[POWER PORTFOLIO LOGO]
ANNUAL REPORT
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December 31, 1996
Dear Valued Customer:
I am pleased to present the annual report for the investment portfolios
available through GNA's Power Portfolio Variable Annuity. This report includes a
discussion from each portfolio manager of financial market activity during the
past twelve months, the positive and negative impacts of recent economic
developments on investment returns, and each portfolio manager's current market
perspective and economic outlook. This report also contains financial statements
and financial highlights for each of the investment portfolios.
I encourage you to regularly review your Power Portfolio Variable Annuity
account to ensure your investment allocation continues to satisfy your
investment objectives. The investment professionals representing the Power
Portfolio are available to assist you with your portfolio evaluations.
Please call the GNA Variable Annuity Service Center at 1-800-455-0870,
Monday-Friday, 8:45 AM - 5:15 PM with questions or comments about this report.
Thank you for investing with GNA.
Sincerely,
Scott A. Curtis
Vice President
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THE POWER PORTFOLIO VARIABLE ANNUITY IS OFFERED BY GNA DISTRIBUTORS, INC.
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2 Power Portfolio Variable Annuity
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TABLE OF CONTENTS
PAGE
----
Letter from the Vice President.......................................... 1
Table of Contents....................................................... 2
GNA VARIABLE SERIES TRUST
Listing of Trustees and Officers...................................... 3
Adviser's Market Review............................................... 5
Sub-Adviser Commentaries and Performance Graphs
GNA Growth Portfolio............................................... 6
GNA Value Portfolio................................................ 8
GNA Government Portfolio........................................... 11
GNA Adjustable Rate Portfolio...................................... 13
Notes to Performance.................................................. 17
Investment Portfolios................................................. 18
Financial Statements.................................................. 34
Financial Highlights.................................................. 38
Notes to Financial Statements......................................... 40
Report of Independent Accountants..................................... 46
Tax Information....................................................... 47
VARIABLE INVESTMENT TRUST
Listing of Trustees and Officers...................................... 48
Adviser Commentaries and Performance Graphs
GE U.S. Equity Portfolio........................................... 49
GE International Equity Portfolio.................................. 51
GE Fixed Income Portfolio.......................................... 53
GE Money Market Portfolio.......................................... 55
Notes to Performance.................................................. 57
Investment Portfolios................................................. 58
Financial Statements.................................................. 82
Financial Highlights.................................................. 86
Notes to Financial Statements......................................... 88
Report of Independent Accountants..................................... 94
This report is prepared for Certificateholders of the Power Portfolio and the
Paragon Power Portfolio Variable Annuities. 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 preceded by the annuity's current prospectus and
the current prospectuses of the portfolios available for investment thereunder.
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GNA Variable Series Trust 3
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GNA VARIABLE SERIES TRUST MUTUAL FUNDS
GROWTH PORTFOLIO o VALUE PORTFOLIO o GOVERNMENT PORTFOLIO o ADJUSTABLE RATE
PORTFOLIO
Annual Report
<TABLE>
<S> <C>
TRUSTEES AND OFFICERS SUB-ADVISERS ADVISER
PIERCE T. LINDBERG GNA CAPITAL MANAGEMENT, INC.
Trustee ADJUSTABLE RATE PORTFOLIO Seattle, Washington
EDWARD R. MCMILLAN STANDISH, AYER & WOOD, INC.
Trustee Boston, Massachusetts DISTRIBUTOR
DOUGLAS H. PEDERSEN GNA DISTRIBUTORS, INC.
Trustee VALUE PORTFOLIO Seattle, Washington
GEOFFREY S. STIFF DUFF & PHELPS INVESTMENT
Senior Vice President MANAGEMENT CO. COUNSEL
and Treasurer Chicago, Illinois GOODWIN, PROCTER & HOAR
CHARLES A. KAMINSKI Boston, Massachusetts
Senior Vice President GROWTH PORTFOLIO
VICTOR C. MOSES VALUE LINE, INC. CUSTODIAN & TRANSFER AGENT
Senior Vice President New York, New York STATE STREET BANK AND
THOMAS W. CASEY TRUST COMPANY
Vice President Boston, Massachusetts
JEROME R. POWERS
Vice President INDEPENDENT ACCOUNTANTS
STEPHEN N. DEVOS COOPERS & LYBRAND L.L.P.
Vice President Boston, Massachusetts
and Controller
EDWARD J. WILES, JR.
Vice President
and Secretary
SCOTT A. CURTIS
Vice President
J. NEIL MCMURDIE
Assistant Vice President
KARRI J. HARRINGTON
Assistant Secretary
</TABLE>
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4 GNA Variable Series Trust
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GNA Variable Series Trust 5
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FINANCIAL MARKET REVIEW
GNA CAPITAL MANAGEMENT, INC., ADVISER
During the year ended December 31, 1996, the financial markets
continued to provide participants with a roller coaster ride that
has been characteristic of the markets for the last few years.
Market perception of the economy went from slowing growth at the
end of 1995, to accelerating growth in the first half of 1996, to
moderate growth in third quarter 1996, to an expectation of above
trend growth in fourth quarter 1996. Annualized quarterly GDP
growth rates of +0.30%, +2.00%, +4.70%, and +2.10% for fourth
quarter 1995--third quarter 1996 retrospectively substantiated
market perceptions. Meanwhile, inflation, as measured by the
year-over-year change in the Consumer Price Index, moved up from
+2.50% in December 1995 to +3.30% in December 1996.
Because of the close connection between economic growth,
inflation expectations and interest rates, the bond market had a
volatile year. For example, the 5-year Treasury yield started the
period at 5.37%, declined to 5.13% in mid-February, rose to 6.85%
in mid-June, declined to 5.83% in late-November, and then rose to
6.21% at year end. Bond prices, which move in the opposite
direction of interest rates, mirrored these rate movements. In
this environment, the bond market, as measured by the Lehman
Brothers Aggregate Bond Index, had a total return of +3.63%, as
bond price declines somewhat offset coupon income for the year.
In the equity markets, stock prices were propelled higher by
increasing corporate profits and optimistic inflation
expectations. Major market indices moved to record highs
periodically throughout the year, while individual stocks that
reported disappointing earnings suffered immediate and sharp
declines. In this environment, the stock market, as measured by
the S&P 500 Stock Index, had a total return of +23%, well above
its long-term average.
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6 GNA Variable Series Trust-GNA Growth Portfolio
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FROM THE GROWTH PORTFOLIO SUB-ADVISER
VALUE LINE, INC.
PORTFOLIO MANAGER: ALAN N. HOFFMAN
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. Calendar 1996 was a very good year for stocks. Though no one
expected a duplication of the extraordinary returns of 1995, the
year started off with a bang. The market did take a "breathing
spell" in the summer, but since then the broad market has gone
almost straight up, setting record after record on the major
market indexes. However, certain sectors of the market didn't
participate in lockstep with the overall updraft.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST SIX AND TWELVE
MONTH PERIODS?
A. In general, the Portfolio performed well during the past six
and twelve months, with returns surpassing those of most indexes.
As stated above, we did have some short-term turbulence in some
sectors, including technology (which was largely responsible for
the summer downturn, and which ran into a headwind again after
Thanksgiving) and financial services (which responded negatively
to rising interest late in the year).
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. We maintain a constructive outlook for both the economy and
the financial markets during 1997. In addition to our forecast for
a slow-growth economic environment, we continue to believe that
inflation will remain benign, with the core levels of both
wholesale and consumer inflation expected at 2.5-3.0%. As
investors regain confidence in the sluggish disposition of the
economy, we expect that bond yields will ease to the 6.00% level
(or perhaps slightly lower) during 1997. Along with our outlook
for modest corporate profit growth, that translates into an upside
objective for the Dow Jones Industrial Average in the low-7,000
area.
Q. HOW HAVE YOU POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR
MARKET OUTLOOK?
A. We continue to focus on sectors that can produce
above-trendline revenue and profit growth over the next year,
including technology, financials, healthcare, and energy. If our
upside objectives for the Dow are met, we believe that a rolling
rotation may ensue during the year, in which investors lock in
profits from large-cap stocks and seek out undervalued smaller
caps, which have generally produced excellent earnings gains but
have dramatically underperformed the large caps over the past
several months.
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GNA Variable Series Trust-GNA Growth Portfolio 7
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Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
17.48% 25.18%
GNA Morningstar S&P 500
Growth Growth Fund Stock
Portfolio Average Index
1/3/95 10,000 10,000 10,000
1/95 10,120 10,160 10,260
2/95 10,564 10,444 10,658
3/95 10,819 10,737 10,974
4/95 11,001 10,949 11,293
5/95 11,317 11,252 11,739
6/95 12,110 11,740 12,015
7/95 12,951 12,326 12,415
8/95 13,006 12,434 12,448
9/95 13,451 12,772 12,970
10/95 13,259 12,558 12,925
11/95 13,579 13,026 13,493
12/95 13,336 13,094 13,743
1/96 13,677 13,355 14,216
2/96 13,940 13,822 14,490
3/96 13,966 13,822 14,490
4/96 14,317 14,308 14,703
5/96 14,848 14,681 15,082
6/96 14,245 14,451 15,144
7/96 13,513 13,576 14,470
8/96 14,242 14,101 14,777
9/96 15,406 14,889 15,607
10/96 15,301 14,958 16,038
11/96 16,228 15,813 17,249
12/96 15,657 15,631 16,927
Performance of a $10,000 investment since inception of the
GNA Growth Portfolio -- (1/3/95)
Past performance is not indicative of future results. See Notes
to Performance (page 17).
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8 GNA Variable Series Trust-GNA Value Portfolio
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FROM THE VALUE PORTFOLIO SUB-ADVISER
DUFF & PHELPS INVESTMENT MANAGEMENT, CO.
PORTFOLIO MANAGER: JEFFREY E. SIMMONS
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. The stock market experienced another good year with the S&P
500 up 23% for the year and 11.7% over the six months ended
December 31, 1996. The past six months could be characterized as a
turbulent period in which the equity markets experienced a flight
to quality based on concerns regarding economic growth and
inflation. While the markets experienced a modest correction,
ranging from 3-9% in July, markets recovered in August and
September as signs of slower economic growth became more evident.
The market finished off the year strongly in the fourth quarter as
investors cheered the results of the November elections and the
continuing good economic news.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST SIX AND TWELVE
MONTHS?
A. We have reduced the number of stocks in the Portfolio, and
have taken larger positions in companies for which we have a high
degree of confidence. These larger positions have, for the most
part benefited the Portfolio (General Electric, Chase Manhattan,
Gillette and National City).
The best and worst performing stocks held throughout the year
and past six months were:
<TABLE>
<CAPTION>
12 Months 6 Months
- --------------------------------------------- -----------------------------------------------------
Best Worst Best Worst
- ------------------- --------------------- ---------------------- --------------------------
<S> <C>
Intel +131% Mobil +13% Intel +79% Pepsi-Co -7%
Microsoft + 88% Morton +15% Compaq +51% American Home Product -6%
MBNA + 73% AIG +17% MBNA +47% Deere -2%
Compaq + 55% Masco +18% Microsoft +38% Eastman Kodak +1%
Gillette + 51% Pitney Bowes +20% National City +30% Oracle +6%
</TABLE>
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. Our outlook for GDP growth is 2.5% in 1997, in line with the
estimated rate for 1996. We expect corporate profits to slow from
an estimated 14% in 1996 to about 8% in 1997. We expect inflation
to remain in the 3-3.5% range for 1997 compared to 3.3% for 1996.
The Federal Reserve appears to be on hold with regard to interest
rates for the first half of 1997; however, this is far from a
certainty.
In our judgment, as this is written, the stock market is
currently slightly under-valued relative to the fixed income
markets. We expect investors will continue to shift toward high
quality companies with consistent earnings growth prospects as
profit growth slows in 1997.
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GNA Variable Series Trust-GNA Value Portfolio 9
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Q. HOW HAVE YOU POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR
MARKET OUTLOOK?
A. We have a modest overweighting in the defensive sector, mainly
in the drug and household product industries. Drug companies
should benefit from strong new product pipelines, favorable
demographics and less turmoil on the legislative front. The
household product companies we own should produce consistent
earnings and dividend growth in 1997 (Kimberly-Clark, Avon
Products, Gillette and Procter & Gamble). We increased our
overweighting in cyclicals recently as this sector historically
has performed well early in the year. We have focused on
diversified industrial companies and avoided some of the deeper
cyclical areas such as aluminum and steel companies.
We are significantly underweighted in the interest sensitive
sector because of our lack of representation in the utility
industries. Due to deregulation and other legislative issues, we
continue to be uncomfortable with the earnings and dividend
outlook for these companies and anticipate continuing to be
underweight in utilities. However, within the interest sensitive
sector, we do remain attracted to some bank stocks. Chase
Manhattan remains a significant position in the Portfolio. Chase
continues to benefit from improving fundamentals and cost cutting
resulting from its merger with Chemical Bank. Finally, we are
about equally weighted in the energy sector and slightly
underweighted in the technology sector. Energy companies offer
attractive yields, but with our outlook for falling energy prices
our enthusiasm is muted. Within technology, we continue to hold
the high quality market leaders such as Intel and Microsoft.
We anticipate that our emphasis on large capitalization, high
quality companies with consistent earnings growth prospects will
result in strong relative performance going forward. Also, we
believe that our strategy of reducing the number of holdings and
increasing positions in stocks in which we have the highest degree
of confidence will benefit the Portfolio.
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10 GNA Variable Series Trust-GNA Value Portfolio
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Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
22.29% 24.95%
S&P 500 GNA Morningstar
Stock Value Equity Income
Index Portfolio Fund Average
1/3/95 10,000 10,000 10,000
1/95 10,260 10,193 10,192
2/95 10,658 10,457 10,517
3/95 10,974 10,624 10,755
4/95 11,293 10,925 10,993
5/95 11,739 11,244 11,328
6/95 12,015 11,355 11,451
7/95 12,415 11,655 11,742
8/95 12,448 11,639 11,852
9/95 12,970 12,153 12,247
10/95 12,925 12,171 12,122
11/95 13,493 12,581 12,644
12/95 13,743 12,768 12,959
1/96 14,216 13,070 13,262
2/96 14,490 13,195 13,377
3/96 14,490 13,233 13,554
4/96 14,703 13,449 13,686
5/96 15,082 13,771 13,892
6/96 15,144 13,751 13,928
7/96 14,470 13,236 13,440
8/96 14,777 13,517 13,784
9/96 15,607 14,548 14,298
10/96 16,038 14,940 14,626
11/96 17,249 16,003 15,435
12,96 16,927 15,611 15,373
Performance of a $10,000 investment since inception of the GNA Value
Portfolio -- (1/3/95)
Past performance is not indicative of future results. See Notes to
Performance (page 17).
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GNA Variable Series Trust-GNA Government Portfolio 11
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FROM THE GOVERNMENT PORTFOLIO ADVISER
GNA CAPITAL MANAGEMENT, INC.
PORTFOLIO MANAGER: CHARLES A. KAMINSKI
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. 1996 broke ranks with recent year's bond market performance.
Unlike its recent predecessors, it spent the first half backing up
(yields) only to reverse in the second half. Much of this can be
attributed to the politics of 1996. During the first half of the
year uncertainty grew. Going into the second half, more and more
of that uncertainty disappeared with the markets verifying in
November that the status quo was preferable to alternatives.
Although stocks continued to rally into year end, bonds
noticeably weakened in December. Tight employment and a pick up in
wage inflation began to alter investor expectations for future
inflation.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST SIX AND TWELVE
MONTHS?
A. The Portfolio finished on a strong note given the back up in
interest rates during December. The Government Portfolio, with an
annual return of 3.38%, outperformed its peer groups, Morningstar
Government Bond-General and the Lipper Intermediate Government
universe, who had total returns of 2.45% and 2.44%, respectively.
The Portfolio outperformed its market index, the Lehman Government
Bond Index whose total return for the same twelve month period was
2.77%. Mortgage security spreads remained relatively unchanged for
the year and gave the Portfolio full benefit of the incremental
yield they offer over U.S. Treasury bonds. In addition, during the
second quarter we shifted strategy to a more neutral outlook on
rates because the forces moving rates appeared to be in balance.
During this period of time we sold options to enhance income. This
continued right through year-end.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. The bond market is being driven by two forces at this point in
time: 1) "How fast is the economy growing?" and 2) "Will tight
employment conditions fuel a jump in inflation?" Now that the new
government is at work, optimism will grow on the balance budget
front. Nevertheless, the Federal Reserve has already made
reference to "irrational exuberance" in the stock market. This
means that every piece of data coming out between now and the
Federal Open Market Committee meetings in February and March will
be scrutinized in an effort to predict whether the Federal Reserve
will be forced to raise short rates to cool the economy. Right
now, it appears to be a close call.
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12 GNA Variable Series Trust-GNA Government Portfolio
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Q. HOW HAVE YOU POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR
MARKET OUTLOOK?
A. We continue to maintain a neutral position on interest rates
and will continue to sell options to capture incremental income.
Should the 30-year Treasury bond approach 7.0%, we will begin to
extend the Portfolio in anticipation of lower rates. The fragility
of the Japanese financial system continues to be a wildcard and
could modify our views greatly depending on what plays out there
is this the second year of the engineered "work-out."
Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
3.38% 9.55%
GNA Lehman Morningstar
Government Government Government Bond--
Portfolio Bond Index General Fund Average
1/3/95 10,000 10,000 10,000
1/95 10,174 10,186 10,155
2/95 10,412 10,405 10,352
3/95 10,487 10,471 10,404
4/95 10,604 10,608 10,518
5/95 10,946 11,035 10,845
6/95 10,984 11,120 10,905
7/95 10,982 11,079 10,878
8/95 11,103 11,209 10,990
9/95 11,198 11,316 11,079
10/95 11,332 11,488 11,211
11/95 11,455 11,667 11,354
12/95 11,597 11,833 11,490
1/96 11,677 11,905 11,552
2/96 11,483 11,662 11,365
3/96 11,396 11,566 11,290
4/96 11,334 11,492 11,230
5/96 11,325 11,472 11,205
6/96 11,463 11,620 11,318
7/96 11,494 11,649 11,344
8/96 11,499 11,624 11,329
9/96 11,688 11,816 11,490
10/96 11,916 12,076 11,696
11/96 12,081 12,287 11,865
12/96 11,990 12,161 11,771
Performance of a $10,000 investment since inception of the GNA Government
Portfolio -- (1/3/95)
Past performance is not indicative of future results. See Notes to
Performance (page 17).
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GNA Variable Series Trust-GNA Adjustable Rate Portfolio 13
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FROM THE ADJUSTABLE RATE PORTFOLIO SUB-ADVISER
STANDISH, AYER & WOOD, INC.
PORTFOLIO MANAGER: LORI DRISCOLL
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. Most of the interest rate rise in 1996 occurred in the first
half of the year. Rates peaked by mid year, with a stable third
quarter, followed by a rally at the end of the year. For the full
year, yield levels rose about 70-80 basis points. However, yields
on short Treasuries (one year and under) rose considerably less.
The one year bill only moved up approximately 35 basis points.
Driving the upward trend in rates this past year has been a change
in expectations regarding the Federal Reserve's monetary policy.
