The AAL
Capital Growth Fund
The AAL
Mid Cap Stock Fund
The AAL
Small Cap Stock Fund
The AAL
International Fund
The AAL
Equity Income Fund
THE AAL MUTUAL FUNDS
Semi-Annual Report
October 31, 1997
The AAL
Bond Fund
The AAL
Municipal Bond Fund
The AAL
High Yield Bond Fund
The AAL
Money Market Fund
[AAL LOGO]
The AAL Mutual Funds
<PAGE>
Table of Contents
President's Letter.......................................... 2
Portfolio Perspectives
The AAL Capital Growth Fund............................... 3
The AAL Mid Cap Stock Fund................................ 5
The AAL Small Cap Stock Fund.............................. 7
The AAL International Fund................................ 9
The AAL Equity Income Fund................................ 11
The AAL Bond Fund......................................... 13
The AAL Municipal Bond Fund............................... 15
The AAL High Yield Bond Fund.............................. 17
Schedule of Investments
The AAL Capital Growth Fund............................... 19
The AAL Mid Cap Stock Fund................................ 23
The AAL Small Cap Stock Fund.............................. 27
The AAL International Fund................................ 32
The AAL Equity Income Fund............................... 39
The AAL Bond Fund......................................... 43
The AAL Municipal Bond Fund............................... 45
The AAL High Yield Bond Fund.............................. 52
The AAL Money Market Fund................................. 57
Statement of Assets and Liabilities......................... 59
Statement of Operations..................................... 61
Statement of Changes in Net Assets.......................... 63
Notes to Financial Statements............................... 67
Financial Highlights
The AAL Capital Growth Fund............................... 75
The AAL Mid Cap Stock Fund................................ 77
The AAL Small Cap Stock Fund.............................. 79
The AAL International Fund................................ 80
The AAL Equity Income Fund................................ 81
The AAL Bond Fund......................................... 83
The AAL Municipal Bond Fund............................... 85
The AAL High Yield Bond Fund.............................. 87
The AAL Money Market Fund................................. 89
1 Table of Contents
<PAGE>
Semi-Annual Report
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- PRESIDENT'S LETTER
[PHOTO]
OCTOBER 31, 1997
Dear AAL Mutual Funds Shareholder:
The True Nature of the Market
While it is never pleasant to witness a decline in the stock market, it is our
opinion that the recent correction in U.S. equity markets was to be expected. We
have been in an extended bull market since 1990, and declines in Asian markets
merely served as the catalyst for the market sell-off. The fundamentals for the
U.S. economy remain sound. Economic growth continues and inflation rates remain
relatively low. Despite the correction, year-to-date returns in U.S. equities
remain in double digits. During the correction, U.S. bond prices actually
increased, demonstrating the value of diversification.
The Strategy of Systematic Investing
One excellent way to help minimize your exposure to market volatility is through
automatic investment plans. By investing regularly, over time, you take
advantage of an investment strategy called dollar cost averaging. This strategy
eliminates the worry of market timing by investing the same dollar amount on a
consistent basis. This long-term program may help you capitalize on market
cycles. However, automatic investment plans do not ensure profits or protect
against losses in declining markets and investors should consider their
financial ability to continue purchases through periods of low price levels. For
further information on automatic investment plans, please contact your local
Registered Representative.
The Cost of Success
Year-to-date, both the stock and bond markets have shown positive returns. Along
with this success, comes profits which may mean tax consequences for you.
Realized capital gains will be incurred and distributed to shareholders in all
of our Funds this year, except for those in The AAL Bond Fund. The most
substantial gains were incurred in our equity-oriented Funds. The record date of
the distribution will be December 12 and the ex-dividend date will be December
15. You will find the dividend information in your year-end statement, which
will be mailed in January 1998. As always, consult with your tax adviser
regarding taxation of these distributions.
Please read on to find each portfolio manager's performance information and
investment management perspective. I believe you will see each has valuable
insights to share.
All of us remain committed to providing you with consistent, quality investment
opportunities and appreciate the confidence you have entrusted to us.
Very truly yours,
/s/ Ronald G. Anderson
Ronald G. Anderson
PRESIDENT
THE AAL MUTUAL FUNDS
President's Letter October 31, 1997 2
<PAGE>
Growth
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL CAPITAL GROWTH FUND
......Ticker Symbol (A shares)................AALGX.....................
......Ticker Symbol (B shares)................BBLGX.....................
......NAV (A shares)...$25.17 ................NAV (B shares)...$25.04...
......Number of Securities in Portfolio.......115.......................
[Photo]
EQUITY-ORIENTED
The AAL Capital Growth Fund
How did large cap stocks perform over the six-month period ended October 31,
1997, and what factors affected performance?
Over the last six months the S&P 500/R/ Index/1/ returned 15.17%. Large cap
stocks lagged the mid and small cap stocks recently due to the slowing of many
of the economies overseas and the strength of the dollar. This type of
environment makes it more difficult for large cap stocks to grow their earnings
in the short run.
Since mid and small cap companies, on average, do less of their business outside
the United States, as compared with large cap companies, they have had an easier
time meeting investors' earnings expectations. As a result, the stocks of mid
and small cap companies have performed better than large cap companies.
Do the foreign markets have an impact on the U.S. market as a whole, or is the
effect just on the stocks that do a large percentage of their business overseas?
The foreign markets affect the U.S. market in many ways. The decline in the U.S.
market caused by the problems in Southeast Asia is a clear example of the
former. Industries can be affected by what happens in foreign markets. The
impact the Japanese auto industry has had on the U.S. is probably the best known
example of this. In addition, there are many other effects and feedback loops
where foreign markets impact the U.S. and where the U.S. impacts foreign
markets.
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($32,647)
Value of Shares Initially Purchased ($24,155)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Capital Growth Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
16-Jul-87 9,596.93 - 9,596.93
31-Jul-87 9,760.08 - 9,760.08
31-Aug-87 10,086.37 (0.00) 10,086.37
30-Sep-87 9,731.29 (0.00) 9,731.29
31-Oct-87 7,859.88 (0.00) 7,859.88
30-Nov-87 7,264.88 - 7,264.88
17-Dec-87 7,581.57 41.27 7,622.84
31-Dec-87 7,763.92 42.26 7,806.17
31-Jan-88 8,119.00 44.19 8,163.19
29-Feb-88 8,320.54 45.29 8,365.83
31-Mar-88 7,965.45 43.36 8,008.81
30-Apr-88 8,023.03 43.67 8,066.70
31-May-88 8,128.60 44.24 8,172.84
30-Jun-88 8,445.30 45.97 8,491.27
1-Jul-88 8,310.94 132.08 8,443.02
29-Jul-88 8,291.75 131.77 8,423.52
31-Aug-88 8,147.79 129.49 8,277.28
30-Sep-88 8,464.49 134.52 8,599.01
31-Oct-88 8,570.06 136.20 8,706.25
30-Nov-88 8,464.49 134.52 8,599.01
16-Dec-88 8,483.69 245.97 8,729.65
30-Dec-88 8,531.67 247.36 8,779.03
31-Jan-89 9,059.50 262.66 9,322.16
28-Feb-89 8,829.17 255.99 9,085.16
31-Mar-89 9,069.10 262.94 9,332.04
30-Apr-89 9,443.38 273.79 9,717.17
31-May-89 9,865.64 286.04 10,151.68
30-Jun-89 9,788.87 283.81 10,072.68
1-Jul-89 9,702.50 387.96 10,090.45
31-Jul-89 10,537.43 421.34 10,958.77
31-Aug-89 10,614.20 424.41 11,038.62
30-Sep-89 10,479.85 419.04 10,898.89
31-Oct-89 10,412.67 416.35 10,829.02
30-Nov-89 10,604.61 424.03 11,028.63
6-Dec-89 10,537.43 555.08 11,092.51
31-Dec-89 10,806.14 569.24 11,375.38
31-Jan-90 10,211.13 537.89 10,749.03
28-Feb-90 10,220.73 538.40 10,759.13
30-Mar-90 10,412.67 548.51 10,961.18
30-Apr-90 10,287.91 541.94 10,829.85
31-May-90 11,209.21 590.47 11,799.68
29-Jun-90 11,190.02 589.46 11,779.48
2-Jul-90 11,065.26 737.46 11,802.71
31-Jul-90 11,084.45 738.73 11,823.19
31-Aug-90 10,105.57 673.50 10,779.06
28-Sep-90 9,731.29 648.55 10,379.84
31-Oct-90 9,817.66 654.31 10,471.97
30-Nov-90 10,460.65 697.16 11,157.81
27-Dec-90 10,556.62 850.96 11,407.58
31-Dec-90 10,614.20 855.60 11,469.81
31-Jan-91 10,844.53 874.17 11,718.70
28-Feb-91 11,516.31 928.32 12,444.64
29-Mar-91 11,900.19 959.27 12,859.46
30-Apr-91 11,919.39 960.81 12,880.20
31-May-91 12,408.83 1,000.27 13,409.10
28-Jun-91 11,986.56 966.23 12,952.79
2-Jul-91 12,034.55 1,129.80 13,164.35
31-Jul-91 12,284.07 1,153.23 13,437.30
30-Aug-91 12,543.19 1,177.55 13,720.74
30-Sep-91 12,447.22 1,168.55 13,615.76
31-Oct-91 12,648.75 1,187.47 13,836.22
30-Nov-91 12,236.08 1,148.72 13,384.81
27-Dec-91 13,186.18 1,385.94 14,572.12
31-Dec-91 13,512.48 1,420.23 14,932.71
31-Jan-92 13,186.18 1,385.94 14,572.12
28-Feb-92 13,243.76 1,391.99 14,635.75
31-Mar-92 13,042.23 1,370.81 14,413.04
30-Apr-92 13,493.28 1,418.22 14,911.50
29-May-92 13,579.65 1,427.30 15,006.95
30-Jun-92 13,387.72 1,407.12 14,794.84
6-Jul-92 13,378.12 1,543.99 14,922.11
31-Jul-92 13,742.80 1,586.07 15,328.88
31-Aug-92 13,579.65 1,567.25 15,146.90
30-Sep-92 13,685.22 1,579.43 15,264.65
30-Oct-92 13,848.37 1,598.26 15,446.63
30-Nov-92 14,145.87 1,632.59 15,778.47
31-Dec-92 14,011.52 1,773.37 15,784.89
31-Dec-92 14,011.52 1,773.37 15,784.89
29-Jan-93 13,771.59 1,743.01 15,514.60
26-Feb-93 14,155.47 1,791.59 15,947.06
31-Mar-93 14,318.62 1,812.24 16,130.86
30-Apr-93 14,232.25 1,801.31 16,033.56
31-May-93 14,452.98 1,829.25 16,282.22
30-Jun-93 14,424.18 1,825.60 16,249.79
1-Jul-93 14,222.65 1,953.62 16,176.27
30-Jul-93 14,145.87 1,943.07 16,088.95
31-Aug-93 14,548.94 1,998.44 16,547.38
30-Sep-93 14,385.80 1,976.03 16,361.83
29-Oct-93 14,740.88 2,024.80 16,765.69
30-Nov-93 14,606.53 2,006.35 16,612.87
31-Dec-93 14,520.15 2,151.66 16,671.82
31-Dec-93 14,520.15 2,220.73 16,740.88
31-Jan-94 14,625.72 2,236.87 16,862.59
28-Feb-94 14,251.44 2,179.63 16,431.07
31-Mar-94 13,714.01 2,097.43 15,811.45
29-Apr-94 13,905.95 2,126.79 16,032.74
31-May-94 13,925.14 2,129.72 16,054.87
30-Jun-94 13,464.49 2,239.63 15,704.12
29-Jul-94 13,790.79 2,293.90 16,084.69
31-Aug-94 14,184.26 2,359.35 16,543.61
30-Sep-94 13,992.32 2,327.42 16,319.75
31-Oct-94 14,337.81 2,384.89 16,722.70
30-Nov-94 13,905.95 2,313.06 16,219.01
30-Dec-94 13,445.30 2,914.08 16,359.37
30-Dec-94 13,445.30 3,065.18 16,510.48
31-Jan-95 13,781.19 3,141.76 16,922.95
28-Feb-95 14,232.25 3,244.59 17,476.83
31-Mar-95 14,481.77 3,301.47 17,783.24
28-Apr-95 14,932.82 3,404.30 18,337.12
31-May-95 15,451.06 3,522.45 18,973.50
30-Jun-95 15,537.43 3,680.02 19,217.45
31-Jul-95 16,065.26 3,805.03 19,870.29
31-Aug-95 15,998.08 3,789.12 19,787.20
29-Sep-95 16,756.24 3,968.69 20,724.93
31-Oct-95 16,669.87 3,948.23 20,618.10
30-Nov-95 17,293.67 4,095.98 21,389.65
28-Dec-95 16,871.40 4,114.67 20,986.07
28-Dec-95 16,871.40 4,268.25 21,139.65
28-Dec-95 16,871.40 4,719.96 21,591.36
29-Dec-95 16,900.19 4,728.02 21,628.21
31-Jan-96 17,600.77 4,924.01 22,524.78
29-Feb-96 17,629.56 4,932.07 22,561.62
29-Mar-96 17,600.77 4,924.01 22,524.78
30-Apr-96 18,032.63 5,044.83 23,077.46
31-May-96 18,426.10 5,154.91 23,581.01
28-Jun-96 18,330.13 5,232.45 23,562.59
31-Jul-96 17,504.80 4,996.86 22,501.66
30-Aug-96 17,869.48 5,100.96 22,970.44
30-Sep-96 19,145.87 5,465.31 24,611.19
31-Oct-96 19,376.20 5,531.06 24,907.26
29-Nov-96 20,911.71 5,969.38 26,881.09
30-Dec-96 19,856.05 5,748.22 25,604.27
30-Dec-96 19,856.05 6,916.62 26,772.67
31-Dec-96 19,577.74 6,819.67 26,397.41
31-Jan-97 20,844.53 7,260.95 28,105.48
28-Feb-97 20,633.40 7,187.40 27,820.80
31-Mar-97 19,644.91 6,843.07 26,487.99
30-Apr-97 20,633.40 7,187.40 27,820.80
30-May-97 22,015.36 7,668.79 29,684.14
30-Jun-97 22,955.85 8,070.16 31,026.01
31-Jul-97 24,616.12 8,653.83 33,269.95
29-Aug-97 23,406.91 8,228.73 31,635.64
30-Sep-97 24,424.18 8,586.35 33,010.54
31-Oct-97 24,155.47 8,491.88 32,647.35
Average Annual Total Returns*
As of October 31, 1997
<TABLE>
<CAPTION>
Year-to- From Inception
Date 1-Year 5-Year 10-Year Inception Date
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales charge).......... 23.68% 31.08% 16.15% 15.30% 12.62% 7/16/87
Class A** (with sales charge)........... 18.73% 25.84% 15.20% 14.84% 12.17% 7/16/87
- -------------------------------------------------------------------------------------------------------
Class B (without CDSC).................. 21.38% NA NA NA 26.99% 1/8/97
Class B** (with CDSC)................... 16.38% NA NA NA 20.57% 1/8/97
- -------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 20.05% 28.77% 15.74% 12.53% 12.40%
Class B** (with CDSC)................... 17.24% NA NA NA 24.49%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
/1/ An index composed of 500 common stocks representative of the stock market
as a whole.
3 The AAL Capital Growth Fund
<PAGE>
What is the difference between growth investing and value investing, and what do
you consider yourself to be?
Value investors believe that you cannot predict a company's future growth and,
therefore, should not buy the stock of companies that have high growth
expectations. Growth investors believe that you can predict a company's future
growth and that future growth must be factored into the price paid for the
company. I am definitely in the growth camp. In the stock market the main
questions is: how much growth am I getting and what am I paying for it? If a
company is going to grow twice as fast as the market, chances are it will not
sell at less than a market multiple. A value investor will miss many companies
that are growing faster than the market because they never get cheap enough to
buy.
Have any of the Fund's holdings made significant contributions over the period?
The largest contribution to the Fund over the last six months came from the
cable TV industry. The Fund owns Comcast (up 87%), Telecommunications (up 66%),
Cox (up 57%) and US West Media Group (up 46%).
/s/ Frederick L. Plautz
- -----------------------
Frederick L. Plautz
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
Consumer Staples ........... 21% 16%
Financials ................. 18% 17%
Technology ................. 17% 21%
Health Care ................ 11% 13%
Energy ..................... 9% 10%
Capital Goods .............. 8% 8%
Consumer Cyclicals ......... 7% 5%
Communication Services ..... 4% 3%
Cash & Cash Equivalents .... 2% 3%
Transportation ............. 1% 2%
Basic Materials ............ 1% 1%
Utilities .................. 1% 1%
-----------------------
Total 100% 100%
5 Largest Holdings
% of Net Assets
10/31/97 4/30/97
-------- -------
General Electric Company ........................... 3.2% 3.2%
Multi-industry company, primarily electronics
American International Group, Inc. ................. 3.1% 3.0%
International commercial and industrial insurance
underwriter
Merck & Co., Incorporated .......................... 3.0% 3.5%
Manufactures and produces a wide range of
health services and products
Exxon Corporation .................................. 2.9% 3.1%
World's largest oil company
Intel Corporation .................................. 2.9% 3.3%
Leading manufacturer in semiconductor chips
October 31, 1997 4
<PAGE>
Growth
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL MID CAP STOCK FUND
. . . Ticker Symbol (A shares) . . . AASCX . . Ticker Symbol (B shares) . .BBSCX
. . . . . . . . NAV (A shares) . . . . . . . . $15.99 . . .NAV (B shares) . . .
. . . . . . . . . . . . . . .$15.89 . . . . . . . . . . .Number of Securities in
Portfolio . . . . . . . . 128 . . . . . . . . . . . . . . . . . .
[PHOTO]
EQUITY-ORIENTED
The AAL Mid Cap Stock Fund
How did mid cap stocks perform over the six-month period ended October 31, 1997,
and what factors affected performance?
Over the last six months, the mid cap portion of the market performed very well
on both an absolute and relative basis. The S&P/R/ MidCap 400 Index/1/ returned
over 24% during the period, while The AAL Mid Cap Stock Fund returned 26% on the
net amount invested. These returns were driven by solid corporate profitability,
restrained inflation and modest interest rates. This ideal economic environment
continues to deliver the extraordinary returns we've become accustomed to during
the past several years.
How did The AAL Mid Cap Stock Fund perform in the volatile markets late in
October?
The AAL Mid Cap Stock Fund weathered this storm well. That is not to say the
Fund did not see substantial declines in value--it did. However, the Fund's
decline during that volatile period was marginally less than both the benchmark
S&P/R/ MidCap 400 Index and the average fund in the Lipper MidCap Universe.
The last days of October were ruled by emotion not economics. I remain
essentially fully invested at all times, adding value through stock selection
and controlling risk relative to the market. I do not attempt to take advantage
of such large shifts in the market and could be swamped by such waves of
emotion-driven selling or buying. Still, the Fund was able to hold its own in
such unusual circumstances.
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($18,359)
Value of Shares Initially Purchased ($15,345)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Mid Cap Stock Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- -----------------------------------------------------------------------------
30-Jun-93 9,596.93 - 9,596.93
30-Jul-93 9,491.36 - 9,491.36
31-Aug-93 9,971.21 (0.00) 9,971.21
30-Sep-93 10,393.47 0.00 10,393.47
29-Oct-93 10,268.71 - 10,268.71
30-Nov-93 9,942.42 - 9,942.42
31-Dec-93 10,422.26 - 10,422.26
31-Jan-94 10,758.16 - 10,758.16
28-Feb-94 10,786.95 - 10,786.95
31-Mar-94 10,019.19 - 10,019.19
29-Apr-94 9,961.61 - 9,961.61
31-May-94 9,404.99 - 9,404.99
30-Jun-94 8,598.85 - 8,598.85
29-Jul-94 8,637.24 - 8,637.24
31-Aug-94 9,443.38 - 9,443.38
30-Sep-94 9,510.56 - 9,510.56
31-Oct-94 9,932.82 - 9,932.82
30-Nov-94 9,577.74 - 9,577.74
30-Dec-94 9,923.22 - 9,923.22
31-Jan-95 9,520.15 - 9,520.15
28-Feb-95 10,009.60 - 10,009.60
31-Mar-95 10,508.64 - 10,508.64
28-Apr-95 10,479.85 (0.00) 10,479.85
31-May-95 10,614.20 (0.00) 10,614.20
30-Jun-95 11,631.48 0.00 11,631.48
31-Jul-95 12,811.90 0.00 12,811.90
31-Aug-95 12,735.12 - 12,735.12
29-Sep-95 13,522.07 - 13,522.07
31-Oct-95 13,742.80 - 13,742.80
30-Nov-95 14,309.02 (0.00) 14,309.02
29-Dec-95 14,337.81 - 14,337.81
31-Jan-96 14,299.42 0.00 14,299.42
29-Feb-96 14,980.81 (0.00) 14,980.81
29-Mar-96 15,095.97 (0.00) 15,095.97
30-Apr-96 16,410.75 - 16,410.75
31-May-96 17,024.95 - 17,024.95
28-Jun-96 15,950.10 - 15,950.10
31-Jul-96 14,059.50 (0.00) 14,059.50
30-Aug-96 15,028.79 - 15,028.79
30-Sep-96 15,825.34 - 15,825.34
31-Oct-96 15,009.60 - 15,009.60
29-Nov-96 15,796.55 - 15,796.55
30-Dec-96 12,965.45 428.74 13,394.19
30-Dec-96 12,965.45 2,545.97 15,511.42
31-Dec-96 13,032.63 2,559.16 15,591.79
31-Jan-97 13,502.88 2,651.50 16,154.38
28-Feb-97 13,042.23 2,561.04 15,603.27
31-Mar-97 12,082.53 2,372.59 14,455.12
30-Apr-97 12,197.70 2,395.21 14,592.90
30-May-97 13,502.88 2,651.50 16,154.38
30-Jun-97 14,078.69 2,764.57 16,843.26
31-Jul-97 14,990.40 2,943.60 17,934.00
29-Aug-97 15,019.19 2,949.25 17,968.44
30-Sep-97 16,122.84 3,165.97 19,288.81
31-Oct-97 15,345.49 3,013.32 18,358.81
Average Annual Total Returns*
As of October 31, 1997
<TABLE>
<CAPTION>
Year-to- From Inception
Date 1-Year Inception Date
------------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge).......... 17.75% 22.31% 16.12% 6/30/93
Class A** (with sales charge)........... 13.00% 17.43% 15.03% 6/30/93
- ---------------------------------------------------------------------------------------
Class B (without CDSC).................. 16.24% NA 20.39% 1/8/97
Class B** (with CDSC)................... 11.24% NA 14.04% 1/8/97
- ---------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 18.73% 16.99% 16.70%
Class B** (with CDSC)................... 17.24% NA 24.49%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
/1/ An index comprised of 400 stocks designed to represent performance of the
mid-cap segment of the U.S. equity markets.
5 The AAL Mid Cap Stock Fund
<PAGE>
What stocks contributed most to the Fund's performance?
One of the largest single contributors to the Fund in the past six months has
been HBO & Co. (no, not the movie channel). HBO is the world's largest supplier
of health care information systems, the computer software doctors and hospitals
use to track patients, their treatments, their medications and the outcomes of
those treatments and medications. HBO's systems help doctors and hospitals
collect, store and analyze this data to provide better care and improve billing
procedures. HBO's stock price increased by over 60% during this six-month
period.
What is your outlook for the mid cap market?
The domestic economy continues to exhibit reasonable growth and restrained
inflation. As long as this environment continues, mid cap stocks should provide
returns above their historical averages. Since most mid cap companies do very
little business in Asia, the recent turmoil there should not have a substantial
impact on their ability to grow. However, the recent volatility in the markets
was an example of the speed and magnitude with which today's financial markets
can change when even the perception of economic conditions becomes more
negative.
/s/ Michael R. Hochholzer
- ---------------------------------
Michael R. Hochholzer
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
Financials................. 15% 13%
Consumer Cyclicals......... 13% 13%
Technology................. 13% 15%
Capital Goods.............. 12% 8%
Consumer Staples........... 10% 14%
Health Care................ 9% 11%
Energy..................... 9% 7%
Utilities.................. 8% 7%
Basic Materials............ 5% 4%
Transportation............. 3% 2%
Communication Services..... 2% 1%
Cash & Cash Equivalents.... 1% 5%
-------------------------
Total....... 100% 100%
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
U.S. Office Products Company................................ 1.5% 1.2%
Supplies office products to corporate, commercial and
industrial customers
HBO & Company............................................... 1.5% 1.1%
Designs and sells computerized information systems to the
health care industry
Starwood Lodging Trust...................................... 1.4% NA*
Owner and operator of hotels and resorts worldwide
Applied Power, Inc.......................................... 1.4% 1.2%
Provides tools, equipment, systems and consumable items to
a variety of end users
Franklin Resources, Inc..................................... 1.4% 1.1%
Operates mutual funds
*Security was not owned on 4/30/97
October 31, 1997 6
<PAGE>
Growth
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL SMALL CAP STOCK FUND
. . . . . . . . . . . . . . Ticker Symbol (A shares) . . . . . . . . AASMX . . .
. . . . . . . . . . . Ticker Symbol (B shares) . . . . . . . . BBSMX . . . . .
. . . . . . . . . NAV (A shares) . . . . . . . . $13.46 . . . . . . . . . . . .
. . . NAV (B shares) . . . . . . . . $13.38 . . . . . . . . . . . . . Number
of Securities in Portfolio . . . . . . . . 145 . . . . . . . . . . . . . . . . .
[PHOTO]
EQUITY-ORIENTED
The AAL Small Cap Stock Fund
How did small cap stocks perform over the six-month period ended October 31,
1997, and what factors affected performance?
Small caps outperformed larger caps during the last six months for several
reasons. The most important is that it appears that the earnings growth in
larger cap stocks may be slowing as the worldwide economic recovery ages. Larger
cap companies have benefited from broader international exposure for their
products and that has helped their growth rates in recent years. We recently
experienced some turmoil in the stock market due to the currency and economic
problems in Southeast Asia. This was one of the fast-growing regions for many
large companies. If these problems continue, it will affect the earnings of
bigger companies more than smaller companies. This summer we saw earnings
disappointments from some longtime favorite large cap stocks such as Gillette
and Coca-Cola. Thus far, smaller companies have not had a slowing in their
earnings growth and that has fueled the better stock performance. A second
reason for this outperformance was that smaller cap stocks were cheaper than
large cap stocks. The valuation measures of smaller cap stocks, such as
price-to-earnings ratios and price-to-book value, were far less than larger cap
stocks. Smaller cap stocks have just been doing a little catching up to the big
guys in terms of valuation.
It seems that technology stocks get a lot of publicity whenever small cap stocks
are discussed. Why is this so?
There are a lot of smaller technology companies that offer very exciting
opportunities for investors. Some of these companies offer exciting productivity
improvements over
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($13,229)
Value of Shares Initially Purchased ($12,917)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Small Cap Stock Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
1-Jul-96 9,596.93 - 9,596.93
31-Jul-96 9,165.07 - 9,165.07
30-Aug-96 10,316.70 - 10,316.70
30-Sep-96 10,786.95 - 10,786.95
31-Oct-96 10,441.46 (0.00) 10,441.46
29-Nov-96 10,681.38 (0.00) 10,681.38
30-Dec-96 10,614.20 256.27 10,870.47
31-Dec-96 10,748.56 259.51 11,008.07
31-Jan-97 10,786.95 260.44 11,047.38
28-Feb-97 10,316.70 249.08 10,565.78
31-Mar-97 9,654.51 233.10 9,887.61
30-Apr-97 9,443.38 228.00 9,671.38
30-May-97 10,882.92 262.75 11,145.67
30-Jun-97 11,631.48 280.83 11,912.30
31-Jul-97 12,159.31 293.57 12,452.88
29-Aug-97 12,533.59 302.61 12,836.20
30-Sep-97 13,464.49 325.08 13,789.57
31-Oct-97 12,917.47 311.88 13,229.34
Average Annual Total Returns*
As of October 31, 1997
<TABLE>
<CAPTION>
Year-to- From Inception
Date 1-Year Inception Date
----------------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge).......... 20.18% 26.70% 27.20% 7/1/96
Class A** (with sales charge)........... 15.34% 21.67% 23.34% 7/1/96
- ----------------------------------------------------------------------------------------
Class B (without CDSC).................. 19.79% NA 24.93% 1/8/97
Class B** (with CDSC)................... 14.79% NA 18.53% 1/8/97
- ----------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 20.22% 22.70% 29.33%
Class B** (with CDSC)................... 19.89% NA 28.38%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
/1/ An index comprised of 600 stocks designed to represent performance of the
small-cap segment of the U.S. equity markets.
7 The AAL Small Cap Stock Fund
<PAGE>
existing technologies. These smaller technology companies can offer bigger
rewards in shorter time periods than do many other smaller companies. However,
smaller technology companies also possess higher risk than do most other small
companies. Technology tends to change very fast and for a smaller company it can
be very difficult to hit what may be a moving target. It may also require a lot
of money to research and develop various technologies and that can be a limiting
factor for these smaller companies. Smaller technology stocks also get a lot of
attention because their stock price movements can be so dramatic. When tech
companies hit that moving target and are successful, their stocks can climb very
fast. But when they miss their targets, the stock price fall is equally
dramatic.
Have you made any major changes to the Fund's sector weightings over the period?
