<PAGE>
Helping You Build a Better Financial Future
[PHOTO OF GLOBE APPEARS HERE]
The AAL
International
Fund
Semi-Annual Report
October 31, 1995
[LOGO]
The AAL Mutual Funds
<PAGE>
[LOGO]
The AAL Mutual Funds
--------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
December 1, 1995
Dear AAL International Fund Shareholder:
Since the Fund's inception on August 1, 1995, most international markets have
performed poorly, particularly relative to the U.S. market. Recently, the
European equity markets have fallen, and the Japanese equity market has
continued its five-year slide. On the positive side, our Sub-Adviser, Societe
Generale Asset Management Corp. (SoGen), believes that these flat to falling
market performances have created many international opportunities for
purchasing bargain-priced foreign stocks. SoGen positions the Fund to take
advantage of potentially low-priced foreign securities that it believes have
long-term prospects for significant capital growth.
As of October 31, 1995, your Fund's portfolio, on an economic basis, was
invested as set forth on the next page:
This report is submitted for the information of the shareholders of The
AAL International Fund. It is not authorized for distribution to prospective
investors unless accompanied by a current prospectus for The AAL International
Fund.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
Bringing Worldwide Investment Opportunities Closer to Home
Europe........................ 26.3%
Japan......................... 13.6%
Other Asia
(Hong Kong, Singapore)........ 5.6%
Australia and New Zealand..... 3.6%
Latin America................. 1.8%
Preferred Stock .............. 1.8%
Miscellaneous................. 0.9%
Canada........................ 2.8%
....................................
Total Foreign Stocks.......... 56.4%
Bonds...........................3.7%
Cash and Cash Equivalents..... 39.9%
====================================
TOTAL 100%
Along with information on the Fund's investments and finances during its first
three months of operation, the semi-annual report will provide you with answers
to questions about The AAL International Fund's value approach to international
investing. On behalf of The AAL Mutual Funds' Board of Trustees, I thank you for
entrusting the Fund with your investments.
/s/ John H. Pender
John H. Pender
President and Chairman of the Board
The AAL Mutual Funds
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
Questions & Answers
The Fund hasn't done much
since its August inception. Why?
................................
The past few months have been difficult for most international markets,
particularly relative to the stellar performance of the U.S. equity market. Most
European equity markets have been down, the Japanese equity market has continued
its five-year slide and most developing markets have been disappointing.
What's the good news?
.....................
The good news is that depressed markets are resulting in some bargain-priced
foreign stocks with long-term growth potential. Also, too much skepticism may be
factored into foreign stock prices, which means two things: 1) positive news may
have significant upside impact and 2) downside risk has decreased along with
investors' expectations.
We are not concerned with short-term results and keep a long-range focus,
especially with foreign investments. We firmly believe that there continue to be
many attractive investment opportunities outside the United States, and that
foreign investments continue to deserve an important place in every diversified
portfolio.
How does the Fund's style compare
to that of other international funds?
.....................................
We have a conservative, value-oriented approach to foreign investing. Rather
than shoot for the stocks that we think will double quickly, we aim for
securities that have long-term growth potential and less downside risk. It is
not a glamorous approach, but successful investing is not about glamour.
Could you provide an example?
.............................
Sure. Buderus is Germany's largest manufacturer of heating systems. The business
will not win any beauty contests, but the quality of the company is what's
special. They're a steady grower in a highly profitable business. The balance
sheet is solid, management is conservative and the price of the stock is low.
There's potential growth in eastern Europe. Finally, the company has significant
"hidden" assets; we like to have that margin of safety.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
Bringing Worldwide Investment Opportunities Closer to Home
Going forward, which
markets are most attractive?
............................
We focus more on specific investments than we do general markets. Nevertheless,
we find that prices in Europe are currently quite reasonable. Japan's enormous
equity market, which is still down more than 50% since its 1989 high, is
offering quite a few bargains. And, from a long-term perspective, we are taking
a cautious look at the fast-growing developing markets of Asia and South
America.
What is your foreign currency policy?
.....................................
We are currently hedging our holdings in currencies that are most overvalued
relative to the dollar: the Japanese yen, the German deutsche mark, the French
franc and the Swiss franc. Currency fluctuation is a fact of life with
international investing. It may contribute to short-term volatility, but, again,
international investors should concentrate on long-term goals.
