[COVER ART APPEARS HERE]
Helping You Build a Better Financial Future
THE AAL
INTERNATIONAL
FUND
ANNUAL REPORT
APRIL 30, 1996
[AAL LOGO]
THE AAL MUTUAL FUNDS
<PAGE>
[AAL LOGO]
THE AAL MUTUAL FUNDS
------------------------------------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
June 1, 1996
Dear Shareholder:
This is our first annual report for The AAL International Fund ("Fund") and
covers the nine-month period from its inception on August 1, 1995, through the
end of The AAL Mutual Funds' fiscal year on April 30, 1996. In addition to
performance and financial information, this report contains a discussion by the
Fund's portfolio manager, Jean-Marie Eveillard of Societe Generale Asset
Management Corp., on the Fund's performance and the "value" strategy he employs
in investing the Fund's net assets.
Since the Fund's inception, most European and Asian markets have significantly
under-performed the U.S. stock market. In Europe, concerns over the extent of
economic recovery and political controversy regarding the upcoming monetary
union kept these markets under pressure. In Asia, Japanese market weakness and
political developments, such as China's confrontation with Taiwan, negatively
affected the markets in this region and increased the volatility in Hong Kong,
Singapore and South Korea. These weak-nesses provided opportunities to purchase
bargain-priced foreign stocks, particularly in the Fall of 1995. We attempt to
position the Fund to take advantage of potentially low-priced foreign securities
that we believe have long-term prospects for significant capital growth. For the
nine-month period from inception to April 30, 1996, the value of the Fund's
shares increased 11.07%/1/, and its net assets were invested in the following
types of securities:
THE AAL INTERNATIONAL FUND
<PAGE>
(Bringing Worldwide Investment Opportunities Closer to Home)
Foreign stocks/2/ 80%
U.S. dollar bonds 4%
Foreign currency bonds 3%
Cash and equivalents 13%
--------------------------------
Total 100%
and in the following regions and/or countries:
Europe 43%
Japan 17%
Other Asia
(Hong Kong, Singapore, etc.) 7%
Australia and New Zealand 4%
Argentina and Chile 3%
Canada 3%
Other 3%
--------------------------------
Total Foreign Stocks 80%
We are pleased with the Fund's performance during its start-up phase. Thank you
for investing in The AAL International Fund.
Very truly yours,
/s/ H. Michael Spence
H. Michael Spence
President
The AAL Mutual Funds
/1/ This figure assumes the immediate reinvestment of all dividends and
distributions and does not give the deduction of the sales load. The SEC
Standardized Total Return based upon gross amount invested, including the
maximum 4.75% sales charge, from inception to 3/29/96 is 2.85%.
/2/ Includes certain convertible bonds.
THE AAL INTERNATIONAL FUND
2
<PAGE>
PORTFOLIO PERSPECTIVE
[PHOTO OF]
Jean-Marie Eveillard
Portfolio Manager
During the first nine months of the Fund's existence it had a gain of 11.07%.
The Fund's return significantly exceeded the 8.04% gain in the international
stock markets during the same time period as represented by Morgan Stanley
Capital International's EAFE Index(R). How did your investment strategy and
resulting stock picks and/or other types of investments contribute to this
difference?
We do not believe the Fund's performance correlates well with the EAFE Index due
to several factors. The EAFE Index measures the performance of specific foreign
markets, in which the Fund may or may not invest. We also include very few, if
any, of the stocks that make up the index in The AAL International Fund
portfolio. Foreign currency movements also affected the relative performance of
the EAFE Index as measured against the Fund. The EAFE measures foreign market
performance in terms of the foreign currencies of the markets in the index. We,
however, have partially hedged some of the currencies in the markets where the
Fund has invested, and these hedges have benefited the Fund's performance
recently. In addition, unlike the EAFE, which measures the performance of
foreign stock markets, the Fund is not fully invested in stocks - it holds some
bond and some cash investments. Lastly, the securities that make up the index
are constantly changing, making the investment time horizon short-term for many
of the securities in the index. We, however, invest with a five-year time
horizon, so our investments do not correlate with the index.
--------------------------
The AAL International Fund
[CHART APPEARS HERE]
Stocks = 80%
Bonds = 7%
Cash = 13%
--------------------------
THE AAL INTERNATIONAL FUND
3
<PAGE>
(Bringing Worldwide Investment Opportunities Closer to Home)
What economic developments affected your strategy during the Fund's first nine
months, and what trends do you think will affect your investment decisions in
the near future?
In Europe, the absence of a full fledged recovery has caused some market
disappointments in certain countries such as Germany, France and Italy. The Fund
bought a number of stocks in Western Europe as prices came down in 1995. Since
the beginning of the year, those markets have rebounded. In other parts of the
world, specific political developments negatively impacted markets such as
Argentina, Hong Kong and South Korea in the beginning of 1996. We increased
investments for the Fund as stock prices became more attractive. While we
monitor economic developments, our investment decisions are based on the
valuation level of a
- ----------------------------------------------
Growth of an Assumed $10,000 Investment from
8/1/95 to 4/30/96 After Deducting Sales Charge
[CHART APPEARS HERE]
AAL International Fund = $10,578
EAFE Index = $10,803
Total Return As of April 30, 1996(1)
Since Inception (8/1/95)
Based on Gross Amount Invested(2) = 5.78%
Since Inception (8/1/95)
Based on Net Amount Invested = 11.07%
(1) Average Annual Total Returns for periods
of one year or longer are not available
because the Fund has been in existence
less than one year.
(2) The Fund's return gives effect to the
maximum sales load of 4.75%. Morgan
Stanley Capital International's EAFE
(Europe, Australasia and Far East)
Index(R), an unmanaged foreign stock
index, return assumes reinvestment of
dividends and does not reflect any fees or
expenses. Past performance does not
indicate future performance.
