<PAGE>
The AAL Mutual Funds
Semi-Annual Report
October 31, 1995
[ART WORK APPEARS HERE]
Helping You Build a
Better Financial Future
The AAL Smaller Company Stock Fund
The AAL Capital Growth Fund
The AAL Utilities Fund
The AAL Bond Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund
[AAL LOGO APPEARS HERE]
The AAL Mutual Funds
<PAGE>
[AAL LOGO APPEARS HERE]
The AAL Mutual Funds
----------------------------------------------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
December 1, 1995
Dear AAL Mutual Funds Shareholder:
1995 has been a year of moderate growth and low inflation. In this environment,
investor confidence increased and raised most markets to record highs. We are
pleased to report that this performance has been reflected in positive returns
for all our Funds. For the six-month period covered by this semi-annual report,
May 1, 1995, through October 31, 1995, the Funds' total returns*, based upon the
net amount invested after deducting the maximum 4.75% sales charge, were:
31.14% The AAL Smaller Company Stock Fund
12.44% The AAL Capital Growth Fund
15.19% The AAL Utilities Fund
6.69% The AAL Bond Fund
6.14% The AAL Municipal Bond Fund
During this period we have completed the process of assuming the day-to-day
portfolio management for all of the Funds, except for The AAL International
Fund, with our experienced staff of portfolio managers. This evolution in
portfolio management began on November 1, 1995. One immediate benefit has been a
substantial reduction in advisory fees paid by the Funds, which is expected to
save shareholders between $750,000 and $1,000,000 in 1996, as we begin to pass
along the benefits of this transition.
The Funds have also added a significant new service, cost-basis reporting, to
make investing easier for shareholders. The AAL Mutual Funds will now report the
cost basis of mutual fund shares liquidated during the tax year so shareholders
can easily report the gain or loss realized on these liquidations on their tax
returns. Shareholders should receive the cost-basis reporting information with
their year-end tax statements for 1995 (which they should receive in early
February of 1996). We strongly encourage shareholders to consult with their
professional advisers for additional information on tax reporting.
We are also pleased to announce that AAL has recently created a site called
AALnet on Compuserve (Go AALnet). This new service uses computer technology to
provide a variety of information to members including mutual fund prices.
We look forward to meeting your investment needs in 1996 and beyond and will
continue providing you with the services necessary to meet your financial goals.
/s/ John H. Pender
John H. Pender
President and Chairman of the Board
The AAL Mutual Funds
<PAGE>
*The SEC standardized average total returns for The AAL Mutual Funds,** based
upon gross amount invested, including the maximum 4.75 percent sales charge,
were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
From Inception
12 months ended 5 years ended (July 16, 1987) to
September 30, 1995 September 30, 1995 September 30, 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
The AAL Smaller
Company Stock Fund 35.42% NA 13.97%***
- -----------------------------------------------------------------------------------------------------------
The AAL Capital
Growth Fund 20.96% 13.72% 9.18%
- -----------------------------------------------------------------------------------------------------------
The AAL Utilities Fund 11.60% N/A 3.95%****
- -----------------------------------------------------------------------------------------------------------
The AAL Bond Fund 5.82% 7.30% 7.13%
- -----------------------------------------------------------------------------------------------------------
The AAL Municipal
Bond Fund 5.46% 7.03% 6.29%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Total returns are calculated after reimbursement of certain Fund expenses by the
Investment Adviser. The Adviser has reimbursed the Funds at various times and
for various amounts during the Funds' existence.
Investment returns and principal values are subject to fluctuation, and shares,
when redeemed, may be worth more or less than their purchase price. Past
performance is not an indication of future results.
**The AAL U. S. Government Zero Coupon Target Funds, Series 2001 and 2006, are
closed to new investors and their financial information is contained in a
separate annual report. The financial information for The AAL International Fund
is also contained in a separate report.
***From inception June 30, 1993.
****From inception March 17, 1994.
- -------------------------------------------------------------------------------
This report is submitted for the information of the shareholders of The AAL
Mutual Funds. It is not authorized for distribution to prospective investors
unless preceded or accompanied by the current prospectuses for The AAL Mutual
Funds which contain more complete information about the Funds, including
investment policies, charges and expenses.
<PAGE>
THE AAL Smaller
Company Stock Fund
The Fund In Review
- -------------------------------------------------------------------------------
Q. After a roller coaster performance in 1994, how was the Fund able to rebound
so dramatically through October of 1995?
A. The strong performance by The AAL Smaller Company Stock Fund in 1995 can be
attributed to two main factors. The first was a stable to declining interest
rate environment that is positive for equities in general. The second was
strong earnings reports from many companies in 1995. The AAL Smaller Company
Stock Fund's orientation is toward companies with very strong earnings
growth. The combination of lower interest rates and higher earnings growth
was very good for The AAL Smaller Company Stock Fund through October of this
year.
Q. What sectors or stocks in the portfolio performed well during the six-month
period ended October 31, 1995?
A. Several sectors have performed exceptionally well over the past six months.
Most notably has been the technology sector which increased almost 30%
during that time period. The operating fundamentals for many technology
companies have been strong and these companies have delivered superior
earnings increases. Another strong performing sector was health care stocks,
which returned more than 20% for the six-month period.
Average Annual Total Return
...............................
As of September 30, 1995 . Based upon the Net Amount Invested
1-Year 5-Year From Inception
(June 30, 1993)
42.18% N/A 16.47%
Past performance is not an indication of future results.
<PAGE>
Q. Looking ahead, how will the Fund be positioned for continued growth?
A. The Fund will retain many of the same characteristics that it has now. We
will still be investing in rapidly growing companies. We also will be
looking for small and mid-capitalization companies we think will become much
larger companies in the future. In the near term, the portfolio structure
will change as the Fund becomes more broadly diversified. Currently, there
is an overweighting in technology stocks relative to the rest of the
portfolio. Technology stocks have done well, but the risk profile of these
stocks has increased with the higher stock prices. The AAL Smaller Company
Stock Fund will continue with a sizable technology weighting; however, some
of these allocations will be shifted to other sectors of the stock market.
Portfolio
Sector Chart
Computer Software.............. 23%
Electronics.................... 17%
Cash & Cash Equivalents........ 15%
Health Care.................... 14%
Retail......................... 12%
Telecommunications............. 8%
Consumer-Related............... 6%
Other Equities................. 3%
Financial Services............. 2%
Total......................... 100%
10 Largest
Holdings
Peoplesoft Inc.
HBO & Company
Stratacom, Inc.
Oxford Health Plans Inc.
Atmel Corporation
Glenayre Technologies, Inc.
Intuit, Inc.
Linear Technology Corporation
HEALTHSOUTH Corporation
Parametric Technology Company
<PAGE>
THE AAL Capital
Growth Fund
The Fund In Review
- -------------------------------------------------------------------------------
Q. The Fund had a total return of 12.44% for the six-month period ended October
31, 1995. What market factors will affect performance into 1996?
A. The factors that will most affect the market going forward are interest
rates, economic growth and inflation. In the last six months, the threat of
accelerating inflation receded, the economy continued to grow and interest
rates declined. This provided a very good market environment for stocks.
Q. The Fund has invested more than 60% of its portfolio in technology,
consumer, financial services and drug and chemical stocks. Will any changes
be made in this allocation?
A. No. The five sectors outlined now comprise about 60% of the S&P 500, and we
plan to continue to approximate this percentage and weighting in the Fund.
Depending on the sector, we expect the Fund will not have less than half,
nor more than two times the weighting of that sector in the S&P 500.
Return on a $10,000 Investment
[_] Value of shares initially purchased ($16,400)
[_] Value of shares acquired through
reinvestment of dividends and
capital gains ($2,618)
-------------------
Initial Net
Asset Value
$9,525
-------------------
<PAGE>
[PERFORMANCE CHART APPEARS HERE]
The AAL Capital Growth Fund
29-Sep-95
(Assuming Reinvestment of all Dividends)
<TABLE>
<CAPTION>
Original Amount Dividends and Total
Date Invested Capital Gains Value
---- -------- ------------- -----
<S> <C> <C> <C>
28-Sep-90 $ 9,525 $ 0 $ 9,525
31-Oct-90 $ 9,609 $ 0 $ 9,609 -
30-Nov-90 $ 10,239 $ 0 $ 10,239
27-Dec-90 $ 10,333 $ 135 $ 10,468
31-Dec-90 $ 10,389 $ 136 $ 10,525
31-Jan-91 $ 10,614 $ 139 $ 10,753
28-Feb-91 $ 11,272 $ 148 $ 11,419
29-Mar-91 $ 11,648 $ 153 $ 11,800
30-Apr-91 $ 11,666 $ 153 $ 11,819
31-May-91 $ 12,145 $ 159 $ 12,304
28-Jun-91 $ 11,732 $ 154 $ 11,886
2-Jul-91 $ 11,779 $ 301 $ 12,080
31-Jul-91 $ 12,023 $ 307 $ 12,330
30-Aug-91 $ 12,277 $ 313 $ 12,590
30-Sep-91 $ 12,183 $ 311 $ 12,494
31-Oct-91 $ 12,380 $ 316 $ 12,696
30-Nov-91 $ 11,976 $ 306 $ 12,282
27-Dec-91 $ 12,906 $ 465 $ 13,372
31-Dec-91 $ 13,226 $ 477 $ 13,703
31-Jan-92 $ 12,906 $ 465 $ 13,372
28-Feb-92 $ 12,963 $ 467 $ 13,430
31-Mar-92 $ 12,765 $ 460 $ 13,226
30-Apr-92 $ 13,207 $ 476 $ 13,683
29-May-92 $ 13,291 $ 479 $ 13,771
30-Jun-92 $ 13,104 $ 472 $ 13,576
6-Jul-92 $ 13,094 $ 599 $ 13,693
31-Jul-92 $ 13,451 $ 615 $ 14,066
31-Aug-92 $ 13,291 $ 608 $ 13,899
30-Sep-92 $ 13,395 $ 612 $ 14,007
30-Oct-92 $ 13,554 $ 620 $ 14,174
30-Nov-92 $ 13,846 $ 633 $ 14,479
31-Dec-92 $ 13,714 $ 770 $ 14,485
31-Dec-92 $ 13,714 $ 770 $ 14,485
29-Jan-93 $ 13,479 $ 757 $ 14,236
26-Feb-93 $ 13,855 $ 778 $ 14,633
31-Mar-93 $ 14,015 $ 787 $ 14,802
30-Apr-93 $ 13,930 $ 783 $ 14,713
31-May-93 $ 14,146 $ 795 $ 14,941
30-Jun-93 $ 14,118 $ 793 $ 14,911
<PAGE>
1-Jul-93 $ 13,921 $ 923 $ 14,844
30-Jul-93 $ 13,846 $ 918 $ 14,763
31-Aug-93 $ 14,240 $ 944 $ 15,184
30-Sep-93 $ 14,080 $ 933 $ 15,014
29-Oct-93 $ 14,428 $ 956 $ 15,384
30-Nov-93 $ 14,296 $ 948 $ 15,244
31-Dec-93 $ 14,212 $ 1,086 $ 15,298
31-Dec-93 $ 14,212 $ 1,150 $ 15,362
31-Jan-94 $ 14,315 $ 1,159 $ 15,474
28-Feb-94 $ 13,949 $ 1,129 $ 15,078
31-Mar-94 $ 13,423 $ 1,086 $ 14,509
29-Apr-94 $ 13,611 $ 1,102 $ 14,712
31-May-94 $ 13,630 $ 1,103 $ 14,733
30-Jun-94 $ 13,179 $ 1,232 $ 14,411
31-Jul-94 $ 13,498 $ 1,262 $ 14,760
31-Aug-94 $ 13,883 $ 1,298 $ 15,181
30-Sep-94 $ 13,695 $ 1,281 $ 14,976
31-Oct-94 $ 14,033 $ 1,312 $ 15,346
30-Nov-94 $ 13,611 $ 1,273 $ 14,883
31-Dec-94 $ 13,160 $ 1,852 $ 15,012
31-Jan-95 $ 13,489 $ 2,041 $ 15,529
28-Feb-95 $ 13,930 $ 2,108 $ 16,038
31-Mar-95 $ 14,174 $ 2,144 $ 16,319
30-Apr-95 $ 14,616 $ 2,211 $ 16,827
31-May-95 $ 15,123 $ 2,288 $ 17,411
30-Jun-95 $ 15,208 $ 2,427 $ 17,635
31-Jul-95 $ 15,724 $ 2,510 $ 18,234
31-Aug-95 $ 15,658 $ 2,499 $ 18,158
30-Sep-95 $ 16,401 $ 2,618 $ 19,018
</TABLE>
<PAGE>
This chart illustrates the cumulative total return of an initial $10,000
investment in the Fund made September 30, 1990. Initial net asset
value ($9,525) is the amount received by the Fund after deducting the maximum
sales charge of 4.75%.
The value of reinvested dividends and capital gains totaled $2,618 and
the initial principal amount appreciated from $9,525 to $16,400, for a total
value of $19,018 as of September 30, 1995.
Average Annual Total Return
As of September 30, 1995 . Based upon the Net Amount Invested
1-Year 5-Year From Inception
(July 16, 1987)
26.99% 14.83% 9.83%
Past performance is not an indication of future results.
<PAGE>
Q. What industries or sectors in the Fund's portfolio experienced the most
success during the period?
A. The sectors that performed the best over the last six months have been
technology, finance and drug stocks.
Q. Going forward, what is the outlook for U.S. equities?
A. The outlook for U.S. equities is good. The economy continues to grow at a
reasonable rate. As inflation continues downward, interest rates should
decline as well, which is good for equities. The most difficult hurdle for
the equity market now is the rate of growth in profits may slow next year.
That is why we are emphasizing those stocks and sectors that can continue to
grow their earnings at the same rate or higher next year.
Portfolio
Sector Chart
Technology......................... 19%
Consumer-Related................... 16%
Financial Services................. 15%
Drugs & Chemical................... 11%
Other Equities..................... 9%
Petroleum.......................... 8%
Utilities.......................... 8%
Cash & Cash Equivalents............ 6%
Retail............................. 6%
Office Equipment................... 2%
Total............................. 100%
10 Largest
Holdings
Merck & Co., Incorporated
Exxon Corporation
Mobil Corporation
General Electric Company
American International Group
National City Corporation
American Express Company
Pfizer Incorporated
Automatic Data Processing,
Incorporated
Raytheon Company
<PAGE>
THE AAL Utilities Fund
The Fund In Review
- --------------------------------------------------------------------------------
Q. Why has the Fund made such a major turnaround in 1995 after a very difficult
1994?
A. 1994 was a difficult year for the equity markets and most mutual funds,
particularly those that are more sensitive to interest rates, because rates
climbed sharply through most of the year. Additionally, there were growing
concerns about increased competition, especially in the electric utility
industry. Both of these factors have reversed in 1995. Interest rates moved
down substantially through the first half of this year and again since early
October. On the regulatory front, there have been indications that increased
competition will probably be phased in more slowly and in a more orderly
fashion than was originally thought.
Q. Specifically, how has the downward trend in interest rates affected utility
fund investors?
A. Because dividends play such a significant role in the total return of
electric utilities, these stocks, much like bonds, are more sensitive to
interest rate swings than most equities. Consequently, the downward trend in
interest rates since late last year has had a very positive impact on the
performance of electric utility stocks. This positive interest rate
environment is probably the most significant factor in explaining the
dramatically improved performance of utility funds in 1995 versus 1994.
Q. Much continues to be written about increased competition in the utility
industries. How rapidly is this increased competition happening, and what
impact is it likely to have on utility stocks?
A. Increased competition will be a way of life in the future for all utility
industries. The unknown at this time is how rapidly competition will be
introduced.
Average Annual Total Return
...............................
As of September 30, 1995 . Based upon the Net Amount Invested
1-Year 5-Year From Inception
(March 17, 1994)
17.16% N/A 7.31%
Past performance is not an indication of future results.
Increased competition for electric utilities began originally with the
passage of The National Energy Policy Act of 1992. The Act introduced more
competition for both the generation and sale of wholesale power. The
wholesale market, however, is not large enough to have a
<PAGE>
significant impact on the earnings of many utilities. The more serious form
of competition will occur at the retail level where a large industrial
customer will be allowed to bypass its local utility and buy power from some
distant low-cost utility. The introduction of retail competition will be
determined by individual states and will likely take many forms and be an
evolutionary rather than a revolutionary process. Companies with low-cost
generating capacity and proactive managements will emerge as the winners in
the marketplace.
The telephone industry has faced a more competitive environment for several
years and there is more comprehensive telecommunications legislation
currently being debated in Congress. The outlook for this new legislation
and the impact it will have on increasing competition and opening up new
markets is unclear at this point. However, companies which have prepared for
increased competition should outperform the industry.
Q. Among utility stocks, do you see certain sectors, such as electric or
telephone companies, that are likely to be outstanding market performers
going forward?
