AMERICAN VARIABLE INSURANCE SERIES
PART B
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1997
(as amended June 3, 1997)
This document is not a prospectus but should be read in conjunction with
the current prospectuses of American Variable Insurance Series (the "Series")
dated April 1, 1997. The prospectuses may be obtained from your investment
dealer or financial planner or by writing to the series at the following
address:
AMERICAN VARIABLE INSURANCE SERIES
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
TABLE OF CONTENTS
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ITEM PAGE NO.
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INVESTMENT POLICIES 1
INVESTMENT RESTRICTIONS 8
SERIES OFFICERS AND TRUSTEES 13
TRUSTEE COMPENSATION 13
MANAGEMENT 17
PRICE OF SHARES 19
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 20
EXECUTION OF PORTFOLIO TRANSACTIONS 21
GENERAL INFORMATION 22
APPENDIX 24
FINANCIAL STATEMENTS ATTACHED
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INVESTMENT POLICIES
With respect to all funds, portfolio changes will be made without regard
to the length of time a particular investment may have been held. Under
certain market conditions, the investment polices of the Asset Allocation Fund,
the Bond Fund, the High-Yield bond Fund, and the U.S. Government/AAA-Rated
Securities Fund may result in higher portfolio turnover than those of the other
funds, although no fund's annual portfolio turnover rate is expected to exceed
100%. A 100% annual portfolio turnover rate would occur, for example, if all
the investments in a fund's portfolio (exclusive of securities with less than
one year to maturity) were replaced in a period of one year. High portfolio
turnover involves correspondingly greater brokerage commissions, to the extent
such commissions are payable, and other transaction costs, which will be borne
directly by the fund involved.
Under normal market conditions, the Global Growth Fund will invest in
issuers domiciled in at least three countries, with no more than 40% of its
assets invested in issuers domiciled in any one country. (For clarification
purposes, the 40% limit excludes cash and cash equivalents.)
GLOBAL GROWTH FUND, GROWTH FUND, GROWTH-INCOME FUND, ASSET ALLOCATION FUND,
BOND FUND AND HIGH-YIELD BOND FUND
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK SECURITIES:
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
securities can be sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress that
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, a fund may incur
losses or expenses in seeking recovery of amounts owed to it. In addition,
periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices and yields of high-yield, high-risk bonds
and each fund's net asset value.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest rate market, a fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
the value of high-yield, high-risk bonds held by each fund will decrease in a
rising interest rate market, as will the value of each fund's assets. If a
fund experiences unexpected net redemptions, this may force it to sell
high-yield, high-risk bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing each fund's rate of return.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely a fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
GLOBAL GROWTH FUND, GROWTH FUND, INTERNATIONAL FUND, ASSET ALLOCATION FUND,
BOND FUND AND HIGH-YIELD BOND FUND
CURRENCY TRANSACTIONS -- The Global Growth Fund, the Growth Fund, the
International Fund, the Bond Fund and the High-Yield Bond Fund have the ability
to enter into forward currency contracts to protect against changes in currency
exchange rates. A forward currency contract is an obligation to purchase or
sell a specific currency at a future date and price, both of which are set at
the time of the contract. The funds intend to enter into forward currency
contracts solely to hedge into the U.S. dollar its exposure to other
currencies. The fund will segregate liquid assets which will be marked to
market daily to meet its forward contract commitments to the extent required by
the Securities and Exchange Commission.
The Growth Fund and the Asset Allocation Fund do not currently intend to
engage in any transactions other than purchasing and selling currencies and
foreign exchange contracts which will be used to facilitate settlement of
trades.
The Bond Fund and the High-Yield Bond Fund may enter into the transactions
described above and may also enter into exchange-traded futures contracts
relating to foreign currencies ("currency contracts") in connection with
investments in securities of foreign issuers in anticipation of, or to protect
against, fluctuations in exchange rates. In addition, forward currency
contracts may be used by these funds to purchase or sell a currency against
another currency at a future date and price as agreed upon by the parties. An
exchange-traded futures contract relating to foreign currency is similar to a
forward foreign currency contract but has a standardized size and exchange
date. Although currency contracts typically will involve the purchase and sale
of a currency against the U.S. dollar, these funds also may enter into currency
contracts not involving the U.S. dollar. In connection with these futures
transactions, the Series has filed a notice of eligibility with the Commodities
Futures Trading Association ("CFTC") that exempts the Series from CFTC
registration as a "commodity pool operator" as defined under the Commodities
Exchange Act. Pursuant to this notice, these funds will observe certain CFTC
guidelines with respect to its futures transactions that, among other things,
limit initial margin deposits in connection with the use of futures contracts
and related options for purposes other than "hedging" (as defined by CFTC
rules) to 5% of a fund's net assets.
The Bond Fund and the High-Yield Bond Fund may attempt to accomplish
objectives similar to those involved in their use of currency contracts by
purchasing put or call options on currencies. A put option gives a fund, as
purchaser, the right (but not the obligation) to sell a specified amount of
currency at the exercise price until the expiration of the option. A call
option gives a fund, as purchaser, the right (but not the obligation) to
purchase a specified amount of currency at the exercise price until its
expiration. The funds might purchase a currency put option, for example, to
protect themselves during the contract period against a decline in the U.S.
dollar value of a currency in which they hold or anticipate holding securities.
If the currency's value should decline against the U.S. dollar, the loss in
currency value should be offset, in whole or in part, by an increase in the
value of the put. If the value of the currency instead should rise against the
U.S. dollar, any gain to the funds would be reduced by the premium they had
paid for the put option. A currency call option might be purchased, for
example, in anticipation of, or to protect against, a rise in the value against
the U.S. dollar of a currency in which the funds anticipate purchasing
securities.
Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(I.E., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike
(exercise) prices and expiration dates. OTC options are two-party contracts
with negotiated strike prices and expiration dates. The High-Yield Bond Fund
and Bond Fund will not purchase an OTC option unless it is believed that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers
directly and not through a clearing corporation which guarantees performance.
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of a quote provided
by the dealer. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time.
Certain provisions of the Internal Revenue code may limit the extent to
which the fund may enter into forward contracts. Such transactions may also
affect, for U.S. federal tax purposes, the character and timing of income, gain
or loss recognized by the fund.
ASSET ALLOCATION FUND, BOND FUND AND U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
GNMA CERTIFICATES, FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS, AND OTHER
MORTGAGE-RELATED SECURITIES -- The funds may purchase certificates issued by
the Government National Mortgage Association ("GNMA") and the U.S.
Government/AAA-Rated Securities Fund expects to invest substantially in these
securities. GNMA certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans on which timely payment of interest and
principal is guaranteed by the full faith and credit of the U.S. Government. A
pool of these mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. GNMA certificates differ from
typical bonds because principal is repaid monthly over the term of the loan
rather than returned in a lump sum at maturity. Because both interest and
principal payments (including prepayments) on the underlying mortgage loans are
passed through to the holder of the certificate, GNMA certificates are called
"pass-through" securities.
The Federal National Mortgage Association ("FNMA"), a federally chartered
and privately-owned corporation, issues pass-through securities representing
interests in a pool of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest, but this guarantee is not backed by the full
faith and credit of the U.S. Government. The Federal Home Loan Mortgage
Corporation ("FHLMC"), a corporate instrumentality of the U.S. Government,
issues participation certificates which represent an interest in a pool of
conventional mortgage loans. FHLMC guarantees the timely payment of interest
and the ultimate collection of principal and maintains reserves to protect
holders against losses due to default, but the certificates are not backed by
the full faith and credit of the U.S. Government. As is the case with GNMA
certificates, the actual maturity of and realized yield on particular FNMA and
FHLMC pass-through securities will vary based on the prepayment experience of
the underlying pool of mortgages.
The funds may invest in mortgage-related securities issued by financial
institutions such as commercial banks, savings and loan associations, mortgage
bankers and securities broker-dealers (or separate trusts or affiliates of such
institutions established to issue the securities) including collateralized
mortgage obligations ("CMO's") and mortgage-backed bonds. CMO's (including
real estate mortgage investment conduits as authorized under the Internal
Revenue Code of 1986, as amended) are issued in series that are made up of a
group of bonds that together are fully collateralized directly or indirectly by
a pool of mortgages on which the payments of principal and interest are
dedicated to payment of principal and interest on the bonds in the series.
Each class of bonds in the series may have a different maturity than the other
classes of bonds in the series, bear a different coupon and have a different
priority in receiving payments. The different maturities come from the fact
that all principal payments, both regular principal payments as well as any
prepayment of principal, are passed through first to the holders of the class
with the shortest maturity until it is completely retired. Thereafter,
principal payments are passed through to the next class of bonds in the series,
until all the classes have been paid off. As a result, an acceleration in the
rate of prepayments that may be associated with declining interest rates
shortens the expected life of each class, with the greatest impact on those
classes with the shortest maturities. Similarly, should the rate of
prepayments slow down, as may happen in times of rising interest rates, the
expected life of each class lengthens, again with the greatest impact on those
classes with the shortest maturities. In the case of some CMO series, each
class may receive a differing proportion of the monthly interest and principal
repayments on the underlying collateral. In these series the classes having
proportionally greater interests in principal repayments generally would be
more affected by an acceleration (or slowing) in the rate of prepayments.
Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMO's). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
BOND FUND AND U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
REVERSE REPURCHASE AGREEMENTS -- Although the Bond Fund and the U.S.
Government/AAA-Rated Securities Fund have no current intention of doing so
during the next 12 months, each fund is authorized to enter into reverse
repurchase agreements. A reverse repurchase agreement is the sale of a
security by a fund and its agreement to repurchase the security at a specified
time and price. Each fund will maintain in a segregated account with its
custodian cash, cash equivalents or U.S. Government securities in an amount
sufficient to cover its obligations under reverse repurchase agreements with
broker-dealers (but no collateral is required on reverse repurchase agreements
with banks). Under the Investment Company Act of 1940 (the "1940 Act"),
reverse repurchase agreements may be considered borrowings by a fund. The use
of reverse repurchase agreements by a fund creates leverage which increases the
fund's investment risk. As a fund's aggregate commitments under these reverse
repurchase agreements increase, the opportunity for leverage similarly
increases. If the income and gains on securities purchased with the proceeds
of reverse repurchase agreements exceed the costs of the agreements, a fund's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if the income and gains fail to exceed the costs, a fund's
earnings or net asset value would decline faster than otherwise would be the
case.
ASSET ALLOCATION FUND, BOND FUND, HIGH-YIELD BOND FUND, AND U.S.
GOVERNMENT/AAA-RATED SECURITIES FUND
LOANS OF PORTFOLIO SECURITIES -- Although the Asset Allocation Fund, the Bond
Fund, the High-Yield Bond Fund and the U.S. Government/AAA-Rated Securities
Fund have no current intention of doing so during the next 12 months, these
funds are authorized to lend portfolio securities to selected securities
dealers or other institutional investors whose financial condition is monitored
by Capital Research and Management Company (the "Investment Adviser"). The
borrower must maintain with the Series' custodian collateral consisting of
cash, cash equivalents or U.S. Government securities equal to at least 100% of
the value of the borrowed securities, plus any accrued interest. The
Investment Adviser will monitor the adequacy of the collateral on a daily
basis. Each fund may at any time call a loan of its portfolio securities and
obtain the return of the loaned securities. Each fund will receive any
interest paid on the loaned securities and a fee or a portion of the interest
earned on the collateral. Each fund will limit its loans of portfolio
securities to an aggregate of 10% of the value of its total assets, determined
at the time any such loan is made.
PORTFOLIO TRADING OF FIXED-INCOME SECURITIES -- The funds intend to engage in
portfolio trading of fixed-income securities when it is believed that the sale
of a fixed-income security owned and the purchase of another security of better
value can enhance principal and/or increase income. A security may be sold to
avoid any prospective decline in market value in light of what is evaluated as
an expected rise in prevailing yields, or a security may be purchased in
anticipation of a market rise (a decline in prevailing yields). A security
also may be sold and a comparable security purchased coincidentally in order to
take advantage of what is believed to be a disparity in the normal yield and
price relationship between the two securities.
"ROLL" TRANSACTIONS -- Although the Asset Allocation Fund, the High-Yield Bond
Fund, the Bond Fund and the U.S. Government/AAA-Rated Securities Fund have no
current intention of doing so during the next 12 months, these funds may engage
in "roll" transactions. A "roll" transaction is the sale of GNMA certificates
or other securities together with a commitment to purchase similar, but not
identical, securities at a future date. The funds intend to treat "roll"
transactions as two separate transactions; one involving the purchase of a
security and a separate transaction involving the sale of a security. Since
the funds do not intend to enter into "roll" transactions for financing
purposes, they may treat these transaction as not falling within the definition
of "borrowing" set forth in Section 2(a)(23) of the 1940 Act. As a fund's
aggregate commitments under these transactions increase, the opportunity for
leverage similarly may increase; however, it is not the intent of the fund to
engage in these transactions for leveraging purposes. In addition, a fund may
enter into other purchase and sale transactions involving securities which are
not settled in the ordinary course of business and under various terms when to
do so is in the best interest of the fund.
A fund will segregate liquid assets, which will be marked to market daily, in
an amount sufficient to meet its payment obligations in these transactions.
Although these transactions will not be entered into for leveraging purposes,
to the extent a fund's aggregate commitments under these transactions exceed
its holdings of cash and securities that do not fluctuate in value (such as
short-term money market instruments), the funds temporarily will be in a
leveraged position (i.e., it will have an amount greater than its net assets
subject to market risk). Should market values of the funds' portfolio
securities decline while the funds are in a leveraged position, greater
depreciation of its net assets would likely occur than were it not in such a
position. A fund will not borrow money to settle these transactions and,
therefore, will liquidate other portfolio securities in advance of settlement
if necessary to generate additional cash to meet its obligations thereunder.
BOND FUND AND HIGH-YIELD BOND FUND
LOAN PARTICIPATIONS -- The High-Yield Bond Fund and the Bond Fund may each
invest up to 10% of its assets in loan participations. These participations,
which can also include loan assignments, typically involve loans made by a
syndicate of banks to U.S. and non-U.S. corporate or governmental borrowers for
a variety of purposes which may be secured or unsecured, and will vary in term
and legal structure. Typically, price quotations with respect to loan
participations are available from the originating bank (the bank that makes the
underlying loan). The originating bank also serves as the market maker for the
resale of loan participations. When purchasing such instruments, a fund may
assume the credit risks associated with the original bank lender as well as the
credit risks associated with the borrower. In addition, if the loan is
foreclosed, a fund could be part owner of any collateral, and could bear the
costs and liabilities of owning and disposing of the collateral. Loan
participations generally are not rated by major rating agencies and may not be
protected by the securities laws. Also, loan participations may be liquid or
illiquid. To the extent these instruments are illiquid, a fund may have
difficulty determining their value or selling the instruments as generally
there is no secondary market. A fund will purchase these instruments only to
the extent that such a purchase would be consistent with its investment
policies regarding debt securities and/or illiquid securities.
In determining whether to purchase a particular loan participation, the
Investment Adviser will take into account all relevant factors including the
instrument's potential volatility, liquidity and risks (including whether the
fund could be put in an undesirable position as lender and/or owner of
collateral).
ASSET ALLOCATION FUND, BOND FUND AND HIGH-YIELD BOND FUND
REINSURANCE RELATED NOTES AND BONDS - The funds may invest in reinsurance
related notes and bonds. These instruments, which are typically issued by
special purpose reinsurance companies, transfer an element of insurance risk to
the note or bond holders. For example, the reinsurance company would not be
required to repay all or a portion of the principal value of the notes or bonds
if losses due to a catastrophic event under the policy (such as a major
hurricane) exceed certain dollar thresholds. Consequently, each fund may lose
the entire amount of its investment in such bonds or notes if such an event
occurs and losses exceed certain dollar thresholds. In this instance,
investors would have no recourse against the insurance company. These
instruments may be issued with fixed or variable interest rates and rated in a
variety of credit quality categories by the rating agencies.
CASH MANAGEMENT FUND
The Cash Management Fund seeks to achieve its investment objective by
investing in a diversified selection of money market instruments, and the other
funds generally will invest a portion of their assets in money market
instruments. These money market instruments include the following:
COMMERCIAL PAPER: Commercial paper is short-term notes (up to nine months)
issued by companies or governmental bodies. The Cash Management Fund may only
purchase commercial paper judged by the Investment Adviser to be of suitable
investment quality. This includes (a) commercial paper that is rated in the
two highest categories by Standard & Poor's Corporation and by Moody's
Investors Service, Inc. or (b) other commercial paper deemed on the basis of
the issuer's creditworthiness to be of a quality appropriate for the Cash
Management Fund. (No more than 5% of the Cash Management Fund's assets may be
invested in commercial paper rated in the second highest rating category by
either Moody's or Standard & Poor's; no more than the greater of 1% of the Cash
Management Fund's assets or $1 million may be invested in such securities of
any one issuer.) See the Appendix for a description of the ratings.
The commercial paper in which the Cash Management Fund may invest includes
variable amount master demand notes. Variable amount master demand notes
permit the Cash Management Fund to invest varying amounts at fluctuating rates
of interest pursuant to the agreement in the master note. These are direct
lending obligations between the lender and borrower, they are generally not
traded, and there is no secondary market. Such instruments are payable with
accrued interest in whole or in part on demand. The amounts of the instruments
are subject to daily fluctuations as the participants increase or decrease the
extent of their participations. Investments in these instruments are limited
to those that have a demand feature enabling the Cash Management Fund
unconditionally to receive the amount invested from the issuer upon seven or
fewer days' notice. (Generally, the Cash Management Fund attempts to invest in
instruments having a one-day notice provision). In connection with master
demand note arrangements, the Investment Adviser, subject to the direction of
the Trustees, monitors on an ongoing basis the earning power, cash flow, and
other liquidity ratios of the borrower and its ability to pay principal and
interest on demand. The Investment Adviser also considers the extent to which
the variable amount master demand notes are backed by bank letters of credit.
These notes generally are not rated by Moody's or Standard & Poor's. The Cash
Management Fund may invest in them only if it is deemed that at the time of
investment the notes are of comparable quality to the other commercial paper in
which the Cash Management Fund may invest. Master demand notes are considered
to have a maturity equal to the repayment notice period unless the Investment
Adviser has reason to believe that the borrower could not make timely repayment
upon demand.
COMMERCIAL BANK OBLIGATIONS: Commercial bank obligations are certificates of
deposit (interest-bearing time deposits), bankers acceptances (time drafts
drawn on a commercial bank where the bank accepts an irrevocable obligation to
pay at maturity) representing direct or contingent obligations of commercial
banks with assets in excess of $1 billion, based on latest published reports,
or other obligations issued by commercial banks with assets of less than $1
billion if the principal amount of such obligation is fully insured by the U.S.
Government.
CORPORATE BONDS AND NOTES: The Cash Management Fund may purchase corporate
obligations that mature or that may be redeemed in one year or less. These
obligations originally may have been issued with maturities in excess of one
year. The Cash Management Fund may invest only in corporate bonds or notes of
issuers having outstanding short-term securities rated as described above in
"Commercial Paper."
SAVINGS ASSOCIATION OBLIGATIONS: Certificates of deposit (interest-bearing
time deposits) issued by savings banks or savings and loan associations that
have assets in excess of $1 billion, based on latest published reports, or
obligations issued by institutions with assets of less than $1 billion if the
principal amount of such obligation is fully insured by the U.S. Government.
FLOATING RATE OBLIGATIONS: These securities have a coupon rate that changes at
least annually and generally more frequently. The coupon rate is set in
relation to money market rates. The obligations, issued primarily by banks,
other corporations, governments and semi-governmental bodies, may have a
maturity in excess of one year. In some cases, the coupon rate may vary with
changes in the yield on Treasury bills or notes or with changes in LIBOR
(London Interbank Offering Rate). The Investment Adviser considers floating
rate obligations to be liquid investments because a number of U.S. and non-U.S.
securities dealers make active markets in these securities.
INVESTMENT RESTRICTIONS
The Series has adopted certain investment restrictions for each fund which
are fundamental policies and cannot be changed without approval by a majority
of the fund's outstanding shares. Such majority is defined by the 1940 Act as
the vote of the lesser of (i) 67% or more of the outstanding shares of the fund
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the fund are present in person or by proxy, or (ii) more than 50%
of the outstanding voting securities of the fund. All percentage limitations
expressed in the following investment restrictions are measured immediately
after the relevant transaction is made.
INVESTMENT RESTRICTIONS OF THE GLOBAL GROWTH FUND, GROWTH FUND, INTERNATIONAL
FUND, GROWTH-INCOME FUND, ASSET ALLOCATION FUND, BOND FUND AND HIGH-YIELD BOND
The Global Growth Fund, Growth Fund, International Fund, Growth-Income
Fund, Asset Allocation Fund, Bond Fund and High-Yield Bond Fund may not:
1. Invest more than 5% of the value of the total assets of the fund in the
securities of any one issuer, provided that this limitation shall apply only to
75% of the value of the fund's total assets and, provided further, that the
limitation shall not apply to obligations of the government of the U.S. under a
general Act of Congress. The short-term obligations of commercial banks are
excluded from this 5% limitation with respect to 25% of the fund's total
assets.
2. As to 75% of its total assets, purchase more than 10% of the outstanding
voting securities of an issuer.
3. Invest more than 25% of the fund's total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the fund may, if deemed advisable, invest more
than 25% of its assets in the obligations of domestic commercial banks.
4. Enter into any repurchase agreement maturing in more than seven days or
invest in any other illiquid security if, as a result, more than 10% of the
fund's total assets would be so invested.
5. Invest in real estate (including limited partnership interests, but
excluding securities of companies, such as real estate investment trusts, which
deal in real estate or interests therein).
6. Purchase commodities or commodity contracts; except that the International
Fund, Asset Allocation Fund, High-Yield Bond Fund and Bond Fund may engage in
transactions involving currencies (including forward or futures contracts and
put and call options).
7. Invest in companies for the purpose of exercising control or management.
8. Make loans to others except for (a) the purchase of debt securities; (b)
entering into repurchase agreements; (c) the loaning of its portfolio
securities; and (d) entering into loan participations.
9. Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the fund's total assets. Moreover,
in the event that the asset coverage for such borrowings falls below 300%, the
fund will reduce, within three days, the amount of its borrowings in order to
provide for 300% asset coverage.
10. Purchase securities on margin.
11. Pledge or hypothecate the fund's assets.
12. Sell securities short, except to the extent that the fund
contemporaneously owns, or has the right to acquire at no additional cost,
securities identical to those sold short.
13. Invest in puts, calls, straddles, spreads or any combination thereof;
except as described above in Investment Restriction number 6.
14. Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization).
15. Engage in underwriting of securities issued by others, except to the
extent it may be deemed to be acting as an underwriter in the purchase or
resale of portfolio securities.
Notwithstanding investment restriction number 14, the funds may invest in
securities of other managed investment companies if deemed advisable by its
officers in connection with the administration of a deferred compensation plan
adopted by Trustees pursuant to an exemptive order granted by the Securities
and Exchange Commission.
Notwithstanding investment restriction number 15, the funds may not engage
in the business of underwriting securities of other issuers, except to the
extent that the disposal of an investment position may technically constitute
the fund an underwriter as that term is defined under the Securities Act of
1933.
The Global Growth Fund, International Fund and High-Yield Bond Fund may
not invest more than 10% of the value of their total assets in securities which
are restricted as to resale; the Growth Fund, Growth-Income Fund and Asset
Allocation Fund may not invest more than 5% of the value of their respective
total assets in securities which are restricted as to resale. (Rule 144A
securities and Section 4(2) commerical paper, as defined in the Securities Act
of 1933, are excluded from these investment limits.) As a condition to the
acquisition of the type of securities mentioned herein, the funds will
ordinarily require that the issuer of such securities agree to bear the
expenses of registration under the Securities Act of 1933, if and when the
funds desire to sell such securities. The need to effect such registration
could result in a delay in disposing of such securities. These policies of the
Series are not deemed fundamental policies and therefore may be changed without
shareholder approval.
To the extent a fund invests in non-U.S. securities, the Series has
undertaken to the California Department of Insurance (which regulates certain
contracts that use the Series as an underlying investment) to adhere to the
following guidelines with respect to such investments:
1. The fund will have no more than 20% of its net asset value invested in
securities of issuers located in any one country. An additional 15% of the
fund's assets may be invested in securities of issuers located in any one of
the following countries: Australia, Canada, France, Japan, the United Kingdom
or the former West Germany.
2. The fund will be invested in a minimum of five different non-U.S. countries
at all times. However, this minimum is reduced to four countries when non-U.S.
investments comprise less than 80% of the fund's net asset value; to three
countries when less than 60%; to two countries when less than 40%; and to one
country when less than 20%.
