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Previous: IDS LIFE MANAGED FUND INC, N-30D, 1996-11-06 |
Next: CATERPILLAR FINANCIAL SERVICES CORP, 8-K, 1996-11-06 |
<PAGE>
PAGE 1
Retirement Annuity Mutual Funds - Symphony
Annual Report 1996
This report contains information on six investment options, three
of which are available under your annuity contract. Please refer
to your Symphony Annuity Prospectus for information regarding the
investment options available to you.
Managed by IDS Life Insurance Company
<PAGE>
PAGE 2
Contents
The purpose of this annual report is to tell investors how the
Funds performed.
1996 annual report
From the president 4
Capital Resource Fund 5
From the portfolio manager 5
Ten largest holdings 6
Long-term performance 7
Special Income Fund 8
From the portfolio manager 8
Ten largest holdings 9
Long-term performance 10
Managed Fund 11
From the portfolio managers 11
Ten largest holdings 12
Long-term performance 13
Moneyshare Fund 14
From the portfolio manager 14
International Equity Fund 15
From the portfolio manager 15
Ten largest holdings 16
Long-term performance 17
Aggressive Growth Fund 18
From the portfolio manager 18
Ten largest holdings 19
Long-term performance 20
All Funds 21
Independent auditors' report 21
Financial statements 22
Notes to financial statements 29
Investments in securities 47
<PAGE>
PAGE 3
To our contract owners
(Photo of) William R. Pearce, President of the Funds
From the president
The stock market continued to advance throughout most of the past
12 months, while the bond market struggled for much of the period.
As a result, the IDS Life Retirement Annuity Mutual Funds that
invest primarily in U.S. securities experienced mixed results for
the past fiscal year -- September 1995 through August 1996.
While the stock and bond markets can be volatile on a short-term
basis, they historically have provided attractive returns over the
long term. A focus on long-term financial objectives and a
balanced investment program are good guidelines for investing in
today's economic environment.
The IDS Life Retirement Annuity Mutual Funds allow you to take
advantage of long-term opportunities through a variety of
investment avenues. Your licensed annuity representative can tell
you about the role each fund can play in meeting your long-term
financial objectives.
Your annuity representative also can help make sure your investment
and protection strategies continue to fit your financial situation
as your objectives and time horizons change.
William R. Pearce
<PAGE>
PAGE 4
Capital Resource Fund
(Photo of) Curt Weaver, Portfolio manager
From the portfolio manager
A summer setback reduced Capital Resource Fund's return for the
fiscal year, though its performance for the entire 12 months was
still positive. For September 1995 through August 1996, the Fund's
total return was 6.15%. (This figure does not reflect expenses
that apply to the variable accounts or subaccounts or to the
annuity contract.)
Aside from a handful of relatively brief retreats, stocks
maintained a pretty powerful pace until the spring of 1996. In
addition to the fundamental forces of strong corporate profits, a
low rate of inflation and declining long-term interest rates,
stocks also found themselves supported by increasingly large cash
flows from individual investors into mutual funds. As fund
managers put the money to work in stocks, the market moved higher.
This past summer, however, proved to be something of a struggle for
stocks, as signs of potentially higher inflation, already-higher
interest rates, less impressive corporate profits and sharply
reduced cash flows into mutual funds presented a hurdle to higher
stock prices. Things came to a head in July, when stocks
experienced their worst month in more than a year.
The Fund's performance roughly tracked that of the market for the
fiscal year, as it recorded a gain of nearly 15% through last May.
During those nine months, the Fund enjoyed expecially good results
from stocks of leisure, media and insurance companies.
Several other types of stocks also made somewhat smaller
contributions, including technology, health care and retailing.
Also benefiting performance was a minimal amount of cash reserves,
which offered a return far below what could be achieved by
investing in stocks.
Stocks' summer slump came earlier for the Fund, however, as a
series of poor earnings announcements from companies whose stocks
comprised a healthy portion of the portfolio sent those issues into
a slide during June and July. Because of that, the Fund was forced
to give up most of its previous gain.
During those months, cash reserves rose to higher levels than at
any time in the past year. In part, this was due to my ongoing
concerns about stock valuations and my inability to find
attractively priced stocks. These concerns were reinforced by an
assessment that the economy was stronger than generally perceived,
which, in turn, could lead to further inflation pressure and rising
long-term interest rates. Therefore, the portfolio continues to
carry somewhat higher-than-normal cash reserves, while the stock
selection has shifted somewhat traditional, large-capitalization
growth names that are overvalued to the more attractive,
economically sensitive issues as well as special situations.
Curt Weaver
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
The Funds ten largest holdings
Capital Resource Fund
(Pie chart) The ten holdings listed here make up 25.91% of the Fund's net assets
Percent Value
(of Fund's net assets) (as of Aug. 31, 1996)
<S> <C> <C>
Apple Computer 5.96% $260,687,500
A leading manufacturer of personal computers and
related software and peripherals.
Novell 4.24 185,265,625
A solid leader in local area network (LAN) software.
The company's NetWare family of products is a
leader in information-sharing among work groups and enterprises.
Time Warner 3.28 143,512,500
One of the world's largest media/entertainment/publishing companies.
Prominent operating units include Time magazine, Warner Bros. and HBO.
State Street Boston 2.35 102,837,500
Investment processing services for financial institutions and corporate
and government clients.
General Signal 1.84 80,250,000
The largest cable system operator, with over 10 million subscribers
in the United States. Approximately 70% of its business is regulated.
ALZA 1.78 78,018,750
A drug delivery company employing various technologies to improve
the efficacy, side-effect profile and patient compliance of
existing drugs. Technologies include transdermal, encapsulation and
electro-transport.
PacifiCare Health Systems Cl B 1.74 75,871,250
Owns and operates federally qualified health maintenance
organizations (HMOs) which provide health care services to
enrolled subscriber groups through independent health care organizations
under contract.
United Healthcare 1.61 70,490,625
A national leader in health care cost management and the largest
publicly held operator of health maintenance organizations.
Westinghouse Electric 1.61 70,412,500
A diversified, global company which engages in a wide variety of
businessses through its Westinghouse/CBS Group and its Industries
& Technology Group.
SGS - Thomson Microelectronics 1.50 65,400,000
A global independent semiconductor company that designs, manufactures
and markets a broad range of semiconductor integrated circuits
and discrete devices.
</TABLE>
<PAGE>
PAGE 6
The Fund's long-term performance
Capital Resource Fund
How $10,000 has grown in Capital Resource Fund
Average annual total return
(as of Aug. 31, 1996)
1 year 5 years 10 years
+6.15% +9.60% +12.48%
Capital Resource Fund
$32,423
S&P 500
$10,000
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, Standard & Poor's 500 Stock
Index (S&P 500).
The S&P 500, an unmanaged list of common stocks, is frequently used
as a general measure of market performance. However, the S&P 500
companies are generally larger than those in which the Fund
invests.
Your investment and return values fluctuate so that your
accumulation units, when redeemed, may be worth more or less than
the original cost. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results. The above graph does not reflect expenses that apply to
the variable accounts or the annuity contracts.
<PAGE>
PAGE 7
To our contract owners
Special Income Fund
(Photo of) Steven C. Merrell, Portfolio manager
From the portfolio manager
Despite a sharp downtown in the U.S. bond market late last winter,
Special Income Fund posted positive results during the fiscal year-
September 1995 through August 1996. For the 12 months, the Fund's
total return was 7.08%. (This figure does not reflect expenses
that apply to the variable accounts or subaccounts or to the
annuity contract.
The bond market enjoyed largely smooth sailing during the final
four months of 1995. Prompted by moderate economic growth, an
ongoing low inflation rate and the possiblity of a meaningful
balanced-budget agreement, long-term interest rates continued to
decline. As always, the drop in rates drove up prices of existing
bonds and, consequintly, the net asset value of mutual funds such
as this one.
This Fund especially benefited from the positive trend because of
its empahsis on bonds with longer-than-average maturities, whose
prices rise more than those of shorter-term bonds when rates fall.
Also providing an extra boost last year were our bond holdings in
so-called "emerging markets," including Brazil, Argentina, Mexico,
Poland, Indonesia and China. These bonds experienced strong price
appreciation and substantially contributed to the Fund's positive
performance. Low-grade bonds issued by U.S. companies also
genereated good results for the Fund.
The environment changed with the new year, however, as U.S. bond
investors became concerned about the future of the balanced-budget
agreement, political rhetoric stemming from the presidential
campaign and the possibility that the economy would overheat and
spark a run-up in inflation. The result was a rapid rise in long-
term interest rates during February and March that drove down bond
prices and, naturally, the Fund's net asset value.
To combat that trend, I shortened the portfolio's duration, which
is a strategy that makes the Fund less sensitive to interest rate
swings. That, combined with ongoing strong performance from
emerging market bonds, helped mitigate the negative effect of the
rise in rates.
Although I continue to expect some volatility in the bond market, I
think we're on more solid ground that we were several months ago.
At this writing (mid-September), there are signs that economic
growth may be moderating and that inflation may remain
unthreatening. Barring a change in those conditions, upward
pressure on long-term interest rates should lessen, allowing a more
positive tone to return to the market.
Steven C. Merrell<PAGE>
PAGE 8
<TABLE>
<CAPTION>
The Fund's ten largest holdings
Special Income Fund
(Pie chart) The ten holdings listed here make up 10.82% of the Fund's net assets
Percent Value
(of Fund's net assets) (as of Aug. 31, 1996)
<S> <C> <C>
Govt of Poland 2.74% $52,335,562
3.75% 2014
Govt of Venezuela 1.49 28,582,500
6.375% 2007
Hydro Quebec 1.09 20,794,200
8.50% 2029
GMAC 1.06 20,310,800
7.85% 1997
Republic of South Africa .88 16,923,090
12.00% 2005
United Kingdom Treasury .80 15,211,686
8.00% 2003
Wal-Mart .77 14,743,050
7.00% 2006
Govt of Canada .75 14,272,775
7.64% 2001
Tenet Healthcare .66 12,699,750
10.125% 2005
News America Holdings .58 11,016,400
10.125% 2012
Excludes U.S. Treasury and government agency holdings.
</TABLE>
<PAGE>
PAGE 9
The Fund's long-term performance
Special Income Fund
How your $10,000 has grown in Special Income Fund
Average annual total return
(as of Aug. 31, 1996) Special Income Fund
$23,259
1 year 5 years 10 years
+7.08% +9.61% +8.81%
Lehman Aggregate
Bond Index
$10,000
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, the Lehman Aggregate Bond
Index.
The Lehman Aggregate Bond Index is made up of a representative list
of government and corporate bonds as well as asset-backed
securities and mortgage-backed securities. The index is frequently
used as a general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in Special Income Fund.
Your investment and return values fluctuate so that your
accumulation units, when redeemed, may be worth more or less than
the original cost. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results. The above graph does not reflect expenses that apply to
the variable accounts or the annuity contracts.
<PAGE>
PAGE 10
To our contract owners
Managed Fund
(Photo of) Alfred Henderson and Deborah L. Pederson, Portfolio
managers
From the portfolio managers
Managed Fund weathered volatile conditions in the stock and bond
markets to provide contract owners with a total return of 10.95%
for the past fiscal year-September 1995 through August 1996. (This
figure does not reflect expenses that apply to the variable
accounts or subaccounts or to the annuity contract.)
The favorable forces of robust corporate profits, moderate economic
growth, low inflation and declining long-term interest rates
dominated the investment environment early in the period. Not
surprisingly, the stock market responded with a largely
uninterrupted advance that continued through February. Bonds
followed suit through January, when dimming hopes of an agreement
to balance the federal budget and concerns about higher inflation
drove up long-term interest rates and sent bond prices on a
downward spiral during February and March.
Somewhat calmer conditions returned to the markets for the next few
months. But in July concerns about potentially higher inflation
drove down stock prices, particularly those of technology-related
growth stocks.
Thanks to its diversified mix of stocks and bonds, the Fund's
performance was less volatile than that of the broad markets during
the fiscal year. The stock side of the portfolio comprised about
80% of portfolio assets in the fall of 1995. This was beneficial
to Fund performance given the strength of the market at that time.
As the fiscal year progressed, we brought the stock exposure down
to about 60-65%, as we grew somewhat less positive on the market's
near-term prospects. Probably the most notable change was our
decision to add more technology-related growth stocks, which
provided positive performance over the summer. Other changes
included a reduction in utility holdings and cash reserves, which
also worked to the Fund's advantage.
Our bond holdings made a substantial contribution to performance
for the first several months of the period. This boost resulted
largely from our "long duration" structure, which makes bond prices
more sensitive to interest-rate swings. When interest rates fell
during the final four months of 1995, our holdings enjoyed
substantial price appreciation. However, when rates rose last
February and March, the long duration penalized performance. We
were able to temper the effect, though, by shifting some money from
U.S. Treasury bonds into corporate bonds, which withstood the rate
rise relatively well, and by shortening the bond portfolio's
durations, which lessened the negative effect of the increase in
rates.
<PAGE>
PAGE 11
As we enter a new fiscal year, we are maintaining a somewhat
conservative investment structure overall, though the stock side of
the portfolio has a greater growth-stock flavor that it has had in
recent years. Once the current uncertainty surrounding economic
growth, inflation and interest rates abates, we will reposition the
portfolio in accordance with those key factors.
Alfred Henderson
Deborah L. Pederson
<PAGE>
PAGE 12
<TABLE>
<CAPTION>
The Fund's ten largest holdings
Managed Fund
(Pie chart) The ten holdings listed here make up 13.06% of the Fund's net assets
Percent Value
(of Fund's net assets) (as of Aug. 31, 1996)
<S> <C> <C>
General Electric 1.77% $61,512,500
A diversified company with interests in manufacturing,
broadcasting (NBC), services and technology.
Amoco 1.59 55,200,000
One of the major integrated domestic oil and gas
companies known traditionally for its
extensive Petroleum Marketing operations.
UNUM 1.44 50,200,000
$2.34 Cv Pfd
Through various subsidiaries, UNUM provides a broad
range of disability, health, life insurance and
group pensions products.
Emerson Electric 1.35 46,900,000
A diversified manufacturer of electrical and electronic
products for use in commercial and industrial products,
appliances and construction-related components.
Tyco Intl 1.21 42,250,000
A diverse, New England-based producer of packaging, cable
manufacturing, fire extinguishing systems, alarms and
controls, plus miscellaneous simple electronic parts.
Green Tree Financial 1.20 41,700,000
A diversified financial services company that originates
conditional sales contracts for manufactured homes, home
improvements, consumer products, and equipment financing,
and provides commercial financing to manufacturers and
dealers.
Raytheon 1.18 41,200,000
Designs, manufactures and sells electronic devices,
equipment and systems for government and commercial
use. About two-thirds of sales are to the military
(missiles and electronics).
BCE 1.13 39,375,000
A holding company that operates in the following business
groups: Canadian Telecommuications, Nortel, Bell Canada
International (BCI), Directories and Corporate.
Compaq Computer 1.10 38,221,875
Manufacturer of high-performance laptop, portable and
desktop personal computers.
Illinois Tool Works 1.09 38,018,750
A highly-regarded industrial manufacturer with a broad,
leading-edge base of capital goods
and consumer component products.
Excludes U.S. Treasury and government agency holdings.
</TABLE>
<PAGE>
PAGE 13
The Fund's long-term performance
Managed Fund
How your $10,000 has grown in Managed Fund
Average annual total return
(as of Aug. 31, 1996)
1 year 5 years 10 years
+10.95% +10.46% +11.08%
Managed Fund
$28,607
S&P 500
$10,000
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, the Standard & Poor's 500
Stock Index (S&P 500).
The S&P 500, an unmanaged list of common stocks, is frequently used
as a general measure of market performance. However, the S&P 500
companies are generally larger than those in which Fund invests.
Your investment and return values fluctuate so that your
accumulation units, when redeemed, may be worth more or less than
the original cost. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results. The above graph does not reflect expenses that apply to
the variable accounts or the annuity contracts.
<PAGE>
PAGE 14
To our contract owners
Moneyshare Fund
(Photo of) Terry Fettig, Portfolio manager
From the portfolio manager
Moneyshare Fund's yield fluctuated somewhat during the fiscal year
(September 1995 through August 1996), tracking a down-then-up trend
in short-term interest rates over the 12 months. For the seven-day
period ended Aug. 31, 1996, the Fund's compound annualized yield
was 4.90%, and the simple annualized yield was 4.79%. In keeping
with its objective, the Fund maintained a stable $1 per share price
throughout the 12-month period. (Although the Fund seeks to
maintain a $1 per share price, there is no assurance that it will
be able to do so. Also, an investment in the Fund is neither
insured nor guaranteed by the U.S. government.)
At the start of the fiscal year (August 1995), it appeared that
economic growth was moderating while inflation was remaining under
control. In that environment, the Federal Reserve decided to lower
short-term interest rates slightly. Two more of these so-called
"easing" moves were to follow-one in December and another in
January of 1996. (By way of background, the Fed adjusts short-term
rates based on the condition of the economy and the inflation
outlook. When the economy appears weak and inflation is low, the
Fed usually lowers rates to stimulate economic growth. When the
economy is strong, the Fed usually raises rates to moderate
economic growth and thereby keep inflation in check.)
While the effect was not dramatic, the rate reductions did lead to
lower rates on the securities this Fund invests in and, ultimately,
to a somewhat lower Fund yield. To counter that effect, we
emphasized investments in securities with longer maturities. By
last February, the average maturity of the portfolio had reached
approximately 53 days, compared with approximately 42 days at the
beginning of the fiscal year.
From that point, and without any action on the part of the Federal
Reserve, short-term rates began edging higher. The impetus was
provided by signs of a strengthening economy and potentially higher
inflation. This modestly higher rate trend remained in place
through the summer and prompted me to reduce the portfolio's
average maturity to about 40 days by period-end.
It's important to point out that these subtle shifts in the
portfolio's maturity level did not alter the Fund's top priority of
providing a stable cash investment for shareholders. In keeping
with that, I maintained our conservative portfolio-management
approach, which results in an exclusive focus on high-grade
securities (high-quality commercial paper, bankers' acceptances and
certificates of deposit).
<PAGE>
PAGE 15
At this writing (mid-September), it appears that the most likely
scenario for the months ahead is that economic growth will slow
down a bit. While that should help keep a lid on inflation, the
Fed may nevertheless find it necessary to nudge short-term rates
higher. Given the uncertainty of the situation at this point, I
plan to keep the portfolio's average maturity at approximately 40
days-a neutral structure that will allow me to easily adjust the
portfolio to take advantage of either a rate rise or decline.
Terry Fettig
<PAGE>
PAGE 16
To our contract owners
International Equity Fund
(Photo of) Paul Hopkins, Portfolio manager
From the portfolio manager
Despite ongoing volatility, international markets were generally
positive in the past 12 months. Reflecting this, International
Equity Fund registered a gain of 8.52% during the September 1995
through August 1996 period. (This figure does not reflect expenses
that apply to the variable accounts, subaccounts or to the annuity
contract.)
Japanese stocks were generally positive, although the depreciation
in the yen versus the U.S. dollar reduced returns. The market was
a good performer during the spring and was up nearly 5% in March
alone. Approximately 30% of the Fund's assets are invested in
Japan. Recently, we have added to the technology weighting,
specifically with the purchase of NEC, which is not nearly 2% of
the Fund's assets, one of the largest individual holdings.
Within Europe, the United Kingdom and Germany were both quite
strong while France was lackluster as the sluggish French economy
tempered stock performance. Weak currencies, particularly the
German mark, also reduced returns for U.S.-based investors. This
was partly offset by hedging some of the investments back into U.S.
dollars. During the 12 months, roughly 25% of the Fund assets were
invested in Europe.
Heading into the new fiscal year, the Fund's asset mix at the
country level is broadly unchanged . In Japan, the government's
monetary and fiscal stimuli should be good for stocks. In Europe,
the German economy appears to have bottomed out and is expected to
lead that part of the world out of recession. And in Southeast
Asia, where economies slowed down this year, the long-term growth
pattern appears ready to re-establish itself.
Paul Hopkins
<PAGE>
PAGE 17
<TABLE>
<CAPTION>
The Fund's ten largest holdings
International Equity Fund
(Pie chart) The ten holdings listed here make up 15.02% of the Fund's net assets
Percent Value
(of Fund's net assets) (as of Aug. 31, 1996)
_____________________________________________________________________________________
<S> <C> <C>
Sandoz (Switzerland) 2.25% $42,122,490
A manufacturer and seller of pharmaceuticals,
chemicals, seeds and agro-chemicals.
Nippon Denso (Japan) 1.65 30,922,141
This company and its subsidiaries form the
NatWest Group, which provides an extensive
range of banking and financial services through
offices and branches in the United Kingdom and
overseas.
Matsushita Electric (Japan) 1.57 29,472,667
One of the world's leading producers of electronic
and electric products. Most of Matsushita group's
products are marketed under several trade names,
including "Panasonic," "National," "Technics,"
"Quasar," "Victor" and "JVC."
TDK (Japan) 1.54 28,805,448
This company and its subsidiaries are engaged
in the manufacturing of components for use in
electronic equipment and machinery.
Nippon Steel (Japan) 1.42 26,707,009
Engaged in the manufacture of cokes, carbon
materials, petrochemicals and coal chemicals
for paints, synthetic resins, plastics,
electronic materials, industrial gases,
cement and building materials.
Siebe (United Kingdom) 1.42 26,527,672
A United Kingdom engineering company with
significant U.S. presence via Foxboro in control
devices and process systems.
NEC (Japan) 1.37 25,621,202
Operates with a synergistic business concept
of "C & C," the integration of computers and
communications. These operations comprise
three product categories: Communications
Systems and Equipment, Computers and Industrial
Electronic Systems, and Electron Devices.
Granada Group (United Kingdom) 1.30 24,441,219
With its subsidiaries, Granada Group is engaged
in renting and retailing electronics, providing
computer services, the television industry,
providing leisure services, and providing
services to businesses.
Credit Commercial de France (France) 1.28 23,990,401
The parent company of a banking group primarily
engaged in retail banking, investment banking,
asset management and international private banking.
Glaxo Wellcome (United Kingdom) 1.22 22,846,490
Engaged in the research, development, manufacture
and distribution of pharmaceuticals, which are
marketed primarily to wholesale drug distributors,
hospitals, pharmacies and health maintenance
organizations.
</TABLE>
<PAGE>
PAGE 18
The Fund's long-term performance
International Equity Fund
How your $10,000 has grown in International Equity Fund
Average annual total return International
(as of Aug. 31, 1996) Equity Fund
$14,929
Since
1 year 1/13/92
+9.64% +9.02%
Morgan Stanley Capital
International World Index
$10,000
1/13/92 '92 '93 '94 '95 '96
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, the Morgan Stanley Capital
International World Index (World Index).
The World Index, compiled from a composite of securities listed on
the markets of North America, Europe, Australasia and the Far East
is widely recognized by investors as the measurement index for
portfolios that invest in the major markets of the world.
Your investment and return values fluctuate so that your
accumulation units, when redeemed, may be worth more or less than
the original cost. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results. The above graph does not reflect expenses that apply to
the variable accounts or the annuity contracts.
