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
Annual Report April 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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<PAGE>
Table of Contents
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....................... 40
The AAL Equity Income Fund........................ 44
The AAL Balanced Fund............................. 48
The AAL High Yield Bond Fund...................... 52
The AAL Municipal Bond Fund....................... 58
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...................... 87
The AAL Mid Cap Stock Fund........................ 88
The AAL International Fund........................ 90
The AAL Capital Growth Fund....................... 92
The AAL Equity Income Fund........................ 94
The AAL Balanced Fund............................. 96
The AAL High Yield Bond Fund...................... 97
The AAL Municipal Bond Fund....................... 98
The AAL Bond Fund.................................100
The AAL Money Market Fund.........................102
Report of Independent Accountants......................106
The AAL Mutual Funds Annual Report April 30, 1998 1
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL REPORT ... PRESIDENT'S LETTER
[PHOTO]
APRIL 30, 1998
Dear AAL Mutual Funds Shareholder:
Economy and Markets
Despite the volatility of the markets, the U.S. economy turned in an excellent
performance over the past fiscal year. We watched the stock market climb to
record highs and, in October, reacting to falling Asian markets, drop
precipitously in the largest single-day decline in the last decade. Still, the
U.S. financial markets remain the strongest in the world. Fueled by a lack of
inflationary pressure and continued earnings growth, both the stock and bond
markets provided investors with high returns. For the third consecutive year,
stocks returned over twenty percent, with small- and mid-cap stocks lagging
somewhat behind large-cap stocks. Although the general economic turmoil and
stock market and currency declines in Southeast Asia impacted global markets in
the fourth quarter of 1997, investors' enthusiasm for stocks and bonds remained
high, evidenced by the continued flow of dollars into mutual funds. This gives
me an opportunity to remind you, once again, that investors who try to second-
guess the direction the markets will move are rarely as successful as those who
invest with a systematic, disciplined, long-term approach.
Outlook
Going forward, many economists predict that the most likely outcome for 1998
will be one of moderate growth, low unemployment and low inflation. Interest
rates are predicted to remain favorable and the long-term outlook for U.S.
corporations appears bright. Although the economy is expected to grow, observers
believe that it will be at a slower pace than we have seen the last three years.
This can be attributed, in part, to the economic weakness in much of Asia and
other emerging markets. It is unclear what long-term impact the Asian crisis
will have on U.S. markets.
Fund Highlights
Once again, The AAL Mutual Funds have had an outstanding year. We are excited
with the progress of the newest addition to our Funds, The AAL Balanced Fund.
The AAL Balanced Fund gives investors the ability to participate in the
performance of
2 The AAL Mutual Funds Annual Report
<PAGE>
L REPORT ... PRESIDENT'S LETTER
the equity markets, while at the same time providing them with a steady income
stream. We are also pleased with the outcome of the change in investment focus
of The AAL Equity Income Fund (formerly The AAL Utilities Fund). This transition
was completed ahead of schedule due to favorable market conditions.
We, at AAL Capital Management Corporation, would like to thank you for your
continued loyalty to The AAL Mutual Funds and look forward to continuing to
service your financial needs in the future. If you have any questions regarding
your account(s), please call 800-553-6319 to speak to a Mutual Fund Service
Center Representative or to access Capital Connection to obtain information
regarding your investments. You should also feel free to call your local
Registered Representative, who is always happy to help you. Please see the
remainder of this annual report for more detailed information about all of The
AAL Mutual Funds.
Very truly yours,
/s/ Ronald G. Anderson
- ----------------------
Ronald G. Anderson
President
THE AAL MUTUAL FUNDS
Our Growth in Net Assets
[BAR GRAPH APPERARS HERE]
<TABLE>
<CAPTION>
$ in Billions
-------------
<S> <C>
4/30/88 62,634,194
4/30/89 287,356,102
4/30/90 516,961,263
4/30/91 692,824,480
4/30/92 975,182,233
4/30/93 1,443,709,926
4/30/94 1,908,532,585
4/30/95 2,204,307,971
4/30/96 2,940,833,455
4/30/97 3,624,635,195
4/30/98 5,248,971,887
</TABLE>
April 30, 1998 3
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
.....A Share Ticker.....AASMX .....B Share Ticker.....BBSMX....
.....A Share Assets.....$120,285,342.....B Share Assets.....
[PHOTO APPEARS HERE]
The AAL Small Cap Stock Fund
Are you pleased with the performance of the Fund over the year ended April 30,
1998? How does it compare to the performance of other small capitalization
mutual funds?
I believe the Fund has done pretty well--up nearly 48% based on net amount
invested in Class A shares. This return is slightly higher than the S&P SmallCap
600 Index/1/. Technology and growth companies in general had a good period. A
big contributor to the performance over the last year has been Atlantic Coast
Airlines, which was up by nearly 300%. The company benefited from a very strong
economy and lower fuel prices.
I read that the financial crisis in Southeast Asia will end up hurting U.S.
small companies most of all. Is this accurate? If so, what defensive measures
are you taking?
The problems in Southeast Asia have had an impact on many companies, including
smaller companies. The slowdown of the Asian economies has hurt some of the
companies in terms of revenues and profits, especially companies in the
technology area. Other small-cap companies and their stocks have been hurt by a
negative investor sentiment. In times of uncertainty, such as with the Asian
problem, investors are more likely to favor that which they perceive to be more
secure. The perception by investors is that the large-cap stocks are more secure
than small-cap stocks, despite the fact that many smaller companies have little
or no exposure to the problems in Southeast Asia. As far as defensive measures
are concerned, I have tried a few things, but it is difficult
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
THE AAL SMALL CAP STOCK FUND FUND S&P 500(R) INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
01-Jul-96 $ 9,596.93 7/1/96 $10,000.00
31-Jul-96 9,165.07 7/31/96 9,312.20
30-Aug-96 10,316.70 8/30/96 9,887.05
30-Sep-96 10,786.95 9/30/96 10,320.43
31-Oct-96 10,441.46 10/31/96 10,249.09
29-Nov-96 10,681.38 11/29/96 10,781.09
30-Dec-96 10,870.47 12/31/96 10,907.24
31-Dec-96 11,008.07 1/31/97 11,088.69
31-Jan-97 11,047.38 2/28/97 10,859.26
28-Feb-97 10,565.78 3/31/97 10,302.18
31-Mar-97 9,887.61 4/30/97 10,428.17
30-Apr-97 9,671.38 5/30/97 11,652.96
30-May-97 11,145.67 6/30/97 12,167.83
30-Jun-97 11,912.30 7/31/97 12,932.70
31-Jul-97 12,452.88 8/29/97 13,258.33
29-Aug-97 12,836.20 9/30/97 14,135.03
30-Sep-97 13,789.57 10/31/97 13,525.24
31-Oct-97 13,229.34 11/28/97 13,426.88
28-Nov-97 13,101.57 12/31/97 13,697.22
15-Dec-97 12,418.79 1/30/98 13,430.13
31-Dec-97 12,863.43 2/27/98 14,653.21
30-Jan-98 12,646.28 3/31/98 15,212.30
27-Feb-98 13,701.00 4/30/98 15,301.43
31-Mar-98 14,145.63
30-Apr-98 14,311.08
/1/ An unmanaged index comprised of 600 stocks designed to represent
performance of the small-cap segment of the U.S. equity markets.
Average Annual Total Returns*
April 30, 1998
From Inception
1-Year Inception Date
-------------------------
Class A (without sales charge)............. 47.97% 24.40% 7/1/96
Class A** (with sales charge).............. 42.05% 21.64% 7/1/96
- ----------------------------------------------------------------------
Class B (without CDSC)..................... 46.86% 21.50% 1/8/97
Class B** (with CDSC)...................... 42.86% 18.60% 1/8/97
- ----------------------------------------------------------------------
Class I***................................. NA 11.41% 12/29/97
- ----------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge).............. 37.33% 21.95%
Class B** (with CDSC)...................... 37.92% 18.86%
* 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 represent total return and are not annualized.
4 The AAL Mutual Funds Annual Report
<PAGE>
REPORT ... EQUITY - ORIENTED FUNDS
.$14,389,944...I Share Assets...$417,383...A Share NAV...$13.84...B Share
NAV...$13.73...I Share NAV ...$13.87...Number of Securities in
Portfolio...152...
to take such measures in the small-cap market. One example is that I
have looked at investing in companies that benefit from the Asian problem, such
as those producing in Asia and selling in the United States.
Why can't I find the companies you invest in under the "New York Stock Exchange"
listing in financial publications? Isn't that where all reputable stocks are
traded?
Many of the companies that I invest in are not traded on the New York Stock
Exchange, but rather on the NASDAQ market. This is where you will see many
smaller, less-established companies. The NASDAQ market is comprised of many
broker-dealers who are linked electronically. These broker-dealers offer prices
at which they will buy or sell shares in the stocks in which they "make a
market." The New York Stock Exchange is a very centralized market while the
NASDAQ market is very decentralized. Both can be very efficient, and
occasionally, very inefficient. Some of America's best-known companies are
traded on the NASDAQ, such as Microsoft and Intel.
/s/ Kevin A. Schmitting
Kevin A. Schmitting
Portfolio Manager
#
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
.Consumer Cyclicals.............................................17% 18%
.Technology.....................................................16% 20%
.Capital Goods..................................................15% 13%
.Financials.....................................................13% 9%
.Health Care....................................................10% 14%
.Consumer Staples...............................................10% 8%
.Energy......................................................... 6% 6%
.Cash & Cash Equivalents........................................ 4% 2%
.Transportation................................................. 3% 4%
.Basic Materials................................................ 2% 3%
.Utilities...................................................... 2% 3%
.Communication Services......................................... 2% NA
--------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
------------------
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
General Cable Corporation.....................................1.68% NA
Designs, develops, manufactures, markets and distributes
copper wire and cable products for the communications and
electrical markets
Tower Automotive, Inc.........................................1.58% 1.40%
Designs and produces body structure components
and assemblies
Applied Power, Inc............................................1.52% 0.40%
Configures technical equipment for end users and
provides enclosures for electronic equipment
BE Aerospace, Inc.............................................1.50% NA
Produces military aircraft, satellites, guidance weapons
and other systems
SOS Staffing Services, Inc....................................1.47% 1.00%
Provides staffing and consulting services
</TABLE>
- --------------------------------------------------------------------------------
April 30, 1998 5
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
....A Share Ticker...AASCX....B Share Ticker...BBSCX....
A Share Assets...$671,479,580....B Share Assets......
[PHOTO APPEARS HERE]
The AAL Mid Cap Stock Fund
What factors affected the performance of your Fund for the year ended April 30,
1998?
The key factors influencing the Fund during the year are the same factors that
influenced the entire domestic equity market. The combination of low inflation
and strong economic growth is an ideal environment for stocks of all kinds. The
moderate and declining inflation numbers in the U.S. economy led to relatively
stable interest rates at rather low levels throughout the year. This meant that
borrowing costs for companies were low, and stocks provided attractive returns
to investors relative to bonds. In addition, the U.S. economy grew strongly
during the year. This allowed corporate earnings to continue to grow at levels
exceeding the market's expectations. Economists could not have constructed a
better environment for the stock market.
Which stocks in your portfolio really stood out over that period?
Royal Caribbean is the second largest cruise line operator in the world. If
they've done their job, each of you should be familiar with the company. A
variety of factors including favorable demographic trends, strong operational
improvements and a key acquisition came together during the year to produce a
return of over 114%. With this being one of the larger positions in the
portfolio, it was a strong contributor.
AES Corp. is the world's largest independent power producer. The company builds,
owns and operates electricity generating facilities both in the U.S. and abroad.
By continuing to prove its excellence as an operator, AES was able to expand its
generating capacity and therefore, its revenues
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
THE AAL MID CAP STOCK FUND S&P 400 MIDCAP INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
30-Jun-93 $9,596.93 6/30/93 $10,000.00
30-Jul-93 9,491.36 7/30/93 9,976.46
31-Aug-93 9,971.21 8/31/93 10,387.96
30-Sep-93 10,393.47 9/30/93 10,497.30
29-Oct-93 10,268.71 10/29/93 10,530.98
30-Nov-93 9,942.42 11/30/93 10,298.24
31-Dec-93 10,422.26 12/31/93 10,775.22
31-Jan-94 10,758.16 1/31/94 11,024.33
28-Feb-94 10,786.95 2/28/94 10,868.22
31-Mar-94 10,019.19 3/31/94 10,364.70
29-Apr-94 9,961.61 4/29/94 10,441.67
31-May-94 9,404.99 5/31/94 10,342.86
30-Jun-94 8,598.85 6/30/94 9,987.17
29-Jul-94 8,637.24 7/29/94 10,324.91
31-Aug-94 9,443.38 8/31/94 10,865.42
30-Sep-94 9,510.56 9/30/94 10,662.57
31-Oct-94 9,932.82 10/31/94 10,780.03
30-Nov-94 9,577.74 11/30/94 10,293.96
30-Dec-94 9,923.22 12/30/94 10,388.09
31-Jan-95 9,520.15 1/31/95 10,496.41
28-Feb-95 10,009.60 2/28/95 11,046.57
31-Mar-95 10,508.64 3/31/95 11,238.98
28-Apr-95 10,479.85 4/28/95 11,465.17
31-May-95 10,614.20 5/31/95 11,741.70
30-Jun-95 11,631.48 6/30/95 12,220.00
31-Jul-95 12,811.90 7/31/95 12,856.65
31-Aug-95 12,735.12 8/31/95 13,093.61
29-Sep-95 13,522.07 9/29/95 13,411.73
31-Oct-95 13,742.80 10/31/95 13,066.51
30-Nov-95 14,309.02 11/30/95 13,634.23
29-Dec-95 14,337.81 12/29/95 13,600.29
31-Jan-96 14,299.42 1/31/96 13,797.71
29-Feb-96 14,980.81 2/29/96 14,265.65
29-Mar-96 15,095.97 3/29/96 14,436.72
30-Apr-96 16,410.75 4/30/96 14,877.88
31-May-96 17,024.95 5/31/96 15,078.78
28-Jun-96 15,950.10 6/28/96 14,852.59
31-Jul-96 14,059.50 7/31/96 13,850.19
30-Aug-96 15,028.79 8/30/96 14,650.08
30-Sep-96 15,825.34 9/30/96 15,288.72
31-Oct-96 15,009.60 10/31/96 15,333.41
29-Nov-96 15,796.55 11/29/96 16,195.93
30-Dec-96 13,394.19 12/31/96 16,213.63
30-Dec-96 15,511.42 1/31/97 16,821.99
31-Dec-96 15,591.79 2/28/97 16,684.15
31-Jan-97 16,154.38 3/31/97 15,973.90
28-Feb-97 15,603.27 4/30/97 16,387.87
31-Mar-97 14,455.12 5/30/97 17,820.84
30-Apr-97 14,592.90 6/30/97 18,321.02
30-May-97 16,154.38 7/31/97 20,133.17
30-Jun-97 16,843.26 8/29/97 20,109.27
31-Jul-97 17,934.00 9/30/97 21,264.64
29-Aug-97 17,968.44 10/31/97 20,339.85
30-Sep-97 19,288.81 11/28/97 20,641.14
31-Oct-97 18,358.81 12/31/97 21,440.53
28-Nov-97 18,266.96 1/30/98 21,032.30
15-Dec-97 17,148.57 2/27/98 22,773.78
15-Dec-97 17,768.68 3/31/98 23,800.40
31-Dec-97 18,403.73 4/30/98 24,233.97
30-Jan-98 17,971.90
27-Feb-98 19,280.10
31-Mar-98 20,080.26
30-Apr-98 20,245.37
/1/ An unmanaged index comprised of 400 stocks designed to represent
performance of the mid-cap segment of the U.S. equity markets.
Average Annual Total Returns*
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year Inception Date
-------------------------------
<S> <C> <C> <C>
Class A (without sales charge)... 38.73% 16.69% 6/30/93
Class A** (with sales charge).... 33.18% 15.70% 6/30/93
- -----------------------------------------------------------------
Class B (without CDSC)........... 37.41% 20.48% 1/8/97
Class B** (with CDSC)............ 33.41% 17.57% 1/8/97
- -----------------------------------------------------------------
Class I***....................... NA 10.83% 12/29/97
- -----------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge).... 33.40% 15.80%
Class B** (with CDSC)............ 33.67% 18.10%
</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 represent total return and are not annualized.
6 The AAL Mutual Funds Annual Report
<PAGE>
REPORT . . . EQUITY-ORIENTED FUNDS
...$13,555,367.... I Share Assets....$1,164,361....A Share NAV...$15.93.....
B Share NAV....$15.78....I Share NAV....$15.96....Number of Securities in
Portfolio...123.......
and earnings, substantially. This is a great example of a company operating in a
seemingly dull business that produced outstanding returns--nearly 70% for the
year.
On the other hand, LSI Logic was the portfolio's biggest disappointment for the
year. The company manufactures semiconductors for a variety of applications,
focused in the telecommunications industry. The industry as a whole suffered,
particularly during the much discussed Asian currency crisis. As expectations
for LSI came down, so did the stock price. I still believe in the longer-term
fundamentals of the company and its business, and I have not sold the position.
I often wonder why the terms "large-cap", "mid-cap" and "small-cap" are used to
describe the size of companies. Would you explain?
As with most professions, the investment business has a jargon all its own.
These terms are simply part of this jargon used to identify a fairly simple
concept. "Cap" is an abbreviation of capitalization, which refers to the
monetary value or investment capital of the company. Market cap identifies the
value that the marketplace is assigning to the business. This calculation is as
basic as the price of one share of stock multiplied by the number of shares that
exist. It is necessary for the investment community to label stocks in such a
way because the domestic stock market is made up of over 10,000 different
stocks. This breakdown is meaningful because companies of similar size typically
have a variety of other factors in common, such as the stage of the lifecycle,
the amount of stock that regularly changes hands in the market and the degree of
diversification within the company's businesses.
/s/ MICHAEL R. HOCHHOLZER
Michael R. Hochholzer
Portfolio Manager
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
Consumer Cyclicals.......... 17% 13%
Financials.................. 14% 13%
Technology.................. 12% 15%
Capital Goods............... 10% 8%
Consumer Staples............ 10% 14%
Utilities................... 9% 7%
Energy...................... 9% 7%
Health Care................. 7% 11%
Basic Materials............. 5% 4%
Transportation.............. 3% 2%
Cash & Cash Equivalents..... 2% 5%
Communication Services...... 2% 1%
----------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
Royal Caribbean Cruises Ltd.................... 2.06% 0.51%
Offers passenger cruises that specialize in
the Caribbean and North American markets
Computer Products, Inc......................... 1.55% NA
Designs, develops and manufactures power
conversion products, high-performance
single-board computers, systems and subsystems
Rite Aid Corporation........................... 1.54% 1.00%
Operates a national retail chain of drugstores
Starwood Hotels & Resorts...................... 1.44% NA
Owner and operator of full service hotels
including Westin and Sheraton.
HBO & Company.................................. 1.44% 1.10%
Designs and sells computerized information
systems to the health care industry
</TABLE>
April 30, 1998 7
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
....A Share Ticker...AAITX....B Share Ticker...BBITX......A Share Assets
...$144,152,707........B Share Assets
[PHOTO APPEARS HERE]
The AAL International Fund
How have international markets performed over the year ended April 30, 1998?
Over the year ended April 30, 1998, European stock markets recorded strong
advances in local currency terms. Local economies experienced steady growth
while interest rates continued to decline ahead of the European Economic and
Monetary Union. In Japan, equities continued to perform poorly due to continuing
problems in the financial sector and a general economic slump. In the rest of
Asia, equities fell dramatically as currency devaluations and financial
instability spread throughout the region. Finally, Latin American markets
finished a volatile year with respectable gains.
How did the Fund perform over the same period and what factors affected
performance?
The Fund finished the fiscal year with a gain of 7.34% based on net amount
invested in Class A shares. European holdings were mixed performers; while the
Fund owns some large capitalization stocks, investments are overweighted in
smaller capitalization stocks, which lagged the local stock market indexes.
Meanwhile, the decline in the value of Asian holdings hurt overall returns. The
strength of the dollar also negatively impacted performance, despite partial
hedges in place during the year. Finally, the Fund maintained a large cash
position throughout the period.
I have been wondering if the Asian crisis has had a direct effect on the Fund's
value and if you think it will in the future?
The Fund had limited direct exposure to specific countries that suffered a
severe crisis over the summer: investments in Southeast Asia represented less
than 4% of total assets, including bond holdings denominated in U.S. dollars.