- ----------------------------------------------
THE AAL INTERNATIONAL FUND
4
<PAGE>
specific security. We will buy and hold stocks that we consider undervalued and
attractive for the long term.There are a number of stocks that we find
undervalued in Europe even though growth may be moderate in European economies.
Likewise, there are a number of stocks that we find attractive in Asia where
economic growth is far greater than in Europe.
What markets do you currently view as attractive and unattractive for your
"value" approach to investing?
We do not favor any particular market at this time. To our mind, there is no
equity market in which we invest today that provides genuine bargains overall.
The Japanese stock market has recovered from its low of 1995. However, despite
the generally high level of securities prices in this market, we believe that it
is very large and we can still find a few securities that are undervalued. In
Europe, a similar situation has developed. The markets have risen but not every
stock has recovered. Some companies have, in fact, disappointed investors. This
may create opportunities for us. Other stocks have been forgotten or are not in
favor at the moment; this is where we are most likely to search for investment
opportunities.
- ------------------------------
Largest Holdings
- - Securities
1. Bank for International
Settlements
2. Shoei Co.
3. Buderus AG
4. Montedison SpA
- ------------------------------
You are well-known for finding value in little known or unusual securities.
Could you describe some of these securities and how they fit into your strategy
for the Fund?
Two of the Fund's largest holdings are "unusual" securities. On the Swiss
market, we bought the American tranche of
THE AAL INTERNATIONAL FUND
5
<PAGE>
(Bringing Worldwide Investment Opportunities Closer to Home)
the Bank for International Settlements for the Fund. The Bank is not a lending
institution, but a central bank for all central banks. The Bank's balance sheet
is extremely strong and most of its assets consist of short-term investments,
cash equivalents and gold reserves. At current exchange rates, the stock trades
at a 10% discount to its net asset value and yields slightly under 2.5%. We
consider the stock somewhat of a proxy for gold bullion prices and find this
valuation attractive. In Japan, the Fund owns Shoei Co. Prior to the 1960s,
Shoei manufactured silk thread. Since then, it has diversified into the
manufacture of electronic components and real estate. It is a conservatively
managed company that has built a significant securities and real estate
portfolio over the years. The value of the portfolio is several times greater
than the current market capitalization of the stock.
- -------------------
Largest Holdings
- - Countries
1. Japan
2. France
3. Germany
4. Switzerland
- -------------------
What effect have foreign currencies had on the Fund?
We have partially hedged the Fund's major foreign currency exposures. The Fund
is hedged against the Japanese Yen, the Deutsche Mark, the Swiss Franc and the
French Franc. Consequently, as the dollar strengthened in recent months, the
value of the Fund's holdings in those countries were not affected by the rising
dollar. In fact, in the case of the Fund's Japanese investments, the returns
were significantly enhanced by gains on our yen hedges when the yen weakened
significantly against the dollar.
THE AAL INTERNATIONAL FUND
6
<PAGE>
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The AAL International Fund
Schedule of Investments as of April 30, 1996
THE FUND SEEKS:
Long-term growth of capital through investing in a diversified
portfolio of foreign securities.
THE FUND IS:
A diversified portfolio of foreign equities in at least three
different countries not including the United States. The Fund also may
invest up to 20% of its assets in bonds.
<TABLE>
<CAPTION>
SHARES COMMON STOCKS (78.6%) INDUSTRY MARKET VALUE
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<C> <S> <C> <C>
ARGENTINA (2.0%)
----------------
50,000 Cresud SA............................ Food & $ 106,938
(Argentine farm company) Agriculture
85,864 IRSA Inversiones y
Representaciones, SA................. Real Estate 260,377
(invests in and develops industrial,
commercial and residential real
estate)
175,000 Ledesma SA........................... Food & 249,523
(produces and sells sugar, alcohol Agriculture
and fruit)
450,000 Siderca S.A.I.C...................... Capital Goods 528,668
(manufactures and sells seamless
steel pipes)
-----------
1,145,506
-----------
AUSTRALIA (0.6%)
----------------
225,000 Spotless Services Limited............ Commercial 321,985
(operates food catering and textile Services
rental services)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
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7
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- --------------------------------------------------------------------------------
<C> <S> <C> <C>
AUSTRIA (0.5%)
--------------
3,000 VAE AG................................ Misc.-- ____280,293$
(manufactures and sells railroad Manufacturing
turnouts and turnout components)
BELGIUM (0.5%)
--------------
2,000 Deceuninck Plastics Industries SA..... Basic 267,184
(produces PVC windows and door Materials
profiles)
CANADA (2.9%)
-------------
35,000 Canadian Pacific, Ltd................. Conglomerate 713,125
(interests in transportation, energy,
real estate, hotels and
telecommunications)
3,250 Franco-Nevada Mining
Corporation, Ltd...................... Gold 193,248
(receives royalties from gold mines)
35,000 Noranda, Inc.......................... Metals-- 782,831
(produces copper and other metals and Diversified
holds interests in oil and gas
companies)
-----------
1,689,204
-----------
DENMARK (1.1%)
--------------
12,000 Carlsberg International A/S
Class "B'............................. Food & 649,493
(produces and sells Carlsberg and Beverage
Tuborg beers)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
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8
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- --------------------------------------------------------------------------------
<C> <S> <C> <C>
FINLAND (0.8%)
--------------
10,000 Vaisala Oy............................ Technology ____469,919$
(develops and manufactures electronic
measurement systems and equipment for
meteorology)
FRANCE (13.2%)
--------------
7,000 Compagnie Generale des Eaux........... Utilities 759,885
(service group that provides
municipalities with water and
environment services; also owns
interests in real estate and