With signs of renewed economic growth, rising interest rates
reflected the risk of higher inflation. Given tighter labor
markets, wage pressure concerns remain in the forefront.
Offsetting some inflationary pressures have been improved
productivity, declining benefit costs and a stronger U.S. dollar.
Looking ahead, some of the unresolved risks for the U.S. bonds
remain Treasury purchases from foreigners and the unprecedented
levels in stocks. While the implication of these risks are not
clear, it is likely the Fed will not raise rates to keep inflation
from rising until growth prospects strengthen in the coming year.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST SIX AND TWELVE
MONTHS?
A. In the moderately higher interest rate environment during
1996, adjustable rate mortgages performed favorably. Absent a Fed
tightening move, short term rates rose considerably less than
longer term yields. Thus, the risk that the upward coupon
adjustment of ARMs would be restricted by their annual caps did
not come into play. Yield spreads in the ARM sector narrowed
versus Treasuries as diminished cap risk and declining volatility
benefited returns. Also contributing to the favorable performance
of ARMs has been positive supply and demand conditions. With
relatively attractive incremental spread over Treasuries, ARMs
have attracted demand from investors looking for high quality
short duration assets. On the supply front, ARM issuance has been
fairly stable due to both a slowdown in refinancing activity and
borrowers' attraction to 30 year fixed rate mortgages.
Portfolio returns benefited from the tightening trend in ARMs
during the past year. The Portfolio's ARM position maintained a
slight bias toward GNMA ARMs with an incremental yield advantage
over FHLMC and FNMA ARMs. However, as rates rose, the latter
benefited from a generally shorter duration than the GNMA ARM
sector. Other spread product in the Portfolio, such as asset
backed securities and fixed rate mortgages, also experienced a
similar narrowing of yield spreads. In total, a favorable spread
environment and incremental yield advantage over Treasuries
enhanced the Portfolio's returns in 1996.
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14 GNA Variable Series Trust-GNA Adjustable Rate Portfolio
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Q. WHAT IS YOUR CURRENT MARKET OUTLOOK?
A. On the economic front, we continue to closely monitor the
momentum of economic growth. If job growth strengthens, pushing
the unemployment rate ever lower, there could be increasing wage
inflation pressures, ultimately pushing the Fed toward a tighter
monetary stance. Moderating this concern is the strength of the
U.S. dollar which has longer term bullish implications in slowing
export growth and low inflation. The weakness in global economies
will also likely moderate U.S. growth. Points of concern continue
to be the uncertainty surrounding foreign purchases of U.S.
Treasuries and the lofty stock market levels. Overall, we expect
growth to moderate, particularly given the already high debt level
of consumers. In this scenario, relatively low inflation levels
should persist and interest rates could move moderately lower from
1996's year end levels.
Q. HOW HAVE YOU POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR
MARKET OUTLOOK?
A. In 1997, if interest rates move moderately in either
direction, spread sectors should perform favorably. While spreads
are not likely to compress to the degree experienced in 1996,
sector returns should benefit from their incremental yield
advantage over Treasuries. If the very short end of the yield
curve remains steep, there is also value to be added from the
incremental return in rolling down the yield curve. The Portfolio
currently uses both Treasuries and call protected asset backeds to
enhance roll return. Barring a Fed tightening move and its
negative cap risk implications, our outlook for the adjustable
rate mortgage sector remains favorable. Relative to Treasuries,
the sector offers the benefits of an attractive yield advantage
and short duration to high quality investors. In the coming year,
we expect stable spread sectors will continue to benefit portfolio
returns.
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GNA Variable Series Trust-GNA Adjustable Rate Portfolio 15
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Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
5.60% 8.55%
GNA Lehman Morningstar
Adjustable Rate Brothers Government Bond--
Portfolio ARM Index ARM Fund Average
1/3/95 10,000 10,000 10,000
1/95 10,120 10,166 10,013
2/95 10,270 10,370 10,102
3/95 10,429 10,420 10,166
4/95 10,490 10,531 10,216
5/95 10,713 11,701 10,319
6/95 10,761 11,745 10,310
7/95 10,754 11,784 10,324
8/95 10,843 10,850 10,378
9/95 10,919 10,927 10,397
10/95 10,999 10,994 10,365
11/95 11,083 11,088 10,431
12/95 11,149 11,172 10,467
1/96 11,226 11,250 11,527
2/96 11,220 11,275 10,528
3/96 11,199 11,295 10,545
4/96 11,208 11,310 10,574
5/96 11,246 11,343 10,606
6/96 11,321 11,423 10,667
7/96 11,367 11,479 10,708
8/96 11,423 11,548 10,754
9/96 11,516 11,637 10,829
10/96 11,646 11,770 10,917
11/96 11,733 11,883 10,993
12/96 11,769 11,921 11,010
Performance of a $10,000 investment since inception of the GNA Adjustable
Rate Portfolio -- (1/3/95)
Past performance is not indicative of future results. See Notes to
Performance (page 17).
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16 GNA Variable Series Trust
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GNA Variable Series Trust 17
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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 the 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 Variable
Annuity. If total returns included the effects of these charges and expenses,
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 Brothers
ARM Index are unmanaged indices and do not reflect the actual cost of investing
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 Adviser and
Sub-Advisers only through December 31, 1996, the end of the period of this
report. The Adviser's and Sub-Advisers' views are subject to change at any time
based on market and other conditions.
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18 GNA Variable Series Trust-GNA Growth Portfolio
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INVESTMENT PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
<S> <C>
COMMON STOCKS 93.7
BASIC INDUSTRIES-6.4
CHEMICALS-4.4%
Airgas, Incorporated (a)......................................... 7,200 158,400
Millipore Corporation............................................ 3,000 124,125
Monsanto Company................................................. 3,400 132,175
Praxair, Incorporated............................................ 3,000 138,375
-----------
553,075
-----------
CONSTRUCTION-0.8%
Texas Industries, Incorporated................................... 2,000 101,250
-----------
CONTAINERS & GLASS-1.2%
Sealed Air Corporation (a)....................................... 3,500 145,688
-----------
800,013
-----------
CAPITAL GOODS-2.5
AGRICULTURAL MACHINERY-0.9%
Deere & Company.................................................. 2,700 109,688
-----------
CONSTRUCTION & MINING EQUIPMENT-1.6%
Dover Corporation................................................ 4,000 201,000
-----------
310,688
-----------
CONGLOMERATES-2.8
Danaher Corporation.............................................. 4,600 214,475
Thermo Electron Corporation...................................... 3,150 129,938
-----------
344,413
-----------
CONSUMER BASICS-18.3
DRUGS & HEALTH CARE-15.0%
Amgen, Incorporated (a).......................................... 2,600 141,375
Boston Scientific Corporation (a)................................ 2,100 126,000
HBO & Company.................................................... 1,600 95,000
HealthCare Compare Corporation (a)............................... 2,200 93,225
Invacare Corporation............................................. 4,800 132,000
Johnson & Johnson................................................ 2,200 109,450
Medtronic, Incorporated.......................................... 2,600 176,800
Merck & Company, Incorporated.................................... 1,600 126,800
Omnicare, Incorporated........................................... 3,600 115,650
Oxford Health Plans, Incorporated (a)............................ 2,900 169,831
Pfizer, Incorporated............................................. 2,000 165,750
</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, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
<S> <C>
Schering Plough Corporation...................................... 2,000 129,500
Stryker Corporation.............................................. 5,600 167,300
U.S. Surgical Corporation........................................ 3,000 118,125
-----------
1,866,806
-----------
FOOD & BEVERAGES-0.9%
Coca-Cola Company................................................ 2,200 115,775
-----------
HOUSEHOLD PRODUCTS-1.2%
Tupperware Corporation........................................... 2,800 150,150
-----------
RETAIL GROCERY-1.2%
Great Atlantic & Pacific Tea, Incorporated....................... 4,700 149,813
-----------
2,282,544
-----------
CONSUMER DURABLE GOODS-1.7
AUTOMOBILES-1.7%
Harley Davidson, Incorporated.................................... 4,400 206,800
-----------
CONSUMER NON-DURABLE GOODS-8.7
APPAREL & TEXTILES-2.0%
Albany International Corporation................................. 5,400 124,875
Nike, Incorporated............................................... 2,000 119,500
-----------
244,375
-----------
COSMETICS & TOILETRIES-1.2%
Gillette Company................................................. 2,000 155,500
-----------
RETAIL TRADE-5.5%
CompUSA, Incorporated (a)........................................ 6,000 123,750
Dollar General Corporation....................................... 3,843 122,976
Gap, Incorporated................................................ 3,600 108,450
Home Depot, Incorporated......................................... 2,300 115,287
Kohl's Corporation (a)........................................... 2,800 109,900
Petsmart, Incorporated (a)....................................... 4,800 105,000
-----------
685,363
-----------
1,085,238
-----------
CONSUMER SERVICES-3.0
HOTELS & RESTAURANTS-3.0%
Hilton Hotels Corporation........................................ 4,000 104,500
La Quinta Inns, Incorporated..................................... 6,000 114,750
McDonald's Corporation........................................... 3,400 153,850
-----------
373,100
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
20 GNA Variable Series Trust-GNA Growth Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
ENERGY-2.1
<S> <C>
DOMESTIC OIL-1.0%
Louisiana Land & Exploration Company............................. 2,200 117,975
-----------
GAS EXPLORATION-1.1%
BJ Services Company (a).......................................... 2,800 142,800
-----------
260,775
-----------
FINANCE-14.2
BANKS-6.8%
Bank of Boston Corporation....................................... 2,100 134,925
Citicorp......................................................... 1,300 133,900
Fifth Third Bancorp.............................................. 3,000 188,437
Star Banc Corporation............................................ 2,000 183,750
Zions Bancorp.................................................... 2,000 208,000
-----------
849,012
-----------
FINANCIAL SERVICES-3.5%
CUC International, Incorporated (a).............................. 6,300 149,625
Finova Group, Incorporated....................................... 2,600 167,050
Green Tree Financial Corporation................................. 3,000 115,875
-----------
432,550
-----------
INSURANCE-3.9%
American International Group, Incorporated....................... 1,200 129,900
MGIC Investment Corporation...................................... 2,400 182,400
SunAmerica, Incorporated......................................... 4,000 177,500
-----------
489,800
-----------
1,771,362
-----------
GENERAL BUSINESS-7.0
BUSINESS SERVICES-4.4%
First Data Corporation........................................... 3,000 109,500
FIserv, Incorporated (a)......................................... 5,400 198,450
Omnicom Group.................................................... 2,800 128,100
Robert Half International, Incorporated (a)...................... 3,400 116,875
-----------
552,925
-----------
COMMUNICATION SERVICES-1.1%
Cascade Communications Corporation (a)........................... 1,900 104,737
Loral Space & Communications (a)................................. 1,800 33,075
-----------
137,812
-----------
</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, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
<S> <C>
OFFICE FURNISHINGS & SUPPLIES-1.5%
Danka Business Systems........................................... 2,400 84,900
Staples, Incorporated (a)........................................ 5,500 99,344
-----------
184,244
-----------
874,981
-----------
TECHNOLOGY-25.0
AEROSPACE-1.2%
McDonnell Douglas Corporation.................................... 2,400 153,600
-----------
COMPUTERS & BUSINESS EQUIPMENT-9.5%
3Com Corporation (a)............................................. 4,200 308,175
Cabletron Systems, Incorporated (a).............................. 2,400 79,800
Ceridian Corporation (a)......................................... 2,700 109,350
Cisco Systems, Incorporated (a).................................. 2,000 127,250
Dell Computer Corporation (a).................................... 4,400 233,750
EMC Corporation Massachusetts (a)................................ 3,600 119,250
Hewlett Packard Company.......................................... 2,000 100,500
Sun Microsystems, Incorporated (a)............................... 4,000 102,750
-----------
1,180,825
-----------
ELECTRONICS-3.3%
Avnet, Incorporated.............................................. 2,000 116,500
Intel Corporation................................................ 1,500 196,406
Newbridge Networks Corporation (a)............................... 3,400 96,050
-----------
408,956
-----------
SOFTWARE-7.4%
America Online, Incorporated (a)................................. 10,800 359,100
Computer Associates International, Incorporated.................. 2,400 119,400
Microsoft Corporation (a)........................................ 1,800 148,725
Oracle Systems Corporation (a)................................... 3,225 134,644
Parametric Technology Corporation (a)............................ 3,000 154,125
-----------
915,994
-----------
TELECOMMUNICATION EQUIPMENT-3.6%
ADC Telecommunications, Incorporated (a)......................... 5,600 174,300
Andrew Corporation (a)........................................... 2,400 127,350
Tellabs, Incorporated (a)........................................ 4,000 150,500
-----------
452,150
-----------
3,111,525
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
22 GNA Variable Series Trust-GNA Growth Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- ---------- -----------
<S> <C>
TRANSPORTATION-1.0
RAILROADS & EQUIPMENT-1.0%
Wisconsin Central Transportation Corporation (a)................. 3,000 118,875
-----------
UTILITIES-1.0
TELEPHONE-1.0%
Cincinnati Bell, Incorporated.................................... 2,000 123,250
-----------
Total Common Stocks
(Cost $8,697,933)......................................... 11,663,564
-----------
MONEY MARKET MUTUAL FUNDS 6.5
The Seven Seas Series Money Market Fund [Class A]................ 489,036 489,036
The Seven Seas Series US Government Money Market Fund............ 315,450 315,450
-----------
Total Money Market Mutual Funds
(Cost $804,486)........................................... 804,486
-------- -----------
SUMMARY
Total investments
(Cost $9,502,419) (b)..................................... 100.2 12,468,050
Other assets and liabilities, net................................ (0.2) (26,385)
-------- -----------
NET ASSETS............................................................ 100.0 $12,441,665
-------- -----------
-------- -----------
</TABLE>
- ------------
NOTES:
(a) Non-income producing security.
(b) See Note 3 in notes to financial statements for cost for federal income tax
purposes and related gross unrealized appreciation (depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Value Portfolio 23
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
<S> <C>
COMMON STOCKS 99.7
BASIC INDUSTRIES-7.1
CHEMICALS-7.1%
DuPont (EI) deNemours & Company..................................... 4,600 434,125
Morton International, Incorporated.................................. 2,600 105,950
PPG Industries, Incorporated........................................ 3,700 207,663
-----------
747,738
-----------
CAPITAL GOODS-9.9
AGRICULTURAL MACHINERY-1.3%
Deere & Company..................................................... 3,300 134,063
-----------
ELECTRICAL EQUIPMENT-8.6%
Emerson Electric Company............................................ 4,300 416,025
General Electric Company............................................ 4,900 484,487
-----------
900,512
-----------
1,034,575
-----------
CONGLOMERATES-3.8
Minnesota Mining & Manufacturing Company............................ 4,800 397,800
-----------
CONSUMER BASICS-20.7
DRUGS & HEALTH CARE-11.9%
American Home Products Corporation.................................. 5,600 328,300
Bristol Myers Squibb Company........................................ 1,700 184,875
Eli Lilly & Company................................................. 5,800 423,400
Pfizer, Incorporated................................................ 3,800 314,925
-----------
1,251,500
-----------
FOOD & BEVERAGES-2.5%
Campbell Soup Company............................................... 1,500 120,375
PepsiCo, Incorporated............................................... 5,000 146,250
-----------
266,625
-----------
HOUSEHOLD PRODUCTS-6.3%
Kimberly Clark Corporation.......................................... 4,300 409,575
Procter & Gamble Company............................................ 2,300 247,250
-----------
656,825
-----------
2,174,950
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
24 GNA Variable Series Trust-GNA Value Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
<S> <C>
CONSUMER DURABLE GOODS-3.9
AUTOMOBILES-3.9%
General Motors Corporation.......................................... 7,300 406,975
-----------
CONSUMER NON-DURABLE GOODS-11.2
COSMETICS & TOILETRIES-5.4%
Avon Products, Incorporated......................................... 5,000 285,625
Gillette Company.................................................... 3,600 279,900
-----------
565,525
-----------
PHOTOGRAPHY-2.0%
Eastman Kodak Company............................................... 2,700 216,675
-----------
RETAIL TRADE-3.8%
Dayton Hudson Corporation........................................... 7,100 278,675
Walgreen Company.................................................... 3,000 120,000
-----------
398,675
-----------
1,180,875
-----------
CONSUMER SERVICES-0.8
AIR TRAVEL-0.8%
AMR Corporation (a)................................................. 900 79,313
-----------
ENERGY-9.4
INTERNATIONAL OIL-8.4%
Exxon Corporation................................................... 3,500 343,000
Mobil Corporation................................................... 2,500 305,625
Royal Dutch Petroleum Company....................................... 1,400 239,050
-----------
887,675
-----------
PETROLEUM SERVICES-1.0%
Halliburton Company................................................. 1,700 102,425
-----------
990,100
-----------
FINANCE-12.5
BANKS-9.1%
Chase Manhattan Corporation......................................... 5,600 499,800
National City Corporation........................................... 10,100 453,237
-----------
953,037
-----------
</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, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
<S> <C>
FINANCIAL SERVICES-2.5%
American Express Company............................................ 2,200 124,300
MBNA Corporation.................................................... 3,400 141,100
-----------
265,400
-----------
INSURANCE-0.9%
American International Group, Incorporated.......................... 900 97,425
-----------
1,315,862
-----------
GENERAL BUSINESS-0.9
NEWSPAPERS-0.9%
Gannett Company, Incorporated....................................... 1,200 89,850
-----------
SHELTER-3.2
CONSTRUCTION MATERIALS-3.2%
Masco Corporation................................................... 9,400 338,400
-----------
TECHNOLOGY-16.3
AEROSPACE-4.1%
Boeing Company...................................................... 4,000 425,500
-----------
COMPUTERS & BUSINESS EQUIPMENT-5.4%
Cisco Systems, Incorporated (a)..................................... 2,400 152,700
Compaq Computer Corporation (a)..................................... 1,600 118,800
Pitney Bowes, Incorporated.......................................... 5,500 299,750
-----------
571,250
-----------
ELECTRONICS-3.5%
Intel Corporation................................................... 2,300 301,156
Micron Technology, Incorporated..................................... 2,300 66,988
-----------
368,144
-----------
SOFTWARE-3.3%
Microsoft Corporation (a)........................................... 2,800 231,350
Oracle Systems Corporation (a)...................................... 2,650 110,637
-----------
341,987
-----------
1,706,881
-----------
Total Common Stocks
(Cost $8,938,073)............................................ 10,463,319
-----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
26 GNA Variable Series Trust-GNA Value Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- -----------
<S> <C>
MONEY MARKET MUTUAL FUNDS 0.1
The Seven Seas Series Money Market Fund [Class A]................... 7,764 7,764
The Seven Seas Series US Government Money Market Fund............... 2,217 2,217
-----------
Total Money Market Mutual Funds
(Cost $9,981)................................................ 9,981
-------- -----------
SUMMARY
Total investments
(Cost $8,948,054) (b)........................................ 99.8 10,473,300
Other assets and liabilities, net................................... 0.2 20,888
-------- -----------
NET ASSETS............................................................... 100.0 $10,494,188
-------- -----------
-------- -----------
</TABLE>
- ------------
NOTES:
(a) Non-income producing security.
