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AMERICAN GENERAL SERIES PORTFOLIO COMPANY
ASSET ALLOCATION FUND
CAPITAL CONSERVATION FUND
GOVERNMENT SECURITIES FUND
GROWTH FUND
GROWTH & INCOME FUND
INTERNATIONAL EQUITIES FUND
INTERNATIONAL GOVERNMENT BOND FUND
MIDCAP INDEX FUND
MONEY MARKET FUND
SCIENCE & TECHNOLOGY FUND
SMALL CAP INDEX FUND
SOCIAL AWARENESS FUND
STOCK INDEX FUND
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STATEMENT OF ADDITIONAL INFORMATION
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FORM N-1A PART B
OCTOBER 1, 1999
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 "Series Company"). It should be read in conjunction with
the Prospectus. The Statement of Additional Information and the related
Prospectus are both dated October 1, 1999. 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
Series Company or American General Distributors, Inc. (the "Distributor") at
2929 Allen Parkway, Houston, Texas 77019. All inquiries regarding variable
annuity contracts or variable life policies 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 1-800-813-5065. Shares in the Series Company are available to the public
only through the purchase of certain variable annuity contracts or variable life
policies issued and employee thrift plans maintained by VALIC and its
affiliates.
VA 9017-1 VER 10/99
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TABLE OF CONTENTS
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PAGE
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General Information and History............................. 4
Additional Information Regarding Certain Funds.............. 5
Asset Allocation Fund..................................... 5
Capital Conservation Fund................................. 5
Government Securities Fund................................ 5
International Equities Fund............................... 5
Performance and Yield Information........................... 7
Investment Restrictions..................................... 10
Fundamental Investment Restrictions Applicable to All
Funds.................................................. 10
MMF Investment Restrictions............................... 11
AAF, CCF, GSF, SIF, IEF, MIF and SCIF Investment
Restrictions........................................... 11
GIF Investment Restrictions............................... 11
GF and STF Investment Restrictions........................ 11
SAF Investment Restrictions............................... 12
IGBF Investment Restrictions.............................. 12
Non-Fundamental Investment Restrictions................... 12
Investment Practices........................................ 14
Adjustable Rate Securities................................ 14
Asset-Backed Securities................................... 14
Bank Obligations.......................................... 14
Convertible Securities.................................... 15
Emerging Markets.......................................... 15
Euro Conversion........................................... 16
Eurodollar Obligations.................................... 16
Fixed Income Securities................................... 17
Foreign Securities........................................ 17
Foreign Currency Exchange Transactions.................... 18
Illiquid Securities....................................... 19
Lending Portfolio Securities.............................. 19
Loan Participations....................................... 19
Lower Rated Debt Securities............................... 20
Mortgage-Related Securities............................... 20
Options and Futures Contracts............................. 24
Real Estate Securities and Real Estate Investment Trusts
("REITs").............................................. 31
Repurchase Agreements..................................... 31
Reverse Repurchase Agreements............................. 32
Rule 144A Securities...................................... 32
Standard and Poor's Depository Receipts................... 33
Swap Agreements........................................... 33
Temporary Defensive Position.............................. 34
Warrants.................................................. 34
When Issued Securities.................................... 35
Investment Adviser.......................................... 35
Investment Sub-Advisers..................................... 37
Portfolio Transactions and Brokerage........................ 38
Offering, Purchase, and Redemption of Fund Shares........... 40
Determination of Net Asset Value............................ 41
Calculation of Yield for the Money Market Fund.............. 42
Accounting and Tax Treatment................................ 43
</TABLE>
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<TABLE>
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PAGE
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Calls and Puts............................................ 43
Financial Futures Contracts............................... 43
Subchapter M of the Internal Revenue Code of 1986......... 44
Section 817(h) of the Code................................ 44
Other Information........................................... 45
Shareholder Reports....................................... 45
Voting and Other Rights................................... 45
Custody of Assets......................................... 46
Index Funds............................................... 46
Description of Corporate Bond Ratings..................... 47
Description of Commercial Paper Ratings................... 48
Independent Auditors...................................... 49
Transfer Agent............................................ 49
Management of the Series Company............................ 50
Compensation of Directors and Certain Officers.............. 55
Financial Statements........................................ 56
</TABLE>
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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 Series
Company and subject to the authority of the Series Company's Board of Directors,
VALIC serves as the Series Company's investment adviser and conducts the
business and affairs of the Series Company. Additionally, VALIC has engaged an
investment sub-adviser to provide investment sub-advisory services for the
Growth Fund, and the Science & Technology Fund, subject to VALIC's control,
direction and supervision. The Series 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. Each of the Funds, except the
International Government Bond Fund, is "diversified" as the term is used in the
1940 Act. The Series 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 Series Company
acts as an investment vehicle for assets of separate accounts sponsored by VALIC
and its affiliates. Additionally, retirement plans maintained by VALIC and
American General Corporation may own shares of certain of the Funds.
The Series Company and VALIC have Codes of Ethics which establish for their
officers, directors and certain employees procedures and restrictions as to
those individuals' 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)
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<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>
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*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.
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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.
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 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 Fund" for an explanation
of U.S. Government obligations and "Debt Securities" in this Statement
of Additional Information 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.
CAPITAL CONSERVATION FUND
The Fund may acquire common stocks by conversion of income-bearing
securities or by exercising warrants attached to income-bearing securities. The
Fund may hold up to 10% of its assets, valued at the time of acquisition, in
common stocks.
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 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 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.
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 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 21 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.
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The weighted breakdown by country of the EAFE Index (as of May 31, 1999) is
set forth below:
EAFE INDEX BREAKDOWN BY COUNTRY [UPDATE]
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COUNTRY WEIGHT
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1 AUSTRALIA................................................... 2.87
2 AUSTRIA..................................................... .29
3 BELGIUM..................................................... 1.52
4 DENMARK..................................................... .79
5 FINLAND..................................................... 1.69
6 FRANCE...................................................... 9.66
7 GERMANY..................................................... 9.65
8 HONG KONG................................................... 2.43
9 IRELAND..................................................... .44
10 ITALY....................................................... 4.65
11 JAPAN....................................................... 23.01
12 MALAYSIA.................................................... 0
13 NETHERLANDS................................................. 5.90
14 NEW ZEALAND................................................. .18
15 NORWAY...................................................... .43
16 PORTUGAL.................................................... .56
17 SINGAPORE................................................... .95
18 SPAIN....................................................... 3.09
19 SWEDEN...................................................... 2.33
20 SWITZERLAND................................................. 7.04
21 UNITED KINGDOM.............................................. 22.48
</TABLE>
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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 or Average Annual Total Return to
the total return of the Fund's benchmark index ("Index Total Return"). The
difference between Portfolio Total Return or Average Annual 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 VALIC'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, 5, and 10 years,
or, since inception of the Fund, are calculated according to the following
formula:
P (1+T)n = ERV
Where:
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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, 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 of 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]
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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:
6
Yield = 2[(1 + NII ) - 1]
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S x NAV
Where:
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<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>
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PERFORMANCE RETURNS
MAY 31, 1999
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10 YEAR
INCEPTION OR SINCE
DATE 1 YEAR 5 YEAR INCEPTION (A)
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<S> <C> <C> <C> <C>
ASSET ALLOCATION FUND:* 09/06/83
Average Annual Total Return 12.23% 16.02% 11.04%
Portfolio Total Return 12.80% 16.59% 11.73%
Benchmark (B) 13.83% 17.33% 13.52%
CAPITAL CONSERVATION FUND: 01/16/86
Average Annual Total Return 3.25% 7.34% 7.22%
Portfolio Total Return 3.85% 7.91% 7.88%
Merrill Lynch Corporate Master Index 3.21% 8.39% 9.12%
GOVERNMENT SECURITIES FUND: 01/16/86
Average Annual Total Return 3.58% 6.93% 7.36%
Portfolio Total Return 4.17% 7.50% 8.02%
Lehman Brothers U.S. Treasury Index 4.30% 7.50% 8.31%
GROWTH FUND: 04/29/94
Average Annual Total Return 14.20% 22.14% 21.43%
Portfolio Total Return 15.06% 23.00% 22.29%
S & P 500 21.04% 25.87% 25.79%
GROWTH & INCOME FUND: 04/29/94
Average Annual Total Return 16.92% 20.19% 19.54%
Portfolio Total Return 17.74% 21.01% 20.36%
S & P 500 21.04% 25.87% 25.79%
INTERNATIONAL EQUITIES FUND: 10/02/89
Average Annual Total Return 4.43% 7.60% 4.98%
Portfolio Total Return 4.86% 8.02% 5.43%
Morgan Stanley Capital International EAFE 4.36% 7.69% 5.15%
INTERNATIONAL GOVERNMENT BOND FUND: 10/01/91
Average Annual Total Return 6.40% 5.95% 7.45%
Portfolio Total Return 6.97% 6.52% 7.91%
Salomon Brothers Non-U.S. Government Bond Index 6.93% 6.25% 8.09%
MIDCAP INDEX FUND: 10/01/91
Average Annual Total Return 11.91% 19.85% 16.85%
Portfolio Total Return 12.29% 20.25% 17.25%
S & P MidCap 400 11.91% 20.16% 17.52%
MONEY MARKET FUND: 01/16/86
Average Annual Total Return 4.84% 5.05% 5.07%
Portfolio Total Return 5.41% 5.61% 5.68%
30-day Certificate of Deposit Primary Offering Rate 4.46% 4.61% 4.83%
by New York City Banks
SCIENCE & TECHNOLOGY FUND: 04/29/94
Average Annual Total Return 48.34% 31.54% 30.47%
Portfolio Total Return 49.30% 32.50% 31.43%
S & P 500 21.04% 25.87% 25.79%
SMALL CAP INDEX FUND: 05/01/92
Average Annual Total Return (2.45)% 13.48% 12.62%
Portfolio Total Return (2.04)% 13.89% 13.05%
Russell 2000 (2.69)% 13.60% 13.72%
SOCIAL AWARENESS FUND: 10/02/89
Average Annual Total Return 20.05% 25.47% 16.56%
Portfolio Total Return 20.62% 26.03% 17.06%
S & P 500 21.04% 25.87% 17.60%
STOCK INDEX FUND: 04/20/87
Average Annual Total Return 20.85% 25.63% 17.45%
Portfolio Total Return 21.17% 25.97% 17.88%
S & P 500 21.04% 25.87% 18.07%
</TABLE>
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* 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% NYC 30 Day Primary CD Rate.
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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). 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 Series 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 investments in options and futures contracts.
Each Fund may use short-term credits when necessary to clear transactions.
8. Lend money, except by purchasing debt obligations in which a Fund
may invest consistent with its investment objective(s) and policies or by
purchasing securities subject to repurchase agreements.
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.
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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, or other persons to the extent
permitted by applicable law. The Science & Technology Fund may borrow from
other T. Rowe Price Funds.
2. Purchase the securities of any issuer if, as a result, more than
25% of the value of the Funds' total assets would be invested in the
securities of issuers having their principal business activities in the
same industry; provided, however, the Growth Fund will normally concentrate
25% or more of its assets in the securities of the banking industry when
the Growth Fund's position in issues maturing in one year or less equals
35% or more of the Growth Fund's total assets.
3. Make loans, although the Funds may (i) lend portfolio securities;
provided that no such loan may be made if, as a result, the aggregate of
such loans would exceed 33 1/3% of the value of the Funds' total assets;
(ii) purchase money market securities and enter into repurchase agreements;
and (iii) acquire publicly-distributed or privately-placed debt securities
and purchase debt.
4. Purchase a security if, as a result, with respect to 75% of the
Funds' total assets, more than 5% of the value of its total assets would be
invested in the securities of a single issuer or more than 10% of the
outstanding voting securities of any issuer would be held by the Funds,
except 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, including limited partnership
interests therein, 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
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<PAGE> 12
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 Funds do 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, STF
may 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 Fund 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.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The following non-fundamental investment restriction is applicable to each
Fund:
The Fund may not invest more than 10% (15% in the case of the Growth Fund,
Growth & Income Fund and Science & Technology Fund) of the Fund's net assets
(taken at the greater of cost or market value) in securities that are illiquid
or not readily marketable including time deposits and repurchase agreements not
maturing within seven days or restricted securities, but excluding (a) Rule 144A
securities that have been determined to be liquid by VALIC or the Sub-adviser,
in accordance with guidelines adopted by the Series Company's Board of
Directors, and (b) commercial paper that is sold under Section 4(2) of the 1933
Act which: (i) is not traded flat or in default as to interest or principal;
(ii) is
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rated in one of the two highest categories by at least two nationally recognized
statistical rating organizations and has been determined to be liquid by VALIC
or the Sub-adviser, in accordance with guidelines adopted by the Series
Company's Board of Directors; or (iii) is rated in one of the two highest
categories by one nationally recognized statistical rating agency and VALIC or
the Sub-adviser, in accordance with guidelines adopted by the Series Company's
Board of Directors, has determined that the commercial paper is of equivalent
quality and is liquid.
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.
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INVESTMENT PRACTICES
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.
ASSET-BACKED SECURITIES
Each of the Funds may invest in asset-backed securities (unrelated to first
mortgage loans) that represent fractional interests in pools of retail
installment loans, both secured (such as certificates for automobile
receivables) and unsecured, and leases, or revolving credit receivables both
secured and unsecured (such as credit card receivable securities). These assets
are generally held by a trust and payments of principal and interest, or
interest only are passed through monthly or quarterly to certificate holders and
may be guaranteed up to certain amounts by letters of credit issued by a
financial institution affiliated or unaffiliated with the trustee or originator
of the trust.
Underlying automobile sales contracts, leases or credit card receivables
are subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, principal repayment rates tend not to vary much with
interest rates and the short-term nature of the underlying loans, leases, or
receivables tends to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying loans, leases or receivables are not realized
by the trust because of unanticipated legal or administrative costs of enforcing
the contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If consistent with
its investment objective(s) and policies, a Fund may invest in other
asset-backed securities that may be developed in the future.
BANK OBLIGATIONS
Each Fund may invest in bank obligations. Bank obligations in which the
Funds may invest include certificates of deposit, bankers' acceptances, and
fixed time deposits. Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on demand
by the investor, but may be subject to early withdrawal penalties which vary
depending upon market conditions and the remaining maturity of the obligation.
There are no contractual restrictions on the right to transfer a beneficial
interest in a fixed time deposit to a third party, although there is no market
for such deposits. A Fund will not invest in fixed time deposits which (1) are
not subject to prepayment or (2) provide for withdrawal penalties upon
prepayment (other than
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overnight deposits) if, in the aggregate, more than 10% of its net assets (15%
in the case of Growth Fund, Growth & Income Fund and Science & Technology Fund)
would be invested in such deposits, repurchase agreements maturing in more than
seven days and other illiquid assets.
The Funds limit investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A Fund
also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.
The Funds limit investments in foreign bank obligations to United States
dollar- or foreign currency-denominated obligations of foreign banks (including
United States branches of foreign banks) which at the time of investment (i)
have more than $10 billion, or the equivalent in other currencies, in total
assets; (ii) in terms of assets are among the 75 largest foreign banks in the
world; (iii) have branches or agencies (limited purpose offices which do not
offer all banking services) in the United States; and (iv) in the opinion of
VALIC or a Sub-adviser, are of an investment quality comparable to obligations
of United States banks in which the Funds may invest. The Government Securities
Fund may invest in the same types of bank obligations as the other Funds, but
they must be U.S. dollar-denominated. Subject to a Fund's limitation on
concentration in the securities of issuers in a particular industry, there is no
limitation on the amount of a Fund's assets which may be invested in obligations
of foreign banks which meet the conditions set forth herein.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibility that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
CONVERTIBLE SECURITIES
The Asset Allocation Fund, Capital Conservation Fund, Growth Fund, Growth &
Income Fund, International Equities Fund, Science and Technology Fund, and
Social Awareness Fund may invest in convertible securities of foreign or
domestic issues. A convertible security is a security (a bond or preferred
stock) which may be converted at a stated price within a specified period of
time into a certain quantity of the common stock of the same or a different
issuer. Convertible securities are senior to common stocks in a corporation's
capital structure but are usually subordinated to similar nonconvertible
securities. Convertible securities provide, through their conversion feature, an
opportunity to participate in capital appreciation resulting from a market price
advance in a convertible security's underlying common stock. The price of a
convertible security is influenced by the market value of the underlying common
stock and tends to increase as the market value of the underlying stock rises,
whereas it tends to decrease as the market value of the underlying stock
declines.
A Fund may be required to permit the issuer of a convertible security to
redeem the security, convert it into the underlying common stock, or sell it to
a third party. Thus, a Fund may not be able to control whether the issuer of a
convertible security chooses to convert that security. If the issuer chooses to
do so, this action could have an adverse effect on a Fund's ability to achieve
its investment objectives.
EMERGING MARKETS
Investments in companies domiciled in emerging market countries may be
subject to additional risks. Specifically, volatile social, political and
economic conditions may expose investments in emerging or developing markets to
economic structures
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that are generally less diverse and mature. Emerging market countries may have
less stable political systems than those of more developed countries. As a
result, it is possible that recent favorable economic developments in certain
emerging market countries may be suddenly slowed or reversed by unanticipated
political or social events in such countries. Moreover, the economies of
individual emerging market countries may differ favorably or unfavorably from
the U.S. economy in such respects as the rate of growth in gross domestic
product, the rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payments position.
Another risk is that the small current size of the markets for such
securities and the currently low or nonexistent volume of trading can result in
a lack of liquidity and in greater price volatility. Until recently, there has
been an absence of a capital market structure or market-oriented economy in
certain emerging market countries. If a Fund's securities will generally be
denominated in foreign currencies, the value of such securities to the Fund will
be affected by changes in currency exchange rates and in exchange control
regulations. A change in the value of a foreign currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of a Fund's
securities. In addition, some emerging market countries may have fixed or
managed currencies which are not free-floating against the U.S. dollar. Further,
certain emerging market currencies may not be internationally traded. Certain of
these currencies have experienced a steady devaluation relative to the U.S.
dollar. Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries.
A further risk is that the existence of national policies may restrict a
Fund's investment opportunities and may include restrictions on investment in
issuers or industries deemed sensitive to national interests. Also, some
emerging market countries may not have developed structures governing private or
foreign investment and may not allow for judicial redress for injury to private
property.
EURO CONVERSION
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU has established a common European currency
for participating countries which is known as the "euro." Each participating
country supplemented its existing currency with the euro on January 1, 1999, and
will replace its existing currency with the euro on July 1, 2002. Any other
European country which is a member of the EMU may elect to participate in the
EMU and may supplement its existing currency with the euro.
The ongoing introduction of the euro presents unique risks and
uncertainties, including whether the payment and operational systems of banks
and other financial institutions will function properly; how outstanding
financial contracts will be treated; the establishment of exchange rates for
existing currencies and the euro; and the creation of suitable clearing and
settlement systems for the euro. These and other factors could cause market
disruptions and could adversely affect the value of securities held by certain
of the Funds.
EURODOLLAR OBLIGATIONS
All Funds except the International Government Bond Fund, in accordance with
their 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 Securities and Exchange
Commission ("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 Series 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.
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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.
All Funds except the International Government Bond Fund also may purchase
and sell Eurodollar futures contracts, which enable purchasers to obtain a fixed
rate for the lending of funds and sellers to obtain a fixed rate for borrowings.
A Fund might use Eurodollar futures contracts and options thereon to hedge
against changes in a foreign prime lending interest rate to which many interest
swaps and fixed income securities are linked.
FIXED INCOME 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 BBB by S&P or their 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. The Adviser
or Sub-Advisers will not necessarily dispose of an investment grade security
that has been downgraded to below investment grade. 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.
FOREIGN SECURITIES
All Funds may invest in foreign securities. The Capital Conservation Fund
focuses on foreign bonds that are of the same quality as other bonds purchased
by the Fund. The Government Securities Fund focuses on high-quality foreign
government securities and high-quality money market securities payable in U.S.
dollars. The MidCap Index Fund, Small Cap Index Fund and Stock Index Fund focus
on the foreign securities included in their respective indices.
A foreign security includes corporate debt securities of foreign issuers
(including preferred or preference stock), certain foreign bank obligations (see
"Bank Obligations") and U.S. dollar or foreign currency-denominated obligations
of foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities. 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
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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.
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.
Money Market Securities of Foreign 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).
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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Foreign currency transactions used by certain of 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
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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.
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% (15% in the case of The Growth Fund,
Growth and Income Fund, and Science and Technology Fund) of the value of a
Fund's net assets.
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 SEC. While the securities are on
loan, the Funds will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower.
Any loan of portfolio securities by any Fund will be callable at any time
by the lending Fund upon notice of five business days. When voting or 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.
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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LOWER RATED DEBT SECURITIES
Issuers of lower rated or non-rated securities ("high yield" securities,
commonly known as "junk bonds") may be highly leveraged and may not have
available to them more traditional methods of financing. Therefore, the risks
associated with acquiring the securities of such issuers generally are greater
than is the case with higher rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, issuers of high yield
securities may be more likely to experience financial stress, especially if such
issuers are highly leveraged. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be adversely affected by
specific issuer developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holders of lower rated securities because such securities may be unsecured and
may be subordinated to other creditors of the issuer.
Lower rated securities frequently have call or redemption features which
would permit an issuer to repurchase the security from a Fund. If a call were
exercised by the issuer during a period of declining interest rates, a Fund
likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to a Fund and dividends to
shareholders.
A Fund may have difficulty disposing of certain lower rated securities
because there may be a thin trading market for such securities. The secondary
trading market for high yield securities is generally not as liquid as the
secondary market for higher rated securities. Reduced secondary market liquidity
may have an adverse impact on market price and a Fund's ability to dispose of
particular issues when necessary to meet a Fund's liquidity needs or in response
to a specific economic event such as a deterioration in the creditworthiness of
the issuer.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of lower rated
securities, particularly in a thinly traded market. Factors adversely affecting
the market value of lower rated securities are likely to adversely affect a
Fund's net asset value. In addition, a Fund may incur additional expenses to the
extent it is required to seek recovery upon a default on a portfolio holding or
participate in the restructuring of the obligation.
Finally, there are risks involved in applying credit ratings as a method
for evaluating lower rated fixed income securities. For example, credit ratings
evaluate the safety of principal and interest payments, not the market risks
involved in lower rated fixed income securities. Since credit rating agencies
may fail to change the credit ratings in a timely manner to reflect subsequent
events, VALIC or a Sub-Adviser will monitor the issuers of lower rated fixed
income securities in a Fund to determine if the issuers will have sufficient
cash flow and profits to meet required principal and interest payments, and to
assure the debt securities' liquidity within the parameters of the Fund's
investment policies. The VALIC and the Sub-Advisers will not necessarily dispose
of a portfolio security when its ratings have been changed.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are interests in pools of residential or
commercial mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations. See "Mortgage Pass-Through
Securities." The Asset Allocation Fund, Capital Conservation Fund and Government
Securities Fund may also invest in fixed income securities which are secured
with collateral consisting of mortgage-related securities (see "Collateralized
Mortgage Obligations"), and in other types of mortgage-related securities.
Mortgage Pass-Through Securities
Interests in pools of mortgage-related securities differ from other forms
of fixed income securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
residential or commercial mortgage loans, net of any fees paid to the issuer or
guarantor of such securities. Additional payments are caused by repayments of
principal resulting from the sale of the underlying property, refinancing or
foreclosure, net of fees or
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costs which may be incurred. Some mortgage-related securities (such as
securities issued by GNMA) are described as "modified pass-through." These
securities entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of certain fees, at the scheduled payment dates
regardless of whether or not the mortgagor actually makes the payment.
The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.
The principal governmental guarantor of mortgage-related securities are
GNMA, Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). GNMA is a wholly owned United States Government
corporation within the Department of Housing and Urban Development. GNMA is
authorized to guarantee, with the full faith and credit of the United States
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage bankers) and backed by pools of mortgages insured by the
Federal Housing Administration (the "FHA"), or guaranteed by the Department of
Veterans Affairs (the "VA").
Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include FNMA and FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved seller/servicers which
include state and federally chartered savings and loan associations, mutual
savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the United States Government. FHLMC was created by Congress in 1970 for the
purpose of increasing the availability of mortgage credit for residential
housing. It is a government-sponsored corporation formerly owned by the twelve
Federal Home Loan Banks and now owned entirely by private stockholders. FHLMC
issues Participation Certificates ("PCs") which represent interests in
conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets the Series Company's investment quality standards. There can be
no assurance that the private insurers or guarantors can meet their obligations
under the insurance policies or guarantee arrangements. Certain Funds may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the originator/servicers and
poolers, VALIC or a Sub-Adviser determines that the securities meet the Series
Company's quality standards. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. No Fund will purchase mortgage-related securities or any
other assets which in VALIC's or the Sub-Adviser's opinion are illiquid if, as a
result, more than 10% of the value of the Fund's net assets will be illiquid
(15%
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in the case of the Growth Fund, Growth & Income Fund and Science & Technology
Fund).
Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from that test available to all U.S.
Government securities. In the case of privately issued mortgage-related
securities, the Funds take the position that mortgage-related securities do not
represent interests in any particular "industry" or group of industries. The
assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of private issue mortgage-related securities whose underlying
assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.
Collateralized Mortgage Obligations (CMOs)
A CMO is a hybrid between a mortgage-backed bond and a mortgage
pass-through security. Similar to a bond, interest and prepaid principal is
paid, in most cases, monthly. CMOs may be collateralized by whole mortgage
loans, but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income
streams.
CMOs are structured in multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
Commercial Mortgage-Backed Securities
Commercial mortgage-backed securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions on
real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.
Other Mortgage-Related Securities
Other mortgage-related securities include securities other than those
described above that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real property, including mortgage
dollar rolls, CMO residuals or stripped mortgage-backed securities ("SMBS").
Other mortgage-related securities may be equity or fixed income securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
CMO Residuals
CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the
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CMOs and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See "Other
Mortgage-Related Securities -- Stripped Mortgage-Backed Securities." In
addition, if a series of a CMO includes a class that bears interest at an
adjustable rate, the yield to maturity on the related CMO residual will also be
extremely sensitive to changes in the level of the index upon which interest
rate adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances a Fund may fail to recoup
fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers.
Transactions in CMO residuals are generally completed only after careful review
of the characteristics of the securities in question. In addition, CMO residuals
may, or pursuant to an exemption therefrom, may not have been registered under
the Securities Act of 1933, as amended (the "1933 Act"). CMO residuals, whether
or not registered under the 1933 Act, may be subject to certain restrictions on
transferability, and may be deemed "illiquid" and subject to a Fund's
limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities
SMBS are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Fund's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Fund may fail to recoup some or all of its initial investment in these
securities even if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.
Mortgage Dollar Rolls
The Asset Allocation Fund, Capital Conservation Fund and Government
Securities Fund may invest in mortgage dollar rolls. In a "dollar roll"
transaction, a Fund sells a mortgage-related security, such as a security issued
by the Government National Mortgage Association, to a dealer and simultaneously
agrees to repurchase a similar security (but not the same security) in the
future at a pre-determined price. A "dollar roll" can be viewed as a
collateralized borrowing in which a Fund pledges a mortgage-related security to
a dealer to obtain cash. The dealer with which a Fund enters into a dollar roll
transaction is not obligated to return the same securities as those originally
sold by the Fund, but only securities which are "substantially identical." To be
considered "substantially identical," the securities returned to a Fund
generally must: (1) be collateralized by the same types of underlying mortgages;
(2) be issued by the same agency and be part of the same program; (3) have a
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similar original stated maturity; (4) have identical net coupon rates; (5) have
similar market yields (and therefore price); (6) satisfy "good delivery"
requirements, meaning that the aggregate principal amounts of the securities
delivered and received must be within 1.0% of the initial amount delivered.
A Fund's obligations under a dollar roll agreement must be covered by
segregated liquid assets equal in value to the securities subject to repurchase
by the Fund. To the extent that positions in dollar roll agreements are not
covered by segregated liquid assets at least equal to the amount of any forward
purchase commitment, such transactions would be subject to the Funds'
limitations on borrowings. Dollar roll transactions for terms exceeding three
months may be deemed "illiquid" and subject to a Fund's overall limitations on
investments in illiquid securities.
OPTIONS AND FUTURE CONTRACTS
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,
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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 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, the
International Government Bond Fund and the Science and Technology 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
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with its portfolio securities in order to earn additional income or in the case
of call options written to minimize or hedge against anticipated declines in the
exchange rate of the currencies in which the Fund's securities are denominated.
To "cover" an option means, for example, to identify and make available for sale
the specific portfolio security or foreign currency to which the option relates.
Through the writing of a covered call option a Fund receives premium income but
obligates itself to sell to the purchaser of such an option the particular
security or foreign currency underlying the option at a specified price at any
time prior to the expiration of the option period, regardless of the market
value of the security or the exchange rate for the foreign currency during this
period. Through the writing of a covered put option a Fund receives premium
income but obligates itself to purchase a 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.
The 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, the International
Government Bond Fund and the Science and Technology 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
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unlisted, over-the-counter options it has written, and such agreements would
enable the Fund to have an absolute right to repurchase, at a pre-established
formula price, the over-the-counter options written by it, the Fund will treat
as illiquid only the amount equal to the formula price described above less the
amount by which the option is "in-the-money."
Although these investment practices will be used to generate additional
income and to 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 covering a
number of indexes as well as financial instruments and foreign currencies,
including: U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates;
three-month U.S. Treasury bills; 90-day commercial paper; bank certificates of
deposit; Eurodollar certificates of deposit; the Australian dollar; the Canadian
dollar; the British pound; the German mark; the Japanese yen; the French franc;
the Swiss franc; the Mexican peso; and certain multinational currencies, such as
the Euro. It is expected that other futures contracts will be developed and
traded in the future.
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
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S&P 500 Index, the New York Stock Exchange Composite Index, the Value Line Stock
Index, and the Major Market Index. It is expected that financial instruments
related to broad-based indices, in addition to those for which futures contracts
are currently traded, will in the future be the subject of publicly-traded
futures contracts, and the Funds may use any of these, which are appropriate, in
its hedging strategies.
A financial futures contract is an agreement to buy or sell a security (or
deliver a final cash 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."
A 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.
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Financial futures contracts generally are not entered into to acquire the
underlying asset and generally are not held to term. Prior to the contract
settlement date, the Funds will normally close all futures positions by entering
into an offsetting transaction which operates to cancel the position held, and
which usually results in a profit or loss.
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
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
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contract's settlement price. In writing options on stock indices or currencies a
Fund could potentially lose a sum equal to the excess of the value of the index
or currency (marked to market daily) over the exercise price. In addition,
because financial futures contracts require delivery at a future date of either
a 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. VALIC and the Sub-Advisers will not speculate. However,
purchasing futures to efficiently invest cash may be considered more risky than
to invest the cash in equities over time. Hedging transactions also, of course,
may be more, rather than less, favorable to a Fund than originally anticipated.
Limitations
No Fund will enter into any financial futures contract or purchase any
option thereon if immediately thereafter the total amount of its assets required
to be on deposit as initial margin to secure its
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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.
REAL ESTATE SECURITIES AND REAL ESTATE INVESTMENT TRUSTS ("REITS")
Each Fund may invest in real estate securities. Real estate securities are
equity securities consisting of (i) common stocks, (ii) rights or warrants to
purchase common stocks, (iii) securities convertible into common stocks and (iv)
preferred stocks issued by real estate companies. A real estate company is one
that derives at least 50% of its revenues from the ownership, construction,
financing, management or sale of commercial, industrial, or residential real
estate or that has at least 50% of its assets invested in real estate.
All Funds except the Stock Index Fund also may invest in REITs. REITs are
pooled investment vehicles which invest primarily in income producing real
estate or real estate related loans or interest. REITs are generally classified
as equity REITs, mortgage REITs or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Like regulated
investment companies such as the Funds, REITs are not taxed on income
distributed to shareholders provided they comply with certain requirements under
the Internal Revenue Code (the "Code"). A Fund will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by a Fund.
Investing in REITs involves certain unique risks. Equity REITs may be
affected by changes in the value of the underlying property owned by such REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified (except to the
extent the Code requires), and are subject to the risks of financing projects.
REITs are subject to heavy cash flow dependency, default by borrowers,
self-liquidation, and the possibilities of failing to qualify for the exemption
from tax for distributed income under the Code and failing to maintain their
exemptions from the 1940 Act. REITs (especially mortgage REITs) are also subject
to interest rate risks.
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,
usually 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
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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 Series 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 Series Company will evaluate the creditworthiness of all banks
and broker-dealers with which the Series 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).
REVERSE REPURCHASE AGREEMENTS
The Growth Fund and Science and Technology Fund may enter into reverse
repurchase agreements. A reverse repurchase agreement involves the sale of a
portfolio-eligible security by the Fund, coupled with its agreement to
repurchase the instrument at a specified time and price. Under a reverse
repurchase agreement, the Fund continues to receive any principal and interest
payments on the underlying security during the term of the agreement. The Fund
typically will segregate assets determined to be liquid by VALIC or a
Sub-Adviser, equal (on a daily mark-to-market basis) to its obligations under
reverse repurchase agreements. However, reverse repurchase agreements involve
the risk that the market value of securities retained by the Fund may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase. To the extent that positions in reverse repurchase
agreements are not covered through the segregation of liquid assets at least
equal to the amount of any forward purchase commitment, such transactions would
be subject to the Fund's limitations on borrowings.
RULE 144A SECURITIES
Each 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 Series 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 Series Company will consider
the trading markets for the specific security taking into account the
unregistered nature of a Rule 144A security. In addition the Series 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
Series 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
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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.
Each Fund may invest in Rule 144A securities (in accordance with each Fund's
investment restrictions as listed in the prospectus) that have been determined
to be liquid by Board approved guidelines.
STANDARD AND POOR'S DEPOSITORY RECEIPTS
Each of the Asset Allocation Fund, International Equities Fund, Growth
Fund, Growth & Income Fund, MidCap Index Fund, Science & Technology Fund, Small
Cap Index Fund, Social Awareness Fund and Stock Index Fund may, consistent with
its objectives, purchase Standard & Poor's Depository Receipts ("SPDR's"). SPDRs
are American Stock Exchange-traded securities that represent ownership in the
SPDR Trust, a trust which has been established to accumulate and hold a
portfolio of common stocks that is intended to track the price performance and
dividend yield of the S&P 500. This trust is sponsored by a subsidiary of the
American Stock Exchange. SPDRs may be used for several reasons, including but
not limited to: facilitating the handling of cash flows or trading, or reducing
transaction costs. The use of SPDRs would introduce additional risk to the Funds
as the price movement of the instrument does not perfectly correlate with the
price action of the underlying index.
SWAP AGREEMENTS
The Asset Allocation Fund, Capital Conservation Fund, Government Securities
Fund and International Government Bond Fund may enter into interest rate, index
and currency exchange rate swap agreements. These transactions are entered into
in an attempt to obtain a particular return when it is considered desirable to
do so, possibly at a lower cost to the Fund than if the Fund had invested
directly in an instrument that yielded that desired return. Swap agreements are
two party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments, which may be adjusted for an interest factor. The gross returns to
be exchanged or "swapped" between the parties are generally calculated with
respect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a particular
foreign currency, or in a "basket" of securities representing a particular
index. Forms of swap agreements include interest rate caps, under which, in
return for a premium, one party agrees to make payments to the other to the
extent that interest rates exceed a specified rate, or "cap"; interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified rate, or
"floor"; and interest rate collars, under which a party sells a cap and
purchases a floor or vice versa in an attempt to protect itself against interest
rate movements exceeding minimum or maximum levels.
Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
segregation of assets determined to be liquid by VALIC or a Sub-adviser to avoid
any potential leveraging of a Fund's portfolio. Obligations under swap
agreements so covered will not be construed to be "senior securities" for
purposes of the Fund's investment restriction concerning senior securities. A
Fund will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering
its investment objective of total return will depend on VALIC or a Sub-
adviser's ability to predict correctly whether certain types of investments are
likely to produce greater returns than other investments. Because they are two
party contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid. Moreover, a Fund bears the risk of
loss of the amount expected to be
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received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty. The Funds will enter into swap agreements only with
counterparties that meet certain standards of creditworthiness (generally, such
counterparties would have to be eligible counterparties under the terms of the
Fund's repurchase agreement guidelines). Certain restrictions imposed on the
Funds by the Internal Revenue Code may limit the Funds' ability to use swap
agreements. The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which include the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public. When a Fund in
invested in this manner, it may not be able to achieve its investment objective.
TEMPORARY DEFENSIVE POSITION
Under normal market conditions, none of the Funds other than the Money
Market Fund, intends to have a substantial portion of its assets invested in
cash or money market instruments. However, when VALIC or a Sub-adviser
determines that adverse market conditions exist, the Growth Fund, the Growth &
Income Fund, the International Equities Fund, the International Government Bond
Fund, and the Science & Technology Fund may adopt a temporary defensive position
and invest entirely in cash, and money market instruments, including domestic
bank obligations, repurchase agreements. The International Equities Fund may
also purchase foreign money market instruments and the International Government
Bond Fund may purchase U.S. Government debt securities.
WARRANTS
All Funds except the International Government Bond Fund may invest in or
acquire warrants to purchase equity or fixed income securities. Bonds with
warrants attached to purchase equity securities have many characteristics of
convertible bonds and their prices may, to some degree, reflect the performance
of the underlying stock. Bonds also may be issued with warrants attached to
purchase additional fixed income securities at the same coupon rate. A decline
in interest rates would permit a Fund to buy additional bonds at the favorable
rate or to sell the warrants at a profit. If interest rates rise, the warrants
would generally expire with no value. 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.
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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.
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. This Investment Advisory Agreement
was also made applicable to the International Government Bond Fund effective
October 1, 1991. 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. 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. 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 Series 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 Series 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 Series Company may need to continue operations. The Investment
Advisory Agreement provides that the Series Company pay all expenses not
specifically assumed by VALIC under the Agreements. Examples of the expenses
paid by the Series 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 Series Company allocates advisory fees, SEC filing fees,
interest expenses and state filing fees, if any, to the Fund that incurs such
charges and allocates all other expenses among the Funds based on the net assets
of each Fund in relation to the net assets of the Series Company.
The advisory fee is calculated as a percentage of average daily net asset
value based on the following annual rates: for the Asset Allocation Fund,
Capital Conservation Fund, Government Securities Fund, International Government
Bond Fund, Money Market Fund, Social Awareness Fund -- 0.50%; for the Growth
Fund -- 0.80%; for the Growth & Income Fund -- 0.75%; for the International
Equities Fund, MidCap Index Fund, Small Cap Index Fund and Stock Index
Fund -- 0.35% of the first $500 million and 0.25% on assets over $500 million;
and for the Science & Technology Fund -- 0.90%.
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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 Series
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
Series Company.
The Series Company, by action of its Board of Directors determined to
transfer the function of providing accounting services from the Series Company's
custodian State Street to VALIC. This transfer was effective October 31, 1996.
Pursuant to this determination the Series Company entered into an Accounting
Services Agreement with VALIC ("Agreement"). The Agreement provides that the
Series 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, 1999, May 31, 1998, and May 31, 1997, the Series Company paid
VALIC $1,526,400, $855,162, and $177,947, respectively, for accounting services
provided by VALIC.
For the fiscal year ended May 31, 1997, the investment advisory fees paid
by the Series 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.
For the fiscal year ended May 31, 1998, the investment advisory fees paid
by the Series 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
$7,946,046, $2,313,256, $798,980, $582,798, $7,593,303, $1,907,885, $8,602,906,
$1,204,327, $943,269, $335,861, $436,775, $846,176, and $752,732, respectively.
For the fiscal year ended May 31, 1999, the investment advisory fees paid
by the Series 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
$10,367,253, $2,426,931, $752,025, $509,578, $9,178,668, $2,053,954,
$11,204,880, $2,076,498, $1,106,792, $327,092, $537,883, $810,795, and
$1,301,265, respectively.
The Investment Advisory Agreements may be continued with respect to any
Fund if specifically approved at least annually by (a)(i) the Series 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 Series
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, under
either Investment Advisory Agreement, VALIC shall not be liable to the Series
Company, or any shareholder in the Series 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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INVESTMENT SUB-ADVISERS
Wellington Management Company, LLP ("Wellington Management") provides
sub-advisory services for the Growth Fund. T. Rowe Price Associates, Inc. ("T.
Rowe Price") provides sub-advisory services for the Science & Technology Fund.
Wellington Management and T. Rowe Price (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 Growth Fund and the Science &
Technology Fund, respectively (collectively the "Sub-Advised Funds").
Pursuant to the Investment Sub-Advisory Agreements VALIC has with each of
the Sub-Advisers 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, establish 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 Series Company
for acting as investment adviser, pay to Wellington Management, for the services
rendered and expenses paid by Wellington Management, a monthly fee computed at
the annual rate of 0.325% on the first $50 million, 0.250% on the next $450
million, 0.200% on the next $1 billion, and 0.180% on assets over $1.5 billion
for the Growth Fund. VALIC shall, from the compensation VALIC receives from the
Series 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 computed at
the annual rate of 0.60% on the first $500 million and 0.55% on assets over $500
million for the Science & Technology Fund.
The Investment Sub-Advisory Agreement between VALIC and T. Rowe Price
requires that T. Rowe Price promptly reduce its monthly fee by the amount of any
commission, tender and exchange offer solicitation fees, other fees or similar
payments received by T. Rowe Price, or any affiliated person of T. Rowe Price,
in connection with Sub-Advised Fund portfolio transactions. Such "commissions"
or "other fees" exclude those charged by brokers or dealers affiliated with T.
Rowe Price, as referred to below. Such "tender and exchange offer solicitation
fees" exclude those received by T. Rowe Price acting in the capacity of manager
for any such offer. In this regard, the Sub-Advisory Agreement requires T. Rowe
Price to use its 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 Series 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
Series 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 Series 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 Series 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 in the case of the T. Rowe Price Sub-Advisory Agreement and on at
least 60 days' notice in the case of the Wellington Management Sub-Advisory
Agreement 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.
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The Investment Sub-Advisory Agreements provide that the Sub-Advisers shall
not be liable to VALIC, the Series Company or to any shareholder of the Series
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 Series 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 Growth 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 & Income
Fund are principal transactions with issuers and dealers at net prices which
entail no brokerage commissions. The MidCap Index Fund, the Stock Index Fund,
the International Equities Fund, the Small Cap Index Fund, and the Social
Awareness Fund, each purchase and sell most of their portfolio securities on a
national securities exchange on an agency basis. The Growth Fund and the Science
& Technology Fund engage in over-the-counter transactions with principals and
transactions with national securities exchanges on an agency basis. The Series
Company normally enters into principal transactions directly with the issuer or
the market-maker.
When the Series 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 Series Company purchases securities from the issuer,
an underwriter usually receives a commission or "concession" paid by the issuer.
When the Series 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 Series 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 Series 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:
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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 Series Company. The Advisers will not
cause the Series Company to pay higher commissions without first determining, in
good faith, that the cost is reasonable considering the brokerage and research
services provided, with respect to either the particular transaction or the
Advisers' overall responsibilities with respect to accounts for which they
exercise investment discretion. The Advisers receive research services at no
cost and cannot assign any specific monetary value to them; nevertheless, the
Advisers believe these supplemental investment research services are essential
to the Advisers' ability to provide high quality portfolio management to the
Funds. Research services furnished by broker-dealers through whom a Fund effects
securities transactions may be used by the Advisers in servicing all of the
Funds, and the Advisers may not use all such services in managing the Funds.
The amount of brokerage commissions paid, the quality of execution, the
nature and quality of research services provided, and the amount of commissions
paid to firms providing research services are reviewed quarterly by the Series
Company's Board of Directors.
Brokerage commissions paid by the Stock Index Fund on portfolio
transactions for the fiscal years ended May 31, 1999, 1998, and 1997, totaled
$123,942, $131,621, and $122,723, respectively. For the fiscal year ended May
31, 1999 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, 1999, 1998, and 1997, totaled
$201,597, $125,995, and $80,089, respectively. For the fiscal year ended May 31,
1999, 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, 1999, 1998 and 1997, totaled
$42,873, $64,613, and $90,498, respectively. For the fiscal year ended May 31,
1999, the Small Cap Index Fund paid no brokerage commissions to brokers for
research services provided to the Advisers.
Brokerage commissions paid by the International Equities Fund on portfolio
transactions for the fiscal years ended May 31, 1999, 1998, and 1997 totaled
$68,659, $130,204, and $153,793, respectively. For the fiscal year ended May 31,
1999, 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, 1999, 1998 and 1997, totaled $1,251,907,
$889,312, and $757,865, respectively. For the fiscal year ended May 31, 1999,
the Growth Fund paid $156,153 in brokerage commissions, on transactions totaling
$73,108,723, 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, 1999, 1998 and 1997, totaled
$347,994, $276,322, and $159,571, respectively. For the fiscal year ended May
31, 1999, the Growth & Income Fund paid $102,911 in brokerage commissions, on
transactions totaling $87,817,612, 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, 1999, 1998, and 1997, totaled
$297,390, $518,012, and $221,028, respectively. For the fiscal year ended May
31, 1999 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, 1999, 1998 and 1997,
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totalled $1,460,178, $1,031,246, and $1,143,004, respectively. For the fiscal
year ended May 31, 1999, the Science & Technology Fund paid $160,072 in
brokerage commissions, on transactions totalling $126,493,964, 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, 1999, 1998 and 1997, totalled
$26,092, $39,049, and $239,365, respectively. For the fiscal year ended May 31,
1998, 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, 1999, 1998 and 1997.
VALIC, T. Rowe Price, and Wellington Management have no affiliated
broker-dealers through which they execute trades.
Occasions may arise when one or more of the Funds or other accounts that
may be considered affiliated persons of the Funds under the 1940 Act desire to
purchase or sell the same portfolio security at approximately the same time. On
those occasions when such simultaneous purchase and sale transactions are made
such transaction will be allocated in an equitable manner according to written
procedures approved by the Series 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 Distributor acts without
remuneration as the Series Company's agent in the distribution of Fund shares on
a "best efforts" basis to the separate accounts. The Distributor address is the
same as that of VALIC. The Distributor is an affiliate of VALIC, the Funds'
adviser and has the same address.
The distribution agreement between the Distributor and the Series 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 Series Company, or (ii) by vote of a majority of the Series Company's
outstanding voting securities (as defined in the 1940 Act) and (b) by the
affirmative vote of a majority of the Series Company's Directors who are not
'interested persons' (as defined in the 1940 Act) of the Series 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 Series Company or by a vote of a majority of the outstanding
voting securities of the Series Company, or by the Distributor, 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.
Shares of the Funds are sold in a continuous offering. Pursuant to the
distribution agreement, the Distributor pays promotional and advertising
expenses and the cost of printing prospectuses used to offer and sell shares of
the Series Company (after typesetting and printing the copies required for
regulatory filings by the Series 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 the Distributor for these expenses. Thus all
such expenses incurred by the Distributor are passed directly on to VALIC, its
parent. The Series Company pays all expenses related to the regis-
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tration 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 Series 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 Series Company's
shareholders.
The Series Company normally redeems Fund shares for cash. Although the
Series Company, with respect to each Fund, may make full or partial payment by
assigning to the separate accounts investing in the Series Company portfolio
securities at their value used in determining the redemption price (i.e. by
redemption-in-kind), the Series Company, pursuant to Rule 18f-1 under the 1940
Act, has filed a notification of election on Form 18f-1. Pursuant to this
election, the Series 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 Series 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 Merrill
Lynch Pierce Fenner & Smith Inc.
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
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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 Series 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.
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 Series 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
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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 Series Company nor VALIC
can assure the yield quoted on any given occasion will remain constant for any
period of time. For example, the Money Market Fund's yield will change if it
experiences a net inflow of new assets which it then invests in securities whose
yield is higher or lower than that being currently earned on investments.
Investments in the Money Market Fund are not insured and investors comparing
results of the Money Market Fund with investment results and yields from other
sources such as banks or savings and loan associations should understand this
distinction. In addition, other money market funds as well as banks and savings
and loan associations may calculate their yields on a different basis and the
yield quoted by the Money Market Fund from time-to-time could vary upwards or
downwards if another method of calculation or base period were used.
ACCOUNTING AND TAX TREATMENT
CALLS 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
43
<PAGE> 44
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 Series 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; and (ii) 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 Series 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 Series 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. However,
since taxpayers other than the taxpayer requesting a particular private ruling
are not entitled to rely on such ruling, the Series 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 Series Company is
otherwise satisfied that those gains are qualifying income.
If a Fund fails to qualify as a regulated investment company or fails to
satisfy the 90% distribution requirement in any taxable year, the Fund would be
taxed as an ordinary corporation on its taxable income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge of 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated in order to qualify as a
regulated investment company in a subsequent year.
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 Series
Company may
44
<PAGE> 45
cause the Contract Owner to be taxable with respect to assets allocated to the
separate account, before distributions are actually received under the Contract.
In order to comply with the requirements of Section 817(h) and the
regulations thereunder, the Series Company may find it necessary to take action
to ensure that a Contract funded by the Series Company continues to qualify as
such under federal tax laws. The Series 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 SEC, 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 Series 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 Series
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 Series 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.
Each outstanding share has one vote on all matters that shareholders vote
on. Participants vote on these matters indirectly by voting their units. The way
participants vote their units depends on their contract. See the 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.
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: (a) to approve certain agreements as required by the 1940
Act; (b) to change fundamental investment objectives in the Diversification
section and to change fundamental investment restrictions, above; (c) 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.
The Series Company will assist in shareholder communications.
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, 1999, VALIC Separate Account A owned of record the following
percentage of the outstanding shares of each Fund: 96.70% of the Stock Index
Fund, 99.91% of the MidCap Index Fund, 100% of the Small Cap Index Fund, 99.87%
of the International Equities Fund, 97.84% of the Growth Fund, 100% of the
Growth & Income Fund, 100% of the Capital Conservation Fund, 100% of the
Government Securities Fund, 100% of the International Government Bond Fund,
99.99% of the Social Awareness Fund, 100% of the Science & Technology Fund,
97.22% of the Money Market Fund, and 99.96% of the Asset Allocation Fund.
45
<PAGE> 46
As of May 31, 1999, the other shareholders of the Funds included separate
accounts sponsored by VALIC and its affiliates, 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 Series Company, State Street, 225
Franklin Street, Boston, Massachusetts 02110, holds the cash and portfolio
securities of the Series Company as custodian.
State Street is responsible for holding all securities and cash of each
Fund, receiving and paying for securities purchased, delivering against payment
securities sold, receiving and collecting income from investments, making all
payments covering expenses of the Series Company, and performing other
administrative duties, all as directed by persons authorized by the Series
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 Series 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
Series 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 Series 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 Series Company and the FCMs or brokers. The Series 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 Series 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 Series 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
46
<PAGE> 47
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 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 Series 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 Series Company or the
Series 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 SERIES 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.
47
<PAGE> 48
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 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
48
<PAGE> 49
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 Series Company.
TRANSFER AGENT
VALIC serves as the Series Company's transfer agent, shareholder service
agent and dividend disbursing agent. VALIC performs these service at cost.
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<PAGE> 50
MANAGEMENT OF THE SERIES COMPANY
The Board of Directors manages the business activities of the Series
Company in accordance with Maryland law. The Board elects officers who are
responsible for the day-to-day operations of the Series Company and who execute
policies formulated by the Board. The names and ages of the Directors and
officers of the Series Company, their addresses, present positions and principal
occupations during the past five years are set forth below.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
---------------- --------------- -------------------
<S> <C> <C>
Thomas L. West, Jr.*.............. Chairman of the Board since Chairman of the Board, VALIC and
2929 Allen Parkway 1998, Director since 1994, American General Annuity Insurance
Houston, Texas 77019 President (1997- 1998) and Company ("AGAIC") (1999-Present) and
Date of Birth: 06/07/37 Executive Vice President Vice Chairman and Group Executive,
(1994-1997) Retirement Services, American General
Corporation ("American General")
(1998-Present). Formerly, Chairman
and Chief Executive Officer of VALIC
(1998-1999); President of VALIC
(1994-1998).(1)
Kent E. Barrett................... Executive Vice President and Executive Vice President and Chief
2929 Allen Parkway Director since 1999 Financial Officer, VALIC and AGAIC
Houston, Texas 77019 (1999- Present), Executive Vice
Date of Birth: 09/20/56 President and Chief Financial
Officer, American General Life &
Accident Insurance Company ("AGLA")
(1998-1999), Senior Vice
President -- Finance and Treasurer,
AGLA (1997-1998), Senior Vice
President-Controller and Treasurer,
AGLA (1994-1997).(1)
Dr. Judith L. Craven.............. Director since 1998 Retired Administrator. Formerly,
3212 Ewing Street President, United Way of Texas Gulf
Houston, Texas 77004 Coast (1992- 1998). Director, Houston
Date of Birth: 10/06/45 Branch, Federal Reserve Bank of
Dallas (1992-Present), Compaq
Computer Corporation (1998-Pre-
sent), Luby's Inc. (1998-Present),
A.H. Belo Corporation (journalism, TV
and radio), (1993-Present), and Sysco
Corporation, (marketing and
distribution of food),
(1996-Present). Formerly, Director,
Sisters of Charity of Incarnate Word
(1996-1999).(1)(4)
Dr. Timothy J. Ebner.............. Director since 1998 Professor and Head, Department of
17994 NW Union Blvd. Neuroscience and Visscher Chair of
Elk River, Minnesota 55330 Physiology (1998-Present), Professor,
Date of Birth: 07/15/49 Departments of Neurosurgery and
Physiology, Director, Graduate
Program in Neuroscience, University
of Minnesota (1991-1999). Formerly,
Consultant to EMPI Inc.,
(manufacturing of medical products)
(1994-1995) and Medtronic Inc.
(manufacturer of medical products)
(1997-1998).(1)(4)
Judge Gustavo E. Gonzales, Jr..... Director since 1998 Municipal Court Judge, Dallas, Texas
3731 Gilbert Ave. A (1995-Present); Director, Downtown
Dallas, Texas 75219 Dallas YMCA Board (1996-Present);
Date of Birth: 07/27/40 Director, Dallas Easter Seals Society
(1997-Present). Formerly, private
attorney (litigation)
(1980-1995).(1)(4)
</TABLE>
50
<PAGE> 51
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
---------------- --------------- -------------------
<S> <C> <C>
Dr. Norman Hackerman.............. Director since 1984 Chairman -- Scientific Advisory Board
2001 Pecos Street for The Robert A. Welch Foundation
Austin, Texas 78703 (1983- Present), Director,
Date of Birth: 03/02/12 Electrosource, Inc., (develops,
manufactures and markets energy
storage products), President
Emeritus, Rice University, Houston,
Texas. Formerly, President, Rice
University, Houston, Texas
(1970-1985), Professor Emeritus,
University of Texas, Austin, Texas
(1970-1985).(1)(2)(3)(4)
Alice T. Kane..................... President and Director since Executive Vice President, American
One Maiden Lane 1999 General Investment Management, L.P.
New York, New York (1998- Present). Formerly, Executive
Date of Birth: 01/16/48 Vice President, New York Life
Insurance Company (1994-1998).