communications businesses)
6,000 Comptoir Lyon-Alemand-Louyot*......... Miscellaneous 462,421
(refines precious metals used in
jewelry, dental implants, art supplies
and electronics)
2,500 Conflandey SA......................... Iron/Steel 150,181
(produces fine galvanized wires)
8,500 Elf Aquitaine......................... Oil-- 630,961
(major integrated oil and gas company; International
also produces chemicals and
pharmaceuticals)
6,500 Emin Leydier.......................... Forest 551,177
(manufactures corrugated paper and Products &
cardboard) Paper
6,500 Eramet................................ Mining 495,181
(involved in the refining and
production of nickel, special metals
and steel)
1,500 Essilor International--ADP............ Consumer Goods 287,709
(produces and sells corrective lenses
and optical instruments)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
9
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
FRANCE--CONTINUED
-----------------
5,500 Gaumont SA............................. Entertainment $ 445,133
(produces and distributes films and
television programming, manages
theaters)
2,500 Legrand ADP............................ Electronics 320,643
(manufactures low-voltage electrical
fittings and accessories)
6,500 Marine-Wendel SA....................... Holdings-- 536,111
(holding company for computer services Diversified
and packaging group)
3,000 Groupe N.S.C........................... Machine-- 423,596
(manufactures and markets textile Diversified
machinery)
3,000 Promodes C.I........................... Retail Stores 515,733
(owns and operates hypermarkets,
convenience stores and supermarkets)
2,000 Rougier SA............................. Forest 187,364
(operates forestry concessions in Products
Africa; also produces wood paneling)
1,000 Sabeton SA............................. Holding 156,458
(investment company with interests in Company
real estate, food and agricultural
businesses)
2,000 Sagem ADP.............................. Technology 594,928
(involved in defense electronics,
telecommunications and data processing
and industrial equipment)
445 Societe Eurafrance SA.................. Holding 170,879
(financial holding company) Company
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
10
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
FRANCE--CONTINUED
-----------------
750 Sucriere de Pithiviers-le- Food and $ 489,656
Vieil.......................... Agriculture
(manufactures sugar from beets)
1,500 Taittinger C.I................. Wine & Spirits 376,369
(produces and sells champagne;
also owns hotels)
-----------
7,554,385
-----------
GERMANY (5.3%)
--------------
2,000 Bayer AG....................... Chemicals 642,452
(produces polymers, organic,
industrial, pharmaceuticals,
agrochemicals and imaging
technology products)
3,500 Bertelsmann AG Genusschein..... Publishing/Printing 440,952
(produces and sells books,
magazines and other media for
music, literature, TV and film)
2,500 Buderus AG..................... Misc.-- 912,944
(manufactures a variety of Manufacturing
heating products; also active
in casting, stainless steel and
aircraft equipment)
1,000 Degussa AG..................... Conglomerate 359,635
(manufactures and produces a
variety of metals; also active
in pharmaceutical specialty
chemicals)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
11
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
GERMANY--CONTINUED
------------------
7,500 Hornbach Holding AG............ Retail Stores $ 479,296
(owns and manages do-it-
yourself superstores which
specialize in building
materials, gardening and other
products)
10,000 SKW Trostberg AG............... Specialty Chemicals 222,367
(produces natural and synthetic
ingredients for food and
cosmetics industries; also
manufactures specialized
products for the construction
industry)
-----------
3,057,646
-----------
HONG KONG (3.0%)
----------------
1,000,000 CDL Hotels International Ltd. . Lodging 568,828
(investment holding company
whose subsidiaries own and
operate hotels globally)
650,000 Shaw Brothers Limited.......... Entertainment 781,492
(involved in film production
and distribution as well as
T.V. programming)
500,000 South China Morning Post
Holdings Corp. ................ Publishing/Printing 339,358
(publishes and sells the "South
China Morning Post", "South
China Sunday Morning Post")
-----------
1,689,678
-----------
ITALY (3.5%)
------------
20,000 Avir Finanziatria SpA.......... Packaging & 144,449
(a holding company for a group Container
that produces glass bottles and
other glass containers)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
12
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
ITALY--CONTINUED
----------------
35,000 IFI Istituto Finanziario SpA Holdings-- $ 364,527
Pfd........................... Diversified
(a financial holding company)
75,000 Arnoldo Mondarori Editore SpA. Publishing/Printing 627,731
(second-largest publishing
company in Italy)
1,500,000 Montedison SpA*............... Holding Company 855,191
(non-convertible savings
share) (industrial holding
company whose subsidiaries
have activities in chemicals,
energy, agro-industrial
services)
-----------
1,991,898
-----------
JAPAN (17.3%)
-------------
45,000 Aida Engineering Limited...... Machine-- 429,589
(leading manufacturer of Diversified
presses)
12,000 Asatsu Inc.................... Business Services 526,962
(advertising agency)
5,000 Chofu Seisakusho.............. Machine-- 130,308
(manufactures air conditioners Diversified
and water heaters)
95,000 Dai-Tokyo Fire & Marine
Insurance Co., Ltd............ Insurance 745,479
(nonlife insurance company)
2,000 Fast Retailing Co., Ltd....... Retail--Apparel 80,190
(designs and sells low price
unisex style casual clothing)
13,500 Fuji Photo Film Co., Ltd.-- Photographic 838,687
ADR........................... Equipment
(manufactures photographic
equipment, film and imaging
systems)
2,500 Hitachi, Ltd. ADR............. Electronics 269,063
(manufactures electronic and
electrical products)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
13
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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<C> <S> <C> <C>
JAPAN--CONTINUED
----------------
55,000 Iino Kaiun Kaisha, Ltd.............. Transportation/ $ 319,232
(carrier and specialized carrier Shipping
operator)
8,000 Ito-Yokado Co., Ltd................. Retail Stores 471,211
(leading department store and
convenience store operator)
25,000 Japan Airport Terminal Co., Ltd..... Commercial 360,377
(manages and maintains passenger Services
terminals, airport facilities,
parking lots, etc.)
