The AAL
Small Cap Stock Fund
The AAL
Mid Cap Stock Fund
The AAL
International Fund
The AAL
Capital Growth Fund
The AAL
Equity Income Fund
The AAL
Balanced Fund
THE AAL
Mutual Funds
Semi-Annual Report October 30, 1998
The AAL
High Yield Bond Fund
The AAL
Municipal Bond Fund
The AAL
Bond Fund
The AAL
Money Market Fund
AAL
The AAL Mutual Funds
<PAGE>
THE AAL
MUTUAL FUNDS
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CAPITAL
Connection
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<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
President's Letter............................................... 2
Portfolio Perspectives
The AAL Small Cap Stock Fund................................. 4
The AAL Mid Cap Stock Fund................................... 6
The AAL International Fund................................... 8
The AAL Capital Growth Fund.................................. 10
The AAL Equity Income Fund................................... 12
The AAL Balanced Fund........................................ 14
The AAL High Yield Bond Fund................................. 16
The AAL Municipal Bond Fund.................................. 18
The AAL Bond Fund............................................ 20
The AAL Money Market Fund.................................... 22
Schedule of Investments
The AAL Small Cap Stock Fund................................. 24
The AAL Mid Cap Stock Fund................................... 29
The AAL International Fund................................... 33
The AAL Capital Growth Fund.................................. 37
The AAL Equity Income Fund................................... 41
The AAL Balanced Fund........................................ 45
The AAL High Yield Bond Fund................................. 50
The AAL Municipal Bond Fund.................................. 55
The AAL Bond Fund............................................ 67
The AAL Money Market Fund.................................... 69
Statement of Assets and Liabilities............................... 72
Statement of Operations........................................... 74
Statement of Changes in Net Assets................................ 76
Notes to Financial Statements..................................... 80
Financial Highlights
The AAL Small Cap Stock Fund................................. 88
The AAL Mid Cap Stock Fund................................... 90
The AAL International Fund................................... 92
The AAL Capital Growth Fund.................................. 94
The AAL Equity Income Fund................................... 96
The AAL Balanced Fund........................................ 98
The AAL High Yield Bond Fund................................. 100
The AAL Municipal Bond Fund.................................. 102
The AAL Bond Fund............................................ 104
The AAL Money Market Fund.................................... 106
</TABLE>
Mutual Funds Semi-Annual Report October 30, 1998 1
<PAGE>
[PHOTO APPEARS HERE]
RONALD G. ANDERSON
October 30, 1998
Dear AAL Mutual Funds Shareholder:
The Markets and Economy In Review
We saw the two sides of the financial markets over this past period.
Specifically, since July 17th, we have seen stock market declines which have
caused panic among some investors followed by a rebound in October. We hope that
all of you, our shareholders, found yourselves in a better position to deal with
all of the volatility because of our continued communications with you regarding
the ups and downs of stock investing and the importance of maintaining a long-
term approach to stock investing. No matter what your comfort level, I encourage
you to contact your local AAL representative in order to review your investment
portfolio so that it can continue to suit your personal needs, objectives and
risk tolerance. That way, you will be better equipped to deal with future
volatility, while focusing on your goals.
Despite market volatility, the economy has continued on with good performance.
Americans have continued to enjoy low interests rates, low unemployment and low
inflation. However, it is becoming more and more apparent that the United States
is closely tied to the world economy, much of which is facing an economic
slowdown. We cannot confine our analysis to within our borders. We must
constantly monitor world events and be aware of their impacts on the U.S.
economy and markets.
Fund Highlights
The six-month returns for all of the Funds display the volatile period we have
just gone through. I encourage you to read on in the report to get a more
detailed look at each Fund, including each portfolio manager's position related
to performance. All of the matters recently presented to you for a vote passed
by overwhelming margins and our new portfolio managers for The AAL International
Fund discuss their outlook in this report.
I'm also excited to share that thanks to our continued growth in assets, on
August 26, 1998, the Board of Trustees lowered the maximum advisory fees for
The AAL Small Cap Stock, Mid Cap Stock, Capital Growth, Equity Income, Balanced,
High Yield Bond, Municipal Bond and Bond Funds. It is always a pleasure to
2 The AAL Mutual Funds Semi-Annual Report
<PAGE>
inform you of our cost saving efforts which, in this case, should save
shareholders about $1 million per year.
Thank you for your continued support of The AAL Mutual Funds. Whenever we can be
of service, please contact your local AAL representative or call 800-553-6319 to
speak to a mutual fund service center representative or to access Capital
Connection.(R)
Very truly yours,
/s/ Ronald G. Anderson
Ronald G. Anderson
PRESIDENT
THE AAL MUTUAL FUNDS
One often overlooked factor affecting investment returns is a fund's
expenses. The following chart shows the reduction in unreimbursed annualized
expenses for the original three AAL Mutual Funds. From their inception in
1987, these Funds have grown to almost $4 billion. They currently make up
over 75% of the total assets of The AAL Mutual Funds. As the assets have
grown, expenses have seen a corresponding reduction. Expenses may increase or
decrease in the future.
[GRAPH APPEARS HERE]
October 30, 1998 3
<TABLE>
<CAPTION>
Label A B C
Label Capital Growth Bond Fund Municipal Bond
<S> <C> <C> <C> <C>
1 4/30/88 1.91% 1.83% 2.28%
2 4/30/89 1.77% 1.37% 1.46%
3 4/30/90 1.49% 1.22% 1.14%
4 4/30/91 1.41% 1.17% 1.10%
5 4/30/92 1.28% 1.08% 1.04%
6 4/30/93 1.20% 1.03% 1.00%
7 4/30/94 1.18% 1.02% 0.99%
8 4/30/95 1.17% 1.03% 0.98%
9 4/30/96 1.12% 1.01% 0.95%
10 4/30/97 1.06% 0.98% 0.89%
11 4/30/98 0.98% 0.95% 0.85%
12 10/30/98 0.97% 0.92% 0.82%
</TABLE>
ANNUALIZED EXPENSES as a percentage of net assets
<PAGE>
[PHOTO OF APPEARS HERE]
KEVIN A. SCHMITTING
The AAL Small Cap Stock Fund
The performance of small-cap stocks has lagged that of large-cap stocks for
some time and, has actually been negative. Why are these small companies out of
favor?
I think there are a number of factors why small-cap stocks have been out of
favor for the past several years. One of the primary reasons is the less liquid
nature of smaller stocks, which means that these stocks are more difficult to
trade. During the past several years the investment industry has seen tremendous
inflows of cash from investors. That tremendous inflow has made it more
difficult for portfolio managers to invest meaningful amounts of cash into
poorer trading stocks. For example, it is much easier to invest $10 million into
the stock of Microsoft, which trades very well, than it is to invest that amount
in a very small company, which may only trade $300,000 worth of stock a day. The
stock market has also taken a shorter-term investment focus in recent years
which has placed an emphasis on selling stocks as soon as any bad news appears.
So, portfolio managers have been looking for stocks that they can get larger
amounts of money into and also get larger amounts of money out of, if they need
to sell quickly. This type of investing scenario is not conducive to smaller
companies which do not trade large dollar amounts. A number of other factors
also played a role in the underperformance of smaller-cap stocks, including
the strong domestic and international economies. For the most part, smaller
companies grow their earnings at a faster rate than larger companies. But in
strong economic periods, even large companies are showing good earnings growth,
which lessens the attractiveness of smaller companies which may be growing
faster but also may carry more risk. These factors, and a number of other
smaller negatives, have contributed to this period of small-cap stock
underperformance.
What kind of environment will it take for small company stocks to rally?
The type of environment that it will take for smaller stocks to rally may
actually be unfolding. In a slower economic and lower inflationary environment,
it becomes more difficult for slower-growing companies to raise the prices of
their products. If
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($10,950)
Value of Shares Initially Purchased ($10,163)
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
- ----------------------------------------------------------------
07/01/96 9,596.929 - 9,596.93
07/31/96 9,165.067 - 9,165.07
08/30/96 10,316.699 - 10,316.70
09/30/96 10,786.948 - 10,786.95
10/31/96 10,441.459 (0.00) 10,441.46
11/29/96 10,681.382 (0.00) 10,681.38
12/30/96 10,614.203 256.27 10,870.47
12/31/96 10,748.560 259.51 11,008.07
01/31/97 10,786.948 260.44 11,047.38
02/28/97 10,316.699 249.08 10,565.78
03/31/97 9,654.511 233.10 9,887.61
04/30/97 9,443.378 228.00 9,671.38
05/30/97 10,882.917 262.75 11,145.67
06/30/97 11,631.478 280.83 11,912.30
07/31/97 12,159.309 293.57 12,452.88
08/29/97 12,533.589 302.61 12,836.20
09/30/97 13,464.491 325.08 13,789.57
10/31/97 12,917.466 311.88 13,229.34
11/28/97 12,792.706 308.86 13,101.57
12/15/97 11,525.912 892.88 12,418.79
12/31/97 11,938.580 924.85 12,863.43
01/30/98 11,737.044 909.24 12,646.28
02/27/98 12,715.931 985.07 13,701.00
03/31/98 13,128.599 1,017.04 14,145.63
04/30/98 13,282.150 1,028.93 14,311.08
05/29/98 12,264.875 950.12 13,215.00
06/30/98 12,284.069 951.61 13,235.68
07/31/98 11,583.493 897.34 12,480.83
08/31/98 8,953.935 693.64 9,647.57
09/30/98 9,664.107 748.65 10,412.76
10/30/98 10,163.148 787.31 10,950.46
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year- From Inception
to-Date*** 1-Year Inception Date
----------------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge).................................. (14.87)% (17.23)% 5.82% 7/1/96
Class A** (with sales charge)................................... (18.29)% (20.53)% 3.97% 7/1/96
- ----------------------------------------------------------------------------------------------------------------
Class B (without CDSC).......................................... (15.59)% (18.05)% (1.02)% 1/8/97
Class B** (with CDSC)........................................... (19.81)% (21.33)% (3.23)% 1/8/97
- ----------------------------------------------------------------------------------------------------------------
Institutional****............................................... (14.54)% N/A (17.14)% 12/29/97
- ----------------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge) .................................. (22.30)% (27.49)% 1.81%
Class B** (with CDSC)........................................... (23.65)% (28.15)% (6.09)%
Institutional**** .............................................. (18.71)% N/A (24.04)%
</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.
** 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%, declining 1% each year during the first
five years and then converting to Class A shares after the fifth year.
*** Periods less than one year are not annualized.
****Institutional shares have no sales charges.
4 The AAL Mutual Funds Semi-Annual Report
<PAGE>
companies cannot raise prices and they cannot sell more of their products, their
earnings will obviously slow down. For faster-growing companies, which can
continue to sell more of their products even in an economic slowdown, this can
be a time period of financial outperformance. While I don't think that the
domestic economy is going into a recession, I do think that we may be entering a
domestic economic slowdown and we have certainly seen a slowdown in
international economies. This type of environment could be difficult for larger
companies. While smaller companies may also struggle in an economic slowdown, I
think that their financial performance could be better than larger companies. If
this scenario unfolds, I think that we will see a rally in small company stocks.
The Fund's upper limits defining "small cap" was increased to $1.5 billion. Will
this affect your investment style at all?
It will not change our investment style. It only adds to the flexibility of our
investment universe. The change allows us to consider a wider range of small-cap
stocks.
Can you tell us about some stocks in the portfolio that best represent what
happened in the small-cap market over the last six months?
The Fund owns a company called DM Management, which is a catalog-based retailer.
The price movement of its stock is probably representative of the small-cap
market during the past six months. The operating fundamentals of the company
have been quite good during the year, as have most small companies. The stock
had been appreciating nicely during the first half of the year, rising from $10
to almost $27 per share in mid-July. The stock declined with the rest of the
market during July and August but when the extreme concerns took over in
September, the stock was severely punished. In early October the stock traded at
$6. There were not any fundamental changes at the company, in management, nor in
guidance for the future, only investors' fears of a recession that might slow
DM's sales. The company did report a good third quarter in October and the stock
has rebounded to $12. While this example is fairly extreme in its volatility,
there have been many other examples with similar patterns and stories.
/s/ Kevin A. Schmitting
Kevin A. Schmitting
Portfolio Manager
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. Technology ................................ 19% 16%
. Consumer Cyclicals ........................ 17% 17%
. Financials ................................ 16% 13%
. Capital Goods ............................. 12% 15%
. Health Care ............................... 11% 10%
. Energy .................................... 6% 6%
. Cash & Cash Equivalents ................... 5% 4%
. Consumer Staples .......................... 4% 10%
. Transportation ............................ 4% 3%
. Utilities ................................. 4% 2%
. Other ..................................... 2% 4%
---------------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
%of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
ITI Technologies, Inc.......................... 2.09% 1.18%
Lamar Advertising Company...................... 1.95% 0.76%
Synopsys, Inc.................................. 1.89% 1.11%
CMAC Investment Corporation.................... 1.76% 0.72%
AmeriSource Health Corporation................. 1.55% 0.89%
</TABLE>
October 30, 1998 5
<PAGE>
[PHOTO OF MICHAEL R. HOCHHOLZER APPEARS HERE]
The AAL Mid Cap Stock Fund
During the last few years, large company stocks have greatly out-performed small
company stocks. Do mid-sized company stocks perform somewhere between, or are
there special factors that may affect these companies?
Mid-cap stocks typically do perform somewhere between large caps and small caps.
However, in the recent downturn in the market, mid caps performed much closer to
the small-cap end of the spectrum (i.e., mid caps declined substantially while
large caps declined modestly). This came about because the very biggest of the
large-cap stocks were perceived as being "safe" investments, even in a declining
market. This flight to perceived quality caused a set of 10 to 15 of the largest
stocks to at least hold their value, if not actually increase, while almost
everything else declined. Since this relatively small group of stocks is owned
by almost all large-cap funds and has a heavy weighting in the large-cap
benchmarks, the results in the large-cap universe were much better than any
other part of the market during this market cycle.
History has shown that over longer periods of time these sort of effects tend to
even out into a much smoother continuum between small, medium and large
companies. The step function that we have seen in the market during the past
year is the exception, not the norm.
What kind of an environment will it take for mid-sized company stocks to rally?
A more certain economic environment will be the key to a rally in mid-cap
stocks. The substantial decline we suffered during the past year was primarily
the result of concerns of economic difficulties around the world spreading to
include the United States and Western Europe and causing a global recession.
Once those fears abate, mid-cap stocks are poised for a meaningful rally as they
have reached record low valuations.
Many of the pieces are in place for such better economic circumstances.
Inflation remains low and declining, the federal government is as fiscally sound
as it has been in decades, and economic activity in the United States remains
solid. Only time will tell if fears of a domestic recession
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($16,270)
Value of Shares Initially Purchased ($12,293)
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
- --------------------------------------------------
06/30/93 9,596.929 - 9,596.93
07/30/93 9,491.363 - 9,491.36
08/31/93 9,971.209 - 9,971.21
09/30/93 10,393.474 - 10,393.47
10/29/93 10,268.714 - 10,268.71
11/30/93 9,942.418 - 9,942.42
12/31/93 10,422.265 - 10,422.26
01/31/94 10,758.157 - 10,758.16
02/28/94 10,786.948 - 10,786.95
03/31/94 10,019.194 - 10,019.19
04/29/94 9,961.612 - 9,961.61
05/31/94 9,404.990 - 9,404.99
06/30/94 8,598.848 - 8,598.85
07/29/94 8,637.236 - 8,637.24
08/31/94 9,443.378 - 9,443.38
09/30/94 9,510.557 - 9,510.56
10/31/94 9,932.821 - 9,932.82
11/30/94 9,577.735 - 9,577.74
12/30/94 9,923.225 - 9,923.22
01/31/95 9,520.154 - 9,520.15
02/28/95 10,009.597 - 10,009.60
03/31/95 10,508.637 - 10,508.64
04/28/95 10,479.846 - 10,479.85
05/31/95 10,614.203 - 10,614.20
06/30/95 11,631.478 - 11,631.48
07/31/95 12,811.900 - 12,811.90
08/31/95 12,735.125 - 12,735.12
09/29/95 13,522.073 - 13,522.07
10/31/95 13,742.802 - 13,742.80
11/30/95 14,309.021 - 14,309.02
12/29/95 14,337.812 - 14,337.81
01/31/96 14,299.424 - 14,299.42
02/29/96 14,980.806 - 14,980.81
03/29/96 15,095.969 - 15,095.97
04/30/96 16,410.749 - 16,410.75
05/31/96 17,024.952 - 17,024.95
06/28/96 15,950.096 - 15,950.10
07/31/96 14,059.501 - 14,059.50
08/30/96 15,028.791 - 15,028.79
09/30/96 15,825.336 - 15,825.34
10/31/96 15,009.597 - 15,009.60
11/29/96 15,796.545 - 15,796.55
12/30/96 12,965.451 428.74 13,394.19
12/30/96 12,965.451 2,545.97 15,511.42
12/31/96 13,032.630 2,559.16 15,591.79
01/31/97 13,502.879 2,651.50 16,154.38
02/28/97 13,042.226 2,561.04 15,603.27
03/31/97 12,082.534 2,372.59 14,455.12
04/30/97 12,197.697 2,395.21 14,592.90
05/30/97 13,502.879 2,651.50 16,154.38
06/30/97 14,078.695 2,764.57 16,843.26
07/31/97 14,990.403 2,943.60 17,934.00
08/29/97 15,019.194 2,949.25 17,968.44
09/30/97 16,122.841 3,165.97 19,288.81
10/31/97 15,345.489 3,013.32 18,358.81
11/28/97 15,268.714 2,998.25 18,266.96
12/15/97 13,426.104 3,722.47 17,148.57
12/15/97 13,426.104 4,342.58 17,768.68
12/31/97 13,905.950 4,497.78 18,403.73
01/30/98 13,579.655 4,392.24 17,971.90
02/27/98 14,568.138 4,711.96 19,280.10
03/31/98 15,172.745 4,907.52 20,080.26
04/30/98 15,297.505 4,947.87 20,245.37
05/29/98 14,395.393 4,656.09 19,051.48
06/30/98 14,673.704 4,746.11 19,419.81
07/31/98 13,761.996 4,451.22 18,213.22
08/31/98 10,719.770 3,467.23 14,187.00
09/30/98 11,554.702 3,737.29 15,291.99
10/30/98 12,293.666 3,976.30 16,269.97
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year-to- From Inception
Date*** 1-Year 5-Year Inception Date
<S> <C> <C> <C> <C> <C>
Class A (without sales
charge).................................. (11.59)% (11/38)% 9.74% 10.40% 6/30/93
Class A** (with sales
charge).................................. (15.11)% (14.94)% 8.84% 9.55% 6/30/93
- ---------------------------------------------------------------------------------------------
Class B (without
CDSC).................................... (12.48)% (12.35)% N/A 1.04% 1/8/97
Class B** (with CDSC).................... (16.86)% (15.65)% N/A (1.17)% 1/8/97
- ---------------------------------------------------------------------------------------------
Institutional****........................ (10.69)% N/A N/A (12.66)% 12/29/97
- ---------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales
charge).................................. (20.21)% (23.89)% 7.30% 8.42%
Class B** (with CDSC).................... (21.73)% (24.67)% N/A (4.67)%
Institutional****........................ (16.04)% N/A N/A (20.71)%
</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.
** 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%, declining 1% each year during the first
five years and then converting to Class A shares after the fifth year.
*** Periods less than one year are not annualized.
****Institutional shares have no sales charges.
6 The AAL Mutual Funds Semi-Annual Report
<PAGE>
were well founded. But, since mid-cap stocks already reflect much of the
downside of that scenario, whether a recession occurs or not is relevant only to
the timing of a recovery in mid-cap stocks. If the economy enters a recession,
the valuations of mid-cap stocks are already prepared for it and will simply
remain low until the economy bottoms and begins to recover. If the economy does
not fall into recession, mid-cap stocks have significant upside that could be
realized very quickly as fears of a recession fade.
The upper limit for the Fund's definition of "mid cap" was increased to $6
billion. Will this affect your investment style at all?
The change to the market cap parameters of the Fund which was approved by
shareholders recently will not change the investment style. What it will change
is the pool of companies from which we select the portfolio by applying those
investment criteria. Our initial screen of companies within the definined market
cap range results in over 1,500 candidates from which we can select a
diversified portfolio of quality growth companies.
This increase in the size of companies for inclusion in this Fund is really a
response to the market's changing definition of mid cap. Since the overall
market has increased substantially since the inception of the Fund over 5 years
ago, it only stands to reason that the definition of mid cap would need to
increase as well.
What sectors and stocks that the Fund owned bucked the generally negative trend
for mid-sized companies?
The two classic defensive sectors of electric utilities and telephone utilities
were the best contributors to performance during the past six months. However,
the market decline was so strong and broadbased that the electrics "contributed"
by going down less than others, leaving the telephones as the lone positive
sector for the period.
A few individual names were also able to fight the trend as well. Comcast, a
cable TV provider, and Concord EFS, a credit card transaction processor, were
able to eke out small positive returns during the decline. Again, both of these
would fit the theme of domestic, defensive stocks.
/s/ Michael R. Hochholzer
Michael R. Hochholzer
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. Consumer Cyclicals 16% 17%
. Financials 14% 14%
. Technology 14% 12%
. Health Care 11% 7%
. Utilities 10% 9%
. Capital Goods 7% 10%
. Consumer Staples 7% 10%
. Energy 6% 9%
. Cash & Cash Equivalents 5% 2%
. Basic Materials 4% 5%
. Transportation 4% 3%
. Other 2% 2%
-------------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
America Online, Inc....................................... 2.97% 0.83%
Concord EFS, Inc.......................................... 2.10% 1.08%
Rite Aid Corporation...................................... 2.04% 1.57%
ABR Information Services, Inc............................. 1.87% 0.86%
Sunrise Assisted Living, Inc.............................. 1.64% 0.33%
</TABLE>
October 30, 1998 7
<PAGE>
[PHOTO APPEARS HERE]
KATHLEEN M. HARRIS
[PHOTO APPEARS HERE]
L. SEAN ROCHE
The AAL International Fund
Tell us something about Oechsle's management philosophy or style that is not
reflected in the prospectus?
At Oechsle we believe that international markets are still quite inefficient,
and the best way to take advantage of these inefficiencies is through rigorous
fundamental research. Our style has a growth bias; and we look to add value
equally from country allocation and stock selection decisions. While we do
engage in currency hedging, this activity is conducted only to protect
principal, not to add value. We execute currency hedging solely through foreign
exchange forward contracts.
Through AAL Capital Management Corporation as the Adviser, you have restructured
the Fund's portfolio. What significant changes have you made?
We have significantly altered the look of the portfolio by reducing exposure to
the small-capitalization holdings and re-structuring the portfolio to a mid-
large capitalization bias. We have also divested of the fixed income
instruments and invested the proceeds in the equity markets. We believe
uncertainty in the markets will continue, due to Asia and Brazil, slowing
earnings in the United States. Therefore, we have positioned the portfolio in
more defensive and liquid sectors of the markets (e.g., pharmaceuticals,
telecommunications, consumer goods and publishing).
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($11,172)
Value of Shares Initially Purchased ($9,827)
Initial Net Asset Value ($9,600)
The AAL International Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- -----------------------------------------------------------------------
08/01/95 9,596.929 - 9,596.93
08/31/95 9,616.123 - 9,616.12
09/29/95 9,577.735 - 9,577.74
10/31/95 9,558.541 (0.00) 9,558.54
11/30/95 9,558.541 (0.00) 9,558.54
12/28/95 9,683.301 23.35 9,706.65
12/29/95 9,712.092 23.42 9,735.51
01/31/96 10,124.760 24.41 10,149.17
02/29/96 10,086.372 24.32 10,110.69
03/29/96 10,239.923 24.69 10,264.61
04/30/96 10,633.397 25.64 10,659.04
05/31/96 10,575.816 25.50 10,601.32
06/28/96 10,623.800 25.62 10,649.42
07/31/96 10,268.714 24.76 10,293.47
08/30/96 10,297.505 24.83 10,322.33
09/30/96 10,489.443 25.29 10,514.73
10/31/96 10,585.413 25.52 10,610.94
11/29/96 10,959.693 26.42 10,986.12
12/30/96 10,479.846 404.15 10,883.99
12/31/96 10,518.234 405.63 10,923.86
01/31/97 10,710.173 413.03 11,123.20
02/28/97 10,950.096 422.28 11,372.38
03/31/97 10,930.902 421.54 11,352.44
04/30/97 10,911.708 420.80 11,332.51
05/30/97 11,410.749 440.04 11,850.79
06/30/97 11,756.238 453.37 12,209.61
07/31/97 11,833.013 456.33 12,289.34
08/29/97 11,449.136 441.52 11,890.66
09/30/97 11,612.284 447.82 12,060.10
10/31/97 10,950.096 422.28 11,372.38
11/28/97 10,767.754 415.25 11,183.00
12/15/97 9,990.403 960.38 10,950.78
12/30/97 9,692.898 1,326.26 11,019.16
12/31/97 9,702.495 1,327.57 11,030.07
01/30/98 9,961.612 1,363.03 11,324.64
02/27/98 10,316.699 1,411.61 11,728.31
03/31/98 10,633.397 1,454.95 12,088.34
04/30/98 10,700.576 1,464.14 12,164.71
05/29/98 10,806.142 1,478.58 12,284.73
06/30/98 10,671.785 1,460.20 12,131.98
07/31/98 10,566.219 1,445.76 12,011.97
08/31/98 9,654.511 1,321.01 10,975.52
09/30/98 9,337.812 1,277.67 10,615.49
10/30/98 9,827.255 1,344.64 11,171.90
<TABLE>
<CAPTION>
Average Annual Total Returns*
October 30, 1998
Year- From Inception
to-Date*** 1-Year Inception Date
-----------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge)........ 1.29% (1.76)% 4.79% 8/1/95
Class A** (with sales charge)......... (2.75)% (5.73)% 3.47% 8/1/95
- ----------------------------------------------------------------------------------
Class B (without CDSC)................ 0.40% (2.75)% 0.19% 1/8/97
Class B** (with CDSC)................. (4.60)% (6.64)% (2.04)% 1/8/97
- ----------------------------------------------------------------------------------
Institutional**** .................... 1.78% N/A 2.13% 12/29/97
- ----------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge)......... (7.60)% (15.47)% 1.90%
Class B** (with CDSC)................. (9.34)% (16.43)% (4.98)%
Institutional****..................... (3.36)% N/A (4.44)%
</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.
** 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%, declining 1% each year for
the first five years and then converting to Class A shares after the fifth
year.
*** Periods less than one year are not annualized.
**** Institutional shares have no sales charges.
8 The AAL Mutual Funds Semi-Annual Report
<PAGE>
International investing involves additional risks including currency
fluctuations, economic and political instability, and accounting standards.
Distribution of Common Stock Holdings
[MAP APPEARS HERE]
How will your management style and investment strategies differ from the
previous sub-adviser?
Our style is earnings-driven, focusing on unanticipated earnings growth
potential. Our capitalization bias is mid-large, very different from SoGen's
small-cap bias. We are typically fully invested in equities, unlike SoGen, who
used cash and fixed income for defensive purposes. We incorporate emerging
markets opportunities at the stock level (i.e., we include emerging markets
companies that measure up on a risk-adjusted basis to companies in the
established markets).
What impact will the "Euro" have on corporate returns for European companies?
Globalization, a common currency, the integration of Eastern Europe, among many
factors, are influencing the direction of European companies. We expect these
factors to drive corporate returns over the longer term as companies are forced
to compete with low-cost producers worldwide. The euro is one factor that
European companies see as driving costs lower and complementing efforts to
improve competition and trade, especially within Europe.
/s/ Kathleen m. Harris
Kathleen M. Harris
PORTFOLIO MANAGER
/s/ L. Sean Roche
L. Sean Roche
PORTFOLIO MANAGER
Fund Allocations
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
Common Stocks...... 89% 71%
Bonds.............. 1% 9%
Commercial Paper... 10% 20%
-----------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security Country 10/30/98
- -------- ------- ----------------
<S> <C> <C>
NTT Mobile
Communications Inc. Japan............... 3.65%
Glaxo
Wellcome plc United Kingdom...... 3.61%
British
Aerospace United Kingdom...... 3.33%
Telecom Italia SpA Italy............... 3.14%
Suez Lyonnaise
des Eauz France.............. 3.06%
</TABLE>
October 30, 1998 9
<PAGE>
THE AAL MUTUAL FUNDS SEMI-ANNUAL REPORT
[PHOTO OF FREDERICK L. PLAUTZ APPEARS HERE]
The AAL Capital Growth Fund
During the past six months the market for large cap stocks has been very
volatile. What happened?
In July the market began a correction caused by concerns of economic recession
and declining
corporate earnings. The concern of economic recession increased due to fears
that the economic problems of Japan and Southeast Asia would spread to the
United States. This occurred at the same time that corporate profits were
declining slightly versus last year. As a result, the market had its first
significant correction since 1990.
Did all this market volatility present any opportunities; in other words, were
there wins for market timers?
While I'm sure the press will anoint some winners, as it always does, the nature
and timing of market volatility leads me to believe there were more losers than
winners.
Here's why. The recent 20% correction was the first of its magnitude in years
and, from the standpoint of large cap stocks, did not last very long. As I
noted in the first question, the volatility was caused by concerns about
recession and declining earnings. In addition, people assumed that because
Russian and some Asian markets imploded, the U.S. markets just had to go down.
For the market this perception became reality. However, when the fundamentals
did not follow, e.g., we have a low budget surplus, and low inflation and
unemployment, the large cap market came back rather quickly. This rebound was
enhanced by Alan Greenspan who was willing to take the actions
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($39,977)
Value of Shares Initially Purchased ($28,253)
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
- ----------------------------------------------------
07/16/87 9,596.929 - 9,596.93
07/31/87 9,760.077 - 9,760.08
08/31/87 10,086.372 (0.00) 10,086.37
09/30/87 9,731.286 (0.00) 9,731.29
10/31/87 7,859.885 (0.00) 7,859.88
11/30/87 7,264.875 - 7,264.88
12/17/87 7,581.574 41.27 7,622.84
12/31/87 7,763.916 42.26 7,806.17
01/29/88 8,090.211 44.04 8,134.25
02/29/88 8,320.537 45.29 8,365.83
03/31/88 7,965.451 43.36 8,008.81
04/30/88 8,023.033 43.67 8,066.70
05/31/88 8,128.599 44.24 8,172.84
06/30/88 8,445.298 45.97 8,491.27
07/03/88 8,310.940 132.08 8,443.02
07/29/88 8,291.747 131.77 8,423.52
08/31/88 8,147.793 129.49 8,277.28
09/30/88 8,464.491 134.52 8,599.01
10/31/88 8,570.058 136.20 8,706.25
11/30/88 8,464.491 134.52 8,599.01
12/16/88 8,483.685 245.97 8,729.65
12/30/88 8,531.670 247.36 8,779.03
01/31/89 9,059.501 262.66 9,322.16
02/28/89 8,829.175 255.99 9,085.16
03/31/89 9,069.098 262.94 9,332.04
04/30/89 9,443.378 273.79 9,717.17
05/31/89 9,865.643 286.04 10,151.68
06/30/89 9,788.868 283.81 10,072.68
07/01/89 9,702.495 387.96 10,090.45
07/31/89 10,537.428 421.34 10,958.77
08/31/89 10,614.203 424.41 11,038.62
09/30/89 10,479.846 419.04 10,898.89
10/31/89 10,412.668 416.35 10,829.02
11/30/89 10,604.607 424.03 11,028.63
12/06/89 10,537.428 555.08 11,092.51
12/31/89 10,806.142 569.24 11,375.38
01/31/90 10,211.132 537.89 10,749.03
02/28/90 10,220.729 538.40 10,759.13
03/30/90 10,412.668 548.51 10,961.18
04/30/90 10,287.908 541.94 10,829.85
05/31/90 11,209.213 590.47 11,799.68
06/29/90 11,190.019 589.46 11,779.48
07/02/90 11,065.259 737.46 11,802.71
07/31/90 11,084.453 738.73 11,823.19
08/31/90 10,105.566 673.50 10,779.06
09/28/90 9,731.286 648.55 10,379.84
10/31/90 9,817.658 654.31 10,471.97
11/30/90 10,460.653 697.16 11,157.81
12/27/90 10,556.622 850.96 11,407.58
12/31/90 10,614.203 855.60 11,469.81
01/31/91 10,844.530 874.17 11,718.70
02/28/91 11,516.315 928.32 12,444.64
03/29/91 11,900.192 959.27 12,859.46
04/30/91 11,919.386 960.81 12,880.20
05/31/91 12,408.829 1,000.27 13,409.10
06/28/91 11,986.564 966.23 12,952.79
07/02/91 12,034.549 1,129.80 13,164.35
07/31/91 12,284.069 1,153.23 13,437.30
08/30/91 12,543.186 1,177.55 13,720.74
09/30/91 12,447.217 1,168.55 13,615.76
10/31/91 12,648.752 1,187.47 13,836.22
11/30/91 12,236.084 1,148.72 13,384.81
12/27/91 13,186.180 1,385.94 14,572.12
12/31/91 13,512.476 1,420.23 14,932.71
01/31/92 13,186.180 1,385.94 14,572.12
02/28/92 13,243.762 1,391.99 14,635.75
03/31/92 13,042.226 1,370.81 14,413.04
04/30/92 13,493.282 1,418.22 14,911.50
05/29/92 13,579.655 1,427.30 15,006.95
06/30/92 13,387.716 1,407.12 14,794.84
07/06/92 13,378.119 1,543.99 14,922.11
07/31/92 13,742.802 1,586.07 15,328.88
08/31/92 13,579.655 1,567.25 15,146.90
09/30/92 13,685.221 1,579.43 15,264.65
10/30/92 13,848.369 1,598.26 15,446.63
11/30/92 14,145.873 1,632.59 15,778.47
12/31/92 14,011.516 1,773.37 15,784.89
12/31/92 14,011.516 1,773.37 15,784.89
01/29/93 13,771.593 1,743.01 15,514.60
02/26/93 14,155.470 1,791.59 15,947.06
03/31/93 14,318.618 1,812.24 16,130.86
04/30/93 14,232.246 1,801.31 16,033.56
05/31/93 14,452.975 1,829.25 16,282.22
06/30/93 14,404.990 1,823.17 16,228.16
07/01/93 14,222.649 1,953.62 16,176.27
07/30/93 14,145.873 1,943.07 16,088.95
08/31/93 14,548.944 1,998.44 16,547.38
09/30/93 14,385.797 1,976.03 16,361.83
10/29/93 14,740.883 2,024.80 16,765.69
11/30/93 14,606.526 2,006.35 16,612.87
12/31/93 14,520.154 2,151.66 16,671.82
12/31/93 14,520.154 2,220.73 16,740.88
01/31/94 14,625.720 2,236.87 16,862.59
02/28/94 14,251.440 2,179.63 16,431.07
03/31/94 13,714.012 2,097.43 15,811.45
04/29/94 13,905.950 2,126.79 16,032.74
05/31/94 13,925.144 2,129.72 16,054.87
06/30/94 13,464.491 2,239.63 15,704.12
07/29/94 13,790.787 2,293.90 16,084.69
08/31/94 14,184.261 2,359.35 16,543.61
09/30/94 13,992.322 2,327.42 16,319.75
10/31/94 14,337.812 2,384.89 16,722.70
11/30/94 13,905.950 2,313.06 16,219.01
12/30/94 13,445.298 2,914.08 16,359.37
12/30/94 13,445.298 3,065.18 16,510.48
01/31/95 13,781.190 3,141.76 16,922.95
02/28/95 14,232.246 3,244.59 17,476.83
03/31/95 14,481.766 3,301.47 17,783.24
04/28/95 14,932.821 3,404.30 18,337.12
05/31/95 15,451.056 3,522.45 18,973.50
06/30/95 15,537.428 3,680.02 19,217.45
07/31/95 16,065.259 3,805.03 19,870.29
08/31/95 15,998.081 3,789.12 19,787.20
09/29/95 16,756.238 3,968.69 20,724.93
10/31/95 16,669.866 3,948.23 20,618.10
11/30/95 17,293.666 4,095.98 21,389.65
12/28/95 16,871.401 4,114.67 20,986.07
12/28/95 16,871.401 4,268.25 21,139.65
12/28/95 16,871.401 4,719.96 21,591.36
12/29/95 16,900.192 4,728.02 21,628.21
01/31/96 17,600.768 4,924.01 22,524.78
02/29/96 17,629.559 4,932.07 22,561.62
03/29/96 17,600.768 4,924.01 22,524.78
04/30/96 18,032.630 5,044.83 23,077.46
05/31/96 18,426.104 5,154.91 23,581.01
06/28/96 18,330.134 5,232.45 23,562.59
07/31/96 17,504.798 4,996.86 22,501.66
08/30/96 17,869.482 5,100.96 22,970.44
09/30/96 19,145.873 5,465.31 24,611.19
10/31/96 19,376.200 5,531.06 24,907.26
11/29/96 20,911.708 5,969.38 26,881.09
12/30/96 19,856.046 5,748.22 25,604.27
12/30/96 19,856.046 6,916.62 26,772.67
12/31/96 19,577.735 6,819.67 26,397.41
01/31/97 20,844.530 7,260.95 28,105.48
02/28/97 20,633.397 7,187.40 27,820.80
03/31/97 19,644.914 6,843.07 26,487.99
04/30/97 20,633.397 7,187.40 27,820.80
05/30/97 22,015.355 7,668.79 29,684.14
06/30/97 22,955.854 8,070.16 31,026.01
07/31/97 24,616.123 8,653.83 33,269.95
08/29/97 23,406.910 8,228.73 31,635.64
09/30/97 24,424.184 8,586.35 33,010.54
10/31/97 24,155.470 8,491.88 32,647.35
11/28/97 25,259.117 8,879.87 34,138.99
12/15/97 24,577.735 10,117.37 34,695.11
12/30/97 24,952.015 10,306.67 35,258.68
12/31/97 24,952.015 10,306.67 35,258.68
01/30/98 25,019.194 10,334.41 35,353.61
02/27/98 26,996.161 11,151.02 38,147.18
03/31/98 28,119.002 11,614.82 39,733.82
04/30/98 28,445.298 11,749.60 40,194.90
05/29/98 27,610.365 11,404.72 39,015.09
06/30/98 29,318.618 12,165.93 41,484.55
07/31/98 28,934.741 12,006.64 40,941.38
08/31/98 24,539.347 10,182.75 34,722.09
09/30/98 26,199.616 10,871.68 37,071.30
10/30/98 28,253.359 11,723.90 39,977.26
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year- From Inception
to-Date*** 1-Year 5-Year 10-Year Inception Date
<S> <C> <C> <C> <C> <C> <C>
Class A
(without sales charge).................. 13.38% 22.45% 18.98% 16.47% 13.46% 7/16/87
Class A**
(with sales charge)..................... 8.86% 17.55% 18.01% 15.99% 13.05% 7/16/87
Class B
(without CDSC).......................... 12.42% 21.20% N/A N/A 23.80% 1/8/97
Class B**
(with CDSC)............................. 7.42% 17.20% N/A N/A 21.93% 1/8/97
Institutional****....................... 13.69% N/A N/A N/A 16.33% 12/29/97
SEC Standardized Returns as of 9/30/98
Class A**
(with sales charge)..................... 0.95% 7.81% 16.82% 15.26% 12.39%
Class B**
(with CDSC)............................. (0.67)% 7.15% N/A N/A 17.72%
Institutional****....................... 5.36% N/A N/A N/A 6.90%
</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.