However, there was an indirect effect because turmoil in the region also
affected the
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
THE AAL INTERNATIONAL FUND EAFE INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
01-Aug-95 $9,596.93 8/1/95 $10,000.00
31-Aug-95 9,616.12 8/31/95 9,618.53
29-Sep-95 9,577.74 9/29/95 9,806.35
31-Oct-95 9,558.54 10/31/95 9,542.75
30-Nov-95 9,558.54 11/30/95 9,808.31
28-Dec-95 9,706.65 12/29/95 10,203.49
29-Dec-95 9,735.51 1/31/96 10,245.37
31-Jan-96 10,149.17 2/29/96 10,279.97
29-Feb-96 10,110.69 3/29/96 10,498.28
29-Mar-96 10,264.61 4/30/96 10,803.51
30-Apr-96 10,659.04 5/31/96 10,604.69
31-May-96 10,601.32 6/28/96 10,664.41
28-Jun-96 10,649.42 7/31/96 10,352.69
31-Jul-96 10,293.47 8/30/96 10,375.39
30-Aug-96 10,322.33 9/30/96 10,651.05
30-Sep-96 10,514.73 10/31/96 10,542.02
31-Oct-96 10,610.94 11/29/96 10,961.45
29-Nov-96 10,986.12 12/31/96 10,820.49
30-Dec-96 10,883.99 1/31/97 10,441.68
31-Dec-96 10,923.86 2/28/97 10,612.58
31-Jan-97 11,123.20 3/31/97 10,650.99
28-Feb-97 11,372.38 4/30/97 10,707.49
31-Mar-97 11,352.44 5/30/97 11,404.29
30-Apr-97 11,332.51 6/30/97 12,033.19
30-May-97 11,850.79 7/31/97 12,227.89
30-Jun-97 12,209.61 8/29/97 11,314.65
31-Jul-97 12,289.34 9/30/97 11,948.47
29-Aug-97 11,890.66 10/31/97 11,030.05
30-Sep-97 12,060.10 11/28/97 10,917.61
31-Oct-97 11,372.38 12/31/97 11,012.83
28-Nov-97 11,183.00 1/30/98 11,516.48
15-Dec-97 10,950.78 2/27/98 12,255.46
30-Dec-97 11,019.16 3/31/98 12,632.81
31-Dec-97 11,030.07 4/30/98 12,732.85
30-Jan-98 11,324.64
27-Feb-98 11,728.31
31-Mar-98 12,088.34
30-Apr-98 12,164.71
/1/ An unmanaged market capitalization-weighted equity index composed of a
sample of companies representative of the market structure in twenty
countries. Constituent stocks are selected on the basis of industry
representation, liquidity and sufficient float.
<TABLE>
<CAPTION>
Average Annual Total Returns*
April 30, 1998
From Inception
1-Year Inception Date
-------------------------------
<S> <C> <C> <C>
Class A (without sales charge)............. 7.34% 9.01% 8/1/95
Class A** (with sales charge) ............. 3.08% 7.39% 8/1/95
- ------------------------------------------------------------------------------
Class B (without CDSC)..................... 6.30% 7.41% 1/8/97
Class B** (with CDSC)...................... 2.30% 4.40% 1/8/97
- ------------------------------------------------------------------------------
Class I*** ................................ NA 10.48% 12/29/97
- ------------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge).............. 2.26% 7.37%
Class B** (with CDSC)...................... 1.44% 4.22%
</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 represent total return and are not annualized.
8 The AAL Mutual Funds Annual Report
<PAGE>
AAL REPORT . . . EQUITY-ORIENTED FUNDS
Assets...$7,910,025....I Share Assets...$460,269....A Share NAV...$11.15....
B Share NAV...$11.05....I Share NAV...$11.17....Number of Securities in
Portfolio...149.......
International investing involves additional risks including currency
fluctuations, economic and political instability, and accounting standards.
Distribution of Common Stock Holdings
................................................................................
[MAP APPEARS HERE]
Japanese market (16% of total assets). Smaller holdings in Hong Kong were also
negatively impacted by regional developments, as were investments in Australia
and New Zealand. While it is difficult to predict when Asian markets will turn,
the crisis may have created opportunities for the long-term investor,
particularly in the Japanese market.
In 1999, the Euro will become the common currency for 11 European countries. How
do you think the Euro will affect these countries' economies?
The introduction of the single currency has already brought about a reduction in
interest rates, lower inflation and stronger growth for European economies. The
trend should continue, although European stock markets are already discounting
most of this. Going forward, one should expect greater harmonization of prices
and increased competition. This will force corporations to restructure further
in order to become more efficient and could create additional merger and
acquisition activity in the near to medium term.
/s/ Jean-Marie Eveillard
Jean-Marie Eveillard
PORTFOLIO MANAGER
Fund Allocations
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
. Common Stocks............. 63% 73%
. Preferred Stocks.......... 8% 7%
. Bonds..................... 9% 7%
. Commercial Paper.......... 20% 13%
-------------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security Country 4/30/98 4/30/97
- -------- ------- ------- -------
<S> <C> <C> <C>
Buderus AG Germany........ 2.00% 1.50%
Kuehne & Nagel
International
AG Bearer Switzerland.... 1.57% 1.10%
Sika Finanz
AG Bearer Switzerland.... 1.57% 1.30%
Eurafrance France......... 1.47% 1.11%
Secom Co., Ltd. Japan.......... 1.35% 1.50%
</TABLE>
April 30, 1998 9
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
....A Share Ticker....AALGX....B Share Ticker....BBLGX....A Share Assets....
$2,766,709,385........................
[PHOTO APPEARS HERE]
The AAL Capital Growth Fund
What has the performance of large company stocks looked like over the year ended
April 30, 1998?
The performance of large company stocks for this period, as measured by the S&P
500(R) Index/1/, was 41.07%. The average annual total return for large company
stocks since 1926 has been approximately 11%. We have enjoyed another extremely
good fiscal year for the Fund as well, outperforming the index by over 3% based
on net amount invested in Class A shares. This performance is mainly due to the
strong economy, declining interest rates and low unemployment.
I see that you tend to hold close to 100 securities in your portfolio. Why do
you choose this strategy versus that of many other fund managers who hold closer
to 30?
I hold more stocks because I want to reduce my exposure to "stock specific"
risk. This nonsystematic risk is the component of a stock's risk that is unique
to an individual stock and so can be minimized by diversification. For example,
in today's equity market, if a company announces some bad news regarding
earnings or near-term business trends, the stock has been known to decline 30%
or more in a single day. If I only held 30 stocks such news would have a much
larger impact on the Fund's performance. Therefore, I prefer to hold a more
diversified portfolio in order to keep its exposure to nonsystematic risk low.
Each report I receive highlights "Fund Allocations." Why is this important? Does
an industry benchmark exist for comparison purposes?
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
THE AAL CAPITAL GROWTH FUND S&P 500(R) INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
16-Jul-87 $9,596.93 7/16/87 $10,000.00
31-Jul-87 9,760.08 7/31/87 10,214.26
31-Aug-87 10,086.37 8/31/87 10,595.37
30-Sep-87 9,731.29 9/30/87 10,363.12
31-Oct-87 7,859.88 10/31/87 8,130.91
30-Nov-87 7,264.88 11/30/87 7,460.84
17-Dec-87 7,622.84 12/31/87 8,028.42
31-Dec-87 7,806.17 1/29/88 8,365.86
29-Jan-88 8,134.25 2/29/88 8,754.07
29-Feb-88 8,365.83 3/31/88 8,484.00
31-Mar-88 8,008.81 4/30/88 8,577.83
30-Apr-88 8,066.70 5/31/88 8,651.00
31-May-88 8,172.84 6/30/88 9,047.71
30-Jun-88 8,491.27 7/29/88 9,013.23
03-Jul-88 8,443.02 8/31/88 8,707.68
29-Jul-88 8,423.52 9/30/88 9,078.27
31-Aug-88 8,277.28 10/31/88 9,330.89
30-Sep-88 8,599.01 11/30/88 9,197.64
31-Oct-88 8,706.25 12/30/88 9,357.98
30-Nov-88 8,599.01 1/31/89 10,041.32
16-Dec-88 8,729.65 2/28/89 9,791.70
30-Dec-88 8,779.03 3/31/89 10,019.86
31-Jan-89 9,322.16 4/30/89 10,539.55
28-Feb-89 9,085.16 5/31/89 10,964.38
31-Mar-89 9,332.04 6/30/89 10,902.67
30-Apr-89 9,717.17 7/31/89 11,886.20
31-May-89 10,151.68 8/31/89 12,117.79
30-Jun-89 10,072.68 9/30/89 12,068.45
01-Jul-89 10,090.45 10/31/89 11,788.58
31-Jul-89 10,958.77 11/30/89 12,028.01
31-Aug-89 11,038.62 12/31/89 12,316.44
30-Sep-89 10,898.89 1/31/90 11,490.01
31-Oct-89 10,829.02 2/28/90 11,639.09
30-Nov-89 11,028.63 3/30/90 11,947.28
06-Dec-89 11,092.51 4/30/90 11,649.67
31-Dec-89 11,375.38 5/31/90 12,783.08
31-Jan-90 10,749.03 6/29/90 12,696.91
28-Feb-90 10,759.13 7/31/90 12,656.33
30-Mar-90 10,961.18 8/31/90 11,513.72
30-Apr-90 10,829.85 9/28/90 10,954.15
31-May-90 11,799.68 10/31/90 10,907.85
29-Jun-90 11,779.48 11/30/90 11,611.55
02-Jul-90 11,802.71 12/31/90 11,934.82
31-Jul-90 11,823.19 1/31/91 12,453.28
31-Aug-90 10,779.06 2/28/91 13,342.80
28-Sep-90 10,379.84 3/29/91 13,665.57
31-Oct-90 10,471.97 4/30/91 13,697.69
30-Nov-90 11,157.81 5/31/91 14,286.96
27-Dec-90 11,407.58 6/28/91 13,632.91
31-Dec-90 11,469.81 7/31/91 14,267.80
31-Jan-91 11,718.70 8/30/91 14,604.84
28-Feb-91 12,444.64 9/30/91 14,360.35
29-Mar-91 12,859.46 10/31/91 14,552.61
30-Apr-91 12,880.20 11/30/91 13,968.18
31-May-91 13,409.10 12/31/91 15,562.92
28-Jun-91 12,952.79 1/31/92 15,272.83
02-Jul-91 13,164.35 2/28/92 15,470.92
31-Jul-91 13,437.30 3/31/92 15,170.32
30-Aug-91 13,720.74 4/30/92 15,615.14
30-Sep-91 13,615.76 5/29/92 15,691.50
31-Oct-91 13,836.22 6/30/92 15,458.17
30-Nov-91 13,384.81 7/31/92 16,089.54
27-Dec-91 14,572.12 8/31/92 15,760.51
31-Dec-91 14,932.71 9/30/92 15,945.77
31-Jan-92 14,572.12 10/30/92 16,000.52
28-Feb-92 14,635.75 11/30/92 16,543.85
31-Mar-92 14,413.04 12/31/92 16,746.82
30-Apr-92 14,911.50 1/29/93 16,886.71
29-May-92 15,006.95 2/26/93 17,116.77
30-Jun-92 14,794.84 3/31/93 17,477.90
06-Jul-92 14,922.11 4/30/93 17,055.46
31-Jul-92 15,328.88 5/31/93 17,510.37
31-Aug-92 15,146.90 6/30/93 17,561.50
30-Sep-92 15,264.65 7/30/93 17,490.85
30-Oct-92 15,446.63 8/31/93 18,153.14
30-Nov-92 15,778.47 9/30/93 18,009.84
31-Dec-92 15,784.89 10/29/93 18,382.08
31-Dec-92 15,784.89 11/30/93 18,207.67
29-Jan-93 15,514.60 12/31/93 18,427.88
26-Feb-93 15,947.06 1/31/94 19,053.78
31-Mar-93 16,130.86 2/28/94 18,537.04
30-Apr-93 16,033.56 3/31/94 17,729.94
31-May-93 16,282.22 4/29/94 17,957.48
30-Jun-93 16,228.16 5/31/94 18,251.43
01-Jul-93 16,176.27 6/30/94 17,804.45
30-Jul-93 16,088.95 7/29/94 18,388.67
31-Aug-93 16,547.38 8/31/94 19,141.28
30-Sep-93 16,361.83 9/30/94 18,674.04
29-Oct-93 16,765.69 10/31/94 19,092.19
30-Nov-93 16,612.87 11/30/94 18,397.81
31-Dec-93 16,671.82 12/30/94 18,670.15
31-Dec-93 16,740.88 1/31/95 19,153.93
31-Jan-94 16,862.59 2/28/95 19,899.67
28-Feb-94 16,431.07 3/31/95 20,485.94
31-Mar-94 15,811.45 4/28/95 21,088.77
29-Apr-94 16,032.74 5/31/95 21,929.99
31-May-94 16,054.87 6/30/95 22,438.98
30-Jun-94 15,704.12 7/31/95 23,182.70
29-Jul-94 16,084.69 8/31/95 23,240.75
31-Aug-94 16,543.61 9/29/95 24,221.02
30-Sep-94 16,319.75 10/31/95 24,134.53
31-Oct-94 16,722.70 11/30/95 25,192.94
30-Nov-94 16,219.01 12/29/95 25,678.21
30-Dec-94 16,359.37 1/31/96 26,551.14
30-Dec-94 16,510.48 2/29/96 26,797.99
31-Jan-95 16,922.95 3/29/96 27,056.05
28-Feb-95 17,476.83 4/30/96 27,454.53
31-Mar-95 17,783.24 5/31/96 28,161.46
28-Apr-95 18,337.12 6/28/96 28,268.78
31-May-95 18,973.50 7/31/96 27,020.43
30-Jun-95 19,217.45 8/30/96 27,591.21
31-Jul-95 19,870.29 9/30/96 29,142.78
31-Aug-95 19,787.20 10/31/96 29,946.27
29-Sep-95 20,724.93 11/29/96 32,207.85
31-Oct-95 20,618.10 12/31/96 31,569.81
30-Nov-95 21,389.65 1/31/97 33,541.03
28-Dec-95 20,986.07 2/28/97 33,804.33
28-Dec-95 21,139.65 3/31/97 32,418.01
28-Dec-95 21,591.36 4/30/97 34,351.65
29-Dec-95 21,628.21 5/30/97 36,441.70
31-Jan-96 22,524.78 6/30/97 38,073.45
29-Feb-96 22,561.62 7/31/97 41,102.01
29-Mar-96 22,524.78 8/29/97 38,801.12
30-Apr-96 23,077.46 9/30/97 40,924.86
31-May-96 23,581.01 10/31/97 39,559.60
28-Jun-96 23,562.59 11/28/97 41,389.35
31-Jul-96 22,501.66 12/31/97 42,099.64
30-Aug-96 22,970.44 1/30/98 42,564.80
30-Sep-96 24,611.19 2/27/98 45,632.99
31-Oct-96 24,907.26 3/31/98 47,967.94
29-Nov-96 26,881.09 4/30/98 48,450.36
30-Dec-96 25,604.27
30-Dec-96 26,772.67
31-Dec-96 26,397.41
31-Jan-97 28,105.48
28-Feb-97 27,820.80
31-Mar-97 26,487.99
30-Apr-97 27,820.80
30-May-97 29,684.14
30-Jun-97 31,026.01
31-Jul-97 33,269.95
29-Aug-97 31,635.64
30-Sep-97 33,010.54
31-Oct-97 32,647.35
28-Nov-97 34,138.99
15-Dec-97 34,695.11
30-Dec-97 35,258.68
31-Dec-97 35,258.68
30-Jan-98 35,353.61
27-Feb-98 38,147.18
31-Mar-98 39,733.82
30-Apr-98 40,194.90
/1/ An unmanaged index comprised of 500 common stocks representative of the
stock market as a whole.
Average Annual Total Returns*
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year 5-Year 10-Year Inception Date
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (without sales charge).......... 44.48% 20.18% 17.42% 14.19% 7/16/87
Class A** (with sales charge)........... 38.67% 19.20% 16.94% 13.75% 7/16/87
- -------------------------------------------------------------------------------------------------
Class B (without CDSC).................. 43.25% NA NA 35.50% 1/8/97
Class B** (with CDSC)................... 39.25% NA NA 32.00% 1/8/97
- -------------------------------------------------------------------------------------------------
Class I***.............................. NA NA NA 13.90% 12/29/97
- -------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge)........... 44.03% 18.79% 16.89% 13.74%
Class B** (with CDSC)................... 44.77% NA NA 33.24%
</TABLE>
*Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost.
**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 represent total return and are not annualized.
10 The AAL Mutual Funds Annual Report
<PAGE>
REPORT . . . EQUITY-ORIENTED FUNDS
Assets....$54,900,438....I Share Assets....$2,985,973....A Share NAV.....$29.64
....B Share Nav....$29.38.....I Share NAV....$29.67....Number of Securities in
Portfolio....115.................
That particular section is a great reference for shareholders to monitor the
Fund's diversification across market sectors. A sector is a particular group of
stocks, usually found in one industry. Diversification across market sectors (or
industries) is even more important for managing risk than having more securities
in the portfolio. If the Fund had all of its 100 securities in the technology
sector, it would not be diversified and; therefore, it would be very risky. One
popular benchmark for comparison purposes is the S&P 500/R/ Index/1/ (for large-
cap stocks). This will give you a good idea of how the index is diversified, but
is not necessarily the "correct" way to diversify, so percentages may vary. This
is especially the case for many portfolio managers like myself who seek to
outperform this index. By diversifying a bit differently across sectors, and not
being too overweighted or too underweighted to any particular sector, we attempt
to outperform the index without taking any undue risk.
I've been hearing about a "whisper number" on financial reports lately. What is
this new term?
The whisper number is the quarterly earnings estimate of the optimists. If the
consensus estimate is $1.00, the whisper number might be $1.05 - $1.10. Usually
the whisper numbers are talked about for the faster-growing companies.
/s/ Frederick L. Plautz
Frederick L. Plautz
Portfolio Manager
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
-----------------
<S> <C> <C>
. Consumer Staples............. 22% 16%
. Financials................... 19% 17%
. Technology................... 15% 21%
. Health Care.................. 11% 13%
. Capital Goods................ 8% 8%
. Energy....................... 8% 10%
. Consumer Cyclicals........... 7% 5%
. Cash & Cash Equivalents...... 5% 3%
. Communication Services....... 2% 3%
. Transportation............... 1% 2%
. Basic Materials.............. 1% 1%
. Utilities.................... 1% 1%
-----------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
General Electric Company......................... 3.29% 3.20%
Diversified manufacturing, technology and
services company
Merck & Co., Inc................................. 3.11% 3.50%
Worldwide research-intensive health
products company
American International Group, Inc................ 3.10% 3.00%
Provides a variety of insurance and
financial services
Exxon Corporation................................ 2.70% 3.10%
Explores for and produces crude oil and
natural gas; manufactures petroleum products;
and transports and sells these products
Microsoft Corporation............................ 2.39% 2.40%
Develops, manufactures, licenses and
supports computer software products
</TABLE>
April 30, 1998 11
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
....A Share Ticker....AAUTX....B Share Ticker....BBEIX....A Share Assets....
$197,653,829....B Share Assets........
[PHOTO APPEARS HERE]
The AAL Equity Income Fund
Are you pleased with the performance of the Fund over the past year? How does it
compare to the performance of other equity income mutual funds?
Yes, I am very pleased! A year ago, the Fund was concentrated almost exclusively
in a rapidly changing and struggling utility market, while today it is a well-
diversified and more vibrant equity income fund. While the Fund has slightly
lagged the equity income universe over the past fiscal year, that lag is due
entirely to the fact that the Fund was a utility fund for one-third of that
time. The performance for the last two-thirds of the year that the Fund was an
equity income fund has been very good.
After a very strong equity market performance in the first quarter of 1998,
performance seemed to be relatively flat in April. I am wondering how your Fund
is likely to perform relative to the AAL growth Funds in a sluggish or even down
market?
The first quarter of 1998 was extremely strong with what some were calling "a
year's worth of performance" in this one quarter. As a conservative alternative
to our more aggressive growth Funds, this Fund will often lag in a market as
strong as the one we experienced in the first quarter of 1998. The Fund
performed much better as the market slowed in April. Because the Fund is
positioned more conservatively than our growth Funds (i.e., it has a potential
for higher yield and lower risks), it has and should continue to outperform
during both sluggish and down markets.