The sector weightings of the Fund have not changed a great deal in the past six
months. The Fund's biggest weightings are capital goods, consumer cyclicals and
technology, with each sector at about 16% of the portfolio. The sector
weightings of the Fund are very similar to the S&P/(R)/ SmallCap 600 Index/1/.
My thought process is not to guess at what the next "hot sector" will be, but
rather to broadly diversify across many sectors. My time and energy is spent
finding what I think are the best companies in each of the sectors.
/s/ Kevin A. Schmitting
- ----------------------------------
Kevin A. Schmitting
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
Capital Goods............ 16% 13%
Consumer Cyclicals....... 16% 18%
Technology............... 16% 20%
Financials............... 12% 9%
Health Care.............. 11% 14%
Energy................... 8% 6%
Consumer Staples......... 7% 8%
Transportation........... 4% 4%
Basic Materials.......... 4% 3%
Utilities................ 3% 3%
Cash & Cash Equivalents.. 2% 2%
Communication Services... 1% 0%
-------------------------------
Total 100% 100%
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
Tower Automotive, Inc...................................... 1.8% 1.4%
Designs and produces high-quality, engineered metal
stampings and assemblies
General Cable Corporation.................................. 1.5% NA*
Designs, develops, manufactures, markets and distributes
copper wire and cable products for the communications and
electrical markets
Hugoton Energy Corporation................................. 1.5% 0.9%
Develops, produces, acquires and explores for natural gas
and oil in Hugoton Field
Chancelor Media Corporation................................ 1.4% 1.4%
Owns and operates 99 radio stations in 21 markets
CMAC Investment Corporation................................ 1.4% 0.5%
Provides private mortgage insurance coverage
*Security was not owned on 4/30/97
October 31, 1997 8
<PAGE>
Growth
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL INTERNATIONAL FUND
...Ticker Symbol (A shares)...AAITX...Ticker Symbol (B shares)...BBITX
...NAV (A shares)...$11.41...NAV (B shares)...$11.33...Number of Securities in
Portfolio....141.....
[PHOTO]
EQUITY-ORIENTED
The AAL International Fund
How did the overall international market perform over the six-month period ended
October 31, 1997, and what factors affected performance?
At the beginning of the period, European stocks performed well, supported by
positive European economic and monetary union ("EMU") developments, easing
interest rate concerns and a stronger dollar. In August, the release of weak
economic data and reemerging rate concerns caused European stocks to decline.
Equities recovered in September, but plummeted in October in reaction to the
deepening currency crisis in Southeast Asia. The crisis began early this summer
in Thailand and quickly spread to several neighboring countries. It culminated
in October with the Hong Kong market collapse, which in turn caused most world
markets to plunge. In Japan, stock performance was additionally hampered by
further delays in the long-awaited economic recovery. As has been true for quite
a while, smaller cap stocks--and there are many in The AAL International Fund's
portfolio--underperformed larger cap stocks.
Have you made major changes to any sector weightings or your investments in any
particular country or region?
The AAL International Fund's portfolio composition has not undergone any major
change in its sector, country or regional weightings. My investment decisions
are primarily based on my assessment of the value of individual securities in
relation to market price. Thus, changes in the Fund's composition tend to
reflect specific opportunities found in various sectors and markets rather than
a pre-determined allocation schedule.
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($11,372)
Value of Shares Initially Purchased ($10,950)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL International Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
1-Aug-95 9,596.93 - 9,596.93
31-Aug-95 9,616.12 - 9,616.12
29-Sep-95 9,577.74 - 9,577.74
31-Oct-95 9,558.54 (0.00) 9,558.54
30-Nov-95 9,558.54 (0.00) 9,558.54
28-Dec-95 9,683.30 23.03 9,706.33
28-Dec-95 9,683.30 23.35 9,706.65
29-Dec-95 9,712.09 23.42 9,735.51
31-Jan-96 10,124.76 24.41 10,149.17
29-Feb-96 10,086.37 24.32 10,110.69
29-Mar-96 10,239.92 24.69 10,264.61
30-Apr-96 10,633.40 25.64 10,659.04
31-May-96 10,575.82 25.50 10,601.32
28-Jun-96 10,623.80 25.62 10,649.42
31-Jul-96 10,268.71 24.76 10,293.47
30-Aug-96 10,297.50 24.83 10,322.33
30-Sep-96 10,489.44 25.29 10,514.73
31-Oct-96 10,585.41 25.52 10,610.94
29-Nov-96 10,959.69 26.42 10,986.12
30-Dec-96 10,479.85 346.10 10,825.94
30-Dec-96 10,479.85 404.15 10,883.99
31-Dec-96 10,518.23 405.63 10,923.86
31-Jan-97 10,710.17 413.03 11,123.20
28-Feb-97 10,950.10 422.28 11,372.38
31-Mar-97 10,930.90 421.54 11,352.44
30-Apr-97 10,911.71 420.80 11,332.51
30-May-97 11,410.75 440.04 11,850.79
30-Jun-97 11,756.24 453.37 12,209.61
31-Jul-97 11,833.01 456.33 12,289.34
29-Aug-97 11,449.14 441.52 11,890.66
30-Sep-97 11,612.28 447.82 12,060.10
31-Oct-97 10,950.10 422.28 11,372.38
% Average Annual Total Returns*
As of October 31, 1997
Year-to- From Inception
Date 1-Year Inception Date
-------- ------ --------- ---------
Class A (without sales charge).......... 4.11% 7.18% 7.83% 8/1/95
Class A** (with sales charge)........... (0.09)% 2.89% 5.88% 8/1/95
- -------------------------------------------------------------------------------
Class B (without CDSC).................. 3.19% NA 3.95% 1/8/97
Class B** (with CDSC)................... (1.81)% NA (2.23)% 1/8/97
- -------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 5.95% 10.06% 9.03%
Class B** (with CDSC)................... 4.56% NA 6.34%
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
9 The AAL International Fund
<PAGE>
ANNUAL REPORT -- THE AAL INTERNATIONAL FUND
[WORLD MAP APPEARS HERE]
Sweden 1.3%
Norway 0.4%
Denmark 0.4%
United Kingdom 4.4%
South Korea 0.8%
Finland 0.4%
Germany 4.7%
Netherlands 1.5%
Austria 1.0%
Belgium 1.0%
Canada 1.9%
Luxembourg 1.0%
France 9.0%
Japan 18.1%
Spain 0.8%
Portugal 0.6%
Hong Kong 1.7%
Mexico 1.1%
Singapore 1.8%
Switzerland 7.5%
Thailand 0.2%
Italy 2.0%
Israel 0.6%
Australia 0.5%
Miscellaneous 1.4%
Argentina 0.4%
New Zealand 2.1%
Did the Fund's fairly high cash position help or hurt us over the period?
The Fund's cash position should be viewed as a by-product of my risk averse
investment approach: in strong bull markets, such as those experienced in Europe
over the past few months, I am unwilling to purchase stocks that are not selling
at a discount to fair value. In bear markets, similar to that experienced in
Japan (where there is "value" to be found for the patient investor), the cash
position protects capital. Over the period, the fairly large cash holdings
lowered the risk profile and minimized the volatility of the Fund when compared
to that of foreign market indices.
Were there stocks that did particularly well for us this period?
Several holdings performed well for The AAL International Fund during the
period: among large cap stocks, Philips Electronics NV ADR, a Dutch electronics
and media concern, surged 46.5% in U.S. dollar terms. Among small cap stocks,
Vaisala Oy 'A', a Finnish technology group, gained 39.9% in U.S. dollar terms.
Additionally, SAirgroup AG, the Swiss airline company, advanced 37.8% over the
period in U.S. dollar terms.
/s/ JEAN-MARIE EVEILLARD
- ---------------------------
Jean-Marie Eveillard
PORTFOLIO MANAGER
Fund Allocations
% of Net Assets
---------------
Common Stocks................................. 66.6%
Commercial Paper.............................. 19.9%
Long-Term Fixed-Income Obligations............ 6.9%
Preferred Stocks.............................. 6.6%
-------------
Total 100.0%
5 Largest Holdings
%of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
Buderus AG (Germany).............................1.7% 1.5%
Manufactures a variety of heating products
Secom Co., Ltd. (Japan)..........................1.6% 1.5%
Pioneer in the security service industry
Kuehne & Nagel International
AG Bearer (Switzerland).......................... 1.5% 1.1%
Transports freight worldwide
Antofagasta Holdings plc.........................1.4% 1.1%
(United Kingdom)
Interests in mining, transportation, banking,
forestry and natural resources in Chile
Sika Finanz AG Bearer
(Switzerland)....................................1.4% 1.3%
Produces specialty products for water
management
October 31, 1997 10
<PAGE>
Growth
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL EQUITY INCOME FUND
. . . Ticker Symbol (A shares) . . . AAUTX . . . Ticker Symbol (B shares)
. . . NA . . . NAV (A shares) . . . $12.39 . . . NAV(B shares) . . . $12.41
. . . Number of Securities in Portfolio . . . 88 . . .
[PHOTO]
EQUITY-ORIENTED
The AAL Equity Income Fund
How did the overall market perform for the period ended October 31, 1997, and
how did equity income funds do in this environment?
This period demonstrated quite vividly the benefits of owning a diversified mix
of different funds. The major large cap indices (Dow Jones Average and the S&P
500/R/ Index) were down sharply for the three months ended October 31. Due to
its more conservative style, The AAL Equity Income Fund was about flat for the
quarter, thus significantly outperforming the major indices. The Fund also
significantly outperformed the average equity income fund for the same period.
The fact that the Fund is not yet a pure equity income fund and still has an
overweighting in utility stocks helped performance versus other equity income
funds during the quarter.
What major changes have you made to the portfolio since September 1, 1997, when
the investment focus was changed?
We initially indicated that the transition period from a utilities fund to an
equity income fund might take 6-12 months to accomplish. However, we have been
able to move more quickly than originally anticipated thanks in large part to
weakness in the equity markets. This allowed us to find attractive investments
at reasonable prices to replace existing utility holdings. We are well over
halfway toward a complete transition to an equity income
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($13,370)
Value of Shares Initially Purchased ($11,890)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Equity Income Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
18-Mar-94 9,596.93 - 9,596.93
31-Mar-94 9,520.15 - 9,520.15
29-Apr-94 9,548.94 - 9,548.94
31-May-94 9,337.81 (0.00) 9,337.81
30-Jun-94 9,040.31 76.78 9,117.08
29-Jul-94 9,299.42 78.98 9,378.40
31-Aug-94 9,309.02 79.06 9,388.08
30-Sep-94 8,973.13 153.63 9,126.76
31-Oct-94 9,069.10 155.28 9,224.37
30-Nov-94 8,934.74 152.98 9,087.72
30-Dec-94 8,685.22 226.79 8,912.01
31-Jan-95 9,049.90 236.32 9,286.22
28-Feb-95 9,040.31 236.07 9,276.37
31-Mar-95 8,896.35 311.09 9,207.44
30-Apr-95 9,088.29 317.80 9,406.09
31-May-95 9,548.94 333.91 9,882.85
30-Jun-95 9,539.35 413.03 9,952.38
31-Jul-95 9,644.91 417.60 10,062.51
31-Aug-95 9,683.30 419.26 10,102.56
29-Sep-95 10,163.15 530.15 10,693.30
31-Oct-95 10,297.50 537.16 10,834.67
30-Nov-95 10,441.46 544.67 10,986.13
28-Dec-95 10,825.34 655.57 11,480.91
29-Dec-95 10,854.13 657.32 11,511.44
31-Jan-96 11,065.26 670.10 11,735.36
29-Feb-96 10,806.14 654.41 11,460.55
29-Mar-96 10,623.80 734.97 11,358.77
30-Apr-96 10,460.65 723.68 11,184.34
31-May-96 10,489.44 725.68 11,215.12
28-Jun-96 10,758.16 836.61 11,594.77
31-Jul-96 10,249.52 797.06 11,046.58
30-Aug-96 10,239.92 796.31 11,036.24
30-Sep-96 10,163.15 904.12 11,067.27
31-Oct-96 10,556.62 939.12 11,495.74
29-Nov-96 10,950.10 974.12 11,924.22
30-Dec-96 11,026.87 1,101.14 12,128.01
31-Dec-96 10,969.29 1,095.39 12,064.68
31-Jan-97 11,084.45 1,106.89 12,191.34
28-Feb-97 11,151.63 1,113.60 12,265.23
31-Mar-97 10,729.37 1,166.43 11,895.79
30-Apr-97 10,882.92 1,183.12 12,066.04
30-May-97 11,477.93 1,247.80 12,725.73
30-Jun-97 11,737.04 1,377.06 13,114.10
31-Jul-97 11,957.77 1,402.95 13,360.73
29-Aug-97 11,487.52 1,347.78 12,835.31
30-Sep-97 12,015.36 1,495.49 13,510.85
31-Oct-97 11,890.60 1,479.96 13,370.56
<TABLE>
<CAPTION>
Average Annual Total Returns*
As of October 31, 1997
Year-to- From Inception
Date 1-Year Inception Date
-----------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge).......... 10.82% 16.31% 9.58% 3/17/94
Class A** (with sales charge)........... 6.36% 11.64% 8.34% 3/17/94
- -----------------------------------------------------------------------------------
Class B (without CDSC).................. 10.38% NA 12.95% 1/8/97
Class B** (with CDSC)................... 5.38% NA 6.68% 1/8/97
- -----------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 7.47% 17.21% 8.87%
Class B** (with CDSC)................... 6.63% NA 9.24%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
11 The AAL Equity Income Fund
<PAGE>
fund. The Fund's concentration in utility-related investments has shrunk from
85% to less than 50% through the end of October.
How does this Fund now compare to AAL's other equity Funds as far as risk is
concerned?
The goal of The AAL Equity Income Fund is to be positioned as a more
conservative alternative to AAL's other equity Funds which have more of a growth
focus. This was also the goal of The AAL Utilities Fund, but due to the changes
in the utility industry, the Fund was proving to be much less conservative than
was our goal. The change in focus of the Fund to equity income was to reposition
the Fund as a conservative and less risky alternative to AAL's growth oriented
equity Funds.
In recent years, has the importance of "the dividend" decreased as a factor in
equity investing? If so, will the October market declines bring it back into
prominence?
The answer is yes, but any sustained correction in the markets will bring
dividend yields back to prominence very quickly. Remember, investors are
interested in the total return of their investments over the long term and there
are two components to total return, capital appreciation and income (dividends).
In recent years, there has been such substantial capital appreciation in the
stock markets that dividend yields have declined substantially as the price of
stocks has grown much more rapidly than dividends. As a result, the average
dividend yield for stocks in the major market indices has declined to well below
2.0%. While the recent market declines have made dividend yields rise, they are
still below 2.0%. Income becomes a much more important part of total return when
the stock market declines or is sluggish. As a result, funds that provide some
income are much more conservative and defensive than non-dividend or low-
dividend paying growth funds.
/s/ Lewis A. Bohannon
- --------------------------------
Lewis A. Bohannon
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
Utilities....................................................... 31% 57%
Communication Services.......................................... 20% 35%
Financials...................................................... 13% 0%
Energy.......................................................... 8% 1%
Cash & Cash Equivalents......................................... 6% 2%
Consumer Staples................................................ 6% 0%
Technology...................................................... 4% 0%
U.S. Treasury Securities........................................ 3% 3%
Capital Goods................................................... 3% 0%
Utility Bonds................................................... 2% 2%
Consumer Cyclicals.............................................. 2% 0%
Health Care..................................................... 1% 0%
Basic Materials................................................. 1% 0%
----------------
Total 100% 100%
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
Telefonica de Espana ADR.......................... 2.9% 4.0%
Supplies telephone service in Spain
MCI Communications
Corporation....................................... 2.8% 3.4%
Diversified communications company
Worldcom Inc...................................... 2.8% 2.2%
Offers domestic and international voice,
data and video products and services
Pinnacle West Capital
Corporation....................................... 2.6% 2.8%
Utility holding company for Arizona Public
Service Company
NIPSCO Industries
Incorporated...................................... 2.5% 3.3%
Holding company whose subsidiary provides
electricity and gas to 1/3 of Indiana
October 31, 1997 12
<PAGE>
Income
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL BOND FUND
. . . Ticker Symbol (A shares) . . . AAINX . . . Ticker Symbol (B shares)
. . . NA . . . NAV (A shares) . . . $9.99 . . . NAV (B shares)
. . . $10.00 . . . Number of Securities in Portfolio . . . 44
[PHOTO]
INCOME-ORIENTED
The AAL Bond Fund
How did the overall bond market perform over the six-month period ended October
31, 1997, and what factors affected performance?
We have had stable, attractive returns in the bond market lately. Since the end
of 1996, the bond market has had a one or two percent price return, which when
coupled with the monthly dividend income totals about six or seven percent. The
primary factors driving returns have been the coupon income, averaging about six
percent a year, and positive price performance resulting primarily from
declining yields.
Yields on investment grade bonds seem low by recent historical standards. Do you
see them rising in the near future?
I believe the general level of interest rates is more likely to decrease than
increase over the next three to twelve months; therefore, I do not expect yields
on investment grade bonds to rise any time soon.
So, how do you plan to position the Fund?
More conservatively than usual. I expect corporate bond prices to continue to
lag those of U.S. Treasuries and will be watching for opportunities to buy
corporate bonds at attractive prices.
Have you made any major changes to the Fund's sector weightings or your
investment strategy over the period?
We have become more defensive and reduced our corporate bond and mortgage-backed
bond holdings, and have increased our U.S. Treasury bond holdings.
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($20,325)
Value of Shares Initially Purchased ($9,587)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Bond Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
16-Jul-87 9,596.93 - 9,596.93
31-Jul-87 9,462.57 16.98 9,479.55
31-Aug-87 9,280.23 61.08 9,341.31
30-Sep-87 8,963.53 114.87 9,078.40
31-Oct-87 9,222.65 180.56 9,403.21
30-Nov-87 9,213.05 245.56 9,458.61
30-Dec-87 9,241.84 312.40 9,554.24
31-Jan-88 9,500.96 384.57 9,885.53
29-Feb-88 9,510.56 462.22 9,972.78
31-Mar-88 9,357.01 529.43 9,886.43
30-Apr-88 9,251.44 591.57 9,843.01
31-May-88 9,069.10 652.81 9,721.91
1-Jun-88 9,107.49 712.15 9,819.64
30-Jun-88 9,193.86 787.07 9,980.93
29-Jul-88 9,097.89 844.52 9,942.41
31-Aug-88 9,040.31 914.44 9,954.75
30-Sep-88 9,165.07 999.97 10,165.04
31-Oct-88 9,251.44 1,084.93 10,336.37
30-Nov-88 9,078.69 1,138.84 10,217.53
30-Dec-88 9,001.92 1,203.32 10,205.24
31-Jan-89 9,049.90 1,288.98 10,338.88
28-Feb-89 8,915.55 1,342.34 10,257.88
31-Mar-89 8,857.97 1,413.14 10,271.10
30-Apr-89 8,953.93 1,500.65 10,454.58
31-May-89 9,107.49 1,610.66 10,718.14
30-Jun-89 9,261.04 1,715.15 10,976.19
31-Jul-89 9,347.41 1,809.60 11,157.01
31-Aug-89 9,174.66 1,854.09 11,028.76
29-Sep-89 9,165.07 1,925.77 11,090.84
31-Oct-89 9,289.83 2,032.60 11,322.42
30-Nov-89 9,299.42 2,110.90 11,410.32
31-Dec-89 9,280.23 2,179.52 11,459.75
31-Jan-90 9,117.08 2,223.97 11,341.06
28-Feb-90 9,097.89 2,294.47 11,392.36
30-Mar-90 9,040.31 2,357.24 11,397.54
30-Apr-90 8,877.16 2,396.81 11,273.97
31-May-90 9,059.50 2,527.29 11,586.79
29-Jun-90 9,126.68 2,622.72 11,749.40
31-Jul-90 9,193.86 2,725.98 11,919.84
31-Aug-90 9,030.71 2,758.80 11,789.51
28-Sep-90 9,040.31 2,836.79 11,877.10
31-Oct-90 9,088.29 2,939.28 12,027.57
30-Nov-90 9,203.45 3,058.07 12,261.52
31-Dec-90 9,270.63 3,162.44 12,433.08
31-Jan-91 9,318.62 3,260.79 12,579.40
28-Feb-91 9,328.21 3,344.94 12,673.15
29-Mar-91 9,328.21 3,419.76 12,747.97
30-Apr-91 9,366.60 3,523.90 12,890.50
31-May-91 9,366.60 3,606.95 12,973.55
28-Jun-91 9,299.42 3,657.84 12,957.26
31-Jul-91 9,347.41 3,766.41 13,113.82
30-Aug-91 9,481.77 3,901.84 13,383.61
30-Sep-91 9,616.12 4,041.78 13,657.90
31-Oct-91 9,692.90 4,156.38 13,849.28
30-Nov-91 9,712.09 4,243.32 13,955.41
27-Dec-91 9,894.43 4,341.10 14,235.53
31-Dec-91 9,942.42 4,446.89 14,389.31
31-Jan-92 9,712.09 4,425.71 14,137.81
28-Feb-92 9,712.09 4,503.46 14,215.56
31-Mar-92 9,606.53 4,539.01 14,145.54
30-Apr-92 9,616.12 4,623.87 14,240.00
29-May-92 9,731.29 4,756.47 14,487.75
30-Jun-92 9,846.45 4,898.70 14,745.15
31-Jul-92 10,019.19 5,066.18 15,085.37
31-Aug-92 10,057.58 5,167.22 15,224.80
30-Sep-92 10,143.95 5,292.34 15,436.29
30-Oct-92 9,932.82 5,259.78 15,192.60
30-Nov-92 9,827.26 5,286.69 15,113.95
31-Dec-92 9,894.43 5,377.85 15,272.29
31-Dec-92 9,894.43 5,459.12 15,353.55
29-Jan-93 10,038.39 5,613.56 15,651.95
28-Feb-93 10,163.15 5,763.41 15,926.56
31-Mar-93 10,153.55 5,844.43 15,997.99
30-Apr-93 10,182.34 5,939.36 16,121.70
28-May-93 10,115.16 5,972.38 16,087.54
30-Jun-93 10,249.52 6,138.20 16,387.72
1-Jul-93 10,182.34 6,210.46 16,392.81
30-Jul-93 10,163.15 6,274.47 16,437.62
31-Aug-93 10,307.10 6,443.93 16,751.03
30-Sep-93 10,287.91 6,508.62 16,796.52
29-Oct-93 10,278.31 6,573.42 16,851.73
30-Nov-93 10,086.37 6,531.63 16,618.01
31-Dec-93 9,913.63 6,715.13 16,628.76
31-Dec-93 9,913.63 6,790.87 16,704.50
31-Jan-94 10,000.00 6,925.59 16,925.59
28-Feb-94 9,731.29 6,814.98 16,546.27
31-Mar-94 9,443.38 6,690.41 16,133.79
29-Apr-94 9,299.42 6,661.97 15,961.40
31-May-94 9,241.84 6,696.90 15,938.74
30-Jun-94 9,184.26 6,730.00 15,914.26
29-Jul-94 9,280.23 6,874.21 16,154.44
31-Aug-94 9,251.44 6,937.05 16,188.49
30-Sep-94 9,078.69 6,887.10 15,965.79
31-Oct-94 9,011.52 6,916.16 15,927.68
30-Nov-94 8,915.55 6,926.17 15,841.72
30-Dec-94 8,905.95 7,001.76 15,907.71
30-Dec-94 8,905.95 7,005.87 15,911.83
31-Jan-95 9,001.92 7,171.22 16,173.14
28-Feb-95 9,136.28 7,363.93 16,500.21
31-Mar-95 9,155.47 7,467.68 16,623.15
28-Apr-95 9,222.65 7,605.49 16,828.14
31-May-95 9,462.57 7,897.62 17,360.19
30-Jun-95 9,472.17 7,993.34 17,465.51
31-Jul-95 9,385.80 8,006.26 17,392.05
31-Aug-95 9,443.38 8,139.32 17,582.70
29-Sep-95 9,481.77 8,256.39 17,738.15
31-Oct-95 9,548.94 8,405.84 17,954.78
30-Nov-95 9,644.91 8,577.96 18,222.87
29-Dec-95 9,731.29 8,736.13 18,467.42
31-Jan-96 9,731.29 8,829.89 18,561.17
29-Feb-96 9,472.17 8,681.05 18,153.22
29-Mar-96 9,347.41 8,648.36 17,995.77
30-Apr-96 9,232.25 8,635.65 17,867.89
31-May-96 9,155.47 8,653.28 17,808.75
28-Jun-96 9,213.05 8,793.14 18,006.20
31-Jul-96 9,193.86 8,875.01 18,068.87
30-Aug-96 9,136.28 8,911.66 18,047.94
30-Sep-96 9,232.25 9,102.17 18,334.42
31-Oct-96 9,385.80 9,347.94 18,733.74
29-Nov-96 9,500.96 9,555.04 19,056.00
31-Dec-96 9,366.60 9,517.80 18,884.40
31-Jan-97 9,357.01 9,603.58 18,960.59
28-Feb-97 9,328.21 9,669.08 18,997.30
31-Mar-97 9,193.86 9,626.79 18,820.64
30-Apr-97 9,241.84 9,774.81 19,016.65
30-May-97 9,270.63 9,899.56 19,170.20
30-Jun-97 9,337.81 10,072.15 19,409.97
31-Jul-97 9,529.75 10,378.06 19,907.81
29-Aug-97 9,414.59 10,345.52 19,760.10
30-Sep-97 9,500.96 10,542.36 20,043.32
31-Oct-97 9,587.33 10,737.74 20,325.07
<TABLE>
<CAPTION>
Average Annual Total Returns*
As of October 31, 1997
Year-to- From Inception
Date 1-Year 5-Year 10-Year Inception Date
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales charge)............. 7.63% 8.49% 5.99% 8.01% 7.56% 7/16/87
Class A** (with sales charge).............. 3.29% 4.13% 5.13% 7.57% 7.13% 7/16/87
- --------------------------------------------------------------------------------------------------------
Class B (without CDSC)..................... 7.48% NA NA NA 9.45% 1/8/97
Class B** (with CDSC)...................... 2.48% NA NA NA 3.22% 1/8/97
- --------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge).............. 1.86% 4.96% 4.51% 7.80% 7.04%
Class B** (with CDSC)...................... 1.06% NA NA NA 1.63%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
13 The AAL Bond Fund
<PAGE>
Were there any bonds that really stood out over the period?
Mortgage-backed securities in general performed well during the period and we
were over-weighted in that sector until recently. One significant success was
that of an investment in a bond issued to finance an oil drilling project in
Venezuela, which was jointly owned by the Venezuelan state oil company and
Conoco (a wholly owned subsidiary of E.I. Du Pont de Nemours). These bonds
outperformed a similar maturity Treasury bond by about 2.5%--which is a large
margin in an investment grade bond.
/s/ Michael R. Hilt
- ------------------------
Michael R. Hilt
PORTFOLIO MANAGER
Credit Quality
[PIE CHARTS APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
AAA............................................................. 63.7% 61.0%
A............................................................... 14.4% 14.0%
BBB............................................................. 12.6% 17.0%
AA.............................................................. 9.3% 8.0%
------------------
Total 100.0% 100.0%
Average Quality: AA
Average Maturity: 6.75 years
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
U.S.Treasury Notes......................................... 14.3% NA*
Coupon Rate: 5.500%
Maturity Date: 12/31/2000
U.S. Treasury Notes........................................ 12.5% NA*
Coupon Rate: 7.875%
Maturity Date: 11/15/2004
Countrywide Home Loans..................................... 4.1% NA*
Coupon Rate: 6.750%
Maturity Date: 11/25/2007
PNC Mortgage Securities
Corporation................................................ 3.9% NA*
Coupon Rate: 6.750%
Maturity Date: 10/25/2027
Delta Air Lines, Inc....................................... 3.5% 3.19%
Coupon Rate: 10.500%
Maturity Date: 4/30/2016
*Security was not owned on 4/30/97
October 31, 1997 14
<PAGE>
Income
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL MUNICIPAL BOND FUND
. . . . . . . . . . . . . . Ticker Symbol (A shares) . . . . . . . . AAMBX . . .
. . . . . . . . . . . . . Ticker Symbol (B shares) . . . . . . . . NA . . . . .
. . . . . . . . . . . NAV (A shares) . . . . . . . . $11.46 . . . . . . . . . .
. . . . . . NAV (B shares) . . . . . . . . $11.46 . . . . . . . . . . . . . . .
. Number of Securities in Portfolio . . . . . . . . 125 . . . . . . . . . . . .
[PHOTO]
INCOME-ORIENTED
The AAL Municipal Bond Fund
How did the overall municipal bond market perform over the six-month period
ended October 31, 1997, and what factors affected performance?
There is good news on two fronts. First, the municipal market performed very
well over the last six months as interest rates moved lower across the yield
curve. Ten-year maturity municipal yields fell approximately one half of one
percent (or 50 basis points) since our last report. Moderate economic growth,
low inflation and concern over stock prices all helped the bond market during
this period. The other good news is that in spite of the favorable performance
of the municipal market, the Treasury market did even better. U.S. government
debt also benefited from a declining budget deficit and strong foreign demand.
As a result, municipal yields relative to Treasury yields are at their cheapest
level of the year, making municipal bonds currently attractive. As we move into
1998, I would expect the municipal market to "catch-up" with the taxable market
providing, hopefully, even more favorable performance in the future.