INVESTMENT RESTRICTIONS OF THE U.S. GOVERNMENT/AAA-RATED SECURITIES FUND
The U.S. Government/AAA-Rated Securities Fund may not:
1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S. Government
securities")) if, immediately after and as a result of such investment, more
than 5% of the value of the fund's total assets would be invested in securities
of the issuer.
2. Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry,
except that this limitation shall not apply to U.S. Government securities or
other securities to the extent they are backed by or represent interests in
U.S. Government securities or U.S. Government-guaranteed mortgages.
3. Invest in companies for the purpose of exercising control or management.
4. Knowingly purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization.
5. Buy or sell real estate or commodities or commodity contracts in the
ordinary course of its business; however, the fund may purchase or sell readily
marketable debt securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein, including
real estate investment trusts.
6. Acquire securities subject to restrictions on disposition imposed by the
Securities Act of 1933, if, immediately after and as a result of such
acquisition, the value of such restricted securities and all other illiquid
securities held by the fund would exceed 10% of the value of the fund's total
assets.
7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933.
8. Make loans, except that the fund may: (a) purchase readily marketable
debt securities; (b) invest in repurchase agreements; (c) make loans of
portfolio securities; and (d) enter into loan participations. The fund will
not invest in repurchase agreements maturing in more than seven days if any
such investment, together with any illiquid securities (including securities
which are subject to legal or contractual restrictions on resale) held by the
fund, exceeds 10% of the value of its total assets.
9. Sell securities short, except to the extent that the fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.
10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.
11. Borrow money, except from banks for temporary or emergency purposes not in
excess of 5% of the value of the fund's total assets, except that the fund may
enter into reverse repurchase agreements.
12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the sale of securities pursuant to a reverse
repurchase agreement.
13. Write, purchase or sell puts, calls or combinations thereof.
Notwithstanding investment restriction number 4, the fund may invest in
securities of other managed investment companies if deemed advisable by its
officers in connection with the administration of a deferred compensation plan
adopted by Trustees pursuant to an exemptive order granted by the Securities
and Exchange Commission.
INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT FUND
The Cash Management Fund may not:
1. Invest more than 5% of the value of the total assets of the fund in the
securities of any one issuer, provided that this limitation shall apply only to
75% of the value of the fund's total assets and, provided further, that the
limitation shall not apply to obligations of the government of the U.S. under a
general Act of Congress. The short-term obligations of commercial banks are
excluded from this 5% limitation with respect to 25% of fund's total assets.
2. As to 75% of its total assets, purchase more than 10% of the outstanding
voting class of securities of an issuer.
3. Invest more than 25% of the fund's total assets in the securities of
issuers in the same industry. Obligations of the U.S. Government, its agencies
and instrumentalities, are not subject to this 25% limitation on industry
concentration. In addition, the fund may, if deemed advisable, invest more
than 25% of its assets in the obligations of domestic commercial banks.
4. Enter into any repurchase agreement maturing in more than seven days or
invest in any other illiquid security if, as a result, more than 10% of the
fund's total assets would be so invested.
5. Make loans to others except for the purchase of the debt securities listed
above. The fund may enter into repurchase agreements as described above.
6. Borrow money, except from banks for temporary purposes, and then in an
amount not in excess of 5% of the value of the fund's total assets. Moreover,
in the event that the asset coverage for such borrowings falls below 300%, the
fund will reduce within three days the amount of its borrowings in order to
provide for 300% asset coverage.
7. Pledge or hypothecate the fund's assets.
8. Sell securities short except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost, securities identical to
those sold short.
9. Invest in puts, calls, straddles, spreads or any combination thereof.
10. Purchase or sell securities of other investment companies (except in
connection with a merger, consolidation, acquisition or reorganization), real
estate or commodities.
11. Act as underwriter of securities issued by others, engage in distribution
of securities for others, or make investments in other companies for the
purpose of exercising control or management.
Notwithstanding investment restriction number 10, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Trustees pursuant to an exemptive order granted by the Securities and Exchange
Commission.
Notwithstanding investment restriction number 1 above, in order to comply
with Rule 2a-7 under the 1940 Act, the Cash Management Fund has adopted a
non-fundamental policy (that may be changed by the Board of Trustees without
shareholder approval) of investing no more than 5% of its assets (measured at
the time of purchase) in the securities of any one issuer (other than the U.S.
Government); provided however, that the Cash Management Fund may invest, as to
25% of its assets, more than 5% of its assets in certain high-quality
securities (as defined in the Rule) of a single issuer for a period of up to
three business days. Investment restriction number 9 above does not prevent
the purchase by the Cash Management Fund of securities that have "put" or
"stand-by" commitment features.
To the extent that any fund is used with a variable life insurance
contract sold in the state of California, it will limit its borrowing
activities to (1) 10% of net asset value when borrowing for any general purpose
and (2) 25% of net asset value when borrowing as a temporary measure to
facilitate redemptions. For this purpose, reverse repurchase agreements shall
constitute borrowing. This policy is not deemed a fundamental policy and
therefore may be changed without shareholder approval.
SERIES TRUSTEES AND OFFICERS
TRUSTEES AND TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER OF
REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS
(POSITIONS DEFERRED DEFERRED ON WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) TRUSTEE
ORGANIZATIONS FROM FROM ALL FUNDS SERVES/2/
LISTED MAY HAVE SERIES DURING MANAGED BY
CHANGED DURING FISCAL CAPITAL
THIS PERIOD) YEAR ENDED RESEARCH AND
11/30/96 MANAGEMENT
COMPANY
<S> <C> <C> <C> <C> <C>
Charles H. Trustee Private $25,600/3/ $112,600 4
Black investor and
525 Alma Real consultant;
Drive Former
Pacific Executive Vice
Palisades, CA President
90272 and Director,
Age: 70 Kaiser Steel
Corporation
+H. Frederick Trustee Private $24,400/3/ $149,900 18
Christie Investor;
P. O. Box 144 Former
Palos Verdes, President
CA 90274 and Chief
Age: 63 Executive
Officer, The
Mission Group
(non-utility
holding
Company,
subsidiary of
Southern
California
Edison Company)
Joe E. Davis Trustee Private $25,000 $25,000 1
3436 Caribeth Investor;
Drive Former
Encino, CA Chairman,
91436 Linear
Age: 62 Corporation;
former
President and
Chief Executive
Officer,
National Health
Enterprises,
Inc.
Martin Fenton, Trustee Chairman, $24,400 $121,000 16
Jr. Senior Resource
4350 Executive Group
Drive (management of
Suite 101 senior living
San Diego, CA centers)
92123
Age: 61
++Richard H. M. Trustee Retired. $21,100 $58,800 4
Holmes Former Vice
580 Laurent President,
Road Capital
Hillsborough, Research and
CA 94010 Management
Age: 71 Company
Mary Myers Trustee Founder and $23,800/3/ $75,500 4
Kauppila President,
286 Congress Energy
Street Investment,
Boston, MA Inc.
02110
Age: 42
Kirk P. Trustee President, $10,444/3/ $48,284 5
Pendleton Cairnwood, Inc.
Cairnwood, Inc.
75 James Way
Southampton, PA
18966
Age: 57
@James F. President President and none/4/ none/4/ 1
Rothenberg and Director,
333 South Hope Trustee Capital
Street Research and
Los Angeles, CA Management
90071 Company
Age: 50
@Thomas E. Chairman Retired. none/4/ none/4/ 3
Terry of Former Vice
6034 S. the Board President and
Highlands Secretary,
Avenue Capital
Madison, WI Research and
53705 Management
Age: 59 Company
</TABLE>
+ May be deemed an "interested person" within the meaning of the Investment
Company Act of 1940 (the "1940 Act") due to membership on the board of
directors of the parent company of a registered broker-dealer.
++ Not considered an "interested person" within the meaning of the 1940 Act,
but he does not participate on the Contracts or Nominating Committees due to
his former affiliation with the Investment Adviser.
@ Trustees who are "interested persons" within the meaning of the 1940 Act on
the basis of their affiliation with the Investment Adviser.
/1/ Amounts may be deferred by eligible trustees under a non-qualified deferred
compensation plan adopted by the Series in 1993. Deferred amounts accumulate
at an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages Anchor Pathway Fund which serves as the
underlying investment vehicle for certain variable insurance contracts; and
Bond Portfolio for Endowments, Inc. and Endowments, Inc. whose shares may be
owned only by tax-exempt organizations. These amounts reflect the aggregate
compensation paid during the most recent fiscal year of the funds involved.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the Series (plus earnings thereon) for participating Trustees is as
follows: Charles H. Black ($3,054); H . Frederick Christie ($30,542); Mary
Myers Kauppila ($79,916) and Kirk P. Pendleton ($1,569). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the Series until paid to the Trustee.
/4/ James F. Rothenberg and Thomas E. Terry are affiliated with the Investment
Adviser and, accordingly, receive no remuneration from the Series.
OFFICERS
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) WITH PRINCIPAL OCCUPATION(S)
REGISTRANT DURING PAST 5 YEARS
<S> <C> <C> <C>
Thomas E. Terry 59 Chairman of the Board Retired. Former Vice President and
6048 S. Highlands Avenue Secretary, Capital Research and
Madison, WI 53705 Management Company
James F. Rothenberg 50 President and Trustee President and Director, Capital
333 South Hope Street Research and Management Company
Los Angeles, CA 90071
James K. Dunton 59 Senior Vice President Senior Vice President and Director,
333 South Hope Stree Capital Research and Management
Los Angeles, CA 90071 Company
Abner D. Goldstine 67 Senior Vice President Senior Vice President and Director,
11100 Santa Monica Capital Research and Management
Boulevard Company
Los Angeles, CA 90025
Michael J. Downer 42 Vice President Vice President - Fund Business
333 South Hope Street Management Group, Capital Research
Los Angeles, CA 90071 and Management Company
Claudia P. Huntington 45 Vice President Senior Vice President, Capital
333 South Hope Street Research Company
Los Angeles, CA 90071
Steven N. Kearsley 55 Vice President Vice President and Treasurer,
135 South State College Capital Research and Management
Blvd. Company
Brea, CA 92821
Dina N. Perry 51 Vice President Vice President, Capital Research and
333 South Hope Street Management Company
Los Angeles, CA 90071
John H. Smet 40 Vice President Vice President, Capital Research and
11100 Santa Monica Management Company
Boulevard
Los Angeles, CA 90025
Chad L. Norton 36 Secretary Vice President - Fund Business
333 South Hope Street Managment Group, Capital Research
Los Angeles, CA 90071 and Management Company
Robert P. Simmer 36 Treasurer Vice President - Fund Business
5300 Robin Hood Road Managment Group, Capital Research
Norfolk, VA 23513 and Management Company
Sheryl F. Johnson 28 Assistant Treasurer Assistant Vice President - Fund
5300 Robin Hood Road Business Management Group, Capital
Norfolk, VA 23513 Research and Management Company
</TABLE>
# Positions within the organizations listed may have changed during this
period.
All of the Trustees and officers also are officers or employees of the
Investment Adviser or affiliated companies. No compensation is paid by the
Series to any officer or Trustee who is a director, officer or employee of the
Investment Adviser or affiliated companies. The Series pays fees of $20,000
per annum to Trustees who are not affiliated with the Investment Adviser, plus
$1,500 for each Board of Trustees meeting attended, plus $600 for each meeting
attended as a member of a committee of the Board of Trustees. The Trustees may
elect, on a voluntary basis, to defer all or a portion of these fees through a
deferred compensation plan in effect for the Series. The Series also
reimburses certain expenses of the Trustees who are not affiliated with the
Investment Adviser.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's professionals travel several million miles a year,
making more than 5,000 research visits in more than 50 countries around the
world. The Investment Adviser believes that it is able to attract and retain
quality personnel. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of
stocks, bonds and money market instruments and serves over five million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the Series and the Investment Adviser,
unless sooner terminated, will continue in effect until November 30, 1997, and
may be renewed from year to year thereafter, provided that any such renewal has
been specifically approved at least annually by (i) the Board of Trustees, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Series, and (ii) the vote of a majority of Trustees
who are not parties to the Agreement or interested persons (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the purpose
of voting on such approval. The Agreement provides that the Investment Adviser
has no liability to the Series for its acts or omissions in the performance of
its obligations to the Series not involving willful misconduct, bad faith,
gross negligence or reckless disregard of its obligations under the Agreement.
The Agreement also provides that either party has the right to terminate it,
without penalty, upon 60 days' written notice to the other party, and that the
Agreement automatically terminates in the event of its assignment (as defined
in the 1940 Act).
As compensation for its services, the Investment Adviser receives a
monthly fee which is accrued daily, calculated at the annual rates of:
GLOBAL GROWTH FUND: 0.69% of net assets;
GROWTH FUND: 0.50% of the first $600 million of net assets, plus 0.45% on net
assets greater than $600 million but not exceeding $1.2 billion, plus 0.42% on
net assets greater than $1.2 billion but not exceeding $2.0 billion, plus 0.37%
on net assets greater than $2.0 billion but not exceeding $3.2 billion, plus
0.35% on net assets in excess of $3.2 billion;
INTERNATIONAL FUND: 0.90% of the first $60 million of net assets, plus 0.78%
on net assets greater than $60 million but not exceeding $600 million, plus
0.60% on net assets greater than $600 million but not exceeding $1.2 billion,
plus 0.48% on net assets greater than $1.2 billion but not exceeding $2.0
billion, plus 0.465% on net assets in excess of $2.0 billion;
GROWTH-INCOME FUND: 0.50% of the first $600 million of net assets, plus 0.45%
on net assets greater than $600 million but not exceeding $1.5 billion, plus
0.40% on net assets greater than $1.5 billion but not exceeding $2.5 billion,
plus 0.32% on net assets greater than $2.5 billion but not exceeding $4.0
billion, plus 0.285% on net assets in excess of $4.0 billion;
ASSET ALLOCATION FUND: 0.50% of the first $600 million of net assets, plus
0.42% on net assets greater than $600 million but not exceeding $1.2 billion,
plus 0.36% on net assets in excess of $1.2 billion;
BOND FUND: 0.6% of the first $30 million of net assets, plus 0.50% on net
assets in excess of $30 million;
HIGH-YIELD BOND FUND: 0.60% of the first $30 million of net assets, plus 0.50%
on net assets greater than $30 million but not exceeding $600 million, plus
0.46% on net assets in excess of $600 million;
U.S. GOVERNMENT/AAA-RATED SECURITIES FUND: 0.60% of the first $30 million of
net assets, plus 0.50% on net assets greater than $30 million but not exceeding
$600 million, plus 0.40% on net assets in excess of $600 million;
CASH MANAGEMENT FUND: 0.50% of the first $100 million of net assets, plus
0.42% on net assets greater than $100 million but not exceeding $400 million,
plus 0.38% on net assets in excess of $400 million.
The Investment Adviser, in addition to providing investment advisory
services, furnishes the services and pays the compensation and travel expenses
of qualified persons to perform the executive, and related administrative
functions of the Series, provides necessary office space, office equipment and
utilities, and general purpose accounting forms, supplies, and postage used at
the office of the Series relating to the services furnished by the Investment
Adviser. Subject to the expense agreement described below, the Series will pay
all expenses not expressly assumed by the Investment Adviser, including, but
not limited to, registration and filing fees with federal and state agencies;
blue sky expenses (if any); expenses of shareholders' meetings; the expense of
reports to existing shareholders; expenses of printing proxies and
prospectuses; insurance premiums; legal and auditing fees; dividend
disbursement expenses; the expense of the issuance, transfer, and redemption of
its shares; custodian fees; printing and preparation of registration
statements; taxes; compensation, fees and expenses paid to Trustees
unaffiliated with the Investment Adviser; association dues; and costs of
stationary and forms prepared exclusively for the Series.
The Agreement provides for an advisory fee reduction to the extent that
each fund's annual ordinary net operating expenses, except the International
Fund's, exceed 1 1/2% of the first $30 million of the average month-end total
net assets of the fund and 1% of the average month-end total net assets in
excess thereof. For the International Fund, the advisory fee will be reduced
to the extent that its annual ordinary net operating expenses exceed 1 1/2% of
its average month-end total net assets. Expenditures, including costs incurred
in connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses.
During the fiscal years ended November 30, 1996, 1995 and 1994, the
Investment Adviser's total fees, respectively, amounted to the following:
Growth Fund $14,284,000, $ 11,222,000 and $8,735,000; International Fund
$12,370,000, $9,882,000 and $8,330,000; Growth-Income Fund $17,451,000,
$13,593,000 and $11,517,000; Asset Allocation Fund $4,663,000, $3,620,000 and
$3,129,000; High-Yield Bond Fund $2,996,000, $2,350,000 and $2,022,000; U. S.
Government/AAA-Rated Securities Fund $2,661,000, $2,550,000 and $2,459,000;
and Cash Management Fund $1,007,000, $907,000 and $905,000. During the fiscal
year ended November 30, 1996, the Investment Adviser's total fees for the Bond
Fund amounted to $204,000.
PLAN OF DISTRIBUTION The Series has adopted a Plan of Distribution (the
"Plan") for its Class 2 shares, pursuant to rule 12b-1 under the 1940 Act. As
required by rule 12b-1, the Plan has been approved by a majority of the entire
Board of Trustees, and separately by a majority of the Trustees who are not
"interested persons" of the Series and who have no direct or indirect financial
interest in the operation of the Plan. The officers and Trustees who are
"interested persons" of the Series may be considered to have a direct or
indirect financial interest in the operation of the Plan due to present or past
affiliations with the Investment Adviser and related companies. Potential
benefits of the Plan to the Series include improved shareholder services,
benefits to the investment process from growth or stability of assets and
maintenance of a financially healthy management organization. The selection
and nomination of Trustees who are not "interested persons" of the Series is
committed to the discretion of the Trustees who are not "interested persons"
during the existence of the Plan. The Plan is reviewed quarterly and must be
renewed annually by the Board of Trustees.
PRICE OF SHARES
The price paid for shares, the net asset value price, is calculated for
each of the funds once daily at the close of trading (currently 4:00 p.m., New
York Time) each day the New York Stock Exchange is open as set forth below.
The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The net
asset value per share is determined as follows:
1. Stocks, and convertible bonds and debentures traded on securities exchanges
or the over-the-counter market are valued at the last reported sale price on
the day of valuation, or, lacking any sales on that day, at the last-reported
bid price.
2. Non-convertible bonds and debentures, and other long-term debt securities
and Treasury notes normally are valued at prices obtained for the day of
valuation from a bond pricing service, when such prices are available on the
day of valuation; however, in circumstances where the Investment Adviser deems
it appropriate to do so, such securities will be valued at the mean of
representative quoted bid or asked prices for such securities or, if such
prices are not available, at such prices for securities of comparable maturity,
quality and type. Securities traded on exchanges outside the U.S. are valued
at the last sale price on the day of valuation, or lacking any sales on that
day, at the last-reported bid price. Short-term securities other than Treasury
notes with original or remaining maturities in excess of 60 days are valued at
the mean of representative quoted bid and asked prices or, if such prices are
not available, at such prices for securities of comparable maturity, quality
and type. Short-term securities with 60 days or less to maturity are valued at
amortized cost, which approximates market value. Options on currencies
purchased by the fund are valued at their last sale price in the case of listed
options or at the average of the last bid prices obtained from dealers in the
case of OTC options. Futures contracts involving foreign currencies traded on
exchanges are valued at their last sale or settlement price as of the close of
such exchanges or, lacking any sales, at the mean between the last reported bid
and asked prices. Other securities are valued on the basis of last sale or bid
prices in what is, in the opinion of the Investment Adviser, the broadest and
most representative market, which may be either a securities exchange or
over-the-counter market.
3. Where quotations are not readily available, securities are valued at fair
value as determined in good faith by the Board of Trustees. The fair value of
all other assets is added to the value of securities to arrive at the
respective fund's total assets;
4. The value of any security denominated in a currency other than U.S. dollars
will be translated into U.S. dollars at the prevailing market rate as
determined by the Series' officers;
5. There are deducted from the total assets, thus determined, the liabilities
of the respective funds including proper accruals of expense items; and
6. The net assets of the respective fund so obtained is then divided by the
total number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearer cent, is the fund's net asset value per share.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
Each fund of the Series intends to qualify to be taxed as a "regulated
investment company" under the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify for the tax
treatment afforded a regulated investment company under the Code, a fund must
annually distribute at least 90% of its net investment income and certain
short-term capital gains and meet certain diversification of assets and other
requirements of the Code. If a fund qualifies for such tax treatment, it will
not be subject to Federal income tax on the part of its ordinary income and its
net realized capital gains which it distributes to shareholders. To meet the
requirements of the Code, a fund must (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities or currencies;
(b) derive less than 30% of its gross income from the sale or other disposition
of securities held less than three months; and (c) diversify its holdings so
that, at the end of each fiscal quarter, (i) at least 50% of the market value
of the fund's assets is represented by cash, U.S. Government securities and
other securities, limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which each fund controls and which are
engaged in the same or similar trades or businesses. It is the Series' policy
to distribute to the shareholders (the insurance company separate accounts) all
of its net investment income and net realized capital gains during each fiscal
year.
Under the Code, the Asset Allocation Fund's and the International Fund's
taxable income for each year will be computed without regard to any net foreign
currency loss attributable to transactions after October 31, and any such net
foreign currency loss will be treated as arising on the first day of the
following taxable year.
The amount of any realized gain or loss of the Asset Allocation Fund and
the International Fund on closing out a currency contract will generally result
in a realized capital gain or loss for tax purposes. Under Code Section 1256,
currency contracts held by each fund at the end of each fiscal year will be
required to be "marked to market" for federal income tax purposes, that is,
deemed to have been sold at market value. Sixty percent of any net gain or
loss recognized on these deemed sales and 60% of any net realized gain or loss
from any actual sales, will be treated as long-term capital gain or loss, and
the remainder of gain or loss from deemed and actual sales will be treated as
short-term capital gain or loss. Code Section 988 may also apply to currency
contracts. Under Section 988, each foreign currency gain or loss is generally
computed separately and treated as ordinary income or loss. In the case of
overlap between Sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss. Each fund will attempt to
monitor Section 988 transactions to avoid an adverse tax impact.
Each fund, except for the Cash Management Fund, may be required to pay
withholding and other taxes imposed by foreign countries which would reduce
investment income. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes.
In addition to the asset diversification and other requirements for
qualification as a regulated investment company, the funds are subject to
another set of asset diversification requirements applicable to insurance
company separate accounts and their underlying funding vehicles. To satisfy
these diversification requirements, as of the end of each calendar quarter or
within 30 days thereafter, no more than 55% of the total assets of a fund may
be represented by any one investment, no more than 70% by any two investments,
no more than 80% by any three investments, and no more than 90% by any four
investments. For this purpose all securities of the same issuer are considered
a single investment, and each agency or instrumentality of the U.S. government
is treated as a separate issue of securities. The Series intends to comply
with these regulations. If a fund should fail to comply with these
regulations, Contracts invested in that fund will not be treated as annuity,
endowment or life insurance contracts under the Code.
See the applicable Contract prospectus for information regarding the
Federal income tax treatment of the Contracts and distributions to the separate
accounts.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the Series may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the Series, they are effected only when the
Investment Adviser believes that to do so is in the interest of the Series.
When such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The Series will not pay a mark-up for
research in principal transactions.
Brokerage commissions paid on portfolio transactions for the fiscal years
ended November 30, 1996, 1995 and 1994, respectively, amounted to the
following: Growth Fund $2,358,000, $1,928,000, and $1,643,000; International
Fund $3,813,000, $1,301,000, and $1,754,000; Growth-Income Fund $3,389,000,
$2,291,000, and $2,421,000; Asset Allocation Fund $557,000, $700,000, and
$585,000.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the Series, including
proceeds from the sale of shares of the Series and of securities in the Series'
portfolios, are held by State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, as Custodian. Non-U.S. securities may be
held by the Custodian in non-U.S. banks or securities depositories or foreign
branches of U.S. banks.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the Series' independent accountants since
March 18, 1991, providing audit services, preparation of tax returns and review
of certain documents to be filed with the Securities and Exchange Commission.
The financial statements included in this Statement of Additional Information
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. Prior to March 18, 1991, KPMG Peat Marwick, 725 South
Figueroa Street, Los Angeles, CA 90017, served as the Series' independent
public accountants. The selection of the Series' independent accountant is
reviewed and determined annually by the Board of Trustees.
REPORTS TO SHAREHOLDERS -- The Series' fiscal year ends November 30. Contract
owners are provided at least semi-annually with reports showing the investment
portfolio, financial statements and other information. The financial
statements included in the Annual Report are audited by the independent
accounting firm of Price Waterhouse LLP.
PERSONAL INVESTING POLICY -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY -- Under the laws of certain states,
including Massachusetts, where the Series was organized, and California, where
the Series' principal office is located, shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Series. However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
circumstances in which the Series itself would be unable to meet its
obligations. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Series and provides that
notice of the disclaimer may be given in each agreement, obligation, or
instrument which is entered into or executed by the Series or trustees. The
Declaration of Trust provides for indemnification out of Series property of any
shareholder personally liable for the obligations of the Series and also
provides for the Series to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or liability.