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
THE AAL EQUITY S&P UTILITIES S&P 500(R)
INCOME FUND INDEX /1/ INDEX /2/
FROM INCEPTION FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS DATE ENDING DOLLARS
- ------------------------ ------------------------- -------------------------
18-Mar-94 $9,596.93 3/17/94 $10,000.00 3/17/94 $10,000.00
31-Mar-94 9,520.15 3/31/94 9,676.73 3/31/94 9,782.30
29-Apr-94 9,548.94 4/29/94 9,919.47 4/29/94 9,907.85
31-May-94 9,337.81 5/31/94 9,650.85 5/31/94 10,070.03
30-Jun-94 9,117.08 6/30/94 9,674.46 6/30/94 9,823.41
29-Jul-94 9,378.40 7/29/94 9,999.27 7/29/94 10,145.75
31-Aug-94 9,388.08 8/31/94 9,968.70 8/31/94 10,560.99
30-Sep-94 9,126.76 9/30/94 9,717.59 9/30/94 10,303.20
31-Oct-94 9,224.37 10/31/94 9,795.95 10/31/94 10,533.91
30-Nov-94 9,087.72 11/30/94 9,655.58 11/30/94 10,150.79
30-Dec-94 8,912.01 12/30/94 9,707.16 12/30/94 10,301.05
31-Jan-95 9,286.22 1/31/95 10,463.00 1/31/95 10,567.97
28-Feb-95 9,276.37 2/28/95 10,444.25 2/28/95 10,979.43
31-Mar-95 9,207.44 3/31/95 10,376.75 3/31/95 11,302.89
30-Apr-95 9,406.09 4/30/95 10,764.46 4/28/95 11,635.50
31-May-95 9,882.85 5/31/95 11,099.86 5/31/95 12,099.63
30-Jun-95 9,952.38 6/30/95 11,147.79 6/30/95 12,380.46
31-Jul-95 10,062.51 7/31/95 11,434.24 7/31/95 12,790.80
31-Aug-95 10,102.56 8/31/95 11,670.39 8/31/95 12,822.83
29-Sep-95 10,693.30 9/29/95 12,401.76 9/29/95 13,363.68
31-Oct-95 10,834.67 10/31/95 12,708.43 10/31/95 13,315.96
30-Nov-95 10,986.13 11/30/95 12,884.57 11/30/95 13,899.93
28-Dec-95 11,480.91 12/29/95 13,790.89 12/29/95 14,167.67
29-Dec-95 11,511.44 1/31/96 13,969.64 1/31/96 14,649.30
31-Jan-96 11,735.36 2/29/96 13,423.85 2/29/96 14,785.50
29-Feb-96 11,460.55 3/29/96 13,134.57 3/29/96 14,927.88
29-Mar-96 11,358.77 4/30/96 13,291.08 4/30/96 15,147.74
30-Apr-96 11,184.34 5/31/96 13,261.31 5/31/96 15,537.78
31-May-96 11,215.12 6/28/96 13,790.37 6/28/96 15,596.99
28-Jun-96 11,594.77 7/31/96 12,906.40 7/31/96 14,908.23
31-Jul-96 11,046.58 8/30/96 13,208.08 8/30/96 15,223.15
30-Aug-96 11,036.24 9/30/96 13,335.18 9/30/96 16,079.21
30-Sep-96 11,067.27 10/31/96 13,997.96 10/31/96 16,522.53
31-Oct-96 11,495.74 11/29/96 14,306.88 11/29/96 17,770.33
29-Nov-96 11,924.22 12/31/96 14,216.59 12/31/96 17,418.30
30-Dec-96 12,128.01 1/31/97 14,286.34 1/31/97 18,505.90
31-Dec-96 12,064.68 2/28/97 14,166.34 2/28/97 18,651.17
31-Jan-97 12,191.34 3/31/97 13,737.52 3/31/97 17,886.28
28-Feb-97 12,265.23 4/30/97 13,506.46 4/30/97 18,953.15
31-Mar-97 11,895.79 5/30/97 14,108.67 5/30/97 20,106.31
30-Apr-97 12,066.04 6/30/97 14,544.53 6/30/97 21,006.61
30-May-97 12,725.73 7/31/97 14,866.59 7/31/97 22,677.59
30-Jun-97 13,114.10 8/29/97 14,622.92 8/29/97 21,408.09
31-Jul-97 13,360.73 9/30/97 15,252.53 9/30/97 22,579.85
29-Aug-97 12,835.31 10/31/97 15,384.69 10/31/97 21,826.58
30-Sep-97 13,510.85 11/28/97 16,494.08 11/28/97 22,836.13
31-Oct-97 13,370.56 12/31/97 17,728.50 12/31/97 23,228.02
28-Nov-97 14,104.38 1/30/98 16,999.50 1/30/98 23,484.66
15-Dec-97 14,384.91 2/27/98 17,601.10 2/27/98 25,177.51
30-Dec-97 14,718.84 3/31/98 18,724.72 3/31/98 26,465.79
31-Dec-97 14,763.75 4/30/98 18,348.72 4/30/98 26,731.96
30-Jan-98 14,640.25
27-Feb-98 15,347.56
31-Mar-98 16,107.64
30-Apr-98 16,107.64
/1/ An unmanaged capitalization-weighted index of all stocks designed to
measure the performance of the utility sector of the S&P 500/R/.
/2/ An unmanaged index composed of 500 common stocks representative of the
stock market as a whole.
Average Annual Total Returns*
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year Inception Date
----------------------------
<S> <C> <C> <C>
Class A (without sales charge).............. 33.50% 13.39% 3/17/94
Class A** (with sales charge)............... 28.18% 12.26% 3/17/94
- --------------------------------------------------------------------------
Class B (without CDSC)...................... 32.42% 23.93% 1/8/97
Class B** (with CDSC)....................... 28.42% 21.06% 1/8/97
- --------------------------------------------------------------------------
Class I***.................................. NA 9.34% 12/29/97
- --------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge)............... 29.94% 12.53%
Class B** (with CDSC)....................... 30.17% 22.69%
</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 represent total return and are not annualized.
12 The AAL Mutual Funds Annual Report
<PAGE>
REPORT ... EQUITY-ORIENTED FUNDS
3,818,315....I Share Assets....$7,087,176....A Share NAV....$14.31....B Share
NAV....$14.31....I Share NAV....$14.32....Number of Securities in
Portfolio....116.......
The investment focus of the Fund was changed September 1, 1997. How has this
transition gone and how has it benefited me?
The transition went very well! My goal from the beginning was to complete the
transition in a timely fashion while providing shareholders with attractive
returns. The transition was effectively completed by the end of 1997. In fact,
performance over that period was so favorable that the Fund was ranked among the
top 50 best-performing stock mutual funds during the fourth quarter of 1997. The
rankings came in a special Jan. 8 section of The Wall Street Journal. The
performance of the Fund trailed the equity income universe somewhat in the first
quarter of 1998, but that was not totally unexpected given the Fund's
outstanding performance in the fourth quarter of 1997. When combined, these two
quarters provided you with outperformance versus the equity income universe.
/s/ Lewis A. Bohannon
Lewis A. Bohannon
Portfolio Manager
Fund Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
. Financials..................18% NA
. Communication Services......15% 35%
. Energy......................11% 1%
. Utilities...................10% 57%
. Capital Goods...............10% NA
. Consumer Staples............ 7% NA
. Technology.................. 6% NA
. Consumer Cyclicals.......... 6% NA
. Health Care................. 6% NA
. Cash & Cash Equivalents..... 5% 2%
. Basic Materials............. 3% NA
. Fixed Income Obligations.... 3% 5%
------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
MCI Communications Corporation................... 2.87% 3.40%
Operates in the telecommunications industry
Starwood Hotels & Resorts........................ 2.26% NA
Owner and operator of full service hotels
Telefonica de Espana ADR......................... 1.81% 4.00%
Provides telecommunications throughout Spain
Telecomunicacoes Brasileiras ADR................. 1.75% 1.37%
Provides telecommunications throughout Brazil
New Century Energies, Inc........................ 1.67% NA
Holding Company
</TABLE>
April 30, 1998 13
<PAGE>
[PHOTOS APPEAR HERE]
THE AAL MUTUAL FUNDS ANNUAL
. . . . A Share Ticker . . . AABFX . . . ..B Share Ticker . . NA . . .A Share
Assets . .. . $27,674,985 . . . .B Share Assets . . . . . . . .
The AAL Balanced Fund
How has the Fund performed since its inception on December 29, 1997?
The Fund has done what we had hoped it would. It has provided investors with
exposure to the equity market, which has been good so far in 1998, while also
providing investors with a moderate amount of stable income.
I read in the prospectus that you will select investments for the Fund
consistent with the policies of The AAL Capital Growth, Bond and Money Market
Funds. What is my advantage to own this Fund if I have already diversified my
investments in similar proportions?
We are constantly monitoring the relative proportions of stocks, bonds and cash
in the Fund in order to provide what we believe to be an appropriate mix. As the
prices and returns of investments in these asset classes vary relative to each
other, the asset mix will change, although within specific parameters laid out
in the prospectus. By constantly
<TABLE>
<CAPTION>
Asset Mix
- ---------------------------------
<S> <C>
Common Stocks.................... 53.6%
Bonds............................ 29.8%
Money Market Instruments......... 16.6%
----------
Total 100%
</TABLE>
<TABLE>
<CAPTION>
5 Largest Common Stock Holdings
- ---------------------------------
% of Net Assets
Security 4/30/98
- -------- -------
<S> <C>
General Electric Company............................................. 1.87%
Diversified manufacturing, technology and services company
Merck & Co., Inc..................................................... 1.78%
Worldwide research-intensive health products company
American International Group, Inc.................................... 1.77%
Provides a variety of insurance and financial services
Exxon Corporation.................................................... 1.53%
Explores for and produces crude oil and natural gas;
manufactures petroleum products; and transports
and sells these products
Microsoft Corporation................................................ 1.36%
Develops, manufactures, licenses and supports
computer software products
</TABLE>
14 The AAL Mutual Funds Annual Report
<PAGE>
REPORT ... EQUITY-ORIENTED FUNDS
.. $2,325,727. . . I Share Assets . . . $1,076,355 . .. A Share NAV . . $10.81..
. . . . . . B Share NAV . . . $10.79 . . . .I Share NAV . . . $10.79 ..........
...Number of Securities in Portfolio . . . 116. . . . . . . .
monitoring the Fund's asset mix, the asset mix of other balanced funds and the
performance of the stock, bond and money markets, we are able to maintain an
appropriate asset mix.
How do the two of you work together to maintain the Fund's investment mix?
The two of us meet and discuss the current status of the Fund, including its
relative performance and estimated relative asset mix frequently on an informal
basis and formally on a weekly basis. We also discuss the relative merits of the
different asset classes and whether we should adjust our targeted allocation to
one or more of the asset classes. Another objective we have is to avoid owning a
very high concentration of both stocks and bonds either issued by one company or
a very high concentration of both stock and bond investments in one industry.
This last point is also another advantage of owning The AAL Balanced Fund rather
than owning diversified investments in similar proportions.
/s/ Michael R. Hilt
- -----------------------------
Michael R. Hilt
Portfolio Manager
/s/ Frederick L. Plautz
- -----------------------------
Frederick L. Plautz
Portfolio Manager
<TABLE>
<CAPTION>
Fund Allocations
[PIE CHART APPEARS HERE]
% of Net Assets
4/30/98
-------
<S> <C>
. Fixed Income Obligations........................... 28%
. Cash & Cash Equivalents............................ 17%
. Consumer Staples................................... 13%
. Financials......................................... 11%
. Technology......................................... 9%
. Health Care........................................ 7%
. Capital Goods...................................... 5%
. Energy............................................. 5%
. Consumer Cyclicals................................. 4%
. Communication Services............................. 1%
-----------
Total 100%
</TABLE>
<TABLE>
<CAPTION>
5 Largest Bond Holdings
% of Net Assets
Security 4/30/98
- -------- -------
<S> <C>
U.S. Treasury Notes...................................................... 18.92%
Negotiable debt obligations of the U.S. government;
intermediate securities with maturities of 1 to 10 years
Coupon Rate: 7.500% Maturity Date: 2/15/2005
Heller Financial, Inc.................................................... 1.56%
Provides an array of commercial financial products
and services
Coupon Rate: 6.250% Maturity Date: 3/1/2001
CNA Financial Corp....................................................... 1.56%
Underwrites property, casualty, life, accident and
health coverages, as well as pension products and annuities
Coupon Rate: 6.500% Maturity Date: 4/15/2005
Lehman Brothers Holding, Inc............................................. 1.56%
Holding company for Lehman Brothers, Inc.
Coupon Rate: 6.250% Maturity Date: 4/1/2003
Computer Associates International, Inc................................... 1.56%
Designs, develops, markets, licenses, and supports
standardized computer software products
Coupon Rate: 6.375% Maturity Date: 4/15/2005
</TABLE>
<TABLE>
<CAPTION>
5 Largest Money Market Holdings
% of Net Assets
Dividend Notes 4/30/98
- -------------- -------
<S> <C>
Pitney Bowes Credit Corporation...................................... 4.21%
Provides lease financing for products of Pitney Bowes, Inc.,
as well as financial services for commercial and
industrial markets
Sara Lee Corporation................................................. 4.09%
Manufacturer and marketer of consumer food products
General Mills, Inc................................................... 3.89%
Manufactures and markets consumer food products
Wisconsin Electric Power Co.......................................... 3.48%
Generates, transmits, distributes and sells electric energy
Warner-Lambert Incorporated.......................................... 0.67%
Discovers, develops, manufactures and markets
pharmaceutical, consumer health care and
confectionary products
</TABLE>
April 30, 1998 15
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
...A Share Ticker...AAHYX...B Share Ticker...BBHYX...A Share Assets...
$100,828,858...B Share Assets.....
[PHOTO APPEARS HERE]
The AAL High Yield Bond Fund
How have high yield bonds performed over the year ended April 30, 1998, and what
factors affected performance?
The high yield bond market, as measured by the Merrill Lynch High Yield Master
Index, had a total return of 14.0% for the year ended April 30, 1998. The
primary factor driving this performance was the overall decline in interest
rates. Ten-year government bond yields declined to 5.67% on April 30, 1998, from
6.72% 12 months prior. Lower interest rates have been beneficial to equity
valuations. The strong equity market has allowed high yield companies to issue
equity and use the proceeds to reduce debt, resulting in financially healthier
credits and ratings upgrades. When a company's credit ratings are upgraded,
(e.g., from "B" to "BB"), the prices of its bonds usually respond favorably. The
Fund itself registered a total return of 15.12% for the year ended April 30,
1998, based on net amount invested in Class A shares.
I understand that the major risk with high yield bonds is that of default. Did
any of your issues default over the period? If so, for what reasons?
The major risk facing high yield bond investing is default. When a company
encounters financial problems and can no longer pay the interest due on its
debt, or can not repay debt when it is due, an event of "default" occurs. The
effect on the company's bonds can be a gradual decline in price as the bad news
slowly becomes public, or can be quite dramatic on unexpected disappointing
news. The bonds do not become worthless if the company enters bankruptcy, but
their value may decline 40% to 60%. In order to reduce this risk, we
continually monitor our investments by talking with management, research
analysts and industry experts. We also take a diversified approach to the
market. With over 100 positions in the Fund, the effect of one default will not
devastate the performance of the entire portfolio. The default rate for the
market over the past year was 2.4%, which compares to the historical average of
3.7%./2/
Although none of the Fund's
Value of a $10,000 Investment
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
THE AAL HIGH YIELD MERRILL LYNCH HIGH YIELD
BOND FUND MASTER INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
09-Jan-97 $9,596.93 1/8/97 $10,000.00
31-Jan-97 9,640.14 1/31/97 10,108.00
28-Feb-97 9,867.39 2/28/97 10,230.42
31-Mar-97 9,599.77 3/31/97 10,118.17
30-Apr-97 9,741.77 4/30/97 10,247.86
30-May-97 10,050.83 5/30/97 10,442.16
30-Jun-97 10,178.95 6/30/97 10,586.13
31-Jul-97 10,447.56 7/31/97 10,825.97
29-Aug-97 10,449.76 8/29/97 10,837.83
30-Sep-97 10,695.36 9/30/97 11,006.54
31-Oct-97 10,680.75 10/31/97 11,054.68
28-Nov-97 10,774.78 11/28/97 11,156.18
15-Dec-97 10,813.95 12/31/97 11,260.04
31-Dec-97 10,867.33 1/30/98 11,405.98
30-Jan-98 11,039.47 2/27/98 11,453.01
27-Feb-98 11,120.07 3/31/98 11,564.20
31-Mar-98 11,196.82 4/30/98 11,607.22
30-Apr-98 11,214.47
/1/ An unmanaged index comprised of over 900 "cash-pay" high yield bonds
representative of the high yield market as a whole.
Average Annual Total Returns*
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year Inception Date
----------------------------
<S> <C> <C> <C>
Class A (without sales charge)............15.12% 12.69% 1/8/97
Class A** (with sales charge).............10.53% 9.19% 1/8/97
- ----------------------------------------------------------------------
Class B (without CDSC)....................14.27% 11.86% 1/8/97
Class B** (with CDSC).....................10.27% 8.89% 1/8/97
- ----------------------------------------------------------------------
Class I***..................................NA 3.28% 12/29/97
- ----------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge).............11.96% 9.69%
Class B** (with CDSC).....................11.66% 9.43%
</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 represent total return and are not annualized.
16 The AAL Mutual Funds Annual Report
<PAGE>
REPORT ... INCOME - ORIENTED FUNDS
.$ 9,714,463...I Share Assets...$178,730...A Share NAV...$10.31...B Share...
NAV...$10.31...I Share NAV...$10.31...Number of Securities in Portfolio...131...
investments defaulted last year, one position did experience serious business
problems. Unifi Communications, a provider of international facsimile
transmission services, encountered an extremely competitive pricing environment
due to unexpected regulatory issues. As a result, the future of the company's
product is uncertain. The bonds were sold at a price of 19, which resulted in a
negative return of 66.5% for the year.
What were some of your success stories and the factors that contributed to the
performance?
The strongest sectors of the high yield market during the past year were bonds
in the media and telecommunication industries. The cable-TV sector got a boost
when Microsoft invested over $1 billion in a large cable-TV operator.
Cablevision Systems benefited as well, and also received a credit ratings
upgrade from the two major rating agencies. Fortress Group, is a home builder in
the Midwest, whose business has been spurred by low interest rates. The company
received an equity investment which will allow it to expand its business faster.
The chart below labeled "Winners" highlights the performance of these two
investments and several other positions.
/s/ David G. Carroll
David G. Carroll
Portfolio Manager
/2/ Moody's, Merrill Lynch, Credit Suisse First Boston
<TABLE>
<CAPTION>
Credit Quality
[PIE CHART APPEARS HERE]
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
.BB.....................24% 25%
.B......................73% 73%
.CCC.................... 2% 1%
.Non-Rated Bonds........ 1% 1%
--------------------
Total 100% 100%
</TABLE>
Average Quality: B+
Average Maturity: 8.1 years
<TABLE>
<CAPTION>
5 Largest Holdings
------------------
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
High Voltage Engineering Corporation....................1.44% N/A
Coupon Rate: 10.5%
Maturity Date: 8/15/2004
Riviera Holdings Corporation............................1.36% 1.10%
Coupon Rate: 10%
Maturity Date: 8/15/2004
Specialty Foods Corporation.............................1.34% 2.10%
Coupon Rate: 10.25%
Maturity Date: 8/15/2001
Algoma Steel, Inc.......................................1.07% 1.77%
Coupon Rate: 12.375%
Maturity Date: 7/15/2005
Moran Transportation Company............................ 1.01% N/A
Coupon Rate: 11.75%
Maturity Date: 7/15/2004
</TABLE>
<TABLE>
<CAPTION>
Winners
4-30-97 4-30-98 Total
Investment/Company Ratings Coupon Price Price Return
<S> <C> <C> <C> <C> <C>
Cablevision Systems B1/BB- 10.50% 100.875 115.75 25.2%
USA Mobile Communications B2/CCC+ 9.50% 83.50 94.75 24.8%
Fortress Group B3/NR 13.75% 103.75 115.50 24.6%
Riverwood Intl. B3/B- 10.25% 93.75 103.50 21.3%
Allbritton Communications B3/B- 9.75% 95.50 104.75 19.9%
</TABLE>
April 30, 1998 17
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
. . . A Share Ticker . . .. . . AAMBX . . . . . . . . . . .B Share Ticker . .
.. . . BBMBX . . . . . . . . . . .A Share Assets . . . . .. $467,145,934 . . .
[PHOTO APPEARS HERE]
The AAL Municipal Bond Fund
Are you pleased with the performance of the Fund over the past year? How does
it compare to the performance of the municipal market in general?
Interest rates fell dramatically over the last twelve months. Better than
expected inflation news brought Treasury yields down by over one percent on
intermediate and longer maturity bonds. Municipal yields declined by less than
one-half that amount as above average supply prevented tax-exempt issues from
keeping pace. Nonetheless, shareholders were well rewarded and the Fund's
performance relative to its peer group was very good. The Fund's above-average
interest rate exposure accounted for most of the favorable relative performance,
but the high average credit quality and lower than average call exposure also
enhanced performance. Fortunately, the nature in which the municipal market
lagged the taxable market during the year provides an environment for favorable
municipal performance in the future.
Is there an easy way for me to decide whether I would be better off with a
taxable or a tax-exempt investment?