A. The AAL Utilities Fund's approach to investing is not a top-down sector
approach. We do not build our portfolio by identifying attractive sectors
and then buying stocks in those sectors. Instead, we try to identify
companies with attractive fundamentals and build our portfolio from the
bottom-up. After our portfolio is established, we do sensitivity analyses
and look at our sector weightings. We may make adjustments to our sectors
for diversification purposes.
Over the next five years, deregulation and increased competition will
continue to be the primary forces impacting both the electric and telephone
industries. This constantly changing regulatory environment will create
investment opportunities in both industries. We will continue to focus on
companies that are well-positioned for a more competitive environment and
that have high-quality managements.
Portfolio
Mix
[PIE CHART APPEARS HERE]
. Stocks: 85%
. Bonds: 12%
. Cash and Cash Equivalents: 3%
[PIE CHART APPEARS HERE]
. Domestic: 90%
. Foreign: 10%
Includes ADR's
Largest Holdings
SBC Communications Incorporated
Ameritech Corporation
NIPSCO Industries Incorporated
AT&T Company
U S WEST, Incorporated
<PAGE>
The AAL Bond Fund
The Fund In Review
- -------------------------------------------------------------------------------
Q. The Fund has rebounded from a less than inspiring performance in 1994. What
factors have lead to the turnaround?
A. The primary reason is the dramatic decline in interest rates from the end of
1994 through the end of October 1995. What we saw in 1994 were investors'
fears that the economy was heating up and that we would begin to see an
increase in the rate of inflation. Those fears were coupled with the Federal
Reserve Board's actions of moving the discount rate from 3.00% at the end of
1993 to 4.75% at the end of 1994. Due to this strong anti-inflation signal
the Fed sent the market, and investor perceptions that the economy is
slowing, we have experienced a decrease in 10-year government bond
yields of about 1.80% in 1995.
Q. With interest rates trending downward, what happens to the underlying value
of the bonds in the portfolio?
A. As interest rates decline, bond values increase. The price on a bond varies
not only with its maturity, but its structure as well. Structure includes
special bond features which serve to limit or "cap" the bond's price
appreciation resulting from a decrease in interest rates.
Return on a $10,000 Investment
..................................
[_] Value of shares initially purchased ($9,990)
[_] Value of shares acquired through reinvestment
of dividends and capital gains ($4,235)
<PAGE>
[PERFORMANCE GRAPH APPEARS HERE]
The AAL Bond Fund
29-Sep-95
(Assumes Reinvestment of all Dividends)
<TABLE>
<CAPTION>
Original Amount Dividends and
Date Invested Capital gains Total Value
---- -------- ------------- -----------
<S> <C> <C> <C>
28-Sep-90 $ 9,525 $ 0 $ 9,525
31-Oct-90 $ 9,575 $ 70 $ 9,645
30-Nov-90 $ 9,697 $ 136 $ 9,833
31-Dec-90 $ 9,767 $ 203 $ 9,971
31-Jan-91 $ 9,818 $ 270 $ 10,088
28-Feb-91 $ 9,828 $ 335 $ 10,163
29-Mar-91 $ 9,828 $ 395 $ 10,223
30-Apr-91 $ 9,868 $ 469 $ 10,337
31-May-91 $ 9,868 $ 536 $ 10,404
28-Jun-91 $ 9,798 $ 593 $ 10,391
31-Jul-91 $ 9,848 $ 668 $ 10,517
30-Aug-91 $ 9,990 $ 743 $ 10,733
30-Sep-91 $ 10,131 $ 821 $ 10,953
31-Oct-91 $ 10,212 $ 894 $ 11,106
30-Nov-91 $ 10,232 $ 959 $ 11,191
27-Dec-91 $ 10,425 $ 991 $ 11,416
31-Dec-91 $ 10,475 $ 1,064 $ 11,539
31-Jan-92 $ 10,232 $ 1,105 $ 11,338
28-Feb-92 $ 10,232 $ 1,168 $ 11,400
31-Mar-92 $ 10,121 $ 1,223 $ 11,344
30-Apr-92 $ 10,131 $ 1,288 $ 11,420
29-May-92 $ 10,253 $ 1,366 $ 11,618
30-Jun-92 $ 10,374 $ 1,451 $ 11,825
31-Jul-92 $ 10,556 $ 1,542 $ 12,098
31-Aug-92 $ 10,596 $ 1,613 $ 12,209
30-Sep-92 $ 10,687 $ 1,692 $ 12,379
30-Oct-92 $ 10,465 $ 1,719 $ 12,184
30-Nov-92 $ 10,354 $ 1,767 $ 12,121
31-Dec-92 $ 10,425 $ 1,823 $ 12,247
31-Dec-92 $ 10,425 $ 1,888 $ 12,313
29-Jan-93 $ 10,576 $ 1,976 $ 12,552
28-Feb-93 $ 10,708 $ 2,065 $ 12,772
31-Mar-93 $ 10,698 $ 2,132 $ 12,830
30-Apr-93 $ 10,728 $ 2,201 $ 12,929
28-May-93 $ 10,657 $ 2,244 $ 12,902
30-Jun-93 $ 10,799 $ 2,344 $ 13,142
<PAGE>
1-Jul-93 $ 10,728 $ 2,418 $ 13,146
30-Jul-93 $ 10,708 $ 2,475 $ 13,182
31-Aug-93 $ 10,859 $ 2,574 $ 13,434
30-Sep-93 $ 10,839 $ 2,631 $ 13,470
29-Oct-93 $ 10,829 $ 2,685 $ 13,514
30-Nov-93 $ 10,627 $ 2,700 $ 13,327
31-Dec-93 $ 10,445 $ 2,891 $ 13,336
31-Dec-93 $ 10,445 $ 2,951 $ 13,396
31-Jan-94 $ 10,536 $ 3,038 $ 13,574
28-Feb-94 $ 10,253 $ 3,017 $ 13,269
31-Mar-94 $ 9,949 $ 2,989 $ 12,939
29-Apr-94 $ 9,798 $ 3,003 $ 12,800
31-May-94 $ 9,737 $ 3,045 $ 12,782
30-Jun-94 $ 9,676 $ 3,086 $ 12,763
29-Jul-94 $ 9,777 $ 3,178 $ 12,955
31-Aug-94 $ 9,747 $ 3,235 $ 12,982
30-Sep-94 $ 9,565 $ 3,239 $ 12,804
31-Oct-94 $ 9,494 $ 3,279 $ 12,773
30-Nov-94 $ 9,393 $ 3,311 $ 12,704
30-Dec-94 $ 9,383 $ 3,374 $ 12,757
30-Dec-94 $ 9,383 $ 3,377 $ 12,761
31-Jan-95 $ 9,484 $ 3,486 $ 12,970
28-Feb-95 $ 9,626 $ 3,607 $ 13,232
31-Mar-95 $ 9,646 $ 3,685 $ 13,331
28-Apr-95 $ 9,717 $ 3,779 $ 13,495
31-May-95 $ 9,970 $ 3,953 $ 13,922
30-Jun-95 $ 9,980 $ 4,027 $ 14,007
31-Jul-95 $ 9,889 $ 4,059 $ 13,948
31-Aug-95 $ 9,949 $ 4,151 $ 14,101
30-Sep-95 $ 9,990 $ 4,235 $ 14,225
</TABLE>
<PAGE>
This chart illustrates the cumulative total return of an initial $10,000
investment in the Fund made September 30, 1990. Initial net asset value ($9,525)
is the amount received by the Fund after deducting the maximum sales charge of
4.75%.
The value of reinvested dividends and capital gains totaled $4,235 and the
initial principal amount appreciated from $9,525 to $9,990, for a total value of
$14,225 as of September 30, 1995.
Average Annual Total Return
...............................
As of September 30, 1995 . Based upon the Net Amount Invested
1-Year 5-Year From Inception
(July 16, 1987)
11.10% 8.35% 7.77%
Past performance is not an indication of future results.
<PAGE>
Q. Do you anticipate any changes in the Fund's portfolio?
A. Over time, the Fund will increase its allocations of
corporate bonds and decrease its allocation of Collateralized Mortgage
Obligations (CMOs) and mortgage-backed bonds. The strategy will enable the
Fund to maintain a high level of liquidity, selling bonds that we currently
own and purchasing bonds which are more attractive securities. At present,
the Fund is attempting to move more of the portfolio's cash flows into the
five- to seven-year area of the yield curve. Because the incremental yield
available in longer-term securities is relatively low by historical
standards, it appears the five- to seven-year area offers the most potential
for price increases as interest rates trend downward.
Percentages of
Fund Holdings
By Rating
[PIE CHART APPEARS HERE]
. AAA 71%
. AA 9%
. A 16%
. BBB 4%
----
100%
As of October 31, 1995
- -------------------------------------------------------------------------------
Average Maturity: 7.5 years
Average Quality: AA+
<PAGE>
The AAL Municipal
Bond Fund
The Fund In Review
- -------------------------------------------------------------------------------
Q. The Fund's performance improved dramatically during the period. How did it
perform relative to other municipal bond funds?
A. Relative to its peer group, the Fund performed well. The Fund's 6.13% return
(on net asset value) during the six-month reporting period outperformed both
the Lipper (5.97%) and Morningstar (5.52%) peer group averages.
The Fund's improved performance was due to several factors including:
1) a slightly more aggressive average maturity that enhanced performance as
interest rates declined; and
2) a strategy of proactively searching for pricing inefficiencies in the
market. We were able to take advantage of an over-supply of undervalued
securities that created a buying opportunity for the Fund. At some future
date, when the supply of bonds begins to shrink, these bonds are expected to
increase in relative value.
Q. "The Wall Street Journal" each week assigns letter grades to funds for their
performance over various time periods. During this recent period, the Fund
maintained either an "A" or "B" ranking for its 12-month performance. What
exactly does this rating mean?
Return on a $10,000 Investment
..................................
[_] Value of shares initially purchased ($10,701)
[_] Value of shares acquired through reinvestment
of dividends and capital gains ($3,344)
-------------------
Initial Net
Asset Value
$9,525
-------------------
<PAGE>
[PERFORMANCE CHART APPEARS HERE]
The AAL Municipal Bond Fund
29-Sep-95
(Assuming Reinvestment of all Dividends)
<TABLE>
<CAPTION>
Original Amount Dividends and
Date Invested Capital gains Total Value
---- -------- ------------- -----------
<S> <C> <C> <C>
28-Sep-90 $ 9,525 $ (0) $ 9,525
31-Oct-90 $ 9,613 $ (0) $ 9,613
30-Nov-90 $ 9,770 $ (0) $ 9,770
27-Dec-90 $ 9,760 $ 4 $ 9,764
31-Dec-90 $ 9,760 $ 158 $ 9,918
31-Jan-91 $ 9,809 $ 159 $ 9,968
28-Feb-91 $ 9,858 $ 160 $ 10,018
29-Mar-91 $ 9,848 $ 307 $ 10,155
30-Apr-91 $ 9,926 $ 309 $ 10,236
31-May-91 $ 9,946 $ 310 $ 10,256
28-Jun-91 $ 9,868 $ 463 $ 10,331
31-Jul-91 $ 9,956 $ 467 $ 10,423
30-Aug-91 $ 10,015 $ 470 $ 10,485
30-Sep-91 $ 10,083 $ 632 $ 10,715
31-Oct-91 $ 10,132 $ 635 $ 10,767
30-Nov-91 $ 10,093 $ 632 $ 10,726
27-Dec-91 $ 10,211 $ 644 $ 10,854
31-Dec-91 $ 10,240 $ 803 $ 11,043
31-Jan-92 $ 10,211 $ 800 $ 11,011
28-Feb-92 $ 10,152 $ 796 $ 10,947
31-Mar-92 $ 10,103 $ 946 $ 11,049
30-Apr-92 $ 10,152 $ 951 $ 11,103
29-May-92 $ 10,230 $ 958 $ 11,189
30-Jun-92 $ 10,338 $ 1,123 $ 11,461
31-Jul-92 $ 10,681 $ 1,160 $ 11,841
31-Aug-92 $ 10,465 $ 1,137 $ 11,602
30-Sep-92 $ 10,436 $ 1,293 $ 11,729
30-Oct-92 $ 10,250 $ 1,270 $ 11,519
30-Nov-92 $ 10,436 $ 1,293 $ 11,729
31-Dec-92 $ 10,505 $ 1,302 $ 11,807
31-Dec-92 $ 10,505 $ 1,458 $ 11,963
29-Jan-93 $ 10,573 $ 1,468 $ 12,041
26-Feb-93 $ 10,848 $ 1,506 $ 12,353
31-Mar-93 $ 10,730 $ 1,646 $ 12,377
30-Apr-93 $ 10,769 $ 1,652 $ 12,422
28-May-93 $ 10,769 $ 1,652 $ 12,422
<PAGE>
30-Jun-93 $ 10,887 $ 1,827 $ 12,714
30-Jul-93 $ 10,857 $ 1,822 $ 12,680
31-Aug-93 $ 11,014 $ 1,849 $ 12,863
30-Sep-93 $ 11,112 $ 2,022 $ 13,134
29-Oct-93 $ 11,122 $ 2,023 $ 13,145
30-Nov-93 $ 10,955 $ 1,993 $ 12,948
31-Dec-93 $ 11,112 $ 2,045 $ 13,157
31-Dec-93 $ 11,112 $ 2,200 $ 13,312
31-Jan-94 $ 11,191 $ 2,216 $ 13,406
28-Feb-94 $ 10,877 $ 2,153 $ 13,031
31-Mar-94 $ 10,397 $ 2,214 $ 12,611
29-Apr-94 $ 10,348 $ 2,204 $ 12,552
31-May-94 $ 10,367 $ 2,208 $ 12,576
30-Jun-94 $ 10,289 $ 2,348 $ 12,637
29-Jul-94 $ 10,426 $ 2,379 $ 12,806
31-Aug-94 $ 10,416 $ 2,377 $ 12,794
30-Sep-94 $ 10,201 $ 2,485 $ 12,685
31-Oct-94 $ 9,995 $ 2,434 $ 12,430
30-Nov-94 $ 9,760 $ 2,377 $ 12,137
30-Dec-94 $ 9,917 $ 2,571 $ 12,488
30-Dec-94 $ 9,917 $ 2,639 $ 12,555
31-Jan-95 $ 10,113 $ 2,691 $ 12,804
28-Feb-95 $ 10,407 $ 2,769 $ 13,176
31-Mar-95 $ 10,456 $ 2,948 $ 13,403
28-Apr-95 $ 10,475 $ 2,953 $ 13,429
31-May-95 $ 10,730 $ 3,025 $ 13,755
30-Jun-95 $ 10,603 $ 3,155 $ 13,758
31-Jul-95 $ 10,622 $ 3,214 $ 13,837
31-Aug-95 $ 10,681 $ 3,286 $ 13,967
30-Sep-95 $ 10,701 $ 3,345 $ 14,045
</TABLE>
<PAGE>
This chart illustrates the cumulative total return of an initial $10,000
investment in the Fund made September 30, 1990. Initial net asset value ($9,525)
is the amount received by the Fund after deducting the maximum sales charge of
4.75%.
The value of reinvested dividends and capital gains totaled $3,344 and the
initial principal amount appreciated from $9,525 to $10,701, for a total value
of $14,045 as of September 30, 1995.
Average Annual Total Return
...............................
As of September 30, 1995 . Based upon the Net Amount Invested
1-Year 5-Year From Inception
(July 16, 1987)
10.72% 8.08% 6.92%
Past performance is not an indication of future results.
<PAGE>
A. The letter grades correspond with the ranking of each fund within its
respective Lipper peer group. Those funds that have performed within the top
20% of their group receive an "A" rating, the next 20% a "B" rating, and so
on. We are proud that the Fund consistently performed above average. Our
goal, obviously, is to continue to remain competitive with the top
performing funds in this group. We're hopeful, however, that over time the
Fund's long-term ratings will improve as well. Ultimately, long-term ratings
are what an investor should focus on when selecting a municipal bond fund.
Q. There has been talk about possible changes in the tax laws that could
adversely impact municipal bond investing. What are your views?
A. Tax reform is not an uncommon topic of congressional discussion. The tax
code has been revised essentially every two years since the last major
reform in 1986. What is surprising this time is the radical nature of the
reform proposals being discussed. When news of these proposals first became
known in April, there was a negative impact on municipal valuations. After
analyzing the details of these proposals, however, many think they're very
debatable. The complexity of the tax code and the strong influence of the
numerous, disparate special interest groups which would be involved in the
reform make radical change unlikely in the near term.
Municipal valuations have improved slightly since April, but remain near
their historically low levels relative to Treasury Bonds. It will be some
time before we know the outcome of this debate. Until then, in spite of the
political rhetoric and media hype, our focus will remain on the outlook for
the economy and inflation-two important variables that ultimately have the
greatest impact on the direction of interest rates and Fund performance.
Q. In the last six months the Fund was able to lock in some higher yielding
bonds. How was this accomplished and what does it mean for shareholders?
