The AAL Mutual Funds
Annual Report
April 30, 1996
[COVER ART 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]
The AAL Mutual Funds
<PAGE>
[AAL LOGO]
The AAL Mutual Funds
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222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
June 1, 1996
Dear Shareholder:
A good economic environment in 1995 provided unusually strong growth for the
stock and bond markets and for The AAL Mutual Funds. In addition to stable
economic growth and low inflation, good corporate earnings reports, particularly
in the technology sector, propelled stock and bond prices. The economy remained
strong through the first four months of 1996, although the markets turned more
volatile.
For the Funds' fiscal year ended April 30, 1996, the Funds' total returns, based
upon the net amount invested, were:
The Funds Performance
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The AAL Smaller Company Stock Fund (Inception date: 6/30/93) 56.59%
(As of July 1, 1996, The AAL Mid Cap Stock Fund)
The AAL Capital Growth Fund (Inception date: 7/16/87) 25.85%
The AAL Utilities Fund (Inception date: 3/17/94) 18.90%
The AAL Bond Fund (Inception date: 7/16/87) 6.18%
The AAL Municipal Bond Fund (Inception date: 7/16/87) 7.74%
Based on generally positive economic fundamentals, we expect the long-term
direction of the markets and The AAL Mutual Funds to continue to be favorable.
However, we do not expect to see a repetition of the record gains of 1995.
Market adjustments are likely to occur with short-term impacts. Therefore, I
encourage you not to be surprised by normal market adjustments and to maintain a
long-term approach to investing. Periodic market adjustments are inevitable and
temporary and should be expected.
I am pleased to announce that on July 1, 1996, we will introduce The AAL Small
Cap Stock Fund as an additional choice for our equity investors. The Fund will
invest at least 65% of its total net assets in the stocks of small companies,
which are those with a market capitalization of $1 billion or less. The Fund
will focus on companies with market capitalizations between $30 million and $600
million and will be suitable for long-term investors with more aggressive
risk/reward tolerance.
Also effective on July 1, 1996, we are changing the name of The AAL Smaller
Company Stock Fund, which primarily invests in the stocks of mid-sized
companies, to The AAL Mid Cap Stock Fund. The name change will not affect the
investment objective or makeup of the Fund, but it will more accurately describe
the Fund and make it easier to compare its performance with other mid cap stock
funds as reported by Lipper Analytical Services, Inc. In addition to managing
the new AAL Small Cap Stock Fund, Kevin Schmitting will continue to manage The
AAL Mid Cap Stock Fund.
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PAGE 1
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Along with information on the Funds' investments and finances during the fiscal
year, this report will provide you with the portfolio managers' answers to
questions on the performance of the Funds they manage, their goals and
strategies.
Thank you for investing in The AAL Mutual Funds.
Very truly yours,
/s/ H. Michael Spence
H. Michael Spence
President
The AAL Mutual Funds
The following table shows the 1-year, 5-year and since inception average annual
total returns for the Funds, except The AAL Money Market Fund.* Column 1
provides the Securities and Exchange Commission ("SEC") standardized average
annual total returns for the periods mentioned as of the last quarterly period
ended March 31, 1996, based upon the gross amount invested (offering price),
which is the return on your investment including the maximum sales charge of
4.75%. Column 2 provides the average annual returns based on the net amount
invested (net asset value), which does not include the maximum sales charge, for
the Funds as of the end of the fiscal year, April 30, 1996.
<TABLE>
<CAPTION>
Average Annual Average Annual
The Funds Total Return Total Return
on Offering Price as on Net Asset Value as
of March 31, 1996** of April 30, 1996***
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<S> <C> <C> <C> <C>
The AAL Smaller Company 1-year 36.78% 1-year 56.59%
Stock Fund Inception date: 6/30/93 Inception 15.85% Inception 20.83%
(As of July 1, 1996, The AAL Mid
Cap Stock Fund)
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The AAL Capital Growth Fund 1-year 20.67% 1-year 25.85%
Inception date: 7/16/87 5-year 10.78% 5-year 12.37%
Inception 9.68% Inception 10.49%
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The AAL Utilities Fund 1-year 17.49% 1-year 18.90%
Inception date: 3/17/94 Inception 6.07% Inception 7.49%
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The AAL Bond Fund 1-year 3.07% 1-year 6.18%
Inception date: 7/16/87 5-year 6.10% 5-year 6.74%
Inception 6.89% Inception 7.32%
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The AAL Municipal Bond Fund 1-year 3.84% 1-year 7.74%
Inception date: 7/16/87 5-year 6.50% 5-year 7.13%
Inception 6.40% Inception 6.85%
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</TABLE>
*The financial information for The AAL U.S. Government Zero Coupon
Target Funds, Series 2001 and 2006 ("Target Funds"), and The AAL
International Fund are reported in separate annual reports. The Target
Funds are closed to new investors.
**The SEC Standardized Average Annual Total Return for The AAL Mutual Funds
based upon gross amount invested, including the maximum 4.75% sales charge.
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. As of April 30, 1996, the
Adviser is reimbursing The AAL Money Market Fund. The Adviser may discontinue
or modify its reimbursement of expenses at any time. This would result in
lowering total return for these Funds. Investment returns and principal values
are subject to fluctuation. Therefore, Fund shares, when redeemed, may be
worth more or less than their purchase price. Past performance does not
indicate future performance.
***The Average Annual Total Returns for The AAL Mutual Funds are based
upon net amount invested, which does not include the maximum 4.75% sales
charge.
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PAGE 2
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[PHOTO]
Kevin A. Schmitting
Portfolio Manager
PORTFOLIO PERSPECTIVE
The AAL Smaller
Company Stock Fund
(The AAL Mid Cap Stock Fund as of July 1, 1996)
The Fund's total return on net amount invested was 56.59% over the past 12
months. What factors contributed to this performance?
The past twelve months have been a very good investment environment for growth
stocks. There was low inflation, decreasing interest rates and strong corporate
profits. The Fund was invested in companies which had earnings growth rates well
above the corporate average. The combination of strong earnings growth and a
favorable investment environment helped create the high returns for The AAL
Smaller Company Stock Fund.
Were there any disappointments over the same period?
There weren't any major disappointments in the last twelve months. There was a
strong downturn in early January which was caused by a number of concerns. There
was some normal profit taking after a strong year in 1995. There was also a
concern about the delay in reaching a federal budget agreement. Finally,
interest rate worries also helped push the market down. In hindsight, this
period in January turned out to be just a bump in the road. It should serve as a
reminder to investors of the risks involved in the equity markets.
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Return on a $10,000 Investment
[CHART APPEARS HERE]
The AAL Smaller Company Stock Fund = $16,286
S&P(R) MIDCAP 400 Index* = $14,110
*The S&P(R) MidCap 400 is an index comprised of
400 stocks designed to represent performance
of the mid-cap segment of the U.S. equity markets.
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Average Annual Total Return
As of April 30, 1996.
Includes sales charge.
Past performance is not an
indication of future results.
1-Year = 49.21%
5-Year = N/A
From July 1, 1993 = 18.77%
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PAGE 3
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Since taking over portfolio management duties for the Fund on November 1, 1995,
what have been the most significant changes to the Fund's portfolio?
The most significant change to the Fund has been the broader diversification of
the portfolio. The Fund had a very heavy weighting in the technology sector,
which did very well in 1995. We have reduced that weighting and allocated those
dollars to other sectors of the stock market. I have maintained the high growth
stock orientation. With that orientation, the Fund has maintained relatively
heavy weightings in the technology, healthcare and consumer sectors. These
sectors will probably continue as the major areas of investment for the
foreseeable future.
Starting on July 1, 1996, the name of this Fund will change to The AAL Mid Cap
Stock Fund. What changes will that mean to the management of the Fund?
The Fund has always been managed more as a mid cap fund rather than a small cap
fund and we will continue to do so. The distinction between large caps, mid
caps, and small caps is based on the size of a company's stock market value.
There isn't a single definition or market size that describes mid caps, but one
can think of mid caps in relation to a typical company life cycle. Smaller
companies can have quick, but unpredictable growth. Larger companies can grow
more predictably, but usually at a slower rate. Mid cap companies, at least in
theory, can offer reasonably fast growth with more predictability. These
characteristics make mid cap stocks a very interesting segment of the stock
market.
What sectors of the stock market have performed well during the six-month period
ended April 30, 1996?
Two of the better performing sectors were the biotechnology sector and the
cyclical sector. The biotechnology stocks continued their rise which began last
June. A number of companies have shown very promising results in the treatment
of some very difficult diseases. The cyclical stocks performed well as there was
some evidence of a stronger than expected economy, which would be beneficial to
these more economically sensitive companies. Fortunately, The AAL Smaller
Company Stock Fund has had some investments in each of these sectors.
/s/ Kevin A. Schmitting
Kevin A. Schmitting
Portfolio Manager
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10 Largest
Holdings
Glenayre Technologies, Inc.
Atmel Corporation
Peoplesoft, Inc.
HBO & Company
Parametric Technology Corporation
HEALTHSOUTH Corporation
Tellabs, Inc.
ADC Telecommunications, Inc.
Clear Channel Communications, Inc.
Oxford Health Plans, Inc.
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Portfolio
Sector Chart
Health Care.................... 20%
Computer Software/Services..... 18%
Technology..................... 14%
Consumer-Related............... 13%
Telecommunications............. 10%
Retailing...................... 8%
Cash & Cash Equivalents........ 5%
Other Equities................. 5%
Transportation................. 4%
Financial Services............. 3%
Total..........................100%
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PAGE 4
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[PHOTO]
Frederick L. Plautz
Portfolio Manager
PORTFOLIO PERSPECTIVE
The AAL Capital
Growth Fund
After an outstanding year in 1995, the stock market as measured by the S&P
500(R) Composite Stock Price Index, has continued to appreciate in early 1996
but at a reduced rate. What market factors are the cause and do you expect these
conditions to continue?
The market factors causing the rise in 1996 are the continuing growth in the
economy, inflation remaining under control and the huge cash inflows into equity
mutual funds. These three factors have been stronger than the 100 basis point
rise in interest rates that has occurred so far this year. The economy should
continue to grow but this growth could slow in the second half of 1996. A
slowdown would ease inflation fears and reduce pressure on interest rates. If
this results, we should see improving price earnings ratios and the market
favoring growth stocks over cyclical stocks. This is reflected in the Fund's
portfolio.
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Return on a $10,000 Investment
[CHART APPEARS HERE]
AAL Capital Growth Fund = $22,902
S&P 500(R) Index* = $26,881
*The S&P 500(R) is an index composed of 500 common stocks representative of the
stock market as a whole.
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Average Annual Total Return
As of April 30, 1996.
Includes sales charge.
Past performance is not an
indication of future results.
1-Year = 19.84%
5-Year = 11.28%
From August 1, 1987 = 9.88%
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PAGE 5
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How much did the Fund's portfolio differ from the S&P 500 over the last 12
months, and what impacts, positive and negative, did these differences have on
Fund performance?
Over the last 12 months, the total return of the Fund was 25.8% on net amount
invested versus the 30.2% for the S&P 500. The main reason the Fund lagged
behind the index is because the average capitalization of the companies in the
Fund is larger than the S&P 500. Over the last 12 months, these smaller
capitalization stocks have outperformed the larger capitalization stocks by a
wide margin. I have been reducing the average capitalization of the Fund and
should be more in line with the S&P 500 by the end of this year.
Since taking over portfolio management duties on November 1, 1995, what changes,
if any, have you made to the Fund?
I have increased the number of companies the Fund holds in order to get more
diversification, to get the average capitalization closer to the S&P 500 and to
get faster growing companies in the Fund. This is being done at a measured pace.
On November 1, 1995, the Fund owned stock in 73 companies. It currently has 89
companies. By increasing the number of companies, we hope to reduce the day to
day price fluctuations in the Fund without affecting its ability to benefit from
longer-term market trends. Buying opportunities exist in the market and we feel
we can do this without reducing overall portfolio quality.
/s/Frederick L. Plautz
Frederick L. Plautz
Portfolio Manager
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10 Largest
Holdings
Exxon Corporation
Merck & Co., Incorporated
General Electric Company
American International Group
Mobil Corporation
Pfizer Incorporated
American Express Company
Philip Morris Companies, Inc.
Raytheon Company
Automatic Data Processing, Incorporated
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Portfolio
Sector Chart
Consumer-Related.............. 20%
Financial Services............ 17%
Computer Software/Services.... 12%
Technology.................... 11%
Drug and Chemical............. 10%
Utilities..................... 9%
Other Equities................ 8%
Petroleum..................... 7%
Cash & Cash Equivalents....... 4%
Entertainment................. 2%
Total.........................100%
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PAGE 6
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[PHOTO]
Lewis A. "Bo" Bohannon
Portfolio Manager
PORTFOLIO PERSPECTIVE
The AAL
Utilities Fund
The performance of utility stocks and the Fund turned around in 1995, but this
turnaround has not carried over into 1996. What market conditions are causing
this?
Since The AAL Utilities Fund was started in early 1994, there have been few
periods of relatively stable interest rates. Because yield plays a big role in
the total return of utilities and many investors use utilities as bond
substitutes, utility stocks have a strong inverse correlation to interest rates,
much as bonds do. That is, they move in the opposite direction from interest
rates. 1994 was a year of sharply rising interest rates and one of the worst
years ever for bonds and utilities. 1995 and the first month of 1996 were just
the opposite. However, in early February, interest rates, once again began to
rise sharply and continued upward for the entire quarter. It is very difficult
for a utility fund to decrease this interest rate sensitivity and consequently
the Fund has been negatively impacted for the first four months of 1996. The
ideal environment would be one in which the Fund's performance would be driven
primarily by the attractive characteristics of its holdings rather than economic
factors. While interest rates may play a pivotal role in the short term, it is
the characteristics of the Fund's holdings which are critical to its success
over the long term.
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Return on a $10,000 Investment
AAL Utilities Fund = $11,100
S&P(R) Utilities Index* = $12,293
*The S&P(R) Utilities is a capitalization-weighted index
of all stocks designed to measure the performance of
the utility sector of the S&P 500(R).
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Average Annual
Total Return
As of April 30, 1996.
Includes sales charge.
Past performance is not an
indication of future results.
1-Year = 13.28%
5-Year = N/A
From April 1, 1994 = 5.05%
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PAGE 7
<PAGE>
Since taking over the portfolio management duties on November 1, 1995, what
changes, if any, have you made to the Fund?
The major change I have made in the Fund since taking over is to raise the
overall quality of the holdings. Regulators at both the federal and state levels
are moving steadily forward to bring increased competition to the electric,
telecommunications and natural gas industries. While I feel the process of
deregulation and increasing competition in these industries will be evolutionary
rather than revolutionary, expectations of increased competition have created
greater uncertainty which implies both greater risks and greater opportunities
for utility investors. I feel that raising the quality of the Fund's holdings is
a prudent way to help manage the risks associated with this Fund. The general
weakness in the utility markets, thus far in 1996, has allowed me to buy a
number of high quality stocks at very attractive prices.
The Fund invests in both the stocks and bonds of public utilities. How do you
determine the portfolio mix between stocks and bonds?
For the most part, I would always prefer to own the stock of a company as
opposed to its bonds. Over the long term, no asset category (financial assets or
physical assets) has given investors greater returns than stocks. Therefore, to
maximize total return, I prefer to keep my stock holdings as high as possible.
But, aren't there shorter periods of time when bonds outperform stocks? The
answer is yes! One of the attractive features of utility stocks is that they
have many of the attractive characteristics of both stocks and bonds (as well as
some of the risks of both). Therefore, in times of rapidly declining interest
rates, when bonds often outperform stocks, utility stocks with their higher
yields also tend to perform strongly. The use of bonds in the Fund is using
their high yields to supplement the low yields of some of the faster growing
utility stocks.