55,000 The Koa Fire & Marine
Insurance Co........................ Insurance 377,513
(medium-scale nonlife insurance
company specialized in auto and fire
insurance)
65,000 The Nichido Fire & Marine Insurance
Co., Ltd............................ Insurance 546,055
(medium-ranking nonlife insurance
firm)
45,000 Nisshinbo Industries, Inc........... Textiles 498,323
(manufactures cotton fabrics and
chemical and synthetic fibers)
45,000 Nittetsu Mining Co., Ltd............ Mining 498,323
(limestone mining company)
20,000 Shimano Inc......................... Bicycles 406,677
(major maker of bicycle parts and
fishing tackle)
75,000 Shoei Co............................ Electronics 937,935
(manufactures electronic parts
including aluminum electrolytic
capacitors; also active in the real
estate business)
27,000 Sotoh Co., Ltd...................... Textiles 378,897
(leading dyer-finisher of woolen
fabrics)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
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14
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
JAPAN--CONTINUED
----------------
16,000 T. Hasegawa Company, Ltd.............. Fragrances & $ 329,924
(manufactures natural and synthetic Flavors
fragrances and flavors)
3,500 Toho Co., Ltd......................... Entertainment 608,106
(one of the Big 4 in the movie
industry)
45,000 Tokio Marine & Fire
Insurance Co. Ltd..................... Insurance 618,607
(writes marine, fire and casualty,
automobile and allied lines of
insurance)
8,000 Tsutsumi Jewelry Co., Ltd............. Jewelry, 400,186
(manufacturer, wholesaler and retailer Watches,
of jewelry) Gemstones
10,000 Yoshimoto Kogyo Co.................... Entertainment 143,196
(major entertainment company)
-----------
9,914,840
-----------
LUXEMBOURG (2.4%)
-----------------
35,000 Espirito Santo Financial
Holdings SA........................... Financial 411,250
(holding company for Banco Espirito Services
Santos a major Portuguese bank)
12,000 Minorco, SA ADR....................... Holding 316,500
(natural resources group with Company
interests in agribusiness, mining and
processing metals and industrial
materials)
250 Socfinasia............................ Food & 662,406
(holding company which has interests Agriculture
in Asian rubber and palm oil
plantations)
-----------
1,390,156
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
15
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
NETHERLANDS (2.2%)
------------------
10,000 Apothekers Cooperative
OPG U.A........................ Wholesale Special $ 282,684
(wholesaler of pharmaceuticals
in the Netherlands and Belgium)
18,000 German City Estates NV......... Real Estate 262,284
(Netherlands based real estate
investment company with
commercial property located in
various German cities)
20,000 Philips Electronics NV ADR..... Electronics 717,500
(manufactures lighting
products, consumer electronics,
home appliances, medical
systems and industrial
electronics)
-----------
1,262,468
-----------
NEW ZEALAND (3.5%)
------------------
100,000 Apple Fields Limited*.......... Food & Agriculture 48,077
(owns and manages apple
orchards and dairy farms)
250,000 Carter Holt Harvey, Limited.... Forest Products & 592,376
(owns large forest plantations Paper
and manufactures building
products)
575,000 Shortland Properties Limited... Real Estate 351,477
(owns real estate properties)
390,000 Tasman Agriculture Limited..... Food & Agriculture 380,357
(owns and manages large dairy
farms)
100,000 Wilson & Horton Group Limited.. Publishing/Printing 659,341
(publishes and markets
newspapers and magazines)
-----------
2,031,628
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
16
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- --------------------------------------------------------------------------------
<C> <S> <C> <C>
NORWAY (0.9%)
-------------
35,000 Schibsted A/S.................. Publishing/Printing ___510,460$
(publishes newspapers and other
publications in Norway; has
interests in local TV channels)
PORTUGAL (0.4%)
---------------
10,000 Companhia de Celulose do Caima
SA............................. Forest Products & 211,203
(pulp producer with paper mill Paper
operations in Portugal)
SINGAPORE (2.3%)
----------------
185,000 Clipsal Industries Ltd......... Electronics 456,950
(manufactures and markets
electrical installation
products)
111,000 Intraco, Ltd................... Holdings-- 178,434
(involved in international Diversified
trading, industrial marketing
and distribution)
35,000 Singapore Bus Service, Ltd..... Transportation 268,867
(operates bus service in
Singapore)
165,000 Times Publishing Ltd........... Publishing/Printing 441,283
(publishes, prints, distributes
and sells books, directories,
magazines, etc.)
----------
1,345,534
----------
SOUTH KOREA (1.9%)
------------------
3,250 Cheil Foods & Chemicals Co. Food & Agriculture 109,833
Pfd............................
(one of Korea's food makers
which produces lycine, MSG,
sugar, wheat powder and
beverages)
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
17
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SOUTH KOREA--CONTINUED
----------------------
5,780 Korean Air Lines...................... Airlines $ 95,068
(the world's tenth largest airline--
passenger and cargo transportation)
7,000 LG Electronics Co., Ltd. Pfd. ........ Electronics 139,420
(manufactures cordless phones and
other telecommunications equipment)
38,000 LG Electronics Co., Ltd.