** 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%, declining 1% of each year during first
five years and then converting to Class A shares after the fifth year.
*** Periods less than one year are not annualized.
**** Institutional shares have no sales charges.
10 The AAL Mutual Funds Semi-Annual Report
<PAGE>
necessary to fight a future recession. Anyone who successfully market timed had
a relatively short time period in which to profit. For those who tried and
failed, there may even be capital gains taxes due, given the tremendous market
appreciation over the past several years.
Internet stocks have been receiving a lot of notice in the press. How, if at
all, does the Fund invest in internet-related stocks?
The Fund plays the internet mainly through cable stocks. Most of the other
internet stocks have small market capitalizations or they have small revenues.
Neither is appropriate for a large capitalization fund. The cable stocks should
get a great deal of leverage from the internet due to the high bandwidth and low
prices that they offer. As they offer internet services more widely and cable
modems become available in stores next year, the cable companies should benefit.
How do you take all the year 2000 issues into account when you select stocks?
The year 2000 problem is the most widely anticipated problem of all time. The
conversion to the Euro has been anticipated for almost as long. Anything that
has been anticipated for that long is priced in the market, so it really doesn't
have much of an effect. The price of a company's stock already reflects these
risks.
/s/ Frederick L. Plautz
Frederick L. Plautz
Portfolio Manager
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
--------------------
<S> <C> <C>
Consumer Staples............. 24% 22%
Financials.................... 18% 19%
Technology.................... 14% 15%
Health Care................... 13% 11%
Capital Goods................. 8% 8%
Energy........................ 7% 8%
Communication Services........ 6% 2%
Consumer Cyclicals............ 6% 7%
Cash &Cash Equivalents........ 2% 5%
Other......................... 2% 3%
------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
-------- -------
<S> <C> <C>
Merck & Company Inc................. 3.53% 3.09%
General Electric Company............ 3.43% 3.27%
Walgreen Company.................... 3.20% 2.23%
American International Group, Inc... 3.05% 3.08%
Philip Morris Companies, Inc........ 2.95% 1.73%
</TABLE>
October 30, 1998 11
<PAGE>
[PHOTO APPEARS HERE]
LEWIS A. BOHANNON
The AAL Equity Income Fund
The market has experienced a great deal of volatility in the last six months.
How has that volatility affected the performance of the Fund?
The Fund has been very volatile over the last six months along with the rest of
the market. However, the Fund's volatility has been substantially less than many
stock funds. For the second calendar quarter (ended 6/30/98) the Fund was up
only slightly, but significantly outperformed other equity income funds. For the
third calendar quarter (ended 9/30/98) the Fund was down sharply in absolute
terms, but was about even with other equity income funds. Thus on balance, while
the Fund, like the market, was down sharply in absolute returns over the last
six months, especially July and August, it has had very good performance
relative to other equity income funds over that period.
With many countries around the world experiencing difficult economic times, what
are you doing to protect shareholders' investments in the Fund?
I am doing what I always do, buying stocks that have attractive fundamentals and
sell at reasonable prices. Since no one knows where the stock market is headed,
much less the United States and world economies, I focus on those things that I
do know and those areas where I can add value for our shareholders. Like my
shareholders, I am a long-term investor. I am not in the more risky business of
"market-timing," where one attempts to forecast the direction of the market and
then act accordingly. My philosophy and my strengths are in identifying valuable
stocks that are selling at attractive prices. If I can build a diversified
portfolio of these types of stocks, then the Fund's investors will be very well
served over the long term through both good and bad economic times. The
significance of difficult times is that they provide buying opportunities and
allow me to buy attractive stocks at much cheaper prices.
Isn't The AAL Balanced Fund similarly positioned to this Fund?
Yes, it is, but the way the two
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($15,446)
Value of Shares Initially Purchased ($13,071)
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
- ------------------------------------------------------------
03/18/94 9,596.929 - 9,596.93
03/31/94 9,520.154 - 9,520.15
04/29/94 9,548.944 - 9,548.94
05/31/94 9,337.812 (0.00) 9,337.81
06/30/94 9,040.307 76.78 9,117.08
07/29/94 9,299.424 78.98 9,378.40
08/31/94 9,309.021 79.06 9,388.08
09/30/94 8,973.129 153.63 9,126.76
10/31/94 9,069.098 155.28 9,224.37
11/30/94 8,934.741 152.98 9,087.72
12/30/94 8,685.221 226.79 8,912.01
01/31/95 9,049.904 236.32 9,286.22
02/28/95 9,040.307 236.07 9,276.37
03/31/95 8,896.353 311.09 9,207.44
04/30/95 9,088.292 317.80 9,406.09
05/31/95 9,548.944 333.91 9,882.85
06/30/95 9,539.347 413.03 9,952.38
07/31/95 9,644.914 417.60 10,062.51
08/31/95 9,683.301 419.26 10,102.56
09/29/95 10,163.148 530.15 10,693.30
10/31/95 10,297.505 537.16 10,834.67
11/30/95 10,441.459 544.67 10,986.13
12/28/95 10,825.336 655.57 11,480.91
12/29/95 10,854.127 657.32 11,511.44
01/31/96 11,065.259 670.10 11,735.36
02/29/96 10,806.142 654.41 11,460.55
03/29/96 10,623.800 734.97 11,358.77
04/30/96 10,460.653 723.68 11,184.34
05/31/96 10,489.443 725.68 11,215.12
06/28/96 10,758.157 836.61 11,594.77
07/31/96 10,249.520 797.06 11,046.58
08/30/96 10,239.923 796.31 11,036.24
09/30/96 10,163.148 904.12 11,067.27
10/31/96 10,556.622 939.12 11,495.74
11/29/96 10,950.096 974.12 11,924.22
12/30/96 11,026.871 1,101.14 12,128.01
12/31/96 10,969.290 1,095.39 12,064.68
01/31/97 11,084.453 1,106.89 12,191.34
02/28/97 11,151.631 1,113.60 12,265.23
03/31/97 10,729.367 1,166.43 11,895.79
04/30/97 10,882.917 1,183.12 12,066.04
05/30/97 11,477.927 1,247.80 12,725.73
06/30/97 11,737.044 1,377.06 13,114.10
07/31/97 11,957.774 1,402.95 13,360.73
08/29/97 11,487.524 1,347.78 12,835.31
09/30/97 12,015.355 1,495.49 13,510.85
10/31/97 11,890.595 1,479.96 13,370.56
11/28/97 12,543.186 1,561.19 14,104.38
12/15/97 12,360.845 2,024.06 14,384.91
12/30/97 12,581.574 2,137.27 14,718.84
12/31/97 12,619.962 2,143.79 14,763.75
01/30/98 12,514.395 2,125.86 14,640.25
02/27/98 13,119.002 2,228.56 15,347.56
03/31/98 13,723.608 2,384.04 16,107.64
04/30/98 13,723.608 2,384.04 16,107.64
05/29/98 13,522.073 2,349.03 15,871.10
06/30/98 13,771.593 2,444.19 16,215.78
07/31/98 13,512.476 2,398.20 15,910.67
08/31/98 11,621.881 2,062.65 13,684.54
09/29/98 12,600.768 2,289.50 14,890.27
09/30/98 12,303.263 2,235.44 14,538.71
10/30/98 13,071.017 2,374.94 15,445.96
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year- From Inception
to-Date*** 1-Year Inception Date
--------------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales
charge).................................. 4.62% 15.52% 10.85% 3/17/94
Class A** (with sales
charge).................................. 0.42% 10.87% 9.86% 3/17/94
- -------------------------------------------------------------------------------------
Class B (without CDSC) 3.74% 14.36% 13.75% 1/8/97
Class B** (with CDSC) (1.26)% 10.36% 11.74% 1/8/97
- -------------------------------------------------------------------------------------
Institutional****........................ 5.00% N/A 6.11% 12/29/97
- -------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A**
(with sales charge)...................... (5.48)% 13.32% 8.59%
Class B** (with CDSC) (7.17)% 2.52% 8.38%
Institutional****........................ (1.16)% N/A (1.44)%
</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.
**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%, declining 1% each year during the first
five years and then converting to Class A shares after the fifth year.
***Periods less than one year are not annualized.
****Institutional shares have no sales charges.
12 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Funds reach their objectives is quite different. The AAL Balanced Fund tries to
provide a balance between growth and income by investing in assets similar to
The AAL Bond and Capital Growth Funds; but not in the Funds themselves. It
derives its growth from the large-cap growth stocks found in The AAL Capital
Growth Fund, while The AAL Bond Fund provides it with income and makes it a more
conservative fund through its investments in high-quality bonds. The AAL Equity
Income Fund also tries to provide both growth and income to investors, but does
so by investing the bulk of its assets in more value oriented, income-producing
stocks. The bottom-line is that both Funds offer investors a combination of
growth and income, but The AAL Equity Income Fund probably gives investors more
potential in a rising market because it is predominantly a stock fund, while The
AAL Balanced Fund gives investors a cushion in a falling market because of its
large bond weighting.
What were some of your success stories and the factors that contributed to their
success?
The two biggest areas of success in the first half were not so much in
individual stocks, but good stock selection in health care and an underweighting
in financial stocks. The Fund's major holdings in health care are in large drug
companies (Eli Lilly, Warner-Lambert and Elan) and these performed quite well
during the past six months, while other areas of health care (hospitals and
HMOs) underperformed. Also, while approximately 15% of the Fund's assets are
invested in financial stocks, the Fund is underweighted in financials versus
other equity income funds and this was a big positive in the first half as
financials dramatically underperformed due to the market's concerns about their
exposure to rapidly deteriorating foreign economies. It is important to note
that I wasn't making a bet against financial stocks by underweighting the group.
The underweighting came about because I was having difficulty finding attractive
investments in the financial area and, consequently, I had less money invested
in this sector. The major reason my sector weightings either rise or fall is my
ability/inability to find attractive names to purchase, not usually a conscious
decision to over/underweight the sector.
/s/ Lewis A. Bohannon
Lewis A. Bohannon
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. Financials................... 16% 18%
. Communication Services....... 15% 15%
. Energy....................... 10% 11%
. Utilities.................... 9% 10%
. Consumer Cyclicals........... 9% 6%
. Health Care.................. 9% 6%
. Capital Goods................ 8% 10%
. Consumer Staples............. 8% 7%
. Technology................... 5% 6%
. Cash &Cash Equivalents....... 5% 5%
. Other 6% 6%
-------------------
Total 100% 100%
</TABLE>
<TABLE>
<CAPTION>
5 Largest Holdings
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
MCI Worldcom, Inc.................... 3.61% 2.87%
American Home Products Corporation... 2.04% N/A
Telefonica S.A. ADR.................. 1.99% 1.81%
Ameritech Corporation................ 1.66% 1.43%
New Century Energies, Inc............ 1.56% 1.67%
</TABLE>
October 30, 1998 13
<PAGE>
[PHOTO APPEARS HERE]
MICHAEL R. HILT
[PHOTO APPEARS HERE]
FEDRICK L. PLAUTZ
The AAL Balanced Fund
The Fund has been in existence for almost one year. How has the Fund performed
during this period and what has contributed to that performance?
The Fund has performed very well during this first year, on both an absolute and
a relative basis. During the most recent quarter, the Fund continued to perform
well during the market correction when compared to other balanced funds. During
the first part of the year we had a 60% equity position, in July we reduced our
equity exposure to 55%. As a result, during the market correction we had a lower
equity position and the equities that we held performed relatively well during
this time period. In addition, our bond investments have primarily been in U.S.
government bonds that have performed well as the interest rates have changed.
The Fund is a mix of stocks, bonds and money market instruments. How do you
establish the investment mix?
The two of us meet on a regular basis and review the attractiveness of stocks
vs. bonds with the outlook of which area will have the best relative performance
while reducing the risk to investors. We currently are at a
[CHART APPEARS HERE]
A Comparison of the Year-To-date (10/30/98) Total Returns of
The AAL Balanced Fund, on Net Amount Invested,
to the AAL Capital Growth, Bond and Money Market Funds
Capital Growth Fund 13.38%
Balanced Fund 10.23%
Bond Fund 6.49%
Money Market Fund 4.06%
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year- From Inception
to-Date*** Inception Date
---------- --------- ---------
<S> <C> <C> <C>
Class A (without sales charge)............. 10.23% 12.36% 12/29/97
Class A** (with sales charge).............. 5.78% 6.96% 12/29/97
- ----------------------------------------------------------------------------
Class B (without CDSC)..................... 9.54% 11.52% 12/29/97
Class B** (with CDSC)...................... 4.54% 5.45% 12/29/97
- ----------------------------------------------------------------------------
Institutional****.......................... 10.12% 12.29% 12/29/97
- ----------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge).............. 1.80% 2.42%
Class B** (with CDSC)...................... 0.41% 0.54%
Institutional****.......................... 5.97% 8.00%
</TABLE>
*Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
less than their original cost.
**Class A performance reflects the maximum sales charge of 4%. Class B
performance reflects the maximum contingent deferred sales charge (CDSC) of
5%, declining 1% each year during the first five years and then converting
to Class A shares after the fifth year.
***Periods less than one year are not annualized.
****Institutional shares have no sales charges.
14 The AAL Mutual Funds Semi-Annual Report
<PAGE>
55% equity positions, a 33% bond position and a 12% money market position. The
bonds and money market investments are combined to achieve an attractive market
duration. As a new Fund we have attracted steady investments from shareholders
which have allowed us to keep the mix as we want it without have to sell or buy
securities in one area.
How is the AAL Balanced Fund positioned among the investment choices available
from The AAL Mutual Funds?
The AAL Balanced Fund is for the investor that wants professional money managers
establishing and reviewing an asset allocation model. We are constantly
reviewing the risk return potential of both asset classes to find the best mix
for most people. For those with longer term investment horizons The AAL Balanced
Fund is probably positioned on the conservative side but, for those with shorter
term investment horizon it is a good solution to provide growth with a reduction
of risk. Like The AAL Capital Growth Fund it invests in large cap stocks and
like The AAL Bond Fund it invests in higher quality bonds. This provides an
investment opportunity different then the other equity and bond funds. The
investment return is provided by finding the right asset allocation mix. During
the recent market volatility it has had slightly less risk than The AAL Equity
Income Fund.
/s/ Michael R. Hilt
Michael R. Hilt
PORTFOLIO MANAGER
/s/ Frederick L. Plautz
Frederick L. Plautz
PORTFOLIO MANAGER
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. Fixed Income Obligations......... 33% 28%
. Cash & Cash Equivalents.......... 14% 17%
. Consumer Staples................. 13% 13%
. Financials....................... 10% 11%
. Technology....................... 8% 9%
. Health Care...................... 7% 7%
. Capital Goods.................... 4% 5%
. Energy........................... 4% 5%
. Consumer Cyclicals............... 3% 4%
. Communication Services........... 4% 1%
------------------
Total 100% 100%
</TABLE>
Asset Mix
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
Common Stocks................... 55% 55%
Bonds........................... 33% 31%
Money Market Instruments........ 12% 14%
------------------
Total 100% 100%
</TABLE>
5 Largest Bond Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
U.S.Treasury Notes....................................... 8.24% 18.92%
Coupon Rate: 7.500% / Maturity Date: 2/15/2005
U.S. Treasury Notes...................................... 3.86% N/A
Coupon Rate: 4.50% / Maturity Date: 11/15/2008
U.S. Treasury Notes...................................... 3.86% N/A
Coupon Rate: 4.125% / Maturity Date: 11/15/2003
U.S Treasury Notes....................................... 2.69% N/A
Coupon Rate: 5.25% / Maturity Date: 8/15/2003
U.S. Treasury Notes...................................... 2.02% N/A
Coupon Rate: 5.375% / Maturity Date: 6/30/2003
</TABLE>
Largest Common Stock Holdings
October 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
Merck & Company, Inc..................... 1.97% 1.78%
General Electric Company................. 1.92% 1.87%
Walgreen Company......................... 1.79% 1.28%
American International Group, Inc........ 1.71% 1.77%
Philip Morris Companies, Inc............. 1.64% 0.99%
</TABLE>
October 30, 1998 15
<PAGE>
[PHOTO APPEARS HERE]
DAVID G. CARROLL
The AAL High Yield Bond Fund
The Fund invests in bonds that are rated below the four highest quality ratings.
Please explain how that affects the investment performance of the Fund.
High yield bonds share some of the characteristics of both stocks and bonds.
During difficult or uncertain economic times, these bonds behave more like
stocks. As growth slows and corporate earnings decline, the premium investors
demand for owning high yield bonds increases to reflect the higher risk of
default. As a result, the value of high yield bonds generally declines along
with the stock market. The government bond market does quite well in this
environment due to expectations of lower inflation. This environment developed
last summer when Russia defaulted on its debt obligations, Japan continued in
recession and Asia saw economic turmoil. High yield bonds lost between 2% and
17% during the three months ended October 30, 1998. (The Fund had a total return
of a negative 9.94% during this period.)
We continue to read about interest rates and having to bail out some foreign
governments. How do these domestic or international monetary concerns affect
your investment strategies?
Many of the companies in which we invest compete with companies based outside
the United States or they export their products overseas. Thus, we follow the
international economic environment very closely. Basic materials (steel, paper
and chemicals) have been most affected by weak international currencies. This
sector currently accounts for 13% of the Fund. Certain Asian countries have
increased their exports to the United States. These exports depressed domestic
pricing and operating profits for many U.S. companies. The bonds of these U.S.
companies then underperformed the overall market. We are monitoring the
financial condition of these investments, and even have added to a few positions
such as Millar Western Forest Products.
There has been a lot of talk recently of slower economic growth. Can you
explain how that affects the types of companies and bonds that you invest in?
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($10,120)
Value of Shares Initially Purchased ($8,522)
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
- ------------------------------------------------------------------
01/09/97 9,596.929 - 9,596.93
01/31/97 9,596.929 43.22 9,640.14
02/28/97 9,750.480 116.91 9,867.39
03/31/97 9,414.587 185.19 9,599.77
04/30/97 9,481.766 260.01 9,741.77
05/30/97 9,712.092 338.73 10,050.83
06/30/97 9,760.077 418.87 10,178.95
07/31/97 9,942.418 505.14 10,447.56
08/29/97 9,875.240 574.52 10,449.76
09/30/97 10,028.791 666.57 10,695.36
10/31/97 9,942.418 738.33 10,680.75
11/28/97 9,961.612 813.17 10,774.78
12/15/97 9,904.031 909.91 10,813.95
12/31/97 9,875.240 992.09 10,867.33
01/30/98 9,961.612 1,077.85 11,039.47
02/27/98 9,961.612 1,158.46 11,120.07
03/31/98 9,952.015 1,244.81 11,196.82
04/30/98 9,894.434 1,320.03 11,214.47
05/29/98 9,827.255 1,388.65 11,215.90
06/30/98 9,760.077 1,464.74 11,224.82
07/31/98 9,702.495 1,539.25 11,241.75
08/31/98 8,905.950 1,496.38 10,402.33
09/30/98 8,790.787 1,562.80 10,353.59
10/30/98 8,522.073 1,597.80 10,119.87
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year- From Inception
to-Date*** 1-Year Inception Date
-------------------------------------------
<S> <C> <C> <C> <C>
Class A (without sales charge).......... (6.88)% (5.25)% 2.98% 1/8/97
Class A** (with sales charge)........... (10.61)% (9.03)% 0.66% 1/8/97
- --------------------------------------------------------------------------------------
Class B (without CDSC).................. (7.53)% (6.03)% 2.24% 1/8/97
Class B** (with CDSC)................... (12.15)% (9.79)% 0.05% 1/8/97
- --------------------------------------------------------------------------------------
Institutional****....................... (6.84)% N/A (8.13)% 12/29/97
- --------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge)........... (8.55)% (7.11)% 2.04%
Class B** (with CDSC)................... (10.07)% (7.74)% 1.48%
Institutional****....................... (4.70)% N/A (6.19)%
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
less than their original cost.
** Class A performance reflects the maximum sales charge of 4%. Class B
performance reflects the maximum contingent deferred sales charge (CDSC) of
5%, declining 1% each year during the first five years and then converting
to Class A shares after the fifth year.
*** Periods less than one year and are not annualized.
****Institutional shares have no sales charges.
16 The AAL Mutual Funds Semi-Annual Report
<PAGE>
In a period of slowing economic growth, the less cyclical sectors of the market
as well as the higher-rated junk bonds (those rated "BB" as opposed to "CCC")
will usually outperform the overall market. "BB" bonds are more closely linked
with the bond market in general, and are less affected by the stock market
volatility. The decline in interest rates this past summer was beneficial to
most bonds. The lower-rated bonds (ratings of "B" and "CCC") are more affected
by the same factors that influence stock valuations and were negatively affected
by the recent stock market correction. Some of these lower-rated bonds,
especially those whose businesses are cyclical, have traded to levels reflective
of a recessionary environment. I believe the U.S. economy will be able to avoid
a recession next year, and think there is value in this part of the high yield
market.
Can you talk about some of your success stories and the factors that contributed
to the performance of the Fund?
The best performing portion of the portfolio this past year was "BB" rated
bonds. They posted a positive return of 5%, while the "B" and "CCC" rated
portions showed returns of -1% to -13%. The media sector also stood above the
crowd. This sector represents 11% of the Fund, and consists of companies in the
cable TV, radio and television broadcasting and publishing industries. These
industries are somewhat defensive because their businesses are non-cyclical and
based entirely in the United States. One profitable investment was Allbritton
Communications. The company operates eight ABC network-affiliated television
stations in various parts of the country. Its bonds, which are rated B3/B- and
carry a coupon of 9.75%, posted a total return of 11.75%. Another position that
contributed was Century Communications. This company owns and operates 72 cable
television systems in 25 states and Puerto Rico. Its bonds, which are rated
Ba3/BB- and carry a coupon of 8.75%, appreciated in price by 3.25 points and
returned 12.0%. These two examples, unfortunately, were the exception rather
than the rule, as most high yield bonds declined in value over the course of the
year.
/s/ David G. Carroll
David G. Carroll
PORTFOLIO MANAGER
Credit Quality
--------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. BB.................... 26% 24%
. B..................... 66% 73%
. CCC................... 8% 2%
. Non-Rated Bonds....... N/A 1%
--------------------------------
......Total 100% 100%
Average Quality: B+
Average Maturity: 7.9 years
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
Comcast Cellular Holdings, Inc..... 1.65% 0.96%
Coupon Rate: 9.500%
Maturity Date: 5/1/2007
CSC Holdings, Inc.................. 1.54% N/A
Coupon Rate: 7.875%
Maturity Date: 2/15/2018
Tenet Healthcare, Inc.............. 1.22% 0.96%
Coupon Rate: 8.125%
Maturity Date: 12/1/2008
ICN Pharmaceuticals, Inc........... 1.18% 0.49%
Coupon Rate: 9.250%
Maturity Date: 8/15/2005
Smithfield Foods Inc............... 1.17% 0.91%
Coupon Rate: 7.625%
Maturity Date: 2/15/2008
</TABLE>
October 30, 1998 17
<PAGE>
[PHOTO APPEARS HERE]
Duane A. McAllister
The AAL Municipal Bond Fund
Your investment performance has remained fairly steady even through the market
volatility we have experienced lately. Can you explain how you have been able to
accomplish this?
With all of the turmoil in the global financial markets over the last several
months, the municipal market has had its share of volatility as well. In spite
of the short-term swings, municipal yields continued to decline over the last
six months, but not nearly as much as comparable-maturity Treasury issues. Yet,
the seemingly moderate pace of the decline in municipal yields provided stable
and quite positive total return figures for our shareholders. The stability of
credit spreads in the municipal market and the intermediate effective average
maturity of the Fund also provided some stability to returns. The good news
going forward is that in spite of the recent appreciation in prices, new
investors are able to buy into the municipal market at its cheapest valuation
level relative to the Treasury market since 1986.
The Federal Reserve has lowered interest rates recently and has discussed
further reductions. With interest rates declining does an investment in
municipal bonds still make sense?
Absolutely. The time to be concerned about investing in a bond fund is when
interest rates are rising and bond prices are falling. Just the opposite seems
likely on the near-term horizon. With the U.S. economy beginning to slow down,
the Federal Reserve has begun to lower short-term rates to prevent the slowdown
from becoming a recession. In addition, inflation remains very low. In this
environment, a bond investment can make a lot of sense as part of an overall
investment plan. And with the
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($21,334)
Value of Shares Initially Purchased ($11,267)
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
- -----------------------------------------------------
07/16/87 9,596.929 - 9,596.93
07/31/87 9,510.557 9.67 9,520.23
08/31/87 9,462.572 9.63 9,472.20
09/30/87 9,030.710 9.19 9,039.90
10/31/87 8,963.532 116.44 9,079.97
11/30/87 9,222.649 119.81 9,342.46
12/31/87 9,251.440 210.66 9,462.10
01/31/88 9,644.914 219.62 9,864.54
02/29/88 9,702.495 220.93 9,923.43
03/31/88 9,328.215 348.92 9,677.14
04/30/88 9,366.603 350.36 9,716.96
05/31/88 9,385.797 351.07 9,736.87
06/30/88 9,366.603 487.46 9,854.06
07/29/88 9,395.393 488.96 9,884.35
08/31/88 9,357.006 486.96 9,843.96
09/30/88 9,366.603 639.74 10,006.34
10/31/88 9,443.378 644.98 10,088.36
11/30/88 9,318.618 636.46 9,955.08
12/31/88 9,366.603 796.95 10,163.56
01/31/89 9,414.587 801.04 10,215.62
02/28/89 9,289.827 790.42 10,080.25
03/31/89 9,222.649 944.87 10,167.52
04/30/89 9,347.409 957.66 10,305.06
05/31/89 9,500.960 973.39 10,474.35
06/30/89 9,558.541 1,140.47 10,699.01
07/31/89 9,606.526 1,146.19 10,752.72
08/31/89 9,491.363 1,132.45 10,623.82
09/29/89 9,414.587 1,282.52 10,697.11
10/31/89 9,481.766 1,291.68 10,773.44
11/30/89 9,548.944 1,300.83 10,849.77
12/06/89 9,558.541 1,307.61 10,866.15
12/29/89 9,558.541 1,470.96 11,029.50
01/31/90 9,433.781 1,451.76 10,885.55
02/28/90 9,481.766 1,459.15 10,940.91
03/30/90 9,424.184 1,619.26 11,043.45
04/30/90 9,309.021 1,599.48 10,908.50
05/31/90 9,452.975 1,624.21 11,077.19
06/29/90 9,500.960 1,806.04 11,306.99
07/31/90 9,577.735 1,820.63 11,398.36
08/31/90 9,347.409 1,776.85 11,124.26
09/28/90 9,318.618 1,945.60 11,264.22
10/31/90 9,414.587 1,965.64 11,380.23
11/30/90 9,568.138 1,997.70 11,565.84
12/27/90 9,558.541 2,000.21 11,558.75
12/31/90 9,558.541 2,183.06 11,741.60
01/31/91 9,606.526 2,194.02 11,800.54
02/28/91 9,654.511 2,204.98 11,859.49
03/29/91 9,644.914 2,377.01 12,021.92
04/30/91 9,721.689 2,395.93 12,117.62
05/31/91 9,740.883 2,400.66 12,141.54
06/28/91 9,664.107 2,565.83 12,229.94
07/31/91 9,750.480 2,588.76 12,339.24
08/30/91 9,808.061 2,604.05 12,412.11
09/30/91 9,875.240 2,809.82 12,685.06
10/31/91 9,923.225 2,823.48 12,746.70
11/30/91 9,884.837 2,812.56 12,697.39
12/27/91 10,000.000 2,850.01 12,850.01
12/31/91 10,028.791 3,043.94 13,072.73
01/31/92 10,000.000 3,035.20 13,035.20
02/28/92 9,942.418 3,017.72 12,960.14
03/31/92 9,894.434 3,186.11 13,080.55
04/30/92 9,942.418 3,201.57 13,143.98
05/29/92 10,019.194 3,226.29 13,245.48
06/30/92 10,124.760 3,443.59 13,568.35
07/31/92 10,460.653 3,557.84 14,018.49
08/31/92 10,249.520 3,486.03 13,735.55
09/30/92 10,220.729 3,663.96 13,884.69
10/30/92 10,038.388 3,598.60 13,636.98
11/30/92 10,220.729 3,663.96 13,884.69
12/31/92 10,287.908 3,689.31 13,977.22
12/31/92 10,287.908 3,874.04 14,161.94
01/29/93 10,355.086 3,899.33 14,254.42
02/26/93 10,623.800 4,000.52 14,624.32
03/31/93 10,508.637 4,143.01 14,651.65
04/30/93 10,547.025 4,158.15 14,705.17
05/28/93 10,547.025 4,158.15 14,705.17
06/30/93 10,662.188 4,389.28 15,051.47
07/30/93 10,633.397 4,377.43 15,010.82
08/31/93 10,786.948 4,440.64 15,227.59
09/30/93 10,882.917 4,665.17 15,548.09
10/29/93 10,892.514 4,669.29 15,561.80
11/30/93 10,729.367 4,599.35 15,328.72
12/31/93 10,882.917 4,692.50 15,575.42
12/31/93 10,882.917 4,876.50 15,759.42
01/31/94 10,959.693 4,910.90 15,870.60
02/28/94 10,652.591 4,773.30 15,425.89
03/31/94 10,182.342 4,747.16 14,929.50
04/29/94 10,134.357 4,724.79 14,859.14
05/31/94 10,153.551 4,733.73 14,887.29
06/30/94 10,076.775 4,883.28 14,960.06
07/29/94 10,211.132 4,948.39 15,159.53
08/31/94 10,201.536 4,943.74 15,145.28
09/30/94 9,990.403 5,027.00 15,017.40
10/31/94 9,788.868 4,925.59 14,714.45
11/30/94 9,558.541 4,809.69 14,368.23
12/30/94 9,712.092 5,071.20 14,783.29
12/30/94 9,712.092 5,151.39 14,863.48
01/31/95 9,904.031 5,253.20 15,157.23
02/28/95 10,191.939 5,405.91 15,597.85
03/31/95 10,239.923 5,627.44 15,867.37
04/28/95 10,259.117 5,637.99 15,897.11
05/31/95 10,508.637 5,775.12 16,283.75
06/30/95 10,383.877 5,903.27 16,287.15
07/31/95 10,403.071 5,976.97 16,380.04
08/31/95 10,460.653 6,073.60 16,534.25
09/29/95 10,479.846 6,147.32 16,627.17
10/31/95 10,633.397 6,305.28 16,938.67
11/30/95 10,834.933 6,491.43 17,326.37
12/28/95 10,854.127 6,626.17 17,480.29
12/29/95 10,873.321 6,701.31 17,574.63
01/31/96 10,873.321 6,775.13 17,648.45
02/29/96 10,777.351 6,782.44 17,559.80
03/29/96 10,575.816 6,719.21 17,295.03
04/30/96 10,470.250 6,723.92 17,194.17
05/31/96 10,441.459 6,773.19 17,214.65
06/28/96 10,508.637 6,879.20 17,387.84
07/31/96 10,566.219 6,988.79 17,555.01
08/30/96 10,499.040 7,011.94 17,510.98
09/30/96 10,662.188 7,192.04 17,854.23
10/31/96 10,748.560 7,319.48 18,068.04
11/29/96 10,959.693 7,532.76 18,492.46
12/30/96 10,710.173 7,479.37 18,189.55
12/30/96 10,710.173 7,658.69 18,368.86
12/31/96 10,652.591 7,693.28 18,345.87
01/31/97 10,595.010 7,723.79 18,318.80
02/28/97 10,662.188 7,845.27 18,507.45
03/31/97 10,431.862 7,748.68 18,180.54
04/30/97 10,479.846 7,856.46 18,336.30
05/30/97 10,614.203 8,026.98 18,641.19
06/30/97 10,700.576 8,168.92 18,869.50
07/31/97 11,055.662 8,512.36 19,568.02
08/29/97 10,834.933 8,410.93 19,245.86
09/30/97 10,969.290 8,595.79 19,565.08
10/31/97 10,998.081 8,691.55 19,689.63
11/28/97 11,036.468 8,790.43 19,826.90
12/15/97 11,046.065 8,919.99 19,966.05
12/15/97 11,046.065 9,027.13 20,073.19
12/31/97 11,094.050 9,148.30 20,242.35
01/30/98 11,180.422 9,292.02 20,472.44
02/27/98 11,113.244 9,312.23 20,425.47
03/31/98 11,055.662 9,341.87 20,397.54
04/30/98 10,940.499 9,321.04 20,261.54
05/29/98 11,122.841 9,548.77 20,671.61
06/30/98 11,122.841 9,631.29 20,754.13
07/31/98 11,084.453 9,675.57 20,760.02
08/31/98 11,247.601 9,896.57 21,144.17
09/30/98 11,381.958 10,093.30 21,475.26
10/30/98 11,266.795 10,067.64 21,334.43
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year From Inception
to Date*** 1-Year 5-Year 10-Year Inception Date
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales charge)............5.40% 8.35% 6.44% 7.72% 7.33% 7/16/87
Class A** (with sales charge).............1.19% 4.00% 5.58% 7.28% 6.94% 7/16/87
- --------------------------------------------------------------------------------------------------------
Class B (without CDSC)....................4.62% 7.42% N/A N/A 8.19% 1/8/97
Class B** (with CDSC).....................0.38% 3.42% N/A N/A 6.10% 1/8/97
- --------------------------------------------------------------------------------------------------------
Institutional****.........................5.60% N/A N/A N/A 6.41% 12/29/97
- --------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge).............1.86% 5.34% 5.81% 7.49% 7.05%
Class B** (with CDSC).....................0.29% 4.73% N/A N/A 6.81%
Institutional****.........................6.27% N/A N/A N/A 8.04%
</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.
**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%, declining 1% each year during the first five years
and then converting to Class A shares after the fifth year.
***Periods less than one year are not annualized.
****Institutional shares have no sales charge.
18 The AAL Mutual Funds Semi-Annual Report
<PAGE>
attractive valuation of municipals today, for moderate to higher tax-bracket
investors, the municipal market may be a very good investment selection.
Can you give an example of a municipal bond that best explains what you look for
in an investment?