/s/ Lewis A. Bohannon
Lewis A. Bohannon
Portfolio Manager
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5 Largest
Holdings
Ameritech Corporation
NIPSCO Industries Incorporated
SBC Communications Incorporated
Telefonica de Espana ADR
AT&T Company
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Portfolio Mix
[CHARTS APPEAR HERE]
Stocks = 77%
Cash & Cash Equivalents = 15%
Bonds = 8%
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Domestic = 90%
Foreign = 10%
(Includes ADRs)
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PAGE 8
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[PHOTO]
Michael R. Hilt
Portfolio Manager
PORTFOLIO PERSPECTIVE
The AAL Bond Fund
The Fund's total return was 6.18% on net amount invested for the past 12 months
but total returns for 1996 have been negative. What factors caused these swings
in performance?
The bond market had a very good year in 1995 due to investor perception that
economic growth was slowing, inflationary concerns were abating, and the Fed was
easing. So far in 1996, the bond market has suffered as interest rates
increased. At the beginning of 1996, investors believed that the economy would
continue to slow, the Fed would continue to ease and that the Republican-
controlled Congress and President Clinton would reach a balanced budget
agreement. None of those things occurred, and interest rates increased by
approximately 1% from the end of 1995 through April 30th of this year.
It seems that every time there is good news about the economy, such as a
reduction in the unemployment rate, bonds and bond funds lose money. Why does
this happen?
Good economic news is poorly received by the bond market because it serves to
increase inflationary forces and the demand for borrowing. These lead to a fear
of higher interest rates.
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Return on a $10,000 Investment
[CHART APPEARS HERE]
AAL Bond Fund = $17,733
Lehman Brothers Aggregate Bond Index* = $21,175
*The Lehman Brothers Aggregate Bond Index is an index that
encompasses four major classes of fixed income securities
in the U.S.: U.S. Treasury and U.S. government agency
securities, corporate debt obligations, mortgage-backed
securities and asset-backed securities.
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Average Annual
Total Return
As of April 30, 1996.
Includes sales charge.
Past performance is not an
indication of future results.
1-Year = 1.13%
5-Year = 5.71%
From August 1, 1987 = 6.73%
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PAGE 9
<PAGE>
Since taking over portfolio management duties on November 1, 1995, what changes,
if any, have you made to the Fund?
I extended the average life or effective maturity of the portfolio and bought
more corporate bonds while selling some U.S. Treasury securities. I increased
the average life of the portfolio to more closely align the portfolio with the
broad-based investment grade bond market and in anticipation of a further
decrease in interest rates. In the short run, the level of interest rates has
increased and this hurt the Fund's return so far this year. Corporate bonds were
purchased to increase the yield of the portfolio without materially increasing
risk. This change should help our return over time.
What are mortgage-backed securities and why does the Fund buy them?
Mortgage-backed securities are bonds backed by mortgage payments made by a group
or pool of home owners. Most mortgage-backed bonds are rated AAA, and therefore
carry little credit risk.
However, the bonds do carry what we refer to as prepayment risk. Sometimes
mortgagors (borrowers) will pay off their mortgage early because interest rates
have come down and they can now save money by refinancing at a lower rate. While
lower interest rates are good for the person who refinances, it is not good for
the holder of the mortgage-backed bond for two reasons. First of all, even
though bond values increase when interest rates go down, mortgages are paid back
at their face amount. So, although the bond has increased in value, the
bondholder is forced to redeem at its face amount and, in effect, takes a loss
on the difference between the face amount and the bond's increased value.
Secondly, when interest rates are lower, not only are more borrowers likely to
refinance, it also means that the bond being redeemed can only be replaced with
one paying a lower interest rate. This, in turn, results in a lower potential
yield for the bondholder.
Because of this prepayment risk, yields on these types of instruments are
usually higher than for a comparably-rated bond without prepayment risk to
compensate the bondholder for this increased risk.
/s/ Michael R. Hilt
Michael R. Hilt
Portfolio Manager
----------------------------------
Portfolio Mix
As of April 30, 1996
Average Maturity: 9.05 years
Average Quality: AA
[CHARTS APPEAR HERE]
Corporate Obligations = 46%
U.S. Govt. Agencies = 32%
U.S. Govt. Obligations = 14%
Collateralized Mortgage Obligations = 7%
Cash & Cash Equivalents = 1%
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AAA = 57% A = 20% AA = 12% BBB = 11%
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PAGE 10
<PAGE>
[PHOTO OF]
Duane A. McAllister
Portfolio Manager
PORTFOLIO PERSPECTIVE
The AAL Municipal
Bond Fund
For the year covered by this report, how does the Fund's total return of 7.74%
compare to other general municipal bond funds?
Very favorably. This 12-month return, which is somewhat higher than the Fund's
five-year average return of 7.13% does not show the fluctuation of interest
rates and bond prices during the year. (These returns are based on the net
amount invested.) Yields on long-maturity municipal bonds varied as much as 75
basis points over this period as investor perceptions over economic growth and
inflation varied dramatically at times. Fortunately, however, the Fund was able
to outperform the average return of 6.68% of its Lipper peer group by over 100
basis points, placing it within the top 15th percentile of all general municipal
funds tracked by Lipper.
What techniques did you use that worked best over the last year?
Typically, the single most important decision impacting a bond fund's
performance over short time periods is its interest rate exposure, and this
12-month period certainly fit the pattern. Throughout the bond rally of 1995,
the Fund benefited from a longer than average interest rate posture.
Fortunately, this aggressive structure was moderated early enough in the
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Return on a $10,000 Investment
AAL Municipal Bond Fund = $17,061
Lehman Brothers Municipal Bond Index* = $19,851
*The Lehman Brothers Municipal Bond Index is a broad based index that provides a
performance indicator of the overall municipal bond market.
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Average Annual
Total Return
As of April 30, 1996.
Includes sales charge.
Past performance is not an
indication of future results.
1-Year = 2.65%
5-Year = 6.08%
From August 1, 1987 = 6.26%
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PAGE 11
<PAGE>
rising rate environment of 1996 to help preserve the principal value of our
shareholders. The combined effect of these actions was the main reason for the
above average returns for the year. Secondary decisions, such as improving the
call structure of bonds in the Fund and modestly increasing the Fund's credit
exposure, and in turn its yield, also helped to enhance performance.
What didn't work as well as you might have hoped?
Obviously, I wish the Fund's average maturity had been shorter in early February
1996 when interest rates began to rise. The warning signs were certainly there
to indicate that the bond rally wouldn't go on forever, but it wasn't until the
sell-off was already underway that it became evident that what had previously
been only concerns were now becoming reality. Economic growth, employment
activity and commodity prices were all on the rise. Throw in a few worrisome
comments from members of the Federal Reserve Board and the market acted
appropriately by adjusting yields higher. Fortunately, however, the price
declines in 1996 have proven to be modest relative to the larger gains earned in
1995.
The Fund has some zero coupon municipal securities in its portfolio. How do
these securities work and what role do they play in the Fund?
A zero coupon bond is one that is issued at a deep discount from its par amount.
Instead of paying interest each six months as other bonds, a zero accrues
interest each year and the owner receives the full par value at maturity. The
small portion of the Fund allocated to this structure was one of the reasons the
Fund had the favorable performance it experienced over the last year. As
interest rates declined dramatically in 1995, these securities appreciated in
value more than other municipal issues. In addition, because of their unique
structure, they often provide a higher yield than comparable maturity coupon
securities. They, of course, also can decline in value more than other
securities when interest rates rise and because of this, the Fund's exposure was
reduced in early 1996.
/s/ Duane A. McAllister
Duane A. McAllister
Portfolio Manager
----------------------------------
5 States with
Largest Holdings
California
New York
Illinois
Washington
Arizona
----------------------------------
Portfolio Mix
As of April 30, 1996
Average Maturity: 16.4 years
Average Quality: AA
[CHART APPEARS HERE]
AAA = 43%
AA = 24%
A = 12%
BBB = 21%
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PAGE 12
<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 mid-sized companies.
Current income is not an objective.
THE FUND IS: A diversified portfolio of mid-sized company common stocks
and convertible securities. The Fund may also invest in
fixed-income investments and cash equivalents as a
protective measure during weak or declining markets.
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (95.5%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES (1.2%)
120,000 Alternative Resource Corporation* (Provides technical
personnel which specialize in information
services)....................................... $ 4,350,000
30,000 AccuStaff, Inc.* (National provider of temporary
staffing personnel)............................... 892,500
--------------
5,242,500
--------------
COMPUTER SOFTWARE (17.0%)
30,000 Adobe Systems, Inc. (Develops, markets and supports
computer software products and technologies...... 1,290,000
110,000 Broderbund Software, Inc.* (Publishes and develops
personal computer software for the home,
school and small business markets................ 4,840,000
120,000 Edmark Corporation* (Publishes and distributes
software to children and adults who are struggling
with fundamental skills)......................... 3,510,000
150,000 Electronic Arts Inc.* (Develops, markets and
distributes interactive entertainment software).. 4,012,500
60,000 HBO & Company (Designs and sells computerized
information systems to the healthcare industry).. 7,125,000
190,000 Hyperion Software Corporation* (Develops and markets
computer software)............................... 2,375,000
150,000 Informix Corporation* (Develops, produces and markets
database management programs and spreadsheet
packages)........................................ 3,956,250
190,000 Intersolv* (Develops tools which enable software
programmers to design more efficient software
programs)........................................ 2,066,250
70,000 Intuit, Inc.* (Develops and markets software products
and related services)............................ 3,640,000
165,000 Maxis, Inc.* (Provides entertainment and educational
software)........................................ 4,042,500
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
Page 13
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE--CONTINUED
30,000 McAfee Associates, Inc.* (Develops, markets and
distributes personal computer software designed for
electronic distribution)........................... $ 1,837,500
83,400 Micro Warehouse, Inc.* (Direct marketer of
microcomputer software and peripheral products).... 3,586,200
170,000 Parametric Technology Corporation* (Develops and
markets integrated software for automating the
mechanical design process)......................... 6,842,500
40,000 Paychex, Inc. (Provides computerized payroll
accounting services)............................... 2,710,000
120,000 Peoplesoft, Inc.* (Designs, develops, markets and
supports human resource management software)....... 7,560,000
75,000 Progress Software Corporation* (Develops and markets
computer software)................................. 1,181,250
30,000 Project Software & Development, Inc.* (Develops and
markets computer software)......................... 1,050,000
30,000 Synopsys, Inc.* (Develops and markets computer
software).......................................... 1,237,500
90,000 Viasoft, Inc.* (Provides business solutions designed
to manage and automate large COBOL applications
software).......................................... 3,262,500
25,000 Xylan Corporation* (Provides high-bandwidth switching
systems that enhance existing local area networks). 1,601,563
93,200 3Com Corporation* (Designs, manufactures and supplies
products for the global data networking market).... 4,298,850
------------
72,025,363
------------
CONSUMER PRODUCTS (0.9%)
80,000 Tommy Hilfiger Corporation* (Designer and marketer of
an upscale men's sportswear line).................. 3,640,000
------------
DRUGS (4.9%)
200,000 Amylin Pharmaceuticals, Inc.* (Performs research for
and develops novel therapeutic products based on
amylin)............................................ 1,900,000
100,000 Biochem Pharma, Inc.* (A Canadian pharmaceutical
company specializing in products for human
disease)........................................... 4,550,000
135,000 Boston Scientific Corporation* (Develops, produces
and markets medical devices worldwide)............. 5,821,875
120,000 Cephalon, Inc.* (Develops products to treat
neurological diseases and disorders)............... 3,450,000
150,000 ImmuLogic Pharmaceutical Corporation* (Develops
treatments for allergies and autoimmune diseases).. 1,612,500
25,000 Medimmune, Inc.* (Develops and markets products for
infectious diseases and transplantation medicine).. 412,500
</TABLE>
The accompanying notes to financial statements are an integral part
of this schedule.
14
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
DRUGS--CONTINUED
50,000 Neurex Corporation (Develops products primarily for
the treatment of cardiorenal and neurological
diseases).......................................... $ 1,162,500
40,700 Watson Pharmaceutical, Inc.* (Produces and sells off-
patent medications and develops advanced drug
delivery systems).................................. 1,933,250
------------
20,842,625
------------
ELECTRONICS (11.8%)
190,000 Atmel Corporation* (Designs, develops, manufactures
and markets high performance circuits)............. 7,600,000
51,675 Cyberoptics Corporation* (Designs, develops,
manufactures and markets laser sensors and sensor
systems)........................................... 1,123,931
100,000 Digital Link Corporation* (Designs, manufactures,
markets and services high-speed digital products).. 1,900,000
15,000 Fore Systems, Inc.* (Designs, develops, manufactures
and markets high performance networking products).. 1,185,000
155,000 Information Storage Devices, Inc.* (Develops,
manufactures and markets analog integrated circuit
products for voice recording)...................... 1,646,875
146,000 Input/Output, Inc.* (Designs and manufactures seismic
data acquisition systems).......................... 5,073,500
170,000 Integrated Process Equipment Corporation* (Develops
and supplies processing equipment used in
manufacturing semiconductor chips)................. 4,441,250
100,000 ITI Technologies, Inc.* (Designs and manufactures
wireless security systems)......................... 2,762,500
70,000 KLA Instruments Corporation* (Manufactures yield
monitoring and process control systems)............ 2,021,250
80,000 Kemet Corporation* (Manufactures and supplies solid
tantalum and multi-layered ceramic capacitors)..... 1,910,000
130,000 Linear Technology Corp. (Manufactures linear
integrated circuits)............................... 4,468,750
80,000 Macromedia, Inc.* (Develops, markets and supports
computer software programs)........................ 3,015,000
90,000 Microchip Technology, Inc.* (Supplier of field 8-bit
micro-controllers and related specialty memory
products).......................................... 2,295,000
100,000 Sanmina Corporation* (Manufactures custom-designed
backplane assemblies, sub-assemblies and circuit
boards)............................................ 3,550,000
94,800 Sierra Semiconductor Corporation* (Supplies high
performance mixed signal integrated circuits)...... 1,552,350
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
15
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS--CONTINUED
100,000 Sync Research, Inc.* (A wide-area access network
company)........................................... $ 1,975,000
73,400 Tencor Instruments* (Designs, manufactures, markets
and services innovative wafer defect inspection
systems)........................................... 1,816,650
75,100 Ultratech Stepper, Inc.* (Develops, manufactures and
markets photolithography equipment)................ 1,961,988
------------
50,299,044
------------
ENTERTAINMENT (0.7%)
50,000 Planet Hollywood International, Inc.* (Operates 24
restaurants and six franchised units throughout
North America, Europe and Asia).................... 1,268,750
40,000 Regal Cinemas, Inc.* (Operates 125 multi-screen
theaters with an aggregate of 972 theatres
throughout the U.S.)............................... 1,630,000
------------
2,898,750
------------
ENVIRONMENTAL CONTROLS (1.5%)
59,600 Sanifill, Inc.* (Acquires, operates, and develops
non-hazardous waste disposal facilities)........... 2,585,150
180,000 Tetra Tech, Inc.* (Provides environmental engineering
and consulting services)........................... 3,915,000
------------
6,500,150
------------
FINANCIAL SERVICES (0.9%)
68,800 First USA, Inc. (A holding company which issues and
processes Visa and Mastercard credit card
transactions)...................................... 3,870,000
------------
FOOD & AGRICULTURE (3.7%)
50,000 Apple South, Inc.* (Operates 138 restaurants under
the name "Applebee's Neighborhood Grill & Bar").... 1,300,000
77,500 Boston Chicken, Inc.* (Operates and franchises food
service stores).................................... 2,480,000
100,000 Lone Star Steakhouse & Saloon* (Operates a chain of
over 104 mid-priced full-service restaurants)...... 4,137,500
100,000 Outback Steakhouse, Inc.* (Operates 173 full-service
restaurants under the "Outback Steakhouse" name)... 4,012,500
22,500 Rainforest Cafe, Inc.* (Operates combination
retail/restaurant facilities based on a rainforest
theme)............................................. 832,500
100,000 Starbucks Corporation* (Purchases and roasts high-
quality whole bean coffees and sells them through
its retail stores)................................. 2,712,500
------------
15,475,000
------------
</TABLE>
The accompanying notes to financial statements are an integral part of
this schedule.