It really depends on your marginal income tax-bracket. Individuals should
consider an investment in the tax-exempt market if they have a marginal tax rate
of 28% or higher. There are several ways to analyze this, but one of the
simplest methods will perhaps become clear through an example. If your federal
marginal income tax rate is 28%, then the after-tax yield you will earn in a
taxable investment is 72% (100 - 28) of your taxable yield. For example, if a
taxable investment will provide a 6.0% yield, then the after-tax yield will be
4.3% (6.0 x .72). A tax-exempt yield higher than 4.3% would make the municipal
Value of a $10,000 Investment
----------------------------
In Class A Shares - Including 4% Sales Charge
[LINE CHART APPEARS HERE]
LEHMAN BROTHERS
THE AAL MUNICIPAL BOND FUND MUNICIPAL BOND INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
16-Jul-87 $9,596.93 7/16/87 $10,000.00
31-Jul-87 9,520.23 7/31/87 10,051.00
31-Aug-87 9,472.20 8/31/87 10,074.12
30-Sep-87 9,039.90 9/30/87 9,702.38
31-Oct-87 9,079.97 10/31/87 9,736.34
30-Nov-87 9,342.46 11/30/87 9,990.46
31-Dec-87 9,462.10 12/31/87 10,135.32
31-Jan-88 9,864.54 1/29/88 10,496.14
29-Feb-88 9,923.43 2/29/88 10,607.40
31-Mar-88 9,677.14 3/31/88 10,484.35
30-Apr-88 9,716.96 4/30/88 10,564.03
31-May-88 9,736.87 5/31/88 10,533.40
30-Jun-88 9,854.06 6/30/88 10,687.18
29-Jul-88 9,884.35 7/29/88 10,756.65
31-Aug-88 9,843.96 8/31/88 10,766.33
30-Sep-88 10,006.34 9/30/88 10,961.20
31-Oct-88 10,088.36 10/31/88 11,154.12
30-Nov-88 9,955.08 11/30/88 11,051.50
31-Dec-88 10,163.56 12/30/88 11,164.23
31-Jan-89 10,215.62 1/31/89 11,395.33
28-Feb-89 10,080.25 2/28/89 11,265.42
31-Mar-89 10,167.52 3/31/89 11,238.38
30-Apr-89 10,305.06 4/30/89 11,504.73
31-May-89 10,474.35 5/31/89 11,744.03
30-Jun-89 10,699.01 6/30/89 11,903.75
31-Jul-89 10,752.72 7/31/89 12,065.64
31-Aug-89 10,623.82 8/31/89 11,947.40
29-Sep-89 10,697.11 9/30/89 11,911.56
31-Oct-89 10,773.44 10/31/89 12,056.88
30-Nov-89 10,849.77 11/30/89 12,267.87
06-Dec-89 10,866.15 12/31/89 12,368.47
29-Dec-89 11,029.50 1/31/90 12,310.34
31-Jan-90 10,885.55 2/28/90 12,419.90
28-Feb-90 10,940.91 3/30/90 12,423.62
30-Mar-90 11,043.45 4/30/90 12,334.17
30-Apr-90 10,908.50 5/31/90 12,603.06
31-May-90 11,077.19 6/29/90 12,713.97
29-Jun-90 11,306.99 7/31/90 12,900.86
31-Jul-90 11,398.36 8/31/90 12,713.80
31-Aug-90 11,124.26 9/28/90 12,721.43
28-Sep-90 11,264.22 10/31/90 12,951.69
31-Oct-90 11,380.23 11/30/90 13,212.01
30-Nov-90 11,565.84 12/31/90 13,270.15
27-Dec-90 11,558.75 1/31/91 13,447.97
31-Dec-90 11,741.60 2/28/91 13,564.96
31-Jan-91 11,800.54 3/29/91 13,570.39
28-Feb-91 11,859.49 4/30/91 13,750.88
29-Mar-91 12,021.92 5/31/91 13,873.26
30-Apr-91 12,117.62 6/28/91 13,859.39
31-May-91 12,141.54 7/31/91 14,028.47
28-Jun-91 12,229.94 8/30/91 14,213.65
31-Jul-91 12,339.24 9/30/91 14,398.42
30-Aug-91 12,412.11 10/31/91 14,528.01
30-Sep-91 12,685.06 11/30/91 14,568.69
31-Oct-91 12,746.70 12/31/91 14,881.91
30-Nov-91 12,697.39 1/31/92 14,916.14
27-Dec-91 12,850.01 2/28/92 14,920.62
31-Dec-91 13,072.73 3/31/92 14,926.59
31-Jan-92 13,035.20 4/30/92 15,059.43
28-Feb-92 12,960.14 5/29/92 15,237.13
31-Mar-92 13,080.55 6/30/92 15,493.12
30-Apr-92 13,143.98 7/31/92 15,957.91
29-May-92 13,245.48 8/31/92 15,801.52
30-Jun-92 13,568.35 9/30/92 15,904.23
31-Jul-92 14,018.49 10/30/92 15,748.37
31-Aug-92 13,735.55 11/30/92 16,030.27
30-Sep-92 13,882.95 12/31/92 16,193.78
30-Oct-92 13,635.28 1/29/93 16,381.63
30-Nov-92 13,882.95 2/26/93 16,974.64
31-Dec-92 13,975.47 3/31/93 16,794.71
31-Dec-92 14,160.17 4/30/93 16,964.34
29-Jan-93 14,252.63 5/31/93 17,059.34
26-Feb-93 14,622.49 6/30/93 17,344.23
31-Mar-93 14,649.81 7/30/93 17,366.77
30-Apr-93 14,703.33 8/31/93 17,728.00
28-May-93 14,703.33 9/30/93 17,930.10
30-Jun-93 15,049.58 10/29/93 17,964.17
30-Jul-93 15,008.94 11/30/93 17,806.08
31-Aug-93 15,225.68 12/31/93 18,181.79
30-Sep-93 15,546.14 1/31/94 18,389.07
29-Oct-93 15,559.85 2/28/94 17,912.79
30-Nov-93 15,326.80 3/31/94 17,183.74
31-Dec-93 15,573.46 4/29/94 17,329.80
31-Dec-93 15,757.45 5/31/94 17,480.57
31-Jan-94 15,868.61 6/30/94 17,373.94
28-Feb-94 15,423.95 7/29/94 17,691.88
31-Mar-94 14,927.63 8/31/94 17,753.80
29-Apr-94 14,857.28 9/30/94 17,492.82
31-May-94 14,885.42 10/31/94 17,181.45
30-Jun-94 14,958.18 11/30/94 16,870.46
29-Jul-94 15,157.63 12/30/94 17,241.62
31-Aug-94 15,143.38 1/31/95 17,734.73
30-Sep-94 15,015.52 2/28/95 18,250.81
31-Oct-94 14,712.61 3/31/95 18,460.69
30-Nov-94 14,366.43 4/28/95 18,482.84
30-Dec-94 14,781.44 5/31/95 19,072.45
30-Dec-94 14,861.62 6/30/95 18,906.52
31-Jan-95 15,155.33 7/31/95 19,086.13
28-Feb-95 15,595.89 8/31/95 19,328.52
31-Mar-95 15,865.38 9/29/95 19,450.29
28-Apr-95 15,895.12 10/31/95 19,732.32
31-May-95 16,281.72 11/30/95 20,059.88
30-Jun-95 16,285.11 12/29/95 20,252.45
31-Jul-95 16,377.99 1/31/96 20,406.37
31-Aug-95 16,532.18 2/29/96 20,267.61
29-Sep-95 16,625.09 3/29/96 20,008.18
31-Oct-95 16,936.55 4/30/96 19,952.16
30-Nov-95 17,324.20 5/31/96 19,944.18
28-Dec-95 17,478.10 6/28/96 20,161.57
29-Dec-95 17,572.43 7/31/96 20,345.04
31-Jan-96 17,646.24 8/30/96 20,340.97
29-Feb-96 17,557.60 9/30/96 20,625.74
29-Mar-96 17,292.86 10/31/96 20,858.81
30-Apr-96 17,192.02 11/29/96 21,240.53
31-May-96 17,212.49 12/31/96 21,151.32
28-Jun-96 17,385.66 1/31/97 21,191.51
31-Jul-96 17,552.81 2/28/97 21,386.47
30-Aug-96 17,508.79 3/31/97 21,102.03
30-Sep-96 17,851.99 4/30/97 21,279.29
31-Oct-96 18,065.78 5/30/97 21,598.48
29-Nov-96 18,490.14 6/30/97 21,829.58
30-Dec-96 18,187.27 7/31/97 22,434.26
30-Dec-96 18,366.56 8/29/97 22,223.38
31-Dec-96 18,343.57 9/30/97 22,487.84
31-Jan-97 18,316.50 10/31/97 22,631.76
28-Feb-97 18,505.14 11/28/97 22,765.29
31-Mar-97 18,178.27 12/31/97 23,097.66
30-Apr-97 18,334.01 1/30/98 23,335.56
30-May-97 18,638.85 2/27/98 23,342.57
30-Jun-97 18,867.13 3/31/98 23,363.57
31-Jul-97 19,565.57 4/30/98 23,258.44
29-Aug-97 19,243.45
30-Sep-97 19,562.63
31-Oct-97 19,687.16
28-Nov-97 19,824.42
15-Dec-97 19,963.55
15-Dec-97 20,070.68
31-Dec-97 20,239.81
30-Jan-98 20,469.88
27-Feb-98 20,422.91
31-Mar-98 20,394.98
30-Apr-98 20,259.00
/1/ An unmanaged broad-based index that provides a performance indicator of the
overall municipal bond market.
<TABLE>
<CAPTION>
Average Annual Total Returns*
April 30, 1998
From Inception
1-Year 5-Year 10-Year Inception Date
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (without sales charge)............10.50% 6.53% 7.58% 7.16% 7/16/87
Class A** (with sales charge)............. 6.03% 5.66% 7.14% 6.76% 7/16/87
- ----------------------------------------------------------------------------------------------
Class B (without CDSC).................... 9.58% NA NA 7.52% 1/8/97
Class B** (with CDSC)..................... 5.58% NA NA 4.52% 1/8/97
- ----------------------------------------------------------------------------------------------
Class I***................................ NA NA NA (0.09)% 12/29/97
- ----------------------------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge)............. 7.73% 5.97% 7.30% 6.88%
Class B** (with CDSC)..................... 7.17% NA NA 5.41%
</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 represent total return and are not annualized.
18 The AAL Mutual Funds Annual Report
<PAGE>
REPORT...INCOME - ORIENTED FUNDS
..B Share Assets...$3,609,800....I Share Assets...$50,091.... A Share NAV...
$11.40...B Share NAV...$11.40...I Share NAV...$11.40...Number of Securities in
Portfolio...154...
investment the better choice for the individual in this example. The higher the
marginal tax-bracket, the lower the tax-equivalent yield required to reach the
point of indifference. Continuing with the same 6.0% taxable yield example, an
investor in the top marginal tax rate of 39.6% would be indifferent at a 3.6%
tax-exempt yield (6.0 x .604).
In the last report, you told us about an Illinois bond that you were especially
excited about. Do you have an update?
That would be the Metropolitan Pier & Expo Authority issue for a hotel being
built adjacent to the McCormick Place Convention Center in Chicago, Illinois.
The hotel, which will be managed by the Hyatt Corp., will open in June, three
months ahead of schedule and $2 million under budget. The strong economy and
shortage of hotel space in the downtown Chicago area continue to enhance the
credit outlook on this bond. In addition, because interest rates have fallen
significantly since this issue sold, the bonds are an excellent refunding
candidate, eliminating credit risk altogether and providing a nice windfall for
bondholders.
One other bond that is progressing nicely with its construction phase is the
Eastern/Foothill Transportation Corridor issue. This issue financed the
construction of a new toll road intended to relieve traffic congestion on
southern California expressways. This too appears headed for an early opening,
perhaps as much as a full year, and within its projected budget. Like the Met
Pier bonds, some of the bonds we own from this issue could get refunded if
interest rates remain stable or fall further.
/s/ Duane McAllister
Duane A. McAllister
Portfolio Manager
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% Of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
. AAA................................... 47% 47%
. AA ................................... 28% 21%
. A ................................... 11% 24%
. BBB................................... 14% 8%
----------------------------
Total 100% 100%
</TABLE>
Average Quality: AA
Average Maturity: 19.5 years
5 Largest Holdings
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
Metropolitan Pier and Exposition Center,
Illinois Revenue Bonds............................ 2.73% 2.79%
Coupon Rate: 7.00% Maturity Date: 7/1/2026
Washington State Public Power Supply
System Revenue Bonds.............................. 2.30% 2.50%
Coupon Rate: 6.00% Maturity Date: 7/1/2007
Salt River Arizona Project Revenue
Bonds............................................. 2.16% 1.14%
Coupon Rate: 5.50% Maturity Date: 1/1/2019
Kitsap County Washington Conservatory
Housing Authority Revenue Bonds................... 2.14% NA
Coupon Rate: 5.60% Maturity Date: 12/1/2028
New York State Thruway Authority
Revenue Bonds..................................... 1.99% 2.14%
Coupon Rate: 5.60% Maturity Date: 4/1/2005
</TABLE>
<TABLE>
<CAPTION>
Fund Allocations
- ----------------
[U.S. MAP APPEARS HERE]
<S> <C>
Nebraska 0.3%
Wisconsin 0.5%
Minnesota 0.2%
New York 14.6%
Missouri 2.1%
Illinois 13.5%
Michigan 1.6%
Washington 11.4%
Ohio 0.2%
Montana 0.1%
Indiana 2.3%
New Hampshire 1.1%
Vermont 0.3%
Wyoming 2.5%
California 17.4%
Pennsylvania 1.2%
Utah 1.4%
Colorado 1.0%
Kansas 0.6%
Virginia 2.5%
Arizona 2.5%
Tennessee 0.4%
North Carolina 1.0%
New Mexico 1.6%
Georgia 3.7%
Alabama 0.9%
Texas 6.7%
Louisiana 0.3%
Florida 4.5%
Oklahoma 0.1%
Puerto Rico 1.8%
</TABLE>
April 30, 1998 19
<PAGE>
[PHOTO APPEARS HERE]
THE AAL MUTUAL FUNDS ANNUAL
A Share Ticker...AAINX.......B Share Ticker...BBNDX.......A Share Assets.....
$353,405,552........B Share
The AAL Bond Fund
How have bonds performed over the year ended April 30, 1998, and what factors
affected performance?
Bonds have done well over the last year. I believe the primary reason
for owning bonds is for the relatively stable level of income they produce. Any
time period over which bonds produce a positive price performance I consider to
be a good period of bond performance. Investment grade bonds returned roughly
ten percent over the last fiscal year, with about six percent of that coming
from interest paid and four percent coming from price appreciation due to
falling interest rates.
Did the financial crisis in Southeast Asia affect the U.S. bond market?
Yes it did. It served to give the Fed pause in what seemed to be an increasing
likelihood of a Fed funds rate hike. It also drove up the price of risk in both
stock and bond markets. In particular, corporate bond prices declined relative
to U.S. Treasuries, especially those issued by entities with significant
economic interests in Southeast Asia.
What changes have you made to the Fund since April 30, 1997?
The Fund does not look a lot different than it did a year ago. At one point
during the period I had a much higher allocation to corporate bonds than I do
now. I have reduced our mortgage-backed bond position a bit since last year.
Value of a $10,000 Investment
-----------------------------
In Class A Shares - Including 4% Sales Charge
[LINE GRAPH APPEARS HERE]
THE AAL BOND FUND LEHMAN BROTHERS AGGREGATE
BOND INDEX /1/
FROM INCEPTION FROM INCEPTION
DATE ENDING DOLLARS DATE ENDING DOLLARS
- ---------------------------------- -------------------------------
16-Jul-87 $9,596.93 7/16/87 $10,000.00
31-Jul-87 9,479.55 7/31/87 9,996.00
31-Aug-87 9,341.31 8/31/87 9,943.02
30-Sep-87 9,078.40 9/30/87 9,731.23
31-Oct-87 9,403.21 10/31/87 10,077.67
30-Nov-87 9,458.61 11/30/87 10,158.29
30-Dec-87 9,554.24 12/31/87 10,296.44
31-Jan-88 9,885.53 1/29/88 10,658.88
29-Feb-88 9,972.78 2/29/88 10,785.72
31-Mar-88 9,886.43 3/31/88 10,684.33
30-Apr-88 9,843.01 4/30/88 10,626.64
31-May-88 9,721.91 5/31/88 10,555.44
01-Jun-88 9,819.64 6/30/88 10,809.82
30-Jun-88 9,980.93 7/29/88 10,752.53
29-Jul-88 9,942.41 8/31/88 10,780.49
31-Aug-88 9,954.75 9/30/88 11,025.20
30-Sep-88 10,165.04 10/31/88 11,232.48
31-Oct-88 10,336.37 11/30/88 11,095.44
30-Nov-88 10,217.53 12/30/88 11,107.65
30-Dec-88 10,205.24 1/31/89 11,267.60
31-Jan-89 10,338.88 2/28/89 11,186.47
28-Feb-89 10,257.88 3/31/89 11,234.57
31-Mar-89 10,271.10 4/30/89 11,469.37
30-Apr-89 10,454.58 5/31/89 11,771.02
31-May-89 10,718.14 6/30/89 12,128.86
30-Jun-89 10,976.19 7/31/89 12,387.20
31-Jul-89 11,157.01 8/31/89 12,203.87
31-Aug-89 11,028.76 9/30/89 12,266.11
29-Sep-89 11,090.84 10/31/89 12,567.86
31-Oct-89 11,322.42 11/30/89 12,687.25
30-Nov-89 11,410.32 12/31/89 12,721.51
31-Dec-89 11,459.75 1/31/90 12,570.12
31-Jan-90 11,341.06 2/28/90 12,610.35
28-Feb-90 11,392.36 3/30/90 12,619.17
30-Mar-90 11,397.54 4/30/90 12,503.08
30-Apr-90 11,273.97 5/31/90 12,873.17
31-May-90 11,586.79 6/29/90 13,080.43
29-Jun-90 11,749.40 7/31/90 13,260.94
31-Jul-90 11,919.84 8/31/90 13,083.24
31-Aug-90 11,789.51 9/28/90 13,191.83
28-Sep-90 11,877.10 10/31/90 13,359.37
31-Oct-90 12,027.57 11/30/90 13,646.59
30-Nov-90 12,261.52 12/31/90 13,859.48
31-Dec-90 12,433.08 1/31/91 14,031.34
31-Jan-91 12,579.40 2/28/91 14,150.60
28-Feb-91 12,673.15 3/29/91 14,248.24
29-Mar-91 12,747.97 4/30/91 14,402.12
30-Apr-91 12,890.50 5/31/91 14,485.66
31-May-91 12,973.55 6/28/91 14,478.41
28-Jun-91 12,957.26 7/31/91 14,679.66
31-Jul-91 13,113.82 8/30/91 14,996.75
30-Aug-91 13,383.61 9/30/91 15,301.18
30-Sep-91 13,657.90 10/31/91 15,471.02
31-Oct-91 13,849.28 11/30/91 15,613.36
30-Nov-91 13,955.41 12/31/91 16,077.07
27-Dec-91 14,235.53 1/31/92 15,858.42
31-Dec-91 14,389.31 2/28/92 15,961.50
31-Jan-92 14,137.81 3/31/92 15,872.12
28-Feb-92 14,215.56 4/30/92 15,986.40
31-Mar-92 14,145.54 5/29/92 16,288.54
30-Apr-92 14,240.00 6/30/92 16,513.32
29-May-92 14,487.75 7/31/92 16,850.20
30-Jun-92 14,745.15 8/31/92 17,020.38
31-Jul-92 15,085.37 9/30/92 17,222.92
31-Aug-92 15,224.80 10/30/92 16,993.86
30-Sep-92 15,436.29 11/30/92 16,997.26
30-Oct-92 15,192.60 12/31/92 17,267.51
30-Nov-92 15,113.95 1/29/93 17,599.05
31-Dec-92 15,272.29 2/26/93 17,907.03
31-Dec-92 15,353.55 3/31/93 17,982.24
29-Jan-93 15,651.95 4/30/93 18,108.12
28-Feb-93 15,926.56 5/31/93 18,131.66
31-Mar-93 15,997.99 6/30/93 18,459.84
30-Apr-93 16,121.70 7/30/93 18,565.06
28-May-93 16,087.54 8/31/93 18,889.95
30-Jun-93 16,387.72 9/30/93 18,940.96
01-Jul-93 16,392.81 10/29/93 19,011.04
30-Jul-93 16,437.62 11/30/93 18,849.44
31-Aug-93 16,751.03 12/31/93 18,951.23
30-Sep-93 16,796.52 1/31/94 19,207.07
29-Oct-93 16,851.73 2/28/94 18,872.87
30-Nov-93 16,618.01 3/31/94 18,406.71
31-Dec-93 16,628.76 4/29/94 18,259.46
31-Dec-93 16,704.50 5/31/94 18,257.63
31-Jan-94 16,925.59 6/30/94 18,217.46
28-Feb-94 16,546.27 7/29/94 18,579.99
31-Mar-94 16,133.79 8/31/94 18,602.29
29-Apr-94 15,961.40 9/30/94 18,328.83
31-May-94 15,938.74 10/31/94 18,312.34
30-Jun-94 15,914.26 11/30/94 18,272.05
29-Jul-94 16,154.44 12/30/94 18,398.13
31-Aug-94 16,188.49 1/31/95 18,762.41
30-Sep-94 15,965.79 2/28/95 19,208.96
31-Oct-94 15,927.68 3/31/95 19,326.13
30-Nov-94 15,841.72 4/28/95 19,596.70
30-Dec-94 15,907.71 5/31/95 20,355.09
30-Dec-94 15,911.83 6/30/95 20,503.68
31-Jan-95 16,173.14 7/31/95 20,458.57
28-Feb-95 16,500.21 8/31/95 20,706.12
31-Mar-95 16,623.15 9/29/95 20,906.97
28-Apr-95 16,828.14 10/31/95 21,178.76
31-May-95 17,360.19 11/30/95 21,496.44
30-Jun-95 17,465.51 12/29/95 21,797.39
31-Jul-95 17,392.05 1/31/96 21,941.26
31-Aug-95 17,582.70 2/29/96 21,559.48
29-Sep-95 17,738.15 3/29/96 21,408.56
31-Oct-95 17,954.78 4/30/96 21,288.67
30-Nov-95 18,222.87 5/31/96 21,246.10
29-Dec-95 18,467.42 6/28/96 21,530.79
31-Jan-96 18,561.17 7/31/96 21,588.93
29-Feb-96 18,153.22 8/30/96 21,552.23
29-Mar-96 17,995.77 9/30/96 21,927.23
30-Apr-96 17,867.89 10/31/96 22,414.02
31-May-96 17,808.75 11/29/96 22,797.30
28-Jun-96 18,006.20 12/31/96 22,585.28
31-Jul-96 18,068.87 1/31/97 22,655.30
30-Aug-96 18,047.94 2/28/97 22,711.94
30-Sep-96 18,334.42 3/31/97 22,459.83
31-Oct-96 18,733.74 4/30/97 22,796.73
29-Nov-96 19,056.00 5/30/97 23,013.30
31-Dec-96 18,884.40 6/30/97 23,287.16
31-Jan-97 18,960.59 7/31/97 23,915.91
28-Feb-97 18,997.30 8/29/97 23,712.63
31-Mar-97 18,820.64 9/30/97 24,063.57
30-Apr-97 19,016.65 10/31/97 24,412.49
30-May-97 19,170.20 11/28/97 24,524.79
30-Jun-97 19,409.97 12/31/97 24,772.49
31-Jul-97 19,907.81 1/30/98 25,089.58
29-Aug-97 19,760.10 2/27/98 25,069.51
30-Sep-97 20,043.32 3/31/98 25,154.75
31-Oct-97 20,325.07 4/30/98 25,285.55
28-Nov-97 20,373.98
31-Dec-97 20,580.24
30-Jan-98 20,817.86
27-Feb-98 20,744.78
31-Mar-98 20,819.72
30-Apr-98 20,891.58
/1/ An unmanaged index that encompasses four major classes of fixed-income
securities in the U.S.: U.S. Treasury and U.S. government agency
securities, corporate debt obligations, mortgage-backed securities and
asset-backed securities.