Why is your turnover rate greater than many other similar funds?
In my opinion, all financial markets, to a degree, are inefficient and provide
opportunities to enhance value and performance. The municipal market offers more
opportunities than most other developed markets for a number of reasons, not the
least of which is that it has traditionally been dominated by individuals rather
than institutions, such as pension funds, who have invested vast resources in
order to identify and capitalize on market inefficiencies. I have the time and
resources to identify securities or sectors of
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($19,689)
Value of Shares Initially Purchased ($10,998)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL Municipal Bond Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
16-Jul-87 9,596.93 - 9,596.93
31-Jul-87 9,510.56 9.67 9,520.23
31-Aug-87 9,462.57 9.63 9,472.20
30-Sep-87 9,030.71 9.19 9,039.90
31-Oct-87 8,963.53 116.44 9,079.97
30-Nov-87 9,222.65 119.81 9,342.46
31-Dec-87 9,251.44 210.66 9,462.10
31-Jan-88 9,644.91 219.62 9,864.54
29-Feb-88 9,702.50 220.93 9,923.43
31-Mar-88 9,328.21 348.92 9,677.14
30-Apr-88 9,366.60 350.36 9,716.96
31-May-88 9,385.80 351.07 9,736.87
30-Jun-88 9,366.60 487.46 9,854.06
29-Jul-88 9,395.39 488.96 9,884.35
31-Aug-88 9,357.01 486.96 9,843.96
30-Sep-88 9,366.60 639.74 10,006.34
31-Oct-88 9,443.38 644.98 10,088.36
30-Nov-88 9,318.62 636.46 9,955.08
31-Dec-88 9,366.60 796.95 10,163.56
31-Jan-89 9,414.59 801.04 10,215.62
28-Feb-89 9,289.83 790.42 10,080.25
31-Mar-89 9,222.65 944.87 10,167.52
30-Apr-89 9,347.41 957.66 10,305.06
31-May-89 9,500.96 973.39 10,474.35
30-Jun-89 9,558.54 1,140.47 10,699.01
31-Jul-89 9,606.53 1,146.19 10,752.72
31-Aug-89 9,491.36 1,132.45 10,623.82
29-Sep-89 9,414.59 1,282.52 10,697.11
31-Oct-89 9,481.77 1,291.68 10,773.44
30-Nov-89 9,548.94 1,300.83 10,849.77
6-Dec-89 9,558.54 1,307.61 10,866.15
29-Dec-89 9,558.54 1,470.96 11,029.50
31-Jan-90 9,433.78 1,451.76 10,885.55
28-Feb-90 9,481.77 1,459.15 10,940.91
30-Mar-90 9,424.18 1,619.26 11,043.45
30-Apr-90 9,309.02 1,599.48 10,908.50
31-May-90 9,452.98 1,624.21 11,077.19
29-Jun-90 9,500.96 1,806.04 11,306.99
31-Jul-90 9,577.74 1,820.63 11,398.36
31-Aug-90 9,347.41 1,776.85 11,124.26
28-Sep-90 9,328.21 1,947.43 11,275.64
31-Oct-90 9,414.59 1,965.46 11,380.05
30-Nov-90 9,568.14 1,997.51 11,565.65
27-Dec-90 9,558.54 2,000.03 11,558.57
31-Dec-90 9,558.54 2,182.87 11,741.41
31-Jan-91 9,606.53 2,193.83 11,800.36
28-Feb-91 9,654.51 2,204.79 11,859.30
29-Mar-91 9,644.91 2,376.81 12,021.73
30-Apr-91 9,721.69 2,395.73 12,117.42
31-May-91 9,740.88 2,400.46 12,141.35
28-Jun-91 9,664.11 2,565.64 12,229.74
31-Jul-91 9,750.48 2,588.57 12,339.05
30-Aug-91 9,808.06 2,603.85 12,411.91
30-Sep-91 9,875.24 2,809.62 12,684.86
31-Oct-91 9,923.22 2,823.27 12,746.50
30-Nov-91 9,884.84 2,812.35 12,697.19
27-Dec-91 10,000.00 2,849.80 12,849.80
31-Dec-91 10,028.79 3,043.73 13,072.52
31-Jan-92 10,000.00 3,034.99 13,034.99
28-Feb-92 9,942.42 3,017.52 12,959.93
31-Mar-92 9,894.43 3,185.91 13,080.34
30-Apr-92 9,942.42 3,201.36 13,143.78
29-May-92 10,019.19 3,226.08 13,245.27
30-Jun-92 10,124.76 3,443.38 13,568.14
31-Jul-92 10,460.65 3,557.61 14,018.27
31-Aug-92 10,249.52 3,485.81 13,735.33
30-Sep-92 10,220.73 3,663.98 13,884.71
30-Oct-92 10,038.39 3,598.61 13,637.00
30-Nov-92 10,220.73 3,663.98 13,884.71
31-Dec-92 10,287.91 3,689.33 13,977.23
31-Dec-92 10,287.91 3,874.05 14,161.96
29-Jan-93 10,355.09 3,899.35 14,254.44
26-Feb-93 10,623.80 4,000.54 14,624.34
31-Mar-93 10,508.64 4,143.03 14,651.67
30-Apr-93 10,547.02 4,158.16 14,705.19
28-May-93 10,547.02 4,158.16 14,705.19
30-Jun-93 10,662.19 4,389.30 15,051.48
30-Jul-93 10,633.40 4,377.44 15,010.84
31-Aug-93 10,786.95 4,440.66 15,227.60
30-Sep-93 10,882.92 4,665.19 15,548.11
29-Oct-93 10,892.51 4,669.31 15,561.82
30-Nov-93 10,729.37 4,599.37 15,328.74
31-Dec-93 10,882.92 4,692.52 15,575.44
31-Dec-93 10,882.92 4,876.52 15,759.44
31-Jan-94 10,959.69 4,910.92 15,870.62
28-Feb-94 10,652.59 4,773.31 15,425.91
31-Mar-94 10,182.34 4,747.18 14,929.52
29-Apr-94 10,134.36 4,724.80 14,859.16
31-May-94 10,153.55 4,733.75 14,887.30
30-Jun-94 10,076.78 4,883.30 14,960.08
29-Jul-94 10,211.13 4,948.41 15,159.54
31-Aug-94 10,201.54 4,943.76 15,145.30
30-Sep-94 9,990.40 5,027.01 15,017.42
31-Oct-94 9,788.87 4,925.60 14,714.47
30-Nov-94 9,558.54 4,809.71 14,368.25
30-Dec-94 9,712.09 5,071.22 14,783.31
30-Dec-94 9,712.09 5,151.41 14,863.50
31-Jan-95 9,904.03 5,253.22 15,157.25
28-Feb-95 10,191.94 5,405.93 15,597.87
31-Mar-95 10,239.92 5,627.46 15,867.39
28-Apr-95 10,259.12 5,638.01 15,897.13
31-May-95 10,508.64 5,775.14 16,283.78
30-Jun-95 10,383.88 5,903.29 16,287.17
31-Jul-95 10,403.07 5,976.99 16,380.06
31-Aug-95 10,460.65 6,073.62 16,534.27
29-Sep-95 10,479.85 6,147.35 16,627.19
31-Oct-95 10,633.40 6,305.30 16,938.70
30-Nov-95 10,834.93 6,491.46 17,326.39
28-Dec-95 10,854.13 6,626.19 17,480.31
29-Dec-95 10,873.32 6,701.33 17,574.66
31-Jan-96 10,873.32 6,775.16 17,648.48
29-Feb-96 10,777.35 6,782.47 17,559.82
29-Mar-96 10,575.82 6,719.23 17,295.05
30-Apr-96 10,470.25 6,723.94 17,194.19
31-May-96 10,441.46 6,773.21 17,214.67
28-Jun-96 10,508.64 6,879.22 17,387.86
31-Jul-96 10,566.22 6,988.81 17,555.03
30-Aug-96 10,499.04 7,011.97 17,511.01
30-Sep-96 10,662.19 7,192.06 17,854.25
31-Oct-96 10,748.56 7,319.50 18,068.06
29-Nov-96 10,959.69 7,532.79 18,492.48
30-Dec-96 10,710.17 7,479.40 18,189.57
30-Dec-96 10,710.17 7,658.71 18,368.89
31-Dec-96 10,652.59 7,693.30 18,345.89
31-Jan-97 10,595.01 7,723.81 18,318.82
28-Feb-97 10,662.19 7,845.29 18,507.48
31-Mar-97 10,431.86 7,748.70 18,180.57
30-Apr-97 10,479.85 7,856.48 18,336.33
30-May-97 10,614.20 8,027.01 18,641.21
30-Jun-97 10,700.58 8,168.94 18,869.52
31-Jul-97 11,055.66 8,512.38 19,568.05
29-Aug-97 10,834.93 8,410.95 19,245.88
30-Sep-97 10,969.29 8,595.81 19,565.10
31-Oct-97 10,998.08 8,691.57 19,689.65
Average Annual Total Returns*
As of October 31, 1997
<TABLE>
<CAPTION>
Year-to- From Inception
Date 1-Year 5-Year 10-Year Inception Date
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales charge).......... 7.32% 8.97% 7.53% 8.05% 7.23% 7/16/87
Class A** (with sales charge)........... 3.05% 4.59% 6.65% 7.61% 6.80% 7/16/87
- --------------------------------------------------------------------------------------------------------------------
Class B (without CDSC).................. 7.33% NA NA NA 9.24% 1/8/97
Class B** (with CDSC)................... 2.33% NA NA NA 3.00% 1/8/97
- --------------------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 2.40% 5.23% 6.24% 7.51% 6.79%
Class B** (with CDSC)................... 1.72% NA NA NA 2.51%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Year-to-Date returns are not
annualized. Class B From Inception returns are annualized. Both Class B
returns are from 1/8/97.
** Class A performance reflects the maximum sales charge of 4%. Prior to
1/1/97, this was 4.75%. Class B performance reflects the maximum contingent
deferred sales charge (CDSC) of 5%.
15 The AAL Municipal Bond Fund
<PAGE>
the market that are over- or undervalued and to have a view on the likely long-
term direction of interest rates reflected in the structure of the Fund.
Hopefully, over time, the additional costs and tax ramifications of the trading
will be minimal relative to the value added by actively managing the Fund.
Could you tell me about a particular purchase which you are excited about and
why?
One of the more interesting bonds would be an issue which will ultimately be
backed by the hotel and parking revenues of the new hotel adjacent to the
McCormick Place Convention Center in Chicago. The hotel is currently under
construction and is expected to be open in June 1998. The McCormick Center,
which is newly renovated and expanded, is the largest convention space in the
U.S. It attracts some of the largest conventions and trade shows in the world,
plus a growing number of small and mid-size shows as well. Occupancy rates at
downtown hotels are running very high, with room shortages on many nights when
conventions are in town. Hyatt Corp. will manage the hotel and jointly market
its space with the Metropolitan and Expo Authority of Chicago which owns
McCormick Place. Over time, this hotel should do very well and the bonds have
certainly performed very nicely in the Fund.
/s/ Duane A. McAllister
- -----------------------
Duane A. McAllister
PORTFOLIO MANAGER
Credit Quality
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
AAA................ 56.6% 47.0%
AA................. 20.4% 21.0%
BBB................ 16.9% 24.0%
A.................. 6.1% 8.0%
---------------------------
Total 100.0% 100.0%
Average Quality: AA
Average Maturity: 17.5 years
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
Texas State Tax & Revenue Notes.... 3.6% 2.4%
Metropolitan Pier and Exposition
Center Illinois Revenue Bonds...... 2.8% 2.8%
New York, New York Revenue Notes
Series A........................... 2.5% NA*
Washington State Public Power
Supply System Project
#2 Revenue Bonds................... 2.5% 2.5%
Wisconsin State Operating Notes.... 2.4% NA*
*Security was not owned on 4/30/97
Fund Allocations
[MAP OF USA APPEARS HERE]
October 31, 1997 16
<PAGE>
Income
1997 AAL MUTUAL FUNDS SEMI-ANNUAL REPORT -- THE AAL HIGH YIELD BOND FUND
. . . Ticker Symbol (A shares) . . . AAHYX . . . Ticker Symbol (B shares)
. . .NA . . .NAV (A shares) . . . $10.36 . . .NAV (B shares) . . . $10.37 . .
. . Number of Securities in Portfolio . . . 127 . . . . . .
INCOME-ORIENTED
The AAL High Yield Bond Fund
How did the overall high yield bond market perform over the six-months ended
October 31, 1997, and what factors affected performance?
The high yield bond market benefited from a strong stock market and a declining
interest rate environment over the last six months. Ten-year government bond
yields declined to 5.83% on October 31, 1997, from 6.72% on April 30, 1997.
Lower interest rates translate into higher prices for all fixed-income
investments, including high yield bonds. The high yield bond market, as measured
by the Merrill Lynch High Yield Index, /1/ showed a total return of 8.3% for
this period. The demand for higher-yielding, fixed-income investments is very
strong, which has led to increased interest in high yield bond funds. The
strongest sectors of the high yield market were bonds in the telecommunications
and media industries. These sectors were helped by continued consolidation of
radio, cable-TV and wireless telephone companies. The chart labeled "Winners"
highlights the performance of several positions in the Fund.
I've heard that high yield bonds act more like stocks than bonds. Is this true?
High yield bonds are generally viewed as a hybrid between stocks and bonds. They
have debt-like characteristics, such as fixed interest rates and a final
maturity, but they trade on specific company news, as do stocks. The credit
quality rating of the bond also can be a factor. Higher-quality bonds rated
double-B are a notch below investment grade, and are more sensitive to the
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($10,680)
Value of Shares Initially Purchased ($9,942)
-----------------------------------
Initial Net Asset Value ($9,600)
-----------------------------------
The AAL High Yield Bond Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------------------------
9-Jan-97 9,596.93 - 9,596.93
31-Jan-97 9,596.93 43.22 9,640.14
28-Feb-97 9,750.48 116.91 9,867.39
31-Mar-97 9,414.59 185.19 9,599.77
30-Apr-97 9,481.77 260.01 9,741.77
30-May-97 9,712.09 338.73 10,050.83
30-Jun-97 9,760.08 418.87 10,178.95
31-Jul-97 9,942.42 505.14 10,447.56
29-Aug-97 9,875.24 574.52 10,449.76
30-Sep-97 10,028.79 666.57 10,695.36
31-Oct-97 9,942.42 738.33 10,680.75
% Average Annual Total Returns*
As of October 31, 1997
From Inception
Inception Date
Class A (without sales charge).......... 14.16% 1/8/97
Class A** (with sales charge)........... 8.49% 1/8/97
- ---------------------------------------------------------------
Class B (without CDSC).................. 13.49% 1/8/97
Class B** (with CDSC)................... 7.19% 1/8/97
- ---------------------------------------------------------------
SEC Standardized Returns as of 9/30/97
Class A** (with sales charge)........... 9.74%
Class B** (with CDSC)................... 8.23%
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost. Periods less than one year represent
total return and are not annualized.
** Class A performance reflects the maximum sales charge of 4%. Class B
performance reflects the maximum contingent deferred sales charge (CDSC) of
5%.
/1/ An index composed of over 800 high yield bonds representative of the high
yield market as a whole.
17 The AAL High Yield Bond Fund
<PAGE>
movement in overall interest rates. Lower-quality bonds rated single-B or
triple-C are most affected by a company's fundamentals such as profitability and
sales growth.
What is your outlook for the high yield market?
The high yield market weathered the storm during the last week of October very
well. The crisis in Southeast Asian markets should dampen domestic economic
growth in the U.S., which bodes well for interest rates and hence fixed-income
investments. During the stock market correction in October, prices for high
yield bonds declined despite a rise in prices for most other bonds. As a result,
the yield difference or "spread" between high yield bonds and U.S. Treasury
bonds increased roughly 1/2% to 1%. I believe this larger spread will attract
more capital into the high yield market. My positive outlook is based on a
healthy U.S. economy and declining interest rates going forward.
/s/ David G. Carroll
- ---------------------------
David G. Carroll
PORTFOLIO MANAGER
Credit Quality
[PIE CHART APPEARS HERE]
% of Net Assets
10/31/97 4/30/97
-------- -------
B........................ 72% 73%
BB....................... 25% 25%
CCC...................... 2% 1%
Non-Rated Bonds.......... 1% 1%
----------------
Total 100% 100%
Average Quality: B+
Average Maturity: 8.0 years
5 Largest Holdings
% of Net Assets
Security 10/31/97 4/30/97
- -------- -------- -------
Algoma Steel Corporation.................. 1.23% 1.77%
Coupon Rate: 12.375%
Maturity Date: 7/15/2005
Tenet Healthcare Corporation.............. 1.17% 1.14%
Coupon Rate: 10.125%
Maturity Date: 3/1/2005
Anchor Glass Containers
Corporation............................. 1.17% 1.10%
Coupon Rate: 11.250%
Maturity Date: 4/1/2005
Glasstech, Inc............................ 1.14% NA*
Coupon Rate: 12.750%
Maturity Date: 7/1/2004
Statia Terminals International N.V........ 1.13% 1.66%
Coupon Rate: 11.750%
Maturity Date: 11/15/2003
* Security was not owned on 4/30/97
Winners
4-30-97 10-31-97 Total
Investment/Company Rating Coupon Price Price Return
USA Mobile Communications, Inc. B2/B- 9.500% $ 83.50 $ 96.00 20.7%
Cablevision Systems Corporation B2/B 10.500% $100.87 $112.25 16.5%
Olympic Financial Limited B2/BB- 11.500% $ 94.00 $102.50 15.2%
Four M Corp. B2/B 12.000% $ 98.50 $106.50 14.2%
TCI Satellite Entertainment, Inc. B3/B- 10.875% $ 95.00 $103.00 14.0%
October 31, 1997 18
<PAGE>
The AAL Capital Growth Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of common stocks and securities convertible into common stocks.
Shares Common Stocks (98.0%) Market Value
===============================================================================
Basic Materials (0.6%)
156,500 Eastman Chemical Company....................... $ 9,331,313
101,500 Praxair, Inc................................... 4,421,594
----------------------------------------
Total Basic Materials 13,752,907
========================================
Capital Goods (8.3%)
157,700 Avery Dennison Corporation..................... 6,278,431
209,600 The Boeing Company............................. 10,034,600
125,100 Caterpillar Inc................................ 6,411,375
248,500 Deere & Company................................ 13,077,313
1,091,700 General Electric Company....................... 70,482,881
147,300 Herman Miller, Inc............................. 7,199,288
146,700 Honeywell, Inc................................. 9,984,769
516,200 Illinois Tool Works Incorporated............... 25,390,588
146,000 Owens Illinois, Inc............................ 5,037,000
94,700 PACCAR Inc..................................... 4,267,419
105,200 Thiokol Corporation............................ 9,632,375
195,600 United Technologies Corp....................... 13,692,000
----------------------------------------
Total Capital Goods 181,488,039
========================================
Communication Services (4.0%)
318,400 Ameritech Corporation.......................... 20,696,000
323,200 Bell Atlantic Corporation...................... 25,815,600
943,800 MCI Communications Corporation................. 33,504,900
126,200 Sprint Corporation............................. 6,562,400
----------------------------------------
Total Communication Services 86,578,900
========================================
Consumer Cyclicals (7.4%)
336,500 Costco Companies, Inc.......................... 12,955,250
156,500 Family Dollar Stores, Inc...................... 3,677,750
317,600 Gannett Company, Inc........................... 16,693,850
647,900 Harley-Davidson, Inc........................... 17,979,225
208,800 The New York Times Company Class A............. 11,431,800
522,000 Pier 1 Imports, Inc............................ 9,526,500
935,900 Ross Stores, Inc............................... 34,979,263
593,100 Service Corporation International.............. 18,052,481
499,400 Tiffany and Company............................ 19,726,300
The accompanying notes to the financial statements are an integral part of this
schedule.
19 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Capital Growth Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.0%) Market Value
===============================================================================
Consumer Cyclicals (7.4%) - continued
102,800 The Times Mirror Company..................... $ 5,564,050
394,300 U.S. Office Products Company................. 12,321,875
---------------------------------------------
Total Consumer Cyclicals 162,908,344
=============================================
Consumer Staples (20.9%)
417,800 Alberto-Culver Company....................... 12,612,338
1,448,600 Comcast Corporation.......................... 39,836,500
1,450,200 Cox Communications, Inc...................... 44,593,650
173,800 CPC International Inc........................ 17,206,200
105,200 Dean Foods Company........................... 4,977,275
568,500 General Nutrition Companies, Inc............. 17,907,750
275,600 Gillette Company............................. 24,545,625
326,400 PepsiCo, Inc................................. 12,015,600
1,317,200 Philip Morris Companies, Inc................. 52,194,050
683,400 Procter & Gamble Company..................... 46,471,200
259,900 Safeway, Inc................................. 15,106,688
210,300 TCI Satellite Entertainment, Inc............. 1,524,675
1,374,794 Tele-Communications Inc...................... 31,534,337
786,206 Tele-Communications Ventures Group........... 18,131,876
172,300 Time Warner Inc.............................. 9,939,556
1,657,849 U.S. West Media Group........................ 41,860,687
1,833,500 Walgreen Company............................. 51,567,188
192,800 The Walt Disney Company...................... 15,857,800
---------------------------------------------
Total Consumer Staples 457,882,995
=============================================
Energy (9.3%)
312,800 Baker Hughes, Inc............................ 14,369,250
304,900 British Petroleum Company plc ADR............ 26,754,975
313,500 CalEnergy Company, Inc....................... 10,737,375
217,200 Chevron Corporation.......................... 18,014,025
157,400 The Columbia Gas System, Inc................. 11,372,150
1,046,300 Exxon Corporation............................ 64,282,056
361,700 Halliburton Company.......................... 21,566,363
700,800 Royal Dutch Petroleum Company ADR............ 36,879,600
---------------------------------------------
Total Energy 203,975,794
=============================================
Financials (18.4%)
386,700 American Express Company..................... 30,162,600
665,450 American International Group, Inc............ 67,917,491
56,500 Associates First Capital Corporation......... 3,594,813
225,800 CIGNA Corporation............................ 35,055,450
54,700 Conseco, Inc................................. 2,386,288
659,600 Fannie Mae................................... 31,949,375
513,776 First Chicago Corporation.................... 37,377,204
26,300 Hartford Life, Inc........................... 971,456
159,700 Household International, Inc................. 18,086,025
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 20
<PAGE>
The AAL Capital Growth Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.0%) Market Value
===============================================================================
Financials (18.4%) - continued
616,262 MBNA Corporation............................... $ 16,215,394
509,600 MGIC Investments Corporation................... 30,735,250
227,500 J.P. Morgan & Company.......................... 24,968,125
463,300 National City Corporation...................... 27,682,175
584,600 Nationsbank Corporation........................ 35,002,925
91,000 Northern Trust Corporation..................... 5,323,500
102,300 Starwood Lodging Trust......................... 6,118,819
429,800 Travelers Group, Inc........................... 30,086,000
---------------------------------------------
Total Financials 403,632,890
=============================================
Health Care (10.7%)
110,600 Centocor, Inc.................................. 4,866,400
161,400 Dura Pharmaceuticals, Inc...................... 7,807,725
173,900 Elan Corporation plc........................... 8,673,263
523,300 Eli Lilly & Company............................ 34,995,688
614,200 Johnson & Johnson.............................. 35,239,725
453,100 Medtronic, Inc................................. 19,709,850
727,900 Merck & Co., Incorporated...................... 64,965,075
584,300 Pfizer Incorporated............................ 41,339,225
316,700 Schering-Plough Corporation.................... 17,754,994
---------------------------------------------
Total Health Care 235,351,945
=============================================
Technology (16.9%)
602,800 ADC Telecommunications, Inc.................... 19,967,740
7,500 At Home Corporation............................ 180,938
722,500 Automatic Data Processing Incorporated......... 36,937,813
203,500 Cisco Sytems, Inc.............................. 16,693,349
420,700 Cognos, Incorporated........................... 9,623,513
452,200 Compaq Computer Corporation.................... 28,827,750
152,850 Computer Associates International, Inc......... 11,396,878
507,566 First Data Corporation......................... 14,751,137
136,300 Gateway 2000, Inc.............................. 3,910,106
369,700 HBO & Company.................................. 16,081,950
165,300 Hewlett-Packard Company........................ 10,196,944
818,300 Intel Corporation.............................. 63,009,100
195,712 Lucent Technologies, Inc....................... 16,134,008
374,600 Microsoft Corporation.......................... 48,698,000
348,900 National Data Corporation...................... 12,887,494
388,150 Oracle Systems Corporation..................... 13,888,473
220,800 Quantum Corporation............................ 6,982,800
284,700 Seagate Technology Incorporated................ 7,722,488
518,700 Tellabs, Inc................................... 28,009,800
147,300 Western Digital Corporation.................... 4,409,794
---------------------------------------------
Total Technology 370,310,075
=============================================
The accompanying notes to the financial statements are an integral part of this
schedule.
21 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Capital Growth Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.0%) Market Value
===============================================================================
Transportation (1.2%)
83,400 CNF Transportation, Inc......................... $ 3,721,725
682,300 Southwest Airlines Company...................... 22,260,038
----------------------------------------------
Total Transportation 25,981,763
==============================================
Utilities (0.3%)
225,700 Entergy Corporation............................. 5,515,544
----------------------------------------------
Total Utilities 5,515,544
==============================================
----------------------------------------------
Total Common Stocks
(cost basis $1,353,893,355) 2,147,379,196
==============================================
Par Value Short-Term Obligations (2.0%)
==================================================================
$2,547,605 American Family Insurance Company*.............. 2,547,605
10,000,000 General Electric Capital Corporation
5.48% 11/5/97................................. 9,993,911
130,704 General Mills Corporation*...................... 130,704
6,700,000 Gillette Company 5.45% 11/3/97.................. 6,697,972
2,400,000 International Business Machines Credit
Corporation 5.45% 11/5/97..................... 2,398,547
10,500,000 Merrill Lynch & Co., Inc. 5.51% 11/10/97........ 10,485,536
2,000,000 Merrill Lynch & Co., Inc. 5.54% 11/10/97........ 1,997,230
2,000,000 Merrill Lynch & Co., Inc. 5.53% 11/19/97........ 1,994,470
280,000 Pitney Bowes Credit Corporation*................ 280,000
3,800,000 Sony Capital Corp. 5.55% 11/25/97............... 3,785,940
4,449,603 Wisconsin Electric Power Company*............... 4,449,603
---------------------------------------------
Total Short-Term Obligations
(amortized cost basis $44,761,518) 44,761,518
=============================================
---------------------------------------------
Total Investments (100.0%) (amortized
cost basis $1,398,654,873) $2,192,140,714
=============================================
* Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 22
<PAGE>
The AAL Mid Cap Stock Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of common stocks, and securities convertible into common stocks, of
mid-sized companies.
Shares Common Stocks (98.2%) Market Value
===============================================================================
Basic Materials (4.9%)
149,600 Cytec Industries Inc......................... $7,293,000
231,300 Hanna (M.A.) Company......................... 5,955,975
181,200 Minerals Technologies Inc.................... 7,497,150
165,800 Rayonier Inc................................. 7,243,388
73,200 Zeigler Coal Holding Company................. 1,308,450
-------------------------------------------------------
Total Basic Materials 29,297,963
=======================================================
Capital Goods (11.8%)
131,200 Applied Power, Inc........................... 8,118,000
147,700 BE Aerospace, Inc............................ 4,154,062
273,400 Computer Products, Inc....................... 7,450,150
204,500 Cuno, Inc.................................... 3,476,500
194,900 Danka Business Systems plc................... 7,211,300
196,700 General Cable Corporation.................... 6,368,162
144,100 Harman International Industries, Inc......... 7,781,400
231,400 Integrated Process Equipment Corporation..... 5,134,188
93,800 Symbol Technologies, Inc..................... 3,728,550
71,500 Titanium Metals Corporation.................. 2,234,375
175,700 Tower Automotive, Inc........................ 7,357,438
102,000 USA Waste Services, Inc...................... 3,774,000
109,400 US Filter Corporation........................ 4,389,675
-------------------------------------------------------
Total Capital Goods 71,177,800
=======================================================
Communication Services (1.8%)
231,400 LCI International, Inc....................... 5,987,475
268,400 SITEL Corporation............................ 2,382,050
107,100 360 Communications Company................... 2,262,488
-------------------------------------------------------
Total Communication Services 10,632,013
=======================================================
Consumer Cyclicals (13.0%)
90,500 Applied Graphics Technologies, Inc........... 4,841,750
150,900 Bed Bath & Beyond, Inc....................... 4,791,075
150,800 Cincinnati Bell, Inc......................... 4,071,600
123,900 CompUSA, Inc................................. 4,057,725
218,100 CUC International, Inc....................... 6,433,950
111,100 Dollar General Corporation................... 3,673,244
188,600 Equity Corporation International............. 3,842,725
163,400 Harley-Davidson, Inc......................... 4,534,350
93,000 Knight-Ridder Inc............................ 4,859,250
The accompanying notes to the financial statements are an integral part of this
schedule.