Rather than point to a specific security, I'd rather describe the
characteristics I look for in every bond I consider for the Fund. I call them
the three "Ss", and they are: security, structure and salability. For security,
I want to be comfortable with the credit. It doesn't mean every bond has to have
a "AAA" credit rating, but am I comfortable with the stability of the credit
support for the bond? Ideally, I'd like to find a bond that has either a stable
or improving credit pattern. If the credit profile improves as I own it, then
hopefully the improvement is reflected in its price as well. Structure refers to
several factors such as coupon, call date and final maturity. The focus here is
to find the right combination of securities with these varying features that,
when put together, allow the Fund to perform well in nearly any interest rate
environment. And finally, salability refers to the liquidity of the bond. Is
there a market for the bond if I decide it should be sold? Some bonds are more
liquid than others. For the less liquid issues, there should be adequate
compensation in the form of additional yield so that, ideally, I'm indifferent
between two given securities. Every bond currently held in the Fund meets the
three "S" test, in my opinion, and I'm looking literally everyday for ways to
improve upon those we own in order to enhance performance.
/s/ Duane A. McAllister
Duane A. McAllister
Portfolio Manager
Credit Quality
--------------
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- -------
<S> <C> <C>
. AAA............................... 42% 47%
. AA................................ 25% 28%
. A................................. 14% 11%
. BBB............................... 19% 14%
--------------------------------
Total 100% 100%
</TABLE>
Average Quality: AA
Average Maturity: 18.4 years
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 10/30/98 4/30/98
- -------- -------- -------
<S> <C> <C>
Metropolitan Pier and Exposition Center,
Illinois Revenue Bonds............................ 2.62% 2.73%
Coupon Rate: 7.000% Maturity Date: 7/1/2026
Washington State Public Power Supply
System Revenue Bonds.............................. 2.22% 2.30%
Coupon Rate: 6.000% Maturity Date: 7/1/2007
Kitsap County Washington Conservatory
Housing Authority Revenue Bonds................... 2.01% 2.14%
Coupon Rate: 5.600% Maturity Date: 12/1/2028
Foothill/Eastern CA............................... 1.92% 1.99%
Coupon Rate: 5.000% Maturity Date: 1/1/2035
New York State Thruway Authority
Revenue Bonds..................................... 1.91% 1.99%
Coupon Rate: 5.600% Maturity Date: 4/1/2005
</TABLE>
[MAP APPEARS HERE]
<TABLE>
<CAPTION>
Fund Allocations
- ----------------
<S> <C>
Alaska 1.0%
Iowa 0.4%
South Dakota 0.1%
Wisconsin 1.2%
New York 11.9%
Missouri 2.5%
Illinois 14.2%
Washington 9.3%
Michigan 3.9%
Ohio 0.9%
Oregon 1.0%
Indiana 1.8%
Montana 0.8%
Vermont 0.3%
Wyoming 2.3%
Massachusetts 0.3%
Idaho 0.2%
Pennsylvania 2.8%
Utah 1.2%
Kentucky 0.1%
Colorado 2.8%
California 17.4%
Kansas 1.2%
Virginia 1.3%
Arizona 1.3%
Nevada 0.6%
North Carolina 1.1%
South Carolina 0.4%
New Mexico 0.5%
Georgia 2.8%
Texas 8.6%
Louisiana 0.3%
Hawaii 0.5%
Florida 3.7%
Oklahoma 0.1%
Mississippi 0.6%
</TABLE>
October 30,1998 19
<PAGE>
[PHOTO APPEARS HERE]
MICHAEL R. HILT
The AAL Bond Fund
With long-term interest rates so low, why should I invest in this Fund as
opposed to The AAL Money Market Fund?
It is important to understand that The AAL Bond Fund and The AAL Money Market
invest in different types of interest bearing securities. Investments in the
Bond Fund portfolio have a longer maturity than investments in the Money Market
portfolio. The Money Market Fund invests in short-term commercial paper with an
average maturity of about 60 days. As a result, the yield on the Money Market
investments will decline much faster in the face of decreasing interest rates
due to its much shorter average time to maturity, as compared to the Bond Fund.
Over the long haul, The AAL Bond Fund should have a consistently higher yield
than The AAL Money Market Fund.
How have the financial crises in Russia and Brazil affected the U.S. bond
market?
These crises have increased investors' expectations about risk and have created
a "flight to quality" trend where riskier assets are sold and less-risky assets
such as U.S. Treasury bonds are bought. This trend has caused less risky assets
to outperform riskier assets.
How do you position the portfolio for maximum returns given the current
volatility in bond market?
The mortgage backed securities market is the area in our investment grade bond
universe that is most susceptible to poor performance when interest rates are
volatile. We have been avoiding mortgage backed securities, such as "Ginnie
Maes," for some time
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($21,916)
Value of Shares Initially Purchased ($9,798)
Initial Net Asset Value ($9,600)
The AAL Bond Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- -----------------------------------------------------------
07/16/87 9,596.929 - 9,596.93
07/31/87 9,462.572 16.98 9,479.55
08/31/87 9,280.230 61.08 9,341.31
09/30/87 8,963.532 114.87 9,078.40
10/31/87 9,222.649 180.56 9,403.21
11/30/87 9,213.052 245.56 9,458.61
12/30/87 9,241.843 312.40 9,554.24
01/31/88 9,500.960 384.57 9,885.53
02/29/88 9,510.557 462.22 9,972.78
03/31/88 9,357.006 529.43 9,886.43
04/30/88 9,251.440 591.57 9,843.01
05/31/88 9,069.098 652.81 9,721.91
06/01/88 9,107.486 712.15 9,819.64
06/30/88 9,193.858 787.07 9,980.93
07/29/88 9,097.889 844.52 9,942.41
08/31/88 9,040.307 914.44 9,954.75
09/30/88 9,165.067 999.97 10,165.04
10/31/88 9,251.440 1,084.93 10,336.37
11/30/88 9,078.695 1,138.84 10,217.53
12/30/88 9,001.919 1,203.32 10,205.24
01/31/89 9,049.904 1,288.98 10,338.88
02/28/89 8,915.547 1,342.34 10,257.88
03/31/89 8,857.965 1,413.14 10,271.10
04/30/89 8,953.935 1,500.65 10,454.58
05/31/89 9,107.486 1,610.66 10,718.14
06/30/89 9,261.036 1,715.15 10,976.19
07/31/89 9,347.409 1,809.60 11,157.01
08/31/89 9,174.664 1,854.09 11,028.76
09/29/89 9,165.067 1,925.77 11,090.84
10/31/89 9,289.827 2,032.60 11,322.42
11/30/89 9,299.424 2,110.90 11,410.32
12/31/89 9,280.230 2,179.52 11,459.75
01/31/90 9,117.083 2,223.97 11,341.06
02/28/90 9,097.889 2,294.47 11,392.36
03/30/90 9,040.307 2,357.24 11,397.54
04/30/90 8,877.159 2,396.81 11,273.97
05/31/90 9,059.501 2,527.29 11,586.79
06/29/90 9,126.679 2,622.72 11,749.40
07/31/90 9,193.858 2,725.98 11,919.84
08/31/90 9,030.710 2,758.80 11,789.51
09/28/90 9,040.307 2,836.79 11,877.10
10/31/90 9,088.292 2,939.28 12,027.57
11/30/90 9,203.455 3,058.07 12,261.52
12/31/90 9,270.633 3,162.44 12,433.08
01/31/91 9,318.618 3,260.79 12,579.40
02/28/91 9,328.215 3,344.94 12,673.15
03/29/91 9,328.215 3,419.76 12,747.97
04/30/91 9,366.603 3,523.90 12,890.50
05/31/91 9,366.603 3,606.95 12,973.55
06/28/91 9,299.424 3,657.84 12,957.26
07/31/91 9,347.409 3,766.41 13,113.82
08/30/91 9,481.766 3,901.84 13,383.61
09/30/91 9,616.123 4,041.78 13,657.90
10/31/91 9,692.898 4,156.38 13,849.28
11/30/91 9,712.092 4,243.32 13,955.41
12/27/91 9,894.434 4,341.10 14,235.53
12/31/91 9,942.418 4,446.89 14,389.31
01/31/92 9,712.092 4,425.71 14,137.81
02/28/92 9,712.092 4,503.46 14,215.56
03/31/92 9,606.526 4,539.01 14,145.54
04/30/92 9,616.123 4,623.87 14,240.00
05/29/92 9,731.286 4,756.47 14,487.75
06/30/92 9,846.449 4,898.70 14,745.15
07/31/92 10,019.194 5,066.18 15,085.37
08/31/92 10,057.582 5,167.22 15,224.80
09/30/92 10,143.954 5,292.34 15,436.29
10/30/92 9,932.821 5,259.78 15,192.60
11/30/92 9,827.255 5,286.69 15,113.95
12/31/92 9,894.434 5,377.85 15,272.29
12/31/92 9,894.434 5,459.12 15,353.55
01/29/93 10,038.388 5,613.56 15,651.95
02/28/93 10,163.148 5,763.41 15,926.56
03/31/93 10,153.551 5,844.43 15,997.99
04/30/93 10,182.342 5,939.36 16,121.70
05/28/93 10,115.163 5,972.38 16,087.54
06/30/93 10,249.520 6,138.20 16,387.72
07/01/93 10,182.342 6,210.46 16,392.81
07/30/93 10,163.148 6,274.47 16,437.62
08/31/93 10,307.102 6,443.93 16,751.03
09/30/93 10,287.908 6,508.62 16,796.52
10/29/93 10,278.311 6,573.42 16,851.73
11/30/93 10,086.372 6,531.63 16,618.01
12/31/93 9,913.628 6,715.13 16,628.76
12/31/93 9,913.628 6,790.87 16,704.50
01/31/94 10,000.000 6,925.59 16,925.59
02/28/94 9,731.286 6,814.98 16,546.27
03/31/94 9,443.378 6,690.41 16,133.79
04/29/94 9,299.424 6,661.97 15,961.40
05/31/94 9,241.843 6,696.90 15,938.74
06/30/94 9,184.261 6,730.00 15,914.26
07/29/94 9,280.230 6,874.21 16,154.44
08/31/94 9,251.440 6,937.05 16,188.49
09/30/94 9,078.695 6,887.10 15,965.79
10/31/94 9,011.516 6,916.16 15,927.68
11/30/94 8,915.547 6,926.17 15,841.72
12/30/94 8,905.950 7,001.76 15,907.71
12/30/94 8,905.950 7,005.87 15,911.83
01/31/95 9,001.919 7,171.22 16,173.14
02/28/95 9,136.276 7,363.93 16,500.21
03/31/95 9,155.470 7,467.68 16,623.15
04/28/95 9,222.649 7,605.49 16,828.14
05/31/95 9,462.572 7,897.62 17,360.19
06/30/95 9,472.169 7,993.34 17,465.51
07/31/95 9,385.797 8,006.26 17,392.05
08/31/95 9,443.378 8,139.32 17,582.70
09/29/95 9,481.766 8,256.39 17,738.15
10/31/95 9,548.944 8,405.84 17,954.78
11/30/95 9,644.914 8,577.96 18,222.87
12/29/95 9,731.286 8,736.13 18,467.42
01/31/96 9,731.286 8,829.89 18,561.17
02/29/96 9,472.169 8,681.05 18,153.22
03/29/96 9,347.409 8,648.36 17,995.77
04/30/96 9,232.246 8,635.65 17,867.89
05/31/96 9,155.470 8,653.28 17,808.75
06/28/96 9,213.052 8,793.14 18,006.20
07/31/96 9,193.858 8,875.01 18,068.87
08/30/96 9,136.276 8,911.66 18,047.94
09/30/96 9,232.246 9,102.17 18,334.42
10/31/96 9,385.797 9,347.94 18,733.74
11/29/96 9,500.960 9,555.04 19,056.00
12/31/96 9,366.603 9,517.80 18,884.40
01/31/97 9,357.006 9,603.58 18,960.59
02/28/97 9,328.215 9,669.08 18,997.30
03/31/97 9,193.858 9,626.79 18,820.64
04/30/97 9,241.843 9,774.81 19,016.65
05/30/97 9,270.633 9,899.56 19,170.20
06/30/97 9,337.812 10,072.15 19,409.97
07/31/97 9,529.750 10,378.06 19,907.81
08/29/97 9,414.587 10,345.52 19,760.10
09/30/97 9,500.960 10,542.36 20,043.32
10/31/97 9,587.332 10,737.74 20,325.07
11/28/97 9,568.138 10,805.84 20,373.98
12/31/97 9,616.123 10,964.12 20,580.24
01/30/98 9,683.301 11,134.55 20,817.86
02/27/98 9,606.526 11,138.25 20,744.78
03/31/98 9,596.929 11,222.79 20,819.72
04/30/98 9,587.332 11,304.25 20,891.58
05/29/98 9,635.317 11,447.56 21,082.88
06/30/98 9,664.107 11,582.35 21,246.45
07/31/98 9,625.720 11,630.76 21,256.48
08/31/98 9,750.480 11,875.24 21,625.72
09/30/98 9,923.225 12,178.07 22,101.29
10/30/98 9,798.464 12,117.58 21,916.04
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year From Inception
to Date*** 1-Year 5-Year 10-Year Inception Date
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales
charge)....................... 6.49% 7.83% 5.405% 7.81% 7.58% 7/16/87
Class A** (with sales
charge)....................... 2.21% 3.48% 4.53% 7.37% 7.19% 7/16/87
- ---------------------------------------------------------------------------------------------
Class B (without CDSC)........ 5.46% 6.64% N/A N/A 7.83% 1/8/97
Class B** (with CDSC)......... 0.46% 2.64% N/A N/A 5.74% 1/8/97
- ---------------------------------------------------------------------------------------------
Institutional****............. 6.84% N/A N/A N/A 7.72% 12/29/97
- ---------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (with sales charge) 3.07% 5.88% 4.78% 7.63% 7.33%
Class B** (with CDSC)......... 1.43% 5.06% N/A N/A 5.74%
Institutional****............. 7.70% N/A N/A N/A 9.77%
</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.
**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%, declining 1% each year during the first five years
and then converting to Class A shares after the fifth year.
***Periods less than one year are not annualized.
****Institutional shares have no sales charges.
20 The AAL Mutual Funds Semi-Annual Report
<PAGE>
because they underperform Treasury securities when interest rates are volatile.
For example, if interest rates fall, homeowners may pay off their mortgages
early, which affects the yield on Ginnie Mae certificates. We try to invest in
securities that provide consistently high levels of current income.
What are some of the factors that go into your portfolio selections?
We always think about the return we are getting for the risk we are taking. The
return is measured by absolute yield for a U.S. Treasury security and for other
bonds it is measured by the yield spread relative to U.S. Treasury securities
having similar interest rate sensitivity. The risk is in the form of prepayment
risk for mortgage backed securities and credit risk for corporate bonds. We also
think about the exposure to various risks of the whole portfolio relative to
other bond mutual funds. We have a high preference for bonds that are easy to
evaluate and easy to trade so that when we think the market is offering
opportunities to add value by selling one security and buying another, we are
able to take advantage of the opportunity.
/s/ Michael R Hilt
- --------------------------
Michael R. Hilt
Portfolio Manager
Credit Quality
[GRAPHIC APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
10/30/98 4/30/98
-------- ------
<S> <C> <C>
. AAA.......................... 76% 64%
. AA........................... 7% 4%
. A............................ 9% 27%
. BBB.......................... 8% 5%
-----------------
Total 100% 100%
</TABLE>
Average Quality: AA+
Average Maturity: 6.74 years
5 Largest Holdings
<TABLE>
<CAPTION>
%of Net Assets
<S> <C> <C>
Security 10/30/98 4/30/98
- -------- -------- -------
Federal National Mortgage Association 17.02% N/A
Coupon Rate: 4.750%
Maturity Date: 11/14/2003
U. S. Treasury Notes 14.08% N/A
Coupon Rate: 11.125%
Maturity Date: 8/15/2003
U. S. Treasury Notes 8.01% N/A
Coupon Rate: 4.500%
Maturity Date: 11/15/2008
U. S. Treasury Notes 6.03% N/A
Coupon Rate: 5.000%
Maturity Date: 11/15/2028
U. S. Treasury Notes 5.84% N/A
Coupon Rate: 4.125%
Maturity Date: 11/15/2003
</TABLE>
Bond Fund
October 30,1988 21
<PAGE>
THE AAL MONEY MARKET FUND
[PHOTO APPEARS HERE]
MICHAEL R. HILT
How do you judge "quality" when investing in short-term commercial paper?
We look for high-quality issuers that will generally provide consistent returns.
We identify these issuers primarily by using the NRSROs (Nationally Recognized
Statistical Rating Organizations) like Moodys and S&P. We also perform
independent analysis of each issuer to determine its credit worthiness. We only
buy securities that are rated in the top tier by at least one of the NRSROOs.
Does the financial crisis in the world's emerging markets have any impact on the
commercial paper market?
Minimally. That is because the top tier commercial paper market is comprised of
only the highest quality issuers. Additionally, because the maturity of the
commercial paper is less than 13 months (our average maturity is only about 60
days) there is little time for a company to experience disastrous results that
would immediately impair the value of the investments.
Currently, interest rates for short-term commercial paper are relatively high
compared to bonds with a longer maturity, what factors would contribute to
decline in interest rates for short-term commercial paper?
There are two primary factors that would contribute to a decline
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[GRAPH APPEARS HERE]
Value of Shares Acquired through Reinvestment
of Dividends and Capital Gains ($17,063)
Value of Shares Initially Purchased ($10,000)
Initial Net Asset Value ($9,600)
The AAL Money Market Fund Class A
Mountain Chart
Value Original Value Div/Cap Total
Date Shares Reinvest Value
- ----------------------------------------------------------
03/10/88 10,000.000 - 10,000.00
03/31/88 10,000.000 39.13 10,039.13
04/30/88 10,000.000 91.40 10,091.40
05/31/88 10,000.000 150.40 10,150.40
06/30/88 10,000.000 208.67 10,208.67
07/29/88 10,000.000 267.92 10,267.92
08/31/88 10,000.000 338.71 10,338.71
09/30/88 10,000.000 403.84 10,403.84
10/31/88 10,000.000 471.27 10,471.27
11/30/88 10,000.000 537.48 10,537.48
12/31/88 10,000.000 608.26 10,608.26
01/31/89 10,000.000 686.66 10,686.66
02/28/89 10,000.000 755.60 10,755.60
03/31/89 10,000.000 834.49 10,834.49
04/28/89 10,000.000 908.64 10,908.64
05/31/89 10,000.000 997.07 10,997.07
06/30/89 10,000.000 1,075.96 11,075.96
07/31/89 10,000.000 1,155.25 11,155.25
08/31/89 10,000.000 1,231.75 11,231.75
09/30/89 10,000.000 1,302.40 11,302.40
10/31/89 10,000.000 1,380.10 11,380.10
11/30/89 10,000.000 1,452.20 11,452.20
12/31/89 10,000.000 1,521.45 11,521.45
01/31/90 10,000.000 1,599.29 11,599.29
02/28/90 10,000.000 1,664.41 11,664.41
03/30/90 10,000.000 1,734.61 11,734.61
04/30/90 10,000.000 1,807.93 11,807.93
05/31/90 10,000.000 1,882.15 11,882.15
06/29/90 10,000.000 1,951.69 11,951.69
07/31/90 10,000.000 2,028.61 12,028.61
08/31/90 10,000.000 2,102.08 12,102.08
09/28/90 10,000.000 2,168.15 12,168.15
10/31/90 10,000.000 2,246.48 12,246.48
11/30/90 10,000.000 2,317.29 12,317.29
12/31/90 10,000.000 2,390.58 12,390.58
01/31/91 10,000.000 2,461.61 12,461.61
02/28/91 10,000.000 2,521.48 12,521.48
03/29/91 10,000.000 2,577.79 12,577.79
04/30/91 10,000.000 2,642.53 12,642.53
05/31/91 10,000.000 2,701.16 12,701.16
06/28/91 10,000.000 2,753.46 12,753.46
07/31/91 10,000.000 2,813.67 12,813.67
08/30/91 10,000.000 2,868.17 12,868.17
09/30/91 10,000.000 2,923.36 12,923.36
10/31/91 10,000.000 2,976.77 12,976.77
11/30/91 10,000.000 3,023.89 13,023.89
12/31/91 10,000.000 3,071.22 13,071.22
01/31/92 10,000.000 3,113.98 13,113.98
02/28/92 10,000.000 3,148.35 13,148.35
03/31/92 10,000.000 3,183.40 13,183.40
04/30/92 10,000.000 3,216.46 13,216.46
05/31/92 10,000.000 3,246.84 13,246.84
06/30/92 10,000.000 3,279.10 13,279.10
07/31/92 10,000.000 3,307.40 13,307.40
08/31/92 10,000.000 3,338.44 13,338.44
09/30/92 10,000.000 3,366.81 13,366.81
10/30/92 10,000.000 3,394.62 13,394.62
11/30/92 10,000.000 3,422.59 13,422.59
12/31/92 10,000.000 3,450.68 13,450.68
01/29/93 10,000.000 3,476.17 13,476.17
02/26/93 10,000.000 3,500.14 13,500.14
03/31/93 10,000.000 3,526.80 13,526.80
04/30/93 10,000.000 3,550.48 13,550.48
05/28/93 10,000.000 3,570.34 13,570.34
06/30/93 10,000.000 3,595.21 13,595.21
07/30/93 10,000.000 3,617.11 13,617.11
08/31/93 10,000.000 3,639.66 13,639.66
09/30/93 10,000.000 3,660.40 13,660.40
10/29/93 10,000.000 3,679.99 13,679.99
11/30/93 10,000.000 3,701.74 13,701.74
12/31/93 10,000.000 3,723.06 13,723.06
01/31/94 10,000.000 3,745.32 13,745.32
02/28/94 10,000.000 3,765.91 13,765.91
03/31/94 10,000.000 3,790.17 13,790.17
04/29/94 10,000.000 3,815.13 13,815.13
05/31/94 10,000.000 3,846.10 13,846.10
06/30/94 10,000.000 3,878.28 13,878.28
07/29/94 10,000.000 3,910.77 13,910.77
08/31/94 10,000.000 3,948.52 13,948.52
09/30/94 10,000.000 3,985.82 13,985.82
10/31/94 10,000.000 4,028.84 14,028.84
11/30/94 10,000.000 4,074.70 14,074.70
12/30/94 10,000.000 4,125.61 14,125.61
01/31/95 10,000.000 4,183.13 14,183.13
02/28/95 10,000.000 4,235.14 14,235.14
03/31/95 10,000.000 4,293.76 14,293.76
04/28/95 10,000.000 4,351.94 14,351.94
05/31/95 10,000.000 4,414.38 14,414.38
06/30/95 10,000.000 4,469.49 14,469.49
07/31/95 10,000.000 4,528.15 14,528.15
08/31/95 10,000.000 4,585.24 14,585.24
09/29/95 10,000.000 4,638.54 14,638.54
10/31/95 10,000.000 4,697.56 14,697.56
11/30/95 10,000.000 4,757.66 14,757.66
12/29/95 10,000.000 4,817.78 14,817.78
01/31/96 10,000.000 4,886.09 14,886.09
02/29/96 10,000.000 4,942.54 14,942.54
03/29/96 10,000.000 4,998.58 14,998.58
04/30/96 10,000.000 5,061.17 15,061.17
05/31/96 10,000.000 5,123.35 15,123.35
06/28/96 10,000.000 5,181.50 15,181.50
07/31/96 10,000.000 5,249.46 15,249.46
08/30/96 10,000.000 5,314.26 15,314.26
09/30/96 10,000.000 5,382.44 15,382.44
10/31/96 10,000.000 5,450.78 15,450.78
11/29/96 10,000.000 5,515.76 15,515.76
12/31/96 10,000.000 5,587.67 15,587.67
01/31/97 10,000.000 5,653.93 15,653.93
02/28/97 10,000.000 5,713.48 15,713.48
03/31/97 10,000.000 5,779.95 15,779.95
04/30/97 10,000.000 5,845.42 15,845.42
05/30/97 10,000.000 5,912.26 15,912.26
06/30/97 10,000.000 5,983.32 15,983.32
07/31/97 10,000.000 6,054.78 16,054.78
08/29/97 10,000.000 6,120.50 16,120.50
09/30/97 10,000.000 6,191.75 16,191.75
10/31/97 10,000.000 6,260.71 16,260.71
11/28/97 10,000.000 6,322.69 16,322.69
12/31/97 10,000.000 6,397.06 16,397.06
01/30/98 10,000.000 6,463.46 16,463.46
02/27/98 10,000.000 6,522.87 16,522.87
03/31/98 10,000.000 6,592.28 16,592.28
04/30/98 10,000.000 6,657.36 16,657.36
05/29/98 10,000.000 6,720.90 16,720.90
06/30/98 10,000.000 6,791.63 16,791.63
07/31/98 10,000.000 6,860.30 16,860.30
08/31/98 10,000.000 6,929.52 16,929.52
09/30/98 10,000.000 6,997.00 16,997.00
10/30/98 10,000.000 7,063.46 17,063.46
Average Annual Total Returns*
October 30, 1998
<TABLE>
<CAPTION>
Year From Inception
to Date*** 1-Year 5-Year 10-Year Inception Date
---------- ------ ------ ------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Class A (without sales
charge).............................. 4.06% 4.94% 4.52% 5.03% 5.15% 3/10/88
- -------------------------------------------------------------------------------------------------------------
Class B (without CDSC)............... 3.20% 3.93% N/A N/A 4.19% 1/8/97
Class B** (with CDSC)................ (1.80)% (0.07)% N/A N/A 2.03% 1/8/97
- -------------------------------------------------------------------------------------------------------------
Institutional****.................... 4.31% N/A N/A N/A 5.17% 12/29/97
- -------------------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 9/30/98
Class A** (without sales
charge).............................. 3.66% 4.97% 4.47% 5.03% 5.15%
Class B** (with CDSC)................ (2.13)% 0.01% N/A N/A 1.93%
Institutional****.................... 3.87% N/A N/A N/A 5.17%
</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.
**Class A shares have no sales charge. Class B performance reflects the maximum
contingent deferred sales charge (CDSC) of 5%, declining 1% each year during the
first five years and then converting to Class A shares after the fifth year.
***Periods less than one year are not annualized.
****Institutional shares have no sales charges.
22 The AAL Mutual Fund Semi-Annual Report
<PAGE>
in interest rates for short-term commercial paper. First, if the economy slows
down there will be less demand for investment capital and interest rates will
subsequently decline. Second, the Federal Reserve Board could reduce short-term
interest rates which will cause a corresponding decline in interest rates for
short-term commercial paper.
What advantages does the Fund offer and how does an investment in the Fund fit
into my overall portfolio allocation?
When allocating assets among different funds, an investor must balance his or
her immediate needs with expectations of long-term growth. The AAL Money Market
Fund is an excellent short-term investment vehicle because it offers stable
principal and relatively high short-term income compared with bank CDs and
savings accounts. However, it is important to remember that the yield on short-
term commercial paper will decline faster in an economic downturn than the yield
on bonds with a longer term to maturity. Also, bonds with a longer maturity
generally offer a higher yield than short-term commercial paper. An investment
in bonds will generally offer better long-term growth than an investment in
commercial paper.
/s/ Michael R. Hilt
MICHAEL R. HILT
PORTFOLIO MANAGER
5 Largest Holdings*
<TABLE>
<CAPTION>
%of Net Assets
Security 10/30/98
- -------- --------
<S> <C>
John Deere Capital Corporation.................................. 4.63%
Coupon Rate: 4.880% - 5.500%
Maturity Date: 11/2/1998 - 3/5/1999
General Electric Capital Corporation............................ 4.61%
Coupon Rate: 4.900% - 5.270%
Maturity Date: 11/10/1998 - 2/23/1999
General Motors Acceptance Corporation........................... 4.58%
Coupon Rate: 4.920% - 5.500%
Maturity Date: 11/9/1998 - 2/22/1999
Toyota Motor Credit Corporation................................. 4.58%
Coupon Rate: 4.960% - 5.480%
Maturity Date: 11/3/1998 - 3/1/1999
CIT Group Holdings, Inc......................................... 4.56%
Coupon Rate: 5.000% - 5.470%
Maturity Date: 11/2/1998 - 2/23/1999
</TABLE>
*The interest rate reflects the discount rate at the time of purchase.
Average Quality: First Tier
Average Maturity: 61 Days
Short-Term Investment Comparison
October 30, 1998
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
The ALL Money Market Fund National Average Bank National Average 6-month
30- Day Yield Money Market Rate/1/ Certificate of Deposit Rate/1/
(Class A shares)
<S> <C> <C>
4.76% 2.39% 4.32%
</TABLE>
/1/ Bank Rate Monitor
October 30, 1998 23
<PAGE>
The AAL Small Cap Stock Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
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.
<TABLE>
<CAPTION>
Shares Common Stocks (95.6%) Market Value
==================================================================================
<S> <C> <C>
Basic Materials (1.3%)
35,000 Cambrex Corporation................................ $ 894,688
37,000 Gibraltar Steel Corporation*....................... 716,875
------------------------------------------
Total Basic Materials 1,611,563
==========================================
Capital Goods (12.2%)
65,000 Anicom, Inc.*...................................... 580,938
49,700 Applied Power, Inc................................. 1,369,856
36,000 Artesyn Technologies, Inc.*........................ 519,750
78,600 BE Aerospace, Inc.*................................ 1,689,900
71,400 General Cable Corporation.......................... 1,410,150
90,000 Integrated Process Equipment Corporation*.......... 804,375
31,100 Oak Industries, Inc.*.............................. 841,644
60,000 Richardson Electronics, Ltd........................ 465,000
10,000 Sanmina Corporation*............................... 410,000
75,000 SLI, Inc.*......................................... 1,256,250
35,000 Superior Services, Inc.*........................... 735,000
43,750 Tetra Tech, Inc.*.................................. 888,672
80,000 Tower Automotive, Inc.*............................ 1,780,000
26,000 Wabash National Corporation........................ 461,500
46,000 World Color Press, Inc.*........................... 1,397,250
------------------------------------------
Total Capital Goods 14,610,285
==========================================
Chemicals (0.3%)
29,700 Tetra Technologies, Inc.*.......................... 358,256
------------------------------------------
Total Chemicals 358,256
==========================================
Communication Services (0.5%)
40,000 IDT Corporation*................................... 665,000
------------------------------------------
Total Communication Services 665,000
==========================================
Consumer Cyclicals (17.2%)
66,400 ABR Information Services, Inc.*................... 1,253,300
50,000 Acxiom Corporation*............................... 1,256,250
105,600 DM Management Company*............................ 1,148,400
25,500 Dollar Tree Stores, Inc.*......................... 983,344
40,000 Dura Automotive Systems, Inc.*.................... 955,000
10,000 Ethan Allen Interiors, Inc........................ 343,750
35,000 Furniture Brands International, Inc.*............. 752,500
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
24 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.6%) Market Value
=================================================================================
<S> <C> <C>
Consumer Cyclicals (17.2%) - continued
43,600 Getty Images, Inc.*................................ $ 536,825
86,800 ITI Technologies, Inc.*............................ 2,506,350
70,000 Lamalie Associates, Inc.*.......................... 542,500
75,000 Lamar Advertising Company*......................... 2,341,402
47,900 NOVA Corporation*.................................. 1,383,112
10,000 O'Reilly Automotive, Inc.*......................... 391,250
67,500 Pier 1 Imports, Inc................................ 624,375
10,700 Restoration Hardware, Inc.*........................ 215,338
15,000 Ross Stores, Inc................................... 487,500
45,000 Sonic Automotive, Inc.*............................ 914,062
28,100 Strattec Security Corporation*..................... 720,063
24,500 The Timberland Company Class A*.................... 980,000
35,000 The Wet Seal, Inc.*................................ 739,375
60,000 Watsco, Inc........................................ 1,016,250
20,000 Williams-Sonoma, Inc.*............................. 545,000
-----------------------------------------
Total Consumer Cyclicals 20,635,946
=========================================
Consumer Staples (4.4%)
42,100 American Tower Corporation*........................ 920,937
49,300 Emmis Communications Corporation*.................. 1,614,575
15,000 Henry Schein, Inc.*................................ 580,312
12,500 Papa John's International, Inc.*................... 474,609
17,200 Safeskin Corporation*.............................. 380,550
79,700 SOS Staffing Services, Inc.*....................... 672,469
25,000 United Natural Foods, Inc.*........................ 696,875
-----------------------------------------
Total Consumer Staples 5,340,327
=========================================
Energy (5.7%)
20,000 Atwood Oceanics, Inc.*............................. 562,500
40,000 Chieftain International, Inc.*..................... 785,000
25,000 Devon Energy Corporation........................... 846,875
75,000 Marine Drilling Companies, Inc.*................... 839,063
60,000 Petroleum Geo-Services ADR*........................ 1,282,500
75,000 Pride International, Inc.*......................... 871,875
30,100 TCA Cable TV, Inc.*................................ 833,394
47,300 Veritas DGC, Inc.*................................. 880,962
-----------------------------------------
Total Energy 6,902,169
=========================================
Financials (15.9%)
137,600 AMRESCO, Inc.*................................... 954,600
77,200 ARM Financial Group, Inc......................... 1,481,275
40,000 Brandywine Realty Trust.......................... 715,000
50,300 CMAC Investment Corporation...................... 2,106,312
65,000 Community First Bankshares, Inc.................. 1,291,875
40,800 E.W. Blanch Holdings, Inc........................ 1,588,650
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 25
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.6%) Market Value
================================================================================
<S> <C> <C>
Financials (15.9%) - Continued
25,000 Executive Risk, Inc................................ $ 1,187,500
30,000 First Industrial Realty Trust, Inc................. 768,750
20,000 FirstMerit Corporation............................. 530,000
45,000 Glenborough Realty Trust, Inc...................... 964,688
60,000 HCC Insurance Holdings, Inc........................ 1,076,250
52,500 Inspire Insurance Solutions, Inc.*................. 1,312,500
40,000 Peoples Heritage Financial Group, Inc.............. 720,000
20,000 Protective Life Corporation........................ 741,250
34,600 TCF Financial Corporation.......................... 815,262
20,000 The FINOVA Group, Inc.............................. 975,000
50,000 Waddell & Reed Financial, Inc...................... 1,046,875
25,000 Westamerica Bancorporation......................... 831,250
----------------------------------------
Total Financials 19,107,037
========================================
Health Care (11.2%)
35,500 AmeriSource Health Corporation*.................... 1,861,531
60,000 BioChem Pharma, Inc.*.............................. 1,301,250
24,300 Biomatrix, Inc.*................................... 1,142,100
25,000 Inhale Therapeutic Systems, Inc.*.................. 656,250
63,600 Interim Services, Inc.*............................ 1,351,500
6,400 Medimmune, Inc.*................................... 430,400
54,900 NCS Healthcare, Inc.*.............................. 967,613
20,000 Pediatrix Medical Group, Inc.*..................... 932,500
32,200 Pharmaceutical Product Development, Inc.*.......... 869,400
68,600 Quorum Health Group, Inc.*......................... 994,700
30,000 Renal Care Group, Inc.*............................ 873,750
37,900 STERIS Corporation*................................ 871,700
27,600 Sunrise Assisted Living, Inc.*..................... 1,188,525
----------------------------------------
Total Health Care 13,441,219
========================================
Technology (18.8%)
35,000 American Management Systems, Inc.*................. 1,074,062
40,000 Analysts International Corporation................. 702,500
42,500 Apex PC Solutions, Inc.*........................... 1,110,312
44,300 Aspect Telecommunications Corporation*............. 670,037
34,400 BroadVision, Inc.*................................. 516,000
30,000 Burr-Brown Corporation*............................ 556,875
50,000 Check Point Software Technologies, Ltd.*........... 1,137,500
25,500 CIBER, Inc.*....................................... 500,438
115,700 Corsair Communications, Inc.*...................... 578,500
20,000 CSG Systems International, Inc.*................... 1,090,000
17,200 HNC Software, Inc.*................................ 578,350
19,100 Hyperion Solutions Corporation*.................... 573,000
60,000 Inso Corporation*.................................. 1,147,500
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
26 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.6%) Market Value
================================================================================
<S> <C> <C>
Technology (18.8%) - Continued
15,000 Lycos, Inc.*..................................... $ 609,375
35,000 National Data Corporation........................ 1,185,625
15,000 Novellus Systems, Inc.*.......................... 582,188
23,200 Platinum Technology, Inc.*....................... 381,350
20,400 PMC-Sierra, Inc.*................................ 915,450
36,500 Quadramed Corporation*........................... 748,250
35,000 SportsLine USA, Inc.*............................ 492,188
63,000 SPR, Inc.*....................................... 1,134,000
50,000 Synopsys, Inc.*.................................. 2,262,500
35,000 The BISYS Group, Inc.*........................... 1,531,250
21,500 Vitesse Semiconductor Corporation*............... 693,375
43,600 World Access, Inc.*.............................. 931,950
11,700 Xircom, Inc.*.................................... 345,150
35,000 Xylan Corporation*............................... 560,000
----------------------------------------
Total Technology 22,607,725
========================================
Transportation (4.4%)
60,000 Allied Holdings, Inc.*........................... 742,500
50,400 Coach USA, Inc.*................................. 1,351,350
25,000 Comair Holdings, Inc............................. 821,875
25,000 SkyWest, Inc..................................... 637,500
55,000 Swift Transportation Company, Inc.*.............. 1,215,154
35,900 U.S. Xpress Enterprises, Inc.*................... 520,550
----------------------------------------
Total Transportation 5,288,929
========================================
Utilities (3.7%)
20,000 CILCORP, Inc..................................... 1,030,000
15,000 KN Energy, Inc................................... 745,312
45,800 MDU Resources Group, Inc......................... 1,216,563
38,200 Sierra Pacific Resources......................... 1,391,912
----------------------------------------
Total Utilities 4,383,787
========================================
----------------------------------------
Total Common Stocks
(cost basis $125,265,528) 114,952,243
========================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 27
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Short-Term Obligations (4.7%) Interest Rate ** Maturity Date Market Value
==================================================================================================================
<S> <C> <C> <C> <C>
$ 1,707,000 Exxon Asset Management Company..... 5.37% 11/4/98 $1,705,981
2,170,000 Ford Motor Credit Corporation...... 5.07% 11/2/98 2,169,389
1,719,000 Merrill Lynch & Company Inc........ 5.23% 11/5/98 1,717,751
---------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $5,593,121) 5,593,121
===================================================
---------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(amortized cost basis $130,858,649) $120,545,364
====================================================
---------------------------------------------------
Other Assets, Less Liabilities (-0.3%) (412,469)
===================================================
---------------------------------------------------
NET ASSETS (100.0%) $120,132,895
===================================================
</TABLE>
* Non-income producing security
** The interest rate reflects the discount rate at the date of purchase
The accompanying notes to the financial statements are an integral part of this
schedule.