Under the Declaration of Trust, the Trustees or officers are not liable
for actions or failure to act; however, they are not protected from liability
by reason of their willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office. The
Series will provide indemnification to its Trustees and officers as authorized
by its By-Laws and by the 1940 Act and the rules and regulations thereunder.
REGISTRATION STATEMENT -- A registration statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
1940 Act, with respect to the Series. The prospectus and this Statement of
Additional Information do not contain all information set forth in the
registration statement, its amendments and exhibits, to which reference is made
for further information concerning the Series. Statements contained in the
prospectus and this Statement of Additional Information as to the content of
the Contracts issued through the separate accounts and other legal instruments
are summaries. For a complete statement of the terms thereof, reference is
made to the registration statements of the separate accounts and Contracts as
filed with the Securities and Exchange Commission.
AUTHORIZED SHARES -- The Series was organized as a Massachusetts Business Trust
which permits each fund of the Series to issue an unlimited number of shares of
beneficial interest of a single class.
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.'s top two rating designations for
commercial paper are described as follows: issuers rated Prime-1 have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earnings coverage
of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong capacity for repayment
of short-term promissory obligations. This will normally be evidenced by many
of the characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
Standard & Poor's Corporation's top two rating categories for commercial
paper are described as follows: A -- Issues assigned its highest rating are
regarded as having the greatest capacity for timely payment. Issues in this
category are delineated with numbers 1 or 2 to indicate the relative degree of
safety. A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics will be denoted with a plus (+)
sign designation. A-2 -- Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high
as for issues designated "A-1".
<TABLE>
<S> <C> <C> <C>
GROWTH FUND
Investment Portfolio November 30, 1996
- --------------------------------------------------------------------
STOCKS 89.58%
CASH &
EQUIVALENTS 10.42%
- --------------------------------------------------------------------
Percent
Of Net
Largest Individual Stocks Assets
- --------------------------------------------------------------------------------
Intel 3.78%
Walt Disney 3.39
America Online 2.90
Time Warner 2.66
Oracle 2.33
Viacom 2.15
Solectron 1.53
Adaptec 1.48
Xilinx 1.42
LSI Logic 1.42
Market Percent
Number of Value of Net
Stocks (common and preferred) Shares (000) Assets
- -------------------------------------------- ---------------------------------
Electronic Components- 18.07%
Intel Corp. 1,150,400 $145,957 3.78%
Adaptec, Inc./1/ 1,536,000 57,216 1.48
Xilinx,Inc./1/ 1,250,000 54,844 1.42
LSI Logic Corp./1/ 1,820,000 54,828 1.42
Analog Devices, Inc./1/ 1,700,000 54,613 1.42
Texas Instruments Inc. 570,000 36,337 .94
Linear Technology Corp. 715,000 33,694 .87
National Semiconductor Corp./1/ 1,265,000 30,993 .80
Maxim Integrated Products, Inc./1/ 600,000 27,825 .72
SCI Systems, Inc./1/ 500,263 26,389 .68
Bay Networks, Inc./1/ 937,000 25,065 .65
EMC Corp./1/ 600,000 19,350 .50
Altera Corp./1/ 250,000 18,875 .49
Quantum Corp./1/ 700,000 18,725 .49
ADC Telecommunications, Inc./1/ 500,000 18,125 .47
Newbridge Networks Corp. (Canada)/1/ 460,000 13,685 .35
Microchip Technology Inc./1/ 248,400 11,861 .31
Flextronics International Ltd. (Incorporated In Singapore)/1/ 300,000 10,500 .27
Western Digital Corp./1/ 156,300 8,401 .22
Seagate Technology/1/ 200,000 7,900 .20
Actel Corp./1/ 300,000 6,600 .17
Park Electrochemical Corp. 250,000 5,687 .15
Rogers Corp./1/ 190,800 5,247 .14
Motorola, Inc. 42,000 2,326 .06
ANTEC Corp./1/ 150,000 1,463 .04
Advanced Micro Devices, Inc./1/ 50,000 1,212 .03
Business & Public Services- 14.64%
America Online, Inc./1/ 3,170,000 112,139 2.90
United HealthCare Corp. 1,265,000 54,553 1.41
Oxford Health Plans, Inc./1/ 804,000 46,632 1.21
Columbia/HCA Healthcare Corp. 997,500 39,900 1.03
Electronic Data Systems Corp.(formerly General Motors Corp.,
Class E) 741,700 35,880 .93
Manpower Inc. 1,000,200 32,632 .85
Federal Express Corp./1/ 700,000 30,975 .80
WMX Technologies, Inc. 800,000 28,800 .75
CUC International Inc./1/ 1,061,250 27,990 .73
ADT Ltd./1/ 1,255,000 25,727 .67
PacifiCare Health Systems, Inc., Class B/1/ 265,000 21,995 .57
Avery Dennison Corp. 310,000 21,894 .57
Ecolab Inc. 429,000 16,677 .43
FHP International Corp./1/ 388,100 13,923 .36
USA Waste Services, Inc./1/ 400,000 12,900 .33
Loewen Group Inc. (Canada) 250,000 10,094 .26
Shared Medical Systems Corp. 200,000 9,950 .26
Ceridian Corp./1/ 150,000 7,219 .19
Apria Healthcare Group Inc./1/ 400,000 7,200 .19
Value Health, Inc./1/ 350,000 6,344 .16
Air & Water Technologies Corp., Class A/1/ 285,000 1,763 .04
Broadcasting & Publishing- 10.54%
Time Warner Inc. 2,519,325 102,662 2.66
Viacom Inc., Class B/1/ 2,200,000 83,050 2.15
News Corp. Ltd. (American Depositary Receipts) (Australia) 1,270,000 26,987
News Corp. Ltd. preferred shares (American .98
Depositary Receipts) 635,000 10,954
Tele-Communications, Inc., Series A, Liberty Media Group/1/ 1,459,050 36,476 .94
BHC Communications, Inc., Class A/1/ 286,189 29,227 .76
Tele-Communications, Inc., Series A, TCI Group/1/ 2,052,500 27,709 .72
New World Communications Group Inc., Class A/1/ 850,000 20,931 .54
U S WEST Media Group/1/ 1,000,000 19,125 .50
Gaylord Entertainment Co., Class A 820,500 17,538 .45
United International Holdings, Inc., Class A/1/ 685,000 9,333 .24
Comcast Corp., Class A, special stock 500,000 8,375 .22
Cablevision Systems Corp., Class A/1/ 240,000 7,230 .19
Jones Intercable, Inc., Class A/1/ 370,000 3,978 .10
Adelphia Communications Corp., Class A/1/ 350,000 2,319 .06
Marvel Entertainment Group, Inc./1/ 363,800 1,000 .03
Data Processing & Reproduction- 10.44%
Oracle Corp./1/ 1,837,500 90,038 2.33
Solectron Corp./1/ 1,009,000 59,027 1.53
Silicon Graphics, Inc./1/ 1,920,000 38,160 .99
Adobe Systems Inc. 920,000 36,340 .94
Digital Equipment Corp./1/ 750,000 27,563 .71
3Com Corp./1/ 350,000 26,294 .68
Sybase, Inc./1/ 1,300,000 22,913 .59
Dell Computer Corp,/1/ 200,000 20,325 .53
Intuit Inc./1/ 554,200 19,813 .51
Autodesk, Inc. 600,000 16,800 .44
Sequent Computer Systems, Inc./1/ 850,000 14,344 .37
Structural Dynamics Research Corp./1/ 475,000 9,203 .24
Mentor Graphics Corp./1/ 800,000 7,800 .20
Tandem Computers Inc./1/ 440,000 5,995 .16
Danka Business Systems PLC (American Depository Receipts)
(United Kingdom) 125,000 5,250 .14
CompuServe Corp./1/ 150,000 1,575 .04
Data General Corp./1/ 100,000 1,462 .04
Leisure & Tourism- 6.45%
Walt Disney Co. 1,775,000 130,906 3.39
King World Productions, Inc./1/ 650,000 24,781 .64
Host Marriott Corp./1/ 1,550,000 23,637 .61
Marriott International, Inc. 400,000 22,300 .58
Carnival Corp., Class A 650,000 20,556 .53
Harrah's Entertainment, Inc./1/ 950,000 16,863 .44
Trump Hotels & Casino Resorts, Inc./1/ 650,000 9,181 .24
Luby's Cafeterias, Inc. 40,000 880 .02
Merchandising- 4.04%
Circuit City Stores, Inc. 1,250,000 41,719 1.08
Barnes & Noble, Inc./1/ 825,000 25,781 .67
Wal-Mart Stores, Inc. 950,000 24,225 .63
Consolidated Stores Corp./1/ 572,900 21,197 .55
Home Shopping Network, Inc./1/ 1,700,000 19,125 .50
Staples, Inc./1/ 711,562 14,053 .36
Spiegel, Inc., Class A/1/ 726,600 6,267 .16
Limited Inc. 150,000 2,700 .07
Amway Asia Pacific Ltd. (Multinational) 24,600 987 .02
Health & Personal Care- 3.35%
Guidant Corp. 700,000 37,012 .96
Omnicare, Inc. 879,602 26,828 .69
Genetics Institute, Inc./1/ 260,000 17,680 .46
Forest Laboratories, Inc./1/ 380,000 14,725 .38
Kimberly-Clark Corp. 100,000 9,775 .25
Nellcor Puritan Bennett Inc./1/ 300,000 6,225 .16
SEQUUS Pharmaceuticals, Inc./1/ 380,808 5,474
SEQUUS Pharmaceuticals, Inc., warrants, expire 1998/1//2/ 40,416 263 .15
Johnson & Johnson 97,600 5,185 .13
Paragon Trade Brands, Inc./1/ 105,000 2,914 .08
Alpha-Beta Technology, Inc./1/ 200,000 1,850 .05
Pharmacia & Upjohn, Inc. 36,250 1,400 .04
Banking- 2.41%
Banc One Corp. 447,700 21,322 .55
Bank of Boston Corp. 290,840 20,322 .53
Commerce Bancshares, Inc. 428,596 19,287 .50
Norwest Corp. 250,000 11,688 .30
Charter One Financial, Inc. 262,500 11,419 .30
Northern Trust Corp. 125,000 9,078 .23
Chemicals- 2.19%
Valspar Corp. 690,000 39,589 1.03
Great Lakes Chemical Corp. 325,000 17,428 .45
Mycogen Corp./1/ 800,000 13,400 .35
Air Products and Chemicals, Inc. 125,000 8,688 .22
Engelhard Corp. 284,400 5,546 .14
Insurance- 2.19%
EXEL Ltd. (Incorporated in Bermuda) 810,000 30,679 .79
Transatlantic Holdings, Inc. 270,000 21,499 .56
Trenwick Group Inc. 266,800 13,006 .34
CNA Financial Corp./1/ 80,000 8,600 .22
Everest Reinsurance Holdings, Inc. 200,000 5,625 .15
NAC Re Corp. 135,000 4,927 .13
Electrical & Electronics- 1.90%
Telefonaktiebolaget LM Ericsson, Class B (American
Depositary Receipts) (Sweden) 1,184,500 36,571 .95
Nokia Corp., Class A (American Depositary Receipts) (Finland) 360,000 20,205 .52
General Instrument Corp./1/ 661,700 14,640 .38
Lucent Technologies Inc. 35,000 1,794 .05
Telecommunications- 1.79%
MCI Communications Corp. 1,420,000 43,310 1.12
AirTouch Communications/1/ 850,000 21,781 .56
United States Cellular Corp./1/ 144,000 4,032 .11
Recreation & Other Consumer Products- 1.78%
Mattel, Inc. 1,596,288 49,285 1.28
Duracell International Inc. 150,000 9,994 .26
Hasbro, Inc. 185,000 7,608 .20
Electronic Arts/1/ 54,400 1,748 .04
Transportation: Airlines- 1.73%
Southwest Airlines Co. 1,750,300 43,320 1.12
AMR Corp./1/ 195,000 17,794 .46
Delta Air Lines, Inc. 75,000 5,644 .15
Energy Equipment- 1.40%
Schlumberger Ltd. (Netherlands Antilles) 325,000 33,800 .87
Reading & Bates Corp./1/ 700,000 20,300 .53
Miscellaneous Materials & Commodities- 1.15%
Pioneer Hi-Bred International, Inc. 635,000 44,291 1.15
Electronic Instruments- 1.10%
Applied Materials, Inc./1/ 650,000 24,781 .64
KLA Instruments Corp./1/ 500,000 17,750 .46
Energy Sources- 0.78%
Murphy Oil Corp. 298,000 15,198 .39
Enterprise Oil PLC (United Kingdom) 1,500,000 15,003 .39
Beverages & Tobacco - 0.65%
Philip Morris Companies Inc. 185,000 19,078 .49
PepsiCo, Inc. 200,000 5,975 .16
Financial Services- 0.64%
Federal National Mortgage Assn. 600,000 24,750 .64
Multi-Industry- 0.32%
U.S. Industries, Inc./1/ 420,000 12,390 .32
Utilities: Electric & Gas- 0.30%
Columbia Gas System, Inc. 178,200 11,516 .30
Construction & Housing- 0.08%
Stone & Webster, Inc. 90,000 2,936 .08
Miscellaneous
Other stocks in initial period of acquisition 63,280 1.64
- -
TOTAL STOCKS (cost: $2,472,575,000 ) 3,458,067 89.58
---------------------
Principal
Amount
Short-Term Securities (000)
- -----------------------------------------------------------------------------------------------------
Corporate Short-Term Notes- 8.17%
National Rural Utilities Cooperative Finance Corp. $54,500 54,124 1.40
5.30%-5.31% due 12/13/96-1/28/97
Walt Disney Co. 5.26%-5.28% due 1/7-1/8/97 37,100 36,890 .96
Lucent Technologies Inc. 5.24%-5.28% due 12/19/96-1/17/97 35,400 35,215 .91
Weyerhaeuser Co. 5.28%-5.29% due 1/22-1/29/97 32,300 32,033 .83
Warner-Lambert Co. 5.28% due 3/4/97 30,000 29,585 .77
General Electric Capital Corp. 5.25%-5.34% due 12/18/96-1/29/97 18,700 18,602 .48
Kellogg Co. 5.23% due 12/9/96 18,200 18,179 .47
American Express Credit Corp. 5.32% due 1/6/97 18,200 18,100 .47
J.C. Penney Funding Corp. 5.24%-5.25% due 12/17-12/20/96 17,500 17,455 .45
Beneficial Corp. 5.25%-5.30% due 12/2/96-1/16/97 17,150 17,079 .44
H.J. Heinz Co. 5.23%-5.28% due 12/10-12/18/96 16,300 16,260 .42
IBM Credit Corp. 5.30% due 1/23/97 15,900 15,773 .41
Sara Lee Corp. 5.26% due 12/24/96 6,300 6,278 .16
Certificates of Deposit- 1.04%
Morgan Guaranty Trust Co. of New York 5.29% due 12/12/96 40,000 40,000 1.04
Federal Agency Discount Notes- 0.80%
Federal Home Loan Mortgage Corp. 5.215% 12/11-12/16/96 24,200 24,151 .63
Federal National Mortgage Assn. 5.00%-5.45% 12/10/96 6,665 6,656 .17
---------------------
TOTAL SHORT-TERM SECURITIES (cost: $386,387,000) 386,380 10.01
---------------------
3,844,447 99.59
TOTAL INVESTMENT SECURITIES (cost: $2,858,962,000)
Excess of cash and receivables over payables 15,902 .41
---------------------
NET ASSETS $3,860,349 100.00%
=====================
/1/ Non-income-producing securities.
/2/ Valued under procedures established by the Board of Trustees.
See Notes to Financial Statements
- --------------------------------------------------------------------
Stocks appearing in the portfolio
since May 31, 1996
- --------------------------------------------------------------------
3Com
Adaptec
Advanced Micro Devices
Altera
Amway Asia Pacific
Bank of Boston
Columbia Gas System
CompuServe
Danka Business Systems
Enterprise Oil
Everest Reinsurance Holdings
KLA Instruments
Limited
Mycogen
Norwest
Quantum
Shared Medical Systems
Solectron
Western Digital
Woolworth
- --------------------------------------------------------------------
Stocks eliminated from the portfolio
since May 31, 1996
- --------------------------------------------------------------------
Bausch & Lomb
BayBanks
Centennial Cellular
Cerner
Circus Circus Enterprises
Cirrus Logic
Compuware
Coram Healthcare
Electronic Arts
Fruit of the Loom
Greyhound Lines
H&R Block
Host Marriott Services
Huntington Bancshares
Infinity Broadcasting
Informix
International Business Machines
LIN Television
Loctite
Mercantile Bancorporation
Mercury General
Michaels Stores
Mirage Resorts
Mohawk Industries
New York Times
Nintendo
Noble Affiliates
Nucor
Phillips-Van Heusen
Pitney Bowes
Rayonier
Revlon
Southern Pacific Rail
Tambrands
Telephone and Data Systems
TIG Holdings
Toys "R" Us
Turner Broadcasting System
</TABLE>
<TABLE>
<S> <C> <C> <C>
AMERICAN VARIABLE INSURANCE SERIES INTERNATIONAL FUND
Investment Portfolio, November 30, 1996
(Unaudited)
Where the Fund's Assets Are Invested
Percent of Percent of
Net Assets Net Assets
-------------- -------------
EUROPE 51.5%
United Kingdom 11.4%
Sweden 8.2
France 5.6
Germany 5.5
Netherlands 4.0
Italy 4.0
Spain 3.7
Switzerland 3.4
Norway 2.4
Finland 1.7
Other Europe 1.6
ASIA/PACIFIC 25.3%
Japan 9.1
Australia 7.4
Hong Kong 4.3
South Korea 1.5
New Zealand 1.4
Other Asia/Pacific 1.6
THE AMERICAS 12.6%
Canada 5.5
Brazil 3.3
Mexico 3.2
Other Americas 0.6
OTHER COUNTRIES 2.1%
CASH AND EQUIVALENTS 8.5%
TOTAL 100.0%
Largest Individual Equity Holdings
Astra 2.27%
Orkla 2.12
Telecomunicacoes Brasileiras 1.95
Australia and New Zealand Banking Group 1.72
Telefonica de Espana 1.70
Mannesmann 1.67
Volvo 1.47
Coca-Cola Amatil 1.39
ASEA/BBC Brown Boveri 1.39
United News & Media 1.35
Market Percent
Number of Value of Net
Stocks (common and preferred) Shares (000) Assets
- --------------------------------------------------------------------- -------------------------------------
TELECOMMUNICATIONS - 11.53%
Telecomunicacoes Brasileiras SA, preferred nominative
(American Depositary Receipts) (Brazil) 609,722 $46,186 1.95%
Telefonica de Espana, SA (Spain) 1,360,000 29,802
Telefonica de Espana, SA (American Depositary Receipts) 158,000 10,428 1.70
Telecom Italia Mobile SpA (Italy) 11,961,000 28,001
Telecom Italia Mobile SpA, savings shares 1,242,200 1,653 1.25
Telecom Corp. of New Zealand Ltd. (New Zealand)/1/ 4,956,800 26,119
Telecom Corp. of New Zealand Ltd. (American Depositary Receipts) 11,700 984 1.14
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 882,000 26,791 1.13
Hong Kong Telecommunications Ltd. (Hong Kong) 14,333,663 24,843 1.05
STET - Societa Finanziaria Telefonica p.a. (Italy) 3,300,000 14,050
STET - Societa Finanziaria Telefonica p.a., nonconvertible .97
savings shares 2,900,000 8,921
Telefonica del Peru SA (American Depositary Receipts) (Peru) 766,700 14,855 .63
Telecom Italia SpA (Italy) 6,075,200 14,210
Telecom Italia SpA, savings shares 276,000 508 .62
Koninklijke PTT Nederland NV (Netherlands) 230,000 8,610 .36
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. (Indonesia) 1,600,000 4,420
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. .23
(American Depositary Receipts) 40,000 1,105
Korea Mobile Telecommunications Corp. (South Korea) 4,730 4,782 .20
Philippine Long Distance Telephone Co. (Global Depositary Receipts)
(Philippines) 80,000 4,400 .19
SmarTone Telecommunications Holdings Ltd. (Hong Kong -
Incorporated in Bermuda) 1,300,000 2,640 .11
BROADCASTING & PUBLISHING - 8.85%
United News & Media plc (United Kingdom) 2,816,000 32,023 1.35
Pathe (France) 73,000 17,055 .72
Television Broadcasts Ltd. (Hong Kong) 4,092,000 15,719 .66
NV Verenigd Bezit VNU (Netherlands) 770,000 15,707 .66
CANAL+ (France) 67,132 15,401 .65
News Corp. Ltd. (American Depositary Receipts) (Australia) 362,000 7,693
News Corp. Ltd., preferred shares (American Depositary Receipts) 181,000 3,122 .61
News Corp. Ltd., preferred shares (United Kingdom) 777,162 3,415
Wolters Kluwer NV (Netherlands) 108,118 14,129 .60
Seven Network Ltd. (Australia) 3,600,000 11,717 .49
Nippon Television Network Corp. (Japan) 39,000 11,716 .49
Independent Newspapers, PLC (Ireland) 2,007,020 10,293 .43
Mediaset SPA (Italy)/2/ 1,967,000 9,411 .40
Grupo Televisa, SA (American Depositary Receipts) (Mexico)/2/ 261,000 7,112 .30
SOFTBANK CORP. (Japan) 94,600 7,063 .30
TeleWest Communications PLC (American Depositary Receipts)
(United Kingdom)/2/ 351,000 7,020 .30
Pearson PLC (United Kingdom) 540,000 6,672 .28
Elsevier NV (Netherlands) 340,000 5,793 .24
Multicanal Participacoes SA (American Depositary Receipts) (Brazil)/2/ 346,000 4,887 .21
Sing Tao Holdings Ltd. (Hong Kong - Incorporated in Bermuda) 6,121,230 2,494 .11
AUDIOFINA (Luxembourg) 26,780 1,195 .05
BANKING - 6.45%
Australia and New Zealand Banking Group Ltd. (Australia) 6,196,216 40,688 1.72
Bank of Nova Scotia (Canada) 874,200 30,259 1.28
HSBC Holdings plc (United Kingdom) 1,000,000 20,824 .88
Banco de Santander, SA (Spain) 287,800 15,589 .66
Westpac Banking Corp. (Australia) 1,900,000 11,363 .48
ABN AMRO Holding NV (Netherlands) 125,000 8,091 .34
Allied Irish Banks, PLC (Ireland) 1,160,253 7,636 .32
Safra Republic Holdings SA (Luxembourg) 42,000 5,775 .24
Hanil Bank (South Korea) 804,980 5,323 .22
Korea First Bank (South Korea)/2/ 850,000 4,923 .21
Grupo Financiero Banamex Accival, SA de CV, Class B (Mexico)/2/ 1,130,397 2,231
Grupo Financiero Banamex Accival, SA de CV, Class L (Mexico)/2/ 92,127 167 .10
AUTOMOBILES - 6.02%
Volvo AB, Class B (Sweden) 1,580,000 34,737 1.47
Bayerische Motoren Werke AG (Germany) 48,000 31,126 1.31
Daimler-Benz AG (Germany)/2/ 320,000 20,907 .88
Toyota Motor Corp. (Japan) 680,000 18,577 .78
Suzuki Motor Corp. (Japan) 1,700,000 17,771 .75
Peugeot SA (France) 110,000 13,524 .57
Hyundai Motor Co. (Global Depositary Receipts) (South Korea) 628,440 6,128 .26
MULTI-INDUSTRY - 5.77%
Orkla AS, Class A (Norway) 755,000 50,297 2.12
Hutchison Whampoa Ltd. (Hong Kong) 3,500,000 27,048 1.14
Industriforvaltnings AB Kinnevik, Class B (Sweden) 305,000 8,547
Industriforvaltnings AB Kinnevik, Class A 101,600 2,756 .48
Benpres Holdings Corp. (Global Depositary Receipts ) (Philippines)/2/ 1,400,000 10,290 .43
Anglovaal LTD, Class N (South Africa) 270,000 8,229 .35
Lend Lease Corp. Ltd. (Australia) 443,522 8,228 .35
Incentive AB, Class A (Sweden) 120,000 8,013 .34
Groupe Bruxelles Lambert SA (Belgium) 57,000 7,230 .31
Brierley Investments Ltd. (New Zealand) 5,985,000 5,362
Brierley Investments Ltd., 9.00% convertible preferred 722,000 626 .25
HEALTH & PERSONAL CARE - 4.92%
AB Astra, Class A (Sweden) 1,120,000 53,755 2.27
Ciba-Geigy Ltd. (Switzerland) 24,540 30,378 1.28
Glaxo Wellcome plc (American Depositary Receipts)
(United Kingdom) 500,000 16,438 .69
Hoya Corp. (Japan) 300,000 11,253 .47
Banyu Pharmaceutical Co., Ltd. (Japan) 250,000 3,206 .14
SmithKline Beecham PLC (American Depositary Receipts) (United Kingdom) 25,000 1,722 .07
ELECTRICAL & ELECTRONICS - 4.66%
ASEA AB, Class A (Sweden) 130,000 15,056
ASEA AB, Class B 69,300 7,974 1.39
BBC Brown Boveri Ltd, Class A (Switzerland) 7,822 9,791
ELECTRICAL & ELECTRONICS (continued)
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 804,600 24,825
Telefonaktiebolaget LM Ericsson, Class B, 4.25% convertible preferred 14,500 62 1.05
Siemens AG (Germany) 400,000 19,278 .81
Nokia Corp., Class A (Finland) 180,000 10,009
Nokia Corp., Class K 150,000 8,309 .77
Northern Telecom Ltd. (Canada) 230,000 15,123 .64
FOOD & HOUSEHOLD PRODUCTS - 4.15%
Nestle SA (Switzerland) 20,936 22,736 .96
Groupe Danone (France) 151,171 22,262 .94
Reckitt & Colman PLC (United Kingdom) 1,687,437 19,884 .84
Cadbury Schweppes PLC (United Kingdom) 2,277,584 19,583 .83
PT Indofood Sukses Makmur (Indonesia) 4,017,000 8,397 .35
Dalgety PLC (United Kingdom) 1,000,000 5,589 .23
BUSINESS & PUBLIC SERVICES - 3.03%
Reuters Holdings PLC (United Kingdom) 2,632,000 31,966 1.35
Rentokil Group PLC (United Kingdom) 2,610,000 19,041 .80
Brambles Industries Ltd. (Australia) 700,000 12,246 .52
NTT Data Communications Systems Corp. (Japan) 160 4,750 .20