16
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE (4.4%)
40,000 American Oncology Resources, Inc.* (Provides
comprehensive management services to 12 oncology
practices in nine states).......................... $ 1,910,000
26,900 FPA Medical Management, Inc.* (Provides regional
health care management services)................... 447,212
115,200 Healthsource, Inc.* (Owns and manages health
maintenance organizations)......................... 3,931,200
70,000 PhyCor, Inc.* (Operates multi-specialty medical
clinics)........................................... 3,447,500
99,400 Renal Treatment Centers, Inc.* (Provides dialysis
treatments to patients suffering from chronic
kidney failure).................................... 2,882,600
32,500 Sterling Healthcare Group* (Provides contract
management services to hospital emergency room
departments in 19 states).......................... 560,625
100,000 Vencor, Inc.* (Provides long-term hospital care to
chronically ill patients dependent on life support
systems)........................................... 3,375,000
140,000 Ventritex, Inc.* (Develops, designs and produces
defibrillators for abnormal heart rhythms)......... 2,196,250
------------
18,750,387
------------
INSURANCE (2.2%)
70,000 AMBAC, Inc. (Provides insurance, investment and
financial products and healthcare information
systems)........................................... 3,403,750
50,000 CMAC Investment Corporation (Provides private
mortgage insurance coverage)....................... 2,800,000
50,000 The PMI Group, Inc. (Provides private mortgage
insurance coverage)................................ 2,125,000
20,000 United Dental Care, Inc.* (Manages dental benefits).. 785,000
------------
9,113,750
------------
MACHINE DIVERSIFIED (1.1%)
100,000 Applied Power, Inc. (Provides tools, equipment,
systems and consumable items to a variety of end
users)............................................. 3,137,500
40,000 Greenfield Industries (Manufactures cutting tools and
related products that are consumed during use)..... 1,520,000
------------
4,657,500
------------
MEDIA (2.6%)
91,800 Clear Channel Communications, Inc. (Owns, operates
and manages radio and television stations)......... 6,219,450
120,000 Evergreen Media Corporation* (Owns and operates 13
radio stations in 13 markets)...................... 4,710,000
------------
10,929,450
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
17
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
MEDICAL SUPPLIES/SERVICES (10.8%)
50,000 Dentsply International, Inc. (Manufactures and
markets x-ray systems for dental and medical
markets)........................................... $ 2,087,500
110,000 Endosonics Corporation* (Develops, produces and sells
angioplast and diagnostic imaging catheters)....... 1,911,250
50,000 Express Scripts, Inc. (Class A)* (Provides pharmacy
benefit management to Health Maintenance
Organizations)..................................... 2,475,000
100,000 Genzyme Corporation (Researches and develops
biopharmaceuticals for cartilage damage)........... 5,625,000
80,000 Guidant Corporation (Designs, develops and
manufactures products used in cardiac rhythm
management)........................................ 4,490,000
69,900 Gulf South Medical Supply, Inc.* (Distributes medical
supplies and related items to the long-term
healthcare industry)............................... 2,830,950
180,000 HEALTHSOUTH Corporation* (Offers rehabilitation
services for disabled patients).................... 6,682,500
100,000 Idexx Laboratories, Inc.* (Develops and manufactures
biotechnology-based detection systems)............. 4,450,000
83,300 Lincare Holdings, Inc.* (Provides oxygen and other
respiratory therapy services to in-home patients).. 3,233,081
120,000 Oxford Health Plans, Inc.* (Managed care company
providing health benefit plans).................... 6,060,000
60,000 Patterson Dental Company* (Distributes dental
supplies, and equipment)........................... 1,815,000
70,000 Physicians Sales and Service, Inc.* (Distributes
medical supplies, equipment and pharmaceuticals to
physicians)........................................ 1,890,000
200,000 Uromed Corporation* (Develops and manufactures
products for the management of urological
disorders)......................................... 2,100,000
------------
45,650,281
------------
MISCELLANEOUS MANUFACTURING (1.7%)
110,000 Millipore Corporation (Analyzes and purifies fluids
using separation technology)....................... 4,606,250
120,000 Wabash National Corporation (Designs, manufactures
and sells truck trailers).......................... 2,370,000
------------
6,976,250
------------
MOTOR VEHICLES (1.1%)
101,000 Harley-Davidson, Inc. (Manufactures heavyweight
motorcycles, recreational vehicles and specialized
vehicles).......................................... 4,456,625
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
18
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
MOTOR VEHICLES--CONTINUED
10,000 Tower Automotive, Inc.* (Designs and produces high
quality engineered metal stampings used in the auto
industry).......................................... $ 226,250
------------
4,682,875
------------
OIL GAS EQUIPMENT & SERVICES (0.6%)
20,000 Belco Oil & Gas Corporation* (Explores for, develops
and produces natural gas and oil).................. 577,500
60,000 Petroleum Geo-Services A/S ADR* (Acquires marine data
and markets the data).............................. 1,897,500
------------
2,475,000
------------
OTHER EQUITIES (0.7%)
76,000 Danaher Corporation (Manufactures
automotive/transportation products and
instrumentation/precision components).............. 2,992,500
------------
PUBLISHING/PRINTING (1.2%)
150,000 Gartner Group, Inc.* (Provides subscription-based
research and analysis of computer hardware and
software).......................................... 5,137,500
------------
RETAIL STORES (8.3%)
30,000 CDW Computer Centers, Inc.* (Sells microcomputer
hardware and peripherals, accessories and
networking products)............................... 2,321,250
170,000 CUC International, Inc. (Membership-based consumer
services company).................................. 5,588,750
124,000 Corporate Express, Inc.* (Sells office supplies
through its telephone ordering system and facsimile
data interchange).................................... 4,634,500
150,000 Discount Auto Parts, Inc.* (Retailing company that
operates stores throughout Florida).................. 4,406,250
50,000 Dollar General Corporation (Operates general
merchandise retail stores throughout western and
southern states)..................................... 1,318,750
60,000 Fastenal Company (Operates retail stores throughout
western and southern states)......................... 2,295,000
250,000 General Nutrition Companies, Inc.* (Retails vitamin,
mineral and sports nutrition supplements)............ 4,875,000
81,600 Kenneth Cole Productions, Inc.* (Designs and sources a
broad range of footwear, handbags and accessories)... 1,632,000
50,000 Williams-Sonoma Inc.* (Retails cookware, home
furnishings and garden accessories).................. 1,250,000
244,800 Staples, Inc.* (Owns and operates high-volume office
superstores and markets office supplies)............. 4,651,200
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
19
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
RETAIL STORES--CONTINUED
80,000 The Sports Authority Inc.* (Operates large format
sporting goods store in the United States and
Canada).............................................. $ 2,380,000
------------
35,352,700
------------
TECHNOLOGY (4.3%)
80,000 LSI Logic Corporation* (Designs, markets and provides
service for application specific products)........... 2,880,000
120,000 Premisys Communications, Inc.* (Designs, manufactures
and markets integrated access products for
telecommunications services)......................... 5,250,000
150,000 Qualcom, Inc.* (Develops, manufactures, markets,
licenses and operates communications systems and
products)............................................ 5,812,500
145,000 Spyglass, Inc.* (Provides World Wide Web technologies
that allow corporations to offer services for the
Internet)............................................ 4,223,125
------------
18,165,625
------------
TELECOMMUNICATIONS (10.1%)
150,000 ADC Telecommunications, Inc.* (Develops, manufactures
and markets transmission systems for voice, data and
video networks)...................................... 6,300,000
150,000 Arch Communications Group, Inc.* (Provides paging
services in 13 states)............................... 3,562,500
84,000 DSP Communications, Inc. (Develops integrated, low
power chip sets for wireless personal communications
applications)........................................ 3,339,000
170,000 Glenayre Technologies, Inc.* (Manufactures
telecommunications equipment and software)........... 7,905,000
40,000 Millicom International Cellular S.A.* (Develops and
operates cellular telephone networks)................ 1,890,000
160,000 MobileMedia Corporation* (Provides paging services to
subscribers in the United States).................... 3,200,000
160,000 Paging Network, Inc.* (Provides paging services in 50
states).............................................. 3,760,000
120,000 Picturetel Corporation* (Develops, manufactures and
markets visual telecommunications systems)........... 4,080,000
114,700 Tellabs, Inc* (Designs, assembles, markets and
services voice and data networking products)......... 6,337,175
67,000 Transaction Network Services, Inc.* (A nationwide
communications network company specializing in
transaction-oriented data services).................. 2,579,500
------------
42,953,175
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
20
<PAGE>
THE AAL SMALLER COMPANY STOCK FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION (2.4%)
110,000 Atlantic Southeast Airlines, Inc. (Regional air
carrier offering service to 26 cities in the
southwest)........................................ $ 2,750,000
50,000 Comair Holdings, Inc. (Regional air carrier
offering service to approximately 78 cities in the
United Sates)..................................... 1,850,000
150,000 Fritz Companies, Inc.* (Provides services and
facilities for the international movement of
goods)............................................ 5,512,500
------------
10,112,500
------------
TRUCKING & FREIGHT (0.9%)
120,000 Landstar Systems, Inc.* (Provides a wide range of
transportation services throughout the U.S.,
Mexico and Canada)................................ 3,300,000
25,300 Swift Transportation Co, Inc.* (Regional truckload
carrier operating throughout the United States)... 474,375
------------
3,774,375
------------
WHOLESALE SPECIAL LINE (0.5%)
60,000 AmeriSource Health Corporation* (Wholesales drugs
through subsidiary)............................... 2,160,000
------------
TOTAL COMMON STOCKS (COST BASIS $299,787,970)...... 404,677,300
------------
<CAPTION>
PRINCIPAL
AMOUNT SHORT-TERM OBLIGATIONS (4.5%)
------------------------------------------------------------------------------
<C> <S> <C>
$ 34,685 American Family Insurance Company.................. 34,685
7,000,000 Asset Securitization Cooperative Corporation
5.26% 5/1/96...................................... 7,000,000
2,500,000 Merrill Lynch & Company, Inc. 5.30% 5/7/96......... 2,497,792
1,944,000 Merrill Lynch & Company, Inc., 5.20% 5/3/96........ 1,943,435
1,160,221 Pitney Bowes Credit Corporation.................... 1,160,221
6,588,567 Wisconsin Electric Power Company................... 6,588,567
------------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST BASIS $19,244,700)............ 19,224,700
------------
TOTAL INVESTMENTS (100.0%) (AMORTIZED COST BASIS $319,012,670). $423,902,000
============
</TABLE>
*Non-income producing security
The accompanying notes to financial statements are an integral part of this
schedule.
21
<PAGE>
THE AAL CAPITAL GROWTH FUND
THE FUND SEEKS: Long-term capital growth by investing in common stocks.
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 APRIL 30, 1996
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (95.8%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE (2.1%)
97,000 Boeing Co. (Produces products for commercial,
military and space transportation)............... $ 7,966,125
190,000 General Motors Class H (GM Hughes Electronics)
(Produces weapons, radar, communications and auto
electronics)..................................... 11,613,750
86,000 United Technologies Corp. (Manufactures aerospace,
building and automobile products)................ 9,503,000
--------------
29,082,875
--------------
APPAREL (0.9%)
152,000 Nike Incorporated (Designs, develops and markets a
wide variety of high quality footwear and apparel
products)........................................ 13,300,000
--------------
BANKING & FINANCE (6.3%)
451,776 First Chicago Corporation (A bank holding company;
parent company of FNB of Chicago)................ 18,635,760
200,000 J.P. Morgan & Company (Financial services company,
primarily serving large corporations)............ 16,825,000
410,000 National City Corporation (Ohio based regional bank
holding company)................................. 15,118,750
257,000 Nationsbank Corporation (Commercial banking company
based in North Carolina)......................... 20,495,750
66,666 Wells Fargo & Company (Bank holding company;
principal subsidiary is Wells Fargo Bank, N.A.).. 16,174,838
--------------
87,250,098
--------------
BASIC MATERIALS (1.0%)
210,000 Illinois Tool Works Incorporated (Manufactures
construction fasteners and packing systems)...... 14,122,500
--------------
CHEMICALS (1.6%)
460,000 PPG Industries, Incorporated (Global manufacturer
of glass, paint and chemical products)........... 23,287,500
--------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
22
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER SOFTWARE/SERVICES (10.3%)
750,000 Automatic Data Processing, Incorporated (Employer,
financial and specialized data processing
services)........................................ $ 29,156,250
90,300 Computer Associates International Incorporated
(Designs and markets standardized computer
software products)............................... 6,625,762
223,083 First Data Corporation (Provides information processing and related
services, such as credit card transactions and mutual fund
shareholder
recordkeeping)................................... 16,954,308
465,500 General Motors Class E (Electronic Data Systems) (A
major computer services firm which specializes in
data center operations).......................... 26,242,562
164,700 Microsoft Corporation* (Develops and markets a
variety of microcomputer software, operating
systems, languages and application programs)..... 18,672,863
412,500 Oracle Systems Corporation* (Develops and markets
computer software products)...................... 13,921,875
252,300 Paychex Incorporated (Provides computerized payroll
accounting services )............................ 17,093,325
250,000 Seagate Technology Incorporated* (Produces and
markets computer drives)......................... 14,500,000
--------------
143,166,945
--------------
CONSUMER CYCLICAL (2.0%)
170,000 Chrysler Corporation (Holding company of Chrysler
automotive and financial divisions).............. 10,667,500
150,000 Harley-Davidson, Inc. (Manufactures heavyweight
motorcycles, recreational vehicles and
specialized vehicles)............................ 6,618,750
142,000 Service Corporation International (Operates funeral
homes, cemeteries and crematories)............... 7,543,750
75,000 Tommy Hilfiger Corp. (Designer and marketer of an
upscale men's sportswear line)................... 3,412,500
--------------
28,242,500
--------------
CONSUMER NON-DURABLES (6.6%)
90,000 Colgate-Palmolive Company (Global consumer products
company)......................................... 6,896,250
244,000 Gillette Company (Manufactures shaving, toiletry,
stationery and dental products).................. 13,176,000
288,000 McDonald's Corporation (World's largest restaurant
chain)........................................... 13,788,000
351,000 Philip Morris Companies, Inc. (Consumer product
company)......................................... 31,633,875
300,400 Procter & Gamble Company (Major consumer products
company)......................................... 25,383,800
--------------
90,877,925
--------------
</TABLE>
The accompanying notes to financial statements are an integral
part of this schedule.