28 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Mid Cap Stock Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
Investment Objective:
The Fund seeks long-term capital growth by investing in a diversified portfolio
of common stocks, and securities convertible into common stocks, of mid-sized
companies.
<TABLE>
<CAPTION>
Shares Common Stocks (94.5%) Market Value
=================================================================================================================
<S> <C> <C>
Basic Materials (4.1%)
119,600 Cytec Industries, Inc.*.............................................. $ 2,870,400
129,200 Minerals Technologies, Inc........................................... 5,886,675
195,800 Rayonier, Inc........................................................ 7,672,913
54,500 Vulcan Materials Company............................................. 6,465,062
------------------------------------------
Total Basic Materials 22,895,050
==========================================
Capital Goods (7.0%)
234,700 Applied Power, Inc.................................................. 6,468,919
463,400 Artesyn Technologies, Inc.*......................................... 6,690,338
295,700 BE Aerospace, Inc.*................................................. 6,357,550
165,000 Hussmann International, Inc......................................... 2,567,812
300,000 SLI, Inc.*.......................................................... 5,025,000
341,400 Tower Automotive, Inc.*............................................. 7,596,150
179,400 US Filter Corporation*.............................................. 3,801,037
------------------------------------------
Total Capital Goods 38,506,806
==========================================
Communication Services (1.3%)
65,000 Century Telephone Enterprises, Inc. 3,692,812
210,000 IDT Corporation* 3,491,250
------------------------------------------
Total Communication Services 7,184,062
==========================================
Consumer Cyclicals (15.9%)
547,000 ABR Information Services, Inc.*...................................... 10,324,625
75,000 Best Buy Company, Inc.*.............................................. 3,600,000
155,800 Cinncinnati Bell, Inc................................................ 4,041,063
331,100 Equity Corporation International*.................................... 8,215,419
264,600 Furniture Brands International, Inc.*................................ 5,688,900
110,000 Hannaford Bros. Co................................................... 4,819,375
148,400 Harley-Davidson, Inc................................................. 5,750,500
166,500 Intimate Brands, Inc................................................. 3,725,437
281,025 Outdoor Systems, Inc.*............................................... 6,200,114
315,000 Republic Services, Inc.*............................................. 6,890,625
245,000 Saks, Inc.*.......................................................... 5,573,750
150,900 Shopko Stores, Inc.*................................................. 4,725,056
105,100 The Timberland Company Class A*...................................... 4,204,000
139,900 Tommy Hilfiger Corporation*.......................................... 6,496,606
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 29
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (94.5%) Market Value
================================================================================================================
<S> <C> <C>
Consumer Cyclicals (15.9%) - Continued
140,000 United Stationers, Inc.*........................................... $ 3,710,000
250,600 Watsco, Inc........................................................ 4,244,538
-----------------------------------------------
Total Consumer Cyclicals 88,210,008
===============================================
Consumer Staples (7.2%)
137,400 Clear Channel Communications, Inc.*................................. 6,260,287
164,200 Comcast Corporation................................................. 8,107,375
218,600 Flowers Industries, Inc............................................. 4,481,300
200,100 Keebler Foods Company*.............................................. 5,752,875
106,600 Outback Steakhouse, Inc.*........................................... 3,691,025
284,800 Rite Aid Corporation................................................ 11,303,000
-----------------------------------------------
Total Consumer Staples 39,595,862
===============================================
Energy (5.9%)
217,500 BJ Services Company*................................................ 4,445,156
145,000 Diamond Offshore Drilling, Inc...................................... 4,449,688
280,000 Marine Drilling Companies, Inc.*.................................... 3,132,500
220,000 Noble Drilling Corporation*......................................... 3,781,250
218,790 Ocean Energy, Inc.*................................................. 2,734,875
172,200 Petroleum Geo-Services ADR*......................................... 3,680,775
170,600 Tosco Corporation................................................... 4,787,463
147,000 Transocean Offshore, Inc............................................ 5,429,812
-----------------------------------------------
Total Energy 32,441,519
===============================================
Financials (14.2%)
70,000 AFLAC, Inc.......................................................... 2,668,750
135,000 AMRESCO, INC.*...................................................... 936,563
104,400 CCB Financial Corporation........................................... 5,494,050
130,000 CMAC Investment Corporation......................................... 5,443,750
285,000 Community First Bankshares, Inc..................................... 5,664,375
406,650 Concord EFS, Inc.*.................................................. 11,589,525
205,000 Dime Bancorp, Inc................................................... 4,881,562
172,500 First Industrial Realty Trust, Inc.................................. 4,420,313
231,000 HCC Insurance Holdings, Inc......................................... 4,143,562
70,000 Marshall & Isley Corporation........................................ 3,412,500
11,300 M&T Bank Corporation................................................ 5,633,050
263,000 Peoples Heritage Financial Group, Inc............................... 4,734,000
140,000 SouthTrust Corporation.............................................. 5,110,000
202,200 Starwood Hotels and Resorts......................................... 5,724,787
70,000 The FINOVA Group Inc................................................ 3,412,500
165,000 Westamerica Bancorporation.......................................... 5,486,250
-----------------------------------------------
Total Financials 78,755,537
===============================================
Health Care (10.8%)
80,000 Artetial Vascular Engineering, Inc.*................................ 2,460,000
202,000 BioChem Pharma, Inc.*............................................... 4,380,875
120,000 DePuy, Inc.*........................................................ 4,200,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
30 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (94.5%) Market Value
===========================================================================================================
<S> <C> <C>
Health Care (10.8%) - continued
287,400 Dura Pharmaceuticals, Inc.*............................................ $ 3,466,763
90,000 Forest Laboratories, Inc.*............................................. 3,763,125
128,300 Genzyme Corporation*................................................... 5,396,619
251,800 HEALTHSOUTH Corporation*............................................... 3,053,075
65,000 McKesson Corporation................................................... 5,005,000
195,000 Mylan Laboratories, Inc................................................ 6,715,312
255,000 Quorum Health Group, Inc.*............................................. 3,697,500
35,000 Sofamor Danek Group, Inc.*............................................. 3,556,875
215,000 STERIS Corporation*.................................................... 4,945,000
210,000 Sunrise Assisted Living, Inc.*......................................... 9,043,125
--------------------------------------
Total Health Care 59,683,269
======================================
Technology (14.1%)
185,700 ADC Telecommunications, Inc.*.......................................... 4,271,100
129,000 America Online, Inc.................................................... 16,391,063
269,900 Analog Devices, Inc.*.................................................. 5,364,262
220,000 Apex PC Solutions, Inc.*............................................... 5,747,500
72,500 Compuware Corporation*................................................. 3,928,594
134,900 Fiserv, Inc.*.......................................................... 6,272,850
51,300 Lexmark International Group, Inc.*..................................... 3,587,794
262,700 LSI Logic Corporation*................................................. 3,973,338
181,511 Network Associates, Inc.*.............................................. 7,714,217
105,000 PMC - Sierra, Inc.*.................................................... 4,711,875
185,000 Synopsys, Inc.*........................................................ 8,371,250
90,000 Teradyne, Inc.*........................................................ 2,925,000
208,000 World Access, Inc.*.................................................... 4,446,000
--------------------------------------
Total Technology 77,704,843
======================================
Transportation (3.6%)
165,000 Atlantic Southeast Airlines, Inc....................................... 5,919,375
321,800 Coach USA, Inc.*....................................................... 8,628,263
211,200 Royal Caribbean Cruises Ltd............................................ 5,608,450
--------------------------------------
Total Transportation 20,156,088
======================================
Utilities (10.4%)
170,300 AES Corporation........................................................ 6,971,656
250,300 Allegheny Energy, Inc.................................................. 7,696,725
157,800 CMS Energy Corporation................................................. 6,953,063
219,600 El Paso Energy Company................................................. 7,782,075
302,150 MDU Resources Group, Inc............................................... 8,025,859
147,800 New Century Energies, Inc.............................................. 7,140,587
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 31
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (94.5%) Market Value
====================================================================================================================
<S> <C> <C>
Utilities (10.4%) - continued
185,000 NIPSCO Industries, Inc............................................... $ 5,538,438
170,300 Pinnacle West Capital Corporation.................................... 7,461,269
----------------------------------------------------
Total Utilities 57,569,672
====================================================
Total Common Stocks
(cost basis $518,357,744) 522,702,716
====================================================
Par Value Short-Term Obligations (4.9%) Interest Rate ** Maturity Date
====================================================================================================================
$ 5,000,000 Exxon Asset Management........................5.070% 11/3/98 4,997,888
1,345,000 Exxon Asset Management........................5.470% 11/4/98 1,344,197
5,407,000 Ford Motor Credit Corporation.................5.070% 11/2/98 5,405,477
5,098,000 Merrill Lynch & Company, Inc..................5.230% 11/5/98 5,094,297
10,000,000 Merrill Lynch & Company, Inc..................5.120% 11/17/98 9,975,822
----------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $26,817,681) 26,817,681
====================================================
----------------------------------------------------
TOTAL INVESTMENTS (99.4%)
(amortized cost basis $545,175,425) $549,520,397
====================================================
----------------------------------------------------
Other Assets, less Liabilities (0.6%) 3,213,829
====================================================
----------------------------------------------------
NET ASSETS (100.0%) $552,734,226
====================================================
</TABLE>
* Non-income producing security
** The interest rate reflects the discount rate at the date of purchase
The accompanying notes to the financial statements are an integral part of this
schedule.
32 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
Investment Objective:
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of foreign stocks.
<TABLE>
<CAPTION>
Shares Common Stocks (89.4%) Industry Market Value
=========================================================================================================
<S> <C> <C>
Australia (0.9%)
128,500 Australia & New Zealand Banking Group Limited...... Banking & Finance $ 731,658
147,600 Coca-Cola Amatil Ltd............................... Food & Beverage 542,547
------------------------------------------
Total Australia 1,274,205
==========================================
Belgium (1.4%)
27,000 KBC Bancassurance.................................. Banking & Finance 1,885,155
------------------------------------------
Total Belgium 1,885,155
==========================================
Canada (1.4%)
56,300 BCE Inc............................................ Technology 1,903,478
------------------------------------------
Total Canada 1,903,478
==========================================
France (11.0%)
13,640 Group Danone....................................... Food & Beverage 3,605,881
4,183 Groupe NSC......................................... Capital Goods 493,065
51,200 Renault SA......................................... Automotive 2,188,310
23,660 Suez Lyonnaise des Eaux............................ Utilities 4,236,557
29,500 Valeo SA........................................... Automotive 2,553,538
9,810 Vivendi............................................ Utilities 2,240,298
------------------------------------------
Total France 15,317,649
==========================================
Germany (3.0%)
20,310 Daimler-Benz AG.................................... Automotive 1,600,420
26,450 Mannesmann AG...................................... Telecommunications 2,561,790
------------------------------------------
Total Germany 4,162,210
==========================================
Hungary (0.4%)
18,400 Gedeon Richter..................................... Drugs 605,688
------------------------------------------
Total Hungary 605,688
==========================================
Italy (9.1%)
1,164,200 Banca Di Roma*..................................... Banking & Finance 2,032,481
60,000 Banca Popolare di Bergamo Credito Varesino SpA..... Banking & Finance 1,226,956
289,700 Mediaset SpA....................................... Media 1,836,487
601,300 Telecom Italia SpA................................. Technology 4,349,530
594,300 Unicredito Italiano................................ Banking & Finance 3,192,428
------------------------------------------
Total Italy 12,637,882
==========================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 33
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (89.4%) Industry Market Value
=====================================================================================================
<S> <C> <C> <C>
Japan (14.4%)
118,000 Denso Corporation............................. Automotive $ 2,222,756
42,000 Ito-Yokado Company, Ltd....................... Retail Stores 2,450,945
126,000 Matsushita Electric Industrial Company, Ltd... Consumer Electronics 1,850,103
20,000 Murata Manufacturing Co., Ltd................. Electronics 674,525
370 Nippon Telegraph & Telephone.................. Technology 2,895,822
140 NTT Mobile Communication Network, Inc......... Technology 5,058,077
22,000 Rohm Company Ltd.............................. Electronics 1,944,622
9,000 Sony Corporation.............................. Consumer Electronics 571,544
72,000 Takeda Chemical Industries.................... Health Care 2,341,785
--------------------------------------------
Total Japan 20,010,179
============================================
Mexico (1.1%)
28,000 Telefonos de Mexico SA ADR.................... Telecommunications 1,478,750
--------------------------------------------
Total Mexico 1,478,750
============================================
Netherlands (7.0%)
29,883 Laurus NV..................................... Retail Stores 752,035
7,000 Philips Electronics N.V....................... Electronics 372,564
7,000 Philips Electronics NV ADR.................... Electronics 384,125
90,060 Royal Kpn Nv.................................. Technology 3,500,940
42,690 Vendex Nv..................................... Retail Stores 1,085,765
103,430 Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit................................ Publishing/Printing 3,577,628
--------------------------------------------
Total Netherlands 9,673,057
============================================
New Zealand (1.5%)
1,090,000 Telecom Corporation of New Zealand............ Technology 2,123,676
--------------------------------------------
Total New Zealand 2,123,676
============================================
Portugal (1.6%)
46,000 Portugal Telecom.............................. Technology 2,181,316
--------------------------------------------
Total Portugal 2,181,316
============================================
Singapore (0.1%)
4,000 Times Publishing, Ltd......................... Media 5,994
--------------------------------------------
Total Singapore 5,994
============================================
Spain (5.3%)
174,500 Argentaria SA................................. Banking & Finance 3,790,099
78,900 Telefonica de Espana.......................... Technology 3,555,976
--------------------------------------------
Total Spain 7,346,075
============================================
Sweden (1.4%)
28,889 Hennes & Mauritz AB........................... Retail Stores 2,032,667
--------------------------------------------
Total Sweden 2,032,667
============================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
34 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (89.4%) Industry Market Value
==========================================================================================================================
<S> <C> <C> <C>
Switzerland (5.6%)
1,090 Nestle SA................................... Consumer Products $ 2,318,464
1,390 Novartis.................................... Health Care 2,504,874
250 Roche Holding AG............................ Drugs 2,917,282
------------------------------------------------------------
Total Switzerland 7,740,620
============================================================
Thailand (0.4%)
100,000 Oriental Hotel PCL.......................... Real Estate 538,866
------------------------------------------------------------
Total Thailand 538,866
============================================================
United Kingdom (22.1%)
91,450 Allied Zurich plc*.......................... Financial Services 1,093,540
162,950 B.A.T. Industries plc....................... Tobacco 1,472,308
619,500 British Aerospace........................... Manufacturing 4,611,753
272,800 Bristish Sky Broadcasting Plc............... Broadcasting/Publishing 2,224,981
295,600 Diageo plc.................................. Beverages/Spirits 3,193,133
160,900 Glaxo Wellcome plc.......................... Drugs 5,001,347
170,200 Imperial Chemical Industries plc............ Chemicals 1,529,263
774,800 LucasVarity plc............................. Manufacturing 2,647,114
73,300 Railtrack Group plc......................... Utilities 1,970,298
424,200 Somerfield plc.............................. Retail Stores 2,728,066
309,400 Vodafone Group plc.......................... Technology 4,145,369
------------------------------------------------------------
Total United Kingdom 30,617,172
============================================================
United States (1.7%)
61,000 Gucci Group................................. Retail Stores 2,325,625
------------------------------------------------------------
Total United States 2,325,625
============================================================
------------------------------------------------------------
Total Common Stocks
(cost basis $115,886,814) 123,860,264
============================================================
Par Value Long-Term Fixed-Income Obligations (0.9%) Currency
====================================================================================
Bonds and Notes
500,000 Air Canada Variable Rate Perpetual Notes
4.625% 3/29/2049........................... Deutsche Mark 160,014
Convertible Bonds
11,250 Immobiliere Hoteliere 5.000% 1/1/2001...... French Franc 293,539
U.S. Dollar Convertible Bonds
525,000 Cheil Jedang Corporation 3.000% 12/31/2006. U.S. Dollar 614,204
250,000 Medya International, Ltd. 10.00% 6/28/2001. U.S. Dollar 162,500
------------------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $1,455,389) 1,230,257
============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 35
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Par Value Commercial Paper (10.3%) Interest Rate ** Maturity Date Market Value
===========================================================================================================
<S> <C> <C> <C> <C>
$4,131,000 McDonald's Corporation.............. 5.000% 11/3/98 $4,129,279
4,409,000 Raytheon Inc........................ 6.050% 11/2/98 4,407,518
5,803,000 Wal-Mart Stores, Inc................ 5.000% 11/2/98 5,801,388
--------------------------------------------------------
Total Commercial Paper
(amortized cost basis $14,338,185) 14,338,185
--------------------------------------------------------
--------------------------------------------------------
TOTAL INVESTMENTS (100.6%)
(amortized cost basis $131,680,388) 139,428,706
--------------------------------------------------------
--------------------------------------------------------
Other Assets, less Liabilities (-0.6%) (865,598)
--------------------------------------------------------
--------------------------------------------------------
NET ASSETS (100.0%) $138,563,108
--------------------------------------------------------
</TABLE>
* Non-income producing security
** The interest rate reflects the discount rate at the date of purchase
The accompanying notes to the financial statements are an integral part of this
schedule.
36 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Capital Growth Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
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.
<TABLE>
<CAPTION>
Shares Common Stocks (97.8%) Market Value
========================================================================================================
<S> <C> <C>
Basic Materials (0.5%)
162,500 Eastman Chemical Company................................ $ 9,546,875
105,400 Praxair, Inc. .......................................... 4,242,350
----------------------------------------------------
Total Basic Materials 13,789,225
====================================================
Capital Goods (7.8%)
163,700 Avery Dennison Corporation.............................. 6,783,319
129,900 Caterpillar, Inc........................................ 5,845,500
218,500 Cordant Technologies, Inc............................... 8,890,219
258,000 Deere & Company......................................... 9,126,750
1,133,500 General Electric Company................................ 99,181,250
617,400 Herman Miller, Inc...................................... 13,621,387
152,300 Honeywell, Inc.......................................... 12,164,963
536,000 Illinois Tool Works, Inc................................ 34,371,000
151,600 Owens Illinois, Inc.*................................... 4,633,275
98,300 PACCAR, Inc............................................. 4,288,337
217,600 The Boeing Company...................................... 8,160,000
203,100 United Technologies Corporation......................... 19,345,275
----------------------------------------------------
Total Capital Goods 226,411,275
====================================================
Communication Services (6.4%)
661,200 Ameritech Corporation................................... 35,663,475
671,100 Bell Atlantic Corporation............................... 35,652,188
300,000 MCI Worldcom, Inc....................................... 16,575,000
1,721,349 MediaOne Group, Inc.*................................... 72,834,579
231,200 Mediaone Group, Inc. OATIO Premium Income Exchangeable
Securities 6.250% 8/15/2001............................. 12,455,900
131,000 Sprint Corporation...................................... 10,054,250
46,975 US West, Inc............................................ 2,695,191
----------------------------------------------------
Total Communication Services 185,930,583
====================================================
Consumer Cyclicals (6.2%)
207,700 AutoZone, Inc.*......................................... 5,465,106
142,060 Aztec Technology Partners, Inc.*........................ 772,451
349,400 Costco Companies, Inc.*................................. 19,828,450
325,000 Family Dollar Stores, Inc............................... 5,890,625
329,800 Gannett Company, Inc.................................... 20,406,375
672,700 Harley-Davidson, Inc.................................... 26,067,125
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 37
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (97.8%) Market Value
========================================================================================================
<S> <C> <C>
Consumer Cyclicals (6.2%) - Continued
71,030 Navigant International, Inc.*........................... $ 408,423
813,000 Pier 1 Imports, Inc..................................... 7,520,250
971,700 Ross Stores, Inc........................................ 31,580,250
78,933 School Specialty, Inc.*................................. 1,243,195
615,800 Service Corporation International....................... 21,937,875
433,600 The New York Times Company Class A...................... 12,249,200
106,700 The Times Mirror Company................................ 5,915,181
518,500 Tiffany and Company..................................... 16,754,031
177,576 U.S. Office Products Company*........................... 1,365,116
94,740 Workflow Management, Inc.*.............................. 544,755
----------------------------------------------------
Total Consumer Cyclicals 177,948,408
====================================================
Consumer Staples (23.8%)
433,800 Alberto-Culver Company.................................. 11,522,813
360,900 Bestfoods............................................... 19,669,050
1,504,000 Comcast Corporation..................................... 74,260,000
45,150 Corn Products International, Inc........................ 1,286,775
1,505,700 Cox Communications, Inc. Class A*....................... 82,625,288
109,200 Dean Foods Company...................................... 5,118,750
623,000 General Mills, Inc...................................... 45,790,500
590,300 General Nutrition Companies, Inc.*...................... 8,596,244
572,300 Gillette Company........................................ 25,717,731
677,800 PepsiCo, Inc............................................ 22,875,750
1,667,600 Philip Morris Companies, Inc............................ 85,256,050
709,600 Procter & Gamble Company................................ 63,065,700
539,700 Safeway, Inc.*.......................................... 25,804,406
218,300 TCI Satellite Entertainment, Inc.*...................... 354,737
1,632,612 TCI Ventures Group*..................................... 30,407,398
1,427,394 Tele-Communications, Inc.*.............................. 60,128,972
600,500 The Walt Disney Company................................. 16,175,969
178,900 Time Warner, Inc........................................ 16,604,156
1,903,700 Walgreen Company........................................ 92,686,394
----------------------------------------------------
Total Consumer Staples 687,946,683
====================================================
Energy (7.2%)
324,800 Baker Hughes, Inc....................................... 7,165,900
316,600 British Petroleum Company plc ADR....................... 27,999,313
325,500 CalEnergy Company, Inc.*................................ 8,910,563
225,500 Chevron Corporation..................................... 18,378,250
245,100 Columbia Energy Group................................... 14,185,162
415,300 ENSCO International, Inc................................ 5,580,594
1,086,300 Exxon Corporation....................................... 77,398,875
375,500 Halliburton Company..................................... 13,494,531
727,600 Royal Dutch Petroleum Company ADR....................... 35,834,300
----------------------------------------------------
Total Energy 208,947,488
====================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
38 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (97.8%) Market Value
=============================================================================
<S> <C> <C>
Financials (17.7%)
401,500 American Express Company.......................... $ 35,482,562
1,036,375 American International Group, Inc................. 88,350,969
58,700 Associates First Capital Corporation.............. 4,138,350
864,231 Banc One Corporation.............................. 42,239,290
607,000 BankAmerica Corporation........................... 34,864,562
703,300 CIGNA Corporation................................. 51,296,944
669,400 Citigroup, Inc.................................... 31,503,638
951,800 Conseco, Inc...................................... 33,015,563
684,800 Fannie Mae........................................ 48,492,400
27,300 Hartford Life, Inc................................ 1,262,625
497,400 Household International, Inc...................... 18,186,187
959,793 MBNA Corporation.................................. 21,895,278
529,100 MGIC Investment Corporation....................... 20,634,900
391,900 J.P. Morgan & Company............................. 36,936,575
481,000 National City Corporation......................... 30,934,313
94,500 Northern Trust Corporation........................ 6,969,375
234,340 Starwood Hotels & Resorts......................... 6,634,751
--------------------------------------
Total Financials 512,838,282
======================================
Health Care (12.5%)
180,600 Elan Corporation plc ADR.......................... 12,653,287
543,300 Eli Lilly & Company............................... 43,973,344
637,700 Johnson & Johnson................................. 51,972,550
210,900 Medtronic, Inc.................................... 13,708,500
755,800 Merck & Company, Inc.............................. 102,221,950
751,700 Pfizer, Inc....................................... 80,666,806
328,800 Schering-Plough Corporation....................... 33,825,300
313,600 Wellpoint Health Networks, Inc.*.................. 23,088,800
--------------------------------------
Total Health Care 362,110,537
======================================
Technology (14.2%)
833,500 ADC Telecommunications, Inc.*..................... 19,170,500
207,700 Arrow Electronics, Inc.*.......................... 4,530,456
7,800 At Home Corporation*.............................. 345,150
750,200 Automatic Data Processing, Inc.................... 58,374,938
475,425 Cisco Systems, Inc.*.............................. 29,951,775
436,800 Cognos, Inc.*..................................... 8,763,300
238,075 Computer Associates International, Inc............ 9,374,203
630,866 First Data Corporation............................ 16,717,949
141,500 Gateway 2000, Inc.*............................... 7,897,469
767,700 HBO & Company..................................... 20,152,125
171,600 Hewlett-Packard Company........................... 10,328,175
269,100 Intel Corporation................................. 24,000,356
821,724 Lucent Technologies, Inc.......................... 65,891,993
777,900 Microsoft Corporation*............................ 82,360,163
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 39
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (97.8%) Market Value
====================================================================================================================
<S> <C> <C>
Technology (14.2%) - continued
362,300 National Data Corporation................................................. $ 12,272,912
229,300 Quantum Corporation*...................................................... 4,012,750
295,600 Seagate Technology, Inc.*................................................. 7,796,450
538,600 Tellabs, Inc.*............................................................ 29,623,000
---------------------------------------------------
Total Technology 411,563,664
===================================================
Transportation (1.3%)
86,600 CNF Transportation, Inc. ................................................. 2,619,650
1,593,975 Southwest Airlines Company................................................ 33,772,345
---------------------------------------------------
Total Transportation 36,391,995
===================================================
Utilities (0.2%)
234,300 Entergy Corporation....................................................... 6,736,125
---------------------------------------------------
Total Utilities 6,736,125
===================================================
---------------------------------------------------
Total Common Stocks
(cost basis $1,590,597,585) 2,830,614,265
===================================================
<CAPTION>
Par Value Short-Term Obligations (2.2%) Interest Rate ** Maturity Date
============================================================================================
<S> <C> <C> <C>
$ 7,400,000 Exxon Asset Management........................ 5.070% 11/3/98 7,396,874
9,226,000 Exxon Asset Management........................ 5.370% 11/4/98 9,220,495
10,619,000 Ford Motor Credit Corporation................. 5.100% 11/10/98 10,603,956
16,876,000 General Motors Acceptance Corporation......... 5.070% 11/2/98 16,871,247
20,000,000 Merrill Lynch & Company, Inc. ................ 5.120% 11/17/98 19,951,644
---------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $64,044,216) 64,044,216
===================================================
---------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $1,654,641,801) 2,894,658,481
===================================================
---------------------------------------------------
Other Assets Less Liabilities (0.0%) 40,496
===================================================
---------------------------------------------------
NET ASSETS (100.0%) $2,894,698,977
===================================================
</TABLE>
* Non-income producing security
** The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
40 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Equity Income Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
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.
<TABLE>
<CAPTION>
Shares Common Stocks (91.4%) Market Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Materials (1.4%)
26,000 Crown Cork & Seal Company, Inc................................. $ 828,750
13,000 E. I. du Pont de Nemours and Company........................... 747,500
36,000 Olin Corporation............................................... 996,750
48,000 Oregon Steel Mills, Inc........................................ 588,000
-----------------------------------------------
Total Basic Materials 3,161,000
===============================================
Capital Goods (8.3%)
64,000 AlliedSignal, Inc.............................................. 2,492,000
21,000 Corning, Inc................................................... 762,563
47,000 Emerson Electric Company....................................... 3,102,000
22,000 Fluor Corporation.............................................. 853,875
57,000 Goodrich (B.F.) Company........................................ 2,052,000
17,000 Lockheed Martin Corporation.................................... 1,893,375
20,000 Pitney-Bowes, Inc.............................................. 1,101,250
67,000 Tenneco, Inc................................................... 2,035,124
44,000 The Boeing Company............................................. 1,650,000
31,000 United Technologies Corporation................................ 2,952,750
-----------------------------------------------
Total Capital Goods 18,894,937
===============================================
Communication Services (15.7%)
55,000 Airtouch Communications, Inc.*................................. 3,080,000
69,740 Ameritech Corporation.......................................... 3,761,601
20,746 AT&T Corporation............................................... 1,291,439
56,600 Bell Atlantic Corporation...................................... 3,006,875
90,000 Cable & Wireless plc ADR....................................... 3,026,250
35,000 GTE Corporation................................................ 2,054,063
148,024 MCI Worldcom, Inc.*............................................ 8,178,326
78,800 MediaOne Group, Inc.*.......................................... 3,334,225
70,370 SBC Communications, Inc........................................ 3,259,011
32,945 Telefonica S.A. ADR............................................ 4,511,405
-----------------------------------------------
Total Communication Services 35,503,195
===============================================
Consumer Cyclicals (9.3%)
61,000 AutoZone, Inc.*........................ 1,605,063
31,000 Chrysler Corporation................... 1,491,875
52,000 Cincinnati Bell, Inc................... 1,348,750
48,000 Dayton Hudson Corporation.............. 2,034,000
33,000 Ford Motor Company..................... 1,790,250
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 41
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (91.4%) Market Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Cyclicals (9.3%) - continued
14,000 Gannett Company, Inc.................................................. $ 866,250
52,000 H&R Block, Inc........................................................ 2,330,250
52,000 Lowe's Companies, Inc................................................. 1,751,750
33,000 Sears, Roebuck and Company............................................ 1,482,937
57,000 Service Corporation International..................................... 2,030,625
21,000 The Gap, Inc.......................................................... 1,262,625
54,000 The Home Depot, Inc................................................... 2,349,000
28,000 The New York Times Company Class A.................................... 791,000
---------------------------------------------------
Total Consumer Cyclicals 21,134,375
===================================================
Consumer Staples (7.8%)
39,000 Albertson's, Inc...................................................... 2,166,938
60,000 Avon Products, Inc.................................................... 2,381,250
71,000 Flowers Industries, Inc............................................... 1,455,500
14,000 Hershey Foods Corporation............................................. 949,374
16,000 Quaker Oats Company................................................... 945,000
54,000 Ralston-Ralston Purina Group.......................................... 1,802,250
78,000 Rite Aid Corporation.................................................. 3,095,625
43,000 Sara Lee Corporation.................................................. 2,566,563
42,200 TCI Ventures Group*................................................... 785,975
36,900 Tele-Communications, Inc.*............................................ 1,554,413
---------------------------------------------------
Total Consumer Staples 17,702,888
===================================================
Energy (10.0%)
21,338 British Petroleum Company plc ADR..................................... 1,887,079
44,000 Coastal Corporation................................................... 1,551,000
19,500 Columbia Energy Group................................................. 1,128,562
27,000 Consolidated Natural Gas Company...................................... 1,425,938
76,000 Diamond Offshore Drilling, Inc........................................ 2,332,250
28,000 Exxon Corporation..................................................... 1,995,000
26,000 Mobil Corporation..................................................... 1,967,875
134,000 Noble Drilling Corporation*........................................... 2,303,125
96,000 Questar Corporation................................................... 1,890,000
46,440 R&B Falcon Corporation*............................................... 629,843
33,000 Texaco, Inc........................................................... 1,957,312
72,000 The Williams Companies, Inc........................................... 1,975,500
40,000 Transocean Offshore, Inc.............................................. 1,477,500
---------------------------------------------------
Total Energy 22,520,984
===================================================
Financials (16.0%)
24,455 Associates First Capital Corporation.................................. 1,724,078
31,900 Banc One Corporation.................................................. 1,559,113
44,000 Chase Manhattan Corporation........................................... 2,499,750
7,500 Citigroup, Inc........................................................ 352,969
63,000 Conseco, Inc.......................................................... 2,185,313
40,000 Crescent Real Estate Equities Company................................. 1,002,500
17,000 Crestar Financial Corporation......................................... 1,119,875
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
42 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (9.4%) Market Value
================================================================================================================
<S> <C> <C>
Financials (16.0%) - continued
52,000 Duke Realty Investments, Inc................................................ $ 1,241,500
25,000 Equity Residential Properties Trust......................................... 1,050,000
27,000 EXEL, Ltd................................................................... 2,063,813
31,000 Fannie Mae.................................................................. 2,195,188
35,000 First Industrial Realty Trust, Inc.......................................... 896,875
30,000 First Union Corporation..................................................... 1,740,000
24,000 Fleet Financial Group, Inc.................................................. 958,500
41,000 Freddie Mac................................................................. 2,357,500
30,000 Mellon Bank Corporation..................................................... 1,803,750
15,000 Mercantile Bancorporation, Inc.............................................. 685,312
23,000 Mercantile Bankshares Corporation........................................... 750,375
13,000 National City Corporation................................................... 836,062
62,000 Patriot American Hospitality, Inc........................................... 550,250
39,000 Simon DeBartolo Group, Inc.................................................. 1,167,563
93,581 Starwood Hotels & Resorts................................................... 2,649,512
25,000 Summit Bancorp.............................................................. 948,437
32,000 The Bank of New York Company, Inc........................................... 1,010,000
53,000 Torchmark Corporation*...................................................... 2,318,750
13,000 Union Planters Corporation.................................................. 603,687
----------------------------------------------------
Total Financials 36,270,672
====================================================
Health Care (8.6%)
95,000 American Home Products Corporation.......................................... 4,631,250
32,000 Elan Corporation plc ADR*................................................... 2,242,000
33,000 Eli Lilly & Company......................................................... 2,670,937
29,000 Johnson & Johnson........................................................... 2,363,500
39,000 Medtronic, Inc.............................................................. 2,535,000
17,000 Merck & Company, Inc........................................................ 2,299,250
36,000 Warner-Lambert Company...................................................... 2,821,500
----------------------------------------------------
Total Health Care 19,563,437
====================================================
Technology (4.6%)
96,000 ADC Telecommunications, Inc.*............................................... 2,208,000
78,000 First Data Corporation...................................................... 2,067,000
19,000 International Business Machines Corporation................................. 2,820,313
41,222 Lucent Technologies, Inc.................................................... 3,305,489
----------------------------------------------------
Total Technology 10,400,802
====================================================
Telecommunications (0.3%)
40,000 CIENA Corporation*.......................................................... 687,500
----------------------------------------------------
Total Telecommunications 687,500
====================================================
Utilities (9.4%)
36,000 Ameren Corporation.......................................................... 1,437,750
47,400 BEC Energy.................................................................. 1,881,188
73,000 Central & Southwest Corporation............................................. 2,030,313
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 43
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (9.4%) Market Value
================================================================================================================
<S> <C> <C>
Utilities (9.4%)-continued
64,000 CMS Energy Corporation...................................................... $ 2,820,000
22,650 Consolidated Edison Company of New York..................................... 1,135,331
48,000 Dominion Resources, Inc..................................................... 2,217,000
65,000 Edison International........................................................ 1,714,375
73,100 New Century Energies, Inc................................................... 3,531,642
56,000 PG&E Corporation............................................................ 1,704,500
67,000 Pinnacle West Capital Corporation........................................... 2,935,438
----------------------------------------------------
Total Utilities 21,407,537
====================================================
====================================================
Total Common Stocks
(cost $176,073,975) 207,247,327
====================================================
Par Value Long-Term Fixed Income Obligations (3.0%)
===============================================================================================
$1,000,000 Potomac Electric Power Bonds 9.000% 4/15/2000.............................. 1,017,377
1,650,000 Texas Utilities Electric Bonds 9.750% 5/1/2021............................. 1,887,844
3,150,000 U.S. Treasury Bonds 6.875% 3/31/2000........................................ 3,256,313
500,000 U.S. Treasury Notes 7.500% 11/15/2016....................................... 623,750
----------------------------------------------------
Total Long-Term Fixed
Income Obligations
(amortized cost $6,711,077) 6,785,284
====================================================
====================================================
Total Long-Term Investments
(amortized cost $182,785,052) 214,032,611
====================================================
Short-Term Obligations (5.0%) Interest Rate ** Maturity Date
============================================================================
5,406,000 Exxon Asset Management 5.370% 11/4/98 5,402,775
3,148,000 Ford Motor Credit Corporation 5.070% 11/2/98 3,147,113
2,794,000 Merrill Lynch & Company, Inc. 5.230% 11/5/98 2,791,970
----------------------------------------------------
Total Short-Term Obligations
(amortized cost $11,341,858) 11,341,858
====================================================
----------------------------------------------------
TOTAL INVESTMENTS (99.4%)
(amortized cost $194,126,910) 225,374,469
----------------------------------------------------
Other Assets Less Liabilities (0.6%) 1,496,071
====================================================
====================================================
TOTAL NET ASSETS: (100.00%) 226,870,540
====================================================
</TABLE>
* Non-income producing security
** The interest rate reflects the discount rate at the date of purchase
The accompanying notes to the financial statements are an integral part of
this schedule.