(b) See Note 3 in notes to financial statements for cost for federal income tax
purposes and related gross unrealized appreciation (depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Government Portfolio 27
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
LONG-TERM GOVERNMENT AND AGENCY SECURITIES 96.6
FEDERAL HOME LOAN MORTGAGE CORPORATION (A)(B)-32.8
6.500%, with a maturity date of February 1, 2011.................... 59,939 59,058
7.000%, with various maturity dates to August 1, 2025............... 1,715,620 1,689,058
8.000%, with various maturity dates to April 1, 2017................ 545,060 560,529
8.500%, with various maturity dates to July 1, 2010................. 336,404 348,798
----------
Total Federal Home Loan Mortgage Corporation
(Cost $2,608,427)............................................ 2,657,443
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION DEBENTURE-0.8
8.250%, with a maturity date of June 1, 2016
(Cost $72,192)............................................... 60,000 67,275
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (A)(B)(D)-8.3
6.000%, with a maturity date of February 20, 2026................... 75,063 76,448
6.500%, with a maturity date of February 20, 2023................... 271,685 276,438
7.000%, with various maturity dates to December 20, 2024............ 314,921 321,474
----------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $634,391).............................................. 674,360
----------
UNITED STATES TREASURY BOND-6.3
7.875%, with a maturity date of February 15, 2021
(Cost $476,234).............................................. 450,000 508,640
----------
FEDERAL HOME LOAN BANK BONDS-5.6
5.720%, with a maturity date of November 22, 2000 (e)............... 360,000 351,788
7.640%, with a maturity date of May 8, 2002......................... 100,000 101,375
----------
Total Federal Home Loan Bank Bonds
(Cost $433,089).............................................. 453,163
----------
FEDERAL FARM CREDIT BANK NOTES-11.4
5.270%, with a maturity date of February 1, 1999.................... 500,000 492,578
8.600%, with a maturity date of May 30, 2006........................ 400,000 429,376
----------
Total Federal Farm Credit Bank Notes
(Cost $934,594).............................................. 921,954
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
28 GNA Variable Series Trust-GNA Government Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REAL ESTATE MORTGAGE INVESTMENT CONDUITS [REMIC] (B)(C)-5.7
6.000%, with a maturity date of March 25, 2019
[Series 1993-136 Class PB]........................................ 86,400 84,240
6.500%, with a maturity date of September 25, 2018
[Series 1992-150 Class GA]........................................ 175,000 175,219
7.000% with a maturity date of November 25, 2009
[Series 1992-14 Class D].......................................... 175,000 175,765
7.000%, with a maturity date of September 25, 2020
[Series 1990-109 Class J]......................................... 25,000 24,617
----------
Total Federal National Mortgage Association
Real Estate Mortgage Investment Conduits [REMIC]
(Cost $456,999).............................................. 459,841
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGE (A)(B)(D)-3.7
8.423%, with a maturity date of July 1, 2019
(Cost $289,058).............................................. 289,964 295,946
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (A)(B)-9.3
6.000%, with a maturity date of August 1, 2008...................... 93,582 90,847
6.500%, with various maturity dates to May 1, 2024.................. 554,902 541,854
7.000%, with a maturity date of September 1, 1999................... 10,494 10,537
7.500%, with a maturity date of June 1, 2002........................ 54,227 55,023
8.000%, with various maturity dates to July 1, 1998................. 53,603 54,776
----------
Total Federal National Mortgage Association
(Cost $762,366).............................................. 753,037
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DEBENTURE-1.3
7.700%, with a maturity date of August 10, 2004
(Cost $103,125).............................................. 100,000 102,031
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (A)(B)-3.8
6.500%, with a maturity date of October 15, 2010.................... 89,941 88,900
7.500%, with a maturity date of April 15, 2001...................... 25,253 25,535
8.500%, with various maturity dates to May 15, 2003................. 182,655 190,436
----------
Total Government National Mortgage Association
(Cost $298,247).............................................. 304,871
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Government Portfolio 29
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
MULTICLASS PARTICIPATION CERTIFICATES (B)(C)-3.7
5.850%, with a maturity date of February 15, 2008
[Series 1678 Class PG]............................................ 110,000 106,322
6.500%, with a maturity date of July 15, 2008
[Series 1480 Class LE]............................................ 50,000 47,140
6.500%, with a maturity date of February 15, 2021
[Series 128 Class I].............................................. 100,000 96,250
7.000%, with a maturity date of February 15, 2021
[Series 1214 Class J]............................................. 50,000 49,156
----------
Total Federal Home Loan Mortgage Corporation
Multiclass Participation Certificates
(Cost $296,481).............................................. 298,868
----------
TENNESSEE VALLEY AUTHORITY NOTE-1.6
6.125%, with a maturity date of July 15, 2003
(Cost $131,533).............................................. 133,000 128,885
----------
UNITED STATES TREASURY STRIPS-1.0
Zero Coupon, with a maturity date of February 15, 2000
(Cost $82,105)............................................... 100,000 82,957
----------
PRIVATE EXPORT FUNDING CORPORATION-1.3
9.100%, with a maturity date of October 30, 1998
(Cost $108,625).............................................. 100,000 105,245
----------
Total Long-Term Government and Agency Securities
(Cost $7,687,466)............................................ 7,814,516
----------
<CAPTION>
NUMBER OF
SHARES
----------
<S> <C>
MONEY MARKET MUTUAL FUNDS 2.8
The Seven Seas Series Money Market Fund [Class A]................... 120,907 120,907
The Seven Seas Series US Government Money Market Fund............... 107,701 107,701
----------
Total Money Market Mutual Funds
(Cost $228,608).............................................. 228,608
-------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
30 GNA Variable Series Trust-GNA Government Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET MARKET
ASSETS VALUE ($)
-------- ----------
<S> <C>
SUMMARY
Total investments
(Cost $7,916,074) (f)........................................ 99.4 8,043,124
Other assets and liabilities, net................................... 0.6 46,461
-------- ----------
NET ASSETS............................................................... 100.0 $8,089,585
-------- ----------
-------- ----------
</TABLE>
- ------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have the same coupon rates, have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for all securities may be shorter than indicated due
to prepayments.
(c) Risks associated with Collateralized Mortgage Obligations ("CMOs")--The
net asset value of the Fund is sensitive to interest rate fluctuations.
CMOs are obligations collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holder of the CMOs as they are
received, but certain classes of CMOs have priority over others with
respect to the receipt of prepayments on the mortgages. Therefore, an
investment in a CMO may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities and this
uncertainty results in greater price volatility.
(d) Risks associated with Adjustable Rate Mortgage securities ("ARMs")--Most
ARMs are subject to limits on coupon changes ("caps" and "floors"). Coupon
caps/floors limit the amount the coupon can adjust on coupon reset dates,
or over the life of the loan. If interest rates change quickly, an
adjustable rate mortgage's coupon adjustment may be constrained by its
periodic or lifetime limit. For example, if rates rise quickly, since the
coupon rate cannot reset to equal the market rates, or at least cannot do
so immediately, an investment in an ARM may be subject to a decline in
price, despite the fact that ARM securities are often represented to have
less price risk than fixed rate securities. Until, and if, the ARM's coupon
rate can adjust to equal current market rates, it will be subject to price
variations, despite being an "adjustable rate" security. This exposure is
called "cap risk". Conversely, an ARM may benefit from the floor on its
rate adjustments if market rates drop below the minimum rate the ARM may
pay.
(e) Collateral for open futures contracts (Note 3).
(f) See Note 3 in the notes to financial statements for cost for federal
income tax purposes and related gross unrealized appreciation
(depreciation).
(g) At December 31, 1996, open futures contracts purchased were as follows:
<TABLE>
<CAPTION>
CONTRACTS EXPIRATION MARKET UNREALIZED
PURCHASED DESCRIPTION DATE VALUE DEPRECIATION
---------- ------------------------------------ ----------- ----------- ------------
<S> <C>
12 U.S. Treasury Note and Bond Futures March 97 $2,199,047 $(21,752)
----------- ------------
----------- ------------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Adjustable Rate Portfolio 31
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
LONG-TERM GOVERNMENT AGENCY SECURITIES 76.5
FEDERAL HOME LOAN MORTGAGE CORPORATION (B)-4.9
8.000%, with a maturity date of January 1, 2000
(Cost $311,901).......................................... 311,841 314,080
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
ADJUSTABLE RATE MORTGAGES (B)(D)-13.6
4.897%, with a maturity date of April 1, 2026................... 297,270 301,173
5.707%, with a maturity date of November 1, 2026................ 150,000 151,476
7.516%, with a maturity date of January 1, 2025................. 323,989 331,483
7.754%, with a maturity date of February 1, 2025................ 79,803 81,412
----------
Total Federal Home Loan Mortgage Corporation
Adjustable Rate Mortgages
(Cost $851,774).......................................... 865,544
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (B)(D)-12.0
4.142%, with a maturity date of April 1, 2026................... 177,961 177,016
7.770%, with a maturity date of November 1, 2024................ 128,342 130,128
7.908%, with a maturity date of July 1, 2024.................... 158,757 162,875
8.148%, with a maturity date of November 1, 2024................ 282,754 293,623
----------
Total Federal National Mortgage Association
Adjustable Rate Mortgages
(Cost $735,105).......................................... 763,642
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
ADJUSTABLE RATE MORTGAGES (A)(B)(D)-38.2
5.500%, with various maturity dates to March 20, 2026........... 319,457 323,348
6.000%, with various maturity dates to October 20, 2024......... 479,978 484,550
6.500%, with various maturity dates to August 20, 2025.......... 1,224,435 1,244,573
7.000%, with a maturity date of April 20, 2024.................. 121,968 124,198
7.125%, with various maturity dates to September 20, 2024....... 250,982 256,507
----------
Total Government National Mortgage Association
Adjustable Rate Mortgages
(Cost $2,276,080)........................................ 2,433,176
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
32 GNA Variable Series Trust-GNA Adjustable Rate Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET PRINCIPAL MARKET
ASSETS AMOUNT ($) VALUE ($)
-------- ---------- ----------
<S> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (A)(B)-7.8
5.000%, with a maturity date of May 20, 2026.................... 248,518 245,915
9.000%, with various maturity dates to November 15, 2016........ 237,971 255,193
----------
Total Government National Mortgage Association
(Cost $495,684).......................................... 501,108
----------
Total Long-Term Government Agency Securities
(Cost $4,670,544)........................................ 4,877,550
----------
NON-AGENCY MORTGAGES 4.9
RESOLUTION TRUST CORPORATION MORTGAGE PASS-THROUGHS (B)(C)- 4.9
8.000%, with a maturity date of September 25, 2021.............. 161,673 162,786
9.000%, with a maturity date of September 25, 2028.............. 144,038 147,953
----------
Total Resolution Trust Corporation Mortgage Pass-Throughs
(Cost $309,130).......................................... 310,739
----------
Total Non-Agency Mortgages
(Cost $309,130).......................................... 310,739
----------
ASSET-BACKED SECURITIES 17.5
Citibank Credit Card Master Trust, 5.790%, February 7, 2003
[Series 1996-1 Class A]....................................... 175,000 134,640
Contimortgage Home Equity Loan, 6.860%, July 15, 2010 [Series
1995-3 Class A2].............................................. 225,000 226,267
EQCC Home Equity Loan Trust, 5.725%, December 15, 2008 [Series
1993-4 Class A]............................................... 78,794 76,923
Equicon Loan Trust, 5.850%, November 18, 2012
[Series 1993-1 Class A]....................................... 165,409 163,575
Household Finance Corporation, 5.700%, May 20, 2008 [Series
1993-1 Class A2].............................................. 79,752 79,976
Merrill Lynch Home Equity Loan Trust, 5.810%, February 15, 2003
[Series 1993-1 Class A]....................................... 67,855 67,909
The Money Store Home Equity Trust, 6.850%, June 15, 2019 [Series
1996-A Class A5](b)(c)........................................ 110,000 110,017
UCFC Loan Trust, 8.250%, April 10, 2016
[Series 1995-A Class A4]...................................... 250,000 257,345
----------
Total Asset-Backed Securities
(Cost $1,123,229)........................................ 1,116,652
----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust-GNA Adjustable Rate Portfolio 33
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
% OF NET NUMBER MARKET
ASSETS OF SHARES VALUE ($)
-------- --------- ----------
<S> <C>
MONEY MARKET MUTUAL FUNDS 0.9
The Seven Seas Series Money Market Fund [Class A].................. 58,981 58,981
The Seven Seas Series US Government Money Market Fund.............. 220 220
----------
Total Money Market Mutual Funds (Cost $59,201)..................... 59,201
-------- ----------
SUMMARY
Total investments
(Cost $6,162,104) (e)....................................... 99.8 6,364,142
Other assets and liabilities, net.................................. 0.2 11,282
-------- ----------
NET ASSETS.............................................................. 100.0 $6,375,424
-------- ----------
-------- ----------
</TABLE>
- ------------
NOTES:
(a) The investments in mortgage-backed securities are interests in separate
pools of mortgages. All such issues which have the same coupon rates have
been aggregated for financial statement presentation purposes.
(b) Effective maturities for all securities may be shorter than indicated due
to prepayments.
(c) Risks associated with Collateralized Mortgage Obligations ("CMOs")--The
net asset value of the Fund is sensitive to interest rate fluctuations.
CMOs are obligations collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holder of the CMOs as they are
received, but certain classes of CMOs have priority over others with
respect to the receipt of prepayments on the mortgages. Therefore, an
investment in a CMO may be subject to a greater or lesser risk of
prepayment than other types of mortgage-related securities and this
uncertainty results in greater price volatility.
(d) Risks associated with Adjustable Rate Mortgage securities ("ARMs")--Most
ARMs are subject to limits on coupon changes ("caps" and "floors"). Coupon
caps/floors limit the amount the coupon can adjust on coupon reset dates,
or over the life of the loan. If interest rates change quickly, an
adjustable rate mortgage's coupon adjustment may be constrained by its
periodic or lifetime limit. For example, if rates rise quickly, since the
coupon rate cannot reset to equal the market rates, or at least cannot do
so immediately, an investment in an ARM may be subject to a decline in
price, despite the fact that ARM securities are often represented to have
less price risk than fixed rate securities. Until, and if, the ARM's coupon
rate can adjust to equal current market rates, it will be subject to price
variations, despite being an "adjustable rate" security. This exposure is
called "cap risk". Conversely, an ARM may benefit from the floor on its
rate adjustments if market rates drop below the minimum rate the ARM may
pay.
(e) See Note 3 in the notes to financial statements for cost for federal
income tax purposes and related gross unrealized appreciation
(depreciation).
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
34 GNA Variable Series Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GNA
GNA GNA GNA ADJUSTABLE
GROWTH VALUE GOVERNMENT RATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ---------- ----------
<S> <C>
ASSETS
Investments at market value (identified cost
$9,502,419, $8,948,054, $7,916,074 and $6,162,104,
respectively) (Notes 2 and 3)....................... $12,468,050 $10,473,300 $8,043,124 $6,364,142
Cash.................................................. 72 92 23 29
Receivables:
Fund shares sold................................. 5,871 21,379 241 57
Dividends........................................ 10,909 11,357 15,406 627
Interest......................................... -- -- 68,486 37,431
Adviser (Note 4)................................. 8,525 8,192 7,950 --
Deferred organization costs (Note 2).................. 6,993 6,993 6,993 6,993
----------- ----------- ---------- ----------
Total assets.......................................... 12,500,420 10,521,313 8,142,223 6,409,279
----------- ----------- ---------- ----------
LIABILITIES
Payables:
Fund shares redeemed............................. 28,016 852 11,268 480
Dividends........................................ -- -- 13,386 10,785
Adviser (Note 4)................................. -- -- -- 6,270
Daily variation margin on open futures contracts
(Notes 2 and 3)................................ -- -- 6,844 --
Accrued management fee (Note 4).................. 8,538 7,120 3,758 2,128
Other accrued expenses........................... 22,201 19,153 17,382 14,192
----------- ----------- ---------- ----------
Total liabilities..................................... 58,755 27,125 52,638 33,855
----------- ----------- ---------- ----------
NET ASSETS............................................ $12,441,665 $10,494,188 $8,089,585 $6,375,424
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
NET ASSETS
Net assets consist of (Note 2):
Undistributed (accumulated distributions in
excess of) net investment income............... $ 17,279 $ -- $ 5,438 $ (2,855)
Accumulated net realized gains (losses).......... (343,380) 71,954 (19,910 ) (10,947)
Unrealized appreciation (depreciation) on:
Investments (Note 3)........................... 2,965,631 1,525,246 127,050 202,038
Futures contracts (Note 3)..................... -- -- (21,752 ) --
Shares of beneficial interest.................... 9,802,135 8,896,988 7,998,759 6,187,188
----------- ----------- ---------- ----------
NET ASSETS............................................ $12,441,665 $10,494,188 $8,089,585 $6,375,424
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
Outstanding shares of beneficial
interest (No par value)............................. 321,744 294,649 312,621 245,516
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
Net asset value, offering and
redemption price per share.......................... $ 38.67 $ 35.62 $ 25.88 $ 25.97
----------- ----------- ---------- ----------
----------- ----------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
GNA Variable Series Trust 35
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GNA
GNA GNA GNA ADJUSTABLE
GROWTH VALUE GOVERNMENT RATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ----------
<S> <C>
INVESTMENT INCOME:
Interest................................................. $ 14,800 $ 2,424 $555,774 $407,101
Dividends................................................ 122,910 188,968 15,407 9,227
---------- ---------- ---------- ----------
Total income............................................. 137,710 191,392 571,181 416,328
---------- ---------- ---------- ----------
EXPENSES:
Management fee (Note 4)............................. 84,327 66,119 43,375 24,168
Transfer agent fee.................................. 10,833 10,833 10,833 10,833
Custodian fee....................................... 49,851 52,964 52,929 47,160
Amortization of organization costs (Note 2)......... 2,326 2,326 2,326 2,326
Professional fees................................... 18,646 15,062 13,911 10,166
Trustees' fees and expenses......................... 920 918 269 141
Excise tax.......................................... 3,864 1,549 5,242 587
Other............................................... 429 335 394 324
---------- ---------- ---------- ----------
Total expenses before reimbursement from Adviser......... 171,196 150,106 129,279 95,705
Reimbursement of expenses from Adviser (Note 4).......... (55,247) (59,192) (58,287) (53,411)
---------- ---------- ---------- ----------
Expenses, net............................................ 115,949 90,914 70,992 42,294
---------- ---------- ---------- ----------
Net investment income.................................... 21,761 100,478 500,189 374,034
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions (Notes 2 and 3)............. (343,380) 605,843 (18,427) (14,389)
Option contracts.................................... -- -- 31,937 --
Futures contracts................................... -- -- (28,944) --
Net increase (decrease) in unrealized appreciation
(depreciation) from:
Investment transactions............................. 2,032,735 1,044,887 (193,239) (25,781)
Futures contracts................................... -- -- (25,634) --
---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on investments... 1,689,355 1,650,730 (234,307) (40,170)
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $1,711,116 $1,751,208 $265,882 $333,864
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
36
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GNA GROWTH PORTFOLIO GNA VALUE PORTFOLIO
---------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 (A) DECEMBER 31, 1996 DECEMBER 31, 1995 (A)
----------------- --------------------- ----------------- ---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................ $ 21,761 $ 19,700 $ 100,478 $ 51,557
Net realized gain (loss) from:
Investment transactions.................... (343,380) 115,086 605,843 87,100
Options contracts.......................... -- -- -- --
Futures contracts.......................... -- -- -- --
Net increase in unrealized appreciation from:
Investment transactions.................... 2,032,735 932,896 1,044,887 480,359
Futures contracts.......................... -- -- -- --
----------------- --------------------- ----------------- ---------------------
Net increase in net assets resulting
from operations............................. 1,711,116 1,067,682 1,751,208 619,016
----------------- --------------------- ----------------- ---------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................ (8,346) (20,410) (104,429) (50,166)
Net realized gains........................... (114,376) -- (619,978) --
----------------- --------------------- ----------------- ---------------------
Total distributions to shareholders........... (122,722) (20,410) (724,407) (50,166)
----------------- --------------------- ----------------- ---------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................ 4,134,849 5,851,980 4,431,471 3,925,119
Reinvestment of distributions................ 122,722 20,411 724,407 50,166
Cost of shares redeemed...................... (330,729) (18,259) (237,236) (20,415)
----------------- --------------------- ----------------- ---------------------
Increase in net assets resulting from
share transactions.......................... 3,926,842 5,854,132 4,918,642 3,954,870
----------------- --------------------- ----------------- ---------------------
INCREASE IN NET ASSETS........................ 5,515,236 6,901,404 5,945,443 4,523,720
Net assets at the beginning of period......... 6,926,429 25,025 4,548,745 25,025
----------------- --------------------- ----------------- ---------------------
NET ASSETS AT END OF PERIOD................... $12,441,665 $ 6,926,429 $10,494,188 $ 4,548,745
----------------- --------------------- ----------------- ---------------------
----------------- --------------------- ----------------- ---------------------
Undistributed (accumulated distributions
in excess of) net investment income
at end of period............................ $ 17,279 $ -- $ -- $ 1,391
----------------- --------------------- ----------------- ---------------------
----------------- --------------------- ----------------- ---------------------
PORTFOLIO SHARE INFORMATION:
Shares sold.................................. 119,100 207,331 135,933 143,157
Shares issued upon reinvestment
of distributions........................... 3,142 621 20,329 1,743
Shares redeemed.............................. (8,885) (566) (6,828) (686)
----------------- --------------------- ----------------- ---------------------
Increase in Portfolio shares outstanding..... 113,357 207,386 149,434 144,214
----------------- --------------------- ----------------- ---------------------
----------------- --------------------- ----------------- ---------------------
</TABLE>
- ------------
(a) For the period January 3, 1995 (commencement of operations) through December
31, 1995.
