<PAGE> 1
AMERICAN GENERAL SERIES
PORTFOLIO COMPANY
2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
PROSPECTUS OCTOBER 1, 1997
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:
INTERNATIONAL EQUITIES FUND
Growth through investments tracking the EAFE 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.
STOCK INDEX FUND
Growth through investments tracking the S&P 500 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:
SCIENCE & TECHNOLOGY FUND
Growth through investments in stocks of companies which benefit from
development of science and technology.
SOCIAL AWARENESS FUND
Growth through investments in stocks of companies meeting social
criteria of the Fund.
MONEY MARKET FUND:
MONEY MARKET FUND
Income through investments in short-term money market securities.
ASSET ALLOCATION FUND:
ASSET ALLOCATION 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, 1997,
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 1-800-44-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
ABOUT INDEX EQUITY FUNDS...................... 15
HOW TO READ A FUND FACT SHEET................. 17
FUND FACT SHEETS.............................. 18
Asset Allocation Fund.................... 18
Capital Conservation Fund................ 20
Government Securities Fund............... 22
Growth Fund.............................. 24
Growth & Income Fund..................... 26
International Equities Fund.............. 28
International Government Bond Fund....... 30
MidCap Index Fund........................ 32
Money Market Fund........................ 34
Science & Technology Fund................ 35
Small Cap Index Fund..................... 37
Social Awareness Fund.................... 39
Stock Index Fund......................... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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, 2929 Allen
Parkway, Houston, Texas 77019, 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
713-831-3505. 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
A FUND'S FISCAL YEAR ends every May 31st.
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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
ASSET ALLOCATION FUND(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $12.55 $11.24 $10.84 $11.18 $10.66 $11.05 $10.48
-------- -------- -------- -------- -------- -------- --------
+ INCOME (LOSS)
from net investment income 0.77 0.44 0.44 0.37 0.35 0.30 0.40
from net realized & unrealized
gain (loss) on
securities 1.44 1.53 0.82 (0.15) 0.61 (0.19) 0.57
-------- -------- -------- -------- -------- -------- --------
total income from investment
operations 2.21 1.97 1.26 0.22 0.96 0.11 0.97
-------- -------- -------- -------- -------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.78) (0.44) (0.44) (0.37) (0.35) (0.30) (0.40)
from net realized gain on
securities (1.41) (0.22) (0.42) (0.19) (0.09) (0.20)
-------- -------- -------- -------- -------- -------- --------
total distributions (2.19) (0.66) (0.86) (0.56) (0.44) (0.50) (0.40)
-------- -------- -------- -------- -------- -------- --------
= SHARE VALUE
AT END OF YEAR $12.57 $12.55 $11.24 $10.84 $11.18 $10.66 $11.05
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN 15.89% 17.90% 12.43% 1.86% 9.17% 0.87% 9.75%
======== ======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.57% 0.57% 0.58% 0.59% 0.70% 0.90% 0.92%
Ratio of net investment income to
average net assets 3.26% 3.62% 4.03% 3.24% 3.28% 2.72% 3.94%
Portfolio turnover rate 103% 119% 133% 76% 78% 111% 55%
Number of shares outstanding at
end of year (000's) 14,107 15,142 16,319 17,956 14,758 13,341 11,891
Net assets at end of year (000's) $177,347 $190,024 $183,393 $194,576 $165,002 $142,213 $131,416
Average net assets during the year
(000's) $179,615 $187,576 $186,487 $185,036 $151,450 $137,179 $116,266
Average commission rate paid $0.0401 N/A N/A N/A N/A N/A N/A
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-----------------------------------
1990 1989 1988
---------- ---------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.06 $9.40 $11.07
-------- -------- -------
+ INCOME (LOSS)
from net investment income 0.55 0.62 0.35
from net realized & unrealized
gain (loss) on
securities 0.44 0.65 (0.31)
-------- -------- -------
total income from investment
operations 0.99 1.27 0.04
-------- -------- -------
- - DISTRIBUTIONS
from net investment income (0.57) (0.61) (0.35)
from net realized gain on
securities (1.36)
-------- -------- -------
total distributions (0.57) (0.61) (1.71)
-------- -------- -------
= SHARE VALUE
AT END OF YEAR $10.48 $10.06 $9.40
======== ======== =======
TOTAL RETURN 10.06% 14.00% 0.88%
======== ======== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.92% 1.00% 1.01%
Ratio of net investment income to
average net assets 5.38% 6.43% 3.56%
Portfolio turnover rate 51% 93% 162%
Number of shares outstanding at
end of year (000's) 11,158 9,969 9,196
Net assets at end of year (000's) $116,966 $100,248 $86,476
Average net assets during the year
(000's) $107,626 $ 92,364 $77,192
Average commission rate paid N/A N/A N/A
</TABLE>
(1) The Asset Allocation Fund was formerly known as the Timed Opportunity Fund.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS -- CONTINUED
CAPITAL CONSERVATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.23 $9.52 $9.13 $9.87 $9.29 $8.81 $9.08
------- -------- ------- ------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.62 0.62 0.63 0.61 0.65 0.69 0.73
from net realized & unrealized
gain (loss) on securities 0.08 (0.29) 0.39 (0.69) 0.58 0.48 (0.27)
------- -------- ------- ------- ------- ------- -------
total income (loss) from
investment operations 0.70 0.33 1.02 (0.08) 1.23 1.17 0.46
------- -------- ------- ------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.62) (0.62) (0.63) (0.61) (0.65) (0.69) (0.73)
from net realized gain on
securities (0.05)
------- -------- ------- ------- ------- ------- -------
total distributions (0.62) (0.62) (0.63) (0.66) (0.65) (0.69) (0.73)
------- -------- ------- ------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $9.31 $9.23 $9.52 $9.13 $9.87 $9.29 $8.81
======= ======== ======= ======= ======= ======= =======
TOTAL RETURN 7.75% 3.41% 11.80% (1.13)% 13.60% 13.72% 5.40%
======= ======== ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.57% 0.57% 0.58% 0.59% 0.67% 0.77% 0.83%
Ratio of net investment income to
average net assets 6.59% 6.47% 6.88% 6.24% 6.77% 7.80% 8.25%
Portfolio turnover rate 45% 80% 100% 55% 58% 121% 142%
Number of shares outstanding at
end of period (000's) 7,168 7,604 6,935 6,712 5,095 3,939 2,333
Net assets at end of period
(000's) $66,747 $70,212 $66,031 $61,305 $50,290 $36,609 $20,541
Average net assets during the
period (000's) $69,352 $70,271 $61,568 $59,210 $43,316 $29,793 $19,105
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------
1990 1989 1988
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.48 $9.29 $9.51
------- ------- --------
+ INCOME (LOSS)
from net investment income 0.80 0.75 0.63
from net realized & unrealized
gain (loss) on securities (0.36) 0.17 (0.24)
------- ------- --------
total income (loss) from
investment operations 0.44 0.92 0.39
------- ------- --------
- - DISTRIBUTIONS
from net investment income (0.84) (0.73) (0.61)
from net realized gain on
securities
------- ------- --------
total distributions (0.84) (0.73) (0.61)
------- ------- --------
= SHARE VALUE
AT END OF YEAR $9.08 $9.48 $9.29
======= ======= ========
TOTAL RETURN 4.73% 10.45% 4.16%
======= ======= ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.83% 0.88% 1.66%
Ratio of net investment income to
average net assets 8.64% 8.82% 6.73%
Portfolio turnover rate 125% 55% 27%
Number of shares outstanding at
end of period (000's) 1,983 1,429 563
Net assets at end of period
(000's) $18,006 $13,544 $5,226
Average net assets during the
period (000's) $16,278 $9,562 $4,584
</TABLE>
GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.61 $9.89 $9.55 $10.30 $9.84 $9.34 $9.20
------- -------- ------- ------- ------- ------- ------
+ INCOME (LOSS)
from investment income 0.59 0.61 0.60 0.55 0.61 0.65 0.66
from net realized & unrealized
gain (loss) on securities 0.06 (0.28) 0.35 (0.59) 0.59 0.49 0.14
------- -------- ------- ------- ------- ------- ------
total income (loss) from
investment operations 0.65 0.33 0.95 (0.04) 1.20 1.14 0.80
------- -------- ------- ------- ------- ------- ------
- - DISTRIBUTIONS
from net investment income (0.59) (0.61) (0.61) (0.55) (0.61) (0.64) (0.66)
from net realized gain on
securities (0.16) (0.13)
------- -------- ------- ------- ------- ------- ------
total distributions (0.59) (0.61) (0.61) (0.71) (0.74) (0.64) (0.66)
------- -------- ------- ------- ------- ------- ------
= SHARE VALUE
AT END OF YEAR $9.67 $9.61 $9.89 $9.55 $10.30 $9.84 $9.34
======= ======== ======= ======= ======= ======= ======
TOTAL RETURN 6.94% 3.32% 10.43% (0.66)% 12.56% 12.60% 9.28%
======= ======== ======= ======= ======= ======= ======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.56% 0.56% 0.58% 0.59% 0.67% 0.76% 0.87%
Ratio of net investment income to
average net assets 6.11% 6.21% 6.36% 5.44% 6.08% 6.77% 7.25%
Portfolio turnover rate 38% 36% 229% 85% 105% 78% 87%
Number of shares outstanding at
end of year (000's) 8,672 8,164 5,478 4,544 3,110 2,090 1,468
Net assets at end of year (000's) $83,827 $78,423 $54,174 $43,401 $32,023 $20,559 $13,711
Average net assets during the year
(000's) $83,293 $68,017 $45,200 $41,596 $26,145 $17,069 $11,393
<CAPTION>
FISCAL YEAR ENDED MAY 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $9.42 $9.24 $9.51
------ ------ ------
+ INCOME (LOSS)
from investment income 0.70 0.71 0.61
from net realized & unrealized
gain (loss) on securities (0.17) 0.15 (0.28)
------ ------ ------
total income (loss) from
investment operations 0.53 0.86 0.33
------ ------ ------
- - DISTRIBUTIONS
from net investment income (0.75) (0.68) (0.60)
from net realized gain on
securities
------ ------ ------
total distributions (0.75) (0.68) (0.60)
------ ------ ------
= SHARE VALUE
AT END OF YEAR $9.20 $9.42 $9.24
====== ====== ======
TOTAL RETURN 5.76% 9.57% 3.45%
====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.86% 0.85% 1.66%
Ratio of net investment income to
average net assets 7.77% 7.89% 6.48%
Portfolio turnover rate 85% 38% 36%
Number of shares outstanding at
end of year (000's) 978 570 405
Net assets at end of year (000's) $8,997 $5,374 $3,747
Average net assets during the year
(000's) $7,233 $4,565 $3,257
</TABLE>
3
<PAGE> 6
FINANCIAL HIGHLIGHTS -- CONTINUED
GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31, PERIOD FROM
---------------------------------------------------- APRIL 29, 1994
1997 1996 1995 TO MAY 31, 1994
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $16.49 $11.43 $9.87 $10.00(1)
-------- -------- -------- -------
+ INCOME (LOSS)
from net investment income 0.02 0.11 0.04 0.01
from net realized & unrealized gain (loss) on
securities 1.45 5.27 1.56 (0.13)
-------- -------- -------- -------
total income (loss) from investment operations 1.47 5.38 1.60 (0.12)
-------- -------- -------- -------
- - DISTRIBUTIONS
from net investment income (0.01) (0.09) (0.04) (0.01)
from net realized gain on securities (0.33) (0.23)
-------- -------- -------- -------
total distributions (0.34) (0.32) (0.04) (0.01)
-------- -------- -------- -------
= SHARE VALUE
AT END OF PERIOD $17.62 $16.49 $11.43 $9.87
======== ======== ======== =======
TOTAL RETURN 9.00% 47.46% 16.25% (1.19)%
======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.86% 0.83% 0.91% 0.08%
Ratio of net investment income to average net
assets 0.09% 0.89% 0.41% 0.11%
Portfolio turnover rate 40% 36% 61% 0%
Number of shares outstanding at end of year
(000's) 42,422 25,826 8,800 1,001
Net assets at end of year (000's) $747,654 $425,787 $100,614 $9,885
Average net assets during the year (000's) $588,056 $238,228 $ 42,232 $9,944
Average commission rate paid $0.0499 N/A N/A N/A
</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
1997 1996 1995 MAY 31, 1994
---------- ---------- --------- --------------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $14.78 $11.09 $9.87 $10.00(1)
-------- -------- ------- -------
+ INCOME (LOSS)
from net investment income 0.10 0.08 0.09 0.02
from net realized & unrealized gain (loss) on
securities 2.38 3.77 1.22 (0.13)
-------- -------- ------- -------
total income (loss) from investment operations 2.48 3.85 1.31 (0.11)
-------- -------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.10) (0.07) (0.09) (0.02)
from net realized gain on securities (0.29) (0.09)
-------- -------- ------- -------
total distributions (0.39) (0.16) (0.09) (0.02)
-------- -------- ------- -------
= SHARE VALUE
AT END OF PERIOD $16.87 $14.78 $11.09 $9.87
======== ======== ======= =======
TOTAL RETURN 17.08% 34.85% 13.35% (1.11)%
======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.81% 0.79% 0.86% 0.07%
Ratio of net investment income to average net
assets 0.70% 0.63% 0.93% 0.22%
Portfolio turnover rate 45% 64% 97% 11%
Number of shares outstanding at end of year
(000's) 12,422 7,685 3,867 1,002
Net assets at end of year (000's) $209,545 $113,546 $42,867 $9,890
Average net assets during the year (000's) $161,226 $75,158 $21,910 $9,946
Average commission rate paid $0.0500 N/A N/A N/A
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
4
<PAGE> 7
FINANCIAL HIGHLIGHTS -- CONTINUED
INTERNATIONAL EQUITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $11.15 $10.42 $10.14 $8.99 $8.03 $8.58 $9.17
-------- -------- -------- -------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.20 0.17 0.15 0.11 0.18 0.15 0.23
from net realized & unrealized
gain (loss) on securities 0.63 0.97 0.34 1.17 0.93 (0.55) (0.59)
-------- -------- -------- -------- ------- ------- -------
total income (loss) from
investment operations 0.83 1.14 0.49 1.28 1.11 (0.40) (0.36)
-------- -------- -------- -------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.19) (0.17) (0.15) (0.11) (0.15) (0.15) (0.23)
from net realized gain on
securities (0.35) (0.24) (0.06) (0.02)
-------- -------- -------- -------- ------- ------- -------
total distributions (0.54) (0.41) (0.21) (0.13) (0.15) (0.15) (0.23)
-------- -------- -------- -------- ------- ------- -------
= SHARE VALUE
AT END OF PERIOD $11.44 $11.15 $10.42 $10.14 $8.99 $8.03 $8.58
======== ======== ======== ======== ======= ======= =======
TOTAL RETURN 7.74% 11.14% 4.92% 14.31% 14.18% (4.69)% (3.71)%
======== ======== ======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.42% 0.42% 0.45% 0.47% 0.53% 0.65% 0.37%
Ratio of net investment income to
average net assets 1.75% 1.65% 1.47% 1.43% 2.33% 1.84% 2.67%
Portfolio turnover rate 12% 20% 14% 7% 9% 5% 3%
Number of shares outstanding at
end of year (000's) 15,857 18,497 20,074 17,273 7,429 4,256 2,451
Net assets at end of year (000's) $181,437 $206,259 $209,091 $175,183 $66,809 $34,182 $21,036
Average net assets during the year
(000's) $191,117 $204,792 $199,235 $117,264 $45,509 $26,542 $15,693
Average commission rate paid $0.0236 N/A N/A N/A N/A N/A N/A
<CAPTION>
PERIOD FROM
OCTOBER 2,
1989
TO MAY 31,
1990
-----------
<S> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $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 PERIOD $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
Average commission rate paid N/A
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on October 2, 1989.
INTERNATIONAL GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1,
FISCAL YEAR ENDED MAY 31, 1991 TO
----------------------------------------------------------- MAY 31,
1997 1996 1995 1994 1993 1992
---------- ---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $11.79 $12.72 $10.97 $11.16 $10.43 $10.00(1)
-------- -------- ------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.63 0.65 0.65 0.62 0.76 0.48
from net realized & unrealized gain (loss) on
securities and foreign currencies (0.49) (0.89) 1.80 (0.20) 0.70 0.42
-------- -------- ------- ------- ------- -------
total income (loss) from investment operations 0.14 (0.24) 2.45 0.42 1.46 0.90
-------- -------- ------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.58) (0.68) (0.70) (0.60) (0.73) (0.47)
from net realized gain on securities (0.02) (0.01) (0.01)
-------- -------- ------- ------- ------- -------
total distributions (0.60) (0.69) (0.70) (0.61) (0.73) (0.47)
-------- -------- ------- ------- ------- -------
= SHARE VALUE
AT END OF PERIOD $11.33 $11.79 $12.72 $10.97 $11.16 $10.43
======== ======== ======= ======= ======= =======
TOTAL RETURN 1.13% (1.91)% 23.23% 3.87% 14.50% 9.18%
======== ======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.56% 0.56% 0.59% 0.48% 0.14% 0.08%
Ratio of net investment income to average net assets 5.13% 5.45% 5.83% 5.87% 7.02% 4.62%
Portfolio turnover rate 4% 11% 6% 3% 26% 12%
Number of shares outstanding at end of year (000's) 15,680 12,073 6,111 3,741 2,062 1,259
Net assets at end of year (000's) $177,709 $142,383 $77,734 $41,028 $23,009 $13,126
Average net assets during the year (000's) $166,147 $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.
5
<PAGE> 8
FINANCIAL HIGHLIGHTS -- CONTINUED
MIDCAP INDEX FUND(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
--------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $19.09 $15.68 $14.54 $14.38 $12.86 $12.51 $12.92
-------- -------- -------- -------- -------- ------- -------
+ INCOME (LOSS)
from net investment income 0.24 0.24 0.26 0.23 0.24 0.23 0.28
from net realized & unrealized
gain (loss) on securities 2.95 4.06 1.59 0.28 1.93 0.39 (0.30)
-------- -------- -------- -------- -------- ------- -------
total income (loss) from
investment operations 3.19 4.30 1.85 0.51 2.17 0.62 (0.02)
-------- -------- -------- -------- -------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.24) (0.24) (0.26) (0.23) (0.24) (0.23) (0.28)
from net realized gain on
securities (1.21) (0.65) (0.45) (0.12) (0.41) (0.04) (0.11)
-------- -------- -------- -------- -------- ------- -------
total distributions (1.45) (0.89) (0.71) (0.35) (0.65) (0.27) (0.39)
-------- -------- -------- -------- -------- ------- -------
= SHARE VALUE
AT END OF YEAR $20.83 $19.09 $15.68 $14.54 $14.38 $12.86 $12.51
======== ======== ======== ======== ======== ======= =======
TOTAL RETURN 17.48% 28.10% 13.26% 3.52% 17.21% 5.01% 0.20%
======== ======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.40% 0.41% 0.44% 0.46% 0.47% 0.54% 0.67%
Ratio of net investment income to
average net assets 1.24% 1.36% 1.73% 1.62% 1.79% 1.82% 2.41%
Portfolio turnover rate 19% 21% 23% 17% 5% 112% 101%
Number of shares outstanding at
end of year (000's) 29,137 28,322 25,988 24,001 14,673 8,862 6,168
Net assets at end of year (000's) $607,061 $540,688 $407,557 $349,041 $210,931 $113,992 $77,146
Average net assets during the year
(000's) $554,397 $477,372 $376,486 $285,247 $154,979 $88,456 $69,696
Average commission rate paid $0.0277 N/A N/A N/A N/A N/A N/A
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------
1990 1989 1988
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $12.25 $10.86 $13.87
------- ------- -------
+ INCOME (LOSS)
from net investment income 0.28 0.30 0.17
from net realized & unrealized
gain (loss) on securities 0.71 1.51 (1.41)
------- ------- -------
total income (loss) from
investment operations 0.99 1.81 (1.24)
------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.32) (0.27) (0.18)
from net realized gain on
securities (0.15) (1.59)
------- ------- -------
total distributions (0.32) (0.42) (1.77)
------- ------- -------
= SHARE VALUE
AT END OF YEAR $12.92 $12.25 $10.86
======= ======= =======
TOTAL RETURN 8.22% 17.06% (7.30)%
======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.68% 0.74% 0.79%
Ratio of net investment income to
average net assets 2.29% 2.72% 1.51%
Portfolio turnover rate 131% 67% 108%
Number of shares outstanding at
end of year (000's) 5,712 5,354 4,827
Net assets at end of year (000's) $73,815 $65,586 $52,435
Average net assets during the year
(000's) $67,421 $57,398 $49,877
Average commission rate paid N/A N/A N/A
</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.
MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- -------- -------- ------- ------- -------
+ INCOME
from net investment income 0.05 0.05 0.05 0.03 0.03 0.05 0.07
-------- ------- -------- -------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.07)
-------- ------- -------- -------- ------- ------- -------
= SHARE VALUE
AT END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======= ======== ======== ======= ======= =======
TOTAL RETURN 5.02% 5.26% 4.90% 2.83% 2.85% 4.47% 7.11%
======== ======= ======== ======== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.57% 0.57% 0.57% 0.58% 0.63% 0.67% 0.68%
Ratio of net investment income to
average net assets 4.95% 5.14% 4.75% 2.78% 2.81% 4.42% 6.86%
Number of shares outstanding at
end of year (000's) 128,125 83,618 82,256 50,534 45,323 48,355 38,572
Total net assets at end of year
(000's) $128,125 $83,618 $82,254 $50,533 $45,322 $48,353 $38,570
Average net assets during the year
(000's) $113,882 $84,271 $67,021 $46,222 $45,562 $46,305 $34,733
<CAPTION>
FISCAL YEAR ENDED MAY 31,
--------------------------------
1990 1989 1988
--------- -------- ---------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $1.00 $1.00 $1.00
------- ------ -------
+ INCOME
from net investment income 0.08 0.08 0.05
------- ------ -------
- - DISTRIBUTIONS
from net investment income (0.08) (0.08) (0.05)
------- ------ -------
= SHARE VALUE
AT END OF YEAR $1.00 $1.00 $1.00
======= ====== =======
TOTAL RETURN 8.31% 8.63% 6.02%
======= ====== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.74% 0.46% 1.77%
Ratio of net investment income to
average net assets 7.93% 8.39% 5.30%
Number of shares outstanding at
end of year (000's) 27,628 21,445 7,336
Total net assets at end of year
(000's) $27,628 $21,445 $7,341
Average net assets during the year
(000's) $22,563 $13,385 $5,390
</TABLE>
6
<PAGE> 9
FINANCIAL HIGHLIGHTS -- CONTINUED
SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
---------------------------------------------------- TO
1997 1996 1995 MAY 31, 1994
---- ---- ---- --------------
<S> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $20.48 $14.43 $9.83 $10.00(1)
-------- -------- -------- -------
+ INCOME (LOSS)
from net investment income 0.00 0.00 0.03 0.00
from realized & unrealized gain (loss) on
securities 0.33 8.08 4.72 (0.17)
-------- -------- -------- -------
total income (loss) from investment operations 0.33 8.08 4.75 (0.17)
-------- -------- -------- -------
- - DISTRIBUTIONS
from net investment income (0.00) (0.00) (0.02) 0.00
from net realized gain on securities (0.93) (2.03) (0.13) 0.00
-------- -------- -------- -------
total distributions (0.93) (2.03) (0.15) 0.00
-------- -------- -------- -------
= SHARE VALUE
AT END OF PERIOD $19.88 $20.48 $14.43 $9.83
======== ======== ======== =======
TOTAL RETURN 1.81% 58.28% 48.61% (1.66)%
======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.96% 0.94% 1.00% 0.08%
Ratio of net investment income (loss) to average
net assets (0.29)% (0.07)% 0.36% 0.04%
Portfolio turnover rate 122% 116% 121% 0%
Number of shares outstanding at end of year
(000's) 40,484 27,696 11,550 1,001
Net assets at end of year (000's) $804,982 $567,187 $166,683 $ 9,834
Average net assets during the year (000's) $664,608 $363,087 $ 64,974 $ 9,918
Average commission rate paid $0.0393 N/A N/A N/A
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
SMALL CAP INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31, PERIOD FROM
-------------------------------------------------------------- MAY 1, 1992
1997 1996 1995 1994 1993 TO MAY 31, 1992
---------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $16.25 $12.49 $11.52 $11.28 $ 9.93 $10.00(1)
-------- -------- -------- -------- -------- --------
+ INCOME (LOSS)
from net investment income 0.19 0.20 0.17 0.13 0.15 0.02
from net realized & unrealized gain (loss)
on securities 0.93 4.04 0.97 0.58 1.48 (0.07)
-------- -------- -------- -------- -------- --------
total income (loss) from investment
operations 1.12 4.24 1.14 0.71 1.63 (0.05)
-------- -------- -------- -------- -------- --------
- - DISTRIBUTIONS
from net investment income (0.19) (0.20) (0.17) (0.13) (0.15) (0.02)
from net realized gain on securities (1.00) (0.28) (0.34) (0.13)
-------- -------- -------- -------- -------- --------
total distributions (1.19) (0.48) (0.17) (0.47) (0.28) (0.02)
-------- -------- -------- -------- -------- --------
= SHARE VALUE
AT END OF PERIOD $16.18 $16.25 $12.49 $11.52 $11.28 $ 9.93
======== ======== ======== ======== ======== ========
TOTAL RETURN 7.51% 34.50% 9.98% 6.18% 16.64% (0.50)%
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.41% 0.41% 0.44% 0.47% 0.47% 0.04%
Ratio of net investment income to average net
assets 1.34% 1.36% 1.44% 1.10% 1.40% 0.21%
Portfolio turnover rate 42% 31% 34% 16% 20% 0%
Number of shares outstanding at end of year
(000's) 11,893 11,129 10,136 9,381 3,687 1,107
Net assets at end of year (000's) $192,459 $180,785 $126,567 $108,050 $ 41,581 $10,989
Average net assets during the year (000's) $178,368 $150,448 $120,298 $70,690 $ 22,142 $10,989
Average commission rate paid $0.0297 N/A N/A N/A N/A N/A
</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.
7
<PAGE> 10
FINANCIAL HIGHLIGHTS -- CONTINUED
SOCIAL AWARENESS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
----------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $15.49 $13.02 $11.98 $12.12 $11.43 $11.13 $10.59
--------- ------- ------- ------- ------- ------- -------
+ INCOME (LOSS)
from net investment income 0.24 0.26 0.27 0.26 0.24 0.26 0.26
from net realized & unrealized
gain (loss) on securities 4.19 3.37 1.75 (0.02) 1.22 0.30 0.54
--------- ------- ------- ------- ------- ------- -------
total income from investment
operations 4.43 3.63 2.02 0.24 1.46 0.56 0.80
--------- ------- ------- ------- ------- ------- -------
- - DISTRIBUTIONS
from net investment income (0.24) (0.25) (0.27) (0.26) (0.24) (0.26) (0.26)
from net realized gain on
securities (1.78) (0.91) (0.71) (0.12) (0.53)
--------- ------- ------- ------- ------- ------- -------
total distributions (2.02) (1.16) (0.98) (0.38) (0.77) (0.26) (0.26)
--------- ------- ------- ------- ------- ------- -------
= SHARE VALUE
AT END OF PERIOD $17.90 $15.49 $13.02 $11.98 $12.12 $11.43 $11.13
========= ======= ======= ======= ======= ======= =======
TOTAL RETURN 30.48% 28.85% 18.19% 1.97% 13.08% 5.08% 7.89%
========= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net
assets 0.56% 0.56% 0.58% 0.60% 0.63% 0.16% 0.44%
Ratio of net investment income to
average net assets 1.53% 1.80% 2.22% 2.19% 2.14% 2.34% 2.66%
Portfolio turnover rate 109% 117% 148% 83% 106% 203% 100%
Number of shares outstanding at
end of year (000's) 8,677 5,220 4,143 3,817 2,819 1,799 973
Net assets at end of year (000's) $155,349 $80,887 $53,927 $45,729 $34,166 $20,570 $10,835
Average net assets during the year
(000's) $106,139 $66,888 $47,942 $41,002 $26,920 $15,365 $ 7,959
Average commission rate paid $0.0400 N/A N/A N/A N/A N/A N/A
<CAPTION>
PERIOD FROM
OCTOBER 2, 1989
TO
MAY 31, 1990
---------------
<S> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF PERIOD $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 PERIOD $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
Average commission rate paid N/A
</TABLE>
- ------------
(1) The net asset value at the beginning of the period is as of commencement of
operations on October 2, 1989.
8
<PAGE> 11
FINANCIAL HIGHLIGHTS -- CONTINUED
STOCK INDEX FUND(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $20.69 $16.81 $14.39 $14.36 $13.34 $12.60 $11.86
---------- ---------- ---------- ---------- -------- -------- -------
+ INCOME (LOSS)
from net investment income 0.39 0.39 0.37 0.35 0.34 0.32 0.31
from net realized & unrealized
gain (loss) on securities 5.57 4.26 2.45 0.12 1.20 0.74 0.81
---------- ---------- ---------- ---------- -------- -------- -------
total income (loss) from
investment operations 5.96 4.65 2.82 0.47 1.54 1.06 1.12
---------- ---------- ---------- ---------- -------- -------- -------
- - DISTRIBUTIONS
from net investment income (0.39) (0.38) (0.37) (0.35) (0.34) (0.32) (0.31)
from net realized gain on
securities (0.17) (0.39) (0.03) (0.09) (0.18) (0.07)
---------- ---------- ---------- ---------- -------- -------- -------
total distributions (0.56) (0.77) (0.40) (0.44) (0.52) (0.32) (0.38)
---------- ---------- ---------- ---------- -------- -------- -------
= SHARE VALUE
AT END OF YEAR $26.09 $20.69 $16.81 $14.39 $14.36 $13.34 $12.60
========== ========== ========== ========== ======== ======== =======
TOTAL RETURN 29.24% 28.17% 19.98% 3.29% 11.74% 8.57% 9.98%
========== ========== ========== ========== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.34% 0.35% 0.38% 0.39% 0.43% 0.50% 0.67%
Ratio of net investment income to
average
net assets 1.76% 2.05% 2.44% 2.44% 2.52% 3.12% 2.82%
Portfolio turnover rate 3% 3% 14% 3% 1% 45% 6%
Number of shares outstanding at
end of year (000's) 93,687 85,117 75,451 75,494 66,224 55,598 6,662
Net assets at end of year (000's) $2,444,200 $1,760,786 $1,267,992 $1,086,459 $951,200 $741,667 $83,970
Average net assets during the
year (000's) $2,019,826 $1,498,398 $1,140,085 $1,030,581 $836,510 $167,262 $55,147
Average commission rate paid $0.0281 N/A N/A N/A N/A N/A N/A
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------
1990 1989 1988
--------- --------- ----------
<S> <C> <C> <C>
PER SHARE DATA
SHARE VALUE AT BEGINNING OF YEAR $10.69 $8.90 $9.88
------- ------- --------
+ INCOME (LOSS)
from net investment income 0.33 0.27 0.19
from net realized & unrealized
gain (loss) on securities 1.32 1.86 (0.92)
------- ------- --------
total income (loss) from
investment operations 1.65 2.13 (0.73)
------- ------- --------
- - DISTRIBUTIONS
from net investment income (0.35) (0.25) (0.21)
from net realized gain on
securities (0.13) (0.09)
------- ------- --------
total distributions (0.48) (0.34) (0.25)
------- ------- --------
= SHARE VALUE
AT END OF YEAR $11.86 $10.69 $8.90
======= ======= ========
TOTAL RETURN 15.78% 24.40% (7.48)%
======= ======= ========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.61% 0.78% 1.29%
Ratio of net investment income to
average
net assets 3.05% 3.05% 2.23%
Portfolio turnover rate 8% 14% 16%
Number of shares outstanding at
end of year (000's) 3,456 1,924 1,174
Net assets at end of year (000's) $40,969 $20,572 $10,443
Average net assets during the
year (000's) $29,824 $14,060 $7,933
Average commission rate paid N/A N/A N/A
</TABLE>
- ------------
(1) Bankers Trust has been the Fund's Sub-adviser since May 1, 1992.
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>
Asset Allocation Fund
Money Market Fund
Capital Conservation Fund
September 7, 1990
Government Securities Fund
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 March 31, 1997, Bankers Trust managed $233 billion in assets.
Bankers Trust is entirely owned by the Bankers Trust New York Corporation, a
bank holding company. Bankers Trust is the seventh largest U.S. financial
services institution as of December 31, 1996.
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 $95
billion of assets as of December 31, 1996. 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 $5 billion as of June 30,
1997, 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 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 0.35% on the first
International Equities $500 million;
Fund 0.25% on assets
MidCap Index Fund over
Small Cap Index Fund $500 million
Stock Index 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%
Science & Technology Fund 0.90%
Social Awareness Fund 0.50%
Money Market Fund 0.50%
Asset Allocation 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, 1997, 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>
International Equities Fund 0.42%
MidCap Index Fund 0.40%
Small Cap Index Fund 0.41%
Stock Index Fund 0.34%
Growth Fund 0.86%
Growth & Income Fund 0.81%
Capital Conservation Fund 0.57%
Government Securities Fund 0.56%
International Government Bond Fund 0.56%
Science & Technology Fund 0.96%
Social Awareness Fund 0.56%
Money Market Fund 0.57%
Asset Allocation Fund* 0.57%
</TABLE>
* The Asset Allocation Fund was formerly known as the Timed Opportunity Fund.
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 0.05% on
the first $500 million and 0.03% 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
0.50% and the Science & Technology Fund at the annual rate of 0.60%.
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
0.45%.
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:
Asset Allocation Fund
Growth Fund
Growth & Income Fund
International Equities Fund
MidCap Index Fund
Science & Technology Fund
Small Cap Index Fund
Social Awareness Fund
Stock Index 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
Government Securities Fund
International Government Bond 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,
1996 1997
------- -------
<S> <C> <C>
International Equities Fund 20% 12%
MidCap Index Fund 21% 19%
Small Cap Index Fund 31% 42%
Stock Index Fund 3% 3%
Growth Fund 36% 40%
Growth & Income Fund 64% 45%
Capital Conservation Fund 80% 45%
Government Securities Fund 36% 38%
International Government Bond
Fund 11% 4%
Science & Technology Fund 116% 122%
Social Awareness Fund 117% 109%
Asset Allocation Fund 119% 103%
</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.
Until June 1, 1998, excessive short-term trading could result in excessive
"short-short income" under the Internal Revenue Code ("Code") which 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. The "short-short
income" test was recently repealed by the Taxpayer Relief Act of 1997, effective
for a Fund beginning on June 1, 1998. 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
ABOUT 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,
1997, 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, 1997, this Index was tracking 139 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 $1 billion.
The Frank Russell Company created this Index in 1979 to give investors an idea
of how the stocks of small capitalized companies generally perform. The median
market capitalization for the Index was $380 million.
The stocks tracked by this Index are updated annually 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.
15
<PAGE> 18
- --------------------------------------------------------------------------------
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.
16
<PAGE> 19
HOW TO READ A FUND FACT SHEET
- --------------------------------------------------------------------------------
[CHART]
17
<PAGE> 20
ASSET ALLOCATION
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 Asset Allocation Fund tries to perform better
than a blend of three market sectors measured by:
o the S&P 500 Index;
o 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>
The Fund has established separate sub-objectives for investments in each of the
three market sectors. Within the stock sector, the Fund seeks appreciation of
capital by selecting investments that it expects will participate in the growth
of the nation's economy. Within the bond sector, the Fund will generally seek
high current income consistent with reasonable investment risk. Within the money
market sector, the Fund seeks the highest level of current income consistent
with liquidity, stability, and preservation of capital.
As of May 31, 1997, the Fund's assets were invested as follows:
<TABLE>
<S> <C>
stocks 61.32%
intermediate and long-term bonds 31.81%
high quality money market securities 6.87%*
</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.
19
<PAGE> 21
ASSET ALLOCATION FUND
Fact Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Fund Investments Fund's Assets*
- ---------------------------------------------------------------
<S> <C>
Foreign securities up to 20%
- ---------------------------------------------------------------
Futures and options no more than 33%
- ---------------------------------------------------------------
Illiquid and restricted up to 10%
securities
- ---------------------------------------------------------------
</TABLE>
*At time of purchase.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE ASSET ALLOCATION FUND*
AND THE S&P 500 INDEX
AVERAGE ANNUAL TOTAL RETURN -- FUND
[CHART]
FISCAL YEAR ENDED MAY 31
* The Asset Allocation Fund was formerly known as the Timed Opportunity Fund.
For the fiscal year ended May 31, 1997, the Fund had a return of 16.46% before
subtracting expenses of 0.57%. This represents a negative tracking difference of
2.67% 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. An over weighting
of some midcap stocks during the first half of the year caused the equity
portion of the Fund to underperform. That strategy was changed and subsequent
performance has more closely paralleled the relevant index.
COMPARISON OF A CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE ASSET ALLOCATION 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.
19
<PAGE> 22
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
The Fund invests in high quality bonds to provide you with the highest possible
total return from current income and capital gains while preserving your
investment. 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, 1997
approximately 3% 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".
20
<PAGE> 23
CAPITAL CONSERVATION FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 8.32% before
subtracting expenses of 0.57%. This represents a negative tracking difference of
0.53% from the Fund's benchmark; the Merrill Lynch Corporate Master Bond Index.
An increase in credit quality with an accompanying lower yield on those issues
exerted a negative effect. As credit concerns diminish higher yields may be
obtainable.
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.
21
<PAGE> 24
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".
22
<PAGE> 25
GOVERNMENT SECURITIES FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 7.50% before
subtracting expenses of 0.56%. This represents a positive tracking difference of
0.12% from the Fund's benchmark, the Lehman Brothers U.S. Treasury Composite
Index. Positions in callable agency notes and collateralized mortgage
obligations allowed the Fund to achieve an enhanced yield.
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.
23
<PAGE> 26
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. 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".
24
<PAGE> 27
GROWTH FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 9.86% before
subtracting expenses of 0.86%. This return represented a negative tracking
difference of 19.57% compared to the Fund's benchmark, the S&P 500 Index. The
Fund's focus on non-cyclical growth companies in service businesses, a strategy
that performs well in a slow growth economy, was not in favor as a surprisingly
strong economy drove favorable earnings reports in most industries.
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.
25
<PAGE> 28
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 (the Ranking System) (discussed below)
does not eliminate these risks. The Sub-adviser believes that the 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, 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***
- -------------------------------------------------
*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.
</TABLE>
Additional information
about THE FUND'S
INVESTMENTS is provided
under "Types of
Investments".
26
<PAGE> 29
GROWTH & INCOME FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 17.89% before
subtracting expenses of 0.81%. This return represented a negative tracking
difference of 11.54% compared to the Fund's benchmark, the S&P 500 Index. Large
capitalization stocks have led this market advance, with small and midcap stocks
lagging. This disparate performance impacted the Fund negatively as the small
and midcap stocks are well represented in the Value Line Timeliness Ranking
System. The Fund is managed using that system.
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.
27
<PAGE> 30
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 may not be
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".
28
<PAGE> 31
INTERNATIONAL EQUITIES FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 8.16% before
subtracting expenses of 0.42%. This return represented a positive tracking
difference of 0.62% 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.
29
<PAGE> 32
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".
30
<PAGE> 33
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, 1997, the Fund had a return of 1.69% before
subtracting expenses of 0.56%. This represents a positive tracking difference of
0.44% compared to its benchmark, the Salomon Brothers Non-U.S. Dollar World
Government Bond Index. The yield was reduced by the strong dollar versus all
currencies in which the Fund is invested.
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.
31
<PAGE> 34
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 may not be 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 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".
32
<PAGE> 35
MIDCAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 17.88%, before
subtracting expenses of 0.40%. This represented a negative tracking difference
of 0.33% 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.
33
<PAGE> 36
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:
o Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities
o Certificates of deposit and other obligations of domestic banks that have
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
o Money market instruments of foreign issuers payable in U.S. dollars (limited
to no more than 20% of the Fund's net assets)
o Asset-backed securities
o Loan participations
o Adjustable rate securities
o 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".
34
<PAGE> 37
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
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.
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
The Fund invests in companies that are
"Types of Investments".
35
<PAGE> 38
SCIENCE & TECHNOLOGY FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 2.77% before
subtracting expenses of 0.96%. This represents a negative tracking difference of
26.66% compared to the Fund's benchmark, the S&P 500 Index. The market
performance for large capitalization stocks caused much of the negative tracking
as the Fund tends to hold significant amounts of small and midcap stocks. A
number of valuation compressions due to volatile market conditions, also weighed
on results.
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.
36
<PAGE> 39
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 may not be 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 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".
37
<PAGE> 40
SMALL CAP INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 7.92%, before
subtracting expenses of 0.41%. This represented a positive tracking difference
of .95% 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.
38
<PAGE> 41
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".
39
<PAGE> 42
SOCIAL AWARENESS FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 31.04% before
subtracting expenses of 0.56%. This resulted in a positive tracking difference
of 1.61% compared to the Fund's benchmark, the S&P 500 Index. Concentration on
the larger capitalization growth sectors and avoidance of the volatile tobacco
industry aided 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.
40
<PAGE> 43
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 may not be 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 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".
41
<PAGE> 44
STOCK INDEX FUND
Fact Sheet
- --------------------------------------------------------------------------------
For the fiscal year ended May 31, 1997, the Fund had a return of 29.58%, before
subtracting expenses of 0.34%. This return represented a positive tracking
difference of 0.15% 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.
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:
o Market Risk
o Credit (Financial) Risk
o Interest Rate Risk
o 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> <C>
Total value of the
Fund's assets*
(including money owed to
the fund but not yet The Fund's
collected) = 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
divided by 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
- --------------------------------------------------------------------------------
See the Statement of
Additional information and
your contract prospectus
for further tax discussions.
You should also CONSULT
YOUR TAX ADVISOR before
investing.
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 Registered Investment Company (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.
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.
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 1-800-44-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
Asset Allocation Fund........................... 4
Performance and Yield Information................... 5
Fundamental Investment Restrictions................. 8
Fundamental Investment Restrictions
Applicable to All Funds....................... 8
MMF Investment Restrictions..................... 9
AAF, 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........................................ 13
Eurodollar Obligations.......................... 14
Asset-Backed Securities......................... 14
Mortgage-Backed Securities...................... 15
Loan Participations............................. 15
Adjustable Rate Securities...................... 15
Illiquid Securities............................. 16
Rule 144A Securities............................ 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Options on Securities and Securities Indices.... 16
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..................................... 23
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............................... 38
Index Funds..................................... 38
Description of Corporate Bond Ratings........... 39
Description of Commercial Paper Ratings......... 40
Independent Auditors............................ 41
Directors and Officers.............................. 42
Financial Statements................................ 45
</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
Thomas L. West, Jr. Thomas L. West, Jr. Executive Vice President
Joe C. Osborne Norman Jaskol Vice President and Senior
Peter V. Tuters Investment Officer
Norman Hackerman Teresa S. Moro Vice President and
John William Lancaster Investment Officer
F. Robert Paulsen John W. Mossbarger Vice President and
R. Miller Upton Investment Officer
Ben H. Love Leon A. Olver Vice President and
Investment Officer
William Trimbur, Jr. Vice President and
Investment Officer
Brent C. Nelson Vice President
Cynthia A. Toles General Counsel and Secretary
Gregory R. Seward Treasurer
Kathryn A. Pearce Controller
David H. den Boer Assistant Secretary
</TABLE>
PRINTED MATTER
PRINTED IN U.S.A. RECYCLED PAPER
VA 9017 VER 10/97 LOGO
<PAGE> 55
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
ASSET ALLOCATION FUND
CAPITAL CONSERVATION FUND
GOVERNMENT SECURITIES FUND
GROWTH FUND
GROWTH & INCOME FUND
INTERNATIONAL EQUITIES FUND
INTERNATIONAL GOVERNMENT SECURITIES FUND
MIDCAP INDEX FUND
MONEY MARKET FUND
SCIENCE & TECHNOLOGY FUND
SOCIAL AWARENESS FUND
SMALL CAP INDEX FUND
STOCK INDEX FUND
-----------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------------------------------------------
FORM N-1A PART B
OCTOBER 1, 1997
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, 1997. 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 1-800-44-VALIC 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 713-831-3505. 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
Asset Allocation Fund.......................... 4
Performance and Yield Information................ 5
Fundamental Investment Restrictions.............. 8
Fundamental Investment Restrictions Applicable
to All Funds................................. 8
MMF Investment Restrictions.................... 9
AAF, 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....................................... 13
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
</TABLE>
<TABLE>
<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.................................... 23
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. 10/97
<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 OPERATIONS
DATE OF DATE SEED COMMENCED
INCORPORATION OR MONEY WAS (BY ISSUANCE OR
BOARD APPROVAL FIRST PROVIDED AVAILABILITY
NAME OF FUND FOR ORGANIZATION TO THE COMPANY OF SHARES)
------------ ---------------- -------------- ---------------
<S> <C> <C> <C>
Asset Allocation Fund ("AAF")*........ 02-22-83 08-08-83 09-06-83
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
Growth Fund ("GF").................... 01-25-94 04-29-94 04-29-94
Growth & Income Fund ("GIF").......... 01-25-94 04-29-94 04-29-94
International Equities Fund ("IEF")... 07-18-89 09-29-89 10-02-89
International Government Bond Fund
("IGBF")............................ 07-30-91 10-01-91 10-01-91
MidCap Index Fund ("MIF")............. 03-16-82 08-30-82 10-13-82
Money Market Fund ("MMF")............. 12-07-84 12-16-85 01-16-86
Science & Technology Fund ("STF")..... 12-17-93 04-29-94 04-29-94
Small Cap Index Fund ("SCIF")......... 10-28-91 05-01-92 05-01-92
Social Awareness Fund ("SAF")......... 07-18-89 09-29-89 10-02-89
Stock Index Fund ("SIF").............. 02-02-87 04-20-87 04-20-87
</TABLE>
- ---------------
*The Asset Allocation Fund was formerly known as the Timed Opportunity Fund.
The MidCap Index Fund and the Asset Allocation 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. The Asset Allocation Fund effected a change in its name from
the Timed Opportunity Fund, effective as of October 1, 1997. 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, 1997) is
set forth below:
EAFE INDEX BREAKDOWN BY COUNTRY
<TABLE>
<CAPTION>
COUNTRY WEIGHT
------- ------
<C> <S> <C>
1 AUSTRALIA................................................... 2.86
2 AUSTRIA..................................................... 0.39
3 BELGIUM..................................................... 1.21
4 DENMARK..................................................... 0.92
5 FINLAND..................................................... 0.68
6 FRANCE...................................................... 6.56
7 GERMANY..................................................... 8.56
8 HONG KONG................................................... 3.78
9 IRELAND..................................................... 0.32
10 ITALY....................................................... 2.92
11 JAPAN....................................................... 32.62
12 MALAYSIA.................................................... 2.24
13 NETHERLANDS................................................. 4.90
14 NEW ZEALAND................................................. 0.37
15 NORWAY...................................................... 0.54
16 SINGAPORE................................................... 1.18
17 SPAIN....................................................... 2.35
18 SWEDEN...................................................... 2.38
19 SWITZERLAND................................................. 6.30
20 UNITED KINGDOM.............................................. 18.92
</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.
ASSET ALLOCATION FUND
In addition to its overall investment objective, the Fund has established
separate sub-objectives for investments in each of the three market sectors. The
following is a statement of the sub-objectives of each sector, which are
designed to maximize the unique investment return characteristics inherent in
that market sector:
1. Within the stock sector, the Fund seeks appreciation of capital by
selecting investments that it expects will participate in the growth of
the nation's economy.
2. Within the bond sector, the Fund will generally seek high current income
consistent with reasonable investment risk. The Fund will pursue the
above objective by investing only in (a) investment grade corporate debt
obligations rated e.g. at least Baa by Moody's Investor Services, Inc.
("Moody's") or by any other NRSRO or unrated debt obligations which VALIC
believes are of comparable investment quality, and (b) obligations of, or
debts guaranteed by, the U.S. Government, its agencies, or
instrumentalities. See "Government Securities Portfolio" for an
explanation of U.S. Government obligation and "Debt Securities" in this
Prospectus and the Appendix for an explanation of corporate debt ratings.
3. Within the money market sector, the Fund seeks the highest level of
current income consistent with liquidity, stability, and preservation of
capital.
The chart below indicates the historic allocations, from June 1983 through
June 1997, 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 $3.96 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, 1997
<TABLE>
<CAPTION>
10 YEAR
INCEPTION OR SINCE
DATE 1 YEAR 3 YEAR 5 YEAR INCEPTION (A)
--------- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUND:* 09/06/83
Average Annual Total Return 15.89% 15.37% 11.30% 9.11%
Portfolio Total Return 16.46% 15.94% 11.90% 10.01%
Benchmark (B) 19.13% 17.23% 13.02% 11.92%
CAPITAL CONSERVATION FUND: 01/16/86
Average Annual Total Return 7.75% 7.59% 6.94% 7.28%
Portfolio Total Return 8.32% 8.16% 7.54% 8.20%
Merrill Lynch Corporate Master Index 8.85% 8.87% 8.22% 9.61%
GOVERNMENT SECURITIES FUND: 01/16/86
Average Annual Total Return 6.94% 6.85% 6.41% 7.24%
Portfolio Total Return 7.50% 7.42% 7.00% 8.16%
Lehman Brothers U.S. Treasury Index 7.38% 7.36% 7.05% 8.45%
GROWTH FUND: 04/29/94
Average Annual Total Return 9.00% 23.15% N/A 21.92%
Portfolio Total Return 9.86% 24.02% N/A 22.79%
S & P 500 29.43% 25.92% N/A 26.25%
GROWTH & INCOME FUND: 04/29/94
Average Annual Total Return 17.08% 21.39% N/A 20.27%
Portfolio Total Return 17.89% 22.21% N/A 21.09%
S & P 500 29.43% 25.92% N/A 26.25%
INTERNATIONAL EQUITIES FUND: 10/02/89
Average Annual Total Return 7.74% 7.89% 10.39% 4.42%
Portfolio Total Return 8.16% 8.32% 10.85% 4.88%
Morgan Stanley Capital International EAFE 7.54% 7.69% 10.55% 4.50%
INTERNATIONAL GOVERNMENT BOND FUND: 10/01/91
Average Annual Total Return 1.13% 6.92% 7.77% 8.49%
Portfolio Total Return 1.69% 7.49% 8.24% 8.92%
Salomon Brothers Non-U.S. Government Bond Index 1.25% 7.34% 8.46% 9.32%
MIDCAP INDEX FUND: 10/13/82
Average Annual Total Return 17.48% 19.43% 15.63% 9.83%
Portfolio Total Return 17.88% 19.85% 16.07% 10.49%
S & P MidCap 400 18.21% 19.88% 16.28% 15.33%
MONEY MARKET FUND: 01/16/86
Average Annual Total Return 5.02% 5.06% 4.16% 5.52%
Portfolio Total Return 5.59% 5.63% 4.74% 6.36%
30-Day Certificate of Deposit Primary Offering
Rate
by New York City Banks 4.62% 4.59% 3.86% 5.38%
SCIENCE & TECHNOLOGY FUND: 04/29/94
Average Annual Total Return 1.81% 33.75% N/A 31.91%
Portfolio Total Return 2.77% 34.72% N/A 32.87%
S & P 500 29.43% 25.92% N/A 26.25%
SMALL CAP INDEX FUND: 05/01/92
Average Annual Total Return 7.51% 16.71% 14.51% 14.14%
Portfolio Total Return 7.92% 17.13% 14.95% 14.58%
Russell 2000 6.97% 17.05% 15.76% 15.79%
SOCIAL AWARENESS FUND: 10/02/89
Average Annual Total Return 30.48% 25.69% 18.03% 14.41%
Portfolio Total Return 31.04% 26.26% 18.62% 14.90%
S & P 500 29.43% 25.92% 18.37% 15.54%
STOCK INDEX FUND: 04/20/87
Average Annual Total Return 29.24% 25.70% 18.05% 13.81%
Portfolio Total Return 29.58% 26.06% 18.43% 14.40%
S & P 500 29.43% 25.92% 18.37% 14.71%
</TABLE>
- ------------
* The Asset Allocation Fund was formerly known as the Timed Opportunity Fund.
(A) Amounts shown are 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% of 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 if, as a result, more than 5% of the
value of the total assets would be invested in such 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)
8
<PAGE> 63
and policies or by purchasing securities subject to repurchase agreements.
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.
AAF, CCF, GSF, SIF, IEF, MIF, AND SCIF
INVESTMENT RESTRICTIONS
AAF, 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
9
<PAGE> 64
a single issuer or more than 10% of the outstanding voting securities of any
issuer would be held by the Funds, except securities 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 State Street Bank and Trust Company ("State Street"), custodian to
the Funds 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.
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<PAGE> 66
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 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 State Street 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 (1) registered
abroad and traded exclusively in foreign markets or (2) registered domestically
and issued 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, International Government Bond Fund, Science & Technology Fund
and the Growth Fund may invest in warrants limited to no more than 5% of the
value (10% in the case of the Science
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<PAGE> 68
& Technology Fund and the Growth Fund) of the total assets of each Fund.
Warrants are securities that give the Funds 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
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may invest in other asset-backed securities that may be developed in the future.
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.
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ADJUSTABLE RATE SECURITIES
Each of the Funds may invest in adjustable rate money market securities.
Adjustable rate securities (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.
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OPTIONS ON SECURITIES AND SECURITIES INDICES
Each Fund, other than the Money Market Fund, may write covered call and put
options on securities and securities indices. 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 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.
The International Equities Fund and the International
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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 Fund and the Science & Technology Fund will not
write a covered option if, as a result, the aggregate market value of all
portfolio securities or currencies covering put or call options exceeds 25% of
the market value of that Fund's net assets. The Growth & Income Fund as a matter
of operating policy, 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
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foreign currency during this period. Through the writing of a covered put option
a Fund receives premium income but obligates itself to purchase a 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."
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Although these investment practices will be used to generate additional
income and to attempt 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. 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.
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A financial futures contract is an agreement to buy or sell a security (or
deliver a final cash 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
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the position held, and which usually results in a profit or loss.
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
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<PAGE> 77
(marked to market daily) over the exercise price. In addition, because financial
futures contracts require delivery at a future date of either a specified
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 imme-
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<PAGE> 78
diately thereafter the total amount of its assets required to be on deposit as
initial margin to secure its obligations under financial futures contracts, 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.
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<PAGE> 79
INVESTMENT ADVISER
VALIC serves as the investment adviser to Asset Allocation 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 Corporation
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 was effective October 31,
1996. Pursuant to this determination the Com-
25
<PAGE> 80
pany entered into an Accounting Services Agreement with VALIC ("Agreement"). The
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.
For the fiscal year ended, May 31, 1997, the Company paid VALIC $177,948 for
accounting services provided by VALIC.
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 Asset
Allocation 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 Asset
Allocation 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.
For the fiscal year ended May 31, 1997, 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 Asset
Allocation Fund, the Capital Conservation Fund, the Government Securities Fund,
the International Government Bond Fund, and the Money Market Fund were
$5,543,535, $1,880,085, $622,719, $668,871, $4,704,380, $1,211,524, $5,973,280,
$525,440, $900,822, $347,154, $417,356, $833,117, and $572,063, 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 and
Bankers Trust Australia collectively are the money managers to the following
registered investment companies: Accessor Funds, Inc. Short Intermediate 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; Small Cap Index Portfolio; EAFE Equity
Index Portfolio; U.S. Bond Index Portfolio; Retirement Plus Portfolio; AARP U.S.
Stock Index Fund; USAA S&P100 Index Fund; AAS&P 100 Index Fund; 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 and Treasury Money Portfolio and Utility
Portfolio.
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 Short-Term Tax-Free Bond 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, Spectrum Income
Fund and Spectrum International 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 Small-Cap Stock Fund, Inc. (formerly known as T. Rowe Price OTC Fund,
Inc.), T. Rowe Price Blue Chip Growth Fund, Inc., T. Rowe Price Dividend Growth
Fund, Inc., T. Rowe Price Capital Oppor-
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tunity Fund, Inc., T. Rowe Price Financial Services Fund, Inc., T. Rowe Price
Health Sciences Fund, Inc., T. Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe
Price Value Fund, Inc., T. Rowe Price Corporate Income 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 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 and Bond Series) and the Penn
Series Funds, Inc. (which includes the Flexibly Managed Fund and High Yield Bond
Fund), T. Rowe Price Equity Series, Inc. (which includes T. Rowe Price Equity
Income Portfolio, T. Rowe Price New America Growth Portfolio, T. Rowe Price
Mid-Cap Growth Portfolio, and T. Rowe Price Personal Strategy Balanced
Portfolio), T. Rowe Price Fixed Income Series, Inc. (which includes T. Rowe
Price Limited-Term Bond Portfolio and T. Rowe Price Prime Reserve 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
Markets Fund, T. Rowe Price Emerging Markets 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 Global Stock Fund, T. Rowe Price
Short-Term Global Income 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 0.05% of the first
$500 million and 0.03% 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
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0.50% and the Science & Technology Fund at the annual rate of 0.60%. 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 0.45%. 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-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 Asset Allocation
Fund, the Money Market Fund, the Capital Conservation Fund, the Government
Securities Fund, the International Government Bond Fund and the Growth & In-
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<PAGE> 84
come 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
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
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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.
Brokerage commissions paid by the Stock Index Fund on portfolio transactions
for the fiscal years ended May 31, 1997, 1996, and 1995, totalled $122,723,
$84,226 and $95,461, respectively. For the fiscal year ended May 31, 1997 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, 1997, 1996, and 1995, totalled
$80,089, $93,068 and $118,210, respectively. For the fiscal year ended May 31,
1997, the MidCap Index Fund paid no brokerage commissions to brokers for
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, 1997, 1996 and 1995, totalled
$90,498, $37,454 and $36,808, respectively. For the fiscal year ended May 31,
1997, the Small Cap Index Fund paid $153 in brokerage commissions on
transactions totalling $68,697 to brokers selected on the basis of the quality
of execution together with research services provided to the Advisers.
Brokerage commissions paid by the International Equities Fund on portfolio
transactions for the fiscal years ended May 31, 1997, 1996, and 1995 totalled
$153,793, $250,882 and $187,369, respectively. For the fiscal year ended May 31,
1997, the International Equities Fund paid no brokerage commissions to brokers
for research services provided to VALIC.
