee for the year ended December 31, 1995 was
$21,241. The expenses reimbursed for the year ended December 31, 1995 were
$71,422 ($0.346 per share). The reimbursement for expenses by the Adviser is
being offset by the payables to the Adviser monthly. Any amount due from the
Adviser in excess of the amounts due to the Adviser is settled in cash within
15 days following month end.
The Adviser retained Standish, Ayer & Wood, Inc. (the "Sub-Adviser") to act as
portfolio manager of the Portfolio. As portfolio manager, the Sub-Adviser is
responsible for the actual investment of the Portfolio's assets (including the
placement of brokerage orders), under the general supervision of the Adviser
and the Board of Trustees.
GNA Government Portfolio. Under an Advisory agreement between the Portfolio
and GNA Capital Management, Inc., the Portfolio's investment adviser (the "Ad-
viser"), the Portfolio agrees to pay the Adviser a fee calculated at an annual
rate of 0.65% of the average daily net assets of the Portfolio if the average
daily net assets of the Portfolio and the Investors Trust Government Fund, a
series of another affiliated registered investment company, ("Combined Average
Daily Net Assets") equals to $500 million or less, 0.60% of the Portfolio's
average daily net assets if the Combined Average Daily Net Assets is greater
than $500 million and is equal to or less than $750 million, 0.55% of the
Portfolio's average daily net assets if the Combined Average Daily Net Assets
is greater than $750 million and is equal to or less than $1.25 billion, 0.50%
of the Portfolio's average daily net assets if the Combined Average Daily Net
Assets is greater than $1.25 billion and is equal to or less than $1.5 billion
and 0.45% of the Portfolio's average daily net assets if the Combined Average
Daily Net Assets exceed $1.5 billion. The Adviser had agreed to reimburse the
Portfolio for expenses incurred to the extent that such expenses exceed 0.90%
of the average daily net assets during the year ended December 31, 1995. The
expense reimbursement may be extended or modified by the Adviser. The expense
reimbursement is currently extended to December 31, 1996 by the Adviser. The
Advisory agreement also provides that if, in any year, the total of certain
specified expenses of the Portfolio exceed the expense limitations applicable
to the Portfolio imposed by the securities regulations of any state in which
it is then registered to sell shares, the Adviser will waive all or a portion
of its management fee equal to such excess. The Adviser is only required to
reimburse the Portfolio for any expenses which exceed state expense limita-
tions up to the amount of management fee paid or payable by the Portfolio dur-
ing such year. The total management fee for the year ended December 31, 1995
was $31,935 which was equivalent to an annual effective rate of 0.55% of aver-
age daily net assets. The expenses reimbursed for the year ended December 31,
1995 were $68,821 ($0.311 per share). The reimbursement for expenses by the
Adviser is
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED
being offset by the payables to the Adviser monthly. Any amount due from the
Adviser in excess of the amounts due to the Adviser is settled in cash within
15 days following month end.
GNA Growth Portfolio. Under an Advisory agreement between the Portfolio and
GNA Capital Management, Inc., the Portfolio's investment adviser (the "Advis-
er"), the Portfolio agrees to pay the Adviser a fee calculated at an annual
rate of 0.80% of the first $100 million of the Portfolio's average daily net
assets and 0.70% of the Portfolio's average daily net assets in excess of $100
million. The Adviser had agreed to reimburse the Portfolio for expenses in-
curred to the extent that such expenses exceed 1.10% of average daily net as-
sets during the year ended December 31, 1995. The expense reimbursement may be
extended or modified by the Adviser. The expense reimbursement is currently
extended to December 31, 1996 by the Adviser. The Advisory agreement also pro-
vides that if, in any year, the total of certain specified expenses of the
Portfolio exceed the expense limitations applicable to the Portfolio imposed
by the securities regulations of any state in which it is then registered to
sell shares, the Adviser will waive all or a portion of its management fee
equal to such excess. The Adviser is only required to reimburse the Portfolio
for any expenses which exceed state expense limitations up to the amount of
management fee paid or payable by the Portfolio during such year. The total
management fee for the year ended December 31, 1995 was $34,065. The expenses
reimbursed for the year ended December 31, 1995 were $75,721 ($0.380 per
share). The reimbursement for expenses by the Adviser is being offset by the
payables to the Adviser monthly. Any amount due from the Adviser in excess of
the amounts due to the Adviser is settled in cash within 15 days following
month end.
The Adviser retained Value Line, Inc. (the "Sub-Adviser") to act as portfolio
manager of the Portfolio. As portfolio manager, the Sub-Adviser is responsible
for the actual investment of the Portfolio's assets (including the placement
of brokerage orders), under the general supervision of the Adviser and the
Board of Trustees.
GNA Value Portfolio. Under an Advisory agreement between the Portfolio and
GNA Capital Management, Inc., the Portfolio's investment adviser (the "Advis-
er"), the Portfolio agrees to pay the Adviser a fee calculated at an annual
rate of 0.80% of the Portfolio's average daily net assets if the combined av-
erage daily net assets of the Portfolio and the Investors Trust Value Fund, a
series of another affiliated registered investment company, ("Combined Average
Daily Net Assets") equals to $100 million or less, and 0.70% of the Portfo-
lio's average daily net assets if the Combined Average Daily Net Assets ex-
ceeds $100 million. The Adviser had agreed to reimburse the Portfolio for ex-
penses incurred to the extent that such expenses exceed 1.10% of average daily
net assets during the year ended December 31, 1995. The expense reimbursement
may be extended or modified by the Adviser. The expense reimbursement is cur-
rently extended to December 31, 1996 by the Adviser. The Advisory agreement
also provides that if, in any year, the total of certain specified expenses of
the Portfolio exceed the expense limitations applicable to the Portfolio im-
posed by the securities regulations of any state
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
38 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
in which it is then registered to sell shares, the Adviser will waive all or a
portion of its management fee equal to such excess. The Adviser is only re-
quired to reimburse the Portfolio for any expenses which exceed state expense
limitations up to the amount of management fee paid or payable by the Portfolio
during such year. The total management fee for the year ended December 31, 1995
was $20,356 which was equivalent to an annual effective rate of 0.80% of aver-
age daily net assets. The expenses reimbursed for the year ended December 31,
1995 were $70,275 ($0.747 per share). The reimbursement for expenses by the Ad-
viser is being offset by the payables to the Adviser monthly. Any amount due
from the Adviser in excess of the amounts due to the Adviser is settled in cash
within 15 days following month end.
The Adviser retained Duff & Phelps Investment Management Co. (the "Sub-
Adviser") to act as portfolio manager of the Portfolio. As portfolio manager,
the Sub-Adviser is responsible for the actual investment of the Portfolio's as-
sets (including the placement of brokerage orders), under the general supervi-
sion of the Adviser and the Board of Trustees.
The Trust pays each Trustee not affiliated with the Adviser its proportionate
share of a fee of: (1) an annual fee of $2,000; and (2) a fee of $250 for each
meeting of the Board of Trustees attended plus all reasonable expenses associ-
ated with attendance at such meetings. The proportionate rate is allocated
among the portfolios principally based on their relative net assets. No remu-
neration is paid by the Trust to any Trustee or officer of the Portfolios who
is affiliated with the Adviser.
================================================================================
<PAGE>
GNA VARIABLE SERIES TRUST
- ----------------------------------------------------------------------------- 39
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board
of Trustees of GNA Variable Series Trust:
We have audited the accompanying statements of assets and liabilities of each
of the series of GNA Variable Series Trust (in this report comprised of GNA
Adjustable Rate Portfolio, GNA Government Portfolio, GNA Growth Portfolio and
GNA Value Portfolio (the "Portfolios")), for the period January 3, 1995 (com-
mencement of operations) to December 31, 1995, and the related statements of
operations, the statements of changes in net assets and the financial high-
lights for the year then ended. These financial statements are the responsi-
bility of the Portfolios' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. 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 De-
cember 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Portfolios enumerated above for the period January 3, 1995 (commencement of
operations) to December 31, 1995, the results of their operations, the changes
in their net assets and the financial highlights for the year then ended in
conformity with generally accepted accounting principles.
Boston, Massachusetts
February 12, 1996 [COOPERS & LYBREND LOGO APPEARS HERE]
================================================================================
<PAGE>
40 -----------------------------------------------------------------------------
VARIABLE INVESTMENT TRUST
GE INVESTMENT MANAGEMENT INCORPORATED, ADVISOR
GE U. S. EQUITY PORTFOLIO
REPORT FROM GENE BOLTON, HEAD OF THE PORTFOLIO'S MANAGEMENT TEAM
1995 was the best year for the U. S. stock market since 1958. For the year,
the market, as represented by the unmanaged S&P 500 Index, posted a total re-
turn of +37.6%. The market was driven by strong corporate profit gains, very
favorable news on inflation, declining interest rates, positive trends in defi-
cit reduction and a strong flow of funds into stock mutual funds.
For the year, the GE U. S. Equity Portfolio had a total return of +35.6%.
Our large overweighting in financial stocks was a significant plus, as these
were among the strongest stocks over the course of the year. We were also
overweighted and did well in capital goods. Well-managed companies like Allied
Signal and United Technologies were strong performers, as were restructuring
companies like Lockheed Martin and Eastman Kodak. The biggest negative factor in
the Portfolio was our cash position of 4% to 5%, which served as a drag on
performance during the year's bull market. We also were hurt by an
underweighting in consumer staples. Our underweighting in technology hurt per-
formance early in the year, but ultimately helped us in the fourth quarter when
that sector had a significant correction.