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNA GOVERNMENT PORTFOLIO GNA ADJUSTABLE RATE PORTFOLIO
---------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 (A) DECEMBER 31, 1996 DECEMBER 31, 1995 (A)
----------------- --------------------- ----------------- ---------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income........................ $ 500,189 $ 375,765 $ 374,034 $ 285,656
Net realized gain (loss) from:
Investment transactions.................... (18,427) 154,781 (14,389) 63,800
Options contracts.......................... 31,937 -- -- --
Futures contracts.......................... (28,944) (3,947) -- --
Net increase in unrealized appreciation from:
Investment transactions.................... (193,239) 320,289 (25,781) 227,819
Futures contracts.......................... (25,634) 3,882 -- --
----------------- --------------------- ----------------- --------------------
Net increase in net assets resulting
from operations............................. 265,882 850,770 333,864 577,275
----------------- --------------------- ----------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................ (500,387) (375,567) (375,605) (284,085)
Net realized gains........................... (155,115) -- (63,800) --
----------------- --------------------- ----------------- --------------------
Total distributions to shareholders........... (655,502) (375,567) (439,405) (284,085)
----------------- --------------------- ----------------- --------------------
SHARE TRANSACTIONS:
Proceeds from sales of shares................ 1,297,060 6,361,451 527,348 5,141,909
Reinvestment of distributions................ 653,972 363,712 438,576 274,129
Cost of shares redeemed...................... (648,394) (48,824) (132,937) (86,275)
----------------- --------------------- ----------------- --------------------
Increase in net assets resulting from
share transactions.......................... 1,302,638 6,676,339 832,987 5,329,763
----------------- --------------------- ----------------- --------------------
INCREASE IN NET ASSETS........................ 913,018 7,151,542 727,446 5,622,953
Net assets at the beginning of period......... 7,176,567 25,025 5,647,978 25,025
----------------- --------------------- ----------------- --------------------
NET ASSETS AT END OF PERIOD................... $ 8,089,585 $ 7,176,567 $ 6,375,424 $ 5,647,978
----------------- --------------------- ----------------- --------------------
----------------- --------------------- ----------------- --------------------
Undistributed (accumulated distributions
in excess of) net investment income
at end of period............................ $ 5,438 $ 8,138 $ (2,855) $ 13,526
----------------- --------------------- ----------------- --------------------
----------------- --------------------- ----------------- --------------------
PORTFOLIO SHARE INFORMATION:
Shares sold.................................. 48,499 250,976 20,153 205,376
Shares issued upon reinvestment
of distributions........................... 25,147 13,782 16,853 10,523
Shares redeemed.............................. (24,953) (1,831) (5,101) (3,289)
----------------- --------------------- ----------------- --------------------
Increase in Portfolio shares outstanding..... 48,693 262,927 31,905 212,610
----------------- --------------------- ----------------- --------------------
----------------- --------------------- ----------------- --------------------
</TABLE>
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
38
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights set forth below include selected data for a share
outstanding thoughout each period and other performance information derived from
the financial statements.
<TABLE>
<CAPTION>
GNA GROWTH PORTFOLIO GNA VALUE PORTFOLIO
----------------------------------------- ----------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 (A) DECEMBER 31, 1996 DECEMBER 31, 1995 (A)
----------------- --------------------- ----------------- ---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 33.24 $ 25.00 $ 31.32 $ 25.00
Income from Investment Operations
Net investment income+...................... 0.08 0.10 0.40 0.55
Net realized and unrealized gains
(losses) on investments................... 5.74 8.24 6.54 6.31
------- ------- ------- -------
Total from investment operations............ 5.82 8.34 6.94 6.86
------- ------- ------- -------
LESS DISTRIBUTIONS FROM
Net investment income....................... (0.03) (0.10) (0.41) (0.54)
Net realized gains.......................... (0.36) 0.00 (2.23) 0.00
------- ------- ------- -------
Total distributions......................... (0.39) (0.10) (2.64) (0.54)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................ $ 38.67 $ 33.24 $ 35.62 $ 31.32
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (%) (B).......................... 17.48 33.37 22.29 27.68
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%) (c)
Net expenses+............................ 1.10 1.10 1.10 1.10
Gross expenses+.......................... 1.64 2.89 1.82 3.87
Net investment income+................... 0.21 0.47 1.22 2.03
Portfolio turnover (%)...................... 42.57 65.88 98.53 41.67
Net Assets, end of period (millions)........ $ 12.4 $ 6.9 $ 10.5 $ 4.5
+Reimbursement of expenses from Adviser....... $ 0.21 $ 0.38 $ 0.24 $ 0.75
Average commission rate (d)................... $ 0.050 N/A 0.050 N/A
</TABLE>
- ------------
(a) For the period January 3, 1995 (commencement of operations) through
December 31, 1995
(b) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the Adviser not absorbed
a portion of expenses, total return would have been lower. Periods less
than one year are not annualized.
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNA GOVERNMENT PORTFOLIO GNA ADJUSTABLE RATE PORTFOLIO
----------------------------------------- ---------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 (A) DECEMBER 31, 1996 DECEMBER 31, 1995 (A)
----------------- --------------------- ----------------- ---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 27.19 $ 25.00 $ 26.44 $ 25.00
Income from Investment Operations
Net investment income+...................... 1.64 1.70 1.54 1.38
Net realized and unrealized gains
(losses) on investments................... (0.79) 2.19 (0.12) 1.44
------- ------- ------- -------
Total from investment operations............ 0.85 3.89 1.42 2.82
------- ------- ------- -------
LESS DISTRIBUTIONS FROM
Net investment income....................... (1.66) (1.70) (1.62) (1.38)
Net realized gains.......................... (0.50) 0.00 (0.27) 0.00
------- ------- ------- -------
Total distributions......................... (2.16) (1.70) (1.89) (1.38)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................ $ 25.88 $ 27.19 $ 25.97 $ 26.44
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (%) (B).......................... 3.38 15.99 5.60 11.50
RATIOS/SUPPLEMENTAL DATA
Ratios to average daily net assets (%) (c)
Net expenses+............................ 0.90 0.90 0.70 0.70
Gross expenses+.......................... 1.68 2.09 1.63 2.05
Net investment income+................... 6.34 6.51 6.19 5.38
Portfolio turnover (%)...................... 1.65 129.71 36.59 36.47
Net Assets, end of period (millions)........ $ 8.1 $ 7.2 $ 6.4 $ 5.6
+Reimbursement of expenses from Adviser....... $ 0.20 $ 0.31 $ 0.23 $ 0.35
Average commission rate (d)................... N/A N/A N/A N/A
</TABLE>
- ------------
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of security
trades on which commissions are charged.
- --------------------------------------------------------------------------------
<PAGE>
40 GNA Variable Series Trust
- --------------------------------------------------------------------------------
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
comprised of four investment portfolios (the "Portfolios"), the GNA Growth
Portfolio, the GNA Value Portfolio, the GNA Government Portfolio and the GNA
Adjustable Rate Portfolio that commenced operations as of January 3, 1995.
Shares of the Trust are offered only to a separate account of Great Northern
Insured Annuity Corporation, an affiliated insurance company which funds certain
variable annuity contracts. As of December 31, 1996, 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 preparation of the Portfolios'
financial statements in accordance 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. The following is a summary of significant accounting policies
followed consistently by the Portfolios.
SECURITIES VALUATION. Securities (including options) listed or traded on an
exchange or quoted on NASDAQ are valued at their last sale prices prior to the
time when assets are valued. Lacking any sales on that day, securities are
valued at the mean between the current closing bid and asked prices. Other
securities for which market quotations are readily available are valued at the
mean of the bid and asked quotations quoted prior to the time when assets are
valued ("market value"). Certain securities are valued primarily utilizing such
pricing services as may be deemed appropriate. The pricing services utilize
information with respect to market transactions, quotations from dealers and
various relationships among securities in determining value and may provide
prices determined as of times prior to the close of the New York Stock Exchange.
Investments in certain long-term debt securities not traded in an organized
market are valued primarily based on market quotations provided by recognized
dealers of such securities. Other securities for which market quotations are not
readily available, such as restricted securities, or where pricing occurs during
periods of market disruption, are valued in good faith by or under the authority
of the Trustees of the Trust. Short-term investments maturing within 60 days are
valued at original cost plus accreted discount or accrued interest which
approximates market value.
SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME. Sales and purchases
are accounted for as of trade date. Realized securities gains or losses are
determined using the identified cost method for both financial and tax reporting
purposes. Dividend income is recorded on the ex-dividend date. Interest income
is accrued pro rata to maturity. Original issue discount is accreted for
financial and tax accounting purposes.
FUTURES CONTRACTS. Each of the Portfolios may purchase and sell futures
contracts, subject to certain limitations. The GNA Government Portfolio uses
interest rate futures contracts as a hedge against changes in interest rates.
Upon entering into a futures contract, each Portfolio is required to deposit
with a broker an amount ("initial margin") equal to a certain percentage of the
face amount of the futures contract. Subsequent payments ("variation margin")
are made or received by the Portfolio each day, dependent on the daily
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 41
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
fluctuations in the value of the unrealized gains and losses by the Portfolio.
If the Portfolio enters into a closing transaction, the Portfolio 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 Portfolio may
be subject to risk upon entering into futures contracts resulting from the
imperfect correlation of prices between the futures and securities markets.
OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and sell listed
call and put options on futures contracts. The GNA Government Portfolio uses
options on interest rate futures contracts as a hedge against changes in
interest rates. Options are valued in accordance with the securities valuation
policies described above. Transactions in options on futures contracts involve
similar risks to those on futures contracts.
When a Portfolio writes a call or put option, an amount equal to the premium
received by the Portfolio is included in the Portfolio's Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the options written.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Each Portfolio 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. A Portfolio
will not enter into such agreements for the purpose of investment leverage.
Liability for the purchase price and all the rights and risks of ownership of
the securities accrue to a Portfolio at the time it becomes 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
commitment to purchase. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolio to
purchase the security at the price above the current market price on the date of
delivery and payment. During the time the Portfolio is obligated to purchase
such securities, it will maintain with the Custodian a segregated account with
U.S. government securities, cash or cash equivalents (or a receivable for
investment sold in connection therewith) of an aggregate current value
sufficient to make payment for the securities.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements in
order to generate additional income. Each repurchase agreement entered into by a
Portfolio will provide that the value of the collateral underlying the
repurchase agreement will always be at least 102% of the repurchase price,
including 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. A Portfolio 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
marketable, would exceed 10% of the net assets of the Portfolio. In addition,
not more than one-third of the current market value of the Portfolio's total
assets shall constitute secured "loans" by the 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
- --------------------------------------------------------------------------------
<PAGE>
42 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Portfolio's shareholders 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 requirements of the Internal Revenue Code which are applicable to
regulated investment companies and to distribute substantially all of their
taxable income and realized gains to their 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 contracts which remain open at year-end are marked-to-market and the
resultant net gain or loss is included in Federal taxable income. As of December
31, 1996, the Portfolios had net tax basis capital loss carryforwards which may
be applied against taxable gains until their expiration date as follows:
EXPIRATION
DATES
PORTFOLIO AMOUNT DECEMBER 31,
- ------------------------------------------------ -------- ------------
GNA Growth Portfolio............................ $136,024 2004
GNA Government Portfolio........................ 25,224 2004
GNA Adjustable Rate Portfolio................... 10,947 2004
Additionally, net capital losses of $207,356 and $14,527 attributable to
security transactions in the GNA Growth Portfolio and GNA Government Portfolio,
respectively, incurred after October 31, 1996 are treated as arising on January
1, 1997, the first day of the Portfolios' next taxable year.
DISTRIBUTION OF INCOME AND GAINS. Net investment income for the GNA Growth
Portfolio is declared and paid annually. Net investment income for the GNA Value
Portfolio is declared and paid quarterly. Net investment income for the GNA
Government and GNA Adjustable Rate Portfolios are declared as dividends to
shareholders of record as of the close of business each day and are paid to
shareholders monthly. During any particular year, net realized gains from
investment transactions in excess of any available capital loss carryforwards,
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
distributions (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 asset
value of the Portfolios.
PREPAID INSURANCE. 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 and of the Portfolios have been deferred ratably and are being
amortized over a 60 month period on a straight-line basis beginning at the
commencement of operations of the Portfolios.
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 43
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
EXPENSES. Expenses such as management fees, custodian fees, transfer agent
fees, and registration fees are charged directly to the Portfolios, while
indirect 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.
3. PURCHASES AND SALES OF SECURITIES. The cost of purchases and the proceeds
from sales and paydowns of investments other than U.S. Government and agency
securities, short term investments and options, for the year ended December 31,
1996, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES PAYDOWNS
- ------------------------------------------ ----------- ---------- --------
<S> <C>
GNA Growth Portfolio...................... $ 8,598,755 $4,101,191 $ --
GNA Value Portfolio....................... 12,243,844 7,707,326 --
GNA Adjustable Rate Portfolio............. 1,066,005 -- 253,179
</TABLE>
The cost of purchases and the proceeds from sales and paydowns of long-term
U.S. Government and agency securities, for the year ended December 31, 1996,
were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES PAYDOWNS
- ------------------------------------------- ---------- ---------- --------
<S> <C>
GNA Value Portfolio........................ $ 33,050 $ 99,564 $ --
GNA Government Portfolio................... 1,995,340 124,890 794,500
GNA Adjustable Rate Portfolio.............. 3,066,749 2,168,300 963,288
</TABLE>
At December 31, 1996, the security pledged to cover margin requirements for
open futures contracts on United States Treasury Notes and Bonds for the GNA
Government Portfolio was as follows:
<TABLE>
<CAPTION>
DESCRIPTION FACE VALUE MARKET VALUE
- ------------------------------------------------------- ---------- ------------
<S> <C>
Federal Home Loan Bank Bonds, 5.720%, 11/22/00......... $ 100,000 $ 97,719
---------- ------------
---------- ------------
</TABLE>
Transactions in options written on United States Treasury Bond Futures for the
GNA Government Portfolio were as follows:
<TABLE>
<CAPTION>
NUMBER OF NET
CONTRACTS OF PREMIUMS
WRITTEN OPTIONS RECEIVED
--------------- --------
<S> <C>
Outstanding at December 31,1995...................... -- $ --
Written.............................................. 205 58,704
Closed and Expired................................... (183) (51,552)
Exercised............................................ (22) (7,152)
--------------- --------
Outstanding at December 31,1996...................... -- $ --
--------------- --------
--------------- --------
</TABLE>
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<PAGE>
44 GNA Variable Series Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Aggregate federal income tax cost and gross unrealized appreciation
(depreciation) of investments for each Portfolio at December 31, 1996 was as
follows:
<TABLE>
<CAPTION>
FEDERAL GROSS GROSS NET
INCOME UNREALIZED UNREALIZED UNREALIZED
PORTFOLIO TAX COST APPRECIATION (DEPRECIATION) APPRECIATION
- --------------------------------------- ---------- ------------ -------------- ------------
<S> <C>
GNA Growth Portfolio................... $9,502,419 $ 3,057,745 $ (92,114) $ 2,965,631
GNA Value Portfolio.................... 8,954,190 1,535,451 (16,341) 1,519,110
GNA Government Portfolio............... 7,916,074 179,441 (52,391) 127,050
GNA Adjustable Rate Portfolio.......... 6,162,104 211,588 (9,550) 202,038
</TABLE>
4. MANAGEMENT, DISTRIBUTION AND TRUSTEES' FEES. Under Advisory agreements
between the Portfolios and GNA Capital Management, Inc. (the "Adviser"), each
Portfolio agrees to pay the Adviser a fee based on its average daily net assets
as follows:
GNA GROWTH PORTFOLIO. The Adviser's fee is calculated based upon the
Portfolio's average daily net assets, equal to an annual rate of .80% of the
first $100 million and .70% of average daily net assets in excess of $100
million.
GNA VALUE PORTFOLIO. The Adviser's fee is calculated at an annual rate of
0.80% of the average daily net assets of the Portfolio if the average 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 Portfolio's average daily net
assets if the Combined Average Daily Net Assets exceeds $100 million. For the
year ended December 31, 1996, the Adviser's fee was equivalent to an annual
effective rate of 0.80%.
GNA GOVERNMENT PORTFOLIO. The Adviser's fee is 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 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. For the year ended
December 31, 1996, the Adviser's fee was equivalent to an annual effective rate
of 0.55%.
GNA ADJUSTABLE RATE PORTFOLIO. The Adviser's fee is calculated at an annual
rate of .40% of the Portfolio's average daily net assets.