Why does the Fund currently
have such a high cash position?
...............................
Our investment style reflects a generally cautious approach. We typically
initiate small positions in many different stocks and build them up over time.
Our holding period is unusually long (three to five years), so the high cash
position is not a result of liquidations. Rather, it reflects the slow
portfolio-building process.
The past three months (the Fund's lifespan) were characterized by significant
volatility in foreign markets which generally were on the decline, with sharp
falls experienced in certain markets. While these market declines can create
attractive investment opportunities, we pay a lot of attention to the price we
pay for a security, and we typically wait for the price of the security to reach
a level that we consider attractive before purchasing it.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
The Fund in Review
Portfolio Mix
.............
[PIE GRAPH APPEARS HERE]
Stocks 56%
Short-Term Holdings 40%
Bonds 4%
Five Largest Holdings*--Securities
.................................
- Ito-Yokado Co., Ltd.
- Shaw Brothers Limited
- Carter Holt Harvey Limited
- CDL Hotels International Ltd.
- Buderus AG
*Exclusive of short-term holdings.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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The AAL International Fund
Schedule of Investments as of October 31, 1995
THE FUND SEEKS:
Long-term growth of capital through investing in a diversified
portfolio of foreign securities.
THE FUND IS:
A diversified portfolio of foreign equities in at least three
different countries not including the United States. The Fund also
may invest up to 20% of its assets in bonds.
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (54.6%) INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
ARGENTINA (1.8%)
----------------
50,000 Cresud S.A *.......................... Food & $ 60,012
(Argentine farm company) Agriculture
30,000 IRSA Inversiones y Representaciones, Real Estate 63,013
S.A...................................
(invests in and develops industrial,
commercial and residential real
estate)
65,000 Ledesma SA............................ Consumer Products 69,564
(produces and sells sugar, alcohol and
fruit)
75,000 Siderca S.A.I.C. .................. Misc. Manufacturing 56,261
(manufactures and
sells seamless steel pipes)
----------
248,850
----------
AUSTRALIA (0.5%)
----------------
67,100 Spotless Services, Limited............ Commercial 79,115
(operates in food catering and
textile rental services)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
AUSTRIA (0.9%)
--------------
1,500 VAE AG.............. Miscellaneous-- $ 134,106
(manufactures and sells turnouts, Manufacturing ----------
turnout systems and turnout
components.)
BELGIUM (0.7%)
--------------
850 Deceuninck Plastics Industries SA.... Basic Materials 92,258
(holding company for Deceuninck ----------
Group, which produces PVC windows and
door profiles)
CANADA (2.8%)
-------------
7,500 Canadian Pacific LTD................. Conglomerate 120,000
(interests in transportation, energy,
real estate, hotels and
telecommunications)
1,000 Franco-Nevada Mining Corp.
Ltd .............................. Gold
(receives royalties from gold mines) 54,275
8,500 Noranda, Inc......................... Metals-- 169,842
(produces copper and other metals and Diversified
holds interests in oil and gas
companies)
25,000 Redstone Resources, Inc.............. Metals-- 53,901
(holds a portfolio of base metal and Diversifies
industrial mineral royalty interests)
----------
398,018
----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
FINLAND (0.9%)
--------------
3,500 Vaisala OyA........................... Technology $ 124,438
(develops and manufactures ----------
electronic measurement systems and equipment for
meteorology and environmental
sciences)
FRANCE (9.7%)
-------------
750 Essilor International ADP. ........... Optical 96,417
(optical corrective lenses,
contact lenses
and optical instruments)
1,500 Comptoir Lyon-Alemand-Louyot*......... Miscellaneous 122,629
(refines precious metals
used in jewelry, dental implants, art
supplies and electronics)
1,000 Conflandey SA......................... Iron/Steel 56,205