Historically, our strength has been in picking individual stocks, and we
will continue this approach in 1996. Our emphasis is on large capitalization
stocks, with an increased weighting in consumer staple stocks, an area that
should do well in the uncertain economic environment that we expect.
Additionally, we have slightly reduced our emphasis on deep value and contrarian
stocks, and have increased our emphasis on core value holdings, an area that has
done well for us in the past.
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GE U.S. Equity
- ---------------------
Portfolio --
- ------------
(1/3/95)
- --------
GE U.S. Equity S&P 500
Month Portfolio Stock Index
- -----------------------------------------------------------------
Dec 1994 $10,000 $10,000
Jan 1995 $10,180 $10,259
Feb 1995 $10,620 $10,659
Mar 1995 $10,940 $10,974
Apr 1995 $11,260 $11,297
May 1995 $11,693 $11,749
Jun 1995 $11,973 $12,022
Jul 1995 $12,387 $12,420
Aug 1995 $12,433 $12,451
Sep 1995 $12,873 $12,977
Oct 1995 $12,760 $12,931
Nov 1995 $13,340 $13,498
Dec 1995 $13,558 $13,758
Past performance is not indicative of future results.
See notes to performance (page 44)
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 41
Looking forward into 1996, consensus forecasts call for slow economic
growth, low inflation, and flat interest rates. This would appear to be a pos-
itive environment for the stock market, but, as always, there is uncertainty
with respect to corporate earnings - a key factor in stock valuations. We ex-
pect 1996 to be a year of increased volatility in the stock market, and one in
which stock selection will be the key to good performance. Longer term, we re-
main optimistic about the prospects for U. S. companies, considering their ex-
cellent competitive position in the world, and their continuing emphasis on
cost control and productivity. We believe the Portfolio is well-positioned for
what could be a volatile market over the next few quarters.
GE INTERNATIONAL EQUITY PORTFOLIO
REPORT FROM PORTFOLIO MANAGER RALPH LAYMAN
For the year ended December 31, 1995, the Morgan Stanley Europe, Australia
and Far East Index (EAFE), the Portfolio's unmanaged market index benchmark,
finished the year with a total return of +11.6%. This performance was a result
of strong performance in Europe and weak performance in Japan, where the mar-
ket remained weak and real economic growth was less than 1% in 1995. For the
full year, currency movements contributed roughly 160 basis points (1.60%) to
the EAFE total return.
For the year, the Portfolio had a total return of +17.7%. The Portfolio's
superior performance was the result of better company selection. The Swiss,
Swedish, and Dutch markets were the star performers, all helped significantly
by currency movements. The worst performing markets were Austria, Japan and
Italy. Some of the top performing companies in our Portfolio were Swiss Rein-
surance, Roche and Carrefour. Our small exposure to the Mexican market hurt
us.
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GE International
- -----------------------
Equity Portfolio --
- -------------------
(1/3/95)
- --------
GE International Morgan Stanley Europe,
Month Portfolio Australia and Far East Index
- ---------------------------------------------------------------------
Dec 1994 $10,000 $10,000
Jan 1995 $9,673 $9,618
Feb 1995 $9,893 $9,593
Mar 1995 $10,280 $10,194
Apr 1995 $10,727 $10,580
May 1995 $10,813 $10,457
Jun 1995 $11,027 $10,276
Jul 1995 $11,660 $10,919
Aug 1995 $11,227 $10,505
Sep 1995 $11,413 $10,713
Oct 1995 $11,320 $10,428
Nov 1995 $11,460 $10,720
Dec 1995 $11,774 $11,155
Past performance is not indicative of future results.
See Notes to Performance (page 44)
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
42 -----------------------------------------------------------------------------
Going forward, European economies may resume growth in the second half of
1996 as the reduction in capital goods inventories comes to an end. Now that
the U. S. dollar has strengthened, and we have seen interest rate cuts in the
U. S., there is considerable latitude for interest rate cuts in the European
region. In Japan, we expect the economic turnaround to be established at a
slower growth rate than consensus. The Japanese consumer sector is the most
promising, as the savings rate is high and deflation increases purchasing pow-
er. Japanese exports might also do well, but will be driven by yen movement.
The Pacific Rim continues to benefit from robust growth. We prefer the outlook
for Indonesia and the Philippines to the fast-growing economies of Malaysia
and Thailand. Hong Kong may prove to be interesting with its ties to China,
whose macro environment has stabilized with inflation falling below 10%.
Our strategy is to manage the Portfolio from the bottom-up, and invest in
particular companies rather than specific markets or sectors. Currently, we
are finding more undervalued growth companies in Continental Europe and are
overweighted in this region relative to our market index benchmark. Our in-
vestments in Japan are focused on global companies, where we remain
underweighted and cautious due to the recent performance of Japanese banks.
GE FIXED INCOME PORTFOLIO
REPORT FROM PORTFOLIO MANAGER BOB MACDOUGALL
U. S. bond markets rebounded strongly in 1995, posting the best returns in
10 years. This was in sharp contrast to the very poor year in the bond markets
in 1994. On February 2, 1995, the Federal Reserve raised the target for the
Federal Funds rate by 50 basis points (0.50%) to 6.00%. The market rallied
following this move, anticipating that the Fed had tightened enough to stave
off inflation. The rally was sustained over the course of the year by further
market acceptance of the so-called "Fed-engineered soft landing"--moderate
economic growth with low inflation. For the year, the bond market, as measured
by the unmanaged Lehman Brothers Aggregate Bond Index, posted a total return
of +18.5%. Corporate bonds lead the way with a total return of +22.3%, driven
by record profits and stable credit trends. As is typical in a rally, mort-
gage-backed securities lagged with a total return of +16.8%, due to the sec-
tor's shorter duration and accelerated prepayments.
At the Portfolio's inception in January, 1995, we remained somewhat defen-
sive on the bond market's prospects as growth and inflation appeared robust.
As a result, we structured the Portfolio to have somewhat lower sensitivity to
interest rate movements than the market overall. As our interest rate outlook
became more positive during the first quarter, we were unable to fully imple-
ment our desire to extend the Portfolio's maturity structure due to regulatory
limitations on realizing short-term capital gains. These factors caused the
Portfolio to underperform the market during its first two quarters of opera-
tion. Performance was more in line with the market during the second half as
we had greater flexibility to adjust the Portfolio. For the year, the Portfo-
lio's total return was +16.8%.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 43
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GE Fixed Income
- ----------------------
Portfolio--
- -----------
(1/3/95)
- --------
MONTH GE Fixed Income Portfolio Lehman Brothers Aggregate Bond Index
- -------------------------------------------------------------------------------
Dec 1994 $10,000 $10,000
Jan 1995 $10,188 $10,198
Feb 1995 $10,375 $10,441
Mar 1995 $10,453 $10,504
Apr 1995 $10,580 $10,651
May 1995 $10,939 $11,064
Jun 1995 $10,016 $11,144
Jul 1995 $10,989 $11,120
Aug 1995 $11,109 $11,254
Sep 1995 $11,210 $11,364
Oct 1995 $11,348 $11,511
Nov 1995 $11,521 $11,684
Dec 1995 $11,683 $11,848
Past performance is not indicative of future
results. See Notes to Performance (page 44)
Our outlook for 1996 is for the market to produce a mid-single digit
coupontype return. While the market could rally further, we do not expect to see
a repeat of 1995. In a more stable environment, we prefer a strategy favoring
yield over interest rate movements as the best way to add value. As a result, we
are overweighting mortgage-backed securities and corporate bonds, both of which
have an attractive yield spread over Treasuries.
GE MONEY MARKET PORTFOLIO
REPORT FROM PORTFOLIO MANAGER BOB MACDOUGALL
In February, 1995, the Fed raised the target for the Federal Funds rate by
50 basis points (0.50%) to 6.00%. The market rallied following this move, an-
ticipating that the Fed had tightened enough to stave off inflation. The rally
was sustained over the course of the year by further market acceptance of the
so-called "Fed-engineered soft landing"--moderate economic growth with low in-
flation. In July, the Fed reversed course and lowered short-term rates by 25
basis points. A second 25 basis point ease came in December. In this environ-
ment, the 90-day U. S. Treasury Bill had a total return of +6.1% for the year.
As a result of the Federal Reserve's tightening of monetary policy in 1994,
and anticipating further monetary policy tightening in 1995, we initially held
our average maturity to approximately 30 days. As the year progressed, it be-
came increasingly clear that this restrictive policy was slowing growth and
containing inflation expectations. So we gradually lengthened the average ma-
turity to about 50 days. In order to provide liquidity for some year-end re-
demptions, we allowed our average maturity to decline, but subsequently built
it back up to 50+ days. For the year, the Portfolio had a total return of
+5.7%.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
44 -----------------------------------------------------------------------------
AN INVESTMENT IN THE GE MONEY MARKET PORTFOLIO IS NEITHER INSURED, NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND NO ASSURANCE CAN BE GIVEN THAT THE GE
MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE .
[GRAPH APPEARS HERE]
Performance of a $10,000
- ------------------------
investment since inception
- --------------------------
of the GE Money Market
- ----------------------
Portfolio--
- -----------
(1/3/95)
- --------
Month GE Money Market Portfolio U.S. 90-Day Treasury Bill
- ---------------------------------------------------------------------------
Dec 1994 $10,000 10,000
Jan 1995 $10,040 10,054
Feb 1995 $10,084 10,101
Mar 1995 $10,132 10,153
Apr 1995 $10,179 10,205
May 1995 $10,228 10,258
Jun 1995 $10,275 10,309
Jul 1995 $10,322 10,359
Aug 1995 $10,369 10,411
Sep 1995 $10,414 10,455
Oct 1995 $10,461 10,503
Nov 1995 $10,506 10,550
Dec 1995 $10,572 10,606
Past performance is not indicative of future results.