23 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Mid Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.2%) Market Value
===============================================================================
Consumer Cyclicals (13.0%)-continued
164,900 Outdoor Systems, Inc........................... $ 5,070,675
25,000 Petco Animal Supplies.......................... 768,750
70,000 Proffits, Inc.................................. 2,008,125
103,000 Primark Corporation............................ 3,090,000
169,700 ShopKo Stores, Inc............................. 4,253,106
89,800 Snap-On, Inc................................... 3,861,400
114,900 Tommy Hilfiger Corporation..................... 4,545,731
293,400 U.S. Office Products Company................... 9,168,750
175,400 Watsco, Inc.................................... 4,121,900
----------------------------------------
Total Consumer Cyclicals 77,994,106
========================================
Consumer Staples (9.9%)
270,300 Apple South, Inc............................... 5,034,337
117,400 AccuStaff, Inc................................. 3,353,238
90,200 Chancellor Media Corporation................... 4,949,725
83,900 Clear Channel Communications, Inc.............. 5,537,400
204,400 Coca-Cola Enterprises, Inc..................... 5,748,750
259,200 Comcast Corporation............................ 7,128,000
323,600 Flowers Industries, Inc........................ 6,148,400
212,000 General Nutrition Companies, Inc............... 6,678,000
76,200 Manpower, Inc.................................. 2,924,175
161,600 Outback Steakhouse, Inc........................ 4,373,300
133,400 Rite Aid Corporation........................... 7,920,625
----------------------------------------
Total Consumer Staples 59,795,950
========================================
Energy (8.6%)
284,000 Belco Oil & Gas Corporation.................... 6,141,500
306,900 Hugoton Energy Corporation..................... 3,759,525
10,000 Hvide Marine, Incorporated..................... 330,000
60,000 Noble Drilling Corporation..................... 2,133,750
98,600 Petroleum Geo-Services ASA..................... 6,828,050
112,600 Reading & Bates Corporation.................... 4,771,425
185,900 Rowan Companies, Inc........................... 7,226,862
120,000 Transocean Offshore Inc........................ 6,480,000
140,600 Tosco Corporation.............................. 4,639,800
124,000 Ultramar Diamond Shamrock Corporation.......... 3,828,500
163,300 United Meridian Corporation.................... 5,541,994
----------------------------------------
Total Energy 51,681,406
========================================
Financials (15.3%)
103,500 AFLAC Inc...................................... 5,265,563
130,100 AMBAC, Inc..................................... 5,496,725
165,300 Ambassador Apartments, Inc..................... 3,543,619
123,373 Associated Banc-Corp........................... 6,184,072
63,000 Astoria Financial Corporation.................. 3,291,750
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 24
<PAGE>
The AAL Mid Cap Stock Fund - continued
Schedule of investments as of October 31, 1997
Shares Common Stocks (98.2%) Market Value
===============================================================================
Financials (15.3%)-continued
221,200 CapMAC Holdings, Inc........................... $ 6,636,000
80,000 Community Trust Bancorp, Inc................... 2,140,000
191,100 Concord EFS, Inc............................... 5,673,281
148,200 Conseco Inc.................................... 6,465,225
271,400 Credit Acceptance Corporation.................. 1,501,168
90,000 Franklin Resources, Inc........................ 8,088,750
161,000 HCC Insurance Holdings, Inc.................... 3,763,375
146,450 Mercantile Bankshares Corporation.............. 5,217,281
80,400 Northern Trust Corporation..................... 4,703,400
75,000 Patriot American Hospitality, Inc.............. 2,475,000
135,500 Peoples Heritage Financial Group, Inc.......... 5,335,312
63,900 The PMI Group, Inc............................. 3,861,956
137,200 Starwood Lodging Trust......................... 8,206,275
43,500 State Street Corporation....................... 2,425,125
50,000 Summit Bancorp................................. 2,134,375
--------------------------------------
Total Financials 92,408,252
======================================
Health Care (8.6%)
109,800 AmeriSource Health Corporation................. 6,519,375
137,000 BioChem Pharma, Inc............................ 3,433,563
96,800 Biogen, Inc.................................... 3,242,800
152,400 Dura Pharmaceuticals, Inc...................... 7,372,350
275,000 FPA Medical Management, Inc.................... 6,634,375
128,300 Genzyme Corporation............................ 3,512,213
238,800 HEALTHSOUTH Corporation........................ 6,104,325
77,900 Lincare Holdings, Inc.......................... 4,177,387
177,500 STERIS Corporation............................. 7,055,625
138,300 Vencor, Inc.................................... 3,734,100
--------------------------------------
Total Health Care 51,786,113
======================================
Technology (12.8%)
135,700 ADC Telecommunications, Inc.................... 4,495,063
63,600 Adobe Systems, Inc............................. 3,036,900
109,900 Analog Devices, Inc............................ 3,358,819
194,400 Andrew Corporation............................. 4,507,650
86,800 Bay Networks, Inc.............................. 2,745,050
111,800 BMC Industries, Inc............................ 3,598,563
101,400 Digital Equipment Corporation.................. 5,076,337
136,600 Fiserv, Inc.................................... 6,112,850
200,000 HBO & Company.................................. 8,700,000
30,000 Lernout and Hauspie............................ 1,455,000
157,700 LSI Logic Corporation.......................... 3,439,831
87,400 Millicom International Cellular S.A............ 3,670,800
250,400 Network General Corporation.................... 5,070,600
48,500 Newbridge Networks Corporation................. 2,570,500
The accompanying notes to the financial statements are an integral part of this
schedule.
25 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Mid Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.2%) Market Value
==============================================================================
Technology (12.8%)-continued
76,800 Parametric Technology Company................... $ 3,388,800
276,400 Sequent Computer Systems, Inc................... 5,787,125
99,400 Sterling Commerce, Inc.......................... 3,298,837
40,000 Synopsys, Inc................................... 1,555,000
65,000 Terodyne Inc.................................... 2,433,437
101,100 TriQuint Semiconductor, Inc..................... 2,476,950
--------------------------------------------------
Total Technology 76,778,112
==================================================
Transportation (3.0%)
192,100 Comair Holdings, Inc............................ 7,059,675
166,600 Royal Caribbean Cruises Ltd..................... 7,736,488
112,100 Wisconsin Central Transportation Corporation.... 3,489,112
--------------------------------------------------
Total Transportation.................. 18,285,275
==================================================
Utilities (8.5%)
190,300 AES Corporation................................. 7,540,637
200,300 Allegheny Power System, Inc..................... 5,658,475
182,800 CMS Energy Corporation.......................... 6,672,200
114,800 El Paso Natural Gas Company..................... 6,880,825
128,000 MCN Corporation................................. 4,432,000
246,300 MDU Resources Group, Inc........................ 6,988,763
161,800 New Century Energies, Inc....................... 6,755,150
180,300 Pinnacle West Capital Corporation............... 6,276,694
--------------------------------------------------
Total Utilities....................... 51,204,744
==================================================
==================================================
Total Common Stocks
(cost basis $507,822,377)............. 591,041,734
==================================================
Par Value Short-Term Obligations (1.8%)
==================================================================
$ 2,608,095 American Family Insurance Company*.............. 2,608,095
3,000,000 Exxon Asset Management 5.52%, 11/4/97........... 2,998,620
47,831 General Mills Corporation*...................... 47,831
3,900,000 Merrill Lynch & Co., Inc. 5.51%, 11/10/97....... 3,894,559
512,511 Pitney Bowes Credit Corporation*................ 512,511
635,106 Wisconsin Electric Power Company*............... 635,106
--------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $10,696,722) 10,696,722
==================================================
==================================================
Total Investments (100.0%)
(amortized cost basis $518,519,099) $601,738,456
==================================================
* Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 26
<PAGE>
The AAL Small Cap Stock Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of common stocks, and securities convertible into common stocks, of
small companies.
Shares Common Stocks (98.5%) Market Value
===============================================================================
Basic Materials (3.9%)
18,000 Cambrex Corporation............................ $ 862,875
10,000 Getchell Gold Corporation...................... 360,000
30,000 Gibraltar Steel Corporation.................... 708,750
25,000 Northland Cranberries, Inc..................... 385,938
40,000 Oregon Metallurgical Corporation............... 937,500
20,000 Steel Dynamics, Inc............................ 425,000
----------------------------------------
Total Basic Materials 3,680,063
========================================
Capital Goods (16.1%)
25,000 Altron, Inc.................................... 396,875
17,000 Applied Power, Inc............................. 1,051,875
25,000 BE Aerospace, Inc.............................. 703,125
20,000 Belden, Inc.................................... 685,000
30,000 Chicago Miniature Lamp, Inc.................... 960,000
20,000 Computer Products, Inc......................... 545,000
35,000 Cuno, Inc...................................... 595,000
60,000 Farr Company................................... 930,000
50,000 Flanders Corporation........................... 400,000
45,000 General Cable Corporation...................... 1,456,875
15,000 Hadco Corporation.............................. 830,625
17,000 Harman International Industries, Inc........... 918,000
35,000 Integrated Process Equipment Corporation....... 776,563
50,000 Kemet Corporation.............................. 1,087,500
4,000 Sanmina Corporation............................ 299,000
10,000 Superior Services, Inc......................... 267,500
35,000 Tetra Tech, Inc................................ 914,375
40,000 Tower Automotive, Inc.......................... 1,675,000
30,000 Tracor, Inc.................................... 802,500
----------------------------------------
Total Capital Goods 15,294,813
========================================
Communication Services (0.9%)
15,000 Datum, Inc..................................... 307,500
60,000 SITEL Corporation.............................. 532,500
----------------------------------------
Total Communication Services 840,000
========================================
Consumer Cyclicals (16.6%)
20,000 Abercrombie & Fitch Company..................... 520,000
40,000 Acxiom Corporation............................. 657,500
30,000 Claire's Stores Inc............................ 663,750
The accompanying notes to the financial statements are an integral part of this
schedule.
27 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.5%) Market Value
===============================================================================
Consumer Cyclicals (16.6%) - continued
50,000 DAMARK International, Inc...................... $581,250
35,000 Dura Automotive Systems, Inc................... 1,085,000
37,100 ITI Technologies, Inc.......................... 950,688
20,000 Just For Feet, Inc............................. 296,250
30,000 K2, Inc........................................ 759,375
20,000 Nautica Enterprises, Inc....................... 532,500
10,000 The North Face, Inc............................ 236,250
20,000 Oakwood Homes Corporation...................... 526,250
40,000 Outdoor Systems, Inc........................... 1,230,000
70,000 PETsMART, Inc.................................. 533,750
15,000 Proffits, Inc.................................. 430,312
15,000 Ross Stores, Inc............................... 560,625
20,000 Southern Electronics Corporation............... 330,000
12,000 St. John Knits, Inc............................ 482,250
37,500 Strattec Security Corporation.................. 1,021,875
15,000 Tech Data Corporation.......................... 667,500
30,000 Universal Outdoor Holdings, Inc................ 1,267,500
40,000 U.S. Office Products Company................... 1,250,000
30,000 Vans, Inc...................................... 506,250
20,000 The Wet Seal, Inc.............................. 457,500
5,000 Williams-Sonoma, Inc........................... 200,625
----------------------------------------
Total Consumer Cyclicals 15,747,000
========================================
Consumer Staples (6.8%)
60,000 Apple South, Inc............................... 1,117,500
25,000 Chancellor Media Corporation................... 1,371,875
25,000 Dominick's Supermarkets, Inc................... 912,500
55,000 PMT Services, Inc.............................. 886,875
10,000 Smithfield Foods, Inc.......................... 298,750
40,000 SOS Staffing Services, Inc..................... 825,000
20,000 United Natural Foods........................... 420,000
10,000 Westwood One, Inc.............................. 306,875
15,000 Worthington Foods, Inc......................... 341,250
----------------------------------------
Total Consumer Staples 6,480,625
========================================
Energy (7.6%)
10,000 Atwood Oceanics, Inc........................... 1,107,500
60,000 Belco Oil & Gas Corporation.................... 1,297,500
120,000 Hugoton Energy Corporation..................... 1,470,000
20,000 Hvide Marine, Incorporated..................... 660,000
10,000 Noble Drilling Corporation..................... 355,625
10,000 Petroleum Geo-Services ASA..................... 692,500
30,000 Pride International, Inc....................... 990,000
20,000 United Meridian Corporation.................... 678,750
----------------------------------------
Total Energy 7,251,875
========================================
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 28
<PAGE>
The AAL Small Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.5%) Market Value
===============================================================================
Financials (12.1%)
35,000 Ambassador Apartments, Inc..................... $750,313
15,000 Bank United Corporation........................ 630,000
20,000 CapMAC Holdings, Inc........................... 600,000
25,000 CMAC Investment Corporation.................... 1,367,187
46,500 Community Trust Bancorp, Inc................... 1,243,875
25,000 HCC Insurance Holdings, Inc.................... 584,375
15,000 Peoples Heritage Financial Group, Inc.......... 590,625
10,000 Protective Life Corporation.................... 528,750
15,000 Provident Financial Group, Inc................. 690,000
25,000 Risk Capital Holdings, Inc..................... 568,750
20,000 Starwood Lodging Trust......................... 1,196,250
10,000 TCF Financial Corporation...................... 568,750
26,000 Texas Regional Bancshares, Inc................. 741,000
40,000 Vermont Financial Services Corporation......... 1,045,000
10,000 Zions Bancorporation........................... 388,750
----------------------------------------
Total Financials 11,493,625
========================================
Health Care (11.6%)
30,000 American Oncology Resources, Inc............... 438,750
22,000 AmeriSource Health Corporation................. 1,306,250
60,000 Ascent Pediatrics, Inc......................... 547,500
25,000 BioChem Pharma, Inc............................ 626,563
30,000 Endosonics Corporation......................... 345,000
25,000 FPA Medical Management, Inc.................... 603,125
20,000 Heska Corporation.............................. 262,500
5,000 Lincare Holdings, Inc.......................... 268,125
20,000 National Dentex Corporation.................... 450,000
50,000 Neurex Corporation............................. 850,000
10,000 Patterson Dental Company....................... 400,000
15,000 Pediatrix Medical Group, Inc................... 633,750
25,000 Pharmaceutical Product Development, Inc........ 443,750
20,000 PhyCor, Inc.................................... 461,250
22,000 Protein Design Labs, Inc....................... 1,097,250
8,000 Renal Treatment Centers, Inc................... 265,500
20,000 STERIS Corporation............................. 795,000
40,000 Trimeris, Inc.................................. 515,000
50,000 UroCor, Inc.................................... 418,750
10,000 Vertex Pharmaceuticals, Inc.................... 295,000
----------------------------------------
Total Health Care 11,023,063
========================================
Technology (16.1%)
35,000 Allen Group, Inc............................... 662,812
20,000 American Management Systems, Inc............... 432,500
15,000 Aspect Telecommunications Corporation.......... 360,000
20,000 The BISYS Group, Inc........................... 622,500
35,000 BMC Industries, Inc............................ 1,126,562
5,000 CIBER, Inc..................................... 221,250
30,000 Data General Corporation....................... 577,500
The accompanying notes to the financial statements are an integral part of this
schedule.
29 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (98.5%) Market Value
================================================================================
Technology (16.1%) - continued
35,000 Digital Link Corporation......................... $ 770,000
30,000 Hyperion Software Corporation.................... 1,143,750
15,000 Kent Electronics Corporation..................... 524,062
11,000 Lattice Semiconductor Corporation................ 550,688
10,000 Microchip Technology, Inc........................ 398,750
26,000 MicroTouch Systems, Inc.......................... 627,250
20,000 Molecular Dynamics, Inc.......................... 470,000
40,000 Network General Corporation...................... 810,000
4,000 Novellus Systems, Inc............................ 178,000
25,000 Perceptron, Inc.................................. 603,125
15,000 P-COM, Inc....................................... 301,875
25,000 PMC-Sierra, Inc.................................. 659,375
20,000 RailTex, Inc..................................... 322,500
15,000 Read-Rite Corporation............................ 298,125
50,000 Red Brick Systems, Inc........................... 393,750
50,000 SS and C Technologies, Inc....................... 506,250
30,000 Structural Dynamics Research Corporation......... 573,750
10,000 Synopsys, Inc.................................... 388,750
15,000 TriQuint Semiconductor, Inc...................... 367,500
10,000 Ultratech Stepper, Inc........................... 272,500
10,000 The Vantive Corporation.......................... 252,500
50,000 Viisage Technology, Inc.......................... 418,750
30,000 Xylan Corporation................................ 480,000
----------------------------------------
Total Technology 15,314,374
========================================
Transportation (4.3%)
12,500 Allied Holdings, Inc............................. 214,062
60,000 Atlantic Coast Airlines, Inc..................... 1,267,500
10,000 Comair Holdings, Inc............................. 367,500
20,000 Heartland Express, Inc........................... 550,000
15,000 Midwest Express Holdings, Inc.................... 481,875
25,000 Swift Transportation Company, Inc................ 800,000
30,000 Trailer Bridge, Inc.............................. 345,000
----------------------------------------
Total Transportation 4,025,937
========================================
Utilities (2.5%)
10,000 CILCORP, Inc..................................... 408,750
20,000 Interstate Power Company......................... 632,500
10,000 KN Energy, Inc................................... 435,000
30,000 Sierra Pacific Resources......................... 913,125
----------------------------------------
Total Utilities 2,389,375
========================================
========================================
Total Common Stocks
(cost basis $83,115,703) 93,540,750
========================================
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 30
<PAGE>
The AAL Small Cap Stock Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Par Value Short-Term Variable Rate Obligations (1.5%) Market Value
===============================================================================
$1,391,826 Wisconsin Electric Power Company*................ $1,391,826
-----------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $1,391,826) 1,391,826
===============================================
===============================================
Total Investments (100.0%)
(amortized cost basis $84,507,529) $94,932,576
===============================================
* Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
31 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of foreign stocks.
<TABLE>
<CAPTION>
Shares Common Stocks (66.6%) Industry Market Value
==================================================================================================================
<S> <C> <C> <C>
Argentina (0.4%)
87,500 Cresud SA................................. Food & Agriculture $157,595
454,629 Ledesma S.A.I.C........................... Food & Agriculture 432,157
----------------------------------------------------------------
Total Argentina 589,752
================================================================
Australia (0.5%)
752,570 Spotless Services Limited................. Commercial Services 689,652
----------------------------------------------------------------
Total Australia 689,652
================================================================
Austria (1.0%)
14,500 VAE AG.................................... Transportation 1,424,397
----------------------------------------------------------------
Total Austria 1,424,397
================================================================
Belgium (1.0%)
6,500 Deceuninck Plastics Industries SA......... Building Materials 1,252,130
----------------------------------------------------------------
Total Belgium 1,252,130
================================================================
Canada (1.9%)
50,000 Canadian Pacific, Ltd..................... Conglomerate 1,490,625
10,000 Franco-Nevada Mining Corp., Ltd........... Gold 231,031
55,000 Noranda, Inc.............................. Conglomerate 968,131
----------------------------------------------------------------
Total Canada 2,689,787
================================================================
Denmark (0.4%)
10,000 Carlsberg International A/S 'B'........... Consumer Products 526,653
----------------------------------------------------------------
Total Denmark 526,653
================================================================
Finland (0.4%)
7,500 Vaisala 'Oy' A.............................Technology 653,158
-----------------------------------------------------------------
Total Finland 653,158
=================================================================
France (9.0%)
7,000 Compagnie Generale des Eaux............... Utilities 818,450
5,000 Compagnie Generale des Eaux Warrants...... Utilities 0
3,000 Conflandey SA............................. Metals & Minerals 160,528
7,000 Elf Aquitaine............................. Energy 868,311
15,000 Emin Leydier.............................. Forest Products & Paper 1,087,995
20,000 Eramet.................................... Metals & Minerals 799,166
4,000 Eurafrance................................ Holding Company 1,632,384
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 32
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (66.6%) Industry Market Value
================================================================================
France (9.0%) - continued
1,000 Europe 1 Communication....... Media $ 208,478
7,500 FIMALAC SA................... Holding Company 648,888
5,500 Gaumont SA................... Media 358,322
5,000 Groupe Didot-Bottin.......... Media 674,079
4,500 Groupe NSC................... Capital Goods 623,089
12,000 Marine-Wendel SA............. Holding Company 1,384,295
2,920 Promodes C.I................. Distribution 786,310
7,500 Rougier SA................... Forest Products
& Paper 438,977
3,000 Sabeton SA................... Holding Company 338,777
1,500 Societe Sucriere de
Pithiviers-le-Vieil........ Food & Agriculture 883,165
3,198 Taittinger C.I............... Consumer Products 888,951
-----------------------------------
Total France 12,600,165
===================================
Germany (4.7%)
1,500 Axel Springer Verlag AG...... Media 1,250,654
15,000 Bayer AG..................... Chemicals 540,352
7,000 Bertelsmann AG D.R.C......... Media 886,642
5,000 Buderus AG................... Capital Goods 2,428,679
60,000 Gerresheimer Glas AG......... Capital Goods 861,077
20,000 IVG Holding AG............... Real Estate 560,107
-----------------------------------
Total Germany 6,527,511
===================================
Hong Kong (1.7%)
1,000,000 Burwill Holdings Ltd......... Distribution 109,968
4,795,959 CDL Hotels International Ltd. Real Estate 1,380,556
1,350,000 Shaw Brothers Limited........ Media 943,140
-----------------------------------
Total Hong Kong 2,433,664
===================================
Israel (0.6%)
296,000 Super-Sol.................... Retail Store 848,776
-----------------------------------
Total Israel 848,776
===================================
Italy (2.0%)
175,000 Arnoldo Mondarori
Editore SpA................ Media 1,402,982
2,500,000 Montedison SpA
(non-convertible
savings share)............. Conglomerate 1,405,201
-----------------------------------
Total Italy 2,808,183
===================================
Japan (18.1%)
230,000 Aida Engineering Ltd......... Capital Goods 1,061,362
70,700 Chofu Seisakusho............. Consumer Products 969,943
250,000 The Dai-Tokyo Fire & Marine
Insurance Co., Ltd......... Insurance 1,072,587
45,000 Fuji Photo Film Co.,
Ltd. ADR................... Consumer Products 1,653,750
300,000 Hanshin Electric
Railway Co., Ltd........... Transportation 1,015,216
10,000 Hitachi, Ltd. ADR............ Technology 800,000
350,000 Iino Kaiun Kaisha, Ltd....... Transportation 785,732
The accompanying notes to the financial statements are an integral part of this
schedule.
33 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 19997
Shares Common Stocks (66.6%) Industry Market Value
===============================================================================
Japan (18.1%) - continued
25,000 Ito-Yokado Co., Ltd. ..... Distribution $ 1,243,036
175,000 The Koa Fire & Marine
Insurance Co. .......... Insurance 909,412
200,000 The Nichido Fire &
Marine Insurance
Co., Ltd. .............. Insurance 1,292,093
200,000 Nisshinbo Industries,
Inc. ................... Consumer Products 1,322,025
115,000 Nittetsu Mining
Co., Ltd. .............. Metals & Minerals 644,467
200,000 Okumura Corporation ...... Services 947,867
35,000 Secom Co., Ltd. .......... Services 2,264,073
75,000 Shimano Inc. ............. Consumer Products 1,527,812
100,000 Shiseido Company Ltd. .... Consumer Products 1,363,599
123,000 Shoei Co., Ltd. .......... Holding Company 1,032,926
127,000 Sotoh Co., Ltd. .......... Consumer Products 760,289
50,000 T. Hasegawa Co., Ltd. .... Consumer Products 1,060,115
115,000 Tachi-S Co. Limited ...... Automotive 1,003,991
12,000 Toho Co., Ltd. ........... Media 1,576,453
85,000 The Tokio Marine &
Fire Insurance
Co., Ltd. .............. Insurance 848,092
6,000 Tsutsumi Jewelry
Co., Ltd. .............. Distribution 83,811
-------------------------------------
Total Japan 25,238,651
=====================================
Luxembourg (1.0%)
40,000 Minorco SA ADR ........... Metals & Minerals 815,000
150 Socfinasia ............... Food & Agriculture 536,506
-------------------------------------
Total Luxembourg 1,351,506
=====================================
Mexico (1.1%)
385,000 Industrias Peoles
S.A. de C.V. ........... Metals & Minerals 1,518,052
Total Mexico 1,518,052
Netherlands (1.5%)
23,500 Apothekers Cooperative
OPG U.A. ............... Health Care 708,378
55,000 European City Estates
NV ..................... Real Estate 816,200
7,000 Philips Electronics
NV ADR ................. Electronics 548,625
-------------------------------------
Total Netherlands 2,073,203
=====================================
New Zealand (2.1%)
100,000 Apple Fields Limited ..... Food & Agriculture 21,833
750,000 Carter Holt Harvey
Limited ................ Forest Products
& Paper 1,309,962
1,000,000 Shortland Properties
Limited ................ Real Estate 592,602
1,604,825 Tasman Agriculture Limited .. Food & Agriculture 941,011
-------------------------------------
Total New Zealand 2,865,408
=====================================
Norway (0.4%)
35,000 Schibsted A/S/A Media 654,953
-------------------------------------
Total Norway 654,953
=====================================
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 34
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Shares Common Stocks (66.6%) Industry Market Value
=================================================================================================================
<S> <C> <C> <C>
Portugal (0.6%)
10,000 Companhia de Celulose do Caima SA..................... Forest Products & Paper $ 183,510
30,000 Espirito Santo Financial Holding SA ADR............... Financial Services 618,750
------------------------------------------
Total Portugal 802,260
==========================================
Singapore (1.8%)
135,000 Clipsal Industries Ltd................................ Building Materials 349,650
499,000 Intraco Ltd........................................... Distribution 317,228
150,000 Singapore Bus Service Ltd............................. Transportation 700,890
650,000 Thakral Corporation Ltd............................... Manufacturing 390,000
400,000 Times Publishing Ltd.................................. Media 762,874
------------------------------------------
Total Singapore 2,520,642
==========================================
South Korea (0.8%)
12,000 Dong Ah Tire Industry Company......................... Automotive 401,741
20,000 LG Industrial Systems................................. Capital Goods 242,537
3,750 Nam Yang Dairy Products Company....................... Consumer Products 365,361
3,000 Woong Jin Publishing Company.......................... Media 92,973
------------------------------------------
Total South Korea 1,102,612
==========================================
Spain (0.8%)
1,500 Corporacion Financiera Alba SA........................ Holding Company 164,488
150,000 Energia e Industrias Aragonesas SA.................... Chemicals 975,165
------------------------------------------
Total Spain 1,139,653
==========================================
Sweden (1.3%)
20,000 AssiDoman AB.......................................... Holding Company 561,182
10,000 Investor AB 'B'....................................... Holding Company 466,316
55,000 IRO AB................................................ Capital Goods 756,928
------------------------------------------
Total Sweden 1,784,426
==========================================
Switzerland (7.5%)
205 Bank for International Settlements (U.S. tranche)..... Gold-Related 1,442,473
5,500 Edipresse S.A. Bearer................................. Media 1,536,203
3,000 Kuhne & Nagel International AG Bearer................. Transportation 2,019,623
175 Lindt & Sprungli AG PC................................ Consumer Products 300,795
1,000 Nestle SA............................................. Consumer Products 1,413,020
650 Sairgroup AG D.R.C.................................... Transportation 143,844
6,000 Sika Finanz AG Bearer................................. Building Materials 1,770,393
5,000 Societe Generale d'Affichage SA D.R.C................. Media 1,879,969
------------------------------------------
Total Switzerland 10,506,320
==========================================
The accompanying notes to the financial statements are an integral part of this
schedule.
</TABLE>
35 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Shares Common Stock (66.6%) Industry Market Value
======================================================================================================================
<S> <C> <C> <C>
Thailand (0.2%)
100,000 Oriental Hotel PCL.................................... Real Estate $ 316,880
---------------------------------------------
Total Thailand 316,880
=============================================
United Kingdom (4.4%)
295,454 Antofagasta Holdings plc.............................. Investment Company 1,882,819
250,000 Berisford plc......................................... Consumer Products 712,729
875,000 Lonrho plc............................................ Conglomerate 1,423,361
300,000 McBride plc........................................... Consumer Products 865,336
375,000 Royal Doulton plc..................................... Consumer Products 1,314,355
---------------------------------------------
Total United Kingdom 6,198,600
=============================================
Miscellaneous (1.4%)
35,000 Banco Latinoamerican de Exportaciones SA, Class 'E'... Financial Services 1,391,250
30,000 North European Oil Royalty Trust...................... Energy 510,000
---------------------------------------------
Total Miscellaneous 1,901,250
=============================================
---------------------------------------------
Total Common Stocks
(cost basis $96,123,662) 93,018,244
=============================================
Preferred Stocks (6.6%)
================================================
25,030 Cheil Jedang Corporation, South Korea................. Conglomerate 262,026
15,000 Freeport-McMoran Copper & Gold, Inc................... Gold-Related 421,875
Preferred Series Gold, United States
30,000 Freeport-McMoran Copper & Gold, Inc................... Gold-Related 551,250
Preferred Series Silver, United States
40,000 Freeport-McMoran Copper & Gold, Inc................... Gold-Related 1,095,000
Preferred Series II, United States
16,500 Hornbach Holding AG, Germany.......................... Distribution 1,102,493
248,474 Independent Press Communications Ltd.,
New Zealand........................................... Media 1,332,965
21,900 Korean Air Lines, South Korea......................... Transportation 72,183
13,500 Legrand ADP, France................................... Capital Goods 1,733,235
8,533 LG Electronics Co., Ltd., South Korea................. Electronics 45,106
5,500 Sagem ADP, France..................................... Electronics 1,375,956
2,800 Samsung Electronics Co., Ltd., South Korea............ Electronics 49,337
67,520 Ssangyong Cement Industries, South Korea.............. Building Materials 230,945
2,000 Suedzucker AG, Germany................................ Consumer Products 1,005,171
---------------------------------------------
Total Preferred Stocks
(cost basis $10,691,314) 9,277,542
=============================================
---------------------------------------------
Total Equities
(cost basis $106,814,976) 102,295,786
=============================================
The accompanying notes to the financial statements are an integral part of this
schedule.