(produces carbon steel and other
galvanized fine wires)
2,500 Elf Aquitaine......................... Oil-- 170,148
(major integrated oil and gas International
company)
1,500 Emin Leydier ............... Forest Prod. & 146,848
(manufactures corrugated paper and Paper
cardboard)
1,000 Eramet ............................ Metals-- 67,446
(involved in the mining, refining and Diversified
production of nickel, special metals
and steel)
1,500 Gaumont SA............................ Entertainment 90,439
(produces and distributes films and
television programs, manages theaters)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
FRANCE--CONTINUED
-----------------
1,500 Legrand ADP.......................... Electrical $ 164,936
(manufactures low-voltage electrical Equipment
fittings and accessories)
2,000 Groupe Legris Industries SA.......... Machine-- 58,044
(manufactures of tower cranes, Diversified
industrial fluid contols)
750 N.S.C. (Nicolas Schlumberger et Cie). Machine-- 143,630
(manufactures and markets textile Diversified
machinery)
581 Promodes C.I......................... Retail Stores 112,809
(owns and operates, hypermarkets, super
markets and convenience stores)
650 Sabeton SA........................... Holding 92,861
(investment company) Company
149 Taittinger C.I. ........... Wine & Spirits 41,112
(produces and sells champagne;
also active in hotel business)
----------
1,363,524
----------
GERMANY (2.6%)
--------------
500 Buderus AG........................... Miscellaneous-- 214,636
(manufactures a wide range of heating Manufacturing
products, also involved in casting,
stainless steel and aircraft
equipment)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
GERMANY--CONTINUED
------------------
150 Hornbach Holding AG Pfd....... Retail Stores $ 150,724
(owns and manages large-scale
do-it-yourself stores)
----------
365,360
----------
HONG KONG (3.5%)
----------------
524,000 CDL Hotels International Ltd... Lodging 237,205
(investment holding company
whose subsidiaries own and
operate hotels world wide)
200,000 Shaw Brothers Limited.......... Entertainment 252,209
(involved in film production and
distribution)
----------
489,414
----------
ITALY (1.8%)
------------
15,000 Arnoldo Mondarori Editore SpA. Publishing/Printing 111,031
(second-largest publishing
company in Italy)
250,000 Montedison non-convertible savings
S.p.A ...... Holding Company 146,630
(industrial holding company
with activities in chemicals,
energy, agro-industrial production)
----------
257,661
----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
JAPAN (13.6%)
-------------
12,000 Aida Engineering Limited......... Machine--Diversified $ 84,268
(leading manufacturer of
presses)
1,000 Asatsu Inc....................... Business Services 34,525
(advertising agency)
3,000 Chofu Seisakusho................. Manufacturing-- 70,419
(manufacturer of air conditioners Diversified
and water heaters)
22,000 Dai-Tokyo Fire & Marine Insurance 141,366
Insurance, Inc...................
(non-life insurance company)
1,000 Fast Retailing Co., Ltd. ........ Retail--Apparel 48,804
(designs and sells low price
unisex style casual clothing)
4,000 Fuji Photo Film Co. Ltd.- Photo 197,000
ADR .......................
(manufactures photographic film, equipment
supplies and imaging systems)
1,000 Hitachi Ltd. ADR................. Electronics 104,625
(manufactures electronic and
electrical products)
15,000 Iino Kaiun Kaisha................ Shipping 73,940
(carrier and specialized carrier
operator)
5,000 Ito-Yokado Co., Ltd .......... Retail Stores 273,363
(one of leading supermarket
operators)
7,000 Nisshinbo Industries Inc......... Textiles 62,164
(manufactures cotton fabrics
chemical and synthetic fibers)
12,000 Nittetsu Mining Co., Ltd......... Mining 103,868
(mining company with
limestone as mainline)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
JAPAN--CONTINUED
----------------
5,000 Shimano Inc........................... Bicycles $ 92,914
(manufacturer of bicycle
parts and fishing tackle)
8,000 Sotoh Co., Ltd. ................ Textiles 89,980
(leading dyer-finisher of woolen
fabrics)
1,330 Toho Co. .......................... Entertainment 187,315
(one of the Big 4 in the movie
industry)
18,000 Tokio Marine & Fire Insurance Co., Ltd.