- --------------------------------------------------------------------------------
<PAGE>
GNA Variable Series Trust 45
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The Adviser has agreed to reimburse the Portfolios, for expenses incurred by
the Portfolios to the extent that such expenses exceed the following percentages
of each Portfolio's average daily net assets during the year ended December 31,
1996:
<TABLE>
<CAPTION>
PORTFOLIO PERCENTAGES
- ---------------------------------------------------------------------- -----------
<S> <C>
GNA Growth Portfolio.................................................. 1.10%
GNA Value Portfolio................................................... 1.10%
GNA Government Portfolio.............................................. 0.90%
GNA Adjustable Rate Portfolio......................................... 0.70%
</TABLE>
The expense reimbursement may be extended or modified by the Adviser. 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 Portfolios' Advisory agreements also provide that if, in any year, the
total of certain specified expenses of any of the Portfolios exceed the expense
limitations applicable to the Portfolios imposed by the securities regulations
of any state in which they are 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 Portfolios for any expenses which exceed state
expense limitations up to the amount of management fees paid or payable by the
Portfolios during such year.
The Adviser has retained the following portfolio managers (the "Sub-Advisers")
for the Portfolios. These Sub-Advisers are responsible for the actual investment
management of the Portfolio's assets (including the placement of brokerage
orders), under the general supervision of the Adviser and the Board of Trustees.
<TABLE>
<CAPTION>
PORTFOLIO SUB-ADVISERS
- ------------------------------------ -----------------------------------------
<S> <C>
GNA Growth Portfolio................ Value Line, Inc.
GNA Value Portfolio................. Duff & Phelps Investment Management, Co.
GNA Adjustable Rate Portfolio....... Standish, Ayer & Wood, Inc.
</TABLE>
The Adviser has not retained a Sub-Adviser for the GNA Government Portfolio.
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
associated with attendance at such meetings. The proportionate rate is allocated
among the portfolios principally based on their relative net assets. No
remuneration is paid by the Trust to any Trustee or officer of the Portfolio who
is affiliated with the Adviser.
- --------------------------------------------------------------------------------
<PAGE>
46 GNA Variable Series Trust
- --------------------------------------------------------------------------------
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 the GNA
Growth Portfolio, the GNA Value Portfolio, the GNA Government Portfolio and the
GNA Adjustable Rate Portfolio (the "Portfolios")) including the investment
portfolios, as of December 31, 1996, and the related statements of operations
for the year then ended, and the statements of changes in net assets and the
financial highlights for the year then ended and for the period January 3, 1995
(commencement of operations) to December 31, 1995. These financial statements
and financial highlights are the responsibility of the Portfolios' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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 as of December 31, 1996, the results of their
operations for the year then ended, and the changes in their net assets and the
financial highlights for the year then ended and for the period January 3, 1995
(commencement of operations) to December 31, 1995 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 12, 1997
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<PAGE>
GNA Variable Series Trust 47
- --------------------------------------------------------------------------------
TAX INFORMATION, UNAUDITED
For the year ended December 31, 1996, 99.0% and 96.7% of the applicable
dividends received by the GNA Growth and GNA Value Portfolios, respectively,
qualifies for the dividends-received deduction for corporate shareholders.
For the year ended December 31, 1996, the GNA Government and GNA Value
Portfolios paid long-term capital gain distributions of $0.000647 and $1.26177
per share, with ex-dividend dates of August 21, 1996 and December 20, 1996,
respectively.
Please consult a tax adviser if you have any question about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Portfolio account, please consult your investment
representative or call toll free 1-800-426-5520.
- --------------------------------------------------------------------------------
<PAGE>
48 Variable Investment Trust
- --------------------------------------------------------------------------------
VARIABLE INVESTMENT TRUST MUTUAL FUNDS
GE U.S. EQUITY PORTFOLIO o GE INTERNATIONAL EQUITY PORTFOLIO o GE FIXED INCOME
PORTFOLIO o GE MONEY MARKET PORTFOLIO
Annual Report
OFFICERS OF THE INVESTMENT ADVISER
DALE F. FREY
Chairman of the Board and
President
EUGENE K. BOLTON
EVP, Domestic Equities
MICHAEL J. COSGROVE
EVP, Mutual Funds
RALPH R. LAYMAN
EVP, International Equities
ALAN M. LEWIS
EVP, General Counsel and
Secretary
JOHN H. MYERS
EVP, Fixed Income and
Alternative Investments
ROBERT A. MACDOUGALL
EVP, Fixed Income
GEOFFREY R. NORMAN
EVP, Institutional Marketing
DON W. TOREY
EVP, Finance and Administration
TRUSTEES
MICHAEL J. COSGROVE
JOHN R. COSTANTINO
ALAN M. LEWIS
WILLIAM J. LUCAS
ROBERT P. QUINN
TREASURER
JEFFREY A. GROH
SECRETARY
MATTHEW J. SIMPSON
ADVISER
GE INVESTMENTS CORPORATION
COUNSEL
WILLKIE FARR & GALLAGHER
CUSTODIAN & TRANSFER AGENT
STATE STREET BANK AND
TRUST COMPANY
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 49
- --------------------------------------------------------------------------------
FROM THE GE U.S. EQUITY PORTFOLIO ADVISER
GE INVESTMENTS CORP.
PORTFOLIO MANAGER: EUGENE K. BOLTON,
HEAD OF THE PORTFOLIO'S MANAGEMENT TEAM
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. The U.S. stock market was very strong in 1996, with the Dow
Jones Industrial Average up 29%, the S&P 500 up 23% and the
Russell 2000 up 16%. The past two years was the sixth best two
year period in the market since 1915. The 1996 outcome is
especially significant because equities rallied without a
supportive bond market. In 1995 the bond market nearly kept up
with the stock market, but in 1996 the long term treasury bond
index actually declined. There are numerous factors that have
propelled stock market performance over these last two years. U.S.
companies have improved their cost structures and are very
competitive in the world marketplace. Corporate profits have risen
for 18 quarters in a row, and inflation remains extremely low for
this late in the economic cycle. Money flowing into mutual funds,
share repurchase and merger and acquisition activity have also
been powerful drivers.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST TWELVE MONTHS?
A. The GE U.S. Equity Portfolio was slightly behind the S&P 500
in 1996. The biggest positive came from our overweighting in
energy stocks, particularly in the oil service industry. We also
did well in technology, the strongest performing sector during the
year. Our approach to investing in technology is to find companies
that have steady long term growth with attractive valuations and
to avoid highly volatile stocks and those with excessive
valuations. In 1996 we were helped by non-traditional technology
companies like Equifax and Reuters and hurt by having only small
holdings of high valuation stocks such as Microsoft and Cisco. We
were also helped by our underweighting in the Utilities sector and
by our overweighting in Financial, particularly Citicorp,
Travelers Group and Federal National Mortgage Association.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW HAVE YOU
POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR MARKET OUTLOOK?
A. As we enter 1997, the economic and supply/demand backdrop for
the market continues to be positive. In this low inflation
environment the stock market can continue to rise in line with
earnings, as long as nothing goes wrong. Valuations are very high,
however, and there is not a lot of margin for error. The top down
consensus forecast calls for S&P 500 earnings to be up 6% in 1997,
but revenue gains are slowing, and profit margins appear to have
stopped rising. Thus, earnings disappointments are certainly a
possibility. The market will also be
- --------------------------------------------------------------------------------
<PAGE>
50 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
very intolerant of inflation or rising interest rates. Any Fed
tightening will probably lead to lower valuation levels, as well
as the possibility of a slowing economy and earnings
disappointments. Thus 1997 is shaping up as a potentially volatile
year with limited upside potential and significant downside risk
if the slow growth, low inflation scenario is seriously called
into question.
Over the years our emphasis has been on selecting stocks with good
managements, strong financials and attractive valuations. These
characteristics coupled with our underweighting in cyclical and
technology stocks and overweighting in financials and capital
goods, should position the Portfolio well for what could be a
volatile market over the next year.
Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
21.72% 28.46%
GE U.S. S&P 500
Equity Index
1/3/95 10,000 10,000
3/95 10,940 10,974
6/95 11,973 12,019
9/95 12,873 12,977
12/95 13,558 13,749
3/96 14,353 14,497
6/96 14,888 15,151
9/96 15,218 15,616
12/96 16,502 16,927
Performance of a $10,000 investment since inception of the GE U.S. Equity
Portfolio -- (1/3/95)
See page 57 for Notes to Performance. Past performance is no guarantee
of future results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE International Equity Portfolio 51
- --------------------------------------------------------------------------------
FROM THE GE INTERNATIONAL EQUITY PORTFOLIO ADVISER
GE INVESTMENTS CORP.
PORTFOLIO MANAGER: RALPH R. LAYMAN
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. Nearly all the major equity markets, with the exception of
Japan and Singapore, showed positive U.S. dollar returns during
1996, led by the European countries (Spain +40%, Sweden +37%,
Finland +34%). Asia Pacific markets excluding Japan outperformed
EAFE during the year, led by Hong Kong (+33%) and New Zealand
(+17%). Japan underperformed significantly in U.S. dollar terms
(-15.5%), followed by Singapore (-6.9%).
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST TWELVE MONTHS?
A. The GE International Equity Portfolio had a return of 16.1% in
1996. The MSCI EAFE Index returned 6.0% for the same period.
Superior stock picking around the world especially Japan, Europe,
and Australia, contributed to a return significantly higher than
EAFE. The Portfolio's top holdings significantly outperformed
EAFE, many with absolute returns in excess of 30%. The Portfolio's
underweight in Japan and overweight in Continental Europe
contributed positively to the Portfolio's performance.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW HAVE YOU
POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR MARKET OUTLOOK?
A. We remain optimistic regarding our European overweight. In
recent months, we have noticed that the "restructuring of Europe'
has received greater attention from both the media and our peers.
We are well positioned to benefit from this trend, and believe
that our emphasis on stock-picking will serve us well in this
environment. Outside Europe, we continue to underweight Japan. On
a company-by-company basis, we are not convinced that Japanese
firms are taking the steps needed to boost their profitability. On
the macro side, we are looking for signs that the economy can
expand without the aid of government spending. We believe 1997, as
in 1996, will be a year in which bottom-up stock selection will be
important.
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<PAGE>
52 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
16.10% 16.92%
GE MSCI
International EAFE
Equity Index
1/3/95 10,000 10,000
3/95 10,280 10,186
6/95 11,027 10,260
9/95 11,413 10,688
12/95 11,774 11,121
3/96 12,405 11,442
6/96 13,056 11,623
9/96 13,198 11,609
12/96 13,671 11,794
Performance of a $10,000 investment since inception of the GE International
Portfolio -- (1/3/95)
See page 57 for Notes to Performance. Past performance is no guarantee
of future results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 53
- --------------------------------------------------------------------------------
FROM THE GE FIXED INCOME PORTFOLIO ADVISER
GE INVESTMENTS CORP.
PORTFOLIO MANAGER: ROBERT A. MACDOUGALL
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. Entering 1996, interest rates were rather low with long
Treasury bonds yielding just under 6%. Moderate economic growth
and stable inflation had rallied the bond market in 1995. Despite
an easing of monetary policy in January, interest rates rose in
the first half reaching a high of 7.2% in June. Stronger economic
activity renewed fears of inflation. During the summer months the
market traded in a .40% range around 7% as the economic data gave
conflicting signals and no clear trend emerged. The resolution of
election uncertainties and signs of a slowdown rallied bonds in
the fall with the yield on long Treasuries dropping to 6.35% in
early December. As the year ended, however, rates were headed back
up. Inflation remains under control but with low unemployment and
little excess industrial capacity, investors are wary of any
indications of above trend economic growth.
Q. WHAT HAPPENED IN THE PORTFOLIO DURING THE PAST TWELVE MONTHS?
A. The GE Fixed Income Portfolio had a total return of 2.9% in
1996, consisting of income of 6.3% offset partially by a 3.4%
price decline. This compares with a 3.6% return for the Lehman
Brothers Aggregate Bond Index. In anticipation of the Federal
Reserve reducing rates, we lengthened our average maturity early
in the year which, unfortunately, hurt performance when rates
rose. This prompted us to shorten to a market neutral duration
position which we then held for the remainder of the year. Happily
our sector allocation which was heavily overweighted in mortgage
backed securities and, to a lesser extent, corporate bonds boosted
performance. Not only did these sectors provide more yield than
U.S. Treasuries but favorable supply/demand technicals allowed
them to also have better price performance.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW HAVE YOU
POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR MARKET OUTLOOK?
A. As mentioned above the market is very sensitive to the
perceived level of economic activity despite continued reports of
mild inflation. As we enter 1997 the latest batch of statistics
are foretelling higher growth which is pushing yields higher. In
1996 we saw that this market action had a self-correcting effect
on the economy. We think that a similar pattern could emerge this
year. With little to no price appreciation expected, we look to
maintain our yield sector overweights and earn the coupon in 1997.
- --------------------------------------------------------------------------------
<PAGE>
54 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
2.92% 9.66%
GE LB
Fixed Aggregate
Income Index
1/3/95 10,000 10,000
3/95 10,453 10,504
6/95 11,016 11,144
9/95 11,210 11,364
12/95 11,683 11,848
3/96 11,445 11,636
6/96 11,463 11,703
9/96 11,674 11,918
12/96 12,024 12,276
Performance of a $10,000 investment since inception of the GE Fixed Income
Portfolio -- (1/3/95)
See page 57 for Notes to Performance. Past performance is no
guarantee of future results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust-GE Money Market Portfolio 55
- --------------------------------------------------------------------------------
FROM THE GE MONEY MARKET PORTFOLIO ADVISER
GE INVESTMENTS CORP.
PORTFOLIO MANAGER: ROBERT A. MACDOUGALL
Q. WHAT HAPPENED IN THE MARKET DURING THE PAST TWELVE MONTHS?
A. Refer to the bond market discussion on page 53 for the GE
Fixed Income Portfolio.
Q. WHAT HAPPENED IN THE PORTFOLIO OVER THE PAST TWELVE MONTHS?
A. The GE Money Market Portfolio posted a total return of 4.9%
for 1996. This compares with 5.2% for 90 day Treasury Bills.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. Our top priorities in this portfolio are to ensure we have
sufficient liquidity to meet investors' needs and to maintain a
high quality portfolio. We do not buy what we would consider to be
exotic derivatives in order to "reach for yield". We do adjust our
average portfolio maturity depending upon our outlook for the
direction of short term rates.
Q. WHAT IS YOUR CURRENT MARKET OUTLOOK AND HOW HAVE YOU
POSITIONED THE PORTFOLIO TO BENEFIT FROM YOUR MARKET OUTLOOK?
A. We are seeing signs of a pickup in economic activity. Should
these signs continue, the Federal Reserve might raise short term
interest rates to help reduce inflationary pressures. We plan to
continue keeping our portfolio's maturity shorter than average so
as to have the flexibility to capitalize on such an increase in
rates. As always safety of principal and liquidity remain our top
priorities.
- --------------------------------------------------------------------------------
<PAGE>
56 Variable Investment Trust-GE Money Market Portfolio
- --------------------------------------------------------------------------------
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.
Average Annual Total Return %
for the period ended December 31, 1996
Since
1 yr Inception
4.87% 5.29%
GE 90-Day
Money T-Bill
Market Index
1/3/95 10,000 10,000
3/95 10,132 10,145
6/95 10,275 10,287
9/95 10,414 10,426
12/95 10,572 10,564
3/96 10,701 10,696
6/96 10,829 10,831
9/96 10,957 10,969
12/96 11,086 11,107
Performance of a $10,000 investment since inception of the GE Money Market
Portfolio -- (1/3/95)
The GE Money Market Portfolio's 7 day current yield was 4.77% and effective
yield was 4.88% as of 12/31/96.
See page 57 for Notes to Performance. Past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 57
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE (UNAUDITED)
Total returns assume changes in share price and reinvestment of dividends and
capital gains. Investment returns and net asset value on an investment will
fluctuate and you may have a loss or gain when you sell your shares.
GEIM has voluntarily agreed to waive and/or bear certain fees and Portfolio
expenses. Without these provisions, the returns (and/or yields) would have been
lower. These provisions may be terminated in the future.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500), Morgan Stanley
Capital International Europe Australia Far East Index (MSCI EAFE), Lehman
Brothers Aggregate Bond Index (LB Aggregate), and the 90 Day U.S. Treasury Index
(90 Day T-Bill) are unmanaged indices and do not reflect the actual cost of
investing in the instruments that comprise each index. 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 1,098 stocks of companies in 20 countries representing stock
markets of Europe, Australasia, New Zealand and the Far East. The LB Aggregate
Bond Index 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 T-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 or interest. Broad market index returns are calculated from the
nearest month end to the Portfolios' inception date. The majority of the broad
market returns are not available from the Portfolios' commencement of investment
operations through December 31, 1996.
The views expressed in this document reflect our judgment as of the
publication date and are subject to change at any time without notice. The
securities cited may not represent future holdings and should not be considered
as a recommendation to purchase or sell a particular security. See the
prospectus for complete descriptions of investment objectives, policies, risks
and permissible investments.