President of other investment
companies advised by VALIC.(1)
Dr. John Wm. Lancaster............ Director since 1984 Pastor Emeritus and Director of
4624 Braeburn Planned Giving, First Presbyterian
Bellaire, Texas 77401 Church, Houston, Texas
Date of Birth: 12/15/23 (1996-Present). Formerly, Pastor,
First Presbyterian Church, Houston,
Texas (1961-1990).(1)(4)
Ben H. Love....................... Director since 1991 Retired. Formerly, Director,
4407 Eaton Circle Mid-American (waste products)
Colleyville, Texas 76034 (1993-1997) and Chief Executive, Boy
Date of Birth: 09/26/30 Scouts of America. (1985-
1993).(1)(4)
Dr. John E. Maupin, Jr............ Director since 1998 President, Meharry Medical College,
Meharry Medical College Nashville, Tennessee (1994-Present),
1005 D.B. Todd Blvd. Nashville Advisory Board Member,
Nashville, Tennessee 37208 First American National Bank
Date of Birth: 10/28/46 (1996-Present), Director, Monarch
Dental Corporation (1997-Present),
LifePoint Hospitals, Inc. (1998-Pre-
sent). Formerly, Executive Vice
President, Morehouse School of
Medicine, Atlanta, Georgia
(1989-1994).(1)(4)
Dr. F. Robert Paulsen............. Director since 1985 Dean and Professor Emeritus,
2801 N. Indian Ruins University of Arizona, Tucson,
Tucson, Arizona 85715 Arizona. Formerly, Dean and
Date of Birth: 07/05/22 Professor, University of Connecticut,
Storrs, Connecticut and Carnegie
Fellow, University of Michigan, Ann
Arbor, Michigan.(1)(2)(3)(4)
Dr. R. Miller Upton............... Director since 1984 Consultant. President Emeritus,
914 Tarrant Dr. Beloit College, Beloit, Wisconsin.
Route 3 Box 85A Formerly, Director, Home Life
Fontana, Wisconsin 53125 Insurance Company of New York
Date of Birth: 12/27/16 (1961-1991) and Director, Household
International, Inc. (1965-
1989).(1)(2)(3)(4)
</TABLE>
- ------------
* Interested persons of the Series Company as defined in the 1940 Act
specifically because of their capacity as officers, directors or consultants
of the Series Company, VALIC or American General Corporation.
(1) A Director or Trustee of American General Series Portfolio Company
("AGSPC"), American General Series Portfolio Company 2 ("AGSPC 2") and
American General Series Portfolio Company 3 ("AGSPC 3"), each an open-end
investment company for which VALIC serves as the investment adviser.
(2) Retired Managing General Partner of Van Kampen American Capital Exchange
Fund.
51
<PAGE> 52
(3) 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.
(4) Directors who are not interested persons of the Series Company receive an
annual retainer of $18,000. In addition, such Directors are paid per board
meeting, committee meeting, telephone meeting and committee chair, a fee of
$1,500, $250, $250 and $250, respectively, plus expenses incurred, if any.
Listed below are the Series 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>
John E. Arant..................... Executive Vice President since Executive Vice President-VALIC Sales
Date of Birth: 09/07/44 1998 (1998 to Present) and Senior Vice
President (1998), VALIC and AGAIC.
Chairman and President, the
Distributor (1998 to Present).
Joe C. Osborne.................... Executive Vice President since Executive Vice President of Marketing
Date of Birth: 09/17/48 1998 and Director (1992-1998) and Director, VALIC and AGAIC.
Executive Vice President, the
Distributor.
Peter V. Tuters................... Senior Investment Officer since Vice President and Investment Officer
Date of Birth: 04/18/52 1998 and Director since 1993 (1998 to Present), Vice President and
Chief Investment Officer (1993-1998),
VALIC and AGAIC; Former Director,
VALIC. Senior Vice President and
Chief Investment Officer, American
General Corporation (1993-1998).
Teresa S. Moro.................... Vice President and Investment Trader -- VALIC. Formerly, Money Mar-
Date of Birth: 08/14/60 Officer since 1991 ket Trader, VALIC (1986-1990).
Leon A. Olver..................... Vice President and Investment Portfolio Manager, VALIC (1995 to
Date of Birth: 06/27/51 Officer since 1995 Present). Formerly Vice President and
Treasurer, First Heights Bank
(1994-1995); Vice President and
Assistant Treasurer, First Heights
Bank (1991-1994).
William Trimbur, Jr............... Vice President and Investment Portfolio Manager, VALIC. Formerly,
Date of Birth: 06/15/51 Officer since 1987 Second Vice President, VALIC
(1985-1990); Controller, VALIC
(1985-1986); Assistant Controller,
VALIC (1982-1985) and Assistant
Treasurer, VALIC (1982-1986).
Maruti D. More.................... Vice President -- Investments Vice President, Investments, VALIC
Date of Birth: 02/02/44 since 1998 (1998 to Present). Portfolio Manager,
American General Corporation (1996 to
1998). Formerly, Managing Director,
Marketable Securities, Paul Revere
Investment Management Corporation
(1993 to 1995); Senior Portfolio
Manager, Dewey Square Investors;
Investment Vice President, New York
Life Insurance Company.
Brent C. Nelson................... Vice President since 1987 Senior Vice President and Controller,
Date of Birth: 07/24/51 VALIC and AGAIC. 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).
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME WITH REGISTRANT DURING PAST 5 YEARS
---- --------------- -------------------
<S> <C> <C>
Cynthia A. Toles.................. Vice President since 1998 and Senior Vice President, General
Date of Birth: 03/28/51 Secretary since 1986 Counsel and Secretary, VALIC (1998 to
Present) and AGAIC (1998 to Present).
Director and Secretary, the
Distributor. Formerly, Senior
Associate General Counsel &
Secretary, VALIC (1990-1998); Vice
President, Asso-ciate General Counsel
& Secretary, VALIC (1988-1989);
Second Vice President, Associate
General Counsel and Assistant Secre-
tary, VALIC (1986-1988); Assistant
Vice President, Assistant General
Counsel and Assistant Secretary,
VALIC (1983-1986).
Gregory R. Seward................. Treasurer since 1991 Vice President -- Variable Product
Date of Birth: 06/27/56 Accounting (1998 to Present) and
Assistant Controller (1991 to 1998),
VALIC and AGAIC (1998 to Present).
Kathryn A. Pearce................. Controller since 1996 Associate Director of Fund
Date of Birth: 02/05/47 Accounting, VALIC (1996 to Present).
Formerly, Supervisor -- Mutual Fund
Accounting, Van Kampen American
Capital, Inc. (1977-1996).
Pauletta P. Cohn.................. Vice President since 1999 Associate General Counsel, American
Date of Birth: 06/06/48 General Life Companies
(1998-Present), Senior Attorney,
American General (1993-1998).
Nori L. Gabert.................... Vice President since 1998 and Associate General Counsel, VALIC
Date of Birth: 08/15/53 Assistant Secretary since (1997 to Present). Formerly, Of
1997 Counsel, Winstead Sechrest & Minick
P.C. (1997); Vice President and
Associate General Counsel of Van
Kampen American Capital, Inc.
(1981-1996).
Cynthia A. Gibbons................ Assistant Vice President since Senior Compliance Analyst, VALIC
Date of Birth: 12/06/67 1998 (1996 to Present).
Jaime M. Sepulveda................ Assistant Treasurer since 1998 Director -- Variable Product
Date of Birth: 01/09/52 Accounting and Financial Reporting,
VALIC (1998 to Present). Formerly,
Accounting Manager, Metro Networks,
Inc. (1997-1998); Controller and
Investment Officer, Port of Houston
Authority (1994-1997).
Donna L. Hathaway................. Assistant Controller since 1998 Manager -- Variable Product
Date of Birth: 09/17/64 Accounting, VALIC. Formerly, Gas
Revenue Accountant, Texaco Inc.;
Accounting Manager, Hewitt
Associates, LLC; Revenue Accounting
Manager, Trans Texas Gas.
Heriberto Valdez.................. Assistant Treasurer since 1999 Associate Director -- Mutual Fund Ac-
Date of Birth: 04/25/57 counting (1999-Present), Manager,
Mutual Fund Accounting (1998-1999),
Manager -- Variable Product
Accounting (1997-1998), Staff
Accountant -- Variable Product Divi-
sion (1989-1997), VALIC.
</TABLE>
The officers conduct and supervise the daily business operations of the
Series Company, while the directors, in addition to their functions set forth
under "Investment Adviser," review such actions and decide on general policy.
The Series Company has an Audit Committee. The Series 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 Series Company and reviews with such indepen-
53
<PAGE> 54
dent 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 Series Company's financial statements or
books of account. The Series Company does not have a standing nominating or
compensation committee.
The nine directors of the Series Company who are not affiliated with VALIC
are each paid annual directors' fees and are reimbursed for certain out-of-
pocket expenses by the Series Company.
The directors and officers of the Series 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, 1999.
54
<PAGE> 55
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
The following table sets forth information regarding compensation and
benefits earned by the Directors for the fiscal year ending May 31, 1999.
COMPENSATION TABLE
FISCAL YEAR ENDING MAY 31, 1999
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS ESTIMATED COMPENSATION
AGGREGATE ACCRUED AS ANNUAL FROM
COMPENSATION PART OF BENEFITS FUND
FROM SERIES COMPANY UPON COMPLEX(3)
NAME OF PERSON, POSITION* SERIES COMPANY EXPENSES(1) RETIREMENT PAID TO DIRECTORS
------------------------- -------------- -------------- ---------- -----------------
<S> <C> <C> <C> <C>
Thomas L. West, Jr.**................. $ 0 $ 0 $ 0 $ 0
Joe C. Osborne**...................... $ 0 $ 0 $ 0 $ 0
Peter V. Tuters**..................... $ 0 $ 0 $ 0 $ 0
Craig R. Rodby**...................... $ 0 $ 0 $ 0 $ 0
Dr. Judith Craven..................... $12,250 $ 0 (2) $24,225
Dr. Timothy Ebner..................... $12,250 $ 0 (2) $24,225
Judge Gustavo Gonzales................ $12,500 $ 0 (2) $24,475
John A. Graf**........................ $ 0 $ 0 $ 0 $ 0
Dr. Norman Hackerman.................. $21,250 $24,500 (2) $40,932
Dr. John Wm. Lancaster................ $21,500 $25,000 (2) $41,932
Ben L. Love........................... $21,250 $19,110 (2) $41,682
Dr. John Maupin....................... $12,500 $ 0 (2) $24,475
Dr. F. Robert Paulsen................. $21,500 $24,500 (2) $41,932
Dr. R. Miller Upton................... $21,500 $24,500 (2) $41,932
</TABLE>
- ---------------
* Messrs. Osborne and Tuters were Directors until November 10, 1998. On that
same date Dr. Judith L. Craven, Dr. Timothy J. Ebner, Judge Gustavo E.
Gonzales, Jr., John A. Graf**, Dr. John Maupin and Craig R. Rodby** were
first elected Directors of the Series Company. Mr. Rodby resigned as a
Director April, 19, 1999. Alice T. Kane and Kent E. Barrett were first
appointed Directors July 27, 1999.
** "Interested person," as defined in the 1940 Act, specifically because of
their capacity as officers, trustees or consultants of the Series Company,
VALIC or American General Corporation.
(1) The total present value of accumulated benefits as of May 31, 1999, under
expense assumptions to be used for the fiscal year ending May 31, 2000 for
Messrs. Hackerman, Lancaster, Love, Paulsen, and Upton is $849,034.
(2) All current directors would earn ten or more years of service as of their
normal retirement date. Complete years of service earned as of May 31, 1999,
are as follows: Messrs. Hackerman, Lancaster, Paulsen, and Upton -- 10 or
greater; Mr. Love -- approximately 8 years; Messrs. Ebner and Gonzales and
Ms. Craven -- approximately 1 year.
PENSION TABLE -- ESTIMATED BENEFITS AT NORMAL RETIREMENT
<TABLE>
<CAPTION>
SERVICE UNDER 5 10 OR MORE
AT RETIREMENT YEARS 5 YEARS 6 YEARS 7 YEARS 8 YEARS 9 YEARS YEARS
- ------------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPENSATION
AT RETIREMENT
$20,000.... $ 0 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000
$30,000.... $ 0 $15,000 $18,000 $21,000 $24,000 $27,000 $30,000
$40,000.... $ 0 $20,000 $24,000 $28,000 $32,000 $36,000 $40,000
$50,000.... $ 0 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000
$60,000.... $ 0 $30,000 $36,000 $42,000 $48,000 $54,000 $60,000
</TABLE>
- ---------------
(3) Includes all investment companies managed by VALIC.
55
<PAGE> 56
FINANCIAL STATEMENTS
The financial statements of the Series Company are included herein.
56
<PAGE> 57
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
ANNUAL REPORT MAY 31, 1999
TABLE OF CONTENTS
Chairman's Letter ......................................................... 1
Stock Index Fund .......................................................... 3
MidCap Index Fund ......................................................... 11
Small Cap Index Fund ...................................................... 18
International Equities Fund ............................................... 34
Growth Fund ............................................................... 40
Growth & Income Fund ...................................................... 43
Science & Technology Fund ................................................. 47
Social Awareness Fund ..................................................... 50
Asset Allocation Fund ..................................................... 57
Capital Conservation Fund ................................................. 67
Government Securities Fund ................................................ 70
International Government Bond Fund ........................................ 72
Money Market Fund ......................................................... 76
Notes to Financial Statements ............................................. 79
Financial Highlights ...................................................... 82
Report of Independent Auditors ............................................ 88
<PAGE> 58
AGSPC CHAIRMAN'S LETTER 1
Dear Valued Customer,
In today's environment of rapidly changing markets, the commitment to your
financial security remains American General Series Portfolio Company's highest
priority. This dedication is reflected in the performance of our funds, and it
is my pleasure to introduce AGSPC's May 31, 1999 Annual Report for your review.
In this report, you will find financial and performance information for AGSPC's
thirteen funds for the fiscal year ended May 31, 1999.
Through your variable annuity contract, you are permitted to invest in one or
more of the funds described in this report.
MARKET CONDITIONS
Equity markets, small-cap company securities being the only exception, have
again provided positive returns for the year ended May 31, 1999. The Standard &
Poor's 500 Index (S&P 500(R)) provided a total return of 21.04% for the 12
months. The Standard & Poor's MidCap 400 Index (MidCap 400(R)) provided
positive returns of 11.91%, while the Russell 2000(R) small-cap companies
posted a negative 2.69% return over the past year. Again, companies with large
capitalization proved to be the best performers.
Reacting to the deflationary impact of global devaluation and the Asian
depression, the United States economy stumbled last summer. By the end of the
1998 calender year, the US had managed to rebound, illustrating that the
fundamentals of the US economy do remain strong. US productivity continued to
increase supporting the prior years fast pace. The lowest sustained inflation
and unemployment rate in nearly thirty years added to the confidence of US
consumers.
As our fiscal year drew to a close, the US equity markets continued to
demonstrate remarkable resilience. Instead of focusing on events like the
Federal Reserve increase in short-term interest rates, chaotic conditions in
Kosovo, rising commodity prices and falling bond prices, investors paid
attention to the continuing strength of the US economy and the emerging signs
of better global economic growth.
As our fiscal year drew to a close, many small-cap stocks began to reverse
their decline to actually out perform larger-cap stocks over the short-term.
Cyclicals did better than non-cyclicals. Value outperformed growth. Strong
sectors included basic materials, communications equipment, machinery,
computers and office equipment, energy, and telephones. Weak groups were led by
household products, drugs and health services, media, and automotive.
FUND RETURNS
INDEXED FUNDS
The AGSPC index funds mirrored their respective indices. The large
capitalization Stock Index Fund followed behind the S&P 500 Index(R) by a 0.19%
difference for the year, returning 20.85%, adjusted for distributions. The
MidCap Index Fund matched the MidCap 400(R)each returning 11.91%, adjusted for
distributions. The Small Cap Index Fund performed better than the Russell 2000
Index, declining only 2.45%, adjusted for distributions, while the index was
down 2.69%, adjusted for distributions. The International Equities Fund also
performed better than the EAFE Index returning 4.43%, adjusted for
distributions, to the index's 4.36%, adjusted for distributions.
MANAGED FUNDS
The Growth Fund earned 14.20%, adjusted for distributions, trailing the
performance of the S&P 500 Index(R) which produced a 21.04% return, adjusted
for distributions. The fund concentrates on stocks with above average growth
potential in the service industry sector. The Science and Technology Fund
invests in the often volatile electronic and health care industries. Its narrow
sector focus resulted in a wide variance when compared the the broad-based,
unmanaged S&P 500 Index(R). For the year, the fund returned 48.34%, adjusted
for distributions, while the index returned 21.04%, adjusted for distributions.
The Social Awareness Fund nearly matched the S&P 500 Index(R) while maintaining
its socially conscious screening process. Adjusted for distribution, the fund
posted positive returns of 20.05%, trailing the index, adjusted for
distributions, by less than 1%. The Growth and Income Fund's portfolio
reflected a concentration in large-cap growth stocks and value stocks producing
positive returns of 16.92%, adjusted for distributions, the fund under
performed the S&P 500 Index(R) adjusted for distributions, by 4.12%.
The Asset Allocation Fund trailed its benchmark, a combination of the S&P 500
Index(R), the Merrill Lynch Corporate and Government Master Index and the NYC
30 Day CD Rate. The fund produced positive returns of 12.23%, adjusted for
distributions, a difference of 1.60% behind the benchmark, adjusted for
distributions.
BOND FUNDS
Bond markets all reported positive results for the
past 12 months though at generally lower levels than the equity markets. The
Capital Conservation Fund inched ahead of the Merrill Lynch Corporate Master
benchmark by 0.04% resulting in a gain, adjusted for distributions, for the
year of 3.25%. The Government Bond Fund nearly matched the performance of the
Lehman Brothers US Treasury benchmark, both adjusted for distributions, with
positive returns of 3.58%, trailing the benchmark by only 0.72%.
The International Government Bond Fund benefited from the withdrawal by foreign
investors from the non-US equity markets. The fund doubled last years
performance by ending this year up 6.40%, adjusted for distributions, staying
in line with the Salomon Non-US Government Bond benchmark which produced
returns of 6.93%, adjusted for distributions.
FUTURE OUTLOOK
Not forgetting the markets' extreme volatility witnessed during the first half
of the fiscal year, the US market has been thriving during this more recent
period of calm. The combination of strong economic growth, rising incomes,
improving productivity, expanding liquidity and nearly dormant inflationary
pressures has created a unique market environment. While members of the Federal
Reserve Board have openly begun questioning conventional theories about the
relationship between growth and inflation, the concern has shifted enough that
the Federal Reserve raised the fed funds rate 25 basis points on June 30.
Non-US market conditions by contrast, are slowing rebounding from devaluation.
More aggressive policies are being adopted to achieve more modest results with
the hope of decreasing the potential of another global downturn. With the
stabilization of the new European currency, the Euro, we begin to see
cross-border investing as the currency risk diminishes. Overall, these factors
should have a positive impact on the investment environment.
Thank you for your continued confidence in the VALIC investment management.
Sincerely,
THOMAS L. WEST, JR.
Thomas L. West, Jr., Chairman
American General Series Portfolio Company
<BAR GRAPH>
<PAGE> 59
2 AGSPC CHAIRMAN'S LETTER CONTINUED
FUND RETURNS AND TRACKING DIFFERENCES For the period ended May 31, 1999
<TABLE>
<CAPTION>
(3) (4)
FUND TOTAL
PERFORMANCE INDEX
BEFORE RETURN
(1) (2) SUBTRACTING INCLUDING TRACKING
FUND FUND EXPENSES REINVESTED DIFFERENCE
AGSPC FUND/RELEVANT MARKET INDEX RETURN(A) EXPENSES (1) + (2) DIVIDENDS (1) - (4)
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
INDEXED FUNDS:
Stock Index Fund/S&P 500 ................................. 20.85% 0.32% 21.17% 21.04% (0.19)
MidCap Index Fund/
Standard & Poor's MidCap 400 ............................ 11.91 0.38 12.29 11.91 0.00
Small Cap Index Fund/Russell 2000 ........................ (2.45) 0.41 (2.04) (2.69) 0.24
International Equities Fund/EAFE ......................... 4.43 0.43 4.86 4.36 0.07
MANAGED FUNDS:
Growth Fund/S&P 500 ...................................... 14.20 0.86 15.06 21.04 (6.84)
Growth & Income Fund/S&P 500 ............................. 16.92 0.82 17.74 21.04 (4.12)
Science & Technology Fund/S&P 500 ........................ 48.34 0.96 49.30 21.04 27.30
Social Awareness Fund/S&P 500 ............................ 20.05 0.57 20.62 21.04 (0.99)
Asset Allocation Fund/Benchmark(b) ....................... 12.23 0.57 12.80 13.83 (1.60)
Capital Conservation Fund/
Merrill Lynch Corporate Master .......................... 3.25 0.60 3.85 3.21 0.04
Government Securities Fund/
Lehman Brothers U.S. Treasury ........................... 3.58 0.59 4.17 4.30 (0.72)
International Goverment Bond Fund/
Salomon Non-U.S. Goverment Bond ......................... 6.40 0.57 6.97 6.93 (0.53)
Money Market Fund/30 Day Certificate of Deposit
Primary Offering Rate by New York City Banks
(NYC 30 Day CD Rate) ................................. 4.84 0.57 5.41 4.46 .38
</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 ON
NET ASSET VALUES (PER SHARE) SECURITIES (PER SHARE)
------------------------------------------ ---------------------------
MAY 31, NOVEMBER 30, MAY 31, 6/1/98 TO 12/1/98 TO
FUND 1998 1998 1999 11/30/98 5/31/99
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Stock Index (emulate S&P 500) ........................... $ 33.38 $ 35.73 $ 39.73 $ 0.20 $ 0.36
MidCap Index (emulate MidCap 400) ....................... 25.27 24.79 25.64 0.11 2.29
Small Cap Index (emulate Russell 2000) .................. 17.94 15.67 15.84 0.10 1.45
International Equities
(long term foreign growth stocks) ...................... 11.95 11.84 11.32 0.13 1.02
Growth Fund (long term growth of capital) ............... 22.08 21.35 24.12 0.00 1.01
Growth & Income Fund (long term
growth of capital and current income) .................. 19.91 19.28 21.53 0.04 1.57
Science & Technology Fund (long term
growth of capital) ..................................... 22.07 24.22 29.95 0.00 2.38
Social Awareness (social criteria growth stocks) ........ 22.16 23.60 24.11 0.11 2.23
Asset Allocation (asset allocation) ..................... 14.02 14.51 14.43 0.20 1.05
Capital Conservation (quality corporate bonds) .......... 9.68 9.64 9.39 0.30 0.30
Government Securities (intermediate and
long term government bonds) ............................ 10.09 10.36 9.90 0.28 0.27
International Government Bond (high quality
foreign government debt securities) .................... 11.42 12.50 11.62 0.18 0.37
Money Market (money market instruments) ................. 1.00 1.00 1.00 0.03 0.02
</TABLE>
The change in net asset value of the funds will not be the same as the change
in the accumulation unit value of your annuity contract because (1) the change
in net asset value does not reflect the reinvestment of income and capital gain
distributions and (2) the mortality and expense charges described in your
annuity contract are not included.
<PAGE> 60
MAY 31, 1999 STOCK INDEX FUND - STATEMENT OF NET ASSETS 3
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
COMMON STOCK - 98.46%
ADVERTISING - 0.18%
44,750 Interpublic Group Companies, Inc. $ 3,389,812
71,700 Omnicom Group, Inc. 5,019,000
-------------
8,408,812
-------------
AEROSPACE/DEFENSE - 1.26%
417,108 Boeing Co. 17,622,812
29,000 EG & G, Inc. 860,938
61,260 General Dynamics Corp. 4,027,845
15,800 Goodrich (B.F.) Co. 639,900
179,952 Lockheed Martin Corp. 7,276,809
30,800 Northrop Grumman Corp. 2,079,000
155,500 Raytheon Co., Class B 10,583,719
54,000 TRW, Inc. 2,703,375
202,600 United Technologies Corp. 12,573,863
-------------
58,368,261
-------------
AIRLINES - 0.31%
74,200 * AMR Corp. 4,827,637
63,200 Delta Air Lines, Inc. 3,626,100
126,100 Southwest Airlines Co. 4,043,081
41,300 * US Airways Group, Inc. 2,005,631
-------------
14,502,449
-------------
APPAREL & PRODUCTS - 0.03%
2 * Abercrombie and Fitch Co. 167
27,000 * Fruit of the Loom, Inc. 278,438
32,900 Liz Claiborne, Inc. 1,184,400
-------------
1,463,005
-------------
APPLIANCES/FURNISHINGS - 0.10%
36,900 Maytag Corp. 2,603,755
30,600 Whirlpool Corp. 1,973,700
-------------
4,577,455
-------------
AUTO - CARS - 1.15%
242,961 * Delphi Automotive Systems Corp. 4,768,101
513,600 Ford Motor Co. 29,307,300
279,800 General Motors Corp. 19,306,200
-------------
53,381,601
-------------
AUTO - ORIGINAL EQUIPMENT - 0.08%
58,700 Danaher Corp. 3,547,680
AUTO - REPLACEMENT PARTS - 0.22%
73,900 * AutoZone, Inc. 2,138,480
26,400 Cooper Tire & Rubber Co. 627,000
76,000 Genuine Parts Co. 2,560,250
73,500 Goodyear Tire & Rubber Co. 4,387,031
17,400 The Pep Boys 328,425
-------------
10,041,186
-------------
BANKS - NEW YORK CITY - 1.89%
354,700 Bank of New York Co., Inc. 12,680,524
969,371 Citigroup, Inc. 64,220,829
77,900 J. P. Morgan & Co., Inc. 10,852,444
-------------
87,753,797
-------------
BANKS - OTHER - 3.05%
753,021 Bank of America Corp. 48,711,045
139,600 BankBoston Corp. 6,613,550
434,100 First Union Corp. 19,995,731
242,486 Fleet Financial Group, Inc. 9,972,237
238,000 Mellon Bank Corp. 8,493,625
133,100 National City Corp. 8,809,556
66,600 Providian Financial Corp. 6,389,438
28,000 Republic of New York Corp. 1,902,250
53,500 Union Planters Corp. 2,210,219
704,430 Wells Fargo Company 28,177,200
-------------
141,274,851
-------------
BANKS - REGIONAL - 3.17%
108,900 AmSouth Bancorporation 3,090,037
507,750 BankOne Corp. 28,719,610
363,264 Chase Manhattan Corp. 26,336,640
75,650 Comerica, Inc. 4,572,097
126,375 Fifth Third Bancorp 8,617,195
324,500 Firstar Corp. 9,349,656
67,460 Huntington Bancshares, Inc. 2,335,803
182,440 KeyCorp. 6,339,790
52,800 Mercantile Bancorporation, Inc. 3,085,500
53,900 Northern Trust Corp. 4,871,213
137,600 PNC Bank Corp. 7,877,600
84,400 Regions Financial Corp. 3,196,650
64,900 SouthTrust Corp. 2,527,044
61,200 State Street Corp. 4,666,500
84,200 Summit Bancorporation 3,446,938
114,200 SunTrust Banks, Inc. 7,708,500
102,150 Synovus Financial Corp. 2,055,769
307,190 U.S. Bancorp 9,983,675
95,713 Wachovia Corp. 8,446,672
-------------
147,226,889
-------------
BEVERAGE - BREWERS/
DISTRIBUTORS - 0.56%
16,400 Adolph Coors Co., Class B 779,000
214,900 Anheuser-Busch Companies, Inc. 15,701,130
19,215 Brown-Forman Corp., Class B 1,281,400
155,600 Seagram Co., Ltd. 8,081,475
-------------
25,843,005
-------------
BEVERAGE - SOFT DRINKS - 2.16%
1,051,800 Coca-Cola Co. 71,851,087
163,800 Coca-Cola Enterprises, Inc. 5,937,750
630,900 PepsiCo, Inc. 22,594,106
-------------
100,382,943
-------------
BROADCASTING - 1.67%
321,358 * CBS Corp. 13,416,696
130,900 * Clear Channel Communications, Inc. 8,647,581
333,100 Comcast Corp., Class A 12,824,350
269,400 * Media One Group, Inc. 19,901,925
223,193 U S WEST, Inc. 12,066,372
269,800 Viacom, Inc., Class B 10,387,300
-------------
77,244,224
-------------
BUILDING MATERIALS - 0.34%
11,300 Armstrong World Industries, Inc. 658,224
158,800 Lowe's Companies, Inc. 8,247,675
172,200 Masco Corp. 4,918,463
63,900 Sherwin-Williams Co. 1,968,919
-------------
15,793,281
-------------
CHEMICAL - MAJOR - 1.48%
100,700 Dow Chemical Co. 12,235,050
481,300 Du Pont (E.I.) de Nemours and Co. 31,495,068
47,500 Hercules, Inc. 1,659,531
262,700 Monsanto Co. 10,902,050
56,800 Morton International, Inc. 2,215,200
68,500 PPG Industries, Inc. 4,157,094
57,700 Rohm and Haas Co. 2,315,213
<PAGE> 61
4 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
CHEMICAL - MAJOR - Continued
68,300 Union Carbide Corp. $ 3,504,644
-------------
68,483,850
-------------
CHEMICAL - MISCELLANEOUS - 0.35%
87,900 Air Products and Chemicals, Inc. 3,603,900
45,837 Eastman Chemical Co. 2,320,497
44,200 Ecolab, Inc. 1,878,500
15,300 * FMC Corp. 1,012,669
26,500 Great Lakes Chemical Corp. 1,197,469
15,928 Millipore Corp. 531,597
20,600 Nalco Chemical Co. 690,100
65,000 Praxair, Inc. 3,172,813
39,800 Sigma Aldrich Corp. 1,273,600
41,400 * W.R. Grace & Co. 737,438
-------------
16,418,583
-------------
CONGLOMERATES - 1.27%
234,800 Allied Signal, Inc. 13,633,074
43,600 ITT Industries, Inc. 1,645,900
41,500 Loews Corp. 3,374,469
125,000 RJR Nabisco Holdings Corp. 3,867,188
65,400 Tenneco, Inc. 1,524,638
60,200 Textron, Inc. 5,361,563
336,044 Tyco International, Ltd. 29,361,844
-------------
58,768,676
-------------
CONSUMER FINANCE - 0.29%
30,300 Capital One Financial Corp. 4,565,830
329,212 MBNA Corp. 9,094,482
-------------
13,660,312
-------------
CONTAINERS - METAL/GLASS - 0.23%
6,800 Ball Corp. 331,074
107,000 Corning, Inc. 5,844,875
66,200 Crown Cork & Seal Co., Inc. 2,077,025
12,300 Owens Corning 484,313
61,200 * Owens-Illinois, Inc. 1,866,600
-------------
10,603,887
-------------
CONTAINERS - PAPER - 0.09%
6,500 Bemis Co., Inc. 245,374
46,814 * Sealed Air Corp. 2,908,320
17,700 Temple-Inland, Inc. 1,185,900
-------------
4,339,594
-------------
COSMETICS/TOILETRIES - 0.71%
6,800 Alberto-Culver Co., Class B 179,774
126,000 Avon Products, Inc. 6,229,125
475,200 Gillette Co. 24,235,200
60,000 International Flavors & Fragrances, Inc. 2,467,500
-------------
33,111,599
-------------
DRUGS - 7.25%
36,000 Allergan, Inc. 3,348,000
49,600 * ALZA Corp. 1,770,100
559,300 American Home Products Corp. 32,229,662
227,800 * Amgen, Inc. 14,408,350
23,900 Bausch & Lomb, Inc. 1,825,363
838,400 Bristol Myers Squibb Co. 57,535,200
481,300 Eli Lilly and Co. 34,382,869
1,034,500 Merck & Co., Inc. 69,828,750
536,100 Pfizer, Inc. 57,362,700
227,070 Pharmacia & Upjohn, Inc. 12,588,193
631,900 Schering-Plough Corp. 28,474,994
336,400 Warner-Lambert Co. 20,856,800
39,700 * Watson Pharmaceuticals, Inc. 1,521,006
-------------
336,131,987
-------------
ELECTRICAL EQUIPMENT - 3.46%
62,000 * Cabletron Systems, Inc. 922,250
194,600 Emerson Electric Co. 12,430,074
1,401,500 General Electric Co. 142,515,031
30,500 National Service Industries, Inc. 1,122,781
48,600 Raychem Corp. 1,688,850
6,800 Thomas & Betts Corp. 291,125
31,300 W. W. Grainger, Inc. 1,660,856
-------------
160,630,967
-------------
ELECTRONIC INSTRUMENTS - 0.03%
1 * Commscope, Inc. 26
7,100 Tektronix, Inc. 164,630
70,400 * Thermo Electron Corp. 1,346,400
-------------
1,511,056
-------------
ENTERTAINMENT - 1.72%
242,700 Carnival Corp., Class A 9,950,700
39,500 * Harrah's Entertainment, Inc. 854,187
110,012 Hasbro, Inc. 3,149,094
51,300 * King World Productions, Inc. 1,712,138
176,087 Mattel, Inc. 4,655,300
499,900 Time Warner, Inc. 34,024,444
869,656 Walt Disney Co. 25,328,731
-------------
779,674,594
-------------
FINANCE COMPANIES - 0.48%
302,300 Associates First Capital Corp. 12,394,300
224,965 Household International, Inc. 9,757,856
-------------
22,152,156
-------------
FINANCIAL SERVICES - 0.59%
193,300 American Express Co. 23,425,543
41,900 Countrywide Credit Industries, Inc. 1,723,138
43,300 H & R Block, Inc. 2,086,519
-------------
27,235,200
-------------
FOODS - 1.57%
231,451 Archer Daniels Midland Co. 3,471,764
130,600 Bestfoods 6,530,000
185,300 Campbell Soup Co. 8,176,363
205,700 ConAgra, Inc. 5,361,056
67,600 General Mills, Inc. 5,433,350
184,050 H J Heinz Co. 8,891,916
48,100 Hershey Foods Corp. 2,609,425
166,800 Kellogg Co. 5,785,875
79,380 Pioneer Hi-Bred International, Inc. 2,976,750
67,600 Quaker Oats Co. 4,465,825
142,800 Ralston Purina Co. 3,891,300
418,900 Sara Lee Corp. 10,053,600
58,900 Wm. Wrigley Jr. Co. 5,127,981
-------------
72,775,205
-------------
FOOTWEAR - 0.15%
104,800 NIKE, Inc., Class B 6,386,250
18,900 * Reebok International, Ltd. 375,637
-------------
6,761,887
-------------
FREIGHT - 0.17%
124,520 * FDX Corp. 6,856,382
37,200 Ryder System, Inc. 892,800
-------------
7,749,182
-------------
FUNERAL SERVICES - 0.03%
83,800 Service Corporation International 1,607,912
-------------
GOLD MINING - 0.10%
159,400 Barrick Gold Corp. 2,749,650
66,400 Battle Mountain Gold Co. 161,850
93,100 Homestake Mining Co. 727,343
<PAGE> 62
MAY 31, 1999 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 5
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
GOLD MINING - CONTINUED
93,800 Placer Dome, Inc. $ 1,043,525
-------------
4,682,368
-------------
GOVERNMENT SPONSORED - 1.10%
304,400 Federal Home Loan Mortgage Corp. 17,750,324
448,800 Federal National Mortgage Association 30,518,400
67,900 Student Loan Marketing Association Holding Corp 2,817,850
-------------
51,086,574
-------------
HARDWARE & TOOLS - 0.09%
41,100 Black & Decker Corp. 2,340,130
17,050 Snap-on, Inc. 616,997
42,600 Stanley Works 1,387,163
-------------
4,344,290
-------------
HEALTHCARE - 0.54%
116,100 Cardinal Health, Inc. 7,009,537
58,500 * HCR Manor Care, Inc. 1,564,875
188,600 * HealthSouth Corp. 2,522,525
71,400 * Humana, Inc. 896,963
155,200 IMS Health, Inc. 3,821,800
123,276 McKesson HBOC, Inc. 4,199,089
87,900 United HealthCare Corp. 5,120,175
-------------
25,134,964
-------------
HEAVY DUTY TRUCKS/PARTS - 0.24%
17,300 Cummins Engine Co., Inc. 875,812
68,288 Dana Corp. 3,525,368
39,700 Eaton Corp. 3,461,344
21,110 * Navistar International Corp. 1,042,306
37,810 PACCAR, Inc. 2,129,176
-------------
11,034,006
-------------
HOME BUILDERS - 0.04%
30,300 Centex Corp. 1,122,993
14,456 Kaufman & Broad Home Corp. 348,751
15,800 Pulte Corp. 376,238
-------------
1,847,982
-------------
HOSPITAL MANAGEMENT - 0.21%
261,684 Columbia/HCA Healthcare Corp. 6,165,928
1 * Lifepoint Hospitals, Inc. 8
13,100 Shared Med Systems Corp. 861,325
108,200 * Tenet Healthcare Corp. 2,650,900
1 * Triad Hospitals, Inc. 9
-------------
9,678,170
-------------
HOSPITAL SUPPLIES - 2.70%
640,000 Abbott Laboratories 28,920,000
126,600 Baxter International, Inc. 8,173,613
122,700 Becton, Dickinson and Co. 4,754,625
64,100 Biomet, Inc. 2,559,994
158,854 * Boston Scientific Corp. 6,026,524
10,300 C. R. Bard, Inc. 470,581
583,000 Johnson & Johnson 54,000,375
30,000 Mallinckrodt, Inc. 1,038,750
253,300 Medtronic, Inc. 17,984,300
37,833 * St. Jude Medical, Inc. 1,279,228
-------------
125,207,990
-------------
HOUSEHOLD PRODUCTS - 2.28%
53,200 Clorox Co. 5,369,875
127,300 Colgate-Palmolive Co. 12,714,088
181,900 Minnesota Mining & Manufacturing Co. 15,597,925
113,377 Newell Rubbermaid, Inc. 4,591,769
542,752 Procter & Gamble Co. 50,679,468
35,300 Tupperware Corp. 785,425
246,071 Unilever N V - ADR 16,071,512
-------------
105,810,062
-------------
INFORMATION PROCESSING - 0.04%
138,000 * Parametric Technology Corp. 1,914,750
-------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 4.24%
91,300 * BMC Software, Inc. 4,513,644
2,172,000 * Microsoft Corp. 175,253,250
1,852 * Momentum Business Applications, Inc. 14,816
619,030 * Oracle Corp. 15,359,682
95,500 * Peoplesoft, Inc. 1,545,906
-------------
196,687,298
-------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 1.74%
63,600 * Apple Computer, Inc. 2,802,375
717,149 Compaq Computer Corp. 16,987,467
1,082,700 * Dell Computer Corp. 37,285,481
62,900 * Gateway, Inc. 3,825,106
59,100 * Silicon Graphics, Inc. 731,363
316,800 * Sun Microsystems, Inc. 18,928,800
-------------
80,560,592
-------------
INFORMATION PROCESSING - COMPUTER SERVICES - 1.92%
438,200 * America Online, Inc. 52,310,125
265,600 Automatic Data Processing, Inc. 10,939,400
55,604 * Ceridian Corp. 1,834,932
206,700 Electronic Data Systems Corp. 11,626,875
202,854 First Data Corp. 9,115,752
101,550 Paychex, Inc. 3,008,419
-------------
88,835,503
-------------
INFORMATION PROCESSING - DATA SERVICES - 5.01%
1 * ACNielson Corp. 28
38,200 Adobe Systems, Inc. 2,831,575
27,800 Autodesk, Inc. 767,975
362,621 * Cendant Corp. 6,685,825
222,330 Computer Associates International 10,518,988
57,700 * Computer Sciences Corp. 3,732,469
178,700 * Compuware Corp. 5,550,869
1,000 * Data General Corp. 13,125
221,800 * EMC Corp. 22,096,825
441,200 Hewlett Packard Co. 41,610,675
61,000 Honeywell, Inc. 5,772,125
793,400 International Business Machines 92,282,338
167,200 * Novell, Inc. 3,929,200
113,000 Pitney Bowes, Inc. 7,203,750
102,100 * Seagate Technology, Inc. 3,082,144
113,500 * Solectron Corp. 6,214,125
104,300 * Unisys Corp. 3,956,881
285,600 Xerox Corp. 16,047,150
-------------
232,296,067
-------------
<PAGE> 63
6 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
INFORMATION PROCESSING - NETWORKING - 1.92%
92,000 * Ascend Communications, Inc. $ 8,527,250
680,775 * Cisco Systems, Inc. 74,119,378
56,500 * General Insturment Corp. 2,185,844
145,800 * 3Com Corp. 4,009,500
-------------
88,841,972
-------------
INSURANCE - CASUALTY - 0.31%
73,700 Chubb Corp. 5,163,606
28,000 Progressive Corp. 3,930,500
58,600 SAFECO Corp. 2,574,738
81,042 St. Paul Companies, Inc. 2,882,056
-------------
14,550,900
-------------
INSURANCE - LIFE - 0.64%
85,992 Aetna, Inc. 7,809,149
177,288 Conseco, Inc. 5,418,365
69,412 Jefferson-Pilot Corp. 4,698,325
64,100 Lincoln National Corp. 6,522,175
54,900 Torchmark Corp. 1,832,288
47,418 Transamerica Corp. 3,479,296
-------------
29,759,598
-------------
INSURANCE - MISCELLANEOUS - 0.22%
57,100 MBIA, Inc. 3,900,644
51,200 MGIC Investment Corp. 2,464,000
73,500 UNUM Corp. 3,955,219
-------------
10,319,863
-------------
INSURANCE - MULTILINE - 2.43%
114,400 AFLAC Incorporated 5,834,400
367,640 Allstate Corp. 13,395,882
526,419 American International Group, Inc. 60,176,272
86,850 Aon Corp. 3,734,550
92,100 CIGNA Corp. 8,588,325
55,800 Cincinnati Financial Corp. 2,298,263
125,250 Marsh & McLennan Companies, Inc. 9,111,938
54,100 Provident Companies, Inc. 2,113,281
115,400 The Hartford Financial Services Group 7,299,050
-------------
112,551,961
-------------
LEISURE TIME - 0.05%
27,200 Brunswick Corp. 652,800
75,600 * Mirage Resorts, Inc. 1,549,800
-------------
2,202,600
-------------
LODGING - 0.12%
123,400 Hilton Hotels Corp. 1,696,750
97,700 Marriott International, Inc. 3,718,706
-------------
5,415,456
-------------
MACHINE TOOLS - 0.00%
4,700 Milacron, Inc. 100,169
-------------
MACHINERY - AGRICULTURE - 0.13%
42,300 Case Corp. 1,988,100
110,100 Deere & Co. 4,190,681
-------------
6,178,781
-------------
MACHINERY - CONSTRUCTION & CONTRACTS - 0.22%
153,500 Caterpillar, Inc. 8,423,313
32,100 Fluor Corp. 1,195,725
33,900 Foster Wheeler Corp. 466,125
10,800 Harnischfeger Industries, Inc. 77,625
-------------
10,162,788
-------------
MACHINERY - INDUSTRIAL SPECIALTY - 0.52%
14,600 Briggs & Stratton Corp. 912,500
46,900 Cooper Industries, Inc. 2,324,481
95,600 Dover Corp. 3,602,925
99,600 Illinois Tool Works, Inc. 7,644,300
73,700 Ingersoll-Rand Co. 4,693,769
33,600 Johnson Controls, Inc. 2,118,900
59,533 Pall Corp. 1,194,381
34,775 Parker Hannifin Corp. 1,519,233
12,800 Timken Co. 263,200
-------------
24,273,689
-------------
MEDICAL TECHNOLOGY - 0.22%
139,900 Guidant Corp. 6,995,000
27,100 PE Corp-PE Biosystems Group 3,026,731
-------------
10,021,731
-------------
MERCHANDISE - DRUG - 0.43%
161,300 CVS Corp. 7,419,800
16,600 Longs Drug Stores Corp. 577,888
101,100 Rite Aid Corp. 2,527,500
398,200 Walgreen Co. 9,258,150
-------------
19,783,338
-------------
MERCHANDISE - SPECIALTY - 2.16%
41,000 American Greetings Corp., Class A 1,173,625
45,500 Circuit City Stores, Inc. 3,267,469
57,000 * Consolidated Stores Corp. 1,959,375
97,622 * CostCo Companies, Inc. 7,077,595
93,250 Dollar General Corp. 2,476,953
86,700 Fortune Brands, Inc. 3,543,863
250,850 Gap, Inc. 15,693,803
648,700 Home Depot, Inc. 36,894,813
89,900 Ikon Office Solutions, Inc. 1,252,981
973 Jostens, Inc. 20,555
72,900 * Kohl's Corp. 4,970,869
94,173 Limited, Inc. 4,602,705
79,200 Nordstrom, Inc. 2,811,600
177,900 * Staples, Inc. 5,114,625
35,700 Tandy Corp. 2,945,250
115,200 TJX Companies, Inc. 3,456,000
129,125 * Toys "R" Us, Inc. 2,977,945
-------------
100,240,026
-------------
MERCHANDISING - DEPARTMENT - 0.55%
192,400 Dayton Hudson Corp. 12,121,200
48,600 Dillards, Inc., Class A 1,707,075
95,300 * Federated Department Stores, Inc. 5,193,850
151,950 May Department Stores Co. 6,581,334
-------------
25,603,459
-------------
MERCHANDISING - FOOD - 0.80%
113,900 Albertsons, Inc. 6,093,650
119,200 American Stores Co. 3,933,600
15,500 Great Atlantic & Pacific Tea 507,625
165,900 * Kroger Co. 9,715,519
212,000 * Safeway, Inc. 9,858,000
36,400 Supervalu, Inc. 882,700
143,800 SYSCO Corp. 4,269,063
52,000 Winn-Dixie Stores, Inc. 1,862,250
-------------
37,122,407
-------------
<PAGE> 64
MAY 31, 1999 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 7
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
MERCHANDISING - MASS - 2.08%
122,500 J.C. Penney Co., Inc. $ 6,331,719
205,300 * Kmart Corp. 3,156,488
163,300 Sears Roebuck and Co. 7,807,781
1,857,600 Wal-Mart Stores, Inc. 79,180,200
-------------
96,476,188
-------------
METALS - ALUMINUM - 0.30%
115,900 Alcan Aluminium, Ltd. 3,245,200
161,200 Alcoa, Inc. 8,866,000
33,100 Reynolds Metals Co. 1,760,506
-------------
13,871,706
-------------
METALS - COPPER - 0.06%
19,300 ASARCO, Inc. 310,006
68,231 Newmont Mining Corp. 1,215,365
28,100 Phelps Dodge Corp. 1,455,931
-------------
2,981,302
-------------
METALS - MISCELLANEOUS - 0.07%
48,650 Cyprus Amax Minerals Co. 611,166
57,275 Engelhard Corp. 1,159,819
50,500 Freeport-McMoRan Copper & Gold, Inc., Class B 713,313
56,300 Inco, Ltd. 802,275
-------------
3,286,573
-------------
METALS - STEEL - 0.11%
59,525 Allegheny Teldyne, Inc. 1,216,542
46,100 * Bethlehem Steel Corp. 383,206
31,100 Nucor Corp. 1,551,113
48,920 USX-US Steel Group, Inc. 1,317,783
53,625 Worthington Industries, Inc. 687,070
-------------
5,155,714
-------------
MISCELLANEOUS - 0.13%
105,400 BB&T Corp. 3,847,100
59,500 Equifax, Inc. 2,142,000
-------------
5,989,100
-------------
MOBILE HOMES - 0.01%
14,600 Fleetwood Enterprises, Inc. 371,388
-------------
NATURAL GAS - DIVERSIFIED - 0.08%
96,800 Coastal Corp. 3,732,850
-------------
OIL - INTEGRATED DOMESTIC - 0.78%
37,300 Amerada Hess Corp. 2,235,669
27,400 Ashland Oil, Inc. 1,116,550
134,300 Atlantic Richfield Co. 11,239,231
75,467 Burlington Resources, Inc. 3,240,364
39,229 Kerr-McGee Corp. 1,824,149
160,700 Occidental Petroleum Corp. 3,394,788
96,500 Phillips Petroleum Co. 5,060,219
116,000 Unocal Corp. 4,611,000
114,100 USX-Marathon Group 3,415,869
-------------
36,137,839
-------------
OIL - INTEGRATED INTERNATIONAL - 4.50%
273,200 Chevron Corp. 25,322,225
1,028,700 Exxon Corp. 82,167,413
339,200 Mobil Corp. 34,344,000
905,700 Royal Dutch Petroleum Co. 51,228,656
235,200 Texaco, Inc. 15,405,600
-------------
208,467,894
-------------
OIL - SERVICES - 0.60%
144,860 Baker Hughes, Inc. 4,508,768
205,000 Halliburton Co. 8,481,875
34,300 McDermott International, Inc. 878,938
35,500 * Rowan Companies, Inc. 599,063
223,900 Schlumberger, Ltd. 13,475,981
-------------
27,944,625
-------------
OIL/GAS PRODUCERS - 0.18%
71,400 Anadarko Petroleum Corp. 2,677,500
33,700 Apache Corp. 1,213,200
12,600 Helmerich & Payne, Inc. 293,738
37,900 Sonat, Inc. 1,343,081
38,716 Sunoco, Inc. 1,178,418
113,842 Union Pacific Resources Group, Inc. 1,586,673
-------------
8,292,610
-------------
PAPER/FOREST PRODUCTS - 1.03%
54,200 Avery Dennison Corp. 3,245,225
15,866 Boise Cascade Corp. 628,690
46,900 Champion International Corp. 2,403,625
96,600 Fort James Corp. 3,537,975
40,900 Georgia-Pacific Corp. 3,535,294
191,768 International Paper Co. 9,588,400
249,332 Kimberly-Clark Corp. 14,632,672
53,800 Louisiana Pacific Corp. 1,089,450
42,100 Mead Corp. 1,573,488
4,900 Potlatch Corp. 192,938
28,850 Westvaco Corp. 824,028
80,100 Weyerhaeuser Co. 4,971,206
35,000 Willamette Industries, Inc. 1,483,125
-------------
47,706,116
-------------
PHOTOGRAPHY - 0.22%
137,250 Eastman Kodak Co. 9,281,531
35,300 Polaroid Corp. 745,713
-------------
10,027,244
-------------
POLLUTION CONTROL - 0.36%
84,500 Browning-Ferris Industries, Inc. 3,506,750
103,500 Laidlaw, Inc. 724,500
235,950 Waste Management, Inc. 12,475,856
-------------
16,707,106
-------------
PUBLISHING - NEWS - 0.43%
35,900 Dow Jones & Co., Inc. 1,884,750
120,600 Gannett Co., Inc. 8,713,350
42,400 Knight-Ridder, Inc. 2,233,950
77,200 New York Times Co., Class A 2,634,450
24,332 Times Mirror Co. 1,434,067
40,300 Tribune Co. 3,181,181
-------------
20,081,748
-------------
PUBLISHING/PRINTING - 0.29%
51,500 Deluxe Corp. 1,857,219
75,200 Dun & Bradstreet Corp. 2,632,000
20,517 Harcourt General, Inc. 1,009,180
95,000 McGraw-Hill, Inc. 4,928,125
79,100 R. R. Donnelley and Sons Co. 2,867,375
-------------
13,293,899
-------------
RAILROAD - 0.57%
227,251 Burlington Northern Santa Fe Corp. 7,044,780
105,300 CSX Corp. 4,942,519
