<PAGE> 1
AMERICAN GENERAL SERIES
PORTFOLIO COMPANY
2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
PROSPECTUS OCTOBER 1, 1996
The American General Series Portfolio Company (the "Series Company") is a mutual
fund made up of 13 separate Funds (the "Funds"). Each of the Funds has a
different investment objective. Each Fund is explained in more detail on its
Fact Sheet contained in this prospectus. Here is a summary of the goals of the
13 Funds:
INDEX EQUITY FUNDS:
STOCK INDEX FUND
Growth through investments tracking the S&P 500 Index.
MIDCAP INDEX FUND
Growth through investments tracking the S&P MidCap 400 Index.
SMALL CAP INDEX FUND
Growth through investments tracking the Russell 2000 Index.
INTERNATIONAL EQUITIES FUND
Growth through investments tracking the EAFE Index.
ACTIVELY MANAGED EQUITY FUNDS:
GROWTH FUND
Growth through investments in service sector companies.
GROWTH & INCOME FUND
Growth and income through investments in stocks (or securities
convertible into stocks).
INCOME FUNDS:
CAPITAL CONSERVATION FUND
Income and possible growth through investments in high quality debt
securities.
GOVERNMENT SECURITIES FUND
Income and possible growth through investments in intermediate and
long-term government debt securities.
INTERNATIONAL GOVERNMENT BOND FUND
Income and possible growth through investments in high quality foreign
government debt securities.
SPECIALTY EQUITY FUNDS:
SOCIAL AWARENESS FUND
Growth through investments in stocks of companies meeting social
criteria of the Fund.
SCIENCE & TECHNOLOGY FUND
Growth through investments in stocks of companies which benefit from
development of science and technology.
MONEY MARKET FUND:
MONEY MARKET FUND
Income through investments in short-term money market securities.
ASSET ALLOCATION FUND:
TIMED OPPORTUNITY FUND
Maximum return through investments in a mix of stocks, bonds and money
market securities.
SHARES OF THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT THIS FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
These Funds are available to you only through a variable annuity contract you or
your employer bought from The Variable Annuity Life Insurance Company ("VALIC")
or one of its affiliates, or employee thrift plans maintained by VALIC or
American General Corporation. VALIC is a member of the American General
Corporation group of companies.
Because different contracts contain different combinations of Funds, all of
the Funds in this prospectus may not be available to you. And, there may be
some Funds that are available to you that don't appear in this prospectus.
See the separate prospectus that describes your, or your employer's, annuity
contract for a complete list of Funds in which you may invest.
BE SURE TO READ BOTH PROSPECTUSES IN FULL BEFORE YOU START PARTICIPATING AND
KEEP THEM FOR FUTURE REFERENCE.
VALIC has filed a Statement of Additional Information, dated October 1, 1996,
with the Securities and Exchange Commission. This Statement contains
additional information about these Funds and is part of this prospectus. For
a free copy, write to the American General Series Portfolio Company at the
address above or call (800)-44-VALIC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
FUNDS. ALSO, IT HAS NOT PASSED ON WHETHER THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
COVER PAGE
WELCOME....................................... 1
FINANCIAL HIGHLIGHTS.......................... 2
ABOUT THE FUND'S MANAGEMENT................... 10
Investment Adviser....................... 10
Investment Sub-advisers.................. 10
Portfolio Manager........................ 11
How Advisers Are Paid for Their
Services............................... 11
About the Board of Directors............. 12
ABOUT THE FUNDS............................... 13
Growth, Income and Stability
Categories............................. 13
About Level of Risk...................... 13
About Portfolio Turnover................. 13
About Fund Performance................... 14
HOW TO READ A FUND FACT SHEET................. 15
THE INDEX EQUITY FUNDS........................ 16
Stock Index Fund......................... 18
MidCap Index Fund........................ 20
Small Cap Index Fund..................... 22
International Equities Fund.............. 24
ACTIVELY MANAGED EQUITY FUNDS
Growth Fund.............................. 26
Growth & Income Fund..................... 28
INCOME FUNDS
Capital Conservation Fund................ 30
Government Securities Fund............... 32
International Government Bond Fund....... 34
SPECIALTY EQUITY FUNDS
Social Awareness Fund.................... 36
Science & Technology Fund................ 39
MONEY MARKET FUND............................. 40
ASSET ALLOCATION FUND
Timed Opportunity Fund................... 41
TYPES OF INVESTMENTS.......................... 43
Stocks................................... 43
Bonds.................................... 43
Asset-Backed Securities............. 43
Loan Participations................. 44
Illiquid and Restricted Securities....... 44
ADRs..................................... 44
Foreign Currency......................... 44
When-Issued Securities................... 44
Money Market Securities.................. 44
Derivatives.............................. 45
Options............................. 45
Futures Contracts................... 45
Repurchase Agreements.................... 46
A Word About Risk........................ 46
Investment Practices..................... 47
Limitations......................... 47
Lending Portfolio Securities........ 47
ABOUT THE SERIES COMPANY...................... 48
Series Company Shares.................... 48
Net Asset Value of the Series Company
Shares................................. 48
Dividends and Capital Gains.............. 49
Diversification.......................... 49
Taxes.................................... 50
Voting Rights............................ 50
Reports.................................. 50
Legal Matters............................ 50
</TABLE>
(i)
<PAGE> 3
WELCOME
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, and VALIC mean
The Variable Annuity Life Insurance Company. The words you and your mean the
participant.
American General Series Portfolio Company (the "Series Company") was
incorporated under the laws of Maryland on December 7, 1984.
The Series Company is an open-end management investment company and currently
consists of 13 different Funds, each of which is described in detail in this
prospectus. We serve as each Fund's Investment Adviser and, in this role, report
directly to the Series Company's Board of Directors. As Investment Adviser, we
make investment decisions for the Funds and are responsible for their day to day
management. For more information, see "About the Funds' Management" in this
prospectus.
Individuals can't invest in these Funds directly. Instead, they participate
through an annuity contract or employer plan with VALIC or one of its
affiliates, or employee thrift plans maintained by VALIC or American General
Corporation. Most often employers set up these annuity contracts so they can
offer their employees a way to save for retirement. Retirement plans through
employers may be entitled to tax benefits that individual retirement plans may
not be entitled to. These tax benefits are fully explained in your contract
prospectus.
After you invest in a Fund you participate in Fund earnings or losses, in
proportion to the amount of money you invest. Depending on your contract, if you
withdraw your money before retirement, you may incur charges and additional tax
liabilities. However, to save for retirement, you generally should let your
investments and their earnings build. At retirement, you may withdraw all or a
portion of your money, leave it in the account until you need it, or start
receiving annuity payments. At a certain age you may be required to begin
withdrawals.
All inquiries regarding this prospectus and annuity contracts issued by VALIC
should be directed, in writing, to VALIC Customer Service, A3-01, at the address
above, or by calling 1 (800) 633-8960.
All inquiries regarding annuity contracts issued by American General Life
Insurance Company (AGL) should be directed to AGL's Annuity Administration
Department, 2727-A Allen Parkway, Houston, Texas 77019-2191 or call (713)
831-3102. AGL is a member of the American General Corporation group of
companies, as is VALIC.
OPEN-END means shares of the
FUNDS can be bought or sold by
the Series Company at any
time. Also, there is no limit on the
number of investors who may
buy shares.
1
<PAGE> 4
FINANCIAL HIGHLIGHTS
Financial highlights are provided below for each of the Funds. The financial
highlights are for the last 10 years of the Funds or if the Fund has been in
operation a shorter period of time, since the date the Fund began operation.
Ernst & Young LLP, Independent Auditors for the Series Company, has audited the
Series Company's financial statements which include the information presented
here. Their unqualified report appears in those audited financial statements,
which are included in the Statement of Additional Information.
Per share data assumes that you held each share from the beginning to the end of
each fiscal year. Total return assumes that you bought additional shares with
dividends paid by the Fund. Total returns for periods of less than one year are
not annualized.
A FUND'S FISCAL YEAR ends every May 31st.
STOCK INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------------ ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $16.81 $14.39 $14.36 $13.34 $12.60 $11.86
------------ ------------ ------------ ---------- ---------- ---------
+ INCOME (LOSS)
from net investment income 0.39 0.37 0.35 0.34 0.32 0.31
from net realized & unrealized gain
(loss) on securities 4.26 2.45 0.12 1.20 0.74 0.81
------------ ------------ ------------ ---------- ---------- ---------
total income (loss) from investment
operations 4.65 2.82 0.47 1.54 1.06 1.12
------------ ------------ ------------ ---------- ---------- ---------
- - DISTRIBUTIONS
from net investment income (0.38) (0.37) (0.35) (0.34) (0.32) (0.31)
from net realized gain on securities (0.39) (0.03) (0.09) (0.18) (0.07)
------------ ------------ ------------ ---------- ---------- ---------
total distributions (0.77) (0.40) (0.44) (0.52) (0.32) (0.38)
------------ ------------ ------------ ---------- ---------- ---------
= SHARE VALUE
AT END OF YEAR $20.69 $16.81 $14.39 $14.36 $13.34 $12.60
============ ============ ============ ========== ========== ========
TOTAL RETURN 28.17% 19.98% 3.29% 11.74% 8.57% 9.98%
============ ============ ============ ========== ========== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.35% 0.38% 0.39% 0.43% 0.50% 0.67%
Ratio of net investment income to average
net assets 2.05% 2.44% 2.44% 2.52% 3.12% 2.82%
Portfolio turnover rate 3% 14% 3% 1% 45% 6%
Number of shares outstanding at end of year
(000's) 85,117 75,451 75,494 66,224 55,598 6,662
Net assets at end of year (000's) $1,760,786 $1,267,992 $1,086,459 $951,200 $741,667 $83,970
Average net assets during the year (000's) $1,498,398 $1,140,085 $1,030,581 $836,510 $167,262 $55,147
<CAPTION>
PERIOD
FROM
APRIL 20,
FISCAL YEAR ENDED MAY 31, 1987 TO
------------------------------------ MAY 31,
1990 1989 1988 1987
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.69 $8.90 $9.88 $10.00(1)
--------- --------- ---------- ----------
+ INCOME (LOSS)
from net investment income 0.33 0.27 0.19 0.05
from net realized & unrealized gain
(loss) on securities 1.32 1.86 (0.92) (0.13)
--------- --------- ---------- ----------
total income (loss) from investment
operations 1.65 2.13 (0.73) (0.08)
--------- --------- ---------- ----------
- - DISTRIBUTIONS
from net investment income (0.35) (0.25) (0.21) (0.04)
from net realized gain on securities (0.13) (0.09) (0.04)
--------- --------- ---------- ----------
total distributions (0.48) (0.34) (0.25) (0.04)
--------- --------- ---------- ----------
= SHARE VALUE
AT END OF YEAR $11.86 $10.69 $8.90 $9.88
======== ======== ========== ==========
TOTAL RETURN 15.78% 24.40% (7.48)% (0.80)%
======== ======== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.61% 0.78% 1.29% 0.14%
Ratio of net investment income to average
net assets 3.05% 3.05% 2.23% 0.54%
Portfolio turnover rate 8% 14% 16% 1%
Number of shares outstanding at end of year
(000's) 3,456 1,924 1,174 511
Net assets at end of year (000's) $40,969 $20,572 $10,443 $5,053
Average net assets during the year (000's) $29,824 $14,060 $7,933 $5,004
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 20, 1987. Bankers Trust has been the Fund's Sub-adviser
since May 1, 1992.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS -- CONTINUED
MIDCAP INDEX FUND(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $15.68 $14.54 $14.38 $12.86 $12.51
-------- -------- -------- -------- -------
+ INCOME (LOSS)
from net investment income 0.24 0.26 0.23 0.24 0.23
from net realized & unrealized gain (loss) on
securities 4.06 1.59 0.28 1.93 0.39
-------- -------- -------- -------- -------
total income (loss) from investment operations 4.30 1.85 0.51 2.17 0.62
-------- -------- -------- -------- -------
- - DISTRIBUTIONS
from net investment income (0.24) (0.26) (0.23) (0.24) (0.23)
from net realized gain on securities (0.65) (0.45) (0.12) (0.41) (0.04)
-------- -------- -------- -------- -------
total distributions (0.89) (0.71) (0.35) (0.65) (0.27)
-------- -------- -------- -------- -------
= SHARE VALUE
AT END OF YEAR $19.09 $15.68 $14.54 $14.38 $12.86
======== ======== ======== ======== =======
TOTAL RETURN 28.10% 13.26% 3.52% 17.21% 5.01%
======== ======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.41% 0.44% 0.46% 0.47% 0.54%
Ratio of net investment income to average net assets 1.36% 1.73% 1.62% 1.79% 1.82%
Portfolio turnover rate 21% 23% 17% 5% 112%
Number of shares outstanding at end of year (000's) 28,322 25,988 24,001 14,673 8,862
Net assets at end of year (000's) $540,688 $407,557 $349,041 $210,931 $113,992
Average net assets during the year (000's) $477,372 $376,486 $285,247 $154,979 $88,456
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-----------------------------------------------------------------
1991 1990 1989 1988 1987
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $12.92 $12.25 $10.86 $13.87 $13.56
------- ------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.28 0.28 0.30 0.17 0.18
from net realized & unrealized gain (loss) on
securities (0.30) 0.71 1.51 (1.41) 0.40
------- ------- ------- ------- -------
total income (loss) from investment operations (0.02) 0.99 1.81 (1.24) 0.58
------- ------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.28) (0.32) (0.27) (0.18) (0.18)
from net realized gain on securities (0.11) (0.15) (1.59) (0.09)
------- ------- ------- ------- -------
total distributions (0.39) (0.32) (0.42) (1.77) (0.27)
------- ------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $12.51 $12.92 $12.25 $10.86 $13.87
======= ======= ======= ======= =======
TOTAL RETURN 0.20% 8.22% 17.06% (7.30)% 4.29%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.67% 0.68% 0.74% 0.79% 1.00%
Ratio of net investment income to average net assets 2.41% 2.29% 2.72% 1.51% 1.36%
Portfolio turnover rate 101% 131% 67% 108% 98%
Number of shares outstanding at end of year (000's) 6,168 5,712 5,354 4,827 3,583
Net assets at end of year (000's) $77,146 $73,815 $65,586 $52,435 $49,691
Average net assets during the year (000's) $69,696 $67,421 $57,398 $49,877 $40,029
</TABLE>
- ------------
(1) Effective October 1, 1991 the Fund's name was changed from the Capital
Accumulation Fund to the MidCap Index Fund. Additionally, on October 1, 1991
the investment objectives and investment program for the Fund were changed.
Bankers Trust has been the Fund's Sub-adviser since May 1, 1992.
3
<PAGE> 6
FINANCIAL HIGHLIGHTS -- CONTINUED
SMALL CAP INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $12.49 $11.52
-------- --------
+ INCOME (LOSS)
from net investment income 0.20 0.17
from net realized & unrealized gain (loss) on securities 4.04 0.97
-------- --------
total income (loss) from investment operations 4.24 1.14
-------- --------
- - DISTRIBUTIONS
from net investment income (0.20) (0.17)
from net realized gain on securities (0.28)
-------- --------
total distributions (0.48) (0.17)
-------- --------
= SHARE VALUE
AT END OF YEAR $16.25 $12.49
======== ========
TOTAL RETURN 34.50% 9.98%
======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.41% 0.44%
Ratio of net investment income to average net assets 1.36% 1.44%
Portfolio turnover rate 31% 34%
Number of shares outstanding at end of year (000's) 11,129 10,136
Net assets at end of year (000's) $180,785 $126,567
Average net assets during the year (000's) $150,448 $120,298
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------
1994 1993
---------- ----------
<S> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $11.28 $ 9.93
-------- --------
+ INCOME (LOSS)
from net investment income 0.13 0.15
from net realized & unrealized gain (loss) on securities 0.58 1.48
-------- --------
total income (loss) from investment operations 0.71 1.63
-------- --------
- - DISTRIBUTIONS
from net investment income (0.13) (0.15)
from net realized gain on securities (0.34) (0.13)
-------- --------
total distributions (0.47) (0.28)
-------- --------
= SHARE VALUE
AT END OF YEAR $11.52 $11.28
======== ========
TOTAL RETURN 6.18% 16.64%
======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.47% 0.47%
Ratio of net investment income to average net assets 1.10% 1.40%
Portfolio turnover rate 16% 20%
Number of shares outstanding at end of year (000's) 9,381 3,687
Net assets at end of year (000's) $108,050 $ 41,581
Average net assets during the year (000's) $70,690 $ 22,142
<CAPTION>
PERIOD FROM
MAY 1,
1992
TO MAY 31,
1992
---------
<S> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $10.00(1)
-------
+ INCOME (LOSS)
from net investment income 0.02
from net realized & unrealized gain (loss) on securities (0.07)
-------
total income (loss) from investment operations (0.05)
-------
- - DISTRIBUTIONS
from net investment income (0.02)
from net realized gain on securities
-------
total distributions (0.02)
-------
= SHARE VALUE
AT END OF YEAR $ 9.93
=======
TOTAL RETURN (0.50)%
=======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.04%
Ratio of net investment income to average net assets 0.21%
Portfolio turnover rate 0%
Number of shares outstanding at end of year (000's) 1,107
Net assets at end of year (000's) $10,989
Average net assets during the year (000's) $10,989
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on May 1, 1992. Bankers Trust has been the Fund's Sub-adviser
since May 1, 1992.
INTERNATIONAL EQUITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.42 $10.14 $8.99
-------- -------- --------
+ INCOME (LOSS)
from net investment income 0.17 0.15 0.11
from net realized & unrealized gain (loss) on securities 0.97 0.34 1.17
-------- -------- --------
total income (loss) from investment operations 1.14 0.49 1.28
-------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.17) (0.15) (0.11)
from net realized gain on securities (0.24) (0.06) (0.02)
-------- -------- --------
total distributions (0.41) (0.21) (0.13)
-------- -------- --------
= SHARE VALUE
AT END OF YEAR $11.15 $10.42 $10.14
======== ======== ========
TOTAL RETURN 11.14% 4.92% 14.31%
======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.42% 0.45% 0.47%
Ratio of net investment income to average net assets 1.65% 1.47% 1.43%
Portfolio turnover rate 20% 14% 7%
Number of shares outstanding at end of year (000's) 18,497 20,074 17,273
Net assets at end of year (000's) $206,259 $209,091 $175,183
Average net assets during the year (000's) $204,792 $199,235 $117,264
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $8.03 $8.58 $9.17
------- ------- -------
+ INCOME (LOSS)
from net investment income 0.18 0.15 0.23
from net realized & unrealized gain (loss) on securities 0.93 (0.55) (0.59)
------- ------- -------
total income (loss) from investment operations 1.11 (0.40) (0.36)
------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.15) (0.15) (0.23)
from net realized gain on securities
------- ------- -------
total distributions (0.15) (0.15) (0.23)
------- ------- -------
= SHARE VALUE
AT END OF YEAR $8.99 $8.03 $8.58
======= ======= =======
TOTAL RETURN 14.18% (4.69)% (3.71)%
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.53% 0.65% 0.37%
Ratio of net investment income to average net assets 2.33% 1.84% 2.67%
Portfolio turnover rate 9% 5% 3%
Number of shares outstanding at end of year (000's) 7,429 4,256 2,451
Net assets at end of year (000's) $66,809 $34,182 $21,036
Average net assets during the year (000's) $45,509 $26,542 $15,693
<CAPTION>
PERIOD FROM
OCTOBER 2,
1989
TO MAY 31,
1990
---------
<S> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.00(1)
-------
+ INCOME (LOSS)
from net investment income 0.10
from net realized & unrealized gain (loss) on securities (0.83)
-------
total income (loss) from investment operations (0.73)
-------
- - DISTRIBUTIONS
from net investment income (0.10)
from net realized gain on securities
-------
total distributions (0.10)
-------
= SHARE VALUE
AT END OF YEAR $9.17
=======
TOTAL RETURN (7.42)%
=======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.19%
Ratio of net investment income to average net assets 1.10%
Portfolio turnover rate 0%
Number of shares outstanding at end of year (000's) 1,310
Net assets at end of year (000's) $12,005
Average net assets during the year (000's) $ 7,853
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on October 2, 1989.
4
<PAGE> 7
FINANCIAL HIGHLIGHTS -- CONTINUED
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
------------------------------- TO
1996 1995 MAY 31, 1994
---------- ---------- ---------------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $11.43 $9.87 $10.00(1)
INCOME (LOSS)
from net investment income 0.11 0.04 0.01
from net realized & unrealized gain (loss) on securities 5.27 1.56 (0.13)
-------- -------- --------
total income (loss) from investment operations 5.38 1.60 (0.12)
-------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.09) (0.04) (0.01)
from net realized gain on securities (0.23)
-------- -------- --------
total distributions (0.32) (0.04) (0.01)
= SHARE VALUE
AT END OF YEAR $16.49 $11.43 $9.87
======== ======== ========
TOTAL RETURN 47.46% 16.25% (1.19)%
======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.83% 0.91% 0.08%
Ratio of net investment income to average net assets 0.89% 0.41% 0.11%
Portfolio turnover rate 36% 61% 0%
Number of shares outstanding at end of year (000's) 25,826 8,800 1,001
Net assets at end of year (000's) $425,787 $100,614 $9,885
Average net assets during the year (000's) $238,228 $ 42,232 $9,944
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
------------------------------- TO
1996 1995 MAY 31, 1994
---------- ---------- ---------------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $11.09 $9.87 $10.00(1)
-------- -------- --------
+ INCOME (LOSS)
from net investment income 0.08 0.09 0.02
from net realized & unrealized gain (loss) on securities 3.77 1.22 (0.13)
-------- -------- --------
total income (loss) from investment operations 3.85 1.31 (0.11)
-------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.07) (0.09) (0.02)
from net realized gain on securities (0.09)
-------- -------- --------
total distributions (0.16) (0.09) (0.02)
-------- -------- --------
= SHARE VALUE
AT END OF YEAR $14.78 $11.09 $9.87
======== ======== ========
TOTAL RETURN 34.85% 13.35% (1.11)%
======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.79% 0.86% 0.07%
Ratio of net investment income to average net assets 0.63% 0.93% 0.22%
Portfolio turnover rate 64% 97% 11%
Number of shares outstanding at end of year (000's) 7,685 3,867 1,002
Net assets at end of year (000's) $113,546 $42,867 $9,890
Average net assets during the year (000's) $ 75,158 $21,910 $9,946
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
5
<PAGE> 8
FINANCIAL HIGHLIGHTS -- CONTINUED
CAPITAL CONSERVATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.52 $9.13 $9.87 $9.29
------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.62 0.63 0.61 0.65
from net realized & unrealized gain (loss) on securities (0.29) 0.39 (0.69) 0.58
------- ------- ------- -------
total income (loss) from investment operations 0.33 1.02 (0.08) 1.23
------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.62) (0.63) (0.61) (0.65)
from net realized gain on securities (0.05)
------- ------- ------- -------
total distributions (0.62) (0.63) (0.66) (0.65)
------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $9.23 $9.52 $9.13 $9.87
======= ======= ======= =======
TOTAL RETURN 3.41% 11.80% (1.13)% 13.60%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.58% 0.59% 0.67%
Ratio of net investment income to average net assets 6.47% 6.88% 6.24% 6.77%
Portfolio turnover rate 80% 100% 55% 58%
Number of shares outstanding at end of period (000's) 7,604 6,935 6,712 5,095
Net assets at end of period (000's) $70,212 $66,031 $61,305 $50,290
Average net assets during the period (000's) $70,271 $61,568 $59,210 $43,316
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------
1992 1991 1990 1989
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $8.81 $9.08 $9.48 $9.29
------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.69 0.73 0.80 0.75
from net realized & unrealized gain (loss) on securities 0.48 (0.27) (0.36) 0.17
------- ------- ------- -------
total income (loss) from investment operations 1.17 0.46 0.44 0.92
------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.69) (0.73) (0.84) (0.73)
from net realized gain on securities
------- ------- ------- -------
total distributions (0.69) (0.73) (0.84) (0.73)
------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $9.29 $8.81 $9.08 $9.48
======= ======= ======= =======
TOTAL RETURN 13.72% 5.40% 4.73% 10.45%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.77% 0.83% 0.83% 0.88%
Ratio of net investment income to average net assets 7.80% 8.25% 8.64% 8.82%
Portfolio turnover rate 121% 142% 125% 55%
Number of shares outstanding at end of period (000's) 3,939 2,333 1,983 1,429
Net assets at end of period (000's) $36,609 $20,541 $18,006 $13,544
Average net assets during the period (000's) $29,793 $19,105 $16,278 $9,562
<CAPTION>
FISCAL YEAR ENDED
MAY 31,
---------------------
1988 1987
--------- ---------
<S> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.51 $9.81
------- -------
+ INCOME (LOSS)
from net investment income 0.63 0.62
from net realized & unrealized gain (loss) on securities (0.24) (0.31)
------- -------
total income (loss) from investment operations 0.39 0.31
------- -------
- - DISTRIBUTIONS
from net investment income (0.61) (0.61)
from net realized gain on securities
------- -------
total distributions (0.61) (0.61)
------- -------
= SHARE VALUE
AT END OF YEAR $9.29 $9.51
======= =======
TOTAL RETURN 4.16% 2.96%
======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 1.66% 1.23%
Ratio of net investment income to average net assets 6.73% 6.33%
Portfolio turnover rate 27% 238%
Number of shares outstanding at end of period (000's) 563 417
Net assets at end of period (000's) $5,226 $3,963
Average net assets during the period (000's) $4,584 $3,252
</TABLE>
6
<PAGE> 9
FINANCIAL HIGHLIGHTS -- CONTINUED
GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.89 $9.55 $10.30 $9.84
------- ------- ------- -------
+ INCOME (LOSS)
from investment income 0.61 0.60 0.55 0.61
from net realized & unrealized gain (loss) on securities (0.28) 0.35 (0.59) 0.59
------- ------- ------- -------
total income (loss) from investment operations 0.33 0.95 (0.04) 1.20
------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.61) (0.61) (0.55) (0.61)
from net realized gain on securities (0.16) (0.13)
------- ------- ------- -------
total distributions (0.61) (0.61) (0.71) (0.74)
------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $9.61 $9.89 $9.55 $10.30
======= ======= ======= =======
TOTAL RETURN 3.32% 10.43% (0.66)% 12.56%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.56% 0.58% 0.59% 0.67%
Ratio of net investment income to average net assets 6.21% 6.36% 5.44% 6.08%
Portfolio turnover rate 36% 229% 85% 105%
Number of shares outstanding at end of year (000's) 8,164 5,478 4,544 3,110
Net assets at end of year (000's) $78,423 $54,174 $43,401 $32,023
Average net assets during the year (000's) $68,017 $45,200 $41,596 $26,145
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------
1992 1991 1990 1989
--------- --------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.34 $9.20 $9.42 $9.24
------- ------- ------ ------
+ INCOME (LOSS)
from investment income 0.65 0.66 0.70 0.71
from net realized & unrealized gain (loss) on securities 0.49 0.14 (0.17) 0.15
------- ------- ------ ------
total income (loss) from investment operations 1.14 0.80 0.53 0.86
------- ------- ------ ------
- - DISTRIBUTIONS
from net investment income (0.64) (0.66) (0.75) (0.68)
from net realized gain on securities
------- ------- ------ ------
total distributions (0.64) (0.66) (0.75) (0.68)
------- ------- ------ ------
= SHARE VALUE
AT END OF YEAR $9.84 $9.34 $9.20 $9.42
======= ======= ====== ======
TOTAL RETURN 12.60% 9.28% 5.76% 9.57%
======= ======= ====== ======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.76% 0.87% 0.86% 0.85%
Ratio of net investment income to average net assets 6.77% 7.25% 7.77% 7.89%
Portfolio turnover rate 78% 87% 85% 38%
Number of shares outstanding at end of year (000's) 2,090 1,468 978 570
Net assets at end of year (000's) $20,559 $13,711 $8,997 $5,374
Average net assets during the year (000's) $17,069 $11,393 $7,233 $4,565
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MAY 31,
--------------------
1988 1987
-------- --------
<S> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.51 $9.74
------ ------
+ INCOME (LOSS)
from investment income 0.61 0.60
from net realized & unrealized gain (loss) on securities (0.28) (0.23)
------ ------
total income (loss) from investment operations 0.33 0.37
------ ------
- - DISTRIBUTIONS
from net investment income (0.60) (0.60)
from net realized gain on securities
------ ------
total distributions (0.60) (0.60)
------ ------
= SHARE VALUE
AT END OF YEAR $9.24 $9.51
====== ======
TOTAL RETURN 3.45% 3.62%
====== ======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 1.66% 1.24%
Ratio of net investment income to average net assets 6.48% 6.38%
Portfolio turnover rate 36% 229%
Number of shares outstanding at end of year (000's) 405 302
Net assets at end of year (000's) $3,747 $2,871
Average net assets during the year (000's) $3,257 $2,237
</TABLE>
INTERNATIONAL GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
FISCAL YEAR ENDED MAY 31, 1991 TO
---------------------------------------------- MAY 31,
1996 1995 1994 1993 1992
--------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $12.72 $10.97 $11.16 $10.43 $10.00(1)
------- ------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.65 0.65 0.62 0.76 0.48
from net realized & unrealized gain (loss) on
securities and foreign currencies (0.89) 1.80 (0.20) 0.70 0.42
------- ------- ------- ------- -------
total income (loss) from investment operations (0.24) 2.45 0.42 1.46 0.90
------- ------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.68) (0.70) (0.60) (0.73) (0.47)
from net realized gain on securities (0.01) (0.01)
------- ------- ------- ------- -------
total distributions (0.69) (0.70) (0.61) (0.73) (0.47)
------- ------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $11.79 $12.72 $10.97 $11.16 $10.43
======= ======= ======= ======= =======
TOTAL RETURN (1.91)% 23.23% 3.87% 14.50% 9.18%
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.56% 0.59% 0.48% 0.14% 0.08%
Ratio of net investment income to average net assets 5.45% 5.83% 5.87% 7.02% 4.62%
Portfolio turnover rate 11% 6% 3% 26% 12%
Number of shares outstanding at end of year (000's) 12,073 6,111 3,741 2,062 1,259
Net assets at end of year (000's) $142,383 $77,734 $41,028 $23,009 $13,126
Average net assets during the year (000's) $114,693 $51,451 $33,561 $18,135 $11,938
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on October 1, 1991.
7
<PAGE> 10
FINANCIAL HIGHLIGHTS -- CONTINUED
SOCIAL AWARENESS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $13.02 $11.98 $12.12
------- ------- -------
+ INCOME (LOSS)
from net investment income 0.26 0.27 0.26
from net realized & unrealized gain (loss) on securities 3.37 1.75 (0.02)
------- ------- -------
total income from investment operations 3.63 2.02 0.24
------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.25) (0.27) (0.26)
from net realized gain on securities (0.91) (0.71) (0.12)
------- ------- -------
total distributions (1.16) (0.98) (0.38)
------- ------- -------
= SHARE VALUE
AT END OF YEAR $15.49 $13.02 $11.98
======= ======= =======
TOTAL RETURN 28.85% 18.19% 1.97%
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.56% 0.58% 0.60%
Ratio of net investment income to average net assets 1.80% 2.22% 2.19%
Portfolio turnover rate 117% 148% 83%
Number of shares outstanding at end of year (000's) 5,220 4,143 3,817
Net assets at end of year (000's) $80,887 $53,927 $45,729
Average net assets during the year (000's) $66,888 $47,942 $41,002
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $11.43 $11.13 $10.59
------- ------- -------
+ INCOME (LOSS)
from net investment income 0.24 0.26 0.26
from net realized & unrealized gain (loss) on securities 1.22 0.30 0.54
------- ------- -------
total income from investment operations 1.46 0.56 0.80
------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.24) (0.26) (0.26)
from net realized gain on securities (0.53)
------- ------- -------
total distributions (0.77) (0.26) (0.26)
------- ------- -------
= SHARE VALUE
AT END OF YEAR $12.12 $11.43 $11.13
======= ======= =======
TOTAL RETURN 13.08% 5.08% 7.89%
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.63% 0.16% 0.44%
Ratio of net investment income to average net assets 2.14% 2.34% 2.66%
Portfolio turnover rate 106% 203% 100%
Number of shares outstanding at end of year (000's) 2,819 1,799 973
Net assets at end of year (000's) $34,166 $20,570 $10,835
Average net assets during the year (000's) $26,920 $15,365 $ 7,959
<CAPTION>
PERIOD FROM
OCTOBER 2, 1989
TO
MAY 31, 1990
---------------
<S> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.00(1)
-------
+ INCOME (LOSS)
from net investment income 0.20
from net realized & unrealized gain (loss) on securities 0.59
-------
total income from investment operations 0.79
-------
- - DISTRIBUTIONS
from net investment income (0.20)
from net realized gain on securities
-------
total distributions (0.20)
-------
= SHARE VALUE
AT END OF YEAR $10.59
=======
TOTAL RETURN 8.09%
=======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.23%
Ratio of net investment income to average net assets 2.04%
Portfolio turnover rate 95%
Number of shares outstanding at end of year (000's) 612
Net assets at end of year (000's) $ 6,485
Average net assets during the year (000's) $ 5,358
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on October 2, 1989.
SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED PERIOD FROM
MAY 31, APRIL 29, 1994
----------------------------- TO
1996 1995 MAY 31, 1994
---------- ---------- --------------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $14.43 $9.83 $10.00(1)
---------- ---------- ----------
+ INCOME (LOSS)
from net investment income 0.00 0.03 0.00
from realized & unrealized gain (loss) on securities 8.08 4.72 (0.17)
---------- ---------- ----------
total income (loss) from investment operations 8.08 4.75 (0.17)
---------- ---------- ----------
- - DISTRIBUTIONS
from net investment income (0.00) (0.02) 0.00
from net realized gain on securities (2.03) (0.13) 0.00
---------- ---------- ----------
total distributions (2.03) (0.15) 0.00
---------- ---------- ----------
= SHARE VALUE
AT END OF YEAR $20.48 $14.43 $9.86
========== ========== ==========
TOTAL RETURN 58.28% 48.61% (1.66)%
========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.94% 1.00% 0.08%
Ratio of net investment income (loss) to average net assets (0.07)% 0.36% 0.04%
Portfolio turnover rate 116% 121% 0%
Number of shares outstanding at end of year (000's) 27,696 11,550 1,001
Net assets at end of year (000's) $567,187 $166,683 $9,834
Average net assets during the year (000's) $363,087 $ 64,974 $9,918
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
8
<PAGE> 11
FINANCIAL HIGHLIGHTS -- CONTINUED
MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------
+ INCOME
from net investment income 0.05 0.05 0.03 0.03
------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.05) (0.05) (0.03) (0.03)
------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $1.00 $1.00 $1.00 $1.00
======= ======= ======= =======
TOTAL RETURN 5.26% 4.90% 2.83% 2.85%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.57% 0.58% 0.63%
Ratio of net investment income to average net assets 5.14% 4.75% 2.78% 2.81%
Number of shares outstanding at end of year (000's) 83,618 82,256 50,534 45,323
Total net assets at end of year (000's) $83,618 $82,254 $50,533 $45,322
Average net assets during the year (000's) $84,271 $67,021 $46,222 $45,562
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------
1992 1991 1990 1989
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------
+ INCOME
from net investment income 0.05 0.07 0.08 0.08
------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.05) (0.07) (0.08) (0.08)
------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $1.00 $1.00 $1.00 $1.00
======= ======= ======= =======
TOTAL RETURN 4.47% 7.11% 8.31% 8.63%
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.67% 0.68% 0.74% 0.46%
Ratio of net investment income to average net assets 4.42% 6.86% 7.93% 8.39%
Number of shares outstanding at end of year (000's) 48,355 38,572 27,628 21,445
Total net assets at end of year (000's) $48,353 $38,570 $27,628 $21,445
Average net assets during the year (000's) $46,305 $34,733 $22,563 $13,385
<CAPTION>
FISCAL YEAR ENDED
MAY 31,
--------------------
1988 1987
-------- --------
<S> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $1.00 $1.00(1)
------- -----
+ INCOME
from net investment income 0.05 0.05
------- -----
- - DISTRIBUTIONS
from net investment income (0.05) (0.05)
------- -----
= SHARE VALUE
AT END OF YEAR $1.00 $1.00
======= =====
TOTAL RETURN 6.02% 4.85%
======= =====
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 1.77% 1.17%
Ratio of net investment income to average net assets 5.30% 4.93%
Number of shares outstanding at end of year (000's) 7,336 2,800
Total net assets at end of year (000's) $7,341 $2,800
Average net assets during the year (000's) $5,390 $1,844
</TABLE>
TIMED OPPORTUNITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $11.24 $10.84 $11.18 $10.66 $11.05
-------- -------- -------- -------- --------
+ INCOME (LOSS)
from net investment income 0.44 0.44 0.37 0.35 0.30
from net realized & unrealized gain (loss) on
securities 1.53 0.82 (0.15) 0.61 (0.19)
-------- -------- -------- -------- --------
total income from investment operations 1.97 1.26 0.22 0.96 0.11
-------- -------- -------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.44) (0.44) (0.37) (0.35) (0.30)
from net realized gain on securities (0.22) (0.42) (0.19) (0.09) (0.20)
-------- -------- -------- -------- --------
total distributions (0.66) (0.86) (0.56) (0.44) (0.50)
-------- -------- -------- -------- --------
= SHARE VALUE
AT END OF YEAR $12.55 $11.24 $10.84 $11.18 $10.66
======== ======== ======== ======== ========
TOTAL RETURN 17.90% 12.43% 1.86% 9.17% 0.87%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.58% 0.59% 0.70% 0.90%
Ratio of net investment income to average net assets 3.62% 4.03% 3.24% 3.28% 2.72%
Portfolio turnover rate 119% 133% 76% 78% 111%
Number of shares outstanding at end of year (000's) 15,142 16,319 17,956 14,758 13,341
Net assets at end of year (000's) $190,024 $183,393 $194,576 $165,002 $142,213
Average net assets during the year (000's) $187,576 $186,487 $185,036 $151,450 $137,179
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------------
1991 1990 1989 1988 1987
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.48 $10.06 $9.40 $11.07 $10.79
-------- -------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.40 0.55 0.62 0.35 0.32
from net realized & unrealized gain (loss) on
securities 0.57 0.44 0.65 (0.31) 0.75
-------- -------- ------- ------- -------
total income from investment operations 0.97 0.99 1.27 0.04 1.07
-------- -------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.40) (0.57) (0.61) (0.35) (0.32)
from net realized gain on securities (1.36) (0.47)
-------- -------- ------- ------- -------
total distributions (0.40) (0.57) (0.61) (1.71) (0.79)
-------- -------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $11.05 $10.48 $10.06 $9.40 $11.07
======== ======== ======= ======= =======
TOTAL RETURN 9.75% 10.06% 14.00% 0.88% 10.72%
======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.92% 0.92% 1.00% 1.01% 1.28%
Ratio of net investment income to average net assets 3.94% 5.38% 6.43% 3.56% 3.04%
Portfolio turnover rate 55% 51% 93% 162% 172%
Number of shares outstanding at end of year (000's) 11,891 11,158 9,969 9,196 5,914
Net assets at end of year (000's) $131,416 $116,966 $100,248 $86,476 $65,498
Average net assets during the year (000's) $116,266 $107,626 $ 92,364 $77,192 $49,902
</TABLE>
9
<PAGE> 12
ABOUT THE FUND'S MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC, a stock life insurance company, has been in the investment advisory
business since 1960. Since May 30, 1985, VALIC has been the Investment Adviser
for the Funds that comprise the Series Company.
VALIC is a member of the American General Corporation group of companies.
Members of the American General Corporation group of companies operate in each
of the 50 states and Canada and collectively provide financial services with
activities heavily weighted toward insurance.
As Investment Adviser, VALIC is responsible for each Fund's day to day
operations. Also, VALIC develops Fund investment strategy and buys and sells
Fund investments. VALIC serves as Investment Adviser through an Investment
Advisory Agreement it enters into with each Fund. These agreements are renewed
once each year, by the Series Company Board of Directors.
One Investment Advisory Agreement covers these Funds:
<TABLE>
<CAPTION>
Effective Date of
Fund Name Agreement
- -------------------------------------------------------------------
<S> <C>
Timed Opportunity Fund }
Money Market Fund }
Capital Conservation Fund }
Government Securities Fund } September 7, 1990
International Equities Fund }
Social Awareness Fund }
International Government Bond } October 1, 1991
Fund }
</TABLE>
Another Investment Advisory Agreement covers these Funds:
<TABLE>
<CAPTION>
Effective Date of
Fund Name Agreement
- -------------------------------------------------------------------
<S> <C>
MidCap Index Fund }
Stock Index Fund } May 1, 1992
Small Cap Index Fund }
Growth Fund }
Growth & Income Fund } May 1, 1994
Science & Technology Fund }
</TABLE>
For more information on these agreements, see the "Investment Adviser" section
in the Statement of Additional Information.
INVESTMENT SUB-ADVISERS
For some of the Funds, VALIC works with Investment Sub-advisers, financial
service companies that specialize in certain types of investing. However, VALIC
still retains ultimate responsibility for managing the Funds. The Sub-adviser's
role is to make investment decisions for the Funds according to each Fund's
investment objectives and restrictions.
The Sub-advisers are:
BANKERS TRUST COMPANY ("BANKERS TRUST")
Since May 1, 1992, Bankers Trust has been the Sub-adviser for the MidCap Index
Fund, the Stock Index Fund, and the Small Cap Index Fund. Bankers Trust first
offered investment management services in 1938 and began managing index funds in
1977. As of December 31, 1995, Bankers Trust managed $185 billion in assets.
Bankers Trust is entirely owned by the Bankers Trust New York Corporation, a
bank holding company. It is the seventh largest U.S. bank-holding company as of
December 31, 1995.
T. ROWE PRICE ASSOCIATES, INC.
("T. ROWE PRICE")
Since May 1, 1994, T. Rowe Price has been the Sub-adviser for the Growth Fund
and the Science & Technology Fund. T. Rowe Price was incorporated in Maryland in
1947.
The firm, which was founded by Thomas Rowe Price Jr. in 1937, is one of the
pioneers of the growth stock theory of investing. T. Rowe Price, one of the
nation's leading no-load fund managers, and its affiliates manage over $65
billion of assets as of December 31, 1995. Its approach to managing money is
based on proprietary research and a strict investment discipline developed over
six decades.
VALUE LINE, INC. ("VALUE LINE")
Since May 1, 1994, Value Line has been the Sub-adviser for the Growth & Income
Fund.
Value Line, with assets under management in excess of $4.4 billion as of June
30, 1996, provides investment counseling services to companies and others.
Investment selection is based on the Value Line Ranking System for TimelinessTM,
which has evolved over many years of research. Value Line also publishes the
Value Line Investment Survey, one of the best known U.S. investment advisory
services covering about 1,700 stocks, organized into 90 industries. The majority
of Value Line's outstanding stock is owned by Arnold Bernhard & Co., Inc. Value
Line is a New York corporation.
VALIC'S ADDRESS is
2929 Allen Parkway,
Houston, Texas 77019.
BANKERS TRUST'S PRINCIPAL
OFFICES are located at
130 Liberty St., New York,
New York 10006.
T. ROWE PRICE'S
PRINCIPAL OFFICES
are located at
100 East Pratt Street,
Baltimore, Maryland
21202.
VALUE LINE'S PRINCIPAL
OFFICES are located at
220 East 42nd Street,
New York, New York
10017-5981.
10
<PAGE> 13
- --------------------------------------------------------------------------------
These financial service companies act as Investment Sub-advisers through an
agreement each entered into with VALIC. For more information on these agreements
and on these Sub-advisers, see the "Investment Sub-Advisers" section in the
Statement of Additional Information.
PORTFOLIO MANAGER
A portfolio manager is a person or team of persons VALIC, or one of its
Sub-advisers, has assigned to be primarily responsible for the day to day
management of a Fund's investments. A Fund's investments are called its
portfolio.
HOW ADVISERS ARE PAID FOR
THEIR SERVICES
VALIC
Each Fund pays VALIC a fee based on its average daily net asset value. A Fund's
net asset value is the total value of the Fund's assets minus any money it owes
for operating expenses, such as the fee paid to its Custodian to safeguard and
value the Fund's investments.
Here is a list of the percentages each Fund pays VALIC.
<TABLE>
<CAPTION>
Advisory Fee
Fund Name (Annual Rate)
- -------------------------------------- -------------------------
<S> <C>
Index Equity Funds
Stock Index Fund } 0.35% on the first
MidCap Index Fund } $500 million;
Small Cap Index Fund } 0.25% on assets over
International Equities } $500 million
Fund }
Growth Fund 0.80%
Growth & Income Fund 0.75%
Capital Conservation Fund 0.50%
Government Securities Fund 0.50%
International Government Bond
Fund 0.50%
Social Awareness Fund 0.50%
Science & Technology Fund 0.90%
Money Market Fund 0.50%
Timed Opportunity Fund 0.50%
</TABLE>
The Investment Advisory Agreements we entered into with each Fund do not limit
how much the Funds pay in monthly expenses each year. However, we voluntarily
limit the Funds' monthly expenses as follows:
If a Fund's average monthly expenses, when annualized, are more than 2% of the
Fund's estimated average daily net assets, we will pay the difference. As a
result the Fund's yield or total return will increase. If VALIC decides to stop
voluntarily reducing a Fund's expenses, it may do so by giving 30 days' notice,
in writing, to the Series Company. To date, VALIC has not had to reduce expenses
of any Fund as a result of this 2% voluntary reduction.
For the fiscal year ended May 31, 1996, the total expenses paid by the Series
Company of each Fund's average net assets were, as a percentage, as follows:
<TABLE>
<CAPTION>
Total
Expenses
Fund Name Ratio
- ------------------------------------------------- --------------
<S> <C>
Stock Index Fund 0.35%
MidCap Index Fund 0.41%
Small Cap Index Fund 0.41%
International Equities Fund 0.42%
Growth Fund 0.83%
Growth & Income Fund 0.79%
Capital Conservation Fund 0.57%
Government Securities Fund 0.56%
International Government Bond Fund 0.56%
Social Awareness Fund 0.56%
Science & Technology Fund 0.94%
Money Market Fund 0.57%
Timed Opportunity Fund 0.57%
</TABLE>
11
<PAGE> 14
- --------------------------------------------------------------------------------
The Sub-advisers
According to the agreements we have with the Sub-advisers, we pay them directly
out of the fee we receive from the Funds. The Funds do not pay the Sub-advisers
directly. We pay them a percentage of what is paid to us by the Funds. We and
the Sub-advisers may agree to change the amount of money we pay them when their
agreements are renewed each year. Any such change increasing the charge would
have to be approved by the Series Company Board of Directors and by the
shareholders of the Fund.
Under the Investment Sub-Advisory Agreement we have with Bankers Trust, we pay
to Bankers Trust a monthly fee based on the respective average daily net asset
values of the MidCap Index Fund, the Stock Index Fund and the Small Cap Index
Fund at the annual rate of .05% on the first $500 million and .03% on assets
over $500 million.
Under the Investment Sub-Advisory Agreement we have with T. Rowe Price, we pay
T. Rowe Price a monthly fee based on the average daily net asset values of the
Growth Fund at an annual rate of .50% and the Science & Technology Fund at the
annual rate of .60%.
Under the Investment Sub-Advisory Agreement we have with Value Line, we pay
Value Line a monthly fee based on the average daily net asset value of the
Growth & Income Fund at an annual rate of .45%.
VALIC is required to pay a minimum yearly sub-advisory fee of $50,000 for the
Small Cap Index Fund. There are no minimum yearly sub-advisory fees for the
Stock Index Fund, MidCap Index Fund, Growth Fund, Growth & Income Fund and the
Science & Technology Fund.
According to the agreements we have with the Sub-advisers, we will receive
investment advice for each sub-advised Fund. Under these agreements we give the
Sub-advisers the authority to manage these Funds and to buy and sell securities
for these Funds. We retain the responsibility for the overall management of
these Funds. The Sub-advisers may buy and sell securities for each Fund with
broker-dealers and other financial intermediaries that they select.
The Sub-advisers may place orders to buy and sell securities of these Funds with
a broker-dealer affiliated with the Sub-adviser as allowed by law. This could
include any affiliated futures commission merchants. Further, in the case of T.
Rowe Price, it may include any indirectly related broker.
The Investment Company Act of 1940 ("1940 Act") permits Sub-advisers under
certain conditions to place an order to buy or sell securities with an
affiliated broker. One of these conditions is that the commission received by
the affiliated broker can not be greater than the usual and customary broker's
commission if the sale was completed on a securities exchange. The Series
Company has adopted procedures, as required by the 1940 Act, which provide that
any commissions received by a Sub-adviser's affiliated broker are reasonable and
fair if compared to the commission received by other brokers for the same type
of securities transaction.
The Securities Exchange Act of 1934 prohibits members of national securities
exchanges from effecting exchange transactions for accounts that they or their
affiliates manage, except as allowed under rules adopted by the Securities and
Exchange Commission ("SEC"). The Series Company and the Sub-advisers have
entered into a written contract, as required by the 1940 Act, to allow the
Sub-adviser's affiliate to effect these type of transactions for commissions.
The 1940 Act generally prohibits a Sub-adviser or a Sub-adviser's affiliate,
acting as principal, from engaging in securities transactions with a Fund,
without an exemptive order from the SEC.
We and the Sub-advisers may enter into simultaneous purchase and sale
transactions for the Funds or affiliates of the Funds.
ABOUT THE BOARD OF DIRECTORS
The Series Company Board of Directors currently consists of nine members: five
are independent directors, three are VALIC employees, and one is an employee of
American General Corporation.
The Board of Directors may change each Fund's investment objective, investment
policies and non-fundamental investment restrictions without shareholder
approval. The Board may not change any fundamental restrictions placed on the
types of investments each Fund may buy. The fundamental restrictions appear in
the Statement of Additional Information. Changes to these restrictions may be
made with shareholder approval only.
For more information on
WHAT THE SUB-ADVISERS
ARE PAID, see the
"Investment Sub-Advisers"
section in the Statement of
Additional Information.
12
<PAGE> 15
ABOUT THE FUNDS
- --------------------------------------------------------------------------------
GROWTH, INCOME AND STABILITY
CATEGORIES
The Funds offered in this prospectus fall into three general investment
categories: growth, income and stability.
Growth Category
The goal of a Fund in the growth category is to increase the value of your
investment over the long term by investing mostly in stocks. Stocks are a type
of investment that can increase in value over a period of years. Companies sell
stock to get the money they need to grow. These companies often keep some of
their profits to reinvest in their business. As they grow, the value of their
stock may increase. This is how the value of your investment may increase.
Series Company Growth Category includes:
Growth Fund
Growth & Income Fund
Stock Index Fund
Social Awareness Fund
MidCap Index Fund
Science & Technology Fund
Small Cap Index Fund
Timed Opportunity Fund
International Equities Fund
Income Category
Unlike Funds in the growth category, where the objective is to make the Fund's
investments increase in value, Funds in the income category try to keep the
value of their investments from falling, while providing an increase in the
value of your investment through the income earned on the Fund's investments. To
meet this objective, Funds in the income category buy investments that are
expected to pay interest to the Fund on a regular basis.
Series Company Income Category includes:
Capital Conservation Fund
International Government Bond Fund
Government Securities Fund
Stability Category
Funds in the stability category provide liquidity, protection of capital and
current income through investments in high quality securities.
Series Company Stability Category includes:
Money Market Fund
ABOUT LEVEL OF RISK
The risks involved in each Fund are described in each Fund's Fact Sheet. These
risks include market risk, credit risk, interest rate risk and risk associated
with foreign securities. These risks are described in the "Types of Investments"
section in this prospectus. The money you invest in the Series Company is not
insured. And, we can't guarantee that any of the Funds will meet their
investment objectives. There's a chance you may lose money and end up with less
than you invested.
ABOUT PORTFOLIO TURNOVER
Portfolio turnover occurs when a Fund sells its investments and buys new ones.
In some Funds, high portfolio turnover occurs when these Funds sell and buy
investments as part of their investment strategy. In other Funds, like the Index
Funds discussed below, portfolio turnover is lower because the make up of the
index stays fairly constant.
High portfolio turnover may cause a fund's expenses to increase. For example, a
fund may have to pay brokerage fees and other related expenses.
13
<PAGE> 16
- --------------------------------------------------------------------------------
For each of the last two fiscal years the portfolio turnover rates for each of
the Funds except the Money Market Fund were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending
---------------------
May 31, May 31,
1995 1996
------- -------
<S> <C> <C>
Stock Index Fund 14% 3%
MidCap Index Fund 23% 21%
Small Cap Index Fund 34% 31%
International Equities Fund 14% 20%
Growth Fund 61% 36%
Growth & Income Fund 97% 64%
Capital Conservation Fund 100% 80%
Government Securities Fund 229% 36%
International Government Bond Fund 6% 11%
Social Awareness Fund 148% 117%
Science & Technology Fund 121% 116%
Timed Opportunity Fund 133% 119%
</TABLE>
A portfolio turnover rate over 100% a year is higher than the rates of many
other mutual fund companies. A high rate increases a Fund's transaction costs
and expenses.
Excessive short-term trading may result in excessive "short-short income" under
the Internal Revenue Code ("Code"). Excessive "short-short income" in a Fund
could affect a Fund's status as a regulated investment company (RIC) under the
Code. Failure of a Fund to qualify as a RIC could cause the separate accounts
investing in the Fund to be nondiversified under Section 817[h] of the Code. See
"Dividends and Capital Gains," "Diversification" and "Taxes" in this prospectus
for a fuller discussion of certain of these tax provisions.
ABOUT FUND PERFORMANCE
From time to time the Series Company may advertise Fund performance
information such as Fund average total return and index total return. Current
Fund performance and information as to how this Fund performance information is
calculated appears in the Statement of Additional Information. Additionally,
information on separate account performance appears in your contract
prospectus.
14
<PAGE> 17
HOW TO READ A FUND FACT SHEET
- --------------------------------------------------------------------------------
[CHART]
15
<PAGE> 18
THE INDEX EQUITY FUNDS
- --------------------------------------------------------------------------------
Four of the 13 Funds in the Series Company are Index Equity Funds investing
mostly in stocks. Their investment strategy is to track the performance of a
specific index. This strategy is followed whether markets go up or down. As part
of this investment strategy, each Fund may also invest in futures contracts and
options. Because these Funds do not have a defensive investment strategy, when
the market goes down, you will bear the risk of such market decline.
Index Funds perform best over the long term. This means you should plan to keep
your money in an Index Fund for a period of years.
WHAT IS AN INDEX?
An index reflects the average performance of a particular class of securities.
Examples of indexes include large company stocks (S&P 500 Index), mid-size
company stocks (S&P MidCap 400 Index), the bond market, or stocks of companies
in specific industries. Indexes are not managed funds, and cannot be bought.
Investment advisers compare the results of the funds they manage to indexes that
are close to the investment style of the fund. Information about the Series
Company's use of Standard & Poor's Indexes is in the Statement of Additional
Information.
WHICH INDEXES DO THESE FUNDS TRY
TO TRACK?
While there are more than a hundred different indexes, the Index Funds in this
prospectus try to track four very prominent stock indexes:
The Stock Index Fund tracks the
Standard & Poor's 500 Stock Index(R)*
The Standard & Poor's 500 Stock Index(R) (S&P 500) tracks the common stock
performance of large U.S. companies in the manufacturing, utilities,
transportation, and financial industries. These companies are usually listed on
the New York Stock Exchange. It also tracks performance of common stocks sold by
foreign and smaller U.S. companies in similar industries. The smaller U.S.
companies are usually listed on the American Stock Exchange. In total, this
index tracks 500 common stocks.
This index may periodically change some of the stocks it tracks. And, different
indexes sometimes track some of the same stocks. For example, as of May 31,
1996, this Index was tracking 24 of the same stocks tracked by the Russell 2000
Index.
The MidCap Index Fund tracks the
Standard & Poor's MidCap 400(R) Index*
The Standard & Poor's MidCap 400(R) Index (S&P MidCap 400) tracks the common
stock performance of 400 medium capitalized U.S. and foreign companies that are
in the manufacturing, utilities, transportation, and financial industries.
Medium capitalized means the market value of these companies' stock is around
$600 million.
Standard & Poor's created this Index in 1991 to give investors an idea of how
the stocks of medium capitalized companies generally perform.
Standard & Poor's may periodically change some of the stocks in the index. And,
different indexes sometimes include some of the same stocks. For example, as of
May 31, 1996, this Index was tracking 115 of the same stocks tracked by the
Russell 2000 Index. This Index does not track the same stocks as the S&P 500
Index.
The Small Cap Index Fund tracks
The Russell 2000(R) Index**
The Russell 2000 Index is provided by The Frank Russell Company. This Index
tracks the common stock performance of 2,000 small capitalized U.S. companies in
various industries. Small capitalized means these companies have a market value
below $750 million.
The Frank Russell Company created this Index in 1979 to give investors an idea
of how the stocks of small capitalized companies generally perform. Most of the
companies tracked by this Index have common stocks with a market value of $100
million to $750 million.
The stocks tracked by this Index are updated monthly because many small
capitalized companies eventually become medium capitalized companies and some
fail.
- ------------
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "S&P MidCap 400(R)" are
trademarks of Standard & Poor's ("S&P"). Neither the MidCap Index Fund nor
the Stock Index Fund is sponsored, endorsed, sold or promoted by S&P, and S&P
makes no representation regarding the advisability of investment in these
Funds.
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. The Small Cap Index Fund is not promoted, sponsored or
endorsed by, nor in any way affiliated with Frank Russell Company. Frank
Russell Company is not responsible for and has not reviewed the Fund or any
associated literature or publications and makes no representation or
warranty, express or implied, as to their accuracy, or completeness, or
otherwise.
INDEX FUNDS have
outperformed most mutual
funds over consecutive ten
year periods. However,
because they are managed
to track an index they will
rise and fall with the
market.
16
<PAGE> 19
- --------------------------------------------------------------------------------
The International Equities Fund tracks The Morgan Stanley Capital
International, Europe, Australia and the Far East (EAFE) Index.
The EAFE Index tracks the performance of about 1,000 common stocks of companies
in 20 foreign countries. This index provides a measure of the performance of
companies in the more developed countries in Europe, Australia and the Far East.
Morgan Stanley publishes the EAFE Index daily and, at times, may change some of
the stocks in the index.
HOW CLOSELY CAN INDEX FUNDS TRACK
THE PERFORMANCE OF THEIR INDEX?
The factors that cause a Fund to perform differently from the Index it tries to
track are called tracking differences. There is no assurance that an Index Fund
can track its index.
The coefficient of correlation (r) is an index number which shows how closely
two variables are related. If r=0 there is no tendency for one variable to
change with the other. A value of +1 means that one variable will vary exactly
with the other. Index funds try to keep their coefficient of correlation as
close to 1 as possible. As a practical matter, any coefficient above 0.95, when
measured against the comparison index, shows good tracking.
The index may remove one stock and substitute another requiring the sub-adviser
of the Fund to do the same. When a stock is sold and the new stock purchased,
the Fund incurs transaction costs. The index incurs no transaction costs.
Therefore, the portfolio manager cannot match exactly the
performance of an index.
Also, it may not be possible for a Fund to buy every stock in its index or in
the same proportions. Fund portfolio managers may rely on a statistical
selection technique to figure out, of the stocks tracked by their index, how
many and which ones to buy. Stocks are bought and sold when they are added to or
dropped from the Index. This keeps brokerage fees and other transaction costs
low. For more information, see the "Investment Strategy" sections on each Fund's
Fact Sheet.
17
<PAGE> 20
STOCK INDEX FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS TRACKING
THE S&P 500 INDEX
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
Bankers Trust
INVESTMENT OBJECTIVE
Seeks long-term capital growth through investment in common stocks that, as a
group, are expected to provide investment results closely corresponding to the
performance of the S&P 500 Index.
INVESTMENT RISK
The S&P 500 Index includes the stocks of many large, well-established companies.
These companies usually have the financial strength to weather difficult
financial times. However, the value of any stock can rise and fall over short
and long periods of time. This Fund which holds nearly all of the 500 stocks in
the S&P 500 Index avoids the risk of individual stock selection and seeks to
provide the return of the large company sector of the market. In the past that
return has been positive over many years but can be negative at certain times.
There is no assurance that a positive return will occur in the future.
Because the Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks,
such as market risk and risk associated with foreign securities. For more
information about market risk and risk associated with foreign securities, see
"A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in most of the stocks in the S&P 500 Index that, as a group,
should reflect its performance. Since it's not possible for this Fund to buy
every stock included in this Index or in the same proportions, we buy as many
stocks as we need to closely track the performance of the S&P 500 Index.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Stocks in the S&P 500 at least 65%
Index
- -------------------------------------------------
Foreign stocks (listed and no more than 20%
over-the-counter) in the
S&P 500 Index
- -------------------------------------------------
Futures and options no more than 33%
- -------------------------------------------------
Investments not in the S&P no more than 35%
500 Index
Common stock and
related securities
High quality money
market securities
Illiquid and restricted
securities
- -------------------------------------------------
*At time of purchase.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
18
<PAGE> 21
STOCK INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 28.52%, before
subtracting expenses of 0.35%. This return represented a positive tracking
difference of 0.09% compared to the S&P 500 Index(C). A combination of careful
purchasing of securities, low cost trading techniques, and the use of futures to
maintain a fully invested position resulted in the close tracking of the Index.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE STOCK INDEX FUND AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
19
<PAGE> 22
MIDCAP INDEX FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS TRACKING
THE S&P 400 MIDCAP
INDEX
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
Bankers Trust
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investments primarily in a
diversified portfolio of common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P MidCap
400 Index.
INVESTMENT RISK
The S&P MidCap 400 Index includes the stocks of many medium sized companies.
These companies usually do not have as much financial strength as very large
companies and so may not be able to do as well in difficult times. However,
because they are medium sized, they have more potential to grow, which means the
value of their stock may increase. The S&P MidCap 400 Index also includes stocks
of certain medium sized foreign companies. These stocks can be more risky than
large company stocks. An index fund holding nearly all of the 400 stocks in the
S&P MidCap 400 Index avoids the risk of individual stock selection and seeks to
provide the return of the medium-sized company sector of the market. On average
that return has been positive over many years but can be negative at certain
times. There is no assurance that a positive return will occur in the future.
Because this Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks such
as market risk and risk associated with foreign securities. For more information
about market risk and risk associated with foreign securities, see "A Word About
Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in most of the stocks in the S&P MidCap 400 Index that, as a
group, should reflect its performance. Since it's not possible for this Fund to
buy every stock included in this index or in the same proportions, we buy as
many stocks as we need to closely track the performance of the S&P MidCap
400 Index.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Stocks in the S&P MidCap at least 65%
400 Index
- -------------------------------------------------
Foreign stocks (listed and no more than 20%
over-the-counter) in the
S&P MidCap 400 Index
- -------------------------------------------------
Futures and options no more than 33%
- -------------------------------------------------
Investments not in the S&P no more than 35%
MidCap 400 Index
Common stock and
related securities
High quality money
market securities
Illiquid and restricted
securities
- -------------------------------------------------
*At time of purchase.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
20
<PAGE> 23
MIDCAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 28.51%, before
subtracting expenses of 0.41%. This represented a positive tracking difference
of 0.06% compared to the S&P MidCap 400 Index. The close tracking was the result
of low cost trading techniques, and the use of futures to maintain a fully
invested position.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE MIDCAP INDEX FUND AND
THE S&P MIDCAP 400 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE MIDCAP INDEX FUND AND
THE S&P MIDCAP 400 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
* Effective October 1, 1991, the Fund's name was changed
from the Capital Accumulation Fund to the MidCap Index
Fund. Additionally, the investment objectives and
investment program for the Fund were changed.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The Fund returns
reflect investment management fees and other Fund expenses. The Fund returns do
not reflect charges included in the annuity contract for mortality and expense
guarantees, administrative fees or surrender charges.
21
<PAGE> 24
SMALL CAP INDEX
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS TRACKING
THE RUSSELL 2000
INDEX
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
Bankers Trust
INVESTMENT OBJECTIVE
Seeks to provide growth of capital through investment primarily in a diversified
portfolio of common stocks that, as a group, are expected to provide investment
results closely corresponding to the performance of the Russell 2000 Index.
INVESTMENT RISK
The Russell 2000 Index includes many small U.S. companies. Some of these
companies often do not have the financial strength needed to do well in
difficult times. Also, they often sell limited numbers of products, which can
make it harder for them to compete with medium and large companies. However,
because they are small, their stock prices may fluctuate more over the
short-term, but they have more potential to grow. This means their stock value
may offer greater potential for appreciation. An index fund holding a large
sampling of the 2,000 stocks in the Russell 2000 Index avoids the risks of
individual stock selection and seeks to provide the return of the smaller-sized
company sector of the market. On average that return has been positive over the
years but has been negative at certain times. There is no assurance that a
positive return will occur in the future.
Because this Fund invests in many of the stocks tracked by this Index, your
investment will experience similar changes in value and share similar risks such
as market risk and risk associated with foreign securities. For more information
about market risk and risk associated with foreign securities, see "A Word About
Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in a sampling of stocks in the Russell 2000 Index that, as a
group, should reflect its performance. Since it's not possible for this Fund to
buy every stock included in this index or in the same proportions, we buy as
many stocks as we need to closely track the performance of the Russell 2000
Index.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Stocks in the Russell 2000 at least 65%
Index
- -------------------------------------------------
Foreign stocks (listed and no more than 20%
over-the-counter) in the
Russell 2000 Index
- -------------------------------------------------
Futures and options no more than 33%
- -------------------------------------------------
Investments not in the no more than 35%
Russell 2000 Index
Common stock and
related securities
High quality money
market securities
Illiquid and restricted
securities
- -------------------------------------------------
*At time of purchase.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
22
<PAGE> 25
SMALL CAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 34.91%, before
subtracting expenses of 0.41%. This represented a negative tracking difference
of .98% compared to the Russell 2000 Index. The Fund uses futures to maintain a
fully invested position to track its index but incurs fees and charges to
acquire securities which created a variance from the index.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE SMALL CAP INDEX FUND AND
THE RUSSELL 2000 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
23
<PAGE> 26
INTERNATIONAL EQUITIES
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS TRACKING
THE EAFE INDEX
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------
PORTFOLIO MANAGER: While this Fund attempts to track the performance of the EAFE
Index, it is actively managed. William Trimbur, Jr. has been this Fund's
Portfolio Manager since the Fund was started in 1989. He has been Vice President
and Investment Officer for the Series Company since 1987. Mr. Trimbur is also
the portfolio manager for the International Government Bond Fund.
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital through investments primarily in a
diversified portfolio of equity and equity related securities of foreign issuers
that, as a group, are expected to provide investment results closely
corresponding to the performance of the EAFE Index.
INVESTMENT RISK
As described in the Investment Strategy section below, this Fund invests almost
all its assets in foreign securities, which have risks that U.S. investments
don't have. For a further explanation of the risks associated with foreign
securities and market risk, see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in a sampling of about 100 foreign stocks of companies that are
either in the EAFE Index or are similar to stocks in the EAFE Index. These
stocks, as a group, should reflect EAFE's performance. Since it's not possible
for this Fund to buy every stock included in this index or in the same
proportions, we buy as many stocks as are needed to closely track the
performance of the EAFE Index.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Stocks in the EAFE Index at least 65%**
- -------------------------------------------------
Other investments not in no more than 35%
EAFE Index
Foreign equity and
related securities
including common
stocks, convertible
stocks, preferred stocks
and warrants
- -------------------------------------------------
Futures and options no more than 33%
Covered put and call
options on foreign
currencies
Listed and unlisted put
and call options on
currency futures
Listed and unlisted
foreign currency
contracts
- -------------------------------------------------
High quality foreign and up to 100%
domestic money market
securities**
- -------------------------------------------------
Illiquid and restricted no more than 10%
securities
- -------------------------------------------------
*At time of purchase.
**It is possible we may invest up to 100% of the
Fund's assets in short term, high quality,
foreign and domestic money market securities when
we think economic, political and market
conditions in foreign countries make it too risky
to follow our general guidelines.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
24
<PAGE> 27
INTERNATIONAL EQUITIES FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 11.56% before
subtracting expenses of 0.42%. This return represented a positive tracking
difference of 0.89% compared to the EAFE Index. The outperformance was a result
of good representation in certain sectors of the European markets and avoidance
of some issues in Asia which performed poorly.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE INTERNATIONAL EQUITIES FUND AND
THE EAFE INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
25
<PAGE> 28
GROWTH FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS IN
SERVICE SECTOR
COMPANIES
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
T. Rowe Price
- --------------------------------------------------
PORTFOLIO MANAGER: This Fund is managed by an Investment Advisory Committee
chaired by John H. Laporte. He has been chairman of this committee since it was
started in 1994. Mr. Laporte joined T. Rowe Price in 1976 and has been managing
investments since 1984.
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital through investment primarily in
common stocks of U.S. growth
companies engaged in service-related activities.
INVESTMENT RISK
This Fund invests in many companies that are small and/or new. These companies
face special risks because they may not have the financial strength to do well
during difficult times. The securities that the Fund invests in involve certain
risks, such as market risk, and risk associated with foreign securities. For a
discussion of these risks, see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests primarily in U.S. companies that are in the services industry.
Examples include: consumer
services (retailing, entertainment/leisure,
media communications, restaurants/food
distribution) business services (healthcare, computer services), and financial
services (insurance, investment service). We believe if service companies
outpace overall economic growth, their stocks could generate above-average
returns. Currently, over 50% of the U.S. economy is made up of service
companies.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Common stocks and at least 75%
related securities, bonds,
preferred stock, convertible
stock of service industry
companies
- -------------------------------------------------
Foreign securities up to 15%
- -------------------------------------------------
Equity securities sold by up to 25%
non-service related
companies
- -------------------------------------------------
Illiquid and restricted up to 15%
securities**
- -------------------------------------------------
Futures and options up to 25%
- -------------------------------------------------
High quality money market up to 100%
securities***
- -------------------------------------------------
*At time of purchase.
**We may invest up to 15% of the Fund's assets in
illiquid securities, as long as no more than 10%
of the Fund's assets are invested in restricted
securities that are also considered illiquid.
Restricted securities are explained under "Types
of Investments".
***If, for temporary defensive reasons, we invest
35% or more of the Fund's assets in money market
securities, it is likely 25% or more of the
Fund's assets will be invested in securities of
the banking industry. This type of concentration
in a single industry may increase the general
level of risk to the Fund.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS
is provided under
"Types of Investments".
26
<PAGE> 29
GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 48.29% before
subtracting expenses of 0.83%. This return represented a positive tracking
difference of 19.86% compared to the Fund's benchmark, the S&P 500 Index. The
diversification of the Fund among financial, consumer and business services
proved to be a very good strategy.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE GROWTH FUND AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
27
<PAGE> 30
GROWTH & INCOME
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH AND INCOME
THROUGH INVESTMENTS
IN STOCKS OR
SECURITIES CONVERTIBLE
INTO STOCKS
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
Value Line
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER: This Fund is managed by an Investment Committee comprised of
Value Line employees.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital and, secondarily, current income
through investment in common stocks and equity-related securities.
INVESTMENT RISK
This Fund invests almost entirely in stocks. Stock values can rise and fall over
both short and long periods of time. However, we believe that our investment
strategy helps us to manage the risks the Fund is subject to such as market
risk, credit risk, interest rate risk and risk associated with foreign
securities. The Value Line Ranking System (discussed below) does not eliminate
these risks. The Sub-adviser believes that the Value Line Ranking System
provides objective standards for determining whether the market is undervaluing
or overvaluing a particular security. Using these rankings provides no assurance
that the Fund will perform better than the general market over any particular
period. For a discussion of market risk, credit risk, interest rate risk and
risk associated with foreign securities, see "A Word About Risk" in this
prospectus.
INVESTMENT STRATEGY
The Fund invests in stocks that provide long-term growth potential. As a
secondary goal, the Fund invests in securities that will provide current income.
We make investments which, according to the Value Line Ranking System (the
Ranking System), are timely. Timely means that, in Value Line's opinion,
on a ranking scale of 1 (highest) to 5 (lowest), certain stocks in the Ranking
System are more likely to outperform the others over the coming year.
The Value Line Investment Survey covers about 1,700 stocks that are ranked for
Timeliness by the Ranking System. These rankings are updated weekly. Stocks
ranked 1 or 2 are expected to comprise the majority of the Fund's investments.
However, the Fund may invest in stocks ranked below 2 or hold stocks that have
fallen below 3, when the Sub-adviser decides it is appropriate.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Common stocks and equity generally 90-95%
related securities
bonds, preferred stock,
convertible stock and
warrants
- -------------------------------------------------
Futures and options up to 25%
- -------------------------------------------------
Foreign securities up to 20%
- -------------------------------------------------
Illiquid and restricted up to 15%
securities**
- -------------------------------------------------
High quality money market up to 100%
securities***
- -------------------------------------------------
</TABLE>
*At time of purchase.
**We may invest up to 15% of the Fund's assets in
illiquid securities, as long as no more than 5%
of the Fund's total assets are invested in
restricted securities that are also considered
illiquid.
Restricted investments are explained under
"Types of Investments".
***For temporary defensive reasons, we may invest
up to 100% of the Fund's assets in fixed income
securities such as U.S. Government securities,
bonds, commercial paper, repurchase agreements
and cash equivalents. We may do this when we
think economic and market conditions make it
too risky for us to follow our general
guidelines.
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
28
<PAGE> 31
GROWTH & INCOME FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 35.64% before
subtracting expenses of 0.79%. This return represented a positive tracking
difference of 7.21% compared to the Fund's benchmark, the S&P 500 Index. The
Fund benefited from selection of investments as evidenced by the technology
sector where networking and software stocks outperformed semiconductor stocks.
Other areas contributing to the outperformance were oil service, retail and
apparel related, tobacco and food retailers.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE GROWTH & INCOME FUND AND
THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
29
<PAGE> 32
CAPITAL CONSERVATION
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal INCOME AND POSSIBLE
GROWTH THROUGH
INVESTMENTS IN
HIGH QUALITY DEBT
SECURITIES
- -------------------------------------------------
Investment Category INCOME
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER: Leon A. Olver, Vice President and Investment Officer for the
Series Company is this Fund's Portfolio Manager. Mr. Olver was an Assistant Vice
President for Pulte Financial Companies, Denver, Colorado, from 1984 to 1991.
From 1991 to 1995 Mr. Olver worked for First Heights Bank, Houston, Texas; he
was Vice President, Assistant Treasurer 1991-1994, and Vice President, Treasurer
from 1994 to 1995. He is also the Portfolio Manager for the Government
Securities Fund.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks the highest possible total return consistent with preservation of capital
through current income and capital gains on investments in intermediate and
long-term debt instruments and other income producing securities.
Investment Risk
The securities the Fund invests in involve certain risks, such as interest rate
risk, credit risk, market risk and risk associated with foreign securities. This
may cause the debt instruments that the Fund owns to be worth less than what the
Fund paid. For a discussion of these risks see "A Word About Risk" in this
prospectus.
INVESTMENT STRATEGY
To provide you with the highest possible total return from current income and
capital gains as is consistent with preserving your investment, the Fund invests
in high quality bonds. To increase the Fund's earning potential, we may use a
small part of the Fund's assets to make some higher risk investments.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Investment grade at least 75%
intermediate and long-term
corporate bonds rated at
least Baa by Moody's or
another rating organiza-
tion**, securities issued or
guaranteed by the U.S.
Government***, mortgage
backed securities, asset-
backed securities,
collateralized mortgage
obligations and high quality
money market securities
- -------------------------------------------------
Debt securities up to 25%
rated at least B by
Moody's or another rating
organization****
Preferred or convertible
preferred stock,
Convertible debt securities
- -------------------------------------------------
Foreign securities, mostly up to 20%
foreign bonds that are of
the same quality as other
bonds purchased by this
Fund
- -------------------------------------------------
Common stocks***** up to 10%
- -------------------------------------------------
Futures and options up to 33%
- -------------------------------------------------
Illiquid and restricted up to 10%
securities
- -------------------------------------------------
*At time of purchase.
**For more information concerning ratings see
"Description of Corporate Bond Ratings" and
"Description of Commercial Paper Ratings" in
the Statement of Additional Information.
***U.S. Government securities are securities
issued or guaranteed by the U.S. Government
which are supported by (i) the full faith and
credit of the U.S. Government, (ii) the right
of the issuer to borrow from the U.S.
Treasury, (iii) the credit of the issuing
government agency or (iv) the discretionary
authority of the U.S. Government or GNMA to
purchase certain obligations of the agency.
For more information see "Government
Securities Fund" in the Statement of
Additional Information.
****The Fund currently intends to limit these
investments to no more than 5% of its total
assets. For the fiscal year ended May 31, 1996
less than 2% of the Fund's average monthly
assets were invested in securities rated below
Baa determined on a dollar-weighted basis.
*****Only stocks acquired by conversion of
income-bearing securities or by exercising
warrants attached to income-bearing
securities.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
30
<PAGE> 33
CAPITAL CONSERVATION FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 3.98% before
subtracting expenses of 0.57%. This represents a negative tracking difference of
0.59% from the Fund's benchmark; the Merrill Lynch Corporate Master Bond Index.
The effects of declining interest rates in 1995 were positive while the
increased interest rates in the early months of 1996 exerted a negative effect.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE CAPITAL CONSERVATION FUND AND
THE MERRILL LYNCH CORPORATE MASTER INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
31
<PAGE> 34
GOVERNMENT
SECURITIES FUND
Fact Sheet
- -------------------------------------------------
Investment Goal INCOME AND POSSIBLE
GROWTH THROUGH
INVESTMENTS IN
INTERMEDIATE & LONG-
TERM GOVERNMENT
DEBT SECURITIES
- -------------------------------------------------
Investment Category INCOME
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------
PORTFOLIO MANAGER: Leon A. Olver, Vice President and Investment Officer for the
Series Company, is this Fund's Portfolio Manager. Mr. Olver was an Assistant
Vice President for Pulte Financial Companies, Denver, Colorado from 1984 to
1991. From 1991 to 1995 Mr. Olver worked for First Heights Bank, Houston, Texas;
he was Vice President, Assistant Treasurer 1991-1994; and Vice President,
Treasurer from 1994 to 1995. He is also the Portfolio Manager for the Capital
Conservation Fund.
INVESTMENT OBJECTIVE
Seeks high current income and protection of capital through
investments in intermediate and long-term U.S. Government debt securities.
INVESTMENT RISK
The securities the Fund invests in involve certain risks, including interest
rate risk, credit risk and risk associated with foreign securities. This may
cause the debt instruments that the Fund owns to be worth less than what the
Fund paid. For a discussion of these risks see "A Word About Risk" in this
prospectus.
INVESTMENT STRATEGY
The Fund primarily invests in intermediate and long term U.S. Government and
government sponsored investments. The Fund may also use up to 20% of its assets
to make high quality foreign investments payable in U.S. dollars.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Debt securities issued or at least 80%
guaranteed by the U.S.
Government**, asset-
backed securities, high
quality domestic money
market securities
- -------------------------------------------------
Mortgage-backed securities up to 25%
- -------------------------------------------------
High quality foreign up to 20%
government securities and
high quality foreign money
market securities payable in
U.S. dollars
- -------------------------------------------------
Futures and options up to 33%
Listed and unlisted call
and put options on
securities, stock indices
and currencies
- -------------------------------------------------
Illiquid and restricted up to 10%
securities
- -------------------------------------------------
*At time of purchase.
**U.S. Government securities are securities issued
or guaranteed by the U.S. Government and which
are supported by (i) the full faith and credit of
the U.S. Government, (ii) the right of the issuer
to borrow from the U.S. Treasury, (iii) the
credit of the issuing government agency, or (iv)
the discretionary authority of the U.S.
Government or GNMA to purchase certain
obligations of the agency. For more information
see "Government Securities Fund" in the Statement
of Additional Information.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
32
<PAGE> 35
GOVERNMENT SECURITIES FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 3.88% before
subtracting expenses of 0.56%. This represents a negative tracking difference of
0.11% from the Fund's benchmark, the Lehman Brothers U.S. Treasury Composite
Index. Price sensitivity in excess of the index caused the variance with the
Index and adjustments have been made to improve results.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE GOVERNMENT SECURITIES FUND AND
THE LEHMAN BROTHERS U.S. TREASURY COMPOSITE INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
33
<PAGE> 36
INTERNATIONAL
GOVERNMENT BOND
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal INCOME AND POSSIBLE
GROWTH THROUGH
INVESTMENTS IN HIGH
QUALITY FOREIGN
GOVERNMENT DEBT
SECURITIES
- -------------------------------------------------
Investment Category INCOME
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------
PORTFOLIO MANAGER: William Trimbur, Jr. has been this Fund's Portfolio Manager
since the Fund was started in 1991. He has been Vice President and Investment
Officer for the American General Series Portfolio Company since 1987. Mr.
Trimbur is also the Portfolio Manager for the International Equities Fund.
INVESTMENT OBJECTIVE
Seeks high current income through investments primarily in high quality debt
securities issued or guaranteed by foreign governments.
INVESTMENT RISK
This Fund invests mostly in bonds that are issued by foreign governments.
Although these governments promise to pay the principal and interest due on
their bonds, it is still possible you may not get back all the money you invest.
For a discussion of the risks associated with foreign securities, credit risk,
and interest rate risk see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund aims to give you foreign investment opportunities primarily in high
quality government and government sponsored debt securities. Since the Fund
expects to concentrate in certain foreign government securities, it is
classified as a "non-diversified" investment company. Also, the Fund attempts
to have all of its investments payable in foreign currencies. The Fund may also
convert its cash to foreign currency. To help us choose which countries to
invest in we rely, in part, on the Salomon Brothers Non-U.S. Dollar World
Government Bond Index (Salomon Index).
The Salomon Index is a widely used, international government bond index. It
tracks the performance of government bonds sold in Austria, Australia, Belgium,
Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden,
and the United Kingdom. In addition, the Fund may invest in securities in other
countries, provided such securities are payable in the currencies of the
countries in the Salomon Index. We do not try to copy this index's performance.
Rather, we use
it as a guide.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
High quality debt securities at least 65%
issued or guaranteed by
foreign governments
- -------------------------------------------------
Other high quality debt no more than 35%
securities, including
Foreign corporate debt
and foreign money
market securities
sold in the countries
listed above
High quality domestic
money market
securities and debt
obligations issued or
guaranteed by the
U.S. Government
Foreign currency
exchange transactions
- -------------------------------------------------
Futures and options no more than 33%
Covered put and
call options on
foreign currencies
Listed put and
call options on
currencies
Listed and
unlisted foreign
currency futures
contracts
- -------------------------------------------------
Illiquid and restricted up to 10%
securities
- -------------------------------------------------
*At time of purchase.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
34
<PAGE> 37
INTERNATIONAL GOVERNMENT BOND FUND
Fact Sheet
- --------------------------------------------------------------------------------
For temporary defensive reasons, we may invest up to 100% of the Fund's assets
in short term, high quality US money market securities, and US Government debt
securities. We may do this when we think economic, political or market
conditions in foreign countries make it too risky to follow our general
guidelines.
For the fiscal year ended May 31, 1996, the Fund had a negative return of 1.35%
before subtracting expenses of 0.56%. This represents a positive tracking
difference of 0.66% compared to its benchmark, the Salomon Brothers Non-U.S.
Dollar World Government Bond Index. The major international bond markets such as
Japan, Germany and France experienced both lower prices and weaker currencies.
The Fund outperformed the index due to a slight overweight position in
Australia, Italy, Sweden and Spain. Those countries had bond rallies and stable
currencies.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE INTERNATIONAL GOVERNMENT BOND FUND
AND THE SALOMON INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses. The
Fund returns do not reflect charges included in the
annuity contract for mortality and expense guarantees, administrative fees or
surrender charges.
35
<PAGE> 38
SOCIAL AWARENESS
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS IN
STOCKS OF COMPANIES
MEETING SOCIAL
CRITERIA OF THE FUND
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER: Since 1992, John W. Mossbarger has been this Fund's
Portfolio Manager and Vice President and Investment Officer for the Series
Company. From 1988 to 1992, Mr. Mossbarger worked for American General
Corporation: he was Managing Director, Common Stocks from 1989 to 1992, and
Senior Vice President, Equity Investments from 1988 to 1989.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to obtain growth of capital through investment, primarily in common
stocks, in companies which meet the social criteria established for the Fund.
The Fund invests only in companies which meet its social criteria. The Fund does
not invest in companies that:
o produce nuclear energy;
o make military weapons or delivery systems; or
o engage continuously in practices or produce products that significantly
pollute the environment (such products include tobacco products).
INVESTMENT RISK
Most of the companies this Fund invests in are included in the S&P 500 Index.
This Fund's degree of market risk is slightly greater than the Stock Index
Fund's degree of risk. This is because its investments are more limited by its
investment objective. This Fund may also experience market risk, and risks
associated with foreign securities. For a discussion of these risks see the
Stock Index Fund's Fact Sheet and "A Word About Risk" in this prospectus.
If a company stops meeting the Fund's social criteria after the Fund invested in
it, the Fund will sell these investments even if this means the Fund loses
money. Also, if the Fund changes its social criteria and the companies the Fund
has already invested in no longer qualify, the Fund will sell these investments
even if this means the Fund loses money. Social criteria screening will limit
the availability of investment opportunities for the Fund
more than for funds having no such criteria.
INVESTMENT STRATEGY
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Common stocks of companies at least 80%
meeting Fund's social criteria
- -------------------------------------------------
Other types of securities of up to 20%
companies meeting social
criteria including
Foreign securities
Preferred stock
Convertible securities
High quality money market
securities and warrants
- -------------------------------------------------
Futures and options up to 33%
- -------------------------------------------------
Illiquid and restricted up to 10%
securities
- -------------------------------------------------
*At time of purchase.
</TABLE>
To find out which companies meet the Fund's social criteria, we rely on industry
classifications, research services such as the Investor Responsibility Research
Center (IRRC), and special magazines and papers that publish this type of
information.
Since our definition of social criteria is not "fundamental," the Series
Company's Board of Directors may change it without shareholder approval. When
deciding to make changes to the criteria, the Board will consider, among other
things, new or revised state laws that govern or affect the investments of
public funds. At least once a year, we survey state laws on this issue to look
for any new developments. If our survey shows that at least 20 states have
adopted laws that restrict public funds from being invested in a clearly
definable category of investments, this category is automatically added to our
social criteria list.
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
36
<PAGE> 39
SOCIAL AWARENESS FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 29.41% before
subtracting expenses of 0.56%. This resulted in a positive tracking difference
of 0.98% compared to the Fund's benchmark, the S&P 500 Index. This performance
is attributed to underweighting of investments in aerospace, oil refining and
international oil industries. Overweighting of telephone, food, business
machines and oil service industries further contributed to the positive
performance.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE SOCIAL AWARENESS FUND
AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
37
<PAGE> 40
SCIENCE &
TECHNOLOGY FUND
Fact Sheet
- -------------------------------------------------
Investment Goal GROWTH THROUGH
INVESTMENTS IN
STOCKS OF COMPANIES
WHICH BENEFIT FROM
DEVELOPMENT OF
SCIENCE AND
TECHNOLOGY
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
INVESTMENT SUB-ADVISER
T. Rowe Price
- --------------------------------------------------
PORTFOLIO MANAGER: This Fund is managed by an Investment Advisory Committee
chaired by Charles A. Morris. He has been chairman of this committee since it
was started in 1994. Mr. Morris joined T. Rowe Price in 1987 as an investment
analyst. He has been managing investments since 1991.
INVESTMENT OBJECTIVE
Seeks long-term growth of capital through investment primarily in the common
stocks and equity-related securities of companies that are expected to benefit
from the development, advancement and use of science and technology.