(writes marine, fire and casualty, Insurance 184,850
automobile and allied lines of
insurance)
2,000 Tsutsumi Jewelry Co., Ltd. ......... Retail Jewelry 98,782
(manufacturer, wholesaler, and
retailer of jewelry)
5,000 Yoshimoto Kogyo Co., Ltd.............. Entertainment 60,150
(major entertainment company)
----------
1,908,333
----------
LUXEMBOURG (0.8%)
-----------------
2,500 Minorco SA ADR ............ Holding 68,125
(natural resources group with Company
interests in agribusiness, mining and
processing metals and industrial
materials)
30 Socfinasia............................ Food & 43,484
(holding company that invests mainly Agriculture
in rubber plantations and palm oils)
----------
111,609
----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
NETHERLANDS (0.9%)
------------------
2,000 German City Estates NV......... Real Estate $ 32,277
(Real estate
investment company with
commercial property located in
various German cities)
2,500 Philips Electronics N.V ADR.... Electronics 96,563
(manufactures lighting,
consumer electronics, small
home appliances, medical
systems and industrial
electronics)
----------
128,840
----------
NEW ZEALAND (3.1%)
------------------
50,000 Apple Fields Limited*........... Food & Agriculture 24,753
(owns and manages horticulture
businesses, mainly apple
orchards and dairy farms)
100,000 Carter Holt Harvey, Limited.... Forest Products & 238,944
(owns a forest plantation and Paper
manufactures building products)
9,500 Shortland Properties, Limited... Real Estate 5,456
(owns real estate properties)
4,750 Shortland Properties, Limited Real Estate 125
Rights.........................
75,000 Tasman Agriculture Limited..... Food & Agriculture 72,772
(corporate dairy farm)
15,000 Wilson & Horton Limited........ Publishing/Printing 89,109
(publishes and markets
newspapers and magazines)
----------
431,159
----------
NORWAY (0.9%)
-------------
12,000 Schibsted A/S .......... Publishing/Printing 132,927
(publishes newspapers, ----------
magazines; owns a TV Channel)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SINGAPORE (2.1%)
----------------
60,000 Clipsal Industries Ltd. ..... Electronics $ 147,000
(develops, manufactures and
markets electrical installation
products)
10,000 Singapore Bus Service Ltd...... Transportation 67,864
(operates bus service in
Singapore)
35,000 Times Publishing Ltd. ....... Publishing/Printing 81,154
(publishes, prints, distributes
and sells books, partworks,
directories, magazines and
musical products)
---------
296,018
---------
SPAIN (0.4%)
------------
10,000 Energia e Industrias Chemicals 50,961
Aragonesas S.A................. ---------
(integrated PVC producer)
SWEDEN (0.6%)
-------------
5,000 Terra Mining AB................ Gold 85,798
(prospecting, mining and gold ---------
producer)
SWITZERLAND (3.2%)
------------------
16 Bank for International
Settlements .............. Financial Services 147,822
(the central banks' central bank)
250 Kuehne & Nagel International AG Transportation 147,382
(transports freight worldwide)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SWITZERLAND--CONTINUED
----------------------
45 Lindt & Spruengli AG-PC............ Food & $ 63,352
(chocolate manufacturer)
350 Sika Finanz AG Bearer.............. Building 89,925
(Producer of specialized Materials
construction and insulation
materials)
---------
448,481
---------
UNITED KINGDOM (2.9%)
---------------------
25,000 Antofagasta Holdings plc........... Holding 119,536
(diversified interests in Companies
mining, transportation, banking,
telecommunications, forestry and natural
resources in Chile)
15,000 Blenheim Group plc................. Advertising 60,597
(organizes and manages exhibitions,
conferences and related trade
publications)
50,000 Lonrho plc......................... Holding 123,481
(industrial holding company) Companies
with interests in various African
businesses)
30,000 McBride plc*....................... Consumer Products 99,653
(manufactures private label
household and personal care
products)
---------
403,267
---------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
MISCELLANEOUS (0.9%)
--------------------
2,000 Banco Latinoamerica de Exportaciones,
SA (Bladex), Panama...................
(specialized multinational bank Financial $ 83,500
established to finance the foreign Services
trade in Latin America and the
Caribbean region)
3,500 North European Oil Royalty Trust...