23
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
DRUGS (7.8%)
100,000 Centocor Incorporated (Develops human health care
products)........................................ $ 4,000,000
100,000 Elan Corporation plc (Produces controlled-
absorption drug delivery systems)................ 6,612,500
230,000 Eli Lilly & Company (Pharmaceutical company)....... 13,570,000
640,000 Merck & Co., Incorporated (Pharmaceutical and
consumer health care products)................... 38,720,000
488,000 Pfizer Incorporated (Produces ethical drugs,
hospital products, animal health items, specialty
chemicals and consumer products)................. 33,611,000
210,100 U S Healthcare Incorporated (Owns and operates
health maintenance organizations)................ 10,951,463
--------------
107,464,963
--------------
ELECTRICAL EQUIPMENT (2.7%)
480,000 General Electric Company (Multi-industry company,
primarily electronics)........................... 37,200,000
--------------
ELECTRONICS (1.1%)
200,000 Atmel Corporation (Manufactures and markets high
performance circuits)............................ 8,000,000
130,000 Varian Associates Inc. (Produces electronic
equipment)....................................... 7,426,250
--------------
15,426,250
--------------
ENTERTAINMENT (0.8%)
172,600 Disney (Walt) Company (Diversified international,
family entertainment company).................... 10,701,200
--------------
FINANCIAL SERVICES (5.4%)
690,000 American Express Company (Travel related,
diversified financial, international banking and
investment services world-wide).................. 33,465,000
580,000 Federal National Mortgage Association (Holds
mortgages and issues and sells guaranteed
mortgage-backed securities)...................... 17,762,500
141,500 Household International Corporation (Financial
services company, serves individuals and
businesses)...................................... 9,781,187
508,650 MBNA Corporation (Issues premium and standard bank
credit cards).................................... 14,432,944
--------------
75,441,631
--------------
FOOD & BEVERAGES (3.8%)
303,900 CPC International Inc. (Major food distribution
company)......................................... 21,007,088
154,000 IBP Incorporated (Produces fresh and boxed beef and
pork products)................................... 4,119,500
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
24
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
FOOD & BEVERAGES--CONTINUED
152,000 Kellogg Company (World's premier marketer of
cereals)......................................... $ 10,849,000
269,000 PepsiCo, Inc. (Worldwide competitor in soft drink,
snack food and restaurant business).............. 17,081,500
--------------
53,057,088
--------------
HEALTH CARE (1.8%)
270,000 Johnson & Johnson (Manufactures and sells consumer
and pharmaceutical products)..................... 24,975,000
--------------
INSURANCE (5.5%)
390,000 American International Group (Underwrites, through
its insurance related subsidiaries, commercial
and industrial insurance)........................ 35,636,250
200,000 Cigna Corporation (Provides a variety of insurance
products to individuals and businesses).......... 22,675,000
31,900 Highlands Insurance Group* (Commercial property and
casualty insurance).............................. 606,100
200,000 MGIC Investment Corp. (Provides private mortgage
coverage)........................................ 10,850,000
370,000 USF&G Corporation (Through its agents, sells
property and casualty insurance, life insurance
and annuities in the U.S.)....................... 5,873,750
--------------
75,641,100
--------------
MEDIA (1.1%)
98,000 Gannett Inc. (Publishes newspapers and operates
television and radio stations)................... 6,700,750
435,649 U.S. West Media Group* (Provides multimedia
services)........................................ 8,495,156
--------------
15,195,906
--------------
NATURAL GAS (0.9%)
304,000 Enron Corporation (Transports and markets natural
gas)............................................. 12,236,000
--------------
OFFICE PRODUCTS (1.8%)
422,000 Alco Standard Corporation (Distributes office
products and paper).............................. 24,423,250
--------------
PETROLEUM (6.3%)
460,000 Exxon Corporation (World's largest oil company).... 39,100,000
300,000 Mobil Corporation (Holding company with operations
in oil and chemicals)............................ 34,500,000
94,000 Royal Dutch Petroleum Company--ADR (Major multi-
national petroleum company)...................... 13,465,500
--------------
87,065,500
--------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
25
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
RETAILING (3.4%)
250,000 General Nutrition Companies Inc.* (Retails vitamin,
mineral and sports nutrition supplements)........ $ 4,875,000
360,000 Office Depot Incorporated (Operates a chain of
office product warehouse stores)................. 8,055,000
230,000 Safeway Inc. (Multi-regional food retailer)........ 7,762,500
806,000 Walgreen Company (Largest drug store retailer)..... 25,792,000
--------------
46,484,500
--------------
TECHNOLOGY (7.0%)
150,000 American Telephone and Telegraph Company (Operates
domestically and internationally, providing
communication products, services, and systems)... 9,187,500
147,000 Andrew Corporation* (International supplier of
communication systems equipment and services).... 7,056,000
154,000 Cisco Systems, Inc. (Produces multi-protocol
internetworking systems)......................... 7,988,750
873,600 Comcast Corporation (Domestic and international
communications company).......................... 15,288,000
159,000 Compaq Computers Incorporated* (Designs, develops,
manufactures and markets personal computers)..... 7,413,375
147,000 Hewlett-Packard Company (Produces computers,
calculators, workstations, video displays,
printers, disc and tape drives, medical
diagnostic and monitoring devices, and mass
spectrometers)................................... 15,563,625
299,800 Intel Corporation (Leading manufacturer in
semiconductor chips)............................. 20,311,450
37,500 Lucent Technologies, Inc.* (Worldwide
communications company, delivering public and
private networks, communications systems and
software, and telephone systems)................. 1,317,187
228,000 Tellabs, Incorporated* (Designs, assembles, markets
and services voice and data networking products). 12,597,000
--------------
96,722,887
--------------
TELECOMMUNICATIONS (1.0%)
200,000 ADC Telecommunications Inc. (Develops transmission
and networking systems internationally).......... 8,400,000
200,000 MCI Communication Corporation (Diversified
communications company).......................... 5,887,500
--------------
14,287,500
--------------
TRANSPORTATION (1.2%)
123,000 Norfolk Southern Corp. (Holding company of railroad
and motor carriers).............................. 10,332,000
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
26
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION--CONTINUED
200,000 Southwest Airlines Co. (Provides scheduled air
carrier service)................................. $ 5,950,000
--------------
16,282,000
--------------
UTILITIES (4.8%)
480,000 Ameritech Corporation (Telecommunications firm
serving five midwestern states).................. 28,020,000
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)........................ 19,110,000
200,000 Entergy Corp. (Holding company for southern
electric companies).............................. 5,300,000
435,649 U S WEST, Incorporated (Telecommunications firm
serving 14 western states from Arizona to
Washington)...................................... 14,267,505
--------------
66,697,505
--------------
OTHER (8.6%)
220,000 Deere & Company (World's largest producer of farm
equipment)....................................... 8,552,500
252,700 Eastman Kodak Company (Provides products and
services including cameras, photofinishing, film
and plastics).................................... 19,331,550
319,000 Halliburton Company (Provides oil field equipment
service, design, engineering, and construction
services)........................................ 18,302,625
132,000 Honeywell, Inc. (Manufactures automation and
control systems)................................. 6,946,500
200,000 Manpower Inc. (Provides temporary and permanent
placement services and training)................. 7,400,000
485,000 Pall Corporation (Operates three divisions,
healthcare, aeropower and fluid processing)...... 13,580,000
608,000 Raytheon Company (Large U.S. defense contractor)... 30,780,000
240,400 Thermo Electron Corporation* (Through
subsidiaries--manufactures and sells alternate
energy and power plants, analytical instruments
and biomedical products)......................... 14,814,650
--------------
119,707,825
--------------
TOTAL COMMON STOCKS (COST BASIS $990,707,527)....... 1,328,340,448
--------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
27
<PAGE>
THE AAL CAPITAL GROWTH FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SHORT-TERM OBLIGATIONS (4.2%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
$ 1,836,445 American Family Insurance Company............... $ 1,836,445
5,500,000 Ford Motor Credit Corporation 5.17% 5/1/96...... 5,500,000
4,285,603 General Mills Company........................... 4,285,603
10,000,000 GTE Capital Corporation 5.35% 5/8/96............ 9,989,597
5,349,000 Merrill Lynch Corporation 5.20% 5/3/96.......... 5,347,422
5,000,000 Merrill Lynch Corporation 5.30% 5/7/96.......... 4,995,583
11,000,000 Merrill Lynch Corporation 5.27% 5/13/96......... 10,980,677
8,468,000 Philip Morris Company 5.28% 5/2/96.............. 8,466,758
4,655,827 Pitney Bowes Credit Corporation................. 4,655,827
1,605,886 Wisconsin Electric Power Company................ 1,605,886
--------------
TOTAL SHORT-TERM OBLIGATIONS (AMORTIZED COST
BASIS $57,663,798)............................. 57,663,798
--------------
TOTAL INVESTMENTS (100.0%) (AMORTIZED COST BASIS
$1,048,371,325)............................................. $1,386,004,246
==============
</TABLE>
*Non-income producing security
The accompanying notes to financial statements are an integral part of this
schedule.
28
<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 public utility securities.
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 APRIL 30, 1996
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (76.7%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC (47.6%)
54,000 Baltimore Gas & Electric Company (Provides
electricity and natural gas service to the state of
Maryland).......................................... $ 1,424,250
56,400 Boston Edison Company (Provides electricity to Boston
and surrounding areas)............................. 1,374,750
92,000 Carolina Power & Light Company (Provides electricity
to portions of North and South Carolina)........... 3,312,000
73,000 Central & Southwest Corporation (Electric utility
holding company in Texas and Oklahoma)............. 1,989,250
110,000 CMS Energy Corporation (Provides electricity and
natural gas throughout Michigan)................... 3,203,750
22,650 Consolidated Edison Company of New York (Provides
electricity to New York City and most of
Westchester County, N.Y.).......................... 665,344
26,000 Delmarva Power & Light Company (Provides electric
service for Delaware and parts of Maryland and
Virginia).......................................... 510,250
28,000 Dominion Resources, Inc. (Holding company whose
subsidiary provides electricity in Virginia and
North Carolina).................................... 1,078,000
41,515 Duke Power Company (Provides electricity to sections
of North Carolina and South Carolina).............. 1,951,205
42,265 Empresa Nacional Electric ADR (Provides electricity
in Spain).......................................... 2,646,846
93,650 Entergy Corporation (Holding Company
whose subsidiaries provide
electricity to Arkansas, Louisiana,
Mississippi, and Missouri)........... 2,481,725
64,650 FPL Group, Incorporated (Diversified electric utility
holding company whose major asset is Florida Power
& Light Company)................................... 2,788,031
90,200 General Public Utilities Corporation (An electric
utility holding company)........................... 2,863,850
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
29
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC--CONTINUED
45,000 Huaneng Power International, Incorporated ADR
(Develops, constructs, owns and operates large
coal-fired power plants throughout China).......... $ 703,125
16,000 National Power ADR (Generates and sells electricity
in England and Wales).............................. 536,000
52,720 New England Electric System (Provides electricity to
Massachusetts, New Hampshire, and Rhode Island
through its subsidiaries).......................... 1,858,380
112,500 NIPSCO Industries Incorporated (Holding company whose
subsidiary provides electricity and gas to 1/3 of
Indiana)........................................... 4,035,937
35,000 Oklahoma Gas & Electric Company (Provides electricity
to wholesale and retail customers in Oklahoma and
western Arkansas).................................. 1,321,250
28,000 PacifiCorp (Conducts retail electric service through
two divisions, Pacific Power & Light and Utah Power
& Light who serve portions of Idaho, California,
Montana, Oregon, Utah, Washington and Wyoming)..... 560,000
38,000 Pacific Gas & Electric Company (Provides electric and
natural gas service throughout most of northern and
central California)................................ 864,500
132,000 Pinnacle West Capital Corporation (Utility holding
company for Arizona Public Service Company)........ 3,514,500
16,000 PowerGen ADR (Generation and sale of electricity to
England and Wales)................................. 552,000
75,000 P P & L Resources, Inc. (Holding company for
Pennsylvania Power & Light that provides power to
customers in central eastern Pennsylvania)......... 1,696,875
39,000 Public Service Company of Colorado (Provides
electricity and natural gas to Colorado)........... 1,291,875
33,500 Public Service Enterprise Group, Inc. (Holding
company for Public Service Electric & Gas whose
subsidiary provides electricity and natural gas to
New Jersey)........................................ 875,188
110,805 Southern Company (Parent company of five electric
companies which provides service for most of the
Southeast)......................................... 2,437,710
153,000 TECO Energy Incorporated (Holding company of Tampa
Electric Company whose subsidiary provides
electricity to west central Florida)............... 3,557,250
36,000 Texas Utilities Company (Holding company of Texas Utilities
Electric Company whose subsidiary provides electricity to north
central, eastern and
western parts of Texas)............................ 1,449,000
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
30
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
ELECTRIC--CONTINUED
25,000 Unicom Corporation (Provides electricity to areas of
Chicago metropolitan and northern Illinois)........ $ 687,500
27,000 Union Electric Company (Provides electric service in
Missouri and Illinois)............................. 1,042,875
32,085 Wisconsin Energy Corporation (Provides electricity
and some gas to portions of Wisconsin and
Michigan).......................................... 854,263
33,500 WPL Holdings, Inc. (Holding company for Wisconsin
Power & Light Company whose subsidiary provides
electricity, natural gas and water to south central
Wisconsin)......................................... 996,625
------------
55,124,104
------------
MEDIA (1.3%)
78,800 U.S. West Media Group* (Provides multimedia services
over wireless networks, cable television and
publishes the White and Yellow pages).............. 1,536,600
------------
PETROLEUM (1.0%)
14,000 Exxon Corporation (World's largest oil company)...... 1,190,000
------------
TELEPHONES (26.8%)
18,000 Airtouch Communications, Inc. (Provides wireless
telecommunications services to customers
worldwide)......................................... 562,500
63,600 American Telephone & Telegraph Company (Operates
domestically and internationally providing
communication products, services and systems)...... 3,895,500
77,870 Ameritech Corporation (Telecommunications firm
serving five midwestern states).................... 4,545,661
35,300 Bell Atlantic Corporation (Owns and operates
telephone subsidiaries and provides cellular
services in the Mid-Atlantic states and the
District of Columbia).............................. 2,294,500
48,000 BellSouth Corporation (Holding company, provides
telecommunications services in nine southeastern
states)............................................ 1,920,000
90,000 Cable & Wireless PLC ADR (International provider of
telecommunications services in over fifty
countries)......................................... 2,103,750
66,400 Frontier Corporation (Holding company, provides long
distance telecommunications nationally)............ 2,099,900
50,000 GTE Corporation (Provides local telephone and mobil-
cellular services to customers in 28 states,
British Columbia and Quebec in Canada, the
Dominican Republic and Venezuela).................. 2,168,750
5,000 PT Indosat ADR (Provides international
telecommunications services to Indonesia).......... 174,375
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
31
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED MARKET 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).............................. $ 3,959,250
30,000 Telefonica de Argentina ADR (Monopoly provider of
local and long distance telecommunication
services in southern Argentina)................. 877,500
74,200 Telefonica de Espana ADR (Supplies telephone
service in Spain that includes domestic,
international, mobile and news transmitting).... 3,904,775
78,800 U S WEST, Incorporated (Telecommunications firm
serving 14 western states from Arizona to
Washington)..................................... 2,580,700
------------
31,087,161
------------
TOTAL COMMON STOCKS (COST BASIS $79,105,441)....... 88,937,865
------------
<CAPTION>
PRINCIPAL
AMOUNT LONG-TERM FIXED INCOME OBLIGATIONS (8.6%)
------------------------------------------------------------------------------
<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)........ 1,426,810
1,000,000 K.C. Power and Light 5.60% 3/10/98
(Provides electricity to western Missouri and
eastern Kansas)................................. 985,409
1,000,000 Potomac Electric Power 9.00% 4/15/2000
(Generates, transmits, distributes and sells
electric energy in parts of Maryland)........... 1,057,646
20,000 Texas Utilities Electric 8.125% 2/1/2002
(Holding company whose subsidiary provides
electricity in Texas)........................... 20,876
1,650,000 Texas Utilities Electric 9.75% 5/1/2021
(Holding company whose subsidiary provides
electricity in Texas)........................... 1,802,061
1,000,000 Union Electric Company 6.875% 8/1/2004
(Provides electric services in Missouri and
Illinois)....................................... 979,262
3,150,000 U.S. Treasury Notes 6.875% 3/31/2000.............. 3,205,125
500,000 U.S. Treasury Bonds 7.50% 11/15/2016.............. 522,500
------------
TOTAL LONG-TERM FIXED INCOME OBLIGATIONS (AMORTIZED
COST BASIS $10,055,106)........................... 9,999,689
------------
TOTAL LONG-TERM INVESTMENTS (AMORTIZED COST BASIS
$89,160,547)...................................... 98,937,554
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
32
<PAGE>
THE AAL UTILITIES FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SHORT-TERM OBLIGATIONS (14.7%) VALUE
------------------------------------------------------------------------------
<C> <S> <C>
$1,041,045 American Family Mutual Insurance................... $ 1,041,045
4,000,000 Asset Securitization Cooperative Company 5.26%
5/3/96............................................ 3,998,831
1,822,493 General Mills Company.............................. 1,822,493
4,226,000 Merrill Lynch & Company 5.27% 5/13/96.............. 4,218,576
2,122,027 Pitney Bowes Credit Corporation.................... 2,122,027
3,200,000 Receivables Capital Corporation 5.28% 5/1/96....... 3,200,000
173,733 Sara Lee Corporation............................... 173,733
412,066 Wisconsin Electric Power Corporation............... 412,066
------------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST BASIS $16,988,771)................ 16,988,771
------------
TOTAL INVESTMENTS (100.0%) (AMORTIZED COST BASIS $106,149,318). $115,926,325
============
</TABLE>
*Non-income producing security
The accompanying notes to financial statements are an integral part of this
schedule.