44 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Balanced Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
Investment Objective
The Fund seeks long-term total return through a balance between income and the
potential for long-term capital growth by investing primarily in a diversified
portfolio of common stocks, bonds and money market instruments.
<TABLE>
<CAPTION>
Shares Common Stocks (54.5%) Market Value
====================================================================================================
<S> <C> <C>
Basic Materials (0.3%)
2,400 Eastman Chemical Company........................... $ 141,000
1,600 Praxair, Inc....................................... 64,400
--------------------------------------------
Total Basic Materials 205,400
============================================
Capital Goods (4.4%)
2,500 Avery Dennison Corporation......................... 103,594
1,900 Caterpillar, Inc................................... 85,500
3,300 Cordant Technologies, Inc.......................... 134,269
3,900 Deere & Company.................................... 137,962
17,000 General Electric Company........................... 1,487,500
9,300 Herman Miller, Inc................................. 205,181
2,300 Honeywell, Inc..................................... 183,713
8,000 Illinois Tool Works, Inc........................... 513,000
2,300 Owens Illinois, Inc.*.............................. 70,294
1,500 PACCAR, Inc........................................ 65,437
3,300 The Boeing Company................................. 123,750
3,000 United Technologies Corporation.................... 285,750
--------------------------------------------
Total Capital Goods 3,395,950
============================================
Communication Services (3.6%)
9,900 Ameritech Corporation.............................. 533,981
10,100 Bell Atlantic Corporation.......................... 536,563
4,500 MCI Worldcom, Inc.................................. 248,625
25,800 MediaOne Group, Inc.*.............................. 1,091,662
3,500 Mediaone Group, Inc. `ATI' Premium Income
Exchangeable Securities 6.250% 8/15/2001........... 188,563
2,000 Sprint Corporation................................. 153,500
690 US West, Inc....................................... 39,589
--------------------------------------------
Total Communication Services 2,792,483
============================================
Consumer Cyclicals (3.4%)
3,100 AutoZone, Inc.*.................................... 81,569
1,074 Aztec Technology Partners, Inc.*................... 5,840
5,200 Costco Companies, Inc.*............................ 295,100
4,900 Family Dollar Stores, Inc.......................... 88,812
4,900 Gannett Company, Inc............................... 303,188
10,100 Harley-Davidson, Inc............................... 391,375
537 Navigant International, Inc.*...................... 3,088
12,150 Pier 1 Imports, Inc................................ 112,387
14,600 Ross Stores, Inc................................... 474,500
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 45
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (54.5%) Market Value
=============================================================================================
<S> <C> <C>
Consumer Cyclicals (3.4%) - continued
597 School Specialty, Inc.*............................ $ 9,403
9,200 Service Corporation International.................. 327,750
6,500 The New York Times Company Class A................. 183,625
1,600 The Times Mirror Company........................... 88,700
7,800 Tiffany and Company................................ 252,037
1,343 U.S. Office Products Company*...................... 10,324
716 Workflow Management, Inc.*......................... 4,117
--------------------------------------------
Total Consumer Cyclicals 2,631,815
============================================
Consumer Staples (13.3%)
6,500 Alberto-Culver Company............................. 172,656
5,400 Bestfoods.......................................... 294,300
22,500 Comcast Corporation................................ 1,110,937
700 Corn Products International, Inc................... 19,950
22,600 Cox Communications, Inc. Class A*.................. 1,240,175
1,600 Dean Foods Company................................. 75,000
9,300 General Mills, Inc................................. 683,550
8,800 General Nutrition Companies, Inc.*................. 128,150
8,600 Gillette Company................................... 386,463
10,200 PepsiCo, Inc....................................... 344,250
25,000 Philip Morris Companies, Inc....................... 1,278,125
10,600 Procter & Gamble Company........................... 942,075
8,100 Safeway, Inc.*..................................... 387,281
3,300 TCI Satellite Entertainment, Inc.*................. 5,362
24,500 TCI Ventures Group*................................ 456,313
21,400 Tele-Communications, Inc.*......................... 901,475
9,000 The Walt Disney Company............................ 242,438
2,700 Time Warner, Inc................................... 250,594
28,500 Walgreen Company................................... 1,387,594
--------------------------------------------
Total Consumer Staples 10,306,688
============================================
Energy (4.0%)
4,900 Baker Hughes, Inc.................................. 108,106
4,700 British Petroleum Company plc ADR.................. 415,656
4,900 CalEnergy Company, Inc.*........................... 134,138
3,400 Chevron Corporation................................ 277,100
3,700 Columbia Energy Group.............................. 214,137
6,200 ENSCO International, Inc........................... 83,313
16,300 Exxon Corporation.................................. 1,161,375
5,600 Halliburton Company................................ 201,250
10,900 Royal Dutch Petroleum Company ADR.................. 536,825
--------------------------------------------
Total Energy 3,131,900
============================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
46 The AAL Mutual Funds Semi-annual Report
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (54.5%) Market Value
====================================================================================================
<S> <C> <C>
Financials (9.9%)
6,000 American Express Company........................... $ 530,250
15,500 American International Group, Inc.................. 1,321,375
900 Associates First Capital Corporation............... 63,450
12,926 Banc One Corporation............................... 631,758
9,100 BankAmerica Corporation............................ 522,681
10,500 CIGNA Corporation.................................. 765,844
10,000 Citigroup, Inc..................................... 470,625
13,900 Conseco, Inc....................................... 482,156
10,300 Fannie Mae......................................... 729,369
400 Hartford Life, Inc................................. 18,500
7,500 Household International, Inc....................... 274,219
5,900 J.P. Morgan & Company.............................. 308,100
14,400 MBNA Corporation................................... 556,075
7,900 MGIC Investment Corporation........................ 328,500
7,200 National City Corporation.......................... 463,050
1,400 Northern Trust Corporation......................... 103,250
3,508 Starwood Hotels & Resorts.......................... 99,320
--------------------------------------------
Total Financials 7,668,522
============================================
Health Care (6.9%)
2,700 Elan Corporation plc ADR........................... 189,169
8,100 Eli Lilly & Company................................ 655,594
9,600 Johnson & Johnson.................................. 782,400
3,200 Medtronic, Inc..................................... 208,000
11,300 Merck & Company, Inc............................... 1,528,325
11,000 Pfizer, Inc........................................ 1,180,437
4,900 Schering-Plough Corporation........................ 504,088
4,700 Wellpoint Health Networks, Inc.*................... 346,037
--------------------------------------------
Total Health Care 5,394,050
============================================
Technology (7.9%)
12,500 ADC Telecommunications, Inc.*...................... 287,500
3,100 Arrow Electronics, Inc.*........................... 67,619
100 At Home Corporation*............................... 4,425
11,200 Automatic Data Processing, Inc..................... 871,500
7,100 Cisco Systems, Inc.*............................... 447,300
6,500 Cognos, Inc.*...................................... 130,406
3,600 Computer Associates International, Inc............. 141,750
9,500 First Data Corporation............................. 251,750
2,100 Gateway 2000, Inc.*................................ 117,206
11,500 HBO & Company...................................... 301,875
2,600 Hewlett-Packard Company............................ 156,488
4,000 Intel Corporation.................................. 356,750
12,300 Lucent Technologies, Inc........................... 986,306
11,700 Microsoft Corporation*............................. 1,238,737
5,400 National Data Corporation.......................... 182,925
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 47
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (54.5%) Market Value
==========================================================================================================================
<S> <C> <C>
Technology (7.9%) - continued
3,400 Quantum Corporation*..................................................... $ 59,500
4,400 Seagate Technology, Inc.*................................................ 116,050
8,100 Tellabs, Inc.*........................................................... 445,500
--------------------------------------------------------
Total Technology 6,163,587
========================================================
Transportation (0.7%)
1,300 CNF Transportation, Inc.................................................. 39,325
23,900 Southwest Airlines Company............................................... 506,381
--------------------------------------------------------
Total Transportation 545,706
========================================================
Utilities (0.1%)
3,500 Entergy Corporation...................................................... 100,625
--------------------------------------------------------
Total Utilities 100,625
========================================================
--------------------------------------------------------
Total Common Stocks
(cost basis $41,054,811) 42,336,726
========================================================
</TABLE>
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-income Obligations (33.2%) Interest Rate Maturity Date
==================================================================================================================
<S> <C> <C> <C> <C>
U.s. Government Obligations (26.7%)
$1,500,000 U.S. Treasury Notes **.......................... 5.000% 11/15/2028 1,485,045
3,000,000 U.S. Treasury Notes **.......................... 4.500 11/15/2008 2,988,060
3,000,000 U.S. Treasury Notes **.......................... 4.125 11/15/2003 2,993,700
2,000,000 U.S. Treasury Notes ***......................... 5.250 8/15/2003 2,086,874
500,000 U.S. Treasury Notes............................. 7.250 8/15/2004 569,531
5,500,000 U.S. Treasury Notes ***......................... 7.500 2/15/2005 6,383,437
1,000,000 U.S. Treasury Notes ***......................... 6.500 5/15/2005 1,112,500
500,000 U.S. Treasury Notes............................. 6.500 8/15/2005 557,813
1,000,000 U.S. Treasury Notes............................. 5.625 5/15/2001 1,033,125
1,500,000 U.S. Treasury Notes............................. 5.375 6/30/2003 1,566,562
--------------------------------------------------------
Total U.S. Government Obligations 20,776,647
========================================================
Asset-backed Securities (0.6%)
500,000 MBNA Master Credit Card Trust 98-J A............ 5.250 10/15/2003 499,297
--------------------------------------------------------
Total Asset-backed Securities 499,297
========================================================
Corporate Obligations (5.9%)
1,000,000 Associates Corporation of North America......... 5.750 11/1/2003 1,003,860
500,000 Federated Department Stores..................... 6.125 9/1/2001 508,942
500,000 Sears Roebuck Acceptance Corporation............ 6.000 3/20/2003 509,481
500,000 Texas Utilities................................. 5.940 10/15/2001 500,780
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
48 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (33.2%) Interest Rate Maturity Date Market Value
===========================================================================================================================
<S> <C> <C> <C> <C>
Corporate Obligations (5.9%) - continued
$ 500,000 Tyco International Group SA................... 6.125 6/15/2001 $ 507,597
500,000 US West Capital Funding, Inc.................. 6.125 7/15/2002 515,584
500,000 Western Resources, Inc........................ 6.250 8/15/2003 518,072
500,000 Worldcom, Inc................................. 6.125 8/15/2001 511,899
-----------------------------------------------------
Total Corporate Obligations 4,576,215
=====================================================
-----------------------------------------------------
Total Long-Term Fixed Income Obligations
(amortized cost basis $25,351,645) 25,852,159
=====================================================
Short-Term Obligations (21.4%) Interest Rate**** Maturity Date
========================================================================================================
3,500,000 Exxon Asset Management..................................... 5.070 11/3/98 3,498,521
1,814,000 Exxon Asset Management..................................... 5.370 11/4/98 1,812,918
3,634,000 Ford Motor Credit Corporation.............................. 5.070 11/2/98 3,632,976
2,000,000 Ford Motor Credit Corporation.............................. 5.100 11/10/98 1,997,167
3,500,000 General Motors Acceptance Corporation...................... 5.150 11/16/98 3,491,989
2,189,000 Merrill Lynch & Company, Inc............................... 5.230 11/5/98 2,187,410
-----------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $16,620,981) 16,620,981
=====================================================
-----------------------------------------------------
Total Investments (109.1%)
(amortized cost basis $83,027,437) 84,809,866
====================================================
-----------------------------------------------------
Other Assets, less Liabilities (-9.1%) (7,071,341)
====================================================
----------------------------------------------------
NET ASSETS (100.0%) $77,738,525
====================================================
</TABLE>
* Non-income producing security
** When issued security
*** Collateral for when issued security
**** The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 49
<PAGE>
The AAL High Yield Bond Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
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>
Par Value Long-Term Fixed-Income Obligations (94.8%) Interest Rate Maturity Date Market Value
================================================================================================================================
<S> <C> <C> <C> <C>
Chemicals (2.4%)
$ 1,250,000 LaRoche Industries, Inc......................... 9.500% 9/15/2007 $1,075,000
1,500,000 PCI Chemicals Canada, Inc....................... 9.250 10/15/2007 1,125,000
1,000,000 Sterling Chemicals, Inc......................... 11.750 8/15/2006 780,000
---------------------------------------------------
Total Chemicals 2,980,000
===================================================
Construction (3.8%)
1,000,000 American Standard, Inc.......................... 7.625 2/15/2010 993,750
1,000,000 Fortress Group, Inc............................. 13.750 5/15/2003 1,032,500
750,000 ISG Resources, Inc.............................. 10.000 4/15/2008 738,750
1,250,000 Omega Cabinets, Ltd............................. 10.500 6/15/2007 1,025,000
1,250,000 Penhall Acquisition Corporation*................ 12.000 8/1/2006 1,062,500
---------------------------------------------------
Total.Construction 4,852,500
===================================================
Consumer Products (3.2%)
1,000,000 Commemorative Brands, Inc....................... 11.000 1/15/2007 700,000
1,000,000 Doskocil Manufacturing Company, Inc............. 10.125 9/15/2007 930,000
1,500,000 Revlon Escrow Corporation....................... 8.625 2/1/2008 1,353,750
1,500,000 Samsonite Corporation........................... 10.750 6/15/2008 1,057,500
----------------------------------------------------
Total Consumer Products 4,041,250
====================================================
Containers (0.8%)
1,000,000 Anchor Glass Containers Corporation............. 11.250 4/1/2005 1,022,500
---------------------------------------------------
Total Containers 1,022,500
===================================================
Energy (7.7%)
1,000,000 Abraxas Petro Corporation....................... 11.500 11/1/2004 770,000
1,000,000 AEI Holdings Company *.......................... 10.000 11/15/2007 900,000
500,000 Amerigas Partners, L.P.......................... 10.125 4/15/2007 493,750
1,000,000 Belco Oil & Gas Corporation..................... 8.875 9/15/2007 860,000
1,250,000 Clark Refining & Marketing Corporation.......... 8.375 11/15/2007 1,156,250
1,750,000 Northern Offshore ASA*.......................... 10.000 5/15/2007 1,137,500
1,000,000 P&L Coal Holding Corporation*................... 8.875 5/15/2008 1,007,500
1,250,000 Pen Holdings, Inc.*............................. 9.875 6/15/2008 1,131,250
1,250,000 Statia Terminals International N.V.............. 11.750 11/15/2003 1,237,500
1,500,000 Transamerican Energy Corporation................ 11.500 6/15/2002 525,000
500,000 XCL Limited *................................... 13.500 5/1/2004 505,000
---------------------------------------------------
Total Energy 9,723,750
===================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
50 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (94.8%) Interest Rate Maturity Date Market Value
================================================================================================================================
<S> <C> <C> <C> <C>
Financials (1.8%)
$ 1,250,000 Arcadia Financial, Ltd.......................... 11.500% 3/15/2007 $812,500
750 Arcadia Financial, Ltd. (Warrants).............. 1,875
1,500,000 Emergent Group, Inc............................. 10.750 9/15/2004 750,000
1,000,000 Imperial Credit Industries...................... 9.875 1/15/2007 700,000
---------------------------------------------------
Total Financials 2,264,375
===================================================
Food & Beverages (3.8%)
258,000 Envirodyne Industries, Inc...................... 12.000 6/15/2000 256,065
750,000 Envirodyne Industries, Inc...................... 10.250 12/1/2001 697,500
1,250,000 Fresh Foods, Inc.*.............................. 10.750 6/1/2006 1,125,000
1,500,000 Smithfield Foods, Inc........................... 7.625 2/15/2008 1,458,750
1,500,000 Specialty Foods Corporation..................... 10.250 8/15/2001 1,230,000
---------------------------------------------------
Total Food & Beverages 4,767,315
===================================================
Food Retailers (2.3%)
1,000,000 DiGiorgio Corporation........................... 10.000 6/15/2007 912,500
1,000,000 Fleming Companies, Inc.......................... 10.625 12/15/2001 1,012,500
1,000,000 Fleming Companies, Inc.......................... 10.500 12/1/2004 930,000
---------------------------------------------------
Total Food Retailers 2,855,000
===================================================
Forest Products & Paper (4.7%)
500,000 American Pad & Paper Company.................... 13.000 11/15/2005 240,000
1,250,000 Four M Corporation.............................. 12.000 6/1/2006 937,500
1,000,000 Gaylord Container Corporation................... 9.375 6/15/2007 760,000
1,500,000 Indah Kiat Finance Mauritius, Ltd............... 10.000 7/1/2007 806,250
1,650,000 Millar Western Forest Products, Ltd.*........... 9.875 5/15/2008 1,023,000
1,000,000 Riverwood International Corporation............. 10.250 4/1/2006 915,000
1,000,000 Sweetheart Cup Company, Inc..................... 9.625 9/1/2000 910,000
500,000 Sweetheart Cup Company, Inc..................... 10.500 9/1/2003 350,000
---------------------------------------------------
Total Forest Products & Paper 5,941,750
===================================================
Health Care (5.0%)
1,500,000 ICN Pharmaceuticals, Inc........................ 9.250 8/15/2005 1,470,000
1,000,000 Mariner Post-acute Network...................... 9.500 11/1/2007 815,000
1,000,000 Oxford Health Plans, Inc.*...................... 11.000 5/15/2005 810,000
1,000,000 Quorum Health Group, Inc........................ 8.750 11/1/2005 950,000
1,500,000 Tenet Healthcare Corporation.................... 8.125 12/1/2008 1,522,500
500 Imagyn (Warrants)............................... 50
1,000,000 Vencor, Inc..................................... 9.875 5/1/2005 780,000
---------------------------------------------------
Total Health Care 6,347,550
===================================================
Leisure (8.7%)
750,000 Booth Creek Ski Holding Company................. 12.500 3/15/2007 697,500
1,000,000 Grand Casinos, Inc.............................. 10.125 12/1/2003 1,050,000
1,250,000 HMH Properties, Inc............................. 7.875 8/1/2005 1,221,875
2,000,000 Livenet, Inc.................................... 9.375 10/15/2004 1,300,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 51
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (94.8%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
Leisure (8.7%) - continued
$ 1,070,000 Prime Hospitality Corporation...................... 9.250% 1/15/2006 $1,070,000
1,250,000 Regal Cinemas, Inc.* .............................. 9.500 6/1/2008 1,221,875
1,500,000 Riviera Holdings Corporation....................... 10.000 8/15/2004 1,252,500
1,000,000 Silver Cinemas, Inc.* ............................. 10.500 4/15/2005 900,000
1,250,000 Trump Atlantic City Associates Funding, Inc. ...... 11.250 5/1/2006 1,085,937
1,193,515 United Artists Theatre Circuit, Inc. .............. 9.300 7/1/2015 1,117,333
-------------------------------------------------------------
Total Leisure 10,917,020
=============================================================
Media (0.8%)
1,000,000 Hollinger International Publishing, Inc. .......... 8.625 3/15/2005 1,045,000
-------------------------------------------------------------
Total Media 1,045,000
=============================================================
Media-Broadcasting (2.4%)
1,000,000 Allbritton Communications, Inc. ................... 9.750 11/30/2007 1,020,000
1,000,000 Chancellor Media Corporation* ..................... 9.000 10/1/2008 1,005,000
1,000,000 Spanish Broadcasting Systems, Inc. ................ 11.000 3/15/2004 1,020,000
-------------------------------------------------------------
Total Media-Broadcasting 3,045,000
=============================================================
Media-Cable (4.6%)
1,000,000 Century Communications Corporation................. 8.750 10/1/2007 1,032,500
2,000,000 CSC Holdings, Inc. ................................ 7.845 2/15/2018 1,925,000
1,000,000 James Cable Partners, L.P. ........................ 10.750 8/15/2004 1,030,000
750,000 Jones Intercable, Inc. ............................ 8.875 4/1/2007 802,500
1,000,000 NTL, Inc. ......................................... 10.000 2/15/2007 960,000
-------------------------------------------------------------
Total Media-Cable 5,750,000
=============================================================
Metals-Diversified (3.1%)
1,500,000 Algoma Steel Corporation........................... 12.375 7/15/2005 1,065,000
1,000,000 AmeriSteel Corporation............................. 8.750 4/15/2008 907,500
1,500,000 Bayou Steel Corporation............................ 9.500 5/15/2008 1,305,000
750,000 Sheffield Steel Corporation........................ 11.500 12/1/2005 562,500
-------------------------------------------------------------
Total Metals-Diversified 3,840,000
=============================================================
Manufacturing-Auto (3.5%)
1,000,000 Breed Technologies* ............................... 9.250 4/15/2008 785,000
1,000,000 Federal Mogul Corporation.......................... 7.875 7/1/2010 977,185
750,000 Talon Automotive Group* ........................... 9.625 5/1/2008 660,000
1,000,000 Trident Automotive PLC............................. 10.000 12/15/2005 1,012,500
1,000,000 Walbro Corporation................................. 9.875 7/15/2005 920,000
-------------------------------------------------------------
Total Manufacturing-Auto 4,354,685
=============================================================
Miscellaneous Manufacturing (10.8%)
1,000,000 AEP Industries, Inc. .............................. 9.875 11/15/2007 937,500
500,000 Day International Group, Inc. ..................... 11.125 6/1/2005 517,500
1,250,000 Derlan Manufacturing, Inc. ........................ 10.000 1/15/2007 1,037,500
1,000,000 Glasstech, Inc. ................................... 12.750 7/1/2004 880,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
52 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (94.8%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
Miscellaneous Manufacturing (10.8%) - continued
$ 1,500,000 High Voltage Engineering Corporation............... 10.500% 8/15/2004 $1,350,000
1,000,000 Impaq Group, Inc.* ................................ 10.125 3/15/2008 950,000
1,250,000 Indesco International, Inc. ....................... 9.750 4/15/2008 1,137,500
1,400,000 Interlake Corporation ............................. 12.125 3/1/2002 1,309,000
1,500,000 Key Components, LLC.* ............................. 10.500 6/1/2008 1,380,000
1,250,000 Morris Materials Handling Corporation.............. 9.500 4/1/2008 850,000
1,750,000 Paragon Corporation Holdings....................... 9.625 4/1/2008 1,203,125
1,000,000 RBX Corporation.................................... 12.000 1/15/2003 783,750
1,250,000 W.R. Carpenter North America, Inc. ................ 10.625 6/15/2007 1,200,000
----------------------------------------------------
Total Miscellaneous-Manufacturing 13,535,875
====================================================
Pollution Control (1.5%)
1,250,000 Envirosource, Inc. ................................ 9.750 6/15/2003 1,012,500
940,000 HydroChem Industrial Services, Inc. ............... 10.375 8/1/2007 857,750
----------------------------------------------------
Total Pollution Control 1,870,250
====================================================
Restaurants/Food Services (3.3%)
1,250,000 American Restaurant Group, Inc. ................... 11.500 2/15/2003 1,125,000
1,250,000 AmeriServe Food Distribution, Inc. ................ 8.875 10/15/2006 1,059,375
1,000,000 Friendly Ice Cream Corporation..................... 10.500 12/1/2007 910,000
1,000,000 Tricon Global...................................... 7.650 5/15/2008 1,040,391
----------------------------------------------------
Total Restaurants/Food Services 4,134,766
====================================================
Retail Stores (3.5%)
750,000 Brown Group, Inc. ................................. 9.500 10/15/2006 757,500
1,000,000 Frank's Nursery & Crafts, Inc. .................... 10.250 3/1/2008 940,000
1,000,000 National Vision Associates......................... 12.750 10/15/2005 1,002,500
750,000 PhillipsVan-Heusen Corporation..................... 9.500 5/1/2008 720,000
1,000,000 The Pantry, Inc. .................................. 10.250 10/15/2007 970,000
----------------------------------------------------
Total Retail Stores 4,390,000
====================================================
Technology (1.0%)
1,500,000.00 Viasystems, Inc. .................................. 9.750 6/1/2007 1,320,000
----------------------------------------------------
Total Technology 1,320,000
====================================================
Telecommunications (6.9%)
750,000 BTI Telecom Corporation............................ 10.500 9/15/2007 570,000
2,000,000 Comcast Cellular Holdings, Inc. ................... 9.500 5/1/2007 2,060,000
1,250,000 Globalstar, L.P. .................................. 11.375 2/15/2004 837,500
1,500,000 Iridium Capital Corporation........................ 11.250 7/15/2005 1,140,000
1,250,000 Level 3 Communications, Inc. ...................... 9.125 5/1/2008 1,175,000
1,000,000 Paging Network, Inc. .............................. 10.000 10/15/2008 975,000
1,000,000 Time Warner Telecommunications, Inc. .............. 9.750 7/15/2008 1,007,500
500 Unifi Communications, Inc. (Warrants)* ............ 50
1,000,000 USA Mobile Communications, Inc. ................... 9.500 2/1/2004 900,000
------------------------------------------------------
Total Telecommunications 8,665,050
======================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 53
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (94.8%) Interest Rate Maturity Date Market Value
==============================================================================================================================
<S> <C> <C> <C> <C>
Textiles (2.1%)
$ 750,000 Anvil Knitwear, Inc. ................................10.875% 3/15/2007 $ 660,000
1,000,000 Ntex, Inc.* .........................................11.500 6/1/2006 960,000
1,250,000 WorldTex, Inc. ...................................... 9.625 12/15/2007 1,042,188
-----------------------------------------------------------
Total Textiles 2,662,188
===========================================================
Transportation (3.7%)
1,000,000 Allied Holdings, Inc. ............................... 8.625 10/1/2007 982,500
1,000,000 Moran Transportation Company.........................11.750 7/15/2004 1,052,500
1,000,000 Panoceanic Bulk Carriers Limited.....................12.000 12/15/2007 630,000
1,250,000 Petro Stopping Center, L.P. .........................10.500 2/1/2007 1,225,000
1,000,000 Transportation Maritima Mexicana S.A. de C.V. .......10.000 11/15/2006 750,000
-----------------------------------------------------------
Total Transportation 4,640,000
===========================================================
Utilities(3.4%)
1,250,000 CalEnergy Company.................................... 7.230 9/15/2020 1,270,125
1,000,000 Cathay International Ltd.* ..........................13.000 4/15/2008 400,000
1,500,000 Energy Corporation of America........................ 9.500 5/15/2007 1,350,000
1,250,000 Niagara Mohawk Power Corporation..................... 7.625 10/1/2005 1,287,281
-----------------------------------------------------------
Total Utilities 4,307,406
===========================================================
Total Long-Term Fixed-Income Obligations
(amortized cost basis $135,764,569) 119,273,230
===========================================================
Short-Term Obligations (2.4%) Interest Rate** Maturity Date
================================================================================
1,570,000 Exxon Asset Management............................... 5.370% 11/4/98 1,569,063
726,000 Ford Motor Credit Corporation........................ 5.070% 11/2/98 725,796
760,000 Merrill Lynch & Company, Inc. ....................... 5.230% 11/5/98 759,448
-----------------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $3,054,307) 3,054,307
===========================================================
-----------------------------------------------------------
Total Investments (97.2%)
(amortized cost basis $138,818,876) 122,327,537
===========================================================
-----------------------------------------------------------
Other Assets, Less Liabilities (2.8%) 3,482,464
===========================================================
-----------------------------------------------------------
NET ASSETS (100%) $125,810,001
===========================================================
</TABLE>
* 144A security
** The interest rate reflects the discount rate at the date of purchase
The accompanying notes to the financial statements are an integral part of this
schedule.