</TABLE>
The AAL Mutual Funds Semi-Annual Report 36
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (6.9%) Currency Market Value
=============================================================================================================
<S> <C> <C> <C>
Bonds and Notes
$500,000 Air Canada Variable Rate Perpetual Notes,
4.625%, 3/29/2049............................... Deutsche Mark $194,643
350,000 New Zealand Government, 10.00%, 3/15/2002....... New Zealand Dollar 244,807
750,000 Trans Power Finance Ltd., 8.00%, 3/15/2002...... New Zealand Dollar 480,896
Convertible Bonds
3,500 Alcatel Alsthom, 2.50%, 1/1/2004................ French Franc 580,090
350,000 BAA plc, 5.75%, 3/29/2006....................... Pound Sterling 647,116
500,000 Berisford, 5.00%, 1/31/2015..................... Pound Sterling 668,707
611 Gaumont SA, 3.75%, 1/1/2003..................... French Franc 51,801
11,250 Immobiliere Hoteliere, 5.00%, 1/1/2001...... French Franc 328,353
750,000 InterTAN, Inc., 9.00%, 8/3/2000................. Canadian Dollar 557,616
65,000,000 Nippon Yusen Kabushiki, 2.00%, 9/29/2000........ Japanese Yen 560,988
U.S. dollar Bonds and Notes
570,150 Federal Republic of Brazil Capitalization Bond, 8.00%, 4/15/2014 383,782
750,000 Federal Republic of Brazil Debt Conversion Bond, 498,750
Floating Rate Note, 6.75%, 4/15/2012
150,000 IRSA Inversiones y Representaciones S.A., 4.50%, 8/2/2003 154,500
230,000 IRSA Inversiones y Representaciones S.A., 4.50%, 8/2/2003 236,900
485,000 Republic of Argentina Floating Rate Bond, 6.6875%, 3/31/2005 411,038
1,000,000 United Mexican States Discount Floating Rate Note A, 6.6925%, 12/31/2019 890,000
250,000 United Mexican States Discount Floating Rate Note B, 6.8359%, 12/31/2019 222,500
(1,920,000 United Mexican States Oil Recovery Rights)
250,000 Yangming Marine Transport Corporation, 2.00%, 10/6/2001 280,000
U.S. Dollar Convertible Bonds
525,000 Cheil Jedang Corporation, 3.00%, 12/31/2006 624,750
250,000 Medya International Ltd., 10.00%, 6/28/2001 185,000
1,150,000 Scandinavian Broadcasting System SA, 7.25%, 8/1/2005 1,198,875
150,000 Sincere Navigation Corporation, 3.75%, 5/26/2003 173,250
---------------------------------------------------
Long-Term Fixed-Income Obligations
(amortized cost basis $9,526,693) 9,574,362
===================================================
===================================================
Total Long-Term Investments
(amortized cost basis $116,341,669) 111,870,148
===================================================
The accompanying notes to the financial statements are an integral part of this
schedule.
</TABLE>
37 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Par Value Commercial Paper (19.9%) Market Value
================================================================================
$3,590,000 CSX, Inc., 5.59%, 11/17/1997................... $3,581,081
3,626,000 ICI Wilmington, Inc., 5.66%, 11/13/1997........ 3,619,159
2,492,000 Knight-Ridder, Inc., 5.65%, 11/6/1997.......... 2,490,045
3,000,000 Merrill Lynch & Co., Inc., 5.52%, 11/12/1997... 2,994,940
3,683,000 Merrill Lynch & Co., Inc., 5.52%, 11/13/1997... 3,676,223
4,071,000 Motorola, Inc., 5.48%, 11/10/1997.............. 4,065,423
3,302,000 Raytheon Inc., 5.78%, 11/5/1997................ 3,299,879
4,070,000 Wal-Mart Stores, Inc., 5.51%, 11/3/1997........ 4,068,754
-------------------------------------------------------
Total Commercial Paper
(amortized cost $27,795,504) 27,795,504
=======================================================
=======================================================
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $144,137,173) $139,665,652
=======================================================
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 38
<PAGE>
The AAL Equity Income Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks current income, long-term income growth and capital growth by
investing primarily in a diversified portfolio of income-producing equity
securities.
Shares Common Stocks (89.6%) Market Value
===============================================================================
Basic Materials (1.5%)
82,000 Calgon Carbon Corporation...................... $ 968,625
26,000 Crown Cork & Seal Company, Inc................. 1,171,625
-----------------------------------------
Total Basic Materials 2,140,250
=========================================
Capital Goods (2.9%)
22,000 AlliedSignal Inc............................... 792,000
44,000 Boeing Company................................. 2,106,500
19,000 United Technologies Corp....................... 1,330,000
-----------------------------------------
Total Capital Goods 4,228,500
=========================================
Communication Services (19.7%)
55,000 Airtouch Communications, Inc................... 2,124,375
34,870 Ameritech Corporation.......................... 2,266,550
28,300 Bell Atlantic Corporation...................... 2,260,463
90,000 Cable & Wireless plc ADR....................... 2,205,000
35,000 GTE Corporation................................ 1,485,313
119,000 MCI Communications Corporation................. 4,224,500
35,185 SBC Communications Incorporated................ 2,238,646
24,000 Telecomunicacoes Brasileiras S/A-Telebras ADR.. 2,436,000
54,200 Telefonica de Espana ADR....................... 4,457,950
22,000 Teleport Communications Group Inc.............. 1,064,250
125,000 Worldcom, Inc.................................. 4,203,125
-----------------------------------------
Total Communication Services 28,966,172
=========================================
Consumer Cyclicals (2.0%)
52,000 Cincinnati Bell, Inc........................... 1,404,000
14,000 Gannett Company, Inc........................... 735,875
14,000 New York Times Class A......................... 766,500
-----------------------------------------
Total Consumer Cyclicals 2,906,375
=========================================
Consumer Staples (5.9%)
14,000 Hershey Foods Corporation...................... 773,500
16,000 Quaker Oats Company............................ 766,000
39,000 Rite Aid Corporation........................... 2,315,625
30,000 Sara Lee Corporation........................... 1,533,750
36,900 Tele-Communications Inc........................ 846,394
21,100 Tele-Communications Ventures Group............. 486,619
78,800 U.S. West Media Group.......................... 1,989,700
-----------------------------------------
Total Consumer Staples 8,711,588
=========================================
The accompanying notes to the financial statements are an integral part of this
schedule.
39 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Equity Income Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (89.6%) Market Value
===============================================================================
Energy (8.3%)
9,000 British Petroleum Company plc ADR.............. $ 789,750
15,000 Coastal Corporation............................ 901,875
21,000 Columbia Gas System, Inc....................... 1,517,250
24,000 Consolidated Natural Gas Company............... 1,297,500
28,000 Exxon Corporation.............................. 1,720,250
23,000 KeySpan Energy Corporation..................... 714,438
36,000 Questar Corporation............................ 1,390,500
43,000 Sonat Inc...................................... 1,975,313
36,000 The Williams Companies, Inc.................... 1,833,750
---------------------------------------------
Total Energy 12,140,626
=============================================
Financials (13.2%)
13,000 Chase Manhattan Corporation.................... 1,499,875
21,000 Crescent Real Estate Equities Company.......... 756,000
17,000 Crestar Financial Corporation.................. 804,313
33,000 Duke Realty Investments, Inc................... 742,500
15,000 Equity Residential Properties Trust............ 757,500
31,000 Fannie Mae..................................... 1,501,563
23,000 First Industrial Realty Trust, Inc............. 796,375
30,000 First Union Corporation........................ 1,471,875
41,000 Freddie Mac.................................... 1,552,875
30,000 Mellon Bank Corporation........................ 1,546,875
15,000 Mercantile Bancorporation, Inc................. 728,438
23,000 Mercantile Bankshares Corporation.............. 819,375
25,000 Patriot American Hospitality, Inc.............. 825,000
24,000 Simon DeBartolo Group, Inc..................... 742,500
55,000 Starwood Lodging Trust......................... 3,289,688
17,000 Summit Bancorp................................. 725,688
13,000 Union Planters Corporation..................... 771,063
---------------------------------------------
Total Financials 19,331,503
=============================================
Health Care (1.5%)
13,000 Johnson & Johnson.............................. 745,875
17,000 Merck & Co., Inc............................... 1,517,250
---------------------------------------------
Total Health Care 2,263,125
=============================================
Technology (4.0%)
78,000 First Data Corporation......................... 2,266,875
19,000 International Business Machines Corporation.... 1,863,188
20,611 Lucent Technologies, Inc....................... 1,699,119
---------------------------------------------
Total Technology 5,829,182
=============================================
Utilities (30.6%)
56,400 Boston Edison Company.......................... 1,780,124
19,000 CINergy Corporation............................ 627,000
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 40
<PAGE>
The AAL Equity Income Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Shares Common Stocks (89.6%) Market Value
===============================================================================
Utilities (30.6%) - continued
103,000 CMS Energy Corporation......................... $ 3,759,500
73,000 Central & Southwest Corporation................ 1,574,062
22,650 Consolidated Edison Company of New York........ 775,762
47,358 Duke Power Company............................. 2,285,023
65,000 Edison International........................... 1,665,624
169,060 Endesa S.A. ADR................................ 3,148,743
43,650 FPL Group, Incorporated........................ 2,256,158
40,200 General Public Utilities Corporation........... 1,454,737
45,000 Huaneng Power International, Incorporated ADR.. 990,000
39,800 KU Energy Corporation.......................... 1,368,125
87,500 NIPSCO Industries Incorporated................. 3,844,530
36,300 National Power ADR............................. 1,206,975
73,100 New Century Energies, Inc...................... 3,051,925
16,000 OGE Energy Company............................. 775,000
56,000 PG&E Corporation............................... 1,431,500
82,000 PacifiCorp..................................... 1,778,375
111,000 Pinnacle West Capital Corporation.............. 3,864,188
48,000 PowerGen ADR................................... 2,160,000
64,805 Southern Company............................... 1,486,465
94,000 TECO Energy Incorporated....................... 2,244,250
36,000 Union Electric Company......................... 1,356,750
---------------------------------------------
Total Utilities 44,884,816
=============================================
=============================================
Total Common Stocks
(cost basis $110,383,743) 131,402,137
=============================================
Par Value Long-Term Fixed-Income Obligations (4.6%)
===============================================================================
$1,000,000 Potomac Electric Power 9.00% 4/15/2000......... 1,041,119
1,650,000 Texas Utilities Electric 9.75% 5/1/2021........ 1,862,442
500,000 U.S. Treasury Bond 7.50% 11/15/2016............ 571,563
3,150,000 U.S. Treasury Note 6.875% 3/31/2000............ 3,233,670
---------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $6,711,077) 6,708,794
=============================================
=============================================
Total Long-Term Investments
(amortized cost basis
$117,094,820) 138,110,931
=============================================
The accompanying notes to the financial statements are an integral part of this
schedule.
41 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Equity Income Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Par Value Short-Term Obligations (5.8%) Market Value
===============================================================================
$1,704,128 American Family Insurance Company*............ $ 1,704,128
1,345,000 Merrill Lynch & Co., Inc. 5.51% 11/10/97...... 1,343,130
3,600,000 Merrill Lynch & Co., Inc. 5.53% 11/18/97...... 3,590,599
1,968,833 Wisconsin Electric Power Company*............. 1,968,833
---------------------------------------------
Total Short-Term Obligations
(amortized cost basis $8,606,690) 8,606,690
=============================================
=============================================
Total Investments (100.0%)
(amortized cost basis
$125,701,510) $146,717,621
=============================================
* Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 42
<PAGE>
The AAL Bond Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks a high level of current income, consistent with capital
preservation by investing primarily in a diversified portfolio of investment
grade bonds.
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (97.0%) Interest Rate Maturity Date Market Value
====================================================================================================================
<S> <C> <C> <C> <C> <C>
U.S. Government Agency Obligations (3.2%)
$ 7,000,000 Federal Home Loan Mortgage
Corporation REMIC Trust.............................. 7.250% 12/15/2005 $ 7,064,029
5,000,000 Federal National Mortgage
Association REMIC Trust.............................. 5.900 7/25/2015 4,987,450
------------------------------------------------
Total U.S. Government
Agency Obligations 12,051,479
================================================
U.S. Government Obligations (26.8%)
55,000,000 U.S. Treasury Notes.................................. 5.500 12/31/2000 54,621,875
43,000,000 U.S. Treasury Notes.................................. 7.875 11/15/2004 47,918,125
------------------------------------------------
Total U.S. Government
Obligations 102,540,000
================================================
Asset-Backed Securities (20.6%)
10,000,000 Aesop Funding 1997-1 A2.............................. 6.400 10/20/2003 10,139,600
10,000,000 American Express 1997-1 A............................ 6.400 4/15/2005 10,165,200
3,000,000 Associates Housing Services
Series 1996-1........................................ 7.900 3/15/2027 3,225,360
10,000,000 Chase Credit Card Master Trust
1997-2A.............................................. 6.300 4/15/2003 10,108,100
417,283 ContiMortgage Home Equity Loan Trust
Series 1996-3........................................ 6.760 2/15/2011 416,548
5,000,000 Dayton Hudson Credit................................. 6.250 8/15/2005 5,020,313
5,000,000 Green Tree Financial Corporation
Series 1997-6........................................ 7.140 1/15/2029 5,115,625
5,000,000 Green Tree Financial Corporation
Series 1996-7........................................ 7.650 10/15/2027 5,366,230
5,250,000 Green Tree Financial Corporation
Series 1997-6........................................ 6.680 1/30/2029 5,305,781
5,000,000 Green Tree Financial Corporation
Series 1996-6........................................ 7.950 9/15/2027 5,408,310
5,000,000 Green Tree Home Equity Loans
1997-C A-2........................................... 6.380 8/15/2028 5,027,850
3,000,000 Green Tree Home Equity Loans
Series 1996-D........................................ 8.100 9/15/2027 3,217,857
10,000,000 MBNA Master Credit Card Trust
1997-F A............................................. 6.600 11/15/2004 10,243,400
------------------------------------------------
Total Asset-Backed Securities 78,760,174
================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
43 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (97.0%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<C> <S> <C> <C> <C>
Collateralized Mortgage Obligations (11.4%)
$ 12,900,000 Citicorp Mortgage Securities, Inc.
Series 1994-8..................................... 6.250% 5/25/2024 $12,884,004
15,360,000 Countrywide Home Loans 1997-5 A3.................. 6.750 11/25/2027 15,499,960
15,000,000 PNC Mortgage Securities Corporation
1997-5 A2......................................... 6.750 10/25/2027 15,084,375
-----------------------------------------------------
Total Collateralized
Mortgage Obligations 43,468,339
=====================================================
Corporate Obligations (35.0%)
5,000,000 Aetna Services, Inc............................... 6.970 8/15/2036 5,195,785
4,000,000 Allegiance Corporation............................ 7.000 10/15/2026 4,128,856
5,000,000 Auburn Hills Trust................................ 12.000 5/1/2020 7,916,140
5,000,000 CSX Corporation................................... 7.250 5/1/2027 5,378,710
10,000,000 Delta Air Lines, Inc. Series 93A2................. 10.500 4/30/2016 13,208,390
10,000,000 First National Bank of Chicago.................... 8.080 1/5/2018 11,231,690
5,000,000 First Union Corporation........................... 6.824 8/1/2026 5,200,590
5,500,000 Florida Power & Light Company..................... 6.875 4/1/2004 5,561,446
5,000,000 Grand Metro Investments........................... 7.450 4/15/2035 5,389,525
10,000,000 Hydro-Quebec Company.............................. 8.050 7/7/2024 11,350,300
5,000,000 Norfolk Southern Corporation...................... 7.050 5/1/2037 5,194,475
6,872,000 NWATrust.......................................... 8.260 3/10/2006 7,416,462
5,075,000 Pennzoil Company.................................. 10.625 6/1/2001 5,408,073
5,000,000 Raytheon Company.................................. 7.200 8/15/2027 5,053,035
5,000,000 Royal Caribbean................................... 7.500 10/15/2027 5,011,545
5,000,000 Salomon, Inc...................................... 6.700 7/5/2000 5,059,675
5,000,000 Service Corporation International................. 7.000 6/1/2015 5,118,950
5,000,000 State Street Boston Corporation................... 7.350 6/15/2026 5,420,365
5,000,000 Transocean Offshore, Inc.......................... 7.450 4/15/2027 5,349,270
5,000,000 USA Waste Services................................ 7.000 10/1/2004 5,088,475
5,000,000 WMX Technologies, Inc............................. 7.100 8/1/2026 5,243,325
-----------------------------------------------------
Total Corporate Obligations 133,925,082
=====================================================
-----------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $362,488,381) 370,745,074
=====================================================
Short-Term Obligations (3.0%)
======================================================================
2,355,767 American Family Insurance Company*................................... 2,355,767
8,610,000 Merrill Lynch & Co., Inc., 5.560%, 11/6/1997......................... 8,603,351
496,067 Wisconsin Electric Power Company*.................................... 496,067
-----------------------------------------------------
Total Short-Term Obligations
(cost basis $11,455,185) 11,455,185
=====================================================
=====================================================
TOTAL INVESTMENTS (100%)
(amortized cost basis $373,943,566) $382,200,259
=====================================================
* Variable rate demand note
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 44
<PAGE>
The AAL Municipal Bond Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks a high level of current income exempt from federal income taxes,
consistent with capital preservation by investing primarily in a diversified
portfolio of municipal securities.
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Alabama (2.3%)
$ 4,000,000 Alabama Special Care Facility Finance Authority
Revenue Bonds (Daughters of Charity System)....................... 5.000% 11/1/2025 $3,735,000
7,000,000 Jefferson County, Alabama Sewer Revenue
Bonds (FGIC Insured)............................................... 5.750 2/1/2027 7,210,000
----------------------------------------------------------
Total Alabama 10,945,000
==========================================================
Alaska (1.4%)
2,000,000 Alaska State Partnership Courthouse Project
Certificate Participation (AMBAC Insured).......................... 5.000 1/1/2013 1,935,000
2,530,000 Alaska State Partnership Courthouse Project
Certificate Participation (AMBAC Insured).......................... 5.000 1/1/2012 2,463,587
2,395,000 Alaska State Partnership Courthouse Project
Certificate Participation (AMBAC Insured).......................... 5.000 1/1/2011 2,365,063
----------------------------------------------------------
Total Alaska 6,763,650
==========================================================
Arizona (2.0%)
4,175,000 Maricopa County, Arizona Unified School
District #097 Deer Project 1996-Series D
General Obligation (FGIC Insured).................................. 4.900 7/1/2009 4,190,655
5,000,000 Salt River Arizona Project Revenue Bonds.......................... 5.500 1/1/2019 5,025,000
----------------------------------------------------------
Total Arizona 9,215,655
==========================================================
California (16.7%)
3,915,000 California Rural Home Finance Authority Single
Family Mortgage Revenue Bonds
(GNMA Insured) (Subject to 'AMT').................................. 6.250 9/1/2029 4,492,463
2,000,000 California Rural Home Mortgage Financial
Authority Single Family Mortgage Revenue Bonds
(Subject to 'AMT')................................................ 5.500 5/1/2029 2,222,500
4,855,000 Contra Costa County California Home Mortgage
Revenue Bonds (Escrowed to Maturity).............................. 7.500 5/1/2014 6,129,437
7,780,000 East Bay Municipal Utility District California
Water System Revenue Bonds (FGIC Insured).......................... 5.000 6/1/2026 7,439,625
5,000,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 0.000 1/1/2009 3,550,000
605,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 0.000 1/1/2012 435,600
6,000,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 0.000 1/1/2013 4,342,500
5,000,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 0.000 1/1/2010 3,568,750
5,000,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 0.000 1/1/2011 3,593,750
10,085,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A...................................... 5.000 1/1/2035 9,189,956
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
45 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Rate Market Value
====================================================================================================================
<S> <C> <C> <C>
California (16.7%) - continued
$ 7,145,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A........................... 0.000% 1/1/2014 $5,180,125
1,335,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A........................... 0.000 1/1/2005 926,156
4,200,000 Fresno, California Sewer Revenue Bonds,
Series 1993 A-1 (AMBACInsured)......................... 6.250 9/1/2014 4,772,250
5,000,000 Los Angeles County, Californa Tax and Revenue
Notes-Series A......................................... 4.500 6/30/1998 5,023,200
3,500,000 Orange County California Transit Authority, Sales
Tax Revenue Bonds, Series 1992 M (MBIAInsured)......... 6.000 2/15/2009 3,858,750
4,200,000 Pomona California Single Family Housing
Revenue Bonds (Escrowed to Maturity)................... 7.600 5/1/2023 5,444,250
2,075,000 Pomona, California Unified School District
General Obligation Bonds (MBIAInsured)................. 6.500 8/1/2019 2,399,218
4,630,000 Suisin-Soland, California Water Authority
Revenue Bonds (FSAInsured)............................. 5.550 5/1/2017 4,838,350
----------------------------------------------------------------------------
Total California 77,406,880
============================================================================
Colorado (0.5%)
2,065,000 Colorado Housing Single Family Mortgage
Revenue Bonds.......................................... 7.250 11/1/2031 2,212,130
----------------------------------------------------------------------------
Total Colorado 2,212,130
============================================================================
District of Columbia (1.7%)
3,620,000 District of Columbia, Howard University
Revenue Bonds.......................................... 7.250 10/1/2020 3,914,125
3,700,000 District of Columbia, Howard University
Revenue Bonds.......................................... 7.250 10/1/2011 4,019,125
----------------------------------------------------------------------------
Total District of Columbia 7,933,250
============================================================================
Florida (2.2%)
1,200,000 Dade County,Florida Aviation Miami International
Airport Series B(FSAInsured) (Subject to 'AMT')........ 5.125 10/1/2017 1,159,500
2,750,000 Dade County,Florida Aviation Revenue Bonds
(FSAInsured)(Subject to 'AMT')......................... 5.375 10/1/2010 2,805,000
2,200,000 Lakeland, Florida Regional Medical Center Revenue
Bonds (MBIAInsured).................................... 5.000 11/15/2017 2,112,000
1,750,000 Manatee County, Florida Revenue Bonds
(Subject to 'AMT')..................................... 7.200 5/1/2028 1,962,187
2,000,000 Orange County, Florida Health Facilities Authority
Bonds (MBIAInsured).................................... 6.250 10/1/2018 2,255,000
----------------------------------------------------------------------------
Total Florida 10,293,687
============================================================================
Georgia (3.5%)
5,000,000 Cherokee County, Georgia Water and Sewer
Authority Revenue Bond................................. 5.200 8/1/2025 4,981,250
4,000,000 Georgia Municipal Electric Authority Power
Revenue Bonds, Series Z (FGICInsured).................. 5.500 1/1/2012 4,205,000
2,690,000 Georgia Municipal Electric Authority Special
Obligation Bonds, Series 1993 (AMBACInsured)........... 7.000 1/1/2008 3,207,825
3,500,000 Municipal Electric Authority Georgia Revenue
Bonds (MBIAInsured).................................... 6.500 1/1/2012 4,029,375
----------------------------------------------------------------------------
Total Georgia 16,423,450
============================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 46
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Rate Market Value
====================================================================================================================
<S> <C> <C> <C>
Illinois (10.8%)
$ 7,400,000 Chicago, Illinois OOHare International Airport
Revenue Bonds (MBIAInsured) (Subject to 'AMT')......... 5.700% 1/1/2008 $7,714,500
2,500,000 Chicago, Illinois Single Family Mortgage Revenue
Bonds (GNMACollateral)(Subject to 'AMT')............... 7.250 9/1/2028 2,815,625
2,250,000 Cook County, Illinois General Obligation Bonds
(FGICInsured).......................................... 5.500 11/15/2022 2,250,000
880,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2006 1,123,100
1,000,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2007 1,290,000
1,080,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2009 1,422,900
1,250,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2011 1,690,625
1,565,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2014 2,159,700
1,815,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGICInsured)........................ 8.500 12/1/2016 2,525,118
3,620,000 DuPage County, Illinois Stormwater Project,
G.O. Bonds............................................. 5.600 1/1/2021 3,823,625
9,400,000 Hoffman Estates, Illinois Tax Increment
Revenue Bonds.......................................... 0.000 5/15/2003 7,202,750
3,000,000 Illinois Regional Transit Authority Revenue
Bonds, Series A (FGICInsured).......................... 6.700 11/1/2021 3,573,750
10,650,000 Metropolitan Pier and Exposition Center,
Illinois Revenue Bonds................................. 7.000 7/1/2026 12,580,313
-----------------------------------------------------------------------------
Total Illinois 50,172,006
=============================================================================
Indiana (2.6%)
500,000 Indiana Municipal Power Revenue Bonds
(MBIA Insured)......................................... 5.500 1/1/2016 515,625
1,420,000 Indiana State Toll Road Revenue Bonds
(Escrowed to Maturity)................................. 9.000 1/1/2015 1,989,775
4,550,000 Indiana Transportation Finance Authority
Revenue Bonds (MBIA Insured)........................... 7.250 6/1/2015 5,533,938
1,500,000 Indianapolis, Indiana Bond Bank Revenue Bonds.......... 6.500 1/1/2013 1,721,250
2,000,000 Lawrence Township Indiana Metropolitan School
District G.O. Bonds.................................... 6.875 7/5/2011 2,330,000
-----------------------------------------------------------------------------
Total Indiana 12,090,588
=============================================================================
Kansas (0.5%)
2,000,000 Sedgwick and Shawnee Counties, Kansas Single
Family Revenue Mortgage Bonds Series A-1
(Subject to 'Amt')..................................... 5.500 6/1/2029 2,192,500
-----------------------------------------------------------------------------
Total Kansas 2,192,500
=============================================================================
Louisiana (0.3%)
1,545,000 Jefferson Parish, Louisiana Revenue Bond
(Subject to 'AMT')..................................... 5.850 12/1/2028 1,562,381
-----------------------------------------------------------------------------
Total Louisiana 1,562,381
=============================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
47 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Rate Market Value
====================================================================================================================
<S> <C> <C> <C>
Massachusetts (1.0%)
$ 5,000,000 Massachusetts State Turnpike Authority
Metropolitan Highway Systems Series A Revenue
Bonds (MBIA Insured)................................... 5.000% 1/1/2037 $4,706,250
----------------------------------------------------------------------------
Total Massachusetts 4,706,250
============================================================================
Michigan (2.9%)
1,950,000 Battle Creek, Michigan Downtown Development
Authority Tax Allocation Bonds (MBIA Insured).......... 5.125 5/1/2020 1,862,250
2,910,000 Battle Creek, Michigan Tax Increment Allocation
Bonds (MBIA Insured)................................... 5.000 5/1/2016 2,786,325
740,000 Battle Creek, Michigan Tax Increment Allocation
Bonds (MBIA Insured)................................... 5.100 5/1/2010 734,450
730,000 Battle Creek, Michigan Tax Increment Allocation
Bonds (MBIA Insured)................................... 5.000 5/1/2009 728,175
775,000 Battle Creek, Michigan Tax Increment Allocation
Bonds (MBIA Insured)................................... 5.200 5/1/2011 769,188
800,000 Battle Creek, Michigan Tax Increment Allocation
Bonds (MBIA Insured)................................... 5.250 5/1/2012 799,000
790,000 Clare County, Michigan General Obligation Bonds........ 5.100 7/1/2008 789,013
5,500,000 Michigan Public Power Agency Revenue Refunding
Bonds (Belle River Project) (MBIA Insured)............. 5.000 1/1/2019 5,190,625
----------------------------------------------------------------------------
Total Michigan 13,659,026
============================================================================
Minnesota (0.4%)
1,675,000 Alexandria Minnesota Independent School District
Number 206 General Obligation Bonds.................... 6.300 2/1/2012 1,823,656
250,000 Minneapolis, Minnesota Community Development
Agency General Obligation LTD Bonds.................... 5.500 6/1/2012 249,688
----------------------------------------------------------------------------
Total Minnesota 2,073,344
============================================================================
Missouri (2.1%)
5,885,000 Missouri State Housing Development Community
Single Family Mortgage Revenue Bonds
(Subject to 'AMT')..................................... 7.300 3/1/2028 6,701,544
2,000,000 Missouri State Housing Development Community
Single Family Mortgage Series C-1 Revenue
Bonds.................................................. 6.550 9/1/2028 2,180,000
1,060,000 Missouri State Housing Development Revenue
Bonds.................................................. 9.375 4/1/2016 1,130,225
----------------------------------------------------------------------------
Total Missouri 10,011,769
============================================================================
Montana (1.0%)
3,270,000 Montana State Board Housing Revenue Bonds,
Single Family Program, Series B-1...................... 6.300 6/1/2008 3,519,338
1,000,000 Montana State Housing Revenue Bonds.................... 6.400 12/1/2012 1,061,250
----------------------------------------------------------------------------
Total Montana 4,580,588
============================================================================
New Jersey (0.4%)
1,895,000 Union City, New Jersey Series A General Obligation
Bonds (MBIA Insured)................................... 5.250 9/1/2006 1,987,381
----------------------------------------------------------------------------
Total New Jersey 1,987,381
============================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 48
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<C> <S> <C> <C> <C>
New Mexico (0.6%)
$ 2,275,000 New Mexico Mortgage Finance Authority
Revenue Bonds, Series 1995 F........................................ 7.000% 1/1/2026 $2,718,625
------------------------------------------------------
Total New Mexico 2,718,625
======================================================
New York (14.6%)
5,000,000 New York Dormitory Authority State University
Educational Facilities Revenue Bonds................................ 5.250 5/15/2019 4,912,500
3,500,000 New York Dormitory Authority State University
Revenue Bonds....................................................... 5.875 5/15/2011 3,771,250
5,000,000 New York Dormitory Authority State University
Revenue Bonds....................................................... 5.875 5/15/2017 5,368,750
2,000,000 New York Dormitory Authority State University
Revenue Bonds....................................................... 7.500 5/15/2013 2,472,500
4,795,000 New York State Local Government Assistance
Corporation, Refunding Revenue Bonds
(MBIA Insured)...................................................... 5.000 4/1/2021 4,525,281
3,000,000 New York State Local Government Assistance
Corporation, Refunding Revenue Bonds
(MBIA Insured)...................................................... 5.250 4/1/2016 3,033,750
3,000,000 New York State Medical Care Facilities, Finance
Agency Revenue Bonds, Mental Health Services
(FSA Insured)....................................................... 5.375 2/15/2014 2,996,250
9,000,000 New York State Thruway Revenue Bonds................................ 5.600 4/1/2005 9,405,000
11,000,000 New York, New York Revenue Notes Series A........................... 4.500 6/30/1998 11,053,790
6,915,000 Triborough Bridge & Tunnel Authority Revenue
Bonds............................................................... 5.000 1/1/2020 6,681,619
5,000,000 Triborough Bridge & Tunnel Authority Revenue
Bonds............................................................... 5.000 1/1/2017 4,800,000
7,450,000 Triborough Bridge and Tunnel Authority,
New York Convention Center Project Bonds,
Series 1990 E....................................................... 7.250 1/1/2010 8,809,625
------------------------------------------------------
Total New York 67,830,315
======================================================
North Carolina (0.5%)
1,845,000 North Carolina Eastern Municipal Power
Agency Revenue Bonds (FSA Insured).................................. 7.500 1/1/2010 2,285,494
------------------------------------------------------
Total North Carolina 2,285,494
======================================================
Oregon (1.2%)
5,000,000 Washington County, Oregon Unified Sewerage
Agency Sr. Lien Series A Revenue Bonds
(AMBAC Insured)..................................................... 6.125 10/1/2012 5,506,250
------------------------------------------------------
Total Oregon 5,506,250
======================================================
Pennsylvania (1.9%)
1,365,000 Pennsylvania Housing Finance Agency Revenue
Bonds (Subject to 'AMT')............................................ 6.750 10/1/2009 1,528,800
1,455,000 Pennsylvania Housing Finance Agency Revenue
Bonds (Subject to 'AMT')............................................ 6.750 10/1/2010 1,625,963
2,000,000 Philadelphia Pennsylvania Hospital Authority
Children's Hospital Revenue Bonds................................... 5.000 2/15/2021 1,875,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
49 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds(99.7%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Pennsylvania (1.9%) - continued
$ 3,945,000 Philadelphia, Pennsylvania Industrial Development
Authority Revenue Bonds (The Girard Coal
Project).................................................. 5.375% 11/15/2012 $ 4,068,281
--------------------------------------------------------------------
Total Pennsylvania 9,098,044
====================================================================
South Carolina (1.8%)
9,000,000 South Carolina State Public Service Authority
Series A Revenue Bonds (MBIA Insured)..................... 5.000 1/1/2029 8,538,750
--------------------------------------------------------------------
Total South Carolina 8,538,750
====================================================================
Tennessee (2.3%)
5,705,000 Tennessee Housing Development Agency Revenue
Bonds (Subject to 'AMT').................................. 0.000 1/1/2007 3,544,231
1,175,000 Tennessee Housing Development Agency Revenue
Bonds (Subject to 'AMT').................................. 0.000 1/1/2008 687,375
5,895,000 Tennessee Housing Development Agency Revenue
Bonds (Subject to 'AMT').................................. 0.000 7/1/2007 3,573,844
4,535,000 Tennessee Housing Development Agency Revenue
Bonds (Subject to 'AMT').................................. 0.000 7/1/2006 2,908,069
--------------------------------------------------------------------
Total Tennessee 10,713,519
====================================================================
Texas (9.0%)
2,000,000 Houston, Texas Airport System Special Facility
Revenue Bonds (Subject to 'AMT') (FSA Insured)............ 5.375 7/15/2010 2,035,000
3,300,000 Houston, Texas Airport Systems Special Facilities
Revenue Bonds (FSA Insured) (Subject to 'AMT')............ 5.375 7/15/2011 3,333,000
5,000,000 Keller Texas Independent School District G.O.