Pfd GDS .............................. Electronics 372,400
(manufactures cordless phones and
other telecommunications equipment)
15,000 Ssangyong Cement Industries
Pfd .................................. Building 235,151
(investment holding company) Materials
3,000 Youngchang Akki Co.* ................. Leisure 131,068
(manufactures grand, upright and
electric pianos as well as other
musical instruments)
-----------
1,082,940
-----------
SPAIN (1.5%)
------------
5,000 Corporacion Financiera Alba SA........ Holdings-- 394,141
(industrial holdings company with Diversified
interests in retail, financial
services and communications)
100,000 Energia e Industrias
Aragonesas SA......................... Chemicals 466,373
(fully integrated PVC producer)
-----------
860,514
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
18
<PAGE>
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<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
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- -------------------------------------------------------------------------------
<C> <S> <C> <C>
SWEDEN (2.8%)
-------------
25,000 AssiDoman AB.......................... Forest $ 573,783
(Swedish forestry group) Products
50,000 IRO AB................................ Misc.-- 478,152
(produces yarn feeders for weaving and Manufacturing
knitting machines)
15,000 Orrefors Kosta Boda AB................ Manufacturer 203,031
(manufactures hand-made and machine-
made crystals and glass products)
20,000 Terra Mining.......................... Mining 317,787
(prospecting, mining and gold
producing)
-----------
1,572,753
-----------
SWITZERLAND (4.6%)
------------------
104 Bank for International Settlements.... Financial 952,595
(the central bank of all central Services
banks)
1,495 Kuehne & Nagel
International AG...................... Transportation 840,832
(transports freight worldwide)
175 Lindt & Spruengli AG-PC............... Food & 295,276
(chocolate processor and manufacturer) Beverages
1,500 Sika Finanz AG Bearer................. Building 351,920
(produces specialty products for the Materials
construction industry)
1,155 Swissair AG D.R.C.*................... Airlines 194,882
(operates an international airline for
passengers and freight; total
ownership)
-----------
2,635,505
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
UNITED KINGDOM (4.1%)
---------------------
100,000 Antofagasta Holdings plc.............. Holding $ 522,209
(interests in mining, transportation, Company
banking, forestry and natural
resources in Chile)
100,000 Berisford plc......................... Holdings-- 318,127
(industrial holding company involved Diversified
in furniture products and automotive
components)
85,000 Blenheim Group plc.................... Advertising 414,541
(organizes and manages exhibitions,
conferences and related trade
publications)
175,000 Lonrho plc............................ Holdings-- 508,141
(industrial holding company with many Diversified
assets in Africa)
195,000 McBride plc*.......................... Consumer Goods 383,328
(manufactures private label household
and personal care products)
45,000 Royal Doulton plc..................... Luxury Goods 205,282
(produces fine china, china and
giftware)
-----------
2,351,628
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCKS--CONTINUED INDUSTRY MARKET VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
MISCELLANEOUS (1.3%)
--------------------
8,500 Banco Latinoamerican de Exportaciones,
SA (Bladex), Panama ..................
(specialized multinational bank Financial $ 470,687
established to finance the foreign Services
trade in Latin America and the
Caribbean region)
18,000 Northern European Oil
Royalty Trust......................... Gas-- 243,000
(holds overriding royalty rights International
covering gas production in Germany)
-----------
713,687
-----------
Total Common Stocks (cost basis $41,873,946).......... 45,000,507
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNITED STATES
SHARES PREFERRED STOCK (1.9%) INDUSTRY MARKET VALUE
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<C> <S> <C> <C>
25,000 Freeport-McMoran Copper &
Gold, Preferred Series C... Mining $ 837,500
11,500 Freeport-McMoran Copper &
Gold, Preferred Series D... Mining 265,938
-----------
Total Preferred Stock (cost basis 1,103,438
$1,082,096)................................
-----------
<CAPTION>
PAR VALUE LONG-TERM FIXED INCOME OBLIGATIONS (6.7%)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<C> <S> <C> <C>
DM 500,000 Air Canada Variable Rate Perpetual......... 197,587
FF 2,000,000 Alcatel Alsthom 2.50% 1/1/2004............. 397,423
US$ 324,720 Federal Republic of Brazil 'C' 8.00% 194,832
4/15/2014..................................
US$ 350,000 Cheil Foods & Chemicals Co. 3.00% 456,750
12/31/2006.................................
US$ 150,000 Far East Textile 4.00% 10/7/2006........... 173,625
FF 1,879,280 Immobiliere Hoteliere 5.00% 1/1/2001....... 224,780
FF 2,000,000 Michelin 6.00% 1/2/1998.................... 440,401
NZ$ 350,000 Republic of New Zealand 10.00% 3/15/2002... 253,342
(Yen) 15,000,000 Nippon Yusen Kabushiki 2.00% 9/29/2000..... 176,847
US$ 495,000 Republic of Argentina FRB 3/31/2005........ 378,675
US$ 200,000 Republic of Poland PDI 3.75% 10/27/2014.... 153,000
US$ 400,000 Scandinavian Broadcasting System SA 7.25%
8/1/2005................................... 412,500
US$ 150,000 Sincere Navigation Corp. 3.75% 5/26/2003... 162,750
NZ$ 350,000 Transpower Finance Ltd. 8.00% 3/15/2002.... 228,942
-----------
Total Fixed Income Obligations
(amortized cost basis $3,747,464).......... 3,851,454
-----------
TOTAL LONG-TERM INVESTMENTS
(AMORTIZED COST BASIS $46,703,506)......... $49,955,399
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE COMMERCIAL PAPER (12.8%) MARKET VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<C> <S> <C>
$1,538,000 American Express Credit 5.25% 5/1/96................. $ 1,538,000
1,844,000 Anheuser Busch Companies 5.20% 5/3/96................ 1,843,467
801,000 The CocaCola Company 5.28% 5/7/96.................... 800,295
1,185,000 Praxair, Inc. 5.46% 5/2/96........................... 1,184,820
1,956,000 Raytheon Co. 5.25% 5/6/96............................ 1,954,574
-----------
Total Commercial Paper
(amortized cost $7,321,156).......................... 7,321,156
-----------
TOTAL INVESTMENTS (AMORTIZED
COST BASIS $54,024,662).............................. $57,276,555
===========
</TABLE>
* Non-income producing security
The accompanying notes to financial statements are an integral part of this
schedule.