33
<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 APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT LONG-TERM OBLIGATIONS (98.1%) RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (31.6%)
$ 4,367,982 Federal Home Loan Mortgage
Corporation #M90345........... 7.000% 5/1/99 $ 4,411,002
5,649,186 Federal Home Loan Mortgage
Corporation #L90123........... 7.000 6/1/99 5,704,825
9,771,263 Federal Home Loan Mortgage
Corporation #M90346........... 7.000 6/1/99 9,867,500
7,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust
Series 1300 .................. 7.250 12/15/2005 7,046,613
4,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust
Series 1219 .................. 7.500 8/15/2006 4,007,116
10,186,719 Federal Home Loan Mortgage
Corporation Pool #G10380...... 7.000 8/1/2010 10,075,297
4,145,285 Federal Home Loan Mortgage
Corporation REMIC Trust
Series 1303................... 7.750 8/15/2018 4,178,401
8,423,838 Federal Home Loan Mortgage
Corporation REMIC Trust
Series 1062................... 7.000 4/15/2019 8,454,240
1,722,697 Federal National Mortgage
Association Pool #124264 ..... 7.500 3/1/99 1,750,758
1,459,982 Federal National Mortgage
Association Pool #143273 ..... 7.500 12/1/2007 1,469,107
7,576,410 Federal National Mortgage
Association Pool #44046....... 7.500 2/1/2014 7,622,997
1,701,047 Federal National Mortgage
Association REMIC Trust
Series 1992 76................ 7.500 6/25/2003 1,696,282
5,000,000 Federal National Mortgage
Association REMIC Trust
Series 1993-G2................ 5.900 7/25/2015 4,866,895
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
34
<PAGE>
THE AAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--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
$24,570,706 Government National Mortgage
Association Pool #780213..... 7.500% 8/15/2025 $ 24,282,713
32,607,624 Government National Mortgage
Association Pool #780212..... 8.000 8/15/2025 33,022,360
4,735,625 Government National Mortgage
Association Pool #780249..... 8.000 9/15/2025 4,795,858
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS........... 133,251,964
------------
U.S. GOVERNMENT OBLIGATIONS (13.9%)
33,000,000 U.S. Treasury Bonds........... 8.750 5/15/2017 38,981,250
7,500,000 U.S. Treasury Bonds........... 8.125 8/15/2019 8,367,187
4,000,000 U.S. Treasury Notes........... 6.750 4/30/2000 4,050,000
7,000,000 U.S. Treasury Notes........... 7.250 5/15/2004 7,249,375
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS.................. 58,647,812
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.9%)
7,000,000 AFC Home Equity Loan Trust
Series 1996-1 Class 1A2...... 6.840 7/25/2027 6,941,484
12,900,000 Citicorp Mortgage Securities,
Inc. Series 1994-8 Class A3.. 6.250 5/25/2024 12,519,695
10,000,000 Green Tree Financial
Corporation Series 1996-2
Class A3..................... 6.900 4/15/2027 9,824,609
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS.......... 29,285,788
------------
CORPORATE OBLIGATIONS (45.7%)
10,000,000 Amoco Canada.................. 7.950 10/1/2022 9,900,870
10,000,000 Anheuser-Busch Company........ 9.000 12/1/2009 11,477,160
5,000,000 Baltimore Gas & Electric
Company...................... 5.500 7/15/2000 4,756,775
6,000,000 Bank America Corp. ........... 7.200 9/15/2002 6,043,146
2,000,000 BP America Inc. .............. 9.375 11/1/2000 2,199,560
5,000,000 Chemical Master Card Trust
Series 1996-1 Class A........ 5.550 9/15/2003 4,780,595
10,000,000 Commonwealth Edison Company... 6.400 10/15/2005 9,036,160
6,000,000 Dean Witter Discover &
Company...................... 6.000 3/1/98 5,969,718
5,000,000 Enron Corporation............. 9.125 4/1/2003 5,513,440
4,500,000 Enron Corporation............. 6.750 9/15/2004 4,352,144
5,000,000 Enserch Corp. ................ 7.125 6/15/2005 4,920,015
5,000,000 Federal Express Corporation... 9.875 4/1/2002 5,622,980
5,000,000 Federal Express Corporation... 7.110 1/2/2014 4,798,595
5,500,000 Florida Power & Light Company. 6.875 4/1/2004 5,338,894
10,000,000 Ford Motor Credit Company..... 6.750 8/15/2008 9,415,510
6,000,000 Kansas City Power & Light
Company...................... 5.600 3/10/98 5,912,454
10,000,000 Korea Electric Power Company.. 7.400 4/1/2016 9,767,780
10,000,000 Mayne Nickless Ltd. .......... 6.250 2/1/2006 9,242,670
9,975,000 McDonnell Douglas Corporation. 9.750 4/1/2012 11,876,554
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
35
<PAGE>
THE AAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL LONG-TERM OBLIGATIONS-- INTEREST MATURITY
AMOUNT CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
$ 2,500,000 Merrill Lynch & Company,
Inc. ................... 8.000 2/1/2002 $ 2,608,700
5,000,000 Merrill Lynch & Company,
Inc. ................... 6.250 10/15/2008 4,522,240
5,000,000 News America Holdings.... 8.625 2/1/2003 5,330,200
2,000,000 Pennzoil Company......... 10.250 11/1/2005 2,308,928
10,000,000 Province of Ontario
Global Bond............. 7.750 6/4/2002 10,430,290
5,000,000 Puget Sound Power & Light
Company................. 7.875 10/1/97 5,103,945
10,000,000 Sears Roebuck Acceptance
Corporation............. 6.750 9/15/2005 9,599,250
7,500,000 Time Warner
Entertainment, Inc. .... 9.625 5/1/2002 8,274,443
5,500,000 Union Electric Company... 6.750 5/1/2008 5,274,022
4,500,000 UpJohn Company........... 5.875 4/15/2000 4,360,783
4,000,000 Western Resources, Inc. . 7.250 7/1/99 4,054,504
------------
TOTAL CORPORATE OBLIGATIONS................... 192,792,325
------------
TOTAL LONG-TERM OBLIGATIONS (AMORTIZED COST
BASIS $420,824,258).......................... 413,977,889
------------
<CAPTION>
SHORT-TERM VARIABLE RATE
OBLIGATIONS (1.9%)
---------------------------------------------------------------------
<C> <S> <C> <C> <C>
1,109,332 American Family Insurance Company............. 1,109,332
2,110,699 General Mills Company......................... 2,110,699
2,816,493 Pitney Bowes Credit Corporation............... 2,816,493
1,603,295 SaraLee Corporation........................... 1,603,295
267,723 Wisconsin Electric Power Company.............. 267,723
------------
TOTAL SHORT-TERM VARIABLE RATE OBLIGATIONS
(COST BASIS $7,907,542)...................... 7,907,542
------------
TOTAL INVESTMENTS (100%) (AMORTIZED COST BASIS
$428,731,800)............................................ $421,885,431
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
36
<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 APRIL 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS (93.8%) RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ALASKA (0.2%)
$ 1,000,000 Ancorage Alaska G.O. Bonds..... 5.000% 10/1/2015 $ 893,750
------------
ARIZONA (8.0%)
12,920,000 Arizona State Student Loan
Marketing Corporation Revenue
Bonds......................... 6.550 3/1/99 13,372,200
1,750,000 Maricopa County, Arizona School
District #40 G.O. Bonds....... 5.700 7/1/2004 1,728,125
2,600,000 Maricopa County, Arizona School
District #40 G.O. Bonds....... 6.100 7/1/2008 2,554,500
1,525,000 Maricopa County, Arizona School
District #40 G.O. Bonds....... 6.200 7/1/2009 1,498,313
4,250,000 Maricopa County, Arizona School
District #41 G.O. Bonds....... 6.250 7/1/2015 4,159,688
2,755,000 Maricopa County, Arizona School
District #38 G.O. Bonds
Series B (FGIC Insured)....... 5.900 7/1/2010 2,761,888
1,000,000 Salt River Arizona Project
Revenue Bonds................. 6.625 1/1/2012 1,055,000
6,000,000 Salt River Arizona Project
Revenue Bonds................. 5.500 1/1/2019 5,662,500
------------
32,792,214
------------
CALIFORNIA (13.4%)
1,000,000 California Housing Finance
Authority Revenue Bonds....... 7.750 8/1/2017 1,055,000
3,000,000 Contra Costa County California
Water Revenue Bonds........... 5.750 10/1/2014 2,947,500
4,855,000 Contra Costa County California
Home Mortgage Revenue Bonds
(Escrowed to Maturity)........ 7.500 5/1/2014 5,734,968
7,500,000 East Bay Muncipal Utility
District California Water
System Revenue................ 5.000 6/1/2026 6,506,250
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
37
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA--CONTINUED
$1,335,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000% 1/1/2005 $ 775,969
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2009 2,956,250
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2010 2,968,750
5,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2011 2,968,750
605,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2012 360,731
6,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2013 3,600,000
7,145,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 0.000 1/1/2014 4,304,863
10,000,000 Foothill/Eastern Transportation
California Toll Road Revenue
Bonds, Series A................ 5.000 1/1/2035 7,962,500
4,200,000 Fresno, California Sewer Revenue
Bonds, Series 1993 A-1 (AMBAC
Insured)....................... 6.250 9/1/2014 4,436,250
3,500,000 Orange County California Transit
Authority, Sales Tax Revenue
Bonds, Series 1992 M (MBIA
Insured)....................... 6.000 2/15/2009 3,644,375
4,000,000 Pomona California Single Family
Housing Revenue Bonds (Escrowed
to Maturity), Series A......... 7.600 5/1/2023 4,835,000
------------
55,057,156
------------
COLORADO (0.8%)
4,000,000 Arapahoe County Colorado Capital
Improvement Federal Highway
Revenue Bonds.................. 0.000 8/31/2007 1,850,000
1,500,000 Colorado Housing Single Family
Mortgage Revenue Bonds......... 7.250 11/1/2031 1,550,625
------------
3,400,625
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
38
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DISTRICT OF COLUMBIA (1.8%)
$ 3,000,000 District of Columbia G.O.
Bonds, Series 1993 A (MBIA
Insured)..................... 4.650% 6/1/2002 $ 2,917,500
4,175,000 District of Columbia G.O.
Bonds, Series 1993 A (MBIA
Insured)..................... 7.000 6/1/98 4,265,722
------------
7,183,222
------------
FLORIDA (1.1%)
5,000,000 Florida State Turnpike
Authority Revenue Bonds (FGIC
Insured)..................... 5.000 7/1/2019 4,418,750
------------
GEORGIA (2.3%)
4,000,000 Georgia Municipal Electric
Authority Power Revenue
Bonds, Series Z (FGIC
Insured)..................... 5.500 1/1/2012 3,885,000
1,690,000 Georgia Municipal Electric
Authority Special Obligation
Bonds, Series 1993 (AMBAC
Insured)..................... 7.000 1/1/2008 1,924,488
1,320,000 Metropolitan Atlanta Rapid
Transit Authority Sales Tax
Revenue Bonds, Series 1983 E
(Escrowed to Maturity)....... 7.000 7/1/2011 1,470,150
2,000,000 Municipal Electric Authority
Georgia Revenue Bonds (MBIA
Insured)..................... 6.500 1/1/2012 2,135,000
------------
9,414,638
------------
ILLINOIS (11.7%)
3,100,000 Bryant, Illinois Pollution
Control Refunding Revenue
Bonds,
Series A..................... 6.500 2/1/2018 3,220,125
1,000,000 Chicago, Illinois Gas
Pollution Control Revenue
Bonds, People's Gas.......... 6.875 3/1/2015 1,076,250
6,300,000 Chicago, Illinois Metropolitan
Water, Reclamation District
G.O. Bonds................... 5.500 12/1/2012 6,174,000
4,980,000 Chicago, Illinois O'Hare
International Airport Revenue
Bonds, Second Lien, Series A
(MBIA Insured)............... 6.375 1/1/2012 5,172,975
3,000,000 Cook County, Illinois G.O.
Bonds, Series 1992 B (FGIC
Insured)..................... 5.375 11/15/2018 2,741,250
2,250,000 Cook County, Illinois G.O.
Bonds, Series 1992 B (FGIC
Insured)..................... 5.500 11/15/2022 2,050,312
5,620,000 Du Page County, Illinois
Stormwater Project, G.O.