Brokerage commissions paid by the Growth Fund on portfolio transactions for
the fiscal years ended May 31, 1997, 1996 and 1995, totalled $757,865, $486,285
and $204,382, respectively. For the fiscal year ended May 31, 1997, the Growth
Fund paid $94,434 in brokerage commissions, on transactions totalling
$41,627,478, 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 Growth & Income Fund on portfolio
transactions for the fiscal year ended May 31, 1997, 1996 and 1995, totalled
$159,571, $112,767 and $81,155, respectively. For the fiscal year ended May 31,
1997, the Growth & Income Fund paid $60,422 in brokerage commissions, on
transactions totalling $49,455,843, 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 Social Awareness Fund on portfolio
transactions for the fiscal years ended May 31, 1997, 1996, and 1995, totalled
$221,028, $99,297 and $134,591, respectively. For the fiscal year ended May 31,
1997 the Social Awareness Fund paid no brokerage commissions to brokers for
research services provided to VALIC.
Brokerage commissions paid by the Science & Technology Fund on portfolio
transactions for the fiscal year ended May 31, 1997, 1996 and 1995, totalled
$1,143,004, $664,932 and $182,202, respectively. For the fiscal year ended May
31, 1997, the Science & Technology Fund paid $75,790 in brokerage commissions,
on transactions totalling $43,440,066, 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 Asset Allocation Fund on portfolio
transactions for the fiscal years ended May 31, 1997, 1996 and 1995, totalled
$239,365, $235,223 and $155,506, respectively. For the fiscal year ended May 31,
1997, the Asset Allocation Fund paid no brokerage commissions to brokers for
research services provided to VALIC.
No brokerage commissions were paid by the Capital Conservation Fund,
Government Securities Fund, International Government Bond Fund and Money Market
Fund for fiscal years ended May 31, 1997, 1996 and 1995.
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
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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 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
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<PAGE> 87
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 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.
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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
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 Com-
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pany 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 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) until June 1, 1998, 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
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three months (recent legislation has repealed 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 for tax years
beginning after August 5, 1997); (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 for its taxable
year ending May 31, 1998, be derived from gains from the sale or other
disposition of securities held for less than three months (the "Short-Short
Test") 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. The elimination of the Short-Short Test beginning in
the Funds' next tax year will increase the ability of the Funds to engage in
options and similar instruments.
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.
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
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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 billion shares of common
stock, $0.01 par value per share, 13 billion of which are authorized to be
issued in thirteen classes comprising 1 billion 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, 1997, 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, 11.71% of the
Capital Conservation Fund, 0% of the Government Securities Fund, 0% of the
International Government Bond Fund, 0% of the Social Awareness Fund, 0% of the
Science & Technology Fund, 0% of the Money Market Fund, and 0% of the Asset
Allocation 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, 1997, VALIC Separate Account A owned of record the following
percentage of the outstanding shares of each Fund: 96.88% of the Stock Index
Fund, 99.99% of the MidCap Index Fund, 100% of the Small Cap Index Fund, 99.85%
of the International Equities Fund, 99.65% of the Growth Fund, 100% of the
Growth & Income Fund, 88.28% of the Capital Conservation Fund, 99.99% of the
Government Securities Fund, 100% of the International Government Bond Fund,
99.92% of the Social Awareness Fund, 100% of the Science & Technology Fund,
99.99% of the Money Market Fund, and 99.95% of the Asset Allocation Fund.
As of May 31, 1997, 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.
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
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<PAGE> 92
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).
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
38
<PAGE> 93
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.
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
39
<PAGE> 94
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 differences 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 auditors of the Company.
40
<PAGE> 95
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
---------------- --------------- -------------------
<S> <C> <C>
Thomas L. West, Jr.*.............. Director and Executive Vice President and Director, VALIC; Direc-
2929 Allen Parkway President since 1994 tor, VAMCO. Formerly Senior Vice
Houston, Texas 77019 President 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
5555 San Felipe for The Robert A. Welch Foundation
Suite 1900 (1983-Present); Director, Electro-
Houston, Texas 77056-2727 source, Inc.; Director, Radian
Corporation; Director, Scientific
Measurement Systems, Inc.; President
Emeritus, Rice University, Houston,
Texas. Formerly, President, Rice
University, Houston, Texas
(1970-1985).(1)(2)(4)
Dr. John W. Lancaster............. Director since 1984 Retired. Pastor Emeritus and Director
5300 Main of Planned Giving, First Presbyterian
Houston, Texas 77004 Church, Houston, Texas. Formerly,
Pastor, First Presbyterian Church,
Houston, Texas.(4)
Dr. F. Robert Paulsen............. Director since 1985 Dean Emeritus and Professor Emeritus,
2801 N. Indian Ruins College of Higher Education,
Tucson, Arizona 85715 University of Arizona, Tucson, Ari-
zona.(1)(2)(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) Retired Managing General Partner of Van Kampen American Capital Exchange
Fund.
(2) Retired Trustee of Van Kampen American Capital Bond Fund, Inc., Van Kampen
American Capital Income Trust, Van Kampen American Capital Convertible
Securities Fund, Inc. and the Common Sense Trust.
(3) Retired Trustee of Van Kampen American Capital Income Trust and Common Sense
Trust and retired Director of Van Kampen American Capital Bond Fund and Van
Kampen American Capital Convertible Securities Fund.
(4) Directors who are not interested persons of the Company receive an annual
retainer of $18,000. In addition, such directors are paid a per meeting fee
of $1,500 plus expenses incurred.
41
<PAGE> 96
<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 Consultant. Formerly, Director, Home
914 Tarrant Dr. Life Insurance Company of New York
Fontana, Wisconsin 53125 (1965-1988) and Director, Household
International, Inc. (1965-1989).(1)
(3)(4)
Ben H. Love....................... Director since 1991 Retired. Formerly, Chief Executive,
4407 Eaton Circle Boy Scouts of America.
Colleyville, Texas 76034 (1985-1993).(4)
</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 and Senior Vice President and Managing
Investment Officer since 1988 Director -- Investments, VALIC.
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 S. Moro.................... Vice President and Investment Trader -- VALIC. Formerly, Money Mar-
Officer since 1990 ket Trader, VALIC (1986-1990); AIM
Management Group Inc. (1983-1986).
John W. Mossbarger................ Vice President and Investment Portfolio Manager, VALIC. Formerly
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 and Investment Portfolio Manager, VALIC. Formerly
Officer since 1995 Vice President and Treasurer, First
Heights Bank (1994-1995); Vice
President and Assistant Treasurer,
First Heights Bank (1991-1994);
Assistant Vice President, Pulte
Financial Companies (1984-1991).
William Trimbur, Jr............... Vice President and Investment Portfolio Manager, VALIC. Formerly,
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>
42
<PAGE> 97
<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 Secretary Senior Associate General Counsel and
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 since 1991 Director of Fund Operations and
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).
Kathryn A. Pearce................. Controller since 1996 Associate Director of Fund
Operations, VALIC. Formerly,
Supervisor -- Mutual Fund Accounting,
Van Kampen American Capital
(1977-1996).
David H. den Boer................. Assistant Secretary since 1991 Senior Associate General Counsel,
VALIC. Formerly, Associate General
Counsel, VALIC (1990-1997), Senior
Counsel, VALIC (1989-1990); Private
Law Practice (1981-1989).
</TABLE>
43
<PAGE> 98
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, 1997.
FINANCIAL STATEMENTS
The financial statements for the year ended May 31, 1997 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, 1997 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.
44
<PAGE> 99
================================================================================
AMERICAN GENERAL SERIES PORTFOLIO COMPANY - ANNUAL REPORT MAY 31, 1997
================================================================================
TABLE OF CONTENTS
<TABLE>
<S> <C>
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stock Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 4
MidCap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Small Cap Index Fund . . . . . . . . . . . . . . . . . . . . . . . . 19
International Equities Fund . . . . . . . . . . . . . . . . . . . . . 36
Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Growth & Income Fund . . . . . . . . . . . . . . . . . . . . . . . . 45
Science & Technology Fund . . . . . . . . . . . . . . . . . . . . . . 49
Social Awareness Fund . . . . . . . . . . . . . . . . . . . . . . . . 52
Timed Opportunity Fund . . . . . . . . . . . . . . . . . . . . . . . 57
Capital Conservation Fund . . . . . . . . . . . . . . . . . . . . . . 65
Government Securities Fund . . . . . . . . . . . . . . . . . . . . . 68
International Government Bond Fund . . . . . . . . . . . . . . . . . 70
Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 77
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 80
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . 86
</TABLE>
<PAGE> 100
================================================================================
AGSPC PRESIDENT'S LETTER 1
================================================================================
We are pleased to provide the May 31, 1997 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, 1997.
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 2.
MARKET CONDITIONS
Domestic large capitalization equity returns exceeded 20% for the third
consecutive year. The Standard & Poor's 500 Stock Index (S&P 500) provided a
total return of 29.43%. An unusual aspect of the market this year, was the
wide divergence in performance of market sectors by market value of company.
In contrast to the return of the S&P, the Standard & Poor's MidCap 400 Index
(MidCap 400) returned 18.21%, an 11.22% difference. The performance of smaller
companies, as measured by the Russell 2000, was even greater with that index
returning 6.97%, a 22.46% difference. The bond markets also presented a wide
range of performance. As the economy continued to grow at a moderate pace with
very low levels of inflation, high quality corporate bonds earned 8.85%. Less
than investment grade bonds, reflecting investor confidence, produced a return
of 13.2%.
International returns, as measured by the Morgan Stanley Capital International
Index of Europe, Australia, and Far East (EAFE) were 7.54%. Stock market
rallies in Europe and Japan were offset somewhat by currency weakness.
FUND RETURNS
INDEXED FUNDS
The Stock Index Fund achieved a total return of 29.58%, 0.15% above its index.
The MidCap Index Fund returned 17.88%, 0.33% below its index. The Small Cap
Index Fund surpassed its index by 0.95% with a return of 7.92%. The
International Equities Fund achieved a return of 8.16%, 0.62% above its index.
MANAGED FUNDS
The managed funds' returns varied widely as concentration in different market
sectors produced the results consistent with the indexes discussed above.
The AGSPC Growth Fund returned 9.86%, under performing the S&P 500 by 19.57%.
The fund's focus on non-cyclical growth companies in service industries was not
in favor as a strong economy permitted better earnings performance among more
cyclical sectors. Continuing to emphasize higher growth, medium capitalization
issues should result in better performance if the economy slows or the market
leadership broadens.
The AGSPC Growth & Income Fund returned 17.89%, 11.54% less than the S&P 500.
The performance was closer to the MidCap 400 as mid-sized and smaller
capitalization stocks are heavily represented in the 1,700 issues that
constitute the Value Line Timeliness Ranking System. It is that system that
drives the investment selections for the AGSPC Growth & Income Fund.
The AGSPC Science & Technology Fund delivered a modest gain of 2.77% before
expenses. The principal deterrents to performance were a valuation compression
across all sectors of technology stocks, concern over the level of business
activity overseas and the general health of the personal computer industry.
Although the near term outlook is somewhat clouded, key industry product cycles
should positively impact the all important PC industry in 1988.
The Social Awareness Fund reported a gain of 31.04% for the fiscal year. This
was 1.61% above its index. Concentration on the larger capitalization growth
sectors and avoidance of the volatile tobacco industry aided performance.
The Timed Opportunity Fund earned 16.46% before expenses, 2.67% less than its
benchmark. An over weighting of some mid-cap stocks during the first half of
the year caused the equity portion of the fund to underperform. That strategy
was changed and subsequent performance has more closely paralleled the relevant
index.
BOND FUNDS
The Capital Conservation Fund yielded 8.32%, under performing its index by
0.53%. The shortfall was the result of an increase in credit quality with an
attendant lower yield on those issues. As credit concerns diminish higher
yields may be obtainable.
The Government Securities Fund achieved a return of 7.50%, 0.12% above its
index. Positions in callable agency notes and collateralized mortgage
obligations allowed the fund to achieve an enhanced yield.
The International Government Bond Fund recorded a return of 1.69%, 0.44% above
its index. The yield was reduced by the strong dollar versus all currencies in
which the fund is invested.
FUTURE OUTLOOK
The U.S. economic performance has been extremely favorable for investors.
Growth has proceeded at modest levels with Gross Domestic Product averaging
3.7% over the past five quarters. Inflation has been well contained with the
Consumer Price Index approximating 3% or less. Expectations of leading
economists are for Gross Domestic Product to rise at 2.4% in the second half of
1997 and to proceed at 2.2% in the first six months of 1988. Inflation is
projected at 2.7% for the second half of this year with an increase to 3.1% for
the first half of next year. Those conditions should result in long term
interest rates remaining in the current range of 6.3% to 7.2%. With relatively
stable interest rates, the stock market could improve from current levels.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, President
American General Series Portfolio Company
July 10, 1997
<PAGE> 101
===============================================================================
2 AGSPC PRESIDENT'S LETTER CONTINUED
===============================================================================
FUND RETURNS AND TRACKING DIFFERENCES
For the period ended May 31, 1997
<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 ...................... 29.24% 0.34% 29.58% 29.43% 0.15%
MidCap Index Fund /
Standard & Poor's MidCap 400 .................. 17.48 0.40 17.88 18.21 (0.33)
Small Cap Index Fund / Russell 2000 ............. 7.51 0.41 7.92 6.97 0.95
International Equities Fund / EAFE .............. 7.74 0.42 8.16 7.54 0.62
Managed Funds:
Growth Fund / S&P 500 ........................... 9.00 0.86 9.86 29.43 (19.57)
Growth & Income Fund / S&P 500 .................. 17.08 0.81 17.89 29.43 (11.54)
Science & Technology Fund / S&P 500 ............. 1.81 0.96 2.77 29.43 (26.66)
Social Awareness Fund / S&P 500 ................. 30.48 0.56 31.04 29.43 1.61
Timed Opportunity Fund / Benchmark(b)............ 15.89 0.57 16.46 19.13 (2.67)
Capital Conservation Fund /
Merrill Lynch Corporate Master Bond ........... 7.75 0.57 8.32 8.85 (0.53)
Government Securities Fund /
Lehman Brothers U.S. Treasury ................. 6.94 0.56 7.50 7.38 0.12
Int'l Gov't Bond Fund /
Salomon Non U.S. Gov't Bond ................... 1.13 0.56 1.69 1.25 0.44
Money Market Fund / 30 Day Certificate of Deposit
Primary Offering Rate by New York City Banks
(NYC 30 Day CD Rate) .......................... 5.02 0.57 5.59 4.62 0.97
</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, 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.
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
- -----------------------------------------------------------------------------------------------------------
(UNAUDITED)
MAY 31, NOVEMBER 27, MAY 31, 6/1/96 TO 11/28/96 TO
FUND 1996 1996 1997 11/27/96 5/31/97
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stock Index (emulate S&P 500) .................. $ 20.69 $ 23.37 $ 26.09 $ 0.19 $ 0.37
MidCap Index (emulate MidCap 400) .............. 19.09 20.33 20.83 0.12 1.33
Small Cap Index (emulate Russell 2000).......... 16.25 15.94 16.18 0.11 1.08
International Equities
(foreign long term growth stocks) ............ 11.15 11.43 11.44 0.11 0.43
Growth Fund (long term growth of capital) ...... 16.49 17.51 17.62 0.00 0.34
Growth & Income Fund (long term growth
of capital and current income) ............... 14.78 16.13 16.87 0.04 0.35
Science & Technology Fund (long term growth
of capital) .................................. 20.48 21.28 19.88 0.00 0.93
Social Awareness (social criteria growth
stocks)....................................... 15.49 17.72 17.90 0.12 1.90
Timed Opportunity (asset allocation) ........... 12.55 13.23 12.57 0.21 1.98
Capital Conservation (quality corporate
bonds) ....................................... 9.23 9.59 9.31 0.30 0.32
Government Securities (intermediate and
long term government bonds) .................. 9.61 9.91 9.67 0.29 0.30
International Government Bond (high quality
foreign government debt securities) .......... 11.79 12.27 11.33 0.31 0.29
Money Market (money market instruments) ........ 1.00 1.00 1.00 0.02 0.03
</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.
<PAGE> 102
===============================================================================
AGSPC PRESIDENT'S LETTER CONTINUED 3
===============================================================================
FUNDS AVAILABLE UNDER VARIABLE ANNUITY CONTRACTS
<TABLE>
<CAPTION>
VALIC SEPARATE ACCOUNT A
-----------------------------------------------------
CONTRACT FORM
-----------------------------------------------------
AG LIFE SEPARATE
ACCOUNT A
--------------------
AG LIFE AG LIFE
PORTFOLIO PORTFOLIO INDEPEN- GROUP SEPARATE SEPARATE
DIRECTOR DIRECTOR DENCE PLUS IMPACT UNIT PUR- NON ACCOUNT ACCOUNT
FUND 2* 1* UIT(G)-585 UIT-981 CHASE** QUALIFIED QUALIFIED B D
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index
(emulate S&P 500) ................... Yes Yes Yes Yes Yes Yes Yes Yes Yes
MidCap Index
(emulate MidCap 400) ................ No Yes Yes Yes No Yes Yes Yes No
Small Cap Index
(emulate Russell 2000) .............. No Yes Yes No No No No No No
International Equities
(foreign long term growth stocks) ... No Yes Yes No No No No No Yes
Growth Fund
(long term growth of capital)........ Yes Yes No No No No No No No
Growth & Income Fund (long term
growth of capital and current income) No Yes No No No No No No No
Science & Technology Fund
(long term growth of capital)........ Yes Yes No No No No No No No
Social Awareness
(social criteria growth stocks) ..... Yes Yes Yes No No No No No Yes
Timed Opportunity
(asset allocation) .................. No Yes Yes Yes No Yes Yes Yes No
Capital Conservation
(quality corporate bonds) ........... No Yes Yes Yes No Yes Yes Yes No
Government Securities (intermediate
and long term government bonds) ..... No Yes Yes No No Yes Yes Yes No
Int'l Government Bond (high quality
foreign government debt securities) . Yes Yes Yes No No No No No No
Money Market
(money market instruments) .......... Yes 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
<PAGE> 103
================================================================================
4 STOCK INDEX FUND - STATEMENT OF NET ASSETS May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.75%
ADVERTISING - 0.08%
28,900 Interpublic Group Cos., Inc....$ 1,730,388
-------------
AEROSPACE/DEFENSE - 1.82%
130,279 Boeing Co...................... 13,711,865
29,000 EG & G, Inc.................... 565,500
27,980 General Dynamics Corp.......... 2,095,003
75,076 Lockheed Martin Corp........... 7,028,991
80,500 McDonnell Douglas Corp......... 5,182,188
22,800 Northrop Grumman Corp.......... 1,932,300
91,200 Raytheon Co.................... 4,354,800
44,000 TRW Inc........................ 2,354,000
91,100 United Technologies Corp....... 7,322,163
-------------
44,546,810
-------------
AIRLINES - 0.38%
35,700 *AMR Corp....................... 3,547,687
31,600 Delta Air Lines, Inc........... 2,962,500
55,200 Southwest Airlines Co.......... 1,421,400
41,400 *US Airways Group, Inc.......... 1,438,649
-------------
9,370,236
-------------
APPAREL & PRODUCTS - 0.10%
27,000 *Fruit of the Loom, Inc. Class A 941,624
32,900 Liz Claiborne, Inc............. 1,501,062
-------------
2,442,686
-------------
APPLIANCES/FURNISHINGS - 0.10%
35,000 Maytag Corp.................... 936,250
30,200 Whirlpool Corp................. 1,506,225
-------------
2,442,475
-------------
AUTO - CARS - 1.67%
270,274 Chrysler Corp.................. 8,581,199
437,300 Ford Motor Co.................. 16,398,750
278,200 General Motors Corp............ 15,926,949
-------------
40,906,898
-------------
AUTO - REPLACEMENT PARTS - 0.36%
44,200 *AutoZone, Inc.................. 1,033,175
18,700 Cooper Tire & Rubber Co........ 418,412
14,300 Echlin Inc..................... 477,263
AUTO - REPLACEMENT PARTS - Continued
74,400 Genuine Parts Co...............$ 2,492,399
65,800 Goodyear Tire & Rubber Co...... 3,849,300
15,800 Pep Boys-Manny, Moe & Jack..... 493,749
-------------
8,764,298
-------------
BANKS - NEW YORK CITY - 2.04%
148,600 Bank of New York Co., Inc...... 6,334,075
162,782 Chase Manhattan Corp........... 15,382,899
175,700 CitiCorp....................... 20,095,687
74,300 J. P. Morgan & Co. Inc......... 7,987,250
-------------
49,799,911
-------------
BANKS - OTHER - 2.70%
133,368 BankAmerica Corp............... 15,587,384
60,400 BankBoston Corp................ 4,409,200
121,923 First Chicago Corp............. 7,223,938
104,497 First Union Corp............... 8,973,679
105,393 *Fleet Financial Group, Inc..... 6,442,147
54,500 Mellon Bank Corp............... 4,768,750
73,200 National City Corp............. 3,769,799
14,000 Republic of New York Corp...... 1,396,500
66,000 US Bancorp..................... 4,050,750
35,233 Wells Fargo & Co............... 9,283,896
-------------
65,906,043
-------------
BANKS - REGIONAL - 2.71%
165,472 BANC ONE CORP.................. 7,156,664
75,000 Barnett Banks, Inc............. 3,946,874
32,700 Comerica Inc................... 2,043,750
81,400 CoreStates Financial Corp...... 4,304,025
45,100 Fifth Third Bancorp............ 3,483,974
53,500 First Bank System, Inc......... 4,387,000
85,170 KeyCorp........................ 4,631,119
287,792 NationsBank Corp............... 16,943,753
139,100 Norwest Corp................... 7,441,850
110,100 PNC Bank Corp.................. 4,610,437
72,200 SunTrust Banks, Inc............ 3,853,675
55,513 Wachovia Corp.................. 3,379,354
-------------
66,182,475
-------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.58%
11,900 Adolph Coors Class B...........$ 290,063
186,100 Anheuser-Busch Companies, Inc.. 7,979,037
18,915 Brown-Forman Corp Class B...... 967,029
124,600 Seagram Co. Ltd................ 5,015,150
-------------
14,251,279
-------------
BEVERAGE - SOFT DRINKS - 3.44%
923,100 Coca-Cola Co................... 63,001,575
571,200 PepsiCo, Inc................... 20,991,600
-------------
83,993,175
-------------
BROADCASTING - 0.85%
78,550 Comcast Corp. Class A Special.. 1,364,806
45,300 *General Instrument Corp........ 1,098,525
229,000 *Tele-Communications, Inc.
Class A ...................... 3,463,625
191,300 U S West Communications Group.. 7,006,363
210,600 *U S West Media Group........... 4,185,675
122,700 *Viacom, Inc. Class B........... 3,642,656
-------------
20,761,650
-------------
BUILDING MATERIALS - 0.32%
8,900 Armstrong World Industries,
Inc. ......................... 605,200
67,100 Lowe's Companies, Inc.......... 2,642,063
70,100 Masco Corp..................... 2,725,138
60,700 Sherwin-Williams Co............ 1,821,000
-------------
7,793,401
-------------
CHEMICAL - MAJOR - 2.13%
95,500 Dow Chemical Co................ 7,962,313
206,300 E.I. du Pont de Nemours and Co. 22,460,913
15,400 Goodrich (B.F.) Co............. 662,200
39,300 Hercules, Inc.................. 1,842,188
218,500 Monsanto Co.................... 9,614,000
54,900 Morton International, Inc...... 1,770,525
66,500 PPG Industries, Inc............ 3,865,313
18,300 Rohm and Haas Co............... 1,578,375
51,600 Union Carbide Corp............. 2,412,300
-------------
52,168,127
-------------
</TABLE>
<PAGE> 104
================================================================================
May 31, 1997 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 5
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
CHEMICAL - MISCELLANEOUS - 0.59%
41,100 Air Products and Chemicals,
Inc. .........................$ 3,195,525
30,637 Eastman Chemical Co............ 1,822,902
8,550 Ecolab Inc..................... 355,894
8,200 FMC Corp....................... 590,400
26,500 Great Lakes Chemical Corp...... 1,295,187
9,328 Millipore Corp................. 402,270
20,300 Nalco Chemical Co.............. 753,638
59,200 Praxair, Inc................... 3,115,400
32,400 Sigma Aldrich Corp............. 992,250
37,800 W. R. Grace & Co............... 1,975,050
------------
14,498,516
------------
CONGLOMERATES - 1.00%
105,800 Allied Signal Inc.............. 8,120,150
38,800 ITT Industries, Inc............ 960,300
36,500 Loews Corp..................... 3,549,625
65,200 Tenneco Inc.................... 2,917,700
27,600 Textron Inc.................... 3,270,600
69,600 Tyco International Ltd......... 4,419,600
53,900 Whitman Corp................... 1,300,337
------------
24,538,312
------------
CONSUMER FINANCE - 0.21%
20,400 Beneficial Corp................ 1,310,700
112,650 MBNA Corp...................... 3,816,019
------------
5,126,719
------------
CONTAINERS - METAL/
GLASS - 0.35%
4,700 Ball Corp...................... 136,887
93,500 Corning Inc.................... 4,710,063
55,700 Crown Cork & Seal Co., Inc..... 3,244,525
12,100 Owens Corning.................. 505,175
------------
8,596,650
------------
CONTAINERS - PAPER - 0.05%
6,500 Bemis Co., Inc................. 260,000
17,700 Temple-Inland Inc.............. 1,070,850
------------
1,330,850
------------
COSMETICS/TOILETRIES - 0.98%
6,800 Alberto-Culver Co. Class B.....$ 193,800
57,800 Avon Products, Inc............. 3,684,750
204,100 Gillette Co.................... 18,139,387
45,300 International Flavors &
Fragrances, Inc............... 2,010,188
------------
24,028,125
------------
DRUGS - 7.01%
14,200 Allergan, Inc.................. 420,675
31,600 *ALZA Corp...................... 932,200
235,600 American Home Products Corp.... 17,964,500
104,400 *Amgen Inc...................... 6,981,750
23,900 Bausch & Lomb Inc.............. 961,975
367,000 Bristol Myers Squibb Co........ 26,928,625
48,200 CVS Corp....................... 2,307,575
203,100 Eli Lilly and Co............... 18,888,300
444,300 Merck & Co., Inc............... 39,931,463
205,570 Pharmacia & Upjohn, Inc........ 7,117,861
250,900 Pfizer, Inc.................... 25,811,337
142,700 Schering-Plough Corp........... 12,950,025
101,600 Warner-Lambert Co.............. 10,236,200
------------
171,432,486
------------
ELECTRICAL EQUIPMENT - 4.00%
93,700 AMP Inc........................ 3,853,413
62,000 *Cabletron Systems, Inc......... 2,728,000
175,000 Emerson Electric Co............ 9,450,000
1,208,000 General Electric Co............ 72,933,000
28,400 *Intergraph Corp................ 200,575
30,500 National Service Industries,
Inc. ......................... 1,338,187
21,600 Raychem Corp................... 1,601,100
6,800 Thomas & Betts Corp............ 345,950
199,258 Westinghouse Electric Corp..... 4,034,975
14,200 W. W. Grainger Inc............. 1,139,550
------------
97,624,750
------------
ELECTRONIC INSTRUMENTS - 0.20%
28,100 General Signal Corp............ 1,183,713
19,400 Perkin-Elmer Corp.............. 1,474,400
3,600 Tektronix, Inc................. 206,550
58,700 *Thermo Electron Corp........... 2,025,150
------------
4,889,813
------------
ENTERTAINMENT - 1.51%
39,400 *Harrah's Entertainment, Inc....$ 733,825
62,475 Hasbro, Inc.................... 1,811,775
16,200 *King World Productions, Inc.... 609,525
117,787 Mattel, Inc.................... 3,518,887
210,200 Time Warner Inc................ 9,774,300
248,552 Walt Disney Co................. 20,350,195
------------
36,798,507
------------
FINANCE COMPANIES - 0.23%
59,300 Green Tree Financial Corp...... 2,075,500
36,800 Household International, Inc... 3,615,600
------------
5,691,100
------------
FOODS - 2.33%
204,945 Archer Daniels Midland Co...... 4,098,899
173,900 Campbell Soup Co............... 7,999,400
89,350 ConAgra, Inc................... 5,372,169
54,200 CPC International Inc.......... 4,661,200
60,000 General Mills, Inc............. 3,795,000
136,650 H J Heinz Co................... 5,875,950
47,000 Hershey Foods Corp............. 2,637,875
77,700 Kellogg Co..................... 5,730,375
24,100 Pioneer Hi-Bred International,
Inc. ......................... 1,680,975
57,400 Quaker Oats Co................. 2,367,750
37,700 Ralston Purina Co.............. 3,213,925
181,200 Sara Lee Corp.................. 7,406,550
37,100 Wm. Wrigley Jr. Co............. 2,198,175
------------
57,038,243
------------
FOOTWEAR - 0.20%
71,400 NIKE, Inc. Class B............ 4,069,800
18,900 *Reebok International Ltd....... 774,900
3,800 Stride Rite Corp............... 57,950
------------
4,902,650
------------
FREIGHT - 0.14%
41,200 *Federal Express Corp........... 2,157,850
37,200 Ryder System, Inc.............. 1,232,250
------------
3,390,100
------------
FUNERAL SERVICES - 0.10%
72,700 Service Corp. International.... 2,562,675
------------
</TABLE>
<PAGE> 105
================================================================================
6 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
GOLD MINING - 0.27%
151,700 Barrick Gold Corp..............$ 3,830,425
52,100 Battle Mountain Gold Co........ 312,599
21,800 *Echo Bay Mines Ltd............. 133,525
53,900 Homestake Mining Co............ 747,863
88,900 Placer Dome Inc................ 1,622,425
------------
6,646,837
------------
GOVERNMENT SPONSORED - 1.08%
266,000 Federal Home Loan Mortgage
Corp. ........................ 8,778,000
402,000 Federal National Mortgage
Association................... 17,537,250
------------
26,315,250
------------
HARDWARE & TOOLS - 0.13%
31,300 Black & Decker Corp............ 1,087,675
11,550 Snap-on Inc.................... 460,556
42,600 Stanley Works.................. 1,746,600
------------
3,294,831
------------
HEALTHCARE - 0.42%
41,300 Cardinal Health, Inc........... 2,405,725
114,400 *HealthSouth Corp............... 2,616,900
45,800 *Humana Inc..................... 1,036,225
72,700 United HealthCare Corp......... 4,107,550
------------
10,166,400
------------
HEAVY DUTY TRUCKS/PARTS - 0.29%
19,700 Cummins Engine Co., Inc........ 1,255,875
27,100 Dana Corp...................... 978,988
31,300 Eaton Corp..................... 2,496,175
39,010 *Navistar International Corp.... 648,541
32,710 PACCAR Inc..................... 1,480,128
------------
6,859,707
------------
HOME BUILDERS - 0.05%
16,600 Centex Corp.................... 661,925
14,456 Kaufman & Broad Home Corp...... 216,840
7,900 Pulte Corp..................... 249,838
------------
1,128,603
------------
HOSPITAL MANAGEMENT - 0.53%
8,000 *Beverly Enterprises, Inc....... 113,000
249,584 Columbia/HCA Healthcare Corp... 9,141,014
HOSPITAL MANAGEMENT - Continued
13,000 Manor Care, Inc................$ 372,125
13,100 Shared Medical Systems Corp.... 694,300
94,700 *Tenet Healthcare Corp.......... 2,604,250
------------
12,924,689
------------
HOSPITAL SUPPLIES - 2.93%
291,900 Abbott Laboratories............ 18,389,700
8,400 Bard (C. R.), Inc.............. 268,800
109,700 Baxter International Inc....... 5,786,675
55,200 Becton, Dickinson and Co....... 2,718,600
64,100 Biomet, Inc.................... 1,197,869
67,677 *Boston Scientific Corp......... 3,612,260
487,200 Johnson & Johnson.............. 29,171,100
37,900 Mallinckrodt, Inc.............. 1,416,513
90,700 Medtronic, Inc................. 6,711,800
40,650 *St. Jude Medical, Inc.......... 1,377,019
25,700 United States Surgical Corp.... 867,375
------------
71,517,711
------------
HOUSEHOLD PRODUCTS - 3.06%
19,200 Clorox Co...................... 2,424,000
118,800 Colgate-Palmolive Co........... 7,365,600
154,600 Minnesota Mining &
Manufacturing Co.............. 14,184,550
59,000 Newell Co...................... 2,256,750
249,226 Procter & Gamble Co............ 34,362,035
63,100 Rubbermaid, Inc................ 1,758,913
27,600 Tupperware Corp................ 1,000,500
59,300 Unilever N V - ADR............. 11,489,375
------------
74,841,723
------------
INFORMATION PROCESSING - 9.21%
1 ACNielson...................... 17
58,400 Adobe Systems Inc.............. 2,606,100
53,500 *Amdahl Corp.................... 535,000
53,700 *Apple Computer, Inc............ 892,763
22,200 Autodesk, Inc.................. 863,025
105,200 Automatic Data Processing, Inc. 5,167,950
78,400 *Bay Networks, Inc.............. 1,920,800
27,452 *Ceridian Corp.................. 1,008,861
241,600 *Cisco Systems, Inc............. 16,368,400
68,600 Cognizant Corp................. 2,538,200
101,400 *Compaq Computer Corp........... 10,976,550
INFORMATION PROCESSING - Continued
137,687 Computer Associates
International, Inc............$ 7,538,363
24,700 *Computer Sciences Corp......... 1,911,163
67,400 *Dell Computer Corp............. 7,582,500
62,800 *Digital Equipment Corp......... 2,252,950
91,900 *E M C Corp..................... 3,664,513
166,754 First Data Corp................ 6,670,160
40,100 H & R Block Inc................ 1,323,300
373,000 Hewlett Packard Co............. 19,209,500
51,900 Honeywell Inc.................. 3,775,725
377,800 International Business
Machines Corp................. 32,679,700
444,000 *Microsoft Corp................. 55,056,000
142,500 *Novell, Inc ................... 1,122,188
244,125 *Oracle Corp.................... 11,382,328
49,900 *Parametric Technology Corp..... 2,239,263
52,800 Pitney Bowes Inc............... 3,709,200
96,300 *Seagate Technology............. 3,912,188
58,100 *Silicon Graphics, Inc.......... 1,096,638
142,100 *Sun Microsystems, Inc.......... 4,582,725
26,800 *Tandem Computers Inc........... 381,900
66,400 *3Com Corp...................... 3,220,400
37,700 Unisys Corp.................... 259,188
7 Wang Laboratories, Inc.
(Warrants) ................... 43
128,800 Xerox Corp..................... 8,726,200
------------
225,173,801
------------
INSURANCE - CASUALTY - 0.34%
67,800 Chubb Corp..................... 4,135,800
47,400 SAFECO Corp.................... 2,061,900
24,300 St. Paul Companies, Inc........ 1,740,488
13,900 USF & G Corp................... 298,850
------------
8,237,038
------------
INSURANCE - LIFE - 0.76%
60,292 Aetna Inc...................... 6,089,492
72,400 Conseco Inc.................... 2,896,000
30,375 Jefferson-Pilot Corp........... 1,932,609
47,800 Lincoln National Corp.......... 2,909,825
20,200 Torchmark Corp................. 1,325,625
21,109 Transamerica Corp.............. 1,918,280
30,150 USLIFE Corp.................... 1,469,813
------------
18,541,644
------------
</TABLE>
<PAGE> 106
================================================================================
May 31, 1997 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 7
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
INSURANCE - MISCELLANEOUS - 0.49%
31,600 General Reinsurance Corp.......$ 5,537,900
15,800 MBIA, Inc...................... 1,696,525
21,800 MGIC Investment Corp........... 1,940,200
33,700 UNUM Corp...................... 2,666,513
------------
11,841,138
------------
INSURANCE - MULTILINE - 2.80%
165,520 Allstate Corp.................. 12,186,409
172,418 American International Group,
Inc. ......................... 23,341,087
49,500 Aon Corp....................... 2,413,125
33,600 CIGNA Corp..................... 5,838,000
55,200 Hartford Financial Services
Group ........................ 4,305,600
35,600 Marsh & McLennan Companies,
Inc........................... 4,690,300
44,500 Providian Corp................. 2,664,437
236,810 Travelers Group, Inc........... 12,994,949
------------
68,433,907
------------
LEISURE TIME - 0.02%
17,900 Brunswick Corp................. 545,950
------------
LODGING - 0.46%
58,600 *HFS, Inc....................... 3,157,075
100,400 Hilton Hotels Corp............. 2,836,300
47,700 *ITT Corp....................... 2,844,113
43,700 Marriott International, Inc.... 2,523,675
------------
11,361,163
------------
MACHINE TOOLS - 0.02%
4,700 Cincinnati Milacron Inc........ 108,688
22,800 Giddings & Lewis, Inc.......... 432,131
------------
540,819
------------
MACHINERY - AGRICULTURE - 0.29%
32,300 Case Corp...................... 1,905,700
100,200 Deere & Co..................... 5,122,725
------------
7,028,425
------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.39%
73,000 Caterpillar Inc................ 7,126,625
34,200 Fluor Corp..................... 1,808,325
2,600 Foster Wheeler Corp............ 100,750
MACHINERY - CONSTRUCTION &
CONTRACTS - Continued
10,800 Harnischfeger Industries Inc...$ 463,050
------------
9,498,750
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.60%
1,600 Aeroquip-Vickers, Inc.......... 69,400
14,600 Briggs & Stratton Corp......... 753,725
42,700 Cooper Industries, Inc......... 2,177,700
32,400 Dover Corp..................... 1,854,900
79,200 Illinois Tool Works Inc........ 3,930,300
33,200 Ingersoll-Rand Co.............. 1,809,400
32,000 Johnson Controls, Inc.......... 1,356,000
51,733 Pall Corp...................... 1,222,192
19,050 Parker Hannifin Corp........... 1,002,506
6,400 Timken Co...................... 439,200
------------
14,615,323
------------
MEDICAL TECHNOLOGY - 0.10%
32,500 Guidant Corp................... 2,522,813
------------
MERCHANDISE - DRUG - 0.27%
16,600 Longs Drug Stores Corp......... 394,250
49,000 Rite Aid Corp.................. 2,278,500
82,400 Walgreen Co.................... 3,852,200
------------
6,524,950
------------
MERCHANDISE - SPECIALTY - 1.28%
41,000 American Greetings Corp.
Class A ...................... 1,404,250
29,500 Charming Shoppes, Inc.......... 154,875
27,100 Circuit City Stores, Inc....... 1,070,450
90,722 *CostCo Companies, Inc.......... 3,061,868
109,800 Gap, Inc....................... 3,760,650
186,400 Home Depot, Inc................ 11,743,200
49,600 Ikon Office Solutions Inc...... 1,438,400
973 Jostens, Inc................... 23,960
79,398 Limited, Inc................... 1,607,810
34,000 Nordstrom, Inc................. 1,632,000
16,800 Tandy Corp..................... 907,200
21,800 TJX Companies, Inc............. 1,046,400
106,625 *Toys "R" Us, Inc............... 3,318,703
------------
31,169,766
------------
MERCHANDISING - DEPARTMENT - 0.55%
81,000 Dayton Hudson Corp.............$ 3,898,125
30,800 Dillards, Inc. Class A......... 1,039,500
87,300 *Federated Department Stores,
Inc . ........................ 3,230,100
94,300 May Department Stores Co....... 4,443,888
16,000 Mercantile Stores Co., Inc..... 860,000
------------
13,471,613
------------
MERCHANDISING - FOOD - 0.60%
108,100 Albertsons, Inc................ 3,621,350
56,700 American Stores Co............. 2,579,850
6,900 Fleming Companies, Inc......... 131,100
15,500 Giant Food Inc. Class A........ 510,531
15,300 Great Atlantic & Pacific Tea
Co., Inc. .................... 422,663
95,600 *Kroger Co...................... 2,449,750
16,700 Supervalu Inc.................. 557,363
71,900 SYSCO Corp..................... 2,507,513
52,000 Winn-Dixie Stores, Inc......... 1,989,000
------------
14,769,120
------------
MERCHANDISING - MASS - 1.83%
149,100 *CUC International Inc.......... 3,429,300
107,000 J.C. Penney Co., Inc........... 5,510,500
190,300 KMart Corp..................... 2,664,200
147,200 Sears Roebuck and Co........... 7,231,200
841,600 Wal-Mart Stores, Inc........... 25,037,600
35,000 *Woolworth Corp................. 844,375
------------
44,717,175
------------
METALS - ALUMINUM - 0.39%
68,000 Alcan Aluminium Ltd............ 2,439,500
66,600 Aluminum Co. of America........ 4,903,425
33,100 Reynolds Metals Co............. 2,246,663
------------
9,589,588
------------
METALS - COPPER - 0.21%
19,300 ASARCO Inc..................... 600,713
58,732 Newmont Mining Corp............ 2,297,884
27,200 Phelps Dodge Corp.............. 2,274,600
------------
5,173,197
------------
METALS - MISCELLANEOUS - 0.21%
31,350 Cyprus Amax Minerals Co........ 764,156
57,075 Engelhard Corp................. 1,234,247
</TABLE>
<PAGE> 107
================================================================================
8 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
METALS - MISCELLANEOUS - Continued
47,000 Freeport-McMoran Copper & Gold
Inc. Class B..................$ 1,368,875
52,400 Inco Limited................... 1,729,200
------------
5,096,478
------------
METALS - STEEL - 0.25%
51,125 Allegheny Teldyne Inc.......... 1,316,469
22,300 Armco Inc...................... 83,625
21,900 *Bethlehem Steel Corp........... 219,000
20,200 Inland Steel Industries, Inc... 497,425
31,100 Nucor Corp..................... 1,834,900
38,620 USX-US Steel Group, Inc........ 1,245,495
53,625 Worthington Industries, Inc.... 992,063
------------
6,188,977
------------
MISCELLANEOUS - 0.50%
176,200 American Express Co............ 12,245,900
------------
MOBILE HOMES - 0.02%
14,600 Fleetwood Enterprises, Inc..... 394,200
------------
NATURAL GAS - DIVERSIFIED - 0.30%
37,900 Coastal Corp................... 1,899,738
11,200 ENSEARCH Corp.................. 239,400
55,200 NorAm Energy Corp.............. 841,800
65,829 PanEnergy Corp................. 3,077,506
23,700 Sonat Inc...................... 1,362,750
------------
7,421,194
------------
OIL - INTEGRATED DOMESTIC - 2.02%
35,700 Amerada Hess Corp.............. 1,909,950
183,100 Amoco Corp..................... 16,364,562
26,900 Ashland Oil, Inc............... 1,287,837
60,100 Atlantic Richfield Co.......... 8,744,550
49,200 Burlington Resources, Inc..... 2,287,800
11,100 Kerr-McGee Corp................ 718,725
117,700 Occidental Petroleum Corp...... 2,736,525
40,800 *Oryx Energy Co................. 943,500
18,500 Pennzoil Co.................... 1,024,437
96,300 Phillips Petroleum Co.......... 4,092,749
40,202 *Santa Fe Energy Resources, Inc. 608,055
40,916 Sun Co., Inc................... 1,222,366
96,000 Unocal Corp.................... 4,092,000
114,000 USX-Marathon Group............. 3,391,500
------------
49,424,556
------------
OIL - INTEGRATED
INTERNATIONAL - 5.79%
240,000 Chevron Corp...................$ 16,800,000
912,000 Exxon Corp..................... 54,036,000
150,900 Mobil Corp..................... 21,107,138
195,500 Royal Dutch Petroleum
Co. - ADR ................... 38,171,375
104,500 Texaco Inc..................... 11,403,563
------------
141,518,076
------------
OIL - SERVICE - PRODUCTS - 0.45%
91,500 Schlumberger Ltd............... 10,899,938
------------
OIL - SERVICES - 0.48%
58,800 Baker Hughes Inc............... 2,205,000
70,900 Dresser Industries, Inc........ 2,428,325
49,500 Halliburton Co................. 3,830,063
34,300 McDermott International, Inc... 951,825
25,500 *Rowan Companies, Inc........... 589,688
26,800 *Western Atlas Inc.............. 1,819,050
------------
11,823,951
------------
OIL/GAS PRODUCERS - 0.14%
3,000 Helmerich & Payne, Inc......... 168,375
8,700 Louisiana Land & Exploration
Co. .......................... 448,050
98,842 Union Pacific Resources Group
Inc. ......................... 2,854,063
------------
3,470,488
------------
PAPER/FOREST PRODUCTS - 1.43%
48,200 Avery Dennison Corp............ 1,813,525
8,366 Boise Cascade Corp............. 317,908
37,900 Champion International Corp.... 1,871,313
39,200 Georgia-Pacific Corp........... 3,459,400
114,918 International Paper Co......... 5,516,064
42,400 James River Corp. of Virginia.. 1,489,300
209,732 Kimberly-Clark Corp............ 10,512,817
41,600 Louisiana Pacific Corp......... 811,200
16,000 Mead Corp...................... 1,020,000
4,900 Potlatch Corp.................. 210,088
23,364 *Stone Container Corp........... 321,255
35,450 Union Camp Corp................ 1,861,125
26,850 Westvaco Corp.................. 839,063
74,300 Weyerhaeuser Co................ 3,705,713
17,500 Willamette Industries, Inc..... 1,303,750
------------
35,052,521
------------
PHOTOGRAPHY - 0.46%
123,850 Eastman Kodak Co...............$ 10,264,069
18,100 Polaroid Corp.................. 923,100
------------
11,187,169
------------
POLLUTION CONTROL - 0.39%
82,500 Browning-Ferris Industries Inc. 2,701,875
71,800 Laidlaw Inc. Class B........... 969,300
50 Safety-Kleen Corp.............. 781
183,700 Waste Management, Inc.......... 5,832,475
------------
9,504,431
------------
PUBLISHING - NEWS - 0.53%
35,100 Dow Jones & Co., Inc........... 1,364,513
53,900 Gannett Co., Inc............... 4,985,750
42,400 Knight-Ridder, Inc............. 1,828,500
24,800 New York Times Co. Class A..... 1,142,350
39,732 Times Mirror Co................ 2,229,959
31,200 Tribune Co..................... 1,349,400
------------
12,900,472
------------
PUBLISHING/PRINTING - 0.35%
44,800 Deluxe Corp.................... 1,456,000
64,500 Dun & Bradstreet Corp.......... 1,685,063
19,217 Harcourt General, Inc.......... 910,405
24,000 McGraw-Hill, Inc............... 1,311,000
21,600 Moore Corp. Ltd................ 480,600
71,800 RR Donnelley & Sons Co......... 2,665,575
------------
8,508,643
------------
RAILROAD - 0.80%
57,317 Burlington Northern Santa Fe... 4,757,310
73,600 CSX Corp...................... 3,900,800
48,300 Norfolk Southern Corp.......... 4,691,138
90,000 Union Pacific Corp............. 6,097,500
------------
19,446,748
------------
RESTAURANTS - 0.58%
55,800 Darden Restaurants, Inc........ 467,325
258,500 McDonald's Corp................ 12,989,624
30,000 Wendy's International, Inc..... 701,250
------------
14,158,199
------------
</TABLE>
<PAGE> 108
================================================================================
May 31, 1997 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 9
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
SAVINGS & LOAN - 0.22%
25,100 Golden West Financial Corp.....$ 1,700,525
53,250 Great Western Financial Corp... 2,582,625
24,900 H.F. Ahmanson & Co............. 1,014,675
------------
5,297,825
------------
SECURITIES RELATED - 0.85%
65,100 Charles Schwab Corp............ 2,644,688
125,496 Dean Witter, Discover & Co..... 5,176,711
63,700 Merrill Lynch & Co., Inc....... 6,752,200
57,700 Morgan Stanley Group Inc....... 3,894,749
41,500 Salomon Inc.................... 2,225,438
------------
20,693,786
------------
SEMICONDUCTORS - 3.52%
57,700 *Advanced Micro Devices, Inc.... 2,308,000
72,500 *Applied Materials, Inc......... 4,730,625
302,000 Intel Corp..................... 45,753,000
55,500 *LSI Logic Corp................. 2,317,125
84,100 *Micron Technology, Inc......... 3,574,250
218,900 Motorola, Inc.................. 14,529,488
46,700 *National Semiconductor Corp.... 1,313,438
76,900 Rockwell International Corp.... 4,960,050
72,800 Texas Instruments Inc.......... 6,542,900
------------
86,028,876
------------
TELECOMMUNICATIONS - 2.02%
202,100 *Airtouch Communications, Inc... 5,633,537
56,300 ALLTEL Corp.................... 1,850,862
32,335 *Andrew Corp.................... 881,129
57,000 *DSC Communications Corp........ 1,457,063
47,300 Frontier Corp.................. 869,138
20,100 Harris Corp.................... 1,781,363
236,090 Lucent Technologies, Inc....... 15,021,226
89,300 Northern Telecom Ltd........... 7,501,200
29,500 Scientific-Atlanta, Inc........ 534,688
70,800 *Tellabs, Inc................... 3,557,699
345,800 *WorldCom, Inc.................. 10,244,324
------------
49,332,229
------------
TEXTILE - PRODUCTS - 0.10%
26,100 Russell Corp................... 799,313
19,700 V F Corp....................... 1,539,063
------------
2,338,376
------------
TOBACCO - 1.85%
74,400 Fortune Brands, Inc............$ 3,645,600
891,000 Philip Morris Cos Inc.......... 39,204,000
85,600 UST Inc........................ 2,439,600
------------
45,289,200
------------
TRUCKERS - 0.02%
14,200 Caliber System, Inc............ 454,400
------------
UTILITIES - COMMUNICATION - 5.07%
593,226 AT & T Corp.................... 21,875,209
201,900 Ameritech Corp................. 13,224,449
161,200 Bell Atlantic Corp............. 11,284,000
365,100 BellSouth Corp................. 16,566,412
355,200 GTE Corp....................... 15,673,199
269,100 MCI Communications Corp........ 10,326,712
164,200 NYNEX Corp..................... 8,825,750
339,279 SBC Communications, Inc........ 19,847,822
130,600 Sprint Corp.................... 6,383,075
------------
124,006,628
------------
UTILITIES - ELECTRIC - 2.35%
58,900 American Electric Power, Inc... 2,400,175
35,200 Baltimore Gas and Electric Co.. 923,999
60,100 Carolina Power & Light Co...... 2,088,474
105,700 Central & South West Corp...... 2,246,125
41,164 Cinergy Corp................... 1,440,740
89,400 Consolidated Edison Co. of
New York, Inc................. 2,603,775
42,300 DTE Energy Co.................. 1,126,238
57,650 Dominion Resources, Inc........ 1,996,130
78,700 Duke Power Co.................. 3,541,499
170,200 Edison International........... 3,978,425
110,500 Entergy Corp................... 2,914,438
68,900 FPL Group, Inc................. 3,203,850
32,600 GPU Inc........................ 1,141,000
127,600 Houston Industries, Inc........ 2,647,699
37,500 *Niagara Mohawk Power Corp...... 328,124
26,000 Northern States Power Co....... 1,274,000
35,900 Ohio Edison Co................. 762,875
161,400 P G & E Corp................... 3,732,375
44,500 P P & L Resources Inc.......... 895,563
83,900 PacifiCorp..................... 1,667,513
109,300 Peco Energy Co................. 2,076,700
112,550 Public Service Enterprise
Group ........................ 2,785,613
UTILITIES - ELECTRIC - Continued
254,700 Southern Co....................$ 5,412,374
100,400 Texas Utilities Co............. 3,451,249
81,400 Unicom Corp.................... 1,851,850
28,800 Union Electric Co.............. 1,054,800
------------
57,545,603
------------
UTILITIES - GAS, DISTRIBUTION - 0.03%
23,700 NICOR Inc...................... 814,688
------------
UTILITIES - GAS, PIPELINE - 0.47%
22,000 Columbia Gas System, Inc....... 1,416,250
44,100 Consolidated Natural Gas Co.... 2,342,812
98,000 Enron Corp..................... 3,993,499
18,300 ONEOK Inc...................... 553,575
15,000 Pacific Enterprises............ 491,249
2,200 Peoples Energy Corp............ 78,100
60,150 Williams Companies, Inc........ 2,654,119
------------
11,529,604
------------
TOTAL COMMON STOCKS
(Cost $1,341,383,385).........2,413,534,435
-------------
PAR
VALUE
- -----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.00%
CONSUMER FINANCE - 0.20%
$5,000,000 Beneficial Corp.,
5.48% due 06/03/97............ 4,998,477
------------
FINANCE COMPANIES - 0.69%
7,223,000 Ford Motor Credit Co.,
5.55% due 06/05/97............ 7,218,543
9,682,000 General Motors Acceptance
Corp., 5.53% due 06/03/97..... 9,679,023
------------
16,897,566
------------
SECURITIES RELATED - 0.11%
2,688,000 Merrill Lynch & Co., Inc.,
5.65% due 06/02/97............ 2,687,578
------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $24,583,621)............. 24,583,621
------------
</TABLE>
<PAGE> 109
================================================================================
10 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT -
SHORT TERM - 0.05%
U.S. TREASURY BILLS - 0.05%
United States Treasury Bills:
$1,000,000 4.99% due 08/21/97.......... $ 988,756
200,000 4.81% due 08/21/97.......... 197,835
--------------
TOTAL UNITED STATES GOVERNMENT -
SHORT TERM
(Cost $1,186,591)........... 1,186,591
--------------
TOTAL INVESTMENTS
(Cost $1,367,153,597) -
99.80% .................... 2,439,304,647
Other assets and liabilities,
net - 0.20%................. 4,894,878
--------------
NET ASSETS (equivalent
to $26.09 per share on
93,687,435 shares
outstanding) - 100%......... $2,444,199,525
==============
*Non-income producing
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- --------- ------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/97)
57(2) S&P 500 Index Futures
(June/$850.60)...............$ 323,500
==============
(1)U.S.Treasury Bills with a market value of
approximately $1,200,000 were maintained in a
segregated account with a portion placed as
collateral for futures contracts.