Average Annual Total Returns*
-----------------------------
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year 5-Year 10-Year Inception Date
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (without sales charge)........... 9.86% 5.32% 7.82% 7.47% 7/16/87
Class A** (with sales charge)............ 5.48% 4.47% 7.38% 7.06% 7/16/87
- --------------------------------------------------------------------------------------------
Class B (without CDSC)................... 8.75% NA NA 7.42% 1/8/97
Class B** (with CDSC).................... 4.75% NA NA 4.41% 1/8/97
- --------------------------------------------------------------------------------------------
Class I*** .............................. NA NA NA 1.24% 12/29/97
- --------------------------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (with sales charge)............ 6.19% 4.55% 7.29% 7.08%
Class B** (with CDSC).................... 5.65% NA NA 4.49%
- --------------------------------------------------------------------------------------------
</TABLE>
* Past performance is not an indication of future results. Investment return
and principal value will fluctuate, and shares, when redeemed, may be worth
more or less than their original cost.
** 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 represent total return and are not annualized.
20 The AAL Mutual Funds Annual Report
<PAGE>
REPORT...INCOME - ORIENTED FUNDS
Assets...$1,431,449.......I Share Assets...$29,249,736.....A Share NAV...$9.99
...B Share NAV...$9.99...I Share NAV...$9.99...Number of Securities in Portfolio
...43
Would you tell us about any bond investments that you have made that have
performed well over the past year?
The most recent example is an investment in Nordstrom bonds. I bought those
bonds in the new issue market at a yield spread of 102 basis points (1.02%) over
a benchmark U.S. Treasury and sold it about a month later at a yield spread of
91 basis points (.91%). A sale at a lower yield spread generates the same
positive price return as a decline in the absolute yield of a bond, so in
selling this bond at an 11 basis point lower yield spread, I generated an excess
return over a comparable maturity U.S. Treasury bond of about 135 basis points.
/s/ Michael R. Hilt
- -------------------
Michael R. Hilt
Portfolio Manager
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Net Assets
4/30/98 4/30/97
------- -------
<S> <C> <C>
. AAA................. 64% 61%
. AA.................. 4% 14%
. A................... 27% 17%
. BBB................. 5% 8%
----------------------
Total 100% 100%
</TABLE>
Average Quality: AA
Average Maturity: 6.81 years
5 Largest Holdings
------------------
<TABLE>
<CAPTION>
% of Net Assets
Security 4/30/98 4/30/97
- -------- ------- -------
<S> <C> <C>
Federal National Mortgage Association........... 29.13% NA
Coupon Rate: 5.750%
Maturity Date: 4/15/2003
Countrywide Home Loans.......................... 4.06% NA
Coupon Rate: 6.750%
Maturity Date: 11/25/2027
PNC Mortgage Securities Corporation............. 3.95% NA
Coupon Rate: 6.750%
Maturity Date: 10/25/2027
Citicorp Mortgage Securities, Inc. ............. 3.37% 3.25%
Coupon Rate: 6.250%
Maturity Date: 5/25/2024
Computer Associates International............... 2.99% NA
Coupon Rate: 6.375%
Maturity Date: 4/15/2005
</TABLE>
April 30, 1998 21
<PAGE>
THE AAL MUTUAL FUNDS ANNUAL
. A Share Ticker . . AMMXX . . . . . . B Share Ticker . . . BMMXX . . . . . .
A Share Assets . . . . .$240,737,453 . . . . . . B Share Assets. . . $1,200,622
. . . . . . I Share Assets. . . $234,492 . . . . . . A Share NAV . . . $1.00 . .
. . . . B Share NAV . . . $1.00 . . . . . . I Share NAV . . . $1.00 . . . . . .
Number of Securities in Portfolio . . . 31 . . . . . . . .
[PHOTO APPEARS HERE]
The AAL Money Market Fund
This Fund is neither insured nor guaranteed by the U.S. government and there can
be no assurances that the Fund will be able to maintain a stable net asset
value.
Are you pleased with the performance of the Fund for the year ended April 30,
1998?
Yes, I am. The Fund met its objective of providing investors with a low risk
income return in line with other retail-oriented money market funds, without
taking any unnecessary risk.
Was there any interesting news in the commercial paper market that contributed
to the performance of the Fund?
The Fund is, as most money market funds are, an extremely conservative
investment. As such, there is not much excitement in the investments made in it.
The commercial paper I buy is in the highest category of commercial paper (First
Tier). I am happy to report that I have seen nothing exciting in any of my
commercial paper investments since I have been managing the Fund.
Due to the short-term nature (397 days or less) of the securities in this market
and the relatively small number of issuing firms, how do you keep up?
Keeping the weighted average maturity (WAM) of the Fund at a target of about 60
days is difficult.
% Average Annual Total Returns*
April 30, 1998
<TABLE>
<CAPTION>
From Inception
1-Year 5-Year 10-Year Inception Date
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (without sales charge)............. 5.12% 4.22% 5.14% 5.16% 3/1/88
- -----------------------------------------------------------------------------------------------------
Class B (without CDSC)..................... 4.26% NA NA 4.29% 1/8/97
Class B** (with CDSC)...................... 0.26% NA NA 1.25% 1/8/97
- -----------------------------------------------------------------------------------------------------
Class I***................................. NA NA NA 1.67% 12/29/97
- -----------------------------------------------------------------------------------------------------
SEC Standardized Returns as of 3/31/98
Class A** (without sales charge)........... 5.15% 4.17% 5.15% 5.16%
Class B** (with CDSC)...................... 0.35% NA NA 1.11%
</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 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 represent total return and are not annualized.
22 The AAL Mutual Funds Annual Report
<PAGE>
REPORT ... INCOME-ORIENTED FUNDS
Assets....$1,200,622....I Share Assets....$234,492....A Share NAV....$1.00....B
Share NAV....$1.00....I Share NAV....$1.00....Number of Securities in
Portfolio.... 31....................
With each day that passes, if I made no new investments, the average maturity
would shorten by a day. I have about fifty issuers on my approved list that I
can buy commercial paper from. I also have a limitation whereby a maximum of 5%
of the total assets (at time of purchase) of the Fund can be invested in any one
issuer. Furthermore, because many of the issuers on my list do not offer
commercial paper investments each day, it does become difficult to keep the Fund
fully invested in commercial paper and keep the structure of the Fund as a whole
in the manner that I want it in.
Do you purchase your commercial paper directly
from the issuer?
Most of the larger issuers of commercial paper do sell it directly to investors.
Some of the less frequent issuers of commercial paper sell it through broker-
dealers. I purchase my issues both ways.
/s/ Michael R. Hilt
Michael R. Hilt
Portfolio Manager
5 Largest Holdings
% of Net Assets
Security 4/30/98
- -------- -------
International Business Machines
Credit Corporation.................................. 4.519%
Coupon Rate: 5.40% - 5.61%
Maturity Date: 5/1 - 8/28/98
Norwest Financial, Inc.............................. 4.514%
Coupon Rate: 5.43% - 5.50%
Maturity Date: 6/9 - 6/24/98
Beneficial Corporation.............................. 4.509%
Coupon Rate: 5.40% - 5.55%
Maturity Date: 5/19 - 8/31/98
Eaton Corporation................................... 4.507%
Coupon Rate: 5.35% - 5.47%
Maturity Date: 5/28 - 7/10/98
Chrysler Financial Corporation...................... 4.506%
Coupon Rate: 5.40% - 5.64%
Maturity Date: 5/8 - 9/14/98
Average Quality: First Tier
Average Maturity: 58 Days
Short-Term Investment Comparison
April 30, 1998
<TABLE>
<CAPTION>
[BAR CHART APPEARS HERE]
The AAL 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>
4.77% 2.49% 4.59%
</TABLE>
/1/ Bank Rate Monitor
April 30, 1998 23
<PAGE>
The AAL Small Cap Stock Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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 (95.9%) Market Value
====================================================================================
<C> <S> <C>
Basic Materials (2.3%)
25,000 Cambrex Corporation............................. $ 1,387,500
37,000 Gibraltar Steel Corporation*.................... 888,000
35,000 Steel Dynamics, Inc.*........................... 800,625
-----------------------------------------------
Total Basic Materials 3,076,125
===============================================
Capital Goods (15.2%)
60,000 Anicom, Inc.*................................... 937,500
55,000 Applied Power, Inc.............................. 2,055,625
65,000 BE Aerospace, Inc.*............................. 2,027,188
65,000 Computer Products, Inc.*........................ 1,430,000
75,000 Farr Company*................................... 1,593,750
50,000 General Cable Corporation....................... 2,265,625
10,000 Hadco Corporation*.............................. 382,500
30,000 Harman International Industries, Inc............ 1,290,000
80,000 Integrated Process Equipment Corp.*............. 1,455,000
20,000 Kemet Corporation*.............................. 360,000
10,000 Sanmina Corporation*............................ 900,000
15,000 Superior Services, Inc.*........................ 487,500
30,000 Tetra Tech, Inc.*............................... 727,500
40,000 Titanium Metals Corporation*.................... 1,065,000
40,000 Tower Automotive, Inc.*......................... 2,132,500
15,000 Tracor, Inc.*................................... 589,687
26,000 Wabash National Corporation..................... 802,750
-----------------------------------------------
Total Capital Goods 20,502,125
===============================================
Communication Services (2.2%)
30,000 IDT Corporation*................................ 920,625
10,000 Pacific Gateway Exchange, Inc.*................. 570,000
60,000 SITEL Corporation*.............................. 705,000
35,000 Tel-Save Holdings, Inc.*........................ 798,437
-----------------------------------------------
Total Communication Services 2,994,062
===============================================
Consumer Cyclicals (17.0%)
20,000 ABR Information Services, Inc.*................. 578,750
55,000 Acxiom Corporation*............................. 1,333,750
20,000 Caribiner International, Inc.*.................. 400,000
15,000 DeVry, Inc.*.................................... 568,125
40,000 DM Management Company*.......................... 1,085,000
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
- -------------------------------------------------------------------------------
24 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.9%) Market Value
================================================================================
<C> <S> <C>
Consumer Cyclicals (17.0%) - continued
15,000 Dollar Tree Stores, Inc.*..................... $ 813,750
35,000 Dura Automotive Systems, Inc.*................ 1,365,000
10,000 Ethan Allen Interiors, Inc.................... 509,372
15,000 Forrester Research, Inc.*..................... 562,500
25,000 Getty Images, Inc.*........................... 571,875
50,000 ITI Technologies, Inc.*....................... 1,600,000
40,000 Lamalie Associates, Inc.*..................... 880,000
30,000 Lamar Advertising Company*.................... 1,035,000
25,000 Nautica Enterprises, Inc.*.................... 621,875
20,000 NOVA Corporation (Georgia).................... 680,000
15,000 Oakwood Homes Corporation..................... 422,812
20,000 On Sale Inc.*................................. 503,750
10,000 O'Reilly Automotive, Inc.*.................... 275,000
90,000 PETsMART, Inc.*............................... 1,057,500
15,000 Proffits, Inc.*............................... 596,250
15,000 Ross Stores, Inc.............................. 694,687
25,000 St. John Knits, Inc........................... 1,115,625
60,000 Strattec Security Corporation*................ 1,860,000
20,000 Tech Data Corporation*........................ 997,500
35,000 The North Face, Inc.*......................... 785,313
10,000 The Timberland Company Class A*............... 856,250
25,000 The Wet Seal, Inc.*........................... 690,625
10,000 Williams-Sonoma, Inc.*........................ 549,375
---------------------------------------------
Total Consumer Cyclicals 23,009,687
=============================================
Consumer Staples (9.4%)
10,000 American Italian Pasta Company*............... 310,000
10,000 American Radio Systems Corporation*........... 663,125
90,000 Apple South, Inc.............................. 1,417,500
20,000 CDI Corp.*.................................... 773,750
25,000 Dominick's Supermarkets, Inc.*................ 1,001,562
30,000 Emmis Broadcasting Corporation*............... 1,552,500
10,000 Heftel Broadcasting Corporation*.............. 438,750
15,000 Henry Schein, Inc.*........................... 585,000
10,000 Jacor Communications, Inc.*................... 568,750
100,000 PMT Services, Inc.*........................... 1,950,000
10,000 Smithfield Foods, Inc.*....................... 303,750
90,000 SOS Staffing Services, Inc.*.................. 1,980,000
25,000 United Natural Foods, Inc.*................... 706,250
15,000 Westwood One, Inc.*........................... 450,000
---------------------------------------------
Total Consumer Staples 12,700,937
=============================================
Energy (5.7%)
20,000 Atwood Oceanics, Inc.*........................ 1,093,750
60,000 Belco Oil & Gas Corporation*.................. 1,053,750
25,000 Hvide Marine Incorporated*.................... 421,875
30,000 Marine Drilling Companies, Inc.*.............. 729,375
15,000 Noble Drilling Corporation*................... 484,688
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
- --------------------------------------------------------------------------------
The AAL Mutual Funds Annual Report 25
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.9%) Market Value
=================================================================================
<C> <S> <C>
Energy (5.7%) - continued
- -------------------------
39,000 Ocean Energy, Inc.*........................ $ 955,500
15,000 Petroleum Geo-Services ADR*................ 986,250
25,000 Pool Energy Services Co.*.................. 659,375
55,000 Pride International, Inc.*................. 1,337,187
----------------------------------------------
Total Energy 7,721,750
==============================================
Financials (12.8%)
- ------------------
15,000 Bank United Corp........................... 776,250
30,000 Brandywine Realty Trust.................... 682,500
10,000 CCB Financial Corporation.................. 1,087,500
15,000 CMAC Investment Corporation................ 968,438
10,000 Community First Bankshares, Inc............ 503,750
41,000 Community Trust Bancorp, Inc............... 1,322,250
5,000 Dain Rauscher Corporation.................. 300,937
30,000 First Industrial Realty Trust, Inc......... 975,000
10,000 FirstMerit Corporation..................... 283,750
45,000 Glenborough Realty Trust, Inc.............. 1,206,563
50,000 HCC Insurance Holdings, Inc................ 1,087,500
35,000 Patriot American Hospitality, Inc.......... 883,750
20,000 Peoples Heritage Financial Group, Inc...... 965,000
20,000 Protective Life Corporation................ 742,500
17,500 Provident Financial Group, Inc............. 926,406
45,000 Reckson Associates Realty Corporation...... 1,102,500
25,000 TCF Financial Corporation.................. 814,062
37,500 Texas Regional Bancshares, Inc............. 1,237,500
50,000 Vermont Financial Services Corporation..... 1,462,500
----------------------------------------------
Total Financials 17,328,656
==============================================
Health Care (10.2%)
- -------------------
45,000 American Oncology Resources, Inc.*......... 675,000
22,000 AmeriSource Health Corporation*............ 1,199,000
50,000 BioChem Pharma, Inc.*...................... 1,271,875
40,000 COR Therapeutics, Inc.*.................... 755,000
25,000 Dura Pharmaceuticals, Inc.*................ 662,500
40,000 Heska Corporation*......................... 520,000
12,000 ICN Pharmaceuticals, Inc................... 591,000
35,000 Interim Services, Inc.*.................... 1,141,875
10,000 Lincare Holdings, Inc.*.................... 811,250
20,000 National Dentex Corporation*............... 495,000
40,000 Neurex Corporation*........................ 1,197,500
15,000 Pediatrix Medical Group, Inc.*............. 632,813
35,000 PhyCor, Inc.*.............................. 796,250
15,000 Protein Design Labs, Inc.*................. 480,000
10,000 STERIS Corporation*........................ 588,125
90,000 Trimeris, Inc.*............................ 888,750
15,000 Vertex Pharmaceuticals, Inc.*.............. 466,875
39,000 Young Innovations, Inc.*................... 633,750
----------------------------------------------
Total Health Care 13,806,563
==============================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
26 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (95.9%) Market Value
================================================================================
<C> <S> <C>
Technology (15.6%)
35,000 American Management Systems, Inc.*.................. $ 1,012,813
35,000 Analysts International Corporation.................. 1,015,000
15,000 Aspect Telecommunications Corporation*.............. 431,250
20,000 ATMI, Inc.*......................................... 557,500
23,000 Black Box Corporation*.............................. 764,750
30,000 Burr-Brown Corporation*............................. 913,125
20,000 Check Point Software Technologies Ltd.*............. 587,500
60,000 Corsair Communications, Inc.*....................... 1,110,000
15,000 CSG Systems International, Inc.*.................... 682,500
28,500 Hyperion Software Corporation*...................... 1,236,187
22,500 Inso Corporation*................................... 405,000
50,000 Kent Electronics Corporation*....................... 1,100,000
18,000 Lattice Semiconductor Corporation*.................. 821,250
10,000 Microchip Technology, Inc.*......................... 283,750
50,000 MicroTouch Systems, Inc.*........................... 953,125
15,000 Novellus Systems, Inc.*............................. 718,125
15,000 PMC-Sierra, Inc.*................................... 682,500
10,000 Premisys Communications, Inc.*...................... 291,875
50,000 Savoir Technology Group, Inc.*...................... 534,375
30,000 Sawtek Inc.*........................................ 911,250
15,000 SportsLine USA, Inc.*............................... 528,750
35,000 Synopsys, Inc.*..................................... 1,505,000
35,000 The BISYS Group, Inc.*.............................. 1,382,500
10,000 The Vantive Corporation*............................ 320,000
25,000 VLSI Technology, Inc.*.............................. 515,625
60,000 Xircom, Inc.*....................................... 1,023,750
30,000 Xylan Corporation*.................................. 854,061
--------------------------------------------
Total Technology 21,141,561
============================================
Transportation (3.2%)
60,000 Allied Holdings, Inc.*.............................. 1,196,250
25,000 Atlantic Coast Airlines, Inc.*...................... 1,414,063
20,000 Comair Holdings, Inc. .............................. 546,250
15,000 Heartland Express, Inc.*............................ 373,125
37,500 Swift Transportation Co., Inc.*..................... 857,812
--------------------------------------------
Total Transportation 4,387,500
============================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 27
<PAGE>
The AAL Small Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
Shares Common Stocks (95.9%) Market Value
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Utilities (2.3%)
10,000 CILCORP, Inc.................................. $ 478,125
22,200 Interstate Energy Corp........................ 700,688
15,000 KN Energy, Inc................................ 880,313
30,000 Sierra Pacific Resources...................... 1,050,000
----------------------------------------
Total Utilities 3,109,126
----------------------------------------
Total Common Stocks
(cost basis $112,715,993) 129,778,092
----------------------------------------
Par Value Short-Term Variable Rate Obligations (4.1%)
=====================================================================
$ 2,159,867 General Mills Corporation**................... 2,159,867
2,249,177 Pitney Bowes Credit Corporation**............. 2,249,177
822,085 Sara Lee Corporation**........................ 822,085
321,814 Warner Lambert Incorporated**................. 321,814
----------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $5,552,943) 5,552,943
----------------------------------------------------
----------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $118,268,936) $135,331,035
----------------------------------------------------
</TABLE>
* Non-income producing security
** Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
28 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Mid Cap Stock Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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 (98.2%) Market Value
================================================================================
<C> <S> <C>
Basic Materials (5.3%)
174,600 Cytec Industries, Inc.*................. $ 9,559,350
176,200 Minerals Technologies, Inc.............. 9,591,888
195,800 Rayonier, Inc........................... 9,814,475
60,000 Vulcan Materials Company................ 6,903,750
-----------------------------------------
Total Basic Materials 35,869,463
=========================================
Capital Goods (10.5%)
231,400 Applied Power, Inc...................... 8,648,575
267,700 BE Aerospace, Inc.*..................... 8,348,894
483,400 Computer Products, Inc.*................ 10,634,800
64,300 General Cable Corporation............... 2,913,594
154,100 Harman International Industries, Inc.... 6,626,300
186,400 Integrated Process Equipment Corp.*..... 3,390,150
123,500 Scotsman Industries, Inc.*.............. 3,535,187
261,500 Titanium Metals Corporation*............ 6,962,437
160,700 Tower Automotive, Inc.*................. 8,567,319
142,000 USA Waste Services, Inc.*............... 6,966,875
144,400 US Filter Corporation*.................. 4,711,050
-----------------------------------------
Total Capital Goods 71,305,181
=========================================
Communication Services (1.8%)
150,000 IDT Corporation*........................ 4,603,125
191,400 LCI International, Inc.*................ 7,608,150
-----------------------------------------
Total Communication Services 12,211,275
=========================================
Consumer Cyclicals (16.5%)
200,000 ABR Information Services, Inc.*......... 5,787,500
245,000 American Skiing Company*................ 3,797,500
168,000 Applied Graphics Technologies, Inc.*.... 8,400,000
133,200 Avis Rent A Car, Inc.*.................. 3,488,175
105,000 Central Newspapers, Inc. Class A........ 7,691,250
120,800 Cincinnati Bell, Inc.................... 4,620,600
120,125 Dollar General Corporation.............. 4,549,734
241,100 Equity Corporation International*....... 5,982,294
110,000 Hannaford Bros. Company*................ 4,888,125
223,400 Harley-Davidson, Inc.................... 8,042,400
187,350 Outdoor Systems, Inc.*.................. 5,948,362
165,000 Proffits, Inc.*......................... 6,558,750
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 29
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.2%) Market Value
================================================================================
<S> <C> <C>
Consumer Cyclicals (16.5%)-continued
175,000 Rubbermaid, Inc.................................... $ 5,009,375
155,900 Shopko Stores, Inc.*............................... 5,398,038
164,800 Snap-On, Inc....................................... 6,973,100
225,000 Staples, Inc.*..................................... 5,554,687
60,100 The Timberland Company Class A*.................... 5,146,063
99,900 Tommy Hilfiger Corporation*........................ 6,093,900
30,000 United Stationers, Inc.*........................... 1,893,750
200,400 Watsco, Inc........................................ 5,861,700
-----------------------------------------
Total Consumer Cyclicals 111,685,303
=========================================
Consumer Staples (9.8%)
285,300 Apple South, Inc................................... 4,493,475
140,400 Chancellor Media Corporation*...................... 6,660,225
74,900 Clear Channel Communications, Inc.*................ 7,059,325
204,400 Coca Cola Enterprises, Inc......................... 7,716,100
184,200 Comcast Corporation................................ 6,596,663
218,600 Flowers Industries, Inc............................ 4,672,575
92,000 General Nutrition Companies, Inc.*................. 3,300,500
110,100 Keebler Foods Company*............................. 3,137,850
136,600 Outback Steakhouse, Inc............................ 5,207,875
