American United Life
Pooled Equity Fund B
board of managers
james w. murphy, Chairman
Senior Vice President,
Corporate Finance, AUL
ronald D. anderson Professor,
School of Business,
Indiana University, Indianapolis, Indiana
jerry D. semler, Vice Chairman
Chairman, President, and
Chief Executive Officer, AUL
james P. shanahan
Senior Vice President,
Pension Division, AUL
leslie lenkowsky President,
Hudson Institute,
Indianapolis, Indiana
richard A. wacker Secretary to the Board, Associate General Counsel, AUL
custodian
National City BankIndianapolis, Indiana
legal counsel
Ice Miller Donadio
& Ryan Indianapolis, Indiana
investment Manager
American United Life
Insurance Company Indianapolis, Indiana
G. David Sapp,
Senior Vice President, Investments
This Report and the financial statements contained herein are submitted for the
general information of the participants in the Fund. The report
is not authorized for distribution to prospective investors in the Fund as sales
literature unless preceded or accompanied by an effective
Prospectus which contains further information concerning the sales charge and
other pertinent information.
<PAGE>
American
United
Life
Pooled
Equity
Fund B
Annual Report
as of
December 31, 1996<PAGE>
A Message
From
The Chairman of the Board
of Managers
To All Participants in Fund B
The U.S. economy continued its moderate expansion during 1996. Investors began
the year fearing that the economic growth
rate would accelerate, forcing the Federal Reserve to tighten monetary policy.
However, GDP (gross domestic product) grew
at a sustainable pace during the year while core inflation remained subdued.
This seemed to have the effect of calming
investors and reduced prospects for monetary tightening by the Federal Reserve
in the near term.
The stock market experienced another rewarding year in 1996 with the Dow Jones
Industrial Average and the S&P 500
(commonly quoted equity indices) establishing new highs throughout the year.
During 1996, investors continued to react
positively to the combination of slow growth and moderate inflation. However,
not all stocks had identical performance.
These major equity indices were driven by the superior returns of large
capitalization growth companies while small and
medium size companies lagged conspicuously.
At the present time, economists are expecting 1997 to be another year of
moderate growth and low inflation. The Federal
Reserve is expected to stay on the sidelines until concrete evidence of
excessive economic growth or weakness surfaces.
Interest rates will be highly dependent upon the Federal Reserve Bank's reaction
to the various indicators of economic growth
and inflation.
Equity investors have now experienced two back-to-back years of excellent stock
performance. Even after the exuberance of
the last two years, the major stock averages could still post further gains
during 1997, but the gains are expected to be on a
more modest scale. The market could also experience increased volatility as
equity concerns heighten.
Investment performance for Fund B for calendar year 1996 was 19.8%. We suggest
your careful review of the Portfolio
Manager comments found in the following page comparing this return to other
indices.
The performance number for Fund B is net of investment advisory fees but does
not reflect mortality and expense risks
charges and other charges that may be incurred when investing in a variable
annuity contract.
James W. Murphy
Chairman of the Board of Managers
Indianapolis, Indiana
January 17, 1997<PAGE>
A Message
From
Kathryn Hudspeth,
Portfolio Manager
of Fund B
Fund B invests primarily in equity securities selected on the basis of
fundamental investment research for their long-term
growth prospects. Using a bottom-up approach, the Portfolio concentrates on
companies which appear undervalued
compared to the market and their own historic valuation levels. Other important
considerations include management ability,
free cashflow, insider ownership and industry dominance.
Equity investors were the obvious winners in 1996 compared to other traditional
asset classes. Except for brief resistance
during July and December, the S&P 500 marched confidently to new highs. Investor
enthusiasm was fueled by the possibility
of continued moderate economic growth coupled with subdued inflation. This
allowed the Federal Reserve to remain on the
sidelines instead of tightening monetary policy. Another major factor supporting
the stock market during 1996 was its overall
liquidity as investors poured record amounts of money into equity mutual funds.
As a result, 1996 was another impressive year for stocks with the S&P 500
advancing 23%. After considering 1995's
investment return, this represents the largest two-year advance since the
mid-1950's. However, not all segments of the stock
market performed as well as the S&P 500. This equity index is dominated by the
returns of large capitalization, or blue chip,
companies. During 1996, it became apparent that profit growth was decelerating.