See Notes to Performance below. The GE Money Market
Portfolio's 7 day current yield was 5.29% and
effective was 5.43% as of 12/31/95.
Looking forward into 1996, we look for additional easings by the Fed due to
the sluggish economy and subdued inflation. The potential for further market
rally exists, yet we anticipate 1996 being more stable than 1995.
The top priorities of the GE Money Market Portfolio are to ensure adequate
liquidity to meet investors' needs and to maintain a stable net asset value by
holding a diversified portfolio of high quality securities. We will not "reach
for yield" by buying what we would consider to be exotic derivatives. Therefore
our primary method of influencing performance is by adjusting the Portfolio's
average maturity--i.e., if we think that rates are going to rise, we shorten
the average maturity, and if we think that rates are going to decline, we
lengthen the average maturity.
NOTES TO PERFORMANCE:
Total returns assume changes in share price and reinvestment of dividends and
capital gains. Investment returns and principal value on an investment will
fluctuate and you may have a loss or gain when you sell your shares.
GEIM has agreed to waive or limit certain expenses as described in detail in
the prospectus of the Portfolios. Performance numbers are net of all Portfolio
operating expenses, but do not include any insurance charges imposed in connec-
tion with your variable insurance contract. If this performance information in-
cluded the effect of the insurance charges, performance numbers for each Port-
folio would be lower. In the absence of the expense limitation, the total re-
turns for each Portfolio would have been as follows: GE U.S. Equity Portfolio
35.3%, GE International Equity Portfolio 17.6%, GE Fixed Income Portfolio
16.3%, GE Money Market Portfolio 5.3%.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500), MSCI Europe Aus-
tralia and Far East Index (MSCI EAFE), Lehman Brothers Aggregate Bond Index
(LBKL), and the 90 Day U.S. Treasury Bill Index are unmanaged indices and do
not reflect the actual cost of investing in the instruments that comprise each
index.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 45
The S&P 500 Index is a composite of the prices of 500 widely held U.S. stocks
recognized by investors to be representative of the stock market in general.
The MSCI EAFE is a composite of 1,110 stocks of 20 countries located in Eu-
rope, Australia, New Zealand and the Far East. The LBKL is a composite index
of short, medium, and long-term bond performance and is widely recognized as a
barometer of the bond market in general. The 90 Day U.S. Treasury Bill Index
is the average return on three month U.S. Treasury Bills. The results shown
for the foregoing indices assume reinvestment of net dividends.
The Portfolios are actively managed and their composition will vary over time.
The specific holdings cited throughout the report are for illustrative pur-
poses and may not represent current or future investments of the Portfolios.
They are not intended to constitute a recommendation to purchase or sell any
of the specific securities cited.
VARIABLE INVESTMENT TRUST
GE INVESTMENT MANAGEMENT INCORPORATED, ADVISOR
Transfer Agent: State Street Bank and Trust Company
Custodian: State Street Bank and Trust Company
Independent Accountants: Price Waterhouse LLP
Legal Counsel: Willkie Farr & Gallagher
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
48 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCK - 92.1%
AEROSPACE - 2.7%
Boeing Co................................................. 279 $ 21,867
General Dynamics Corp..................................... 108 6,385
General Motors Corp. (Class H)............................ 248 12,183
Lockheed Martin Corp...................................... 805 63,595
McDonnell Douglas Corp.................................... 524 48,208
Raytheon Co. ............................................. 431 20,365
Rockwell International Corp............................... 238 12,584
United Technologies Corp. ................................ 627 59,487
----------
244,674
----------
AUTOMOTIVE - 1.9%
Eaton Corp. .............................................. 208 11,154
Ford Motor Co............................................. 1,936 56,144
General Motors Corp. ..................................... 1,208 63,873
Goodyear Tire & Rubber Co................................. 788 35,755
Stewart & Stevenson Services Inc.......................... 230 5,808
----------
172,734
----------
BANKS & FINANCIAL SERVICES - 9.3%
American Express Co. ..................................... 1,533 63,428
Bank of New York Inc. .................................... 655 31,931
BankAmerica Corp.......................................... 311 20,137
Barnett Banks Inc......................................... 63 3,717
BayBanks Inc. ............................................ 135 13,264
Beneficial Corp........................................... 822 38,326
Block H & R Inc........................................... 49 1,985
Boatmen's Bancshares Inc. ................................ 519 21,214
Chemical Banking Corp. ................................... 276 16,215
Citicorp.................................................. 1,108 74,513
Countrywide Credit Industries............................. 476 10,353
Dean Witter Discover & Co................................. 1,002 47,094
Edwards A G Inc........................................... 252 6,017
Federal National Mortgage Assoc........................... 1,164 144,481
First Chicago Corp........................................ 637 25,161
First Interstate Bancorp.................................. 202 27,573
Mellon Bank Corp.......................................... 407 21,876
Morgan (J.P.) & Co. Inc................................... 669 53,687
Nationsbank Corp.......................................... 205 14,273
Rollins Inc............................................... 78 1,726
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 47
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
Standard Federal Bancorporation........................ 141 $ 5,552
State Street Boston Corp............................... 320 14,400
Student Loan Marketing Assoc........................... 39 2,569
T. Rowe Price & Associates............................. 134 6,599
Transamerica Corp. .................................... 186 13,555
Travelers Group Inc.................................... 1,809 113,741
United States Bancorp.................................. 582 19,570
Wells Fargo & Co....................................... 124 26,784
----------
839,741
----------
BROADCASTING, ENTERTAINMENT & MEDIA - 4.2%
Capital Cities/ABC Inc................................. 347 42,811
Carmike Cinemas Inc.................................... 26 585(a)
Carnival Corp. (Class A)............................... 156 3,803
Catalina Marketing Corp................................ 58 3,640
Circus Enterprises Inc................................. 239 6,662
Comcast Corp. (Class A)................................ 1,480 26,917
Disney (Walt) Co....................................... 284 16,756
Donnelley (R.R.) & Sons Co. ........................... 941 37,052
Dun & Bradstreet Corp.................................. 523 33,864
Gannett Inc............................................ 821 50,389
Interpublic Group Cos. Inc............................. 473 20,516
Knight Ridder Inc. .................................... 67 4,188
Readers Digest Assoc. Inc. (Class A)................... 35 1,794
Reuters Holdings PLC ADR (Class B)..................... 922 50,825
Tele-Communications Inc................................ 791 21,258(a)
Tele-Communications Inc. (Class A)..................... 1,076 21,385(a)
Time Warner Inc........................................ 623 23,596
Viacom Inc. (Class B).................................. 307 14,544(a)
----------
380,585
----------
BUILDING MATERIALS & CONSTRUCTION - 0.3%
Masco Corp............................................. 161 5,051
Newmont Mining Corp.................................... 413 18,688
Sherwin Williams Co.................................... 149 6,072
----------
29,811
----------
CHEMICAL - 2.8%
Air Products & Chemicals Inc. ......................... 676 35,659
Airgas Inc. ........................................... 137 4,555(a)
Du Pont de Nemours (E.I.).............................. 1,558 108,865
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
48 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
Eastman Chemical Co.................................... 246 $ 15,406
FMC Corp............................................... 99 6,695(a)
Grace (WR) & Co........................................ 151 8,928
IMC Global Inc......................................... 338 13,816
Lubrizol Corp.......................................... 468 13,045
Morton International Inc............................... 947 33,974
Olin Corp.............................................. 82 6,088
Witco Corp............................................. 400 11,700
----------
258,731
----------
CONSUMER RELATED - 11.1%
American Stores Co..................................... 893 23,888
Anheuser Busch Cos. Inc................................ 1,055 70,553
Archer-Daniels Midland Co.............................. 910 16,380
Armstrong World Industries Inc......................... 336 20,832
Coca Cola Co........................................... 41 3,044
Colgate Palmolive Co................................... 742 52,125
Conagra Inc............................................ 477 19,676
CPC International Inc.................................. 423 29,028
Dole Food Inc.......................................... 272 9,520
Duracell International Inc............................. 61 3,157
Eastman Kodak Co....................................... 1,324 88,708
General Mills Inc...................................... 321 18,538
Kellogg Co............................................. 206 15,913
Marriot International Inc.............................. 68 2,601
McDonalds Corp......................................... 1,246 56,226
Nestle S.A. ........................................... 28 30,974
Penney J C Inc......................................... 201 9,573
Pepsico Inc............................................ 2,951 164,887
Philip Morris Cos. Inc................................. 1,564 141,542
Procter & Gamble Co.................................... 991 82,253
Ralston Purina Co...................................... 156 9,730
Rubbermaid Inc......................................... 132 3,366
Sara Lee Corp.......................................... 268 8,543
Scholastic Corp........................................ 31 2,410(a)
Stanhome Inc........................................... 172 5,010
Tambrands Inc.......................................... 113 5,396
Timken Co.............................................. 333 12,737
Tyson Foods Inc. (Class A)............................. 161 4,206
Wal Mart Stores Inc.................................... 4,127 92,342
----------
1,003,158
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 49
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
DIVERSIFIED MANUFACTURING - 5.0%
Allied Signal Inc...................................... 2,385 $ 113,287
Canadian Pacific Ltd................................... 998 18,089
Dover Corp............................................. 1,195 44,066
Hanson PLC ADR......................................... 1,301 19,840
ITT Corp. (new)........................................ 245 12,985
ITT Industries Inc..................................... 245 5,880
Loews Corp............................................. 755 59,173
Minnesota Mining & Manufacturing....................... 1,387 91,889
Tenneco Inc............................................ 520 25,805
Textron Inc............................................ 809 54,607
Trinova Corp........................................... 160 4,580
----------
450,201
----------
DRUGS, HEALTHCARE & COSMETICS - 10.5%
Abbott Laboratories.................................... 2,054 85,754
Allergan Inc........................................... 1,146 37,245
American Home Products Corp............................ 785 76,145
American Medical Response.............................. 136 4,420(a)
Arbor Drugs Inc........................................ 245 5,145
Arrow International Inc................................ 318 12,641
Avon Products Inc...................................... 260 19,598