54 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
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>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Alaska (1.0%)
$ 2,130,000 Alaska Industrial Development Authority Power
Revenue Bonds (Snettisham Hydroelectric Project,
1st Series) (AMBAC Insured) (Subject to `AMT')............ 6.000% 1/1/2014 $ 2,345,663
2,260,000 Alaska Industrial Development Authority Power
Revenue Bonds (Snettisham Hydroelectric Project,
1st Series) (AMBAC Insured) (Subject to `AMT')............ 6.000 1/1/2015 2,480,350
-----------------------------------------------------------------------
Total Alaska 4,826,013
=======================================================================
Arizona (1.3%)
1,000,000 Mohave County, Arizona School District No. 1
General Obligation Bonds, Series A (FGIC Insured)......... 5.900 7/1/2015 1,092,500
5,000,000 Salt River, Arizona Project Revenue Bonds**............... 5.500 1/1/2019 5,168,750
450,000 University of Arizona Certificate Participation Bonds
(Administrative and Parking Facility) (MBIA Insured)...... 6.000 7/15/2023 488,250
-----------------------------------------------------------------------
Total Arizona 6,749,500
=======================================================================
California (17.4%)
3,715,000 California Rural Home Mortgage Finance Authority
Single Family Mortgage Revenue Bonds
(GNMA/FNMA/FHLMC Insured) (Subject to `AMT').............. 7.000 9/1/2029 4,188,663
1,780,000 California Rural Home Mortgage Finance
Authority Single Family Mortgage Revenue Bonds,
Series D, Class 5 (GNMA/FNMA/FHLMC Insured)
(Subject to `AMT')........................................ 6.700 5/1/2029 2,031,425
1,015,000 California Rural Home Mortgage Finance Authority
Single Family Mortgage Revenue Bonds, Series A-3
(GNMA/FHLMC/FNMA Insured) (Subject to `AMT').............. 7.250 12/1/2024 1,121,575
4,250,000 California Rural Home Mortgage Finance Authority
Single Family Mortgage Revenue Bonds, Series A
(GNMA/FNMA/FHLMC Insured) (Subject to `AMT').............. 5.750 12/1/2029 4,637,812
2,500,000 California Statewide Communities Development
Authority Apartment Revenue Bonds
(Subject to `AMT')........................................ 5.250 5/15/2025 2,540,625
2,500,000 California Statewide Communities Development
Authority Apartment Revenue Bonds
(Subject to `AMT ')....................................... 4.900 5/15/2025 2,534,375
5,000,000 California Statewide Communities Development
Authority Apartment Revenue Bonds
(Subject to `AMT' )....................................... 5.050 5/15/2025 5,068,750
4,855,000 Contra Costa County, California Home Mortgage
Revenue Bonds (Escrowed to Maturity)...................... 7.500 5/1/2014 6,086,956
2,830,000 Elk Grove, California School District Special Tax
Capital Appreciation (Community Facilities District 1)
(MBIA Insured)*........................................... 0.000 12/1/2012 1,432,688
2,830,000 Elk Grove, California School District Special Tax
Capital Appreciation (Community Facilities District 1)
(MBIA Insured)*........................................... 0.000 12/1/2013 1,344,250
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 55
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
California (17.4%) - continued
$ 2,820,000 Elk Grove, California School District Special Tax
Capital Appreciation (Community Facilities District 1)
(MBIA Insured)*........................................... 0.000% 12/1/2014 $ 1,254,900
1,335,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2005 999,581
5,000,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2009 4,018,750
5,000,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2010 4,062,500
5,000,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2011 4,106,250
605,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2012 504,418
6,000,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2013 5,077,500
7,145,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 0.000 1/1/2014 6,126,838
10,135,000 Foothill/Eastern Transportation California Toll Road
Revenue Bonds, Series A................................... 5.000 1/1/2035 9,729,600
4,200,000 Fresno, California Sewer Revenue Bonds,
Series 1993 A-1 (AMBAC Insured)........................... 6.250 9/1/2014 4,977,000
1,580,000 Kern, California High School District General
Obligation Bonds, Series A (MBIA Insured)................. 6.600 2/1/2020 1,919,700
440,000 Los Angeles, California Wastewater Revenue Bonds,
Series B (MBIA Insured)................................... 5.700 6/1/2023 466,400
4,320,000 Murrieta Valley, California Unified School District
General Obligation Unlimited Bonds (FGIC Insured)......... 0.000 9/1/2013 2,149,200
3,500,000 Orange County, California Transit Authority, Sales Tax
Revenue Bonds, Series 1992-M (MBIA Insured)............... 6.000 2/15/2009 4,003,125
4,200,000 Pomona, California Single Family Housing Revenue
Bonds (Escrowed to Maturity).............................. 7.600 5/1/2023 5,622,750
2,075,000 Pomona, California Unified School District General
Obligation Bonds (MBIA Insured)........................... 6.500 8/1/2019 2,500,375
-------------------------------------------------------------
Total California 88,506,006
=============================================================
Colorado (2.8%)
1,000,000 Colorado Housing Finance Authority Revenue
Bonds..................................................... 6.500 5/1/2016 1,100,000
2,500,000 Colorado Housing Finance Authority Revenue Bonds
(Subject to `AMT')........................................ 6.660 5/1/2028 2,765,625
3,250,000 Colorado Housing Finance Authority (Single Family
Program, Series D-2) (Subject to `AMT')................... 6.350 11/1/2029 3,542,500
1,750,000 Colorado Housing Finance Authority Single Family
Revenue Bonds, Series B................................... 6.550 5/1/2025 1,931,563
800,000 Dawson Ridge Metropolitan District No. 1,
Colorado, Series A........................................ 0.000 10/1/2012 397,000
620,000 Dawson Ridge Metropolitan District No. 1,
Colorado, Series B........................................ 0.000 10/1/2012 307,675
1,000,000 Denver, Colorado Health and Hospital Revenue
Bonds..................................................... 5.150 12/1/2011 1,013,750
1,600,000 Denver, Colorado Health and Hospital Revenue
Bonds..................................................... 5.100 2/1/2010 1,622,000
1,390,000 Highlands Ranch Metro District No. 3, Colorado
General Obligation Unlimited Bonds (ACA Insured).......... 5.125 12/1/2012 1,417,800
-------------------------------------------------------------
Total Colorado 14,097,913
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
56 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Florida (3.7%)
$ 430,000 Enterprise Community Development District,
Florida Water and Sewer Revenue Bonds
(MBIA Insured)............................................. 6.125% 5/1/2024 $ 472,463
2,605,000 Escambia County, Florida Health Facilities Baptist
Hospital and Baptist Manor Revenue Bonds................... 5.125 10/1/2014 2,611,512
505,000 Florida State Board of Education Capital Outlay
General Obligation Unlimited Bonds......................... 6.000 6/1/2022 551,081
290,000 Florida State Board of Education General
Obligation Bonds........................................... 5.875 6/1/2024 312,838
1,000,000 Halifax Hospital Medical Center of Florida
Revenue Bonds (ACA Insured)................................ 5.000 4/1/2011 1,040,000
500,000 Hillsborough County, Florida Aviation Revenue
Bonds (Tampa International Airport, Series B)
(FGIC Insured)............................................. 5.875 10/1/2023 546,250
6,760,000 Jacksonville, Florida Electric Authority Water and
Sewer System Revenue Bonds, Series A....................... 5.625 10/1/2037 6,945,900
1,000,000 Jacksonville, Florida Port Authority Airport
Revenue Refunding Bonds (FGIC Insured)
(Subject to `AMT')......................................... 5.000 10/1/2011 1,016,250
1,670,000 Manatee County, Florida Revenue Bonds
(Subject to `AMT')......................................... 7.200 5/1/2028 1,882,925
2,000,000 Orange County, Florida Health Facilities Authority
Bonds (MBIA Insured)....................................... 6.250 10/1/2018 2,350,000
850,000 Tallahassee, Florida Municipal Electric Revenue
Bonds, Series B............................................ 6.200 10/1/2012 939,250
-------------------------------------------------------------
Total Florida 18,668,469
=============================================================
Georgia (2.8%)
750,000 Atlanta, Georgia General Obligation Unlimited
Bonds, Series A............................................ 6.100 12/1/2019 829,688
565,000 Baldwin County, Georgia Hospital Authority
Revenue Bonds (Oconee Regional Medical Center)............. 5.350 12/1/2014 562,881
880,000 Baldwin County, Georgia Hospital Authority
Revenue Bonds (Oconee Regional Medical Center)............. 5.400 12/1/2015 885,500
4,000,000 Georgia Municipal Electric Authority Power
Revenue Bonds, Series Z (FGIC Insured)..................... 5.500 1/1/2012 4,375,000
3,500,000 Georgia Municipal Electric Authority Revenue
Bonds (MBIA Insured)....................................... 6.500 1/1/2012 4,160,625
2,690,000 Georgia Municipal Electric Authority Special
Obligation Bonds, Series 1993 (AMBAC Insured).............. 7.000 1/1/2008 3,228,000
-------------------------------------------------------------
Total Georgia 14,041,694
=============================================================
Hawaii (0.5%)
2,465,000 Hawaii State Housing Finance and Development
Corporation Single Family Revenue Bonds, Series A
(Subject to `AMT')......................................... 5.200 7/1/2012 2,483,488
-------------------------------------------------------------
Total Hawaii 2,483,488
=============================================================
Idaho (0.2%)
1,175,000 Idaho Health Facilities Authority Hospital
Revenue Bonds (Idaho Elks Rehabilitation
Hospital).................................................. 5.125 7/15/2013 1,158,844
-------------------------------------------------------------
Total Idaho 1,158,844
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 57
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Illinois (14.2%)
$ 5,000,000 Chicago, Illinois Board of Education
(Capital Appreciation - School Reform, Series B-1)
(FGIC Insured).............................................. 0.000% 12/1/2012 $ 2,537,500
7,000,000 Chicago, Illinois Board of Education
(Capital Appreciation - School Reform, Series B-1)
(FGIC Insured).............................................. 0.000 12/1/2013 3,333,750
1,805,000 Chicago, Illinois Board of Education General
Obligation Unlimited Bonds (MBIA Insured)................... 6.000 12/1/2026 1,976,475
325,000 Chicago, Illinois Public Building Authority
Revenue Bonds (Chicago Transit) (AMBAC
Insured).................................................... 6.100 1/1/2007 359,125
5,000,000 Chicago, Illinois Revenue Bonds (O'Hare International
Airport) (MBIA Insured) (Subject to `AMT').................. 5.700 1/1/2008 5,312,500
2,250,000 Chicago, Illinois Single Family Mortgage
Revenue Bonds (Collection Series A-1)
(GNMA/FNMA/FHLMC Insured) (Subject to `AMT')................ 6.450 9/1/2029 2,444,062
2,380,000 Chicago, Illinois Single Family Mortgage
Revenue Bonds (GNMA Collateral)
(Subject to `AMT').......................................... 7.250 9/1/2028 2,698,325
3,000,000 Chicago, Illinois Single Family Mortgage
Revenue Bonds (Series C-1) (Subject to AMT)
(FNMA/GNMA Insured)......................................... 6.300 9/1/2029 3,273,750
2,250,000 Cook County, Illinois General Obligation
Bonds (FGIC Insured)........................................ 5.500 11/15/2022 2,317,500
880,000 Cook County, Illinois School District No. 99 -
Cicero General Obligation Bonds
(FGIC Insured).............................................. 8.500 12/1/2006 1,137,400
1,250,000 Cook County, Illinois School District No. 99 -
Cicero General Obligation Bonds
(FGIC Insured).............................................. 8.500 12/1/2011 1,729,688
1,565,000 Cook County, Illinois School District No. 99 -
Cicero General Obligation Bonds
(FGIC Insured).............................................. 8.500 12/1/2014 2,214,475
1,815,000 Cook County, Illinois School District No. 99 -
Cicero General Obligation Bonds
(FGIC Insured).............................................. 8.500 12/1/2016 2,606,793
765,000 Cook County, Illinois School District No. 100
General Obligation Unlimited Bonds
(Berwyn South) (FSA Insured)................................ 8.200 12/1/2009 1,020,318
2,620,000 Du Page County, Illinois Stormwater Project,
General Obligation Bonds.................................... 5.600 1/1/2021 2,852,525
9,400,000 Hoffman Estates, Illinois Tax Increment
Revenue Bonds............................................... 0.000 5/15/2003 7,719,750
1,065,000 Illinois Development Finance Authority Revenue
Bonds (Capital Appreciation, School District
PG-304) (FSA Insured)....................................... 0.000 1/1/2010 632,344
3,500,00 llinois Educational Facilities Authority Revenue
Bonds-Medium Term (Northwestern University)................. 5.200 1/1/2032 3,683,750
2,225,000 Illinois Educational Facilities Authority Revenue
Bonds-Medium Term (Northwestern University)................. 5.150 11/1/2032 2,336,250
375,000 Illinois Regional Transit Authority Revenue Bonds,
Series A (AMBAC Insured).................................... 6.250 6/1/2024 413,438
3,000,000 Illinois Regional Transit Authority Revenue Bonds,
Series A (FGIC Insured)..................................... 6.700 11/1/2021 3,716,250
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
58 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
Illinois (14.2%) - continued
$ 225,000 Illinois Regional Transit Authority Revenue Bonds
Series 94 D (FGIC Insured)............................. 7.100% 6/1/2025 $ 261,000
250,000 Illinois State General Obligation Unlimited
Bonds (MBIA Insured)................................... 6.000 2/1/2016 270,000
450,000 Illinois State General Obligation Unlimited
Bonds (MBIA Insured)................................... 6.100 2/1/2019 486,563
10,650,000 Metropolitan Pier and Exposition Center,
Illinois Revenue Bonds................................. 7.000 7/1/2026 13,285,875
2,225,000 Winnebago County, Illinois School District
Capital Appreciation General Obligation Unlimited
Bonds (FSA Insured).................................... 0.000 1/1/2012 1,179,250
4,445,000 Winnebago County, Illinois School District
Capital Appreciation General Obligation Unlimited
Bonds (FSA Insured).................................... 0.000 1/1/2013 2,216,943
------------------------------------------------------------
Total Illinois 72,015,599
============================================================
Indiana (1.8%)
1,000,000 Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue Bonds, Series A............... 6.250 11/1/2016 1,073,750
4,550,000 Indiana Transportation Finance Authority Revenue
Bonds (MBIA Insured)................................... 7.250 6/1/2015 5,778,500
2,000,000 Lawrence Township, Indiana Metropolitan School
District General Obligation Bonds...................... 6.875 7/5/2011 2,422,500
------------------------------------------------------------
Total Indiana 9,274,750
============================================================
Iowa (0.4%)
400,000 Keokuk, Iowa Hospital Facility Revenue Refunding
Bonds (Keokuk Area Hospital Project)................... 4.900 12/1/2006 398,500
350,000 Keokuk, Iowa Hospital Facility Revenue Refunding
Bonds (Keokuk Area Hospital Project)................... 5.500 12/1/2009 360,063
1,100,000 Keokuk, Iowa Hospital Facility Revenue Refunding
Bonds (Keokuk Area Hospital Project)................... 5.400 12/1/2015 1,082,125
------------------------------------------------------------
Total Iowa 1,840,688
============================================================
Kansas (1.2%)
1,000,000 Labette County, Kansas Single Family Revenue
Bonds.................................................. 7.650 12/1/2011 1,081,250
2,500,000 Sedgwick and Shawnee Counties, Kansas Single
Family Revenue Bonds (Mortgage Backed
Securities, Program A-1) (GNMA Insured)................ 5.500 12/1/2022 2,706,250
2,000,000 Sedgwick and Shawnee Counties, Kansas Single
Family Revenue Mortgage Bonds, Series A-1
(Subject to "AMT")..................................... 6.950 6/1/2029 2,220,000
------------------------------------------------------------
Total Kansas 6,007,500
============================================================
Kentucky (0.1%)
520,000 Henry County, Kentucky Water District No. 2
Water Revenue Bonds (MBIA Insured)..................... 4.750 1/1/2028 498,550
------------------------------------------------------------
Total Kentucky 498,550
============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 59
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
Louisiana (0.3%)
$ 1,545,000 Jefferson Parish, Louisiana Revenue Bonds
(Subject to "AMT").................................... 5.850% 12/1/2028 $1,593,281
------------------------------------------------------------
Total Louisiana 1,593,281
============================================================
Massachusetts (0.3%)
1,365,000 Massachusetts State Health and Educational
Facilities Authority Revenue Refunding Bonds
(Cape Cod Heathcare Project, Series B)................ 5.250 11/15/2013 1,373,531
------------------------------------------------------------
Total Massachusetts 1,373,531
============================================================
Michigan (3.9%)
1,570,000 Grand Rapids, Michigan Building Authority
General Obligation Limited Bonds...................... 5.000 4/1/2015 1,597,475
1,000,000 Grand Rapids, Michigan Building Authority
General Obligation Limited Bonds...................... 5.000 4/1/2016 1,012,500
145,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 4.300 5/15/2000 144,818
100,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 4.600 5/15/2002 99,625
260,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 4.700 5/15/2004 258,375
175,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 4.800 5/15/2005 173,906
85,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 4.900 5/15/2006 84,469
225,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 5.000 5/15/2007 223,875
1,890,000 Hillsdale, Michigan Hospital Finance Authority
Hospital Revenue Bonds (Hillsdale Community
Health Center)........................................ 5.000 5/15/2013 1,818,444
1,775,000 Michigan Higher Education Facilities Authority
Revenue Bonds (Limited Obligation - Aquinas,
Series C) (GTD Insured)............................... 5.000 5/1/2014 1,763,906
6,600,000 Michigan Public Power Agency Revenue
Refunding Bonds (Belle River Project)
(MBIA Insured)........................................ 5.000 1/1/2019 6,558,750
2,500,000 Michigan State Hospital Finance Authority
Revenue Bonds......................................... 5.300 5/1/2013 2,525,000
2,000,000 Michigan State Strategic Fund Pollution Control
Revenue Bonds (General Motors Corporation) 6.200 9/1/2020 2,195,000
1,375,000 Tawas City, Michigan Hospital Finance Authority
Revenue Refunding Bonds (St. Joseph Project,
Series A) (IBCC Guaranteed)........................... 5.750 2/15/2023 1,464,375
------------------------------------------------------------
Total Michigan 19,920,518
============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
60 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
Mississippi (0.6%)
$ 3,000,000 Mississippi Home Corporation Single Family
Revenue Bonds (Mortgage Class 7, Series B)
(FNMA/GNMA Insured) (Subject to "AMT")................ 5.250% 6/1/2030 $ 3,213,750
------------------------------------------------------------
Total Mississippi 3,213,750
============================================================
Missouri (2.5%)
1,170,000 Missouri State Health and Educational Facilities
Authority Revenue Bonds (Lake Ozarks General
Hospital, Inc.) (Asset Guaranteed).................... 5.250 2/15/2011 1,227,038
1,140,000 Missouri State Health and Educational Facilities
Authority Revenue Bonds (Lake Ozarks General
Hospital, Inc.) (Asset Guaranteed).................... 5.250 2/15/2012 1,179,900
1,150,000 Missouri State Housing Development Community
Mortgage Single Family Revenue Bonds,
Series D-2 (FNMA/GNMA Insured) (Subject to
"AMT")................................................ 6.300 3/1/2029 1,250,625
5,425,000 Missouri State Housing Development Community
Single Family Mortgage Revenue Bonds
(Subject to "AMT").................................... 7.300 3/1/2028 6,164,156
1,975,000 Missouri State Housing Development Community
Single Family Mortgage Revenue Bonds,
Series C-1............................................ 6.550 9/1/2028 2,179,906
625,000 Missouri State Housing Development Revenue
Bonds................................................. 9.375 4/1/2016 668,750
------------------------------------------------------------
Total Missouri 12,670,375
============================================================
Montana (0.8%)
3,000,000 Montana State Board Housing Revenue Bonds
(Single Family Mortgage, Series A-1) (FHA Insured).... 5.950 12/1/2027 3,183,750
1,000,000 Montana State Housing Revenue Bonds................... 6.400 12/1/2012 1,062,500
------------------------------------------------------------
Total Montana 4,246,250
============================================================
Nevada (0.6%)
3,000,000 Clark County, Nevada Industrial Development
Revenue Bonds (Nevada Power Company
Project, Series A) (Subject to "AMT")................. 5.900 11/1/2032 3,067,500
------------------------------------------------------------
Total Nevada 3,067,500
============================================================
New Mexico (0.5%)
2,275,000 New Mexico Mortgage Finance Authority
Revenue Bonds, Series 1995-F.......................... 7.000 1/1/2026 2,735,688
------------------------------------------------------------
Total New Mexico 2,735,688
============================================================
New York (11.8%)
3,370,000 New York City, New York General Obligation
Unlimited Bonds, Series A............................. 5.300 8/1/2012 3,509,012
5,000,000 New York Dormitory Authority State University
Educational Facilities Revenue Bonds.................. 5.250 5/15/2019 5,175,000
3,500,000 New York Dormitory Authority State University
Revenue Bonds......................................... 5.875 5/15/2011 3,963,750
2,000,000 New York Dormitory Authority State University
Revenue Bonds......................................... 7.500 5/15/2013 2,622,500
5,000,000 New York Dormitory Authority State University
Revenue Bonds......................................... 5.875 5/15/2017 5,556,250
1,000,000 New York State Dormitory Authority Revenue
Bonds (Sam Hospital Sufferen) (Asset Guaranteed)...... 5.500 7/1/2011 1,065,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 61
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
==================================================================================================================================
<S> <C> <C> <C> <C>
New York (11.8%) - continued
$ 3,000,000 New York State Local Government Assistance
Corporation, Refunding Revenue Bonds
(MBIA Insured)......................................... 5.250% 4/1/2016 $ 3,161,250
3,000,000 New York State Medical Care Facilities, Finance
Agency Revenue Bonds (Mental Health Services)
(FSA Insured).......................................... 5.375 2/15/2014 3,090,000
2,000,000 New York State Mortgage Agency Homeowner
Mortgage Revenue Bonds, Series 72...................... 5.000 4/1/2012 2,020,000
9,000,000 New York State Thruway Revenue Bonds**................. 5.600 4/1/2005 9,663,750
7,025,000 Triborough Bridge and Tunnel Authority Revenue
Bonds (New York Convention Center Project
Bonds, Series E)....................................... 7.250 1/1/2010 8,465,125
6,915,000 Triborough Bridge and Tunnel Authority Revenue
Bonds, Series B........................................ 5.000 1/1/2020 6,940,931
5,000,000 Triborough Bridge and Tunnel Authority Revenue
Bonds, Series Q........................................ 5.000 1/1/2017 4,975,000
------------------------------------------------------------
Total New York 60,207,568
============================================================
North Carolina (1.1%)
1,845,000 North Carolina Eastern Municipal Power Agency
Power Revenue Bonds (FSA Insured)...................... 7.500 1/1/2010 2,350,068
700,000 North Carolina Eastern Municipal Power Agency
Power Revenue Bonds, Series A (FGIC Insured)........... 6.125 1/1/2011 759,500
865,000 North Carolina Eastern Municipal Power Agency
Power System Revenue Bonds............................. 4.500 1/1/2024 824,994
325,000 North Carolina Eastern Municipal Power Agency
Power System Revenue Bonds, Series A................... 6.400 1/1/2021 343,281
1,500,000 North Carolina Medical Care Community
Hospital Revenue Bonds (Gaston Memorial
Hospital and Gaston Health Services, Inc.)............. 5.000 2/15/2019 1,462,500
------------------------------------------------------------
Total North Carolina 5,740,343
============================================================
Ohio (0.9%)
100,000 Ohio State Higher Education Facility Revenue
Bonds.................................................. 6.000 10/1/2022 105,500
730,000 Parma, Ohio Hospital Improvement Revenue
Refunding Bonds (Parma Community General
Hospital Association).................................. 4.900 11/1/2006 742,775
925,000 Parma, Ohio Hospital Improvement Revenue
Refunding Bonds (Parma Community General
Hospital Association).................................. 4.950 11/1/2007 943,500
620,000 Parma, Ohio Hospital Improvement Revenue
Refunding Bonds (Parma Community General
Hospital Association).................................. 5.000 11/1/2008 633,175
2,250,000 Parma, Ohio Hospital Improvement Revenue
Refunding Bonds (Parma Community General
Hospital Association).................................. 5.250 11/1/2013 2,266,875
------------------------------------------------------------
Total Ohio 4,691,825
============================================================
Oklahoma (0.1%)
100,000 Tulsa, Oklahoma Industrial Authority Hospital
Revenue Bonds (Saint John's Medical Center
Project)............................................... 6.250 2/15/2014 108,125
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
62 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Oklahoma (0.1%) - continued
$ 175,000 Tulsa, Oklahoma Industrial Authority Hospital
Revenue Bonds (St. John's Medical Center
Project).................................................... 6.250% 2/15/2017 $ 188,563
-------------------------------------------------------------
Total Oklahoma 296,688
=============================================================
Oregon (1.0%)
2,000,000 Cow Creek Band, Oregon Revenue Bonds
(Umpqua Tribe of Indians) (AMBAC Insured)................... 5.100 7/1/2012 2,017,500
3,000,000 Port Saint Helens, Oregon Revenue Bonds
(Portland General Electric Company)
(Subject to 'AMT').......................................... 5.250 8/1/2014 3,056,250
-------------------------------------------------------------
Total Oregon 5,073,750
=============================================================
Pennsylvania (2.8%)
900,000 Delaware County, Pennsylvania Authority School
Revenue Bonds (The Haverford School Project)................ 5.000 3/15/2014 891,000
1,000,000 Delaware County, Pennsylvania Authority School
Revenue Bonds (The Haverford School Project)................ 5.000 3/15/2019 970,000
250,000 Media Boro, Pennsylvania Guaranteed Water
Revenue Bonds (MBIA Insured)................................ 6.550 1/1/2017 272,188
1,365,000 Pennsylvania Housing Finance Agency
Revenue Bonds (Subject to 'AMT')............................ 6.750 10/1/2009 1,568,044
1,455,000 Pennsylvania Housing Finance Agency
Revenue Bonds (Subject to 'AMT')............................ 6.750 10/1/2010 1,671,431
200,000 Pennsylvania State Higher Education Facilities
Authority Health Services Revenue Bonds
(Allegheny, Delaware, Obligation A)
(MBIA Insured).............................................. 4.900 11/15/2001 204,500
5,000,000 Pennsylvania State Higher Education Facilities
Authority Health Services Revenue Bonds
(Allegheny, Delaware, Obligation A)
(MBIA Insured).............................................. 5.400 11/15/2007 5,093,750
1,000,000 Pennsylvania State Higher Educational Facility
Authority Revenue Bonds (State System of
Higher Education, Series N) (MBIA Insured).................. 5.800 6/15/2024 1,058,750
2,640,000 Philadelphia, Pennsylvania Hospital Authority
Revenue Bonds (Children's Hospital)......................... 5.000 2/12/2021 2,557,500
-------------------------------------------------------------
Total Pennsylvania 14,287,163
=============================================================
South Carolina (0.4%)
2,000,000 Connector 2000 Association, Inc., South Carolina
Toll Road Revenue Bonds (Southern Connector
Project, Series A).......................................... 5.375 1/1/2038 1,875,000
-------------------------------------------------------------
Total South Carolina 1,875,000
=============================================================
South Dakota (0.1%)
500,000 South Dakota Conservancy District Revenue
Bonds, (State Revolving, Series A).......................... 6.200 8/1/2015 538,750
-------------------------------------------------------------
Total South Dakota 538,750
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 63
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Texas (8.6%)
$ 800,000 Edgewood, Texas Independent School District
Facility Corporation Lease Revenue Bonds
(Southwest Securities Insured).............................. 5.250% 8/15/2013 $ 801,000
3,375,000 El Paso, Texas Independent School District Capital
Appreciation General Obligation Unlimited Bonds
(PSF Guaranteed)............................................ 0.000 8/15/2009 2,046,094
4,000,000 El Paso, Texas Independent School District Capital
Appreciation General Obligation Unlimited Bonds
(PSF Guaranteed)............................................ 0.000 8/15/2012 1,975,000
2,300,000 El Paso, Texas Independent School District Capital
Appreciation General Obligation Unlimited Bonds
(PSF Guaranteed)............................................ 0.000 8/15/2013 1,060,875
2,710,000 Harris County, Houston, Texas Sports Authority
Special Revenue Bonds (Capital Appreciation,
Jr. Lien, Series B) (MBIA Insured).......................... 0.000 11/15/2010 1,514,213
3,345,000 Harris County, Houston, Texas Sports Authority
Special Revenue Bonds (Capital Appreciation,
Jr Lien, Series B) (MBIA Insured)........................... 0.000 11/15/2011 1,743,581
4,115,000 Harris County, Houston, Texas Sports Authority
Special Revenue Bonds (Capital Appreciation,
Jr. Lien, Series B) (MBIA Insured).......................... 0.000 11/15/2012 2,031,781
4,950,000 Harris County, Houston, Texas Sports Authority
Special Revenue Bonds (Capital Appreciation,
Jr. Lien, Series B) (MBIA Insured).......................... 0.000 11/15/2014 2,153,250
1,685,000 Hereford, Texas Independent School District Public
Facilities Corporation Revenue Bonds........................ 5.000 8/15/2008 1,718,700
1,315,000 Hereford, Texas Independent School District Public
Facilities Corporation Revenue Bonds........................ 5.125 8/15/2013 1,305,138
2,000,000 Houston, Texas Airport Systems Special Facility
Revenue Bonds (FSA Insured) (Subject to 'AMT').............. 5.375 7/15/2010 2,102,500
3,300,000 Houston, Texas Airport Systems Special Facilities
Revenue Bonds (FSA Insured) (Subject to 'AMT').............. 5.375 7/15/2011 3,456,750
7,880,000 Waco, Texas Health Facilities Development
Corporation Revenue Bonds (Daughters of
Charity System)............................................. 5.000 11/1/2020 7,722,400
3,075,000 Wichita Falls, Texas Independent School Capital
Appreciation Bonds*......................................... 0.000 2/1/2013 1,537,500
3,075,000 Wichita Falls, Texas Independent School Capital
Appreciation Bonds*......................................... 0.000 2/1/2014 1,460,625
5,080,000 Wylie, Texas Independent School District General
Obligation Unlimited Bonds (PSF Guaranteed)................. 7.000 8/15/2024 6,254,750
3,770,000 Wylie, Texas Independent School District General
Obligation Unlimited Bonds (PSF Guaranteed)
(PreRefunded)............................................... 7.000 8/15/2024 4,613,537
------------------------------------------------------------------
Total Texas 43,497,694
==================================================================
Utah (1.2%)
5,360,000 Intermountain Power Agency Special Obligation
Revenue Bonds, Series 1986-A (MBIA Insured)................. 5.000 7/1/2021 5,185,800
1,005,000 Utah State Housing Finance Agency Revenue
Bonds (Single Family Mortgage, MEZZ-SER,
Series G-1)................................................. 7.250 7/1/2011 1,094,194
------------------------------------------------------------------
Total Utah 6,279,994
==================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
64 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Vermont (0.3%)
$ 1,250,000 Vermont Finance Revenue Bonds (Educational
and Health Buildings)..................................... 6.000% 9/1/2006 $ 1,342,188
-------------------------------------------------------------
Total Vermont 1,342,188
=============================================================
Virginia (1.3%)
3,000,000 Fairfax County, Virginia Development Authority
Revenue Bonds............................................. 5.250 8/15/2019 3,071,250
2,000,000 Fairfax County, Virginia Industrial Development
Authority Revenue Bonds (Health Care - Inova
Health Systems)........................................... 6.000 8/15/2026 2,167,500
450,000 Lynchburg, Virginia Individual Development
Authority Healthcare Facilities Revenue Bonds............. 5.000 1/1/2012 452,250
1,000,000 Lynchburg, Virginia Individual Development
Authority Healthcare Facilities Revenue Bonds............. 5.375 1/1/2013 1,032,500
-------------------------------------------------------------
Total Virginia 6,723,500
=============================================================
Washington (9.3%)
1,800,000 Chelan County, Washington Public Utility District
No. 1 Conservation Revenue Bonds (Chelan
Hydroelectric-Division 1, Series B) (Subject to 'AMT').... 5.000 7/1/2033 1,800,000
10,000,000 Kitsap County, Washington Conservatory Housing
Authority Revenue Bonds (ACA-CBI Insured)**............... 5.600 12/1/2028 10,175,000
2,275,000 Pierce County, Washington School District
General Obligation Bonds (AMBAC Insured).................. 5.450 12/1/2013 2,465,531
5,000,000 Washington State General Obligation Unlimited
Bonds, Series A........................................... 6.750 2/1/2015 6,081,250
6,530,000 Washington State General Obligation Unlimited
Bonds, Series A........................................... 5.750 9/1/2019 6,946,287
1,250,000 Washington State General Obligation Unlimited
Bonds, Series AT-6........................................ 5.750 2/1/2017 1,298,438
300,000 Washington State Motor Vehicle Fuel Tax General
Obligation Unlimited Bonds, Series B (FGIC Insured)....... 5.875 7/1/2021 317,625
10,000,000 Washington State Public Power Supply Systems
Revenue Refunding Bonds (Nuclear Project No. 2,
Series A)................................................. 6.000 7/1/2007 11,225,000
6,195,000 Washington State Public Power Supply System
Revenue Refunding Bonds (Nuclear Project No. 3,
Series A) (AMBAC Insured)................................. 5.700 7/1/2009 6,775,781
-------------------------------------------------------------
Total Washington 47,084,912
=============================================================
Wisconsin (1.2%)
910,000 Wisconsin Housing and Economic Development
Authority Home Ownership Revenue Bonds,
Series 1990-D............................................. 7.750 9/1/2010 932,750
2,000,000 Wisconsin Housing and Economic Development
Authority Home Ownership Revenue Bonds,
Series F (Subject to 'AMT')............................... 5.200 7/1/2018 1,997,500
1,000,000 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Children's Hospital)
(AMBAC Insured)........................................... 5.625 2/15/2015 1,081,250
1,845,000 Wisconsin State Health and Educational Facility
Authority Revenue Bonds (Lawrence University,
Wisconsin)................................................ 5.000 10/15/2013 1,838,081
-------------------------------------------------------------
Total Wisconsin 5,849,581
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
- --------------------------------------------------------------------------------
The AAL Mutual Funds Semi-Annual Report 85
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER
30, 1998
<TABLE>
<CAPTION>
Par Value Municipal Bonds (99.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Wyoming (2.3%)
$ 3,930,000 Wyoming Community Development Authority
Single Family Mortgage Revenue Bonds, Series B............ 6.650% 6/1/2013 $ 4,234,575
1,000,000 Wyoming State Farm Loan Board Capital Projects
Facilities Revenue Bonds.................................. 6.300 10/1/2010 1,107,500
5,785,000 Wyoming State Farm Loan Board Capital Projects
Facilities Revenue Bonds.................................. 5.750 10/1/2020 6,356,269
-------------------------------------------------------------
Total Wyoming 11,698,344
=============================================================
-------------------------------------------------------------
Total Municipal Bonds
(amortized cost basis $465,622,188) 504,177,207
=============================================================
Short-Term Tax-Exempt Variable Rate Obligations (0.6%)
=============================================================================
3,308,469 Citifunds Institutional Tax Free Reserves.................................... 3,308,469
-------------------------------------------------------------
Total Short-Term Tax-Exempt Variable Rate
Obligations (cost basis $3,308,469) 3,308,469
=============================================================
-------------------------------------------------------------
Total Investments (99.9%)
(amortized cost basis $468,930,657) 507,485,676
=============================================================
-------------------------------------------------------------
Other Assets, Less Liabilities (0.1%) 573,012
=============================================================
-------------------------------------------------------------
NET ASSETS (100.0%) $508,058,688
=============================================================
</TABLE>
*When issued security
**Collateral for when issued security
The accompanying notes to the financial statements are an integral part of this
schedule.
66 The AAL Mutual Funds Semi-Annual Report
<PAGE>
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>
Par Value Long-Term Fixed-income Obligations (93.9%) Interest Rate Maturity Date Market Value
================================================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations (16.9%)
$70,000,000 Federal National Mortgage Association**................. 4.750% 11/14/2003 $ 69,874,665
----------------------------------------------------------------
Total U.S. Government
Agency Obligations 69,874,665
================================================================
U.S. Government Obligations (35.3%)
33,000,000 U.S. Treasury Notes*.................................... 4.500 11/15/2008 32,868,660
45,000,000 U.S. Treasury Notes**................................... 11.125 8/15/2003 57,796,875
25,000,000 U.S. Treasury Notes*.................................... 5.000 11/15/2028 24,750,750
24,000,000 U.S. Treasury Notes*.................................... 4.125 11/15/2003 23,949,600
23,000,000 U.S. Treasury Strip..................................... 0.000 11/15/2021 6,372,794
----------------------------------------------------------------
Total U.S. Government
Obligations 145,738,679
================================================================
Asset-Backed Securities (8.5%)
3,000,000 Associates Housing Services Series 1996-1............... 7.900 3/15/2027 3,295,800
5,000,000 Green Tree Financial Corporation Series 1996-6.......... 7.950 9/15/2027 5,314,800
5,000,000 Green Tree Financial Corporation Series 1996-7.......... 7.650 10/15/2027 5,386,430
5,000,000 Green Tree Financial Corporation Series 1997-6.......... 7.140 1/15/2029 5,261,635
5,250,000 Green Tree Financial Corporation Series 1997-6.......... 6.680 1/15/2029 5,376,315
2,684,549 Green Tree Home Equity Loans 1997-C A-2................. 6.380 8/15/2028 2,702,240
3,000,000 Green Tree Home Equity Loans Series 1996-D.............. 8.100 9/15/2027 3,222,336
4,500,000 MBNA Master Credit Card Trust 98-J A.................... 5.250 10/15/2003 4,493,847
----------------------------------------------------------------
Total Asset-Backed Securities 35,053,403
================================================================
Collateralized Mortgage Obligations (10.6%)
12,900,000 Citicorp Mortgage Securities, Inc. Series 1994-8........ 6.250 5/25/2024 12,971,337
15,360,000 Countrywide Home Loans 1997-6 A-3....................... 6.750 11/25/2027 15,502,080
15,000,000 PNC Mortgage Securities Corporation 1997-5 A-2.......... 6.750 10/25/2027 15,078,600
----------------------------------------------------------------
Total Collateralized
Mortgage Obligations 43,552,017
================================================================
Corporate Obligations (22.6%)
5,000,000 Aetna Services, Inc..................................... 6.970 8/15/2036 5,201,210
11,000,000 Associate Corporation NA................................ 5.750 11/1/2003 11,042,405
5,500,000 Federated Department Stores, Inc........................ 6.125 9/1/2001 5,598,357
10,000,000 First National Bank of Chicago.......................... 8.080 1/5/2018 11,320,790
5,000,000 Ford Motor Credit Corporation........................... 6.125 4/28/2003 5,090,070
5,075,000 Pennzoil Company........................................ 10.625 6/1/2001 5,138,260
5,000,000 Petroleos de Venezula SA Finance, Ltd. Series 1998-1.... 6.650 2/15/2006 4,510,995
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 67
<PAGE>
The AAL Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (93.9%) Interest Rate Maturity Date Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Corporate Obligations (22.6%) - continued
$ 4,500,000 Sears Roebuck Acceptance Corporation.............. 6.000% 3/20/2003 $ 4,585,325
4,500,000 Texas Utilities Company........................... 5.940 10/15/2001 4,507,024
10,000,000 Tyco International Group SA....................... 6.125 6/15/2001 10,151,940
8,000,000 US West Capital Funding, Inc. .................... 6.125 7/15/2002 8,249,344
5,000,000 USA Waste Services................................ 7.000 10/1/2004 5,207,555
5,000,000 Western Resources, Inc. .......................... 6.250 8/15/2003 5,180,720
7,500,000 Worldcom, Inc. ................................... 6.125 8/15/2001 7,678,477
--------------------------------------------------------------
Total Corporate Obligations 93,462,472
==============================================================
--------------------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $384,486,052) 387,681,236
==============================================================
<CAPTION>
Short-Term Investments (24.4%) Interest Rate*** Maturity Date
=================================================================================
<S> <C> <C> <C>
20,000,000 American Express Credit Corporation................ 5.180 11/16/1998 19,953,956
20,000,000 Exxon Asset Management............................. 5.480 11/2/1998 19,993,911
20,000,000 Ford Motor Credit Corporation...................... 5.070 11/2/1998 19,993,822
20,000,000 General Electric Capital Corporation............... 5.180 11/16/1998 19,953,956
20,000,000 Household Finance Corporation...................... 5.550 11/2/1998 19,993,833
1,000,000 Sears Roebuck Acceptance Corporation............... 5.550 11/2/1998 999,692
--------------------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $100,889,170) 100,889,170
==============================================================
--------------------------------------------------------------
Total Investments (118.3%)
(amortized cost basis $485,375,222) 488,570,406
==============================================================
--------------------------------------------------------------
Other Assets, less Liabilities (-18.3%) (75,784,158)
==============================================================
--------------------------------------------------------------
NET ASSETS (100.0%) 412,786,248
==============================================================
</TABLE>
* When issued security
** Collateral for when issued security
*** The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
68 The AAL Mutual Funds Semi-Annual Report
<PAGE>
The AAL Money Market Fund SCHEDULE OF INVESTMENTS AS OF OCTOBER 30, 1998
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>
<CAPTION>
Par Value Commercial Paper (100.0%) Interest Rate Range* Maturity Date Range Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
$12,000,000 American Express Credit Corporation.................. 5.000-5.470% 11/13/98-1/19/99 $11,907,433
12,000,000 American General Finance Corporation................. 5.140-5.490 11/12/98-1/8/99 11,933,150
11,414,000 Associates Corporation of North America.............. 5.050-5.470 12/2/98-2/16/99 11,290,883
2,800,000 Bell South Telecommunications........................ 4.850 2/12/99 2,760,769
12,579,000 CIT Group Holdings, Inc.............................. 5.000-5.470 11/2/98-2/23/99 12,449,347
4,400,000 Coca-Cola Company.................................... 4.880-5.440 11/24/98-1/26/99 4,364,443
6,500,000 Commercial Credit Company............................ 5.450-5.500 1/17/98-11/25/98 6,480,616
5,800,000 Countrywide Home Loans, Inc.......................... 5.150-5.200 1/21/99-1/22/99 5,731,194
11,000,000 E.I. Du Pont de Nemours & Company.................... 4.860-5.460 11/4/98-2/18/99 10,948,255
11,500,000 Eaton Corporation**.................................. 5.430-5.470 11/3/98-2/26/99 11,376,375
11,474,000 Ford Motor Credit Corporation........................ 5.040-5.480 11/6/98-2/19/98 11,353,342
4,500,000 GTE Corporation...................................... 5.210-5.220 12/4/98-1/25/99 4,457,474
12,644,000 General Electric Capital Corporation................. 4.900-5.270 11/10/98-2/23/99 12,569,694
12,613,000 General Motors Acceptance Corporation................ 4.920-5.500 11/9/98-2/22/99 12,496,241
3,205,000 Gillette Company..................................... 5.120 1/4/99 3,175,372
6,469,000 Goldman Sachs Group.................................. 5.080 2/24/99 6,363,110
3,576,000 H.J. Heinz, Inc...................................... 5.300 11/17/98 3,567,050
12,000,000 Household Finance Corporation........................ 5.120-5.460 11/5/98-2/1/99 11,927,654
12,130,000 International Business Machines Credit Corporation... 4.850-5.060 12/28/98-2/23/99 11,994,760
8,000,000 International Lease Finance Corporation.............. 5.120-5.440 1/7/99-1/22/99 7,914,976
12,736,000 John Deere Capital Corporation....................... 4.880-5.500 11/2/98-3/5/99 12,632,179
2,500,000 Lucent Technologies, Inc............................. 4.900 1/5/99 2,477,542
3,000,000 McGraw-Hill, Inc..................................... 5.480 11/9/98 2,995,890
1,500,000 Merrill Lynch & Company, Inc......................... 5.340 1/15/99 1,483,090
9,726,000 Motorola, Inc........................................ 5.050-5.400 11/20/98-1/28/99 9,623,467
11,500,000 Norwest Financial, Inc............................... 5.100-5.480 11/16/98-1/25/99 11,394,634
2,300,000 Penney (JC) Funding Corporation...................... 4.900 2/17/99 2,265,877
2,317,000 Procter & Gamble Company............................. 5.280 1/11/99 2,292,533
12,064,000 Sears Roebuck Acceptance Corporation................. 5.070-5.480 11/18/98-1/27/99 11,972,401
12,619,000 Toyota Motor Credit Corporation...................... 4.960-5.480 11/3/98-3/1/99 12,488,387
7,000,000 Transamerica Finance Corporation..................... 5.470 1/20/99-1/29/99 6,906,326
29,500,000 Walt Disney Company.................................. 4.890-5.420 11/16/98-2/11/99 10,537,424
5,754,000 Xerox Corporation.................................... 5.400 12/7/98-12/10/98 5,720,376
5,000,000 Xerox Credit Corporation............................. 4.850-4.900 1/20/99-2/8/99 4,937,533
-------------------------------------------------------
Total Commercial Paper 272,789,797
=======================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Semi-Annual Report 69
<PAGE>
The AAL Money Market Fund - continued SCHEDULE OF INVESTMENTS AS OF OCTOBER 30,
1998
<TABLE>
<CAPTION>
Market Value
================================================================================================================================
<S> <C>
-----------------------------------------------------
Total Investments (100.0%)
(Amortized Cost Basis $272,789,797) $272,789,797
=====================================================
-----------------------------------------------------
Other Assets Less Liabilities (0.0%) 21,778
-----------------------------------------------------
-----------------------------------------------------
Net Assets (100.0%) $272,811,575
=====================================================
</TABLE>
* The interest rate reflects 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.