A. The Fund accomplished this in two ways. First we bought bonds with longer
average maturities when interest rates were higher, thereby locking in
higher yielding issues. Second, on a very selective basis, we added higher
yielding issues among the lower-tier investment grade credit ratings. Both
means of increasing the Fund's yield will serve, over time, to enhance the
income distribution to shareholders and ultimately improve the Fund's
performance.
Percentages of
Fund Holdings
By Rating
[PIE CHART APPEARS HERE]
. AAA 36%
. AA 30%
. A 11%
. BBB 23%
----
100%
As of October 31, 1995
- -------------------------------------------------------------------------------
Average Maturity: 17.1 years
Average Quality: AA-
Largest Holdings
(Top 5 States)
1. New York
2. California
3. Washington
4. Illinois
5. Arizona
<PAGE>
THE AAL
Money Market Fund
The Fund In Review
- -------------------------------------------------------------------------------
Q. What is the current outlook for money market funds?
A. Because investments comprising money market fund portfolios are generally
short-term, these funds will continue to reflect short-term yields compared
with other market instruments. Money market funds provide investors with
preservation of principal, a high degree of liquidity and limited risk.
Q. Are yields competitive?
A. Yes. The current yield available from an investment in The AAL Money Market
Fund is competitive with those being offered by other money market funds, as
well as alternative short-term instruments.
The AAL Money
Market Fund
As of October 31, 1995
- -------------------------------------------------------------------------------
Average Maturity: 46 Days
Quality Rating: 100% First Tier
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
. THE FUND SEEKS: Capital appreciation by investing primarily in a
diversified portfolio of common stocks, and securities
convertible into common stocks, of smaller companies.
Current income is not an objective.
. THE FUND IS: A diversified portfolio of smaller company common stocks
and convertible securities. The Fund may also invest in
fixed-income investments and cash equivalents under
appropriate conditions.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS (84.8%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES (0.4%)
43,600 Alternative Resource Corporation* (Provides technical
personnel which specialize in information
services).......................................... $ 1,351,600
------------
COMPUTER SOFTWARE (19.9%)
64,300 Applix, Inc.* (Develops, markets and supports
Applixware)........................................ 1,784,325
28,000 EPIC Design Technology, Inc.* (Develops, markets and
supports a family of simulation and analysis
software tools).................................... 1,288,000
60,900 Electronics for Imaging, Inc.* (Develops and markets
color processing/printing solutions for desktop
publishing applications)........................... 5,009,025
109,700 HBO & Company (Designs and sells computerized
information systems to the healthcare industry).... 7,761,275
164,600 Informix Corporation* (Develops, produces and markets
database management programs and spreadsheet
packages).......................................... 4,793,975
78,800 Intuit, Inc.* (Develops and markets software products
and related services).............................. 5,673,600
27,500 Kronos, Inc.* (Engineers, manufactures and supports
integrated hardware and software).................. 1,265,000
46,200 McAfee Associates, Inc.* (Develops, markets and
distributes personal computer software designed for
electronic distribution)........................... 2,691,150
83,400 Micro Warehouse, Inc.* (Direct marketer of
microcomputer software and peripheral products).... 3,711,300
76,800 Parametric Technology Company* (Develops and markets
integrated software for automating the mechanical
design process).................................... 5,136,000
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
MARKET
. SHARES COMMON STOCKS--CONTINUED VALUE
------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE--CONTINUED
86,850 Paychex, Inc. (Provides computerized payroll
accounting services)................................ $ 3,767,119
94,700 Peoplesoft, Inc.* (Designs, develops, markets and supports
human resource management software)................. 8,144,200
92,600 Security Dynamics Technologies, Inc. (Designs,
develops, markets a family of security products).... 2,916,900
70,800 Softkey International, Inc.* (Publishes consumer-
oriented software applications)..................... 2,230,200
93,200 3Com Corporation* (Designs, manufactures and supplies
products for the global data networking market)..... 4,380,400
-----------
60,552,469
-----------
CONSUMER PRODUCTS (1.8%)
12,300 Blyth Industries, Inc.* (Designs, manufactures and
markets a variety of candles and other fragrance
products)........................................... 621,150
130,200 Tommy Hilfiger Corporation* (Designer and marketer of
an upscale men's sportswear line)................... 4,963,875
-----------
5,585,025
-----------
DRUGS (1.9%)
93,000 Boston Scientific Corporation* (Develops, produces and
markets medical devices worldwide).................. 3,917,625
40,700 Watson Pharmaceuticals, Inc.* (Produces and sells off-
patent medications and develops advanced drug
delivery systems)................................... 1,821,325
-----------
5,738,950
-----------
ELECTRONICS (17.0%)
208,800 Atmel Corporation* (Designs, develops, manufactures
and markets high performance circuits).............. 6,525,000
51,675 Cyberoptics Corporation (Designs, develops,
manufactures and markets laser sensors and sensor
systems)............................................ 1,705,275
500 Electro Scientific Industries, Inc.* (Designs and
manufactures computer-controlled laser systems)..... 15,500
73,000 Input/Output, Inc.* (Designs and manufactures seismic
data acquisition systems)........................... 2,728,375
49,700 Integrated Silicon Solution, Inc.* (Develops and
markets high performance SRAM and non-volatile
memory integrated circuits)......................... 1,556,231
92,600 KLA Instruments Corporation* (Manufactures yield
monitoring and process control systems)............. 3,958,650
102,400 Kemet Corporation (Manufactures and supplies solid
tantalum and multi-layered ceramic capacitors)...... 3,532,800
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS--CONTINUED
93,000 LSI Logic Corporation* (Designs, manufactures and
provides service for application specific
integrated circuits)............................... $ 4,382,625
127,400 Linear Technology Corporation* (Manufactures linear
integrated circuits)............................... 5,573,750
106,200 Macromedia, Inc. (Develops, markets and supports
computer software programs)........................ 3,929,400
7,100 Photronics, Inc. (Manufactures ultra high precision
photographic glass plates)......................... 209,450
46,800 Sanmina Corporation (Manufactures custom-designed
backplane assemblies, sub-assemblies and circuit
boards)............................................ 2,527,200
94,800 Sierra Semiconductor Corporation (Supplies high
performance mixed signal integrated circuits)...... 1,694,550
121,100 Stratacom, Inc.* (Designs, manufactures and markets
switching systems for wide area networks).......... 7,447,650
73,400 Tencor Instruments (Designs, manufactures, markets
and services innovative wafer defect inspection
systems)........................................... 3,128,675
75,100 Ultratech Stepper, Inc. (Develops, manufactures and
markets photolithography equipment)................ 3,004,000
------------
51,919,131
------------
ENVIRONMENTAL CONTROLS (0.6%)
59,600 Sanifill, Inc.* (Acquires, operates, and develops
non-hazardous waste disposal facilities)........... 1,877,400
------------
FINANCIAL SERVICES (1.8%)
68,800 First USA, Inc. (A holding company which issues and
processes Visa and Mastercard credit card
transactions)...................................... 3,164,800
115,400 Mercury Finance Company (Purchases sales and
financing contracts from automobile dealers)....... 2,221,450
------------
5,386,250
------------
FOOD & AGRICULTURE (2.4%)
77,500 Boston Chicken, Inc.* (Operates and franchises food
service stores).................................... 2,620,469
100,000 Outback Steakhouse, Inc. (Operates 173 full-service
restaurants under the "Outback Steakhouse" name)... 3,137,500
40,400 Papa John's International, Inc. (Operates franchise
pizza delivery and carry-out restaurants).......... 1,555,400
------------
7,313,369
------------
HEALTH CARE (3.3%)
57,600 Healthsource, Inc.* (Owns and manages health
maintenance organizations)......................... 3,052,800
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
MARKET
. SHARES COMMON STOCKS--CONTINUED VALUE
------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE--CONTINUED
105,000 PhyCor, Inc. (Operated multi-specialty medical
clinics)............................................ $ 3,858,750
49,700 Renal Treatment Centers, Inc. (Provides dialysis
treatments to patients suffering from chronic kidney
failure)............................................ 1,789,200
52,700 Vencor, Inc.* (Provides long-term hospital care to
chronically ill patients dependent on life support
systems)............................................ 1,462,425
-----------
10,163,175
-----------
INSURANCE (0.6%)
58,100 Compdent Corporation (Provides dental coverage in the
managed dental care industry)....................... 1,808,363
-----------
MEDIA (1.2%)
45,900 Clear Channel Communications, Inc. (Owns, operates and
manages radio and television stations).............. 3,763,800
-----------
MEDICAL SUPPLIES/SERVICES (9.2%)
83,100 Express Scripts, Inc. (Class A)* (Provides pharmacy
benefit management to Health Maintenance
Organizations)...................................... 3,157,800
22,600 Genzyme Corporation* (Researches and develops
biopharmaceuticals for cartilage damage)............ 1,316,450
69,900 Gulf South Medical Supply, Inc.* (Distributes medical
supplies and related items to the long-term
healthcare industry)................................ 1,450,425
203,100 HEALTHSOUTH Corporation* (Offers rehabilitation
services for disabled patients)..................... 5,305,987
118,400 Idexx Laboratories, Inc.* (Develops and manufactures
biotechnology-based detection systems).............. 4,824,800
83,300 Lincare Holdings, Inc. (Provides oxygen and other
respiratory therapy services to in-home patients)... 2,072,087
84,900 Oxford Health Plans, Inc.* (Managed care company
providing health benefit plans)..................... 6,643,425
90,900 Physicians Sales and Service, Inc. (Distributes
medical supplies, equipment and pharmaceuticals to
physicians)......................................... 1,477,125
34,600 Thermo Cardiosystems, Inc. (Researches, develops and
manufactures implantable left ventricular-assist
devices)............................................ 1,678,100
-----------
27,926,199
-----------
OTHER EQUITIES (1.4%)
76,000 Danaher Corporation (Manufactures
automotive/transportation products and
instrumentation/precision components)............... 2,356,000
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
OTHER EQUITIES--CONTINUED
48,600 Integrated Process Equipment Corporation (Develops
and supplies processing equipment used in
manufacturing semiconductor chips)................. $ 1,804,275
------------
4,160,275
------------
PERSONAL COMPUTERS (2.1%)
50,800 ALANTEC Corporation* (Designs, develops,
manufactures, markets and supports switching hubs
for Ethernet and FDDI)............................. 1,816,100
38,500 Cognex Corporation (Develops, manufactures and
markets machine vision systems used to replace
human vision)...................................... 2,300,375
79,100 Optical Data Systems, Inc. (Designs, develops,
manufactures, markets and supports computer
networking products)............................... 2,363,112
------------
6,479,587
------------
PUBLISHING/PRINTING (1.9%)
23,500 Day Runner, Inc. (Develops, manufactures and markets
paper-based personal organizers for retail
markets)........................................... 593,375
117,000 Gartner Group, Inc.* (Provides subscription-based
research and analysis of computer hardware and
software).......................................... 5,104,125
------------
5,697,500
------------
RETAIL STORES (11.2%)
64,000 Baby Superstore, Inc. (Large retailer of non-food
baby and young children's products)................ 3,024,000
54,800 CDW Computer Centers, Inc. (Sells microcomputer
hardware and peripherals, accessories and
networking products)............................... 2,657,800
121,900 CUC International, Inc. (Membership-based consumer
services company).................................. 4,220,788
124,000 Corporate Express, Inc.* (Sells office supplies
through its telephone ordering system and facsimile
data interchange).................................... 3,239,500
44,000 Discount Auto Parts, Inc. (Retailing company that
operates stores throughout Florida).................. 1,177,000
89,600 Fastenal Company (Operates retail stores throughout
western and southern states)......................... 3,119,200
180,400 General Nutrition Companies, Inc. (Retails vitamin,
mineral and sports nutrition supplements and other
health related products)............................. 4,487,450
40,800 Kenneth Cole Productions, Inc. (Designs and sources a
broad range of footware, handbags and accessories)... 1,667,700
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
RETAIL STORES--CONTINUED
93,000 Office Depot, Inc.* (Operates a chain of office
product warehouse stores)............................ $ 2,662,125
163,200 Staples, Inc.* (Owns and operates high-volume office
superstores and markets office supplies)............. 4,345,200
135,200 Sunglass Hut International, Inc.* (Specialty retailer
of non-prescription sunglasses)...................... 3,684,200
------------
34,284,963
------------
TELECOMMUNICATION (7.5%)
45,200 Adtran, Inc. (Designs, develops, produces, markets and
services high speed digital transmission products)... 2,000,100
56,800 Cascade Communications Corp. (Designs, develops and
maintains a line of multi-service wide network
switches)............................................ 4,047,000
59,600 DSP Communications, Inc. (Develops integrated, low
power chip sets for wireless personal communications
applications)........................................ 2,160,500
96,000 Glenayre Technologies, Inc.* (Manufactures
telecommunications equipment and software)........... 6,168,000
44,700 Picturetel Corporation (Develops, manufactures and
markets visual telecommunications systems)........... 2,950,200
114,700 Tellabs, Inc.* (Designs, assembles, markets and
services voice and data networking products)......... 3,899,800
67,000 Transaction Network Services, Inc. (A nationwide
communications network company specializing in
transaction-oriented data services).................. 1,541,000
------------
22,766,600
------------
TEXTILES (0.6%)
35,600 St. John Knits, Inc. (Designs, manufactures and
markets women's clothing and accessories)............ 1,704,350
------------
TOTAL COMMON STOCKS (COST BASIS $171,317,630)......... 258,479,006
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PAR VALUE SHORT-TERM OBLIGATIONS (15.2%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
$1,500,000 Associates Corporation 5.82% 11/1/95............... $ 1,500,000
456,290 Eli Lilly & Company................................ 456,290
4,954,467 General Mills Company.............................. 4,954,467
8,441,636 Pitney Bowes Credit Corporation.................... 8,441,636
12,500,000 Prudential Funding Corporation 5.70%, 11/1/95...... 12,500,000
2,987,766 Sara Lee Corporation............................... 2,987,766
3,263,170 Southwestern Bell Telephone Company................ 3,263,170
3,110,435 Warner-Lambert Company............................. 3,110,435
9,004,469 Wisconsin Electric Power Company................... 9,004,469
------------
TOTAL SHORT-TERM OBLIGATIONS (COST BASIS
$46,218,233).................................. 46,218,233
------------
TOTAL INVESTMENTS (100.0%) (COST BASIS $217,535,863)........... $304,697,239
============
</TABLE>
*Non-income producing securities
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
. THE FUND SEEKS: Long-term capital growth by investing in equity
securities. Capital growth may be accompanied by growth
in income.