(holds overriding royalty rights on Energy 45,938
gas production in Germany)
---------
129,438
---------
Total Common Stocks (cost basis $7,759,913)........... 7,679,575
---------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS (1.8%)
-----------------------
<C> <S> <C> <C>
5,000 Freeport-McMoran Copper & Gold, Preferred
Series C ............................. Mining $157,500
4,500 Freeport-McMoran Copper & Gold, Preferred
Series D ......................... Mining 94,500
--------
Total Preferred Stock (cost basis $260,096).......... 252,000
--------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE U.S. DOLLAR CONVERTIBLE BONDS (1.8%) MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C>
$ 100,000 Cheil Foods & Chemical Co 3.00%
12/31/2006........................................... 131,000
$ 100,000 Far Eastern Textile 4.00% 10/7/2006................. 115,000
-------
Total U.S. Dollar Convertible Bonds (cost basis $237,263) 246,000
-------
</TABLE>
NON U.S. DOLLAR CORPORATE BONDS (0.3%)
- --------------------------------------
<TABLE>
<CAPTION>
<C> <S> <C>
100,000 Air Canada Variable Rate Perpetual Bonds 3/29/2049
(Germany) ............................................ 40,158
------
Total Non U.S. Dollar Corporate Bonds 40,158
</TABLE>
------
U.S. DOLLAR BONDS (1.6%)
- ------------------------
<TABLE>
<CAPTION>
<C> <S> <C>
265,300 Federal Republic of Brazil "C" Bonds 8.00% 4/15/2014. 134,971
50,000 Republic of Argentina FRB
3/31/2005............................................ 29,625
100,000 Republic of Poland PDI 10/27/2014.................... 64,125
----------
Total Non U.S. Dollar Corporate Bonds
(amortized cost basis $275,783)...................... 228,721
----------
TOTAL LONG-TERM INVESTMENTS (amortized cost basis
$8,533,055)......................................... 8,446,454
----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL PAPER (39.9%)
------------------------
<C> <S> <C>
500,000 American Telephone & Telegraph Company 5.73%
11/10/95.............................................. $ 499,284
642,000 Bridgestone Firestone Inc. 5.78% 11/6/95.............. 641,485
600,000 Dover Corporation 5.75% 11/2/95....................... 599,904
687,000 Ford Motor Credit Corporation 5.75% 11/20/95.......... 684,915
619,000 GE Capital Corporation 5.67% 11/1/95.................. 619,000
600,000 Hewlett-Packard Company 5.70% 11/7/95................. 599,430
679,000 ITT Corporation 5.83% 11/8/95......................... 678,230
672,000 McDonald's Corporation 5.70% 11/9/95.................. 671,149
623,000 Sony Capital Corporation 5.73% 11/3/95................ 622,801
-----------
Total Commercial Paper (amortized cost $5,616,198)... 5,616,198
-----------
TOTAL INVESTMENTS (amortized cost basis $14,149,254) $14,062,652
===========
*non-income producing security
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
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- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
OCTOBER 31, 1995 FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
- ------
Investments, at value (Cost: $14,149,254)....................... $14,062,652
Dividends and interest receivable............................... 11,900
Receivable for forward contracts held, at value................. 1,959,491
Account receivable from affiliate............................... 23,564
Unamortized organization and initial registration expense....... 52,509
Cash............................................................ 1,549,052
-----------
TOTAL ASSETS $17,659,168
===========
LIABILITIES
- -----------
Payable for forward currency contracts held, at cost............ $ 1,952,810
Payable for investments purchased............................... 918,752
Accrued expenses................................................ 93,020
-----------
TOTAL LIABILITIES 2,964,582
-----------
NET ASSETS
- ----------
Trust capital (beneficial interest)............................. 14,751,878
Accumulated undistributed net investment income................. 23,504
Accumulated net realized gain on investments.................... 329
Net unrealized appreciation (depreciation) on:
Investments.................................................... (86,602)
Forward currency contracts..................................... 6,681
Foreign currency related transactions.......................... (1,204)
-----------
TOTAL NET ASSETS 14,694,586
-----------
TOTAL LIABILITIES AND CAPITAL $17,659,168
===========
Shares of beneficial interest outstanding (unlimited number of
shares authorized)............................................. 1,475,448
===========
Net Asset Value Per Share....................................... $ 9.96
===========
Maximum Public Offering Price................................... $ 10.46
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
FOR THE PERIOD ENDED OCTOBER 31, 1995 FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of $1,155 foreign taxes withheld).................. $ 15,092
Taxable interest.................................................. 52,288
--------
TOTAL INVESTMENT INCOME 67,380
--------
EXPENSES
Adviser fees...................................................... 4,388
Sub-Adviser fees.................................................. 13,163
Audit fees........................................................ 2,200
Custody fees...................................................... 4,550
Administrative service fees....................................... 12,572
Legal fees........................................................ 1,247