Baxter International Inc............................... 755 31,616
Bristol-Myers Squibb Co................................ 1,249 107,258
Cardinal Health Inc.................................... 93 5,092
Dentsply International Inc............................. 94 3,760
Eli Lilly & Co......................................... 1,096 61,650
FHP International Corp................................. 693 19,750(a)
Gillette Co............................................ 90 4,691
International Flavours................................. 89 4,272
Johnson & Johnson...................................... 1,217 104,206
Lincare Holdings Inc................................... 75 1,875(a)
Living Centers of America Inc.......................... 97 3,395(a)
Merck & Co. Inc........................................ 1,932 127,029
Pfizer Inc............................................. 1,391 87,633
Pharmacia & Upjohn Inc................................. 832 32,240
Schering-Plough Corp................................... 774 42,376
Smithkline Beecham PLC ADR............................. 1,333 73,981
Warner Lambert Co...................................... 46 4,468
----------
956,240
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
50 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
ELECTRICAL & ELECTRONICS - 7.7%
ADT Ltd. .............................................. 640 $ 9,600(a)
Airtouch Communications................................ 1,647 46,528(a)
AMP Inc. .............................................. 1,309 50,233
Applied Materials Inc. ................................ 677 26,657(a)
BBC Brown Boveri....................................... 31 36,012
EG & G Inc. ........................................... 660 16,005
Emerson Electric Co. .................................. 1,225 100,144
General Instrument Corp. .............................. 82 1,917(a)
General Signal Corp. .................................. 619 20,040
Hewlett Packard Co. ................................... 1,269 106,279
Hubbell Inc. (Class B)................................. 1,096 72,062
Intel Corp. ........................................... 1,146 65,035
Molex Inc. (Class A)................................... 197 6,033
Motorola Inc. ......................................... 676 38,532
Northern Telecom Ltd. ................................. 274 11,782
Perkin Elmer Corp. .................................... 335 12,646
Philips Electronics N.V. .............................. 840 30,135
Sensormatic Electronics Corp. ......................... 85 1,477
Ucar International Inc. ............................... 178 6,007(a)
Varian Associates Inc. ................................ 764 36,481
VLSI Technology Inc. .................................. 47 852(a)
----------
694,457
----------
ELECTRIC UTILITIES - 2.5%
CMS Energy Corp. ...................................... 314 9,381
Dominion Resources Inc. ............................... 511 21,079
Illinova Corp. ........................................ 271 8,130
NIPSCO Industries Inc. ................................ 393 15,032
Pacificorp............................................. 1,200 25,500
Pinnacle West Capital Corp. ........................... 654 18,802
Portland General Corp. ................................ 268 7,806(a)
Public Service Co. Colorado............................ 311 11,002
Public Service Co. New Mexico.......................... 734 12,937(a)
Southern Co. .......................................... 1,844 45,408
Unicom Corp. .......................................... 1,610 52,727
----------
227,804
----------
ENERGY & ENERGY RELATED - 9.8%
Amerada Hess Corp. .................................... 93 4,929
Amoco Corp. ........................................... 1,196 85,962
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 51
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
Anadarko Petroleum Co. ................................ 401 $ 21,704
Atlantic Richfield Co.................................. 217 24,033
Baker Hughes Inc. ..................................... 788 19,207
Burlington Resources Inc. ............................. 986 38,700
Chevron Corp. ......................................... 333 17,483
Dresser Industries Inc................................. 319 7,776
Eastern Enterprises.................................... 335 11,809
Elf Aquitaine ADR...................................... 167 6,137
Exxon Corp............................................. 1,953 156,484
FPL Group Inc.......................................... 706 32,741
Mobil Corp............................................. 627 70,224
Nabors Industries Inc.................................. 707 7,865(a)
Occidental Petroleum Corp. ............................ 412 8,807
Phillips Petroleum Co.................................. 194 6,620
Royal Dutch Petroleum Co............................... 1,151 162,435
Santa Fe Energy Resources Inc.......................... 356 3,427(a)
Schlumberger Ltd. ..................................... 1,247 86,355
Texaco Inc............................................. 1,034 81,169
Unocal Corp............................................ 1,017 29,620
USX Marathon Group..................................... 488 9,516
----------
893,003
----------
FOREST PRODUCTS, PAPER & PACKAGING - 1.7%
Avery Dennison Corp.................................... 132 6,617
International Paper Capital Trust...................... 113 5,113(b)
International Paper Co................................. 284 10,757
Kimberly Clark Corp. .................................. 544 45,016
Mead Corp. ............................................ 642 33,544
Owens Illinois Inc. ................................... 648 9,396(a)
Weyerhaeuser Co. ...................................... 1,023 44,245
----------
154,688
----------
INDUSTRIAL PRODUCTS & SERVICES - 0.9%
Browning-Ferris Industries Inc......................... 459 13,540
Corning Inc............................................ 164 5,248
Ecolab Inc. ........................................... 96 2,880
Flightsafety International Inc......................... 63 3,166
Waste Management International PLC ADR................. 187 2,010(a)
Wheelabrator Technologies Inc.......................... 346 5,796(a)
WMX Technologies Inc. ................................. 1,618 48,338
----------
80,978
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
52 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
INSURANCE - 4.7%
American International Group Inc....................... 1,113 $ 102,952
Chubb Corp............................................. 110 10,643
CMAC Investment Corp................................... 147 6,468
CNA Financial Corp..................................... 53 6,016
General Reinsurance Corp. ............................. 312 48,360
ITT Hartford Group Inc................................. 245 11,852
Jefferson Pilot Corp. ................................. 24 1,755
Lincoln National Corp.................................. 752 40,420
Marsh & McLennan Cos................................... 393 34,879
Providian Corp. ....................................... 940 38,305
Reliastar Financial Corp. ............................. 254 11,271
St. Paul Cos. Inc...................................... 957 53,233
TIG Holdings Inc....................................... 1,691 48,193
UNUM Corp.............................................. 234 12,870
----------
427,217
----------
MACHINERY & MACHINE TOOLS - 1.1%
Caterpillar Inc........................................ 250 14,688
Cooper Industries Inc.................................. 318 11,687
Deere & Co. ........................................... 1,356 47,799
Ingersoll Rand Co...................................... 530 18,616
Tecumseh Products Co. (Class A)........................ 91 4,709
----------
97,499
----------
MERCHANDISING - 2.6%
Albertsons Inc......................................... 79 2,597
American Greetings Corp. (Class A)..................... 392 10,829
Charming Shoppes Inc................................... 1,066 3,065
Circuit City Stores Inc................................ 460 12,708
CUC International Inc.................................. 31 1,058(a)
Dayton Hudson Corp. ................................... 238 17,850
Federated Department Stores Inc. ...................... 1,132 31,130(a)
Home Depot Inc......................................... 689 32,986
Limited Inc. .......................................... 200 3,475
May Department Stores Co............................... 164 6,929
Melville Corp.......................................... 111 3,413
Price Costco Inc....................................... 830 12,658
Sears Roebuck & Co. ................................... 1,733 67,587
Sysco Corp............................................. 274 8,905
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 53
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
TJX Cos. Inc........................................... 38 $ 717
Toys 'R Us............................................. 734 15,964(a)
----------
231,871
----------
METALS - 0.5%
Barrick Gold Corp...................................... 476 12,555
Freeport McMoran Copper & Gold (Class A)............... 588 16,464
Inco Ltd............................................... 173 5,752
Nucor Corp. ........................................... 130 7,426
Reynolds Metals Co..................................... 61 3,454
----------
45,651
----------
NATURAL GAS - 0.4%
Enserch Corp........................................... 653 10,611
Petroleum Geo Services ADR............................. 42 1,050(a)
Sonat Inc.............................................. 522 18,596
Tosco Corp............................................. 150 5,719
----------
35,976
----------
OFFICE EQUIPMENT & SUPPLIES - 4.1%
Amdahl Corp. .......................................... 319 2,712
Apple Computer......................................... 162 5,164
Automatic Data Processing Inc.......................... 578 42,916
Cisco Systems Inc...................................... 173 12,910(a)
Compaq Computer Corp................................... 287 13,776(a)
Computer Associates International Inc.................. 549 31,224
Equifax Inc. .......................................... 2,404 51,385
First Data Corp........................................ 816 54,570
International Business Machines........................ 1,552 142,396
Microsoft Corp......................................... 78 6,845(a)
Pitney Bowes Inc....................................... 186 8,742
----------
372,640
----------
REAL ESTATE - 0.2%
Camden Property Trust.................................. 161 3,844
Castle and Cooke Inc. (new)............................ 91 1,519
Debartolo Realty Corp. ................................ 459 5,967
Glimcher Realty Trust.................................. 228 3,933
Oasis Residential Inc.................................. 138 3,139
----------
18,402
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
54 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
TELEPHONE & UTILITIES - 6.2%
American Telephone & Telegraph......................... 3,077 $ 199,236
Bellsouth Corp. ....................................... 1,185 51,547
Cellular Communications Inc. .......................... 228 11,343
Frontier Corp. ........................................ 172 5,160
GTE Corp. ............................................. 2,633 115,852
International Cabletel Inc. ........................... 982 24,059(a)
MCI Communications Corp. .............................. 1,190 31,089
NYNEX Corp. ........................................... 704 38,016
Pacific Telesis Group.................................. 578 19,435
SBC Communications Inc. ............................... 703 40,422
Sprint Corp. .......................................... 182 7,257
U.S. West Inc. ........................................ 510 18,233
----------
561,649
----------
TRANSPORTATION - 1.9%
AMR Corp. ............................................. 445 33,041(a)
Burlington Northern Santa Fe........................... 520 40,560
CSX Corp. ............................................. 486 22,174
Delta Air Lines Inc. .................................. 116 8,570
Pittston Services Group................................ 94 2,949
Union Pacific Corp. ................................... 1,026 67,716
----------
175,010
----------
TOTAL COMMON STOCK (Cost $6,817,858)................... 8,352,720
----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
BONDS AND NOTES - 0.2%
Banco Nacional de Mexico S.A.