Autopistas del Mare Nostrum, SA Concesionaria del Estado (Spain) 250,000 3,848 .16
MACHINERY & ENGINEERING - 2.95%
Mannesmann AG (Germany) 95,000 39,637 1.67
Valmet Corp. (Finland) 600,000 9,886 .42
Svedala Industri AB (Sweden) 530,000 9,085 .38
Kawasaki Heavy Industries, Ltd. (Japan) 1,400,000 6,420 .27
VA Technologie AG (Austria) 31,764 4,998 .21
BEVERAGES & TOBACCO - 2.94%
Coca-Cola Amatil Ltd. (Australia) 2,908,736 32,851 1.39
LVMH Moet Hennessy Louis Vuitton (France) 48,000 12,170 .51
Panamerican Beverages, Inc., Class A (Mexico) 190,000 8,883 .37
San Miguel Corp., Class B (Philippines) 1,870,000 7,470 .32
Swedish Match AB (Sweden) 1,580,000 5,181 .22
South African Breweries Ltd. (South Africa) 121,928 3,075 .13
UTILITIES: ELECTRIC & GAS - 2.85%
Hongkong Electric Holdings Ltd. (Hong Kong) 5,875,000 18,845 .80
Centrais Eletricas Brasileiras SA, Class B, preferred nominative
(American Depositary Receipts) (Brazil) 948,000 15,524 .65
Iberdrola, SA (Spain) 1,275,000 14,708 .62
Korea Electric Power Corp. (South Korea) 188,000 6,011
Korea Electric Power Corp. (American Depositary Receipts) 200,000 3,525 .40
Scottish Power PLC (United Kingdom) 661,200 3,757 .16
Consolidated Electric Power Asia Ltd. (Hong Kong -
Incorporated in Bermuda) 1,181,400 2,781 .12
CESP-Companhia Energetica de Sao Paulo, preferred nominative
(American Depositary Receipts) (Brazil)/2/ 204,096 1,939
CESP-Companhia Energetica de Sao Paulo, ordinary nominative 9,745,000 377 .10
ELECTRONIC COMPONENTS - 2.53%
Rohm Co., Ltd. (Japan) 330,000 20,292 .86
Murata Manufacturing Co., Ltd. (Japan) 420,000 14,352 .61
Kyocera Corp. (Japan) 199,000 12,796 .54
ASM Lithography Holding NV (Netherlands)/2/ 240,000 10,556 .44
Hirose Electric Co., Ltd. (Japan) 30,000 1,818 .08
METALS: NONFERROUS - 2.42%
Western Mining Corp. Holdings Ltd. (Australia) 2,390,451 15,172 .64
Inco Ltd. (Canada) 420,000 14,648 .62
Alcan Aluminium Ltd. (Canada) 310,000 10,928 .46
Noranda Inc. (Canada) 400,000 9,457 .40
Teck Corp., Class B (Canada) 300,000 7,093 .30
MERCHANDISING - 1.87%
Carrefour, SA (France) 20,000 12,355 .52
Tesco PLC (United Kingdom) 2,064,980 11,820 .50
Cifra, SA de CV, Class C (Mexico)/2/ 6,000,000 8,294 .35
Woolworths Ltd. (Australia) 2,533,042 6,307 .27
Amway Japan Ltd. (American Depositary Receipts) (Japan) 300,000 5,588 .23
INSURANCE - 1.82%
Royal Sun Alliance (United Kingdom) 2,978,861 22,458 .95
Internationale Nederlanden Groep NV, warrants, expire 2001
(Netherlands)/2/ 1,500,000 10,266 .43
Corporacion Mapfre, CIR, SA (Spain) 109,798 5,788 .25
National Mutual Asia Ltd. (Hong Kong) 5,000,000 4,559 .19
APPLIANCES & HOUSEHOLD DURABLES - 1.74%
Philips Electronics NV (Netherlands) 464,000 18,742 .79
Sony Corp. (Japan) 224,000 14,344 .61
AB Electrolux, Class B (Sweden) 137,900 8,088 .34
RECREATION & OTHER CONSUMER PRODUCTS - 1.54%
EMI Group PLC (United Kingdom) (formerly THORN EMI) 468,712 10,814 .45
Fuji Photo Film Co., Ltd. (Japan) 300,000 9,408 .40
Sony Music Entertainment Inc. (Japan) 215,000 8,839 .37
Square Co. Ltd. (Japan) 102,000 4,928 .21
PolyGram NV (New York Registered Shares) (Netherlands) 52,500 2,553 .11
BUILDING MATERIALS & COMPONENTS - 1.43%
Cemex, SA de CV, ordinary participation certificates (Mexico) 4,562,700 15,219
Cemex, SA de CV, Class A 2,321,450 7,773 .97
Holderbank Financiere Glaris Ltd. (Switzerland) 15,000 10,833 .46
CHEMICALS - 1.38%
AGA AB, Class B (Sweden) 800,000 12,222
AGA AB, Class A 220,000 3,410 .66
L'Air Liquide (France) 83,159 13,265 .56
Hoechst AG (Germany) 88,000 3,852 .16
MISCELLANEOUS MATERIALS & COMMODITIES - 1.31%
SGL Carbon AG (Germany) 89,600 11,014 .47
De Beers Consolidated Mines Ltd. (South Africa) 345,000 10,533 .44
English China Clays PLC (United Kingdom) 3,168,750 9,535 .40
ENERGY SOURCES - 1.01%
TOTAL, Class B (France) 156,372 12,508
TOTAL, Class B, preferred nominative (American Depositary Receipts) 75,000 3,028 .66
ENI SpA (American Depositary Receipts) (Italy) 140,000 7,350 .31
"Shell" Transport and Trading Co., PLC (United Kingdom) 10,000 998 .04
GOLD MINES - 0.53%
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) (Ghana) 500,600 7,196
Ashanti Goldfields Co. Ltd. (Australia) 386,088 5,454 .53
Normandy Mining Ltd. (Australia) 7,400,000 9,935 .42
AEROSPACE & MILITARY TECHNOLOGY - 0.60%
Bombardier Inc., Class B (Canada) 793,900 14,122 .60
INDUSTRIAL COMPONENTS - 0.52%
Compagnie Generale des Etablissements Michelin, Class B (France) 220,000 11,286
Compagnie Generale des Etablissements Michelin, .50
2.50% convertible preferred 10,000 574
Orbital Engine Corp. Ltd. (Australia)/2/ 611,040 452 .02
TRANSPORTATION: RAIL & ROAD - 0.50%
TNT Ltd. (Australia)/2/ 5,248,007 10,334
TNT Ltd., 8.00% convertible preferred 783,255 1,555 .50
LEISURE & TOURISM - 0.45%
Mandarin Oriental International Ltd. (Singapore) 6,911,218 10,574 .45
DATA PROCESSING & REPRODUCTION - 0.42%
Olivetti SpA (Italy)/2/ 28,300,000 10,066 .42
TRANSPORTATION: SHIPPING - 0.40%
Stolt-Nielsen SA, Class B (American Depositary Receipts)
(Multinational) 327,000 5,723 .24
Nippon Yusen KK (Japan) 790,000 3,782 .16
METALS: STEEL - 0.36%
Kawasaki Steel Corp. (Japan) 2,700,000 8,467 .36
FOREST PRODUCTS & PAPER - 0.33%
UPM-Kymmene Corp. (Finland)/2/ 385,000 7,712 .33
FINANCIAL SERVICES - 0.19%
ACOM CO., LTD. (Japan) 100,000 4,392 .19
REAL ESTATE - 0.15%
Mitsui Fudosan Co., Ltd. (Japan) 300,000 3,558 .15
MISCELLANEOUS
Other stocks in initial period of acquisition 118,420 5.00
------------------------
TOTAL STOCKS (cost: $1,785,725,000) 2,157,219 91.04
------------------------
Principal
Amount
Convertible Debentures (000)
- --------------------------------------------------------------------- ------------- -----------------------
ELECTRIC & GAS - 0.21%
Korea Electric Power Corp 5.00% 2001 KW5,000 4,925 .21
FOREST PRODUCTS & PAPER - 0.18%
UPM-Kymmene Corp. 8.25% 2043 FM17,000 4,183 .18
ELECTRONIC COMPONENTS - 0.08%
Acer Peripherals Inc. 1.25% 2006 $2000 2,010 .08
AUTOMOBILES - 0.01%
Daimler-Benz AG 4.125% 2003 DM463 348 .01
----------------------
TOTAL CONVERTIBLE DEBENTURES (cost: $11,595,000) 11,466 .48
----------------------
TOTAL EQUITY-TYPE SECURITIES (cost: $1,797,320,000) 2,168,685 91.52
----------------------
Principal Market Percent
Amount Value of Net
Short-Term Securities (000) (000) Assets
- --------------------------------------------------------------------- ------------- ----------------------
CORPORATE SHORT-TERM NOTES - 6.90%
Daimler-Benz North America Corp. 5.34%-5.42% due 12/11-12/17/96 $20,400 20,355 .86
Panasonic Finance Inc. 5.28% due 2/7/97/1/ 20,000 19,795 .84
Siemens Corp. 5.24%-5.31% due 12/5/96-1/31/97 19,800 19,685 .83
SmithKline Beecham Corp. 5.23%-5.25% due 12/2-12/3/96 19,600 19,594 .83
Toyota Motor Corp. 5.28%-5.29% due 12/3-12/4/96 16,200 16,192 .68
France Telecom 5.30% due 2/10-2/25/97 13,990 13,823 .58
Halifax Building Society 5.40% due 1/3/97 13,300 13,232 .56
Canada Bills 5.23%-5.27% due 12/9-12/12/96 13,200 13,181 .56
Sony Capital Corp. 5.31% due 1/13-1/15/97/1/ 8,100 8,046 .34
Abbey National North America 5.31% due 12/30/96 7,000 6,969 .29
Svenska Handelsbanken Inc. 5.43% due 12/19/96 5,000 4,986 .21
Dresdner U.S. Finance Inc. 5.30% due 1/6/97 4,000 3,978 .17
ABN AMRO North America Finance Inc. 5.50% due 12/3/96 3,600 3,598 .15
CERTIFICATES OF DEPOSIT - 0.21%
National Westminster Bank PLC 5.53% due 12/12/96 5,000 5,000 .21
-----------------------
TOTAL SHORT-TERM SECURITIES (cost: $168,440,000) 168,434 7.11
-----------------------
TOTAL INVESTMENT SECURITIES (cost: $1,965,760,000) 2,337,119 98.63
Excess of cash and receivables over payables 32,509 1.37
-----------------------
NET ASSETS 2,369,628 100.00%
======== ========
/1/ Purchased in a private placement transaction; resale to the public
may require registration or sale only to qualified institutional buyers.
/2/ Non-income-producing securities.
See Notes to Financial Statements
Equity-type securities appearing in the portfolio
since May 31, 1996
Acer Peripherals
Anglovaal
ASM Lithography Holding
Benpres Holdings
De Beers Consolidated Mines
Hirose Electric
Hoechst
Hong Kong Telecommunications
Hyundai Motor
Kawasaki Steel
Korea Electric Power
Korea Mobile Telecommunications
Mediaset
Mitsui Fudosan
Multicanal Participacoes
Normandy Mining
Pathe
SGL Carbon
"Shell" Transport and Trading
SmarTone Telecommunications Holdings
SmithKline Beecham
Sony Music Entertainment
Square
Svedala Industri
Telefonica del Peru
Equity-type securities eliminated from the portfolio
since May 31, 1996
Air New Zealand
Atlas Copco
Autopistas, Concesionaria Espanola
Banco Popular Espanol
Bank of Montreal
BARCO nv
British Airways
British Sky Broadcasting Group
Canadian National Railway
Chargeurs
China Light & Power
Compagnie de Saint-Gobain
Deutsche Bank
Engen
Hazlewood Foods
Irish Life
Ito-Yokado
ITOCHU
John Fairfax Holdings
Munchener Ruckversicherungs-Gesellschaft
NetCom Systems
News International
Nippon Telegraph and Telephone
Pohang Iron & Steel
Preussag
Rank Organisation
Securicor Group
Sidel
Sun Hung Kai Properties
Svenskt Stal
Swire Pacific
Tele Danmark
Telefonica de Sao Paulo
Uni-Charm
Vodafone Group
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series
GROWTH-INCOME FUND
Investment Portfolio - November 30, 1996
Stocks 84.96%
Cash & Equivalents 15.04%
Percent
of Net
Largest Individual Stocks Assets
AT&T 1.62%
Aluminum Co. of America 1.43
Walt Disney 1.39
Atlantic Richfield 1.31
Potash Corp. of Saskatchewan 1.19
Seagram 1.17
WMX Technologies 1.12
Schering-Plough 1.09
Bowater 1.07
Philip Morris 1.05
Number Market Percent
of Value of Net
Stocks (common and preferred) Shares (000) Assets
Energy Sources - 8.79%
Atlantic Richfield Co. 495,000 68,867 1.31%
Phillips Petroleum Co. 1,075,000 48,509 .93
Diamond Shamrock, Inc. 1,460,000 47,450 .90
Amoco Corp. 600,000 46,575 .89
Pennzoil Co. 750,000 42,188 .80
Valero Energy Corp. 1,275,000 38,250 .73
Unocal Corp. 835,000 34,026 .65
Exxon Corp. 300,000 28,387 .54
Texaco Inc. 175,000 17,347 .33
Royal Dutch Petroleum Co. (New York Registered Shares)
(Netherlands) 100,000 16,988 .32
Chevron Corp. 250,000 16,750 .32
TOTAL, Class B (American Depositary Receipts) (France) 409,455 16,532 .32
Union Pacific Resources Group, Inc. 419,281 12,526 .24
Ashland Inc. 200,000 9,600 .18
Societe Nationale Elf Aquitaine (American Depositary Receipts) .00
(France) 200,000 8,775 .17
Murphy Oil Corp. 163,200 8,323 .16
Health & Personal Care - 6.82%
Schering-Plough Corp. 800,000 57,000 1.09
Pfizer Inc 600,000 53,775 1.02
Merck & Co., Inc. 575,000 47,725 .91
American Home Products Corp. 660,000 42,405 .81
Warner-Lambert Co. 520,000 37,180 .71
Kimberly-Clark Corp. 370,000 36,167 .69
Abbott Laboratories 350,000 19,513 .37
Johnson & Johnson 300,000 15,938 .30
AB Astra, Class A (American Depositary Receipts) (Sweden) 300,000 14,475 .28
Eli Lilly and Co. 180,000 13,770 .26
Bristol-Myers Squibb Co. 100,000 11,375 .22
Tambrands Inc. 200,000 8,550 .16
Banking - 6.44%
Norwest Corp. 800,000 37,400 .71
First Union Corp. 365,000 27,877 .53
PNC Bank Corp. 700,000 27,650 .53
BankAmerica Corp. 260,000 26,780 .51
Banc One Corp. 551,375 26,259 .50
KeyCorp 450,000 23,569 .45
SunTrust Banks, Inc. 450,000 22,837 .43
Chase Manhattan Corp. 200,000 18,900 .36
National City Corp. 400,000 18,550 .35
Fleet Financial Group, Inc. 300,000 16,613 .32
First Chicago NBD Corp. 250,000 14,687 .28
Northern Trust Corp. 200,000 14,525 .28
Bank of New York Co., Inc. 400,000 14,350 .27
Wells Fargo & Co. 50,000 14,231 .27
CoreStates Financial Corp 250,000 13,469 .26
Citicorp 100,000 10,925 .21
J.P. Morgan & Co. Inc. 100,000 9,438 .18
Business & Public Services - 5.89%
WMX Technologies, Inc. 1,630,000 58,680 1.12
Browning-Ferris Industries, Inc. 1,450,000 38,969 .74
Cognizant Corp./1/ 960,000 33,120 .63
Electronic Data Systems Corp.
(formerly General Motors Corp., Class E) 649,500 31,419 .60
Alexander & Baldwin, Inc. 1,020,000 27,030 .51
Dun & Bradstreet Corp. 960,000 21,720 .41
Omnicom Group Inc. 340,000 17,340 .33
Federal Express Corp./1/ 380,000 16,815 .32
Manpower Inc. 450,000 14,681 .28
PacifiCare Health Systems, Inc., Class A/1/ 160,000 12,640 .24
Humana Inc./1/ 600,000 11,325 .22
Pitney Bowes Inc. 175,000 10,325 .20
Ecolab Inc. 250,000 9,719 .18
A.C. Nielsen Corp./1/ 320,000 5,560 .11
Broadcasting & Publishing - 4.11%
Viacom Inc., Class B/1/ 1,235,000 46,621 .89
Time Warner Inc. 942,000 38,386 .73
News Corp. Ltd. (American Depositary Receipts) (Australia) 1,100,000 23,375
News Corp. Ltd., preferred shares (American Depositary
Receipts) 400,000 6,900 .58
New York Times Co., Class A 645,000 24,107 .46
E.W. Scripps Co., Class A 630,000 21,892 .42
U S WEST Media Group/1/ 775,000 14,822 .28
Gannett Co., Inc. 170,000 13,345 .25
Comcast Corp., Class A, special stock 729,706 12,223 .23
Tele-Communications, Inc., Series A, Liberty
Media Group/1/ 393,750 9,844 .19
Chris-Craft Industries, Inc./1/ 101,821 4,162 .08
Telecommunications- 4.06%
AT&T Corp. 2,170,000 85,172 1.62
Ameritech Corp. 804,100 47,341 .90
U S WEST Communications, Inc. 850,000 26,563 .51
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 575,000 17,466 .33
MCI Communications Corp. 539,800 16,464 .31
AirTouch Communications/1/ 449,621 11,522 .22
SBC Communications Inc. 100,000 5,262 .10
ALLTEL Corp. 108,200 3,449 .07
Merchandising - 3.74%
Circuit City Stores, Inc. 1,418,000 47,326 .90
Wal-Mart Stores, Inc. 1,650,000 42,075 .80
Limited Inc. 1,294,900 23,308 .45
Giant Food Inc., Class A 450,000 15,187 .29
Federated Department Stores/1/ 400,000 13,650 .26
J.C. Penney Co., Inc. 250,000 13,437 .26
Mercantile Stores Co., Inc. 250,000 12,563 .24
May Department Stores Co. 250,000 12,188 .23
Sears, Roebuck and Co. 200,000 9,950 .19
Gap, Inc. 200,000 6,425 .12
Chemicals - 3.71%
Mallinckrodt, Inc. 799,600 35,182 .67
Praxair, Inc. 600,000 29,175 .56
Monsanto Co. 673,000 26,752 .51
E.I. du Pont de Nemours and Co. 275,000 25,919 .49
Dow Chemical Co. 180,000 15,075 .29
Great Lakes Chemical Corp. 250,000 13,406 .26
Imperial Chemical Industries PLC (American
Depositary Receipts) (United Kingdom) 200,000 10,350 .20
Eastman Chemical Co. 175,000 9,997 .19
PPG Industries, Inc. 140,000 8,575 .16
Lyondell Petrochemical Co. 340,000 7,650 .15
Air Products and Chemicals, Inc. 100,000 6,950 .13
Engelhard Corp. 284,400 5,546 .10
Forest Products & Paper - 3.50%
Bowater Inc. 1,495,000 56,249 1.07
Union Camp Corp. 750,000 36,844 .70
Weyerhaeuser Co. 450,000 20,700 .40
Rayonier Inc. 525,000 20,344 .39
International Paper Co. 450,000 19,125 .36
Georgia-Pacific Corp. 150,000 10,912 .21
James River Corp. of Virginia 300,000 9,600 .18
Westvaco Corp. 187,500 5,297 .10
Louisiana-Pacific Corp. 200,000 4,525 .09
Insurance - 3.15%
SAFECO Corp. 1,078,800 44,905 .86
General Re Corp. 156,000 26,325 .50
Allstate Corp. 400,000 24,100 .46
American General Corp. 420,000 17,272 .33
Liberty Corp. 350,000 13,344 .25
Aetna Inc. 181,100 13,062 .25
AMBAC Inc. 129,900 8,898 .17
St. Paul Companies, Inc. 120,000 7,065 .13
Arthur J. Gallagher & Co. 188,100 5,784 .11
American International Group, Inc. 41,250 4,744 .09
Machinery & Engineering - 3.08%
Caterpillar Inc. 625,000 49,453 .94
Parker Hannifin Corp. 1,000,000 40,625 .77
Deere & Co. 716,600 31,978 .61
Ingersoll-Rand Co. 350,000 16,275 .31
Crompton & Knowles Corp. 700,000 12,863 .25
Greenfield Capital Trust, 6.00% convertible preferred/2/ 118,000 5,428 .10
Case Corp. 100,000 5,250 .10
Beverages & Tobacco - 2.84%
Seagram Co. Ltd. (Canada) 1,500,000 61,313 1.17
Philip Morris Companies Inc. 535,000 55,172 1.05
PepsiCo, Inc. 870,000 25,991 .49
Anheuser-Busch Companies, Inc. 160,000 6,780 .13
Food & Household Products - 2.71%
Unilever NV (New York Registered Shares) (Netherlands) 250,000 43,281 .82
McCormick & Co. 950,000 23,394 .45
Archer Daniels Midland Co. 850,000 18,700 .36
CPC International Inc. 200,000 16,650 .32
H.J. Heinz Co. 375,000 14,203 .27
General Mills, Inc. 210,200 13,348 .25
ConAgra, Inc. 240,000 12,750 .24
Aerospace & Military Technology - 2.15%
United Technologies Corp. 145,000 20,336 .39
General Motors Corp., Class H 370,000 20,165 .38
Boeing Co. 200,000 19,875 .38
Sundstrand Corp. 500,000 19,500 .37
Raytheon Co. 350,000 17,894 .34
Litton Industries, Inc./1/ 321,800 15,044 .29
Miscellaneous Materials & Commodities - 2.05%
Potash Corp. of Saskatchewan Inc. (Canada) 830,000 62,561 1.19
Crown Cork & Seal Co., Inc. 450,000 23,850 .46
Pioneer Hi-Bred International, Inc. 300,000 20,925 .40
Metals: Nonferrous - 1.78%
Aluminum Co. of America 1,180,000 75,078 1.43
Inco Ltd. (Canada) 280,000 9,765 .18
Alumax Inc./1/ 160,000 5,180 .10
Phelps Dodge Corp. 50,000 3,631 .07
Recreation & Other Consumer Products - 1.74%
Polaroid Corp. 950,000 40,494 .77
Eastman Kodak Co. 220,000 17,820 .34
Stanley Works 400,000 11,800 .22
American Greetings Corp., Class A 400,000 11,300 .22
Duracell International Inc. 150,000 9,994 .19
Financial Services - 1.74%
Household International, Inc. 300,000 28,425 .54
Beneficial Corp. 400,000 24,850 .47
Finova Group Inc. 180,000 11,880 .23
ADVANTA Corp., Class A 200,000 8,900 .17
American Express Co. 170,000 8,882 .17
Capital One Financial Corp. 150,000 5,419 .10
Associates First Capital Corp., Class A 60,000 2,903 .06
Transportation: Rail & Road - 1.68%
Conrail, Inc. 352,122 34,244 .65
Union Pacific Corp. 548,250 31,935 .61
Norfolk Southern Corp. 245,000 22,050 .42
Leisure & Tourism - 1.67%
Walt Disney Co. 989,932 73,007 1.39
Host Marriott Corp./1/ 600,000 9,150 .17
Marriott International, Inc. 100,000 5,575 .11
Data Processing & Reproduction - 1.50%
Silicon Graphics, Inc./1/ 1,300,000 25,837 .49
Xerox Corp. 510,000 25,054 .48
Adobe Systems Inc. 400,000 15,800 .30
International Business Machines Corp. 75,000 11,953 .23
Electronic Components - 1.41%
Texas Instruments Inc. 500,000 31,875 .61
Intel Corp. 200,000 25,375 .48
Linear Technology Corp. 350,000 16,494 .32
Multi-Industry - 1.36%
Tenneco Inc. 555,000 28,305 .54
Textron Inc. 170,000 16,214 .31
AlliedSignal Inc. 200,000 14,650 .28
Harsco Corp. 100,000 6,975 .13
Minnesota Mining and Manufacturing Co. 60,000 5,025 .10
Energy Equipment - 1.21%
Western Atlas Inc./1/ 296,800 20,924 .40
Schlumberger Ltd. (Netherlands Antilles) 170,000 17,680 .34
Baker Hughes Inc. 300,000 10,988 .21
Cooper Industries, Inc. 179,802 7,462 .14
Dresser Industries, Inc. 200,000 6,550 .12
Electrical & Electronics - 0.93%
Nokia Corp., Class A (American Depositary Receipts) (Finland)
(Finland) 600,000 33,675 .64
Lucent Technologies Inc. 297,136 15,228 .29
Telefonaktiebolaget LM Ericsson, Class B
(American Depositary Receipts) (Sweden) 350,000 10,806 .21
Industrial Components - 1.02%
Goodyear Tire & Rubber Co. 595,000 28,857 .55
Rockwell International Corp. 200,000 12,850 .24
Dana Corp. 231,800 7,215 .14
ITT Industries, Inc. 200,000 4,675 .09
Utilities: Electric & Gas - 0.95%
Union Electric Co. 500,000 19,875 .38
Consolidated Edison Co. of New York, Inc. 450,000 13,050 .25
Pacific Gas and Electric Co. 500,000 12,062 .23
Edison International 250,000 4,969 .09
Automobiles - 0.95%
General Motors Corp. 550,000 31,694 .61
Ford Motor Co., Class A 550,000 18,012 .34
Transportation: Airlines - 0.80%
AMR Corp./1/ 412,500 37,641 .72
Delta Air Lines, Inc. 60,000 4,515 .08
Appliances & Household Durables - 0.71%
Corning Inc. 670,000 27,135 .52
Philips Electronics NV (New York Registered Shares)
(Netherlands) 250,000 10,125 .19
Textiles & Apparel - 0.30%
VF Corp. 230,000 15,611 .30
Electronic Instruments
Imation Corp./1/ 6,000 182 .00
Miscellaneous
Other stocks in initial period of acquisition 103,038 1.96
- -
TOTAL STOCKS (cost: $3,221,455,000) 4,459,328 84.96
- -
Short-Term Securities
Corporate Short-Term Notes - 12.05%
H.J. Heinz Co. 5.23%-5.30% due 12/9/96-1/8/97 68,900 68,709 1.31
IBM Credit Corp. 5.30% due 1/15-1/30/97 56,200 55,750 1.06
Coca-Cola Co. 5.25% due 12/19-12/26/96 55,000 54,822 1.04
Lucent Technologies Inc. 5.24%-5.29% due 12/3/96-2/5/97 53,200 52,973 1.01
Walt Disney Co. 5.26%-5.28% due 1/7-2/14/97 50,200 49,779 .95
Southwestern Bell Capital Corp. 5.24%-5.30%
due 12/3/96-1/22/97/2/ 43,000 42,846 .82
General Electric Capital Corp. 5.25%-5.34%
due 12/18/96-1/29/97 42,800 42,486 .81
National Rural Utilities Cooperative Finance Corp. 5.28%-5.31%
due 1/6-2/18/97 41,200 40,839 .78
Weyerhaeuser Co. 5.28%-5.30% due 1/13-1/24/97 39,700 39,415 .75
Hershey Foods Corp. 5.24%-5.26% due 12/2/96-1/14/97 34,600 34,466 .66
Kellogg Co. 5.23%-5.30% due 12/4/96-1/2/97 27,000 26,949 .51
American Express Credit Corp. 5.32% due 1/6/97 26,800 26,653 .51
Monsanto Co. 5.25% due 12/13/96/2/ 25,200 25,152 .48
Sara Lee Corp. 5.28% due 12/27/96 20,000 19,921 .38
Beneficial Corp. 5.30% due 1/16/97 16,000 15,889 .30
Gannett Co., Inc. 5.25% due 12/5/96/2/ 13,600 13,590 .26
J.C. Penney Funding Corp. 5.24%-5.25% due 12/10-12/20/96 12,200 12,176 .23
United Parcel Service of America Inc. 5.40% due 12/11/96 10,000 9,984 .19
Federal Agency Discount Notes - 1.52%
Federal Home Loan Mortgage Corp. 5.215% due 12/11-12/16/96 79,715 79,560 1.52
Certificates of Deposit - 0.95%
Morgan Guaranty Trust Co. of New York 5.29% due 12/12/96 50,000 50,000 .95
- -
TOTAL SHORT-TERM SECURITIES (cost: $761,970,000) 761,959 14.52
- -
TOTAL INVESTMENT SECURITIES (cost: $3,983,425,000) 5,221,287 99.48
Excess of cash and receivables
over payables 27,353 .52
- -
NET ASSETS 5,248,640 100.00%
=======================
/1/ Non-income-producing securities.