THE AAL INTERNATIONAL FUND
................................................................................
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
APRIL 30, 1996 FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C>
ASSETS
- ------
Investments, at value (Cost: $54,024,662)....................... $57,276,555
Dividends and interest receivable............................... 142,856
Receivable for forward contracts held........................... 20,016,007
Prepaid expenses................................................ 11,016
Unamortized organization and initial registration expense....... 62,511
Cash............................................................ 585,105
-----------
TOTAL ASSETS $78,094,050
===========
LIABILITIES
- -----------
Payable for forward currency contracts held..................... $19,726,926
Payable for investments purchased............................... 1,123,675
Payable to affiliate............................................ 59,397
Accrued expenses................................................ 66,867
-----------
TOTAL LIABILITIES 20,976,865
-----------
NET ASSETS
- ----------
Trust capital (beneficial interest)............................. 53,081,925
Accumulated undistributed net investment income................. 1,350,310
Accumulated net realized gain on investments and foreign cur-
rency transactions............................................ 51,335
Net unrealized appreciation (depreciation) on:
Investments.................................................... 2,634,916
Forward currency contracts..................................... (4,373)
Foreign currency related transactions.......................... 3,072
-----------
TOTAL NET ASSETS 57,117,185
-----------
TOTAL LIABILITIES AND CAPITAL $78,094,050
===========
Shares of beneficial interest outstanding (unlimited number of
shares authorized)............................................ 5,156,647
===========
Net Asset Value Per Share....................................... $ 11.08
===========
Maximum Public Offering Price................................... $ 11.63
===========
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
FOR THE PERIOD ENDED APRIL 30, 1996 FUND (1)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
- -----------------
Dividends (net of $32,241 foreign taxes withheld)................ $ 258,717
Taxable interest................................................. 307,947
----------
TOTAL INVESTMENT INCOME 566,664
----------
EXPENSES
- --------
Adviser fees..................................................... 45,664
Sub-Adviser fees................................................. 136,992
Custody fees..................................................... 45,957
Administrative service fees...................................... 37,965
Audit and legal fees............................................. 12,806
Amortization of organization & registration expense.............. 7,645
Printing and postage expense..................................... 28,417
Distribution expense (12b-1)..................................... 45,664
S.E.C. and state registration fees............................... 569
Transfer agent fees.............................................. 44,137
Shareholder maintenance fee...................................... 12,615
Trustees fees and expenses....................................... 7,156
Other expenses................................................... 453
----------
TOTAL EXPENSES 426,040
----------
Less reimbursement from Adviser.................................. (32,010)
----------
TOTAL NET EXPENSES 394,030
----------
NET INVESTMENT INCOME 172,634
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
- --------------------------------------------
Net realized gains on investment transactions.................... 55,899
Net realized gains on foreign currency transactions.............. 322,668
Increase in unrealized appreciation on investments............... 3,251,893
Increase in unrealized appreciation on currency.................. 292,153
----------
NET REALIZED & UNREALIZED GAINS ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS.......................................... 3,922,613
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $4,095,247
==========
</TABLE>
- ------------
(1) Since Inception of August 1, 1995
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
FUND
-------------
PERIOD
ENDED
4/30/96(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
OPERATIONS
- ----------
Net investment income............................................. $ 172,634
Net realized gains on investment transactions..................... 55,899
Net realized gains on foreign currency transactions............... 322,668
Increase in unrealized appreciation on investments................ 3,251,893
Increase in unrealized appreciation on currency................... 292,153
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 4,095,247
-----------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------
Dividends from net investment income.............................. (59,178)
Capital gains distributions....................................... (809)
-----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............................... (59,987)
-----------
TRUST SHARES TRANSACTIONS
- -------------------------
Purchases of trust shares......................................... 53,745,186
Income dividends reinvested....................................... 56,542
Capital gains reinvested.......................................... 771
Redemption of trust shares........................................ (720,574)
-----------
NET INCREASE IN TRUST CAPITAL..................................... 53,081,925
-----------
NET INCREASE IN NET ASSETS........................................ 57,117,185
-----------
NET ASSETS BEGINNING OF PERIOD.................................... --
-----------
NET ASSETS END OF PERIOD(2)....................................... $57,117,185
===========
</TABLE>
- ------------
(1) From commencement of operation on August 1, 1995.
(2) Including undistributed income of $113,456.
The accompanying notes to financial statements are an integral part of this
statement.
THE AAL INTERNATIONAL FUND
................................................................................
26
<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."
On August 1, 1995, The AAL International Fund (the "Fund") commenced
operations.
(B) SIGNIFICANT ACCOUNTING POLICIES
The Fund's principal accounting policies are:
VALUATION - The Fund invests in foreign securities, including stocks, bonds,
notes and convertible securities, whose values are subject to changes in market
conditions, as well as changes in political and regulatory environments. All
securities for which market quotations are available on a national securities
exchange in the United States or a securities exchange abroad are valued at
their last sale price, except when an occurrence subsequent to the time a value
was so established is likely to have changed such value. In such an event, the
fair value of those securities is determined through the consideration of other
factors by or under the direction of the Board of Trustees. All over-the-
counter securities for which market quotations are readily available are valued
at the last sale price. All other securities are valued at fair value as
determined by the Investment Adviser under supervision of the Board of
Trustees.