7.00% 12/15/99....................................... $11,000 8,855(b)
Cemex
4.25% 11/01/97....................................... 8,000 6,760(b)
Exide Corp.
2.90% 12/15/05....................................... 8,000 6,230(b)
Valhi Inc.
9.25% 10/20/07....................................... 6,000 2,333(d)
----------
TOTAL BONDS AND NOTES (Cost $23,825)................... 24,178
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE U.S. EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 55
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
CONVERTIBLE BONDS - 0.3%
ADT Operations Inc.
6.50% 07/06/10...................................... $ 4,000 $ 1,870(d)
AMR Corp.
6.125% 11/01/24..................................... 21,000 21,735
Federated Department Stores Inc.
5.00% 10/01/03...................................... 3,000 2,992
----------
TOTAL CONVERTIBLE BONDS (Cost $26,086)................ 26,597
----------
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK - 0.6%
Citicorp, 10.75%...................................... 28 5,141
Ford Motor Co. (Series A), 8.40%...................... 167 15,823
Occidental Petroleum Corp., 7.75%..................... 315 17,325(b)
Reynolds Metals Co., 7.00%............................ 89 4,506
Santa Fe Energy Resources Inc. (Series A), 7.00%...... 167 3,194
St. Paul Capital LLC, 6.00%........................... 22 1,238
Unocal Corp., 7.00%................................... 107 5,858(b)
----------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $48,425)...... 53,085
----------
TOTAL INVESTMENTS IN SECURITIES (Cost $6,916,194)..... 8,456,580
----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT TERM INVESTMENTS - 1.1%
U.S. GOVERNMENT AGENCIES
Federal Home Loan Mortgage Corp. 5.60% 01/03/96 (Cost
$99,969)............................................ $100,000 99,969(d)
Other Assets and Liabilities, net 5.7%................. 514,547
----------
NET ASSETS - 100%...................................... $9,071,096
==========
</TABLE>
OTHER INFORMATION
- -------------------------------------------------------------------------------
The GE U.S. Equity Portfolio had the following long Futures Contract open at
December 31, 1995:
<TABLE>
<CAPTION>
NUMBER
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE GAIN
- -------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 March 1996 1 $309,225 $575
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE INTERNATIONAL EQUITY PORTFOLIO
56 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCK - 98.6%
AUSTRALIA - 3.8%
Brambles Industries Ltd. .............................. 10,527 $ 117,367
Burns Philip & Co. .................................... 56,746 126,955
----------
244,322
----------
AUSTRIA - 5.3%
Bohler Uddeholm........................................ 1,441 110,093(a)
Flughafen Wien AG...................................... 1,219 82,246
VA Technologie AG...................................... 1,124 142,752
----------
335,091
----------
DENMARK - 1.3%
ISS (Series B)......................................... 3,706 83,431
----------
FRANCE - 13.2%
Alcatel Alsthom........................................ 911 78,543
Banque Nationale Paris................................. 3,318 149,673
Carrefour.............................................. 304 184,436
Coflexip ADR........................................... 6,158 116,232
Total (Class B)........................................ 2,880 194,372
Valeo.................................................. 2,523 116,850
----------
840,106
----------
GERMANY - 13.2%
Deutsche Bank AG....................................... 2,162 102,441
Gehe AG................................................ 209 106,358
Gehe AG (new).......................................... 52 25,755(a)
Sap AG................................................. 863 130,548
SGL Carbon............................................. 1,217 94,170
Siemens AG............................................. 300 164,169
Veba AG................................................ 5,049 214,349
----------
837,790
----------
HONG KONG - 3.2%
Hopewell Holdings...................................... 93,280 53,682
Hutchison Whampoa Ltd. ................................ 24,900 151,670
----------
205,352
----------
ITALY - 2.9%
Eni Spa................................................ 5,753 20,105(a)
Istituto Mobilaire Italiano............................ 12,253 77,154
Stet (Savings)......................................... 42,362 86,424
----------
183,683
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE INTERNATIONAL EQUITY PORTFOLIO
- ----------------------------------------------------------------------------- 57
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ---------
<S> <C> <C>
JAPAN - 19.0%
Canon Inc. ........................................... 7,000 $ 126,780
DDI Corp. ............................................ 17 131,719
Ito Yokado Co......................................... 2,000 123,196
Murata Manufacturing Co. ............................. 3,000 110,411
Nippondenso Co. ...................................... 5,000 93,462
Rohm Co. ............................................. 3,000 169,395
Secom Co. ............................................ 3,000 208,620
Suzuki Motor Corp..................................... 14,000 155,932
Tokyo Steel Manufacturing............................. 5,000 92,010
---------
1,211,525
---------
MALAYSIA - 2.4%
AMMB Holdings Berhad.................................. 5,000 57,093
Telekom Malaysia...................................... 12,000 93,555
---------
150,648
---------
MEXICO - 1.3%
Grupo Carso S.A. de C.V. ADR.......................... 7,714 81,961(a,b)
---------
NETHERLANDS - 6.2%
Gucci Group N.V. ADR.................................. 2,963 115,187(a)
IHC Caland N.V........................................ 2,082 70,062
International Nederlanden............................. 1,669 111,495
Wolters Kluwer........................................ 1,033 97,719
---------
394,463
---------
PORTUGAL - 1.2%
Banco Comercial Portugues............................. 5,853 79,578
---------
SPAIN - 1.2%
Sevillana De Electricidad............................. 9,600 74,552
---------
SWEDEN - 4.8%
Astra AB.............................................. 3,092 122,475
Autoliv AB............................................ 1,888 110,328
Getinge............................................... 1,576 71,801
---------
304,604
---------
SWITZERLAND - 12.2%
BBC Brown Boveri...................................... 205 238,145
Nestle S.A............................................ 132 146,018
Roche Holdings AG..................................... 31 245,232
Schw Ruckversicher.................................... 125 145,427
---------
774,822
---------
</TABLE>
===============================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE INTERNATIONAL EQUITY PORTFOLIO
58 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
THAILAND - 1.0%
Siam Cement.............................................. 1,200 $ 66,503
----------
UNITED KINGDOM - 6.4%
Medeva................................................... 39,784 166,822
Reed International....................................... 8,384 127,798
Thorn EMI................................................ 4,799 113,025
----------
407,645
----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $5,343,646)....................................... 6,276,076
Other Assets and Liabilities, net 1.4%.................... 87,947
----------
NET ASSETS - 100%......................................... $6,364,023
==========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE FIXED INCOME PORTFOLIO
- ----------------------------------------------------------------------------- 59
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------
<S> <C> <C>
BONDS AND NOTES - 94.9%
U.S. TREASURIES - 18.9%
U.S. Treasury Bonds
7.625% 02/15/25...................................... $ 300,000 $ 366,843
12.00% 08/15/13...................................... 35,000 53,927
----------
420,770
----------
U.S. Treasury Notes
6.00% 08/31/97....................................... 12,000 12,148
6.125% 05/31/97...................................... 10,000 10,122
6.25% 08/31/00....................................... 70,000 72,417
6.50% 04/30/99....................................... 100,000 103,656
----------
198,343
----------
TOTAL U.S. TREASURIES (Cost $557,438)................. 619,113
----------
ASSET BACKED - 3.9%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25....................................... 7,944 7,817
Conti Mortgage Home Equity
7.63% 05/15/09....................................... 9,203 9,309
Discover Card Master Trust
6.70% 02/16/00....................................... 10,000 10,184
Fleetwood Credit Grantor Trust
6.55% 05/16/11....................................... 9,383 9,529
Household Finance Corp.
8.15% 03/19/96....................................... 9,127 9,164(e)
Premier Auto Trust
5.95% 12/06/98....................................... 10,000 10,053
Standard Credit Card Master Trust
6.55% 10/07/07....................................... 10,000 10,290
6.75% 06/07/00....................................... 60,000 61,631
----------
TOTAL ASSET BACKED (Cost $125,934).................... 127,977
----------
CORPORATE NOTES - 30.6%
American Home Products
7.70% 02/15/00....................................... 50,000 53,499
Capital One Bank
6.43% 06/29/98....................................... 50,000 50,648
Carter Holt Harvey Ltd.
8.875% 12/01/04...................................... 50,000 58,026
Foster Technology Inc.