(2)Per 500
<CAPTION>
MARKET
VALUE
------
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
93,687,435 shares outstanding.......... $ 936,874
Additional paid in capital............... 1,357,087,077
Undistributed net realized gain on
securities ............................. 13,320,453
Undistributed net investment income...... 380,571
Unrealized appreciation of:
Investments........... $1,072,151,050
Futures .............. 323,500 1,072,474,550
-------------- --------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................ $2,444,199,525
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 110
================================================================================
STOCK INDEX FUND - FINANCIAL STATEMENTS 11
================================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ....................................................................... $ 40,617,795
Interest ........................................................................ 1,650,621
-------------
Total investment income ....................................................... 42,268,416
-------------
EXPENSES:
Advisory fees ................................................................... 5,543,535
Custodian and accounting services ............................................... 712,922
Reports to shareholders ......................................................... 278,292
Audit fees and tax services ..................................................... 74,760
Directors' fees and expenses .................................................... 47,386
Miscellaneous ................................................................... 118,984
-------------
Total expenses ................................................................ 6,775,879
NET INVESTMENT INCOME ........................................................... 35,492,537
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain on:
Investments ................................................... $ 9,929,103
Futures contracts ............................................. 4,849,795 14,778,898
------------- -------------
Net unrealized appreciation (depreciation) of securities
during the year:
Investments ................................................... 489,223,396
-------------
Futures contracts ............................................. (95,175) 489,128,221
------------- -------------
Net realized and unrealized gain on securities during the year................ 503,907,119
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ 539,399,656
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................... $ 35,492,537 $ 30,725,263
--------------- ---------------
Net realized gain on securities ..................... 14,778,898 14,548,606
Net unrealized appreciation of securities
during the year .................................... 489,128,221 322,971,346
--------------- ---------------
Increase in net assets resulting from operations .. 539,399,656 368,245,215
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................... (35,484,625) (30,481,712)
Net realized gain on securities ..................... (14,806,928) (30,841,988)
--------------- ---------------
Decrease in net assets resulting from distributions
to shareholders .................................. (50,291,553) (61,323,700)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold .................... 241,746,270 195,841,204
Proceeds from capital stock issued for distributions
reinvested ........................................ 50,291,553 61,323,700
--------------- ---------------
292,037,823 257,164,904
Cost of capital stock repurchased ................... (97,732,690) (71,292,243)
--------------- ---------------
Increase in net assets resulting from capital stock
transactions ..................................... 194,305,133 185,872,661
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ........................ 683,413,236 492,794,176
NET ASSETS:
Beginning of year ................................... 1,760,786,289 1,267,992,113
--------------- ---------------
End of year (including undistributed net
investment income of $380,571 and $372,659) ....... $ 2,444,199,525 $ 1,760,786,289
=============== ===============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ........................ 10,718,393 10,230,862
Shares issued for distributions reinvested .......... 2,200,590 3,223,528
Shares of capital stock repurchased ................. (4,348,853) (3,788,544)
--------------- ---------------
Increase in shares outstanding .................... 8,570,130 9,665,846
Shares outstanding:
Beginning of year ................................. 85,117,305 75,451,459
--------------- ---------------
End of year ....................................... 93,687,435 85,117,305
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 111
================================================================================
12 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.92%
ADVERTISING - 0.60%
62,764 Omnicom Group, Inc.............$ 3,640,312
------------
AEROSPACE/DEFENSE - 1.03%
21,780 Gencorp Inc.................... 460,102
19,371 OEA, Inc....................... 731,254
18,155 *Rohr, Inc...................... 383,523
5,900 Sequa Corp. Class A............ 287,624
48,674 Sunstrand Corp................. 2,421,531
12,210 Teleflex Inc................... 752,440
16,661 Thiokol Corp................... 1,197,508
------------
6,233,982
------------
AIRLINES - 0.15%
11,721 *Alaska Air Group, Inc.......... 291,560
24,274 ASA Holdings, Inc.............. 634,158
------------
925,718
------------
APPAREL & PRODUCTS - 0.95%
20,900 *Ann Taylor Stores Corp......... 485,924
38,553 Cintas Corp.................... 2,390,285
39,271 Claire's Stores, Inc........... 755,966
25,424 Land's End, Inc................ 765,897
42,700 Warnaco Group Inc. Class A..... 1,398,424
------------
5,796,496
------------
APPLIANCES/FURNISHINGS - 1.04%
39,859 Heilig-Meyers Co............... 657,673
41,528 Herman Miller, Inc............. 1,484,625
27,501 Lancaster Colony Corp.......... 1,237,545
72,076 Leggett & Platt, Inc........... 2,720,868
6,104 National Presto Industries,
Inc. ......................... 230,425
------------
6,331,136
------------
AUTO - ORIGINAL EQUIPMENT - 1.23%
16,925 Arvin Industries, Inc.......... 469,668
20,400 Carlisle Cos Inc............... 622,199
46,542 Danaher Corp................... 2,257,286
17,418 Donaldson Co., Inc............. 637,933
31,470 Federal-Mogul Corp............. 916,563
50,245 Mark IV Industries, Inc........ 1,174,476
26,928 Modine Manufacturing Co........ 787,643
23,200 Superior Industries
International, Inc. ......... 591,599
------------
7,457,367
------------
AUTO - OTHER - 0.45%
61,070 Harley-Davidson, Inc...........$ 2,732,883
------------
AUTO - REPLACEMENT PARTS - 0.13%
16,121 Kaydon Corp.................... 800,005
------------
BANKS - OTHER - 1.38%
54,302 First Tennessee National Corp.. 2,450,377
117,200 Firstar Corp................... 3,501,349
50,800 Union Planters Corp............ 2,400,299
------------
8,352,025
------------
BANKS - REGIONAL - 7.54%
46,428 Central Fidelity Banks, Inc.... 1,358,018
40,955 City National Corp............. 988,038
86,972 Crestar Financial Corp......... 3,304,935
22,018 Dauphin Deposit Corp........... 971,543
48,643 First of America Bank Corp..... 3,350,286
92,341 First Security Corp............ 2,262,354
26,575 First Virginia Banks, Inc...... 1,488,199
106,200 Hibernia Corp. Class A......... 1,407,149
74,048 Marshall & Ilsley Corp......... 2,952,663
58,334 Mercantile Bankcorporation Inc. 3,441,705
35,756 Mercantile Bankshares Corp..... 1,421,301
90,306 Northern Trust Corp............ 4,436,282
32,834 Pacific Century Financial Corp. 1,510,364
49,909 Regions Financial Corp......... 2,982,063
76,487 SouthTrust Corp................ 2,973,432
130,344 State Street Corp.............. 5,816,601
75,403 Summit Bancorporation.......... 3,723,023
31,878 Wilmington Trust Corp.......... 1,422,556
------------
45,810,512
------------
BEVERAGE - SOFT DRINKS - 1.39%
309,309 Coca Cola Enterprises, Inc..... 6,534,153
61,200 *Starbucks Corp................. 1,927,800
------------
8,461,953
------------
BROADCASTING - 0.65%
52,428 A.H. Belo Corp. ............... 2,018,478
25,130 *Chris-Craft Industries, Inc.... 1,074,308
24,416 TCA Cable TV, Inc.............. 824,040
------------
3,916,826
------------
BUILDING MATERIALS - 1.14%
12,766 CalMat Co......................$ 253,724
33,600 Fastenal Co.................... 1,570,800
23,125 HON INDUSTRIES, Inc............ 1,121,563
72,465 RPM, Inc....................... 1,376,835
15,200 Southdown, Inc................. 613,700
27,000 Vulcan Materials Co............ 1,971,000
------------
6,907,622
------------
CHEMICAL - MAJOR - 0.15%
49,625 Albemarle Corp................. 930,469
------------
CHEMICAL - MISCELLANEOUS - 2.85%
30,373 A. Schulman Inc................ 675,799
51,800 *Airgas, Inc.................... 880,600
22,580 Betz Laboratories, Inc......... 1,439,475
64,637 Crompton & Knowles Corp........ 1,510,890
35,900 *Cytec Industries, Inc.......... 1,404,588
19,068 Dexter Corp.................... 574,424
95,700 Ethyl Corp..................... 897,188
22,547 Ferro Corp..................... 842,694
28,233 Georgia Gulf Corp.............. 779,937
11,364 H.B. Fuller Co................. 627,861
41,836 M.A. Hanna Co.................. 967,458
28,193 Lawter International, Inc...... 324,220
48,119 Lubrizol Corp.................. 1,714,239
67,278 Lyondell Petrochemical Co...... 1,480,116
18,700 Minerals Technologies Inc...... 738,650
4,355 NCH Corp....................... 283,619
40,342 Olin Corp...................... 1,654,022
26,525 Rollins, Inc................... 517,238
------------
17,313,018
------------
CONGLOMERATES - 1.05%
43,398 Alexander & Baldwin, Inc....... 1,177,171
71,200 Dial Corp...................... 1,192,600
37,600 *Litton Industries, Inc......... 1,701,400
5,100 *MAXXAM, Inc.................... 224,400
40,200 Ogden Corp..................... 783,900
75,300 Viad Corp...................... 1,308,338
------------
6,387,809
------------
CONSUMER FINANCE - 0.36%
68,700 Capital One Financial.......... 2,206,988
------------
</TABLE>
<PAGE> 112
===============================================================================
May 31, 1997 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 13
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
CONTAINERS - PAPER - 0.71%
19,814 Chesapeake Utilities Corp......$ 663,769
34,122 *Sealed Air Corp................ 1,565,347
71,536 Sonoco Products Co............. 2,083,486
------------
4,312,602
------------
COSMETICS/TOILETRIES - 0.25%
31,188 Tambrands Inc.................. 1,504,821
------------
DRUGS - 3.35%
29,904 Bergen Brunswig Corp. Class A.. 1,136,352
58,652 *Biogen, Inc.................... 1,946,513
42,046 Carter-Wallace Inc............. 693,759
55,788 *Centocor, Inc.................. 1,966,527
137,580 Chiron Corp.................... 2,596,823
41,125 *Covance Inc.................... 765,953
47,658 CVS Corp....................... 2,281,645
34,141 *Forest Laboratories, Inc....... 1,442,457
55,442 *Genzyme Corp................... 1,323,678
97,736 *IVAX Corp...................... 1,050,662
34,100 McKesson Corp.................. 2,561,763
104,734 Mylan Laboratories Inc......... 1,584,102
18,900 R.P. Scherer Corp.............. 992,250
------------
20,342,484
------------
ELECTRICAL EQUIPMENT - 2.27%
75,186 *American Power Conversion Corp. 1,748,075
32,431 AMETEK, Inc.................... 758,075
55,270 Hubbell Inc. Class B........... 2,514,785
101,666 Molex Inc...................... 3,964,974
50,396 *Quantum Corp................... 1,959,145
68,446 *Teradyne, Inc.................. 2,806,286
------------
13,751,340
------------
ELECTRONIC INSTRUMENTS - 1.92%
40,676 *Arrow Electronics, Inc......... 2,323,618
17,966 *Exabyte Corp................... 253,770
38,750 *Imation Corp................... 930,000
63,000 *Integrated Device Technology,
Inc. ......................... 885,938
25,521 *MagnaTek, Inc.................. 446,618
31,300 Pittston Brink's Group......... 978,125
59,779 Sensormatic Electronics Corp... 934,047
31,909 Symbol Technologies, Inc....... 1,001,145
25,116 Varian Associates, Inc......... 1,331,148
20,273 *VeriFone, Inc.................. 1,036,457
ELECTRONIC INSTRUMENTS - Continued
51,928 *Vishay Intertechnology, Inc...$ 1,525,378
------------
11,646,244
------------
ENTERTAINMENT - 0.19%
34,800 *GTECH Holdings Corp............ 1,144,050
------------
FERTILIZERS - 0.48%
74,746 IMC Global, Inc................ 2,924,437
------------
FINANCE COMPANIES - 0.76%
97,100 SunAmerica, Inc................ 4,587,975
------------
FOODS - 3.01%
32,182 Dean Foods Co.................. 1,222,916
48,509 Dole Food Co., Inc............. 2,061,633
14,118 Dreyer's Grand Ice Cream, Inc.. 518,837
78,504 Flowers Industries, Inc........ 1,383,633
57,900 Hormel Foods Corp.............. 1,461,975
77,500 IBP, Inc....................... 1,821,250
10,312 International Multifoods Corp.. 291,314
28,200 Interstate Bakeries Corp....... 1,515,750
18,171 J.M. Smucker Co. Class A....... 352,063
23,271 Lance, Inc..................... 459,602
63,778 McCormick & Co., Inc........... 1,666,200
34,721 Trinity Industries, Inc........ 1,041,630
174,486 Tyson Foods, Inc. Class A...... 3,576,963
25,229 Universal Foods Corp........... 905,090
------------
18,278,856
------------
FOOTWEAR - 0.44%
28,900 *Nine West Group, Inc........... 1,112,650
33,100 *Payless ShoeSource, Inc........ 1,568,113
------------
2,680,763
------------
FREIGHT - 0.40%
17,573 Airborne Freight Corp.......... 672,167
20,160 APL Ltd........................ 609,840
37,300 J.B. Hunt Transport Services,
Inc. ......................... 568,825
30,371 Overseas Shipholding Group
Inc. ......................... 573,253
------------
2,424,085
------------
HARDWARE & TOOLS - 0.03%
7,355 Lawson Products, Inc........... 183,875
HEALTHCARE - 2.62%
46,400 Allegiance Corp................$ 1,258,600
40,800 *Apria Healthcare Group, Inc.... 734,400
96,949 *Foundation Health Systems
Class A ...................... 2,896,351
27,186 Healthcare COMPARE Corp........ 1,342,309
42,100 *Horizon/CMS Healthcare Corp.... 768,325
111,880 Laboratory Corp. of America
Holdings...................... 321,654
51,191 *NovaCare, Inc.................. 646,286
62,600 *Oxford Health Plans, Inc....... 4,413,300
32,874 *PacifiCare Health System, Inc.
Class B....................... 2,605,265
44,185 *Value Health, Inc.............. 894,746
------------
15,881,236
------------
HEAVY DUTY TRUCKS/PARTS - 0.15%
36,704 Federal Signal Corp............ 935,952
------------
HOME BUILDERS - 0.24%
96,825 Clayton Homes, Inc............. 1,464,478
------------
HOSPITAL MANAGEMENT - 0.87%
40,400 *Health Care & Retirement Corp.. 1,373,600
50,500 *Healthsource, Inc.............. 1,085,750
67,100 *Medaphis Corp.................. 532,606
55,900 *Vencor, Inc.................... 2,277,925
------------
5,269,881
------------
HOSPITAL SUPPLIES - 1.66%
19,835 *Acuson Corp.................... 515,710
14,510 *Advanced Technology
Laboratories, Inc............. 562,263
20,833 Beckman Instruments, Inc....... 971,339
17,568 *Datascope Corp................. 333,792
21,900 DENTSPLY International Inc..... 1,100,475
9,309 Diagnostic Products Corp....... 278,106
54,000 Hillenbrand Industries, Inc.... 2,544,750
48,636 *Nellcor Puritan Bennett, Inc... 1,039,595
78,182 Stryker Corp................... 2,726,597
------------
10,072,627
------------
HOUSEHOLD PRODUCTS - 0.55%
58,400 *Bed Bath & Beyond, Inc......... 1,657,100
12,914 Church & Dwight Co., Inc....... 342,221
31,646 First Brands Corp.............. 830,708
</TABLE>
<PAGE> 113
================================================================================
14 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
HOUSEHOLD PRODUCTS - Continued
15,764 Stanhome Inc...................$ 494,596
------------
3,324,625
------------
HUMAN RESOURCES - 1.19%
30,303 Kelly Services Inc. Class A.... 890,151
66,300 Manpower Inc................... 2,966,925
61,750 Olsten Corp.................... 1,211,844
49,700 *Robert Half International, Inc. 2,130,888
------------
7,199,808
------------
INFORMATION PROCESSING - 8.14%
48,373 ACNielson...................... 816,294
76,400 *America Online, Inc............ 4,221,100
35,262 *AST Research, Inc.............. 185,126
81,504 *BMC Software, Inc.............. 4,411,404
65,878 *Cadence Design Systems, Inc.... 2,190,444
39,439 Comdisco, Inc.................. 1,454,313
69,600 *Compuware Corp................. 3,227,700
59,251 Diebold, Inc................... 2,221,913
43,300 *Electronic Arts................ 1,385,600
36,764 *FIserv, Inc.................... 1,511,920
29,268 *Information Resources, Inc..... 439,020
121,200 *Informix Corp.................. 1,090,800
52,707 *Mentor Graphics Corp........... 401,891
82,173 *NCR Corp....................... 2,670,623
91,257 Paychex, Inc................... 3,353,696
17,018 *Policy Management Systems Corp. 808,355
71,608 Reynolds and Reynolds Co.
Class A ...................... 1,673,837
27,525 Sequent Computer Systems, Inc.. 464,484
44,300 *Solectron Corp................. 2,768,750
74,752 *Sterling Commerce Inc.......... 2,485,504
47,890 *Storage Technology Corp........ 1,951,518
19,025 *Stratus Computer, Inc.......... 870,394
26,773 *Structural Dynamics Research
Corp. ........................ 655,939
31,800 *SunGard Data Systems, Inc...... 1,351,500
44,712 *Symantec Corp.................. 852,323
71,100 *U.S. Robotics Corp............. 5,972,400
------------
49,436,848
------------
INSURANCE - CASUALTY - 1.32%
49,333 American Financial Group, Inc.. 1,874,654
58,062 Progressive Corp............... 4,594,156
17,218 Transatlantic Holdings, Inc.... 1,543,163
------------
8,011,973
------------
INSURANCE - MISCELLANEOUS - 0.72%
25,700 AMBAC Inc.....................$ 1,927,500
17,766 Hartford Steam Boiler Inspection
& Insurance Co................ 906,066
28,100 PMI Group Inc.................. 1,541,988
------------
4,375,554
------------
INSURANCE - MULTILINE - 1.39%
111,325 AFLAC Inc...................... 5,677,575
51,586 Provident Companies Inc........ 2,772,748
------------
8,450,323
------------
LEISURE TIME - 1.51%
57,100 Callaway Golf Co............... 1,841,475
79,425 *Circus Circus Enterprises, Inc. 2,065,050
101,402 International Game Technology.. 1,799,886
146,190 *Mirage Resorts, Inc............ 3,490,286
------------
9,196,697
------------
LODGING - 0.24%
1 Deltic Timber Corp............. 12
39,900 *Promus Hotel Corp.............. 1,441,388
------------
1,441,400
------------
MACHINERY - AGRICULTURE - 0.25%
47,500 Agco Corp...................... 1,514,063
------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.14%
17,271 Granite Construction, Inc...... 345,420
18,168 *Jacobs Engineering Group, Inc.. 488,265
------------
833,685
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.15%
24,573 Albany International Corp.
Class A ...................... 559,036
23,818 Durco International, Inc....... 672,859
29,576 Keystone International, Inc.... 964,917
28,000 Newport News Shipbuilding...... 465,500
12,714 Nordson Corp................... 686,556
27,133 Stewart & Stevenson Services,
Inc. ......................... 725,808
17,500 Tecumseh Products Co. Class A.. 990,938
32,500 *Watson Pharmaceuticals, Inc.... 1,271,563
26,324 Watts Industries, Inc. Class
A ............................ 654,810
------------
6,991,987
------------
MERCHANDISE - DRUG - 0.13%
66,600 *Perrigo Co.....................$ 799,200
------------
MERCHANDISE - SPECIALTY - 3.74%
34,900 *Best Buy Co., Inc.............. 475,513
53,875 *Consolidated Stores Corp....... 2,060,719
74,182 Dollar General Corp............ 2,494,369
17,723 Duty Free International, Inc... 276,922
38,100 Fingerhut Companies, Inc....... 671,513
16,171 *Gibson Greetings, Inc.......... 351,719
10,157 Hancock Fabrics, Inc........... 124,423
29,027 *Intelligent Electronics, Inc... 78,010
62,000 *Kohl's Corp.................... 3,340,250
23,821 *Mac Frugal's Bargains
Close-outs Inc. .............. 708,675
28,400 *Micro Warehouse, Inc........... 489,900
128,337 *Office Depot, Inc.............. 2,213,813
97,700 *OfficeMax, Inc................. 1,355,588
53,711 Sotheby's Holdings, Inc.
Class A ...................... 832,521
130,050 *Staples, Inc................... 2,861,100
28,236 Tiffany & Co................... 1,309,445
54,716 Unisource Worldwide, Inc....... 950,691
67,500 *Viking Office Products, inc.... 1,274,063
26,786 *Waban Inc...................... 813,625
------------
22,682,859
------------
MERCHANDISING - FOOD - 0.29%
31,300 Hannaford Bros. Co............. 1,091,588
30,400 Ruddick Corp................... 459,800
15,268 Savannah Foods & Industries,
Inc. ......................... 238,563
------------
1,789,951
------------
MERCHANDISING - MASS - 0.41%
45,707 Family Dollar Stores, Inc...... 1,176,955
22,300 Fred Meyer, Inc................ 1,023,013
81,724 *Service Merchandise Co., Inc... 265,603
------------
2,465,571
------------
METALS - ALUMINUM - 0.26%
40,667 *Alumax Inc..................... 1,570,763
------------
METALS - MISCELLANEOUS - 0.39%
13,700 Brush Wellman Inc.............. 291,125
21,606 Kennametal, Inc................ 858,839
19,450 Precision Castparts Corp....... 1,215,625
------------
2,365,589
------------
</TABLE>
<PAGE> 114
===============================================================================
May 31, 1997 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 15
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
METALS - STEEL - 0.55%
12,610 Carpenter Technology Corp......$ 545,383
13,457 Cleveland-Cliffs Inc........... 568,558
39,742 Harsco Corp.................... 1,549,938
15,516 Lukens Inc..................... 304,502
18,323 Oregon Steel Mills, Inc........ 343,556
------------
3,311,937
------------
MISCELLANEOUS - 0.64%
124,500 Equifax Inc.................... 3,890,625
------------
NATURAL GAS - DIVERSIFIED - 1.03%
44,100 El Paso Natural Gas Co......... 2,612,925
37,743 Questar Corp................... 1,481,413
48,832 *Seagull Energy Corp............ 878,976
34,991 Valero Energy Corp............. 1,250,928
------------
6,224,242
------------
OIL - INTEGRATED DOMESTIC - 0.29%
45,160 MAPCO Inc...................... 1,433,830
22,414 Quaker State Corp.............. 339,012
------------
1,772,842
------------
OIL - INTEGRATED
INTERNATIONAL - 0.28%
36,046 Murphy Oil Corp................ 1,671,633
------------
OIL - SERVICE - PRODUCTS - 1.07%
30,021 *BJ Services Co................. 1,658,660
102,300 *Noble Drilling Corp............ 2,225,025
55,625 *Parker Drilling Co............. 535,391
22,586 *Varco International, Inc....... 621,115
42,082 *Weatherford Enterra, Inc....... 1,436,049
------------
6,476,240
------------
OIL - SERVICES - 2.93%
58,800 *ENSCO International, Inc....... 2,932,650
139,115 *Global Marine Inc.............. 3,130,088
71,639 *Nabors Industries, Inc......... 1,607,400
33,346 *Smith International, Inc....... 1,746,497
50,492 Tidewater, Inc................. 2,126,976
41,800 Transocean Offshore, Inc....... 2,884,200
46,146 Witco Corp..................... 1,707,402
33,900 York International Corp........ 1,644,150
------------
17,779,363
------------
OIL/GAS PRODUCERS - 2.09%
49,555 Anadarko Petroleum Corp........$ 3,121,965
72,798 Apache Corp.................... 2,493,332
57,680 Cabot Corp..................... 1,478,050
44,435 Noble Affiliates, Inc.......... 1,871,824
29,500 Parker & Parsley Petroleum Co.. 1,003,000
70,866 Ranger Oil Ltd................. 744,093
60,280 Ultramar Diamond Shamrock Corp. 1,989,240
------------
12,701,504
------------
PAPER/FOREST PRODUCTS - 1.29%
30,639 Bowater Inc.................... 1,512,801
35,135 Consolidated Papers, Inc....... 1,914,858
36,739 Longview Fibre Co.............. 619,971
29,200 P. H. Glatfelter Co............ 511,000
32,376 Pentair Inc.................... 1,064,361
24,900 Rayonier Inc................... 1,067,588
19,770 Standard Register Co........... 689,479
25,561 Wausau Paper Mills Co.......... 479,269
------------
7,859,327
------------
PHOTOGRAPHY - 0.02%
6,453 CPI Corp....................... 120,994
------------
POLLUTION CONTROL - 1.05%
25,533 Calgon Carbon Corp............. 357,462
57,600 *United States Filter Corp...... 1,814,400
115,900 *USA Waste Services, Inc........ 4,201,375
------------
6,373,237
------------
PUBLISHING - NEWS - 0.79%
33,600 Lee Enterprises, Inc........... 848,400
18,868 Media General, Inc. Class A.... 576,653
8,761 Washington Post Co. Class B.... 3,378,461
------------
4,803,514
------------
PUBLISHING/PRINTING - 0.55%
29,886 Banta Corp..................... 829,337
24,625 *Golden Books Family
Entertainment, Inc............ 280,109
14,616 Houghton Mifflin Co............ 865,998
12,900 *Scholastic Corp................ 383,775
35,428 Wallace Computer Services,
Inc. ......................... 991,984
------------
3,351,203
------------
RAILROAD - 0.72%
16,212 GATX Corp......................$ 920,031
49,577 Illinois Central Corp.......... 1,790,969
30,332 Kansas City Southern
Industries, Inc. ............. 1,664,469
------------
4,375,469
------------
RESTAURANTS - 0.94%
38,533 Bob Evans Farms, Inc........... 544,279
58,955 *Brinker International, Inc..... 818,001
37,432 *Buffets, Inc................... 332,209
49,266 Cracker Barrel Old Country
Store, Inc.................... 1,428,714
12,880 *International Dairy Queen,
Inc. Class A.................. 299,460
34,200 *Lone Star Steakhouse & Saloon.. 786,600
39,100 *Outback Steakhouse Inc......... 909,075
19,788 Sbarro, Inc.................... 578,799
------------
5,697,137
------------
SECURITIES RELATED - 2.53%
66,476 A.G. Edwards, Inc.............. 2,467,922
98,484 Bear Stearns Co. Inc........... 3,200,729
103,602 Franklin Resources, Inc........ 6,708,230
83,600 Paine Webber Group Inc......... 2,967,800
------------
15,344,681
------------
SEMICONDUCTORS - 3.66%
71,440 *Altera Corp.................... 3,786,320
126,038 *Analog Devices, Inc............ 3,371,508
80,400 *Atmel Corp..................... 2,311,500
35,088 Avnet, Inc..................... 2,210,544
53,836 *Cirrus Logic, Inc.............. 646,032
65,582 *Cypress Semiconductor Corp..... 934,544
62,254 Linear Technology Corp......... 3,120,482
49,600 *Maxim Integrated Products...... 2,666,000
58,881 *Xilinx, Inc.................... 3,157,494
------------
22,204,424
------------
TELECOMMUNICATIONS - 1.99%
107,228 ADC Communications, Inc........ 3,672,559
39,242 COMSAT Corp.................... 882,945
63,200 *LCI International, Inc......... 1,532,600
187,900 *Nextel Communications, Inc.
Class A ...................... 2,771,525
</TABLE>
<PAGE> 115
===============================================================================
16 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - Continued
41,640 *Octel Communications Corp......$ 801,570
99,601 *360 Communications Co.......... 1,879,969
40,740 *Vanguard Cellular Systems, Inc.
Class A....................... 534,713
------------
12,075,881
------------
TEXTILE - PRODUCTS - 0.99%
49,900 *Burlington Industries, Inc..... 548,900
43,500 *Jones Apparel Group, Inc....... 2,039,063
108,510 Shaw Industries Inc............ 1,356,375
49,429 Unifi, Inc..................... 1,594,085
25,184 Wellman, Inc................... 450,164
------------
5,988,587
------------
TOBACCO - 0.18%
30,635 Universal Corp................. 1,114,348
------------
TRUCKERS - 0.24%
17,614 Arnold Industries, Inc......... 295,035
35,600 CNF Transportation, Inc........ 1,148,100
------------
1,443,135
------------
UTILITIES - COMMUNICATION - 0.97%
23,318 Aliant Communications, Inc..... 478,019
48,050 Century Telephone Enterprises,
Inc. ......................... 1,453,513
52,964 Southern New England
Telecommunications Corp....... 2,065,596
49,291 Telephone and Data Systems,
Inc. ......................... 1,913,107
------------
5,910,235
------------
UTILITIES - ELECTRIC - 9.13 %
61,336 *AES Corp....................... 4,400,858
97,514 Allegheny Power System, Inc.... 2,547,553
44,235 Atlantic Energy, Inc........... 729,878
5,253 Black Hills Corp............... 151,024
50,100 *Calenergy, Inc................. 2,066,625
16,159 Central Louisiana Electric Co.. 408,015
30,416 Central Maine Power Co......... 338,378
74,264 CMS Energy Corp................ 2,497,127
48,537 Delmarva Power & Light Co...... 843,330
77,862 Florida Progress Corp.......... 2,287,196
18,866 Hawaiian Electric Industries,
Inc. ......................... 653,235
26,223 Idaho Power Co................. 786,690
61,100 Illinova Corp.................. 1,336,563
UTILITIES - ELECTRIC - Continued
13,859 Indiana Energy, Inc............$ 330,884
45,764 IPALCO Enterprises, Inc........ 1,424,405
58,419 Kansas City Power & Light Co... 1,628,430
62,542 LG&E Energy Corp............... 1,438,466
75,334 MidAmerican Energy Co.......... 1,271,261
18,718 Minnesota Power & Light Co..... 542,822
43,857 Montana Power Co............... 997,747
28,833 Nevada Power Co................ 594,681
52,017 New England Electrical System.. 1,801,089
56,621 New York State Electric &
Gas Corp...................... 1,231,507
47,972 NIPSCO Industries, Inc......... 1,942,866
117,333 *Northeast Utilities............ 1,070,664
32,446 OGE Energy Corp................ 1,395,178
70,123 Pinnacle West Capital Corp..... 2,059,863
41,591 Portland General Corp.......... 1,663,640
96,364 Potomac Electric Power Co...... 2,216,372
51,912 Public Service Co. of Colorado. 2,095,947
37,837 Public Service Co. of New
Mexico ....................... 666,877
69,562 Puget Sound Energy Inc......... 1,730,355
84,688 SCANA Corp..................... 2,117,200
39,848 Southwestern Public Service Co. 1,494,300
94,220 TECO Energy, Inc............... 2,343,723
35,188 UtiliCorp United Inc........... 950,076
29,424 Washington Gas Light Co........ 724,566
89,252 Wisconsin Energy Corp.......... 2,153,205
18,416 WPL Holdings, Inc.............. 508,742
------------
55,441,338
------------
UTILITIES - GAS, DISTRIBUTION - 1.52%
46,436 AGL Resources, Inc............. 888,089
38,505 Brooklyn Union Gas Co.......... 1,073,327
60,168 MCN Energy Group Inc........... 1,782,477
31,578 National Fuel Gas Co........... 1,306,540
127,246 Tosco Corp..................... 4,151,401
------------
9,201,834
------------
WATER SERVICES - 0.21%
58,800 American Water Works Co., Inc.. 1,264,200
------------
TOTAL COMMON STOCKS
(Cost $439,854,680)............ 600,459,653
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 0.96%
FINANCE COMPANIES - 0.18%
$1,086,000 Ford Motor Credit Co.,
5.60% due 06/03/97............$ 1,085,662
------------
SECURITIES RELATED - 0.78%
4,744,000 Merrill Lynch & Co., Inc.,
5.50% 06/02/97................ 4,743,275
------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $5,828,937).............. 5,828,937
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.02%
U.S. TREASURY BILLS - 0.02%
150,000 United States Treasury Bills,
4.99% due 08/21/97
(Cost $148,313)............... 148,313
------------
TOTAL INVESTMENTS
(Cost $445,831,930) - 99.90%... 606,436,903
Other assets and liabilities,
net - 0.10% .................. 624,443
------------
NET ASSETS (equivalent
to $20.83 per share on
29,137,334 shares
outstanding) - 100%...........$607,061,346
============
</TABLE>
*Non-income producing
<PAGE> 116
===============================================================================
May 31, 1997 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 17
===============================================================================
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- -------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/97)
43(2) S&P MidCap 400 Index Futures
(June/$279.65).................$ 119,855
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
29,137,334 shares outstanding........... $ 291,373
Additional paid in capital................ 406,838,519
Undistributed net realized gain on
securities ............................. 39,149,762
Undistributed net investment income....... 56,864
Unrealized appreciation of:
Investments........... $160,604,973
Futures............... 119,855 160,724,828
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $607,061,346
============
</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 500
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 117
================================================================================
18 MIDCAP INDEX FUND - FINANCIAL STATEMENTS
================================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ...................................................................... $ 8,574,566
Interest ....................................................................... 557,965
-------------
Total investment income ...................................................... 9,132,531
-------------
EXPENSES:
Advisory fees .................................................................. 1,880,085
Custodian and accounting services .............................................. 203,871
Reports to shareholders ........................................................ 76,689
Audit fees and tax services .................................................... 19,667
Directors' fees and expenses ................................................... 13,603
Miscellaneous .................................................................. 43,796
-------------
Total expenses ............................................................... 2,237,711
NET INVESTMENT INCOME .......................................................... $ 6,894,820
-------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments ................................................... $ 38,698,502
Futures contracts ............................................. 1,010,640 39,709,142
------------- -------------
Net unrealized appreciation during the year:
Investments ................................................... 45,539,487
Futures contracts ............................................. 64,180 45,603,667
------------- -------------
Net realized and unrealized gain on securities during the year............... 85,312,809
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................... $ 92,207,629
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................ $ 6,894,820 $ 6,480,259
Net realized gain on securities .................................. 39,709,142 33,442,786
Net unrealized appreciation of securities during the year ........ 45,603,667 76,393,023
------------- -------------
Increase in net assets resulting from operations ............... 92,207,629 116,316,068
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................ (6,892,259) (6,584,543)
Net realized gain on securities .................................. (33,690,297) (17,378,059)
------------- -------------
Decrease in net assets resulting from distributions
to shareholders ............................................... (40,582,556) (23,962,602)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ................................. 33,601,532 43,226,671
Proceeds from capital stock issued for distributions reinvested .. 40,582,556 23,962,602
------------- -------------
74,184,088 67,189,273
Cost of capital stock repurchased ................................ (59,435,374) (26,411,830)
------------- -------------
Increase in net assets resulting from
capital stock transactions .................................... 14,748,714 40,777,443
------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................... 66,373,787 133,130,909
NET ASSETS:
Beginning of year ................................................ 540,687,559 407,556,650
------------- -------------
End of year (including undistributed net investment income
of $56,864 and $54,303) ........................................ $ 607,061,346 $ 540,687,559
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ..................................... 1,775,391 2,455,783
Shares issued for distributions reinvested ....................... 2,124,784 1,381,367
Shares of capital stock repurchased .............................. (3,084,568) (1,503,393)
------------- -------------
Increase in shares outstanding ................................. 815,607 2,333,757
Shares outstanding:
Beginning of year .............................................. 28,321,727 25,987,970
------------- -------------
End of year .................................................... 29,137,334 28,321,727
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 118
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS 19
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.66%
ADVERTISING - 0.62%
13,800 *Acxiom Corp. .................. $ 234,600
5,025 *ADVO, Inc. .................... 69,722
2,700 *American Business Information,
Inc. ......................... 55,350
5,200 *Catalina Marketing Corp. ...... 191,750
400 Grey Advertising, Inc. ........ 116,800
1,625 *HA-LO Industries, Inc. ........ 37,984
2,650 Harte-Hanks Communications..... 79,169
4,700 *National Media Corp. .......... 34,663
1,300 *Robert Mondavi Corp. Class A .. 57,850
4,900 True North Communications
Inc. ......................... 97,387
8,100 *Westwood One, Inc. ............ 220,725
-----------
1,196,000
-----------
AEROSPACE/DEFENSE - 1.29%
3,400 *Alliant Techsystems Inc. ...... 163,625
6,700 *Aviall, Inc. .................. 98,825
4,600 *BE Aerospace, Inc. ............ 111,550
11,100 *Coltec Industries, Inc. ....... 217,837
600 Cubic Corp. ................... 14,100
5,200 *Fairchild Corp. Class A ....... 85,150
6,900 Gencorp Inc. .................. 145,762
14,500 *Geotek Communications, Inc. ... 64,797
3,200 *GRC International, Inc. ....... 16,800
4,400 Logicon, Inc. ................. 221,100
5,200 OEA, Inc. ..................... 196,300
6,200 *Orbital Sciences Corp. ........ 103,075
7,500 *Rohr, Inc. .................... 158,437
2,800 *Sequa Corp. Class A ........... 136,500
1,700 *Tech-Sym Corp. ................ 54,188
3,800 Teleflex Inc. ................. 234,175
4,800 Thiokol Corp. ................. 345,000
6,600 *Trimble Navigation Ltd. ....... 101,475
700 *Whittaker Corp. ............... 7,788
-----------
2,476,484
-----------
AIRLINES - 0.72%
3,800 *Alaska Air Group, Inc. ........ 94,525
12,300 America West Airlines, Inc.
Class B ...................... 189,112
4,900 ASA Holdings, Inc. ............ 128,013
3,500 Circle International Group Inc. 97,125
13,000 *Continental Airlines, Inc.
Class B ...................... 455,000
6,300 Expeditors International of
Washington, Inc. ............. 181,912
AIRLINES - Continued
6,700 *Mesa Airlines, Inc. ........... $ 33,500
4,200 Pittston Burlington Group ..... 108,150
1,800 SkyWest, Inc. ................. 27,225
7,900 *ValuJet, Inc. ................. 54,313
2,000 *Western Pacific
Airlines, Inc. ............... 11,500
-----------
1,380,375
-----------
APPAREL & PRODUCTS - 1.35%
1,000 *American Eagle Outfitters...... 11,313
3,400 Angelica Corp. ................ 61,200
5,100 *Ann Taylor Stores Corp. ....... 118,575
5,600 Authentic Fitness Corp. ....... 81,900
2,200 Blair Corp. ................... 35,475
1,000 *Buckle, Inc. .................. 21,250
5,950 Cato Corp. .................... 29,750
11,925 Claire's Stores, Inc. ......... 229,556
8,700 CML Group, Inc. ............... 20,663
2,100 *Donnkenny, Inc. ............... 8,663
6,500 *Dress Barn, Inc. .............. 112,125
1,200 Fab Industries, Inc. .......... 37,500
2,900 *Gadzooks, Inc. ................ 96,244
6,700 *Gymboree Corp. ................ 167,500
2,700 *Hartmarx Corp. ................ 26,662
5,550 Kellwood Co. .................. 145,687
5,700 *Land's End, Inc. .............. 171,712
3,700 *Men's Wearhouse, Inc. ......... 123,487
10,800 *Nautica Enterprises, Inc. ..... 253,800
5,000 OshKosh B'Gosh, Inc. Class A .. 84,375
5,700 Phillips-Van Heusen Corp. ..... 79,800
13,000 Ross Stores, Inc. ............. 365,625
3,600 St. John Knits, Inc. .......... 153,000
6,600 UniFirst Corp. ................ 129,525
2,000 *Urban Outfitters, Inc. ........ 32,500
-----------
2,597,887
-----------
APPLIANCES/FURNISHINGS - 1.29%
4,100 Aaron Rents, Inc. Class A ..... 50,225
3,750 Bassett Furniture Industries,
Inc. ......................... 93,574
4,100 *CORT Business Services Corp. .. 113,775
3,800 Ethan Allen Interiors Inc. .... 198,550
1,600 *Falcon Building Products, Inc.
Class A ...................... 28,000
18,100 *Furniture Brands International,
Inc. ......................... 282,813
11,097 *Griffon Corp. ................. 151,197
8,000 Hechinger Co. Class A ......... 10,000
APPLIANCES/FURNISHINGS - Continued
11,200 Heilig-Meyers Co. ............. $ 184,800
2,900 *Helen of Troy Ltd. ............ 77,575
12,600 Herman Miller, Inc. ........... 450,450
4,100 Hunt Manufacturing Co. ........ 76,875
4,700 Kimball International, Inc.
Class B ...................... 185,650
2,200 La-Z-Boy Chair Co. ............ 75,625
7,385 *Metromedia International Group. 80,773
1,500 National Presto Industries,
Inc. ......................... 56,625
3,600 Oneida Ltd. ................... 85,950
3,600 *Renters Choice, Inc. .......... 69,300
4,400 Rival Co. ..................... 61,600
4,900 Windmere Corp. ................ 72,275
6,623 *Zenith Electronics Corp. ...... 72,853
-----------
2,478,485
-----------
AUTO - ORIGINAL EQUIPMENT - 0.72%
8,000 Arvin Industries, Inc. ........ 222,000
2,900 BREED Technologies, Inc. ...... 56,913
9,200 Carlisle Cos. Inc. ............ 280,600
6,600 Donaldson Co., Inc. ........... 241,725
7,900 Federal-Mogul Corp. ........... 230,087
3,150 *Miller Industries, Inc. ....... 51,581
5,800 Modine Manufacturing Co. ...... 169,650
4,000 Superior Industries
International, Inc. .......... 102,000
1,000 *Tower Automotive Inc. ......... 39,625
-----------
1,394,181
-----------
AUTO - REPLACEMENT PARTS - 0.86%
3,300 A.O. Smith Corp. .............. 121,275
4,900 *APS Holding Corp. Class A ..... 49,000
15,700 *Collins & Aikman Corp. ........ 182,512
975 Dart Group Corp. Class A ...... 99,450
3,900 *Discount Auto Parts, Inc. ..... 72,638
2,700 Furon Co. ..................... 68,850
5,400 Handy & Harman................. 89,775
4,800 Kaydon Corp. .................. 238,200
1,343 Myers Industries, Inc. ........ 23,503
5,350 Simpson Industries, Inc. ...... 54,503
3,100 *SPX Corp. ..................... 184,837
4,400 Standard Motor Products, Inc.
Class A ...................... 60,500
5,050 Standard Products Co.
Class A ...................... 125,619
9,600 *TBC Corp. ..................... 73,200
3,300 Walbro Corp. .................. 66,000
</TABLE>
<PAGE> 119
================================================================================
20 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
AUTO - REPLACEMENT PARTS - Continued
5,512 Wynn's International, Inc. .... $ 136,422
-----------
1,646,284
-----------
BANKS - NEW YORK CITY - 0.09%
5,450 New York Bancorp Inc. ......... 178,488
-----------
BANKS - OTHER - 0.02%
1 BankBoston Corp. .............. 73
1,120 *Fleet Financial Group, Inc.
(Warrants) ................... 25,480
800 Irwin Financial Corp. ......... 21,600
-----------
47,153
-----------
BANKS - REGIONAL - 6.47%
3,100 AMCORE Financial, Inc. ........ 88,350
2,425 Anchor BanCorp Wisconsin
Inc. ......................... 103,214
4,701 Associated Banc-Corp. ......... 178,638
7,000 BancorpSouth, Inc. ............ 203,875
985 Bank of Granite Corp. ......... 28,319
1,000 Banknorth Group, Inc. ......... 43,500
2,472 *BOK Financial Corp. ........... 83,121
4,012 CCB Financial Corp. ........... 281,843
6,200 Centura Banks, Inc. ........... 268,150
2,415 Chemical Financial Corp. ...... 86,336
4,700 Citizens Banking Corp. ........ 151,575
10,800 City National Corp. ........... 260,550
5,152 CNB Bancshares, Inc. .......... 226,044
5,349 Collective Bancorp, Inc. ...... 230,007
6,600 Colonial BancGroup, Inc. ...... 159,225
2,952 Commerce Bancorp, Inc. ........ 101,106
7,350 Commercial Federal Corp. ...... 256,331
2,000 Commonwealth Bancorp, Inc. .... 30,000
4,900 Community First Bankshares,
Inc. ......................... 169,050
660 Community Trust Bancorp, Inc. . 16,500
3,250 Corus Bankshares, Inc. ........ 83,281
7,540 Cullen/Frost Bankers, Inc. .... 296,887
6,800 Dauphin Deposit Corp. ......... 300,050
12,100 Deposit Guaranty Corp. ........ 379,637
2,542 F & M National Corp. .......... 60,055
3,124 First American Financial Corp. 111,293
3,250 First Citizens BancShares,
Inc. ......................... 269,750
1,125 First Commerce Bancshares,
Inc. ......................... 28,125
5,697 First Commercial Corp. ........ 233,577
7,400 First Commonwealth Financial
Corp. Pennsylvania ........... 143,375
BANKS - REGIONAL - Continued
3,520 First Financial BanCorp. ...... $ 132,880
220 First Financial Corp. of
Indiana ...................... 7,700
12,375 First Financial Corp. of
Wisconsin .................... 344,953
4,200 First Hawaiian, Inc. .......... 148,838
8,167 First Michigan Bank Corp. ..... 234,798
3,875 First Midwest Bancorp, Inc. ... 126,906
3,972 First Western Bancorp, Inc. ... 140,013
937 Firstbank of Illinois Co. ..... 35,255
1,300 FirstBank Puerto Rico. ........ 32,013
7,500 FirstMerit Corp. .............. 344,062
4,687 Fort Wayne National Corp. ..... 209,743
9,378 Fulton Financial Corp. ........ 246,159
5,000 Great Financial Corp. ......... 165,000
330 Harleysville National Corp. ... 9,983
3,500 Heritage Financial Services,
Inc. ......................... 93,625
5,175 HUBCO, Inc. ................... 135,197
6,793 *Imperial BanCorp. ............. 168,976
3,230 Jefferson Bankshares, Inc. .... 94,478
2,500 Liberty Bancorp, Inc. ......... 124,688
7,900 Magna Group, Inc. ............. 254,775
3,141 Mercantile Bancorporation
Inc. ......................... 185,319
5,199 Mid-Am, Inc. .................. 92,282
1,025 National Bancorp of Alaska,
Inc. ......................... 80,463
830 National City Bancshares,
Inc. ......................... 30,918
12,574 National Commerce
Bancorporation ............... 298,632
3,516 National Penn Bancshares,
Inc. ......................... 107,238
16,416 North Fork Bancorporation,
Inc. ......................... 344,736
5,135 Old National Bancorp Indiana .. 206,042
4,660 ONBANCorp, Inc. ............... 219,602
6,467 One Valley Bancorp of West
Virginia, Inc. ............... 261,105
331 Peoples First Corp. ........... 8,854
6,068 Provident Bancorp Inc. ........ 244,237
5,200 Riggs National Corp. .......... 96,200
9,018 Roosevelt Financial Group,
Inc. ......................... 209,668
1,200 S&T Bancorp, Inc. ............. 43,500
1,300 *Silicon Valley Bancshares ..... 51,350
5,900 St. Paul Bancorp, Inc. ........ 187,325
1,400 Sumitomo Bank of California ... 38,850
4,075 Susquehanna Bancshares, Inc. .. 159,944
2,800 Trans Financial, Inc. ......... 69,650
4,900 Trust Co. of New Jersey........ 90,650
5,211 Trustco Bank Corp. of
New York ..................... 107,477
8,350 Trustmark Corp. ............... 227,537
4,293 UMB Financial Corp. ........... 171,720
BANKS - REGIONAL - Continued
3,500 United Bankshares Inc.
West Virginia ................ $ 131,250
6,387 United Carolina Bancshares
Corp. ........................ 287,415
6,600 UST Corp. ..................... 138,600
3,087 Westamerica Bankcorporation ... 210,688
694 WestCorp. ..................... 11,625
5,500 Whitney Holding Corp. ......... 211,750
-----------
12,446,433
-----------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.22%
9,900 Adolph Coors Class B .......... 241,313
3,200 *Boston Beer Co., Inc.
Class A ...................... 28,800
4,300 *Canandaigua Wine, Inc.
Class B ...................... 153,725
-----------
423,838
-----------
BEVERAGE - SOFT DRINKS - 0.07%
2,200 Coca-Cola Bottling Co. ........ 99,000
7,100 *Pepsi-Cola Puerto Rico
Bottling Co. Class B ......... 35,500
-----------
134,500
-----------
BROADCASTING - 1.52%
3,200 Ackerley Inc. ................. 39,600
3,300 *Adelphia Communications Corp.
Class A ...................... 18,975
5,300 *American Mobile Satellite Corp. 47,700
6,570 *American Radio Systems, Corp.
Class A ...................... 244,732
7,300 *American Telecasting, Inc. .... 7,984
5,700 *ANTEC Corp. ................... 70,537
2,000 *Argyle Television, Inc. ....... 46,750
5,900 *CAI Wireless Systems, Inc. .... 8,666
1,300 *Cellularvision USA, Inc. ...... 9,263
4,800 *Century Communications Corp.
Class A ...................... 26,400
3,900 *Chancellor Corp. Class A ...... 134,550
4,300 *Cyrix Corp. ................... 108,575
8,900 *Data Broadcasting Corp. ....... 43,387
2,000 *Emmis Broadcasting Corp.
Class A ...................... 76,750
5,550 *Evergreen Media Corp. ......... 215,756
2,200 *Heartland Wireless
Communications, Inc. ......... 6,463
1,300 *Heftel Broadcasting Corp.
Class A ...................... 64,350
7,200 *Heritage Media Corp. Class A .. 131,400
</TABLE>
<PAGE> 120
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 21
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
BROADCASTING - Continued
11,876 *HSN, Inc. ..................... $ 363,702
8,250 *International Family
Entertainment, Inc. Class B .. 229,969
1,700 *Jacor Communications, Inc. .... 58,650
3,500 *Jones Intercable Inc. ......... 37,188
4,500 *Lin Television Corp. .......... 195,187
2,500 *Paxson Communications Corp. ... 25,313
2,900 *People's Choice TV Corp. ...... 3,988
4,375 *SAGA Communications, Inc.
Class A ...................... 80,391
2,500 *SFX Broadcasting, Inc.
Class A ...................... 80,625
4,200 TCA Cable TV, Inc. ............ 141,750
8,700 *United International Holdings,
Inc. Class A ................. 87,000
1,700 United Television, Inc. ....... 151,300
4,400 *United Video Satellite Group,
Inc. Class A ................. 74,800
3,600 *Young Broadcasting Inc.
Class A ...................... 96,750
-----------
2,928,451
-----------
BUILDING MATERIALS - 1.17%
3,100 *ABT Building Products Corp. ... 77,500
1,500 Ameron, Inc. .................. 83,250
9,100 Apogee Enterprises, Inc. ...... 168,350
2,450 Butler Manufacturing Co. ...... 87,894
5,000 CalMat Co. .................... 99,375
3,000 Centex Construction
Productions, Inc. ............ 60,375
2,300 Elcor Corp. ................... 64,400
15,200 Fedders USA Inc. .............. 96,900
1,500 *Fibreboard Corp. .............. 81,563
1,700 Florida Rock Industries,
Inc. ......................... 56,950
5,300 HON INDUSTRIES, Inc. .......... 257,050
5,000 Interface, Inc. Class A ....... 116,250
3,200 Lone Star Industries, Inc. .... 127,200
1,900 LSI Industries, Inc. .......... 28,975
4,200 Medusa Corp. .................. 162,225
700 *NCI Building Systems, Inc. .... 20,388
13,800 *Payless Cashways Inc. ......... 22,425
1,000 Puerto Rican Cement Co. Inc. .. 32,750
5,900 Southdown, Inc. ............... 238,212
6,000 Texas Industries, Inc. ........ 144,000
5,500 *Triangle Pacific Corp. ........ 164,312
2,200 Watsco, Inc. .................. 63,800
-----------
2,254,144
-----------
CHEMICAL - MAJOR - 0.36%
4,800 Borg-Warner Automotive, Inc. .. $ 234,000
4,000 Chemed Corp. .................. 146,000
8,409 *Hexcel Corp. .................. 151,362
4,100 *Synetic, Inc. ................. 159,388
-----------
690,750
-----------
CHEMICAL - MISCELLANEOUS - 1.97%
8,300 A. Schulman Inc. .............. 184,675
3,600 *Buckeye Cellulose Corp. ....... 113,400
1,950 Cambrex Corp. ................. 70,444
6,900 ChemFirst Inc. ................ 178,537
18,167 Crompton & Knowles Corp. ...... 424,654
6,200 Dexter Corp. .................. 186,775
5,300 Ferro Corp. ................... 198,087
5,300 Fisher Scientific
International Inc. ........... 192,125
3,700 *Foamex International Inc. ..... 55,962
5,600 Geon Co. ...................... 121,800
3,600 H.B. Fuller Co. ............... 198,900
3,800 *Landec Corp. .................. 20,900
10,400 Lawter International, Inc. .... 119,600
3,400 LeaRonal, Inc. ................ 91,800
2,500 MacDermid, Inc. ............... 113,125
3,700 *McWhorter Technologies, Inc. .. 81,400
4,900 Minerals Technologies Inc. .... 193,550
4,800 *Mycogen Corp. ................. 112,800
1,200 NCH Corp. ..................... 78,150
8,700 *NL Industries, Inc. ........... 110,925
6,700 Om Group Inc. ................. 211,050
2,600 O'Sullivan Corp. .............. 23,400
925 Petrolite Corp. ............... 55,616
3,200 Rollins, Inc. ................. 62,400
2,000 Stepan Co. .................... 39,250
6,200 Valspar Corp. ................. 173,600
4,450 VWR Scientific Products
Corp. ........................ 68,975
6,150 W.H. Brady Co. Class A ........ 175,275
2,500 WD-40 Co. ..................... 141,875
-----------
3,799,050
-----------
COAL - 0.14%
3,200 Ashland Coal, Inc. ............ 85,600
2,534 NACCO Industries, Inc.
Class A ...................... 128,917
2,600 Zeigler Coal Holding Co. ...... 60,450
-----------
274,967
-----------
CONGLOMERATES - 0.27%
1,500 *MAXXAM, Inc. .................. $ 66,000
12,900 Ogden Corp. ................... 251,550
2,600 *PEC Israel Economic Corp. ..... 59,150
10,600 *Walter Industries, Inc. ....... 151,050
-----------
527,750
-----------
CONSUMER FINANCE - 0.42%
7,900 *AmeriCredit Corp. ............. 148,125
8,200 *Arcadia Financial Limited ..... 85,075
200 Chittenden Corp. .............. 5,950
6,200 Eaton Vance Corp. ............. 152,675
1,500 Fund American Enterprises,
Inc. ......................... 152,250
7,800 *Jayhawk Acceptance Corp. ...... 12,675
6,430 *National Auto Credit, Inc. .... 62,693
5,100 SEI Corp. ..................... 114,750
700 WesBanco, Inc. ................ 25,725
9,000 *World Acceptance Corp. ........ 55,125
-----------
815,043
-----------
CONTAINERS - METAL/GLASS - 0.47%
3,600 *Alltrista Corp. ............... 86,400
4,700 AptarGroup, Inc. .............. 208,563
7,900 Ball Corp. .................... 230,087
2,800 CLARCOR Inc. .................. 65,800
600 *CSS Industries, Inc. .......... 18,075
6,500 Greif Brothers Corp. Class A .. 182,000
1,125 Liqui-Box Corp. ............... 37,406
473 *Omega Environmental, Inc. ..... 207
4,900 *U. S. Can Corp. ............... 79,625
-----------
908,163
-----------
CONTAINERS - PAPER - 0.26%
5,400 Chesapeake Utilities Corp. .... 180,900
12,600 *Gaylord Container Corp.
Class A ...................... 103,163
8,890 Rock-Tenn Co. Class A ......... 134,461
3,600 *Shorewood Packaging Corp. ..... 72,900
-----------
491,424
-----------
COSMETICS/TOILETRIES - 0.10%
4,050 *INBRAND Corp. ................. 106,819
9,100 *Playtex Products, Inc. ........ 87,587
-----------
194,406
-----------
</TABLE>
<PAGE> 121
================================================================================
22 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
DRUGS - 2.98%
3,500 A.L. Pharma Inc. Class A ...... $ 58,625
3,400 *Agouron Pharmaceuticals,
Inc. ......................... 272,425
3,100 Alkermes, Inc. ................ 51,150
8,700 *Alliance Pharmaceutical
Corp. ........................ 88,087
267 *Alpha 1 Biomedicals, Inc. ..... 28
2,100 *Alteon, Inc. .................. 8,400
5,700 *AmeriSource Health Corp.
Class A ...................... 242,962
6,300 *Amylin Pharmaceuticals, Inc. .. 81,900
2,500 *Aphton Corp. .................. 36,250
444 *Aquila Biopharmaceuticals,
Inc. ......................... 2,109
4,100 Bindley Western Industries,
Inc. ......................... 90,200
1,200 *Carrington Laboratories,
Inc. ......................... 9,150
3,700 Carter-Wallace Inc. ........... 61,050
3,500 *CellPro, Inc. ................. 22,750
7,400 *Cephalon, Inc. ................ 92,500
4,017 *Chad Therapeutics, Inc. ....... 32,387
2,000 *Chronimed, Inc. ............... 19,750
4,000 *CNS, Inc. ..................... 35,000
7,500 *Cocensys, Inc. ................ 30,000
5,500 *Columbia Laboratories, Inc. ... 107,250
3,598 *Copley Pharmaceutical, Inc. ... 22,937
3,000 *COR Therapeutics, Inc. ........ 26,813
5,300 *Cygnus, Inc. .................. 87,450
8,200 *Cytel Corp. ................... 16,913
1,900 *DepoTech Corp. ................ 26,600
10,900 *Dura Pharmaceuticals, Inc. .... 433,275
2,600 *GelTex Pharmaceuticals, Inc. .. 49,400
10,400 *Genelabs Technologies, Inc. ... 24,700
10,900 *Gensia, Inc. .................. 50,413
7,200 *Gilead Sciences, Inc. ......... 195,300
2,700 Herbalife International,
Inc. ......................... 56,025
4,900 *Human Genome Sciences, Inc. ... 189,875
9,265 ICN Pharmaceuticals, Inc. ..... 200,356
7,400 *ICOS Corp. .................... 59,662
4,100 *IDEC Pharmaceuticals Corp. .... 92,250
7,100 *ImmuLogic Pharmaceutical
Corp. ........................ 28,400
5,900 *Immune Response Corp. ......... 50,150
5,700 *Immunex Corp. ................. 178,837
2,300 *Incyte Pharmacuticals, Inc. ... 150,650
3,900 *Inhale Therapeutic Systems..... 78,975
1,500 *Intercardia, Inc. ............. 28,500
5,700 Jones Medical Industries,
Inc. ......................... 204,487
4,050 Life Technologies, Inc. ....... 109,350
4,358 *Ligand Pharmaceuticals Inc.
Class B ...................... 51,751
DRUGS - Continued
4,400 *Martek Biosciences Corp. ...... $ 74,800
3,100 *Matrix Pharmaceuticals, Inc. .. 21,700
5,130 Natures Sunshine Products,
Inc. ......................... 86,569
4,300 *Neoprobe Corp. ................ 65,037
3,700 *Neose Technologies, Inc. ...... 48,100
2,600 *Neurogen Corp. ................ 49,725
7,100 *NeXstar Pharmaceuticals,
Inc. ......................... 77,212
5,900 *Noven Pharmaceuticals, Inc. ... 46,463
3,400 *Parexel International Corp. ... 111,775
3,800 *PathoGensis Corp. ............. 104,975
2,400 *PDT Inc. ...................... 67,200
5,300 *R.P. Scherer Corp. ............ 278,250
6,600 *Regeneron Pharmaceuticals
Inc. ......................... 70,125
2,700 *Roberts Pharmaceutical Corp. .. 33,413
4,300 *SangStat Medical Corp. ........ 107,500
7,100 *Sepracor Inc. ................. 173,950
9,300 *SEQUUS Pharmaceuticals, Inc. .. 65,681
6,500 *Somatogen, Inc. ............... 35,750
4,500 *Vertex Pharmaceuticals Inc. ... 182,250
2,150 *Vitalink Pharmacy Services,
Inc. ......................... 41,119
4,600 *Vivus Inc. .................... 188,025
9,100 *Xoma Corp. .................... 46,638
-----------
5,731,299
-----------
ELECTRICAL EQUIPMENT - 2.05%
10,800 AMETEK, Inc. .................. 252,450
12,300 *Anixter International, Inc. ... 209,100
1,200 *Applied Digital Access, Inc. .. 7,500
2,400 *Applied Innovation Inc. ....... 14,400
7,157 *BancTec, Inc. ................. 180,714
7,000 Belden Inc. ................... 254,625
1,200 *Brite Voice Systems, Inc. ..... 10,050
3,950 *C-COR Electronics, Inc. ....... 38,513
4,600 *Cable Design Technologies
Corp. ........................ 126,500
4,300 *California Microwave, Inc. .... 52,675
7,233 *Chyron Corp. .................. 33,453
5,000 *Computer Products, Inc. ....... 111,250
4,900 *Digital Microwave Corp. ....... 151,900
3,475 *Electro Rent Corp. ............ 79,925
3,400 *Energy Conversion Devices,
Inc. 51,850
3,600 *Esterline Technologies Corp. .. 108,450
5,300 *Executive Telecard Ltd. ....... 38,425
700 *Franklin Electronic
Publishers, Inc. ............. 7,088
1,500 *Galileo Corp. ................. 10,500
6,900 *GenRad, Inc. .................. 128,512
ELECTRICAL EQUIPMENT - Continued
2,800 *Holophane Corp. ............... $ 59,500
4,400 *Hutchinson Technology Inc. .... 121,000
2,800 *Identix, Inc. ................. 28,350
5,400 *Integrated Silicon Solution,
Inc. ......................... 52,650
10,500 *Intergraph Corp. .............. 74,156
1,200 *Jabil Circuit, Inc. ........... 70,275
4,800 Juno Lighting, Inc. ........... 76,800
9,100 *Kemet Corp. ................... 230,912
5,500 *Kent Electronics Corp. ........ 178,750
2,000 Kuhlman Corporation ........... 55,250
3,100 *Littelfuse, Inc. .............. 160,425
3,500 *Semitool, Inc. ................ 43,312
9,200 *Sierra Semiconductor Corp. .... 221,950
4,800 Standex International Corp. ... 130,800
593 *Sulcus Computer Corp. ......... 1,038
5,200 *TCSI Corp. .................... 33,800
1,200 *Thermo Ecotek Corp. ........... 19,200
1,100 Thomas Industries Inc. ........ 30,938
4,200 *Uniphase Corp. ................ 220,500
7,000 *Vicor Corp. ................... 138,250
5,100 X-Rite, Inc. .................. 94,987
1,800 *Zytec Corp. ................... 31,950
-----------
3,942,673
-----------
ELECTRONIC INSTRUMENTS - 2.68%
10,000 *Ampex Corp. ................... 64,375
3,150 Analogic Corp. ................ 102,769
6,200 *Applied Magnetics Corp. ....... 154,225
2,700 *Berg Electronics Corp. ........ 93,825
6,400 BMC Industries, Inc. .......... 210,400
8,500 *Cognex Corp. .................. 221,531
2,000 CTS Corp. ..................... 138,000
5,400 Daniel Industries, Inc. ....... 72,225
3,300 *Dionex Corp. .................. 174,900
4,600 *Dynatech Corp. ................ 172,500
2,400 *Eltron International, Inc. .... 65,400
4,000 *Evans & Sutherland Computer
Corp. ........................ 105,000
4,600 *Exabyte Corp. ................. 64,975
1,600 Fluke Corp. ................... 79,800
7,800 *Gentex Corp. .................. 156,975
5,500 *Genus, Inc. ................... 31,625
6,300 Gerber Scientific, Inc. ....... 118,912
2,200 *HADCO Corp. ................... 132,137
4,575 Harman International
Industries, Inc. ............. 191,006
</TABLE>
<PAGE> 122
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 23
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
ELECTRONIC INSTRUMENTS - Continued
3,600 *Harmonic Lightwaves, Inc. ..... $ 59,400
5,300 *IMP, Inc. ..................... 9,275
18,400 *Integrated Device Technology,
Inc. ......................... 258,750
12,000 *InterDigital Communications
Corp. ........................ 79,500
1,400 *ITI Technologies, Inc. ........ 22,400
5,850 *Lattice Semiconductor Corp. ... 339,300
8,300 *LoJack Corp. .................. 96,487
10,200 *LTX Corp. ..................... 62,475
7,700 *MagneTek, Inc. ................ 134,750
4,400 *Marshall Industries ........... 160,050
9,850 Methode Electronics, Inc.