In response, investors focused almost
exclusively on companies with consistent and visible earnings growth. This
resulted in massive purchases of large
capitalization growth companies which pushed the prices of this small group of
stocks to extreme valuation levels.
Unfortunately, the rest of the market trailed dramatically. Therefore, size
became an overriding equity theme during 1996.
Fund B achieved a 19.8% investment return for calendar 1996 which is much higher
than the long-term average return for
stocks. The Portfolio benefitted from its concentration in technology,
pharmaceutical and merchandising companies. The
return of the Portfolio was also propelled by several merger situations and
share repurchase programs. However, since Fund
B utilizes a value approach, it did not invest heavily in large capitalization
companies as this area of the market was
overvalued and became more extended as the year progressed.
Equity investors have experienced two successive years of phenomenal returns.
The obvious debate is whether enough
positive information exists to keep equity momentum moving forward. Investors
are generally expecting another year of
moderate growth and subdued inflation. Any deviation from this expectation will
cause increased volatility for the stock
market. Earnings momentum and mutual fund flows have slowed since the first of
the year. Even Federal Reserve Chairman
Alan Greenspan commented on the "irrational exuberance" of the stock market,
which raised concerns that the Federal
Reserve might intervene and tighten monetary policy. While economic fundamentals
remain attractive, equity investing will
remain challenging during 1997.
<PAGE>
American United Life Pooled Equity Fund B
Fund B S&P 500
One Year 19.8% 23.0%
Five Years 14.7% 15.2%
Ten Years 13.7% 15.3%
Value of a hypothetical $10,000
investment made 12/31/86 $36,216 $41,450
The charts above show the Fund B Portfolio's total returns, which include
reinvestment of dividends and capital gains.
Figures for the S&P 500, an unmanaged index of common stocks, include
reinvestment of dividends and capital gains. S&P
500 is a registered trademark of Standard & Poor's Corporation.
Performance numbers are net of all portfolio operating expenses, but do not
include any separate account or contract charges.
If performance data included the effect of these charges, returns would be
lower. Past performance is no guarantee of future
results. Principal and investment return will vary so units may be worth more or
less than their original cost when redeemed.
<PAGE>
(This page is intentionally blank.)
<PAGE>
Report of Independent Accountants
Board of Managers and Contract Owners
American United Life Pooled Equity Fund B
Indianapolis, Indiana
We have audited the accompanying statement of net assets of American United Life
Pooled Equity
Fund B, including the schedule of investments, as of December 31, 1996, and the
related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and
financial highlights based on our 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 investments
and cash held by the custodian as of December
31, 1996, confirmation by correspondence with brokers as to securities purchased
but not received at that date, or other
auditing procedures where confirmations from brokers were not received. 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 American United Life Pooled Equity Fund B as of December
31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Indianapolis, Indiana
January 31, 1997
<PAGE>
(This page is intentionally blank.)
<PAGE>
American United Life Pooled Equity Fund B
statement of net assets
December 31, 1996
Assets:
Investments in securities at market value (cost: $8,999,299)
Common stock $ 11,646,272
Money market mutual funds 636,700
Notes 251,016
12,533,988
Cash 32,617
Dividends and interest receivable 18,855
Total assets 12,585,460
Liabilities 14,071
Net Assets: $12,571,389
Units outstanding 1,067,642
Accumulation Unit Value $ 11.77
The accompanying notes are an integral part of the financial statements.
<PAGE>
American United Life Pooled Equity Fund B
statement of operations
for the year ended December 31, 1996
Net Investment Income:
Income
Dividends $ 265,207
Interest 44,092
309,299
Expense
Investment management services 37,854
Mortality and expense risks charges 113,562
151,416
Net investment income 157,883
Gain on Investments:
Net realized gain 370,506
Net change in unrealized gain 1,637,717
Net gain 2,008,223
Increase in Net Assets from Operations $ 2,166,106
The accompanying notes are an integral part of the financial statements.
<PAGE>
American United Life Pooled Equity Fund B
statementS of changes IN net assets
for the years ended December 31, 1996 and 1995
1996 1995
Operations:
Net investment income $ 157,883 $ 170,092
Net realized gain 370,506 868,191
Net change in unrealized gain 1,637,717 1,181,274
Increase in assets from operations 2,166,106 2,219,557
Changes from Contract Owner Transactions:
Proceeds from units sold 604,294 399,714
Payments for units withdrawn (2,723,610) (1,775,378)
Payments for units redeemed (1,684) (23,881)
Decrease (2,121,000) (1,399,545)
Net increase in net assets 45,106 820,012
Net Assets at beginning year 12,526,283 11,706,271
Net Assets at end of year $ 12,571,389 $12,526,283
Units sold 57,351 43,713
Units withdrawn (253,596) (194,201)
Units redeemed (156) (2,212)
Net decrease in units outstanding (196,401) (152,700)
Units outstanding at beginning of year 1,264,043 1,416,743
Units outstanding at end of year 1,067,642 1,264,043
The accompanying notes are an integral part of the financial statements.