. THE FUND IS: A diversified portfolio consisting primarily of high-
quality common stocks and convertible securities. The
Fund may also invest in fixed-income investments and cash
equivalents under appropriate conditions.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS (94.3%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
APPAREL (0.7%)
152,000 Nike Incorporated (Designs, develops and markets a
wide variety of high quality footwear and apparel
products).......................................... $ 8,626,000
------------
BANKING & FINANCE (6.5%)
249,600 First Chicago Corporation (A bank holding company;
parent company of FNB of Chicago).................. 16,941,600
200,000 J.P. Morgan & Company (Financial services company,
primarily serving large corporations).............. 15,425,000
910,000 National City Corporation (Ohio based regional bank
holding company)................................... 28,096,250
257,000 Nationsbank Corporation (Commercial banking company
based in North Carolina)........................... 16,897,750
------------
77,360,600
------------
BASIC MATERIALS (1.0%)
210,000 Illinois Tool Works Incorporated (Manufactures
construction fasteners and packing systems)........ 12,206,250
------------
CHEMICALS (2.9%)
480,000 Nalco Chemical Company (Producer of specialty
chemicals used in water treatment systems)......... 14,400,000
460,000 PPG Industries, Incorporated (Global manufacturer of
glass, paint and chemical products)................ 19,550,000
------------
33,950,000
------------
CONSUMER SOFTWARE/SERVICES (8.6%)
375,000 Automatic Data Processing, Incorporated (Employer,
financial and specialized data processing
services).......................................... 26,812,500
90,300 Computer Associates International Incorporated
(Designs and markets standardized computer software
products).......................................... 4,966,500
223,084 First Data Corporation (Provides information
processing and related services, such as credit
card transactions and mutual fund shareholder
recordkeeping)..................................... 14,751,396
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER SOFTWARE/SERVICES--CONTINUED
465,500 General Motors Class E (Electronic Data Systems) (A
major computer services firm which specializes in
data center operations)............................ $ 21,936,688
107,700 Microsoft Corporation* (Develops and markets a
variety of microcomputer software, operating
systems, languages and application programs)....... 10,770,000
275,000 Oracle Systems Corporation* (Develops and markets
computer software products)........................ 11,996,875
252,300 Paychex Incorporated (Provides computerized payroll
accounting services)............................... 10,943,512
------------
102,177,471
------------
CONSUMER CYCLICALS (1.8%)
519,900 Ford Motor Company (Manufacturers automobiles,
trucks, tractors, related parts and accessories)... 14,947,125
325,000 Maytag Corporation (Manufactures home appliances and
washing equipment)................................. 6,175,000
------------
21,122,125
------------
CONSUMER NON-DURABLES (7.0%)
180,000 Colgate-Palmolive Company (Manufactures oral, body,
household surface, fabric, animal and dietary
nutrition care products)........................... 12,465,000
244,000 Gillette Company (Manufactures shaving, toiletry,
stationery and dental products).................... 11,803,500
282,700 International Flavors and Fragrances, Incorporated
(Manufacturer of fragrances and flavors that go
into cosmetic/household products).................. 13,640,275
288,000 McDonald's Corporation (World's largest restaurant
chain)............................................. 11,808,000
300,400 Procter & Gamble Company (Major consumer products
company)........................................... 24,332,400
470,000 Wendy's International Incorporated (Owns and operates
a chain of fast-food restaurants).................. 9,341,250
------------
83,390,425
------------
DRUGS (8.3%)
640,000 Abbott Laboratories (Diversified health care
company)........................................... 25,440,000
640,000 Merck & Co., Incorporated (Pharmaceutical and
consumer health care products)..................... 36,800,000
488,000 Pfizer Incorporated (Produces ethical drugs, hospital
products, animal health items, specialty chemicals
and consumer products)............................. 27,999,000
210,100 U S Healthcare Incorporated (Owns and operates health
maintenance organizations)......................... 8,088,850
------------
98,327,850
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (3.6%)
480,000 General Electric Company (Multi-industry company,
primarily electronics)............................. $ 30,360,000
505,000 Premier Industrial Corporation (Distributor of
electronics and maintenance supplies).............. 12,561,875
------------
42,921,875
------------
ENTERTAINMENT (0.8%)
172,600 Disney (Walt) Company (Diversified international,
family entertainment company)...................... 9,946,075
------------
FINANCIAL SERVICES (5.4%)
690,000 American Express Company (Travel related, diversified
financial, international banking and investment
services world-wide)............................... 28,031,250
145,000 Federal National Mortgage Association (Holds
mortgages and issues and sells guaranteed mortgage-
backed-securities)................................. 15,206,875
141,500 Household International Corporation (Financial
services company, serves individuals and
businesses)........................................ 7,959,375
339,100 MBNA Corporation (Issues premium and standard bank
credit cards)...................................... 12,504,312
------------
63,701,812
------------
FOOD & BEVERAGES (3.7%)
303,900 CPC International Inc. (Major food distribution
company)........................................... 20,171,363
177,000 The Coca-Cola Company (World-wide leader in soft
drinks)............................................ 12,721,875
152,000 Kellogg Company (World's premier marketer of
cereals)........................................... 10,982,000
------------
43,875,238
------------
INSURANCE (3.3%)
390,000 American International Group (Underwrites, through
its insurance related subsidiaries, commercial and
industrial insurance).............................. 32,906,250
370,000 USF&G Corporation (Through its agents, sells property
and casualty insurance, life insurance and
annuities in the U.S.)............................. 6,197,500
------------
39,103,750
------------
MEDIA (1.6%)
500,000 Donnelley (R.R.) & Sons Company (A commercial printer
and supplier of commercial printing services)...... 18,250,000
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
NATURAL GAS (0.9%)
304,000 Enron Corporation (Transports and markets natural
gas)............................................... $ 10,450,000
------------
OFFICE EQUIPMENT (0.6%)
167,800 Pitney Bowes Incorporated (World-wide leader in
mailing equipment)................................. 7,320,275
------------
OFFICE PRODUCTS (1.6%)
211,000 Alco Standard Corporation (Distributes office
products and paper)................................ 18,673,500
------------
OTHER (8.1%)
208,000 Armstrong World Industries Incorporated
(Manufacturers and sells interior furnishings
worldwide)......................................... 12,350,000
150,000 DSC Communications Corporation* (Services and sells
digital switching and transmission control
systems)........................................... 5,550,000
252,700 Eastman Kodak Company (Provides products and services
including cameras, photofinishing, film and
plastics).......................................... 15,825,338
319,000 Halliburton Company (Provides oil field equipment
service, design, engineering, and construction
services).......................................... 13,238,500
485,000 Pall Corporation (Operates three divisions,
healthcare, aeropower and fluid processing)........ 11,821,875
608,000 Raytheon Company (Large U.S. defense contractor)..... 26,524,000
240,400 Thermo Electron Corporation* (Through subsidiaries--
manufactures and sells alternate energy and power
plants, analytical instruments and biomedical
products).......................................... 11,058,400
------------
96,368,113
------------
PETROLEUM (6.5%)
460,000 Exxon Corporation (World's largest oil company)...... 35,132,500
300,000 Mobil Corporation (Holding company with operations in
oil and chemicals)................................. 30,225,000
94,000 Royal Dutch Petroleum Company ADR (Major multi-
national petroleum company)........................ 11,550,250
------------
76,907,750
------------
RETAIL STORES (5.4%)
333,000 CUC International, Incorporated* (Membership-based
consumer services company)......................... 11,530,125
485,000 May Department Stores Company (Largest U.S.
department store retailer)......................... 19,036,250
360,000 Office Depot Inc.* (Operates a chain of office
product warehouse stores).......................... 10,305,000
806,000 Walgreen Company (Largest drug store retailer)....... 22,971,000
------------
63,842,375
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY (9.2%)
620,000 AMP Incorporated (World leader in
electrical/electronic connection devices)......... $ 24,335,000
150,000 American Telephone and Telegraph Company (Operates
domestically and internationally, providing
communication products, services, and systems).... 9,600,000
98,000 Andrew Corporation* (International supplier of
communication systems equipment and services)..... 4,140,500
873,600 Comcast Corporation (Communications company with
domestic and international interests and provides
cable services to 18 states and a majority
interest in QVC, Inc.)............................ 15,615,600
159,000 Compaq Computers Incorporated* (Designs, develops,
manufactures and markets personal computers) 8,864,250
147,000 Hewlett-Packard Company (Produces computers,
calculators, workstations, video displays,
printers, disc and tape drives, medical diagnostic
and monitoring devices, and mass spectrometers)... 13,615,875
149,800 Intel Corporation (Leading manufacturer in
semiconductor chips).............................. 10,467,275
298,000 LSI Logic Corporation* (Designs, manufactures,
markets and provides service for application of
specific integrated circuits)..................... 14,043,250
228,000 Tellabs, Inc.* (Designs, assembles, markets and
services voice and data networking products)...... 7,752,000
-------------
108,433,750
-------------
TRANSPORTATION (1.3%)
225,000 Union Pacific Corporation (Operates rail, motor
freight, mining and hazardous waste removal
businesses)....................................... 14,709,375
-------------
UTILITIES (5.5%)
480,000 Ameritech Corporation (Telecommunications firm
serving five midwestern states)................... 25,920,000
294,000 Bell Atlantic Corporation (Owns and operates various
telephone subsidiaries and provides cellular
services in the Mid-Atlantic states and the
District of Columbia)............................. 18,705,750
435,649 U S WEST, Incorporated (Telecommunications firm
serving 14 western states from Arizona to
Washington)....................................... 20,747,784
-------------
65,373,534
-------------
TOTAL COMMON STOCKS (COST BASIS $883,596,158)........ 1,117,038,143
-------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PAR
VALUE SHORT-TERM OBLIGATIONS (5.7%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
$13,500,000 Associates Corporation 5.73% 11/7/95............ $ 13,487,108
9,699,793 Eli Lilly & Company............................. 9,699,793
1,532,726 General Mills Company........................... 1,532,726
23,500,000 Household Finance Corporation 5.72-5.73%
11/6/95........................................ 23,481,311
8,000,000 Merrill Lynch & Co., Inc. 5.75% 11/7/95......... 7,992,333
682,314 Pitney Bowes Credit Corporation................. 682,314
6,650,840 Sara Lee Corporation............................ 6,650,840
3,815,107 Southwestern Bell Telephone Company............. 3,815,107
--------------
TOTAL SHORT-TERM OBLIGATIONS (AMORTIZED COST
BASIS $67,341,532)............................. 67,341,532
--------------
TOTAL INVESTMENTS (100.0%) (AMORTIZED COST BASIS
$950,937,690)............................................... $1,184,379,675
==============
</TABLE>
*Non-income producing securities
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL UTILITIES FUND
. THE FUND SEEKS: Current income, long-term growth of income and capital
appreciation by investing primarily in a diversified
portfolio of equity and debt securities of companies in
the public utilities industry.
. THE FUND IS: A diversified portfolio of equity and debt securities of
companies in the public utilities industry. The Fund may
also invest in money market securities as a protective
measure during weak or declining markets.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
. SHARES COMMON STOCKS (85.4%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC (56.9%)
56,400 Boston Edison Company (Provides electricity to Boston
and surrounding areas)............................. $ 1,543,950
92,000 Carolina Power & Light Company (Provides electricity
to portions of North and South Carolina)........... 3,013,000
90,000 Cable & Wireless PLC ADR (International provider of
telecommunications services in over 50 countries).. 1,743,750
73,000 Central & Southwest Corporation (Electric utility
holding company in Texas and Oklahoma)............. 1,952,750
110,000 CMS Energy Corporation (Provides electricity and
natural gas throughout Michigan)................... 3,038,750
22,650 Consolidated Edison Company of New York (Provides
electricity to New York City and most of
Westchester County, N.Y.).......................... 687,994
130,450 DQE, Incorporated (Holding company for Duquesne Light
Company)........................................... 3,587,375
23,515 Duke Power Company (Provides electricity to sections
of North Carolina and South Carolina).............. 1,052,296
42,265 Empresa Nacional Electric ADR (Provides electricity
in Spain).......................................... 2,123,816
58,650 Entergy Corporation (Holding Company
whose subsidiaries provide
electricity to Arkansas, Louisiana,
Mississippi, and Missouri)........... 1,671,525
51,650 FPL Group, Incorporated (Diversified electric utility
holding company whose major asset is Florida Power
& Light Company)................................... 2,162,844
90,200 General Public Utilities Corporation (Electric
utility holding company)........................... 2,818,750
45,000 Huaneng Power International, Incorporated ADR
(Develops, constructs, owns and operates large
coal-fired power plants throughout China).......... 748,125
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
MARKET
. SHARES COMMON STOCKS--CONTINUED VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC--CONTINUED
38,720 New England Electric System (Provides electricity to
Massachusetts, New Hampshire, and Rhode Island
through its subsidiaries)............................ $1,510,080
100,960 Niagara Mohawk Power Corporation (Provides electricity
and gas in New York State)........................... 1,085,320
112,500 NIPSCO Industries Incorporated (Holding company whose
subsidiary provides electricity and gas to one-third
of Indiana).......................................... 4,106,250
120,000 PECO Energy Company (Holding company for Philadelphia
Electric Company which provides electricity and gas
to southwestern Pennsylvania)........................ 3,510,000
132,000 Pinnacle West Capital Corporation (Utility holding
company for Arizona Public Service Company).......... 3,630,000
50,000 SCE Corporation (Holding company in California)........ 850,000
110,805 Southern Company (Parent company of five electric
companies which provides service for most of the
Southeast)........................................... 2,645,469
153,000 TECO Energy Incorporated (Holding company of Tampa
Electric Company whose subsidiary provides
electricity to west central Florida)................. 3,614,625
25,000 Unicom Corporation (Provides electricity to areas of
Chicago metropolitan and northern Illinois).......... 818,750
330 United Illuminating Company (Provides electricity to
areas of Connecticut)................................ 12,540
25,085 Wisconsin Energy Corporation (Provides electricity and
some gas to portions of Wisconsin and Michigan)...... 740,008
----------
48,667,967
----------
PETROLEUM (1.3%)
14,000 Exxon Corporation (World's largest oil company)........ 1,069,250
----------
TELEPHONES (27.2%)
63,600 American Telephone & Telegraph Company (Operates
domestically and internationally providing
communication products, services and systems)........ 4,070,400
77,870 Ameritech Corporation (Telecommunications firm serving
five midwestern states).............................. 4,204,980
35,300 Bell Atlantic Corporation (Owns and operates telephone
subsidiaries and provides cellular services in the
Mid-Atlantic states and the District of Columbia).... 2,245,962
36,400 Frontier Corporation (Holding company, provides long
distance telecommunications nationally).............. 982,800
5,000 PT Indosat ADR (Provides international
telecommunications services to Indonesia)............ 165,625
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
MARKET
. SHARES COMMON STOCKS--CONTINUED VALUE
------------------------------------------------------------------------------
<C> <S> <C>
TELEPHONES--CONTINUED
79,185 SBC Communications Incorporated (Holding company
whose subsidiaries provide communication services
ranging from a local basis to an international
one)............................................. $ 4,424,462
30,000 Telefonica de Argentina ADR (Monopoly provider of
local and long distance telecommunication
services in southern Argentina).................. 622,500
74,200 Telefonica de Espana ADR (Supplies telephone
service in Spain that includes domestic,
international, mobile and news transmitting)..... 2,791,775
78,800 U S WEST, Incorporated (Telecommunications firm
serving 14 western states from Arizona to
Washington)...................................... 3,752,850
-----------
23,261,354
-----------
TOTAL COMMON STOCKS (COST BASIS $63,594,184)........ 72,998,571
-----------
<CAPTION>
. PRINCIPAL
AMOUNT BONDS (12.1%)
------------------------------------------------------------------------------
<C> <S> <C>
$1,500,000 Illinois Power Corporation 6.75% 3/15/2005
(Provides electricity and natural gas to parts of
northern, central and southern Illinois)......... 1,489,076
1,000,000 K.C. Power and Light 5.60% 3/10/98
(Provides electricity to western Missouri and
eastern Kansas).................................. 988,499
1,000,000 Potomac Electric Power 9.00% 4/15/2000
(Generates, transmits, distributes and sells
electric energy in parts of Maryland)............ 1,074,200
20,000 Texas Utilities Electric 8.125% 2/1/2002
(Holding company whose subsidiary provides
electricity in Texas)............................ 21,503
1,650,000 Texas Utilities Electric 9.75% 5/1/2021
(Holding company whose subsidiary provides
electricity in Texas)............................ 1,898,081
1,000,000 Union Electric Company 6.875% 8/1/2004
(Provides electric services in Missouri and
Illinois)........................................ 1,026,793
3,150,000 U.S. Treasury Note 6.875% 3/31/2000................ 3,279,937
500,000 U.S. Treasury Note 7.50% 11/15/2016................ 563,125
-----------
TOTAL BONDS (AMORTIZED COST BASIS $10,053,481)...... 10,341,214
-----------
TOTAL LONG-TERM INVESTMENTS (AMORTIZED COST BASIS
$73,647,665)....................................... 83,339,785
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PAR MARKET
VALUE SHORT-TERM VARIABLE RATE OBLIGATIONS (2.5%) VALUE
-------------------------------------------------------------------------------
<C> <S> <C>
$1,069,392 Eli Lilly & Company................................. $ 1,069,392
179,288 General Mills Company............................... 179,288
7,643 Pitney Bowes Credit Corporation..................... 7,643
800,282 Sara Lee Corporation................................ 800,282
75,486 Southwestern Bell Telephone Company................. 75,486
------------
TOTAL SHORT-TERM VARIABLE RATE OBLIGATIONS
(COST BASIS $2,132,091)............................ 2,132,091
------------
TOTAL INVESTMENTS (100.0%) (AMORTIZED COST BASIS $75,779,756)... $ 85,471,876
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL BOND FUND
. THE FUND SEEKS: A high level of current income consistent with the
preservation of capital.