Class A ...................... 166,219
5,100 National Computer Systems,
Inc. ......................... 128,775
5,400 *Nimbus CD International,
Inc. ......................... 60,750
3,300 Park Electrochemical Corp. .... 82,913
4,200 *Performance Food Group Co. .... 87,150
8,237 Pioneer-Standard Electronics,
Inc. ......................... 101,933
5,100 *Robotic Vision Systems, Inc. .. 59,288
5,700 *Standard Microsystems Corp. ... 51,300
400 Technitrol, Inc. .............. 10,000
6,200 Telxon Corp. .................. 114,894
6,400 *3DO Co. ....................... 28,800
4,200 *Tracor, Inc. .................. 106,575
5,800 *Waters Corp. .................. 187,050
2,900 Watkins-Johnson Co. ........... 91,713
4,000 Wyle Electronics .............. 148,000
5,100 ZERO Corp. .................... 117,300
1,600 *Zygo Corp. .................... 46,400
-----------
5,162,027
-----------
ENTERTAINMENT - 0.56%
800 *AMC Entertainment, Inc. ....... 18,400
3,800 *Argosy Gaming Co. ............. 11,875
79 *Autotote Corp. Class A ........ 89
11,000 *Aztar Corp. ................... 77,000
2,200 *BET Holdings, Inc. Class A .... 70,675
1,800 *Carmike Cinemas, Inc. ......... 62,550
2,300 *GC Companies, Inc. ............ 97,750
3,000 Harveys Casino Resorts ........ 50,625
6,700 *Hollywood Entertainment Corp. . 134,837
3,900 NN Ball & Roller, Inc. ........ 45,338
3,000 *Penn National Gaming, Inc. .... 54,000
3,300 *Playboy Enterprises Inc.
Class B ...................... 38,775
3,300 *Primadonna Resorts, Inc. ...... 72,600
2,100 *Recoton Corp. ................. 26,775
5,925 *Regal Cinemas, Inc. ........... 194,784
ENTERTAINMENT - Continued
1,150 *Shuffle Master, Inc. .......... $ 9,631
3,400 *Sodak Gaming, Inc. ............ 49,938
5,900 *Toy Biz, Inc. Class A ......... 52,362
-----------
1,068,004
-----------
FERTILIZERS - 0.20%
8,065 Delta & Pine Land Co. ......... 244,974
6,504 Mississippi Chemical Corp. .... 147,966
-----------
392,940
-----------
FINANCE COMPANIES - 0.62%
5,300 Aames Financial Corp. ......... 68,238
3,400 *Amresco, Inc. ................. 59,925
1,300 *Cityscape Financial Corp. ..... 18,850
5,400 *Credit Acceptance Corp. ....... 76,275
2,000 *FIRSTPLUS Financial Group,
Inc. ......................... 51,000
5,734 *Imperial Credit Industries,
Inc. ......................... 108,229
9,150 Keystone Financial, Inc. ...... 272,212
7,300 Phoenix Duff & Phelps Corp. ... 54,750
140 Phoenix Duff & Phelps Corp.
(Preferred) .................. 3,570
3,100 Reliance Acceptance Group,
Inc. ......................... 17,825
1,900 Sirrom Capital Corp. .......... 73,863
2,000 Student Loan Corp. ............ 76,500
5,000 U. S. Trust Corp. ............. 235,000
2,530 *WFS Financial, Inc. ........... 32,890
1,200 Winthrop Resources Corp. ...... 38,250
-----------
1,187,377
-----------
FOODS - 1.28%
7,400 Chiquita Brands International . 113,775
9,200 Dean Foods Co. ................ 349,600
3,200 Dreyer's Grand Ice Cream,
Inc. ......................... 117,600
2,000 Earthgrains Co. ............... 114,000
22,275 Flowers Industries, Inc. ...... 392,597
5,550 Hudson Foods, Inc. Class A .... 88,106
4,100 International Multifoods Corp. 115,825
9,800 J.M. Smucker Co. Class A ...... 189,875
2,300 *JP Foodservice, Inc. .......... 66,700
4,200 Lance, Inc. ................... 82,950
8,400 M & F Worldwide Corp. ......... 65,100
3,200 Michael Foods, Inc. ........... 45,400
3,700 *Morningstar Group Inc. ........ 97,125
3,400 *NBTY, Inc. .................... 79,900
2,000 Northland Cranberries, Inc. ... 26,000
FOODS - Continued
1,100 Pilgrims Pride Corp. .......... $ 13,750
8,000 *Ralcorp Holdings, Inc. ........ 97,000
4,667 Tootsie Roll Industries,
Inc. ......................... 225,183
5,300 Universal Foods Corp. ......... 190,137
-----------
2,470,623
-----------
FOOTWEAR - 0.52%
4,400 Brown Group, Inc. ............. 79,200
6,150 *Just For Feet Inc. ............ 120,694
8,000 Justin Industries, Inc. ....... 95,000
3,400 *Kenneth Cole Productions, Inc.
Class A ...................... 53,975
13,000 Stride Rite Corp. ............. 198,250
2,100 *Timberland Co. Class A ........ 123,112
12,488 Wolverine World Wide, Inc. .... 323,114
-----------
993,345
-----------
FREIGHT - 0.68%
4,100 Air Express International Corp. 149,650
3,900 Airborne Freight Corp. ........ 149,175
8,200 APL Ltd. ...................... 248,050
2,500 *Eagle USA Airfreight, Inc. .... 50,625
10,200 *Greyhound Lines, Inc. ......... 42,713
5,400 Interpool, Inc. ............... 75,600
5,500 J.B. Hunt Transport Services,
Inc. ......................... 83,875
6,300 *Kirby Corp. ................... 118,912
10,700 *OMI Corp. ..................... 102,988
9,700 Overseas Shipholding Group
Inc. ......................... 183,087
2,100 *SEACOR Holdings, Inc. ......... 108,675
-----------
1,313,350
-----------
GOLD MINING - 0.45%
12,800 *Amax Gold Inc. ................ 84,800
64,700 Battle Mountain Gold Co. ...... 396,288
5,600 Coeur d'Alene Mines Corp. ..... 76,300
6,630 *Getchell Gold Corp. ........... 264,371
65,500 *Sunshine Mining Co. ........... 53,219
-----------
874,978
-----------
HARDWARE & TOOLS - 0.08%
600 Barnes Group, Inc. ............ 16,125
2,500 *Barnett, Inc. ................. 55,625
3,200 Lawson Products, Inc. ......... 80,000
-----------
151,750
-----------
</TABLE>
<PAGE> 123
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24 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
HEALTHCARE - 2.60%
4,300 *Access Health, Inc. ........... $ 94,600
11,300 *Advanced Tissue Sciences,
Inc. ......................... 145,488
10,700 *American Oncology Resources,
Inc. ......................... 151,137
2,400 *Arbor Health Care Co. ......... 68,400
2,536 Block Drug Co., Inc. Class A .. 112,535
4,100 Collagen Corp. ................ 69,700
8,300 *Coram Healthcare Corp. ........ 22,825
2,800 *Curative Technologies, Inc. ... 77,875
8,902 *CYTOGEN Corp. ................. 50,074
8,300 *Genesis Health Ventures,
Inc. ......................... 272,862
4,500 *GranCare, Inc. ................ 41,625
12,462 *Horizon/CMS Healthcare Corp. .. 227,431
5,800 Integrated Health Services,
Inc. ......................... 208,800
6,600 Invacare Corp. ................ 141,900
2,300 Kinetic Concepts, Inc. ........ 37,950
17,000 *Laboratory Corp. of America
Holdings ..................... 48,875
1,383 *Laboratory Corp. of America
Holdings (Rights) ............ 11,062
3,400 *LCA-Vision, Inc. .............. 14,025
3,600 *Living Centers of America,
Inc. ......................... 137,250
7,400 *Mariner Health Group, Inc. .... 88,800
5,500 *Matria Healthcare, Inc. ....... 24,063
5,500 *Maxicare Health Plans Inc. .... 132,000
7,300 Mentor Corp. .................. 192,537
5,100 *Multicare Companies, Inc. ..... 126,863
1,500 *National Surgery Centers,
Inc. ......................... 57,750
16,500 *NovaCare, Inc. ................ 208,312
3,750 *Patterson Dental Co. .......... 129,375
4,499 *Pharmaceutical Product
Development, Inc. ............ 86,043
3,000 *PHP Healthcare Corp. .......... 45,375
8,300 *Physician Corp. of America .... 59,138
3,000 *Physicians Health Services,
Inc. Class A ................. 79,125
4,300 *Regency Health Services,
Inc. ......................... 52,675
6,600 *Renal Treatment Centers Inc. .. 189,750
1,800 *ReSound Corp. ................. 8,775
3,300 *Respironics Inc. .............. 66,825
1,000 *RightCHOICE Managed Care, Inc.
Class A ...................... 11,750
6,600 *RoTech Medical Corp. .......... 111,375
2,300 *Rural/Metro Corp. ............. 73,600
5,000 *Sierra Health Services, Inc. .. 155,625
4,400 *SpaceLabs Medical, Inc. ....... 98,450
HEALTHCARE - Continued
1,000 *Summit Care Corp. ............. $ 12,000
10,488 *Sun Healthcare Group, Inc. .... 175,674
5,500 *Sunrise Medical Inc. .......... 70,813
3,850 *TECNOL Medical Products,
Inc. ......................... 74,113
11,493 *Transitional Hospitals Corp. .. 182,451
8,700 *Universal Health Services, Inc.
Class B ...................... 352,350
5,000 *Veterinary Centers of America,
Inc. ......................... 61,250
3,500 *VISX, Inc. .................... 103,250
2,300 Vital Signs, Inc. ............. 45,713
-----------
5,010,234
-----------
HEAVY DUTY TRUCKS/PARTS - 0.25%
800 Cascade Corp. ................. 13,500
4,000 *Detroit Diesel Corp. .......... 88,000
16,600 *Navistar International Corp. .. 275,975
4,450 Wabash National Corp. ......... 98,456
-----------
475,931
-----------
HOME BUILDERS - 0.76%
1,250 Cavalier Homes, Inc. .......... 14,063
7,600 Centex Corp. .................. 303,050
3,300 Continental Homes Holding
Corp. ........................ 54,037
7,905 D R Horton Inc. ............... 76,086
6,600 Del Webb Corp. ................ 100,650
10,200 Kaufman & Broad Home Corp. .... 153,000
5,300 *NVR Inc. ...................... 81,819
3,500 *Palm Harbor Homes, Inc. ....... 98,875
5,900 Pulte Corp. ................... 186,587
4,200 Ryland Group, Inc. ............ 54,600
10,200 Standard Pacific Corp. ........ 104,550
6,200 *Toll Brothers, Inc. ........... 113,150
4,370 *U. S. Home Corp. .............. 115,259
-----------
1,455,726
-----------
HOSPITAL MANAGEMENT - 0.65%
4,500 *ABR Information Services,
Inc. ......................... 144,562
1,700 *Coastal Physician Group Inc. .. 1,594
7,500 *Coventry Corp. ................ 109,219
2,900 *EmCare Holdings Inc. .......... 87,000
1,900 *Enterprise Systems, Inc. ...... 55,219
3,700 *Equimed, Inc. ................. 12,141
5,000 *Health Management Systems,
Inc. ......................... 28,125
52 *Hospital Staffing Services,
Inc. ......................... 123
4,100 *Inphynet Medical Management,
Inc. ......................... 89,175
HOSPITAL MANAGEMENT - Continued
7,100 *Magellan Health Services,
Inc. ......................... $ 193,475
2,000 *MedCath Inc. .................. 30,250
6,600 *OccuSystems, Inc. ............. 173,250
5,500 *Orthodontic Centers of America
Inc. ......................... 92,125
3,000 *Pediatrix Medical Group ....... 119,250
4,400 *Physicians Resource Group,
Inc. ......................... 51,700
3,800 *Prime Medical Services, Inc. .. 42,275
6,400 *Transcend Services, Inc. ...... 25,600
-----------
1,255,083
-----------
HOSPITAL SUPPLIES - 1.32%
5,700 *Acuson Corp. .................. 148,200
3,400 *Advanced Technology
Laboratories, Inc. ........... 131,750
2,100 Arrow International, Inc. ..... 67,725
1,400 *ArthroCare Corp. .............. 10,675
7,000 Ballard Medical Products ...... 134,750
11,200 *Bio-Technology General Corp. .. 162,400
3,531 *Boston Scientific Corp. ....... 188,467
3,500 *Coherent, Inc. ................ 153,125
2,700 *CONMED Corp. .................. 50,625
5,200 *Datascope Corp. ............... 98,800
3,600 Diagnostic Products Corp. ..... 107,550
3,700 *Gulf South Medical Supply,
Inc. ......................... 73,075
3,250 *Healthdyne Technologies Inc. .. 47,937
3,600 *ICU Medical, Inc. ............. 31,950
7,800 *Immunomedics, Inc. ............ 41,437
8,100 *Isis Pharmaceuticals, Inc. .... 127,575
600 Landauer, Inc. ................ 13,650
4,900 *Marquette Medical Systems ..... 112,700
4,400 Meridian Diagnostics, Inc. .... 37,400
2,100 *MiniMed, Inc. ................. 52,500
3,900 *OrthoLogic Corp. .............. 22,913
2,000 *Ostex International, Inc. ..... 4,000
9,750 Owens & Minor, Inc. ........... 123,094
165 *PerSeptive Biosystems Inc. .... 1,052
93 *PerSeptive Biosystems Inc.
(Warrants) ................... 105
3,200 *Physio-Control International
Corp. ........................ 40,800
2,800 *Protocol Systems, Inc. ........ 21,350
3,400 *Safeskin Corp. ................ 85,425
3,000 *St. Jude Medical, Inc. ........ 101,625
9,500 *Summit Technology, Inc. ....... 73,031
1,800 *TECHNE Corp. .................. 49,725
3,600 *Theragenics Corp. ............. 80,100
</TABLE>
<PAGE> 124
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May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 25
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
HOSPITAL SUPPLIES - Continued
8,000 *Uromed Corp. .................. $ 38,000
3,800 West Co., Inc. ................ 112,100
-----------
2,545,611
-----------
HOUSEHOLD PRODUCTS - 0.71%
3,100 Church & Dwight Co., Inc. ..... 82,150
3,900 *Culligan Water Technologies,
Inc. ......................... 173,550
5,300 Libbey Inc. ................... 176,887
4,050 Pittway Corp. Class A ......... 214,650
13,900 Premark International Inc. .... 378,775
9,750 Rykoff-Sexton, Inc. ........... 186,469
4,700 Stanhome Inc. ................. 147,463
1,100 *USA Detergents, Inc. .......... 14,300
-----------
1,374,244
-----------
HUMAN RESOURCES - 0.18%
2,400 *COREStaff, Inc. ............... 57,000
5,800 *Employee Solutions, Inc. ...... 30,813
4,200 *Interim Services Inc. ......... 163,800
3,300 *Personal Group of America,
Inc. ......................... 100,238
-----------
351,851
-----------
INFORMATION PROCESSING - 7.56%
2,100 *ACT Networks, Inc. ............ 37,013
3,200 *Activision, Inc. .............. 41,600
4,333 *ADAC Laboratories ............. 112,658
5,400 *Affiliated Computer Services,
Inc. Class A ................. 143,100
3,400 *Amisys Managed Care Systems
Inc. ......................... 74,800
3,800 Analysts International Corp. .. 137,750
3,100 *Applix, Inc. .................. 13,950
2,500 *Arbor Software Corp. .......... 74,375
4,400 *Aspen Technologies, Inc. ...... 168,300
11,503 *AST Research, Inc. ............ 60,391
4,600 *Astea International, Inc. ..... 14,950
7,900 *Auspex Systems, Inc. .......... 81,962
4,308 *Avant! Corp. .................. 99,084
2,000 *Barra, Inc. ................... 59,000
6,600 *BBN Corp. ..................... 190,575
6,800 *BDM International.............. 176,800
2,400 *Bell & Howell Co. ............. 64,200
5,800 *BISYS Group, Inc. ............. 221,125
5,400 *Black Box Corp. ............... 190,350
6,025 *Boole & Babbage, Inc. ......... 125,019
10,100 *Borland International, Inc. ... 73,225
INFORMATION PROCESSING - Continued
7,100 *Boston Technology, Inc. ....... $ 204,125
1,300 *BRC Holdings, Inc. ............ 48,750
5,400 *Broderbund Software Inc. ...... 135,675
3,300 *Brooktrout Technology, Inc. ... 44,550
2,295 *Cadence Design Systems, Inc. .. 76,309
3,300 *Caere Corp. ................... 27,225
4,200 *Centennial Technologies,
Inc. ......................... 12,075
340 *Centura Software Corp. ........ 510
4,900 *Cerner Corp. .................. 95,550
6,700 *Checkfree Corp. ............... 117,250
2,600 *Ciber, Inc. ................... 107,575
6,800 *Citrix Systems, Inc. .......... 255,850
2,200 *Clarify, Inc. ................. 26,675
1,100 *COMFORCE Corp. ................ 6,463
4,750 *Computer Horizons Corp. ....... 264,812
800 Computer Language Research,
Inc. ......................... 8,750
1,150 *Computer Management Sciences,
Inc. ......................... 23,000
7,000 *Computer Network Technology
Corp. ........................ 33,688
1,100 Computer Task Group, Inc. ..... 67,237
14,900 *Computervision Corp. .......... 72,637
1,600 *ComShare, Inc. ................ 22,000
5,600 *Comverse Technology, Inc. ..... 256,200
3,700 *Control Data Systems, Inc. .... 54,112
15,900 *CopyTele, Inc. ................ 82,481
800 *CSG Systems International,
Inc. ......................... 19,000
1,000 *Cybercash, Inc. ............... 13,000
11,400 *Data General Corp. ............ 243,675
800 *Data Translation, Inc. ........ 3,000
2,700 *Dialogic Corp. ................ 78,975
6,900 *Diamond Multimedia Systems,
Inc. ......................... 55,200
1,900 *Documentum, Inc. .............. 37,288
7,100 *Egghead, Inc. ................. 33,281
4,200 *Envoy Corp. ................... 126,525
3,600 *Excalibur Technologies Corp. .. 15,750
1,300 Fair Issac & Co., Inc. ........ 51,350
4,000 *FileNet Corp. ................. 66,500
202 First Data Corp. .............. 8,080
6,500 *FTP Software, Inc. ............ 36,563
6,800 *General DataComm Industries,
Inc. ......................... 61,200
3,900 *Geoworks ...................... 24,375
2,700 *Harbinger Corp. ............... 83,700
800 *HCIA, Inc. .................... 19,800
4,350 Henry Jack & Associates ....... 97,331
3,700 *HMT Technology Corp. .......... 49,487
INFORMATION PROCESSING - Continued
4,800 *HNC Software, Inc. ............ $ 158,400
5,700 *Hyperion Software Corp. ....... 102,600
2,000 *IDX Systems Corp. ............. 64,500
3,000 *IKOS Systems, Inc. ............ 74,250
3,300 *Imnet Systems, Inc. ........... 82,500
3,100 *In Focus Systems, Inc. ........ 80,600
1,200 *Individual, Inc. .............. 6,675
10,000 *Information Resources, Inc. ... 150,000
2,600 *Inso Corp. .................... 73,125
700 *Integrated Measurment Systems,
Inc. ......................... 11,725
3,200 *Integrated Systems, Inc.
Class A ...................... 46,400
7,200 *INTERSOLV, Inc. ............... 71,100
700 *JDA Software Group, Inc. ...... 19,425
8,600 *Keane, Inc. ................... 484,825
1,300 *Kronos, Inc. .................. 33,800
3,000 *Learning Tree International,
Inc. ......................... 117,000
4,900 *Legato Systems, Inc. .......... 98,000
2,500 *Manugistics Group, Inc. ....... 162,500
3,200 *Media 100 Inc. ................ 18,400
5,800 *Mercury Interactive Corp. ..... 101,500
1,300 MetaCreations, Inc. ........... 15,600
14,200 *Microchip Technology, Inc. .... 504,100
1,400 *MICROS Systems Inc. ........... 55,650
1,600 *Microware Systems Corp. ....... 12,400
4,200 MTS Systems Corp. ............. 108,675
3,800 *Mylex Corp. ................... 37,525
6,650 National Data Corp. ........... 291,769
3,600 *National Instruments Corp. .... 119,250
2,300 *NETCOM On-Line Communication
Services, Inc. ............... 32,631
9,900 *NetManage, Inc. ............... 34,031
4,500 *Network Appliance, Inc. ....... 182,531
4,100 *Network Peripherals, Inc. ..... 39,463
9,200 *Oak Technology, Inc. .......... 86,250
3,100 *ODS Networks Inc. ............. 50,181
4,316 *Paxar Corp. ................... 83,083
2,600 *Perceptron, Inc. .............. 73,450
1,900 *Periphonics Corp. ............. 35,388
4,700 *Phoenix Technologies Ltd. ..... 65,212
6,200 *Physician Computer Network,
Inc. ......................... 35,650
1,100 *Pinnacle Systems, Inc. ........ 20,075
800 *Planar Systems, Inc. .......... 9,500
333 *Platinum Software Corp. ....... 3,018
11,600 *PLATINUM technology, Inc. ..... 168,200
</TABLE>
<PAGE> 125
================================================================================
26 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
INFORMATION PROCESSING - Continued
6,400 *PMT Services, Inc. ............ $ 102,400
3,400 *Policy Management Systems
Corp. ........................ 161,500
2,900 *Premenos Technology Corp. ..... 19,575
5,800 *Primark Corp. ................. 137,750
1,200 *Prism Solutions, Inc. ......... 8,400
4,400 *Progress Software Corp. ....... 77,000
2,300 *Project Software &
Development, Inc. ............ 44,562
7,800 *PsiNet, Inc. .................. 58,987
7,470 *Pure Atria Corp. .............. 119,520
6,600 *Quarterdeck Corp. ............. 17,738
1,900 *RadiSys Corp. ................. 69,825
2,300 *Red Brick Systems, Inc. ....... 20,269
3,600 *Remedy Corp. .................. 145,350
1,400 *Renaissance Solutions, Inc. ... 51,800
12,300 *S3, Inc. ...................... 150,675
2,700 *Sandisk Corp. ................. 38,813
1,900 *Santa Cruz Operation, Inc. .... 8,550
400 *Sapient Corp. ................. 17,900
2,700 *Scopus Technology, Inc. ....... 81,506
9,700 *Sequent Computer Systems,
Inc. ......................... 163,687
3,800 *SMART Modular Technologies,
Inc. ......................... 128,250
4,900 *Smith Micro Software, Inc. .... 15,925
5,100 *Spectrum HoloByte, Inc. ....... 32,513
2,700 *SPSS, Inc. .................... 87,075
8,100 *Stac, Inc. .................... 33,413
1,000 *Storage Computer Corp. ........ 13,625
3,700 *StorMedia, Inc. Class A ....... 43,937
5,800 *Stratus Computer, Inc. ........ 265,350
10,100 *Structural Dynamics Research
Corp. ........................ 247,450
13,100 *Symantec Corp. ................ 249,719
5,000 *Sync Research, Inc. ........... 20,938
7,350 *System Software Associates,
Inc. ......................... 67,987
3,600 *Systems & Computer
Technology Corp. ............. 86,400
4,000 *Systemsoft Corp. .............. 48,000
9,400 *Tech Data Corp. ............... 278,475
5,300 *Technology Solutions Co. ...... 192,125
6,200 *Transaction Systems Architects,
Inc. Class A ................. 260,400
4,200 *Trident Microsystems, Inc. .... 60,375
5,100 *Tseng Labs, Inc. .............. 19,763
1,600 *USDATA Corp., Inc. ............ 7,800
5,000 *Vanstar Corp. ................. 50,000
3,200 *Vantive Corp. ................. 86,000
INFORMATION PROCESSING - Continued
3,200 *Veritas Software Corp. ........ $ 159,200
4,600 *Viasoft, Inc. ................. 243,800
4,100 *VideoServer, Inc. ............. 71,237
6,300 *Viewlogic Systems, Inc. ....... 94,500
1,600 *Visio Corp. ................... 92,000
5,800 *Visioneer Communications Inc. . 20,300
3,100 *Wall Data, Inc. ............... 77,500
8,500 *Wang Laboratories, Inc. ....... 174,250
3,150 *Wind River Systems Inc. ....... 107,100
3,200 *Wonderware Corp. .............. 43,800
6,600 *Workgroup Technology Corp. .... 28,875
5,500 *Xircom, Inc. .................. 79,664
1,800 *Yahoo!, Inc. .................. 58,050
5,000 *Zebra Technologies Corp.
Class A ...................... 153,750
-----------
14,544,116
-----------
INSURANCE - CASUALTY - 1.27%
3,000 *Acceptance Insurance
Companies, Inc. .............. 63,000
900 Baldwin & Lyons, Inc.
Class B ...................... 15,750
4,000 *Capsure Holdings Corp. ........ 50,000
3,500 Citizens Corp. ................ 88,813
6,600 Commerce Group, Inc. .......... 148,500
2,600 E.W. Blanch Holdings, Inc. .... 64,350
3,485 Frontier Insurance Group,
Inc. ......................... 191,239
4,473 Gainsco, Inc. ................. 36,902
6,400 HCC Insurance Holdings, Inc. .. 167,200
1,700 *Highlands Insurance Group,
Inc. ......................... 34,000
3,900 NAC Re Corp. .................. 155,512
200 Nymagic, Inc. ................. 3,875
3,181 Orion Capital Corp. ........... 212,729
16,100 Reliance Group Holdings Inc. .. 197,225
7,600 *RISCORP, Inc. ................. 27,550
5,800 *Risk Capital Holdings, Inc. ... 110,200
900 RLI Corp. ..................... 28,688
3,800 Selective Insurance Group,
Inc. ......................... 168,150
3,150 Trenwick Group Inc. ........... 106,313
10,200 20th Century Industries ....... 196,350
1,405 United Fire & Casualty Co. .... 50,580
5,700 Vesta Insurance Group, Inc. ... 261,487
1,600 Zurich Reinsurance Centre
Holdings, Inc. ............... 62,200
-----------
2,440,613
-----------
INSURANCE - LIFE - 0.58%
450 American Heritage Life Investment
Corp. ........................ $ 13,050
2,000 *Compdent Corp. ................ 36,250
300 Kansas City Life Insurance Co. 21,750
7,100 *Life USA Holding, Inc. ........ 85,644
500 *National Western Life
Insurance Co. Class A ........ 43,500
6,500 Presidential Life Corp. ....... 93,437
3,700 Reinsurance Group of
America Inc. ................. 199,800
435 Seafield Capital Corp. ........ 14,029
2,200 Security-Connecticut Corp. .... 106,975
7,600 *UICI........................... 204,250
6,870 United Companies Financial
Corp. ........................ 157,151
2,800 W.R. Berkley Corp. ............ 145,250
-----------
1,121,086
-----------
INSURANCE - MISCELLANEOUS - 1.42%
3,600 Acordia, Inc. ................. 127,800
5,175 ALLIED Group, Inc. ............ 205,706
6,800 *Amerin Corp. .................. 159,800
3,600 Arthur J. Gallagher & Co. ..... 114,300
3,700 Capital Re Corp. .............. 162,338
6,800 CMAC Investment Corp. ......... 283,050
10,300 Crawford & Co. Class B ........ 169,950
3,600 Executive Risk Inc. ........... 187,650
3,877 Fidelity National Financial,
Inc. ......................... 49,916
2,900 Foremost Corp. of America ..... 163,850
5,512 Fremont General Corp. ......... 193,609
1,770 Guaranty National Corp. ....... 38,055
3,300 Harleysville Group ............ 120,450
4,300 Hartford Steam Boiler
Inspection & Insurance Co. ... 219,300
2,250 Hilb, Rogal & Hamilton Co. .... 33,188
4,200 Integon Corp. ................. 52,500
3,900 Liberty Corp. ................. 155,025
9,200 *Mid Atlantic Medical
Services, Inc. ............... 118,450
2,200 MMI Companies, Inc. ........... 52,250
525 Poe & Brown Inc. .............. 15,750
4,100 Zenith National Insurance
Corp. ........................ 102,500
-----------
2,725,437
-----------
INSURANCE - MULTILINE - 0.98%
2,450 Alfa Corp. .................... 30,625
4,678 American Annuity Group, Inc. .. 87,128
</TABLE>
<PAGE> 126
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 27
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
INSURANCE - MULTILINE - Continued
5,500 American Bankers Insurance
Group, Inc. .................. $ 312,125
5,700 AmVestors Financial Corp. ..... 100,462
3,300 Argonaut Group, Inc. .......... 97,350
3,427 *Delphi Financial Group, Inc. .. 130,234
5,400 Horace Mann Educators Corp. ... 260,550
5,300 John Alden Financial Corp. .... 112,625
3,700 Life Re Corp. ................. 159,100
550 *Markel Corp. .................. 68,200
2,000 Meadowbrook Insurance Group,
Inc. ......................... 49,000
2,272 Medican Assum Inc. ............ 86,336
5,900 PennCorp Financial Group,
Inc. ......................... 201,337
1,700 United Wisconsin Services,
Inc. ......................... 60,563
4,900 *Washington National Corp. ..... 137,200
-----------
1,892,835
-----------
LEISURE TIME - 0.73%
6,500 *Acclaim Entertainment, Inc. ... 26,813
3,300 *Action Performance Companies,
Inc. ......................... 79,406
4,800 *Ameristar Casinos ............. 25,800
2,300 *Anchor Gaming ................. 97,750
400 *Bally's Grand, Inc. ........... 15,700
4,100 *Boyd Gaming Corp. ............. 24,088
2,682 *Casino America, Inc. .......... 6,286
10,700 *Casino Magic Corp. ............ 15,047
12,500 *Handleman Co. ................. 82,812
6,400 *Hollywood Park, Inc. .......... 89,600
5,000 Huffy Corp. ................... 65,000
3,100 Lewis Galoob Toys, Inc. ....... 55,800
5,200 *Outboard Marine Corp. ......... 76,700
7,500 *Players International, Inc. ... 29,062
5,600 Polaris Industries, Inc. ...... 165,900
5,600 *Rio Hotel & Casino Inc. ....... 81,900
4,800 *Scotts Co. Class A ............ 140,400
5,600 Showboat Inc. ................. 110,600
2,200 *Station Casinos, Inc. ......... 19,525
4,900 *Trump Hotels & Casino
Resorts, Inc. ................ 47,775
1,900 Winnebago Industries, Inc. .... 13,063
6,500 *WMS Industries Inc. ........... 134,875
-----------
1,403,902
-----------
LODGING - 0.52%
4,400 *Bristol Hotel Co. ............. 161,700
9,542 *Doubletree Corp. .............. 427,004
7,400 *Extended Stay America, Inc. ... 102,675
LODGING - Continued
3,900 *Host Marriott Services Corp. .. $ 39,000
2,993 Marcus Corp. .................. 73,329
10,100 *Prime Hospitality Corp. ....... 188,112
1,625 *WHG Resorts & Casinos Inc. .... 17,063
-----------
1,008,883
-----------
MACHINE TOOLS - 0.54%
10,400 Cincinnati Milacron Inc. ...... 240,500
7,000 Giddings & Lewis, Inc. ........ 132,672
2,000 Gleason Corp. ................. 74,250
5,000 Greenfield Industries ......... 130,000
5,600 Lincoln Electric Co. .......... 219,100
2,200 *PRI Automation Inc. ........... 83,875
3,400 Roper Industries, Inc. ........ 167,025
-----------
1,047,422
-----------
MACHINERY - AGRICULTURE - 0.16%
1,500 Allied Products Corp. ......... 48,750
2,700 Lindsay Manufacturing Co. ..... 97,200
4,100 Toro Co. ...................... 153,750
-----------
299,700
-----------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.62%
1,100 *American Buildings Co. ........ 31,075
1,900 Blount, Inc. Class A .......... 78,375
3,700 CDI Corp. ..................... 149,387
4,400 Granite Construction, Inc. .... 88,000
5,345 *Insituform Technologies
Class A ...................... 32,070
3,900 *J. Ray McDermott, S.A ......... 106,275
5,500 *Jacobs Engineering Group,
Inc. ......................... 147,813
8,200 Kaman Corp. Class A ........... 112,238
7,100 Lennar Corp. .................. 186,375
3,522 *Morrison Knudsen Corp. ........ 44,465
6 *Morrison Knudsen Corp.
(Warrants).................... 38
3,000 Stone & Webster, Inc. ......... 128,625
3,900 TJ International Inc. ......... 91,163
-----------
1,195,899
-----------
MACHINERY - INDUSTRIAL/
SPECIALTY - 2.38%
4,900 AAR Corp. ..................... 151,900
3,700 *ABC Rail Products Corp. ....... 61,050
6,100 Aeroquip-Vickers, Inc. ........ 264,587
MACHINERY - INDUSTRIAL/
SPECIALTY - Continued
8,800 Albany International Corp.
Class A ...................... $ 200,200
3,225 Applied Power Inc. Class A .... 141,900
7,480 Baldor Electric Co. ........... 209,440
3,300 *Burlington Coat Factory
Warehouse .................... 58,988
9,000 BW/IP, Inc. Class A ........... 172,125
3,000 *DII Group, Inc. ............... 95,250
6,350 Durco International, Inc. ..... 179,387
4,600 Exide Corp. ................... 100,625
3,000 *GaSonics International Corp. .. 35,625
475 General Binding Corp. ......... 14,013
2,000 Graco Inc. .................... 56,000
2,400 Greenwich Air Services, Inc. .. 69,300
2,700 Helix Technology Corp. ........ 109,350
2,200 Hughes Supply Inc. ............ 84,150
6,750 IDEX Corp. .................... 191,531
3,300 *Insilco Corp. ................. 124,162
4,300 *Integrated Process
Equipment Corp. .............. 79,013
3,200 *International Imaging
Materials, Inc. .............. 56,000
3,700 *Ionics, Inc. .................. 176,675
7,900 Keystone International, Inc. .. 257,737
6,300 *Kulicke & Soffa
Industries Inc. .............. 212,625
5,050 Lilly Industries, Inc.
Class A ...................... 106,050
4,250 Manitowoc Co., Inc. ........... 190,187
4,040 *Oak Industries Inc. ........... 99,990
1,500 *Ortel Corp. ................... 20,438
900 *Osmonics, Inc. ................ 14,738
5,100 Pacific Scientific Co. ........ 68,213
3,500 *Park-Ohio Industries Inc. ..... 45,500
7,300 Regal-Beloit Corp. ............ 194,362
800 Robbins & Myers, Inc. ......... 27,500
1,300 Scotsman Industries Inc. ...... 34,613
4,700 *Specialty Equipment Companies,
Inc. ......................... 64,625
2,200 *SPS Technologies, Inc. ........ 161,700
6,800 Stewart & Stevenson Services,
Inc. ......................... 181,900
3,500 Tennant Co. ................... 105,000
1,200 *Thermo Power Corp. ............ 7,200
3,300 Watts Industries, Inc.
Class A ...................... 82,087
2,300 *Zoltek Companies, Inc. ........ 71,875
-----------
4,577,611
-----------
MEDICAL TECHNOLOGY - 1.55%
2,100 *ATS Medical, Inc. ............. 12,830
3,600 *Bio-Rad Laboratories, Inc.
Class A ...................... 91,800
</TABLE>
<PAGE> 127
================================================================================
28 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
MEDICAL TECHNOLOGY - Continued
3,100 *Biomatrix, Inc. ............... $ 53,475
5,400 *Capstone Pharmacy Services .... 54,000
5,600 *Creative BioMolecules, Inc. ... 56,700
3,200 Dekalb Genetics Corp.
Class B ...................... 227,600
4,900 *Endosonics Corp. .............. 54,512
6,300 *Enzo Biochem, Inc. ............ 94,500
4,800 *Epitope, Inc. ................. 42,000
7,500 *Haemonetics Corp. ............. 128,437
3,500 *Hologic, Inc. ................. 84,000
4,400 *i- STAT Corp. ................. 78,100
16,600 *Imatron, Inc. ................. 46,687
5,000 *InControl, Inc. ............... 46,875
7,700 *KLA-Tencor Corp. .............. 366,231
8,700 *Liposome Co., Inc. ............ 221,850
2,300 *Lunar Corp. ................... 46,000
3,000 *Myriad Genetics, Inc. ......... 79,500
8,400 *NABI Inc. ..................... 58,800
4,500 *NeoPath, Inc. ................. 88,875
4,600 *Neurex Corp. .................. 67,275
6,300 *Neuromedical Systems, Inc. .... 41,737
3,100 *Northfield Laboratories Inc. .. 30,613
6,000 *Organogenesis Inc. ............ 112,500
3,800 *Protein Design Labs, Inc. ..... 120,175
5,500 *SciClone Pharmaceuticals,
Inc. ......................... 37,813
12,924 *Scios Nova Inc. ............... 81,583
1,950 *Serologicals Corp. ............ 37,294
5,100 *Sofamor Danek Group, Inc. ..... 234,600
3,600 *Spine-Tech, Inc. .............. 124,425
3,400 *ThermoTrex Corp. .............. 98,175
2,100 *Thoratec Laboratories Corp. ... 12,075
4,300 US Bioscience, Inc. ........... 45,150
-----------
2,976,187
-----------
MERCHANDISE - DRUG - 0.41%
9,225 Arbor Drugs, Inc. ............. 181,040
4,439 *Avatex Corp. .................. 4,994
4,400 *Express Scripts, Inc.
Class A ...................... 200,750
6,800 Longs Drug Stores Corp. ....... 161,500
4,200 *MedImmune, Inc. ............... 65,100
14,500 *Perrigo Co. ................... 174,000
-----------
787,384
-----------
MERCHANDISE - SPECIALTY - 2.67%
4,500 *Alliance Entertainment Corp. .. 3,938
6,818 Arctic Cat, Inc. .............. 71,589
MERCHANDISE - SPECIALTY - Continued
10,700 *Aura Systems, Inc. ............ $ 19,728
5,100 *Avid Technology, Inc. ......... 119,850
7,200 *Best Buy Co., Inc. ............ 98,100
2,550 *BMC West Corp. ................ 33,788
9,600 *Bombay Co., Inc. .............. 43,200
2,700 *Books-A-Million, Inc. ......... 13,838
3,000 *Bush Boake Allen Inc. ......... 87,375
6,100 Casey's General Stores, Inc. .. 122,000
7,667 Cash America International,
Inc. ......................... 74,753
24,700 *Charming Shoppes, Inc. ........ 129,675
2,100 *Cole National Corp. Class A ... 79,537
3,700 *Compucom Systems, Inc. ........ 26,825
1,000 *Copart, Inc. .................. 15,500
3,300 Cross (A.T.) Co. Class A ...... 36,712
1,800 *Daisytek International Corp. .. 56,700
4,500 *Department 56, Inc. ........... 95,062
600 *DH Technology, Inc. ........... 9,750
3,400 Duty Free International,
Inc. ......................... 53,125
4,900 *Eagle Hardware & Garden,
Inc. ......................... 117,906
15,100 Fingerhut Companies, Inc. ..... 266,137
1,300 *Fossil, Inc. .................. 21,938
5,500 Franklin Covey................. 132,000
4,900 *Friedman's Inc. Class A ....... 91,569
6,350 *Garden Ridge Corp. ............ 76,994
4,100 *Gibson Greetings, Inc. ........ 89,175
7,100 Hancock Fabrics, Inc. ......... 86,975
3,105 Hancock Holding Co. ........... 129,634
13,000 *HEARx, Ltd. ................... 22,750
1,800 *Inacom Corp. .................. 58,275
10,000 *Intelligent Electronics,
Inc. ......................... 26,875
1,848 *Jenny Craig, Inc. ............. 11,319
7,800 Jostens, Inc. ................. 192,075
4,500 *Jumbosports, Inc. ............. 19,688
3,178 K2, Inc. ...................... 91,765
1,800 *L.L. Knickerbocker Co. ........ 9,338
600 LabOne, Inc. .................. 10,500
6,700 *Mac Frugal's Bargains
Close-outs Inc. .............. 199,325
4,700 *Michaels Stores Inc. .......... 92,825
2,900 *MicroAge Inc. ................. 52,562
1,300 *Movie Gallery, Inc. ........... 8,938
3,800 *Paragon Trade Brands, Inc. .... 61,275
3,000 *Petco Animal Supplies, Inc. ... 80,250
10,800 Petroleum Heat & Power Co.,
Inc. Class A ................. 39,150
MERCHANDISE - SPECIALTY - Continued
6,200 Price Enterprises Inc. ........ $ 113,925
3,400 *Rexall Sundown, Inc. .......... 90,950
4,000 Russ Berrie and Co. Inc. ...... 83,000
72 *Score Board, Inc. ............. 81
3,200 *Seitel, Inc. .................. 118,800
4,400 *Sitel Corp. ................... 72,600
8,700 Sotheby's Holdings, Inc.
Class A ...................... 134,850
8,450 *Sports Authority, Inc. ........ 152,100
5,200 Sturm, Ruger & Co. Inc. ....... 98,150
1,100 *Tractor Supply Co. ............ 22,550
5,100 *United Stationers Inc. ........ 110,287
3,900 Unitog Co. .................... 91,650
9,900 US Office Products, Co. ....... 245,025
7,700 *Waban Inc. .................... 233,887
1,300 *West Marine, Inc. ............. 34,125
4,900 *Williams-Sonoma, Inc. ......... 180,687
8,600 *Zale Corp. .................... 173,075
-----------
5,136,025
-----------
MERCHANDISING - DEPARTMENT - 0.41%
1,300 *Alexander's, Inc. ............. 85,150
4,300 *Carson Pirie Scott & Co. ...... 138,675
11,715 Pier 1 Imports, Inc. .......... 262,123
4,246 *Proffitt's Inc. ............... 169,309
3,750 *Stein Mart, Inc. .............. 113,437
1,812 Strawbridge & Clothier ........ 29,672
-----------
798,366
-----------
MERCHANDISING - FOOD - 0.76%
2,000 Delchamps, Inc. ............... 54,500
75 Farmer Bros. Co. .............. 9,525
7,800 Fleming Companies, Inc. ....... 148,200
3,100 *IHOP Corp. .................... 86,800
1,800 Ingles Markets, Inc. .......... 25,988
3,375 Nash Finch Co. ................ 67,500
1,334 *Quality Food Centers Inc. ..... 50,692
4,400 Ruddick Corp. ................. 66,550
4,500 Sanderson Farms, Inc. ......... 66,375
7,800 Savannah Foods &
Industries, Inc. ............. 121,875
4,100 *ShowBiz Pizza Time, Inc. ...... 92,250
3,700 Smart & Final Inc. ............ 79,088
4,300 *Smithfield Foods, Inc. ........ 235,962
3,098 *Smith's Food & Drug
Centers, Inc. Class B ........ 146,380
4,300 *Whole Foods Market, Inc. ...... 134,913
</TABLE>
<PAGE> 128
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 29
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
MERCHANDISING - FOOD - Continued
7,073 WLR Foods, Inc. ............... $ 70,730
-----------
1,457,328
-----------
MERCHANDISING - MASS - 0.37%
9,300 Family Dollar Stores, Inc. .... 239,475
6,300 Fred Meyer, Inc. .............. 289,012
26,400 *Service Merchandise Co.,
Inc. ......................... 85,800
4,500 ShopKo Stores, Inc. ........... 106,313
-----------
720,600
-----------
METALS - ALUMINUM - 0.22%
5,600 *ACX Technologies, Inc. ........ 119,000
400 Commonwealth Industries Inc. .. 7,550
4,400 IMCO Recycling Inc. ........... 78,100
6,000 *Kaiser Aluminum Corp. ......... 69,000
2,706 Tredegar Industries, Inc. ..... 147,815
-----------
421,465
-----------
METALS - COPPER - 0.12%
3,900 *Chase Industries Inc. ......... 87,750
4,900 *Wolverine Tube, Inc. .......... 143,938
-----------
231,688
-----------
METALS - MISCELLANEOUS - 0.82%
4,337 A.M. Castle & Co. ............. 94,330
4,050 Applied Industrial
Technology, Inc. ............. 142,256
4,000 Brush Wellman Inc. ............ 85,000
4,033 Commercial Metals Co. ......... 119,478
3,500 *Dravo Corp. ................... 38,500
5,900 Freeport McMoRan, Inc. ........ 166,675
1,400 Greenbrier Companies, Inc. .... 15,750
12,600 *Hecla Mining Co. .............. 72,450
1,530 *Intermagnetics General Corp. .. 21,420
5,900 Kennametal, Inc. .............. 234,525
4,050 *Material Sciences Corp. ....... 56,700
5,400 Precision Castparts Corp. ..... 337,500
2,400 *RMI Titanium Co. .............. 55,800
2,800 *Stillwater Mining Co. ......... 65,100
2,000 *Tremont Corporation Delaware .. 82,000
-----------
1,587,484
-----------
METALS - STEEL - 1.15%
4,700 *Acme Metals, Inc. ............. 71,675
4,000 Amcast Industrial Corp. ....... 98,000
22,400 *Armco Inc. .................... 84,000
METALS - STEEL - Continued
9,600 Birmingham Steel Corp. ........ $ 153,600
4,100 Carpenter Technology Corp. .... 177,325
800 Chaparral Steel Co. ........... 12,000
1,900 *Citation Corp. ................ 28,262
2,800 Cleveland-Cliffs Inc. ......... 118,300
1,850 Commercial Intertech Corp. .... 24,050
10,700 *Geneva Steel Co. Class A ...... 25,413
800 *Gibraltar Steel Corp. ......... 17,400
1,500 Huntco Inc. Class A ........... 20,063
3,400 *Intermedia Communications Inc. 102,425
6,700 Intermet Corp. ................ 93,800
4,500 J & L Specialty Steel, Inc. ... 57,375
2,600 Lukens Inc. ................... 51,025
5,200 *Mueller Industries, Inc. ...... 207,350
3,100 *National Steel Corp. Class B .. 41,850
5,900 Oregon Steel Mills, Inc. ...... 110,625
3,400 Quanex Corp. .................. 92,650
1,200 Reliance Steel &
Aluminum Co. ................. 43,500
3,300 *Shiloh Industries, Inc. ....... 54,450
2,250 Steel Technologies Inc. ....... 23,625
5,900 TriMas Corp. .................. 167,412
6,000 UNR Industries, Inc. .......... 37,500
3,400 Valmont Industries, Inc. ...... 142,800
5,700 *WHX Corp. ..................... 37,762
4,800 *Wyman-Gordon Co. .............. 109,200
-----------
2,203,437
-----------
MISCELLANEOUS - 1.96%
4,800 *Alternative Resources Corp. ... 88,800
6,000 AMCOL International Corp. ..... 110,250
5,300 *AMERCO Inc. ................... 145,750
900 *Associated Group, Inc.
Class A ...................... 36,900
1,600 *Avondale Industries, Inc. ..... 30,400
800 *Bacou U.S.A., Inc. ............ 11,800
1,271 Barnett Banks, Inc. ........... 66,886
4,900 *Billing Information Concepts .. 142,100
5,800 *Borg-Warner Security Corp. .... 89,900
3,475 *Brightpoint, Inc. ............. 107,725
2,100 Central Parking Corp. ......... 65,625
1,500 *ClinTrials Inc. ............... 14,813
1,500 *CRA Managed Care, Inc. ........ 68,625
5,000 CTG Resources Inc. ............ 108,125
7,000 DeVry, Inc. ................... 193,375
3,000 *Encad, Inc. ................... 111,750
MISCELLANEOUS - Continued
2,100 *Equity Corp. International .... $ 50,400
4,800 *Figgie International Inc.
Class A ...................... 59,400
3,758 Gemstar Group Ltd. ............ 78,918
8,580 *HFS, Inc. ..................... 462,247
2,775 *ITT Educational Services,
Inc. ......................... 62,784
1,800 Mathews International Corp.
Class A ...................... 61,650
4,056 Mattel, Inc. .................. 121,164
9,600 *National Education Corp. ...... 201,600
3,300 Norrell Corp. ................. 106,425
2,600 *Pinkerton's, Inc. ............. 76,375
5,700 *Prepaid Legal Services, Inc. .. 115,069
4,000 Regis Corp. ................... 86,000
5,600 *Rexel, Inc. ................... 102,200
2,000 *RTW, Inc. ..................... 16,750
3,000 *Samsonite Corp. ............... 134,625
5,600 *Sola International, Inc. ...... 160,300
5,400 *Solv-Ex Corp. ................. 35,775
2,600 *Strategic Distribution, Inc. .. 10,075
5,950 *Sylvan Learning Systems,
Inc. ......................... 213,456
2,900 *The Profit Recovery Group
International, Inc. .......... 35,525
3,400 *Veritas DGC Inc. .............. 70,550
1,400 Wackenhut Corp. Class A ....... 24,675
2,800 *Wackenhut Corrections Corp. ... 54,950
2,900 *Youth Services International,
Inc. ......................... 40,238
-----------
3,773,975
-----------
MOBILE HOMES - 0.22%
12,752 *Champion Enterprises, Inc. .... 234,318
2,800 Coachmen Industries, Inc. ..... 47,600
800 McGrath RentCorp. ............. 15,000
4,200 Skyline Corp. ................. 103,425
750 Thor Industries, Inc. ......... 17,906
-----------
418,249
-----------
NATURAL GAS - DIVERSIFIED - 1.05%
3,750 Atmos Energy Corp. ............ 86,719
3,400 Bay State Gas Co. ............. 90,525
5,300 Eastern Enterprises ........... 182,850
5,204 K N Energy, Inc. .............. 219,218
5,800 Laclede Gas Co. ............... 125,425
4,600 New Jersey Resources Corp. .... 143,175
14,068 *Seagull Energy Corp. .......... 253,224
1,996 *Southern Union Co. ............ 47,156
</TABLE>
<PAGE> 129
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30 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
NATURAL GAS - DIVERSIFIED - Continued
6,400 Southwest Gas Corp. ........... $ 109,600
3,772 *Tejas Gas Corp. ............... 176,812
11,300 UGI Corp. ..................... 254,250
5,600 United Cities Gas Co. ......... 126,700
2,300 Western Gas Resources, Inc. ... 45,425
4,400 WICOR, Inc. ................... 161,700
-----------
2,022,779
-----------
OIL - INTEGRATED DOMESTIC - 0.22%
3,750 Cross Timbers Oil Co. ......... 72,656
3,800 *Crown Central Petroleum Corp.
Class A ...................... 50,825
2,500 *Hondo Oil & Gas Co. ........... 22,813
12,700 Quaker State Corp. ............ 192,087
6,200 *Tesoro Petroleum Corp. ........ 81,375
-----------
419,756
-----------
OIL - SERVICE - PRODUCTS - 0.94%
9,800 *BJ Services Co. ............... 541,450
6,750 *EVI Inc. ...................... 253,969
3,600 Getty Petroleum Corp. ......... 60,300
3,600 *Getty Petroleum Marketing
Inc. ......................... 17,100
7,800 *Global Industrial
Technologies, Inc. ........... 144,300
7,400 *Global Industries Inc. ........ 162,800
14,500 *Kelley Oil & Gas Corp. ........ 35,344
7,100 *Lone Star Technologies, Inc. .. 167,737
18,300 *Parker Drilling Co. ........... 176,137
6,500 *Pride Petroleum
Services, Inc. ............... 144,625
4,163 *Varco International, Inc. ..... 114,483
-----------
1,818,245
-----------
OIL - SERVICES - 0.80%
6,300 Camco International, Inc. ..... 322,875
2,400 Lomak Petroleum, Inc. ......... 42,600
10,800 *Marine Drilling
Companies, Inc. .............. 217,350
7,200 Mascotech, Inc. ............... 161,100
7,900 *Oceaneering International
Inc. ......................... 134,300
4,900 *Offshore Logistics, Inc. ...... 88,813
6,150 Pennsylvania Enterprises Inc. . 152,212
3,600 *Pool Energy Services Co. ...... 59,850
3,000 Production Operators Corp. .... 200,625
9,300 *Tuboscope Vetco
International Corp. .......... 151,125
-----------
1,530,850
-----------
OIL/GAS PRODUCERS - 2.07%
800 *Atwood Oceanics, Inc. ......... $ 53,600
160 *Aztec Energy Corp. ............ 5
8,050 *Barrett Resources Corp. ....... 269,675
2,100 *Belden & Blake Corp. .......... 56,044
8,300 *Benton Oil and Gas Co. ........ 128,650
3,400 Berry Petroleum Co. Class A ... 51,000
7,800 *Box Energy Corp. Class B ...... 58,500
5,900 Cabot Oil & Gas Corp.
Class A ...................... 109,150
2,400 *Cliffs Drilling Co. ........... 167,700
5,000 Devon Energy Corp. ............ 186,250
2,600 *Falcon Drilling Co., Inc. ..... 119,275
3,700 *Flores & Rucks, Inc. .......... 181,300
1,400 *Forcenergy, Inc. .............. 49,000
4,600 *Forest Oil Corp. .............. 64,400
16,700 *Harken Energy Corp. ........... 79,325
6,500 Helmerich & Payne, Inc. ....... 364,812
500 Holly Corp. ................... 12,500
3,400 KCS Energy, Inc. .............. 141,525
2,600 *Louis Dreyfus Natural
Gas Corp. .................... 41,275
20,700 *MESA Inc. ..................... 113,850
7,700 Mitchell Energy & Development
Corp. Class A ................ 170,362
11,000 *Newfield Exploration Co. ...... 236,500
2,600 *Nuevo Energy Co. .............. 113,425
9,200 Parker & Parsley
Petroleum Co. ................ 312,800
3,100 *Plains Resources, Inc. ........ 44,175
9,400 Snyder Oil Corp. .............. 171,550
3,600 *Stone Energy Corp. ............ 100,800
3,500 *Swift Energy Co. .............. 93,625
6,100 *Tom Brown, Inc. ............... 122,763
7,700 *United Meridian Corp. ......... 277,200
2,500 Vintage Petroleum, Inc. ....... 85,000
-----------
3,976,036
-----------
PAPER/FOREST PRODUCTS - 0.77%
6,500 Caraustar Industries, Inc. .... 187,687
10,800 Longview Fibre Co. ............ 182,250
3,440 Mosinee Paper Corp. ........... 93,296
4,500 P. H. Glatfelter Co. .......... 78,750
8,400 Pentair Inc. .................. 276,150
2,900 Ply Gem Industries Inc. ....... 48,575
4,700 Pope & Talbot, Inc. ........... 77,550
5,700 Schweitzer-Mauduit
International, Inc. .......... 195,937
5,100 Standard Register Co. ......... 177,863
PAPER/FOREST PRODUCTS - Continued
1,700 Universal Forest
Products, Inc. ............... $ 23,588
7,400 Wausau Paper Mills Co. ........ 138,750
-----------
1,480,396
-----------
PHOTOGRAPHY - 0.15%
3,800 CPI Corp. ..................... 71,250
1,950 *Photronics Inc. ............... 87,019
1,800 *Seattle Filmworks, Inc. ....... 21,150
5,800 *Ultratech Stepper, Inc. ....... 118,175
-----------
297,594
-----------
POLLUTION CONTROL - 1.30%
9,600 *Air & Water Technologies Corp.
Class A ...................... 45,600
20,500 *Allied Waste
Industries, Inc. ............. 302,375
5,700 *Allwaste, Inc. ................ 47,737
7,800 Calgon Carbon Corp. ........... 109,200
2,050 *Cuno Inc. ..................... 33,825
7,700 Dames & Moore, Inc. ........... 90,475
546 Heidemij NV.................... 5,665
2,700 *KFX, Inc. ..................... 10,463
15,800 Laidlaw Environmental
Services Inc. ................ 45,425
1,725 Mine Safety Appliances Co. .... 104,794
3,900 *Molten Metal Technology,
Inc. ......................... 27,787
3,850 *Newpark Resources, Inc. ....... 202,125
5,200 *OHM Corp. ..................... 41,600
12,000 Safety-Kleen Corp. ............ 187,500
1,000 *Superior Services, Inc. ....... 21,500
5,000 *Tetra Tech, Inc. .............. 100,000
4,700 *Tetra Technologies, Inc. ...... 114,562
5,700 Thermo Remediation Inc. ....... 39,900
900 *Thermo TerraTech, Inc. ........ 9,844
14,900 *United States Filter Corp. .... 469,350
10,600 *United Waste Systems, Inc. .... 406,775
3,200 Zurn Industries, Inc. ......... 84,800
-----------
2,501,302
-----------
PUBLISHING - NEWS - 0.30%
3,200 Hollinger International,
Inc. Class A ................. 35,600
8,075 McClatchy Newspapers, Inc.