<PAGE>
PAGE 19
To our contract owners
Aggressive Growth Fund
(Photo of) Martin G. Hurwitz, Portfolio manager
From the portfolio manager
Despite a steep decline last summer in the small-company growth
stocks that characterize this portfolio, Aggressive Growth Fund
managed to provide a double-digit return during the fiscal year
(September 1995 through August 1996). For the 12 months, the total
return was 11.82% (This figure does not reflect expenses that
apply to the variable accounts or subaccounts or to the annuity
contract.)
The favorable forces of moderate economic growth, low inflation,
healthy corporate profits and falling long-term interest rates
continued to push stocks higher during the first several months of
the period, extending the powerful bull market that was set in
motion at the start of 1995. In light of the positive investment
environment, I reduced the cash reserves in the portfolio and put
that money to work in stocks, whose return far exceeded that
available from cash-equivalent investments.
Much of the money went into stocks of biotechnology and oil
services companies. Concurrently, I reduced our holdings among
technology stocks (largely computer-related), a group that had
earlier comprised nearly half of portfolio assets.
The timing proved to be good, as the technology sector went into an
overall slump late in 1995, while most of our biotechnology and oil
services issues began to advance. In addition, the Fund enjoyed
largely positive results from holdings among health care,
retailing, restaurant and chemical stocks, plus those of selected
foreign companies. Prior to that, stocks of telecommunications
equipment, insurance and financial services companies were
especially productive for the Fund.
The Fund continued to gain ground through last spring, but the
advance would soon come to an abrupt end. Although there was only
modest change in key fundamentals such as inflation, economic
growth and corporate profits, by June many professional investors,
spurred mainly by a run-up in long-term interest rates, evidently
decided that stocks had run their course for the time and that it
was time to sell. As is usually the case, they first went after
those issues that had risen the most-namely, small-company growth
stocks, especially those in the technology sector. The result was
that in June and July, the Fund was forced to give back most of its
gain from the previous nine months.
<PAGE>
PAGE 20
While last summer's bloodletting was a distasteful way to finish
the fiscal year, it may turn out to be something of a blessing in
the long run because it made the stocks of many promising companies
more affordable. In fact, during August and early September, small
stocks as a whole began to bounce back. I certainly don't expect
smooth sailing for stocks in the current fiscal year, but I do
think there are enough opportunities for an agile investment
approach to yield positive results.
Martin G. Hurwitz
<PAGE>
PAGE 21
<TABLE>
<CAPTION>
The Fund's ten largest holdings
Aggressive Growth Fund
(Pie chart) The ten holdings listed here make up 13.43% of the
Fund's net assets
Percent Value
(of Fund's net assets) (as of Aug.31,1996)
__________________________________________________________________________________________________________
<S> <C> <C>
HBO & Company 2.81% $54,625,000
A health-care information service company that provides a
variety of computer-based information systems and services
to hospitals and their affiliates.
Cisco Systems 2.04 39,562,500
The leading designer and builder of devices that link
personal computers in powerful networks. Cisco is a
leader in the fast-growing business network market.
Paychex 1.34 26,081,250
Provider of computerized payroll accounting services
to more than 172,000 small- to medium-sized businesses
nationwide.
Hospitality Franchise System 1.23 23,950,000
The largest hotel franchiser in the world, as measured
by the number of rooms. The company provides operational
and administrative services to its franchises including
Days Inn, Ramada, Howard Johnson, Super 8, Park International
and Village Lodge brand names.
Oracle 1.16 22,471,875
One of the largest independent vendors of database-
management software offering a variety of new products,
enhancements and applications software.
First Data 1.01 19,500,000
Operates in one business segment providing high-quality,
high-volume information processing and related services
to specific client groups: the transaction card, payment
instruments, teleservices, mutual funds, health care,
receivables and information management industries.
Parametric Technology 1.00 19,470,938
A producer of software products for the automation of
complex engineering tasks that are essential to the
development of virtually all manufactured products.
Tyco Intl 1.00 19,405,425
A diverse, New England-based producer of packaging, cable
manufacturing, fire extinguishing systems, alarms and
controls, plus miscellaneous simple electronic parts.
Marriott Intl .93 18,108,750
Operates lodging facilities under five separate Marriott
brand names: Mariott Hotels, Resorts and Suites; Courtyard
Hotels; Residence Inn; Fairfield Inn; and Mariott Ownership
Resorts.
TJX .91 17,600,000
The largest off-price apparel retailer in North America.
The Company operates T.J. Maxx stores, the recently
acquired Marshalls chain of stores, and Winners Apparel
Ltd., a Canadian off-price family apparel chain.
</TABLE>
<PAGE>
PAGE 22
The Fund's long-term performance
Aggressive Growth Fund
How your $10,000 has grown in Aggressive Growth Fund
Average annual total return Aggressive
(as of Aug. 31, 1996) Growth Fund
$16,336
Since
1 year 1/13/92
+11.82% +11.15%
S&P 500
$10,000
1/13/92 '92 '93 '94 '95 '96
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, Standard & Poor's 500 Stock
Index (S&P 500).
The S&P 500, and unmanaged list of common stocks, is frequently
used as a general measure of the market performance. However, the
S&P 500 companies are generally larger than those in which the Fund
invests.
Your investment and return values fluctuate so that your
accumulation units, when redeemed, may be worth more or less than
the original cost. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results. The above graph does not reflect expenses that apply to
the variable accounts or the annuity contracts.
<PAGE>
PAGE 23
The board and shareholders
IDS Life Investment Series, Inc.
IDS Life Capital Resource Fund
IDS Life International Equity Fund
IDS Life Aggressive Growth Fund
IDS Life Special Income Fund, Inc.
IDS Life Moneyshare Fund, Inc. and
IDS Life Managed Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in securities,
of IDS Life Capital Resource Fund, IDS Life International Equity
Fund, IDS Life Aggressive Growth Fund, (funds within IDS Life
Investment Series, Inc.), IDS Life Special Income Fund, Inc., IDS
Life Moneyshare Fund, Inc. and IDS Life Managed Fund, Inc. as of
August 31, 1996, and the related statements of operations for the
year then ended and the statements of changes in net assets for
each of the years in the two-year period ended August 31, 1996. We
have also audited the financial highlights for each of the periods
presented in Note 9 to the financial statements. These financial
statements and the financial highlights are the responsibility of
Fund management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and
sold but not received or delivered, and securities on loan, we
request confirmations from brokers and, where replies are not
received, we carry out other appropriate auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
<PAGE>
PAGE 24
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of IDS Life Capital Resource Fund, IDS Life
International Equity Fund, IDS Life Aggressive Growth Fund, IDS
Life Special Income Fund, Inc., IDS Life Moneyshare Fund, Inc., and
IDS Life Managed Fund, Inc. at August 31, 1996 and the results of
their operations, the changes in their net assets, and the
financial highlights for the periods stated in the first paragraph
above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
October 4, 1996
<PAGE>
PAGE 25
<TABLE>
<CAPTION>
Statements of assets and liabilities
Retirement Annuity Mutual Funds
Aug. 31, 1996
Capital Special Managed
Resource Income Fund
Fund Fund
Assets
<S> <C> <C> <C>
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated
issuers (identified cost, $3,835,104,082;
$1,892,810,877 and $3,101,548,672 respectively) $3,820,948,332 $1,899,362,473 $3,495,337,797
Investments in securities of affiliated issuers
(identified cost, $718,514,347 for Capital
Resource Fund) 586,155,325 -- --
Cash in bank on demand deposit 3,556,649 -- --
Receivable for investment securities sold 29,168,945 7,104,915 7,269,117
Dividends and accrued interest receivable 5,657,924 31,137,176 18,800,078
U.S. government securities held as collateral for
securities loaned (Note 5) 5,507,109 80,577,399 81,726,488
Receivable (for capital stock sold) from:
IDS Life accounts 6,028,950 3,699,449 18,319,658
IDS Life of New York accounts 352,173 184,891 1,192,629
Total assets 4,457,375,407 2,022,066,303 3,622,645,767
Liabilities
Disbursements in excess of cash on demand deposit -- 1,080,338 147,364
Dividends payable to separate accounts (Note 1) 12,755,722 5,354,016 25,728,303
Payable for investment securities purchased 32,850,675 13,829,021 23,415,132
Accrued investment management and services fee 2,174,764 961,210 1,726,152
Unrealized depreciation on foreign currency
contracts held, at value (Notes 1 and 4) 2,160 -- --
Payable upon return of securities loaned (Note 5) 36,920,831 87,150,399 89,000,988
Payable (for capital stock redeemed) to:
IDS Life accounts -- 1,500,057 --
Other accrued expenses 802,391 343,636 563,659
Open option contracts written, at value
(premium received $396,260 for Managed Fund)(Note 8) -- -- 146,875
Total liabilities 85,506,543 110,218,677 140,728,473
Net assets applicable to outstanding capital stock $4,371,868,864 $1,911,847,626 $ 3,481,917,294
Represented by
Capital stock -- authorized 10,000,000,000
shares for each Fund of $.01 par value ($.001 for
Managed Fund); outstanding, 170,998,178; 165,711,504;
and 217,610,488 shares, respectively $ 1,709,982 $ 1,657,115 $ 217,610
Additional paid-in capital 3,849,041,747 1,889,313,160 2,860,670,518
Undistributed (excess of distributions over)
net investment income (2,086,918) (2,119,837) (2,225,051)
Accumulated net realized gain (Note 1) 669,718,521 14,828,295 229,206,401
Unrealized appreciation (depreciation) of investments
and on translation of assets and liabilities in foreign
currencies (Notes 4 and 7) (146,514,468) 8,168,893 394,047,816
Total -- representing net assets applicable to outstanding
capital stock $4,371,868,864 $1,911,847,626 $ 3,481,917,294
Net asset value per share of outstanding capital stock $ 25.57 $ 11.54 $ 16.00
See accompanying notes to financial statements.
<PAGE>
PAGE 26
Statements of assets and liabilities (continued)
Retirement Annuity Mutual Funds
Aug. 31, 1996
Moneyshare International Aggressive
Fund Equity Growth
Fund Fund
Assets
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated
issuers (identified cost, $289,823,876;
$1,807,735,562 and $1,687,574,425, respectively) $289,823,876 $1,923,397,199 $1,933,326,459
Investments in securities of affiliated issuers
(identified cost, $12,266,622 for Aggressive
Growth Fund) -- -- 16,337,750
Cash in bank on demand deposit 165,948 -- 2,296,659
Receivable for investment securities sold -- 21,028,517 6,556,761
Dividends and accrued interest receivable 238,315 4,992,000 827,452
Unrealized appreciation on foreign currency contracts
held, at value (Notes 1 and 4) -- 593,005 2,927
U.S. government securities held as collateral for
securities loaned (Note 5) -- 59,000,960 --
Receivable (for capital stock sold) from:
IDS Life accounts 854,162 416,680 1,861,511
IDS Life of New York accounts 37,905 -- 189,380
Total assets 291,120,206 2,009,428,361 1,961,398,899
Liabilities
Disbursements in excess of cash on demand deposit -- 789,176 --
Dividends payable to separate accounts (Note 1) 1,140,557 -- 2,949,647
Payable for investment securities purchased -- 9,941,028 12,756,333
Accrued investment management and services fee 119,712 1,280,433 965,713
Unrealized depreciation on foreign currency
contracts held, at value (Notes 1 and 4) -- 237,387 1,371
Payable upon return of securities loaned (Note 5) -- 120,591,560 3,200,000
Payable (for capital stock redeemed) to:
IDS Life accounts 1,517,316 1,511,691 --
IDS Life of New York accounts 165,972 37,611 --
Other accrued expenses 56,792 589,082 430,953
Total liabilities 3,000,349 134,977,968 20,304,017
Net assets applicable to outstanding capital stock $288,119,857 $1,874,450,393 $ 1,941,094,882
Represented by
Capital stock -- authorized 10,000,000,000
shares for each Fund of $.01 par value;
outstanding, 288,142,905; 140,912,770;
and 120,996,059 shares, respectively $ 2,881,429 $ 1,409,128 $ 1,209,961
Additional paid-in capital 285,239,062 1,719,233,598 1,477,380,195
Excess of distributions over net investment income (714) (1,731,277) (9,476)
Accumulated net realized gain (Note 1) 80 39,462,610 212,688,492
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies (Note 4) -- 116,076,334 249,825,710
Total -- representing net assets applicable to outstanding
capital stock $288,119,857 $1,874,450,393 $ 1,941,094,882
Net asset value per share of outstanding capital stock $ 1.00 $ 13.30 $ 16.04
See accompanying notes to financial statements.
<PAGE>
PAGE 27
Statements of operations
Retirement Annuity Mutual Funds
Year ended Aug. 31, 1996
Capital Special Managed
Resource Income Fund
Fund Fund
Income:
Investment income
Dividends (net of foreign taxes withheld of $404,294;
$22,791 and $621,728, respectively) $51,660,407 $ 656,439 $ 37,488,647
Dividends earned from affiliates for Capital Resource Fund 1,293,258 -- --
Interest (net of foreign taxes withheld of $266,948 for
Special Income Fund) 25,572,476 152,455,954 82,654,239
Total income 78,526,141 153,112,393 120,142,886
Expenses (Note 2):
Investment management services fee 26,046,721 11,311,856 19,987,805
Administrative services fee 1,804,056 894,104 991,587
Custodian fees and expenses 376,767 253,580 318,071
Compensation of board members and officers 101,543 41,114 91,790
Printing and postage 232,142 97,116 146,816
Audit fees 27,820 27,197 26,046
Registration fees 453,333 94,283 243,633
Other 45,979 21,467 31,544
Total expenses 29,088,361 12,740,717 21,837,292
Investment income -- net 49,437,780 140,371,676 98,305,594
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions (including
$53,981,593 realized loss on investments of affiliated
issuers for Capital Resource Fund) (Note 3) 679,436,528 38,984,702 275,660,376
Net realized gain (loss) on foreign currency transactions 25,673 (4,046,600) (43,075)
Net realized gain (loss) on closed or expired options contracts
written (Note 8) -- (105,126) 264,991
Net realized loss on closed interest rate futures contracts (Note 7) -- (1,963,506) --
Net realized gain on investments and foreign currency 679,462,201 32,869,470 275,882,292
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies (494,927,652) (49,126,958) (34,119,724)
Net gain (loss) on investments and foreign currency 184,534,549 (16,257,488) 241,762,568
Net increase in net assets resulting from operations $233,972,329 $124,114,188 $340,068,162
See accompanying notes to financial statements.
<PAGE>
PAGE 28
Statements of operations (continued)
Retirement Annuity Mutual Funds
Year ended Aug. 31, 1996
Moneyshare International Aggressive
Fund Equity Growth
Fund Fund
Income:
Investment income
Dividends (net of foreign taxes withheld of $0;
$6,054,323 and $111,812, respectively) $ -- $30,579,489 $ 4,969,838
Interest 14,076,718 7,178,696 17,913,461
Total income 14,076,718 37,758,185 22,883,299
Expenses (Note 2):
Investment management services fee 1,283,789 13,990,974 10,459,512
Administrative services fee 59,375 797,200 808,467
Custodian fees and expenses 20,401 1,115,809 263,639
Compensation of board members and officers 7,538 56,592 55,473
Printing and postage 6,572 51,683 82,128
Audit fees 15,688 19,000 22,539
Registration fees 16,574 193,152 114,494
Other 7,860 23,615 16,939
Total expenses 1,417,797 16,248,025 11,823,191
Investment income -- net 12,658,921 21,510,160 11,060,108
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions (including $5,434,742
realized loss on investments of affiliated issuers for
Aggressive Growth Fund) (Note 3) 325 72,152,375 243,203,290
Net realized gain (loss) on foreign currency transactions -- 17,185,787 (2,232)
Net realized gain on investments and foreign currency 325 89,338,162 243,201,058
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies -- 33,859,236 (79,505,605)
Net gain on investments and foreign currency 325 123,197,398 163,695,453
Net increase in net assets resulting from operations $12,659,246 $144,707,558 $174,755,561
See accompanying notes to financial statements.
<PAGE>
PAGE 29
</TABLE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Retirement Annuity Mutual Funds
Year ended Aug. 31,
Capital Resource Fund Special Income Fund
Operations and distributions 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Investment income -- net $ 49,437,780 $ 39,674,769 $140,371,676 $123,083,727
Net realized gain (loss) on investments
and foreign currency 679,462,201 383,135,166 32,869,470 (19,987,914)
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies (494,927,652) 128,698,908 (49,126,958) 94,905,201
Net increase in net assets resulting
from operations 233,972,329 551,508,843 124,114,188 198,001,014
Distributions to shareholders from:
Net investment income (47,593,459) (39,584,237) (135,814,306) (121,683,870)
Net realized gain (10,771,339) (383,078,138) -- (2,300,916)
Excess distributions of net investment
income (Note 1) (1,869,994) (52,587) -- (2,378,142)
Excess distributions of net realized
gain (Note 1) -- (977,300) -- --
Total distributions (60,234,792) (423,692,262) (135,814,306) (126,362,928)
Capital share transactions (Note 6)
Proceeds from sales 410,478,022 436,224,431 214,108,604 86,906,199
Reinvested distributions at net asset value 60,234,792 423,692,262 135,814,306 126,362,928
Payments for redemptions (117,295,599) (42,461,613) (129,574,450) (140,624,932)
Increase in net assets from capital share
transactions 353,417,215 817,455,080 220,348,460 72,644,195
Total increase in net assets 527,154,752 945,271,661 208,648,342 144,282,281
Net assets at beginning of period 3,844,714,112 2,899,442,451 1,703,199,284 1,558,917,003
Net assets at end of period $4,371,868,864 $3,844,714,112 $1,911,847,626 $1,703,199,284
Undistributed (excess of distributions over)
net investment income $ (2,086,918) $ (1,844,321) $ (2,119,837) $ 415,998
See accompanying notes to financial statements.
<PAGE>
PAGE 30
Statements of changes in net assets (continued)
Retirement Annuity Mutual Funds
Year ended Aug. 31, Managed Fund Moneyshare Fund
1996 1995 1996 1995
Operations and distributions
Investment income -- net $ 98,305,594 $79,031,286 $12,658,921 $10,161,955
Net realized gain (loss) on investments
and foreign currency 275,882,292 (49,425,540) 325 (152)
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies (34,119,724) 293,779,938 -- --
Net increase in net assets resulting
from operations 340,068,162 323,385,684 12,659,246 10,161,803
Distributions to shareholders from:
Net investment income (97,692,300) (78,601,919) (12,658,921) (10,161,955)
Net realized gain -- (198,282) -- --
Excess distributions of net investment
income (Note 1) (784,045) -- -- (126)
Total distributions (98,476,345) (78,800,201) (12,658,921) (10,162,081)
Capital share transactions (Note 6)
Proceeds from sales 203,558,285 265,867,838 247,288,271 113,426,072
Reinvested distributions at net asset value 98,476,345 78,800,201 12,658,921 10,162,081
Payments for redemptions (105,925,809) (44,391,869) (198,768,626) (75,889,680)
Increase in net assets from capital share
transactions 196,108,821 300,276,170 61,178,566 47,698,473
Total increase in net assets 437,700,638 544,861,653 61,178,891 47,698,195
Net assets at beginning of period 3,044,216,656 2,499,355,003 226,940,966 179,242,771
Net assets at end of period $3,481,917,294 $3,044,216,656 $288,119,857 $226,940,966
Excess of distributions over net
investment income $ (2,225,051) $ (613,294) $ (714) $ --
See accompanying notes to financial statements.
<PAGE>
PAGE 31
Statements of changes in net assets (continued)
Retirement Annuity Mutual Funds
Year ended Aug. 31,
International Equity Fund Aggressive Growth Fund
1996 1995 1996 1995
Operations and distributions
Investment income -- net $ 21,510,160 $ 19,548,137 $ 11,060,108 $ 7,510,039
Net realized gain (loss) on investments
and foreign currency 89,338,162 (16,979,187) 243,201,058 6,178,928
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies 33,859,236 (6,548,017) (79,505,605) 270,146,371
Net increase (decrease) in net assets resulting
from operations 144,707,558 (3,979,067) 174,755,561 283,835,338
Distributions to shareholders from:
Net investment income (15,453,784) (17,257,772) (11,052,242) (7,502,171)
Net realized gain (23,947,543) -- -- --
Excess distributions of net investment
income (Note 1) (18,917,064) -- (7,244) (7,442)
Total distributions (58,318,391) (17,257,772) (11,059,486) (7,509,613)
Capital share transactions (Note 6)
Proceeds from sales 335,601,053 360,572,294 388,624,475 383,256,895
Reinvested distributions at net asset value 58,318,391 17,257,772 11,059,486 7,509,613
Payments for redemptions (47,735,823) (26,008,343) (34,177,762) (17,849,325)
Increase in net assets from capital share
transactions 346,183,621 351,821,723 365,506,199 372,917,183
Total increase in net assets 432,572,788 330,584,884 529,202,274 649,242,908
Net assets at beginning of period 1,441,877,605 1,111,292,721 1,411,892,608 762,649,700
Net assets at end of period $1,874,450,393 $1,441,877,605 $1,941,094,882 $1,411,892,608
Excess of distributions over net
investment income $(1,731,277) $ (6,056,376) $ (9,476) $ (7,866)
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 32
___________________________________________________________________
1. Summary of significant accounting policies
Each Fund is registered under the Investment Company Act of 1940
(as amended) as a diversified, open-end management investment
company.
The investment objectives of each Fund are as follows:
Capital Resource invests primarily in U.S. common stocks;
Special Income invests primarily in investment grade bonds;
Managed invests in stocks, convertible securities, bonds and
money market instruments;
Moneyshare invests in money market securities;
International Equity invests primarily in common stocks of
foreign issuers;
Aggressive Growth invests primarily in stocks of small- and
medium-sized companies;
Shares of each Fund are sold through the purchase of an annuity
contract offered by IDS Life Insurance Company (IDS Life) or its
affiliates.
The significant accounting policies followed by the Funds are
summarized as follows:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
Securities traded on national securities exchanges or included in
the NASDAQ National Market System are valued at the last quoted
sales price at the close of each business day; securities traded
over-the-counter but not included in the NASDAQ National Market
System and securities for which a last quoted sales price is not
readily available are valued at the mean of the bid and asked
prices. Bonds and other securities are valued at fair value as
determined by the board when market quotations are not readily
available. Determination of fair value involves, among other
things, references to market indexes, matrices and data from
independent brokers. Short-term securities in Capital Resource,
Special Income, Managed, International Equity and Aggressive Growth
Fund maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on the
current interest rates; those maturing in 60 days or less are
valued at amortized cost. Pursuant to Rule 2a-7 of the 1940 Act,
all securities in Moneyshare Fund are valued at amortized cost
which approximates market value in order to maintain a constant net
asset value of $1 per share.
<PAGE>
PAGE 33
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, the Funds may buy and sell put and call options and write
covered call options on portfolio securities and write cash-secured
puts. The risk in writing a call option is that the Funds give up
the opportunity for profit if the market price of the security
increases. The risk in writing a put option is that the Funds may
incur a loss if the market price of the security decreases and the
option is exercised. The risk in buying an option is that the Funds
pay a premium whether or not the option is exercised. The Funds
also have the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist.