. THE FUND IS:
A diversified portfolio of investment grade bonds and
other debt securities which, for the most part, will
include corporate debt issues, utilities, U.S.
government bonds, Government National Mortgage
Association (GNMA) securities and other debt-based
investments.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT LONG-TERM OBLIGATIONS (98.6%) RATE DATE MARKET VALUE
-------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (44.8%)
$ 6,600,000 Federal Agriculture Mortgage
Association................... 7.250% 1/15/1999 $ 6,837,329
4,779,067 Federal Home Loan Mortgage
Corporation #M90345........... 7.000 5/1/1999 4,832,348
6,113,304 Federal Home Loan Mortgage
Corporation #L90123........... 7.000 6/1/1999 6,181,461
11,176,492 Federal Home Loan Mortgage
Corporation #M90346........... 7.000 6/1/1999 11,301,099
37,226,675 Federal Home Loan Mortgage
Corporation Pool #G00379...... 8.500 7/1/2025 38,610,838
11,016,195 Federal Home Loan Mortgage
Corporation Pool #G10380...... 7.000 8/1/2010 11,105,635
7,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust Series
1300.......................... 7.250 12/15/2005 7,129,003
4,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust Series
1219.......................... 7.500 8/15/2006 4,125,236
10,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust Series
1062.......................... 7.000 4/15/2019 10,054,190
6,056,570 Federal Home Loan Mortgage
Corporation REMIC Trust Series
1303.......................... 7.750 8/15/2018 6,107,136
1,917,155 Federal National Mortgage
Association Pool #124264...... 7.500 3/1/1999 1,957,701
5,000,000 Federal National Mortgage
Association REMIC Trust Series
1992 76....................... 7.500 6/25/2000 5,002,245
5,000,000 Federal National Mortgage
Association REMIC Trust Series
1993-G2....................... 5.900 7/25/2015 4,925,495
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL LONG-TERM OBLIGATIONS-- INTEREST MATURITY
AMOUNT CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--CONTINUED
$ 1,686,780 Federal National Mortgage
Association Pool #143273..... 7.500% 12/1/2007 $ 1,721,033
8,322,488 Federal National Mortgage
Association Pool #44046...... 7.500 2/1/2014 8,401,793
25,518,552 Government National Mortgage
Association Pool #780213..... 7.500 8/15/2025 25,853,330
35,112,556 Government National Mortgage
Association Pool #780212..... 8.000 8/15/2025 36,122,040
5,133,241 Government National Mortgage
Association Pool #780249..... 8.000 9/15/2025 5,280,822
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS........... 195,548,734
------------
U.S. GOVERNMENT OBLIGATIONS (19.3%)
40,000,000 U.S. Treasury Bonds........... 8.750 5/15/2017 50,787,440
7,500,000 U.S. Treasury Bonds........... 8.125 8/15/2019 9,025,770
7,000,000 U.S. Treasury Bonds........... 7.250 5/15/2004 18,391,875
6,000,000 U.S. Treasury Bonds........... 6.750 4/30/2000 6,219,366
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS.................. 84,424,451
------------
CORPORATE OBLIGATIONS (34.5%)
$13,000,000 Advanta Credit Card Master
Trust Series 1994-B Class A
Var. Rate B.................. 6.155 10/1/2000 13,070,707
5,000,000 Baltimore Gas & Electric
Company...................... 5.500 7/15/2000 4,830,215
2,000,000 BP America Inc................ 9.375 11/1/2000 2,272,632
6,000,000 Dean Witter Discover &
Company...................... 6.000 3/1/1998 5,998,458
5,000,000 Enron Corporation............. 9.125 4/1/2003 5,706,750
4,500,000 Enron Corporation............. 6.750 9/15/2004 4,482,463
5,500,000 Florida Power & Light Company. 6.875 4/1/2002 5,526,884
10,000,000 Ford Motor Credit Company..... 6.750 8/15/2008 9,950,000
6,000,000 General Motors Acceptance
Corporation.................. 7.750 2/25/1997 6,125,514
5,000,000 Hydro-Quebec Company.......... 7.375 2/1/2003 5,191,045
6,000,000 Kansas City Power & Light
Company...................... 5.600 3/10/1998 5,930,994
10,000,000 Lehman Brothers Holdings...... 8.875 2/15/2000 10,780,090
10,000,000 MBNA Master Credit Card Trust
Series 1992-1 Class A........ 7.250 12/15/1997 10,196,090
2,500,000 Merrill Lynch & Company, Inc.. 8.000 2/1/2002 2,691,710
5,000,000 Merrill Lynch & Company, Inc.. 6.250 10/15/2008 4,720,905
2,000,000 Pennzoil Company.............. 10.250 11/1/2005 2,460,868
5,000,000 Puget Sound Power & Light
Company...................... 7.875 10/1/1997 5,150,095
10,000,000 Province of Ontario Global
Bond......................... 7.625 6/22/2004 10,693,890
7,500,000 Raytheon Company.............. 6.500 7/15/2005 7,489,395
7,500,000 Time Warner Entertainment..... 9.625 5/1/2002 8,543,160
5,500,000 Union Electric Company........ 6.750 5/1/2008 5,557,487
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL LONG-TERM OBLIGATIONS-- INTEREST MATURITY
AMOUNT CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
$ 4,500,000 UpJohn Company................ 5.875% 4/15/2000 $ 4,445,748
5,000,000 Wal-Mart Stores, Inc. ........ 5.875 10/15/2005 4,763,875
4,000,000 Western Resources, Inc. ...... 7.250 7/1/1999 4,122,540
------------
TOTAL CORPORATE OBLIGATIONS........................ 150,701,515
------------
TOTAL LONG-TERM OBLIGATIONS (AMORTIZED COST BASIS
$421,213,279)..................................... 430,674,700
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS (1.4%)
-------------------------------------------------
<C> <S> <C> <C> <C>
693,770 Eli Lilly & Company............... 693,770
1,900,000 Ford Motor Credit Corporation..... 5.370 11/17/95 1,898,186
8,084 General Mills Company............. 8,084
3,100,000 Prudential Funding Corporation.... 5.720 11/16/95 3,097,537
40,000 Sara Lee Corporation.............. 40,000
253,399 Southwestern Bell Telephone
Company........................... 253,399
------------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST BASIS
$5,990,976)...................... 5,990,976
------------
TOTAL INVESTMENTS (100%) (AMORTIZED COST BASIS
$427,204,255)................................ $436,665,676
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
. THE FUND SEEKS: A high level of current income that is exempt from federal
income taxes, consistent with the preservation of capital.
. THE FUND IS: A diversified portfolio, at least 80% of which will
consist of municipal securities which are exempt from
federal income taxation.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS (99.9%) RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ALASKA (0.5%)
$ 2,000,000 Alaska State Housing Financial
Corporation Revenue Bonds,
Series A...................... 6.100% 12/1/2006 $ 2,101,876
------------
ARIZONA (7.1%)
7,000,000 Arizona Salt River Agriculture
Improvement Series A.......... 5.500 1/1/2019 6,776,889
4,000,000 Arizona State Student Loan
Marketing Corporation Revenue
Bonds......................... 6.550 3/1/1999 4,197,856
4,250,000 Maricopa County, Arizona School
District #41 G.O. Unlimited
Bonds......................... 6.250 7/1/2015 4,290,294
2,275,000 Maricopa County, Arizona School
District #40 G.O. Unlimited
Bonds......................... 6.200 7/1/2009 2,282,253
2,600,000 Maricopa County, Arizona School
District #40 G.O. Unlimited
Bonds......................... 6.100 7/1/2008 2,608,343
1,750,000 Maricopa County, Arizona School
District #40 G.O. Unlimited
Bonds......................... 5.700 7/1/2004 1,748,659
2,755,000 Maricopa County, Arizona School
District #38 Revenue Bonds,
Series B...................... 5.900 7/1/2010 2,843,328
1,975,000 Santa Cruz County Arizona
University School District #1,
Nogales, G.O. Bonds, Series B. 6.100 7/1/2014 2,156,599
2,385,000 Santa Cruz County Arizona
University School District #1,
(AMBAC Insured)............... 0.000 7/1/2007 1,266,230
------------
28,170,451
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA (13.1%)
$ 3,000,000 Contra Costa California Water
District Revenue Bonds, Series
1994 (MBIA Insured)........... 5.750% 10/1/2014 $ 3,004,647
4,830,000 Contra Costa County California
Home Mortgage Revenue Bonds
(Escrowed to Maturity)........ 7.500 5/1/2014 5,674,980
1,335,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2005 760,758
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2009 2,732,745
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2010 2,726,245
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2011 2,719,395
605,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2012 322,919
6,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2013 3,256,494
7,145,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 0.000 1/1/2014 3,877,942
12,315,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A............... 5.000 1/1/2035 9,804,747
4,200,000 Fresno, California Sewer
Revenue Bonds, Series 1993 A-1
(AMBAC Insured)............... 6.250 9/1/2014 4,474,285
4,000,000 Los Angeles County California
Transportation Authority Sales
Tax Refunding Revenue Bonds,
Series A...................... 5.500 7/1/2013 3,920,020
3,500,000 Orange County California
Transit Authority, Sales Tax
Revenue Bonds, Series 1992 M
(MBIA Insured)................ 6.000 2/15/2009 3,653,030
4,000,000 Pomona California Single Family
Housing Revenue Bonds (FNMA
Backed Securities), Series A.. 7.600 5/1/2023 4,869,248
------------
51,797,455
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY MARKET
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO (4.0%)
$4,000,000 Arapahoe County Colorado Capital
Improvement Federal Highway
Revenue Bonds................... 0.000% 8/31/2007 $ 1,778,116
16,765,000 Arapahoe County Colorado Capital
Improvement Federal Highway
Revenue Bonds................... 0.000 8/31/2008 6,916,032
665,000 Arapahoe County Colorado Capital
Improvement Federal Highway
Revenue Bonds................... 0.000 8/31/2009 256,041
18,940,000 Arapahoe County Colorado Capital
Improvement Federal Highway
Revenue Bonds................... 0.000 8/31/2010 6,718,984
-----------
15,669,173
-----------
DISTRICT OF COLUMBIA (0.7%)
3,000,000 District of Columbia G.O. Bonds,
Series 1993 A (MBIA Insured).... 4.650 6/1/2002 2,931,729
-----------
FLORIDA (1.1%)
750,000 Dade County, Florida Water &
Sewer System Revenue Bonds...... 6.250 10/1/2009 824,142
1,365,000 Florida State Board of Education
Administration G.O. Bonds,
Series 1986 B................... 7.500 6/1/2005 1,420,749
2,000,000 Florida State Board of Education
Capital Outlay, Public Education
G.O. Bonds, Series C............ 5.300 6/1/2013 1,944,212
-----------
4,189,103
-----------
GEORGIA (4.9%)
5,000,000 Fulton County, Georgia School
District G.O. Bonds, Series 1986
B 5.600 1/1/2014 4,960,185
4,000,000 Georgia Municipal Electric
Authority Power Revenue Bonds,
Series Z (FGIC Insured)......... 5.500 1/1/2012 3,961,668
2,000,000 Georgia Municipal Electric
Authority Revenue Bonds, Series
BB (MBIA Insured)............... 6.500 1/1/2012 2,189,612
1,690,000 Georgia Municipal Electric
Authority Special Obligation
Bonds, Series 1993 (AMBAC
Insured)........................ 7.000 1/1/2008 1,979,999
1,690,000 Georgia Municipal Electric
Authority Special Obligation
Bonds........................... 5.250 1/1/2025 1,542,186
3,000,000 Georgia State G.O. Bonds......... 7.200 3/1/2003 3,478,581
1,150,000 Metropolitan Atlanta Rapid
Transit Authority Sales Tax
Revenue Bonds, Series 1983 E.... 7.000 7/1/2011 1,290,668
-----------
19,402,899
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
IDAHO (0.6%)
$ 1,000,000 Idaho Student Loan Fund
Marketing Association, Inc.,
Student Loan Revenue Bonds,
Series 1992.................. 6.000% 10/1/1997 $ 1,013,453
1,240,000 Idaho Student Loan Fund
Marketing Association, Inc.,
Student Loan Revenue Bonds,
Series 1992.................. 6.400 10/1/1999 1,277,452
------------
2,290,905
------------
ILLINOIS (9.0%)
3,100,000 Bryant, Illinois Pollution
Control Refunding Revenue
Bonds,
Series A..................... 6.500 2/1/2018 3,230,023
8,000,000 Chicago, Illinois Metropolitan
Water G.O. Bonds............. 5.500 12/1/2010 8,000,000
5,200,000 Chicago, Illinois Metropolitan
Water G.O. Bonds............. 5.500 12/1/2012 5,114,959
4,980,000 Chicago, Illinois O'Hare
International Airport Revenue
Bonds, Second Lien, Series A
(MBIA Insured)............... 6.375 1/1/2012 5,248,143
2,250,000 Cook County, Illinois G.O.
Bonds, Series 1992 B (FGIC
Insured)..................... 5.500 11/15/2022 2,158,357
5,220,000 Du Page County, Illinois
Stormwater Project, G.O.
Unlimited, Revenue Bonds..... 5.600 1/1/2021 5,095,717
1,070,000 Illinois Educational
Facilities Authority Revenue
Bonds (Wesleyan University),
Series 1993 (MBIA Insured)... 5.600 9/1/2013 1,050,979
580,000 Illinois Health Facilities
Authority Revenue Bonds
(Northwestern Memorial
Hospital), Series 1989 B 7.200 8/15/2007 635,217
2,000,000 Illinois Housing Development
Authority Revenue Bonds,
Homeowner Mortgage, Series B. 6.250 8/1/2017 2,026,498
2,500,000 Illinois Regional Transit
Authority Revenue Bonds,
Series A (FGIC Insured)...... 6.700 11/1/2021 2,764,230
------------
35,324,123
------------
INDIANA (2.9%)
1,165,000 Concord Indiana Community
School Buildings Corporation,
First Mortgage Revenue Bonds
(CAP Guarantee Insured)...... 7.000 7/1/2011 1,304,896
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
INDIANA--CONTINUED
$ 1,500,000 Indiana State Office Building
Commission Correctional
Facilities Revenue Bonds,
Series A 6.500% 11/1/2007 $ 1,599,882
2,000,000 Indiana Transportation Finance
Authority, Apartment
Facilities Lease Revenue
Bonds, Series A............... 6.250 11/1/2016 2,020,542
2,050,000 Indiana Transportation Finance
Authority Series 1990 A (MBIA
Insured)...................... 7.250 6/1/2015 2,395,076
1,000,000 Indianapolis Indiana Bond Bank
Transportation Revenue Bonds.. 6.000 7/1/2010 1,023,459
2,000,000 Middle School Building
Corporation of Lawrence
Township, Marion County, First
Mortgage Bonds, (Unlimited
Tax) Series 1991.............. 6.875 7/15/2011 2,218,184
------------
10,562,039
------------
IOWA (0.5%)
2,000,000 Iowa, Student Loan Liquidity
Corp. Revenue Bonds, Series
1991 C (AMBAC Insured)........ 6.750 12/1/2001 2,106,554
------------
KENTUCKY (0.3%)
1,000,000 Kentucky Higher Education
Student Loan Corporation
Revenue Bonds................. 6.400 6/1/2000 1,058,338
------------
MASSACHUSETTS (1.8%)
1,000,000 Massachusetts State College
Building Authority Project
Revenue Bonds, Series 1994 A.. 7.500 5/1/2014 1,191,325
6,000,000 Massachusetts State
Construction Lien G.O. Bonds,
Series B...................... 6.000 8/1/2013 6,142,566
------------
7,333,891
------------
MICHIGAN (2.9%)
5,000,000 Michigan Public Power Agency
Revenue Refunding Bonds, Belle
River Project (MBIA Insured).. 5.250 1/1/2018 4,730,435
7,500,000 Michigan Public Power Agency
Revenue Refunding Bonds, Belle
River Project (MBIA Insured).. 5.000 1/1/2019 6,731,212
------------
11,461,647
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MINNESOTA (1.4%)
$ 1,815,000 Southern Minnesota Municipal
Power Agency Revenue Bonds,
Series A (MBIA Insured)....... 5.750% 1/1/2018 $ 1,826,175
1,000,000 Western Minnesota Municipal
Power Agency Revenue Bonds,
Series A...................... 9.050 1/1/2000 1,029,062
1,000,000 Western Minnesota Municipal
Power Agency Revenue Bonds,
Series A...................... 8.950 1/1/1999 1,027,147
1,500,000 Western Minnesota Municipal
Power Agency Revenue Bonds,
Series A...................... 8.800 1/1/1998 1,535,259
------------
5,417,643
------------
MISSOURI (1.0%)
3,400,000 Missouri State Health and
Educational Facilities
Authority Health Facilities
Revenue and Improvement,
Christian Health, Revenue
Bonds (FGIC Insured).......... 6.875 2/15/2021 3,822,093
------------
MONTANA (1.7%)
3,720,000 Montana State Board Housing
Revenue Bonds, Single Family
Program, Series B-1........... 6.300 6/1/2008 3,868,800
3,000,000 Montana State Board Housing
Revenue Bonds, Single Family
Program, Series A-1........... 6.250 12/1/2017 3,048,750
------------
6,917,550
------------
NEBRASKA (0.6%)
1,000,000 Nebraska Public Gas Agency
Supply System Revenue Bonds,
Series A...................... 5.650 4/1/2006 1,000,000
1,410,000 Nebraska Public Gas Agency
Supply System Revenue Bonds,
Series A...................... 5.600 4/1/2005 1,414,016
------------
2,414,016
------------
NEVADA (1.7%)
1,500,000 Las Vegas, Nevada Water G.O.
Limited, Revenue Bonds (FGIC
Insured)...................... 6.500 10/1/2007 1,614,852
4,395,000 Nevada State Prerefunded G.O.