Class A ...................... 225,090
1,900 Media General, Inc. Class A ... 58,069
6,500 *Network Equipment
Technologies, Inc. ........... 112,125
</TABLE>
<PAGE> 130
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 31
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
PUBLISHING - NEWS - Continued
2,933 Pulitzer Publishing Co. ....... $ 142,617
18 *Radius, Inc. .................. 6
-----------
573,507
-----------
PUBLISHING/PRINTING - 1.16%
1,400 American Business
Products, Inc. ............... 34,475
5,900 *ATC Communications, Inc. ...... 23,600
7,950 Banta Corp. ................... 220,612
800 *Berlitz International, Inc. ... 19,100
2,600 *Big Flower Press
Holdings, Inc. ............... 55,575
3,000 Bowne & Co., Inc. ............. 89,625
2,700 *Devon Group, Inc. ............. 83,025
7,600 Ennis Business Forms, Inc. .... 75,050
6,700 *Golden Books Family
Entertainment, Inc. .......... 76,213
3,800 Houghton Mifflin Co. .......... 225,150
8,000 John H. Harland Co. ........... 183,000
4,300 John Wiley & Sons Inc.
Class A ...................... 136,525
3,100 Merrill Corp. ................. 101,137
3,300 New England Business
Service, Inc. ................ 96,113
5,700 *Nu-kote Holding, Inc.
Class A ...................... 14,250
2,700 *Scholastic Corp. .............. 80,325
4,400 *Scientific Games
Holdings Corp. ............... 107,800
700 *Steck-Vaughn
Publishing Corp. ............. 9,100
5,509 Thomas Nelson, Inc. ........... 57,156
17,600 *Topps Co. Inc. ................ 67,100
7,500 *Valassis Communications,
Inc. ......................... 208,125
9,000 *ValueVision International,
Inc. Class A ................. 34,875
900 Waverly, Inc. ................. 19,350
7,900 *World Color Press, Inc. ....... 207,375
-----------
2,224,656
-----------
RAILROAD - 0.24%
1,500 Florida East Coast
Industries, Inc. ............. 162,375
4,100 GATX Corp. .................... 232,675
3,700 *RailTex, Inc. ................. 68,450
-----------
463,500
-----------
REAL ESTATE - 0.67%
2,400 *Avatar Holdings Inc. .......... 78,600
2,500 *Castle & Cooke, Inc. .......... 38,125
19,800 *Catellus Development Corp. .... 334,125
6,075 Cousins Properties Inc. ....... 162,506
2,100 Forest City
Enterprises, Inc. ............ 92,663
REAL ESTATE - Continued
7,600 *Insignia Financial Group, Inc.
Class A ...................... $ 134,900
3,200 Mercer International Inc. ..... 36,600
8,800 Merry Land &
Investment Co., Inc. ......... 184,800
5,000 North American Mortgage Co. ... 100,625
8,289 Republic Bancorp Inc. ......... 108,793
500 Tejon Ranch Co. ............... 8,500
-----------
1,280,237
-----------
REAL ESTATE INVESTMENT
TRUSTS - 7.27%
3,600 Allied Capital
Commercial Corp. ............. 85,050
7,800 American Health
Properties, Inc. ............. 195,000
1,500 Apartment Investment &
Management Co. ............... 41,813
2,600 Associated Estates
Realty Corp. ................. 58,500
8,800 Avalon Properties, Inc. ....... 242,000
4,200 Bay Apartment
Communities, Inc. ............ 148,050
8,500 Beacon Properties Corp. ....... 263,500
12,500 Berkshire Realty Co., Inc. .... 134,375
5,373 Bradley Real Estate, Inc. ..... 101,415
9,730 BRE Properties, Inc. .......... 239,601
2,300 Burnham Pacific
Properties, Inc. ............. 30,475
4,800 Cali Realty Corp. ............. 142,200
7,228 Camden Property Trust ......... 212,322
9,450 Capstead Mortgage Corp. ....... 226,800
6,500 CarrAmerica Realty Corp. ...... 184,437
8,200 CBL & Associates
Properties, Inc. ............. 194,750
2,800 CenterPoint Properties Corp. .. 84,000
500 Charles E. Smith Residential
Realty, Inc. ................. 13,688
2,400 Chelsea GCA Properties ........ 87,300
7,000 Colonial Properties Trust ..... 204,750
3,000 Columbus Realty Trust ......... 66,000
5,900 Commercial Net Lease
Realty, Inc. ................. 88,500
17,400 Crescent Real Estate
Equities, Inc. ............... 474,150
4,600 Criimi Mae, Inc. .............. 75,325
6,100 Crown American Realty Trust.... 48,800
12,000 CWM Mortgage Holdings, Inc. ... 250,500
5,500 Developers Diversified
Realty Corp. ................. 204,875
7,400 Duke Realty Investments,
Inc. ......................... 282,125
10,800 Dynex Capital Inc. ............ 148,500
6,000 Equity Inns Inc. .............. 78,750
1,800 Evans Withycombe
Residential, Inc. ............ 36,900
3,900 Excel Realty Trust, Inc. ...... 100,913
REAL ESTATE INVESTMENT
TRUSTS - Continued
7,200 Federal Realty
Investment Trust ............. $ 188,100
6,100 FelCor Suite Hotels, Inc. ..... 227,225
6,100 First Industrial Realty
Trust, Inc. .................. 179,950
8,100 Franchise Finance Corp.
of America ................... 195,412
6,700 Gables Residential Trust....... 167,500
6,800 General Growth
Properties, Inc. ............. 219,300
7,300 Glimcher Realty Trust.......... 146,000
6,100 Health Care Property
Investors, Inc. .............. 205,875
1,800 Health Care REIT, Inc. ........ 43,200
1,400 Healthcare Realty
Trust, Inc. .................. 36,400
6,700 Highwoods Properties, Inc. .... 202,675
3,392 Horizon Group, Inc. ........... 44,096
4,700 Hospitality Properties Trust... 149,225
7,300 IRT Property Co. .............. 84,863
4,900 Irvine Apartment
Communities, Inc. ............ 137,813
3,200 JDN Realty Corp. .............. 92,400
3,300 JP Realty, Inc. ............... 85,388
5,100 Kimco Realty Corp. ............ 160,650
6,400 *Koger Equity, Inc. ............ 106,400
6,100 Liberty Property Trust......... 146,400
4,600 LTC Properties, Inc. .......... 81,650
3,500 Macerich Co. .................. 94,500
8,700 Manufactured Home
Communities, Inc. ............ 191,400
6,200 MGI Properties ................ 130,200
2,800 Mid-America Apartment
Communities, Inc. ............ 74,550
6,300 Mills Corp. ................... 159,862
5,100 National Golf
Properties, Inc. ............. 165,750
6,700 National Health
Investors, Inc. .............. 252,925
10,900 Nationwide Health
Properties, Inc. ............. 234,350
3,200 Oasis Residential, Inc. ....... 73,600
4,586 Omega Healthcare
Investors, Inc. .............. 150,191
8,800 Patriot American
Hospitality, Inc. ............ 190,300
4,700 Pennsylvania Real Estate
Investment Trust ............. 103,400
4,800 Post Properties, Inc. ......... 190,800
500 Price REIT, Inc. .............. 19,063
18,200 Public Storage, Inc. .......... 484,575
8,600 Realty Income Corp. ........... 220,375
2,400 Reckson Associates
Realty Corp. ................. 54,000
1,600 Redwood Trust, Inc. ........... 91,400
2,300 Regency Realty Corp. .......... 60,663
9,000 RFS Hotel Investors, Inc. ..... 167,625
</TABLE>
<PAGE> 131
================================================================================
32 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUSTS - Continued
6,300 Saul Centers, Inc. ............ $ 103,163
6,400 Shurgard Storage Centers, Inc.
Class A ...................... 179,200
108 *SLH Corp. ..................... 5,886
500 Sovran Self Storage, Inc. ..... 14,500
6,500 Spieker Properties, Inc. ...... 239,687
2,200 Storage Trust Realty........... 55,000
5,100 Storage USA, Inc. ............. 194,437
7,100 Summit Properties, Inc. ....... 142,887
5,100 Sun Communities, Inc. ......... 166,387
4,600 Taubman Centers, Inc. ......... 59,800
3,900 Thornburg Mortgage
Asset Corp. .................. 78,488
1,600 Town and Country Trust ........ 23,800
5,000 TriNet Corporate Realty
Trust, Inc. .................. 163,750
20,241 United Dominion Realty
Trust, Inc. .................. 298,555
4,000 Universal Health Realty Income
Trust ........................ 77,000
1,600 Urban Shopping Centers, Inc. .. 46,400
6,300 Vornado Realty Trust........... 431,550
2,800 Walden Residential
Properties, Inc. ............. 66,500
11,700 Washington Real Estate
Investment Trust ............. 198,900
5,100 Weeks Corp. ................... 160,650
6,100 Weingarten Realty Investors ... 261,537
6,200 Wellsford Residential Property
Trust ........................ 200,725
4,300 Western Investment Real Estate
Trust ........................ 58,050
-----------
13,982,267
-----------
RESTAURANTS - 1.16%
6,562 Apple South, Inc. ............. 99,250
8,650 Applebee's International,
Inc. ......................... 215,169
11,100 Bob Evans Farms, Inc. ......... 156,787
12,180 *Buffets, Inc. ................. 108,098
7,750 CKE Restaurants, Inc. ......... 185,031
2,200 *Daka International, Inc. ...... 27,775
7,600 *Foodmaker, Inc. ............... 106,400
3,200 *International Dairy Queen, Inc.
Class A ...................... 74,400
4,700 *Landry's Seafood
Restaurants, Inc. ............ 86,950
8,300 Luby's Cafeterias, Inc. ....... 160,812
3,400 *Manhattan Bagel Inc. .......... 23,800
4,800 Morrison Health Care, Inc. .... 78,000
RESTAURANTS - Continued
7,400 *NPC International Inc. ........ $ 87,875
4,425 *Papa John's
International, Inc. .......... 141,047
500 *Quality Dining, Inc. .......... 2,906
3,200 *Rainforest Cafe, Inc. ......... 78,400
4,900 *Ruby Tuesday, Inc. ............ 105,350
18,600 *Ryan's Family Steak
Houses, Inc. ................. 169,725
2,700 Sbarro, Inc. .................. 78,975
12,200 *Shoney's, Inc. ................ 68,625
4,750 *Sonic Corp. ................... 83,125
3,900 *Triarc Companies Inc.
Class A ...................... 89,213
-----------
2,227,713
-----------
SAVINGS & LOAN - 1.95%
5,220 ALBANK Financial Corp. ........ 200,318
4,800 American Federal Bank
of Greenville ................ 147,600
4,500 Astoria Financial Corp. ....... 185,625
3,612 Bankers Corp. ................. 91,655
1,600 Bay View Capital Corp. ........ 80,400
3,000 CitFed Bancorp, Inc. .......... 111,750
4,900 *Coast Savings Financial Inc. .. 208,862
2,810 Downey Financial Corp. ........ 56,200
1,910 Financial Trust Corp. ......... 92,874
3,700 *FirstFed Financial Corp. ...... 100,825
11,292 *Glendale Federal Bank FSB ..... 287,946
2,900 JSB Financial, Inc. ........... 127,600
5,100 Klamath First BanCorp. ........ 94,350
6,000 Long Island Bancorp, Inc. ..... 209,250
2,855 MAF Bancorp, Inc. ............. 119,196
1,800 Magna Bancorp, Inc. ........... 42,750
800 ML Bancorp, Inc. .............. 13,900
3,000 Peoples Bank of Bridgeport
Connecticut .................. 70,875
5,324 Peoples Heritage Financial
Group, Inc. .................. 176,358
3,631 Provident Bankshares Corp. .... 137,070
2,199 Queens County Bancorp, Inc. ... 90,159
3,100 RCSB Financial, Inc. .......... 126,906
3,300 Security Capital Corp. ........ 303,600
14,400 Sovereign Bancorp, Inc. ....... 189,000
3,500 Standard Financial, Inc. ...... 81,594
4,400 TR Financial Corp. ............ 89,100
11,660 Washington Federal, Inc. ...... 307,532
-----------
3,743,295
-----------
SECURITIES RELATED - 1.01%
5,050 Alex Brown Inc. ............... $ 338,350
3,700 Enhance Financial Services
Group Inc. ................... 154,475
7,917 Financial Security Assurance
Holdings Ltd. ................ 286,002
3,300 Interra Financial, Inc. ....... 143,550
199 Investors Financial Services
Corp. Class A ................ 5,871
2,600 Jefferies Group, Inc. ......... 140,075
3,250 Legg Mason, Inc. .............. 149,906
1,206 Liberty Financial
Companies, Inc. .............. 54,119
1,400 Mc Donald & Co.
Investments, Inc. ............ 53,725
3,900 Morgan Keegan, Inc. ........... 70,200
5,600 Pioneer Group, Inc. ........... 140,700
5,200 Piper Jaffray Companies,
Inc. ......................... 102,050
4,231 Quick & Reilly Group Inc. ..... 97,313
5,400 Raymond James Financial Inc. .. 148,500
1,000 *White River Corp. ............. 64,000
-----------
1,948,836
-----------
SEMICONDUCTORS - 2.07%
6,100 *Actel Corp. ................... 128,100
8,100 *Alliance Semiconductor Corp. .. 67,838
4,800 *Altron, Inc. .................. 79,800
6,300 *Burr Brown Corp. .............. 197,662
5,800 *Chips & Technologies, Inc. .... 64,525
3,800 Cohu, Inc. .................... 130,625
6,950 *Credence Systems Corp. ........ 205,025
3,300 *Cree Research, Inc. ........... 41,250
7,300 Dallas Semiconductor Corp. .... 281,962
6,200 *Electroglas, Inc. ............. 155,969
5,600 *ESS Technology, Inc. .......... 86,800
4,600 *Etec Systems, Inc. ............ 204,700
5,600 *FSI International, Inc. ....... 78,400
1,900 *Fusion Systems Corp. .......... 58,663
2,400 *Integrated Packaging Assembly
Corp. ........................ 9,600
4,400 *Level One
Communications, Inc. ......... 166,100
4,300 *Mattson Technology, Inc. ...... 45,150
4,400 *MRV Communications Inc. ....... 108,900
4,300 *Novellus Systems, Inc. ........ 352,062
2,200 *OnTrak Systems, Inc. .......... 63,250
5,200 *Quickturn Design
System, Inc. ................. 53,300
6,900 *Ramtron International Corp. ... 34,500
</TABLE>
<PAGE> 132
================================================================================
May 31, 1997 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 33
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
SEMICONDUCTORS - Continued
1,850 *SDL, Inc. ..................... $ 37,000
6,900 *Silicon Valley Group Inc. ..... 165,169
3,200 *Siliconix, Inc. ............... 80,000
1,900 *Speedfam International, Inc. .. 69,231
2,900 *Triquint Semiconductor, Inc. .. 114,913
3,900 *Unitrode Corp. ................ 193,538
8,100 *Vitesse Semiconductor Corp. ... 290,587
11,000 *VLSIi Technology, Inc. ........ 267,437
6,450 *Zilog, Inc. ................... 143,513
-----------
3,975,569
-----------
TELECOMMUNICATIONS - 1.93%
6,000 ABM Industries Inc. ........... 116,250
3,000 *ACC Corp. ..................... 77,250
7,100 *Allen Telecom Inc. ............ 165,075
7,600 *American Paging, Inc. ......... 17,100
2,500 *Ancor Communications, Inc. .... 14,688
4,600 *Arch Communications
Group, Inc. .................. 35,650
1,000 *Atlantic Tele-Network, Inc. ... 12,500
3,600 *BroadBand Technologies, Inc. .. 33,525
4,900 *California Amplifier, Inc. .... 19,600
3,400 *CellStar Corp. ................ 121,975
3,500 *Cellular Communications
International, Inc. .......... 93,187
6,580 *Cellular Technical
Services Inc. ................ 89,652
4,800 *Centennial Cellular Corp.
Class A ...................... 67,200
3,800 *Cidco, Inc. ................... 55,100
700 *CKS Group, Inc. ............... 20,213
3,500 *Coherent Communications
Systems Corp. ................ 76,125
4,900 *CommNet Cellular Inc. ......... 167,825
3,800 *Diana Corp. ................... 8,550
4,200 *Digi International Inc. ....... 38,325
12,700 *DSP Communications, Inc. ...... 141,287
4,900 *HighwayMaster Communications,
Inc. ......................... 67,375
4,600 *InteliData
Technologies Corp. ........... 23,575
1,100 *Inter-Tel, Inc. ............... 17,188
5,400 *InterVoice, Inc. .............. 59,400
1,000 *IPC Information
Systems, Inc. ................ 12,500
3,400 *Itron, Inc. ................... 91,375
2,250 *MasTec, Inc. .................. 91,406
3,400 *Metricom, Inc. ................ 27,413
8,815 *Metrocall, Inc. ............... 44,075
TELECOMMUNICATIONS - Continued
4,715 *Metrocall, Inc. (Rights)....... $ 23,575
2,794 *Millicom International
Cellular S.A. ................ 126,778
16,100 *Mobile Telecommunications
Technologies Corp. ........... 196,219
9,200 *MobileMedia Corp. Class A ..... 4,600
1,600 *Mosaix Inc. ................... 22,600
7,866 NTL Inc. ...................... 179,935
5,100 *P-COM, Inc. ................... 164,475
2,700 *Plantronics, Inc. ............. 118,800
6,640 *PriCellular Corp. Class A ..... 60,590
2,900 *ProNet, Inc. .................. 9,425
3,500 *Proxim, Inc. .................. 89,687
1,200 *Quintel Entertainment, Inc. ... 11,850
4,400 *Sanmina Corp. ................. 254,925
6,000 *Symmetricom, Inc. ............. 96,000
4,500 *Tel-Save Holdings, Inc. ....... 69,750
2,600 *Teltrend, Inc. ................ 43,550
4,100 *Transaction Network
Services, Inc. ............... 60,475
3,200 *TresCom International, Inc. ... 23,200
5,300 *U. S. Long Distance Corp. ..... 82,150
7,600 *Vanguard Cellular Systems, Inc.
Class A ...................... 99,750
3,200 *VideoLan Technologies, Inc. ... 1,700
6,400 *WinStar Communications, Inc. .. 90,000
3,900 *Wireless One, Inc. ............ 11,456
1,700 Wireless Telecom Group ........ 18,700
2,300 *Xpedite Systems, Inc. ......... 43,700
-----------
3,709,274
-----------
TEXTILE - PRODUCTS - 0.67%
14,200 *Burlington Industries, Inc. ... 156,200
5,000 *Cone Mills Corp. .............. 43,125
2,200 *Fabri-Centers of America, Inc.
Class A ...................... 51,700
4,000 *Fieldcrest Cannon, Inc. ....... 75,000
4,950 G&K Services, Inc. Class A .... 162,113
4,350 Guilford Mills, Inc. .......... 85,369
3,000 *Lydall, Inc. .................. 68,625
600 *Marisa Christina, Inc. ........ 5,850
5,600 *Mohawk Industries, Inc. ....... 119,000
3,600 Springs Industries, Inc. ...... 182,250
9,700 Wellman, Inc. ................. 173,387
4,500 *WestPoint Stevens Inc.
Class A ...................... 170,437
-----------
1,293,056
-----------
TOBACCO - 0.41%
1,100 *Culbro Corp. .................. $ 140,663
10,400 DIMON Inc. .................... 240,500
2,200 *Mafco Consolidated
Group Inc. ................... 72,875
8,400 *Mafco Consolidated Group Inc.
(Rights) ..................... 7,350
9,100 Universal Corp. ............... 331,012
-----------
792,400
-----------
TRUCKERS - 0.68%
6,200 *American Freightways Corp. .... 85,250
4,950 Arnold Industries, Inc. ....... 82,913
2,421 Frozen Food Express
Industries, Inc. ............. 21,486
3,432 *Heartland Express, Inc. ....... 74,646
500 *Knight Transportation, Inc. ... 11,875
4,200 *Landstar System Inc. .......... 112,875
3,200 *M.S. Carriers, Inc. ........... 67,200
2,300 Roadway Express Inc. .......... 43,700
12,575 Rollins Truck Leasing Corp. ... 172,906
4,600 *Swift Transportation
Co., Inc. .................... 148,350
7,500 USFreightways Corp. ........... 181,875
3,150 Werner Enterprises, Inc. ...... 61,425
3,100 Xtra Corp. .................... 132,912
5,900 *Yellow Corp. .................. 112,838
-----------
1,310,251
-----------
UTILITIES - COMMUNICATION - 0.27%
9,500 Aliant Communications, Inc. ... 194,750
3,100 *C-Tec Corp. ................... 94,550
1,400 CFW Communications Co. ........ 26,075
3,700 *CoreComm Inc. ................. 59,200
5,378 PXRE Corp. .................... 145,206
-----------
519,781
-----------
UTILITIES - ELECTRIC - 1.63%
10,200 Atlantic Energy, Inc. ......... 168,300
3,600 Black Hills Corp. ............. 103,500
5,800 Central Louisiana
Electric Co., Inc. ........... 146,450
8,000 Central Maine Power Co. ....... 89,000
5,100 CILCORP, Inc. ................. 197,625
6,500 Commonwealth Energy System
Companies .................... 141,375
2,300 *Destec Energy, Inc. ........... 48,875
5,200 Eastern Utilities Associates .. 91,650
12,200 *El Paso Electric Co. .......... 86,925
2,100 Empire District Electric Co. .. 36,488
</TABLE>
<PAGE> 133
================================================================================
34 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
================================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
UTILITIES - ELECTRIC - Continued
5,900 Indiana Energy, Inc. .......... $ 140,863
3,200 Interstate Power Co. .......... 90,400
5,025 Madison Gas & Electric Co. .... 100,500
5,800 Minnesota Power & Light Co. ... 168,200
9,300 Nevada Power Co. .............. 191,812
2,875 Otter Tail Power Co. .......... 88,406
9,700 Public Service Co.
of New Mexico ................ 170,962
6,800 Rochester Gas &
Electric Corp. ............... 136,000
9,450 SIG Corp, Inc. ................ 238,612
2,700 TNP Enterprises, Inc. ......... 59,400
11,020 *Tuscon Electric Power Co. ..... 162,545
3,700 United Illuminating Co. ....... 105,913
8,800 Washington Gas Light Co. ...... 216,700
5,900 WPL Holdings, Inc. ............ 162,988
------------
3,143,489
------------
UTILITIES - GAS, DISTRIBUTION - 0.58%
11,600 AGL Resources, Inc. ........... 221,850
4,100 Colonial Gas Co. .............. 84,050
1,800 Connecticut Energy Corp. ...... 40,500
2,600 Energen Corp. ................. 85,800
234 NGC Corp. ..................... 4,212
8,300 Northwest Natural Gas Co. ..... 202,312
1,200 NUI Corp. ..................... 26,250
7,400 Piedmont Natural
Gas Co., Inc. ................ 180,375
4,800 Public Service Co. of
North Carolina, Inc. ......... 90,600
1,514 South Jersey
Industries, Inc. ............. 33,876
7,800 Southwestern Energy Co. ....... 103,350
9 World Fuel Services Corp. ..... 181
2,150 Yankee Energy System, Inc. .... 49,719
------------
1,123,075
------------
UTILITIES - GAS, PIPELINE - 0.10%
400 North Carolina Natural
Gas Corp. .................... 12,350
6,100 ONEOK Inc. .................... 184,525
------------
196,875
------------
UTILITIES - MISCELLANEOUS - 0.68%
5,100 Central Hudson Gas &
Electric Corp. ............... 164,475
16,559 *Citizens Utilities Co.
Class B ...................... 155,238
6,800 IES Industries Inc. ........... 198,050
7,450 MDU Resources Group, Inc. ..... 180,663
2,000 Northwestern Public
Service Co. .................. 39,250
UTILITIES - MISCELLANEOUS - Continued
3,600 Orange and Rockland
Utilities, Inc. .............. $ 114,300
8,000 Sierra Pacific Resources ...... 237,000
2,900 Trigen Energy Corp. ........... 68,875
5,400 WPS Resources Corp. ........... 143,100
------------
1,300,951
------------
WATER SERVICES - 0.19%
3,000 Aquarion Co. .................. 77,250
400 California Water Service Co. .. 18,250
1,300 E'Town Corp. .................. 43,063
3,150 Philadelphia Suburban Corp. ... 59,062
2,150 Southern California
Water Co. .................... 49,988
6,200 United Water Resources ........ 111,600
------------
359,213
------------
TOTAL COMMON STOCKS
(Cost $152,348,063) ........... 186,025,897
------------
PAR
VALUE
- -----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 3.27%
CONSUMER FINANCE - 1.74%
$1,790,000 Beneficial Corp.,
5.48% due 6/2/97 ............. 1,789,726
1,559,000 Sears Roebuck Acceptance Corp.,
5.59% due 6/6/97 ............. 1,557,789
------------
3,347,515
------------
SECURITIES RELATED - 1.53%
2,948,000 Merrill Lynch & Co., Inc.,
5.55% due 6/4/97 ............. 2,946,637
------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $6,294,152) ............. 6,294,152
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.10%
U.S. TREASURY BILLS - 0.10%
200,000 United States Treasury Bills,
4.99% due 8/21/97
(Cost $197,756) .............. 197,756
------------
TOTAL INVESTMENTS
(Cost $158,839,971) - 100.03%.. $192,517,805
Other assets and liabilities,
net - (0.03%) ................ (59,062)
------------
NET ASSETS (equivalent
to $16.18 per share on
11,893,324 shares
outstanding) - 100% ......... $192,458,743
============
*Non-income producing
UNREALIZED
CONTRACTS APPRECIATION
- --------- ------------
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/97)
35(2) Russell 2000 Index Futures
(June/$380.60) ............... $ 312,000
============
(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
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
11,893,324 shares outstanding ............ $ 118,933
Additional paid in capital ................ 141,230,121
Undistributed net realized gain
on securities ............................ 17,101,210
Undistributed net investment income ....... 18,645
Unrealized appreciation of:
Investments ........... $33,677,834
Futures ............... 312,000 33,989,834
----------- ------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $192,458,743
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 134
===============================================================================
SMALL CAP INDEX FUND - FINANCIAL STATEMENTS 35
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $ 2,740,363
Interest............................................................. 385,073
-----------
Total investment income............................................ 3,125,436
-----------
EXPENSES:
Advisory fees........................................................ 622,719
Custodian and accounting services.................................... 65,793
Reports to shareholders.............................................. 24,512
Audit fees and tax services.......................................... 6,366
Directors' fees and expenses......................................... 4,388
Miscellaneous........................................................ 13,184
-----------
Total expenses..................................................... 736,962
-----------
NET INVESTMENT INCOME................................................ 2,388,474
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments.......................................... $17,599,392
Futures contracts.................................... (76,255) 17,523,137
-----------
Net unrealized depreciation during the year:
Investments.......................................... (6,354,278)
Futures contracts.................................... (27,775) (6,382,053)
----------- -----------
Net realized and unrealized gain on securities
during the year................................................. 11,141,084
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $13,529,558
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ....................................... $ 2,388,474 $ 2,051,245
Net realized gain on securities ............................. 17,523,137 10,949,662
Net unrealized appreciation (depreciation) of securities
during the year ........................................... (6,382,053) 31,694,970
------------- -------------
Increase in net assets resulting from operations .......... 13,529,558 44,695,877
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................................... (2,385,945) (2,050,531)
Net realized gain on securities ............................. (11,216,991) (2,945,819)
------------- -------------
Decrease in net assets resulting from distributions
to shareholders .......................................... (13,602,936) (4,996,350)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ............................ 20,665,121 26,328,751
Proceeds from capital stock issued for distributions
reinvested ............................................... 13,602,936 4,996,350
------------- -------------
34,268,057 31,325,101
Cost of capital stock repurchased ........................... (22,521,418) (16,806,251)
------------- -------------
Increase in net assets resulting from capital
stock transactions ........................................ 11,746,639 14,518,850
------------- -------------
TOTAL INCREASE IN NET ASSETS ................................ 11,673,261 54,218,377
------------- -------------
NET ASSETS:
Beginning of year ........................................... 180,785,482 126,567,105
------------- -------------
End of year (including undistributed net investment
income of $18,645 and $16,116) ............................ $ 192,458,743 $ 180,785,482
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ................................ 1,339,448 1,827,343
Shares issued for distributions reinvested .................. 890,371 350,648
Shares of capital stock repurchased ......................... (1,465,127) (1,185,615)
------------- -------------
Increase in shares outstanding ............................ 764,692 992,376
Shares outstanding:
Beginning of year ......................................... 11,128,632 10,136,256
------------- -------------
End of year ............................................... 11,893,324 11,128,632
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 135
===============================================================================
36 INTERNATIONAL EQUITIES FUND -
STATEMENT OF NET ASSETS May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 97.93%
AEROSPACE/DEFENSE - 0.17%
15,089 British Aerospace..............$ 306,815
------------
AIRLINES - 0.82%
4,100 British Airways plc - ADR...... 482,263
40,000 *Japan Air Lines Co. Ltd........ 169,687
25,000 Lufthansa AG................... 398,017
60,000 Malay Airline System Bhd....... 138,496
35,000 Singapore Airlines............. 298,539
------------
1,487,002
------------
APPAREL & PRODUCTS - 0.59%
20,000 Onward Kashiyama Co., Ltd...... 302,276
163,039 Pacific Dunlop Ltd............. 455,749
140,000 Yue Yuen Industrial............ 307,156
------------
1,065,181
------------
APPLIANCES/FURNISHINGS - 2.15%
50,000 Brother Industries............. 195,363
22,000 Matsushita Electric Industrial
Co. Ltd. ..................... 413,740
4,200 Matsushita Electric Industrial
Co. Ltd. - ADR ............... 798,000
10,000 Philips Electronics NV......... 546,684
133,000 Sanyo Electric Co. Ltd......... 560,781
3,400 Sanyo Electric Co. Ltd. - ADR.. 72,250
30,000 Sharp Corp..................... 386,432
10,970 Sony Corp - ADR................ 935,193
------------
3,908,443
------------
AUTO - CARS - 4.36%
20,000 Daimler-Benz AG - ADR.......... 1,582,500
100,000 Fiat S.p.A..................... 327,835
15,000 Fiat S.p.A. - ADR.............. 253,125
12,500 Honda Motor Co., Ltd. - ADR.... 756,250
35,000 Nissan Motor Co., Ltd.......... 232,030
18,000 Nissan Motor Co., Ltd. - ADR... 240,750
500 Peugeot Citroen SA............. 49,441
98,000 Toyota Motor Corp.............. 2,810,820
13,519 Toyota Motor Corp. - ADR....... 777,343
500 Volkswagen Ag.................. 322,977
20,000 Volvo AB....................... 553,463
------------
7,906,534
------------
AUTO - ORIGINAL EQUIPMENT - 0.08%
25,000 Calsonic Corp..................$ 138,471
------------
AUTO - REPLACEMENT PARTS - 1.60%
36,000 Bridgestone Corp............... 813,053
1,600 Bridgestone Corp. - ADR........ 361,108
5,550 Denso Corp..................... 554,381
10,000 Michelin (CGDE) Class B........ 546,012
40,000 Phoenix AG..................... 633,082
------------
2,907,636
------------
BANKS - OTHER - 13.64%
60,000 AMMB Holdings BHD.............. 379,671
50,000 Asahi Bank Ltd................. 326,750
3,190 Asahi Bank Ltd. - ADR.......... 208,323
10,000 Banco de Santander SA.......... 852,933
126,000 Bank of Tokyo - Mitsubishi..... 2,185,659
4,180 Bank of Tokyo Ltd. - ADR....... 580,067
68,000 Bank of Yokohama Ltd........... 337,518
2,296 Bank of Yokohama Ltd. - ADR.... 113,884
37,922 Barclays plc................... 737,596
10,840 Barclays plc - ADR............. 850,940
40,000 Chiba Bank Ltd................. 207,815
90,000 Commerce Asset Holding......... 261,472
250,000 DCB Holdings BHD............... 805,906
50,000 DCB Holdings BHD (Warrants).... 69,248
6,300 Den Danske Bank AF 1871 - ADR.. 600,398
32,500 Deutsche Bank AG - ADR......... 1,804,537
10,000 Development Bank of
Singapore Ltd................. 125,149
13,625 Development Bank of
Singapore Ltd. - ADR ......... 682,429
32,000 Dresdner Bank AG - ADR......... 1,121,974
60,000 Fuji Bank Ltd.................. 772,864
4,830 Fuji Bank Ltd. - ADR........... 621,728
25,000 Hang Seng Bank................. 300,058
6,180 HSBC Holdings plc - ADR........ 1,874,290
13,500 Istituto Mobiliare Italiano
S.p.A. - ADR ................. 362,813
48,000 Joyo Bank...................... 234,951
164,322 Lloyds TSB Group plc........... 1,652,494
29,959 National Australia Bank Ltd.... 428,540
9,319 National Australia Bank
Ltd. - ADR ................... 666,309
10,412 National Westminster Bank plc.. 127,233
4,600 National Westminster Bank
plc - ADR..................... 339,825
BANKS - OTHER - Continued
20,000 Royal Bank Scot Group..........$ 196,957
98,000 Sakura Bank Ltd................ 586,569
2,000 Schweiz Bankverein............. 480,090
30,000 Shizuoka Bank.................. 288,536
74,000 Sumitomo Bank.................. 1,023,100
26,000 Tokai Bank..................... 213,894
2,225 Tokai Bank - ADR............... 365,837
25,000 Toyo Trust & Banking........... 177,544
1,300 Union Bank of Switzerland AG... 1,424,454
13,300 Westpac Banking Corp.
Ltd. - ADR ................... 359,100
------------
24,749,455
------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 1.38%
38,800 Bass plc....................... 505,549
96,100 Guinness plc................... 894,502
16,000 Kirin Brewery Co., Ltd......... 158,008
12,000 LVMH (Moet Hennessy
Louis Vuitton) - ADR ......... 583,500
45,000 Sapporo Breweries.............. 358,995
------------
2,500,554
------------
BROADCASTING - 0.45%
50,000 British Sky Broadcasting
Group plc .................... 470,309
750 Canal Plus..................... 127,022
100,000 *General Cable.................. 224,113
------------
821,444
------------
BUILDING MATERIALS - 1.87%
20,000 Asahi Glass Co. Ltd............ 194,075
1,200 Cie De St Gobain............... 165,622
30,674 CRH plc........................ 302,068
2,505 Fletcher Challenge Building
Division ..................... 67,635
2,700 Glaverbel SA................... 361,887
725 Holderbank Finance Glarus...... 635,731
40,000 Inax Corp...................... 278,575
4,116 Lafarge SA..................... 263,015
15,000 Tostem Corp.................... 400,601
26,400 Toto Ltd....................... 296,986
578 Toto Ltd. - ADR................ 64,921
38,000 Uralita, SA.................... 368,012
------------
3,399,128
------------
</TABLE>
<PAGE> 136
===============================================================================
May 31,1997 INTERNATIONAL EQUITIES FUND - 37
STATEMENT OF NET ASSETS CONTINUED
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CHEMICAL - MAJOR - 1.36%
25,000 BASF AG........................$ 921,538
10,000 Bayer AG....................... 387,631
18,000 Bayer AG - ADR................. 699,182
41,821 Montedison S.p.A. - ADR........ 256,154
20,000 Sekisui Chemical............... 207,815
------------
2,472,320
------------
CHEMICAL - MISCELLANEOUS - 2.03%
13,603 Air Liquide - ADR.............. 417,900
5,100 Akzo Nobel N V- ADR............ 342,975
8,500 Asahi Chemical Co. Ltd. - ADR.. 472,666
28,014 BOC Group plc.................. 470,643
7,500 Degussa Ag..................... 364,446
6,000 Imperial Chemical Industries
plc - ADR .................... 327,000
23,100 Shin Etsu Chemical Co.......... 579,236
50,000 Toray Industries Inc........... 340,060
5,500 Toray Industries Inc. - ADR.... 373,809
------------
3,688,735
------------
CONGLOMERATES - 2.95%
29,390 Broken Hill Proprietary Co.
Ltd. - ADR ................... 848,636
43,006 BTR plc........................ 140,000
37,426 BTR plc - ADR.................. 486,156
30,000 Hutchison Whampoa.............. 249,726
3,300 Itochu Corp. - ADR............. 167,931
71,250 Keppel Corp. Ltd............... 325,789
26,875 Keppel Corp. Ltd. - ADR........ 248,156
8,000 Lagardere Groupe............... 235,237
70,000 Marubeni Corp.................. 297,553
3,200 Marubeni Corp. - ADR........... 135,931
42,000 Mitsubishi Corp................ 494,118
50,000 Mitsui & Co.................... 442,250
60,000 Sime Darby Holdings Ltd........ 195,805
194,400 Sime Darby Holdings Ltd. - ADR. 634,405
105,728 Tomkins plc.................... 459,196
------------
5,360,889
------------
CONSUMER FINANCE - 0.07%
37,000 Nippon Shinpan Co.............. 127,729
------------
COSMETICS/TOILETRIES - 1.11%
1,100 Loreal Co......................$ 399,075
15,400 Loreal Co. - ADR............... 1,119,951
34,490 Shiseido Ltd. - ADR............ 503,157
------------
2,022,183
------------
DRUGS - 6.81%
26,667 Astra AB....................... 430,041
55,400 Glaxo Wellcome plc - ADR....... 2,229,850
7,700 Kissei Pharmaceutical Co....... 175,225
2,100 Novartis Ag.................... 2,846,653
5,000 Ono Pharmaceutical............. 171,318
250 Roche Holdings AG.............. 2,220,418
27,000 Sankyo Co. Ltd................. 855,560
78,564 SmithKline Beecham Plc......... 1,350,740
45,000 Takeda Chemical Industries Ltd. 1,139,974
10,300 Zeneca Group plc - ADR......... 943,738
------------
12,363,517
------------
ELECTRICAL EQUIPMENT - 1.52%
1,000 Barco.......................... 178,521
58,000 Delta plc...................... 305,513
15,000 Fanuc.......................... 534,564
30,000 Fujikura....................... 262,774
84,000 General Electric plc........... 479,568
10,400 General Electric plc - ADR..... 59,294
10,000 Murata Manufacturing Co........ 395,878
3,400 Sumitomo Electric Industries
Ltd. - ADR ................... 533,940
------------
2,750,052
------------
ELECTRONIC INSTRUMENTS - 3.27%
50,000 Hitachi Ltd.................... 532,417
8,550 Hitachi Ltd. - ADR............. 927,675
6,000 Kyocera Corp................... 432,289
144,000 Mitsubishi Electric Corp....... 816,144
600 Mitsubishi Electric Corp. - ADR 33,983
25,000 NEC Corp....................... 347,789
5,100 NEC Corp. - ADR................ 353,813
50,000 Racal Electronics plc.......... 188,942
7,110 Schneider SA................... 341,427
8,000 *Siemens AG..................... 450,904
23,000 *Siemens AG - ADR............... 1,299,038
25,000 Yokogawa Electric.............. 207,170
------------
5,931,591
------------
FINANCE COMPANIES - 2.05%
20,000 Abbey National.................$ 288,893
61,160 ABN Amro Holdings N V.......... 1,129,352
2,025 Compagnie Bancaire SA.......... 224,080
126 *Credit Local de France......... 11,761
7,992 Fortis Amev NV................. 327,994
19,664 ING Groep NV................... 868,387
7,758 Societe Generale............... 861,164
129 Societe Generale (Warrants).... 12,443
------------
3,724,074
------------
FOODS - 2.92%
25,000 Ajinomoto Inc.................. 251,181
1,900 Ajinomoto Inc. - ADR........... 190,766
21,799 Cadbury Schweppes plc.......... 195,420
13,634 Cadbury Schweppes plc - ADR.... 494,233
31,532 Coca Cola Amatil Ltd........... 365,059
10,000 Daiei, Inc..................... 65,264
11,500 Daiei, Inc. - ADR.............. 143,750
106,875 Grand Metropolitan............. 993,048
38,000 Nestle S A - ADR............... 2,363,801
30,750 Tate & Lyle plc................ 226,613
------------
5,289,135
------------
FOOTWEAR - 0.26%
4,500 Adidas AG...................... 472,617
------------
FREIGHT - 0.59%
98,000 *Mitsui Osk Lines Ltd........... 218,806
40,000 Nippon Yusen Kabushiki Kaish... 164,878
8,570 Nippon Yusen Kabushiki Kaish -
ADR........................... 353,008
31,683 P & O Steam Navigation......... 330,020
------------
1,066,712
------------
HOME BUILDERS - 0.22%
15,000 Daiwa House Industry Co. Ltd... 176,471
214 *Sekisui Homes Ltd. - ADR....... 20,935
20,000 Sekisui House Hokuriku, Ltd.... 195,792
------------
393,198
------------
HOSPITAL SUPPLIES - 0.51%
2,000 Novo-Nordisk A/S............... 214,155
12,800 Novo-Nordisk A/S - ADR......... 702,400
------------
916,555
------------
</TABLE>
<PAGE> 137
===============================================================================
38 INTERNATIONAL EQUITIES FUND - May 31, 1997
STATEMENT OF NET ASSETS CONTINUED
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
HOUSEHOLD PRODUCTS - 0.88%
7,000 Katokichi Co...................$ 129,240
7,600 Unilever N V- ADR.............. 1,472,500
------------
1,601,740
------------
INFORMATION PROCESSING - 0.70%
5,000 CSK Corp....................... 154,143
3,700 CSK Corp. - ADR................ 113,313
14,000 Fujitsu Ltd.................... 170,717
7,200 Fujitsu Ltd. - ADR............. 438,684
2,250 SAP AG......................... 401,264
------------
1,278,121
------------
INSURANCE - CASUALTY - 0.46%
25,000 Mitsui Marine & Fire........... 167,454
50,000 Nippon Fire & Marine Insurance. 237,441
25,000 Sumitomo Marine & Fire......... 188,922
20,000 *Tokio Marine & Fire
Insurance Co. ................ 235,294
------------
829,111
------------
INSURANCE - LIFE - 0.61%
65,312 Irish Life plc................. 334,412
15,240 Prudential plc - ADR........... 765,432
------------
1,099,844
------------
INSURANCE - MULTILINE - 2.11%
3,000 Allianz AG..................... 634,545
23,549 Assic Generali................. 403,034
15,962 AXA............................ 955,022
7,000 *Gan Group...................... 156,738
91,498 Royal Sun Alliance............. 690,014
154,095 Sedgwick Group plc............. 315,097
500 Swiss Reinsurance AG........... 670,714
------------
3,825,164
------------
LEISURE TIME - 1.63%
8,000 Canon, Inc. - ADR.............. 1,015,000
20,000 Fuji Photo..................... 774,581
150,000 Ladbroke Group plc............. 564,371
85,000 Rank Group..................... 597,906
------------
2,951,858
------------
LODGING - 0.43%
297,916 Hong Kong & Shanghai Hotels....$ 461,379
22,916 Hong Kong & Shanghai Hotels
(Warrants) ................... 4,495
180,000 Hotel Properties............... 308,327
------------
774,201
------------
MACHINE TOOLS - 0.51%
35,000 Amada Co., Ltd................. 296,050
16,000 Makita Corp. - ADR............. 232,000
40,000 Minebea Co. Ltd................ 391,584
------------
919,634
------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 1.39%
200 BBC Brown Boveri Limited-AG.... 274,216
15,000 Bilfinger & Berger Bau AG...... 583,641
2,000 Jean Lefebvre SA............... 114,986
52,000 Kajima Corp.................... 290,700
2,340 Kajima Corp. - ADR............. 130,725
80,000 Kumagai Gumi Co................ 88,791
16,000 Kumagai Gumi Co. (Warrants).... 5,007
70,000 Shimizu Corp................... 416,574
5,324 Volker Stevin.................. 613,380
------------
2,518,020
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 2.42%
10,000 Atlas Copco AB Series A........ 268,346
20,000 Atlas Copco AB Series B........ 527,660
125 Bobst SA....................... 207,392
8,000 Ebara Corp..................... 116,101
2,530 Ebara Corp. - ADR.............. 366,918
75,000 Halma plc...................... 217,160
50,000 Kawasaki Heavy Industries...... 216,402
34,000 Komatsu Ltd.................... 256,934
2,000 Komatsu Ltd. - ADR............. 60,414
70,000 Kubota Corp.................... 321,597
1,350 Kubota Corp. - ADR............. 128,250
750 Man AG......................... 214,587
1,000 Mannesmann AG.................. 406,062
612 Rauma Oy....................... 14,262
1,000 Rieter Holdings AG............. 324,767
80 Rieter Holdings AG (Warrants).. 26,320
78,595 Rolls Royce.................... 321,426
25,367 Siebe plc...................... 399,199
------------
4,393,797
------------
MEDICAL TECHNOLOGY - 0.04%
20,000 *Instrumentation Laboratory
S. p. A. ..................... 75,000
------------
MERCHANDISE - SPECIALTY - 1.22%
41,490 BAA plc........................ 359,720
150,000 Dickson Concepts
International Ltd. ........... 561,399
10,000 Esselte AB Series B............ 236,092
35,000 Great Universal Stores plc..... 369,295
10,000 Hennes and Mauritz............. 326,401
1,500 *Herlitz AG..................... 158,856
15,000 Takashimaya Co................. 195,792
------------
2,207,555
------------
MERCHANDISING - DEPARTMENT - 1.17%
500 Karstadt AG.................... 176,409
15,000 Marks & Spencer plc............ 124,714
25,033 Marks & Spencer plc - ADR...... 1,249,505
16,000 Marui Co., Ltd................. 298,154
36,000 Mitsukoshi Ltd................. 253,190
200 Mitsukoshi Ltd. - ADR.......... 14,056
------------
2,116,028
------------
MERCHANDISING - FOOD - 1.52%
2,550 Carrefour SA................... 1,673,622
10,000 Delhaize-Le Lion, S.A.......... 497,308
5,050 Koninklijke Ahold NV........... 383,248
15,000 Melco International Development
Limited ...................... 5,033
10,000 Uny Co. Ltd.................... 196,651
------------
2,755,862
------------
MERCHANDISING - MASS - 0.89%
32,666 Argos plc...................... 327,568
4,356 Familymart Co.................. 199,003
4,050 Ito-Yokado Co. Ltd. - ADR...... 925,425
20,000 Seiyu Ltd...................... 162,817
------------
1,614,813
------------
</TABLE>
<PAGE> 138
===============================================================================
May 31, 1997 INTERNATIONAL EQUITIES FUND -
STATEMENT OF NET ASSETS CONTINUED 39
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
METALS - COPPER - 0.61%
8,062 Rio Tinto Ltd. - ADR...........$ 528,558
6,432 Rio Tinto plc.................. 110,479
6,700 Rio Tinto plc - ADR............ 467,325
------------
1,106,362
------------
METALS - MISCELLANEOUS - 0.69%
400 Alusuisse Lonza Holdings....... 377,012
106,151 North Ltd...................... 405,879
71,596 *Western Mining................. 462,983
------------
1,245,874
------------
METALS - STEEL - 1.73%
500 Bekaert SA..................... 295,409
36,700 British Steel plc.............. 90,955
2,000 British Steel plc - ADR........ 51,750
50,000 Cockerill Sambre............... 189,855
60,000 Kawasaki Steel................. 176,213
15,420 Kawasaki Steel - ADR........... 452,555
200,000 Nippon Steel Co................ 585,659
155,000 NKK Corp....................... 304,809
178,000 Sumitomo Metal Industries Ltd.. 453,980
7,400 Sumitomo Metal Industries Ltd. -
ADR .......................... 188,602
50,000 Sumitomo Metal Mining.......... 348,218
------------
3,138,005
------------
MISCELLANEOUS - 0.32%
8,000 Secom Co....................... 575,698
------------
OIL - INTEGRATED
INTERNATIONAL - 4.41%
14,722 British Petroleum Co. plc - ADR 2,132,850
20,946 Elf Aquitaine SA - ADR......... 1,091,810
10,000 Repsol S A - ADR............... 421,250
17,098 Royal Dutch Petroleum Co. - ADR 3,338,385
11,207 Total.......................... 1,024,711
------------
8,009,006
------------
OIL/GAS PRODUCERS - 1.50%
225,000 Eni S.p.A...................... 1,122,046
2,505 Fletcher Challenge Energy
Division ..................... 80,160
13,500 Norsk Hydro A/S - ADR.......... 685,125
3,000 OMV AG......................... 380,590
OIL/GAS PRODUCERS - Continued
112,500 Santos Ltd.....................$ 461,383
------------
2,729,304
------------
PAPER/FOREST PRODUCTS - 0.73%
149,394 Fletcher Challenge Forest Ltd.. 196,788
3,926 *Fletcher Challenge Ltd. - ADR.. 51,038
5,010 Fletcher Challenge Paper
Division ..................... 115,230
22,000 New Oji Paper Co., Ltd......... 127,145
300 New Oji Paper Co., Ltd. - ADR.. 17,326
60,000 Nippon Paper Industries........ 319,966
22,000 UPM - Kymmene Corp............. 505,001
------------
1,332,494
------------
PUBLISHING - NEWS - 0.87%
69,356 Independent Newspapers plc..... 348,297
22,500 News Corp Ltd. - ADR........... 399,375
50,000 Reuters Holdings plc........... 561,099
20,952 United News & Media plc........ 265,285
------------
1,574,056
------------
PUBLISHING/PRINTING - 0.48%
30,000 Dai Nippon Printing Co. Ltd.... 600,258
100,000 *Seat S.p.A..................... 29,744
2,020 Wolters Kluwer NV.............. 242,820
------------
872,822
------------
RAILROAD - 0.99%
30,000 Fukuyama Transporting Co....... 202,233
90,000 Nagoya Railroad Co. Ltd........ 341,606
9,218 Nagoya Railroad Co. Ltd. - ADR. 349,639
101,970 Odakyu Electric Railway Co.
Ltd. ......................... 564,797
60,000 Tokyu Corp..................... 343,152
------------
1,801,427
------------
REAL ESTATE - 2.45%
41,076 Hammerson plc.................. 325,223
240,000 Hang Lung Development Co....... 459,960
63,000 Mitsubishi Estate Co. Ltd...... 860,198
35,000 Mitsui Fudosan................. 441,821
25,000 New World Development Co....... 158,740
132,600 Sun Hung Kai Properties Ltd.... 1,630,012
128,000 Wharf (Holdings) Ltd........... 573,221
------------
4,449,175
------------
SECURITIES RELATED - 1.19%
25,000 Daiwa Securities Co. Ltd.......$ 183,985
46,000 Mitsubishi Trust & Banking
Corp. ........................ 659,682
35,000 Nomura Securities Co. Ltd...... 414,770
3,800 Nomura Securities Co. Ltd.
- ADR ........................ 450,012
160,000 Peregrine Investment Holdings
Ltd. ......................... 284,958
16,000 Peregrine Investment Holdings
Ltd. (Warrants) .............. 4,440
6,000 *Yamaichi Securities Co.
Ltd. - ADR ................... 169,913
------------
2,167,760
------------
TELECOMMUNICATIONS - 6.23%
35,000 British Telecommunications
plc. ......................... 253,640
16,379 British Telecommunications
plc - ADR .................... 1,201,809
45,222 Cable & Wireless plc........... 369,144
15,000 Deutsche Telekom............... 332,631
48,204 Hong Kong Telecommunications
Ltd.- ADR .................... 1,090,616
15,395 Kon Ptt Nederland.............. 538,124
9,000 Nokia AB OY.................... 588,138
100,000 Stet Societa' Finanziaria
Telefonica S.p.A. ............ 504,589
5,600 Telecom Corp. of New Zealand
Ltd. - ADR ................... 214,900
300,000 *Telecom Italia Mobile.......... 879,932
335,000 Telecom Italia S.p.A........... 922,290
40,200 Telefonaktiebolage & LM
Ericsson Class B - ADR ....... 1,432,125
14,000 Telefonica de Espana........... 403,846
11,600 Telefonica de Espana - ADR..... 1,013,550
110,000 Telekom Malaysia Berhad........ 814,264
16,500 Vodafone Group plc - ADR....... 736,313
------------
11,295,911
------------
TEXTILE - PRODUCTS - 0.33%
20,000 Courtaulds Textiles plc........ 91,935
4,000 DMC Dollfus Mieg............... 82,430
30,000 Marzotto & Figli S.p.A......... 247,248
15,000 Wacoal Corp.................... 182,911
------------
604,524
------------
</TABLE>
<PAGE> 139
===============================================================================
40 INTERNATIONAL EQUITIES FUND -
STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
TOBACCO - 0.74%
75,977 B.A.T. Industries plc.........$ 680,475
30,100 B.A.T. Industries plc - ADR... 553,088
32,000 Swedish Match AB............... 104,036
------------
1,337,599
------------
UTILITIES - ELECTRIC - 4.36%
155,000 China Light & Power............ 776,150
12,000 Empresa Nacional de Electridad
SA - ADR ..................... 931,500
6,500 Hidroel Cantabrico............. 253,597
30,000 Iberdrola SA................... 368,359
16,600 Kansai Electric Power Co. Inc.. 312,185
80,000 National Power................. 723,704
4,000 Oesterreichisch
Elektrizitatswirt Schafts
- AG Class A ................. 287,635
20,000 RWE AG - ADR................... 853,676
48,488 Scottish Power plc............. 303,794
10,000 Sydkraft AB.................... 258,025
145,000 Tenaga Nasional Berhad......... 663,629
25,200 Tokyo Electric Power........... 480,412
30,000 VEBA AG........................ 1,695,629
------------
7,908,295
------------
UTILITIES - GAS, DISTRIBUTION - 0.18%
127,000 Osaka Gas Co................... 333,723
------------
WATER SERVICES - 1.36%
10,196 Eaux (Cie Generale)............ 1,253,621
10,196 Eaux (Cie Generale) (Warrants). 6,974
20,395 Hyder plc...................... 270,743
26,385 Thames Water plc............... 296,416
55,611 United Utilities plc........... 635,892
------------
2,463,646
------------
TOTAL COMMON STOCKS
(Cost $141,960,324)............ 177,676,399
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.15%
U.S. TREASURY BILLS - 0.15%
$275,000 United States Treasury Bills,
4.99% due 8/21/97
(Cost $271,912)...............$ 271,912
------------
TOTAL INVESTMENTS
(Cost $142,232,236) - 98.08%... 177,948,311
Other assets and liabilities,
net - 1.92% .................. 3,488,672
------------
NET ASSETS (equivalent
to $11.44 per share on
15,857,442 shares
outstanding) - 100% ..........$181,436,983
============
* Non-income producing
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- ---------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 05/31/97)
30 (2) Nikkei 225 Futures
(June/$172.99)................$ 302,018
============
(1) U.S.Treasury Bills with a market value of
approximately $275,000 were maintained in a
segregated account with a portion placed as
collateral for futures contracts.
(2) Per 500
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
- ---------------------------------------------------------
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
15,857,442 shares outstanding........... $ 158,574
-------------
Additional paid in capital................ 140,297,784
Undistributed net realized gain on
securities ............................. 4,489,559
Undistributed net investment income....... 448,887
Unrealized appreciation of:
Investments................ $35,716,075
Futures ................... 302,018
Foreign currency translation 24,086 36,042,179
----------- -------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $ 181,436,983
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 140
===============================================================================
INTERNATIONAL EQUITIES FUND - FINANCIAL STATEMENTS 41
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $557,737)............. $ 3,666,126
Interest............................................................. 481,858
-----------
Total investment income............................................ 4,147,984
-----------
EXPENSES:
Advisory fees........................................................ 668,871
Custodian and accounting services.................................... 76,611
Reports to shareholders.............................................. 25,220
Audit fees and tax services.......................................... 5,808
Directors' fees and expenses......................................... 4,916
Miscellaneous........................................................ 26,567
-----------
Total expenses..................................................... 807,993
-----------
NET INVESTMENT INCOME................................................ 3,339,991
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments.......................................... $ 6,661,147
Foreign currency transactions........................ (182,088)
Futures.............................................. (401,648) 6,077,411
-----------
Net unrealized appreciation during the year:
Investments.......................................... 3,803,766
Foreign currency translation......................... 22,338
Futures.............................................. 130,782 3,956,886
----------- -----------
Net realized and unrealized gain on securities and
foreign currencies during the year.............................. 10,034,297
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $13,374,288
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................. $ 3,339,991 $ 3,381,202
Net realized gain on securities and foreign currency
transactions ....................................... 6,077,411 7,822,417
Net unrealized appreciation of securities and
translation of foreign currencies during the year.... 3,956,886 10,529,705
------------ ------------
Increase in net assets resulting from operations.... 13,374,288 21,733,324
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (3,206,176) (3,224,568)
Net realized gain on securities........................ (6,030,686) (4,471,011)
------------ ------------
Decrease in net assets resulting from distributions
to shareholders..................................... (9,236,862) (7,695,579)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold....................... 74,488,255 67,168,258
Proceeds from capital stock issued for distributions
reinvested .......................................... 9,236,862 7,695,579
------------ ------------
83,725,117 74,863,837
Cost of capital stock repurchased...................... (112,684,896) (91,733,125)
------------ ------------
Decrease in net assets resulting from capital stock
transactions....................................... (28,959,779) (16,869,288)
TOTAL DECREASE IN NET ASSETS........................... (24,822,353) (2,831,543)
NET ASSETS:
Beginning of year...................................... 206,259,336 209,090,879
------------ ------------
End of year (including undistributed net investment
income of $448,887 and $262,279) ................. $181,436,983 $206,259,336
------------ ------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold........................... 6,846,567 6,277,440
Shares issued for distributions reinvested............. 848,956 721,434
Shares of capital stock repurchased ................... (10,334,613) (8,576,096)
------------ ------------
Decrease in shares outstanding....................... (2,639,090) (1,577,222)
Shares outstanding:
Beginning of year.................................... 18,496,532 20,073,754
------------ ------------
End of year.......................................... 15,857,442 18,496,532
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 141
===============================================================================
42 GROWTH FUND - STATEMENT OF NET ASSETS May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCKS - 87.37%
ADVERTISING - 3.07%
<S> <C>
350,000 *ADVO, Inc.............................. $ 4,856,249
290,000 *Catalina Marketing Corp................ 10,693,750
222,500 *Outdoor Systems Inc.................... 7,370,313
22,920,312
-----------
APPAREL & PRODUCTS - 0.80%
134,500 *Tommy Hilfiger Corp.................... 5,985,250
-----------
AUTO - REPLACEMENT PARTS - 0.94%
300,000 *AutoZone, Inc.......................... 7,012,500
-----------
BANKS - REGIONAL - 1.54%
215,000 Norwest Corp........................... 11,502,500
-----------
BROADCASTING - 1.89%
625,000 Comcast Corp. Class A Special.......... 10,859,375
146,100 Gaylord Entertainment Co. Class A...... 3,250,725
-----------
14,110,100
-----------
CONSUMER FINANCE - 0.18%
470,000 Mercury Finance Co..................... 1,233,750
-----------
ELECTRONIC INSTRUMENTS - 0.92%
236,000 *ADT Ltd................................ 6,873,500
-----------
ENTERTAINMENT - 3.01%
290,000 Carnival Corp. Class A................. 11,020,000
140,000 Walt Disney Co......................... 11,462,501
-----------
22,482,501
-----------
FINANCE COMPANIES - 3.61%
325,000 Green Tree Financial Corp.............. 11,375,000
100,000 Household International, Inc........... 9,825,000
225,000 Money Store, Inc....................... 5,765,625
-----------
26,965,625
FOODS - 1.06%
650,000 *Petsmart Inc........................... 7,962,500
-----------
FUNERAL SERVICES - 2.00%
425,000 Service Corp. International............ 14,981,250
-----------
GOVERNMENT SPONSORED - 2.93%
400,000 Federal Home Loan Mortgage Corp........ $13,200,000
200,000 Federal National Mortgage
Association........................... 8,725,000
-----------
21,925,000
-----------
HEALTHCARE - 6.97%
330,000 *Apria Healthcare Group, Inc............ 5,940,000
225,000 Cardinal Health, Inc................... 13,106,250
90,000 *PacifiCare Health System, Inc.