6.75% 11/15/05....................................... 40,000 41,232
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE FIXED INCOME PORTFOLIO
60 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- ----------
<S> <C> <C>
General Motors Corp.
8.89% 08/18/03........................................ $ 25,000 $ 28,813
Great Atlantic & Pacific Tea Inc.
9.125% 01/15/98....................................... 50,000 52,713
HSBC Finance Nederland B.V.
7.40% 04/15/03........................................ 50,000 52,425(b)
Hydro Quebec
8.05% 07/07/24........................................ 50,000 57,088
Joy Technologies Inc.
10.25% 09/01/03....................................... 50,000 56,625
KFW International Finance Inc.
8.20% 06/01/06........................................ 50,000 58,359
Landeskreditbank Baden
7.875% 04/15/04....................................... 25,000 28,048
Merrill Lynch & Co. Inc.
6.64% 09/19/02........................................ 60,000 61,622
News America Holdings Inc.
10.125% 10/15/12...................................... 50,000 60,509
North Atlantic Energy Corp.
9.05% 06/01/02........................................ 50,000 51,688
Paramount Communications Inc.
5.875% 07/15/00....................................... 50,000 49,334
RJR Nabisco Inc.
8.00% 07/15/01........................................ 50,000 50,956
Smurfit Capital
7.50% 11/20/25........................................ 25,000 26,078
Tele-Communications Inc.
7.13% 02/02/98........................................ 50,000 51,118
Time Warner Entertainment Co. L.P.
10.15% 05/01/12....................................... 50,000 61,975
United Co. Financial Corp.
7.00% 07/15/98........................................ 50,000 51,016
----------
TOTAL CORPORATE NOTES (Cost $955,692).................. 1,001,772
----------
MORTGAGE-BACKED - 41.5%
Federal Home Loan Mortgage Corp.
6.50% 07/01/09-11/01/10............................... 115,483 116,096
7.00% TBA............................................. 80,000 80,700(c)
7.50% 10/01/25........................................ 341,761 350,411
----------
547,207
----------
</TABLE>
===============================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE FIXED INCOME PORTFOLIO
- ----------------------------------------------------------------------------- 61
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Federal National Mortgage Assoc.
8.00% 11/01/24..................................... $ 120,465 $ 124,756
8.50% 10/01/24..................................... 147,972 154,446
----------
279,202
----------
Government National Mortgage Assoc.
8.00% 04/15/17..................................... 141,790 149,033
9.00% 06/15/16-08/15/18............................ 121,872 129,998
9.50% 06/15/17..................................... 99,122 107,103
----------
386,134
----------
Collateralized Mortgage Obligations
American Southwest Financial Securities Corp.
1.078% 01/18/09.................................... 196,179 10,820(g)
Asset Securitization Corp.
7.10% 08/13/29..................................... 17,963 18,819
Federal Home Loan Mortgage Corp.
3.50% 11/15/07..................................... 37,000 31,022
Federal National Mortgage Assoc.
8.00% 07/01/24..................................... 43,634 9,818(g)
8.921% 10/01/24.................................... 43,494 36,426(d,f)
LB Commercial Conduit Mortgage Trust
7.144% 08/25/04.................................... 14,966 15,415
Merrill Lynch Mortgage Investor's Inc.
7.523% 06/15/21.................................... 19,873 20,406
----------
142,726
----------
TOTAL MORTGAGE-BACKED (Cost $1,320,864)............. 1,355,269
----------
TOTAL BONDS AND NOTES (Cost $2,959,928)............. 3,104,131
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
EXPIRATION DATE/ OF
STRIKE PRICE CONTRACTS
---------------- ---------
<S> <C> <C> <C>
CALL OPTIONS PURCHASED--0.0%
U.S. Treasury Note (Cost $117).......... Jan. 96/103.25 9 291
----------
TOTAL INVESTMENTS IN SECURITIES (Cost
$2,960,045)........................... 3,104,422
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
SHORT TERM INVESTMENTS - 3.1%
U.S. GOVERNMENT AGENCIES
Federal Home Loan Mortgage Corp.
5.60% 01/03/96 (Cost $99,969)........................ $ 100,000 99,969(d)
Other Assets and Liabilities, net 2.0%................. 66,804
----------
NET ASSETS - 100%...................................... $3,271,195
==========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE MONEY MARKET PORTFOLIO
62 -----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
---------- ----------
<S> <C> <C>
SHORT TERM INVESTMENTS - 91.4%
U.S. GOVERNMENTS(D) - 40.4%
Federal Home Loan Bank
5.35% 05/14/96.......................................... $ 180,000 $ 176,415
5.57% 02/02/96.......................................... 100,000 99,505
----------
275,920
----------
Federal Home Loan Mortgage Corp.
5.75% 01/02/96.......................................... 1,660,000 1,659,735
Federal National Mortgage Assoc.
5.50% 02/20/96.......................................... 130,000 129,007
----------
TOTAL U.S. GOVERNMENTS (Cost $2,064,662)................. 2,064,662
----------
COMMERCIAL PAPER (D) - 22.4%
Abbey National PLC
5.62% 02/23/96.......................................... 100,000 99,173
5.63% 02/23/96.......................................... 160,000 158,674
Chemical Bank and Trust Company
5.70% 01/17/96.......................................... 240,000 239,392
Kredietbank
5.70% 01/05/96.......................................... 210,000 209,867
Merrill Lynch & Co. Inc.
5.72% 01/03/96.......................................... 210,000 209,933
National Australia Funding
5.70% 01/12/96.......................................... 230,000 229,599
----------
TOTAL COMMERCIAL PAPER (Cost $1,146,638)................. 1,146,638
----------
CERTIFICATES OF DEPOSIT - 17.4%
Bank of Montreal
5.80% 01/25/96.......................................... 230,000 230,000
Bayerische Hypotheken Bank
5.78% 01/08/96.......................................... 240,000 240,000
Royal Bank of Canada
5.69% 01/02/96.......................................... 210,000 210,000
West Deutsche Landesbank
5.75% 01/04/96.......................................... 210,000 210,000
----------
TOTAL CERTIFICATES OF DEPOSIT (Cost $890,000)............ 890,000
----------
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST - GE MONEY MARKET PORTFOLIO
- ----------------------------------------------------------------------------- 63
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
---------- ----------
<S> <C> <C>
TIME DEPOSITS - 11.2%
Bank of Nova Scotia
5.78% 01/22/96......................................... $ 230,000 $ 230,000
Deutsche Bank AG
5.75% 01/08/96......................................... 210,000 210,000
State Street Cayman Islands
5.875% 01/02/96........................................ 130,000 130,000
----------
TOTAL TIME DEPOSITS (Cost $570,000)..................... 570,000
----------
TOTAL SHORT TERM INVESTMENTS (Cost $4,671,300)........... 4,671,300
Other Assets and Liabilities, net 8.6%................... 439,002
----------
NET ASSETS - 100%........................................ $5,110,302
==========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
64 -----------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 1995, these securities amounted to
$50,141, $81,961 and $52,425 or 0.6%, 1.3% and 1.6% of net assets for the
GE U.S. Equity, GE International Equity and GE Fixed Income Portfolios, re-
spectively.
(c) Settlement is on a delayed delivery or when issued basis with final matu-
rity to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) Floating rate coupon. The stated rate represents the rate at December 31,
1995.
(f) Principal only securities represent the right to receive the monthly prin-
cipal payments on an underlying pool of mortgages. No payments of interest
on the pool are passed through to the principal only holder.
(g) Interest only securities represent the right to receive the monthly inter-
est payments on an underlying pool of mortgages. Payments of principal on
the pool reduce the value of the interest only holding.