Amortization of organization & registration expense............... 1,089
Printing and postage expense...................................... 15,626
Distribution expense (12b-1)...................................... 4,388
S.E.C. and state registration fees................................ --
Transfer Agent fees............................................... 25,809
Shareholder Maintenance Fees...................................... 788
Trustees fees and expenses........................................ 2,514
Other expenses.................................................... 175
--------
TOTAL EXPENSES 88,509
--------
Less reimbursement from Adviser.................................. (44,633)
--------
TOTAL NET EXPENSES 43,876
--------
NET INVESTMENT INCOME 23,504
--------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investment transactions..................... 810
Net realized losses on foreign currency transactions (481)
Decrease in unrealized appreciation on investment................. (86,602)
Increase in unrealized appreciation on currency................... 5,477
--------
NET REALIZED & UNREALIZED LOSSES ON INVESTMENTS................... (80,796)
--------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $(57,292)
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
THE AAL
-------------
INTERNATIONAL
FUND
-------------
PERIOD ENDED
10/31/95(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
OPERATIONS
Net investment income............................................. $ 23,504
Net realized gains on investments and foreign currency........... 329
Decrease in unrealized appreciation on investments................ (81,125)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. (57,292)
-----------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.............................. --
Capital gains distributions....................................... --
-----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................... --
-----------
TRUST SHARES TRANSACTIONS
Purchases of trust shares......................................... 14,838,291
Redemption of trust shares........................................ (86,413)
-----------
NET INCREASE IN TRUST CAPITAL..................................... 14,751,878
-----------
NET INCREASE IN NET ASSETS........................................ 14,694,586
NET ASSETS BEGINNING OF PERIOD.................................... --
-----------
NET ASSETS END OF PERIOD(2)....................................... $14,694,586
===========
</TABLE>
- ---------
(1 From commencement of operation on August 1, 1995.
(2 Including undistributed income of $23,504.
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to Financial Statements
(A) ORGANIZATION
The AAL Mutual Funds (the "Trust") was organized as a Massachusetts Business
Trust on March 13, 1987, and is registered as an open-end diversified
management company under the Investment Company Act of 1940. The Trust
commenced operations on July 16, 1987, with The AAL Capital Growth Fund, The
AAL Income Fund and The AAL Municipal Bond Fund. On March 10, 1988, The AAL
Money Market Fund commenced operations. On July 1, 1992, The AAL Income Fund
changed its name to The AAL Bond Fund. On June 30, 1993, The AAL Smaller
Company Stock Fund commenced operations; on March 17, 1994, The AAL Utilities
Fund commenced operations; and on August 1, 1995, The AAL International Fund
(the "Fund") commenced operations. The AAL U.S. Government Zero Coupon Target
Funds, Series 2001 and 2006, are also portfolios in the series. The nine AAL
Funds are collectively referred to as the "Funds."
(B) SIGNIFICANT ACCOUNT POLICIES
The Funds' principal accounting policies are:
SECURITY VALUATION - The Fund invests in foreign securities, including stocks,
bonds, notes and convertible securities, whose values are subject to changes in
market conditions, as well as changes in political and regulatory environments.
All securities for which market quotations are available on a national
securities exchange in the United States or a securities exchange abroad are
valued at their last sale price. All over-the-counter securities for which
market quotations are readily available are valued at the last sale price. All
other securities are valued at fair value as determined by the Investment
Adviser under supervision of the Board of Trustees.
FOREIGN CURRENCY TRANSLATION - The market values of securities that are not
traded in United States currency are recorded in the financial statements after
translation to U.S. dollars using the exchange quotation in effect at the time
net asset value is calculated. The costs of such securities are translated at
exchange rates prevailing when acquired. Additionally, other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars.
The Fund does not isolate the portion of gains and losses on investments that
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the equity securities.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS - In connection with purchases and sales of
securities denominated in foreign currencies, the Fund may enter into forward
currency contracts. Additionally, the Fund may enter into such contracts to
hedge certain other foreign currency denominated investments. These contracts
are recorded at market value, and the related realized and unrealized foreign
exchange gains and losses are included in the statement of operations. In the
event that counter parties fail to settle these currency contracts or the
related foreign security trades, the Fund could be exposed to foreign currency
fluctuations.