/2/ Purchased in a private placement transaction; resale to the public
may require registration or sale only to qualified institutional buyers.
See Notes to Financial Statements
Stocks appearing in the portfolio
since May 31, 1996
AB Astra
A.C. Nielsen
Aetna
Air Products and Chemicals
Ashland
Associates First Capital
Circuit City Stores
Cognizant
Comcast
Crown Cork & Seal
Dresser Industries
Federated Department Stores
Finova Group
Humana
Imation
ITT Industries
Limited
Linear Technology
Lucent Technologies
Lyondell Petrochemical
McCormick & Co.
PacifiCare Health Systems
Pennzoil
Philips Electronics
Pioneer Hi-Bred International
Raytheon
Societe Nationale Elf Aquitaine
Telefonaktiebolaget LM Ericsson
Union Pacific
Stocks eliminated from the portfolio
since May 31, 1996
360/0/ Communications
Bankers Trust New York
Bausch & Lomb
Betz Laboratories
Boatmen's Bancshares
Cleveland-Cliffs
Colgate-Palmolive
Cox Communications
Digital Equipment
General Electric
General Public Utilities
Johnson Controls
LADD Furniture
McKesson
Novell
Oracle
Pacific Telesis Group
Southern Pacific Rail
TIG Holdings
Times Mirror
Tosco
Tribune
TRINOVA
TRW
Walgreen
</TABLE>
<TABLE>
<S> <C> <C> <C>
Percent
Asset Allocation Fund of Net
Investment Portfolio November 30, 1996 Assets
- ---------------------------------------------------- ----------
Equity-Type Securities 62.13%
Cash & Equivalents 14.30
U.S. Government Bonds 12.05
Corporate Bonds 11.31
Non-U.S. Government Bonds .21
LARGEST INDIVIDUAL EQUITIES
Atlantic Richfield 1.95%
Warner-Lambert 1.88
Pfizer 1.81
Rockwell International 1.74
DuPont 1.65
Tenneco 1.56
NationsBank 1.41
Rentokil Group 1.39
J.C. Penney 1.37
PepsiCo 1.36
Market Percent
Number of Value of Net
Stocks (common and preferred) Shares (000) Assets
- ---------------------------------------------------- ---------- ---------- ----------
Energy Sources- 7.21%
Atlantic Richfield Co. 160,000 22,260 1.95%
Royal Dutch Petroleum Co. (New York Registered
Shares) (Netherlands) 90,000 15,289 1.34
Chevron Corp. 225,000 15,075 1.32
Phillips Petroleum Co. 200,000 9,025 .79
Kerr-McGee Corp. 100,000 7,000 .61
Diamond Shamrock, Inc. 175,000 5,687 .50
Amoco Corp. 60,000 4,658 .41
Unocal Corp. 80,000 3,260 .29
Health & Personal Care- 7.06%
Warner-Lambert Co. 300,000 21,450 1.88
Pfizer Inc 230,000 20,614 1.81
SmithKline Beecham PLC (American Depositary
Receipts) (United Kingdom) 150,000 10,331 .90
Bristol-Myers Squibb Co. 70,000 7,962 .70
Tambrands Inc. 170,000 7,268 .64
American Home Products Corp. 110,000 7,068 .62
Kimberly-Clark Corp. 60,000 5,865 .51
Banking- 7.03%
NationsBank Corp. 155,000 16,062 1.41
Citicorp 140,000 15,295 1.34
First Union Corp. 94,500 7,217 .63
Jefferson BankShares, Inc. 238,700 6,997 .61
CoreStates Financial Corp 125,000 6,734 .59
Fleet Financial Group, Inc. 120,000 6,645 .58
H.F. Ahmanson & Co. 200,000 6,600 .58
PNC Bank Corp. 135,000 5,333 .47
BankAmerica Corp. 50,000 5,150 .45
KeyCorp 80,000 4,190 .37
Merchandising- 5.91%
J.C. Penney Co., Inc. 290,000 15,587 1.37
Wal-Mart Stores, Inc. 525,000 13,388 1.17
Walgreen Co. 300,000 12,525 1.10
Limited Inc. 550,000 9,900 .87
May Department Stores Co. 125,000 6,094 .53
Circuit City Stores, Inc. 130,000 4,339 .38
Sears, Roebuck and Co. 60,000 2,985 .26
Mercantile Stores Co., Inc. 52,400 2,633 .23
Chemicals- 4.92%
E.I. du Pont de Nemours and Co. 200,000 18,850 1.65
Air Products and Chemicals, Inc. 195,000 13,552 1.19
PPG Industries, Inc. 150,000 9,187 .81
Mallinckrodt Inc. 150,000 6,600 .58
Armor All Products Corp. 250,000 4,719 .41
Great Lakes Chemical Corp. 60,000 3,218 .28
Industrial Components- 2.74%
Rockwell International Corp. 310,000 19,917 1.74
Echlin Inc. 200,000 6,725 .59
Dana Corp. 150,000 4,669 .41
Food & Household Products- 2.37%
McCormick & Co. 400,000 9,850 .86
General Mills, Inc. 100,000 6,350 .56
H.J. Heinz Co. 150,000 5,681 .50
Archer Daniels Midland Co. 236,250 5,198 .45
Insurance- 2.25%
American General Corp. 176,700 7,267 .64
CIGNA Corp. 50,000 7,069 .62
SAFECO Corp. 150,000 6,244 .55
General Re Corp. 30,000 5,062 .44
Beverages & Tobacco- 2.19%
PepsiCo, Inc. 520,000 15,535 1.36
Seagram Co. Ltd. (Canada) 230,000 9,401 .83
Business & Public Services- 2.13%
Rentokil Group PLC (American Depositary Receipts)
(United Kingdom) 214,000 15,836 1.39
Dun & Bradstreet Corp. 200,000 4,525 .39
Alexander & Baldwin, Inc. 150,000 3,975 .35
Multi-Industry- 2.06%
Tenneco Inc. 350,000 17,850 1.56
Textron Inc. 60,000 5,722 .50
Recreation & Other Consumer Products- 1.96%
American Greetings Corp., Class A 300,000 8,475 .74
Duracell International Inc. 120,000 7,995 .70
Stanley Works 200,000 5,900 .52
Forest Products & Paper- 1.71%
Georgia-Pacific Corp. 100,000 7,275 .64
Union Camp Corp. 100,000 4,912 .43
Weyerhaeuser Co. 100,000 4,600 .40
Rayonier Inc. 70,000 2,713 .24
Transportation: Rail & Road- 1.56%
Union Pacific Corp. 230,000 13,397 1.17
Conrail, Inc. 45,929 4,467 .39
Aerospace & Military Technology- 1.48%
General Motors Corp., Class H 200,000 10,900 .96
Boeing Co. 60,000 5,963 .52
Electrical & Electronics- 1.30%
Nokia Corp., Class A (American Depositary
Receipts) (Finland) 170,000 9,541 .84
Hubbell Inc., Class B 126,000 5,292 .46
Machinery & Engineering- 1.19%
Deere & Co. 180,000 8,032 .71
Crompton & Knowles Corp. 300,000 5,513 .48
Leisure & Tourism- 1.11%
Carnival Corp., Class A 400,000 12,650 1.11
Data Processing & Reproduction- 0.87%
Adobe Systems Inc. 130,000 5,135 .45
International Business Machines Corp. 30,000 4,781 .42
Telecommunications- 0.80%
Pacific Telesis Group 150,000 5,550 .49
AT&T Corp. 90,000 3,533 .31
Metals: Nonferrous- 0.78%
Aluminum Co. of America 140,000 8,907 .78
Miscellaneous Materials & Commodities- 0.53%
Potash Corp. of Saskatchewan Inc. (Canada) 80,000 6,030 .53
Automobiles- 0.50%
General Motors Corp. 100,000 5,762 .50
Broadcasting & Publishing- 0.44%
Time Warner Inc., preferred equity redemption
cumulative stock 55,000 2,200
Time Warner Inc., 10.25% cumulative exchangeable
preferred, Series K/1/ 2,597 2,811 .44
----------- -----------
TOTAL STOCKS (cost: $504,469,000) 685,822 60.10
----------- -----------
Principal
Amount
Convertible Debentures (000)
- ---------------------------------------------------- ---------- ---------- ----------
Industrials & Services- 0.90%
Turner Broadcasting System, Inc. 0% 2007/1/ 10,000 4,850 .43
Hanson America Inc. 2.39% 2001/1/ 5,000 4,375 .38
Time Warner Inc. 0% 2012 2,500 944 .08
Discovery Zone 0% 2013 6,000 75 .01
Telecommunications- 0.25%
U S WEST Communications, Inc. 0% 2011 8,000 2,890 .25
---------- ----------
TOTAL CONVERTIBLE DEBENTURES (cost: $14,695,000) 13,134 1.15
---------- ----------
MISCELLANEOUS
Other equity-type securities in initial period of
acquisition (cost:$9,725,000) 9,986 .88
---------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost: $528,889,000) 708,942 62.13
---------- ----------
Bonds & Notes
- -----------------------------------------------
Industrials- 9.06%
Oryx Energy Co.:
9.50% 1999 3,000 3,195
8.375% 2004 2,500 2,641
10.00% 1999 1,000 1,070 .61
Time Warner Inc. 9.125% 2013 4,000 4,430 .39
Inco Ltd.:
9.60% 2022 2,000 2,240
9.875% 2019 1,500 1,621 .34
News America Holdings Inc.:
10.125% 2012 2,000 2,369
7.43% 2026 1,250 1,303 .32
Mobil Corp. 8.00% 2032 3,000 3,182 .28
Allegiance Corp. 7.00% 2026 3,000 3,105 .27
General Motors Corp. 8.80% 2021 2,500 2,948 .26
USX Corp. 9.125% 2013 2,500 2,896 .25
Dayton Hudson Corp. 8.50% 2022 2,500 2,666 .23
Philips Electronics NV 7.20% 2026 2,500 2,597 .23
360/0/ Communications Co. 7.50% 2006 2,500 2,530 .22
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 2,500 2,525 .22
OXYMAR 7.50% 2016/1/ 2,500 2,450 .21
Acme Metals Inc. 12.50% 2002 2,000 2,140 .19
Container Corp. of America 9.75% 2003 2,000 2,085 .18
CenCall Communications Corp. 0%/10.125% 2004/2/ 3,000 1,995 .18
TCI Communications, Inc. 8.75% 2015 2,000 1,967 .17
Tele-Communications, Inc. 9.25% 2023 2,000 1,957 .17
Unisys Corp. 11.75% 2004 1,750 1,829 .16
Comtel Brasileira Ltda. 10.75% 2004/1/ 1,500 1,556 .14
Loehmann's, Inc. 11.875% 2003 1,000 1,080 .09
Omnipoint Corp. 11.625% 2006/1/ 1,000 1,052 .09
Kaiser Aluminum Corp. 12.75% 2003 750 791 .07
PriCellular Wireless Corp. 10.75% 2004/1/ 750 780 .07
Woolworth Corp., Series A, 7.00% 2002 750 753 .07
Federal Agency Obligations-Mortgage
Pass-Throughs /4/- 3.65%
Government National Mortgage Assn.:
8.00% 2020-2026 20,729 21,438
7.50% 2026 9,900 10,042
8.50% 2022-2026 5,695 5,980
10.00% 2019 1,384 1,525 3.42
Federal National Mortgage Assn.:
7.00% 2009 1,812 1,826
9.00% 2019 759 809 .23
Financial- 3.48%
Capital One Bank:
7.35% 2000 7,500 7,699
7.15% 2006 2,000 2,051 .85
General Motors Acceptance Corp.:
8.875% 2010 3,235 3,865
9.625% 2001 2,000 2,275 .54
Ocwen Financial Corp. 11.875% 2003 2,850 3,028 .26
Aetna Services, Inc. 6.97% 2036 2,500 2,593 .23
Terra Nova (Bermuda) Holdings Ltd. 10.75% 2005 2,000 2,265 .20
First Union Corp. 6.82%/7.57% 2026/2/ 2,000 2,059 .18
Chevy Chase Bank, F.S.B. 9.25% 2008 2,000 2,020 .18
American Re Corp. 10.875% 2004 1,500 1,623 .14
B.F. Saul Real Estate Investment Trust 11.625% 2002 1,500 1,620 .14
First Nationwide Holdings Inc. 10.625% 2003/1/ 1,500 1,605 .14
Security Capital Industrial Trust 7.95% 2008 1,500 1,587 .14
Shopping Center Associates 6.75% 2004/1/ 1,500 1,488 .13
Irvine Co. 7.46% 2006/1/ /3/ 1,500 1,466 .13
Metropolitan Life Insurance Co. 7.45% 2023/1/ 1,500 1,438 .12
National Westminster Bancorp Inc. 9.45% 2001 1,000 1,124 .10
Collateralized Mortgage Obligations
(Privately Originated) /4/- 2.05%
Continental Airlines, Inc.:
1996-A, 6.94% 2013/1/ 4,000 4,045
1996-2C, 10.22% 2014/1/ 2,250 2,693 .59
United Air Lines, Inc.:
1996-A2, 7.87% 2019 2,500 2,512
1995-A1, 9.02% 2012 1,417 1,573 .36
Delta Air Lines, Inc.:
1993-A2, 10.50% 2016 2,000 2,481
1992-A2, 9.20% 2014 1,000 1,128 .31
Airplanes Pass Through Trust, Class C, 8.15% 2019 3,000 3,157 .28
Jet Equipment Trust, Series 1995-B, 7.83% 2015/1/ 2,431 2,575 .22
USAir, Inc., 1996-B, 7.50% 2008/1/ 1,948 2,026 .18
Federal Express Corp. 7.53% 2006 1,238 1,279 .11
Federal Agency Obligations-Other- 1.42%
Federal National Mortgage Assn.:
6.53% 2006 10,000 9,742
7.52% 2004 4,000 4,090 1.21
Federal Home Loan Mortgage Corp. 6.555% 2006 2,400 2,358 .21
Non-U.S. Government Obligations- 0.21%
Israel (State of) 6.375% 2005 2,500 2,437 .21
Transportation- 0.15%
AMR Corp. 9.75% 2000 1,000 1,090 .10
United Air Lines, Inc. 9.00% 2003 500 549 .05
Asset-Backed Obligations 4- 0.13%
Green Tree Financial Corp., Series 1995-A, Class NIM,
7.25% 2005 1,429 1,427 .13
Electric & Gas Utilities- 0.09%
Columbia Gas System Inc., Series E, 7.32% 2010 1,000 1,017 .09
U.S. Treasury Obligations- 6.98%
10.375% 2012 17,000 22,453
7.25% 2004 13,000 13,985
7.125% 2000 8,000 8,325
8.75% 1997 6,000 6,166
8.75% 2008 5,000 5,738
8.25% 2005 5,000 5,335
9.25% 1998 5,000 5,295
8.75% 2000 3,000 3,295
8.875% 1999 2,500 2,666
11.125% 2003 2,000 2,563
10.375% 2009 2,000 2,528
11.75% 2010 500 679
10.75% 2003 500 627 6.98
---------- ----------
TOTAL BONDS & NOTES (cost: $264,266,000) 269,013 23.57
---------- ----------
Short-Term Securities
- ------------------------------------------------
Corporate Short-Term Notes- 12.66%
J.C. Penney Funding Corp. 5.23%-5.31% due 12/12/96-1/30/97 25,300 25,218 2.21
American Express Credit Corp. 5.25%-5.26% due 12/5-12/18/96 20,000 19,967 1.75
Warner-Lambert Co. 5.28% due 3/5/97/1/ 20,000 19,721 1.73
Lucent Technologies Inc. 5.24%-5.26% due 12/5/96-1/6/97 13,500 13,467 1.18
PACCAR Financial Corp. 5.24% due 12/19/96 12,000 11,967 1.05
Walt Disney Co. 5.28% due 1/7/97 10,700 10,640 .93
Hershey Foods Corp. 5.24% due 12/2/96 10,400 10,397 .91
Sara Lee Corp. 5.28% due 12/27/96 10,000 9,961 .87
IBM Credit Corp. 5.30% due 1/15-1/30/97 9,900 9,820 .86
General Electric Capital Corp. 5.34% due 1/29/97 7,700 7,631 .67
National Rural Utilities Cooperative Finance Corp.
5.30% due 12/13/96 5,700 5,689 .50
Federal Agency Discount Notes- 1.14%
Federal National Mortgage Assn. 5.45% due 12/10/96 13,000 12,981 1.14
--------- ---------
TOTAL SHORT-TERM SECURITIES (cost: $157,461,000) 157,459 13.80
--------- ---------
TOTAL INVESTMENT SECURITIES (cost: $950,616,000) 1,135,414 99.50
Excess of cash and receivables over payables 5,677 .50
--------- ---------
NET ASSETS 1,141,091 100.00%
========= =========
/1/Purchased in a private placement transaction; resale to the public may require registration or sale
only to qualified institutional buyers.
/2/Represents a step bond; coupon rate will increase at a later date.
/3/Valued under procedures established by the Board of Trustees.
/4/ Pass-through securities backed by a pool of mortgages or other loans on which principal payments
are periodically made. Therefore, the effective maturity is shorter than the stated maturity.