52,300 Kansas City Southern Industries, Inc. 2,941,875
170,400 Norfolk Southern Corp. 5,580,600
105,200 Union Pacific Corp. 6,002,975
-------------
26,512,749
-------------
<PAGE> 65
8 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
RESTAURANTS - 0.64%
69,600 Darden Restaurants, Inc. $ 1,483,350
603,300 McDonald's Corp. 23,227,050
72,620 * Tricon Global Restaurants, Inc. 4,230,115
30,200 Wendy's International, Inc. 822,950
-------------
29,763,465
-------------
SAVINGS & LOAN - 0.25%
23,500 Golden West Financial Corp. 2,229,563
247,943 Washington Mutual, Inc. 9,468,323
-------------
11,697,886
-------------
SECURITIES RELATED - 1.37%
49,385 Bear Stearns Co., Inc. 2,191,459
168,175 Charles Schwab Corp. 17,795,017
100,700 Franklin Resources, Inc. 4,380,450
53,500 Lehman Brothers Holdings, Inc. 2,922,438
145,200 Merrill Lynch & Co., Inc. 12,196,800
249,201 Morgan Stanley Dean Witter & Co. 24,047,898
-------------
63,534,062
-------------
SEMICONDUCTOR EQUIPMENT - 0.24%
163,800 * Applied Materials, Inc. 8,998,763
42,500 * KLA-Tencor Corp. 1,933,750
-------------
10,932,513
-------------
SEMICONDUCTORS - 2.81%
58,600 * Advanced Micro Devices, Inc. 1,084,100
1,438,800 Intel Corp. 77,785,125
56,700 * LSI Logic Corp. 2,101,444
100,700 * Micron Technology, Inc. 3,820,306
250,200 Motorola, Inc. 20,719,687
95,800 * National Semiconductor Corp. 1,856,125
95,400 Rockwell International Corp. 5,264,888
160,300 Texas Instruments, Inc. 17,532,813
-------------
130,164,488
-------------
TELECOMMUNICATIONS - 4.52%
238,000 * Airtouch Communications, Inc. 23,919,000
99,500 ALLTEL Corp. 7,132,906
33,235 * Andrew Corp. 515,143
77,050 CenturyTel, Inc. 2,951,978
88,200 Frontier Corp. 4,641,525
32,800 Harris Corp. 1,240,250
1,124,260 Lucent Technologies, Inc. 63,942,288
794,111 * MCI Worldcom, Inc. 68,591,338
131,600 * Nextel Communications, Inc., Class A 4,852,750
285,340 Nortel Networks Corp. 21,400,500
30,600 Scientific-Atlanta, Inc. 1,080,563
160,200 * Tellabs, Inc. 9,371,700
-------------
209,639,941
-------------
TEXTILE - PRODUCTS - 0.06%
26,100 Russell Corp. 611,719
49,300 V. F. Corp. 2,267,800
-------------
2,879,519
-------------
TOBACCO - 0.91%
1,015,600 Philip Morris Companies, Inc. 39,164,075
94,300 UST, Inc. 2,876,150
-------------
42,040,225
-------------
UTILITIES - COMMUNICATION - 5.99%
1,360,885 AT&T Corp. 75,529,118
465,300 Ameritech Corp. 30,622,556
676,010 Bell Atlantic Corp. 37,011,548
827,500 BellSouth Corp. 39,047,656
415,500 GTE Corp. 26,202,469
805,258 SBC Communications, Inc. 41,168,815
176,000 Sprint Corp., FON Group 19,844,000
188,700 * Sprint Corp., PCS Group 8,491,500
-------------
277,917,662
-------------
UTILITIES - ELECTRIC - 2.23%
45,500 Ameren Corp. 1,862,656
101,600 * American Electric Power, Inc. 4,406,900
60,400 Carolina Power & Light Co. 2,642,500
123,800 Central & South West Corp. 3,187,850
42,964 Cinergy Corp. 1,466,147
45,900 CMS Energy Corp. 2,134,350
114,200 Consolidated Edison, Inc. 5,545,838
35,200 Constellation Energy Group, Inc. 1,097,800
73,850 Dominion Resources, Inc. 3,189,397
55,000 DTE Energy Co. 2,395,938
164,751 Duke Energy Corp. 9,936,545
170,200 Edison International 4,680,500
139,300 Entergy Corp. 4,518,544
82,300 FirstEnergy Corp. 2,618,169
89,700 FPL Group, Inc. 5,219,419
34,300 GPU, Inc. 1,494,194
44,900 New Century Energies, Inc. 1,815,644
37,500 * Niagara Mohawk Holdings, Inc. 557,813
52,000 Northern States Power Co. 1,355,250
122,100 PacifiCorp 2,220,694
92,700 Peco Energy Co. 4,536,506
161,800 PG&E Corp. 5,460,750
42,264 PP&L Resources, Inc. 1,267,920
97,050 Public Service Enterprise Group, Inc. 4,070,034
116,279 Reliant Energy, Inc. 3,546,510
291,900 Southern Co. 8,282,663
142,220 Texas Utilities Co. 6,399,900
80,100 The AES Corp. 3,984,975
87,000 Unicom Corp. 3,681,188
-------------
103,576,594
-------------
UTILITIES - GAS, DISTRIBUTION - 0.02%
23,700 NICOR, Inc. 891,713
-------------
UTILITIES - GAS, PIPELINE - 0.61%
37,800 Columbia Energy Group 2,022,300
44,100 Consolidated Natural Gas Co. 2,621,194
146,100 Enron Corp. 10,427,888
18,300 ONEOK, Inc. 549,000
6,000 Peoples Energy Corp. 231,000
94,262 Sempra Energy 2,026,633
96,500 Williams Companies, Inc. 10,181,156
-------------
28,059,171
-------------
TOTAL COMMON STOCK
(Cost $2,118,189,264) 4,565,809,330
-------------
PAR
VALUE
- ------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.21%
HEAVY DUTY TRUCKS/PARTS - 0.48%
$17,242,000 Dana Corp., 4.93% due 06/01/99 17,242,000
5,123,000 Eaton Corp., 4.95% due 06/04/99 5,120,886
-------------
22,362,886
-------------
<PAGE> 66
MAY 31, 1999 STOCK INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 9
PAR MARKET
VALUE VALUE
- ---------- -------------
INFORMATION PROCESSING - COMPUTER SERVICES - 0.12%
$5,630,000 Electronic Data Systems Corp., 4.88% due 06/07/99 $ 5,625,418
-------------
INSURANCE - LIFE - 0.17%
7,991,000 Jefferson-Pilot Corp., 4.88% due 06/03/99 7,988,832
-------------
INSURANCE - MULTILINE - 0.17%
8,036,000 Marsh & McLennan Companies, Inc., 4.90% due 06/03/99 8,033,811
-------------
OIL/GAS PRODUCERS - 0.27%
12,433,000 Sunoco, Inc., 5.05% due 06/02/99 12,431,254
-------------
TOTAL CORPORATE SHORT TERM COMMERCIAL PAPER
(Cost $56,442,201) 56,442,201
-------------
UNITED STATES GOVERNMENT - SHORT TERM - 0.15%
U.S. TREASURY BILLS - 0.15%
United States Treasury Bills:
200,000 4.41% due 06/10/99 199,778
1,700,000 4.40% due 06/10/99 1,698,124
100,000 4.36% due 06/10/99 99,891
200,000 4.35% due 06/10/99 199,782
200,000 4.30% due 06/10/99 199,784
425,000 4.20% due 06/10/99 424,551
4,000,000 4.17% due 06/10/99 3,995,816
-------------
6,817,726
-------------
MARKET
VALUE
-------------
TOTAL UNITED STATES GOVERNMENT - SHORT TERM
(Cost $6,817,726) $ 6,817,726
-------------
TOTAL INVESTMENTS
(Cost $2,181,449,191) - 99.82% 4,629,069,257
Other assets less liabilities, net- 0.18% 8,558,582
-------------
NET ASSETS (equivalent to $39.73 per share on
116,730,587 shares outstanding) - 100.00% $4,637,627,839
==============
* Non-income producing
UNREALIZED
CONTRACTS DEPRECIATION
- --------- ------------
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/99)
149(2) S&P 500 Index Futures (June/$1,300) $ (1,381,230)
==============
(1) U.S.Treasury Bills with a market value of approximately
$6,825,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 250
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
116,730,587 shares outstanding $ 1,167,306
Additional paid in capital 2,146,355,984
Undistributed net realized gain on securities 44,047,392
Undistributed net investment income (181,679)
Unrealized appreciation (depreciation) of:
Investments $2,447,620,066
Futures (1,381,230) 2,446,238,836
-------------- --------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $4,637,627,839
==============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 67
10 STOCK INDEX FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 55,255,245
Interest 2,160,149
-------------
Total investment income 57,415,394
-------------
EXPENSES:
Advisory fees 10,367,253
Custodian fees 307,136
Registration and filing fees 23,860
Audit fees and tax services 106,678
Accounting services 713,451
Directors' fees and expenses 100,739
Directors' retirement plan expenses 427,962
Reports to shareholders 387,264
Miscellaneous 339,187
-------------
Total expenses 12,773,530
-------------
NET INVESTMENT INCOME 44,641,864
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain on securities:
Investments $ 40,293,377
Futures contracts 4,556,796 44,850,173
------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments 660,939,598
Futures contracts (990,393) 659,949,205
----------- -------------
Net realized and unrealized gain on securities during the year 704,799,378
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 749,441,242
=============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 44,641,864 $ 39,567,862
Net realized gain on securities 44,850,173 16,742,928
Net unrealized appreciation of securities during the year 659,949,205 713,815,081
--------------- ---------------
Increase in net assets resulting from operations 749,441,242 770,125,871
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (45,201,454) (39,570,522)
Net realized gain on securities (16,018,507) (14,847,655)
--------------- ---------------
Decrease in net assets resulting from
distributions to shareholders (61,219,961) (54,418,177)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 554,346,043 367,059,600
Proceeds from capital stock issued
for distributions reinvested 61,219,961 54,418,177
--------------- ---------------
615,566,004 421,477,777
Cost of capital stock repurchased (148,814,269) (98,730,173)
--------------- ---------------
Increase in net assets resulting
from capital stock transactions 466,751,735 322,747,604
--------------- ---------------
Total Increase in Net Assets 1,154,973,016 1,038,455,298
NET ASSETS:
Beginning of year 3,482,654,823 2,444,199,525
--------------- ---------------
End of year (including undistributed net
investment income of ($181,679) and $377,911) $ 4,637,627,839 $ 3,482,654,823
=============== ===============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 14,885,043 12,118,343
Shares issued for distributions reinvested 1,671,194 1,806,919
Shares of capital stock repurchased (4,159,197) (3,279,150)
--------------- ---------------
Increase in shares outstanding 12,397,040 10,646,112
Shares outstanding:
Beginning of year 104,333,547 93,687,435
--------------- ---------------
End of year 116,730,587 104,333,547
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 68
MAY 31, 1999 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS 11
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
COMMON STOCK - 98.39%
ADVERTISING - 0.19%
64,400 * Snyder Communications, Inc. $ 1,573,774
-------------
AEROSPACE/DEFENSE - 1.50%
32,580 Gencorp, Inc. 796,173
64,700 * Gulfstream Aerospace Corp. 3,995,225
54,800 * SCI Systems, Inc. 2,274,200
8,000 * Sequa Corp., Class A 463,000
48,774 Sunstrand Corp. 3,374,551
30,520 Teleflex, Inc. 1,333,343
-------------
12,236,492
-------------
AIRLINES - 0.32%
23,421 * Alaska Air Group, Inc. 971,971
87,300 Comair Holdings, Inc. 1,653,244
-------------
2,625,215
-------------
APPAREL & PRODUCTS - 1.99%
47,300 * Abercrombie and Fitch Co. 3,979,112
96,506 Cintas Corp. 6,128,131
48,371 Claire's Stores, Inc. 1,414,852
27,224 * Land's End, Inc. 1,163,826
41,100 Ross Stores, Inc. 1,888,031
58,000 Warnaco Group, Inc., Class A 1,711,000
-------------
16,284,952
-------------
APPLIANCES/FURNISHINGS - 1.09%
46,300 * Furniture Brands International, Inc. 1,122,774
49,059 Heilig-Meyers Co. 340,347
76,856 Herman Miller, Inc. 1,551,531
37,301 Lancaster Colony Corp. 1,246,087
175,552 Leggett & Platt, Inc. 4,630,184
-------------
8,890,923
-------------
AUTO - CARS - 0.17%
58,600 Meritor Automotive, Inc. 1,428,374
-------------
AUTO - ORIGINAL EQUIPMENT - 1.47%
20,125 Arvin Industries, Inc. 789,905
23,700 Borg-Warner Automotive, Inc. 1,313,869
24,700 Carlisle Companies, Inc. 1,154,725
39,036 Donaldson Co., Inc. 944,183
54,670 Federal-Mogul Corp. 2,521,654
60,300 * Lear Corp. 2,966,006
50,245 Mark IV Industries, Inc. 929,533
24,928 Modine Manufacturing Co. 800,812
23,200 Superior Industries International, Inc. 578,550
-------------
11,999,237
-------------
AUTO - REPLACEMENT PARTS - 0.39%
31,642 Kaydon Corp. 1,054,073
27,300 * SPX Corp. 2,119,163
-------------
3,173,236
-------------
BANKS - OTHER - 0.78%
114,304 First Tennessee National Corp. 4,707,895
129,200 Sovereign Bancorp, Inc. 1,703,825
-------------
6,411,720
-------------
BANKS - REGIONAL - 5.29%
58,400 Associated Banc-Corp 2,022,100
33,900 CCB Financial Corp. 1,828,480
38,455 City National Corp. 1,514,166
168,311 First Security Corp. 3,187,390
43,362 First Virginia Banks, Inc. 2,154,549
95,300 GreenPoint Financial Corp. 3,287,850
134,200 Hibernia Corp., Class A 1,912,350
94,648 Marshall & Ilsley Corp. 6,625,360
71,934 Mercantile Bankshares Corp. 2,585,128
132,550 North Fork Bancorporation, Inc. 2,824,972
93,859 Old Kent Financial Corp. 4,217,789
66,368 Pacific Century Financial Corp. 1,327,360
35,800 Provident Financial Group 1,532,688
77,500 TCF Financial Corp. 2,150,625
28,178 Wilmington Trust Corp. 1,657,219
69,800 Zions Bancorporation 4,449,750
-------------
43,277,776
-------------
BEVERAGE - SOFT DRINKS - 0.17%
81,900 Whitman Corp. 1,392,300
-------------
BROADCASTING - 1.34%
107,556 A.H. Belo Corp. 2,372,953
27,389 * Chris-Craft Industries, Inc. 1,263,318
44,232 TCA Cable TV, Inc. 2,504,637
80,500 * Univision Communications, Inc. 4,774,656
-------------
10,915,564
-------------
BUILDING MATERIALS - 1.93%
36,400 Fastenal Co. 1,865,500
52,150 HON INDUSTRIES, Inc. 1,271,155
41,500 Martin Marietta Materials, Inc. 2,515,938
99,856 RPM, Inc. 1,385,502
34,900 Southdown, Inc. 2,211,788
44,200 USG Corp. 2,502,825
89,700 Vulcan Materials Co. 4,053,319
-------------
15,806,027
-------------
CHEMICAL - MAJOR - 0.38%
37,845 Albemarle Corp. 849,146
99,600 Solutia, Inc. 2,234,775
-------------
3,083,921
-------------
CHEMICAL - MISCELLANEOUS - 1.56%
29,873 A. Schulman, Inc. 496,639
53,200 * Airgas, Inc. 608,474
64,237 Crompton & Knowles Corp. 1,160,281
37,800 * Cytec Industries, Inc. 1,037,138
19,368 Dexter Corp. 750,510
66,900 Ethyl Corp. 334,500
36,170 Ferro Corp. 1,051,191
26,933 Georgia Gulf Corp. 402,312
11,264 H.B. Fuller Co. 715,264
29,693 Lawter International, Inc. 361,883
50,719 Lubrizol Corp. 1,394,773
70,778 Lyondell Chemical Co. 1,349,206
50,436 M.A. Hanna Co. 743,931
18,500 Minerals Technologies, Inc. 985,125
5,955 NCH Corp. 326,781
40,442 Olin Corp. 535,857
32,025 Rollins, Inc. 538,420
-------------
12,792,285
-------------
CONGLOMERATES - 1.34%
40,598 Alexander & Baldwin, Inc. 918,530
95,000 Dial Corp. 2,968,750
40,500 * Litton Industries, Inc. 2,629,968
7,900 * MAXXAM, Inc. 483,875
53,500 Ogden Corp. 1,334,156
87,900 Viad Corp. 2,615,025
-------------
10,950,304
-------------
<PAGE> 69
12 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
CONTAINERS - PAPER - 0.37%
17,414 Chesapeake Corp. $ 627,991
95,179 Sonoco Products Co. 2,379,475
-------------
3,007,466
-------------
DRUGS - 3.96%
94,860 Bergen Brunswig Corp., Class A 2,086,920
67,252 * Biogen, Inc. 7,338,874
38,046 Carter-Wallace, Inc. 687,206
66,388 * Centocor, Inc. 2,883,729
167,880 * Chiron Corp. 3,546,465
52,825 * Covance, Inc. 1,119,230
73,782 * Forest Laboratories, Inc. 3,513,868
73,342 Genzyme Corp. 2,974,935
65,500 ICN Pharmaceuticals, Inc. 2,153,313
109,736 * IVAX Corp. 1,474,578
115,334 Mylan Laboratories, Inc. 2,926,600
25,800 Sepracor, Inc. 1,644,750
-------------
32,350,468
-------------
ELECTRIC PRODUCTS - MISCELLANEOUS - 0.07%
26,716 CMP Group, Inc. 540,998
-------------
ELECTRICAL EQUIPMENT - 2.35%
87,086 * American Power Conversion 3,390,910
29,031 AMETEK, Inc. 665,899
101,700 * FORE Systems, Inc. 3,495,938
58,670 Hubbell, Inc., Class B 2,456,806
140,057 Molex, Inc. 4,289,246
77,446 * Teradyne, Inc. 4,090,117
37,800 * UCAR International, Inc. 855,225
-------------
19,244,141
-------------
ELECTRONIC INSTRUMENTS - 1.58%
85,252 * Arrow Electronics, Inc. 1,481,253
119,000 * Concord EFS, Inc. 4,031,125
33,250 * Imation Corp. 781,375
88,700 * Integrated Device Technology, Inc. 704,056
25,621 * MagnaTek, Inc. 259,413
33,800 Pittston Brink's Group 963,300
60,979 * Sensormatic Electronics Corp. 815,594
53,113 Symbol Technologies, Inc. 2,655,650
60,313 * Vishay Intertechnology, Inc. 1,255,264
-------------
12,947,030
-------------
ENTERTAINMENT - 0.10%
34,100 * GTECH Holdings Corp. 841,843
-------------
FERTLIIZERS - 0.26%
101,946 IMC Global, Inc. 2,134,493
-------------
FINANCE COMPANIES - 0.53%
55,100 Finova Group, Inc. 2,634,468
53,900 Keystone Financial, Inc. 1,726,484
-------------
4,360,952
-------------
FINANCIAL SERVICES - 1.31%
49,300 Allamerica Financial Corp. 2,887,131
138,900 * Convergys Corp. 2,448,113
26,200 Investment Technology Group, Inc. 1,160,987
108,200 T. Rowe Price Associates, Inc. 4,179,225
-------------
10,675,456
-------------
FOODS - 3.07%
35,982 Dean Foods Co. 1,349,324
52,809 Dole Food Co., Inc. 1,620,576
27,036 Dreyer's Grand Ice Cream, Inc. 447,784
89,004 Flowers Industries, Inc. 1,980,339
65,000 Hormel Foods Corp. 2,575,625
82,800 IBP, Inc. 1,775,025
15,012 International Multifoods Corp. 330,264
64,200 Interstate Bakeries Corp. 1,404,375
27,171 Lance, Inc. 395,678
66,678 McCormick & Co., Inc. 2,025,344
22,871 Smucker, J.M. Co., Class A 473,144
35,800 * Suiza Foods Corp. 1,311,175
43,821 Trinity Industries, Inc. 1,366,667
205,786 Tyson Foods, Inc., Class A 4,733,078
46,100 * U. S. Foodservice 2,051,450
44,258 Universal Foods Corp. 1,015,168
37,500 * Vlasic Foods International, Inc. 283,594
-------------
25,138,610
-------------
FOOTWEAR - 0.29%
28,800 * Nine West Group, Inc. 799,200
30,000 * Payless ShoeSource, Inc. 1,545,000
-------------
2,344,200
-------------
FREIGHT - 0.25%
44,446 Airborne Freight Corp. 1,150,040
29,300 J.B. Hunt Transport Services, Inc. 494,438
30,271 Overseas Shipholding Group, Inc. 378,388
-------------
2,022,866
-------------
FUNERAL SERVICES - 0.22%
98,000 Stewart Enterprises, Inc. 1,806,875
-------------
HEALTHCARE - 3.50%
46,800 Apria Healthcare Group, Inc. 965,250
54,272 * First Health Group Corp. 1,099,008
107,249 * Foundation Health Systems, Inc., Class A 1,917,076
229,100 * Health Management Associates, Inc. 2,978,300
53,000 * Lincare Holdings, Inc. 1,305,125
81,300 Omnicare, Inc. 1,946,119
71,900 * Oxford Health Plans, Inc. 1,370,594
40,674 * PacifiCare Health System, Inc., Class B 3,513,217
100,700 * Quintiles Transnational Corp. 4,090,938
71,100 * Quorum Health Group, Inc. 893,194
60,700 * Steris Corp. 1,005,344
92,100 * Sybron International Corp. 2,314,013
73,600 * Total Renal Care Holdings, Inc. 1,131,600
36,300 * Trigon Healthcare, Inc. 1,383,938
51,900 * VISX, Inc. 2,695,556
-------------
28,609,272
-------------
HEAVY DUTY TRUCKS/PARTS - 0.20%
18,600 Bandag, Inc. 640,538
41,704 Federal Signal Corp. 998,289
-------------
1,638,827
-------------
HOME BUILDERS - 0.18%
128,781 Clayton Homes, Inc. 1,472,933
-------------
HOSPITAL MANAGEMENT - 0.20%
112,600 * Beverly Enterprises, Inc. 816,350
58,400 * Concentra Managed Care, Inc. 857,750
-------------
1,674,100
-------------
HOSPITAL SUPPLIES - 1.42%
29,835 * Acuson Corp. 462,443
25,633 Beckman Coulter, Inc. 1,300,875
47,500 DENTSPLY International, Inc. 1,282,500
59,500 Hillenbrand Industries, Inc. 2,495,281
<PAGE> 70
MAY 31, 1999 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 13
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
HOSPITAL SUPPLIES - Continued
71,300 PSS World Medical, Inc. $ 877,881
87,282 Stryker Corp. 5,193,279
-------------
11,612,259
-------------
HOUSEHOLD PRODUCTS - 0.89%
126,600 * Bed Bath & Beyond, Inc. 4,328,138
16,014 Church & Dwight Co., Inc. 683,598
62,100 Premark International, Inc. 2,223,956
-------------
7,235,692
-------------
HUMAN RESOURCES - 0.87%
31,303 Kelly Services Inc., Class A 907,787
71,000 Manpower, Inc. 1,633,000
108,500 * Modis Professional Services, Inc. 1,600,375
66,650 Olsten Corp. 591,519
83,200 * Robert Half International, Inc. 2,345,200
-------------
7,077,881
-------------
INFORMATION PROCESSING - 0.51%
61,850 * Comverse Technology, Inc. 4,178,741
-------------
INFORMATION PROCESSING - BUSINESS SOFTWARE - 1.07%
78,300 * Citrix Systems, Inc. 3,870,956
152,800 * Informix Corp. 1,017,075
43,900 * Veritas Software Corp. 3,874,175
-------------
8,762,206
-------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 1.82%
74,300 * Jabil Circut, Inc. 3,584,975
59,100 * Lexmark International Group, Inc. 8,044,988
16,971 OEA, Inc. 170,771
157,092 * Quantum Corp. 3,112,385
-------------
14,913,119
-------------
INFORMATION PROCESSING - COMPUTER SERVICES - 1.28%
53,900 * Cambridge Technology Partners, Inc. 916,300
78,000 * Rationale Software Corp. 2,637,375
86,852 * Sterling Commerce, Inc. 3,376,372
101,900 * SunGard Data Systems, Inc. 3,566,500
-------------
10,496,547
-------------
INFORMATION PROCESSING - CONSUMER SOFTWARE - 0.76%
54,700 * Intuit, Inc. 4,451,213
121,550 * Networks Associates, Inc. 1,785,266
-------------
6,236,479
-------------
INFORMATION PROCESSING - DATA SERVICES - 4.58%
55,673 * ACNielson Corp. 1,569,283
133,516 Comdisco, Inc. 3,254,453
63,951 Diebold, Inc. 1,798,622
55,400 * Electronic Arts, Inc. 2,711,138
111,094 * Fiserv, Inc. 4,166,025
23,768 * Information Resources, Inc. 202,028
62,900 * Keane, Inc. 1,824,100
34,600 * Legato Systems, Inc. 1,894,350
53,407 * Mentor Graphics Corp. 674,263
90,273 * NCR Corp. 3,526,289
66,300 * NOVA Corp. 1,475,175
37,136 * Policy Management Systems Corp. 1,350,822
70,008 Reynolds and Reynolds Co., Class A 1,531,425
49,925 * Sequent Computer Systems, Inc. 649,025
81,800 * Siebel Systems, Inc. 3,724,456
71,600 * Sterling Software, Inc. 1,740,775
92,180 * Storage Technology Corp. 1,832,078
29,395 * Structural Dynamics Research Corp. 525,436
50,212 * Symantec Corp. 1,230,194
47,000 * Tech Data Corp. 1,728,719
-------------
37,408,656
-------------
INSURANCE - CASUALTY - 0.40%
52,533 American Financial Group, Inc. 1,772,989
46,500 Everest Reinsurance Holdings, Inc. 1,528,688
-------------
3,301,677
-------------
INSURANCE - LIFE - 0.23%
52,900 Protective Life Corp. 1,914,319
-------------
INSURANCE - MISCELLANEOUS - 0.77%
62,200 Ambac Financial Group, Inc. 3,627,038
26,699 HSB Group, Inc. 1,096,328
27,000 The PMI Group, Inc. 1,579,500
-------------
6,302,866
-------------
INSURANCE - MULTILINE - 0.80%
37,900 Horace Mann Educators Corp. 980,663
121,600 Old Republic International Corp. 2,211,600
81,300 Reliastar Financial Corp. 3,379,031
-------------
6,571,294
-------------
LEISURE TIME - 1.43%
69,100 Callaway Golf Co. 1,135,831
84,425 * Circus Circus Enterprises, Inc. 1,783,478
138,240 Harley-Davidson, Inc. 7,058,880
95,902 International Game Technology 1,690,273
-------------
11,668,462
-------------
LODGING - 0.23%
76,357 * Promus Hotel Corp. 1,908,925
-------------
MACHINE TOOLS - 0.15%
28,000 * Gilead Sciences, Inc. 1,221,500
-------------
MACHINERY - AGRICULTURE - 0.07%
49,000 AGCO Corp. 569,625
-------------
MACHINERY - CONSTRUCTION & CONTRACTS - 0.17%
22,456 Granite Construction, Inc. 630,172
21,268 * Jacobs Engineering Group, Inc. 790,904
-------------
1,421,076
-------------
MACHINERY - INDUSTRIAL/SPECIALTY - 1.33%
25,314 * Albany International Corp., Class A 593,297
63,600 * American Standard Companies, Inc. 2,941,500
32,522 Cordant Technologies, Inc. 1,577,317
38,218 Flowserve Corp. 783,469
31,500 Newport News Shipbuilding, Inc. 866,250
16,514 Nordson Corp. 970,198
25,433 Stewart & Stevenson Services, Inc. 279,763
17,900 Tecumseh Products Co., Class A 1,181,400
51,092 Tidewater, Inc. 1,306,039
22,224 Watts Industries, Inc., Class A 376,419
-------------
10,875,652
-------------
MERCHANDISE - DRUG - 0.45%
49,000 * Medimmune, Inc. 3,117,625
63,000 * Perrigo Co. 578,813
-------------
3,696,438
-------------
<PAGE> 71
14 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
MERCHANDISE - SPECIALTY - 3.35%
61,400 * Barnes & Noble, Inc. $ 1,730,713
183,300 * Best Buy Co., Inc. 8,340,150
68,072 * BJ's Wholesale Club, Inc. 1,769,872
79,800 * CompUSA, Inc. 643,388
13,764 Enesco Group, Inc. 315,712
61,700 * General Nutrition Companies, Inc. 1,021,906
32,100 * MicroWarehouse, Inc. 497,550
328,705 * Office Depot, Inc. 6,861,717
127,600 * OfficeMax, Inc. 1,467,400
55,911 Sotheby's Holdings, Inc., Class A 2,121,124
31,836 Tiffany & Co. 2,638,409
-------------
27,407,941
-------------
MERCHANDISING - DEPARTMENT - 0.60%
78,200 * Borders Group, Inc. 1,339,175
127,804 * Saks, Inc. 3,530,586
-------------
4,869,761
-------------
MERCHANDISING - FOOD - 0.30%
35,200 Hannaford Bros. Co. 1,830,400
37,300 Ruddick Corp. 657,413
-------------
2,487,813
-------------
MERCHANDISING - MASS - 0.65%
53,800 * Dollar Tree Stores, Inc. 1,809,025
155,620 Family Dollar Stores, Inc. 3,472,271
-------------
5,281,296
-------------
METALS - MISCELLANEOUS - 0.21%
28,306 Kennametal, Inc. 804,952
21,850 Precision Castparts Corp. 884,925
-------------
1,689,877
-------------
METALS - STEEL - 0.53%
52,600 AK Steel Holding Corp. 1,262,400
16,910 Carpenter Technology Corp. 481,935
9,257 Cleveland-Cliffs, Inc. 342,509
41,542 Harsco Corp. 1,355,308
21,123 Oregon Steel Mills, Inc. 289,121
24,885 Ryerson Tull, Inc. 572,355
-------------
4,303,628
-------------
MISCELLANEOUS - 0.24%
70,700 * Apollo Group, Inc., Class A 1,975,181
-------------
MULTIMEDIA - 0.66%
197,856 * Cadence Design Systems, Inc. 2,547,396
63,500 * Synopsys, Inc. 2,817,813
-------------
5,365,209
-------------
NATURAL GAS-DIVERSIFIED - 0.81%
107,200 El Paso Energy Corp. 3,865,900
61,150 K N Energy, Inc. 1,310,903
74,886 Questar Corp. 1,427,514
-------------
6,604,317
-------------
OIL - INTEGRATED DOMESTIC - 0.12%
70,475 Pennzoil-Quaker State Co. 977,841
-------------
OIL - INTEGRATED INTERNATIONAL - 0.23%
37,746 Murphy Oil Corp. 1,851,913
-------------
OIL - SERVICE - PRODUCTS - 1.27%
67,942 * BJ Services Co. 1,872,651
117,100 * Noble Drilling Corp. 2,122,438
160,702 * Ocean Energy, Inc. 1,586,932
170,700 * Santa Fe Snyder Corp. 1,450,950
52,472 * Varco International, Inc. 478,807
87,667 Weatherford International, Inc. 2,893,011
-------------
10,404,789
-------------
OIL - SERVICES - 1.62%
130,800 ENSCO International, Inc. 2,321,700
152,015 * Global Marine, Inc. 2,137,711
88,039 * Nabors Industries, Inc. 1,760,780
43,546 * Smith International, Inc. 1,883,365
95,100 Transocean Offshore, Inc. 2,341,838
61,946 Witco Corp. 1,084,055
41,300 York International Corp. 1,742,344
-------------
13,271,793
-------------
OIL/GAS PRODUCERS - 0.87%
65,780 Cabot Corp. 1,554,053
51,535 Noble Affiliates, Inc. 1,365,678
86,200 Pioneer Natural Resources Corp. 937,425
94,466 * Ranger Oil, Limited 425,097
83,680 Ultramar Diamond Shamrock Corp. 1,840,960
47,391 Valero Energy Corp. 950,782
-------------
7,073,995
-------------
PAPER/FOREST PRODUCTS - 1.57%
50,139 Bowater, Inc. 2,582,159
77,670 Consolidated Papers, Inc. 2,155,343
77,900 Georgia-Pacific Corp. (Timber Group) 2,088,694
42,639 Longview Fibre Co. 578,291
33,300 P. H. Glatfelter Co. 443,306
31,876 Pentair, Inc. 1,406,529
23,100 Rayonier, Inc. 1,077,038
23,370 Standard Register Co. 695,258
76,216 Unisource Worldwide, Inc. 895,538
48,861 Wausau-Mosinee Paper Corp. 879,498
-------------
12,801,654
-------------
POLLUTION CONTROL - 0.37%
161,000 * Allied Waste Industries, Inc. 2,998,625
-------------
PUBLISHING - NEWS - 1.30%
36,100 Lee Enterprises, Inc. 1,046,900
22,168 Media General, Inc., Class A 1,144,423
94,600 The Reader's Digest Association, Inc., Class A 3,464,725
8,961 Washington Post Co., Class B 4,986,236
-------------
10,642,284
-------------
PUBLISHING/PRINTING - 0.49%
24,486 Banta Corp. 599,907
31,232 Houghton Mifflin Co. 1,436,672
18,200 * Scholastic Corp. 882,700
45,928 Wallace Computer Services, Inc. 1,053,474
-------------
3,972,753
-------------
RAILROAD - 0.32%
43,924 GATX Corp. 1,704,800
45,600 * Wisconsin Central Transportation Corp. 900,600
-------------
2,605,400
-------------
RESTAURANTS - 1.73%
37,233 Bob Evans Farms, Inc. 716,735
57,755 * Brinker International, Inc. 1,620,750
<PAGE> 72
MAY 31, 1999 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 15
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
RESTAURANTS - Continued
36,732 * Buffets, Inc. $ 385,686
56,766 CBRL Group, Inc. 982,761
33,100 * Lone Star Steakhouse & Saloon, Inc. 333,069
67,750 * Outback Steakhouse, Inc. 2,430,531
26,300 * Papa Johns International, Inc. 1,038,850
16,888 * Sbarro, Inc. 460,198
165,800 * Starbucks Corp. 6,165,688
-------------
14,134,268
-------------
SAVINGS & LOAN - 1.01%
48,000 Astoria Financial Corp. 2,160,000
142,065 Charter One Financial, Inc. 4,039,973
99,700 Dime Bancorp, Inc. 2,031,388
-------------
8,231,361
-------------
SECURITIES RELATED - 2.21%
86,614 A.G. Edwards, Inc. 2,912,396
206,000 * E*Trade Group, Inc. 9,167,000
127,600 Paine Webber Group, Inc. 5,997,200
-------------
18,076,596
-------------
SEMICONDUCTOR EQUIPMENT - 0.24%
45,200 * Microchip Technology, Inc. 1,983,150
-------------
SEMICONDUCTORS - 4.84%
178,380 * Altera Corp. 6,209,854
145,038 * Analog Devices, Inc. 5,574,898
90,100 * Atmel Corp. 1,779,475
31,288 Avnet, Inc. 1,362,984
55,436 * Cirrus Logic, Inc. 415,770
93,782 * Cypress Semiconductor Corp. 1,043,325
134,308 Linear Technology Corp. 7,118,324
122,500 * Maxim Integrated Products, Inc. 6,546,094
67,000 * Vitesse Semiconductor Corp. 3,680,813
131,462 * Xilinx, Inc. 5,841,843
-------------
39,573,380
-------------
TELECOMMUNICATIONS - 2.92%
120,328 * ADC Communications, Inc. 5,881,031
48,242 COMSAT Corp. 1,573,895
128,200 QUALCOMM, Inc. 12,467,450
52,300 * Sanmina Corp. 3,921,683
-------------
23,844,059
-------------
TEXTILE - PRODUCTS - 1.19%
47,600 * Burlington Industries, Inc. 467,075
93,500 * Jones Apparel Group, Inc. 2,875,125
53,000 * Mohawk Industries, Inc. 1,543,625
123,323 * Shaw Industries, Inc. 2,081,076
52,229 * Unifi, Inc. 861,779
24,984 Wellman, Inc. 340,407
49,500 WestPoint Stevens, Inc., Class A 1,565,438
-------------
9,734,525
-------------
TOBACCO - 0.13%
39,635 Universal Corp. 1,035,464
-------------
TRUCKERS - 0.27%
26,114 Arnold Industries, Inc. 430,881
43,200 CNF Transportation, Inc. 1,792,800
-------------
2,223,681
-------------
UTILITIES - COMMUNICATION - 1.01%
35,218 Aliant Communications, Inc. 1,672,855
1 AT&T Corp. 38
121,700 Cincinnati Bell, Inc. 2,943,619
12 SBC Communications, Inc. 614
54,491 Telephone and Data Systems, Inc. 3,664,520
-------------
8,281,646
-------------
UTILITIES - ELECTRIC - 8.14%
111,214 Allegheny Energy, Inc. 3,878,588
62,616 Alliant Energy Corp. 1,890,221
16,279 Black Hills Corp. 374,417
18,459 Cleco Corp. 610,301
95,238 Conectiv, Inc. 2,297,617
146,200 DPL, Inc. 2,640,738
110,442 Energy East Corp. 3,064,766
87,162 Florida Progress Corp. 3,655,356
24,166 Hawaiian Electric Industries, Inc. 888,101
30,823 Idacorp, Inc. 1,024,865
75,200 Illinova Corp. 2,044,500
22,478 Indiana Energy, Inc. 497,326
83,228 IPALCO Enterprises, Inc. 2,054,691
56,219 Kansas City Power & Light Co. 1,563,591
117,642 LG&E Energy Corp. 2,683,708
53,100 * Midamerican Energy Holdings Co. 1,792,125
65,736 Minnesota Power, Inc. 1,413,324
52,157 Montana Power Co. 3,853,098
37,633 Nevada Power Co. 945,529
54,317 New England Electric System 2,719,245
103,144 Nisource, Inc. 2,881,586
108,733 * Northeast Utilities 1,916,419
66,192 OGE Energy Corp. 1,704,444
75,623 Pinnacle West Capital Corp. 3,166,713
107,664 Potomac Electric Power Co. 3,324,126
37,937 Public Service Co. of New Mexico 787,193
69,062 Puget Sound Energy, Inc. 1,799,928
94,088 Scana Corp. 2,510,974
119,820 TECO Energy, Inc. 2,778,326
81,982 UtiliCorp United, Inc. 2,044,426
35,724 Washington Gas Light Co. 873,005
104,652 Wisconsin Energy Corp. 2,904,093
-------------
66,583,340
-------------
UTILITIES - GAS, DISTRIBUTION - 1.35%
45,536 AGL Resources, Inc. 859,492
133,205 KeySpan Corp. 3,596,535
82,068 MCN Energy Group, Inc. 1,641,360
31,178 National Fuel Gas Co. 1,480,955
136,546 Tosco Corp. 3,490,457
-------------
11,068,799
-------------
WATER SERVICES - 0.26%
67,500 American Water Works Co., Inc. 2,092,500
-------------
TOTAL COMMON STOCK
(Cost $655,785,123) 804,474,883
-------------
WARRANTS - 0.00%
969 Coram Healthcare Corp. Expiring 7/11/99 -
-------------
TOTAL WARRANTS (cost $0) _
-------------
<PAGE> 73
16 MIDCAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
PAR MARKET
VALUE VALUE
- ---------- -------------
CORPORATE SHORT TERM COMMERCIAL PAPER - 0.08%
AEROSPACE/DEFENSE - 0.08%
$642,000 TRW, Inc., 5.13% due 06/01/99 $ 642,000
TOTAL CORPORATE SHORT TERM COMMERCIAL PAPER
(Cost $642,000) 642,000
UNITED STATES GOVERNMENT - SHORT TERM - 0.03%
U. S. TREASURY BILLS - 0.03%
250,000 United States Treasury Bills, 4.17% due 06/10/99 249,738
TOTAL UNITED STATES GOVERNMENT - SHORT TERM
(Cost $249,738) 249,738
TOTAL INVESTMENTS
(Cost $656,676,861) - 98.50% 805,366,621
Other assets less liabilities, net - 1.50% 12,206,412
NET ASSETS (equivalent to $25.64 per share on
31,886,072 shares outstanding) - 100.00% $ 817,573,033
* Non-income producing
UNREALIZED
APPRECIATION
CONTRACTS (DEPRECIATION)
- ---------- -------------
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/99)
14(2) Mid Cap 400 Index Futures (June/$396.75) $ (11,147)
24(3) S&P 500 Index Futures (June/$1,297.20) 68,757
$ 57,610
(1) U.S.Treasury Bills with a market value of approximately
$250,000 were maintained in a segregated account with a
portion placed as collateral for futures contracts.
(2) Per 250
(3) Per 500
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
31,886,072 shares outstanding $ 318,860
Additional paid in capital 474,376,813
Undistributed net realized gain on securities 194,203,347
Undistributed net investment income (73,357)
Unrealized appreciation of:
Investments $ 148,689,760
Futures 57,610 148,747,370
------------- -------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 817,573,033
=============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 74
MIDCAP INDEX FUND - FINANCIAL STATEMENTS 17
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 9,522,144
Interest 492,726
-------------
Total investment income 10,014,870
-------------
EXPENSES:
Advisory fees 2,426,931
Custodian fees 63,261
Registration and filing fees 36,115
Audit fees and tax services 19,655
Accounting services 135,722
Directors' fees and expenses 20,731
Directors' retirement plan expenses 73,589
Report to shareholders 133,664
Miscellaneous 30,717
-------------
Total expenses 2,940,385
-------------
NET INVESTMENT INCOME 7,074,485
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on securities:
Investments $ 196,062,976
Futures contracts (98,571) 195,964,405
--------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments (116,171,721)
Futures contracts 98,335 (116,073,386)
-------------- -------------
Net realized and unrealized gain on securities during the year 79,891,019
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 86,965,504
=============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,074,485 $ 6,901,224
Net realized gain on securities 195,964,405 68,478,713
Net unrealized appreciation (depreciation)
of securities during the year (116,073,386) 104,095,928
------------- -------------
Increase in net assets resulting from operations 86,965,504 179,475,865
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (7,190,189) (6,915,741)
Net realized gain on securities (69,496,818) (39,892,715)
------------- -------------
Decrease in net assets resulting from
distributions to shareholders (76,687,007) (46,808,456)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 28,483,907 54,227,081
Proceeds from capital stock issued
for distributions reinvested 76,687,007 46,808,456
------------- -------------
105,170,914 101,035,537
Cost of capital stock repurchased (102,194,007) (36,446,663)
------------- -------------
Increase in net assets resulting
from capital stock transactions 2,976,907 64,588,874
------------- -------------
Total Increase in Net Assets 13,255,404 197,256,283
NET ASSETS:
Beginning of year 804,317,629 607,061,346
------------- -------------
End of year (including undistributed net
investment income of ($73,357) and $42,347) $ 817,573,033 $ 804,317,629
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 1,168,332 2,234,398
Shares issued for distributions reinvested 3,146,767 1,997,359
Shares of capital stock repurchased (4,258,920) (1,539,198)
------------- -------------
Increase in shares outstanding 56,179 2,692,559
Shares outstanding:
Beginning of year 31,829,893 29,137,334
------------- -------------
End of year 31,886,072 31,829,893
============= =============
</TABLE>
<PAGE> 75
18 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
COMMON STOCK - 99.59%
ADVERTISING - 0.93%
6,625 * ADVO, Inc. $ 131,258
5,100 * Catalina Marketing Corp. 451,669
6,800 * Doubleclick, Inc. 662,575
7,500 * Getty Images, Inc. 164,063
300 Grey Advertising, Inc. 90,300
6,787 * HA-LO Industries, Inc. 81,868
7,300 * NFO Worldwide, Inc. 103,569
2,500 * TMP Worldwide, Inc. 122,031
6,800 * Westwood One, Inc. 236,300
-------------
2,043,633
-------------
AEROSPACE/DEFENSE - 0.51%
2,165 * Alliant Techsystems, Inc. 184,025
6,700 * Aviall, Inc. 105,106
6,600 * BE Aerospace, Inc. 117,975
2,200 Cubic Corp. 53,075
5,402 * Fairchild Corp., Class A 80,692
8,400 Gencorp, Inc. 205,274
2,500 HEICO Corp. 62,656
3,100 * Moog, Inc. 85,056
5,100 * Remec, Inc. 66,300
1,600 * Sequa Corp., Class A 92,600
6,100 * Trimble Navigation, Ltd. 76,250
-------------
1,129,009
-------------
AIRLINES - 0.71%
10,600 * Airtran Holdings, Inc. 50,350
5,600 * Alaska Air Group, Inc. 232,400
10,500 * American West Holdings Corp., Class B 204,749
2,300 * Amtran, Inc. 54,050
2,000 * Atlantic Coast Airlines Holdings. 35,000
4,850 * Atlas Air, Inc. 130,344
3,300 Circle International Group, Inc. 68,475
6,100 Expeditors International of WA 339,313
10,900 * Mesa Airlines, Inc. 72,213
1,050 * Mesaba Holdings, Inc. 15,619
5,450 * Midwest Express Holdings, Inc. 163,159
5,200 SkyWest, Inc. 120,900
16,600 * Transport World Airlines, Inc. 86,113
-------------
1,572,685
-------------
APPAREL & PRODUCTS - 1.58%
7,200 * American Eagle Outfitters 293,850
4,900 * Ann Taylor Stores Corp. 211,619
5,600 Authentic Fitness Corp. 92,050
2,900 * Buckle, Inc. 80,294
2,600 * Children's Place, Inc. 101,238
10,225 Claire's Stores, Inc. 299,081
6,100 * Dress Barn, Inc. 89,594
6,200 * Footstar, Inc. 240,638
2,900 * Gadzooks, Inc. 27,550
3,200 * Goodys Family Clothing, Inc. 34,800
7,200 * Guess?, Inc. 78,300
6,200 * Gymboree Corp. 76,338
13,500 * Hartmarx Corp. 66,656
5,000 * Jo-ann Stores, Inc. 84,063
5,450 Kellwood Co. 129,438
5,100 * Land's End, Inc. 218,025
5,550 * Mens Wearhouse, Inc. 141,698
8,500 * Nautica Enterprises, Inc. 137,594
4,900 * Oakley, Inc. 39,813
5,800 OshKosh B'Gosh, Inc., Class A 113,825
900 Oxford Industries, Inc. 24,975
5,225 * Pacific Sunwear of California 195,937
6,000 Phillips-Van Heusen Corp. 52,500
3,450 * Quicksilver, Inc. 98,325
4,300 St. John Knits, Inc. 123,088
6,800 * Stage Stores, Inc. 36,125
4,400 Talbots, Inc. 139,700
2,400 UniFirst Corp. 43,200
2,400 * Urban Outfitters, Inc. 57,000
4,800 * Value City Dept. Stores, Inc. 45,900
3,700 * Wet Seal, Inc. 102,675
-------------
3,475,889
-------------
APPLIANCES/FURNISHINGS - 0.85%
6,400 Aaron Rents, Inc. 121,600
3,850 Bassett Furniture Industries 92,400
5,000 * CORT Business Services Corp. 120,938
8,797 * Griffon Corp. 70,376
4,600 Haverty Furniture Cos., Inc. 135,700
15,400 Heilig-Meyers Co. 106,838
5,200 Hunt Corp. 52,325
11,500 Hussmann International, Inc. 184,000
9,000 Kimball International, Inc., Class B 162,000
12,000 La-Z-Boy Chair Co. 238,500
13,185 * Metromedia International Group. 109,600
3,800 National Presto Industries 141,788
4,650 Oneida Ltd. 119,447
3,750 * SLI, Inc. 121,406
6,500 * Windmere Corp. 85,313
-------------
1,862,231
-------------
AUTO - CARS - 0.22%
6,700 * Avis Rent A Car, Inc. 192,205
6,500 * Budget Group, Inc. 86,938
2,000 * Group 1 Automotive, Inc. 49,625
4,700 * Rent-A-Center, Inc. 121,319
4,000 * United Auto Group, Inc. 40,000
-------------
490,087
-------------
AUTO - ORIGINAL EQUIPMENT - 0.75%
7,100 * Allen Telecom, Inc. 74,106
5,700 Arvin Industries, Inc. 223,724
6,800 * Breed Technologies, Inc. 22,525
9,400 Donaldson Co., Inc. 227,363
6,200 * Hayes Lemmerz International, Inc. 204,600
13,300 Mark IV Industries, Inc. 246,050
14,550 * Miller Industries, Inc. 70,022
5,500 Modine Manufacturing Co. 176,687
5,300 Superior Industries International, Inc. 132,169
11,800 * Tower Automotive, Inc. 269,924
-------------
1,647,170
-------------
AUTO - REPLACEMENT PARTS - 0.97%
5,100 A.O. Smith Corporation 124,313
5,100 * Aftermarket Technology Corp. 56,100
15,100 Collins & Aikman Corp. 83,994
3,800 * CSK Auto Corp. 106,399
3,900 * Discount Auto Parts, Inc. 96,525
5,400 Furon Co. 98,550
4,500 * Gentek, Inc. 58,500
8,000 Kaydon Corp. 266,499
3,400 Midas, Inc. 106,463
4,657 Myers Industries, Inc. 106,529
2,400 * O'Reilly Automotive, Inc. 105,750
5,350 Simpson Industries, Inc. 53,834
7,100 * SPX Corp. 551,137
4,700 Standard Motor Products, Inc. 111,919
4,450 Standard Products Co., Class A 99,291
6,168 Wynn's International, Inc. 111,409
-------------
2,137,212
-------------
<PAGE> 76
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 19
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
BANKS - OTHER - 0.53%
600 Alabama National Bancorp $ 14,475
6,400 First Bancorp/Puerto Rico 153,599
5,400 First Merchants Corporation 128,249
7,998 Husdon United Bancorp 244,938
3,000 Irwin Financial Corp. 69,375
11,200 Republic Security Financial Co. 93,800
9,764 Sky Financial Group, Inc. 287,427
2,100 Sterling Bancshares, Inc. 26,381
10,600 Westernbank Puerto Rico 145,088
-------------
1,163,332
-------------
BANKS - REGIONAL - 6.16%
5,280 1st Source Corporation 169,454
7,350 AMCORE Financial, Inc. 155,727
7,700 Anchor BanCorp Wisconsin, Inc. 127,049
2,400 BancFirst Corp. 76,800
10,400 BancorpSouth, Inc. 177,450
3,900 Bancwest Corporation 148,200
3,700 Bank Atlantic Bancorp, Class B 29,600
2,931 Bank of Granite Corp. 70,344
6,100 Banknorth Group, Inc. 162,794
2,486 * BOK Financial Corp. 62,772
400 BT Financial Corp. 10,800
3,150 Capital City Bank Group, Inc. 73,238
1,900 Carolina First Corp. 52,131
3,200 Cathay Bancorp, Inc. 112,400
5,137 Chemical Financial Corp. 157,642
6,350 Citizens Banking Corp. 188,913
2,388 City Holding Co. 65,073
6,587 CNB Bancshares, Inc. 284,064
7,624 Commerce Bancorp, Inc. 306,865
15,144 Commercial Federal Corp. 345,472
7,900 Commonwealth Bancorp, Inc. 128,375
11,700 Community First Bankshares 247,894
2,156 Community Trust Bancorp 49,319
3,750 Corus Bankshares, Inc. 120,000
5,740 Cullen/Frost Bankers, Inc. 322,874
2,860 F & M Bancorporation, Inc. 105,641
8,142 F & M National Corp. 243,751
2,800 Farmers Capital Bank Corp. 94,850
12,958 First American Financial Corp., Class A 212,997
1,750 First Citizens BancShares, Inc., Class A 144,375
4,900 First Commerce Bancshares, Inc., Class B 131,688
5,600 First Commonwealth Financial 126,000
7,218 First Financial Bancorp 171,428
2,200 First Financial Bankshares 68,750
2,731 First Financial Corp. 102,413
8,168 First Midwest Bancorp, Inc. 316,509
5,800 First United Bancshares 90,625
5,208 First Western Bancorp, Inc. 182,280
5,681 FNB Corp. 153,018
8,700 * Friedman Billings Ramsey, Class A 90,806
2,200 Frontier Financial Corp. 53,350
5,900 GBC Bancorp 109,150
5,700 Harbor Florida Bancshares 68,400
2,546 Harleysville National Corp. 88,951
4,500 Harris Financial, Inc. 51,188
11,166 * Imperial Bancorp 214,946
21,500 Independence Community Bank 284,875
1,700 International Bancshares Corp. 79,794
2,100 InterWest Bancorp, Inc. 43,050
3,166 JeffBanks, Inc. 81,129
2,400 Mississippi Valley Bancshares 78,300
6,195 NBT Bancorp, Inc. 130,095
4,000 National Bancorp of Alaska 110,000
4,552 National City Bancshares, Inc. 114,938
3,276 National Penn Bancshares, Inc. 74,939
6,200 Ocean Financial Corp. 109,663
10,782 Old National Bancorp Indiana 373,663
2,400 Omega Financial Corp. 84,600
8,458 One Valley Bancorp of West Virginia 325,104
5,200 Pacific Capital Bancorp 147,875
2,900 Park National Corp. 284,199
6,700 Peoples Bancorp, Inc. 69,722
6,300 * PFF Bancorp, Inc. 114,188
6,300 Premier Bancshares, Inc. 131,119
5,300 Prime Bancorp 141,775
3,100 * Republic Bancshares, Inc. 59,288
6,200 Riggs National Corp. 104,238
19,000 Roslyn Bancorp, Inc. 344,374
7,380 S&T Bancorp, Inc. 184,500
4,900 * Silicon Valley Bancshares 94,325
9,200 * Southwest Bancorporation of Texas 154,100
11,950 St. Paul Bancorp, Inc. 309,952
3,100 Sterling Financial Corp. 104,625
8,718 Susquehanna Bancshares, Inc. 158,559
5,400 Texas Regional Bancshares, Class A 146,475
8,450 Triangle Bancorp, Inc. 141,538
6,700 Trust Co. of New Jersey 148,238
6,890 TrustCo Bank Corp. New York 192,920
4,620 U.S.B. Holding Co., Inc. 66,701
3,792 UMB Financial Corp. 161,160
9,700 United Bankshares Inc. WV 258,868
3,600 USBANCORP, Inc. 55,350
13,100 UST Corp. 316,038
5,700 Vermont Financial Services 178,481
8,600 Webster Financial Corp. 249,938
12,361 Westamerica Bankcorporation 427,227
6,794 Westcorp 63,269
2,900 Western Bancorp 117,994
6,400 Whitney Holding Corp. 260,800
-------------
13,544,352
-------------
BEVERAGE - BREWERS/ DISTRIBUTORS - 0.39%
3,900 * Beringer Wine Estates, Class B 158,438
3,700 * Boston Beer, Inc., Class A 30,756
3,900 Canandaigua Brands, Inc., Class A 194,025
8,800 Coors Adolph, Class B 417,999
2,000 * Robert Mondavi Corp., Class A 67,500
-------------
868,718
-------------
BEVERAGE - SOFT DRINKS - 0.04%
1,400 Coca-Cola Bottling Co. 76,125
3,532 * Pepsi-Cola Puerto Rico,. Class B 16,777
-------------
92,902
-------------
BROADCASTING - 1.31%
3,900 Ackerley Group, Inc. 73,613
4,200 * Adelphia Communications Corp., Class A 317,089
7,900 * American Mobile Satellite Corp. 113,069
5,800 * ANTEC Corp. 170,013
3,400 * CD Radio, Inc. 76,925
8,900 * Century Communications Corp., Class A 473,924
1,500 * Cox Radio, Inc. Class A 80,156
4,000 * Emmis Communications Corp., Class A 187,000
2,400 * Jones Intercable, Inc. 128,400
2,500 * Paxson Communications Corp. 32,344
10,300 * United International Holdings, Class A 741,599
1,800 United Television, Inc. 179,100
8,800 * US Satellite Broadcasting, Inc., Class A 160,600
3,400 * Young Broadcasting, Inc., Class A 138,125
-------------
2,871,957
-------------
<PAGE> 77
20 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
BUILDING MATERIALS - 0.83%
1,100 Ameron, Inc. $ 47,369