329,800 Rite Aid Corporation............................... 10,594,825
110,000 Suiza Foods Corporation*........................... 6,517,500
-----------------------------------------
Total Consumer Staples 65,956,913
=========================================
Energy (9.1%)
314,000 Belco Oil & Gas Corporation*....................... 5,514,625
122,000 Key Energy Group, Inc.*............................ 2,279,875
175,000 Marine Drilling Companies, Inc.*................... 4,254,688
180,000 Noble Drilling Corporation*........................ 5,816,250
216,900 NS Group, Inc.*.................................... 2,914,594
218,790 Ocean Energy, Inc.*................................ 5,360,355
118,600 Petroleum Geo-Services ADR*........................ 7,797,950
232,368 R&B Falcon Corporation*............................ 7,450,299
75,900 Rowan Companies, Inc.*............................. 2,234,306
140,600 Tosco Corporation.................................. 5,008,875
155,000 Transocean Offshore, Inc........................... 8,660,625
139,000 Ultramar Diamond Shamrock Corporation.............. 4,491,437
-----------------------------------------
Total Energy 61,783,879
=========================================
Financials (14.2%)
105,100 AMBAC Financial Group, Inc......................... 5,957,856
108,373 Associated Banc-Corp............................... 5,689,582
35,300 CCB Financial Corporation.......................... 3,838,875
231,100 Concord EFS, Inc................................... 7,279,650
60,000 Crestar Financial Corporation*..................... 3,588,750
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
30 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.2%) Market Value
================================================================================
<S> <C> <C>
Financials (14.2%)-continued
130,000 Dime Bancorp, Inc.................................. $ 3,989,375
13,000 First Empire State Corporation..................... 6,630,000
147,500 First Industrial Realty Trust, Inc................. 4,793,750
80,000 Firstar Corporation.............................. 2,985,000
181,000 HCC Insurance Holdings, Inc........................ 3,936,750
60,000 Marshall & Isley Corporation....................... 3,510,000
40,000 Mercantile Bancorporation, Inc..................... 2,215,000
176,450 Mercantile Bankshares Corporation.................. 6,771,269
140,000 Patriot American Hospitality, Inc.................. 3,535,000
80,500 Peoples Heritage Financial Group, Inc.............. 3,884,125
80,000 Regions Financial Corporation...................... 3,490,000
36,000 Republic New York Corporation...................... 4,815,000
60,000 SouthTrust Corporation............................. 2,561,250
197,200 Starwood Hotel & Resort............................ 9,896,975
43,900 The PMI Group, Inc................................. 3,566,875
50,000 Union Planters Corporation......................... 3,075,000
-----------------------------------------
Total Financials 96,010,082
=========================================
Health Care (6.6%)
65,000 Alternative Living Services, Inc.*................. 2,275,000
90,800 AmeriSource Health Corporation*.................... 4,948,600
172,000 BioChem Pharma, Inc.*.............................. 4,375,250
66,800 Biogen, Inc.*...................................... 2,964,250
15,000 DePuy, Inc.*....................................... 465,000
202,400 Dura Pharmaceuticals, Inc.*........................ 5,363,600
330,000 FPA Medical Management, Inc.*...................... 4,125,000
108,300 Genzyme Corporation*............................... 3,350,531
248,800 HEALTHSOUTH Corporation*........................... 7,510,650
85,000 Mylan Laboratories................................. 2,305,625
77,500 STERIS Corporation*................................ 4,557,969
50,000 Sunrise Assisted Living, Inc.*..................... 2,240,625
-----------------------------------------
Total Health Care 44,482,100
=========================================
Technology (11.9%)
175,700 ADC Telecommunications, Inc.*...................... 5,260,019
70,000 America Online, Inc.*.............................. 5,600,000
184,900 Analog Devices, Inc.*.............................. 7,199,544
124,400 Andrew Corporation*................................ 2,845,650
160,000 Autodesk, Inc...................................... 7,520,000
101,800 Bay Networks, Inc.*................................ 2,385,938
96,600 Fiserv, Inc.*...................................... 6,315,225
165,000 HBO & Company...................................... 9,869,062
177,700 LSI Logic Corporation*............................. 4,820,112
124,341 Network General Corporation*....................... 8,517,359
250,000 Pegasystems, Inc.*................................. 4,687,500
100,000 SMART Modular Technologies, Inc.*.................. 2,468,750
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 31
<PAGE>
The AAL Mid Cap Stock Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.2%) Market Value
====================================================================================
<S> <C> <C>
Technology (11.9%)-continued
99,400 Sterling Commerce, Inc.*................ $ 4,230,712
135,000 Synopsys, Inc.*......................... 5,805,000
90,000 Terodyne, Inc.*......................... 3,285,000
------------------------------------------------
Total Technology 80,809,871
------------------------------------------------
Transportation (3.3%)
165,000 Atlantic Southeast Airlines, Inc........ 6,270,000
45,000 Coach USA, Inc.*........................ 2,134,688
206,600 Royal Caribbean Cruises Ltd............. 14,126,275
------------------------------------------------
Total Transportation 22,530,963
------------------------------------------------
Utilities (9.2%)
175,300 AES Corporation*........................ 9,674,369
220,300 Allegheny Power System, Inc............. 6,746,687
157,800 CMS Energy Corporation.................. 6,893,887
229,600 El Paso Natural Gas Company............. 8,480,850
148,000 MCN Corporation......................... 5,587,000
248,100 MDU Resources Group, Inc................ 8,605,969
167,800 New Century Energies, Inc............... 7,970,500
170,300 Pinnacle West Capital Corporation....... 7,535,775
------------------------------------------------
Total Utilities 61,495,037
------------------------------------------------
------------------------------------------------
Total Common Stocks
(cost basis $546,972,153)......... 664,140,067
------------------------------------------------
Par Value Short-Term Obligations (1.8%)
======================================================================
$7,000,000 Exxon Asset Management, 5.47%, 5/4/98... 6,996,809
1,529,589 General Mills Corporation**............. 1,529,589
2,831,269 Pitney Bowes Credit Corporation**....... 2,831,269
696,827 Sara Lee Corporation**.................. 696,827
------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $12,054,494) 12,054,494
------------------------------------------------
------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $559,026,647) $676,194,561
------------------------------------------------
</TABLE>
* Non-income producing security
** Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
32 The AAL Mutual Funds Annual Report
<PAGE>
The AAL International Fund SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
Investment Objective
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of foreign securities.
<TABLE>
<CAPTION>
Shares Common Stocks (64.1%) Industry Market Value
============================================================================================
<S> <C> <C> <C>
Argentina (0.4%)
87,500 Cresud SA...........................Food & Agriculture $ 175,035
454,629 Ledesma S.A.I.C.....................Food & Agriculture 413,795
----------------------------------------
Total Argentina 588,830
----------------------------------------
Australia (0.5%)
850,000 Spotless Services Limited (1).......Commercial Services 698,311
----------------------------------------
Total Australia 698,311
----------------------------------------
Austria (1.1%)
16,500 VAE AG..............................Transportation 1,590,157
----------------------------------------
Total Austria 1,590,157
----------------------------------------
Belgium (1.1%)
6,500 Deceuninck Plastics Industries SA...Building Materials 1,600,734
----------------------------------------
Total Belgium 1,600,734
----------------------------------------
Canada (1.7%)
45,000 Canadian Pacific, Ltd...............Conglomerate 1,324,687
10,000 Franco-Nevada Mining Corp., Ltd.....Gold 244,704
45,000 Noranda, Inc........................Conglomerate 928,127
----------------------------------------
Total Canada 2,497,518
----------------------------------------
Denmark (0.4%)
10,000 Carlsberg International A/S 'B'.....Consumer Products 622,525
----------------------------------------
Total Denmark 622,525
----------------------------------------
Finland (0.4%)
7,000 Vaisala 'Oy' A......................Technology 603,891
----------------------------------------
Total Finland 603,891
----------------------------------------
France (9.7%)
5,000 Compagnie Generale des Eaux (1).....Utilities 928,926
3,000 Conflandey SA.......................Metals & Minerals 164,515
5,000 Elf Aquitaine (1)...................Energy 655,566
15,000 Emin Leydier........................Forest Products & Paper 1,091,281
12,000 Eramet..............................Metals & Minerals 602,223
4,000 Eurafrance (1)......................Holding Company 2,246,706
3,000 Europe 1 Communication (1)..........Media 777,706
7,000 FIMALAC SA (1)......................Holding Company 802,632
5,500 Gaumont SA..........................Media 424,996
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 33
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (64.1%) Industry Market Value
=========================================================================================================
<S> <C> <C> <C>
France (9.7%) - continued
5,500 Groupe Didot-Bottin (1)............................ Media $ 776,875
4,500 Groupe NSC......................................... Capital Goods 698,440
7,000 Marine-Wendel SA (1)............................... Holding Company 1,244,662
2,500 Promodes C.I. (1).................................. Distribution 831,713
7,500 Rougier SA......................................... Forest Products & Paper 533,426
3,000 Sabeton SA......................................... Holding Company 349,968
1,500 Societe Sucriere de Pithiviers-Le-Vieil (1)........ Food & Agriculture 795,154
3,364 Taittinger C.I. (1)................................ Consumer Products 1,540,093
-----------------------------------------
Total France 14,464,882
=========================================
Germany (5.9%)
1,500 Axel Springer Verlag AG (1)........................ Media 1,333,315
15,000 Bayer AG (1)....................................... Chemicals 668,747
10,000 Bertelsmann AG D.R.C. (1).......................... Media 1,242,755
6,500 Buderus AG (1)..................................... Capital Goods 3,057,289
80,000 Gerresheimer Glas AG (1)........................... Capital Goods 1,156,933
35,000 IVG Holding AG (1)................................. Real Estate 1,349,755
-----------------------------------------
Total Germany 8,808,794
=========================================
Hong Kong (1.9%)
6,305,959 CDL Hotels International Ltd....................... Real Estate 1,933,469
1,500,000 Shaw Brothers Limited.............................. Media 871,418
-----------------------------------------
Total Hong Kong 2,804,887
=========================================
Israel (0.6%)
296,000 Super-Sol.......................................... Retail Store 931,843
-----------------------------------------
Total Israel 931,843
=========================================
Italy (0.9%)
35,000 Arnoldo Mondarori Editore SpA...................... Media 395,144
1,000,000 Montedison SpA* (non-convertable saving share)..... Conglomerate 911,990
-----------------------------------------
Total Italy 1,307,134
=========================================
Japan (16.0%)
250,000 Aida Engineering Ltd. (1).......................... Capital Goods 993,340
70,700 Chofu Seisakusho (1)............................... Consumer Products 1,027,352
45,000 Fuji Photo Film Co., Ltd. ADR (1).................. Consumer Products 1,636,875
300,000 Hanshin Electric Railway Co., Ltd.................. Transportation 928,631
10,000 Hitachi, Ltd. ADR.................................. Technology 722,500
350,000 Iino Kaiun Kaisha, Ltd............................. Transportation 688,716
30,000 Ito-Yokado Co., Ltd. (1)........................... Distribution 1,555,286
250,000 Nisshinbo Industries, Inc. (1)..................... Consumer Products 1,133,353
115,000 Nittetsu Mining Co., Ltd........................... Metals & Minerals 449,974
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
34 The AAL Mutual Funds Annual Report
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (64.1%) Industry Market Value
==============================================================================================================
<C> <S> <C> <C>
Japan (16.0%) - continued
225,000 Okumura Corporation.................................... Services $ 834,406
35,000 Secom Co., Ltd. (1).................................... Services 2,066,147
75,000 Shimano, Inc. (1)...................................... Consumer Products 1,646,106
100,000 Shiseido Company Ltd. (1).............................. Consumer Products 1,320,669
123,000 Shoei Co., Ltd......................................... Holding Company 789,404
127,000 Sotoh Co., Ltd......................................... Consumer Products 874,669
150,000 Tachi-S Co. Limited.................................... Automotive 794,672
50,000 T. Hasegawa Co., Ltd. (1).............................. Consumer Products 1,044,426
300,000 The Dai-Tokyo Fire & Marine Insurance Co., Ltd. (1).... Insurance 1,101,188
185,000 The Koa Fire & Marine Insurance Co., Ltd............... Insurance 791,077
250,000 The Nichido Fire & Marine Insurance Co., Ltd. (1)...... Insurance 1,341,482
85,000 The Tokio Marine & Fire Insurance Co., Ltd............. Insurance 926,360
12,000 Toho Co., Ltd. (1)..................................... Media 1,261,485
---------------------------------------
Total Japan 23,928,118
=======================================
Luxembourg (0.7%)
35,000 Minorco SA ADR......................................... Metals & Minerals 673,750
117 Socfinasia............................................. Food & Agriculture 394,918
---------------------------------------
Total Luxembourg 1,068,668
=======================================
Mexico (1.0%)
385,000 Industrias Penoles S.A. de C.V......................... Metals & Minerals 1,555,510
---------------------------------------
Total Mexico 1,555,510
=======================================
Netherlands (1.6%)
35,000 Apothekers Cooperatie OPG U.A.......................... Health Care 1,082,653
55,000 European City Estates NV............................... Real Estate 713,190
7,000 Philips Electronics NV ADR............................. Electronics 630,000
---------------------------------------
Total Netherlands 2,425,843
=======================================
New Zealand (1.6%)
1,000,000 Carter Holt Harvey Limited............................. Forest Products & Paper 1,327,999
1,000,000 Shortland Properties Limited........................... Real Estate 427,849
1,604,825 Tasman Agriculture Limited............................. Food & Agriculture 695,540
---------------------------------------
Total New Zealand 2,451,388
=======================================
Norway (0.4%)
35,000 Schibsted A/S/A........................................ Media 666,398
---------------------------------------
Total Norway 666,398
=======================================
Portugal (0.5%)
10,000 Companhia de Celulose do Caima SA...................... Forest Products & Paper 152,215
25,000 Espirito Santo Financial Holdings SA ADR............... Financial Services 645,312
---------------------------------------
Total Portugal 797,527
=======================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 35
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (64.1%) Industry Market Value
==========================================================================================================================
<C> <S> <C> <C>
Singapore (1.7%)
475,000 Clipsal Industries Ltd........................................ Building Materials $ 684,000
469,500 Delgro Corporation Limited.................................... Transportation 539,655
499,000 Intraco Ltd................................................... Distribution 261,570
150,000 Singapore Bus Service Ltd..................................... Transportation 72,471
650,000 Thakral Corporation Ltd....................................... Manufacturing 289,250
450,000 Times Publishing Ltd.......................................... Media 773,020
-----------------------------------
Total Singapore 2,619,966
-----------------------------------
South Korea (0.6%)
12,180 Dongah Tire Industry Company.................................. Automotive 492,121
20,000 LG Industrial Systems......................................... Capital Goods 76,319
3,750 Nam Yang Dairy Products Company............................... Consumer Products 252,525
7,000 Woong Jin Publishing Company.................................. Media 108,941
-----------------------------------
Total South Korea 929,906
-----------------------------------
Spain (0.8%)
1,500 Corporacion Financiera Alba SA................................ Holding Company 185,316
115,000 Energia e Industrias Aragonesas SA............................ Chemicals 1,003,510
-----------------------------------
Total Spain 1,188,826
-----------------------------------
Sweden (1.1%)
12,000 AssiDoman AB.................................................. Holding Company 322,531
10,000 Investor ABB.................................................. Holding Company 564,687
55,000 IRO AB........................................................ Capital Goods 824,417
-----------------------------------
Total Sweden 1,711,635
-----------------------------------
Switzerland (7.8%)
205 Bank for International Settlements (U.S. tranche)............. Gold-Related 1,339,423
5,500 Edipresse S.A................................................. Media 1,760,117
3,000 Kuehne & Nagel International AG Bearer (1).................... Transportation 2,400,160
175 Lindt & Spruengli AG PC....................................... Consumer Products 382,692
700 Nestle SA..................................................... Consumer Products 1,358,091
610 Sairgroup AG D.R.C............................................ Transportation 158,611
6,000 Sika Finanz AG Bearer (1)..................................... Building Materials 2,400,160
5,000 Societe Generale d Affichage S.A. D.R.C. (1).................. Media 1,900,127
-----------------------------------
Total Switzerland 11,699,381
-----------------------------------
Thailand (0.4%)
100,000 Oriental Hotel PCL............................................ Real Estate 605,042
-----------------------------------
Total Thailand 605,042
-----------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
36 The AAL Mutual Funds Annual Report
<PAGE>
The AAL International Fund - continued
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (64.1%) Industry Market Value
====================================================================================================================
<C> <S> <C> <C>
United Kingdom (4.1%)
335,000 Antofagasta Holdings plc............................ Investment Company $1,829,055
150,000 Berisford plc (1)................................... Consumer Products 561,873
215,000 Lonrho plc.......................................... Conglomerate 1,561,267
300,000 McBride plc......................................... Consumer Products 983,278
375,000 Royal Doulton plc................................... Consumer Products 1,282,400
------------------------------------------
Total United Kingdom 6,217,873
==========================================
Miscellaneous (1.2%)
35,000 Banco Latinoamerican de Exportaciones SA Class E.... Financial Services 1,251,250
30,000 North European Oil Royalty Trust.................... Energy 472,500
------------------------------------------
Total Miscellaneous 1,723,750
==========================================
------------------------------------------
Total Common Stocks
(cost basis $97,020,731) 96,109,337
==========================================
Preferred Stocks (7.3%)
====================================================
4,807 Cheil Jedang Corporation, Common Rights, South Korea Conglomerate 21,580
25,030 Cheil Jedang Corporation, South Korea............... Conglomerate 73,227
25,000 Freeport-McMoran Copper & Gold, Inc.,
Preferred Series Gold, United States................ Gold-Related 628,125
40,000 Freeport-McMoran Copper & Gold, Inc.,
Preferred Series II, United States.................. Gold-Related 895,000
33,500 Freeport-McMoran Copper & Gold, Inc.,
Prefered Series Silver, United States............... Gold-Related 670,000
18,500 Hornbach Holding AG, Germany........................ Distribution 1,799,069
248,474 Independent Press Communications Ltd.,
New Zealand (1)..................................... Media 1,277,093
27,375 Korean Air Lines, South Korea....................... Transportation 41,989
10,000 Legrand ADP, France................................. Capital Goods 1,703,309
53,533 LG Electronics Co., Ltd., South Korea............... Electronics 193,864
5,500 Sagem ADP, France................................... Electronics 1,745,684
222 Samsung Electronics Co., Ltd., Common Rights,
South Korea......................................... Electronics 4,286
2,800 Samsung Electronics Co., Ltd., South Korea.......... Electronics 48,709
70,896 Ssangyong Cement Industries, South Korea............ Building Materials 103,174
3,000 Suedzucker AG, Germany (1).......................... Consumer Products 1,742,086
------------------------------------------
Total Preferred Stocks
(cost basis $11,447,749) 10,947,195
==========================================
------------------------------------------
Total Equities
(cost basis $108,468,480) 107,056,532
==========================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 37
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Par Value Long-Term Fixed-Income Obligations (8.6%) Currency Market Value
=================================================================================================================
<C> <S> <C> <C>
Bonds and Notes
500,000 Air Canada Variable Rate Perpetual Notes,
6.25%, 3/29/2049........................................ Deutsche Mark $ 187,389
435,000 Carlsberg Finance, 7.00%, 2/26/2013..................... Pound Sterling 744,701
2,500,000 Queensland Treasury Corporation, 8.00%, 9/14/2007 (1)... Australian Dollar 1,840,639
350,000 Republic of New Zealand, 10.00%, 3/15/2002 (1).......... New Zealand Dollar 211,102
2,000,000 Trans Power Finance Limited, 8.00%, 3/15/2002 (1)....... New Zealand Dollar 1,105,686
Convertible Bonds
3,000 Alcatel Alsthom, 2.50%, 1/1/2004........................ French Franc 527,444
350,000 BAA plc, 5.75%, 3/29/2006............................... Pound Sterling 702,341
550,000 Berisford plc, 5.00%, 1/31/2015......................... Pound Sterling 873,746
611 Gaumont SA, 3.75%, 1/1/2003............................. French Franc 57,468
11,250 Immobiliere Hoteliere, 5.00%, 1/1/2001.................. French Franc 429,608
750,000 InterTAN, Inc., 9.00%, 8/3/2000......................... Canadian Dollar 647,591
250,000 Lonrho Finance, 6.00%, 2/27/2004........................ Pound Sterling 388,796
50,000,000 Nippon Yusen Kabushiki, 2.00%, 9/29/2000................ Japanese Yen 399,228
U.S. Dollar Bonds and Notes
$ 580,100 Federal Republic of Brazil Capitalization Bond,
8.00%, 4/15/2014........................................ 480,033
500,000 Federal Republic of Brazil Debt Conversion Bond,
Floating Rate Note, 6.75%, 4/15/2012.................... 396,875
150,000 IRSA Inversiones 4 Representaciones S.A., 4.50%, 8/2/2003 168,750
230,000 IRSA Inversiones 4 Representaciones S.A., 4.50%, 8/2/2003 258,750
1,000,000 United Mexican States Discount Floating Rate Note A,
6.6925%, 12/31/2019..................................... 935,000
250,000 United Mexican States Discount Floating Rate Note B,
6.8359%, 12/31/2019..................................... 233,750
(1,920,000 United Mexican States Oil Recovery Rights)
250,000 Yangming Marine Transport Corporation,
2.00%, 10/6/2001........................................ 286,875
U.S. Dollar Convertible Bonds
525,000 Cheil Jedang Corporation, 3.00%, 12/31/2006............. 569,625
250,000 Medya International Ltd., 10.00%, 6/28/2001............. 187,500
1,150,000 Scandinavian Broadcasting System SA, 7.25%, 8/1/2005.... 1,311,000
------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $12,470,987) 12,943,897
------------------------------------------------
------------------------------------------------
Total Long-Term Investments
(amortized cost basis $120,939,467) 120,000,429