INVESTMENT RISK
The Science & Technology Fund invests in many small and/or new companies that
develop and sell new products or services. These products or services may fail
or become quickly outdated. Also, small and new companies have limited product
lines and do not always have the financial strength to do well in difficult
times. Because these companies are small, their stock prices will go up and down
over the short-term, but may have greater growth potential.
The securities the Fund invests in involve certain risks, including market risk
and risk associated with foreign securities. For a discussion of these risks,
see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in companies that are expected to benefit from scientific
breakthroughs and advancements in technology. We believe that stocks of
companies that develop products using new technology or benefit from this
technology may greatly increase in value. These companies are in the following
industries: computer, pharmaceutical, defense, telecommunications and
electronics.
We follow the guidelines listed below for making the primary investments for the
Fund.
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
<S> <C>
- -------------------------------------------------
Common stocks of science at least 65%
and technology companies
- -------------------------------------------------
Other equity-related up to 25%
securities of science and
technology companies
including convertible debt
securities, convertible
preferred stock
- -------------------------------------------------
Foreign securities up to 30%
- -------------------------------------------------
Illiquid and restricted up to 15%
securities**
- -------------------------------------------------
Futures and options up to 25%
- -------------------------------------------------
High quality money market up to 100%
securities***
- -------------------------------------------------
</TABLE>
* At time of purchase.
** We may invest up to 15% of the Fund's assets in illiquid securities, as long
as no more than 10% of the Fund's assets are invested in restricted
securities that are considered illiquid. Restricted securities are explained
under "Types of Investments".
*** For temporary defensive reasons, we may invest up to 100% of the Fund's
assets in cash and cash equivalents. We may do this when we think economic
and market conditions make it too risky for us to follow our general
guidelines.
Additional information
about THE FUND'S
INVESTMENTS
is provided under
"Types of Investments".
38
<PAGE> 41
SCIENCE & TECHNOLOGY FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 59.22% before
subtracting expenses of 0.94%. This represents a positive tracking difference of
30.79% compared to the Fund's benchmark, the S&P 500 Index. Most of the Fund's
absolute performance was generated during the first half of the fiscal year when
electronic technology stocks surged. In the second half of the fiscal year the
Fund achieved much of its performance relative to its benchmark when investments
in the healthcare, data services, and telecom/media industries provided
stability during a difficult period for electronic technology stocks.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE SCIENCE & TECHNOLOGY FUND
AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The Fund returns
reflect investment management fees and other Fund expenses. The Fund returns do
not reflect charges included in the annuity contract for mortality and expense
guarantees, administrative fees or surrender charges.
39
<PAGE> 42
MONEY MARKET FUND
Fact Sheet
- -------------------------------------------------
Investment Goal INCOME THROUGH
INVESTMENT IN SHORT-
TERM MONEY MARKET
SECURITIES
- -------------------------------------------------
Investment Category STABILITY
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------
PORTFOLIO MANAGER: Teresa Moro has been this Fund's Portfolio Manager and Vice
President and Investment Officer for the Series Company since 1991. From 1986 to
1991, Ms. Moro was an Assistant Vice President and Money Market Trader for the
Fund.
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
INVESTMENT RISK
The short-term money market securities that this Fund invests in are high
quality investments, posing low credit and interest rate risk. The current yield
of the Fund will generally go up or down with changes in the level of interest
rates. The Fund uses the amortized cost method to value its portfolio securities
and tries to keep its net asset value at $1.00 per share. There can be no
assurance that the net asset value will be $1.00 per share at all times.
Because the risk to the money you invest is low, the potential for profit is
also low. The Fund may experience risks including interest rate risk, market
risk, credit risk and risk associated with foreign securities. For a discussion
of these risks, see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund invests in short-term money market securities to provide you with
liquidity, protection of your investment and current income. We use 95% of the
Fund's assets to buy short-term securities that are rated within the highest
rating category for short term debt obligations by at least two nationally
recognized rating services or unrated securities of comparable investment
quality. These eligible securities must mature in 13 months or less and the Fund
must have a dollar-weighted average portfolio maturity of 90 days or less. These
practices are designed to minimize any fluctuation in the value of the Fund's
portfolio.
The investments this Fund may buy include:
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities
Certificates of deposit and other obligations of domestic banks that have
total assets in excess of $1 billion
Commercial paper sold by corporations and finance companies
Corporate debt obligations with remaining maturities of 13 months or less
Repurchase agreements
Money market instruments of foreign issuers payable in U.S. dollars (limited
to no more than 20% of the Fund's net assets)
Asset-backed securities
Loan participations
Adjustable rate securities
Illiquid and restricted securities (except for Rule 144A Securities)*
- ------------
*limited to 10% of the Fund's net assets
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
40
<PAGE> 43
TIMED OPPORTUNITY
FUND
Fact Sheet
- -------------------------------------------------
Investment Goal MAXIMUM RETURN
THROUGH INVESTMENT
IN A MIX OF STOCKS,
BONDS AND MONEY
MARKET SECURITIES
- -------------------------------------------------
Investment Category GROWTH
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
VALIC
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER: Norman Jaskol who is Vice President and Managing Director of
Investments for VALIC is the Portfolio Manager of this Fund. Mr. Jaskol has been
Vice President and Senior Investment Officer for the Series Company since 1988.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks maximum aggregate rate of return over the long-term through controlled
investment risk by adjusting its investment mix among stocks, long-term debt
securities and short-term money market securities.
INVESTMENT RISK
The Fund uses the Bankers Trust Tactical Asset Allocation Model (Model) which
allocates the Fund's assets. The Model tries to get the best return from three
types of securities. A part of that program also tries to reduce risk.
The mix of securities the Fund invests in involves market risk, credit risk,
interest rate risk and risk associated with foreign securities. For a discussion
of these risks, see "A Word About Risk" in this prospectus.
INVESTMENT STRATEGY
The Fund is an asset allocation fund that attempts to maximize returns with a
mix of stocks, bonds and money market securities. We buy and sell securities for
the Fund by changing its investment mix among stocks, intermediate and long-term
bonds and money market securities. As a result, the Fund's investments may
change often. Also, the Fund can invest 100% in just one of these market
sectors.
Unlike an index fund, which tries to increase the money you invest by matching
a specific index's performance, the Timed Opportunity Fund tries to perform
better than a blend of three market sectors measured by:
o the S&P 500 Index;
0 the Merrill Lynch Corporate and
Government Master Index; and
o the Certificate of Deposit Primary
Offering by New York City Banks,
30-Day Rate
To help us decide how to allocate the Fund's assets, we rely on the Model. The
Model analyzes many factors that affect the performance of securities that
comprise certain indexes.
Based on the Model, we intend to allocate the Fund's assets around the following
benchmarks:
<TABLE>
<S> <C>
stocks (common stock, preferred 55%
stock and convertible preferred
stock)
intermediate and long-term bonds 35%
high quality money market securities 10%
</TABLE>
As of May 31, 1996, the Fund's assets were invested as follows:
<TABLE>
<S> <C>
stocks 60.76%
intermediate and long-term bonds 27.38%
high quality money market securities 11.86%*
</TABLE>
- ------------
* After taking the contract value of futures positions into consideration. See
"Types of Investments".
Because there is no limit as to how often we may buy and sell securities for
this Fund, this can increase what is called the "portfolio turnover" rate. A
higher rate of portfolio turnover will also increase the brokerage fees and
expenses payable out of the Fund's assets. For more information about portfolio
turnover, see "About the Funds" in this prospectus.
For additional information
about THE FUND'S
INVESTMENTS see "Types
of Investments" in the
prospectus.
41
<PAGE> 44
TIMED OPPORTUNITY FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1996, the Fund had a return of 18.47% before
subtracting expenses of 0.57%. This represents a positive tracking difference of
1.42% compared to the Fund's benchmark, a blended Index of the S&P 500 Index,
the Merrill Lynch Corporate and Government Master Index and the Certificate of
Deposit Primary Offering to New York City Banks, 30 Day Rate. Very positive
stock returns more than made up for lesser returns from bonds and cash. The
Fund's asset allocations favored equity investments during this period.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE TIMED OPPORTUNITY FUND
AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE TIMED OPPORTUNITY FUND
AND THE MODEL BENCHMARK
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
* Beginning September 1, 1992 we began to use the Bankers Trust Tactical Asset
Allocation Model to manage this Fund. The performance of the Fund may be
compared to a benchmark comprised of a weighted average of three market
sectors in which the Fund invests. This benchmark is described above.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund returns reflect investment management fees and other Fund expenses.
The Fund returns do not reflect charges included in the annuity contract for
mortality and expense guarantees, administrative fees or surrender charges.
42
<PAGE> 45
TYPES OF INVESTMENTS
- --------------------------------------------------------------------------------
STOCKS -- also called equity securities
If you own a share of stock, you own a part of the company that issued it.
Companies sell stock to get the money they need to grow.
There are three types of stocks:
Common stock -- Each share of common stock represents a part of the ownership of
the company. The holder of common stock participates in the growth of the
company through increasing stock price and receipt of dividends. If the company
runs into difficulty, the stock price can decline and dividends may not be paid.
Preferred stock -- Each share of preferred stock allows the holder to get a set
dividend before the common stock shareholders receive any dividends on their
shares.
Convertible preferred stock -- A stock with a set dividend which the holder may
exchange for a certain amount of common stock.
All of the Funds except the Money Market Fund in this prospectus may invest in
common, preferred, and convertible preferred stock in accordance with their
investment strategies.
BONDS -- also called debt securities
Bonds are sold by governments on the local, state, and federal levels, and by
companies. There are many different kinds of bonds. For example, each bond issue
has specific terms. U.S. Government bonds are guaranteed to pay interest and
principal by the federal government. Revenue bonds are usually only paid from
the revenue of the issuer. An example of that would be an airport revenue bond.
Debentures are a very common type of corporate bond (a bond sold by a company).
Payment of interest and return of principal is subject to the company's ability
to pay. Convertible bonds are corporate bonds that can be exchanged for stock.
The types of bonds the Funds may invest in are as follows: U.S. Government
bonds and investment grade corporate bonds (the Capital Conservation Fund may
also invest in below investment grade bonds). For a description of investment
grade bonds see "A Word about Risk -- Market Risk" in this prospectus.
Investing in a bond is like making a loan for a fixed period of time at a fixed
interest rate. During the fixed period, the bond pays interest on a regular
basis. At the end of the fixed period, the bond matures and the investor usually
gets back the principal amount of the bond. Fixed periods to maturity are
categorized as short term (generally less than 12 months), intermediate (one to
10 years), and long term (10 years or more).
Commercial paper is a specific type of corporate or short term note. In fact,
it's very short term, being paid in less than 270 days. Most commercial paper
matures in 50 days or less.
Bonds rated Ba or B by Moody's Investors Services, Inc. (generally known as
lower-medium and lower-quality bonds) are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance with the terms of the obligation. While such bonds will likely
have some quality and protective characteristics, these are outweighed by
uncertainties or risk exposures to adverse conditions. Lower-medium and
lower-quality bonds may be more susceptible to real or perceived adverse
economic and individual corporate developments than would investment grade
bonds.
For example, a projected economic downturn or the possibility of an increase in
interest rates could cause a decline in high-yield, high-risk bond prices
because such an event might lessen the ability of highly leveraged high yield
issuers to meet their principal and interest payment obligations, meet projected
business goals, or obtain additional financing. In addition, the secondary
trading market for lower-medium and lower-quality bonds may be less liquid than
the market for investment grade bonds. This potential lack of liquidity may make
it more difficult to accurately value certain of these lower-grade portfolio
securities.
Asset-Backed Securities
Asset-backed securities are bonds or notes that are normally supported by a
specific property. If the issuer fails to pay the interest or return the
principal when the bond matures, then the issuer must give the property to the
bondholders or noteholders.
All of the Funds in this prospectus may invest in asset-backed securities.
Examples of assets supporting asset-backed securities include credit card
receivables, retail installment loans, home equity loans, auto loans, and
manufactured housing loans.
ISSUED means the
Company (ISSUER) sold it
originally to the
public.
For more information
about BONDS AND RATINGS
OF BONDS, see the Statement
of Additional Information.
For more information about
ASSET-BACKED SECURITIES
see the Statement of
Additional Information.
43
<PAGE> 46
- --------------------------------------------------------------------------------
Loan Participations
A loan participation is an investment in a loan made to a U.S. company that is
secured by the company's assets. The assets must be, at all times, worth enough
money to cover the balance due on the loan. Major national and regional banks
make loans to companies and then sell the loans to investors. These banks don't
guarantee the companies will pay the principal and interest due on the loans.
All the Funds in this prospectus may invest in loan participations.
ILLIQUID AND RESTRICTED SECURITIES
An illiquid security is one that may not be frequently traded. If it must be
sold quickly, it may have to be sold at a loss. For example, if a fund owns a
stock that is not sold very often and the fund needs to sell this stock quickly,
it may have to offer the investment at a low price for someone to buy it.
A restricted security is one that has not been registered with the SEC and
therefore can't be sold in the public market. Restricted securities do include
securities eligible for resale under Rule 144A of the Securities Act of 1933.
Some Rule 144A securities may be liquid as determined by VALIC. For more
information about Rule 144A securities see the Statement of Additional
Information. These investments can be very risky because the Fund's ability to
sell a restricted stock is very limited.
All the Funds may buy illiquid and restricted securities, but are restricted as
to how much money they may invest in them. See "Limitations" below.
ADRS
ADRs are certificates issued by a United States bank or trust company and
represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a United States bank. We consider ADRs
foreign securities.
FOREIGN CURRENCY
All of the Funds, except the Government Securities Fund and the Money Market
Fund, may buy and sell foreign currencies the same way they buy and sell other
investments. Funds buy foreign currencies when they believe the value of the
currency will increase. If it does increase, they sell the currency for a
profit. If it decreases they will experience a loss. Funds may also buy foreign
currencies to pay for foreign securities bought for the Fund.
The Funds, except the Money Market Fund and the Government Securities Fund, may
purchase forward foreign currency exchange contracts to protect against a
decline in the value of the U.S. dollar.
WHEN-ISSUED SECURITIES
When-issued securities are those investments that have been announced by the
issuer and will be on the market soon. The Funds negotiate the price with a
broker before it goes on the market. If the security ends up selling on the
market at a lower price than negotiated, the Funds may have a loss. If it sells
at a higher price, the Funds may have a profit.
All of the Funds may buy when-issued securities in accordance with their
investment strategy.
MONEY MARKET SECURITIES
All of the Funds may invest part of their assets in high quality money market
securities payable in U.S. dollars. A listing of the types of money market
securities in which the Money Market Fund may invest in is in that Fund's Fact
Sheet. A money market security is high quality when it is rated in one of the
two highest credit categories by Moody's or Standard & Poor's or another
nationally recognized rating service or if unrated, deemed high quality by
VALIC.
These high quality money market securities include:
o Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities
o Certificates of deposit and other obligations of domestic banks having total
assets in excess of $1 billion
o Commercial paper sold by corporations and finance companies
o Corporate debt obligations with remaining maturities of 13 months or less
o Repurchase agreements, money market securities of foreign issuers if payable
in U.S. dollars, asset-backed securities, loan participations, and
adjustable rate securities
For more information about
LOAN PARTICIPATIONS see
the Statement of Additional
Information.
For more information about
WHEN-ISSUED SECURITIES,
see the Statement of
Additional Information.
For more information about
ILLIQUID AND RESTRICTED
SECURITIES see the
Statement of Additional
Information.
For more information about
MONEY MARKET SECURITIES
OF FOREIGN ISSUERS the
Funds may purchase, see
the Statement of Additional
Information.
For more information about
FOREIGN CURRENCY
EXCHANGE TRANSACTIONS,
see the Statement of
Additional Information.
44
<PAGE> 47
- --------------------------------------------------------------------------------
DERIVATIVES
Unlike stocks and bonds that represent actual ownership of that stock or bond,
derivatives are investments which "derive" their value from securities issued by
a company, government, or government agency. Derivatives are bought to protect
("hedge") against a change in the price of the underlying security. There are
some investors who take higher risk ("speculate") and buy derivatives to profit
from a change in price of the underlying security. We buy derivatives to hedge
the investment portfolios and to earn additional income in order to help achieve
the Funds' objectives. We do not buy derivatives to speculate.
The Funds, except the Money Market Fund, may buy two types of derivatives:
futures and options.
Options
An option is the right to buy or sell any type of investment for a preset price
over a specific period of time.
Call Option
For example, you can buy an option from Mr. Smith that gives you the right to
buy 10 shares of stock X at $25.00 per share anytime between now and six weeks
from now. You believe stock X will be selling for more than $25.00 per share
between now and then. Mr. Smith believes it won't be. If you exercise this
option before it expires, Mr. Smith must sell you 10 shares of stock X at $25.00
per share.
On the other hand, you can sell an option to Mr. Smith that gives him the right
to buy 10 shares of stock X at $25.00 per share anytime between now and six
weeks from now. You believe stock X will be selling for less than $25.00 per
share between now and then. Mr. Smith believes it won't be. If he exercises this
option before it expires, you must sell to Mr. Smith 10 shares of stock X at
$25.00 per share.
Put Option
Or, you can buy an option from Mr. Smith that gives you the right to sell him 10
shares of X stock at $25.00 per share anytime between now and six weeks from
now. In this example, you believe stock X will be selling for less than $25.00
per share between now and then. Mr. Smith thinks it will be selling for more.
Or, you can sell an option to Mr. Smith that gives him the right to sell to you
10 shares of X stock at $25.00 per share anytime between now and six weeks from
now. In this example, he believes stock X will be selling for less than $25.00
per share between now and then.
Futures Contracts
A futures contract is an agreement between a buyer and a seller to buy or sell
an investment on a future date at a price the buyer and seller set today. The
buyer thinks the price will go up between now and then, and the seller thinks
the price will go down or they may just want to receive today's price because
they do not know which way prices are going to go.
All of the Funds, except the Money Market Fund, may enter into certain types of
futures contracts. The Funds use futures contracts as a tool to earn more money,
and to protect against rising or falling prices in the stock and bond markets.
The Funds use stock and bond futures to invest cash and cash equivalents. When
certain levels are reached the Fund will sell the futures and buy stocks or
bonds.
All of the Funds, except the Money Market Fund can invest in these types of
futures and options:
o Write exchange traded covered put and call options on securities and stock
indices.
o Purchase exchange traded put and call options on securities and stock
indices.
o Purchase and sell exchange traded financial futures contracts.
o Write covered call options and purchase exchange traded put and call options
on financial futures contracts.
o Write covered call options and purchase non-exchange traded call and put
options on financial futures contracts.
The Capital Conservation Fund, the Government Securities Fund, the International
Equities Fund, the International Government Bond Fund and the Science &
Technology Fund may write and purchase put and call options on securities and
stock indices that are not traded on an exchange.
For more information on
put and call OPTIONS AND
FINANCIAL FUTURES
CONTRACTS AND OPTIONS,
see the Statement of
Additional information.
45
<PAGE> 48
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
A repurchase agreement requires the seller of the security to buy it back at a
set price at a certain time. If a Fund enters into a repurchase agreement, it is
really making a short term loan (usually for one day to one week). The Funds may
enter into repurchase agreements only with well-established
securities dealers or banks that are members of the Federal Reserve System. All
the Funds in this prospectus may invest in repurchase agreements.
The risk in a repurchase agreement is the failure of the seller to be able to
buy the security back. If the value of the security declines, the Fund may have
to sell at a loss.
A repurchase agreement of more than 7 days duration is illiquid. A discussion of
repurchase agreements, illiquid securities and Fund limitations is contained in
the Statement of Additional Information.
A WORD ABOUT RISK
There are four basic types of investment risk you may be subject to:
Market Risk
Credit (Financial) Risk
Interest Rate Risk
Risk Associated with Foreign Securities
Generally stocks are considered to be subject to market risk, while debt
securities, such as U.S. government bonds and money market securities are
subject to interest rate risk. Other debt securities, such as corporate bonds,
involve both interest rate and credit (financial) risk. Lastly, risks associated
with foreign securities can involve political, currency and limited information
risks. Each of these four basic types of investment risks is discussed below.
Market Risk
Market risk refers to the loss of capital resulting from changes in the prices
of investments. For example, market risk occurs when expectations of lower
corporate profits in general cause the broad market of stocks to fall in price.
When this happens, even though a company is experiencing growth in profits, the
price of its stock could fall.
Credit (Financial) Risk
Credit risk refers to the risk that the issuer of a bond may default or be
unable to pay interest or principal due on a bond.
To help the Funds' Investment Adviser or
Sub-advisers decide which U.S. corporate and foreign bonds to buy, they rely on
Moody's and Standard & Poor's (two nationally recognized bond rating services),
and on VALIC's own research. This research lowers the risk of buying a bond of a
company that may not pay the interest and principal on the bond.
All of the Funds in this prospectus may buy bonds that are rated as investment
grade. There are four different levels of investment grade, from AAA to BBB; see
Description of Corporate Bond Ratings in the Statement of Additional
Information. All bonds with these ratings are considered to have adequate
ability to pay interest and principal.
All of the Funds in this prospectus may buy bonds issued by the U.S. Government.
The U.S. Government guarantees it will always pay principal and interest.
Interest Rate Risk
Interest rate risk refers to the risk that fluctuations in interest rates may
affect the value of interest paying securities in a Fund. If a fund sells a bond
before it matures, it may lose money, even if the bond is guaranteed by the U.S.
Government. Say, for example, a fund bought an intermediate government bond last
year that was paying interest at a fixed rate of 6%. Now, intermediate
government bonds are paying interest at a rate of 7%. If the fund wants to sell
the bond paying 6%, it will have to sell it at a discount (and realize a loss)
to attract buyers because they can buy new bonds paying 7% interest.
46
<PAGE> 49
- --------------------------------------------------------------------------------
Risk Associated with Foreign Securities
Each of the Funds may, subject to limits stated in each Fund's Fact Sheet,
invest in foreign securities including ADRs. A foreign security is a security
issued by an entity domiciled or incorporated outside of the U.S.
There are three principal risks of owning foreign securities:
Political risk -- the chance of a change in government and the assets of the
company being taken away.
Currency risk -- a change in the value of the foreign currency compared to
the dollar. If the foreign currency declines in value, your investment valued in
U.S. dollars will decline even if the value of the foreign stock or bond is
unchanged.
Limited information -- foreign companies generally are not regulated to the
degree U.S. companies are and may not report all of the information we are used
to getting. To minimize taxes they may not report some income or they may report
higher expenses.
INVESTMENT PRACTICES
Limitations
Each Fund has limitations on the percentage of its assets that it may allocate
to certain investments. These limits are determined by the Fund's investment
objectives and risk level.
For example, the Stock Index Fund's investment goal is growth through
investments tracking the S&P 500 Index, an index that includes stocks of
domestic and foreign companies. As a result, this Fund may invest no more than
35% of its assets in stocks that are not part of the S&P 500 Index.
Some Funds are restricted from buying certain types of investments altogether.
For example, the Money Market Fund may not invest in futures and options.
Each Fund's limitations are shown in the Investment Strategy section of its Fact
Sheet.
Lending Portfolio Securities
Each Fund except the Growth Fund and the Science & Technology Fund may lend up
to 30% of its total assets to broker-dealers and other financial institutions to
earn more money for the Fund. The Growth Fund and the Science & Technology Fund
may lend up to 33 1/3% of their net assets. Assets are placed in a special
account by the borrower to cover the market value of the securities on loan. The
assets serving as collateral for the loan are valued daily.
A risk of lending portfolio investments is that there may be a delay in the Fund
getting its investments back when a loaned security is sold.
The Funds will only make loans to broker-dealers and other financial
institutions that VALIC considers to be creditworthy.
For more information about
LENDING PORTFOLIO
SECURITIES, see the
Statement of Additional
Information.
For more information about
FOREIGN SECURITIES, see
the Statement of Additional
Information.
For more information about
INVESTMENT LIMITATIONS,
see the Statement of
Additional Information.
47
<PAGE> 50
ABOUT THE SERIES COMPANY
- --------------------------------------------------------------------------------
SERIES COMPANY SHARES
The Series Company is an open-end mutual fund and may offer shares of the Funds
for sale at any time. However, the Series Company offers shares of the Funds
only to registered and unregistered separate accounts of VALIC and its
affiliates, or employee thrift plans maintained by VALIC or American General
Corporation.
As a participant, you do not directly buy shares of the Funds that make up the
Series Company. Instead, you buy units in either a registered or unregistered
separate account of VALIC or of its affiliates. When you buy these units, you
specify which Funds you want the separate account to invest your money in. The
separate account, in turn, buys the shares of the Funds according to your
instructions. See your contract prospectus for more information on the separate
account associated with your contract.
When the separate accounts buy, sell, or transfer shares of the Funds, they do
not pay any charges related to these transactions.
As distributor, VAMCO sells shares of the Funds to the separate accounts. VAMCO
is a wholly owned subsidiary of VALIC and acts as a distributor under an
agreement it has with the Series Company. VAMCO does not charge the Series
Company or the separate accounts for its services. Also, VAMCO is not required
to sell a minimum number of shares to the separate accounts.
VAMCO sends orders to buy, sell or transfer shares to the Series Company's
transfer agent daily. The price of any share affected by the request is the next
net asset value calculated after order is received.
For more information on how to participate, see your contract prospectus.
NET ASSET VALUE OF THE SERIES
COMPANY SHARES
How Net Asset Value is Calculated
Here is how the Series Company calculates the net asset value of each Fund's
shares:
Step 1:
<TABLE>
<S> <C>
Total value of the
Fund's assets*
(including money owed to
the fund but not yet
collected) = The Fund's Total
- -- The Fund's liabilities Net Asset Value
(including money owed by
the Fund but not yet
paid)
Step 2:
The Fund's total net
asset value (from
Step 1) NET ASSET VALUE
- -- The total number of the = PER SHARE
Fund's shares that are
outstanding.
</TABLE>
* The Series Company uses the fair market value of Fund's investments to
calculate the Fund's total value. However, it uses the amortized cost method
to determine the values of all the Money Market Fund's investments and of any
other Fund's short-term securities maturing within 60 days. The amortized cost
method approximates fair market value.
If a Fund's portfolio includes investments that are not sold often or are not
sold on any exchanges, the Series Company's Board of Directors or its delegate
will, in good faith, estimate fair market value of these investments.
When Net Asset Value is Calculated
The Series Company calculates the net asset value of each Fund's shares at
approximately 4pm EST each day the New York Stock Exchange is open, with a few
exceptions. (The New York Stock Exchange is open Monday through Friday but is
closed on certain federal and other holidays.)
In addition, the Series Company will not calculate net asset values on the
following days even when the New York Stock Exchange is open:
o the Friday after Thanksgiving; or
o when Christmas falls on a Thursday, the Friday after Christmas; and
o when Christmas falls on a Tuesday, the Monday before Christmas.
THE VARIABLE ANNUITY
MARKETING COMPANY
(VAMCO) acts as the
Series Company's
distributor.
48
<PAGE> 51
- --------------------------------------------------------------------------------
The separate accounts can buy, sell, and transfer shares in the Funds only on
days that the Series Company calculates the net asset value of each Fund's
shares. Through VAMCO, the separate accounts send orders to the Series Company
to buy, sell, or transfer shares based on requests they receive from
participants.
DIVIDENDS AND CAPITAL GAINS
Dividends from Net Investment Income
Net investment income generally includes stock dividends received and bond
interest earned less expenses paid by the Fund. Each Fund pays dividends from
net investment income occasionally. Dividends from net investment income are
automatically reinvested for you into additional shares of the Fund. The Money
Market Fund pays dividends daily and all other Funds pay dividends once a month.
Distributions from Capital Gains
When a Fund sells a security for more than it paid for that security, a capital
gain results. Once a year, each Fund pays distributions from capital gains, as
long as total capital gains exceed total capital losses. Distributions from
capital gains are automatically reinvested for you into additional shares of the
Fund.
DIVERSIFICATION
Each Fund's diversification policy limits the amount that the Fund may invest in
certain securities. Each Fund's diversification policy is also designed to
comply with the diversification requirements of the Internal Revenue Code (the
"Code") as well as the Investment Company Act of 1940 ("the 1940 Act").
All of the Funds except International Government Bond Fund, Growth Fund and
Science & Technology Fund may invest up to 5% of their total assets in a single
issuer. An issuer, or "company" does not include the U.S. Government or agencies
of the U.S. Government according to the Code and the 1940 Act. For
diversification purposes, repurchase agreements are considered to be issued by
the U.S. Government if backed by U.S. Government securities. Also, these Funds
may not own more than 10% of the voting securities of a company.
The Growth Fund and the Science & Technology Fund may invest more than 5% of
their total assets in one company and more than 10% of their total assets in the
voting securities of one company as long as the total of these investments does
not exceed 25% of total assets.
The International Government Bond Fund is "non-diversified" under the 1940 Act.
This means it can invest more of its assets in fewer issuers and for this reason
may be riskier than the other Funds. This Fund may invest up to 25% of its total
assets in a single issuer as long as those investments representing over 5% of
total assets in one issuer do not exceed 50% of total assets of the Fund. The
remaining 50% of total assets may not include more than 5% of total assets in
one issuer.
Also, the Money Market Fund may not invest more than 5% of its total assets in
any company rated as "second tier" by a national rating service (as described in
Types of Investments).
49
<PAGE> 52
- --------------------------------------------------------------------------------
TAXES
By paying out all earnings as described in the Dividends and Capital Gains
section above and by complying with the diversification requirements under the
Code, each Fund expects to qualify as a RIC under Subchapter M of the Code. By
qualifying as a RIC the Fund will not have to pay federal income taxes.
VOTING RIGHTS
One Vote Per Share
Each outstanding share has one vote on all matters that shareholders vote on. As
a participant, you vote on these matters indirectly by voting your units. The
way you vote your units as a participant depends on your contract. See your
contract prospectus for specific details.
When a matter comes up for vote, the separate account will vote its shares in
the same proportion as the unit votes it actually receives. If VALIC determines
that it may, under the current interpretation of the 1940 Act, vote shares
directly instead of voting through its units, it may decide to vote that way.
VALIC owns more than 25% of the Growth & Income Fund. As a result, VALIC may
have a "controlling interest" in this Fund as this term is defined in the Act.
VALIC has the same voting and other rights as any other participant.
Shareholder Meetings
Maryland law does not require the Series Company to hold regular, annual
shareholder meetings. But, the Series Company must hold shareholder meetings on
the following matters:
o to approve certain agreements as required by the 1940 Act;
o to change fundamental investment objectives in the Diversification section
and to change fundamental investment restrictions, above;
o to fill vacancies on the Series Company's Board of Directors if the
shareholders have elected less than a majority of the Directors.
Shareholders may call a meeting to remove a Director from the Board if at least
10% of the outstanding shares vote to have this meeting. Then, at the meeting,
at least 2/3 of all the outstanding shares of all the Funds must vote in favor
of removing the Director.
Shareholder Communications
The Series Company will assist in shareholder communications.
REPORTS
The Series Company sends Annual Reports containing audited financial statements,
Semi-Annual Reports containing unaudited financial statements, and proxy
materials to Contract owners or participants. Also, the Series Company includes
an Annual Report with each Statement of Additional Information it sends out.
If you have any questions about the Annual or Semi-Annual Reports, call or write
to the Series Company at the phone number/address found on the cover page of
this prospectus.
LEGAL MATTERS
Cynthia A. Toles, Senior Associate, General Counsel and Secretary of VALIC,
reviews the legal matters regarding the investments offered in this prospectus
and the federal laws and regulations related to their issue and sale.
See the Statement of
Additional information and
your contract prospectus
for further tax discussions.
You should also CONSULT
YOUR TAX ADVISOR before
investing.
50
<PAGE> 53
Please tear off, complete and return the form below to Suite A3-01,
Communications Unit, The Variable Annuity Life Insurance Company, 2929 Allen
Parkway, Houston, Texas 77019 to order a Statement of Additional Information for
the Company. A Statement of Additional Information may also be ordered by
calling (800)-44-VALIC.
- --------------------------------------------------------------------------------
Please send me a free copy of the Statement of Additional Information for
American General Series Portfolio Company.
<TABLE>
<S> <C>
Name:
----------------------------------------------- GA. #:
-------------------------------------------
Address:
-------------------------------------------- Policy #:
----------------------------------------
Social Security Number:
-----------------------------
</TABLE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
General Information and History..................... 2
Additional Information Regarding Certain Funds...... 3
International Equities Fund..................... 3
Government Securities Fund...................... 3
Timed Opportunity Fund.......................... 4
Performance and Yield Information............... 5
Fundamental Investment Restrictions................. 8
Fundamental Investment Restrictions
Applicable to All Funds....................... 8
MMF Investment Restrictions..................... 9
TOF, CCF, GSF, SIF, IEF MIF and SCIF Investment
Restrictions.................................. 9
GIF Investment Restrictions..................... 9
GF and STF Investment Restrictions.............. 9
SAF Investment Restrictions..................... 10
IGBF Investment Restrictions.................... 10
Investment Practices................................ 11
Repurchase Agreements........................... 11
Lending Portfolio Securities.................... 11
Foreign Securities.............................. 12
Foreign Currency Exchange Transactions.......... 13
When Issued Securities.......................... 13
Debt Securities................................. 13
Warrants........................................ 14
Eurodollar Obligations.......................... 14
Asset-Backed Securities......................... 14
Mortgage-Backed Securities...................... 15
Loan Participations............................. 15
Adjustable Rate Securities...................... 16
Illiquid Securities............................. 16
Rule 144A Securities............................ 16
<CAPTION>
PAGE
---
<S> <C>
Options on Securities and Securities Indices.... 17
Writing Covered Call and Put Options and
Purchasing Call and Put Options............... 18
Financial Futures Contracts..................... 20
Options on Financial Futures Contracts.......... 22
Certain Additional Risks of Options and
Financial Futures Contracts................... 22
Limitations..................................... 24
Money Market Securities of Foreign Issuers...... 24
Investment Adviser.................................. 25
Investment Sub-Advisers............................. 27
Portfolio Transactions and Brokerage................ 29
Offering, Purchase, and Redemption of Fund Shares... 32
Determination of Net Asset Value.................... 33
Calculation of Yield for the Money Market Fund...... 34
Accounting and Tax Treatment........................ 35
Calls and Puts.................................. 35
Financial Futures Contracts..................... 35
Subchapter M of the Internal Revenue Code
of 1986....................................... 35
Section 817(h) of the Code...................... 36
Other Information................................... 37
Shareholder Reports............................. 37
Voting and Other Rights......................... 37
Custody of Assets............................... 37
Index Funds..................................... 38
Description of Corporate Bond Ratings........... 39
Description of Commercial Paper Ratings......... 40
Independent Auditors............................ 40
Directors and Officers.............................. 41
Financial Statements................................ 44
</TABLE>
51
<PAGE> 54
INVESTMENT ADVISER:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
INVESTMENT SUB-ADVISERS:
Bankers Trust Company
130 Liberty St.
New York, New York 10006
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Value Line, Inc.
220 East 42nd Street
New York, New York 10017-5981
DISTRIBUTOR:
The Variable Annuity Marketing Company
2929 Allen Parkway
Houston, Texas 77019
CUSTODIAN:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS:
Ernst & Young LLP
1221 McKinney
Houston, Texas 77010
TRANSFER AND SHAREHOLDER SERVICE AGENT:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
DIRECTORS AND OFFICERS
<TABLE>
<S> <C> <C>
DIRECTORS OFFICERS
Stephen D. Bickel Stephen D. Bickel Chairman and President
Thomas L. West, Jr.
Peter V. Tuters Thomas L. West, Jr. Executive Vice President
Joe C. Osborne
Norman Hackerman Norman Jaskol Vice President and Senior
John William Lancaster Investment Officer
F. Robert Paulsen
R. Miller Upton John W. Mossbarger Vice President and
Ben H. Love Investment Officer
Teresa S. Moro Vice President and
Investment Officer
William Trimbur, Jr. Vice President and
Investment Officer
Leon A. Olver Vice President and
Investment Officer
Brent C. Nelson Vice President
Cynthia A. Toles General Counsel and Secretary
Gregory R. Seward Treasurer and Controller
Betty J. North Assistant Vice President
David H. den Boer Assistant Secretary
Debra A. Yeang Assistant Treasurer
Kay Kramer Assistant Controller
</TABLE>
PRINTED MATTER
PRINTED IN U.S.A. [PRINTED ON RECYCLED PAPER]
VA 9017 VER 10/96
<PAGE> 55
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
STOCK INDEX FUND
MIDCAP INDEX FUND
SMALL CAP INDEX FUND
INTERNATIONAL EQUITIES FUND
GROWTH FUND
GROWTH & INCOME FUND
CAPITAL CONSERVATION FUND
GOVERNMENT SECURITIES FUND
INTERNATIONAL GOVERNMENT SECURITIES FUND
SOCIAL AWARENESS FUND
SCIENCE & TECHNOLOGY FUND
MONEY MARKET FUND
TIMED OPPORTUNITY FUND
-----------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------------------------------------------
FORM N-1A PART B
OCTOBER 1, 1996
This Statement of Additional Information is not a prospectus and contains
information in addition to that in the Prospectus for American General Series
Portfolio Company (the "Company"). It should be read in conjunction with the
Prospectus. The Statement of Additional Information and the related Prospectus
are both dated October 1, 1996. For an individual interested in a variable
annuity contract issued by The Variable Annuity Life Insurance Company
("VALIC"), a Prospectus may be obtained by calling (713) 831-5069 or writing the
Company or The Variable Annuity Marketing Company ("VAMCO") at 2929 Allen
Parkway, Houston, Texas 77019. All inquiries regarding variable annuity
contracts issued by American General Life Insurance Company ("AGL"), the
successor to California-Western States Life Insurance Company ("Cal-West"),
should be directed in writing to AGL's Annuity Administration Department, 2727-A
Allen Parkway, Houston, Texas 77019-2191 or by calling (713) 831-3102. Shares in
the Company are available to the public only through the purchase of certain
variable annuity contracts issued and employee thrift plans maintained by VALIC
and its affiliates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
General Information and History.................. 2
Additional Information Regarding Certain Funds... 3
International Equities Fund.................... 3
Government Securities Fund..................... 3
Timed Opportunity Fund......................... 4
Performance and Yield Information.............. 5
Fundamental Investment Restrictions............ 8
Fundamental Investment Restrictions Applicable
to All Funds................................. 8
MMF Investment Restrictions.................... 9
TOF, CCF, GSF, SIF, IEF, MIF and SCIF
Investment Restrictions...................... 9
GIF Investment Restrictions.................... 9
GF and STF Investment Restrictions............. 9
SAF Investment Restrictions.................... 10
IGBF Investment Restrictions................... 10
Investment Practices............................. 11
Repurchase Agreements.......................... 11
Lending Portfolio Securities................... 11
Foreign Securities............................. 12
Foreign Currency Exchange Transactions......... 13
When Issued Securities......................... 13
Debt Securities................................ 13
Warrants....................................... 14
Eurodollar Obligations......................... 14
Asset-Backed Securities........................ 14
Mortgage-Backed Securities..................... 15
Loan Participations............................ 15
Adjustable Rate Securities..................... 16
Illiquid Securities............................ 16
Rule 144A Securities........................... 16
<CAPTION>
Page
---
<S> <C>
Options on Securities and Securities Indices... 17
Writing Covered Call and Put Options and
Purchasing Call and Put Options.............. 18
Financial Futures Contracts.................... 20
Options on Financial Futures Contracts......... 22
Certain Additional Risks of Options and
Financial Futures Contracts.................. 22
Limitations.................................... 24
Money Market Securities of Foreign Issuers..... 24
Investment Adviser............................... 25
Investment Sub-Advisers.......................... 27
Portfolio Transactions and Brokerage............. 29
Offering, Purchase, and Redemption of Fund
Shares......................................... 32
Determination of Net Asset Value................. 33
Calculation of Yield for the Money Market Fund... 34
Accounting and Tax Treatment..................... 35
Calls and Puts................................. 35
Financial Futures Contracts.................... 35
Subchapter M of the Internal Revenue Code of
1986......................................... 35
Section 817(h) of the Code..................... 36
Other Information................................ 37
Shareholder Reports............................ 37
Voting and Other Rights........................ 37
Custody of Assets.............................. 37
Index Funds.................................... 38
Description of Corporate Bond Ratings.......... 39
Description of Commercial Paper Ratings........ 40
Independent Auditors........................... 40
Directors and Officers........................... 41
Financial Statements............................. 44
</TABLE>
VA 9017-1, REV. 10/96
<PAGE> 56
GENERAL INFORMATION AND HISTORY
American General Series Portfolio Company (the "Company") was incorporated
in Maryland on December 7, 1984, by VALIC and is registered under the Investment
Company Act of 1940, as amended, (the "1940 Act") as an open-end, management
investment company. Pursuant to Investment Advisory Agreements with the Company
and subject to the authority of the Company's Board of Directors, VALIC serves
as the Company's investment adviser and conducts the business and affairs of the
Company. Additionally, VALIC has engaged an investment sub-adviser to provide
investment sub-advisory services for the Stock Index Fund, the MidCap Index
Fund, the Small Cap Index Fund, the Growth Fund, the Growth & Income Fund, and
the Science & Technology Fund, subject to VALIC's control, direction and
supervision. The Company consists of thirteen separate investment portfolios
(hereinafter collectively referred to as the "Funds" or individually as a
"Fund"), each of which is, in effect, a separate mutual fund issuing its own
separate class of common stock. The Company issues shares of common stock of
each Fund to registered and unregistered separate accounts of VALIC and its
affiliates to fund variable annuity contracts (the "Contracts"). Currently the
Company acts as an investment vehicle for assets of VALIC's Separate Account A,
and AGL Separate Account A and Separate Account D, each of which is a unit
investment trust registered as an investment company under the 1940 Act, and AGL
Separate Account B, a unit investment trust that is exempt from registration as
an investment company under the 1940 Act. Additionally, retirement plans
maintained by VALIC and American General Corporation may own shares of certain
of the Funds.
The Company and VALIC have Codes of Ethics which establish for their
officers, directors and certain employees procedures and restrictions as to
those individual's personal investment trading activities.
<TABLE>
<CAPTION>
DATE OF DATE SEED DATE
INCORPORATION MONEY WAS OPERATIONS
OR BOARD FIRST COMMENCED (BY
APPROVAL PROVIDED ISSUANCE OR
FOR TO THE AVAILABILITY
NAME OF FUND ORGANIZATION COMPANY OF SHARES)
- -------------------------------------- ------------ --------- ----------
<S> <C> <C> <C>
Stock Index Fund ("SIF").............. 2-02-87 4-20-87 4-20-87
MidCap Index Fund ("MIF")............. 3-16-82 8-30-82 10-13-82
Small Cap Index Fund ("SCIF")......... 10-28-91 5-01-92 5-01-92
International Equities Fund ("IEF")... 7-18-89 9-29-89 10-02-89
Growth Fund ("GF").................... 1-25-94 4-29-94 4-29-94
Growth & Income Fund ("GIF").......... 1-25-94 4-29-94 4-29-94
Science & Technology Fund ("STF")..... 12-17-93 4-29-94 4-29-94
Social Awareness Fund ("SAF")......... 7-18-89 9-29-89 10-02-89
Timed Opportunity Fund ("TOF")........ 2-22-83 8-08-83 9-06-83
Capital Conservation Fund ("CCF")..... 12-07-84 12-16-85 01-16-86
Government Securities Fund ("GSF").... 12-07-84 12-16-85 01-16-86
International Government Bond Fund
("IGBF")............................ 7-30-91 10-01-91 10-01-91
Money Market Fund ("MMF")............. 12-07-84 12-16-85 01-16-86
</TABLE>
The MidCap Index Fund and the Timed Opportunity Fund are the successors to
Capital Accumulation Fund, Inc. and Timed Opportunity Fund, Inc., respectively,
which were separately registered open-end diversified management investment
companies under the 1940 Act, pursuant to a reorganization entered into on
September 25, 1985. The MidCap Index Fund effected a change in its name and
investment objective, investment program and one of its restrictions as of
October 1, 1991. In addition, the Quality Growth Fund was combined into the
Stock Index Fund, by means of a reclassification of its shares, effective May 1,
1992.
2
<PAGE> 57
ADDITIONAL INFORMATION REGARDING CERTAIN FUNDS
The following disclosures supplement disclosures set forth in the Prospectus
and do not, standing alone, present a complete explanation of the matters
disclosed. Please refer also to the Prospectus for a complete presentation of
these matters.
INTERNATIONAL EQUITIES FUND
The International Equities Fund intends to provide long-term growth of
capital through investments primarily in a diversified portfolio of equity and
equity-related securities of foreign issuers that, as a group, are expected to
provide investment results closely corresponding to the Morgan Stanley's Capital
International, Europe, Australia and Far East Index ("EAFE Index"). The EAFE
Index, which commenced in 1969, is an unmanaged capitalization weighted stock
index consisting of more than 1000 companies operating in 20 countries in
Europe, Australia, and the Far East. The EAFE Index is a well known measure for
international stock performance. The EAFE Index does not reflect charges, fees,
and commissions applicable to the Fund.
The weighted breakdown by country of the EAFE Index (as of May 31, 1996) is
set forth below:
EAFE INDEX BREAKDOWN BY COUNTRY
<TABLE>
<CAPTION>
COUNTRY WEIGHT
------------------------------------------------------------------------- ------
<C> <S> <C>
1 AUSTRALIA................................................................ 2.83
2 AUSTRIA.................................................................. 0.45
3 BELGIUM.................................................................. 1.12
4 DENMARK.................................................................. 0.76
5 FINLAND.................................................................. 0.53
6 FRANCE................................................................... 6.39
7 GERMANY.................................................................. 6.65
8 HONG KONG................................................................ 3.35
9 IRELAND.................................................................. 0.30
10 ITALY.................................................................... 2.74
11 JAPAN.................................................................... 40.23
12 MALAYSIA................................................................. 2.43
13 NETHERLANDS.............................................................. 4.17
14 NEW ZEALAND.............................................................. 0.36
15 NORWAY................................................................... 0.49
16 SINGAPORE................................................................ 1.46
17 SPAIN.................................................................... 1.83
18 SWEDEN................................................................... 2.15
19 SWITZERLAND.............................................................. 5.56
20 UNITED KINGDOM........................................................... 16.20
</TABLE>
GOVERNMENT SECURITIES FUND
The Government Securities Fund may invest in intermediate and long-term debt
instruments issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities in which the Fund may invest
include: (1) U.S. Treasury bills, notes, and bonds; (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the U.S. Government
(e.g., Government National Mortgage Association ("GNMA") Certificates); (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury (e.g., debt of each of the Federal Home Loan banks); (c)
the discretionary authority of the U.S. Government or GNMA to purchase certain
financial obligations of the agency or instrumentality (e.g., Federal National
Mortgage Association); or (d) the credit of the issuing agency or
instrumentality (e.g., Federal Land Banks, Farmers, Farmers Home Administration
or Student Loan Marketing Association); and (3) collateralized mortgage
obligations ("CMOs") that are issued by governmental or non-governmental
entities and collateralized by U.S. Treasury Obligations or by U.S. Government
agency or instrumentality securities. No assurance can be
3
<PAGE> 58
given that the U.S. Government will provide support to such U.S. Government
sponsored agencies or instrumentalities in the future, since it is not required
to do so by law.
TIMED OPPORTUNITY FUND
The chart below indicates the historic allocations, from June 1983 through
June 1996, based on the investment benchmarks of 55% in equity securities, 35%
in intermediate or long-term debt securities and 10% in money market or short
term debt instruments, as recommended by the Bankers Trust Company Tactical
Asset Allocation Model. The Bankers Trust Company Tactical Asset Allocation
Model is currently used in connection with the management of over $1.4 billion
of assets.
[CHART]
4
<PAGE> 59
PERFORMANCE AND YIELD INFORMATION
The Series Company may compute the total return of a Fund ("Average Annual
Total Return"), total return of a Fund before expenses ("Portfolio Total
Return"), and compare Portfolio Total Return to the total return of the Fund's
benchmark index ("Index Total Return"). The difference between Portfolio Total
Return and Index Total Return is referred to as "tracking difference." Tracking
difference represents the amount that the return on the investment portfolio
(which results from the Adviser's investment selection) deviates from its
benchmark's Index Total Return. Fund performance does not reflect contract
charges or separate account charges which will reduce Fund values which are
available to Participants. Information about Separate Account performance is
available in the applicable contract prospectus.
AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for periods of 1, 3, 5, and 10 years,
or, since inception of the Fund, are calculated according to the following
formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C>
P = A hypothetical initial Purchase Payment of $1,000.
T = Average annual total return.
n = Number of years.
ERV = Ending redeemable value of a hypothetical $1,000 Purchase Payment made at the
beginning of the first period.
</TABLE>
Average Annual Total Return reflects the deduction of Fund expenses and
assumes that all dividends and distributions are reinvested when paid.
PORTFOLIO TOTAL RETURN
Portfolio Total Return quotations for periods of 1, 3, 5, and 10 years, or,
since inception are calculated by adding to the Average Total Annual Return
(described above) the expenses of the Fund. Expenses of the Fund are calculated
at the end of each Fund's fiscal year and are expressed as a percentage of
average net assets. Expenses as a percentage of average net assets are prorated
equally over the months in the fiscal year in which the ratio was calculated
when determining expenses for periods crossing over fiscal years.
INDEX TOTAL RETURN
Index Total Return quotations for periods 1, 3, 5, and 10 years, or, since
inception, are calculated by determining the percentage change in value of the
benchmark index over the applicable period including reinvestment of dividends
and interest as applicable. Index Total Return is calculated according to the
formula described above for Average Annual Total Return, however it does not
include an expense component; if an expense component were included the return
would be lower.
SEVEN DAY YIELDS
The Money Market Fund may quote a Seven Day Current Yield and a Seven Day
Effective Yield. The Seven Day Current Yield is calculated by determining the
total return for the current seven day period ("based period return") and
annualizing the base period return by dividing by seven days, then multiplying
the result by 365 days. The Seven Day Effective Yield annualizes the base period
return while compounding weekly the base period return according to the
following formula:
Seven Day Effective Yield = [(Base Period Return + 1)365/7 - 1]
5
<PAGE> 60
30 DAY CURRENT YIELD
The Capital Conservation Fund, Government Securities Fund, and the
International Government Bond Fund may quote a 30 Day Current Yield which is
determined based on the current 30 day period, according to the following
standardized formula:
Yield = 2[(1 + NII )6 - 1]
-------
S x NAV
Where:
<TABLE>
<S> <C>
NII = Net investment income (interest income, plus dividend income, plus
other income, less fund expenses.
S = Average daily shares outstanding.
NAV = Net asset value per share on the last day of the period.
</TABLE>
6
<PAGE> 61
PERFORMANCE RETURNS
MAY 31, 1996
<TABLE>
<CAPTION>
PERFORMANCE RETURNS
-------------------------------------------------
10 YEAR
INCEPTION OR SINCE
DATE 1 YEAR 3 YEAR 5 YEAR INCEPTION (A)
----------- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
STOCK INDEX FUND: 04/20/87
Average Annual Total Return 28.17% 16.66% 14.00% 11.95%
Portfolio Total Return 28.52% 17.03% 14.41% 12.56%
S & P 500 28.43% 17.17% 14.54% 13.07%
MIDCAP INDEX FUND: 10/13/82
Average Annual Total Return 28.10% 14.50% 13.06% 8.53%
Portfolio Total Return 28.51% 14.94% 13.52% 9.15%
S & P MidCap 400 28.45% 14.88% 15.80% 14.73%
SMALL CAP INDEX FUND: 05/01/92
Average Annual Total Return 34.50% 16.23% N/A 15.82%
Portfolio Total Return 34.91% 16.65% N/A 16.25%
Russell 2000 35.89% 17.67% N/A 18.06%
INTERNATIONAL EQUITIES FUND: 10/02/89
Average Annual Total Return 11.14% 10.04% 7.71% 3.93%
Portfolio Total Return 11.56% 10.49% 8.21% 4.39%
Morgan Stanley Capital International EAFE 10.67% 9.67% 8.21% 4.10%
GROWTH FUND: 04/29/94
Average Annual Total Return 47.46% N/A N/A 28.63%
Portfolio Total Return 48.29% N/A N/A 29.51%
S & P 500 28.43% N/A N/A 24.28%
GROWTH & INCOME FUND: 04/29/94
Average Annual Total Return 34.85% N/A N/A 21.82%
Portfolio Total Return 35.64% N/A N/A 22.65%
S & P 500 28.43% N/A N/A 24.28%
SCIENCE & TECHNOLOGY FUND: 04/29/94
Average Annual Total Return 58.28% N/A N/A 49.28%
Portfolio Total Return 59.22% N/A N/A 50.25%
S & P 500 28.43% N/A N/A 24.28%
SOCIAL AWARENESS FUND: 10/02/89
Average Annual Total Return 28.85% 15.79% 13.02% 12.18%
Portfolio Total Return 29.41% 16.37% 13.53% 12.66%
S & P 500 28.43% 17.17% 14.54% 13.59%
TIMED OPPORTUNITY FUND: 09/06/83
Average Annual Total Return 17.90% 10.52% 8.25% 8.62%
Portfolio Total Return 18.47% 11.10% 8.92% 9.47%
Benchmark (B) 17.05% 11.71% 11.30% 11.49%
CAPITAL CONSERVATION FUND: 01/16/86
Average Annual Total Return 3.41% 4.55% 8.10% 6.79%
Portfolio Total Return 3.98% 5.13% 8.74% 7.65%
Merrill Lynch Corporate Master Index 4.57% 6.39% 9.18% 9.32%
GOVERNMENT SECURITIES FUND: 01/06/86
Average Annual Total Return 3.32% 4.26% 7.51% 6.90%
Portfolio Total Return 3.88% 4.84% 8.14% 7.76%
Lehman Brothers U.S. Treasury Index 3.99% 5.28% 7.95% 8.35%
INTERNATIONAL GOVERNMENT BOND FUND: 10/01/91
Average Annual Total Return -1.91% 7.88% N/A 10.13%
Portfolio Total Return -1.35% 8.42% N/A 10.53%
Salomon Brothers Non-U.S. Government Bond Index -2.01% 8.51% N/A 11.13%
MONEY MARKET FUND: 01/16/86
Average Annual Total Return 5.26% 4.32% 4.05% 5.50%
Portfolio Total Return 5.83% 4.89% 4.65% 6.28%
30-Day Certificate of Deposit Primary Offering Rate
by New York City Banks 4.72% 3.96% 3.80% 5.50%
</TABLE>
- ------------
(A) Amounts shown are annual returns for ten years or since inception if the
fund has been in existence for less than ten years.
(B) Benchmark consists of 55% S&P 500 Index, 35% Merrill Lynch Corporate &
Government Master Index, and 10% NYC 30 Day Primary CD Rate.
7
<PAGE> 62
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Funds have each adopted certain fundamental investment restrictions
which, unlike the other investment objective(s), policies, and investment
program of each Fund, may only be changed for each Fund with the consent of a
majority of the outstanding voting securities of the particular Fund. The 1940
Act defines such a majority as the lesser of (1) 67% or more of the voting
securities present in person or by proxy at a shareholders' meeting, if the
holders of more than 50% of the outstanding voting securities of a Fund are
present or represented by proxy, or (2) more than 50% of a Fund's outstanding
voting securities.
FUNDAMENTAL INVESTMENT RESTRICTIONS
APPLICABLE TO ALL FUNDS
All the Funds, except the International Government Bond Fund, the Growth
Fund and the Science & Technology Fund have adopted each of the following
fundamental investment restrictions. The percentage limitations referenced in
some of the following fundamental investment restrictions are to be determined
at the time of purchase. The International Government Bond Fund has adopted
fundamental investment restrictions 2-10 below. (The Growth Fund and the Science
& Technology Fund have adopted investment restrictions 3, 6 and 7 as
non-fundamental operating policies. In addition, as a non-fundamental operating
policy, the Growth Fund and the Science & Technology Fund will not invest in
oil, gas or mineral exploration programs.) Such restrictions provide that no
Fund may:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer or purchase more than 10% of the outstanding
voting securities, or any other class of securities, of any one issuer. For
purposes of this restriction, all outstanding debt securities of an issuer
are considered as one class, and all preferred stock of an issuer is
considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities. As a matter of operating policy, the Company will not
consider repurchase agreements subject to the 5% limitation if the
collateral underlying the repurchase agreements are U.S. Government
securities.
2. (a) Issue senior securities except in connection with investments in
options and futures contracts; or (b) borrow money except as a temporary
measure for extraordinary or emergency purposes (such as to meet redemption
requests which might otherwise require the disadvantageous sale of portfolio
securities) and then not in excess of 5% of the Fund's total assets. No Fund
may mortgage, pledge or hypothecate more than 5% of the value of its total
assets, and then only to secure borrowings made under this restriction.
3. Acquire more than 3% of the voting securities of any single other
investment company or invest more than 10% of (the value of) the Fund's
assets in the securities of other investment companies (5% in the case of
each such other company). Additionally, investment company securities will
only be purchased on the open market or from brokers or dealers receiving
customary commissions.
4. Acquire real estate or real estate contracts, although a Fund may
acquire obligations that are secured by real estate or securities issued by
companies investing in real estate, such as real estate investment trusts.
5. Underwrite securities of other issuers except where the sale of
restricted portfolio securities constitutes an underwriting under the
federal securities laws.
6. Acquire securities for the purpose of influencing the management of,
or exercising control over, the issuer.
7. Effect short sales of securities or purchase securities on margin,
except in connection with investment in options and futures contracts. Each
Fund may use short-term credits when necessary to clear transactions.
8. Lend money, except by purchasing debt obligations in which a Fund may
invest consistent with its investment objective(s) and policies or by
purchasing securities subject to repurchase agreements.
8
<PAGE> 63
9. Purchase or sell commodities (except in connection with investments
in options and futures contracts) or invest in oil, gas or mineral
exploration programs.
10. Make loans to other persons, except that a Fund may lend its
portfolio securities to broker-dealers and other financial institutions in
an amount up to 30% of the value of the Fund's total assets.
MMF INVESTMENT RESTRICTIONS
MMF may not:
1. Purchase any security which matures more than 13 months from the date
of purchase.
2. Purchase or sell commodity contracts.
3. Invest in warrants, or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof.
4. Invest more than 25% of the value of its total assets in the
securities of issuers primarily engaged in any one industry, except
investments in obligations issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities.
TOF, CCF, GSF, SIF, IEF, MIF, AND SCIF
INVESTMENT RESTRICTIONS
TOF, CCF, GSF, SIF, IEF, MIF, and SCIF may not:
1. Enter into a financial futures contract (by exercise of any option or
otherwise) or acquire any options thereon, if, immediately thereafter, the
total of the initial margin deposits required with respect to all open
futures positions, at the time such positions were established, plus the sum
of the premiums paid for all unexpired options on futures contracts would
exceed 5% of the value of its total assets.
2. Invest more than 25% of the value of its total assets in the
securities of issuers primarily engaged in any one industry.
GIF INVESTMENT RESTRICTIONS
GIF may not:
1. Invest 25% or more of its assets in securities of issuers in any one
industry.
GF AND STF INVESTMENT RESTRICTIONS
GF and STF may not:
1. Borrow money except that the Funds may (i) borrow for non-leveraging,
temporary or emergency purposes and (ii) engage in reverse repurchase
agreements and make other investments or engage in other transactions, which
may involve a borrowing, in a manner consistent with the Funds' investment
objective and program, provided that the combination of (i) and (ii) shall
not exceed 33 1/3% of the value of the Funds' total assets (including the
amount borrowed) less liabilities (other than borrowings) or such other
percentage permitted by law. Any borrowings which come to exceed this amount
will be reduced in accordance with applicable law. The Funds may borrow from
banks, other T. Rowe Price Funds or other persons to the extent permitted by
law.
2. Purchase the securities of any issuer if, as a result, more than 25%
of the value of the Funds' total assets would be invested in the securities
of issuers having their principal business activities in the same industry;
provided, however, the Growth Fund will normally concentrate 25% or more of
its assets in the securities of the banking industry when the Growth Fund's
position in issues maturing in one year or less equals 35% or more of the
Growth Fund's total assets.
3. Make loans, although the Funds may (i) lend portfolio securities;
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 33 1/3% of the value of the Funds' total assets;
(ii) purchase money market securities and enter into repurchase agreements;
and (iii) acquire publicly-distributed or privately-placed debt securities
and purchase debt.
4. Purchase a security if, as a result, with respect to 75% of the
Funds' total assets, more than 5% of the value of its total assets would be
invested in the securities of a single issuer or more than 10% of the
outstanding voting securities of any issuer would be held by the Funds,
except securi-
9
<PAGE> 64
ties issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities.
5. Purchase or sell physical commodities; except that it may enter into
futures contracts and options thereon.
6. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Funds
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).
7. Issue senior securities except in compliance with the Investment
Company Act of 1940.
8. Underwrite securities issued by other persons, except to the extent
that the Funds may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of its
portfolio securities in the ordinary course of pursuing its investment
program.
With respect to investment restriction (5), the Fund does not consider
forward foreign currency contracts or hybrid investments to be commodities.
For purposes of investment restriction (2), U.S., state or local
governments, or related agencies or instrumentalities, are not considered an
industry.
Notwithstanding anything in the above fundamental and operating
restrictions to the contrary, subject to any regulatory requirements, GF and
STF may each invest all of its assets in a single investment company or a
series thereof in connection with a "master-feeder" arrangement. Such an
investment would be made where the Fund (a "Feeder"), and one or more other
funds with the same investment objective and program as the Fund, sought to
accomplish its investment objective and program by investing all of its
assets in the shares of another investment company (the "Master"). The
Master would, in turn, have the same investment objective and program as the
Fund. The Funds would invest in this manner in an effort to achieve the
economies of scale associated with having a Master fund make investments in
portfolio companies on behalf of a number of Feeder funds.
SAF INVESTMENT RESTRICTIONS
SAF may not:
1. Enter into financial futures contracts (by exercise of any option or
otherwise) or acquire any options thereon, if, immediately thereafter, the
total of the initial margin deposits required with respect to all open
futures positions at the time such positions were established plus the sum
of the premiums paid for all unexpired options on futures contracts would
exceed 5% of the value of its total assets.
2. Invest more than 25% of the value of its total assets in the
securities of issuers primarily engaged in any one industry.
IGBF INVESTMENT RESTRICTIONS
IGBF may not:
1. With respect to 50% of its total assets, invest more than 5% of its
total assets in securities of any one issuer or purchase more than 10% of
the outstanding voting securities of any one issuer. With respect to the
remaining 50% of its total assets, invest more than 25% of its total assets
in the securities of any one issuer. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
2. Enter into a financial futures contract (by exercise of any option or
otherwise) or acquire any options thereon, if, immediately thereafter, the
total of the initial margin deposits required with respect to all open
futures positions, at the time such positions were established, plus the sum
of the premiums paid for all unexpired options on futures contracts would
exceed 5% of the value of its total assets.
3. Invest more than 25% of the value of its total assets in the
securities of issuers primarily engaged in any one industry.
10
<PAGE> 65
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS
Each Fund may hold commercial paper, certificates of deposits, and
government obligations (including government guaranteed obligations) subject to
repurchase agreements with certain well established domestic banks and certain
broker-dealers, including primary government securities dealers, approved as
creditworthy by the Board of Directors. The underlying security must be a
high-quality domestic money market security (except for the International
Equities Fund and International Government Bond Fund which utilize foreign money
market securities) and the seller must be a well-established securities dealer
or bank that is a member of the Federal Reserve System. For the Money Market
Fund, the underlying security must be a U.S. Government security or a security
rated in the highest rating category by the Requisite NRSROs (Nationally
Recognized Statistical Rating Organization) and must be determined to present
minimal credit risk. Repurchase agreements are generally for short periods,
often less than a week. Repurchase agreements typically obligate a seller, at
the time it sells securities to a Fund, to repurchase the securities at a
specific future time and price. The price for which the Fund resells the
securities is calculated to exceed the price the Fund initially paid for the
same securities, thereby determining the yield during the Fund's holding period.
This results in a fixed market rate of interest, agreed upon by that Fund and
the seller, which is accrued as ordinary income. Most repurchase agreements
mature within seven days although some may have a longer duration. The
underlying securities constitute collateral for these repurchase agreements,
which are considered loans under the 1940 Act.
The Funds do not intend to sell the underlying securities subject to a
repurchase agreement (except to the seller upon maturity of the agreement).
During the term of the repurchase agreement, the Funds (i) retain the securities
subject to the repurchase agreement as collateral securing the seller's
obligation to repurchase the securities, (ii) monitor on a daily basis the
market value of the securities subject to the repurchase agreement, and (iii)
require the seller to deposit with the Company's custodian collateral equal to
any amount by which the market value of the securities subject to the repurchase
agreement falls below the resale amount provided under the repurchase agreement.
In the event that a seller defaults on its obligation to repurchase the
securities, the Funds must hold the securities until they mature or may sell
them on the open market, either of which may result in a loss to a Fund if, and
to the extent that, the values of the securities decline. Additionally, the
Funds may incur disposition expenses when selling the securities. Bankruptcy
proceedings by the seller may also limit or delay realization and liquidation of
the collateral by a Fund and may result in a loss to that Fund. The Board of
Directors of the Company will evaluate the creditworthiness of all banks and
broker-dealers with which the Company proposes to enter into repurchase
agreements. The Funds will not invest in repurchase agreements that do not
mature within seven days if any such investment, together with any illiquid
assets held by a Fund, exceeds 10% of the value of that Fund's total assets (15%
in the case of Growth Fund, Growth & Income Fund and Science & Technology Fund).
LENDING PORTFOLIO SECURITIES
For purposes of realizing additional income, each Fund may make secured
loans of its portfolio securities amounting to no more than 30% of the value of
each Fund's total assets (33 1/3% in the case of Growth Fund and Science &
Technology Fund). This policy is a fundamental policy of each of the Funds.
Securities loans are made to broker-dealers and other financial institutions
approved by VALIC and pursuant to agreements requiring that the loans be
continuously secured by collateral at least equal at all times to the loaned
securities marked to market on a daily basis. The collateral received will
consist of cash, U.S. government securities, letters of credit or such other
collateral as permitted by interpretations or rules of the Securities and
Exchange Commission ("SEC"). While the securities are on loan, the Funds will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower.
Any loan of portfolio securities by any Fund will be callable at any time by
the lending Fund upon notice of five business days. When voting or
11
<PAGE> 66
consent rights which accompany loaned securities pass to the borrower, the
lending Fund will call the loan, in whole or in part as appropriate, to permit
the exercise of such rights if the matters involved would have a material effect
on that Fund's investment in the securities being loaned. If the borrower fails
to maintain the requisite amount of collateral, the loan will automatically
terminate, and the lending Fund will be permitted to use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in receiving additional collateral or in the recovery of the
securities or, in some cases, even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will be made only when VALIC considers the borrowing broker-dealers
or financial institutions to be creditworthy and of good standing and the
interest earned from such loans to justify the attendant risks. On termination
of the loan, the borrower will be required to return the securities to the
lending Fund. Any gain or loss in the market price during the loan would inure
to the lending Fund. The lending Fund may pay reasonable finders',
administrative, and custodial fees in connection with a loan of its securities.
FOREIGN SECURITIES
A foreign security is a security issued by an entity domiciled or
incorporated outside of the United States.
Included within the definition of foreign securities are American Depository
Receipts (ADRs).
ADRs are certificates issued by a United States bank or trust company and
represent the right to receive securities of a foreign issuer deposited in a
domestic bank or foreign branch of a United States bank and traded on a United
States exchange or in an over-the-counter market. Generally, ADRs are in
registered form. Investment in ADRs has certain advantages over direct
investment in the underlying foreign securities since: (i) ADRs are U.S.
dollar-denominated investments that are easily transferable and for which market
quotations are readily available, and (ii) issuers whose securities are
represented by ADRs are generally subject to auditing, accounting and financial
reporting standards similar to those applied to domestic issuers.
Each Fund may also, in accordance with its specific investment objective(s)
and investment program, policies and restrictions purchase U.S.
dollar-denominated money market securities of foreign issuers. Such money market
securities may be registered domestically and traded on domestic exchanges or in
the over-the-counter market (e.g., Yankee securities) or may be registered
abroad and traded exclusively in foreign markets (e.g., Eurodollar securities).
In addition, all the Funds, except the Government Securities Fund and the
Money Market Fund, may invest in non-U.S. dollar-denominated foreign securities,
in accordance with their specific investment objective(s), investment programs,
policies, and restrictions. Investing in foreign securities may involve
advantages and disadvantages not present in domestic investments. There may be
less publicly available information about securities not registered
domestically, or their issuers, than is available about domestic issuers or
their domestically registered securities. Stock markets outside the U.S. may not
be as developed as domestic markets, and there may also be less government
supervision of foreign exchanges and brokers. Foreign securities may be less
liquid or more volatile than U.S. securities. Trade settlements may be slower
and could possibly be subject to failure. In addition, brokerage commissions and
custodial costs with respect to foreign securities may be higher than those for
domestic investments. Accounting, auditing, financial reporting and disclosure
standards for foreign issuers may be different than those applicable to domestic
issuers. Non-U.S. dollar-denominated foreign securities may be affected
favorably or unfavorably by changes in currency exchange rates and exchange
control regulations (including currency blockage) and a Fund may incur costs in
connection with conversions between various currencies. Foreign securities may
also involve risks due to changes in the political or economic conditions of
such foreign countries, the possibility of expropriation of assets or
nationalization, and possible difficulty in obtaining and enforcing judgments
against foreign entities.
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<PAGE> 67
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Foreign currency transactions used by the Funds may be either: (i) on the
spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange
market, or (ii) conducted through the use of forward foreign currency exchange
contracts. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date. In general, forward
foreign currency exchange contracts are not guaranteed by a third party and,
accordingly, each party to a forward foreign currency exchange contract is
dependent upon the creditworthiness and good faith of the other party.
A Fund will enter into forward foreign currency exchange contracts only
under two circumstances. First, a Fund may enter into a forward foreign currency
exchange contract to purchase an amount of foreign currency to protect itself
against a possible loss that might occur between trade and settlement dates for
a particular security, resulting from a decline in the U.S. dollar against the
foreign currency in which such security is denominated. This practice may limit
the potential gains that might result from a positive change in such currency
relationships. Second, when VALIC or a Sub-adviser believes that the currency of
a particular foreign country may suffer or enjoy a substantial movement against
the U.S. dollar, a Fund may enter into a forward foreign currency exchange
contract to purchase or sell an amount of foreign currency approximating the
value of some or all of that Fund's portfolio securities denominated in such
foreign currency. The forecasting of short-term currency market movements is
extremely difficult and it is uncertain whether such short-term hedging
strategies will be successful.
WHEN-ISSUED SECURITIES
Each of the Funds except the Money Market Fund may purchase securities on a
when-issued or delayed delivery basis. When such transactions are negotiated,
the price of such securities is fixed at the time of commitment, but delivery
and payment for the securities may take place a month or more after the date of
the commitment to purchase. The securities so purchased are subject to market
fluctuation, and no interest accrues to the purchaser during this period.
Forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. VALIC does not believe that a
Fund's net asset value or income will be adversely affected by the purchase of
securities on a when-issued basis.
DEBT SECURITIES
Debt securities are considered high-quality if they are rated at least Aa by
Moody's or its equivalent by any other NRSRO or, if unrated, are determined to
be of equivalent investment quality. High-quality debt securities are considered
to have a very strong capacity to pay principal and interest. Debt securities
are considered investment grade if they are rated, for example, at least Baa by
Moody's or its equivalent by any other NRSRO or, if not rated, are determined to
be of equivalent investment quality. Investment grade debt securities are
regarded as having an adequate capacity to pay principal and interest.
Lower-medium and lower-quality securities rated, for example, Ba and B by
Moody's or its equivalent by any other NRSRO are regarded on balance as high
risk and predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. See the Section regarding
"Description of Corporate Bond Ratings" for a description of each rating
category in this Statement of Additional Information for a more complete
description of lower-medium and lower-quality debt securities and their risks.
The maturity of debt securities may be considered long (ten plus years),
intermediate (one to ten years), or short-term (thirteen months or less). In
general, the principal values of longer-term securities fluctuate more widely in
response to changes in interest rates than those of shorter-term securities,
providing greater opportunity for capital gain or risk of capital loss. A
decline in interest rates usually produces an increase in the value of debt
securities, while an increase in interest rates generally reduces their value.
WARRANTS
Each Fund, except the Money Market Fund, Government Securities Fund, Capital
Conservation Fund and the International Government Bond Fund may invest in
warrants limited to no more than 5% of the value of the total assets of each
Fund. Warrants are securities that give the Funds
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<PAGE> 68
the right to purchase equity securities from the issuer at a specific price (the
"strike price") for a limited period of time. Warrants do not entitle a holder
to dividends or voting rights with respect to the underlying securities and do
not represent any rights in the assets of the issuing company. In addition, the
value of warrants does not, necessarily, in all cases change to the same extent
as the value of the underlying securities to which they relate. Warrants cease
to have value if they are not exercised prior to the expiration date. These
factors can make warrants more speculative than other types of investments.
EURODOLLAR OBLIGATIONS
Each Fund in accordance with its investment objective(s), policies, and
investment program may invest in Eurodollar obligations, including Eurodollar
bonds and Eurodollar certificates of deposit. A Eurodollar obligation is a
security denominated in U.S. dollars and originated principally in Europe,
giving rise to the term Eurodollar.
Such securities are not registered with the SEC and generally may only be
sold to U.S. investors after the initial offering and cooling-off periods. The
market for Eurodollar securities is dominated by foreign-based investors and the
primary trading market for these securities is London.
Eurodollar obligations, including Eurodollar bonds and Eurodollar
certificates of deposit, are principally obligations of foreign branches of U.S.
banks. These instruments represent the loan of funds actually on deposit in the
U.S. The Company believes that the U.S. bank would be liable in the event that
its foreign branch failed to pay on its U.S. dollar denominated obligations.
Nevertheless, the assets supporting the liability could be expropriated or
otherwise restricted if located outside the U.S. Exchange controls, taxes, or
political and economic developments also could affect liquidity or repayment.
Due to possibly conflicting laws or regulations, the foreign branch of the U.S.
bank could maintain and prevail that the liability is solely its own, thus
exposing a Fund to a possible loss. Such U.S. dollar denominated obligations of
foreign branches of Federal Deposit Insurance Corporation ("FDIC") member U.S.
banks are not covered by the usual $100,000 of FDIC insurance if they are
payable only at an office of such a bank located outside the U.S., Puerto Rico,
Guam, American Samoa, and the Virgin Islands.
Moreover, there may be less publicly available information about foreign
issuers whose securities are not registered with the SEC and such foreign
issuers may not be subject to the accounting, auditing, and financial reporting
standards applicable to issuers registered domestically. In addition, foreign
issuers, stock exchanges, and brokers generally are subject to less government
regulation. There are, however, no risks of currency fluctuation since the
obligations are U.S. dollar denominated.
ASSET-BACKED SECURITIES
Each of the Funds may invest in asset-backed securities (unrelated to first
mortgage loans) that represent fractional interests in pools of retail
installment loans, both secured (such as certificates for automobile
receivables) and unsecured, and leases, or revolving credit receivables both
secured and unsecured (such as credit card receivable securities). These assets
are generally held by a trust and payments of principal and interest, or
interest only are passed through monthly or quarterly to certificate holders and
may be guaranteed up to certain amounts by letters of credit issued by a
financial institution affiliated or unaffiliated with the trustee or originator
of the trust.
Underlying automobile sales contracts, leases or credit card receivables are
subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, principal repayment rates tend not to vary much with
interest rates and the short-term nature of the underlying loans, leases, or
receivables tends to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying loans, leases or receivables are not realized
by the trust because of unanticipated legal or administrative costs of enforcing
the contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If consistent with
its investment objective(s) and policies, a Fund may invest in other
asset-backed securities that may be developed in the future.
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MORTGAGE-BACKED SECURITIES
Certain of the Funds may invest in Government National Mortgage Association
("GNMA") Certificates. GNMA Certificates are securities representing part
ownership of a pool of mortgage loans. These loans, issued by lenders such as
mortgage bankers, commercial banks, and savings and loan associations, are
either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. Each pool of mortgage loans is assembled and, after
being approved by GNMA, is offered to investors through securities dealers in
the form of certificates representing participations in the pool. Once approved
by GNMA, the timely payment of interest and principal of each mortgage is
guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. GNMA Certificates differ from bonds in that principal is paid
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity. GNMA Certificates are called "pass-through" certificates
because both principal and interest payments (including prepayments) are passed
through to the holder of the certificate.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments. Upon receipt, principal payments may be used by
the Funds to purchase additional GNMA Certificates or other U.S. Government
Securities. In addition, prepayments of the mortgages included in the underlying
mortgage pool will usually result in the return of the greatest part of
principal invested well before the maturity of the mortgages in the pool. The
volume of such prepayments of principal in a given pool of mortgages will
influence the actual yield of the GNMA Certificate, and principal returned to
the Funds may be reinvested in instruments whose yield may be higher or lower
than that which might have been obtained had such prepayments not occurred. In
quoting yields of GNMA Certificates, the standard practice is to assume that the
certificates will have a 12 year life. As previously noted, however, the actual
life of an individual pool may differ widely and actual yield may differ
significantly from estimated yields based on the 12 year life assumption.
Certain Funds may also invest in collateralized mortgage obligations
("CMOs") issued by governmental or non-governmental entities, such as banks and
other mortgage lenders. Non-governmental securities may offer a higher yield but
may be subject to greater price fluctuation and risk than governmental
securities.
CMOs are obligations fully collateralized directly or indirectly by a pool
of mortgages on which payments of principal and interest are passed through to
the holders of the CMOs on the same schedule as they are received, although not
necessarily on a pro rata basis. In reliance on an SEC interpretation, the
Funds' investments in certain qualifying CMOs are not subject to legal
limitations on acquiring interests in other investment companies. In order to be
able to rely on the SEC's interpretation, the CMOs must be unmanaged,
fixed-asset issuers that (i) invest primarily in mortgage-backed securities,
(ii) do not issue redeemable securities, (iii) operate under general exemptive
orders exempting them from all provisions of the Investment Company Act, and
(iv) are not registered or regulated under the Investment Company Act as
investment companies. To the extent that a Fund selects CMOs that do not meet
the above requirements, the Fund may not invest more than 10% of its assets in
all such entities and may not acquire more than 3% of the voting securities of
any single such entity.
LOAN PARTICIPATIONS
Loan Participations are debt obligations of corporations and are usually
purchased from major money center banks, selected regional banks, and major
foreign banks with branches in the U.S. which are regulated by the Federal
Reserve System or appropriate state regulatory authorities. VALIC and the
Sub-advisers believe that the credit standards imposed by such banks are
comparable to the standards such banks use in connection with loans originated
by them and in which they intend to maintain a full interest. The financial
institutions offering loan participations do not guarantee principal or interest
on the loan participations which they offer. VALIC and the Sub-advisers will not
purchase such securities for the Funds unless they believe that the collateral
underlying the corporate loans is adequate and the corporation will be able, in
a timely fashion, to pay scheduled interest and principal amounts.
ADJUSTABLE RATE SECURITIES
Each of the Funds may invest in adjustable rate money market securities.
Adjustable rate se-
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curities (i.e., variable rate and floating rate instruments) are securities that
have interest rates that are adjusted periodically, according to a set formula.
The maturity of some adjustable rate securities may be shortened under certain
special conditions described more fully below.
Variable rate instruments are obligations (usually certificates of deposit)
that provide for the adjustment of their interest rates on predetermined dates
or whenever a specific interest rate changes. A variable rate instrument whose
principal amount is scheduled to be paid in 13 months or less is considered to
have a maturity equal to the period remaining until the next readjustment of the
interest rate. Many variable rate instruments are subject to demand features
which entitle the purchaser to resell such securities to the issuer or another
designated party, either (1) at any time upon notice of usually 30 days or less,
or (2) at specified intervals, not exceeding 13 months, and upon 30 days notice.
A variable rate instrument subject to a demand feature is considered to have a
maturity equal to the longer of the period remaining until the next readjustment
of the interest rate or the period remaining until the principal amount can be
recovered through demand.
Floating rate instruments (generally corporate notes, bank notes, or
Eurodollar certificates of deposit) have interest rate reset provisions similar
to those for variable rate instruments and may be subject to demand features
like those for variable rate instruments. The maturity of a floating rate
instrument is considered to be the period remaining until the principal amount
can be recovered through demand.
ILLIQUID SECURITIES
The Funds will not invest more than 10% (15% in the case of Growth Fund,
Growth & Income Fund and Science & Technology Fund) of the value of their assets
in securities or other investments that are illiquid or not readily marketable
(including repurchase agreements with maturities exceeding seven days).
Securities received as a result of a corporate reorganization or similar
transaction affecting readily-marketable securities already held in the
portfolio of a Fund will not be considered securities or other investments that
are not readily marketable. However, the Funds will attempt, in an orderly
fashion, to dispose of any securities received under these circumstances, to the
extent that such securities are considered not readily marketable, and together
with other illiquid securities, exceed 10% of the value of a Fund's net assets.
RULE 144A SECURITIES
Each Fund, other than the Money Market Fund, may purchase securities which,
while privately placed, are eligible for purchase and sale pursuant to Rule 144A
under the Securities Act of 1933 (the "1933 Act"). This Rule permits certain
qualified institutional buyers, such as the Funds, to trade in privately placed
securities even though such securities are not registered under the 1933 Act.
The Company, under the supervision of the Board of Directors, will consider
whether securities purchased under Rule 144A are illiquid and thus subject to
the Funds' restriction on investing more than 10% (15% in the case of the Growth
Fund, Growth & Income Fund and Science & Technology Fund) of its assets in
illiquid securities. Determination of whether a Rule 144A security is liquid or
not is a question of fact. In making this determination the Company will
consider the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition the Company could
consider (i) frequency of trades and quotes, (ii) number of dealers and
potential purchasers, (iii) dealer undertakings to make a market, and (iv)
nature of the security and market place trades (for example, the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A securities will also be monitored by the
Company and, if, as a result of changed conditions, it is determined that a Rule
144A security is no longer liquid, the Funds' holding of illiquid securities
will be reviewed to determine what, if any, action is required to assume that
the Funds do not invest more than 10% of their assets in illiquid securities
(15% in the case of the Growth Fund, Growth & Income Fund and Science &
Technology Fund). Investing in Rule 144A securities could have the effect of
increasing the amount of the Funds' investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund, other than the Money Market Fund, may write covered call and put
options on
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securities and securities indices. As a matter of operating policy, the Growth &
Income Fund will only write covered call options on securities. In addition, the
Growth Fund and the Science & Technology Fund have no current intention of
writing put options on securities or securities indices. The International
Equities Fund and the International Government Bond Fund may also write covered
call and put options on foreign currencies that correlate with the Fund's
portfolio of foreign securities. A call option is a contract that gives to the
holder the right to buy a specified amount of the underlying security or
currency at a fixed or determinable price (called the exercise or "strike"
price) upon exercise of the option. A put option is a contract that gives the
holder the right to sell a specified amount of the underlying security or
currency at a fixed or determinable price upon exercise of the option.
To "cover" a call option written, a Fund may, for example, identify and have
available for sale the specific portfolio security, group of securities, or
foreign currency to which the option relates. To cover a put option written, a
Fund may, for example, establish a segregated asset account with its custodian
containing cash or liquid assets that, when added to amounts deposited with its
broker or futures commission merchant ("FCM") as margin, equals the market value
of the instruments underlying the put option written.
Each of these Funds may write options on securities and securities indices
and the International Equities Fund and the International Government Bond Fund
may write options on currencies for the purpose of increasing the Funds' return
on such securities or its entire portfolio of securities or to protect the value
of the entire portfolio. Such investment strategies will not be used for
speculation. If a Fund writes an option which expires unexercised or is closed
out by the Fund at a profit, it will retain the premium received for the option,
which will increase its gross income. If the price of the underlying security or
currency moves adversely to the Fund's position, the option may be exercised and
the Fund, as the writer of the option, will be required to sell or purchase the
underlying security or currency at a disadvantageous price, which may only be
partially offset by the amount of premium received.
Options on stock indices are similar to options on stock, except that all
settlements are made in cash rather than by delivery of stock, and gains or
losses depend on price movements in the stock market generally (or in a
particular industry or segment of the market represented by the index) rather
than price movements of individual stocks. When a Fund writes an option on a
securities index, and the underlying index moves adversely to the Fund's
position, the option may be exercised. Upon such exercise, the Fund, as the
writer of the option, will be required to pay in cash an amount equal to the
difference between the exercise settlement value of the underlying index and the
exercise price of the option, multiplied by a specified index "multiplier."
Call or put options on a stock index may be written at an exercise or
"strike" price which is either below or above the current value of the index. If
the exercise price at the time of writing the option is below the current value
of the index for a call option or above the current value of the index for a put
option the option is considered to be "in the money." In such a case, the Fund
will cover such options written by segregating with its custodian or pledging to
its commodity broker as collateral cash, U.S. Government or other high-grade,
short-term debt obligations equal in value to the amount by which the option
written is in the money, times the multiplier, times the number of contracts.
Stock indices for which options are currently traded include the S&P 500
Index, Value Line Index, National OTC Index, Major Market Index, Computer
Technology Index, Oil Index, NYSE Options Index, Technology Index, Gold/Silver
Index, Institutional Index and NYSE Beta Index. The Funds may also use options
on such other indices as may now or in the future be available.
Each Fund, except the Money Market Fund, may also purchase put or call
options on securities and securities indices in order to (i) hedge against
anticipated changes in interest rates or stock prices that may adversely affect
the prices of securities that the Fund intends to purchase at a later date, (ii)
hedge its investments against an anticipated decline in value, or (iii) attempt
to reduce the risk of missing a market or industry segment advance. As a matter
of operating policy, the Growth & Income Fund will only purchase call options on
securities to close out open positions for covered call options it has written.
In addition, the Growth Fund and the Science &
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Technology Fund have no current intention of purchasing call options on
securities or securities indices. The International Equities Fund and the
International Government Bond Fund also may purchase put options on foreign
currencies that correlate with the Fund's portfolio securities in order to
minimize or hedge against anticipated declines in the exchange rate of the
currencies in which the Fund's securities are denominated and may purchase call
options on foreign currencies that correlate with its portfolio securities to
take advantage of anticipated increases in exchange rates. In the event that the
anticipated changes in interest rates, stock prices, or exchange rates occur,
the Fund may be able to offset the resulting adverse effect on the Fund, in
whole or in part, through the options purchased.
The premium paid for a put or call option plus any transaction costs will
reduce the benefit, if any, realized by the Fund upon exercise or liquidation of
the option, and, unless the price of the underlying security, securities index,
or currency changes sufficiently, the option may expire without value to the
Fund. To close option positions purchased by the Funds, the Funds may sell put
or call options identical to options previously purchased, which could result in
a net gain or loss depending on whether the amount received on the sale is more
or less than the premium and other transaction costs paid on the put or call
option purchased.
Options used by the Funds may be traded on the national securities exchanges
or in the over-the-counter market. Only the Capital Conservation Fund, the
Government Securities Fund, the International Equities Fund and the
International Government Bond Fund may use over-the-counter options. Options
traded in the over-the-counter market may not be as actively traded as those on
an exchange. Accordingly, it may be more difficult to value such options. In
addition, it may be more difficult to enter into closing transactions with
respect to options traded over-the-counter. In this regard, the Funds may enter
into contracts with the primary dealers with whom they write over-the-counter
options. The contracts will provide that each Fund has the absolute right to
repurchase an option it writes at any time at a repurchase price which
represents the fair market value of such option, as determined in good faith
through negotiations between the parties, but which in no event will exceed a
price determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a multiple of the
premium received by each Fund for writing the option, plus the amount, if any,
of the option's intrinsic value (i.e., the amount the option is "in-the-money").