- --------------------------------------------------------------------------------
<PAGE>
58 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
COMMON STOCK-87.6%
BASIC MATERIALS-4.0%
Air Products & Chemicals Inc................................................. 719 49,701
Airgas Inc................................................................... 699 15,378(a)
Avery Dennison Corp.......................................................... 398 14,079
Barrick Gold Corp............................................................ 747 21,476
Du Pont de Nemours (E.I.) & Co............................................... 2,356 222,347
Eastman Chemical Co.......................................................... 298 16,465
FMC Corp..................................................................... 314 22,019(a)
Freeport McMoran Copper & Gold Inc. (Class A)................................ 921 25,903
Hoechst AG................................................................... 187 8,835
IMC Global Inc............................................................... 541 21,167
Mead Corp.................................................................... 824 47,895
Morton International Inc..................................................... 2,273 92,625
Newmont Mining Corp.......................................................... 1,056 47,256
PPG Industries Inc........................................................... 143 8,026
Rayonier Inc................................................................. 660 25,327
Santa Fe Pacific Gold Corp................................................... 995 15,298
Weyerhaeuser Co.............................................................. 1,423 67,415
-----------
721,212
-----------
CAPITAL GOODS-11.6%
ABB AG....................................................................... 24 29,854(a)
AlliedSignal Inc............................................................. 4,445 297,815
AMP Inc...................................................................... 1,140 43,747
Armstrong World Industries Inc............................................... 523 36,348
Boeing Co.................................................................... 301 32,019
Browning-Ferris Industries Inc............................................... 1,144 30,030
Caterpillar Inc.............................................................. 100 7,525
Cooper Industries Inc........................................................ 249 10,489
Corning Inc.................................................................. 434 20,073
Deere & Co................................................................... 2,109 85,678
Dover Corp................................................................... 3,848 193,362
Eaton Corp................................................................... 265 18,484
Emerson Electric Co.......................................................... 2,643 255,710
General Signal Corp.......................................................... 778 33,259
Hanson PLC ADR............................................................... 2,194 14,810
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 59
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Hubbell Inc. (Class B)....................................................... 4,243 183,510
Ingersoll Rand Co............................................................ 411 18,290
Lockheed Martin Corp......................................................... 728 66,612
Mannesmann AG................................................................ 18 7,802
Martin Marietta Materials, Inc............................................... 897 20,855
Masco Corp................................................................... 249 8,964
McDonnell Douglas Corp....................................................... 660 42,240
Minnesota Mining & Manufacturing............................................. 532 44,089
Molex Inc. (Class A)......................................................... 670 23,869
National Service Industries Inc.............................................. 498 18,613
Newport News Shipbuilding Inc................................................ 179 2,685(a)
Parker Hannifin Corp......................................................... 137 5,309
Sherwin Williams Co.......................................................... 271 15,176
Tenneco Inc.................................................................. 394 17,779(a)
Textron Inc.................................................................. 2,302 216,963
Timken Co.................................................................... 498 22,846
Tyco International Ltd....................................................... 318 16,814
Ucar International Inc....................................................... 267 10,046(a)
United Technologies Corp..................................................... 1,979 130,614
Waste Management International PLC ADR....................................... 476 3,749(a)
Wheelabrator Technologies Inc................................................ 498 8,093
WMX Technologies Inc......................................................... 2,713 88,512
-----------
2,082,633
-----------
CONSUMER--CYCLICAL-7.2%
ACNielsen Corp............................................................... 568 8,591(a)
American Greetings Corp. (Class A)........................................... 199 5,647
American Medical Response.................................................... 737 23,953(a)
Automatic Data Processing Inc................................................ 2,235 95,826
Carnival Corp. (Class A)..................................................... 648 21,384
Catalina Marketing Corp...................................................... 251 13,836(a)
Circus Circus Enterprises Inc................................................ 1,262 43,381(a)
Comcast Corp. (Class A)...................................................... 2,805 49,964
Comcast UK Cable Partners Ltd. (Class A)..................................... 295 4,019(a)
CUC International Inc........................................................ 119 2,826(a)
Disney (Walt) Co............................................................. 2,448 170,442
Donnelley (R.R.) & Sons Co................................................... 199 6,244
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
60 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Dun & Bradstreet Corp........................................................ 659 15,651
Eastman Kodak Co............................................................. 1,619 129,925
Federal-Mogul Corp........................................................... 150 3,300
Ford Motor Co................................................................ 2,375 75,703
Gannett Inc.................................................................. 1,504 112,612
General Motors Corp.......................................................... 925 51,569
Goodyear Tire & Rubber Co.................................................... 617 31,698
Harman International Industries Inc.......................................... 314 17,466
International Cabletel Inc................................................... 3,212 81,103(a)
Interpublic Group Cos. Inc................................................... 1,473 69,967
ITT Industries Inc........................................................... 436 10,682
Knight Ridder Inc............................................................ 274 10,481
McDonalds Corp............................................................... 1,756 79,459
Metromedia International Group Inc........................................... 398 3,930(a)
Readers Digest Assoc. Inc. (Class A)......................................... 146 5,877
Rubbermaid Inc............................................................... 197 4,482
Scholastic Corp.............................................................. 240 16,140(a)
TCI Satellite Entertainment Inc. (Class A)................................... 191 1,886(a)
Tele-Communications Inc. (Series A).......................................... 2,883 37,659(a)
Tele-Communications Inc. Liberty Media Group (Series A)...................... 1,989 56,811(a)
Time Warner, Inc............................................................. 791 29,662
-----------
1,292,176
-----------
CONSUMER--STABLE-8.3%
Anheuser Busch Cos. Inc...................................................... 4,283 171,320
Archer-Daniels Midland Co.................................................... 1,242 27,324
Avon Products Inc............................................................ 1,027 58,668
Coca Cola Co................................................................. 146 7,683
Colgate Palmolive Co......................................................... 946 87,269
Conagra Inc.................................................................. 423 21,044
CPC International Inc........................................................ 747 57,893
Duracell International Inc................................................... 230 16,071
General Mills Inc............................................................ 686 43,475
Gillette Co.................................................................. 168 13,062
International Flavours....................................................... 487 21,915
Kellogg Co................................................................... 249 16,341
Kimberly Clark Corp.......................................................... 1,760 167,640
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 61
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Nestle S.A. (Regd.).......................................................... 26 27,913
Pepsico Inc.................................................................. 8,232 240,786
Philip Morris Cos. Inc....................................................... 2,483 279,648(g)
Procter & Gamble Co.......................................................... 1,846 198,445
Ralston Purina Co............................................................ 249 18,270
Sara Lee Corp................................................................ 773 28,794
-----------
1,503,561
-----------
ENERGY-9.3%
Amerada Hess Corp............................................................ 162 9,376
Amoco Corp................................................................... 1,980 159,390
Anadarko Petroleum Co........................................................ 578 37,426
Atlantic Richfield Co........................................................ 243 32,198
Baker Hughes Inc............................................................. 1,361 46,954
British Petroleum PLC ADR.................................................... 149 21,065
Burlington Resources Inc..................................................... 1,654 83,320
Diamond Offshore Drilling Inc................................................ 161 9,177(a)
Elf Aquitaine SA............................................................. 150 6,788
Exxon Corp................................................................... 3,263 319,774
Halliburton Co............................................................... 462 27,836
Louisiana Land & Exploration Co.............................................. 189 10,135
Mobil Corp................................................................... 961 117,482
Nabors Industries Inc........................................................ 1,069 20,578(a)
Royal Dutch Petroleum Co. ADR................................................ 1,388 237,001
Schlumberger Ltd............................................................. 2,292 228,913
Texaco Inc................................................................... 1,404 137,767
Tosco Corp................................................................... 311 24,608
Total S.A. ADR............................................................... 661 26,605
Union Pacific Resources Group Inc............................................ 1,153 33,725
Unocal Corp.................................................................. 2,240 91,000
-----------
1,681,118
-----------
FINANCIAL-11.1%
American Express Co.......................................................... 2,805 158,482
Bank of Boston Corp.......................................................... 970 62,322
Bank of New York Inc......................................................... 1,166 39,352
BankAmerica Corp............................................................. 274 27,332
Bankers Trust New York Corp.................................................. 59 5,089
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
62 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Beneficial Corp.............................................................. 651 41,257
Boatmen's Bancshares Inc..................................................... 717 46,246
Chase Manhattan Corp......................................................... 498 44,446
Citicorp..................................................................... 2,836 292,108
CMAC Investment Corp......................................................... 504 18,522
Countrywide Credit Industries................................................ 941 26,936
Dean Witter Discover & Co.................................................... 1,519 100,634
Echelon International Corp................................................... 35 546
Edwards A G Inc.............................................................. 448 15,064
Federal National Mortgage Assoc.............................................. 8,283 308,542
Mellon Bank Corp............................................................. 757 53,747
Merrill Lynch & Co. Inc...................................................... 225 18,338
Morgan (J.P.) & Co. Inc...................................................... 1,235 120,567
Morgan Stanley Group Inc..................................................... 256 14,624
Oasis Residential Inc........................................................ 168 3,822
Salomon Inc.................................................................. 286 13,478
Standard Federal Bancorporation.............................................. 324 18,428
State Street Boston Corp..................................................... 837 53,986
T. Rowe Price & Associates................................................... 300 13,050
Travelers Group Inc.......................................................... 7,338 332,962
Trizec Hahn Corp............................................................. 348 7,656(a)
US Bancorp................................................................... 516 23,188
Wells Fargo & Co............................................................. 551 148,632
-----------
2,009,356
-----------
HEALTHCARE-10.1%
Abbott Laboratories.......................................................... 3,966 201,274
Allergan Inc................................................................. 1,696 60,420
American Home Products Corp.................................................. 3,213 188,362
Arrow International Inc...................................................... 278 7,993
Baxter International Inc..................................................... 829 33,989
Bristol-Myers Squibb Co...................................................... 2,459 267,416
Cardinal Health Inc.......................................................... 503 29,271
Columbia/HCA Healthcare Corp................................................. 293 11,940
Dentsply International Inc................................................... 238 11,305
Eli Lilly & Co............................................................... 1,381 100,813
Johnson & Johnson............................................................ 4,092 203,577
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 63
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Lincare Holdings Inc......................................................... 335 13,735(a)
Living Centers of America Inc................................................ 483 13,403(a)
Merck & Co. Inc.............................................................. 2,908 230,459
Pfizer Inc................................................................... 2,002 165,916
Scherer (R.P.) Corp. Delaware................................................ 512 25,728(a)
Schering Plough Corp......................................................... 1,344 87,024
Smithkline Beecham PLC ADR................................................... 2,085 141,780
St. Jude Medical Inc......................................................... 125 5,328(a)
Watson Pharmaceuticals Inc................................................... 426 19,143(a)
-----------
1,818,876
-----------
INSURANCE-5.4%
Aetna Inc.................................................................... 25 2,000
American International Group Inc............................................. 2,154 233,170
Chubb Corp................................................................... 523 28,111
Everest Reinsurance Holdings................................................. 166 4,773
General Reinsurance Corp..................................................... 705 111,214
ITT Hartford Group Inc....................................................... 408 27,540
Lincoln National Corp........................................................ 1,444 75,810
Loews Corp................................................................... 1,864 175,682
Marsh & McLennan Cos. Inc.................................................... 781 81,224
Provident Cos. Inc........................................................... 1,443 69,805
Providian Corp............................................................... 452 23,221
TIG Holdings Inc............................................................. 3,258 110,365
UNUM Corp.................................................................... 483 34,897
-----------
977,812
-----------
RETAIL TRADE-3.6%
American Stores Co........................................................... 747 30,534
Arbor Drugs Inc.............................................................. 1,720 29,885
CVS Corp..................................................................... 300 12,413
Dayton Hudson Corp........................................................... 1,044 40,977
Eckerd Jack Corp............................................................. 147 4,704(a)
Federated Department Stores Inc.............................................. 1,164 39,721(a)
General Nutrition Cos. Inc................................................... 398 6,716(a)
Home Depot Inc............................................................... 1,718 86,115
Lowes Cos. Inc............................................................... 176 6,248
May Department Stores Co..................................................... 262 12,249
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
64 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
Office Max Inc............................................................... 365 3,878(a)
Penney J C Inc............................................................... 225 10,969
Price Costco Inc............................................................. 1,331 33,441(a)
Sears Roebuck & Co........................................................... 2,487 114,713
Toys 'R Us Inc............................................................... 2,563 76,890(a)
Wal Mart Stores Inc.......................................................... 6,268 143,380
-----------
652,833
-----------
SOFTWARE & SERVICES-3.2%
Computer Associates International Inc........................................ 1,233 61,342
Electronic Data Systems Corp................................................. 479 20,717
Equifax Inc.................................................................. 4,995 152,972
First Data Corp.............................................................. 4,246 154,979
Informix Corp................................................................ 249 5,073(a)
Intuit Inc................................................................... 293 9,229(a)
Microsoft Corp............................................................... 398 32,885(a)
Reuters Holdings PLC ADR (Class B)........................................... 1,882 143,973
-----------
581,170
-----------
TECHNOLOGY-6.1%
3Com Corp.................................................................... 415 30,451(a)
Applied Materials Inc........................................................ 736 26,450(a)
Cisco Systems Inc............................................................ 862 54,845(a)
DSC Communications Corp...................................................... 292 5,220(a)
Hewlett Packard Co........................................................... 4,060 204,015
Intel Corp................................................................... 2,529 331,141
International Business Machines Corp......................................... 1,677 253,227
Lucent Technologies Inc...................................................... 392 18,130
Motorola Inc................................................................. 440 27,005
Northern Telecom Ltd......................................................... 354 21,904
Perkin Elmer Corp............................................................ 56 3,297
Pitney Bowes Inc............................................................. 375 20,437
Rockwell International Corp.................................................. 349 21,245(a)
Storage Technology Corp...................................................... 166 7,906(a)
Varian Associates Inc........................................................ 898 45,686
Xerox Corp................................................................... 428 22,523
-----------
1,093,482
-----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 65
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
--------- -----------
<S> <C>
TRANSPORTATION-1.3%
Burlington Northern Santa Fe................................................. 890 76,874
Canadian Pacific Ltd. (new).................................................. 1,307 34,635
Continental Airlines Inc. (Class B).......................................... 255 7,204(a)
Delta Air Lines Inc.......................................................... 249 17,648
Pittston Brinks Group........................................................ 460 12,420
Union Pacific Corp........................................................... 1,300 78,162
-----------
226,943
-----------
UTILITIES-6.4%
Airtouch Communications Inc.................................................. 5,472 138,168(a)
Allegheny Power Systems Inc.................................................. 393 11,937
American Electric Power Inc.................................................. 591 24,305
American Telephone & Telegraph Corp.......................................... 3,668 159,558
Bellsouth Corp............................................................... 1,663 67,144
Duke Power Co................................................................ 864 39,960
El Paso Natural Gas Co....................................................... 61 3,081
Enron Corp................................................................... 75 3,234
Florida Progress Corp........................................................ 590 19,028
FPL Group Inc................................................................ 958 44,068
Frontier Corp................................................................ 325 7,353
GTE Corp..................................................................... 5,093 231,731
MCI Communications Corp...................................................... 3,200 104,600
Mobile Telecommunication Technologies Corp................................... 235 1,998(a)
NYNEX Corp................................................................... 884 42,542
Pacificorp................................................................... 1,918 39,319(g)
Pinnacle West Capital Corp................................................... 430 13,653
Portland General Corp........................................................ 136 5,712
Public Service Co. Colorado.................................................. 548 21,303
SBC Communications Inc....................................................... 1,790 92,632
Scana Corp................................................................... 266 7,116
Sonat Inc.................................................................... 822 42,333
Southern Co.................................................................. 904 20,453
Vanguard Cellular Systems Inc. (Class A)..................................... 576 9,072
-----------
1,150,300
-----------
Total Common Stock
(Cost $12,680,498).................................................... 15,791,472
-----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
66 Variable Investment Trust-GE U.S. Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- -----------
<S> <C>
CONVERTIBLE BONDS-0.1%
Berkshire Hathaway Inc.
1.00% 12/02/01........................................................ 7,000 6,510
Charming Shoppes Inc.
7.50% 07/15/06........................................................ 6,000 5,970
Continental Airlines Inc.
6.75% 04/15/06........................................................ 11,000 12,403(b)
-----------
Total Convertible Bonds
(Cost $23,696)...................................................... 24,883
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C>
PREFERRED STOCK-0.7%
Airtouch Communications Inc. (Class B), 6.00%.............................. 272 7,412
Airtouch Communications Inc. (Class C), 4.25%.............................. 207 9,367
Continental Airlines Finance Trust, 8.50%.................................. 71 4,739
Continental Airlines Finance Trust, 8.50%.................................. 224 14,952(b)
Microsoft Corp. (Series A), 2.20%.......................................... 764 61,215
Occidental Petroleum Corp., 7.75%.......................................... 319 18,183(b)
-----------
Total Preferred Stock
(Cost $113,886)..................................................... 115,868
-----------
Total Investments in Securities
(Cost $12,818,080).................................................. 15,932,223
-----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE U.S. Equity Portfolio 67
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- -----------
<S> <C>
SHORT TERM INVESTMENTS-11.4%
U.S. GOVERNMENT AGENCIES AND TIME DEPOSITS-11.4%
Federal Home Loan Mortgage Corp.
5.27% 01/03/97.......................................................... 600,000 599,825(d)
5.34% 01/30/97.......................................................... 600,000 597,419(d)
Federal National Mortgage Assoc.