UNITED STATES INCOME TAXES - No provision has been made for United States
federal income taxes since it is the intention of the Fund to distribute to
shareholders all taxable net investment income and net realized gains on
investments, if any, within the allowable time limit, and to comply with the
other provisions of the Internal Revenue Code for a regulated investment
company. Such income dividends and capital gains distributions are declared and
paid by the Fund on an annual basis.
OTHER - For financial statement purposes, investment security transactions are
accounted for on the trade date. Dividend income is recognized on the ex-
dividend date, and interest income is recognized on an accrual basis. Discounts
on bonds are amortized over the life of the respective bonds. Realized gains or
losses on sales are determined on a specific cost identification basis. The
Funds have no right to require registration of unregistered securities. The
cost incurred with the organization and initial registration of shares for The
AAL International Fund is being amortized over the period of benefit, but not
to exceed 60 months from each Fund's commencement of operation.
(C) INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS
The Trust has entered into an Investment Advisory Agreement with AAL Capital
Management Corporation ("The Adviser") under which The AAL International Fund
pays a fee for investment advisory services. The annual rates of fees under the
Investment Advisory Agreement are calculated as 1% of the Funds average daily
net asset.
The Adviser has entered into a Sub-Advisory Agreement with Societe Generale
Asset Management Corp. ("Sub-Adviser"). The sub-advisory fee, which is paid
by the Adviser, is equal to the rate of .75 of 1% of the Funds average daily
net assets.
The Trust has entered into an Administrative Services Agreement with the
Adviser pursuant to which the Adviser provides certain administrative services.
The Adviser earned the fee of $10,000 from the Fund for the period ended
October 31, 1995.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Trust has also contracted with AAL Capital Management Corporation for
certain shareholder maintenance services, effective April 1, 1995. These
shareholder services include pre-processing and quality control of new
accounts, shareholder correspondence, account response and answering customer
inquires regarding account status, option and facilitating shareholder
telephone transactions. Fees charged to the Funds under terms of the contract
approximated $3.58 per shareholder account for the period ended October 31,
1995.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan authorizes the Trust to use
a portion of its assets to finance certain activities relating to the
distribution of its shares to investors. Payments under the Plan are equal to a
maximum of .25 of 1% of the average daily net assets of the Fund.
Trustees of the Trust not affiliated with AAL or the Adviser receive an annual
fee of $10,000 and $1,000 for each meeting of the Board of Trustees, or
Committee thereof, attended. No remuneration has been paid by the Trust to any
of the officers or affiliated Trustees of the Trust. In addition, the Trust
reimburses unaffiliated Trustees for reasonable expenses incurred in relation
to attendance at the meetings.
Each of the Funds is charged for those expenses that are directly attributable
to it, such as advisory, custodian and certain shareholder service fees, while
other expenses that cannot be directly attributable to the Funds are allocated
among the Funds in proportion to the net assets of the respective Fund.
The Adviser reimburses the Funds for annual expenses in excess of the lowest
expense limitation imposed by the states.
AAL is the ultimate parent company for AAL Capital Management Corporation.
(D) SECURITY TRANSACTIONS
During the period ended October 31, 1995, purchases and sales of securities
other than short-term obligations were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
PERIOD ENDED PERIOD ENDED
10/31/95 10/31/95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
The AAL International Fund............................ $8,532,445 $810
</TABLE>
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cost of investments is substantially the same for financial reporting purposes
and Federal income tax purposes.
The gross unrealized appreciation and depreciation on investments at the period
ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>
10/31/95
------------------------------------------
NET UNREALIZED
APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
The AAL International Fund........... $130,668 ($217,270) ($86,602)
</TABLE>
(E) TRUST TRANSACTIONS
Transactions in trust shares for the period ended October 31, 1995, were
as follows:
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
FUND
-------------
PERIOD ENDED
10/31/95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
Shares purchased.................................................. 1,484,102
Income dividends reinvested....................................... --
Capital gains reinvested.......................................... --
Shares redeemed................................................... (8,654)
---------
Net increase of trust shares...................................... 1,475,448
---------
</TABLE>
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(F) COMMITMENTS
As of October 31, 1995, the Fund had entered into forward currency contracts,
as summarized below, resulting in net unrealized appreciation of $6,681.