Bonds........................ 5.600 1/1/2021 5,402,225
9,400,000 Hoffman Estates, Illinois Tax
Increment Revenue Bonds...... 0.000 5/15/2003 6,262,750
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
39
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ILLINOIS--CONTINUED
$ 2,000,000 Illinois Housing Development
Authority Revenue Bonds,
Homeowner Mortgage, Series B.. 6.250% 8/1/2017 $ 2,002,500
2,500,000 Illinois Regional Transit
Authority Revenue Bonds,
Series A (FGIC Insured)....... 6.700 11/1/2021 2,756,250
1,125,000 Joliet, Illinois Pollution
Control Revenue Bonds,
Commonwealth Edison........... 6.875 8/15/2009 1,129,691
9,650,000 Metropolitan Pier and
Exposition Center Illinois
Revenue Bonds................. 7.000 7/1/2026 10,229,000
------------
48,217,328
------------
INDIANA (3.6%)
3,500,000 Indiana Municipal Power Agency
Revenue Bonds (MBIA Insured).. 5.500 1/1/2016 3,360,000
2,000,000 Indiana Student Loan Authority
Revenue Bonds (AMBAC Insured). 7.000 12/1/99 2,147,500
2,000,000 Indiana Transportation Finance
Authority, Airport Facilities,
Lease Revenue Bonds, Series A
.............................. 6.250 11/1/2016 2,002,500
2,050,000 Indiana Transportation Finance
Authority Series 1990 A (MBIA
Insured)...................... 7.250 6/1/2015 2,380,563
1,500,000 Indiana Transportation Finance
Authority, Airport Facilities,
Lease Revenue Bonds, Series A. 6.500 11/1/2007 1,584,375
1,000,000 Indianapolis Indiana Bond Bank
Transportation Authority
Revenue Bonds................. 6.000 7/1/2010 1,013,750
2,000,000 Lawrence Township Indiana
Metropolitan School District
G.O. Bonds.................... 6.875 7/5/2011 2,182,500
------------
14,671,188
------------
IOWA (0.6%)
2,500,000 Iowa Student Loan Fund
Marketing Association, Inc.,
Student Loan Revenue Bonds,
Series 1992 (AMBAC Insured)... 6.750 12/1/2001 2,650,000
------------
KENTUCKY (0.5%)
2,000,000 Jefferson County Kentucky
Capital Projects Corp. Revenue
Bonds (AMBAC Insured)......... 5.600 4/1/2016 1,935,000
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
40
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS (2.4%)
$ 3,000,000 Massachusetts Bay
Transportation Authority
Revenue Bonds................. 5.375% 3/1/2016 $ 2,801,250
6,000,000 Massachusetts State
Construction Lien G.O. Bonds,
Series B ..................... 6.000 8/1/2013 6,090,000
1,000,000 Massachusetts State G.O. Bonds. 6.500 8/1/2011 1,053,750
------------
9,945,000
------------
MICHIGAN (2.8%)
2,000,000 Detroit Michigan Convention
Facility Authority Revenue
Bonds......................... 4.500 9/30/99 1,972,500
1,500,000 Livonia, Michigan Public School
District G.O. Bonds (FGIC
Insured)...................... 5.125 5/1/2022 1,321,875
675,000 Marysville, Michigan Public
School District G.O. Bonds
(MBIA Insured)................ 5.750 5/1/2019 651,375
2,000,000 Michigan Municipal Board
Authority Revenue Bonds....... 5.625 10/1/2019 1,885,000
5,500,000 Michigan Public Power Agency
Revenue Refunding Bonds, Belle
River Project (MBIA Insured).. 5.000 1/1/2019 4,764,375
1,125,000 Milan, Michigan School District
G.O. Bonds (AMBAC Insured).... 5.000 5/1/2012 1,030,781
------------
11,625,906
------------
MINNESOTA (0.7%)
1,000,000 Metropolitan Council Minnesota,
Minneapolis-St. Paul Area G.O.
Bonds......................... 5.000 9/1/2007 977,500
1,815,000 Southern Minnesota Municipal
Power Agency Revenue Bonds
Series A (MBIA Insured)....... 5.750 1/1/2018 1,830,881
------------
2,808,381
------------
MISSOURI (0.2%)
660,000 Kansas City Missouri Port
Authority Revenue Bonds....... 5.750 10/1/2005 659,175
------------
MONTANA (1.2%)
3,650,000 Montana State Board Housing
Revenue Bonds, Single Family
Program, Series B-1........... 6.300 6/1/2008 3,732,125
1,000,000 Montana State Board Housing
Bonds, Single Family Program,
Series A-1.................... 6.250 12/1/2017 988,750
------------
4,720,875
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
41
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEVADA (0.6%) $ 1,500,000 Las Vegas, Nevada Water G.O.
Limited Tax Bonds (FGIC
Insured)...................... 6.500% 10/1/2007 $ 1,599,375
1,000,000 Nevada State Authority, Single
Family Mortgage Revenue Bonds
(AMBAC Insured)............... 5.900 10/1/2008 996,250
------------
2,595,625
------------
NEW MEXICO (1.1%)
1,965,000 Farmington New Mexico Pollution
Control Revenue Bonds,
Southern Cal Edison Co.,
Series A...................... 7.200 4/1/2021 2,109,918
2,275,000 New Mexico Mortgage Finance
Authority Revenue Bonds,
Series 1995 F................. 7.000 1/1/2026 2,488,281
------------
4,598,199
------------
NEW YORK (13.0%)
5,000,000 New York Dormitory Authority
State University Educational
Facilities Revenue Bonds...... 5.250 5/15/2019 4,437,500
2,000,000 New York Dormitory Authority
State University Revenue
Bonds,
Series A...................... 7.500 5/15/2013 2,272,500
2,500,000 New York Dormitory Authority
State University Revenue
Bonds,
Series A...................... 6.500 5/15/2006 2,621,875
3,500,000 New York Dormitory Authority
State University Revenue
Bonds,
Series A...................... 5.875 5/15/2011 3,416,875
5,000,000 New York Dormitory Authority
State University Revenue
Bonds,
Series A...................... 5.875 5/15/2017 4,862,500
2,500,000 New York State Local Government
Assistance Corp., Sales Tax
Revenue Bonds, Series 1993 E.. 5.250 4/1/2016 2,312,500
3,000,000 New York State Medical Care
Facilities, Finance Agency
Revenue Bonds, Mental Health
Services (FSA Insured)........ 5.375 2/15/2014 2,801,250
6,295,000 New York State Thruway Revenue
Bonds......................... 5.750 4/1/2008 6,145,494
9,500,000 New York State Thruway Revenue
Bonds......................... 5.600 4/1/2005 9,405,000
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
42
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK--CONTINUED
$ 6,960,000 Triborough Bridge and Tunnel
Authority, New York Convention
Center Project, Series 1990 E. 7.250% 1/1/2010 $ 7,734,300
7,780,000 Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds, Series
Y............................. 5.500 1/1/2017 7,459,075
------------
53,468,869
------------
NORTH CAROLINA (0.4%)
2,000,000 University of North Carolina
Chapel Hill Hospital Revenue
Bonds......................... 5.250 2/15/2026 1,812,500
------------
OHIO (1.1%)
1,500,000 Butler County, Ohio Sewer
System Revenue Bonds (AMBAC
Insured)...................... 5.250 12/1/2021 1,385,625
1,000,000 Ohio Building Authority Revenue
Bonds (AMBAC Insured)......... 5.500 4/1/2016 961,250
2,195,000 Ohio State Turnpike Authority
Revenue Bonds................. 5.750 2/15/2024 2,126,406
------------
4,473,281
------------
OKLAHOMA (1.7%)
3,925,000 Muskogee Oklahoma Industrial
Pollution Revenue Bonds,
Series A...................... 7.000 3/1/2017 4,053,112
3,000,000 Oklahoma State Housing Finance
Agency Multi Family
Revenue Bonds................. 5.500 11/1/2025 2,981,250
------------
7,034,362
------------
PENNSYLVANIA (3.3%)
3,005,000 Muhlenberg Pennsylvania School
District G.O. Bonds
(MBIA Insured)................ 5.200 4/1/2017 2,757,088
10,000,000 Pennsylvania State Higher
Education Authority Revenue
Bonds, Series A (FGIC
Insured)...................... 6.800 12/1/2000 10,712,500
------------
13,469,588
------------
SOUTH CAROLINA (0.8%)
1,500,000 Piedmont Municipal Power
Authority, South Carolina
Revenue Bonds................. 5.600 1/1/2000 1,530,000
2,150,000 South Carolina Public Service
Authority Revenue Bonds....... 5.000 1/1/2025 1,857,063
------------
3,387,063
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
43
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TENNESSEE (0.3%)
$ 1,350,000 Shelby County Tennessee
G.O. Bonds.................... 5.600% 4/1/2010 $ 1,339,875
------------
TEXAS (5.7%)
2,000,000 East Texas Criminal Justice
Facilities Revenue Bonds
(AMBAC Insured)............... 5.750 11/1/2009 2,012,500
1,000,000 Harris City Texas G.O. Bonds... 6.750 8/1/2014 1,077,500
5,900,000 Houston, Texas Independent
School District, G.O. (PSF
Guaranteed)................... 6.300 8/15/2014 6,276,125
4,775,000 Lewisville, Texas Independent
School District G.O.
(PSF Guaranteed).............. 5.250 8/15/2014 4,440,750
1,000,000 Port Neches Grove Texas G.O.
Bonds (PSF Guaranteed)*....... 5.000 2/15/2014 910,000
1,000,000 Port Neches Grove Texas G.O.
Bonds (PSF Guaranteed)*....... 5.000 2/15/2013 918,750
7,050,000 Wylie Texas Independent School
District G.O. Bonds
(PSF Guaranteed).............. 7.000 8/15/2024 7,931,250
------------
23,566,875
------------
UTAH (1.7%)
1,000,000 Intermountain Power Agency
Special Obligation Revenue
Bonds, Series 1986 C.......... 5.000 7/1/2018 863,750
3,230,000 Intermountain Power Agency
Special Obligation Revenue
Bonds, Series 1986 A.......... 5.000 7/1/2021 2,745,500
3,605,000 State of Utah Building
Authority Lease Revenue Bonds,
Series A (AMBAC Insured)...... 5.700 5/15/2014 3,514,875
------------
7,124,125
------------
VIRGINIA (1.1%)
1,205,000 Virginia State Housing
Development Authority Multi
Family Revenue Bonds, Series
H............................. 5.900 5/1/2009 1,188,431
1,220,000 Virginia State Housing
Development Authority Multi
Family Revenue Bonds, Series
H............................. 6.100 5/1/2011 1,203,225
2,000,000 Virginia State Housing
Development Authority Revenue
Bonds, Series B............... 6.700 1/1/2015 2,090,000
------------
4,481,656
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
44
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT MUNICIPAL BONDS--CONTINUED RATE DATE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WASHINGTON (8.5%)
$ 1,250,000 King County, Washington School
District #408 G.O. Bonds,
Unlimited Bonds............... 6.700% 12/1/2007 $ 1,337,500
2,875,000 Pierce County, Washington
School District G.O. Bonds
(AMBAC Insured)............... 5.450 12/1/2013 2,713,281
5,000,000 Snohomish County Public
Utilities District #1 Revenue
Bonds, Series 1993 (FGIC
Insured)...................... 5.625 1/1/2005 5,150,000
5,000,000 Washington State G.O. Bonds.... 6.750 2/1/2015 5,543,750
1,540,000 Washington State G.O. Bonds.... 6.000 9/1/2020 1,549,625
10,000,000 Washington State Public Power
Supply System Project #2,
Revenue Bonds, Series 1994 A.. 6.000 7/1/2007 10,237,500
7,000,000 Washington State Public Power
Supply System Project #2
Revenue Bonds, Series B....... 5.625 7/1/2012 6,597,500
2,000,000 Washington State Public Power
Supply System Project #2
Revenue Bonds, Series B....... 5.600 7/1/2007 1,982,500
------------
35,111,656
------------
WISCONSIN (0.9%)
1,990,000 Wisconsin Housing and Economic
Development Authority Home
Ownership Revenue Bonds,
Series 1990 D................. 7.750 9/1/2010 2,091,988
1,715,000 Wisconsin Housing and Economic
Development Authority Home
Ownership Revenue Bonds,
Series 1990 D................. 6.100 9/1/2014 1,712,856
------------
3,804,844
------------
WYOMING (2.3%)
3,930,000 Wyoming Community Development
Authority Single Family
Mortgage Revenue Bonds, Series
B............................. 6.650 6/1/2013 4,028,250
5,765,000 Wyoming State Farm Loan Board
Capital Projects Facilities
Revenue Bonds................. 5.750 10/1/2020 5,577,638
------------
9,605,888
------------
TOTAL MUNICIPAL BONDS (AMORTIZED COST BASIS
$377,491,897)..................................... 386,267,614
------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
45
<PAGE>
THE AAL MUNICIPAL BOND FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT
PRINCIPAL AMOUNT VARIABLE RATE OBLIGATIONS (6.2%) MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C>
$ 5,100,000 Indiana Hospital Equipment 3.65% Put
Bond................................ $ 5,100,000
3,625,000 Indianapolis Indiana Federation 3.65%
Put Bond............................ 3,625,000
4,910,000 Purdue University 3.50% Put Bond..... 4,910,000
11,515,072 Strong Municipal Money Market........ 11,515,072
------------
TOTAL SHORT-TERM OBLIGATIONS (COST
BASIS $25,150,072).................. 25,150,072
------------
TOTAL INVESTMENTS (100%) (AMORTIZED COST BASIS $402,641,969)... $411,417,686
============
</TABLE>
*When issued security
The accompanying notes to financial statements are an integral part of this
schedule.
46
<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%
Average Maturity: 46 Days
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE
AMOUNT COMMERCIAL PAPER (92.2%) RANGE* RANGE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$4,000,000 American Express Credit
Corporation................ 5.20% 5/22/96 $ 3,987,867
4,000,000 American General Finance
Corporation................ 5.16-5.45 5/2/96 3,999,399
4,000,000 AT&T Capital Corporation.... 5.28 6/13/96 3,974,773
4,000,000 Aristar Incorporated........ 5.38 5/21/96 3,988,045
4,000,000 Asset Securitization
Cooperative Corp. ......... 5.28 7/1/96 3,964,213
4,000,000 Beneficial Corporation...... 5.04 5/13/96 3,993,280
4,000,000 CIT Group Holdings, Inc. ... 4.95 6/28/96 3,968,100
3,400,000 CPC International........... 5.28-5.30 7/10-7/11/96 3,364,810
4,000,000 Consolidated Natural Gas
Company.................... 5.22 5/3/96 3,998,840
5,000,000 Ford Motor Credit Company... 5.26 6/24/96 4,960,550
4,000,000 General Electric Capital
Corporation................ 5.04 7/26/96 3,951,840
4,000,000 GMAC Medium Term Note....... 7.75 2/25/97 4,079,826
4,000,000 Heller Financial, Inc. ..... 5.46 6/7/96 3,977,553
4,000,000 Household Finance
Corporation................ 5.17 5/24/96 3,986,788
5,000,000 International Business
Machines Credit
Corporation................ 5.25 5/23/96 4,983,916
4,000,000 International Lease Finance
Corporation................ 5.29 6/18/96 3,971,787
5,000,000 John Deere Capital
Corporation................ 4.95-5.28 5/17/96 4,988,322
5,000,000 McGraw-Hill, Inc. .......... 5.28 8/13/96 4,923,733
4,000,000 Merrill Lynch & Co., Inc. .. 4.90 8/5/96 3,947,733
4,000,000 Norwest Financial, Inc. .... 5.05 5/6/96 3,997,194
4,000,000 NYNEX Corporation........... 5.35 6/10/96 3,976,222
5,000,000 Philip Morris Companies,
Inc. ...................... 5.23 6/14/96 4,968,014
3,700,000 Sears Roebuck Acceptance
Corporation................ 5.30 6/17/96 3,674,398
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
47
<PAGE>
THE AAL MONEY MARKET FUND
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996--CONTINUED
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL RATE DATE
AMOUNT COMMERCIAL PAPER--CONTINUED RANGE* RANGE MARKET VALUE
------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$4,000,000 Three Rivers Funding Corporation. 5.35% 5/8/96 $ 3,995,839
4,000,000 The Travelers Group Inc. ........ 5.26 5/10/96 3,994,740
4,000,000 US West Capital Funding
Corporation..................... 5.18 5/14/96 3,992,518
------------
TOTAL COMMERCIAL PAPER.............................. 107,610,300
------------
<CAPTION>
U.S. AGENCY OBLIGATIONS (7.7%)
-----------------------------------------------------
<C> <S> <C> <C> <C>
4,000,000 Federal Home Loan Bank........... 5.20% 6/3/96 3,980,933
5,000,000 Federal Home Loan Mortgage
Corporation..................... 5.30 5/1/96 5,000,000
------------
TOTAL U.S. AGENCY OBLIGATIONS....................... 8,980,933
------------
VARIABLE RATE OBLIGATIONS (0.1%)
----------------------------------------------------
163,527 Pitney Bowes Credit Corporation..................... 163,527
------------
TOTAL INVESTMENTS (100%) (AMORTIZED COST $116,754,760)......... $116,754,760
============
</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.