5.28% 01/21/97.......................................................... 500,000 498,533(d)
State Street Cayman Islands
6.25% 01/02/97.......................................................... 370,000 370,000
-----------
Total Short Term Investments
(Cost $2,065,777)................................................... 2,065,777
Other Assets and Liabilities, net 0.2%..................................... 28,541
-----------
NET ASSETS-100%................................................................. $18,026,541
-----------
-----------
</TABLE>
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GE U.S. Equity Portfolio had the following long Futures Contract open at
December 31, 1996:
<TABLE>
<CAPTION>
EXPIRATION NUMBER UNDERLYING UNREALIZED
DESCRIPTION DATE OF CONTRACTS FACE VALUE LOSS
- ------------ ----------- ------------- ----------- -----------
<S> <C>
S&P 500 March 1997 5 $1,861,250 $8,850
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
68 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- ----------
<S> <C>
COMMON STOCK-96.8%
AUSTRALIA-4.3%
Brambles Industries Ltd................................................... 12,808 249,929
Burns Philip & Co......................................................... 58,396 103,972
----------
353,901
----------
AUSTRIA-2.9%
Flughafen Wien AG......................................................... 1,219 62,141
VA Technologie AG......................................................... 1,124 176,408
----------
238,549
----------
CZECH REPUBLIC-0.9%
Komercni Banka A.S........................................................ 2,841 76,991 (a,b)
----------
FINLAND-2.8%
KCI Konecranes International.............................................. 4,246 133,841 (a)
Valmet Corp............................................................... 5,594 98,503 (a)
----------
232,344
----------
FRANCE-11.3%
Alcatel Alsthom........................................................... 925 74,307
Carrefour................................................................. 456 296,705
Coflexip ADR.............................................................. 6,158 161,648 (a)
Total S.A. (Class B)...................................................... 2,944 239,446
Valeo..................................................................... 2,545 156,963
----------
929,069
----------
GERMANY-10.3%
Deutsche Bank AG.......................................................... 2,162 101,019
Fresenius Medical Care Inc. AG ADR........................................ 500...... 40,275 (a)
Gehe AG................................................................... 1,177 75,341
Sap AG.................................................................... 276 38,562
SGL Carbon AG............................................................. 1,217 153,430
Siemens AG................................................................ 3,990 187,987
Veba AG................................................................... 4,278 247,428
----------
844,042
----------
HONG KONG-3.0%
HSBC Holdings............................................................. 5,268 112,723
Hutchison Whampoa Ltd..................................................... 16,900 132,739
----------
245,462
----------
INDONESIA-0.7%
Astra International....................................................... 20,500 56,414
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE International Equity Portfolio 69
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- ----------
ITALY-7.2%
<S> <C>
Edison SPA................................................................ 18,915 119,700
ENI SPA................................................................... 15,104 77,511
Gucci Group N.V. ADR...................................................... 1,361 86,934
IMI....................................................................... 12,253 105,003
Industrie Natuzzi Spa ADR................................................. 3,028 69,644
Telecom Italia Mobile..................................................... 51,052 129,060
----------
587,852
----------
JAPAN-15.4%
Canon Inc................................................................. 10,000 221,052
Credit Saison Co.......................................................... 4,700 105,112
DDI Corp.................................................................. 22 145,514
Honda Motor Co............................................................ 4,000 114,325
Ito Yokado Co............................................................. 1,000 43,520
Murata Manufacturing Co................................................... 3,000 99,732
Rohm Co................................................................... 3,000 196,874
Secom Co.................................................................. 3,000 181,591
Suzuki Motor Corp......................................................... 9,000 82,376
Tokyo Steel Manufacturing................................................. 5,000 71,237
----------
1,261,333
----------
MALAYSIA-2.3%
AMMB Holdings Berhad...................................................... 10,000 83,944
Telekom Malaysia.......................................................... 12,000 106,909
----------
190,853
----------
MEXICO-1.1%
Grupo Carso S.A. de C.V. ADR.............................................. 7,714 80,997
Grupo Financiero Bancomer S.A. ADR (Series C)............................. 1,415.... 11,497 (a,b)
Grupo Financiero Inbursa S.A. de C.V. ADR................................. 108...... 1,830
----------
94,324
----------
NETHERLANDS-5.5%
Endemol Entertainment BV.................................................. 2,125 70,772 (a)
IHC Caland N.V............................................................ 2,082 119,023
ING Groep N.V............................................................. 4,310 155,275
Polygram N.V.............................................................. 2,097 106,884
----------
451,954
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
70 Variable Investment Trust-GE International Equity Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- ----------
<S> <C>
NEW ZEALAND-0.9%
Carter Holt Harvey Ltd.................................................... 33,152 75,234
----------
PERU-0.7%
Telefonica del Peru S.A. ADR (Class B).................................... 2,940.... 55,493
----------
PHILIPPINES-1.8%
Metro Bank & Trust Co..................................................... 1,875 46,340
San Miguel Corp........................................................... 22,600 99,681
----------
146,021
----------
PORTUGAL-1.2%
Banco Comercial Portugues ADR............................................. 7,221.... 95,240
----------
SOUTH KOREA-0.9%
Korea Electric Power...................................................... 2,450 71,325
----------
SPAIN-1.3%
Repsol S.A................................................................ 2,753 105,603
----------
SWEDEN-3.1%
Autoliv AB................................................................ 3,776 165,549
Getinge Intustrier AB..................................................... 4,728 93,244
----------
258,793
----------
SWITZERLAND-8.0%
ABB AG.................................................................... 157 195,297
Nestle S.A. (Regd.)....................................................... 132 141,714
Novartis AG............................................................... 119 136,292
Roche Holdings AG......................................................... 10 77,811
Schw Rueckversicher (Regd.)............................................... 75 80,071
Tag Heuer................................................................. 186 30,016 (a)
----------
661,201
----------
THAILAND-0.5%
Siam Cement Co. Ltd....................................................... 1,200 37,620
----------
UNITED KINGDOM-10.7%
EMI Group................................................................. 4,927 116,464
Granada Group............................................................. 8,570 126,707
Medeva.................................................................... 46,917 204,162
Reed International........................................................ 8,384 157,712
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE International Equity Portfolio 71
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE ($)
---------- ----------
Siebe..................................................................... 13,394 248,743
<S> <C>
Thorn..................................................................... 4,830 20,935
----------
874,723
----------
Total Common Stock
(Cost $6,279,640).................................................. 7,944,341
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE
---------- ----------
<S> <C>
SHORT TERM INVESTMENTS-2.9%
TIME DEPOSIT-2.9%
State Street Cayman Islands
6.25% 01/02/97
(Cost $240,000) 240,000 240,000
Other Assets and Liabilities, net 0.3%.................................... 20,688
----------
NET ASSETS-100%................................................................ $8,205,029
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
72 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
BONDS AND NOTES-96.9%
U.S. TREASURIES-37.9%
U.S. Treasury Bonds
6.75% 08/15/26.......................................................... 276,000 278,070(g)
8.125% 08/15/19.......................................................... 142,000 164,254(g)
----------
442,324
----------
U.S. Treasury Notes
5.625% 02/28/01.......................................................... 131,000 128,401(g)
5.875% 10/31/98-11/15/99................................................. 284,000 283,336(g)
6.00% 12/31/01.......................................................... 77,000 76,711
6.125% 05/31/97-08/31/98................................................. 149,000 149,636(g)
6.25% 10/31/01.......................................................... 31,000 31,029(g)
6.375% 09/30/01.......................................................... 202,000 203,200(g)
6.50% 10/15/06.......................................................... 100,000 100,547(g)
6.625% 07/31/01.......................................................... 13,000 13,207
6.625% 06/30/01.......................................................... 122,000 123,963(g)
7.00% 07/15/06.......................................................... 114,000 118,436(g)
7.75% 12/31/99.......................................................... 353,000 369,217(g)
----------
1,597,683
----------
Total U.S. Treasuries
(Cost $2,039,165).................................................... 2,040,007
----------
ASSET BACKED-2.0%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25.......................................................... 6,391 6,201
CIT RV Owner Trust
5.40% 12/15/11.......................................................... 8,024 7,912
First Plus Home Input Loan Trust
7.80% 03/20/16.......................................................... 10,000 10,231
Fleetwood Credit Grantor Trust
6.90% 03/15/12.......................................................... 12,320 12,432
Ford Credit Auto Loan Master Trust
5.50% 02/15/03.......................................................... 9,000 8,688
Lehman FHA Title I Loan Trust
7.83% 09/25/17.......................................................... 10,000 10,244
MBNA Master Credit Card Trust
5.40% 09/15/00.......................................................... 9,000 8,893
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 73
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
Provident Bank Home Equity Loan Trust
7.60% 10/25/12.......................................................... 13,574 13,748
Standard Credit Card Master Trust
5.95% 10/07/04.......................................................... 12,000 11,535
The Money Store Home Equity Trust
7.50% 01/15/26.......................................................... 14,000 14,149
7.90% 10/15/22.......................................................... 6,000 6,150
----------
Total Asset Backed
(Cost $109,014)...................................................... 110,183
----------
CORPORATE NOTES-20.9%
Argentaria Capital Fund
6.375% 02/14/06.......................................................... 30,000 28,406
Barnett Capital Trust
7.95% 12/01/26.......................................................... 7,000 6,926(b)
Bell Telephone Co.-Canada
9.50% 10/15/10.......................................................... 35,000 42,222
Camden Property Trust
7.00% 11/15/06.......................................................... 7,000 6,790
Capital One Bank
6.43% 06/29/98.......................................................... 50,000 50,035
Carter Holt Harvey Ltd.
8.875% 12/01/04.......................................................... 50,000 55,381
China International Trust & Investment Corp.
9.00% 10/15/06.......................................................... 10,000 11,045
Circus Circus Enterprises Inc.
6.70% 11/15/96.......................................................... 10,000 9,835
Deutsche Bank Financial Inc.
6.70% 12/13/06.......................................................... 20,000 19,627
Dresser Industries Inc.
7.60% 08/15/96.......................................................... 23,000 23,481
Enersis S.A.
7.40% 12/01/16.......................................................... 10,000 9,702
Federated Department Stores Inc.
10.00% 02/15/01.......................................................... 50,000 54,311
First Security Capital
8.41% 12/15/26.......................................................... 7,000 7,157(b)
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
74 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
General Motors Corp.
8.89% 08/18/03.......................................................... 25,000 27,576
Great Atlantic & Pacific Tea Inc.
9.125% 01/15/98.......................................................... 50,000 51,285
Guangdong International Trust & Investment Corp.
8.75% 10/24/16.......................................................... 10,000 10,291
HSBC Finance Nederland B.V.
7.40% 04/15/03.......................................................... 50,000 50,943(b)
Hydro-Quebec
8.05% 07/07/24.......................................................... 60,000 65,971
ITT Corp.
6.25% 11/15/00.......................................................... 7,000 6,887
Joy Technologies Inc.
10.25% 09/01/03.......................................................... 50,000 54,872
Korea Electric Power Corp.
7.75% 04/01/13.......................................................... 10,000 10,313
Landeskreditbank Baden
7.875% 04/15/04.......................................................... 25,000 26,633
Lehman Brothers Holdings Inc.
6.84% 09/25/98.......................................................... 25,000 25,190
Loewen Group International Inc.
7.50% 04/15/01.......................................................... 25,000 25,088
Morgan Stanley Finance PLC
8.03% 02/28/17.......................................................... 5,000 5,013
National Bank Hungary
8.875% 11/01/13.......................................................... 30,000 32,494
New York State Dormitory Authority Revenues
6.32% 04/01/99.......................................................... 15,000 15,014
News America Holdings Inc.
8.15% 10/17/36.......................................................... 45,000 44,245
North Atlantic Energy Corp.
9.05% 06/01/02.......................................................... 47,000 47,303
Paramount Communications Inc.
5.875% 07/15/00.......................................................... 50,000 48,304
Petroleos Mexicanos
7.75% 10/29/99.......................................................... 15,000 14,944(b)
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 75
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
Provident Capital Trust
8.60% 12/01/26.......................................................... 5,000 5,071(b)
Reliance Industries Ltd.
10.375% 06/24/16.......................................................... 5,000 5,399(b)
10.50% 08/06/46.......................................................... 5,000 5,350(b)
Republic of Poland
3.75% 10/27/14.......................................................... 10,000 8,463
Riggs Capital Trust
8.625% 12/31/26.......................................................... 10,000 10,094(b)
RJR Nabisco Inc.
8.00% 07/15/01.......................................................... 50,000 50,161
Tele-Communications Inc.
8.25% 01/15/03.......................................................... 35,000 35,344
Time Warner Entertainment Co. L.P.
10.15% 05/01/12.......................................................... 50,000 59,968
United Co. Financial Corp.
7.00% 07/15/98.......................................................... 50,000 50,244
Union Electric Co.
7.69% 12/15/36.......................................................... 10,000 9,856
----------
Total Corporate Notes
(Cost $1,111,398).................................................... 1,127,234
----------
MORTGAGE-BACKED-36.1%
Federal Home Loan Mortgage Corp.
6.50% 03/01/04-07/01/09................................................. 45,622 45,123
7.50% 06/01/24-10/01/25................................................. 206,867 207,331
9.00% 02/01/17.......................................................... 71,590 76,042
----------
328,496
----------
Federal National Mortgage Assoc.
6.50% 01/01/04-04/01/26................................................. 78,825 76,126
7.00% 04/01/26-05/01/26................................................. 116,164 113,586
7.50% 11/01/22-04/01/24................................................. 43,306 43,468
----------
233,180
----------
Government National Mortgage Assoc.
7.50% 02/15/23-08/15/23................................................. 204,576 205,533
8.00% 03/15/23-12/15/23................................................. 121,204 124,259
8.50% 10/15/17.......................................................... 185,970 197,162
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
76 Variable Investment Trust-GE Fixed Income Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
9.00% 08/15/18.......................................................... 77,326 82,633
9.00% TBA............................................................... 21,000 22,555(c)
9.50% 06/15/17.......................................................... 73,753 80,090
----------
712,232
----------
Mid-State Trust
8.33% 04/01/30.......................................................... 108,862 114,714
----------
COLLATERALIZED MORTGAGE OBLIGATIONS
Aetna Commercial Mortgage Trust
6.422% 12/26/30.......................................................... 37,847 37,871
DLJ Mortgage Acceptance Corp.
6.85% 12/17/27.......................................................... 40,000 39,913(b)
7.29% 11/12/21.......................................................... 10,000 10,250(b)
8.72% 06/28/26.......................................................... 20,856 21,188(b)
Federal Home Loan Mortgage Corp.
7.00% 07/01/26.......................................................... 136,650 47,315(f)
1009% 09/15/21.......................................................... 166 5,966(f)
Federal National Mortgage Assoc.
7.12% 09/25/23.......................................................... 27,192 17,335(d,e)
7.41% 03/25/21.......................................................... 18,000 18,473
8.00% 02/01/23.......................................................... 58,188 17,893(f)
8.50% 07/25/22.......................................................... 22,405 6,853(f)
9.41% 09/25/23.......................................................... 35,000 22,137(d,e)
Federal National Mortgage Assoc. REMIC
6.61% 08/25/23.......................................................... 42,680 31,503(d,e)
6.78% 09/25/22.......................................................... 17,133 13,679(d,e)
6.856% 06/17/11.......................................................... 11,000 11,028
7.12% 09/25/23.......................................................... 7,556 4,817(d,e)
7.14% 07/25/20.......................................................... 19,000 15,865(d,e)
10.88% 10/25/23.......................................................... 14,293 10,970(d,e)
LB Commercial Conduit Mortgage Trust
7.141% 08/25/04.......................................................... 63,661 64,556
7.416% 10/25/26.......................................................... 17,955 18,342
Merrill Lynch Mortgage Investor's Inc.
7.113% 05/25/15.......................................................... 22,784 23,097
7.252% 06/15/21.......................................................... 74,315 75,546
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Fixed Income Portfolio 77
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE ($)
---------- ----------
<S> <C>
Structured Asset Securities Corp.
9.087% 09/25/31.......................................................... 39,435 41,173
----------
555,770
----------
Total Mortgage-Backed
(Cost $1,921,233).................................................... 1,944,392
----------
Total Bonds and Notes
(Cost $5,180,810).................................................... 5,221,816
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ----------
<S> <C>
PREFERRED STOCK-1.0%
Appalachian Power Co. (Series A), 8.25%..................................... 80....... 2,010
Central Hispano Capital, 9.43%.............................................. 400...... 10,600
Entergy Gulf States Inc., $1.75............................................. 500...... 12,539
Equity Residential Properties Trust, 9.125%................................. 250 6,437
Grand Metropolitan Delaware, 9.42%.......................................... 400...... 11,200
National Rural Utilities Cooperative Finance Corp., 8.00%................... 120...... 2,985
Security Capital Industrial Trust, 8.54%.................................... 170...... 8,623
----------
Total Preferred Stock
(Cost $52,704)....................................................... 54,394
----------
Total Investments in Securities
(Cost $5,233,514).................................................... 5,276,210
----------
<CAPTION>
PRINCIPAL
AMOUNT ($) VALUE
---------- ----------
<S> <C>
SHORT TERM INVESTMENTS-1.9%
U.S. GOVERNMENT AGENCY-1.9%
Federal Home Loan Mortgage Corp.
5.34% 01/30/97
(Cost $99,570)....................................................... 100,000 99,570(d)
Other Assets and Liabilities, net 0.2%...................................... 11,915
----------
NET ASSETS-100%.................................................................. $5,387,695
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
78 Variable Investment Trust-GE Money Market Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT ($) COST ($)
---------- ----------
<S> <C>
SHORT TERM INVESTMENTS-99.8%
U.S. GOVERNMENTS(D)-47.0%
Federal Home Loan Bank
5.22% 01/09/97........................................................ 100,000 99,884
5.24% 01/03/97........................................................ 200,000 199,942
5.49% 03/06/97........................................................ 200,000 198,048
----------
497,874
----------
Federal Home Loan Mortgage Corp.
5.19% 03/07/97........................................................ 100,000 99,063
5.22% 06/13/97........................................................ 150,000 146,455
5.23% 02/14/97........................................................ 200,000 198,723
5.70% 01/02/97........................................................ 110,000 109,982
----------
554,223
----------
Federal National Mortgage Assoc.
5.21% 05/12/97........................................................ 160,000 156,972
5.22% 03/06/97........................................................ 110,000 108,979
5.23% 02/18/97-02/26/97............................................... 360,000 357,269
5.25% 01/16/97........................................................ 200,000 199,563
5.27% 01/03/97........................................................ 190,000 189,944
----------
1,012,727
----------
Total U.S. Governments
(Cost $2,064,824).................................................. 2,064,824
----------
COMMERCIAL PAPER(D)-22.5%
Abbey National PLC
5.27% 02/18/97........................................................ 180,000 178,735
Chase Manhattan Corp.
5.313% 01/15/97........................................................ 160,000 160,000
First Union Corp.
5.29% 02/19/97........................................................ 130,000 129,064
Merrill Lynch & Co. Inc.
5.30% 02/14/97........................................................ 160,000 158,964
Morgan (J.P.) & Co. Inc.
5.30% 01/16/97........................................................ 200,000 199,558
Norwest Corp.
5.30% 01/17/97........................................................ 160,000 159,623
----------
Total Commercial Paper
(Cost $985,944).................................................... 985,944
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust-GE Money Market Portfolio 79
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT ($) COST ($)
---------- ----------
CERTIFICATES OF DEPOSIT-28.0%
<S> <C>
Algemene Bank Nederland N.V.
5.38% 01/17/97........................................................ 180,000 180,000
Bank of Nova Scotia
5.51% 01/06/97........................................................ 200,000 200,000
Bayerische Hypotheken Bank
5.35% 02/21/97........................................................ 150,000 150,000
Credit Suisse
5.36% 02/11/97........................................................ 200,000 200,000
Dresdner Bank AG
5.36% 02/11/97........................................................ 150,000 150,000
Royal Bank of Canada
5.35% 03/13/97........................................................ 150,000 150,000
Societe Generale
5.50% 01/02/97........................................................ 200,000 200,000
----------
Total Certificates of Deposit
(Cost $1,230,000).................................................. 1,230,000
----------
TIME DEPOSIT-2.3%
State Street Cayman Islands
6.25% 01/02/97
(Cost $100,000)...................................................... 100,000 100,000
----------
Total Short Term Investments
(Cost $4,380,768).................................................. 4,380,768
Other Assets and Liabilities, net 0.2%.................................... 9,706
----------
NET ASSETS-100%................................................................ $4,390,474
----------
----------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO SCHEDULE OF INVESTMENTS AND FINANCIAL STATEMENTS.
<PAGE>
80 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
(a) Non-income producing security.
(b) Pursuant to Rule 144A of Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 1996, these securities amounted to
$45,538, $88,488 and $177,235 or 0.3%, 1.1% and 3.3% of net assets for the
GE U.S. Equity, GE International Equity and GE Fixed Income Portfolios,
respectively.
(c) Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the principal only holder.
(f) Interest only securities represent the right to receive the monthly
interest payments on an underlying pool of mortgages. Payments of
principal on the pool reduce the value of the interest only holding.
(g) At December 31, all or a portion of this security was pledged to cover
collateral requirements for futures and TBA's.