Class B............................... 7,132,500
168,900 *Patterson Dental Co.................... 5,827,050
190,000 *Phycor, Inc............................ 5,438,750
415,000 *Quorum Health Group Inc................ 14,680,625
-----------
52,125,175
-----------
HOSPITAL MANAGEMENT - 4.67%
250,000 Columbia/HCA Healthcare Corp........... 9,156,250
350,000 *Vencor, Inc............................ 14,262,500
325,000 *Vivra, Inc............................. 11,496,875
-----------
34,915,625
-----------
HUMAN RESOURCES - 4.64%
550,000 Accustaff, Inc......................... 13,200,000
350,000 *COREStaff, Inc......................... 8,312,500
282,800 *Employee Solutions, Inc................ 1,502,375
300,000 Interim Services Inc................... 11,700,000
-----------
34,714,875
-----------
INFORMATION PROCESSING - 6.59%
300,000 *BISYS Group, Inc....................... 11,437,500
485,000 First Data Corp........................ 19,400,000
225,000 Paychex, Inc........................... 8,268,750
240,000 *SunGard Data Systems, Inc.............. 10,200,000
-----------
49,306,250
-----------
INSURANCE - LIFE - 0.05%
13,600 *UICI................................... 365,500
-----------
INSURANCE- MISCELLANEOUS - 6.18%
250,000 Ace Limited............................ 16,000,000
90,000 MGIC Investment Corp................... 8,010,000
130,000 PMI Group Inc.......................... 7,133,750
190,000 UNUM Corp.............................. 15,033,750
-----------
46,177,500
-----------
LEISURE TIME - 0.93%
200,000 *Sabre Group Holdings, Inc.............. $ 5,575,000
59,000 *Vail Resorts Inc....................... 1,408,625
-----------
6,983,625
-----------
LODGING - 4.83%
335,000 *Extended Stay America, Inc............. 4,648,125
275,000 *HFS, Inc............................... 14,815,625
725,000 La Quinta Inns, Inc.................... 16,675,000
-----------
36,138,750
-----------
MERCHANDISE - SPECIALTY - 11.77%
250,000 Circuit City Stores, Inc............... 9,875,000
300,000 *Cole National Corp. Class A............ 11,362,500
744,600 *Corporate Express, Inc................. 10,238,250
370,000 *CostCo Companies, Inc.................. 12,487,500
650,000 *General Nutrition Cos., Inc............ 15,112,500
125,000 Home Depot, Inc........................ 7,875,000
475,000 Ikon Office Solutions Inc.............. 13,775,000
135,000 Kohl's Corp............................ 7,273,125
-----------
87,998,875
-----------
MERCHANDISING - MASS - 2.50%
811,600 *CUC International Inc.................. 18,666,800
-----------
MISCELLANEOUS - 0.21%
44,800 *Sylvan Learning Systems, Inc........... 1,607,200
-----------
OIL - SERVICE - PRODUCTS - 1.53%
110,000 *BJ Services Co......................... 6,077,500
45,000 Schlumberger Ltd....................... 5,360,625
-----------
11,438,125
-----------
OIL - SERVICES - 3.96%
175,000 Camco International, Inc............... 8,968,750
200,000 *Smith International, Inc............... 10,475,000
150,000 *Western Atlas Inc...................... 10,181,250
-----------
29,625,000
-----------
POLLUTION CONTROL - 2.65%
370,000 *Republic Industries, Inc............... 8,903,125
300,000 *USA Waste Services, Inc................ 10,875,000
-----------
19,778,125
-----------
</TABLE>
<PAGE> 142
===============================================================================
May 31, 1997 GROWTH FUND - STATEMENT OF NET ASSETS CONTINUED 43
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C>
PUBLISHING - NEWS - 0.69%
120,000 Tribune Co............................. $ 5,190,000
-------------
RESTAURANTS - 2.81%
425,000 *Boston Chicken, Inc.................... 7,650,000
125,000 *Lone Star Steakhouse & Saloon.......... 2,875,000
450,000 *Outback Steakhouse Inc................. 10,462,500
-------------
20,987,500
-------------
SECURITIES RELATED - 2.86%
330,000 Franklin Resources, Inc................ 21,367,500
-------------
TELECOMMUNICATIONS - 1.58%
425,000 *Airtouch Communications, Inc........... 11,846,875
-------------
TOTAL COMMON STOCKS
(Cost $538,978,043).................... 653,188,088
-------------
PAR
VALUE
- ------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 11.69%
CONSUMER FINANCE - 3.72%
Sears Roebuck Acceptance Corp:
$10,000,000 5.55% due 06/09/97 ................... 9,987,660
9,000,000 5.53% due 06/03/97.................... 8,997,231
8,903,000 5.53% due 06/05/97.................... 8,897,525
-------------
27,882,416
-------------
FINANCE COMPANIES - 5.57%
9,814,000 Ford Motor Credit Co.,
5.52 % due 06/10/97................... 9,800,450
15,972,000 General Electric Capital Services Inc.,
5.50 % due 06/02/97................... 15,969,555
General Motors Acceptance Corp:
7,891,000 5.53% due 06/06/97.................... 7,884,935
7,979,000 5.48% due 06/04/97.................... 7,975,351
-------------
41,630,291
-------------
SECURITIES RELATED - 2.40%
17,941,000 Merrill Lynch & Co. Inc.,
5.62% due 06/11/97.................... 17,912,982
-------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $ 87,425,689).................... $ 87,425,689
-------------
TOTAL INVESTMENTS
(Cost $626,403,732) - 99.06%........... 740,613,777
Other assets less liabilities,
net - 0.94%........................... 7,040,236
-------------
NET ASSETS (equivalent
to $17.62 per share on
42,421,874 shares
outstanding) - 100%................... $747,654,013
=============
*Non-income producing
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
42,421,874 shares outstanding.................... $ 424,219
Additional paid in capital......................... 618,177,079
Undistributed net realized gain on securities 14,539,455
Undistributed net investment income................ 303,215
Unrealized appreciation of securities.............. 114,210,045
-------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING...................................... $747,654,013
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 143
===============================================================================
44 GROWTH FUND - FINANCIAL STATEMENTS
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends ............................................................ $ 2,226,275
Interest ............................................................. 3,365,118
-----------
Total investment income ............................................ 5,591,393
-----------
EXPENSES:
Advisory fees ........................................................ 4,704,380
Custodian and accounting services .................................... 182,315
Reports to shareholders .............................................. 85,619
Audit fees and tax services .......................................... 26,695
Directors' fees and expenses ......................................... 13,226
Miscellaneous ........................................................ 26,765
-----------
Total expenses ..................................................... 5,039,000
-----------
NET INVESTMENT INCOME ................................................ 552,393
-----------
REALIZED AND UNREALIZED GAINON SECURITIES:
Net realized gain on securities ...................................... 16,994,556
Net unrealized appreciation of securities during the year ............ 39,599,901
-----------
Net realized and unrealized gain on securities during the year ..... 56,594,457
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... $57,146,850
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 552,393 $ 2,125,410
Net realized gain on securities ...................................... 16,994,556 12,920,523
Net unrealized appreciation of securities during the year ............ 39,599,901 65,916,187
-------------- --------------
Increase in net assets resulting from operations ................... 57,146,850 80,962,120
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................ (503,196) (1,871,667)
Net realized gain on securities ...................................... (11,891,551) (3,757,835)
-------------- --------------
Decrease in net assets resulting from distributions
to shareholders ................................................... (12,394,747) (5,629,502)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ..................................... 268,628,198 258,993,562
Proceeds from capital stock issued for distributions reinvested ...... 12,394,747 5,629,502
-------------- --------------
281,022,945 264,623,064
Cost of capital stock repurchased .................................... (3,908,102) (14,782,740)
-------------- --------------
Increase in net assets resulting from capital stock transactions ... 277,114,843 249,840,324
-------------- --------------
TOTAL INCREASE IN NET ASSETS ......................................... 321,866,946 325,172,942
NET ASSETS:
Beginning of year .................................................... 425,787,067 100,614,125
-------------- --------------
End of year (including undistributed net investment income
of $303,215 and $254,018) .......................................... $ 747,654,013 $ 425,787,067
============== ==============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ......................................... 16,096,764 17,658,112
Shares issued for distributions reinvested ........................... 733,851 382,244
Shares of capital stock repurchased .................................. (234,388) (1,014,547)
-------------- --------------
Increase in shares outstanding ..................................... 16,596,227 17,025,809
Shares outstanding:
Beginning of year .................................................. 25,825,647 8,799,838
-------------- --------------
End of year ........................................................ 42,421,874 25,825,647
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 144
===============================================================================
May 31, 1997 GROWTH & INCOME FUND - STATEMENT OF NET ASSETS 45
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
--------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 90.54%
ADVERTISING - 1.05%
38,000 Omnicom Group, Inc. .................... $ 2,204,000
-----------
AEROSPACE/DEFENSE - 3.29%
9,000 Logicon, Inc. .......................... 452,250
50,200 McDonnell Douglas Corp. ................ 3,231,625
40,000 United Technologies Corp. .............. 3,215,000
-----------
6,898,875
-----------
APPAREL & PRODUCTS - 0.75%
45,000* Fruit of the Loom, Inc. Class A ........ 1,569,375
-----------
AUTO - ORIGINAL EQUIPMENT - 0.97%
42,000 Danaher Corp. .......................... 2,037,000
-----------
BANKS - NEW YORK CITY - 1.26 %
23,000 CitiCorp ............................... 2,630,625
-----------
BANKS - OTHER - 2.93%
30,000 BankAmerica Corp. ...................... 3,506,250
30,000 Mellon Bank Corp. ...................... 2,625,000
-----------
6,131,250
-----------
BANKS - REGIONAL - 2.21%
45,000 Norwest Corp. .......................... 2,407,500
54,000 Star Banc Corp. ........................ 2,227,500
-----------
4,635,000
-----------
BEVERAGE - SOFT DRINKS - 1.79%
55,000 Coca-Cola Co. .......................... 3,753,750
-----------
CHEMICAL - MAJOR - 0.90%
17,000 E.I. du Pont de Nemours and Co. ........ 1,850,875
600 Hercules, Inc. ......................... 28,125
-----------
1,879,000
-----------
CHEMICAL - MISCELLANEOUS - 1.21%
48,000 Pra air, Inc. .......................... 2,526,000
-----------
CONTAINERS - PAPER - 0.35%
16,000* Sealed Air Corp. ....................... 734,000
-----------
DRUGS - 2.57%
50,000* Dura Pharmaceuticals, Inc. ............. $1,987,500
33,000 Pfizer, Inc. ........................... 3,394,875
-----------
5,382,375
-----------
ELECTRONIC INSTRUMENTS - 1.30%
50,000* Dynatech Corp. ......................... 1,875,000
27,000 Symbol Technologies, Inc. .............. 847,125
-----------
2,722,125
-----------
FINANCE COMPANIES - 1.74%
15,000 Green Tree Financial Corp. ............. 525,000
7,000 Household International, Inc. .......... 687,750
21,000 Money Store, Inc. ...................... 538,125
40,000 SunAmerica, Inc. ....................... 1,890,000
-----------
3,640,875
-----------
FOODS - 2.57%
56,000 Campbell Soup Co. ...................... 2,576,000
50,000 Hershey Foods Corp. .................... 2,806,250
-----------
5,382,250
-----------
FOOTWEAR - 0.54%
20,000 NIKE, Inc. Class B ..................... 1,140,000
-----------
GOVERNMENT SPONSORED - 0.87%
15,000 Student Loan Marketing
Association ............................ 1,824,375
-----------
HEALTHCARE - 3.55%
45,000 Cardinal Health, Inc. .................. 2,621,250
141,480* HealthSouth Corp. ...................... 3,236,355
55,000 Omnicare, Inc. ......................... 1,574,375
-----------
...................................... 7,431,980
-----------
HOSPITAL SUPPLIES - 2.81%
43,200 Becton, Dickinson and Co. .............. 2,127,600
50,000 Johnson & Johnson ...................... 2,993,750
23,000 United States Surgical Corp. ........... 776,250
-----------
5,897,600
-----------
HOUSEHOLD PRODUCTS - 1.32%
20,000 Procter & Gamble Co. ................... 2,757,500
-----------
INFORMATION PROCESSING - 9.15%
55,000* Adaptec, Inc............................ $ 2,021,250
50,000* Ascend Communications Inc. ............. 2,787,500
70,000* BMC Software, Inc. ..................... 3,788,750
35,000* Cisco Systems, Inc. .................... 2,371,250
50,000 Computer Associates
International, Inc. .................... 2,737,500
35,000* Gateway 2000, Inc. ..................... 2,323,125
5,000 Microsoft Corp. (Preferred) ............ 430,625
60,000 Reynolds and Reynolds Co. ..............
Class A ................................ 1,402,500
14,183* Storage Technology Corp. ............... 577,957
15,000* 3Com Corp. ............................. 727,500
----------
$19,167,957
-----------
INSURANCE - CASUALTY - 1.70% ...........
65,000 Frontier Insurance Group, Inc. ......... 3,566,875
-----------
INSURANCE - LIFE - 2.10% ...............
110,000 Conseco Inc. ........................... 4,400,000
-----------
INSURANCE - MULTILINE - 4.25% ..........
50,000 Allstate Corp. ......................... 3,681,250
4,000* CNA Financial Corp. .................... 409,500
35,000 Reliastar Financial Corp. .............. 2,244,375
46,666 Travelers Group, Inc. .................. 2,560,795
-----------
8,895,920
-----------
LODGING - 0.49% ........................
19,000* HFS, Inc. .............................. 1,023,625
-----------
MACHINERY - INDUSTRIAL/ ................
SPECIALTY - 1.78% ......................
36,000 Illinois Tool Works Inc. ............... 1,786,500
30,000* SCI Systems, Inc. ...................... 1,950,000
-----------
3,736,500
-----------
MERCHANDISE - SPECIALTY - 3.68% ........
44,250* Consolidated Stores Corp. .............. 1,692,563
70,000 Dollar General Corp. ................... 2,353,750
75,375* Staples, Inc. .......................... 1,658,250
42,000 TJX Companies, Inc. .................... 2,016,000
-----------
7,720,563
-----------
</TABLE>
<PAGE> 145
===============================================================================
46 GROWTH & INCOME FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
MERCHANDISING - FOOD - 1.68%
32,000 *Kroger Co. .................... $ 820,000
60,000 *Safeway, Inc. ................. 2,700,000
------------
3,520,000
------------
METALS - MISCELLANEOUS - 1.37%
45,900 Precision Castparts Corp. ..... 2,868,750
------------
NATURAL GAS - DIVERSIFIED - 0.89%
40,000 PanEnergy Corp. ............... 1,870,000
------------
OIL - INTEGRATED DOMESTIC - 2.44%
40,000 Occidental Petroleum Corp. .... 930,000
45,000 *Oryx Energy Co. ............... 1,040,625
25,000 Phillips Petroleum Co. ........ 1,062,500
70,000 USX-Marathon Group ............ 2,082,500
------------
5,115,625
------------
OIL - INTEGRATED
INTERNATIONAL - 1.04%
15,090 British Petroleum Co.
plc - ADR .................... 2,186,164
------------
OIL - SERVICE - PRODUCTS - 1.05%
40,000 *BJ Services Co. ............... 2,210,000
------------
OIL - SERVICES - 6.93%
60,000 Baker Hughes Inc. ............. 2,250,000
45,000 *ENSCO International, Inc. ..... 2,244,375
80,000 *Rowan Companies, Inc. ......... 1,850,000
50,000 *Smith International, Inc. ..... 2,618,750
50,000 Tidewater, Inc. ............... 2,106,250
50,000 Transocean Offshore, Inc. ..... 3,450,000
------------
14,519,375
------------
OIL/GAS PRODUCERS - 4.42%
45,000 *Falcon Drilling Co., Inc. ..... 2,064,375
48,000 Helmerich & Payne, Inc. ....... 2,694,000
65,000 Louisiana Land &
Exploration Co. .............. 3,347,500
27,285 Noble Affiliates, Inc. ........ 1,149,381
------------
9,255,256
------------
PAPER/FOREST PRODUCTS - 0.72%
40,000 Avery Dennison Corp. .......... 1,505,000
------------
POLLUTION CONTROL - 0.46%
25,000 *United Waste Systems, Inc. .... 959,375
------------
SEMICONDUCTORS - 2.09%
35,000 *Applied Materials, Inc. ....... $ 2,283,750
50,000 *LSI Logic Corp. ............... 2,087,500
------------
4,371,250
------------
TELECOMMUNICATIONS - 4.73%
40,000 *ADC Communications, Inc. ...... 1,370,000
47,850 *Andrew Corp. .................. 1,303,913
125,000 *Pairgain Technologies Inc. .... 2,609,375
48,000 *Tellabs, Inc. ................. 2,412,000
75,000 *WorldCom, Inc. ................ 2,221,875
------------
9,917,163
------------
TOBACCO - 1.89%
90,000 Philip Morris Cos Inc. ........ 3,960,000
------------
UTILITIES - COMMUNICATION - 0.73%
25,000 Cincinnati Bell, Inc. ......... 1,537,500
------------
UTILITIES - ELECTRIC - 1.71%
50,000 *AES Corp. ..................... 3,587,500
------------
UTILITIES - GAS, PIPELINE - 1.26%
60,000 Williams Companies, Inc. ...... 2,647,500
------------
TOTAL COMMON STOCKS
(Cost $144,555,813) ........... 189,719,853
------------
PAR
VALUE
- -----------
CONVERTIBLE BONDS - 6.58%
AEROSPACE/DEFENSE - 0.39%
$ 500,000 Rohr, Inc.,
7.75% due 05/15/04 ........... 825,000
------------
AIRLINES - 0.30%
500,000 Alaska Air Group, Inc.,
6.50% due 06/15/05 ........... 622,500
------------
DRUGS - 0.77%
500,000 ALZA Corp.,
5.00% due 05/01/06 ........... 500,000
1,000,000 ICN Pharmaceuticals, Inc.,
8.50% due 11/15/99 ........... 1,105,000
------------
1,605,000
------------
ELECTRONIC INSTRUMENTS - 0.12%
$ 300,000 C-Cube Microsystems, Inc.,
5.88% due 11/01/05 ........... $ 280,500
------------
HEALTHCARE - 0.47%
1,000,000 Phycor, Inc.,
4.50% due 02/15/03 ........... 985,000
------------
INFORMATION PROCESSING - 1.68%
500,000 Adaptec, Inc.,
4.75% due 02/01/04 .......... 498,750
Data General Corp:
1,000,000 7.75% due 06/01/01 ........... 1,150,000
300,000 6.00% due 05/15/04 ........... 322,500
1,500,000 National Data Corp.,
5.00% due 11/01/03 ........... 1,545,000
------------
3,516,250
------------
INSURANCE - LIFE - 0.58%
1,000,000 Equitable Cos., Inc.
6.13% due 12/15/24 ........... 1,207,500
------------
LODGING - 0.52%
500,000 HFS, Inc.,
4.75% due 03/01/03 ........... 552,500
500,000 Hilton Hotels Corp.,
5.00% due 05/15/06 ........... 542,500
------------
1,095,000
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.34%
500,000 SCI Systems, Inc.,
5.00% due 05/01/06 ........... 708,750
------------
MERCHANDISE - SPECIALTY - 0.26%
500,000 Home Depot, Inc.,
3.25% due 10/01/01 ........... 535,000
------------
OIL - INTEGRATED DOMESTIC - 0.59%
1,000,000 Pennzoil Co.,
4.75% due 10/01/03 ........... 1,232,500
------------
OIL - SERVICES - 0.30%
500,000 Nabors Industries, Inc.,
5.00% due 05/15/06 ........... 635,000
------------
</TABLE>
<PAGE> 146
===============================================================================
May 31, 1997 GROWTH & INCOME FUND - STATEMENT OF NET ASSETS CONTINUED 47
===============================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------
<S> <C> <C>
OIL/GAS PRODUCERS - 0.26%
$ 500,000 Diamond Offshore Drilling, Inc.,
3.75% due 02/15/07 ........... $ 548,750
------------
TOTAL CONVERTIBLE BONDS
(Cost $13,515,369) ............ 13,796,750
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 2.92%
CONSUMER FINANCE - 1.61%
3,371,000 Beneficial Corp.,
5.48% due 06/02/97 ........... 3,370,486
------------
FINANCE COMPANIES - 1.31%
2,746,000 Ford Motor Credit Co.,
5.60% due 06/03/97 ........... 2,745,146
------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $6,115,632) ............. 6,115,632
------------
TOTAL INVESTMENTS
(Cost $164,186,814) - 100.04% . 209,632,235
Other assets less liabilities,
net - (0.04%) ................ (87,111)
------------
NET ASSETS (equivalent
to $16.87 per share on
12,422,162 shares
outstanding) - 100% .......... $209,545,124
============
*Non-income producing
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
12,422,162 shares outstanding ........... $ 124,222
Additional paid in capital ............... 161,101,892
Accumulated net realized gain
on securities ........................... 2,712,317
Undistributed net investment income ...... 161,272
Unrealized appreciation of securities .... 45,445,421
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING ............................. $209,545,124
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 147
================================================================================
48 GROWTH & INCOME FUND - FINANCIAL STATEMENTS
================================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ....................................................... $ 1,272,521
Interest ........................................................ 1,167,033
-----------
Total investment income ....................................... 2,439,554
-----------
EXPENSES:
Advisory fees ................................................... 1,211,524
Custodian and accounting fees ................................... 51,399
Reports to shareholders ......................................... 23,351
Audit fees and tax services ..................................... 7,005
Directors' fees and expenses .................................... 3,616
Miscellaneous ................................................... 8,014
-----------
Total expenses ................................................ 1,304,909
-----------
NET INVESTMENT INCOME ........................................... 1,134,645
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on securities ................................. 2,722,032
Net unrealized appreciation on securities during the year ....... 24,022,009
-----------
Net realized and unrealized gain on securities during
the year.................................................... 26,744,041
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $27,878,686
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................... $ 1,134,645 $ 475,333
Net realized gain on securities ..................................... 2,722,032 4,151,221
Net unrealized appreciation of securities during the year ........... 24,022,009 17,414,828
------------- -------------
Increase in net assets resulting from operations .................. 27,878,686 22,041,382
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................... (1,058,649) (392,678)
Net realized gain on securities ..................................... (3,131,642) (556,363)
------------- -------------
Decrease in net assets resulting from distributions
to shareholders .................................................. (4,190,291) (949,041)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold .................................... 70,892,821 62,680,575
Proceeds from capital stock issued for distributions reinvested ..... 4,190,291 949,041
------------- -------------
75,083,112 63,629,616
Cost of capital stock repurchased ................................... (2,772,662) (14,042,186)
------------- -------------
Increase in net assets resulting from capital stock transactions .. 72,310,450 49,587,430
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................ 95,998,845 70,679,771
NET ASSETS:
Beginning of year ................................................... 113,546,279 42,866,508
------------- -------------
End of year (including undistributed net investment income
of $161,272 and $85,276) .......................................... $ 209,545,124 $ 113,546,279
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ........................................ 4,647,143 4,772,881
Shares issued for distributions reinvested .......................... 268,315 73,503
Shares of capital stock repurchased ................................. (177,920) (1,028,347)
------------- -------------
Increase in shares outstanding .................................... 4,737,538 3,818,037
Shares outstanding:
Beginning of year ................................................. 7,684,624 3,866,587
------------- -------------
End of year ....................................................... 12,422,162 7,684,624
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 148
===============================================================================
May 31, 1997 SCIENCE & TECHNOLOGY FUND - STATEMENT OF NET ASSETS 49
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
COMMON STOCKS - 82.74%
AEROSPACE/DEFENSE - 0.94%
<S> <C>
200,000 OEA, Inc.......................$ 7,550,000
------------
ELECTRICAL EQUIPMENT - 1.37%
500,000 *Anixter International, Inc..... 8,500,000
152,000 *FORE Systems, Inc.............. 2,517,497
------------
11,017,497
------------
ELECTRONIC INSTRUMENTS - 0.90%
200,000 *LAM Research Corp.............. 7,275,000
------------
HOSPITAL SUPPLIES - 3.54%
250,000 *Boston Scientific Corp......... 13,343,750
450,000 United States Surgical Corp.... 15,187,500
------------
28,531,250
------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 16.85%
750,000 *BMC Software, Inc.............. 40,593,750
100,000 *Citrix Systems, Inc............ 3,762,500
58,500 *Clarify, Inc................... 709,313
400,000 *Medic Computer Systems, Inc.... 6,925,000
125,000 *Microsoft Corp................. 15,500,000
700,000 *Oracle Corp.................... 32,637,500
800,000 *PLATINUM technology, inc....... 11,600,000
300,000 *Premenos Technology Corp....... 2,025,000
500,000 *Synopsys Inc................... 18,687,500
65,000 *Veritas Software Corp.......... 3,233,750
------------
135,674,313
------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 3.99%
300,000 *Adaptec, Inc................... 11,025,000
80,000 *Dell Computer Corp............. 9,000,000
340,000 *Microchip Technology, Inc...... 12,070,000
------------
32,095,000
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 20.67%
440,000 *America Online, Inc............ 24,310,000
250,000 *Checkfree Corp................. 4,375,000
225,000 *Cognos Inc..................... 7,031,250
200,000 Electronic Data Systems Corp... 7,475,000
INFORMATION PROCESSING -
COMPUTER SERVICES - Continued
800,000 First Data Corp................$ 32,000,000
550,000 *Gartner Group, Inc............. 16,018,750
300,000 National Data Corp............. 13,162,500
350,000 *Parametric Technology Corp..... 15,706,250
6,800 *Rationale Software Corp........ 128,350
250,000 *Security Dynamics Technology... 9,218,750
500,000 *Sterling Commerce Inc.......... 16,625,000
300,000 *SunGard Data Systems, Inc...... 12,750,000
285,000 *Vantive Corp................... 7,659,375
------------
166,460,225
------------
INFORMATION PROCESSING -
CONSUMER SOFTWARE - 0.99%
72,200 *CBT Group PLC.................. 3,934,900
250,000 *Pure Atria Corp................ 4,000,000
------------
7,934,900
------------
INFORMATION PROCESSING -
NETWORKING - 8.96%
125,000 *Ascend Communications Inc...... 6,968,750
250,000 *Cascade Communications Corp.... 9,562,500
250,000 *Cisco Systems, Inc............. 16,937,500
350,000 *Network Gen Corp............... 6,431,250
90,000 *Remedy Corp.................... 3,633,750
300,000 *Sync Research, Inc............. 1,256,250
325,000 *U.S. Robotics Corp............. 27,300,000
------------
72,090,000
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.52%
80,000 *ASM Lithography Holding NV..... 4,180,000
------------
MERCHANDISING - MASS - 2.43%
850,000 *CUC International Inc.......... 19,550,000
------------
SEMICONDUCTORS - 15.59%
300,000 *Altera Corp.................... 15,900,000
1,000,000 *Analog Devices, Inc............ 26,750,000
60,000 *Applied Materials, Inc......... 3,915,000
55,000 Intel Corp..................... 8,332,500
75,000 *KLA-Tencor Corp................ 3,567,187
275,000 Linear Technology Corp......... 13,784,375
SEMICONDUCTORS - Continued
400,000 *Maxim Integrated Products......$ 21,500,000
60,000 *Novellus Systems, Inc.......... 4,912,500
500,000 *Xilinx, Inc.................... 26,812,500
------------
125,474,062
------------
TELECOMMUNICATIONS - 5.99%
450,000 *ADC Communications, Inc........ 15,412,500
600,000 *Airtouch Communications, Inc... 16,725,000
250,000 *Omnipoint Corp................. 3,437,500
22,782 Panamsat....................... 652,135
160,700 Vodafone Group plc - ADR....... 7,171,237
162,700 *WorldCom, Inc.................. 4,819,987
------------
48,218,359
------------
TOTAL COMMON STOCKS
(Cost $538,754,380)............ 666,050,606
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
- -----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 15.04%
CONSUMER FINANCE - 11.76%
<C> <C>
8,662,000 Ford Motor Credit Co.,
5.52% due 06/12/97 ........... 8,647,383
General Electric Capital Corp:
15,973,000 5.50% due 06/06/97 ........... 15,960,779
15,391,000 5.47% due 06/09/97 ........... 15,372,265
General Motors Acceptance Corp:
5,186,000 5.62% due 06/11/97............ 5,177,901
17,462,000 5.53% due 06/10/97............ 17,437,839
9,772,000 Pactel Capital Resources.,
5.52% due 06/11/97............ 9,757,007
Sears Roebuck Acceptance Corp:
7,279,000 5.63% due 06/04/97 .......... 7,276,763
15,000,000 5.57% due 06/02/97 .......... 14,996,489
----------
94,626,426
----------
SECURITIES RELATED - 3.28%
Merrill Lynch & Co:
10,000,000 5.62% due 06/03/97............ 9,996,872
16,482,000 5.52% due 06/05/97............ 16,471,873
----------
26,468,745
----------
</TABLE>
<PAGE> 149
================================================================================
50 SCIENCE & TECHNOLOGY FUND - STATEMENT OF NET ASSETS CONTINUED May 31,1997
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
- --------------------------------------------------------
TOTAL SHORT TERM
COMMERCIAL PAPER
<S> <C>
(Cost $121,095,171)............$121,095,171
------------
TOTAL INVESTMENTS
(Cost $659,849,551) - 97.78%... 787,145,777
Other assets and liabilities,
net - 2.22%................... 17,836,170
------------
NET ASSETS (equivalent
to $19.88 per share on
40,484,129 shares
outstanding) - 100%...........$804,981,947
============
*Non-income producing
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
40,484,129 shares outstanding........... $ 404,841
Additional paid in capital................ 691,474,318
Accumulated net realized loss on
securities.............................. (12,258,083)
Accumulated net investment loss........... (1,935,355)
Unrealized appreciation of securities..... 127,296,226
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $804,981,947
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 150
===============================================================================
SCIENCE & TECHNOLOGY FUND - FINANCIAL STATEMENTS 51
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ...................................................... $ 764,508
Interest ....................................................... 3,692,989
------------
Total investment income ...................................... 4,457,497
------------
EXPENSES:
Advisory fees .................................................. 5,973,280
Custodian and accounting services .............................. 212,011
Reports to shareholders ........................................ 97,009
Audit fees and tax services .................................... 28,366
Directors' fees and expenses ................................... 15,717
Miscellaneous .................................................. 50,905
------------
Total expenses ............................................... 6,377,288
------------
NET INVESTMENT LOSS ............................................ (1,919,791)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments ...................................... $(8,891,536)
Foreign currency transactions .................... 1,633
----------- (8,889,903)
Net unrealized appreciation of securities during the year ...... 33,692,829
------------
Net realized and unrealized gain on securities during the
year ....................................................... 24,802,926
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $ 22,883,135
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment loss.................................... $ (1,919,791) $ (250,091)
Net realized gain (loss) on securities................. (8,889,903) 59,379,986
Net unrealized appreciation of securities
during the year ................................... 33,692,829 79,262,122
------------ ------------
Increase in net assets resulting from operations..... 22,883,135 138,392,017
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. - (30,219)
Net realized gain on securities........................ (32,117,202) (39,016,725)
------------ ------------
Decrease in net assets resulting from distributions
to shareholders..................................... (32,117,202) (39,046,944)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold....................... 286,682,331 310,357,765
Proceeds from capital stock issued for
distributions reinvested............................. 32,117,202 39,046,944
------------ ------------
318,799,533 349,404,709
Cost of capital stock repurchased...................... (71,770,130) (48,246,211)
------------ ------------
Increase in net assets resulting from
capital stock transactions......................... 247,029,403 301,158,498
------------ ------------
TOTAL INCREASE IN NET ASSETS........................... 237,795,336 400,503,571
NET ASSETS:
Beginning of year...................................... 567,186,611 166,683,040
------------ ------------
End of year (including undistributed net
investment income of ($1,935,355) and $0) ........... $804,981,947 $567,186,611
============ ============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold........................... 14,868,580 16,506,873
Shares issued for distributions reinvested............. 1,636,128 2,210,100
Shares of capital stock repurchased ................... (3,716,452) (2,571,296)
------------ ------------
Increase in shares outstanding....................... 12,788,256 16,145,677
Shares outstanding:
Beginning of year.................................... 27,695,873 11,550,196
------------ ------------
End of year.......................................... 40,484,129 27,695,873
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 151
===============================================================================
52 SOCIAL AWARENESS FUND - STATEMENT OF NET ASSETS May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.43%
ADVERTISING - 0.16%
4,060 Interpublic Group Cos., Inc.... $ 243,093
----------
AIRLINES - 0.35%
3,193 *AMR Corp....................... 317,304
2,482 Delta Air Lines, Inc........... 232,687
----------
549,991
----------
APPLIANCES/FURNISHINGS - 0.18%
5,674 Whirlpool Corp................. 282,991
----------
AUTO - CARS - 1.01%
49,511 Chrysler Corp.................. 1,571,974
----------
AUTO - REPLACEMENT PARTS - 0.86%
1,722 Echlin Inc..................... 57,472
10,961 Genuine Parts Co............... 367,194
15,555 Goodyear Tire & Rubber Co...... 909,967
----------
1,334,633
----------
BANKS - NEW YORK CITY - 3.08%
7,006 Bank of New York Co., Inc...... 298,631
17,975 Chase Manhattan Corp........... 1,698,637
15,421 CitiCorp....................... 1,763,777
9,692 J. P. Morgan & Co. Inc......... 1,041,890
----------
4,802,935
----------
BANKS - OTHER - 2.96%
9,850 BankAmerica Corp............... 1,151,219
1,062 BankBoston Corp................ 77,526
9,889 First Chicago Corp............. 585,923
11,193 First Union Corp............... 961,199
8,329 *Fleet Financial Group, Inc..... 509,110
272 Mellon Bank Corp............... 23,800
4,279 National City Corp............. 220,369
480 US Bancorp..................... 29,460
3,920 Wells Fargo & Co............... 1,032,920
----------
4,591,526
----------
BANKS - REGIONAL - 2.68%
15,677 BANC ONE CORP.................. 678,030
3,358 Barnett Banks, Inc............. 176,715
5,846 CoreStates Financial Corp...... 309,107
318 Fifth Third Bancorp............ 24,566
253 First Bank System, Inc......... 20,746
BANKS - REGIONAL - Continued
6,971 KeyCorp........................ $ 379,047
25,343 NationsBank Corp............... 1,492,069
9,556 Norwest Corp................... 511,246
12,069 PNC Bank Corp.................. 505,389
1,125 Wachovia Corp.................. 68,484
----------
4,165,399
----------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.88%
15,965 Anheuser-Busch Companies, Inc.. 684,499
16,991 Seagram Co. Ltd................ 683,887
----------
1,368,386
----------
BEVERAGE - SOFT DRINKS - 4.14%
67,784 Coca-Cola Co................... 4,626,257
49,374 PepsiCo, Inc................... 1,814,495
----------
6,440,752
----------
BROADCASTING - 1.13%
4,201 Comcast Corp. Class A Special.. 72,992
9,756 *Tele-Communications, Inc.
Class A...................... 147,560
26,046 U S West Communications Group.. 953,935
9,997 *U S West Media Group........... 198,690
13,131 *Viacom, Inc. Class B........... 389,827
----------
1,763,004
----------
BUILDING MATERIALS - 0.29%
1,982 Armstrong World Industries,
Inc.......................... 134,776
424 Lowe's Companies, Inc.......... 16,695
7,703 Masco Corp..................... 299,454
----------
450,925
----------
CHEMICAL - MAJOR - 1.44%
3,831 Goodrich (B.F.) Co............. 164,733
19,907 Morton International, Inc...... 642,001
14,522 PPG Industries, Inc............ 844,091
3,219 Rohm and Haas Co............... 277,639
6,446 Union Carbide Corp............. 301,351
----------
2,229,815
----------
CHEMICAL - MISCELLANEOUS - 0.62%
5,445 Lubrizol Corp.................. 193,977
8,684 Lyondell Petrochemical Co...... 191,047
6,952 Nalco Chemical Co.............. 258,093
5,702 Praxair, Inc................... 300,067
CHEMICAL - MISCELLANEOUS - Continued
322 W. R. Grace & Co............... $ 16,825
----------
960,009
----------
CONGLOMERATES - 0.20%
5,396 Ogden Corp..................... 105,222
3,319 Tyco International Ltd......... 210,757
----------
315,979
----------
CONSUMER FINANCE - 0.22%
2,571 Beneficial Corp................ 165,187
5,169 MBNA Corp...................... 175,100
----------
340,287
----------
CONTAINERS - METAL/GLASS - 0.44%
3,338 Corning Inc.................... 168,152
8,861 Crown Cork & Seal Co., Inc..... 516,153
----------
684,305
----------
CONTAINERS - PAPER - 0.05%
2,586 Sonoco Products Co............. 75,317
----------
COSMETICS/TOILETRIES - 1.21%
17,986 Gillette Co.................... 1,598,506
6,314 International Flavors &
Fragrances, Inc............... 280,184
----------
1,878,690
----------
DRUGS - 6.98%
22,720 American Home Products Corp.... 1,732,400
2,922 *Amgen Inc...................... 195,409
32,971 Bristol Myers Squibb Co........ 2,419,247
16,894 Eli Lilly and Co............... 1,571,142
35,741 Merck & Co., Inc............... 3,212,222
9,254 Schering-Plough Corp........... 839,801
8,804 Warner-Lambert Co.............. 887,003
----------
10,857,224
----------
ELECTRICAL EQUIPMENT - 1.41%
15,056 AMP Inc........................ 619,177
25,264 Emerson Electric Co............ 1,364,256
2,674 Raychem Corp................... 198,210
191 W. W. Grainger Inc............. 15,327
----------
2,196,970
----------
</TABLE>
<PAGE> 152
===============================================================================
May 31, 1997 SOCIAL AWARENESS FUND - STATEMENT OF NET ASSETS CONTINUED 53
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 2.12%
10,232 Hasbro, Inc.................... $ 296,727
5,597 Mattel, Inc.................... 167,210
20,554 Time Warner Inc................ 955,761
22,797 Walt Disney Co................. 1,866,504
----------
3,286,202
----------
FINANCE COMPANIES - 0.29%
4,509 Household International, Inc... 443,009
----------
FOODS - 2.48%
16,570 Archer Daniels Midland Co...... 331,400
13,605 Campbell Soup Co............... 625,830
6,891 ConAgra, Inc................... 414,321
7,857 CPC International Inc.......... 675,702
5,972 General Mills, Inc............. 377,729
16,743 H J Heinz Co................... 719,949
329 Hershey Foods Corp............. 18,465
6,847 Kellogg Co..................... 504,966
1,469 Ralston Purina Co.............. 125,232
1,088 Wm. Wrigley Jr. Co............. 64,464
----------
3,858,058
----------
FOOTWEAR - 0.38%
10,243 NIKE, Inc. Class B............ 583,851
----------
FREIGHT - 0.24%
6,846 *Federal Express Corp........... 358,559
1,074 J.B. Hunt Transport Services,
Inc.......................... 16,379
----------
374,938
----------
FUNERAL SERVICES - 0.10%
4,408 Service Corp. International.... 155,382
----------
GOLD MINING - 0.36%
17,000 Barrick Gold Corp.............. 429,250
6,884 Placer Dome Inc................ 125,633
----------
554,883
----------
GOVERNMENT SPONSORED - 1.38%
15,723 Federal Home Loan Mortgage
Corp......................... 518,859
37,072 Federal National Mortgage
Association................... 1,617,266
----------
2,136,125
----------
HARDWARE & TOOLS - 0.21%
318 Black & Decker Corp............ $ 11,051
2,082 Snap-on Inc.................... 83,020
5,492 Stanley Works.................. 225,172
----------
319,243
----------
HEALTHCARE - 0.15%
4,034 United HealthCare Corp......... 227,921
----------
HEAVY DUTY TRUCKS/PARTS - 0.22%
9,304 Dana Corp...................... 336,107
----------
HOSPITAL MANAGEMENT - 0.50%
16,919 Columbia/HCA Healthcare Corp... 619,658
5,918 *Tenet Healthcare Corp.......... 162,745
----------
782,403
----------
HOSPITAL SUPPLIES - 3.64%
25,272 Abbott Laboratories............ 1,592,136
12,903 Baxter International Inc....... 680,633
5,376 Becton, Dickinson and Co....... 264,767
4,213 *Boston Scientific Corp......... 224,869
41,402 Johnson & Johnson.............. 2,478,945
1,434 Mallinckrodt, Inc.............. 53,596
4,877 Medtronic, Inc................. 360,897
----------
5,655,843
----------
HOUSEHOLD PRODUCTS - 3.64%
14,134 Colgate-Palmolive Co........... 876,308
23,807 Procter & Gamble Co............ 3,282,390
7,798 Unilever N V - ADR............. 1,510,863
----------
5,669,561
----------
INFORMATION PROCESSING - 9.38%
1,768 *Apple Computer, Inc............ 29,393
5,315 Automatic Data Processing,
Inc.......................... 261,099
14,652 *Cisco Systems, Inc............. 992,673
6,047 *Compaq Computer Corp........... 654,588
6,034 Computer Associates
International, Inc............ 330,362
2,741 *Dell Computer Corp............. 308,363
228 *Digital Equipment Corp......... 8,180
4,839 *E M C Corp..................... 192,955
11,139 First Data Corp................ 445,560
36,600 Hewlett Packard Co............. 1,884,900
INFORMATION PROCESSING - Continued
29,736 International Business Machines
Corp.......................... $2,572,164
28,639 *Microsoft Corp................. 3,551,236
3,059 *Novell, Inc ................... 24,090
16,567 *Oracle Corp.................... 772,436
5,997 Pitney Bowes Inc............... 421,289
6,087 *Seagate Technology............. 247,284
4,474 *Silicon Graphics, Inc.......... 84,447
9,349 Sun Microsystems, Inc.......... 301,505
2,579 *3Com Corp...................... 125,082
20,316 Xerox Corp..................... 1,376,409
----------
14,584,015
----------
INSURANCE - CASUALTY - 0.21%
3,029 Chubb Corp..................... 184,769
1,718 SAFECO Corp.................... 74,733
863 St. Paul Companies, Inc........ 61,812
----------
321,314
----------
INSURANCE - LIFE - 0.79%
4,755 Aetna Inc...................... 480,255
622 Conseco Inc.................... 24,880
2,595 Lincoln National Corp.......... 157,971
6,152 Transamerica Corp.............. 559,063
----------
1,222,169
----------
INSURANCE - MISCELLANEOUS - 0.18%
1,571 General Reinsurance Corp....... 275,318
----------
INSURANCE - MULTILINE - 3.38%
9,594 Allstate Corp.................. 706,358
15,549 American International Group,
Inc.......................... 2,104,946
3,188 CIGNA Corp..................... 553,915
3,832 Hartford Financial Services
Group........................ 298,896
4,434 Marsh & McLennan Companies,
Inc.......................... 584,180
18,278 Travelers Group, Inc........... 1,003,005
----------
5,251,300
----------
LEISURE TIME - 0.01%
272 Brunswick Corp................. 8,296
----------
LODGING - 0.09%
520 *HFS, Inc....................... 28,015
1,758 *ITT Corp....................... 104,821
----------
132,836
----------
</TABLE>
<PAGE> 153
===============================================================================
54 SOCIAL AWARENESS FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
MACHINERY - AGRICULTURE - 0.49%
14,879 Deere & Co..................... $ 760,689
----------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.60%
8,367 Caterpillar Inc................ 816,828
2,657 Harnischfeger Industries Inc... 113,919
----------
930,747
----------
MACHINERY - INDUSTRIAL/
SPECIALTY - 1.30%
6,946 Cooper Industries, Inc......... 354,246
4,300 Dover Corp..................... 246,175
11,832 Illinois Tool Works Inc........ 587,163
2,700 Ingersoll-Rand Co.............. 147,150
9,035 Johnson Controls, Inc.......... 382,858
9,531 Pall Corp...................... 225,170
1,439 Tecumseh Products Co. Class A.. 81,483
----------
2,024,245
----------
MERCHANDISE - SPECIALTY - 0.71%
5,321 Gap, Inc....................... 182,244
9,763 Home Depot, Inc................ 615,069
5,978 Ikon Office Solutions Inc...... 173,362
2,914 Limited, Inc................... 59,009
2,432 *Toys "R" Us, Inc............... 75,696
----------
1,105,380
----------
MERCHANDISING - DEPARTMENT - 0.46%
5,025 Dayton Hudson Corp............. 241,828
9,947 May Department Stores Co....... 468,752
----------
710,580
----------
MERCHANDISING - FOOD - 0.36%
8,554 Albertsons, Inc................ 286,559
2,891 American Stores Co............. 131,541
989 *Kroger Co...................... 25,343
3,430 SYSCO Corp..................... 119,621
----------
563,064
----------
MERCHANDISING - MASS - 2.54%
4,131 *CUC International Inc.......... 95,013
15,209 J.C. Penney Co., Inc........... 783,264
125 KMart Corp..................... 1,750
18,604 Sears Roebuck and Co........... 913,922
70,609 Wal-Mart Stores, Inc........... 2,100,618
MERCHANDISING - MASS - Continued
1,823 *Woolworth Corp................. $ 43,980
----------
3,938,547
----------
METALS - ALUMINUM - 0.51%
21,947 Alcan Aluminium Ltd............ 787,349
----------
METALS - MISCELLANEOUS - 0.36%
12,938 Freeport-McMoran Copper &
Gold Inc. Class B............. 376,819
5,627 Inco Limited................... 185,691
----------
562,510
----------
METALS - STEEL - 0.08%
7,100 Worthington Industries, Inc.... 131,350
----------
MISCELLANEOUS - 0.74%
16,446 American Express Co............ 1,142,997
----------
NATURAL GAS - DIVERSIFIED - 0.25%
5,467 PanEnergy Corp................. 255,582
2,219 Sonat Inc...................... 127,593
----------
383,175
----------
OIL - INTEGRATED DOMESTIC - 2.29%
8,222 Amerada Hess Corp.............. 439,877
4,660 Ashland Oil, Inc............... 223,098
6,055 Burlington Resources, Inc..... 281,558
4,252 MAPCO Inc...................... 135,001
11,379 *Oryx Energy Co................. 263,139
5,052 Pennzoil Co.................... 279,755
27,826 Phillips Petroleum Co.......... 1,182,605
3,802 Sun Co., Inc................... 113,585
21,609 USX-Marathon Group............. 642,868
----------
3,561,486
----------
OIL - INTEGRATED
INTERNATIONAL - 2.09%
2,528 Murphy Oil Corp................ 117,236
28,706 Texaco Inc..................... 3,132,542
----------
3,249,778
----------
OIL - SERVICE - PRODUCTS - 0.87%
11,286 Schlumberger Ltd............... 1,344,445
----------
OIL - SERVICES - 0.73%
6,003 Baker Hughes Inc............... $ 225,113
13,768 Dresser Industries, Inc........ 471,554
3,480 Halliburton Co................. 269,265
5,962 McDermott International, Inc... 165,446
----------
1,131,378
----------
OIL/GAS PRODUCERS - 0.45%
1,733 Apache Corp.................... 59,355
8,086 Ultramar Diamond Shamrock...... 266,838
12,821 Union Pacific Resources Group
Inc.......................... 370,206
----------
696,399
----------
PAPER/FOREST PRODUCTS - 1.03%
7,049 Avery Dennison Corp............ 265,219
954 James River Corp. of Virginia.. 33,509
25,934 Kimberly-Clark Corp............ 1,299,942
----------
1,598,670
----------
POLLUTION CONTROL - 0.57%
4,008 Browning-Ferris Industries,
Inc.......................... 131,262
23,702 Waste Management, Inc.......... 752,539
----------
883,801
----------
PUBLISHING - NEWS - 0.50%
6,920 Dow Jones & Co., Inc........... 269,015
5,152 Gannett Co., Inc............... 476,560
263 New York Times Co. Class A..... 12,114
363 Times Mirror Co................ 20,373
----------
778,062
----------
PUBLISHING/PRINTING - 0.52%
6,116 Deluxe Corp.................... 198,770
13,817 Dun & Bradstreet Corp.......... 360,969
3,819 McGraw-Hill, Inc............... 208,613
1,980 Moore Corp. Ltd................ 44,055
----------
812,407
----------
RAILROAD - 1.62%
5,481 Burlington Northern Santa Fe... 454,923
11,578 CSX Corp....................... 613,634
7,129 Norfolk Southern Corp.......... 692,404
11,105 Union Pacific Corp............. 752,364
----------
2,513,325
----------
</TABLE>
<PAGE> 154
===============================================================================
May 31, 1997 SOCIAL AWARENESS FUND - STATEMENT OF NET ASSETS CONTINUED 55
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
RESTAURANTS - 0.72%
22,407 McDonald's Corp................ $ 1,125,952
-----------
SAVINGS & LOAN - 0.09%
3,025 Great Western Financial Corp... 146,713
-----------
SECURITIES RELATED - 1.32%
7,081 Dean Witter, Discover & Co..... 292,091
6,878 Merrill Lynch & Co., Inc....... 729,068
7,417 Morgan Stanley Group Inc....... 500,648
9,819 Salomon Inc.................... 526,544
-----------
2,048,351
-----------
SEMICONDUCTORS - 3.17%
2,697 *Advanced Micro Devices, Inc.... 107,880
4,141 *Applied Materials, Inc......... 270,200
21,374 Intel Corp..................... 3,238,161
264 *LSI Logic Corp................. 11,022
5,295 *Micron Technology, Inc......... 225,038
5,695 *National Semiconductor Corp.... 160,172
14,062 Rockwell International Corp.... 906,999
-----------
4,919,472
-----------
TELECOMMUNICATIONS - 1.54%
8,243 ALLTEL Corp.................... 270,989
822 *Andrew Corp.................... 22,400
239 *DSC Communications Corp........ 6,109
14,686 Lucent Technologies, Inc....... 934,397
8,216 Northern Telecom Ltd........... 690,144
15,712 *WorldCom, Inc.................. 465,468
-----------
2,389,507
-----------
UTILITIES - COMMUNICATION - 6.82%
77,098 AT & T Corp.................... 2,842,990
23,836 Ameritech Corp................. 1,561,258
14,288 Bell Atlantic Corp............. 1,000,160
33,532 BellSouth Corp................. 1,521,515
8,415 MCI Communications Corp........ 322,926
13,990 NYNEX Corp..................... 751,963
32,049 SBC Communications, Inc........ 1,874,867
14,806 Sprint Corp.................... 723,643
-----------
10,599,322
-----------
UTILITIES - ELECTRIC - 1.58%
13,195 Allegheny Power System, Inc.... 344,719
UTILITIES - ELECTRIC - Continued
17,115 Cinergy Corp................... $ 599,025
173 Hawaiian Electric Industries,
Inc.......................... 5,990
5,367 Montana Power Co............... 122,099
1,964 OGE Energy Corp................ 84,452
31,985 PacifiCorp..................... 635,702
12,863 Potomac Electric Power Co...... 295,849
2,756 Public Service Co. of Colorado. 111,274
9,169 Puget Sound Energy Inc......... 228,079
477 TECO Energy, Inc............... 11,865
521 UtiliCorp United Inc........... 14,067
-----------
2,453,121
-----------
UTILITIES - GAS, DISTRIBUTION - 0.03%
1,320 Tosco Corp..................... 43,065
-----------
UTILITIES - GAS, PIPELINE - 1.05%
9,247 Consolidated Natural Gas Co.... 491,247
15,457 Enron Corp..................... 629,873
1,479 Pacific Enterprises............ 48,437
10,508 Williams Companies, Inc........ 463,666
-----------
1,633,223
-----------
TOTAL COMMON STOCKS
(Cost $121,517,004)............ 148,252,089
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
-----
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 4.19%
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.63%
$ 980,000 Cooper Industries, Inc.,
5.67% due 06/02/97............ 979,846
-----------
SECURITIES RELATED - 3.56%
5,530,000 Merrill Lynch & Co., Inc.
5.65% due 06/03/97............ 5,528,263
-----------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $6,508,109).............. 6,508,109
-----------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.19%
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- ---------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS - 0.19%
United States Treasury Bills,
$ 200,000 5.02% due 08/21/97............ $ 197,752
100,000 4.99% due 08/21/97 ........... 98,862
------------
296,614
------------
TOTAL UNITED STATES GOVERNMENT -
SHORT TERM (Cost $296,614)..... 296,614
------------
TOTAL INVESTMENTS
(Cost $128,321,727) - 99.81%... 155,056,812
Other assets less liabilities,
net - 0.19%................... 292,242
------------
NET ASSETS (equivalent
to $17.90 per share on
8,677,411 shares
outstanding) - 100 %.......... $155,349,054
============
</TABLE>
* Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- ---------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/97)
13(2) S&P 500 Index Futures
(June/$850.60)................ $ 90,650
============
</TABLE>
(1)U.S.Treasury Bills with a market value of
approximately $300,000 were maintained in
a segregated account with a portion placed
as collateral for futures contracts.
(2)Per 500
=========================================================
NET ASSETS REPRESENTED BY:
<TABLE>
<S> <C>
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
8,677,411 shares outstanding............ $ 86,774
Additional paid in capital................ 119,582,326
Undistributed net realized gain on
securities.............................. 8,762,191
Undistributed net investment income....... 92,028
Unrealized appreciation of:
Investments........... $26,735,085
Futures .............. 90,650 26,825,735
----------- ------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $155,349,054
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 155
===============================================================================
56 SOCIAL AWARENESS FUND - FINANCIAL STATEMENTS
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 2,079,690
Interest .................................................. 130,703
-----------
Total investment income ................................. 2,210,393
-----------
EXPENSES:
Advisory fees ............................................. 525,440
Custodian and accounting services ......................... 35,707
Reports to shareholders ................................... 14,276
Audit fees and tax services ............................... 3,987
Directors' fees and expenses .............................. 2,322
Miscellaneous ............................................. 9,187
-----------
Total expenses .......................................... 590,919
-----------
NET INVESTMENT INCOME ..................................... 1,619,474
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments................................. 13,494,506
Futures Contracts.................... ...... (138,043) 13,356,463
----------
Net unrealized appreciation of securities
during the year:
Investments................................. 14,605,162
Futures Contracts........................... 90,650 14,695,812
---------- -----------
Net realized and unrealized gain on securities
during the year:..................................... 28,052,275
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $29,671,749
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 1,619,474 $ 1,207,110
Net realized gain on securities ...................................... 13,356,463 9,289,840
Net unrealized appreciation of securities during the year ............ 14,695,812 6,259,077
------------- -------------
Increase in net assets resulting from operations ................... 29,671,749 16,756,027
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................ (1,578,118) (1,156,438)
Net realized gain on securities ...................................... (10,727,011) (4,173,232)
------------- -------------
Decrease in net assets resulting from distributions
to shareholders ................................................... (12,305,129) (5,329,670)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ..................................... 52,814,227 17,740,343
Proceeds from capital stock issued for distributions reinvested ...... 12,305,129 5,329,670
------------- -------------
65,119,356 23,070,013
Cost of capital stock repurchased .................................... (8,024,362) (7,536,021)
------------- -------------
Increase in net assets resulting from capital stock transactions ... 57,094,994 15,533,992
------------- -------------
TOTAL INCREASE IN NET ASSETS ......................................... 74,461,614 26,960,349
NET ASSETS:
Beginning of year .................................................... 80,887,440 53,927,091
------------- -------------
End of year (including undistributed net investment income
of $92,028 and $50,672) ............................................ $ 155,349,054 $ 80,887,440
------------- -------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ......................................... 3,190,691 1,209,065
Shares issued for distributions reinvested ........................... 775,715 376,165
Shares of capital stock repurchased .................................. (509,440) (507,806)
------------- -------------
Increase in shares outstanding ..................................... 3,456,966 1,077,424
Shares outstanding:
Beginning of year .................................................. 5,220,445 4,143,021
------------- -------------
End of year ........................................................ 8,677,411 5,220,445
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 156
===============================================================================
May 31, 1997 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS 57
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 61.32%
ADVERTISING - 0.05%
1,530 Interpublic Group Cos., Inc.... $ 91,609
----------
AEROSPACE/DEFENSE - 1.09%
6,264 Boeing Co...................... 659,285
321 Crane Co....................... 13,160
858 EG & G, Inc.................... 16,730
227 General Dynamics Corp.......... 16,996
2,783 Lockheed Martin Corp........... 260,557
3,895 McDonnell Douglas Corp......... 250,740
432 Northrop Grumman Corp.......... 36,611
4,218 Raytheon Co.................... 201,409
2,278 TRW Inc........................ 121,872
4,334 United Technologies Corp....... 348,344
----------
1,925,704
----------
AIRLINES - 0.19%
1,626 *AMR Corp....................... 161,584
1,307 Delta Air Lines, Inc........... 122,531
751 Southwest Airlines Co.......... 19,338
913 *US Airways Group, Inc.......... 31,727
----------
335,180
----------
APPAREL & PRODUCTS - 0.05%
1,370 *Fruit of the Loom, Inc.