48
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
THE AAL
---------------------------------------------------------------------------------
SMALLER CAPITAL MUNICIPAL MONEY
COMPANY GROWTH UTILITIES BOND BOND MARKET
APRIL 30, 1996 STOCK FUND FUND FUND FUND FUND FUND
- ------------------------ ------------ -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(Cost: $319,012,670,
$1,048,371,325,
$106,149,318,
$428,731,800,
$402,641,969, and
$116,754,760
respectively).......... $423,902,000 $1,386,004,246 $115,926,325 $421,885,431 $411,417,686 $116,754,760
Unamortized
organization & initial
registration expense... 15,285 -- 17,383 -- -- --
Dividends and interest
receivable............. 57,390 1,673,305 659,138 5,631,324 6,661,820 29,130
Prepaid expenses....... 21,392 27,554 20,450 16,076 15,382 19,517
Receivable from
securities sold........ 6,235,699 -- -- -- 500,000 --
Cash................... 1,003,577 760,322 619,469 4,414,093 156,281 1,206,651
------------ -------------- ------------ ------------ ------------ ------------
TOTAL ASSETS........... $431,235,343 $1,388,465,427 $117,242,765 $431,946,924 $418,751,169 $118,010,058
============ ============== ============ ============ ============ ============
LIABILITIES
Payable for investments
purchased.............. $ 5,657,822 $ 5,229,812 $ 2,631,906 $ -- $ 5,152,435 $ --
Income distributions
payable................ -- -- -- 481,492 325,471 84,014
Redemptions payable.... -- -- -- -- -- 1,426,112
Payable to affiliate... 346,026 1,040,010 78,001 303,720 440,481 5,748
Accrued expenses....... 256,667 843,383 72,472 315,026 55,462 480,093
------------ -------------- ------------ ------------ ------------ ------------
TOTAL LIABILITIES...... 6,260,515 7,113,205 2,782,379 1,100,238 5,973,849 1,995,967
------------ -------------- ------------ ------------ ------------ ------------
NET ASSETS
Trust capital
(beneficial interest).. 273,138,115 1,007,315,718 104,990,889 453,371,074 399,135,664 115,978,880
Accumulated
undistributed net
investment income...... -- 3,845,698 533,101 41,051 41,917 35,211
Net unrealized
appreciation
(depreciation) on
investments............ 104,889,330 337,632,921 9,777,007 (6,846,369) 8,775,717 --
Accumulated net
realized gain (loss) on
investments............ 46,947,383 32,557,885 (840,611) (15,719,070) 4,824,022 --
------------ -------------- ------------ ------------ ------------ ------------
TOTAL NET ASSETS....... 424,974,828 1,381,352,222 114,460,386 430,846,686 412,777,320 116,014,091
------------ -------------- ------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
CAPITAL................ $431,235,343 $1,388,465,427 $117,242,765 $431,946,924 $418,751,169 $118,010,058
============ ============== ============ ============ ============ ============
Shares of beneficial
interest outstanding
(unlimited number of
shares authorized)...... 24,840,871 73,529,954 10,497,093 44,806,465 37,839,087 116,014,091
============ ============== ============ ============ ============ ============
Net Asset Value Per
Share................... $ 17.11 $ 18.79 $ 10.90 $ 9.62 $ 10.91 $ 1.00
============ ============== ============ ============ ============ ============
Maximum Public Offering
Price................... $ 17.96 $ 19.73 $ 11.44 $ 10.10 $ 11.45
============ ============== ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
49
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THE AAL
---------------------------------------------------------------------------
SMALLER CAPITAL MUNICIPAL MONEY
FOR THE YEAR ENDED APRIL COMPANY GROWTH UTILITIES BOND BOND MARKET
30, 1996 STOCK FUND FUND FUND FUND FUND FUND
------------------------ ------------ ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............... $ 213,901 $ 25,378,151 $ 3,275,883 $ -- $ -- $ --
Taxable interest........ 1,513,551 2,103,339 981,322 30,338,884 982,200 5,150,181
Tax exempt interest..... -- -- -- -- 21,704,340 --
------------ ------------ ----------- ----------- ----------- ----------
TOTAL INVESTMENT
INCOME................. 1,727,452 27,481,490 4,257,205 30,338,884 22,686,540 5,150,181
------------ ------------ ----------- ----------- ----------- ----------
EXPENSES
Adviser fees............ 1,697,938 6,262,404 347,112 1,931,789 1,786,374 408,324
Sub-Adviser fees........ 509,573 1,070,216 98,067 478,814 428,863 40,295
Audit and legal fees.... 17,877 24,090 11,980 22,625 21,505 15,961
Custody fees............ 48,568 171,153 13,627 66,308 66,107 16,277
Administrative service
fees.................... 37,295 35,943 33,304 38,756 49,650 31,101
Amortization of
organization &
registration expense.... 7,353 -- 9,055 -- -- --
Printing and postage
expense................. 165,238 540,140 46,312 156,012 105,056 130,281
Distribution expense
(12b-1)................. 757,526 3,009,625 222,589 1,099,493 1,004,931 112,144
S.E.C. and state
registration fees....... 62,946 65,894 46,505 32,641 37,555 24,963
Transfer Agent fees..... 711,197 1,802,146 178,615 476,265 232,566 301,481
Shareholder Maintenance
Fees.................... 180,666 471,689 46,318 122,557 60,625 57,543
Trustee fees and
expenses................ 11,669 13,095 11,669 13,095 13,095 11,669
Other expenses.......... 5,383 29,850 3,241 11,063 9,686 2,201
------------ ------------ ----------- ----------- ----------- ----------
TOTAL EXPENSES......... 4,213,229 13,496,245 1,068,394 4,449,418 3,816,013 1,152,240
------------ ------------ ----------- ----------- ----------- ----------
Less reimbursement from
Adviser................ -- -- -- -- -- (409,655)
------------ ------------ ----------- ----------- ----------- ----------
TOTAL NET EXPENSES..... 4,213,229 13,496,245 1,068,394 4,449,418 3,816,013 742,585
------------ ------------ ----------- ----------- ----------- ----------
NET INVESTMENT INCOME
(LOSS).................. (2,485,777) 13,985,245 3,188,811 25,889,466 18,870,527 4,407,596
------------ ------------ ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS
Net realized gains
(losses) on investments. 67,728,842 68,503,278 (771,932) (2,338,822) 9,680,486 --
Increase in unrealized
appreciation on
investments............. 70,556,642 189,806,057 10,947,842 2,660,208 555,380 --
------------ ------------ ----------- ----------- ----------- ----------
NET REALIZED &
UNREALIZED GAINS ON
INVESTMENTS............. 138,285,484 258,309,335 10,175,910 321,386 10,235,866 --
------------ ------------ ----------- ----------- ----------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.............. $135,799,707 $272,294,580 $13,364,721 $26,210,852 $29,106,393 $4,407,596
============ ============ =========== =========== =========== ==========
</TABLE>
50
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE AAL
-------------------------------------------------------------------------------------
SMALLER COMPANY CAPITAL GROWTH UTILITIES
STOCK FUND FUND FUND
-------------------------- ------------------------------ -------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 4/30/96 4/30/95 4/30/96 4/30/95 4/30/96
------------ ------------ -------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss)................. $ (1,377,361) $ (2,485,777) $ 17,337,195 $ 13,985,245 $ 2,126,626 $ 3,188,811
Net realized gains
(losses) on
investments............ (16,692,455) 67,728,842 (840,545) 68,503,278 (68,679) (771,932)
Increase (decrease) in
unrealized appreciation
on investments......... 32,846,797 70,556,642 112,486,469 189,806,057 (1,173,321) 10,947,842
------------ ------------ -------------- -------------- ----------- ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.............. 14,776,981 135,799,707 128,983,119 272,294,580 884,626 13,364,721
------------ ------------ -------------- -------------- ----------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income...... -- -- (18,335,662) (14,682,748) (1,869,225) (2,958,088)
Capital gains
distributions.......... -- -- (37,856,746) (35,099,992) -- --
------------ ------------ -------------- -------------- ----------- ------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS............ -- -- (56,192,408) (49,782,740) (1,869,225) (2,958,088)
------------ ------------ -------------- -------------- ----------- ------------
TRUST SHARES
TRANSACTIONS
Purchases of trust
shares................. 80,866,039 100,047,117 121,311,533 171,912,068 59,687,740 41,504,800
Income dividends
reinvested............. -- -- 18,154,413 14,539,765 1,758,941 2,809,415
Capital gains
distributions
reinvested............. -- -- 37,487,552 34,786,821 -- --
Redemption of trust
shares................. (17,380,419) (31,664,066) (86,426,278) (94,566,393) (5,024,539) (11,121,866)
------------ ------------ -------------- -------------- ----------- ------------
NET INCREASE IN TRUST
CAPITAL................. 63,485,620 68,383,051 90,527,220 126,672,261 56,422,142 33,192,349
------------ ------------ -------------- -------------- ----------- ------------
NET INCREASE IN NET
ASSETS.................. 78,262,601 204,182,758 163,317,931 349,184,101 55,437,543 43,598,982
NET ASSETS BEGINNING OF
PERIOD.................. 142,529,469 220,792,070 868,850,190 1,032,168,121 15,423,861 70,861,404
------------ ------------ -------------- -------------- ----------- ------------
NET ASSETS END OF PERIOD
(1)..................... $220,792,070 $424,974,828 $1,032,168,121 $1,381,352,222 $70,861,404 $114,460,386
============ ============ ============== ============== =========== ============
</TABLE>
(1) Including undistributed income of $0 and $0 for The AAL Smaller Company
Stock Fund, $4,543,201 and $3,845,698 for The AAL Capital Growth Fund and
$302,378 and $533,101 for The AAL Utilities Fund for each period
respectively.
51
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE AAL
-----------------------------------------------------------------------------------
BOND FUND MUNICIPAL BOND FUND MONEY MARKET FUND
-------------------------- -------------------------- ---------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED YEAR ENDED
4/30/95 4/30/96 4/30/95 4/30/96 ENDED 4/30/95 4/30/96
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income.. $ 26,370,442 $ 25,889,466 $ 18,593,428 $ 18,870,527 $ 2,646,147 $ 4,407,596
Net realized gains
(losses) on
investments............ (13,380,248) (2,338,822) (1,918,573) 9,680,486 -- --
Increase in unrealized
appreciation on
investments............ 9,259,565 2,660,208 7,975,495 555,380 -- --
------------ ------------ ------------ ------------ ------------- ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS.............. 22,249,759 26,210,852 24,650,350 29,106,393 2,646,147 4,407,596
------------ ------------ ------------ ------------ ------------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income...... (26,370,442) (25,889,466) (18,593,428) (18,870,527) (2,646,147) (4,407,596)
Capital gains
distributions.......... (107,963) -- (1,954,973) (2,937,391) -- --
------------ ------------ ------------ ------------ ------------- ------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS............ (26,478,405) (25,889,466) (20,548,401) (21,807,918) (2,646,147) (4,407,596)
------------ ------------ ------------ ------------ ------------- ------------
TRUST SHARES
TRANSACTIONS
Purchases of trust
shares................. 44,491,616 48,352,817 40,640,851 52,190,830 108,011,919 180,198,221
Income dividends
reinvested............. 21,777,898 21,399,951 15,159,507 16,770,677 2,491,076 4,222,862
Capital gains
distributions
reinvested............. 90,587 -- 1,612,397 2,442,657 -- --
Redemptions of trust
shares................. (75,738,835) (68,582,631) (54,317,690) (43,691,180) (105,300,623) (138,617,667)
------------ ------------ ------------ ------------ ------------- ------------
NET INCREASE (DECREASE)
IN TRUST CAPITAL........ (9,378,734) 1,170,137 3,095,065 27,712,984 5,202,372 45,803,416
------------ ------------ ------------ ------------ ------------- ------------
NET INCREASE (DECREASE)
IN NET ASSETS........... (13,607,380) 1,491,523 7,197,014 35,011,459 5,202,372 45,803,416
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 $430,846,686 $377,765,861 $412,777,320 $ 70,210,675 $116,014,091
============ ============ ============ ============ ============= ============
</TABLE>
(1) Including undistributed income of $41,051 for The AAL Bond Fund, $41,917 for
The AAL Municipal Bond Fund and $35,211 for The AAL Money Market Fund for each
period respectively.
52
The accompanying notes to financial statements are an integral part of this
schedule.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(A) ORGANIZATION
The AAL Mutual Funds (the "Trust") was organized as a Massachusetts Business
Trust on March 13, 1987, and is registered as an open-end diversified management
company under the Investment Company Act of 1940. The Trust commenced operations
on July 16, 1987, and currently consists of The AAL International Fund, 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, and
The AAL U.S. Government Zero Coupon Target Funds Series 2001 and 2006. The nine
AAL Mutual Funds are collectively referred to as the "Funds".
(B) SIGNIFICANT ACCOUNTING 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 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 securities are
valued at the latest bid quotation if such quotations are readily available.
Otherwise, such securities are valued at 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 companies
and to distribute substantially all of their taxable income to their
shareholders. The Funds accordingly paid no Federal income taxes and no Federal
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, The AAL Municipal Bond and The AAL
Money Market Funds are declared daily and distributed monthly. Dividends from
The AAL Capital Growth Fund are declared and paid semi-annually. Dividends from
The AAL Smaller Company Stock Fund are declared and paid annually. Dividends
from The AAL Utilities Fund are declared and paid quarterly. For The AAL Capital
Growth Fund and The AAL Utilities Fund, the percentage of income, which is
eligible for
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
the corporate dividend received deduction for the fiscal year ended April 30,
1996 is 98%, and 96%, respectively. Net realized gains from securities
transactions, if any, are distributed at least annually in the calendar 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. Discounts
and premiums on municipal bonds are amortized over the life of the respective
bonds. Discounts on bonds purchased after April 30, 1995, are amortized over the
life of the respective 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 exceed
60 months from each Fund's commencement of operation.
Statement of Position 93-2 requires that permanent financial reporting and tax
differences be reclassified to trust capital. During the year, The AAL Smaller
Company Stock Fund reclassified a permanent difference between book and taxable
net investment loss to trust capital in the amount of $2,485,776. Net assets
were not affected by this reclassification.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(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
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Adviser"), under which each of the six separate mutual fund portfolios pays a
fee for investment advisory services.
Prior to November 1, 1995, the annual rates of fees under the Investment
Advisory Agreement were calculated 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 average 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 million 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 The
AAL Utilities Fund.
For periods prior to November 1, 1995, the adviser had entered into sub-
advisory agreements with Duff & Phelps Investment Management Company and Pilgrim
Baxter & Associates LTD for which the adviser paid a portion of its fees.
Effective November 1, 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 and approved the current fee schedule
described below. The adviser has hired a team of portfolio managers to manage
the Funds' assets.
Effective November 1, 1995, the annual rates of fees under the Investment
Advisory Agreement are calculated at the following rates: .75 of 1% on the first
$200 million of average daily net assets and .65 of 1% on the average daily net
assets over $200 million for The AAL Smaller Company Stock Fund; .70 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; .55 of 1% on the first
$250 million of average daily net assets, .50 of 1% on the next $250 million and
.45 of 1% on average daily net assets over $500 million for The AAL Bond and The
AAL Municipal Bond Funds; .50 of 1% on the first $250 million of average daily
net assets and .45 of 1% on average daily net assets over $250 million for The
AAL Money Market Fund and The AAL Utilities Fund.
The Trust has entered into an Administrative Services Agreement with the
Adviser pursuant to which the Adviser
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
provides certain administrative services. The Adviser earned $30,000 from each
of the following Funds for the year ended April 30, 1996: 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. Each Fund
pays those pricing fees which are attributable to it.