7,200 Apogee Enterprises, Inc. 85,950
1,650 Butler Manufacturing Co. 46,406
3,000 Centex Construction Production 107,625
9,500 * Comfort Systems USA, Inc. 149,625
3,400 * Cooper Companies, Inc. 77,138
12,800 * Dal-Tile International, Inc. 125,600
3,350 Elcor Corp. 135,256
13,700 Fedders USA, Inc. 77,919
3,400 Florida Rock Industries, Inc. 135,574
2,800 * Giant Cement Holding, Inc. 61,600
11,900 Interface, Inc., Class A 92,225
4,500 Lone Star Industries, Inc. 160,313
5,100 * NCI Building Systems, Inc. 128,775
1,100 Puerto Rican Cement Co., Inc. 36,163
5,500 Texas Industries, Inc. 200,063
8,400 Watsco, Inc. 162,225
-------------
1,829,826
-------------
CHEMICAL - MAJOR - 0.50%
5,600 Albemarle Corp. 125,650
4,575 Borg-Warner Automotive, Inc. 253,627
5,000 Chemed Corp. 162,188
6,009 * Hexcel Corp. 64,221
6,900 * Polymer Group, Inc. 84,525
4,500 * Synetic, Inc. 411,750
-------------
1,101,961
-------------
CHEMICAL - MISCELLANEOUS - 1.67%
8,500 A. Schulman, Inc. 141,313
8,500 * Agribiotech, Inc. 54,188
12,400 * Airgas, Inc. 141,825
5,350 Brady Corporation 134,084
7,700 Cambrex Corp. 173,250
7,600 ChemFirst, Inc. 180,975
5,900 Dexter Corp. 228,625
8,200 Ethyl Corp. 41,000
9,600 Ferro Corp. 279,000
9,300 * Fisher Scientific International, Inc. 188,325
4,500 * Foamex International, Inc. 27,141
4,500 General Chemical Group, Inc. 19,125
5,900 Geon, Co. 177,738
7,900 Georgia Gulf Corp. 118,006
3,300 H.B. Fuller Co. 209,550
9,800 Lawter International, Inc. 119,438
11,500 M.A. Hanna Co. 169,625
2,900 MacDermid, Inc. 116,725
1,900 * McWhorter Technologies, Inc. 26,363
4,900 Minerals Technologies, Inc. 260,925
1,200 NCH Corp. 65,850
5,600 NL Industries, Inc. 59,500
5,800 OM Group, Inc. 216,775
9,300 Procurenet, Inc. 1,395
8,500 Rollins, Inc. 142,906
2,000 Stepan Co. 49,375
3,400 * TETRA Technologies, Inc. 28,900
5,350 * VWR Scientific Products Corp. 153,144
5,800 WD-40 Co. 148,988
-------------
3,674,054
-------------
COAL - 0.06%
1,634 NACCO Industries, Inc. Class A 121,937
-------------
CONGLOMERATES - 0.19%
7,400 Alexander & Baldwin, Inc. 167,425
2,100 * MAXXAM, Inc. 128,625
3,600 * PEC Israel Economic Corp. 114,075
-------------
410,125
-------------
CONSUMER FINANCE - 0.73%
15,400 * AmeriCredit Corp. 245,438
14,300 * Arcadia Financial Ltd. 106,356
6,875 Chittenden Corp. 200,234
7,300 Eaton Vance Corp. 223,563
4,797 Metris Companies, Inc. 279,725
3,800 SEI Investments Co. 387,600
5,350 WesBanco, Inc. 157,825
-------------
1,600,741
-------------
CONTAINERS - METAL/GLASS - 0.44%
7,700 AptarGroup, Inc. 211,750
7,900 Ball Corp. 384,631
6,250 CLARCOR, Inc. 114,844
1,800 * CSS Industries, Inc. 48,600
5,000 Greif Brothers Corp., Class A 128,750
4,000 * Silgan Holdings, Inc. 80,500
-------------
969,075
-------------
CONTAINERS - PAPER - 0.27%
4,900 Chesapeake Corp. 176,706
13,000 * Gaylord Container Corp., Class A 108,875
3,000 * Ivex Packaging Corp. 57,750
6,390 Rock-Tenn Co., Class A 96,649
8,800 * Shorewood Packaging Corp. 150,700
-------------
590,680
-------------
COSMETICS/TOILETRIES - 0.08%
1,500 * Chattem, Inc. 54,000
8,400 * Playtex Products, Inc. 127,050
-------------
181,050
-------------
DRUGS - 2.85%
4,400 A. L. Pharma Inc., Class A 117,425
2,600 * Algos Pharmaceuticals Corp. 58,500
5,700 * Alkermes, Inc. 141,075
10,600 * AmeriSource Health Corp., Class A 313,363
2,300 * Barr Laboratories, Inc. 75,756
4,100 Bindley Western Industries 123,513
6,900 Carter-Wallace Inc. 124,631
7,900 * Cephalon, Inc. 106,650
10,500 * Columbia Laboratories, Inc. 91,875
7,900 * COR Therapeutics, Inc. 112,081
4,400 * Coulter Pharmaceutical, Inc. 114,400
14,500 * Covance, Inc. 307,219
10,200 * Dura Pharmaceuticals, Inc. 105,825
7,200 * Fuisz Technologies, Ltd. 28,350
4,500 * GelTex Pharmaceuticals, Inc. 76,500
27,500 * Gensia, Inc. 123,750
5,700 * Guilford Pharmaceuticals, Inc. 61,631
3,000 Herbalife International, Inc., Class A 33,000
5,600 * Human Genome Sciences, Inc. 236,600
8,800 * ICOS Corp. 385,550
4,400 * IDEC Pharmaceuticals Corp. 221,925
7,800 * Immune Response Corp. Delaware 49,725
5,900 * Incyte Pharmaceuticals, Inc. 153,400
4,100 * Inhale Therapeutic Systems Inc. 108,650
21,700 * IVAX Corp. 291,594
5,800 Jones Pharma, Inc. 206,263
10,258 * Ligand Pharmaceuticals, Inc., Class B 105,145
7,200 * Medicis Pharmaceutical, Class A 192,600
8,200 * Millennium Pharmaceuticals 310,575
2,200 * Miravant Medical Technologies 16,638
3,830 Natures Sunshine Products, Inc. 46,678
<PAGE> 78
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 21
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
DRUGS - Continued
4,900 * Neurogen Corp. $ 61,250
7,600 * NeXstar Pharmaceuticals, Inc. 133,000
6,200 * Parexel International Corp. 148,413
4,100 * Pathogenesis Corp. 58,169
11,100 * P-Com, Inc. 48,909
6,600 * Regeneron Pharmaceuticals, Inc. 47,025
5,300 * Roberts Pharmaceutical Corp. 100,700
5,200 * SangStat Medical Corp. 71,500
2,400 * Schein Pharmaceutical, Inc. 31,500
7,000 * Sepracor, Inc. 446,250
6,400 * Vertex Pharmaceuticals, Inc. 128,400
8,800 * Vivus, Inc. 37,675
7,772 Warner-Lambert Co. 481,864
3,900 * Zonagen, Inc. 41,925
-------------
6,277,467
-------------
ELECTRICAL EQUIPMENT - 1.68%
1,900 * Advanced Lighting Technologies 13,775
8,500 AMETEK, Inc. 194,969
13,100 * AMKOR Technologies, Inc. 121,175
4,000 * Amphenol Corp. Class A 150,500
13,900 Avista Corp. 251,068
5,557 * BancTec, Inc. 89,607
6,700 Belden, Inc. 157,869
1,600 * Benchmark Electronics, Inc. 48,000
1,700 C&D Technologies, Inc. 46,431
9,300 * Cable Design Technologies 131,363
3,500 * Dbt Online, Inc. 126,000
13,000 * Digital Microwave Corp. 164,125
6,450 * Electro Rent Corp. 80,222
2,900 * Electro Scientific Industries 108,750
6,600 * Esterline Technologies Corp. 98,588
7,500 General Cable Corp. 113,906
7,400 * GenRad, Inc. 135,050
2,800 * Holophane Corp. 76,650
5,000 * Hutchinson Technology, Inc. 116,250
7,000 Juno Lighting, Inc. 160,563
10,000 * Kemet Corp. 160,625
7,100 * Kent Electronics Corp. 92,744
15,100 * Intergraph Corp. 120,800
3,600 * Neomagic Corporation 29,588
5,100 * Littelfuse, Inc. 102,000
9,800 * Mail-Well, Inc. 145,163
4,100 * Plexus Corp. 125,306
4,900 Standex International Corp. 128,013
1,200 * Thermo Ecotek Corp. 12,750
5,850 Thomas Industries, Inc. 118,463
2,300 * Triumph Group, Inc. 70,438
7,900 * Vicor Corp. 130,350
4,600 X-Rite, Inc. 32,200
-------------
3,653,301
-------------
ELECTRONIC INSTRUMENTS - 2.67%
1,950 Analogic Corp. 63,497
7,000 BMC Industries 70,438
8,500 * C-Cube Microsystems, Inc. 213,031
11,500 * Checkpoint Systems, Inc. 104,938
8,300 * Cognex Corp. 223,063
9,700 * Commscope, Inc. 254,625
2,800 CTS Corp. 156,800
4,300 Daniel Industries, Inc. 90,300
7,100 * Dionex Corp. 290,656
2,400 * Evans & Sutherland Computer 37,800
18,400 * Gentex Corp. 552,574
6,500 Gerber Scientific, Inc. 151,938
3,400 * HADCO Corp. 105,400
4,475 Harman International Industries 198,578
10,200 * Imation Corp. 239,699
21,000 * Integrated Device Technology 166,688
12,600 * InterDigital Communication 58,275
5,000 * Lattice Semiconductor Corp. 245,624
7,000 * LoJack Corp. 54,688
7,700 * MagnaTek, Inc. 77,963
4,200 * Marshall Industries 74,025
12,750 Methode Electronics, Inc. Class A 235,077
11,800 * Metromedia Fiber Network, Inc. 476,425
8,800 * Mettler-Toledo International 217,800
8,900 National Computer Systems, Inc. 278,125
2,400 * Optical Cable Corp. 27,150
2,700 Park Electrochemical Corp. 64,631
4,700 * Performance Food Group Co. 111,919
6,937 Pioneer-Standard Electronics 68,069
5,200 Pittston Bax Group 56,225
14,000 * Read-Rite Corp. 92,313
1,900 * Sawtek, Inc. 75,288
2,400 * Semtech Corp. 100,350
14,300 * Sensormatic Electronics Corp. 191,263
4,900 Technitrol, Inc. 145,775
5,000 Telxon Corp. 51,875
4,100 * Thermedics, Inc. 35,363
10,800 * Vishay Intertechnology, Inc. 224,775
-------------
5,883,023
-------------
ELECTRONIC PRODUCTS - MISCELLANEOUS - 0.08%
8,200 CMP Group, Inc. 166,050
-------------
ENTERTAINMENT - 0.95%
3,600 * AMC Entertainment, Inc. 61,200
4,800 * Ascent Entertainment Group 54,600
11,700 * Aztar Corp. 78,975
4,100 * Carmike Cinemas, Inc., Class A 72,006
9,100 * Florida Panthers Holdings, Inc. 98,963
1,900 * GC Companies, Inc. 68,638
4,100 Gaylord Entertainment Co. 127,356
9,100 * GTECH Holdings Corp. 224,656
8,400 * Hollywood Entertainment Corp. 216,300
5,800 International Speedway Corp. 284,200
5,900 * Marvel Enterprises, Inc. 52,363
6,946 * Midway Games, Inc. 73,801
4,000 * Playboy Enterprises, Inc. 116,500
1,100 * Recoton Corp. 11,000
6,200 * SFX Entertainment, Inc., Class A 337,513
11,400 * Spelling Entertainment Group 110,438
2,800 * Trans World Entertainment Corp. 35,350
3,100 * Trendwest Resorts, Inc. 72,850
-------------
2,096,709
-------------
FERTILIZERS - 0.04%
6,604 Mississippi Chemical Corp. 63,564
8,400 Terra Industries, Inc. 33,075
-------------
96,639
-------------
FINANCE COMPANIES - 0.37%
8,800 Aames Financial Corp. 12,650
9,000 * Credit Acceptance Corp. 54,000
3,300 * Delta Financial Corp. 22,275
7,800 Doral Financial Corp. 131,625
3,900 * First Sierra Financial, Inc. 85,800
4,100 * Franchise Mortgage Acceptance Co. 36,388
9,734 * Imperial Credit Industries 80,306
2,166 Oriental Financial Group 57,399
16,000 Phoenix Investment Partners, Ltd. 157,000
<PAGE> 79
22 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
FINANCE COMPANIES - Continued
2,400 Student Loan Corp. $ 95,850
2,300 * Triad Guaranty, Inc. 35,075
8,800 * UniCapital Corporation 49,500
-------------
817,868
-------------
FINANCIAL SERVICES - 0.82%
4,100 Advanta Corp. 70,981
4,500 * Affiliated Managers Group 131,625
4,200 * Ameritrade Holding Corp., Class A 376,688
5,000 Conning Corp. 85,313
5,200 EVEREN Capital Corporation 152,425
1,200 First Liberty Financial Corp. 34,500
2,300 * HealthCare Financial Partners 77,625
2,200 * International Telecommunications Data Systems, Inc. 27,500
7,152 Investment Technology Group 316,923
4,600 Jefferies Group, Inc. 112,988
3,600 Resource America, Inc. 51,975
8,900 Richmond Count Financial Corp. 162,425
1,500 Southwest Securities Group, Inc. 100,125
2,800 * The Profit Recovery Group 103,075
-------------
1,804,168
-------------
FOODS - 1.07%
3,900 * Agribrands International, Inc. 136,256
4,700 * American Italian Pasta Co., Class A 129,250
13,700 Chiquita Brands International 110,456
7,500 Corn Products International, Inc. 221,250
6,400 Dreyer's Grand Ice Cream, Inc. 106,000
10,000 Earthgrains Co. 234,375
4,400 International Multifoods Corp. 96,800
3,600 Interpool, Inc. 45,225
6,600 J.M. Smucker Co., Class A 136,538
6,000 Lance, Inc. 87,375
3,500 Michael Foods, Inc. 82,250
15,600 * NBTY, Inc. 97,988
3,200 Pilgrims Pride Corp. 66,200
7,840 * Ralcorp Holdings, Inc. 147,980
11,900 Richfood Holdings, Inc. 152,469
4,300 Riviana Foods 88,150
1,000 * United Natural Foods, Inc. 26,750
12,700 Universal Foods Corp. 291,305
6,600 * Vlasic Foods International, Inc. 49,913
1,700 * Wild Oats Markets, Inc. 49,831
-------------
2,356,361
-------------
FOOTWEAR - 0.43%
7,400 Brown Group, Inc. 140,600
6,800 * Genesco, Inc. 90,950
7,250 * Just For Feet, Inc. 55,281
4,300 Justin Industries, Inc. 57,781
3,600 * Kenneth Cole Productions, Inc., Class A 108,000
4,600 * Nine West Group, Inc. 127,650
12,100 Stride Rite Corp. 126,294
1,800 * Timberland Co., Class A 116,550
8,500 Wolverine World Wide, Inc. 114,750
-------------
937,856
-------------
FREIGHT - 0.51%
8,550 Air Express International Corp. 213,750
4,900 * Coach USA, Inc. 142,713
2,800 * Eagle USA Airfreight, Inc. 131,950
7,800 J.B. Hunt Transport Services, Inc. 131,625
8,412 * Kirby Corp. 158,777
14,000 OMI Corp. 36,750
10,200 Overseas Shipholding Group, Inc. 127,500
3,500 * SEACOR Holdings, Inc. 173,688
-------------
1,116,753
-------------
GOLD MINING - 0.16%
53,900 Battle Mountain Gold Co. 131,381
20,164 Placer Dome, Inc. 224,319
-------------
355,700
-------------
HARDWARE & TOOLS - 0.09%
3,900 Barnes Group, Inc. 89,944
5,500 * Barnett, Inc. 50,875
2,700 Lawson Products, Inc. 66,825
-------------
207,644
-------------
HEALTHCARE - 1.95%
9,500 * Advanced Tissue Sciences, Inc. 36,813
4,400 * Alterra Healthcare Corp. 53,900
7,300 * American Oncology Resources 74,141
10,900 * Apria Healthcare Group, Inc. 224,812
3,514 Block Drug Co., Inc., Class A 130,897
3,800 * Care Matrix Corporation 56,288
3,500 * Curative Technologies, Inc. 23,844
11,000 * Genesis Health Ventures, Inc. 48,813
4,700 * Hanger Orthopedic Group, Inc. 76,963
4,900 HealthPlan Services Corp. 43,488
6,200 * Henry Schein, Inc. 187,163
4,000 Hooper Holmes, Inc. 72,500
5,900 Invacare Corp. 147,131
28,000 * Laboratory Corp. of America 70,000
580 * LTC Healtcare, Inc. 1,124
27,371 * Mariner Post-Acute Network, Inc. 61,585
5,600 * Medquist, Inc. 205,800
6,200 Mentor Corp. 98,813
3,600 * NCS HealthCare, Inc., Class A 49,500
15,800 * NovaCare, Inc. 33,575
20,000 * Oxford Health Plans, Inc. 381,250
5,375 * Patterson Dental Co. 196,859
4,299 * Pharmaceutical Product Development 114,998
15,700 * PhyCor, Inc. 109,409
4,704 * Priority Healthcare Corp. 160,524
3,300 * Province Healthcare Co. 71,363
9,675 * Renal Care Group, Inc. 268,481
9,896 * Respironics, Inc. 159,573
4,400 * Rural/Metro Corp. 33,275
6,100 * Sierra Health Services, Inc. 93,025
11,088 * Sun Healthcare Group, Inc. 12,474
8,300 * Sunrise Medical, Inc. 68,994
2,400 * Superior Consultant Holdings Co. 90,150
2,100 * United Payors & Providers, Inc. 39,244
20,000 * Vencor, Inc. 13,750
14,000 * VISX, Inc. 727,124
2,300 Vital Signs, Inc. 44,131
-------------
4,281,774
-------------
HEAVY DUTY TRUCKS/PARTS - 0.28%
1,800 Bandag, Inc. 61,988
2,200 Detroit Diesel Corp. 54,588
9,000 Federal Signal Corp. 215,437
3,200 * Terex Corp. 99,000
7,900 Titan International, Inc. 74,063
5,850 Wabash National Corp. 111,516
-------------
616,592
-------------
<PAGE> 80
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 23
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
HOME BUILDERS - 0.83%
5,100 * American Homestar Corporation $ 37,613
8,605 D R Horton, Inc. 146,285
6,000 Del Webb Corp. 135,000
11,700 * Fairfield Communities, Inc. 185,737
9,900 Kaufman & Broad Home Corp. 238,837
6,900 M.D.C. Holdings, Inc. 136,275
3,500 * NVR, Inc. 168,438
4,781 * Palm Harbor Homes, Inc. 102,792
6,100 Pulte Corp. 145,256
5,500 Ryland Group, Inc. 152,969
9,500 Standard Pacific Corp. 124,688
6,200 * Toll Brothers, Inc. 135,238
3,470 * U.S. Home Corp. 119,715
-------------
1,828,843
-------------
HOSPITAL MANAGEMENT - 0.48%
7,400 * ABR Information Services, Inc. 186,850
11,829 * Concentra Managed Care, Inc. 173,738
12,200 * Coventry Health Care, Inc. 161,650
7,900 * Magellan Health Services, Inc. 63,694
18,100 * Medaphis Corp. 90,500
9,300 * Orthodontic Centers of America 112,180
3,200 * Pediatrix Medical Group 72,200
3,600 * Sunrise Assisted Living, Inc. 133,200
11,600 Ventas, Inc. 62,350
-------------
1,056,362
-------------
HOSPITAL SUPPLIES - 0.81%
5,700 Acuson Corp. 88,350
4,700 * Arrow International, Inc. 119,262
7,500 Ballard Medical Products 178,124
12,400 * Bio-Technology General Corp. 87,575
2,500 * Closure Medical Corp. 77,656
5,800 * Coherent, Inc. 93,525
3,600 * CONMED Corp. 122,400
4,700 * Datascope Corp. 118,234
3,000 Diagnostic Products Corp. 68,250
9,800 * Isis Pharmaceuticals, Inc. 99,225
2,100 Landauer, Inc. 58,275
3,200 * MiniMed, Inc. 189,000
7,850 Owens & Minor, Inc. 85,369
17,275 * PSS World Medical, Inc. 212,697
4,600 * TECHE Corp. 115,575
7,800 * Theragenics Corp. 58,500
-------------
1,772,017
-------------
HOUSEHOLD PRODUCTS - 0.33%
4,600 Church & Dwight Co., Inc. 196,363
4,500 Libbey, Inc. 134,719
9,700 * Linens `N Things, Inc. 386,787
1,504 * Samsonite Corp. 9,494
-------------
727,363
-------------
HUMAN RESOURCES - 0.64%
2,900 * Data Processing Resources 44,044
10,300 * Interim Services Inc. 224,668
6,200 * Labor Ready, Inc. . 220,875
7,300 * Metamor Worldwide, Inc. 199,838
6,200 Norrell Corp. 115,088
10,400 * Novacare Employee Services Inc. 48,425
21,800 Olsten Corp. 193,475
8,400 * Personnel Group of America 95,550
2,100 * Probusiness Services Inc. 65,100
3,000 * Remedytemp, Inc. 40,500
6,000 * SCB Computer Technology 38,625
4,600 * SOS Staffing Services, Inc. 27,888
3,000 * Staff Leasing, Inc. 33,938
4,200 * Staffmark, Inc. 45,675
3,700 * Westaff, Inc. 24,513
-------------
1,418,202
-------------
INFORMATION PROCESSING - 1.98 %
14,980 * Acxiom Corp. 404,460
2,500 * Administaff, Inc. 40,000
2,300 * Advent Software, Inc. 162,150
10,500 * American Management Systems 333,375
3,600 * CDW Computer Centers, Inc. . 156,600
4,500 * ChoicePoint Inc. 270,563
9,750 * CHS Electronics, Inc. 43,266
3,400 * Complete Business Solutions 82,450
4,700 * Decisionone Holdings Corp. 14,541
1,400 * F.Y.I., Inc. 38,500
4,800 * InfoUSA, Inc., Class B 29,550
9,000 * International Network Services 336,375
10,800 * Lycos, Inc. 1,085,398
1,600 * Medical Manager Corp. 79,200
3,400 * Micrel, Inc. 190,400
5,900 * Paymentech, Inc. 147,869
2,800 * Pegasystems, Inc. 23,450
7,200 * Safeguard Scientifics, Inc. 526,500
3,700 * Sipex Corp. 59,894
20,600 * Sybase, Inc. 199,563
4,500 * Systemax, Inc. 61,313
2,300 * Veeco Instruments, Inc. 70,725
-------------
4,356,142
-------------
INFORMATION PROCESSING - BUSINESS SOFTWARE - 1.03%
4,400 * Alydaar Software Corp. 16,913
3,400 * Aspect Development, Inc. 48,450
5,400 * AXENT Technologies, Inc. 67,163
2,918 * Baan Company NV 33,375
6,000 * Cerner Corp. 120,750
5,500 * Clarify, Inc. 177,719
1,200 * Engineering Animation, Inc. 26,850
6,300 * Epicor Software Corporation 44,494
4,300 * First Consulting Group, Inc. 48,375
1,300 * Great Plains Software, Inc. 48,994
4,800 * H.T.E., Inc. 22,200
6,500 * Harbinger Corp. 72,109
6,500 * HNC Software, Inc. 175,906
42,500 * Informix Corp. 282,890
2,500 * Metro Information Services, Inc. 57,500
3,100 * New Era of Networks, Inc. 137,950
3,400 * Peregrine Systems, Inc. 77,988
5,600 * Quadramed Corp. 57,750
8,800 * SAGA Systems, Inc. 103,400
2,800 * Sanchez Computer Associates 192,850
2,600 * SCM Microsystems, Inc. 150,800
3,700 * SS&C Technologies, Inc. 46,250
7,800 * TAVA Technologies, Inc. 57,038
6,200 * Visio Corp. 203,825
-------------
2,271,539
-------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 0.92%
8,394 * Artesyn Technologies, Inc. 177,323
14,400 * Electronics for Imaging, Inc. 706,500
11,300 * Jabil Circut, Inc. 545,225
13,700 * Komag, Inc. 52,231
8,000 * MEMC Electronic Materials 66,000
<PAGE> 81
24 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - Continued
9,000 * Micron Electronics, Inc. $ 90,563
6,700 OEA, Inc. 67,419
4,100 * Rambus, Inc. 317,750
-------------
2,023,011
-------------
INFORMATION PROCESSING - COMPUTER SERVICES - 2.23%
10,700 * Checkfree Holdings Corp. 503,569
18,000 * CMGI, Inc. 1,865,248
4,000 * CNet, Inc. 433,000
8,425 * Computer Horizons Corp. 154,283
5,900 Computer Task Group, Inc. 98,088
2,700 * Concord Communications, Inc. 120,150
4,200 * Cotelligent, Inc. 56,175
1,500 Factset Research Systems, Inc. 64,875
3,000 * Intelligroup, Inc. 20,250
4,000 * Mastech Corporation 76,750
7,800 National Data Corp. 367,088
4,700 * Nichols Research Corp. 95,175
5,100 * Presstek, Inc. 35,700
22,543 * Rationale Software Corp. 762,235
8,400 * Security Dynamics Technologies 159,600
7,900 * Vantive Corp. 85,913
-------------
4,898,099
-------------
INFORMATION PROCESSING - CONSUMER SOFTWARE - 0.85%
3,300 * Advantage Learning Systems, Inc. 73,425
4,900 * BroadVision, Inc. 254,800
3,900 * Imrglobal Corp. 81,656
5,900 * Infoseek Corp. 247,063
9,700 * Macromedia, Inc. 371,934
4,000 * Mindspring Enterprises, Inc. 296,000
9,400 * MTI Technology 84,600
6,900 * Open Market, Inc. 85,388
5,400 * QAD, Inc. 18,900
5,000 * Realnetworks, Inc. 354,375
-------------
1,868,141
-------------
INFORMATION PROCESSING - DATA SERVICES - 4.61%
5,033 * ADAC Laboratories 40,579
7,100 Analysts International Corp. 113,156
8,800 * Anixter International, Inc. 155,650
2,120 * Applied Graphics Technology 23,055
5,400 * Aspen Technology, Inc. 56,363
8,208 * Avant! Corp. 100,035
2,550 * Barra, Inc. 61,200
13,000 * Bea Systems, Inc. 264,875
4,100 * Bell & Howell Co. 156,056
6,000 * BISYS Group, Inc. 329,437
4,300 * Black Box Corp. 196,188
6,500 * CCC Information Services 83,688
12,800 * CSG Systems International, Inc. 408,799
12,700 * Data General Corp. 166,688
3,800 * Data Transmission Network 84,788
2,900 * Davox Corp. 24,288
2,600 * Dialogic Corp. 86,775
13,400 * Diamond Multimedia Systems 59,044
3,700 * Documentum, Inc. 51,800
3,700 Fair Issac & Co., Inc. 121,175
8,900 * FileNet Corp. 87,888
7,300 * GT Interactive Software Corp. 28,972
3,250 Henry Jack & Associates 114,766
9,700 * HMT Technology Corp. 39,103
9,310 * Hyperion Solutions Corp. 144,886
2,100 * IDX Systems Corp. 50,138
6,900 * Industri-Matematik International Corp. 15,848
10,100 * Information Resources, Inc. 85,850
6,000 Innovex, Inc. 80,250
17,900 * Inprise Corp. 66,006
1,300 * INSpire Insurance Solutions, Inc. 22,669
4,700 * Integrated Systems, Inc. 58,163
6,150 * JDA Software Group, Inc. 54,966
3,150 * Kronos, Inc. 116,599
3,000 * Learning Tree International 31,500
9,400 * Legato Systems, Inc. 514,649
4,500 * Manugistics Group, Inc. 40,781
15,800 * Mentor Graphics Corp. 199,475
8,900 * Mercury Interactive Corp. 292,588
4,200 * MICROS Systems, Inc. 131,250
8,000 MTS Systems Corp. 95,000
4,050 * National Instruments Corp. 154,153
15,600 * Network Appliance, Inc. 735,636
2,000 * Network Solutions, Inc. 127,250
18,650 * NOVA Corp. 414,963
17,100 * Oak Technology, Inc. 59,850
9,045 * Paxar Corp. 81,970
7,500 * Physician Computer Network 2,813
5,285 * Primark Corp. 143,025
5,650 * Progress Software Corp. 147,253
2,300 * Project Software & Development 65,406
11,000 * PsiNet, Inc. 489,500
2,800 * QRS Corp. 207,200
3,520 * Renaissance Worldwide, Inc. 25,520
13,200 * S3, Inc. 88,688
4,800 * Sandisk Corp. 148,800
2,500 * Sapient Corp. 159,375
11,200 * Sequent Computer Systems, Inc. 145,600
6,700 * SMART Modular Technologies 100,919
3,500 * Splash Technology Holdings 28,000
9,300 * Structural Dynamic Research 166,238
3,100 * Sykes Enterprises, Inc. 96,488
14,700 * Symantec Corp. 360,149
12,850 * System Software Associates 26,102
10,000 * Systems & Computer Technology 163,125
10,125 * Technology Solutions Co. 94,289
6,800 * Transaction Systems Architects, Class A 216,749
5,000 * Viasoft, Inc. 19,688
2,800 * Volt Information Sciences, Inc. 48,300
10,300 * Wang Laboratories, Inc. 298,055
8,175 * Wind River Systems, Inc. 171,675
5,900 * Xircom, Inc. 148,975
4,800 * Zebra Technologies Corp., Class A 154,200
-------------
10,144,940
-------------
INFORMATION PROCESSING - NETWORKING - 1.61%
9,600 * Concentric Network Corp. 310,200
4,200 * Earthlink Network, Inc. 224,700
6,900 * Excite, Inc. 917,700
5,800 * Exodus Communications, Inc. 435,000
13,300 * Picturetel Corp. 118,038
15,800 * PMC-Sierra, Inc. 767,288
6,000 * Remedy Corp. 114,000
14,200 * USWeb Corporation 360,325
2,400 * Verio, Inc. 130,200
5,700 * Visual Networking, Inc. 168,150
-------------
3,545,601
-------------
<PAGE> 82
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 25
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
INSURANCE - CASUALTY - 0.83%
5,000 * Acceptance Insurance Co., Inc. $ 78,438
4,700 Baldwin & Lyons, Inc., Class B 98,406
5,100 Commerce Group, Inc. 118,256
3,300 E.W. Blanch Holdings, Inc. 211,199
1,300 * FPIC Insurance Group, Inc. 58,663
8,217 Frontier Insurance Group, Inc. 141,230
9,700 HCC Insurance Holdings, Inc. 215,825
3,500 Highlands Insurance Group 37,406
2,800 Midland Co. 68,600
3,800 NAC Re Corp. 207,337
1,100 Nymagic, Inc. 13,750
6,200 * Risk Capital Holdings, Inc. 99,200
2,000 RLI Corp. 74,375
7,200 Selective Insurance Group 135,899
1,800 Stewart Information Services Corporation 34,988
3,350 Trenwick Group, Inc. 105,525
3,505 United Fire & Casualty Co. 91,130
5,300 Vesta Insurance Group, Inc. 26,831
-------------
1,817,058
-------------
INSURANCE - LIFE - 0.62%
6,700 American Heritage Life Investments 155,775
2,900 American Medical Security Group 27,006
4,400 Arm Financial Group, Inc., Class A 66,000
600 Kansas City Life Insurance Co. 49,209
9,200 Life USA Holding, Inc. 183,425
500 * National Western Life Insurance Co., Class A 48,000
7,200 Presidential Life Corp. 132,300
9,825 Reinsurance Group of America 383,175
7,800 * UICI 187,200
5,350 W.R. Berkley 135,756
-------------
1,367,846
-------------
INSURANCE - MISCELLANEOUS - 1.22%
6,000 * Amerin Corp. 161,250
4,100 Arthur J. Gallaher & Co. 199,618
4,387 Brown & Brown, Inc. 156,561
5,600 Capital Re Corp. 91,350
2,900 Chicago Title Corporation 106,756
9,000 Crawford & Co., Class B 123,750
2,700 Executive Risk, Inc. 230,175
6,450 Fidelity National Financial 109,247
4,600 Foremost Corp. of America 102,063
3,200 Harleysville Group 62,000
7,250 HSB Group, Inc. 297,703
2,747 Liberty Corp. 141,986
15,200 * Mid Atlantic Medical Services, Inc. 157,700
4,200 MMI Companies, Inc. 72,450
5,600 Radian Group, Inc. 283,150
4,200 SCPIE Holdings, Inc. 119,700
1,250 White Moutain Insurance Group 186,250
4,100 Zenith National Insurance Corp. 93,275
-------------
2,694,984
-------------
INSURANCE - MULTILINE - 0.62%
4,650 Alfa Corp. 79,631
4,878 American Annuity Group, Inc. 114,633
6,253 AmerUs Life Holdings, Inc. 161,406
4,400 Argonaut Group, Inc. 118,250
5,600 CNA Surety Corp. 81,200
3,635 * Delphi Financial Group, Inc., Class A 126,099
7,900 FBL Financial Group, Inc., Class A 158,494
4,700 Land America Financial Group 134,831
1,050 * Markel Corp. 198,187
1,500 Meadowbrook Insurance Group 20,250
5,940 * Medical Assurance, Inc. 165,949
6,200 PennCorp Financial Group, Inc. 3,488
-------------
1,362,418
-------------
LEISURE TIME - 1.06%
15,300 * Acclaim Entertainment, Inc. 98,972
3,700 * Action Performance Co., Inc. 140,600
2,100 * Anchor Gaming 93,975
6,000 * Bally Total Fitness Holdings Corp. 153,375
9,300 * Boyd Gaming Corp. 55,219
100 Churchill Downs, Inc. 3,275
5,600 * Family Golf Centers, Inc. 50,925
8,500 * Handleman Co. 100,406
5,100 * Hollywood Park, Inc. 73,631
5,800 Polaris Industries, Inc. 249,763
15,400 * Premier Parks, Inc. 548,624
4,600 * Scotts Co., Class A 202,400
1,700 * Speedway Motorsports 68,213
5,400 * Station Casinos, Inc. 93,488
6,450 * Sunterra Corp. 87,478
6,800 * Vail Resorts, Inc. 140,250
3,300 * Vistana, Inc. 51,150
7,200 Winnebago Industries, Inc. 118,800
-------------
2,330,544
-------------
LODGING - 0.54%
9,700 * Choice Hotels International, Inc. 150,956
4,100 Deltic Timber Corp. 101,988
14,900 * Extended Stay America, Inc. 158,313
7,500 * Host Marriott Services Corp. 58,594
6,039 Marcus Corp. 75,865
14,080 Meristar Hospitality Corp. 308,000
8,900 * NS Group, Inc. 63,413
12,800 * Prime Hospitality Corp. 133,600
7,100 * Red Roof Inns, Inc. 127,800
-------------
1,178,529
-------------
MACHINE - CONTRACT - 0.05%
4,800 * Rental Service Corp. 114,600
-------------
MACHINE TOOLS - 0.46%
3,450 * Chase Industries, Inc. 28,894
7,600 * Gilead Sciences, Inc. 331,550
3,200 Gleason Corp. 53,600
9,700 Milacron, Inc. 206,731
5,000 OmniQuip International, Inc. 52,813
3,600 * PRI Automation, Inc. 88,200
7,600 Roper Industries, Inc. 245,100
-------------
1,006,888
-------------
MACHINERY - AGRICULTURE - 0.10%
2,700 Allied Products Corp. 14,006
5,400 Lindsay Manufacturing Co. 95,175
3,500 Toro Co. 117,469
-------------
226,650
-------------
MACHINERY - CONSTRUCTION & CONTRACTS - 0.96%
2,200 * Astec Industries, Inc. 82,225
6,100 Blount, Inc., Class A 170,038
5,100 * Calpine Corp. 276,356
4,700 * CDI Corp. 152,163
4,700 Columbus McKinnon Corp. 116,913
8,100 Foster Wheeler Corp. 111,375
4,750 Granite Construction, Inc. 133,297
8,500 * Insituform Technologies, Inc., Class A 142,375
<PAGE> 83
26 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
MACHINERY - CONSTRUCTION & CONTRACTS - Continued
5,400 * Jacobs Engineering Group, Inc. $ 200,813
5,900 Kaman Corp., Class A 78,175
3,900 * McDermott J. Ray S.A. 138,206
4,822 * Morrison Knudsen Corp. 47,919
3,400 Stone & Webster, Inc. 83,300
5,200 TJ International, Inc. 143,000
7,542 * United Rentals, Inc. 226,260
-------------
2,102,415
-------------
MACHINERY - INDUSTRIAL/SPECIALTY - 2.56%
7,350 AAR Corp. 145,163
4,738 * Albany International Corp., Class A 111,047
6,075 Applied Industrial Tech., Inc. 102,895
9,680 Applied Power, Inc. Class A 234,740
6,873 Baldor Electric Co. 132,305
5,000 Briggs & Stratton Corp. 312,499
7,280 Burlington Coat Factory Whse 122,850
6,100 * DII Group, Inc. 200,918
4,600 Exide Corp. 71,875
9,700 Flowserve Corp. 198,850
2,000 Franklin Electric Co., Inc. 124,250
5,200 * Gardner Denver, Inc. 89,050
1,275 General Binding Corp. 26,138
5,550 Graco, Inc. 181,416
5,200 * Halter Marine Group, Inc. 38,350
4,400 Helix Technology Corp. 75,075
4,800 Hughes Supply, Inc. 129,300
7,350 IDEX Corp. 208,096
4,100 * Ionics, Inc. 128,381
10,200 JLG Industries, Inc. 196,988
5,900 * Kulicke & Soffa Industries 124,638
5,850 Lilly Industries, Inc., Class A 111,516
11,200 Lincoln Electric Holdings 250,600
6,562 Manitowoc Co.,Inc. 223,108
8,800 Newport News Shipbuilding 242,000
3,600 Nordson Corp. 211,500
4,440 * Oak Industries, Inc. 213,953
5,300 Regal-Beloit Corp. 123,225
2,400 Robbins & Myers, Inc. 57,300
5,200 Scotsman Industries, Inc. 106,925
4,400 * Specialty Equipment Companies 127,600
5,437 * Speedfam-IPEC Inc. 71,361
2,700 * SPS Technologies, Inc. 114,413
8,100 Stewart & Stevenson Services 89,100
8,750 * Stillwater Mining Co. 279,453
3,700 Tecumseh Products Co., Class A 244,199
2,700 Tennant Co. 91,800
5,600 Watts Industries, Inc., Class A 94,850
3,300 * Zoltek Companies, Inc. 25,575
-------------
5,633,302
-------------
MEDICAL TECHNOLOGY - 1.32%
3,900 * Affymetrix, Inc. 136,987
15,200 * Alaris Medical, Inc. 76,000
4,400 * Aviron 95,150
4,600 * Biomatrix, Inc. 140,875
4,300 * Bio-Rad Laboratories, Inc., Class A 121,206
5,600 * Cytyc Corp. 116,200
3,800 * Dendrite International, Inc. 125,400
7,875 * Enzo Biochem, Inc. 84,656
5,900 * Haemonetics Corp. 112,100
3,900 * Hologic, Inc. 29,738
9,100 * Idexx Laboratories, Inc. 232,050
2,000 * IGEN International, Inc. 57,500
3,000 * Kendle International, Inc. 41,063
11,800 * Liposome, Inc. 168,888
2,200 * Maxxim Medical ,Inc. 34,925
1,400 * OEC Medical Systems, Inc. 33,425
1,600 * On Assignment, Inc. 41,000
9,118 * Organogenesis, Inc. 100,868
1,800 * Perclose, Inc. 70,875
6,300 * Protein Design Labs, Inc. 123,638
7,500 * Quest Diagnostics, Inc. 191,719
2,900 * ResMed, Inc. 81,381
2,800 * Sabratek Corp. 63,350
13,124 * Scios Nova, Inc. 47,575
7,275 * Serologicals Corp. 57,745
4,200 * Thermo Cardiosystems, Inc. 50,138
6,900 * Thermolase Corp. 16,388
3,400 * ThermoTrex Corp. 27,838
4,300 * Transkaryotic Therapies, Inc. 129,538
6,400 * US Bioscience, Inc. 51,600
2,300 * Ventana Medical Systems, Inc. 46,000
3,474 West Pharmaceutical Services 119,202
2,050 * Xomed Surgical Products, Inc. 83,538
-------------
2,908,556
-------------
MERCHANDISE - DRUG - 0.99%
1,800 * Andrex Corporation 181,575
3,700 * Duane Reade, Inc. 117,938
9,100 * Express Scripts, Inc., Class A 638,138
8,000 Longs Drug Stores Corp. 278,500
12,400 * Medimmune, Inc. 788,950
16,900 * Perrigo Co. 155,269
4,600 Weider Nutrition International 24,150
-------------
2,184,520
-------------
MERCHANDISE - SPECIALTY - 2.52%
1,700 * Advanced Energy Industries 42,288
5,800 * Ames Department Stores, Inc. 237,800
9,100 * APAC Teleservices, Inc. 33,556
6,818 Arctic Cat, Inc. 56,675
5,600 * Avid Technology, Inc. 91,000
1,600 * Bush Boake Allen, Inc. 46,100
13,300 Caseys General Stores, Inc. 178,719
9,067 Cash America International 115,038
7,500 * Central Garden & Pet Co. 101,250
33,200 * Charming Shoppes, Inc. 168,075
4,800 * Cole National Corp., Class A 44,100
5,600 * Compucom Systems, Inc. 23,100
2,300 * Copart, Inc. 41,975
24,400 * Corporate Express, Inc. 160,124
4,200 * Daisytek International Corp. 67,200
4,500 * Department 56, Inc. 149,344
9,800 * Earthshell Corp. 73,500
4,500 Enesco Group, Inc. 103,219
5,700 * Finish Line 70,181
3,150 * Fossil, Inc. 132,103
5,200 * Franklin Covey Co. 50,700
5,000 Friedman's, Inc., Class A 45,000
5,950 * Garden Ridge Corp. 36,444
4,400 * Gibson Greetings, Inc. 31,900
2,900 * Guitar Center, Inc. 44,225
6,700 Hancock Fabrics, Inc. 38,106
4,005 Hancock Holding Co. 177,220
19,800 * Hanover Direct, Inc. 50,738
15,100 * Homebase, Inc. 85,881
10,468 * Inacom Corp. 115,802
2,800 * JLK Direct Distribution, Inc. 30,800
8,200 Jostens, Inc. 173,224
3,578 K2, Inc. 35,556
2,100 * Keystone Automotive Industries 33,994
5,400 * Knoll, Inc. 130,949
2,600 LabOne, Inc. 31,200
6,100 * Michaels Stores, Inc. 163,175
<PAGE> 84
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 27
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
MERCHANDISE - SPECIALTY - Continued
8,800 * Micro Warehouse, Inc. $ 136,400
5,200 * MicroAge, Inc. 29,088
5,400 * Petco Animal Supplies, Inc. 76,275
29,000 * Petsmart, Inc. 261,000
4,963 Price Enterprises, Inc. 38,463
3,700 * Rent-Way, Inc. 92,963
2,700 Russ Berrie and Co., Inc. 69,356
8,300 Seitel, Inc. 131,244
14,100 * Sitel Corp. 38,775
9,500 Sotheby's Holdings, Inc., Class A 360,405
1,914 South Jersey Industries, Inc. 53,592
7,400 * Spiegel, Inc., Class A 54,575
8,050 * Sports Authority, Inc. 40,250
2,800 * Sports Line USA, Inc. 104,125
5,100 Sturm, Ruger & Co., Inc. 57,056
13,800 * Sunglass Hut International 210,449
5,700 * Twinlab Corp. 52,369
8,600 * United Stationers, Inc. 161,250
2,400 * West Marine, Inc. 30,900
8,900 * Zale Corp. 343,206
-------------
5,552,002
-------------
MERCHANDISING - DEPARTMENT - 0.13%
800 * 99 Cents Only Stores 37,700
1,300 * Alexander's, Inc. 97,175
3,300 * K&G Men's Center, Inc. 36,713
5,400 * Maxim Group, Inc. 48,600
16 May Department Stores Co. 693
7,500 * Stein Mart, Inc. 68,906
-------------
289,787
-------------
MERCHANDISING - FOOD - 0.51%
4,800 * CEC Entertainment, Inc. 181,500
75 Farmer Brothers Co. 15,375
14,400 Fleming Companies, Inc. 148,500
4,600 Great Atlantic & Pacific Tea 150,650
6,400 * IHOP Corp. 152,800
2,300 Ingles Markets, Inc., Class A 28,175
7,000 Ruddick Corp. 123,375
3,000 * Smart & Final, Inc. 28,688
8,500 * Smithfield Foods, Inc. 226,843
7,200 Zapata Corporation 58,050
-------------
1,113,956
-------------
MERCHANDISING - MASS - 0.20%
3,800 * Coldwater Creek, Inc. 76,000
5,250 * Insight Enterprises, Inc. 133,219
6,500 * ShopKo Stores, Inc. 230,750
-------------
439,969
-------------
METALS - ALUMINUM - 0.21%
6,100 * ACX Technologies, Inc. 75,869
7,000 Century Aluminum Co. 45,063
5,000 Commonwealth Industries, Inc. 53,750
4,400 IMCO Recycling, Inc. 73,700
5,500 * Kaiser Aluminum Corp. 48,125
7,500 Tredegar Corporation 160,781
-------------
457,288
-------------
METALS - COPPER - 0.11%
7,600 ASARCO, Inc. 122,075
4,800 * Wolverine Tube, Inc. 114,300
-------------
236,375
-------------
METALS - MISCELLANEOUS - 0.35%
4,400 Brush Wellman, Inc. 74,525
3,337 Castle A. M. & Co. 51,306
4,033 Commercial Metals Co. 94,523
14,500 * Hecla Mining Co. 35,344
5,100 Precision Castparts Corp. 206,550
4,500 * RTI International Metals 59,906
9,700 * Steel Dynamics, Inc. 165,506
5,900 Titanium Metals Corp. 41,300
1,900 Tremont Corp. 37,050
-------------
766,010
-------------
METALS - STEEL - 1.23%
11,300 AK Steel Holding Corp. 271,199
24,800 * Armco, Inc. 159,650
29,495 * Bethlehem Steel Corp. 245,176
8,200 Birmingham Steel Corp. 42,025
4,500 Carpenter Technology Corp. 128,250
5,300 * Citation Corp. 71,219
4,200 Cleveland-Cliffs, Inc. 155,400
3,550 Commercial Intertech Corp. 53,694
2,300 Gibraltar Steel Corp. 49,881
7,200 Intermet Corp. 99,900
20,600 LTV Corp. 126,175
8,600 * Metals USA, Inc. 98,900
9,000 * Mueller Industries, Inc. 261,000
8,500 National Steel Corp., Class B 64,813
5,400 Oregon Steel Mills, Inc. 73,913
5,500 Quanex Corp. 143,688
2,500 Reliance Steel & Aluminium Co. 89,063
6,000 * Rohn Industries, Inc. 9,000
9,494 Ryerson Tull, Inc. 218,362
3,300 * Shiloh Industries, Inc. 40,838
7,700 Valmont Industries, Inc. 127,291
3,400 * WHX Corp. 25,500
7,400 * Wyman-Gordon Co. 142,913
-------------
2,697,850
-------------
MOBILE HOMES - 0.42%
10,152 * Champion Enterprises, Inc. 207,482
6,300 Coachmen Industries, Inc. 138,600
2,500 McGrath Rentcorp 46,875
1,900 * Monaco Coach Corp. 57,000
3,900 * National R.V. Holdings, Inc. 100,181
11,800 Oakwood Homes Corp. 147,500
4,200 Skyline Corp. 130,988
3,875 Thor Industries, Inc. 101,961
-------------
930,587
-------------
MISCELLANEOUS - 2.77%
49,700 * 7-eleven, Inc. 118,038
2,200 * Abacus Direct Corp. 161,838
6,700 * Alternative Resources Corp. 51,088
6,700 AMCOL International Corp. 95,056
4,200 * AMERCO, Inc. 105,000
4,600 Arch Coal, Inc. 67,275
7,000 * Associated Group, Inc., Class A 454,999
3,000 * Aviation Sales Company 115,500
2,800 * Avondale Industries, Inc. 102,200
4,100 * Bacou U.S.A., Inc. 66,881
11,400 * Billing Concepts Corp. 142,500
5,500 * Borg-Warner Security Corp. 89,719
1,800 * Boron LePore & Associates, Inc. 16,650
13,350 * Brightpoint, Inc. 75,928
3,081 * Building One Services Corp. 41,208
9,200 C. H. Robinson Worldwide, Inc. 297,274
3,400 Cabot Industrial Trust 73,100
5,800 * Cadiz, Inc. 59,450
1,400 * Capital Senior Living Corp. 15,225
4,600 * Caribiner International, Inc. 24,725
<PAGE> 85
28 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
MISCELLANEOUS - Continued
10,700 * Catalytica, Inc. $ 127,063
3,984 Cdnow, Inc. 71,463
2,150 Central Parking Corp. 69,875
11,400 * Century Business Services 126,825
4,200 * Championship Auto Racing Teams 141,225
1,800 * Coinmach Laundry Corp. 22,050
5,600 * Computer Learning Centers 28,000
7,516 * Gemstar Group Ltd. 464,583
6,000 * Hvide Marine, Inc., Class A 11,063
3,400 * Integrated Electrical Services 51,213
3,000 * Iron Mountain, Inc. 82,875
1,200 * Kroll-O'Gara Co. 24,113
2,400 * Lason, Inc. 91,950
4,100 Matthews International Corp., Class A 118,900
2,100 * MemberWorks Incorporated 95,025
3,500 * Metzler Group, Inc. 114,625
7,200 * Musicland Stores Corp Com 63,900
1,400 * ONSALE, Inc. 27,300
2,900 * Polycom, Inc. 74,313
5,000 * Prepaid Legal Services, Inc. 132,813
7,900 * Protection Onc, Inc. 43,450
5,800 * Rayovac Corp. 146,450
6,750 Regis Corp. 162,844
7,500 * Romac International, Inc. 107,813
7,500 * Scott Technologies, Inc. 141,563
2,100 * Service Experts, Inc. 38,981
8,500 * Sola International, Inc. 141,844
4,200 * Triangle Pharmaceuticals, Inc. 77,700
7,700 Valhi, Inc. 90,956
5,800 * Veritas DGC, Inc. 105,850
5,300 * Veterinary Centers of America 73,869
4,600 Wackenhut Corp. 105,800
3,900 * Wackenhut Corrections Corp. 78,000
4,200 * Wesley Jessen VisionCare 130,725
6,000 * West Teleservices Corp. 45,750
3,600 * Westell Technologies, Inc., Class A 24,975
4,900 Westinghouse Air Brake Co. 112,088
6,300 * Whittman-Hart, Inc. 178,763
4,100 Woodward Governor Co. 102,500
5,500 * World Access, Inc. 62,563
-------------
6,085,312
-------------
NATURAL GAS - DIVERSIFIED - 0.73%
7,750 Atmos Energy Corp. 198,594
5,200 Eastern Enterprises 180,375
6,100 * Hanover Compressor Company 169,275
4,500 Laclede Gas Co. 99,281
4,500 New Jersey Resources Corp. 169,875
4,567 * Southern Union Co. 103,328
7,200 Southwest Gas Corp. 203,400
8,300 UGI Corp. 163,406
9,300 WICOR, Inc. 237,150
6,600 Western Gas Resources, Inc. 85,800
-------------
1,610,484
-------------
OIL - INTEGRATED DOMESTIC - 0.09%
1,800 * Belco Oil and Gas Corporation 14,288
7,875 Cross Timbers Oil Co. 85,148
9,100 * Tesoro Petroleum Corp. 107,494
-------------
206,930
-------------
OIL - SERVICE - PRODUCTS - 0.69%
8,150 * Barrett Resources Corp. 275,571
2,700 * Drill Quip 69,694
3,100 Getty Realty Corp. 42,431
5,700 * Global Industrial Technologies 70,894
3,600 * Gulf Island Fabrication, Inc. 38,925
32,300 * Kelley Oil & Gas Corp. 22,206
8,000 * Lone Star Technologies, Inc. 124,500
2,700 * Maverick Tube Corp. 34,931
13,500 * Ocean Energy, Inc. 133,313
22,200 * Parker Drilling Co. 69,375
12,800 * Pride International, Inc. 133,600
45,085 * Santa Fe Snyder Corp. 383,222
6,300 * TransMontaigne, Inc. 88,988
5,200 * Trico Marine Services, Inc. 36,725
-------------
1,524,375
-------------
OIL - SERVICES - 0.52%
4,700 * Key Energy Services 14,981
14,000 * Marine Drilling Companies, Inc. 201,249
7,900 Mascotech, Inc. 123,438
6,500 * Oceaneering International, Inc. 100,344
6,800 * Offshore Logistics, Inc. 76,925
3,000 * OMNI Energy Services Corp. 13,125
5,350 Pennsylvania Enterprises, Inc. 155,150
5,400 * Pool Energy Services Co. 91,125
6,400 Range Resources Corp. 30,800
11,500 * Tuboscope, Inc. 153,813
5,300 * UTI Energy Corp. 76,188
7,700 * Unova, Inc. 111,650
-------------
1,148,788
-------------
OIL/GAS PRODUCERS - 1.36%
3,200 * Atwood Oceanics, Inc. 92,800
8,300 * Benton Oil and Gas Co. 29,050
4,800 Berry Petroleum Co., Class A 68,400
9,700 * Brown Shoe Company, Inc. 125,494
7,000 Cabot Oil & Gas Corp., Class A 125,125
22,016 Chesapeake Energy Corp. 46,784
6,400 * Comstock Resources, Inc. 26,000
5,800 Devon Energy Corp. 201,550
9,300 * EEX Corporation 63,356
9,200 Equitable Resources, Inc. 290,375
7,400 * Forest Oil Corp. 78,163
27,800 * Grey Wolf, Inc. 57,338
31,700 * Harken Energy Corp. 61,419
11,300 Helmerich & Payne, Inc. 263,431
1,400 Holly Corp. 17,850
12,300 * Input/Output, Inc. 104,550
6,500 KCS Energy, Inc. 3,656
5,000 * Louis Dreyfus Natural Gas Corp. 97,500
2,300 Mitchell Energy & Development, Class A 36,800
8,300 * Newfield Exploration Co. 210,613
6,700 * Nuevo Energy Co. 102,175
8,100 * Patterson Energy, Inc. 67,584
6,400 * Plains Resources, Inc. 110,000
10,300 Pogo Producing Co. 188,619
3,400 St. Mary Land & Exploration 68,000
4,100 * Stone Energy Corp. 154,519
5,610 * Swift Energy Co. 72,579
4,000 * The Houston Exploration Company 75,250
7,300 * Titan Exploration, Inc. 33,763
10,800 Vintage Petroleum, Inc. 121,500
-------------
2,994,243
-------------
PAPER/FOREST PRODUCTS - 0.78%
7,200 * Buckeye Technologies, Inc. 117,450
6,300 Caraustar Industries, Inc. 166,163
13,000 Longview Fibre Co. 176,313
<PAGE> 86
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 29
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
PAPER/FOREST PRODUCTS - Continued
10,700 P. H. Glatfelter Co. $ 142,444
5,700 Potlatch Corp. 224,438
5,700 Rayonier, Inc. 265,762
4,000 Schweitzer-Mauduit, Inc. 61,250
3,500 Standard Register Co. 104,125
13,200 Unisource Worldwide, Inc. 155,100
2,300 Universal Forest Products 41,400
14,834 Wausau-Mosinee Paper Corp. 267,011
-------------
1,721,456
-------------
PHOTOGRAPHY - 0.12%
2,520 CPI Corp. 79,380
313 * Panavision, Inc. 2,602
5,500 * Photronics, Inc. 108,625
5,400 * Ultratech Stepper, Inc. 70,875
-------------
261,482
-------------
POLLUTION CONTROL - 0.57%
61,800 * Aqua Alliance, Inc. 146,775
560 Arcadis N.V. 4,200
9,000 Calgon Carbon Corp. 51,188
6,150 * Cuno, Inc. 112,622
9,200 Dames & Moore, Inc. 144,900
1,225 Mine Safety Appliances Co. 76,563
18,900 * Newpark Resources, Inc. 170,100
10,585 * Safety Kleen 166,052
8,500 * Superior Services, Inc. 182,219
9,750 * Tetra Tech, Inc. 207,188
-------------
1,261,807
-------------
PUBLISHING - NEWS - 0.33%
5,900 Hollinger International, Inc. 81,863
9,200 Lee Enterprises, Inc. 266,800
5,800 Media General, Inc., Class A 299,425
7,400 Network Equipment Technologies 76,775
-------------
724,863
-------------
PUBLISHING/PRINTING - 1.44%
7,000 * American Business Products 111,563
7,250 Banta Corp. 177,625
2,200 * Berlitz International, Inc. 46,888
4,800 * Big Flower Holdings, Inc. 149,400
9,400 Bowne & Co., Inc. 157,450
2,800 * Consolidated Graphics, Inc. 129,150
7,600 Houghton Mifflin Co. 349,599
9,500 John H. Harland Co. 169,813
6,400 John Wiley & Sons, Inc., Class A 276,400
5,900 * Journal Register Co. 102,513
5,975 McClatchy Company, Class A 219,954
4,700 Merrill Corp. 71,088
4,700 New England Business Service 127,781
3,300 * Scholastic Corp. 160,050
2,800 * Scientific Games Holdings 50,225
12,600 * Valassis Communications, Inc. 438,638
8,900 Wallace Computer Services, Inc. 204,144
9,100 * World Color Press, Inc. 232,050
-------------
3,174,331
-------------
RAILROAD - 0.22%
4,300 Florida East Coast Industries 150,500
6,900 * Motivepower Industries, Inc. 116,869
11,100 * Wisconsin Central Transport 219,225
-------------
486,594
-------------
REAL ESTATE - 0.56%
2,300 * Avatar Holdings, Inc. 42,550
5,900 Brandywine Realty Trust 114,681
3,330 * Castle & Cooke, Inc. 52,031
4,400 * CB Richard Ellis Services 85,250
6,475 Cousins Properties, Inc. 224,602
4,000 Forest City Enterprises, Inc., Class A 110,750
7,200 * Grubb & Ellis Co. 45,900
5,200 * Insignia Financial Group, Inc. 63,700
7,100 LNR Property Corp. 142,000
18,433 Republic Bancorp, Inc. 238,477
2,700 SL Green Realty Corp. 58,725
2,300 Tejon Ranch Co. 61,238
-------------
1,239,904
-------------
REAL ESTATE INVESTMENT TRUSTS - 6.27%
500 Alexandria Real Estate Equitie 15,813
5,700 American Health Properties Com-Core Group 114,000
6,600 Amli Residential Properties 148,913
3,400 Associated Estates Realty 38,888
3,200 Bedford Prpty Investors, Inc. 55,400
9,200 Berkshire Realty Co., Inc. 105,225
5,373 Bradley Real Estate, Inc. 112,161
10,030 BRE Properties, Inc., Class A 258,899
13,800 Burnham Pacific Properties 152,663
11,041 Camden Property Trust 302,937
7,900 Capital Automotive REIT 102,206
17,850 Capstead Mortgage Corp. 103,753
5,800 CBL & Associates Properties 149,713
4,500 CenterPoint Properties Corp. 161,438
5,300 Chateau Communities, Inc. 159,994
3,900 Chelsea GCA Properties 147,956
6,600 Colonial Properties Trust 185,213
12,800 Commercial Net Lease Realty 168,800
9,400 Cornerstone Realty Income 98,113
7,800 Criimi Mae, Inc. 18,038
6,100 Crown American Realty Trust 46,894
14,600 Developers Diversified Realty 240,900
17,200 Dynex Capital, Inc. 53,750
4,200 EastGroup Properties, Inc. 85,313
12,400 Equity Inns, Inc. 118,575