The formula will also include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written "out-of-the-money." Although the specific details of the formula may
vary with different primary dealers, each contract will provide a formula to
determine the maximum price at which each Fund can repurchase the option at any
time. The Funds have established standards of creditworthiness for these primary
dealers.
WRITING COVERED CALL AND PUT OPTIONS AND
PURCHASING CALL AND PUT OPTIONS
All of the Funds, except the Money Market Fund, may write exchange-traded
covered call and put options on or relating to specific securities in order to
earn additional income or, in the case of a call written, to minimize or hedge
against anticipated declines in the value of the Fund's securities. As a matter
of operating policy, the Growth & Income Fund will only write covered call
options on securities. The International Equities Fund and the International
Government Bond Fund may also write covered call and put options on foreign
currencies that correlate with its portfolio securities in order to earn
additional income or in the case of call options written to minimize or hedge
against anticipated declines in the exchange rate of the currencies in which the
Fund's securities are denominated. To "cover" an option means, for example, to
identify and make available for sale the specific portfolio security or foreign
currency to which the option relates. Through the writing of a covered call
option a Fund receives premium income but obligates itself to sell to the
purchaser of such an option the particular security or foreign currency
underlying the option at a specified price at any time prior to the expiration
of the option period, regardless of the market value of the security or the
exchange rate for the foreign currency during this period. Through the writing
of a covered put option a Fund receives premium income but obligates itself to
purchase a
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particular security or foreign currency underlying the option at a specified
price at any time prior to the expiration of the option period, regardless of
market value or exchange rate during the option period.
Certain Funds, in accordance with their investment objective(s) and
investment programs, may also write exchange-traded covered call and put options
on stock indices and may purchase call and put options on stock indices that
correlate with the Fund's portfolio securities. These Funds may engage in such
transactions for the same purposes as they may engage in such transactions with
respect to individual portfolio securities or foreign currencies, that is, to
generate additional income or as a hedging technique to minimize anticipated
declines in the value of the Fund's portfolio securities or the exchange rate of
the securities in which the Fund invested. In economic effect, a stock index
call or put option is similar to an option on a particular security, except that
the value of the option depends on the weighted value of the group of securities
comprising the index, rather than a particular security, and settlements are
made in cash rather than by delivery of a particular security.
Each Fund, other than the Money Market Fund, may also purchase
exchange-traded call and put options with respect to securities and stock
indices that correlate with that Fund's particular portfolio securities. As a
matter of operating policy, the Growth & Income Fund will only purchase call
options on securities to close out open positions for covered call options
written by it. The International Equities Fund and the International Government
Bond Fund may also purchase call and put options on foreign currencies that
correlate with the currencies in which the Fund's securities are denominated.
A Fund may purchase put options for defensive purposes in order to protect
against an anticipated decline in the value of its portfolio securities or
currencies. As the holder of a put option with respect to individual securities
or currencies, the Fund has the right to sell the securities or currencies
underlying the options and to receive a cash payment at the exercise price at
any time during the option period. As the holder of a put option on an index, a
Fund has the right to receive, upon exercise of the option, a cash payment equal
to a multiple of any excess of the strike price specified by the option over the
value of the index.
A Fund may purchase call options on individual securities, currencies or
stock indices in order to take advantage of anticipated increases in the price
of those securities or currencies by purchasing the right to acquire the
securities or currencies underlying the option or, with respect to options on
indices, to receive income equal to the value of such index over the strike
price. As the holder of a call option with respect to individual securities or
currencies, a Fund obtains the right to purchase the underlying securities or
currencies at the exercise price at any time during the option period. As the
holder of a call option on a stock index, a Fund obtains the right to receive,
upon exercise of the option, a cash payment equal to the multiple of any excess
of the value of the index on the exercise date over the strike price specified
in the option.
Unlisted options may be used by the Capital Conservation Fund, the
Government Securities Fund, the International Equities Fund and the
International Government Bond Fund. Such options are not traded on an exchange
and may not be as actively traded as listed securities, making the valuation of
these securities more difficult. In addition, an unlisted option entails a risk
not found in connection with listed options -- that the party on the other side
of the option transaction will default. This may make it impossible to close out
an unlisted option position in some cases, and profits may be lost thereby. Such
unlisted, over-the-counter options, unless otherwise indicated, will be
considered illiquid securities. The Funds will engage in such transactions only
with firms of sufficient credit to minimize these risks. In instances in which a
Fund has entered into agreements with primary dealers with respect to the
unlisted, over-the-counter options it has written, and such agreements would
enable the Fund to have an absolute right to repurchase, at a pre-established
formula price, the over-the-counter options written by it, the Fund will treat
as illiquid only the amount equal to the formula price described above less the
amount by which the option is "in-the-money."
Although these investment practices will be used to generate additional
income and to at-
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tempt to reduce the effect of any adverse price movement in the securities or
currencies subject to the option, they do involve certain risks that are
different in some respects from investment risks associated with similar funds
which do not engage in such activities. These risks include the following:
writing covered call options -- the inability to effect closing transactions at
favorable prices and the inability to participate in the appreciation of the
underlying securities or currencies above the exercise price; writing covered
put options -- the inability to effect closing transactions at favorable prices
and the obligation to purchase the specified securities or currencies or to make
a cash settlement on the stock index at prices which may not reflect current
market values or exchange rates; and purchasing put and call options -- possible
loss of the entire premium paid. In addition, the effectiveness of hedging
through the purchase or sale (writing) of stock index options will depend upon
the extent to which price movements in the portion of a Fund's portfolio being
hedged correlate with price movements in the selected stock index. Perfect
correlation may not be possible because the securities held or to be acquired by
a Fund may not exactly match the composition of the stock index on which options
are purchased or written. If the forecasts of VALIC regarding movements in
securities prices, currencies or interest rates are incorrect, a Fund's
investment results may have been better without the hedge.
FINANCIAL FUTURES CONTRACTS
Each Fund, except the Money Market Fund, in accordance with its investment
objective(s), investment program, policies, and restrictions may purchase and
sell exchange-traded financial futures contracts as a hedge to protect against
anticipated changes in prevailing interest rates, overall stock prices or
currency rates, or to efficiently and in a less costly manner implement either
increases or decreases in exposure to the equity or bond markets. The Funds may
also write covered call options and purchase put and call options on financial
futures contracts for the same purposes or to earn additional income. Although
they have no current intention to do so, the Growth Fund, the Growth & Income
Fund and the Science & Technology Fund may also write covered put options on
stock index futures contracts. Only the International Equities Fund and the
International Government Bond Fund may utilize currency futures contracts and
both listed and unlisted financial futures contracts and options thereon.
Financial futures contracts consist of interest rate futures contracts,
stock index futures contracts, and currency futures contracts. An interest rate
futures contract is a contract to buy or sell specified debt securities at a
future time for a fixed price. A stock index futures contract is similar in
economic effect, except that rather than being based on specific securities, it
is based on a specified index of stocks and not the stocks themselves. A
currency futures contract is a contract to buy or sell a specific foreign
currency at a future time for a fixed price.
An interest rate futures contract binds the seller to deliver to the
purchaser on a specified future date a specified quantity of one of several
listed financial instruments, against payment of a settlement price specified in
the contract. A public market currently exists for futures contracts on GNMA
Certificates, long-term U.S. Treasury Bonds, three-month U.S. Treasury Bills,
short-term U.S. Treasury Notes, and bank certificates of deposit.
Stock index futures contracts bind purchaser and seller to deliver, at a
future date specified in the contract, a cash amount equal to a multiple of the
difference between the value of a specified stock index on that date and the
settlement price specified by the contract. That is, the seller of the futures
contract must pay and the purchaser would receive a multiple of any excess of
the value of the index over the settlement price, and conversely, the purchaser
must pay and the seller would receive a multiple of any excess of the settlement
price over the value of the index. A public market currently exists for stock
index
futures contracts based on the S&P 500 Index, the New York Stock Exchange
Composite Index, the Value Line Stock Index, and the Major Market Index. It is
expected that financial instruments related to broad-based indices, in addition
to those for which futures contracts are currently traded, will in the future be
the subject of publicly-traded futures contracts, and the Funds may use any of
these, which are appropriate, in its hedging strategies.
A financial futures contract is an agreement to buy or sell a security (or
deliver a final cash
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settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery of a specified security) for a set price in
the future. Exchange-traded futures contracts are designated by boards of trade
which have been designated "contracts markets" by the Commodity Futures Trading
Commission ("CFTC").
Positions taken in the futures markets are not normally held until delivery
or cash settlement is required, but instead are liquidated through offsetting
transactions which may result in a gain or a loss. While futures positions taken
by a Fund will usually be liquidated in this manner, the Fund may instead make
or take delivery of underlying securities whenever it appears economically
advantageous to the Fund to do so. A clearing organization associated with the
relevant exchange assumes responsibility for closing out transactions and
guarantees that, as between the clearing members of an exchange, the sale and
purchase obligations will be performed with regard to all positions that remain
open at the termination of the contract.
Unlisted financial futures contracts, which may be purchased or sold only by
the International Equities Fund and the International Government Bond Fund, like
unlisted options, are not traded on an exchange and, generally, are not as
actively traded as listed futures contracts or listed securities. Such financial
futures contracts generally do not have the following elements: standardized
contract terms, margin requirements relating to price movements, clearing
organizations that guarantee counter-party performance, open and competitive
trading in centralized markets, and public price dissemination. These elements
in listed instruments serve to facilitate their trading and accurate valuation.
As a result, the accurate valuation of unlisted financial futures contracts may
be difficult. In addition, it may be difficult or even impossible, in some
cases, to close out an unlisted financial futures contract, which may, in turn,
result in significant losses to the Fund. Such unlisted financial futures
contracts will be considered by the Fund to be illiquid securities and together
with other illiquid securities will be limited to no more than 10% (15% in the
case of the Growth Fund, the Growth & Income Fund and the Science & Technology
Fund) of the value of such Fund's total assets. In making such determination,
the value of unlisted financial futures contracts will be based upon the "face
amount" of such contracts. The International Equities Fund and the International
Government Bond Fund will engage in such transactions only with securities firms
having sufficient credit or other resources to minimize certain of these risks.
When financial futures contracts are entered into by a Fund, either as the
purchaser or the seller of such contracts, the Fund is required to deposit with
its custodian in a segregated account in the name of the FCM an initial margin
of cash or U.S. Treasury bills equalling as much as 5% to 10% or more of the
contract settlement price. The nature of initial margin requirements in futures
transactions differs from traditional margin payments made in securities
transactions in that initial margins for financial futures contracts do not
involve the borrowing of funds by the customer to finance the transaction.
Instead, a customer's initial margin on a financial futures contract represents
a good faith deposit securing the customer's contractual obligations under the
financial futures contract. The initial margin deposit is returned, assuming
these obligations have been met, when the financial futures contract is
terminated. In addition, subsequent payments to and from the FCM, called
"variation margin," are made on a daily basis as the price of the underlying
security, stock index, or currency fluctuates, reflecting the change in value in
the long (purchase) or short (sale) positions in the financial futures contract,
a process known as "marking to market."
The Fund, as an internal operating policy may not hold financial futures
contracts in an amount greater than 33% of the Fund's net assets. A Fund may not
adhere to this internal operating policy in circumstances where the Fund is
required to invest a large cash infusion. In this circumstance the Fund's total
invested position, including the security value of the financial futures
contracts may not exceed 100% of the Fund's net assets.
Financial futures contracts generally are not entered into to acquire the
underlying asset and generally are not held to term. Prior to the contract
settlement date, the Funds will normally close all futures positions by entering
into an offsetting transaction which operates to cancel the position held, and
which usually results in a profit or loss.
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OPTIONS ON FINANCIAL FUTURES CONTRACTS
For bona fide hedging purposes, each Fund, except the Money Market Fund, may
also purchase call and put options on financial futures contracts and write call
options on financial futures contracts of the type which the particular Fund is
authorized to enter into. Except for options on currency futures contracts used
by the International Equities Fund and the International Government Bond Fund,
options on financial future contracts used by the Funds are traded on exchanges
that are licensed and regulated by the CFTC. A call option on a financial
futures contract gives the purchaser the right in return for the premium paid,
to purchase a financial futures contract (assume a "long" position) at a
specified exercise price at any time before the option expires. A put option
gives the purchaser the right, in return for the premium paid, to sell a
financial futures contract (assume a "short" position), for a specified exercise
price, at any time before the option expires.
Unlike entering into financial futures contracts, purchasing options on
financial futures contracts allows a Fund to decline to exercise the option,
thereby avoiding any loss beyond foregoing the purchase price (or "premium")
paid for the options. Therefore, the purchase of options on financial futures
contracts may be a preferable hedging strategy when a Fund desires maximum
flexibility. Whether, in order to achieve a particular objective, a Fund enters
into a financial futures contract, on the one hand, or an option contract, on
the other, will depend on all the circumstances, including the relative costs,
liquidity, availability and capital requirements of such financial futures and
options contracts. Also, the Funds will consider the relative risks involved,
which may be quite different. These factors, among others, will be considered in
light of market conditions and the particular objective to be achieved.
CERTAIN ADDITIONAL RISKS OF OPTIONS AND
FINANCIAL FUTURES CONTRACTS
In addition to the risks described in the Company's Prospectus, the use of
options and financial futures contracts may entail the following risks. First,
although such instruments when used by the Funds are intended to correlate with
the Funds' portfolio securities or currencies, in many cases the options or
financial futures contracts used may be based on securities, currencies, or
stock indices the components of which are not identical to the portfolio
securities owned or intended to be acquired by the Funds. Second, due to supply
and demand imbalances and other market factors, the price movements of financial
futures contracts, options thereon, currency options, and stock index options
may not necessarily correspond exactly to the price movements of the securities,
currencies, or stock indices on which such instruments are based. Accordingly,
there is a risk that a Fund's transactions in those instruments will not in fact
offset the impact on the Fund of adverse market developments in the manner or to
the extent contemplated or that such transactions will result in losses to the
Fund which are not offset by gains with respect to corresponding portfolio
securities owned or to be purchased by that Fund.
To some extent, these risks can be minimized by careful management of
hedging activities. For example, where price movements in a financial futures or
option contract are expected to be less volatile than price movements in the
related portfolio securities owned or intended to be acquired by a Fund, it may,
in order to compensate for this difference, use an amount of financial futures
or option contracts which is greater than the amount of such portfolio
securities. Similarly, where the price movement of a financial futures or option
contract is anticipated to be more volatile, a Fund may use an amount of such
contracts which is smaller than the amount of portfolio securities to which such
contracts relate.
The risk that the hedging technique used will not actually or entirely
offset an adverse change in a Fund's portfolio securities is particularly
relevant to financial futures contracts and options written on stock indices and
currencies. A Fund, in entering into a futures purchase contract, potentially
could lose any or all of the contract's settlement price. In entering into a
futures sale contract, a Fund could potentially lose a sum equal to the excess
of the contract's value (marked to market daily) over the contract's settlement
price. In writing options on stock indices or currencies a Fund could
potentially lose a sum equal to the excess of the value of the index or currency
(marked to market daily) over the exercise price. In addition, because financial
futures contracts require delivery at a future date of either a speci-
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<PAGE> 77
fied security or currency, or an amount of cash equal to a multiple of the
difference between the value of a specified stock index on that date and the
settlement price, an algebraic relationship exists between any price movement in
the underlying security or currency or index and the potential cost of
settlement to a Fund. A small increase or decrease in the value of the
underlying security or currency or stock index can, therefore, result in a much
greater increase or decrease in the cost to the Fund.
Stock index call options written also pose another risk as hedging tools.
Because exercises of stock index options are settled in cash, there is an
inherent timing risk that the value of a Fund's portfolio securities "covering"
a stock index call option written by it may decline during the time between
exercise of the option by the option holder and notice to the Fund of such
exercise (usually one day or more) thereby requiring the Fund to use additional
assets to settle the transaction. This risk is not present in the case of
covered call options on individual securities, which are settled by delivery of
the actual securities.
There are also special risks in using currency options including the
following: (i) settlement of such options must occur in the country issuing the
currency in conformity with foreign regulations for such delivery, including the
possible imposition of additional costs and taxes, (ii) no systematic reporting
of "last sale" information for foreign currencies, and (iii) the need to use
"odd lot" transactions for underlying currencies at prices less favorable than
those for "round lot" transactions.
Although the Funds intend to establish positions in these instruments only
when there appears to be an active market, there is no assurance that a liquid
market for such instruments will exist when a Fund seeks to "close out" (i.e.
terminate) a particular financial futures contract or option position. This is
particularly relevant for over-the-counter options and financial futures
contracts, as previously noted. Trading in such instruments could be
interrupted, for example, because of a lack of either buyers or sellers. In
addition, the futures and options exchanges may suspend trading after the price
of such instruments has risen or fallen more than the maximum amount specified
by the exchange. Exercise of options could also be restricted or delayed because
of regulatory restrictions or other factors. A Fund may be able, by adjusting
investment strategy in the cash or other contract markets, to offset to some
extent any adverse effects of being unable to liquidate a hedge position.
Nevertheless, in some cases, a Fund may experience losses as a result of such
inability. Therefore it may have to liquidate other more advantageous
investments to meet its cash needs.
In addition, FCMs or brokers in certain circumstances will have access to a
Fund's assets posted as margin in connection with these transactions as
permitted under the 1940 Act. See "Other Information Custody of Assets" in this
Statement of Additional Information. The Funds will use only FCMs or brokers in
whose reliability and financial soundness they have full confidence and have
adopted certain other procedures and limitations to reduce the risk of loss with
respect to any assets which brokers hold or to which they may have access.
Nevertheless, in the event of a broker's insolvency or bankruptcy, it is
possible that a Fund could experience a delay or incur costs in recovering such
assets or might recover less than the full amount due. Also the value of such
assets could decline by the time a Fund could effect such recovery.
The success of a Fund in using hedging techniques depends, among other
things, on VALIC's ability to predict the direction and volatility of price
movements in both the futures and options markets as well as the securities
markets and on VALIC's ability to select the proper type, time, and duration of
hedges. There can be no assurance that these techniques will produce their
intended results. In any event, VALIC will use financial future contracts,
options thereon, currency options and stock index options only when it believes
the overall effect is to reduce, rather than increase, the risks to which a Fund
is exposed. Hedging transactions also, of course, may be more, rather than less,
favorable to a Fund than originally anticipated.
LIMITATIONS
No Fund will enter into any financial futures contract or purchase any
option thereon if immediately thereafter the total amount of its assets required
to be on deposit as initial margin to secure its obligations under financial
futures con-
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<PAGE> 78
tracts, plus the amount of premiums paid by it for outstanding options to
purchase futures contracts, exceeds 5% of the market value of its total assets.
(Net assets in the case of Growth & Income Fund); provided however, that in the
case of an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. This is a fundamental
policy of each Fund that is permitted to use options and financial futures
contracts.
In addition, each Fund has an operating policy which provides that it will
not enter into financial futures contracts or write put or call options with
respect to financial futures contracts unless such transactions are either
"covered" or subject to segregation requirements considered appropriate by the
SEC staff. Further, each Fund has an operating policy which provides that it
will not enter into custodial arrangements with respect to initial or variation
margin deposits or marked-to-market amounts unless the custody of such initial
and variation margin deposits and marked-to-market amounts are in compliance
with current SEC staff interpretive positions or no-action letters or rules
adopted by the SEC.
MONEY MARKET SECURITIES OF FOREIGN ISSUERS
Foreign money market instruments utilized by the Funds will be limited to:
(i) obligations of, or guaranteed by, a foreign government, its agencies or
instrumentalities; (ii) certificates of deposit, bankers' acceptances,
short-term notes, negotiable time deposits and other obligations of the ten
largest banks in each foreign country, measured in terms of net assets; and
(iii) other short-term unsecured corporate obligations (usually 1 to 270 day
commercial paper) of foreign companies. For temporary purposes or in light of
adverse foreign political or economic conditions, the Funds may invest in
short-term high quality foreign money market securities without limitation.
24
<PAGE> 79
INVESTMENT ADVISER
VALIC serves as the investment adviser to Timed Opportunity Fund, Money
Market Fund, Capital Conservation Fund, Government Securities Fund,
International Equities Fund and Social Awareness Fund pursuant to an Investment
Advisory Agreement dated September 30, 1987, approved by shareholders at a
meeting held on September 7, 1990. This Investment Advisory Agreement was also
made applicable to the International Government Bond Fund effective October 1,
1991. The Investment Advisory Agreement was approved by the shareholders of the
International Government Bond Fund on September 15, 1992. VALIC also serves as
investment adviser to the MidCap Index Fund, the Stock Index Fund, the Small Cap
Index Fund pursuant to an Investment Advisory Agreement effective May 1, 1992
that was approved by shareholders of the MidCap Index Fund and Stock Index Fund
on April 28, 1992 and approved by shareholders of the Small Cap Index Fund on
September 15, 1992. This Investment Advisory Agreement was also made applicable
to the Growth Fund, the Growth & Income Fund and the Science & Technology Fund
effective May 1, 1994. Prior to May 1, 1992, VALIC served as investment adviser
to the MidCap Index Fund and Stock Index Fund pursuant to the Investment
Advisory Agreement dated September 30, 1987. VALIC is a stock life insurance
company organized on May 1, 1969 under the Texas Insurance Code as a successor
to The Variable Annuity Life Insurance Company of America, a District of
Columbia insurance company organized in 1955. VALIC's sole business consists of
offering fixed and variable (and combinations thereof) retirement annuity
contracts. VALIC is an indirect wholly-owned subsidiary of American General
Corporation, Houston, Texas. Members of the American General Corporation group
of companies operate in each of the 50 states, the District of Columbia, and
Canada and collectively engage in substantially all forms of financial services,
with activities heavily weighted toward insurance. American General was
incorporated as a Texas business corporation on February 26, 1980 as the
successor to American General Life Insurance Company (organized in 1926) as the
result of a corporate reorganization completed on July 1, 1980.
Pursuant to the Investment Advisory Agreements, the Company retains VALIC to
manage the investment of the assets of each Fund, maintain a trading desk, and
place orders for the purchase and sale of portfolio securities. As investment
adviser, VALIC obtains and evaluates as appropriate economic, statistical, and
financial information in order to formulate and implement investment programs in
furtherance of each Fund's investment objective(s) and investment program.
Pursuant to the Investment Advisory Agreements, VALIC provides other services
including furnishing the services of the President and such other executives and
clerical personnel as the Company requires to conduct its day-to-day operations,
to prepare the various reports and statements required by law, and to conduct
any other recurring or nonrecurring activity which the Company may need to
continue operations. The Investment Advisory Agreement provides that the Company
pay all expenses not specifically assumed by VALIC under the Agreements.
Examples of the expenses paid by the Company include transfer agency fees,
custodial fees, the fees of outside legal and auditing firms, the costs of
reports to shareholders, expenses of servicing shareholder accounts (e.g., daily
calculation of the net asset value).
The Investment Advisory Agreements require that VALIC's advisory fee be
reduced by any commissions, tender and exchange offer solicitation fees and
other fees, or similar payments (less any direct expenses incurred) received by
VALIC or its affiliates in connection with the purchase and sale of portfolio
investments of the Funds. In this regard, the Investment Advisory Agreements
require VALIC to use its best efforts to recapture tender and exchange
solicitation offer fees for each Fund's benefits, and to advise the Company's
Board of Directors of any other fees, or similar payments that it (or any of its
affiliates) may receive in connection with each Fund's portfolio transactions or
of other arrangements that may benefit any of the Funds or the Company.
The Company, by action of its Board of Directors determined to transfer the
function of providing accounting services from the Company's custodian State
Street Bank and Trust Company to VALIC. This transfer will be effective October
31, 1996. Pursuant to this determination the Company entered into an Accounting
Services Agreement with VALIC ("Agreement"). The
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<PAGE> 80
Agreement provides that the Company will pay to VALIC an annual fee payable
monthly based on average daily net assets for providing the accounting services.
The annual fee VALIC will charge the Company under the Agreement will be less
than the fee charged by the prior provider of accounting services.
For the fiscal year ended May 31, 1994, the investment advisory fees (before
reduction of expenses or waiver) paid by the Company for the Stock Index Fund,
the MidCap Index Fund, the Small Cap Index Fund, the International Equities
Fund, the Social Awareness Fund, the Timed Opportunity Fund, the Capital
Conservation Fund, the Government Securities Fund, the International Government
Bond Fund and the Money Market Fund were $3,073,673, $993,023, $244,441,
$406,818, $204,647, $925,356, $297,020, $209,147, $167,533 and $229,057
respectively. For the same period, VALIC reduced expenses by $44,024 for the
International Government Bond Fund as a result of its voluntary reduction. This
waiver expired on September 30, 1993. For the period from April 29, 1994 to May
31, 1994 the investment advisory fees paid by the Company for the Growth Fund,
Growth & Income Fund and Science & Technology Fund were $6,706, $6,294 and
$7,517 respectively.
For the fiscal year ended May 31, 1995, the investment advisory fees paid by
the Company for the Stock Index Fund, the MidCap Index Fund, the Small Cap Index
Fund, the International Equities Fund, the Growth Fund, the Growth & Income
Fund, the Science & Technology Fund, the Social Awareness Fund, the Timed
Opportunity Fund, the Capital Conservation Fund, the Government Securities Fund,
the International Government Bond Fund, and the Money Market Fund were
$3,339,165, $1,314,837, $420,925, $697,990, $323,295, $159,996, $558,564,
$238,741, $931,720, $307,082, $224,415, $252,782, and $321,207, respectively.
For the fiscal year ended May 31, 1996, the investment advisory fees paid by
the Company for the Stock Index Fund, the MidCap Index Fund, the Small Cap Index
Fund, the International Equities Fund, the Growth Fund, the Growth & Income
Fund, the Science & Technology Fund, the Social Awareness Fund, the Timed
Opportunity Fund, the Capital Conservation Fund, the Government Securities Fund,
the International Government Bond Fund, and the Money Market Fund were
$4,242,848, $1,666,107, $523,833, $715,452, $1,871,756, $557,628, $3,228,500,
$333,783, $939,313, $352,058, $340,148, $573,962, and $421,853, respectively.
The Investment Advisory Agreements may be continued with respect to any Fund
if specifically approved at least annually by (a)(i) the Company's Board of
Directors or (ii) a majority of that Fund's outstanding voting securities (as
defined by the 1940 Act), and (b) the affirmative vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (as defined by the 1940 Act) by votes cast in person at a meeting
called for this purpose. The Investment Advisory Agreements also provide that
they shall terminate automatically if assigned. The Investment Advisory
Agreements may be terminated as to any Fund at any time by the Company's Board
of Directors, by vote of a majority of the Fund's outstanding voting securities,
or by VALIC, on not more than 60 days' written notice, nor less than 30 days'
written notice, or upon such shorter notice as may be mutually agreed upon,
without the payment of any penalty. Additionally either Investment Advisory
Agreement that VALIC shall not be liable to the Company, or any shareholder in
the Company, for any act or omission in rendering services under the Agreement,
or for any losses sustained in the purchase, holding, or sale of any portfolio
security, so long as there has been no willful misfeasance, bad faith,
negligence, or reckless disregard of obligations or duties on the part of VALIC.
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<PAGE> 81
INVESTMENT SUB-ADVISERS
Pursuant to an Investment Sub-Advisory Agreement which was approved by
shareholders of the Stock Index Fund and the MidCap Index Fund on April 28, 1992
and by shareholders of the Small Cap Index Fund on September 15, 1992, VALIC has
engaged Bankers Trust Company ("Bankers Trust") to provide investment
Sub-Advisory services for the Stock Index Fund, the MidCap Index Fund and the
Small Cap Index Fund. T. Rowe Price Associates, Inc. ("T. Rowe Price") provides
Sub-Advisory services for the Growth Fund and the Science & Technology Fund
pursuant to a Sub-Advisory Agreement. Value Line, Inc. ("Value Line") provides
Sub-Advisory services for the Growth & Income Fund pursuant to a Sub-Advisory
Agreement. Bankers Trust, T. Rowe Price and Value Line (collectively the "Sub-
Advisers") will be subject to the control, supervision and direction of VALIC,
which will retain responsibility for the overall management of the Stock Index
Fund, the MidCap Index Fund, the Small Cap Index Fund, the Growth Fund, the
Growth & Income Fund and the Science & Technology Fund, respectively
(collectively the "Sub-Advised Funds").
In addition to acting as Sub-adviser to the MidCap Index Fund, the Stock
Index Fund and Small Cap Index Fund as of September 30, 1995, Bankers Trust was
an investment adviser to the following registered investment companies: Accessor
Funds, Inc. Short Intermediate Fixed Income Portfolio; AHA Investment Funds,
Inc. -- Full Maturity Fixed Income Portfolio; Asset Management Portfolio; Asset
Management Portfolio II; Asset Management Portfolio III; The Bank Fiduciary Fund
- -- Equity Portfolio and Fixed Income Portfolio; Capital Appreciation Portfolio;
Cash Management Portfolio; Equity 500 Index Portfolio; GCG Trust; Limited
Maturity Bond Series; Liquid Asset Series and Emerging Market Series; Global
High Yield Portfolio; Hercules Latin American Value Fund; International Equity
Portfolio; Intermediate Tax Free Portfolio; Latin American Equity Portfolio;
Liquid Assets Portfolio; NY Tax Free Money Portfolio; Pacific Basin Equity
Portfolio; Pacific Select Fund -- Equity Index Series; Short Intermediate
Government Securities Portfolio; Small Cap Portfolio; Tax Free Money Portfolio;
Treasury Money Portfolio and Utility Portfolio, EAFE Equity Index Fund and Small
Cap Index Fund.
In addition to acting as Sub-adviser to the Growth Fund and the Science &
Technology Fund, T. Rowe Price manages the following funds with which it is
affiliated: T. Rowe Price Growth Stock Fund, Inc.; T. Rowe Price New Horizons
Fund, Inc.; T. Rowe Price New Era Fund, Inc.; T. Rowe Price New Income Fund,
Inc.; T. Rowe Price Growth & Income Fund, Inc.; T. Rowe Price Prime Reserve
Fund, Inc.; T. Rowe Price Tax-Free Income Fund, Inc.; T. Rowe Price Tax-Exempt
Money Fund, Inc.; T. Rowe Price Short-Term Bond Fund, Inc.; T. Rowe Price
Tax-Free Insured Intermediate Bond Fund, Inc.; T. Rowe Price Tax-Free
Short-Intermediate, Inc.; T. Rowe Price High Yield Fund, Inc.; T. Rowe Price
Tax-Free High Yield Fund, Inc.; T. Rowe Price GNMA Fund; T. Rowe Price Equity
Income Fund; T. Rowe Price New America Growth Fund; T. Rowe Price Capital
Appreciation Fund; T. Rowe Price Science & Technology Fund, Inc.; T. Rowe Price
Small-Cap Value Fund, Inc.; T. Rowe Price U.S. Treasury Funds, Inc. (which
includes U.S. Treasury Money Fund, U.S. Treasury Intermediate Fund and U.S.
Treasury Long-Term Fund); T. Rowe Price State Tax-Free Income Trust (which
includes Maryland Tax-Free Bond Fund, New York Tax-Free Bond Fund, New York
Tax-Free Money Fund, Virginia Tax-Free Bond Fund, New Jersey Tax-Free Bond Fund,
Georgia Tax-Free Bond Fund, Florida Insured Intermediate Tax-Free Fund, and
Maryland Short-Term Tax-Free Bond Fund); T. Rowe Price California Tax-Free
Income Trust (which includes California Tax-Free Bond Fund and California Tax-
Free Money Fund); T. Rowe Price Index Trust, Inc. (which includes the T. Rowe
Price Equity Index Fund); T. Rowe Price Spectrum Fund, Inc. (which includes the
Spectrum Growth Fund and Spectrum Income Fund); T. Rowe Price Short Term U.S.
Government Fund Inc. (formerly T. Rowe Price Adjustable Rate U.S. Government
Fund, Inc.); T. Rowe Price Balanced Fund, Inc.; T. Rowe Price Mid-Cap Value
Fund, Inc.; T. Rowe Price OTC Fund, Inc., T. Rowe Price Blue Chip Growth Fund,
Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price Summit Funds, Inc.
(which includes Summit Cash Reserves Fund, Summit Limited-Term Bond Fund and
Summit GNMA Fund), T. Rowe Price Summit
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<PAGE> 82
Municipal Funds, Inc. (which includes Summit Municipal Money Market Fund, Summit
Municipal Intermediate Fund, Summit Municipal Income Fund. T. Rowe Price also
serves as investment adviser to the following unaffiliated funds: the Security
First Trust (which includes the Growth and Income Series, Bond Series and the
Money Market Series) and the Penn Series Funds, Inc. (which includes the
Aggressive Equity Fund and High Yield Fund), T. Rowe Price Equity Series, Inc.
(which includes T. Rowe Price Equity Income Portfolio and T. Rowe Price New
America Growth Portfolio), T. Rowe Price Fixed Income Series, Inc. (which
includes T. Rowe Price Limited-Term Bond Portfolio), T. Rowe Price International
Series, Inc. (which includes T. Rowe Price International Stock Portfolio); T.
Rowe Price Personal Strategy Funds, Inc. (which includes T. Rowe Price Personal
Strategy Income Fund, T. Rowe Price Strategy Balanced Fund and Personal Strategy
Growth Fund). In addition, an affiliate of T. Rowe Price, Rowe Price-Fleming
International, Inc., acts as investment adviser to the T. Rowe Price
International Funds, Inc. (which includes the T. Rowe Price International Stock
Fund, T. Rowe Price International Bond Fund, T. Rowe Price International
Discovery Fund, T. Rowe Price Emerging Stock Fund, T. Rowe Price Emerging Bond
Fund, T. Rowe Price European Stock Fund, T. Rowe Price New Asia Fund, T. Rowe
Price Global Government Bond Fund, T. Rowe Price Japan Fund; T. Rowe Price
Short-Term Global Fund, and T. Rowe Price Latin America Fund; the RPF
International Bond Fund; the Institutional International Funds, Inc. (which
includes the Foreign Equity Fund) and Institutional Equity Fund, Inc. (which
includes Mid-Cap Equity Growth Fund).
In addition to acting as Sub-adviser to the Growth & Income Fund, Value Line
manages the following funds with which it is affiliated: The Value Line Fund,
Inc.; The Value Line Income Fund, Inc.; The Value Line Special Situations Fund,
Inc.; Value Line Leveraged Growth Investors, Inc.; The Value Line Cash Fund,
Inc.; Value Line Government Securities Fund, Inc.; Value Line Centurion Fund,
Inc.; The Value Line Tax Exempt Fund, Inc.; Value Line Convertible Fund, Inc.;
Value Line Aggressive Income Trust; Value Line New York Tax Exempt Trust; Value
Line Strategic Asset Management Trust; The Value Line Intermediate Bond Fund,
Inc.; Value Line Small-Cap Growth Fund, Inc.; Value Line Asset Allocation Fund,
Inc.; and Value Line U.S. Multi-National Fund, Inc.
Pursuant to the Investment Sub-Advisory Agreements and subject to VALIC's
control, supervision and direction, the Sub-Advisers will manage the investment
and reinvestment of the assets of the Sub-Advised Funds, including the
evaluation of pertinent economic, statistical, financial and other data, and the
determination of industries and companies to be represented in the Sub-Advised
Funds. Further, the Sub-Advisers will maintain a trading desk and place orders
for the purchase and sale of portfolio investments for the Sub-Advised Funds,
accounts with brokers and dealers selected by the Sub-Advisers, or arrange for
any other entity to provide a trading desk and to place orders with brokers and
dealers selected by the Sub-Advisers and VALIC.
The Investment Sub-Advisory Agreements provide that the Sub-Advisers will
bear the expense of discharging their responsibilities.
VALIC shall, from the compensation VALIC receives from the Company for
acting as investment adviser, pay to BTC, for the services rendered and expenses
paid by BTC, a monthly fee computed at the annual rate of .05% of the first $500
million and .03% of average daily net asset values on the excess over $500
million based on the Stock Index Fund, the MidCap Index Fund and Small Cap Index
Fund respectively. VALIC shall, from the compensation VALIC receives from the
Company for acting as investment adviser, pay to T. Rowe Price, for the services
rendered and expenses paid by T. Rowe Price, a monthly fee based on average
daily net asset values of the Growth Fund at an annual rate of .50% and the
Science & Technology Fund at the annual rate of .60%. VALIC shall, from the
compensation VALIC receives from the Company for acting as investment adviser,
pay to Value Line, for services rendered and expenses paid by Value Line, a
monthly fee based on average daily net asset values of the Growth & Income Fund
at an annual rate of .45%. Notwithstanding the above provision, VALIC is
required to pay a minimum annual sub-advisory fee of $50,000 to BTC for the
Small Cap Index Fund. There are no minimum sub-
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<PAGE> 83
advisory fees for the Stock Index Fund, MidCap Index Fund, the Growth Fund, the
Growth & Income Fund or the Science & Technology Fund.
The Investment Sub-Advisory Agreements require that each Sub-Adviser
promptly reduce its monthly fee by the amount of any commission, tender and
exchange offer solicitation fees, other fees or similar payments received by the
Sub-Adviser, or any affiliated person of the Sub-Adviser, in connection with
Sub-Advised Fund portfolio transactions. Such "commissions" or "other fees"
exclude those charged by brokers or dealers affiliated with a Sub-Adviser, as
referred to below. Such "tender and exchange offer solicitation fees" exclude
those received by a Sub-Adviser acting in the capacity of manager for any such
offer. In this regard, the Sub-Advisory Agreements require the Sub-Advisers to
use their best efforts to obtain tender and exchange solicitation offer fees for
each Fund's benefit, and to advise VALIC of any other fees or similar payments
that they (or any of their affiliates) may receive in connection with any Fund's
portfolio transactions or of other arrangements that may benefit any of the
Funds.
The Investment Sub-Advisory Agreements may be continued with respect to any
of the Funds if approved at least annually by the vote of the Company's Board of
Directors who are not parties to the Investment Sub-Advisory Agreements or
interested persons of any such parties, cast in person at a meeting called for
the purpose of voting on such approval and by a vote of a majority of the
Company's Board of Directors or a majority of the relevant Fund's outstanding
voting securities.
The Investment Sub-Advisory Agreements will automatically terminate in the
event of assignment or in the event of termination of the Investment Advisory
Agreement between VALIC and the Company as it relates to the relevant Sub-
Advised Fund. The Investment Sub-Advisory Agreements may be terminated at any
time by VALIC, the relevant Sub-Adviser, the Company's Board of Directors, or by
vote of a majority of the outstanding voting securities of the relevant Sub-
Advised Fund, on not more than 60 days' nor less than 30 days' written notice to
the other entities, or upon such shorter notice as may be mutually agreed upon.
Such termination shall be without the payment of any penalty.
The Investment Sub-Advisory Agreements provide that the Sub-Advisers shall
not be liable to VALIC, the Company or to any shareholder of the Company for any
act or omission in rendering services under the Investment Sub-Advisory
Agreements or for any losses sustained in the purchase, holding or sale of any
portfolio security, so long as there has been no willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties on the part of the
Sub-Advisers.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As investment adviser to the Company, VALIC has responsibility for placing
(and deciding when to place) orders for the purchase and sale of investments for
the portfolio of each Fund, selecting brokers or dealers to handle these
transactions, and negotiating commissions on these transactions. VALIC utilizes
the assistance of Sub-Advisers in selecting brokers or dealers to handle
transactions for the Stock Index Fund, the MidCap Index Fund, the Small Cap
Index Fund, the Growth Fund, the Growth & Income Fund and the Science &
Technology Fund. The Sub-Advisers may employ affiliated brokers or, in the case
of T. Rowe Price, indirectly related brokers for portfolio transactions under
circumstances described in the Prospectus under the heading "Investment
Management."
Virtually all of the over-the-counter transactions by the Timed Opportunity
Fund, the Money Market Fund, the Capital Conservation Fund, the Government
Securities Fund, the International Government Bond Fund and the Growth & Income
Fund are principal transactions with issuers and dealers at net prices which
entail no brokerage commissions. The MidCap Index Fund, the Stock Index Fund,
the International Equities Fund, the Small Cap Index Fund, and the Social
Awareness Fund, each purchase and sell most of their portfolio securities on a
national securities exchange on an agency basis. The Growth Fund and the Science
& Technology Fund engage in over-the-counter transactions with principals and
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<PAGE> 84
transactions with national securities exchanges on an agency basis. The Company
normally enters into principal transactions directly with the issuer or the
market-maker.
When the Company purchases or sells securities or financial futures
contracts on an exchange, it pays a commission to any FCM or broker executing
the transaction. When the Company purchases securities from the issuer, an
underwriter usually receives a commission or "concession" paid by the issuer.
When the Company purchases securities from a market-maker, it pays no
commission, but the price includes a "spread" or "mark-up" (between the bid and
asked price) earned by the market-making dealer on the transaction.
In purchasing and selling each Fund's portfolio securities, it is the policy
of VALIC and the Sub-Advisers (collectively, the "Advisers") to seek the best
execution at the most favorable price through responsible broker-dealers and, in
the case of agency transactions, at competitive commission rates. When selecting
brokers or dealers, and in negotiating prices and commissions, the Advisers
consider such factors as: the broker or dealer's reliability; the quality of the
broker or dealer's execution services on a continuing basis; the rate of the
commission; the size and difficulty of the order and the timeliness of
execution; the reliability, integrity, financial condition, general execution,
and operational capabilities of that firm and competing broker-dealers. In
over-the-counter transactions, the Advisers place orders directly with the
principal market-maker unless they believe the Company can obtain a better price
(or receive better execution of orders) from a broker on an agency basis. In
transactions executed on securities or commodities exchanges, the Advisers seek
the best overall price and execution at the most favorable commission rate
(except when higher brokerage commissions are paid to obtain brokerage and
research services, as explained below). When the Advisers believe that more than
one firm meets these criteria the Advisers may prefer brokers who provide the
Advisers or the Company with brokerage and research services, described below.
The Advisers may cause a Fund to pay a broker-dealer a commission (for
executing a securities transaction) that is greater than the commission another
broker-dealer would have received for executing the same transaction, if the
Advisers determine in good faith that the greater commission paid to the first
broker-dealer is reasonable in relation to the value of brokerage and research
services provided to the Advisers viewed in terms of either that particular
transaction or the overall responsibilities of the Advisers.
The Advisers receive a wide range of research services from broker-dealers,
including: information on securities markets, the economy and individual
companies; statistical information; accounting and tax law interpretations;
technical market action; pricing and appraisal services; and credit analyses.
Research services are received by the Advisers primarily in the form of written
reports, telephone contacts, personal meetings with securities analysts,
corporate and industry spokespersons, and access to various computer-generated
data.
The Advisers have no agreements or understandings with broker-dealers by
which specific amounts of transactions or commissions are directed to specific
broker-dealers.
The Advisers evaluate whether such research services provide lawful and
appropriate assistance to them in the performance of their investment
decision-making responsibilities, for the Company. The Advisers will not cause
the Company to pay higher commissions without first determining, in good faith,
that the cost is reasonable considering the brokerage and research services
provided, with respect to either the particular transaction or the Advisers'
overall responsibilities with respect to accounts for which they exercise
investment discretion. The Advisers receive research services at no cost and
cannot assign any specific monetary value to them; nevertheless, the Advisers
believe these supplemental investment research services are essential to the
Advisers' ability to provide high quality portfolio management to the Funds.
Research services furnished by broker-dealers through whom a Fund effects
securities transactions may be used by the Advisers in servicing all of the
Funds, and the Advisers may not use all such services in managing the Funds.
The amount of brokerage commissions paid, the quality of execution, the
nature and quality of research services provided, and the amount of commissions
paid to firms providing research services are reviewed quarterly by the
Company's Board of Directors.
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Brokerage commissions paid by the Stock Index Fund on portfolio transactions
for the fiscal years ended May 31, 1996, 1995, and 1994, totalled $84,226,
$95,461, and $92,443, respectively. For the fiscal year ended May 31, 1996 the
Stock Index Fund paid no brokerage commissions to brokers for research services
provided to the Advisers.
Brokerage commissions paid by the MidCap Index Fund on portfolio
transactions for the fiscal years ended May 31, 1996, 1995, and 1994, totalled
$93,068, $118,210, and $138,626, respectively. For the fiscal year ended May 31,
1996, the MidCap Index Fund paid $522 in brokerage commissions, on transactions
totalling $798,747, to brokers selected on the basis of the quality of the
execution together with research services provided to the Advisers.
Brokerage commissions paid by the Small Cap Index Fund on portfolio
transactions for the fiscal year ended May 31, 1996, 1995 and 1994, totalled
$37,454, $36,808 and $64,996, respectively. For the fiscal year ended May 31,
1996, the Small Cap Index Fund paid no brokerage commissions to brokers for
research services provided to the Advisors.
Brokerage commissions paid by the International Equities Fund on portfolio
transactions for the fiscal years ended May 31, 1996, 1995, and 1994 totalled
$250,882, $187,369, and $28,981, respectively. For the fiscal year ended May 31,
1996, the International Equities Fund paid $203 in brokerage commissions, on
transactions totalling $55,108, to brokers selected on the basis of the quality
of the execution together with research services provided to VALIC.
Brokerage commissions paid by the Growth Fund on portfolio transactions for
the fiscal years ended May 31, 1996 and 1995, totalled $486,285 and $204,382,
respectively. Brokerage commissions paid by the Growth Fund on portfolio
transactions for the period beginning April 29, 1994 and ended May 31, 1994
totalled $16,320. For the fiscal year ended May 31, 1996, the Growth Fund paid
$85,153 in brokerage commissions, on transactions totalling $47,699,858, to
brokers selected on the basis of the quality of the execution together with
research services provided by VALIC.
Brokerage commissions paid by the Growth & Income Fund on portfolio
transactions for the fiscal year ended May 31, 1996 and 1995, totalled $112,767
and $81,155, respectively. Brokerage commissions paid by the Growth & Income
Fund on portfolio transactions for the period beginning April 29, 1994 and ended
May 31, 1994 totalled $8,400. For the fiscal year ended May 31, 1996, the Growth
& Income Fund paid $29,806 in brokerage commissions, on transactions totalling
$23,189,974, to brokers selected on the basis of the quality of the execution
together with research services provided to VALIC.
Brokerage commissions paid by the Social Awareness Fund on portfolio
transactions for the fiscal years ended May 31, 1996, 1995, and 1994, totalled
$99,297, $134,591, and $78,908, respectively. For the fiscal year ended May 31,
1996 the Social Awareness Fund paid $325 in brokerage commissions on
transactions totalling $149,798, to brokers selected on the basis of the quality
of the execution together with research services provided by VALIC.
Brokerage commissions paid by the Science & Technology Fund on portfolio
transactions for the fiscal year ended May 31, 1996 and 1995, totalled $664,932
and $182,202, respectively. Brokerage commissions paid by the Science &
Technology Fund on portfolio transactions for the period beginning April 29,
1994 and ended May 31, 1994 totalled $5,735. For the fiscal year ended May 31,
1996, the Science & Technology Fund paid $58,379 in brokerage commissions, on
transactions totalling $43,383,036, to brokers selected on the basis of the
quality of the execution together with research services provided to VALIC.
Brokerage commissions paid by the Timed Opportunity Fund on portfolio
transactions for the fiscal years ended May 31, 1996, 1995, and 1994, totalled
$235,223, $155,506, and $75,690, respectively. For the fiscal year ended May 31,
1996, the Timed Opportunity Fund paid $382 in brokerage commissions, on
transactions totalling $480,292 to brokers selected on the basis of the quality
of the execution together with research services provided to VALIC.
No brokerage commissions were paid by the Capital Conservation Fund,
Government Securities Fund, International Government Bond Fund
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and Money Market Fund for fiscal years ended May 31, 1996, 1995 and 1994.
Occasions may arise when one or more of the Funds or other accounts that may
be considered affiliated persons of the Funds under the 1940 Act desire to
purchase or sell the same portfolio security at approximately the same time. On
those occasions when such simultaneous purchase and sale transactions are made
such transaction will be allocated in an equitable manner according to written
procedures approved by the Company's Board of Directors. Specifically, such
written procedures provide that in allocating purchase and sale transactions
made on a combined basis the parties will seek to achieve the same net unit
price of securities for each Fund or other account and to allocate as nearly as
practicable, such transactions on a pro-rata basis substantially in proportion
to the amounts ordered to be purchased and sold by each Fund or other account.
In some cases, this procedure could have an adverse effect on the price or
quantity of securities available to the Funds. However, the Funds may,
alternatively, benefit from lower broker's commissions and/or correspondingly
lower costs for brokerage and research services by engaging in such combined
transactions. In the Advisers' opinion, the results of this procedure will, on
the whole, be in the best interest of each Fund.
OFFERING, PURCHASE, AND REDEMPTION OF FUND SHARES
Pursuant to a distribution agreement, the Variable Annuity Marketing Company
("VAMCO") acts without remuneration as the Company's agent in the distribution
of Fund shares to the VALIC, AG Life and AGNY separate accounts. VAMCO's address
is the same as that of VALIC.
The distribution agreement between VAMCO and the Company provides that it
shall continue in force from year to year, provided that such continuance is
approved at least annually (a)(i) by the Board of Directors of the Company, or
(ii) by vote of a majority of the Company's outstanding voting securities (as
defined in the 1940 Act) and (b) by the affirmative vote of a majority of the
Company's Directors who are not 'interested persons' (as defined in the 1940
Act) of the Company by votes cast in person at a meeting called for such
purpose. The distribution agreement may be terminated at any time, without
penalty, by a vote of the Board of Directors of the Company or by a vote of a
majority of the outstanding voting securities of the Company, or by VAMCO, on
sixty days' written notice to the other party. The distribution agreement also
provides that it shall automatically terminate in the event of its assignment.
Pursuant to the distribution agreement, VAMCO pays promotional and
advertising expenses and the cost of printing prospectuses used to offer and
sell shares of the Company (after typesetting and printing the copies required
for regulatory filings by the Company). Promotional and advertising expenses
include any expense related to distribution of shares of the Funds or
attributable to any activity primarily intended to result in the sale of shares,
including, for example, the preparation, printing, and distribution of
advertising and sales literature (including reports to shareholders used as
sales literature). VALIC reimburses VAMCO for these expenses. Thus all such
expenses incurred by VAMCO are passed directly on to VALIC, its parent. The
Company pays all expenses related to the registration of Fund shares under
federal and state laws, including registration and filing fees, the cost of
preparing the prospectus for such purpose, and related expenses of outside legal
and auditing firms.
As explained in the prospectus for the Contracts, payments of surrender
values, as well as lump sum payments available under the annuity options of the
Contracts, may be suspended or postponed at any time when redemption of shares
is suspended. Normally, the Company redeems Fund shares within seven days of
receipt of request therefor, but may postpone redemptions beyond seven days
when: (1) the New York Stock Exchange is closed for other than weekends and
customary holidays, or trading on the New York Stock Exchange becomes
restricted; (2) an emergency exists making disposal or valuation of a Fund's
assets not reasonably practicable; or (3) the Securities and Exchange Commission
has so permitted by order for the protection of the Company's shareholders.
The Company normally redeems Fund shares for cash. Although the Company,
with respect to each Fund, may make full or partial payment by
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assigning to the separate accounts investing in the Company portfolio securities
at their value used in determining the redemption price (i.e. by
redemption-in-kind), the Company, pursuant to Rule 18f-1 under the 1940 Act, has
filed a notification of election on Form 18f-1. Pursuant to this election, the
Company has committed itself to pay the separate accounts, in cash, all
redemptions made during any 90 day period, up to the lesser of $250,000 or 1% of
the Company's net asset value. The securities to be paid in-kind to the separate
accounts will be selected in such manner as the Board of Directors deems fair
and equitable. In such cases, the separate accounts would incur brokerage
expenses should they wish to liquidate these portfolio securities.
All shares are offered for sale and redeemed at net asset value. Net asset
value per share is determined by dividing the net assets of a Fund by the number
of that Fund's outstanding shares at such time.
DETERMINATION OF NET ASSET VALUE
Equity investments (including common stocks, preferred stocks, convertible
securities, and warrants) and call options written on all portfolio investments
listed or traded on a national exchange are valued at their last sale price on
that exchange prior to the time when assets are valued. In the absence of any
exchange sales on that day and for unlisted equity securities, such securities
and call options written on portfolio securities are valued at the last sale
price on the NASDAQ (National Association of Securities Dealers Automated
Quotations) National Market System. In the absence of any National Market System
sales on that day, equity securities are valued at the last reported bid price
and call options written on all portfolio securities for which other over-the-
counter market quotations are readily available are valued at the last reported
asked price.
U.S. Treasury securities and other obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities, are valued at representative
quoted prices. Such quotations generally are obtained from government securities
pricing services; however, in circumstances where it is deemed appropriate to do
so, quotations may be obtained from dealers in government securities.
Publicly-traded corporate bonds are valued at prices obtained from State
Street Bank and Trust Company.
Short-term debt securities for which market quotations are readily available
are valued at the last reported bid price, except for those with a remaining
maturity of 60 days or less which are valued by the amortized cost method
(unless, due to special circumstances, the use of such a method with respect to
any security would result in a valuation which does not approximate fair market
value).
Convertible bonds are valued at prices obtained from one or more of the
major dealers in such bonds. Where there is a discrepancy between dealers or
when no quotes are readily available, values may be adjusted based on a
combination of yields and premium spreads to the underlying common stock.
Portfolio securities that are primarily traded on foreign securities
exchanges are generally valued at the last sale price on the exchange where such
security is primarily traded. All foreign securities traded on the
over-the-counter market are valued at the last sale quote, if market quotations
are available, or the last closing bid price, if there is no active trading in a
particular security for a given day. Where market quotations are not readily
available for such foreign over-the-counter securities, then such securities
will be valued in good faith by a method that the Company's Board of Directors,
or its delegates, believes accurately reflects fair value. Quotations of foreign
securities in foreign currencies are converted, at current exchange rates, to
their U.S. dollar equivalents in order to determine their current value. In
addition, because of the need to value foreign securities (other than ADRs) as
of the close of trading on various exchanges and over-the-counter markets
throughout the world, the calculation of the net asset value of Funds investing
in such foreign securities may not take place contemporaneously with the
valuation of such foreign securities in those Funds' portfolios.
Options purchased by the Funds (including options on financial futures
contracts, stock indices, foreign currencies, and securities) listed on
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national securities exchanges are valued on the exchange where such security is
primarily traded.
Over-the-counter options purchased or sold by the Funds are valued based
upon prices provided by market-makers in such securities or dealers in such
currencies.
Exchange-traded financial futures contracts (including interest rate futures
contracts, stock index futures contracts, and currency futures contracts) are
valued at the settlement price for such contracts established each day by the
board of trade or exchange on which such contracts are traded. Unlisted
financial futures contracts are valued based upon prices provided by market-
makers in such financial futures contracts.
All of the assets of the Money Market Fund are valued on the basis of
amortized cost. Under the amortized cost method of valuation, securities are
valued at a price on a given date, and thereafter a constant accretion of any
discount or amortization of any premium to maturity is assumed, regardless of
the impact of fluctuating interest rates on the market value of the security.
While this method provides certainty in valuation it may result in periods in
which value as determined by amortized cost is higher or lower than the price a
Fund would receive if it sold the security. During such periods, the yield to
investors may differ somewhat from that obtained by a similar fund or portfolio
which uses available market quotations to value all of its portfolio securities.
The Company's Board of Directors has established procedures reasonably designed,
taking into account current market conditions and Money Market Fund's investment
objective, to stabilize the net asset value per share for purposes of sales and
redemptions at $1.00. These procedures include review by the Board, at such
intervals as it deems appropriate, to determine the extent, if any, to which the
net asset value per share calculated by using available market quotations
deviates from $1.00 per share. In the event such deviation should exceed one
half of one percent, the Board will promptly consider initiating corrective
action. If the Board believes that the extent of any deviation from a $1.00
amortized cost price per share may result in material dilution or other unfair
results to new or existing shareholders, it will take such steps as it considers
appropriate to eliminate or reduce these consequences to the extent reasonably
practicable. Such steps may include: selling portfolio securities prior to
maturity; shortening the average maturity of the portfolio; withholding or
reducing dividends; or utilizing a net asset value per share determined from
available market quotations. Even if these steps were taken, the Money Market
Fund's net asset value might still decline.
CALCULATION OF YIELD FOR THE MONEY MARKET FUND
The yield of the Money Market Fund is its net income expressed as a
percentage of assets on an annualized basis for a seven day period. Rule 482
under the Securities Act of 1933 requires that a yield quotation set forth in an
advertisement for a money market fund be computed by a standardized method based
on an historical seven calendar day period. The current yield is computed by
determining the net change (exclusive of realized gains and losses from the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, and then dividing the net change in account value by the value of
the account at the beginning of the base period to obtain the base period
return. The base period return is then multiplied by (365/7) to annualize the
yield figure. The determination of net change in account value reflects the
value of additional shares purchased with dividends from the original share,
dividends declared on both the original share and such additional shares, and
any fees that are charged to all shareholder accounts, in proportion to the
length of the base period and the Money Market Fund's average account size. The
Money Market Fund may also calculate its compound effective yield by compounding
the unannualized base period return (calculated as described above) by adding
one to the base period return, raising the sum to a power equal to 365 divided
by 7, and subtracting one.
The yield quoted by the Money Market Fund at any time represents the amount
being earned on a current basis for the indicated period and is a function of
the types of instruments in the Money Market Fund's portfolio, their quality and
length of maturity, and the Money Market Fund's operating expenses. The length
of maturity for the portfolio is the average dollar weighted maturity of the
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portfolio. In other words, the portfolio has an average maturity for all of its
issues, stated in numbers of days and weighted according to the relative value
of each investment.
The yield fluctuates daily as the income earned on the investments of the
Money Market Fund fluctuates. Accordingly, neither the Company nor VALIC can
assure the yield quoted on any given occasion will remain constant for any
period of time. For example, the Money Market Fund's yield will change if it
experiences a net inflow of new assets which it then invests in securities whose
yield is higher or lower than that being currently earned on investments.
Investments in the Money Market Fund are not insured and investors comparing
results of the Money Market Fund with investment results and yields from other
sources such as banks or savings and loan associations should understand this
distinction. In addition, other money market funds as well as banks and savings
and loan associations may calculate their yields on a different basis and the
yield quoted by the Money Market Fund from time-to-time could vary upwards or
downwards if another method of calculation or base period were used.
ACCOUNTING AND TAX TREATMENT
CALL AND PUTS
When a Fund writes a call or put option, an amount equal to the premium
received by it is included in that Fund'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
option written. The current market value of a written option is the last sale
price on the principal Exchange on which such option is traded. If a call option
which a Fund has written either expires on its stipulated expiration date, or if
a Fund enters into a closing purchase transaction, it realizes a gain (or loss
if the cost of the closing transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a call
option which a Fund has written is exercised, the Fund realizes a capital gain
or loss from the sale of the underlying security and proceeds from such sale are
increased by the premium originally received.
The premium paid by a Fund for the purchase of a put option is included in
the asset section of its Statement of Assets and Liabilities as an investment
and subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. The
current market value of a purchased option is the last sale price on the
principal Exchange on which such option is traded. If a put option which a Fund
has purchased expires unexercised it realizes a capital loss equal to the cost
of the option. If a Fund exercises a put option, it realizes a capital gain or
loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid.
FINANCIAL FUTURES CONTRACTS
Accounting for financial futures contracts will be in accordance with
generally accepted accounting principles. Initial margin deposits made upon
entering into financial futures contracts will be recognized as assets due from
the FCM (the Fund's agent in acquiring the futures position). During the period
the financial futures contract is open, changes in the value of the contract
will be recognized as unrealized gains or losses by "marking-to-market" on a
daily basis to reflect the market value of the contract at the end of each day's
trading. Variation (or maintenance) margin payments will be made or received,
depending upon whether gains or losses are incurred. Financial futures contracts
held by a Fund at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes (that is, treated as having been sold at
market value).
SUBCHAPTER M OF THE INTERNAL REVENUE CODE OF 1986
Each Fund of the Company intends to qualify annually as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). A
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Fund must meet several requirements to obtain and maintain its status as a
regulated investment company. Among these requirements are that: (i) at least
90% of a Fund's gross income be derived from dividends, interest, payments with
respect to securities loans and gains from the sale or disposition of
securities; (ii) less than 30% of a Fund's gross income be derived from gains
(without deduction for losses) from sales of securities held for less than three
months (legislation has been introduced in Congress, in each of the past several
years, which, if adopted, would repeal the requirement that less than 30% of a
Fund's gross income be derived from gains from the sale or other disposition of
securities held for less than three months); (iii) at the close of each quarter
of a Fund's taxable year (a) at least 50% of the value of the Fund's assets
consist of cash, government securities, securities of other regulated investment
companies and other securities (such other securities of any one issuer being
not greater than 5% of the value of a Fund and the Fund holding not more than
10% of the outstanding voting securities of any such issuer) and (b) not more
than 25% of the value of a Fund's assets be invested in the securities of any
one issuer (other than United States government securities or securities of
other regulated investment companies). Each Fund of the Company is treated as a
separate entity for federal income tax purposes.
The Internal Revenue Service ("Service") has ruled publicly that an
exchange-traded call option is a security for purposes of the 50% of assets test
and that its issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. It has ruled
privately (at the request of a taxpayer other than the Company) that income from
closing financial futures contracts is considered gain from a disposition of
securities for purposes of the 90% of gross income test, and that all of the
gain taken into income as a result of the mark-to-market rule will be treated as
gain from a sale of a security held for at least three months, regardless of
when the contract was acquired, for purposes of the 30% limitation on
less-than-three-month gains. However, since taxpayers other than the taxpayer
requesting a particular private ruling are not entitled to rely on such ruling,
the Company intends to keep its Funds' activity in futures contracts and options
at a low enough volume such that gains from closing futures contracts will not
exceed 10% of a Fund's gross income until the Service rules publicly on the
issues or the Company is otherwise satisfied that those gains are qualifying
income.
The requirement that less than 30% of a Fund's gross income be derived from
gains from the sale or other disposition of securities held for less than three
months may restrict a Fund's ability to write covered call options on securities
which it has held less than three months and on stock indices based on such
securities, to write options which expire in less than three months, and to
effect closing purchase transactions with respect to options which have been
written less than three months prior to such transactions. Consequently, in
order to avoid realizing a gain within the three month period, a Fund may be
required to defer the closing out of a contract beyond the time when it might
otherwise be advantageous to do so. A Fund may also be restricted in the
purchasing of put options for the purpose of hedging underlying securities
because of the application of short sale holding period rules with respect to
such underlying securities.
SECTION 817(H) OF THE CODE
Each of the Funds intends to comply with Section 817(h) of the Code and the
regulations issued thereunder. Section 817(h) of the Code and Treasury
Department regulations thereunder impose certain diversification requirements on
variable annuity contracts based upon segregated asset accounts. These
requirements are in addition to the diversification requirements of Subchapter M
and the 1940 Act and may affect the securities in which a Fund may invest.
Failure to meet the requirements of Section 817(h) could result in immediate
taxation of the Contract Owner to the extent of appreciation on investment under
the Contract.
The Section 817(h) diversification requirements do not apply to pension plan
contracts. "Pension plan contracts" for these purposes generally means annuity
contracts issued with respect to plans qualified under Section 401(a) or 403(a)
of the Code, Section 403(b) annuities, Individual Retirement Accounts,
Individual Retirement Annuities and annuities issued with respect to Section 457
plans.
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The Secretary of the Treasury may, in the future, issue additional
regulations that will prescribe the circumstances in which a Contract Owner's
control of the investments of the separate accounts investing in the Company may
cause the Contract Owner, rather than VALIC, to be treated as the owner of the
assets of that separate account.
In order to comply with the requirements of Section 817(h) and the
regulations thereunder, the Company may find it necessary to take action to
ensure that a Contract funded by the Company continues to qualify as such under
federal tax laws. The Company, for example, may be required to alter the
investment objectives of a Fund or Funds, or substitute the shares of one Fund
for those of another. No such change of investment objectives or substitution of
securities will take place without notice to the shareholders of the affected
Fund, and the approval of a majority of such shareholders (as defined in the
1940 Act) and without prior approval of the Securities and Exchange Commission,
to the extent legally required.
It is not feasible to comment on all of the federal income tax consequences
concerning the Funds. Each owner of a Contract funded by the Company should
consult a qualified tax adviser for more complete information. The reader should
refer to the appropriate prospectus related to his or her Contracts for a more
complete description of the taxation of the separate account and of the owner of
the particular Contract.
OTHER INFORMATION
SHAREHOLDER REPORTS
Annual Reports containing audited financial statements of the Company and
Semiannual Reports containing unaudited financial statements, as well as proxy
materials, are sent to Contract Owners, annuitants, or beneficiaries as
appropriate.
VOTING AND OTHER RIGHTS
The Company has an authorized capitalization of 13,000,000,000 shares of
common stock, $0.01 par value per share, 13,000,000,000 of which are authorized
to be issued in fourteen classes comprising 1,000,000,000 shares each. Each of
the thirteen classes of stock corresponds to one of the Funds and represents an
ownership interest in that Fund. See "Voting and Other Rights" in the Prospectus
for a full discussion of the manner in which shares of the Fund are voted.
VALIC has made initial organization investments in each of the following
Funds, and, as of May 31, 1996, owned of record the following percentage of the
outstanding shares of these Funds: 0% of the Stock Index Fund, 0% of the MidCap
Index Fund, 0% of the Small Cap Index Fund, 0% of the International Equities
Fund, 0% of the Growth Fund, 0% of the Growth & Income Fund, 13.53% of the
Capital Conservation Fund, 0% of the Government Securities Fund, 0% of the
International Government Bond Fund, 6.15% of the Social Awareness Fund, 0% of
the Science & Technology Fund, 0% of the Money Market Fund, and 0% of the Timed
Opportunity Fund.
VALIC's ownership of more than 25% of the outstanding shares may result in
VALIC's being deemed a controlling entity of each of those Funds as that term is
defined in the 1940 Act. Such control will dilute the effect of the votes of
other shareholders and contract owners.
As of May 31, 1996, VALIC Separate Account A owned of record the following
percentage of the outstanding shares of each Fund: 96.71% of the Stock Index
Fund, 99.99% of the MidCap Index Fund, 100% of the Small Cap Index Fund, 99.79%
of the International Equities Fund, 100% of the Growth Fund, 100% of the Growth
& Income Fund, 86.46% of the Capital Conservation Fund, 99.99% of the Government
Securities Fund, 100% of the International Government Bond Fund, 93.75% of the
Social Awareness Fund, 100% of the Science & Technology Fund, 99.99% of the
Money Market Fund, and 95.80% of the Timed Opportunity Fund.
As of May 31, 1996, the other shareholders of the Funds included AGL
Separate Account A, AGL Separate Account B, AGL Separate Account D, American
General Corporation Thrift Plan and VALIC Agents' and Managers' Thrift Plan.
None of these other shareholders owned of record more than 5% of any Fund's
outstanding shares.
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CUSTODY OF ASSETS
Pursuant to a Custodian Contract with the Company, State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, holds the cash and portfolio securities of the Company as custodian.
State Street is responsible for holding all securities and cash of each
Fund, receiving and paying for securities purchased, delivering against payment
securities sold, receiving and collecting income from investments, making all
payments covering expenses of the Company, and performing other administrative
duties, all as directed by persons authorized by the Company. State Street does
not exercise any supervisory function in such matters as the purchase and sale
of portfolio securities, payment of dividends, or payment of expenses of the
Funds or the Company. Portfolio securities of the Funds purchased domestically
are maintained in the custody of State Street and may be entered into the book
entry systems of securities depositories approved by the Board of Directors.
Pursuant to the Custodian Contract, portfolio securities purchased outside the
United States will be maintained in the custody of various foreign branches of
State Street and such other custodians, including foreign banks and foreign
securities depositories, as are approved by the Board of Directors, in
accordance with regulations under the 1940 Act.
State Street holds securities of the Funds on which call options have been
written and certain assets of the Funds constituting margin deposits with
respect to financial futures contracts at the disposal of the FCMs through which
such transactions are effected. The Funds may also be required to post margin
deposits with respect to covered call and put options written on stock indices
and for this purpose certain assets of those Funds may be held by the custodian
pursuant to similar arrangements with the brokers involved.
This arrangement regarding margin deposits essentially consists of State
Street creating a separate segregated account into which it transfers (upon the
Company's instructions) assets from a Fund's general (regular) custodial
account. The custody agreement for such arrangement provides that FCMs or
brokers will have access to the funds in the segregated accounts when and if the
FCMs or brokers represent that the Company has defaulted on its obligation to
the FCMs or brokers and that the FCMs or brokers have met all the conditions
precedent to their right to receive such funds under the agreement between the
Company and the FCMs or brokers. The Company has an agreement with each FCM or
broker which provides (1) that the assets of any Fund held by the FCM or broker
will be in the possession of State Street until released or sold or otherwise
disposed of in accordance with or under the terms of such agreement, (2) that
such assets would not otherwise be pledged or encumbered by the FCM or broker,
(3) that when requested by the Company the FCM or broker will cause State Street
to release to its general custodial account any assets to which a Fund is
entitled under the terms of such agreement, and (4) that the assets in the
segregated account shall otherwise be used only to satisfy the Company's
obligations to the FCM or broker under the terms of such agreement.
If on any day a Fund experiences net realized or unrealized gains with
respect to financial futures contracts or covered options on stock indices held
through a given FCM or broker, it is entitled immediately to receive from the
FCM or broker, and usually will receive by the next business day, the net amount
of such gains. Thereupon, such assets will be deposited in its general or
segregated account with State Street, as appropriate.
INDEX FUNDS
The Small Cap Index Fund is not promoted, sponsored or endorsed by, nor in
any way affiliated with Frank Russell Company. Frank Russell Company is not
responsible for and has not reviewed the Fund nor any associated literature or
publications and Frank Russell Company makes no representation or warranty,
express or implied, as to their accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change its Index(es). Frank Russell
Company has no obligation to take the needs of any particular fund or its
participants or any product or person into consideration in determining,
comprising or calculating the Index(es).
38
<PAGE> 93
Frank Russell Company's publication of the Index(es) in no way suggests or
implies an opinion by Frank Russell Company as to the attractiveness or
appropriateness of investment in any or all securities upon which the Index(es)
is (are) based. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION, WARRANTY, OR
GUARANTEE AS TO THE ACCURACY, COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE
INDEX(ES) OR ANY DATA INCLUDED IN THE INDEX(ES). FRANK RUSSELL COMPANY MAKES NO
REPRESENTATION OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF THE
INDEX(ES) OR ANY DATA INCLUDED THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF)
COMPRISING THE INDEX(ES). FRANK RUSSELL COMPANY MAKES NO OTHER EXPRESS OR
IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ANY WARRANTY, OF ANY KIND, INCLUDING
WITHOUT MEANS OR LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEX(ES) OR ANY DATA OR ANY SECURITY (OR
COMBINATION THEREOF) INCLUDED THEREIN.
The Stock Index Fund and the MidCap Index Fund are not sponsored, endorsed,
sold or promoted by Standard & Poor's Corporation ("S&P"). S&P makes no
representation or warranty, express or implied, to the Company or its
participants regarding the advisability of investing in securities generally or
in the Stock Index Fund or MidCap Index Fund particularly or the ability of the
S&P Index or the S&P MidCap 400 Index Fund to track general stock market
performance. S&P has no obligation to take the need of the Company or the
Company's participants into consideration in determining, composing or
calculating the S&P 500 Index or S&P MidCap 400 Index. S&P is not responsible
for and has not participated in the determination of the prices and amount of
the Stock Index Fund or MidCap Index Fund or the timing of the issuance or sale
of such Funds or in the determination or calculation of the equation by which
such Funds are to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the Funds.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE COMPANY FROM
THE USE OF THE S&P 500 INDEX OR S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
DESCRIPTION OF CORPORATE BOND RATINGS
Moody's Investors Service, Inc.'s corporate bond ratings are as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.
39
<PAGE> 94
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements and
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
Standard & Poor's Corporation classifications are as follows:
AAA -- This is the highest rating assigned by Standard & Poor's to a
financial obligation and indicates an extremely strong capacity to meet its
financial commitment.
AA -- An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB -- Obligations rated "BBB" exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
BB-B-CCC-CC -- Obligations rated "BB", "B", "CCC" and "CC" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "CC" a higher degree of speculation. While such obligations
will likely have some quality and protective characteristics, they may be
outweighed by large uncertainties or major exposures to adverse conditions.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A and Prime Commercial Paper Ratings.
Commercial paper rated A by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better, although, in some cases "BBB" credits may be allowed. The issuer
has access to at least two additional channels of borrowing. Basic earnings and
cash flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned. The rating is described by S&P as the investment grade category,
the highest rating classification. Relative strength or weakness of the above
factors determine whether the issuer's commercial paper is rated A-1, A-2 or
A-3.
Among the factors considered by Moody's in assigning commercial paper
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Relative differ-
40
<PAGE> 95
ences in strengths and weaknesses in respect of these criteria establish a
rating in one of three classifications. The rating Prime-1 is the highest
commercial paper rating assigned by Moody's. Its other two ratings, Prime-2 and
Prime-3 are designated Higher Quality and High Quality, respectively.
INDEPENDENT AUDITORS
Ernst & Young LLP, One Houston Center, 1221 McKinney, Suite 2400, Houston,
Texas 77010, serve as independent accountants and auditors of the Company.
41
<PAGE> 96
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
- ---------------------------- -------------------------- -------------------------------------
<S> <C> <C>
Stephen D. Bickel*.......... President and Chairman Chairman, Chief Executive Officer and
2929 Allen Parkway since 1988 Director, VALIC; Chairman of the
Houston, Texas 77019 Board of Directors, VAMCO. Formerly,
President, Chief Executive Officer,
and Director, VALIC (1988-1994);
Executive Vice President -- Actuarial
& Tax, American General Corporation
(1987-1988); Senior Vice President &
Actuary, American General Corporation
(1983-1987).
Thomas L. West, Jr.*........ Director since 1994 President and Director, VALIC.
2929 Allen Parkway Formerly Senior Vice President
Houston, Texas 77019 Annuity Business Unit -- Aetna Life
Insurance & Annuity Co. (1987-1994).
Joe C. Osborne*............. Director since 1992 Senior Vice President -- Marketing
2929 Allen Parkway and Director, VALIC; President and
Houston, Texas 77019 Director, VAMCO; Formerly, Executive
Vice President -- Marketing, VALIC
(1987-1989); Senior Vice
President -- Marketing, VALIC
(1983-1987).
Peter V. Tuters*............ Director since 1992 Vice President, Chief Investment
2929 Allen Parkway Officer and Director, VALIC; Senior
Houston, Texas 77019 Vice President, Chief Investment
Officer, American General
Corporation; Vice President -- Bonds,
Crown Life Insurance Company
(1977-1992).
Dr. Norman Hackerman........ Director since 1984 Chairman -- Scientific Advisory Board
4605 Post Oak Place The Robert A. Welch Foundation; (Di-
Suite 200 rector, First Federal Savings and
Houston, TX 77027 Loan Association of Austin; Radian
Corporation (Research and
Development); Tracor, Inc. (Research
and Development, Electronic
Equipment); Sum X Corporation
(Research and Development); Vista
Chemical Corporation (Chemicals);
Consultant, FuelTech, (National
Science Board.) Formerly, President,
Rice University, Houston, Texas
(1970-1985).(1)(2)(4)
Dr. John W. Lancaster....... Director since 1984 Retired. Formerly, Pastor, First
229 Texas Extension Rd. Presbyterian Church, Houston,
Montreat, NC 28757 Texas.(4)
Dr. F. Robert Paulsen....... Director since 1985 Dean Emeritus and Professor, College
2801 N. Indian Ruins of Higher Education, The University
Tucson, AZ 85715 of Arizona, Tucson,
Arizona.(1)(2)(3)(4)
</TABLE>
- ------------
* Interested persons of the Company as defined in the 1940 Act specifically
because of their capacity as officers, directors or consultants of the
Company, VALIC or American General Corporation.
(1) A managing general partner of American Capital Exchange Fund.
(2) A director of American Capital Bond Fund, Inc., American Capital Income Fund
Inc. and American Capital Convertible Securities Fund, Inc.
(3) A trustee of Common Sense Trust.
(4) Directors who are not interested persons of the Company receive an annual
retainer of $16,000. In addition, such directors are paid a per meeting fee
of $1,500 plus expenses incurred.
42
<PAGE> 97
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
- ---------------------------- -------------------------- -------------------------------------
<S> <C> <C>
Dr. R. Miller Upton......... Director since 1984 Economist; President, Elkhorn, Stud,
3201 South Short Dr. Inc. Director, Household
Delavan, WI 43115 International, Inc. (1965-1989).
Formerly, Director, Home Life
Insurance Company of
New York (1965-1988) President, of
Beloit College, Wisconsin. (1954-
1975)(1)(2)(4)
Ben H. Love................. Director since 1991 Chief Executive, Boy Scouts of
1325 West Walnut Hill Lane America. (Retired)(4)
Irving, Texas 75015
</TABLE>
Listed below are the Company's officers and their principal occupations. All
are affiliates of VALIC and are located at 2929 Allen Parkway, Houston, Texas
77019. Each officer serves until his or her successor is elected and shall
qualify.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME WITH REGISTRANT DURING PAST 5 YEARS
- ---------------------------- -------------------------- -------------------------------------
<S> <C> <C>
Norman Jaskol............... Vice President & Senior Vice President and Managing
Investment Officer since Director -- Investments, VALIC.
1988 Formerly, Senior Vice
President -- Portfolio Manager, Lo-
mas Capital Management Company
(1987-1988); Deputy Executive Direc-
tor -- Investments, Colorado Public
Employees Retirement Association
(1978-1987).
Teresa Moro................. Vice President & Invest- Trader -- VALIC. Formerly, Money Mar-
ment Officer since 1990 ket Trader, VALIC (1986-1990); AIM
Management Group Inc. (1983-1986).
John W. Mossbarger.......... Vice President and Invest- Portfolio Manager, VALIC. Formerly
ment Officer since 1992 Managing Director, Common Stocks
American General Corporation
(1989-1992) Senior Vice President
Equity Investments American General
Corporation (1988- 1989) Vice
President and Trust Officer Texas
Commerce Bank N.A. (1982- 1988).
Leon A. Olver............... Vice President & Invest- Portfolio Manager, VALIC. Formerly
ment Officer since 1995 Vice President Treasurer, First
Heights Bank (1994-1995), Vice
President, Assistant Treasurer, First
Heights Bank (1991-1994); Assistant
Vice President Pulte Financial
Companies (1984-1991).
William Trimbur, Jr......... Vice President & Invest- Portfolio Manager, VALIC. Formerly,
ment Officer since 1987 Second Vice President, VALIC (1985-
1990); Controller, VALIC (1985-1986);
Assistant Controller, VALIC
(1982-1985) and Assistant Treasurer,
VALIC (1982-1986)
</TABLE>
43
<PAGE> 98
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME WITH REGISTRANT DURING PAST 5 YEARS
- ---------------------------- -------------------------- -------------------------------------
<S> <C> <C>
Brent C. Nelson............. Vice President since 1987 Senior Vice President and Controller,
Director, VALIC. Formerly, Vice
President and Controller, VALIC
(1990-1994); Controller, VALIC
(1987-1990); Second Vice President
and Controller, VALIC (1986-1987);
Second Vice President -- Fund
Operations, VALIC (1985-1986);
Assistant Vice President --
Controller, Lomas Financial Security
Insurance Co. (1982-1985).
Cynthia A. Toles............ General Counsel and Sec- Senior Associate General Counsel and
retary since 1985 Secretary, VALIC. Secretary and
Assistant Treasurer, VAMCO. Formerly,
Vice President, Associate General
Counsel & Assistant Secretary (1988-
1989); Second Vice President,
Associate General Counsel and
Assistant Secretary, VALIC
(1986-1988); Assistant Vice
President, Assistant General Counsel
and Assistant Secretary, VALIC (1983-
1986).
Gregory R. Seward........... Treasurer and Controller Director of Fund Operations and
since 1991 Assistant Controller, VALIC.
Formerly, Controller, Avanti Health
Systems, Inc. (1988-1991); Reports
Manager, American Capital Asset
Management, Inc. (1986-1988); Senior
Auditor, Price Waterhouse
(1982-1986).
Betty J. North.............. Assistant Vice President Senior Compliance Analyst, VALIC.
since 1991 Formerly, Vice President, American
Capital Advisors (1982-1987).
David H. den Boer........... Assistant Secretary since Associate General Counsel, VALIC.
1991 Formerly, Senior Counsel, VALIC
(1989-1990); Private Law Practice
(1981-1989).
Kay Kramer.................. Assistant Controller since Manager, Variable Product Accounting.
1996 Formerly, Project Analyst, Securities
Accounting American General
Corporation (1992-1996), Accountant
II Common Trust Funds, Texas Commerce
Bank (1990-1992).
Debra A. Yeang.............. Assistant Treasurer since Manager -- Fund Reporting, VALIC.
1992 Formerly, Staff Accountant -- Fund
Operations, VALIC (1991-1992); Senior
Auditor, Arthur Andersen (1987-1991).
</TABLE>
44
<PAGE> 99
The officers conduct and supervise the daily business operations of the
Company, while the directors, in addition to their functions set forth under
"Investment Adviser," review such actions and decide on general policy.
The Company has an Audit Committee. The Company's Audit Committee consists
of Messrs. Lancaster, Hackerman, Paulsen, Upton, and Love. The Audit Committee
recommends to the Board the selection of independent auditors for the Company
and reviews with such independent auditors the scope and results of the annual
audit, reviews the performance of the accounts, and considers any comments of
the independent auditors regarding the Company's financial statements or books
of account. The Company does not have a standing nominating or compensation
committee.
The five directors of the Company who are not affiliated with VALIC are each
paid annual directors' fees and are reimbursed for certain out-of-pocket
expenses by the Company.
The directors and officers of the Company and members of their families as a
group, beneficially owned less than 1% of the common stock of each Fund
outstanding as of May 31, 1996.
FINANCIAL STATEMENTS
The financial statements for the year ended May 31, 1996 and the report of
independent auditors for that period are included in the American General Series
Portfolio Company Annual Report for that period.
The Annual Report to shareholders as of May 31, 1996 is incorporated by
reference in this Statement of Additional Information. The financial statements
included in the Annual Report and incorporated by reference in this Statement of
Additional Information have been audited by Ernst & Young LLP, Independent
Auditors, as set forth in their report thereon which appears in the Annual
Report and have been incorporated by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
45
<PAGE> 100
********************
* *
* ANNUAL REPORT *
* MAY 31, 1996 *
* *
********************
AMERICAN
GENERAL
SERIES
PORTFOLIO
COMPANY
---------------------------------
<PAGE> 101
================================================================================
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ANNUAL REPORT MAY 31, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stock Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MidCap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Small Cap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
International Equities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Growth & Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Science & Technology Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Social Awareness Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Timed Opportunity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Capital Conservation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Government Securities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
International Government Bond Fund . . . . . . . . . . . . . . . . . . . . . . . 75
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 93
</TABLE>
<PAGE> 102
================================================================================
AGSPC PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
We are pleased to provide the May 31, 1996 Annual Report of the American
General Series Portfolio Company. This report details the investments of each
of the thirteen funds that comprise the American General Series Portfolio
Company and provides financial and performance information for each fund for
the fiscal year ended May 31, 1996.
Your variable annuity contract permits you to invest in one or more of the
funds described in this report. The funds that are available under your
contract are shown on the chart on page 4.
MARKET CONDITIONS
Domestic stock returns for the fiscal year ended May 31, 1996 were well above
long term trends. The Standard & Poor's 500 Stock Index provided a total return
of 28.43%. Bond returns were below historic standards even though the Federal
Reserve Board reduced interest rates three times during the year. The rate on
Federal Funds (the rate banks charge each other for loans to meet reserve
requirements) was reduced in one-quarter point increments on July 6, 1995,
December 19, 1995 and January 31, 1996. Nevertheless, the yield on the long
term U.S. Government bond increased from a low of 5.95% on December 29, 1995 to
6.99% on May 31, 1996. Rising long term yields during a period of lower short
term rates is attributed to investor expectations of a stronger economy. For
the year, the Merrill Lynch Corporate Master Bond index had a total return of
4.57% and the Lehman Bros. U.S. Treasury index returned 3.99%.
Economic forecasts are calling for a strong second quarter followed by a
deceleration for the balance of the year. The 100 basis point rise in interest
rates mentioned above should dampen consumer spending for the second half of
the year.
The stock market, measured by the Standard & Poor's 500 Index (S&P 500(R)),
trended upward throughout the year with a 7.95% return for the third calendar
quarter followed by a return of 6.02% in the fourth quarter. The market
leveled in the early months of 1996 but picked up again in May.
International returns, as measured by the Morgan Stanley Capital International
Index of Europe, Australia, and Far East (EAFE) reached 10.67%. The performance
of the EAFE Index reflected rallies in Japan and particularly in Europe. The
local returns were moderated by a gently rising dollar.
FUND RETURNS
INDEXED FUNDS
The Stock Index Fund and the MidCap Index Fund achieved positive tracking
within ten basis points of their respective indexes. The Small Cap Index Fund
achieved a total return of 34.5% but fell short of its index by 98 basis
points. International Equities Fund exceeded its index return by 89 basis
points.
MANAGED FUNDS
Returns among the growth oriented funds were notable when measured by historic
standards. Positions in major growth stocks and technology issues were the
prime factors in the above average performance for the year.
The AGSPC Growth Fund exceeded the S&P 500 by 19.86%. The diversification of
the fund between financial, consumer and business services proved to be a very
good strategy. A reduction in consumer services and increases in financial and
business services took place during the course of the year.
The AGSPC Growth & Income Fund returned 7.21% more than the S&P 500. The fund
benefited from good issue selection as evidenced by the technology sector where
networking and software stocks outperformed semiconductor stocks. Other areas
contributing to the outperformance were oil service, retail and apparel
related, tobacco and food retailers.
The AGSPC Science & Technology Fund surpassed the S&P 500 by 30.79%. Most of
the fund's absolute performance was generated during the first half of the
fiscal year when electronic technology stocks surged. In the second half of the
fiscal year the fund achieved much of its relative performance when investments
in the healthcare, data services, and telecom/media provided stability during a
difficult period for electronic technology stocks.
The Social Awareness Fund experienced a 0.98% tracking difference versus the
S&P 500. This performance is attributed to underweighting of aerospace, oil
refining and international oil. Overweighting of telephone, food, business
machines and oil service issues further contributed to the positive
performance.
1
<PAGE> 103
================================================================================
AGSPC PRESIDENT'S LETTER -- CONTINUED
- --------------------------------------------------------------------------------
The Timed Opportunity Fund outperformed its benchmark of 55% stocks, 35% bonds
and 10% cash by 1.42%. Very positive stock returns more than made up for lesser
returns from bonds and cash. The asset allocations favored equity investments
during this period.
BOND FUNDS
The Capital Conservation Fund underperformed its index by 0.59% for the year.
Results in the declining interest rate environment of 1995 were positive while
the increased interest rates in the early months of 1996 exerted a negative
effect.
The Government Securities Fund experienced a negative tracking difference of
0.11% versus its index. Price sensitivity in excess of the index caused the
variance and adjustments have been made to improve results.
The International Government Bond Fund achieved a positive tracking difference
of 0.66% versus its index but both the fund and the index returns were
negative. The major international bond markets such as Japan, Germany and
France experienced both lower prices and weaker currencies. The fund
outperformed the index due to a slight overweight position in Australia, Italy,
Sweden and Spain. Those countries had bond rallies and stable currencies.