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.
THE AAL INTERNATIONAL FUND
................................................................................
27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION - The market values of securities which are not
traded in United States currency are recorded in the financial statements after
translation to U.S. dollars using the exchange quotation in effect at the time
net asset value is calculated. The costs of such securities are translated at
exchange rates prevailing when acquired. Additionally, other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the equity securities.
FORWARD CURRENCY CONTRACTS - In connection with purchases and sales of
securities denominated in foreign currencies, the Fund may enter into forward
currency contracts. Additionally, the Fund may enter into such contracts to
hedge certain other foreign currency denominated investments. These contracts
are recorded at market value, and the related realized and unrealized foreign
exchange gains and losses are included in the statement of operations. In the
event that counter parties fail to settle these currency contracts or the
related foreign security trades, the Fund could be exposed to foreign currency
fluctuations.
FEDERAL INCOME TAXES - No provision has been made for United States federal
income taxes since it is the intention of the Fund to distribute to
shareholders all taxable net investment income and net realized gains on
investments, if any, within the allowable time limit, and to comply with the
other provisions of the Internal Revenue Code for a regulated investment
company.
DISTRIBUTIONS TO SHAREHOLDERS - Net investment income and realized gains from
security transactions, if any, are distributed at least annually in the
calendar year.
OTHER - For financial statement purposes, investment security transactions are
accounted for on the trade date. Dividend income is recognized on the ex-
dividend date, and interest income is recognized on an accrual basis. Discounts
on bonds are amortized over the life of the respective bonds. Realized gains or
losses on sales are determined on a specific cost identification basis. The
Funds have no right to require registration of unregistered securities. The
cost incurred with the organization and initial registration of shares for The
AAL International Fund is being amortized over the period of benefit, but not
to exceed 60 months from the Fund's commencement of operation.
THE AAL INTERNATIONAL FUND
................................................................................
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(C) INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATED PERSONS
The Trust has entered into an Investment Advisory Agreement with AAL Capital
Management Corporation ("The Adviser") under which The AAL International Fund
pays a fee for investment advisory services. The annual rates of fees under the
Investment Advisory Agreement are calculated as 1% of the Fund's average daily
net assets.
The Adviser has entered into a Sub-Advisory Agreement with Societe Generale
Asset Management Corp. ("Sub-Adviser"). The annual sub-advisory fee, which is
paid by the Adviser, is equal to the rate of .75 of 1% of the Fund's average
daily net assets.
The Trust has entered into an Administrative Services Agreement with the
Adviser pursuant to which the Adviser provides certain administrative services.
The Adviser earned a fee of $30,000 from the Fund for the period ended April
30, 1996.
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 and options and facilitating shareholder
telephone transactions. Fees charged to the Funds, at an annualized rate, under
terms of the contract approximated $3.58 per shareholder account for the period
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 Fund.
Trustees of the Trust not affiliated with AAL or the Adviser receive an annual
fee of $10,000 and $1,000 for each meeting of the Board of Trustees, or
Committee thereof, attended. No remuneration has been paid by the Trust to any
of the officers or affiliated Trustees of the Trust. In addition, the Trust
reimburses unaffiliated Trustees for reasonable expenses incurred in relation
to attendance at the meetings.
The 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 the Fund are allocated among
the Funds in the Trust in proportion to the net assets of the respective Funds.
The Adviser reimburses the Fund for annual expenses in excess of the lowest
expense limitation imposed by the states.
AAL is the ultimate parent company for AAL Capital Management Corporation.
THE AAL INTERNATIONAL FUND
................................................................................
29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(D) SECURITY TRANSACTIONS
During the period ended April 30, 1996, purchases and sales of securities other
than short-term obligations were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
PERIOD ENDED PERIOD ENDED
4/30/96 4/30/96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
The AAL International Fund............................ $46,911,078 $267,466
</TABLE>
The tax cost basis as of April 30, 1996, is $54,641,639. As a result of book-
to-tax differences, the following reclassifications have been made:
Due to Section 1256 Gains/Losses (net of post-October losses) undistributed net
investment income has been increased and accumulated net realized and
unrealized gains on foreign currency contracts have been decreased by $326,423
and $293,454, respectively.
Due to acquisition of passive foreign investment companies, undistributed net
investment income has been increased and accumulated net unrealized gain on
investments has been decreased by $616,977.
The gross unrealized appreciation and depreciation on investments at the period
ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
APPRECIATION (DEPRECIATION) (DEPRECIATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
The AAL International Fund........... $4,211,438 $(959,545) $3,251,893
</TABLE>
(E) TRUST TRANSACTIONS
Transactions in trust shares for the period ended April 30, 1996, were as
follows:
<TABLE>
<CAPTION>
THE AAL
INTERNATIONAL
FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
Shares purchased.................................................. 5,220,133
Income dividends reinvested....................................... 5,611
Capital gains reinvested.......................................... 77
Shares redeemed................................................... (69,174)
---------
Net increase of trust shares...................................... 5,156,647
---------
</TABLE>
THE AAL INTERNATIONAL FUND
................................................................................
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(F) FORWARD CURRENCY CONTRACTS
As of April 30, 1996, the Fund had entered into forward currency contracts, as
summarized below, resulting in net unrealized appreciation of $289,081.