See Notes to Financial Statements
Equity-type securities appearing in the portfolio
since May 31, 1996
Carnival
Discovery Zone
General Re
Limited
Mallinckrodt
Potash Corp of Saskatchewan
PPG Industries
Rentokil Group
Equity-type securities eliminated from the portfolio
since May 31, 1996
AMBAC
Anheuser-Busch
Baker Hughes
Bausch & Lomb
H&R Block
Colgate-Palmolive
Comerica
Cooper Cameron
CSX
Eastman Chemical
Eastman Kodak
Gap
General Public Utilities
Greenfield Capital Trust
Hancock Fabrics
Long Island Lighting
Louisiana-Pacific
Minnesota Mining and Manufacturing
Norfolk Southern
Ralston Purina
Texaco
</TABLE>
<TABLE>
<S> <C> <C> <C>
AMERICAN VARIABLE INSURANCE SERIES
BOND FUND
INVESTMENT PORTFOLIO - NOVEMBER 30, 1996
U.S. GOVERNMENT BONDS 33.10%
CORPORATE BONDS 35.87
CASH & EQUIVALENTS 23.76
EQUITY-TYPE SECURITIES 4.21
NON-U.S. GOVERNMENT BONDS 3.06
Principal Market Percent
Amount Value Of Net
Bonds & Notes (000) (000) Assets
Diversified Media, Cable Television &
Telecommunications - 4.88%
MFS Communications Co., Inc.:
0%/9.375% 2004/1/ $800 $692
0%/8.875% 2006/1/ 750 544 1.60%
Comtel Brasileira Ltda. 10.75% 2004/2/ 1,000 1,038 1.34
Brooks Fiber Properties, Inc. 0%/10.875% 2006/1/ 700 459 .59
AT&T Corp. 8.625% 2031 250 272 .35
Time Warner Inc. 7.95% 2000 250 260 .34
Muzak LP/Capital 10.00% 2003 250 256 .33
Viacom International Inc. 9.125% 1999 250 256 .33
Transportation - 4.21%
USAir, Inc. 9.625% 2001 1,000 985 1.27
Airplanes Pass Through Trust:
Class C, 8.15% 2019/3/ 500 526
Class D, 10.875% 2019/3/ 275 307 1.08
Jet Equipment Trust:
Series 1995-A, 11.44% 2014/2/ /3/ 300 362
Series 1994-A, 11.79% 2013/2/ /3/ 250 308 .86
Continental Airlines, Inc., Series 1996-C, 9.50% 2015/3/ 250 287 .37
Teekay Shipping Corp. 8.32% 2008 250 247 .32
United Air Lines, Inc. 10.67% 2004 200 241 .31
Financial Services - 3.88%
Ocwen Financial Corp. 11.875% 2003 1,150 1,222 1.58%
Capital One Bank 7.15% 2006 500 513 .66
Aames Financial Corp. 9.125% 2003 500 510 .66
Ford Motor Credit Co. 6.85% 2000 500 510 .66
General Motors Acceptance Corp. 6.625% 2005 250 249 .32
Manufacturing & Materials - 3.75%
Kaiser Aluminum & Chemical Corp.:
10.875% 2006/2/ 500 516
9.875% 2002 250 252 .99
Knoll Group, Inc. 10.875% 2006 500 545 .70
Printpack Inc. 10.625% 2006/2/ 500 520 .67
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 300 303 .39
U.S. Can Corp. 10.125% 2006/2/ 250 261 .34
Northern Telecom Ltd. 6.875% 2002 250 257 .33
AMTROL Inc. 10.625% 2006/2/ 250 253 .33
Energy & Related Companies - 3.30%
Oryx Energy Co. 8.375% 2004 500 528 .68
J. Ray McDermott, SA 9.375% 2006 500 525 .68
Mariner Energy, Inc. 10.50% 2006/2/ 500 519 .67
Chesapeake Energy Corp. 9.125% 2006 500 517 .67
Falcon Drilling Co., Inc., Series B, 8.875% 2003 250 253 .33
McDermott Inc. 9.375% 2002 200 211 .27
Cellular, Paging & Wireless Communications - 2.57%
PriCellular Wireless Corp. 10.75% 2004/2/ 500 520 .67
NEXTEL Communications, Inc. 0%/11.50% 2003/1/ 500 376 .49
360/0/ Communications Co. 7.50% 2006 325 329 .43
Sprint Spectrum LP, Sprint Spectrum Finance Corp. 500 325 .42
0%/12.50% 2006/1/
Omnipoint Corp. 11.625% 2006/2/ 250 263 .34
Cellular Communications International, Inc.
Units, 0% 2000 250 170 .22
Banking & Thrifts - 2.37%
First Nationwide Holdings Inc. 10.625% 2003/2/ 1,000 1,070 1.38
Chevy Chase Bank, FSB 9.25% 2008 500 505 .66
First Union Corp. 6.82%/7.57% 2026/1/ 250 257 .33
Health & Personal Care - 1.92%
Integrated Health Services, Inc. 10.75% 2004 500 529 .68
Allegiance Corp. 7.00% 2026 500 517 .67
Paracelsus Healthcare Corp. 10.00% 2006 500 443 .57
Collateralized Mortgage Obligations (Privately
Originated) /3/ - 1.86%
Wells Fargo Capital Markets APT Financing Trust 6.56% 2005/2/ 1,000 1,007 1.30
Merrill Lynch Mortgage Investors, Inc., Series 1995-C2,
Class A, 7.452% 2021 /4/ 427 436 .56
Broadcasting & Publishing - 1.73%
Young Broadcasting Inc. 10.125% 2005 500 502 .65
Grupo Televisa, S.A. 0%/13.25% 2008/1/ 500 329 .42
News America Holdings Inc. 7.43% 2026 250 261 .34
Chancellor Broadcasting Co. 9.375% 2004 250 249 .32
Business & Public Services - 1.03%
Allied Waste North America, Inc. 10.25% 2006/2/ 500 510 .66
Federal Express Corp. 9.875% 2002 250 288 .37
Merchandising - 0.92%
Loehmann's, Inc. 11.875% 2003 500 540 .70
Woolworth Corp., Series A, 7.00% 2002 170 171 .22
Asset- Backed Obligations/3/ - 0.85%
Green Tree Financial Corp., Series 1995-A, Class NIM, 7.25% 2005 357 357 .46
EQCC Home Equity Loan Asset-Backed Certificates, Series 1996-A
Class A-2, 6.95% 2012 300 304 .39
Insurance - 0.70%
Terra Nova (Bermuda) Holdings Ltd. 10.75% 2005 250 283 .37
Aetna Services, Inc. 6.97% 2036 250 259 .33
Cable & Telephone in the United Kingdom - 0.57%
Comcast UK Cable Partners Ltd. 0%/11.20% 2007/1/ 650 444 .57
Machinery & Engineering - 0.38%
Deere & Co. 8.95% 2019 250 294 .38
Data Processing & Reproduction - 0.34%
Unisys Corp. 11.75% 2004 250 261 .34
Electrical & Electronics - 0.34%
Philips Electronics NV 7.20% 2026 250 260 .34
Independent Power Producers - 0.27%
California Energy Co., Inc. 9.875% 2003 200 209 .27
Non-U.S. Governments & Governmental
Authorities - 3.06%
Canadian Government 4.599% 2021 /4/ C$1000 833 1.08
Argentina (Republic of):
Eurobond Series L, 6.625% 2005 /4/ $319 275
8.375% 2003 250 233 .66
Ireland (Republic of) 8.00% 2006 IRE250 461 .59
Brazil (Federal Republic of) Capitalization Bond 8.00% 2014 /5/ $275 202 .26
Deutschland Republic 8.00% 2002 DM250 185 .24
South Africa (Republic of) 13.00% 2010 ZAR1,000 180 .23
Federal Agency Obligations-Mortgage Pass-Throughs/3/ - 11.17%
Government National Mortgage Assn.:
5.00% 2026 $2,181 2,156
6.50% 2025-2026 1,310 1,273 7.72
9.50% 2021 955 1,040
10.00% 2019 923 1,016
7.00% 2026 498 495
Federal National Mortgage Assn.:
10.00% 2018-2025 1,392 1,542 3.45
9.00% 2021 781 833
6.50% 2026 303 294
Federal Agency Obligations-Other - 2.28%
Federal National Mortgage Assn. 7.04% 2005 890 884 1.14
Federal Home Loan Mortgage Corp.:
6.78% 2005 500 496
5.78% 2003 400 384 1.14
U.S. Treasury Obligations - 19.65%
6.25% 2003 7,500 7,634 19.65
10.375% 2009-2012 3,000 3,934
7.25% 2004 2,500 2,691
8.875% 2017 750 955
-------- --------
TOTAL BONDS & NOTES (cost: $54,281,000) 55,768 72.03
-------- -------
Number
of
Shares
or Principal
Amount
(000)
Equity-Type Securities
Preferred Stocks - 1.04%
Time Warner Inc. exchangeable preferred, Series K/2/ 524 567 .73
El Paso Electric Co., 11.40% preferred,
Series, A 2008 /5/ 2,168 239 .31
Convertible Debentures - 0.70%
U S WEST Communications, Inc. 0% 2011 $1,500 542 .70
Miscellaneous
Equity-type securities in initial period of acquisition 1,909 2.47
-------- --------
TOTAL EQUITY-TYPE SECURITIES (cost: $2,667,000) 3,257 4.21
-------- --------
Principal
Amount
Short-Term Securities (000)
Corporate Short-Term Notes - 22.35%
Southwestern Bell Telephone Co. 5.25% due 12/6/96 $ 2,000 1,998 2.58
H.J. Heinz Co. 5.25% due 12/4/96 1,900 1,899 2.45
CIT Group Holdings Inc. 5.26% 12/16/96 1,900 1,896 2.45
Abbott Laboratories Inc. 5.25% due 12/5/96 1,500 1,499 1.94
Lucent Technologies Inc. 5.25% due 12/17/96 1,500 1,496 1.93
Coca-Cola Co. 5.24% due 12/30/96 1,400 1,394 1.80
Raytheon Co. 5.25% due 12/10/96 1,300 1,298 1.68
International Lease Finance Corp. 5.23% due 12/13/96 1,300 1,297 1.67
IBM Credit Corp. 5.33% due 1/14/97 1,300 1,291 1.67
American Express Credit Corp. 5.26% due 12/9/96 1,000 999 1.29
General Electric Capital Corp. 5.75% due 12/2/96 900 900 1.16
PACCAR Financial Corp. 5.26% due 12/19/96 838 836 1.08
BellSouth Telecommunications, Inc. 5.22% due 12/4/96 502 502 .65
Federal Agency Discount Notes - 1.29%
Federal Farm Credit Bank 5.22% due 12/6/96 1,000 999 1.29
-------- -------
TOTAL SHORT-TERM SECURITIES (cost: $18,304,000) 18,304 23.64
-------- -------
TOTAL INVESTMENT SECURITIES (cost: $75,252,000) 77,329 99.88
Excess of cash and receivables over payables 96 .12
--------- -------
NET ASSETS $77,425 100.00
--------- ---------
/1/ Represents a step bond; coupon rate will increase at a later date.
/2/ Purchased in a private placement transaction; resale to the public may require registration or sale
only to qualified institutional buyers.
/3/ Pass-through securities backed by a pool of mortgages or other loans on which principal
payments are periodically made. Therefore, the effective maturity is shorter than the stated maturity.
/4/ Coupon rate may change periodically.
/5/ Payment in kind. The issuer has the option of paying additional securities in lieu of cash.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
AMERICAN VARIABLE INSURANCE SERIES
HIGH-YIELD BOND FUND
INVESTMENT PORTFOLIO - NOVEMBER 30, 1996
CORPORATE BONDS 77.19%
NON-U.S. CORPORATE BONDS 0.00%
U.S. TREASURY BONDS 7.36%
NON-U.S. GOVERNMENT BONDS 1.72%
CASH & EQUIVALENTS 11.42%
STOCKS & CONVERTIBLE DEBENTURES 2.31%
Percent
of Net
Largest Corporate Holdings Assets
MFS Communications 3.17%
Bell Cablemedia 2.39
Videotron Holdings 2.18
Integrated Health Services 2.10
California Energy 2.08
Container Corp. of America 2.06
Coltec Industries 1.82
USAir 1.81
International CableTel 1.62
CellNet Data Systems 1.57
Principal Market Percent
Amount Value Of Net
Bonds & Notes (000) (000) Assets
Cellular, Paging & Wireless Communications - 12.55%
Centennial Cellular Corp. 8.875% 2001 $10,000 $9,600 1.45%
PriCellular Wireless Corp.:
0%/12.25% 2003/1/ 6,000 5,055
10.75% 2004/2/ 2,250 2,340 1.44
0%/14.00% 2001/1/ 2,185 2,152
CellNet Data Systems, Inc. 0%/13.00% 2005/1/ /2/ /3/ 14,000 9,170 1.38
PanAmSat, LP:
9.75% 2000 6,000 6,345 1.24
0%/11.375% 2003/1/ 2,000 1,840
Paging Network, Inc. 11.75% 2002 7,300 7,884 1.19
NEXTEL Communications, Inc.:
0%/10.125% 2004 (formerly CenCall Communications)/1/ 4,750 3,159
0%/11.50% 2003/1/ 3,000 2,257 1.07
0%/9.75% 2004/1/ 2,500 1,653
Cellular Communications International, Inc. Units, 0% 2000 6,500 4,420 .67
Cellular, Inc. 0%/11.75% 2003/1/ 4,500 4,050 .61
Rogers Cantel Mobile Communications Inc.:
11.125% 2002 2,500 2,637 .56
9.375% 2008 1,000 1,050
Comunicacion Celular SA 0%/13.125% 2003/1/ 5,000 3,263 .49
Omnipoint Corp. 11.625% 2006/2/ 3,000 3,157 .48
Heartland Wireless Communications, Inc. 13.00% 2003 3,000 3,090 .47
MobileMedia Communications, Inc. 0%/10.50% 2003/1/ 5,250 2,284 .35
Sprint Spectrum LP, Sprint Spectrum
Finance Corp. 11.00% 2006 2,000 2,125 .32
Mobile Telecommunications Technology Corp. 13.50% 2002 1,750 1,811 .27
Western Wireless Corp. 10.50% 2006/2/ 1,500 1,545 .23
InterCel, Inc. 0%/12.00% 2006/1/ 2,000 1,190 .18
Vanguard Cellular Systems, Inc. 9.375% 2006 1,000 1,004 .15
Manufacturing & Materials - 8.52%
Coltec Industries Inc.:
9.75% 2000 9,450 10,230 1.82
9.75% 1999 1,750 1,881
Kaiser Aluminum & Chemical Corp.:
12.75% 2003 4,850 5,117
10.875% 2006/2/ 2,500 2,581 1.52
9.875% 2002 2,350 2,374
Texas Petrochemicals Corp. 11.125% 2006/2/ 5,500 5,885 .89
Acme Metals Inc.:
0%/13.50% 2004/1/ 3,000 3,030 .86
12.50% 2002 2,500 2,675
MagneTek, Inc. 10.75% 1998 3,500 3,605 .54
AGCO Corp. 8.50% 2006 3,500 3,587 .54
UCAR Global Enterprises Inc. 12.00% 2005 2,865 3,305 .50
Westinghouse Air Brake Co. 9.375% 2005 3,000 3,090 .47
Owens-Illinois, Inc. 11.00% 2003 2,500 2,766 .42
Sterling Chemicals, Inc. 11.75% 2006 2,000 2,040 .31
U.S. Can Corp. 10.125% 2006/2/ 1,750 1,829 .28
Knoll Group, Inc. 10.875% 2006 1,250 1,363 .21
AK Steel Corp. 10.75% 2004 1,000 1,072 .16
Cable & Telephone in the United Kingdom - 8.14%
Bell Cablemedia PLC 0%/11.95% 2004/1/ 18,500 15,817 2.39
Videotron Holdings PLC:
0%/11.125% 2004/1/ 14,500 12,470 2.18
0%/11.00% 2005/1/ 2,500 1,969
International CableTel Inc. 0%/10.875% 2003/1/ 13,250 10,699 1.62
Comcast UK Cable Partners Ltd. 0%/11.20% 2007/1/ 11,500 7,849 1.18
TeleWest PLC:
9.625% 2006 2,500 2,556 .49
0%/11.00% 2007/1/ 1,000 678
Ionica, PLC Units 13.50% 2006/2/ 1,750 1,873 .28
Energy & Related Companies - 6.13%
Triton Energy Corp. 0%/9.75% 2000/1/ 4,500 4,669 .70
Chesapeake Energy Corp.:
9.125% 2006 3,000 3,105 .63
10.50% 2002 1,000 1,095
Mariner Energy, Inc. 10.50% 2006/2/ 4,000 4,150 .63
Abraxas Petroleum Corp. 11.50% 2004/2/ 4,000 4,130 .62
Kelley Oil & Gas Corp. 10.375% 2006/2/ 4,000 4,080 .62
Dual Drilling Co. 9.875% 2004 3,500 3,780 .57
Benton Oil and Gas Co. 11.625% 2003 3,000 3,300 .50
Falcon Drilling Co., Inc.:
Series B, 8.875% 2003 2,250 2,273 .50
Series B, 9.75% 2001 1,000 1,024
Global Marine, Inc. 12.75% 1999 2,700 2,903 .44
Tuboscope Vetco International Inc. 10.75% 2003 2,000 2,195 .33
Flores & Rucks, Inc. 13.50% 2004 1,750 2,069 .31
J. Ray McDermott, SA 9.375% 2006 1,000 1,050 .16
Forcenergy Inc. 9.50% 2006 750 780 .12
Diversified Media, Cable Television &
Telecommunications - 6.04%
MFS Communications Co., Inc. 0%/9.375% 2004/1/ 24,250 20,976 3.17
Multicanal Participacoes SA 12.625% 2004/2/ 4,000 4,310 .65
Cablevision Systems Corp. 9.875% 2013 3,000 2,925 .44
Brooks Fiber Properties, Inc. 0%/10.875% 2006/1/ 3,250 2,129 .32
Jones Intercable, Inc. 9.625% 2002 1,500 1,545 .23
Viacom International Inc. 7.75% 2005 1,500 1,492 .22
Telecom Argentina STET-France Telecom SA 12.00% 2002 1,000 1,102 .17
Summitt Communications Group, Inc. 10.50% 2005 1,000 1,097 .17
Teleport Communications Group Inc. 9.875% 2006 1,000 1,057 .16
Comtel Brasileira Ltda. 10.75% 2004/2/ 1,000 1,038 .16
Comcast Corp. 10.25% 2001 925 983 .15
IntelCom Group Inc. 0%/13.50% 2005/1/ 1,000 688 .10
Storer Communications, Inc. 10.00% 2003 634 640 .10
Health & Personal Care - 5.76%
Integrated Health Services, Inc.:
10.25% 2006/2/ 5,000 5,150
9.625% 2002 2,750 2,812 1.60
10.75% 2004 2,500 2,644
Regency Health Services, Inc.:
9.875% 2002 6,250 6,312 1.28
12.25% 2003 2,000 2,128
Paracelsus Healthcare Corp. 10.00% 2006 8,250 7,301 1.10
Universal Health Services, Inc. 8.75% 2005 6,500 6,711 1.01
Merit Behavioral Care Corp. 11.50% 2005 2,500 2,650 .40
Mariner Health Group, Inc. 9.50% 2006 2,500 2,438 .37
Leisure, Tourism & Restaurants - 4.83%
Foodmaker, Inc.:
9.75% 2002 3,750 3,825 .96
9.25% 1999 2,500 2,538
AMF Group Inc.:
0%/12.25% 2006/1/ 6,000 3,795 .85
10.875% 2006 1,750 1,838
Four Seasons Hotels Inc. 9.125% 2000/2/ 3,500 3,579 .54
Trump Atlantic City Associates, Trump Atlantic
City Funding, Inc. 11.25% 2006 3,750 3,544 .53
Station Casinos, Inc. 9.625% 2003 3,600 3,510 .53
California Hotel Finance Corp. 11.00% 2002 3,250 3,372 .51
Wyndham Hotel Corp. 10.50% 2006 2,500 2,650 .40
Rio Hotel & Casino, Inc. 10.625% 2005 2,250 2,379 .36
Casino America, Inc. 12.50% 2003 1,000 970 .15
Broadcasting & Publishing - 4.38%
American Media Operations, Inc. 11.625% 2004 7,000 7,473 1.13
American Radio Systems Corp. 9.00% 2006 4,750 4,631 .70
Chancellor Broadcasting Co.:
12.50% 2004 1,750 1,975 .53
9.375% 2004 1500 1496
Newsquest Capital PLC 11.00% 2006/2/ 3,000 3,060 .46
Infinity Broadcasting Corp. 10.375% 2002 2,750 2,929 .44
Univision Television Group, Inc. 11.75% 2001 2,500 2,608 .39
Young Broadcasting Inc. 10.125% 2005 2,000 2,010 .30
Tevecap SA 12.625% 2004/2/ 1,500 1,543 .23
Gray Communications Systems, Inc. 10.625% 2006 1,250 1,288 .20
Forest Products & Paper - 4.35%
Container Corp. of America:
9.75% 2003 10,000 10,425
Series A, 11.25% 2004 2,000 2,160 2.06
Series B, 10.75% 2002 1,000 1,070
Fort Howard Paper Corp.:
9.25% 2001 3,750 3,909
8.25% 2002 3,000 3,008 1.33
11.00% 2002 /4/ 1,813 1,908
Pacific Lumber Co. 10.50% 2003 4,000 4,005 .61
MAXXAM Group Inc. 11.25% 2003 2,000 2,045 .31
Four M Corp., Series B, 12.00% 2006 250 256 .04
Food Retailing - 4.25%
Stater Brothers Holdings Inc. 11.00% 2001 6,750 7,222 1.09
Bruno's, Inc. 10.50% 2005 6,250 6,469 .98
Star Markets Co., Inc. 13.00% 2004 5,000 5,525 .83
Carr-Gottstein Foods Co. 12.00% 2005 4,000 4,240 .64
Rykoff-Sexton, Inc. 8.875% 2003 4,400 4,147 .63
The Penn Traffic Co. 9.625% 2005 1,000 540 .08
Transportation - 3.64%
USAir, Inc.:
10.00% 2003 4,500 4,432
Pass Through Trust, Series 1993-A3, 10.375% 2013 /4/ 3,500 3,570 1.81
9.625% 2001 3,000 2,955
Series 1993-A2, 9.625% 2003 1,000 1,015
Airplanes Pass Through Trust, Class D, 10.875% 2019 /4/ 5,370 5,987 .90
Teekay Shipping Corp. 8.32% 2008 5,000 4,950 .75
Delta Air Lines, Inc. 10.00% 2014/2/ 1,000 1,191 .18
Independent Power Producers - 2.08%
California Energy Co., Inc. 0%/10.25% 2004/1/ 13,300 13,766 2.08
Merchandising - 2.07%
Barnes & Noble, Inc., Series B, 11.875% 2003 5,250 5,736 .87
Thrifty PayLess, Inc. 12.25% 2004 3,250 3,802 .57
Loehmann's, Inc. 11.875% 2003 2,500 2,700 .41
AnnTaylor, Inc. 8.75% 2000 1,500 1,455 .22
Beverages - 1.28%
Canandaigua Wine Co., Inc.:
8.75% 2003 2,750 2,685 .73
Series B, 8.75% 2003/2/ 2,250 2,171
Dr Pepper Bottling Co. of Texas 10.25% 2000 3,500 3623 .55
Construction & Housing - 1.00%
M.D.C. Holdings, Inc. 11.125% 2003 3,850 3,889 .59
Toll Corp. 8.75% 2006 1,500 1,500 .22
Del Webb Corp. 9.75% 2003 1,250 1,238 .19
Banking & Financial Services - 0.67%
First Nationwide Holdings Inc., 10.625% 2003/2/ 1,500 1,605 .24
Chevy Chase Bank, FSB 9.25% 2008 1,500 1,515 .23
Ocwen Financial Corp. 11.875% 2003 1,250 1,328 .20
Protection Services - 0.59%
ADT Operations, Inc. 9.25% 2003 2,000 2,120 .32
Protection One Alarm Monitoring, Inc. 0%/13.625% 2005/1/ 2,000 1,820 .27
Real Estate - 0.33%
B.F. Saul Real Estate Investment Trust 11.625% 2002 2,000 2,160 .33
Electric & Gas Utilities - 0.30%
Columbia Gas System, Inc., Series A, 6.39% 2000 2,000 2,010 .30
Textiles & Apparel - 0.28%
WestPoint Stevens Inc. 8.75% 2001 1,000 1,027 .16
Tultex Corp. 10.625% 2005 750 810 .12
Non-U.S. Governments & Governmental
Authorities - 1.72%
Argentina (Republic of):
Eurobond, Series L, 6.625% 2005 /5/ 5880 5079
Bocon 4.751% 2007 /5/ /6/ ARP2,500 1420 1.05
8.375% 2003 $ 500 465
Panama (Republic of) Interest Reduction Bond 3.50% 2014/2/ /5/ 3000 2055 .31
United Mexican States Government:
11.375% 2016 1250 1299 .28
9.75% 2001 500 518
Ecuador (Republic of) Past Due Interest Bond 6.50% 2015 /5/ /6/ 529 320 .05
Brazil (Federal Republic of) Eligible Interest Bond
6.50% 2006 /5/ 250 217 .03
U.S. Treasury Obligations - 7.36%
11.625% 2004 9,600 12,958
7.375% 1997 10,000 10,173
7.75% 2001 8,000 8,576
6.875% 1999 7,000 7,203 7.36
8.50% 2000 5,000 5,475
8.00% 2001 4,000 4,341
-------- --------
TOTAL BONDS & NOTES (cost: $549,728,000) 571,254 86.27
-------- -------
Number
of
Stocks Shares
Common & Preferred Stocks - 1.39%
EarthWatch Inc., 12.00% convertible preferred,
Series C /2/ /3/ /6/ /7/ 350,000 3,751 .56
Time Warner Inc., 10.25% cumulative exchangeable
preferred, Series K/2/ 3,145 3,405 .51
CellNet Data Systems, Inc., warrants, expire 1997 /3/ /7/ 56,000 1,232 .19
Marriott International, Inc. 4,512 251 .04
El Paso Electric Co., 11.40% preferred, Series A 2008 /6/ 2,168 239 .04
IntelCom Group Inc., warrants, expire 2005/2/ /7/ 13,200 165 .02
Protection One Alarm Monitoring, Inc., warrants,
expire 2005/2/ /7/ 6,400 50 .01
Heartland Wireless Communications, Inc.,
warrants, expire 2000/2/ /7/ 18,000 36 .01
Sterling Chemicals Inc., warrants, expire 2008 /7/ 1,000 35 .01
Comunicacion Celular, SA, warrants, expire 2003/2/ /7/ 5,000 31 .00
NEXTEL Communications, Inc., warrants, expire 1999/3/ /7/ 9,500 0 .00
-------- --------
TOTAL STOCKS (cost: $8,375,000) 9,195 1.39
-------- --------
Principal
Amount
Convertible Debentures - 0.92% (000)
Integrated Health Services, Inc. 5.75% 2001 $ 3,500 3,316 .50
Ashland Capital Group Inc. 9.50% 2006 1700 2,772 .42
-------- --------
TOTAL CONVERTIBLE DEBENTURES (cost: $6,191,000) 6,088 .92
-------- --------
Short-Term Securities
Corporate Short-Term Notes - 9.73%
Lucent Technologies Inc. 5.23%-5.29% due 12/10/96-2/5/97 21,300 21,167 3.20
H.J. Heinz Co. 5.24% due 12/13/96 11,400 11,378 1.72
National Rural Utilities Cooperative Finance Corp. 9400 9382 1.42
5.30% due 12/13/96
J.C. Penney Funding Corp. 5.31% due 12/9/96-1/30/97 7,000 6,951 1.05
IBM Credit Corp. 5.30% due 1/23/97 6,000 5,952 .90
Southwestern Bell Telephone Co. 5.27% due 12/3/96/2/ 5,000 4,998 .75
General Electric Capital Corp. 5.75% due 12/2/96 4,600 4,599 .69
-------- -------
TOTAL SHORT-TERM SECURITIES (cost: $64,430,000) 64,427 9.73
-------- -------
TOTAL INVESTMENT SECURITIES (cost: $628,724,000) 650,964 98.31
Excess of cash and receivables over payables 11,221 1.69
--------- -------
NET ASSETS $662,185 100.00%
========= =======
/1/ Represents a step bond; coupon rate will increase at a later date.