FUTURE OUTLOOK
The U.S. economic performance for the first half of 1996 has exceeded
expectations. The 2.2% gain in Gross Domestic Product (GDP) reported for the
first quarter is expected to be followed by an increase of 4% for the second
quarter. The 100 basis point increase in interest rates in recent months should
dampen economic growth in the second half of the year. For the fourth quarter,
projections are in the area of 1% GDP growth. Only modest progress for the
first half of 1997 should permit a reduction in interest rates. Some forecasts
are calling for a long term Treasury bond yield of less than 6.5%. Generally, a
lower interest rate setting and modest economic growth have been positive for
investors.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, President
American General Series Portfolio Company
July 12, 1996
2
<PAGE> 104
================================================================================
AGSPC PRESIDENT'S LETTER -- CONTINUED
- --------------------------------------------------------------------------------
FUND RETURNS AND TRACKING DIFFERENCES
FOR THE TWELVE MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
FUND TOTAL
PERFORMANCE INDEX
BEFORE RETURN
SUBTRACTING INCLUDING TRACKING
FUND FUND EXPENSES REINVESTED DIFFERENCE
AGSPC FUND/RELEVANT MARKET INDEX RETURN(A) EXPENSES (1) + (2) DIVIDENDS (3) -- (4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDEXED FUNDS:
Stock Index Fund / S&P 500 . . . . . . . . . . . . . . . . . . . . 28.17% 0.35% 28.52% 28.43% 0.09%
MidCap Index Fund / Standard & Poor's MidCap 400 . . . . . . . . . 28.10 0.41 28.51 28.45 0.06
Small Cap Index Fund / Russell 2000(R) . . . . . . . . . . . . . . 34.50 0.41 34.91 35.89 (0.98)
International Equities Fund / EAFE . . . . . . . . . . . . . . . . 11.14 0.42 11.56 10.67 0.89
MANAGED FUNDS:
Growth Fund / S&P 500 . . . . . . . . . . . . . . . . . . . . . . . 47.46 0.83 48.29 28.43 19.86
Growth & Income Fund / S&P 500 . . . . . . . . . . . . . . . . . . 34.85 0.79 35.64 28.43 7.21
Science & Technology Fund / S&P 500 . . . . . . . . . . . . . . . . 58.28 0.94 59.22 28.43 30.79
Social Awareness Fund / S&P 500 . . . . . . . . . . . . . . . . . . 28.85 0.56 29.41 28.43 0.98
Timed Opportunity Fund / Benchmark(b) . . . . . . . . . . . . . . . 17.90 0.57 18.47 17.05 1.42
Capital Conservation Fund / Merrill Lynch Corporate Master Bond . . 3.41 0.57 3.98 4.57 (0.59)
Government Securities Fund / Lehman Bros U.S. Treasury . . . . . . 3.32 0.56 3.88 3.99 (0.11)
Intl Gov't Bond Fund / Salomon Non U.S. Gov't Bond . . . . . . . . (1.91) 0.56 (1.35) (2.01) 0.66
Money Market Fund / 30 Day Certificate of Deposit
Primary Offering Rate by New York City Banks
(NYC 30 Day CD Rate) . . . . . . . . . . . . . . . . . . . . . . 5.26 0.57 5.83 4.72 1.11
</TABLE>
(a) Fund level returns are net of investment management fees and other fund
expenses, but do not reflect charges specified in annuity contracts for
mortality and expense guarantees (1.00%), administrative fees, or
surrender charges.
(b) Benchmark consists of 55% S&P 500 Index, 35% Merrill Lynch Corporate and
Government Master Index, and 10% NYC 30 Day CD Rate.
3
<PAGE> 105
================================================================================
AGSPC PRESIDENT'S LETTER -- CONTINUED
- --------------------------------------------------------------------------------
SUMMARY OF NET ASSET VALUES PER SHARE
AND PER SHARE DISTRIBUTIONS
<TABLE>
<CAPTION>
DISTRIBUTIONS FROM NET
INVESTMENT INCOME AND
NET REALIZED GAINS
NET ASSET VALUES ON SECURITIES
------------------------------- ----------------------
NOVEMBER 30,
MAY 31, 1995 MAY 31, 6/1/95 TO 12/1/95 TO
FUND 1995 (UNAUDITED) 1996 11/30/95 5/31/96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stock Index (emulate S & P 500) . . . . . . . . . . . . . . . $16.81 $19.10 $20.69 $0.18 $0.59
MidCap Index (emulate MidCap 400) . . . . . . . . . . . . . . 15.68 18.04 19.09 0.12 0.77
Small Cap Index (emulate Russell 2000) . . . . . . . . . . . 12.49 14.22 16.25 0.09 0.39
International Equities (foreign long term growth stocks) . . 10.42 10.53 11.15 0.08 0.33
Growth Fund (long term growth of capital) . . . . . . . . . . 11.43 14.64 16.49 0.02 0.30
Growth & Income Fund (long term growth of capital
and current income) . . . . . . . . . . . . . . . . . . . 11.09 12.99 14.78 0.04 0.12
Science & Technology Fund (long term growth of capital) . . . 14.43 20.29 20.48 0.02 2.01
Social Awareness (social criteria growth stocks) . . . . . . 13.02 14.88 15.49 0.13 1.03
Timed Opportunity (asset allocation) . . . . . . . . . . . . 11.24 12.15 12.55 0.23 0.43
Capital Conservation (quality corporate bonds) . . . . . . . 9.52 9.79 9.23 0.31 0.31
Government Securities (intermediate and
long term government bonds) . . . . . . . . . . . . . . . 9.89 10.12 9.61 0.31 0.30
International Government Bond (high quality
foreign government debt securities) . . . . . . . . . . . 12.72 12.25 11.79 0.33 0.36
Money Market (money market instruments) . . . . . . . . . . . 1.00 1.00 1.00 0.03 0.02
</TABLE>
The change in net asset value of the funds will not be the same as the change
in the accumulation unit value of your annuity contract because (1) the change
in net asset value does not reflect the reinvestment of income and capital gain
distributions and (2) the mortality and expense charges described in your
annuity contract are not included.
FUNDS AVAILABLE UNDER
VARIABLE ANNUITY CONTRACTS
<TABLE>
<CAPTION>
VALIC SEPARATE ACCOUNT A
---------------------------------------
CONTRACT FORM
--------------------------------------- AG LIFE
SEPARATE ACCOUNT A AG LIFE AG LIFE
INDEPENDENCE GROUP ------------------- SEPARATE SEPARATE
PORTFOLIO PLUS IMPACT UNIT NON ACCOUNT ACCOUNT
FUND DIRECTOR* UIT(G)-585 UIT-981 PURCHASE** QUALIFIED QUALIFIED B D
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index (emulate S & P 500) . . . . . . Yes Yes Yes Yes Yes Yes Yes Yes
MidCap Index (emulate MidCap 400) . . . . . Yes Yes Yes No Yes Yes Yes No
Small Cap Index (emulate Russell 2000) . . Yes Yes No No No No No No
International Equities (foreign long term
growth stocks) . . . . . . . . . . . . . Yes Yes No No No No No Yes
Growth Fund (long term growth of capital) . Yes No No No No No No No
Growth & Income Fund (long term growth
of capital and current income) . . . . . Yes No No No No No No No
Science & Technology Fund (long term
growth of capital) . . . . . . . . . . . Yes No No No No No No No
Social Awareness (social criteria growth
stocks) . . . . . . . . . . . . . . . . Yes Yes No No No No No Yes
Timed Opportunity (asset allocation) . . . Yes Yes Yes No Yes Yes Yes No
Capital Conservation (quality corporate
bonds) . . . . . . . . . . . . . . . . . Yes Yes Yes No Yes Yes Yes No
Government Securities (intermediate and
long term government bonds) . . . . . . Yes Yes No No Yes Yes Yes No
Int'l Government Bond (high quality
foreign government debt securities) . . Yes Yes No No No No No No
Money Market (money market instruments) . . Yes Yes Yes No Yes Yes Yes No
</TABLE>
*UIT(G)194, UITN-194, UIT-IRA-194, UIT-SEP-194
**GUP, IVA, GVA SA-1, GVA SA-2
4
<PAGE> 106
STOCK INDEX FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 98.08%
ADVERTISING - 0.06%
21,700 Interpublic Group of Companies, Inc. $ 1,006,338
--------------
AEROSPACE/DEFENSE - 2.25%
120,850 Boeing Co. . . . . . . . . . . . . . 10,302,462
29,000 EG & G, Inc. . . . . . . . . . . . . 630,750
18,880 General Dynamics Corp. . . . . . . . 1,163,480
70,784 Lockheed Martin Corp. . . . . . . . . 5,937,008
61,600 * Loral Space & Communications
Limited . . . . . . . . . . . . . 985,600
38,800 McDonnell Douglas Corp. . . . . . . . 3,918,800
18,100 Northrop Grumman Corp. . . . . . . . 1,133,513
86,500 Raytheon Co. . . . . . . . . . . . . 4,606,125
68,900 Rockwell International Corp. . . . . 4,022,038
22,000 TRW Inc. . . . . . . . . . . . . . . 2,073,500
44,700 United Technologies Corp. . . . . . . 4,889,062
--------------
39,662,338
--------------
AIRLINES - 0.38%
28,700 * AMR Corp. . . . . . . . . . . . . . . 2,708,562
20,100 Delta Air Lines, Inc. . . . . . . . . 1,665,788
55,200 Southwest Airlines Co. . . . . . . . 1,511,100
41,400 * USAir Group, Inc. . . . . . . . . . . 817,650
--------------
6,703,100
--------------
APPAREL & PRODUCTS - 0.09%
16,500 * Fruit of the Loom, Inc. Class A . . . 445,500
32,900 Liz Claiborne, Inc. . . . . . . . . . 1,221,413
--------------
1,666,913
--------------
APPLIANCES/FURNISHINGS - 0.12%
21,800 Maytag Corp. . . . . . . . . . . . . 468,700
27,800 Whirlpool Corp. . . . . . . . . . . . 1,581,125
--------------
2,049,825
--------------
AUTO - CARS - 2.10%
131,937 Chrysler Corp. . . . . . . . . . . . 8,790,303
374,600 Ford Motor Co. . . . . . . . . . . . 13,672,900
263,400 General Motors Corp. . . . . . . . . 14,519,925
--------------
36,983,128
--------------
AUTO - REPLACEMENT PARTS - 0.37%
18,700 Cooper Tire & Rubber Co. . . . . . . 451,138
14,300 Echlin Inc. . . . . . . . . . . . . . 491,562
49,600 Genuine Parts Co. . . . . . . . . . . 2,256,800
56,800 Goodyear Tire & Rubber Co. . . . . . 2,868,400
15,800 Pep Boys- Manny, Moe & Jack . . . . . 521,400
--------------
6,589,300
--------------
BANKS - NEW YORK CITY - 1.98%
73,300 Bank of New York Co., Inc. . . . . . 3,802,438
154,082 Chase Manhattan Corp. . . . . . . . . 10,785,740
170,500 CitiCorp. . . . . . . . . . . . . . . 14,322,000
67,900 J.P. Morgan & Co. Inc. . . . . . . . 5,898,812
--------------
34,808,990
--------------
BANKS - OTHER - 2.48%
44,200 Bank of Boston Corp. . . . . . . . . $ 2,204,475
129,368 BankAmerica Corp. . . . . . . . . . . 9,734,942
120,623 First Chicago Corp. . . . . . . . . . 5,262,178
102,397 First Union Corp. . . . . . . . . . . 6,259,017
96,793 Fleet Financial Group, Inc. . . . . . 4,270,991
43,500 Mellon Bank Corp. . . . . . . . . . . 2,484,937
69,700 National City Corp. . . . . . . . . . 2,483,063
14,000 Republic of New York Corp. . . . . . 885,500
44,400 US Bancorp . . . . . . . . . . . . . 1,581,750
34,933 Wells Fargo & Co. . . . . . . . . . . 8,418,853
--------------
43,585,706
--------------
BANKS - REGIONAL - 2.46%
163,172 Banc One Corp. . . . . . . . . . . . 6,037,364
37,500 Barnett Banks, Inc. . . . . . . . . . 2,343,750
41,800 Boatmen's Bancshares, Inc. . . . . . 1,690,288
32,700 Comerica Inc. . . . . . . . . . . . . 1,430,625
81,400 CoreStates Financial Corp. . . . . . 3,205,125
30,200 Fifth Third Bancorp . . . . . . . . . 1,645,900
53,500 First Bank System, Inc. . . . . . . . 3,230,063
83,770 KeyCorp. . . . . . . . . . . . . . . 3,246,087
97,702 NationsBank Corp. . . . . . . . . . . 7,926,075
117,900 Norwest Corp. . . . . . . . . . . . . 4,111,762
110,100 PNC Bank Corp. . . . . . . . . . . . 3,344,287
72,200 SunTrust Banks, Inc. . . . . . . . . 2,635,300
55,513 Wachovia Corp. . . . . . . . . . . . 2,380,120
--------------
43,226,746
--------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.65%
11,900 Adolph Coors Class B . . . . . . . . 223,125
86,500 Anheuser- Busch Companies, Inc. . . . 6,163,125
18,915 Brown-Forman Corp Class B . . . . . . 768,422
121,700 Seagram Co. Ltd . . . . . . . . . . . 4,213,862
--------------
11,368,534
--------------
BEVERAGE - SOFT DRINKS - 3.29%
863,700 Coca-Cola Co. . . . . . . . . . . . . 39,730,200
547,800 PepsiCo, Inc. . . . . . . . . . . . . 18,214,350
--------------
57,944,550
--------------
BROADCASTING - 0.82%
71,850 Comcast Corp. Class A Special . . . . 1,248,394
34,000 * General Instrument Corp. . . . . . . 1,049,750
207,800 Tele-Communications, Inc. Class A . . 3,922,225
155,300 * U S West Media Group . . . . . . . . 2,931,287
125,000 * Viacom Inc. Class B . . . . . . . . . 5,296,875
--------------
14,448,531
--------------
BUILDING MATERIALS - 0.31%
8,900 Armstrong World Industries, Inc. . . 523,987
57,100 Lowe's Companies, Inc. . . . . . . . 1,955,675
57,500 Masco Corp. . . . . . . . . . . . . . 1,796,875
28,200 Sherwin-Williams Co. . . . . . . . . 1,265,475
--------------
5,542,012
--------------
</TABLE>
5
<PAGE> 107
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
CHEMICAL - MAJOR - 2.47%
88,300 Dow Chemical Co. . . . . . . . . . . $ 7,384,087
194,500 E.I. du Pont de Nemours and Co. . . . 15,511,375
11,800 Goodrich (B.F.) Co. . . . . . . . . . 467,575
39,300 Hercules Inc. . . . . . . . . . . . . 2,230,275
41,800 Monsanto Co. . . . . . . . . . . . . 6,348,375
54,900 Morton International, Inc. . . . . . 2,086,200
66,500 PPG Industries Inc. . . . . . . . . . 3,441,375
16,600 Rohm and Haas Co. . . . . . . . . . . 1,124,650
48,900 Union Carbide Corp. . . . . . . . . . 2,108,813
36,500 W.R. Grace & Co. . . . . . . . . . . 2,719,250
--------------
43,421,975
--------------
CHEMICAL - MISCELLANEOUS - 0.68%
41,100 Air Products and Chemicals, Inc. . . 2,445,450
30,637 Eastman Chemical Co. . . . . . . . . 2,052,679
8,550 Ecolab Inc. . . . . . . . . . . . . . 277,875
8,200 * FMC Corp. . . . . . . . . . . . . . . 551,450
26,500 Great Lakes Chemical Corp. . . . . . 1,709,250
30,800 Mallinckrodt Group Inc. . . . . . . . 1,158,850
9,328 Millipore Corp. . . . . . . . . . . . 409,266
20,300 Nalco Chemical Co. . . . . . . . . . 644,525
46,300 Praxair, Inc. . . . . . . . . . . . 1,880,937
16,200 Sigma Aldrich Corp. . . . . . . . . . 907,200
--------------
12,037,482
--------------
CONGLOMERATES - 1.21%
100,700 AlliedSignal Inc. . . . . . . . . . . 5,513,325
24,000 Dial Corp. . . . . . . . . . . . . . 690,000
43,800 * ITT Corp. . . . . . . . . . . . . . . 2,693,700
38,800 ITT Inds, Inc. . . . . . . . . . . . 1,062,150
35,000 Loews Corp. . . . . . . . . . . . . . 2,791,250
3,900 Ogden Corp. . . . . . . . . . . . . . 75,563
17,000 Teledyne, Inc. . . . . . . . . . . . 641,750
63,200 Tenneco Inc. . . . . . . . . . . . . 3,397,000
24,300 Textron Inc. . . . . . . . . . . . . 2,059,425
42,400 Tyco International Ltd . . . . . . . 1,674,800
25,900 Whitman Corp. . . . . . . . . . . . . 650,737
--------------
21,249,700
--------------
CONSUMER FINANCE - 0.15%
11,600 Beneficial Corp. . . . . . . . . . . 675,700
64,500 MBNA Corp. . . . . . . . . . . . . . 1,975,313
--------------
2,651,013
--------------
CONTAINERS - METAL/GLASS - 0.13%
4,700 Ball Corp. . . . . . . . . . . . . . 129,838
46,900 Crown Cork & Seal Co., Inc. . . . . . 2,192,575
--------------
2,322,413
--------------
CONTAINERS - PAPER - 0.05%
6,500 Bemis Co., Inc. . . . . . . . . . . . 215,313
13,300 Temple-Inland Inc. . . . . . . . . . 655,025
--------------
870,338
--------------
COSMETICS/TOILETRIES - 0.73%
3,400 Alberto-Culver Co. Class B . . . . . $ 134,725
19,300 Avon Products, Inc. . . . . . . . . . 1,785,250
156,600 Gillette Co. . . . . . . . . . . . . 9,258,975
34,800 International Flavors & Fragrances, Inc. 1,692,150
--------------
12,871,100
--------------
DRUGS - 6.23%
14,200 Allergan, Inc. . . . . . . . . . . . 546,700
31,600 * ALZA Corp. . . . . . . . . . . . . . 900,600
220,400 American Home Products Corp. . . . . 11,791,400
94,000 * Amgen Inc. . . . . . . . . . . . . . 5,593,000
176,100 Bristol Myers Squibb Co. . . . . . . 15,034,538
192,900 Eli Lilly and Co. . . . . . . . . . . 12,393,825
425,000 Merck & Co., Inc. . . . . . . . . . . 27,465,625
222,000 Pfizer Inc. . . . . . . . . . . . . . 15,706,500
128,800 Schering-Plough Corp. . . . . . . . . 7,550,900
179,270 Upjohn Co. . . . . . . . . . . . . . 7,327,661
97,000 Warner-Lambert Co. . . . . . . . . . 5,432,000
--------------
109,742,749
--------------
ELECTRICAL EQUIPMENT - 3.66%
74,000 AMP Inc. . . . . . . . . . . . . . . 3,117,250
20,000 * Cabletron Systems, Inc. . . . . . . . 1,455,000
79,500 Emerson Electric Co. . . . . . . . . 6,807,187
573,600 General Electric Co. . . . . . . . . 47,465,400
9,200 National Service Industries, Inc. . . 357,650
20,200 Raychem Corp. . . . . . . . . . . . . 1,509,950
6,800 Thomas & Betts Corp. . . . . . . . . 261,800
14,200 W. W. Grainger Inc. . . . . . . . . . 949,625
135,400 Westinghouse Electric Corp. . . . . . 2,487,975
--------------
64,411,837
--------------
ELECTRONIC INSTRUMENTS - 0.14%
22,800 General Signal Corp. . . . . . . . . 872,100
28,400 * Intergraph Corp. . . . . . . . . . . 372,750
19,400 Perkin-Elmer Corp. . . . . . . . . . 1,028,200
3,600 Tektronix, Inc. . . . . . . . . . . . 136,800
--------------
2,409,850
--------------
ENTERTAINMENT - 1.48%
39,200 Harrah's Entertainment, Inc. . . . . 1,318,100
35,350 Hasbro, Inc. . . . . . . . . . . . . 1,334,463
16,200 * King World Productions, Inc. . . . . 676,350
97,187 Mattel, Inc. . . . . . . . . . . . . 2,648,346
139,900 Time Warner Inc. . . . . . . . . . . 5,648,462
236,352 Walt Disney Co. . . . . . . . . . . . 14,358,384
--------------
25,984,105
--------------
FINANCE COMPANIES - 0.19%
40,400 Green Tree Financial Corp. . . . . . 1,323,100
27,900 Household International, Inc. . . . . 1,932,075
--------------
3,255,175
--------------
</TABLE>
6
<PAGE> 108
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
FOODS - 2.46%
160,424 Archer Daniels Midland Co. . . . . . $ 3,128,268
83,000 Campbell Soup Co. . . . . . . . . . . 5,353,500
88,950 ConAgra, Inc. . . . . . . . . . . . . 3,791,494
53,000 CPC International Inc. . . . . . . . 3,663,625
58,500 General Mills, Inc. . . . . . . . . . 3,356,438
123,150 H J Heinz Co. . . . . . . . . . . . . 4,094,737
23,500 Hershey Foods Corp. . . . . . . . . . 1,709,625
77,500 Kellogg Co. . . . . . . . . . . . . . 5,638,125
24,100 Pioneer Hi-Bred International, Inc. . 1,361,650
45,000 Quaker Oats Co. . . . . . . . . . . . 1,580,625
37,700 Ralston Purina Co. . . . . . . . . . 2,309,125
172,700 Sara Lee Corp. . . . . . . . . . . . 5,763,862
31,300 Wm. Wrigley Jr. Co. . . . . . . . . . 1,639,338
--------------
43,390,412
--------------
FOOTWEAR - 0.27%
16,900 Brown Group, Inc. . . . . . . . . . . 287,300
34,000 NIKE Inc. Class B . . . . . . . . . . 3,412,750
13,792 * Payless ShoeSource Inc. . . . . . . . 387,900
20,700 Reebok International Ltd. . . . . . . 628,762
3,800 Stride Rite Corp. . . . . . . . . . . 34,200
--------------
4,750,912
--------------
FREIGHT - 0.09%
20,600 * Federal Express Corp. . . . . . . . . 1,578,475
--------------
GOLD MINING - 0.46%
128,100 Barrick Gold Corp. . . . . . . . . . 4,035,150
21,800 Echo Bay Mines Ltd . . . . . . . . . 294,300
53,900 Homestake Mining Co. . . . . . . . . 1,111,688
88,900 Placer Dome Inc. . . . . . . . . . . 2,633,662
--------------
8,074,800
--------------
GOVERNMENT SPONSORED - 0.97%
63,900 Federal Home Loan Mortgage Corp. . . 5,279,738
381,700 Federal National Mortgage
Association . . . . . . . . . . . 11,784,987
--------------
17,064,725
--------------
HARDWARE & TOOLS - 0.11%
22,200 Black & Decker Corp. . . . . . . . . 912,975
7,700 Snap-on Inc. . . . . . . . . . . . . 370,563
11,400 Stanley Works . . . . . . . . . . . . 691,125
--------------
1,974,663
--------------
HEALTHCARE - 0.38%
56,900 U.S. Healthcare, Inc. . . . . . . . . 3,086,825
64,700 United HealthCare Corp. . . . . . . . 3,550,412
--------------
6,637,237
--------------
HEAVY DUTY TRUCKS/PARTS - 0.27%
19,700 Cummins Engine Co., Inc. . . . . . . $ 837,250
27,100 Dana Corp. . . . . . . . . . . . . . 907,850
31,300 Eaton Corp. . . . . . . . . . . . . . 1,811,487
39,010 * Navistar International Corp. . . . . 404,729
16,355 PACCAR Inc. . . . . . . . . . . . . . 805,484
--------------
4,766,800
--------------
HOME BUILDERS - 0.05%
16,600 Centex Corp. . . . . . . . . . . . . 500,075
14,456 Kaufman & Broad Home Corp. . . . . . 215,033
7,900 Pulte Corp. . . . . . . . . . . . . . 221,200
--------------
936,308
--------------
HOSPITAL MANAGEMENT - 0.69%
8,000 * Beverly Enterprises, Inc. . . . . . . 98,000
157,023 Columbia/HCA Healthcare Corp. . . . . 8,459,614
8,950 * Community Psychiatric Centers . . . . 85,025
45,800 * Humana Inc. . . . . . . . . . . . . . 1,007,600
13,000 Manor Care, Inc. . . . . . . . . . . 507,000
13,100 Shared Medical Systems Corp. . . . . 876,063
54,900 * Tenet Healthcare Corp. . . . . . . . 1,180,350
--------------
12,213,652
--------------
HOSPITAL SUPPLIES - 2.94%
275,200 Abbott Laboratories . . . . . . . . . 11,868,000
8,400 Bard (C. R.), Inc. . . . . . . . . . 276,150
23,900 Bausch & Lomb Inc. . . . . . . . . . 1,027,700
100,000 Baxter International Inc. . . . . . . 4,425,000
23,200 Becton, Dickinson and Co. . . . . . . 1,972,000
29,000 * Biomet, Inc. . . . . . . . . . . . . 406,000
57,177 * Boston Scientific Corp. . . . . . . . 2,451,464
231,100 Johnson & Johnson . . . . . . . . . . 22,503,362
84,400 Medtronic, Inc. . . . . . . . . . . . 4,747,500
30,450 * St. Jude Medical, Inc. . . . . . . . 1,157,100
25,700 United States Surgical Corp. . . . . 880,225
--------------
51,714,501
--------------
HOUSEHOLD PRODUCTS - 2.76%
14,400 Clorox Co. . . . . . . . . . . . . . 1,225,800
52,900 Colgate-Palmolive Co. . . . . . . . . 4,165,875
147,000 Minnesota Mining &
Manufacturing Co. . . . . . . . . 10,032,750
59,000 Newell Co. . . . . . . . . . . . . . 1,770,000
24,200 Premark International Inc. . . . . . 390,225
238,126 Procter & Gamble Co. . . . . . . . . 20,925,322
47,900 Rubbermaid, Inc. . . . . . . . . . . 1,341,200
24,200 * Tupperware Corp. . . . . . . . . . . 1,107,150
56,500 Unilever N V- ADR . . . . . . . . . . 7,620,438
--------------
48,578,760
--------------
</TABLE>
7
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STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
INFORMATION PROCESSING - 9.09%
53,500 * Amdahl Corp. . . . . . . . . . . . . $ 628,625
48,200 Apple Computer, Inc. . . . . . . . . 1,259,225
22,200 Autodesk, Inc. . . . . . . . . . . . 771,450
105,200 Automatic Data Processing, Inc. . . . 4,037,050
70,700 * Bay Networks, Inc. . . . . . . . . . 2,050,300
21,152 * Ceridian Corp. . . . . . . . . . . . 1,118,412
199,000 * Cisco Systems, Inc. . . . . . . . . . 10,895,250
96,300 * Compaq Computer Corp. . . . . . . . . 4,682,587
85,725 Computer Associates International,Inc. 6,236,494
14,900 * Computer Sciences Corp. . . . . . . . 1,175,238
396 * Cray Research, Inc. . . . . . . . . . 10,841
56,300 * Digital Equipment Corp. . . . . . . . 2,934,637
82,900 * EMC Corp. . . . . . . . . . . . . . . 1,834,162
79,327 First Data Corp. . . . . . . . . . . 6,326,328
40,100 H&R Block Inc. . . . . . . . . . . . 1,398,488
177,000 Hewlett-Packard Co. . . . . . . . . . 18,894,750
35,500 Honeywell Inc. . . . . . . . . . . . 1,801,625
284,900 Intel Corp. . . . . . . . . . . . . . 21,509,950
188,700 International Business Machines
Corp. . . . . . . . . . . . . . . 20,143,725
205,700 * Microsoft Corp. . . . . . . . . . . . 24,426,875
139,900 * Novell, Inc. . . . . . . . . . . . . 1,993,575
230,725 * Oracle Corp. . . . . . . . . . . . . 7,642,766
52,800 Pitney Bowes Inc. . . . . . . . . . . 2,620,200
58,100 * Silicon Graphics, Inc. . . . . . . . 1,597,750
67,500 * Sun Microsystems, Inc. . . . . . . . 4,227,187
26,800 * Tandem Computers Inc. . . . . . . . . 335,000
61,800 * 3Com Corp. . . . . . . . . . . . . . 3,043,650
37,700 * Unisys Corp. . . . . . . . . . . . . 306,313
38,600 Xerox Corp. . . . . . . . . . . . . . 6,074,675
--------------
159,977,128
--------------
INSURANCE - CASUALTY - 0.35%
64,600 Chubb Corp. . . . . . . . . . . . . . 3,011,975
47,400 SAFECO Corp. . . . . . . . . . . . . 1,596,787
24,300 St. Paul Companies, Inc. . . . . . . 1,284,863
13,900 USF & G Corp. . . . . . . . . . . . . 222,400
--------------
6,116,025
--------------
INSURANCE - LIFE - 0.34%
30,375 Jefferson-Pilot Corp. . . . . . . . . 1,560,516
37,300 Lincoln National Corp. . . . . . . . 1,753,100
20,200 Torchmark Corp. . . . . . . . . . . . 861,025
21,109 Transamerica Corp. . . . . . . . . . 1,709,829
2,550 USLIFE Corp. . . . . . . . . . . . . 76,500
--------------
5,960,970
--------------
INSURANCE - MISCELLANEOUS - 0.35%
3,200 Alexander & Alexander Services Inc. . 63,600
29,900 General Reinsurance Corp. . . . . . . 4,365,400
28,800 UNUM Corp. . . . . . . . . . . . . . 1,699,200
--------------
6,128,200
--------------
INSURANCE - MULTILINE - 2.47%
43,600 Aetna Life and Casualty Co. . . . . . $ 3,215,500
158,520 Allstate Corp. . . . . . . . . . . . 6,697,470
165,218 American International Group, Inc. . 15,571,796
33,000 Aon Corp. . . . . . . . . . . . . . . 1,662,375
28,300 CIGNA Corp. . . . . . . . . . . . . . 3,250,962
42,500 ITT Hartford Group, Inc. . . . . . . 2,199,375
21,700 Marsh & McLennan Companies, Inc. . . 2,031,663
44,500 Providian Corp. . . . . . . . . . . . 1,941,313
168,134 Travelers Group, Inc. . . . . . . . . 6,977,540
--------------
43,547,994
--------------
LEISURE TIME - 0.05%
16,100 Bally Entertainment Corp. . . . . . . 386,400
17,900 Brunswick Corp. . . . . . . . . . . . 400,512
8,700 Outboard Marine Corp. . . . . . . . . 168,563
--------------
955,475
--------------
LODGING - 0.22%
18,500 Hilton Hotels Corp. . . . . . . . . . 1,993,375
38,100 Marriot International, Inc. . . . . . 1,809,750
--------------
3,803,125
--------------
MACHINE TOOLS - 0.03%
4,700 Cincinnati Milacron Inc. . . . . . . 112,800
22,800 Giddings & Lewis, Inc. . . . . . . . 379,050
--------------
491,850
--------------
MACHINERY - AGRICULTURE - 0.30%
19,200 Case Corp. . . . . . . . . . . . . . 962,400
95,400 Deere & Co. . . . . . . . . . . . . . 3,971,025
5,340 * Varity Corp. . . . . . . . . . . . . 262,327
--------------
5,195,752
--------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.41%
70,000 Caterpillar Inc. . . . . . . . . . . 4,593,750
31,500 Fluor Corp. . . . . . . . . . . . . . 2,055,375
2,600 Foster Wheeler Corp. . . . . . . . . 115,700
10,800 Harnischfeger Industries, Inc. . . . 378,000
--------------
7,142,825
--------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.57%
14,600 Briggs & Stratton Corp. . . . . . . . 627,800
42,700 Cooper Industries, Inc. . . . . . . . 1,820,087
32,400 Dover Corp. . . . . . . . . . . . . . 1,539,000
33,600 Illinois Tool Works Inc. . . . . . . 2,251,200
25,600 Ingersoll-Rand Co. . . . . . . . . . 1,078,400
16,000 Johnson Controls, Inc. . . . . . . . 1,116,000
25,633 Pall Corp. . . . . . . . . . . . . . 685,683
16,350 Parker Hannifin Corp. . . . . . . . . 666,263
6,400 Timken Co. . . . . . . . . . . . . . 252,000
1,600 TRINOVA Corp. . . . . . . . . . . . . 52,800
--------------
10,089,233
--------------
</TABLE>
8
<PAGE> 110
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
MERCHANDISE - DRUG - 0.19%
8,300 Longs Drug Stores Corp. . . . . . . . $ 355,863
24,200 Rite Aid Corp. . . . . . . . . . . . 710,875
72,800 Walgreen Co. . . . . . . . . . . . . 2,320,500
--------------
3,387,238
--------------
MERCHANDISE - SPECIALTY - 1.31%
32,900 American Greetings Corp. Class A . . 892,413
29,500 Charming Shoppes, Inc. . . . . . . . 236,000
27,100 Circuit City Stores, Inc. . . . . . . 884,138
106,000 Gap, Inc. . . . . . . . . . . . . . . 3,564,250
167,700 Home Depot, Inc. . . . . . . . . . . 8,573,662
973 Jostens Inc. . . . . . . . . . . . . 22,014
70,598 Limited, Inc. . . . . . . . . . . . . 1,464,909
41,700 Melville Corp. . . . . . . . . . . . 1,694,062
32,000 Nordstrom, Inc. . . . . . . . . . . . 1,632,000
16,800 Tandy Corp. . . . . . . . . . . . . . 907,200
18,600 TJX Companies, Inc. . . . . . . . . . 655,650
89,225 * Toys "R" Us, Inc. . . . . . . . . . . 2,587,525
--------------
23,113,823
--------------
MERCHANDISING - DEPARTMENT - 0.66%
26,900 Dayton Hudson Corp. . . . . . . . . . 2,743,800
30,800 Dillard Department Stores, Inc.
Class A . . . . . . . . . . . . . 1,232,000
70,900 * Federated Department Stores, Inc. . . 2,454,912
86,200 May Department Stores Co. . . . . . . 4,083,725
16,000 Mercantile Stores Co., Inc. . . . . . 1,032,000
--------------
11,546,437
--------------
MERCHANDISING - FOOD - 0.73%
92,400 Albertsons, Inc. . . . . . . . . . . 3,684,450
37,300 American Stores Co. . . . . . . . . . 1,394,087
6,900 Fleming Companies, Inc. . . . . . . . 107,813
15,500 Giant Food Inc. Class A . . . . . . . 534,750
15,300 Great Atlantic & Pacific Tea Co.,Inc. 524,025
47,800 * Kroger Co. . . . . . . . . . . . . . 1,876,150
16,700 Supervalu Inc. . . . . . . . . . . . 517,700
71,900 SYSCO Corp. . . . . . . . . . . . . . 2,453,587
52,000 Winn-Dixie Stores, Inc. . . . . . . . 1,794,000
--------------
12,886,562
--------------
MERCHANDISING - MASS - 2.06%
81,400 J.C. Penney Co., Inc. . . . . . . . . 4,222,625
179,400 KMart Corp. . . . . . . . . . . . . . 2,085,525
82,622 * Price/Costco, Inc. . . . . . . . . . 1,652,440
138,600 Sears Roebuck and Co. . . . . . . . . 7,051,275
796,100 Wal-Mart Stores, Inc. . . . . . . . . 20,599,087
35,000 * Woolworth Corp. . . . . . . . . . . . 717,500
--------------
36,328,452
--------------
METALS - ALUMINUM - 0.42%
68,000 Alcan Aluminium Ltd . . . . . . . . . 2,227,000
63,400 Aluminum Co. of America . . . . . . . 3,907,025
24,800 Reynolds Metals Co. . . . . . . . . . 1,339,200
--------------
7,473,225
--------------
METALS - COPPER - 0.24%
9,200 ASARCO Inc. . . . . . . . . . . . . . $ 288,650
35,149 Newmont Mining Corp. . . . . . . . . 2,117,727
26,200 Phelps Dodge Corp. . . . . . . . . . 1,794,700
--------------
4,201,077
--------------
METALS - MISCELLANEOUS - 0.27%
31,350 Cyprus Amax Minerals Co. . . . . . . 752,400
57,075 Engelhard Corp. . . . . . . . . . . . 1,398,337
47,000 Freeport-McMoRan Copper & Gold
Inc. Class B . . . . . . . . . . . 1,562,750
32,300 Inco Limited . . . . . . . . . . . . 1,053,788
--------------
4,767,275
--------------
METALS - STEEL - 0.24%
22,300 * Armco Inc. . . . . . . . . . . . . . 117,075
21,900 * Bethlehem Steel Corp. . . . . . . . . 279,225
20,200 Inland Steel Industries, Inc. . . . . 436,825
31,100 Nucor Corp. . . . . . . . . . . . . . 1,710,500
29,620 USX-US Steel Group, Inc. . . . . . . 918,220
38,925 Worthington Industries, Inc. . . . . 783,366
--------------
4,245,211
--------------
MISCELLANEOUS - 0.47%
84,900 Corning Inc. . . . . . . . . . . . . 3,247,425
68,300 * CUC International Inc. . . . . . . . 2,527,100
12,100 * Owens Corning . . . . . . . . . . . . 487,025
36,350 Service Corp. International . . . . . 2,031,056
--------------
8,292,606
--------------
MOBILE HOMES - 0.03%
14,600 Fleetwood Enterprises, Inc. . . . . . 439,825
--------------
NATURAL GAS - DIVERSIFIED - 0.22%
26,000 Coastal Corp. . . . . . . . . . . . . 1,066,000
11,200 ENSEARCH Corp. . . . . . . . . . . . 242,200
8,800 NorAm Energy Corp. . . . . . . . . . 93,500
47,929 PanEnergy Corp. . . . . . . . . . . . 1,539,719
23,700 Sonat Inc. . . . . . . . . . . . . . 1,004,288
--------------
3,945,707
--------------
OIL - INTEGRATED DOMESTIC - 2.18%
34,000 Amerada Hess Corp. . . . . . . . . . 1,938,000
173,400 Amoco Corp. . . . . . . . . . . . . . 12,571,500
10,000 Ashland Oil, Inc. . . . . . . . . . . 427,500
57,000 Atlantic Richfield Co. . . . . . . . 6,818,625
47,300 Burlington Resources Inc. . . . . . . 1,797,400
11,100 Kerr-McGee Corp. . . . . . . . . . . 652,125
117,700 Occidental Petroleum Corp. . . . . . 3,045,487
40,800 * Oryx Energy Co. . . . . . . . . . . . 663,000
11,000 Pennzoil Co. . . . . . . . . . . . . 475,750
95,500 Phillips Petroleum Co. . . . . . . . 3,963,250
40,202 * Santa Fe Energy Resources, Inc. . . . 482,424
29,016 Sun Co., Inc. . . . . . . . . . . . . 888,615
87,500 Unocal Corp. . . . . . . . . . . . . 2,843,750
87,000 USX-Marathon Group . . . . . . . . . 1,903,125
--------------
38,470,551
--------------
</TABLE>
9
<PAGE> 111
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
OIL - INTEGRATED
INTERNATIONAL - 5.74%
227,700 Chevron Corp. . . . . . . . . . . . . $ 13,605,075
429,000 Exxon Corp. . . . . . . . . . . . . . 36,357,750
137,300 Mobil Corp. . . . . . . . . . . . . . 15,497,737
185,500 Royal Dutch Petroleum Co. - ADR . . . 27,825,000
93,200 Texaco Inc. . . . . . . . . . . . . . 7,805,500
--------------
101,091,062
--------------
OIL - SERVICES - 0.85%
55,700 Baker Hughes Inc. . . . . . . . . . . 1,747,588
69,600 Dresser Industries, Inc. . . . . . . 2,035,800
43,300 Halliburton Co. . . . . . . . . . . . 2,408,562
24,000 McDermott International, Inc. . . . . 522,000
85,900 Schlumberger Ltd . . . . . . . . . . 7,161,912
18,500 * Western Atlas Inc. . . . . . . . . . 1,133,125
--------------
15,008,987
--------------
OIL/GAS PRODUCERS - 0.03%
3,000 Helmerich & Payne, Inc. . . . . . . . 108,750
8,700 Louisiana Land & Exploration Co. . . 468,713
--------------
577,463
--------------
PAPER/FOREST PRODUCTS - 1.69%
41,000 Alco Standard Corp. . . . . . . . . . 2,562,500
24,100 Avery Dennison Corp. . . . . . . . . 1,373,700
8,366 Boise Cascade Corp. . . . . . . . . . 351,372
36,500 Champion International Corp. . . . . 1,610,562
34,100 Georgia-Pacific Corp. . . . . . . . . 2,463,725
107,018 International Paper Co. . . . . . . . 4,267,343
33,100 James River Corp. of Virginia . . . . 823,363
99,266 Kimberly-Clark Corp. . . . . . . . . 7,234,010
41,600 Louisiana Pacific Corp. . . . . . . . 1,024,400
16,000 Mead Corp. . . . . . . . . . . . . . 860,000
4,900 Potlatch Corp. . . . . . . . . . . . 202,125
23,364 Stone Container Corp. . . . . . . . . 362,142
27,250 Union Camp Corp. . . . . . . . . . . 1,434,031
26,850 Westvaco Corp. . . . . . . . . . . . 859,200
72,800 Weyerhaeuser Co. . . . . . . . . . . 3,303,300
17,500 Willamette Industries, Inc. . . . . . 1,050,000
--------------
29,781,773
--------------
PHOTOGRAPHY - 0.54%
121,550 Eastman Kodak Co. . . . . . . . . . . 9,040,281
10,400 Polaroid Corp. . . . . . . . . . . . 468,000
--------------
9,508,281
--------------
POLLUTION CONTROL - 0.53%
76,500 Browning-Ferris Industries, Inc. . . 2,333,250
71,800 Laidlaw Inc Class B . . . . . . . . . 726,975
50 Safety-Kleen Corp. . . . . . . . . . 831
175,900 WMX Technologies, Inc. . . . . . . . 6,200,475
--------------
9,261,531
--------------
PUBLISHING - NEWS - 0.55%
31,600 Dow Jones & Co., Inc. . . . . . . . . $ 1,236,350
47,600 Gannett Co., Inc. . . . . . . . . . . 3,320,100
21,200 Knight-Ridder, Inc. . . . . . . . . . 1,584,700
22,200 New York Times Co. Class A . . . . . 729,825
39,732 Times Mirror Co. . . . . . . . . . . 1,733,308
15,600 Tribune Co. . . . . . . . . . . . . . 1,156,350
--------------
9,760,633
--------------
PUBLISHING/PRINTING - 0.49%
21,700 Deluxe Corp. . . . . . . . . . . . . 786,625
60,200 Dun & Bradstreet Corp. . . . . . . . 3,845,275
19,217 Harcourt General, Inc. . . . . . . . 975,263
24,000 McGraw-Hill, Inc. . . . . . . . . . . 1,125,000
21,600 Moore Corp. Ltd . . . . . . . . . . . 402,300
39,200 R R Donnelley & Sons Co. . . . . . . 1,440,600
--------------
8,575,063
--------------
RAILROAD - 1.12%
46,917 Burlington Northern Inc. . . . . . . 3,976,216
29,300 Conrail Inc. . . . . . . . . . . . . 2,058,325
73,600 CSX Corp. . . . . . . . . . . . . . . 3,643,200
48,300 Norfolk Southern Corp. . . . . . . . 4,165,875
45,309 Santa Fe Pacific Gold Corp. . . . . . 690,962
73,700 Union Pacific Corp. . . . . . . . . . 5,168,212
--------------
19,702,790
--------------
RESTAURANTS - 0.75%
55,800 Darden Restaurants, Inc. . . . . . . 662,625
7,550 Luby's Cafeterias, Inc. . . . . . . . 185,919
245,000 McDonald's Corp. . . . . . . . . . . 11,790,625
7,800 * Shoney's, Inc. . . . . . . . . . . . 95,550
30,000 Wendy's International, Inc. . . . . . 540,000
--------------
13,274,719
--------------
SAVINGS & LOAN - 0.18%
25,100 Golden West Financial Corp. . . . . . 1,377,363
47,050 Great Western Financial Corp. . . . . 1,082,150
24,900 H.F. Ahmanson & Co. . . . . . . . . . 641,175
--------------
3,100,688
--------------
SECURITIES RELATED - 1.13%
170,400 American Express Co. . . . . . . . . 7,795,800
61,648 Dean Witter, Discover & Co. . . . . . 3,652,644
62,400 Merrill Lynch & Co., Inc. . . . . . . 4,040,400
53,900 Morgan Stanley Group Inc. . . . . . . 2,668,050
41,500 Salomon Inc. . . . . . . . . . . . . 1,737,812
--------------
19,894,706
--------------
SEMICONDUCTORS - 1.46%
37,000 * Advanced Micro Devices, Inc. . . . . 652,125
67,100 * Applied Materials, Inc. . . . . . . . 2,499,475
49,800 * LSI Logic Corp. . . . . . . . . . . . 1,550,025
77,700 Micron Technology, Inc. . . . . . . . 2,505,825
206,500 Motorola, Inc. . . . . . . . . . . . 13,783,875
46,700 * National Semiconductor Corp. . . . . 758,875
69,100 Texas Instruments Inc. . . . . . . . 3,886,875
--------------
25,637,075
--------------
</TABLE>
10
<PAGE> 112
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
TELECOMMUNICATIONS - 1.16%
158,600 * Airtouch Communications, Inc. . . . . $ 5,055,375
56,300 ALLTEL Corp. . . . . . . . . . . . . 1,773,450
15,490 * Andrew Corp. . . . . . . . . . . . . 840,333
45,900 * DSC Communications Corp. . . . . . . 1,382,737
6,600 Harris Corp. . . . . . . . . . . . . 426,525
85,800 Northern Telecommunications Corp . . 4,654,650
29,500 Scientific-Atlanta, Inc. . . . . . . 556,813
33,800 * Tellabs, Inc. . . . . . . . . . . . . 2,180,100
70,900 * WorldCom, Inc. . . . . . . . . . . . 3,465,237
--------------
20,335,220
--------------
TEXTILE - PRODUCTS - 0.08%
11,400 Russell Corp. . . . . . . . . . . . . 313,500
17,600 VF Corp. . . . . . . . . . . . . . . 1,071,400
--------------
1,384,900
--------------
TOBACCO - 1.91%
62,800 American Brands, Inc. . . . . . . . . 2,747,500
287,200 Philip Morris Cos Inc. . . . . . . . 28,540,500
73,300 UST Corp. . . . . . . . . . . . . . . 2,418,900
--------------
33,706,900
--------------
TRUCKERS - 0.07%
14,200 Caliber System, Inc. . . . . . . . . 527,175
2,300 Consolidated Freightways, Inc. . . . 54,625
15,900 Ryder System, Inc. . . . . . . . . . 465,075
19,300 * Yellow Corp. . . . . . . . . . . . . 250,900
--------------
1,297,775
--------------
UTILITIES - COMMUNICATION - 7.13%
194,400 Ameritech Corp. . . . . . . . . . . . 10,983,600
552,326 AT & T Corp. . . . . . . . . . . . . 34,451,334
153,700 Bell Atlantic Corp. . . . . . . . . . 9,587,037
346,400 BellSouth Corp. . . . . . . . . . . . 14,072,500
339,700 GTE Corp. . . . . . . . . . . . . . . 14,522,175
244,700 MCI Communications Corp. . . . . . . 7,126,888
154,700 NYNEX Corp. . . . . . . . . . . . . . 7,135,537
153,400 Pacific Telesis Group . . . . . . . . 5,119,725
213,400 SBC Communications, Inc. . . . . . . 10,536,625
154,300 Sprint Corp. . . . . . . . . . . . . 6,538,463
169,100 US West Communications Group . . . . 5,516,888
--------------
125,590,772
--------------
UTILITIES - ELECTRIC - 2.97%
57,600 American Electric Power, Inc. . . . . 2,311,200
35,200 Baltimore Gas and Electric Co. . . . 963,600
60,100 Carolina Power & Light Co. . . . . . 2,171,112
70,100 Central & South West Corp. . . . . . 1,936,512
41,164 Cinergy Corp. . . . . . . . . . . . . 1,219,484
71,500 Consolidated Edison Co. of
New York, Inc. . . . . . . . . . . 1,993,062
57,650 Dominion Resources, Inc. . . . . . . 2,183,494
42,300 DTE Energy Co. . . . . . . . . . . . 1,237,275
61,200 Duke Power Co. . . . . . . . . . . . 2,952,900
UTILITIES - ELECTRIC - Continued
163,800 Edison International . . . . . . . . $ 2,702,700
86,000 Entergy Corp. . . . . . . . . . . . . 2,257,500
68,400 FPL Group, Inc. . . . . . . . . . . . 2,924,100
101,800 Houston Industries, Inc. . . . . . . 2,226,875
37,500 Niagara Mohawk Power Corp. . . . . . 285,938
26,000 Northern States Power Co. . . . . . . 1,222,000
35,900 Ohio Edison Co. . . . . . . . . . . . 785,313
44,500 P P & L Resources Inc. . . . . . . . 1,017,938
151,700 Pacific Gas and Electric Co. . . . . 3,527,025
83,900 PacifiCorp . . . . . . . . . . . . . 1,688,488
83,500 Peco Energy Co. . . . . . . . . . . . 2,056,187
90,850 Public Service Enterprise Group, Inc. 2,407,525
239,200 Southern Co. . . . . . . . . . . . . 5,531,500
82,700 Texas Utilities Co. . . . . . . . . . 3,380,362
81,400 Unicom Corp. . . . . . . . . . . . . 2,248,675
28,800 Union Electric Co. . . . . . . . . . 1,134,000
--------------
52,364,765
--------------
UTILITIES - GAS, PIPELINE - 0.51%
13,000 Columbia Gas System Inc. . . . . . . 635,375
22,600 Consolidated Natural Gas Co. . . . . 1,093,275
91,500 Enron Corp. . . . . . . . . . . . . . 3,660,000
23,700 NICOR Inc. . . . . . . . . . . . . . 657,675
18,300 ONEOK Inc. . . . . . . . . . . . . . 498,675
15,000 Pacific Enterprises . . . . . . . . . 395,625
2,200 Peoples Energy Corp. . . . . . . . . 70,675
40,100 Williams Companies, Inc. . . . . . . 2,015,025
--------------
9,026,325
--------------
UTILITIES - MISCELLANEOUS - 0.06%
32,600 General Public Utilities Corp. . . . 1,092,100
--------------
TOTAL COMMON STOCKS
(Cost $1,144,047,433) . . . . . . . . 1,726,975,087
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- -----------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.53%
CONSUMER FINANCE - 0.51%
$8,951,000 Associates Corp. of North America,
5.20% due 6/3/96 . . . . . . . . . 8,948,414
--------------
FINANCE COMPANIES - 0.28%
4,917,000 Ford Motor Credit Co.,
5.27% due 6/4/96 . . . . . . . . . 4,914,841
--------------
SECURITIES RELATED - 0.74%
13,073,000 Merrill Lynch & Co., Inc.,
5.35% due 6/5/96 . . . . . . . . . 13,065,229
--------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $26,928,484) . . . . . . . . . 26,928,484
--------------
</TABLE>
11
<PAGE> 113
STOCK INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
<S> <C>
UNITED STATES GOVERNMENT -
SHORT TERM - 0.10%
U.S. TREASURY BILLS - 0.10%
United States Treasury Bills:
$ 250,000 4.98% due 6/20/96 . . . . . . . . . $ 249,343
200,000 4.935% due 6/20/96 . . . . . . . . 199,479
1,400,000 4.93% due 6/20/96 . . . . . . . . . 1,396,357
--------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $1,845,179) . . . . . . . . . . 1,845,179
--------------
TOTAL INVESTMENTS
(Cost $1,172,821,096) - 99.71% . . . 1,755,748,750
Other assets and liabilities,
net - 0.29% . . . . . . . . . . . . 5,037,539
--------------
NET ASSETS (equivalent
to $20.69 per share on
85,117,305 shares
outstanding) - 100% . . . . . . . $1,760,786,289
--------------
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
CONTRACTS (DEPRECIATION)
- ----------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
82 (2) S&P 500 Index Futures
(June/$666.95) . . . . . . . . . . $ 436,500
5 (2) S&P 500 Index Futures
(September/$672.75) . . . . . . . . (17,825)
--------------
$ 418,675
--------------
</TABLE>
(1) U.S.Treasury Bills with a market value of approximately
$1,850,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 500
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
85,117,305 shares outstanding . . . . . . . . . . $ 851,173
Additional paid in capital . . . . . . . . . . . . 1,162,867,645
Undistributed net realized gain on securities . . . 13,348,483
Undistributed net investment income . . . . . . . . 372,659
Unrealized appreciation of:
Investments . . . . . . . . . . . $ 582,927,654
Futures . . . . . . . . . . . . . 418,675 583,346,329
------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . $1,760,786,289
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 114
STOCK INDEX FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,670,238
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,297,301
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,967,539
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,242,848
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621,341
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,834
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,556
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,817
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,880
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,242,276
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,725,263
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,011,332
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,537,274 14,548,606
-------------
NET unrealized appreciation of securities during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,706,596
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264,750 322,971,346
------------- -------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . 337,519,952
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 368,245,215
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,725,263 $ 27,820,558
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,548,606 30,306,629
Net unrealized appreciation of securities during the year . . . . . . . . . . . . . . . 322,971,346 154,652,699
----------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 368,245,215 212,779,886
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,481,712) (27,954,349)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,841,988) (2,497,235)
----------------------------
Decrease in net assets resulting from distributions to shareholders . . . . . . . (61,323,700) (30,451,584)
----------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,841,204 100,308,445
Proceeds from capital stock issued for distributions reinvested . . . . . . . . . . . . 61,323,700 30,451,584
----------------------------
257,164,904 130,760,029
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,292,243) (131,555,447)
----------------------------
Increase (decrease) in net assets resulting from capital stock transactions . . . 185,872,661 (795,418)
----------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,794,176 181,532,884
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267,992,113 1,086,459,229
----------------------------
End of year (including undistributed net investment income of $372,659 and $129,108) . 1,760,786,289 1,267,992,113
----------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,230,862 6,656,098
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 3,223,528 2,028,815
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . (3,788,544) (8,727,186)
----------------------------
Increase (decrease) in shares outstanding . . . . . . . . . . . . . . . . . . . . 9,665,846 (42,273)
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,451,459 75,493,732
----------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,117,305 75,451,459
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 115
MIDCAP INDEX FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 98.45%
ADVERTISING - 0.47%
58,364 Omnicom Group, Inc. . . . . . . . . . $ 2,546,130
--------------
AEROSPACE/DEFENSE - 0.91%
18,480 Gencorp Inc. . . . . . . . . . . . . 279,510
22,071 OEA, Inc. . . . . . . . . . . . . . . 904,911
21,855 * Rohr Industries, Inc. . . . . . . . . 461,687
5,000 * Sequa Corp. Class A . . . . . . . . . 204,375
51,774 Sundstrand Corp. . . . . . . . . . . 1,825,033
10,710 Teleflex Inc. . . . . . . . . . . . . 493,999
18,761 Thiokol Corp. . . . . . . . . . . . . 771,546
--------------
4,941,061
--------------
AIRLINES - 0.22%
17,921 * Alaska Air Group, Inc. . . . . . . . 463,706
28,174 Atlantic Southeast Airlines, Inc. . . 746,611
--------------
1,210,317
--------------
APPAREL & PRODUCTS - 1.00%
2,753 Angelica Corp. . . . . . . . . . . . 67,793
22,600 * Ann Taylor Stores Corp. . . . . . . . 466,125
42,453 Cintas Corp. . . . . . . . . . . . . 2,271,235
25,614 Claire's Stores, Inc. . . . . . . . . 640,350
37,014 CML Group, Inc. . . . . . . . . . . . 198,950
23,424 * Land's End, Inc. . . . . . . . . . . 512,400
43,300 Warnaco Group, Inc. Class A . . . . . 1,228,638
--------------
5,385,491
--------------
APPLIANCES/FURNISHINGS - 0.90%
44,359 Heilig-Meyers Co . . . . . . . . . . 914,905
25,814 Herman Miller, Inc. . . . . . . . . . 797,007
29,101 Lancaster Colony Corp. . . . . . . . 1,054,911
69,576 Leggett & Platt, Inc. . . . . . . . . 1,974,219
2,604 National Presto Industries, Inc. . . 105,462
--------------
4,846,504
--------------
AUTO - ORIGINAL EQUIPMENT - 1.14%
16,925 Arvin Industries, Inc. . . . . . . . 414,663
8,400 Carlisle Cos Inc. . . . . . . . . . . 437,850
44,942 Danaher Corp. . . . . . . . . . . . . 1,865,093
16,218 Donaldson Co., Inc. . . . . . . . . . 425,722
37,170 Federal-Mogul Corp. . . . . . . . . . 682,999
45,853 Mark IV Industries, Inc. . . . . . . 997,303
27,228 Modine Manufacturing Co. . . . . . . 687,507
23,200 Superior Industries International,Inc. 635,100
--------------
6,146,237
--------------
AUTO - OTHER - 0.61%
68,670 Harley-Davidson, Inc. . . . . . . . . 3,287,576
--------------
AUTO - REPLACEMENT PARTS - 0.13%
16,221 Kaydon Corp. . . . . . . . . . . . . 697,503
--------------
BANKS - OTHER - 1.15%
57,100 Firstar Corp. . . . . . . . . . . . . 2,797,900
65,372 State Street Boston Corp. . . . . . . 3,407,515
--------------
6,205,415
--------------
BANKS - REGIONAL - 5.75%
28,734 Bancorp Hawaii, Inc. . . . . . . . . 1,045,199
--------------
BANKS - REGIONAL - Continued
30,952 Central Fidelity Banks, Inc. . . . . $ 1,060,106
43,055 City National Corp. . . . . . . . . . 661,971
32,586 Crestar Financial Corp. . . . . . . . 1,837,036
22,018 Dauphin Deposit Corp. . . . . . . . . 610,999
52,343 First of America Bank Corp. . . . . . 2,394,692
64,361 First Security Corp. . . . . . . . . 1,528,574
64,402 First Tennessee National Corp. . . . 2,165,517
24,775 First Virginia Banks, Inc. . . . . . 991,000
113,700 Hibernia Corp. Class A . . . . . . . 1,250,700
86,148 Marshall & Ilsley Corp. . . . . . . . 2,369,070
59,334 Mercantile Bancorporation Inc. . . . 2,788,698
35,356 Mercantile Bankshares Corp. . . . . . 914,836
47,053 Northern Trust Corp. . . . . . . . . 2,576,152
57,209 Regions Financial Corp. . . . . . . . 2,703,125
76,487 SouthTrust Corp. . . . . . . . . . . 2,093,832
82,103 Summit Bancorporation . . . . . . . . 2,986,497
33,678 Wilmington Trust Corp. . . . . . . . 1,111,374
--------------
31,089,378
--------------
BEVERAGE - SOFT DRINKS - 0.64%
108,303 Coca-Cola Enterprises Inc. . . . . . 3,438,620
--------------
BROADCASTING - 0.54%
29,828 A.H. Belo Corp. . . . . . . . . . . . 1,140,921
26,387 * Chris-Craft Industries, Inc. . . . . 1,078,569
25,016 TCA Cable TV, Inc. . . . . . . . . . 706,702
--------------
2,926,192
--------------
BUILDING MATERIALS - 0.96%
12,766 CalMat Co. . . . . . . . . . . . . . 234,575
28,900 Fastenal Co. . . . . . . . . . . . . 1,300,500
21,125 HON INDUSTRIES Inc. . . . . . . . . . 591,500
75,465 RPM, Inc. . . . . . . . . . . . . . . 1,254,606
12,000 Southdown, Inc. . . . . . . . . . . . 277,500
26,400 Vulcan Materials Co. . . . . . . . . 1,518,000
--------------
5,176,681
--------------
CHEMICAL - MAJOR - 0.21%
49,625 Albemarle Corp. . . . . . . . . . . . 1,116,563
--------------
CHEMICAL - MISCELLANEOUS - 3.13%
23,380 Betz Laboratories, Inc. . . . . . . . 1,072,557
34,337 Crompton & Knowles Corp. . . . . . . 605,190
14,268 Dexter Corp. . . . . . . . . . . . . 408,422
115,300 Ethyl Corp. . . . . . . . . . . . . . 1,196,237
22,547 Ferro Corp. . . . . . . . . . . . . . 614,406
32,633 Georgia Gulf Corp. . . . . . . . . . 1,117,680
14,064 H.B. Fuller Co. . . . . . . . . . . . 474,660
25,693 Lawter International, Inc. . . . . . 295,470
25,480 Loctite Corp. . . . . . . . . . . . . 1,270,815
59,319 Lubrizol Corp. . . . . . . . . . . . 1,801,815
67,278 Lyondell Petrochemical Co. . . . . . 1,740,818
34,824 M.A. Hanna Co. . . . . . . . . . . . 1,197,075
20,400 Minerals Technologies Inc. . . . . . 742,050
4,355 NCH Corp. . . . . . . . . . . . . . . 247,146
22,571 Olin Corp. . . . . . . . . . . . . . 2,087,817
23,025 Rollins, Inc. . . . . . . . . . . . . 523,819
37,373 Schulman A. Inc. . . . . . . . . . . 967,026
49,900 * Sterling Chemicals, Inc. . . . . . . 573,850
--------------
16,936,853
--------------
</TABLE>
14
<PAGE> 116
MIDCAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
COAL - 0.17%
30,500 Pittston Brink's Group . . . . . . . $ 922,625
--------------
CONGLOMERATES - 1.04%
43,498 Alexander & Baldwin, Inc. . . . . . . 1,114,636
43,700 * Litton Industries, Inc. . . . . . . . 2,026,588
5,100 * MAXXAM, Inc. . . . . . . . . . . . . 218,663
17,561 PHH Corp. . . . . . . . . . . . . . . 972,440
37,421 Trinity Industries, Inc. . . . . . . 1,295,702
--------------
5,628,029
--------------
CONTAINERS - PAPER - 0.74%
15,614 Chesapeake Utilities Corp. . . . . . 415,723
40,722 * Sealed Air Corp. . . . . . . . . . . 1,445,631
78,836 Sonoco Products Co. . . . . . . . . . 2,158,135
--------------
4,019,489
--------------
COSMETICS/TOILETRIES - 0.30%
35,088 Tambrands Inc. . . . . . . . . . . . 1,618,434
--------------
DRUGS - 3.77%
27,904 Bergen Brunswig Corp. Class A . . . . 742,944
29,276 * Biogen, Inc. . . . . . . . . . . . . 1,771,198
42,046 Carter-Wallace Inc. . . . . . . . . . 588,644
54,088 * Centocor, Inc. . . . . . . . . . . . 1,913,363
34,070 * Chiron Corp. . . . . . . . . . . . . 3,577,350
37,341 * Forest Laboratories, Inc. . . . . . . 1,540,316
25,871 * Genzyme Corp. . . . . . . . . . . . . 1,506,986
94,836 IVAX Corp. . . . . . . . . . . . . . 2,607,990
35,700 McKesson Corp. . . . . . . . . . . . 1,664,512
107,334 Mylan Laboratories Inc. . . . . . . . 2,039,346
22,600 * R P Scherer Corp. . . . . . . . . . . 949,200
32,500 * Watson Pharmaceuticals, Inc. . . . . 1,462,500
--------------
20,364,349
--------------
ELECTRICAL EQUIPMENT - 2.55%
74,286 * American Power Conversion Corp. . . . 956,432
34,331 AMETEK, Inc. . . . . . . . . . . . . 738,117
25,935 Hubbell Inc. Class B . . . . . . . . 1,812,208
87,633 Molex Inc. . . . . . . . . . . . . . 2,793,302
43,596 * Quantum Corp. . . . . . . . . . . . . 1,040,854
86,499 * Seagate Technology . . . . . . . . . 5,081,816
67,446 * Teradyne, Inc. . . . . . . . . . . . 1,357,351
--------------
13,780,080
--------------
ELECTRONIC INSTRUMENTS - 2.59%
39,876 * Arrow Electronics, Inc. . . . . . . . 1,963,893
23,266 * Exabyte Corp. . . . . . . . . . . . . 462,412
63,000 * Integrated Device Technology, Inc. . 811,125
21,321 * MagneTek, Inc. . . . . . . . . . . . 207,880
59,779 Sensormatic Electronics Corp. . . . . 1,068,550
21,673 * Symbol Technologies, Inc. . . . . . . 937,357
70,840 Thermo Electron Corp. . . . . . . . . 4,516,050
27,816 Varian Associates, Inc. . . . . . . . 1,585,512
22,673 * VeriFone, Inc. . . . . . . . . . . . 1,142,152
47,355 * Vishay Intertechnology, Inc. . . . . 1,308,182
--------------
14,003,113
--------------
FERTILIZERS - 0.50%
73,646 IMC Global Inc. . . . . . . . . . . . $ 2,697,285
--------------
FINANCE COMPANIES - 0.45%
43,300 SunAmerica, Inc. . . . . . . . . . . 2,424,800
--------------
FOODS - 2.42%
40,882 Dean Foods Co. . . . . . . . . . . . 996,499
49,209 Dole Food Co., Inc. . . . . . . . . . 1,857,640
15,118 Dreyer's Grand Ice Cream, Inc. . . . 510,233
43,136 Flowers Industries, Inc. . . . . . . 679,392
78,200 IBP, Inc. . . . . . . . . . . . . . . 2,140,725
8,212 International Multifoods Corp. . . . 163,214
18,171 J.M. Smucker Co. Class A . . . . . . 370,234
23,271 Lance, Inc. . . . . . . . . . . . . . 386,880
75,578 McCormick & Co., Inc. . . . . . . . . 1,719,399
20,676 Michaels Foods, Inc. . . . . . . . . 211,929
127,991 Tyson Foods, Inc. Class A . . . . . . 3,135,779
26,329 Universal Foods Corp. . . . . . . . . 928,097
--------------
13,100,021
--------------
FOOTWEAR - 0.45%
33,800 * Nine West Group, Inc. . . . . . . . . 1,643,525
28,200 * Payless ShoeSource Inc. . . . . . . . 793,125
--------------
2,436,650
--------------
FREIGHT - 0.43%
19,073 Airborne Freight Corp. . . . . . . . 481,593
21,560 American President Companies, Ltd. . 568,645
37,300 J.B. Hunt Transport Services, Inc. . 708,700
28,971 Overseas Shipholding Group Inc. . . . 543,207
--------------
2,302,145
--------------
GOLD MINING - 0.13%
79,194 Battle Mountain Gold Co. . . . . . . 692,948
--------------
HARDWARE & TOOLS - 0.03%
7,355 Lawson Products, Inc. . . . . . . . . 169,165
--------------
HEALTHCARE - 3.00%
37,500 * Apria Healthcare Group, Inc. . . . . 1,096,875
43,453 Cardinal Health, Inc. . . . . . . . . 2,775,560
44,243 * Coram Healthcare Corp. . . . . . . . 215,685
37,576 * FHP International Corp. . . . . . . . 1,070,916
31,486 * Healthcare COMPARE Corp. . . . . . . 1,523,135
124,601 * HealthSouth Corp. . . . . . . . . . . 4,361,035
50,800 * Horizon/CMS Healthcare Corp. . . . . 622,300
88,064 * Laboratory Corp. of America . . . . . 671,488
12,018 * Laboratory Corp. of America
(Warrants) . . . . . . . . . . . . 6,760
51,891 * NovaCare, Inc. . . . . . . . . . . . 337,292
27,400 * PacifiCare Health System, Inc.
Class B . . . . . . . . . . . . . 2,267,350
47,585 * Value Health, Inc. . . . . . . . . . 1,296,691
--------------
16,245,087
--------------
HEAVY DUTY TRUCKS/PARTS - 0.15%
31,704 Federal Signal Corp. . . . . . . . . 796,563
--------------
</TABLE>
15
<PAGE> 117
MIDCAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
HOME BUILDERS - 0.31%
85,920 Clayton Homes, Inc. . . . . . . . . . $ 1,653,960
--------------
HOSPITAL MANAGEMENT - 1.38%
45,600 * Foundation Health Corp. . . . . . . . 1,812,600
29,800 * Health Care & Retirement Corp. . . . 1,076,525
50,500 * Healthsource, Inc. . . . . . . . . . 1,142,562
40,200 * Medaphis Corp. . . . . . . . . . . . 1,517,550
61,400 * Vencor, Inc. . . . . . . . . . . . . 1,941,775
--------------
7,491,012
--------------
HOSPITAL SUPPLIES - 1.29%
17,635 * Acuson Corp. . . . . . . . . . . . . 337,269
15,310 * Advanced Technology Laboratories,
Inc. . . . . . . . . . . . . . . . 539,678
19,533 Beckman Instruments, Inc. . . . . . . 710,513
17,568 * Datascope Corp. . . . . . . . . . . . 311,832
26,400 DENTSPLY International Inc. . . . . . 1,135,200
8,109 Diagnostic Products Corp. . . . . . . 305,101
25,968 * Nellcor Puritan Bennett Inc. . . . . 1,415,256
42,691 Stryker Corp. . . . . . . . . . . . . 2,209,259
--------------
6,964,108
--------------
HOUSEHOLD PRODUCTS - 0.59%
62,200 * Bed Bath & Beyond, Inc. . . . . . . . 1,749,375
10,314 Church & Dwight Co., Inc. . . . . . . 206,280
31,246 First Brands Corp. . . . . . . . . . 773,339
15,764 Stanhome Inc. . . . . . . . . . . . . 457,156
--------------
3,186,150
--------------
INFORMATION PROCESSING - 9.85%
59,550 Adobe Systems Inc. . . . . . . . . . 2,210,794
69,000 * America Online, Inc. . . . . . . . . 3,898,500
27,562 * AST Research, Inc. . . . . . . . . . 223,941
40,452 * BMC Software, Inc. . . . . . . . . . 2,548,476
29,321 * Borland International, Inc. . . . . . 394,001
46,119 * Cadence Design Systems, Inc. . . . . 2,617,253
37,539 Comdisco, Inc. . . . . . . . . . . . 1,032,323
39,800 * Compuware Corp. . . . . . . . . . . . 1,562,150
76,612 * Dell Computer Corp. . . . . . . . . . 4,242,389
38,334 Diebold, Inc. . . . . . . . . . . . . 1,461,484
45,400 * Electronic Arts . . . . . . . . . . . 1,435,775
41,664 * FIserv, Inc. . . . . . . . . . . . . 1,307,208
30,968 * Information Resources, Inc. . . . . . 387,100
121,100 * Informix Corp. . . . . . . . . . . . 2,755,025
9,514 Measurex Corp. . . . . . . . . . . . 274,717
53,907 * Mentor Graphics Corp. . . . . . . . . 963,588
103,184 * Parametric Technology Corp. . . . . . 4,720,668
61,038 Paychex Inc. . . . . . . . . . . . . 2,685,672
17,418 * Policy Management Systems Corp. . . . 931,863
37,654 Reynolds and Reynolds Co. Class A . . 1,877,993
34,725 * Sequent Computer Systems, Inc. . . . 460,106
39,300 * Solectron Corp. . . . . . . . . . . . 1,704,637
46,890 * Storage Technology Corp. . . . . . . 1,605,982
60,100 * Stratacom, Inc. . . . . . . . . . . . 3,267,937
24,425 * Stratus Computer, Inc. . . . . . . . 720,538
27,773 * Structural Dynamics Research Corp. . 791,531
45,312 * Symantec Corp. . . . . . . . . . . . 713,664
INFORMATION PROCESSING - Continued
70,600 * U. S. Robotics Corp. . . . . . . . . $ 6,477,550
--------------
53,272,865
--------------
INSURANCE - CASUALTY - 1.00%
55,933 American Financial Group, Inc. . . . 1,677,990
56,962 Progressive Corp. . . . . . . . . . . 2,634,492
17,018 Transatlantic Holdings, Inc. . . . . 1,093,407
--------------
5,405,889
--------------
INSURANCE - MISCELLANEOUS - 0.15%
17,766 Hartford Steam Boiler Inspection &
Insurance Co. . . . . . . . . . . 823,898
--------------
INSURANCE - MULTILINE - 0.93%
117,225 AFLAC Inc. . . . . . . . . . . . . . 3,531,403
42,486 Provident Companies Inc. . . . . . . 1,524,185
--------------
5,055,588
--------------
LEISURE TIME - 2.12%
62,300 Callaway Golf Co. . . . . . . . . . . 1,876,788
84,525 * Circus Circus Enterprises, Inc. . . . 3,518,353
116,102 International Game Technology . . . . 1,843,119
74,445 * Mirage Resorts Inc. . . . . . . . . . 4,234,059
--------------
11,472,319
--------------
LODGING - 1.21%
88,200 * HFS Inc. . . . . . . . . . . . . . . 5,501,475
38,300 * Promus Hotel Corp. . . . . . . . . . 1,053,250
--------------
6,554,725
--------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.15%
17,271 Granite Construction Inc. . . . . . . 382,121
16,268 * Jacobs Engineering Group Inc. . . . . 437,202
--------------
819,323
--------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.74%
29,273 Albany International Corp. Class A . 589,119
25,318 Duriron Co., Inc. . . . . . . . . . . 715,233
25,925 Goulds Pumps, Inc. . . . . . . . . . 615,719
29,576 Keystone International, Inc. . . . . 646,975
12,514 Nordson Corp. . . . . . . . . . . . . 738,326
33,433 Stewart & Stevenson Services, Inc. . 835,825
18,300 Tecumseh Products Co. Class A . . . . 1,033,950
48,792 Tidewater Inc. . . . . . . . . . . . 2,012,670
27,624 Watts Industries, Inc. Class A . . . 521,403
32,000 York International Corp. . . . . . . 1,692,000
--------------
9,401,220
--------------
MEDICAL TECHNOLOGY - 0.02%
12,788 * Applied Bioscience International Inc. 116,691
--------------
MERCHANDISE - DRUG - 0.36%
66,600 * Perrigo Co. . . . . . . . . . . . . . 749,250
50,700 * Revco D.S., Inc. . . . . . . . . . . 1,204,125
--------------
1,953,375
--------------
</TABLE>
16
<PAGE> 118
MIDCAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
MERCHANDISE - SPECIALTY - 3.71%
40,800 * Best Buy Co., Inc. . . . . . . . . . $ 928,200
3,857 Cross (A.T.) Co. Class A . . . . . . 61,712
66,646 Dollar General Corp. . . . . . . . . 1,849,426
16,423 Duty Free International, Inc. . . . . 246,345
41,100 Fingerhut Companies, Inc. . . . . . . 631,913
22,271 * Gibson Greetings, Inc. . . . . . . . 320,146
6,657 Hancock Fabrics, Inc. . . . . . . . . 75,723
83,964 * Home Shopping Network, Inc. . . . . . 1,206,982
33,027 Intelligent Electronics, Inc. . . . . 324,077
66,800 * Kohl's Corp. . . . . . . . . . . . . 2,212,750
23,821 * Mac Frugal's Bargains Close-outs Inc. 452,599
31,400 * Micro Warehouse, Inc. . . . . . . . . 1,224,600
125,337 * Office Depot, Inc. . . . . . . . . . 3,211,761
53,711 Sotheby's Holdings, Inc. . . . . . . 765,382
127,350 * Staples, Inc. . . . . . . . . . . . . 2,547,000
15,768 Tiffany & Co. . . . . . . . . . . . . 1,196,397
69,600 * Viking Office Products, Inc. . . . . 1,992,300
31,086 * Waban Inc. . . . . . . . . . . . . . 831,551
--------------
20,078,864
--------------
MERCHANDISING - FOOD - 0.54%
29,900 Hannaford Bros. Co. . . . . . . . . . 945,587
27,500 Ruddick Corp. . . . . . . . . . . . . 371,250
13,668 Savannah Foods & Industries, Inc. . . 169,142
39,688 * Vons Companies, Inc. . . . . . . . . 1,448,612
--------------
2,934,591
--------------
MERCHANDISING - MASS - 0.29%
40,007 Family Dollar Stores, Inc. . . . . . 680,119
18,100 * Fred Meyer, Inc. . . . . . . . . . . 522,638
66,624 * Service Merchandise Co., Inc. . . . . 358,104
--------------
1,560,861
--------------
METALS - ALUMINUM - 0.25%
40,267 * Alumax Inc. . . . . . . . . . . . . . 1,338,878
--------------
METALS - MISCELLANEOUS - 0.41%
17,700 Brush Wellman Inc. . . . . . . . . . 331,875
27,806 Kennametal Inc. . . . . . . . . . . . 1,032,298
19,950 Precision Castparts Corp. . . . . . . 852,862
--------------
2,217,035
--------------
METALS - STEEL - 0.77%
60,152 Allegheny Ludlum Corp. . . . . . . . 1,203,040
9,010 Carpenter Technology Corp. . . . . . 325,486
12,857 Cleveland-Cliffs Inc. . . . . . . . . 515,887
21,721 Harsco Corp. . . . . . . . . . . . . 1,409,150
15,516 Lukens Inc. . . . . . . . . . . . . . 416,993
18,323 Oregon Steel Mills, Inc. . . . . . . 293,168
--------------
4,163,724
--------------
MISCELLANEOUS - 2.12%
18,836 * Castle & Cooke, Inc. . . . . . . . . 329,630
134,500 Equifax Inc. . . . . . . . . . . . . 3,328,875
22,386 FlightSafety International, Inc. . . 1,234,028
23,400 * Jones Apparel Group, Inc. . . . . . . 1,193,400
MISCELLANEOUS - Continued
30,303 Kelly Services Inc. Class A . . . . . $ 901,514
68,100 Manpower Inc. . . . . . . . . . . . . 2,621,850
59,750 Olsten Corp. . . . . . . . . . . . . 1,837,313
--------------
11,446,610
--------------
NATURAL GAS - DIVERSIFIED - 0.80%
34,600 El Paso Natural Gas Co. . . . . . . . 1,254,250
40,843 Questar Corp. . . . . . . . . . . . . 1,337,608
35,232 * Seagull Energy Corp. . . . . . . . . 792,720
34,191 Valero Energy Corp. . . . . . . . . . 940,253
--------------
4,324,831
--------------
OIL - INTEGRATED DOMESTIC - 0.52%
28,873 Diamond Shamrock, Inc. . . . . . . . 949,200
27,580 MAPCO Inc. . . . . . . . . . . . . . 1,592,745
17,614 Quaker State Corp. . . . . . . . . . 270,815
--------------
2,812,760
--------------
OIL - INTEGRATED
INTERNATIONAL - 0.30%
36,846 Murphy Oil Corp. . . . . . . . . . . 1,625,830
--------------
OIL - SERVICE - PRODUCTS - 0.40%
68,825 * Parker Drilling Co. . . . . . . . . . 490,378
19,186 * Varco International, Inc. . . . . . . 318,967
42,582 * Weatherford Enterra, Inc. . . . . . . 1,341,333
--------------
2,150,678
--------------
OIL - SERVICES - 1.51%
25,621 * BJ Services Co. . . . . . . . . . . . 864,709
54,800 * ENSCO International, Inc. . . . . . . 1,664,550
139,115 * Global Marine Inc. . . . . . . . . . 1,704,159
68,339 * Nabors Industries, Inc. . . . . . . . 1,050,712
37,846 * Smith International, Inc. . . . . . . 1,192,149
52,646 Witco Corp. . . . . . . . . . . . . . 1,678,091
--------------
8,154,370
--------------
OIL/GAS PRODUCERS - 1.63%
51,155 Anadarko Petroleum Corp. . . . . . . 2,749,581
59,998 Apache Corp. . . . . . . . . . . . . 1,717,443
63,280 Cabot Corp. . . . . . . . . . . . . . 1,732,290
45,335 Noble Affiliates, Inc. . . . . . . . 1,535,723
24,700 Parker & Parsley Petroleum Co. . . . 602,063
65,166 Ranger Oil Ltd . . . . . . . . . . . 488,745
--------------
8,825,845
--------------
PAPER/FOREST PRODUCTS - 1.39%
36,439 Bowater Inc. . . . . . . . . . . . . 1,434,786
34,435 Consolidated Papers, Inc. . . . . . . 1,799,229
36,739 Longview Fibre Co. . . . . . . . . . 619,971
28,700 P H Glatfelter Co. . . . . . . . . . 505,837
40,176 Pentair Inc. . . . . . . . . . . . . 1,074,708
27,800 Rayonier Inc. . . . . . . . . . . . . 1,042,500
18,270 Standard Register Co. . . . . . . . . 511,560
25,161 Wausau Paper Mills Co. . . . . . . . 534,671
--------------
7,523,262
--------------
</TABLE>
17
<PAGE> 119
MIDCAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
PHOTOGRAPHY - 0.01%
3,753 CPI Corp. . . . . . . . . . . . . . . $ 61,455
--------------
POLLUTION CONTROL - 0.43%
24,533 Calgon Carbon Corp. . . . . . . . . . 315,862
68,800 * USA Waste Services, Inc. . . . . . . 2,029,600
--------------
2,345,462
--------------
PUBLISHING - NEWS - 0.84%
31,700 Lee Enterprises, Inc. . . . . . . . . 740,987
18,468 Media General, Inc. Class A . . . . . 692,550
9,861 Washington Post Co. Class B . . . . . 3,084,028
--------------
4,517,565
--------------
PUBLISHING/PRINTING - 0.81%
33,286 Banta Corp. . . . . . . . . . . . . . 798,864
3,857 Ennis Business Forms, Inc. . . . . . 41,945
24,625 * Golden Books Family Entertainment,
Inc. . . . . . . . . . . . . . . . 338,594
16,616 Houghton Mifflin Co. . . . . . . . . 787,183
15,500 * Scholastic Corp. . . . . . . . . . . 964,875
53,800 * Topps Co. Inc. . . . . . . . . . . . 336,250
18,514 Wallace Computer Services, Inc. . . . 1,110,840
--------------
4,378,551
--------------
RAILROAD - 0.72%
16,312 GATX Corp. . . . . . . . . . . . . . 734,040
59,477 Illinois Central Corp. . . . . . . . 1,776,875
31,632 Kansas City Southern Industries, Inc. 1,407,624
--------------
3,918,539
--------------
RESTAURANTS - 1.31%
40,133 Bob Evans Farms, Inc. . . . . . . . . 607,012
57,255 * Brinker International, Inc. . . . . . 959,021
24,732 * Buffets, Inc. . . . . . . . . . . . . 312,242
56,866 Cracker Barrel Old Country Store, Inc. 1,506,949
12,780 * International Dairy Queen, Inc.
Class A . . . . . . . . . . . . . 268,380
34,500 * Lone Star Steakhouse & Saloon, Inc. . 1,392,937
40,000 * Outback Steakhouse Inc. . . . . . . . 1,515,000
19,988 Sbarro, Inc. . . . . . . . . . . . . 532,180
--------------
7,093,721
--------------
SECURITIES RELATED - 2.63%
71,276 A.G. Edwards, Inc. . . . . . . . . . 1,826,448
105,804 Bear Stearns Co. Inc. . . . . . . . . 2,552,529
154,452 Charles Schwab Corp. . . . . . . . . 3,745,461
74,268 Franklin Resources, Inc. . . . . . . 4,353,961
80,600 Paine Webber Group Inc. . . . . . . . 1,763,125
--------------
14,241,524
--------------
SEMICONDUCTORS - 3.20%
37,120 * Altera Corp. . . . . . . . . . . . . 1,795,680
92,629 * Analog Devices, Inc. . . . . . . . . 2,558,876
80,600 * Atmel Corp. . . . . . . . . . . . . . 2,861,300
39,888 Avnet, Inc. . . . . . . . . . . . . . 2,054,232
50,136 * Cirrus Logic, Inc. . . . . . . . . . 1,065,390
SEMICONDUCTORS - Continued
75,682 * Cypress Semiconductor Corp. . . . . . $ 1,040,627
60,854 Linear Technology Corp. . . . . . . . 2,099,463
52,100 * Maxim Integrated Products, Inc. . . . 1,771,400
59,181 * Xilinx, Inc. . . . . . . . . . . . . 2,056,540
--------------
17,303,508
--------------
TELECOMMUNICATIONS - 2.96%
54,164 * ADC Telecommunications, Inc. . . . . 2,491,544
46,242 COMSAT Corp. . . . . . . . . . . . . 1,312,117
137,046 Frontier Corp. . . . . . . . . . . . 4,385,472
175,200 * Nextel Communications, Inc. Class A . 3,635,400
41,940 * Octel Communications Corp. . . . . . 1,027,530
92,101 * 360 Communications Co. . . . . . . . 2,129,835
42,040 * Vanguard Cellular Systems, Inc.