ABBREVIATIONS:
ADR - American Depository Receipt
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 65
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GE GE GE GE
U.S. INTERNATIONAL FIXED MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
market (cost $6,916,194,
$5,343,646, $2,960,045 and $0,
respectively)................. $8,456,580 $6,276,076 $3,104,422 $ 0
Short term investments
(at amortized cost)........... 99,969 0 99,969 4,671,300
Cash............................ 450,131 0 108,520 26,156
Foreign currency (cost $35,
$409,409, $0, and $0,
respectively)................. 35 409,390 0 0
Receivable for investments sold. 8,710 341,169 70,379 0
Income receivables.............. 20,193 10,716 43,468 16,565
Receivable for fund shares sold. 50,296 1,230 14,081 412,698
Deferred organizational costs... 24,036 24,036 24,036 24,036
Variation margin receivable..... 350 0 0 0
---------- ---------- ---------- ----------
Total assets.................... 9,110,300 7,062,617 3,464,875 5,150,755
---------- ---------- ---------- ----------
LIABILITIES
Distributions payable to
shareholders.................. 0 0 16,140 13,718
Payable for investments
purchased..................... 7,926 0 150,813 0
Payable for fund shares
repurchased................... 61 12,772 34 79
Payable to GEIM................. 31,217 33,804 26,693 26,656
Payable to custodian............ 0 652,018 0 0
---------- ---------- ---------- ----------
Total liabilities............... 39,204 698,594 193,680 40,453
---------- ---------- ---------- ----------
NET ASSETS...................... $9,071,096 $6,364,023 $3,271,195 $5,110,302
========== ========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in................ $6,592,639 $5,016,161 $3,010,500 $5,110,172
Undistributed/(overdistributed)
net investment income........ 0 5,059 (109) 130
Accumulated net realized gain.. 937,496 413,359 116,427 0
Net unrealized appreciation/
(depreciation) on:
Investments................... 1,540,386 932,430 144,377 0
Futures....................... 575 0 0 0
Foreign currency transactions. 0 (2,986) 0 0
---------- ---------- ---------- ----------
NET ASSETS...................... $9,071,096 $6,364,023 $3,271,195 $5,110,302
========== ========== ========== ==========
Shares outstanding
($.001 par value)............. 470,821 366,337 260,979 5,116,169
Net asset value, offering and
redemption price per share.... $ 19.27 $ 17.37 $ 12.53 $ 1.00
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
66 -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 3 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
GE GE GE GE
U.S. INTERNATIONAL FIXED MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................... $ 217,452 $ 170,669 $ 0 $ 0
Interest...................... 65,099 37,299 328,948 307,619
Less: Foreign taxes withheld.. (1,777) (19,333) 0 0
---------- ---------- -------- --------
Total income................... 280,774 188,635 328,948 307,619
---------- ---------- -------- --------
Expenses:
Advisory and administration
fees........................ 53,162 77,057 22,614 15,595
Transfer agent................ 7,000 7,000 7,000 7,000
Trustees' fees................ 6,796 6,508 3,336 3,359
Custody and accounting........ 1,291 1,237 634 638
Legal......................... 8,495 8,135 4,171 4,199
Audit......................... 16,991 16,270 8,341 8,398
Amortization of deferred
organizational expense...... 5,997 5,997 5,997 5,997
---------- ---------- -------- --------
Total expenses before waiver... 99,732 122,204 52,093 45,186
Less: Expenses waived or borne
by the advisor............... (22,406) (13,418) (18,169) (19,195)
---------- ---------- -------- --------
Net expenses................... 77,326 108,786 33,924 25,991
---------- ---------- -------- --------
Net investment income.......... 203,448 79,849 295,024 281,628
---------- ---------- -------- --------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain (loss) on:
Investments................... 1,060,686 473,552 259,037 98
Futures....................... 136,775 0 0 0
Written options............... 701 0 0 0
Foreign currency
transactions................ (1,784) (27,334) 0 0
INCREASE (DECREASE) IN
UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments................... 1,540,386 932,430 144,377 0
Futures....................... 575 0 0 0
Foreign currency
transactions................ 0 (2,986) 0 0
---------- ---------- -------- --------
Net realized and unrealized
gain on investments.......... 2,737,339 1,375,662 403,414 98
---------- ---------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $2,940,787 $1,455,511 $698,438 $281,726
========== ========== ======== ========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 67
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 3 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1995
<TABLE>
<CAPTION>
GE GE GE GE
U.S. INTERNATIONAL FIXED MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income.... $ 203,448 $ 79,849 $ 295,024 $ 281,628
Net realized gain on
investments, futures,
written options, and
foreign currency
transactions........... 1,196,378 446,218 259,037 98
Net increase in
unrealized
appreciation........... 1,540,961 929,444 144,377 0
----------- ---------- ---------- ------------
Net increase from
operations............. 2,940,787 1,455,511 698,438 281,726
----------- ---------- ---------- ------------
Distributions to
shareholders from:
Net investment income.... (207,780) (53,453) (301,130) (287,593)
Net realized gains....... (260,666) (60,193) (143,981) 0
----------- ---------- ---------- ------------
Total distributions....... (468,446) (113,646) (445,111) (287,593)
----------- ---------- ---------- ------------
Increase (decrease) in net
assets from operations
and distributions....... 2,472,341 1,341,865 253,327 (5,867)
----------- ---------- ---------- ------------
Share transactions:
Proceeds from sale of
shares................. 16,940,648 14,329,796 7,347,507 15,872,664
Value of distributions
reinvested............. 86,880 17,380 321,567 271,852
Cost of shares redeemed.. (10,448,773) (9,345,018) (4,671,206) (11,048,347)
----------- ---------- ---------- ------------
Net increase from share
transactions............ 6,578,755 5,002,158 2,997,868 5,096,169
----------- ---------- ---------- ------------
Total increase in net
assets.................. 9,051,096 6,344,023 3,251,195 5,090,302
NET ASSETS
Beginning of period....... 20,000 20,000 20,000 20,000
----------- ---------- ---------- ------------
End of period............. $ 9,071,096 $6,364,023 $3,271,195 $ 5,110,302
=========== ========== ========== ============
UNDISTRIBUTED/
(OVERDISTRIBUTED) NET
INVESTMENT INCOME, END
OF PERIOD............... $ 0 $ 5,059 $ (109) $ 130
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
68 -----------------------------------------------------------------------------
CHANGES IN PORTFOLIO SHARES
<TABLE>
<CAPTION>
GE U.S. GE INTERNATIONAL GE FIXED GE MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares sold by
subscription.......... 998,802 901,233 599,669 15,872,664
Issued for distributions
reinvested............ 4,523 1,002 25,466 271,852
Shares redeemed......... (533,837) (537,231) (365,823) (11,048,347)
-------- -------- -------- -----------
Net increase in
Portfolio shares...... 469,488 365,004 259,312 5,096,169
======== ======== ======== ===========
</TABLE>
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 69
FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING FOR THE PERIOD JANUARY 3
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
GE GE GE GE
U.S. INTERNATIONAL FIXED MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $15.00 $15.00 $12.00 $ 1.00
Income from investment operations:
Net investment income.............. 0.46 0.21 0.82 0.05
Net realized and unrealized gains
on investments................... 4.87 2.45 1.13 0.01
------ ------ ------ ------
Total income from investment
operations....................... 5.33 2.66 1.95 0.06
------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income............. 0.47 0.14 0.84 0.06
Net realized gains................ 0.59 0.15 0.58 0.00
------ ------ ------ ------
Total distributions................ 1.06 0.29 1.42 0.06
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.................... $19.27 $17.37 $12.53 $ 1.00
====== ====== ====== ======
TOTAL RETURN (a)................... 35.58% 17.74% 16.83% 5.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).................. $9,071 $6,364 $3,271 $5,110
Ratio of net investment income to
average net assets*............. 2.10% 0.88% 6.52% 5.41%
Ratio of expenses to average net
assets*......................... 0.80% 1.20% 0.75% 0.50%
Ratio of expenses to average net
assets before voluntary expense
limitation*..................... 1.03% 1.35% 1.15% 0.87%
Portfolio turnover rate........... 71% 60% 253% N/A
</TABLE>
- ------------------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and rein-
vestment of dividends and capital gains. Had the advisor not absorbed a
portion of expenses, total return would have been lower. Periods less than
one year are not annualized.
* Annualized for periods less than one year.
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
VARIABLE INVESTMENT TRUST
70 ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, DECEMBER 31, 1995
1. ORGANIZATION OF THE PORTFOLIOS. Variable Investment Trust (the "Trust") is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Trust was formed as a
Massachusetts business trust pursuant to a Declaration of Trust (as amended)
on February 25, 1994. The Declaration authorizes the Trust's Trustees to
create separate series, each with an unlimited number of shares of beneficial
interest. The Trust is comprised of five investment portfolios (the
"Portfolios"), only four of which are currently being offered through the
Power Portfolio Variable Annuity, as follows: GE U.S. Equity Portfolio, GE
International Equity Portfolio, GE Fixed Income Portfolio and GE Money Market
Portfolio.
Shares of the Trust are offered only to insurance company separate accounts
that fund certain variable contracts. These insurance companies may include
insurance companies affiliated with GE Investment Management Incorporated
("GEIM"), the investment advisor and administrator of each Portfolio. As of
December 31, 1995, Great Northern Insured Annuity Corporation, an affiliated
insurance company, controlled the Portfolios by ownership of virtually all of
the Portfolios' shares of beneficial interest. The Trust may in the future of-
fer shares of some or all of the Portfolios to variable life insurance sepa-
rate accounts.
The investment objective of GE U.S. Equity Portfolio is long-term growth of
capital, which the Portfolio seeks to achieve through investment primarily in
equity securities of U.S. companies. The investment objective of GE Interna-
tional Equity Portfolio is long-term growth of capital, which the Portfolio
seeks to achieve by investing primarily in foreign equity securities. The in-
vestment objective of GE Fixed Income Portfolio is to seek maximum income con-
sistent with prudent investment management and the preservation of capital,
which the Portfolio seeks to achieve by investing in fixed income securities.
The investment objective of GE Money Market Portfolio is to seek a high level
of current income consistent with the preservation of capital and the mainte-
nance of liquidity, which the Portfolio seeks to achieve by investing in a de-
fined group of short-term, U.S. dollar denominated money market instruments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The following summarizes the
significant accounting policies of the Trust:
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Security Valuation and Transactions. Securities for which exchange quota-
tions are readily available are valued at the last sale price, or if no sales
occurred
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 71
NOTES TO FINANCIAL STATEMENTS, CONTINUED
on that day, at the current quoted bid price. Certain fixed income securities
are valued by a dealer or by a pricing service based upon a computerized ma-
trix system, which considers market transactions and dealer supplied valua-
tions.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are principally traded. Written
options traded on an exchange are valued using the last sale price or, in the
absence of a sale, the last offering price, and options traded over-the-
counter are valued using dealer-supplied valuations.
Short term investments maturing within 60 days are valued at amortized cost or
original cost plus accrued interest, each of which approximates market value.
Portfolio positions which cannot be valued as set forth above are valued at
fair value under procedures approved by the Trustees.
GE Money Market Portfolio values its securities using the amortized cost meth-
od, which values securities initially at cost and thereafter assumes a con-
stant amortization to maturity of any discount or premium. Amortized cost ap-
proximates market value.