70 The AAL Mutual Funds Semi-Annual Report
<PAGE>
This Page Intentionally Left Blank
The AAL Mutual Funds Semi-Annual Report 71
<PAGE>
Statement Of Assets And Liabilities As Of October 30, 1998
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL
Small Cap Stock Fund Mid Cap Stock Fund International Fund Capital Growth Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Assets
Investments at value (Cost: $130,858,649,
$545,175,425, $131,680,388, $1,654,641,801,
$194,126,910, $83,027,437, $138,818,876,
$468,930,657, $485,375,222, and $272,789,797,
respectively)..................................... $ 120,545,364 $ 549,520,397 $ 139,428,706 $ 2,894,658,481
Unamortized organization & initial registration
expenses.......................................... 19,365 -- 25,773 --
Dividend and interest receivable.................. 24,485 299,151 364,995 2,308,893
Prepaid expenses.................................. 57,024 69,947 50,888 149,834
Receivable from securities sold................... 576,970 7,565,179 441,278 --
Receivable for forward contracts held............. -- -- 415,154 --
Cash.............................................. 147,381 141,602 26,469 381,569
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 121,370,589 $ 557,596,276 $ 140,753,263 $ 2,897,498,777
====================================================================================================================================
Liabilities
Payable for forward currency contracts held....... $ -- $ -- $ 1,753,061 $ --
Payable for investment purchased.................. 958,831 3,795,837 -- --
Income distributions payable...................... -- -- -- --
Redemptions payable............................... -- 161,109 33,980 --
Payable to affiliate.............................. 104,268 420,762 142,660 1,871,794
Accrued expenses.................................. 174,595 484,342 260,454 928,006
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,237,694 4,862,050 2,190,155 2,799,800
====================================================================================================================================
Net Assets
Trust capital (beneficial interest)............... 133,356,543 539,041,710 146,998,103 1,605,670,062
Accumulated undistributed net investment
income (loss)..................................... (666,469) (890,040) 4,071,929 3,566,118
Accumulated net realized gain (loss)
on investments.................................... (2,243,894) 10,237,584 (18,935,701) 45,446,117
Net unrealized appreciation (depreciation) on:
Investments................................... (10,313,285) 4,344,972 7,748,318 1,240,016,680
Foreign currency contracts.................... -- -- (1,337,907) --
Foreign currency related transactions......... -- -- 18,366 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets 120,132,895 552,734,226 138,563,108 2,894,698,977
====================================================================================================================================
Total Liabilities and Capital $ 121,370,589 $ 557,596,276 $ 140,753,263 $ 2,897,498,777
====================================================================================================================================
Class A share capital............................. $ 105,752,097 $ 537,844,966 $ 128,972,493 $ 2,813,102,858
Shares of beneficial interest outstanding
(Class A)......................................... 9,988,060 41,980,593 12,593,640 95,543,849
Net asset value per share......................... $ 10.59 $ 12.81 $ 10.24 $ 29.44
Maximum public offering price..................... $ 11.03 $ 13.34 $ 10.67 $ 30.67
Class B share capital............................. $ 13,614,840 $ 13,369,900 $ 7,938,509 $ 70,713,204
Shares of beneficial interest outstanding
(Class B)......................................... 1,303,357 1,059,452 786,400 2,432,998
Net asset value per share......................... $ 10.45 $ 12.62 $ 10.10 $ 29.06
Class I share capital............................. $ 765,958 $ 1,519,360 $ 1,652,106 $ 10,882,915
Shares of beneficial interest outstanding
(Class I)......................................... 71,950 118,116 160,549 369,312
Net asset value per share......................... $ 10.65 $ 12.86 $ 10.29 $ 29.47
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
72 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL The AAL The AAL
Equity Income Fund Balanced Fund High Yield Bond Fund Municipal Bond Fund Bond Fund Money Market Fund
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
$ 225,374,469 $ 84,809,866 $ 122,327,537 $ 507,485,676 $ 488,570,406 $ 272,789,797
-- 65,723 21,081 -- -- --
487,367 284,557 3,867,316 7,395,885 2,685,211 --
38,106 25,593 44,008 51,397 31,038 61,034
2,246,481 -- -- 3,307,818 73,012,049 --
-- -- -- -- -- --
100,890 238,383 268,160 169,660 1,029,307 1,062,580
- ------------------------------------------------------------------------------------------------------------------------------------
$ 228,247,313 $ 85,424,122 $ 126,528,102 $ 518,410,436 $ 565,328,011 $ 273,913,411
====================================================================================================================================
$ -- $ -- $ -- $ -- $ -- $ --
1,086,802 7,483,954 251,506 9,561,808 151,754,047 --
-- -- 302,267 316,243 416,757 54,158
-- -- -- -- -- 751,425
134,273 39,772 71,784 298,727 238,527 91,223
155,698 161,871 92,544 174,970 132,432 205,030
- ------------------------------------------------------------------------------------------------------------------------------------
1,376,773 7,685,597 718,101 10,351,748 152,541,763 1,101,836
====================================================================================================================================
184,827,407 75,821,025 142,732,988 461,649,817 411,740,801 272,776,364
314,366 112,806 8,630 (47,081) 96,451 35,211
10,481,208 22,265 (440,278) 7,900,933 (2,246,188) --
-- -- -- -- -- --
31,247,559 1,782,429 (16,491,339) 38,555,019 3,195,184 --
-- -- -- -- -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
226,870,540 77,738,525 125,810,001 508,058,688 412,786,248 272,811,575
- ------------------------------------------------------------------------------------------------------------------------------------
$ 228,247,313 $ 85,424,122 $ 126,528,102 $ 518,410,436 $ 565,328,011 $ 273,913,411
====================================================================================================================================
$ 212,556,986 $ 70,323,082 $ 113,350,755 $ 502,286,746 $ 369,662,354 $ 255,305,095
15,604,955 6,450,491 12,767,770 42,776,206 36,205,136 255,305,095
$ 13.62 $ 10.90 $ 8.88 $ 11.74 $ 10.21 $ 1.00
$ 14.19 $ 11.35 $ 9.25 $ 12.23 $ 10.64 $ --
$ 6,468,515 $ 5,953,273 $ 10,441,295 $ 5,719,131 $ 2,467,348 $ 1,520,808
475,189 547,610 1,176,159 487,190 241,574 1,520,808
$ 13.61 $ 10.87 $ 8.88 $ 11.74 $ 10.21 $ 1.00
$ 7,845,039 $ 1,462,170 $ 2,017,951 $ 52,811 $ 40,656,546 $ 15,985,672
575,408 134,366 227,476 4,497 3,981,464 15,985,672
$ 13.63 $ 10.88 $ 8.87 11.74 $ 10.21 $ 1.00
</TABLE>
The AAL Mutual Funds Semi-Annual Report 73
<PAGE>
Statement of Operations FOR THE PERIOD ENDED OCTOBER 30, 1998
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL
Small Cap Mid Cap International Capital
Stock Fund Stock Fund Fund Growth Fund
====================================================================================================================================
<S> <C> <C> <C> <C>
Investment Income
Dividends........................................................ $ 350,322 $ 2,519,716 $ 1,470,117 $ 15,645,699
Taxable interest................................................. 140,020 604,122 1,330,709 4,382,076
Tax exempt interest.............................................. -- -- -- --
Foreign dividend withholding..................................... -- -- (167,459) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 490,342 3,123,838 2,633,367 20,027,775
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Adviser fees..................................................... 452,010 2,031,565 183,081 7,655,278
Sub-Adviser fees................................................. -- -- 402,777 --
Audit fees and legal fees........................................ 17,653 14,217 15,623 15,614
Custody fees..................................................... 6,830 22,074 63,474 69,837
Administrative service and pricing fees.......................... 21,745 21,514 34,925 21,507
Amortization of organizational costs & registration fees......... 3,634 817 7,366 --
Printing and postage expense..................................... 82,883 202,300 80,674 412,121
Distribution expense Class A..................................... 135,814 730,763 171,346 3,436,236
Distribution expense Class B..................................... 67,726 66,269 39,828 311,896
SEC and state registration expense............................... 34,515 39,131 33,889 71,636
Transfer agent fees Class A...................................... 222,641 665,290 219,005 1,417,439
Transfer agent fees Class B...................................... 40,381 41,306 24,368 113,276
Transfer agent fees Class I...................................... 53 67 41 115
Shareholder maintenance fees Class A............................. 61,569 187,339 63,629 398,140
Shareholder maintenance fees Class B............................. 12,516 11,327 7,121 29,652
Shareholder maintenance fees Class I............................. 13 22 12 30
Trustees fees and expenses....................................... 3,165 3,165 4,805 3,165
Other expenses................................................... 3,022 4,534 2,745 13,725
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,166,170 4,041,700 1,354,709 13,969,667
- ------------------------------------------------------------------------------------------------------------------------------------
Less reimbursement from Adviser.................................. -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Expenses 1,166,170 4,041,700 1,354,709 13,969,667
====================================================================================================================================
Net Investment Income (Loss) (675,828) (917,862) 1,278,658 6,058,108
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments....................... (5,665,804) (21,123,468) (20,198,948) 12,195,745
Net realized gains on foreign currency
transactions..................................................... -- -- 134,038 --
Increase (decrease) in unrealized
appreciation on investments...................................... (27,375,384) (112,822,942) 8,687,356 (33,899,736)
Increase (decrease) in unrealized appreciation
on currency transactions......................................... -- -- (2,490,220) --
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains (Losses)
on Investments (33,041,188) (133,946,410) (13,867,774) (21,703,991)
====================================================================================================================================
Net Increase (Decrease) in Net Assets
Resulting from Operations $(33,717,016) $(134,864,272) $(12,589,116) $(15,645,883)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
74 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
The AAL The AAL The AAL The AAL The AAL The AAL
Equity Income Fund Balanced Fund High Yield Bond Fund Municipal Bond Fund Bond Fund Money Market Fund
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
$ 1,995,416 $ 168,517 $ -- $ -- $ -- $ --
659,181 731,708 6,246,705 141,806 12,171,372 7,142,957
-- -- -- 12,811,001 -- --
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
2,654,597 900,225 6,246,705 12,952,807 12,171,372 7,142,957
- -----------------------------------------------------------------------------------------------------------------------------------
520,711 152,571 355,358 1,126,046 931,457 639,313
-- -- -- -- -- --
5,864 8,030 13,844 5,432 12,723 7,519
6,313 30,515 4,121 15,701 10,176 7,450
21,555 21,061 25,303 33,387 23,685 20,518
-- 7,257 3,332 -- -- --
100,257 40,564 40,291 13,367 35,180 184,262
253,284 59,015 137,983 607,406 448,191 155,475
25,771 20,919 52,132 23,341 8,896 5,598
23,520 8,290 22,719 32,064 25,127 41,991
168,129 42,875 71,550 125,405 202,589 293,105
11,249 8,422 9,569 2,513 2,463 1,769
57 32 44 13 69 36
47,324 10,320 17,157 34,960 54,157 60,033
2,880 1,463 2,957 843 698 464
15 8 11 2 23 11
3,165 3,165 3,165 3,165 3,165 3,165
2,745 900 2,998 2,435 2,175 2,745
- -----------------------------------------------------------------------------------------------------------------------------------
1,192,839 415,407 762,534 2,026,080 1,760,774 1,423,454
- -----------------------------------------------------------------------------------------------------------------------------------
-- (72,097) (122,847) -- -- (412,711)
- -----------------------------------------------------------------------------------------------------------------------------------
1,192,839 343,310 639,687 2,026,080 1,760,774 1,010,743
===================================================================================================================================
1,461,758 556,915 5,607,018 10,926,727 10,410,598 6,132,214
- -----------------------------------------------------------------------------------------------------------------------------------
(2,829,134) 55,837 (1,271,115) 5,003,272 8,305,500 --
-- -- -- -- -- --
(7,566,870) 798,663 (17,264,760) 9,212,971 323,491 --
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(10,396,004) 854,500 (18,535,875) 14,216,243 8,628,991 --
===================================================================================================================================
$ (8,934,246) $1,411,415 $ (12,928,857) $ 25,142,970 $ 19,039,589 $ 6,132,214
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds Semi-Annual Report 75
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund The AAL Mid Cap Stock Fund
Year Ended Period Ended Year Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98
===================================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income (loss).......................... $ (1,037,980) $ (675,828) $ (1,693,526) $ (917,862)
Net realized gains (losses) on investment
transactions.......................................... 9,736,718 (5,665,804) 66,674,556 (21,123,468)
Net realized gains (losses) on foreign
currency transactions................................. -- -- -- --
Increase (decrease) in unrealized appreciation
on investments........................................ 20,348,718 (27,375,384) 118,067,392 (112,822,942)
Increase (decrease) in unrealized appreciation on
foreign currency...................................... -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (DecreasE) In Net Assets
Resulting From Operations 29,047,456 (33,717,016) 183,048,422 (134,864,272)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions To Shareholders
Distributions from net investment income
class A............................................... -- -- -- --
Capital gains distributions class A................... (4,330,010) -- (55,619,593) --
Distributions from net investment income
class B............................................... -- -- -- --
Capital gains distributions class B................... (429,281) -- (825,701) --
Distributions from net investment income
class I............................................... -- -- -- --
Capital gains distributions class I................... -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TotaL Distributions To Shareholders (4,759,291) -- (56,445,294) --
- ---------------------------------------------------------------------------------------------------------------------------------
Trust Shares Transactions
Purchase of trust shares.............................. 68,657,418 28,913,720 99,347,772 41,183,169
Income dividends reinvested........................... -- -- -- --
Capital gains distributions reinvested................ 4,741,670 -- 56,185,767 --
Redemption of trust shares............................ (10,476,518) (10,156,478) (60,940,889) (39,783,979)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Trust Capital 62,922,570 18,757,242 94,592,650 1,399,190
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase In Net Assets 87,210,735 (14,959,774) 221,195,778 (133,465,082)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS BEGINNING OF PERIOD 47,881,934 135,092,669 465,003,530 686,199,308
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (1) $135,092,669 $120,132,895 $686,199,308 $ 552,734,226
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prior to September 1, 1997, formerly The AAL Utilities Fund
(b) Since inception December 29, 1997.
(1) Including undistributed income of $9,359 and $(666,469) for The AAL Small
Cap Stock Fund; $27,822 and $(890,040) for The AAL Mid Cap Stock Fund;
$2,793,271 and $4,071,929 for The AAL International Fund; $1,389,567 and
$3,566,118 for The AAL Capital Growth Fund; and $324,789 and $314,366 for
The AAL Equity Income Fund for each period, respectively
The accompanying notes to the financial statements are an integral part of this
statement.
76 The Mutual Funds Semi-Annual Report (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
The AAL International Fund The AAL Capital Equity The AAL Growth Fund Income Fund
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
4/30/98 10/30/98 4/30/1998 10/30/98 4/30/98(a) 10/30/98
===================================================================================================================
<S> <C> <C> <C> <C> <C>
$ 1,848,853 $ 1,278,658 $ 8,558,419 $ 6,058,108 $ 3,494,354 $ 1,461,758
5,389,493 (20,198,948) 107,878,390 12,195,745 19,250,254 (2,829,134)
5,840,769 134,038 -- -- -- --
(1,606,668) 8,687,356 714,923,258 (33,899,736) 24,269,617 (7,566,870)
(2,406,763) (2,490,220) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
9,065,684 (12,589,116) 831,360,067 (15,645,883) 47,014,225 (8,934,246)
- -------------------------------------------------------------------------------------------------------------------
4,680,366) -- (7,150,934) (3,856,617) (3,574,397) (1,389,407)
6,818,663) -- (98,647,241) -- (5,528,978) --
(192,611) -- (17,918) -- (21,149) (14,655)
(310,653) -- (1,384,876) -- (60,243) --
-- -- -- (24,940) (26,918) (68,119)
-- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
(12,002,293) -- (107,200,969) (3,881,557) (9,211,685) (1,472,181)
- -------------------------------------------------------------------------------------------------------------------
49,533,709 14,152,083 363,179,248 212,011,481 52,747,159 38,922,286
4,800,618 -- 7,099,757 3,840,747 3,344,008 1,354,189
7,021,201 -- 99,155,028 -- 5,225,719 --
(24,649,658) (15,522,860) (174,444,619) (126,221,607) (25,251,474) (11,558,828)
- -------------------------------------------------------------------------------------------------------------------
36,705,870 (1,370,777) 294,989,414 89,630,621 36,065,412 28,717,647
- -------------------------------------------------------------------------------------------------------------------
33,769,261 (13,959,893) 1,019,148,512 70,103,181 73,867,952 18,311,220
- -------------------------------------------------------------------------------------------------------------------
118,753,740 152,523,001 1,805,447,284 2,824,595,796 134,691,368 208,559,320
- -------------------------------------------------------------------------------------------------------------------
$152,523,001 $138,563,108 $2,824,595,796 $2,894,698,977 $208,559,320 $226,870,540
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds Semi-Annual Report 77
<PAGE>
Statement of Changes in Net Assets - continued
<TABLE>
<CAPTION>
The AAL Balanced Fund The AAL High Yield Bond Fund
Period Ended Period Ended Year Ended Period Ended
4/30/1998 (b) 10/30/98 4/30/98 10/30/98
====================================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income (loss).......................... $ 97,076 $ 556,915 $ 7,740,779 $ 5,607,018
Net realized gains (losses) on investment
transactions.......................................... (33,572) 55,837 1,860,676 (1,271,115)
Net realized gains (losses) on foreign
currency transactions................................. -- -- -- --
Increase (decrease) in unrealized appreciation
on investments........................................ 983,766 798,663 1,260,221 (17,264,760)
Increase (decrease) in unrealized appreciation on
foreign currency...................................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,047,270 1,411,415 10,861,676 (12,928,857)
====================================================================================================================================
Distributions to Shareholders
Distributions from net investment income
class A............................................... (50,767) (446,166) (7,235,858) (5,113,693)
Capital gains distributions class A................... -- -- (904,721) --
Distributions from net investment income
class B............................................... (2,521) (26,224) (500,450) (443,568)
Capital gains distributions class B................... -- -- (66,779) --
Distributions from net investment income
class I............................................... (2,686) (12,821) (4,471) (49,757)
Capital gains distributions class I................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders (55,974) (485,211) (8,712,279) (5,607,018)
- ------------------------------------------------------------------------------------------------------------------------------------
Trust Shares Transactions
Purchase of trust shares.............................. 30,286,303 48,982,485 85,083,040 41,252,783
Income dividends reinvested........................... 54,955 476,319 4,442,780 3,903,240
Capital gains distributions reinvested................ -- -- 614,901 --
Redemption of trust shares............................ (255,487) (3,723,550) (28,909,013) (11,532,198)
====================================================================================================================================
Net Increase (Decrease) in Trust Capital 30,085,771 45,735,254 61,231,708 33,623,825
====================================================================================================================================
Net Increase (Decrease) in Net Assets 31,077,067 46,661,458 63,381,105 15,087,950
====================================================================================================================================
Net Assets Beginning of Period -- 31,077,067 47,340,946 110,722,051
====================================================================================================================================
Net Assets End of Period (1) $ 31,077,067 $ 77,738,525 $110,722,051 $125,810,001
====================================================================================================================================
</TABLE>
(a) Prior to September 1, 1997 formerly The AAL Utilities Fund
(b) Since inception December 29, 1997.
(1) Including undistributed income of $41,102 and $112,806 for The AAL Balanced
Fund; $8,630 and $8,630 for The AAL High Yield Bond Fund; $(47,081) and
$(47,081) for The AAL Municipal Bond Fund; $96,451 and $96,451 for The AAL
Bond Fund; and $35,211 and $35,211 for The AAL Money Market Fund for each
period, respectively
The accompanying notes to the financial statements are an integral part of this
statement.
78 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund The AAL Bond Fund The AAL Money Market Fund
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
===========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 20,465,545 $ 10,926,727 $ 22,211,775 $ 10,410,598 $ 10,832,661 $ 6,132,214
7,482,803 5,003,272 9,902,653 8,305,500 -- --
-- -- -- -- -- --
15,997,733 9,212,971 4,006,350 323,491 -- --
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
43,946,081 25,142,970 36,120,778 19,039,589 10,832,661 6,132,214
- -----------------------------------------------------------------------------------------------------------
(20,389,290) (10,840,502) (21,676,538) (9,388,031) (10,788,522) (5,959,916)
(5,191,075) -- -- -- -- --
(75,468) (85,009) (39,897) (37,856) (42,662) (24,492)
(26,807) -- -- -- -- --
(787) (1,216) (495,340) (984,711) (1,477) (147,806)
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
(25,683,427) (10,926,727) (22,211,775) (10,410,598) (10,832,661) (6,132,214)
- -----------------------------------------------------------------------------------------------------------
58,635,631 35,700,160 62,304,932 43,649,136 332,575,912 202,078,987
16,598,508 8,847,557 17,287,957 7,958,674 10,627,301 5,969,233
4,353,818 -- -- -- -- --
(49,477,885) (21,511,097) (99,148,766) (31,537,290) (291,216,645) (177,409,212)
- -----------------------------------------------------------------------------------------------------------
30,110,072 23,036,620 (19,555,877) 20,070,520 51,986,568 30,639,008
- -----------------------------------------------------------------------------------------------------------
48,372,726 37,252,863 (5,646,874) 28,699,511 51,986,568 30,639,008
- -----------------------------------------------------------------------------------------------------------
422,433,099 470,805,825 389,733,611 384,086,737 190,185,999 242,172,567
- -----------------------------------------------------------------------------------------------------------
$ 470,805,825 $ 508,058,688 $ 384,086,737 $ 412,786,248 $ 242,172,567 $ 272,811,575
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds Semi-Annual Report 79
<PAGE>
Notes to Financial Statements As of October 30, 1998
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, Balanced, High
Yield Bond, Bond, Municipal Bond, Money Market, and U.S. Government Zero Coupon
Target Funds 2001 and 2006. The twelve 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, High Yield Bond, Bond, Municipal Bond and Money Market Funds. The Class
A shares are subject to a maximum 4.00% sales charge of the offering price and a
0.25% annual service fee. Class B shares are offered at net asset value and a
1.00% annual 12b-1 and service fee. In addition, Series B shares have a
contingent deferred sales charge of 5% declining 1% each year upon redemption
during the first five years. The AAL Balanced Fund added Class B shares on its
inception date of December 29, 1997.
On December 29, 1997, the Trust began issuing a third class of fund shares
(institutional) in The AAL Capital Growth, Mid Cap Stock, Small Cap Stock,
International, Equity Income, Balanced, High Yield Bond, Bond, Municipal Bond
and Money Market Funds. The Class I shares are offered at net asset value and
have no annual 12b-1 charges. 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.
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. However, for
federal income tax purposes The AAL International Fund does isolate and treat as
ordinary income the effect of changes in foreign exchange rates arising from
actual foreign currency transactions and the effect of changes in foreign
exchange rates from the fluctuations arising from trade date and settlement date
differences.
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--Each Fund intends 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 anticipate paying 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 portfolio in proportion to their respective
net assets, number of shareholder accounts or other reasonable basis. Net
investment income for the class 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 and Balanced Funds are declared and paid quarterly. Dividends
from The AAL Bond, High Yield Bond, Municipal 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 are amortized over the life of the
respective bonds in The AAL
80 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - Continued As of October 30, 1998
International, High Yield Bond, Bond, Equity Income and Balanced 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 Small Cap Stock, International, Balanced and
High Yield Bond Funds is being amortized over the period of benefit, but not to
exceed 60 months from each Fund's commencement of operation.
Generally accepted accounting principles require that permanent financial
reporting and tax differences be reclassified to trust capital.
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. Effective September 1,
1998, the annual rates of fees under the investment advisory agreement were as
follows:
<TABLE>
<CAPTION>
(M - MILLIONS) $0 TO $200M $200 TO $500M $500 TO $1,000M OVER $1,000M
======================================================================================================================
<S> <C> <C> <C> <C>
The AAL Small Cap Stock Fund 0.70% 0.65% 0.65% 0.65%
The AAL Mid Cap Stock Fund 0.70% 0.65% 0.65% 0.65%
The AAL International Fund 0.80% 0.80% 0.80% 0.80%
The AAL Capital Growth Fund 0.65% 0.65% 0.575% 0.50%
The AAL Equity Income Fund 0.45% 0.45% 0.45% 0.45%
The AAL Balanced Fund 0.55% 0.55% 0.55% 0.55%
The AAL High Yield Bond Fund 0.55% 0.55% 0.55% 0.55%
The AAL Municipal Bond Fund 0.45% 0.45% 0.45% 0.45%
The AAL Bond Fund 0.45% 0.45% 0.45% 0.45%
The AAL Money Market Fund 0.50% 0.50% 0.45% 0.45%
</TABLE>
Prior to September 1, 1998, the fees for The AAL Mutual Funds were as follows:
<TABLE>
<CAPTION>
(M - MILLIONS) $0 TO $200M $200 TO $250M $250 TO $500M $500 TO 1,000M OVER $1,000M
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Small Cap Stock Fund 0.75% 0.65% 0.65% 0.65% 0.65%
The AAL Mid Cap Stock Fund 0.75% 0.65% 0.65% 0.65% 0.65%
The AAL International Fund 0.80% 0.80% 0.80% 0.80% 0.80%
The AAL Capital Growth Fund 0.70% 0.70% 0.65% 0.575% 0.50%
The AAL Equity Income Fund 0.50% 0.50% 0.45% 0.45% 0.45%
The AAL Balanced Fund 0.60% 0.60% 0.60% 0.60% 0.60%
The AAL High Yield Bond Fund 0.60% 0.60% 0.60% 0.60% 0.60%
The AAL Municipal Bond Fund 0.50% 0.50% 0.45% 0.45% 0.45%
The AAL Bond Fund 0.50% 0.50% 0.45% 0.45% 0.45%
The AAL Money Market Fund 0.50% 0.50% 0.50% 0.45% 0.45%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 81
<PAGE>
Notes to Financial Statements - continued As of October 30, 1998
For the period May 1, 1998, to October 30, 1998, The AAL International Fund has
entered into a sub-advisory agreement with Societe Generale Asset Management
Corp., which is paid 0.55 of 1% on daily net assets (payable from the 0.80%
Annual Advisory fee paid to the Adviser). Effective November 1, 1998, the Board
of Trustees approved the termination of the sub-advisory agreement with Societe
Generale Asset Management Corporation and approved a new sub-advisory agreement
with Oeschle International Advisers LLC, which is paid 0.40% of 1% on the first
$50 million and 0.35% of 1% on average daily net assets over $50 million
(payable from the annual advisory fee paid to the Adviser).
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 period ended
October 30, 1998,: $22,500 for The AAL International Fund, $20,000 for The AAL
Capital Growth, Mid Cap Stock, Small Cap Stock Fund, Equity Income, High Yield
Bond Fund, Bond, Municipal Bond, and Money Market Funds, respectively and
$17,500 for The AAL Balanced Fund.
The Trust has also contracted with AAL Capital Management Corporation for
certain shareholder maintenance services. 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, Bond, Municipal Bond, Mid Cap Stock,
Equity Income, Balanced, International, Small Cap Stock, and High Yield Bond
Funds; 0.125% of 1% for the AAL Money Market Fund. 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, Bond, Municipal Bond, Mid Cap Stock, Equity Income,
Balanced, International, Small Cap Stock, 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. There is no 12b-1 Distribution Fee on Class I shares.
Trustees of the Trust not affiliated with AAL or the Adviser received $49,645 in
fees during the period of May 1 to October 30, 1998. 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.
The Adviser voluntarily has reimbursed various Funds since inception. As of
October 30, 1998, the Adviser is waiving expenses of The AAL Money Market Fund
of 0.425% based on 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 AAL High Yield Bond Fund; and is waiving all expenses in excess
of 1.25% for Class A and 2.00% for Class B of The AAL Balanced Fund. Voluntary
waiver of expenses to these Funds may be modified of discontinued at any time by
the Adviser.
AAL is the ultimate parent company for AAL Capital Management Corporation.
D: Security Transactions
During the year ended April 30, 1998, and the period ended October 30, 1998,
purchases and sales of securities other than short-term obligations were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------- ------------------------------
Year Ended Period Ended Year Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98
===========================================================================================
<S> <C> <C> <C> <C>
The AAL Small Cap Stock Fund $ 147,796,741 $ 85,099,944 $ 94,896,968 $ 66,444,606
The AAL Mid Cap Stock Fund 634,736,099 302,866,486 597,740,432 310,311,775
The AAL International Fund 37,362,229 118,663,853 22,491,590 101,119,261
The AAL Capital Growth Fund 489,194,062 214,275,236 394,294,099 37,298,864
The AAL Equity Income Fund 122,835,962 33,138,094 98,863,905 6,881,771
The AAL Balanced Fund* 27,104,073 56,489,746 1,430,608 15,779,020
The AAL High Yield Bond Fund 152,446,699 60,882,441 93,287,589 30,124,768
The AAL Municipal Bond Fund 664,361,670 256,540,269 607,497,985 22,167,408
The AAL Bond Fund 1,782,756,237 950,844,222 1,762,774,060 952,109,166
</TABLE>
For the year ended April 30, 1998, and six month ended October 30, 1998, The
AAL Bond Fund purchased $985,955,124 and $528,240,662 and sold $1,010,603,182
and $400,766,394 in U.S. Government Obligations.
For the period ended April 30, 1998, and six month ended October 30, 1998, The
AAL Balanced Fund purchased $6,710,502 and $20,663,548 and sold $617,844 and
$6,501,448 in U.S. Government Obligations.
*Inception 12/29/97
82 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - continued AS OF OCTOBER 30, 1998
The gross unrealized appreciation and depreciation on investments at year or
period ended April 30, 1998 and the period ended
October 30, 1998, were as follows:
<TABLE>
<CAPTION>
4/30/98 10/30/98
Net Unrealized Net Unrealized
Appreciation Appreciation
Appreciation (Depreciation) (Depreciation) Appreciation (Depreciation) (Depreciation)
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
The AAL Capital
Growth Fund $1,285,921,272 $(12,004,856) $1,273,916,416 $1,317,701,255 $(77,684,575) $1,240,016,680
The AAL Mid Cap
Stock Fund 132,609,100 (15,441,186) 117,167,914 78,959,851 (74,614,879) 4,344,972
The AAL Small Cap
Stock Fund 20,805,961 (3,743,862) 17,062,099 10,764,892 (21,078,177) (10,313,285)
The AAL
International Fund 23,333,826 (23,099,326) 234,500 11,098,658 (4,688,247) 6,410,411
The AAL
Balanced Fund 1,193,311 (209,545) 983,766 4,364,563 (2,582,134) 1,782,429
The AAL Equity
Income Fund 40,487,563 (1,673,134) 38,814,429 47,283,988 (16,036,429) 31,247,559
The AAL High Yield
Bond Fund 2,117,499 (1,344,078) 773,421 620,929 (17,112,268) (16,491,339)
The AAL Bond Fund 4,001,527 (1,129,834) 2,871,693 4,854,315 (1,659,131) 3,195,184
The AAL Municipal
Bond Fund 29,840,546 (498,498) 29,342,048 38,862,691 (307,672) 38,555,019
</TABLE>
(E) Shareholder Meeting
On October 30, 1998, a special shareholder meeting was held at which time a
majority vote of The AAL Small Cap Stock and Mid Cap Stock Funds shareholders
agreed to change its fundamental investment objective.
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund
<S> <C> <C> <C>
For 5,230,155.505 ....... 47.914% 93.998%
Against 92,370.399 ....... 0.846% 1.660%
Abstained 241,606.988 ....... 2.213% 4.342%
------------- -------
Total 5,564,132.892 ....... 50.973% 100.000%
The AAL Mid Cap Stock Fund
For 20,722,662.178 ....... 48.021% 93.827%
Against 317,918.803 ....... 0.737% 1.440%
Abstained 1,045,391.031 ....... 2.422% 4.733%
-------------- -------
Total 22,085,972.012 ....... 51.180% 100.000%
</TABLE>
Also, the shareholders of The AAL International Fund agreed to a change in sub-
adviser from Societe Generale Asset Management Corp. to Oechsle International
Advisers LLC, effective November 1, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For 7,382,768.097 ....... 53.821% 94.646%
Against 79,092.486 ....... 0.577% 1.014%
Abstained 338,536.103 ....... 2.468% 4.340%
------------- -------
Total 7,800,396.686 ....... 56.866% 100.000%
</TABLE>
Proposal to elect 7 candidates to serve on the Board of Trustees
<TABLE>
<CAPTION>
Votes
<S> <C> <C>
John H. Pender
Affirmative 282,502,836.140 51.86%
Withhold 5,458,900.926 1.00%
Richard L Gady
Affirmative 282,499,995.401 51.86%
Withhold 5,483,268.421 1.01%
Lawrence M. Woods
Affirmative 282,376,542.000 51.84%
Withhold 5,584,995.072 1.03%
F. Gregory Campbell
Affirmative 282,463,924.061 51.85%
Withhold 5,497,613.005 1.01%
John O. Gilbert
Affirmative 282,535,204.440 51.87%
Withhold 5,426,332.626 1.00%
Ronald G. Anderson
Affirmative 282,425,583.449 51.85%
Withhold 5,535,953.617 1.02%
Edward W. Smeds
Affirmative 282,300,409.506 51.82%
Withhold 5,661,127.569 1.04%
</TABLE>
D.W. Russler did not stand for re-election
Proposal to ratify PricewaterhouseCoopers as independent accountants for fiscal
year ending April 30, 1999
<TABLE>
<S> <C> <C>
Affirmative 275,960,818.636 50.66%
Against 1,573,013.706 0.29%
Abstain 10,411,000.724 1.91%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 83
<PAGE>
Notes to Financial Statements - continued AS OF OCTOBER 30, 1998
F: Trust Transactions
Transactions in trust shares were as follows:
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 4,581,398 2,124,469 707,744 307,825 30,103 49,346
Income dividends reinvested -- -- -- -- -- --
Capital gains reinvested 359,191 -- 35,879 -- -- --
Shares redeemed (770,817) (826,203) (41,520) (52,398) -- (7,499)
---------- ---------- -------- -------- ------- --------
Net increase of trust shares 4,169,772 1,298,266 702,103 255,427 30,103 41,847
========== ========== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
The AAL Mid Cap Stock Fund
-------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
-------------------------- --------------------------- ---------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 5,854,933 2,656,137 566,630 237,569 73,106 86,308
Income dividends reinvested -- -- -- -- -- --
Capital gains reinvested 3,957,823 -- 59,255 -- -- --
Shares redeemed (3,985,235) (2,832,063) (24,842) (36,943) (172) (41,126)
---------- ---------- -------- -------- ------- --------
Net increase (decrease) of trust shares 5,827,521 (175,926) 601,043 200,626 72,934 45,182
========== ========== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
The AAL International Fund
--------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
-------------------------- --------------------------- ---------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 3,772,173 1,053,446 479,030 109,174 41,212 152,967
Income dividends reinvested 456,456 -- 19,125 -- -- --
Capital gains reinvested 644,791 -- 30,027 -- -- --
Shares redeemed (2,164,121) (1,390,355) (41,612) (38,684) -- (33,630)
---------- ---------- -------- -------- ------- --------
Net increase (decrease) of trust shares 2,709,299 (336,909) 486,570 70,490 41,212 119,337
========== ========== ======== ======== ======= ========
</TABLE>
84 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - Continued As of October 30, 1998
<TABLE>
<CAPTION>
The AAL Capital Growth Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 12,378,718 6,373,968 1,344,950 628,324 104,072 307,269
Income dividends reinvested 288,468 124,970 748 -- -- 801
Capital gains reinvested 3,818,058 -- 54,225 -- -- --
Shares redeemed (6,622,943) (4,286,896) (45,132) (64,030) (3,420) (39,410)
---------- ---------- --------- -------- -------- --------
Net increase of trust shares 9,862,301 2,212,042 1,354,791 564,294 100,652 268,660
========== ========== ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
The AAL Equity Income Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 3,285,078 2,523,705 221,116 222,652 494,961 86,405
Income dividends reinvested 258,113 97,332 1,588 1,033 87 617
Capital gains reinvested 401,552 -- 4,591 -- -- --
Shares redeemed (1,967,090) (832,135) (4,028) (15,292) -- (6,662)
---------- --------- ------- ------- ------- ------
Net increase of trust shares 1,977,653 1,788,902 223,267 208,393 495,048 80,360
========== ========= ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
The AAL Balanced Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 2,577,656 4,190,178 216,251 341,408 99,473 34,396
Income dividends reinvested 4,577 40,638 234 2,360 251 1,188
Capital gains reinvested -- -- -- -- -- --
Shares redeemed (23,136) (339,422) (1,015) (11,628) -- (942)
--------- --------- ------- ------- ------ ------
Net increase of trust shares 2,559,097 3,891,394 215,470 332,140 99,724 34,642
========= ========= ======= ======= ====== ======
</TABLE>
The AAL Mutual Funds Semi-Annual Report 85
<PAGE>
Notes to Financial Statements - Continued As of October 30, 1998
<TABLE>
<CAPTION>
The AAL High Yield Bond Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 7,562,713 3,770,310 664,944 244,497 16,914 207,036
Income dividends reinvested 399,044 374,591 30,318 28,730 430 4,368
Capital gains reinvested 54,806 -- 4,779 -- -- --
Shares redeemed (2,759,953) (1,156,070) (27,277) (38,977) -- (1,272)
----------- ---------- ------- ------- ------ -------
Net increase of trust shares 5,256,610 2,988,831 672,764 234,250 17,344 210,132
=========== ========== ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 4,874,442 2,890,569 244,779 174,815 4,325 --
Income dividends reinvested 1,447,260 751,779 5,354 5,950 68 104
Capital gains reinvested 376,282 -- 1,982 -- -- --
Shares redeemed (4,333,958) (1,840,592) (5,422) (10,299) -- --
---------- ---------- -------- -------- ----- ---
Net increase of trust shares 2,364,026 1,801,756 246,693 170,466 4,393 104
========== ========== ======== ======== ===== ===
</TABLE>
<TABLE>
<CAPTION>
The AAL Bond Fund
--------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
-------------------------- --------------------------- ---------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Shares purchased 3,202,810 3,134,877 104,248 100,562 2,928,980 1,069,504
Income dividends reinvested 1,727,721 768,408 3,370 3,135 11,357 13,265
Capital gains reinvested -- -- -- -- -- --
Shares redeemed (9,960,597) (3,086,304) (4,940) (5,372) (11,686) (29,956)
----------- ---------- ------- -------- ---------- ---------
Net increase (decrease) of trust shares (5,030,066) 816,981 102,678 98,325 2,928,651 1,052,813
=========== ========== ======= ======== ========== =========
</TABLE>
86 The AAL Mutual Funds Semi-Annual Report
<PAGE>
Notes to Financial Statements - continued AS OF OCTOBER 30, 1998
<TABLE>
<CAPTION>
The AAL Money Market Fund
-------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------------- ------------------------------ -----------------------------
Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
4/30/98 10/30/98 4/30/98 10/30/98 4/30/98 10/30/98
=================================================================================================================================
<S> <C> <C> <C> <C> <C> C>
Shares purchased 328,956,368 173,423,877 3,114,103 1,712,421 505,441 26,942,689
Income dividends reinvested 10,583,981 5,820,661 41,867 24,196 1,453 124,376
Capital gains reinvested -- -- -- -- -- --
Shares redeemed (288,419,798) (164,676,896) (2,524,445) (1,416,431) (272,402) (11,315,885)
------------- ------------ ----------- ----------- -------- -----------
Net increase of trust shares 51,120,551 14,567,642 631,525 320,186 234,492 15,751,180
============= ============ =========== =========== ======== ===========
</TABLE>
G: Forward Currency Contracts
As of October 30, 1998, The AAL International Fund had entered into forward
currency contracts, as summarized below, resulting in net unrealized
depreciation of $1,337,907.