The Funds also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing
of the other party.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Funds may buy and sell stock index and interest rate
futures contracts. The Funds also may buy or write put and call
options on futures contracts. Risks of entering into futures
contracts and related options include the possibility that there
may be an illiquid market and a change in the value of the contract
or option may not correlate with changes in the value of the
underlying securities.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by
Special Income and Managed Funds on a forward-commitment or
when-issued basis can take place one month or more after the
transaction date. During this period, such securities are subject
to market fluctuations and they may affect each Fund's net assets
the same as owned securities. Each Fund designates cash or liquid
high-grade debt securities at least equal to the amount of its
commitment. As of Aug. 31, 1996, each Fund had entered into
outstanding when-issued or forward commitment of $4,765,000 and
$1,786,875, respectively.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. In the statement of
operations, net realized gains or losses from foreign currency
transactions may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the
trade date and settlement dates on securities transactions, and
other translation gains or losses on dividends, interest income and
foreign withholding taxes.
<PAGE>
PAGE 34
Illiquid securities
At Aug. 31, 1996, investments in securities for Capital Resource
Fund, Special Income Fund, Managed Fund, and Aggressive Growth Fund
included issues that are illiquid. The Funds currently limit
investments in illiquid securities to 10% of the net assets, at
market value, at the time of purchase. The aggregate value of such
securities at Aug. 31, 1996, was $28,250,000, $21,413,174,
$13,563,156, $2,915,130 and $363,125 that represents 0.65%, 1.12%,
0.39%, 0.15% and 0.75% of net assets for Capital Resource Fund,
Special Income Fund, Managed Fund and Aggressive Growth Fund,
respectively. Pursuant to guidelines adopted by the board, certain
unregistered securities are determined to be liquid and are not
included within the limitations specified above.
Federal income taxes
Since each Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to the Variable
Accounts, no provision for income or excise taxes is required. Each
Fund is treated as a separate entity for federal income tax
purposes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts, the
recognition of certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes, the timing and amount of market
discount recognized as ordinary income, foreign tax credits and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or
net realized gains may differ from their ultimate characterization
for federal income tax purposes. The effect on dividend
distributions of certain book-to-tax differences is presented
as "excess distributions" in the statement of changes in net
assets. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the
year that the income or realized gains (losses) are recorded by the
Funds.
On the Statements of Assets and Liabilities, due to permanent
book-to-tax differences, undistributed net investment income and
accumulated net realized gain (loss) have been increased
(decreased), resulting in net reclassification adjustments to
additional paid-in capital as follows:
<TABLE>
<CAPTION>
Capital Special International Aggressive
Resource Income Managed Moneyshare Equity Growth
<S> <C> <C> <C> <C> <C> <C>
Undistributed net investment income $(216,924) $(7,093,205) $(1,441,006) $ (714) $ 17,185,787 $ (2,232)
Accumulated net realized gain (loss) 216,924 7,093,205 1,441,006 714 (17,185,787) 2,232
Additional paid-in capital reduction $ -- $ -- $ -- $ -- $ -- $ --
(increase)
</TABLE>
<PAGE>
PAGE 35
Dividends
At Aug. 31, 1996, dividends declared for each Fund payable Sept. 3,
1996 are as follows:
Capital Resource $0.075
Special Income $0.032
Managed $0.119
Moneyshare $0.004
Aggressive Growth $0.024
Distributions to the Variable Accounts are recorded as of the close
of business on the record date and are payable on the first
business day following the record date. Dividends from net
investment income are declared daily and paid monthly for Special
Income and Moneyshare Funds and declared and paid quarterly for
Capital Resource, Managed, International Equity and Aggressive
Growth Funds. Capital gain distributions (if any) will be made
annually. However, an additional capital gain distribution may be
made during the fiscal year in order to comply with the Internal
Revenue Code, as applicable to regulated investment companies.
Other
Security transactions are accounted for on the date the securities
are purchased or sold. Dividend income is recognized on the
ex-dividend date and interest income, including amortization of
premium and discount on a level yield basis, is accrued daily.
___________________________________________________________________
2. Investment management and services agreement
The Funds have entered into an agreement with IDS Life for managing
investments, record keeping and other services that are based
solely on the assets of each Fund. The management fee is a
percentage of each Fund's average daily net assets in reducing
percentages annually as follows:
Fund Percentage Range
________________________________________________________________
Capital Resource 0.630% to 0.570%
Special Income 0.610% to 0.535%
Managed 0.630% to 0.550%
Moneyshare 0.510% to 0.440%
International Equity 0.870% to 0.795%
Aggressive Growth 0.650% to 0.575%
IDS Life, in turn, pays to American Express Financial Corporation
(AEFC) a fee based on a percentage of each Fund's average daily net
assets for the year. This fee is equal to 0.35% for International
Equity Fund and 0.25% for each remaining Fund. In addition to
paying its own management fee, brokerage commissions, taxes and
costs of certain legal services, each Fund will reimburse IDS Life
an amount equal to the cost of certain expenses incurred and paid
<PAGE>
PAGE 36
by IDS Life in connection with each Fund's operations. The Funds
also pay custodian fees to American Express Trust Company, an
affiliate of IDS Life. The reimbursement paid by Moneyshare Fund
will be limited to 0.25% of the Fund's average daily net assets.
The Funds have also entered into an Administrative Services
Agreement with AEFC. Under this agreement, each Fund pays AEFC for
administration and accounting services at a percentage of each
Fund's average daily net assets in reducing percentages annually as
follows:
Fund Percentage Range
Capital Resource 0.050% to 0.030%
Special Income 0.050% to 0.025%
Managed 0.040% to 0.020%
Moneyshare 0.030% to 0.020%
International Equity 0.060% to 0.035%
Aggressive Growth 0.060% to 0.035%
Prior to April 30, 1996, each Fund had a retirement plan for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense for the year and the total liability
for the plan are as follows:
Fund Liability Expense
Capital Resource $68,788 $32,166
Special Income 33,310 1,957
Managed 54,003 29,799
Moneyshare 9,348 1,561
International Equity 26,377 23,851
Aggressive Growth 22,217 16,598
The liability will be paid out at some future date.
___________________________________________________________________
3. Securities transactions
For the year ended Aug. 31, 1996, cost of purchases and proceeds
from sales of securities aggregated, respectively, $1,792,551,302
and $1,730,455,563 for Moneyshare Fund. Cost of purchases and
proceeds from sales of securities (other than short-term
obligations) aggregated for each Fund are as follows:
Fund Purchases Proceeds
Capital Resource $5,216,876,015 5,213,727,372
Special Income 1,168,682,060 996,875,478
Managed 2,953,933,344 2,626,069,127
International Equity 1,128,945,972 909,271,649
Aggressive Growth 2,737,102,117 2,657,743,146
Net realized gains and losses on investment sales are determined on
an identified cost basis.
<PAGE>
PAGE 37
Brokerage commissions paid to brokers affiliated with IDS Life for
the year ended Aug. 31, 1996 are as follows:
Capital Resource $841,159
Managed 76,269
Aggressive Growth 245,269
___________________________________________________________________
4. Foreign currency contracts
The Funds also may enter into forward foreign currency exchange
contracts for operational purposes. The net U.S. dollar value of
foreign currency underlying all contractual commitments held by the
Funds and the resulting unrealized appreciation and/or depreciation
are determined using foreign currency exchange rates from an
independent pricing service. The Funds are subject to the credit
risk that the other party will not complete the obligations of the
contract.
At Aug. 31, 1996, Capital Resource Fund, Aggressive Growth Fund and
International Equity Fund had entered into forward foreign currency
exchange contracts that obligate the Funds to deliver currencies at
a specified future date. The unrealized appreciation and/or
depreciation on these contracts is included in the accompanying
financial statements. The terms of the open contracts are as
follows:
<TABLE>
<CAPTION>
Capital Resource Fund
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
09-02-96 4,033,800 629,200 $ -- $ 44
Norway Krona U.S. Dollar
09-02-96 8,077,600 1,259,272 -- 776
Norway Krona U.S. Dollar
09-03-96 3,389,826 26,208,782 -- 175
U.S. Dollar Hong Kong Dollar
09-04-96 6,069,000 945,555 -- 1,165
Norway Krona U.S. Dollar
_____ _____
$ -- $ 2,160
<PAGE>
PAGE 38
Aggressive Growth Fund
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
09-03-96 2,268,817 17,541,583 $ -- $ 117
U.S. Dollar Hong Kong Dollar
09-04-96 1,095,988 4,903,450 233 --
U.S. Dollar Finnish Mark
09-10-96 137,919 4,236,876 1,131 --
U.S. Dollar Belgian Francs
09-10-96 541,826 16,480,174 -- 960
U.S. Dollar Belgian Francs
09-10-96 207,881 6,325,200 -- 294
U.S. Dollar Belgian Francs
09-30-96 4,733,670 936,470 1,563 --
French Franc U.S. Dollar
______ ______
$ 2,927 $ 1,371
International Equity Fund
Currency to Currency to Unrealized Unrealized
Exchange date be delivered be received appreciation depreciation
09-03-96 1,865,288 2,754,359 $ -- $ 4,172
U.S. Dollar Deutsche Mark
09-03-96 274,833 386,223 -- 332
U.S. Dollar Singapore Dollar
09-04-96 1,307,011 839,011 3,272 --
U.S. Dollar British Pound
09-04-96 212,252 298,639 -- --
U.S. Dollar Singapore Dollar
09-04-96 197,152 136,493 389 --
New Zealand Dollar U.S. Dollar
09-05-96 2,568,257 4,008,793 -- 2,055
British Pound U.S. Dollar
09-05-96 555,947,626 4,438,774 -- 6,495
Spanish Peseta U.S. Dollar
09-05-96 164,255 113,303 -- 90
New Zealand Dollar U.S. Dollar
09-30-96 41,289,818 8,159,076 4,270 --
French Franc U.S. Dollar
11-29-96 62,185,880 37,780,000 51,344 --
Dutch Guilder U.S. Dollar
11-29-96 272,177,550 54,490,000 533,730 --
French Franc U.S. Dollar
11-29-96 54,337,606 45,410,000 -- 224,243
Swiss Franc U.S. Dollar ________ ________
$593,005 $237,387
<PAGE>
PAGE 39
___________________________________________________________________
5. Lending of portfolio securities
Presented below is information regarding securities on loan at Aug.
31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Capital Special International Aggressive
Resource Income Managed Equity Growth
<S> <C> <C> <C> <C> <C>
Value of securities on loan to brokers $35,458,995 $83,524,800 $85,649,095 $118,721,146 $3,000,000
Collateral received for securities loaned:
Cash $31,413,722 $ 6,573,000 $ 7,274,500 $ 61,590,600 $3,200,000
U.S. Government Securities, at value 5,507,109 80,577,399 81,726,488 59,000,960 --
Total collateral received for securities
loaned $36,920,831 $87,150,399 $89,000,988 $120,591,560 $3,200,000
</TABLE>
Income from securities lending amounted to $672,786, $327,354,
$217,534, $421,694 and $54,130 for Capital Resource, Special
Income, Managed, International Equity and Aggressive Growth,
respectively, for the year ended Aug. 31, 1996.
The risks to each Fund of securities lending are that the borrower
may not provide additional collateral when required or return the
securities when due.
6. Capital share transactions
Transactions in shares of each Fund for the years ended Aug. 31,
1996 and 1995 are as follows:
<TABLE><CAPTION>
Year ended Aug. 31, 1996
Capital Special International Aggressive
Resource Income Managed Moneyshare Equity Growth
<S> <C> <C> <C> <C> <C> <C>
Sold 15,763,681 18,199,129 13,012,081 247,309,082 25,280,136 24,647,795
Issued for reinvested
distributions 2,332,581 11,583,367 6,196,744 12,659,993 4,329,590 675,192
Redeemed (4,539,063) (11,162,609) (6,655,268) (198,785,551) (3,581,859) (2,123,509)
Net increase 13,557,199 18,619,887 12,553,557 61,183,524 26,027,867 23,199,478
Year ended Aug. 31, 1995
Capital Special International Aggressive
Resource Income Managed Moneyshare Equity Growth
Sold 18,048,365 7,654,880 19,490,950 113,435,448 29,602,833 32,035,435
Issued for reinvested 17,356,230 11,415,969 5,727,716 10,162,908 1,338,365 638,223
distributions
Redeemed (1,723,811) (13,019,320) (3,226,704) (75,896,018) (2,106,010) (1,448,445)
Net increase 33,680,784 6,051,529 21,991,962 47,702,338 28,835,188 31,225,213
</TABLE>
<PAGE>
PAGE 40
7. Interest rate futures contracts
Upon entering into a futures contract, the Funds may be required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Funds each
day. The variation margin payments are equal to the daily changes
in the contract value and recorded as unrealized gains and losses.
The Funds recognize a realized gain or loss when the contract is
closed or expires.
At Aug. 31, 1996, investments in securities for Special Income Fund
included securities valued at $4,184,620 that were pledged as
collateral to cover initial margin deposits on 900 open sales
contracts. The market value of the open contracts at Aug. 31, 1996
was $96,103,125 with a net unrealized gain of $1,622,906.
8. Options contracts written
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Funds will realize a gain or loss
upon expiration or closing of the option transaction. When an
option is exercised the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the
amount of premium received or paid.
The number of contracts and premium amounts associated with option
contracts written by Managed Fund during the year ended Aug. 31,
1996 is as follows:
Calls
Contracts Premuim
Balance Aug. 31, 1995 -- $ --
Opened 7,100 719,249
Closed or expired (4,000) (264,991)
Exercised (800) (57,998)
Balance Aug. 31, 1996 2,300 $ 396,260
9. Financial highlights
The tables below show certain important information for evaluating
each Fund's results.
<PAGE>
PAGE 41
Performance
<TABLE>
<CAPTION>
Capital Resource Fund
Financial highlights
Fiscal year ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $24.42 $23.43 $24.58 $23.90 $23.15 $17.54 $20.17 $15.06 $17.71 $15.97
Income from investment operations:
Net investment income .30 .29 .29 .23 .21 .40 .52 .39 .31 .52
Net gains (losses) on securities (both realized
and unrealized) 1.22 3.70 1.56 1.89 1.75 6.61 (2.06) 5.38 (2.54) 4.23
Total from investment operations 1.52 3.99 1.85 2.12 1.96 7.01 (1.54) 5.77 (2.23) 4.75
Less distributions:
Dividends from net investment income (.29) (.29) (.29) (.23) (.21) (.40) (.52) (.39) (.31) (.52)
Distributions from realized gains (.07) (2.71) (2.71) (1.21) (1.00) (1.00) (.57) (.27) (.11) (2.49)
Excess distributions from net
investment income (.01) -- -- -- -- -- -- -- -- --
Total distributions (.37) (3.00) (3.00) (1.44) (1.21) (1.40) (1.09) (.66) (.42) (3.01)
Net asset value, end of period $25.57 $24.42 $23.43 $24.58 $23.90 $23.15 $17.54 $20.17 $15.06 $17.71
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of year
(in millions) $4,372 $3,845 $2,899 $2,308 $1,681 $1,191 $ 702 $ 660 $ 454 $ 493
Ratio of expenses to average
daily net assets .68% .69% .68% .68% .70% .70% .70% .73% .69% .59%
Ratio of net income to average
daily net assets 1.15% 1.22% 1.20% .94% .91% 1.94% 2.69% 2.22% 2.01% 2.94%
Portfolio turnover rate
(excluding short-term
securities) 131% 88% 85% 65% 63% 74% 82% 42% 111% 171%
Total return** 6.15% 17.18% 7.61% 8.87% 8.54% 40.68% (7.79)% 38.72% (12.59)% 30.32%
Average brokerage commission rate*** $0.0565 -- -- -- -- -- -- -- -- --
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
***Beginning in fiscal 1996, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by
dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total
number of related shares purchased and sold. See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 42
<TABLE>
<CAPTION>
Special Income Fund
Financial highlights
Fiscal period ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $11.58 $11.05 $12.08 $11.26 $10.72 $10.10 $11.11 $10.88 $11.09 $11.91
__________________________________________________________________________________________________________________________
Income (loss) from investment operations:
Net investment income .88 .88 .84 .85 .90 .97 .99 1.03 1.03 1.08
Net gains (losses) on securities (both
realized and unrealized) (.07) .56 (.99) .82 .54 .62 (1.01) .23 (.21) (.56)
___________________________________________________________________________________________________________________________
Total from investment operations .81 1.44 (.15) 1.67 1.44 1.59 (.02) 1.26 .82 .52
___________________________________________________________________________________________________________________________
Less distributions:
Dividends from net investment income (.85) (.87) (.85) (.85) (.90) (.97) (.99) (1.03) (1.03) (1.08)
Distributions from realized gains - (.02) (.02) - - - - - - (.26)
Excess distributions from net investment
income - (.02) (.01) - - - - - - -
___________________________________________________________________________________________________________________________
Total distributions (.85) (.91) (.88) (.85) (.90) (.97) (.99) (1.03) (1.03) (1.34)
___________________________________________________________________________________________________________________________
Net asset value, end of period $11.54 $11.58 $11.05 $12.08 $11.26 $10.72 $10.10 $11.11 $10.88 $11.09
___________________________________________________________________________________________________________________________
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period
(in millions) $1,912 $1,703 $1,559 $1,551 $1,136 $ 800 $ 641 $ 565 $ 428 $ 409
Ratio of expenses to
average daily net assets .68% .68% .67% .69% .71% .70% .71% .73% .69% .58%
Ratio of net income to
average daily net assets 7.47% 8.08% 7.20% 7.41% 8.22% 9.31% 9.42% 9.37% 9.45% 9.11%
Portfolio turnover rate
(excluding short-term
securities) 56% 56% 57% 77% 92% 97% 118% 132% 169% 101%
___________________________________________________________________________________________________________________________
Total return** 7.08% 13.75% (1.30)% 15.47% 13.96% 16.54% (.12)% 12.19% 7.76% 4.48%
Average brokerage commission rate*** $0.0546 -- -- -- -- -- -- -- -- --
___________________________________________________________________________________________________________________________
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
***Beginning in fiscal 1996, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by
dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total
number of related shares purchased and sold. See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 43
<TABLE>
<CAPTION>
Moneyshare Fund
Financial highlights
Fiscal period ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
_________________________________________________________________________________________________________________________
Income from investment operations:
Net investment income .05 .05 .03 .03 .04 .07 .08 .09 .07 .06
_________________________________________________________________________________________________________________________
Less distributions:
Dividends from net investment
income (.05) (.05) (.03) (.03) (.04) (.07) (.08) (.09) (.07) (.06)
_________________________________________________________________________________________________________________________
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
_________________________________________________________________________________________________________________________
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period
(in millions) $ 288 $ 227 $ 179 $ 180 $ 246 $ 285 $ 274 $ 160 $ 102 $ 67
_________________________________________________________________________________________________________________________
Ratio of expenses to average
daily net assets .56% .59% .57% .60% .60% .57% .62% .54% .58% .54%
_________________________________________________________________________________________________________________________
Ratio of net income to average
daily net assets 5.02% 5.23% 3.12% 2.67% 3.93% 6.55% 7.85% 8.68% 6.77% 5.87%
_________________________________________________________________________________________________________________________
Total return** 5.16% 5.27% 3.15% 2.73% 3.98% 6.77% 8.18% 8.99% 7.01% 6.01%
_________________________________________________________________________________________________________________________
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
</TABLE>
<PAGE>
PAGE 44
<TABLE>
<CAPTION>
Managed Fund
Financial highlights
Fiscal period ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.85 $13.65 $14.32 $13.08 $12.59 $10.93 $12.08 $9.87 $11.34 $10.10
Income from investment operations:
Net investment income .46 .40 .47 .49 .56 .58 .65 .48 .42 .45
Net gain (losses) on securities (both
realized and unrealized) 1.15 1.20 (.26) 1.60 .95 2.11 (.67) 2.25 (1.47) 1.45
Total from investment operations 1.61 1.60 .21 2.09 1.51 2.69 (.02) 2.73 (1.05) 1.90
Less distributions:
Dividends from net investment income (.46) (.40) (.47) (.49) (.56) (.58) (.65) (.48) (.42) (.45)
Distributions from net realized gains -- -- (.41) (.36) (.46) (.45) (.48) (.04) -- (.21)
Total distributions (.46) (.40) (.88) (.85) (1.02) (1.03) (1.13) (.52) (.42) (.66)
Net asset value, end of period $16.00 $14.85 $13.65 $14.32 $13.08 $12.59 $10.93 $12.08 $ 9.87 $11.34
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period (in millions) $3,482 $3,044 $2,499 $1,858 $1,169 $ 810 $ 545 $ 462 $ 381 $ 340
Ratio of expenses to average daily net
assets .65% .68% .68% .69% .71% .70% .71% .73% .69% .67%
Ratio of net income to average
daily net assets 2.94% 2.96% 3.46% 3.70% 4.35% 4.86% 5.42% 5.06% 4.42% 4.10%
Portfolio turnover rate (excluding
short-term securities) 85% 72% 79% 58% 50% 52% 37% 69% 62% 48%
Total return** 10.95% 11.94% 1.51% 16.33% 12.14% 25.24% (.23)% 28.47% (9.06)% 19.13%
Average brokerage commission rate*** $0.0606 -- -- -- -- -- -- -- -- --
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
***Beginning in fiscal 1996, the Fund is required to disclose an average brokerage commission rate. The rate is calculated by
dividing the total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period by the total
number of related shares purchased and sold. See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 45
<TABLE>
<CAPTION>
International Equity Fund
Financial highlights
Fiscal period ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992**
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.55 $12.91 $11.60 $10.01 $10.00
__________________________________________________________________________________________________
Income from investment operations:
Net investment income .20 .17 .14 .15 .05
Net gains (losses) on securities (both
realized and unrealized) 1.01 (.37) 1.61 1.81 .01
__________________________________________________________________________________________________
Total from investment operations 1.21 (.20) 1.75 1.96 .06
__________________________________________________________________________________________________
Less distributions:
Dividends from net investment income (.44) (.16) (.08) (.15) (.05)
Distributions from realized gains (.02) -- (.29) (.22) --
Excess distributions from realized gains -- -- (.07) -- --
__________________________________________________________________________________________________
Total distributions (.46) (.16) (.44) (.37) (.05)
__________________________________________________________________________________________________
Net asset value, end of period $13.30 $12.55 $12.91 $11.60 $10.01
__________________________________________________________________________________________________
Ratios/supplemental data
1996 1995 1994 1993 1992**
Net assets, end of period (in millions) $1,874 $1,442 $1,111 $ 291 $ 39
__________________________________________________________________________________________________
Ratio of expenses to average
daily net assets .96% 1.03% .98% 1.10% 1.57%***
Ratio of net income to average
daily net assets 1.28% 1.56% 1.09% 1.37% 0.93%***
Portfolio turnover rate (excluding
short-term securities) 58% 38% 51% 62% 22%
__________________________________________________________________________________________________
Total return# 9.64% (1.77%) 15.11% 19.76% 0.55%
Average brokerage commission rate## $0.0186 -- -- -- --
__________________________________________________________________________________________________
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 13, 1992 to Aug. 31, 1992.
***Adjusted to an annual basis.
#Total return does not reflect payment of the expenses that apply to the variable accounts
or any annuity charges.