------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
38 The AAL Mutual Funds Annual Report
<PAGE>
The AAL International Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Par Value Commercial Paper (20.0%) Market Value
======================================================================================================
<S> <C> <C>
$ 804,000 American Home Products, Inc., 5.50%, 5/1/98........................... $ 804,000
1,124,000 BMW US Capital, Inc., 5.51%, 5/4/98................................... 1,123,484
5,664,000 Pearson, Inc., 5.50%, 5/20/98......................................... 5,647,559
5,020,000 Rayonier, Inc., 5.67%, 5/12/98........................................ 5,011,303
7,000,000 Raytheon, Inc., 5.67%, 5/1/98......................................... 7,000,000
4,476,000 Raytheon, Inc., 5.67%, 5/4/98......................................... 4,470,887
6,035,000 Toshiba Capital Asia, 5.53%, 5/6/98................................... 6,030,364
---------------------------------------------------
Total Commercial Paper
(amortized cost $30,087,597) 30,087,597
---------------------------------------------------
---------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $151,027,064) $150,088,026
---------------------------------------------------
</TABLE>
*Non-income producing security
(1) Security pledged as collateral for forward currency contracts
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 39
<PAGE>
The AAL Capital Growth Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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 Stock (94.2%) Market Value
======================================================================================================
<S> <C> <C>
Basic Materials (0.6%)
156,500 Eastman Chemical Company............................................... $ 10,759,375
101,500 Praxair, Inc........................................................... 5,106,719
------------------------------------------
Total Basic Materials 15,866,094
==========================================
Capital Goods (8.3%)
157,700 Avery Dennison Corporation............................................. 8,259,538
125,100 Caterpillar, Inc....................................................... 7,122,881
248,500 Deere & Company........................................................ 14,521,719
1,091,700 General Electric Company............................................... 92,930,963
294,600 Herman Miller, Inc..................................................... 8,893,237
146,700 Honeywell, Inc......................................................... 13,661,438
516,200 Illinois Tool Works Incorporated....................................... 36,392,100
146,000 Owens Illinois, Inc.*.................................................. 5,776,125
94,700 PACCAR, Inc............................................................ 5,622,812
209,600 The Boeing Company..................................................... 10,493,100
210,400 Thiokol Corporation.................................................... 11,335,300
195,600 United Technologies Corporation........................................ 19,254,375
------------------------------------------
Total Capital Goods 234,263,588
==========================================
Communication Services (2.3%)
636,800 Ameritech Corporation.................................................. 27,103,800
323,200 Bell Atlantic Corporation.............................................. 30,239,400
126,200 Sprint Corporation..................................................... 8,621,037
------------------------------------------
Total Communication Services 65,964,237
==========================================
Consumer Cyclicals (7.4%)
336,500 Costco Companies, Inc.................................................. 18,801,937
156,500 Family Dollar Stores, Inc.............................................. 5,321,000
317,600 Gannett Company, Inc................................................... 21,576,950
647,900 Harley-Davidson, Inc................................................... 23,324,400
522,000 Pier 1 Imports, Inc.................................................... 13,767,750
935,900 Ross Stores, Inc....................................................... 43,343,869
593,100 Service Corporation International...................................... 24,465,375
499,400 Tiffany and Company.................................................... 22,722,700
208,800 The New York Times Company Class A..................................... 14,811,750
102,800 The Times Mirror Company............................................... 6,290,075
891,450 U.S. Office Products Company*.......................................... 15,767,522
------------------------------------------
Total Consumer Cyclicals 210,193,328
==========================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
40 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stock (94.2%) Market Value
======================================================================================================
<S> <C> <C>
Consumer Staples (21.8%)
417,800 Alberto-Culver Company................................................. $ 12,272,875
347,600 Bestfoods.............................................................. 19,074,550
1,448,600 Comcast Corporation.................................................... 51,877,987
43,450 Corn Products International, Inc.*..................................... 1,547,906
1,450,200 Cox Communications, Inc.*.............................................. 64,715,175
105,200 Dean Foods Company..................................................... 4,931,250
600,000 General Mills, Inc..................................................... 40,537,500
568,500 General Nutrition Companies, Inc.*..................................... 20,394,937
275,600 Gillette Company....................................................... 31,814,575
326,400 PepsiCo, Inc........................................................... 12,954,000
1,317,200 Philip Morris Companies, Inc........................................... 49,148,025
683,400 Procter & Gamble Company............................................... 56,166,937
519,800 Safeway, Inc.*......................................................... 19,882,350
210,300 TCI Satellite Entertainment, Inc.*..................................... 1,656,113
1,374,794 Tele-Communications, Inc.*............................................. 44,337,107
1,572,412 Tele-Communications Ventures Group*.................................... 25,649,971
192,800 The Walt Disney Company................................................ 23,967,450
172,300 Time Warner, Inc....................................................... 13,525,550
1,657,849 U.S. West Media Group*................................................. 62,583,800
1,833,500 Walgreen Company*...................................................... 63,255,750
------------------------------------------
Total Consumer Staples 620,293,808
==========================================
Energy (8.1%)
312,800 Baker Hughes, Inc...................................................... 12,668,400
304,900 British Petroleum Company plc ADR...................................... 28,813,050
313,500 CalEnergy Company, Inc.*............................................... 10,227,938
217,200 Chevron Corporation.................................................... 17,959,725
157,400 Columbia Energy Group.................................................. 12,788,750
400,000 ENSCO International, Incorporated...................................... 11,300,000
1,046,300 Exxon Corporation...................................................... 76,314,506
361,700 Halliburton Company.................................................... 19,893,500
700,800 Royal Dutch Petroleum Company ADR...................................... 39,639,000
------------------------------------------
Total Energy 229,604,869
==========================================
Financials (18.5%)
386,700 American Express Company............................................... 39,443,400
665,450 American International Group, Inc...................................... 87,548,266
56,500 Associates First Capital Corporation................................... 4,223,375
225,800 CIGNA Corporation...................................................... 46,726,487
54,700 Conseco, Inc........................................................... 2,714,488
659,600 Fannie Mae............................................................. 39,493,550
513,776 First Chicago Corporation.............................................. 47,716,946
26,300 Hartford Life, Inc..................................................... 1,300,206
159,700 Household International, Inc........................................... 20,990,569
616,262 MBNA Corporation....................................................... 20,875,875
509,600 MGIC Investment Corporation............................................ 32,104,800
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 41
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (94.2%) Market Value
===========================================================================
<C> <S> <C>
Financials (18.5%) - continued
377,500 J.P. Morgan & Company...................... $ 49,546,875
463,300 National City Corporation.................. 32,083,525
584,600 Nationsbank Corporation.................... 44,283,450
91,000 Northern Trust Corporation................. 6,643,000
225,740 Starwood Hotels & Resorts.................. 11,329,326
644,700 Travelers Group, Inc....................... 39,447,581
----------------------------------
Total Financials 526,471,719
----------------------------------
Health Care (11.1)
173,900 Elan Corporation plc ADR*.................. 10,803,538
523,300 Eli Lilly & Company........................ 36,402,056
614,200 Johnson & Johnson.......................... 43,838,525
453,100 Medtronic, Inc............................. 23,844,388
727,900 Merck & Co., Inc........................... 87,711,950
584,300 Pfizer Incorporated........................ 66,500,644
316,700 Schering-Plough Corporation................ 25,375,587
302,000 Wellpoint Health Networks Inc.*............ 21,781,750
----------------------------------
Total Health Care 316,258,438
----------------------------------
Technology (14.8%)
802,800 ADC Telecommunications, Inc.*.............. 24,033,825
7,500 At Home Corporation*....................... 249,844
722,500 Automatic Data Processing, Inc............. 48,362,344
305,250 Cisco Systems, Inc.*....................... 22,359,563
420,700 Cognos, Incorporated*...................... 11,582,376
229,275 Computer Associates International, Inc..... 13,426,917
607,566 First Data Corporation..................... 20,581,298
136,300 Gateway 2000, Inc.*........................ 7,999,106
369,700 HBO & Company.............................. 22,112,681
165,300 Hewlett-Packard Company.................... 12,449,156
518,300 Intel Corporation.......................... 41,885,119
791,424 Lucent Technologies, Inc................... 60,247,152
749,200 Microsoft Corporation*..................... 67,521,650
348,900 National Data Corporation.................. 14,239,481
220,800 Quantum Corporation*....................... 5,188,800
284,700 Seagate Technology, Inc.*.................. 7,597,931
518,700 Tellabs, Inc.*............................. 36,762,863
147,300 Western Digital Corporation*............... 2,909,175
----------------------------------
Total Technology 419,509,281
----------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
42 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Capital Growth Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (94.2%) Market Value
=========================================================================================
<C> <S> <C>
Transportation (1.1%)
83,400 CNF Transportation, Inc....................... $ 3,221,325
1,023,450 Southwest Airlines Company.................... 28,080,909
----------------------------------------------------
Total Transportation 31,302,234
----------------------------------------------------
Utilities (0.2%)
225,700 Entergy Corporation 5,614,288
----------------------------------------------------
Total Utilities 5,614,288
----------------------------------------------------
----------------------------------------------------
Total Common Stocks
(cost basis $1,401,425,468) 2,675,341,884
----------------------------------------------------
Par Value Short-Term Obligations (5.8%)
===================================================================
$24,000,000 Exxon Asset Management 5.47% 5/4/98.......... 23,989,060
1,805,192 General Mills Corporation**................... 1,805,192
17,500,000 General Motors Acceptance Corp. 5.48% 5/7/98. 17,484,017
36,000,000 Merrill Lynch & Co., Inc. 5.51% 5/20/98...... 35,895,310
17,000,000 Merrill Lynch & Co., Inc. 5.51% 5/26/98...... 16,934,951
20,000,000 Merrill Lynch & Co., Inc. 5.50% 6/9/98....... 19,880,833
2,673,463 Pitney Bowes Credit Corporation**............. 2,673,463
2,612,972 Sara Lee Corporation**........................ 2,612,972
9,500,000 Toyota Motor Credit Corporation 5.49% 5/5/98. 9,494,205
13,800,000 Toyota Motor Credit Corporation 5.49% 5/12/98 13,776,851
20,000,000 Toyota Motor Credit Corporation 5.49% 5/15/98 19,957,300
1,010,398 Wisconsin Electric Power Company**............ 1,010,398
----------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $165,514,552) 165,514,552
----------------------------------------------------
----------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $1,566,940,020) $2,840,856,436
----------------------------------------------------------
* Non-income producing security
** Variable rate demand note
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 43
<PAGE>
The AAL Equity Income Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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.
Shares Common Stocks (92.1%) Market Value
==============================================================================
<TABLE>
<CAPTION>
<C> <S> <C>
Basic Materials (2.7%)
62,000 Calgon Carbon Corporation........................ $ 751,750
26,000 Crown Cork & Seal Company, Inc................... 1,353,625
13,000 E.I. du Pont de Nemours and Company.............. 946,563
36,000 Olin Corporation................................. 1,685,250
38,000 Oregon Steel Mills, Inc.......................... 902,500
--------------------------------------------
Total Basic Materials 5,639,688
--------------------------------------------
Capital Goods (9.5%)
64,000 AlliedSignal, Inc................................ 2,804,000
21,000 Corning Incorporated............................. 840,000
47,000 Emerson Electric Company......................... 2,990,375
22,000 Fluor Corporation................................ 1,039,500
17,000 Lockheed Martin Corporation...................... 1,893,375
20,000 Pitney Bowes, Inc................................ 960,000
22,000 Tenneco, Inc..................................... 947,375
57,000 The B.F. Goodrich Company........................ 3,067,313
44,000 The Boeing Company............................... 2,202,750
31,000 United Technologies Corporation.................. 3,051,562
--------------------------------------------
Total Capital Goods 19,796,250
--------------------------------------------
Communication Services (15.0%)
55,000 Airtouch Communications, Inc.*................... 2,921,875
69,740 Ameritech Corporation............................ 2,968,309
28,300 Bell Atlantic Corporation........................ 2,647,819
90,000 Cable & Wireless plc ADR......................... 3,161,250
35,000 GTE Corporation.................................. 2,045,312
119,000 MCI Communications Corporation................... 5,987,187
70,370 SBC Communications Incorporated.................. 2,915,957
30,000 Telecomunicacoes Brasileiras S/A-Telebras ADR.... 3,654,375
30,200 Telefonica de Espana ADR......................... 3,773,112
30,200 Telefonica de Espana ADR Rights*................. 67,950
22,000 Teleport Communications Group Inc.*.............. 1,185,250
--------------------------------------------
Total Communication Services 31,328,396
--------------------------------------------
Consumer Cyclicals (6.1%)
23,000 Chrysler Corporation............................. 924,313
52,000 Cincinnati Bell, Inc............................. 1,989,000
24,000 Dayton Hudson Corporation........................ 2,095,500
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
44 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (92.1%) Market Value
================================================================================
<S> <C> <C>
Consumer Cyclicals (6.1%) - continued
17,000 Ford Motor Company................................. $ 778,813
14,000 Gannett Company, Inc............................... 951,125
33,000 Sears, Roebuck and Co.............................. 1,957,312
21,000 The Gap, Inc....................................... 1,080,187
27,000 The Home Depot, Inc................................ 1,879,875
14,000 The New York Times Company Class A................. 993,125
-----------------------------------------
Total Consumer Cyclicals 12,649,250
=========================================
Consumer Staples (6.9%)
30,000 Avon Products, Inc................................. 2,465,625
41,000 Flowers Industries, Inc............................ 876,375
14,000 Hershey Foods Corporation.......................... 1,025,500
16,000 Quaker Oats Company................................ 832,000
78,000 Rite Aid Corporation............................... 2,505,750
30,000 Sara Lee Corporation............................... 1,786,875
36,900 Tele-Communications, Inc.*......................... 1,190,025
42,200 Tele-Communications Ventures Group*................ 688,388
78,800 U.S. West Media Group*............................. 2,974,700
-----------------------------------------
Total Consumer Staples 14,345,238
=========================================
Energy (11.4%)
21,000 British Petroleum Company plc ADR.................. 1,984,500
22,000 Coastal Corporation................................ 1,571,625
13,000 Columbia Energy Group.............................. 1,056,250
27,000 Consolidated Natural Gas Company................... 1,552,500
19,000 Diamond Offshore Drilling, Inc..................... 961,875
28,000 Exxon Corporation.................................. 2,042,250
19,000 H&R Block, Inc..................................... 855,000
23,000 KeySpan Energy Corporation......................... 784,875
26,000 Mobil Corporation.................................. 2,054,000
30,000 Noble Drilling Corporation*........................ 969,375
48,000 Questar Corporation................................ 2,082,000
46,440 R&B Falcon Corporation*............................ 1,488,983
30,000 Rowan Companies, Inc.*............................. 883,125
33,000 Texaco, Inc........................................ 2,029,500
72,000 The Williams Companies, Inc........................ 2,277,000
20,000 Transocean Offshore, Inc........................... 1,117,500
-----------------------------------------
Total Energy 23,710,358
=========================================
Financials (18.3%)
24,455 Associates First Capital Corporation............... 1,828,011
31,900 Banc One Corporation............................... 1,876,119
22,000 Chase Manhattan Corporation........................ 3,048,375
39,000 Conseco, Inc....................................... 1,935,375
21,000 Crescent Real Estate Equities Company.............. 716,625
17,000 Crestar Financial Corporation...................... 1,016,813
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 45
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Shares Common Stocks (92.1%) Market Value
==============================================================================
<C> <S> <C>
Financials (18.3%) - continued
52,000 Duke Realty Investments, Inc...................... $ 1,238,250
25,000 Equity Residential Properties Trust............... 1,228,125
27,000 EXEL Limited...................................... 2,016,563
31,000 Fannie Mae........................................ 1,856,125
35,000 First Industrial Realty Trust, Inc................ 1,137,500
30,000 First Union Corporation........................... 1,811,250
12,000 Fleet Financial Group, Inc........................ 1,036,500
41,000 Freddie Mac....................................... 1,898,812
30,000 Mellon Bank Corporation........................... 2,160,000
15,000 Mercantile Bancorporation, Inc.................... 830,625
23,000 Mercantile Bankshares Corporation................. 882,625
13,000 National City Corporation......................... 900,250
62,000 Patriot American Hospitality, Inc................. 1,565,500
39,000 Simon DeBartolo Group, Inc........................ 1,284,562
93,581 Starwood Hotels & Resorts......................... 4,696,596
25,000 Summit Bancorp.................................... 1,253,125
16,000 The Bank of New York Company, Inc................. 945,000
13,000 Union Planters Corporation........................ 799,500
-------------------------------------
Total Financials 37,962,226
-------------------------------------
Health Care (6.0%)
32,000 Elan Corporation plc ADR*......................... 1,988,000
29,000 Eli Lilly & Company............................... 2,017,312
29,000 Johnson & Johnson................................. 2,069,875
39,000 Medtronic, Inc.................................... 2,052,375
17,000 Merck & Co., Inc.................................. 2,048,500
12,000 Warner Lambert Company............................ 2,270,250
-------------------------------------
Total Health Care 12,446,312
-------------------------------------
Technology (6.5%)
96,000 ADC Telecommucations, Inc.*....................... 2,874,000
78,000 First Data Corporation............................ 2,642,250
21,000 Intel Corporation................................. 1,697,062
19,000 International Business Machines Corporation....... 2,201,625
41,000 Kent Electronics Corporation*..................... 902,000
41,222 Lucent Technologies, Inc.......................... 3,138,025
-------------------------------------
Total Technology 13,454,962
-------------------------------------
Utilities (9.7%)
36,000 Ameren Corporation................................ 1,426,500
47,400 Boston Edison Company............................. 1,931,550
73,000 Central & Southwest Corporation................... 1,902,562
64,000 CMS Energy Corporation............................ 2,796,000
22,650 Consolidated Edison Company of New York........... 1,024,913
65,000 Edison International.............................. 1,937,812
22,200 General Public Utilities Corporation.............. 879,675
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
46 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Equity Income Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
Shares Common Stocks (92.1%) Market Value
==============================================================================
<TABLE>
<CAPTION>
<C> <S> <C>
Utilities (9.7%) - continued
73,100 New Century Energies, Inc........................ $ 3,472,250
56,000 PG&E Corporation................................. 1,813,000
67,000 Pinnacle West Capital Corporation................ 2,964,750
-------------------------------------------------
Total Utilities 20,149,012
-------------------------------------------------
-------------------------------------------------
Total Common Stocks
(cost basis $152,644,294) 191,481,692
-------------------------------------------------
Par Value Long-Term Fixed Income Obligations (3.2%)
=================================================================
$1,000,000 Potomac Electric Power 9.00% 4/15/2000........... 1,027,957
1,650,000 Texas Utilities Electric 9.75% 5/1/2021.......... 1,857,712
500,000 U.S. Treasury Bond 7.50% 11/15/2016.............. 581,563
3,150,000 U.S. Treasury Note 6.875% 3/31/2000.............. 3,220,875
-------------------------------------------------
Total Long-Term Fixed Income Obligations
(amortized cost basis $6,711,076) 6,688,107
-------------------------------------------------
-------------------------------------------------
Total Long-Term Investments
(amortized cost basis $159,355,370) 198,169,799
-------------------------------------------------
Short-Term Obligations (4.7%)
=================================================
2,200,000 Cargill Incorporated 5.40% 5/1/98................ 2,200,000
1,744,043 General Mills Corporation**...................... 1,744,043
2,283,629 Pitney Bowes Credit Corporation**................ 2,283,629
2,503,446 Sara Lee Corporation**........................... 2,503,446
302,476 Warner Lambert Incorporated**.................... 302,476
754,951 Wisconsin Electric Power Company**............... 754,951
-------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $9,788,545) 9,788,545
-------------------------------------------------
-------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(amortized cost basis $169,143,915) $207,958,344
-------------------------------------------------
</TABLE>
*Non-income producing security
**Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 47
<PAGE>
The AAL Balanced Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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.