The Trust has also contracted with AAL Capital Management Corporation for
certain shareholder maintenance services, effective April 1, 1995. These
shareholder services include, pre-processing and quality control of new
accounts, shareholder correspondence, account response and answering customer
inquires regarding account status, options and facilitating shareholder
telephone transactions. Fees charged to the Funds under terms of the contract
approximated $3.58 per shareholder account for the year ended April 30, 1996.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Investment Company Act of 1940. The Plan authorizes the Trust to use a
portion of its assets to finance certain activities relating to the distribution
of its shares to investors. Payments under the Plan are equal to a maximum of
.25 of 1% of the average daily net assets of The AAL Smaller Company 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 annual
fee of $10,000 and $1,000 for each meeting of the Board of Trustees, or
Committee thereof, attended. No remuneration has been paid by the Trust to any
of the officers or affiliated Trustees of the Trust. In addition, the Trust
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 directly 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
required under the Investment Advisory Agreement, the Adviser voluntarily has
reimbursed various funds since inception. As of April 30, 1996, the Adviser is
reimbursing The AAL Money Market Fund .625% of average daily net assets.
Voluntary
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 year ended April 30, 1996, purchases
and sales of securities other than short-term obligations were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
4/30/95 4/30/96 4/30/95 4/30/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund................. $181,214,320 $326,900,164 $139,876,821 $253,451,798
The AAL Capital Growth
Fund....................... 393,241,285 557,752,827 296,479,660 517,205,642
The AAL Utilities Fund..... 72,216,425 38,069,103 11,929,861 18,309,757
The AAL Bond Fund.......... 193,580,496 541,194,780 186,956,061 547,177,273
The AAL Municipal Bond
Fund....................... 612,855,314 507,267,650 612,836,296 500,090,847
</TABLE>
In 1995, The AAL Bond Fund purchased $109,160,469 and sold $117,798,125, and
in 1996, the Fund purchased $161,637,969 and sold $231,199,644 in U.S. Govern-
ment Obligations.
In 1995, The AAL Utilities Fund purchased $5,970,117 and sold $1,862,969,
and in 1996, the Fund purchased $3,238,102 and sold $5,595,031 in U.S. Govern-
ment Obligations.
Cost of investments is substantially the same for financial reporting purposes
and Federal income tax purposes.
For the year ended April 30, 1996, The AAL Utilities Fund and The AAL Bond
Fund incurred Federal income tax capital losses totaling $840,611 and
$10,693,380, respectively, which will be carried forward and expire in the year
2004. Additionally, at April 30, 1996, The AAL Bond Fund had a Federal income
tax capital loss carry forward totaling $4,972,985 incurred during
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS--CONTINUED the fiscal year
ended 1995, which expires in the year 2003. For the year ended April 30, 1995,
The AAL Smaller Company Stock, Utilities and Bond Funds also incurred
$3,538,076, $68,679, $8,462,663, respectively, of post-October losses treated
for tax purposes as occurring in the fiscal year ended 1996.
The gross unrealized appreciation and depreciation on investments at April 30,
1995 and April 30, 1996, were as follows:
<TABLE>
<CAPTION>
4/30/95 4/30/96
------------------------------------------ ------------------------------------------
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 $113,186,743 $ (8,297,413) $104,889,330
The AAL Capital Growth
Fund.................... 162,507,211 (14,680,347) 147,826,864 351,273,890 (13,640,969) 337,632,921
The AAL Utilities Fund.. 2,115,100 (3,285,935) (1,170,835) 11,405,167 (1,628,160) 9,777,007
The AAL Bond Fund....... 3,813,698 (13,320,275) (9,506,577) 4,559,814 (11,406,183) (6,846,369)
The AAL Municipal Bond
Fund.................... 9,474,439 (1,254,102) 8,220,337 9,884,307 (1,108,590) 8,775,717
</TABLE>
58
<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 YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 4/30/96 4/30/95 4/30/96 4/30/95 4/30/96
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased........ 8,203,611 6,940,300 8,315,188 9,785,929 6,277,200 3,811,394
Income dividends
reinvested............. -- -- 1,294,493 864,754 190,275 261,139
Capital gains reinvest-
ed..................... -- -- 2,675,771 1,978,773 -- --
Shares redeemed......... (1,706,687) (2,323,788) (5,921,488) (5,428,045) (537,340) (1,056,401)
---------- ---------- ---------- ---------- ------------ ------------
Net increase of trust
shares.................. 6,496,924 4,616,512 6,363,964 7,201,411 5,930,135 3,016,132
========== ========== ========== ========== ============ ============
<CAPTION>
THE AAL THE AAL THE AAL
BOND FUND MUNICIPAL BOND FUND MONEY MARKET FUND
---------------------- ---------------------- --------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
4/30/95 4/30/96 4/30/95 4/30/96 4/30/95 4/30/96
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased........ 4,676,792 4,899,331 3,888,302 4,715,857 108,011,920 180,198,222
Income dividends rein-
vested................. 2,293,802 2,163,280 1,451,298 1,521,292 2,491,076 4,222,862
Capital gains reinvest-
ed..................... 9,762 -- 159,328 215,973 -- --
Shares redeemed......... (7,991,980) (6,934,723) (5,234,874) (3,963,923) (105,300,623) (138,617,668)
---------- ---------- ---------- ---------- ------------ ------------
Net increase (decrease)
of trust shares........ (1,011,624) (127,888) 264,054 2,489,199 5,202,373 45,803,416
========== ========== ========== ========== ============ ============
</TABLE>
59
<PAGE>
A special shareholders meeting was held on September 28, 1995 at which time
the following six Trustees were elected to the Board:
<TABLE>
<CAPTION>
TRUSTEE VOTES FOR TOTAL VOTES %
- ------- --------------- --------------- -------
<S> <C> <C> <C>
F. Gregory Campbell..................... 113,194,508.754 115,324,624.765 98.153%
Richard L. Gady......................... 113,219,883.435 115,324,624.765 98.175%
Richard L. Gunderson.................... 112,974,342.806 115,324,624.765 97.962%
John H. Pender.......................... 113,235,125.335 115,324,624.765 98.188%
D. W. Russler........................... 113,236,800.848 115,324,624.765 98.190%
Lawrence M. Woods....................... 113,211,444.773 115,324,624.765 98.168%
</TABLE>
The selection of Price Waterhouse LLP as independent accountants for the Funds
for the fiscal year was ratified by the vote of 111,363,282.980 shares out of
115,324,624.765 shares voted.
60
<PAGE>
FINANCIAL HIGHLIGHTS
PER SHARE INFORMATION
(BASED ON A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
THE AAL UTILITIES FUND THE AAL SMALLER COMPANY STOCK FUND
---------------------------------------- ------------------------------------------
PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED PERIOD ENDED ENDED ENDED
4/30/94 4/30/95 4/30/96 4/30/94 4/30/95 4/30/96
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
beginning of period..... $10.00 $9.95 $9.47 $10.00 $10.38 $10.92
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss).................. 0.022 0.338 0.360 (0.044) (0.054) (0.100)
Net realized and
unrealized gain (loss)
on investments.......... (0.072) (0.498) 1.420 0.424 0.594 6.290
----------- ----------- ------------ ------------ ------------ ------------
Total from investment
operations.............. (0.050) (0.160) 1.780 0.380 0.540 6.190
----------- ----------- ------------ ------------ ------------ ------------
DISTRIBUTIONS FROM:
Net investment income... -- (0.320) (0.350) -- -- --
Net realized capital
gains................... -- -- -- -- -- --
----------- ----------- ------------ ------------ ------------ ------------
Total distributions..... 0.000 (0.320) (0.350) 0.000 0.000 0.000
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease)
in net asset value...... (0.050) (0.480) 1.430 0.380 0.540 6.19
Net asset value:
End of period........... $9.95 $9.47 $10.90 $10.38 $10.92 $17.11
=========== =========== ============ ============ ============ ============
Average commission per
share................... -- -- $0.056 -- -- $0.055
Total return(e)......... (0.50)% (1.51)% 18.90% 3.80% 5.20% 56.59%
Net assets, end of
period.................. $15,423,861 $70,861,404 $114,460,386 $142,529,469 $220,792,070 $424,974,828
Ratio of expenses to
average net
assets(a)(b)............ 1.60% 1.19% 1.20% 1.72% 1.54% 1.39%
Ratio of net investment
income to average net
assets(a)(c)............ 5.12% 4.08% 3.58% (1.14)% (0.77)% (0.82)%
Portfolio turnover rate. 0.00% 24.65% 21.79% 55.49% 88.18% 90.14%
</TABLE>
61
<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 YEAR YEAR YEAR
ENDED YEAR ENDED ENDED ENDED 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 0.296 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 1.973
----------- ----------- ------------ ------------ ------------ ------------ ------------ --------------
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(d)........ -- -- -- (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 $15.56
=========== =========== ============ ============ ============ ============ ============ ==============
Average
commission per
share........... -- -- -- -- -- -- -- --
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%
62
<PAGE>
<CAPTION>
THE AAL CAPITAL GROWTH FUND
---------------------------
--------------
YEAR
ENDED
4/30/96
--------------
<S> <C>
Net asset value:
beginning of
period.......... $15.56
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.201
Net realized and
unrealized gain
(loss) on
investments..... 3.756
--------------
Total from
investment
operations...... 3.957
--------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.217)
Net realized
capital
gains(d)........ (0.510)
--------------
Total
distributions... (0.727)
--------------
Net increase
(decrease) in
net asset value. 3.230
Net asset value:
End of period... $18.79
==============
Average
commission per
share........... $ 0.053
Total return(e). 25.85%
Net assets: end
of period....... $1,381,352,222
Ratio of
expenses to
average net
assets(a)(b).... 1.12%
Ratio of net
investment
income to
average net
assets(a)(c).... 1.16%
Portfolio
turnover rate... 44.26%
</TABLE>
63
<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 0.721 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... -- (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%
64
<PAGE>
<CAPTION>
THE AAL BOND FUND
-----------------
-------------
YEAR
ENDED
4/30/96
------------
<S> <C>
Net asset value:
beginning of
period.......... $9.61
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income.......... 0.584
Net realized and
unrealized gain
(loss) on
investments..... 0.010
------------
Total from
investment
operations...... 0.594
------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.584)
Net realized
capital gains... --
------------
Total
distributions... (0.584)
------------
Net increase
(decrease) in
net asset value. 0.010
Net asset value:
End of period... $9.62
Total return(e). 6.18%
Net assets, end
of period....... $430,846,686
Ratio of
expenses to
average net
assets(a)(b).... 1.01%
Ratio of net
investment
income to
average net
assets(a)(c).... 5.89%
Portfolio
turnover rate... 125.77%
</TABLE>
65
<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
operation........ 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%
66
<PAGE>
<CAPTION>
THE AAL MUNICIPAL BOND FUND
---------------------------
-------------
YEAR
ENDED
4/30/96
------------
<S> <C>
Net asset value:
beginning of
period........... $10.69
INCOME FROM
INVESTMENT
OPERATIONS.......
Net investment
income........... 0.521
Net realized and
unrealized gain
(loss) on
investments...... 0.300
------------
Total from
investment
operation........ 0.821
------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.521)
Net realized
capital
gains(d)........ (0.080)
------------
Total
distributions.... (0.601)
------------
Net increase
(decrease) in net
asset value...... 0.220
Net asset value:
End of period.... $10.91
============
Total return(e).. 7.74%
Net assets, end
of period........ $412,777,320
Ratio of expenses
to average net
assets(a)(b)..... 0.95%
Ratio of net
investment income
to average net
assets(a)(c)..... 4.69%
Portfolio
turnover rate.... 130.52%
67
</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...... -- -- -- -- -- -- -- --
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
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... -- -- -- -- -- -- -- --
---------- ------------ ------------ ------------ ------------ ----------- ----------- -----------
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...... -- -- -- -- -- -- -- --
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
68
<PAGE>
<CAPTION>
THE AAL MONEY MARKET FUND
-------------------------
-------------
YEAR
ENDED
4/30/96
------------
<S> <C>
Net asset value:
beginning of
period........... $1.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income........... 0.048
Net realized and
unrealized gain
(loss) on
investments...... --
------------
Total from
investment
operations....... 0.048
------------
DISTRIBUTIONS
FROM:
Net investment
income.......... (0.048)
Net realized
capital gains... --
------------
Total
distributions.... (0.048)
------------
Net increase
(decrease) in net
asset value...... --
Net asset value:
End of period.... $1.00
============
Total return(e).. 4.94%
Net assets, end
of period........ $116,014,091
Ratio of expenses
to average net
assets(a)(b)..... 0.83%
Ratio of net
investment income
to average net
assets(a)(c)..... 4.89%
Portfolio
turnover rate.... N/A
</TABLE>
69
<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>
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
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 4/30/96
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund.............. -- -- -- -- -- -- 1.73% 1.54% 1.39%
The AAL Capital Growth
Fund.................... 1.91% 1.77% 1.49% 1.41% 1.28% 1.20% 1.18% 1.17% 1.12%
The AAL Utilities Fund.. -- -- -- -- -- -- 2.91% 1.19% 1.20%
The AAL Bond Fund....... 1.83% 1.37% 1.22% 1.17% 1.08% 1.03% 1.02% 1.03% 1.01%
The AAL Municipal Bond
Fund.................... 2.28% 1.46% 1.14% 1.10% 1.04% 1.00% 0.99% 0.98% 0.95%
The AAL Money Market
Fund.................... 1.76% 1.18% 1.04% 1.07% 1.11% 1.27% 1.51% 1.42% 1.28%
(c) If the Funds had paid all of their expenses the ratios would have been as
follows:
<CAPTION>
PERIOD YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
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 4/30/96
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The AAL Smaller Company
Stock Fund.............. -- -- -- -- -- -- (1.14%) (0.77%) (0.82%)
The AAL Capital Growth
Fund.................... 2.21% 2.54% 2.51% 2.59% 2.27% 2.15% 2.07% 1.89% 1.16%
The AAL Utilities Fund.. -- -- -- -- -- -- 3.81% 4.08% 3.58%
The AAL Bond Fund....... 7.59% 8.32% 8.13% 7.89% 7.14% 6.35% 5.61% 6.12% 5.89%
The AAL Municipal Bond
Fund.................... 4.95% 5.79% 5.89% 6.01% 5.72% 5.32% 4.87% 5.01% 4.69%
The AAL Money Market
Fund.................... 5.37% 7.87% 7.84% 6.85% 4.56% 2.38% 1.75% 3.70% 4.46%
</TABLE>
(d) The respective Funds had the following per share short-term capital gain
distributions during the fiscal year ended April 30, 1996: The AAL Capital
Growth Fund $0.129 and The AAL Municipal Bond Fund $0.080.
(e) Total return calculations are based on net amount invested
70
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REPORT OF INDEPENDENT ACCOUNTANTS
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Telephone 414/276-9500
LOGO LOGO
To the Shareholders and Trustees of The AAL Mutual Funds
In our opinion, the accompanying statement of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The AAL Smaller Company Stock Fund,
The AAL Capital Growth Fund, The AAL Utilities Fund, The AAL Bond Fund, The AAL
Municipal Bond Fund and The AAL Money Market Fund (six of the portfolios
constituting The AAL Mutual Funds, the "Funds") at April 30, 1996, the results
of each of their operations for the year then ended, the changes in each of
their net assets for the years ended April 30, 1996, and 1995, and their
financial highlights for the year ended April 30, 1996, and for the other
periods indicated, all in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at April 30, 1996, by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
May 24, 1996
71
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[AAL LOGO]
The AAL Mutual Funds
------------------------------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
World Wide Web: http://www.aal.org
e-mail address: [email protected]
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
H. Michael Spence Joseph F. Wreschnig
President Assistant Secretary
Robert G. Same Charles D. Gariboldi, Jr.
Vice President & Secretary Assistant Treasurer
Terrance P. Gallagher
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Suite 1500
100 East Wisconsin Avenue
Milwaukee, WI 53202
LEGAL COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