To secure prices or yields deemed advantageous at a particular time, the Port-
folios may purchase or sell securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the date of
the transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transac-
tion is negotiated. This may increase the risk if the other party involved in
the transaction fails to deliver and causes the Portfolios to subsequently in-
vest at less advantageous yields. In connection with such purchases, the Port-
folios are required to hold collateral (cash, Government securities or other
liquid, high grade debt obligations) with the Portfolios' custodian sufficient
to cover the purchase price, unless they enter into an offsetting contract for
the sale of equal securities and value.
Transactions are accounted for as of the trade date. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal income tax purposes.
Foreign Currency. Accounting records of the Portfolios are maintained in
U.S. dollars. Investment securities and other assets and liabilities and pur-
chases and sales of investment securities are denominated in foreign currency
and translated to U.S. dollars at the prevailing exchange rate on the respec-
tive dates of such transactions.
The Portfolios do not isolate that portion of the results of operations re-
sulting from changes in foreign exchange rates on investments from the fluctu-
ations arising from changes in market prices of securities held. Such fluctua-
tions are in-
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
72 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
cluded with the net realized and unrealized gain or loss from investments. Re-
ported net realized exchange gains or losses from foreign currency transactions
represent sale of foreign currencies, currency gains or losses between the
trade date and the settlement date on securities transactions and the differ-
ence between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Portfolios' books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities other than in-
vestments in securities at fiscal year end, as a result of changes in the ex-
change rate.
Income Taxes. It is each Portfolio's policy to comply with all sections of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income and gains to its shareholders and there-
fore no provision for federal income tax has been made. Each Portfolio is
treated as a separate taxpayer for federal income tax purposes.
Investment Income. Corporate actions (including cash dividends) are
recorded net of nonreclaimable tax withholdings on the ex-dividend date, except
for cer-tain foreign securities for which corporate actions are recorded as soon
as the Portfolios are informed. Interest income is recorded on the accrual
basis. All discounts on taxable bonds are amortized to call or maturity date,
whichever is shorter using the effective yield method.
Expenses. Expenses of the Trust which are directly identifiable to a
specific Portfolio are allocated to that Portfolio. Expenses which are not
readily iden-tifiable to a specific Portfolio are allocated in such a manner as
deemed equi-table, taking into consideration the nature and type of expense and
the rela-tive sizes of the Portfolios. All expenses of the Portfolios are paid
by the Investment Advisor and reimbursed by the Portfolios up to the voluntary
expense limitations.
Distributions to Shareholders. GE Fixed Income Portfolio and GE Money
Market Portfolio declare investment income dividends daily (paid monthly). GE
U.S. Eq-uity Portfolio and GE International Equity Portfolio declare and pay
dividends of net investment income annually. All Portfolios declare and pay net
realized capital gain distributions annually. The character of income and gains
to be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
include treatment of realized and unrealized gains and losses on foreign
currency transactions, paydown gains and losses on mortgage-backed securities,
losses on wash sale transactions and deferred organizational expenses.
Reclassifications are made to the Portfolios' capital accounts to reflect income
and gains avail-able for distribution (or available capital loss carryovers)
under income tax regulations. The calculation of net investment income per share
in the Finan-cial Highlights table excludes these adjustments.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 73
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Deferred Organizational Costs. Organizational expenses applicable to the
Portfolios have been deferred and are being amortized on a straight-line basis
over a period of five years from commencement of investment operations.
Repurchase Agreements. The Portfolios' custodian takes possession of the
collateral pledged for investments in repurchase agreements on behalf of the
Portfolios. It is the policy of the Portfolios to value the underlying collat-
eral daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Portfolios have the right to liq-
uidate the collateral and apply the proceeds in satisfaction of the obliga-
tion.
Futures and Options. Each Portfolio except the GE Money Market Portfolio
may invest in futures contracts and purchase and write options. These
investments involve, to varying degrees, elements of market risk and risks in
excess of the amount recognized in the Statement of Assets and Liabilities. The
face or contract amounts reflect the extent of the involvement the Portfolios
have in the particular classes of instruments. Risks may be caused by an
imperfect correlation between movements in the price of the instruments and the
price of the underlying securities and interest rates. Risks also may arise if
there is an illiquid secondary market for the instruments, or due to the
inability of counterparties to perform. The Portfolios will invest in these
instruments to hedge against the effects of changes in value of portfolio
securities due to anticipated changes in interest rates and/or market
conditions, to equitize a cash position, for duration management, or when the
transactions are economi-cally appropriate to the reduction of risk inherent in
the management of the Portfolios involved.
Upon entering into a futures contract, the Portfolios are required to
deposit either cash or securities in an amount (initial margin) equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Portfolios each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Portfolios recognize a realized gain or loss
when the futures contract is closed. The Portfolios will realize a gain or loss
upon the expiration or closing of an option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase cost
for a written put option, or the cost of the security for a purchased put or
call option is adjusted by the amount of premium received or paid.
Other. There are certain additional risks involved when investing in
foreign securities that are not inherent in domestic securities. These risks may
in-volve foreign currency exchange rate fluctuations, adverse political and eco-
nomic developments and the imposition of unfavorable foreign governmental laws
and restrictions.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
74 -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3.FEES AND COMPENSATION PAID TO AFFILIATES.
Advisory and Administration Fees. Compensation to GEIM, the Portfolios' In-
vestment Advisor and Administrator, a wholly owned subsidiary of General Elec-
tric Company, for investment advisory and administrative services, is paid
monthly based on the average daily net assets of each Portfolio. Such advisory
and administration fee is based on the annual rates listed in the table below.
Until further notice, GEIM has agreed to reduce other operating expenses (ex-
clusive of advisory and administration fees) for each Portfolio as indicated in
the following table:
<TABLE>
<CAPTION>
ANNUALIZED BASED ON AVERAGE DAILY NET ASSETS
-----------------------------------------------------
ADVISORY AND LIMITATION OF OTHER
ADMINISTRATION FEES OPERATING EXPENSES
---------------------- ----------------------
<S> <C> <C>
GE U.S. Equity
Portfolio............. .55% .25%
GE International Equity
Portfolio............. .85% .35%
GE Fixed Income
Portfolio............. .50% .25%
GE Money Market
Portfolio............. .30% .20%
</TABLE>
Trustees' Fees. The Portfolios pay no compensation to their Trustees who are
employees of GEIM. Trustees who are not GEIM employees receive an annual fee of
$5,000 and an additional fee of $500 for each Trustees' meeting attended.
4.AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION. Aggregate gross
unrealized appreciation/depreciation of investments for each Portfolio at
December 31, 1995, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
GE U.S. Equity Portfolio................. $ 1,599,736 $ 59,350 $ 1,540,386
GE International Equity Portfolio........ 1,135,803 203,373 932,430
GE Fixed Income Portfolio................ 145,416 1,039 144,377
</TABLE>
The aggregate cost of each Portfolio's investments was substantially the same
for book and federal income tax purposes at December 31, 1995.
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
- ----------------------------------------------------------------------------- 75
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5.OPTIONS. During the period ended December 31, 1995, the following option
contracts were written:
<TABLE>
<CAPTION>
GE U.S. EQUITY PORTFOLIO
-------------------------
NUMBER
OF CONTRACTS PREMIUM
------------ -----------
<S> <C> <C>
Balance as of January 3, 1995 ....................... 0 $ 0
Written.............................................. 4 1,551
Closed and Expired................................... (3) (1,329)
Exercised............................................ (1) (222)
------------ -----------
Balance as of December 31, 1995...................... 0 $ 0
============ ===========
6.INVESTMENT TRANSACTIONS. The cost of purchases and the proceeds from sales
of investments, other than U.S. Government obligations, short term investments
and options, for the period ended December 31, 1995, were:
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
GE U.S. Equity Portfolio............................. $ 11,587,276 $ 5,815,371
GE International Equity Portfolio.................... 9,604,865 4,734,771
GE Fixed Income Portfolio............................ 2,697,058 1,576,390
The cost of purchases and the proceeds from sales of long-term U.S. Government
obligations for the period ended December 31, 1995, were:
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
GE U.S. Equity Portfolio............................. $ 122,166 $ 40,155
GE International Equity Portfolio.................... 0 0
GE Fixed Income Portfolio............................ 10,242,480 8,582,035
</TABLE>
================================================================================
<PAGE>
VARIABLE INVESTMENT TRUST
76 -----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Trustees of Variable Investment Trust
In our opinion, the accompanying statements of assets and liabilities, includ-
ing the schedules of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects the financial position of GE U.S. Equity Portfolio, GE In-
ternational Equity Portfolio, GE Fixed Income Portfolio and GE Money Market
Portfolio, each a portfolio of Variable Investment Trust (the "Trust"), at De-
cember 31, 1995 and the results of their operations, the changes in their net
assets and the financial highlights for the period January 3, 1995 (commence-
ment of operations) through December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements and financial high-
lights (hereafter referred to as "financial statements") are the responsibil-
ity of the Trust's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reason-
able assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence support-
ing the amounts and disclosures in the financial statements, assessing the ac-
counting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by cor-
respondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, pro-
vide a reasonable basis for the opinion expressed above.
[LOGO OF PRICE WATERHOUSE LLP APPEARS HERE]
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 8, 1996
================================================================================
<PAGE>
[LOGO GNA APPEARS HERE] Great Northern Insured Annuity Corporation*
*Doing business in Texas as GNA Insurance Company
Two Union Square.Suite 5600.P.O.Box 490
Seatt;e. Washington 98111-0490
A10714 12/95