## Beginning in Fiscal 1996, the Fund is required to disclose an average brokerage commission
rate. The rate is calculated by dividing the total brokerage commissions paid on applicable
purchases and sales of portfolio securities for the period by the total number of related
shares purchased and sold. See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 46
<TABLE>
<CAPTION>
Aggressive Growth Fund
Financial highlights
Fiscal period ended Aug. 31,
Per share income and capital changes*
1996 1995 1994 1993 1992**
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.44 $11.46 $11.68 $9.00 $10.00
_________________________________________________________________________________________________
Income (loss) from investment operations:
Net investment income .10 .08 .01 .02 .02
Net gains (losses) on securities (both
realized and unrealized) 1.60 2.98 (.22) 2.68 (1.00)
_________________________________________________________________________________________________
Total from investment operations 1.70 3.06 (.21) 2.70 (.98)
_________________________________________________________________________________________________
Less distributions:
Dividends from net investment income (.10) (.08) (.01) (.02) (.02)
_________________________________________________________________________________________________
Net asset value, end of period $16.04 $14.44 $11.46 $11.68 $ 9.00
_________________________________________________________________________________________________
Ratios/supplemental data
1996 1995 1994 1993 1992**
Net assets, end of period (in millions) $1,941 $1,412 $ 763 $ 299 $ 57
_________________________________________________________________________________________________
Ratio of expenses to average
daily net assets .69% .70% .69% .75% .98%***
Ratio of net income to average
daily net assets .65% .72% .14% .28% .21%***
Portfolio turnover rate (excluding
short-term securities) 189% 116% 59% 55% 28%
_________________________________________________________________________________________________
Total return# 11.82% 26.80% (1.77)% 29.98% (9.76)%
Average brokerage commission rate $0.0531 -- -- -- --
_________________________________________________________________________________________________
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Commencement of operations. Period from Jan. 13, 1992 to Aug. 31, 1992.
***Adjusted to an annual basis.
#Total return does not reflect payment of the expenses that apply to the variable accounts or
any annuity charges.
## Beginning in Fiscal 1996, the Fund is required to disclose an average brokerage commission
rate. The rate is calculated by dividing the total brokerage commissions paid on applicable
purchases and sales of portfolio securities for the period by the total number of related
shares purchased and sold. See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 47
<TABLE>
<CAPTION>
Retirement Annuity Mutual Funds (Percentages represent value of
Aug. 31, 1996 investments compared to total net assets)
Capital Resource Fund
Investments in securities of unaffiliated issuers
Common stocks (73.9%)
Issuer Shares Value(a)
__________________________________________________________________________________
<S> <C> <C>
Automotive & related (0.7%)
General Motors 575,000 $ 28,606,250
__________________________________________________________________________________
Banks and savings & loans (6.0%)
Associates First Capital Cl A 500,000 19,750,000
First Chicago 700,000 29,837,500
Great Western Financial 1,000,000 24,750,000
Mellon Bank 500,000 27,687,500
Norwest 700,000 26,337,500
SouthTrust 1,000,000 29,500,000
State Street Boston 1,900,000 102,837,500
Total 260,700,000
__________________________________________________________________________________
Building materials & construction (0.5%)
Weyerhaeuser 500,000 22,312,500
__________________________________________________________________________________
Chemicals (0.8%)
Betz Laboratories 230,100 11,303,662
Safety-Kleen 1,250,000 21,562,500
Total 32,866,162
__________________________________________________________________________________
Communications equipment & services (0.3%)
Brightpoint 350,000(b) 7,656,250
Geotek Communication 500,000(b) 4,562,500
Total 12,218,750
__________________________________________________________________________________
Computers & office equipment (5.0%)
BISYS Group 500,000(b) 17,937,500
Ceridian 500,000(b) 21,312,500
Checkfree 1,600,000(b) 26,600,000
Cylink 501,000(b) 7,295,813
Fiserv 1,150,000(b) 38,956,250
Hadco 187,500(b) 4,851,563
Infoseek 495,000(b) 3,155,625
Intuit 255,000(b) 9,307,500
Natl Processing 300,000(b) 5,137,500
Netscape Communications 125,000(b) 4,421,875
Network General 600,000(b) 10,200,000
Open Market 775,000(b) 10,850,000
Policy Mgmt Systems 347,100(b) 12,235,275
Solectron 371,200(b) 13,873,600
Sterling Commerce 500,000(b) 15,500,000
See accompanying notes to investments in securities
Wallace Computer Services 700,000 18,987,500
Total 220,622,501
__________________________________________________________________________________
Electronics (4.2%)
Microchip Technology 1,350,000(b) 49,612,500
Molex 160,300 5,269,863
Natl Semiconductor 1,600,000(b) 29,400,000
SCI Systems 550,000(b) 24,543,750
Sensormatic Electronics 3,200,000 58,800,000
Symbol Technologies 400,000(b) 17,800,000
Total 185,426,113
___________________________________________________________________________________
Financial services (0.8%)
AMRESCO 300,000 7,162,500
Insurance Auto Auctions 145,000(b) 1,286,875
MGIC Investment 400,000 25,350,000
Total 33,799,375
__________________________________________________________________________________
Health care (8.9%)
Abbott Laboratories 1,000,000 45,125,000
<PAGE>
PAGE 48
ALZA 2,850,000(b) 78,018,750
Baxter Intl 925,000 41,278,125
Diagnostic Products 275,600 10,231,650
Forest Labs 1,500,000(b) 61,687,500
Gilead Sciences 1,100,000(b) 26,675,000
STERIS 1,100,000(b) 33,825,000
U.S. Surgical 1,500,000 54,750,000
Watson Pharmaceuticals 1,300,000(b) 37,700,000
Total 389,291,025
__________________________________________________________________________________
Health care services (3.2%)
Gulf South Medical Supply 285,000(b) 6,198,750
Humana 1,600,000(b) 30,000,000
Tenet Healthcare 1,600,000(b) 33,600,000
United Healthcare 1,825,000 70,490,625
Total 140,289,375
__________________________________________________________________________________
Household products (0.4%)
Rubbermaid 700,000 18,550,000
__________________________________________________________________________________
Industrial equipment & services (4.7%)
AGCO 1,000,000 23,625,000
Barnett 350,000(b) 8,487,500
Fisher Scientific Intl 561,800 22,331,550
General Signal 2,000,000 80,250,000
Greenfield Inds 500,000 14,500,000
Illinois Tool Works 500,000 34,562,500
Superior Services 350,000(b) 5,687,500
USA Waste Services 500,000(b) 13,750,000
Total 203,194,050
__________________________________________________________________________________
Insurance (1.1%)
ACE 675,000 31,471,875
Everest Reinsurance Holdings 300,000 7,312,500
Reliance Group Holdings 500,000 3,937,500
Terra Nova Holdings 300,000 5,475,000
Total 48,196,875
__________________________________________________________________________________
Leisure time & entertainment (2.8%)
Carnival Cl A 1,525,000 43,081,250
Gaylord Entertainment Cl A 850,000 20,825,000
GTECH Holdings 1,125,000(b) 31,218,750
Harrah's Entertainment 1,000,000(b) 19,000,000
WMS Inds 400,000(b) 9,250,000
Total 123,375,000
__________________________________________________________________________________
Media (4.4%)
Deluxe 500,000 19,125,000
Digital Generation Systems 460,000(b) 3,737,500
Marvel Entertainment Group 438,400(b) 3,781,200
Reed Intl 600,000(f) 21,750,000
Time Warner 4,300,000 143,512,500
Total 191,906,200
__________________________________________________________________________________
Metals (0.2%)
Stillwater Mining 470,000(b) 9,635,000
__________________________________________________________________________________
Multi-industry conglomerates (2.7%)
Data Processing Resources 350,000(b) 6,475,000
Emerson Electric 500,000 41,875,000
Westinghouse Electric 4,300,000 70,412,500
Total 118,762,500
__________________________________________________________________________________
Paper & packaging (5.7%)
Champion Intl 1,110,000 47,730,000
Crown Cork & Seal 800,000 37,400,000
Fort Howard 650,000(b) 15,356,250
Intl Paper 600,000 24,000,000
James River 700,000 18,200,000
Kimberly-Clark 620,000 48,592,500
Stone Container 4,000,000 55,500,000
<PAGE>
PAGE 49
Total 246,778,750
__________________________________________________________________________________
Restaurants & lodging (0.5%)
Brinker Intl 1,500,000(b) 22,500,000
__________________________________________________________________________________
Retail (4.0%)
Arbor Drugs 730,000 15,147,500
Federated Department Stores 1,000,000(b) 34,625,000
Food Lion Cl A 3,500,000 30,187,500
General Nutrition 1,000,000(b) 14,750,000
Home Shopping Network 2,352,000(b) 25,284,000
K mart 4,200,000 42,000,000
Walgreen 420,000 13,860,000
Total 175,854,000
__________________________________________________________________________________
Textiles & apparel (0.4%)
Payless ShoeSource 500,000(b) 17,562,500
__________________________________________________________________________________
Utilities -- telephone (0.2%)
Nextel Communcations 627,900(b) 10,281,862
__________________________________________________________________________________
Foreign (12.1%) (h)
Amway Asia Pacific 1,500,000 45,937,500
Amway Japan ADR 488,047(f) 9,943,958
BAT Inds ADR 950,000(f) 12,587,500
CPT Telefonica del Peru-B 1,000,000 23,375,000
Daimler-Benz Aktieng 500,000(b) 27,250,000
Elsag Bailey Process Auto 1,100,000(b) 26,537,500
Grupo Casa Autrey ADR 1,000,000 23,750,000
Grupo Televisa 600,000(b) 18,225,000
Hafslund Nycomed 450,000 2,842,965
Mid Ocean 450,000 18,618,750
Moore 704,200 12,323,500
News Corp ADR 1,200,000 25,500,000
Reuters Holdings ADR 500,000(f) 34,937,500
Sandoz 29,000 34,507,124
Schibsted Group 740,000(e) 10,735,428
SGS - Thomson Microelectronics 1,600,000(b) 65,400,000
SmithKline Beecham ADR 500,000 29,125,000
Sony ADR 800,000 50,600,000
Swire Pacific Cl A 2,254,000 20,041,709
Tamro 1,400,000 9,170,476
Volkswagen 80,000 29,730,734
Total 531,139,644
__________________________________________________________________________________
Total common stocks
(Cost: $2,971,009,560) $3,043,868,432
__________________________________________________________________________________
Bonds (3.0%)
Issuer Principal Value(a)
amount
__________________________________________________________________________________
Computers & office equipment (1.2%)
Apple Computer
6% Cv 2001 50,000,000(e) $51,875,000
__________________________________________________________________________________
Electronics (0.6%)
SCI Systems
5% Cv 2006 25,000,000(e,i) 28,250,000
__________________________________________________________________________________
Retail (0.1%)
Home Shopping 4,000,000(e) 4,200,000
5.875% Cv 2006
__________________________________________________________________________________
Foreign (1.1%) (h)
Cemex(U.S. Dollar)
4.25% Cv 1997 25,000,000(e) 23,750,000
Rogers Communication(U.S. Dollar)
Zero Coupon Cv with attached put
5.50% 2013 65,000,000(g) 23,806,250
Total 47,556,250
__________________________________________________________________________________
Total bonds
(Cost: $128,212,712) $131,881,250
__________________________________________________________________________________
<PAGE>
PAGE 50
Preferred stocks & other (1.0%)
Issuer Shares Value(a)
__________________________________________________________________________________
AJL Peps Trust
$7.50 Cv 1,040,000(h) $19,630,000
Browning Ferris Inds
$7.25 Cv 826,600(b) 24,384,700
Viacom
Warrants 350,000 87,500
__________________________________________________________________________________
Total preferred stocks & other
(Cost: $48,521,544) $44,102,200
__________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (9.5%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (--%)
Federal Home Loan Mtge Corp Disc Nt
09-09-96 5.23% $ 400,000 $ 399,478
_____________________________________________________________________________________________________
Commercial paper (9.5%)
ABN AMRO North American Finance
10-11-96 5.52 15,000,000 14,903,545
American General Finance
09-17-96 5.41 5,900,000 5,884,355
10-07-96 5.36 10,000,000 9,941,485
Ameritech
09-17-96 5.43 4,400,000(c) 4,387,562
AVCO Financial Services
10-17-96 5.50 7,200,000 7,147,880
10-31-96 5.50 6,000,000 5,942,250
11-15-96 5.37 5,000,000 4,940,417
Beneficial
09-16-96 7.21 10,000,000 9,968,092
CAFCO
09-11-96 5.44 3,500,000 3,493,221
Cargill
09-23-96 5.47 11,500,000 11,457,150
10-01-96 5.36 12,300,000 12,243,652
10-23-96 5.50 5,000,000(c) 4,959,213
Chevron
09-16-96 5.45 5,000,000(c) 4,986,705
Ciesco LP
09-13-96 5.45 8,800,000 8,780,444
10-01-96 5.43 9,800,000 9,750,255
10-01-96 5.46 4,400,000 4,377,665
CPC Intl
09-20-96 5.40 5,900,000(c) 5,882,431
09-24-96 5.37 8,000,000(c) 7,969,523
09-26-96 5.45 5,000,000(c) 4,979,147
10-22-96 5.49 4,600,000(c) 4,563,049
Dean Witter
09-04-96 5.32 3,800,000 3,797,766
Deutsche Financial
10-16-96 5.32 18,400,000 18,271,578
Fleet Funding
09-13-96 5.34 5,400,000(c) 5,389,645
Gannett
10-15-96 5.52 9,600,000(c) 9,531,578
Goldman Sachs
09-09-96 5.50 1,600,000 1,597,524
09-10-96 5.47 10,000,000 9,983,209
Household Finance
09-19-96 5.44 10,000,000 9,967,465
Krediet Bank North America Finance
10-29-96 5.50 4,500,000 4,458,761
MetLife Funding
09-09-96 5.37 3,600,000 3,595,194
09-23-96 5.33 3,500,000 3,488,149
<PAGE>
PAGE 51
Mobil Australia Finance
09-18-96 5.45 9,000,000(c) 8,973,821
09-18-96 5.48 8,000,000(c) 7,976,730
10-02-96 5.49 8,000,000(c) 7,959,948
10-09-96 5.37 2,700,000(c) 2,683,734
Morgan Stanley
09-05-96 5.37 4,800,000 4,796,440
Natl Australia Funding
10-02-96 5.43 8,000,000 7,959,948
10-21-96 5.32 5,900,000 5,853,433
Northern States Power
10-07-96 5.37 6,500,000 6,462,645
Penney (JC) Funding
09-17-96 5.43 8,500,000 8,477,107
Pitney Bowes
10-08-96 5.52 9,200,000 9,145,501
10-09-96 5.49 4,700,000 4,658,145
10-17-96 5.51 6,040,000 5,996,277
12-06-96 5.53 6,100,000 6,007,673
Reed Elsevier
10-10-96 5.32 7,500,000(c) 7,456,000
SAFECO
09-20-96 5.40 3,500,000 3,489,578
09-23-96 5.40 6,000,000 5,977,771
09-25-96 5.41 8,000,000 7,967,513
10-02-96 5.44 1,900,000 1,890,223
Sandoz
09-11-96 5.41 2,600,000(c) 2,595,198
Siemens
09-12-96 5.31 10,800,000 10,780,956
Southwest Bell Capital
09-10-96 5.37 9,500,000 9,485,908
10-25-96 5.48 8,300,000(c) 8,228,665
Toyota Motor
10-04-96 5.32 11,000,000 10,945,147
Transamerica Financial
09-23-96 5.40 5,000,000 4,981,476
USAA Capital
09-19-96 5.41 7,700,000 7,675,036
U S WEST Communications
09-03-96 5.37 1,500,000 1,499,331
09-17-96 5.44 4,400,000 4,386,645
09-18-96 5.43 6,600,000 6,578,873
09-23-96 5.41 7,200,000 7,172,042
09-24-96 5.40 4,300,000 4,284,635
10-24-96 5.49 6,500,000 6,446,038
Total 415,431,347
______________________________________________________________________________________________________
Total short-term securities
(Cost: $415,937,255) $ 415,830,825
______________________________________________________________________________________________________
Total investments in securities of unaffiliated issuers
(Cost: $3,563,681,071) $3,635,682,707
____________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Investments in securities of affiliated issuers (d)
Common stocks (17.7%)
Issuer Shares Value(a)
__________________________________________________________________________________
<S> <C> <C>
Apple Computer 10,750,000 $ 260,687,500
Arbour Health Care 400,000(b) 8,600,000
Coram Healthcare 4,036,400(b) 15,641,050
Fulcrum 775,000(b,h) 9,493,750
Giddings & Lewis 2,100,000 27,300,000
Highlands Insurance Group 600,000(b) 11,400,000
New England Business Services 899,900 13,948,450
Novell 17,750,000(b) 185,265,625
Owens & Minor 3,000,000 31,500,000
PacifiCare Health Systems Cl B 942,500(b) 75,871,250
Primadonna Resorts 1,600,000(b) 32,400,000
Quality Food Centers 920,000(b) 28,750,000
Secure Computing 558,000(b) 7,393,500
Station Casinos 1,800,000(b) 20,925,000
Tootsie Roll Inds 1,194,200 42,244,825
<PAGE>
PAGE 52
_____________________________________________________________________________________________________
Total investments in securities of affiliated issuers
(Cost: $989,937,358) $ 771,420,950
_____________________________________________________________________________________________________
Total investments in securities
(Cost: $4,553,618,429)(j) $4,407,103,657
_____________________________________________________________________________________________________
Notes to investments in securities
(a)Securities are valued by procedures described in Note 1 to the financial statements.
(b)Non-income producing.
(c)Commercial paper sold within terms of a private placement memorandum, exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid under guidelines established by
the board.
(d)Investments representing 5% or more of the outstanding voting securities of the issuer. Transactions with
companies that are or were affiliates during the year ended Aug. 31, 1996 are as follows:
</TABLE>
<TABLE>
<CAPTION>
Beginning Purchase Sales Ending Dividend
Affiliates cost cost cost cost income
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Apple Computer* $ 91,139,645 $259,980,045 $ -- $ 351,119,690 $ 501,000
Arbour Health Care* -- 10,510,400 -- 10,510,400 --
Bolle America* 2,824,375 698,730 3,523,105 -- --
Career Horizons* 9,467,323 -- 9,467,323 -- --
CIBER* 2,828,450 2,171,250 4,999,700 -- --
Community Pysch Centers* 33,918,844 18,155,811 52,074,655 -- --
Coram Healthcare* 52,219,037 837,481 -- 53,056,518 --
DAKA Intl* 6,397,825 -- 6,397,825 -- --
Envoy* 4,268,172 2,836,950 7,105,122 -- --
FPA Medical Mgmt* 3,933,025 1,350,000 5,283,025 -- --
Fulcrum* 780,070 13,673,745 2,104,308 12,349,507 --
Giddings & Lewis* 22,096,410 13,685,570 -- 35,781,980 115,800
Grupo & Casa Autrey ADR* 17,078,410 7,527,859 10,037,950 14,568,319 155,700
HCC Insurance* 10,264,148 -- 10,264,148 -- --
Health Mgmt* 9,692,225 -- 9,692,225 -- --
Highlands Insurance* -- 11,771,851 -- 11,771,851 --
Ins Auto* 23,503,773 310,000 21,874,213 1,939,560 --
NBTY* 14,207,505 -- 14,207,505 -- --
New England Bus Service* -- 16,439,262 -- 16,439,262 329,980
Norton McNaughton* 13,604,115 1,411,400 15,015,515 -- --
Novell* 73,399,475 198,023,536 -- 271,423,011 --
Owens & Minor* 26,235,901 10,753,790 -- 36,989,691 46,125
Pacificare* -- 69,745,990 -- 69,745,990 --
PMT Services* 4,691,250 -- 4,691,250 -- --
Primadonna* 19,977,242 16,435,403 7,383,110 29,029,535 --
Quality Food Centers* 17,947,178 5,986,850 4,772,500 19,161,528 --
Quality Systems* -- 6,188,620 6,188,620 -- --
Regency Health Services* 13,455,442 3,685,859 17,141,301 -- --
Renaissance Solutions* 4,869,644 -- 4,869,644 -- --
Rogers Comm B* 22,102,065 21,503,369 43,605,434 -- --
Romac* 1,010,305 4,781,259 5,791,564 -- --
Secure Computing* -- 24,235,270 7,784,522 16,450,748 --
Simware* -- 5,078,150 5,078,150 -- --
Spiegal Cl A* 10,264,425 5,537,850 15,802,275 -- 63,750
Station Casinos* 4,816,252 20,021,628 -- 24,837,880 --
SysteMed* 8,779,150 3,424,450 12,203,600 -- --
Tootsie Roll* 17,835,470 13,434,300 -- 31,269,770 80,903
Ventritex* 17,386,524 -- 17,386,524 -- --
__________________________________________________________________________________________________________
Total $560,993,675 $770,196,678 $324,745,113 $1,006,445,240 $1,293,258
_________________________________________________________________________________________________________
(e)Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of
1933, as amended. This security has been determined to be liquid under guidelines established by the
board.
(f)Security is partially or fully on loan. See Note 5 to the financial statements.
(g) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the
date of acquisition.
(h)Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated
in the currency indicated.
<PAGE>
PAGE 53
(i)Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements).
Information concerning such security holdings at Aug. 31, 1996 is as follows:
Security Acquisition Purchase
date cost
________________________________________________________________________________________________________________
SCI Systems 04-17-96 $25,000,000
(j)At Aug. 31, 1996, the cost of securities for federal income tax purposes was $4,557,563,684 and the
aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . .$251,736,133
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . .. (402,196,160)
________________________________________________________________________________________________________________
Net unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . $(150,460,027)
________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 54
<TABLE>
<CAPTION>
Retirement Annuity Mutual Funds (Percentages represent value of
Aug. 31, 1996 investments compared to total net assets)
Special Income Fund
Bonds (91.1%)
Issuer Coupon Maturity Principal Value(a)
rate year amount
________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (13.1%)
Resolution Funding Corp 8.125% 2019 $ 48,059,000 $ 51,548,564
U.S. Treasury 5.875 2005 50,000,000(h) 46,449,000
6.375 2002 10,900,000 10,691,374
7.00 2006 30,000,000(h) 30,123,300
7.25 2016 12,700,000(i) 12,684,760
7.50 2016 40,000,000 40,959,600
7.875 2021 12,000,000 12,809,280
8.125 2019 42,200,000(i) 46,146,122
Total 251,412,000
________________________________________________________________________________________________________
Mortgage backed securities (19.2%)
Federal Home Loan Mtge Corp 8.00 2024 8,862,342 8,876,698
9.00 2007-25 14,153,924 14,560,733
Collateralized Mtge Obligation 7.00 2022 23,395,000 21,850,744
8.50 2022 10,000,000 10,428,000
Inverse Floater 4.17 2024 16,150,000(g) 8,970,679
4.26 2023 6,101,857(g) 2,871,351
Federal Natl Mtge Assn 6.00 2024-26 29,102,108 26,103,947
6.50 2010-25 102,920,899 95,216,704
7.00 2025 7,668,812 7,302,166
7.50 2025 52,541,380 51,359,199
8.00 2021-22 5,920,835 5,922,671
8.50 2007-23 21,423,448 21,991,649
9.00 2005-24 33,268,005 34,567,454
Collateralized Mtge Obligation
Inverse Floater 4.23 2024 13,627,812(g) 5,767,563
5.69 2023 7,244,751(g) 4,700,336
Government Natl Mtge Assn 6.00 2023-24 41,198,933 36,782,820
Adjustable Rate Mortgage 7.00 2024 7,812,375(j) 7,900,264
Structured Asset Securities Corp
Collateralized Mtge Obligation 6.76 2028 2,500,000 2,427,734
Total 367,600,712
_________________________________________________________________________________________________________
See accompanying notes to investments in securities.