<PAGE>
American United Life Pooled Equity Fund B
schedule of investments
December 31, 1996
<PAGE>
Market
Description Shares Value
Common Stock (92.9%)
Banks & Financial (10.7%)
American Express Company 5,100 $ 288,150
Banc One Corporation 9,020 387,860
Great Western Financial 8,300 240,700
Ohio Casualty Corporation 5,200 184,600
Salomon, Inc. 5,400 254,475
1,355,785
Broadcasting & Publishing (10.0%)
Chris-Craft Industries, Inc.* 4,972 206,960
Deluxe Corporation 7,300 239,075
Gibson Greetings, Inc. 12,400 243,350
Harland (John H.) Company 5,100 168,300
Meredith Corporation 3,700 195,175
Moore Corporation, Ltd. 9,600 196,800
1,249,660
Chemicals (1.5%)
Carlisle Companies, Inc. 2,100 127,050
Quaker Chemical Corporation 4,000 65,500
192,550
Electrical Equipment & Electronics (9.3%)
Baldor Electric Company 14,930 367,651
Dynatech Corporation* 14,200 628,350
General Electric Company 1,700 168,513
1,164,514
Entertainment & Leisure (4.4%)
CPI Corporation 17,900 299,825
Fleetwood Enterprises, Inc. 9,100 250,250
550,075
Furniture & Apparel (13.8%)
Hillenbrand Industries, Inc. 8,000 290,000
Kellwood Corporation 10,000 200,000
La Z Boy Chair Company 9,300 274,350
Liz Claiborne, Inc. 10,500 405,563
Oshkosh B'Gosh, Inc. Class A 11,800 179,950
Reebok International 9,100 382,200
1,732,063
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
American United Life Pooled Equity Fund B
schedule of investments (continued)
December 31, 1996
Market
Description Shares Value
Common Stock (92.9%), continued
Health Care (8.0%)
Acuson Corporation 9,500 $ 231,563
Guidant Corp. 1,816 103,512
Lilly (Eli) and Company 1,686 123,078
Merck & Company, Inc. 3,200 254,400
McKesson Corporation 5,200 290,550
1,003,103
Industrial Services (2.5%)
Fluor Daniel/GTI Inc. 5,997 47,225
Kelly Services 9,800 264,600
311,825
Information Processing & Telecommunications (7.8%)
Apple Computer, Inc.* 4,100 85,587
International Business Machines Corporation 1,800 272,025
Novell* 10,500 99,422
Sun Microsystems, Inc.* 12,400 318,525
Telxon Corporation 16,200 198,450
974,009
Machinery (1.5%)
Lawson Products, Inc. 2,700 59,063
Precision Castparts Corporation 2,500 124,062
183,125
Merchandising (6.5%)
Longs Drug Stores Corporation 6,600 324,225
Mac Frugal's Bargains Close-outs, Inc. 4,100 107,113
Mercantile Stores Co. 4,100 202,437
Stanhome, Inc. 7,000 185,500
819,275
Metals & Mining (2.6%)
Aluminum Company of America 4,100 261,375
Oregon Steel Mills, Inc. 3,800 63,650
325,025
Oil & Oil Services (4.3%)
Royal Dutch Petroleum Company 1,300 221,975
Valero Energy Corporation 11,100 317,738
539,713
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
American United Life Pooled Equity Fund B
schedule of investments (continued)
December 31, 1996
Market
Description Shares Value
Common Stock (92.9%), continued
Transportation (4.1%)
Alexander & Baldwin, Inc. 10,500 262,500
Norfolk Southern Corporation 2,900 255,200
517,700
Miscellaneous (5.9%)
Boeing Company 2,100 223,650
Ford Motor Co. 8,500 272,000
Michael Foods, Inc. 12,200 155,550
Sealright, Inc. 7,300 76,650
727,850
Total common stock (cost: $8,108,498) 11,646,272
Money Market Mutual Funds (5.1%)
Dreyfus Cash Management 357,440 357,440
Merrill Lynch Institutional Fund 279,260 279,260
Total money market mutual funds (cost: $636,700) 636,700
Interest Maturity Principal
Rate Date Amount
Notes (2.0%)
U.S. Treasury Note (cost: $254,101) 6.50% 05/15/97 250,000 251,016
Total Investments (cost: $8,999,299) $ 12,533,988
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
notes to financial statements
1. Significant Accounting Policies
American United Life Pooled Equity Fund B (Fund B) is registered under the
Investment Company Act of 1940 as an
open-end, diversified management investment company. Fund B was established by
and is managed by American United
Life Insurance Company (AUL) for the purpose of issuing group and individual
variable annuities.