3,800 Essex Property Trust, Inc. 122,075
10,000 Federal Realty Investment Trust 231,249
16,081 Felcor Lodging Trust, Inc. 364,837
9,400 First Industrial Realty Trust 254,388
6,020 * First Union Real Estate 30,476
9,600 Franchise Finance Corp. 236,400
6,600 Gables Residential Trust 158,400
8,900 General Growth Properties 342,094
8,000 Glenborough Realty Trust, Inc. 146,500
6,100 Glimcher Realty Trust 103,319
500 Great Lakes REIT 7,938
8,800 Health Care Property Investors 266,749
7,100 Health Care REIT, Inc. 175,725
9,925 Healthcare Realty Trust, Inc. 214,628
6,800 Home Properties of New York, Inc. 177,225
8,900 Hospitality Properties Trust 241,413
5,800 Imperial Credit Comm. Mortgage 59,450
4,600 Innkeepers USA Trust 47,438
9,500 IRT Property Co. 92,031
4,700 Irvine Apartment Communities 158,625
8,400 JDN Realty Corp. 183,750
3,200 * Jones Lang Lasalle, Inc. 90,400
3,300 JP Realty, Inc. 67,444
4,400 Kilroy Realty Corp. 108,900
1,692 Kimco Realty Corp., Class D 43,992
6,900 Koger Equity, Inc. 115,144
5,800 LTC Properties, Inc. 77,213
<PAGE> 87
30 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
REAL ESTATE INVESTMENT TRUSTS - Continued
4,700 Macerich Co. $ 124,256
5,500 Manufactured Home Communities 142,313
505 * Merry Land Properties, Inc. 2,714
3,200 MGI Properties 89,200
4,900 Mid-American Apartment Communities 111,475
8,200 Mills Corp. 180,913
4,300 National Golf Properties, Inc. 110,994
5,600 National Health Investors, Inc. 131,250
10,800 Nationwide Health Properties 220,050
19,600 New Plan Excel Realty Trust 392,000
6,300 Ocwen Asset Investment Corp. 34,256
4,786 Omega Healthcare Investors 125,633
8,100 Pacific Gulf Properties, Inc. 180,225
1,100 Parkway Properties, Inc. 36,369
4,500 Pennsylvania Real Estate Inv. 93,375
10,300 Prentiss Properties Trust 243,338
16,323 Prime Retail, Inc. 145,887
22,200 Prison Realty Trust 280,275
3,200 PS Business Parks, Inc. 79,600
6,500 Realty Income Corp. 155,594
10,200 Reckson Assoc Realty Corp., Class B 263,925
5,800 Redwood Trust, Inc. 96,425
5,300 Regency Realty Corp. 116,931
9,000 RFS Hotel Investors, Inc. 123,188
8,500 * Security Capital Group 125,906
7,200 Shurgard Storage Centers, Inc., Class A 195,750
4,500 Smith Charles E Realty, Inc. 155,531
3,100 Sovran Self Storage, Inc. 77,306
6,900 Storage USA, Inc. 230,288
5,600 Summit Properties, Inc. 108,850
6,900 Sun Communities, Inc. 252,281
8,100 Sunstone Hotel Investors, Inc. 73,406
7,700 Taubman Centers, Inc. 105,394
5,600 Thornburg Mortgage Asset Corp. 58,100
9,900 Town & Country Trust 167,063
6,200 * Trammell Crow Co. 114,700
5,300 TriNet Corporate Realty Trust 143,431
20,600 United Dominion Realty Trust 227,888
5,800 Urban Shopping Centers, Inc. 191,400
5,400 Walden Residential Properties 107,663
8,600 Washington Real Estate Inv. 152,650
4,900 Weeks Corp. 153,125
5,100 Weingarten Realty Investors 214,200
7,200 * Wellsford Real Properties, Inc. 75,150
4,400 Western Investment Real Estate 52,800
4,100 Westfield America, Inc. 68,163
-------------
13,794,589
-------------
RESTAURANTS - 1.10%
6,900 * Advantica Restaurant Corp. 31,913
6,350 Applebees International, Inc. 187,325
10,662 Avado Brands, Inc. 96,291
10,300 Bob Evans Farms, Inc. 198,275
11,780 * Buffets, Inc. 123,690
6,100 * Cheesecake Factory 168,513
5,250 * Consolidated Products, Inc. 97,125
8,400 * Foodmaker, Inc. 226,800
7,100 * Landrys Seafood Restaurants 64,788
7,900 * Lone Star Steakhouse & Saloon 79,494
10,000 Luby's, Inc. 170,000
2,900 * NPC International, Inc. 51,113
5,025 * Papa Johns International, Inc. 198,488
2,500 * PJ America, Inc. 58,594
8,500 * Rainforest Cafe, Inc. 46,219
7,500 Ruby Tuesday, Inc. 139,219
10,300 * Ryan's Family Steak Houses 120,381
3,500 * Sbarro, Inc. 95,375
4,925 * Sonic Corp. 135,591
8,900 Tcby Enterprises, Inc. 58,963
3,750 * Triarc Companies Inc., Class A 76,406
-------------
2,424,563
-------------
SAVINGS & LOAN - 0.79%
8,300 Bay View Capital Corp. 149,400
5,200 * Coast Federal Litigation-CVF 6,663
5,200 Dime Community Bancshares 115,050
5,155 Downey Financial Corp. 113,410
3,500 First Financial Holdings, Inc. 67,375
4,000 First Indiana Corp. 77,000
8,113 First Sentinel Bancorp, Inc. 66,932
9,000 * FirstFed Financial Corp. 169,875
2,900 JSB Financial, Inc. 148,625
8,900 * Local Financial Corp. 90,113
5,698 MAF Bancorp, Inc. 131,410
8,006 Provident Bankshares Corp. 185,139
4,422 Queens County Bancorp, Inc. 139,846
2,500 Reliance Bancorp, Inc. 70,313
10,200 Staten Island Bancorp, Inc. 196,350
2,400 * Wilshire Financial Services Group 900
-------------
1,728,401
-------------
SCHOOLS - 0.31%
14,000 * DeVry, Inc. 311,500
2,800 * Education Management Corp. 50,050
3,275 * ITT Educational Services, Inc. 77,986
9,225 * Sylvan Learning Systems, Inc. 251,381
-------------
690,917
-------------
SECURITIES RELATED - 1.42%
4,100 Dain Rauscher Corp. 213,456
51,000 * E*Trade Group, Inc. 2,269,498
6,200 Enhanced Financial Services 121,288
4,500 * Hambrecht & Quist Group 161,719
3,398 Investors Financial Services 119,780
6,950 Morgan Keegan, Inc. 128,141
5,700 * Pioneer Group, Inc. 100,463
-------------
3,114,345
-------------
SEMICONDUCTOR EQUIPMENT - 0.83%
3,000 * ATMI, Inc. 66,000
9,100 * LAM Research Corp. 252,525
12,300 * Microchip Technology, Inc. 539,662
9,300 * Novellus Systems, Inc. 453,955
4,600 * QLogic Corp. 504,849
-------------
1,816,991
-------------
SEMICONDUCTORS - 1.74%
5,300 * Actel Corp. 68,238
5,300 * Applied Micro Circuits Corp. 313,363
8,100 * Burr Brown Corp. 259,200
14,600 * Cirrus Logic, Inc. 109,500
3,100 Cohu, Inc. 92,225
6,850 * Credence Systems Corp. 202,931
6,900 * Cymer, Inc. 126,356
21,200 * Cypress Semiconductor Corp. 235,850
6,200 Dallas Semiconductor Corp. 269,700
10,800 * DSP Communications, Inc. 332,099
7,600 * Electroglas, Inc. 110,200
5,200 * Etec Systems, Inc. 139,425
6,200 * FSI International, Inc. 50,763
2,900 * Fusion Systems Corp. -
13,200 * International Rectifier Corp. 143,550
8,900 * Level One Communications, Inc. 402,724
5,900 * MRV Communications, Inc. 68,956
3,650 * SDL, Inc. 339,450
7,200 * Silicon Valley Group, Inc. 99,000
2,700 * Siliconix, Inc. 99,900
<PAGE> 88
MAY 31, 1999 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED 31
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
SEMICONDUCTORS - Continued
8,100 * Unitrode Corp. $ 168,581
9,200 * VLSI Technology, Inc. 192,625
-------------
3,824,636
-------------
TELECOMMUNICATIONS - 4.29%
5,400 ABM Industries, Inc. 147,488
4,300 * Adaptive Broadband Corp. 68,263
6,400 * Adtran, Inc. 164,800
4,600 * Aerial Communications, Inc. 50,025
25,670 * American Tower Corp., Class A 577,573
14,500 * Aspect Telecommunications Co. 123,250
12,800 * CellNet Data Systems, Inc. 113,600
8,400 * CellStar Corp. 65,625
6,400 Cellular Communication of Puerto Rico 180,800
7,800 * CommNet Cellular, Inc. 156,975
2,800 * Diamond Tech Partners, Inc. 67,200
3,700 * Dycom Industries, Inc. 178,525
15,400 * E. Spire Communication, Inc. 176,138
2,600 * EchoStar Communications Corp., Class A 298,349
2,700 * Excel Switching Corp. 59,400
17,000 * General Communication, Inc. 83,938
8,900 * General Magic, Inc. 32,819
4,700 * Geotel Communications Corp. 260,850
15,700 * Glenayre Technologies, Inc. 55,931
10,500 * ICG Communications, Inc. 200,155
5,300 Inter-Tel, Inc. 78,506
11,700 * ITC Deltacom, Inc. 279,338
3,100 * Itron, Inc. 25,769
6,700 * IXC Communications, Inc. 241,200
4,550 * MasTec, Inc. 110,338
4,000 * MGC Communications, Inc. 109,750
2,794 * Millicom International Cellular 100,584
7,700 * MMC Networks, Inc. 214,638
4,600 * Natural Microsystems Corp. 27,888
2,000 North Pittsburgh Systems 27,000
14,766 * NTL, Inc. 1,394,462
9,300 * Omnipoint Corp. 162,169
2,700 * Pacific Gateway Exchange, Inc. 106,313
12,800 * PageMart Wireless, Inc., Class A 59,200
15,900 * Pairgain Technologies, Inc. 197,755
4,400 * Plantronics, Inc. 269,499
6,000 * Powertel, Inc. 150,000
2,300 * Powerwave Technologies, Inc. 53,188
6,600 * Premier Technologies, Inc. 101,887
6,700 * Premisys Communications, Inc. 58,206
2,000 * Primus Telecommunications Gp 33,250
7,600 * RCN Corp. 315,874
14,200 * Skytel Communications, Inc. 288,437
8,600 * STAR Telecommunications, Inc. 76,325
1,625 Superior Telecom, Inc. 48,141
8,600 * Talk.com, Inc. 89,225
8,600 * Tekelec 87,075
5,500 * Telegroup, Inc. -
4,100 * Transaction Network Services 109,675
2,000 * US LEC Corp. 39,125
9,900 * USN Communications, Inc. 297
19,500 * Voicestream Wireless Corp. 532,594
19,500 Western Wireless Corp., Class A 477,750
10,400 * WinStar Communications, Inc. 514,150
-------------
9,441,312
-------------
TEXTILE - PRODUCTS - 0.49%
14,200 * Burlington Industries, Inc. 139,338
6,100 * Cone Mills Corp. 37,744
5,700 * Dan River Inc., Class A 52,369
4,850 G & K Services, Inc., Class A 229,162
7,650 Guilford Mills, Inc. 76,500
6,600 * Lydall, Inc. 79,613
7,700 Russell Corp. 180,469
4,700 Springs Industries, Inc., Class A 186,238
7,800 Wellman, Inc. 106,275
-------------
1,087,708
-------------
TOBACCO - 0.14%
12,100 DIMON, Inc. 63,525
6,001 * General Cigar Holdings, Inc. 48,008
7,300 Universal Corp. 190,713
-------------
302,246
-------------
TRUCKERS - 0.88%
7,500 * American Freightways Corp. 131,249
5,150 Arnold Industries, Inc. 84,975
7,800 * Consolidated Freightways Corp. 104,325
4,532 * Heartland Express, Inc. 69,396
750 * Knight Transportation, Inc. 14,859
3,200 * Landstar System, Inc. 120,400
2,300 * M.S. Carriers, Inc. 72,738
4,200 Roadway Express, Inc. 80,850
17,862 Rollins Truck Leasing Corp. 194,249
9,150 * Swift Transportation Co., Inc. 167,273
6,500 USFreightways Corp. 255,938
4,375 Varlen Corp. 165,156
10,587 Werner Enterprises, Inc. 204,461
3,500 * Xtra Corp. 155,750
6,500 * Yellow Corp. 110,500
-------------
1,932,119
-------------
UTILITIES - COMMUNICATION - 0.39%
1 A T & T Corp. 46
8,900 Aliant Communications, Inc. 422,749
6,200 * Alpine Group, Inc. 99,975
3,300 CFW Communications Co. 81,263
3,966 * Commonwealth Telephone Enterprises 156,161
5,178 PXRE Corp. 96,440
-------------
856,634
-------------
UTILITIES - ELECTRIC - 1.99%
5,400 Black Hills Corp. 124,200
3,400 CILCORP, Inc. 207,188
5,700 Cleco Corp. 188,456
4,600 Commonwealth Energy System Co. 194,925
5,200 Eastern Utilities Associates 150,150
15,100 * El Paso Electric Co. 129,294
4,400 Empire District Electric Co. 113,850
8,000 Hawaiian Electric Industries 294,000
7,500 Idacorp, Inc. 249,374
7,466 Indiana Energy, Inc. 165,185
7,425 Madison Gas & Electric Co. 157,781
22,000 Minnesota Power, Inc. 472,999
11,600 Nevada Power Co. 291,449
5,800 Northwestern Corp. 152,250
2,875 Otter Tail Power Co. 112,844
10,500 Public Service Co. of New Mexico 217,874
9,300 Rochester Gas & Electric Corp. 259,818
5,950 SIG Corp, Inc. 187,053
5,000 TNP Enterprises, Inc. 186,563
8,020 * Unisource Energy Corp. Holdings 100,250
3,600 United Illuminating Co. 157,725
11,200 Washington Gas Light Co. 273,700
-------------
4,386,928
-------------
UTILITIES - GAS, DISTRIBUTION - 0.61%
14,300 AGL Resources, Inc. 269,912
2,200 Colonial Gas Co. 75,625
2,400 Connecticut Energy Corp. 90,150
8,600 Energen Corp. 164,475
<PAGE> 89
32 SMALL CAP INDEX FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
UTILITIES - GAS, DISTRIBUTION - Continued
6,300 Northwest Natural Gas Co. $ 151,200
1,200 NUI Corp. 29,850
7,500 Piedmont Natural Gas Co., Inc. 253,594
5,200 Public Service Co. of NC 150,800
7,500 Southwestern Energy Co. 70,781
2,650 Yankee Energy Systems, Inc. 83,641
-------------
1,340,028
-------------
UTILITIES - GAS, PIPELINE - 0.27%
2,600 North Carolina Natural Gas 87,588
7,800 ONEOK, Inc. 234,000
7,300 Peoples Energy Corp. 281,050
-------------
602,638
-------------
UTILITIES - MISCELLANEOUS - 0.62%
4,300 Central Hudson Gas & Electric 181,406
4,300 * Group Maintenance America Corp. 58,588
12,075 MDU Resources Group, Inc. 276,216
3,500 Orange and Rockland Utilities 203,656
7,700 Sierra Pacific Resources 280,088
11,000 * Walter Industries, Inc. 144,375
6,600 WPS Resources Corp. 211,200
-------------
1,355,529
-------------
WATER SERVICES - 0.27%
4,500 Aquarion Co. 139,781
2,900 California Water Service Group 75,400
2,000 E'Town Corp. 85,625
6,300 Philadelphia Suburban Corp. 138,600
6,900 United Water Resources 150,075
-------------
589,481
-------------
TOTAL COMMON STOCK
(Cost $196,402,652) 219,098,559
-------------
PREFERRED STOCK - 0.06%
5,900 Price Enterprises, Inc. 88,869
778 Prime Retail, Inc. 13,080
689 Superior Trust 1, Class A 33,287
-------------
135,236
-------------
TOTAL PREFERRED STOCK
(Cost $116,203) 135,236
-------------
RIGHTS - 0.00%
3,000 Smart & Final, Inc. Rights 94
-------------
TOTAL RIGHTS
(Cost $0) 94
-------------
WARRANTS - 0.00%
519 American Satellite Network, Inc. Expiring 06/30/99 -
218 Coram Healthcare Corp Expiring 07/11/99. -
-------------
TOTAL WARRANTS
(Cost $0) -
-------------
PAR
VALUE
- ---------
CORPORATE SHORT TERM COMMERCIAL PAPER - 0.29%
AEROSPACE/DEFENSE - 0.29%
$639,000 TRW, Inc. Discount Note, 5.13% due 06/01/99 639,000
-------------
TOTAL CORPORATE SHORT TERM- COMMERCIAL PAPER
(Cost $639,000) 639,000
-------------
UNITED STATES GOVERNMENT - SHORT TERM - 0.07%
U. S. TREASURY BILLS - 0.07%
150,000 United States Treasury Bills,
4.17% due 06/10/99 149,843
TOTAL UNITED STATES GOVERNMENT - SHORT TERM
(Cost $149,843) 149,843
-------------
TOTAL INVESTMENTS - 100%
(Cost $197,307,698) 220,022,732
Other assets less liabilities,
net - (0.0%) (21,207)
-------------
NET ASSETS (equivalent
to $15.84 per share on
13,889,833 shares
outstanding) -100% $ 220,001,525
=============
* Non-income producing
UNREALIZED
CONTRACTS DEPRECIATION
- --------- -------------
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/99)
3(2) Russell 2000 Index Futures
(June/$440.85) $ (8,825)
=============
(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
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
13,889,833 shares outstanding $ 138,898
Additional paid in capital 176,140,360
Undistributed net realized gain on securities 21,013,536
Undistributed net investment income 2,522
Unrealized appreciation (depreciation) of:
Investments $ 22,715,034
Futures (8,825) 22,706,209
------------ -------------
NET ASSETS APPLICABLE
TO SHARES Outstanding $ 220,001,525
=============
<PAGE> 90
SMALL CAP INDEX FUND - FINANCIAL STATEMENTS 33
INVESTMENT INCOME:
Dividends $ 3,133,159
Interest 349,880
-------------
Total investment income 3,483,039
-------------
EXPENSES:
Advisory fees 752,025
Custodian fees 17,794
Registration and filing fees 10,948
Audit fees and tax services 5,171
Accounting services 38,011
Directors' fees and expenses 5,911
Directors' retirement plan expenses 1,952
Reports to shareholders 54,359
Miscellaneous 9,119
-------------
Total expenses 895,290
-------------
NET INVESTMENT INCOME 2,587,749
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain (loss) on securities:
Investments $ 21,590,474
Futures contracts (837,243) 20,753,231
------------- -------------
Net unrealized (depreciation) appreciation of securities during the year:
Investments (31,211,883)
Futures contracts 302,400 (30,909,483)
------------- -------------
Net realized and unrealized loss on securities during the year (10,156,252)
-------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (7,568,503)
=============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,587,749 $ 2,380,770
Net realized gain on securities 20,753,231 19,072,915
Net unrealized appreciation (depreciation)
of securities during the year (30,909,483) 19,625,858
------------- -------------
Increase (decrease) in net assets resulting from operations (7,568,503) 41,079,543
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,617,126) (2,367,516)
Net realized gain on securities (18,436,501) (17,477,319)
------------- -------------
Decrease in net assets resulting from
distributions to shareholders (21,053,627) (19,844,835)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 30,591,343 39,604,509
Proceeds from capital stock issued
for distributions reinvested 21,053,627 19,844,835
------------- -------------
51,644,970 59,449,344
Cost of capital stock repurchased (50,203,873) (25,960,237)
------------- -------------
Increase in net assets resulting
from capital stock transactions 1,441,097 33,489,107
------------- -------------
Total Increase (decrease) in Net Assets (27,181,033) 54,723,815
NET ASSETS:
Beginning of year 247,182,558 192,458,743
------------- -------------
End of year (including undistributed net
investment income of $2,522 and $31,899) $ 220,001,525 $ 247,182,558
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 1,985,030 2,173,506
Shares issued for distributions reinvested 1,409,310 1,157,942
Shares of capital stock repurchased (3,281,424) (1,447,855)
------------- -------------
Increase in shares outstanding 112,916 1,883,593
Shares outstanding:
Beginning of year 13,776,917 11,893,324
------------- -------------
End of year 13,889,833 13,776,917
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 91
34 INTERNATIONAL EQUITIES FUND - STATEMENT OF NET ASSETS MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
COMMON STOCK - 98.58%
AIRLINES - 0.78%
30,000 Alitalia Linee $ 87,883
4,100 British Airways plc - ADR 297,250
40,000 Japan Air Lines Co., Ltd. 125,093
10,000 Lufthansa Ag 214,755
60,000 Malay Airline System Bhd 73,895
35,000 Singapore Airlines 312,826
-------------
1,111,702
-------------
APPAREL & PRODUCTS - 0.28%
20,000 Onward Kashiyama Co., Ltd. 231,654
250 Swatch Group 165,222
-------------
396,876
-------------
APPLIANCES/FURNISHINGS - 0.66%
4,200 Matsushita Electric Industrial Co. Ltd. - ADR 764,137
33,000 Sanyo Electric Co., Ltd. 118,764
3,400 Sanyo Electric Co., Ltd. - ADR 59,925
-------------
942,826
-------------
AUTO - CARS - 3.82%
300 * Bayer Motoren Werk 192,028
16,582 Daimler Chrysler Ag Stuttgart 1,449,889
10,000 Honda Motor Co., Ltd. - ADR 821,250
500 Peugeot Citroen SA 74,018
200 Porche AG 455,572
78,000 Toyota Motor Corp. 2,129,561
5,000 Volkswagen Ag 309,622
-------------
5,431,940
-------------
AUTO - ORIGINAL EQUIPMENT - 0.05%
25,000 Calsonic Corp. 71,978
-------------
AUTO - REPLACEMENT PARTS - 1.02%
26,000 Bridgestone Corp. 681,889
5,550 Denso Corp. 410,669
8,191 Michelin (CGDE), Class B 361,034
-------------
1,453,592
-------------
BANKS - OTHER - 13.44%
60,000 AMMB Holdings BHD 114,474
50,000 Asahi Bank, Ltd. 237,859
3,190 Asahi Bank, Ltd. - ADR 151,817
106,000 Bank of Tokyo - Mitsubishi 1,420,700
68,000 Bank of Yokohama, Ltd. 180,028
2,296 Bank of Yokohama, Ltd. - ADR 60,811
39,426 Barclays plc 1,197,163
50,000 Bco Bilbao Vizcaya 720,888
11,977 Bco Comm Portugues 325,885
4,000 Bco Espir Santo 97,995
41,610 Bco Santander S A 867,568
40,000 Chiba Bank, Ltd. 157,525
108,000 * Commerce Asset Holding 228,789
50,000 Credito Italiano 235,084
250,000 DCB Holdings BHD 273,684
6,300 Den Danske Bank - ADR 677,370
24,500 Deutsche Bank AG - ADR 1,253,557
13,000 Development Bank of Singapore, Ltd. 134,301
14,987 Development Bank of Singapore, Ltd. - ADR 618,690
17,000 Dresdner Bank AG - ADR 632,803
10,000 Foreningssparbk 204,694
25,000 Hang Seng Bank 267,575
1,180 HSBC Holdings plc - ADR 386,512
15,000 Industrial Bank of Japan, Ltd. 106,106
48,000 Joyo Bank 194,589
136,178 Lloyds TSB Group plc 1,817,647
60,000 Malayan Bk Bhd 167,368
35,000 Merita Oyj 207,249
32,867 National Australia Bank, Ltd. 532,397
9,319 National Australia Bank, Ltd. - ADR 752,509
10,915 National Westminster Bank plc 247,650
21,131 Royal Bank Scot Group 450,328
98,000 Sakura Bank, Ltd. 332,423
25,000 Sao Paolo Imi Spa 337,509
30,000 Shizuoka Bank 314,718
54,000 Sumitomo Bank 653,611
26,000 Tokai Bank 151,866
2,225 Tokai Bank - ADR 260,031
5,653 Ubs Ag 1,634,959
13,300 Westpac Banking Corp., Ltd. - ADR 455,525
-------------
19,062,257
-------------
BANKS - REGIONAL - 0.90%
60,000 Bca Intensa Spa 204,090
10,000 Bca Pop Di Brescia 394,586
3,000 * Cobepa Cis Belge 105,740
21,160 Instituto Bancario San Paolo 577,933
-------------
1,282,349
-------------
BEVERAGE - BREWERS/ DISTRIBUTORS - 0.95%
34,642 Bass 510,680
61,154 Diageo 643,795
45,000 Sapporo Breweries 200,298
-------------
1,354,773
-------------
BROADCASTING - 0.38%
764 Canal Plus 221,020
40,000 Mediaset 324,009
-------------
545,029
-------------
BUILDING MATERIALS - 2.00%
20,000 Asahi Glass Co., Ltd. 129,561
1,223 Cie De St Gobain 191,884
31,463 CRH plc 537,102
2,505 Fletcher Challenge Building Division 38,827
2,700 Glaverbel SA 262,757
525 * Holderbank Finance Glarus 623,851
40,000 Inax Corp. 272,028
4,459 Lafarge SA 401,631
23,797 Rexam 93,040
15,000 Tostem Corp. 288,533
-------------
2,839,214
-------------
CHEMICAL - MAJOR - 1.23%
25,000 BASF AG 972,131
10,000 Bayer AG 388,852
10,000 Bayer AG - ADR 390,012
-------------
1,750,995
-------------
CHEMICAL - MISCELLANEOUS - 1.55%
15,303 Air Liquide - ADR 462,108
10,200 Akzo Nobel N V- ADR 423,300
23,420 BOC Group plc 400,414
6,000 Imperial Chemical Industries plc - ADR 263,625
13,100 Shin Etsu Chemical Co. 406,428
50,000 Toray Industries, Inc. 242,823
-------------
2,198,698
-------------
<PAGE> 92
MAY 31, 1999 INTERNATIONAL EQUITIES FUND - STATEMENT OF NET ASSETS CONTINUED 35
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
CONGLOMERATES - 2.50%
7,500 Degussa Huls Ag $ 296,721
6,890 Broken Hill Proprietary Co., Ltd. - ADR 142,968
30,000 Hutchison Whampoa 250,488
16,424 * Invensys Plc 149,618
3,300 Itochu Corp. - ADR 75,112
71,250 Keppel Corp., Ltd. 203,453
26,875 Keppel Corp., Ltd. - ADR 153,327
8,157 Lagardere Groupe 318,463
22,000 Mitsubishi Corp. 133,780
50,000 Mitsui & Co. 319,765
20,565 * Vivendi 1,466,782
6,400 Wharf Holdings 3,301
-------------
3,513,778
-------------
CONSUMER FINANCE - 0.08%
37,000 Nippon Shinpan Co. 117,548
-------------
COSMETICS/TOILETRIES - 1.29%
1,100 Loreal Co. 662,248
7,900 Loreal Co. - ADR 954,066
14,490 Shiseido Ltd. - ADR 214,675
-------------
1,830,989
-------------
DRUGS - 7.39%
20,900 * Astrazeneca Plc 822,937
44,900 Glaxo Wellcome plc - ADR 2,525,625
7,700 Kissei Pharmaceutical Co. 162,447
1,400 Novartis Ag 2,030,034
5,000 Ono Pharmaceutical 179,946
200 Roche Holdings AG 2,114,837
10,000 Sankyo Co., Ltd. 235,377
100,520 Smithkline Beecham 1,308,680
25,000 Takeda Chemical Industries, Ltd. 1,110,698
-------------
10,490,581
-------------
ELECTRICAL EQUIPMENT - 1.85%
1,000 Barco 156,375
15,000 Fanuc 646,562
84,000 General Electric plc 794,125
10,400 General Electric plc - ADR 98,240
10,000 Murata Manufacturing Co. 551,833
3,400 Sumitomo Electric Industries Ltd.- ADR 381,030
-------------
2,628,165
-------------
ELECTRONIC INSTRUMENTS - 2.05%
50,000 Hitachi Ltd. 367,750
5,050 Hitachi Ltd. - ADR 368,966
6,000 Kyocera Corp. 314,718
50,000 Racal Electronics plc 300,841
7,110 Schneider SA 422,494
8,000 Siemens AG 537,930
7,000 Siemens AG - ADR 472,093
25,000 Yokogawa Electric 123,687
-------------
2,908,479
-------------
FINANCE COMPANIES - 3.61%
30,000 Abbey National 617,706
45,051 ABN Amro Holdings N V 998,020
38,879 Allied Zurich 495,579
9,907 Allied Zurich Plc 249,238
2,000 Bqe Natl Paris 168,468
126 Credit Local de France 17,497
16,572 Fortis 538,157
20,578 ING Groep NV 1,099,444
3,984 Societe Generale 723,508
3,000 Unidanmark 210,438
-------------
5,118,055
-------------
FOODS - 2.97%
25,000 Ajinomoto, Inc. 267,229
45,112 Cadbury Schweppes plc 305,948
3,929 Cadbury Schweppes plc - ADR 217,814
10,000 Daiei, Inc. 28,957
11,500 Daiei, Inc. - ADR 69,719
100,000 Golden Hope Plantations 88,421
1,000 Groupe Danone 275,220
20,000 Nestle S A - ADR 1,801,736
30,750 Tate & Lyle plc 202,016
14,642 Unilever N V 968,202
-------------
4,225,262
-------------
FREIGHT - 0.88%
98,000 Mitsui Osk Lines, Ltd. 220,534
40,000 Nippon Yusen Kabushiki Kaish 162,158
8,570 Nippon Yusen Kabushiki Kaish - ADR 347,567
35,178 P & O Steam Navigation 514,635
-------------
1,244,894
-------------
HOME BUILDERS - 0.39%
214 Sekisui Homes, Ltd. - ADR 23,239
20,000 Sekisui House, Ltd. 217,093
9,000 Skanska Ab 314,019
-------------
554,351
-------------
HOUSEHOLD PRODUCTS - 0.17%
8,000 Electrolux Ab 154,916
7,000 Katokichi Co. 93,125
-------------
248,041
-------------
INFORMATION PROCESSING - 0.83%
1,200 Cap Gemini 172,763
14,000 Fujitsu, Ltd. 233,970
7,200 Fujitsu, Ltd. - ADR 601,887
1,500 * Nintendo Co. 176,222
-------------
1,184,842
-------------
INSURANCE - CASUALTY - 0.32%
25,000 Mitsui Marine & Fire 125,755
50,000 Nippon Fire & Marine Insurance 166,708
25,000 Sumitomo Marine & Fire 162,985
-------------
455,448
-------------
INSURANCE - LIFE - 1.37%
955 Irish Life plc 7,498
41,082 * Irish Life 518,723
2,500 * Mundial Confianca 71,881
15,240 Prudential plc - ADR 1,004,302
20,000 Skandia Forsakring 343,095
-------------
1,945,499
-------------
INSURANCE - MULTILINE - 3.48%
3,088 Allianz AG 843,440
27,313 Assic Generali 970,956
10,962 AXA 1,262,781
60,000 * Ina Ist Naz Ass 140,112
3,180 * Munchener Ruckvers 531,956
52,135 Royal Sun Alliance 424,961
400 Swiss Reinsurance AG 758,253
-------------
4,932,459
-------------
LEISURE TIME - 1.25%
20,000 Canon, Inc. - ADR 502,500
15,000 Fuji Photo 536,113
55,322 Ladbroke Group plc 239,342
90,052 Rank Group 326,107
25,000 Tab Corporation Holdings Limited 173,985
-------------
1,778,047
-------------
<PAGE> 93
36 INTERNATIONAL EQUITIES FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
LODGING - 0.25%
297,916 Hong Kong & Shanghai Hotels $ 218,975
180,000 Hotel Properties 138,944
-------------
357,919
-------------
MACHINE TOOLS - 0.45%
35,000 Amada Co., Ltd. 217,176
16,000 Makita Corp. - ADR 171,000
25,000 Minebea Co., Ltd. 248,614
-------------
636,790
-------------
MACHINERY - CONSTRUCTION & CONTRACTS - 0.78%
10,000 Cardo Ab 201,205
2,000 Groupe Gtm 200,160
2,000 Jean Lefebvre SA 191,820
52,000 Kajima Corp. 156,598
2,340 Kajima Corp. - ADR 70,498
96,000 Kumagai Gumi Co. 38,128
70,000 Shimizu Corp. 247,291
-------------
1,105,700
-------------
MACHINERY - INDUSTRIAL/ SPECIALTY - 2.81 %
10,000 Atlas Copco AB Series A 250,052
125 Bobst SA 153,771
61,837 British Aerospace 408,229
8,000 Ebara Corp. 90,345
2,530 Ebara Corp. - ADR 285,834
100,000 Halma plc 149,820
50,000 Kawasaki Heavy Industries 112,931
70,000 Kubota Corp. 203,855
1,350 Kubota Corp. - ADR 76,950
7,000 * Kvaerner Asa 115,570
7,500 * Man AG 219,707
10,000 Mannesmann AG 1,365,674
612 Rauma Oy 6,763
549 Rolls Royce 2,327
120,716 Siebe plc 551,274
-------------
3,993,102
-------------
MEDICAL TECHNOLOGY - 0.01%
20,000 * Instrumentation Laboratory SpA 17,500
-------------
MERCHANDISE - SPECIALTY - 0.89%
43,378 BAA plc 465,695
10,000 Esselte AB Series B 153,521
20,000 Great Universal Stores plc 213,433
1,500 Herlitz AG 50,040
6,000 Metro AG 378,427
-------------
1,261,116
-------------
MERCHANDISING - DEPARTMENT - 0.61%
500 Karstadt AG 206,415
15,311 Marks & Spencer plc 96,662
5,033 Marks & Spencer plc - ADR 190,292
16,000 Marui Co., Ltd. 240,523
36,000 Mitsukoshi, Ltd. 125,987
200 Mitsukoshi, Ltd. - ADR 7,002
-------------
866,881
-------------
MERCHANDISING - FOOD - 1.11%
16,400 Ahold Kon Nv 571,879
10,000 Delhaize-Le Lion, S.A. 859,020
15,000 Melco International Development Limited 1,606
10,000 Uny Co., Ltd. 150,161
-------------
1,582,666
-------------
MERCHANDISING - MASS - 2.35%
9,300 * Carrefour 1,219,662
4,356 Familymart Co. 181,996
40,000 * Hennes Mauritz 897,862
10,200 Ito-Yokado Co., Ltd. - ADR 614,550
8,666 Jeronimo Martins Sgps 309,063
20,000 Seiyu, Ltd. 119,136
-------------
3,342,269
-------------
METALS - MISCELLANEOUS - 1.01%
200 Alusuisse Lonza Holdings 233,601
7,816 * Boliden Limited 17,544
8,062 Rio Tinto Limited 453,318
13,132 Rio Tinto plc 486,884
67,410 Western Mining 249,969
-------------
1,441,316
-------------
METALS - STEEL - 0.50%
500 Bekaert SA 208,500
36,700 British Steel plc 78,506
2,000 Britih Steel plc - ADR 43,375
78,000 Sumitomo Metal Industries, Ltd. 102,606
50,000 Sumitomo Metal Mining 204,352
2,000 Vallourec Usin 70,056
-------------
707,395
-------------
MISCELLANEOUS - 0.91%
2,734 Preussag Ag 141,085
8,000 Secom Co. 761,148
15,718 Tnt Post Groer Nv 394,903
-------------
1,297,136
-------------
OIL - INTEGRATED INTERNATIONAL - 6.03%
28,089 Bp Amoco Plc 3,009,034
16,946 Elf Aquitaine SA - ADR 1,203,166
225,000 Eni S.p.A. 1,405,029
25,000 Fortum Oyj 135,525
30,000 Repsol S A - ADR 540,000
20,392 Royal Dutch Pete Co 1,153,423
9,207 Total 1,118,201
-------------
8,564,378
-------------
OIL/GAS PRODUCERS - 0.57%
20 Dampsskibselkabet (D/S 1912) 168,089
2,505 Fletcher Challenge Energy Division 60,746
3,500 Norsk Hydro A/S - ADR 140,219
3,000 OMV AG 251,138
62,500 Santos, Ltd. 193,815
-------------
814,007
-------------
PAPER/FOREST PRODUCTS - 0.86%
150,801 Fletcher Challenge Forest, Ltd. 76,781
4,326 Fletcher Challenge Ltd. - ADR 21,900
5,010 Fletcher Challenge Paper Division 43,837
22,000 New Oji Paper Co., Ltd. 127,410
300 New Oji Paper Co., Ltd. - ADR 17,381
60,000 Nippon Paper Industries 295,359
22,000 UPM - Kymmene Corp. 644,473
-------------
1,227,141
-------------
POLLUTION CONTROL- 0.12%
1,000 Lyonnaise Des Eaux SA 165,653
-------------
<PAGE> 94
MAY 31, 1999 INTERNATIONAL EQUITIES FUND - STATEMENT OF NET ASSETS CONTINUED 37
NUMBER MARKET
OF SHARES VALUE
- ---------- -------------
PUBLISHING - NEWS - 0.87%
52,378 Independent Newspapers plc $ 270,290
22,500 News Corp Ltd. - ADR 746,719
21,379 United News & Media plc 218,557
-------------
1,235,566
-------------
PUBLISHING/PRINTING - 0.78%
43,333 Reuters Group 595,750
20,000 Trelleborg Ab 177,944
8,232 * Wolters Kluwer 330,831
-------------
1,104,525
-------------
RAILROAD - 0.43%
30,000 Fukuyama Transporting Co. 152,395
9,218 Nagoya Railroad Co. Ltd. - ADR 307,470
60,000 Tokyu Corp. 155,870
-------------
615,735
-------------
REAL ESTATE - 1.47%
6,000 * Asticus Ab 81,296
12,000 Diligentia 90,717
9,000 Drott Ab 76,935
35,000 Great Portland Est. 128,148
42,102 Hammerson plc 310,326
240,000 Hang Lung Development Co. 278,535
43,000 Mitsubishi Estate Co., Ltd. 409,117
35,000 Mitsui Fudosan 292,174
27,095 New World Development Co. 66,210
44,498 Sun Hung Kai Properties, Ltd. 355,761
-------------
2,089,219
-------------
SECURITIES RELATED - 0.43%
25,000 Daiwa Securities Co., Ltd. 131,960
2,137 Garban 9,074
3,800 Nomura Securities Co., Ltd. - ADR 379,308
160,000 Peregrine Investment Holdings, Ltd. 88,719
6,000 Yamaichi Securities Co., Ltd. - ADR -
-------------
609,061
-------------
TELECOMMUNICATIONS - 12.57%
3,000 Alcatel Alst Cge 356,535
36,344 British Telecommunications plc 602,159
11,379 British Telecommunications plc - ADR 1,911,672
46,822 Cable & Wireless plc 576,194
40,000 Deutsche Telekom 1,595,024
20,000 * Europolitan Holdings 167,477
15,000 France Telecom 1,149,356
11,423 Hong Kong Telecommunications, Ltd. - ADR 270,582
15,857 Kon Kpn Nv 765,382
5,000 * Netcom Asa 160,672
300 Nippon Tel+Tel Cp 2,928,767
29,000 * Nokia Ab Oy 2,061,856
500 Swisscom Ag 179,944
2,600 Telecom Corp. of New Zealand, Ltd. - ADR 90,025
125,000 Telecom Italia Mobile 734,962
20,400 Telefonaktiebolage & Ericsson, Class B - ADR 549,525
14,280 Telefonica de Espana 684,499
6,543 Telefonica de Espana - ADR 943,871
285 Telefonica Sa 13,816
115,000 Telekom Malaysia Berhad 393,421
9,000 Vodafone Group plc - ADR 1,722,375
-------------
17,858,114
-------------
TEXTILE - PRODUCTS - 0.14%
20,000 Courtaulds Textiles plc 43,263
15,000 Wacoal Corp. 161,579
-------------
204,842
-------------
TOBACCO - 0.46%
38,879 British America Tobacco 356,966
9,908 British America Tobacco plc 183,917
32,000 Swedish Match AB 116,490
-------------
657,373
-------------
UTILITIES - COMMUNICATION - 0.13%
1,500 Telecel Comuni Pes 188,745
-------------
UTILITIES - ELECTRIC - 3.33%
55,000 Clp Holdings 265,253
48,000 Endesa S A 1,035,000
30,000 Iberdrola SA 429,718
16,600 Kansai Electric Power Co., Inc. 341,284
62,265 National Power 486,381
2,000 Oesterreichisch Elektrizitatswirt Schafts - AG Class A 261,667
10,000 RWE AG - ADR 448,044
48,488 Scottish Power plc 416,833
95,000 Tenaga Nasional Berhad 216,250
25,200 Tokyo Electric Power 549,367
5,000 * VEBA AG 285,124
-------------
4,734,921
-------------
UTILITIES - GAS, DISTRIBUTION - 0.23%
44,117 Bg 242,470
27,000 Osaka Gas Co. 87,565
-------------
330,035
-------------
UTILITIES - MISCELLANEOUS - 0.14%
1,500 Tractebel Inv International 198,283
-------------
WATER SERVICES - 0.85%
22,702 Hyder plc 271,733
24,545 Thames Water 388,577
45,183 United Utilities plc 544,441
-------------
1,204,751
-------------
TOTAL COMMON STOCK
(Cost $106,950,745) 140,030,806
-------------
RIGHTS - 0.00%
19,047 Vivendi 19,856
-------------
TOTAL RIGHTS
(Cost $13,550) 19,856
-------------
WARRANTS - 0.00%
11,250 Commerce Asset Holding 7,372
50,000 DCB Holdings 27,500
76 Eaux (Cie Generale) 164
-------------
TOTAL WARRANTS
(Cost $18,218) 35,036
-------------
TOTAL INVESTMENTS
(Cost $106,982,513) 140,085,698
Other assets less liabilities, net - 2.34% 2,021,928
-------------
NET ASSETS (equivalent to $11.32 per share on
12,559,144 shares outstanding) - 100% $ 142,107,626
=============
* Non-income producing
<PAGE> 95
38 INTERNATIONAL EQUITIES FUND - STATEMENT OF NET ASSETS CONTINUED MAY 31, 1999
FOWARD CURRENCY CONTRACTS
SETTLEMENT FACE MARKET UNREALIZED
LONG/SHORT DATE VALUE VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
1,000,000 Eur/1,062,330 usd 06/03/99 $1,062,330 $1,042,500 $(19,830)
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
12,559,144 shares outstanding $ 125,591
Additional paid in capital 101,103,047
Undistributed net realized gain on securities 7,672,498
Undistributed net investment income 132,461
Unrealized appreciation (depreciation) of:
Investments $ 33,103,185
Forward contracts (19,830)
Foreign currency translation (9,326) 33,074,029
------------ --------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 142,107,626
==============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 96
INTERNATIONAL EQUITIES FUND - STATEMENT 39
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $330,256) $ 2,690,383
Interest 670,482
-------------
Total investment income 3,360,865
-------------
EXPENSES:
Advisory fees 509,578
Custodian fees 12,758
Registration and filing fees 800
Audit fees and tax services 3,245
Accounting services 25,429
Directors' fees and expenses 3,861
Directors' retirement plan expenses 13,997
Report to shareholders 36,550
Miscellaneous 14,192
-------------
Total expenses 620,410
-------------
NET INVESTMENT INCOME 2,740,455
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments $ 8,270,169
Foreign currency transactions 93,841
Futures contracts (254,506) 8,109,504
-----------
Net unrealized appreciation (depreciation) of securities during the year:
Investments (4,565,679)
Forward contracts (19,830)
Foreign currency translation 18,737
Futures contracts 121,309 (4,445,463)
---------- -------------
Net realized and unrealized gain on securities and
foreign currencies during the year 3,664,041
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,404,496
=============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal yeard ended May 31:
1999 1998
-------------------------------
OPERATIONS:
Net investment income $ 2,740,455 $ 3,180,171
Net realized gain on securities and
foreign currency transactions 8,109,504 10,927,955
Net unrealized appreciation of
securities and translation of foreign
currencies during the year (4,445,463) 1,477,313
-------------------------------
Increase in net assets resulting
from operations 6,404,496 15,585,439
-------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,076,811) (3,388,878)
Net realized gain on securities (11,030,196) (4,595,687)
-------------------------------
Decrease in net assets resulting
from distributions to shareholders (14,107,007) (7,984,565)
-------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 82,990,722 58,848,665
Proceeds from capital stock issued for
distributions reinvested 14,107,007 7,984,565
-------------------------------
97,097,729 66,833,230
Cost of capital stock repurchased (102,756,759) (100,401,920)
-------------------------------
Decrease in net assets resulting
from capital stock transactions (5,659,030) (33,568,690)
-------------------------------
TOTAL DECREASE IN NET ASSETS (13,361,541) (25,967,816)
NET ASSETS:
Beginning of year 155,469,167 181,436,983
-------------------------------
End of year (including undistributed net
investment income of $132,461 and $468,817) $142,107,626 $155,469,167
===============================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 7,190,824 5,111,681
Shares issued for distributions reinvested 1,245,781 728,332
Shares of capital stock repurchased (8,886,737) (8,688,179)
-------------------------------
Decrease in shares outstanding (450,132) (2,848,166)
Shares outstanding:
Beginning of year 13,009,276 15,857,442
-------------------------------
End of year 12,559,144 13,009,276
===============================
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 97
40 GROWTH FUND - STATEMENT OF NET ASSETS MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.30%
ADVERTISING - 4.96%
480,000* ADVO, Inc. $ 9,510,000
285,000* Catalina Marketing Corp. 25,240,312
945,000* Outdoor Systems, Inc. 28,290,938
------------
63,041,250
------------
AUTO - CARS - 1.39%
615,000* Avis Rent A Car, Inc. 17,642,812
------------
AUTO - REPLACEMENT PARTS - 0.31%
134,400* AutoZone, Inc. 3,889,200
------------
BANKS - OTHER - 1.49%
475,000 Wells Fargo Company 19,000,000
------------
BROADCASTING - 7.62%
600,000* Chancellor Media Corp., Class A 30,487,500
347,194* Clear Channel Communications, Inc. 22,936,503
690,000 Comcast Corp., Class A 26,565,000
660,000* Infinity Broadcasting Corp. 16,871,250
------------
96,860,253
------------
ENTERTAINMENT - 2.34%
275,000 Carnival Corp., Class A 11,275,000
725,000* Fox Entertainment Group, Inc. 18,487,500
------------
29,762,500
------------
FINANCE COMPANIES - 2.02%
520,000 Associates First Capital Corp. 21,320,000
64,000* Goldman Sachs Group, Inc. 4,348,000
------------
25,668,000
------------
FINANCIAL SERVICES - 3.51%
796,900 CIT Group, Inc. 23,110,100
50,000* Donaldson, Lufkin & Jenrette, Inc. 2,062,500
200,000 Waddell & Reed Financial, Inc., Class A 4,900,000
605,000 Waddell & Reed Financial, Inc., Class B 14,595,624
------------
44,668,224
------------
FREIGHT - 0.72%
313,300* Coach USA, Inc. $ 9,124,862
------------
GOVERNMENT SPONSORED - 3.46%
485,000 Federal Home Loan Mortgage Corp. 28,281,562
230,000 Federal National Mortgage Association 15,640,000
------------
43,921,562
------------
HEALTHCARE - 3.56%
200,000 Cardinal Health, Inc. 12,075,000
295,000 IMS Health, Inc. 7,264,374
487,000 Omnicare, Inc. 11,657,563
925,000* Total Renal Care Holdings, Inc. 14,221,875
------------
45,218,812
------------
HOUSEHOLD PRODUCTS - 1.03%
725,000 ServiceMaster Co. 13,140,625
------------
HUMAN RESOURCES - 4.76%
725,000* Interim Services, Inc. 15,814,063
650,000* Metamor Worldwide, Inc. 17,793,750
1,200,000* Modis Professional Services, Inc. 17,700,000
325,000* Robert Half International, Inc. 9,160,938
------------
60,468,751
------------
INFORMATION PROCESSING - 1.65%
775,000* Acxiom Corp. 20,925,000
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 5.79%
180,000* Ceridian Corp. 5,940,000
530,000 First Data Corp. 23,816,875
559,200* Gartner Group, Inc., Class A 12,861,600
337,500 Paychex, Inc. 9,998,438
600,000* SunGard Data Systems, Inc. 21,000,000
------------
73,616,913
------------
INFORMATION PROCESSING -
DATA SERVICES - 8.74%
610,000* Affiliated Computer Services, Inc., Class A 26,458,750
420,000* BISYS Group, Inc. 23,060,625
1,660,000* Cendant Corp. 30,606,250
545,000 Galileo International, Inc. 24,525,000
287,600* NOVA Corp. 6,399,100
------------
111,049,725
------------
INSURANCE - MISCELLANEOUS - 1.74%
265,000 MGIC Investment Corp. $ 12,753,125
305,000 Ace Limited 9,302,500
------------
22,055,625
------------
INSURANCE - MULTILINE - 0.31%
13,900* Fairfax Financial Holdings, Ltd. 3,903,403
------------
LEISURE TIME - 2.30%
385,250* Mirage Resorts, Inc. 7,897,625
600,000* Premier Parks, Inc. 21,375,000
------------
29,272,625
------------
LODGING - 1.00%
1,200,000* Extended Stay America, Inc. 12,750,000
------------
MERCHANDISE - DRUG - 0.54%
150,000 CVS Corp. 6,900,000
------------
MERCHANDISE - SPECIALTY - 9.89%
410,000 Circuit City Stores, Inc. 29,443,125
600,000* Cole National Corp., Class A 5,512,500
305,000* CostCo Companies, Inc. 22,112,500
336,200* General Nutrition Companies, Inc. 5,568,313
420,000 Home Depot, Inc. 23,887,500
1,477,500* Office Depot, Inc. 30,842,813
277,000* Williams-Sonoma, Inc. 8,258,063
------------
125,624,814
------------
MERCHANDISING - FOOD - 2.66%
420,000* Kroger Co. 24,596,250
198,500* Safeway, Inc. 9,230,250
------------
33,826,500
------------
MISCELLANEOUS - 2.86%
1,075,000* Apollo Group, Inc., Class A 30,032,813
177,000 Equifax, Inc. 6,372,000
------------
36,404,813
------------
OIL - SERVICES - 2.01%
254,700 Schlumberger, Ltd. 15,329,756
237,200* Smith International, Inc. 10,258,900
------------
25,588,656
------------
<PAGE> 98
MAY 31, 1999 41
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
POLLUTION CONTROL - 4.28%
219,600* Allied Waste Industries, Inc. $ 4,090,050
790,000* Republic Services Inc., Class A 18,565,000
600,000 Waste Management, Inc. 31,725,000
------------
54,380,050
------------
RESTAURANTS - 1.91%
675,000* Outback Steakhouse, Inc. 24,215,625
------------
SCHOOLS - 1.35%
630,000* Sylvan Learning Systems, Inc. 17,167,500
------------
SECURITIES RELATED - 2.93%
325,000 Franklin Resources, Inc. 14,137,500
240,000 Morgan Stanley Dean Witter & Co. 23,160,000
------------
37,297,500
------------
TELECOMMUNICATIONS - 8.14%
350,000* Airtouch Communications, Inc. 35,175,000
400,000* MCI Worldcom, Inc. 34,550,000
625,400* Voicestream Wireless Corp. 17,081,238
680,000 Western Wireless Corp., Class A 16,660,000
------------
103,466,238
------------
UTILITIES - COMMUNICATION - 3.03%
580,000* AT&T Corp. 38,533,750
------------
TOTAL COMMON STOCK
(Cost $855,398,140) 1,249,385,588
-------------
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 1.21%
AEROSPACE/DEFENSE - 1.17%
$14,813,000 TRW, Inc.,
5.13% due 06/01/99 $ 14,813,000
------------
METALS - STEEL - 0.04%
557,000 Harsco Corp.,
4.85% due 06/04/99 556,775
------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $15,369,775) 15,369,775
------------
TOTAL INVESTMENTS
(Cost $870,767,915) - 99.51% 1,264,755,363
Other assets less liabilities,
net - 0.49% 6,278,612
------------
NET ASSETS (equivalent
to $24.12 per share on
52,689,887 shares
outstanding) - 100.00% $1,271,033,975
==============
* Non-income producing
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
52,689,887 shares outstanding $ 526,899
Additional paid in capital 826,205,678
Undistributed net realized gain on securities 51,429,732
Accumulated net investment loss (1,115,782)
Unrealized appreciation of securities 393,987,448
--------------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $1,271,033,975
==============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 99
42 GROWTH FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 3,111,546
Interest 2,631,710
------------
Total investment income 5,743,256
------------
EXPENSES:
Advisory fees 9,178,668
Custodian fees 93,880
Registration and filing fees 27,023
Audit fees and tax services 30,692
Accounting services 202,205
Directors' fees and expenses 30,014
Directors' retirement plan expenses 115,378
Report to shareholders 188,042
Miscellaneous 42,234
------------
Total expenses 9,908,136
------------
NET INVESTMENT LOSS (4,164,880)
------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on securities 52,401,254
Net unrealized appreciation of securities during the year 113,817,130
------------
Net realized and unrealized gain on securities during the year 166,218,384
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $162,053,504
============
STATEMENT OF CHANGES IN NET ASSETS
1999 1998
------------------------------
OPERATIONS:
Net investment loss $ (4,164,880) $ (1,052,032)
Net realized gain on securities 52,401,254 52,174,007
Net unrealized appreciation of securities
during the year 113,817,130 165,960,273
------------------------------
Increase in net assets resulting
from operations 162,053,504 217,082,248
------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (303,215)
Net realized gain on securities (52,627,247) (15,121,487)
------------------------------
Decrease in net assets resulting from
distributions to shareholders (52,627,247) (15,424,702)
------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 82,766,079 155,432,936
Proceeds from capital stock issued
for distributions reinvested 52,627,247 15,424,702
------------------------------
135,393,326 170,857,638
Cost of capital stock repurchased (73,922,671) (20,032,134)
------------------------------
Increase in net assets resulting
from capital stock transactions 61,470,655 150,825,504
------------------------------
TOTAL INCREASE IN NET ASSETS 170,896,912 352,483,050
NET ASSETS:
Beginning of year 1,100,137,063 747,654,013
------------------------------
End of year (including accumulated net
investment losses of $1,115,782
and $1,115,782) $1,271,033,975 $1,100,137,063
==============================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 3,800,046 7,600,994
Shares issued for distributions reinvested 2,359,966 769,312
Shares of capital stock repurchased (3,302,384) (959,921)
------------------------------
Increase in shares outstanding 2,857,628 7,410,385
Shares outstanding:
Beginning of year 49,832,259 42,421,874
------------------------------
End of year 52,689,887 49,832,259
==============================
SEET NOTES TO FINANCIAL STATEMENTS.