_________________________________________________________________________________________________________
Aerospace & defense (0.7%)
Airplanes Cl D 10.875 2019 2,750,000 2,921,875
Alliant Techsystems
Sr Sub Nts 11.75 2003 3,000,000(d) 3,270,000
BE Aerospace 9.875 2006 5,000,000(d) 5,006,250
K&F Inds 10.375 2004 1,600,000(d) 1,620,000
Total 12,818,125
_________________________________________________________________________________________________________
Airlines (0.3%)
AMR 9.50 2001 4,500,000 4,862,610
_________________________________________________________________________________________________________
Automotive & related (2.0%)
Ford Motor Credit 7.50 2003 5,000,000 5,059,600
GMAC 7.85 1997 20,000,000 20,310,800
Medium-term Nts 5.95 1998 10,000,000 9,838,800
Mascotech
Cv 4.50 2003 3,500,000 2,703,750
Total 37,912,950
__________________________________________________________________________________________________________
Banks and savings & loans (1.0%)
BankAmerica 7.50 2002 7,500,000 7,575,675
Fleet/Norstar Financial 9.00 2001 5,000,000 5,363,600
9.90 2001 5,000,000 5,515,400
Total 18,454,675
___________________________________________________________________________________________________________
<PAGE>
PAGE 55
Building materials & construction (0.8%)
AAF McQuay
Sr Nts 8.875 2003 10,000,000 9,700,000
Masco 9.00 2001 5,000,000 5,371,500
Total 15,071,500
___________________________________________________________________________________________________________
Chemicals (0.4%)
G-I Holdings
Sub Nts 10.00 2006 1,733,000(d) 1,687,509
Zero Coupon 11.37 1998 1,820,000(d,l) 1,531,075
General Chemical 9.25 2003 5,000,000 4,956,250
Total 8,174,834
_________________________________________________________________________________________________________
Communications equipment & services (1.3%)
American Communication Services
Zero Coupon 14.64 2000 3,000,000(d,m) 1,650,000
Celcaribe
Zero Coupon Cv 10.31 1998 1,450,000(d,m) 1,573,250
Zero Coupon Cv 14.66 1998 1,700,000(d,m) 1,394,000
CenCall Communications
Zero Coupon Cv 10.00 1999 4,000,000(m) 2,400,000
Comcast Cellular
Zero Coupon with attached put 9.53 1995 4,475,000(l) 3,121,313
GST Telecommunications
Zero Coupon 7.45 2000 1,745,000(d,m) 1,465,800
Intl Cabletel
Zero Coupon 12.04 2001 5,000,000(d,m) 2,937,500
Ionica 13.50 2006 6,435,000(d) 6,410,869
Shared Technologies
Zero Coupon 12.25 1999 4,000,000(d,m) 3,065,000
Total 24,017,732
_________________________________________________________________________________________________________
Computers & office equipment (0.3%)
Softkey Intl
Cv 5.50 2000 5,000,000(d) 4,025,000
Solectron 6.00 2006 2,000,000(d) 1,835,000
Total 5,860,000
_________________________________________________________________________________________________________
Electronics (0.2%)
Thomas & Betts 6.50 2006 4,500,000(d) 4,146,615
_________________________________________________________________________________________________________
Energy (2.3%)
Honam Oil 7.125 2005 9,000,000(d) 8,535,060
Occidental Petroleum
Medium-term Nts 10.98 2000 5,000,000 5,607,050
with attached put 9.25 2019 8,725,000 9,881,063
Oryx Energy 10.00 2001 5,000,000 5,372,300
PDV America 7.875 2003 7,500,000 7,153,050
Triton Energy
Zero Coupon 9.75 1996 5,000,000(m) 4,925,000
UNC
Sr Sub Nts 11.00 2006 3,000,000(d) 3,120,000
Total 44,593,523
_________________________________________________________________________________________________________
Financial services (1.8%)
Developers Div Realty 7.00 1999 1,500,000 1,531,875
First Union REIT
Sub Nts 8.875 2003 4,000,000 3,700,000
GPA Delaware 8.75 1998 1,500,000 1,500,000
Household Finance
Sr Sub Nts 9.55 2000 6,500,000 6,985,615
Malan Realty REIT
Cv 9.50 2004 2,300,000(d) 2,133,250
Olympic Financial 13.00 2000 6,500,000 7,085,000
Salomon Brothers Holdings
Medium-term Nts 6.99 1999 5,000,000 4,969,600
Standard Credit Card 8.625 2002 6,590,000 6,645,158
Total 34,550,498
__________________________________________________________________________________________________________
Food (0.2%)
Specialty Foods 11.25 2003 4,000,000(d,l) 3,355,000
Zero Coupon 13.00 1999 1,000,000(d,m) 416,250
<PAGE>
PAGE 56
Total 3,771,250
_________________________________________________________________________________________________________
Furniture & appliances (0.3%)
Interface 9.50 2005 5,000,000(d) 4,818,750
_________________________________________________________________________________________________________
Health care (0.6%)
Dade Intl
Sr Sub Nts 11.125 2006 3,000,000(e) 3,157,500
Eli Lilly 6.77 2036 10,000,000 8,786,600
Total 11,944,100
_________________________________________________________________________________________________________
Health care services (1.8%)
Columbia/HCA Healthcare 7.69 2025 6,500,000 6,301,620
Foundation Health 7.75 2003 3,250,000 3,267,940
Healthsource
Cv 5.00 2003 3,000,000(e) 2,291,250
Magellan Health
Sr Sub Nts 11.25 2004 5,000,000(d) 5,356,250
Merit Behavioral 11.50 2005 2,000,000(d) 2,097,500
Owens & Minor
Sr Sub Nts 10.875 2006 2,000,000 2,072,500
Tenet Healthcare
Sr Sub Nts 10.125 2005 11,800,000 12,699,750
Total 34,086,810
_________________________________________________________________________________________________________
Household products (0.2%)
Revlon Consumer Products 9.375 2001 2,500,000 2,525,000
Sweetheart Cup
Sr Sub Nts 9.625 2000 2,000,000 2,022,500
Total 4,547,500
_________________________________________________________________________________________________________
Industrial equipment & services (1.1%)
ADT Operations 9.25 2003 3,500,000 3,675,000
AGCO 8.50 2006 2,800,000(d) 2,789,500
Case 7.25 2005 5,475,000 5,317,648
Clark Equipment 9.75 2001 5,000,000 5,417,100
IDEX 9.75 2002 3,000,000 3,153,750
Total 20,352,998
_________________________________________________________________________________________________________
Industrial transportation (0.3%)
CSX
Medium-term Nts 9.23 1998 5,000,000 5,175,250
_________________________________________________________________________________________________________
Insurance (1.0%)
Americo Life 9.25 2005 4,500,000 4,291,875
Nationwide CSN Trust 9.875 2025 6,500,000(d) 6,939,270
Nationwide Mutual 7.50 2024 4,000,000(d) 3,523,680
New England Mutual
Credit Sensitive Nts 7.875 2024 5,000,000(d) 4,704,400
Total 19,459,225
_________________________________________________________________________________________________________
Leisure time & entertainment (1.4%)
AMF Group
Zero Coupon 12.25 2001 5,500,000(d,m) 3,210,625
Bally's Park Place Funding
1st Mtge 9.25 2004 6,500,000 6,865,625
Coast Hotels 13.00 2002 1,600,000(d) 1,712,000
Plitt Theatres 10.875 2004 5,000,000 5,118,750
Trump Atlantic City Funding 11.25 2006 7,500,000 7,200,000
Trump Holdings
Sr Nts 15.50 2005 2,500,000 2,878,125
Total 26,985,125
_________________________________________________________________________________________________________
Media (5.3%)
Ackerley Communications
Sr Secured Nts 10.75 2003 2,500,000(d) 2,637,500
American Telecasting
Zero Coupon 11.75 2000 4,000,000(e,m) 2,430,000
Cablevision Systems 10.50 2016 5,000,000 4,925,000
10.75 2004 2,000,000 2,050,000
<PAGE>
PAGE 57
Continental Cablevision
Sr Sub Deb 8.875 2005 5,000,000 5,343,750
Cox Communications 7.625 2025 10,000,000 9,460,700
Echostar Satellite Broadcasting
Zero Coupon Cv 13.125 2000 8,300,000(d,m) 5,125,250
Heritage Media Services 8.75 2006 2,000,000 1,885,000
News America Holdings 8.875 2023 2,500,000 2,563,000
10.125 2012 10,000,000 11,016,400
12.00 2001 5,000,000 5,357,800
Outdoor Systems
Sr Sub Nts 11.41 2008 4,666,667 4,666,667
People's Choice TV
Zero Coupon 11.60 2000 5,000,000(m) 2,875,000
Scandinavian Broadcasting
Cv Sub Deb 7.25 2005 4,670,000 4,611,625
Time Warner Entertainment 6.21 2000 2,500,000 2,506,250
7.975 2004 1,500,000 1,478,745
8.11 2006 3,000,000 2,947,770
8.18 2007 3,000,000 2,948,910
8.375 2033 7,500,000(d) 7,128,150
9.15 2023 10,000,000 10,179,300
United Artist Theatre 9.30 2015 4,958,824(d) 4,524,927
ViaCom 7.00 2003 2,500,000 2,295,125
8.00 2006 3,000,000 2,760,000
Total 101,716,869
_________________________________________________________________________________________________________
Metals (0.8%)
Bar Technologies
Units 13.50 2001 4,500,000(d) 4,387,500
Magma Copper 12.00 2001 5,000,000 5,456,250
Santa Fe Gold 8.375 2005 5,000,000 4,868,750
Total 14,712,500
_________________________________________________________________________________________________________
Multi-industry conglomerates (0.5%)
Mark IV Inds 8.75 2003 3,500,000 3,513,125
Prime Succession Acquisition 10.75 2004 2,125,000(d) 2,188,750
Talley Inds
Zero Coupon 12.25 1998 1,503,000(m) 1,234,339
Talley Mfg & Technology
Sr Nts 10.75 2003 2,500,000 2,606,250
Total 9,542,464
________________________________________________________________________________________________________
Natural gas (0.9%)
Tenneco Credit 9.625 2001 10,000,000 10,893,700
Transco Energy 9.875 2020 6,000,000 6,878,460
Total 17,772,160
__________________________________________________________________________________________________________
Paper & packaging (2.7%)
APP Intl Finance 11.75 2005 7,000,000 7,122,500
Chesapeake 9.875 2003 5,000,000 5,576,100
Crown Cork & Seal 8.00 2023 5,000,000 4,757,350
Federal Paperboard 10.00 2011 6,000,000 7,149,840
Gaylord 12.75 1996 5,500,000 5,898,750
Grupo Industrial Durango 12.625 2003 4,000,000(h) 4,210,000
Plastic Container
Sr Secured Nts 10.75 2001 2,000,000 2,052,500
Pope & Talbot 8.375 2013 4,000,000 3,597,840
Scotia Pacific Holding 7.95 2015 6,547,986 6,425,015
Silgan
Sr Sub Nts 11.75 2002 2,000,000 2,092,500
13.25 2002 665,000 675,806
Stone Container
Sr Nts 12.625 1998 1,500,000 1,586,250
Total 51,144,451
_________________________________________________________________________________________________________
Restaurants & lodging (0.6%)
Flagstar 10.75 2001 8,750,000 7,743,750
10.875 2002 1,250,000(h) 1,100,000
Hammons (John Q) Hotel
1st Mtge 8.875 2004 3,400,000 3,204,500
Total 12,048,250
_________________________________________________________________________________________________________
Retail (3.0%)
American Stores 8.00 2026 10,000,000 9,776,400
<PAGE>
PAGE 58
Dairy Mart Convenience Stores
Sr Sub Nts 10.25 2004 1,500,000 1,413,750
Dayton Hudson 8.50 2022 3,000,000 2,907,690
Eye Care Center 12.00 2003 3,000,000 3,195,000
Jitney-Jungle Stores
Sr Nts 12.00 2006 2,000,000 2,102,500
Kroger 8.15 2006 3,000,000 3,037,500
9.25 2005 3,000,000 3,150,000
Musicland Stores 9.00 2003 6,500,000 3,737,500
Pathmark Stores 9.625 2003 5,000,000 4,725,000
Penn Traffic
Sr Nts 8.625 2003 3,500,000 2,905,000
Revco 9.125 2000 2,000,000 2,098,340
Stop & Shop 9.75 2002 3,000,000 3,288,750
Wal-Mart 7.00 2006 15,000,000(d) 14,743,050
Total 57,080,480
_________________________________________________________________________________________________________
Textiles & apparel (0.6%)
J.P. Stevens 9.00 2017 2,500,000 2,406,250
Polysindo Intl Finance 11.375 2006 2,300,000 2,323,000
VF 9.50 2001 5,000,000 5,432,850
Westpoint Stevens 8.75 2001 2,500,000 2,506,250
Total 12,668,350
_________________________________________________________________________________________________________
Utilities -- electric (4.3%)
Arizona Public Service 8.75 2024 2,500,000 2,595,500
Boston Edison 9.875 2020 5,000,000 5,365,750
Cleveland Electric 9.50 2005 6,000,000 5,867,340
Long Island Lighting 9.625 2024 9,000,000 8,886,150
Louisiana Power & Light
Sale Lease-backed Obligation 10.67 2017 2,500,000 2,674,050
Midland Cogeneration Venture 10.33 2002 1,801,240 1,884,548
10.33 2002 1,551,636 (d) 1,623,400
11.75 2005 5,000,000 5,281,250
Niagara Mohawk Power 7.75 2006 10,500,000 9,223,515
Pacific Gas & Electric 7.25 2026 6,000,000 5,354,940
RGS Funding AEGCO
Sale Lease-backed Obligation 9.82 2022 2,484,957 2,876,661
RGS Funding IME
Sale Lease-backed Obligation 9.82 2022 2,484,982 2,876,690
Sithe Independent Funding 9.00 2013 7,500,000(d) 7,318,950
Texas-New Mexico Power 11.25 1997 3,877,000 3,973,925
1st Mtge 9.25 2000 3,500,000 3,631,250
Texas Utilities 9.70 2002 6,000,000 6,635,940
Texas Utilities Electric
1st Mtge 9.75 2021 6,350,000 6,979,539
Total 83,049,398
_________________________________________________________________________________________________________
Utilities -- telephone (2.4%)
Arch Communications Group
Zero Coupon 10.875 2000 2,000,000(m) 1,065,000
Bell Telephone of Pennsylvania 7.375 2033 10,000,000 9,208,000
GTE 10.25 2020 7,000,000 7,935,270
Geotek Communications
Cv 12.00 2001 5,000,000(e) 5,500,000
Zero Coupon 14.90 2000 5,000,000(d,m) 3,112,500
New England Tel & Tel 9.00 2031 7,500,000 8,143,350
Omnipoint 11.625 2006 10,000,000(d) 10,087,500
Total 45,051,620
__________________________________________________________________________________________________________
Miscellaneous (0.8%)
Adams Outdoor Advertising 10.75 2006 4,500,000(e) 4,646,250
Coty 10.25 2005 1,500,000(h) 1,582,500
Kinder-Care Learning Centers 10.375 2001 3,000,000 3,153,750
Petersburg
Zero Coupon 20.83 2004 5,000,000(d,l) 3,925,000
Pierce Leahy 11.125 2006 1,250,000(d) 1,298,438
Total 14,605,938
_________________________________________________________________________________________________________
Foreign (18.9%)(c)
Alcan Aluminum
(U.S. Dollar) 8.875 2022 6,750,000 6,953,242
Argentina Bocon
(U.S. Dollar) Zero coupon 5.41 2001 5,000,000(l) 5,742,500
<PAGE>
PAGE 59
BAA
(British Pound) 5.75 2006 2,000,000 3,203,436
Banca Italy N.Y.
(U.S. Dollar) 8.25 2007 5,000,000 5,139,900
Carter Holt Harvey
(U.S. Dollar) 8.875 2004 5,000,000 5,333,650
City of Helsinki
(U.S. Dollar) 8.70 2006 1,600,000(d,e) 1,576,480
(U.S. Dollar) 9.20 2006 1,500,000(d,e) 1,506,000
Dominion Textiles
(U.S. Dollar) 8.875 2003 4,000,000 3,925,000
(U.S. Dollar) 9.25 2006 1,000,000 991,250
Financiera Ener Nacional
(U.S. Dollar) 9.375 2006 5,300,000(d) 5,273,500
Ford Capital BV
(U.S. Dollar) 9.875 2002 5,000,000 5,600,000
Govt of Canada
(Canadian Dollar) 7.64 2001 17,000,000 14,272,775
Govt of Poland
(Polish Zloty) Zero Coupon 3.23 1996 14,500,000(l) 5,223,639
(U.S. Dollar) 2.75 2024 16,500,000(k) 8,404,687
(U.S. Dollar) 3.75 2014 66,300,000(k) 52,335,562
Govt of Russia
(U.S. Dollar) 6.60 2049 8,000,000(n) 4,715,000
Govt of Venezuela
(U.S. Dollar) 6.375 2007 37,000,000(k) 28,582,500
Groupe Videotron
(U.S. Dollar) 10.625 2005 2,000,000 2,140,000
Grupo Televisa
Sr Nts 11.875 2006 7,250,000(d,h) 7,612,500
Zero Coupon 13.25 2001 6,500,000(d,m) 3,810,625
Gulf Canada Resources
(U.S. Dollar) 9.00 1999 5,000,000 5,118,750
Hydro Quebec
(U.S. Dollar) 8.50 2029 20,000,000 20,794,200
Imexsa Export Trust
(U.S. Dollar) 10.125 2003 5,000,000(d) 5,093,750
Korea Electric Power
(U.S. Dollar) 7.75 2013 4,300,000 4,190,307
MacMillan Bloedel
(U.S. Dollar) 8.50 2004 7,500,000 7,746,300
Ogden Euro
(U.S. Dollar) Cv 6.00 2002 2,200,000 2,035,000
Petronas
(U.S. Dollar) Cv 7.75 2015 10,000,000(d) 9,738,400
Pueblo Extra Intl
(U.S. Dollar) Cv 9.50 2003 4,000,000 3,600,000
Reliance Inds
(U.S. Dollar) 8.125 2005 2,250,000(d) 2,156,242
Repap New Brunswick
(U.S. Dollar) 10.625 2005 2,000,000 1,925,000
Republic of Argentina
(U.S. Dollar) 6.31 2005 8,019,000 6,224,749
Republic of Brazil
(U.S. Dollar) C Bonds 8.00 2014 10,824,300 6,988,439
(U.S. Dollar) Inverse Floater 6.875 2012 12,500,000(g) 8,867,187
Republic of Columbia
(U.S. Dollar) 8.70 2016 6,000,000 5,435,460
Republic of Italy
(U.S. Dollar) 6.875 2023 7,500,000 6,661,050
(U.S. Dollar) Cv 5.00 2001 1,500,000 1,501,875
Republic of Slovenia
(U.S. Dollar) 7.00 2001 7,200,000(d) 7,185,600
Republic of South Africa
(South African Rand) 12.00 2005 89,500,000 16,923,090
Rogers Cable Systems
(Canadian Dollar) 9.65 2014 2,700,000 1,755,810
Rogers Cantel Mobile
(U.S. Dollar) 9.375 2008 4,650,000 4,562,812
11.125 2002 1,000,000 1,053,750
State of Isreal
(U.S. Dollar) 6.375 2005 3,700,000 3,413,139
Sumitomo Bank Intl Finance
(Japanese Yen) Cv 0.75 2001 200,000,000(d) 1,964,840
Tarkett
(U.S. Dollar) 9.00 2002 4,000,000(d) 4,055,000
Telekom Malaysia
(U.S. Dollar) 7.875 2025 10,000,000(d) 9,694,900
United Kingdom Treasury
(British Pound) 8.00 2003 9,500,000 15,211,686
<PAGE>
PAGE 60
United Mexican States
(U.S. Dollar) 11.50 2026 6,525,000 6,276,234
WMC Finance USA
(U.S. Dollar) 7.25 2013 10,000,000 9,473,300
Zhuhai Highway
(U.S. Dollar) 11.50 2008 10,000,000(d) 10,250,000
Total 362,239,116
_________________________________________________________________________________________________________
Total bonds
(Cost: $1,733,338,963) $1,742,248,378
_________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Stocks & other (0.5%)
_________________________________________________________________________________________________________
Issuer Shares Value(a)
_________________________________________________________________________________________________________
<S> <C> <C>
American Communications Services
Warrants 6,000(d) $ 390,000
Bar Technologies
Warrants 4,500(d) 225,000
Celcaribe
Common 276,420(b,d) 414,630
Dairy Mart Convenience Stores
Warrants 10,000 30,000
Eye Care Center
Warrants 3,000(d) 45,000
First Nationwide Bank
11.50% Pfd 25,000 2,725,000
Geotek
Warrants 250,000(d) 1,062,500
Great Bay Power
Common 28(b) 238
Methanex
Common 200,000(b) 1,537,500
Security Pacific
1.75% Cv Pfd 73,500 1,874,250
Southdown
Warrants 30,000(e) 221,250
Specialty Foods
Common 15,000(b) 7,500
Station Casinos
7% Cv Pfd 15,000 761,250
Triangle Wire & Cable
Common 84,444(b,e) 84,444
_________________________________________________________________________________________________________
Total stocks & other
(Cost: $11,722,689) $9,378,562
_________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (7.7%)
_________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.3%)
Federal Home Loan Mtge Corp Disc Nts
09-19-96 5.19% $ 3,300,000 $ 3,290,995
10-10-96 5.31 2,000,000 1,988,267
Total 5,279,262
_________________________________________________________________________________________________________
Commercial paper (7.4%)
American General Finance
09-16-96 5.41 7,000,000 6,983,293
BBV Finance
09-13-96 5.30 2,700,000 2,694,852
BellSouth Telephone
09-03-96 5.42 2,600,000 2,598,834
CAFCO
09-19-96 5.43 19,600,000 19,536,843
<PAGE>
PAGE 61
CPC Intl
10-17-96 5.49 10,400,000(f) 10,324,715
Dean Witter
09-04-96 5.32 7,500,000 7,495,592
Fleet Funding
09-10-96 5.32 8,400,000(f) 8,387,633
Goldman Sachs
10-07-96 5.46 13,000,000 12,923,931
Metlife Funding
09-24-96 5.31 17,500,000 17,438,400
Michigan Consolidated Gas
09-11-96 5.30 5,100,000 5,091,772
Natl Australia Funding (Delaware)
10-07-96 5.33 3,000,000 2,983,689
Pacific Mutual Life
09-13-96 5.30 7,000,000 6,986,653
Penney (JC) Funding
10-11-96 5.30 900,000 894,598
SAFECO Credit
09-20-96 5.40 7,900,000 7,876,476
St. Paul Companies
09-13-96 5.30 1,100,000(f) 1,097,903
Siemens
09-18-96 5.44 1,400,000 1,395,652
Southern California Gas
09-18-96 5.30 7,000,000 6,981,520
Toyota Motor
10-04-96 5.32 500,000 497,507
USAA Capital
09-06-96 5.33 2,900,000 2,897,438
U S WEST Communications
09-12-96 5.39 17,400,000 17,368,970
Total 142,456,271
__________________________________________________________________________________________________________
Total short-term securities
(Cost: $147,749,225) $ 147,735,533
__________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,892,810,877)(o) $1,899,362,473
__________________________________________________________________________________________________________
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b)Non-income producing. For long-term debt securities, items identified are in default as to payment of interest or principal.