Bonds (PSF Guaranteed).................................... 5.125 8/15/2025 4,818,750
16,000,000 Texas State Tax and Revenue Series A Notes................ 4.750 8/31/1998 16,125,440
7,880,000 Waco Texas Health Facilities Development
Corporation (Daughters of Charity System)................. 5.000 11/1/2020 7,545,100
7,050,000 Wylie Texas Independent School District G.O.
Bonds (PSF Guaranteed).................................... 7.000 8/15/2024 8,371,875
--------------------------------------------------------------------
Total Texas 42,229,165
====================================================================
Utah (2.9%)
5,325,000 Intermountain Power Agency Special Obligation
Revenue Bonds, Series 1986 A (MBIA Insured)............... 5.000 7/1/2021 4,879,031
3,800,000 Intermountain Power Agency Special Obligation
Revenue Bonds, Series 1986 C.............................. 5.000 7/1/2018 3,524,500
515,000 Intermountain Power Agency Utah 1986 Series B
Revenue Bonds............................................. 5.000 7/1/2016 482,813
575,000 Intermountain Power Agency Utah 1986 Series B
Revenue Bonds............................................. 5.000 7/1/2016 549,125
2,000,000 Intermountain Power Agency Utah Power Supply
Revenue Bond.............................................. 6.000 7/1/2015 2,001,400
410,000 Intermountain Power Agency Utah Revenue Bonds............. 5.000 7/1/2023 377,713
1,385,000 Utah State Housing Finance Agency......................... 7.250 7/1/2011 1,509,650
--------------------------------------------------------------------
Total Utah 13,324,232
====================================================================
The accompanying notes to the financial statements are an integral part of this
schedule. The AAL Mutual Funds Semi-Annual Report 50
</TABLE>
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (99.7%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Virginia (1.6%)
$ 3,000,000 Fairfax County, Virginia Development Authority
Revenue Bonds............................................. 5.250% 8/15/2019 $ 2,992,500
4,300,000 Metropolitan Washington D.C. Airport
Authority, Virginia Revenue Bonds (FGIC Insured)
(Subject to 'AMT')........................................ 5.250 10/1/2011 4,326,875
--------------------------------------------------------------------
Total Virginia 7,319,375
====================================================================
Washington (6.0%)
1,330,000 Chelan County, Washington Public District
Number 1 Revenue Bonds (Subject to 'AMT')................. 4.850 7/1/2032 1,331,663
2,275,000 Pierce County, Washington School District G.O.
Bonds (AMBAC Insured)..................................... 5.450 12/1/2013 2,388,750
5,000,000 Washington State G.O. Bonds............................... 6.750 2/1/2015 5,906,250
10,000,000 Washington State Public Power Supply System
Project #2, Revenue Bonds, Series 1994 A.................. 6.000 7/1/2007 10,975,000
6,195,000 Washington State Public Power Supply System
Project #3 Revenue Bonds (AMBAC Insured).................. 5.700 7/1/2009 6,558,956
1,000,000 Washington State Series A General Obligation
Bonds..................................................... 5.750 2/1/2017 1,016,250
--------------------------------------------------------------------
Total Washington 28,176,869
====================================================================
Wisconsin (2.7%)
1,990,000 Wisconsin Housing and Economic Development
Authority Home Ownership Revenue Bonds,
Series 1990 D............................................. 7.750 9/1/2010 2,109,400
10,500,000 Wisconsin State Operating Notes........................... 4.500 6/15/1998 10,545,150
--------------------------------------------------------------------
Total Wisconsin 12,654,550
====================================================================
Wyoming (2.3%)
570,000 Wyoming Community Development Authority
Revenue Bonds............................................. 5.750 6/1/2007 615,600
3,930,000 Wyoming Community Development Authority
Single Family Mortgage Revenue Bonds,
Series B.................................................. 6.650 6/1/2013 4,229,663
5,765,000 Wyoming State Farm Loan Board Capital
Projects Facilities Revenue Bonds......................... 5.750 10/1/2020 6,010,013
--------------------------------------------------------------------
Total Wyoming 10,855,276
====================================================================
--------------------------------------------------------------------
Total Municipal Bonds
(amortized cost basis $435,948,522) 465,479,999
====================================================================
Short-Term Tax-Exempt Variable Rate Obligations (0.3%)
============================================================================
1,496,361 Strong Municipal Money Market............................................... 1,496,361
--------------------------------------------------------------------
Total Short-Term Tax-Exempt Variable
Rate Obligations (cost basis $1,496,361) 1,496,361
====================================================================
====================================================================
TOTAL INVESTMENTS (100%)
(amortized cost basis $437,444,883) $466,976,360
====================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part
of this schedule.
51 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks high current income and secondarily capital growth by investing
primarily in a diversified portfolio of high risk, high yield bonds commonly
referred to as "junk bonds."
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (96.4%) Interest Rate Maturity Date Market Value
===================================================================================================================
<C> <S> <C> <C> <C>
Auto Manufacturing (1.7%)
$ 500,000 Advanced Accessory Systems*................................. 9.750% 10/1/2007 $ 493,750
500,000 Collins & Aikman Products................................... 11.500 4/15/2006 567,500
500,000 Walbro Corporation.......................................... 9.875 7/15/2005 515,000
--------------------------------------------------
Total Auto Manufacturing 1,576,250
==================================================
Basic Materials (5.7%)
600,000 Four M Corporation.......................................... 12.000 6/1/2006 639,000
750,000 Indah Kiat Finance Muritius Ltd.*........................... 10.000 7/1/2007 675,000
500,000 Maxxam Group Holdings, Inc.................................. 12.000 8/1/2003 533,750
1,000,000 Riverwood International Corporation......................... 10.250 4/1/2006 1,017,500
750,000 Stone Container Corporation................................. 10.750 10/1/2002 798,750
1,000,000 Sweetheart Cup Company, Inc................................. 10.500 9/1/2003 995,000
750,000 Tjiwi Kimia Finance Mauritius Ltd.*......................... 10.000 8/1/2004 675,000
--------------------------------------------------
Total Basic Materials 5,334,000
==================================================
Chemicals (4.3%)
750,000 General Chemical, Inc....................................... 9.250 8/15/2003 772,500
750,000 LaRoche Industries, Inc.*................................... 9.500 9/15/2007 750,000
500,000 PCI Chemicals Canada, Inc.*................................. 9.250 10/15/2007 495,000
750,000 Pioneer Americas Acquistion Corporation..................... 9.250 6/15/2007 742,500
500,000 Sterling Chemicals, Inc..................................... 11.750 8/15/2006 553,750
750,000 Trikem S.A.*................................................ 10.625 7/24/2007 703,125
--------------------------------------------------
Total Chemicals 4,016,875
==================================================
Construction (4.5%)
500,000 American Builders & Contractors Supply Co., Inc............. 10.625 5/15/2007 520,000
500,000 Building Materials Corporation*............................. 8.000 10/15/2007 492,500
500,000 Fortress Group, Inc......................................... 13.750 5/15/2003 555,000
500,000 MMI Products, Inc........................................... 11.250 4/15/2007 535,000
500,000 Neenah Corporation.......................................... 11.125 5/1/2007 542,500
750,000 Omega Cabinets, Ltd.*....................................... 10.500 6/15/2007 783,750
750,000 Williams Scotsman, Inc...................................... 9.875 6/1/2007 765,000
--------------------------------------------------
Total Construction 4,193,750
==================================================
Consumer Products (2.2%)
1,000,000 Doskocil Manufacturing Company, Inc.*....................... 10.125 9/15/2007 1,030,000
1,000,000 Ekco Group, Inc............................................. 9.250 4/1/2006 1,025,000
--------------------------------------------------
Total Consumer Products 2,055,000
==================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 52
<PAGE>
The AAL High Yield Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (96.4%) Interest Rate Maturity Date Market Value
=====================================================================================================================
<S> <C> <C> <C> <C>
Containers (1.7%)
$1,000,000 Anchor Glass Containers Corporation*.................. 11.250% 4/1/2005 $1,090,000
500,000 Plastic Containers, Inc............................... 10.000 12/15/2006 528,750
------------------------------------------------------
Total Containers 1,618,750
======================================================
Energy (8.1%)
500,000 Amerigas Partners, L.P................................ 10.125 4/15/2007 535,000
500,000 Anker Coal Group, Inc.*............................... 9.750 10/1/2007 502,500
750,000 Belco Oil & Gas Corporation*.......................... 8.875 9/15/2007 746,250
500,000 Coho Energy, Inc...................................... 8.875 10/15/2007 491,250
500,000 Dawson Production Services, Inc....................... 9.375 2/1/2007 525,000
500,000 Nuevo Energy Company.................................. 9.500 4/15/2006 531,250
500,000 Panaco, Inc.*......................................... 10.625 10/1/2004 500,000
500,000 Pride Petroleum Services, Inc......................... 9.375 5/1/2007 532,500
750,000 Southwest Royalties, Inc.*............................ 10.500 10/15/2004 744,375
1,000,000 Statia Terminals International N.V.................... 11.750 11/15/2003 1,060,000
750,000 Transamerican Energy Corporation*..................... 11.500 6/15/2002 768,750
500,000 XCL Limited*.......................................... 13.500 5/1/2004 650,000
------------------------------------------------------
Total Energy 7,586,875
======================================================
Financials (4.4%)
750,000 Cityscape Financial Corporation....................... 12.750 6/1/2004 525,000
750,000 Emergent Group, Inc.*................................. 10.750 9/15/2004 735,000
500,000 First Nationwide Holdings, Inc........................ 9.125 1/15/2003 517,500
1,000,000 Imperial Credit Capital Trust*........................ 10.250 6/14/2002 1,043,008
750,000 Olympic Financial Limited............................. 11.500 3/15/2007 768,750
500,000 Penncorp Financial Group, Inc......................... 9.250 12/15/2003 520,000
------------------------------------------------------
Total Financials 4,109,258
======================================================
Food & Beverages (4.4%)
500,000 Coca-Cola Femsa S.A................................... 8.950 11/1/2006 521,902
1,500,000 Envirodyne Industries, Inc............................ 12.000 6/15/2000 1,545,000
500,000 Southern Foods Group, L.P.*........................... 9.875 9/1/2007 515,000
1,000,000 Specialty Foods Corporation........................... 10.250 8/15/2001 1,000,000
500,000 Tom's Foods, Inc.*.................................... 10.500 11/1/2004 501,250
------------------------------------------------------
Total Food & Beverages 4,083,152
======================================================
Food Retailers (3.3%)
750,000 DiGiorgio Corporation................................. 10.000 6/15/2007 733,125
1,000,000 Duane Reade Corporation............................... 12.000 9/15/2002 1,030,000
750,000 Fleming Companies, Inc.*.............................. 10.500 12/1/2004 780,000
500,000 Fleming Companies, Inc................................ 10.625 12/15/2001 530,000
------------------------------------------------------
Total Food Retailers 3,073,125
======================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
53 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (96.4%) Interest Rate Maturity Date Market Value
===================================================================================================================
<C> <S> <C> <C> <C>
Health Care (3.4%)
$ 500,000 ICN Pharmaceuticals, Inc.*......................... 9.250% 8/15/2005 $525,000
1,000,000 Integrated Health Services, Inc.................... 9.500 9/15/2007 1,032,500
1,000,000 Tenet Healthcare Corporation....................... 10.125 3/1/2005 1,092,500
500,000 Urohealth Systems, Inc.*........................... 12.500 4/1/2004 485,000
500 Urohealth Systems, Inc. Warrants................... 2,500
--------------------------------------------------------
Total Health Care 3,137,500
========================================================
Leisure (7.7%)
500,000 Boyd Gaming Corporation............................ 9.250 10/1/2003 512,500
750,000 Cinemark USA, Inc.................................. 9.625 8/1/2008 772,500
750,000 Grand Casinos, Inc................................. 10.125 12/1/2003 793,125
1,000,000 HMH Properties, Inc................................ 9.500 5/15/2005 1,030,000
500,000 Livent, Inc.*...................................... 9.375 10/15/2004 505,000
570,000 Prime Hospitality Corporation...................... 9.250 1/15/2006 592,800
1,000,000 Riviera Holdings Corporation*...................... 10.000 8/15/2004 1,005,000
1,000,000 Trump Atlantic City Associates Funding, Inc........ 11.250 5/1/2006 985,000
987,067 United Artists Theatre Circuit, Inc................ 11.500 5/1/2002 1,009,461
--------------------------------------------------------
Total Leisure 7,205,386
========================================================
Media (2.4%)
500,000 Big Flower Press*.................................. 8.875 7/1/2007 503,750
750,000 Hollinger International Publishing, Inc............ 8.625 3/15/2005 765,000
1,000,000 T/SF Communications Corporation.................... 10.375 11/1/2007 975,000
--------------------------------------------------------
Total Media 2,243,750
========================================================
Media-Broadcasting (4.2%)
1,000,000 Allbritton Communications, Inc..................... 9.750 11/30/2007 1,000,000
750,000 Capstar Broadcasting............................... 9.250 7/1/2007 753,750
500,000 SFX Broadcasting, Inc.............................. 10.750 5/15/2006 545,000
1,000,000 Spanish Broadcasting Systems, Inc.................. 12.500 6/15/2002 1,117,500
500,000 TV Azteca, S.A. de C.V............................. 10.500 2/15/2007 520,000
--------------------------------------------------------
Total Media-Broadcasting 3,936,250
========================================================
Media-Cable (5.6%)
750,000 Adelphia Communications Corporation................ 9.875 3/1/2007 768,750
750,000 Cablevision Systems Corporation.................... 10.500 5/15/2016 841,875
1,000,000 Century Communications Corporation................. 8.750 10/1/2007 1,000,000
1,000,000 James Cable Partners, L.P.*........................ 10.750 8/15/2004 1,042,500
750,000 Jones Intercable, Inc.............................. 8.875 4/1/2007 780,000
750,000 TCI Satellite Entertainment, Inc................... 10.875 2/15/2007 772,500
--------------------------------------------------------
Total Media-Cable 5,205,625
========================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule. The AAL Mutual Funds Semi-Annual Report 54
<PAGE>
The AAL High Yield Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (96.4%) Interest Rate Maturity Date Market Value
=================================================================================================================
<S> <C> <C> <C> <C>
Metals-Diversified (3.7%)
$ 1,000,000 Algoma Steel Corporation............................12.375% 7/15/2005 $1,150,000
1,000,000 Bayou Steel Corporation.............................10.250 3/1/2001 1,025,000
500,000 Wells Aluminum Corporation*.........................10.125 6/1/2005 512,500
750,000 Wheeling-Pittsburgh Corporation..................... 9.375 11/15/2003 765,938
-------------------------------------------------
Total Metals-Diversified 3,453,438
=================================================
Miscellaneous Manufacturing (8.9%)
500,000 Atlantis Plastics, Inc..............................11.000 2/15/2003 502,500
1,000,000 Glasstech, Inc......................................12.750 7/1/2004 1,070,000
500,000 GSI Group, Inc.*....................................10.250 11/1/2007 505,000
1,000,000 High Voltage Engineering Corporation*...............10.500 8/15/2004 1,030,000
500,000 Interlake Corporation...............................12.125 3/1/2002 518,750
750,000 Plastic Specialties & Technologies, Inc.............11.250 12/1/2003 813,750
500,000 Precise Technology, Inc.*...........................11.125 6/15/2007 507,500
901,000 Terex Corporation...................................13.250 5/15/2002 1,022,635
500,000 Vicap, S.A. de C.V.*................................11.375 5/15/2007 512,500
1,000,000 W.R. Carpenter North America, Inc...................10.625 6/15/2007 1,035,000
795,000 Wyman-Gordon Company................................10.750 3/15/2003 837,731
-------------------------------------------------
Total Miscellaneous Manufacturing 8,355,366
=================================================
Pollution Control (1.6%)
1,000,000 Envirosource, Inc................................... 9.750 6/15/2003 990,000
500,000 HydroChem Industrial Services, Inc.*................10.375 8/1/2007 516,250
-------------------------------------------------
Total Pollution Control 1,506,250
=================================================
Restaurants/Food Services (2.2%)
1,500,000 AmeriServe Food Distribution, Inc.*................. 8.875 10/15/2006 1,512,500
500,000 Apple South, Inc.................................... 9.750 6/1/2006 523,750
-------------------------------------------------
Total Restaurants/Food Services 2,036,250
=================================================
Retail Stores (3.5%)
750,000 Brown Group, Inc.................................... 9.500 10/15/2006 766,875
500,000 Central Tractor Farm & Company, Inc.................10.625 4/1/2007 517,500
1,000,000 J Crew Operating Corporation........................10.375 10/15/2007 1,000,000
1,000,000 The Pantry, Inc.....................................10.250 10/15/2007 980,000
-------------------------------------------------
Total Retail Stores 3,264,375
=================================================
Technology (2.5%)
500,000 American Banknote Corporation.......................10.375 6/1/2002 521,250
1,000,000 Flextronics International Ltd.*..................... 8.750 10/15/2007 990,000
750,000 Unisys Corporation..................................12.000 4/15/2003 840,000
-------------------------------------------------
Total Technology 2,351,250
=================================================
The accompanying notes to the financial statements are an integral part of this schedule.
</TABLE>
55 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (96.4%) Interest Rate Maturity Date Market Value
==============================================================================================================================
Telecommunications (5.6%)
<S> <C> <C> <C> <C>
$ 500,000 BTI Telecom Corporation*................................ 10.500% 9/15/2007 $ 497,500
750,000 Comcast Cellular Holdings, Inc.......................... 9.500 5/1/2007 772,500
500,000 Globalstar L.P.......................................... 11.375 2/15/2004 495,000
1,000,000 Iridium Capital Corporation............................. 11.250 7/15/2005 930,000
500,000 Powertel, Inc........................................... 11.125 6/1/2007 527,500
750,000 Talton Holdings, Inc.................................... 11.000 6/30/2007 795,000
500,000 Unifi Communications, Inc............................... 14.000 3/1/2004 470,000
500 Unifi Communications, Inc. Warrants..................... 7,500
750,000 USA Mobile Communications, Inc.......................... 9.500 2/1/2004 720,000
--------------------------------------------------------
Total Telecommunications 5,215,000
========================================================
Textiles (1.6%)
750,000 Anvil Knitwear, Inc..................................... 10.875 3/15/2007 768,750
750,000 Polysindo International Finance Company
B.V. Guaranteed Secured Notes........................... 9.375 7/30/2007 675,000
--------------------------------------------------------
Total Textiles 1,443,750
========================================================
Transportation (3.2%)
500,000 Allied Holdings, Inc.*.................................. 8.625 10/1/2007 508,750
1,000,000 Atlas Air, Inc.*........................................ 10.750 8/1/2005 1,055,000
750,000 Petro Stopping Center, L.P.............................. 10.500 2/1/2007 783,750
650,000 TFM, S.A. de C.V.*...................................... 10.250 6/15/2007 643,500
--------------------------------------------------------
Total Transportation 2,991,000
========================================================
========================================================
Total Long-Term Fixed-
Income Obligations
(amortized cost basis $88,833,711) 89,992,225
========================================================
Short-Term Variable Rate Obligations (3.6%)
===========================================================================
747,630 American Family Insurance Company**........................................ 747,630
626,000 General Mills Corporation**................................................ 626,000
114,473 Warner Lambert Incorporated**.............................................. 114,473
1,881,692 Wisconsin Electric Power Company**......................................... 1,881,692
--------------------------------------------------------
Total Short-Term Variable Rate
Obligations (cost basis $3,369,795) 3,369,795
========================================================
========================================================
Total Investments (100%)
(amortized cost basis $92,203,506) $93,362,020
========================================================
</TABLE>
* 144A Security
** Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 56
<PAGE>
The AAL Money Market Fund
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Investment Objective
The Fund seeks a high level of current income, consistent with liquidity and the
preservation of capital, by investing in a diversified portfolio of high-
quality, short-term money market instruments.
<TABLE>
Principal Amount Commercial Paper (97.1%) Interest Rate Range* Maturity Date Range Market Value
==============================================================================================================================
<C> <S> <C> <C> <C>
$ 9,000,000 American Express Credit Corporation.................. 5.50-5.51% 12/8-2/23/98 $ 8,887,984
8,500,000 American General Finance Corporation................. 5.51-5.56 12/5-3/23/98 8,401,389
8,500,000 Associates Corporation of North America.............. 5.48-5.51 12/10/97-1/15/98 8,425,747
4,000,000 AT&T Company......................................... 5.45 1/9-1/16/98 3,955,567
7,000,000 Beneficial Corporation............................... 5.49-5.53 12/5/97-2/5/98 6,906,335
2,500,000 Cargill Incorporated**............................... 5.48 12/15/97 2,483,256
9,000,000 Chrysler Financial Corporation....................... 5.49-5.52 11/18/97-2/3/98 8,900,594
7,000,000 CIT Group Holdings, Inc.............................. 5.50-5.51 1/6-1/28/98 6,912,489
9,000,000 Coca-Cola Company.................................... 5.41-5.50 11/24/97-2/6/98 8,923,440
9,000,000 Commercial Credit Company............................ 5.50-5.53 12/2/97-2/6/98 8,930,866
5,500,000 Countrywide Home Loans, Inc.......................... 5.55-5.56 11/17-11/18/97 5,485,810
2,000,000 CPC International**.................................. 5.50 12/18/97 1,985,639
6,000,000 Eaton Corporation**.................................. 5.50-5.51 12/11-12/17/97 5,959,151
9,000,000 Ford Motor Credit Corporation........................ 5.48-5.57 11/6/97-2/2/98 8,908,820
9,000,000 General Electric Capital Corporation................. 5.50-5.56 11/19/97-1/30/98 8,921,042
10,000,000 General Motors Acceptance Corporation................ 5.48-5.63 11/10/97-3/31/98 9,889,668
2,000,000 Gillette Company**................................... 5.46 11/5/97 1,998,787
9,000,000 Heller Financial, Inc................................ 5.52-5.58 11/13-11/21/97 8,977,182
9,000,000 Household Finance Corporation........................ 5.47-5.50 11/12-12/12/97 8,971,180
9,000,000 International Business Machines
Credit Corporation................................... 5.47-5.52 11/7/97-1/8/98 8,941,111
5,500,000 International Lease Finance Corporation.............. 5.48 12/3/97-1/21/98 5,454,562
9,000,000 John Deere Capital Corporation....................... 5.49-5.68 11/3/97-2/4/98 8,911,651
8,500,000 Lucent Technologies Inc.............................. 5.47-5.50 11/5/97-1/16/98 8,442,838
3,500,000 McGraw-Hill, Inc..................................... 5.49-5.52 11/14-11/25/97 3,490,524
9,000,000 Merrill Lynch & Co., Inc............................. 5.53-5.56 11/5/97-1/27/98 8,901,987
9,000,000 Norwest Financial, Inc............................... 5.52-5.58 1/22/98-2/13/98 8,864,123
7,500,000 Sears Roebuck Acceptance Corporation................. 5.50-5.62 11/20/97-3/6/98 7,423,451
10,000,000 Toyota Motor Credit Corporation...................... 5.46-5.55 11/4/97-3/27/98 9,901,025
9,000,000 Walt Disney Company.................................. 5.50-5.53 12/30/97-3/4/98 8,889,235
------------------------------------------------------------
Total Commercial Paper 213,045,453
============================================================
Variable Rate Demand Notes (2.9%)
========================================
1,708,782 General Mills Corporation*........................... 1,708,782
149,957 Sara Lee Corporation*................................ 149,957
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
57 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Money Market Fund - continued
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1997
Principal Amount Variable Rate Demand Notes (2.9%) Market Value
================================================================================
$4,569,000 Warner Lambert Incorporated*................ $ 4,569,000
7,000 Wisconsin Electric Power Company*........... 7,000
---------------------------------------------------------
Total Variable Rate Obligations 6,434,739
=========================================================
---------------------------------------------------------
Total Investments (100%)
(amortized cost basis $219,480,192) $219,480,192
=========================================================
* The interest rate shown reflects the coupon rate or, for the securities
purchased at a discount, the discount rate at the date of purchase.