Class A...................... 47,779
1,010 Liz Claiborne, Inc............. 46,081
----------
93,860
----------
APPLIANCES/FURNISHINGS - 0.05%
729 Maytag Corp.................... 19,501
1,329 Whirlpool Corp................. 66,284
----------
85,785
----------
AUTO - CARS - 1.05%
12,955 Chrysler Corp.................. 411,321
18,256 Ford Motor Co.................. 684,600
13,278 General Motors Corp............ 760,166
----------
1,856,087
----------
AUTO - REPLACEMENT PARTS - 0.22%
1,708 *AutoZone, Inc.................. 39,924
1,115 Echlin Inc..................... 37,212
3,226 Genuine Parts Co............... 108,070
2,876 Goodyear Tire & Rubber Co...... 168,245
AUTO - REPLACEMENT PARTS - Continued
1,082 Pep Boys-Manny, Moe & Jack..... $ 33,812
----------
387,263
----------
BANKS - NEW YORK CITY - 1.30%
5,908 Bank of New York Co., Inc...... 251,829
7,979 Chase Manhattan Corp........... 754,016
8,239 CitiCorp....................... 942,336
3,284 J. P. Morgan & Co. Inc......... 353,030
----------
2,301,211
----------
BANKS - OTHER - 1.64%
5,188 BankAmerica Corp............... 606,348
2,533 BankBoston Corp................ 184,909
4,954 First Chicago Corp............. 293,525
5,131 First Union Corp............... 440,625
4,788 *Fleet Financial Group, Inc..... 292,667
1,894 Mellon Bank Corp............... 165,725
3,797 National City Corp............. 195,546
1,005 Republic of New York Corp...... 100,249
2,789 US Bancorp..................... 171,175
1,750 Wells Fargo & Co............... 461,125
----------
2,911,894
----------
BANKS - REGIONAL - 1.72%
7,037 BANC ONE CORP.................. 304,350
3,830 Barnett Banks, Inc............. 201,554
2,020 Comerica Inc................... 126,250
4,118 CoreStates Financial Corp...... 217,739
1,992 Fifth Third Bancorp............ 153,882
2,404 First Bank System, Inc......... 197,128
3,940 KeyCorp........................ 214,238
12,250 NationsBank Corp............... 721,219
6,218 Norwest Corp................... 332,663
5,973 PNC Bank Corp.................. 250,119
3,185 SunTrust Banks, Inc............ 169,999
2,752 Wachovia Corp.................. 167,528
----------
3,056,669
----------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.40%
478 Adolph Coors Class B........... 11,651
8,896 Anheuser-Busch Companies, Inc.. 381,416
833 Brown-Forman Corp Class B...... 42,587
BEVERAGE - BREWERS/
DISTRIBUTORS - Continued
6,625 Seagram Co. Ltd................ $ 266,656
----------
702,310
----------
BEVERAGE - SOFT DRINKS - 2.12%
41,299 Coca-Cola Co................... 2,818,657
25,761 PepsiCo, Inc................... 946,717
----------
3,765,374
----------
BROADCASTING - 0.57
5,984 Comcast Corp. Class A Special.. 103,972
2,347 *General Instrument Corp........ 56,915
9,367 Tele-Communications, Inc.
Class A...................... 141,676
8,565 U S West Communications Group.. 313,693
10,363 *U S West Media Group........... 205,965
6,150 *Viacom, Inc. Class B........... 182,578
----------
1,004,799
----------
BUILDING MATERIALS - 0.22%
805 Armstrong World Industries,
Inc.......................... 54,740
3,192 Lowe's Companies, Inc.......... 125,685
2,967 Masco Corp..................... 115,342
2,868 Sherwin-Williams Co............ 86,040
----------
381,807
----------
CHEMICAL - MAJOR - 1.32%
4,119 Dow Chemical Co................ 343,422
9,331 E.I. du Pont de Nemours
and Co....................... 1,015,913
142 Goodrich (B.F.) Co............. 6,106
1,853 Hercules, Inc.................. 86,859
9,508 Monsanto Co.................... 418,352
2,610 Morton International, Inc...... 84,173
3,335 PPG Industries, Inc............ 193,847
1,043 Rohm and Haas Co............... 89,959
2,020 Union Carbide Corp............. 94,435
----------
2,333,066
----------
CHEMICAL - MISCELLANEOUS - 0.38%
1,961 Air Products and Chemicals,
Inc.......................... 152,468
1,388 Eastman Chemical Co............ 82,586
1,153 Ecolab Inc..................... 47,994
364 FMC Corp....................... 26,208
1,131 Great Lakes Chemical Corp...... 55,278
773 Millipore Corp................. 33,336
</TABLE>
<PAGE> 157
===============================================================================
58 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
CHEMICAL - MISCELLANEOUS - Continued
1,204 Nalco Chemical Co.............. $ 44,699
2,286 Praxair, Inc................... 120,301
1,836 Sigma Aldrich Corp............. 56,228
1,187 W. R. Grace & Co............... 62,021
----------
681,119
----------
COAL - 0.01%
190 NACCO Industries, Inc. Class A. 9,666
----------
CONGLOMERATES - 0.62%
4,980 Allied Signal Inc.............. 382,215
1,781 Loews Corp..................... 173,202
3,051 Tenneco Inc.................... 136,532
1,478 Textron Inc.................... 175,143
2,979 Tyco International Ltd......... 189,167
1,954 Whitman Corp................... 47,140
----------
1,103,399
----------
CONSUMER FINANCE - 0.15%
966 Beneficial Corp................ 62,066
5,761 MBNA Corp...................... 195,154
----------
257,220
----------
CONTAINERS - METAL/GLASS - 0.22%
545 Ball Corp...................... 15,873
3,892 Corning Inc.................... 196,060
2,393 Crown Cork & Seal Co., Inc..... 139,392
1,007 Owens Corning.................. 42,042
----------
393,367
----------
CONTAINERS - PAPER - 0.04%
432 Bemis Co., Inc................. 17,280
990 Temple-Inland Inc.............. 59,895
----------
77,175
----------
COSMETICS/TOILETRIES - 0.61%
999 Alberto-Culver Co. Class B..... 28,472
1,957 Avon Products, Inc............. 124,759
9,446 Gillette Co.................... 839,513
2,071 International Flavors &
Fragrances, Inc............... 91,901
----------
1,084,645
----------
DRUGS - 4.29%
1,175 Allergan, Inc.................. $ 34,809
1,414 *ALZA Corp...................... 41,713
10,378 American Home Products Corp.... 791,323
4,526 *Amgen Inc...................... 302,676
992 Bausch & Lomb Inc.............. 39,928
16,814 *Bristol Myers Squibb Co........ 1,233,727
1,889 CVS Corp....................... 90,436
9,380 Eli Lilly and Co............... 872,340
20,437 Merck & Co., Inc............... 1,836,775
10,171 Pfizer, Inc.................... 1,046,342
9,311 Pharmacia & Upjohn, Inc........ 322,393
5,927 Schering-Plough Corp........... 537,875
4,518 Warner-Lambert Co.............. 455,189
----------
7,605,526
----------
ELECTRICAL EQUIPMENT - 2.44%
2,737 AMP Inc........................ 112,559
1,984 *Cabletron Systems, Inc......... 87,296
7,988 Emerson Electric Co............ 431,352
54,102 General Electric Co............ 3,266,408
850 *Intergraph Corp................ 6,003
810 National Service Industries,
Inc.......................... 35,539
798 Raychem Corp................... 59,152
550 Thomas & Betts Corp............ 27,981
11,102 Westinghouse Electric Corp..... 224,816
948 W. W. Grainger Inc............. 76,077
----------
4,327,183
----------
ELECTRONIC INSTRUMENTS - 0.12%
891 General Signal Corp............ 37,533
806 Perkin-Elmer Corp.............. 61,256
590 Tektronix, Inc................. 33,851
2,376 *Thermo Electron Corp........... 81,972
----------
214,612
----------
ENTERTAINMENT - 0.92%
1,939 *Harrah's Entertainment, Inc.... 36,114
2,366 Hasbro, Inc.................... 68,614
668 *King World Productions, Inc.... 25,134
4,261 Mattel, Inc.................... 127,297
10,063 Time Warner Inc................ 467,930
11,104 Walt Disney Co................. 909,140
----------
1,634,229
----------
FINANCE COMPANIES - 0.15%
2,556 Green Tree Financial Corp...... $ 89,460
1,778 Household International, Inc... 174,689
----------
264,149
----------
FOODS - 1.52%
8,113 Archer Daniels Midland Co...... 162,260
8,350 Campbell Soup Co............... 384,100
4,291 Conagra, Inc................... 257,996
2,669 CPC International Inc.......... 229,534
2,934 General Mills, Inc............. 185,576
6,434 H J Heinz Co................... 276,662
2,744 Hershey Foods Corp............. 154,007
3,366 Kellogg Co..................... 248,243
972 Pioneer Hi-Bred International,
Inc.......................... 67,797
2,419 Quaker Oats Co................. 99,784
2,000 Ralston Purina Co.............. 170,500
8,096 Sara Lee Corp.................. 330,924
2,076 Wm. Wrigley Jr. Co............. 123,003
----------
2,690,386
----------
FOOTWEAR - 0.20%
5,331 NIKE, Inc. Class B............. 303,867
995 *Reebok International Ltd....... 40,795
887 Stride Rite Corp............... 13,527
----------
358,189
----------
FREIGHT - 0.09%
2,074 *Federal Express Corp........... 108,626
1,363 Ryder System, Inc.............. 45,149
----------
153,775
----------
FUNERAL SERVICES - 0.09%
4,345 Service Corp. International.... 153,161
----------
GOLD MINING - 0.16%
6,383 Barrick Gold Corp.............. 161,171
1,600 Battle Mountain Gold Co........ 9,600
2,600 *Echo Bay Mines Ltd............. 15,925
1,971 Homestake Mining Co............ 27,348
4,279 Placer Dome Inc................ 78,092
----------
292,136
----------
</TABLE>
<PAGE> 158
===============================================================================
May 31, 1997 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED 59
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
GOVERNMENT SPONSORED - 0.66%
12,080 Federal Home Loan Mortgage
Corp......................... $ 398,640
17,625 Federal National Mortgage
Association................... 768,891
----------
1,167,531
----------
HARDWARE & TOOLS - 0.09%
1,684 Black & Decker Corp............ 58,519
1,084 Snap-on Inc.................... 43,225
1,588 Stanley Works.................. 65,108
----------
166,852
----------
HEALTHCARE - 0.21%
5,168 *HealthSouth Corp............... 118,218
2,769 *Humana Inc..................... 62,649
3,405 United HealthCare Corp......... 192,383
----------
373,250
----------
HEAVY DUTY TRUCKS/PARTS - 0.15%
506 Cummins Engine Co., Inc........ 32,258
1,824 Dana Corp...................... 65,892
1,378 Eaton Corp..................... 109,896
527 *Navistar International Corp.... 8,761
1,188 PACCAR Inc..................... 53,757
----------
270,564
----------
HOME BUILDERS - 0.02%
516 Centex Corp.................... 20,576
695 Kaufman & Broad Home Corp...... 10,425
416 Pulte Corp..................... 13,156
----------
44,157
----------
HOSPITAL MANAGEMENT - 0.35%
1,800 *Beverly Enterprises, Inc....... 25,425
10,936 Columbia/HCA Healthcare Corp... 400,531
1,122 Manor Care, Inc................ 32,117
420 Shared Medical Systems Corp.... 22,260
5,381 *Tenet Healthcare Corp.......... 147,978
----------
628,311
----------
HOSPITAL SUPPLIES - 1.75%
12,924 Abbott Laboratories............ 814,212
119 Bard (C. R.), Inc.............. 3,808
4,110 Baxter International Inc....... 216,803
2,297 Becton, Dickinson and Co....... 113,127
HOSPITAL SUPPLIES - Continued
2,100 Biomet, Inc.................... $ 39,244
3,573 *Boston Scientific Corp......... 190,709
21,848 Johnson & Johnson.............. 1,308,149
1,322 Mallinckrodt, Inc.............. 49,410
3,816 Medtronic, Inc................. 282,384
1,447 *St. Jude Medical, Inc.......... 49,017
1,122 United States Surgical Corp.... 37,868
----------
3,104,731
----------
HOUSEHOLD PRODUCTS - 1.90%
724 Clorox Co...................... 91,405
5,216 Colgate-Palmolive Co........... 323,392
7,143 Minnesota Mining &
Manufacturing Co.............. 655,370
2,510 Newell Co...................... 96,008
11,369 Procter & Gamble Co............ 1,567,501
2,790 Rubbermaid, Inc................ 77,771
1,112 Tupperware Corp................ 40,310
2,708 Unilever N V - ADR............. 524,675
----------
3,376,432
----------
INFORMATION PROCESSING - 5.77%
1,300 Adobe Systems Inc.............. 58,012
1,603 *Amdahl Corp.................... 16,029
2,328 *Apple Computer, Inc............ 38,702
735 Autodesk, Inc.................. 28,572
5,129 Automatic Data Processing,
Inc.......................... 251,961
2,582 *Bay Networks, Inc.............. 63,258
1,432 *Ceridian Corp.................. 52,625
10,889 *Cisco Systems, Inc............. 737,729
3,001 Cognizant Corp................. 111,036
4,497 *Compaq Computer Corp........... 486,799
5,289 Computer Associates
International, Inc............ 289,572
1,435 *Computer Sciences Corp......... 111,032
614 *Data General Corp.............. 13,123
3,007 *Dell Computer Corp............. 338,287
2,310 *Digital Equipment Corp......... 82,870
4,561 *E M C Corp..................... 181,869
8,198 First Data Corp................ 327,919
1,959 H & R Block Inc................ 64,646
17,365 Hewlett Packard Co............. 894,297
2,365 Honeywell Inc.................. 172,053
16,674 International Business
Machines Corp................ 1,442,300
INFORMATION PROCESSING - Continued
1,002 Meredith Corp.................. $ 25,927
19,857 *Microsoft Corp................. 2,462,267
6,384 *Novell, Inc ................... 50,273
12,080 *Oracle Corp.................... 563,229
2,378 *Parametric Technology Corp..... 106,712
2,453 Pitney Bowes Inc............... 172,322
4,518 *Seagate Technology............. 183,543
3,199 *Silicon Graphics, Inc.......... 60,380
6,778 *Sun Microsystems, Inc.......... 218,590
1,710 *Tandem Computers Inc........... 24,367
3,244 *3Com Corp...................... 157,333
3,200 Unisys Corp.................... 21,999
5,983 Xerox Corp..................... 405,347
----------
10,214,980
----------
INSURANCE - CASUALTY - 0.23%
2,584 Chubb Corp..................... 157,624
2,353 SAFECO Corp.................... 102,356
1,483 St. Paul Companies, Inc........ 106,220
2,079 USF & G Corp................... 44,699
----------
410,899
----------
INSURANCE - LIFE - 0.46%
2,797 Aetna Inc...................... 282,497
3,098 Conseco Inc.................... 123,920
1,264 Jefferson-Pilot Corp........... 80,422
1,940 Lincoln National Corp.......... 118,098
735 Torchmark Corp................. 48,234
1,187 Transamerica Corp.............. 107,869
1,218 USLIFE Corp.................... 59,378
----------
820,418
----------
INSURANCE - MISCELLANEOUS - 0.29%
1,397 General Reinsurance Corp....... 244,824
772 MBIA, Inc...................... 82,894
953 MGIC Investment Corp........... 84,817
1,307 UNUM Corp...................... 103,416
----------
515,951
----------
INSURANCE - MULTILINE - 1.70%
7,946 Allstate Corp.................. 585,024
7,427 American International Group,
Inc.......................... 1,005,430
2,753 Aon Corp....................... 134,184
1,343 CIGNA Corp..................... 233,346
</TABLE>
<PAGE> 159
===============================================================================
60 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
INSURANCE - MULTILINE - Continued
2,203 Hartford Financial Services
Group........................ $ 171,834
1,542 March & McLennan Companies,
Inc........................... 203,159
1,674 Providian Corp................. 100,231
10,630 Travelers Group, Inc........... 583,321
----------
3,016,529
----------
LEISURE TIME - 0.03%
1,843 Brunswick Corp................. 56,212
----------
LODGING - 0.29%
2,899 *HFS, Inc....................... 156,184
3,710 Hilton Hotels Corp............. 104,808
2,093 *ITT Corp....................... 124,795
2,288 Marriott International, Inc.... 132,132
----------
517,919
----------
MACHINE TOOLS - 0.01%
644 Cincinnati Milacron Inc........ 14,893
----------
MACHINERY - AGRICULTURE - 0.18%
1,311 Case Corp...................... 77,349
4,670 Deere & Co..................... 238,754
----------
316,103
----------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.25%
3,020 Caterpillar Inc................ 294,828
1,503 Fluor Corp..................... 79,471
726 Foster Wheeler Corp............ 28,133
879 Harnischfeger Industries Inc... 37,687
----------
440,119
----------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.41%
517 Briggs & Stratton Corp......... 26,690
1,407 Cooper Industries, Inc......... 71,757
2,110 Dover Corp..................... 120,798
4,560 Illinois Tool Works Inc........ 226,290
1,423 Ingersoll-Rand Co.............. 77,554
1,487 Johnson Controls, Inc.......... 63,012
2,295 Pall Corp...................... 54,219
803 Parker Hannifin Corp........... 42,258
559 Timken Co...................... 38,361
----------
720,939
----------
MEDICAL TECHNOLOGY - 0.06%
1,403 Guidant Corp................... $ 108,908
----------
MERCHANDISE - DRUG - 0.16%
697 Longs Drug Stores Corp......... 16,554
2,081 Rite Aid Corp.................. 96,767
3,502 Walgreen Co.................... 163,719
----------
277,040
----------
MERCHANDISE - SPECIALTY - 0.77%
989 American Greetings Corp.
Class A...................... 33,873
1,351 Circuit City Stores, Inc....... 53,365
3,866 *CostCo Companies, Inc.......... 130,478
5,165 Gap, Inc....................... 176,901
8,004 Home Depot, Inc................ 504,252
2,506 Ikon Office Solutions Inc...... 72,674
191 Jostens, Inc................... 4,703
4,844 Limited, Inc................... 98,091
933 Nordstrom, Inc................. 44,784
1,041 Tandy Corp..................... 56,214
1,289 TJX Companies, Inc............. 61,872
4,333 *Toys "R" Us, Inc............... 134,865
----------
1,372,072
----------
MERCHANDISING - DEPARTMENT - 0.36%
3,876 Dayton Hudson Corp............. 186,533
2,030 Dillards, Inc. Class A......... 68,513
3,816 *Federated Deparment Stores,
Inc.......................... 141,192
4,357 May Department Stores Co....... 205,324
658 Mercantile Stores Co., Inc..... 35,368
----------
636,930
----------
MERCHANDISING - FOOD - 0.38%
4,603 Albertsons, Inc................ 154,201
2,621 American Stores Co............. 119,256
675 Fleming Companies, Inc......... 12,825
1,070 Giant Food Inc. Class A........ 35,243
683 Great Atlantic & Pacific Tea
Co., Inc..................... 18,868
4,642 *Kroger Co...................... 118,951
1,196 Supervalu Inc.................. 39,917
3,257 SYSCO Corp..................... 113,588
1,579 Winn-Dixie Stores, Inc......... 60,397
----------
673,246
----------
MERCHANDISING - MASS - 1.14%
7,272 *CUC International Inc..........$ 167,256
3,648 J.C. Penney Co., Inc........... 187,872
5,476 KMart Corp..................... 76,664
7,196 Sears Roebuck and Co........... 353,504
39,674 Wal-Mart Stores, Inc........... 1,180,302
2,461 *Woolworth Corp................. 59,372
----------
2,024,970
----------
METALS - ALUMINUM - 0.26%
4,043 Alcan Aluminium Ltd............ 145,043
3,190 Aluminum Co. of America........ 234,864
1,142 Reynolds Metals Co............. 77,513
----------
457,420
----------
METALS - COPPER - 0.11%
765 ASARCO Inc..................... 23,811
1,773 Newmont Mining Corp............ 69,369
1,159 Phelps Dodge Corp.............. 96,921
----------
190,101
----------
METALS - MISCELLANEOUS - 0.15%
1,666 Cyprus Amax Minerals Co........ 40,609
1,574 Engelhard Corp................. 34,038
3,453 Freeport-Mcmoran Copper &
Gold Inc. Class B............ 100,569
3,007 Inco Limited................... 99,231
----------
274,447
----------
METALS - STEEL - 0.15%
3,179 Allegheny Teldyne Inc.......... 81,859
1,995 Bethlehem Steel Corp........... 19,950
1,467 Nucor Corp..................... 86,553
1,515 USX-US Steel Group, Inc........ 48,859
1,800 Worthington Industries, Inc.... 33,300
----------
270,521
----------
MISCELLANEOUS - 0.31%
7,821 American Express Co............ 543,560
----------
MOBILE HOMES - 0.01%
635 Fleetwood Enterprises, Inc..... 17,145
----------
NATURAL GAS - DIVERSIFIED - 0.22%
1,781 Coastal Corp................... 89,273
363 Eastern Enterprises............ 12,524
</TABLE>
<PAGE> 160
===============================================================================
May 31, 1997 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED 61
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
NATURAL GAS - DIVERSIFIED - Continued
1,245 ENSEARCH Corp.................. $ 26,612
2,500 NorAm Energy Corp.............. 38,125
2,800 PanEnergy Corp................. 130,900
1,541 Sonat Inc...................... 88,608
----------
386,042
----------
OIL - INTEGRATED DOMESTIC - 1.29%
1,664 Amerada Hess Corp.............. 89,024
8,944 Amoco Corp..................... 799,370
1,162 Ashland Oil, Inc............... 55,631
2,554 Atlantic Richfield Co.......... 371,607
2,232 Burlington Resources, Inc..... 103,788
867 Kerr-McGee Corp................ 56,138
6,007 Occidental Petroleum Corp...... 139,663
1,573 *Oryx Energy Co................. 36,376
832 Pennzoil Co.................... 46,072
4,784 Phillips Petroleum Co.......... 203,320
900 *Santa Fe Energy Resources,
Inc.......................... 13,613
804 Sun Co., Inc................... 24,020
4,560 Unocal Corp.................... 194,370
5,111 USX-Marathon Group............. 152,052
----------
2,285,044
----------
OIL - INTEGRATED
INTERNATIONAL - 3.56%
11,359 Chevron Corp................... 795,130
39,828 Exxon Corp..................... 2,359,809
6,750 Mobil Corp..................... 944,156
8,648 Royal Dutch Petroleum Co.
- ADR........................ 1,688,522
4,837 Texaco Inc..................... 527,838
----------
6,315,455
----------
OIL - SERVICE - PRODUCTS - 0.27%
4,001 Schlumberger Ltd............... 476,619
----------
OIL - SERVICES - 0.28%
2,660 Baker Hughes Inc............... 99,750
3,177 Dresser Industries, Inc........ 108,812
2,007 Halliburton Co................. 155,292
981 McDermott International, Inc... 27,223
1,529 *Rowan Companies, Inc........... 35,358
958 *Western Atlas Inc.............. 65,024
----------
491,459
----------
OIL/GAS PRODUCERS - 0.08%
445 Helmerich & Payne, Inc......... $ 24,976
611 Louisiana Land & Exploration
Co........................... 31,467
3,211 Union Pacific Resources Group
Inc.......................... 92,718
----------
149,161
----------
PAPER/FOREST PRODUCTS - 0.89%
1,963 Avery Dennison Corp............ 73,858
666 Boise Cascade Corp............. 25,308
1,207 Champion International Corp.... 59,596
1,533 Georgia-Pacific Corp........... 135,287
4,862 International Paper Co......... 233,376
1,538 James River Corp. of Virginia.. 54,022
10,334 Kimberly-Clark Corp............ 517,992
2,043 Louisiana Pacific Corp......... 39,839
634 Mead Corp...................... 40,418
515 Potlatch Corp.................. 22,081
1,872 *Stone Container Corp........... 25,740
1,044 Union Camp Corp................ 54,810
1,221 Westvaco Corp.................. 38,156
3,644 Weyerhaeuser Co................ 181,745
989 Willamette Industries, Inc..... 73,681
----------
1,575,909
----------
PHOTOGRAPHY - 0.28%
5,834 Eastman Kodak Co............... 483,493
146 Polaroid Corp.................. 7,446
----------
490,939
----------
POLLUTION CONTROL - 0.25%
2,659 Browning-Ferris Industries Inc. 87,082
5,700 Laidlaw Inc. Class B........... 76,950
941 Safety-Kleen Corp.............. 14,703
8,331 Waste Management, Inc.......... 264,509
----------
443,244
----------
PUBLISHING - NEWS - 0.37%
1,727 Dow Jones & Co., Inc........... 67,137
2,619 Gannett Co., Inc............... 242,258
1,696 Knight-Ridder, Inc............. 73,140
1,729 New York Times Co. Class A..... 79,642
1,767 Times Mirror Co................ 99,173
2,201 Tribune Co..................... 95,193
----------
656,543
----------
PUBLISHING/PRINTING - 0.23%
1,519 Deluxe Corp.................... $ 49,368
3,086 Dun & Bradstreet Corp.......... 80,622
1,271 Harcourt General, Inc.......... 60,214
526 John H. Harland Co............. 12,032
1,878 McGraw-Hill, Inc............... 102,586
1,796 Moore Corp. Ltd................ 39,961
1,696 RR Donnelley & Sons Co......... 62,964
----------
407,747
----------
RAILROAD - 0.55%
2,833 Burlington Northern Santa Fe... 235,139
3,976 CSX Corp...................... 210,728
2,335 Norfolk Southern Corp.......... 226,787
4,346 Union Pacific Corp............. 294,442
----------
967,096
----------
RESTAURANTS - 0.37%
2,957 Darden Restaurants, Inc........ 24,765
11,361 McDonald's Corp................ 570,890
2,400 Wendy's International, Inc..... 56,100
----------
651,755
----------
SAVINGS & LOAN - 0.14%
625 Golden West Financial Corp..... 42,344
2,561 Great Western Financial Corp... 124,209
1,985 H.F. Ahmanson & Co............. 80,889
----------
247,442
----------
SECURITES RELATED - 0.46%
5,518 Dean Witter, Discover & Co..... 227,618
2,815 Merrill Lynch & Co., Inc....... 298,390
2,724 Morgan Stanley Group Inc....... 183,870
2,038 Salomon Inc.................... 109,288
----------
819,166
----------
SEMICONDUCTORS - 2.21%
2,557 *Advanced Micro Devices, Inc.... 102,280
3,133 *Applied Materials, Inc......... 204,428
13,901 Intel Corp..................... 2,106,002
2,210 *LSI Logic Corp................. 92,268
3,844 *Micron Technology, Inc......... 163,370
10,390 Motorola, Inc.................. 689,636
2,537 *National Semiconductor Corp.... 71,353
3,517 Rockwell International Corp.... 226,847
</TABLE>
<PAGE> 161
===============================================================================
62 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
SEMICONDUCTORS - Continued
2,914 Texas Instruments Inc.......... $ 261,896
-----------
3,918,080
-----------
TELECOMMUNICATIONS - 1.16%
7,049 *Airtouch Communications, Inc... 196,491
3,484 ALLTEL Corp.................... 114,537
1,624 *Andrew Corp.................... 44,254
2,147 *DSC Communications Corp........ 54,883
2,978 Frontier Corp.................. 54,721
10,504 Lucent Technologies, Inc....... 668,317
3,917 Northern Telecom Ltd........... 329,028
1,381 Scientific-Atlanta, Inc........ 25,031
2,604 *Tellabs, Inc................... 130,851
14,968 *WorldCom, Inc.................. 443,427
-----------
2,061,540
-----------
TEXTILE - PRODUCTS - 0.01%
683 Russell Corp................... 20,917
-----------
TOBACCO - 1.12%
2,757 Fortune Brands, Inc............ 135,093
39,929 Philip Morris Cos Inc.......... 1,756,876
3,427 UST Inc........................ 97,670
-----------
1,989,639
-----------
TRUCKERS - 0.01%
700 Caliber System, Inc............ 22,400
-----------
UTILITIES - COMMUNICATION - 3.17%
29,854 AT & T Corp.................... 1,100,866
9,959 Ameritech Corp................. 652,315
5,506 Bell Atlantic Corp............. 385,420
16,527 BellSouth Corp................. 749,913
17,487 GTE Corp....................... 771,614
11,257 MCI Communications Corp........ 431,987
5,097 NYNEX Corp..................... 273,964
14,857 SBC Communications, Inc........ 869,135
7,920 Sprint Corp.................... 387,090
-----------
5,622,304
-----------
UTILITIES - ELECTRIC - 1.47%
3,449 American Electric Power, Inc... 140,547
2,698 Baltimore Gas and Electric Co.. 70,823
2,806 Carolina Power & Light Co...... 97,509
3,792 Central & South West Corp...... 80,580
UTILITIES - ELECTRIC - Continued
2,918 Cinergy Corp................... $ 102,130
4,299 Consolidated Edison Co. of
New York, Inc................. 125,208
3,308 Dominion Resources, Inc........ 114,540
2,593 DTE Energy Co.................. 69,039
3,602 Duke Power Co.................. 162,090
7,917 Edison International........... 185,060
4,227 Entergy Corp................... 111,487
2,670 FPL Group, Inc................. 124,155
2,154 GPU Inc........................ 75,390
4,315 Houston Industries, Inc........ 89,536
1,200 *Niagara Mohawk Power Corp...... 10,500
1,234 Northern States Power Co....... 60,466
2,826 Ohio Edison Co................. 60,053
4,835 P G & E Corp................... 111,809
3,000 P P & L Resources Inc.......... 60,375
5,445 PacifiCorp..................... 108,219
4,077 Peco Energy Co................. 77,463
4,381 Public Service Enterprise
Group........................ 108,430
12,108 Southern Co.................... 257,295
4,014 Texas Utilities Co............. 137,981
1,925 Union Electric Co.............. 70,502
-----------
2,611,187
-----------
UTILITIES - GAS, DISTRIBUTION - 0.02%
890 NICOR Inc...................... 30,594
-----------
UTILITIES - GAS, PIPELINE - 0.30%
987 Columbia Gas System, Inc....... 63,538
1,695 Consolidated Natural Gas Co.... 90,047
4,547 Enron Corp..................... 185,290
1,520 Pacific Enterprises............ 49,780
625 Peoples Energy Corp............ 22,188
2,913 Williams Companies, Inc........ 128,536
-----------
539,379
-----------
TOTAL COMMON STOCKS
(Cost $82,495,326)............. 108,735,366
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
-----
<S> <C>
CORPORATE BONDS - 18.33%
AUTO - CARS - 1.12%
$2,000,000 Ford Motor Co.,
7.25% due 10/01/08............ 1,987,740
-----------
BANKS - OTHER - 2.98%
$1,000,000 BankAmerica Corp.,
6.63% due 05/30/01............ $ 991,160
3,000,000 Malayan Banking Berhad,
7.13% due 09/15/05............ 2,952,600
1,500,000 Santander Finance Issuance,
6.38% due 02/15/11............ 1,348,725
-----------
5,292,485
-----------
BANKS - REGIONAL - 1.14%
2,000,000 NationsBank Corp.,
7.75% due 08/15/15............ 2,014,300
-----------
ENTERTAINMENT - 1.78%
3,000,000 News America Holdings, Inc.,
9.13% due 10/15/99............ 3,159,120
-----------
FINANCE COMPANIES - 5.89%
3,000,000 AT&T Capital Corp.,
6.80% due 02/01/01............ 2,989,830
2,000,000 CIT Group Holdings, Inc.,
6.63% due 06/28/99............ 2,005,300
1,000,000 Ford Motor Credit Co.,
6.25% due 11/08/00............ 983,810
1,500,000 GE Capital Mortgage Services,
6.46% due 02/25/01............ 1,492,734
3,000,000 International Lease Finance,
Corp., 6.45% due 09/11/00..... 2,972,520
-----------
10,444,194
-----------
HOSPITAL MANAGEMENT - 0.88%
1,650,000 Columbia/HCA Healthcare Corp.,
7.19% due 11/15/15............ 1,563,920
-----------
MERCHANDISING - MASS - 0.57%
1,000,000 Sears Roebuck, and Co.,
7.35% due 03/23/00............ 1,015,550
-----------
OIL - INTEGRATED
DOMESTIC - 1.12%
2,000,000 Union Oil California,
7.20% due 05/15/05............ 1,990,500
-----------
</TABLE>
<PAGE> 162
===============================================================================
May 31, 1997 TIMED OPPORTUNITY FUND - STATEMENT OF NET ASSETS CONTINUED 63
===============================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------
<S> <C> <C>
SECURITIES RELATED - 1.17%
Bear Stearns Co. Inc:
$1,000,000 9.38% due 06/01/01........... $ 1,084,150
1,000,000 6.75% due 05/01/01........... 994,120
------------
2,078,270
------------
UTILITIES - COMMUNICATION - 1.07%
2,000,000 Bellsouth Telecommunications,
Inc., 7.00% due 10/01/25...... 1,895,340
------------
UTILITIES - GAS, PIPELINE - 0.61%
1,000,000 Williams Companies, Inc.,
8.88% due 09/15/12............ 1,087,800
------------
TOTAL CORPORATE BONDS
(Cost $32,981,637)............. 32,529,219
------------
UNITED STATES GOVERNMENT -
LONG TERM - 13.48%
GOVERNMENT SPONSORED - 3.68%
Federal Home Loan Mortgage
Corp (Pools/REMICS):
191,530 7.50% due 09/01/25........... 191,410
490,081 7.50% due 09/01/25........... 489,772
366,671 7.50% due 09/01/25........... 366,440
492,061 7.50% due 09/01/25........... 491,751
Federal National Mortgage
Association:
2,000,000 7.00% due 05/10/01........... 2,005,320
3,000,000 6.90% due 10/09/01........... 2,986,860
------------
6,531,553
------------
UNITED STATES NOTES - 9.80%
United States Treasury Notes:
1,500,000 8.13% due 08/15/19........... 1,686,795
1,000,000 8.00% due 08/15/99........... 1,035,310
2,000,000 7.25% due 05/15/16........... 2,057,820
1,000,000 6.75% due 05/31/99........... 1,010,000
4,000,000 6.50% due 08/15/05........... 3,961,240
2,200,000 6.38% due 04/30/99........... 2,207,216
1,500,000 6.25% due 02/15/03........... 1,479,615
2,000,000 5.75% due 12/31/98........... 1,990,620
1,000,000 5.75% due 08/15/03........... 959,370
1,000,000 5.50% due 04/15/00........... 978,120
------------
17,366,106
------------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $23,964,578)............. $ 23,897,659
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 6.30%
BANKS - REGIONAL - 1.52%
$2,701,000 BANC ONE CORP.,
5.55% due 06/02/97............ 2,700,582
------------
FINANCE COMPANIES - 2.02%
General Motors Acceptance Corp:
2,204,000 5.63% due 06/05/97........... 2,202,618
1,382,000 5.62% due 06/09/97........... 1,380,273
------------
3,582,891
------------
SECURITIES RELATED - 2.76%
Merrill Lynch & Co., Inc:
1,691,000 5.58% due 06/04/97........... 1,690,212
2,255,000 5.52% due 06/06/97........... 2,253,269
952,000 5.50% due 06/03/97 .......... 951,710
------------
4,895,191
------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $11,178,664)............. 11,178,664
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.11%
U.S. TREASURY BILLS - 0.11%
200,000 United States Treasury Bills,
4.99% due 08/21/97
(Cost $197,751)............... 197,751
------------
TOTAL INVESTMENTS
(Cost $ 150,817,956) - 99.54%.. 176,538,659
Other assets less liabilities,
net - 0.46%................... 808,024
------------
NET ASSETS (equivalent
to $ 12.57 per share on
14,106,892 shares
outstanding) - 100%........... $177,346,683
============
</TABLE>
*Non-income producing
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- ---------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/97)
3(2) S&P 500 Index Futures
(June/$850.60)................ $ 102,600
----------
</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
===============================================================================
NET ASSETS REPRESENTED BY:
<TABLE>
<S> <C>
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
14,106,892 shares outstanding ............................ $ 141,069
Additional paid in capital ................................. 141,362,223
Undistributed net realized gain on securities .............. 9,979,602
Undistributed net investment income ........................ 40,486
Unrealized appreciation of:
Investments............................ $25,720,703
Futures ............................... 102,600 25,823,303
----------- ------------
NET ASSETS APPLICABLETOSHARES
OUTSTANDING............................................... $177,346,683
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 163
===============================================================================
64 TIMED OPPORTUNITY - FINANCIAL STATEMENTS
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 2,197,882
Interest .................................................. 4,673,462
-----------
Total investment income ................................. 6,871,344
-----------
EXPENSES:
Advisory fees ............................................. 900,822
Custodian and accounting services ......................... 71,329
Reports to shareholders ................................... 23,470
Audit fees and tax services ............................... 5,439
Directors' fees and expenses .............................. 4,572
Miscellaneous ............................................. 19,103
-----------
Total expenses .......................................... 1,024,735
NET INVESTMENT INCOME ..................................... 5,846,609
-----------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on:
Investments............................... $10,326,981
Futures contracts......................... 201,568 10,528,549
-----------
Net unrealized appreciation during the year:
Investments............................... 9,739,302
Futures contracts......................... 101,100 9,840,402
----------- -----------
Net realized and unrealized gain during the year........ 20,368,951
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $26,215,560
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 5,846,609 $ 6,782,286
Net realized gain on securities ...................................... 10,528,549 20,179,137
Net unrealized appreciation of securities during the year ............ 9,840,402 3,925,617
------------- -------------
Increase in net assets resulting from operations ................... 26,215,560 30,887,040
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................ (5,861,358) (6,883,971)
Net realized gain on securities ...................................... (19,664,171) (3,314,027)
------------- -------------
Decrease in net assets resulting from distributions
to shareholders ................................................... (25,525,529) (10,197,998)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ..................................... 3,274,322 4,919,015
Proceeds from capital stock issued for distributions reinvested ...... 25,525,529 10,197,998
------------- -------------
28,799,851 15,117,013
Cost of capital stock repurchased .................................... (42,167,070) (29,175,524)
------------- -------------
Decrease in net assets resulting from capital stock transactions ... (13,367,219) (14,058,511)
TOTAL INCREASE (DECREASE) IN NET ASSETS .............................. (12,677,188) 6,630,531
NET ASSETS:
Beginning of year .................................................... 190,023,871 183,393,340
------------- -------------
End of year (including undistributed net investment income
of $40,486 and $55,235) ............................................ $ 177,346,683 $ 190,023,871
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ......................................... 264,558 406,767
Shares issued for distributions reinvested ........................... 2,146,236 849,188
Shares of capital stock repurchased .................................. (3,446,167) (2,433,033)
------------- -------------
Decrease in shares outstanding ..................................... (1,035,373) (1,177,078)
Shares outstanding:
Beginning of year .................................................. 15,142,265 16,319,343
------------- -------------
End of year ........................................................ 14,106,892 15,142,265
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 164
===============================================================================
May 31, 1997 CAPITAL CONSERVATION FUND - STATEMENT OF NET ASSETS 65
===============================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS - 83.99%
AIRLINES - 5.89%
$1,500,000 Delta Air Lines, Inc.,
9.75% due 5/15/21............. $1,766,760
2,000,000 Southwest Airlines Co.,
8.75% due 10/15/03............ 2,163,420
----------
3,930,180
----------
BANKS - OTHER - 7.22%
1,500,000 Bank of Boston Corp.,
8.25% due 12/15/26............ 1,495,635
1,000,000 BankAmerica Corp.,
7.20% due 4/15/06............. 994,520
1,500,000 Santander Finance Issuances,
7.25% due 11/1/15............. 1,416,510
1,000,000 Toronto Dominion Bank Ont,
6.125% due 11/1/08............ 910,090
----------
4,816,755
----------
BANKS - REGIONAL - 3.73%
1,500,000 Barnett Capital Inc.,
8.06% due 12/1/26............. 1,470,900
1,000,000 SouthTrust Corp.,
7.625% due 5/1/04............. 1,021,710
----------
2,492,610
----------
BROADCASTING - 2.95%
2,000,000 Viacom Inc,
7.75% due 6/1/05.............. 1,967,560
----------
BUILDING MATERIALS - 2.93%
2,000,000 CSR America Inc.,
6.875% due 7/21/05............ 1,956,580
----------
ENTERTAINMENT - 3.00%
2,000,000 News America Holdings Inc.,
8.25% due 8/10/18............. 2,001,360
----------
FINANCE COMPANIES - 13.09%
2,000,000 Capital One Bank,
8.125% due 3/1/00............. 2,062,040
1,000,000 CIT Group Holdings, Inc.,
8.375% due 11/1/01............ 1,054,590
2,000,000 Finova Capital Corp.,
9.125% due 2/27/02............ 2,169,900
FINANCE COMPANIES - Continued
$ 500,000 Ford Motor Credit Co.,
6.375% due 11/5/08............ $ 462,770
3,000,000 GE Capital Mortgage Services
Inc., 6.46% due 2/25/01....... 2,985,703
----------
8,735,003
----------
HOSPITAL MANAGEMENT - 2.18%
1,500,000 Columbia/HCA Healthcare
Corp., 7.50% due 12/15/23..... 1,457,670
----------
MERCHANDISE - DRUG - 0.71%
500,000 IMCERA Group Inc.,
6.00% due 10/15/03............ 473,445
----------
MERCHANDISING - DEPARTMENT - 3.31%
2,000,000 Associated Dry Goods Corp.,
8.85% due 3/1/06.............. 2,209,200
----------
MERCHANDISING - MASS - 4.63%
1,000,000 Sears Roebuck and Co.,
6.25% due 1/15/04............. 956,600
2,000,000 Wal-Mart Stores, Inc.,
9.10% due 7/15/00............. 2,136,040
----------
3,092,640
----------
METALS - STEEL - 3.04%
2,000,000 Pohang Iron & Steel Limited,
7.50% due 8/1/02.............. 2,027,520
----------
MISCELLANEOUS - 2.14%
1,500,000 Hertz Corp.,
6.00% due 1/15/03............. 1,425,645
----------
PAPER/FOREST PRODUCTS - 3.45%
2,000,000 Georgia-Pacific Corp.,
9.50% due 12/1/11............. 2,304,760
----------
SECURITIES RELATED - 5.15%
Lehman Brothers Holdings Inc.:
1,500,000 7.125% due 9/15/03............ 1,487,385
2,000,000 6.125% due 2/1/01............. 1,951,540
----------
3,438,925
----------
TELECOMMUNICATIONS - 3.02%
2,000,000 Airtouch Communications,
Inc., 7.50% due 7/15/06....... 2,013,020
----------
UTILITIES - COMMUNICATION - 5.56%
$2,500,000 Century Telephone Enterprises,
Inc., 7.20% due 12/1/25....... $2,349,775
1,500,000 GTE South, Inc.,
6.00% due 2/15/08............. 1,362,045
----------
3,711,820
----------
UTILITIES - ELECTRIC - 6.07%
1,000,000 Georgia Power Co.,
6.125% due 9/1/99............. 991,090
1,000,000 PSI Energy Inc.,
5.35% due 9/23/98............. 987,610
2,000,000 Tenaga Nasional Berhad,
7.875% due 6/15/04............ 2,075,800
----------
4,054,500
----------
UTILITIES - GAS, PIPELINE - 5.92%
2,000,000 Columbia Gas System, Inc.,
7.62% due 11/28/25............ 1,904,700
2,000,000 Enron Corp.,
7.625% due 9/10/04............ 2,050,060
----------
3,954,760
----------
TOTAL CORPORATE BONDS
(Cost $57,231,956)............. 56,063,953
----------
UNITED STATES GOVERNMENT -
LONG TERM - 13.26%
FEDERAL AGENCIES - 2.45%
Government National Mortgage
Association:
111,449 Pool #233862,
9.50% due 5/15/18............. 120,182
5,753 Pool #248341,
9.50% due 6/15/18............. 6,204
2,663 Pool #252064,
9.50% due 6/15/18............. 2,872
170,316 Pool #247397,
9.50% due 7/15/18............. 183,662
38,439 Pool #256190,
9.50% due 8/15/18............. 41,451
14,197 Pool #253172,
9.50% due 10/15/18............ 15,309
274,065 Pool #185210,
8.00% due 1/15/22............. 280,741
</TABLE>
<PAGE> 165
===============================================================================
66 CAPITAL CONSERVATION FUND - STATEMENT OF NET ASSETS CONTINUED May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCIES - Continued
$ 968,491 Pool #421496,
8.00% due 9/15/26............. $ 985,439
-----------
1,635,860
-----------
GOVERNMENT SPONSORED - 10.05%
1,000,000 Federal Home Loan Mortgage Corp.
(Pools/REMICS),
5.75% due 12/15/16............ 979,060
2,000,000 Federal National Mortgage
Association, 7.23%
due 3/30/06................... 1,964,680
Federal National Mortgage
Association (Pools/REMICS):
983,183 7.50% due 7/1/26.............. 980,725
945,033 7.00% due 5/1/11.............. 940,402
909,397 7.00% due 5/1/11.............. 904,941
941,209 7.00% due 6/1/11.............. 936,597
-----------
6,706,405
-----------
UNITED STATES NOTES - 0.76%
500,000 United States Treasury Notes,
6.875% due 5/15/06............ 506,640
-----------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $8,793,748).............. 8,848,905
-----------
FOREIGN GOVERNMENT
BOND - 0.76%
CANADA - 0.76%
500,000 New Brunswick Province,
7.125% due 10/1/02
(Cost $495,392)............... 505,635
-----------
TOTAL INVESTMENTS
(Cost $66,521,096) - 98.01%.... 65,418,493
Other assets and liabilities,
net - 1.99% .................. 1,328,963
-----------
NET ASSETS (equivalent
to $9.31 per share on
7,168,057 shares
outstanding) - 100% .......... $66,747,456
===========
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
7,168,057 shares outstanding............ $ 71,681
Additional paid in capital................ 68,530,834
Accumulated net realized loss on
securities.............................. (776,445)
Undistributed net investment income....... 23,989
Unrealized depreciation of securities..... (1,102,603)
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $ 66,747,456
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 166
===============================================================================
CAPITAL CONSERVATION FUND - FINANCIAL STATEMENTS 67
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest ................................................... $4,962,895
----------
EXPENSES:
Advisory fees .............................................. 347,154
Custodian and accounting services .......................... 27,014
Reports to shareholders .................................... 8,609
Audit fees and tax services ................................ 2,108
Directors' fees and expenses ............................... 1,787
Miscellaneous .............................................. 5,966
----------
Total expenses ........................................... 392,638
NET INVESTMENT INCOME ...................................... 4,570,257
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized loss on:
Investments......................................$(28,682)
Futures contracts................................ (99,075) (127,757)
--------
Net unrealized appreciation during the year:
Investments...................................... 724,354
Futures contracts................................ 36,094 760,448
-------- ----------
Net realized and unrealized gain on securities
during the year......................................... 632,691
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $5,202,948
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,570,257 $ 4,543,523
Net realized gain (loss) on securities ..................... (127,757) 2,248,102
Net unrealized appreciation (depreciation) of securities
during the year .......................................... 760,448 (4,541,924)
------------ ------------
Increase in net assets resulting from operations ........ 5,202,948 2,249,701
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................... (4,560,074) (4,530,909)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ........................... 5,054,950 14,391,888
Proceeds from capital stock issued for distributions
reinvested ................................................ 4,560,074 4,530,909
------------ ------------
9,615,024 18,922,797
Cost of capital stock repurchased .......................... (13,722,282) (12,460,655)
------------ ------------
Increase (decrease) in net assets resulting from
capital stock transactions .............................. (4,107,258) 6,462,142
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................... (3,464,384) 4,180,934
NET ASSETS:
Beginning of year .......................................... 70,211,840 66,030,906
------------ ------------
End of year (including undistributed net investment
income of $23,989 and $13,806) ........................... $ 66,747,456 $ 70,211,840
============ ============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ............................... 540,826 1,491,047
Shares issued for distributions reinvested ................. 488,804 474,239
Shares of capital stock repurchased ........................ (1,466,062) (1,296,137)
------------ ------------
Increase (decrease) in shares outstanding ................ (436,432) 669,149
Shares outstanding:
Beginning of year ........................................ 7,604,489 6,935,340
------------ ------------
End of year .............................................. 7,168,057 7,604,489
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 167
===============================================================================
68 GOVERNMENT SECURITIES FUND - STATEMENT OF NET ASSETS May 31, 1997
===============================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- --------------------------------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT -
LONG TERM - 97.33%
FEDERAL AGENCIES - 5.46%
$ 274,065 Government National Mortgage
Association Pool #185210,
8.00% due 1/15/22.............$ 280,741
Tennessee Valley Authority:
2,500,000 6.75% due 11/1/25............. 2,354,300
2,000,000 6.375% due 6/15/05............ 1,941,240
-----------
4,576,281
-----------
GOVERNMENT SPONSORED - 61.94%
Federal Farm Credit Banks:
1,150,000 7.10% due 11/2/02............. 1,170,481
1,500,000 6.92% due 5/13/02............. 1,513,830
Federal Home Loan Banks:
1,155,000 7.26% due 9/6/01.............. 1,179,902
2,000,000 6.60% due 4/13/99............. 2,009,380
3,000,000 5.695% due 12/19/00........... 2,917,980
Federal Home Loan Mortgage Corp.:
3,000,000 7.125% due 7/21/99............ 3,045,930
1,500,000 7.09% due 6/1/05.............. 1,481,010
1,500,000 6.90% due 3/26/03............. 1,482,885
3,500,000 6.705% due 11/9/05............ 3,389,540
1,500,000 6.37% due 1/23/06............. 1,426,170
Federal Home Loan Mortgage Corp.