Class A . . . . . . . . . . . . . 1,014,215
--------------
15,996,113
--------------
TEXTILE - PRODUCTS - 0.76%
45,300 * Burlington Industries, Inc. . . . . . 577,575
108,910 Shaw Industries Inc. . . . . . . . . 1,415,830
54,921 Unifi, Inc. . . . . . . . . . . . . . 1,524,058
26,284 Wellman, Inc. . . . . . . . . . . . . 594,675
--------------
4,112,138
--------------
TOBACCO - 0.15%
31,835 Universal Corp. . . . . . . . . . . . 807,813
--------------
TRUCKERS - 0.05%
17,614 Arnold Industries, Inc. . . . . . . . 270,815
--------------
UTILITIES - COMMUNICATION - 1.21%
52,750 Century Telephone Enterprises, Inc. . 1,714,375
23,318 Lincoln Telecommunications Co. . . . 384,747
53,064 Southern New England
Telecommunications Corp. . . . . . 2,288,385
49,291 Telephone and Data Systems, Inc. . . 2,150,320
--------------
6,537,827
--------------
UTILITIES - ELECTRIC - 9.89%
56,836 * AES Corp. . . . . . . . . . . . . . . 1,577,199
99,814 Allegheny Power System, Inc. . . . . 2,932,036
49,435 Atlantic Energy, Inc. . . . . . . . . 834,216
3,853 Black Hills Corp. . . . . . . . . . . 92,954
36,400 * Calenergy, Inc. . . . . . . . . . . . 973,700
8,959 Central Louisiana Electric Co., Inc. 238,533
30,416 Central Maine Power Co. . . . . . . . 406,814
82,464 CMS Energy Corp. . . . . . . . . . . 2,370,840
54,537 Delmarva Power & Light Co. . . . . . 1,070,289
78,862 Florida Progress Corp. . . . . . . . 2,602,446
17,366 Hawaiian Electric Industries, Inc. . 590,444
22,423 Idaho Power Co. . . . . . . . . . . . 655,873
59,100 Illinova Corp. . . . . . . . . . . . 1,551,375
11,759 Indiana Energy, Inc. . . . . . . . . 279,276
51,264 IPALCO Enterprises, Inc. . . . . . . 1,288,008
56,619 Kansas City Power & Light Co. . . . . 1,479,171
62,942 LG&E Energy Corp. . . . . . . . . . . 1,329,650
68,934 MidAmerican Energy Co. . . . . . . . 1,180,495
</TABLE>
18
<PAGE> 120
MIDCAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C>
UTILITIES - ELECTRIC - Continued
16,218 Minnesota Power & Light Co. . . . . . $ 435,859
57,557 Montana Power Co. . . . . . . . . . . 1,251,865
27,833 Nevada Power Co. . . . . . . . . . . 553,181
63,017 New England Electric System . . . . . 2,118,947
65,521 New York State Electric & Gas Corp. . 1,498,793
57,472 NIPSCO Industries, Inc. . . . . . . . 2,140,832
121,233 Northeast Utilities . . . . . . . . . 1,757,878
41,346 Oklahoma Gas and Electric Co. . . . . 1,576,316
76,223 Pinnacle West Capital Corp. . . . . . 2,019,909
34,491 Portland General Corp. . . . . . . . 1,017,484
109,264 Potomac Electric Power Co. . . . . . 2,786,232
57,112 Public Service Co. of Colorado . . . 1,891,835
41,437 Public Service Co. of New Mexico . . 776,944
67,362 Puget Sound Power & Light Co. . . . . 1,583,007
87,988 SCANA Corp. . . . . . . . . . . . . . 2,298,686
40,248 Southwestern Public Service Co. . . . 1,232,595
104,520 TECO Energy, Inc. . . . . . . . . . . 2,469,285
32,788 UtiliCorp United Inc. . . . . . . . . 897,572
27,024 Washington Gas Light Co. . . . . . . 560,748
93,652 Wisconsin Energy Corp. . . . . . . . 2,622,256
16,916 WPL Holdings, Inc. . . . . . . . . . 511,709
--------------
53,455,252
--------------
UTILITIES - GAS, DISTRIBUTION - 1.11%
60,836 AGL Resources, Inc. . . . . . . . . . 1,072,234
32,905 Brooklyn Union Gas Co. . . . . . . . 880,209
57,768 MCN Corp. . . . . . . . . . . . . . . 1,371,990
35,578 National Fuel Gas Co. . . . . . . . . 1,222,993
28,982 Tosco Corp. . . . . . . . . . . . . . 1,434,610
--------------
5,982,036
--------------
WATER SERVICES - 0.15%
22,300 American Water Works Co., Inc. . . . 794,438
--------------
TOTAL COMMON STOCKS
(Cost $417,231,837) . . . . . . . . . 532,297,323
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- ----------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.39%
FINANCE COMPANIES - 0.11%
$ 608,000 Ford Motor Credit Co.,
5.29% due 6/4/96 . . . . . . . . . 607,732
--------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.28%
6,924,000 Cooper Industries, Inc.,
5.40% due 6/3/96 . . . . . . . . . 6,921,923
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $7,529,655) . . . . . . . . . . $ 7,529,655
--------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.04%
U.S. TREASURY BILLS - 0.04%
$ 200,000 United States Treasury Bills,
4.93% due 6/20/96 (Cost $199,479) . 199,479
--------------
TOTAL INVESTMENTS
(Cost $424,960,971) - 99.88% . . . . 540,026,457
Other assets and liabilities, net - 0.12% 661,102
--------------
NET ASSETS (equivalent
to $19.09 per share on
28,321,727 shares
outstanding)- 100% . . . . . . . . $ 540,687,559
--------------
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
(DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
59 (2) S&P MidCap 400 Index Futures
(June/$239.25) . . . . . . . . . . $ 58,575
4 (2) S&P MidCap 400 Index Futures
(September/$241.65) . . . . . . . . (2,900)
--------------
$ 55,675
--------------
</TABLE>
(1) U.S.Treasury Bills with a market value of approximately
$200,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 500
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
28,321,727 shares outstanding . . . . . . . . . . $ 283,217
Additional paid in capital . . . . . . . . . . . . 392,097,961
Undistributed net realized gain on securities . . . 33,130,917
Undistributed net investment income . . . . . . . . 54,303
Unrealized appreciation of:
Investments . . . . . . . . . . . . $ 115,065,486
Futures . . . . . . . . . . . . 55,675 115,121,161
--------------- --------------
Net Assets Applicable to Shares
Outstanding . . . . . . . . . . . . . . . . . $ 540,687,559
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 121
MIDCAP INDEX FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,036,632
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419,613
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,456,245
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,666,107
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,231
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,376
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,811
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,981
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,480
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975,986
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,480,259
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,518,426
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,360 33,442,786
-------------
Net unrealized appreciation during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,364,198
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,825 76,393,023
------------- -------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . 109,835,809
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 116,316,068
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,480,259 $ 6,497,943
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,442,786 17,285,230
Net unrealized appreciation of securities during the year . . . . . . . . . . . . . . . 76,393,023 24,441,688
----------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 116,316,068 48,224,861
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,584,543) (6,508,350)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,378,059) (11,552,354)
----------------------------
Decrease in net assets resulting from distributions to shareholders . . . . . . . (23,962,602) (18,060,704)
----------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,226,671 49,716,369
Proceeds from capital stock issued for distributions reinvested . . . . . . . . . . . . 23,962,602 18,060,704
----------------------------
67,189,273 67,777,073
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,411,830) (39,425,302)
----------------------------
Increase in net assets resulting from capital stock transactions . . . . . . . . . 40,777,443 28,351,771
----------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,130,909 58,515,928
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407,556,650 349,040,722
----------------------------
End of year (including undistributed net investment income of $54,303 and $158,587) . . $ 540,687,559 $ 407,556,650
----------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,455,783 3,399,417
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 1,381,367 1,269,279
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . (1,503,393) (2,681,672)
----------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 2,333,757 1,987,024
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987,970 24,000,946
----------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,321,727 25,987,970
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 122
SMALL CAP INDEX FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.34%
ADVERTISING - 0.58%
5,200 * Acxiom Corp. . . . . . . . . . . . . $ 162,500
5,025 ADVO, Inc. . . . . . . . . . . . . . 54,647
2,700 * American Business Information, Inc. . 49,613
2,600 * Catalina Marketing Corp. . . . . . . 201,500
600 Grey Advertising, Inc. . . . . . . . 137,400
450 Harte-Hanks Communications . . . . . 11,869
4,700 * National Media Corp. . . . . . . . . 87,537
8,100 True North Communications Inc. . . . 208,575
8,100 * Westwood One, Inc. . . . . . . . . . 141,750
--------------
1,055,391
--------------
AEROSPACE/DEFENSE - 1.38%
2,600 * Alliant Techsystems Inc. . . . . . . 124,800
6,700 Aviall, Inc. . . . . . . . . . . . . 67,000
7,400 * BE Aerospace, Inc. . . . . . . . . . 107,300
400 Cubic Corp. . . . . . . . . . . . . . 13,400
6,900 Gencorp Inc. . . . . . . . . . . . . 104,363
14,500 * Geotek Communications, Inc. . . . . . 201,187
5,100 Logicon, Inc. . . . . . . . . . . . . 147,900
1,000 * Nortek, Inc. . . . . . . . . . . . . 14,250
5,800 OEA, Inc. . . . . . . . . . . . . . . 237,800
6,200 * Orbital Sciences Corp. . . . . . . . 110,825
7,900 * Rohr Industries, Inc. . . . . . . . . 166,888
9,100 * SCI Systems, Inc. . . . . . . . . . . 409,500
3,600 * Sequa Corp. Class A . . . . . . . . . 147,150
2,000 * Special Devices, Inc. . . . . . . . . 40,000
2,000 * Tech-Sym Corp. . . . . . . . . . . . 68,250
3,700 Teleflex Inc. . . . . . . . . . . . . 170,662
4,800 Thiokol Corp. . . . . . . . . . . . . 197,400
6,400 * Trimble Navigation Ltd . . . . . . . 154,400
600 * Whittaker Corp. . . . . . . . . . . . 11,550
--------------
2,494,625
--------------
AIRLINES - 0.98%
3,800 * Alaska Air Group, Inc. . . . . . . . 98,325
12,300 * America West Airlines, Inc. Class B . 250,612
10,012 Comair Holdings, Inc. . . . . . . . . 262,815
6,500 * Continental Airlines, Inc. Class B . 369,687
5,350 Expeditors International of
Washington, Inc. . . . . . . . . . 165,181
5,400 Harper Group, Inc. . . . . . . . . . 110,700
9,700 * Mesa Airlines, Inc. . . . . . . . . . 128,525
1,300 SkyWest, Inc. . . . . . . . . . . . . 24,863
7,300 Tower Air, Inc. . . . . . . . . . . . 42,888
15,100 * USAir Group, Inc. . . . . . . . . . . 298,225
1,700 * Worldcorp Inc. . . . . . . . . . . . 13,175
--------------
1,764,996
--------------
APPAREL & PRODUCTS - 1.49%
4,400 Angelica Corp. . . . . . . . . . . . 108,350
5,000 * Ann Taylor Stores Corp. . . . . . . . 103,125
7,100 Authentic Fitness Corp. . . . . . . . 134,900
2,200 Blair Corp. . . . . . . . . . . . . . 54,725
8,150 Cato Corp. . . . . . . . . . . . . . 61,889
5,800 * Chic By H. I. S., Inc. . . . . . . . 34,800
8,550 Claire's Stores, Inc. . . . . . . . . 213,750
APPAREL & PRODUCTS - Continued
3,100 CML Group, Inc. . . . . . . . . . . . $ 16,663
5,400 * Designs, Inc. . . . . . . . . . . . . 35,100
2,000 * Donnkenny, Inc. . . . . . . . . . . . 38,000
9,400 * Dress Barn, Inc. . . . . . . . . . . 110,450
1,200 Fab Industries, Inc. . . . . . . . . 34,950
5,250 * Goody's Family Clothing, Inc. . . . . 52,500
6,400 * Gymboree Corp. . . . . . . . . . . . 217,600
2,300 Haggar Corp. . . . . . . . . . . . . 33,925
2,700 * Hartmarx Corp. . . . . . . . . . . . 16,875
400 * Johnson Worldwide Associates, Inc. . 6,950
5,550 Kellwood Co. . . . . . . . . . . . . 95,737
4,000 * Men's Wearhouse, Inc. . . . . . . . . 135,000
9,900 * Nautica Enterprises, Inc. . . . . . . 247,500
6,300 OshKosh B'Gosh, Inc. Class A . . . . 112,219
3,700 Oxford Industries, Inc. . . . . . . . 67,525
1,700 Phillips-Van Heusen Corp. . . . . . . 22,737
6,600 Ross Stores, Inc. . . . . . . . . . . 259,050
3,600 St. John Knits, Inc. . . . . . . . . 152,100
3,000 * Today's Man, Inc. . . . . . . . . . . 6,000
16,600 * Tultex Corp. . . . . . . . . . . . . 89,225
8,600 UniFirst Corp. . . . . . . . . . . . 195,650
1,000 * Urban Outfitters, Inc. . . . . . . . 42,250
--------------
2,699,545
--------------
APPLIANCES/FURNISHINGS - 0.98%
2,100 Aaron Rents, Inc. Class A . . . . . . 60,375
3,750 Bassett Furniture Industries, Inc. . 94,219
4,200 Crown Crafts, Inc. . . . . . . . . . 44,100
1,650 Falcon Products, Inc. . . . . . . . . 27,431
12,100 * Furniture Brands International, Inc. 131,587
13,653 * General Host Corp. . . . . . . . . . 46,079
11,697 * Griffon Corp. . . . . . . . . . . . . 106,735
5,000 Haverty Furniture Companies, Inc. . . 67,500
11,000 Hechinger Co. Class A . . . . . . . . 48,125
1,450 * Helen of Troy Limited . . . . . . . . 38,788
6,500 Herman Miller, Inc. . . . . . . . . . 200,687
6,000 Hunt Manufacturing Co. . . . . . . . 99,000
2,200 La-Z-Boy Chair Co. . . . . . . . . . 71,775
4,800 * Lechters, Inc. . . . . . . . . . . . 33,000
11,400 * Levitz Furniture, Inc. . . . . . . . 49,875
4,585 * Metromedia International Group . . . 64,190
1,500 National Presto Industries, Inc. . . 60,750
4,400 * O'Sullivan Industries Holdings, Inc. 33,550
4,600 Oneida Ltd. . . . . . . . . . . . . . 79,925
5,200 * Renters Choice, Inc. . . . . . . . . 140,400
4,400 Rival Co. . . . . . . . . . . . . . . 103,400
5,200 Sun Television and Appliances, Inc. . 26,000
4,900 Windmere Corp. . . . . . . . . . . . 63,700
5,423 * Zenith Electronics Corp. . . . . . . 78,634
--------------
1,769,825
--------------
AUTO - CARS - 0.10%
2,800 * Insurance Auto Auctions, Inc. . . . . 33,950
2,600 * Oxford Resources Corp. Class A . . . 66,625
6,200 * Roadmaster Industries, Inc. . . . . . 11,625
3,243 Varlen Corp. . . . . . . . . . . . . 70,941
--------------
183,141
--------------
</TABLE>
21
<PAGE> 123
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
AUTO - ORIGINAL EQUIPMENT - 0.67%
8,800 Allen Group Inc. . . . . . . . . . . $ 242,000
8,900 Arvin Industries, Inc. . . . . . . . 218,050
2,900 BREED Technologies, Inc. . . . . . . 65,250
2,500 Carlisle Cos Inc. . . . . . . . . . . 130,313
8,500 Donaldson Co., Inc. . . . . . . . . . 223,125
3,500 Excel Industries, Inc. . . . . . . . 52,500
7,100 Federal-Mogul Corp. . . . . . . . . . 130,462
4,500 Hayes Wheels International, Inc. . . 140,625
--------------
1,202,325
--------------
AUTO - REPLACEMENT PARTS - 1.12%
3,300 A.O. Smith Corp. . . . . . . . . . . 88,275
5,500 * APS Holding Corp. Class A . . . . . . 121,000
14,200 * Collins & Aikman Corp. . . . . . . . 95,850
1,075 Dart Group Corp. Class A . . . . . . 91,375
1,200 * Discount Auto Parts, Inc. . . . . . . 30,900
4,600 Furon Co. . . . . . . . . . . . . . . 109,825
6,300 Handy & Harman . . . . . . . . . . . 111,037
800 * Jason Inc. . . . . . . . . . . . . . 6,400
6,600 Kaydon Corp. . . . . . . . . . . . . 283,800
4,700 Masland Corp. . . . . . . . . . . . . 123,375
1,470 * Monro Muffler Brake, Inc. . . . . . . 27,930
943 Myers Industries, Inc. . . . . . . . 19,214
7,950 Simpson Industries, Inc. . . . . . . 76,519
6,400 SPX Corp. . . . . . . . . . . . . . . 171,200
2,100 Standard Motor Products, Inc.
Class A . . . . . . . . . . . . . 35,700
6,450 Standard Products Co. Class A . . . . 175,762
7,600 Stant Corp. . . . . . . . . . . . . . 84,550
11,200 * TBC Corp. . . . . . . . . . . . . . . 99,400
2,900 * Thomson PBE, Inc. . . . . . . . . . . 31,900
2,200 TransPro, Inc. . . . . . . . . . . . 16,500
3,300 Walbro Corp. . . . . . . . . . . . . 71,775
5,775 Wynn's International, Inc. . . . . . 158,091
--------------
2,030,378
--------------
BANKS - NEW YORK CITY - 0.07%
5,000 New York Bancorp Inc. . . . . . . . . 127,500
--------------
BANKS - REGIONAL - 5.92%
4,900 AMCORE Financial, Inc. . . . . . . . 98,613
2,625 Anchor BanCorp Wisconsin Inc. . . . . 89,250
3,918 Associated Banc-Corp. . . . . . . . . 150,843
7,800 BancorpSouth, Inc. . . . . . . . . . 175,500
590 Bank of Granite Corp. . . . . . . . . 22,494
3,150 BSB Bancorp, Inc. . . . . . . . . . . 80,719
259 BT Financial Corp. . . . . . . . . . 9,518
5,712 CCB Financial Corp. . . . . . . . . . 297,024
5,800 Center Financial Corp. . . . . . . . 122,525
8,100 Centura Banks, Inc. . . . . . . . . . 303,750
3,900 Chemical Financial Corp. . . . . . . 152,100
5,600 Citizens Bancorp . . . . . . . . . . 168,000
600 Citizens Bancshares, Inc. . . . . . . 19,050
600 Citizens Banking Corp. . . . . . . . 17,775
14,000 City National Corp. . . . . . . . . . 215,250
5,207 CNB Bancshares, Inc. . . . . . . . . 148,399
3,900 Cole Taylor Financial Group, Inc. . . 103,350
BANKS - REGIONAL - Continued
5,449 Collective Bancorp, Inc. . . . . . . $ 133,501
3,800 Colonial BancGroup, Inc. . . . . . . 133,000
2,112 Commerce Bancorp, Inc. . . . . . . . 51,216
5,100 Commercial Federal Corp. . . . . . . 197,625
5,300 Community First Bankshares, Inc. . . 123,888
4,120 Cullen/Frost Bankers, Inc. . . . . . 212,180
6,600 Deposit Guaranty Corp. . . . . . . . 298,650
1,742 F & M National Corp. . . . . . . . . 30,485
3,524 First American Financial Corp. . . . 107,923
3,550 First Citizens BancShares, Inc. . . . 225,425
225 First Commerce Bancshares, Inc. . . . 5,231
8,726 First Commercial Corp. . . . . . . . 266,143
9,400 First Commonwealth Financial Corp.
Pennsylvania . . . . . . . . . . . 178,600
3,200 First Financial Bancorp . . . . . . . 104,800
210 First Financial Corp. . . . . . . . . 6,405
7,700 First Financial Corp. . . . . . . . . 177,100
7,935 First Michigan Bank Corp. . . . . . . 240,029
3,900 First Midwest Bancorp, Inc. . . . . . 113,100
472 First Western Bancorp, Inc. . . . . . 12,508
337 Firstbank of Illinois Co. . . . . . . 10,279
7,500 FirstMerit Corp. . . . . . . . . . . 227,812
5,087 Fort Wayne National Corp. . . . . . . 161,512
8,525 Fulton Financial Corp. . . . . . . . 172,098
7,000 Great Financial Corp. . . . . . . . . 188,125
315 Harleysville National Corp. . . . . . 8,269
1,900 Heritage Financial Services, Inc. . . 38,950
5,925 HUBCO, Inc. . . . . . . . . . . . . . 124,610
5,120 * Imperial Bancorp . . . . . . . . . . 125,440
6,700 Jefferson Bankshares, Inc. . . . . . 147,400
4,500 Leader Financial Corp. . . . . . . . 204,750
3,100 Liberty Bancorp, Inc. . . . . . . . . 111,600
10,700 Magna Group, Inc. . . . . . . . . . . 256,800
3,300 Mark Twain Bancshares, Inc. . . . . . 120,450
4,727 Mid-Am, Inc. . . . . . . . . . . . . 87,450
1,825 National Bancorp of Alaska, Inc. . . 112,238
7,287 National Commerce Bancorporation . . 225,897
3,549 National Penn Bancshares, Inc. . . . 93,161
6,100 North Fork Bancorporation, Inc. . . . 148,687
3,012 North Side Savings Bank . . . . . . . 108,432
4,860 ONBANCorp, Inc. . . . . . . . . . . . 153,090
6,474 One Valley Bancorp of West
Virginia, Inc. . . . . . . . . . . 209,596
220 Peoples First Corp. . . . . . . . . . 4,950
600 Pikeville National Corp. . . . . . . 13,050
5,513 Provident Bancorp Inc. . . . . . . . 190,181
9,000 Riggs National Corp. . . . . . . . . 106,875
5,250 River Forest Bancorp, Inc. . . . . . 158,812
9,218 Roosevelt Financial Group, Inc. . . . 164,772
4,800 St. Paul Bancorp, Inc. . . . . . . . 111,000
5,475 Susquehanna Bancshares, Inc. . . . . 160,144
2,000 Trans Financial, Inc. . . . . . . . . 31,250
8,200 Trust Co. of New Jersey . . . . . . . 111,725
4,532 TrustCo Bank Corp. N Y . . . . . . . 100,837
9,650 Trustmark Corp. . . . . . . . . . . . 219,537
3,199 UMB Financial Corp. . . . . . . . . . 119,163
5,300 United Bankshares Inc. West Virginia 141,775
</TABLE>
22
<PAGE> 124
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKS - REGIONAL - Continued
8,987 United Carolina Bancshares Corp. . . $ 202,207
8,000 UST Corp. . . . . . . . . . . . . . . 105,000
7,940 Valley National Bancorp . . . . . . . 231,252
4,000 Westamerica Bankcorporation . . . . . 193,000
694 Westcorp . . . . . . . . . . . . . . 12,493
4,000 Whitney Holding Corp. . . . . . . . . 124,000
5,000 Zions Bancorporation . . . . . . . . 370,000
--------------
10,700,638
--------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.15%
10,000 Adolph Coors Class B . . . . . . . . 187,500
2,800 * Canandaigua Wine, Inc. Class B . . . 85,750
--------------
273,250
--------------
BEVERAGE - SOFT DRINKS - 0.06%
3,000 Coca-Cola Bottling Co. . . . . . . . 104,250
--------------
BROADCASTING - 1.28%
3,300 * Adelphia Communications Corp.
Class A . . . . . . . . . . . . . 23,925
5,300 * American Mobile Satellite Corp. . . . 97,388
5,100 * American Telecasting, Inc. . . . . . 72,038
6,300 * ANTEC Corp. . . . . . . . . . . . . . 107,887
200 * CAI Wireless Systems, Inc. . . . . . 2,150
6,500 Citicasters Inc. . . . . . . . . . . 202,312
4,500 * Cyrix Corp. . . . . . . . . . . . . . 138,937
4,800 * Evergreen Media Corp. . . . . . . . . 192,000
1,300 * EZ Communications, Inc. . . . . . . . 25,025
3,400 * Heritage Media Corp. Class A . . . . 135,150
8,250 * International Family
Entertainment, Inc. Class B . . . 148,500
800 * Jacor Communications, Inc. . . . . . 23,500
2,700 * Microtest, Inc. . . . . . . . . . . . 31,388
9,000 * Paxson Communications Corp. . . . . . 114,750
3,200 * People's Choice TV Corp. . . . . . . 54,400
6,700 * Renaissance Communication Corp. . . . 201,000
6,400 TCA Cable TV, Inc. . . . . . . . . . 180,800
13,300 * United International Holdings,
Inc. Class A . . . . . . . . . . . 189,525
1,100 United Television, Inc. . . . . . . . 96,250
5,600 * United Video Satellite Group, Inc.
Class A . . . . . . . . . . . . . 112,000
3,700 * WavePhore, Inc. . . . . . . . . . . . 37,000
3,600 * Young Broadcasting Inc. . . . . . . . 135,000
--------------
2,320,925
--------------
BUILDING MATERIALS - 0.85%
3,100 * ABT Building Products Corp. . . . . . 64,325
800 Ameron, Inc. . . . . . . . . . . . . 33,300
5,700 Apogee Enterprises, Inc. . . . . . . 152,475
2,850 Butler Manufacturing Co. . . . . . . 107,587
5,000 CalMat Co. . . . . . . . . . . . . . 91,875
3,200 Centex Construction Productions, Inc. 45,200
3,600 * Congoleum Corp. Class A . . . . . . . 39,150
2,100 Elcor Corp. . . . . . . . . . . . . . 46,463
9,500 Fedders USA Inc. . . . . . . . . . . 68,875
1,900 Florida Rock Industries, Inc. . . . . 48,450
BUILDING MATERIALS - Continued
5,000 Interface, Inc. Class A . . . . . . . $ 71,875
3,200 Lone Star Industries, Inc. . . . . . 106,400
4,200 Medusa Corp. . . . . . . . . . . . . 128,625
13,800 * Payless Cashways Inc. . . . . . . . . 65,550
1,000 Puerto Rican Cement Co. Inc. . . . . 32,875
3,500 Southdown, Inc. . . . . . . . . . . . 80,938
3,300 Texas Industries, Inc. . . . . . . . 206,662
7,100 * Triangle Pacific Corp. . . . . . . . 146,437
--------------
1,537,062
--------------
CHEMICAL - MAJOR - 0.23%
5,100 Borg-Warner Automotive, Inc. . . . . 201,450
3,800 Chemed Corp. . . . . . . . . . . . . 142,975
1,800 * Synetic, Inc. . . . . . . . . . . . . 62,100
--------------
406,525
--------------
CHEMICAL - MISCELLANEOUS - 1.56%
4,400 * Cytec Industries Inc. . . . . . . . . 393,800
4,300 Dexter Corp. . . . . . . . . . . . . 123,087
4,200 Fisher Scientific International Inc. 171,675
10,400 * Foamex International Inc. . . . . . . 127,400
5,100 Geon Co. . . . . . . . . . . . . . . 138,337
5,200 H.B. Fuller Co. . . . . . . . . . . . 175,500
14,300 Lawter International, Inc. . . . . . 164,450
500 LeaRonal, Inc. . . . . . . . . . . . 14,063
2,000 LESCO, Inc. . . . . . . . . . . . . . 32,500
6,400 * McWhorter Technologies, Inc. . . . . 118,400
4,900 Minerals Technologies Inc. . . . . . 178,237
7,000 * Mycogen Corp. . . . . . . . . . . . . 127,750
1,400 NCH Corp. . . . . . . . . . . . . . . 79,450
2,600 O'Sullivan Corp. . . . . . . . . . . 30,550
5,300 Om Group Inc. . . . . . . . . . . . . 214,650
375 PENWEST, LTD. . . . . . . . . . . . . 7,219
925 Petrolite Corp. . . . . . . . . . . . 30,525
1,700 Quaker Chemical Corp. . . . . . . . . 22,738
13,200 * Sterling Chemicals, Inc. . . . . . . 151,800
375 Tuscarora Inc. . . . . . . . . . . . 9,141
8,900 * Uniroyal Chemical Corp. . . . . . . . 142,400
600 Univar Corp. . . . . . . . . . . . . 7,425
3,450 VWR Scientific Products Corp. . . . . 58,650
6,150 W.H. Brady Co. Class A . . . . . . . 158,362
2,900 WD-40 Co. . . . . . . . . . . . . . . 137,750
--------------
2,815,859
--------------
COAL - 0.28% . . . . . . . . . . . .
1,900 * Addington Resources, Inc. . . . . . . 38,950
4,000 Ashland Inc. . . . . . . . . . . . . 94,500
7,500 Eastern Enterprises . . . . . . . . . 255,938
2,200 NACCO Industries, Inc. Class A . . . 123,200
--------------
512,588
--------------
CONGLOMERATES - 0.23%
2,300 * MAXXAM, Inc. . . . . . . . . . . . . 98,613
2,600 * PEC Israel Economic Corp. . . . . . . 50,050
4,700 PHH Corp. . . . . . . . . . . . . . . 260,262
--------------
408,925
--------------
</TABLE>
23
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SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER FINANCE - 0.46%
10,200 * AmeriCredit Corp. . . . . . . . . . . $ 154,275
3,700 Eaton Vance Corp. . . . . . . . . . . 121,175
1,120 * Fleet Financial Group, Inc. . . . . . 13,440
1,100 Fund American Enterprises, Inc. . . . 89,100
6,930 * National Auto Credit, Inc. . . . . . 84,893
6,600 * Olympic Financial Limited . . . . . . 155,925
6,000 SEI Corp. . . . . . . . . . . . . . . 130,500
2,400 * TFC Enterprises, Inc. . . . . . . . . 6,300
9,100 * World Acceptance Corp. . . . . . . . 81,900
--------------
837,508
--------------
CONTAINERS - METAL/GLASS - 0.35%
2,200 * Alltrista Corp. . . . . . . . . . . . 50,050
4,700 AptarGroup, Inc. . . . . . . . . . . 199,162
2,800 CLARCOR Inc. . . . . . . . . . . . . 57,750
600 * CSS Industries, Inc. . . . . . . . . 15,375
5,800 Greif Brothers Corp. Class A . . . . 166,750
625 Liqui-Box Corp. . . . . . . . . . . . 19,219
9,900 * Omega Environmental, Inc. . . . . . . 29,700
5,700 * U. S. Can Corp. . . . . . . . . . . . 97,613
--------------
635,619
--------------
CONTAINERS - PAPER - 0.29%
5,800 Chesapeake Utilities Corp. . . . . . 154,425
12,600 * Gaylord Container Corp. Class A . . . 112,613
9,900 Rock-Tenn Co. Class A . . . . . . . . 195,525
3,600 * Shorewood Packaging Corp. . . . . . . 59,400
--------------
521,963
--------------
COSMETICS/TOILETRIES - 0.17%
2,300 * American Safety Razor Co. . . . . . . 27,025
4,100 * INBRAND Corp. . . . . . . . . . . . . 119,412
9,100 * Playtex Products, Inc. . . . . . . . 87,588
2,600 * Thermolase Corp. . . . . . . . . . . 77,350
--------------
311,375
--------------
DRUGS - 2.87%
3,500 A.L. Pharma Inc. Class A . . . . . . 85,750
3,400 * Agouron Pharmaceuticals, Inc. . . . . 146,200
9,100 * Alliance Pharmaceutical Corp. . . . . 196,787
5,100 * AmeriSource Health Corp. Class A . . 172,125
1,900 * Amylin Pharmaceuticals, Inc. . . . . 23,275
1,000 * Aphton Corp. . . . . . . . . . . . . 24,000
5,400 * Athena Neurosciences, Inc. . . . . . 99,900
5,300 Bindley Western Industries, Inc. . . 90,763
1,400 * Biocraft Laboratories, Inc. . . . . . 28,700
200 Carter-Wallace Inc. . . . . . . . . . 2,800
1,500 * CellPro, Inc. . . . . . . . . . . . . 27,375
6,800 * Cephalon, Inc. . . . . . . . . . . . 183,600
2,800 * Columbia Laboratories, Inc. . . . . . 38,150
2,698 * Copley Pharmaceutical, Inc. . . . . . 42,494
200 * COR Therapeutics, Inc. . . . . . . . 2,025
5,500 * Cygnus, Inc. . . . . . . . . . . . . 102,094
8,200 * Cytel Corp. . . . . . . . . . . . . . 65,600
3,300 * Dura Pharmaceuticals, Inc. . . . . . 203,362
2,400 * Duramed Pharmaceuticals, Inc. . . . . 42,900
4,400 * Faulding, Inc. . . . . . . . . . . . 28,600
DRUGS - Continued
6,700 * Gilead Sciences, Inc. . . . . . . . . $ 232,825
800 Herbalife International, Inc. . . . . 12,800
2,200 * Human Genome Sciences, Inc. . . . . . 80,575
7,165 ICN Pharmaceuticals, Inc. . . . . . . 189,872
10,300 * ICOS Corp. . . . . . . . . . . . . . 91,412
10,300 * IDEXX Laboratories, Inc. . . . . . . 448,050
6,200 * ImmuLogic Pharmaceutical Corp. . . . 57,350
7,500 * Immunex Corp. . . . . . . . . . . . . 116,250
2,600 * Incyte Pharmacuticals, Inc. . . . . . 89,050
7,200 * Interneuron Pharmaceuticals, Inc. . . 279,000
4,200 Life Technologies, Inc. . . . . . . . 129,675
3,458 * Ligand Pharmaceuticals Inc. Class B . 57,922
1,600 * Medco Research, Inc. . . . . . . . . 16,200
6,930 Natures Sunshine Products, Inc. . . . 195,772
7,100 * NeXstar Pharmaceuticals, Inc. . . . . 175,725
7,700 * Noven Pharmaceuticals, Inc. . . . . . 132,825
1,200 * PDT Inc. . . . . . . . . . . . . . . 57,900
3,600 * Pharmaceutical Resources, Inc. . . . 26,100
7,000 * Regeneron Pharmaceuticals Inc. . . . 121,625
2,700 * Roberts Pharmaceutical Corp. . . . . 56,700
6,400 * Sepracor Inc. . . . . . . . . . . . . 93,600
7,900 * SEQUUS Pharmaceuticals, Inc. . . . . 168,862
4,100 * Somatogen, Inc. . . . . . . . . . . . 69,188
12,100 * Systemed, Inc. . . . . . . . . . . . 34,788
800 * SyStemix, Inc. . . . . . . . . . . . 14,000
3,100 * Vertex Pharmaceuticals Inc. . . . . . 115,475
4,200 * Vivus Inc. . . . . . . . . . . . . . 124,425
8,930 * Watson Pharmaceuticals, Inc. . . . . 401,850
--------------
5,196,316
--------------
ELECTRICAL EQUIPMENT - 1.61%
200 * Acme Electric Corp. . . . . . . . . . 2,475
3,500 * Alpha Industries, Inc. . . . . . . . 33,688
5,100 * American Superconductor Corp. . . . . 71,400
7,200 AMETEK, Inc. . . . . . . . . . . . . 154,800
900 * Applied Digital Access, Inc. . . . . 13,725
3,800 * Applied Innovation Inc. . . . . . . . 47,500
8,157 * BancTec, Inc. . . . . . . . . . . . . 165,179
6,200 Belden Inc. . . . . . . . . . . . . . 198,400
3,950 * C-COR Electronics, Inc. . . . . . . . 92,331
9,400 * C-Cube Microsystems, Inc. . . . . . . 470,000
4,000 * Cable Design Technologies Corp . . . 182,000
4,700 * California Microwave, Inc. . . . . . 89,887
400 * Cherry Corp. Class B . . . . . . . . 5,000
4,900 * Digital Microwave Corp. . . . . . . . 77,175
4,775 * Electro Rent Corp. . . . . . . . . . 118,181
3,700 * Energy Conversion Devices, Inc. . . . 89,725
2,300 * Exide Electronics Group, Inc. . . . . 35,075
500 * Franklin Electronic Publishers, Inc. 12,313
3,000 * Holophane Corp. . . . . . . . . . . . 53,250
2,200 * Hutchinson Technology Inc. . . . . . 124,850
2,700 * Integrated Circuit Systems, Inc. . . 32,738
5,300 * Integrated Silicon Solution, Inc. . . 79,169
4,800 Juno Lighting, Inc. . . . . . . . . . 73,200
5,500 * Kent Electronics Corp. . . . . . . . 195,250
2,800 * Micrel, Inc. . . . . . . . . . . . . 46,200
5,400 * Sierra Semiconductor Corp. . . . . . 79,650
</TABLE>
24
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SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT - Continued
3,300 Standex International Corp. . . . . . $ 87,862
1,000 * Summa Four, Inc. . . . . . . . . . . 18,000
2,800 * Thermo Ecotek Corp. . . . . . . . . . 67,550
900 Thomas Industries Inc. . . . . . . . 18,563
5,900 Woodhead Industries, Inc. . . . . . . 83,337
5,100 X-Rite, Inc. . . . . . . . . . . . . 88,612
--------------
2,907,085
--------------
ELECTRONIC INSTRUMENTS - 3.69%
4,850 Analogic Corp. . . . . . . . . . . . 123,675
8,600 * Applied Magnetics Corp. . . . . . . . 147,275
5,900 Augat Inc. . . . . . . . . . . . . . 127,587
2,045 * Bell Industries, Inc. . . . . . . . . 44,999
5,600 Bmc Inds Inc. Minnesota . . . . . . . 166,600
9,800 * Cognex Corp. . . . . . . . . . . . . 173,950
1,400 CTS Corp. . . . . . . . . . . . . . . 63,175
700 Daniel Industries, Inc. . . . . . . . 10,325
6,000 * Dionex Corp. . . . . . . . . . . . . 220,500
6,800 * Dynatech Corp. . . . . . . . . . . . 237,150
1,800 * Eltron International, Inc. . . . . . 49,950
4,000 * Evans & Sutherland Computer Corp. . . 94,000
4,600 * Exabyte Corp. . . . . . . . . . . . . 91,425
3,700 * Exar Corp. . . . . . . . . . . . . . 60,125
2,100 Fluke Corp. . . . . . . . . . . . . . 81,638
3,700 * Gentex Corp. . . . . . . . . . . . . 167,425
5,500 * Genus, Inc. . . . . . . . . . . . . . 59,813
8,300 Gerber Scientific, Inc. . . . . . . . 144,212
3,200 * HADCO Corp. . . . . . . . . . . . . . 75,200
3,675 Harman International Industries, Inc. 192,937
14,700 * InterDigital Communications Corp. . . 138,731
14,200 * Intergraph Corp. . . . . . . . . . . 186,375
31,000 * Iomega Corp. . . . . . . . . . . . . 1,367,875
1,000 * ITI Technologies, Inc. . . . . . . . 33,750
6,150 * Lattice Semiconductor Corp. . . . . . 212,944
8,300 * LoJack Corp. . . . . . . . . . . . . 109,975
10,200 * LTX Corp. . . . . . . . . . . . . . . 109,650
6,100 * MagneTek, Inc. . . . . . . . . . . . 59,475
6,400 * Marshall Industries . . . . . . . . . 200,800
11,050 Methode Electronics, Inc. Class A . . 196,137
2,500 Nashua Corp. . . . . . . . . . . . . 41,875
5,900 National Computer Systems, Inc. . . . 143,075
4,200 Park Electrochemical Corp. . . . . . 101,325
3,000 * Performance Food Group Co. . . . . . 94,500
8,737 Pioneer-Standard Electronics, Inc. . 132,147
3,800 * Robotic Vision Systems, Inc. . . . . 72,200
5,700 * Standard Microsystems Corp. . . . . . 89,063
6,200 Telxon Corp. . . . . . . . . . . . . 113,150
6,200 * 3DO Co. . . . . . . . . . . . . . . . 71,494
1,500 * Three-Five Systems, Inc. . . . . . . 20,625
900 * Union Switch & Signal . . . . . . . . 9,675
7,300 * VeriFone, Inc. . . . . . . . . . . . 367,737
3,100 Watkins-Johnson Co. . . . . . . . . . 94,938
4,400 Wyle Electronics . . . . . . . . . . 187,000
8,200 ZERO Corp. . . . . . . . . . . . . . 175,275
--------------
6,661,752
--------------
ENTERTAINMENT - 1.04%
3,300 * AMC Entertainment, Inc. . . . . . . . $ 109,725
8,100 * American Classic Voyages Co. . . . . 65,812
4,400 * Argosy Gaming Co. . . . . . . . . . . 34,650
6,900 * Autotote Corp. Class A . . . . . . . 21,994
15,400 * Aztar Corp. . . . . . . . . . . . . . 177,100
2,200 * BET Holdings, Inc. Class A . . . . . 58,575
1,100 * Carmike Cinemas, Inc. . . . . . . . . 30,663
12,200 * Discovery Zone, Inc. . . . . . . . . 6,863
3,400 * GC Companies, Inc. . . . . . . . . . 124,950
7,850 * Grand Casinos, Inc. . . . . . . . . . 274,750
3,200 * Griffin Gaming & Entertainment . . . 45,600
1,000 Harveys Casino Resorts . . . . . . . 21,500
7,000 * Hollywood Entertainment Corp. . . . . 108,500
6,700 * Musicland Stores Corp. . . . . . . . 29,313
1,800 NN Ball & Roller, Inc. . . . . . . . 42,300
3,000 * Primadonna Resorts, Inc. . . . . . . 69,375
2,100 * Recoton Corp. . . . . . . . . . . . . 36,225
4,350 * Regal Cinemas, Inc. . . . . . . . . . 201,731
1,050 * Shuffle Master, Inc. . . . . . . . . 15,750
3,300 * Sodak Gaming, Inc. . . . . . . . . . 100,650
4,500 * Sports & Recreation, Inc. . . . . . . 42,750
7,400 * StarSight Telecast, Inc. . . . . . . 73,884
6,300 * Toy Biz, Inc. Class A . . . . . . . . 137,812
8,200 * Tyco Toys, Inc. . . . . . . . . . . . 44,075
--------------
1,874,547
--------------
FERTILIZERS - 0.30%
6,449 Delta & Pine Land Co. . . . . . . . . 277,307
7,400 First Mississippi Corp. . . . . . . . 183,150
3,900 Mississippi Chemical Corp. . . . . . 86,775
--------------
547,232
--------------
FINANCE COMPANIES - 0.41%
3,267 * Imperial Credit Industries, Inc. . . 95,560
6,100 Keystone Financial, Inc. . . . . . . 204,350
7,625 Money Store Inc. . . . . . . . . . . 200,156
4,400 Phoenix Duff & Phelps Corp. . . . . . 31,900
440 Phoenix Duff & Phelps Corp.
(Preferred) . . . . . . . . . . . 11,385
3,600 U. S. Trust Corp. . . . . . . . . . . 193,050
--------------
736,401
--------------
FOODS - 0.81%
350 Bridgford Foods Corp. . . . . . . . . 2,844
800 Chiquita Brands International . . . . 10,700
3,200 Dreyer's Grand Ice Cream, Inc. . . . 108,000
15,450 Flowers Industries, Inc. . . . . . . 243,337
5,850 Hudson Foods, Inc. . . . . . . . . . 78,244
7,200 International Multifoods Corp. . . . 143,100
5,200 Interstate Bakeries Corp. . . . . . . 143,650
6,300 J.M. Smucker Co. Class A . . . . . . 128,362
4,200 Lance, Inc. . . . . . . . . . . . . . 69,825
7,700 Michaels Foods, Inc. . . . . . . . . 78,925
6,700 * Morningstar Group Inc. . . . . . . . 77,050
2,700 * NBTY, Inc. . . . . . . . . . . . . . 24,975
</TABLE>
25
<PAGE> 127
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
FOODS - Continued
8,000 * Ralcorp Holdings Inc. . . . . . . . . $ 199,000
2,250 Thorn Apple Valley, Inc. . . . . . . 32,063
3,285 Tootsie Roll Industries, Inc. . . . . 115,796
--------------
1,455,871
--------------
FOOTWEAR - 0.43%
4,400 Brown Group, Inc. . . . . . . . . . . 74,800
3,366 * Converse Inc. . . . . . . . . . . . . 15,568
4,600 Edison Brothers Stores, Inc. . . . . 12,075
4,400 J Baker Inc. . . . . . . . . . . . . 42,350
2,400 * Just For Feet Inc. . . . . . . . . . 128,700
7,100 Justin Industries, Inc. . . . . . . . 86,975
3,800 * Kenneth Cole Productions, Inc.
Class A . . . . . . . . . . . . . 68,400
9,700 Stride Rite Corp. . . . . . . . . . . 87,300
2,100 * Timberland Co. Class A . . . . . . . 47,775
6,150 * Wolverine World Wide, Inc. . . . . . 204,487
--------------
768,430
--------------
FREIGHT - 0.74%
6,100 Air Express International Corp. . . . 175,375
3,900 Airborne Freight Corp. . . . . . . . 98,475
7,800 American President Companies, Ltd. . 205,725
5,486 * Fritz Companies, Inc. . . . . . . . . 189,267
1,800 * Greyhound Lines, Inc. . . . . . . . . 8,213
500 International Shipholding Corp. . . . 9,625
5,500 Interpool, Inc. . . . . . . . . . . . 106,562
3,900 J.B. Hunt Transport Services, Inc. . 74,100
6,000 * Kirby Corp. . . . . . . . . . . . . . 105,750
14,900 * OMI Corp. . . . . . . . . . . . . . . 130,375
10,900 Overseas Shipholding Group Inc. . . . 204,375
800 * SEACOR Holdings, Inc. . . . . . . . . 38,400
--------------
1,346,242
--------------
GOLD MINING - 0.33%
12,800 * Amax Gold Inc. . . . . . . . . . . . 86,400
6,600 Coeur d'Alene Mines Corp. . . . . . . 146,025
6,630 * FirstMiss Gold Inc. . . . . . . . . . 259,399
2,600 FMC Gold Co. . . . . . . . . . . . . 14,950
65,500 * Sunshine Mining Co. . . . . . . . . . 98,250
--------------
605,024
--------------
HARDWARE & TOOLS - 0.07%
2,100 Brenco, Inc. . . . . . . . . . . . . 27,563
4,400 Lawson Products, Inc. . . . . . . . . 101,200
--------------
128,763
--------------
HEALTHCARE - 4.18%
2,800 * Access Health, Inc. . . . . . . . . . 152,600
12,200 * Advanced Tissue Sciences, Inc. . . . 222,650
4,900 * American Medical Response, Inc. . . . 178,237
12,990 * Apria Healthcare Group, Inc. . . . . 379,957
4,100 * Arbor Health Care Co. . . . . . . . . 114,800
2,163 Block Drug Co., Inc. Class A . . . . 93,009
5,100 Collagen Corp. . . . . . . . . . . . 109,650
8,300 * Coram Healthcare Corp. . . . . . . . 40,463
HEALTHCARE - Continued
5,102 * CYTOGEN Corp. . . . . . . . . . . . . $ 45,918
7,800 * Genesis Health Ventures, Inc. . . . . 246,675
4,300 * GranCare Inc. . . . . . . . . . . . . 79,013
12,462 * Horizon/CMS Healthcare Corp. . . . . 152,660
7,100 Integrated Health Services, Inc. . . 185,487
6,500 Invacare Corp. . . . . . . . . . . . 169,000
1,200 Kinetic Concepts, Inc. . . . . . . . 20,400
6,400 * Lincare Holdings Inc. . . . . . . . . 241,600
4,100 * Living Centers of America, Inc. . . . 154,775
8,600 * Mariner Health Group, Inc. . . . . . 152,650
7,000 * Maxicare Health Plans Inc. . . . . . 171,500
6,274 * MedPartners/Mullikin, Inc. . . . . . 146,655
7,600 Mentor Corp. . . . . . . . . . . . . 169,100
7,500 * Multicare Companies, Inc. . . . . . . 150,000
23,600 * NovaCare, Inc. . . . . . . . . . . . 153,400
6,500 Omnicare, Inc. . . . . . . . . . . . 362,375
13,100 * OrNda HealthCorp . . . . . . . . . . 329,137
5,050 * Patterson Dental Co. . . . . . . . . 162,862
3,600 * PHP Healthcare Corp. . . . . . . . . 119,250
9,600 * PhyCor, Inc. . . . . . . . . . . . . 520,800
2,800 * Physicians Health Services, Inc.
Class A . . . . . . . . . . . . . 77,000
5,000 * Quantum Health Resources Inc. . . . . 87,500
4,300 * Regency Health Services, Inc. . . . . 43,538
4,800 * Renal Treatment Centers Inc. . . . . 163,200
800 * Respironics Inc. . . . . . . . . . . 15,800
4,600 * RightCHOICE Managed Care, Inc.
Class A . . . . . . . . . . . . . 78,775
5,600 * RoTech Medical Corp. . . . . . . . . 120,400
3,500 * Rural/Metro Corp. . . . . . . . . . . 117,250
4,200 * Sierra Health Services, Inc. . . . . 135,450
5,000 * SpaceLabs Medical, Inc. . . . . . . . 121,250
10,086 * STERIS Corp. . . . . . . . . . . . . 345,445
3,100 * Summit Care Corp. . . . . . . . . . . 74,400
12,488 * Sun Healthcare Group, Inc. . . . . . 184,198
5,600 * Sunrise Medical Inc. . . . . . . . . 105,700
3,850 * TECNOL Medical Products, Inc. . . . . 76,038
4,500 * TheraTx, Inc. . . . . . . . . . . . . 66,375
10,000 * Universal Health Services, Inc.
Class B . . . . . . . . . . . . . 260,000
3,500 * VISX, Inc. . . . . . . . . . . . . . 113,750
2,300 Vital Signs, Inc. . . . . . . . . . . 55,200
7,725 * Vivra Inc. . . . . . . . . . . . . . 263,616
1,600 * Wellcare Management Group, Inc. . . . 20,200
--------------
7,549,708
--------------
HEAVY DUTY TRUCKS/PARTS - 0.20%
800 Cascade Corp. . . . . . . . . . . . . 11,800
4,300 * Detroit Diesel Corp. . . . . . . . . 81,162
3,900 Kysor Industrial Corp. . . . . . . . 102,862
1,700 Oshkosh Truck Corp. Class B . . . . . 24,863
577 Raymond Corp. . . . . . . . . . . . . 10,242
4,450 Spartan Motors, Inc. . . . . . . . . 35,044
4,450 Wabash National Corp. . . . . . . . . 90,669
--------------
356,642
--------------
</TABLE>
26
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<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
HOME BUILDERS - 0.65%
3,100 Continental Homes Holding Corp. . . . $ 76,338
7,905 * D R Horton Inc. . . . . . . . . . . . 83,002
6,700 Del Webb Corp. . . . . . . . . . . . 118,925
4,050 * Hovnanian Enterprises, Inc. Class A . 28,350
350 * Hovnanian Enterprises, Inc. Class B . 2,450
7,000 * NVR Inc. . . . . . . . . . . . . . . 74,375
6,900 Pulte Corp. . . . . . . . . . . . . . 193,200
6,000 * Redman Industries Inc. . . . . . . . 131,250
7,000 Ryland Group, Inc. . . . . . . . . . 114,625
3,600 * Schuler Homes, Inc. . . . . . . . . . 25,200
10,200 Standard Pacific Corp. . . . . . . . 73,950
7,700 * Toll Brothers, Inc. . . . . . . . . . 128,975
5,170 * U. S. Home Corp. . . . . . . . . . . 133,127
--------------
1,183,767
--------------
HOSPITAL MANAGEMENT - 0.76%
2,250 * ABR Information Services, Inc. . . . 141,187
19,500 * CareAdvantage, Inc. . . . . . . . . . 4,680
800 * Champion Healthcare Corp. . . . . . . 9,100
1,700 * Coastal Physician Group Inc. . . . . 14,238
4,250 * Community Health Systems, Inc. . . . 184,344
11,400 * Community Psychiatric Centers . . . . 108,300
7,500 * Coventry Corp. . . . . . . . . . . . 137,812
3,200 * EmCare Holdings Inc. . . . . . . . . 100,000
5,700 * Health Management Systems, Inc. . . . 175,275
4,400 * Health Management, Inc. . . . . . . . 23,650
6,500 * Magellan Health Services, Inc. . . . 156,000
3,600 * Orthodontic Centers of America Inc. . 133,650
2,600 * Physician Reliance Network Inc. . . . 136,500
13,300 * Unilab Corp. . . . . . . . . . . . . 24,938
2,300 * United American Healthcare Corp. . . 26,450
--------------
1,376,124
--------------
HOSPITAL SUPPLIES - 1.67%
9,400 * Acuson Corp. . . . . . . . . . . . . 179,775
2,600 * Advanced Technology Laboratories,
Inc. . . . . . . . . . . . . . . . 91,650
9,900 Ballard Medical Products . . . . . . 196,762
10,200 * Bio-Technology General Corp. . . . . 74,588
15,900 * Biocontrol Technology, Inc. . . . . . 27,825
2,900 * Coherent, Inc. . . . . . . . . . . . 141,737
5,300 * Daig Corp. . . . . . . . . . . . . . 131,175
5,200 * Datascope Corp. . . . . . . . . . . . 92,300
4,100 Diagnostic Products Corp. . . . . . . 154,262
4,800 * Gulf South Medical Supply, Inc. . . . 229,200
4,750 * Healthdyne Technologies Inc. . . . . 62,938
7,300 * Isis Pharmaceuticals, Inc. . . . . . 132,312
600 Landauer, Inc. . . . . . . . . . . . 12,375
1,600 * Maxxim Medical, Inc. . . . . . . . . 29,200
900 * MediSense, Inc. . . . . . . . . . . . 40,050
8,224 * Nellcor Puritan Bennett Inc. . . . . 448,208
10,950 Owens & Minor, Inc. . . . . . . . . . 136,875
2,700 * Pharmaceutical Marketing Services,
Inc. . . . . . . . . . . . . . . . 28,013
6,500 * Physician Sales & Service Inc. . . . 209,625
1,000 * Safeskin Corp. . . . . . . . . . . . 35,875
1,800 Sullivan Dental Products, Inc. . . . 20,700
9,700 * Summit Technology, Inc. . . . . . . . 166,112
HOSPITAL SUPPLIES - Continued
3,200 * Target Therapeutics, Inc. . . . . . . $ 158,400
1,800 * TECHNE Corp. . . . . . . . . . . . . 52,200
6,500 * Uromed Corp . . . . . . . . . . . . . 78,813
3,800 West Co., Inc. . . . . . . . . . . . 94,525
--------------
3,025,495
--------------
HOUSEHOLD PRODUCTS - 0.57%
4,500 Armor All Products Corp. . . . . . . 69,750
3,700 * Blyth Industries, Inc. . . . . . . . 170,200
3,000 Ekco Group, Inc. . . . . . . . . . . 18,375
1,125 Fay's Inc. . . . . . . . . . . . . . 9,141
8,700 * First Alert, Inc. . . . . . . . . . . 56,550
6,100 Libbey Inc. . . . . . . . . . . . . . 147,925
2,312 * Midwest Grain Products, Inc. . . . . 28,900
4,225 Oil-Dri Corp. of America . . . . . . 57,566
4,050 Pittway Corp. Class A . . . . . . . . 195,412
3,250 Rykoff-Sexton, Inc. . . . . . . . . . 50,375
7,000 Stanhome Inc. . . . . . . . . . . . . 203,000
800 * Syratech Corp. . . . . . . . . . . . 21,100
--------------
1,028,294
--------------
INFORMATION PROCESSING - 8.68%
300 * Active Voice Corp. . . . . . . . . . 4,050
7,733 ADAC Laboratories . . . . . . . . . . 126,628
13,387 * American Management Systems, Inc. . . 381,529
3,900 Analysts International Corp. . . . . 167,700
3,500 * Applix, Inc. . . . . . . . . . . . . 114,625
3,300 * Artisoft, Inc. . . . . . . . . . . . 34,650
5,703 * AST Research, Inc. . . . . . . . . . 46,337
3,100 * Atria Software, Inc. . . . . . . . . 196,075
8,300 * Auspex Systems, Inc. . . . . . . . . 191,937
5,200 * Banyan Systems Inc. . . . . . . . . . 48,100
4,600 * BBN Corp. . . . . . . . . . . . . . . 120,750
5,800 * BISYS Group, Inc. . . . . . . . . . . 213,150
7,300 * Black Box Corp. . . . . . . . . . . . 151,475
4,650 * Boole & Babbage, Inc. . . . . . . . . 113,925
10,100 * Borland International, Inc. . . . . . 135,719
6,900 * Boston Technology, Inc. . . . . . . . 125,063
1,300 * Business Records Corp. Holding Co. . 47,775
1,400 * Caere Corp. . . . . . . . . . . . . . 18,725
2,900 * Cambridge Technology Partners, Inc. . 221,850
1,700 * CDW Computer Centers, Inc. . . . . . 139,825
9,500 * Cheyenne Software, Inc. . . . . . . . 205,437
10,800 * CompUSA Inc. . . . . . . . . . . . . 472,500
4,950 * Computer Horizons Corp. . . . . . . . 231,412
7,000 * Computer Network Technology Corp. . . 58,625
14,900 * Computervision Corp. . . . . . . . . 173,212
7,500 * Comverse Technology, Inc. . . . . . . 220,312
11,612 * Concord EFS, Inc. . . . . . . . . . . 400,614
7,668 * Continuum Co., Inc. . . . . . . . . . 471,582
5,800 * Control Data Systems, Inc. . . . . . 143,550
9,500 * CopyTele, Inc. . . . . . . . . . . . 176,937
1,430 * Cray Research, Inc. . . . . . . . . . 39,146
10,000 * Data General Corp. . . . . . . . . . 127,500
3,000 * Dialogic Corp. . . . . . . . . . . . 162,000
3,600 * DSP Group, Inc. . . . . . . . . . . . 42,300
2,300 * Edmark Corp. . . . . . . . . . . . . 66,700
7,100 * Egghead, Inc. . . . . . . . . . . . . 84,313
</TABLE>
27
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SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION PROCESSING - Continued
7,600 * Electronic For Imaging, Inc. . . . . $ 608,000
2,600 * Emulux Corp. . . . . . . . . . . . . 49,075
3,800 * Epic Design Technology, Inc. . . . . 112,100
4,000 * FileNet Corp. . . . . . . . . . . . . 185,500
2,000 * Firefox Communications, Inc. . . . . 17,469
5,700 * FORE Systems, Inc. . . . . . . . . . 461,700
4,800 * FTP Software, Inc. . . . . . . . . . 56,100
5,400 * General DataComm Industries, Inc. . . 85,725
1,400 * Global Village Communications . . . . 13,825
3,200 * Gupta Corp. . . . . . . . . . . . . . 20,400
1,600 * HCIA, Inc. . . . . . . . . . . . . . 103,600
1,800 Henry Jack & Associates . . . . . . . 59,175
6,200 * Hyperion Software Corp. . . . . . . . 86,800
8,100 * IMO Industries Inc. . . . . . . . . . 57,713
3,200 * In Focus Systems, Inc. . . . . . . . 184,000
1,700 * Incomnet, Inc. . . . . . . . . . . . 9,138
10,200 * Information Resources, Inc. . . . . . 127,500
11,500 * Input/Output, Inc. . . . . . . . . . 464,312
3,000 * Inso Corp. . . . . . . . . . . . . . 170,250
5,900 * INTERSOLV, Inc. . . . . . . . . . . . 70,063
5,800 * Keane, Inc. . . . . . . . . . . . . . 231,275
5,800 * Landmark Graphics Corp. . . . . . . . 108,750
4,300 MacNeal-Schwendler Corp. . . . . . . 47,838
7,800 * Macromedia, Inc. . . . . . . . . . . 332,475
2,300 * MapInfo Corp. . . . . . . . . . . . . 40,250
4,400 * Marcam Corp. . . . . . . . . . . . . 55,550
6,600 * McAfee Associates, Inc. . . . . . . . 244,200
5,100 Measurex Corp. . . . . . . . . . . . 147,263
2,600 * Medic Computer Systems, Inc. . . . . 241,800
4,500 * Mercury Interactive Corp. . . . . . . 65,250
5,600 * Merisel, Inc. . . . . . . . . . . . . 23,800
3,500 * Microcom, Inc. . . . . . . . . . . . 67,813
2,400 * Microdyne Corp. . . . . . . . . . . . 19,050
2,300 * Micron Electronics, Inc. . . . . . . 36,800
800 * MICROS Systems Inc. . . . . . . . . . 23,800
6,100 MTS Systems Corp. . . . . . . . . . . 111,325
7,250 National Data Corp. . . . . . . . . . 273,687
7,800 * NetManage, Inc. . . . . . . . . . . . 131,625
8,800 * Network General Corp. . . . . . . . . 209,000
3,200 * Norand Corp. . . . . . . . . . . . . 65,600
4,000 * Oak Technology, Inc. . . . . . . . . 51,000
2,400 * Open Environment Corp. . . . . . . . 15,600
3,100 * Optical Data Systems, Inc. . . . . . 71,300
2,133 * Paxar Corp. . . . . . . . . . . . . . 35,728
5,100 * Platinum Software Corp. . . . . . . . 54,825
9,700 * PLATINUM technology, Inc. . . . . . 176,419
5,500 * Primark Corp. . . . . . . . . . . . . 193,875
4,400 * Progress Software Corp. . . . . . . . 69,850
6,600 * Quarterdeck Corp. . . . . . . . . . . 95,700
9,200 * Racoktek Inc. . . . . . . . . . . . . 55,200
4,500 * Rational Software Corp. . . . . . . . 279,562
1,800 * Remedy Corp. . . . . . . . . . . . . 140,850
13,800 * S3, Inc. . . . . . . . . . . . . . . 194,925
3,400 * Safeguard Scientifics, Inc. . . . . . 299,625
2,900 * Security Dynamics Technologies, Inc. 257,375
8,400 * Sequent Computer Systems, Inc. . . . 111,300
5,600 * Shiva Corp. . . . . . . . . . . . . . 418,600
INFORMATION PROCESSING - Continued
5,200 * Sierra On-Line, Inc. . . . . . . . . $ 234,000
6,100 * Softkey International, Inc. . . . . . 151,737
100 * Spectrum HoloByte, Inc. . . . . . . . 738
8,100 * Stac, Inc. . . . . . . . . . . . . . 103,275
5,400 * Stratus Computer, Inc. . . . . . . . 159,300
9,800 * Structural Dynamics Research Corp. . 279,300
4,500 * SyQuest Technology, Inc. . . . . . . 49,500
7,350 System Software Associates, Inc. . . 120,356
5,000 * Systems & Computer Technology Corp. . 87,500
11,100 * Tech Data Corp. . . . . . . . . . . . 258,075
3,400 * Trident Microsystems, Inc. . . . . . 50,150
5,100 * Tseng Labs, Inc. . . . . . . . . . . 58,650
6,600 * Viewlogic Systems, Inc. . . . . . . . 103,125
8,800 * Wang Laboratories, Inc. . . . . . . . 190,300
3,200 * Wonderware Corp. . . . . . . . . . . 64,000
3,300 * Xircom, Inc. . . . . . . . . . . . . 53,625
4,400 * Zebra Technologies Corp. Class A . . 111,100
--------------
15,692,089
--------------
INSURANCE - CASUALTY - 1.15%
2,050 * Arbatax International Inc. . . . . . 11,788
500 AVEMCO Corp. . . . . . . . . . . . . 7,813
900 Baldwin & Lyons, Inc. Class B . . . . 15,862
4,000 * Capsure Holdings Corp. . . . . . . . 73,500
5,700 Citizens Corp. . . . . . . . . . . . 104,025
8,800 Commerce Group, Inc. . . . . . . . . 192,500
4,600 E.W. Blanch Holdings, Inc. . . . . . 97,750
3,969 Frontier Insurance Group, Inc. . . . 136,434
1,473 GAINSCO, INC. . . . . . . . . . . . . 15,466
4,000 * HCC Insurance Holdings, Inc. . . . . 86,500
4,600 NAC Re Corp. . . . . . . . . . . . . 149,500
4,400 National Re Corp. . . . . . . . . . . 145,200
750 * Navigators Group, Inc. . . . . . . . 13,688
200 Nymagic, Inc. . . . . . . . . . . . . 3,750
3,081 Orion Capital Corp. . . . . . . . . . 145,577
17,700 Reliance Group Holdings Inc. . . . . 137,175
900 RLI Corp. . . . . . . . . . . . . . . 20,925
3,800 Selective Insurance Group, Inc. . . . 120,650
3,500 Transnational Re Corp. Class A . . . 84,000
2,800 Trenwick Group Inc. . . . . . . . . . 133,350
9,000 * 20th Century Industries . . . . . . . 148,500
505 United Fire & Casualty Co. . . . . . 18,685
6,100 Vesta Insurance Group, Inc. . . . . . 211,975
--------------
2,074,613
--------------
INSURANCE - LIFE - 0.69%
450 American Heritage Life Investment
Corp. . . . . . . . . . . . . . . 9,450
300 Kansas City Life Insurance Co. . . . 16,500
7,100 * Life USA Holding, Inc. . . . . . . . 56,800
500 * National Western Life Insurance
Co. Class A . . . . . . . . . . . 33,094
6,500 Presidential Life Corp. . . . . . . . 64,188
7,750 Protective Life Corp. . . . . . . . . 289,656
3,400 Reinsurance Group of America Inc. . . 135,575
435 Seafield Capital Corp. . . . . . . . 17,019
</TABLE>
28
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SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - LIFE - Continued
4,900 Security-Connecticut Corp. . . . . . $ 142,100
7,470 United Companies Financial Corp. . . 226,901
6,400 * United Insurance Companies, Inc. . . 138,400
2,800 W.R. Berkley Corp. . . . . . . . . . 121,800
--------------
1,251,483
--------------
INSURANCE - MISCELLANEOUS - 1.19%
3,600 Acordia, Inc. . . . . . . . . . . . . 114,300
3,450 ALLIED Group, Inc. . . . . . . . . . 137,137
3,600 Arthur J. Gallagher & Co. . . . . . . 115,650
5,000 Capital Re Corp. . . . . . . . . . . 182,500
4,300 CMAC Investment Corp. . . . . . . . . 234,350
9,500 Crawford & Co. . . . . . . . . . . . 156,750
5,500 Executive Risk Inc. . . . . . . . . . 193,875
4,125 Fidelity National Financial, Inc. . . 57,234
3,600 Foremost Corp. of America . . . . . . 207,000
5,212 Fremont General Corp. . . . . . . . . 124,436
1,300 Guaranty National Corp. . . . . . . . 22,100
600 Harleysville Group . . . . . . . . . 15,900
2,250 Hilb, Rogal & Hamilton Co. . . . . . 30,375
4,800 Integon Corp. . . . . . . . . . . . . 90,600
4,050 Lawyers Title Corp. . . . . . . . . . 67,838
5,100 Liberty Corp. . . . . . . . . . . . . 163,200
200 Midland Co. . . . . . . . . . . . . . 9,700
900 MMI Companies, Inc. . . . . . . . . . 26,663
525 Poe & Brown Inc. . . . . . . . . . . 12,469
3,600 Stewart Information Services Corp. . 73,350
4,100 Zenith National Insurance Corp. . . . 114,288
--------------
2,149,715
--------------
INSURANCE - MULTILINE - 0.96%
1,650 Alfa Corp. . . . . . . . . . . . . . 19,800
6,378 American Annuity Group, Inc. . . . . 82,914
6,600 American Bankers Insurance Group,
Inc. . . . . . . . . . . . . . . . 255,750
4,800 * American Travellers Corp. . . . . . . 103,800
6,600 AmVestors Financial Corp. . . . . . . 99,000
2,900 Argonaut Group, Inc. . . . . . . . . 93,525
400 Capitol American Financial Corp. . . 9,900
2,800 * Delphi Financial Group, Inc. . . . . 77,350
3,700 Home Beneficial Corp. Class B . . . . 92,500
4,800 Horace Mann Educators Corp. . . . . . 153,000
5,200 John Alden Financial Corp. . . . . . 116,350
5,300 Life Re Corp. . . . . . . . . . . . . 161,650
2,144 * Maic Holdings Inc. . . . . . . . . . 76,112
250 * Markel Corp. . . . . . . . . . . . . 22,750
7,700 PennCorp Financial Group, Inc. . . . 234,850
1,700 United Wisconsin Services, Inc. . . . 33,575
4,000 Washington National Corp. . . . . . . 106,000
--------------
1,738,826
--------------
LEISURE TIME - 0.84%
2,100 * Anchor Gaming . . . . . . . . . . . . $ 134,400
11,200 Bally Entertainment Corp. . . . . . . 268,800
2,600 * Bally Total Fitness Holding Corp. . . 13,163
1,500 * Casino America, Inc. . . . . . . . . 14,063
2,500 * First Team Sports, Inc. . . . . . . . 35,312
12,900 Handleman Co. . . . . . . . . . . . . 95,137
4,900 * Hollywood Park, Inc. . . . . . . . . 50,225
7,800 Huffy Corp. . . . . . . . . . . . . . 106,275
6,100 Outboard Marine Corp. . . . . . . . . 118,187
9,200 * Players International, Inc. . . . . . 88,550
7,100 * Rio Hotel & Casino Inc. . . . . . . . 127,800
7,400 * Scotts Co. Class A . . . . . . . . . 135,975
5,600 Showboat Inc. . . . . . . . . . . . . 156,100
1,900 Winnebago Industries, Inc. . . . . . 19,475
7,100 * WMS Industries Inc. . . . . . . . . . 156,200
--------------
1,519,662
--------------
LODGING - 0.13%
3,900 * Doubletree Corp. . . . . . . . . . . 138,450
3,393 Marcus Corp. . . . . . . . . . . . . 88,218
--------------
226,668
--------------
MACHINE TOOLS - 0.36%
300 Acme-Cleveland Corp. . . . . . . . . 8,888
7,000 Giddings & Lewis, Inc. . . . . . . . 116,375
2,100 Gleason Corp. . . . . . . . . . . . . 85,575
6,100 Greenfield Industries . . . . . . . . 230,275
800 * PRI Automation Inc. . . . . . . . . . 31,900
3,900 Roper Industries, Inc. . . . . . . . 183,300
--------------
656,313
--------------
MACHINERY - AGRICULTURE - 0.14%
1,200 * Central Tractor Farm & Country, Inc. 15,900
1,800 Lindsay Manufacturing Co. . . . . . . 68,850
5,400 Toro Co. . . . . . . . . . . . . . . 170,775
--------------
255,525
--------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.68%
2,900 * Astec Industries, Inc. . . . . . . . 28,638
2,700 Blount, Inc. Class A . . . . . . . . 89,775
4,600 * CDI Corp. . . . . . . . . . . . . . . 156,400
3,000 Granite Construction Inc. . . . . . . 66,375
6,645 * Insituform Technologies Class A . . . 63,127
3,900 * J. Ray McDermott, S.A. . . . . . . . 97,500
5,400 * Jacobs Engineering Group Inc. . . . . 145,125
9,600 Kaman Corp. Class A . . . . . . . . . 116,400
8,100 Lennar Corp. . . . . . . . . . . . . 201,487
1,300 M.D.C. Holdings, Inc. . . . . . . . . 9,100
9,000 * Morrison Knudsen Corp. . . . . . . . 11,250
3,900 Stone & Webster, Inc. . . . . . . . . 136,500
3,900 TJ International Inc. . . . . . . . . 73,125
3,500 * Washington Construction Group . . . . 36,313
--------------
1,231,115
--------------
</TABLE>
29
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SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MACHINERY - INDUSTRIAL/
SPECIALTY - 2.51%
7,700 AAR CORP. . . . . . . . . . . . . . . $ 170,362
1,300 * ABC Rail Products Corp. . . . . . . . 28,275
900 AEP Industries, Inc. . . . . . . . . 23,175
9,100 Albany International Corp. Class A . 183,137
4,325 Applied Power Inc. Class A . . . . . 127,588
6,780 Baldor Electric Co. . . . . . . . . . 150,007
5,850 Bearings, Inc. . . . . . . . . . . . 167,456
9,400 BW/IP, Inc. Class A . . . . . . . . . 185,650
1,800 * Central Sprinkler Corp. . . . . . . . 41,400
3,700 * DII Group, Inc. . . . . . . . . . . . 123,950
5,150 Duriron Co., Inc. . . . . . . . . . . 145,488
5,700 Exide Corp. . . . . . . . . . . . . . 133,950
3,000 * GaSonics International Corp. . . . . 39,750
475 General Binding Corp. . . . . . . . . 10,331
450 Gorman-Rupp Co. . . . . . . . . . . . 6,244
8,600 Goulds Pumps, Inc. . . . . . . . . . 204,250
900 Graco Inc. . . . . . . . . . . . . . 19,125
2,700 Helix Technology Corp. . . . . . . . 98,550
2,400 Hughes Supply Inc. . . . . . . . . . 96,600
8,100 * ICC Technologies Inc. . . . . . . . . 68,850
6,700 IDEX Corp. . . . . . . . . . . . . . 254,600
4,100 * Insilco Corp. . . . . . . . . . . . . 151,187
4,300 * Integrated Process Equipment Corp. . 125,775
3,300 * International Imaging Materials, Inc. 77,138
3,700 * Ionics, Inc. . . . . . . . . . . . . 183,150
4,500 JLG Industries, Inc. . . . . . . . . 356,062
10,200 * Kenetech Corp. . . . . . . . . . . . 7,013
6,000 * Kulicke & Soffa Industries Inc. . . . 105,000
4,950 Lilly Industries, Inc. Class A . . . 77,963
850 Lufkin Industries, Inc. . . . . . . . 17,956
4,300 Manitowoc Co., Inc. . . . . . . . . . 159,637
3,840 * Oak Industries Inc. . . . . . . . . . 120,000
3,500 * Ortel Corp. . . . . . . . . . . . . . 85,750
600 * Osmonics, Inc. . . . . . . . . . . . 14,250
3,500 * Park-Ohio Industries Inc. . . . . . . 78,750
7,000 Regal-Beloit Corp. . . . . . . . . . 145,250
350 Robbins & Myers, Inc. . . . . . . . . 15,663
2,125 Roto-Rooter, Inc. . . . . . . . . . . 85,000
800 Scotsman Industries Inc. . . . . . . 16,300
7,300 * Specialty Equipment Companies, Inc. . 101,288
2,700 * SPS Technologies, Inc. . . . . . . . 165,375
1,400 * Stimsonite Corp. . . . . . . . . . . 12,075
4,400 Tennant Co. . . . . . . . . . . . . . 112,750
2,900 * Thermo Power Corp. . . . . . . . . . 40,600
--------------
4,532,670
--------------
MEDICAL TECHNOLOGY - 1.42%
11,500 * Applied Bioscience International Inc. 104,937
2,600 * Bio-Rad Laboratories, Inc. Class A . 133,900
10,600 * Calgene, Inc. . . . . . . . . . . . . 63,600
6,200 * Enzo Biochem, Inc. . . . . . . . . . 108,500
5,800 * Epitope, Inc. . . . . . . . . . . . . 119,625
8,000 * Haemonetics Corp. . . . . . . . . . . 159,000
3,100 * i- STAT Corp. . . . . . . . . . . . . 63,550
5,600 * InControl, Inc. . . . . . . . . . . . 82,600
MEDICAL TECHNOLOGY - Continued
8,100 * Liposome Co., Inc. . . . . . . . . . $ 162,000
8,500 * NABI Inc. . . . . . . . . . . . . . . 115,281
3,700 * NeoPath, Inc. . . . . . . . . . . . . 95,275
3,100 * Northfield Laboratories Inc. . . . . 52,313
5,500 * Organogenesis Inc. . . . . . . . . . 123,062
5,300 * Protein Design Labs, Inc. . . . . . . 139,125
2,900 * Quintiles Transnational Corp. . . . . 220,400
5,900 * SciClone Pharmaceuticals, Inc. . . . 72,275
12,924 * Scios Nova Inc. . . . . . . . . . . . 94,507
3,600 * Sofamor Danek Group, Inc. . . . . . . 128,700
6,200 * Thermedics, Inc. . . . . . . . . . . 186,000
3,400 * ThermoTrex Corp. . . . . . . . . . . 180,200
100 * UniHolding Corp. . . . . . . . . . . 1,525
3,300 * US Bioscience, Inc. . . . . . . . . . 56,513
5,300 * Ventritex, Inc. . . . . . . . . . . . 106,000
--------------
2,568,888
--------------
MERCHANDISE - DRUG - 0.36%
7,050 Arbor Drugs, Inc. . . . . . . . . . . 133,069
6,000 Big B, Inc. . . . . . . . . . . . . . 57,750
3,800 * Express Scripts, Inc. Class A . . . . 190,000
4,439 * Foxmeyer Health Corp. . . . . . . . . 77,128
847 Genovese Drug Stores, Inc. Class A . 8,046
2,700 Longs Drug Stores Corp. . . . . . . . 115,762
3,800 * MedImmune, Inc. . . . . . . . . . . . 70,775
--------------
652,530
--------------
MERCHANDISE - SPECIALTY - 2.89%
578 Anthony Industries, Inc. . . . . . . 17,268
11,318 Arctco, Inc. . . . . . . . . . . . . 107,521
10,700 * Aura Systems, Inc. . . . . . . . . . 44,138
5,100 * Avid Technology, Inc. . . . . . . . . 115,387
1,919 * BEC Group, Inc. . . . . . . . . . . . 11,754
2,550 * BMC West Corp. . . . . . . . . . . . 44,625
9,600 * Bombay Co., Inc. . . . . . . . . . . 74,400
5,200 * Books-A-Million, Inc. . . . . . . . . 61,750
8,300 * Borders Group, Inc. . . . . . . . . . 271,825
3,400 * Bush Boake Allen Inc. . . . . . . . . 84,150
6,100 Casey's General Stores, Inc. . . . . 144,112
8,200 Cash America International, Inc. . . 47,150
30,900 Charming Shoppes, Inc. . . . . . . . 247,200
1,500 * Colonial Data Technologies Corp. . . 29,250
1,000 * Copart, Inc. . . . . . . . . . . . . 17,000
6,500 Cross (A.T.) Co. Class A . . . . . . 104,000
7,800 * Eagle Hardware & Garden, Inc. . . . . 107,250
4,600 * Empi, Inc. . . . . . . . . . . . . . 80,500
14,100 Fingerhut Companies, Inc. . . . . . . 216,787
3,000 * Fossil, Inc. . . . . . . . . . . . . 47,625
7,500 * Franklin Quest Co. . . . . . . . . . 163,125
4,900 * Friedman's Inc. Class A . . . . . . . 138,425
4,100 * Gibson Greetings, Inc. . . . . . . . 58,938
10,100 Hancock Fabrics, Inc. . . . . . . . . 114,887
12,200 * Home Shopping Network, Inc. . . . . . 175,375
3,000 Intelligent Electronics, Inc. . . . . 29,438
6,248 * Jenny Craig, Inc. . . . . . . . . . . 109,340
500 LabOne, Inc. . . . . . . . . . . . . 8,875
</TABLE>
30
<PAGE> 132
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MERCHANDISE - SPECIALTY - Continued
9,600 * Mac Frugal's Bargains Close-outs Inc. $ 182,400
5,900 * Michaels Stores Inc. . . . . . . . . 98,088
2,200 * MicroAge Inc. . . . . . . . . . . . . 29,425
4,600 * Paragon Trade Brands, Inc. . . . . . 113,275
8,900 Price Enterprises Inc. . . . . . . . 139,062
3,600 * REX Stores Corp. . . . . . . . . . . 56,250
5,200 Russ Berrie and Co. Inc. . . . . . . 90,350
1,600 * Safety 1st, Inc. . . . . . . . . . . 24,000
3,200 * Seitel, Inc. . . . . . . . . . . . . 84,000
8,100 Sotheby's Holdings, Inc. . . . . . . 115,425
5,900 * Sportmart, Inc. . . . . . . . . . . . 28,394
2,700 * Sports Authority, Inc. . . . . . . . 80,325
2,600 Sturm, Ruger & Co. Inc. . . . . . . . 129,025
14,600 * Sunglass Hut International, Inc. . . 401,500
3,600 Tiffany & Co. . . . . . . . . . . . . 273,150
3,700 * Tractor Supply Co. . . . . . . . . . 91,575
4,100 Unitog Co. . . . . . . . . . . . . . 111,725
7,500 * Waban Inc. . . . . . . . . . . . . . 200,625
4,900 * Williams-Sonoma, Inc. . . . . . . . . 135,975
8,400 * Zale Corp. . . . . . . . . . . . . . 161,700
--------------
5,218,364
--------------
MERCHANDISING - DEPARTMENT - 0.55%
200 * Alexander's, Inc. . . . . . . . . . . 14,525
12,500 * Best Products Co., Inc. . . . . . . . 32,813
1,300 * Bon-Ton Stores, Inc. . . . . . . . . 8,288
6,100 * Carson Pirie Scott & Co. . . . . . . 169,275
7,500 * Neiman Marcus Group, Inc. . . . . . . 207,187
13,915 Pier 1 Imports, Inc.. . . . . . . . . 219,161
6,446 * Proffitt's Inc. . . . . . . . . . . . 236,890
4,150 * Stein Mart, Inc. . . . . . . . . . . 70,550
412 Strawbridge & Clothier . . . . . . . 7,442
3,700 * Venture Stores, Inc. . . . . . . . . 26,825
--------------
992,956
--------------
MERCHANDISING - FOOD - 0.85%
3,400 Delchamps, Inc. . . . . . . . . . . . 78,200
75 Farmer Bros. Co. . . . . . . . . . . 10,725
4,400 * IHOP Corp. . . . . . . . . . . . . . 124,300
5,600 Ingles Markets, Inc. . . . . . . . . 72,100
5,600 * J & J Snack Foods Corp. . . . . . . . 73,500
4,575 Nash Finch Co. . . . . . . . . . . . 76,631
1,800 * Penn Traffic Co. . . . . . . . . . . 22,950
1,234 * Quality Food Centers Inc. . . . . . . 33,010
5,818 Richfood Holdings Inc. . . . . . . . 194,903
3,800 Ruddick Corp. . . . . . . . . . . . . 51,300
3,300 Sanderson Farms, Inc. . . . . . . . . 44,550
10,300 Savannah Foods & Industries, Inc. . . 127,462
4,500 * ShowBiz Pizza Time, Inc. . . . . . . 72,000
5,500 Smart & Final Inc. . . . . . . . . . 134,062
3,500 Smith's Food & Drug Centers, Inc.
Class B . . . . . . . . . . . . . 80,938
4,900 * Smithfield Foods, Inc. . . . . . . . 127,400
1,900 Super Food Services, Inc. . . . . . . 23,275
4,300 * Whole Foods Market, Inc. . . . . . . 105,888
7,037 WLR Foods, Inc. . . . . . . . . . . . 91,481
--------------
1,544,675
--------------
MERCHANDISING - MASS - 0.48%
4,900 * Caldor Corp. . . . . . . . . . . . . $ 15,313
3,600 * Dollar Tree Stores, Inc. . . . . . . 153,000
7,800 Family Dollar Stores, Inc. . . . . . 132,600
5,700 * Fred Meyer, Inc. . . . . . . . . . . 164,587
5,400 * GoodGuys, Inc. . . . . . . . . . . . 50,625
5,470 * Hills Stores Co. . . . . . . . . . . 66,324
34,500 * Service Merchandise Co.,Inc. . . . . 185,437
6,700 ShopKo Stores, Inc. . . . . . . . . . 101,338
--------------
869,224
--------------
METALS - ALUMINUM - 0.26%
5,800 * ACX Technologies, Inc. . . . . . . . 118,900
4,700 IMCO Recycling Inc. . . . . . . . . . 109,275
5,200 * Kaiser Aluminum Corp. . . . . . . . . 66,300
5,206 Tredegar Industries, Inc. . . . . . . 166,592
--------------
461,067
--------------
METALS - COPPER - 0.11%
5,200 * Wolverine Tube, Inc. . . . . . . . . 189,800
--------------
METALS - MISCELLANEOUS - 0.44%
938 A.M. Castle & Co. . . . . . . . . . . 26,602
6,800 Brush Wellman Inc. . . . . . . . . . 127,500
5,633 Commercial Metals Co. . . . . . . . . 176,735
3,500 * Dravo Corp. . . . . . . . . . . . . . 45,500
12,600 * Hecla Mining Co. . . . . . . . . . . 100,800
900 * Intermagnetics General Corp. . . . . 14,512
6,650 * Material Sciences Corp. . . . . . . . 112,219
4,500 Precision Castparts Corp. . . . . . . 192,375
--------------
796,243
--------------
METALS - STEEL - 1.45%
5,000 * Acme Metals Inc. . . . . . . . . . . 85,000
6,400 AK Steel Holdings Corp. . . . . . . . 276,800
5,000 Amcast Industrial Corp. . . . . . . . 96,875
29,300 * Armco Inc. . . . . . . . . . . . . . 153,825
5,300 Birmingham Steel Corp. . . . . . . . 85,463
4,200 Carpenter Technology Corp. . . . . . 151,725
800 Chaparral Steel Co. . . . . . . . . . 11,700
3,400 * Citation Corp. . . . . . . . . . . . 50,150
3,100 Cleveland-Cliffs Inc. . . . . . . . . 124,387
1,350 Commercial Intertech Corp. . . . . . 28,181
1,500 * EnviroSource, Inc. . . . . . . . . . 5,906
5,100 * Geneva Steel Co. Class A . . . . . . 29,963
3,100 Huntco Inc. Class A . . . . . . . . . 58,900
8,900 * Intermet Corp. . . . . . . . . . . . 150,187
7,800 J & L Specialty Steel, Inc. . . . . . 135,525
2,600 Lukens Inc. . . . . . . . . . . . . . 69,875
5,600 * Mueller Industries, Inc. . . . . . . 242,900
11,100 * Northwestern Steel & Wire Co. . . . . 67,988
7,500 Oregon Steel Mills, Inc. . . . . . . 120,000
5,300 Quanex Corp. . . . . . . . . . . . . 123,225
1,850 Steel Technologies Inc. . . . . . . . 26,594
12,200 UNR Industries, Inc. . . . . . . . . 117,425
4,400 Valmont Industries, Inc. . . . . . . 136,950
7,000 WCI Steel, Inc. . . . . . . . . . . . 33,250
7,800 * Weirton Steel Corp. . . . . . . . . . 30,225
4,400 * WHX Corp. . . . . . . . . . . . . . . 44,000
10,000 * Wyman-Gordon Co. . . . . . . . . . . 171,250
--------------
2,628,269
--------------
</TABLE>
31
<PAGE> 133
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS - 2.20%
11,100 * AccuStaff, Inc. . . . . . . . . . . . $ 349,650
6,400 AMCOL International Corp. . . . . . . 92,000
1,800 * AMERCO Inc. . . . . . . . . . . . . . 39,150
1,100 Ampal-American Israel Corp. Class A . 6,050
1,962 * Atlantic Realty Trust, Inc. . . . . . 15,941
6,600 Barefoot Inc. . . . . . . . . . . . . 72,600
7,800 * Borg-Warner Security Corp. . . . . . 91,650
6,000 * Career Horizons, Inc. . . . . . . . . 237,750
9,400 * Corrections Corp. of America . . . . 695,600
5,600 * DeVry, Inc. . . . . . . . . . . . . . 222,600
2,800 * Equity Corp. International . . . . . 81,900
8,200 * Figgie International Inc. Class A . . 119,925
7,900 Ideon Group, Inc. . . . . . . . . . . 109,613
5,100 * Interim Services Inc. . . . . . . . . 242,250
3,750 * ITT Educational Services, Inc. . . . 113,437
3,400 * KinderCare Learning Centers, Inc. . . 50,575
1,091 LADD Furniture, Inc. . . . . . . . . 12,547
3,156 MAF Bancorp, Inc. . . . . . . . . . . 76,921
11,900 * National Education Corp. . . . . . . 221,637
412 * Patlex Corp. . . . . . . . . . . . . 22,042
3,000 * Pinkerton's, Inc. . . . . . . . . . . 72,938
7,800 * Prepaid Legal Services, Inc. . . . . 162,825
7,500 * Rexel, Inc. . . . . . . . . . . . . . 109,688
5,300 * Robert Half International Inc. . . . 297,462
5,500 * Sola International, Inc. . . . . . . 166,375
3,700 * Sylvan Learning Systems, Inc. . . . . 143,375
800 Wackenhut Corp. . . . . . . . . . . . 21,800
2,000 * Wackenhut Corrections Corp. . . . . . 132,000
--------------
3,980,301
--------------
MOBILE HOMES - 0.31%
5,200 * Champion Enterprises, Inc. . . . . . 210,600
400 McGrath RentCorp . . . . . . . . . . 8,400
5,450 Oakwood Homes Corp. . . . . . . . . . 264,325
2,500 Skyline Corp. . . . . . . . . . . . . 64,687
750 Thor Industries, Inc. . . . . . . . . 16,313
--------------
564,325
--------------
NATURAL GAS - DIVERSIFIED - 0.96%
3,150 Atmos Energy Corp. . . . . . . . . . 75,994
6,100 Bay State Gas Co. . . . . . . . . . . 160,887
300 Cascade Natural Gas Corp. . . . . . . 4,575
5,204 K N Energy, Inc. . . . . . . . . . . 175,635
7,900 Laclede Gas Co. . . . . . . . . . . . 180,712
7,600 New Jersey Resources Corp. . . . . . 209,000
8,100 * Seagull Energy Corp. . . . . . . . . 182,250
1,101 * Southern Union Co. . . . . . . . . . 25,874
6,400 Southwest Gas Corp. . . . . . . . . . 110,400
4,372 * Tejas Gas Corp. . . . . . . . . . . . 160,125
7,400 UGI Corp. . . . . . . . . . . . . . . 171,125
7,600 United Cities Gas Co. . . . . . . . . 112,100
4,400 WICOR, Inc. . . . . . . . . . . . . . 160,600
--------------
1,729,277
--------------
OIL - INTEGRATED DOMESTIC - 0.21%
4,600 * Crown Central Petroleum Corp.