<PAGE> 100
MAY 31, 1999 GROWTH & INCOME FUND - STATEMENT OF NET ASSETS 43
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 97.38%
ADVERTISING - 0.75%
31,900 Omnicom Group, Inc. $ 2,233,000
------------
BANKS - NEW YORK CITY - 1.12%
50,000 Citigroup, Inc. 3,312,500
------------
BANKS - OTHER - 3.34%
95,000 First Union Corp. 4,375,938
120,000 Mellon Bank Corp. 4,282,500
12,000 National City Corp. 794,250
11,100 Union Planters Corp. 458,568
------------
9,911,256
------------
BANKS - REGIONAL - 4.17%
85,500 BankOne Corp. 4,836,093
60,000 Fifth Third Bancorp 4,091,250
10,000 SouthTrust Corp. 389,375
25,000 State Street Corp. 1,906,250
18,200 Zions Bancorporation 1,160,250
------------
12,383,218
------------
BEVERAGE - SOFT DRINKS - 1.03%
85,000 PepsiCo, Inc. 3,044,063
------------
BROADCASTING - 2.17%
55,000* Clear Channel Communications, Inc. 3,633,437
51,900 U S WEST, Inc. 2,805,844
------------
6,439,281
------------
BUILDING MATERIALS - 0.70%
40,000 Lowe's Companies, Inc. 2,077,500
------------
CHEMICAL - MAJOR - 0.01%
600 Hercules, Inc. 20,963
------------
CONGLOMERATES - 2.33%
20,000 Allied Signal, Inc. 1,161,250
45,000 Dial Corp. 1,406,250
55,000 Tenneco, Inc. 1,282,188
35,000 Tyco International, Ltd. 3,058,125
------------
6,907,813
------------
CONTAINERS - METAL/GLASS - 0.67%
65,000* Owens-Illinois, Inc. $ 1,982,500
------------
DRUGS - 8.49%
10,000* ALZA Corp. 356,875
30,400* Amgen, Inc. 1,922,800
6,100* Biogen, Inc. 665,663
60,000 Eli Lilly and Co. 4,286,250
30,000 Genzyme Corp. 1,216,874
70,000 Merck & Co., Inc. 4,725,000
39,900 Pfizer, Inc. 4,269,300
60,000 Schering-Plough Corp. 2,703,750
60,000 Warner-Lambert Co. 3,720,000
35,000* Watson Pharmaceuticals, Inc. 1,340,938
------------
25,207,450
------------
ELECTRICAL EQUIPMENT - 2.12%
62,000 General Electric Co. 6,304,625
------------
FINANCE COMPANIES - 0.64%
40,000 Finova Group, Inc. 1,912,500
------------
FINANCIAL SERVICES - 0.82%
20,000 American Express Co. 2,423,750
------------
FOODS - 0.75%
50,000* U. S. Foodservice 2,225,000
------------
GOVERNMENT SPONSORED - 1.23%
39,100 Federal Home Loan Mortgage Corp. 2,280,018
20,000 Federal National Mortgage Association 1,360,000
------------
3,640,018
------------
HEALTHCARE - 1.12%
55,000 Cardinal Health, Inc. 3,320,625
------------
HOME BUILDERS - 1.25%
100,000 Centex Corp. 3,706,250
------------
HOSPITAL SUPPLIES - 1.46%
20,000 Johnson & Johnson 1,852,500
35,000 Medtronic, Inc. 2,485,000
------------
4,337,500
------------
HOUSEHOLD PRODUCTS - 3.08%
85,000* Bed Bath & Beyond, Inc. $ 2,905,938
25,000 Clorox Co. 2,523,438
25,000 Colgate-Palmolive Co. 2,496,875
12,900 Procter & Gamble Co. 1,204,538
------------
9,130,789
------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 4.93%
100,000* BMC Software, Inc. 4,943,750
90,000* Microsoft Corp. 7,261,875
97,500* Oracle Corp. 2,419,219
------------
14,624,844
------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 2.96%
80,000 Compaq Computer Corp. 1,895,000
200,000* Dell Computer Corp. 6,887,500
------------
8,782,500
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 1.61%
40,100* America Online, Inc. 4,786,937
------------
INFORMATION PROCESSING -
DATA SERVICES - 5.80%
10,000 Autodesk, Inc. 276,250
75,000 Computer Associates International 3,548,437
15,000* Compuware Corp. 465,938
52,200* EMC Corp. 5,200,424
57,000* Electronic Arts, Inc. 2,789,438
30,000 International Business Machines Corp. 3,489,375
75,000* Storage Technology Corp. 1,490,625
------------
17,260,487
------------
INFORMATION PROCESSING -
NETWORKING - 2.97%
45,000* 3Com Corp. 1,237,500
70,000* Cisco Systems, Inc. 7,621,250
------------
8,858,750
------------
INSURANCE - LIFE - 0.67%
65,000 Conseco, Inc. 1,986,563
------------
<PAGE> 101
44 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE - MULTILINE - 1.73%
45,000 American International Group, Inc. $ 5,144,063
------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.05%
10,000 Foster Wheeler Corp. 137,500
------------
MACHINERY - INDUSTRIAL/
SPECIALTY - 0.86%
40,000 Ingersoll-Rand Co. 2,547,500
------------
MEDICAL TECHNOLOGY - 1.35%
80,000 Guidant Corp. 4,000,000
------------
MERCHANDISE - DRUG - 0.23%
15,000 CVS Corp. 690,000
------------
MERCHANDISE - SPECIALTY - 4.27%
10,000 American Greetings Corp., Class A 286,250
6,000 Circuit City Stores, Inc. 430,875
11,300* CostCo Companies, Inc. 819,250
15,900 Gap, Inc. 994,744
40,000 Home Depot, Inc. 2,275,000
24,800* Kohl's Corp. 1,691,050
10,000* Office Depot, Inc. 208,750
120,000* Staples, Inc. 3,450,000
14,800 Tandy Corp. 1,221,000
45,000* Williams-Sonoma, Inc. 1,341,562
------------
12,718,481
------------
MERCHANDISING -
DEPARTMENT - 1.49%
70,100 Dayton Hudson Corp. 4,416,300
------------
MERCHANDISING - FOOD - 2.07%
45,000 Albertsons, Inc. 2,407,500
8,000* Kroger Co. 468,500
70,000* Safeway, Inc. 3,255,000
------------
6,131,000
------------
MERCHANDISING - MASS - 1.12%
22,000* KMart Corp. 338,250
70,000 Wal-Mart Stores, Inc. 2,983,750
------------
3,322,000
------------
METALS - STEEL - 0.05%
11,000 Worthington Industries, Inc. $ 140,938
------------
MOBILE HOMES - 0.09%
10,000 Fleetwood Enterprises, Inc. 254,375
------------
NATURAL GAS - DIVERSIFIED - 0.18%
20,000 K N Energy, Inc. 428,750
5,000 Questar Corp. 95,313
------------
524,063
------------
OIL - INTEGRATED DOMESTIC - 0.26%
10,000 Ashland Oil, Inc. 407,500
12,000 Sunoco, Inc. 365,250
------------
772,750
------------
OIL - INTEGRATED
INTERNATIONAL - 5.00%
35,600 Chevron Corp. 3,299,675
75,300 Exxon Corp. 6,014,588
5,600 Mobil Corp. 567,000
88,500 Royal Dutch Petroleum Co. 5,005,780
------------
14,887,043
------------
OIL - SERVICES - 0.62%
75,000 Transocean Offshore, Inc. 1,846,875
------------
OIL/GAS PRODUCERS - 0.11%
15,000 Ultramar Diamond Shamrock Corp. 330,000
------------
PHOTOGRAPHY - 0.82%
36,000 Eastman Kodak Co. 2,434,500
------------
PUBLISHING/PRINTING - 0.09%
7,000 R. R. Donnelley and Sons Co. 253,750
------------
SECURITIES RELATED - 1.41%
30,000 Charles Schwab Corp. 3,174,375
12,000 Merrill Lynch & Co., Inc. 1,008,000
------------
4,182,375
------------
SEMICONDUCTORS - 2.55%
60,000 Intel Corp. $ 3,243,750
50,000* Maxim Integrated Products, Inc. 2,671,875
30,000* Vitesse Semiconductor Corp. 1,648,124
------------
7,563,749
------------
TELECOMMUNICATIONS - 4.21%
50,000* Airtouch Communications, Inc. 5,025,000
1,733* Intermedia Communications, Inc. 43,867
70,000 Lucent Technologies, Inc. 3,981,250
8,000 Scientific-Atlanta, Inc. 282,500
54,000* Tellabs, Inc. 3,159,000
------------
12,491,617
------------
TOBACCO - 0.65%
50,000 Philip Morris Companies, Inc. 1,928,125
------------
TRUCKERS - 0.63%
45,000 CNF Transportation, Inc. 1,867,500
------------
UTILITIES - COMMUNICATION - 4.11%
118,050 AT&T Corp. 6,551,774
89,600 GTE Corp. 5,650,400
------------
12,202,174
------------
UTILITIES - ELECTRIC - 6.94%
40,000* AES Corp. 1,990,000
15,000 Ameren Corp. 614,063
22,000 American Electric Power, Inc. 954,250
24,800 Carolina Power & Light Co. 1,085,000
17,100 Consolidated Edison, Inc. 830,419
42,000 Dominion Resources, Inc. 1,813,875
40,000 DTE Energy Co. 1,742,500
65,000 FPL Group, Inc. 3,782,188
19,600 New Century Energies, Inc. 792,575
76,500 Public Service Enterprise Group, Inc. 3,208,218
84,400 Texas Utilities Co. 3,798,000
------------
20,611,088
------------
UTILITIES - GAS, DISTRIBUTION - 0.20%
30,000 MCN Energy Group, Inc. 600,000
------------
UTILITIES - GAS, PIPELINE - 0.10%
10,000 ONEOK, Inc. 300,000
------------
<PAGE> 102
MAY 31, 1999 45
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $212,965,638) $289,118,448
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 2.48%
AEROSPACE/DEFENSE - 2.48%
$7,354,000 TRW, Inc.,
5.13% due 06/01/99 7,354,000
------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $7,354,000) 7,354,000
------------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.13%
U. S. TREASURY notes - 0.13%
400,000 United States Treasury Note,
4.36% due 06/10/99 399,563
------------
TOTAL UNITED STATES GOVERNMENT
SHORT TERM
(Cost $399,563) 399,563
------------
TOTAL INVESTMENTS
(Cost $220,719,201) - 100.00% 296,872,011
Other assets less liabilities,
net - 0.00% 13,167
------------
NET ASSETS (equivalent
to $21.53 per share on
13,790,192 shares
outstanding) - 100.00% $296,885,178
============
* Non-income producing
UNREALIZED
CONTRACTS DEPRECIATION
- --------------------------------------------------------------------------------
FUTURES CONTRACTS PURCHASED(1)
(Delivery month/Value at 5/31/99)
10(2) S&P 500 Index Futures
(June/$1,300) $ (51,750)
============
(1) U.S.Treasury Bills with a market value of approximately $400,000
were maintained in a segregated account with a portion placed as
collateral for futures contracts.
(2) Per 250
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
13,790,192 shares outstanding $ 137,902 Additional paid in
capital 187,475,293 Undistributed net realized gain on securities
33,219,714 Undistributed net investment loss (48,791) Unrealized
appreciation (depreciation) of:
Investments $ 76,152,810
Futures (51,750) 76,101,060
------------ ------------
NET ASSETS APPLICABLE
TO SHARES Outstanding $296,885,178
============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 103
46 GROWTH & INCOME FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 1,821,469
Interest 1,225,248
------------
Total investment income 3,046,717
------------
EXPENSES:
Advisory fees 2,053,954
Custodian fees 22,790
Registration and filing fees 6,627
Audit fees and tax services 6,746
Accounting services 49,387
Directors' fees and expenses 13,462
Directors' retirement plan expenses 28,589
Report to shareholders 61,538
Miscellaneous 9,466
------------
Total expenses 2,252,559
------------
NET INVESTMENT INCOME 794,158
------------
REALIZED AND UNREALIZED GAIN (loss) ON SECURITIES:
Net realized gain on securities:
Investments $ 33,135,669
Futures contracts 398,313 33,533,982
------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments 8,912,470
Futures contracts (51,750) 8,860,720
------------ ------------
Net realized and unrealized gain on
securities during the year 43,394,702
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 43,188,860
============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
1999 1998
---------------------------------
OPERATIONS:
Net investment income $ 794,158 $ 1,096,169
Net realized gain on securities 33,533,982 20,112,463
Net unrealized appreciation of
securities during the year 8,860,720 21,794,919
---------------------------------
Increase in net assets resulting
from operations 43,188,860 43,003,551
---------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,016,358) (1,084,032)
Net realized gain on securities (20,275,426) (2,863,622)
---------------------------------
Decrease in net assets resulting from
distributions to shareholders (21,291,784) (3,947,654)
---------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 12,125,509 31,809,939
Proceeds from capital stock issued
for distributions reinvested 21,291,784 3,947,654
---------------------------------
33,417,293 35,757,593
Cost of capital stock repurchased (29,588,189) (13,199,616)
---------------------------------
Increase in net assets resulting
from capital stock transactions 3,829,104 22,557,977
---------------------------------
Total Increase in Net Assets 25,726,180 61,613,874
NET ASSETS:
Beginning of year 271,158,998 209,545,124
---------------------------------
End of year (including undistributed
net investment income of ($48,791)
and $173,409) $296,885,178 $271,158,998
=================================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 601,285 1,662,136
Shares issued for distributions reinvested 1,071,553 209,426
Shares of capital stock repurchased (1,501,205) (675,165)
---------------------------------
Increase in shares outstanding 171,633 1,196,397
Shares outstanding:
Beginning of year 13,618,559 12,422,162
---------------------------------
End of year 13,790,192 13,618,559
=================================
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 104
MAY 31, 1999 SCIENCE & TECHNOLOGY FUND - STATEMENTS OF NET ASSETS 47
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 92.52%
AEROSPACE/DEFENSE - 2.79%
1,132,000* SCI Systems, Inc. $ 46,978,000
------------
ELECTRONIC INSTRUMENTS - 0.41%
255,000* Cognex Corp. 6,853,124
------------
INFORMATION PROCESSING - 0.26%
115,000* International Network Services 4,298,124
------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 8.74%
705,000* BMC Software, Inc. 34,853,436
425,000* Citrix Systems, Inc. 21,010,937
126,300* Great Plains Software, Inc. 4,759,931
665,000* Microsoft Corp. 53,657,188
705,000* Oracle Corp. 17,492,813
48,600* Veritas Software Corp. 4,288,950
335,000* Visio Corp. 11,013,125
------------
147,076,380
------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 5.06%
845,000* Dell Computer Corp. 29,099,686
283,000* Electronics for Imaging, Inc. 13,884,688
705,000* Sun Microsystems, Inc. 42,123,750
------------
85,108,124
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 8.99%
170,000* America Online, Inc. 20,293,750
96,400* Automatic Data Processing, Inc. 3,970,461
705,000* Ceridian Corp. 23,265,000
1,135,000 First Data Corp. 51,004,062
1,070,000* Gartner Group, Inc., Class A 24,610,000
249,100 National Data Corp. 11,723,268
425,000* Sterling Commerce, Inc. 16,521,875
------------
151,388,416
------------
INFORMATION PROCESSING -
CONSUMER SOFTWARE - 5.06%
465,000* Intuit, Inc. 37,839,374
3,410,000* Parametric Technology Corp. 47,313,750
------------
85,153,124
------------
INFORMATION PROCESSING -
DATA SERVICES - 17.04%
905,000 Adobe Systems, Inc. $ 67,083,124
355,000* Avant! Corp. 4,326,563
505,000* EMC Corp. 50,310,625
480,000 Hewlett Packard Co. 45,270,000
200,000* National Instruments Corp. 7,612,500
845,000* Novell, Inc. 19,857,500
735,000* PsiNet, Inc. 32,707,500
56,000* Sapient Corp. 3,570,000
930,000* Solectron Corp. 50,917,500
255,000* Wind River Systems, Inc. 5,355,000
------------
287,010,312
------------
INFORMATION PROCESSING -
NETWORKING - 8.22%
565,000* Ascend Communications, Inc. 52,368,437
450,000* Cisco Systems, Inc. 48,993,750
420,000* General Insturment Corp. 16,248,750
140,000 Softbank Corp. 16,027,256
185,000* USWeb Corporation 4,694,375
------------
138,332,568
------------
MULTIMEDIA - 2.98%
1,130,000* Synopsys, Inc. 50,143,750
------------
SEMICONDUCTOR EQUIPMENT - 3.25%
310,000* Applied Materials, Inc. 17,030,625
285,000* ASM Lithography Holding NV 12,575,625
55,000* Galileo Technology, Ltd. 1,711,875
255,000* KLA-Tencor Corp. 11,602,500
240,000* Novellus Systems, Inc. 11,715,000
------------
54,635,625
------------
SEMICONDUCTORS - 16.23%
1,410,000* Altera Corp. 49,085,625
1,700,000* Analog Devices, Inc. 65,343,750
280,000* Burr Brown Corp. 8,960,000
280,000 Intel Corp. 15,137,500
918,200* Maxim Integrated Products, Inc. 49,066,320
325,000 Texas Instruments, Inc. 35,546,875
1,130,000* Xilinx, Inc. 50,214,375
------------
273,354,445
------------
TELECOMMUNICATIONS - 12.51%
570,000* Airtouch Communications, Inc. $ 57,285,000
605,000* MCI Worldcom, Inc. 52,256,875
508,000* Nokia Corp. - ADR, Series A 36,068,000
425,000* PanAmSat Corp. 13,812,500
195,000* Premisys Communications, Inc. 1,694,063
420,000* Qwest Communications International, Inc. 17,823,750
425,000* Sanmina Corp. 31,868,358
------------
210,808,546
------------
UTILITIES - COMMUNICATION - 0.98%
367,000* Sprint Corp., PCS Group 16,515,000
------------
TOTAL COMMON STOCK
(Cost $1,257,601,912) 1,557,655,538
-------------
PAR
VALUE
----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 6.84%
AEROSPACE/DEFENSE - 2.09%
8,545,000 Lockheed Martin Corp.,
4.95% due 06/03/99 8,542,648
26,673,000 TRW, Inc.,
5.11% due 06/02/99 26,669,854
------------
35,212,502
------------
CHEMICAL - MAJOR - 0.03%
497,000 PPG Industries, Inc.,
4.80% due 06/11/99 496,337
------------
FINANCE COMPANIES - 0.62%
10,466,000 Mobil Credit Finance Corp.,
4.85% due 06/03/99 10,463,178
------------
FOODS - 0.89%
15,000,000 Sara Lee Corp.,
4.90% due 06/04/99 14,993,871
------------
INSURANCE - LIFE - 0.34%
5,715,000 Jefferson-Pilot Corp.,
4.88% due 06/03/99 5,713,450
------------
<PAGE> 105
48 MAY 31, 1999
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
INSURANCE - MULTILINE - 1.38%
$23,258,000 Marsh & McLennan Companies, Inc.,
4.80% due 06/01/99 $ 23,258,000
---------------
METALS - STEEL - 0.30%
5,043,000 Harsco Corp.,
4.85% due 06/04/99 5,040,960
---------------
NATURAL GAS-DIVERSIFIED - 1.19%
20,000,000 El Paso Natural Gas Co.,
4.92% due 06/03/99 19,994,528
---------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $115,172,826) 115,172,826
---------------
TOTAL INVESTMENTS
(Cost $1,372,774,738) - 99.36% 1,672,828,364
Other assets less liabilities,
net - 0.64% 10,756,391
---------------
NET ASSETS(equivalent
to $29.95 per share on
56,210,670 shares
outstanding) - 100.00% $ 1,683,584,755
===============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
56,210,670 shares outstanding $ 562,107
Additional paid in capital 1,077,031,615
Undistributed net realized gain on securities 311,709,398
Accumulated net investment loss (5,771,991)
Unrealized appreciation of securities 300,053,626
---------------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $ 1,683,584,755
===============
* Non-income producing
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 106
SCIENCE & TECHNOLOGY FUND - FINANCIAL STATEMENTS 49
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 1,060,499
Interest 5,239,801
------------
Total investment income 6,300,300
------------
EXPENSES:
Advisory fees 11,204,880
Custodian Fees 112,255
Registration and filing fees 44,903
Audit fees and tax services 35,794
Accounting services 225,428
Directors fees and expenses 30,773
Directors' retirement plan expenses 150,035
Reports to shareholders 215,972
Miscellaneous 52,251
------------
Total expenses 12,072,291
------------
NET INVESTMENT LOSS (5,771,991)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain on securities:
Investments $331,067,405
Foreign currency transactions (312,182)
Forward contracts (524) 330,754,699
------------
Net unrealized appreciation of securities during the year:
Investments 189,451,552
Foreign currency translation 2,518
Forward contracts 2,056 189,456,126
------------ ------------
Net realized and unrealized gain on
securities during the year 520,210,825
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $514,438,834
============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
1999 1998
------------------------------------
OPERATIONS:
Net investment loss $ (5,771,991) $ (4,399,764)
Net realized gain on securities 330,754,699 111,229,008
Net unrealized appreciation (depreciation)
of securities during the year 189,456,126 (16,698,726)
------------------------------------
Increase in net assets resulting
from operations 514,438,834 90,130,518
------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - -
Net realized gain on securities (113,616,462) -
------------------------------------
Decrease in net assets resulting from
distributions to shareholders (113,616,462) -
------------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 221,258,442 217,275,229
Proceeds from capital stock issued
for distributions reinvested 113,616,462 -
------------------------------------
334,874,904 217,275,229
Cost of capital stock repurchased (75,253,459) (89,246,756)
------------------------------------
Increase in net assets resulting
from capital stock transactions 259,621,445 128,028,473
------------------------------------
TOTAL INCREASE IN NET ASSETS 660,443,817 218,158,991
NET ASSETS:
Beginning of year 1,023,140,938 804,981,947
------------------------------------
End of year (including accumulated net
investment losses of $5,771,991 and $0) $1,683,584,755 $1,023,140,938
====================================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 8,585,468 10,004,608
Shares issued for distributions reinvested 4,443,350 -
Shares of capital stock repurchased (3,173,308) (4,133,577)
------------------------------------
Increase in shares outstanding 9,855,510 5,871,031
Shares outstanding:
Beginning of year 46,355,160 40,484,129
------------------------------------
End of year 56,210,670 46,355,160
====================================
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 107
50 SOCIAL AWARENESS FUND - STATEMENT OF NET ASSETS MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 98.71%
ADVERTISING - 0.29%
9,782 Interpublic Group Companies, Inc. $ 740,987
11,061 Omnicom Group, Inc. 774,270
------------
1,515,257
------------
AIRLINES - 0.34%
10,536* AMR Corp. 685,499
8,466 Delta Air Lines, Inc. 485,737
17,432 Southwest Airlines Co. 558,914
1,450* US Airways Group, Inc. 70,416
------------
1,800,566
------------
APPAREL & PRODUCTS - 0.00%
300 Cintas Corp. 19,050
------------
APPLIANCES/FURNISHINGS - 0.04%
3,075 Maytag Corp. 216,980
------------
AUTO - CARS - 0.00%
1 Daimlerchrysler AG 59
------------
AUTO - ORIGINAL EQUIPMENT - 0.03%
1,155 Arvin Industries, Inc. 45,334
1,403 Federal-Mogul Corp. 64,713
1,006 Modine Manufacturing Co. 32,318
------------
142,365
------------
AUTO - REPLACEMENT PARTS - 0.27%
25,178 Genuine Parts Co. 848,184
7,300* SPX Corp. 566,663
------------
1,414,847
------------
BANKS - NEW YORK CITY - 2.34%
45,442 Bank of New York Co., Inc. 1,624,552
119,146 Citigroup, Inc. 7,893,423
19,310 J. P. Morgan & Co., Inc. 2,690,124
------------
12,208,099
------------
BANKS - OTHER - 4.24%
103,058 Bank of America Corp. 6,666,565
12,391 BankBoston Corp. 587,024
4,918 Bankers Trust Corp. 455,222
98,172 First Union Corp. 4,522,050
31,811 Fleet Financial Group, Inc. 1,308,228
34,014 Mellon Bank Corp. 1,213,875
30,316 National City Corp. 2,006,540
13,643 Providian Financial Corp. 1,308,875
4,500 Republic of New York Corp. 305,719
94,538 Wells Fargo Company 3,781,520
------------
22,155,618
------------
BANKS - REGIONAL - 3.57%
85,801 BankOne Corp. 4,853,120
54,028 Chase Manhattan Corp. 3,917,031
5,595 Comerica, Inc. 338,148
14,423 Fifth Third Bancorp 983,468
41,583 Firstar Corp. 1,198,111
23,409 KeyCorp. 813,463
8,945 Northern Trust Corp. 808,404
14,774 PNC Bank Corp. 845,812
9,686 State Street Corp. 738,558
1,160 Summit Bancorporation 47,488
21,468 SunTrust Banks, Inc. 1,449,090
38,504 U.S. Bancorp 1,251,380
15,563 Wachovia Corp. 1,373,435
------------
18,617,508
------------
BEVERAGE - SOFT DRINKS - 3.10%
156,303 Coca-Cola Co. 10,677,451
20,920 Coca Cola Enterprises, Inc. 758,350
131,883 PepsiCo, Inc. 4,723,060
------------
16,158,861
------------
BROADCASTING - 1.85%
10,900* Chris-Craft Industries, Inc. 502,763
11,319* Clear Channel Communications, Inc. 747,761
46,912 Comcast Corp., Class A 1,806,112
34,359* Media One Group, Inc. 2,538,272
42,237 US WEST, Inc. 2,283,439
46,474* Viacom, Inc., Class B 1,789,249
------------
9,667,596
------------
BUILDING MATERIALS - 0.30%
2,103 Armstrong World Industries, Inc. 122,500
18,766 Lowe's Companies, Inc. 974,659
1,400 Martin Marietta Materials, Inc. 84,875
14,300 Masco Corp. 408,444
------------
1,590,478
------------
CHEMICAL - MAJOR - 0.01%
2,551 Albemarle Corp. 57,238
------------
CHEMICAL - MISCELLANEOUS - 0.26%
11,684 Ecolab, Inc. 496,570
700 Millipore Corp. 23,363
5,496 Nalco Chemical Co. 184,116
9,440 Praxair, Inc. 460,790
6,632 Sigma Aldrich Corp. 212,224
------------
1,377,063
------------
COAL - 0.09%
6,100 NACCO Industries, Inc., Class A 455,213
------------
CONGLOMERATES - 0.89%
21,589 Tenneco, Inc. 503,294
47,233 Tyco International, Ltd. 4,126,984
------------
4,630,278
------------
CONSUMER FINANCE - 0.38%
5,476 Capital One Financial Corp. 825,165
42,267 MBNA Corp. 1,167,627
------------
1,992,792
------------
CONTAINERS - METAL/GLASS - 0.34%
24,643 Corning, Inc. 1,346,125
4,800 Crown Cork & Seal Co., Inc. 150,600
8,280* Owens-Illinois, Inc. 252,540
------------
1,749,265
------------
CONTAINERS - PAPER - 0.40%
4,457 Bemis Co., Inc. 168,252
867 Chesapeake Corp. 31,266
3,901* Sealed Air Corp. 242,338
7,590 Sonoco Products Co. 189,750
22,000 Temple-Inland, Inc. 1,474,000
------------
2,105,606
------------
<PAGE> 108
MAY 31, 1999 51
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COSMETICS/TOILETRIES - 0.88%
16,947 Avon Products, Inc. $ 837,817
68,697 Gillette Co. 3,503,548
6,651 International Flavors &
Fragrances, Inc. 273,522
------------
4,614,887
------------
DRUGS - 7.33%
3,485 Allergan, Inc. 324,105
3,659* ALZA Corp. 130,581
83,968 American Home Products Corp. 4,838,657
29,142* Amgen, Inc. 1,843,232
2,310 Bausch & Lomb, Inc. 176,426
131,650 Bristol Myers Squibb Co. 9,034,482
68,518 Eli Lilly and Co. 4,894,755
143,024 Merck & Co., Inc. 9,654,121
93,942 Schering-Plough Corp. 4,233,261
50,417 Warner-Lambert Co. 3,125,855
------------
38,255,475
------------
ELECTRICAL EQUIPMENT - 1.04%
700* American Power Conversion Corp. 27,256
59,866 Emerson Electric Co. 3,823,942
6,000 Hubbell, Inc., Class B 251,250
3,500 Molex, Inc. 107,188
2,600 Raychem Corp. 90,350
1,800* Teradyne, Inc. 95,063
5,347 Thomas & Betts Corp. 228,918
15,563 W. W. Grainger, Inc. 825,812
------------
5,449,779
------------
ELECTRONIC INSTRUMENTS - 0.01%
1,288* Integrated Device Technology, Inc. 10,224
2,200 Tektronix, Inc. 51,013
------------
61,237
------------
ENTERTAINMENT - 1.83%
7,842 Hasbro, Inc. 224,477
13,552 Mattel, Inc. 358,281
78,784 Time Warner, Inc. 5,362,238
123,416 Walt Disney Co. 3,594,491
------------
9,539,487
------------
FINANCE COMPANIES - 0.75%
51,700 Associates First Capital Corp. 2,119,700
41,886 Household International, Inc. 1,816,806
------------
3,936,506
------------
FINANCIAL SERVICES - 1.04%
39,875 American Express Co. 4,832,353
4,608 Countrywide Credit Industries, Inc. 189,504
8,716 H & R Block, Inc. 420,002
------------
5,441,859
------------
FOODS - 2.32%
23,239 BestFoods 1,161,950
31,110 Campbell Soup Co. 1,372,730
29,776 ConAgra, Inc. 776,037
18,096 General Mills, Inc. 1,454,467
32,754 H J Heinz Co. 1,582,429
8,089 Hershey Foods Corp. 438,828
29,038 Kellogg Co. 1,007,256
14,219 Pioneer Hi-Bred International, Inc. 533,213
9,896 Quaker Oats Co. 653,756
21,527 Ralston Purina Co. 586,611
65,280 Sara Lee Corp. 1,566,720
11,496 Wm. Wrigley Jr. Co. 1,000,871
------------
12,134,868
------------
FOOTWEAR - 0.20%
16,803 NIKE, Inc., Class B 1,023,933
------------
FREIGHT - 0.20%
19,302* FDX Corp. 1,062,816
------------
FUNERAL SERVICES - 0.07%
18,233 Service Corp. International 349,846
------------
GOLD MINING - 0.03%
24,548 Battle Mountain Gold Co. 59,836
10,410 Homestake Mining Co. 81,328
------------
141,164
------------
GOVERNMENT SPONSORED - 1.74%
49,647 Federal Home Loan Mortgage Corp. 2,895,041
84,484 Federal National Mortgage Association 5,744,914
11,078 SLM Holding Corp. 459,737
------------
9,099,692
------------
HARDWARE & TOOLS - 0.22%
12,819 Black & Decker Corp. 729,882
10,600 Snap-on, Inc. 383,588
396 Stanley Works 12,895
------------
1,126,365
------------
HEALTHCARE - 0.55%
14,406 Cardinal Health, Inc. 869,747
16,310* HealthSouth Corp. 218,146
3,603* Humana, Inc. 45,263
15,704 IMS Helath, Inc. 386,711
14,856 Mckesson HBOC, Inc. 506,033
14,768 United HealthCare Corp. 860,236
------------
2,886,136
------------
HEAVY DUTY TRUCKS/PARTS - 0.13%
12,900 Cummins Engine Co., Inc. 653,063
------------
HOSPITAL MANAGEMENT - 0.21%
33,951 Healthcare Corp. 799,970
1,787* Lifepoint Hospitals, Inc. 17,869
9,822* Tenet Healthcare Corp. 240,639
1,787* Triad Hospitals, Inc. 18,092
------------
1,076,570
------------
HOSPITAL SUPPLIES - 3.66%
106,912 Abbott Laboratories 4,831,087
26,533 Baxter International, Inc. 1,713,038
15,099 Becton, Dickinson and Co. 585,086
2,614 Biomet, Inc. 104,397
15,854* Boston Scientific Corp. 601,461
935 Hillenbrand Industries, Inc. 39,212
92,889 Johnson & Johnson 8,603,844
37,249 Medtronic, Inc. 2,644,679
------------
19,122,804
------------
<PAGE> 109
52 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 3.14%
10,956 Clorox Co. $ 1,105,871
28,657 Colgate-Palmolive Co. 2,862,119
9,292 Newell Rubbermaid, Inc. 376,326
98,712 Procter & Gamble Co. 9,217,234
43,495 Unilever NV - ADR 2,840,767
------------
16,402,317
------------
INFORMATION PROCESSING - 0.02%
6,713* Parametric Technology Corp. 93,143
------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 4.31%
7,711* BMC Software, Inc. 381,213
252,716* Microsoft Corp. 20,391,022
67,935* Oracle Corp. 1,685,637
2,227* Peoplesoft, Inc. 36,050
------------
22,493,922
------------
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 1.76%
5,055* Apple Computer, Inc. 222,736
80,029 Compaq Computer Corp. 1,895,687
123,610* Dell Computer Corp. 4,256,820
6,570* Gateway, Inc. 399,538
40,098* Sun Microsystems, Inc. 2,395,857
------------
9,170,638
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 2.07%
50,574* America Online, Inc. 6,037,271
44,566 Automatic Data Processing, Inc. 1,835,562
31,135 Electronic Data Systems Corp. 1,751,344
18,828 First Data Corp. 846,083
10,574 Paychex, Inc. 313,240
------------
10,783,500
------------
INFORMATION PROCESSING -
DATA SERVICES - 5.35%
31,635* Cendant Corp. 583,270
3,872 Comdisco, Inc. 94,380
24,771 Computer Associates International 1,171,978
7,353* Computer Sciences Corp. 475,647
11,102* Compuware Corp. 344,856
27,283* EMC Corp. 2,718,070
58,343 Hewlett Packard Co. 5,502,474
102,438 International Business Machines Corp. 11,914,820
7,783* Novell, Inc. 182,901
22,335 Pitney Bowes, Inc. 1,423,856
9,167* Seagate Technology, Inc. 276,729
13,810* Solectron Corp. 756,098
44,558 Xerox Corp. 2,503,603
------------
27,948,682
------------
INFORMATION PROCESSING -
NETWORKING - 2.03%
15,240* 3Com Corp. 419,100
10,638* Ascend Communications, Inc. 986,010
81,505* Cisco Systems, Inc. 8,873,858
7,553* General Insturment Corp. 292,207
------------
10,571,175
------------
INSURANCE - CASUALTY - 0.35%
9,169 Chubb Corp. 642,403
4,090 Progressive Corp. 574,134
3,366 SAFECO Corp. 147,894
13,509 St. Paul Companies, Inc. 480,414
------------
1,844,845
------------
INSURANCE - LIFE - 0.70%
9,361 Aetna, Inc. 850,096
32,315 Conseco, Inc. 987,627
4,031 Jefferson-Pilot Corp. 272,848
8,232 Lincoln National Corp. 837,606
2,856 Torchmark Corp. 95,319
8,374 Transamerica Corp. 614,442
------------
3,657,938
------------
INSURANCE - MISCELLANEOUS - 0.05%
4,965 UNUM Corp. 267,179
------------
INSURANCE - MULTILINE - 3.23%
1,021 AFLAC, Inc. 52,071
48,156 Allstate Corp. 1,754,684
83,348 American International Group, Inc. 9,527,717
27,782 Aon Corp. 1,194,606
14,997 CIGNA Corp. 1,398,470
4,572 Cincinnati Financial Corp. 188,309
13,092 Hartford Financial Services Group 828,069
25,278 Marsh & McLennan Companies, Inc. 1,838,975
1,400 Provident Companies, Inc. 54,688
------------
16,837,589
------------
LEISURE TIME - 0.03%
1,947 Brunswick Corp. 46,728
2,100 Harley-Davidson, Inc. 107,231
------------
153,959
------------
LODGING - 0.07%
3,716 Hilton Hotels Corp. 51,095
7,442 Marriott International, Inc. 283,261
3,716* Park Place Entertainment Corp. 39,018
------------
373,374
------------
MACHINERY - AGRICULTURE - 0.39%
20,600 Case Corp. 968,200
27,573 Deere & Co. 1,049,497
------------
2,017,697
------------
MACHINERY - CONSTRUCTION & CONTRACTS - 0.49%
43,689 Caterpillar, Inc. 2,397,434
10,178 Foster Wheeler Corp. 139,948
------------
2,537,382
------------
MACHINERY - INDUSTRIAL/SPECIALTY - 1.61%
1,200* American Standard Companies 55,500
6,700 Briggs & Stratton Corp. 418,750
19,047 Cooper Industries, Inc. 944,017
15,495 Dover Corp. 583,968
37,181 Illinois Tool Works, Inc. 2,853,642
16,743 Ingersoll-Rand Co. 1,066,321
12,815 Johnson Controls, Inc. 808,146
6,500 Nordson Corp. 381,875
19,445 Pall Corp. 390,115
11,100 Tecumseh Products Co., Class A 732,600
8,072 Timken Co. 165,981
------------
8,400,915
------------
<PAGE> 110
MAY 31, 1999 53
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL TECHNOLOGY - 0.29%
2,579 Celera Genomics $ 43,843
17,548 Guidant Corp. 877,400
5,258* PE Corp-PE Biosystems Group 587,253
------------
1,508,496
------------
MERCHANDISE - DRUG - 0.45%
18,709 CVS Corp. 860,614
9,962 Rite Aid Corp. 249,050
52,902 Walgreen Co. 1,229,972
------------
2,339,636
------------
MERCHANDISE - SPECIALTY - 1.67%
2,323 American Greetings Corp., Class A 66,496
2,500 Circuit City Stores, Inc. 179,531
8,920* CostCo Companies, Inc. 646,700
2,480 Dollar General Corp. 65,875
28,263 Gap, Inc. 1,768,173
81,521 Home Depot, Inc. 4,636,507
2,378 Ikon Office Solutions, Inc. 33,143
3,156* Kohl's Corp. 215,200
2,850 Limited, Inc. 139,294
2,341 Nordstrom, Inc. 83,106
16,744* Staples, Inc. 481,390
2,252 Tandy Corp. 185,790
5,668 TJX Companies, Inc. 170,040
1,477* Toys R Us, Inc. 34,063
------------
8,705,308
------------
MERCHANDISING - DEPARTMENT - 0.38%
21,146 Dayton Hudson Corp. 1,332,198
1,473* Federated Department Stores, Inc. 80,279
13,624 May Department Stores Co. 590,090
------------
2,002,567
------------
MERCHANDISING - FOOD - 0.86%
16,505 Albertsons, Inc. 883,018
13,029 American Stores Co. 429,957
17,971* Kroger Co. 1,052,427
29,803* Safeway, Inc. 1,385,840
15,889 SYSCO Corp. 471,705
7,109 Winn-Dixie Stores, Inc. 254,591
------------
4,477,538
------------
MERCHANDISING - MASS - 2.33%
12,825 J.C. Penney Co., Inc. 662,892
15,124* KMart Corp. 232,532
20,628 Sears Roebuck and Co. 986,276
241,088 Wal-Mart Stores, Inc. 10,276,376
------------
12,158,076
------------
METALS - MISCELLANEOUS - 0.14%
7,437 Engelhard Corp. 150,599
13,888 Precision Castparts Corp. 562,464
------------
713,063
------------
METALS - STEEL - 0.08%
7,300 Harsco Corp. 238,163
12,948 Worthington Industries, Inc. 165,896
------------
404,059
------------
MISCELLANEOUS - 0.08%
1,815 BB&T Corp. 66,248
9,155 Equifax, Inc. 329,580
------------
395,828
------------
MOBILE HOMES - 0.00%
887 Fleetwood Enterprises, Inc. 22,563
------------
NATURAL GAS-DIVERSIFIED - 0.21%
3,832 Eastern Enterprises 132,923
6,901 El Paso Energy Corp. 248,867
20,000 K N Energy, Inc. 428,750
16,300 Questar Corp. 310,719
------------
1,121,259
------------
OIL - INTEGRATED DOMESTIC - 0.49%
19,966 Ashland Oil, Inc. 813,615
11,615 Kerr-McGee Corp. 540,098
40,022 USX-Marathon Group 1,198,159
------------
2,551,872
------------
OIL - SERVICE - PRODUCTS - 0.03%
15,603* Ocean Energy, Inc. 154,080
------------
OIL - SERVICES - 0.04%
5,100 York International Corp. 215,156
------------
OIL/GAS PRODUCERS - 0.49%
14,061 Pennzenergy Co. 217,067
14,437 Pioneer Natural Resources Corp. 157,002
20,348 Sonat, Inc. 721,082
12,673 Sunoco, Inc. 385,734
23,108 Ultramar Diamond Shamrock Corp. 508,376
39,531 Union Pacific Resources Group, Inc. 550,963
------------
2,540,224
------------
PAPER/FOREST PRODUCTS - 0.85%
12,209 Avery Dennison Corp. 731,014
7,919 Fort James Corp. 290,033
48,325 Kimberly-Clark Corp. 2,836,073
9,697 Longview Fibre Co. 131,516
6,736 Louisiana Pacific Corp. 136,404
7,800 Mead Corp. 291,525
------------
4,416,565
------------
POLLUTION CONTROL - 0.45%
11,181 Industries, Inc. 464,012
35,496 Waste Management, Inc. 1,876,851
------------
2,340,863
------------
PUBLISHING - NEWS - 0.74%
6,850 Dow Jones & Co., Inc. 359,625
23,631 Gannett Co., Inc. 1,707,340
2,042 Knight-Ridder, Inc. 107,588
11,806 New York Times Co., Class A 402,880
3,357 Times Mirror Co. 197,853
7,387 Tribune Co. 583,111
900 Washington Post Co., Class B 500,794
------------
3,859,191
------------
PUBLISHING/PRINTING - 0.33%
6,090 Deluxe Corp. 219,621
14,372 Dun & Bradstreet Corp. 503,020
19,120 McGraw-Hill, Inc. 991,850
------------
1,714,491
------------
<PAGE> 111
54 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
RAILROAD - 1.69%
58,788 Burlington Northern Santa Fe $ 1,822,428
46,301 CSX Corp. 2,173,253
11,400 Kansas City Southern Industries, Inc. 641,250
55,610 Norfolk Southern Corp. 1,821,228
41,161 Union Pacific Corp. 2,348,750
------------
8,806,909
------------
RESTAURANTS - 0.83%
103,016 McDonald's Corp. 3,966,116
6,072* Tricon Global Restaurants, Inc. 353,694
------------
4,319,810
------------
SAVINGS & LOAN - 0.25%
2,690 Golden West Financial Corp. 255,214
27,430 Washington Mutual, Inc. 1,047,483
------------
1,302,697
------------
SECURITIES RELATED - 1.53%
21,480 Charles Schwab Corp. 2,272,853
13,436 Franklin Resources, Inc. 584,466
2,504 Lehman Brothers Holdings, Inc. 136,781
22,018 Merrill Lynch & Co., Inc. 1,849,512
32,320 Morgan Stanley Dean Witter & Co. 3,118,885
------------
7,962,497
------------
SEMICONDUCTOR EQUIPMENT - 0.25%
19,358* Applied Materials, Inc. 1,063,480
4,914* KLA-Tencor Corp. 223,587
------------
1,287,067
------------
SEMICONDUCTORS - 2.92%
3,530* Advanced Micro Devices, Inc. 65,305
175,676 Intel Corp. 9,497,484
2,966* LSI Logic Corp. 109,927
11,384* Micron Technology, Inc. 431,881
3,301* National Semiconductor Corp. 63,957
39,600 Rockwell International Corp. 2,185,425
26,458 Texas Instruments, Inc. 2,893,844
------------
15,247,823
------------
TELECOMMUNICATIONS - 3.60%
32,233* Airtouch Communications, Inc. 3,239,417
23,145 ALLTEL Corp. 1,659,207
5,700 Frontier Corp. 299,963
96,372* MCI Worldcom, Inc. 8,324,133
10,003* Nextel Communications, Inc., Class A 368,861
43,324 Nortel Networks Corp. 3,249,300
1,800 QUALCOMM, Inc. 175,050
1,832 Scientific-Atlanta, Inc. 64,693
25,008* Tellabs, Inc. 1,462,968
------------
18,843,592
------------
TEXTILE - PRODUCTS - 0.05%
5,513 V. F. Corp. 253,598
------------
UTILITIES - COMMUNICATION - 7.13%
90,000 AT&T Corp. 4,995,000
82,782 Ameritech Corp. 5,448,090
106,920 Bell Atlantic Corp. 5,853,870
127,036 BellSouth Corp. 5,994,511
60,000 GTE Corp. 3,783,750
128,235 SBC Communications, Inc. 6,556,014
32,387 Sprint Corp., FON Group 3,651,634
21,784* Sprint Corp., PCS Group 980,258
------------
37,263,127
------------
UTILITIES - ELECTRIC - 2.35%
11,280* AES Corp. 561,180
26,375 Allegheny Energy, Inc. 919,828
4,400 Black Hills Corp. 101,200
31,104 Cinergy Corp. 1,061,424
3,383 Cleco Corp. 111,850
22,500 DPL, Inc. 406,406
6,006 Hawaiian Electric Industries, Inc. 220,721
10,014 Idacorp, Inc. 332,966
5,481 Indiana Energy, Inc. 121,267
13,980 IPALCO Enterprises, Inc. 345,131
9,402 Kansas City Power & Light Co. 261,493
12,658 Minnesota Power, Inc. 272,147
21,515 Montana Power Co. 1,589,421
9,560 Nevada Power Co. 240,195
29,879 New Century Energies, Inc. 1,208,232
22,287 Nisource, Inc. 622,643
15,157 OGE Energy Corp. 390,293
55,779 PacifiCorp 1,014,481
28,442 Potomac Electric Power Co. 878,147
17,468 Puget Sound Energy, Inc. 455,260
24,709 TECO Energy, Inc. 572,940
15,129 UtiliCorp United, Inc. 377,279
8,187 Washington Gas Light Co. 200,070
------------
12,264,574
------------
UTILITIES - GAS, DISTRIBUTION - 0.57%
10,694 AGL Resources, Inc. 201,849
25,486 Keyspan Energy Corp. 688,122
49,022 MCN Energy Group, Inc. 980,440
15,619 National Fuel Gas Co. 741,903
9,630 NICOR, Inc. 362,329
------------
2,974,643
------------
UTILITIES - GAS, PIPELINE - 1.04%
13,633 Columbia Energy Group 729,366
28,441 Consolidated Natural Gas Co. 1,690,462
26,186 ONEOK, Inc. 785,580
12,624 Peoples Energy Corp. 486,024
33,430 Williams Companies, Inc. 1,732,092
------------
5,423,524
------------
WATER SERVICES - 0.04%
6,927 American Water Works Co., Inc. 214,738
------------
TOTAL COMMON STOCK
(Cost $416,405,627) 515,210,915
------------
<PAGE> 112
MAY 31, 1999 55
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 0.86%
HOSPITAL MANAGEMENT - 0.71%
$3,713,000 Humana, Inc.,
5.11% due 06/01/99 $ 3,713,000
------------
INSURANCE - MULTILINE - 0.15%
761,000 Marsh & McLennan Companies, Inc.,
4.90% due 06/03/99 760,793
------------
TOTAL CORPORATE SHORT TERM
COMMERCIAL PAPER
(Cost $4,473,793) 4,473,793
------------
UNITED STATES GOVERNMENT
SHORT TERM - 0.29%
U. S. TREASURY BILLS - 0.29%
1,500,000 United States Treasury Bills,
4.41% due 06/10/99 1,498,340
------------
TOTAL UNITED STATES GOVERNMENT
SHORT TERM
(Cost $1,498,340) 1,498,340
------------
TOTAL INVESTMENTS
(Cost $422,377,760) - 99.85% 521,183,048
------------
Other assets less liabilities,
net - 0.15% 781,509
------------
NET ASSETS (equivalent
to $24.11 per share on
21,646,123 shares
outstanding) - 100.00% $521,964,557
------------
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
21,646,123 shares outstanding $ 216,461
Additional paid in capital 402,462,419
Undistributed net realized gain on securities 20,521,962
Undistributed net investment loss (41,573)
Unrealized appreciaton of securities 98,805,288
------------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $521,964,557
============
* Non-income producing
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 113
56 SOCIAL AWARENESS FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 5,720,024
Interest 484,096
Total Investment Income 6,204,120
EXPENSES:
Advisory fees 2,076,498
Custodian fees 31,663
Registration and filing fees 17,328
Audit fees and services 12,122
Accounting services 75,764
Directors' fees and expenses 10,368
Directors' retirement plan expenses 47,629
Report to shareholders 84,103
Miscellaneous 12,439
------------
Total expenses 2,367,914
------------
NET INVESTMENT INCOME 3,836,206
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain on securities:
Investments $21,326,713
Futures contracts 691,211 22,017,924
-----------
Net unrealized appreciation of securities during the year:
Investments 50,552,924
Futures 137,250 50,690,174
----------- ------------
Net realized and unrealized gain on
securities during the year 72,708,098
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 76,544,304
============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
1999 1998
--------------------------------
OPERATIONS:
Net investment income $ 3,836,206 $ 2,820,855
Net realized gain on securities 22,017,924 36,311,508
Net unrealized appreciation of securities
during the year 50,690,174 21,289,379
--------------------------------
Increase in net assets result 76,544,304 60,421,742
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,053,286) (2,737,376)
Net realized gain on securities (37,006,972) (9,562,689)
--------------------------------
Decrease in net assets resulting from
distributions to shareholders (41,060,258) (12,300,065)
--------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 118,062,922 120,526,570
Proceeds from capital stock issued
for distributions reinvested 41,060,258 12,300,065
--------------------------------
159,123,180 132,826,635
Cost of capital stock repurchased (6,810,019) (2,130,016)
--------------------------------
Increase in net assets resulting
from capital stock transactions 152,313,161 130,696,619
--------------------------------
TOTAL INCREASE IN NET ASSETS 187,797,207 178,818,296
NET ASSETS:
Beginning of year 334,167,350 155,349,054
--------------------------------
End of year (including undistributed net
investment income of $(41,573) and $175,507) $ 521,964,557 $334,167,350
================================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 5,074,114 5,891,588
Shares issued for distributions reinvested 1,800,031 618,253
Shares of capital stock repurchased (308,485) (106,789)
--------------------------------
Increase in shares outstanding
Beginning of year 15,080,463 8,677,411
--------------------------------
End of year 21,646,123 15,080,463
================================
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 114
MAY 31, 1999 ASSSETS ALLOCATION FUND - STATEMENT OF NET ASSETS 57
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 57.86%
ADVERTISING - 0.13%
1,995 Interpublic Group Companies, Inc. $ 151,121
2,300 Omnicom Group, Inc. 161,000
------------
312,121
------------
AEROSPACE/DEFENSE - 0.72%
12,611 Boeing Co. 532,815
881 Crane Co. 26,484
558 EG&G, Inc. 16,566
1,754 General Dynamics Corp. 115,326
1,042 Goodrich (B.F.) Co. 42,201
5,266 Lockheed Martin Corp. 69,660
4,618 Raytheon Co., Class B 314,313
1,578 TRW, Inc. 78,999
6,268 United Technologies Corp. 389,008
------------
1,798,316
------------
AIRLINES - 0.19%
2,452* AMR Corp. 159,533
1,914 Delta Air Lines, Inc. 109,816
4,414 Southwest Airlines Co. 141,523
1,213* US Airways Group, Inc. 58,906
------------
469,778
------------
APPAREL & PRODUCTS - 0.02%
1,000* Fruit of The Loom, Inc. 10,312
910 Liz Claiborne, Inc. 32,760
------------
43,072
------------
APPLIANCES/FURNISHINGS - 0.06%
1,229 Maytag Corp. 86,721
1,029 Whirlpool Corp. 66,370
------------
153,091
------------
AUTO - CARS - 0.67%
6,205* Delphi Automotive Systems Corp. 121,774
16,356 Ford Motor Co. 933,313