Bonds, Series A............... 6.750 7/1/2002 4,953,547
------------
6,568,399
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW MEXICO (1.2%)
$ 1,965,000 Farmington New Mexico Pollution
Control Revenue Bonds,
Southern Cal Edison Co.,
Series A...................... 7.200% 4/1/2021 $ 2,151,726
2,275,000 New Mexico Mortgage Finance
Authority Revenue Bonds,
Series 1995 F................. 7.000 1/1/2026 2,471,239
------------
4,622,965
------------
NEW YORK (13.9%)
5,000,000 New York Dormitory Authority
State University Educational
Facilities Revenue Bonds...... 5.250 5/15/2019 4,530,285
2,000,000 New York Dormitory Authority
State University Revenue
Bonds,
Series A...................... 7.500 5/15/2013 2,346,682
2,500,000 New York Dormitory Authority
State University Revenue
Bonds, Series A............... 6.500 5/15/2006 2,677,208
3,500,000 New York Dormitory Authority
State University Revenue
Bonds, Series A............... 5.875 5/15/2011 3,506,972
5,000,000 New York Dormitory Authority
State University Revenue
Bonds, Series A............... 5.875 5/15/2017 4,892,280
2,500,000 New York State Local Government
Assistance Corp., Sales Tax
Revenue Bonds, Series 1993 E.. 5.250 4/1/2016 2,368,037
3,000,000 New York State Medical Care
Facilities, Finance Agency
Revenue Bonds, Mental Health
Services (FSA Insured)........ 5.375 2/15/2014 2,898,084
6,295,000 New York State Thruway Revenue
Bonds......................... 5.750 4/1/2008 6,328,936
9,500,000 New York State Thruway Revenue
Bonds......................... 5.600 4/1/2005 9,687,492
6,950,000 Triborough Bridge and Tunnel
Authority, New York Convention
Center Project, Series 1990 E. 7.250 1/1/2010 7,920,991
7,780,000 Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds, Series
Y 5.500 1/1/2017 7,664,607
------------
54,821,574
------------
NORTH CAROLINA (0.4%)
1,110,000 North Carolina Municipal Power
Agency #1 (CATAWBA),
Electric Revenue Bonds,
Series 1992................... 6.000 1/1/2004 1,164,620
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NORTH CAROLINA--CONTINUED
$ 500,000 North Carolina Municipal Power
Agency #1 (CATAWBA),
Electric Revenue Bonds,
Series 1986................... 5.000% 1/1/2020 $ 456,176
------------
1,620,796
------------
OHIO (1.0%)
1,750,000 Columbus, Ohio Water System
Revenue Bonds................. 6.375 11/1/2010 1,859,097
1,040,000 Lorain County, Ohio Hospital
EMH Regional Medical Center
Revenue Bonds (AMBAC Insured). 7.750 11/1/2013 1,204,003
900,000 State of Ohio G.O. Unlimited
Bonds......................... 4.700 8/1/2006 874,775
------------
3,937,875
------------
OKLAHOMA (1.0%)
3,925,000 Muskogee Oklahoma Industrial
Pollution Revenue Bonds,
Series A 7.000 3/1/2017 4,095,573
------------
PENNSYLVANIA (1.5%)
5,215,000 Pennsylvania State Higher
Education Revenue Bonds,
Series A (FGIC Insured)....... 6.800 12/1/2000 5,801,875
------------
PUERTO RICO (0.6%)
$2,000,000 Puerto Rico Electric Power
Authority Revenue Bonds (MBIA
Insured)...................... 6.500 7/1/2006 2,270,340
------------
SOUTH CAROLINA (0.5%)
2,200,000 South Carolina State Public
Service Authority Revenue
Bonds (AMBAC Insured)......... 5.000 1/1/2014 2,031,658
------------
SOUTH DAKOTA (1.1%)
4,650,000 South Dakota Housing
Development Authority Revenue
Bonds, Series B 5.800 5/1/2014 4,557,000
------------
TEXAS (5.3%)
1,640,000 Copperas Cove Texas Independent
School G.O. Bonds, Copperas
Cove Texas (PSF Guaranteed)... 6.800 8/15/2010 1,874,051
5,900,000 Houston, Texas Independent
School District, G.O. Limited
Bonds......................... 6.300 8/15/2014 6,433,372
4,775,000 Lewisville, Texas Independent
School District G.O. Unlimited
Bonds (PSFG Rated)............ 5.250 8/15/2014 4,523,453
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS--CONTINUED
$ 7,050,000 Wylie Texas Independent School
District G.O. Bonds (PSF
Guaranteed)................... 7.000% 8/15/2024 $ 8,050,719
------------
20,881,595
------------
UTAH (2.8%)
1,500,000 Intermountain Power Agency
Special Obligation Revenue
Bonds, Series 1986 C.......... 5.000 7/1/2018 1,318,707
3,230,000 Intermountain Power Agency
Special Obligation Revenue
Bonds, Series 1986 A.......... 5.000 7/1/2021 2,817,057
3,330,000 Intermountain Power Agency
Power Supply Special
Obligation Second Crossover
Bonds, Series 1986 C.......... 7.500 7/1/2016 3,467,123
3,605,000 State of Utah Building
Authority Lease Revenue Bonds,
Series A...................... 5.700 5/15/2014 3,544,195
------------
11,147,082
------------
VIRGINIA (1.1%)
1,220,000 Virginia State Housing
Development Authority Multi
Family Revenue Bonds, Series
H............................. 6.100 5/1/2011 1,243,226
1,205,000 Virginia State Housing
Development Authority Multi
Family Revenue Bonds, Series
H............................. 5.900 5/1/2009 1,221,066
2,000,000 Virginia State Housing
Development Authority Revenue
Bonds, Series B 6.700 1/1/2015 2,087,806
------------
4,552,098
------------
WASHINGTON (9.7%)
1,250,000 King County, Washington School
District #408 G.O. Bonds,
Unlimited Bonds............... 6.700 12/1/2007 1,362,161
2,035,000 King County, Washington School
District #408 G.O. Bonds,
Series 1993 (AMBAC Insured)... 4.875 12/1/2006 1,985,566
2,875,000 Pierce County, Washington
School District G.O. Bonds
(AMBAC-TCRS Insured).......... 5.450 12/1/2013 2,803,878
5,000,000 Snohomish County Public
Utilities District #1 Revenue
Bonds, Series 1993 (FGIC
Insured)...................... 5.625 1/1/2005 5,225,345
5,000,000 Washington State G.O. Bonds,
Series 1980 A................. 6.750 2/1/2015 5,614,555
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
. PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WASHINGTON--CONTINUED
$10,000,000 Washington State Public Power
Supply System Nuclear Project
#2, Revenue Refunding, Series
1994 A 6.000% 7/1/2007 $ 10,141,480
7,000,000 Washington State Public Power
Supply System Revenue Bonds,
Series B...................... 5.625 7/1/2012 6,657,875
2,000,000 Washington State Public Power
Supply System Revenue Bonds,
Series B...................... 5.600 7/1/2007 1,962,930
2,615,000 Washington State Various
Purpose G.O. Bonds, Series
1991 A........................ 5.000 9/1/2013 2,422,565
------------
38,176,355
------------
WISCONSIN (1.5%)
1,990,000 Wisconsin Housing and Economic
Development Authority Home
Ownership Revenue Bonds,
Series 1990 D................. 7.750 9/1/2010 2,086,155
1,715,000 Wisconsin Housing and Economic
Development Authority Home
Ownership Revenue Bonds,
Series 1990 D................. 6.100 9/1/2014 1,727,381
2,365,000 Wisconsin State G.O. Refunding
Bonds, Series 2............... 5.125 11/1/20 2,250,856
------------
6,064,392
------------
WYOMING (2.5%)
3,930,000 Wyoming Community Development
Authority Single Family
Mortgage, Series B............ 6.650 6/1/2013 4,099,576
5,765,000 Wyoming State Farm Land Board
Capital Projects Facilities
Revenue Bonds................. 5.750 10/1/2020 5,749,527
------------
9,849,103
------------
TOTAL MUNICIPAL BONDS (AMORTIZED COST BASIS
$376,612,055) 393,970,165
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT VARIABLE RATE OBLIGATIONS (0.1%)
--------------------------------------------------------------------------
<C> <S> <C>
393,322 Strong Municipal Money Market Fund
(COST BASIS $393,322) .............................. 393,322
------------
TOTAL INVESTMENTS (100%) (AMORTIZED COST BASIS $377,005,377).... $394,363,487
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MONEY MARKET FUND
. THE FUND SEEKS: A high level of current income with preservation of
capital and liquidity.
. THE FUND IS: A diversified portfolio of high-quality, short-term
money market instruments.
Quality Ratings: First Tier--100.0%
Average Maturity: 46 days
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
INTEREST MATURITY
. PRINCIPAL RATE DATE MARKET
AMOUNT COMMERCIAL PAPER (58.8%) RANGE* RANGE VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,500,000 American Express Credit
Corporation..................... 5.63% 1/24/96 $ 3,454,022
3,500,000 American General Finance
Corporation..................... 5.60 12/5/95 3,481,489
3,500,000 Beneficial Corporation........... 5.65 12/27/95 3,469,500
3,500,000 The CIT Group Holdings, Inc...... 5.65 2/1/96 3,449,464
3,500,000 Commercial Credit Corporation.... 5.70 11/2/95 3,499,446
3,500,000 John Deere Capital Corporation... 5.64 12/7/95 3,480,260
3,500,000 Ford Motor Credit Company........ 5.56 1/17/96 3,458,377
3,500,000 General Electric Capital Corp.... 5.58 1/29/96 3,451,717
3,500,000 General Motors Acceptance
Corporation..................... 5.66 11/27/95 3,485,693
3,500,000 Heller Financial, Inc............ 5.68 11/9/95 3,495,582
3,500,000 Honeywell Corporation............ 5.67 11/13/95 3,493,385
3,500,000 Household Finance Corporation.... 5.53 1/11/96 3,461,828
3,000,000 International Lease Finance
Corporation..................... 5.68 11/21/95 3,488,955
3,500,000 Merrill Lynch & Co., Inc......... 5.63 2/8/96 3,445,811
3,500,000 Norwest Financial Corporation.... 5.70 11/21/95 3,488,917
-----------
TOTAL COMMERCIAL PAPER.............................. 52,104,446
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
THE AAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995--CONTINUED
<TABLE>
<CAPTION>
INTEREST MATURITY
. PRINCIPAL U.S. AGENCY OBLIGATIONS RATE DATE MARKET
AMOUNT (37.5%) RANGE* RANGE VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$11,000,000 Federal Home Loan Bank...... 5.52-5.63% 11/1-3/4/96 $10,924,087
4,000,000 Federal Home Loan Mortgage.. 5.57 11/2/95 3,999,381
18,500,000 Federal National Mortgage
Association................ 5.50-5.61 11/8-4/4/96 18,346,262
-----------
TOTAL U.S. AGENCY OBLIGATIONS...................... 33,269,730
-----------
VARIABLE RATE OBLIGATIONS (3.7%)
-----------------------------------------------------
617,749 Eli Lilly & Company................................ 617,749
496,140 General Mills Company.............................. 496,140
388,022 Pitney Bowes Credit Corporation.................... 388,022
1,343,830 Sara Lee Corporation............................... 1,343,830
401,745 Southwestern Bell Telephone Company................ 401,745
-----------
TOTAL VARIABLE RATE OBLIGATIONS.................... 3,247,486
-----------
TOTAL INVESTMENTS (100%) (AMORTIZED COST $88,621,662).......... $88,621,662
===========
</TABLE>
*The interest rate shown reflects the coupon rate or, for the securities
purchased at a discount, the discount rate at the date of purchase.
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
THE AAL
--------------------------------------------------------------------------------
SMALLER CAPITAL MUNICIPAL MONEY
COMPANY GROWTH UTILITIES BOND BOND MARKET
OCTOBER 31, 1995 STOCK FUND FUND FUND FUND FUND FUND
- ------------------------ ------------ -------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $217,535,863,
$950,937,690,
$75,779,756,
$427,204,255,
$377,005,377 and
$88,621,662
respectively).......... $304,697,239 $1,184,379,675 $85,471,876 $436,665,676 $394,363,487 $88,621,662
Unamortized
organization & initial
registration expense... 18,941 -- 21,886 -- -- --
Dividends and interest
receivable............. 155,117 2,018,351 570,706 5,868,283 6,772,619 18,407
Prepaid expenses....... 42,144 44,389 29,347 18,029 24,009 14,226
Receivable from
securities sold........ -- -- -- -- 279,280 --
Cash................... 309,278 252,985 92,551 421,992 70,284 335,808
------------ -------------- ----------- ------------ ------------ -----------
TOTAL ASSETS........... $305,222,719 $1,186,695,400 $86,186,366 $442,973,980 $401,509,679 $88,990,103
============ ============== =========== ============ ============ ===========
LIABILITIES
Income distributions
payable................ $ -- $ -- $ -- $ 344,515 $ 271,341 $ 29,953
Redemptions payable.... -- -- 117,587 448,339 191,534 --
Payable to affiliate... 191,399 639,073 36,995 284,249 198,640 37,843
Accrued expenses....... 263,295 878,590 76,240 390,867 276,854 458,530
------------ -------------- ----------- ------------ ------------ -----------
TOTAL LIABILITIES...... 454,694 1,517,663 230,822 1,467,970 938,369 526,326
------------ -------------- ----------- ------------ ------------ -----------
NET ASSETS
Trust capital
(beneficial interest).. 221,254,772 912,114,045 77,213,690 449,026,495 380,281,194 88,428,566
Accumulated
undistributed net
investment income
(loss)................. (969,409) 4,526,571 345,926 41,050 41,917 35,211
Net unrealized
appreciation on
investments............ 87,161,376 233,441,985 9,692,120 9,461,422 17,358,110 --
Accumulated net
realized gain (loss) on
investments............ (2,678,714) 35,095,136 (1,296,192) (17,022,957) 2,890,089 --
------------ -------------- ----------- ------------ ------------ -----------
TOTAL NET ASSETS....... 304,768,025 1,185,177,737 85,955,544 441,506,010 400,571,310 88,463,777
------------ -------------- ----------- ------------ ------------ -----------
TOTAL LIABILITIES AND
CAPITAL................ $305,222,719 $1,186,695,400 $86,186,366 $442,973,980 $401,509,679 $88,990,103
============ ============== =========== ============ ============ ===========
Shares of beneficial
interest outstanding
(unlimited number of
shares authorized)...... 21,286,596 68,223,389 8,010,373 44,354,868 36,162,526 88,463,777
============ ============== =========== ============ ============ ===========
Net Asset Value Per
Share................... $ 14.32 $ 17.37 $ 10.73 $ 9.95 $ 11.08 $ 1.00
============ ============== =========== ============ ============ ===========
Maximum Public Offering
Price................... $ 15.03 $ 18.24 $ 11.27 $ 10.45 $ 11.63
============ ============== =========== ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THE AAL
--------------------------------------------------------------------------
SMALLER CAPITAL MUNICIPAL MONEY
FOR THE SIX MONTHS ENDED COMPANY GROWTH UTILITIES BOND BOND MARKET
OCTOBER 31, 1995 STOCK FUND FUND FUND FUND FUND FUND
------------------------ ----------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............... $ 78,515 $ 13,633,713 $ 1,490,890 $ -- $ -- $ --
Taxable interest........ 902,349 584,652 362,633 15,402,749 313,076 2,392,284
Tax-exempt interest..... -- -- -- -- 10,742,121 --
----------- ------------ ----------- ----------- ----------- ----------
TOTAL INVESTMENT
INCOME................. 980,864 14,218,365 1,853,523 15,402,749 11,055,197 2,392,284
----------- ------------ ----------- ----------- ----------- ----------
EXPENSES
Adviser fees............ 487,433 2,433,995 98,067 773,357 692,186 161,182
Sub-Adviser fees........ 509,573 1,070,216 98,067 478,814 428,863 40,296
Audit fees.............. 7,704 10,506 8,484 9,790 8,900 6,223
Custody fees............ 22,915 80,529 7,608 20,193 33,564 7,938
Administrative service
fees.................... 18,623 17,730 16,528 33,303 25,373 15,622
Legal fees.............. 2,800 2,800 2,800 2,800 2,800 2,800
Amortization of
organization &
registration expense.... 3,697 -- 4,552 -- -- --
Printing and postage
expense................. 79,964 229,650 14,583 80,007 63,919 93,613
Distribution expense
(12b-1)................. 330,198 1,406,213 98,067 551,356 488,916 50,369
S.E.C. and state
registration fees....... 25,781 26,235 19,118 13,421 15,332 8,729
Transfer Agent fees..... 339,798 895,182 95,271 238,106 116,377 150,380
Shareholder maintenance
fees.................... 86,326 237,044 21,860 63,847 31,111 28,550
Trustee fees and
expenses................ 7,979 7,979 7,979 7,979 7,979 7,979
Other expenses.......... 27,482 59,458 2,234 9,156 6,870 6,125
----------- ------------ ----------- ----------- ----------- ----------
TOTAL EXPENSES......... 1,950,273 6,477,537 495,218 2,282,129 1,922,190 579,806
----------- ------------ ----------- ----------- ----------- ----------
Less reimbursement from
Adviser................ -- -- -- -- -- (100,739)
----------- ------------ ----------- ----------- ----------- ----------
TOTAL NET EXPENSES..... 1,950,273 6,477,537 495,218 2,282,129 1,922,190 479,067
----------- ------------ ----------- ----------- ----------- ----------
NET INVESTMENT INCOME
(LOSS).................. (969,409) 7,740,828 1,358,305 13,120,620 9,133,007 1,913,217
----------- ------------ ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS
Net realized gains
(losses) on investments. 18,102,745 35,940,538 (1,227,513) (3,642,709) 4,809,162 --
Increase in unrealized
appreciation on
investments............. 52,828,689 85,615,120 10,862,956 18,967,998 9,137,773 --
----------- ------------ ----------- ----------- ----------- ----------
NET REALIZED &
UNREALIZED GAINS ON
INVESTMENTS............. 70,931,434 121,555,658 9,635,443 15,325,289 13,946,935 --
----------- ------------ ----------- ----------- ----------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.............. $69,962,025 $129,296,486 $10,993,748 $28,445,909 $23,079,942 $1,913,217
=========== ============ =========== =========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE AAL
------------------------------------------------------------------------------------
SMALLER COMPANY CAPITAL GROWTH UTILITIES
STOCK FUND FUND FUND
-------------------------- ------------------------------ ------------------------
YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 10/31/95 4/30/95 10/31/95 4/30/95 10/31/95
------------ ------------ -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss)................. $ (1,377,361) $ (969,409) $ 17,337,195 $ 7,740,828 $ 2,126,626 $ 1,358,305
Net realized gain
(loss) on investments.. (16,692,455) 18,102,745 (840,545) 35,940,538 (68,679) (1,227,513)
Increase (decrease) in
unrealized appreciation
on investments......... 32,846,797 52,828,689 112,486,468 85,615,120 (1,173,321) 10,862,956
------------ ------------ -------------- -------------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... 14,776,981 69,962,025 128,983,118 129,296,486 884,626 10,993,748
------------ ------------ -------------- -------------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income...... -- -- (18,335,661) (7,757,458) (1,869,226) (1,314,758)
Capital gains
distributions.......... -- -- (37,856,745) -- -- --
------------ ------------ -------------- -------------- ----------- -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS............ -- -- (56,192,406) (7,757,458) (1,869,226) (1,314,758)
------------ ------------ -------------- -------------- ----------- -----------
TRUST SHARES
TRANSACTIONS
Purchases of trust
shares................. 80,866,039 31,301,304 121,311,533 67,616,830 59,687,740 10,288,337
Income dividends
reinvested............. -- -- 18,154,413 7,722,515 1,758,941 1,247,124
Capital gains
distributions
reinvested............. -- -- 37,487,552 -- -- --
Redemptions of trust
shares................. (17,380,419) (17,287,373) (86,426,278) (43,868,757) (5,024,539) (6,120,311)
------------ ------------ -------------- -------------- ----------- -----------
NET INCREASE (DECREASE)
IN TRUST CAPITAL........ 63,485,620 14,013,931 90,527,220 31,470,588 56,422,142 5,415,150
------------ ------------ -------------- -------------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS........... 78,262,601 83,975,956 163,317,930 153,009,616 55,437,543 15,094,140
NET ASSETS BEGINNING OF
PERIOD.................. 142,529,468 220,792,069 868,850,191 1,032,168,121 15,423,861 70,861,404
------------ ------------ -------------- -------------- ----------- -----------
NET ASSETS END OF PERIOD
(1)..................... $220,792,069 $304,768,025 $1,032,168,121 $1,185,177,737 $70,861,404 $85,955,544
============ ============ ============== ============== =========== ===========
</TABLE>
(1) Including undistributed income of ($1,987,449) and ($969,409), for The AAL
Smaller Company Stock Fund; $4,501,285 and $4,526,571 for The AAL Capital
Growth Fund; and $291,937 and $345,926 for The AAL Utilities Fund in each
period respectively.