Class A . . . . . . . . . . . . . $ 79,350
2,800 * Hondo Oil & Gas Co. . . . . . . . . . 38,500
12,600 Quaker State Corp. . . . . . . . . . 193,725
5,600 * Tesoro Petroleum Corp. . . . . . . . 63,000
--------------
374,575
--------------
OIL - SERVICE - PRODUCTS - 0.63%
4,275 * Energy Ventures, Inc. . . . . . . . . 142,678
3,600 Getty Petroleum Corp. . . . . . . . . 49,050
7,100 * Global Industrial Technologies, Inc. 131,350
3,900 * Global Industries Inc. . . . . . . . 120,900
7,100 * Kelley Oil & Gas Corp. . . . . . . . 22,188
9,700 * Lone Star Technologies, Inc. . . . . 105,487
12,100 * Parker Drilling Co. . . . . . . . . . 86,212
4,163 * Varco International, Inc. . . . . . . 69,210
12,832 * Weatherford Enterra, Inc. . . . . . . 404,208
--------------
1,131,283
--------------
OIL - SERVICES - 1.54%
6,400 * BJ Services Co. . . . . . . . . . . . 216,000
4,900 Camco International, Inc. . . . . . . 161,087
12,100 * Marine Drilling Companies, Inc. . . . 122,513
1,500 Mascotech, Inc. . . . . . . . . . . . 22,500
21,900 * Nabors Industries, Inc. . . . . . . . 336,712
17,200 * Noble Drilling Corp. . . . . . . . . 230,050
11,500 * Oceaneering International Inc. . . . 189,750
4,900 * Offshore Logistics, Inc. . . . . . . 71,050
3,575 Pennsylvania Enterprises Inc. . . . . 143,894
3,600 * Pool Energy Services Co. . . . . . . 49,950
3,200 Production Operators Corp. . . . . . 116,800
15,500 * Reading & Bates Corp. . . . . . . . . 341,000
20,800 * Rowan Companies, Inc. . . . . . . . . 314,600
12,700 * Smith International, Inc. . . . . . . 400,050
5,400 * Tuboscope Vetco International Corp. . 71,550
--------------
2,787,506
--------------
OIL/GAS PRODUCERS - 1.72%
1,800 Apache Corp. . . . . . . . . . . . . 51,525
160 * Aztec Energy Corp. . . . . . . . . . 3
6,650 * Barrett Resources Corp. . . . . . . . 173,731
9,300 * Benton Oil and Gas Co. . . . . . . . 165,075
3,400 Berry Petroleum Co. Class A . . . . . 36,975
7,800 * Box Energy Corp. Class B . . . . . . 78,000
5,900 Cabot Oil & Gas Corp. Class A . . . . 100,300
3,300 * Chesapeake Energy Corp. . . . . . . . 253,275
7,900 Devon Energy Corp. . . . . . . . . . 201,450
3,500 * Flores & Rucks, Inc. . . . . . . . . 104,562
6,100 * Global Natural Resources Inc. . . . . 98,363
3,100 * H S Resources, Inc. . . . . . . . . . 37,200
6,500 Helmerich & Payne, Inc. . . . . . . . 235,625
500 Holly Corp. . . . . . . . . . . . . . 13,500
4,600 KCS Energy, Inc. . . . . . . . . . . 115,575
2,600 * Louis Dreyfus Natural Gas Corp. . . . 36,400
22,400 * MESA Inc. . . . . . . . . . . . . . . 81,200
</TABLE>
32
<PAGE> 134
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
OIL/GAS PRODUCERS - Continued
3,300 * Newfield Exploration Co. . . . . . . $ 122,925
2,400 * Nuevo Energy Co. . . . . . . . . . . 74,400
11,300 Parker & Parsley Petroleum Co. . . . 275,437
6,900 Snyder Oil Corp. . . . . . . . . . . 68,138
2,400 St. Mary Land & Exploration Co. . . . 42,300
5,900 * Stone Energy Corp. . . . . . . . . . 109,887
6,100 * Texas Meridian Resources Corp. . . . 65,575
4,200 * Tide West Oil Co. . . . . . . . . . . 67,725
6,400 * Tom Brown, Inc. . . . . . . . . . . . 110,400
6,900 * United Meridian Corp. . . . . . . . . 196,650
6,200 USX-Delhi Group . . . . . . . . . . . 85,250
1,600 Vintage Petroleum, Inc. . . . . . . . 41,600
11,200 * Wainoco Oil Corp. . . . . . . . . . . 42,000
2,400 Wiser Oil Co. . . . . . . . . . . . . 31,500
--------------
3,116,546
--------------
PAPER/FOREST PRODUCTS - 0.47%
2,000 * Boise Cascade Office Products
Corp. . . . . . . . . . . . . . . . 83,000
8,000 Caraustar Industries, Inc. . . . . . 208,000
2,293 Mosinee Paper Corp. . . . . . . . . . 60,200
3,200 Ply Gem Industries Inc. . . . . . . . 47,600
5,500 Pope & Talbot, Inc. . . . . . . . . . 92,125
4,000 Republic Group Inc. . . . . . . . . . 56,500
3,600 Sealright Co., Inc. . . . . . . . . . 47,475
4,300 Standard Register Co. . . . . . . . . 120,400
1,700 Universal Forest Products, Inc. . . . 17,850
5,800 Wausau Paper Mills Co. . . . . . . . 123,250
--------------
856,400
--------------
PHOTOGRAPHY - 0.14%
6,400 CPI Corp. . . . . . . . . . . . . . . 104,800
1,950 * Photronics Inc. . . . . . . . . . . . 58,013
3,500 * Ultratech Stepper, Inc. . . . . . . . 87,500
--------------
250,313
--------------
POLLUTION CONTROL - 1.34%
700 * Air & Water Technologies Corp.
Class A . . . . . . . . . . . . . 4,463
4,000 * Allied Waste Industries, Inc. . . . . 40,500
5,700 * Allwaste, Inc. . . . . . . . . . . . 24,225
3,700 Calgon Carbon Corp. . . . . . . . . . 47,638
4,400 Dames & Moore, Inc. . . . . . . . . . 53,350
546 Heidemij NV . . . . . . . . . . . . . 5,460
4,200 * International Technology Corp. . . . 11,550
7,100 * Mid-American Waste Systems, Inc. . . 6,656
225 Mine Safety Appliances Co. . . . . . 10,800
3,900 * Molten Metal Technology, Inc. . . . . 118,950
5,250 * Newpark Resources, Inc. . . . . . . . 190,313
5,200 * OHM Corp. . . . . . . . . . . . . . . 46,150
4,400 * Prins Recycling Corp. . . . . . . . . 11,000
10,200 * Republic Industries Inc. . . . . . . 530,400
15,800 * Rollins Environmental Services, Inc. 55,300
5,900 * Sanifill, Inc. . . . . . . . . . . . 264,762
6,200 * TETRA Technologies, Inc. . . . . . . 128,650
POLLUTION CONTROL - Continued
5,000 * United States Filter Corp. . . . . . $ 174,375
4,400 * United Waste Systems, Inc. . . . . . 242,550
13,033 * USA Waste Services, Inc. . . . . . . 384,473
3,200 Zurn Industries, Inc. . . . . . . . . 65,200
--------------
2,416,765
--------------
PUBLISHING - NEWS - 0.21%
2,100 McClatchy Newspapers, Inc. Class A . 51,975
6,500 * Network Equipment Technologies, Inc. 182,000
2,500 Pulitzer Publishing Co. . . . . . . . 137,500
--------------
371,475
--------------
PUBLISHING/PRINTING - 1.23%
7,950 Banta Corp. . . . . . . . . . . . . . 190,800
2,200 Bowne & Co., Inc. . . . . . . . . . . 45,100
4,400 Ennis Business Forms, Inc. . . . . . 47,850
7,900 * Golden Books Family Entertainment,
Inc. . . . . . . . . . . . . . . . 108,625
3,800 Houghton Mifflin Co. . . . . . . . . 180,025
8,000 John H. Harland Co. . . . . . . . . . 217,000
5,800 John Wiley & Sons Inc. Class A . . . 183,425
8,700 Meredith Corp. . . . . . . . . . . . 399,112
4,000 Merrill Corp. . . . . . . . . . . . . 101,000
3,300 New England Business Service, Inc. . 60,638
5,700 * Nu-kote Holding, Inc. Class A . . . . 104,025
300 Plenum Publishing Corp. . . . . . . . 10,650
5,000 * Scientific Games Holdings Corp. . . . 167,500
5,809 Thomas Nelson, Inc. . . . . . . . . . 71,886
18,100 * Topps Co. Inc. . . . . . . . . . . . 113,125
8,900 * Valassis Communications, Inc. . . . . 157,975
9,000 * ValueVision International, Inc.
Class A . . . . . . . . . . . . . 64,125
100 Waverly, Inc. . . . . . . . . . . . . 4,250
--------------
2,227,111
--------------
RAILROAD - 0.06%
500 Florida East Coast Industries, Inc. . 43,938
6,300 * Johnstown America Industries, Inc. . 25,200
1,700 * RailTex, Inc. . . . . . . . . . . . . 42,075
--------------
111,213
--------------
REAL ESTATE - 0.65%
2,900 * Avatar Holdings Inc. . . . . . . . . 101,500
20,700 * Catellus Development Corp. . . . . . 191,475
200 * Christiana Companies . . . . . . . . 4,300
7,675 Cousins Properties Inc. . . . . . . . 149,662
9,500 * Insignia Financial Group, Inc. Class A 247,000
4,100 * Mercer International Inc. . . . . . . 80,463
8,800 Merry Land & Investment Co., Inc. . . 192,500
5,900 North American Mortgage Co. . . . . . 101,775
8,081 Republic Bancorp Inc. . . . . . . . . 91,416
500 Tejon Ranch Co. . . . . . . . . . . . 8,875
--------------
1,168,966
--------------
</TABLE>
33
<PAGE> 135
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS - 5.42%
5,800 Alexander Haagen Properties, Inc. . . $ 68,875
3,600 Allied Capital Commercial Corp. . . . 71,550
6,800 American Health Properties, Inc. . . 144,500
4,500 Associated Estates Realty Corp. . . . 92,250
9,100 Avalon Properties, Inc. . . . . . . . 194,512
4,400 Bay Apartment Communities, Inc. . . . 112,750
6,800 Beacon Properties Corp. . . . . . . . 171,700
8,600 Berkshire Realty Co., Inc. . . . . . 94,600
7,973 Bradley Real Estate, Inc. . . . . . . 117,602
6,565 BRE Properties, Inc. . . . . . . . . 243,726
2,300 Burnham Pacific Properties, Inc. . . 25,588
7,800 Capstead Mortgage Corp. . . . . . . . 195,975
4,000 CenterPoint Properties Corp. . . . . 95,000
3,100 Chateau Properties, Inc. . . . . . . 72,075
2,400 Chelsea GCA Properties . . . . . . . 70,800
3,900 Columbus Realty Trust . . . . . . . . 75,563
8,200 Commercial Net Lease Realty, Inc. . . 109,675
4,500 Crescent Real Estate Equities, Inc. . 155,812
12,600 CRI Liquidating REIT, Inc. . . . . . 20,475
1,400 Criimi Mae, Inc. . . . . . . . . . . 15,225
10,200 Crown American Realty Trust . . . . . 77,775
13,400 CWM Mortgage Holdings, Inc. . . . . . 237,850
11,900 DeBartolo Realty Corp. . . . . . . . 193,375
6,300 Developers Diversified Realty Corp. . 196,875
7,400 Duke Realty Investments, Inc. . . . . 222,925
8,200 Equity Inns Inc. . . . . . . . . . . 97,375
3,400 Essex Property Trust, Inc. . . . . . 70,550
4,500 Excel Realty Trust, Inc. . . . . . . 84,937
2,700 Factory Stores America, Inc. . . . . 26,663
7,200 Federal Realty Investment Trust . . . 155,700
9,000 FelCor Suite Hotels, Inc. . . . . . . 277,875
6,100 First Industrial Realty Trust, Inc. . 144,112
9,900 First Union Real Estate Investments . 69,300
3,800 Gables Residential Trust . . . . . . 87,400
8,400 General Growth Properties, Inc. . . . 202,650
7,800 Glimcher Realty Trust . . . . . . . . 127,725
500 Health Care REIT, Inc. . . . . . . . 10,750
3,392 HGI Realty, Inc. . . . . . . . . . . 73,776
6,600 Highwoods Properties, Inc. . . . . . 193,875
10,300 IRT Property Co. . . . . . . . . . . 96,562
4,900 Irvine Apartment Communities, Inc. . 99,225
3,200 JDN Realty Corp. . . . . . . . . . . 67,200
4,700 JP Realty, Inc. . . . . . . . . . . . 97,525
8,500 * Koger Equity, Inc. . . . . . . . . . 107,312
4,400 Kranzco Realty Trust . . . . . . . . 68,200
6,100 Liberty Property Trust . . . . . . . 124,287
7,900 LTC Properties, Inc. . . . . . . . . 126,400
3,500 Macerich Co. . . . . . . . . . . . . 73,500
5,300 Manufactured Home Communities,
Inc. . . . . . . . . . . . . . . . 99,375
4,400 Mark Controls Trust . . . . . . . . . 47,300
5,400 MGI Properties . . . . . . . . . . . 92,475
2,800 Mid-America Apartment
Communities, Inc. . . . . . . . . 70,700
4,200 Mills Corp. . . . . . . . . . . . . . 75,600
4,500 National Golf Properties, Inc. . . . 110,250
4,900 National Health Investors, Inc. . . . 165,375
REAL ESTATE INVESTMENT
TRUSTS - Continued
11,800 Nationwide Health Properties, Inc. . $ 256,650
4,186 Omega Healthcare Investors,Inc. . . . 119,824
3,500 Pennsylvania Real Estate
Investment Trust . . . . . . . . . 69,125
4,800 Post Properties, Inc. . . . . . . . . 160,800
500 Price REIT, Inc. . . . . . . . . . . . 15,375
4,500 Prime Residential, Inc. . . . . . . . 78,750
8,900 Public Storage, Inc. . . . . . . . . 186,900
3,925 Ramco-Gershenson Properties . . . . . 63,781
7,000 Realty Income Corp. . . . . . . . . . 146,125
3,700 Regency Realty Corp. . . . . . . . . 69,838
5,500 Resource Mortgage Capital Inc. . . . 124,437
9,000 RFS Hotel Investors, Inc. . . . . . . 155,250
3,300 ROC Communities, Inc. . . . . . . . . 78,788
16,200 * Rockefeller Center Properties, Inc. . 127,575
5,200 Saul Centers, Inc. . . . . . . . . . 70,200
3,700 South West Property Trust Inc. . . . 51,338
6,500 Spieker Properties, Inc. . . . . . . 178,750
3,200 Storage Trust Realty . . . . . . . . 66,400
5,600 Storage USA, Inc. . . . . . . . . . . 188,300
3,100 Sun Communities, Inc. . . . . . . . . 82,925
3,400 Tanger Factory Outlet Centers, Inc. . 82,450
2,300 Taubman Centers, Inc. . . . . . . . . 24,150
5,600 Thornburg Mortgage Asset Corp. . . . 91,700
1,600 Town and Country Trust . . . . . . . 21,600
3,600 TriNet Corporate Realty Trust, Inc. . 108,000
15,800 United Dominion Realty Trust, Inc. . 231,075
4,300 Universal Health Realty Income Trust 83,313
1,600 Urban Shopping Centers, Inc. . . . . 38,000
3,500 Walden Residential Properties, Inc. . 72,625
11,000 Washington Real Estate Investment
Trust . . . . . . . . . . . . . . 181,500
3,300 Weeks Corp. . . . . . . . . . . . . . 84,975
7,700 Wellsford Residential Property Trust 175,175
7,200 Western Investment Real Estate Trust 88,200
--------------
9,794,921
--------------
RESTAURANTS - 1.27%
7,062 Apple South, Inc. . . . . . . . . . . 176,550
8,550 Applebee's International, Inc. . . . 242,606
5,600 * Au Bon Pain Co., Inc. Class A . . . . 48,913
10,100 * Buffets, Inc. . . . . . . . . . . . . 127,513
7,000 CKE Restaurants, Inc. . . . . . . . . 161,875
15,280 * Flagstar Companies, Inc. . . . . . . 53,480
7,000 * Foodmaker, Inc. . . . . . . . . . . . 56,875
4,000 * HomeTown Buffet, Inc. . . . . . . . . 59,500
3,200 * International Dairy Queen, Inc.
Class A . . . . . . . . . . . . . 67,200
4,100 * Landry's Seafood Restaurants, Inc. . 98,400
9,100 Luby's Cafeterias, Inc. . . . . . . . 224,087
1,350 Morrison Fresh Cooking, Inc. . . . . 9,956
1,800 Morrison Health Care, Inc. . . . . . 25,875
3,450 * Papa John's International, Inc. . . . 169,912
2,700 Ruby Tuesday, Inc. . . . . . . . . . 57,375
19,100 * Ryan's Family Steak Houses, Inc. . . 169,512
2,700 Sbarro, Inc. . . . . . . . . . . . . 71,888
</TABLE>
34
<PAGE> 136
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
RESTAURANTS - Continued
3,433 * ShoLodge, Inc. . . . . . . . . . . . $ 53,212
12,800 * Shoney's, Inc. . . . . . . . . . . . 156,800
7,800 Sizzler International, Inc. . . . . . 29,250
5,850 * Sonic Corp. . . . . . . . . . . . . . 140,400
3,000 TCBY Enterprises, Inc. . . . . . . . 13,125
3,900 * Triarc Companies Inc. Class A . . . . 47,775
2,400 * VICORP Restaurants, Inc. . . . . . . 31,800
--------------
2,293,879
--------------
SAVINGS & LOAN - 1.98%
6,720 ALBANK Financial Corp. . . . . . . . 183,960
2,800 Astoria Financial Corp. . . . . . . . 155,400
7,212 Bankers Corp. . . . . . . . . . . . . 124,407
3,700 Bay View Capital Corp. . . . . . . . 122,562
2,500 Bell Bancorp, Inc. . . . . . . . . . 93,750
3,250 Boston Bancorp . . . . . . . . . . . 136,500
16,720 Cal Fed Bancorp Inc. . . . . . . . . 307,230
10,590 Charter One Financial, Inc. . . . . . 385,211
2,000 CitFed Bancorp, Inc. . . . . . . . . 75,500
4,900 * Coast Savings Financial Inc. . . . . 164,150
1,785 Downey Financial Corp. . . . . . . . 38,824
2,310 Financial Trust Corp. . . . . . . . . 67,568
1,600 * FirstFed Financial Corp. . . . . . . 26,600
10,892 * Glendale Federal Bank FSB . . . . . . 194,694
3,600 * Greater New York Savings Bank . . . . 40,050
10,300 Home Financial Corp. . . . . . . . . 142,912
3,000 JSB Financial, Inc. . . . . . . . . . 99,562
5,200 Long Island Bancorp, Inc. . . . . . . 147,550
2,000 Peoples Bank of Bridgeport
Connecticut . . . . . . . . . . . 41,250
6,500 Peoples Heritage Financial Group, Inc. 129,187
3,759 Provident Bankshares Corp. . . . . . 124,517
1,100 Queens County Bancorp, Inc. . . . . . 52,663
6,200 RCSB Financial, Inc. . . . . . . . . 146,475
2,700 Security Capital Corp. . . . . . . . 166,050
11,700 Sovereign Bancorp, Inc. . . . . . . . 122,850
4,600 St. Francis Capital Corp. . . . . . . 118,450
1,300 Standard Financial, Inc. . . . . . . 19,663
2,400 TR Financial Corp. . . . . . . . . . 64,800
3,300 Webster Financial Corp. . . . . . . . 94,463
--------------
3,586,798
--------------
SECURITIES RELATED - 0.92%
3,100 Alex Brown Inc. . . . . . . . . . . . 179,025
2,650 BHC Financial, Inc. . . . . . . . . . 37,431
3,700 Enhance Financial Services Group Inc. 107,300
8,817 Financial Security Assurance
Holdings Ltd. . . . . . . . . . . 243,570
1,200 Inter-Regional Financial Group, Inc. 30,000
1,035 Investors Financial Services Corp. . 23,417
199 Investors Financial Services Corp.
Class A . . . . . . . . . . . . . 4,502
2,600 Jefferies Group, Inc. . . . . . . . . 85,150
3,250 Legg Mason, Inc. . . . . . . . . . . 108,063
1,206 Liberty Financial Companies, Inc. . . 38,441
900 Mc Donald & Co. Investments, Inc. . . 17,550
8,100 Morgan Keegan, Inc. . . . . . . . . . 107,325
SECURITIES RELATED - Continued
5,600 Pioneer Group, Inc. . . . . . . . . . $ 155,400
4,400 Piper Jaffray Companies, Inc. . . . 58,850
5,321 Quick & Reilly Group Inc. . . . . . . 180,249
3,600 Raymond James Financial Inc. . . . . 81,900
3,983 Waterhouse Investor Services, Inc. . 145,877
1,400 * White River Corp. . . . . . . . . . . 57,750
--------------
1,661,800
--------------
SEMICONDUCTORS - 1.12%
7,100 * Actel Corp. . . . . . . . . . . . . . 139,337
6,200 * Brooktree Corp. . . . . . . . . . . . 74,400
5,100 * Burr Brown Corp. . . . . . . . . . . 107,100
5,750 * Credence Systems Corp. . . . . . . . 116,438
3,300 * Cree Research, Inc. . . . . . . . . . 55,275
8,300 Dallas Semiconductor Corp. . . . . . 174,300
6,200 * Electroglas, Inc. . . . . . . . . . . 120,900
6,000 * FSI International, Inc. . . . . . . . 78,750
1,900 * Fusion Systems Corp. . . . . . . . . 56,525
11,100 * International Rectifier Corp. . . . . 288,600
5,000 * Level One Communications, Inc. . . . 130,000
3,400 * Quickturn Design System, Inc. . . . . 49,938
1,700 * SDL, Inc. . . . . . . . . . . . . . . 72,250
3,200 * Siliconix, Inc. . . . . . . . . . . . 88,000
4,500 * Unitrode Corp. . . . . . . . . . . . 128,812
4,900 * Vitesse Semiconductor Corp. . . . . . 137,200
5,850 * Zilog, Inc. . . . . . . . . . . . . . 215,719
--------------
2,033,544
--------------
TELECOMMUNICATIONS - 2.77%
1,400 ABM Industries Inc. . . . . . . . . . 53,375
6,100 * Apertus Technologies, Inc. . . . . . 24,781
4,600 * Arch Communications Group, Inc. . . . 105,800
6,000 * Aspect Telecommunications Corp. . . . 340,500
3,600 * BroadBand Technologies, Inc. . . . . 110,250
400 * CellStar Corp. . . . . . . . . . . . 4,050
3,500 * Cellular Communications
International, Inc. . . . . . . . 119,000
3,700 * Cellular Communications of Puerto
Rico, Inc. . . . . . . . . . . . . 113,775
4,190 * Cellular Technical Services Inc. . . 145,341
4,800 * Centennial Cellular Corp. Class A . . 81,600
6,600 * Checkpoint Systems, Inc. . . . . . . 256,575
3,800 * Cidco, Inc. . . . . . . . . . . . . . 149,625
2,600 * Coherent, Inc. . . . . . . . . . . . 68,250
4,900 * CommNet Cellular Inc. . . . . . . . . 168,437
4,400 Communications Systems, Inc. . . . . 69,300
7,300 * Compression Laboratories, Inc. . . . 56,575
5,300 * CrossCom Corp. . . . . . . . . . . . 60,950
5,100 * Digi International Inc. . . . . . . . 143,438
5,800 * DSP Communications, Inc. . . . . . . 218,950
1,500 Harmon Industries, Inc. . . . . . . . 25,500
9,066 * International CableTel Inc. . . . . . 284,446
5,400 * InterVoice, Inc. . . . . . . . . . . 120,150
3,100 * IPC Information Systems, Inc. . . . . 65,875
3,600 * Itron, Inc. . . . . . . . . . . . . . 122,400
3,800 * Metricom, Inc. . . . . . . . . . . . 70,300
2,794 * Millicom International Cellular S.A. 134,461
</TABLE>
35
<PAGE> 137
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - Continued
14,680 * Octel Communications Corp. . . . . . $ 359,660
2,600 * Pairgain Technologies Inc. . . . . . 264,550
9,600 * PictureTel Corp. . . . . . . . . . . 376,800
3,700 * Plantronics, Inc. . . . . . . . . . 130,888
2,200 * Premisys Communications, Inc. . . . 125,400
5,312 * PriCellular Corp. Class A . . . . . . 74,368
2,800 * ProNet, Inc. . . . . . . . . . . . . 70,000
4,400 * Sanmina Corp. . . . . . . . . . . . . 162,250
4,700 * Symmetricom, Inc. . . . . . . . . . . 63,450
5,300 * U. S. Long Distance Corp. . . . . . . 190,137
2,900 * Xpedite Systems, Inc. . . . . . . . . 79,025
--------------
5,010,232
--------------
TEXTILE - PRODUCTS - 0.59%
13,900 * Burlington Industries, Inc. . . . . . 177,225
5,000 * Cone Mills Corp. . . . . . . . . . . 58,125
3,100 Delta Woodside Industries, Inc. . . . 17,825
600 * Fabri-Centers of America, Inc.
Class A . . . . . . . . . . . . . 8,850
3,600 * Fieldcrest Cannon, Inc. . . . . . . . 75,600
7,550 G&K Services, Inc. Class A . . . . . 228,387
3,100 * Galey & Lord, Inc. . . . . . . . . . 35,263
2,900 Guilford Mills, Inc. . . . . . . . . 70,687
2,800 * Lydall, Inc. . . . . . . . . . . . . 65,100
7,300 * Mohawk Industries, Inc. . . . . . . . 122,275
4,500 * Norton McNaughton Inc. . . . . . . . 46,688
6,900 * WestPoint Stevens Inc. Class A . . . 160,425
--------------
1,066,450
--------------
TOBACCO - 0.11%
10,400 DIMON Inc. . . . . . . . . . . . . . 187,200
1,600 * Standard Commercial Corp. . . . . . . 14,599
--------------
201,799
--------------
TRUCKERS - 0.52%
6,300 * American Freightways Corp. . . . . . 80,325
7,350 Arnold Industries, Inc. . . . . . . . 113,006
221 Frozen Food Express Industries, Inc. 2,542
1,088 * Heartland Express, Inc. . . . . . . . 31,552
800 * Knight Transportation, Inc. . . . . . 14,450
4,200 * Landstar System Inc. . . . . . . . . 123,900
3,200 * M.S. Carriers, Inc. . . . . . . . . . 61,600
16,375 Rollins Truck Leasing Corp. . . . . . 178,078
5,700 * Swift Transportation Co., Inc. . . . 105,450
4,500 * US Xpress Enterprises, Inc. Class A . 32,062
4,900 USFreightways Corp. . . . . . . . . . 106,575
800 Werner Enterprises, Inc. . . . . . . 19,600
5,900 * Yellow Corp. . . . . . . . . . . . . 76,700
--------------
945,840
--------------
UTILITIES - COMMUNICATION - 0.22%
4,200 * C-Tec Corp. . . . . . . . . . . . . . 118,650
12,100 Lincoln Telecommunications Co. . . . 199,650
3,300 PXRE Corp. . . . . . . . . . . . . . 82,500
--------------
400,800
--------------
UTILITIES - ELECTRIC - 1.46%
6,700 Black Hills Corp. . . . . . . . . . . $ 161,637
5,900 Central Louisiana Electric Co., Inc. 157,088
6,250 Central Vermont Public Service Corp. 86,719
5,500 CILCORP, Inc. . . . . . . . . . . . . 234,437
4,200 Commonwealth Energy System
Companies . . . . . . . . . . . . 203,175
5,200 Eastern Utilities Associates . . . . 98,800
800 Empire District Electric Co. . . . . 14,600
1,400 Green Mountain Power Corp. . . . . . 37,100
8,200 Indiana Energy, Inc. . . . . . . . . 194,750
5,300 Interstate Power Co. . . . . . . . . 169,600
7,425 Madison Gas & Electric Co. . . . . . 180,984
4,575 Otter Tail Power Co. . . . . . . . . 152,119
15,700 Public Service Co. of New Mexico . . 294,375
6,600 SIG Corp, Inc. . . . . . . . . . . . 220,275
400 St. Joseph Light & Power Co. . . . . 13,050
4,500 TNP Enterprises, Inc. . . . . . . . . 120,375
10,720 * Tuscon Electric Power Co. . . . . . . 158,120
3,800 United Illuminating Co. . . . . . . . 140,125
--------------
2,637,329
--------------
UTILITIES - GAS, DISTRIBUTION - 0.62%
1,000 Colonial Gas Co. . . . . . . . . . . 23,000
1,800 Connecticut Energy Corp. . . . . . . 36,675
1,200 Connecticut Natural Gas Corp. . . . . 28,200
4,100 Energen Corp. . . . . . . . . . . . . 96,350
234 NGC Corp . . . . . . . . . . . . . . 3,627
3,800 Northwest Natural Gas Co. . . . . . . 130,150
1,200 NUI Corp. . . . . . . . . . . . . . . 21,600
7,400 Piedmont Natural Gas Co., Inc. . . . 160,025
4,800 Public Service Co. of North
Carolina, Inc. . . . . . . . . . . 77,400
714 South Jersey Industries, Inc. . . . . 16,244
7,800 Southwestern Energy Co. . . . . . . . 111,150
3,451 Tosco Corp. . . . . . . . . . . . . . 170,811
10,500 Washington Energy Co. . . . . . . . . 196,875
9 World Fuel Services Corp. . . . . . . 161
2,150 Yankee Energy System, Inc. . . . . . 47,837
--------------
1,120,105
--------------
UTILITIES - GAS, PIPELINE - 0.15%
9,900 ONEOK Inc. . . . . . . . . . . . . . 269,775
--------------
UTILITIES - MISCELLANEOUS - 0.61%
5,200 Central Hudson Gas & Electric Corp . 155,350
15,242 * Citizens Utilities Co. Class B . . . 179,094
5,500 IES Industries Inc. . . . . . . . . . 156,062
4,650 MDU Resources Group, Inc. . . . . . . 97,650
400 Northwestern Public Service Co. . . . 11,100
3,600 Orange and Rockland Utilities, Inc. 125,550
7,700 Sierra Pacific Resources . . . . . . 182,875
2,900 Trigen Energy Corp. . . . . . . . . . 56,550
4,300 WPS Resources Corp. . . . . . . . . . 133,300
--------------
1,097,531
--------------
</TABLE>
36
<PAGE> 138
SMALL CAP INDEX FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
WATER SERVICES - 0.24%
3,000 Aquarion Co. . . . . . . . . . . . . $ 72,750
400 California Water Service Co. . . . . 13,800
1,200 Consumers Water Co. . . . . . . . . . 21,000
1,300 E'Town Corp. . . . . . . . . . . . . 36,238
1,050 IWC Resources Corp. . . . . . . . . . 20,213
2,100 Philadelphia Suburban Corp. . . . . . 51,187
1,600 SJW Corp. . . . . . . . . . . . . . . 59,200
2,150 Southern California Water Co. . . . . 47,837
8,400 United Water Resources . . . . . . . 112,350
--------------
434,575
--------------
TOTAL COMMON STOCKS
(Cost $132,321,923) . . . . . . . . . 172,354,035
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- ----------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 4.45%
FINANCE COMPANIES - 1.59%
$2,887,000 Ford Motor Credit Co.,
5.16% due 6/3/96 . . . . . . . . . 2,886,172
--------------
SECURITIES RELATED - 2.86%
5,168,000 Merrill Lynch & Co., Inc.,
5.35% due 6/4/96 . . . . . . . . . 5,165,696
--------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $8,051,868) . . . . . . . . . . 8,051,868
--------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.14%
U.S. TREASURY BILLS - 0.14%
United States Treasury Bills:
100,000 5.04% due 6/20/96 . . . . . . . . . 99,734
150,000 4.93% due 6/20/96 . . . . . . . . . 149,610
--------------
249,344
--------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $249,344) . . . . . . . . . . . 249,344
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
- --------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS
(Cost $140,623,135) - 99.93% . . . . $ 180,655,247
Other assets and liabilities,
net - 0.07% . . . . . . . . . . . 130,235
--------------
NET ASSETS (equivalent
to $16.25 per share on
11,128,632 shares
outstanding) - 100% . . . . . . . $ 180,785,482
--------------
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
CONTRACTS (DEPRECIATION)
- --------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
43 (2) Russell 2000 Index Futures
(June/$361.75) . . . . . . . . . . $ 342,650
1 (2) Russell 2000 Index Futures
(September/$366.25) . . . . . . . . (2,875)
--------------
$ 339,775
--------------
</TABLE>
(1) U.S.Treasury Bills with a market value of approximately
$250,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 500
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
11,128,632 shares outstanding . . . . . . . . . . $ 111,286
Additional paid in capital . . . . . . . . . . . . 129,491,129
Undistributed net realized gain on securities . . . 10,795,064
Undistributed net investment income . . . . . . . . 16,116
Unrealized appreciation of:
Investments . . . . . . . . . . . . . $40,032,112
Futures . . . . . . . . . . . . . . . 339,775 40,371,887
----------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . $ 180,785,482
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 139
SMALL CAP INDEX FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,212,097
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,052
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,669,149
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523,833
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,065
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,855
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,669
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,280
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,202
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,904
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,051,245
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,088,072
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861,590 10,949,662
-------------
Net unrealized appreciation during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,386,370
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308,600 31,694,970
------------- -------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . 42,644,632
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,695,877
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,051,245 $ 1,728,509
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,949,662 2,796,349
Net unrealized appreciation of securities during the period . . . . . . . . . . . . . . 31,694,970 7,291,771
----------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 44,695,877 11,816,629
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,050,531) (1,724,116)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,945,819) -
----------------------------
Decrease in net assets resulting from capital stock transactions . . . . . . . . . (4,996,350) (1,724,116)
----------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,328,751 27,773,025
Proceeds from capital stock issued for distributions reinvested . . . . . . . . . . . . 4,996,350 1,724,116
----------------------------
31,325,101 29,497,141
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,806,251) (21,072,208)
----------------------------
Increase in net assets resulting from capital stock transactions . . . . . . . . . 14,518,850 8,424,933
----------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,218,377 18,517,446
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,567,105 108,049,659
----------------------------
End of year (including undistributed net investment income of $16,116 and $15,402) . . $ 180,785,482 $ 126,567,105
----------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,827,343 2,410,176
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 350,648 147,801
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . (1,185,615) (1,802,417)
----------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 992,376 755,560
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,136,256 9,380,696
----------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,128,632 10,136,256
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 140
INTERNATIONAL EQUITIES FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.52%
AIRLINES - 0.61%
4,100 British Airways plc - ADR . . . . . . $ 355,675
40,000 * Japan Air Lines Co. Ltd. . . . . . . 322,593
2,500 Lufthansa AG . . . . . . . . . . . . 387,451
60,000 Malay Airline System Bhd . . . . . . 188,664
--------------
1,254,383
--------------
APPAREL & PRODUCTS - 0.47%
4,000 Hennes & Mauritz AB - Series B . . . 294,718
20,000 Onward Kashiyama Co., Ltd. . . . . . 325,926
163,039 Pacific Dunlop Ltd. . . . . . . . . . 352,650
--------------
973,294
--------------
APPLIANCES/FURNISHINGS - 2.05%
50,000 Brother Industries . . . . . . . . . 306,481
22,000 Matsushita Electric Industrial Co. Ltd. 378,889
4,200 Matsushita Electric Industrial
Co. Ltd. - ADR . . . . . . . . . . 722,400
15,000 Philips Electronics NV . . . . . . . 532,357
133,000 Sanyo Electric Co. Ltd. . . . . . . . 791,843
3,400 Sanyo Electric Co. Ltd. - ADR . . . . 102,425
30,000 Sharp Corp. . . . . . . . . . . . . . 488,889
13,970 Sony Corp - ADR . . . . . . . . . . . 895,826
--------------
4,219,110
--------------
AUTO - CARS - 3.79%
27,500 Daimler-Benz AG - ADR . . . . . . . . 1,498,750
100,000 Fiat S.p.A. . . . . . . . . . . . . . 353,037
15,000 Fiat S.p.A. - ADR . . . . . . . . . . 258,750
12,500 Honda Motor Co., Ltd. - ADR . . . . . 596,875
18,000 Nissan Motor Co., Ltd. - ADR . . . . . 297,000
35,000 Nissan Motor Co., Ltd. . . . . . . . 288,102
500 Peugeot Citroen SA . . . . . . . . . 69,639
13,200 Peugeot Citroen SA - ADR . . . . . . 458,993
98,000 Toyota Motor Corp. . . . . . . . . . 2,241,296
23,519 Toyota Motor Corp. - ADR . . . . . . 1,075,994
32,000 Volvo AB . . . . . . . . . . . . . . 678,743
--------------
7,817,179
--------------
AUTO - REPLACEMENT PARTS - 1.06%
36,000 Bridgestone Corp. . . . . . . . . . . 626,667
1,600 Bridgestone Corp. - ADR . . . . . . . 278,260
10,000 Michelin (CGDE) Class B . . . . . . . 503,917
5,550 Nippondenso Ltd. - ADR . . . . . . . 478,501
2,000 Phoenix AG . . . . . . . . . . . . . 293,447
--------------
2,180,792
--------------
BANKS - OTHER - 15.52%
15,007 ABN Amro Holdings NV . . . . . . . . 827,912
30,000 AMMB Holdings BHD . . . . . . . . . . 405,568
50,000 Asahi Bank Ltd. . . . . . . . . . . . 601,852
6,190 Asahi Bank Ltd. - ADR . . . . . . . . 744,402
10,000 Banco de Santander SA . . . . . . . . 456,224
5,700 Banco de Santander SA - ADR . . . . . 257,925
136,000 Bank of Tokyo - Mitsubishi . . . . . 3,223,703
BANKS - OTHER - Continued
4,180 Bank of Tokyo Ltd. - ADR . . . . . . $ 792,652
68,000 Bank of Yokohama Ltd. . . . . . . . . 582,407
2,296 Bank of Yokohama Ltd. - ADR . . . . . 196,466
36,785 Barclays plc . . . . . . . . . . . . 428,104
15,840 Barclays plc - ADR . . . . . . . . . 746,460
40,000 Chiba Bank Ltd. . . . . . . . . . . . 347,778
275,000 Credito Italiano . . . . . . . . . . 342,024
250,000 * DCB Holdings BHD . . . . . . . . . . 831,164
50,000 * DCB Holdings BHD (Warrants) . . . . . 63,689
13,300 Den Danske Bank AF 1871 - ADR . . . . 831,444
42,500 Deutsche Bank AG - ADR . . . . . . . 1,993,620
10,000 Development Bank of Singapore Ltd. . 118,566
13,625 Development Bank of
Singapore Ltd. - ADR . . . . . . . 645,629
10,000 Dresdner Bank AG . . . . . . . . . . 250,655
52,000 Dresdner Bank AG - ADR . . . . . . . 1,302,184
60,000 Fuji Bank Ltd. . . . . . . . . . . . 1,305,556
4,830 Fuji Bank Ltd. - ADR . . . . . . . . 1,049,999
6,180 HSBC Holdings plc - ADR . . . . . . . 934,486
53,000 Industrial Bank of Japan Ltd. . . . . 1,364,259
13,500 Istituto Mobiliare Italiano S.p.A. - ADR 335,813
48,000 Joyo Bank . . . . . . . . . . . . . . 376,889
277,744 Lloyds TSB Group plc . . . . . . . . 1,342,881
30,000 Mitsui Trust & Banking Co. Ltd. . . . 330,556
28,014 National Australia Bank Ltd. . . . . 262,722
9,319 National Australia Bank Ltd. - ADR . 435,663
10,000 National Westminster Bank plc . . . . 96,699
9,100 National Westminster Bank plc - ADR . 525,525
98,000 Sakura Bank Ltd. . . . . . . . . . . 1,070,741
3,290 Sakura Bank Ltd. - ADR . . . . . . . 359,130
30,000 Shizuoka Bank . . . . . . . . . . . . 388,889
89,000 Sumitomo Bank . . . . . . . . . . . . 1,755,278
3,410 Sumitomo Bank - ADR . . . . . . . . . 671,905
46,000 Tokai Bank . . . . . . . . . . . . . 575,000
2,225 Tokai Bank - ADR . . . . . . . . . . 555,735
10,000 Tokyo Trust & Banking . . . . . . . . 95,370
1,800 Union Bank of Switzerland AG . . . . 1,685,657
21,300 Westpac Banking Corp. Ltd. - ADR . . 492,562
--------------
32,001,743
--------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 1.81%
58,800 Bass plc . . . . . . . . . . . . . . 742,176
96,100 Guinness plc . . . . . . . . . . . . 693,236
16,000 Kirin Brewery Co., Ltd. . . . . . . . 198,519
4,995 Kirin Brewery Co., Ltd. - ADR . . . . 626,872
12,000 LVMH (Moet Hennessy Louis
Vuitton) - ADR . . . . . . . . . . 585,000
45,000 Sapporo Breweries . . . . . . . . . . 429,167
40,000 Whitbread plc . . . . . . . . . . . . 452,503
--------------
3,727,473
--------------
BROADCASTING - 0.19%
30,000 British Sky Broadcasting Group plc . 208,740
750 Canal Plus . . . . . . . . . . . . . 183,819
--------------
392,559
--------------
</TABLE>
39
<PAGE> 141
INTERNATIONAL EQUITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
BUILDING MATERIALS - 2.85%
20,000 Asahi Glass Co. Ltd. . . . . . . . . $ 240,741
5,400 Asahi Glass Co. Ltd. - ADR . . . . . 649,398
30,190 CRH plc . . . . . . . . . . . . . . . 287,752
2,505 * Fletcher Challenge Building Division 51,352
4,700 Glaverbel SA . . . . . . . . . . . . 548,533
725 Holderbank Finance Glarus . . . . . . 556,133
40,000 Inax Corp . . . . . . . . . . . . . . 407,407
4,000 Lafarge SA . . . . . . . . . . . . . 263,391
79,487 Redland plc . . . . . . . . . . . . . 494,561
24,642 Redland plc - ADR . . . . . . . . . . 153,483
2,400 Taisei Construction Ltd. - ADR . . . 180,943
110,000 Taisei Corp. . . . . . . . . . . . . 830,093
15,000 Tostem Corp. . . . . . . . . . . . . 438,889
24,000 Toto Ltd. . . . . . . . . . . . . . . 353,333
525 Toto Ltd. - ADR . . . . . . . . . . . 77,220
38,000 Uralita, SA . . . . . . . . . . . . . 335,212
--------------
5,868,441
--------------
CHEMICAL - MAJOR - 1.18%
2,000 Ciba Geigy AG . . . . . . . . . . . . 2,200,559
20,000 Sekisui Chemical . . . . . . . . . . 237,037
--------------
2,437,596
--------------
CHEMICAL - MISCELLANEOUS - 3.37%
12,367 Air Liquide - ADR . . . . . . . . . . 429,552
5,100 Akzo Nobel N V- ADR . . . . . . . . . 309,188
8,500 Asahi Chemical Co. Ltd. - ADR . . . . 616,466
2,500 BASF AG . . . . . . . . . . . . . . . 694,626
1,000 Bayer A G . . . . . . . . . . . . . . 334,207
18,000 Bayer A G - ADR . . . . . . . . . . . 601,009
41,962 BOC Group plc . . . . . . . . . . . . 604,752
11,000 Imperial Chemical Industries plc - ADR 584,375
20,000 Mitsubishi Chemical Corp. . . . . . . 98,889
8,040 Mitsubishi Chemical Corp. - ADR . . . 397,165
56,515 * Montedison S.p.A. - ADR . . . . . . . 339,090
195,000 Nylex (Malaysia) Bhd . . . . . . . . 773,283
23,100 Shin Etsu Chemical Co. . . . . . . . 462,000
50,000 Toray Industries Inc. . . . . . . . . 337,963
5,500 Toray Industries Inc. - ADR . . . . . 371,414
--------------
6,953,979
--------------
CONGLOMERATES - 3.45%
27,195 Broken Hill Proprietary Co. Ltd. - ADR 1,641,898
41,825 BTR plc . . . . . . . . . . . . . . . 182,130
37,426 BTR plc - ADR . . . . . . . . . . . . 651,781
75,000 Halma plc . . . . . . . . . . . . . . 209,205
3,300 Itochu Corp. - ADR . . . . . . . . . 236,891
57,000 Keppel Corp. Ltd. . . . . . . . . . . 477,529
21,500 Keppel Corp. Ltd. - ADR . . . . . . . 359,929
18,000 Lagardere Groupe . . . . . . . . . . 488,519
70,000 Marubeni Corp. . . . . . . . . . . . 381,759
3,200 Marubeni Corp. - ADR . . . . . . . . 174,357
27,000 Mitsubishi Corp. . . . . . . . . . . 370,000
50,000 Mitsui & Co. . . . . . . . . . . . . 460,648
CONGLOMERATES - Continued
2,200 Mitsui & Co. - ADR . . . . . . . . . $ 404,250
60,000 Sime Darby Holdings Ltd. . . . . . . 161,026
194,400 Sime Darby Holdings Ltd. - ADR . . . 521,284
101,741 Tomkins plc . . . . . . . . . . . . . 402,833
--------------
7,124,039
--------------
CONSUMER FINANCE - 0.13%
37,000 Nippon Shinpan Co. . . . . . . . . . 274,074
--------------
COSMETICS/TOILETRIES - 0.77%
1,000 Loreal Co. . . . . . . . . . . . . . 304,285
14,000 Loreal Co. - ADR . . . . . . . . . . 850,840
34,490 Shiseido Ltd. - ADR . . . . . . . . . 427,531
--------------
1,582,656
--------------
DRUGS - 5.03%
20,000 Astra AB Series A . . . . . . . . . . 915,410
80,400 Glaxo Wellcome plc - ADR . . . . . . 2,100,450
30,000 Kaken Pharmaceutical . . . . . . . . 253,889
7,700 Kissei Pharmaceutical Co. . . . . . . 222,444
5,000 Ono Pharmaceutical . . . . . . . . . 174,537
300 Roche Holdings AG . . . . . . . . . . 2,301,239
1,500 Sandoz AG . . . . . . . . . . . . . . 1,555,733
37,000 Sankyo Co. Ltd. . . . . . . . . . . . 877,037
3,000 Sanofi SA . . . . . . . . . . . . . . 230,854
65,000 Takeda Chemical Industries Ltd. . . . 1,077,315
10,300 Zeneca Group plc - ADR . . . . . . . 660,487
--------------
10,369,395
--------------
ELECTRICAL EQUIPMENT - 1.27%
58,000 Delta plc . . . . . . . . . . . . . . 377,499
15,000 Fanuc . . . . . . . . . . . . . . . . 586,111
134,000 General Electric plc . . . . . . . . 772,478
10,400 General Electric plc - ADR . . . . . 60,022
10,000 Murata Manufacturing Co. . . . . . . 366,667
3,400 Sumitomo Electric Industries
Ltd. - ADR . . . . . . . . . . . . 462,349
--------------
2,625,126
--------------
ELECTRONIC INSTRUMENTS - 3.11%
50,000 Hitachi Ltd. . . . . . . . . . . . . 462,963
8,550 Hitachi Ltd. - ADR . . . . . . . . . 801,562
6,000 Kyocera Corp . . . . . . . . . . . . 411,111
144,000 Mitsubishi Electric Corp. . . . . . . 986,667
600 Mitsubishi Electric Corp. - ADR . . . 41,073
25,000 NEC Corp. . . . . . . . . . . . . . . 275,463
5,100 NEC Corp. - ADR . . . . . . . . . . . 281,775
50,000 Racal Electronics plc . . . . . . . . 244,847
7,000 Schneider SA . . . . . . . . . . . . 323,900
8,000 Siemens AG . . . . . . . . . . . . . 448,650
28,000 Siemens AG - ADR . . . . . . . . . . 1,568,804
55,000 Yokogawa Electric . . . . . . . . . . 560,185
--------------
6,407,000
--------------
</TABLE>
40
<PAGE> 142
INTERNATIONAL EQUITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 0.33%
85,000 Rank Organisation . . . . . . . . . . $ 673,756
--------------
FINANCE COMPANIES - 0.92%
4,000 Compagnie Bancaire SA . . . . . . . . 437,954
126 Credit Local de France . . . . . . . 10,322
7,747 Internationale Nederlanden
Groep NV . . . . . . . . . . . . . 637,908
7,554 Societe Generale . . . . . . . . . . 803,695
--------------
1,889,879
--------------
FOODS - 3.19%
25,000 Ajinomoto Inc. . . . . . . . . . . . 300,926
1,900 Ajinomoto Inc. - ADR . . . . . . . . 228,492
21,113 Cadbury Schweppes plc . . . . . . . . 158,356
13,634 Cadbury Schweppes plc - ADR . . . . . 412,428
31,077 Coca Cola Amatil Ltd. . . . . . . . . 338,575
10,000 Daiei, Inc. . . . . . . . . . . . . . 122,222
11,500 Daiei, Inc. - ADR . . . . . . . . . . 273,125
122,569 Grand Metropolitan . . . . . . . . . 828,143
750 Groupe Danone . . . . . . . . . . . . 109,682
20,060 Groupe Danone - ADR . . . . . . . . . 585,928
5,346 KAO Corp - ADR . . . . . . . . . . . 712,140
38,000 Nestle S A - ADR . . . . . . . . . . 2,139,385
54,322 Northern Foods plc . . . . . . . . . 155,735
30,000 Tate & Lyle plc . . . . . . . . . . . 211,530
--------------
6,576,667
--------------
FOOTWEAR - 0.33%
4,500 Adidas AG . . . . . . . . . . . . . . 337,795
50,000 Church & Co. plc . . . . . . . . . . 344,801
--------------
682,596
--------------
FREIGHT - 0.64%
98,000 * Mitsui Osk Lines Ltd. . . . . . . . . 336,648
40,000 Nippon Yusen Kabushiki Kaish . . . . 234,815
8,570 Nippon Yusen Kabushiki
Kaish - ADR . . . . . . . . . . . . 502,624
30,000 P & O Steam Navigation . . . . . . . 243,608
--------------
1,317,695
--------------
HARDWARE & TOOLS - 0.13%
12,000 SKF AB . . . . . . . . . . . . . . . 270,604
--------------
HEALTHCARE - 0.29%
33,159 Eisai Ltd. . . . . . . . . . . . . . 607,347
--------------
HOME BUILDERS - 0.24%
15,000 Daiwa House Industry Co. Ltd. . . . . 229,167
214 Sekisui Homes Ltd. - ADR . . . . . . 25,141
20,000 Sekisui House Hokuriku, Ltd. . . . . 235,185
--------------
489,493
--------------
HOSPITAL SUPPLIES - 0.28%
1,000 Novo-Nordisk A/S . . . . . . . . . . 137,463
12,800 Novo-Nordisk A/S - ADR . . . . . . . 443,200
--------------
580,663
--------------
HOUSEHOLD PRODUCTS - 0.77%
7,000 Katokichi Co . . . . . . . . . . . . $ 165,278
10,600 Unilever N V-ADR . . . . . . . . . . . 1,429,675
--------------
1,594,953
--------------
INFORMATION PROCESSING - 0.82%
5,000 CSK Corp. . . . . . . . . . . . . . . 146,759
3,700 CSK Corp. - ADR . . . . . . . . . . . 107,300
14,000 Fujitsu Ltd. . . . . . . . . . . . . 127,037
15,200 Fujitsu Ltd. - ADR . . . . . . . . . 688,989
500,000 * Ing C. Olivetti & C. S.p.A. . . . . . 313,199
2,250 SAP AG . . . . . . . . . . . . . . . 307,421
--------------
1,690,705
--------------
INSURANCE - CASUALTY - 0.90%
25,000 Mitsui Marine & Fire . . . . . . . . 193,287
50,000 Nippon Fire & Marine Insurance . . . 330,556
25,000 Sumitomo Marine & Fire . . . . . . . 226,389
20,000 Tokio Marine & Fire Insurance Co. . . 259,259
13,100 Tokio Marine & Fire Insurance
Co. - ADR . . . . . . . . . . . . 851,500
--------------
1,860,991
--------------
INSURANCE - LIFE - 0.61%
62,758 Irish Life plc . . . . . . . . . . . 253,833
30,240 Prudential plc - ADR . . . . . . . . 1,006,184
--------------
1,260,017
--------------
INSURANCE - MULTILINE - 2.89%
39,590 Assic Generali . . . . . . . . . . . 941,184
22,500 AXA . . . . . . . . . . . . . . . . . 1,275,704
200 Baloise Holding Ltd. . . . . . . . . 433,080
15,690 Fortis Amev NV . . . . . . . . . . . 1,223,039
7,000 * Gan Group . . . . . . . . . . . . . . 199,052
40,525 General Accident . . . . . . . . . . 417,936
98,280 Royal Insurance Holdings plc . . . . 644,996
150,000 Sedgwick Group plc . . . . . . . . . 346,350
500 * Swiss Reinsurance AG . . . . . . . . 482,621
--------------
5,963,962
--------------
LEISURE TIME - 1.18%
8,000 Canon, Inc. - ADR . . . . . . . . . . 784,000
20,000 Fuji Photo . . . . . . . . . . . . . 622,222
9,601 Fuji Photo - ADR . . . . . . . . . . 595,262
150,000 Ladbroke Group plc . . . . . . . . . 440,493
--------------
2,441,977
--------------
LODGING - 0.52%
275,000 Hong Kong & Shang Hai Hotels . . . . 485,150
180,000 Hotel Properties . . . . . . . . . . 318,211
200,000 Shangri La Asia Ltd. . . . . . . . . 276,582
--------------
1,079,943
--------------
MACHINE TOOLS - 0.46%
35,000 Amada Co., Ltd. . . . . . . . . . . . 362,963
16,000 Makita Corp. - ADR . . . . . . . . . 248,000
40,000 Minebea Co. Ltd. . . . . . . . . . . 332,963
--------------
943,926
--------------
</TABLE>
41
<PAGE> 143
INTERNATIONAL EQUITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MACHINERY - CONSTRUCTION &
CONTRACTS - 1.72%
200 BBC Brown Boveri Limited-ADR . . . . $ 239,073
1,500 Bilfinger & Berger Bau AG . . . . . . 624,181
2,000 Jean Lefebvre SA . . . . . . . . . . 120,321
52,000 Kajima Corp. . . . . . . . . . . . . 544,074
2,340 Kajima Corp. - ADR . . . . . . . . . 244,607
80,000 Kumagai Gumi (Hong Kong) Ltd. . . . . 79,614
70,000 Shimizu Corp. . . . . . . . . . . . . 803,704
5,200 Volker Stevin . . . . . . . . . . . . 387,983
1,500 Vossloh AG . . . . . . . . . . . . . 511,140
--------------
3,554,697
--------------
MACHINERY - INDUSTRIAL/SPECIALTY - 3.19%
10,000 Atlas Copco AB Series A . . . . . . . 186,059
20,000 Atlas Copco AB Series B . . . . . . . 373,606
125 Bobst SA . . . . . . . . . . . . . . 179,784
10,250 CNIM . . . . . . . . . . . . . . . . 385,651
8,000 Ebara Corp. . . . . . . . . . . . . . 121,482
2,530 Ebara Corp. - ADR . . . . . . . . . . 383,830
325,000 Johan Holdings Berhad . . . . . . . . 304,627
50,000 * Kawasaki Heavy Industries . . . . . . 261,574
54,000 Komatsu Ltd. . . . . . . . . . . . . 515,000
400 Komatsu Ltd. - ADR . . . . . . . . . 76,226
70,000 Kubota Corp. . . . . . . . . . . . . 467,963
1,350 Kubota Corp. - ADR . . . . . . . . . 176,850
140,000 Mitsubishi Hvy Industries . . . . . . 1,204,259
4,000 Oyo Corp. . . . . . . . . . . . . . . 251,852
2,000 Rieter Holdings AG . . . . . . . . . 559,329
78,595 Rolls Royce . . . . . . . . . . . . . 275,259
70,000 SASIB S.p.A. . . . . . . . . . . . . 290,202
25,000 Siebe plc . . . . . . . . . . . . . . 335,115
350 Sulzer AG . . . . . . . . . . . . . . 222,333
--------------
6,571,001
--------------
MERCHANDISE - SPECIALTY - 0.88%
40,487 BAA plc . . . . . . . . . . . . . . . 305,550
450,000 Dickson Concepts International Ltd. . 514,715
10,000 Esselte AB Series B . . . . . . . . . 190,524
35,000 Great Universal Stores . . . . . . . 368,550
1,500 Herlitz AG . . . . . . . . . . . . . 199,836
15,000 Takashimaya Co. . . . . . . . . . . . 244,444
--------------
1,823,619
--------------
MERCHANDISING - DEPARTMENT - 1.25%
40,000 Hankyu Department Store . . . . . . . 540,741
500 Karstadt AG . . . . . . . . . . . . . 196,920
15,000 Marks & Spencer plc . . . . . . . . . 107,508
25,033 Marks & Spencer plc - ADR . . . . . . 1,076,314
32,000 Marui Co., Ltd. . . . . . . . . . . . 657,778
--------------
2,579,261
--------------
MERCHANDISING - FOOD - 1.65%
1,700 * Carrefour SA . . . . . . . . . . . . 930,651
1,700 * Carrefour SA (Rights) . . . . . . . . 466,970
15,000 Delhaize-Le Lion, S.A. . . . . . . . 760,523
100,000 J. Sainsbury plc . . . . . . . . . . 614,443
5,000 Koninklijke Ahold NV . . . . . . . . 268,228
MERCHANDISING - FOOD - Continued
20,000 Kwik Save Group plc . . . . . . . . . $ 141,019
15,000 Melco International Development Ltd. 4,653
10,000 Uny Company Ltd. . . . . . . . . . . 211,111
--------------
3,397,598
--------------
MERCHANDISING - MASS - 1.08%
10,000 Centros Com Pryca . . . . . . . . . . 235,107
3,960 Familymart Co. . . . . . . . . . . . 181,133
4,050 Ito-Yokado Co. Ltd. - ADR . . . . . . 912,262
56,000 Mitsukoshi Ltd. . . . . . . . . . . . 617,037
200 Mitsukoshi Ltd. - ADR . . . . . . . . 22,017
20,000 Seiyu Ltd. . . . . . . . . . . . . . 259,265
--------------
2,226,821
--------------
METALS - COPPER - 0.50%
22,379 RTZ Corp. plc . . . . . . . . . . . . 348,534
10,700 RTZ Corp. plc - ADR . . . . . . . . . 676,775
--------------
1,025,309
--------------
METALS - MISCELLANEOUS - 0.81%
400 Alusuisse Lonza Holdings . . . . . . 314,183
8,062 CRA Ltd. - ADR . . . . . . . . . . . 522,952
102,458 North Ltd. . . . . . . . . . . . . . 295,214
70,000 Western Mining . . . . . . . . . . . 530,210
--------------
1,662,559
--------------
METALS - STEEL - 2.08%
500 Bekaert SA . . . . . . . . . . . . . 419,324
36,700 British Steel plc . . . . . . . . . . 96,826
2,000 British Steel plc - ADR . . . . . . . 53,750
50,000 Cockerill Sambre . . . . . . . . . . 261,480
60,000 Kawasaki Steel . . . . . . . . . . . 222,222
15,420 Kawasaki Steel - ADR . . . . . . . . 570,582
200,000 Nippon Steel Co. . . . . . . . . . . 679,630
255,000 * NKK Corp. . . . . . . . . . . . . . . 746,111
178,000 Sumitomo Metal Industries Ltd. . . . 548,833
7,400 Sumitomo Metal Industries
Ltd. - ADR . . . . . . . . . . . . 227,955
50,000 Sumitomo Metal Mining . . . . . . . . 467,592
--------------
4,294,305
--------------
MISCELLANEOUS - 0.97%
32,667 Argos . . . . . . . . . . . . . . . . 370,050
1,250 Preussag AG . . . . . . . . . . . . . 319,053
8,000 Secom Co. . . . . . . . . . . . . . . 518,519
76,819 Smithkline Beecham plc . . . . . . . 782,118
--------------
1,989,740
--------------
OIL - INTEGRATED
INTERNATIONAL - 3.30%
19,713 British Petroleum Co. plc - ADR . . . 2,077,258
20,946 Elf Aquitaine SA - ADR . . . . . . . 767,147
18,000 Repsol S A - ADR . . . . . . . . . . 612,000
17,098 Royal Dutch Petroleum Co. - ADR . . . 2,564,700
10,961 Total . . . . . . . . . . . . . . . . 792,364
--------------
6,813,469
--------------
</TABLE>
42
<PAGE> 144
INTERNATIONAL EQUITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
OIL - SERVICE - PRODUCTS - 0.13%
30,000 Mitsubishi Oil Co. . . . . . . . . . $ 261,389
--------------
OIL/GAS PRODUCERS - 1.03%
60,000 Eni Spa . . . . . . . . . . . . . . . 284,891
2,505 * Fletcher Challenge Energy Division . 52,605
23,500 Norsk Hydro A/S - ADR . . . . . . . . 1,101,562
5,000 OMV AG . . . . . . . . . . . . . . . 516,736
50,000 Santos Limited . . . . . . . . . . . 176,391
--------------
2,132,185
--------------
PAPER/FOREST PRODUCTS - 0.95%
147,000 Fletcher Challenge Forest Ltd. . . . 188,859
3,926 Fletcher Challenge Ltd. - ADR . . . . 51,038
5,010 * Fletcher Challenge Paper Division . . 91,432
37,000 Honshu Paper Co. Ltd. . . . . . . . . 262,083
22,000 New Oji Paper Co., Ltd. . . . . . . . 192,093
300 New Oji Paper Co., Ltd. - ADR . . . . 26,170
60,000 Nippon Paper Industries . . . . . . . 402,778
15,000 Sumitomo Forestry Co. . . . . . . . . 233,333
27,000 * UPM - Kymmene Corp. . . . . . . . . . 520,366
--------------
1,968,152
--------------
PUBLISHING - NEWS - 1.11%
63,069 Independent Newspapers plc . . . . . 500,945
17,500 News Corp Ltd. - ADR . . . . . . . . 391,562
80,000 Reuters Holdings plc . . . . . . . . 929,800
40,952 United News & Media plc . . . . . . . 471,840
--------------
2,294,147
--------------
PUBLISHING/PRINTING - 0.89%
30,000 Dai Nippon Printing Co. Ltd. . . . . 555,555
1,000 Dai Nippon Printing Co. Ltd. - ADR . 185,014
81,380 Pearson plc . . . . . . . . . . . . . 875,216
2,000 Wolters Kluwer NV . . . . . . . . . . 223,602
--------------
1,839,387
--------------
RAILROAD - 1.07%
30,000 Fukuyama Transporting Co. . . . . . . 291,667
90,000 Nagoya Railroad Co. Ltd. . . . . . . 465,833
9,218 Nagoya Railroad Co. Ltd. - ADR . . . 476,675
101,970 Odakyu Electric Railway Co. Ltd. . . 681,688
40,000 Tokyu Corp. . . . . . . . . . . . . . 299,630
--------------
2,215,493
--------------
REAL ESTATE - 2.48%
179,441 Great Eagle Holdings Ltd. . . . . . . 549,643
40,000 * Hammerson plc . . . . . . . . . . . . 233,070
240,000 Hang Lung Development Co. . . . . . . 466,830
83,000 Mitsubishi Estate Co. Ltd. . . . . . 1,160,463
35,000 Mitsui Fudosan . . . . . . . . . . . 443,981
172,600 Sun Hung Kai Properties Ltd. . . . . 1,762,294
128,000 Wharf (Holdings) Ltd. . . . . . . . . 493,816
--------------
5,110,097
--------------
SECURITIES RELATED - 1.88%
25,000 Daiwa Securities Co. Ltd. . . . . . . $ 335,648
61,000 Mitsubishi Trust & Banking Corp. . . 1,016,667
35,000 Nomura Securities Co. Ltd. . . . . . 661,111
3,800 Nomura Securities Co. Ltd. - ADR . . 717,113
160,000 Peregrine Investment Holdings Ltd. . 248,148
16,000 Peregrine Investment Holdings
Ltd. (warrants) . . . . . . . . . . 6,204
6,000 Yamaichi Securities Co. Ltd. - ADR . 432,932
20,000 Yasuda Trust & Banking . . . . . . . 121,111
5,670 Yasuda Trust & Banking - ADR . . . . 343,032
--------------
3,881,966
--------------
TELECOMMUNICATIONS - 4.15%
35,000 British Telecommunications plc . . . 192,817
16,379 British Telecommunications plc - ADR 896,750
61,982 Hong Kong Telecommunications
Ltd.- ADR . . . . . . . . . . . . 1,146,667
15,395 Kon Ptt Nederland . . . . . . . . . . 557,195
12,000 Nokia AB OY . . . . . . . . . . . . . 522,149
100,000 Stet Societa' Finanziaria
Telefonica S.p.A. . . . . . . . . . 358,543
4,800 Telecom Corp. of New Zealand
Ltd. - ADR . . . . . . . . . . . . 315,000
135,000 Telecom Italia Mobile . . . . . . . . 288,583
335,000 Telecom Italia S.p.A. . . . . . . . . 670,543
40,200 Telefonaktiebolage & LM Ericsson
Class B - ADR . . . . . . . . . . 927,113
14,000 Telefonica de Espana . . . . . . . . 251,350
14,600 Telefonica de Espana - ADR . . . . . 764,675
110,000 Telekom Malaysia Bhd . . . . . . . . 1,004,606
16,500 Vodafone Group plc - ADR . . . . . . 653,813
--------------
8,549,804
--------------
TEXTILE - PRODUCTS - 0.35%
20,000 Courtaulds Textiles plc . . . . . . . 116,690
4,000 DMC Dollfus Mieg . . . . . . . . . . 190,734
30,000 Marzotto & Figli S.p.A. . . . . . . . 202,105
15,000 Wacoal Corp. . . . . . . . . . . . . 209,722
--------------
719,251
--------------
TOBACCO - 0.66%
74,376 B.A.T. Industries plc . . . . . . . . 599,342
40,100 B.A.T. Industries plc - ADR . . . . . 656,637
32,000 * Swedish Match AB . . . . . . . . . . 106,694
--------------
1,362,673
--------------
UTILITIES - ELECTRIC - 4.01%
205,000 China Light & Power . . . . . . . . . 975,017
12,000 Empresa Nacional de Electridad
SA - ADR . . . . . . . . . . . . . 747,000
30,000 Iberdrola SA . . . . . . . . . . . . 304,279
36,600 Kansai Electric Power Co. Inc. . . . 843,833
80,000 National Power . . . . . . . . . . . 645,281
4,000 Oesterreichisch Elektrizitatswirt
Schafts - AG Class A . . . . . . . 305,759
30,000 RWE AG - ADR . . . . . . . . . . . . 1,183,356
44,000 Scottish Power plc . . . . . . . . . 216,489
</TABLE>
43
<PAGE> 145
INTERNATIONAL EQUITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES - ELECTRIC - Continued
10,000 Sydkraft AB . . . . . . . . . . . . . $ 217,317
145,000 Tenaga Nasional Bhd . . . . . . . . . 615,662
25,200 Tokyo Electric Power . . . . . . . . 646,333
30,000 VEBA AG . . . . . . . . . . . . . . . 1,569,790
--------------
8,270,116
--------------
UTILITIES - GAS, DISTRIBUTION - 0.24%
127,000 Osaka Gas Co. . . . . . . . . . . . . 495,065
--------------
WATER SERVICES - 0.98%
10,196 Eaux (Cie Generale) . . . . . . . . . 1,090,703
20,000 Hyder . . . . . . . . . . . . . . . . 232,760
25,000 Thames Water plc . . . . . . . . . . 229,157
52,602 United Utilities plc . . . . . . . . 476,866
--------------
2,029,486
--------------
TOTAL COMMON STOCKS
(Cost $171,289,294) . . . . . . . . . 203,201,603
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- ----------
<S> <C> <C>
UNITED STATES GOVERNMENT -
SHORT TERM - 0.17%
U.S. TREASURY BILLS - 0.17%
United States Treasury Bills:
$ 50,000 4.90% due 6/20/96 . . . . . . . . . 49,871
300,000 4.81% due 6/20/96 . . . . . . . . . 299,238
--------------
349,109
--------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $349,109) . . . . . . . . . . . 349,109
--------------
TOTAL INVESTMENTS
(Cost $171,638,403) - 98.69% . . . . 203,550,712
Other assets and liabilities,
net - 1.31% . . . . . . . . . . . 2,708,624
--------------
NET ASSETS (equivalent
to $11.15 per share
on 18,496,532 shares
outstanding) - 100% . . . . . . . $ 206,259,336
--------------
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
30 (2) Nikkei 225 Futures
(June/$203.47) . . . . . . . . . . $ 165,259
5 (2) Nikkei 225 Futures
(September/$204.26) . . . . . . . . 5,977
--------------
$ 171,236
--------------
</TABLE>
(1) U.S.Treasury Bills with a market value of approximately
$350,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 500
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
18,496,532 shares outstanding . . . . . . . . . . . $ 184,965
Additional paid in capital . . . . . . . . . . . . 169,231,172
Undistributed net realized gain on securities and
foreign currency transactions. . . . . . . . . . . 4,495,627
Undistributed net investment income . . . . . . . . 262,279
Unrealized appreciation of:
Investments . . . . . . . . . . . . . $31,912,309
Futures . . . . . . . . . . . . . . 171,236
Foreign currency translation . . . . 1,748 32,085,293
----------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . $ 206,259,336
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 146
INTERNATINAL EQUITY FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $591,929) . . . . . . . . . . . . . . . . . . . . . . $ 3,929,354
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,983
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,246,337
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715,452
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,184
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,703
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,362
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,723
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,711
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865,135
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,381,202
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,624,523
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . (164,304)
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,198 7,822,417
-------------
Net unrealized appreciation during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,279,781
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,463
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,461 10,529,705
------------- -------------
Net realized and unrealized gain on securities and foreign currencies during the year . . . . 18,352,122
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,733,324
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,381,202 $ 2,935,676
Net realized gain on securities and foreign currency transactions . . . . . . . . . . . 7,822,417 1,612,508
Net unrealized appreciation of securities and translation of foreign currencies
during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,529,705 4,179,750
----------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 21,733,324 8,727,934
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,224,568) (2,923,253)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,471,011) (1,262,696)
----------------------------
Decrease in net assets resulting from distributions to shareholders . . . . . . . (7,695,579) (4,185,949)
----------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,168,258 70,844,488
Proceeds from capital stock issued for distributions reinvested . . . . . . . . . . . . 7,695,579 4,185,949
----------------------------
74,863,837 75,030,437
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,733,125) (45,664,455)
----------------------------
Increase (decrease) in net assets resulting from capital stock transactions . . . (16,869,288) 29,365,982
----------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . (2,831,543) 33,907,967
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,090,879 175,182,912
----------------------------
End of year (including undistributed net investment income of $262,279 and $82,048) . . $ 206,259,336 $ 209,090,879
----------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,277,440 6,923,001
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 721,434 410,419
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . (8,576,096) (4,532,670)
----------------------------
Increase (decrease) in shares outstanding . . . . . . . . . . . . . . . . . . . . (1,577,222) 2,800,750
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,073,754 17,273,004
----------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,496,532 20,073,754
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 147
GROWTH FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 94.61%
ADVERTISING - 1.99%
175,000 ADVO, Inc. . . . . . . . . . . . . . $ 1,903,125
85,000 * Catalina Marketing Corp. . . . . . . 6,587,500
--------------
8,490,625
--------------
APPAREL & PRODUCTS - 1.29%
100,000 * Tommy Hilfiger Corp. . . . . . . . . 5,500,000
--------------
AUTO - REPLACEMENT PARTS - 0.33%
40,000 * AutoZone, Inc. . . . . . . . . . . . 1,405,000
--------------
BANKS - REGIONAL - 1.23%
150,000 Norwest Corp. . . . . . . . . . . . . 5,231,250
--------------
BROADCASTING - 4.63%
100,000 Comcast Corp. Class A . . . . . . . . 1,737,500
250,000 Comcast Corp. Class A Special . . . . 4,343,750
50,000 * Cox Communications, Inc. Class A . . 1,125,000
236,250 Gaylord Entertainment Co. Class A . . 6,172,031
150,000 * Viacom Inc. Class B . . . . . . . . . 6,356,250
--------------
19,734,531
--------------
CHEMICAL - MISCELLANEOUS - 0.53%
107,800 * Airgas, Inc. . . . . . . . . . . . . 2,250,325
--------------
CONSUMER FINANCE - 1.15%
50,000 ADVANTA Corp. . . . . . . . . . . . . 2,600,000
185,000 Mercury Finance Co. . . . . . . . . . 2,312,500
--------------
4,912,500
--------------
ENTERTAINMENT - 0.93%
65,000 Walt Disney Co. . . . . . . . . . . . 3,948,750
--------------
FINANCE COMPANIES - 3.65%
18,000 * Associates First Capital Corp. . . . 666,000
175,000 Green Tree Financial Corp. . . . . . 5,731,250
75,000 Household International, Inc. . . . . 5,193,750
150,000 Money Store Inc. . . . . . . . . . . 3,937,500
--------------
15,528,500
--------------
GOVERNMENT SPONSORED - 2.26%
70,000 Federal Home Loan Mortgage Corp. . . 5,783,750
125,000 Federal National Mortgage
Association . . . . . . . . . . . 3,859,375
--------------
9,643,125
--------------
HEALTHCARE - 10.97%
220,000 * Apria Healthcare Group, Inc. . . . . 6,435,000
110,000 Cardinal Health, Inc. . . . . . . . . 7,026,250
30,000 * Oxford Health Plans, Inc. . . . . . . 1,417,500
75,000 * PacifiCare Health System, Inc.