<TABLE>
<CAPTION>
CURRENCY U.S. VALUE AT
FORWARD CONTRACTS TO BE DELIVERED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
French Franc for delivery
February 9, 1996....................... 3,500,000 $ 714,035
French Franc for delivery
April 5, 1996.......................... 1,395,000 284,463
German Deutsche Mark for delivery
February 9, 1996....................... 250,000 178,369
German Deutsch Mark for delivery
April 4, 1996.......................... 46,000 32,901
Japanese Yen for delivery
February 9, 1996....................... 75,000,000 744,825
Japanese Yen for delivery
April 4, 1996.......................... 56,050,000 561,145
Swiss Franc for delivery
February 9, 1996....................... 200,000 177,841
----------
$2,693,579
----------
</TABLE>
<TABLE>
<CAPTION>
U.S. VALUE
AT
CURRENCY TO BE OCTOBER 31,
FORWARD CONTRACTS RECEIVED DUE DATE 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Austrian Schilling.................... 225,505 11/6/95 $ 22,755
British Pound Sterling................ 39,596 11/1/95 62,484
Canadian Dollar....................... 98,410 11/1/95 73,167
Canadian Dollar....................... 45,425 11/2/95 33,773
Finnish Marka......................... 148,373 11/1/95 34,935
French Franc.......................... 274,541 11/3/95 56,111
Hong Kong Dollar...................... 243,767 11/2/95 31,528
Italian Lira.......................... 236,601,433 11/30/95 148,419
Japanese Yen.......................... 7,002,128 11/1/95 68,484
Japanese Yen.......................... 8,206,120 11/2/95 80,259
New Zealand Dollar.................... 90,436 11/1/95 59,694
New Zealand Dollar.................... 53,461 11/3/95 35,288
Singapore Dollar...................... 19,115 11/1/95 13,513
Singapore Dollar...................... 28,800 11/3/95 20,359
--------
$740,769
--------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights
Per Share Information
(Based on a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD
ENDED
10/31/95(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE: BEGINNING OF PERIOD.............................. $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................................. (0.016)
Net realized and unrealized loss on investments................... (0.056)
-----------
Total From Investment Operations.................................. (0.040)
-----------
DISTRIBUTIONS FROM:
Net investment income............................................. --
Net realized capital gains........................................ --
-----------
Total distributions.............................................. 0.000
-----------
Net decrease in net asset value................................... (0.040)
Net asset value:
End of period.................................................... $ 9.96
-----------
Total Return(d) .................................................. 0.40%
Net Assets: End of Period......................................... $14,694,586
Ratio of expenses to average net assets(a)(b)..................... 2.50%
Ratio of net investment income to average net assets(a)(c)........ 1.34%
Portfolio turnover rate........................................... 0.02%
</TABLE>
- ---------
(1) From commencement of operations on August 1, 1995.
(a) calculated on an annualized basis.
(b) computed after giving effect to Adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 5.04%
for the period ended October 31, 1995.
(c) If the Fund had paid all of its expenses, the ratio would have been (1.20%)
for the period ended October 31, 1995.
(d) Total return information is calculated on net amount invested and is
reported as period-to-date.
THE AAL INTERNATIONAL FUND
................................................................................
<PAGE>
[LOGO]
The AAL Mutual Funds
------------------------------------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
Board of Trustees
......................
John H. Pender--Chairman of the Board
Richard L. Gady
Lawrence M. Woods
D.W. Russler
F. Gregory Campbell
Richard L. Gunderson
Officers
.............
John H. Pender--President
H. Michael Spence--Vice President
Robert G. Same--Secretary
Terrance P. Gallagher--Treasurer
Investment Adviser & Distributor
.....................................
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
Sub-Adviser
................
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
Custodian
..............
The Chase Manhattan Bank, N.A.
Chase MetroTech Center
Brooklyn, NY 11245
Transfer Agent & Disbursing Agent
......................................
Firstar Trust Company
615 East Michigan Street
P.O. Box 2981
Milwaukee, WI 53201-2981
Legal Counsel
..................
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