ABBREVIATIONS:
ADR--American Depositary Receipt
REMIC--Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 81
- --------------------------------------------------------------------------------
(This Page Intentionally Left Blank)
<PAGE>
82 Variable Investment Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
GE U.S. GE INTERNATIONAL GE FIXED GE MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------------- ---------- ----------
<S> <C>
ASSETS
Investments in securities, at market (cost
$12,818,080, $6,279,640, $5,233,514 and $0,
respectively).................................... $15,932,223 $7,944,341 $5,276,210 $ --
Short term investments (at amortized cost)......... 2,065,777 240,000 99,570 4,380,768
Cash............................................... 11,467 7,321 -- 12,689
Foreign currency (cost $14,164, $17,455, $0, and
$0, respectively)................................ 14,300 17,516 -- --
Receivable for investments sold.................... 68,070 -- 11,881 --
Income receivables................................. 28,173 12,398 70,188 12,912
Receivable for fund shares sold.................... 455 96 458 61
Deferred organizational costs...................... 9,476 9,476 9,476 9,476
----------- ---------------- ---------- ----------
Total assets....................................... 18,129,941 8,231,148 5,467,783 4,415,906
----------- ---------------- ---------- ----------
LIABILITIES
Payable to custodian............................... -- -- 17,398 --
Distributions payable to shareholders.............. -- -- 5,531 3,378
Payable for investments purchased.................. 31,067 -- 36,243 --
Payable for fund shares repurchased................ 2,510 650 4,672 8,781
Payable to GEIM.................................... 33,323 25,469 16,244 13,273
Variation margin payable........................... 36,500 -- -- --
----------- ---------------- ---------- ----------
Total liabilities.................................. 103,400 26,119 80,088 25,432
----------- ---------------- ---------- ----------
NET ASSETS......................................... $18,026,541 $8,205,029 $5,387,695 $4,390,474
----------- ---------------- ---------- ----------
----------- ---------------- ---------- ----------
NET ASSETS CONSIST OF:
Capital paid in............................... $14,472,431 $6,487,478 $5,364,664 $4,383,902
Undistributed (overdistributed) net investment
income...................................... 267 (320) (3,063) 6,590
Accumulated net realized gain (loss).......... 448,301 53,310 (16,602) (18)
Net unrealized appreciation/(depreciation) on:
Investments................................. 3,114,143 1,664,701 42,696 --
Futures..................................... (8,850) -- -- --
Foreign currency transactions............... 249 (140) -- --
----------- ---------------- ---------- ----------
NET ASSETS......................................... $18,026,541 $8,205,029 $5,387,695 $4,390,474
----------- ---------------- ---------- ----------
----------- ---------------- ---------- ----------
Shares outstanding ($.001 par value)............... 853,799 447,428 455,230 4,390,492
Net asset value, offering and redemption price per
share............................................ $ 21.11 $ 18.34 $ 11.84 $ 1.00
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust 83
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GE U.S. GE INTERNATIONAL GE FIXED GE MONEY
EQUITY EQUITY INCOME MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------------- --------- --------
<S> <C>
INVESTMENT INCOME
Income:
Dividends.......................................... $ 275,363 $ 132,290 $ 2,452 $ --
Interest........................................... 107,174 7,556 329,458 277,249
Less: Foreign taxes withheld....................... (2,464) (16,606) (38) --
---------- ---------------- --------- --------
Total income........................................... 380,073 123,240 331,872 277,249
---------- ---------------- --------- --------
EXPENSES:
Advisory and administration fees................... 80,400 63,053 23,311 15,468
Transfer agent..................................... 8,000 8,000 8,000 8,000
Trustees' fees..................................... 7,579 5,400 2,727 4,292
Custody and accounting............................. 1,441 1,027 520 815
Legal.............................................. 9,474 6,749 3,411 5,368
Audit.............................................. 18,949 13,498 6,822 10,734
Amortization of deferred organization expense...... 3,159 3,159 3,159 3,159
---------- ---------------- --------- --------
Total expenses before waiver........................... 129,002 100,886 47,950 47,836
Less: Expenses waived or borne by the advisor.......... (12,056) (11,870) (12,983) (22,056 )
---------- ---------------- --------- --------
Net expenses........................................... 116,946 89,016 34,967 25,780
---------- ---------------- --------- --------
Net investment income.................................. 263,127 34,224 296,905 251,469
---------- ---------------- --------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments........................................ 884,271 342,314 (20,980) (18 )
Futures............................................ 198,575 -- -- --
Written options.................................... 1,136 -- 199 --
Foreign currency transactions...................... (456) (7,865) -- --
Increase (decrease) in unrealized
appreciation/(depreciation) on:
Investments........................................ 1,573,757 732,271 (101,681) --
Futures............................................ (9,425) -- -- --
Foreign currency transactions...................... 249 2,846 -- --
---------- ---------------- --------- --------
Net realized and unrealized gain (loss) on
investments.......................................... 2,648,107 1,069,566 (122,462) (18 )
---------- ---------------- --------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $2,911,234 $1,103,790 $ 174,443 $251,451
---------- ---------------- --------- --------
---------- ---------------- --------- --------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
84 Variable Investment Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GE U.S. EQUITY PORTFOLIO GE INTERNATIONAL EQUITY PORTFOLIO
------------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 263,127 $ 203,448 $ 34,224 $ 79,849
Net realized gain (loss) on investments,
futures, written options, and foreign
currency transactions.................... 1,083,526 1,196,378 334,449 446,218
Net increase (decrease) in unrealized
appreciation/(depreciation).............. 1,564,581 1,540,961 735,117 929,444
----------------- ----------------- ----------------- -----------------
Net increase from operations................ 2,911,234 2,940,787 1,103,790 1,455,511
----------------- ----------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................... (266,657) (207,780) (32,331) (53,453)
Net realized gains.......................... (1,569,398) (260,666) (702,363) (60,193)
----------------- ----------------- ----------------- -----------------
Total distributions........................... (1,836,055) (468,446) (734,694) (113,646)
----------------- ----------------- ----------------- -----------------
Increase (decrease) in net assets from
operations and distributions............... 1,075,179 2,472,341 369,096 1,341,865
----------------- ----------------- ----------------- -----------------
SHARE TRANSACTIONS:
Proceeds from sale of shares................ 6,384,529 16,940,648 941,134 14,329,796
Value of distributions reinvested........... 1,836,055 86,880 734,691 17,380
Cost of shares redeemed..................... (340,318) (10,448,773) (203,915) (9,345,018)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) from
share transactions.......................... 7,880,266 6,578,755 1,471,910 5,002,158
----------------- ----------------- ----------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....... 8,955,445 9,051,096 1,841,006 6,344,023
NET ASSETS
Beginning of year............................. 9,071,096 20,000 6,364,023 20,000
----------------- ----------------- ----------------- -----------------
End of year................................... $18,026,541 $ 9,071,096 $ 8,205,029 $ 6,364,023
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Undistributed (overdistributed) net
investment income, end of year.............. $ 267 $ -- $ (320) $ 5,059
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription................... 313,305 998,802 51,543 901,233
Issued for distributions reinvested........... 85,239 4,523 40,501 1,002
Shares redeemed............................... (15,566) (533,837) (10,953) (537,231)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) in Portfolio shares... 382,978 469,488 81,091 365,004
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust 85
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE FIXED INCOME PORTFOLIO GE MONEY MARKET PORTFOLIO
------------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income....................... $ 296,905 $ 295,024 $ 251,469 $ 281,628
Net realized gain (loss) on investments,
futures, written options, and foreign
currency transactions.................... (20,781) 259,037 (18) 98
Net increase (decrease) in unrealized
appreciation/(depreciation).............. (101,681) 144,377 -- --
----------------- ----------------- ----------------- -----------------
Net increase from operations................ 174,443 698,438 251,451 281,726
----------------- ----------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................... (296,905) (301,130) (245,602) (287,593)
Net realized gains.......................... (114,424) (143,981) -- --
----------------- ----------------- ----------------- -----------------
Total distributions........................... (411,329) (445,111) (245,602) (287,593)
----------------- ----------------- ----------------- -----------------
Increase (decrease) in net assets from
operations and distributions............... (236,886) 253,327 5,849 (5,867)
----------------- ----------------- ----------------- -----------------
SHARE TRANSACTIONS:
Proceeds from sale of shares................ 2,351,196 7,347,507 6,445,298 15,872,664
Value of distributions reinvested........... 405,749 321,567 242,158 271,852
Cost of shares redeemed..................... (403,559) (4,671,206) (7,413,133) (11,048,347)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) from
share transactions.......................... 2,353,386 2,997,868 (725,677) 5,096,169
----------------- ----------------- ----------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....... 2,116,500 3,251,195 (719,828) 5,090,302
NET ASSETS
Beginning of year............................. 3,271,195 20,000 5,110,302 20,000
----------------- ----------------- ----------------- -----------------
End of year................................... $ 5,387,695 $ 3,271,195 $ 4,390,474 $ 5,110,302
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Undistributed (overdistributed) net
investment income, end of year.............. $ (3,063) $ (109) $ 6,590 $ 130
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
CHANGES IN PORTFOLIO SHARES:
Shares sold by subscription................... 193,912 599,669 6,445,298 15,872,664
Issued for distributions reinvested........... 34,209 25,466 242,158 271,852
Shares redeemed............................... (33,870) (365,823) (7,413,133) (11,048,347)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) in Portfolio shares... 194,251 259,312 (725,677) 5,096,169
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
86 Variable Investment Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding throughout the periods indicated
<TABLE>
<CAPTION>
GE U.S. EQUITY GE INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO
------------------------ ------------------------
12/31/96 12/31/95 (B) 12/31/96 12/31/95 (B)
-------- ------------ -------- ------------
<S> <C>
Net asset value, beginning of period......................................... $ 19.27 $15.00 $17.37 $15.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income...................................................... 0.34 0.46 0.08 0.21
Net realized and unrealized gains (losses) on investments.................. 3.90 4.87 2.70 2.45
-------- ------------ -------- ------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS............................... 4.24 5.33 2.78 2.66
-------- ------------ -------- ------------
LESS DISTRIBUTIONS FROM:
Net investment income...................................................... 0.35 0.47 0.08 0.14
Net realized gains......................................................... 2.05 0.59 1.73 0.15
-------- ------------ -------- ------------
TOTAL DISTRIBUTIONS.......................................................... 2.40 1.06 1.81 0.29
-------- ------------ -------- ------------
NET ASSET VALUE, END OF PERIOD............................................... $ 21.11 $19.27 $18.34 $17.37
-------- ------------ -------- ------------
-------- ------------ -------- ------------
TOTAL RETURN (A)............................................................. 21.72 % 35.58% 16.10% 17.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................................... $18,027 $9,071 $8,205 $6,364
Ratio of net investment income to average net assets*...................... 1.80 % 2.10% 0.46% 0.88%
Ratio of expenses to average net assets*................................... 0.80 % 0.80% 1.20% 1.20%
Ratio of expenses to average net assets before voluntary expense
limitation*............................................................. 0.88 % 1.03% 1.36% 1.35%
Portfolio turnover rate.................................................... 35 % 71% 26% 60%
Average brokerage commissions (c).......................................... $ .071 N/A $ .048 N/A
</TABLE>
- ------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains. Had the adviser not absorbed a
portion of expenses, total returns would have been lower. Periods less than
one year are not annualized.
(b) Information is for the period January 3, 1995, commencement of investment
operations, through December 31, 1995.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
Variable Investment Trust 87
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE FIXED INCOME GE MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------- -----------------------
12/31/96 12/31/95 (B) 12/31/96 12/31/95 (B)
-------- ------------ -------- ------------
<S> <C>
Net asset value, beginning of period......................................... $12.53 $12.00 $ 1.00 $ 1.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income...................................................... 0.76 0.82 0.05 0.05
Net realized and unrealized gains (losses) on investments.................. (0.43) 1.13 0.00 0.01
-------- ------------ -------- ------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS............................... 0.33 1.95 0.05 0.06
-------- ------------ -------- ------------
LESS DISTRIBUTIONS FROM:
Net investment income...................................................... 0.76 0.84 0.05 0.06
Net realized gains......................................................... 0.26 0.58 0.00 0.00
-------- ------------ -------- ------------
TOTAL DISTRIBUTIONS.......................................................... 1.02 1.42 0.05 0.06
-------- ------------ -------- ------------
NET ASSET VALUE, END OF PERIOD............................................... $11.84 $12.53 $ 1.00 $ 1.00
-------- ------------ -------- ------------
-------- ------------ -------- ------------
TOTAL RETURN (A)............................................................. 2.92% 16.83% 4.87% 5.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................................... $5,388 $3,271 $4,390 $5,110
Ratio of net investment income to average net assets*...................... 6.37% 6.52% 4.88% 5.41%
Ratio of expenses to average net assets*................................... 0.75% 0.75% 0.50% 0.50%
Ratio of expenses to average net assets before voluntary expense
limitation*............................................................. 1.03% 1.15% 0.93% 0.87%
Portfolio turnover rate.................................................... 222% 253% N/A N/A
Average brokerage commissions (c).......................................... N/A N/A N/A N/A
</TABLE>
- ------------
(c) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. Mark-ups, mark-downs and spreads on shares
traded on a principal basis are not included unless they are disclosed on
confirmations prepared in accordance with rule 10b-10 under the 1934 Act.
* Annualized for periods less than one year.
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
88 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 adviser and administrator of each Portfolio. As of
December 31, 1996, Great Northern Insured Annuity Corporation, an affiliated
insurance company, controlled the Portfolios by ownership, through separate
accounts, of virtually all of the Portfolios' shares of beneficial interest. The
Trust may in the future offer shares of some or all of the Portfolios to
variable life insurance separate 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
International Equity Portfolio is long-term growth of capital, which the
Portfolio seeks to achieve by investing primarily in foreign equity securities.
The investment objective of GE Fixed Income Portfolio is to seek maximum income
consistent 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 maintenance
of liquidity, which the Portfolio seeks to achieve by investing in a defined
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 may differ from those estimates.
SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations
are readily available are valued at the last sale price, or if no sales occurred
on that day, at the last quoted bid price. Certain fixed income securities are
valued by a dealer or by a pricing service based upon a computerized matrix
system, which considers market transactions and dealer supplied valuations.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are principally traded. Options
that are written or purchased are valued using the mean between the
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 89
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
last asked and bid prices. Forward foreign currency contracts are valued at the
mean between the bid and the offered forward rates as last quoted by a
recognized dealer.
Short term investments maturing within 60 days are valued at amortized cost or
original cost plus accrued interest, each of which approximates fair 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
method, which values securities initially at cost and thereafter assumes a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair 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 purchases
and sales of investment securities denominated in a foreign currency are
translated to U.S. dollars at the prevailing exchange rate on the respective
dates of such transactions.
The Portfolios do not isolate the portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in their market prices. Such fluctuations are
included in net realized and unrealized gain or loss from investments. Reported
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, realized gains and
losses on forward foreign currency contracts, and the difference 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 investments in
securities at fiscal year end, as a result of changes in exchange rates.
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,
therefore, no provision for federal income tax has been made. Each Portfolio is
treated as a separate taxpayer for federal income tax purposes.
Capital loss carryovers are available to offset future realized capital gains.
To the extent that these carryover losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders because they would be taxable as ordinary income. At December 31,
1996, the GE Fixed Income Portfolio had a capital loss carryover of $15,499
which expires December 31, 2004.
Any net capital and currency losses incurred after October 31, within the
Fund's tax year, are deemed to arise on the first day of the Fund's next tax
year if the Fund so elects to defer such losses.
- --------------------------------------------------------------------------------
<PAGE>
90 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INVESTMENT INCOME. Corporate actions (including cash dividends) are recorded
net of nonreclaimable tax withholdings on the ex-dividend date, except for
certain foreign securities for which corporate actions are recorded as soon
after ex-dividend date as such information is available. 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
identifiable to a specific Portfolio are allocated in such a manner as deemed
equitable, taking into consideration the nature and type of expense and the
relative sizes of the Portfolios. All expenses of the Portfolios are paid by the
Investment Adviser 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 and pay monthly. GE U.S.
Equity 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 forward foreign
currency contracts, paydown gains and losses on mortgage-backed securities,
losses on wash sale transactions, and deferred organization expenses.
Reclassifications are made to the Portfolios' capital accounts to reflect income
and gains available for distribution (or available capital loss carryovers)
under income tax regulations. The calculation of net investment income per share
in the Financial Highlights table excludes these adjustments.
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.
WHEN-ISSUED SECURITIES. The Portfolios 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 transaction is negotiated. This may increase the risk if
the other party involved in the transaction fails to deliver and causes the
Portfolio to subsequently invest at less advantageous yields. In connection with
such purchases, the Portfolio is required to hold liquid assets as collateral
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.
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
collateral 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 liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 91
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FUTURES AND OPTIONS. The Portfolios, other than 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 Statements of Assets and Liabilities. The
face or contract amounts reflect the extent of the involvement the Portfolios
have in the particular classes of these 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 an inability of
counterparties to perform. The Portfolios may invest in these instruments for
the following reasons: 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 economically appropriate to reduce the risk inherent in the
management of the Portfolio involved.
Upon entering into a futures contract, the Portfolio is 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 Portfolio each day. The variation margin payments are
equal to the daily change in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
futures contract is closed. The Portfolio 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 proceeds on the sale of the security for a purchased put or cost
of the security for a 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 involve
foreign currency exchange rate fluctuations, adverse political and economic
developments and the imposition of unfavorable foreign governmental laws and
restrictions.
3. FEES AND COMPENSATION PAID TO AFFILIATES.
ADVISORY AND ADMINISTRATION FEES. Compensation of GEIM, the Portfolio's
Investment Adviser and Administrator, a wholly owned subsidiary of General
Electric Company, for investment advisory and administrative services is paid
monthly based on the average daily net assets of each Portfolio. Such advisory
and administration fees are based on the annual rates listed in the table below.
Until further notice, GEIM has agreed to reduce other operating expenses
(exclusive 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>
GE U.S Equity Portfolio................................. .55% .25%
GE International EquityPortfolio........................ .85% .35%
GE Fixed Income Portfolio............................... .50% .25%
GE Money Market Portfolio............................... .30% .20%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
92 Variable Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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, 1996, were as
follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C>
GE U.S. Equity Portfolio..................................... $3,179,954 $ 65,811 $3,114,143
GE International Equity Portfolio............................ 1,952,034 287,333 1,664,701
GE Fixed Income Portfolio.................................... 64,781 22,085 42,696
</TABLE>
The aggregate cost of each Portfolio's investments was substantially the same
for book and federal income tax purposes at December 31, 1996.
5. OPTIONS. During the period ended December 31, 1996, the following option
contracts were written:
<TABLE>
<CAPTION>
GE U.S. EQUITY PORTFOLIO GE U.S. FIXED PORTFOLIO
------------------------ ------------------------
NUMBER NUMBER
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
------------ ------- ------------ -------
<S> <C>
Balance as of December 31, 1995................ -- $ -- -- $ --
Written........................................ 8 2,638 204 199
Closed and Expired............................. (5) (1,585) (204) (199)
Exercised...................................... (3) (1,053) -- --
--------- ------- ------------ -------
Balance as of December 31, 1996................ -- $ -- -- $ --
--------- ------- ------------ -------
--------- ------- ------------ -------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Variable Investment Trust 93
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. INVESTMENT TRANSACTIONS. The cost of purchases and the proceeds from sales
of investments, other than U.S. Government obligations, short term securities
and options, for the period ended December 31, 1996, were:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C>
GE U.S. Equity Portfolio................................ $9,298,619 $4,396,116
GE International Equity Portfolio....................... 2,467,371 1,872,654
GE Fixed Income Portfolio............................... 2,097,785 1,469,578
</TABLE>
The cost of purchases and the proceeds from sales of long term U.S. Government
obligations for the period ended December 31, 1996, were:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------
<S> <C>
GE U.S. Equity Portfolio............................... $ 143,448 $ 25,763
GE Fixed Income Portfolio.............................. 10,359,335 8,439,574
</TABLE>
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94 Variable Investment Trust
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Variable Investment Trust
In our opinion, the accompanying statements of assets and liabilities,
including 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
International Equity Portfolio, GE Fixed Income Portfolio and GE Money Market
Portfolio, each a portfolio of Variable Investment Trust (the "Trust"), at
December 31, 1996, the results of their operations, the changes in their net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 11, 1997
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[GE LOGO GREAT NORTHERN INSURED ANNUITY CORPORATION*
*DOING BUSINESS IN TEXAS AS GNA INSURANCE COMPANY
Two Union Square (Bullet) Suite 900 (Bullet) P.O. Box 490
Seattle, Washington 98111-0490
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POWER PORTFOLIO
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ANNUAL REPORT
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December 31, 1996
GNA VARIABLE SERIES TRUST
VARIABLE INVESTMENT TRUST
---------------------------------------
GREAT NORTHERN INSURED ANNUITY CORPORATION
Corporate Office: Two Union Square
P.O. Box 490 (Bullet) Seattle, Washington
98111-0490
(206) 625-1755
VARIABLE ANNUITY SERVICE CENTER:
300 Berwyn Park (Bullet) Berwyn, PA
19312-0031
(800) 455-0870
THE POWER PORTFOLIO VARIABLE ANNUITY
IS OFFERED BY GNA DISTRIBUTORS, INC.