Class B . . . . . . . . . . . . . 6,206,250
150,000 * Patterson Dental Co. . . . . . . . . 4,837,500
275,000 * Quorum Health Group Inc. . . . . . . 7,046,875
250,000 United HealthCare Corp. . . . . . . . 13,718,750
--------------
46,688,125
--------------
HOSPITAL MANAGEMENT - 2.89%
135,000 Columbia/HCA Healthcare Corp. . . . . $ 7,273,125
159,600 * Vencor, Inc. . . . . . . . . . . . . 5,047,350
--------------
12,320,475
--------------
INFORMATION PROCESSING - 5.37%
27,700 * America Online, Inc. . . . . . . . . 1,565,050
125,000 * BISYS Group, Inc. . . . . . . . . . . 4,593,750
82,500 * Ceridian Corp. . . . . . . . . . . . 4,362,187
75,000 First Data Corp. . . . . . . . . . . 5,981,250
168,000 * SunGard Data Systems, Inc. . . . . . 6,342,000
--------------
22,844,237
--------------
INSURANCE - MISCELLANEOUS - 6.65%
175,000 Ace Limited . . . . . . . . . . . . . 8,575,000
125,000 MGIC Investment Corp. . . . . . . . . 7,343,750
150,000 PMI Group Inc. . . . . . . . . . . . 6,487,500
100,000 UNUM Corp. . . . . . . . . . . . . . 5,900,000
--------------
28,306,250
--------------
LODGING - 3.85%
187,000 * HFS Inc. . . . . . . . . . . . . . . 11,664,125
150,000 La Quinta Inns, Inc. . . . . . . . . 4,725,000
--------------
16,389,125
--------------
MERCHANDISE - DRUG - 3.37%
225,000 * Eckerd Corp. . . . . . . . . . . . . 5,118,750
290,000 * Revco D.S., Inc. . . . . . . . . . . 6,887,500
80,000 Rite Aid Corp. . . . . . . . . . . . 2,350,000
--------------
14,356,250
--------------
MERCHANDISE - SPECIALTY - 10.48%
200,000 Circuit City Stores, Inc. . . . . . . 6,525,000
222,900 * Cole National Corp. Class A . . . . . 4,513,725
184,700 * Corporate Express, Inc. . . . . . . . 7,757,400
500,000 * General Nutrition Companies, Inc. . . 7,750,000
61,800 * Global DirectMail Corp. . . . . . . . 2,773,275
125,000 Home Depot, Inc. . . . . . . . . . . 6,390,625
125,000 * Kohl's Corp. . . . . . . . . . . . . 4,140,625
110,000 * Micro Warehouse, Inc. . . . . . . . . 4,290,000
10,400 * PetSmart, Inc. . . . . . . . . . . . 462,800
--------------
44,603,450
--------------
MERCHANDISING - MASS - 1.53%
325,000 * Price/Costco, Inc. . . . . . . . . . 6,500,000
--------------
MISCELLANEOUS - 8.95%
625,000 * ADT Ltd. . . . . . . . . . . . . . . 12,031,250
250,000 * CUC International Inc. . . . . . . . 9,250,000
275,000 Olsten Corp. . . . . . . . . . . . . 8,456,250
150,000 Service Corp. International . . . . . 8,381,250
--------------
38,118,750
--------------
</TABLE>
46
<PAGE> 148
GROWTH FUND -- CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
OIL - SERVICES - 5.24%
110,000 * BJ Services Co. . . . . . . . . . . . $ 3,712,500
105,000 Camco International, Inc. . . . . . . 3,451,875
70,000 Schlumberger Ltd . . . . . . . . . . 5,836,250
150,000 * Smith International, Inc. . . . . . . 4,725,000
75,000 * Western Atlas Inc. . . . . . . . . . 4,593,750
--------------
22,319,375
--------------
PAPER/FOREST PRODUCTS - 1.83%
125,000 Alco Standard Corp. . . . . . . . . . 7,812,500
--------------
POLLUTION CONTROL - 4.23%
85,200 * Republic Industries Inc. . . . . . . 4,430,400
40,000 * Republic Industries Inc. (Restricted) 1,996,800
110,000 * Sanifill, Inc. . . . . . . . . . . . 4,936,250
225,000 * USA Waste Services, Inc. . . . . . . 6,637,500
--------------
18,000,950
--------------
PUBLISHING/PRINTING - 1.24%
85,000 * Scholastic Corp. . . . . . . . . . . 5,291,250
--------------
RESTAURANTS - 2.78%
275,000 * Boston Chicken, Inc. . . . . . . . . 8,971,875
43,100 * Lone Star Steakhouse & Saloon, Inc. . 1,740,163
30,000 * Outback Steakhouse Inc. . . . . . . . 1,136,250
--------------
11,848,288
--------------
SECURITIES RELATED - 2.07%
150,000 Franklin Resources, Inc. . . . . . . 8,793,750
--------------
TELECOMMUNICATIONS - 5.17%
200,000 * Airtouch Communications, Inc. . . . . 6,375,000
291,900 * Paging Network, Inc. . . . . . . . . 6,567,750
40,000 * PanAmSat Corp. . . . . . . . . . . . 1,130,000
200,000 Vodafone Group plc - ADR . . . . . . 7,925,000
--------------
21,997,750
--------------
TOTAL COMMON STOCKS
(Cost $328,224,987) . . . . . . . . . 402,835,131
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 4.78%
CONSUMER FINANCE - 2.35%
$1,991,000 Beneficial Corp., 5.24% due 6/3/96 . $ 1,990,420
8,000,000 Commercial Credit Corp.,
5.16% due 6/3/96 . . . . . . . . . 7,997,707
--------------
9,988,127
--------------
FINANCE COMPANIES - 1.36%
5,804,000 Ford Motor Credit Co.,
5.27% due 6/4/96 . . . . . . . . . 5,801,450
--------------
SECURITIES RELATED - 1.07%
4,555,000 Merrill Lynch & Co., Inc.,
5.35% due 6/4/96 . . . . . . . . . 4,552,970
--------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $20,342,547) . . . . . . . . . 20,342,547
--------------
TOTAL INVESTMENTS
(Cost $348,567,534) - 99.39% . . . . 423,177,678
Other assets and liabilities,
net - 0.61% . . . . . . . . . . . 2,609,389
--------------
NET ASSETS (equivalent
to $16.49 per share on
25,825,647 shares
outstanding) - 100% . . . . . . . $ 425,787,067
--------------
</TABLE>
* Non-income producing
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
25,825,647 shares outstanding . . . . . . . . . . $ 258,256
Additional paid in capital . . . . . . . . . . . . 341,228,199
Undistributed net realized gain on securities . . . 9,436,450
Undistributed net investment income . . . . . . . . 254,018
Unrealized appreciation of securities . . . . . . . 74,610,144
--------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . $ 425,787,067
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 149
GROWTH FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,643,749
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,468,131
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,111,880
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,871,756
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,200
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,634
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,880
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,986,470
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,125,410
-------------
REALIZED AND UNREALIZED GAINON SECURITIES:
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,920,523
Net unrealized appreciation of securities during the year . . . . . . . . . . . . . . . . . . . . . . 65,916,187
-------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . . . 78,836,710
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,962,120
--------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,125,410 $ 175,040
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,920,523 273,762
Net unrealized appreciation of securities during the year . . . . . . . . . . . . . . . 65,916,187 8,820,861
----------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . . . . . 80,962,120 9,269,663
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,871,667) (175,491)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,757,835) -
----------------------------
Decrease in net assets resulting from distributions to shareholders . . . . . . . (5,629,502) (175,491)
----------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,993,562 81,516,869
Proceeds from capital stock issued for distributions reinvested . . . . . . . . . . . . 5,629,502 175,491
----------------------------
264,623,064 81,692,360
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,782,740) (57,829)
----------------------------
Increase in net assets resulting from capital stock transactions . . . . . . . . . 249,840,324 81,634,531
----------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,172,942 90,728,703
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,614,125 9,885,422
----------------------------
End of year (including undistributed net investment income of $254,018 and $275) . . . $ 425,787,067 $ 100,614,125
----------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,658,112 7,787,173
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . . . . . . 382,244 16,615
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . (1,014,547) (5,125)
----------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 17,025,809 7,798,663
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,799,838 1,001,175
----------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,825,647 8,799,838
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 150
GROWTH & INCOME FUND May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 87.69%
ADVERTISING - 1.15%
30,000 Omnicom Group, Inc. . . . . . . . . . . . . . $ 1,308,750
---------------
AEROSPACE/DEFENSE - 3.71%
6,700 Logicon, Inc. . . . . . . . . . . . . . . . . 194,300
10,600 * Loral Space & Communications Limited . . . . 169,600
17,600 McDonnell Douglas Corp. . . . . . . . . . . . 1,777,600
13,000 * SCI Systems, Inc. . . . . . . . . . . . . . . 585,000
8,000 Sundstrand Corp. . . . . . . . . . . . . . . 282,000
11,000 United Technologies Corp. . . . . . . . . . . 1,203,125
---------------
4,211,625
---------------
APPAREL & PRODUCTS - 1.35%
39,000 Ross Stores, Inc. . . . . . . . . . . . . . . 1,530,750
---------------
AUTO - ORIGINAL EQUIPMENT - 1.08%
29,600 Danaher Corp. . . . . . . . . . . . . . . . . 1,228,400
---------------
AUTO - OTHER - 0.84%
20,000 Harley-Davidson, Inc. . . . . . . . . . . . . 957,500
---------------
BANKS - OTHER - 0.80%
12,000 BankAmerica Corp. . . . . . . . . . . . . . . 903,000
---------------
BANKS - REGIONAL - 0.43%
7,000 Star Banc Corp. . . . . . . . . . . . . . . . 486,500
---------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.46%
17,500 * Robert Mondavi Corp. Class A . . . . . . . . 520,625
---------------
BEVERAGE - SOFT DRINKS - 1.70%
42,000 Coca-Cola Co. . . . . . . . . . . . . . . . . 1,932,000
---------------
BROADCASTING - 1.53%
17,000 * Evergreen Media Corp. . . . . . . . . . . . . 680,000
9,000 * Heritage Media Corp. Class A . . . . . . . . 357,750
16,464 * Viacom Inc. Class B . . . . . . . . . . . . . 697,662
---------------
1,735,412
---------------
BUILDING MATERIALS - 0.33%
6,000 Texas Industries, Inc. . . . . . . . . . . . 375,750
---------------
CHEMICAL - MAJOR - 1.58%
26,000 Goodrich (B.F.) Co. . . . . . . . . . . . . . 1,030,250
13,400 Hercules Inc. . . . . . . . . . . . . . . . . 760,450
---------------
1,790,700
---------------
CHEMICAL - MISCELLANEOUS - 2.67%
20,000 * Airgas, Inc. . . . . . . . . . . . . . . . . 417,500
22,000 Millipore Corp. . . . . . . . . . . . . . . . 965,250
20,000 Praxair, Inc. . . . . . . . . . . . . . . . . 812,500
15,000 Sigma Aldrich Corp. . . . . . . . . . . . . . 840,000
---------------
3,035,250
---------------
CONGLOMERATES - 0.76%
2,500 ITT Inds, Inc. . . . . . . . . . . . . . . . $ 68,438
5,200 Loews Corp. . . . . . . . . . . . . . . . . . 414,700
7,000 Tenneco Inc. . . . . . . . . . . . . . . . . 376,250
---------------
859,388
---------------
CONTAINERS - PAPER - 0.47%
15,000 * Sealed Air Corp. . . . . . . . . . . . . . . 532,500
---------------
DRUGS - 2.22%
27,000 * ALZA Corp. . . . . . . . . . . . . . . . . . 769,500
24,800 Pfizer Inc. . . . . . . . . . . . . . . . . . 1,754,600
---------------
2,524,100
---------------
ELECTRONIC INSTRUMENTS - 1.87%
4,200 * Dionex Corp. . . . . . . . . . . . . . . . . 154,350
9,600 * Dynatech Corp. . . . . . . . . . . . . . . . 334,800
8,700 Perkin-Elmer Corp. . . . . . . . . . . . . . 461,100
27,000 * Symbol Technologies, Inc. . . . . . . . . . . 1,167,750
---------------
2,118,000
---------------
ENTERTAINMENT - 0.41%
3,500 * GTECH Holdings Corp. . . . . . . . . . . . . 105,000
10,800 Harrah's Entertainment, Inc. . . . . . . . . 363,150
---------------
468,150
---------------
FERTILIZERS - 0.89%
18,200 IMC Global Inc. . . . . . . . . . . . . . . . 666,575
25,100 Terra Industries Inc. . . . . . . . . . . . . 338,850
---------------
1,005,425
---------------
FINANCE COMPANIES - 1.74%
15,000 Green Tree Financial Corp. . . . . . . . . . 491,250
4,700 Household International, Inc. . . . . . . . . 325,475
14,250 Money Store Inc. . . . . . . . . . . . . . . 374,062
14,000 SunAmerica, Inc. . . . . . . . . . . . . . . 784,000
---------------
1,974,787
---------------
FOOTWEAR - 0.79%
8,900 NIKE Inc. Class B . . . . . . . . . . . . . . 893,337
---------------
FREIGHT - 0.03%
1,500 Stolt Nielsen S A . . . . . . . . . . . . . . 30,188
---------------
HARDWARE & TOOLS - 0.87%
24,000 Black & Decker Corp. . . . . . . . . . . . . 987,000
---------------
HEALTHCARE - 3.50%
21,800 Cardinal Health, Inc. . . . . . . . . . . . . 1,392,475
12,000 * Healthcare COMPARE Corp. . . . . . . . . . . 580,500
22,162 * HealthSouth Corp. . . . . . . . . . . . . . . 775,670
22,000 Omnicare, Inc. . . . . . . . . . . . . . . . 1,226,500
---------------
3,975,145
---------------
HOME BUILDERS - 0.51%
30,000 Clayton Homes, Inc. . . . . . . . . . . . . . 577,500
---------------
</TABLE>
49
<PAGE> 151
GROWTH & INCOME FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
HOSPITAL SUPPLIES - 4.16%
20,000 * Advanced Technology Laboratories, Inc. . . . $ 705,000
13,100 Becton, Dickinson and Co. . . . . . . . . . . 1,113,500
17,000 Johnson & Johnson . . . . . . . . . . . . . . 1,655,375
11,856 * Nellcor Puritan Bennett Inc. . . . . . . . . 646,152
16,000 * St. Jude Medical, Inc. . . . . . . . . . . . 608,000
---------------
4,728,027
---------------
INFORMATION PROCESSING - 12.40%
15,000 * Adaptec, Inc. . . . . . . . . . . . . . . . . 898,125
29,000 * BMC Software, Inc. . . . . . . . . . . . . . 1,827,000
20,000 * Ceridian Corp. . . . . . . . . . . . . . . . 1,057,500
32,000 * Cisco Systems, Inc. . . . . . . . . . . . . . 1,752,000
17,350 Computer Associates International, Inc. . . 1,262,212
8,000 Danka Business Systems - ADR . . . . . . . . 396,000
12,000 First Data Corp. . . . . . . . . . . . . . . 957,000
20,000 * Gateway 2000, Inc. . . . . . . . . . . . . . 757,500
9,600 HBO & Co. . . . . . . . . . . . . . . . . . . 1,198,800
7,000 Hewlett-Packard Co. . . . . . . . . . . . . . 747,250
30,000 Paychex Inc. . . . . . . . . . . . . . . . . 1,320,000
22,000 Reynolds and Reynolds Co. Class A . . . . . . 1,097,250
10,000 * Sterling Software, Inc. . . . . . . . . . . . 805,000
---------------
14,075,637
---------------
INSURANCE - CASUALTY - 0.56%
38,200 * 20th Century Industries . . . . . . . . . . . 630,300
---------------
INSURANCE - MULTILINE - 2.21%
12,000 Allstate Corp. . . . . . . . . . . . . . . . 507,000
8,200 American Bankers Insurance Group, Inc. . . . 317,750
4,000 * CNA Financial Corp. . . . . . . . . . . . . . 400,000
30,900 Travelers Group, Inc. . . . . . . . . . . . . 1,282,350
---------------
2,507,100
---------------
LEISURE TIME - 1.19%
23,700 * Mirage Resorts Inc. . . . . . . . . . . . . . 1,347,937
---------------
LODGING - 0.38%
7,000 * HFS Inc. . . . . . . . . . . . . . . . . . . 436,625
---------------
MACHINERY - INDUSTRIAL/SPECIALTY - 2.24%
14,900 Dover Corp. . . . . . . . . . . . . . . . . . 707,750
24,000 IDEX Corp. . . . . . . . . . . . . . . . . . 912,000
6,600 Pall Corp. . . . . . . . . . . . . . . . . . 176,550
18,400 Parker Hannifin Corp. . . . . . . . . . . . . 749,800
---------------
2,546,100
---------------
MEDICAL TECHNOLOGY - 0.78%
5,500 * Bio-Rad Laboratories, Inc. Class A . . . . . 283,250
8,000 * Quintiles Transnational Corp. . . . . . . . . 608,000
---------------
891,250
---------------
MERCHANDISE - SPECIALTY - 2.86%
21,900 * Consolidated Stores Corp. . . . . . . . . . . $ 829,463
21,875 Dollar General Corp. . . . . . . . . . . . . 607,031
10,000 * Micro Warehouse, Inc. . . . . . . . . . . . . 390,000
60,375 * Staples, Inc. . . . . . . . . . . . . . . . . 1,207,500
8,000 * Waban Inc. . . . . . . . . . . . . . . . . . 214,000
---------------
3,247,994
---------------
MERCHANDISING - FOOD - 2.09%
14,500 * Kroger Co. . . . . . . . . . . . . . . . . . 569,125
53,600 * Safeway Inc. . . . . . . . . . . . . . . . . 1,809,000
---------------
2,378,125
---------------
METALS - MISCELLANEOUS - 0.99%
8,800 * Oregon Metallurgical Corp. . . . . . . . . . 272,800
20,000 Precision Castparts Corp. . . . . . . . . . . 855,000
---------------
1,127,800
---------------
MISCELLANEOUS - 2.29%
48,400 Equifax Inc. . . . . . . . . . . . . . . . . 1,197,900
19,000 Manpower Inc. . . . . . . . . . . . . . . . . 731,500
12,000 * Robert Half International Inc. . . . . . . . 673,500
---------------
2,602,900
---------------
MOBILE HOMES - 1.30%
30,400 Oakwood Homes Corp. . . . . . . . . . . . . . 1,474,400
---------------
NATURAL GAS - DIVERSIFIED - 0.48%
17,000 PanEnergy Corp. . . . . . . . . . . . . . . . 546,125
---------------
OIL - INTEGRATED DOMESTIC - 1.20%
13,600 Occidental Petroleum Corp. . . . . . . . . . 351,900
30,000 * Oryx Energy Co. . . . . . . . . . . . . . . . 487,500
8,000 Phillips Petroleum Co. . . . . . . . . . . . 332,000
9,000 USX-Marathon Group . . . . . . . . . . . . . 196,875
---------------
1,368,275
---------------
OIL - INTEGRATED INTERNATIONAL - 0.67%
5,190 British Petroleum Co. plc - ADR . . . . . . . 546,896
1,900 Mobil Corp. . . . . . . . . . . . . . . . . . 214,463
---------------
761,359
---------------
OIL - SERVICES - 4.58%
40,000 Baker Hughes Inc. . . . . . . . . . . . . . . 1,255,000
7,000 * BJ Services Co. . . . . . . . . . . . . . . . 236,250
18,400 Halliburton Co. . . . . . . . . . . . . . . . 1,023,500
40,000 * Rowan Companies, Inc. . . . . . . . . . . . . 605,000
24,000 * Smith International, Inc. . . . . . . . . . . 756,000
25,000 Sonat Offshore Drilling Co. . . . . . . . . . 1,325,000
---------------
5,200,750
---------------
OIL/GAS PRODUCERS - 2.39%
17,000 Helmerich & Payne, Inc. . . . . . . . . . . . 616,250
39,000 Louisiana Land & Exploration Co. . . . . . . 2,101,125
---------------
2,717,375
---------------
</TABLE>
50
<PAGE> 152
GROWTH & INCOME FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
PAPER/FOREST PRODUCTS - 0.75%
15,000 Avery Dennison Corp. . . . . . . . . . . . . $ 855,000
---------------
POLLUTION CONTROL - 0.99%
19,000 * Sanifill, Inc. . . . . . . . . . . . . . . . 852,625
5,000 * United Waste Systems, Inc. . . . . . . . . . 275,625
---------------
1,128,250
---------------
PUBLISHING - NEWS - 0.80%
18,900 New York Times Co. Class A . . . . . . . . . 621,337
4,100 Reuters Holdings Plc - ADR . . . . . . . . . 285,463
---------------
906,800
---------------
RESTAURANTS - 0.27%
10,900 Applebee's International, Inc. . . . . . . . 309,288
---------------
SECURITIES RELATED - 0.43%
10,600 American Express Co. . . . . . . . . . . . . 484,950
---------------
SEMICONDUCTORS - 0.41%
15,000 * LSI Logic Corp. . . . . . . . . . . . . . . . 466,875
---------------
TELECOMMUNICATIONS - 6.16%
16,000 * ADC Telecommunications, Inc. . . . . . . . . 736,000
20,475 * Andrew Corp. . . . . . . . . . . . . . . . . 1,110,769
18,000 * Inter-Tel, Inc. . . . . . . . . . . . . . . . 501,750
40,000 * Newbridge Networks Corp. . . . . . . . . . . 2,845,000
15,000 * Tellabs, Inc. . . . . . . . . . . . . . . . . 967,500
17,000 * WorldCom, Inc. . . . . . . . . . . . . . . . 830,875
---------------
6,991,894
---------------
TOBACCO - 1.23%
14,000 Philip Morris Cos Inc. . . . . . . . . . . . 1,391,250
---------------
UTILITIES - COMMUNICATION - 1.00%
8,300 Century Telephone Enterprises, Inc. . . . . . 269,750
16,300 Cincinnati Bell, Inc. . . . . . . . . . . . . 865,937
---------------
1,135,687
---------------
UTILITIES - ELECTRIC - 0.53%
17,000 * AES Corp. . . . . . . . . . . . . . . . . . . 471,750
4,800 Illinova Corp. . . . . . . . . . . . . . . . 126,000
---------------
597,750
---------------
UTILITIES - GAS, PIPELINE - 0.66%
15,000 Williams Companies, Inc. . . . . . . . . . . 753,750
---------------
TOTAL COMMON STOCKS
(Cost $78,147,943) . . . . . . . . . . . . . 99,571,355
---------------
PAR
VALUE
- -----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 10.49%
CONSUMER FINANCE - 5.72%
$ 2,992,000 Beneficial Corp.,
5.26% due 6/4/96 . . . . . . . . . . . . . . $ 2,990,688
3,500,000 Commercial Credit Corp.,
5.16% due 6/3/96 . . . . . . . . . . . . . . 3,498,997
---------------
6,489,685
---------------
FINANCE COMPANIES - 0.37%
423,000 Ford Motor Credit Co.,
5.30% due 6/5/96 . . . . . . . . . . . . . . . 422,751
---------------
SECURITIES RELATED - 4.40%
5,000,000 Merrill Lynch & Co., Inc.,
5.35% due 6/4/96 . . . . . . . . . . . . . . . 4,997,771
---------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $11,910,207) . . . . . . . . . . . . . . 11,910,207
---------------
TOTAL INVESTMENTS
(Cost $90,058,150) - 98.18% . . . . . . . . . . 111,481,562
Other assets and liabilities, net - 1.82% . . 2,064,717
---------------
NET ASSETS (equivalent to $14.78 per share on
7,684,624 shares outstanding) - 100% . . . . . $ 113,546,279
===============
</TABLE>
* Non-income producing
<TABLE>
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
7,684,624 shares outstanding . . . . . . . . . . . . . . . . . $ 76,846
Additional paid in capital . . . . . . . . . . . . . . . . . . . 88,838,818
Accumulated net realized gain on securities . . . . . . . . . . . 3,121,927
Undistributed net investment income . . . . . . . . . . . . . . . 85,276
Unrealized appreciation of securities . . . . . . . . . . . . . . 21,423,412
---------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING . . . . . . . . . . . $ 113,546,279
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> 153
GROWTH & INCOME FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 647,133
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,436
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,069,569
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,628
Custodian and accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,170
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,358
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,080
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594,236
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,333
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,151,221
Net unrealized appreciation on securities during the year . . . . . . . . . . . . . . . . . . . . . 17,414,828
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . 21,566,049
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,041,382
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 475,333 $ 202,114
Net realized gain (loss) on securities . . . . . . . . . . . . . . . . . . . 4,151,221 (401,877)
Net unrealized appreciation of securities during the year . . . . . . . . . . 17,414,828 4,070,674
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 22,041,382 3,870,911
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (392,678) (202,618)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . (556,363) --
---------------------------------
Decrease in net assets resulting from distributions to shareholders . . . (949,041) (202,618)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 62,680,575 29,191,427
Proceeds from capital stock issued for distributions reinvested . . . . . . . 949,041 202,618
---------------------------------
63,629,616 29,394,045
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (14,042,186) (85,788)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 49,587,430 29,308,257
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 70,679,771 32,976,550
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,866,508 9,889,958
---------------------------------
End of year (including undistributed net investment
income of $85,276 and $2,621) . . . . . . . . . . . . . . . . . . . . . . . $ 113,546,279 $ 42,866,508
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 4,772,881 2,853,051
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 73,503 19,591
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (1,028,347) (8,074)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 3,818,037 2,864,568
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,866,587 1,002,019
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,684,624 3,866,587
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 154
SCIENCE & TECHNOLOGY FUND May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.86%
AEROSPACE/DEFENSE - 1.81%
250,000 OEA, Inc. . . . . . . . . . . . . . . . . . . $ 10,250,000
---------------
DRUGS - 6.48%
275,000 * ALZA Corp. . . . . . . . . . . . . . . . . . 7,837,500
150,000 * Amgen Inc. . . . . . . . . . . . . . . . . . 8,925,000
170,000 Astra AB . . . . . . . . . . . . . . . . . . 7,679,770
125,000 * Biogen, Inc. . . . . . . . . . . . . . . . . 7,562,500
250,000 Mylan Laboratories Inc. . . . . . . . . . . . 4,750,000
---------------
36,754,770
---------------
ELECTRICAL EQUIPMENT - 1.88%
200,000 * Quantum Corp. . . . . . . . . . . . . . . . . 4,775,000
100,000 * Seagate Technology . . . . . . . . . . . . . 5,875,000
---------------
10,650,000
---------------
HEALTHCARE - 0.77%
150,000 * Apria Healthcare Group, Inc. . . . . . . . . 4,387,500
---------------
HOSPITAL SUPPLIES - 1.12%
174,900 * CardioThoracic Systems, Inc. . . . . . . . . 3,804,075
75,000 United States Surgical Corp. . . . . . . . . 2,568,750
---------------
6,372,825
---------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 22.63%
350,000 Adobe Systems Inc. . . . . . . . . . . . . . 12,993,750
250,000 * BMC Software, Inc. . . . . . . . . . . . . . 15,750,000
180,000 * C ATS Software Inc. . . . . . . . . . . . . . 1,192,500
100,000 * Cadence Design Systems, Inc. . . . . . . . . 5,675,000
143,000 * Cerner Corp. . . . . . . . . . . . . . . . . 3,575,000
200,000 * Epic Design Technology, Inc. . . . . . . . . 5,900,000
250,000 * Informix Corp. . . . . . . . . . . . . . . . 5,687,500
225,000 Intel Corp. . . . . . . . . . . . . . . . . . 16,987,500
30,000 * Medic Computer Systems, Inc. . . . . . . . . 2,790,000
85,000 * Microsoft Corp. . . . . . . . . . . . . . . . 10,093,750
300,000 * Oracle Corp. . . . . . . . . . . . . . . . . 9,937,500
80,000 * Peoplesoft Inc. . . . . . . . . . . . . . . . 5,660,000
500,000 * PLATINUM technology, Inc. . . . . . . . . . . 9,093,750
267,400 * Sybase Inc. . . . . . . . . . . . . . . . . . 6,183,625
250,000 * Synopsys Inc. . . . . . . . . . . . . . . . . 11,187,500
50,000 * Verity Inc. . . . . . . . . . . . . . . . . . 1,962,500
65,000 * Visio Corp. . . . . . . . . . . . . . . . . . 2,656,875
71,200 * Xcellenet Inc. . . . . . . . . . . . . . . . 1,014,600
---------------
128,341,350
---------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 4.44%
100,000 Hewlett-Packard Co. . . . . . . . . . . . . . 10,675,000
300,000 * Silicon Graphics, Inc. . . . . . . . . . . . 8,250,000
100,000 * Sun Microsystems, Inc. . . . . . . . . . . . 6,262,500
---------------
25,187,500
---------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 8.65%
90,000 * America Online, Inc. . . . . . . . . . . . . 5,085,000
143,300 Automatic Data Processing, Inc. . . . . . . . 5,499,138
180,000 First Data Corp. . . . . . . . . . . . . . . 14,355,000
120,000 National Data Corp. . . . . . . . . . . . . . 4,530,000
234,400 * Premenos Technology Corp. . . . . . . . . . . 4,688,000
60,000 * Security Dynamics Technologies, Inc. . . . . 5,325,000
7,000 SS & C Technologies, Inc. . . . . . . . . . . 138,250
250,000 * SunGard Data Systems, Inc. . . . . . . . . . 9,437,500
---------------
49,057,888
---------------
INFORMATION PROCESSING -
CONSUMER SOFTWARE - 5.89%
180,000 * Broderbund Software Inc. . . . . . . . . . . 7,582,500
200,000 * Electronic Arts . . . . . . . . . . . . . . . 6,325,000
375,000 * Expert Software Inc. . . . . . . . . . . . . 5,062,500
150,000 * Intuit . . . . . . . . . . . . . . . . . . . 7,800,000
100,000 * Macromedia, Inc. . . . . . . . . . . . . . . 4,262,500
100,000 * Maxis, Inc. . . . . . . . . . . . . . . . . . 2,350,000
---------------
33,382,500
---------------
INFORMATION PROCESSING -
NETWORKING - 12.22%
120,000 * Ascend Communications Inc. . . . . . . . . . 8,025,000
500,000 * Bay Networks, Inc. . . . . . . . . . . . . . 14,500,000
95,000 * Cascade Communications Corp. . . . . . . . . 5,355,625
200,000 * Cisco Systems, Inc. . . . . . . . . . . . . . 10,950,000
125,000 * FORE Systems, Inc. . . . . . . . . . . . . . 10,125,000
75,000 * Shiva Corp. . . . . . . . . . . . . . . . . . 5,606,250
300,000 * 3Com Corp. . . . . . . . . . . . . . . . . . 14,775,000
---------------
69,336,875
---------------
SECURITIES RELATED - 0.35%
125,000 * Investment Technology Group Inc. . . . . . . 2,000,000
---------------
SEMICONDUCTORS - 12.25%
200,000 * Actel Corp. . . . . . . . . . . . . . . . . . 3,925,000
200,000 * Altera Corp. . . . . . . . . . . . . . . . . 9,675,000
492,700 * Analog Devices, Inc. . . . . . . . . . . . . 13,610,837
150,000 Linear Technology Corp. . . . . . . . . . . . 5,175,000
500,000 * Maxim Integrated Products, Inc. . . . . . . . 17,000,000
250,000 * Micro Linear Corp. . . . . . . . . . . . . . 2,718,750
500,000 * Xilinx, Inc. . . . . . . . . . . . . . . . . 17,375,000
---------------
69,479,587
---------------
TELECOMMUNICATIONS - 13.37%
325,000 * Airtouch Communications, Inc. . . . . . . . . 10,359,375
350,000 * Centennial Cellular Corp. Class A . . . . . . 5,950,000
100,000 * EchoStar Communications Corp. . . . . . . . 3,450,000
250,000 * Intercel, Inc. . . . . . . . . . . . . . . . 6,062,500
52,000 * Millicom International Cellular S.A. . . . . 2,502,500
350,000 * Mobile Telecommunications Technologies Corp. 5,075,000
130,000 Nokia Corp - ADR . . . . . . . . . . . . . . 5,655,000
154,000 * Omnipoint Corp. . . . . . . . . . . . . . . . 4,735,500
200,000 * PanAmSat Corp. . . . . . . . . . . . . . . . 5,650,000
450,000 Vodafone Group plc - ADR . . . . . . . . . . 17,831,250
175,000 * WorldCom, Inc. . . . . . . . . . . . . . . . 8,553,125
---------------
75,824,250
---------------
</TABLE>
53
<PAGE> 155
SCIENCE & TECHNOLOGY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL COMMON STOCKS
(Cost $427,422,796) . . . . . . . . . . . . . $ 521,025,045
---------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 7.34%
FINANCE COMPANIES - 3.52%
$ 19,988,000 Ford Motor Credit Co.,
5.27% due 6/4/96 . . . . . . . . . . . . . . 19,979,222
---------------
SECURITIES RELATED - 3.82%
21,646,000 Merrill Lynch & Co., Inc.,
5.35% due 6/3/96 . . . . . . . . . . . . . . 21,639,566
---------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $41,618,788) . . . . . . . . . . . . . 41,618,788
---------------
TOTAL INVESTMENTS
(Cost $469,041,584) - 99.20% . . . . . . . . 562,643,833
Other assets and liabilities, net - 0.80% . 4,542,778
---------------
NET ASSETS (equivalent to $20.48 per share on
27,695,873 shares outstanding) - 100% . . . $ 567,186,611
===============
</TABLE>
* Non-income producing
<TABLE>
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
27,695,873 shares outstanding . . . . . . . . . . . . . . . . $ 276,959
Additional paid in capital . . . . . . . . . . . . . . . . . . . 444,572,797
Undistributed net realized gain on securities . . . . . . . . . . 28,733,458
Unrealized appreciation of securities and
foreign currency translation . . . . . . . . . . . . . . . . 93,603,397
---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 567,186,611
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE> 156
SCIENCE & TECHNOLOGY FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $47,234) . . . . . . . . . . . . . . . . . . . . . . . . $ 510,485
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,644,199
------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,154,684
------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,228,500
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,370
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,861
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,044
------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,404,775
------------
NET INVESTMENT LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (250,091)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,410,161
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . (30,175) 59,379,986
--------------
Net unrealized appreciation of securities during the year . . . . . . . . . . . . . . . . . . . . . . . 79,262,122
------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . . . . . 138,642,108
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . $138,392,017
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (250,091) $ 231,664
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . 59,379,986 9,293,121
Net unrealized appreciation of securities during the year . . . . . . . . . . 79,262,122 14,512,577
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 138,392,017 24,037,362
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,219) (194,344)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . (39,016,725) (680,121)
---------------------------------
Decrease in net assets resulting from distributions to shareholders . . . (39,046,944) (874,465)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 310,357,765 138,322,673
Proceeds from capital stock issued for distributions reinvested . . . . . . . 39,046,944 874,465
---------------------------------
349,404,709 139,197,138
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (48,246,211) (5,510,922)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 301,158,498 133,686,216
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 400,503,571 156,849,113
---------------------------------
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,683,040 9,833,927
---------------------------------
End of year (including undistributed net investment income of $0 and $30,219) $ 567,186,611 $ 166,683,040
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 16,506,873 10,904,305
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 2,210,100 69,381
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (2,571,296) (424,004)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 16,145,677 10,549,682
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,550,196 1,000,514
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,695,873 11,550,196
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE> 157
SOCIAL AWARENESS FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.62%
ADVERTISING - 0.03%
532 Interpublic Group of Companies, Inc. . . . . $ 24,672
---------------
AIRLINES - 0.46%
2,770 * AMR Corp. . . . . . . . . . . . . . . . . . . 261,419
576 Delta Air Lines, Inc. . . . . . . . . . . . . 47,736
2,208 Southwest Airlines Co. . . . . . . . . . . . 60,444
---------------
369,599
---------------
APPLIANCES/FURNISHINGS - 0.22%
3,171 Whirlpool Corp. . . . . . . . . . . . . . . . 180,351
---------------
AUTO - CARS - 1.06%
12,901 Chrysler Corp. . . . . . . . . . . . . . . . 859,529
---------------
AUTO - REPLACEMENT PARTS - 0.97%
3,887 Echlin Inc. . . . . . . . . . . . . . . . . . 133,616
6,256 Genuine Parts Co. . . . . . . . . . . . . . . 284,648
7,178 Goodyear Tire & Rubber Co. . . . . . . . . . 362,489
---------------
780,753
---------------
BANKS - NEW YORK CITY - 3.08%
5,079 Bank of New York Co., Inc. . . . . . . . . . 263,473
12,406 Chase Manhattan Corp. . . . . . . . . . . . . 868,420
10,577 CitiCorp. . . . . . . . . . . . . . . . . . . 888,468
5,395 J.P. Morgan & Co. Inc. . . . . . . . . . . . 468,691
---------------
2,489,052
---------------
BANKS - OTHER - 3.09%
1,769 Bank of Boston Corp. . . . . . . . . . . . . 88,229
11,217 BankAmerica Corp. . . . . . . . . . . . . . . 844,079
8,195 First Chicago Corp. . . . . . . . . . . . . . 357,507
7,215 First Union Corp. . . . . . . . . . . . . . . 441,017
3,878 Fleet Financial Group, Inc. . . . . . . . . . 171,117
1,906 Mellon Bank Corp. . . . . . . . . . . . . . . 108,880
2,013 Wells Fargo & Co. . . . . . . . . . . . . . . 485,133
---------------
2,495,962
---------------
BANKS - REGIONAL - 2.99%
14,198 Banc One Corp. . . . . . . . . . . . . . . . 525,326
7,284 CoreStates Financial Corp. . . . . . . . . . 286,808
5,092 KeyCorp. . . . . . . . . . . . . . . . . . . 197,315
8,628 NationsBank Corp. . . . . . . . . . . . . . . 699,946
7,128 Norwest Corp. . . . . . . . . . . . . . . . . 248,589
11,155 PNC Bank Corp. . . . . . . . . . . . . . . . 338,833
2,895 Wachovia Corp. . . . . . . . . . . . . . . . 124,123
---------------
2,420,940
---------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.89%
6,335 Anheuser-Busch Companies, Inc. . . . . . . . 451,368
7,806 Seagram Co. Ltd . . . . . . . . . . . . . . . 270,283
---------------
721,651
---------------
BEVERAGE - SOFT DRINKS - 4.42%
52,324 Coca-Cola Co. . . . . . . . . . . . . . . . . $ 2,406,904
35,088 PepsiCo, Inc. . . . . . . . . . . . . . . . . 1,166,676
---------------
3,573,580
---------------
BROADCASTING - 0.91%
11,706 Tele-Communications, Inc. Class A . . . . . . 220,951
11,235 * U S West Media Group . . . . . . . . . . . . 212,061
7,222 * Viacom Inc. Class B . . . . . . . . . . . . . 306,032
---------------
739,044
---------------
BUILDING MATERIALS - 0.27%
574 Armstrong World Industries, Inc. . . . . . . 33,794
2,366 Lowe's Companies, Inc. . . . . . . . . . . . 81,035
3,291 Masco Corp. . . . . . . . . . . . . . . . . . 102,844
---------------
217,673
---------------
CHEMICAL - MAJOR - 1.49%
3,486 Goodrich (B.F.) Co. . . . . . . . . . . . . . 138,133
6,362 Morton International, Inc. . . . . . . . . . 241,756
8,655 PPG Industries Inc. . . . . . . . . . . . . . 447,896
3,550 Rohm and Haas Co. . . . . . . . . . . . . . . 240,512
1,783 W.R. Grace & Co. . . . . . . . . . . . . . . 132,834
---------------
1,201,131
---------------
CHEMICAL - MISCELLANEOUS - 1.36%
4,725 Air Products and Chemicals, Inc. . . . . . . 281,137
8,517 Ethyl Corp. . . . . . . . . . . . . . . . . . 88,364
3,212 Great Lakes Chemical Corp. . . . . . . . . . 207,174
2,640 Lubrizol Corp. . . . . . . . . . . . . . . . 80,190
2,460 Lyondell Petrochemical Co. . . . . . . . . . 63,653
3,454 Nalco Chemical Co. . . . . . . . . . . . . . 109,664
4,534 Praxair, Inc. . . . . . . . . . . . . . . . . 184,194
1,575 Sigma Aldrich Corp. . . . . . . . . . . . . . 88,200
---------------
1,102,576
---------------
CONGLOMERATES - 0.19%
383 Dial Corp. . . . . . . . . . . . . . . . . . 11,011
1,133 * ITT Corp. . . . . . . . . . . . . . . . . . . 69,680
638 Ogden Corp. . . . . . . . . . . . . . . . . . 12,361
1,510 Tyco International Ltd . . . . . . . . . . . 59,645
---------------
152,697
---------------
CONSUMER FINANCE - 0.07%
1,947 MBNA Corp. . . . . . . . . . . . . . . . . . 59,627
---------------
CONTAINERS - METAL/GLASS - 0.28%
4,847 Crown Cork & Seal Co., Inc. . . . . . . . . . 226,597
---------------
CONTAINERS - PAPER - 0.06%
1,057 Temple-Inland Inc. . . . . . . . . . . . . . 52,057
---------------
COSMETICS/TOILETRIES - 1.15%
1,524 Avon Products, Inc. . . . . . . . . . . . . . 140,970
11,064 Gillette Co. . . . . . . . . . . . . . . . . 654,159
2,821 International Flavors & Fragrances, Inc. . . 137,171
---------------
932,300
---------------
</TABLE>
56
<PAGE> 158
SOCIAL AWARENESS FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
DRUGS - 6.96%
15,512 American Home Products Corp. . . . . . . . . $ 829,892
2,801 * Amgen Inc. . . . . . . . . . . . . . . . . . 166,659
15,274 Bristol Myers Squibb Co. . . . . . . . . . . 1,304,018
26,147 Merck & Co., Inc. . . . . . . . . . . . . . . 1,689,750
12,601 Pfizer Inc. . . . . . . . . . . . . . . . . . 891,521
7,863 Schering-Plough Corp. . . . . . . . . . . . . 460,968
5,152 Warner-Lambert Co. . . . . . . . . . . . . . 288,512
---------------
5,631,320
---------------
ELECTRICAL EQUIPMENT - 1.92%
13,402 AMP Inc. . . . . . . . . . . . . . . . . . . 564,559
9,494 Emerson Electric Co. . . . . . . . . . . . . 812,924
3,045 Molex Inc. . . . . . . . . . . . . . . . . . 97,059
719 * Seagate Technology . . . . . . . . . . . . . 42,241
885 Thomas & Betts Corp. . . . . . . . . . . . . 34,073
---------------
1,550,856
---------------
ELECTRONIC INSTRUMENTS - 0.02%
1,079 Sensormatic Electronics Corp. . . . . . . . . 19,287
---------------
ENTERTAINMENT - 1.96%
881 Hasbro, Inc. . . . . . . . . . . . . . . . . 33,258
6,506 Mattel, Inc. . . . . . . . . . . . . . . . . 177,288
8,968 Time Warner Inc. . . . . . . . . . . . . . . 362,083
16,736 Walt Disney Co. . . . . . . . . . . . . . . . 1,016,712
---------------
1,589,341
---------------
FINANCE COMPANIES - 0.16%
1,918 Household International, Inc. . . . . . . . . 132,822
---------------
FOODS - 2.85%
9,129 Archer Daniels Midland Co. . . . . . . . . . 178,016
4,991 Campbell Soup Co. . . . . . . . . . . . . . . 321,920
6,171 ConAgra, Inc. . . . . . . . . . . . . . . . . 263,039
3,611 CPC International Inc. . . . . . . . . . . . 249,611
2,214 General Mills, Inc. . . . . . . . . . . . . . 127,028
10,769 H J Heinz Co. . . . . . . . . . . . . . . . . 358,069
5,519 Kellogg Co. . . . . . . . . . . . . . . . . . 401,507
5,085 Ralston Purina Co. . . . . . . . . . . . . . 311,456
1,729 Wm. Wrigley Jr. Co. . . . . . . . . . . . . . 90,556
---------------
2,301,202
---------------
FOOTWEAR - 0.31%
2,291 NIKE Inc. Class B . . . . . . . . . . . . . . 229,959
804 * Payless ShoeSource Inc. . . . . . . . . . . . 22,613
---------------
252,572
---------------
GOLD MINING - 0.69%
12,314 Barrick Gold Corp. . . . . . . . . . . . . . 387,891
5,844 Placer Dome Inc. . . . . . . . . . . . . . . 173,128
---------------
561,019
---------------
GOVERNMENT SPONSORED - 1.38%
2,825 Federal Home Loan Mortgage Corp. . . . . . . 233,416
28,499 Federal National Mortgage Association . . . 879,906
---------------
1,113,322
---------------
HARDWARE & TOOLS - 0.08%
1,595 Black & Decker Corp. . . . . . . . . . . . . $ 65,594
---------------
HEALTHCARE - 0.29%
1,744 U.S. Healthcare, Inc. . . . . . . . . . . . . 94,612
2,550 United HealthCare Corp. . . . . . . . . . . . 139,931
---------------
234,543
---------------
HEAVY DUTY TRUCKS/PARTS - 0.41%
6,110 Dana Corp. . . . . . . . . . . . . . . . . . 204,685
2,553 PACCAR Inc. . . . . . . . . . . . . . . . . . 125,735
---------------
330,420
---------------
HOME BUILDERS - 0.01%
556 Kaufman & Broad Home Corp. . . . . . . . . . 8,271
---------------
HOSPITAL MANAGEMENT - 0.60%
7,952 Columbia/HCA Healthcare Corp. . . . . . . . . 428,414
2,807 * Tenet Healthcare Corp. . . . . . . . . . . . 60,350
---------------
488,764
---------------
HOSPITAL SUPPLIES - 3.87%
19,740 Abbott Laboratories . . . . . . . . . . . . . 851,287
9,012 Baxter International Inc. . . . . . . . . . . 398,781
587 Becton, Dickinson and Co. . . . . . . . . . . 49,895
308 * Boston Scientific Corp. . . . . . . . . . . . 13,206
15,802 Johnson & Johnson . . . . . . . . . . . . . . 1,538,720
4,961 Medtronic, Inc. . . . . . . . . . . . . . . . 279,056
---------------
3,130,945
---------------
HOUSEHOLD PRODUCTS - 1.84%
188 Clorox Co. . . . . . . . . . . . . . . . . . 16,004
6,174 Colgate-Palmolive Co. . . . . . . . . . . . . 486,203
2,275 Premark International Inc. . . . . . . . . . 36,684
642 Rubbermaid, Inc. . . . . . . . . . . . . . . 17,976
2,275 * Tupperware Corp. . . . . . . . . . . . . . . 104,081
6,125 Unilever N V-ADR . . . . . . . . . . . . . . 826,109
---------------
1,487,057
---------------
INFORMATION PROCESSING - 10.42%
1,862 Apple Computer, Inc. . . . . . . . . . . . . 48,645
6,544 Automatic Data Processing, Inc. . . . . . . . 251,126
353 * Bay Networks, Inc. . . . . . . . . . . . . . 10,237
9,571 * Cisco Systems, Inc. . . . . . . . . . . . . . 524,012
3,676 * Compaq Computer Corp. . . . . . . . . . . . . 178,746
4,338 Computer Associates International, Inc. . . . 315,589
3,246 * Digital Equipment Corp. . . . . . . . . . . . 169,198
3,979 * EMC Corp. . . . . . . . . . . . . . . . . . . 88,035
2,399 First Data Corp. . . . . . . . . . . . . . . 191,320
10,965 Hewlett-Packard Co. . . . . . . . . . . . . . 1,170,514
16,403 Intel Corp. . . . . . . . . . . . . . . . . . 1,238,426
14,779 International Business Machines Corp. . . . 1,577,658
10,828 * Microsoft Corp. . . . . . . . . . . . . . . . 1,285,825
314 * Novell, Inc. . . . . . . . . . . . . . . . . 4,475
9,145 * Oracle Corp. . . . . . . . . . . . . . . . . 302,928
7,819 Pitney Bowes Inc. . . . . . . . . . . . . . . 388,018
501 * Silicon Graphics, Inc. . . . . . . . . . . . 13,778
</TABLE>
57
<PAGE> 159
SOCIAL AWARENESS FUND - CONTINUED MAY 31, 1996 STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION PROCESSING - Continued
263 * Solectron Corp. . . . . . . . . . . . . . . . $ 11,408
2,086 * Sun Microsystems, Inc. . . . . . . . . . . . 130,636
145 * 3Com Corp. . . . . . . . . . . . . . . . . . 7,141
3,299 Xerox Corp. . . . . . . . . . . . . . . . . . 519,180
---------------
8,426,895
---------------
INSURANCE - CASUALTY - 0.11%
1,262 Chubb Corp. . . . . . . . . . . . . . . . . . 58,841
813 Safeco Corp. . . . . . . . . . . . . . . . . 27,388
---------------
86,229
---------------
INSURANCE - LIFE - 0.59%
3,955 Lincoln National Corp. . . . . . . . . . . . 185,885
3,618 Transamerica Corp. . . . . . . . . . . . . . 293,058
---------------
478,943
---------------
INSURANCE - MULTILINE - 3.09%
4,142 Aetna Life and Casualty Co. . . . . . . . . . 305,473
8,392 Allstate Corp. . . . . . . . . . . . . . . . 354,562
11,382 American International Group, Inc. . . . . . 1,072,753
1,722 CIGNA Corp. . . . . . . . . . . . . . . . . . 197,815
636 ITT Hartford Group, Inc. . . . . . . . . . . 32,913
12,957 Travelers Group, Inc. . . . . . . . . . . . . 537,715
---------------
2,501,231
---------------
LEISURE TIME - 0.08%
2,725 Brunswick Corp. . . . . . . . . . . . . . . . 60,972
---------------
MACHINERY - AGRICULTURE - 0.60%
1,830 Case Corp. . . . . . . . . . . . . . . . . . 91,729
9,422 Deere & Co. . . . . . . . . . . . . . . . . . 392,190
---------------
483,919
---------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.68%
8,413 Caterpillar Inc. . . . . . . . . . . . . . . 552,103
---------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.48%
7,406 Cooper Industries, Inc. . . . . . . . . . . . 315,681
396 Dover Corp. . . . . . . . . . . . . . . . . . 18,810
2,548 Illinois Tool Works Inc. . . . . . . . . . . 170,716
6,361 Ingersoll-Rand Co. . . . . . . . . . . . . . 267,957
3,162 Johnson Controls, Inc. . . . . . . . . . . . 220,549
4,066 Pall Corp. . . . . . . . . . . . . . . . . . 108,766
2,405 Timken Co. . . . . . . . . . . . . . . . . . 94,697
---------------
1,197,176
---------------
MERCHANDISE - DRUG - 0.23%
5,886 Walgreen Co. . . . . . . . . . . . . . . . . 187,616
---------------
MERCHANDISE - SPECIALTY - 0.76%
1,586 Gap, Inc. . . . . . . . . . . . . . . . . . . 53,329
8,812 Home Depot, Inc. . . . . . . . . . . . . . . 450,514
2,024 Limited, Inc. . . . . . . . . . . . . . . . . 41,998
2,261 * Toys "R" Us, Inc. . . . . . . . . . . . . . . 65,569
---------------
611,410
---------------
MERCHANDISING - DEPARTMENT - 0.33%
266 Dayton Hudson Corp. . . . . . . . . . . . . . $ 27,132
5,029 May Department Stores Co. . . . . . . . . . . 238,249
---------------
265,381
---------------
MERCHANDISING - FOOD - 0.40%
3,538 Albertsons, Inc. . . . . . . . . . . . . . . 141,078
3,009 American Stores Co. . . . . . . . . . . . . . 112,461
1,274 SYSCO Corp. . . . . . . . . . . . . . . . . . 43,475
662 Winn-Dixie Stores, Inc. . . . . . . . . . . . 22,839
---------------
319,853
---------------
MERCHANDISING - MASS - 2.80%
9,123 J.C. Penney Co., Inc. . . . . . . . . . . . . 473,256
2,696 KMart Corp. . . . . . . . . . . . . . . . . . 31,341
10,339 Sears Roebuck and Co. . . . . . . . . . . . . 525,996
47,654 Wal-Mart Stores, Inc. . . . . . . . . . . . . 1,233,047
---------------
2,263,640
---------------
METALS - ALUMINUM - 0.89%
11,039 Alcan Aluminium Ltd . . . . . . . . . . . . . 361,527
5,826 Aluminum Co. of America . . . . . . . . . . . 359,027
---------------
720,554
---------------
METALS - COPPER - 0.02%
206 Newmont Mining Corp. . . . . . . . . . . . . 12,412
---------------
METALS - MISCELLANEOUS - 0.37%
2,317 Cyprus Amax Minerals Co. . . . . . . . . . . 55,608
5,370 Freeport-McMoRan Copper & Gold Inc. Class B 178,552
1,958 Inco Limited . . . . . . . . . . . . . . . . 63,880
---------------
298,040
---------------
METALS - STEEL - 0.17%
487 Nucor Corp. . . . . . . . . . . . . . . . . . 26,785
3,460 USX-US Steel Group, Inc. . . . . . . . . . . 107,260
---------------
134,045
---------------
MISCELLANEOUS - 0.20%
4,318 Corning Inc. . . . . . . . . . . . . . . . . 165,164
---------------
NATURAL GAS - DIVERSIFIED - 0.22%
5,580 PanEnergy Corp. . . . . . . . . . . . . . . . 179,258
---------------
OIL - INTEGRATED DOMESTIC - 2.37%
5,005 Amerada Hess Corp. . . . . . . . . . . . . . 285,285
3,013 Ashland Oil, Inc. . . . . . . . . . . . . . . 128,806
5,874 Burlington Resources Inc. . . . . . . . . . . 223,212
1,478 MAPCO Inc. . . . . . . . . . . . . . . . . . 85,355
4,653 * Oryx Energy Co. . . . . . . . . . . . . . . . 75,611
488 Pennzoil Co. . . . . . . . . . . . . . . . . 21,106
14,403 Phillips Petroleum Co. . . . . . . . . . . . 597,724
5,629 Sun Co., Inc. . . . . . . . . . . . . . . . . 172,388
14,989 USX-Marathon Group . . . . . . . . . . . . . 327,884
---------------
1,917,371
---------------
</TABLE>
58
<PAGE> 160
SOCIAL AWARENESS FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
OIL - INTEGRATED
INTERNATIONAL - 2.23%
2,390 Murphy Oil Corp. . . . . . . . . . . . . . . $ 105,459
20,301 Texaco Inc. . . . . . . . . . . . . . . . . . 1,700,208
---------------
1,805,667
---------------
OIL - SERVICES - 1.47%
1,348 Baker Hughes Inc. . . . . . . . . . . . . . . 42,294
6,973 Dresser Industries, Inc. . . . . . . . . . . 203,960
3,231 Halliburton Co. . . . . . . . . . . . . . . . 179,724
1,934 McDermott International, Inc. . . . . . . . . 42,065
8,667 Schlumberger Ltd . . . . . . . . . . . . . . 722,611
---------------
1,190,654
---------------
PAPER/FOREST PRODUCTS - 1.46%
1,684 Alco Standard Corp. . . . . . . . . . . . . . 105,250
501 Avery Dennison Corp. . . . . . . . . . . . . 28,557
1,701 James River Corp. of Virginia . . . . . . . . 42,312
11,337 Kimberly-Clark Corp. . . . . . . . . . . . . 826,184
1,286 Louisiana Pacific Corp. . . . . . . . . . . . 31,668
1,225 Mead Corp. . . . . . . . . . . . . . . . . . 65,844
1,201 Potlatch Corp. . . . . . . . . . . . . . . . 49,541
535 Willamette Industries, Inc. . . . . . . . . . 32,100
---------------
1,181,456
---------------
PHOTOGRAPHY - 0.03%
597 Polaroid Corp. . . . . . . . . . . . . . . . 26,865
---------------
POLLUTION CONTROL - 1.08%
8,463 Browning-Ferris Industries, Inc. . . . . . . 258,122
14,089 Laidlaw Inc Class B . . . . . . . . . . . . . 142,651
13,416 WMX Technologies, Inc. . . . . . . . . . . . 472,914
---------------
873,687
---------------
PUBLISHING - NEWS - 0.42%
2,158 Dow Jones & Co., Inc. . . . . . . . . . . . . 84,432
3,698 Gannett Co., Inc. . . . . . . . . . . . . . . 257,935
---------------
342,367
---------------
PUBLISHING/PRINTING - 0.97%
9,906 Dun & Bradstreet Corp. . . . . . . . . . . . 632,746
116 Harcourt General, Inc. . . . . . . . . . . . 5,887
7,672 Moore Corp. Ltd . . . . . . . . . . . . . . . 142,891
---------------
781,524
---------------
RAILROAD - 1.84%
2,495 Burlington Northern Inc. . . . . . . . . . . 211,451
2,444 Conrail Inc. . . . . . . . . . . . . . . . . 171,691
3,214 CSX Corp. . . . . . . . . . . . . . . . . . . 159,093
4,182 Norfolk Southern Corp. . . . . . . . . . . . 360,698
8,312 Union Pacific Corp. . . . . . . . . . . . . . 582,879
---------------
1,485,812
---------------
RESTAURANTS - 0.99%
16,652 McDonald's Corp. . . . . . . . . . . . . . . 801,377
---------------
SAVINGS & LOAN - 0.06%
1,639 Great Western Financial Corp. . . . . . . . . $ 37,697
482 H.F. Ahmanson & Co. . . . . . . . . . . . . . 12,412
---------------
50,109
---------------
SECURITIES RELATED - 1.99%
12,859 American Express Co. . . . . . . . . . . . . 588,299
813 Bear Stearns Co. Inc. . . . . . . . . . . . . 19,607
3,117 Dean Witter, Discover & Co. . . . . . . . . . 184,682
5,967 Merrill Lynch & Co., Inc. . . . . . . . . . . 386,363
5,390 Morgan Stanley Group Inc. . . . . . . . . . . 266,805
3,818 Salomon Inc. . . . . . . . . . . . . . . . . 159,879
---------------
1,605,635
---------------
SEMICONDUCTORS - 0.34%
2,048 * Advanced Micro Devices, Inc. . . . . . . . . 36,096
2,497 * Applied Materials, Inc. . . . . . . . . . . . 93,013
834 * LSI Logic Corp. . . . . . . . . . . . . . . . 25,958
3,113 Micron Technology, Inc. . . . . . . . . . . . 100,395
1,028 * National Semiconductor Corp. . . . . . . . . 16,705
---------------
272,167
---------------
TELECOMMUNICATIONS - 0.67%
2,479 ALLTEL Corp. . . . . . . . . . . . . . . . . 78,088
252 * DSC Communications Corp. . . . . . . . . . . 7,592
8,197 Northern Telecommunications Corp. . . . . . . 444,687
209 Tellabs, Inc. . . . . . . . . . . . . . . . . 13,481
---------------
543,848
---------------
TRUCKERS - 0.05%
1,150 Caliber System, Inc. . . . . . . . . . . . . 42,694
---------------
UTILITIES - COMMUNICATION - 9.42%
12,485 Ameritech Corp. . . . . . . . . . . . . . . . 705,402
37,225 AT & T Corp. . . . . . . . . . . . . . . . . 2,321,909
11,596 Bell Atlantic Corp. . . . . . . . . . . . . . 723,300
20,950 BellSouth Corp. . . . . . . . . . . . . . . . 851,094
10,627 MCI Communications Corp. . . . . . . . . . . 309,511
16,437 NYNEX Corp. . . . . . . . . . . . . . . . . . 758,157
12,399 Pacific Telesis Group . . . . . . . . . . . . 413,817
15,329 SBC Communications, Inc. . . . . . . . . . . 756,869
4,788 Sprint Corp. . . . . . . . . . . . . . . . . 202,892
17,750 US West Communications Group . . . . . . . . 579,094
---------------
7,622,045
---------------
UTILITIES - ELECTRIC - 1.99%
5,389 Allegheny Power System, Inc. . . . . . . . . 158,302
11,950 Cinergy Corp. . . . . . . . . . . . . . . . . 354,019
290 Montana Power Co. . . . . . . . . . . . . . . 6,307
639 NIPSCO Industries, Inc. . . . . . . . . . . . 23,803
1,099 Oklahoma Gas and Electric Co. . . . . . . . . 41,899
20,855 PacifiCorp . . . . . . . . . . . . . . . . . 419,707
9,108 Potomac Electric Power Co. . . . . . . . . . 232,254
4,372 Public Service Co. of Colorado . . . . . . . 144,822
4,892 Puget Sound Power & Light Co. . . . . . . . . 114,962
873 TECO Energy, Inc. . . . . . . . . . . . . . . 20,625
3,358 Utilicorp United Inc. . . . . . . . . . . . . 91,925
---------------
1,608,625
---------------
</TABLE>
59
<PAGE> 161
SOCIAL AWARENESS FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES - GAS, DISTRIBUTION - 0.24%
3,639 Brooklyn Union Gas Co. . . . . . . . . . . . $ 97,343
2,471 National Fuel Gas Co. . . . . . . . . . . . . 84,941
206 Tosco Corp. . . . . . . . . . . . . . . . . . 10,197
---------------
192,481
---------------
UTILITIES - GAS, PIPELINE - 1.22%
5,134 Consolidated Natural Gas Co. . . . . . . . . 248,357
8,239 Enron Corp. . . . . . . . . . . . . . . . . . 329,560
6,509 Pacific Enterprises . . . . . . . . . . . . . 171,675
1,520 Peoples Energy Corp. . . . . . . . . . . . . 48,830
3,755 Williams Companies, Inc. . . . . . . . . . . 188,689
---------------
987,111
---------------
TOTAL COMMON STOCKS
(Cost $67,643,539) . . . . . . . . . . . . . 79,773,462
---------------
PAR
VALUE
- --------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.13%
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.13%
$ 914,000 Cooper Industries, Inc.,
5.40% due 6/3/96 . . . . . . . . . . . . . 913,726
---------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $913,726) . . . . . . . . . . . . . . . 913,726
---------------
TOTAL INVESTMENTS
(Cost $68,557,265) - 99.75% . . . . . . . . . $ 80,687,188
Other assets and liabilities, net - 0.25% . 200,252
---------------
NET ASSETS (equivalent to $15.49 per share on
5,220,445 shares outstanding) - 100% . . . . $ 80,887,440
---------------
</TABLE>
* Non-income producing
<TABLE>
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
5,220,445 shares outstanding . . . . . . . . . . . . . . . . . $ 52,204
Additional paid in capital . . . . . . . . . . . . . . . . . . . 62,521,902
Undistributed net realized gain on securities . . . . . . . . . . 6,132,739
Undistributed net investment income . . . . . . . . . . . . . . . 50,672
Unrealized appreciation of investments . . . . . . . . . . . . . 12,129,923
---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,887,440
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE> 162
SOCIAL AWARENESS FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,542,542
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,429
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,584,971
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,783
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,479
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,019
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,512
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,320
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,748
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,861
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,207,110
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,243,435
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,405 9,289,840
-------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,277,027
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,950) 6,259,077
------------- -------------
Net realized and unrealized gain on securities during the year . . . . . . . . . . . . . . . . . 15,548,917
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,756,027
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,207,110 $ 1,063,220
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . 9,289,840 2,356,297
Net unrealized appreciation of securities during the year . . . . . . . . . . 6,259,077 4,816,175
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 16,756,027 8,235,692
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,156,438) (1,067,168)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . (4,173,232) (2,755,148)
---------------------------------
Decrease in net assets resulting from distributions to shareholders . . . (5,329,670) (3,822,316)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 17,740,343 6,436,649
Proceeds from capital stock issued for distributions reinvested . . . . . . . 5,329,670 3,822,316
---------------------------------
23,070,013 10,258,965
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (7,536,021) (6,474,724)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 15,533,992 3,784,241
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 26,960,349 8,197,617
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,927,091 45,729,474
---------------------------------
End of year (including undistributed net investment income of $50,672 and $0) $ 80,887,440 $ 53,927,091
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 1,209,065 537,130
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 376,165 336,272
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (507,806) (547,073)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 1,077,424 326,329
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,143,021 3,816,692
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,220,445 4,143,021
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE> 163
TIMED OPPORTUNITY FUND May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 60.76%
AEROSPACE/DEFENSE - 0.67%
5,457 Boeing Co. . . . . . . . . . . . . . . . . . $ 465,209
2,335 Lockheed Martin Corp. . . . . . . . . . . . . 195,848
2,166 McDonnell Douglas Corp. . . . . . . . . . . . 218,766
3,681 Northrop Grumman Corp. . . . . . . . . . . . 230,523
1,449 Raytheon Co. . . . . . . . . . . . . . . . . 77,159
922 TRW Inc. . . . . . . . . . . . . . . . . . . 86,899
---------------
1,274,404
---------------
AUTO - CARS - 1.11%
12,149 Chrysler Corp. . . . . . . . . . . . . . . . 809,427
23,653 General Motors Corp. . . . . . . . . . . . . 1,303,872
---------------
2,113,299
---------------
AUTO - REPLACEMENT PARTS - 0.48%
6,943 Cooper Tire & Rubber Co. . . . . . . . . . . 167,500
1,156 Echlin Inc. . . . . . . . . . . . . . . . . . 39,738
6,266 Genuine Parts Co. . . . . . . . . . . . . . . 285,103
8,283 Goodyear Tire & Rubber Co. . . . . . . . . . 418,291
---------------
910,632
---------------
BANKS - NEW YORK CITY - 0.38%
5,705 Bank of New York Co., Inc. . . . . . . . . . 295,947
4,961 J.P. Morgan & Co. Inc. . . . . . . . . . . . 430,987
---------------
726,934
---------------
BANKS - OTHER - 1.46%
187 Bank of Boston Corp. . . . . . . . . . . . . 9,327
4,288 First Union Corp. . . . . . . . . . . . . . . 262,104
8,287 Fleet Financial Group, Inc. . . . . . . . . . 365,664
3,748 National City Corp. . . . . . . . . . . . . . 133,522
56,443 US Bancorp . . . . . . . . . . . . . . . . . 2,010,782
---------------
2,781,399
---------------
BANKS - REGIONAL - 2.01%
11,514 Barnett Banks, Inc. . . . . . . . . . . . . . 719,625
791 Boatmen's Bancshares, Inc. . . . . . . . . . 31,986
39,639 Comerica Inc. . . . . . . . . . . . . . . . . 1,734,206
1,418 CoreStates Financial Corp. . . . . . . . . . 55,834
15,204 Norwest Corp. . . . . . . . . . . . . . . . . 530,240
10,389 PNC Bank Corp. . . . . . . . . . . . . . . . 315,566
7,174 SunTrust Banks, Inc. . . . . . . . . . . . . 261,851
3,943 Wachovia Corp. . . . . . . . . . . . . . . . 169,056
---------------
3,818,364
---------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.46%
8,517 Anheuser- Busch Companies, Inc. . . . . . . . 606,836
7,704 Seagram Co. Ltd . . . . . . . . . . . . . . . 266,751
---------------
873,587
---------------
BEVERAGE - SOFT DRINKS - 1.78%
43,326 Coca-Cola Co. . . . . . . . . . . . . . . . . 1,992,996
41,840 PepsiCo, Inc. . . . . . . . . . . . . . . . . 1,391,180
---------------
3,384,176
---------------
BROADCASTING - 0.46%
20,280 Tele-Communications, Inc. Class A . . . . . . $ 382,785
6,602 * U S West Media Group . . . . . . . . . . . . 124,613
8,560 * Viacom Inc. Class B . . . . . . . . . . . . . 362,730
---------------
870,128
---------------
BUILDING MATERIALS - 1.18%
957 Armstrong World Industries, Inc. . . . . . . 56,343
60,091 Lowe's Companies, Inc. . . . . . . . . . . . 2,058,117
4,048 Masco Corp. . . . . . . . . . . . . . . . . . 126,500
---------------
2,240,960
---------------
CHEMICAL - MAJOR - 1.63%
16,887 E.I. du Pont de Nemours and Co. . . . . . . . 1,346,738
562 Hercules Inc. . . . . . . . . . . . . . . . . 31,894
7,663 Morton International, Inc. . . . . . . . . . 291,194
9,998 PPG Industries Inc. . . . . . . . . . . . . . 517,396
3,354 Rohm and Haas Co. . . . . . . . . . . . . . . 227,234
16,027 Union Carbide Corp. . . . . . . . . . . . . . 691,164
---------------
3,105,620
---------------
CHEMICAL - MISCELLANEOUS - 1.03%
721 Air Products and Chemicals, Inc. . . . . . . 42,900
3,316 Ecolab Inc. . . . . . . . . . . . . . . . . . 107,770
4,091 * FMC Corp. . . . . . . . . . . . . . . . . . . 275,120
4,172 Great Lakes Chemical Corp. . . . . . . . . . 269,094
191 Mallinckrodt Group Inc. . . . . . . . . . . . 7,186
1,651 Nalco Chemical Co. . . . . . . . . . . . . . 52,419
21,596 Sigma Aldrich Corp. . . . . . . . . . . . . . 1,209,376
---------------
1,963,865
---------------
COAL - 0.34%
19,203 Eastern Enterprises . . . . . . . . . . . . . 655,302
---------------
CONGLOMERATES - 0.32%
4,920 * ITT Corp. . . . . . . . . . . . . . . . . . . 302,580
2,936 Loews Corp. . . . . . . . . . . . . . . . . . 234,146
1,407 Tenneco Inc. . . . . . . . . . . . . . . . . 75,626
---------------
612,352
---------------
CONTAINERS - PAPER - 0.89%
34,197 Temple-Inland Inc. . . . . . . . . . . . . . 1,684,202
---------------
COSMETICS/TOILETRIES - 0.55%
1,086 Alberto-Culver Co. Class B . . . . . . . . . 43,033
10,161 Gillette Co. . . . . . . . . . . . . . . . . 600,769
8,426 International Flavors & Fragrances, Inc. . . 409,714
---------------
1,053,516
---------------
DRUGS - 3.12%
19,968 American Home Products Corp. . . . . . . . . 1,068,288
6,727 * Amgen Inc. . . . . . . . . . . . . . . . . . 400,257
12,065 Bristol Myers Squibb Co. . . . . . . . . . . 1,030,049
26,436 Merck & Co., Inc. . . . . . . . . . . . . . . 1,708,427
12,548 Pfizer Inc. . . . . . . . . . . . . . . . . . 887,771
6,527 Schering-Plough Corp. . . . . . . . . . . . . 382,645
11,095 Upjohn Co. . . . . . . . . . . . . . . . . . 453,508
---------------
5,930,945
---------------
</TABLE>
62
<PAGE> 164
TIMED OPPORTUNITY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL EQUIPMENT - 1.35%
450 * Cabletron Systems, Inc. . . . . . . . . . . . $ 32,738
3,691 Emerson Electric Co. . . . . . . . . . . . . 316,042
23,274 General Electric Co. . . . . . . . . . . . . 1,925,923
4,372 W. W. Grainger Inc. . . . . . . . . . . . . . 292,377
---------------
2,567,080
---------------
ELECTRONIC INSTRUMENTS - 0.30%
43,103 * Intergraph Corp. . . . . . . . . . . . . . . 565,727
---------------
ENTERTAINMENT - 0.76%
8,339 Harrah's Entertainment, Inc. . . . . . . . . 280,399
3,343 * King World Productions, Inc. . . . . . . . . 139,570
6,685 Mattel, Inc. . . . . . . . . . . . . . . . . 182,166
13,934 Walt Disney Co. . . . . . . . . . . . . . . . 846,491
---------------
1,448,626
---------------
FOODS - 1.60%
7,612 Campbell Soup Co. . . . . . . . . . . . . . . 490,974
1,587 ConAgra, Inc. . . . . . . . . . . . . . . . . 67,646
4,725 CPC International Inc. . . . . . . . . . . . 326,616
340 * Earthgrains Co. . . . . . . . . . . . . . . . 12,240
7,402 H J Heinz Co. . . . . . . . . . . . . . . . . 246,117
4,906 Kellogg Co. . . . . . . . . . . . . . . . . . 356,911
5,983 Quaker Oats Co. . . . . . . . . . . . . . . . 210,153
2,549 Ralston Purina Co. . . . . . . . . . . . . . 156,126
14,194 Sara Lee Corp. . . . . . . . . . . . . . . . 473,725
13,553 Wm. Wrigley Jr. Co. . . . . . . . . . . . . . 709,838
---------------
3,050,346
---------------
FOOTWEAR - 0.31%
34,042 Brown Group, Inc. . . . . . . . . . . . . . . 578,714
400 Stride Rite Corp. . . . . . . . . . . . . . . 3,600
---------------
582,314
---------------
GOLD MINING - 0.26%
9,191 Barrick Gold Corp. . . . . . . . . . . . . . 289,517
6,786 Placer Dome Inc. . . . . . . . . . . . . . . 201,035
---------------
490,552
---------------
GOVERNMENT SPONSORED - 0.12%
2,783 Federal Home Loan Mortgage Corp. . . . . . . 229,945
---------------
HARDWARE & TOOLS - 0.07%
3,264 Black & Decker Corp. . . . . . . . . . . . . 134,232
---------------
HEALTHCARE - 0.05%
1,655 United HealthCare Corp. . . . . . . . . . . . 90,818
---------------
HOME BUILDERS - 0.05%
1,595 Centex Corp. . . . . . . . . . . . . . . . . 48,049
1,683 Pulte Corp. . . . . . . . . . . . . . . . . . 47,124
---------------
95,173
---------------
HOSPITAL MANAGEMENT - 0.73%
11,032 Columbia/HCA Healthcare Corp. . . . . . . . . $ 594,349
29,500 * Humana Inc. . . . . . . . . . . . . . . . . . 649,000
3,354 Manor Care, Inc. . . . . . . . . . . . . . . 130,806
307 * Tenet Healthcare Corp. . . . . . . . . . . . 6,600
---------------
1,380,755
---------------
HOSPITAL SUPPLIES - 2.28%
22,292 Abbott Laboratories . . . . . . . . . . . . . 961,342
716 Bard (C. R.), Inc. . . . . . . . . . . . . . 23,539
19,220 Becton, Dickinson and Co. . . . . . . . . . . 1,633,700
6,577 * Biomet, Inc. . . . . . . . . . . . . . . . . 92,078
2,254 * Boston Scientific Corp. . . . . . . . . . . . 96,640
13,518 Johnson & Johnson . . . . . . . . . . . . . . 1,316,315
2,955 Medtronic, Inc. . . . . . . . . . . . . . . . 166,219
1,147 * St. Jude Medical, Inc. . . . . . . . . . . . 43,586
---------------
4,333,419
---------------
HOUSEHOLD PRODUCTS - 1.39%
5,084 Minnesota Mining & Manufacturing Co. . . . . 346,983
1,951 Premark International Inc. . . . . . . . . . 31,460
14,540 Procter & Gamble Co. . . . . . . . . . . . . 1,277,702
8,683 Rubbermaid, Inc. . . . . . . . . . . . . . . 243,124
1,951 * Tupperware Corp. . . . . . . . . . . . . . . 89,258
4,803 Unilever N V-ADR . . . . . . . . . . . . . . 647,805
---------------
2,636,332
---------------
INFORMATION PROCESSING - 6.32%
125 Apple Computer, Inc. . . . . . . . . . . . . 3,266
12,776 Automatic Data Processing, Inc. . . . . . . . 490,279
8,740 * Bay Networks, Inc. . . . . . . . . . . . . . 253,460
7,795 * Ceridian Corp. . . . . . . . . . . . . . . . 412,161
5,705 * Data General Corp. . . . . . . . . . . . . . 72,739
27,705 * Digital Equipment Corp. . . . . . . . . . . . 1,444,123
34,806 * EMC Corp. . . . . . . . . . . . . . . . . . . 770,083
1,235 First Data Corp. . . . . . . . . . . . . . . 98,491
48,320 H&R Block Inc. . . . . . . . . . . . . . . . 1,685,160
39,215 Honeywell Inc. . . . . . . . . . . . . . . . 1,990,161
7,000 Intel Corp. . . . . . . . . . . . . . . . . . 528,500
18,659 International Business Machines Corp. . . . 1,991,848
13,504 * Microsoft Corp. . . . . . . . . . . . . . . . 1,603,600
46,706 * Novell, Inc. . . . . . . . . . . . . . . . . 665,560
---------------
12,009,431
---------------
INSURANCE - CASUALTY - 0.15%
1,674 Chubb Corp. . . . . . . . . . . . . . . . . . 78,050
348 * Highlands Insurance Company . . . . . . . . . 6,743
2,678 SAFECO Corp. . . . . . . . . . . . . . . . . 90,215
6,510 USF & G Corp. . . . . . . . . . . . . . . . . 104,160
---------------
279,168
---------------
INSURANCE - LIFE - 0.79%
2,860 Lincoln National Corp. . . . . . . . . . . . 134,420
45,712 USLIFE Corp. . . . . . . . . . . . . . . . . 1,371,360
---------------
1,505,780
---------------
</TABLE>
63
<PAGE> 165
TIMED OPPORTUNITY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE - MISCELLANEOUS - 0.18%
8,107 Alexander & Alexander Services Inc. . . . . . $ 161,127
1,284 General Reinsurance Corp. . . . . . . . . . . 187,464
---------------
348,591
---------------
INSURANCE - MULTILINE - 0.73%
7,038 Aetna Life and Casualty Co. . . . . . . . . . 519,052
6,104 Allstate Corp. . . . . . . . . . . . . . . . 257,894
4,920 ITT Hartford Group, Inc. . . . . . . . . . . 254,610
8,597 Travelers Group, Inc. . . . . . . . . . . . . 356,755
---------------
1,388,311
---------------
LEISURE TIME - 0.50%
13,292 Bally Entertainment Corp. . . . . . . . . . . 319,008
3,323 * Bally Total Fitness Holding Corp. . . . . . . 16,823
67,683 Handleman Co. . . . . . . . . . . . . . . . . 499,162
5,891 Outboard Marine Corp. . . . . . . . . . . . . 114,138
---------------
949,131
---------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.03%
1,123 Foster Wheeler Corp. . . . . . . . . . . . . 49,974
---------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.09%
285 Illinois Tool Works Inc. . . . . . . . . . . 19,095
870 Johnson Controls, Inc. . . . . . . . . . . . 60,683
50,492 Timken Co. . . . . . . . . . . . . . . . . . 1,988,122
---------------
2,067,900
---------------
MERCHANDISE - DRUG - 1.18%
10,997 Longs Drug Stores Corp. . . . . . . . . . . . 471,496
2,500 Rite Aid Corp. . . . . . . . . . . . . . . . 73,438
53,093 Walgreen Co. . . . . . . . . . . . . . . . . 1,692,339
---------------
2,237,273
---------------
MERCHANDISE - SPECIALTY - 0.48%
4,211 American Greetings Corp. Class A . . . . . . 114,223
10,075 Home Depot, Inc. . . . . . . . . . . . . . . 515,084
394 Jostens Inc. . . . . . . . . . . . . . . . . 8,914
3,014 Limited, Inc. . . . . . . . . . . . . . . . . 62,541
3,942 Tandy Corp. . . . . . . . . . . . . . . . . . 212,868
---------------
913,630
---------------
MERCHANDISING -
DEPARTMENT - 0.07%
1,940 Mercantile Stores Co., Inc. . . . . . . . . . 125,130
---------------
MERCHANDISING - FOOD - 0.50%
10,467 Albertsons, Inc. . . . . . . . . . . . . . . 417,371
3,855 * Kroger Co. . . . . . . . . . . . . . . . . . 151,309
1,702 Supervalu Inc. . . . . . . . . . . . . . . . 52,762
9,117 SYSCO Corp. . . . . . . . . . . . . . . . . . 311,118
616 Winn-Dixie Stores, Inc. . . . . . . . . . . . 21,252
---------------
953,812
---------------
MERCHANDISING - MASS - 0.97%
7,442 J.C. Penney Co., Inc. . . . . . . . . . . . . $ 386,054
56,612 Wal-Mart Stores, Inc. . . . . . . . . . . . . 1,464,835
---------------
1,850,889
---------------
METALS - ALUMINUM - 0.98%
52,638 Alcan Aluminium Ltd . . . . . . . . . . . . . 1,723,894
2,302 Aluminum Co. of America . . . . . . . . . . . 141,861
---------------
1,865,755
---------------
METALS - COPPER - 1.05%
2,744 Newmont Mining Corp. . . . . . . . . . . . . 165,326
26,606 Phelps Dodge Corp. . . . . . . . . . . . . . 1,822,511
---------------
1,987,837
---------------
METALS - MISCELLANEOUS - 0.87%
50,494 Inco Limited . . . . . . . . . . . . . . . . 1,647,367
---------------
METALS - STEEL - 0.01%
294 Nucor Corp. . . . . . . . . . . . . . . . . . 16,170
---------------
MISCELLANEOUS - 0.12%
3,212 Corning Inc. . . . . . . . . . . . . . . . . 122,859
2,709 * Owens Corning . . . . . . . . . . . . . . . . 109,037
---------------
231,896
---------------
NATURAL GAS - DIVERSIFIED - 0.14%
3,047 Coastal Corp. . . . . . . . . . . . . . . . . 124,927
4,153 PanEnergy Corp. . . . . . . . . . . . . . . . 133,415
---------------
258,342
---------------
OIL - INTEGRATED DOMESTIC - 2.06%
12,253 Amoco Corp. . . . . . . . . . . . . . . . . . 888,342
5,469 Atlantic Richfield Co. . . . . . . . . . . . 654,229
845 Burlington Resources Inc. . . . . . . . . . . 32,110
28,335 Kerr-McGee Corp. . . . . . . . . . . . . . . 1,664,681
6,100 Pennzoil Co. . . . . . . . . . . . . . . . . 263,825
9,003 Unocal Corp. . . . . . . . . . . . . . . . . 292,598
5,111 USX-Marathon Group . . . . . . . . . . . . . 111,803
---------------
3,907,588
---------------
OIL - INTEGRATED
INTERNATIONAL - 2.82%
21,476 Exxon Corp. . . . . . . . . . . . . . . . . . 1,820,091
8,787 Mobil Corp. . . . . . . . . . . . . . . . . . 991,833
12,579 Royal Dutch Petroleum Co. - ADR . . . . . . . 1,886,850
7,828 Texaco Inc. . . . . . . . . . . . . . . . . . 655,595
---------------
5,354,369
---------------
OIL - SERVICES - 0.69%
5,592 Baker Hughes Inc. . . . . . . . . . . . . . . 175,449
18,580 * Rowan Companies, Inc. . . . . . . . . . . . . 281,023
9,064 Schlumberger Ltd . . . . . . . . . . . . . . 755,711
1,572 * Western Atlas Inc. . . . . . . . . . . . . . 96,285
---------------
1,308,468
---------------
</TABLE>
64
<PAGE> 166
TIMED OPPORTUNITY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
PAPER/FOREST PRODUCTS - 0.36%
13,142 International Paper Co. . . . . . . . . . . . $ 524,037
2,057 Kimberly-Clark Corp. . . . . . . . . . . . . 149,904
193 Schweitzer-Mauduit International, Inc. . . . 5,404
---------------
679,345
---------------
PHOTOGRAPHY - 0.24%
6,189 Eastman Kodak Co. . . . . . . . . . . . . . . 460,307
---------------
POLLUTION CONTROL - 0.37%
30,059 Laidlaw Inc Class B . . . . . . . . . . . . . 304,347
11,355 WMX Technologies, Inc. . . . . . . . . . . . 400,264
---------------
704,611
---------------
PUBLISHING - NEWS - 0.09%
4,260 Dow Jones & Co., Inc. . . . . . . . . . . . . 166,673
---------------
PUBLISHING/PRINTING - 0.49%
2,360 McGraw-Hill, Inc. . . . . . . . . . . . . . . 110,625
14,507 Meredith Corp. . . . . . . . . . . . . . . . 665,509
4,080 R R Donnelley & Sons Co. . . . . . . . . . . 149,940
---------------
926,074
---------------
RAILROAD - 0.35%
6,319 Burlington Northern Inc. . . . . . . . . . . 535,535
1,892 Union Pacific Corp. . . . . . . . . . . . . . 132,677
---------------
668,212
---------------
RESTAURANTS - 0.98%
4,937 Darden Restaurants, Inc. . . . . . . . . . . 58,627
31,883 Luby's Cafeterias, Inc. . . . . . . . . . . . 785,119
12,591 McDonald's Corp. . . . . . . . . . . . . . . 605,942
10,922 * Ryan's Family Steak Houses, Inc. . . . . . . 96,932
17,695 Wendy's International, Inc. . . . . . . . . . 318,510
---------------
1,865,130
---------------
SAVINGS & LOAN - 0.10%
3,500 Great Western Financial Corp. . . . . . . . . 80,500
3,904 H.F. Ahmanson & Co. . . . . . . . . . . . . . 100,528
---------------
181,028
---------------
SECURITIES RELATED - 0.62%
10,578 American Express Co. . . . . . . . . . . . . 483,943
9,153 Dean Witter, Discover & Co. . . . . . . . . . 542,315
2,466 Merrill Lynch & Co., Inc. . . . . . . . . . . 159,674
---------------
1,185,932
---------------
SEMICONDUCTORS - 0.86%
2,820 * Applied Materials, Inc. . . . . . . . . . . . 105,045
4,874 Micron Technology, Inc. . . . . . . . . . . . 157,187
60,792 * National Semiconductor Corp. . . . . . . . . 987,870
7,006 Texas Instruments Inc. . . . . . . . . . . . 394,087
---------------
1,644,189
---------------
TELECOMMUNICATIONS - 0.12%
2,730 * DSC Communications Corp. . . . . . . . . . . $ 82,241
6,494 Scientific-Atlanta, Inc. . . . . . . . . . . 122,575
1,210 * 360 Communications Co. . . . . . . . . . . . 27,981
---------------
232,797
---------------
TOBACCO - 1.04%
17,549 Philip Morris Cos Inc. . . . . . . . . . . . 1,743,932
6,822 UST Corp. . . . . . . . . . . . . . . . . . . 225,126
---------------
1,969,058
---------------
UTILITIES - COMMUNICATION - 4.08%
13,648 Ameritech Corp. . . . . . . . . . . . . . . . 771,112
26,775 AT & T Corp. . . . . . . . . . . . . . . . . 1,670,091
8,979 Bell Atlantic Corp. . . . . . . . . . . . . . 560,065
20,844 BellSouth Corp. . . . . . . . . . . . . . . . 846,788
28,484 GTE Corp. . . . . . . . . . . . . . . . . . . 1,217,691
9,025 NYNEX Corp. . . . . . . . . . . . . . . . . . 416,278
13,762 Pacific Telesis Group . . . . . . . . . . . . 459,307
24,953 SBC Communications, Inc. . . . . . . . . . . 1,232,054
17,773 US West Communications Group . . . . . . . . 579,844
---------------
7,753,230
---------------
UTILITIES - ELECTRIC - 1.79%
134 American Electric Power, Inc. . . . . . . . . 5,377
2,698 Baltimore Gas and Electric Co. . . . . . . . 73,858
3,046 Central & South West Corp. . . . . . . . . . 84,146
4,373 Cinergy Corp. . . . . . . . . . . . . . . . . 129,550
10,006 Consolidated Edison Co. of
New York, Inc. . . . . . . . . . . . . . 278,917
8,484 Dominion Resources, Inc. . . . . . . . . . . 321,331
7,258 Duke Power Co. . . . . . . . . . . . . . . . 350,198
18,204 Edison International . . . . . . . . . . . . 300,366
8,674 Entergy Corp. . . . . . . . . . . . . . . . . 227,693
1,629 FPL Group, Inc. . . . . . . . . . . . . . . . 69,640
3,022 Houston Industries, Inc. . . . . . . . . . . 66,106
8,919 Pacific Gas and Electric Co. . . . . . . . . 207,367
4,945 PacifiCorp . . . . . . . . . . . . . . . . . 99,518
11,817 Public Service Enterprise Group, Inc. . . . 313,151
24,239 Southern Co. . . . . . . . . . . . . . . . . 560,527
2,037 Unicom Corp. . . . . . . . . . . . . . . . . 56,272
6,649 Union Electric Co. . . . . . . . . . . . . . 261,804
---------------
3,405,821
---------------
UTILITIES - GAS, PIPELINE - 0.40%
459 Consolidated Natural Gas Co. . . . . . . . . 22,204
14,934 Enron Corp. . . . . . . . . . . . . . . . . . 597,360
3,777 NICOR Inc. . . . . . . . . . . . . . . . . . 104,812
1,400 Pacific Enterprises . . . . . . . . . . . . . 36,925
---------------
761,301
---------------
TOTAL COMMON STOCKS
(Cost $98,143,627) . . . . . . . . . . . . . 115,465,524
---------------
</TABLE>
65
<PAGE> 167
TIMED OPPORTUNITY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 14.59%
AEROSPACE/DEFENSE - 0.87%
$ 1,750,000 Raytheon Co., 6.50% due 7/15/05 . . . . . . . $ 1,658,685
---------------
BANKS - OTHER - 0.52%
1,000,000 BankAmerica Corp.,
6.625% due 5/30/01 . . . . . . . . . . . . 990,950
---------------
BANKS - REGIONAL - 1.04%
2,000,000 NationsBank Corp.,
7.75% due 8/15/15 . . . . . . . . . . . . . 1,984,780
---------------
CONGLOMERATES - 0.74%
1,500,000 ITT Corp.,
6.75% due 11/15/05 . . . . . . . . . . . . 1,411,980
---------------
CONSUMER FINANCE - 2.82%
1,700,000 Associates Corp. of North America,
6.00% due 6/15/00 . . . . . . . . . . . . . 1,638,783
2,000,000 Commercial Credit Corp.,
6.125% due 12/1/05 . . . . . . . . . . . . 1,821,660
2,000,000 Sears Roebuck Acceptance Corp.,
6.75% due 9/15/05 . . . . . . . . . . . . . 1,902,960
---------------
5,363,403
---------------
ENTERTAINMENT - 0.51%
1,000,000 Walt Disney Co., 6.375% due 3/30/01 . . . . . 975,190
---------------
FINANCE COMPANIES - 1.51%
Ford Motor Credit Co.:
1,000,000 6.25% due 11/8/00 . . . . . . . . . . . . . 971,550
2,000,000 5.75% due 1/25/01 . . . . . . . . . . . . . 1,894,440
---------------
2,865,990
---------------
MERCHANDISING - MASS - 0.53%
1,000,000 Sears Roebuck and Co.,
7.35% due 3/23/00 . . . . . . . . . . . . . 1,012,250
---------------
OIL - INTEGRATED DOMESTIC - 1.03%
2,000,000 Union Oil Co. California,
7.20% due 5/15/05 . . . . . . . . . . . . . 1,953,820
---------------
PUBLISHING/PRINTING - 0.98%
2,000,000 Time Warner Inc.,
7.25% due 9/1/08 . . . . . . . . . . . . . 1,855,060
---------------
SECURITIES RELATED - 1.04%
2,000,000 Bear Stearns Co. Inc.,
6.75% due 5/1/01 . . . . . . . . . . . . . 1,966,020
---------------
UTILITIES - COMMUNICATION - 2.00%
2,000,000 Bellsouth Telecommunications,
7.00% due 10/1/25 . . . . . . . . . . . . . 1,864,940
2,000,000 GTE California Inc.,
7.00% due 5/1/08 . . . . . . . . . . . . . 1,935,220
---------------
3,800,160
---------------
UTILITIES - ELECTRIC - 1.00%
$ 2,000,000 Texas Utilities Electric Co.,
6.75% due 7/1/05 . . . . . . . . . . . . . $ 1,898,320
---------------
TOTAL CORPORATE BONDS
(Cost $28,697,483) . . . . . . . . . . . . . 27,736,608
---------------
UNITED STATES GOVERNMENT -
LONG TERM - 12.19%
GOVERNMENT SPONSORED - 2.87%
Federal Home Loan Mortgage Corp.
(Pools/REMICS):
193,866 7.50% due 9/1/25 . . . . . . . . . . . . . 189,989
502,328 7.50% due 9/1/25 . . . . . . . . . . . . . 492,281
390,024 7.50% due 9/1/25 . . . . . . . . . . . . . 382,223
569,427 7.50% due 9/1/25 . . . . . . . . . . . . . 558,039
Federal National Mortgage
Association:
2,000,000 7.00% due 5/10/01 . . . . . . . . . . . . 1,992,820
2,000,000 5.875% due 2/2/06 . . . . . . . . . . . . 1,831,880
---------------
5,447,232
---------------
UNITED STATES TREASURY NOTES - 9.32%
United States Treasury Notes:
1,000,000 8.50% due 7/15/97 . . . . . . . . . . . . . 1,027,810
1,000,000 8.00% due 8/15/99 . . . . . . . . . . . . . 1,042,810
1,000,000 6.75% due 5/31/99 . . . . . . . . . . . . . 1,007,810
2,000,000 6.375% due 3/31/01 . . . . . . . . . . . . 1,977,180
2,000,000 6.25% due 2/15/03 . . . . . . . . . . . . . 1,946,560
4,000,000 6.125% due 5/15/98 . . . . . . . . . . . . 3,992,480
1,000,000 5.875% due 7/31/97 . . . . . . . . . . . . 998,910
3,000,000 5.75% due 8/15/03 . . . . . . . . . . . . . 2,825,160
3,000,000 5.50% due 4/15/00 . . . . . . . . . . . . . 2,893,590
---------------
17,712,310
---------------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $23,539,163) . . . . . . . . . . . . . 23,159,542
---------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 11.39%
BEVERAGE - SOFT DRINKS - 1.57%
Coca-Cola Enterprises Inc.:
1,000,000 5.28% due 8/2/96 . . . . . . . . . . . . . 990,907
1,000,000 5.27% due 7/3/96 . . . . . . . . . . . . . 995,315
1,000,000 5.26% due 6/7/96 . . . . . . . . . . . . . 999,123
---------------
2,985,345
---------------
CONSUMER FINANCE - 1.18%
748,000 Commercial Credit Corp.,
5.16% due 6/3/96 . . . . . . . . . . . . . 747,786
1,500,000 Sears Roebuck Acceptance Corp.,
5.30% due 6/10/96 . . . . . . . . . . . . . 1,498,012
---------------
2,245,798
---------------
</TABLE>
66
<PAGE> 168
TIMED OPPORTUNITY FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 1.73%
Mattel, Inc.:
$ 400,000 5.50% due 7/18/96 . . . . . . . . . . . . . $ 397,128
912,000 5.48% due 8/1/96 . . . . . . . . . . . . . 903,531
2,000,000 Walt Disney Co., 5.28% due 8/1/96 . . . . . . 1,982,107
---------------
3,282,766
---------------
FINANCE COMPANIES - 3.87%
2,710,000 Ford Motor Credit Co.,
5.28% due 6/13/96 . . . . . . . . . . . . . 2,705,230
Transamerica Finance Corp.:
1,656,000 5.31% due 8/14/96 . . . . . . . . . . . . . 1,637,925
3,000,000 5.29% due 6/4/96 . . . . . . . . . . . . . 2,998,678
---------------
7,341,833
---------------
OIL - INTEGRATED DOMESTIC - 0.52%
1,000,000 Atlantic Richfield Co.,
5.24% due 7/23/96 . . . . . . . . . . . . . 992,431
---------------
SECURITIES RELATED - 2.52%
Merrill Lynch & Co., Inc.:
2,173,000 5.28% due 6/3/96 . . . . . . . . . . . . . 2,172,363
1,605,000 5.27% due 6/5/96 . . . . . . . . . . . . . 1,604,060
1,015,000 5.27% due 6/6/96 . . . . . . . . . . . . . 1,014,257
---------------
4,790,680
---------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $21,638,853) . . . . . . . . . . . . . 21,638,853
---------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.60%
U.S. TREASURY BILLS - 0.60%
United States Treasury Bills:
1,000,000 4.96% due 9/5/96 . . . . . . . . . . . . . 986,773
150,000 4.93% due 6/20/96 . . . . . . . . . . . . . 149,610
---------------
1,136,383
---------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $1,136,383) . . . . . . . . . . . . . . 1,136,383
---------------
TOTAL INVESTMENTS
(Cost $173,155,509) - 99.53% . . . . . . . . $ 189,136,910
Other assets and liabilities, net - 0.47% . 886,961
---------------
NET ASSETS (equivalent to $12.55 per share on
15,142,265 shares outstanding) - 100% . . . $ 190,023,871
---------------
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- -------------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
19 (2) U.S. Treasury Bond Futures
(September/$107.53) . . . . . . . . . . . . . $ 1,500
---------------
</TABLE>
(1) U.S. Treasury Bills with a market value of approximately
$150,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 1,000
<TABLE>
<S> <C> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
15,142,265 shares outstanding . . . . . . . . . . . . . . . . $ 151,423
Additional paid in capital . . . . . . . . . . . . . . . . . . . 154,719,088
Undistributed net realized gain on securities . . . . . . . . . . 19,115,224
Undistributed net investment income . . . . . . . . . . . . . . . 55,235
Unrealized appreciation of:
Investments . . . . . . . . . . . . . . . . . $ 15,981,401
Futures . . . . . . . . . . . . . . . . . . . 1,500 15,982,901
------------ ---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 190,023,871
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE> 169
TIMED OPPORTUNITY FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,451,195
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,408,737
-------------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,859,932
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939,313
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,697
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,533
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,045
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,023
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,035
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077,646
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,782,286
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,945,867
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233,270 20,179,137
-------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,218,717
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (293,100) 3,925,617
-------------- -------------
Net realized and unrealized gain during the year . . . . . . . . . . . . . . . . . . . . . . . . 24,104,754
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,887,040
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,782,286 $ 7,512,913
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . 20,179,137 3,400,944
Net unrealized appreciation of securities during the year . . . . . . . . . . 3,925,617 10,353,911
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 30,887,040 21,267,768
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,883,971) (7,558,597)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . (3,314,027) (7,068,460)
---------------------------------
Decrease in net assets resulting from distributions to shareholders . . . (10,197,998) (14,627,057)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 4,919,015 6,307,925
Proceeds from capital stock issued for distributions reinvested . . . . . . . 10,197,998 14,627,057
---------------------------------
15,117,013 20,934,982
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (29,175,524) (38,758,320)
---------------------------------
Decrease in net assets resulting from capital stock transactions . . . . . (14,058,511) (17,823,338)
---------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . 6,630,531 (11,182,627)
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,393,340 194,575,967
---------------------------------
End of year (including undistributed net investment
income of $55,235 and $156,920) . . . . . . . . . . . . . . . . . . . . . . . $ 190,023,871 $ 183,393,340
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 406,767 585,687
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 849,188 1,389,056
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (2,433,033) (3,610,925)
---------------------------------
Decrease in shares outstanding . . . . . . . . . . . . . . . . . . . . . . (1,177,078) (1,636,182)
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,319,343 17,955,525
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,142,265 16,319,343
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE> 170
CAPITAL CONSERVATION FUND May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 72.52%
AEROSPACE/DEFENSE - 0.76%
$ 500,000 Boeing Co., 8.10% due 11/15/06 . . . . . . . $ 531,095
---------------
AIRLINES - 3.04%
2,000,000 Southwest Airlines Co.,
8.75% due 10/15/03 . . . . . . . . . . . . 2,135,480
---------------
BANKS - OTHER - 4.65%
1,000,000 BankAmerica Corp.,
7.20% due 4/15/06 . . . . . . . . . . . . . 975,670
1,500,000 Santander Finance Issuances,
7.25% due 11/1/15 . . . . . . . . . . . . . 1,403,100
1,000,000 Toronto Dominion Bank Ont,
6.125% due 11/1/08 . . . . . . . . . . . . 886,260
---------------
3,265,030
---------------
BANKS - REGIONAL - 9.79%
Barnett Banks Inc.:
500,000 10.875% due 3/15/03 . . . . . . . . . . . . 586,220
1,000,000 6.90% due 9/1/05 . . . . . . . . . . . . . 960,850
2,000,000 First Bank System, Inc.,
6.875% due 9/15/07 . . . . . . . . . . . . 1,905,340
NationsBank Corp.:
1,500,000 7.75% due 8/15/15 . . . . . . . . . . . . . 1,488,585
1,000,000 6.50% due 3/15/06 . . . . . . . . . . . . . 930,600
1,000,000 SouthTrust Corp.,
7.625% due 5/1/04 . . . . . . . . . . . . . 1,004,160
---------------
6,875,755
---------------
BUILDING MATERIALS - 2.73%
2,000,000 CSR America Inc.,
6.875% due 7/21/05 . . . . . . . . . . . . 1,915,360
---------------
CONSUMER FINANCE - 1.41%
1,000,000 Commercial Credit Corp.,
6.875% due 5/1/02 . . . . . . . . . . . . . 986,700
---------------
CONTAINERS - METAL/GLASS - 1.42%
1,000,000 Crown Cork & Seal Co., Inc.,
7.00% due 6/15/99 . . . . . . . . . . . . . 1,000,130
---------------
ENTERTAINMENT - 2.78%
2,000,000 News America Holdings Inc.,
8.25% due 8/10/18 . . . . . . . . . . . . . 1,950,940
---------------
FINANCE COMPANIES - 10.80%
2,000,000 Capital One Bank,
8.125% due 3/1/00 . . . . . . . . . . . . . 2,057,660
1,000,000 CIT Group Holdings, Inc.,
8.375% due 11/1/01 . . . . . . . . . . . . 1,056,590
2,000,000 Finova Capital Corp.,
9.125% due 2/27/02 . . . . . . . . . . . . 2,167,080
Ford Motor Credit Co.:
1,000,000 8.20% due 2/15/02 . . . . . . . . . . . . . 1,047,150
500,000 6.375% due 11/5/08 . . . . . . . . . . . . 451,200
750,000 General Electric Capital Corp.,
8.125% due 5/15/12 . . . . . . . . . . . . 801,420
---------------
7,581,100
---------------
LODGING - 1.99%
$ 1,500,000 ITT Corp., 7.375% due 11/15/15 . . . . . . . $ 1,400,475
---------------
MERCHANDISE - DRUG - 0.64%
500,000 IMCERA Group Inc.,
6.00% due 10/15/03 . . . . . . . . . . . . 447,610
---------------
MERCHANDISING - DEPARTMENT - 3.88%
2,000,000 Associated Dry Goods Corp.,
8.85% due 3/1/06 . . . . . . . . . . . . . 2,201,260
500,000 Dillard Department Stores, Inc.,
8.75% due 6/15/98 . . . . . . . . . . . . . 519,355
---------------
2,720,615
---------------
MERCHANDISING - FOOD - 0.72%
500,000 SUPERVALU INC.,
7.25% due 7/15/99 . . . . . . . . . . . . . 504,590
---------------
MERCHANDISING - MASS - 1.33%
1,000,000 Sears Roebuck and Co.,
6.25% due 1/15/04 . . . . . . . . . . . . . 935,410
---------------
METALS - STEEL - 2.87%
2,000,000 Pohang Iron & Steel Limited,
7.50% due 8/1/02 . . . . . . . . . . . . . 2,013,640
---------------
MISCELLANEOUS - 1.98%
1,500,000 Hertz Corp., 6.00% due 1/15/03 . . . . . . . 1,392,750
---------------
OIL - INTEGRATED DOMESTIC - 0.74%
500,000 Texaco Inc., 9.00% due 11/15/97 . . . . . . . 517,700
---------------
PAPER/FOREST PRODUCTS - 3.21%
2,000,000 Georgia-Pacific Corp.,
9.50% due 12/1/11 . . . . . . . . . . . . . 2,253,560
---------------
PUBLISHING/PRINTING - 1.32%
1,000,000 Time Warner Inc.,
7.25% due 9/1/08 . . . . . . . . . . . . . 927,530
---------------
SECURITIES RELATED - 2.08%
1,500,000 Lehman Brothers Holdings Inc.,
7.125% due 9/15/03 . . . . . . . . . . . . 1,461,405
---------------
TRUCKERS - 1.39%
1,000,000 Ryder System, Inc.,
6.77% due 4/20/01 . . . . . . . . . . . . . 979,020
---------------
UTILITIES - COMMUNICATION - 6.16%
2,500,000 Century Telephone Enterprises, Inc.,
7.20% due 12/1/25 . . . . . . . . . . . . . 2,270,900
2,000,000 Southern Bell Telephone &
Telegraph Co., 7.625% due 3/15/13 . . . . . 2,053,320
---------------
4,324,220
---------------
UTILITIES - ELECTRIC - 4.17%
1,000,000 Georgia Power Co.,
6.125% due 9/1/99 . . . . . . . . . . . . . 978,380
1,000,000 PSI Energy Inc., 5.35% due 9/23/98 . . . . . 968,800
1,000,000 West Penn Power Co.,
5.50% due 6/1/98 . . . . . . . . . . . . . 982,430
---------------
2,929,610
---------------
</TABLE>
69
<PAGE> 171
CAPITAL CONSERVATION FUND - CONTINUED May 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES - GAS, DISTRIBUTION - 2.66%
$ 2,000,000 Columbia Gas System, Inc.,
7.62% due 11/28/25 . . . . . . . . . . . . . $ 1,866,940
---------------
TOTAL CORPORATE BONDS
(Cost $52,604,811) . . . . . . . . . . . . . 50,916,665
---------------
UNITED STATES GOVERNMENT -
LONG TERM - 21.55%
FEDERAL AGENCIES - 1.06%
Government National Mortgage
Association:
133,944 Pool #233862, 9.50% due 5/15/18 . . . . . . 144,012
9,159 Pool #248341, 9.50% due 6/15/18 . . . . . . 9,847
4,278 Pool #252064, 9.50% due 6/15/18 . . . . . . 4,600
186,838 Pool #247397, 9.50% due 7/15/18 . . . . . . 200,883
48,907 Pool #256190, 9.50% due 8/15/18 . . . . . . 52,583
15,755 Pool #253172, 9.50% due 10/15/18 . . . . . 16,939
316,946 Pool #185210, 8.00% due 1/15/22 . . . . . . 319,431
---------------
748,295
---------------
GOVERNMENT SPONSORED - 11.79%
1,000,000 Federal Home Loan Mortgage,
5.75% due 12/15/16 . . . . . . . . . . . . 971,560
Federal National Mortgage
Association:
1,000,000 7.50% due 7/1/26 . . . . . . . . . . . . . 978,438
2,000,000 7.23% due 3/30/06 . . . . . . . . . . . . . 1,946,880
1,010,000 7.00% due 5/1/11 . . . . . . . . . . . . . 990,740
1,010,000 7.00% due 5/1/11 . . . . . . . . . . . . . 990,431
1,010,000 7.00% due 6/1/11 . . . . . . . . . . . . . 990,431
1,500,000 Federal National Mortgage
Association REMIC,
6.75% due 6/25/21 . . . . . . . . . . . . . 1,408,590
---------------
8,277,070
---------------
UNITED STATES NOTES - 8.70%
United States Treasury Notes:
1,000,000 6.875% due 2/28/97 . . . . . . . . . . . . 1,008,280
4,500,000 6.875% due 5/15/06 . . . . . . . . . . . . 4,507,020
600,000 5.25% due 12/31/97 . . . . . . . . . . . . 592,218
---------------
6,107,518
---------------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $15,271,447) . . . . . . . . . . . . . 15,132,883
---------------
FOREIGN GOVERNMENT BOND - 0.71%
CANADA - 0.71%
500,000 New Brunswick Province,
7.125% due 10/1/02
(Cost $498,872) . . . . . . . . . . . . . . 498,625
---------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 5.23%
CONSUMER FINANCE - 1.71%
1,200,000 Commercial Credit Corp.,
5.27% due 6/13/96 . . . . . . . . . . . . . 1,197,892
---------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 3.52%
$ 2,476,000 Cooper Industries, Inc.,
5.40% due 6/3/96 . . . . . . . . . . . . . $ 2,475,257
---------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $3,673,149) . . . . . . . . . . . . . . 3,673,149
---------------
TOTAL INVESTMENTS
(Cost $72,048,279) - 100.01% . . . . . . . . 70,221,322
Other assets and liabilities, net - (0.01%) (9,482)
----------------
NET ASSETS (equivalent to $9.23 per share on
7,604,489 shares outstanding) -100% . . . . $ 70,211,840
---------------
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
5(2) U.S. Treasury Bond Futures
(September/$107.53) . . . . . . . . . . . . . $ (7,969)
20(2) U.S. Treasury 10 Year Notes
(September/$106.06) . . . . . . . . . . . . . (24,375)
4(2) U.S. Treasury 5 Year Notes
(September/$104.77) . . . . . . . . . . . . . (3,750)
---------------
$ (36,094)
---------------
</TABLE>
(1) U.S.Treasury Notes with a market value of approximately
$100,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 1,000
<TABLE>
<S> <C> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
7,604,489 shares outstanding . . . . . . . . . . . . . . . . . $ 76,045
Additional paid in capital . . . . . . . . . . . . . . . . . . . 72,633,728
Accumulated net realized loss on securities . . . . . . . . . . . (648,688)
Undistributed net investment income . . . . . . . . . . . . . . . 13,806
Unrealized depreciation of:
Investments . . . . . . . . . . . . . . . . . . $ (1,826,957)
Futures . . . . . . . . . . . . . . . . . . . . (36,094) (1,863,051)
------------ ---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 70,211,840
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE> 172
CAPITAL CONSERVATION FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,943,537
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,058
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,777
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,521
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,299
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,578
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,781
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,014
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,543,523
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,265,730
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,628) 2,248,102
-------------
Net unrealized depreciation during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,505,267)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,657) (4,541,924)
------------- -------------
Net realized and unrealized loss on securities during the year . . . . . . . . . . . . . . . . . (2,293,822)
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,249,701
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,543,523 $ 4,244,789
Net realized gain (loss) on securities . . . . . . . . . . . . . . . . . . . 2,248,102 (2,788,646)
Net unrealized appreciation (depreciation) of securities during the year . . (4,541,924) 5,470,987
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 2,249,701 6,927,130
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,530,909) (4,277,330)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 14,391,888 11,988,687
Proceeds from capital stock issued for distributions reinvested . . . . . . . 4,530,909 4,277,330
---------------------------------
18,922,797 16,266,017
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (12,460,655) (14,190,188)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 6,462,142 2,075,829
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4,180,934 4,725,629
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,030,906 61,305,277
---------------------------------
End of year (including undistributed net investment
income of $13,806 and $1,192) . . . . . . . . . . . . . . . . . . . . . . . $ 70,211,840 $ 66,030,906
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 1,491,047 1,308,761
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 474,239 474,405
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (1,296,137) (1,560,060)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 669,149 223,106
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,935,340 6,712,234
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,604,489 6,935,340
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<PAGE> 173
GOVERNMENT SECURITIES FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT -
LONG TERM - 85.04%
FEDERAL AGENCIES - 5.26%
$ 316,946 Government National Mortgage
Association Pool #185210,
8.00% due 1/15/22 . . . . . . . . . . . . . $ 319,431
4,000,000 Tennessee Valley Authority,
6.375% due 6/15/05 . . . . . . . . . . . . 3,805,000
---------------
4,124,431
---------------
GOVERNMENT SPONSORED - 59.49%
Federal Farm Credit Banks:
2,000,000 7.16% due 5/19/10 . . . . . . . . . . . . . 1,980,140
1,150,000 7.10% due 11/2/02 . . . . . . . . . . . . . 1,159,165
1,500,000 6.92% due 5/13/02 . . . . . . . . . . . . . 1,500,240
Federal Home Loan Banks:
3,700,000 7.93% due 1/20/98 . . . . . . . . . . . . . 3,794,239
1,155,000 7.26% due 9/6/01 . . . . . . . . . . . . . 1,173,041
3,000,000 5.695% due 12/19/00 . . . . . . . . . . . . 2,871,570
Federal Home Loan Mortgage Corp.:
1,500,000 7.86% due 1/15/97 . . . . . . . . . . . . . 1,518,750
1,500,000 7.09% due 6/1/05 . . . . . . . . . . . . . 1,455,705
1,500,000 6.90% due 3/26/03 . . . . . . . . . . . . . 1,470,465
3,500,000 6.705% due 11/9/05 . . . . . . . . . . . . 3,341,415
1,500,000 6.37% due 1/23/06 . . . . . . . . . . . . . 1,401,330
Federal Home Loan Mortgage Corp.