8,878 General Motors Corp. 612,582
------------
1,667,669
------------
AUTO - ORIGINAL EQUIPMENT - 0.04%
1,800 Danaher Corp. 108,788
------------
AUTO - REPLACEMENT PARTS - 0.12%
2,008* AutoZone, Inc. 58,107
1,000 Cooper Tire & Rubber Co. 23,749
2,326 Genuine Parts Co. 78,357
2,176 Goodyear Tire & Rubber Co. 129,880
882 Pep Boys-Manny, Moe & Jack 16,648
------------
306,741
------------
BANKS - NEW YORK CITY - 1.10%
10,016 Bank of New York Co., Inc. 358,072
30,509 Citigroup, Inc. 2,021,221
2,484 J. P. Morgan & Co., Inc. 346,051
------------
2,725,344
------------
BANKS - OTHER - 1.83%
3,966 BankBoston Corp. 187,889
1,400 Bankers Trust Corp. 129,588
23,414 Bank of America Corp. 1,514,593
13,327 First Union Corp. 613,875
7,576 Fleet Financial Group, Inc. 311,563
7,176 Mellon Bank Corp. 256,094
4,497 National City Corp. 297,645
1,911 Providian Financial Corp. 183,337
1,510 Republic of New York Corp. 102,585
1,800 Union Planters Corp. 74,363
22,036 Wells Fargo & Co. 881,440
------------
4,552,972
------------
BANKS - REGIONAL - 1.87%
2,250 AmSouth Bancorporation 63,844
15,899 Bank One Corp. 899,287
11,458 Chase Manhattan Corp. 830,705
2,130 Comerica, Inc. 128,732
3,657 Fifth Third Bancorp 249,362
8,900 Firstar Corp. 256,431
2,920 Huntington Bancshares, Inc. 101,105
5,980 KeyCorp 207,805
2,200 Mercantile Bancorporation, Inc. 128,562
1,600 Northern Trust Corp. 144,600
4,073 PNC Bank Corp. 233,179
2,900 Regions Financial Corp. 109,838
2,100 SouthTrust Corp. 81,769
2,200 State Street Corp. 167,750
2,400 Summit Bancorporation 98,250
4,385 SunTrust Banks, Inc. 295,988
3,500 Synovus Financial Corp. 70,438
9,821 U.S. Bancorp 319,183
2,852 Wachovia Corp. 251,689
------------
4,638,517
------------
BEVERAGE -
BREWERS/DISTRIBUTORS - 0.34%
6,396 Anheuser-Busch Companies, Inc. 467,308
933 Brown-Forman Corp., Class B 62,219
478 Coors Adolph, Class B 22,704
5,425 Seagram Co., Ltd. 281,761
------------
833,992
------------
BEVERAGE - SOFT DRINKS - 1.27%
33,299 Coca-Cola Co. 2,274,738
5,200 Coca Cola Enterprises, Inc. 188,500
19,661 PepsiCo, Inc. 704,109
------------
3,167,347
------------
BROADCASTING - 0.97%
9,402* CBS Corp. 392,534
4,400* Clear Channel Communications 290,675
9,868 Comcast Corp., Class A 379,918
8,263* Media One Group, Inc. 610,429
6,809 U S WEST, Inc. 368,111
9,300* Viacom, Inc., Class B 358,050
------------
2,399,717
------------
BUILDING MATERIALS - 0.20%
605 Armstrong World Industries, Inc. 35,241
4,984 Lowe's Companies, Inc. 258,857
4,534 Masco Corp. 129,502
2,268 Sherwin-Williams Co. 69,883
------------
493,483
------------
CHEMICAL - MAJOR - 0.86%
3,019 Dow Chemical Co. 366,809
15,162 E.I. du Pont de Nemours and Co. 992,163
1,353 Hercules, Inc. 47,270
8,408 Monsanto Co. 348,932
1,610 Morton International, Inc. 62,790
2,435 PPG Industries, Inc. 147,773
2,229 Rohm and Haas Co. 89,439
1,720 Union Carbide Corp. 88,258
------------
2,143,434
------------
<PAGE> 115
58 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICAL - MISCELLANEOUS - 0.21%
3,022 Air Products and Chemicals, Inc. 123,902
1,088 Eastman Chemical Co. 55,080
1,706 Ecolab, Inc. 72,505
500* FMC Corp. 33,094
731 Great Lakes Chem Corp. 33,032
573 Millipore Corp. 19,124
904 Nalco Chemical Co. 30,284
2,086 Praxair, Inc. 101,823
1,336 Sigma Aldrich Corp. 42,751
1,000* W.R. Grace & Co. 17,813
------------
529,408
------------
COAL - 0.00%
100 NACCO Industries, Inc., Class A 7,463
------------
CONGLOMERATES - 0.79%
7,460 Allied Signal, Inc. 433,146
1,300 ITT Industries, Inc. 49,075
1,681 Loews Corp. 136,686
4,400 RJR Nabisco Holdings Corp. 136,125
2,251 Tenneco, Inc. 52,476
2,256 Textron, Inc. 200,924
11,001 Tyco International, Ltd. 961,212
------------
1,969,644
------------
CONSUMER FINANCE - 0.17%
900 Capital One Financial Corp. 135,619
10,461 MBNA Corp. 288,985
------------
424,604
------------
CONTAINERS - METAL/GLASS - 0.13%
400 Ball Corp. 19,475
3,092 Corning, Inc. 168,901
1,693 Crown Cork & Seal Co., Inc. 53,117
700 Owens Corning 27,563
2,000* Owens-Illinois, Inc. 61,000
------------
330,056
------------
CONTAINERS - PAPER - 0.06%
700 Bemis Co., Inc. 26,425
1,182* Sealed Air Corp. 73,432
800 Temple-Inland, Inc. 53,600
------------
153,457
------------
COSMETICS/TOILETRIES - 0.41%
699 Alberto-Culver Co., Class B 18,480
3,514 Avon Products, Inc. 173,723
14,892 Gillette Co. 759,492
1,371 International Flavors & Fragrances, Inc. 56,382
------------
1,008,077
------------
DRUGS - 4.27%
875 Allergan, Inc. 81,375
1,314* ALZA Corp. 46,893
17,756 American Home Products Corp. 1,023,189
6,852* Amgen, Inc. 433,389
792 Bausch & Lomb, Inc. 60,489
26,828 Bristol Myers Squibb Co. 1,841,072
14,860 Eli Lilly and Co. 1,061,561
32,174 Merck & Co., Inc. 2,171,745
6,911 Pharmacia & Upjohn, Inc. 383,129
17,542 Pfizer, Inc. 1,876,994
19,808 Schering-Plough Corp. 892,598
11,054 Warner-Lambert Co. 685,348
1,300* Watson Pharmaceuticals, Inc. 49,806
------------
10,607,588
------------
ELECTRICAL EQUIPMENT - 2.04%
2,184* Cabletron Systems, Inc. 32,487
5,988 Emerson Electric Co. 382,484
44,302 General Electric Co. 4,504,960
510 National Service Industries, Inc. 18,774
1,096 Raychem Corp. 38,086
750 Thomas & Betts Corp. 32,109
1,296 W. W. Grainger, Inc. 68,769
------------
5,077,669
------------
ELECTRONIC INSTRUMENTS - 0.02%
650 Tektronix, Inc. 15,071
2,176* Thermo Electron Corp. 41,616
------------
56,687
------------
ENTERTAINMENT - 0.99%
8,200 Carnival Corp., Class A 336,200
1,439* Harrah's Entertainment, Inc. 31,118
2,649 Hasbro, Inc. 75,827
936* King World Productions, Inc. 31,239
3,861 Mattel, Inc. 102,075
15,826 Time Warner, Inc. 1,077,157
27,412 Walt Disney Co. 798,375
------------
2,451,991
------------
FINANCE COMPANIES - 0.27%
9,778 Associates First Capital Corp. 400,898
6,476 Household International, Inc. 280,896
------------
681,794
------------
FINANCIAL SERVICES - 0.35%
6,221 American Express Co. 753,907
1,500 Countrywide Credit Industries, Inc. 61,687
1,359 H & R Block, Inc. 65,487
------------
881,081
------------
FOODS - 0.90%
7,923 Archer Daniels Midland Co. 118,845
3,838 BestFoods 191,900
5,950 Campbell Soup Co. 262,544
6,482 ConAgra, Inc. 168,937
2,134 General Mills, Inc. 171,520
4,834 H J Heinz Co. 233,543
1,944 Hershey Foods Corp. 105,462
5,332 Kellogg Co. 184,954
3,216 Pioneer Hi-Bred International, Inc. 120,600
1,819 Quaker Oats Co. 120,167
4,100 Ralston Purina Co. 111,725
12,192 Sara Lee Corp. 292,608
1,676 Wm. Wrigley Jr. Co. 145,917
------------
2,228,722
------------
<PAGE> 116
MAY 31, 1999 59
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
FOOTWEAR - 0.10%
3,831 NIKE, Inc., Class B $ 223,452
700* Reebok International, Ltd. 13,913
------------
247,365
------------
FREIGHT - 0.10%
4,008* FDX Corp. 220,691
963 Ryder System, Inc. 23,111
------------
243,802
------------
GOLD MINING - 0.06%
4,983 Barrick Gold Corp. 85,957
3,100 Battle Mountain Gold Co. 7,556
2,871 Homestake Mining Co. 22,429
3,279 Placer Dome, Inc. 36,479
------------
152,421
------------
GOVERNMENT SPONSORED - 0.64%
9,280 Federal Home Loan Mortgage 541,140
14,125 Federal National Mortgage Association 960,500
2,300 SLM Holding Corp. 95,450
------------
1,597,090
------------
FUNERAL SERVICES - 0.03%
3,445 Service Corp. International 66,101
------------
HARDWARE & TOOLS - 0.05%
1,184 Black & Decker Corp. 67,414
784 Snap-on, Inc. 28,371
1,188 Stanley Works 38,684
------------
134,469
------------
HEALTHCARE - 0.30%
3,650 Cardinal Health, Inc. 220,369
1,400* HCR Manor Care, Inc. 37,450
5,568* HealthSouth Corp. 74,472
2,169* Humana, Inc. 27,248
4,202 IMS Helath, Inc. 103,474
3,709 Mckesson HBOC, Inc. 126,338
2,605 United HealthCare Corp. 151,741
------------
741,092
------------
HEAVY DUTY TRUCKS/PARTS - 0.14%
600 Cummins Engine Co., Inc. 30,375
2,253 Dana Corp. 116,311
978 Eaton Corp. 85,269
927* Navistar International Corp. 45,771
1,088 PACCAR, Inc. 61,268
------------
338,994
------------
HOME BUILDERS - 0.02%
832 Centex Corp. 30,836
500 Kaufman & Broad Home Corp. 12,063
600 Pulte Corp. 14,288
------------
57,187
------------
HOSPITAL MANAGEMENT - 0.14%
8,536 Columbia/HCA Healthcare Corp. 201,130
449* Lifepoint Hospitals, Inc. 4,493
400 Shared Med Systems Corp. 26,300
4,081* Tenet Healthcare Corp. 99,985
449* Triad Hospitals, Inc. 4,549
------------
336,457
------------
HOSPITAL SUPPLIES - 1.58%
20,348 Abbott Laboratories 919,475
719 Bard (C. R.), Inc. 32,849
3,910 Baxter International, Inc. 252,439
3,294 Becton, Dickinson and Co. 127,643
1,500 Biomet, Inc. 59,906
5,246* Boston Scientific Corp. 199,020
18,248 Johnson & Johnson 1,690,221
1,022 Mallinckrodt, Inc. 35,387
7,932 Medtronic, Inc. 563,172
1,147* St. Jude Medical, Inc. 38,783
------------
3,918,895
------------
HOUSEHOLD PRODUCTS - 1.37%
1,648 Clorox Co. 166,345
4,016 Colgate-Palmolive Co. 401,098
5,543 Minnesota Mining & Manufacturing Co. 475,312
3,678 Newell Rubbermaid, Inc. 148,959
17,938 Procter & Gamble Co. 1,674,961
800 Tupperware Corp. 17,800
7,796 Unilever NV - ADR 509,180
------------
3,393,655
------------
INFORMATION PROCESSING - 0.02%
3,556* Parametric Technology Corp. 49,340
------------
INFORMATION PROCESSING -
BUSINESS SOFTWARE - 2.49%
3,200* BMC Software, Inc. 158,200
68,128* Microsoft Corp. 5,497,078
19,280* Oracle Corp. 478,385
3,000* Peoplesoft, Inc. 48,563
------------
6,182,226
INFORMATION PROCESSING -
COMPUTER HARDWARE SYSTEMS - 1.04%
1,828* Apple Computer, Inc. 80,546
22,572 Compaq Computer Corp. 534,662
34,312* Dell Computer Corp. 1,181,620
2,100* Gateway, Inc. 127,706
2,499* Silicon Graphics, Inc. 30,925
10,356* Sun Microsystems, Inc. 618,771
------------
2,574,230
------------
INFORMATION PROCESSING -
COMPUTER SERVICES - 1.13%
13,900* America Online, Inc. 1,659,313
8,258 Automatic Data Processing, Inc. 340,126
1,864* Ceridian Corp. 61,512
6,700 Electronic Data Systems Corp. 376,875
5,998 First Data Corp. 269,535
3,300 Paychex, Inc. 97,763
------------
2,805,124
------------
INFORMATION PROCESSING -
DATA SERVICES - 2.90%
900 Adobe Systems, Inc. 66,713
735 Autodesk, Inc. 20,304
10,496* Cendant Corp. 193,520
7,333 Computer Associates International 346,943
2,170* Computer Sciences Corp. 140,372
4,800* Compuware Corp. 149,100
700* Data General Corp. 9,188
6,822* EMC Corp. 679,642
13,765 Hewlett Packard Co. 1,298,212
1,765 Honeywell, Inc. 167,013
24,948 International Business Machines Corp. 2,901,764
4,484* Novell, Inc. 105,374
3,706 Pitney Bowes, Inc. 236,258
3,218* Seagate Technology, Inc. 97,143
3,400* Solectron Corp. 186,150
3,500* Unisys Corp. 132,781
8,866 Xerox Corp. 498,158
------------
7,228,635
------------
<PAGE> 117
60 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION PROCESSING -
NETWORKING - 1.14%
3,000* Ascend Communications, Inc. 278,063
21,374* Cisco Systems, Inc. 2,327,094
2,247* General Insturment Corp. 86,931
4,744* 3Com Corp. 130,460
------------
2,822,548
------------
INSURANCE - CASUALTY - 0.20%
2,284 Chubb Corp. 160,023
1,000 Progressive Corp. 140,375
1,953 SAFECO Corp. 85,810
3,168 St. Paul Companies, Inc. 112,662
------------
498,870
------------
INSURANCE - LIFE - 0.32%
2,097 Aetna, Inc. 190,434
4,307 Conseco, Inc. 131,632
1,596 Jefferson-Pilot Corp. 108,029
1,540 Lincoln National Corp. 156,695
2,070 Torchmark Corp. 69,086
1,774 Transamerica Corp. 130,167
------------
786,043
------------
INSURANCE - MISCELLANEOUS - 0.11%
1,444 MBIA, Inc. 98,643
1,506 MGIC Investment Corp. 72,476
1,914 UNUM Corp. 102,997
------------
274,116
------------
INSURANCE - MULTILINE - 1.36%
10,992 Allstate Corp. 400,521
16,729 American International Group, Inc. 1,912,334
3,528 Aon Corp. 151,704
2,929 CIGNA Corp. 273,129
2,200 Cincinnati Financial Corp. 90,613
3,306 Hartford Financial Services Group 209,104
3,626 Marsh & McLennan Companies, Inc. 263,792
2,000 Provident Companies, Inc. 78,125
------------
3,379,322
------------
LEISURE TIME - 0.03%
1,243 Brunswick Corp. 29,832
2,400* Mirage Resorts, Inc. 49,200
------------
79,032
------------
LODGING - 0.07%
3,510 Hilton Hotels Corp. 48,263
3,288 Marriott International, Inc. 125,150
------------
173,413
------------
MACHINE TOOLS - 0.00%
544 Milacron, Inc. 11,594
------------
MACHINERY - AGRICULTURE - 0.07%
1,011 Case Corp. 47,517
3,170 Deere & Co. 120,658
------------
168,175
------------
MACHINERY - CONSTRUCTION &
CONTRACTS - 0.13%
4,840 Caterpillar, Inc. 265,595
1,003 Fluor Corp. 37,362
526 Foster Wheeler Corp. 7,233
700 Harnischfeger Industries, Inc. 5,031
------------
315,221
------------
MACHINERY - INDUSTRIAL/SPECIALTY - 0.32%
300 Briggs & Stratton Corp. 18,750
1,307 Cooper Industries, Inc. 64,778
2,920 Dover Corp. 110,048
3,460 Illinois Tool Works, Inc. 265,555
2,234 Ingersoll-Rand Co. 142,278
1,187 Johnson Controls, Inc. 74,855
1,595 Pall Corp. 31,999
1,504 Parker Hannifin Corp. 65,706
800 Timken Co. 16,450
------------
790,419
------------
MEDICAL TECHNOLOGY - 0.12%
4,112 Guidant Corp. 205,600
303* PE Corp-Celera Genomics Group 5,151
706 PE Corp-PE Biosystems Group 78,851
------------
289,602
------------
MERCHANDISE - DRUG - 0.26%
5,278 CVS Corp. 242,788
497 Longs Drug Stores Corp. 17,302
3,462 Rite Aid Corp. 86,550
13,208 Walgreen Co. 307,086
------------
653,726
------------
MERCHANDISE - SPECIALTY - 1.23%
889 American Greetings Corp., Class A 25,448
1,351 Circuit City Stores, Inc. 97,019
1,500* Consolidated Stores Corp. 51,563
2,966* CostCo Companies, Inc. 215,035
2,969 Dollar General Corp. 78,857
2,257 Fortune Brands, Inc. 92,255
7,720 Gap, Inc. 482,983
19,912 Home Depot, Inc. 1,132,495
1,806 Ikon Office Solutions, Inc. 25,171
491 Jostens, Inc. 10,372
2,200* Kohl's Corp. 150,013
3,044 Limited, Inc. 148,775
1,866 Nordstrom, Inc. 66,243
6,100* Staples, Inc. 175,375
1,382 Tandy Corp. 114,015
4,256 TJX Companies, Inc. 127,680
3,433* Toys R Us, Inc. 79,174
------------
3,072,473
------------
MERCHANDISING - DEPARTMENT - 0.32%
5,952 Dayton Hudson Corp. 374,975
1,430 Dillards, Inc., Class A 50,229
2,816* Federated Department Stores, Inc. 153,472
4,735 May Department Stores Co. 205,085
------------
783,761
------------
<PAGE> 118
MAY 31, 1999 61
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
MERCHANDISING - FOOD - 0.48%
3,403 Albertsons, Inc. $ 182,061
3,642 American Stores Co. 120,186
5,542* Kroger Co. 324,553
6,600* Safeway, Inc. 306,900
1,592 SUPERVALU, Inc. 38,606
4,414 SYSCO Corp. 131,041
500 The Great Atlantic & Pacific Tea Co., Inc. 16,375
1,979 Winn-Dixie Stores, Inc. 70,873
------------
1,190,595
------------
MERCHANDISING - MASS - 1.24%
3,648 J.C. Penney Co., Inc. 188,555
6,576* KMart Corp. 101,106
5,196 Sears Roebuck and Co. 248,434
59,848 Wal-Mart Stores, Inc. 2,551,021
------------
3,089,116
------------
METALS - ALUMINUM - 0.16%
3,043 Alcan Aluminium, Ltd. 85,204
4,980 Aluminum Co. of America 273,900
942 Reynolds Metals Co. 50,103
------------
409,207
------------
METALS - COPPER - 0.04%
600 ASARCO, Inc. 9,638
2,273 Newmont Mining Corp. 40,488
859 Phelps Dodge Corp. 44,507
------------
94,633
------------
METALS - STEEL - 0.07%
2,579 Allegheny Teldyne, Inc. 52,708
1,695* Bethlehem Steel Corp. 14,090
1,167 Nucor Corp. 58,204
1,215 USX-US Steel Group, Inc. 32,728
1,300 Worthington Industries, Inc. 16,656
------------
174,386
------------
METALS - MISCELLANEOUS - 0.05%
1,366 Cyprus Amax Minerals Co. 17,160
1,874 Engelhard Corp. 37,948
2,453 Freeport-McMoRan Copper & Gold, Inc.,Class B 34,649
2,207 Inco, Ltd. 31,450
------------
121,207
------------
MISCELLANEOUS - 0.09%
4,000 BB&T Corp. 146,000
2,000 Equifax, Inc. 72,000
------------
218,000
------------
MOBILE HOMES - 0.01%
500 Fleetwood Enterprises, Inc. 12,719
------------
MULTIMEDIA - 0.01%
702 Meredith Corp. 24,526
------------
NATURAL GAS-DIVERSIFIED - 0.05%
2,762 Coastal Corp. 106,510
300 Eastern Enterprises 10,406
------------
116,916
------------
OIL - INTEGRATED DOMESTIC - 0.47%
1,264 Amerada Hess Corp. 75,761
962 Ashland Oil, Inc. 39,202
4,508 Atlantic Richfield Co. 377,263
2,363 Burlington Resources, Inc. 101,461
1,173 Kerr-McGee Corp. 54,545
4,707 Occidental Petroleum Corp. 99,434
3,384 Phillips Petroleum Co. 177,449
3,160 Unocal Corp. 125,610
3,911 USX-Marathon Group 117,086
------------
1,167,811
------------
OIL - INTEGRATED
INTERNATIONAL - 2.67%
8,859 Chevron Corp. 821,119
32,828 Exxon Corp. 2,622,137
10,600 Mobil Corp. 1,073,250
28,992 Royal Dutch Peteroleum Co. 1,639,860
7,274 Texaco, Inc. 476,447
------------
6,632,813
------------
OIL - SERVICES - 0.35%
4,220 Baker Hughes, Inc. 131,348
5,891 Halliburton Co. 243,740
781 McDermott International, Inc. 20,012
1,129* Rowan Companies, Inc. 19,052
7,402 Schlumberger, Ltd. 445,508
------------
859,660
------------
OIL/GAS PRODUCERS - 0.10%
1,600 Anadarko Petroleum Corp. 60,004
1,300 Apache Corp. 46,800
700 Helmerich & Payne, Inc. 16,319
1,441 Sonat, Inc. 51,065
1,204 Sunoco, Inc. 36,647
3,311 Union Pacific Resources Group, Inc. 46,147
------------
256,982
------------
PAPER/FOREST PRODUCTS - 0.59%
1,563 Avery Dennison Corp. 93,585
766 Boise Cascade Corp. 30,353
1,307 Champion International Corp. 66,984
2,938 Fort James Corp. 107,604
1,233 Georgia-Pacific Corp. 106,577
5,515 International Paper Co. 275,750
7,334 Kimberly-Clark Corp. 430,414
1,443 Louisiana Pacific Corp. 29,221
1,368 Mead Corp. 51,129
315 Potlatch Corp. 12,409
1,321 Westvaco Corp. 37,731
2,744 Weyerhaeuser Co. 170,300
1,478 Willamette Industries, Inc. 62,630
------------
1,474,687
------------
PHOTOGRAPHY - 0.13%
4,434 Eastman Kodak Co. 299,848
646 Polaroid Corp. 13,647
------------
313,495
------------
POLLUTION CONTROL - 0.22%
2,159 Browning-Ferris Industries, Inc. 89,599
4,400 Laidlaw, Inc. 30,800
8,062 Waste Management, Inc. 426,278
------------
546,677
------------
PUBLISHING - NEWS - 0.27%
1,327 Dow Jones & Co., Inc. 69,668
------------
<PAGE> 119
62 MAY 31, 1999
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
PUBLISHING - NEWS - Continued
3,838 Gannett Co., Inc. $ 277,296
1,096 Knight-Ridder, Inc. 57,746
2,458 New York Times Co., Class A 83,879
967 Times Mirror Co. 56,993
1,701 Tribune Co. 134,273
------------
679,855
------------
PUBLISHING/PRINTING - 0.15%
1,100 Deluxe Corp. 39,669
2,186 Dun & Bradstreet Corp. 76,510
971 Harcourt General, Inc. 47,761
2,656 McGraw-Hill, Inc. 137,780
1,196 Moore Corp., Ltd. 10,540
1,796 R. R. Donnelley and Sons Co. 65,105
------------
377,365
------------
RAILROAD - 0.31%
6,299 Burlington Northern Santa Fe 195,269
2,876 CSX Corp. 134,992
1,500 Kansas City Southern Industries, Inc. 84,375
5,005 Norfolk Southern Corp. 163,914
3,346 Union Pacific Corp. 190,931
------------
769,481
------------
RESTAURANTS - 0.36%
1,857 Darden Restaurants, Inc. 39,577
18,122 McDonald's Corp. 697,697
2,076* Tricon Global Restaurants, Inc. 120,926
1,700 Wendy's International, Inc. 46,325
------------
904,525
------------
SAVINGS & LOAN - 0.16%
925 Golden West Financial Corp. 87,759
7,858 Washington Mutual, Inc. 300,077
------------
387,836
------------
SECURITIES RELATED - 0.82%
1,475 Bear Stearns Co., Inc. 65,453
5,450 Charles Schwab Corp. 576,678
3,400 Franklin Resources, Inc. 147,900
1,500 Lehman Brothers Holdings, Inc. 81,938
4,830 Merrill Lynch & Co., Inc. 405,720
7,812 Morgan Stanley, Dean Witter,
Discover and Co. 753,858
------------
2,031,547
------------
SEMICONDUCTORS - 1.65%
1,957* Advanced Micro Devices, Inc. 36,205
44,904 Intel Corp. 2,427,623
1,910* LSI Logic Corp. 70,789
3,344* Micron Technology, Inc. 126,863
8,090 Motorola, Inc. 669,953
2,237* National Semiconductor Corp. 43,341
2,617 Rockwell International Corp. 144,426
5,328 Texas Instruments, Inc. 582,750
------------
4,101,950
------------
SEMICONDUCTOR EQUIPMENT - 0.13%
4,966* Applied Materials, Inc. 272,820
1,200* KLA-Tencor Corp. 54,600
------------
327,420
------------
TELECOMMUNICATIONS - 2.66%
7,749* Airtouch Communications, Inc. 778,775
3,784 ALLTEL Corp. 271,266
1,124* Andrew Corp. 17,422
1,800 CenturyTel, Inc. 68,963
2,278 Frontier Corp. 119,880
1,100 Harris Corp. 41,594
35,616 Lucent Technologies, Inc. 2,025,660
24,829* MCI Worldcom, Inc. 2,144,605
3,800* Nextel Communications, Inc., Class A 140,125
8,983 Nortel Networks Corp. 673,725
981 Scientific-Atlanta, Inc. 34,642
5,208* Tellabs, Inc. 304,667
------------
6,621,324
------------
TEXTILE - PRODUCTS - 0.04%
500 Russell Corp. 11,719
200 Springs Industries, Inc., Class A 7,925
1,600 V F Corp. 73,600
------------
93,244
------------
TOBACCO - 0.54%
32,829 Philip Morris Companies, Inc. $ 1,265,968
2,427 UST, Inc. 74,024
------------
1,339,992
------------
UTILITIES - COMMUNICATION - 3.56%
42,437 AT&T Corp. 2,355,254
14,818 Ameritech Corp. 975,210
20,990 Bell Atlantic Corp. 1,149,203
26,154 BellSouth Corp. 1,234,142
13,087 GTE Corp. 825,299
26,414 SBC Communications, Inc. 1,350,415
6,120 Sprint Corp., FON Group 690,030
5,960* Sprint Corp., PCS Group 268,200
------------
8,847,753
------------
UTILITIES - ELECTRIC - 1.32%
2,600* AES Corp. 129,350
1,825 Ameren Corp. 74,711
2,549 American Electric Power, Inc. 110,563
2,006 Carolina Power & Light Co. 87,763
2,892 Central & South West Corp. 74,469
2,118 Cinergy Corp. 72,277
1,400 CMS Energy Corp. 65,100
3,199 Consolidated Edison, Inc. 155,351
1,998 Constellation Energy Group, Inc. 62,313
2,608 Dominion Resources, Inc. 112,633
1,893 DTE Energy Co. 82,464
4,904 Duke Energy Corp. 295,773
4,717 Edison International 129,718
3,327 Entergy Corp. 107,920
3,126 FirstEnergy Corp. 99,446
2,570 FPL Group, Inc. 149,542
1,754 GPU, Inc. 76,409
1,500 New Century Energies, Inc. 60,656
2,400* Niagara Mohawk Holdings, Inc. 35,700
1,968 Northern States Power Co. 51,291
5,035 PG&E Corp. 169,931
2,046 PP&L Resources, Inc. 61,380
4,045 PacifiCorp 73,568
2,977 Peco Energy Co. 145,687
3,081 Public Service Enterprise Group, Inc. 129,209
3,989 Reliant Energy, Inc. 121,665
9,208 Southern Co. 261,277
3,794 Texas Utilities Co. 170,730
2,900 Unicom Corp. 122,706
------------
3,289,602
------------
<PAGE> 120
MAY 31, 1999 63
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
UTILITIES - GAS, DISTRIBUTION - 0.01%
590 NICOR, Inc. $ 22,199
------------
UTILITIES - GAS, PIPELINE - 0.36%
1,130 Columbia Energy Group 60,454
1,395 Consolidated Natural Gas Co. 82,915
4,847 Enron Corp. 345,955
400 ONEOK, Inc. 12,000
500 Peoples Energy Corp. 19,250
3,234 Sempra Energy 69,531
5,726 Williams Companies, Inc. 296,678
------------
886,783
------------
TOTAL COMMON STOCK
(Cost $83,377,329) 143,772,327
------------
CORPORATE LONG TERM
BONDS- 15.70%
BANKS - OTHER - 0.35%
$ 940,000 Bank of America Corp.,
5.88% due 02/15/09 880,639
------------
BANKS - REGIONAL - 0.31%
830,000 First Union National,
5.80% due 12/01/08 771,004
------------
BEVERAGE - 0.16%
400,000 Anheuser-Busch Companies, Inc.,
7.25% due 09/15/15 397,972
------------
BEVERAGE - SOFT DRINKS - 0.37%
1,000,000 Coca Cola Enterprises, Inc.,
5.75% due 11/01/08 929,270
------------
CHEMICAL - MAJOR - 0.29%
740,000 Monsanto Co.,
5.38% due 12/01/01 725,718
------------
CONTAINERS - METAL/GLASS - 0.54%
600,000 Owens Corning,
7.70% due 05/01/08 602,934
------------
785,000 Owens Corning,
7.00% due 03/15/09 749,055
------------
1,351,989
------------
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.56%
$ 1,510,000 National Service Industries, Inc.,
6.00% due 02/01/09 $ 1,400,906
------------
FINANCE COMPANIES - 1.66%
810,000 AT&T Capital Corp.,
7.50% due 11/15/00 818,497
1,185,000 Capital One Bank,
7.00% due 04/30/01 1,195,535
1,245,000 Newcourt Credit Group, Inc.,
7.13% due 12/17/03 1,268,829
830,000 Newcourt Credit Group, Inc.,
6.88% due 02/16/05 833,469
------------
4,116,330
------------
FINANCIAL SERVICES - 0.38%
1,000,000 Countrywide Home,
6.25% due 04/15/09 949,020
------------
HEAVY DUTY TRUCKS/PARTS - 0.50%
1,330,000 Dana Corp.,
7.00% due 03/01/29 1,238,416
------------
INSURANCE - MULTILINE - 0.60%
500,000 Fairfax Financial Holdings, Ltd.,
8.25% due 10/01/15 512,490
1,000,000 Fairfax Financial Holdings, Ltd.,
7.38% due 03/15/06 983,119
------------
1,495,609
------------
MERCHANDISE - DRUG - 0.35%
925,000 Rite Aid Corp.,
6.00% due 12/15/05 859,621
------------
NATURAL GAS-DIVERSIFIED - 0.83%
661,000 PanEnergy Corp.,
7.38% due 09/15/03 681,517
1,400,000 Valero Energy Corp.,
7.38% due 03/15/06 1,372,280
------------
2,053,797
------------
OIL - INTEGRATED DOMESTIC - 0.30%
$ 300,000 Conoco, Inc.,
5.90% due 04/15/04 294,012
470,000 USX-Marathon Group,
6.65% due 02/01/06 454,467
------------
748,479
------------
OIL - SERVICE - PRODUCTS - 0.38%
1,000,000 Halliburton Co.,
5.63% due 12/01/08 933,530
------------
OIL - SERVICES - 0.38%
940,000 Canadian Occidental Petroleum,
7.13% due 02/04/04 932,405
------------
PAPER/FOREST PRODUCTS - 0.36%
940,000 Temple-Inland, Inc., Series F,
6.75% due 03/01/09 906,038
------------
SECURITIES RELATED - 0.83% Merrill Lynch & Co., Inc.:
830,000 8.00% due 06/01/07 895,910
830,000 6.00% due 02/17/09 780,192
375,000 Merrill Lynch MTNB.,
7.20% due 10/15/12 380,636
------------
2,056,738
------------
TELECOMMUNICATIONS - 2.37%
1,830,000 Bell Atlantic Pennsylvania,
6.00% due 12/01/28 1,585,677
500,000 Northwestern Bell Telephone,
7.75% due 05/01/30 518,720
3,130,000 Sprint Capital Corp.,
6.38% due 05/01/09 3,002,046
830,000 Sprint Capital Corp.,
6.13% due 11/15/08 780,814
------------
5,887,257
------------
UTILITIES - COMMUNICATION - 1.22%
315,000 AT&T Corp.,
6.50% due 03/15/29 294,068
2,130,000 GTE California, Inc.,
5.50% due 01/15/09 1,954,083
800,000 MCI Communications Corp.,
6.50% due 04/15/10 782,776
------------
3,030,927
------------
<PAGE> 121
64 MAY 31, 1999
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
UTILITIES - ELECTRIC - 2.17%
$ 1,015,000 Arizona Public Service,
5.88% due 02/15/04 990,518
800,000 (1) Cinergy Corp.,
6.13% due 04/15/04 780,407
1,000,000 National Rual Utilities,
6.20% due 02/01/08 974,600
475,000 National Rual Utilities,
5.70% due 01/15/10 440,743
1,000,000 Pennsylvania Electric Co., Series C,
6.63% due 04/01/19 946,300
1,240,646 Texas Utilities Electric,
6.62% due 07/01/01 1,252,091
------------
5,384,659
------------
UTILITIES - GAS, PIPELINE - 0.79%
1,000,000 Enron Corp.,
6.75% due 09/01/04 1,000,910
1,000,000 Peco Energy Transition Trust,
6.13% due 03/01/09 962,180
------------
1,963,090
------------
TOTAL CORPORATE
LONG TERM BONDS
(Cost $40,059,946) 39,013,414
------------
UNITED STATES GOVERNMENT - 14.79%
LONG TERM
FEDERAL AGENCIES - 0.68%
Government National Mortgage
Association (pools/REMICS):
393,718 6.50% due 12/15/28 383,997
469,810 6.50% due 01/15/29 458,211
837,545 6.50% due 04/15/29 816,866
36,382 Single Family Mortgage,
6.50% due 01/15/29 35,484
------------
1,694,558
------------
GOVERNMENT SPONSORED - 11.77% Federal Home Loan Bank:
$ 1,310,000 6.00% due 05/17/06 1,273,975
1,000,000 5.81% due 03/23/09 960,470
925,000 5.32% due 12/23/08 855,773
Federal Home Loan Mortgage Corp.
(pools/REMICS):
869,219 8.50% due 10/01/26 912,402
327,580 8.50% due 11/01/26 343,752
35,466 8.50% due 07/01/28 37,223
138,193 7.50% due 09/01/25 141,129
238,925 7.50% due 09/01/25 244,002
206,032 7.50% due 09/01/25 210,410
311,831 7.50% due 09/01/25 318,457
Federal Home Loan Mortgage Corp.,
Gold (pools/REMICS):
683,651 7.00% due 03/01/12 693,687
2,500,000 7.00% due 06/15/28 2,501,175
3,300,000 6.00% due 06/01/29 3,140,676
175,000 6.00% due 06/01/29 168,656
Federal National Mortgage Association:
925,000 6.65% due 11/07/07 920,088
1,900,000 6.37% due 01/30/08 1,869,125
486,000 6.30% due 12/20/04 483,113
1,000,000 6.28% due 02/12/08 979,370
300,000 5.86% due 03/30/04 294,843
Federal National Mortgage Association
(pools/REMICS):
343,733 8.50% due 01/01/25 360,703
261,372 8.50% due 02/01/25 274,276
463,948 8.50% due 04/01/25 488,644
341,212 8.50% due 05/01/25 358,058
471,437 8.50% due 12/01/25 494,712
596,251 8.50% due 01/01/27 625,688
24,826 7.50% due 09/01/25 25,339
441,581 7.50% due 10/01/25 450,691
442,835 7.50% due 04/01/26 451,970
146,902 7.50% due 10/01/26 149,933
24,525 7.50% due 09/01/27 25,031
346,649 7.50% due 09/01/27 353,797
247,039 7.50% due 11/01/27 252,133
Federal National Mortgage Association
(pools/REMICS):
391,824 7.00% due 08/01/09 397,454
407,481 7.00% due 09/01/10 413,336
90,142 7.00% due 03/01/12 91,437
GOVERNMENT SPONSORED - Continued
Federal National Mortgage Association
(pools/REMICS):
$ 809,611 7.00% due 10/01/12 821,245
137,660 7.00% due 10/02/12 139,638
491,355 7.00% due 12/01/13 498,416
2,084,000 6.50% due 06/01/29 2,036,777
2,426,441 6.00% due 01/01/29 2,307,376
925,632 6.00% due 01/01/29 880,211
1,000,000 Federal National Mortgage Association,
6.76% due 07/16/07 1,002,810
------------
29,248,001
------------
UNITED STATES NOTES - 2.34% United States Treasury Notes:
1,000,000 6.50% due 05/31/02 1,024,530
1,800,000 5.00% due 04/30/01 1,787,346
1,000,000 5.63% due 02/15/06 990,780
2,000,000 3.88% due 01/15/09 2,000,000
------------
5,802,656
------------
TOTAL UNITED STATES
GOVERNMENT-LONG TERM
(Cost $37,238,507) 36,745,215
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 14.29%
DRUGS - 2.01%
5,000,000 Bergen Brunswig Corp.,
4.97% due 06/16/99 4,989,637
------------
ENTERTAINMENT - 2.01%
5,000,000 Time Warner Entertainment,
5.00% due 06/16/99 4,989,575
------------
HEAVY DUTY TRUCKS/PARTS - 2.01%
4,993,000 Eaton Corp.,
4.95% due 06/04/99 4,990,939
------------
INSURANCE - LIFE - 2.92%
7,294,000 Jefferson-Pilot Corp.,
4.88% due 06/03/99 7,292,021
------------
<PAGE> 122
MAY 31, 1999 65
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
METALS - ALUMINUM - 1.07%
$ 2,656,000 Reynolds Metals Co.,
4.90% due 06/02/99 $ 2,655,638
------------
MISCELLANEOUS - 1.16%
2,872,000 Sunoco, Inc.,
5.05% due 06/03/99 2,871,194
------------
TRUCKERS - 2.72%
6,750,000 J.B. Hunt Transport Services, Inc.,
4.92% due 06/01/99 6,750,000
------------
UTILITIES - MISCELLANEOUS - 0.39%
972,000 Orange and Rockland Utilities,
4.81% due 06/01/1999 972,000
------------
TOTAL CORPORATE SHORT
TERM COMMERCIAL PAPER
(Cost $35,511,004) 35,511,004
------------
TOTAL INVESTMENTS
(Cost $196,186,786) 102.64% 255,041,960
Other assets less liabilities,
net - (2.64)% (6,568,763)
------------
NET ASSETS (equivalent
to $14.43 per share on
17,222,217 shares
outstanding) - 100.00% 248,473,197
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
17,222,217 shares outstanding 172,222
Additional paid in capital 185,202,337
Undistributed net realized gain on securities 4,199,691
Undistributed net investment income 43,773
Unrealized appreciaton of securities 58,855,174
------------
NET ASSETS APPLICABLE
to shares Outstanding $248,473,197
============
* Non-income producing
(1) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1999
the aggregate value of these securities was $780,407 representing 0.31% of
net assets.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 123
66 ASSET ALLOCATION FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Dividends $ 1,828,885
Interest 5,656,270
------------
Total investment income 7,485,155
------------
EXPENSES:
Advisory fees 1,106,792
Custodian fees 16,869
Registration and filing fees 9,219
Audit and tax services 5,604
Accounting services 39,549
Directors fees and expenses 5,683
Directors' retirement plan expenses 23,115
Report to shareholders 54,828
Miscellaneous 8,369
------------
Total expenses 1,270,028
------------
NET INVESTMENT INCOME 6,215,127
------------
REALIZED AND UNREALIZED GAIN ON SECURITIES:
Net realized gain (loss) on securities:
Investments $ 5,347,128
Futures contracts (904,998) 4,442,130
-----------
Net unrealized appreciation of securities during the year:
Investments 14,676,807
Futures contracts 68,925 14,745,732
----------- ------------
Net realized and unrealized gain
during the year 19,187,862
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,402,989
------------
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
1999 1998
--------------------------------
OPERATIONS:
Net investment income $ 6,215,127 $ 5,684,679
Net realized gain on securities 4,442,130 13,272,397
Net unrealized appreciation of
securities during the year 14,745,732 18,286,139
--------------------------------
Increase in net assets resulting
from operations 25,402,989 37,243,215
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,223,150) (5,673,369)
Net realized gain on securities (12,942,384) (10,552,054)
--------------------------------
Decrease in net assets resulting from
distributions to shareholders (19,165,534) (16,225,423)
--------------------------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 29,740,452 6,643,565
Proceeds from capital stock issued
for distributions reinvested 19,165,534 16,225,423
--------------------------------
48,905,986 22,868,988
Cost of capital stock repurchased (6,769,056) (21,134,651)
--------------------------------
Increase in net assets resulting
from capital stock transactions 42,136,930 1,734,337
--------------------------------
Total Increase in Net Assets 48,374,385 22,752,129
--------------------------------
NET ASSETS:
Beginning of year 200,098,812 177,346,683
--------------------------------
End of year (including undistributed net
investment income of $43,773 and $51,796) $248,473,197 $200,098,812
================================
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 2,076,208 488,059
Shares issued for distributions reinvested 1,352,667 1,231,303
Shares of capital stock repurchased (476,138) (1,556,774)
--------------------------------
Increase in shares outstanding 2,952,737 162,588
Shares outstanding:
Beginning of year 14,269,480 14,106,892
--------------------------------
End of year 17,222,217 14,269,480
================================
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 124
MAY 31, 1999 CAPITAL CONSERVATION FUND - STATEMENT OF NET ASSETS 67
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS - 89.81%
AIRLINES - 2.89%
$1,500,000 Delta Air Lines, Inc.,
9.75% due 05/15/21 $ 1,822,740
------------
AUTO - CARS - 2.33%
1,500,000 Hertz Corp.,
6.00% due 01/15/03 1,468,815
------------
BANKS - OTHER - 5.42%
1,000,000 Bank of America Corp.,
7.20% due 04/15/06 1,025,260
1,500,000 Santander Finance Issuances,
7.25% due 11/01/15 1,446,315
1,000,000 Toronto Dominion Bank,
6.13% due 11/01/08 948,790
------------
3,420,365
------------
BANKS - REGIONAL - 6.51%
1,500,000 Bank Boston Capital Trust I,
8.25% due 12/15/26 1,535,460
1,500,000 Barnett Capital Trust I,
8.06% due 12/01/26 1,537,845
1,000,000 SouthTrust Corp.,
7.63% due 05/01/04 1,038,980
------------
4,112,285
------------
BUILDING MATERIALS - 3.07%
2,000,000 CSR America, Inc.,
6.88% due 07/21/05 1,940,860
------------
DRUGS - 3.13%
2,000,000 Akzo Nobel, Inc.,
6.00% due 11/15/03 1,973,200
------------
FINANCE COMPANIES - 9.02%
2,000,000 Capital One Bank,
8.13% due 03/01/00 2,029,840
1,000,000 C.I.T. Group Holdings, Inc.,
8.38% due 11/01/01 1,046,970
2,000,000 Finova Capital Corp.,
9.13% due 02/27/02 2,133,360
$ 500,000 Ford Motor Credit Co.,
6.38% due 11/05/08 $ 484,600
------------
5,694,770
------------
FINANCIAL SERVICES - 3.06%
2,000,000 Bear Stearns Companies, Inc.,
6.15% due 03/02/04 1,929,820
------------
HEALTHCARE - 1.97%
1,500,000 Columbia Healthcare Corp.,
7.50% due 12/15/23 1,242,660
------------
HEAVY DUTY TRUCKS/PARTS - 2.21%
1,500,000 Dana Corp.,
7.00% due 03/15/28 1,397,640
------------
INFORMATION PROCESSING -
DATA SERVICES - 3.15%
2,000,000 Comdisco, Inc.,
6.13% due 08/01/01 1,990,540
------------
MERCHANDISE - DRUG - 0.75%
500,000 Imcera Group,
6.00% due 10/15/03 474,605
------------
MERCHANDISING -
DEPARTMENT - 7.42%
2,000,000 Associated Dry Goods Corp.,
Debentures, 8.85% due 03/01/06 2,209,120
2,500,000 Federated Department Stores, Inc.,
6.79% due 07/15/27 2,474,450
------------
4,683,570
------------
MERCHANDISING - MASS - 2.31%
1,500,000 ShopKo Stores, Inc.,
6.50% due 08/15/03 1,460,790
------------
METALS - STEEL - 3.02% 2,000,000 Pohang Iron & Steel, Ltd.
7.50% due 08/01/02 1,909,620
------------
PAPER/FOREST PRODUCTS - 3.74%
$ 2,000,000 Georgia-Pacific Corp.,
9.50% due 12/01/11 $ 2,359,960
------------
POLLUTION CONTROL - 2.40%
1,500,000 US Filter Corp.,
6.38% due 05/15/01 1,515,555
------------
PUBLISHING - NEWS - 3.40%
2,000,000 News America Holdings,
8.25% due 08/10/18 2,143,500
------------
RAILROAD - 3.12%
2,000,000 Union Pacific Corp.,
6.79% due 11/09/07 1,966,700
------------
TELECOMMUNICATIONS - 6.53%
2,000,000 Airtouch Communications, Inc.,
7.50% due 07/15/06 2,080,520
2,000,000 360 Communications Co.,
7.13% due 03/01/03 2,038,760
------------
4,119,280
------------
UTILITIES - COMMUNICATION - 6.06%
2,500,000 CenturyTelephone Enterprises, Inc.,
7.20% due 12/01/25 2,391,325
1,500,000 GTE South, Inc.,
6.00% due 02/15/08 1,437,030
------------
3,828,355
------------
UTILITIES - GAS, DISTRIBUTION - 1.70%
1,000,000 Tosco Corp.,
9.63% due 03/15/02 1,076,320
------------
UTILITIES - GAS, PIPELINE - 6.60%
2,000,000 Columbia Energy Group,
7.62% due 11/28/25 2,089,980
2,000,000 Enron Corp.,
7.63% due 09/10/04 2,078,660
------------
4,168,640
------------
TOTAL CORPORATE BONDS
(Cost $57,417,750) 56,700,590
------------
<PAGE> 125
68 MAY 31, 1999
PAR MARKET
VALUE VALUE
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT
LONG TERM - 7.16%
FEDERAL AGENCIES - 0.28%
Government National Mortgage
Association:
$ 30,169 9.50% due 05/15/18 $ 32,424
1,731 9.50% due 06/15/18 1,860
1,220 9.50% due 06/15/18 1,311
110,323 9.50% due 07/15/18 118,568
17,818 9.50% due 08/15/18 19,150
3,130 9.50% due 10/15/18 3,363
------------
176,676
------------
GOVERNMENT SPONSORED - 6.04%
765,542 Federal Home Loan Bank,
5.75% due 12/15/16 765,779
742,809 Federal Home Loan Mortgage Corp.,
6.50% due 06/01/12 740,254
Federal National Mortgage
Association:
517,145 7.50% due 07/01/26 527,814
592,308 7.00% due 05/01/11 600,819
574,872 7.00% due 05/01/11 583,133
588,079 7.00% due 06/01/11 596,530
------------
3,814,329
------------
UNITED STATES NOTES - 0.84%
500,000 United States Treasury Notes,
6.88% due 05/15/06 530,000
------------
TOTAL UNITED STATES GOVERNMENT
LONG TERM
(Cost $4,415,194) 4,521,005
------------
FOREIGN GOVERNMENT BONDS - 0.81%
CANADA - 0.81%
500,000 New Brunswick Province,
7.13% due 10/01/02
(Cost $499,345) 514,035
------------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 0.50%
AEROSPACE/DEFENSE - 0.50%
$314,000 TRW, Inc., 5.13% due 06/01/99
(Cost $314,000) 314,000
------------
TOTAL INVESTMENTS
(Cost $62,646,289) - 98.29% 62,049,630
Other assets less liabilities, net - 1.71% 1,080,875
------------
NET ASSETS (equivalent to $9.39 per share on
6,720,215 shares outstanding) - 100.00% $ 63,130,505
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
6,720,215 shares outstanding $ 67,202
Additional paid in capital 64,243,829
Accumulated net realized loss on securities (617,186)
Undistributed net investment income 33,319
Unrealized depreciation of securities (596,659)
------------
Net Assets applicable to shares Outstanding $ 63,130,505
============
<PAGE> 126
CAPITAL CONSERVATION FUND - FINANCIAL STATEMENTS 69
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Interest $ 4,463,927
------------
EXPENSES:
Advisory fees 327,092
Custodian fees 4,913
Registration and filing fees 1,515
Audit fees and tax services 1,438
Accounting services 11,178
Directors' fees and expenses 1,800
Directors' retirement plan expenses 6,077
Report to shareholders 32,365
Miscellaneous 2,888
------------
Total expenses 389,266
------------
NET INVESTMENT INCOME 4,074,661
------------
REALIZED AND UNREALIZED GAIN (loss) ON SECURITIES:
Net realized gain (loss) on securities:
Investments $ (119,162)
Futures contracts 19,161 (100,001)
----------
Net unrealized appreciation (depreciation) of securities during the year:
Investments (1,841,141)
Futures contracts 102 (1,841,039)
--------- ------------
Net realized and unrealized loss on securities during the year (1,941,040)
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,133,621
============
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................. $ 4,074,661 $ 4,230,852
Net realized (loss) gain on securities ............. (100,001) 259,260
Net unrealized (depreciation) appreciation
of securities during the year .................... (1,841,039) 2,346,983
------------ ------------
Increase in net assets resulting from operations 2,133,621 6,837,095
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (4,075,946) (4,220,237)
Net realized gain on securities .................... _ _
------------ ------------
Decrease in net assets resulting from
distributions to shareholders .................... (4,075,946) (4,220,237)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ................... 10,972,502 11,469,948
Proceeds from capital stock issued
for distributions reinvested ..................... 4,075,946 4,220,237
------------ ------------
15,048,448 15,690,185
Cost of capital stock repurchased .................. (13,629,170) (21,400,947)
------------ ------------
Increase (decrease) in net assets resulting
from capital stock transactions ................ 1,419,278 (5,710,762)
------------ ------------
Total DECREASE in Net Assets ....................... (523,047) (3,093,904)
NET ASSETS:
Beginning of year .................................. 63,653,552 66,747,456
------------ ------------
End of year (including undistributed net
investment income of $33,319 and $34,604) ........ $ 63,130,505 $ 63,653,552
============ ============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ....................... 1,136,484 1,185,836
Shares issued for distributions reinvested ......... 424,316 439,548
Shares of capital stock repurchased ................ (1,417,596) (2,216,430)
------------ ------------
Increase (decrease) in shares outstanding ........ 143,204 (591,046)
Shares outstanding:
Beginning of year ................................ 6,577,011 7,168,057
------------ ------------
End of year ...................................... 6,720,215 6,577,011
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 127
70 GOVERNMENT SECURITIES FUND - STATEMENT OF NET ASSETS MAY 31, 1999
PAR MARKET
VALUE VALUE
- ----------- -----------
UNITED STATES GOVERNMENT LONG TERM - 97.31% GOVERNMENT SPONSORED -
64.16% Federal Farm Credit Bank:
$1,150,000 7.10% due 11/02/02 $ 1,196,713
1,500,000 6.92% due 05/13/02 1,545,465
Federal Home Loan Banks:
1,155,000 7.26% due 09/06/01 1,192,896
2,000,000 6.38% due 12/20/00 2,020,320
5,000,000 6.12% due 08/26/08 4,835,150
3,000,000 6.11% due 06/19/03 2,967,180
3,000,000 5.91% due 03/27/08 2,914,680
1,145,000 5.81% due 01/21/05 1,119,776
3,000,000 5.70% due 12/19/00 3,002,820
2,000,000 5.63% due 03/19/ 175,000 Federal Home Loan Bank
(pools/REMICS),
5.50% due 02/25 172,867
Federal Home Loan Mortgage Corp.:
1,500,000 7.09% due 06/01/05 1,507,035
3,500,000 6.71% due 11/09/05 3,485,789
3,991,902 6.50% due 02/01/29 3,904,559
1,500,000 6.37% due 01/23/06 1,477,260
Federal National Mortgage Association:
1,000,000 9.05% due 04/10/00 1,030,470
2,000,000 7.27% due 08/24/05 2,019,060
3,000,000 7.00% due 08/27/12 3,004,680
2,000,000 6.85% due 09/12/05 1,999,380
4,000,000 6.25% due 12/13/02 3,991,880
1,475,000 6.15% due 07/02/08 1,429,364
3,000,000 6.06% due 05/07/03 2,978,430
1,000,000 6.00% due 01/21/28 934,060
1,000,000 5.81% due 03/02/04 983,750
2,500,000 5.50% due 09/29/03 2,446,100
1,000,000 5.42% due 02/02/04 972,190
112,000 5.13% due 02/13/04 107,869
2,000,000 4.63% due 10/15/01 1,954,060
1,000,000 Student Loan Marketing Association,
7.50% due 03/08/00 1,015,780
Tennessee Valley Authority:
2,500,000 6.75% due 11/01/25 2,534,425
2,000,000 6.38% due 06/15/05 2,018,440
3,000,000 6.00% due 03/15/13 2,885,160
3,500,000 5.38% due 11/13/08 3,276,315
-----------
68,920,483
-----------
UNITED STATES BONDS, NOTES & STRIPS - 33.15% United States
Treasury Bonds:
1,800,000 9.00% due 11/15/18 2,381,616
4,000,000 8.75% due 08/15/20 5,234,360
3,500,000 8.50% due 02/15/20 4,463,585
3,500,000 7.25% due 08/15/22 3,988,915
2,000,000 6.75% due 08/15/26 2,181,240
2,000,000 6.13% due 11/15/27 2,023,440
United States Treasury Notes:
2,500,000 6.75% due 04/30/00 2,534,775
1,000,000 6.38% due 01/15/00 1,008,120
3,000,000 5.75% due 08/15/03 3,006,090
2,000,000 5.50% due 01/31/03 1,989,060
6,000,000 5.50% due 12/31/00 6,010,320
1,500,000 United States Treasury Strips, zero coupon,
due 11/15/09 794,295
-----------
35,615,816
-----------
TOTAL UNITED STATES GOVERNMENT - LONG TERM
(Cost $104,671,613) 104,536,299
-----------
CORPORATE SHORT TERM REPURCHASE AGREEMENT - 0.99%
BANKS - OTHER - 0.99%
1,068,000 State Street Bank Repurchase Agreement, 4.80%, dated 05/28/99, to
be repurchased at $1,068,570 on 06/01/99, collateralized by U.S.