The accompanying notes to financial statements are an integral part of this
statement.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE AAL
----------------------------------------------------------------------------------
BOND FUND MUNICIPAL BOND FUND MONEY MARKET FUND
-------------------------- -------------------------- --------------------------
YEAR SIX MONTHS YEAR SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED YEAR ENDED
4/30/95 10/31/95 4/30/95 10/31/95 ENDED 4/30/95 10/31/95
------------ ------------ ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income.. $ 26,370,442 $ 13,120,620 $ 18,593,428 $ 9,133,007 $ 2,646,147 $ 1,913,217
Net realized gain
(loss) on investments.. (13,380,248) (3,642,709) (1,918,573) 4,809,162 -- --
Increase (decrease) in
unrealized appreciation
on investments......... 9,259,565 18,967,998 7,975,495 9,137,773 -- --
------------ ------------ ------------ ------------ ------------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... 22,249,759 28,445,909 24,650,350 23,079,942 2,646,147 1,913,217
------------ ------------ ------------ ------------ ------------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income...... (26,370,442) (13,120,620) (18,593,428) (9,133,007) (2,646,147) (1,913,217)
Capital gains
distributions.......... (107,963) -- (1,954,973) -- -- --
------------ ------------ ------------ ------------ ------------- -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS............ (26,478,405) (13,120,620) (20,548,401) (9,133,007) (2,646,147) (1,913,217)
------------ ------------ ------------ ------------ ------------- -----------
TRUST SHARES
TRANSACTIONS
Purchases of trust
shares................. 44,491,616 19,213,836 40,640,851 21,619,793 108,011,919 76,542,138
Income dividends
reinvested............. 21,777,898 10,909,513 15,159,507 8,825,581 2,491,076 1,854,983
Capital gains
distributions
reinvested............. 90,587 -- 1,612,397 -- -- --
Redemptions of trust
shares................. (75,738,835) (33,297,791) (54,317,690) (21,586,860) (105,300,623) (60,144,019)
------------ ------------ ------------ ------------ ------------- -----------
NET INCREASE (DECREASE)
IN TRUST CAPITAL........ (9,378,734) (3,174,442) 3,095,065 8,858,514 5,202,372 18,253,102
------------ ------------ ------------ ------------ ------------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS........... (13,607,380) 12,150,847 7,197,014 22,805,449 5,202,372 18,253,102
NET ASSETS BEGINNING OF
PERIOD.................. 442,962,543 429,355,163 370,568,847 377,765,861 65,008,303 70,210,675
------------ ------------ ------------ ------------ ------------- -----------
NET ASSETS END OF PERIOD
(1)..................... $429,355,163 $441,506,010 $377,765,861 $400,571,310 $ 70,210,675 $88,463,777
============ ============ ============ ============ ============= ===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
<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 manage-
ment company under the Investment Company Act of 1940. The Trust commenced op-
erations 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 and on March 17, 1994, The AAL Utilities Fund com-
menced operations. The AAL International Fund and 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:
Valuation--Securities traded on national securities exchanges are valued at
last reported sales prices. Each over-the-counter security for which the last
sale price is available from NASDAQ is valued at that price. Interest bearing
money market instruments and variable rate demand notes are valued at cost
which approximates market. All other instruments held by The AAL Money Market
Fund and money market investments with a remaining maturity of 60 days or less
held by the other Funds are valued on an amortized cost basis. All other secu-
rities are valued at the latest bid quotation if such quotations are readily
available. Otherwise, such securities are valued at a fair value as determined
in good faith by the Investment Adviser under supervision of the Board of
Trustees.
Federal Income Taxes--The Funds' policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment com-
panies and to distribute substantially all of their taxable income to their
shareholders. The Funds accordingly paid no Federal income taxes and no Fed-
eral income tax provision was required.
Distributions to Shareholders--Net investment income is distributed to each
shareholder as a dividend. Dividends to shareholders are recorded on the ex-
dividend date. Dividends from The AAL Bond and The AAL Money Market Funds are
declared daily and distributed monthly. Dividends from The AAL Municipal Bond
Fund are declared daily and distributed monthly. Dividends from The AAL Capi-
tal Growth Fund are declared and paid semi-annually. Dividends from The AAL
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Smaller Company Stock Fund are declared and paid annually. Dividends from The
AAL Utilities Fund are declared and paid quarterly. Net realized gains from
securities transactions, if any, are distributed at least annually in the cal-
endar year.
Credit Risk--The Funds hold investments in variable rate demand notes, which
are unsecured instruments. The Funds may be susceptible to credit risk with
respect to these instruments to the extent the issuer defaults on its payment
obligation. The Funds' policy is to monitor the creditworthiness of the issuer
and does not anticipate nonperformance on the instruments.
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. Dis-
counts and premiums on municipal bonds are amortized over the life of the re-
spective bonds. Discounts on bonds purchased after April 30, 1995, are amor-
tized over the life of the respected bonds in The AAL Utilities Fund and The
AAL Bond Fund. 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 Smaller Company Stock Fund and The AAL
Utilities Fund is being amortized over the period of benefit, but not to ex-
ceed 60 months from each Fund's commencement of operation.
During the prior fiscal year, the Funds adopted Statement of Position 93-2
(SOP), "Determination, Disclosure, and Financial Statement Presentation of In-
come, Capital Gain, and Return of Capital Distributions by Investment Compa-
nies." In accordance with provisions of the SOP, permanent differences between
book and taxable net investment income and realized gain/loss on security
transactions have been reclassified from accumulated net investment income
(loss) and net accumulated realized loss on investments, to trust capital. As
of April 30, 1995, $1,987,449, $41,917, $10,441, $41,050, $41,917 and $35,211
were reclassified in The AAL Smaller Company Stock, Capital Growth, Utilities,
Bond, Municipal Bond and Money Market Funds respectively. Net investment in-
come (loss), net realized losses on investments and net assets were not af-
fected by this change.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(C) INVESTMENT ADVISORY MANAGEMENT FEES AND TRANSACTIONS WITH RELATED PARTIES
The Trust has entered into an Investment Advisory Agreement with AAL Capital
Management Corporation ("The Adviser") under which each of the six separate
mutual fund portfolios pays a fee for investment advisory services.
The annual rates of fees under the Investment Advisory Agreement are calcu-
lated at the following rates: .85 of 1% on the first $100 million of average
daily net assets, .75 of 1% on the next $100 million and .65 of 1% on the av-
erage daily net assets over $200 million for The AAL Smaller Company Stock
Fund; .75 of 1% on the first $250 million of average daily net assets .65 of
1% on the next $250 million, .575 of 1% on the next $500 million and .50 of 1%
on average daily net assets over $1 billion for The AAL Capital Growth Fund;
.60 of 1% on the first $250 million of average daily net assets, .525 of 1% on
the next $250 million and .45 of 1% on average daily net assets over $500 mil-
lion for The AAL Bond and The AAL Municipal Bond Funds; .50 of 1% on the first
$500 million of average daily net assets and .45 of 1% on average daily net
assets over $500 million for The AAL Money Market Fund and .50 of 1% of the
average daily net assets as to The AAL Utilities Fund.
The Adviser has entered into a Sub-Advisory Agreement with Duff & Phelps In-
vestment Management Co. (Sub-Adviser). The sub-advisory fee, which is paid by
the Adviser, is equal to the rates following: .30 of 1% on the first $75 mil-
lion, .20 of 1% on the next $425 million, .175 of 1% on the next $500 million
and .150 of 1% on average daily net assets over $1 billion for The AAL Capital
Growth Fund; .25 of 1% on the first $150 million of average daily net assets,
.20 of 1% on the next $350 million and .175 of 1% on average daily net assets
over $500 million for The AAL Bond Fund and The AAL Municipal Bond Fund; .10
of 1% of the average daily net assets for The AAL Money Market and .25 of 1%
on the first $250 million of daily net assets, .20 of 1% on the next $500 mil-
lion of average daily net assets and .15 of 1% on average daily net assets
over $750 million for The AAL Utilities Fund.
Additionally, the Adviser has entered into a Sub-Advisory Agreement with
Pilgrim Baxter & Associates, Ltd. (Sub-Adviser). The sub-advisory fee, which
is paid by the Adviser, is equal to the following rates: .50 of 1% of average
daily net assets on the first $50 million, .45 of 1% of average daily net as-
sets over $50 million to $100 million, .40 of 1% of average daily net assets
over $100 million to $150 million, .35 of 1% of average daily net assets over
$150 million to $200 million
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
and .30 of 1% of average daily net assets over $200 million for The AAL Smaller
Company Stock Fund.
On October 16, 1995, the Board of Trustees approved the termination of the
sub-advisory agreement with both Duff & Phelps Investment Management Company
and Pilgrim Baxter & Associates, Ltd. effective November 1, 1995. The Adviser
has hired a team of portfolio managers to manage the Funds' assets.
The Trust has entered into an Administrative Services Agreement with the Ad-
viser pursuant to which the Adviser provides certain administrative services.
The adviser earned the following fees from the respective Funds for the six
months ended October 31, 1995: The AAL Smaller Company Stock Fund, The AAL
Capital Growth Fund, The AAL Bond Fund, The AAL Municipal Bond Fund, The AAL
Money Market Fund, $15,000 each; and The AAL Utilities Fund, $12,500.
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 ac-
counts, shareholder correspondence, account response and answering customer
inquires regarding account status, option and facilitating shareholder tele-
phone transactions. Fees charged to the Funds under terms of the contract ap-
proximated $3.58 per shareholder account on an annual basis.
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 dis-
tribution 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 AAL Smaller Com-
pany Stock Fund, The AAL Capital Growth Fund, The AAL Utilities Fund, The AAL
Bond Fund and The AAL Municipal Bond Fund; and .125 of 1% of the average daily
net assets of The AAL Money Market Fund.
Trustees of the Trust not affiliated with AAL or the Adviser receive an an-
nual 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
reimbursed unaffiliated Trustees for reasonable expenses incurred in relation
to attendance at the meetings.
Each Fund 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 di-
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
rectly attributable to a Fund 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. In addition to the reimbursement re-
quired under the Investment Advisory Agreement, the Adviser voluntarily has
reimbursed various funds since inception. The Adviser reimbursed The AAL Money
Market .25% of average daily net assets. Voluntary reimbursements to this Fund
may be modified or discontinued at any time by the Adviser.
AAL is the ultimate parent company for AAL Capital Management Corporation.
(D) SECURITY TRANSACTIONS
During the year ended April 30, 1995 and six months ended October 31, 1995,
purchases and sales of securities other than short-term obligations were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------- -------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
4/30/95 10/31/95 4/30/95 10/31/95
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund................. $181,214,320 $101,550,715 $139,876,821 $106,946,593
The AAL Capital Growth
Fund....................... 393,241,285 217,385,887 296,479,660 251,387,330
The AAL Utilities Fund..... 72,216,425 14,151,294 11,929,861 9,447,625
The AAL Bond Fund.......... 193,580,496 273,865,102 186,956,061 278,147,820
The AAL Municipal Bond
Fund....................... 612,855,314 273,211,751 612,836,296 261,262,331
</TABLE>
Included in these transactions were purchases and sales of U.S. government
obligations for the years ended April 30, 1995, and the six months ended Octo-
ber 31, 1995, of $54,604,531 and $75,867,500, and $117,798,125 and
$124,974,531 for The AAL Bond Fund; $5,970,117 and $3,238,102 and $1,862,969
and $5,595,031 in U.S. Government Obligations purchased and sold during the
respective periods for The AAL Utilities Fund.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Cost of investments is substantially the same for financial reporting pur-
poses and federal income tax purposes.