(Pools/REMICS):
1,570,851 8.50% due 3/1/25 . . . . . . . . . . . . . 1,604,719
1,276,756 8.00% due 2/1/25 . . . . . . . . . . . . . 1,279,540
128,498 7.50% due 9/1/25 . . . . . . . . . . . . . 125,928
470,333 7.50% due 9/1/25 . . . . . . . . . . . . . 460,926
232,155 7.50% due 9/1/25 . . . . . . . . . . . . . 227,512
1,500,000 7.30% due 4/15/21 . . . . . . . . . . . . . 1,464,375
2,000,000 7.00% due 9/15/23 . . . . . . . . . . . . . 1,941,860
175,000 5.50% due 2/25/19 . . . . . . . . . . . . . 161,710
Federal National Mortgage Association:
1,000,000 9.05% due 4/10/00 . . . . . . . . . . . . . 1,077,810
2,000,000 7.27% due 8/24/05 . . . . . . . . . . . . . 1,976,560
2,000,000 6.85% due 9/12/05 . . . . . . . . . . . . . 1,920,940
2,000,000 6.82% due 3/27/01 . . . . . . . . . . . . . 1,971,880
1,000,000 6.78% due 7/28/00 . . . . . . . . . . . . . 990,620
2,000,000 6.70% due 11/10/05 . . . . . . . . . . . . 1,896,880
2,000,000 6.41% due 3/8/06 . . . . . . . . . . . . . 1,907,500
Student Loan Marketing Association:
1,000,000 7.50% due 3/8/00 . . . . . . . . . . . . . 1,025,310
3,000,000 7.00% due 3/3/98 . . . . . . . . . . . . . 3,033,750
2,000,000 5.88% due 2/6/01 . . . . . . . . . . . . . 1,918,120
---------------
46,652,000
---------------
UNITED STATES BONDS & NOTES - 20.29%
United States Treasury Bonds:
2,000,000 8.75% due 8/15/20 . . . . . . . . . . . . . 2,354,380
3,500,000 8.50% due 2/15/20 . . . . . . . . . . . . . 4,016,810
United States Treasury Notes:
1,000,000 8.25% due 7/15/98 . . . . . . . . . . . . . 1,038,440
2,000,000 8.125% due 2/15/98 . . . . . . . . . . . . 2,060,620
2,500,000 6.75% due 4/30/00 . . . . . . . . . . . . . 2,514,850
1,000,000 6.50% due 5/15/97 . . . . . . . . . . . . . 1,005,940
1,000,000 6.375% due 1/15/00 . . . . . . . . . . . . 994,690
1,000,000 5.75% due 8/15/03 . . . . . . . . . . . . . 941,720
1,000,000 5.25% due 12/31/97 . . . . . . . . . . . . 987,030
---------------
15,914,480
---------------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $67,576,847) . . . . . . . . . . . . . 66,690,911
---------------
SUPRANATIONAL - 2.72%
1,800,000 International Bank for
Reconstruction & Development,
9.25% due 7/15/17
(Cost $1,965,099) . . . . . . . . . . . . . 2,134,674
---------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 10.81%
CONSUMER FINANCE - 8.52%
3,500,000 Commercial Credit Corp.,
5.16% due 6/3/96 . . . . . . . . . . . . . 3,498,997
3,188,000 Sears Roebuck Acceptance Corp.,
5.30% due 6/7/96 . . . . . . . . . . . . . 3,185,184
---------------
6,684,181
---------------
SECURITIES RELATED - 2.29%
1,794,000 Merrill Lynch & Co., Inc.,
5.30% due 6/5/96 . . . . . . . . . . . . . 1,792,943
---------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $8,477,124) . . . . . . . . . . . . . . 8,477,124
---------------
TOTAL INVESTMENTS
(Cost $78,019,070) - 98.57% . . . . . . . . . 77,302,709
Other assets and liabilities,
net - 1.43% . . . . . . . . . . . . . . . 1,120,340
---------------
NET ASSETS (equivalent to $9.61 per share on
8,163,674 shares outstanding) - 100% . . . $ 78,423,049
---------------
</TABLE>
72
<PAGE> 174
GOVERNMENT SECURITIES FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/96)
8 (2) U.S. Treasury Bond Futures
(September/$107.53) . . . . . . . . . . . . $ (12,124)
5 (2) U.S. Treasury 10 Year Notes
(September/$106.06) . . . . . . . . . . . . (6,094)
----------------
$ (18,218)
----------------
</TABLE>
(1) U.S.Treasury Notes with a market value of
approximately $35,000 were maintained in a segregated
account with a portion placed as collateral
for futures contracts.
(2) Per 1,000
<TABLE>
<S> <C> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
8,163,674 shares outstanding . . . . . . . . . . . . . . . . . . $ 81,637
Additional paid in capital . . . . . . . . . . . . . . . . . . . 81,156,490
Accumulated net realized loss on securities . . . . . . . . . . (2,096,740)
Undistributed net investment income . . . . . . . . . . . . . . . 16,241
Unrealized depreciation of:
Investments . . . . . . . . . . . . . . . . . . $ (716,361)
Futures . . . . . . . . . . . . . . . . . . . . (18,218) (734,579)
----------- ---------------
NET ASSETS APPLICABLE TO
SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . . $ 78,423,049
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE> 175
GOVERNMENT SECURITIES FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,610,882
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,148
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,918
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,642
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,798
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,367
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,196
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384,069
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,226,813
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 801,569
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,498) 788,071
-------------
Net unrealized depreciation during the year:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,218,748)
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,718) (3,244,466)
------------- -------------
Net realized and unrealized loss on securities during the year . . . . . . . . . . . . . . . . . (2,456,395)
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,770,418
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,226,813 $ 2,881,198
Net realized gain (loss) on securities . . . . . . . . . . . . . . . . . . . 788,071 (2,249,712)
Net unrealized appreciation (depreciation) of securities during the year . . (3,244,466) 4,099,486
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 1,770,418 4,730,972
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,221,098) (2,899,817)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 29,935,878 12,735,273
Proceeds from capital stock issued for distributions reinvested . . . . . . . 4,221,098 2,899,817
---------------------------------
34,156,976 15,635,090
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (7,457,426) (6,693,122)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 26,699,550 8,941,968
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 24,248,870 10,773,123
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,174,179 43,401,056
---------------------------------
End of year (including undistributed net investment
income of $16,241 and $10,526) . . . . . . . . . . . . . . . . . . . . . . $ 78,423,049 $ 54,174,179
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 3,005,467 1,337,149
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 426,047 306,305
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (745,798) (709,711)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 2,685,716 933,743
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,477,958 4,544,215
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,163,674 5,477,958
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE> 176
INTERNATIONAL
GOVERNMENT BOND FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT BONDS - 84.70%
AUSTRALIA - 2.69%
Commonwealth:
A$ 1,000,000 12.00% due 7/15/99 . . . . . . . . . . . . $ 875,265
A$ 400,000 10.00% due 10/15/07 . . . . . . . . . . . . 343,980
A$ 500,000 9.75% due 3/15/02 . . . . . . . . . . . . . 418,537
A$ 500,000 8.75% due 1/15/01 . . . . . . . . . . . . . 401,704
A$ 750,000 7.50% due 7/15/05 . . . . . . . . . . . . . 549,693
A$ 500,000 7.00% due 4/15/00 . . . . . . . . . . . . . 379,667
A$ 300,000 South Australia Finance Authority,
12.50% due 5/8/01 . . . . . . . . . . . . . 270,722
A$ 400,000 South Australian Government,
7.75% due 4/15/98 . . . . . . . . . . . . . 315,618
A$ 200,000 State Bank of New South Wales,
7.00% due 6/30/99 . . . . . . . . . . . . . 153,344
A$ 150,000 State Bank of South Australia,
7.25% due 6/15/00 . . . . . . . . . . . . . 113,661
---------------
3,822,191
---------------
AUSTRIA - 2.23%
Republic of Austria:
As 2,500,000 8.50% due 2/21/01 . . . . . . . . . . . . . 261,045
As 2,000,000 7.125% due 7/12/04 . . . . . . . . . . . . 195,056
As 1,500,000 7.00% due 2/14/00 . . . . . . . . . . . . . 149,015
As 2,200,000 7.00% due 1/20/03 . . . . . . . . . . . . . 215,279
As 2,000,000 7.00% due 5/16/05 . . . . . . . . . . . . . 192,356
As 2,000,000 6.875% due 4/19/02 . . . . . . . . . . . . 197,104
As 2,000,000 6.50% due 11/17/05 . . . . . . . . . . . . 186,397
As 1,000,000 5.75% due 3/22/99 . . . . . . . . . . . . . 96,225
As 1,500,000 5.375% due 11/23/98 . . . . . . . . . . . . 143,080
Y. 100MM 4.75% due 12/20/04 . . . . . . . . . . . . 1,030,912
Y. 50MM 4.50% due 9/28/05 . . . . . . . . . . . . . 510,498
---------------
3,176,967
---------------
BELGIUM - 3.90%
Kingdom of Belgium:
Bf 10,000,000 10.00% due 8/2/00 . . . . . . . . . . . . . 376,467
Bf 4,000,000 9.25% due 8/29/97 . . . . . . . . . . . . . 136,505
Bf 15,000,000 9.00% due 7/30/98 . . . . . . . . . . . . . 527,391
Bf 25,000,000 8.75% due 6/25/02 . . . . . . . . . . . . . 914,302
Bf 10,000,000 8.00% due 12/24/12 . . . . . . . . . . . . 337,564
Bf 10,000,000 8.00% due 3/28/15 . . . . . . . . . . . . . 335,491
Bf 10,000,000 7.75% due 12/22/00 . . . . . . . . . . . . 350,383
Bf 25,000,000 7.75% due 10/15/04 . . . . . . . . . . . . 863,201
Bf 10,000,000 7.50% due 7/29/08 . . . . . . . . . . . . . 331,951
Bf 22,000,000 7.00% due 4/29/99 . . . . . . . . . . . . . 749,656
Bf 20,000,000 6.50% due 3/31/05 . . . . . . . . . . . . . 635,332
---------------
5,558,243
---------------
CANADA - 4.70%
C$ 800,000 British Columbia Province,
9.85% due 5/1/98 . . . . . . . . . . . . . 621,848
Government of Canada:
C$ 550,000 9.50% due 6/1/10 . . . . . . . . . . . . . 452,627
C$ 500,000 9.00% due 12/1/04 . . . . . . . . . . . . . 395,495
C$ 500,000 9.00% due 6/1/25 . . . . . . . . . . . . . 399,511
C$ 500,000 8.75% due 12/1/05 . . . . . . . . . . . . . 390,586
C$ 500,000 8.50% due 3/1/00 . . . . . . . . . . . . . 384,709
C$ 1,000,000 8.50% due 4/1/02 . . . . . . . . . . . . . 771,075
C$ 1,000,000 8.00% due 6/1/23 . . . . . . . . . . . . . 719,813
C$ 1,000,000 7.75% due 9/1/99 . . . . . . . . . . . . . 752,007
C$ 1,000,000 7.50% due 3/1/01 . . . . . . . . . . . . . 742,079
C$ 1,000,000 7.25% due 6/1/03 . . . . . . . . . . . . . 721,316
C$ 500,000 6.50% due 6/1/04 . . . . . . . . . . . . . 340,768
---------------
6,691,834
---------------
DENMARK - 3.66%
Kingdom of Denmark:
DK 2,500,000 9.00% due 11/15/98 . . . . . . . . . . . . 462,240
DK 2,500,000 9.00% due 11/15/00 . . . . . . . . . . . . 470,683
DK 5,000,000 8.00% due 11/15/01 . . . . . . . . . . . . 904,964
DK 2,500,000 8.00% due 5/15/03 . . . . . . . . . . . . . 449,257
DK 3,000,000 8.00% due 3/15/06 . . . . . . . . . . . . . 527,145
DK 3,000,000 7.00% due 12/15/04 . . . . . . . . . . . . 502,808
DK 1,250,000 7.00% due 11/10/24 . . . . . . . . . . . . 181,587
L. 250,000 6.75% due 8/24/98 . . . . . . . . . . . . . 385,722
DK 2,000,000 6.00% due 12/10/99 . . . . . . . . . . . . 343,996
Ff 5,000,000 5.50% due 10/26/99 . . . . . . . . . . . . 980,511
---------------
5,208,913
---------------
FINLAND - 1.73%
Republic of Finland:
L. 250,000 8.00% due 4/7/03 . . . . . . . . . . . . . 384,995
Ff 5,000,000 7.00% due 6/15/04 . . . . . . . . . . . . . 998,646
Y. 100MM 6.00% due 1/29/02 . . . . . . . . . . . . . 1,082,176
---------------
2,465,817
---------------
FRANCE - 4.43%
Government of France:
Ff 4,600,000 9.50% due 1/25/01 . . . . . . . . . . . . . 1,033,632
Ff 3,500,000 8.50% due 11/25/02 . . . . . . . . . . . . 768,111
Ff 1,500,000 8.50% due 12/26/12 . . . . . . . . . . . . 335,284
Ff 6,000,000 7.75% due 4/12/00 . . . . . . . . . . . . . 1,260,470
Ff 7,000,000 6.75% due 10/25/03 . . . . . . . . . . . . 1,400,135
Ff 7,000,000 6.00% due 10/25/25 . . . . . . . . . . . . 1,143,128
Ff 2,000,000 5.50% due 4/25/04 . . . . . . . . . . . . . 368,895
---------------
6,309,655
---------------
GERMANY - 12.62%
Federal Republic of Germany:
DM 2,000,000 7.50% due 9/9/04 . . . . . . . . . . . . . 1,408,519
DM 3,100,000 7.125% due 12/20/02 . . . . . . . . . . . . 2,163,093
DM 1,500,000 7.00% due 1/13/00 . . . . . . . . . . . . . 1,055,111
DM 3,000,000 6.875% due 2/24/99 . . . . . . . . . . . . 2,092,136
DM 3,000,000 6.50% due 3/15/00 . . . . . . . . . . . . . 2,074,836
DM 3,000,000 6.50% due 7/15/03 . . . . . . . . . . . . . 2,012,713
DM 2,000,000 6.50% due 10/14/05 . . . . . . . . . . . . 1,315,990
DM 2,000,000 6.25% due 1/4/24 . . . . . . . . . . . . . 1,156,488
DM 2,500,000 6.00% due 2/20/98 . . . . . . . . . . . . . 1,697,246
DM 4,000,000 6.00% due 6/20/16 . . . . . . . . . . . . . 2,320,052
DM 1,000,000 5.00% due 1/14/99 . . . . . . . . . . . . . 668,218
---------------
17,964,402
---------------
</TABLE>
75
<PAGE> 177
INTERNATIONAL
GOVERNMENT BOND FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
ITALY - 7.55%
Republic of Italy:
Lit 1,500MM 12.00% due 9/18/98 . . . . . . . . . . . . $ 1,034,915
Lit 1,000MM 12.00% due 6/1/01 . . . . . . . . . . . . . 724,146
Lit 500MM 12.00% due 1/1/02 . . . . . . . . . . . . . 363,498
Lit 2,000MM 10.50% due 4/1/00 . . . . . . . . . . . . . 1,365,117
Lit 500MM 10.50% due 4/1/05 . . . . . . . . . . . . . 345,231
Lit 500MM 10.50% due 9/1/05 . . . . . . . . . . . . . 345,101
Lit 900MM 10.00% due 8/1/03 . . . . . . . . . . . . . 606,374
Lit 2,000MM 9.50% due 12/1/97 . . . . . . . . . . . . . 1,309,279
Lit 500MM 9.50% due 1/1/05 . . . . . . . . . . . . . 326,640
Lit 2,000MM 9.00% due 11/1/23 . . . . . . . . . . . . . 1,208,745
Lit 1,400MM 8.50% due 1/1/99 . . . . . . . . . . . . . 907,880
Lit 1,000MM 8.50% due 4/1/99 . . . . . . . . . . . . . 649,393
Lit 500MM 8.50% due 8/1/99 . . . . . . . . . . . . . 322,785
Lit 1,000MM 8.50% due 4/1/04 . . . . . . . . . . . . . 623,935
Lit 1,000MM 8.50% due 8/1/04 . . . . . . . . . . . . . 619,903
---------------
10,752,942
---------------
JAPAN - 20.58%
Government of Japan:
Y. 250MM 6.60% due 6/20/01 . . . . . . . . . . . . . 2,772,454
Y. 320MM 6.40% due 3/20/00 . . . . . . . . . . . . . 3,445,333
Y. 105MM 6.00% due 12/20/01 . . . . . . . . . . . . 1,142,944
Y. 365MM 5.50% due 3/20/02 . . . . . . . . . . . . . 3,896,375
Y. 30MM 5.00% due 12/22/97 . . . . . . . . . . . . 295,361
Y. 120MM 5.00% due 12/20/02 . . . . . . . . . . . . 1,254,444
Y. 100MM 5.00% due 9/21/09 . . . . . . . . . . . . . 1,068,519
Y. 100MM 5.00% due 3/20/15 . . . . . . . . . . . . . 1,082,130
Y. 250MM 4.90% due 9/20/99 . . . . . . . . . . . . . 2,551,852
Y. 130MM 4.80% due 6/21/99 . . . . . . . . . . . . . 1,318,657
Y. 170MM 4.60% due 6/22/98 . . . . . . . . . . . . . 1,683,000
Y. 127MM 4.50% due 6/20/03 . . . . . . . . . . . . . 1,292,460
Y. 75MM 4.50% due 12/20/04 . . . . . . . . . . . . 765,625
Y. 150MM 4.40% due 9/22/03 . . . . . . . . . . . . . 1,520,000
Y. 200MM 4.20% due 9/21/15 . . . . . . . . . . . . . 1,959,445
Y. 100MM 3.90% due 6/21/04 . . . . . . . . . . . . . 980,000
Y. 100MM 3.00% due 9/20/05 . . . . . . . . . . . . . 915,185
Y. 150MM 2.90% due 12/20/05 . . . . . . . . . . . . 1,350,972
---------------
29,294,756
---------------
NETHERLANDS - 4.52%
Government of the Netherlands:
NG 1,050,000 9.00% due 10/16/00 . . . . . . . . . . . . 707,789
NG 500,000 8.50% due 3/15/01 . . . . . . . . . . . . . 332,064
NG 500,000 8.25% due 2/15/02 . . . . . . . . . . . . . 330,015
NG 500,000 8.25% due 6/15/02 . . . . . . . . . . . . . 330,893
NG 500,000 8.25% due 2/15/07 . . . . . . . . . . . . . 331,332
NG 1,000,000 7.75% due 3/1/05 . . . . . . . . . . . . . 641,874
NG 500,000 7.50% due 6/15/99 . . . . . . . . . . . . . 317,716
NG 500,000 7.50% due 4/15/10 . . . . . . . . . . . . . 314,349
NG 750,000 7.50% due 1/15/23 . . . . . . . . . . . . . 464,275
NG 1,250,000 6.50% due 7/15/98 . . . . . . . . . . . . . 770,498
NG 1,250,000 6.50% due 4/15/03 . . . . . . . . . . . . . 756,223
NG 2,000,000 5.75% due 1/15/04 . . . . . . . . . . . . . 1,144,949
---------------
6,441,977
---------------
SPAIN - 4.15%
Government of Spain:
Pst 40MM 12.25% due 3/25/00 . . . . . . . . . . . . $ 350,585
Pst 55MM 11.45% due 8/30/98 . . . . . . . . . . . . 458,501
Pst 70MM 11.00% due 6/15/97 . . . . . . . . . . . . 562,437
Pst 50MM 10.50% due 10/30/03 . . . . . . . . . . . . 419,271
Pst 50MM 10.30% due 6/15/02 . . . . . . . . . . . . 416,784
Pst 100MM 10.15% due 1/31/06 . . . . . . . . . . . . 823,852
Pst 100MM 10.10% due 2/28/01 . . . . . . . . . . . . 824,078
Pst 50MM 10.00% due 2/28/05 . . . . . . . . . . . . 409,089
Pst 50MM 8.30% due 12/15/98 . . . . . . . . . . . . 391,715
Pst 70MM 8.20% due 2/28/09 . . . . . . . . . . . . . 504,333
Pst 50MM 8.00% due 5/30/04 . . . . . . . . . . . . . 366,145
Pst 50MM 7.40% due 7/30/99 . . . . . . . . . . . . . 382,583
---------------
5,909,373
---------------
SWEDEN - 3.45%
Kingdom of Sweden:
SK 2,000,000 13.00% due 6/15/01 . . . . . . . . . . . . 361,693
SK 3,500,000 11.00% due 1/21/99 . . . . . . . . . . . . 570,874
SK 3,000,000 10.25% due 5/5/00 . . . . . . . . . . . . . 489,811
SK 6,000,000 10.25% due 5/5/03 . . . . . . . . . . . . . 991,090
SK 5,000,000 9.00% due 4/20/09 . . . . . . . . . . . . . 760,267
SK 6,000,000 6.00% due 2/9/05 . . . . . . . . . . . . . 761,728
Y. 100MM 3.875% due 6/21/99 . . . . . . . . . . . . 982,639
---------------
4,918,102
---------------
SWITZERLAND - 0.57%
Government of Switzerland:
Chf 500,000 4.50% due 4/8/06 . . . . . . . . . . . . . 398,921
Chf 500,000 4.00% due 3/10/99 . . . . . . . . . . . . . 409,709
---------------
808,630
---------------
UNITED KINGDOM - 6.11%
Government of United Kingdom:
L. 250,000 10.00% due 2/26/01 . . . . . . . . . . . . 423,132
L. 325,000 9.00% due 3/3/00 . . . . . . . . . . . . . 529,139
L. 400,000 9.00% due 10/13/08 . . . . . . . . . . . . 655,702
L. 400,000 9.00% due 8/6/12 . . . . . . . . . . . . . 654,540
L. 750,000 8.75% due 8/25/17 . . . . . . . . . . . . . 1,199,659
L. 250,000 8.50% due 12/7/05 . . . . . . . . . . . . . 397,344
L. 250,000 8.00% due 12/7/00 . . . . . . . . . . . . . 394,802
L. 550,000 8.00% due 6/10/03 . . . . . . . . . . . . . 857,111
L. 500,000 8.00% due 9/25/09 . . . . . . . . . . . . . 759,337
L. 250,000 8.00% due 12/7/15 . . . . . . . . . . . . . 373,736
L. 100,000 7.25% due 3/30/98 . . . . . . . . . . . . . 156,274
L. 500,000 7.00% due 11/6/01 . . . . . . . . . . . . . 753,041
L. 300,000 6.75% due 11/26/04 . . . . . . . . . . . . 428,144
L. 750,000 6.00% due 8/10/99 . . . . . . . . . . . . . 1,122,660
---------------
8,704,621
---------------
UNITED STATES - 1.81%
DM 4,000,000 Federal National Mortgage Association,
5.00% due 2/16/01 . . . . . . . . . . . . . 2,576,540
---------------
TOTAL GOVERNMENT BONDS
(Cost $119,739,850) . . . . . . . . . . . . . 120,604,963
---------------
</TABLE>
76
<PAGE> 178
INTERNATIONAL
GOVERNMENT BOND FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
SUPRANATIONAL - 7.86%
Asian Development Bank:
Y. 50MM 5.00% due 2/5/03 . . . . . . . . . . . . . $ 520,509
Y. 150MM 3.125% due 6/29/05 . . . . . . . . . . . . 1,376,736
Eurofima:
Ff 1,600,000 9.25% due 12/18/03 . . . . . . . . . . . . 362,317
L. 250,000 7.50% due 2/5/98 . . . . . . . . . . . . . 391,291
European Investment Bank:
Lit 400MM 10.50% due 4/30/98 . . . . . . . . . . . . 269,150
Lit 1,100MM 10.50% due 2/7/02 . . . . . . . . . . . . . 816,761
L. 250,000 9.00% due 5/14/02 . . . . . . . . . . . . . 408,240
Ff 5,000,000 6.75% due 5/14/98 . . . . . . . . . . . . . 1,005,900
Ff 2,000,000 6.125% due 10/8/04 . . . . . . . . . . . . 382,049
Y. 25MM 6.625% due 3/15/00 . . . . . . . . . . . . 269,387
Y. 100MM 4.625% due 2/26/03 . . . . . . . . . . . . 1,020,833
Y. 55MM Inter America Development Bank,
6.75% due 2/20/01 . . . . . . . . . . . . . 606,655
International Bank for
Reconstruction & Development:
Lit 150MM 10.80% due 11/13/01 . . . . . . . . . . . . 112,227
Lit 1,000MM 10.625% due 11/25/97 . . . . . . . . . . . 667,118
Lit 1,000MM 10.625% due 3/27/98 . . . . . . . . . . . . 672,208
Lit 200MM 9.45% due 8/11/03 . . . . . . . . . . . . . 133,441
L. 400,000 9.25% due 7/20/07 . . . . . . . . . . . . . 650,860
Y. 100MM 4.50% due 3/20/03 . . . . . . . . . . . . . 1,018,519
Y. 50MM 4.50% due 6/20/00 . . . . . . . . . . . . . 506,655
---------------
TOTAL SUPRANATIONAL
(Cost $11,587,770) . . . . . . . . . . . . . 11,190,856
---------------
CORPORATE BONDS - 4.09%
FRANCE - 3.52%
Credit Local de France:
FF 2,500,000 9.25% due 12/7/99 . . . . . . . . . . . . . 544,057
FF 5,000,000 8.875% due 6/10/02 . . . . . . . . . . . . 1,105,039
FF 3,000,000 6.25% due 9/27/05 . . . . . . . . . . . . . 566,907
FF 4,000,000 6.00% due 11/15/01 . . . . . . . . . . . . 783,441
FF 10,000,000 Elf Aquitaine SA - ADR,
7.125% due 8/11/03 . . . . . . . . . . . . 2,017,845
---------------
5,017,289
---------------
NETHERLANDS - 0.33%
NG 750,000 Aegon NV,
7.125% due 9/1/98 . . . . . . . . . . . . . $ 467,630
--------------
SWITZERLAND - 0.24%
Lit 500MM Union Bank of Switzerland AG,
9.25% due 8/23/00 . . . . . . . . . . . . . 334,413
---------------
TOTAL CORPORATE BONDS
(Cost $5,629,755) . . . . . . . . . . . . . . 5,819,332
---------------
TOTAL INVESTMENTS
(Cost $136,957,375) - 96.65% . . . . . . . . 137,615,151
Other assets and liabilities, net - 3.35% . 4,768,114
---------------
NET ASSETS (equivalent to $11.79 per share on
12,072,675 shares outstanding) - 100% . . $ 142,383,265
---------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
12,072,675 shares outstanding . . . . . . . . . . . . . . . . $ 120,727
Additional paid in capital . . . . . . . . . . . . . . . . . . . 141,222,238
Undistributed net realized gain on securities and
foreign currency transactions . . . . . . . . . . . . . . . . 284,453
Undistributed net investment income . . . . . . . . . . . . . . . 151,884
Unrealized appreciation of securities and
foreign currency translation . . . . . . . . . . . . . . . . . 603,963
---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 142,383,265
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
77
<PAGE> 179
INTERNATIONAL GOVERNMENT BOND FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $263,811) . . . . . . . . . . . . . . . . . . . . . . $ 6,898,596
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573,962
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,876
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,624
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,934
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,824
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643,592
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,255,004
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 971,930
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . (176,695) 795,235
--------------
Net unrealized depreciation during the year:
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,542,937)
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . (107,034) (8,649,971)
-------------- --------------
Net realized and unrealized loss on securities and foreign currencies during the year . . . . (7,854,736)
--------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,599,732)
--------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,255,004 $ 3,002,824
Net realized gain on securities and foreign currency transactions . . . . . . 795,235 194,660
Net unrealized appreciation (depreciation) of securities and translation
of foreign currencies during the year . . . . . . . . . . . . . . . . . . (8,649,971) 8,491,114
---------------------------------
Increase (decrease) in net assets resulting from operations . . . . . . (1,599,732) 11,688,598
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,585,664) (3,173,182)
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . (127,626) -
---------------------------------
Decrease in net assets resulting from distributions to shareholders . . . (6,713,290) (3,173,182)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 95,539,705 34,640,967
Proceeds from capital stock issued for distributions reinvested . . . . . . . 6,713,290 3,173,182
---------------------------------
102,252,995 37,814,149
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (29,290,511) (9,623,857)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 72,962,484 28,190,292
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 64,649,462 36,705,708
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,733,803 41,028,095
---------------------------------
End of year (including undistributed net investment
income of $151,884 and $28,252) . . . . . . . . . . . . . . . . . . . . . . $ 142,383,265 $ 77,733,803
---------------------------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 7,828,955 2,933,943
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 556,598 274,556
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (2,423,786) (838,751)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 5,961,767 2,369,748
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,110,908 3,741,160
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,072,675 6,110,908
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE> 180
MONEY MARKET FUND MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 85.31%
BANKS - REGIONAL - 3.57%
BANC ONE CORP.:
$ 1,500,000 5.27% due 7/22/96 . . . . . . . . . . . . . $ 1,488,801
1,500,000 5.22% due 6/14/96 . . . . . . . . . . . . . 1,497,173
---------------
2,985,974
---------------
BEVERAGE - SOFT DRINKS - 7.68%
Coca-Cola Enterprises Inc.:
1,000,000 5.28% due 8/2/96 . . . . . . . . . . . . . 990,907
1,000,000 5.27% due 7/3/96 . . . . . . . . . . . . . 995,316
1,000,000 5.26% due 6/7/96 . . . . . . . . . . . . . 999,123
Pepsico Inc.:
1,962,000 5.25% due 7/15/96 . . . . . . . . . . . . . 1,949,410
1,500,000 5.25% due 8/8/96 . . . . . . . . . . . . . 1,485,125
---------------
6,419,881
---------------
CHEMICAL - MAJOR - 2.98%
E. I. du Pont de Nemours and Co.:
1,000,000 5.28% due 7/30/96 . . . . . . . . . . . . . 991,347
1,500,000 5.23% due 6/25/96 . . . . . . . . . . . . . 1,494,770
---------------
2,486,117
---------------
CONSUMER FINANCE - 12.05%
Associates Corp. of North America:
562,000 5.22% due 7/8/96 . . . . . . . . . . . . . 558,985
1,900,000 5.18% due 6/28/96 . . . . . . . . . . . . . 1,892,619
Beneficial Corp.:
830,000 5.28% due 7/29/96 . . . . . . . . . . . . . 822,939
1,128,000 5.27% due 8/28/96 . . . . . . . . . . . . . 1,113,469
1,338,000 5.25% due 8/14/96 . . . . . . . . . . . . . 1,323,561
550,000 5.23% due 7/19/96 . . . . . . . . . . . . . 546,165
Sears Roebuck Acceptance Corp.:
1,500,000 5.32% due 9/4/96 . . . . . . . . . . . . . 1,478,942
1,000,000 5.30% due 8/19/96 . . . . . . . . . . . . . 988,369
500,000 5.28% due 7/1/96 . . . . . . . . . . . . . 497,800
856,000 5.24% due 6/17/96 . . . . . . . . . . . . . 854,006
---------------
10,076,855
---------------
DRUGS - 3.11%
Schering Corp.:
630,000 5.27% due 7/16/96 . . . . . . . . . . . . . 625,850
2,000,000 5.25% due 8/27/96 . . . . . . . . . . . . . 1,974,625
---------------
2,600,475
---------------
ELECTRICAL EQUIPMENT - 3.11%
General Electric Co.:
1,700,000 5.28% due 8/7/96 . . . . . . . . . . . . . 1,683,294
920,000 5.09% due 6/3/96 . . . . . . . . . . . . . 919,740
---------------
2,603,034
---------------
ENTERTAINMENT - 5.68%
$ 1,000,000 Mattel, Inc., 5.48% due 8/1/96 . . . . . . . $ 990,715
Walt Disney Co.:
1,200,000 5.28% due 8/1/96 . . . . . . . . . . . . . 1,189,264
1,000,000 5.26% due 7/22/96 . . . . . . . . . . . . . 992,548
1,600,000 5.20% due 8/30/96 . . . . . . . . . . . . . 1,579,200
---------------
4,751,727
---------------
FINANCE COMPANIES - 19.70%
CIESCO L P:
1,200,000 5.27% due 7/19/96 . . . . . . . . . . . . . 1,191,568
1,200,000 5.25% due 8/6/96 . . . . . . . . . . . . . 1,188,450
CIT Group Holdings, Inc.:
2,000,000 5.25% due 8/23/96 . . . . . . . . . . . . . 1,975,792
1,250,000 5.23% due 7/26/96 . . . . . . . . . . . . . 1,240,012
1,300,000 General Electric Capital Services Inc.,
5.31% due 8/21/96 . . . . . . . . . . . . . 1,284,468
International Lease Finance Corp.:
1,200,000 5.27% due 9/12/96 . . . . . . . . . . . . . 1,181,906
1,500,000 5.26% due 7/9/96 . . . . . . . . . . . . . 1,491,672
1,100,000 5.22% due 7/18/96 . . . . . . . . . . . . . 1,092,504
J.C. Penney Funding Corp.:
1,000,000 5.29% due 7/11/96 . . . . . . . . . . . . . 994,122
1,192,000 5.28% due 6/6/96 . . . . . . . . . . . . . 1,191,126
Transamerica Finance Corp.:
975,000 5.33% due 11/1/96 . . . . . . . . . . . . . 952,914
1,858,000 5.27% due 6/27/96 . . . . . . . . . . . . . 1,850,928
845,000 5.27% due 8/20/96 . . . . . . . . . . . . . 835,104
---------------
16,470,566
---------------
INFORMATION PROCESSING - 7.59%
Hewlett-Packard Co.:
1,000,000 5.18% due 7/17/96 . . . . . . . . . . . . . 993,381
1,200,000 5.17% due 7/11/96 . . . . . . . . . . . . . 1,193,107
428,000 5.02% due 6/20/96 . . . . . . . . . . . . . 426,866
International Business Machines Corp.:
1,000,000 5.27% due 8/15/96 . . . . . . . . . . . . . 989,021
950,000 5.25% due 6/19/96 . . . . . . . . . . . . . 947,506
1,800,000 5.24% due 6/21/96 . . . . . . . . . . . . . 1,794,760
---------------
6,344,641
---------------
INSURANCE - MULTILINE - 1.19%
1,000,000 Marsh & McLennan Companies, Inc.,
5.32% due 7/12/96 . . . . . . . . . . . . . 993,941
---------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 2.02%
1,686,000 Cooper Industries, Inc.,
5.40% due 6/3/96 . . . . . . . . . . . . . 1,685,494
---------------
MERCHANDISING - MASS - 2.38%
2,000,000 Wal-Mart Stores, Inc.,
5.27% due 7/10/96 . . . . . . . . . . . . . 1,988,582
---------------
</TABLE>
79
<PAGE> 181
MONEY MARKET FUND - CONTINUED MAY 31, 1996 STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
OIL - INTEGRATED DOMESTIC - 1.78%
$ 1,500,000 Atlantic Richfield Co.,
5.24% due 7/23/96 . . . . . . . . . . . . . $ 1,488,647
---------------
SECURITIES RELATED - 4.52%
Merrill Lynch & Co., Inc.:
1,500,000 5.33% due 8/12/96 . . . . . . . . . . . . . 1,484,010
600,000 5.25% due 6/10/96 . . . . . . . . . . . . . 599,212
700,000 5.25% due 6/26/96 . . . . . . . . . . . . . 697,448
1,000,000 4.75% due 6/24/96 . . . . . . . . . . . . . 999,298
---------------
3,779,968
---------------
TOBACCO - 4.65%
1,000,000 American Brands, Inc.,
5.29% due 6/12/96 . . . . . . . . . . . . . 998,383
Philip Morris Companies Inc.:
974,000 5.27% due 7/25/96 . . . . . . . . . . . . . 966,300
948,000 5.26% due 9/9/96 . . . . . . . . . . . . . 934,149
1,000,000 5.25% due 8/5/96 . . . . . . . . . . . . . 990,521
---------------
3,889,353
---------------
UTILITIES - COMMUNICATION - 0.69%
582,000 GTE Corp., 5.37% due 6/12/96 . . . . . . . . 581,045
---------------
UTILITIES - ELECTRIC - 2.61%
1,000,000 Central & South West,
5.50% due 6/5/96 . . . . . . . . . . . . . 999,389
1,200,000 Southern California Edison Co.,
5.25% due 8/26/96 . . . . . . . . . . . . . 1,184,950
---------------
2,184,339
---------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $71,330,639) . . . . . . . . . . . . . 71,330,639
---------------
CORPORATE SHORT TERM
OBLIGATIONS - 4.78%
FINANCE COMPANIES - 1.19%
1,000,000 Ford Motor Credit Co,
Floating rate note due 2/18/97,
5.63828% at 5/31/96 . . . . . . . . . . . . 1,001,590
---------------
SECURITIES RELATED - 3.59%
Bear Stearns Co. Inc.:
1,000,000 Floating rate note due 5/14/97,
5.4875% at 5/31/96 . . . . . . . . . . . 1,000,000
2,000,000 Floating rate note due 1/22/97,
5.4875% at 5/31/96 . . . . . . . . . . . 2,000,000
---------------
3,000,000
---------------
TOTAL CORPORATE SHORT TERM
OBLIGATIONS
(Cost $4,001,590) . . . . . . . . . . . . . . 4,001,590
---------------
UNITED STATES GOVERNMENT -
SHORT TERM - 10.95%
GOVERNMENT SPONSORED - 9.77%
Federal Farm Credit Banks:
$ 1,000,000 5.875% due 9/3/96 . . . . . . . . . . . . . $ 1,000,000
1,000,000 5.60% due 7/1/96 . . . . . . . . . . . . . 999,893
1,000,000 5.40% due 4/1/97 . . . . . . . . . . . . . 1,000,000
1,000,000 Federal Home Loan Banks,
5.705% due 5/1/97 . . . . . . . . . . . . . 1,000,000
1,000,000 Federal Home Loan Mortgage Corp.,
7.86% due 1/15/97 . . . . . . . . . . . . . 1,017,854
Federal National Mortgage Association:
1,000,000 7.88% due 12/20/96 . . . . . . . . . . . . 1,013,144
1,000,000 5.50% due 9/23/96 . . . . . . . . . . . . . 1,000,329
1,150,000 5.15% due 9/13/96 . . . . . . . . . . . . . 1,132,890
---------------
8,164,110
---------------
U.S. TREASURY BILLS - 1.18%
1,000,000 United States Treasury Bills,
4.96% due 9/5/96 . . . . . . . . . . . . . 986,773
---------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $9,150,883) . . . . . . . . . . . . . . 9,150,883
---------------
TOTAL INVESTMENTS
(Cost $84,483,112) - 101.04% . . . . . . . . 84,483,112
Other assets and liabilities, net - (1.04%) (865,467)
----------------
NET ASSETS (equivalent to $1.00 per share on
83,617,645 shares outstanding) - 100% . . $ 83,617,645
---------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
83,617,645 shares outstanding . . . . . . . . . . . . . . . . $ 836,176
Additional paid in capital . . . . . . . . . . . . . . . . . . . 82,781,469
---------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,617,645
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE> 182
MONEY MARKET FUND FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,810,801
-------------
EXPENSES:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,853
Custodian and accounting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,294
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,432
Audit fees and tax services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,794
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,127
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,409
-------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478,909
-------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,331,892
-------------
REALIZED GAIN ON SECURITIES:
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,796
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,333,688
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,331,892 $ 3,186,812
Net realized gain on securities . . . . . . . . . . . . . . . . . . . . . . . 1,796 -
---------------------------------
Increase in net assets resulting from operations . . . . . . . . . . . . . 4,333,688 3,186,812
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,331,892) (3,186,812)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold . . . . . . . . . . . . . . . . . . . . . . 150,153,912 133,137,958
Proceeds from capital stock issued for distributions reinvested . . . . . . . 4,331,892 3,186,812
---------------------------------
154,485,804 136,324,770
Cost of capital stock repurchased . . . . . . . . . . . . . . . . . . . . . . (153,123,752) (104,603,566)
---------------------------------
Increase in net assets resulting from capital stock transactions . . . . . 1,362,052 31,721,204
---------------------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1,363,848 31,721,204
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,253,797 50,532,593
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,617,645 $ 82,253,797
---------------------------------
CHANGE IN SHARES OUTSTANDING
Shares of capital stock sold . . . . . . . . . . . . . . . . . . . . . . . . 150,153,912 133,137,958
Shares issued for distributions reinvested . . . . . . . . . . . . . . . . . 4,331,892 3,186,812
Shares of capital stock repurchased . . . . . . . . . . . . . . . . . . . . (153,123,752) (104,603,566)
---------------------------------
Increase in shares outstanding . . . . . . . . . . . . . . . . . . . . . . 1,362,052 31,721,204
Shares outstanding:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,255,593 50,534,389
---------------------------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,617,645 82,255,593
---------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<PAGE> 183
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
The American General Series Portfolio Company (the "Series") consists of
thirteen separate investment portfolios (the "Funds"):
Stock Index Fund
MidCap Index Fund
Small Cap Index Fund
International Equities Fund
Growth Fund
Growth & Income Fund
Science & Technology Fund
Social Awareness Fund
Timed Opportunity Fund
Capital Conservation Fund
Government Securities Fund
International Government Bond Fund
Money Market Fund
The Series is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. Each
Fund is diversified with the exception of International Government Bond Fund
which is non-diversified as defined by the 1940 Act.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). GAAP requires accruals which
occasionally are based upon management estimates. The following is a summary of
significant accounting policies consistently followed by each Fund in the
preparation of its financial statements.
A. INVESTMENT VALUATION
Securities listed or traded on a national exchange are valued daily at
their last reported sale price. In the absence of any exchange sales on that
day and for unlisted issues, securities are valued at the last sale price on
the NASDAQ National Market System. In the absence of any National Market System
sales on that day, securities are valued at the last reported bid price.
However, options written for which other over-the-counter market quotations are
readily available are valued at the last reported asked price, in the absence
of any National Market System sales on that day. Futures contracts, options
thereon, and options on stock indexes are valued at the amount which would be
received upon a current disposition of such investments (i.e., their fair
market value), in the absence of any sales on that day. Short term debt
securities for which market quotations are readily available are valued at the
last reported bid price. However, any short term security with a remaining
maturity of 60 days or less and all investments of the Money Market Fund are
valued by the amortized cost method which approximates fair market value.
Investments for which market quotations are not readily available are valued at
fair value as determined in good faith by, or under authority delegated by, the
Series' Board of Directors.
B. OPTIONS AND FUTURES
CALL AND PUT OPTIONS. When a Fund writes a call or a put option, an amount
equal to the premium received is recorded as a liability. The liability is
"marked to market" daily to reflect the current market value of the option
written. When a written option expires, the Fund realizes a gain in the amount
of the premium originally received. If the Fund enters into a closing purchase
transaction, the Fund realizes a gain or loss in the amount of the original
premium less the cost of the closing transaction. If a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security, and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received reduces the cost of the security which the Fund
purchases upon exercise of the option.
Purchased options are recorded as investments. If a purchased option
expires, the Fund realizes a loss in the amount of the cost of the option. If
the Fund enters into a closing transaction, it realizes a gain (or loss), to
the extent that the proceeds from the sale are greater (or less) than the cost
of the option. If the Fund exercises a put option, it realizes a gain or loss
from the sale of the underlying security by adjusting the proceeds from such
sale by the amount of the premium originally paid. If the Fund exercises a call
option, the cost of the security purchased upon exercise is increased by the
premium originally paid.
FUTURES CONTRACTS. The initial margin deposit made upon entering into a
futures contract is held by the custodian, in a segregated account, in the name
of the broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in the value of the contract are
recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are received or made daily, as unrealized
gains or losses are incurred. When the contract is closed, the Fund realizes a
gain or loss in the amount of the cost of or proceeds from the closing
transaction less the Fund's basis in the contract.
C. REPURCHASE AGREEMENTS
The seller of a repurchase agreement collateralizes the agreement with
securities delivered to the Fund's custodian bank. The Adviser determines, on a
daily basis, that the seller maintains collateral of at least 100% of the
repurchase proceeds due to the Fund at maturity.
82
<PAGE> 184
NOTES TO FINANCIAL STATEMENTS - CONTINUED
D. FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund are maintained in U.S. dollars.
Transactions denominated in foreign currencies ("local currencies") are
translated into U.S. dollars at prevailing exchange rates on transaction date.
Net realized gains or losses on foreign currency transactions include
exchange rate gains and losses from disposition of foreign currencies, currency
gains and losses realized between trade and settlement dates of security
transactions, and currency gains and losses realized on settlement of other
assets and liabilities settled in local currencies.
In determining realized and unrealized gains or losses on foreign
securities for the period, the Funds do not isolate exchange rate fluctuations
from local security price fluctuations. Foreign currencies and other assets and
liabilities denominated in local currencies are marked-to-market daily to
reflect fluctuations in foreign exchange rates.
E. FEDERAL INCOME TAXES
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code and to distribute all of its taxable
net investment income and taxable net realized capital gains, in excess of any
available capital loss carryovers. Therefore no federal income tax provision is
required.
F. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains
and losses are determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date, except for dividend income on certain foreign
securities which is recorded when the Fund becomes aware of the dividend.
Interest income on investments is accrued daily.
G. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the record date. The Funds
declare distributions from net investment income monthly, except for the Money
Market Fund, which declares daily. Capital gains distributions are declared
annually.
Investment income and capital gains and losses are recognized in accordance
with generally accepted accounting principles ("book"). Distributions from net
investment income and realized capital gains are based on earnings as
determined in accordance with federal tax regulations ("tax") which may differ
from book basis earnings. At the end of the year, offsetting adjustments to
undistributed net investment income and undistributed net realized gains
(losses) are made to eliminate permanent book/tax differences arising in the
current year.
NOTE 3 -- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
VALIC (the "Adviser") serves as investment adviser to the Series. VALIC is
an indirect wholly-owned subsidiary of American General Corporation, Houston,
Texas. On May 1, 1992, the Adviser entered into a sub-advisory agreement with
Bankers Trust Company ("Bankers Trust"), a wholly-owned subsidiary of Bankers
Trust New York Corporation, to serve as investment sub-adviser to Stock Index
Fund, MidCap Index Fund, and Small Cap Index Fund. On April 29, 1994, the
Adviser entered into sub-advisory agreements with T. Rowe Price Associates,
Inc. to serve as investment sub-adviser to Growth Fund and Science & Technology
Fund, and with Value Line, Inc., to serve as investment sub-adviser to Growth &
Income Fund. Sub-advisers are compensated for such services by the Adviser.
The Adviser receives from the Series a monthly fee based on each Fund's
average daily net asset value at the following annual rates: for Stock Index
Fund, MidCap Index Fund, Small Cap Index Fund and International Equities Fund
.35% on the first $500 million and .25% on the excess over $500 million; for
Social Awareness Fund, Timed Opportunity Fund, Capital Conservation Fund,
Government Securities Fund, International Government Bond Fund, and Money
Market Fund, .50%; for Growth & Income Fund, .75%; for Growth Fund, .80%; for
Science & Technology Fund, .90%.
To the extent that any Fund's accrued expenses for a given month exceed, on
an annualized basis, 2% of the Fund's average daily net assets, the Adviser
will voluntarily reduce expenses of any such Fund by the amount of the excess.
The Adviser may withdraw this voluntary undertaking upon 30 days written notice
to the Series.
The Adviser provided to the Series, at cost, certain services associated
with the printing of reports to shareholders. During the fiscal year ended May
31, 1996, the Series paid $11,346 for such services.
83
<PAGE> 185
NOTES TO FINANCIAL STATEMENTS - CONTINUED
During the fiscal year ended May 31, 1996, security transactions were
affected between the following Funds at the then current market price with no
brokerage commissions incurred:
<TABLE>
<CAPTION>
SELLER PURCHASER COST TO PURCHASER NET GAIN TO SELLER
- -------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C>
MidCap Index Fund Stock Index Fund $28,226,166 $12,399,050
Small Cap Index Fund Stock Index Fund 504,002 226,144
Stock Index Fund MidCap Index Fund 1,366,776 305,069
</TABLE>
At May 31, 1996, VALIC Separate Account A (a registered separate account of
VALIC) and VALIC owned over five percent of the outstanding shares of the
following Funds:
<TABLE>
<CAPTION>
VALIC
SEPARATE
ACCOUNT A VALIC
-------------------------------
<S> <C> <C>
Stock Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.71%
MidCap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.99
Small Cap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
International Equities Fund . . . . . . . . . . . . . . . . . . . . . . . . . 99.79
Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
Growth & Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
Science & Technology Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
Social Awareness Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.75 6.15
Timed Opportunity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 95.80
Capital Conservation Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 86.46 13.53
Government Securities Fund . . . . . . . . . . . . . . . . . . . . . . . . . 99.99
International Government Bond Fund . . . . . . . . . . . . . . . . . . . . . 100.00
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.99
</TABLE>
Certain officers and directors of the Series are officers and directors of
VALIC or American General Corporation.
NOTE 4 -- INVESTMENT ACTIVITY
The information in the following table is presented on the basis of cost for
federal income tax purposes at May 31, 1996.
<TABLE>
<CAPTION>
IDENTIFIED COST GROSS GROSS NET UNREALIZED
OF INVESTMENTS UNREALIZED UNREALIZED APPRECIATION
OWNED APPRECIATION DEPRECIATION (DEPRECIATION)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Index Fund . . . . . . . . . . . . . . . . . $ 1,174,279,541 $600,372,776 $ 18,484,892 $ 581,887,884
MidCap Index Fund . . . . . . . . . . . . . . . . . 425,520,351 134,570,016 20,008,235 114,561,781
Small Cap Index Fund . . . . . . . . . . . . . . . 141,045,064 50,440,203 10,490,245 39,949,958
International Equities Fund . . . . . . . . . . . . 171,638,403 37,477,950 5,565,641 31,912,309
Growth Fund . . . . . . . . . . . . . . . . . . . . 348,568,897 79,476,648 4,867,867 74,608,781
Growth & Income Fund . . . . . . . . . . . . . . . 90,067,864 22,074,119 660,421 21,413,698
Science & Technology Fund . . . . . . . . . . . . . 472,425,328 99,960,251 9,741,746 90,218,505
Social Awareness Fund . . . . . . . . . . . . . . . 68,762,614 12,225,726 301,152 11,924,574
Timed Opportunity Fund . . . . . . . . . . . . . . 173,704,456 18,686,247 3,252,293 15,433,954
Capital Conservation Fund . . . . . . . . . . . . . 72,012,185 503,613 2,330,570 (1,826,957)
Government Securities Fund . . . . . . . . . . . . 78,006,868 877,603 1,599,981 (722,378)
International Government Bond Fund . . . . . . . . 136,957,375 5,668,394 5,010,618 657,776
Money Market Fund . . . . . . . . . . . . . . . . . 84,483,112 - - -
</TABLE>
The following net realized capital loss carryforwards at May 31, 1996, may
be utilized to offset future capital gains.
<TABLE>
<CAPTION>
Capital Loss Expiration
Carryforward through:
------------------------------
<S> <C> <C>
Capital Conservation Fund . . . . . . . . . . . . . $ 684,782 May 31, 2003
Government Securities Fund . . . . . . . . . . . . 2,108,943 May 31, 2003
Money Market Fund . . . . . . . . . . . . . . . . . 3,089 May 31, 2004
</TABLE>
84
<PAGE> 186
NOTES TO FINANCIAL STATEMENTS - CONTINUED
During the period, the cost of purchases and proceeds from sales of securities,
excluding short term securities were:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
SECURITIES SECURITIES SOLD
PURCHASED OR MATURED
-------------------------------
<S> <C> <C>
Stock Index Fund . . . . . . . . . . . . . . . . . $ 185,755,541 $ 48,056,029
MidCap Index Fund . . . . . . . . . . . . . . . . . 121,059,415 99,926,017
Small Cap Index Fund . . . . . . . . . . . . . . . 51,734,809 45,235,038
International Equities Fund . . . . . . . . . . . . 41,054,511 60,995,970
Growth Fund . . . . . . . . . . . . . . . . . . . . 309,740,347 78,243,468
Growth & Income Fund . . . . . . . . . . . . . . . 80,614,303 43,570,790
Science &Technology Fund . . . . . . . . . . . . . 599,767,616 371,663,283
Social Awareness Fund . . . . . . . . . . . . . . . 88,654,719 77,415,553
Timed Opportunity Fund . . . . . . . . . . . . . . 210,212,347 189,984,026
Capital Conservation Fund . . . . . . . . . . . . . 58,210,552 54,266,155
Government Securities Fund . . . . . . . . . . . . 41,904,685 23,090,632
International Government Bond Fund . . . . . . . . 83,031,737 12,191,448
</TABLE>
NOTE 5 -- PORTFOLIO SECURITIES LOANED
To realize additional income, a Fund may lend portfolio securities with a
value of up to 30% (33 1/3% in the case of Growth Fund and Science & Technology
Fund) of its total assets. Any such loans will be continuously secured by
collateral consisting of cash or U.S. Government securities, maintained in a
segregated account, at least equal to the market value of the securities
loaned. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delays in receiving additional required
collateral or in the recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. Loans by a Fund will only
be made to broker-dealers deemed by the Adviser to be creditworthy and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans would justify the risk. Each Fund receives income earned on the
securities loaned during the lending period and a portion of the interest or
rebate earned on the collateral received.
Portfolio securities on loan at May 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL VALUE
-------------------------------
<S> <C> <C>
Stock Index Fund . . . . . . . . . . . . . . . . . . $ 6,372,938 $ 6,544,600
MidCap Index Fund . . . . . . . . . . . . . . . . . . 15,123,225 15,626,308
Small Cap Index Fund . . . . . . . . . . . . . . . . 10,518,612 11,363,511
International Equities Fund . . . . . . . . . . . . . 10,459,357 10,748,363
Growth Fund . . . . . . . . . . . . . . . . . . . . . 29,632,062 30,100,020
Growth & Income Fund . . . . . . . . . . . . . . . . 3,411,700 3,580,400
Science & Technology Fund . . . . . . . . . . . . . . 19,788,864 20,277,108
Social Awareness Fund . . . . . . . . . . . . . . . . 527,112 540,518
Timed Opportunity Fund . . . . . . . . . . . . . . . 802,267 832,575
Capital Conservation Fund . . . . . . . . . . . . . . 890,484 909,290
Government Securities Fund . . . . . . . . . . . . . 494,575 510,813
----------------------------
Total . . . . . . . . . . . . . . . . . . . . . . $ 98,021,196 $101,033,506
----------------------------
</TABLE>
NOTE 6 -- INVESTMENT CONCENTRATION
A significant portion of Government Securities Fund's investments may be in
U.S. Government sponsored securities. No assurance can be given that the U.S.
Government will provide support to such U.S. Government sponsored agencies or
instrumentalities in the future since it is not required to do so by law. As a
result of the Fund's concentration in such investments, it may be subject to
risks associated with U.S. Government sponsored securities. At May 31, 1996,
Government Securities Fund had 59% of its net assets invested in such
securities.
At May 31, 1996, International Government Bond Fund had 21% of its net
assets invested in securities issued by the Government of Japan and an
additional 6% in issues of companies located in Japan and/or denominated in
Japanese Yen. Future economic and political developments in a foreign country
could adversely affect the liquidity and value of foreign securities or the
currency exchange rates from which foreign currencies are translated.
85
<PAGE> 187
FINANCIAL HIGHLIGHTS
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK INDEX FUND
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . $16.81 $14.39 $14.36 $13.34 $12.60
------------------------------------------------------------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . 0.39 0.37 0.35 0.34 0.32
Net realized and unrealized gain on securities . . . 4.26 2.45 0.12 1.20 0.74
------------------------------------------------------------
Total income from investment operations . . . . . . 4.65 2.82 0.47 1.54 1.06
------------------------------------------------------------
Distributions:
Distributions from net investment income . . . . . . (0.38) (0.37) (0.35) (0.34) (0.32)
Distributions from net realized gain on securities . (0.39) (0.03) (0.09) (0.18)
------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . . . (0.77) (0.40) (0.44) (0.52) (0.32)
------------------------------------------------------------
Net asset value at end of period . . . . . . . . . . . . $20.69 $16.81 $14.39 $14.36 $13.34
------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . 28.17% 19.98% 3.29% 11.74% 8.57%
------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . 0.35% 0.38% 0.39% 0.43% 0.50%
Ratio of net investment income to average net assets . 2.05% 2.44% 2.44% 2.52% 3.12%
Portfolio turnover rate . . . . . . . . . . . . . . . 3% 14% 3% 1% 45%
Number of shares outstanding at end of period (000's). 85,117 75,451 75,494 66,224 55,598
Net assets at end of period (000's) . . . . . . . . . $1,760,786 $1,267,992 $1,086,459 $951,200 $741,667
Average net assets during the period (000's) . . . . . $1,498,398 $1,140,085 $1,030,581 $836,510 $167,262
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MIDCAP INDEX FUND(1)
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . $15.68 $14.54 $14.38 $12.86 $12.51
------------------------------------------------------------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . 0.24 0.26 0.23 0.24 0.23
Net realized and unrealized gain on securities . . . 4.06 1.59 0.28 1.93 0.39
------------------------------------------------------------
Total income from investment operations . . . . . . 4.30 1.85 0.51 2.17 0.62
------------------------------------------------------------
Distributions:
Distributions from net investment income . . . . . . (0.24) (0.26) (0.23) (0.24) (0.23)
Distributions from net realized gain on securities . (0.65) (0.45) (0.12) (0.41) (0.04)
------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . . . (0.89) (0.71) (0.35) (0.65) (0.27)
------------------------------------------------------------
Net asset value at end of period . . . . . . . . . . . . $19.09 $15.68 $14.54 $14.38 $12.86
------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . 28.10% 13.26% 3.52% 17.21% 5.01%
------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . 0.41% 0.44% 0.46% 0.47% 0.54%
Ratio of net investment income to average net assets . 1.36% 1.73% 1.62% 1.79% 1.82%
Portfolio turnover rate . . . . . . . . . . . . . . . 21% 23% 17% 5% 112%
Number of shares outstanding at end of period (000's) 28,322 25,988 24,001 14,673 8,862
Net assets at end of period (000's) . . . . . . . . . $540,688 $407,557 $349,041 $210,931 $113,992
Average net assets during the period (000's) . . . . . $477,372 $376,486 $285,247 $154,979 $ 88,456
</TABLE>
(1) Effective October 1, 1991, the Fund's name was changed from Capital
Accumulation Fund to MidCap Index Fund. Additionally, on October 1, 1991,
the investment objectives and investment program for the Fund were changed.
SEE NOTES TO FINANCIAL STATEMENTS.
86
<PAGE> 188
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, MAY 1, 1992
------------------------------------------------- TO
1996 1995 1994 1993 MAY 31,1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SMALL CAP INDEX FUND
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . $ 12.49 $ 11.52 $ 11.28 $ 9.93 10.00(1)
------------------------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . 0.20 0.17 0.13 0.15 0.02
Net realized and unrealized gain (loss) on securities 4.04 0.97 0.58 1.48 (0.07)
------------------------------------------------------------
Total income (loss) from investment operations . . . 4.24 1.14 0.71 1.63 (0.05)
------------------------------------------------------------
Distributions:
Distributions from net investment income . . . . . . (0.20) (0.17) (0.13) (0.15) (0.02)
Distributions from net realized gain on securities . (0.28) (0.34) (0.13)
------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . . . (0.48) (0.17) (0.47) (0.28) (0.02)
------------------------------------------------------------
Net asset value at end of period . . . . . . . . . . . . $16.25 $ 12.49 $ 11.52 $ 11.28 $ 9.93
------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . 34.50% 9.98% 6.18% 16.64% (0.50)%
------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . 0.41% 0.44% 0.47% 0.47% 0.04%
Ratio of net investment income to average net assets . 1.36% 1.44% 1.10% 1.40% 0.21%
Portfolio turnover rate . . . . . . . . . . . . . . . 31% 34% 16% 20% 0%
Number of shares outstanding at end of period (000's) 11,129 10,136 9,381 3,687 1,107
Net assets at end of period (000's) . . . . . . . . . $180,785 $126,567 $108,050 $41,581 $10,989
Average net assets during the period (000's) . . . . . $150,448 $120,298 $ 70,690 $22,142 $10,989
</TABLE>
(1) The net asset value at the beginning of the period is as of commencement of
operations on May 1, 1992.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITIES FUND
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . $10.42 $10.14 $ 8.99 $ 8.03 $ 8.58
------------------------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . 0.17 0.15 0.11 0.18 0.15
Net realized and unrealized gain (loss) on securities
and foreign currencies . . . . . . . . . . . . . . 0.97 0.34 1.17 0.93 (0.55)
------------------------------------------------------------
Total income (loss) from investment operations . . . 1.14 0.49 1.28 1.11 (0.40)
------------------------------------------------------------
Distributions:
Distributions from net investment income . . . . . . (0.17) (0.15) (0.11) (0.15) (0.15)
Distributions from net realized gain on securities . (0.24) (0.06) (0.02)
------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . . . (0.41) (0.21) (0.13) (0.15) (0.15)
------------------------------------------------------------
Net asset value at end of period . . . . . . . . . . . . $11.15 $10.42 $10.14 $ 8.99 $ 8.03
------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . 11.14% 4.92% 14.31% 14.18% (4.69)%
------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . 0.42% 0.45% 0.47% 0.53% 0.65%
Ratio of net investment income to average net assets . 1.65% 1.47% 1.43% 2.33% 1.84%
Portfolio turnover rate . . . . . . . . . . . . . . . 20% 14% 7% 9% 5%
Number of shares outstanding at end of period (000's) 18,497 20,074 17,273 7,429 4,256
Net assets at end of period (000's) . . . . . . . . . $206,259 $209,091 $175,183 $66,809 $34,182
Average net assets during the period (000's) . . . . . $204,792 $199,235 $117,264 $45,509 $26,542
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
87
<PAGE> 189
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
Annualized.
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
--------------------------- TO
GROWTH FUND 1996 1995 MAY 31, 1994
--------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . . . $ 11.43 $ 9.87 $ 10.00(1)
--------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . 0.11 0.04 0.01
Net realized and unrealized gain (loss) on securities . . . . . 5.27 1.56 (0.13)
--------------------------------------------
Total income (loss) from investment operations . . . . . . . . . 5.38 1.60 (0.12)
--------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . (0.09) (0.04) (0.01)
Distributions from net realized gain (loss) on securities . . . (0.23)
--------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . (0.32) (0.04) (0.01)
--------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . . . $ 16.49 $ 11.43 $ 9.87
--------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.46% 16.25% (1.19)%
--------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . 0.83% 0.91% 0.08%
Ratio of net investment income to average net assets . . . . . . . 0.89% 0.41% 0.11%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 36% 61% 0%
Number of shares outstanding at end of period (000's) . . . . . . 25,826 8,800 1,001
Net assets at end of period (000's) . . . . . . . . . . . . . . . $ 425,787 $ 100,614 $ 9,885
Average net assets during the period (000's) . . . . . . . . . . . $ 238,228 $ 42,232 $ 9,944
</TABLE>
(1) The net asset value at the beginning of the period is as of
commencement of operations on April 29, 1994.
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
--------------------------- TO
1996 1995 MAY 31, 1994
GROWTH & INCOME FUND --------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . . . $ 11.09 $ 9.87 $ 10.00(1)
--------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . 0.08 0.09 0.02
Net realized and unrealized gain (loss) on securities . . . . . 3.77 1.22 (0.13)
--------------------------------------------
Total income (loss) from investment operations . . . . . . . . . 3.85 1.31 (0.11)
--------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . (0.07) (0.09) (0.02)
Distributions from net realized gain (loss) on securities . . . (0.09)
--------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . (0.16) (0.09) (0.02)
--------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . . . $ 14.78 $ 11.09 $ 9.87
--------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.85% 13.35% (1.11)%
--------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . 0.79% 0.86% 0.07%
Ratio of net investment income to average net assets . . . . . . . 0.63% 0.93% 0.22%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 64% 97% 11%
Number of shares outstanding at end of period (000's) . . . . . . 7,685 3,867 1,002
Net assets at end of period (000's) . . . . . . . . . . . . . . . $ 113,546 $ 42,867 $ 9,890
Average net assets during the period (000's) . . . . . . . . . . . $ 75,158 $ 21,910 $ 9,946
</TABLE>
(1) The net asset value at the beginning of the period is as of
commencement of operations on April 29, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
88
<PAGE> 190
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
--------------------------- TO
1996 1995 MAY 31, 1994
SCIENCE & TECHNOLOGY FUND --------------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . . . $ 14.43 $ 9.83 $ 10.00(1)
--------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . 0.00 0.03 0.00
Net realized and unrealized gain (loss) on securities and
foreign currencies . . . . . . . . . . . . . . . . . . . . 8.08 4.72 (0.17)
--------------------------------------------
Total income (loss) from investment operations . . . . . . . . . 8.08 4.75 (0.17)
--------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . (0.00) (0.02) 0.00
Distributions from net realized gain on securities . . . . . . . (2.03) (0.13) 0.00
--------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . (2.03) (0.15) 0.00
--------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . . . $20.48 $ 14.43 $ 9.83
--------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.28% 48.61% (1.66)%
--------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . 0.94% 1.00% 0.08%
Ratio of net investment income to average net assets . . . . . . . (0.07)% 0.36% 0.04%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 116% 121% 0%
Number of shares outstanding at end of period (000's) . . . . . . 27,696 11,550 1,001
Net assets at end of period (000's) . . . . . . . . . . . . . . . $ 567,187 $166,683 $ 9,834
Average net assets during the period (000's) . . . . . . . . . . . $ 363,087 $ 64,974 $ 9,918
</TABLE>
(1) The net asset value at the beginning of the period is as of
commencement of operations on April 29, 1994.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------
SOCIAL AWARENESS FUND 1996 1995 1994 1993 1992
---------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 13.02 $ 11.98 $ 12.12 $ 11.43 $ 11.13
---------------------------------------------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.26 0.27 0.26 0.24 0.26
Net realized and unrealized gain (loss) on securities . . . . . . . 3.37 1.75 (0.02) 1.22 0.30
---------------------------------------------
Total income from investment operations . . . . . . . . . . . . . . 3.63 2.02 0.24 1.46 0.56
---------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.25) (0.27) (0.26) (0.24) (0.26)
Distributions from net realized gain on securities . . . . . . . . (0.91) (0.71) (0.12) (0.53)
---------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (1.16) (0.98) (0.38) (0.77) (0.26)
---------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $ 15.49 $ 13.02 $ 11.98 $ 12.12 $ 11.43
---------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.85% 18.19% 1.97% 13.08% 5.08%
---------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.56% 0.58% 0.60% 0.63% 0.16%
Ratio of net investment income to average net assets . . . . . . . . 1.80% 2.22% 2.19% 2.14% 2.34%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . 117% 148% 83% 106% 203%
Number of shares outstanding at end of period (000's) . . . . . . . . 5,220 4,143 3,817 2,819 1,799
Total net assets at end of period (000's) . . . . . . . . . . . . . . $80,887 $53,927 $ 45,729 $34,166 $ 20,570
Average net assets during the period (000's) . . . . . . . . . . . . $66,888 $47,942 $ 41,002 $26,920 $ 15,365
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
89
<PAGE> 191
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------
TIMED OPPORTUNITY FUND 1996 1995 1994 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 11.24 $ 10.84 $ 11.18 $ 10.66 $ 11.05
----------------------------------------------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.44 0.44 0.37 0.35 0.30
Net realized and unrealized gain (loss) on securities . . . . . . . 1.53 0.82 (0.15) 0.61 (0.19)
----------------------------------------------
Total income from investment operations . . . . . . . . . . . . . . 1.97 1.26 0.22 0.96 0.11
----------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.44) (0.44) (0.37) (0.35) (0.30)
Distributions from net realized gain on securities . . . . . . . . (0.22) (0.42) (0.19) (0.09) (0.20)
----------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (0.66) (0.86) (0.56) (0.44) (0.50)
----------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $ 12.55 $ 11.24 $ 10.84 $ 11.18 $ 10.66
----------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.90% 12.43% 1.86% 9.17% 0.87%
----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.57% 0.58% 0.59% 0.70% 0.90%
Ratio of net investment income to
average net assets . . . . . . . . . . . . . . . . . . . . . . . . 3.62% 4.03% 3.24% 3.28% 2.72%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . 119% 133% 76% 78% 111%
Number of shares outstanding at end of period (000's) . . . . . . . . 15,142 16,319 17,956 14,758 13,341
Total net assets at end of period (000's) . . . . . . . . . . . . . . $190,024 183,393 $194,576 165,002 $142,213
Average net assets during the period (000's) . . . . . . . . . . . . $187,576 186,487 $185,036 151,450 $137,179
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------
CAPITAL CONSERVATION FUND 1996 1995 1994 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 9.52 $ 9.13 $ 9.87 $ 9.29 $ 8.81
----------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.62 0.63 0.61 0.65 0.69
Net realized and unrealized gain (loss) on securities . . . . . . . (0.29) 0.39 (0.69) 0.58 0.48
----------------------------------------------
Total income (loss) from investment operations . . . . . . . . . . 0.33 1.02 (0.08) 1.23 1.17
----------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.62) (0.63) (0.61) (0.65) (0.69)
Distributions from net realized gain on securities . . . . . . . . (0.05)
----------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (0.62) (0.63) (0.66) (0.65) (0.69)
----------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $ 9.23 $ 9.52 $ 9.13 $ 9.87 $ 9.29
----------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.41% 11.80% (1.13)% 13.60% 13.72%
----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.57% 0.58% 0.59% 0.67% 0.77%
Ratio of net investment income to average net assets . . . . . . . . 6.47% 6.88% 6.24% 6.77% 7.80%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . 80% 100% 55% 58% 121%
Number of shares outstanding at end of period (000's) . . . . . . . . 7,604 6,935 6,712 5,095 3,939
Total net assets at end of period (000's) . . . . . . . . . . . . . . $ 70,212 $66,031 $ 61,305 $50,290 $ 36,609
Average net assets during the period (000's) . . . . . . . . . . . . $ 70,271 $61,568 $ 59,210 $43,316 $ 29,793
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
90
<PAGE> 192
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------
GOVERNMENT SECURITIES FUND 1996 1995 1994 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 9.89 $ 9.55 $ 10.30 $ 9.84 $ 9.34
----------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.61 0.60 0.55 0.61 0.65
Net realized and unrealized gain (loss) on securities . . . . . . . (0.28) 0.35 (0.59) 0.59 0.49
----------------------------------------------
Total income (loss) from investment operations . . . . . . . . . . 0.33 0.95 (0.04) 1.20 1.14
----------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.61) (0.61) (0.55) (0.61) (0.64)
Distributions from net realized gain on securities . . . . . . . . (0.16) (0.13)
----------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (0.61) (0.61) (0.71) (0.74) (0.64)
----------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $ 9.61 $ 9.89 $ 9.55 $ 10.30 $ 9.84
----------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.32% 10.43% (0.66)% 12.56% 12.60%
----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.56% 0.58% 0.59% 0.67% 0.76%
Ratio of net investment income to average net assets . . . . . . . . 6.21% 6.36% 5.44% 6.08% 6.77%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . 36% 229% 85% 105% 78%
Number of shares outstanding at end of period (000's) . . . . . . . . 8,164 5,478 4,544 3,110 2,090
Total net assets at end of period (000's) . . . . . . . . . . . . . . $ 78,423 $54,174 $ 43,401 $32,023 $ 20,559
Average net assets during the period (000's) . . . . . . . . . . . . $ 68,017 $45,200 $ 41,596 $26,145 $1 7,069
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
FISCAL YEAR ENDED MAY 31, 1991 TO
------------------------------------ MAY 31,
INTERNATIONAL GOVERNMENT BOND FUND 1996 1995 1994 1993 1992
------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 12.72 $ 10.97 $ 11.16 $ 10.43 $ 10.00(1)
----------------------------------------------
Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.65 0.65 0.62 0.76 0.48
Net realized and unrealized gain (loss) on securities
and foreign currencies . . . . . . . . . . . . . . . . . . . . . (0.89) 1.80 (0.20) 0.70 0.42
----------------------------------------------
Total income (loss) from investment operations . . . . . . . . . . (0.24) 2.45 0.42 1.46 0.90
----------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.68) (0.70) (0.60) (0.73) (0.47)
Distributions from net realized gain on securities . . . . . . . . (0.01) (0.01)
----------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . (0.69) (0.70) (0.61) (0.73) (0.47)
----------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $11.79 $ 12.72 $ 10.97 $ 11.16 $ 10.43
----------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.91)% 23.23% 3.87% 14.50% 9.18%
----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.56% 0.59% 0.48% 0.14% 0.08%
Ratio of net investment income to average net assets . . . . . . . . 5.45% 5.83% 5.87% 7.02% 4.62%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . 11% 6% 3% 26% 12%
Number of shares outstanding at end of period (000's) . . . . . . . . 12,073 6,111 3,741 2,062 1,259
Total net assets at end of period (000's) . . . . . . . . . . . . . . $142,383 $77,734 $ 41,028 $23,009 $ 13,126
Average net assets during the period (000's) . . . . . . . . . . . . $114,693 $51,451 $ 33,561 $18,135 $ 11,938
</TABLE>
(1) The net asset value at the beginning of the period is as of
commencement of operations on October 1, 1991.
SEE NOTES TO FINANCIAL STATEMENTS.
91
<PAGE> 193
FINANCIAL HIGHLIGHTS - CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of dividends on the reinvestment
date. Total returns and ratios for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED May 31,
----------------------------------------------
MONEY MARKET FUND 1996 1995 1994 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period . . . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.05 0.05 0.03 0.03 0.05
----------------------------------------------
Distributions:
Distributions from net investment income . . . . . . . . . . . . . (0.05) (0.05) (0.03) (0.03) (0.05)
----------------------------------------------
Net asset value at end of period . . . . . . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.26% 4.90% 2.83% 2.85% 4.47%
----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . . . . . . . . . . . . . 0.57% 0.57% 0.58% 0.63% 0.67%
Ratio of net investment income to average net assets . . . . . . . . 5.14% 4.75% 2.78% 2.81% 4.42%
Number of shares outstanding at end of period (000's) . . . . . . . . 83,618 82,256 50,534 45,323 48,355
Total net assets at end of period (000's) . . . . . . . . . . . . . . $ 83,618 $82,254 $ 50,533 $45,322 $ 48,353
Average net assets during the period (000's) . . . . . . . . . . . . $ 84,271 $67,021 $ 46,222 $45,562 $ 46,305
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
92
<PAGE> 194
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
We have audited the accompanying statements of net assets of Stock Index Fund,
MidCap Index Fund, Small Cap Index Fund, International Equities Fund, Growth
Fund, Growth & Income Fund, Science & Technology Fund, Social Awareness Fund,
Timed Opportunity Fund, Capital Conservation Fund, Government Securities Fund,
International Government Bond Fund, and Money Market Fund (such "Funds"
comprising the American General Series Portfolio Company) as of May 31, 1996.
We have also audited for each of the Funds the related statement of operations
for the year ended May 31, 1996, the statement of changes in net assets for
each of the two years in the period ended May 31, 1996, and the financial
highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Company'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 securities owned as of May
31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 each
of the respective Funds comprising the American General Series Portfolio
Company at May 31, 1996, the results of their operations and the changes in
their net assets for the periods identified above, and the financial highlights
for each of the periods indicated therein, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
July 12, 1996
93
<PAGE> 195
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
BOARD OF DIRECTORS SHAREHOLDER SERVICE AGENT
Stephen D. Bickel The Variable Annuity Life
Norman Hackerman Insurance Company (VALIC)
John W. Lancaster 2929 Allen Parkway
Ben H. Love Houston, Texas 77019
Joe C. Osborne
F. Robert Paulsen OFFICERS
Peter V. Tuters Stephen D. Bickel,
R. Miller Upton Chairman and President
Thomas L. West, Jr. Thomas L. West, Jr.,
Executive Vice President
DISTRIBUTOR Norman Jaskol,
The Variable Annuity Marketing Vice President and
Company (VAMCO) Senior Investment Officer
2929 Allen Parkway Brent C. Nelson,
Houston, Texas 77019 Vice President
Teresa S. Moro,
CUSTODIAN Vice President and
State Street Bank and Trust Company Investment Officer
225 Franklin Street John W. Mossbarger,
Boston, Massachusetts 02110 Vice President and
Investment Officer
INVESTMENT ADVISER Leon A. Olver,
The Variable Annuity Life Vice President and
Insurance Company (VALIC) Investment Officer
2929 Allen Parkway William Trimbur, Jr.,
Houston, Texas 77019 Vice President and
Investment Officer
INVESTMENT SUB-ADVISERS Cynthia A. Toles,
Bankers Trust Company General Counsel
280 Park Avenue and Secretary
New York, New York 10017 Gregory R. Seward,
Treasurer and Controller
T. Rowe Price Associates, Inc. Betty J. North,
100 East Pratt Street Assistant Vice President
Baltimore, Maryland 21202 David H. den Boer,
Assistant Secretary
Value Line, Inc. Debra A. Yeang,
220 East 42nd Street Assistant Treasurer
New York, New York 10017-5891 Kay Kramer,
Assistant Controller
INDEPENDENT AUDITORS
Ernst & Young LLP
1221 McKinney
Houston, Texas 77010
This report is for the information of the shareholders and variable
contract owners participating in the American General Series Portfolio Company.
It is authorized for distribution to other persons only when preceded or
accompanied by an effective prospectus which contains information on how to
purchase shares and other pertinent information.
If you would like further information about this material or products
issued by VALIC or American General Life Insurance Company, please contact your
account representative.
"Standard & Poor's(R)", "Standard & Poor's MidCap 400 Index" and "S&P 500(R)"
are trademarks of Standard & Poor's Corporation. The Stock Index Fund and
MidCap Index Fund are not sponsored, endorsed, sold or promoted by S&P and S&P
makes no representation regarding the advisability of investing in the funds.
The Russell 2000(R) Index is a trademark / service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
[VALIC LOGO]
(C)1996 The Variable Annuity Life Insurance Company, Houston, Texas
VALIC is a registered service mark of The Variable Annuity Life Insurance
Company
VA 9530 VER 5/96
<PAGE> 196
AMERICAN GENERAL SERIES PORTFOLIO COMPANY -----------------
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P.O. Box 3206 U.S. Postage
Houston, Texas 772-3206 PAID
Permit No. 6748
Houston, Texas
-----------------
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VA 9530 VER 5/96