(c)Foreign securities values are stated in U.S. dollars; principal amounts are denominated in the currency indicated.
(d)Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines established by the board.
(e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements).
Informationconcerning such security holdings at Aug. 31, 1996, is as follows:
Security Acquisition Purchase
date cost
_________________________________________________________________________________________________________
Adams Outdoor Advertising
10.75% 2006 03-07-96 $4,518,173
American Telecasting
Zero Coupon
11.75% 2000 03-08-96 4,000,000
Dade Intl*
Sr Sub Nts
11.125% 2006 04-30-96 3,000,000
City of Helsinki
8.70% 2006 02-07-95 1,565,584
9.20% 2006 02-07-95 1,500,000
Geotek Communications
Cv
12% 2001 03-04-96 5,000,000
Healthsource*
5% 2003 06-28-96 3,000,000
Southdown
Warrants 10-30-91 90,000
Triangle Wire & Cable 01-13-92 2,000,018
*Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933,
as amended.
(f)Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) ofthe
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors."
<PAGE>
PAGE 62
This security has been determined to be liquid under guidelines established by the board.
(g) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a
multiple of, a decline (increase) in the LIBOR (London InterBank Offered Rate) Index. Interest rate disclosed is the rate in
effect on Aug. 31, 1996. Inverse floaters in the aggregate represent 1.6% of the Fund's net assets as of Aug. 31, 1996.
(h) Security is partially or fully on loan. See Note 5 to the financial statements.
(i) Partially pledged as initial margin deposit on the following open interest rate futures contract (See Note 7 to the financial
statements):
Type of security Notional amount
_________________________________________________________________________________________________________
Sales contracts
U.S. Treasury Bonds Dec. 1996 $90,000,000
(j) Adjustable rate mortgage; interest rate varies to reflect current market conditions; shown is the effective rate on Aug. 31,
1996.
(k) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the
effective rate on Aug. 31, 1996.
(l) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition.
(m) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the
annualized effective yield from the date of acquisition to interest reset date disclosed.
(n) At Aug. 31, 1996, the cost securities purchased, including interest purchased, on a when-issued basis was $4,765,000.
(o)At Aug. 31, 1996, the cost of securities for federal income tax purposes was $1,889,734,786 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$50,129,252
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,501,565)
________________________________________________________________________________________________________________________________
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,627,687
________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 63
<TABLE>
<CAPTION>
Investments in securities
Retirement Annuity Mutual Funds (Percentages represent value of
Aug. 31, 1996 investments compared to total net assets)
Managed Fund
Common & preferred stocks (64.8%)
Issuer Shares Value(a)
<S> <C> <C>
Aerospace & defense (4.4%)
Allied Signal 400,000 $ 24,700,000
Boeing 350,000 31,675,000
Litton Inds 512,900 (b) 23,913,962
Raytheon 800,000 41,200,000
United Technologies 285,000 32,133,750
Total 153,622,712
Airlines (0.4%)
Southwest Airlines 600,000 13,725,000
Banks and savings & loans (1.9%)
Citicorp 200,000 16,650,000
First Nationwide
$11.50 Pfd 20,000 2,180,000
Norwest 800,000 30,100,000
Washington Mutual 475,000 17,218,750
Total 66,148,750
Beverages & tobacco (3.4%)
Anheuser-Busch 400,000 30,300,000
Coca-Cola 720,000 36,000,000
PepsiCo 600,000 17,250,000
Philip Morris 380,000 (k) 34,105,000
Total 117,655,000
Building materials & construction (1.8%)
Clayton Homes 1,100,000 22,137,500
Tyco Intl 1,000,000 42,250,000
Total 64,387,500
Communications equipment & services (0.7%)
ADC Telecommunications 300,000 (b) 17,025,000
Loral Space Communication 600,000 (b) 8,475,000
Total 25,500,000
Computers & office equipment (6.8%)
American Power Conversion 2,050,000 (b) 28,187,500
Compaq Computer 675,000 (b) 38,221,875
Computer Associates 630,000 33,075,000
See accompanying notes to investments in securities.
First Data 400,000 31,200,000
Microsoft 225,000 (b,k) 27,562,500
Oracle Systems 800,000 (b) 28,200,000
3 Com 700,000 (b) 32,725,000
Xerox 300,000 16,462,500
Total 235,634,375
Electronics (1.1%)
Intel 470,000 37,511,875
Energy (1.6%)
Amoco 800,000 55,200,000
Financial services (7.1%)
American General Hospital 325,000 (b) 5,728,125
Bay Apartment 300,000 8,400,000
Dean Witter 400,000 20,000,000
Duke Realty 220,000 6,985,000
Equity Residential 275,000 9,728,125
Federal Natl Mortgage 600,000 18,600,000
Green Tree Financial 1,200,000 41,700,000
Health Care Property 200,000 6,775,000
<PAGE>
PAGE 64
MBNA 600,000 18,225,000
Nationwide Health 400,000 8,900,000
ROC Communities 300,000 7,200,000
Storage USA 200,000 6,500,000
Travelers 750,000 32,531,250
UNUM
$2.34 Cv Pfd 800,000 50,200,000
Weeks 200,000 5,725,000
Total 247,197,500
Food (1.0%)
ConAgra 400,000 16,850,000
Pioneer Hi-Bred 300,000 16,537,500
Total 33,387,500
Furniture & appliances (0.8%)
Black & Decker 700,000 27,650,000
Health care (4.5%)
American Home Products 540,000 31,995,000
Amgen 300,000 (b) 17,475,000
Boston Scientific 800,000 (b,g) 36,700,000
Medtronic 250,000 13,000,000
Merck 450,000 29,531,250
Pfizer 400,000 28,400,000
Total 157,101,250
Health care services (3.5%)
Cardinal Health 250,000 18,343,750
Columbia/HCA Healthcare 525,000 29,596,875
Manor Care 300,000 10,312,500
PacifiCare Health
Systems Cl B 310,000 (b,g) 24,955,000
Service Intl 300,000 16,912,500
United Healthcare 600,000 23,175,000
Total 123,295,625
Household products (1.3%)
Gillette 200,000 (k) 12,750,000
Proctor & Gamble 373,515 33,196,146
Total 45,946,146
Industrial equipment & services (3.1%)
American Standard 400,000 (b) 13,650,000
Deere & Co 800,000 31,800,000
General Signal 400,000 16,050,000
Hubbell 183,600 6,632,550
Illinois Tool Works 550,000 38,018,750
Total 106,151,300
Industrial transportation (0.7%)
Union Pacific 350,000 (g) 25,506,250
Insurance (0.9%)
PennCorp Financial Group 494,700 15,088,350
Travelers/Aetna 600,000 16,500,000
Total 31,588,350
Leisure time & entertainment (0.3%)
Disney (Walt) 200,000 11,400,000
Media (0.7%)
Time Warner 500,000 16,687,500
10.25% Pay-in-kind Pfd 6,133 (d,l) 6,178,997
Total 22,866,497
Metals (0.6%)
Freeport Copper Cl B 500,000 14,687,500
Newmont Mining 150,000 7,931,250
Total 22,618,750
<PAGE>
PAGE 65
Multi-industry conglomerates (4.3%)
ALCO Standard
6.50% Cv Pfd 129,250 11,002,406
Emerson Electric 560,000 46,900,000
General Electric 740,000 61,512,500
Olsten 700,000 19,512,500
Westinghouse Electric 700,000 11,462,500
Total 150,389,906
Paper & packaging (2.1%)
Crown Cork & Seal 775,000 36,231,250
Kimberly-Clark 450,000 35,268,750
Total 71,500,000
Retail (2.8%)
CUC Intl 1,000,000 (b,g) 34,375,000
Dollar General 657,100 21,191,475
Home Depot 530,000 28,156,250
Pep Boys -
Manny, Moe & Jack 400,000 13,400,000
Total 97,122,725
Utilities -- electric (1.4%)
CMS Energy 400,000 11,950,000
FPL Group 350,000 15,487,500
General Public Utilities 400,000 12,600,000
Pinnacle West Capital 300,000 8,625,000
Total 48,662,500
Utilities -- telephone (1.9%)
BCE 1,000,000 39,375,000
GTE 660,000 25,987,500
Total 65,362,500
Foreign (c) (5.7%)
ASEA Cl A 200,000 (b) 21,584,906
Ciba-Geigy 7,500 (b) 9,467,961
Ericsson Cl B 1,450,000 33,440,625
Northern Telecom 650,000 32,418,750
SGL Carbon 303,300 12,207,825
Sandoz Registered 25,000 (b) 29,747,521
SmithKline Beecham 430,000 25,047,500
TOTAL 950,000 35,268,750
Total 199,183,838
Total common & preferred stocks
(Cost: $1,849,748,900) $2,256,315,849
</TABLE>
<TABLE>
<CAPTION>
Bonds (30.5%)
Issuer Coupon Maturity Principal Value(a)
rate year amount
<S> <C> <C> <C> <C>
U.S. government obligations (8.3%)
U.S. Treasury Bonds 7.25% 2016 $ 5,500,000 $ 5,493,400
7.50 2016 15,000,000 15,359,850
8.875 2017 12,000,000 14,054,880
U.S. Treasury Notes 5.125 1998 4,000,000 3,895,440
5.375 1997-98 113,000,000 111,504,330
5.75 2003 20,300,000 19,080,376
6.375 1999 15,000,000 14,956,050
6.75 1999 30,000,000 30,181,500
7.75 2000 56,000,000 57,933,120
7.875 2004 5,000,000 5,297,400
Resolution Funding Corp
Zero Coupon 6.62 2011 28,000,000 (f) 9,478,840
Total 287,235,186
<PAGE>
PAGE 66
Mortgage-backed securities (6.7%)
Federal Home Loan Mtge Corp 6.50 2025 34,143,716 31,647,127
8.00 2024 4,738,867 4,743,321
Collateralized Mtge Obligation
Trust Series Z 6.50 2023 5,555,327 (j) 4,234,826
Federal Natl Mtge Assn 5.50 2009 27,847,863 25,541,782
6.00 2024 6,524,369 5,853,598
6.50 2010-25 18,730,494 17,686,707
7.00 2026 9,719,308 9,254,628
7.40 2004 10,000,000 10,152,400
7.50 2025-26 34,153,766 33,385,307
8.00 2022 5,583,435 5,585,165
8.50 2023-25 20,572,306 20,958,037
9.00 2024 3,924,155 4,077,433
Collateralized Mtge Obligation
Trust Series Z 6.00 2024 6,968,401 (j) 4,912,235
7.00 2022 13,889,318 (j) 12,132,318
Govt Natl Mtge Assn 7.00 2008-24 44,203,586 42,676,979
Merrill Lynch Mtge Investors 8.29 2021 1,902,341 (d) 1,688,030
Total 234,529,893
Aerospace & defense (0.3%)
Airplanes Cl D 10.875 2019 1,750,000 1,859,375
Alliant Techsystems
Sr Sub Nts 11.75 2003 700,000 (d) 763,000
BE Aerospace 9.875 2006 2,500,000 (d) 2,503,125
Northrup-Grumman 7.75 2016 3,750,000 (d) 3,576,638
Total 8,702,138
Airlines (0.2%)
Continental Air 6.94 2015 5,100,000 (d,n) 4,861,881
Northwest Airlines 8.07 2015 2,000,000 1,995,060
8.97 2015 1,000,000 1,021,790
Total 7,878,731
Automotive & related (0.2%)
GMAC
Medium-term Nts 5.95 1998 7,000,000 6,917,120
8.375 1997 1,400,000 1,420,244
Total 8,337,364
Banks and savings & loans (0.6%)
First Nationwide Holdings
Sr Nts 12.50 2003 2,400,000 (n) 2,490,000
First USA Bank
Medium term Nts 6.88 1996 6,700,000 6,701,742
Norwest
Sr Nts 6.375 2002 5,800,000 5,580,006
Riggs Natl
Sub Nts 8.50 2006 4,900,000 4,942,875
Total 19,714,623
Building materials & construction (0.2%)
AAF McQuay
Sr Nts 8.875 2003 3,000,000 2,910,000
Owens Corning Fiberglass 9.375 2012 1,500,000 1,624,695
Schuller Intl Group 10.875 2004 1,750,000 1,894,375
Southdown 10.00 2006 1,400,000 (d) 1,394,750
Total 7,823,820
Communications equipment & services (0.5%)
Celcaribe
Zero Coupon Cv 10.31 1998 1,450,000 (d,h) 1,573,250
Comcast Cellular
Zero Coupon with attached put 9.53 2000 2,000,000 (f) 1,395,000
Geotek Communications
Cv 12.00 2001 2,000,000 (n) 2,200,000
GST Telecommunications
Zero Coupon Cv 8.95 2005 550,000 (d,h) 462,000
Ionica PLC 13.50 2006 2,020,000 2,012,425
Shared Technologies
Zero Coupon 12.25 1999 3,500,000 (d,h) 2,681,875
TCI Communications 7.875 2026 10,000,000 8,528,600
<PAGE>
PAGE 67
Total 18,853,150
Computers & office equipment (0.2%)
Softkey
Cv 5.50 2000 8,000,000 (d) 6,440,000
Energy (0.4%)
Honam Oil 7.125 2005 5,750,000 (d) 5,452,955
Parker & Parsley 8.25 2007 4,200,000 4,284,504
UNC
Sr Nts 9.125 2003 2,300,000 2,251,125
Sr Sub Nts 11.00 2006 1,900,000 (d,g) 1,976,000
Total 13,964,584
Energy equipment & services (0.2%)
Foster Wheeler 6.75 2005 8,600,000 8,072,562
Financial services (1.4%)
Associates Corp NA 6.375 2002 10,000,000 9,577,800
AVCO Financial 7.25 1999 4,750,000 4,805,385
Corporate Property Investors 7.18 2013 2,200,000 (d) 2,028,598
GPA Delaware 8.75 1998 1,000,000 1,000,000
Homeside 11.25 2003 2,500,000 (d) 2,646,875
KFW Intl Finance 8.00 2010 4,000,000 4,208,920
Olympic Financial 13.00 2000 2,000,000 2,180,000
Salomon Brothers 6.75 2006 4,000,000 3,640,040
Salomon Hewlett-Packard ELK
Cv Pfd 5.25 1997 8,752,500 (i) 10,500,000
Salomon-Oracle ELK
Cv Pfd 7.25 1996 9,803,628 (i) 9,735,900
Total 50,323,518
Furniture & appliances (0.2%)
Interface 9.50 2005 3,500,000 (d) 3,373,125
Life Style Furniture 10.875 2006 3,150,000 (d) 3,177,563
Total 6,550,688
Health care (0.9%)
Johnson & Johnson 8.00 1998 10,000,000 10,009,500
Maxxim Medical 10.50 2006 2,250,000 (d) 2,289,375
Roche Holdings
Zero Coupon 6.65 2010 30,000,000 (d,f) 13,162,500
Schering-Plough
Zero Coupon 7.31 1996 5,000,000 (d,f) 4,929,800
Total 30,391,175
Health care services (0.7%)
Columbia/HCA Healthcare 7.69 2025 3,600,000 3,490,128
Foundation Health
Sr Nts 7.75 2003 6,600,000 6,636,432
La Petite Holdings 9.625 2001 1,200,000 1,116,000
Magellan Health
Sr Sub Nts Cl A 11.25 2004 2,000,000 (d) 2,142,500
Manor Care 7.50 2006 6,000,000 5,929,620
Merit Behavioral 11.50 2005 1,300,000 (d) 1,363,375
Owens & Minor 10.875 2006 1,200,000 1,243,500
Tenet Healthcare
Sr Sub Nts 10.125 2005 2,000,000 2,152,500
Total 24,074,055
Household products (0.1%)
Sweetheart Cup
Sr Sub Nts 9.625 2000 2,000,000 2,022,500
Industrial equipment & services (0.2%)
AGCO 8.50 2006 2,200,000 (d) 2,191,750
Case 7.25 2005 5,000,000 4,856,300
Total 7,048,050
Insurance (1.0%)
American United Life 7.75 2026 2,500,000 (n) 2,256,025
Americo Life 9.25 2005 1,600,000 1,526,000
Arkwright 9.625 2026 3,000,000 (d) 3,018,810
<PAGE>
PAGE 68
Met Life 7.80 2025 6,900,000 (d) 6,422,520
MN Mutual Surplus 8.25 2025 2,700,000 (d) 2,769,390
Nationwide Mutual 7.50 2024 4,000,000 (d) 3,523,680
Credit Sensitive Nts 9.875 2025 5,000,000 (d) 5,337,900
New England Mutual
Credit Sensitive Nts 7.875 2024 2,000,000 (d) 1,881,760
Principal Mutual 8.00 2044 2,500,000 (d) 2,299,700
SunAmerica
Medium-term Nts 7.34 2005 5,000,000 4,878,350
Total 33,914,135
Leisure time & entertainment (0.2%)
Plitt Theatres 10.875 2004 3,000,000 3,071,250
Trump Atlantic City Associates 11.25 2006 2,250,000 2,160,000
Total 5,231,250
Media (1.5%)
Adelphia Communications 9.875 2005 1,500,000 1,391,250
Cablevision Systems 9.25 2005 3,000,000 2,880,000
Cox Communications 7.25 2015 5,000,000 4,634,350
7.625 2025 5,000,000 4,730,350
CS Wire 11.375 2001 500,000 (d) 960,000
Echostar Satellite Broadcasting
Zero Coupon Cv 13.125 2000 5,000,000 (d,f) 3,087,500
News American Holdings 7.50 2000 4,000,000 4,026,640
7.75 2045 10,000,000 8,782,200
Tele-Communications 8.75 2023 3,500,000 3,197,145
Time Warner 8.375 2033 5,000,000 (d) 4,752,100
9.15 2023 5,000,000 5,089,650
United Artist Theatre 9.30 2015 1,983,529 (d) 1,809,971
Universal Outdoor
Zero Coupon 9.95 2004 2,750,000 (d,f) 2,031,562
Viacom Intl 7.00 2003 2,000,000 1,836,100
8.00 2006 4,000,000 3,680,000
Total 52,888,818
Metals (0.1%)
Ryerson Tull 8.50 2001 4,000,000 4,010,000
Multi-industry conglomerates (0.1%)
Crane 7.25 1999 2,000,000 1,999,620
Prime Succession 10.75 2004 1,275,000 1,313,250
Talley Inds
Zero Coupon 11.19 1998 2,148,000 (h) 1,764,045
Total 5,076,915
Paper & packaging (0.2%)
Gaylord 12.75 2005 2,150,000 2,305,875
Pope & Talbot 8.375 2013 3,800,000 3,417,948
Total 5,723,823
Restaurants & lodging (--%)
Flagstar 10.875 2002 1,500,000 (g) 1,320,000
Retail (0.7%)
American Stores 8.00 2026 5,000,000 4,888,200
Bruno's
Sr Sub Nts 10.50 2005 250,000 255,625
Grand Union 12.00 2004 2,500,000 2,475,000
Jitney-Jungle Stores
Sr Nts 12.00 2006 2,500,000 2,628,125
Kash n' Karry Food Stores
Pay-in-kind 11.50 2003 3,000,000 (l) 3,000,000
Pep Boys - Manny,
Moe & Jack 7.00 2005 4,200,000 4,032,714
Wal-Mart 7.00 2006 5,000,000 (d) 4,914,350
White Rose Foods
Zero Coupon Sr Disc Nts 26.29 1998 1,000,000 (f) 691,250
Total 22,885,264
Textiles & apparel (0.1%)
Dominion Textiles 9.25 2006 2,000,000 1,982,500
Polysindo Intl Finance 11.375 2006 1,825,000 1,843,250
<PAGE>
PAGE 69
Total 3,825,750
Utilities -- electric (1.6%)
Alabama Power 9.00 2024 2,200,000 2,349,952
Arizona Public Service
Sale Lease-backed Obligation 8.00 2015 3,600,000 3,541,212
California Energy 9.875 2003 1,000,000 1,025,000
Cleveland Electric Illuminating 9.50 2005 7,000,000 6,845,230
Commonwealth Edison 8.375 2023 5,000,000 4,842,400
El Paso Electric 8.90 2006 2,750,000 2,750,000
First PV Funding 10.15 2016 3,000,000 3,024,630
Jersey Central Power & Light 6.75 2025 7,200,000 6,096,456
Long Island Lighting 9.75 2021 2,500,000 2,470,200
Niagara Mohawk Power 7.75 2006 5,500,000 4,831,365
Pacific Gas & Electric 7.25 2026 5,000,000 4,462,450
Public Services Electric & Gas 6.75 2016 2,600,000 2,319,928
Salton Sea 7.84 2010 1,325,000 (d) 1,248,521
Sithe Independent Funding 9.00 2013 1,500,000 (d) 1,463,790
Texas Utilities 5.875 1998 5,000,000 4,942,700
Wisconsin Electric Power 6.875 2095 2,800,000 2,405,928
Total 54,619,762
Utilities -- gas (0.5%)
ARKLA 9.875 1997 5,000,000 5,096,700
Coastal 10.25 2004 1,450,000 1,672,749
Columbia Gas 7.32 2010 7,000,000 6,508,950
Transcontinental Energy 9.375 2001 5,000,000 5,434,550
Total 18,712,949
Utilities -- telephone (0.1%)
MFS Telecommunications
Zero Coupon Cv 10.58 1999 3,000,000 (h) 2,437,500
Miscellaneous (0.4%)
Adams Outdoor Advertising 10.75 2006 1,700,000 (n) 1,755,250
Coty 10.25 2005 1,500,000 1,582,500
Kinder-Care Learning Centers 10.375 2001 2,750,000 2,890,937
Norcal Waste System
Sr Nts 12.50 2005 2,000,000 (d) 2,117,500
Pierce Leahy 11.125 2006 1,250,000 (d) 1,298,437
Standard Credit Card Trust 5.95 2004 3,000,000 2,785,200
8.625 2002 1,750,000 1,764,647
Total 14,194,471
Foreign (2.7%)(c)
Bank of China
(U.S. Dollar) 8.25 2014 2,500,000 2,321,600
CAF
(U.S. Dollar) 7.10 2003 5,200,000 5,028,764
China Light & Power
(U.S. Dollar) 7.50 2006 7,000,000 6,808,410
Clearnet Communications
(U.S. Dollar) Zero Coupon 14.75 2005 1,900,000 (h) 1,178,000
Financiero Ener Nacional
(U.S. Dollar) 9.375 2006 5,000,000 (d) 4,975,000
Govt Certificates of Israel
(U.S. Dollar) 9.25 2001 3,000,000 3,178,530
Govt of Poland
(U.S. Dollar) Step-up Nts 3.75 2014 14,950,000 (k) 11,801,156
Govt of Russia
(U.S. Dollar) 6.60 2049 3,000,000 (o) 1,768,125
Govt of Venezuela
(U.S. Dollar) 6.375 2007 1,500,000 (k) 1,158,750
Grupo Televisa
Sr Nts 11.875 2006 2,250,000 (d) 2,362,500
Imexsa Export Trust
(U.S. Dollar) 10.125 2003 3,000,000 (d) 3,056,250
Korea Electric Power
(U.S. Dollar) 7.75 2013 2,100,000 2,046,429
Peoples Republic of China
(U.S.Dollar) 7.375 2001 2,000,000 1,996,920
(U.S. Dollar) 9.00 2096 2,500,000 2,367,900
Petronas
(U.S. Dollar) Cv 7.75 2015 6,000,000 (d) 5,843,040
Quno Corp
(U.S. Dollar) 9.125 2005 2,500,000 2,440,625
<PAGE>
PAGE 70
Repap New Brunswick
(U.S. Dollar) 10.625 2005 1,400,000 1,347,500
Reliance Inds
(U.S. Dollar) 8.125 2005 750,000 (d) 718,747
Republic of Argentina
(U.S. Dollar) 6.313 2005 3,960,000 (k) 3,073,950
Republic of Brazil
(U.S. Dollar) Inverse Floater 6.875 2012 2,000,000 (k) 1,418,750
Republic of Slovenia
(U.S. Dollar) 7.00 2001 3,600,000 (d) 3,592,800
Rogers Cable System
(Canadian Dollar) 7.06 2014 5,000,000 3,251,500
Rogers Cantel Mobile
(U.S. Dollar) 9.375 2008 2,800,000 2,747,500
State of Israel
(U.S. Dollar) 6.375 2005 1,850,000 1,706,570
Telekom Malaysia
(U.S. Dollar) 7.875 2025 3,000,000 (d) 2,908,470
United Mexican States
(U.S. Dollar) 11.50 2026 2,284,000 2,196,923
Usinor Sacilor
(U.S. Dollar) 7.25 2006 8,000,000 7,699,360
Zhuhai Highway
(U.S. Dollar) 11.50 2008 5,000,000 (d) 5,125,000
Total 94,119,069
Total bonds
(Cost: $1,073,683,580) $1,060,921,743
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (5.1%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government agency (0.1%)
Federal Home Loan Mtge Corp Disc Nts
09-12-96 5.24% $ 5,200,000 $ 5,190,941
Commercial paper (5.0%)
ANZ Delaware
11-06-96 5.39 6,000,000 5,936,750
AT&T
09-09-96 5.33 9,000,000 8,988,075
Associates North America
09-03-96 5.35 1,100,000 1,099,512
AVCO Financial Services
10-17-96 5.53 2,800,000 2,779,731
Barclays U.S. Funding
09-30-96 5.29 7,800,000 7,765,745
CAFCO
09-19-96 5.43 21,600,000 21,530,398
Cargill
10-01-96 5.36 5,800,000 5,773,429
10-04-96 5.29 10,000,000 9,950,228
CIT Group
09-23-96 5.33 8,500,000 8,471,218
Commercial Credit
09-24-96 5.33 5,500,000 5,480,567
10-03-96 5.32 7,000,000 6,966,056
Commerzbank U.S. Finance
09-10-96 5.30 7,000,000 6,989,733
Dean Witter
09-04-96 5.34 4,000,000 3,997,636
09-05-96 5.35 3,800,000 3,797,187
10-02-96 5.30 4,800,000 4,777,472
Merrill Lynch
09-27-96 5.34 4,900,000 4,880,522
Morgan Stanley Group
09-06-96 5.37 4,800,000 4,795,728
NBD Canada
09-13-96 5.30 7,900,000 7,884,937
Penney (JC) Funding
10-07-96 5.35 4,300,000 4,275,288
<PAGE>
PAGE 71
PepsiCo
10-10-96 5.31 2,200,000 (e) 2,187,093
Pfizer
09-11-96 5.33 14,400,000 (e) 14,376,680
09-26-96 5.26 6,200,000 (e) 6,176,536
Reed Elsevier
11-05-96 5.37 1,700,000 (e) 1,683,168
St. Paul Companies
09-18-96 5.30 7,600,000 (e) 7,579,936
Sandoz
09-20-96 5.33 3,700,000 (e) 3,689,106
Siemens
09-13-96 5.30 4,700,000 4,691,039
Toyota Motor Credit
09-13-96 5.30 1,400,000 1,397,331
USAA Capital
09-13-96 5.43 5,000,000 4,988,163
Total 172,909,264
Total short-term securities
(Cost: $178,116,192) $178,100,205
Total investments in securities
(Cost: $3,101,548,672)(p) $3,495,337,797
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency
indicated.