(Pools/REMICS):
1,268,482 8.50% due 3/1/25.............. 1,315,048
1,016,815 8.00% due 2/1/25.............. 1,038,107
123,007 7.50% due 9/1/25.............. 122,929
442,173 7.50% due 9/1/25.............. 441,894
200,613 7.50% due 9/1/25.............. 200,486
2,000,000 7.00% due 9/15/23............. 1,980,000
175,000 5.50% due 2/25/19............. 166,359
Federal National Mortgage
Association:
1,000,000 9.05% due 4/10/00............. 1,065,940
2,000,000 7.27% due 8/24/05............. 1,990,000
3,500,000 7.17% due 6/12/01............. 3,507,105
2,300,000 6.90% due 10/9/01............. 2,289,926
2,000,000 6.85% due 9/12/05............. 1,951,880
1,000,000 6.78% due 7/28/00............. 996,250
3,000,000 6.45% due 6/10/03............. 2,907,180
2,000,000 6.41% due 3/8/06.............. 1,929,380
GOVERNMENT SPONSORED - Continued
Federal National Mortgage
Association:
$2,500,000 6.40% due 12/10/01............$ 2,454,300
5,000,000 6.00% due 3/26/99............. 4,978,900
Student Loan Marketing Association:
1,000,000 7.50% due 3/8/00.............. 1,025,310
2,000,000 5.88% due 2/6/01.............. 1,945,320
-----------
51,923,422
-----------
UNITED STATES BONDS,
NOTES & STRIPS - 29.93%
United States Treasury Bonds:
1,800,000 9.00% due 11/15/18............ 2,196,288
4,000,000 8.75% due 8/15/20............. 4,793,120
3,500,000 8.50% due 2/15/20............. 4,087,895
United States Treasury Notes:
1,000,000 8.25% due 7/15/98............. 1,024,690
2,500,000 6.75% due 4/30/00............. 2,525,400
1,000,000 6.375% due 1/15/00............ 1,002,030
6,000,000 5.875% due 11/15/99........... 5,942,820
3,000,000 5.75% due 8/15/03............. 2,878,110
1,500,000 United States Treasury Strips,
0.00% due 11/15/09............ 634,560
-----------
25,084,913
-----------
TOTAL UNITED STATES
GOVERNMENT - LONG TERM
(Cost $81,839,788)............. 81,584,616
-----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.02%
SECURITIES RELATED - 1.02%
858,000 Merrill Lynch & Co., Inc.,
5.65% due 6/2/97
(Cost $857,865)............... 857,865
-----------
TOTAL INVESTMENTS
(Cost $82,697,653) - 98.35%.... 82,442,481
Other assets and liabilities,
net - 1.65% .................. 1,384,121
-----------
NET ASSETS (equivalent
to $9.67 per share on
8,672,214 shares
outstanding) - 100% .......... $83,826,602
===========
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
- -------------------------------------------------------
<S> <C>
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
8,672,214 shares outstanding............ $ 86,722
Additional paid in capital................ 86,056,002
Accumulated net realized loss on securities (2,092,608)
Undistributed net investment income....... 31,658
Unrealized depreciation of securities..... (255,172)
-----------
NET ASSETS APPLICABLE TO
SHARES OUTSTANDING...................... $83,826,602
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 168
===============================================================================
GOVERNMENT SECURITIES FUND - FINANCIAL STATEMENTS 69
===============================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 5,558,419
-----------
EXPENSES:
Advisory fees........................................................ 417,356
Custodian and accounting services.................................... 29,457
Reports to shareholders.............................................. 11,112
Audit fees and tax services.......................................... 2,917
Directors' fees and expenses......................................... 2,072
Miscellaneous........................................................ 6,748
-----------
Total expenses..................................................... 469,662
NET INVESTMENT INCOME................................................ 5,088,757
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on:
Investments.......................................... $ 92,038
Futures contracts.................................... (87,906) 4,132
-----------
Net unrealized appreciation during the year:
Investments.......................................... 461,189
Futures contracts.................................... 18,218 479,407
----------- -----------
Net realized and unrealized gain on securities during the year..... 483,539
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 5,572,296
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ....................................... $ 5,088,757 $ 4,226,813
Net realized gain on securities ............................. 4,132 788,071
Net unrealized appreciation (depreciation) of securities
during the year ........................................... 479,407 (3,244,466)
------------ ------------
Increase in net assets resulting from operations ......... 5,572,296 1,770,418
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................................... (5,073,340) (4,221,098)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ............................ 11,299,725 29,935,878
Proceeds from capital stock issued for distributions
reinvested ............................................... 5,073,340 4,221,098
------------ ------------
16,373,065 34,156,976
Cost of capital stock repurchased ........................... (11,468,468) (7,457,426)
------------ ------------
Increase in net assets resulting from capital stock
transactions ............................................. 4,904,597 26,699,550
------------ ------------
TOTAL INCREASE IN NET ASSETS ................................ 5,403,553 24,248,870
NET ASSETS:
Beginning of year ........................................... 78,423,049 54,174,179
------------ ------------
End of year (including undistributed net investment
income of $31,658 and $16,241) ............................ $ 83,826,602 $ 78,423,049
============ ============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ................................ 1,165,828 3,005,467
Shares issued for distributions reinvested .................. 523,483 426,047
Shares of capital stock repurchased ......................... (1,180,771) (745,798)
------------ ------------
Increase in shares outstanding ............................ 508,540 2,685,716
Shares outstanding:
Beginning of year ......................................... 8,163,674 5,477,958
------------ ------------
End of year ............................................... 8,672,214 8,163,674
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 169
================================================================================
70 INTERNATIONAL GOVERNMENT BOND FUND - STATEMENT OF NET ASSETS May 31, 1997
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------
<S><C> <C>
GOVERNMENT BONDS - 86.35%
AUSTRALIA - 2.62%
Commonwealth:
A$ 1,000,000 12.00% due 7/15/99........... $ 854,216
A$ 400,000 10.00% due 10/15/07.......... 356,950
A$ 500,000 9.75% due 3/15/02............ 424,614
A$ 500,000 9.00% due 9/15/04............ 417,777
A$ 500,000 8.75% due 1/15/01............ 408,778
A$ 750,000 7.50% due 7/15/05............ 576,356
A$ 500,000 7.50% due 9/15/09............ 379,641
A$ 500,000 7.00% due 4/15/00............ 389,066
A$ 300,000 South Australia Finance
Authority, 12.50%
due 5/8/01................... 270,632
A$ 400,000 South Australian Government,
7.75% due 4/15/98............ 309,810
A$ 200,000 State Bank of New South Wales,
7.00% due 6/30/99............ 154,524
A$ 150,000 State Bank of South Australia,
7.25% due 6/15/00............ 115,965
-----------
4,658,329
-----------
AUSTRIA - 2.46%
Republic of Austria:
As 2,500,000 8.50% due 2/21/01............ 236,355
DM 1,000,000 7.25% due 5/3/07............. 638,055
As 2,000,000 7.125% due 7/12/04........... 181,818
As 1,500,000 7.00% due 2/14/00............ 134,109
As 2,200,000 7.00% due 1/20/03............ 199,265
As 2,000,000 7.00% due 5/16/05............ 180,232
As 2,000,000 6.875% due 4/19/02........... 180,829
As 2,000,000 6.50% due 11/17/05........... 174,719
As 6,000,000 6.25% due 5/31/06............ 514,406
As 1,000,000 5.75% due 3/22/99............ 86,239
As 1,500,000 5.375% due 11/23/98.......... 128,283
Y. 100MM 4.75% due 12/20/04........... 978,961
Y. 50MM 4.50% due 9/28/05............ 488,407
As 3,000,000 4.375% due 2/28/02........... 245,918
-----------
4,367,596
-----------
BELGIUM - 3.61%
Kingdom of Belgium:
Bf10,000,000 10.00% due 8/2/00............ 330,575
Bf25,000,000 8.75% due 6/25/02............ 826,296
Bf10,000,000 8.00% due 12/24/12........... 324,398
Bf10,000,000 8.00% due 3/28/15............ 324,483
Bf10,000,000 7.75% due 12/22/00........... 313,403
Bf25,000,000 7.75% due 10/15/04........... 798,952
Bf20,000,000 7.50% due 7/29/08............ 627,203
Bf22,000,000 7.00% due 4/29/99............ 660,125
Bf15,000,000 7.00% due 5/15/06............ 457,183
Bf20,000,000 6.50% due 3/31/05............ 594,559
Bf20,000,000 6.25% due 3/28/07............ 576,141
Bf20,000,000 5.00% due 3/28/01............ 575,234
-----------
6,408,552
-----------
CANADA - 4.85%
C$ 800,000 British Columbia Province,
9.85% due 5/1/98............. 609,562
Government of Canada:
C$ 550,000 9.50% due 6/1/10............. 490,967
C$ 500,000 9.00% due 12/1/04............ 420,171
C$ 500,000 9.00% due 6/1/25............. 447,543
C$ 1,000,000 8.75% due 12/1/05............ 834,254
C$ 500,000 8.50% due 3/1/00............. 392,907
C$ 1,000,000 8.50% due 4/1/02............. 803,771
C$ 1,000,000 8.00% due 6/1/23............. 806,977
C$ 1,000,000 7.75% due 9/1/99............. 767,598
C$ 500,000 7.50% due 9/1/00............. 384,932
C$ 1,000,000 7.50% due 3/1/01............. 770,891
C$ 1,000,000 7.25% due 6/1/03............. 766,143
C$ 1,000,000 7.00% due 12/1/06............ 750,524
C$ 500,000 6.50% due 6/1/04............. 367,503
-----------
8,613,743
-----------
DENMARK - 3.21%
Kingdom of Denmark:
DK 2,500,000 9.00% due 11/15/98........... 409,837
DK 2,500,000 9.00% due 11/15/00........... 434,379
DK 5,000,000 8.00% due 11/15/01........... 853,932
DK 2,500,000 8.00% due 5/15/03............ 427,811
DK 3,000,000 8.00% due 3/15/06............ 509,041
DK 3,000,000 7.00% due 12/15/04........... 485,167
DK 1,250,000 7.00% due 11/10/24........... 183,526
L. 250,000 6.75% due 8/24/98............ 407,686
DK 2,000,000 6.00% due 12/10/99........... 318,007
DK 5,000,000 6.00% due 11/15/02........... 788,871
Ff 5,000,000 5.50% due 10/26/99........... 893,460
-----------
5,711,717
-----------
FINLAND - 1.96%
Republic of Finland:
FIM 1,000,000 11.00% due 1/15/99........... $ 215,487
FIM 2,000,000 10.00% due 9/15/01........... 462,739
FIM 1,000,000 9.50% due 3/15/04............ 233,008
L. 250,000 8.00% due 4/7/03............. 417,911
FIM 1,000,000 7.25% due 4/18/06............ 206,510
Ff 5,000,000 7.00% due 6/15/04............ 936,212
Y. 100MM 6.00% due 1/29/02............ 1,006,870
-----------
3,478,737
-----------
FRANCE - 4.56%
Government of France:
Ff 4,600,000 9.50% due 1/25/01............ 929,225
Ff 3,500,000 8.50% due 11/25/02........... 706,776
Ff 1,500,000 8.50% due 12/26/12........... 318,022
Ff 8,000,000 7.75% due 4/12/00............ 1,516,988
Ff 3,000,000 7.25% due 4/25/06............ 575,157
Ff 7,000,000 6.75% due 10/25/03........... 1,307,606
Ff 2,000,000 6.50% due 10/25/06........... 366,477
Ff 8,500,000 6.00% due 10/25/25........... 1,341,695
Ff 2,000,000 5.50% due 4/25/04............ 348,422
Ff 2,000,000 5.50% due 4/25/07............ 338,413
Ff 2,000,000 4.50% due 10/12/98........... 349,773
-----------
8,098,554
-----------
GERMANY - 11.83%
Federal Republic of Germany:
DM 1,000,000 7.75% due 10/1/02............ 657,480
DM 2,000,000 7.50% due 9/9/04............. 1,301,972
DM 3,100,000 7.125% due 12/20/02.......... 1,987,584
DM 2,000,000 7.00% due 1/13/00............ 1,257,036
DM 3,000,000 6.875% due 2/24/99........... 1,849,219
DM 1,000,000 6.75% due 7/15/04............ 627,114
DM 3,000,000 6.50% due 3/15/00............ 1,866,596
DM 3,000,000 6.50% due 7/15/03............ 1,864,490
DM 2,000,000 6.50% due 10/14/05........... 1,224,153
DM 1,000,000 6.25% due 4/26/06............ 601,135
DM 2,000,000 6.25% due 1/4/24............. 1,100,111
DM 2,500,000 6.00% due 2/20/98............ 1,490,551
DM 1,000,000 6.00% due 11/12/03........... 606,495
DM 1,000,000 6.00% due 1/4/07............. 588,380
DM 4,000,000 6.00% due 6/20/16............ 2,207,478
DM 2,000,000 5.00% due 1/14/99............ 1,196,419
</TABLE>
<PAGE> 170
================================================================================
May 31, 1997 INTERNATIONAL GOVERNMENT BOND FUND - 71
STATEMENT OF NET ASSETS CONTINUED
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------
<S><C> <C>
GERMANY - Continued
DM 1,000,000 5.00% due 5/21/01............ $ 596,688
-----------
21,022,901
-----------
IRELAND - 0.57%
Republic of Ireland:
IL. 100,000 8.25% due 8/18/15........... 169,507
IL. 100,000 8.00% due 8/18/06........... 163,776
IL. 150,000 6.50% due 10/18/01.......... 230,282
IL. 150,000 6.25% due 4/1/99............ 227,228
IL. 150,000 6.25% due 10/18/04.......... 224,175
-----------
1,014,968
-----------
ITALY - 7.27%
Republic of Italy:
Lit 1,500MM 12.00% due 9/18/98........... 937,118
Lit 1,000MM 12.00% due 6/1/01............ 690,490
Lit 1,500MM 12.00% due 1/1/02............ 1,053,439
Lit 2,000MM 10.50% due 4/1/00............ 1,286,553
Lit 1,000MM 10.50% due 7/15/00........... 649,178
Lit 500MM 10.50% due 4/1/05............ 345,864
Lit 500MM 10.50% due 9/1/05............ 348,225
Lit 3,400MM 10.00% due 8/1/03............ 2,276,031
Lit 500MM 9.50% due 1/1/05............. 329,015
Lit 500MM 9.50% due 2/1/06............. 333,147
Lit 2,000MM 9.00% due 11/1/23............ 1,299,537
Lit 2,000MM 8.50% due 1/1/99............. 1,210,894
Lit 1,000MM 8.50% due 4/1/99............. 607,454
Lit 500MM 8.50% due 8/1/99............. 304,170
Lit 1,000MM 8.50% due 4/1/04............. 627,519
Lit 1,000MM 8.50% due 8/1/04............. 627,643
-----------
12,926,277
-----------
JAPAN - 20.59%
Government of Japan:
Y. 250MM 6.60% due 6/20/01............ 2,551,739
Y. 320MM 6.40% due 3/20/00............ 3,127,454
Y. 105MM 6.00% due 12/20/01........... 1,062,263
Y. 365MM 5.50% due 3/20/02............ 3,640,597
Y. 120MM 5.00% due 12/20/02........... 1,184,749
Y. 100MM 5.00% due 9/21/09............ 1,037,355
Y. 100MM 5.00% due 3/20/15............ 1,053,156
Y. 250MM 4.90% due 9/20/99............ 2,325,032
Y. 130MM 4.80% due 6/21/99............ 1,198,858
Y. 170MM 4.60% due 6/22/98............ 1,518,102
JAPAN - Continued
Y. 127MM 4.50% due 6/20/03............ $ 1,229,866
Y. 75MM 4.50% due 12/20/04........... 733,383
Y. 150MM 4.40% due 9/22/03............ 1,447,574
Y. 200MM 4.20% due 9/21/15............ 1,920,137
Y. 150MM 4.10% due 6/21/04............ 1,427,995
Y. 100MM 3.90% due 6/21/04............ 941,005
Y. 100MM 3.80% due 9/20/16............ 911,464
Y. 250MM 3.50% due 3/21/16............ 2,191,498
Y. 100MM 3.30% due 6/20/06............ 902,447
Y. 200MM 3.20% due 3/20/06............ 1,791,842
Y. 250MM 3.00% due 9/20/05............ 2,213,826
Y. 150MM 2.90% due 12/20/05........... 1,315,543
Y. 100MM 2.70% due 3/20/07............ 856,677
-----------
36,582,562
-----------
NETHERLANDS - 4.39%
Government of the Netherlands:
NG 1,050,000 9.00% due 10/16/00........... 623,719
NG 1,000,000 8.75% due 9/15/01............ 600,780
NG 500,000 8.50% due 3/15/01............ 295,059
NG 500,000 8.25% due 2/15/02............ 296,749
NG 500,000 8.25% due 6/15/02............ 298,179
NG 500,000 8.25% due 2/15/07............ 306,372
NG 1,500,000 7.75% due 3/1/05............. 885,176
NG 500,000 7.50% due 6/15/99............ 278,414
NG 500,000 7.50% due 4/15/10............ 293,758
NG 750,000 7.50% due 1/15/23............ 436,151
NG 1,250,000 6.50% due 7/15/98............ 670,676
NG 1,250,000 6.50% due 4/15/03............ 694,083
NG 1,500,000 6.00% due 1/15/06............ 795,058
NG 2,000,000 5.75% due 1/15/04............ 1,062,159
NG 500,000 5.75% due 2/15/07............ 259,168
-----------
7,795,501
-----------
PORTUGAL - 0.30%
Ff 3,000,000 Republic of Portugal,
6.625% due 5/13/08........... 540,946
-----------
SPAIN - 4.38%
Government of Spain:
Pst 40MM 12.25% due 3/25/00........... 325,457
Pst 55MM 11.45% due 8/30/98........... 407,843
Pst 100MM 10.50% due 10/30/03.......... 846,154
Pst 100MM 10.30% due 6/15/02........... 822,842
SPAIN - Continued
Pst 100MM 10.15% due 1/31/06........... $ 851,204
Pst 100MM 10.10% due 2/28/01........... 796,693
Pst 50MM 10.00% due 2/28/05........... 418,494
Pst 50MM 8.30% due 12/15/98........... 361,130
Pst 70MM 8.20% due 2/28/09............ 535,701
Pst 80MM 8.00% due 5/30/04............ 610,127
Pst 150MM 7.40% due 7/30/99............ 1,083,495
Pst 50MM 6.75% due 4/15/00............ 358,865
Ff 2,000,000 6.50% due 6/20/01............ 368,424
-----------
7,786,429
-----------
SWEDEN - 2.97%
Kingdom of Sweden:
SK 4,000,000 13.00% due 6/15/01........... 643,890
SK 3,500,000 11.00% due 1/21/99........... 492,990
SK 3,000,000 10.25% due 5/5/00............ 435,150
SK 6,000,000 10.25% due 5/5/03............ 914,158
SK 5,000,000 9.00% due 4/20/09............ 736,389
SK 3,000,000 8.00% due 8/15/07............ 413,274
SK 6,000,000 6.00% due 2/9/05............. 734,983
Y. 100MM 3.875% due 6/21/99........... 903,821
-----------
5,274,655
-----------
SWITZERLAND - 0.64%
Government of Switzerland:
Chf 500,000 4.50% due 7/8/02............. 387,144
Chf 500,000 4.50% due 4/8/06............. 385,661
Chf 500,000 4.00% due 3/10/99............ 368,363
-----------
1,141,168
-----------
UNITED KINGDOM - 8.80%
Government of United Kingdom:
L. 250,000 10.00% due 2/26/01........... 447,049
L. 500,000 9.75% due 8/27/02............ 909,051
L. 325,000 9.00% due 3/3/00............. 557,406
L. 400,000 9.00% due 10/13/08........... 741,044
L. 250,000 9.00% due 7/12/11............ 469,542
L. 400,000 9.00% due 8/6/12............. 754,131
L. 750,000 8.75% due 8/25/17............ 1,410,161
L. 500,000 8.50% due 12/7/05............ 884,002
L. 500,000 8.00% due 12/7/00............ 842,211
L. 550,000 8.00% due 6/10/03............ 936,835
L. 500,000 8.00% due 9/25/09............ 862,148
L. 500,000 8.00% due 12/7/15............ 877,229
</TABLE>
<PAGE> 171
================================================================================
72 INTERNATIONAL GOVERNMENT BOND FUND May 31, 1997
STATEMENT OF NET ASSETS CONTINUED
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- ----------------------------------------------------------
<S><C> <C>
UNITED KINGDOM - Continued
L. 750,000 8.00% due 6/7/21............. $ 1,330,220
L. 500,000 7.50% due 12/7/06............ 833,009
L. 100,000 7.25% due 3/30/98............ 164,301
L. 500,000 7.00% due 11/6/01............ 816,139
L. 750,000 6.75% due 11/26/04........... 1,200,822
L. 1,000,000 6.00% due 8/10/99............ 1,608,253
------------
15,643,553
------------
UNITED STATES - 1.34%
DM 4,000,000 Federal National Mortgage
Association,
5.00% due 2/16/01............ 2,375,519
------------
TOTAL GOVERNMENT BONDS
(Cost $158,485,988)........... 153,441,707
------------
SUPRANATIONAL - 6.72%
Asian Development Bank:
Y. 50MM 5.00% due 2/5/03............. 491,627
Y. 150MM 3.125% due 6/29/05........... 1,336,410
Eurofima:
Ff 5,000,000 9.875% due 8/21/00........... 1,005,481
Ff 1,600,000 9.25% due 12/18/03........... 334,222
L. 250,000 7.50% due 2/5/98............. 410,242
European Investment Bank:
Lit 400MM 10.50% due 4/30/98........... 243,737
Lit 1,100MM 10.50% due 2/7/02............ 770,088
L. 250,000 9.00% due 5/14/02............ 439,776
Ff 5,000,000 6.75% due 5/14/98............ 889,404
Y. 25MM 6.625% due 3/15/00........... 244,740
Ff 2,000,000 6.125% due 10/8/04........... 358,466
Y. 100MM 4.625% due 2/26/03........... 967,153
Y. 100MM 3.00% due 9/20/06............ 877,523
Y. 55MM Inter America Development Bank,
6.75% due 2/20/01............ 555,550
International Bank for
Reconstruction & Development:
Lit 150MM 10.80% due 11/13/01.......... 105,399
Lit 1,000MM 10.625% due 3/27/98.......... 608,604
Lit 200MM 9.45% due 8/11/03............ 131,957
L. 400,000 9.25% due 7/20/07............ 742,680
Y. 100MM 4.50% due 3/20/03............ 964,470
Y. 50MM 4.50% due 6/20/00............ 466,670
------------
TOTAL SUPRANATIONAL
(Cost $12,949,762)............ $ 11,944,199
------------
CORPORATE BONDS - 4.03%
FRANCE - 3.63%
Credit Local de France:
Ff 2,500,000 9.25% due 12/7/99............ 484,341
Lit 2,000MM 9.00% due 6/14/01............ 1,268,848
Ff 5,000,000 8.875% due 6/10/02........... 1,009,810
Ff 3,000,000 6.25% due 9/27/05............ 535,102
Ff 4,000,000 6.00% due 11/15/01........... 721,699
Ff10,000,000 Elf Aquitaine SA,
7.125% due 8/11/03........... 1,881,083
Ff 3,000,000 Toyota Motor Credit,
6.25% due 4/11/02............ 547,765
------------
6,448,648
------------
NETHERLANDS - 0.23%
NG 750,000 Aegon NV,
7.125% due 9/1/98............ 405,074
------------
SWITZERLAND - 0.17%
Lit 500MM Union Bank of Switzerland AG,
9.25% due 8/23/00............ 315,737
------------
TOTAL CORPORATE BONDS
(Cost $7,604,776)............. 7,169,459
------------
TOTAL INVESTMENTS
(Cost $179,040,526) - 97.10%.. 172,555,365
Other assets and liabilities,
net - 2.90% ................. 5,153,432
------------
NET ASSETS (equivalent
to $11.33 per share on
15,679,563 shares
outstanding) - 100% ......... $177,708,797
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
15,679,563 shares outstanding........... $ 156,796
Additional paid in capital................ 183,937,011
Undistributed net realized gain on
securities.............................. 136,607
Undistributed net investment income....... 84,875
Unrealized depreciation of securities and
foreign currency translation............ (6,606,492)
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $177,708,797
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 172
================================================================================
INTERNATIONAL GOVERNMENT BOND FUND - FINANCIAL STATEMENTS 73
================================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $291,931).............. $ 9,457,681
-----------
EXPENSES:
Advisory fees ....................................................... 833,117
Custodian and accounting services.................................... 55,093
Reports to shareholders.............................................. 23,033
Audit fees and tax services.......................................... 6,205
Directors' fees and expenses......................................... 3,967
Miscellaneous........................................................ 13,825
-----------
Total expenses..................................................... 935,240
-----------
NET INVESTMENT INCOME................................................ 8,522,441
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Securities........................................... $ 229,409
Foreign currency transactions........................ (375,371) (145,962)
----------- -----------
Net unrealized depreciation during the year:
Securities........................................... (7,142,937)
Foreign currency translation......................... (67,518) (7,210,455)
----------- -----------
Net realized and unrealized loss on securities and
foreign currencies during the year.............................. (7,356,417)
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $ 1,166,024
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
----------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................... $ 8,522,441 $ 6,255,004
Net realized gain (loss) on securities and foreign currency
transactions ............................................................ (145,962) 795,235
Net unrealized depreciation of securities and
translation of foreign currencies during the year ....................... (7,210,455) (8,649,971)
----------------------------------
Increase (decrease) in net assets resulting from operations ............ 1,166,024 (1,599,732)
----------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................................................... (8,295,746) (6,585,664)
Net realized gain on securities ........................................... (295,588) (127,626)
----------------------------------
Decrease in net assets resulting from distributions
to shareholders ........................................................ (8,591,334) (6,713,290)
----------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold .......................................... 72,164,939 95,539,705
Proceeds from capital stock issued for distributions reinvested ........... 8,591,334 6,713,290
----------------------------------
80,756,273 102,252,995
Cost of capital stock repurchased ......................................... (38,005,431) (29,290,511)
----------------------------------
Increase in net assets resulting from capital stock transactions ........ 42,750,842 72,962,484
----------------------------------
TOTAL INCREASE IN NET ASSETS .............................................. 35,325,532 64,649,462
NET ASSETS:
Beginning of year ......................................................... 142,383,265 77,733,803
----------------------------------
End of year (including undistributed net investment income
of $84,875 and $151,884) ................................................ $ 177,708,797 $ 142,383,265
==================================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold .............................................. 6,113,938 7,828,955
Shares issued for distributions reinvested ................................ 729,242 556,598
Shares of capital stock repurchased ....................................... (3,236,292) (2,423,786)
----------------------------------
Increase in shares outstanding .......................................... 3,606,888 5,961,767
Shares outstanding:
Beginning of year ....................................................... 12,072,675 6,110,908
----------------------------------
End of year ............................................................. 15,679,563 12,072,675
==================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 173
================================================================================
74 MONEY MARKET FUND - STATEMENT OF NET ASSETS May 31, 1997
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- -------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT TERM
COMMERCIAL PAPER - 89.25%
BANKS - REGIONAL - 1.95%
$ 2,500,000 BANC ONE CORP.,
5.57% due 6/19/97............ $ 2,493,038
-----------
BEVERAGE - SOFT DRINKS - 3.00%
Pepsico Inc.:
1,847,000 5.50% due 6/16/97............ 1,842,767
2,000,000 5.47% due 6/18/97............ 1,994,834
-----------
3,837,601
-----------
CHEMICAL - MAJOR - 5.87%
E.I. du Pont de Nemours
and Co.:
855,000 5.52% due 7/9/97............. 850,018
1,600,000 5.32% due 7/16/97............ 1,589,360
2,100,000 5.27% due 7/8/97............. 2,088,626
3,000,000 PPG Industries, Inc.,
5.52% due 6/12/97............ 2,994,940
-----------
7,522,944
-----------
CONSUMER FINANCE - 15.49%
Associates Corp. of North
America:
1,700,000 5.61% due 7/21/97............ 1,686,754
1,250,000 5.61% due 7/28/97............ 1,238,897
950,000 5.36% due 6/18/97............ 947,595
Beneficial Corp.:
2,000,000 5.62% due 8/4/97............. 1,980,018
900,000 5.59% due 8/11/97............ 890,078
1,200,000 5.58% due 8/28/97............ 1,183,632
1,100,000 5.56% due 6/30/97............ 1,095,073
Commercial Credit Corp.:
610,000 5.70% due 3/1/98............. 609,558
1,800,000 5.61% due 7/14/97............ 1,787,938
957,000 5.61% due 8/1/97............. 947,903
1,800,000 5.54% due 6/19/97............ 1,795,014
Sears Roebuck Acceptance
Corp.:
1,024,000 5.63% due 7/23/97............ 1,015,673
1,000,000 5.60% due 8/20/97............ 987,556
750,000 5.60% due 8/27/97............ 739,850
1,350,000 5.52% due 6/30/97............ 1,343,997
1,600,000 5.34% due 6/2/97............. 1,599,763
-----------
19,849,299
-----------
DRUGS - 3.21%
Schering Corp.:
$ 1,200,000 5.70% due 10/21/97........... $ 1,173,020
1,000,000 5.50% due 7/1/97............. 995,416
1,950,000 5.42% due 6/10/97............ 1,947,358
-----------
4,115,794
-----------
ELECTRICAL EQUIPMENT - 2.69%
General Electric Co.:
2,000,000 5.67% due 10/20/97........... 1,955,585
1,500,000 5.61% due 7/31/97............ 1,485,975
-----------
3,441,560
-----------
ENTERTAINMENT - 1.55%
1,000,000 Mattel, Inc.,
5.72% due 7/17/97............ 992,691
1,000,000 Walt Disney Co.,
5.60% due 8/8/97............. 989,422
-----------
1,982,113
-----------
FINANCE COMPANIES - 20.07%
CIESCO L P:
1,500,000 5.57% due 7/17/97............ 1,489,324
1,900,000 5.55% due 7/22/97............ 1,885,061
1,470,000 5.33% due 6/3/97............. 1,469,565
CIT Group Holdings, Inc.:
1,000,000 5.60% due 8/13/97............ 988,644
1,500,000 5.37% due 6/23/97............ 1,495,078
1,500,000 5.31% due 6/13/97............ 1,497,345
2,032,000 5.30% due 6/9/97............. 2,029,607
Ford Motor Credit Co.:
1,221,000 5.66% due 10/6/97............ 1,196,620
900,000 5.62% due 8/27/97............ 887,777
General Electric Capital
Corp.:
1,000,000 5.68% due 11/28/97........... 971,600
450,000 5.43% due 7/18/97............ 446,810
824,000 5.35% due 6/16/97............ 822,163
General Motors Acceptance
Corp.:
2,000,000 5.62% due 7/10/97............ 1,987,823
3,000,000 5.60% due 6/17/97............ 2,992,533
International Lease Finance
Corp.:
1,000,000 5.65% due 9/12/97............ 983,835
1,205,000 5.60% due 7/30/97............ 1,193,941
2,000,000 5.30% due 6/4/97............. 1,999,117
$ 1,387,000 5.23% due 6/24/97............ $ 1,382,365
-----------
25,719,208
-----------
FOODS - 1.16%
1,500,000 Kellogg Co,
5.48% due 7/16/97............ 1,489,725
-----------
HOSPITAL SUPPLIES - 1.17%
1,500,000 Abbott Laboratories,
5.48% due 6/3/97............. 1,499,543
-----------
INFORMATION PROCESSING - 3.42%
International Business
Machines Corp.:
1,000,000 5.65% due 1/22/98............ 999,382
1,200,000 5.56% due 6/26/97............ 1,195,367
2,200,000 5.54% due 7/7/97............. 2,187,812
-----------
4,382,561
-----------
INSURANCE - MULTILINE - 2.86%
Marsh & McLennan Companies,
Inc.:
1,200,000 5.70% due 9/5/97............. 1,181,760
1,000,000 5.64% due 9/9/97............. 984,333
1,000,000 5.36% due 6/25/97............ 996,427
500,000 5.30% due 7/3/97............. 497,644
-----------
3,660,164
-----------
MACHINERY - INDUSTRIAL/
SPECIALTY - 3.14%
4,020,000 Cooper Industries, Inc.,
5.67% due 6/2/97............. 4,019,367
-----------
OIL - INTEGRATED DOMESTIC - 1.92%
2,500,000 Atlantic Richfield Co.,
5.56% due 9/15/97............ 2,459,072
-----------
SECURITIES RELATED - 4.35%
Merrill Lynch & Co., Inc.:
1,200,000 5.74% due 10/1/97............ 1,176,657
850,000 5.70% due 10/9/97............ 832,504
900,000 5.70% due 10/16/97........... 880,478
1,600,000 5.70% due 11/25/97........... 1,555,160
450,000 5.68% due 10/17/97........... 440,202
700,000 5.45% due 9/11/97............ 689,191
-----------
5,574,192
-----------
</TABLE>
<PAGE> 174
================================================================================
May 31, 1997 MONEY MARKET FUND - STATEMENT OF NET ASSETS 75
================================================================================
<TABLE>
<CAPTION>
PAR MARKET
VALUE VALUE
- ---------------------------------------------------------
<S> <C> <C>
TOBACCO - 4.41%
Philip Morris Cos Inc.:
$ 1,500,000 5.60% due 6/23/97............ $ 1,494,867
1,000,000 5.58% due 8/27/97............ 986,515
3,179,000 5.29% due 6/11/97............ 3,174,328
------------
5,655,710
------------
UTILITIES - COMMUNICATION - 7.95%
1,600,000 Bellsouth Telecommunications,
Inc.,
5.30% due 6/4/97............. 1,599,293
GTE Corp.:
1,000,000 5.59% due 6/20/97............ 997,050
2,100,000 5.57% due 6/2/97............. 2,099,675
2,700,000 5.56% due 6/10/97............ 2,696,247
2,800,000 Pacific Bell,
5.52% due 6/5/97............. 2,798,283
------------
10,190,548
------------
UTILITIES - ELECTRIC - 5.04%
Pacific Gas & Electric Co.:
400,000 5.56% due 6/26/97............ 398,456
1,000,000 5.00% due 10/7/97............ 997,638
Southern California Edison Co.:
1,500,000 5.59% due 7/15/97............ 1,489,752
1,979,000 5.54% due 6/5/97............. 1,977,782
1,600,000 5.51% due 6/5/97............. 1,599,020
------------
6,462,648
------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $114,355,087)........... 114,355,087
------------
FOREIGN GOVERNMENT BONDS - 2.54%
CANADA - 2.54%
British Columbia Province:
1,500,000 5.66% due 8/26/97............ 1,479,718
350,000 5.65% due 9/10/97............ 344,452
1,433,000 5.31% due 6/12/97............ 1,430,675
------------
3,254,845
------------
TOTAL FOREIGN GOVERNMENT
BONDS
(Cost $3,254,845)............. 3,254,845
------------
CORPORATE SHORT TERM
OBLIGATIONS - 3.91%
SECURITIES RELATED - 3.91%
Bear Stearns Co. Inc.:
$2,000,000 Floating rate note due 6/2/97,
5.72% at 5/31/97.............. $ 2,000,000
3,000,000 Floating rate note due 6/27/97,
5.6675% at 5/31/97............ 3,000,000
------------
TOTAL CORPORATE SHORT
TERM OBLIGATIONS
(Cost $5,000,000)............. 5,000,000
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 7.80%
1,000,000 Federal Farm Credit Banks,
5.51% due 1/2/98............. 999,178
Federal Home Loan Banks:
2,000,000 5.875% due 6/27/97........... 2,000,175
1,000,000 5.875% due 2/5/98............ 1,000,000
1,000,000 5.65% due 8/12/97............ 1,000,000
1,000,000 5.46% due 12/12/97........... 999,490
Federal National Mortgage
Association:
1,000,000 5.765% due 6/20/97........... 1,000,065
1,000,000 5.60% due 1/16/98............ 999,278
1,000,000 5.42% due 12/16/97........... 998,830
1,000,000 5.40% due 12/5/97............ 999,508
------------
9,996,524
------------
TOTAL UNITED STATES
GOVERNMENT - SHORT TERM
(Cost $9,996,524)............. 9,996,524
------------
TOTAL INVESTMENTS
(Cost $132,606,456) - 103.50%. 132,606,456
Other assets and liabilities,
net - (3.50%) ............... (4,481,811)
------------
NET ASSETS (equivalent
to $1.00 per share on
128,124,645 shares
outstanding) - 100% ......... $128,124,645
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
128,124,645 shares outstanding.......... $ 1,281,246
Additional paid in capital................ 126,843,399
------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING............................. $128,124,645
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 175
================================================================================
76 MONEY MARKET FUND - FINANCIAL STATEMENTS
================================================================================
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest ........................................................... $6,283,155
----------
EXPENSES:
Advisory fees ...................................................... 572,063
Custodian and accounting services .................................. 42,840
Reports to shareholders ............................................ 16,152
Audit fees and tax services ........................................ 4,285
Directors' fees and expenses ....................................... 2,622
Miscellaneous ...................................................... 7,550
----------
Total expenses ................................................... 645,512
----------
NET INVESTMENT INCOME .............................................. 5,637,643
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $5,637,643
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1997 1996
----------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................ $ 5,637,643 $ 4,331,892
Net realized gain on securities .................. -- 1,796
----------------------------------
Increase in net assets resulting from
operations................................... 5,637,643 4,333,688
----------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (5,637,643) (4,331,892)
----------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ................. 294,478,892 150,153,912
Proceeds from capital stock issued for
distributions reinvested ....................... 5,637,643 4,331,892
----------------------------------
300,116,535 154,485,804
Cost of capital stock repurchased ................ (255,609,535) (153,123,752)
----------------------------------
Increase in net assets resulting from
capital stock transactions ................... 44,507,000 1,362,052
----------------------------------
TOTAL INCREASE IN NET ASSETS ..................... 44,507,000 1,363,848
NET ASSETS:
Beginning of year ................................ 83,617,645 82,253,797
----------------------------------
End of year ...................................... $ 128,124,645 $ 83,617,645
==================================
CHANGE IN SHARES OUTSTANDING
Shares of capital stock sold ..................... 294,478,892 150,153,912
Shares issued for distributions reinvested ....... 5,637,643 4,331,892
Shares of capital stock repurchased .............. (255,609,535) (153,123,752)
----------------------------------
Increase in shares outstanding ................. 44,507,000 1,362,052
Shares outstanding:
Beginning of year .............................. 83,617,645 82,255,593
----------------------------------
End of year .................................... 128,124,645 83,617,645
==================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 176
===============================================================================
NOTES TO FINANCIAL STATEMENTS 77
===============================================================================
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.
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.
<PAGE> 177
===============================================================================
78 NOTES TO FINANCIAL STATEMENTS continued
===============================================================================
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.
On October 31, 1996, the Series entered into an accounting services
agreement with VALIC which appointed VALIC as Accounting Services Agent. Under
the agreement VALIC will provide, or cause to be provided, certain accounting
and administrative services to the Series. During the year ended May 31, 1997,
the Series paid VALIC $177,947 for such services provided directly by VALIC.
VALIC provided to the Series, at cost, certain services associated with
the printing of reports to shareholders. During the fiscal year ended May 31,
1997, the Series paid $14,185 for such services.
During the fiscal year ended May 31, 1997, 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 $18,552,714 $10,357,209
Stock Index Fund MidCap Index Fund 2,869,743 898,155
Small Cap Index Fund MidCap Index Fund 222,579 24,431
</TABLE>
At May 31, 1997, 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........................................96.88%
MidCap Index Fund....................................... 99.99
Small Cap Index Fund....................................100.00
International Equities Fund............................. 99.85
Growth Fund............................................. 99.65
Growth & Income Fund....................................100.00
Science & Technology Fund...............................100.00
Social Awareness Fund................................... 99.92
Timed Opportunity Fund.................................. 99.95
Capital Conservation Fund............................... 88.28 11.71
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 31,1997.
<TABLE>
<CAPTION>
IDENTIFIED COST GROSS GROSS
OF INVESTMENTS UNREALIZED UNREALIZED NET UNREALIZED
OWNED APPRECIATION DEPRECIATION APPRECIATION
--------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C>
Stock Index Fund ...................... $1,369,004,299 $1,093,563,133 $22,939,285 $ 1,070,623,848
MidCap Index Fund ..................... 446,694,738 192,754,247 32,892,227 159,862,020
Small Cap Index Fund .................. 159,528,081 49,895,601 16,593,877 33,301,724
International Equities Fund ........... 142,338,365 49,620,737 14,010,791 35,609,946
Growth Fund ........................... 626,985,764 141,577,164 27,949,151 113,628,013
Growth & Income Fund .................. 164,338,119 47,553,041 2,258,925 45,294,116
Science & Technology Fund ............. 670,314,391 138,673,519 21,842,133 116,831,386
Social Awareness Fund ................. 129,212,877 26,488,788 554,203 25,934,585
Timed Opportunity Fund ................ 151,494,008 26,592,551 1,445,300 25,147,251
Capital Conservation Fund ............. 66,521,096 360,926 1,463,529 (1,102,603)
Government Securities Fund ............ 82,703,670 824,489 1,085,678 (261,189)
International Government
Bond Fund .......................... 179,040,526 4,517,896 11,003,057 (6,485,161)
Money Market Fund ..................... 132,606,456 - - -
</TABLE>
The following net realized capital loss carryforwards at May 31, 1997, may
be utilized to offset future capital gains.
<TABLE>
<CAPTION>
CAPITAL LOSS CARRYFORWARD EXPIRATION THROUGH
------------------------- ------------------
<S> <C> <C>
Science & Technology Fund.............. $ 698,127 May 31, 2005
Capital Conservation Fund.............. 574,958 May 31, 2003
Government Securities Fund............. 2,086,592 May 31, 2003
Money Market Fund...................... 3,017 May 31, 2005
</TABLE>
<PAGE> 178
===============================================================================
NOTES TO FINANCIAL STATEMENTS continued 79
===============================================================================
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 ......................... $253,120,990 $ 65,720,162
MidCap Index Fund ........................ 103,367,099 119,442,770
Small Cap Index Fund ..................... 74,891,949 72,465,201
International Equities Fund .............. 22,217,400 58,218,877
Growth Fund .............................. 409,714,720 215,956,220
Growth & Income Fund ..................... 143,618,700 66,343,852
Science & Technology Fund ................ 862,216,562 742,010,646
Social Awareness Fund .................... 152,531,401 112,152,443
Timed Opportunity Fund ................... 170,451,719 190,958,843
Capital Conservation Fund ................ 30,004,835 31,751,701
Government Securities Fund ............... 41,395,354 29,171,050
International Government Bond Fund ....... 46,210,209 6,470,536
</TABLE>
NOTE 5 - PORTFOLIO SECURITIES LOANED
To realize additional income, a Fund may lend portfolio securities with a
value of up to 30% (331/3% 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 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 Custodian 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, 1997 are summarized as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL VALUE
---------------------------------
<S> <C> <C>
Stock Index Fund ..................... $ 22,480,371 $ 22,988,564
MidCap Index Fund .................... 27,322,579 28,429,544
Small Cap Index Fund ................. 9,932,026 10,487,087
International Equities Fund .......... 10,934,014 11,385,475
Growth Fund .......................... 51,328,128 52,289,867
Growth & Income Fund ................. 5,811,079 6,020,652
Science & Technology Fund ............ 29,419,841 30,593,344
Social Awareness Fund ................ 1,680,752 1,732,462
Timed Opportunity Fund ............... 999,923 1,021,843
Capital Conservation Fund ............ 11,166 11,640
Government Securities Fund ........... 312,968 316,500
------------ ------------
Total ............................. $160,232,847 $165,276,978
============ ============
</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, 1997,
Government Securities Fund had 62% of its net assets invested in such
securities.
At May 31, 1997, 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.
<PAGE> 179
===============================================================================
80 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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
STOCK INDEX FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 20.69 $ 16.81 $ 14.39 $ 14.36 $ 13.34
----------------------------------------------------------------
Income from investment operations:
Net investment income ..................... 0.39 0.39 0.37 0.35 0.34
Net realized and unrealized gain
on securities ............................ 5.57 4.26 2.45 0.12 1.20
----------------------------------------------------------------
Total income from investment operations ... 5.96 4.65 2.82 0.47 1.54
----------------------------------------------------------------
Distributions:
Distributions from net investment
income ................................... (0.39) (0.38) (0.37) (0.35) (0.34)
Distributions from net realized gain
on securities ............................ (0.17) (0.39) (0.03) (0.09) (0.18)
----------------------------------------------------------------
Total distributions ....................... (0.56) (0.77) (0.40) (0.44) (0.52)
----------------------------------------------------------------
Net asset value at end of period .............. $ 26.09 $ 20.69 $ 16.81 $ 14.39 $ 14.36
================================================================
TOTAL RETURN .................................. 29.24% 28.17% 19.98% 3.29% 11.74%
================================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.34% 0.35% 0.38% 0.39% 0.43%
Ratio of net investment income to
average net assets ......................... 1.76% 2.05% 2.44% 2.44% 2.52%
Portfolio turnover rate ..................... 3% 3% 14% 3% 1%
Number of shares outstanding at end
of period (000's) .......................... 93,687 85,117 75,451 75,494 66,224
Net assets at end of period (000's) ......... $2,444,200 $1,760,786 $1,267,992 $1,086,459 $951,200
Average net assets during the
period (000's) ............................. $2,019,826 $1,498,398 $1,140,085 $1,030,581 $836,510
Average commission rate paid ................ $ 0.0281 n/a n/a n/a n/a
</TABLE>
MIDCAP INDEX FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 19.09 $ 15.68 $ 14.54 $ 14.38 $ 12.86
--------------------------------------------------------
Income from investment operations:
Net investment income ..................... 0.24 0.24 0.26 0.23 0.24
Net realized and unrealized gain
on securities ............................ 2.95 4.06 1.59 0.28 1.93
--------------------------------------------------------
Total income from investment operations ... 3.19 4.30 1.85 0.51 2.17
--------------------------------------------------------
Distributions:
Distributions from net investment
income ................................... (0.24) (0.24) (0.26) (0.23) (0.24)
Distributions from net realized gain
on securities ............................ (1.21) (0.65) (0.45) (0.12) (0.41)
--------------------------------------------------------
Total distributions ....................... (1.45) (0.89) (0.71) (0.35) (0.65)
--------------------------------------------------------
Net asset value at end of period .............. $ 20.83 $ 19.09 $ 15.68 $ 14.54 $ 14.38
--------------------------------------------------------
TOTAL RETURN .................................. 17.48% 28.10% 13.26% 3.52% 17.21%
========================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.40% 0.41% 0.44% 0.46% 0.47%
Ratio of net investment income to
average net assets ......................... 1.24% 1.36% 1.73% 1.62% 1.79%
Portfolio turnover rate ..................... 19% 21% 23% 17% 5%
Number of shares outstanding at end
of period (000's) .......................... 29,137 28,322 25,988 24,001 14,673
Net assets at end of period (000's) ......... $607,061 $540,688 $407,557 $349,041 $210,931
Average net assets during the
period (000's) ............................. $554,397 $477,372 $376,486 $285,247 $154,979
Average commission rate paid ................ $ 0.0277 n/a n/a n/a n/a
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 180
===============================================================================
FINANCIAL HIGHLIGHTS CONTINUED 81
===============================================================================
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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
SMALL CAP INDEX FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 16.25 $ 12.49 $ 11.52 $ 11.28 $ 9.93
-------------------------------------------------------
Income from investment operations:
Net investment income ...................... 0.19 0.20 0.17 0.13 0.15
Net realized and unrealized gain
on securities ............................ 0.93 4.04 0.97 0.58 1.48
-------------------------------------------------------
Total income from investment
operations ............................... 1.12 4.24 1.14 0.71 1.63
-------------------------------------------------------
Distributions:
Distributions from net investment income ... (0.19) (0.20) (0.17) (0.13) (0.15)
Distributions from net realized gain
on securities ............................ (1.00) (0.28) -- (0.34) (0.13)
-------------------------------------------------------
Total distributions ......................... (1.19) (0.48) (0.17) (0.47) (0.28)
-------------------------------------------------------
Net asset value at end of period .............. $ 16.18 $ 16.25 $ 12.49 $ 11.52 $ 11.28
=======================================================
TOTAL RETURN .................................. 7.51% 34.50% 9.98% 6.18% 16.64%
=======================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ....... 0.41% 0.41% 0.44% 0.47% 0.47%
Ratio of net investment income to
average net assets .......................... 1.34% 1.36% 1.44% 1.10% 1.40%
Portfolio turnover rate ....................... 42% 31% 34% 16% 20%
Number of shares outstanding at
end of period (000's) ....................... 11,893 11,129 10,136 9,381 3,687
Net assets at end of period (000's) .......... $192,459 $180,785 $126,567 $108,050 $41,581
Average net assets during the period (000's) .. $178,368 $150,448 $120,298 $ 70,690 $22,142
Average commission rate paid .................. $ 0.0297 n/a n/a n/a n/a
</TABLE>
INTERNATIONAL EQUITIES FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 11.15 $ 10.42 $ 10.14 $ 8.99 $ 8.03
-------------------------------------------------------
Income from investment operations:
Net investment income ...................... 0.20 0.17 0.15 0.11 0.18
Net realized and unrealized gain
on securities and foreign currencies ..... 0.63 0.97 0.34 1.17 0.93
-------------------------------------------------------
Total income from investment
operations .............................. 0.83 1.14 0.49 1.28 1.11
-------------------------------------------------------
Distributions:
Distributions from net investment income ... (0.19) (0.17) (0.15) (0.11) (0.15)
Distributions from net realized gain
on securities ............................ (0.35) (0.24) (0.06) (0.02) --
-------------------------------------------------------
Total distributions ........................ (0.54) (0.41) (0.21) (0.13) (0.15)
-------------------------------------------------------
Net asset value at end of period .............. $ 11.44 $ 11.15 $ 10.42 $ 10.14 $ 8.99
=======================================================
TOTAL RETURN .................................. 7.74% 11.14% 4.92% 14.31% 14.18%
=======================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ....... 0.42% 0.42% 0.45% 0.47% 0.53%
Ratio of net investment income to
average net assets .......................... 1.75% 1.65% 1.47% 1.43% 2.33%
Portfolio turnover rate ....................... 12% 20% 14% 7% 9%
Number of shares outstanding at
end of period (000's) ....................... 15,857 18,497 20,074 17,273 7,429
Net assets at end of period (000's) .......... $181,437 $206,259 $209,091 $175,183 $66,809
Average net assets during the period (000's) .. $191,117 $204,792 $199,235 $117,264 $45,509
Average commission rate paid .................. $ 0.0236 n/a n/a n/a n/a
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 181
===============================================================================
82 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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
GROWTH FUND
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
------------------------------- TO
1997 1996 1995 MAY 31, 1994
---------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 16.49 $ 11.43 $ 9.87 $10.00(1)
---------------------------------------------
Income (loss) from investment operations:
Net investment income ..................... 0.02 0.11 0.04 0.01
Net realized and unrealized gain (loss)
on securities ............................ 1.45 5.27 1.56 (0.13)
---------------------------------------------
Total income (loss) from investment
operations ............................... 1.47 5.38 1.60 (0.12)
---------------------------------------------
Distributions:
Distributions from net investment income .. (0.01) (0.09) (0.04) (0.01)
Distributions from net realized gain (loss)
on securities ............................ (0.33) (0.23) -- --
---------------------------------------------
Total distributions ....................... (0.34) (0.32) (0.04) (0.01)
---------------------------------------------
Net asset value at end of period .............. $ 17.62 $ 16.49 $ 11.43 $ 9.87
=============================================
TOTAL RETURN .................................. 9.00% 47.46% 16.25% (1.19)%
=============================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.86% 0.83% 0.91% 0.08%
Ratio of net investment income to
average net assets ......................... 0.09% 0.89% 0.41% 0.11%
Portfolio turnover rate ..................... 40% 36% 61% 0%
Number of shares outstanding at end
of period (000's) .......................... 42,422 25,826 8,800 1,001
Net assets at end of period (000's) ........ $747,654 $425,787 $100,614 $9,885
Average net assets during the period (000's) $588,056 $238,228 $ 42,232 $9,944
Average commission rate paid ................ $ 0.0499 n/a n/a n/a
</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
1997 1996 1995 MAY 31, 1994
---------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ......... $ 14.78 $ 11.09 $ 9.87 $10.00(1)
---------------------------------------------
Income (loss) from investment operations:
Net investment income ...................... 0.10 0.08 0.09 0.02
Net realized and unrealized gain (loss)
on securities ............................. 2.38 3.77 1.22 (0.13)
---------------------------------------------
Total income (loss) from investment
operations ................................ 2.48 3.85 1.31 (0.11)
---------------------------------------------
Distributions:
Distributions from net investment income ... (0.10) (0.07) (0.09) (0.02)
Distributions from net realized gain (loss)
on securities ............................. (0.29) (0.09) -- --
---------------------------------------------
Total distributions ........................ (0.39) (0.16) (0.09) (0.02)
---------------------------------------------
Net asset value at end of period ............... $ 16.87 $ 14.78 $ 11.09 $ 9.87
=============================================
TOTAL RETURN ................................... 17.08% 34.85% 13.35% (1.11)%
=============================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ...... 0.81% 0.79% 0.86% 0.07%
Ratio of net investment income to
average net assets .......................... 0.70% 0.63% 0.93% 0.22%
Portfolio turnover rate ...................... 45% 64% 97% 11%
Number of shares outstanding at end
of period (000's) ........................... 12,422 7,685 3,867 1,002
Net assets at end of period (000's) ......... $209,545 $113,546 $42,867 $9,890
Average net assets during the period (000's) . $161,226 $ 75,158 $21,910 $9,946
Average commission rate paid ................. $ 0.0500 n/a n/a n/a
</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.
<PAGE> 182
===============================================================================
FINANCIAL HIGHLIGHTS CONTINUED 83
===============================================================================
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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
SCIENCE & TECHNOLOGY FUND
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED MAY 31, APRIL 29, 1994
------------------------------- TO
1997 1996 1995 MAY 31, 1994
----------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 20.48 $ 14.43 $ 9.83 $ 10.00(1)
----------------------------------------------
Income (loss) from investment operations:
Net investment income ..................... -- -- 0.03 --
Net realized and unrealized gain (loss)
on securities and foreign currencies ..... 0.33 8.08 4.72 (0.17)
----------------------------------------------
Total income (loss) from investment
operations ............................... 0.33 8.08 4.75 (0.17)
----------------------------------------------
Distributions:
Distributions from net investment income .. -- -- (0.02) --
Distributions from net realized gain
on securities ............................ (0.93) (2.03) (0.13) --
----------------------------------------------
Total distributions ........................ (0.93) (2.03) (0.15) --
----------------------------------------------
Net asset value at end of period .............. $ 19.88 $ 20.48 $ 14.43 $ 9.83
==============================================
TOTAL RETURN .................................. 1.81% 58.28% 48.61% (1.66)%
==============================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.96% 0.94% 1.00% 0.08%
Ratio of net investment income to
average net assets ......................... (0.29)% (0.07)% 0.36% 0.04%
Portfolio turnover rate ..................... 122% 116% 121% 0%
Number of shares outstanding at end
of period (000's) .......................... 40,484 27,696 11,550 1,001
Net assets at end of period (000's) ........ $804,982 $567,187 $166,683 $ 9,834
Average net assets during the period (000's) $664,608 $363,087 $ 64,974 $ 9,918
Average commission rate paid ................ $ 0.0393 n/a n/a n/a
</TABLE>
(1) The net asset value at the beginning of the period is as of commencement of
operations on April 29, 1994.
SOCIAL AWARENESS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period....... $15.49 $13.02 $11.98 $12.12 $11.43
----------------------------------------------
Income from investment operations:
Net investment income.................... 0.24 0.26 0.27 0.26 0.24
Net realized and unrealized gain (loss)
on securities........................... 4.19 3.37 1.75 (0.02) 1.22
----------------------------------------------
Total income from investment operations.. 4.43 3.63 2.02 0.24 1.46
----------------------------------------------
Distributions:
Distributions from net investment
income.................................. (0.24) (0.25) (0.27) (0.26) (0.24)
Distributions from net realized gain
on securities........................... (1.78) (0.91) (0.71) (0.12) (0.53)
----------------------------------------------
Total distributions...................... (2.02) (1.16) (0.98) (0.38) (0.77)
----------------------------------------------
Net asset value at end of period............. $17.90 $15.49 $13.02 $11.98 $12.12
==============================================
TOTAL RETURN................................. 30.48% 28.85% 18.19% 1.97% 13.08%
==============================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets.... 0.56% 0.56% 0.58% 0.60% 0.63%
Ratio of net investment income to
average net assets........................ 1.53% 1.80% 2.22% 2.19% 2.14%
Portfolio turnover rate.................... 109% 117% 148% 83% 106%
Number of shares outstanding at end
of period (000's)......................... 8,677 5,220 4,143 3,817 2,819
Total net assets at end of period (000's).. $155,349 $80,887 $53,927 $45,729 $34,166
Average net assets during the
period (000's)............................ $106,139 $66,888 $47,942 $41,002 $26,920
Average commission rate paid............... $0.0400 n/a n/a n/a n/a
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 183
===============================================================================
84 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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
TIMED OPPORTUNITY FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 12.55 $ 11.24 $ 10.84 $ 11.18 $ 10.66
--------------------------------------------------------
Income from investment operations:
Net investment income ..................... 0.77 0.44 0.44 0.37 0.35
Net realized and unrealized gain (loss)
on securities ............................ 1.44 1.53 0.82 (0.15) 0.61
--------------------------------------------------------
Total income from investment operations ... 2.21 1.97 1.26 0.22 0.96
--------------------------------------------------------
Distributions:
Distributions from net investment
income ................................... (0.78) (0.44) (0.44) (0.37) (0.35)
Distributions from net realized gain
on securities ............................ (1.41) (0.22) (0.42) (0.19) (0.09)
--------------------------------------------------------
Total distributions ....................... (2.19) (0.66) (0.86) (0.56) (0.44)
--------------------------------------------------------
Net asset value at end of period .............. $ 12.57 $ 12.55 $ 11.24 $ 10.84 $ 11.18
========================================================
TOTAL RETURN .................................. 15.89% 17.90% 12.43% 1.86% 9.17%
========================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.57% 0.57% 0.58% 0.59% 0.70%
Ratio of net investment income to
average net assets ......................... 3.26% 3.62% 4.03% 3.24% 3.28%
Portfolio turnover rate ..................... 103% 119% 133% 76% 78%
Number of shares outstanding at end
of period (000's) .......................... 14,107 15,142 16,319 17,956 14,758
Total net assets at end of period (000's) ... $177,347 $190,024 $183,393 $194,576 $165,002
Average net assets during the
period (000's) ............................. $179,615 $187,576 $186,487 $185,036 $ 151,450
Average commission rate paid ................ $ 0.0401 n/a n/a n/a n/a
</TABLE>
CAPITAL CONSERVATION FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 9.23 $9.52 $9.13 $9.87 $9.29
---------------------------------------------------------
Income (loss) from investment operations:
Net investment income........... 0.62 0.62 0.63 0.61 0.65
Net realized and unrealized gain (loss)
on securities.................. 0.08 (0.29) 0.39 (0.69) 0.58
---------------------------------------------------------
Total income (loss) from investment
operations..................... 0.70 0.33 1.02 (0.08) 1.23
---------------------------------------------------------
Distributions:
Distributions from net investment
income......................... (0.62) (0.62) (0.63) (0.61) (0.65)
---------------------------------------------------------
Distributions from net realized gain
on securities.................. - - - (0.05) -
Total distributions............. (0.62) (0.62) (0.63) (0.66) (0.65)
---------------------------------------------------------
Net asset value at end of period.... $ 9.31 $9.23 $9.52 $9.13 $9.87
=========================================================
TOTAL RETURN........................ 7.75% 3.41% 11.80% (1.13)% 13.60%
=========================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.57% 0.58% 0.59% 0.67%
Ratio of net investment income to
average net assets............... 6.59% 6.47% 6.88% 6.24% 6.77%
Portfolio turnover rate........... 45% 80% 100% 55% 58%
Number of shares outstanding at end
of period (000's)................ 7,168 7,604 6,935 6,712 5,095
Total net assets at end of period (000's) $66,747 $70,212 $66,031 $61,305 $50,290
Average net assets during the
period (000's)................... $69,352 $70,271 $61,568 $59,210 $43,316
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 184
===============================================================================
FINANCIAL HIGHLIGHTS CONTINUED 85
===============================================================================
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. The average commission rate paid on investment equity securities
(on a per share basis) is presented for the period beginning June 1, 1996.
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 9.61 $ 9.89 $ 9.55 $ 10.30 $ 9.84
-----------------------------------------------------
Income (loss) from investment operations:
Net investment income ..................... 0.59 0.61 0.60 0.55 0.61
Net realized and unrealized gain (loss)
on securities ............................ 0.06 (0.28) 0.35 (0.59) 0.59
-----------------------------------------------------
Total income (loss) from investment
operations ............................... 0.65 0.33 0.95 (0.04) 1.20
-----------------------------------------------------
Distributions:
Distributions from net investment
income ................................... (0.59) (0.61) (0.61) (0.55) (0.61)
-----------------------------------------------------
Distributions from net realized gain
on securities ............................ -- -- -- (0.16) (0.13)
-----------------------------------------------------
Total distributions ....................... (0.59) (0.61) (0.61) (0.71) (0.74)
Net asset value at end of period .............. $ 9.67 $ 9.61 $ 9.89 $ 9.55 $ 10.30
=====================================================
TOTAL RETURN .................................. 6.94% 3.32% 10.43% (0.66)% 12.56%
=====================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.56% 0.56% 0.58% 0.59% 0.67%
Ratio of net investment income to
average net assets ......................... 6.11% 6.21% 6.36% 5.44% 6.08%
Portfolio turnover rate ..................... 38% 36% 229% 85% 105%
Number of shares outstanding at end
of period (000's) .......................... 8,672 8,164 5,478 4,544 3,110
Total net assets at end of period (000's) ... $ 83,827 $ 78,423 $54,174 $43,401 $32,023
Average net assets during the
period (000's) ............................. $ 83,293 $ 68,017 $45,200 $41,596 $26,145
</TABLE>
INTERNATIONAL GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period ........ $ 11.79 $ 12.72 $ 10.97 $ 11.16 $ 10.43
-----------------------------------------------------
Income (loss) from investment operations:
Net investment income ..................... 0.63 0.65 0.65 0.62 0.76
Net realized and unrealized gain (loss)
on securities and foreign currencies ..... (0.49) (0.89) 1.80 (0.20) 0.70
-----------------------------------------------------
Total income (loss) from investment
operations ............................... 0.14 (0.24) 2.45 0.42 1.46
-----------------------------------------------------
Distributions:
Distributions from net investment
income ................................... (0.58) (0.68) (0.70) (0.60) (0.73)
Distributions from net realized gain
on securities ............................ (0.02) (0.01) -- (0.01) --
-----------------------------------------------------
Total distributions ..................... (0.60) (0.69) (0.70) (0.61) (0.73)
-----------------------------------------------------
Net asset value at end of period .............. $ 11.33 $ 11.79 $ 12.72 $ 10.97 $ 11.16
=====================================================
TOTAL RETURN .................................. 1.13% (1.91)% 23.23% 3.87% 14.50%
=====================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.56% 0.56% 0.59% 0.48% 0.14%
Ratio of net investment income to
average net assets ......................... 5.13% 5.45% 5.83% 5.87% 7.02%
Portfolio turnover rate ..................... 4% 11% 6% 3% 26%
Number of shares outstanding at end
of period (000's) .......................... 15,680 12,073 6,111 3,741 2,062
Total net assets at end of period (000's) ... $177,709 $142,383 $77,734 $41,028 $23,009
Average net assets during the
period (000's) ............................. $166,147 $114,693 $51,451 $33,561 $18,135
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 185
===============================================================================
86 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.
MONEY MARKET FUND
<TABLE>
<CAPTION>
Fiscal year ended May 31,
----------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------
<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 0.05 0.03 0.03
----------------------------------------------------
Distributions:
Distributions from net investment income .. (0.05) (0.05) (0.05) (0.03) (0.03)
----------------------------------------------------
Net asset value at end of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================
TOTAL RETURN .................................. 5.02% 5.26% 4.90% 2.83% 2.85%
====================================================
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets ..... 0.57% 0.57% 0.57% 0.58% 0.63%
Ratio of net investment income to
average net assets ......................... 4.95% 5.14% 4.75% 2.78% 2.81%
Number of shares outstanding at end of
period (000's) ............................. 128,125 83,618 82,256 50,534 45,323
Total net assets at end of period (000's) ... $128,125 $83,618 $82,254 $50,533 $45,322
Average net assets during the
period (000's) ............................. $113,882 $84,271 $67,021 $46,222 $45,562
</TABLE>
===============================================================================
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, 1997.
We have also audited for each of the Funds the related statement of operations
for the year ended May 31, 1997, the statement of changes in net assets for
each of the two years in the period ended May 31, 1997, 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, 1997, 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, 1997, 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 10, 1997
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 186
===============================================================================
REPORT OF INDEPENDENT AUDITORS 87
===============================================================================
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, 1997.
We have also audited for each of the Funds the related statement of operations
for the year ended May 31, 1997, the statement of changes in net assets for
each of the two years in the period ended May 31, 1997, 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, 1997, 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, 1997, 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.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
July 10, 1997
<PAGE> 187
===============================================================================
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
1 Bankers Trust Plaza and Secretary
New York, New York 10006 Gregory R. Seward,
Treasurer
T. Rowe Price Associates, Inc. Kathryn A. Pearce,
100 East Pratt Street Controller
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.
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(C) 1997 The Variable Annuity Life Insurance Company, Houston Texas
VALIC is a registered service mark of The Variable Annuity Life
Insurance Company
VA 9530 VER 5/97