** 4(2) commercial paper
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 58
<PAGE>
Statement of Assets and Liabilities
AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL
Capital Growth Fund Mid Cap Stock Fund Small Cap Stock Fund International Fund
======================================================================================================================
<S> <C> <C> <C> <C>
Assets
Investments at value..........$2,192,140,714 $601,738,456 $94,932,576 $139,665,652
(Cost: $1,398,654,873,
$518,519,099,
$84,507,529, $144,137,173,
$125,701,510,
$373,943,566,
$437,444,883, $92,203,506,
and $219,480,192,
respectively)
Unamortized organization &
initial registration expenses. -- 4,453 26,594 40,424
Dividend and interest
receivable.................... 1,520,552 350,444 34,818 406,400
Prepaid expenses.............. 146,112 113,256 64,326 71,807
Receivable from securities
sold.......................... -- 5,908,175 1,701,168 386,704
Receivable for forward
contracts held................ -- -- -- 45,152,472
Cash.......................... 743,463 367,336 384,128 80,566
- ----------------------------------------------------------------------------------------------------------------------
Total Assets..................$2,194,550,841 $608,482,120 $97,143,610 $185,804,025
======================================================================================================================
Liabilities
Payable for forward
currency contracts held....... $ -- $ -- $ -- $45,484,118
Payable for investment
purchased..................... -- 7,425,344 1,204,263 342,128
Income distributions..........
payable....................... -- -- -- --
Redemptions payable........... -- -- -- --
Payable to affiliate.......... 1,621,963 532,569 94,501 168,868
Accrued expenses.............. 601,911 282,028 100,123 143,619
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities............. 2,223,874 8,239,941 1,398,887 46,138,733
======================================================================================================================
Net Assets
Trust capital (beneficial
interest)..................... 1,298,338,939 458,270,115 80,353,134 133,312,517
Accumulated undistributed
net investment income (loss).. 473,194 (644,928) (419,026) (46,161)
Accumulated net realized
gain (loss) on investments.... 100,029,993 59,397,635 5,385,568 11,199,339
Net unrealized appreciation
(depreciation) on:
Investments.............. 793,485,841 83,219,357 10,425,047 (4,471,521)
Foreign currency
contracts................ -- -- -- (331,646)
Foreign currency
related transactions..... -- -- -- 2,764
- ----------------------------------------------------------------------------------------------------------------------
Total Net Assets.............. 2,192,326,967 600,242,179 95,744,723 139,665,292
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Capital.......................$2,194,550,841 $608,482,120 $97,143,610 $185,804,025
======================================================================================================================
Net Assets Class A............$2,165,051,915 $592,114,604 $86,977,816 $134,023,024
Shares of beneficial
interest outstanding
(Class A)..................... 86,025,880 37,040,815 6,461,181 11,749,297
Net asset value per share..... $25.17 $15.99 $13.46 $11.41
Maximum public offering
price......................... $26.22 $16.66 $14.02 $11.89
Net Assets Class B............ $27,275,052 $8,127,575 $8,766,907 $5,642,268
Shares of beneficial
interest outstanding
(Class B)..................... 1,089,101 511,474 655,338 498,097
Net asset value per share..... $25.04 $15.89 $13.38 $11.33
</TABLE>
59 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL The AAL
Equity Income Fund Bond Fund Municipal Bond Fund High Yield Bond Fund Money Market Fund
=======================================================================================================
<S> <C> <C> <C> <C> <C>
$146,717,621 $382,200,259 $466,976,360 $93,362,020 $219,480,192
3,801 -- -- 27,709 --
640,442 5,553,800 6,504,742 2,226,947 3,416
49,812 49,983 62,449 50,888 85,327
7,212,293 6,150,945 21,900,00 1,970,651
-- -- -- -- --
55,714 425,723 33,674 229,076 794,580
- -------------------------------------------------------------------------------------------------------
$154,679,683 $394,380,710 $495,477,225 $97,867,291 $220,363,515
=======================================================================================================
$ -- $ -- $ -- $ -- $ --
3,063,115 9,214,130 46,547,521 3,395,919 --
-- 441,042 303,755 293,875 --
-- -- 34,398 -- 1,720,958
101,788 247,714 276,865 50,648 93,725
61,511 117,132 191,187 33,655 146,873
- -------------------------------------------------------------------------------------------------------
3,226,414 10,020,018 47,353,726 3,774,097 1,961,556
=======================================================================================================
124,293,046 391,726,726 413,328,264 91,965,571 218,366,748
555,170 96,451 41,917 2,019 35,211
5,588,942 (15,719,178) 5,221,841 967,090 --
21,016,111 8,256,693 29,531,477 1,158,514 --
-- -- -- -- --
-- -- -- -- --
- -------------------------------------------------------------------------------------------------------
151,453,269 384,360,692 448,123,499 94,093,194 218,401,959
- -------------------------------------------------------------------------------------------------------
$154,679,683 $394,380,710 $495,477,225 $97,867,291 $220,363,515
=======================================================================================================
$150,059,623 $383,510,252 $446,073,978 $87,856,956 $217,172,870
12,106,401 38,377,918 38,925,247 8,476,592 217,172,870
$12.39 $9.99 $11.46 $10.36 $1.00
$12.91 $10.41 $11.94 $10.79 $1.00
$1,393,646 $850,440 $2,049,521 $6,236,238 $1,229,089
112,270 85,053 178,872 601,460 1,229,089
$12.41 $10.00 $11.46 $10.37 $1.00
</TABLE>
The AAL Mutual Funds Semi-Annual Report 60
<PAGE>
Statement of Operations
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL
Capital Growth Mid Cap Stock Small Cap Stock International
Fund Fund Fund Fund
===========================================================================================================================
<S> <C> <C> <C> <C>
Investment Income
Dividends............................................... $ 15,572,987 $ 2,185,369 $ 171,259 $ 1,333,069
Taxable interest........................................ 183,670 840,283 73,540 954,904
Tax exempt interest..................................... -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 15,756,657 3,025,652 244,799 2,287,973
===========================================================================================================================
Expenses
Adviser fees............................................ 5,925,288 1,949,065 280,371 172,978
Sub-Adviser fees........................................ -- -- -- 518,934
Audit fees and legal fees............................... 13,350 13,631 8,457 14,111
Custody fees............................................ 58,428 22,169 6,156 100,577
Administrative service and pricing fees................. 20,394 20,544 22,033 35,614
Amortization of organizational costs
& registration fees..................................... -- 3,697 3,654 7,406
Printing and postage expense............................ 86,856 89,418 24,001 42,731
Distribution expense Class A............................ 2,622,844 703,553 85,658 167,475
Distribution expense Class B............................ 98,926 29,238 31,196 22,010
SEC and state registration expense...................... 52,384 38,244 17,415 24,456
Transfer agent fees..................................... 1,229,952 639,240 144,627 202,038
Shareholder maintenance fees Class A.................... 342,598 173,306 33,738 54,771
Shareholder maintenance fees Class B.................... 10,250 4,810 4,983 3,646
Trustees fees and expenses.............................. 3,206 3,206 3,206 3,206
Other expenses.......................................... 9,135 4,059 3,050 4,918
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 10,473,611 3,694,180 668,545 1,374,871
===========================================================================================================================
Less reimbursement from Adviser......................... -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Expenses 10,473,611 3,694,180 668,545 1,374,871
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 5,283,046 (668,528) (423,746) 913,102
===========================================================================================================================
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments.............. 74,624,894 36,575,430 6,013,971 4,483,964
Net realized gains (losses) on
foreign currency transactions........................... -- -- -- 2,923,448
Increase (decrease) in unrealized appreciation
on investments.......................................... 234,492,683 84,118,835 13,711,666 (5,139,149)
Increase (decrease) in unrealized appreciation
on currency transactions................................ -- -- -- (3,906,524)
- ---------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains
(Losses) on Investments 309,117,577 120,694,265 19,725,637 (1,638,261)
===========================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting Operations $314,400,623 $120,025,737 $19,301,891 $ (725,159)
===========================================================================================================================
</TABLE>
61 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL The AAL
Equity Income Fund Bond Fund Municipal Bond Fund High Yield Bond Fund Money Market Fund
=======================================================================================================
<S> <C> <C> <C> <C> <C>
$ 2,536,586 $ -- $ -- $ -- $ --
454,356 13,425,487 132,929 3,489,163 5,834,675
-- -- 11,850,385 -- --
- -------------------------------------------------------------------------------------------------------
2,990,942 13,425,487 11,983,314 3,489,163 5,834,675
=======================================================================================================
367,499 1,000,827 1,094,253 211,117 515,325
-- -- -- -- --
12,497 10,762 12,256 13,141 6,699
3,741 14,768 8,202 1,397 5,923
20,120 24,134 27,495 26,746 20,185
4,552 -- -- 3,351 --
18,068 29,869 13,532 15,350 22,419
182,675 484,130 549,353 82,498 128,187
4,299 2,897 6,808 21,869 4,511
17,060 16,590 22,263 10,600 30,301
132,977 202,271 131,281 25,167 206,795
37,812 59,209 34,932 7,256 50,650
569 264 270 1,384 249
3,206 3,206 3,206 3,206 3,206
1,601 5,732 4,292 3,325 686
- -------------------------------------------------------------------------------------------------------
806,676 1,854,659 1,908,143 426,407 995,136
=======================================================================================================
-- -- -- (61,490) (402,239)
- -------------------------------------------------------------------------------------------------------
806,676 1,854,659 1,908,143 364,917 592,897
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
2,184,266 11,570,828 10,075,171 3,124,246 5,241,778
=======================================================================================================
5,942,124 4,735,163 4,678,099 1,025,429 --
-- -- -- -- --
6,471,299 9,391,350 16,187,162 1,645,314
-- -- -- -- --
- -------------------------------------------------------------------------------------------------------
12,413,423 14,126,513 20,865,261 2,670,743 --
=======================================================================================================
- -------------------------------------------------------------------------------------------------------
$14,597,689 $25,697,341 $30,940,432 $5,794,989 $5,241,778
=======================================================================================================
</TABLE>
The AAL Mutual Funds Semi-Annual Report 62
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
The AAL Capital Growth Fund The AAL Mid Cap Stock Fund
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
====================================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income (loss)........................ $ 9,778,642 $ 5,283,046 $ (4,314,133) $ (668,528)
Net realized gains (losses) on
investment transactions............................. 63,871,032 74,624,894 57,272,939 36,575,430
Net realized gains (losses) on
foreign currency transactions....................... -- -- -- --
Increase (decrease) in unrealized appreciation
on investments...................................... 221,360,237 234,492,683 (105,788,808) 84,118,835
Increase in unrealized appreciation on
foreign currency.................................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 295,009,911 314,400,623 (52,830,002) 120,025,737
====================================================================================================================================
Distributions to Shareholders
Distributions from net investment income
Class A............................................. (9,778,642) (4,791,934) -- --
Capital gains distributions Class A................. (74,870,516) -- (78,919,695) --
Distributions from net investment income
Class B............................................. -- (17,918) -- --
Capital gains distributions Class B................. -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders (84,649,158) (4,809,852) (78,919,695) --
====================================================================================================================================
Trust Shares Transactions
Purchase of trust shares............................ 249,270,564 149,143,663 152,186,004 43,766,260
Income dividends reinvested......................... 11,253,149 4,763,372 -- --
Capital gains distributions reinvested.............. 72,686,041 -- 78,042,123 --
Redemption of trust shares.......................... (119,475,445) (76,618,123) (58,449,728) (28,553,348)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Trust Capital 213,734,309 77,288,912 171,778,399 15,212,912
====================================================================================================================================
Net Increase in Net Assets 424,095,062 386,879,683 40,028,702 135,238,649
====================================================================================================================================
Net Assets Beginning of Period 1,381,352,222 1,805,447,284 424,974,828 465,003,530
====================================================================================================================================
Net Assets End of Period (1) $1,805,447,284 $2,192,326,967 $ 465,003,530 $600,242,179
====================================================================================================================================
</TABLE>
(a) Since inception July 1, 1996.
(b) Prior to September 1, 1997, formerly The AAL Utilities Fund.
(1) Including undistributed income of $0 and $473,194 for The AAL Capital
Growth Fund; $23,600 and $(644,928) for The AAL Mid Cap Stock Fund; $4,720
and $(419,026) for The AAL Small Cap Stock Fund; $(584,861) and $(46,161)
for The AAL International Fund; and $447,037 and $526,642 for The AAL
Equity Income Fund for each period, respectively.
63 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund The AAL International Fund The AAL Equity Income Fund
Period Ended Six Months Ended Period Ended Six Months Ended Year Ended Six Months Ended
4/30/97(a) 10/31/97 4/30/97 10/31/97 4/30/97 10/31/97(b)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$ (259,744) $ (423,746) $ 765,721 $ 913,102 $ 4,594,264 $ 2,184,266
356,648 6,013,971 4,041,492 4,483,964 487,429 5,942,124
-- -- 843,337 2,923,448
(3,286,619) 13,711,666 (2,584,263) (5,139,149) 4,767,805 6,471,299
-- -- 3,285,289 (3,906,524) --
- ----------------------------------------------------------------------------------------------------------------------
(3,189,715) 19,301,891 6,351,576 (725,159) 9,849,498 14,597,689
======================================================================================================================
-- -- (2,818,054) -- (4,697,577) (2,065,609)
(726,525) -- (509,864) -- -- --
-- -- -- -- (837) (10,524)
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
(726,525) -- (3,327,918) -- (4,698,414) (2,076,133)
======================================================================================================================
53,019,419 32,094,655 63,370,618 30,244,559 32,639,353 13,842,237
-- -- 2,756,776 -- 4,372,914 1,916,993
721,583 -- 498,910 -- -- --
(1,942,828) (3,533,757) (8,013,407) (8,607,848) (21,932,369) (11,518,885)
- ----------------------------------------------------------------------------------------------------------------------
51,798,174 28,560,898 58,612,897 21,636,711 15,079,898 4,240,345
======================================================================================================================
47,881,934 47,862,789 61,636,555 20,911,552 20,230,982 16,761,901
======================================================================================================================
-- 47,881,934 57,117,185 118,753,740 114,460,386 134,691,368
======================================================================================================================
$47,881,934 $95,744,723 $118,753,740 $139,665,292 $134,691,368 $151,453,269
======================================================================================================================
</TABLE>
The AAL Mutual Funds Semi-Annual Report 64
<PAGE>
Statement of Changes in Net Assets - continued
<TABLE>
<CAPTION>
The AAL Bond Fund The AAL Municipal Bond Fund
Year Ended Six Months Ended Period Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
===============================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income (loss)............................. $ 25,509,886 $ 11,570,828 $ 19,810,749 $ 10,075,171
Net realized gains (losses) on
investment transactions.................................. (4,679,871) 4,735,163 2,734,930 4,678,099
Net realized gains (losses) on
foreign currency transactions............................ -- -- -- --
Increase (decrease) in unrealized
appreciation on investments.............................. 5,711,712 9,391,350 4,568,598 16,187,162
Increase in unrealized appreciation
on foreign currency...................................... -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 26,541,727 25,697,341 27,114,277 30,940,432
===============================================================================================================================
Distributions to Shareholders
Distributions from net investment income
Class A.................................................. (25,506,598) (11,555,802) (19,805,296) (10,049,190)
Capital gains distributions Class A...................... -- -- (7,015,210) --
Distributions from net investment income
Class B.................................................. (3,288) (15,026) (5,453) (25,981)
Capital gains distributions Class B...................... -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders (25,509,886) (11,570,828) (26,825,959) (10,075,171)
===============================================================================================================================
Trust Shares Transactions
Purchase of trust shares................................. 38,659,955 14,154,608 42,811,680 22,201,441
Income dividends reinvested.............................. 20,213,589 8,968,544 16,258,819 8,163,357
Capital gains distributions reinvested................... -- -- 5,824,183 --
Redemption of trust shares............................... (101,018,460) (42,622,584) (55,527,221) (25,539,659)
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Trust Capital (42,144,916) (19,499,432) 9,367,461 4,825,139
===============================================================================================================================
Net Increase in Net Assets (41,113,075) (5,372,919) 9,655,779 25,690,400
===============================================================================================================================
Net Assets Beginning of Period 430,846,686 389,733,611 412,777,320 422,433,099
===============================================================================================================================
Net Assets End of Period $389,733,611 $384,360,692 $422,433,099 $448,123,499
===============================================================================================================================
</TABLE>
(a) Since inception January 8, 1997.
(1) Including undistributed income of $96,451 and $96,451 for The AAL Bond
Fund; $41,917 and $41,917 for The AAL Municipal Bond Fund; and $35,211 and
$35,211 for The AAL Money Market Fund for each period, respectively.
65 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund The AAL Money Market Fund
Period Ended Six Months Ended Period Ended Six Months Ended
4/30/97(a) 10/31/97 4/30/97(c) 10/31/97
=================================================================
$ 912,510 $ 3,124,246 $ 7,658,318 $ 5,241,778
(58,339) 1,025,429 -- --
-- -- -- --
(486,800) 1,645,314 -- --
-- -- -- --
- -----------------------------------------------------------------
367,371 5,794,989 7,658,318 5,241,778
=================================================================
(879,944) (2,945,602) (7,656,186) (5,219,530)
-- -- -- --
(32,566) (178,644) (2,132) (22,248)
-- -- -- --
- -----------------------------------------------------------------
(912,510) (3,124,246) (7,658,318) (5,241,778)
=================================================================
48,042,384 45,045,152 298,188,613 161,141,742
281,381 1,583,368 7,658,318 5,175,955
-- -- -- --
(437,680) (2,547,015) (231,675,023) (138,101,737)
- -----------------------------------------------------------------
47,886,085 44,081,505 74,171,908 28,215,960
=================================================================
47,340,946 46,752,248 74,171,908 28,215,960
=================================================================
-- 47,340,946 116,014,091 190,185,999
=================================================================
$47,340,946 $94,093,194 $ 190,185,999 $ 218,401,959
=================================================================
The AAL Mutual Funds Semi-Annual Report 66
<PAGE>
Notes to Financial Statements
AS OF OCTOBER 31, 1997
A: Organization
The AAL Mutual Funds (the "Trust") was organized as a Massachusetts Business
Trust on March 31, 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 Capital Growth, Mid Cap
Stock, Small Cap Stock, International, Equity Income, Bond, Municipal Bond, High
Yield Bond, Money Market and U.S. Government Zero Coupon Target Funds 2001 and
2006. The eleven AAL Mutual Funds are collectively referred to as the "Funds".
On January 8, 1997, the Trust began issuing two classes of Fund shares in The
AAL Capital Growth, Mid Cap Stock, Small Cap Stock, International, Equity
Income, Bond, Municipal Bond, High Yield Bond and Money Market Funds. The Series
A shares are subject to a maximum 4.00% sales charge of the offering price and a
0.25% annual service fee (.125% for The AAL Money Market Fund). Series B shares
are offered at net asset value and a 1.00% annual 12b-1 and service fee (.875%
for The AAL Money Market Fund). In addition, Series B shares have a contingent
deferred sales charge upon redemption during the first five years. Each class of
shares has identical rights and privileges except with respect to voting matters
affecting a single class of shares and the exchange privilege of each class of
shares.
On September 1, 1997, The AAL Utilities Fund changed its name to The AAL Equity
Income Fund.
B: Significant Accounting Policies
The Funds' principal accounting policies are:
Valuation--Securities traded on national securities exchanges abroad are valued
at last reported sales prices. Each over-the-counter security for which the last
sales price is available from NASDAQ is valued at that price. Interest bearing
money market instruments and variable rate demand notes are valued at a cost
that approximates the market. All other instruments held by The AAL Money Market
Fund and money market investments with a remaining maturity of 60 days or less
held by the other Funds are valued on an amortized cost basis. The AAL
International Fund invests in foreign securities, including stocks, bonds, notes
and convertible securities, whose values are subject to change in market
conditions, as well as changes in political and regulatory environments. All
other securities are valued at the latest bid quotation if such quotations are
readily available. Otherwise, such securities are valued at a fair value as
determined in good faith by the Investment Adviser under supervision of the
Board of Trustees.
Foreign Currency Translation--The market values of securities that are not
traded in United States currency are recorded in the financial statements after
translation to U.S. dollars using the exchange quotation in effect at the time
net asset value is calculated. The costs of such securities are translated at
exchange rates prevailing when acquired. Additionally, other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars.
The AAL International Fund does not isolate that portion of realized gains and
losses on investments that is due to changes in foreign exchange rates from that
which is due to changes in market prices of equity securities.
Foreign Currency Contracts--In connection with purchases and sales of securities
denominated in foreign currencies, The AAL International 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 AAL International Fund could be exposed to
foreign currency fluctuations.
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.
Income and Expenses--The Funds are charged for those expenses that are directly
attributed to each portfolio, such as advisory, custodian and shareholder
service fees. Expenses that are not directly attributable to a portfolio are
typically allocated among the Funds' portfolios in proportion to their
respective net assets, number of shareholder accounts or other reasonable basis.
Net investment income for the classes specific expenses and realized and
unrealized gains or losses are allocated directly to each class based upon the
relative net asset value of outstanding shares, or the value of dividend
eligible shares, as appropriate for each class of shares.
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 Capital Growth Fund are declared and paid
semi-annually. Dividends from The AAL Mid Cap Stock, Small Cap Stock and
International Funds are declared and paid annually. Dividends from The AAL
Equity Income Fund are declared and paid quarterly. Dividends from The AAL Bond,
Municipal Bond, High Yield Bond and Money Market Funds are declared daily and
distributed monthly. Dividends from 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.
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.
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 International, Equity Income, Bond and
High Yield Bond Funds. 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 Mid Cap Stock, Small Cap Stock,
International, Equity Income and High Yield Bond Funds is being amortized over
the period of benefit, but not to exceed 60 months from each Funds's
commencement of operation.
67 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - continued
AS OF OCTOBER 31, 1997
C: Investment Advisory Management Fees and Transactions With Related Parties
The Trust has entered into an Investment Advisory Agreement with AAL Capital
Management Corporation ("The Adviser") under which each of the mutual fund
portfolios pay a fee for investment advisory services.
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.
For the period May 1, 1997, to August 31, 1997, the annual rates of fees under
the Investment Advisory Agreement are calculated at the following rates: .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; .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 Mid Cap Stock and Small Cap Stock
Funds; 1% of the Funds average daily net assets for The AAL International 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 Municipal Bond Funds; .50 of 1% on the first $250
million and .45 of 1% on average daily net assets over $250 million for The AAL
Equity Income Fund; and .50 of 1% on the first $500 million and .45 of 1% on
average daily net assets over $500 million for The AAL Money Market Fund. In
addition, The AAL International Fund has entered into a Sub-Advisory Agreement
with Societe Generale Asset Management Corporation, which is paid .75 of 1% on
average daily net assets.
Effective September 1, 1997, the annual rates of fees under the Investment
Advisory Agreement changed for The AAL Bond and Municipal Bond Funds only. The
rates are calculated as follows: 0.50 of 1% on the first $250 million of average
daily net assets, and 0.45 of 1% on average Daily net assets over $250 million.
All other Investment Advisory Agreements remain the same.
The Trust has entered into an Administrative Services Agreement with the Adviser
pursuant to which the Adviser provides certain administrative services. The
adviser earned the following fees from the respective Funds for the six months
ended October 31,1997: $16,667 for The AAL Capital Growth, Mid Cap Stock, Small
Cap Stock, Equity Income, Bond, Municipal Bond, High Yield Bond and Money Market
Funds, and $20,833 for The AAL International Fund, respectively.
The Trust has also contracted with AAL Capital Management Corporation for
certain shareholder maintenance services, effective April 1, 1995. These
shareholder services include: pre-processing and quality control of new
accounts, shareholder correspondence, account response and answering customer
inquires regarding account status, option and facilitating shareholder telephone
transactions. Fees and cost reimbursements charged to the Funds under terms of
the contract approximated $4.08 per year per shareholder account.
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. On the Class A shares, a service fee of 0.25% of 1%
for The AAL Capital Growth, Mid Cap Stock, Small Cap Stock, International,
Equity Income, Bond, Municipal Bond and High Yield Bond Funds; 0.125% of 1% for
The AAL Money Market Fund and 0.10% of 1% for The AAL U.S. Government Zero
Coupon Target Funds. On the Class B shares, a service fee of 0.25% of 1% and a
12b-1 Distribution Fee of .75% of 1% for The AAL Capital Growth, Mid Cap Stock,
Small Cap Stock, International, Equity Income, Bond, Municipal Bond and High
Yield Bond Funds; a service fee of 0.125% of 1% and a 12b-1 Distribution Fee of
0.75% of 1% for 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 voluntarily has reimbursed various funds since inception. For the
period May 1, 1997, through August 31,1997, the Adviser reimbursed The AAL Money
Market Fund .625% of average daily net assets. Effective September 1, 1997, the
Adviser is reimbursing The AAL Money Market Fund .525% of average daily net
assets. In addition, AAL Capital Management Corporation is waiving all expenses
in excess of 1.00% for Class A and 1.75% for Class B of The High Yield Bond
Fund. Voluntary reimbursements to these Funds may be modified or discontinued at
any time by the Adviser.
AAL is the ultimate parent company for AAL Capital Management Corporation.
The AAL Mutual Funds Semi-Annual Report 68
<PAGE>
Notes to Financial Statements - continued
AS OF OCTOBER 31, 1997
D: Security Transactions
During the year ended April 30, 1997, and the period ended October 31, 1997,
purchases and sales of securities other than short-term obligations were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
----------------------------------- -----------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
============================================================================================================================
<S> <C> <C> <C> <C>
The AAL Capital Growth Fund $511,839,315 $366,373,515 $367,734,996 $285,787,930
The AAL Mid Cap Stock Fund 586,304,570 315,110,634 499,728,977 287,165,618
The AAL Small Cap Stock Fund 82,807,470 69,268,404 32,623,815 42,246,176
The AAL International Fund 63,954,615 25,789,286 13,112,616 13,931,250
The AAL Equity Income Fund 33,256,370 43,624,016 6,189,126 49,189,144
The AAL Bond Fund 859,392,631 673,547,946 927,975,869 663,416,645
The AAL Municipal Bond Fund 470,376,617 352,687,421 493,033,170 323,666,269
The AAL High Yield Bond Fund 55,060,147 77,185,818 9,837,171 34,570,695
</TABLE>
For the year ended April 30, 1997, and six months ended October 31, 1997, The
AAL Bond Fund purchased $353,792,852 and $418,433,516 and sold $375,639,422 and
$355,389,441 in U.S. government obligations.
The gross unrealized appreciation and depreciation on investments at year ended
April 30, 1996, and six months ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Net Unrealized Net Unrealized
Appreciation Appreciation
Appreciation (Depreciation) (Depreciation) Appreciation (Depreciation) (Depreciation)
================================================4/30/97========================================10/31/97====================
<S> <C> <C> <C> <C> <C> <C>
The AAL Capital
Growth Fund $587,689,407 $(28,696,249) $558,993,158 $803,753,970 $(10,268,129) $793,485,841
The AAL Mid Cap
Stock Fund 43,560,575 (44,460,053) (899,478) 98,728,937 (15,509,580) 83,219,357
The AAL Small Cap
Stock Fund 2,002,184 (5,288,803) (3,286,619) 12,664,981 (2,239,934) 10,425,047
The AAL
International Fund 13,348,307 (9,088,073) 4,260,234 11,870,722 (16,673,885) (4,803,167)
The AAL Equity
Income Fund 18,968,225 (4,423,413) 14,544,812 23,084,841 (2,068,730) 21,016,111
The AAL Bond Fund 1,834,241 (2,968,898) (1,134,657) 8,444,979 (188,286) 8,256,693
The AAL Municipal
Bond Fund 13,710,118 (365,803) 13,344,315 29,579,099 (47,622) 29,531,477
The AAL High Yield
Bond Fund 211,334 (698,134) (486,800) 2,013,817 (855,303) 1,158,514
</TABLE>
69 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - continued
as of October 31, 1997
E: Shareholder Meeting
On August 15, 1997, a special shareholder meeting was held at which time a
majority vote of The AAL Utilities Fund shareholders agreed to change The AAL
Utilities Fund's fundamental objective and the industry concentration policy.
The AAL Utilities Fund's name was also changed to The AAL Equity Income Fund.