The gross unrealized appreciation and depreciation on investments at April
30, 1995 and the six months ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>
4/30/95 10/31/95
------------------------------------------ ------------------------------------------
NET
UNREALIZED NET UNREALIZED
APPRECIATION APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION) APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------ -------------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund.............. $ 39,831,728 $ (5,499,040) $34,332,688 $ 90,643,338 $ (3,481,962) $ 87,161,376
The AAL Capital Growth
Fund.................... 162,507,211 (14,680,347) 47,826,864 250,084,428 (16,642,443) 233,441,985
The AAL Utilities Fund.. 2,115,100 (3,285,935) (1,170,835) 10,823,292 (1,131,172) 9,692,120
The AAL Bond Fund....... 3,813,698 (13,320,275) (9,506,577) 12,036,752 (2,575,330) 9,461,422
The AAL Municipal Bond
Fund.................... 9,474,439 (1,254,102) 8,220,337 17,390,570 (32,460) 17,358,110
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(E) TRUST TRANSACTIONS
Transactions in trust shares were as follows:
<TABLE>
<CAPTION>
THE AAL
SMALLER COMPANY THE AAL THE AAL
STOCK FUND CAPITAL GROWTH FUND UTILITIES FUND
---------------------- ---------------------- -------------------------
YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 10/31/95 4/30/95 10/31/95 4/30/95 10/31/95
---------- ---------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased........ 8,203,611 2,433,012 8,315,188 3,989,307 6,277,200 1,015,894
Income dividends
reinvested............. -- -- 1,294,493 548,692 190,275 121,230
Capital gains reinvest-
ed..................... -- -- 2,675,771 -- -- --
Shares redeemed......... (1,706,687) (1,370,775) (5,921,488) (2,643,153) (537,340) (607,712)
---------- ---------- ---------- ---------- ------------ -----------
Net increase of trust
shares.................. 6,496,924 1,062,237 6,363,964 1,894,846 5,930,135 529,412
========== ========== ========== ========== ============ ===========
<CAPTION>
THE AAL THE AAL THE AAL
BOND FUND MUNICIPAL BOND FUND MONEY MARKET FUND
---------------------- ---------------------- -------------------------
YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 10/31/95 4/30/95 10/31/95 4/30/95 10/31/95
---------- ---------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased........ 4,676,792 1,951,476 3,888,302 1,981,466 108,011,920 76,542,138
Income dividends rein-
vested................. 2,293,802 1,106,038 1,451,298 810,714 2,491,076 1,854,983
Capital gains reinvest-
ed..................... 9,762 -- 159,328 -- -- --
Shares redeemed......... (7,991,980) (3,381,223) (5,234,874) (1,979,542) (105,300,623) (60,144,019)
---------- ---------- ---------- ---------- ------------ -----------
Net increase of trust
shares................. (1,011,624) (323,709) 264,054 812,638 5,202,373 18,253,102
========== ========== ========== ========== ============ ===========
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL SMALLER COMPANY
------------------------------------------
YEAR SIX MONTHS
PERIOD ENDED ENDED ENDED
4/30/94 4/30/95 10/31/95
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value: Beginning of
Period.......................... $10.00 $10.38 $10.92
INCOME FROM INVESTMENT
OPERATIONS
Net investment income........... (0.044) (0.054) (0.046)
Net realized and unrealized gain
(loss) on investments........... 0.424 0.594 3.446
------------ ------------ ------------
Total From Investment
Operations...................... 0.380 0.540 3.400
------------ ------------ ------------
DISTRIBUTIONS FROM:
Net investment income........... -- -- --
Net realized capital gains...... -- -- --
------------ ------------ ------------
Total distributions............. 0.000 0.000 0.000
------------ ------------ ------------
Net increase (decrease) in net
asset value..................... 0.380 0.540 3.400
Net asset value:
End of Period................... $10.38 $10.92 $14.32
============ ============ ============
Total Return(e)................. 3.80% 5.20% 31.14%
Net Assets: End of Period....... $142,529,469 $220,792,070 $304,768,025
Ratio of expenses to average net
assets(a)(b).................... 1.72% 1.54% 1.48%
Ratio of net investment income
to average net assets(a)(c)..... (1.14)% (0.77)% (0.73)%
Portfolio turnover rate......... 55.49% 88.18% 43.78%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL CAPITAL GROWTH FUND
--------------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED ENDED ENDED YEAR
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 ENDED 4/30/95
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of
Period.......... $10.00 $8.36 $9.84 $10.72 $12.42 $14.06 $14.83 $14.49
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.112 0.218 0.233 0.271 0.276 0.284 .296 0.274
Net realized and
unrealized gain
(loss) on
investments..... (1.709) 1.466 0.889 1.726 1.659 0.761 (0.287) 1.699
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
Total From
Investment
Operations...... (1.597) 1.684 1.122 1.997 1.935 1.045 0.009 1.975
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.043) (0.204) (0.242) (0.269) (0.280) (0.274) (0.286) (0.298)
Net realized
capital gains... -- -- -- (0.028) (0.015) (0.001) (0.063) (0.605)
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
Total
distributions... (0.043) (0.204) (0.242) (0.297) (0.295) (0.275) (0.349) (0.903)
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
Net increase
(decrease) in
net asset value. (1.640) 1.480 0.880 1.700 1.640 0.770 (0.340) 1.070
Net asset value:
End of Period... $8.36 $9.84 $10.72 $12.42 $14.06 $14.83 $14.49 $15.55
=========== =========== ============ ============ ============ ============ ============ ==============
Total Return (e) (15.95)% 20.46% 11.45% 18.93% 15.77% 7.52% 0.00% 14.37%
Net Assets: End
of Period....... $23,672,346 $48,915,003 $119,731,099 $209,055,868 $423,231,713 $714,184,330 $868,850,190 $1,032,168,121
Ratio of
expenses to
average net
assets(a)(b).... 1.50% 1.50% 1.44% 1.41% 1.28% 1.20% 1.18% 1.17%
Ratio of net
investment
income to
average net
assets(a)(c).... 2.61% 2.80% 2.56% 2.59% 2.27% 2.15% 2.07% 1.89%
Portfolio
turnover rate... 1.36% 2.78% 1.43% 2.26% 1.11% 2.99% 40.60% 33.34%
</TABLE>
<TABLE>
<CAPTION>
THE AAL CAPITAL GROWTH FUND
---------------------------
SIX MONTHS
ENDED
10/31/95
-----------
<S> <C>
Net asset value:
Beginning of
Period.......... $15.55
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.115
Net realized and
unrealized gain
(loss) on
investments..... 1.822
--------------
Total From
Investment
Operations...... 1.937
--------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.117)
Net realized
capital gains... --
--------------
Total
distributions... (0.117)
--------------
Net increase
(decrease) in
net asset value. 1.820
Net asset value:
End of Period... $17.37
==============
Total Return (e) 12.44%
Net Assets: End
of Period....... $1,185,177,737
Ratio of
expenses to
average net
assets(a)(b).... 1.15%
Ratio of net
investment
income to
average net
assets(a)(c).... 1.38%
Portfolio
turnover rate... 19.86%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL UTILITIES FUND
---------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED ENDED
4/30/94 4/30/95 10/31/95
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value: Beginning of
Period.............................. $10.00 $9.95 $9.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.022 0.338 0.177
Net realized and unrealized gain
(loss) on investments............... (0.072) (0.498) 1.253
----------- ----------- -----------
Total From Investment Operations.... (0.050) (0.160) 1.430
----------- ----------- -----------
DISTRIBUTIONS FROM:
Net investment income............... -- (0.320) (0.170)
Net realized capital gains(d)....... -- -- --
----------- ----------- -----------
Total distributions................. 0.000 (0.320) (0.170)
----------- ----------- -----------
Net increase (decrease) in net asset
value............................... (0.050) (0.482) 1.260
Net asset value:
End of Period....................... $9.95 $9.47 $10.73
=========== =========== ===========
Total Return (e).................... (0.50)% (1.51)% 15.19%
Net Assets: End of Period........... $15,423,861 $70,861,404 $85,955,544
Ratio of expenses to average net
assets(a)(b)........................ 1.60% 1.19% 1.26%
Ratio of net investment income to
average net assets(a)(c)............ 5.12% 4.08% 3.46%
Portfolio turnover rate............. 0.00% 24.65% 12.37%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL BOND FUND
-----------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR
ENDED YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of
Period.......... $10.00 $9.64 $9.33 $9.25 $9.76 $10.02 $10.61 $9.69
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.602 0.826 0.806 0.772 .0721 0.661 0.584 0.580
Net realized and
unrealized gain
(loss) on
investments..... (0.360) (0.255) (0.080) 0.510 0.273 0.627 (0.660) (0.078)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total From
Investment
Operations...... 0.242 0.571 0.726 1.282 0.994 1.288 (0.076) 0.502
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.602) (0.826) (0.806) (0.772) (0.721) (0.661) (0.584) (0.580)
Net realized
capital
gains(d)........ -- (0.055) -- -- (0.013) (0.037) (0.260) (0.002)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total
distributions... (0.602) (0.881) (0.806) (0.772) (0.734) (0.698) (0.844) (0.582)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in
net asset value. (0.360) (0.310) (0.080) 0.510 0.260 0.590 (0.920) (0.080)
Net asset value:
End of Period... $9.64 $9.33 $9.25 $9.76 $10.02 $10.61 $9.69 $9.61
=========== =========== =========== ============ ============ ============ ============ ============
Total Return (e) 2.56% 6.21% 7.84% 14.34% 10.47% 13.22% (0.99)% 5.47%
Net Assets: End
of Period....... $20,938,863 $54,006,123 $94,937,997 $139,228,954 $229,309,955 $370,219,492 $442,962,543 $429,355,163
Ratio of
expenses to
average net
assets(a)(b).... 0.75% 0.83% 0.98% 1.00% 1.03% 1.03% 1.02% 1.03%
Ratio of net
investment
income to
average net
assets(a)(c).... 8.67% 8.86% 8.38% 8.06% 7.19% 6.35% 5.61% 6.12%
Portfolio
turnover rate... 85.88% 54.49% 38.00% 6.39% 12.18% 26.12% 27.75% 44.57%
</TABLE>
<TABLE>
<CAPTION>
THE AAL BOND FUND
-----------------
SIX MONTHS
ENDED
10/31/95
------------
<S> <C>
Net asset value:
Beginning of
Period.......... $9.61
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.297
Net realized and
unrealized gain
(loss) on
investments..... 0.340
------------
Total From
Investment
Operations...... 0.637
------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.297)
Net realized
capital
gains(d)........ --
------------
Total
distributions... (0.297)
------------
Net increase
(decrease) in
net asset value. 0.340
Net asset value:
End of Period... $9.95
============
Total Return (e) 6.69%
Net Assets: End
of Period....... $441,506,010
Ratio of
expenses to
average net
assets(a)(b).... 1.04%
Ratio of net
investment
income to
average net
assets(a)(c).... 5.95%
Portfolio
turnover rate... 63.83%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL MUNICIPAL BOND FUND
-----------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of
Period........... $10.00 $9.72 $9.74 $9.70 $10.13 $10.36 $10.99 $10.56
INCOME FROM
INVESTMENT
OPERATIONS.......
Net investment
income........... 0.398 0.599 0.608 0.616 0.598 0.571 0.539 0.523
Net realized and
unrealized gain
(loss) on
investments...... (0.280) 0.020 (0.035) 0.434 0.234 0.631 (0.410) 0.186
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total From
Investment
Operations....... 0.118 0.619 0.573 1.050 0.832 1.202 0.129 0.709
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.398) (0.599) (0.608) (0.616) (0.598) (0.571) (0.539) (0.523)
Net realized
capital
gains(d)........ -- -- (0.005) (0.004) (0.004) (0.001) (0.020) (0.056)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total
distributions.... (0.398) (0.599) (0.613) (0.620) (0.602) (0.572) (0.559) (0.579)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
asset value...... (0.280) 0.020 (0.040) 0.430 0.230 0.630 (0.430) 0.130
Net asset value:
End of Period.... $9.72 $9.74 $9.70 $10.13 $10.36 $10.99 $10.56 $10.69
=========== =========== =========== ============ ============ ============ ============ ============
Total Return (e). 1.29% 6.53% 5.93% 11.12% 8.39% 11.84% 1.04% 7.01%
Net Assets: End
of Period........ $10,031,478 $41,217,475 $78,844,594 $114,953,939 $172,494,589 $271,319,546 $370,568,847 $377,765,861
Ratio of expenses
to average net
assets(a)(b)..... 1.50% 0.94% 0.90% 0.90% 0.95% 1.00% 0.99% 0.98%
Ratio of net
investment income
to average net
assets(a)(c)..... 5.72% 6.30% 6.13% 6.21% 5.81% 5.32% 4.87% 5.01%
Portfolio
turnover rate.... 20.83% 29.24% 30.83% 13.63% 0.74% 3.41% 10.15% 172.49%
</TABLE>
<TABLE>
<CAPTION>
THE AAL MUNICIPAL BOND FUND
---------------------------
SIX MONTHS
ENDED
10/31/95
------------
<S> <C>
Net asset value:
Beginning of
Period........... $10.69
INCOME FROM
INVESTMENT
OPERATIONS.......
Net investment
income........... 0.259
Net realized and
unrealized gain
(loss) on
investments...... 0.390
------------
Total From
Investment
Operations....... 0.649
------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.259)
Net realized
capital
gains(d)........ --
------------
Total
distributions.... (0.259)
------------
Net increase
(decrease) in net
asset value...... 0.390
Net asset value:
End of Period.... $11.08
============
Total Return (e). 6.14%
Net Assets: End
of Period........ $400,571,310
Ratio of expenses
to average net
assets(a)(b)..... 0.98%
Ratio of net
investment income
to average net
assets(a)(c)..... 4.67%
Portfolio
turnover rate.... 71.20%
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL MONEY MARKET FUND
--------------------------------------------------------------------------------------------------------
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
<S> <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
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income........... 0.009 0.078 0.079 0.068 0.045 0.025 0.019 0.038
Net realized and
unrealized gain
(loss) on
investments...... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
Total From
Investment
Operations....... 0.009 0.078 0.079 0.068 0.045 0.025 0.019 0.038
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.009) (0.078) (0.079) (0.068) (0.045) (0.025) (0.019) (0.038)
Net realized
capital
gains(d)........ 0.000 0.000 0.000 0.000 0.000 0.000 0.000 --
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
Total
distributions.... (0.009) (0.078) (0.079) (0.068) (0.045) (0.025) (0.019) (0.038)
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
Net increase
(decrease) in net
asset value...... 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Net asset value:
End of Period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ============ ============ ============ ============ =========== =========== ===========
Total Return (e). 0.91% 8.10% 8.24% 7.07% 4.54% 2.53% 1.95% 3.92%
Net Assets: End
of Period........ $7,990,507 $143,217,501 $223,447,573 $228,465,749 $147,584,931 $83,274,493 $65,008,303 $70,210,675
Ratio of expenses
to average net
assets(a)(b)..... 0.07% 0.76% 1.04% 1.07% 1.11% 1.13% 1.26% 1.17%
Ratio of net
investment income
to average net
assets(a)(c)..... 7.06% 8.29% 7.84% 6.85% 4.56% 2.53% 2.00% 3.95%
Portfolio
turnover rate.... N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
THE AAL MONEY MARKET FUND
-------------------------
SIX MONTHS
ENDED
10/31/95
-----------
<S> <C>
Net asset value:
Beginning of
Period........... $1.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income........... 0.024
Net realized and
unrealized gain
(loss) on
investments...... 0.000
-----------
Total From
Investment
Operations........ 0.024
-----------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.024)
Net realized
capital
gains(d)........ --
-----------
Total
distributions.... (0.024)
-----------
Net increase
(decrease) in net
asset value...... 0.000
Net asset value:
End of Period.... $1.00
===========
Total Return (e). 2.35%
Net Assets: End
of Period........ $88,463,777
Ratio of expenses
to average net
assets(a)(b)..... 1.19%
Ratio of net
investment income
to average net
assets(a)(c)..... 4.75%
Portfolio
turnover rate.... N/A
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS--CONTINUED
(a) Calculated on an annualized basis.
(b) Computed after giving effect to Adviser's expense limitation undertaking.
If the Funds had paid all of their expenses, the ratios would have been as
follows:
<TABLE>
<CAPTION>
SIX
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 10/31/95
------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund.............. -- -- -- -- -- -- 1.73% 1.54% 1.48%
The AAL Capital Growth
Fund.................... 1.91% 1.77% 1.49% 1.41% 1.28% 1.20% 1.18% 1.17% 1.15%
The AAL Utilities Fund.. -- -- -- -- -- -- 2.91% 1.19% 1.26%
The AAL Bond Fund....... 1.83% 1.37% 1.22% 1.17% 1.08% 1.03% 1.02% 1.03% 1.04%
The AAL Municipal Bond
Fund.................... 2.28% 1.46% 1.14% 1.10% 1.04% 1.00% 0.99% 0.98% 0.98%
The AAL Money Market
Fund.................... 1.76% 1.18% 1.04% 1.07% 1.11% 1.27% 1.50% 1.42% 1.44%
(c) If the Funds had paid all of their expenses the ratios would have been as
follows:
<CAPTION>
SIX
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 10/31/95
------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund.............. -- -- -- -- -- -- (1.14%) (0.77%) (0.73%)
The AAL Capital Growth
Fund.................... 2.21% 2.54% 2.51% 2.59% 2.27% 2.15% 2.07% 1.89% 1.38%
The AAL Utilities Fund.. -- -- -- -- -- -- 3.81% 4.08% 3.46%
The AAL Bond Fund....... 7.59% 8.32% 8.13% 7.89% 7.14% 6.35% 5.61% 6.12% 5.95%
The AAL Municipal Bond
Fund.................... 4.95% 5.79% 5.89% 6.01% 5.72% 5.32% 4.87% 5.01% 4.67%
The AAL Money Market
Fund.................... 5.37% 7.87% 7.84% 6.85% 4.56% 2.38% 1.75% 3.70% 4.50%
(d) The Funds had the following per share short-term capital gain distributions
during the fiscal year ended April 30, 1995: The AAL Capital Growth Fund
$.0006; The AAL Bond Fund $.0028; and The AAL Municipal Bond Fund $.0008.
(e) Total return calculations are based on net amount invested.
</TABLE>
<PAGE>
[AAL LOGO APPEARS HERE]
The AAL Mutual Funds
----------------------------------------------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
Board of Trustees
- -------------------------------------------------------------------------------
John H. Pender D. W. Russler
Chairman of the Board F. Gregory Campbell
Richard L. Gady Richard L. Gunderson
Lawrence M. Woods
Officers
- -------------------------------------------------------------------------------
John H. Pender Robert G. Same
President Secretary
H. Michael Spence Terrance P. Gallagher
Vice President Treasurer
Investment Adviser & Distributor
- -------------------------------------------------------------------------------
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
Custodian, 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