Investments are valued at closing prices for those securities traded on
organized exchanges and at bid prices for securities
traded over-the-counter. Gains and losses on the sale of investments are
determined on a first-in, first-out (FIFO) basis.
Investment transactions are accounted for on a trade date basis.
Dividends are included in income as of the ex-dividend date. Interest income is
accrued daily.
Operations of the Variable Account are part of, and are taxed with, the
operations of AUL, which is taxed as a "life insurance
company" under the Internal Revenue Code. Under current law, investment income,
including realized and unrealized
capital gains of the investment accounts, is not taxed to AUL to the extent it
is applied to increase reserves under the contracts.
The Variable Account has not been charged for federal and state income taxes
since none have been imposed.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from
those estimates.
2. Investments
Net realized and unrealized gain on investments is summarized below.
Common
Stock
Net Realized Gain:
Proceeds from securities sold $ 3,435,011
Cost of securities sold 3,064,505
$ 370,506
Net change in Unrealized Gain:
Market value at end of period $ 11,897,288
Less: investments purchased (2,021,562)
Add: investments sold at cost 3,064,505
Less: market value at beginning of year (11,302,514)
$ 1,637,717
<PAGE>
notes to financial statements (continued)
3. Transactions With AUL
Fund B pays AUL an annual fee of 1.2% of its average daily net assets for
providing investment management services and for
mortality and expense risk charges. The expense incurred during the years ended
December 31, 1996 and 1995 was $151,416
and $146,477, respectively.
AUL withholds a portion of the proceeds obtained from contract owners to pay
commissions and certain expenses under a
sales and administrative services agreement with Fund B. The amount AUL retained
during the years ended December 31,
1996 and 1995 was $23,406 and $17,995, respectively.
4. Net Assets
Net Assets as of December 31, 1996:
Proceeds from units sold less payments $(6,175,737)
for units withdrawn and redeemed
Net investment income 3,978,989
Net realized gains 11,233,448
Unrealized gain 3,534,689
$ 12,571,389
The unrealized gain of $3,534,689 consists of common stock appreciation and
depreciation of $3,826,587 and $291,898,
respectively.<PAGE>
FINANCIAL HIGHLIGHTS
The per unit amounts are based on average units outstanding throughout the year.
Year Ended December 31
1996 1995 1994 1993 1992
Investment income $ 0.26 $ 0.24 $ 0.19 $ 0.16 $ 0.18
Expenses 0.13 0.11 0.10 0.09 0.08
Net investment income 0.13 .13 0.09 0.07 0.10
Net gain 1.73 1.52 0.07 1.24 0.48
Net increase 1.86 1.65 0.16 1.31 0.58
Value per unit:
Beginning of year 9.91 8.26 8.10 6.79 6.21
End of year $ 11.77 $ 9.91 $ 8.26 $ 8.10 $ 6.79
Ratio to Average Net
Assets:
Expenses 1.20% 1.20% 1.20% 1.19% 1.21%
Net investment income 1.25% 1.39% 1.16% 1.01% 1.64%
Total Return 18.76% 21.1% 2.94% 20.4% 10.3%
Portfolio Turnover Rate 18% 20% 23% 25% 12%
Average Commission Rate Paid* $ 0.0669 N/A N/A N/A N/A
Units outstanding 1,068 1,264 1,417 1,518 1,635
(in 000's)
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
<PAGE>
(This page is intentionally blank.)
<PAGE>
zxc
American United Life Insurance Company
Pooled Equity Fund B
P.O. Box 1995
Indianapolis, IN 46206-9101
first
class
mail
VA-9964V