<TABLE>
<CAPTION>
Settlement Date Currency to U.S. Value at Currency to U.S. Value at
Through Be Delivered October 30, 1998 Be Received October 30, 1998
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
11/04/98 412,124 U.S. Dollar $ 412,124 2,289,346 French Franc $ 411,990
11/06/98 3,030 U.S. Dollar 3,030 4,923 Singapore Dollar 3,023
12/14/98 33,264,000 French Franc 5,986,071 5,986,071 U.S. Dollar 6,057,221
12/14/98 (33,264,000) French Franc (5,986,071) (5,986,071) U.S. Dollar (5,632,906)
12/17/98 3,023,000 Deutsche Mark 1,825,263 1,825,263 U.S. Dollar 1,800,262
12/17/98 (3,023,000) Deutsche Mark (1,825,263) (1,825,263) U.S. Dollar (1,686,777)
12/21/98 2,681,000 Australian Dollar 1,668,326 1,668,326 U.S. Dollar 1,567,839
12/21/98 (2,681,000) Australian Dollar (1,668,326) (1,668,326) U.S. Dollar (1,601,254)
12/23/98 308,000 Swiss Franc 227,457 227,457 U.S. Dollar 220,157
12/23/98 (308,000) Swiss Franc (227,457) (227,457) U.S. Dollar (212,707)
12/24/98 973,821,000 Japanese Yen 8,357,544 8,357,544 U.S. Dollar 8,044,843
12/24/98 (973,821,000) Japanese Yen (8,357,544) (8,357,544) U.S. Dollar (7,218,630)
----------- -----------
$ 415,154 $ 1,753,061
=========== ===========
</TABLE>
The AAL Mutual Funds Semi-Annual Report 87
<PAGE>
Financial Highlights PER SHARE INFORMATION
The AAL Small Cap Stock Fund
<TABLE>
<CAPTION>
Class A Class B Class A Class B
Period Ended Period Ended Year Ended Year Ended
4/30/97 4/30/97 4/30/98 4/30/98
=============================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period......................................... $ 10.00 $ 11.17 $ 9.84 $ 9.81
Income from Investment Operations
Net investment income....................................... (0.06) (0.03) (0.10) (0.16)
Net realized and unrealized gain (loss) on investments...... 0.16 (1.33) 4.73 4.67
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.10 (1.36) 4.63 4.51
=============================================================================================================================
Distributions from:
Net investment income....................................... -- -- -- --
Net realized capital gains.................................. (0.26) -- (0.63) (0.59)
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.26) 0.00 (0.63) (0.59)
==============================================================================================================================
Net increase (decrease) in
net asset value............................................. (0.16) (1.36) 4.00 3.92
Net asset value:
End of period............................................... $ 9.84 $ 9.81 $ 13.84 $ 13.73
=============================================================================================================================
Total return (d)............................................ 0.78% (12.18)% 47.97% 46.86%
Net assets, end of period................................... $44,487,852 $3,394,082 $120,285,342 $14,389,944
Ratio of expenses to
average net assets (a) (b).................................. 2.06% 3.20% 1.71% 2.60%
Ratio of net investment income to average
net assets (a) (c).......................................... (1.20)% (2.39)% (1.05)% (1.94)%
Portfolio turnover rate..................................... 138.50% 138.50% 105.60% 105.60%
</TABLE>
88 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class I Class A Class B Class I
Period Ended Period Ended Period Ended Period E
4/30/98 10/30/98 10/30/98 10/30/98
========================================================================
<S> <C> <C> <C>
$ 12.45 $ 13.84 $ 13.73 $ 13.87
(0.01) (0.05) (0.11) (0.01)
1.43 (3.20) (3.17) (3.21)
- ------------------------------------------------------------------------
1.42 (3.25) (3.28) (3.22)
========================================================================
-- -- -- --
-- -- -- --
- ------------------------------------------------------------------------
-- -- -- --
========================================================================
1.42 (3.25) (3.28) (3.22)
$ 13.87 $ 10.59 $ 10.45 $ 10.65
========================================================================
11.41% (23.48)% (23.89)% (23.29)%
$417,383 $105,752,097 $13,614,840 $ 765,958
1.19% 1.78% 2.90% 1.04%
(0.39)% (0.99)% (2.10)% (0.22)%
105.60% 56.25% 56.25% 56.25%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 89
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Mid Cap Stock Fund
<TABLE>
<CAPTION>
Class A Class B
Period Ended Year Ended Year Ended Year Ended Period Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period........................... $ 10.00 $ 10.38 $ 10.92 $ 17.11 $ 13.67
Income from Investment Operations
Net investment income......................... (0.04) (0.05) (0.10) (0.12) (0.03)
Net realized and unrealized gain (loss)
on investments................................ 0.42 0.59 6.29 (1.63) (0.95)
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.38 (0.54) 6.19 (1.75) (0.98)
================================================================================================================================
Distributions from:
Net investment income......................... -- -- -- -- --
Net realized capital gains.................... -- -- -- (2.65) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.00 0.00 0.00 (2.65) 0.00
================================================================================================================================
Net increase (decrease) in
net asset value............................... 0.38 (0.54) 6.19 (4.40) (0.98)
Net asset value:
End of period................................. $ 10.38 $ 10.92 $ 17.11 $ 12.71 $ 12.69
================================================================================================================================
Total return (d).............................. 3.80% 5.20% 56.59% (11.08)% (7.17)%
Net assets, end of period..................... $142,529,469 $220,792,070 $424,974,828 $461,732,660 $3,270,870
Ratio of expenses to average
net assets (a) (b)............................ 1.72% 1.54% 1.39% 1.35% 2.29%
Ratio of net investment income to
average net assets (a) (c).................... (1.14)% (0.77)% (0.82)% (0.94)% (1.41)%
Portfolio turnover rate....................... 55.49% 88.18% 90.14% 112.60% 112.60%
</TABLE>
90 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98 (e) 10/30/98 10/30/98 10/30/98
==========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 12.71 $ 12.69 $ 14.40 $ 15.93 $ 15.78 $ 15.96
(0.04) (0.12) 0.00 (0.02) (0.09) 0.02
4.75 4.65 1.56 (3.10) (3.07) (3.12)
- ----------------------------------------------------------------------------------------------------------
4.71 4.53 1.56 (3.12) (3.16) (3.10)
==========================================================================================================
-- -- -- -- -- --
(1.49) (1.44) -- -- -- --
- ----------------------------------------------------------------------------------------------------------
(1.49) (1.44) -- -- -- --
==========================================================================================================
3.22 3.09 1.56 (3.12) (3.16) (3.10)
$ 15.93 $ 15.78 $ 15.96 $ 12.81 $ 12.62 $ 12.86
==========================================================================================================
38.73% 37.41% 10.83% (19.64)% (20.13)% (19.42)%
$671,479,580 $13,555,367 $1,164,361 $537,844,966 $13,369,900 $1,519,360
1.30% 2.33% 0.86% 1.32% 2.48% 0.79%
(0.27)% (1.30)% 0.18% (0.28)% (1.48)% 0.26%
104.73% 104.73% 104.73% 52.75% 52.75% 52.75%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 91
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL International Fund
<TABLE>
<CAPTION>
Class A Class B Class A
Period Ended Year Ended Period Ended Year Ended
4/30/96 4/30/97 4/30/97 4/30/98
=================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period...................................... $ 10.00 $ 11.08 $ 10.98 $ 11.37
Income from Investment Operations
Net investment income.................................... 0.05 0.01 -- 0.17
Net realized and unrealized gain (loss) on investments... 1.06 0.68 0.36 0.56
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations......................... 1.11 0.69 0.36 0.73
=================================================================================================================================
Distributions from:
Net investment income.................................... (0.03) (0.34) -- (0.37)
Net realized capital gains............................... -- (0.06) -- (0.58)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions...................................... (0.03) (0.40) 0.00 (0.95)
=================================================================================================================================
Net increase (decrease) in net asset value............... 1.08 0.29 0.36 (0.22)
Net asset value:
End of period............................................ $ 11.08 $ 11.37 $ 11.34 $ 11.15
=================================================================================================================================
Total return (d)......................................... 11.07% 6.32% 3.28% 7.34%
Net assets, end of period................................ $57,117,185 $116,153,782 $2,599,958 $144,152,707
Ratio of expenses to average net assets (a) (b).......... 2.15% 2.10% 2.94% 1.91%
Ratio of net investment income to average net
assets (a) (c)........................................... 0.94% 0.88% (0.03)% 1.36%
Portfolio turnover rate.................................. 1.30% 12.95% 12.95% 19.90%
</TABLE>
92 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class B Class I Class A Class B Class I
Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98(e) 10/30/98 10/30/98 10/30/98
==========================================================================================
<S> <C> <C> <C> <C>
$ 11.34 $ 10.11 $ 11.15 $ 11.05 $ 11.17
0.13 0.03 0.10 0.03 0.10
0.49 1.03 (1.01) (0.98) (0.98)
- ------------------------------------------------------------------------------------------
0.62 1.06 (0.91) (0.95) (0.88)
==========================================================================================
(0.33) - - - -
(0.58) - - - -
- ------------------------------------------------------------------------------------------
(0.91) 0.00 - - -
==========================================================================================
(0.29) 1.06 (0.91) (0.95) (0.88)
$ 11.05 $ 11.17 $ 10.24 $ 10.10 $ 10.29
==========================================================================================
6.30% 10.48% (8.16)% (8.60)% (7.88)%
$7,910,025 $460,269 $128,972,493 $7,938,509 $1,652,106
2.90% 1.19% 1.80% 2.89% 1.14%
0.34% 2.38% 1.80% 0.69% 2.26%
19.90% 19.90% 91.19% 91.19% 91.19%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 93
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Capital Growth Fund
<TABLE>
<CAPTION>
Class A Class B
Year Ended Year Ended Year Ended Year Ended Period Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period............................. $ 14.83 $ 14.49 $ 15.56 $ 18.79 $ 20.66
Income from Investment Operations
Net investment income........................... 0.30 0.27 0.20 0.13 (0.01)
Net realized and unrealized gain (loss) on
investments.................................... (0.29) 1.70 3.76 3.68 0.80
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations................ 0.01 1.97 3.96 3.81 0.79
================================================================================================================================
Distributions from:
Net investment income........................... (0.29) (0.30) (0.22) (0.15) -
Net realized capital gains...................... (0.06) (0.60) (0.51) (0.95) -
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions............................. (0.35) (0.90) (0.73) (1.10) 0.00
================================================================================================================================
Net increase (decrease) in net asset value...... (0.34) 1.07 3.23 2.71 0.79
Net asset value:
End of period................................... $ 14.49 $ 15.56 $ 18.79 $ 21.50 $ 21.45
================================================================================================================================
Total return (d)................................ 0.00% 14.37% 25.85% 20.55% 3.82%
Net assets, end of period....................... $868,850,190 $1,032,168,121 $1,381,352,221 $1,794,422,211 $11,025,073
Ratio of expenses to average net assets
(a) (b)......................................... 1.18% 1.17% 1.12% 1.06% 1.89%
Ratio of net investment income to average net
assets (a) (c)................................. 2.07% 1.89% 1.16% 0.62% (0.39)%
Portfolio turnover rate......................... 40.60% 33.34% 44.26% 24.30% 24.30%
</TABLE>
94 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98(e) 10/30/98 10/30/98 10/30/98
==========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 21.50 $ 21.45 $ 26.05 $ 29.64 $ 29.38 $ 29.67
0.10 0.04 0.02 0.07 (0.08) 0.11
9.26 9.06 3.60 (0.23) (0.24) (0.22)
- ----------------------------------------------------------------------------------------------------------
9.36 9.10 3.62 (0.16) (0.32) (0.11)
==========================================================================================================
(0.08) (0.03) - (0.04) - (0.09)
(1.14) (1.14) - - - -
- ----------------------------------------------------------------------------------------------------------
(1.22) (1.17) - (0.04) - (0.09)
==========================================================================================================
8.14 7.93 3.62 (0.20) (0.32) (0.20)
$ 29.64 $ 29.38 $ 29.67 $ 29.44 $ 29.06 $ 29.47
==========================================================================================================
44.48% 43.25% 13.90% (0.54)% (1.09)% (0.37)%
$2,766,709,385 $54,900,438 $2,985,982 $2,813,102,858 $70,713,204 $10,882,915
0.98% 1.90% 0.58% 0.97% 2.03% 0.59%
0.39% (0.58)% 0.52% 0.45% (0.60)% 0.83%
17.96% 17.96% 17.96% 1.41% 1.41% 1.41%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 95
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Equity Income Fund
<TABLE>
<CAPTION>
Class A Class B
Period Ended Year Ended Year Ended Year Ended Period Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period............................. $ 10.00 $ 9.95 $ 9.47 $ 10.90 $ 11.40
Income from Investment Operations
Net investment income........................... 0.02 0.34 0.36 0.39 0.05
Net realized and unrealized gain (loss)
on investments.................................. (0.07) (0.50) 1.42 0.45 (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.05) (0.16) 1.78 0.84 (0.01)
================================================================================================================================
Distributions from:
Net investment income........................... -- (0.32) (0.35) (0.40) (0.02)
Net realized capital gains...................... -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.00 (0.32) (0.35) (0.40) (0.02)
================================================================================================================================
Net increase (decrease) in
net asset value................................. (0.05) (0.48) 1.43 0.44 (0.02)
Net asset value:
End of period................................... $ 9.95 $ 9.47 $ 10.90 $ 11.34 $ 11.37
================================================================================================================================
Total return (d)................................ (0.50)% (1.51)% 18.90% 7.88% (0.04)%
Net assets, end of period....................... $15,423,861 $70,861,404 $114,460,386 $134,196,399 $494,969
Ratio of expenses to average
net assets (a) (b).............................. 1.60% 1.19% 1.20%
Ratio of net investment income to............... 1.15% 1.99%
average net assets (a) (c)...................... 5.12% 4.08% 3.58% 3.57% 2.36%
Portfolio turnover rate......................... 0.00% 24.65% 21.79% 5.14% 5.14%
</TABLE>
96 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98 10/30/98 10/30/98 10/30/98
=========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 11.34 $ 11.37 $ 13.14 $ 14.31 $ 14.31 $ 14.32
0.27 0.19 0.08 0.09 0.01 0.10
3.44 3.41 1.16 (0.69) (0.67) (0.67)
- ---------------------------------------------------------------------------------------------------------
3.71 3.60 1.24 (0.60) (0.66) (0.57)
=========================================================================================================
(0.29) (0.21) (0.06) (0.09) (0.04) (0.12)
(0.45) (0.45) -- -- -- --
- ---------------------------------------------------------------------------------------------------------
(0.74) (0.66) (0.06) (0.09) (0.04) (0.12)
=========================================================================================================
2.97 2.94 1.18 (0.69) (0.70) (0.69)
$ 14.31 $ 14.31 $ 14.32 $ 13.62 $ 13.61 $ 13.63
=========================================================================================================
33.50% 32.42% 9.34% (4.11)% (4.64)% (3.90)%
$197,653,829 $3,818,315 $7,087,176 $212,556,986 $6,468,515 $7,845,039
1.11% 2.04% 0.68% 1.10% 2.14% 0.64%
2.17% 0.96% 2.10% 1.37% 0.33% 1.83%
64.00% 64.00% 64.00% 3.44% 3.44% 3.44%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 97
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Balanced Fund
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Period Ended Period Ended Period Ended Period Ended Period Ended Period End
4/30/98 (e) 4/30/98 (e) 4/30/98 (e) 10/30/98 10/30/98 10/30/98
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period....................... $ 10.00 $ 10.00 $ 10.00 $ 10.81 $ 10.79 $ 10.79
Income from Investment Operations
Net investment income..................... 0.04 0.03 0.04 0.10 0.06 0.10
Net realized and unrealized gain (loss)
on investments............................ 0.80 0.78 0.78 0.08 0.08 0.09
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.84 0.81 0.82 0.18 0.14 0.19
================================================================================================================================
Distributions from:
Net investment income..................... (0.03) (0.02) (0.03) (0.09) (0.06) (0.10)
Net realized capital gains................ -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.02) (0.03) (0.09) (0.06) (0.10)
================================================================================================================================
Net increase (decrease) in net
asset value............................... 0.81 0.79 0.79 0.09 0.08 0.09
Net asset value:
End of period............................. $ 10.81 $ 10.79 $ 10.79 $ 10.90 $ 10.87 $ 10.88
================================================================================================================================
Total return (d).......................... 8.37% 8.10% 8.17% 1.71% 1.33% 1.80%
Net assets, end of period................. $27,674,985 $2,325,727 $1,076,355 $70,323,082 $5,953,273 $1,462,170
Ratio of expenses to average
net assets (a) (b)........................ 1.37% 2.11% 1.95% 1.25% 2.00% 1.03%
Ratio of net investment income to
average net assets (a) (c)................ 2.19% 1.45% 1.76% 2.17% 1.42% 2.36%
Portfolio turnover rate................... 11.52% 11.52% 11.52% 35.32% 35.32% 35.32%
</TABLE>
98 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
This Page Intentionally Left Blank
The AAL Mutual Funds Semi-Annual Report 99
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL High Yield Bond Fund
<TABLE>
<CAPTION>
Class A Class B Class A
Period Ended Period Ended Year Endeded
4/30/97 4/30/97 4/30/98
====================================================================================================================
<S> <C> <C> <C>
Net Asset Value:
Beginning of period........................................... $ 10.00 $ 10.00 $ 9.88
Income from Investment Operations
Net investment income......................................... 0.27 0.25 0.92
Net realized and unrealized gain (loss) on
investments................................................... (0.12) (0.12) 0.53
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.15 0.13 1.45
====================================================================================================================
Distributions from:
Net investment income......................................... (0.27) (0.25) (0.92)
Net realized capital gains.................................... -- -- (0.10)
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (0.25) (1.02)
====================================================================================================================
Net increase (decrease) in net asset value.................... (0.12) (0.12) 0.43
Net asset value:
End of period................................................. $ 9.88 $ 9.88 $ 10.31
====================================================================================================================
Total return (d).............................................. 1.51% 1.31% 15.12%
Net assets, end of period..................................... $44,680,637 $2,660,309 $100,828,858
Ratio of expenses to average net assets (a) (b)............... 1.00% 1.75% 0.99%
Ratio of net investment income to average net
assets (a) (c)................................................ 9.11% 8.66% 8.94%
Portfolio turnover rate....................................... 36.90% 36.90% 112.37%
</TABLE>
100 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class B Class I Class A Class B Class I
Year Ended Period Ended Period Ended Period Ended Period End
4/30/98 4/30/98 (e) 10/30/98 10/30/98 10/30/98
=======================================================================================
<S> <C> <C> <C> <C>
$ 9.88 $ 10.29 $ 10.31 $ 10.31 $ 10.31
0.84 0.31 0.45 0.41 0.46
0.53 0.02 (1.43) (1.43) (1.44)
- ---------------------------------------------------------------------------------------
1.37 0.33 (0.98) (1.02) (0.98)
=======================================================================================
(0.84) (0.31) (0.45) (0.41) (0.46)
(0.10) -- -- -- --
- ---------------------------------------------------------------------------------------
(0.94) (0.31) (0.45) (0.41) (0.46)
=======================================================================================
0.43 0.02 (1.43) (1.43) (1.44)
$ 10.31 $ 10.31 $ 8.88 $ 8.88 $ 8.87
=======================================================================================
14.27% 3.28% (9.76)% (10.09)% (9.79)%
$9,714,463 $178,730 $113,350,755 $10,441,295 $2,017,951
1.74% 0.75% 1.00% 1.75% 0.82%
8.22% 9.53% 9.38% 8.57% 9.72%
112.37% 112.37% 25.97% 25.97% 25.97%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 101
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Municipal Bond Fund
<TABLE>
<CAPTION>
Class A Class B
Year Year Year Year Period
Ended Ended Ended Ended Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period.......... $ 10.99 $ 10.56 $ 10.69 $ 10.91 $ 11.02
Income from Investment
Operations
Net investment income........ 0.54 0.52 0.52 0.52 0.14
Net realized and
unrealized gain (loss)
on investments.............. (0.41) 0.19 0.30 0.19 (0.10)
- -------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations.................. 0.13 0.71 0.82 0.71 0.04
===================================================================================================================
Distributions from:
Net investment income........ (0.54) (0.52) (0.52) (0.52) (0.14)
Net realized capital gains... (0.02) (0.06) (0.08) (0.18) -
- -------------------------------------------------------------------------------------------------------------------
Total Distributions.......... (0.56) (0.58) (0.60) (0.70) (0.14)
===================================================================================================================
Net increase (decrease) in
net asset value............. (0.43) 0.13 0.22 0.01 (0.10)
Net asset value:
End of period................ $ 10.56 $ 10.69 $ 10.91 $ 10.92 $ 10.92
===================================================================================================================
Total return (d)............. 1.04% 7.01% 7.74% 6.64% 0.34%
Net assets, end of period.... $370,568,847 $377,764,861 $412,777,320 $421,668,316 $764,783
Ratio of expenses to
average net assets (a) (b).. 0.99% 0.98% 0.95% 0.89% 1.69%
Ratio of net investment
income to average net
assets (a) (c).............. 4.87% 5.01% 4.69% 4.69% 4.09%
Portfolio turnover rate...... 10.15% 172.49% 130.52% 119.79% 119.79%
</TABLE>
102 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Year Period Period Period Period
Ended Ended Ended Ended Ended Ended
4/30/98 4/30/98 4/30/98 10/30/98 10/30/98 10/30/98
=======================================================================================
<S> <C> <C> <C> <C> <C>
$ 10.92 $ 10.92 $ 11.59 $ 11.40 $ 11.40 $ 11.40
0.52 0.42 0.18 0.26 0.21 0.27
0.61 0.61 (0.19) 0.34 0.34 0.34
- ----------------------------------------------------------------------------------------
1.13 1.03 (0.01) 0.60 0.55 0.61
========================================================================================
(0.52) (0.42) (0.18) (0.26) (0.21) (0.27)
(0.13) (0.13) -- -- -- --
- ----------------------------------------------------------------------------------------
(0.65) (0.55) (0.18) (0.26) (0.21) (0.27)
========================================================================================
0.48 0.48 (0.19) 0.34 0.34 0.34
$ 11.40 $ 11.40 $ 11.40 $ 11.74 $ 11.74 $ 11.74
========================================================================================
10.50% 9.58% (0.09)% 5.30% 4.86% 5.42%
$467,145,934 $3,609,800 $ 50,091 $502,286,746 $5,719,131 $ 52,811
0.85% 1.74% 0.60% 0.82% 1.65% 0.58%
4.55% 3.67% 4.79% 4.46% 3.64% 4.70%
139.18% 139.18% 139.18% 45.76% 45.76% 45.76%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 103
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Bond Fund
<TABLE>
<CAPTION>
Class A Class B
Year Ended Year Ended Year Ended Period Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of period ...................... $ 10.61 $ 9.69 $ 9.61 $ 9.62 $ 9.71
Income from Investment Operations
Net investment income .................... 0.58 0.58 0.58 0.60 0.18
Net realized and unrealized gain
(loss) on investments .................... (0.66) (0.08) 0.01 0.01 (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.08) 0.50 0.59 0.61 0.11
=============================================================================================================================
Distributions from:
Net investment income..................... (0.58) (0.58) (0.58) (0.60) (0.18)
Net realized capital gains................ (0.26) (0.00) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.84) (0.58) (0.58) (0.60) (0.18)
=============================================================================================================================
Net increase (decrease) in
net asset value .......................... (0.92) (0.08) 0.01 0.01 (0.07)
Net asset value:
End of period ............................ $ 9.69 $ 9.61 $ 9.62 $ 9.63 $ 9.64
=============================================================================================================================
Total return (d).......................... (0.99)% 5.47% 6.18% 6.43% 0.96%
Net assets, end of period................. $442,962,543 $429,355,163 $430,846,686 $389,342,652 $390,959
Ratio of expenses to
average net assets (a) (b)................ 1.02% 1.03% 1.01% 0.98% 1.86%
Ratio of net investment
income to
average net assets (a) (c)................ 5.61% 6.12% 5.89% 6.10% 5.51%
Portfolio turnover rate................... 27.75% 44.57% 125.77% 212.49% 212.49%
</TABLE>
104 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 (e) 4/30/98 (e) 10/30/98 10/30/98 10/30/98
========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 9.63 $ 9.64 $ 10.06 $ 9.99 $ 9.99 $ 9.99
0.57 0.48 0.20 0.27 0.21 0.29
0.36 0.35 (0.07) 0.22 0.22 0.22
- ---------------------------------------------------------------------------------------------------------
0.93 0.83 0.13 0.49 0.43 0.51
=========================================================================================================
(0.57) (0.48) (0.20) (0.27) (0.21) (0.29)
-- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
(0.57) (0.48) (0.20) (0.27) (0.21) (0.29)
=========================================================================================================
0.36 0.35 (0.07) 0.22 0.22 0.22
$ 9.99 $ 9.99 $ 9.99 $ 10.21 $ 10.21 $ 10.21
========================================================================================================
9.86% 8.75% 1.24% 4.90% 4.38% 5.11%
$53,405,552 $1,431,449 $29,249,736 $369,662,354 $2,467,348 $40,656,546
0.95% 1.92% 0.56% 0.92% 1.92% 0.53%
5.77% 4.74% 6.29% 5.24% 4.26% 5.63%
483.76% 483.76% 483.76% 249.50% 249.50% 249.50%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 105
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Money Market Fund
<TABLE>
<CAPTION>
Class A Class B
Year Ended Year Ended Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
==================================================================================================================================
<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................................. 0.02 0.04 0.05 0.05 0.01
Net realized and unrealized gain (loss)
on investments........................................ -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.02 0.04 0.05 0.05 0.01
==================================================================================================================================
Distributions from:
Net investment income................................. (0.02) (0.04) (0.05) (0.05) (0.01)
Net realized capital gains............................ -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.04) (0.05) (0.05) (0.01)
==================================================================================================================================
Net increase (decrease) in net asset value............ 0.00 0.00 0.00 0.00 0.00
Net asset value:
End of period......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==================================================================================================================================
Total return (d)...................................... 1.95% 3.92% 4.94% 5.21% 1.32%
Net assets, end of period............................. $65,008,303 $70,210,675 $116,014,091 $189,616,902 $569,097
Ratio of expenses to average
net assets (a) (b).................................... 1.26% 1.17% 0.83% 0.55% 1.78%
Ratio of net investment income to
average net assets (a) (c)........................... 2.00% 3.95% 4.89% 4.91% 3.81%
Portfolio turnover rate............................... N/A N/A N/A N/A N/A
</TABLE>
106 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98(e) 10/30/98 10/30/98 10/30/98
======================================================================================
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
0.05 0.04 0.02 0.01 0.01 0.01
-- -- -- -- -- --
- --------------------------------------------------------------------------------------
0.05 0.04 0.02 0.01 0.01 0.01
======================================================================================
(0.05) (0.04) (0.02) (0.01) (0.01) (0.01)
-- -- -- -- -- --
- --------------------------------------------------------------------------------------
(0.05) (0.04) (0.02) (0.01) (0.01) (0.01)
======================================================================================
0.00 0.00 0.00 0.00 (0.00) (0.00)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================================================
5.12% 4.26% 1.67% 2.44% 1.95% 2.60%
$240,737,453 $1,200,622 $234,492 $255,305,095 $1,520,808 $15,985,672
0.68% 1.65% 0.67% 0.79% 1.76% 0.56%
4.98% 4.02% 5.11% 4.79% 3.82% 5.02%
N/A N/A N/A N/A N/A N/A
</TABLE>
The AAL Mutual Funds Semi-Annual Report (unaudited) 107
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
(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>
Class A Class B
Year Ended Year Ended Year Ended Year Ended Period Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Capital Growth Fund....................... 1.18% 1.17% 1.12% 1.06% 1.89%
The AAL Mid Cap Stock Fund........................ 1.73% 1.54% 1.39% 1.35% 2.29%
The AAL Small Cap Stock Fund...................... -- -- -- 2.06% 3.21%
The AAL International Fund........................ -- -- 2.32% 2.10% 2.94%
The AAL Equity Income Fund........................ 2.91% 1.19% 1.20% 1.15% 1.99%
The AAL Balanced Fund............................. -- -- -- -- --
The AAL Bond Fund................................. 1.02% 1.03% 1.01% 0.98% 1.86%
The AAL Municipal Bond Fund....................... 0.99% 0.98% 0.95% 0.89% 1.69%
The AAL High Yield Bond Fund...................... -- -- -- 1.28% 2.00%
The AAL Money Market Fund......................... 1.51% 1.42% 1.28% 1.10% 3.54%
</TABLE>
(c) If the Funds had paid all of their expenses the ratios would have been as
follows:
<TABLE>
<CAPTION>
Class A Class B
Year Ended Year Ended Year Ended Year Ended Period Ended
4/30/94 4/30/95 4/30/96 4/30/97 4/30/97
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Capital Growth Fund....................... 2.07% 1.89% 1.16% 0.62% (0.39)%
The AAL Mid Cap Stock Fund........................ (1.14)% (0.77)% (0.82)% (0.94)% (1.41)%
The AAL Small Cap Stock Fund...................... -- -- -- (1.20)% (2.40)%
The AAL International Fund........................ -- -- 0.77% 0.88% (0.03)%
The AAL Equity Income Fund........................ 3.81% 4.08% 3.58% 3.57% 2.36%
The AAL Balanced Fund............................. -- -- -- -- --
The AAL Bond Fund................................. 5.61% 6.12% 5.89% 6.10% 5.51%
The AAL Municipal Bond Fund....................... 4.87% 5.01% 4.69% 4.69% 4.09%
The AAL High Yield Bond Fund...................... -- -- -- 8.83% 8.41%
The AAL Money Market Fund......................... 1.75% 3.70% 4.46% 4.36% 2.05%
</TABLE>
(d) Total return calculations are based on net amount invested. Periods less
than one year are not annualized. All returns exclude any sales changes.
(e) Commenced operations December 29, 1997.
108 The AAL Mutual Funds Semi-Annual Report (unaudited)
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98(e) 10/30/98 10/30/98 10/30/98
=======================================================================================
<S> <C> <C> <C> <C> <C>
0.98% 1.90% 0.58% 0.97% 2.03% 0.59%
1.30% 2.33% 0.86% 1.32% 2.48% 0.79%
1.71% 2.60% 1.19% 1.78% 2.90% 1.04%
1.91% 2.90% 1.19% 1.80% 2.89% 1.14%
1.11% 2.04% 0.68% 1.10% 2.14% 0.64%
1.63% 2.50% 1.98% 1.52% 2.37% 1.03%
0.95% 1.92% 0.56% 0.92% 1.92% 0.53%
0.85% 1.74% 0.60% 0.82% 1.65% 0.58%
1.18% 2.05% 0.75% 1.19% 2.12% 0.82%
1.04% 2.01% 1.43% 1.12% 2.08% 0.78%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class I Class A Class B Class I
Year Ended Year Ended Period Ended Period Ended Period Ended Period Ended
4/30/98 4/30/98 4/30/98(e) 10/30/98 10/30/98 10/30/98
=======================================================================================
<S> <C> <C> <C> <C> <C>
0.39% (0.58)% 0.52% 0.45% (0.60)% 0.83%
(0.27)% (1.30)% 0.18% (0.28)% (1.43)% 0.26%
(1.05)% (1.94)% (0.39)% (0.98)% (2.10)% (0.22)%
1.36% 0.34% 2.38% 1.80% 0.69% 2.26%
2.17% 0.96% 2.10% 1.37% 0.33% 1.83%
1.93% 1.06% 1.76% 1.90% 1.05% 2.36%
5.77% 4.74% 6.29% 5.24% 4.26% 5.63%
4.55% 3.67% 4.79% 4.46% 3.64% 4.70%
8.75% 7.90% 9.53% 9.19% 8.20% 9.72%
4.62% 3.67% 4.36% 4.47% 3.50% 4.80%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 109
<PAGE>
Board John H. Pender - Chairman of the Board
of Ronald G. Anderson
Trustees F. Gregory Campbell
Richard L. Gady
John O. Gilbert
D.W. Russler
Lawrence M. Woods
Officers Ronald G. Anderson - President
Charles D. Gariboldi, Jr. - Treasurer
Robert G. Same - Vice President & Secretary
Joseph F. Wreschnig - Assistant Secretary
Investment AAL Capital Management Corporation
Adviser & 222 West College Avenue
Distributor Appleton, WI 54919-0007
Sub-Adviser Societe Generale Asset Management Corp.
(The AAL International 1221 Avenue of the Americas
Fund Only) New York, NY 10020
Custodian Citibank, N.A.
111 Wall Street
New York, NY 10043
Transfer Agent & Firstar Trust Company
Disbursing 615 East Michigan Street
Agent P.O. Box 2981
Milwaukee, WI 53201-2981
Custodian The Chase Manhattan Bank, N.A.
(The AAL International Chase Metro Tech Center
Fund Only) Brooklyn, NY 11245
Legal Quarles & Brady
Counsel 411 East Wisconsin Avenue
Milwaukee, WI 53202
Independent PricewaterhouseCoopers
Accountants 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
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]