<
For 6,026,629.223 95.16%
Against 97,267.076 0.02%
Abstained 209,078.883 4.82%
------------- -------
Total 6,332,975.182 100.00%
F: Trust Transactions
Transactions in trust shares were as follows:
<TABLE>
<CAPTION>
The AAL Capital Growth Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 11,764,223 5,457,504 516,710 589,299
Income dividends reinvested 569,065 198,589 ------- 747
Capital gains reinvested 3,513,100 ------- ------- -------
Shares redeemed (5,906,836) (3,099,719) (2,797) (14,858)
---------- ---------- ---------- ----------
Net increase of trust shares 9,939,552 2,556,374 513,913 575,188
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
The AAL Mid Cap Stock Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 9,684,073 2,583,976 257,913 261,359
Income dividends reinvested ------- ------- ------- -------
Capital gains reinvested 5,777,146 ------- ------- -------
Shares redeemed (3,973,092) (1,872,159) (130) (7,668)
---------- ---------- ---------- ----------
Net increase of trust shares 11,488,127 711,817 257,783 253,691
========== ========== ========== ==========
</TABLE>
The AAL Mutual Funds Semi-Annual Report 70
<PAGE>
Notes to Financial Statements - continued
as of October 31, 1997
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 4,637,506 2,206,009 345,998 322,558
Income dividends reinvested ------- ------- ------- -------
Capital gains reinvested 65,191 ------- ------- -------
Shares redeemed (182,675) (264,850) (171) (13,047)
---------- ---------- ---------- ----------
Net increase of trust shares 4,520,022 1,941,159 345,827 309,511
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
The AAL International Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 5,486,739 2,237,605 229,431 275,290
Income dividends reinvested 45,809 ------- ------- -------
Capital gains reinvested 252,387 ------- ------- -------
Shares redeemed (720,333) (709,558) (92) (6,533)
---------- ---------- ---------- ----------
Net increase of trust shares 5,064,602 1,528,047 229,339 268,757
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
The AAL Equity Income Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 2,906,152 1,055,293 43,457 68,205
Income dividends reinvested 393,768 154,328 74 831
Capital gains reinvested ------- ------- ------- -------
Shares redeemed (1,958,613) (941,620) (2) (295)
---------- ---------- ---------- ----------
Net increase of trust shares 1,341,307 268,001 43,529 68,741
========== ========== ========== ==========
</TABLE>
71 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - continued
as of October 31, 1997
<TABLE>
<CAPTION>
The AAL Bond Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 3,970,015 1,394,980 40,256 44,662
Income dividends reinvested 2,091,671 910,479 325 1,314
Capital gains reinvested ------ ------ ------ ------
Shares redeemed (10,449,930) (4,345,762) (10) (1,494)
----------- ----------- ----------- -----------
Net increase (decrease) of trust shares (4,388,244) (2,040,303) 40,571 44,482
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 3,803,846 1,860,632 71,756 107,303
Income dividends reinvested 1,469,699 719,392 453 1,990
Capital gains reinvested 521,880 ------ ------ ------
Shares redeemed (5,033,038) (2,265,201) (2,178) (452)
----------- ----------- ----------- -----------
Net increase of trust shares 762,387 314,823 70,031 108,841
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
The AAL High Yield Bond Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 4,536,334 4,050,855 271,056 329,766
Income dividends reinvested 26,252 142,357 2,140 11,130
Capital gains reinvested ------ ------ ------ ------
Shares redeemed (40,257) (238,949) (4,051) (8,581)
----------- ----------- ----------- -----------
Net increase of trust shares 4,522,329 3,954,263 269,145 332,315
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
The AAL Money Market Fund
--------------------------------------------------------------------------------
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C>
Shares purchased 297,511,853 159,331,540 676,761 1,810,201
Income dividends reinvested 7,656,532 5,153,716 1,786 22,240
Capital gains reinvested ------ ------ ------ ------
Shares redeemed (231,565,574) (136,929,288) (109,450) (1,172,449)
----------- ----------- ----------- -----------
Net increase of trust shares 73,602,811 27,555,968 569,097 659,992
=========== =========== =========== ===========
</TABLE>
The AAL Mutual Funds Semi-Annual Report 72
<PAGE>
Notes to Financial Statements - continued
AS OF OCTOBER 31, 1997
G. Forward Currency Contracts
As of October 31, 1997, The AAL International Fund had entered into forward
currency contracts, as summarized below, resulting in net unrealized
depreciation of $331,646.
<TABLE>
<CAPTION>
Settlement Date Currency to U.S. Value at Currency to U.S. Value at
Through Be Delivered October 31, 1997 Be Received October 31, 1997
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
11/3/97 68,831 U.S. Dollar $ 68,831 97,643 Australian Dollar $ 67,559
11/5/97 (86,111) U.S. Dollar (86,111) (444,951) Finnish Markka (85,650)
11/5/97 51,021 U.S. Dollar 51,021 293,678 French Franc 50,859
11/5/97 (141,067) U.S. Dollar (141,067) (1,055,773) Swedish Krona (140,681)
11/11/97 (7,483) U.S. Dollar (7,483) (900,000) Japanese Yen (7,586)
11/28/97 224,821 U.S. Dollar 224,821 1,294,071 French Franc 223,849
1/8/98 8,831,000 Swiss Franc 6,188,719 6,367,438 U.S. Dollar 6,367,438
1/15/98 10,453,500 Deutsche Mark 6,104,863 6,097,824 U.S. Dollar 6,097,824
1/22/98 31,499,600 French Franc 5,540,310 5,497,696 U.S. Dollar 5,497,696
1/29/98 950,850,000 Japanese Yen 8,495,701 8,004,462 U.S. Dollar 8,004,462
4/3/98 4,054,000 New Zealand Dollar 2,568,790 2,536,921 U.S. Dollar 2,536,921
6/3/98 46,512,000 French Franc 7,560,410 8,170,751 U.S. Dollar 8,170,751
6/10/98 1,084,000 Swiss Franc 753,379 793,558 U.S. Dollar 793,558
6/17/98 1,549,000 Deutsche Mark 894,156 910,481 U.S. Dollar 910,480
6/24/98 813,779,000 Japanese Yen 6,936,132 6,996,638 U.S. Dollar 6,996,638
----------- -----------
$45,152,472 $45,484,118
=========== ===========
</TABLE>
73 The AAL Mutual Funds Semi-Annual Report
<PAGE>
This Page Intentionally Left Blank
The AAL Mutual Funds Semi-Annual Report 74
<PAGE>
Financial Highlights
PER SHARE INFORMATION
The AAL Capital Growth Fund
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.......................... $10.00 $8.36 $9.84 $10.72 $12.42
Income from Investment Operations
Net investment income (loss)................. 0.112 0.218 0.233 0.271 0.276
Net realized and unrealized gain (loss)
on investments............................... (1.709) 1.466 0.889 1.726 1.659
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Operations............. (1.597) 1.684 1.122 1.997 1.935
===================================================================================================================
Distributions from:
Net investment income........................ (0.043) (0.204) (0.242) (0.269) (0.280)
Net realized capital gains................... -- -- -- (0.028) (0.015)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions.......................... (0.043) (0.204) (0.242) (0.297) (0.295)
===================================================================================================================
Net increase (decrease) in net asset value... (1.640) 1.480 0.880 1.700 1.640
Net asset value:
End of period................................ $8.36 $9.84 $10.72 $12.42 $14.06
===================================================================================================================
Average commission per share................. -- -- -- -- --
Total return (d)............................. (15.95)% 20.46% 11.45% 18.93% 15.77%
Net assets, end of period....................$23,672,346 $48,915,003 $119,731,099 $209,055,868 $423,231,713
Ratio of expenses to average
net assets (a) (b)........................... 1.50% 1.50% 1.44% 1.41% 1.28%
Ratio of net investment income to
average net assets (a) (c)................... 2.61% 2.80% 2.56% 2.59% 2.27%
Portfolio turnover rate...................... 1.36% 2.78% 1.43% 2.26% 1.11%
</TABLE>
75 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$14.06 $14.83 $14.49 $15.56 $18.79 $21.50 $20.66 $21.45
0.284 0.296 0.274 0.201 0.125 0.062 (0.011) (0.036)
0.761 (0.287) 1.699 3.756 3.682 3.665 0.801 3.652
- ----------------------------------------------------------------------------------------------------------------------------------
1.045 0.009 1.973 3.957 3.807 3.727 0.790 3.616
==================================================================================================================================
(0.274) (0.286) (0.298) (0.217) (0.150) (0.057) 0.000 (0.026)
(0.001) (0.063) (0.605) (0.510) (0.947) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
(0.275) (0.349) (0.903) (0.727) (1.097) (0.057) 0.000 (0.026)
==================================================================================================================================
0.770 (0.340) 1.070 3.230 2.710 3.670 0.790 3.590
$14.83 $14.49 $15.56 $18.79 $21.50 $25.17 $21.45 $25.04
==================================================================================================================================
-- -- -- $0.053 $0.057 $0.054 $0.057 $0.054
7.52% 0.00% 14.37% 25.85% 20.55% 17.35% 3.82% 16.91%
$714,184,330 $868,850,190 $1,032,168,121 $1,381,352,222 $1,794,422,211 $2,165,051,915 $11,025,073 $27,275,052
1.20% 1.18% 1.17% 1.12% 1.06% 0.98% 1.89% 1.80%
2.15% 2.07% 1.89% 1.16% 0.62% 0.51% (0.39)% (0.34)%
2.99% 40.60% 33.34% 44.26% 24.30% 14.61% 24.30% 14.61%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 76
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Mid Cap Stock Fund
<TABLE>
<CAPTION>
Class A
Period Ended Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97
=========================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period........ $ 10.00 $ 10.38 $ 10.92 $ 17.11
Income from Investment
Operations
Net investment income
(loss)..................... (0.044) (0.054) (0.100) (0.119)
Net realized and unrealized
gain (loss) on investments. 0.424 0.594 6.290 (1.628)
- -----------------------------------------------------------------------------------------
Total from Investment
Operations 0.380 0.540 6.190 (1.747)
=========================================================================================
Distributions from:
Net investment income...... -- -- -- 0.000
Net realized capital gains. -- -- -- (2.653)
- -----------------------------------------------------------------------------------------
Total Distributions 0.000 0.000 0.000 (2.653)
=========================================================================================
Net increase (decrease) in
net asset value............ 0.380 0.540 6.190 (4.400)
Net asset value:
End of period.............. $ 10.38 $ 10.92 $ 17.11 $ 12.71
=========================================================================================
Average commission per
share...................... -- -- $ 0.055 $ 0.060
Total return (d)........... 3.80% 5.20% 56.59% (11.08)%
Net assets, end of period.. $142,529,469 $220,792,070 $424,974,829 $461,732,660
Ratio of expenses to
average net assets (a) (b). 1.72% 1.54% 1.39% 1.35%
Ratio of net investment
income to average net
assets (a) (c)............. (1.14)% (0.77)% (0.82)% (0.94)%
Portfolio turnover rate.... 55.49% 88.18% 90.14% 112.60%
</TABLE>
77 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Class A Class B Class B
Six Months Ended Year Ended Six Months Ended
10/31/97 4/30/97 10/31/97
==============================================
$ 12.71 $ 13.67 $ 12.69
(0.017) (0.026) (0.063)
3.297 (0.954) 3.263
- ----------------------------------------------
3.280 (0.980) 3.200
==============================================
-- 0.000 --
-- -- --
- ----------------------------------------------
-- 0.000 --
==============================================
3.280 0.980 3.200
$ 15.99 $ 12.69 $ 15.89
==============================================
$ 0.058 $ 0.060 $ 0.058
25.81% (7.17)% 25.22%
$592,114,604 $3,270,870 $8,127,575
1.29% 2.29% 2.14%
(0.22)% (1.41)% (1.07)%
54.05% 112.60% 54.05%
The AAL Mutual Funds Semi-Annual Report 78
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Small Cap Stock Fund
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
===================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period............................................ $10.00 $9.84 $11.17 $9.81
Income from Investment Operations
Net investment income.......................................... (0.055) (0.055) (0.032) (0.087)
Net realized and unrealized gain (loss) on investments......... 0.162 3.675 (1.328) 3.657
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.107 3.620 (1.360) 3.570
===================================================================================================================================
Distributions from:
Net investment income.......................................... 0.000 -- 0.000 --
Net realized capital gains..................................... (0.267) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.267) -- 0.000 --
===================================================================================================================================
Net increase (decrease) in net asset value..................... (0.160) 3.620 (1.360) 3.570
Net asset value:
End of period.................................................. $9.84 $13.46 $9.81 $13.38
===================================================================================================================================
Average commission per share................................... $0.059 $0.058 $0.059 $0.058
Total return (d)............................................... 0.78% 36.79% (12.18)% 36.39%
Net assets, end of period...................................... $44,487,852 $86,977,816 $3,394,082 $8,766,907
Ratio of expenses to average net assets (a) (b)................ 2.06% 1.72% 3.20% 2.53%
Ratio of net investment income to average net assets (a) (c)... (1.20)% (1.07)% (2.39)% (1.88)%
Portfolio turnover rate........................................ 138.50% 58.86% 138.50% 58.86%
</TABLE>
79 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL International Fund
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Period Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
<S> <C> <C> <C> <C> <C>
====================================================================================================================================
Beginning of period.............................. $ 10.00 $ 11.08 $ 11.37 $ 10.98 $ 11.34
Income from Investment Operations
Net investment income............................ 0.046 0.005 0.053 0.000 0.030
Net realized and unrealized gain (loss) on
investments...................................... 1.058 0.680 (0.013) 0.360 (0.040)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations................. 1.104 0.685 0.040 0.360 (0.010)
====================================================================================================================================
Distributions from:
Net investment income............................ (0.024) (0.335) -- 0.000 --
Net realized capital gains....................... -- (0.060) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions.............................. (0.024) (0.395) -- 0.000 --
====================================================================================================================================
Net increase in net asset value.................. 1.080 0.290 0.040 0.360 (0.010)
Net asset value:
End of period.................................... $ 11.08 $ 11.37 $ 11.41 $ 11.34 $ 11.33
====================================================================================================================================
Average commission per share..................... $ 0.018 $ 0.013 $ 0.009 $ 0.013 $ 0.009
Total return (d)................................. 11.07% 6.32% 0.35% 3.28% (0.09)%
Net assets, end of period........................ $57,117,185 $116,153,782 $134,023,024 $2,599,958 $5,642,268
Ratio of expenses to average net assets (a) (b).. 2.15% 2.10% 1.96% 2.94% 2.81%
Ratio of net investment income to average
net assets (a) (c)............................... 0.94% 0.88% 1.35% (0.03) % 0.38%
Portfolio turnover rate.......................... 1.30% 12.95% 12.39% 12.95% 12.39%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 80
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Equity Income Fund (1)
<TABLE>
<CAPTION>
Class A
Period Ended Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97
===============================================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period................................. $10.00 $9.95 $9.47 $10.90
Income from Investment Operations
Net investment income............................... 0.022 0.338 0.360 0.390
Net realized and unrealized gain (loss)
on investments...................................... (0.072) (0.498) 1.420 0.455
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.050) (0.160) 1.780 0.845
===============================================================================================================
Distributions from:
Net investment income............................... -- (0.320) (0.350) (0.405)
Net realized capital gains.......................... -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions 0.000 (0.320) (0.350) (0.405)
===============================================================================================================
Net increase (decrease) in net asset value.......... (0.050) (0.480) 1.430 0.440
Net asset value:
End of period $9.95 $9.47 $10.90 $11.34
===============================================================================================================
Average commission per share........................ -- -- $0.056 $0.060
Total return (d).................................... (0.50)% (1.51)% 18.90% 7.88%
Net assets, end of period........................... $15,423,861 $70,861,404 $114,460,386 $134,196,399
Ratio of expenses to average net assets (a) (b)..... 1.60% 1.19% 1.20% 1.15%
Ratio of net investment income to average
net assets (a) (c).................................. 5.12% 4.08% 3.58% 3.57%
Portfolio turnover rate............................. 0.00% 24.65% 21.79% 5.14%
</TABLE>
(1) Prior to September 1, 1997, The AAL Utilities Fund
81 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Class A Class B Class B
Six Months Ended Year Ended Six Months Ended
10/31/97 4/30/97 10/31/97
==================================================
$11.34 $11.40 $11.37
0.183 0.051 0.139
1.052 (0.056) 1.046
- --------------------------------------------------
1.235 (0.005) 1.185
==================================================
(0.175) (0.025) (0.145)
-- -- --
- --------------------------------------------------
(0.175) (0.025) (0.145)
==================================================
1.060 (0.030) 1.040
$12.39 $11.37 $12.41
==================================================
$0.0590 $0.060 $0.0590
10.81% (0.04)% 10.43%
$150,059,623 $494,969 $1,393,646
1.09% 1.99% 1.93%
2.98% 2.36% 2.13%
35.81% 5.14% 35.81%
The AAL Mutual Funds Semi-Annual Report 82
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Bond Fund
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period......... $ 10.00 $ 9.64 $ 9.33 $ 9.25 $ 9.76
Income from Investment
Operations
Net investment income....... 0.602 0.826 0.806 0.772 0.721
Net realized and
unrealized gain (loss)
on investments.............. (0.360) (0.255) (0.080) 0.510 0.273
- ----------------------------------------------------------------------------------------------------
Total from Investment
Operations.................. 0.242 0.571 0.726 1.282 0.994
====================================================================================================
Distributions from:
Net investment income....... (0.602) (0.826) (0.806) (0.772) (0.721)
Net realized capital gains.. -- (0.055) -- -- (0.013)
- ----------------------------------------------------------------------------------------------------
Total Distributions......... (0.602) (0.881) (0.806) (0.772) (0.734)
====================================================================================================
Net increase (decrease)
in net asset value.......... (0.360) (0.310) (0.080) 0.510 0.260
Net asset value:
End of period............... $ 9.64 $ 9.33 $ 9.25 $ 9.76 $ 10.02
====================================================================================================
Total return (d)............ 2.56% 6.21% 7.84% 14.34% 10.47%
Net assets, end of period... $20,938,863 $54,006,123 $94,937,997 $139,228,954 $229,309,955
Ratio of expenses to
average net assets (a) (b).. 0.75% 0.83% 0.98% 1.00% 1.03%
Ratio of net investment
income to average
net assets (a) (c).......... 8.67% 8.86% 8.38% 8.06% 7.19%
Portfolio turnover rate..... 85.88% 54.49% 38.00% 6.39% 12.18%
</TABLE>
83 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.02 $ 10.61 $ 9.69 $ 9.61 $ 9.62 $ 9.63 $ 9.71 $ 9.64
0.661 0.584 0.580 0.584 0.595 0.297 0.175 0.257
0.627 (0.660) (0.078) 0.010 0.010 0.360 (0.070) 0.360
- --------------------------------------------------------------------------------------------------------------------------
1.288 (0.076) 0.502 0.594 0.605 0.657 0.105 0.617
==========================================================================================================================
(0.661) (0.584) (0.580) (0.584) (0.595) (0.297) (0.175) (0.257)
(0.037) (0.260) (0.002) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
(0.698) (0.844) (0.582) (0.584) (0.595) (0.297) (0.175) (0.257)
==========================================================================================================================
0.590 (0.920) (0.080) 0.010 0.010 0.360 (0.070) 0.360
$ 10.61 $ 9.69 $ 9.61 $ 9.62 $ 9.63 $ 9.99 $ 9.64 $ 10.00
==========================================================================================================================
13.22% (0.99)% 5.47% 6.18% 6.43% 6.88% 0.96% 6.45%
$370,219,492 $442,962,543 $429,355,163 $430,846,686 $389,342,652 $383,510,252 $390,959 $850,440
1.03% 1.02% 1.03% 1.01% 0.98% 0.96% 1.86% 1.77%
6.35% 5.61% 6.12% 5.89% 6.10% 5.97% 5.51% 5.17%
26.12% 27.75% 44.57% 125.77% 212.49% 184.02% 212.49% 184.02%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 84
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Municipal Bond Fund
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period......................... $10.00 $9.72 $9.74 $9.70 $10.13
Income from Investment Operations
Net investment income....................... 0.398 0.599 0.608 0.616 0.598
Net realized and unrealized gain (loss)
on investments.............................. (0.280) 0.020 (0.035) 0.434 0.234
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.118 0.619 0.573 1.050 0.832
=========================================================================================================================
Distributions from:
Net investment income....................... (0.398) (0.599) (0.608) (0.616) (0.598)
Net realized capital gains.................. -- -- (0.005) (0.004) (0.004)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.398) (0.599) (0.613) (0.620) (0.602)
=========================================================================================================================
Net increase (decrease) in
net asset value............................. (0.280) 0.020 (0.040) 0.430 0.230
Net asset value:
End of period............................... $9.72 $9.74 $9.70 $10.13 $10.36
=========================================================================================================================
Total return (d)............................ 1.29% 6.53% 5.93% 11.12% 8.39%
Net assets, end of period................... $10,031,478 $41,217,475 $78,844,594 $114,953,939 $172,494,589
Ratio of expenses to average
net assets (a) (b).......................... 1.50% 0.94% 0.90% 0.90% 0.95%
Ratio of net investment income to
average net assets (a) (c).................. 5.72% 6.30% 6.13% 6.21% 5.81%
Portfolio turnover rate..................... 20.83% 29.24% 30.83% 13.63% 0.74%
</TABLE>
85 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$10.36 $10.99 $10.56 $10.69 $10.91 $10.92 $10.91 $10.92
0.571 0.539 0.523 0.521 0.521 0.260 0.147 0.217
0.631 (0.410) 0.186 0.300 0.194 0.540 0.010 0.540
- --------------------------------------------------------------------------------------------------------------------------
1.202 0.129 0.709 0.821 0.715 0.800 0.157 0.757
==========================================================================================================================
(0.571) (0.539) (0.523) (0.521) (0.521) (0.260) (0.147) (0.217)
(0.001) (0.020) (0.056) (0.080) (0.184) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
(0.572) (0.559) (0.579) (0.601) (0.705) (0.260) (0.147) (0.217)
==========================================================================================================================
0.630 (0.430) 0.130 0.220 0.010 0.540 (0.010) 0.540
$10.99 $10.56 $10.69 $10.91 $10.92 $11.46 $10.92 $11.46
==========================================================================================================================
11.84% 1.04% 7.01% 7.74% 6.64% 7.38% 0.34% 6.97%
$271,319,546 $370,568,847 $377,764,861 $412,777,320 $421,668,316 $446,073,978 $764,783 $2,049,521
1.00% 0.99% 0.98% 0.95% 0.89% 0.86% 1.69% 1.64%
5.32% 4.87% 5.01% 4.69% 4.69% 4.57% 4.09% 3.79%
3.41% 10.15% 172.49% 130.52% 119.79% 77.53% 119.79% 77.53%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 86
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL High Yield Bond Fund
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Six Months Ended Year Ended Six Months Ended
4/30/97 10/31/97 4/30/97 10/31/97
====================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period......................................... $10.00 $9.88 $10.00 $9.88
Income from Investment Operations
Net investment income....................................... 0.270 0.460 0.251 0.422
Net realized and unrealized gain (loss) on
investments................................................. (0.120) 0.480 (0.120) 0.490
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.150 0.940 0.131 0.912
====================================================================================================================================
Distributions from:
Net investment income....................................... (0.270) (0.460) (0.251) (0.422)
Net realized capital gains.................................. -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.270) (0.460) (0.251) (0.422)
====================================================================================================================================
Net increase (decrease) in net asset value.................. (0.120) 0.480 (0.120) 0.490
Net asset value:
End of period............................................... $9.88 $10.36 $9.88 $10.37
====================================================================================================================================
Total return (d)............................................ 1.51% 9.64% 1.31% 9.34%
Net assets, end of period................................... $44,680,637 $87,856,956 $2,660,309 $6,036,238
Ratio of expenses to average net assets (a) (b)............. 1.00% 1.00% 1.75% 1.75%
Ratio of net investment income to average net
assets (a) (c).............................................. 9.11% 8.93% 8.66% 8.18%
Portfolio turnover rate..................................... 36.90% 51.44% 36.90% 51.44%
</TABLE>
87 The AAL Mutual Funds Semi-Annual Report
<PAGE>
This Page Intentionally Left Blank
The AAL Mutual Funds Semi-Annual Report 88
<PAGE>
Financial Highlights - continued
PER SHARE INFORMATION
The AAL Money Market Fund
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
<S> <C> <C> <C> <C> <C>
====================================================================================================================================
Net asset value:
Beginning of period............................... $ 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
Net realized and unrealized gain (loss)
on investments.................................... -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations.................. 0.009 0.078 0.079 0.068 0.045
====================================================================================================================================
Distributions from:
Net investment income............................. (0.009) (0.078) (0.079) (0.068) (0.045)
Net realized capital gains........................ -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions............................... (0.009) (0.078) (0.079) (0.068) (0.045)
====================================================================================================================================
Net increase (decrease) in
net asset value................................... 0.000 0.000 0.000 0.000 0.000
Net asset value:
End of period..................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================================================================================
Total return (d).................................. 0.91% 8.10% 8.24% 7.07% 4.54%
Net assets, end of period......................... $7,990,507 $143,217,501 $223,447,573 $228,465,749 $147,584,931
Ratio of expenses to average
net assets (a) (b)................................ 0.07% 0.76% 1.04% 1.07% 1.11%
Ratio of net investment income to
average net assets (a) (c)........................ 7.06% 8.29% 7.84% 6.85% 4.56%
Portfolio turnover rate........................... N/A N/A N/A N/A N/A
</TABLE>
89 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
==================================================================================================================================
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
0.025 0.019 0.038 0.048 0.051 0.026 0.013 0.019
-- -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
0.025 0.019 0.038 0.048 0.051 0.026 0.013 0.019
==================================================================================================================================
(0.025) (0.019) (0.038) (0.048) (0.051) (0.026) (0.013) (0.019)
-- -- -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
(0.025) (0.019) (0.038) (0.048) (0.051) (0.026) (0.013) (0.019)
==================================================================================================================================
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================================================================================================================================
2.53% 1.95% 3.92% 4.94% 5.21% 2.62% 1.32% 2.28%
$83,274,493 $65,008,303 $70,210,675 $116,014,091 $189,616,902 $217,172,870 $569,097 $1,229,089
1.13% 1.26% 1.17% 0.83% 0.55% 0.57% 1.78% 1.33%
2.53% 2.00% 3.95% 4.89% 4.91% 5.09% 3.81% 4.33%
N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
The AAL Mutual Funds Semi-Annual Report 90
<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 Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
=======================================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Capital Growth Fund........ 1.91% 1.77% 1.49% 1.41% 1.28%
The AAL Mid Cap Stock Fund......... -- -- -- -- --
The AAL Small Cap Stock Fund....... -- -- -- -- --
The AAL International Fund......... -- -- -- -- --
The AAL Equity Income Fund......... -- -- -- -- --
The AAL Bond Fund.................. 1.83% 1.37% 1.22% 1.17% 1.08%
The AAL Municipal Bond Fund........ 2.28% 1.46% 1.17% 1.10% 1.04%
The AAL High Yield Bond Fund....... -- -- -- -- --
The AAL Money Market Fund.......... 1.76% 1.18% 1.04% 1.07% 1.11%
</TABLE>
(c) If the Funds had paid all of their expenses the ratios would have been as
follows:
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended Year Ended Year Ended
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92
=======================================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Capital Growth Fund........ 2.21% 2.54% 2.51% 2.59% 2.27%
The AAL Mid Cap Stock Fund......... -- -- -- -- --
The AAL Small Cap Stock Fund....... -- -- -- -- --
The AAL International Fund......... -- -- -- -- --
The AAL Equity Income Fund......... -- -- -- -- --
The AAL Bond Fund.................. 7.59% 8.32% 8.13% 7.89% 7.14%
The AAL Municipal Bond Fund........ 4.95% 5.79% 5.89% 6.01% 5.72%
The AAL High Yield Bond Fund....... -- -- -- -- --
The AAL Money Market Fund.......... 5.37% 7.87% 7.84% 6.85% 4.56%
</TABLE>
(d) Total return calculations are based on net amount invested and are for six
months.
91 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Months Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.20% 1.18% 1.17% 1.12% 1.06% 0.98% 1.89% 1.80%
-- 1.73% 1.54% 1.39% 1.35% 1.29% 2.29% 2.14%
-- -- -- -- 2.06% 1.72% 3.21% 2.53%
-- -- -- 2.32% 2.10% 1.96% 2.94% 2.81%
-- 2.91% 1.19% 1.20% 1.15% 1.09% 1.99% 1.93%
1.03% 1.02% 1.03% 1.01% 0.98% 0.96% 1.86% 1.77%
1.00% 0.99% 0.98% 0.95% 0.89% 0.86% 1.69% 1.64%
-- -- -- -- 1.28% 1.16% 2.06% 1.95%
1.27% 1.51% 1.42% 1.28% 1.10% 0.96% 3.54% 1.72%
</TABLE>
<TABLE>
<CAPTION>
Class A Class A Class B Class B
Year Ended Year Ended Year Ended Year Ended Year Ended Six Months Ended Year Ended Six Month Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97 10/31/97 4/30/97 10/31/97
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2.15% 2.07% 1.89% 1.16% 0.62% 0.51% (0.39)% (0.34)%
-- (1.14)% (0.77)% (0.82)% (0.94)% (0.22)% (1.41)% (1.07)%
-- -- -- -- (1.20)% (1.07)% (2.40)% (1.88)%
-- -- -- 0.77% 0.88% 1.35% (0.03)% 0.38%
-- 5.12% 4.08% 3.58% 3.57% 2.98% 2.36% 2.13%
6.35% 5.61% 6.12% 5.89% 6.10% 5.97% 5.51% 5.17%
5.32% 4.87% 5.01% 4.69% 4.69% 4.57% 4.09% 4.82%
-- -- -- -- 8.83% 8.75% 8.41% 7.97%
2.38% 1.75% 3.70% 4.46% 4.36% 4.70% 2.05% 3.97%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 92
<PAGE>
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
Ronald G. Anderson
Officers
Ronald G. Anderson - President
Robert G. Same - Vice President & Secretary
Terrance P. Gallagher - Treasurer
Charles D. Gariboldi, Jr. - Assistant Treasurer
Joseph F. Wreschnig - Assistant Secretary
Investment
Adviser &
Distributor
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
Sub-Adviser
(AAL International
Fund Only)
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
Custodian,
Transfer Agent &
Disbursing
Agent
Firstar Trust Company
615 East Michigan Street
P.O. Box 2981
Milwaukee, WI 53201-2981
Custodian
(AAL International
Fund Only)
The Chase Manhattan Bank, N.A.
Chase Metro Tech Center
Brooklyn, NY 11245
Legal
Counsel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Independent
Accountants
Price Waterhouse LLP
Suite 1500
100 East Wisconsin Avenue
Milwaukee, WI 53202
This report is submitted for the information of shareholders of
The AAL Mutual Funds.
It is not authorized for distribution to prospective investors unless preceded
or accompanied by the current prospectus for The AAL Mutual Funds which
contains more complete information about the Funds, including investment
policies, charges and expenses.
[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]