Treasury Note, 6.125%, 09/30/2000,
with a value of $1,093,659 (Cost $1,068,000) 1,068,000
-----------
TOTAL CORPORATE SHORT TERM
REPURCHASE AGREEMENT
(Cost $1,068,000) $ 1,068,000
-----------
TOTAL INVESTMENTS
(Cost $105,739,613) - 98.31% 105,604,299
Other assets less liabilities, net - 1.69% 1,820,576
-----------
NET ASSETS (equivalent to $9.90 per share on
10,852,951 shares outstanding) - 100% $107,424,875
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
10,852,951 shares outstanding $ 108,530
Additional paid in capital 108,570,249
Accumulated net realized loss on securities (1,172,491)
Undistributed net investment income 53,901
Unrealized depreciation of securities (135,314)
------------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $107,424,875
============
<PAGE> 128
GOVERNMENT SECURITIES FUND - FINANCIAL STATEMENTS 71
INVESTMENT INCOME:
Interest $ 6,447,867
------------
EXPENSES:
Advisory fees 537,883
Custodian fees 7,657
Registration and filing fees 2,435
Audit fees and tax services 2,867
Accounting services 18,827
Directors' fees and expenses 2,976
Directors' retirement plan expenses 10,352
Report to shareholders 39,260
Miscellaneous 3,595
------------
Total expenses 625,852
------------
NET INVESTMENT INCOME 5,822,015
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES:
Net realized gain on securities:
Investments $ 380,619
Futures contracts 181,097 561,716
------------
Net unrealized appreciation (depreciation) of securities during the year:
Investments (3,151,336)
Futures contracts 133 (3,151,203)
----------- ------------
Net realized and unrealized loss on securities during the year (2,589,487)
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,232,528
===========
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
OPERATIONS:
<S> <C> <C>
Net investment income .............................. $ 5,822,015 $ 5,097,779
Net realized gain on securities .................... 561,716 358,401
Net unrealized (depreciation) appreciation
of securities during the year .................... (3,151,203) 3,271,061
------------- -------------
Increase in net assets resulting from operations 3,232,528 8,727,241
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (5,815,587) (5,081,964)
Net realized gain on securities .................... _ _
------------- -------------
Decrease in net assets resulting from
distributions to shareholders .................... (5,815,587) (5,081,964)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold ................... 65,762,148 17,280,167
Proceeds from capital stock issued
for distributions reinvested ..................... 5,815,587 5,081,964
------------- -------------
71,577,735 22,362,131
Cost of capital stock repurchased .................. (53,690,018) (17,713,793)
------------- -------------
Increase in net assets resulting
from capital stock transactions ................ 17,887,717 4,648,338
------------- -------------
Total Increase In Net Assets ....................... 15,304,658 8,293,615
NET ASSETS:
Beginning of year .................................. 92,120,217 83,826,602
------------- -------------
End of year (including undistributed net
investment income of $53,901 and $47,473) ........ $ 107,424,875 $ 92,120,217
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold ....................... 6,399,271 1,716,427
Shares issued for distributions reinvested ......... 569,433 509,952
Shares of capital stock repurchased ................ (5,245,250) (1,769,096)
------------- -------------
Increase in shares outstanding ................... 1,723,454 457,283
Shares outstanding:
Beginning of year ............................... 9,129,497 8,672,214
------------- -------------
End of year ..................................... 10,852,951 9,129,497
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 129
72 INTERNATIONAL GOVERNMENT BOND FUND - STATEMENT OF NET ASSETS MAY 31, 1999
PAR MARKET
VALUE VALUE
- ------------ -----------
GOVERNMENT BONDS - 87.74% AUSTRALIA - 1.13% Commonwealth:
A$ 500,000 9.75% due 3/15/02 $ 362,358
A$ 500,000 9.00% due 9/15/04 374,808
A$ 500,000 8.75% due 1/15/01 344,512
A$ 500,000 7.50% due 7/15/05 354,338
A$ 500,000 7.50% due 9/15/09 362,168
-----------
1,798,184
-----------
AUSTRIA - 3.92% Republic of Austria:
DM 1,000,000 7.25% due 5/3/07 643,357
As 145,346 7.13% due 7/12/04 176,449
As 109,009 7.00% due 2/14/00 117,051
As 159,880 7.00% due 1/20/03 187,509
As 145,346 7.00% due 5/16/05 177,509
As 145,346 6.88% due 4/19/02 166,979
As 145,346 6.50% due 11/17/05 174,327
As 436,038 6.25% due 5/31/06 518,437
As 218,019 5.63% due 7/15/07 250,922
+ 1,822,285 5.50% due 1/18/04 2,060,259
(Y) 100MM 4.75% due 12/20/04 1,005,336
(Y) 50MM 4.50% due 9/28/05 504,406
As 218,019 4.38% due 2/28/02 235,126
-----------
6,217,667
-----------
BELGIUM - 3.74% Kingdom of Belgium:
Bf 247,893 8.75% due 6/25/02 300,475
Bf 247,893 8.00% due 12/24/12 343,219
Bf 247,893 8.00% due 3/28/15 347,069
Bf 247,893 7.75% due 12/22/00 277,836
Bf 619,733 7.75% due 10/15/04 776,255
Bf 495,786 7.50% due 7/29/08 639,713
Bf 371,840 7.00% due 5/15/06 459,435
Bf 495,786 6.50% due 3/31/05 592,266
Bf 495,787 6.25% due 3/28/07 590,562
+ 500,000 5.50% due 3/28/28 536,887
Bf 495,787 5.00% due 3/28/01 536,602
Bf 495,787 4.00% due 1/22/00 521,716
-----------
5,922,035
-----------
CANADA - 4.55% Government of Canada:
C$ 550,000 9.50% due 6/1/10 495,905
C$ 500,000 9.00% due 12/1/04 395,998
C$ 500,000 9.00% due 6/1/25 497,081
C$ 1,000,000 8.75% due 12/1/05 799,986
C$ 1,000,000 8.50% due 4/1/02 734,268
C$ 1,000,000 8.00% due 6/1/23 896,840
C$ 500,000 7.50% due 9/1/00 348,834
C$ 1,000,000 7.50% due 3/1/01 703,493
C$ 1,000,000 7.25% due 6/1/03 723,317
C$ 1,000,000 7.00% due 12/1/06 743,318
C$ 500,000 6.50% due 6/1/04 355,179
C$ 750,000 5.50% due 2/1/00 510,883
-----------
7,205,102
-----------
DENMARK - 2.24% Kingdom of Denmark:
DK 5,000,000 8.00% due 11/15/01 775,603
DK 2,500,000 8.00% due 5/15/03 405,584
DK 3,000,000 8.00% due 3/15/06 513,258
DK 5,500,000 7.00% due 12/15/04 888,117
DK 1,250,000 7.00% due 11/10/24 212,472
DK 5,000,000 6.00% due 11/15/02 754,770
-----------
3,549,804
-----------
FINLAND - 2.38% Republic of Finland:
FIM 336,375 10.00% due 9/15/01 404,744
FIM 504,562 9.50% due 3/15/04 663,293
FIM 504,563 7.25% due 4/18/06 630,798
Ff 5,000,000 7.00% due 6/15/04 918,405
(Y) 100MM 6.00% due 1/29/02 954,414
+ 168,187 6.00% due 4/25/08 197,690
-----------
3,769,344
-----------
FRANCE - 4.33% Government of France:
Ff 701,265 9.50% due 1/25/01 807,977
Ff 533,571 8.50% due 11/25/02 652,478
Ff 228,673 8.50% due 12/26/12 335,608
Ff 1,067,143 6.75% due 10/25/03 1,266,577
Ff 304,989 6.50% due 10/25/06 371,796
Ff 1,295,816 6.00% due 10/25/25 1,527,179
Ff 304,898 5.50% due 4/25/04 348,052
Ff 609,796 5.50% due 4/25/07 699,919
+ 457,347 5.50% due 4/25/29 507,775
+ 304,898 5.25% due 4/25/08 344,079
-----------
6,861,440
-----------
GERMANY - 10.03% Federal Republic of Germany:
DM 1,022,583 7.50% due 9/9/04 1,267,524
DM 1,585,004 7.13% due 12/20/02 1,868,165
DM 1,533,875 6.50% due 7/15/03 1,794,150
DM 1,533,875 6.50% due 10/14/05 1,849,957
DM 511,291 6.25% due 4/26/06 611,348
DM 1,022,583 6.25% due 1/4/24 1,239,594
DM 511,291 6.00% due 1/5/06 602,260
DM 1,533,875 6.00% due 1/4/07 1,813,339
DM 1,022,583 6.00% due 6/20/16 1,228,614
+ 511,291 4.75% due 7/4/28 506,103
DM 1,917,344 4.50% due 8/19/02 2,083,980
+ 1,000,000 3.50% due 7/15/04 1,042,969
-----------
15,908,003
-----------
IRELAND - 0.50% Republic of Ireland:
Ilb 126,973 8.25% due 8/18/15 188,494
Ilb 126,973 8.00% due 8/18/06 165,792
Ilb 190,460 6.50% due 10/18/01 214,895
Ilb 190,460 6.25% due 10/18/04 224,764
-----------
793,945
-----------
ITALY - 10.11% Republic of Italy:
Lit 516,456 12.00% due 6/1/01 630,096
Lit 516,456 12.00% due 1/1/02 654,754
Lit 516,456 10.50% due 7/15/00 583,308
Lit 258,228 10.50% due 4/1/05 363,289
Lit 258,228 10.50% due 9/1/05 368,458
Lit 1,755,950 10.00% due 8/1/03 2,295,544
Lit 258,228 9.50% due 1/1/05 346,544
Lit 258,228 9.50% due 2/1/06 356,586
Lit 1,032,912 9.00% due 11/1/23 1,633,414
Lit 516,456 8.50% due 4/1/04 656,854
Lit 774,684 8.50% due 8/1/04 991,944
Lit 516,456 7.75% due 9/15/01 594,130
Lit 774,684 6.75% due 2/1/07 946,759
Lit 258,228 6.25% due 3/1/02 291,492
Lit 1,032,912 5.75% due 9/15/02 1,161,878
Lit 1,549,368 5.50% due 9/15/00 1,670,295
+ 500,00 5.00% due 2/15/03 551,638
+ 1,032,912 5.00% due 5/1/08 1,133,235
+ 758,228 4.50% due 5/1/09 798,436
-----------
16,028,654
-----------
<PAGE> 130
MAY 31, 1999 73
INTERNATIONAL GOVERNMENT BOND FUND - STATEMENT OF NET ASSETS CONTINUED
PAR MARKET
VALUE VALUE
- ------------ -----------
JAPAN - 22.78% Government of Japan:
(Y) 250MM 6.60% due 6/20/01 $ 2,342,455
(Y) 105MM 6.00% due 12/20/01 994,577
(Y) 365MM 5.50% due 3/20/02 3,455,829
(Y) 120MM 5.00% due 12/20/02 1,153,239
(Y) 100MM 5.00% due 9/21/09 1,097,212
(Y) 100MM 5.00% due 3/20/15 1,146,703
(Y) 200MM 4.80% due 12/20/02 1,910,483
(Y) 127MM 4.50% due 6/20/03 1,218,935
(Y) 75MM 4.50% due 12/20/04 746,277
(Y) 150MM 4.40% due 9/22/03 1,445,768
(Y) 200MM 4.20% due 9/21/15 2,117,945
(Y) 150MM 4.10% due 6/21/04 1,444,900
(Y) 100MM 3.90% due 6/21/04 962,108
(Y) 100MM 3.80% due 9/20/16 1,016,174
(Y) 250MM 3.50% due 3/21/16 2,447,278
(Y) 100MM 3.30% due 6/20/06 948,126
(Y) 200MM 3.20% due 3/20/06 1,892,778
(Y) 250MM 3.00% due 9/20/05 2,323,364
(Y) 150MM 2.90% due 12/20/05 1,383,594
(Y) 100MM 2.70% due 3/20/07 921,651
(Y) 150MM 2.00% due 12/20/07 1,309,754
(Y) 200MM 1.40% due 11/20/03 1,720,212
(Y) 250MM 1.10% due 10/22/01 2,112,435
-----------
36,111,797
-----------
NETHERLANDS - 3.89% Government of the Netherlands:
NG 453,780 8.75% due 9/15/01 533,145
NG 226,890 8.25% due 2/15/02 268,110
NG 226,890 8.25% due 6/15/02 271,303
NG 226,890 8.25% due 2/15/07 302,052
NG 680,670 7.75% due 3/1/05 859,678
NG 226,890 7.50% due 4/15/10 300,633
NG 340,335 7.50% due 1/15/23 472,238
NG 907,560 6.50% due 4/15/03 1,055,882
NG 680,670 6.00% due 1/15/06 800,427
NG 907,560 5.75% due 1/15/04 1,040,744
NG 226,890 5.75% due 2/15/07 264,089
-----------
6,168,301
-----------
PORTUGAL - 2.14% Republic of Portugal:
Ff 457,347 6.63% due 5/13/08 556,788
374,098 5.38% due 6/23/08 419,247
+ 374,098 4.81% due 4/23/03 411,057
+ 2,000,000 3.95% due 7/15/09 2,001,391
-----------
3,388,483
-----------
SPAIN - 4.44% Government of Spain:
Pst 601,012 10.30% due 6/15/02 754,860
Pst 300,506 10.00% due 2/28/05 413,545
Ff 2,000,000 6.50% due 2/20/01 339,963
Pst 1,416,705 6.00% due 1/31/08 1,657,408
+ 601,012 6.00% due 1/31/29 694,480
Pst 405,382 5.25% due 1/31/03 451,982
+ 559,782 5.15% due 7/30/09 613,206
+ 977,606 5.00% due 1/31/01 1,055,833
+ 989,385 4.50% due 7/30/04 1,058,509
-----------
7,039,786
-----------
SWEDEN - 2.73% Kingdom of Sweden:
SK 6,000,000 10.25% due 5/5/03 860,322
SK 3,000,000 9.00% due 4/20/09 468,901
SK 3,000,000 8.00% due 8/15/07 432,809
(pound) 500,000 7.63% due 12/27/01 835,466
C$ 500,000 6.75% due 12/31/01 348,450
SK 2,000,000 6.50% due 10/25/06 263,592
SK 3,000,000 6.00% due 2/09/05 381,847
SK 6,000,000 5.50% due 4/12/02 733,375
-----------
4,324,762
-----------
SWITZERLAND - 0.67% Government of Switzerland:
Chf 500,000 4.50% due 7/8/02 355,145
Chf 500,000 4.50% due 4/8/06 373,793
sf 500,000 4.00% due 4/8/28 336,987
-----------
1,065,925
-----------
UNITED KINGDOM - 5.48% Government of United Kingdom:
(pound) 250,000 9.75% due 8/27/02 453,666
(pound) 250,000 9.00% due 7/12/11 546,201
(pound) 500,000 8.50% due 12/7/05 952,197
(pound) 500,000 8.00% due 12/7/15 1,075,578
(pound) 500,000 8.00% due 6/7/21 1,136,468
(pound) 400,000 9.00% due 10/13/08 831,492
(pound) 1,000,000 7.50% due 12/7/06 1,845,107
(pound) 500,000 7.00% due 11/6/01 834,024
(pound) 584,250 5.75% due 12/7/09 1,004,982
-----------
8,679,715
-----------
UNITED STATES - 2.68% Federal National Mortgage
Association:
(pound) 750,000 6.88% due 6/7/02 1,244,786
(pound) 500,000 5.50% due 12/7/03 796,332
DM 4,000,000 5.50% due 2/16/01 2,206,709
-----------
4,247,827
-----------
TOTAL GOVERNMENT BONDS
(Cost $142,326,903) 139,080,774
-----------
SUPRANATIONAL - 6.11%
Eurofima,
Ff 1,600,000 9.25% due 12/18/03 314,945
European Investment Bank:
Lit 1,100MM 10.50% due 2/7/02 711,283
(pound) 250,000 9.00% due 5/14/02 436,320
Ff 2,000,000 6.13% due 8/10/04 356,364
(pound) 1,000,000 6.00% due 11/26/04 1,632,715
(Y) 100MM 4.63% due 2/26/03 958,840
(Y) 100MM 3.00% due 9/20/06 935,592
International Bank for
Reconstruction & Development:
Lit 150MM 10.80% due 11/13/01 96,347
Lit 200MM 9.45% due 8/11/03 132,518
(pound) 400,000 9.25% due 7/20/07 788,485
(Y) 250MM 5.25% due 3/20/02 2,358,009
(Y) 100MM 4.50% due 3/20/03 956,606
-----------
TOTAL SUPRANATIONAL
(Cost $10,072,105) 9,678,024
-----------
<PAGE> 131
74 MAY 31, 1999
INTERNATIONAL GOVERNMENT BOND FUND - STATEMENT OF NET ASSETS CONTINUED
PAR MARKET
VALUE VALUE
- ------------ -----------
CORPORATE BONDS - 4.16%
AUSTRALIA
New South Wales Tsy,
A $1,000,000 5.50% due 10/1/02 $ 647,888
-----------
FRANCE
Credit Local de France:
Lit 1,000MM 9.00% due 6/14/01 600,803
Ff 5,000,000 8.875% due 6/10/02 920,233
Ff 8,000,000 6.25% due 9/27/05 1,436,328
Ff 4,000,000 6.00% due 11/15/01 677,828
Ff 10,000,000 Elf Aquitaine SA, 7.125% due 8/11/03 1,797,238
Ff 3,000,000 Toyota Motor Credit, 6.25% due 4/11/02 514,283
-----------
TOTAL CORPORATE BONDS
(Cost $7,119,607) 6,594,601
-----------
UNITED STATES GOVERNMENT -
SHORT TERM - 0.03%
U.S. TREASURY BILLS - 0.03%
USD 50,000 United States Treasury Bills,
4.38% due 6/3/99 49,988
-----------
TOTAL UNITED STATES GOVERNMENT
SHORT TERM
(Cost $49,988) 49,988
-----------
TOTAL INVESTMENTS
(Cost $159,568,603) - 98.04% 155,403,387
Other assets less liabilities, net - 1.96% 3,105,875
-----------
NET ASSETS (equivalent
to $11.62 per share on
13,646,617 shares
outstanding) - 100% $158,509,262
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000,000 shares authorized,
13,646,617 shares outstanding $ 136,466
Additional paid in capital 161,392,448
Undistributed net realized gain on securities 185,916
Undistributed net investment income 917,843
Unrealized (depreciation) appreciation of:
Investments $ (4,165,216)
Foreign currency translation 41,805 (4,123,411)
------------- ------------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $158,509,262
============
<PAGE> 132
INTERNATIONAL GOVERNMENT BOND FUND - FINANCIAL STATEMENTS 75
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $127,153) $ 7,798,520
-----------
EXPENSES:
Advisory fees 810,795
Custodian fees 13,516
Audit fees and tax services 3,770
Accounting services 28,713
Directors' fees and expenses 4,418
Directors' retirement plan expenses 15,121
Report to shareholders 38,499
Miscellaneous 7,979
-----------
Total expenses 922,811
-----------
NET INVESTMENT INCOME 6,875,709
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain on securities:
Investments $ 79,972
Foreign currency transaction 82,494
Futures 237,512 399,978
----------
Net unrealized appreciation (depreciation) of
securities during the year:
Investments 2,394,272
Foreign currency translation 61,248
Futures contracts (214,063) 2,241,457
---------- -----------
Net realized and unrealized gain on securities and
foreign currencies during the year (2,641,435)
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,517,144
===========
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,875,709 7,923,140
Net realized gain (loss) on securities
and foreign currency transactions 399,978 (3,852,314)
Net unrealized appreciation of securities and
translation of foreign currencies during the year 2,241,457 241,624
------------- -------------
Increase in net assets resulting from operations 9,517,144 4,312,450
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,419,995) (3,034,869)
Net realized gain on securities (872,765) (136,607)
------------- -------------
Decrease in net assets resulting from
distributions to shareholders (7,292,760) (3,171,476)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 85,397,013 30,361,915
Proceeds from capital stock issued
for distributions reinvested 7,292,760 3,171,476
------------- -------------
92,689,773 33,533,391
Cost of capital stock repurchased (92,187,778) (56,600,279)
------------- -------------
Increase (decrease) in net assets resulting
from capital stock transactions 501,995 (23,066,888)
------------- -------------
Total Increase (DECREASE) in Net Assets 2,726,379 (21,925,914)
NET ASSETS:
Beginning of year 155,782,883 177,708,797
------------- -------------
End of year (including undistributed net
investment income of $917,843 and $462,129) $ 158,509,262 $ 155,782,883
------------- -------------
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 6,993,303 2,685,573
Shares issued for distributions reinvested 596,194 279,556
Shares of capital stock repurchased (7,588,479) (4,999,093)
------------- -------------
Increase (decrease) in shares outstanding 1,018 (2,033,964)
Shares outstanding:
Beginning of year 13,645,599 15,679,563
------------- -------------
End of year 13,646,617 13,645,599
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 133
76 MONEY MARKET FUND - STATEMENT OF NET ASSETS MAY 31, 1999
PAR MARKET
VALUE VALUE
- ------------ -----------
CORPORATE SHORT TERM
COMMERCIAL PAPER - 18.36%
BANKS - REGIONAL - 2.03%
$5,000,000 Bank One Corp.,
6.50% due 01/14/00 $ 5,041,204
2,000,000 NationsBank Corp.,
5.38% due 04/15/00 2,002,132
-----------
7,043,336
-----------
CHEMICAL - MISCELLANEOUS - 0.58%
2,000,000 Dow Chemical Company,
4.90% due 03/15/00 1,999,416
-----------
CONSUMER FINANCE - 1.30%
Associates Corp. of North America:
1,500,000 7.82% due 10/21/99 1,516,492
1,000,000 6.38% due 08/15/99 1,002,433
2,000,000 Commercial Credit Co., 6.00% due 04/15/00 2,013,018
-----------
4,531,943
-----------
FEDERAL AGENCIES - 1.73% Federal Home Loan Bank:
3,000,000 5.03% due 10/29/99 3,000,000
3,000,000 4.93% due 01/19/00 2,999,523
-----------
5,999,523
-----------
FINANCE COMPANIES - 5.09%
2,000,000 Caterpillar Financial Service Corp.,
6.80% due 06/15/99 2,000,797
2,250,000 CIT Group Holdings, Inc., 6.13% due 11/15/99 2,261,335
General Motors Acceptance Corp.:
2,000,000 9.63% due 05/15/00 2,081,745
1,000,000 8.63% due 06/15/99 1,001,338
2,250,000 8.40% due 10/15/99 2,277,504
1,000,000 6.38% due 10/12/99 1,004,671
2,000,000 6.38% due 06/06/00 2,018,521
2,000,000 Ford Motor Credit Co.,
8.38% due 01/15/00 2,036,499
2,000,000 IBM Credit Corp.,
5.27% due 04/07/00 1,999,040
1,000,000 International Lease Finance Corp.,
6.64% due 02/01/00 1,009,762
-----------
17,691,212
-----------
GOVERNMENT SPONSORED - 2.30%
$2,000,000 Federal Home Loan Bank, 5.09% due 03/03/00 2,000,000
4,000,000 Province of British Columbia,
4.78% due 06/02/99 3,999,469
2,000,000 Student Loan Marketing Association,
5.58% due 08/11/99 2,002,315
-----------
8,001,784
-----------
SECURITIES RELATED - 5.33% Bear Stearns Co., Inc.:
1,000,000 6.08% due 10/06/99 1,002,787
5,000,000 4.97% due 04/13/00 5,000,000
5,000,000 4.96% due 05/03/00 5,000,000
3,000,000 4.87% due 06/07/99 3,000,000
4,500,000 Morgan Stanley Dean Witter & Co.,
4.94% due 01/14/00 4,500,000
-----------
18,502,787
-----------
TOTAL CORPORATE SHORT TERM COMMERCIAL PAPER
(Cost $63,770,001) 63,770,001
-----------
CORPORATE SHORT TERM OBLIGATIONS - 79.68%
AEROSPACE/DEFENSE - 0.86%
3,000,000 Lockheed Martin Corp., 4.98% due 07/28/99 2,976,290
-----------
AUTO - CARS - 0.34%
1,200,000 Hertz Corp., 4.83% due 08/06/99 1,189,334
-----------
BANKS - OTHER - 1.39%
5,000,000 Bank of America Corp., 5.00% due 01/24/00 4,835,262
-----------
BEVERAGE - SOFT DRINKS - 4.37%
2,839,000 Coca Cola Enterprises, Inc.,
4.87% due 06/10/99 2,818,957
12,445,000 Coca Cola Co., 4.80% due 06/08/99 12,367,088
-----------
15,186,045
-----------
CHEMICAL - MAJOR - 2.44%
E.I. Du Pont de Nemours and Co.:
$2,000,000 4.83% due 06/18/99 1,995,383
2,500,000 4.75% due 07/13/99 2,485,942
4,000,000 PPG Industries, Inc., 4.79% due 06/04/99 3,998,399
-----------
8,479,724
-----------
CONGLOMERATES - 3.74%
13,098,000 Fortune Brands, 4.81% due 08/16/99 12,987,358
-----------
CONSUMER FINANCE - 8.99%
Associates Corp. of North America:
1,441,000 4.84% due 06/11/99 1,439,039
10,650,000 4.76% due 06/30/99 10,563,971
4,000,000 Commercial Credit Co., 4.79% due 07/09/99 3,974,282
15,344,000 Sears Roebuck Acceptance Corp.,
4.79% due 07/07/99 15,268,376
-----------
31,245,668
-----------
DRUGS - 2.30%
8,049,000 Schering Corp., 4.83% due 07/21/99 7,990,873
-----------
ENTERTAINMENT - 6.14%
6,732,000 Mattel, Inc., 4.86% due 06/07/99 6,718,491
14,839,000 Walt Disney Co., 4.74% due 07/08/99 14,625,358
-----------
21,343,849
-----------
FINANCE COMPANIES - 14.98%
1,200,000 Caterpillar Financial Services,
4.78% due 06/30/99 1,195,351
2,500,000 Ciesco LP, 4.81% due 06/17/99 2,494,616
4,298,000 CIT Group Holdings, Inc., 4.80% due 06/01/99 4,274,789
11,683,000 Ford Motor Credit Co., 4.73% due 07/26/99 11,638,229
2,325,000 General Electric Capital Corp.,
4.81% due 06/22/99 2,310,058
13,000,000 General Electric Capital Services, Inc.,
4.74% due 08/04/99 12,887,616
<PAGE> 134
MAY 31, 1999 MONEY MARKET FUND - STATEMENT OF NET ASSETS CONTINUED 77
PAR MARKET
VALUE VALUE
- ------------ -----------
FINANCE COMPANIES - Continued
$3,564,000 General Motors Acceptance Corp.,
4.80% due 07/23/99 $3,528,309
13,805,000 International Lease Finance Corp.,
4.77% due 07/06/99 13,717,242
-----------
52,046,210
-----------
FOODS - 2.49%
8,751,000 Archer Daniels Midland Co., 4.78% due 08/23/99 8,656,240
-----------
GOVERNMENT SPONSORED - 2.75%
2,000,000 Federal Home Loan Bank, 4.98% due 02/11/00 1,998,896
7,664,000 Province of British Columbia, 4.80% due 06/07/99 7,563,527
-----------
9,562,423
-----------
INFORMATION PROCESSING - 1.42%
DATA SERVICES -
5,000,000 International Business Machines Corp.,
4.85% due 08/24/99 4,942,675
-----------
INSURANCE - MULTILINE - 6.50%
9,501,000 Aon Corp., 4.84% due 07/08/99 9,461,291
13,111,000 Marsh & McLennan Companies, Inc.,
4.83% due 06/02/99 13,108,209
-----------
22,569,500
-----------
MACHINERY - INDUSTRIAL/ SPECIALTY - 3.22%
11,192,000 Cooper Industries, Inc., 4.95% due 06/01/99 11,192,000
-----------
MISCELLANEOUS - 0.86%
3,000,000 CVS Corp., 4.92% due 07/08/99 2,984,818
-----------
SECURITIES RELATED - 7.26% Merrill Lynch & Co., Inc.:
$3,890,000 4.78% due 07/14/99 3,824,145
11,063,000 4.70% due 06/03/99 10,947,748
10,487,000 Morgan Stanley Dean Witter & Co.,
4.80% due 07/20/99 10,445,271
-----------
25, 217,164
-----------
UTILITIES - COMMUNICATION - 5.68%
8,250,000 Bellsouth Telecom., Inc., 4.76% due 07/13/99 8,202,940
GTE Corp.:
7,198,000 4.84% due 06/11/99 7,189,462
4,349,000 4.81% due 06/01/99 4,349,000
-----------
19,741,402
-----------
UTILITIES - ELECTRIC - 3.93%
13,763,000 Southern California Edison Co.,
4.81% due 07/02/99 13,664,994
-----------
TOTAL CORPORATE SHORT TERM OBLIGATIONS
(Cost $276,811,829) 276,811,829
-----------
TOTAL INVESTMENTS
(Cost $340,581,830) - 98.04% 340,581,830
Other assets less liabilities, net - 1.96% 6,812,051
-----------
NET ASSETS (equivalent to $1 per share on
347,393,881 shares outstanding) - 100.00% $347,393,881
============
NET ASSETS REPRESENTED BY:
Capital stock, $.01 par value per share,
1,000,000 shares authorized,
347,393,881 shares outstanding $ 3,473,939
Additional paid in capital 343,919,942
-----------
NET ASSETS APPLICABLE
TO SHARES OUTSTANDING $347,393,881
============
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 135
78 MONEY MARKET FUND - FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
For the fiscal year ended May 31, 1999
INVESTMENT INCOME:
Interest $13,634,960
-----------
EXPENSES:
Advisory fees 1,301,265
Custodian fees 19,328
Registration and filing fees 3,398
Audit fees and tax services 7,554
Account services 47,447
Directors' fees and expenses 6,313
Directors' retirement plan expenses 30,942
Report to shareholders 54,407
Miscellaneous 7,453
-----------
Total expenses 1,478,107
-----------
NET INVESTMENT INCOME 12,156,853
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,156,853
===========
STATEMENT OF CHANGES IN NET ASSETS For the fiscal year ended May 31:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,156,853 $ 7,739,732
------------- -------------
Increase in net assets resulting from operations 12,156,853 7,739,732
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (12,156,853) (7,739,732)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from capital stock sold 456,114,092 331,782,891
Proceeds from capital stock issued
for distributions reinvested 12,202,772 7,739,732
------------- -------------
468,316,864 339,522,623
Cost of capital stock repurchased (311,898,433) (276,671,818)
------------- -------------
Increase in net assets resulting
from capital stock transactions 156,418,431 62,850,805
------------- -------------
TOTAL INCREASE IN NET ASSETS 156,418,431 62,850,805
NET ASSETS:
Beginning of year 190,975,450 128,124,645
------------- -------------
End of year $ 347,393,881 $ 190,975,450
============= =============
CHANGE IN SHARES OUTSTANDING:
Shares of capital stock sold 456,114,092 331,782,891
Shares issued for distributions reinvested 12,202,773 7,739,732
Shares of capital stock repurchased (311,898,434) (276,671,818)
------------- -------------
Increase in shares outstanding 156,418,431 62,850,805
Shares outstanding:
Beginning of year 190,975,450 128,124,645
------------- -------------
End of year 347,393,881 190,975,450
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 136
NOTES TO FINANCIAL STATEMENTS 79
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 Asset Allocation 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. VALIC (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> 137
80 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
serves as investment adviser to the Series. VALIC is an indirect wholly-owned
subsidiary of American General Corporation, Houston, Texas. On May 1, 1992, as
amended February 2, 1998, 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 the
Stock Index Fund, the MidCap Index Fund, and the Small Cap Index Fund. On
February 24, 1994, as amended February 2, 1998, the Adviser entered into a
sub-advisory agreement with T. Rowe Price Associates, Inc. to serve as
investment sub-adviser to the Growth Fund and the Science & Technology Fund. On
February 20, 1999, VALIC terminated its March 4, 1994 sub-advisory agreement
with Value Line, Inc., who served as investment sub-adviser to the Growth &
Income Fund. Value Line, Inc. served as investment sub-adviser to the Growth
and Income Fund from March 4, 1994 to February 20, 1999, at which time VALIC
assumed sole management of the 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, Asset Allocation 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, 1999,
the Series paid VALIC $1,526,400 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,
1999, the Series paid $8,308 for such services.
During the fiscal year ended May 31, 1999, security transactions were
affected between the following Funds at the then current market price with no
brokerage commissions incurred:
SELLER PURCHASER COST TO PURCHASER NET GAIN TO SELLER
------ --------- ----------------- ------------------
MidCap Index Fund Stock Index Fund $99,887,427 $51,662,919
At May 31, 1999, VALIC Separate Account A (a registered separate account
of VALIC) owned over five percent of the outstanding shares of the Series.
Certain officers and directors of the Series are officers and directors
of VALIC or American General Corporation.
The Series provides a retirement plan for its independent directors who
are not an officer, director or employee of VALIC, or any affiliate. The Series
is responsible for the payment of the retirement benefits, as well as all
expenses of administration of the plan. Benefits under the plan are payable for
a ten-year period upon retirement and are based upon each director's years of
service, as defined, to the Series.
At May 31, 1999, the Series had a retirement plan liability to its
independent directors totaling $944,738.
NOTE 4 -- INVESTMENT ACTIVITY
The information in the following table is presented on the basis of cost
for federal income tax purposes at May 31,1999.
<TABLE>
<CAPTION>
IDENTIFIED COST GROSS GROSS NET UNREALIZED
OF INVESTMENTS UNREALIZED UNREALIZED APPRECIATION
OWNED APPRECIATION DEPRECIATION (DEPRECIATION)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Stock Index Fund $ 2,181,143,448 $ 2,497,340,599 $ 47,263,817 $ 2,450,076,782
MidCap Index Fund 658,353,038 216,561,510 66,310,791 150,250,719
Small Cap Index Fund 197,302,478 57,634,341 34,901,245 22,733,096
International Equities Fund 107,290,307 51,345,128 18,261,773 33,083,355
Growth Fund 870,772,368 422,969,052 28,986,057 393,982,995
Growth & Income Fund 221,255,452 81,937,824 5,145,263 76,792,561
Science & Technology Fund 1,395,587,851 344,852,115 21,985,393 322,866,722
Social Awareness Fund 423,950,169 113,469,874 13,092,179 100,377,695
Asset Allocation Fund 196,424,634 62,678,293 4,060,967 58,617,326
Capital Conservation Fund 62,646,290 674,578 1,271,238 (596,660)
Government Securities Fund 105,739,613 1,938,022 2,073,336 (135,314)
International Government
Bond Fund 159,387,305 5,230,140 9,214,058 (3,983,918)
Money Market Fund 340,581,830 -- -- --
</TABLE>
The following net realized capital loss carryforwards at May 31, 1999,
may be utilized to offset future capital gains.
CAPITAL LOSS CARRYFORWARD EXPIRATION THROUGH
------------------------- ------------------
Capital Conservation Fund $ 231,795 May 31, 2003
Government Securities Fund 1,178,565 May 31, 2003
Money Market Fund 1,907 May 31, 2004
<PAGE> 138
NOTES TO FINANCIAL STATEMENTS CONTINUED 81
During the period, the cost of purchases and proceeds from sales of
securities, excluding short term securities were:
COST OF PROCEEDS FROM
SECURITIES SECURITIES SOLD
PURCHASED OR MATURED
-------------- ---------------
Stock Index Fund $ 496,803,033 $ 88,804,806
MidCap Index Fund 310,513,731 385,087,957
Small Cap Index Fund 76,956,323 88,038,090
International Equities Fund 10,836,026 27,733,208
Growth Fund 480,461,833 460,205,121
Growth & Income Fund 267,627,640 289,445,201
Science & Technology Fund 1,771,775,523 1,736,269,408
Social Awareness Fund 318,280,552 200,734,978
Asset Allocation Fund 344,019,692 326,555,805
Capital Conservation Fund 27,970,067 26,166,157
Government Securities Fund 58,233,459 40,145,103
International Government Bond Fund 36,569,107 34,941,349
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, 1999 are summarized as follows:
MARKET VALUE COLLATERAL VALUE
------------ ----------------
Stock Index Fund $ 13,255,378 $ 13,596,733
MidCap Index Fund 1,259,063 1,326,000
Small Cap Index Fund 7,905,116 8,323,918
International Equities Fund 7,204,459 7,407,490
Growth Fund 19,201,125 20,214,000
Science & Technology Fund 5,285,600 5,464,700
Asset Allocation Fund 364,988 374,400
Capital Conservation Fund 106,880 109,000
------------ ----------------
Total $ 54,582,609 $ 56,816,241
============ ================
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, 1999,
Government Securities Fund had 64.16% of its net assets invested in such
securities.
At May 31, 1999, International Government Bond Fund had 23% of its net
assets invested in securities issued by the Government of Japan and an
additional 5% 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.
NOTE 7 -- YEAR 2000 (UNAUDITED)
VALIC serves as investment adviser to the Series. VALIC initiated its Year 2000
readiness plan in 1995. Since that time, VALIC management along with a team of
skilled information technology and business professionals have been dedicated
to achieving the objectives of the plan. This plan calls for the renovation,
upgrade and/or replacement of our mission critical computer systems, whether
developed internally or otherwise. It includes the five steps that we believe
are essential to Year 2000 readiness: inventory and discovery; analysis;
construction; testing; and implementation. As of May 31, 1999, we have
substantially completed all steps with respect to our critical systems.
VALIC's plan also includes an evaluation of the status of our key third party
relationships and their efforts in addressing Year 2000 issues. Throughout 1999
we will continue to work with critical third party dependencies and to develop
contingency plans for any identified risks or shortcomings. If significant
third parties fail to achieve Year 2000 readiness on a timely basis, then the
Year 2000 issue could have a material adverse impact on the operations of VALIC
and the Series. However, the third party contingency plans we develop are meant
to identify those risks and provide alternative actions should a third party
not achieve readiness. While we believe no one can predict with certainty
outcomes as to all the issues that may arise, VALIC is confident that its
comprehensive plan and resource commitment will allow it to meet its Year 2000
objectives.
Through May, 1999, VALIC has incurred and expensed $28.1 million (pretax)
related to Year 2000 readiness, including $1.4 million incurred during 1999.
VALIC currently anticipates that it will incur future costs of $1.9 million for
additional internal staff, third party vendors, and other expenses to maintain
readiness and complete third party contingency plans.
<PAGE> 139
82 FINANCIAL HIGHLIGHTS
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
STOCK INDEX FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 33.38 $ 26.09 $ 20.69 $ 16.81 $ 14.39
------------- ------------- ----------- ------------- -------------
Income from investment operations:
Net investment income 0.40 0.40 0.39 0.39 0.37
Net realized and unrealized gain on securities 6.51 7.44 5.57 4.26 2.45
------------- ------------- ----------- ------------- -------------
Total income from investment operations 6.91 7.84 5.96 4.65 2.82
------------- ------------- ----------- ------------- -------------
Distributions:
Distributions from net investment income (0.41) (0.40) (0.39) (0.38) (0.37)
Distributions from net realized gain on securities (0.15) (0.15) (0.17) (0.39) (0.03)
------------- ------------- ----------- ------------- -------------
Total distributions (0.56) (0.55) (0.56) (0.77) (0.40)
------------- ------------- ----------- ------------- -------------
Net asset value at end of period $ 39.73 $ 33.38 $ 26.09 $ 20.69 $ 16.81
============= ============= =========== ============= =============
TOTAL RETURN 20.85% 30.30% 29.24% 28.17% 19.98%
============= ============= =========== ============= =============
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.32% 0.31% 0.34% 0.35% 0.38%
Ratio of net investment income to average net assets 1.13% 1.33% 1.76% 2.05% 2.44%
Portfolio turnover rate 2% 3% 3% 3% 14%
Number of shares outstanding at end of period (000's) 116,731 104,334 93,687 85,117 75,451
Net assets at end of period (000's) $ 4,637,628 $ 3,482,655 $ 2,444,200 $ 1,760,786 $ 1,267,992
</TABLE>
MIDCAP INDEX FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 25.27 $ 20.83 $ 19.09 $ 15.68 $ 14.54
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.23 0.23 0.24 0.24 0.26
Net realized and unrealized gain on securities 2.54 5.80 2.95 4.06 1.59
----------- ----------- ----------- ----------- -----------
Total income from investment operations 2.77 6.03 3.19 4.30 1.85
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.23) (0.23) (0.24) (0.24) (0.26)
Distributions from net realized gain on securities (2.17) (1.36) (1.21) (0.65) (0.45)
----------- ----------- ----------- ----------- -----------
Total distributions (2.40) (1.59) (1.45) (0.89) (0.71)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 25.64 $ 25.27 $ 20.83 $ 19.09 $ 15.68
----------- ----------- ----------- ----------- -----------
TOTAL RETURN 11.91% 29.62% 17.48% 28.10% 13.26%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.38% 0.36% 0.40% 0.41% 0.44%
Ratio of net investment income to
average net assets 0.92% 0.95% 1.24% 1.36% 1.73%
Portfolio turnover rate 41% 26% 19% 21% 23%
Number of shares outstanding at end of period (000's) 31,886 31,830 29,137 28,322 25,988
Net assets at end of period (000's) $ 817,573 $ 804,318 $ 607,061 $ 540,688 $ 407,557
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 140
FINANCIAL HIGHLIGHTS CONTINUED 83
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
SMALL CAP INDEX FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 17.94 $ 16.18 $ 16.25 $ 12.49 $ 11.52
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.19 0.19 0.19 0.20 0.17
Net realized and unrealized gain (loss) on securities (0.74) 3.17 0.93 4.04 0.97
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment operations (0.55) 3.36 1.12 4.24 1.14
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.19) (0.19) (0.19) (0.20) (0.17)
Distributions from net realized gain on securities (1.36) (1.41) (1.00) (0.28) --
----------- ----------- ----------- ----------- -----------
Total distributions (1.55) (1.60) (1.19) (0.48) (0.17)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 15.84 $ 17.94 $ 16.18 $ 16.25 $ 12.49
=========== =========== =========== =========== ===========
TOTAL RETURN (2.45) 21.34% 7.51% 34.50% 9.98%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.41% 0.39% 0.41% 0.41% 0.44%
Ratio of net investment income to average net assets 1.20% 1.05% 1.34% 1.36% 1.44%
Portfolio turnover rate 36% 36% 42% 31% 34%
Number of shares outstanding at end of period (000's) 13,890 $ 13,777 11,893 11,129 10,136
Net assets at end of period (000's) $ 220,002 $ 247,183 $ 192,459 $ 180,785 $ 126,567
</TABLE>
INTERNATIONAL EQUITIES FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 11.95 $ 11.44 $ 11.15 $ 10.42 $ 10.14
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.22 0.23 0.20 0.17 0.15
Net realized and unrealized gain on securities
and foreign currencies 0.30 0.85 0.63 0.97 0.34
----------- ----------- ----------- ----------- -----------
Total income from investment operations 0.52 1.08 0.83 1.14 0.49
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.25) (0.24) (0.19) (0.17) (0.15)
Distributions from net realized gain on securities (0.90) (0.33) (0.35) (0.24) (0.06)
----------- ----------- ----------- ----------- -----------
Total distributions (1.15) (0.57) (0.54) (0.41) (0.21)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 11.32 $ 11.95 $ 11.44 $ 11.15 $ 10.42
=========== =========== =========== =========== ===========
TOTAL RETURN 4.43% 9.92% 7.74% 11.14% 4.92%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.43% 0.40% 0.42% 0.42% 0.45%
Ratio of net investment income to average net assets 1.89% 1.92% 1.75% 1.65% 1.47%
Portfolio turnover rate 8% 9% 12% 20% 14%
Number of shares outstanding at end of period (000's) 12,559 13,009 15,857 18,497 20,074
Net assets at end of period (000's) $ 142,108 $ 155,469 $ 181,437 $ 206,259 $ 209,091
</TABLE>
<PAGE> 141
84 FINANCIAL HIGHLIGHTS CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
GROWTH FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 22.08 $ 17.62 $ 16.49 $ 11.43 $ 9.87
------------ ------------ ---------- ------------- ----------
Income (loss) from investment operations:
Net investment (loss) income (0.08) (0.02) 0.02 0.11 0.04
Net realized and unrealized gain on securities 3.13 4.82 1.45 5.27 1.56
------------ ------------ ---------- ------------- ----------
Total income from investment operations 3.05 4.80 1.47 5.38 1.60
------------ ------------ ---------- ------------- ----------
Distributions:
Distributions from net investment income -- (0.01) (0.01) (0.09) (0.04)
Distributions from net realized gain (loss)
on securities (1.01) (0.33) (0.33) (0.23) --
------------ ------------ ---------- ------------- ----------
Total distributions (1.01) (0.34) (0.34) (0.32) (0.04)
------------ ------------ ---------- ------------- ----------
Net asset value at end of period $ 24.12 $ 22.08 $ 17.62 $ 16.49 $ 11.43
============ ============ ========== ============= ==========
TOTAL RETURN 14.20% 27.41% 9.00% 47.46% 16.25%
============ ============ ========== ============= ==========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.86% 0.84% 0.86% 0.83% 0.91%
Ratio of net investment (loss) income to
average net assets (0.36%) (0.11%) 0.09% 0.89% 0.41%
Portfolio turnover rate 42% 43% 40% 36% 61%
Number of shares outstanding at end of period (000's) 52,690 49,832 42,422 25,826 8,800
Net assets at end of period (000's) $ 1,271,034 $ 1,100,137 $ 747,654 $ 425,787 $ 100,614
</TABLE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 19.91 $ 16.86 $ 14.78 $ 11.09 $ 9.87
------------ ------------ ---------- ------------- ----------
Income from investment operations:
Net investment income 0.06 0.08 0.10 0.08 0.09
Net realized and unrealized gain on securities 3.17 3.26 2.38 3.77 1.22
------------ ------------ ---------- ------------- ----------
Total income from investment operations 3.23 3.34 2.48 3.85 1.31
------------ ------------ ---------- ------------- ----------
Distributions:
Distributions from net investment income (0.08) (0.08) (0.10) (0.07) (0.09)
Distributions from net realized gain (loss) on securities (1.53) (0.21) (0.29) (0.09) --
------------ ------------ ---------- ------------- ----------
Total distributions (1.61) (0.29) (0.39) (0.16) (0.09)
------------ ------------ ---------- ------------- ----------
Net asset value at end of period $ 21.53 19.91 $ 16.87 $ 14.78 $ 11.09
============ ============ ========== ============= ==========
TOTAL RETURN 16.92% 19.87% 17.08% 34.85% 13.35%
============ ============ ========== ============= ==========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.82% 0.80% 0.81% 0.79% 0.86%
Ratio of net investment income to average net assets 0.29% 0.43% 0.70% 0.63% 0.93%
Portfolio turnover rate 102% 78% 45% 64% 97%
Number of shares outstanding at end of period (000's) 13,790 13,619 12,422 7,685 3,867
Net assets at end of period (000's) $ 296,885 $ 271,159 $ 209,545 $ 113,546 $ 42,867
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 142
FINANCIAL HIGHLIGHTS CONTINUED 85
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
SCIENCE & TECHNOLOGY FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 22.07 $ 19.88 $ 20.48 $ 14.43 $ 9.83
------------- ------------- ------------ ----------- ----------
Income (loss) from investment operations:
Net investment (loss) income (0.10) (0.09) -- -- 0.03
Net realized and unrealized gain
on securities and foreign currencies 10.36 2.28 0.33 8.08 4.72
------------- ------------- ------------ ----------- ----------
Total income from investment operations 10.26 2.19 0.33 8.08 4.75
------------- ------------- ------------ ----------- ----------
Distributions:
Distributions from net investment income -- -- -- -- (0.02)
Distributions from net realized gain on securities (2.38) -- (0.93) (2.03) (0.13)
------------- ------------- ------------ ----------- ----------
Total distributions (2.38) -- (0.93) (2.03) (0.15)
------------- ------------- ------------ ----------- ----------
Net asset value at end of period $ 29.95 $ 22.07 $ 19.88 $ 20.48 $ 14.43
============= ============= ============ =========== ==========
TOTAL RETURN 48.34% 10.85% 1.81% 58.28% 48.61%
============= ============= ============ =========== ==========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.96% 0.95% 0.96% 0.94% 1.00%
Ratio of net investment income (loss) to average net assets (0.46)% (0.46)% (0.29)% (0.07)% 0.36%
Portfolio turnover rate 149% 128% 122% 116% 121%
Number of shares outstanding at end of period (000's) 56,211 46,355 40,484 27,696 11,550
Net assets at end of period (000's) $ 1,683,585 $ 1,023,141 $ 804,982 $ 567,187 $ 166,683
</TABLE>
SOCIAL AWARENESS FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 22.16 $ 17.90 $ 15.49 $ 13.02 $ 11.98
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.21 0.23 0.24 0.26 0.27
Net realized and unrealized gain on securities 4.08 5.07 4.19 3.37 1.75
----------- ----------- ----------- ----------- -----------
Total income from investment operations 4.29 5.30 4.43 3.63 2.02
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.22) (0.23) (0.24) (0.25) (0.27)
Distributions from net realized gain on securities (2.12) (0.81) (1.78) (0.91) (0.71)
----------- ----------- ----------- ----------- -----------
Total distributions (2.34) (1.04) (2.02) (1.16) (0.98)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 24.11 $ 22.16 $ 17.90 $ 15.49 $ 13.02
=========== =========== =========== =========== ===========
TOTAL RETURN 20.05% 30.34% 30.48% 28.85% 18.19%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.54% 0.56% 0.56% 0.58%
Ratio of net investment income to average net assets 0.93% 1.17% 1.53% 1.80% 2.22%
Portfolio turnover rate 49% 120% 109% 117% 148%
Number of shares outstanding at end of period (000's) 21,646 15,080 8,677 5,220 4,143
Total net assets at end of period (000's) $ 521,965 $ 334,167 $ 155,349 $ 80,887 $ 53,927
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 143
86 FINANCIAL HIGHLIGHTS CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 14.02 $ 12.57 $ 12.55 $ 11.24 $ 10.84
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.40 0.41 0.77 0.44 0.44
Net realized and unrealized gain on securities 1.26 2.24 1.44 1.53 0.82
----------- ----------- ----------- ----------- -----------
Total income from investment operations 1.66 2.65 2.21 1.97 1.26
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.40) (0.41) (0.78) (0.44) (0.44)
Distributions from net realized gain on securities (0.85) (0.79) (1.41) (0.22) (0.42)
----------- ----------- ----------- ----------- -----------
Total distributions (1.25) (1.20) (2.19) (0.66) (0.86)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 14.43 $ 14.02 $ 12.57 $ 12.55 $ 11.24
=========== =========== =========== =========== ===========
TOTAL RETURN 12.23% 21.94% 15.89% 17.90% 12.43%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.54% 0.57% 0.57% 0.58%
Ratio of net investment income to average net assets 2.81% 3.02% 3.26% 3.62% 4.03%
Portfolio turnover rate 160% 24% 103% 119% 133%
Number of shares outstanding at end of period (000's) 17,222 14,269 14,107 15,142 16,319
Total net assets at end of period (000's) $ 248,473 $ 200,099 $ 177,347 $ 190,024 $ 183,393
</TABLE>
CAPITAL CONSERVATION FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 9.68 $ 9.31 $ 9.23 $ 9.52 $ 9.13
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income 0.60 0.61 0.62 0.62 0.63
Net realized and unrealized gain (loss) on securities (0.29) 0.37 0.08 (0.29) 0.39
Total income from investment operations 0.31 0.98 0.70 0.33 1.02
Distributions:
Distributions from net investment income (0.60) (0.61) (0.62) (0.62) (0.63)
Distributions from net realized gain on securities -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.60) (0.61) (0.62) (0.62) (0.63)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 9.39 $ 9.68 $ 9.31 $ 9.23 $ 9.52
=========== =========== =========== =========== ===========
TOTAL RETURN 3.25% 10.76% 7.75% 3.41% 11.80%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.60% 0.54% 0.57% 0.57% 0.58%
Ratio of net investment income to average net assets 6.24% 6.32% 6.59% 6.47% 6.88%
Portfolio turnover rate 41% 14% 45% 80% 100%
Number of shares outstanding at end of period (000's) 6,720 6,577 7,168 7,604 6,935
Total net assets at end of period (000's) $ 63,131 $ 63,654 $ 66,747 $ 70,212 $ 60,031
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 144
FINANCIAL HIGHLIGHTS CONTINUED 87
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 10.09 $ 9.67 $ 9.61 $ 9.89 $ 9.55
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.55 0.58 0.59 0.61 0.60
Net realized and unrealized gain (loss) on securities (0.19) 0.42 0.06 (0.28) 0.35
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment operations 0.36 1.00 0.65 0.33 0.95
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.55) (0.58) (0.59) (0.61) (0.61)
Distributions from net realized gain on securities -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions (0.55) (0.58) (0.59) (0.61) (0.61)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 9.90 $ 10.09 $ 9.67 $ 9.61 $ 9.89
=========== =========== =========== =========== ===========
TOTAL RETURN 3.58% 10.60% 6.94% 3.32% 10.43%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.59% 0.54% 0.56% 0.56% 0.58%
Ratio of net investment income to average net assets 5.46% 5.82% 6.11% 6.21% 6.36%
Portfolio turnover rate 39% 24% 38% 36% 229%
Number of shares outstanding at end of period (000's) 10,853 9,129 8,672 8,164 5,478
Total net assets at end of period (000's) $ 107,425 $ 92,120 $ 83,827 $ 78,423 $ 54,174
</TABLE>
INTERNATIONAL GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period $ 11.42 $ 11.33 $ 11.79 $ 12.72 $ 10.97
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income 0.51 0.56 0.63 0.65 0.65
Net realized and unrealized gain (loss)
on securities and foreign currencies 0.24 (0.26) (0.49) (0.89) 1.80
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment operations 0.75 0.30 0.14 (0.24) 2.45
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.48) (0.20) (0.58) (0.68) (0.70)
Distributions from net realized gain on securities (0.07) (0.01) (0.02) (0.01) --
----------- ----------- ----------- ----------- -----------
Total distributions (0.55) (0.21) (0.60) (0.69) (0.70)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 11.62 $ 11.42 $ 11.33 $ 11.79 $ 12.72
=========== =========== =========== =========== ===========
TOTAL RETURN 6.40% 2.65% 1.13% (1.91)% 23.23%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.55% 0.56% 0.56% 0.59%
Ratio of net investment income to average net assets 4.27% 4.70% 5.13% 5.45% 5.83%
Portfolio turnover rate 22% 17% 4% 11% 6%
Number of shares outstanding at end of period (000's) 13,647 13,646 15,680 12,073 6,111
Total net assets at end of period (000's) $ 158,509 $ 155,783 $ 177,709 $ 142,383 $ 77,734
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 145
88 FINANCIAL HIGHLIGHTS CONTINUED
Per share data is for a share of capital stock outstanding throughout the
period. Total return includes reinvestment of divedends on the reinvestment
date. Total returns and ratios for the periods of less than one year are not
annualized.
MONEY MARKET FUND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<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 0.05 0.05
----------- ----------- ----------- ----------- -----------
Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
TOTAL RETURN 4.84% 5.25% 5.02% 5.26% 4.90%
=========== =========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets 0.57% 0.54% 0.57% 0.57% 0.57%
Ratio of net investment income to average net assets 4.66% 5.14% 4.95% 5.14% 4.75%
Number of shares outstanding at end of period (000's) 347,394 190,975 128,125 83,618 82,256
Total net assets at end of period (000's) $ 347,394 $ 190,975 $ 128,125 $ 83,618 $ 82,254
</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,
Asset Allocation Fund (formerly the 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, 1999. We have also audited for each of the
Funds the related statement of operations for the year ended May 31, 1999, the
statement of changes in net assets for each of the two years in the period
ended May 31, 1999, 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, 1999, 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, 1999, 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 8, 1999
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 146
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
BOARD OF DIRECTORS
Judith L. Craven
Timothy J. Ebner
Gustavo E. Gonzales, Jr.
John A. Graf
Norman Hackerman
John W. Lancaster
Ben H. Love
John E. Maupin, Jr.
F. Robert Paulsen
R. Miller Upton
Thomas L. West, Jr.
DISTRIBUTOR
A. G. Distributors, Inc.
2929 Allen Parkway
Houston, Texas 77019
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
The Variable Annuity Life
Insurance Company (VALIC)
2929 Allen Parkway
Houston, Texas 77019
INVESTMENT SUB-ADVISERS
Bankers Trust Company
1 Bankers Trust Plaza
New York, New York 10006
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
INDEPENDENT AUDITORS
Ernst & Young LLP
1221 McKinney
Houston, Texas 77010
SHAREHOLDER SERVICE AGENT
The Variable Annuity Life
Insurance Company (VALIC)
2929 Allen Parkway
Houston, Texas 77019
OFFICERS
Thomas L. West, Jr., Chairman
John A. Graf, President
John E. Arant, Executive Vice President
Joe C. Osborne, Executive Vice President
Peter V. Tuters, Senior Investment Officer
Brent C. Nelson, Vice President
Maruti D. More, Vice President - Investments
Teresa S. Moro, Vice President and Investment Officer
Leon A. Olver, Vice President and Investment Officer
William Trimbur, Jr., Vice President and Investment Officer
Cynthia A. Toles, Vice President and Secretary
Gregory R. Seward, Treasurer
Kathryn A. Pearce, Controller
Nori L. Gabert, Vice President and Assistant Secretary
Jaime M. Sepulveda, Assistant Treasurer
Earl E. Allen, Jr., Assistant Treasurer
Donna L. Hathaway, Assistant Controller
Heriberto Valdez, Assistant Controller
Cynthia A. Gibbons, Assistant Vice President
This report is for the information of the shareholders and variable
contract owners participating in the American General Series Portfolio Company.
It is authorized for distribution to other persons only when preceded or
accompanied by an effective prospectus which contains information on how to
purchase shares and other pertinent information.
If you would like further information about this material or products
issued by VALIC or American General Life Insurance Company, please contact your
account representative.
"Standard & Poor's(R)", "Standard & Poor's MidCap 400 Index" and "S&P
500(R)" are trademarks of Standard & Poor's Corporation. The Stock Index Fund
and MidCap Index Fund are not sponsored, endorsed, sold or promoted by S&P and
S&P makes no representation regarding the advisability of investing in the
funds. The Russell 2000(R) Index is a trademark / service mark of the Frank
Russell Company. Russell(TM) is a trademark of the Frank Russell Company.
[VALIC LOGO]
(c) 1999 The Variable Annuity Life Insurance Company, Houston
Texas VALIC is a registered service mark of
The Variable Annuity Life Insurance Company
VA 9530 VER 5/99