(d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security
has been determined to be liquid under guidelines established by the board.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield from the date of acquisition.
(g) Security is partially or fully on loan. See Note 5 to the financial statements.
(h) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized
effective yield from the date of acquisition to interest reset date disclosed.
(i) ELKS are equity-linked securities that are structured as an interest-bearing debt security of a brokerage firm and linked to
the common stock of another company. The terms of ELKS differ from those of ordinary debt securities in that the principal amount
received at maturity is not fixed, but is based on the price of the common stock the ELK is linked to. The principal amount
disclosed equals the current estimated future value of the amount to be received upon maturity.
(j) This security is a collateralized mortgage obligation that pays no interest or principal during its initial accrual period
until payment of a previous series within the trust have been paid off. Interest is accrued at an effective yield.
(k)Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the
effective rate on Aug. 31,1996.
(l) Pay-in-kind securities are securities in which the issuer has the option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the same terms, including maturity date, as the pay-in-kind securities.
(m) At Aug. 31, 1996, securities valued at $20,980,000 were held to cover open call options written as follows:
Issuer Number of Exercise Expiration Value
contracts price date
Gillette 500 65 Sep. 1996 $ 50,000
Microsoft 500 135 Oct. 1996 62,500
Philip Morris 700 95 Sep. 1996 30,625
Philip Morris 600 100 Sep. 1996 3,750
Total $146,875
(n) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements).
Information concerning such security holdings at Aug. 31, 1996, is as follows:
Aquisition Purchase
Security date cost
Adams Outdoor Advertising
10.75% 2006 03-05-96 $1,700,000
American United Life
7.75% 2026 02-13-96 2,500,000
Continental Air*
6.94% 2015 01-24-96 5,100,000
First Nationwide Holdings
12.50% Sr Nts 2003 04-12-96 2,372,712
Geotek Communications
12% Cv 2001 03-04-96 2,000,000
*Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
<PAGE>
PAGE 72
(o) At Aug. 31, 1996, the cost of securities purchased, including interest purchased, on a when-issued basis was $1,786,875.
(p) At Aug. 31, 1996, the cost of securities for federal income tax purposes was $3,100,838,074 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$442,557,644
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(48,057,921)
Net unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$394,499,723
</TABLE>
<PAGE>
PAGE 73
<TABLE>
<CAPTION>
Retirement Annuity Mutual Funds (Percentages represent value of
Aug. 31, 1996 investments compared to total net assets)
Moneyshare Fund
________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
________________________________________________________________________________________________
<S> <C> <C> <C>
U. S. government agency (2.1%)
Federal Home Loan Bank
09-19-96 5.33% $6,000,000 $ 5,983,217
________________________________________________________________________________________________
Total U. S. government agency
(Cost: $5,983,217) 5,983,217
________________________________________________________________________________________________
Certificates of deposit (2.8%)
Eurodollar
ABN Amro Yankee
03-18-97 5.53 1,000,000 999,526
CIBC Yankee
01-09-97 5.50 1,000,000 1,000,000
03-20-97 5.71 1,000,000 1,000,000
Commerzbank Yankee
03-19-97 5.68 1,000,000 1,000,000
Deutsche Bank Yankee
03-21-97 5.73 1,000,000 1,000,000
Societe Generale Yankee
02-24-97 5.35 2,000,000 2,000,000
03-12-97 5.60 1,000,000 1,000,000
________________________________________________________________________________________________
Total certificates of deposit
(Cost: $7,999,526) 7,999,526
________________________________________________________________________________________________
Commercial paper (86.5%)
Automotive & related (3.7%)
Ford Motor Credit
10-04-96 5.33 2,700,000 2,686,485
10-11-96 5.28 4,000,000 3,976,083
Toyota Motor Credit
09-20-96 5.30 4,100,000 4,087,973
Total 10,750,541
________________________________________________________________________________________________
Banks and savings & loans (6.9%)
BBV Finance Delaware
10-15-96 5.33 8,800,000 8,741,700
11-22-96 5.37 4,100,000 4,049,806
First Union Bank
06-06-97 5.95 1,000,000 1,000,000
Kredietbank
10-29-96 5.50 5,000,000 4,955,504
PNC Bank
See accompanying notes to
investments in securities.
12-20-96 5.38 1,000,000 999,883
Total 19,746,893
________________________________________________________________________________________________
Beverages & tobacco (1.3%)
PepsiCo
10-10-96 5.31 3,800,000(b) 3,777,707
_______________________________________________________________________________________________
Broker dealers (5.3%)
Goldman Sachs Group
09-09-96 5.50 4,000,000 3,994,550
Merrill Lynch
10-11-96 5.31 6,500,000 6,460,913
Morgan Stanley Group
09-03-96 5.35 4,900,000 4,897,828
Total 15,353,291
_______________________________________________________________________________________________
<PAGE>
PAGE 74
Commercial finance (4.5%)
Ciesco LP
09-11-96 5.35 2,100,000 2,096,586
10-01-96 5.43 5,200,000 5,175,932
10-01-96 5.46 5,600,000 5,573,912
Total 12,846,430
_________________________________________________________________________________________________
Consumer finance (5.0%)
Avco Financial
10-30-96 5.49 5,000,000 4,954,833
11-01-96 5.51 4,100,000 4,061,587
Household Finance
10-01-96 5.47 5,500,000 5,474,330
Total 14,490,750
________________________________________________________________________________________________
Electronics (2.3%)
Siemens
09-18-96 5.44 6,600,000 6,582,213
________________________________________________________________________________________________
Energy (2.9%)
Chevron Transport
10-25-96 5.33 2,600,000(b) 2,579,027
Mobil Australia Finance
09-17-96 5.39 5,700,000(b) 5,685,600
Total 8,264,627
________________________________________________________________________________________________
Energy equipment & services (1.6%)
ABB Treasury
10-22-96 5.31 4,500,000(b) 4,465,745
________________________________________________________________________________________________
Financial services (23.1%)
American General Finance
09-27-96 5.42 6,500,000 6,473,821
Associates North America
09-09-96 5.40 5,000,000 4,993,287
Beneficial
09-12-96 5.39 4,500,000 4,491,975
09-26-96 5.31 1,900,000 1,892,741
CAFCO
09-19-96 5.42 4,600,000(b) 4,586,963
10-24-96 5.31 4,500,000 4,464,428
CIT Group Holdings
09-23-96 5.33 5,000,000 4,983,069
Fleet Funding
09-06-96 5.37 4,800,000(b) 4,795,720
General Electric Capital Services
10-21-96 5.32 6,000,000 5,955,120
10-22-96 5.32 6,000,000 5,954,240
Transamerica Financial
10-04-96 5.36 3,000,000 2,984,927
10-22-96 5.32 4,000,000 3,969,493
USAA Capital
10-08-96 5.32 7,000,000 6,960,913
10-21-96 5.31 4,000,000 3,970,137
Total 66,476,834
________________________________________________________________________________________________
Food (4.3%)
Cargill Global Funding
09-20-96 5.31 7,500,000 7,477,958
CPC Intl
10-17-96 5.49 5,000,000(b) 4,964,619
Total 12,442,577
________________________________________________________________________________________________
Health care (2.1%)
Sandoz
09-03-96 5.34 2,600,000(b) 2,598,847
09-11-96 5.39 3,500,000 3,494,268
Total 6,093,115
________________________________________________________________________________________________
Industrial equipment & services (1.7%)
Illinois Tool Works
10-08-96 5.47 5,000,000 4,971,447
________________________________________________________________________________________________
<PAGE>
PAGE 75
Insurance (6.5%)
Pacific Mutual Life
09-23-96 5.30 7,000,000 6,976,387
SAFECO Credit
10-07-96 5.36 3,900,000 3,878,676
11-25-96 5.39 8,100,000 7,996,865
Total 18,851,928
_______________________________________________________________________________________________
Media (3.0%)
Gannett
10-18-96 5.54 2,600,000(b) 2,581,037
Reed Elsevier
10-21-96 5.32 6,000,000(b) 5,955,120
Total 8,536,157
_______________________________________________________________________________________________
Retail (0.7%)
Penney (JC) Funding
09-05-96 5.33 2,100,000 2,098,451
_______________________________________________________________________________________________
Transportation (1.2%)
Consolidated Rail
10-08-96 5.34 3,600,000(b) 3,579,860
________________________________________________________________________________________________
Utilities -- gas (4.2%)
Ameritech
09-13-96 5.33 4,600,000(b) 4,591,196
Southern California Gas
11-07-96 5.37 7,500,000(b) 7,424,918
Total 12,016,114
_______________________________________________________________________________________________
Utilities -- telephone (6.2%)
Southwestern Bell
09-10-96 5.37 7,000,000 6,989,617
U S WEST Communications
09-17-96 5.44 6,000,000 5,984,728
09-23-96 5.40 4,900,000 4,883,220
Total 17,857,565
_______________________________________________________________________________________________
Total commercial paper
(Cost: $249,202,245) 249,202,245
_______________________________________________________________________________________________
Letters of credit (9.2 %)
Domestic (2.1%)
Bank of New York-
River Fuel
09-04-96 5.39 6,000,000(b) 5,996,420
_______________________________________________________________________________________________
Eurodollar (7.1%)
ABN Amro-
Sci Systems
10-08-96 5.33 4,000,000 3,977,495
Bank of Montreal-
Bancomer
10-04-96 5.32 3,200,000 3,183,922
Barclays Bank-
Banco Real
10-01-96 5.43 3,000,000 2,986,308
Credit Suisse-
Sinochem
09-04-96 5.34 4,000,000 3,997,627
Natl Westminster Bank-
Nebraska Higher Education
09-03-96 5.34 1,500,000 1,499,333
Societe Generale Yankee
09-03-96 5.32 5,000,000 4,997,783
Total 20,642,468
_______________________________________________________________________________________________
Total letters of credit
(Cost: $26,638,888) 26,638,888
_______________________________________________________________________________________________
Total investments in securities
(Cost: $289,823,876)(c) $289,823,876
________________________________________________________________________________________________
<PAGE>
PAGE 76
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Commercial paper sold within terms of a private placement memorandum, exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and may be
sold only to dealers in that program or other "accredited investors." This security
has been determined to be liquid under guidelines established by the board.
(c) At Aug. 31, 1996, the cost also represents the cost of securities for federal income
tax purposes.
</TABLE>
<PAGE>
PAGE 77
<TABLE>
<CAPTION>
Retirement Annuity Mutual Funds (Percentage represent value of
Aug. 31, 1996 investments compared to total net assets)
International Equity Fund
Common stocks (88.3%)
Issuer Shares Value(a)
<S> <C> <C>
Australia (3.9%)
Banks and savings & loans (0.9%)
Westpac Banking 3,488,000 (c) $17,121,528
Energy (0.4%)
Broken Hill Proprietary 531,568 (c) 7,235,464
Metals (2.3%)
CRA 654,905 (c) 9,949,611
MIM Holdings 5,095,000 6,524,295
Pasminco 9,403,382 13,899,524
WMC Limited 1,947,000 (c) 13,543,254
Total 43,916,684
Paper & packaging (0.3%)
Amcor 925,000 (c) 5,659,227
Austria (0.9%)
Energy (0.5%)
OMV 96,430 9,630,499
Machinery (0.4%)
Boehler-Uddeholm 107,600 (b,d) 8,390,186
Brazil (0.4%)
Communications equipment & services
Telebras ADR 110,000 8,181,250
Canada (0.9%)
Aerospace & defense (0.5%)
Bombardier Cl B 600,800 8,472,788
Communications equipment & services (0.4%)
BCE Mobile 250,300 (b) 7,407,218
Chile (0.1%)
Utilities -- electric
Empresa Nacional de Electric ADR 84,100 1,650,462
France (6.5%)
Automotive & related (0.6%)
Peugeot 100,300 (b) 11,489,458
Banks and savings & loans (1.9%)
See accompanying notes to investments in securities.
Banque Nationale de Paris 341,000 12,284,283
Credit Commercial de France 522,000 23,990,401
Total 36,274,684
Building materials & construction (1.0%)
Lafarge-Coppee (Bearer) 319,280 17,656,327
Lafarge-Coppee Bonus Shares 10,971 606,701
Total 18,263,028
Energy (0.9%)
Societe Nationale Elf Aquitaine 119,084 8,673,911
Total Petroleum Cl B 112,500 8,276,552
Total 16,950,463
Insurance (0.2%)
Union des Assurances Federales 33,000 3,786,698
Leisure time & entertainment (0.8%)
Accor 116,500 14,104,478
<PAGE>
PAGE 78
Multi-industry conglomerates (1.0%)
Lyonnaise des Eaux Dumez 207,000 18,143,80
Retail (0.1%)
Casino Guichard Perrachon 59,366 2,343,803
Germany (5.4%)
Automotive & related (0.9%)
Daimler-Benz 304,000 16,545,964
Chemicals (2.4%)
Bayer 446,010 (c) 15,861,008
Henkel KGaA 45,660 1,928,275
Henkel KGaA Pfd 410,940 16,896,313
Hoechst 302,000 (c) 10,590,763
Total 45,276,359
Leisure time & entertainment (0.2%)
Adidas (Bearer) 41,400 3,559,681
Utilities -- electric (0.4%)
RWE 206,000 (c) 7,502,551
Miscellaneous (1.5%)
Degussa 38,506 13,607,648
SGL Carbon 123,400 (d) 15,058,644
Total 28,666,292
Hong Kong (3.7%)
Banks and savings & loans (0.9%)
HSBC Holdings 1,022,800 17,659,570
Multi-industry conglomerates (1.4%)
Citic Pacific 1,340,000 5,892,394
Hutchison Whampoa 1,449,000 8,770,459
Swire Pacific Cl A 1,200,000 10,669,943
Total 25,332,796
Real estate (1.4%)
Cheung Kong Holdings 1,187,000 8,328,342
Henderson Land 1,024,000 8,012,415
Sun Hung Kai Properties 941,000 9,188,502
Total 25,529,259
Indonesia (0.1%)
Multi-industry conglomerates
India Fund 350,000 (b) 2,756,250
Italy (2.6%)
Communications equipment & services (1.1%)
Stet Risp 4,095,500 9,883,863
Telecom Italia 5,256,000 10,318,164
Total 20,202,027
Energy (1.0%)
Ente Nazionale Idrocarburi Spa 4,457,297 (c) 19,477,710
Insurance (0.5%)
INA 5,993,800 (c) 8,552,080
Japan (27.5%)
Banks and savings & loans (1.4%)
Sanwa Bank 977,000 (c) 17,263,390
Sumitomo Trust & Banking 700,000 8,310,325
Total 25,573,715
Building materials & construction (1.8%)
Nihon Cement 2,300,000 15,070,863
Taisei 2,900,000 18,388,549
Total 33,459,412
<PAGE>
PAGE 79
Communications equipment & services (1.0%)
Nippon Telegraph & Telecommunications 2,600 18,448,371
Electronics (7.0%)
Matsushita Electric 1,750,000 29,472,667
NEC 2,400,000 25,621,202
Omron 640,000 11,720,964
Rohm 270,000 16,176,146
Sanyo Electric 3,800,000 19,584,022
TDK 500,000 28,805,448
Total 131,380,449
Health care (1.4%)
Banyu Pharmaceuticals 600,000 7,840,972
Sankyo Pharmaceuticals 770,000 19,133,076
Total 26,974,048
Industrial equipment & services (3.4%)
DAI Nippon Printing 900,000 15,819,988
Kawasaki Heavy Inds 1,400,000 6,442,113
Mitsubishi Heavy Inds 2,800,000 22,135,098
Secom 310,000 19,827,903
Total 64,225,102
Insurance (0.9%)
Tokio Marine & Fire 1,500,000 17,117,614
Metals (1.4%)
Nippon Steel 8,436,000 26,707,009
Real estate (1.2%)
Mitsui Fudosan 1,800,000 22,197,679
Retail (1.0%)
Ito-Yokado 117,000 6,169,796
Marui 654,000 12,819,989
Total 18,989,785
Textiles & apparel (0.6%)
Onward Kashiyama 800,000 11,043,622
Transportation (1.6%)
Japan Airlines 1,985,000 (b) 14,797,073
Nippon Express 1,810,000 15,941,191
Total 30,738,264
Wire & cable (3.3%)
Nippon Denso 1,500,000 (b) 30,922,141
NTN 2,500,000 15,990,242
Sumitomo Electric Inds 1,025,000 13,583,655
Total 60,496,038
Miscellaneous (1.5%)
Itochu 2,600,000 15,768,451
Mitsubishi Material 2,505,000 12,103,118
Total 27,871,569
Korea (0.5%)
Electronics (0.2%)
Samsung Electronics 52,400 4,080,708
Utilities -- electric (0.3%)
Korea Electric Power ADR 300,000 (c) 6,375,000
Malaysia (1.7%)
Banks and savings & loans (0.2%)
Malayan Banking 471,000 4,477,617
Building materials & construction (0.4%)
United Engineers 945,000 6,709,386
<PAGE>
PAGE 80
Leisure time & entertainment (0.4%)
Resorts World 1,444,000 7,877,416
Multi-industry conglomerates (0.5%)
Sime Darby 2,818,000 9,551,583
Utilities -- telephone (0.2%)
Telekom Malaysia 496,000 4,377,056
Mexico (0.6%)
Banks and savings & loans (0.3%)
Banamex Series B 642,800 5,454,158
Building materials & construction (0.3%)
Empresas ICA Sociedad Controladora ADR 404,890 (c) 6,073,350
Netherlands (3.2%)
Chemicals (1.0%)
Akzo Nobel 152,621 17,744,916
Financial services (1.0%)
Ing Groep 567,637 17,688,405
Textiles & apparel (1.0%)
Gucci 289,944 (b) 19,643,002
Transportation (0.2%)
KLM Royal Dutch Airlines 160,700 4,426,490
New Zealand (0.5%)
Paper & packaging
Carter Holt Harvey 3,851,000 8,640,242
Fletcher Challenge Forest 230,203 317,841
Total 8,958,083
Norway (--%)
Industrial transportation
First Olsen Tankers 98,420 (b) 813,699
Peru (0.4%)
Communications equipment & services
Telefonica Del Peru ADR 350,000 8,181,250
Philippines (0.7%)
Financial services (0.3%)
Philippine Commercial Intl Bank 441,000 6,144,875
Utilities -- telephone (0.4%)
Philippines Long Distance Telephone ADR 131,900 (c) 7,897,513
Singapore (5.0%)
Automotive & related (0.7%)
Cycle & Carriage 1,306,000 12,530,916
Banks and savings & loan (1.1%)
Development Bank Singapore 539,500 (b) 6,326,759
Overseas Union Bank 1,978,000 13,777,114
Total 20,103,873
Beverages & tobacco (0.6%)
Fraser & Neave 1,099,000 11,091,542
Industrial equipment & services (0.3%)
Sembawang Shipyard 1,243,000 5,742,359
Industrial transportation (0.7%)
Keppel 1,647,000 12,525,158
Mutli-industry conglomerates (0.5%)
Straits Steamship 2,815,000 9,643,424
Real estate (1.1%)
City Developments 968,000 8,049,467
DBS Land 3,967,000 13,195,139
Total 21,244,606
<PAGE>
PAGE 81
Spain (1.6%)
Communications equipment & services (1.0%)
Telefonica 984,017 18,293,204
Energy (0.6%)
Repsol 364,000 11,831,128
Sweden (2.6%)
Industrial equipment & services (1.8%)
Asea B Free Shares 130,000 13,892,830
Ericsson (LM) B Free 825,000 19,239,622
Total 33,132,452
Machinery (0.8%)
Scania Cl A 302,373 (b) 8,032,852
Scania Cl B 294,220 (b) 7,838,465
Total 15,871,317
Switzerland (3.8%)
Banks and savings & loans (0.6%)
Swiss Bank 52,444 (b) 10,214,803
Financial services (1.0%)