/2/ Purchased in a private placement transaction; resale to the public may require registration or sale only to
qualified institutional buyers.
/3/Valued under procedures established by the Board of Trustees.
/4/ Pass-through securities backed by a pool of mortgages or other loans on which principal payments
are periodically made. Therefore, the effective maturity is shorter than the stated maturity.
/5/ Coupon rate may change periodically.
/6/ Payment in kind. The issuer has the option of paying additional securities in lieu of cash.
/7/ Non-income-producing securities.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series
U.S. Government/AAA-Rated Securities Fund
Investment Portfolio, November 30, 1996
- ------------------------------------------------ -------- -------- --------
U.S. TREASURY BONDS 47.61%
PRIVATE MORTGAGE & ASSET-BACKED SECURITIES 18.16
FEDERAL AGENCY MORTGAGE-RELATED SECURITIES 17.95
OTHER FEDERAL OBLIGATIONS 8.82
CASH & EQUIVALENTS 5.21
CORPORATE BONDS 1.40
DEVELOPMENTAL AGENCIES & NON-U.S.
GOVERNMENT BONDS .85
- ------------------------------------------------ -------- -------- --------
Principal Market Percent
Amount Value of Net
Bonds & Notes (000) (000) Assets
- ------------------------------------------------ -------- -------- --------
U.S. Treasury Obligations - 47.61%
10.375% 2012 $47,500 $62,737
8.875% 2017 40,300 51,320
10.375% 2009 33,500 42,341
12.00% 2013 13,000 19,086
8.75% 2008 10,000 11,477
7.25% 2004 10,000 10,758
9.25% 1998 10,000 10,591 47.61%
8.875% 1997 10,000 10,312
11.75% 2010 5,500 7,470
8.375% 2008 5,000 5,620
12.50% 2014 3,000 4,606
14.25% 2002 2,000 2,746
13.125% 2001 1,500 1,923
10.75% 2003 1,250 1,567
9.00% 1998 1,250 1,310
Federal Agency Obligations - Mortgage
Pass-Throughs/1/ - 17.41%
Government National Mortgage Assn.:
8.50% 2021-2026 24,347 25,612
9.50% 2019-2021 7,437 8,094
7.50% 2022-2023 4,698 4,795
7.00% 2024 4,327 4,411
6.50% 2024 4,030 4,098
10.00% 2019 3,690 4,066 10.96
8.00% 2022 3,106 3,242
9.00% 2009-2016 1,495 1,608
10.50% 2019 151 169
11.00% 2019 69 79
12.00% 2012-2014 8 9
Federal National Mortgage Assn.:
8.00% 2024 8,504 8,827
8.50% 2023 6,328 6,658
10.00% 2018 4,521 5,005 6.04
7.50% 2009 3,854 3,947
9.00% 2011-2025 3,483 3,696
7.00% 2010 2,785 2,805
Federal Home Loan Mortgage Corp.:
9.00% 2021-2022 1,797 1,915
9.50% 2016 151 164 .41
12.00% 2010 2 2
Collateralized Mortgage Obligations
(Privately Originated)/1/ - 12.73%
GE Capital Mortgage Services, Inc.:
Series 1995-10, Class A-1, 7.00% 2010 9,934 10,008
Series 1994-15, Class A-10, 6.00% 2009 8,000 7,600 3.44
Prudential-Bache CMO Trust III, 9.44 2018 14,000 15,133 2.95
Westam Mortgage, Class 4-H, 8.95% 2018 11,000 11,894 2.32
Structured Asset Securities Corp., Series 1996-CFL,
Class A1-C, 5.944% 2028 4,900 4,839 .94
CMC Securities Corp. I, Series 1993-E, Class S-9, 6.50% 2008 4,518 4,331 .85
Prudential Home Mortgage Securities Co., Inc., Series 1992-33,
Class A-12, 7.50% 2022 4,029 4,035 .79
J.P. Morgan Commercial Mortgage Finance Corp., Series 1995-C1,
Class A2, 7.399% 2010/2/ 3,000 3,112 .61
CS First Boston Mortgage Securities Corp., Series 1995-AEW1,
Class A-1, 6.665% 2027 2,725 2,740 .53
Merrill Lynch Mortgage Investors, Inc., Series 1995-C3,
Class A-2, 6.848% 2025/2/ 1,500 1,514 .30
Federal Agency Obligations - Other - 8.82%
FNSM Principal STRIPS:
0%/7.56% 2001/3/ 15,000 14,976
0%/8.62% 2022/3/ 10,000 9,164 5.05
0%/8.25% 2022/3/ 2,000 1,736
Federal Home Loan Mortgage Corp.:
6.555% 2006 8,500 8,350
6.945% 2005 2,000 1,996 2.02
Federal National Mortgage Assn.:
6.53% 2006 7,000 6,820
8.625% 2021 2,000 2,112 1.75
Asset-Backed Obligations/1/ - 5.43%
ContiMortgage Home Equity Loan Trust 1996-4,
Class A-4, 6.37% 2006 15,000 15,015 2.93
Standard Credit Card Master Trust 1991-3, Class A,
8.875% 1999 5,500 5,751 1.12
Green Tree Financial Corp., Series 1995-9, Class A-5,
6.80% 2027 5,000 5,004 .98
EQCC Home Equity Loan Asset Backed Certificates,
Series 1996-A, Class A-2, 6.95% 2012 2,000 2,030 .40
Electric & Gas Utilities - 0.75%
Public Service Electric and Gas Co. First and Refunding Mortgage
Bonds, Series SS, MBIA insured, 7.00% 2024 4,000 3,860 .75
Non-U.S. Government Obligations - 0.61%
Ontario (Province of):
15.75% 2012 1,700 1,852
15.25% 2012 1,145 1,287 .61
Collateralized Mortgage Obligations
(Federal Agencies)/1/ - 0.54%
Federal Home Loan Mortgage Corp.:
Series 1716, Class A, 6.50% 2009 2,250 2,194
Series 83-B, Class B-3, 12.50% 2013 523 587 .54
Financial - 0.44%
Signal Capital Corp. 9.95% 2006 2,157 2,217 .44
Developmental Authorities - 0.24%
International Bank for Reconstruction & Development 14.90%
1997 1,200 1,251 .24
Telephone Utilities - 0.21%
BellSouth Savings and Security ESOP Trust 9.125% 2003 999 1,086 .21
-------- --------
TOTAL BONDS & NOTES (cost: $481,978,000) 485,560 94.79
-------- --------
Short-Term Securities
- ------------------------------------------------
Corporate Short-Term Notes - 7.22%
IBM Credit Corp. 5.30% due 1/23/97 14,600 14,483 2.83
National Rural Utilities Cooperative Finance Corp.
5.30% due 12/13/96 8,400 8,384 1.64
General Electric Capital Corp. 5.75% due 12/2/96 7,700 7,698 1.50
Lucent Technologies Inc. 5.29% due 2/5/97 6,500 6,435 1.25
-------- --------
TOTAL SHORT-TERM SECURITIES (cost: $37,002,000) 37,000 7.22
-------- --------
TOTAL INVESTMENT SECURITIES (cost: $518,980,000) 522,560 102.01
Excess of payables over cash and receivables 10,309 2.01
-------- --------
NET ASSETS $512,251 100.00%
======== ========
/1/ Pass-through securities backed by a pool of mortgages or other loans on which principal
payments are periodically made. Therefore, the effective maturity is shorter than the
stated maturity.
/2/ Coupon rates may change periodically.
/3/ Represents a step bond; coupon rate will increase at a later date.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series
Cash Management Fund
Investment Portfolio November 30, 1996
Principal Market
Amount Value Percent of
Short-Term Securities (000) (000) Net Assets
Corporate Short-Term Notes - 83.69%
Coca-Cola Co. 5.22%-5.23% due 12/3-12/20/96 $ 9,600 $ 9,583 3.99%
General Electric Capital Corp. 5.24%-5.25% due 12/5-12/18/96 8,700 8,685 3.61
Harvard University 5.24% due 12/11/96 8,300 8,287 3.45
American Express Credit Corp. 5.23%-5.25% due 12/5-12/26/96 8,300 8,283 3.45
IBM Credit Corp. 5.25% due 12/10-12/19/96 8,250 8,233 3.43
E.I. du Pont de Nemours and Co. 5.23% due 12/18/96 8,100 8,079 3.36
Motorola Credit Corp. 5.24% due 12/10/96 8,000 7,988 3.32
H.J. Heinz Co. 5.23%-5.25% due 12/9-12/12/96 7,500 7,488 3.12
Beneficial Corp. 5.25% due 12/4/96 7,000 6,996 2.91
J.C. Penney Funding Corp. 5.24% due 12/17/96 7,000 6,983 2.91
American General Finance Corp. 5.25% due 12/27/96 7,000 6,972 2.90
Walt Disney Co. 5.25%-5.26% due 12/10/96-1/9/97 7,000 6,968 2.90
CIT Group Holdings, Inc. 5.31% due 1/13/97 7,000 6,955 2.89
Warner-Lambert Co. 5.24% due 12/9/96 6,900 6,891 2.87
John Deere Capital Corp. 5.23% due 12/12/96 6,500 6,489 2.70
Ford Motor Credit Co. 5.25% due 12/13/96 6,500 6,488 2.70
Minnesota Mining and Manufacturing Co. 5.23% due 12/16/96 6,500 6,485 2.70
Campbell Soup Co. 5.25% due 12/6/96 6,000 5,995 2.49
Lucent Technologies Inc. 5.25% due 12/20/96 5,800 5,783 2.41
International Lease Finance Corp. 5.29% due 1/27/97 5,600 5,552 2.31
National Rural Utilities Cooperative Finance Corp.
5.29% due 1/7/97 5,400 5,370 2.23
Monsanto Co. 5.25% due 12/3/96 5,000 4,998 2.08
Weyerhaeuser Co. 5.24% due 12/19/96 5,000 4,986 2.08
Ameritech Corp. 5.24% due 12/23/96 5,000 4,984 2.07
U S WEST Communications, Inc. 5.26% due 12/24/96 5,000 4,982 2.07
Albertson's Inc. 5.27% due 1/7/97 5,000 4,974 2.07
Atlantic Richfield Co. 5.28% due 1/15/97 5,000 4,967 2.07
SAFECO Credit Co. Inc. 5.29% due 1/22/97 5,000 4,961 2.06
American Brands, Inc. 5.30% due 1/8/97 4,000 3,977 1.65
Sara Lee Corp. 5.25% due 12/2/96 3,900 3,899 1.62
BellSouth Telecommunications, Inc. 5.25% due 12/23/96 3,000 2,990 1.24
Southwestern Bell Telephone Co. 5.22% due 12/23/96 2,600 2,591 1.08
Commercial Credit Co. 5.24% due 12/17/96 2,300 2,294 .95
Federal Agency Discount Notes - 13.98%
Federal Farm Credit Bank 5.22%-5.23% due 12/6-12/16/96 14,985 14,966 6.23
Federal Home Loan Mortgage Corp. 5.20%-5.22% due 10,400 10,365 4.31
12/20-12/27/96
International Bank for Reconstruction and Development
5.22% due 12/30/96 5,700 5,675 2.36
Federal National Mortgage Assn. 5.23% due 12/16/96 2,600 2,594 1.08
Certificates of Deposit - 2.08%
Morgan Guaranty Trust Co. of New York 5.29% due 12/13/96 5,000 5,000 2.08
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $239,756,000) 239,756 99.75
Excess of cash and receivables over payables 592 .25
---------- ----------
NET ASSETS $240,348 100.00%
========== ==========
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series
FINANCIAL STATEMENTS
(dollars
Statement of Assets and Liabilities in
at November 30, 1996 thousands)
Inter- Growth-
Growth national Income
Fund Fund Fund
- --------------------------------- ---------- ---------- ----------
ASSETS:
Investment securities at market
(cost: $2,858,962; $1,965,760;
$3,983,425; $950,616; $75,252;
$628,724; $518,980; $239,756
and $11,221,475, respectively) $3,844,447 $2,337,119 $5,221,287
Cash 81 1,857 316
Receivables for-
Sales of investments 19,989 32,469 21,750
Sales of fund's shares 797 1,047 1,081
Open forward currency
contracts
Dividends and accrued
interest 1,245 7,973 10,257
---------- ---------- ----------
3,866,559 2,380,465 5,254,691
LIABILITIES: ---------- ---------- ----------
Payables for-
Purchases of investments 4,596 9,338 4,301
Repurchases of fund's shares 312 95 135
Management services 1,254 1,126 1,555
Accrued expenses 48 278 60
---------- ---------- ----------
6,210 10,837 6,051
NET ASSETS AT ---------- ---------- ----------
November 30, 1996 $ 3,860,3 $2,369,628 $5,248,640
=========== =========== ===========
Shares of beneficial interest
outstanding (unlimited
shares authorized) 88,690,116 152,588,793 146,906,619
Net asset value per share $43.53 $15.53 $35.73
Asset High-Yield
Allocation Bond Bond
Fund Fund Fund
- --------------------------------- ---------- ---------- ----------
ASSETS:
Investment securities at market
(cost: $2,858,962; $1,965,760;
$3,983,425; $950,616; $75,252;
$628,724; $518,980; $239,756
and $11,221,475, respectively) $1,135,414 $77,329 $650,964
Cash 156 1 11
Receivables for-
Sales of investments 2,373 - 2,265
Sales of fund's shares 620 251 142
Open forward currency
contracts 6
Dividends and accrued
interest 6,188 871 10,628
---------- ---------- ----------
1,144,751 78,458 664,010
LIABILITIES: ---------- ---------- ----------
Payables for-
Purchases of investments 3,206 1,000 1,500
Repurchases of fund's shares 14 - 44
Management services 423 32 269
Accrued expenses 17 1 12
---------- ---------- ----------
3,660 1,033 1,825
NET ASSETS AT ---------- ---------- ----------
November 30, 1996 $1,141,091 $77,425 $662,185
=========== =========== ===========
Shares of beneficial interest
outstanding (unlimited
shares authorized) 75,174,289 7,511,221 45,638,580
Net asset value per share $15.18 $10.31 $14.51
U.S.
Government/
AAA-Rated Cash
Securities Management
Fund Fund Total
- --------------------------------- ---------- ---------- ----------
ASSETS:
Investment securities at market
(cost: $2,858,962; $1,965,760;
$3,983,425; $950,616; $75,252;
$628,724; $518,980; $239,756
and $11,221,475, respectively) $522,560 $239,756 $14,028,876
Cash 27 81 2,530
Receivables for-
Sales of investments - 78,846
Sales of fund's shares 117 732 4,787
Open forward currency
contracts - 6
Dividends and accrued
interest 4,914 16 42,092
---------- ---------- ----------
527,618 240,585 14,157,137
LIABILITIES: ---------- ---------- ----------
Payables for-
Purchases of investments 15,047 38,988
Repurchases of fund's shares 97 141 838
Management services 213 91 4,963
Accrued expenses 10 5 431
---------- ---------- ----------
15,367 237 45,220
NET ASSETS AT ---------- ---------- ----------
November 30, 1996 $512,251 $240,348 $14,111,917
=========== =========== ===========
Shares of beneficial interest
outstanding (unlimited
shares authorized) 45,370,093 21,610,763
Net asset value per share $11.29 $11.12
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series (dollars
FINANCIAL STATEMENTS in
thousands)
Statement of Operations
for the year ended November 30, 1996
Inter- Growth-
Growth national Income
Fund Fund Fund
---------- ---------- ---------
INVESTMENT INCOME:
Income:
Dividends $16,764 $41,019 $88,452
Interest 19,020 13,569 31,672
---------- ---------- ----------
35,784 54,588 120,124
---------- ---------- ----------
Expenses:
Management services fee 14,284 12,370 17,451
Reports to shareholders 113 72 157
Registration statement and
prospectus 197 104 223
Postage, stationery and
supplies 70 36 81
Trustees' fees 45 26 57
Auditing and legal fees 40 22 50
Custodian fee 136 1,428 158
Taxes other than federal
income tax 46 27 60
Other expenses 26 54 33
---------- ---------- ----------
14,957 14,139 18,270
---------- ---------- ----------
Net investment income 20,827 40,449 101,854
---------- ---------- ----------
REALIZED GAIN (LOSS) AND
UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS:
Realized gain (loss) 269,265 96,629 373,978
---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) on investments 183,049 177,135 407,012
Net increase in unrealized appreciation
on open forward currency contracts - - -
---------- ---------- ----------
Net unrealized appreciation
(depreciation) 183,049 177,135 407,012
---------- ---------- ----------
Net realized gain (loss) and
unrealized appreciation (depreciation)
on investments 452,314 273,764 780,990
---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $473,141 $314,213 $882,844
========= =========== =========
High-
Asset Yield
Allocation Bond Bond
Fund Fund /1/ Fund
---------- ---------- ----------
INVESTMENT INCOME:
Income:
Dividends $16,529 $51 $163
Interest 26,719 2,629 58,061
---------- ---------- ----------
43,248 2,680 58,224
---------- ---------- ----------
Expenses:
Management services fee 4,663 204 2,996
Reports to shareholders 34 1 20
Registration statement and
prospectus 41 1 44
Postage, stationery and
supplies 18 1 11
Trustees' fees 13 - 7
Auditing and legal fees 11 - 7
Custodian fee 54 2 37
Taxes other than federal
income tax 14 - 9
Other expenses 9 1 7
---------- ---------- ----------
4,857 210 3,138
---------- ---------- ----------
Net investment income 38,391 2,470 55,086
---------- ---------- ----------
REALIZED GAIN (LOSS) AND
UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS:
Realized gain (loss) 72,509 38 4,194
---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) on investments 62,633 2,077 17,642
Net increase in unrealized appreciation
on open forward currency contracts - 6 -
----------- ----------- ----------
Net unrealized appreciation
(depreciation) 62,633 2,083 17,642
----------- ----------- ----------
Net realized gain (loss) and
unrealized appreciation (depreciation)
on investments 135,142 2,121 21,836
----------- ----------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $173,533 $4,591 $76,922
========= ========= =========
U.S.
Government/ Cash
AAA-Rated Manage-
Securities ment
Fund Fund Total
--------------- ---------- ---------
INVESTMENT INCOME:
Income:
Dividends - - $162,978
Interest $ 41,273 $ 11,985 204,
---------- ---------- ----------
41,273 11,985 367,906
---------- ---------- ----------
Expenses:
Management services fee 2,661 1,007 55,636
Reports to shareholders 18 8 423
Registration statement and
prospectus 23 3 636
Postage, stationery and
supplies 10 4 231
Trustees' fees 7 3 158
Auditing and legal fees 7 2 139
Custodian fee 29 12 1,856
Taxes other than federal
income tax 9 3 168
Other expenses 7 4 141
---------- ---------- ----------
2,771 1,046 59,388
---------- ---------- ----------
Net investment income 38,502 10,939 308,518
---------- ---------- ----------
REALIZED GAIN (LOSS) AND
UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS:
Realized gain (loss) (2,883) - 813,730
---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) on investments (8,951) - 840,597
Net increase in unrealized appreciation
on open forward currency contracts - - 6
--------------- ---------- ----------
Net unrealized appreciation
(depreciation) (8,951) - 840,603
--------------- ---------- ----------
Net realized gain (loss) and
unrealized appreciation (depreciation)
on investments (11,834) - 1,654,333
--------------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $26,668 $10,939 $1,962,851
=============== ========= =========
/1/ For the period January 2, 1996, commencement of operations, through
November 30, 1996.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C>
American Variable Insurance Series (dollars
FINANCIAL STATEMENTS in
thousands)
Statement of Changes in Net Assets
for the year ended November 30, 1996
Inter- Growth-
Growth national Income
Fund Fund Fund
- ---------------------------------- ----------- ----------- -----------
OPERATIONS:
Net investment income $ 20,827 $ 40,449 $ 101,854
Net realized gain (loss) on investments 269,265 96,629 373,978
Net unrealized appreciation (depreciation)
on investments 183,049 177,135 407,012
----------- ----------- -----------
Net increase in net assets
resulting from operations 473,141 314,213 882,844
----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (24,246) (42,718) (101,529)
Distributions from net realized
gain on investments (259,930) (35,844) (159,645)
----------- ----------- -----------
Total dividends and distributions (284,176) (78,562) (261,174)
----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold:
12,825,093; 28,612,329; 16,813,646;
9,441,738; 7,434,995; 6,502,188;
3,523,988; 24,337,746 and 109,491,723
shares, respectively 506,249 412,624 540,891
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
7,512,662; 5,605,115; 8,475,637;
4,980,163; 137,024; 3,834,396;
3,478,224; 937,903 and 34,961,124 shares,
respectively 284,176 78,562 261,174
Cost of shares repurchased:
7,086,581; 4,238,963; 4,001,696;
2,391,438; 160,798; 2,875,119;
8,689,601; 21,049,530 and 50,493,726
shares, respectively (273,482) (60,680) (128,364)
Net increase (decrease) in net ----------- ----------- -----------
assets resulting from capital share
transactions 516,943 430,506 673,701
----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 705,908 666,157 1,295,371
NET ASSETS:
Beginning of year 3,154,441 1,703,471 3,953,269
----------- ----------- -----------
End of year (including
undistributed net investment
income: $4,638; $7,669; $25,264;
$9,974; $1,121; $14,357; $9,778;
$3,089 and $75,890, respectively) $3,860,349 $2,369,628 $5,248,640
============ ============ ============
Asset High-Yield
Allocation Bond Bond
Fund Fund/1/ Fund
- ---------------------------------- ----------- ----------- -----------
OPERATIONS:
Net investment income $ 38,391 $ 2,470 $ 55,086
Net realized gain (loss) on investments 72,509 38 4,194
Net unrealized appreciation (depreciation)
on investments 62,633 2,083 17,642
----------- ----------- -----------
Net increase in net assets
resulting from operations 173,533 4,591 76,922
----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (36,923) (1,349) (53,386)
Distributions from net realized
gain on investments (30,506) - -
----------- ----------- -----------
Total dividends and distributions (67,429) (1,349) (53,386)
----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold:
12,825,093; 28,612,329; 16,813,646;
9,441,738; 7,434,995; 6,502,188;
3,523,988; 24,337,746 and 109,491,723
shares, respectively 131,175 73,438 91,739
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
7,512,662; 5,605,115; 8,475,637;
4,980,163; 137,024; 3,834,396;
3,478,224; 937,903 and 34,961,124 shares,
respectively 67,429 1,349 53,386
Cost of shares repurchased:
7,086,581; 4,238,963; 4,001,696;
2,391,438; 160,798; 2,875,119;
8,689,601; 21,049,530 and 50,493,726
shares, respectively (33,309) (1,604) (40,681)
Net increase (decrease) in net ----------- ----------- -----------
assets resulting from capital share
transactions 165,295 73,183 104,444
----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 271,399 76,425 127,980
NET ASSETS:
Beginning of year 869,692 1,000/2/ 534,205
----------- ----------- -----------
End of year (including
undistributed net investment
income: $4,638; $7,669; $25,264;
$9,974; $1,121; $14,357; $9,778;
$3,089 and $75,890, respectively) $1,141,091 $77,425 $662,185
============ ============ ============
U.S.