<TABLE>
<CAPTION>
SETTLEMENT
DATE CURRENCY TO U.S. VALUE AT
THROUGH BE DELIVERED APRIL 30, 1996
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<S> <C> <C>
5/2/96 69,201 U.S. Dollar $ 69,201
5/2/96 75,315 U.S. Dollar 75,315
5/2/96 53,615 U.S. Dollar 53,615
5/2/96 45,228 U.S. Dollar 45,228
5/3/96 14,573 U.S. Dollar 14,573
5/6/96 92,124 U.S. Dollar 92,124
5/6/96 85,540 U.S. Dollar 85,540
5/6/96 104,540 U.S. Dollar 104,540
5/6/96 231,152 U.S. Dollar 231,152
5/7/96 103,725 U.S. Dollar 103,725
5/7/96 41,890 U.S. Dollar 41,890
5/7/96 3,253 U.S. Dollar 3,253
5/8/96 81,950 U.S. Dollar 81,950
6/15/96 53,602 U.S. Dollar 53,602
6/27/96 717,000 Swiss Franc 579,254
7/3/96 689,000 Deutshce Mark 450,931
7/11/96 7,154,000 French Franc 1,386,112
7/18/96 138,800,000 Japanese Yen 1,338,844
8/9/96 516,000 Swiss Franc 418,627
8/16/96 1,281,500 Deutsche Mark 841,072
8/23/96 14,583,000 French Franc 2,831,046
8/30/96 337,950,000 Japanese Yen 3,277,672
10/4/96 239,000 Swiss Franc 195,006
10/11/96 2,363,000 Deutsche Mark 1,556,602
10/18/96 16,301,600 French Franc 3,172,629
10/25/96 268,550,000 Japanese Yen 2,623,423
-----------
$19,726,926
-----------
</TABLE>
THE AAL INTERNATIONAL FUND
................................................................................
31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SETTLEMENT
DATE CURRENCY TO U.S. VALUE AT
THROUGH BE RECEIVED APRIL 30, 1996
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
<S> <C> <C>
5/2/96 105,676 Deutsch Mark $ 68,912
5/2/96 388,587 French Franc 75,059
5/2/96 83,250,920 Italian Lira 53,210
5/2/96 305,650 Swedish Krone 44,968
5/3/96 20,490 Singapore Dollars 14,574
5/6/96 140,655 Deutsche Mark 91,722
5/6/96 442,453 French Franc 85,464
5/6/96 163,264,456 Italian Lira 104,352
5/6/96 285,335 Swiss Franc 229,258
5/7/96 162,060,572 Italian Lira 103,582
5/7/96 4,396,346 Japanese Yen 41,969
5/7/96 4,567 Singapore Dollars 3,249
5/8/96 127,989,520 Italian Lira 81,805
6/15/96 78,000 New Zealand Dollar 53,572
6/27/96 612,785 U.S. Dollar 612,785
7/3/96 478,353 U.S. Dollar 478,353
7/11/96 1,436,943 U.S. Dollar 1,436,943
7/18/96 1,348,799 U.S. Dollar 1,348,799
8/9/96 436,818 U.S. Dollar 436,818
8/16/96 877,945 U.S. Dollar 877,945
8/23/96 2,996,687 U.S. Dollar 2,896,687
8/30/96 3,264,936 U.S. Dollar 3,264,936
10/4/96 196,740 U.S. Dollar 196,740
10/11/96 1,604,563 U.S. Dollar 1,604,563
10/18/96 3,237,597 U.S. Dollar 3,237,597
10/25/96 2,572,145 U.S. Dollar 2,572,145
-----------
$20,016,007
-----------
</TABLE>
THE AAL INTERNATIONAL FUND
................................................................................
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights
Per Share Information
(Based on a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/96(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE: BEGINNING OF PERIOD.............................. $ 10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income............................................. 0.046
Net realized and unrealized gain on investments................... 1.058
-----------
Total From Investment Operations.................................. 1.104
-----------
DISTRIBUTIONS FROM:
- -------------------
Net investment income............................................. (0.024)
Net realized capital gains........................................ 0.000
-----------
Total distributions.............................................. (0.024)
-----------
Net increase in net asset value................................... 1.080
Net asset value:
End of period.................................................... $ 11.08
-----------
Average commission per share...................................... $ 0.018
Total Return(1)................................................... 11.07%
Net Assets, End of Period......................................... $57,117,185
Ratio of expenses to average net assets(a)(b)..................... 2.15%
Ratio of net investment income to average net assets(a)(c)........ 0.94%
Portfolio turnover rate........................................... 1.30%
</TABLE>
- ------------
(1) From commencement of operation on August 1, 1995.
(a) Calculated on an annualized basis.
(b) Computed after giving effect to Adviser's expense limitation undertaking.
If the Fund had paid all of its expenses, the ratio would have been 2.32%
for the period ended April 30, 1996.
(c) If the Fund had paid all of its expenses, the ratio would have been 0.77%
for the period ended April 30, 1996.
THE AAL INTERNATIONAL FUND
................................................................................
33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 schedule 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 International Fund, (one
of the portfolios constituting The AAL Mutual Funds, the "Funds") at April 30,
1996, and the results of its operations, the changes in its net assets and its
financial highlights for the period August 1, 1995, (commencement of
operations) through April 30, 1996, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at April 30, 1996, by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
May 24, 1996
THE AAL INTERNATIONAL FUND
34
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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
email address: [email protected]
BOARD OF TRUSTEES
John H. Pender-Chairman of the Board
Richard L. Gady
Lawrence M. Woods
D.W. Russler
F. Gregory Campbell
Richard L. Gunderson
OFFICERS
H. Michael Spence-President
Robert G. Same-Vice President & Secretary
Terrance P. Gallagher-Treasurer
Joseph F. Wreschnig-Assistant Secretary
Charles D. Gariboldi, Jr.-Assistant Treasurer
INVESTMENT ADVISER & DISTRIBUTOR
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
SUB-ADVISER
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase Metro Tech Center
Brooklyn, NY 11245
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