CS Holdings 188,892 19,595,912
Health care (2.2%)
Sandoz 35,400 42,122,490
Taiwan (0.4%)
Multi-industry conglomerates
Taiwan Fund 322,800 (c) 7,585,800
Thailand (1.5%)
Banks and savings & loans (0.8%)
First Bangkok City Bank 4,332,500 6,634,435
Siam Commercial Bank616,0007,741,079
Total 14,375,514
Building materials & construction (0.4%)
TPI Polene 2,265,585 6,401,475
Financial services (0.3%)
Dhana Siam Finance 1,006,400 4,812,266
United Kingdom (13.8%)
Banks and savings & loans (1.3%)
Lloyds TSB 3,092,300 18,109,662
Natl Westminster 593,407 6,139,543
Total 24,249,205
Beverages & tobacco (0.2%)
Guinness 412 3,139,522
Building materials & construction (1.1%)
Redland 3,116,100 21,339,215
Electronics (0.8%)
Pemier Farnell 1,423,300 14,603,579
Energy (1.1%)
Shell Transport & Trading 1,394,200 20,270,864
Furniture & appliances (0.8%)
Emi Group 536,500 12,073,445
Thorn 536,500 3,259,243
Total 15,332,688
Health care (1.5%)
Glaxo Wellcome 1,593,600 22,846,490
Smith & Nephew 1,490,100 4,520,369
Total 27,366,859
<PAGE>
PAGE 82
Insurance (0.3%)
Sun Life 1,420,200 4,812,899
Leisure time & entertainment (1.3%)
Granada Group 1,795,800 24,441,219
Machinery (1.4%)
Siebe 1,853,400 26,527,672
Multi-industry conglomerates (0.1%)
Framlington Maghreb Fund Units 50,000 (b) 2,625,000
Paper & packaging (0.3%)
Smurfit Group 1,724,727 4,713,634
Retail (2.2%)
Great Universal Stores 1,969,700 20,040,659
Kingfisher 1,216,300 12,441,693
Next 927,812 8,411,234
Total 40,893,586
Transportation (1.4%)
British Airways 1,352,300 11,097,962
NFC 5,180,595 15,291,106
Total 26,389,068
Total common stocks
(Cost: $1,539,778,201) $1,655,602,691
Other (0.2%)
Issuer Shares Value (a)
Singapore
Keppel Warrants 1,233,000 $ 4,223,923
Total other
(Cost: $5,015,287) $ 4,223,923
Bond (0.4%)
Issuer and Principal Value (a)
coupon rate amount
Malaysia
Renong
(U.S. Dollar)
2.50% Cv 2005 $6,000,000 (d) $6,645,000
Total bond
(Cost $6,003,288) $6,645,000
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (13.7%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government agency (0.3%)
Federal Home Loan Mtge Corp Disc Nts
09-12-96 5.24% $ 3,500,000 3,493,910
09-18-96 5.19 2,500,000 2,493,537
____________
Total 5,987,447
Commercial paper (13.4%)
Alabama Power
10-29-96 5.35 2,200,000 2,180,855
Avco Financial Services
10-22-96 5.49 1,300,000 1,289,557
BBV Finance
10-15-96 5.33 12,000,000 11,920,500
BellSouth Telephone
10-08-96 5.32 1,000,000 994,427
<PAGE>
PAGE 83
CAFCO
09-19-96 5.42 2,900,000 (e) 2,890,655
Cargill Global
10-23-96 5.48 6,000,000 (e) 5,951,056
Ciesco LP
09-25-96 5.27 9,000,000 8,967,187
11-06-96 5.39 7,400,000 7,321,992
Colgate Palmolive
09-26-96 5.28 5,900,000 (e) 5,877,587
Commerzbank US Finance
09-10-96 5.30 4,800,000 4,792,960
Dean Witter
10-03-96 5.32 8,000,000 7,961,280
First Chicago Natl Bank Detroit Canada
09-09-96 5.32 4,700,000 4,693,773
Fleet Funding
09-10-96 5.32 2,100,000 (e) 2,096,908
Ford Motor Credit
10-11-96 5.28 2,400,000 2,385,650
General Electric Capital
10-22-96 5.32 10,000,000 9,923,733
Goldman Sachs Group LP
10-18-96 5.34 9,400,000 9,331,434
Merrill Lynch
09-06-96 5.38 12,600,000 12,588,765
Mobil Australia Finance (Delaware)
09-23-96 5.28 7,600,000 (e) 7,574,508
Natl Australia Funding (Delaware)
09-23-96 5.26 6,000,000 5,979,913
10-07-96 5.34 9,800,000 9,746,718
Northern States Power
09-26-96 5.28 1,100,000 1,095,821
Pacific Mutual Life Insurance
09-23-96 5.30 6,100,000 6,079,423
Penney (JC) Funding
09-05-96 5.33 3,700,000 3,697,271
10-10-96 5.30 7,600,000 7,555,498
10-11-96 5.30 4,200,000 4,174,792
Pfizer
09-12-96 5.30 3,000,000 (e) 2,994,720
Pitney Bowes Credit
10-16-96 5.52 3,000,000 2,978,721
St. Paul Companies
09-13-96 5.31 12,800,000 (e) 12,775,595
09-18-96 5.31 2,600,000 (e) 2,593,136
Sandoz
09-03-96 5.42 3,900,000 3,898,252
09-04-96 5.32 5,000,000 (e) 4,997,061
Siemens
09-26-96 5.29 5,200,000 5,180,208
SmithKline Beecham
09-20-96 5.27 6,700,000 6,680,458
09-30-96 5.26 7,600,000 7,566,813
Sysco
09-17-96 5.30 3,800,000 (e) 3,790,525
Toyota Motor Credit
09-17-96 5.28 5,800,000 5,785,594
09-20-96 5.31 9,200,000 9,173,013
09-27-96 5.28 5,000,000 4,980,275
10-04-96 5.32 2,200,000 2,189,029
Transamerica Financial
09-18-96 5.30 7,900,000 7,879,144
USAA Capital
09-19-96 5.27 4,000,000 3,988,917
10-21-96 5.31 1,700,000 1,686,339
U S WEST Communications
09-18-96 5.43 2,900,000 2,890,717
09-24-96 5.40 7,100,000 7,074,629
10-23-96 5.30 4,000,000 3,968,508
Total 250,143,917
Letter of credit (--%)
First Chicago-
Commed Fuel
10-16-96 5.34 800,000 794,222
Total short-term securities
(Cost: $256,938,786) $ 256,925,586
<PAGE>
PAGE 84
Total investments in securities
(Cost: $1,807,735,562)(f) $1,923,397,199
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Non-income producing.
(c) Security is partially or fully on loan. See Note 5 to the financial statements.
(d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2)of the
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security
has been determined to be liquid under guidelines established by the board.
(f) At Aug. 31, 1996, the cost of securities for federal income tax purposes was $1,809,367,950 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $180,593,648
Unrealized depreciation (66,564,399)
Net unrealized appreciation $114,029,249
</TABLE>
<PAGE>
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<TABLE><CAPTION>
Retirement Annuity Mutual Funds (Percentages represent value of
Aug. 31, 1996 investments compared to total net assets)
Aggressive Growth Fund
Investments in securities of unaffiliated issuers
Common & preferred stocks (75.1%)
Issuer Shares Value(a)
<S> <C> <C>
Airlines (--%)
AirNet Systems 36,300 (b) $ 435,600
Automotive & related (0.8%)
Miller Inds 480,000 (b) 16,080,000
Banks and savings & loans (4.6%)
Bank of Boston 173,000 9,125,750
Bank of New York 350,000 9,756,250
Barnett Banks 150,000 9,843,750
Cityscape Financial 228,000 (b) 6,270,000
Dime Bancorp 780,000 (b) 10,237,500
GreenPoint Financial 288,000 10,260,000
MBNA 370,000 11,238,750
SouthTrust 325,000 9,587,500
Washington Mutual 335,600 12,165,500
Total 88,485,000
Building materials & construction (1.0%)
Tyco Intl 459,300 19,405,425
Chemicals (1.9%)
IMC Global 330,000 14,190,000
Praxair 275,000 11,309,375
Safety-Kleen 591,800 10,208,550
Total 35,707,925
Communications equipment & services (1.8%)
Cascade Communications 100,000 6,812,500
Geotek Communications 247,700 (b) 2,260,263
Tellabs 170,000 (b) 10,773,750
Verifone 300,000 (b) 14,325,000
Total 34,171,513
Computers & office equipment (9.4%)
Broadway & Seymour 414,000 (b) 5,019,750
CCC Information Services Group 79,300 (b) 1,467,050
Cisco Systems 750,000 (b) 39,562,500
Computer Task Group 300,000 8,625,000
E*TRADE Group 150,000 (b) 1,575,000
Equifax 392,000 9,996,000
See accompanying notes to investments in securities.
First Data 250,000 19,500,000
Fiserv 303,000 (b) 10,264,125
Natl Processing 34,700 (b) 594,237
Network General 540,000 (b) 9,180,000
Oracle 637,500 (b) 22,471,875
Parametric Technology 430,000 (b) 19,470,938
PeopleSoft 120,000 (b) 9,210,000
Sungard Data Systems 385,000 (b) 16,458,750
Wall Data 383,100 (b) 9,481,725
Total 182,876,950
Electronics (2.8%)
ADT 243,900 (b) 4,786,537
Computer Products 563,000 (b) 10,978,500
Dynatech 260,000 (b) 10,205,000
Harman Intl 200,000 8,775,000
Symbol Technologies 216,000 (b) 9,612,000
Vitesse Semiconductor 330,000 (b) 10,518,750
Total 54,875,787
Energy (4.2%)
Barrett Resources 326,000 (b) 10,798,750
Brown (Tom) 275,000 (b) 4,400,000
<PAGE>
PAGE 86
Louisiana Land & Exploration 190,000 10,806,250
Nabors Inds 710,000 10,561,250
Noble Affiliates 250,000 10,031,250
Pogo Producing 325,000 11,090,625
Santa Fe Energy Resources 325,000 3,818,750
Swift Energy 490,000 (b) 12,188,750
United Meridian 190,600 (b) 7,576,350
Total 81,271,975
Energy equipment and services (4.0%)
Cooper Cameron 125,600 (b) 6,625,400
Diamond Offshore Drilling 125,000 (b) 6,375,000
Global Marine 1,100,000 (b) 15,812,500
Lone Star Technologies 606,600 (b) 9,933,075
Marine Drilling 1,155,000 (b) 10,106,250
Smith Intl 299,200 10,397,200
Sonat Offshore Drilling 184,800 10,094,700
Tidewater 215,000 8,250,625
Total 77,594,750
Financial services (4.1%)
ADVANTA Cl B 204,000 9,078,000
Franklin Resources 170,000 10,115,000
Green Tree Financial 240,000 8,340,000
Household Intl 126,000 9,985,500
Olympic Financial 425,000 (b) 10,412,500
Paychex 487,500 26,081,250
Winthrop Resources 200,000 4,950,000
Total 78,962,250
Furniture & appliances (0.7%)
Leggett & Platt 119,600 3,408,600
Miller (Herman) 273,900 10,275,530
Total 13,684,130
Health care (2.1%)
Boston Scientific 200,000 (b) 9,175,000
Guidant 202,400 10,271,800
Mentor 400,000 12,650,000
Vivus 267,000 (b) 9,345,000
Total 41,441,800
Health care services (3.9%)
Cardinal Health 160,000 11,740,000
HBO & Company 1,000,000 54,625,000
Vivra 335,000 (b) 10,091,875
Total 76,456,875
Household products (0.5%)
Estee Lauder 228,000 9,804,000
Industrial equipment & services (1.2%)
Energy Biosystems
8% Cv Pfd 35,000 (b,c) 1,436,715
Sanifill 259,600 (b) 12,038,950
United Waste Systems 350,000 (b) 10,325,000
Total 23,800,665
Insurance (1.2%)
AFLAC 285,000 9,796,875
Everest Reinsurance Holdings 209,400 5,104,125
UMUM 145,000 9,207,500
Total 24,108,500
Leisure time & entertainment (3.9%)
Harley-Davidson 280,000 11,480,000
Intl Game Technology 770,000 15,688,750
Marriott Intl 330,000 18,108,750
<PAGE>
PAGE 87
Mattel 250,000 6,593,750
Natl Education 795,000 14,409,375
WMS Inds 399,000 (b) 9,226,875
Total 75,507,500
Media (3.5%)
American Radio Systems 280,000 (b) 9,940,000
Belo (AH) Cl A 276,210 11,082,926
Clear Channel Communications 135,000 (b) 11,120,625
Emmis Broadcasting 217,600 (b) 11,369,600
Harcourt General 300,000 14,362,500
Outdoor Systems 254,500 (b) 10,752,625
Total 68,628,276
Metals (1.6%)
SGL Carbon 300,000 (b) 12,075,000
Titanium Metals 217,300 (b) 5,188,038
UCAR Intl 350,800 (b) 13,681,200
Total 30,944,238
Multi-industry conglomerates (0.5%)
Alco Standard 200,000 8,725,000
Paper & packaging (0.5%)
Sealed Air 270,000 (b) 10,226,250
Restaurants & lodging (3.8%)
Apple South 380,000 7,980,000
Applebee's Intl 400,000 11,600,000
CapStar Hotel 520,000 (b) 9,360,000
Hospitality Franchise System 400,000 23,950,000
Prime Hospitality 525,000 (b) 9,975,000
Sonic 430,000 (b) 10,105,000
Total 72,970,000
Retail (9.2%)
Albertson's 223,000 9,449,625
American Stores 245,000 10,075,625
Corporate Express 255,500 (b) 9,581,250
Dollar General 510,000 16,447,500
Fingerhut 320,000 4,280,000
Friedman's Cl A 317,000 (b) 6,657,000
Gap 330,000 11,550,000
Home Depot 182,000 9,668,750
Home Shopping Network 679,000 (b) 7,299,250
Lowe's 400,000 14,450,000
Pep Boys--Manny, Moe & Jack 290,000 9,715,000
Price Costo 500,000 (b) 9,937,500
Richfood Holdings Cl A 270,000 10,260,000
Safeway 280,000 (b) 10,150,000
Saks Holdings 300,000 (b) 10,237,500
TJX 550,000 17,600,000
Vons 231,000 (b) 10,221,750
Total 177,580,750
Textiles & apparel (0.5%)
Shaw Inds 684,000 10,260,000
Utilities -- electric (0.6%)
AES 300,000 10,650,000
Utilities -- gas (1.0%)
Seagull Energy 500,000 (b) 9,000,000
Sonat 243,000 10,722,375
Total 19,722,375
Utilities -- telephone (1.1%)
NEXTEL Communications 219,900 (b) 3,600,863
Tel-Save Holdings 445,000 (b) 10,235,000
WorldCom 345,000 (b) 7,245,000
Total 21,080,863
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Foreign (4.7%) (h)
American Group 206,000 (b) 5,019,841
Banco de Galicia -- Buenos Aires 35,000 721,875
Barco 36,100 6,196,357
Bufete Industrial ADR 260,000 4,680,000
Coca-Cola FEMSA 350,000 9,187,500
Danka Business Systems 400,000 11,650,000
Empresas ICA Sociedad 900,000 (f) 13,500,000
Northern Telecommunications 200,000 9,975,000
Renaissance Energy 373,000 (b) 10,493,221
Schlumberger 70,000 5,906,250
Sun Intl Hotels 169,600 (b) 8,034,800
Swire Pacific 724,000 6,437,532
Total 91,802,376
Total common & preferred stocks
(Cost: $1,211,876,053) $1,457,260,773
Bonds (0.8%)
Issuer Principal Value(a)
amount
Park Electrochemical
7% 2006 $4,500,000 $ 3,577,500
Richy Electronics
7% Cv 2006 3,000,000 (g) 2,915,130
Thermo Electron
4.25% Cv 2003 7,500,000 (c) 8,962,500
Total bonds
(Cost: $15,000,000) $ 15,455,130
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (23.7%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
<S> <C> <C> <C>
U.S. government agencies (0.8%)
Federal Home Loan Bank
09-19-96 5.33% $12,000,000 $ 11,966,433
Federal Home Loan Mtge Corp Disc Nts
09-12-96 5.24 3,600,000 3,593,736
09-12-96 5.33 200,000 199,647
Total 15,759,816
Commercial paper (22.9%)
A.I. Credit
09-18-96 5.37 4,000,000 3,989,340
American General Finance
09-17-96 5.41 3,700,000 3,690,188
Ameritech Capital Funding
09-13-96 5.33 5,800,000 (d) 5,788,899
09-24-96 5.40 2,100,000 (d) 2,091,857
09-26-96 5.40 9,900,000 9,858,712
10-04-96 5.34 2,000,000 (d) 1,989,989
ANZ (Delaware)
11-06-96 5.39 13,900,000 13,753,471
AT&T
09-09-96 5.33 6,143,000 6,134,861
BBV Finance (Delaware)
09-13-96 5.30 6,700,000 6,687,225
11-22-96 5.37 8,000,000 7,896,111
CAFCO
09-19-96 5.42 17,600,000 (d) 17,543,287
10-24-96 5.31 5,300,000 5,257,453
Cargill
09-23-96 5.47 5,500,000 5,479,506
10-04-96 5.29 8,500,000 8,457,694
Cargill Global Funding
10-23-96 5.48 4,100,000 (d) 4,066,555
<PAGE>
PAGE 89
Ciesco LP
09-03-96 5.42 10,000,000 9,995,517
09-11-96 5.35 4,000,000 3,993,498
10-21-96 5.31 11,600,000 (d) 11,511,953
CIT Group
10-08-96 5.34 11,400,000 11,331,263
Coca-Cola
10-15-96 5.37 15,000,000 (d) 14,893,090
CPC Intl
09-20-96 5.40 8,100,000 (d) 8,075,880
Dean Witter
10-03-96 5.30 9,300,000 9,254,988
Fleet Funding
09-06-96 5.37 11,700,000 (d) 11,689,567
Ford Motor Credit
09-05-96 5.39 10,000,000 9,992,569
Gannett
10-18-96 5.54 12,400,000 (d) 12,306,821
Goldman Sachs
09-27-96 5.33 7,700,000 7,669,392
Merrill Lynch
09-24-96 5.31 3,600,000 3,587,304
Metlife Funding
09-09-96 5.37 3,800,000 3,794,927
09-09-96 5.39 10,198,000 10,184,335
10-24-96 5.32 7,100,000 7,043,768
Mobil Australia Finance (Delaware)
10-02-96 5.49 10,000,000 (d) 9,949,935
Morgan Stanley Group
09-04-96 5.35 4,500,000 4,497,335
Natl Australia Funding (Delaware)
10-01-96 5.46 10,000,000 9,951,412
10-21-96 5.32 11,600,000 11,508,444
NationsBank
11-26-96 5.37 6,500,000 6,498,772
NBD Canada Schedule B
09-03-96 5.35 8,900,000 8,896,047
Northern States Power
10-07-96 5.37 8,400,000 8,351,725
10-10-96 5.30 7,400,000 7,356,669
Pacific Mutual
09-13-96 5.30 2,400,000 2,395,424
Penney (JC) Funding
09-05-96 5.33 6,400,000 6,395,280
09-17-96 5.43 7,500,000 7,479,800
09-24-96 5.41 3,100,000 3,088,465
Pitney Bowes Credit
10-17-96 5.51 8,000,000 7,942,088
SAFECO Credit
09-20-96 5.40 6,900,000 6,879,453
10-02-96 5.44 8,900,000 8,854,204
10-09-96 5.36 5,600,000 5,565,478
Sandoz
09-16-96 5.44 8,000,000 (d) 7,978,358
10-24-96 5.32 6,900,000 (d) 6,845,352
Siemens
09-06-96 5.41 4,600,000 4,595,883
09-18-96 5.44 9,100,000 9,072,394
09-25-96 5.32 7,500,000 7,472,396
09-26-96 5.29 8,900,000 8,866,126
Southwestern Bell Capital
10-25-96 5.48 10,000,000 (d) 9,914,055
Toyota Motor Credit
09-30-96 5.29 3,700,000 3,683,751
Transamerica Finance
09-16-96 5.44 8,000,000 7,978,359
10-22-96 5.32 4,000,000 3,967,295
USAA Capital
10-10-96 5.35 15,000,000 14,903,458
U S West Communications
10-23-96 5.30 6,000,000 5,952,762
Total 444,850,740
Total short-term securities
(Cost: $460,698,372) $ 460,610,556
Total investments in securities of unaffiliated issuers
(Cost: $1,687,574,425) $ 1,933,326,459
Investments in securities of affliated issuer (e)
<PAGE>
PAGE 90
Common stock (0.8%)
Issuer Shares Value(a)
Heftel Broadcasting 457,000 (b) $ 16,337,750
Total investments in securities of affiliated issuer
(Cost: $12,266,622) $ 16,337,750
Total investments in securities
(Cost: $1,699,841,047) (i) $ 1,949,664,209
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Non-income producing.
(c) Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933,
as amended. This security has been determined to be liquid under guidelines established by the board.
(d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2)
of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited
investors. " This security has been determined to be liquid under guidelines established by the board.
(e) Investments representing 5% or more of the outstanding voting securities of the issuer. Transactions with
companies that are or were affiliates during the year ended Aug. 31, 1996 are as follows:
Beginning Purchase Sales Ending Dividend
Issuer cost cost cost cost income
Broadway & Seymour* $7,473,136 $ 3,357,042 $ 3,108,313 $ 7,721,865 $ --
Emispere Technologies* 1,902,405 2,850,206 4,752,611 -- --
Heftel Broadcasting* -- 12,266,622 -- 12,266,622 --
Manhattan Bagel Company* -- 9,548,438 9,548,438 -- --
ParcPlace* -- 7,878,837 7,878,837 -- --
Total $9,375,541 $35,901,145 $25,288,199 $19,988,487 $ --
*Issuer was not an affiliate for the entire fiscal year.
(f) Security is partially or fully in loan. See Note 6 to the financial statement.
(g) Identifies issuers considered to be illiquid as to their marketability (see Note 1 to the financial statements).
Information concerning such security holdings at Aug. 31, 1996 is as follows:
Acquisition Purchase
Security date cost
Richy Electronics 02-21-96 $3,000,000
(h) Foreign securities values are stated in U.S. dollars.
(i) At Aug. 31, 1996, the cost of securities for federal income tax purposes was $1,700,953,086 and the aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $277,122,954
Unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,411,831)
Net unrealized appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $248,711,123
</TABLE>
<PAGE>
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IN0786 J5
recycled paper with a minimum
of 10% post-consumer waste
S-6551 C (10/96)
<PAGE>
PAGE 92
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue
strip at the top
of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described to
annual report. the left of the text.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
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