Government/
AAA-Rated Cash
Securities Management
Fund Fund Total
- ---------------------------------- ----------- ----------- -----------
OPERATIONS:
Net investment income $ 38,502 $ 10,939 $ 308,518
Net realized gain (loss) on investments (2,883) - 813,730
Net unrealized appreciation (depreciation)
on investments (8,951) - 840,603
----------- ----------- -----------
Net increase in net assets
resulting from operations 26,668 10,939 1,962,851
----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (38,383) (10,336) (308,870)
Distributions from net realized
gain on investments - - (485,925)
----------- ----------- -----------
Total dividends and distributions (38,383) (10,336) (794,795)
----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold:
12,825,093; 28,612,329; 16,813,646;
9,441,738; 7,434,995; 6,502,188;
3,523,988; 24,337,746 and 109,491,723
shares, respectively 39,469 269,588 2,065,173
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
7,512,662; 5,605,115; 8,475,637;
4,980,163; 137,024; 3,834,396;
3,478,224; 937,903 and 34,961,124 shares,
respectively 38,383 10,336 794,795
Cost of shares repurchased:
7,086,581; 4,238,963; 4,001,696;
2,391,438; 160,798; 2,875,119;
8,689,601; 21,049,530 and 50,493,726
shares, respectively (96,167) (233,296) (867,583)
Net increase (decrease) in net ----------- ----------- -----------
assets resulting from capital share
transactions (18,315) 46,628 1,992,385
----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (30,030) 47,231 3,160,441
NET ASSETS:
Beginning of year 542,281 193,117 10,951,476
----------- ----------- -----------
End of year (including
undistributed net investment
income: $4,638; $7,669; $25,264;
$9,974; $1,121; $14,357; $9,778;
$3,089 and $75,890, respectively) $512,251 $240,348 $14,111,917
============ ============ ============
/1/ For the period January 2, 1996, commencement of operations, through November 30, 1996.
/2/ Represents initial capitalization from sale of 100,000 shares of beneficial interest.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
American Variable Insurance Series (dollars
FINANCIAL STATEMENTS in
thousands)
Statement of Changes in Net Assets
for the year ended November 30, 1995
Inter- Growth- Asset
Growth national Income Allocation
Fund Fund Fund Fund
- ---------------------------------- ----------- ----------- ----------- -----------
OPERATIONS:
Net investment income $ 23,635 $ 40,140 $ 88,796 $ 30,480
Net realized gain (loss) on investments 259,039 34,945 160,279 30,610
Net unrealized appreciation
on investments 480,224 83,096 691,459 129,814
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 762,898 158,181 940,534 190,904
----------- ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (20,133) (37,537) (85,055) (29,507)
Distributions from net realized
gain on investments (51,801) (44,136) (112,521) (9,640)
----------- ----------- ----------- -----------
Total dividends and distributions (71,934) (81,673) (197,576) (39,147)
----------- ----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold:
14,348,086; 19,173,422; 13,715,393;
6,084,975; 7,379,725; 6,989,389;
20,995,679 and 88,686,669 shares,
respectively 528,750 254,241 387,075 76,296
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
2,225,519; 6,335,172; 7,750,200;
3,296,555; 3,356,613; 3,279,414;
937,931 and 27,181,404 shares,
respectively 71,934 81,673 197,576 39,147
Cost of shares repurchased:
4,610,567; 8,773,846; 4,174,136;
2,877,501; 2,819,500; 6,063,251;
24,444,114 and 53,762,915 shares,
respectively (164,548) (113,837) (114,706) (34,878)
Net increase (decrease) in net ----------- ----------- ----------- -----------
assets resulting from capital share
transactions 436,136 222,077 469,945 80,565
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,127,100 298,585 1,212,903 232,322
NET ASSETS:
Beginning of year 2,027,341 1,404,886 2,740,366 637,370
----------- ----------- ----------- -----------
End of year (including
undistributed net investment
income: $8,057; $9,938; $24,939;
$8,506; $12,657; $9,659; $2,486
and $76,242, respectively) $3,154,441 $1,703,471 $3,953,269 $869,692
============ ============ ============ ============
U.S.
Government/
High-Yield AAA-Rated Cash
Bond Securities Management
Fund Fund Fund Total
- ---------------------------------- ----------- ----------- ----------- -----------
OPERATIONS:
Net investment income $ 46,966 $ 37,218 $ 10,687 $ 277,922
Net realized gain (loss) on investments (11,260) (5,497) - 468,116
Net unrealized appreciation
on investments 47,164 37,855 - 1,469,612
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 82,870 69,576 10,687 2,215,650
----------- ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS PAID TO
SHAREHOLDERS:
Dividends from net investment income (44,378) (36,115) (10,344) (263,069)
Distributions from net realized
gain on investments - - - (218,098)
----------- ----------- ----------- -----------
Total dividends and distributions (44,378) (36,115) (10,344) (481,167)
----------- ----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares sold:
14,348,086; 19,173,422; 13,715,393;
6,084,975; 7,379,725; 6,989,389;
20,995,679 and 88,686,669 shares,
respectively 99,350 77,672 233,089 1,656,473
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
2,225,519; 6,335,172; 7,750,200;
3,296,555; 3,356,613; 3,279,414;
937,931 and 27,181,404 shares,
respectively 44,378 36,115 10,344 481,167
Cost of shares repurchased:
4,610,567; 8,773,846; 4,174,136;
2,877,501; 2,819,500; 6,063,251;
24,444,114 and 53,762,915 shares,
respectively (37,940) (67,704) (271,390) (805,003)
Net increase (decrease) in net ----------- ----------- ----------- -----------
assets resulting from capital share
transactions 105,788 46,083 (27,957) 1,332,637
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 144,280 79,544 (27,614) 3,067,120
NET ASSETS:
Beginning of year 389,925 462,737 220,731 7,883,356
----------- ----------- ----------- -----------
End of year (including
undistributed net investment
income: $8,057; $9,938; $24,939;
$8,506; $12,657; $9,659; $2,486
and $76,242, respectively) $534,205 $542,281 $193,117 $10,950,476
============ ============ ============ ============
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. American Variable Insurance Series (the "series") is registered under the
Investment Company Act of 1940 as an open-end, diversified management
investment company with eight different funds. The eighth fund, the Bond Fund,
commenced operations on January 2, 1996. The assets of each fund are
segregated, with each fund accounted for separately. The funds' investment
objectives are as follows: Growth Fund - growth of capital by investing
primarily in common stocks or securities with common stock characteristics;
International Fund - long-term growth of capital by investing primarily in
securities of issuers domiciled outside the United States; Growth-Income Fund -
growth of capital and income by investing primarily in common stocks or other
securities which demonstrate the potential for appreciation and/or dividends;
Asset Allocation Fund - high total return (including income and capital gains)
consistent with long-term preservation of capital; Bond Fund - as high a level
of current income as is consistent with the preservation of capital by
investing primarily in fixed-income securities; High-Yield Bond Fund - high
current income and secondarily capital appreciation by investing primarily in
intermediate and long-term corporate obligations; U.S. Government/AAA-Rated
Securities Fund - a high level of current income consistent with prudent
investment risk and preservation of capital by investing primarily in a
combination of securities guaranteed by the U.S. government and other debt
securities rated AAA or Aaa; Cash Management Fund - high current yield while
preserving capital by investing in a diversified selection of high-quality
money market instruments. The following paragraphs summarize the significant
accounting policies consistently followed by the series in the preparation of
its financial statements:
Equity-type securities traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price
on the day of valuation; other securities, and securities for which no sale was
reported on that date, are stated at the last quoted bid price. Bonds and notes
are valued at prices obtained from a bond-pricing service provided by a major
dealer in bonds, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such securities
will be valued at the mean of their representative quoted bid and asked prices
or, if such prices are not available, at prices for securities of comparable
maturity, quality and type. Securities denominated in non-U.S. currencies are
generally valued on the basis of bid quotations. Short-term securities with
original or remaining maturities in excess of 60 days, including forward
currency contracts, are valued at the mean of their quoted bid and asked
prices. Short-term securities with 60 days or less to maturity are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as determined by
the Board of Trustees or a committee thereof.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Dividend and
interest income is reported on the accrual basis. Discounts on securities
purchased are amortized over the life of the respective securities. The series
does not amortize premiums on securities purchased. Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
Investment securities and other assets and liabilities, including forward
currency contracts, denominated in non-U.S. currencies are recorded in the
financial statements after translation into U.S. dollars utilizing rates of
exchange on the last business day of the year. Purchases and sales of
investment securities, income and expenses are calculated using the prevailing
exchange rate as accrued. The effects of changes in foreign currency exchange
rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities.
Common expenses incurred by the series are allocated among the funds based
upon relative net assets. In all other respects, expenses are charged to each
fund as incurred on a specific identification basis.
Pursuant to the custodian agreement, each fund within the series receives
credits against its custodian fee for imputed interest on certain balances with
the custodian bank. Custodian fees for the series aggregated $1,856,000, of
which $60,000 was paid by these credits rather than in cash.
2. It is the series' policy to continue to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. During the year ended November 30, 1996, the International Fund
realized, on a tax basis, a net capital gain of $96,027,000 on securities
transactions. During the year ended November 30, 1996, the High-Yield Bond Fund
utilized a capital loss carryforward of $2,806,000 to offset, for tax purposes,
capital gains realized during the year up to such amount. The High-Yield Bond
Fund and the U.S. Government/AAA-Rated Securities Fund had available at
November 30, 1996 capital loss carryforwards totaling $6,501,000 and $9,822,000
respectively, which may be used to offset capital gains realized during
subsequent years through November 30, 2003 and 2004, respectively. It is the
intention of these funds not to make distributions from capital gains while
there are capital loss carryforwards. For book and federal income tax purposes,
the amounts of unrealized appreciation and depreciation and the cost of
portfolio securities, excluding forward currency contracts, at November 30,
1996 were as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
(Table for footnote 2) (dollars
in
thousands)
Growth- Asset
Growth Interna- Income Allocation Bond
Fund tional Fund Fund Fund Fund
Unrealized
appreciation $1,099,498 $ 461,949 $1,280,331 $190,020 $ 2,234
Unrealized
depreciation 114,013 90,590 42,469 5,222 157
Net unrealized
appreciation 985,485 371,359 1,237,862 184,798 2,077
Cost of portfolio
securities 2,858,962 1,965,760 3,983,425 950,616 75,252
High-Yield U.S. Government/ Cash
Bond AAA-Rated Management
Fund Securities Fund Fund Total
Unrealized
appreciation $ 28,039 $ 9,479 - $ 3,071,550
Unrealized
depreciation 5,799 5,899 - 264,149
Net unrealized
appreciation 22,240 3,580 - 2,807,401
Cost of portfolio
securities 628,724 518,980 $239,756 11,221,475
</TABLE>
3. The fees for management services were paid pursuant to an Investment
Advisory and Service Agreement with Capital Research and Management Company
(CRMC), with which certain officers and Trustees of the series are affiliated.
The agreement provides for monthly fees, accrued daily, based on the following
annual rates: Growth Fund - 0.60% of the first $30 million of average net
assets; 0.50% of such assets in excess of $30 million but not exceeding $600
million; 0.45% of such assets in excess of $600 million but not exceeding $1.2
billion; 0.42% of such assets in excess of $1.2 billion but not exceeding $2.0
billion; and 0.37% of such assets in excess of $2.0 billion; International Fund
- - 0.90% of the first $60 million of average net assets; 0.78% of such assets in
excess of $60 million but not exceeding $600 million; 0.60% of such assets in
excess of $600 million but not exceeding $1.2 billion; 0.48% of such assets in
excess of $1.2 billion but not exceeding $2.0 billion; and 0.465% of such
assets in excess of $2.0 billion; Growth-Income Fund - 0.60% of the first $30
million of average net assets; 0.50% of such assets in excess of $30 million
but not exceeding $600 million; 0.45% of such assets in excess of $600 million
but not exceeding $1.5 billion; 0.40% of such assets in excess of $1.5 billion
but not exceeding $2.5 billion; and 0.32% of such assets in excess of $2.5
billion; Asset Allocation Fund - 0.60% of the first $30 million of average net
assets; 0.50% of such assets in excess of $30 million but not exceeding $600
million; and 0.42% of such assets in excess of $600 million; Bond Fund - 0.60%
of the first $30 million of average net assets; and 0.50% of such assets in
excess of $30 million; High-Yield Bond Fund - 0.60% of the first $30 million of
average net assets; 0.50% of such assets in excess of $30 million but not
exceeding $600 million; and 0.46% of such assets in excess of $600 million;
U.S. Government/AAA-Rated Securities Fund - 0.60% of the first $30 million of
average net assets; 0.50% of such assets in excess of $30 million but not
exceeding $600 million; and 0.40% of such assets in excess of $600 million;
Cash Management Fund - 0.50% of the first $100 million of average net assets;
0.42% of such assets in excess of $100 million but not exceeding $400 million;
and 0.38% of such assets in excess of $400 million.
The Board of Trustees has approved an amended Investment Advisory and
Service agreement, which provides for reduced fees for the Growth Fund,
Growth-Income Fund, and the Asset Allocation Fund effective December 1, 1996,
at the following annual rates: Growth Fund - 0.50% of the first $600 million of
average net assets; 0.45% of such assets in excess of $600 million but not
exceeding $1.2 billion; 0.42% of such assets in excess of $1.2 billion but not
exceeding $2.0 billion; 0.37% of such assets in excess of $2.0 billion but not
exceeding $3.2 billion; and 0.35% of such assets in excess of $3.2 billion;
Growth-Income Fund - 0.50% of the first $600 million of average net assets;
0.45% of such assets in excess of $600 million but not exceeding $1.5 billion;
0.40% of such assets in excess of $1.5 billion but not exceeding $2.5 billion;
0.32% of such assets in excess of $2.5 billion but not exceeding $4.0 billion;
and 0.285% of such assets in excess of $4.0 billion; Asset Allocation Fund -
0.50% of the first $600 million of average net assets; 0.42% of such assets in
excess of $600 million but not exceeding $1.2 billion; and 0.36% of such assets
in excess of $1.2 billion. Beginning October 1, 1996, CRMC has voluntarily
agreed to waive its management fees in excess of those provided by the amended
agreement.
Trustees who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the series. As of November 30,
1996, aggregate amounts deferred and earnings thereon were $110,000.
<TABLE>
<S> <C> <C> <C>
(Table for footnote 4) (dollars
in
thousands)
Growth-
Growth Interna- Income
Fund tional Fund Fund
As of November 30,
1996:
Accumulated
undistributed
net realized
gain (loss) on
investments $ 267,737 $ 95,444 $ 373,216
Paid-in capital 2,602,489 1,895,065 3,612,298
For the year
ended November 30,
1996:
Purchases of
investment
securities /1/ 1,304,842 1,121,564 1,584,674
Sales of invest-
ment securities /1/ 946,236 576,765 1,223,882
Asset High-Yield
Allocation Bond Bond
Fund Fund Fund
As of November 30,
1996:
Accumulated
undistributed
net realized
gain (loss) on
investments $ 72,422 $ 38 $ (7,163)
Paid-in capital 873,897 74,183 632,750
For the year
ended November 30,
1996:
Purchases of
investment
securities /1/ 458,007 66,769/2/ 295,440
Sales of invest-
ment securities /1/ 436,285 10,095/2/ 245,208
U.S. Government/ Cash
AAA-Rated Management
Securities Fund Fund Total
As of November 30,
1996:
Accumulated
undistributed
net realized
gain (loss) on
investments $ (11,022) - $ 790,672
Paid-in capital 509,915 $237,259 10,437,856
For the year
ended November 30,
1996:
Purchases of
investment
securities /1/ 167,672 - 4,998,968
Sales of invest-
ment securities /1/ 149,264 - 3,587,735
/1/ Excludes short-
term securities
/2/ For the period
January 2, 1996,
commencement of
operations, through
November 30, 1996.
</TABLE>
5. Dividend and interest income for the International Fund is recorded net of
non-U.S. taxes paid. For the year ended November 30, 1996, such non-U.S. taxes
were $5,796,000. Net realized currency gains on dividends, interest,
withholding taxes reclaimable, and sales of non-U.S. bonds and notes were
$877,000 for the year ended November 30, 1996.
The funds may enter into forward currency contracts, which represent an
agreement to exchange currencies of different countries at a specified future
date at a specified rate. The funds enter into these contracts to reduce their
exposure to fluctuations in foreign exchange rates arising from investments
denominated in non-U.S. currencies. The funds' use of forward currency
contracts involves market risk in excess of the amount recognized in the
statement of assets and liabilities. The contracts are recorded in the
statement of assets and liabilities at their net unrealized value. The face or
contract amount in U.S. dollars reflects the total exposure the funds have in
that particular contract. Losses may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from possible movements in non-U.S. exchange rates and securities values
underlying these instruments. At November 30, 1996, the Bond Fund had an
outstanding forward currency contract to sell non-U.S. currencies as follows:
<TABLE>
<S> <C> <C> <C> <C>
(Table for
footnote 5)
Non-U.S. Currency Sale ContractContract Amount U.S. Valuation at 11/30/96
Unrealized
Non-U.S. U.S. Amount Appreciation
------------------------------ --------------- ---------------
Deutsche Markes
expiring 1/8/97 DM275,000 $185,000 $179,000 $6,000
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
PER-SHARE
DATA AND
RATIOS
Net Total
realized & income Dividends
Net asset Net unrealized from from net
Year value, invest- gain (loss) invest- invest-
Ended beginning ment on invest- ment ment
11/30 of year income ments operations income
- --------- --------- --------- --------- --------- ---------
Growth Fund
1992 $24.18 $ .29 $ 4.25 $ 4.54 $(.31) /2/
1993 28.41 .25 4.13 4.38 (.24)
1994 32.34 .24 .69 .93 (.24)
1995 31.94 .33 10.63 10.96 (.29)
1996 41.81 .24 5.17 5.41 (.29)
International Fund
1992 $10.02 $ .19 $ (.09) $ .10 $ (.21)
1993 9.89 .17 2.50 2.67 (.16)
1994 12.40 .25 1.04 1.29 (.20)
1995 13.27 .34 1.02 1.36 (.33)
1996 13.89 .28 1.96 2.24 (.31)
Growth-Income Fund
1992 $21.72 $ .65 $ 2.74 $ 3.39 $ (.67)
1993 24.17 .63 2.12 2.75 (.63)
1994 26.01 .68 .14 .82 (.65)
1995 25.30 .73 7.20 7.93 (.73)
1996 31.47 .71 5.55 6.26 (.74)
Asset Allocation Fund
1992 $10.59 $ .48 $ .94 $ 1.42 $ (.49)
1993 11.47 .51 .67 1.18 (.49)
1994 12.01 .51 (.57) (.06) (.52)
1995 11.25 .50 2.69 3.19 (.50)
1996 13.77 .53 1.89 2.42 (.53)
Bond Fund /3/
1996 $10.00 $ .40 $ .16 $ .56 $ (.25)
High-Yield Bond Fund
1992 $13.53 $1.10 $ .62 $ 1.72 $(1.08)
1993 14.17 1.09 1.20 2.29 (1.10)
1994 15.17 1.27 (2.07) (.80) (1.23)
1995 12.89 1.32 1.10 2.42 (1.32)
1996 13.99 1.28 .54 1.82 (1.30)
U.S. Government/AAA-
Rated Securities Fund
1992 $11.22 $ .75 $ .32 $ 1.07 $ (.76)
1993 11.53 .74 .68 1.42 (.75)
1994 12.15 .76 (1.30) (.54) (.74)
1995 10.80 .82 .71 1.53 (.81)
1996 11.52 .83 (.24) .59 (.82)
Cash Management Fund
1992 $11.11 $ .35 $ .01 $ .36 $ (.43)
1993 11.04 .29 - .29 (.31)
1994 11.02 .37 .02 .39 (.32)
1995 11.09 .63 (.02) .61 (.59)
1996 11.11 .54 .01 .55 (.54)
Distri-
butions
from Net asset Net assets,
Year net Total value, end of
Ended realized distri- end of Total year (in
11/30 gains butions year return millions)
- --------- --------- --------- --------- --------- ---------
Growth Fund
1992 - $ (.31) $28.41 18.90% $1,212
1993 $ (.21) (.45) 32.34 15.59 1,737
1994 (1.09) (1.33) 31.94 2.92 2,027
1995 (.80) (1.09) 41.81 35.35 3,154
1996 (3.40) (3.69) 43.53 14.32 3,860
International Fund
1992 $ (.02) $ (.23) $ 9.89 0.90% $ 360
1993 - (.16) 12.40 27.20 840
1994 (.22) (.42) 13.27 10.48 1,405
1995 (.41) (.74) 13.89 10.78 1,703
1996 (.29) (.60) 15.53 16.66 2,370
Growth-Income Fund
1992 $ (.27) $ (.94) $24.17 15.90% $1,704
1993 (.28) (.91) 26.01 11.63 2,436
1994 (.88) (1.53) 25.30 3.21 2,740
1995 (1.03) (1.76) 31.47 33.14 3,953
1996 (1.26) (2.00) 35.73 21.02 5,249
Asset Allocation Fund
1992 $ (.05) $ (.54) $11.47 13.69% $ 359
1993 (.15) (.64) 12.01 10.59 578
1994 (.18) (.70) 11.25 (.54) 637
1995 (.17) (.67) 13.77 29.45 870
1996 (.48) (1.01) 15.18 18.65 1,141
Bond Fund /3/
1996 - $ (.25) $10.31 5.74% /4/ $ 77
High-Yield Bond Fund
1992 - $(1.08) $14.17 13.14% $ 197
1993 $ (.19) (1.29) 15.17 17.09 379
1994 (.25) (1.48) 12.89 (5.71) 390
1995 - (1.32) 13.99 19.81 534
1996 - (1.30) 14.51 13.75 662
U.S. Government/AAA-
Rated Securities Fund
1992 - $ (.76) $11.53 9.83% $ 360
1993 $ (.05) (.80) 12.15 12.65 505
1994 (.07) (.81) 10.80 (4.58) 463
1995 - (.81) 11.52 14.73 542
1996 - (.82) 11.29 5.49 512
Cash Management Fund
1992 - $ (.43) $11.04 3.31% $ 197
1993 - (.31) 11.02 2.67 206
1994 - (.32) 11.09 3.59 221
1995 - (.59) 11.11 5.65 193
1996 - (.54) 11.12 5.09 240
Ratio
Ratio of of net Average
Year expenses income to commissions Portfolio
Ended to average average paid per turnover
11/30 net assets net assets share /1/ rate
- --------- --------- --------- --------- ---------
Growth Fund
1992 0.53% 1.15% 6.89 cents 11.15%
1993 .50 .86 6.43 20.40
1994 .49 .78 6.09 29.58
1995 .47 .92 5.91 35.47
1996 .44 .61 5.42 30.88
International Fund
1992 1.00% 2.11% 1.22 cents 16.73%
1993 .96 1.75 .23 17.70
1994 .80 2.03 1.01 19.66
1995 .75 2.64 .16 24.66
1996 .69 1.99 1.24 32.08
Growth-Income Fund
1992 0.52% 3.01% 7.46 cents 13.60%
1993 .49 2.66 7.02 24.93
1994 .47 2.72 6.39 29.26
1995 .44 2.70 6.21 26.91
1996 .41 2.26 5.75 31.27
Asset Allocation Fund
1992 0.57% 4.73% 7.12 cents 19.74%
1993 .55 4.66 6.85 19.01
1994 .53 4.55 6.38 36.13
1995 .52 4.11 6.27 39.89
1996 .49 3.88 5.60 50.62
Bond Fund /3/
1996 .52% /4/ 6.18% /4/ - 32.83%/4/
High-Yield Bond Fund
1992 0.59% 8.88% - 47.44%
1993 .56 8.18 - 34.05
1994 .54 9.37 - 38.46
1995 .54 10.12 - 31.73
1996 .53 9.27 - 44.81
U.S. Government/AAA-
Rated Securities Fund
1992 0.57% 7.08% - 39.96%
1993 .55 6.42 - 21.69
1994 .54 6.69 - 45.21
1995 .54 7.37 - 30.11
1996 .53 7.33 - 30.45
Cash Management Fund
1992 0.53% 3.24% - -
1993 .51 2.57 - -
1994 .49 3.60 - -
1995 .49 5.37 - -
1996 .47 4.94 - -
/1/ Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not reflected
in the funds' statement of operations. Shares traded on a principal basis, such as most
over-the-counter and fixed-income transactions, are excluded. Generally, non-U.S. commissions
are lower than U.S. commissions when expressed as cents per share but higher when
expressed as a percentage of transactions because of the lower per-share
prices of many non-U.S. securities.
/2/ Amount includes net realized short-term gains treated as net investment income for
federal income tax purposes.
/3/ Commenced operations January 2, 1996.
/4/ Based on operations for the period shown and, accordingly, not representative of a
full year's operations.
See Notes to Financial Statements
</TABLE>