Shares Common Stocks (53.6%) Market Value
==============================================================================
<TABLE>
<CAPTION>
<C> <S> <C>
Basic Materials (0.3%)
1,000 Eastman Chemical Company............................. $ 68,750
700 Praxair, Inc......................................... 35,219
-------------------------------------------
Total Basic Materials 103,969
-------------------------------------------
Capital Goods (4.7%)
1,000 Avery Dennison Corporation........................... 52,375
800 Caterpillar, Inc..................................... 45,550
1,600 Deere & Company...................................... 93,500
7,000 General Electric Company............................. 595,875
1,900 Herman Miller, Inc................................... 57,356
900 Honeywell, Inc....................................... 83,813
3,300 Illinois Tool Works Incorporated..................... 232,650
900 Owens Illinois, Inc.*................................ 35,606
600 PACCAR, Inc.......................................... 35,625
1,300 The Boeing Company................................... 65,081
1,400 Thiokol Corporation.................................. 75,425
1,300 United Technologies Corporation...................... 127,969
-------------------------------------------
Total Capital Goods 1,500,825
-------------------------------------------
Communication Services (1.3%)
4,100 Ameritech Corporation................................ 174,506
2,100 Bell Atlantic Corporation............................ 196,481
800 Sprint Corporation................................... 54,650
-------------------------------------------
Total Communication Services 425,637
-------------------------------------------
Consumer Cyclicals (4.2%)
2,200 Costco Companies, Inc................................ 122,925
1,000 Family Dollar Stores, Inc............................ 34,000
2,000 Gannett Company, Inc................................. 135,875
4,200 Harley-Davidson, Inc................................. 151,200
3,400 Pier 1 Imports, Inc.................................. 89,675
6,000 Ross Stores, Inc..................................... 277,875
3,800 Service Corporation International.................... 156,750
3,200 Tiffany and Company.................................. 145,600
1,300 The New York Times Company Class A................... 92,219
700 The Times Mirror Company............................. 42,831
5,700 U.S. Office Products Company*........................ 100,819
-------------------------------------------
Total Consumer Cyclicals 1,349,769
-------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
48 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.6%) Market Value
===============================================================================
<C> <S> <C>
Consumer Staples (12.2%)
2,700 Alberto-Culver Company............................... $ 79,313
2,200 Bestfoods............................................ 120,725
9,300 Comcast Corporation.................................. 333,056
400 Corn Products International, Inc.*................... 14,250
9,300 Cox Communications, Inc.*............................ 415,013
700 Dean Foods Company................................... 32,812
2,600 General Mills, Inc................................... 175,663
3,700 General Nutrition Companies, Inc.*................... 132,738
1,800 Gillette Company..................................... 207,787
2,100 PepsiCo, Inc......................................... 83,344
8,500 Philip Morris Companies, Inc......................... 317,156
4,400 Procter & Gamble Company............................. 361,625
3,300 Safeway, Inc.*....................................... 126,225
1,400 TCI Satellite Entertainment, Inc.*................... 11,025
8,800 Tele-Communications, Inc.*........................... 283,800
10,100 Tele-Communications Ventures Group*.................. 164,756
1,200 The Walt Disney Company.............................. 149,175
1,100 Time Warner, Inc..................................... 86,350
10,700 U.S. West Media Group*............................... 403,925
11,800 Walgreen Company*.................................... 407,100
-----------------------------------------
Total Consumer Staples 3,905,838
-----------------------------------------
Energy (4.6%)
2,000 Baker Hughes, Inc.................................... 81,000
2,000 British Petroleum Company plc ADR.................... 189,000
2,000 CalEnergy Company, Inc.*............................. 65,250
1,400 Chevron Corporation.................................. 115,763
1,000 Columbia Energy Group................................ 81,250
1,900 ENSCO International, Incorporated.................... 53,675
6,700 Exxon Corporation.................................... 488,681
2,300 Halliburton Company.................................. 126,500
4,500 Royal Dutch Petroleum Company ADR.................... 254,531
-----------------------------------------
Total Energy 1,455,650
-----------------------------------------
Financials (10.7%)
2,500 American Express Company............................. 255,000
4,300 American International Group, Inc.................... 565,719
400 Associates First Capital Corporation................. 29,900
1,500 CIGNA Corporation.................................... 310,406
400 Conseco, Inc......................................... 19,850
4,200 Fannie Mae........................................... 251,475
3,300 First Chicago Corporation............................ 306,488
200 Hartford Life, Inc................................... 9,887
1,000 Household International, Inc......................... 131,437
4,000 MBNA Corporation..................................... 135,500
3,300 MGIC Investments Corporation......................... 207,900
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 49
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.6%) Market Value
===============================================================================
<C> <S> <C>
Financials (10.7%) continued
2,400 J.P. Morgan & Company....................... $ 315,000
3,000 National City Corporation................... 207,750
3,800 Nationsbank Corporation..................... 287,850
600 Northern Trust Corporation.................. 43,800
1,408 Starwood Hotels & Resorts................... 70,664
4,100 Travelers Group, Inc........................ 250,869
----------------------------------------
Total Financials 3,399,495
----------------------------------------
Health Care (6.4%)
1,100 Elan Corporation plc ADR*................... 68,338
3,400 Eli Lilly & Company......................... 236,513
4,000 Johnson & Johnson........................... 285,500
2,900 Medtronic, Inc.............................. 152,612
4,700 Merck & Co., Inc............................ 566,350
3,800 Pfizer Incorporated......................... 432,487
2,000 Schering-Plough Corporation................. 160,250
1,900 Wellpoint Health Networks Inc.*............. 137,037
----------------------------------------
Total Health Care 2,039,087
----------------------------------------
Technology (8.5%)
5,200 ADC Telecommunications, Inc.*............... 155,675
4,600 Automatic Data Processing, Inc.............. 307,913
2,000 Cisco Systems, Inc.*......................... 146,500
2,700 Cognos, Incorporated*....................... 74,334
1,500 Computer Associates International, Inc...... 87,844
3,900 First Data Corporation...................... 132,112
900 Gateway 2000, Inc.*......................... 52,819
2,400 HBO & Company............................... 143,550
1,100 Hewlett-Packard Company..................... 82,844
3,300 Intel Corporation........................... 266,681
5,100 Lucent Technologies, Inc.................... 388,237
4,800 Microsoft Corporation*...................... 432,600
2,200 National Data Corporation................... 89,787
1,400 Quantum Corporation*........................ 32,900
1,800 Seagate Technology, Inc.*................... 48,038
3,300 Tellabs, Inc.*.............................. 233,888
900 Western Digital Corporation*................ 17,775
----------------------------------------
Total Technology 2,693,497
----------------------------------------
Transportation (0.6%)
500 CNF Transportation, Inc..................... 19,312
6,600 Southwest Airlines Company.................. 181,088
----------------------------------------
Total Transportation 200,400
----------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
50 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Balanced Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.6%) Market Value
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Utilities (0.1%)
1,500 Entergy Corporation........................................................... $37,312
------------------------------------------------
Total Utilities 37,312
------------------------------------------------
------------------------------------------------
Total Common Stocks
(cost basis $16,053,954) 17,111,479
------------------------------------------------
Principal Amount Long-Term Fixed-Income Obligations (29.8%) Interest Rate Maturity Date
==================================================================================================
U.S. Government Obligations (18.9%)
$ 5,500,000 U.S. Treasury Notes.................................. 7.500% 2/15/2005 6,036,250
------------------------------------------------
Total U.S. Government Obligations 6,036,250
------------------------------------------------
Corporate Obligations (10.9%)
500,000 CNA Financial Corporation............................ 6.500 4/15/2005 499,031
500,000 Computer Associates International***................. 6.375 4/15/2005 497,145
500,000 GTE Corporation...................................... 6.940 4/15/2028 496,867
500,000 Heller Financial, Inc................................ 6.250 3/1/2001 499,134
500,000 Lehman Brothers Holding, Inc......................... 6.250 4/1/2003 497,190
500,000 MCI Communications Corporation....................... 6.500 4/15/2010 492,671
500,000 Sears Roebuck Acceptance Corporation................. 6.000 3/20/2003 493,892
------------------------------------------------
Total Corporate Obligations 3,475,930
------------------------------------------------
------------------------------------------------
Total Long-Term Fixed Income Obligations
(amortized cost basis $9,585,939) 512,180
------------------------------------------------
Short-Term Variable Rate Obligations (16.6%)
==============================================================================
67,912 American Family Insurance Company**........................................... 67,912
1,240,427 General Mills Corporation**................................................... 1,240,427
1,341,861 Pitney Bowes Credit Corporation**............................................. 1,341,861
1,303,866 Sara Lee Corporation**........................................................ 1,303,866
214,139 Warner Lambert Incorporated**................................................. 214,139
1,109,582 Wisconsin Electric Power Company**............................................ 1,109,582
------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $5,277,787) 5,277,787
------------------------------------------------
------------------------------------------------
TOTAL INVESTMENTS (100%)
(amortized cost basis $30,917,680) $31,901,446
------------------------------------------------
</TABLE>
*Non-income producing security
**Variable rate demand note
***144A security
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 51
<PAGE>
The AAL High Yield Bond Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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>
Principal
Amount Long-Term Fixed-Income Obligations (98.8%) Interest Rate Maturity Date Market Value
================================================================================================================
<C> <S> <C> <C> <C>
Auto Manufacturing(2.6%)
$ 750,000 Talon Automotive*.................................... 9.625% 5/1/2008 $ 750,000
1,000,000 Trident Automotive Group, Inc.*...................... 10.000 12/15/2005 1,065,000
1,000,000 Walbro Corporation................................... 9.875 7/15/2005 995,000
---------------------------------------------------------------------
Total Auto Manufacturing 2,810,000
---------------------------------------------------------------------
Basic Materials (5.1%)
500,000 American Pad & Paper Company......................... 13.000 11/15/2005 506,250
600,000 Four M Corporation................................... 12.000 6/1/2006 618,000
1,000,000 Gaylord Container Corporation........................ 9.375 6/15/2007 995,000
1,000,000 Indah Kiat Finance Mauritius, Ltd.................... 10.000 7/1/2007 835,000
1,000,000 Riverwood International Corporation.................. 10.250 4/1/2006 1,035,000
1,000,000 Sweetheart Cup Company, Inc.......................... 9.625 9/1/2000 995,000
500,000 Sweetheart Cup Company, Inc.......................... 10.500 9/1/2003 500,000
---------------------------------------------------------------------
Total Basic Materials 5,484,250
---------------------------------------------------------------------
Chemicals (3.7%)
1,000,000 LaRoche Industries, Inc.............................. 9.500 9/15/2007 995,000
1,000,000 PCI Chemicals Canada, Inc............................ 9.250 10/15/2007 987,500
1,000,000 Sterling Chemicals, Inc.............................. 11.750 8/15/2006 1,005,000
1,000,000 Trans-Resourses, Inc.*............................... 10.750 3/15/2008 1,020,000
---------------------------------------------------------------------
Total Chemicals 4,007,500
---------------------------------------------------------------------
Construction (3.8%)
1,000,000 American Builders & Contractors Supply Co., Inc...... 10.625 5/15/2007 1,035,000
1,000,000 American Standard, Inc............................... 7.625 2/15/2010 972,500
500,000 Fortress Group, Inc.................................. 13.750 5/15/2003 577,500
750,000 JTM Industries, Inc.*................................ 10.000 4/15/2008 759,375
750,000 Omega Cabinets, Ltd.................................. 10.500 6/15/2007 785,625
---------------------------------------------------------------------
Total Construction 4,130,000
---------------------------------------------------------------------
Consumer Products (4.3%)
1,000,000 Commemorative Brands, Inc............................ 11.000 1/15/2007 1,020,000
500,000 Diamond Brands Operating Company*.................... 10.125 4/15/2008 505,000
1,000,000 Doskocil Manufacturing Company, Inc.................. 10.125 9/15/2007 1,055,000
1,000,000 Ekco Group, Inc...................................... 9.250 4/1/2006 1,040,000
1,000,000 Revlon Consumer Products Corporation*................ 8.625 2/1/2008 997,500
---------------------------------------------------------------------
Total Consumer Products 4,617,500
---------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
52 The AAL Mutual Funds Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (98.8%) Interest Rate Maturity Date Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Containers (1.0%)
$ 1,000,000 Anchor Glass Containers Corporation........................................11.250% 4/1/2005 $1,100,000
-------------------------------------------------------------
Total Containers 1,100,000
-------------------------------------------------------------
Energy (8.8%)
1,000,000 Abraxas Petro Corporation*.................................................11.500 11/1/2004 1,042,500
1,000,000 AEI Holdings Company*......................................................10.000 11/15/2007 1,042,500
500,000 Amerigas Partners, L.P.....................................................10.125 4/15/2007 532,500
1,000,000 Belco Oil & Gas Corporation................................................ 8.875 9/15/2007 1,010,000
500,000 Chesapeke Energy Corporation*.............................................. 9.625 5/1/2005 503,125
1,000,000 Clark Refining & Marketing Corporation..................................... 8.375 11/15/2007 1,010,000
500,000 Octel Developments*........................................................10.000 5/1/2006 500,000
500,000 Pride Petroleum Services, Inc.............................................. 9.375 5/1/2007 535,000
750,000 Southwest Royalties, Inc...................................................10.500 10/15/2004 671,250
1,000,000 Statia Terminals International N.V.........................................11.750 11/15/2003 1,060,000
1,000,000 Transamerican Energy Corporation...........................................11.500 6/15/2002 975,000
500,000 XCL Limited*...............................................................13.500 5/1/2004 605,000
-------------------------------------------------------------
Total Energy 9,486,875
-------------------------------------------------------------
Financials (3.0%)
750,000 Arcadia Financial, Ltd.....................................................11.500 3/15/2007 738,750
750 Arcadia Financial, Ltd. (Warrants)......................................... 7,500
1,000,000 Emergent Group, Inc........................................................10.750 9/15/2004 967,500
1,000,000 Imperial Credit Industries................................................. 9.875 1/15/2007 985,000
500,000 Penncorp Financial Group, Inc.............................................. 9.250 12/15/2003 517,500
-------------------------------------------------------------
Total Financials 3,216,250
-------------------------------------------------------------
Food & Beverages (5.5%)
1,000,000 Cuddy International*.......................................................10.750 12/1/2007 975,000
750,000 Envirodyne Industries, Inc.................................................12.000 6/15/2000 795,000
750,000 Envirodyne Industries, Inc.................................................10.250 12/1/2001 755,625
1,000,000 Imperial Holly Corporation................................................. 9.750 12/15/2007 1,005,000
1,000,000 Smithfield Foods, Inc.*.................................................... 7.625 2/15/2008 990,000
1,500,000 Speciality Foods Corporation...............................................10.250 8/15/2001 1,477,500
-------------------------------------------------------------
Total Food & Beverages 5,998,125
-------------------------------------------------------------
Food Retailers (2.6%)
1,000,000 DiGiorgio Corporation......................................................10.000 6/15/2007 995,000
1,000,000 Fleming Companies, Inc.....................................................10.625 12/15/2001 1,063,750
750,000 Fleming Companies, Inc.....................................................10.500 12/1/2004 780,938
-------------------------------------------------------------
Total Food Retailers 2,839,688
-------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 53
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (98.8%) Interest Rate Maturity Date Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Health Care (4.5%)
$ 1,000,000 Abbey Healthcare Group Corporation........................... 9.500% 11/1/2002 $1,012,500
500,000 ICN Pharmaceuticals, Inc. ................................... 9.250 8/15/2005 533,750
500,000 Imagyn Medical Technology Corporation........................ 12.500 4/1/2004 277,500
1,000,000 Paragon Health Network, Inc. ................................ 9.500 11/1/2007 1,030,000
1,000,000 Tenet Healthcare Corporation................................. 8.625 1/15/2007 1,036,250
500 UroHealth System (Warrants).................................. 125
1,000,000 Vencor, Inc.*................................................ 9.875 5/1/2005 1,007,500
---------------------------------------------------------------
Total Health Care 4,897,625
===============================================================
Leisure (6.7%)
500,000 Booth Creek Ski Holding Company.............................. 12.500 3/15/2007 522,500
250,000 Booth Creek Ski Holding Company*............................. 12.500 3/15/2007 261,250
750,000 Grand Casinos, Inc. ......................................... 10.125 12/1/2003 804,375
1,000,000 Livent, Inc. ................................................ 9.375 10/15/2004 1,010,000
570,000 Prime Hospitality Corporation................................ 9.250 1/15/2006 601,350
1,500,000 Riviera Holdings Corporation................................. 10.000 8/15/2004 1,500,000
500,000 Silver Cinemas, Inc.*........................................ 10.500 4/15/1998 506,250
1,000,000 Trump Atlantic City Associates Funding, Inc. ................ 11.250 5/1/2006 995,000
500,000 United Artists Theatre Circuit, Inc. ........................ 11.500 5/1/2002 515,625
482,347 United Artists Theatre Circuit, Inc. ........................ 9.300 7/1/2015 488,584
---------------------------------------------------------------
Total Leisure 7,204,934
===============================================================
Media (1.9%)
1,000,000 Hollinger International Publishing, Inc. .................... 8.625 3/15/2005 1,036,250
1,000,000 T/SF Communications Corporation.............................. 10.375 11/1/2007 1,017,500
---------------------------------------------------------------
Total Media 2,053,750
===============================================================
Media-Broadcasting (2.9%)
1,000,000 Allbritton Communications, Inc. ............................. 9.750 11/30/2007 1,047,500
1,000,000 Lin Television Corporation*.................................. 8.375 3/1/2008 997,500
500,000 Spanish Broadcasting Systems, Inc. .......................... 12.500 6/15/2002 570,000
500,000 Spanish Broadcasting Systems, Inc. .......................... 11.000 3/15/2004 542,500
---------------------------------------------------------------
Total Media-Broadcasting 3,157,500
===============================================================
Media-Cable (4.4%)
750,000 Cablevision Systems Corporation.............................. 10.500 5/15/2016 868,125
1,000,000 Cablevision Systems Corporation.............................. 7.875 2/15/2018 990,000
1,000,000 Century Communications Corporation........................... 8.750 10/1/2007 1,035,000
1,000,000 James Cable Partners, L.P. .................................. 10.750 8/15/2004 1,052,500
750,000 Jones Intercable, Inc. ...................................... 8.875 4/1/2007 788,437
---------------------------------------------------------------
Total Media-Cable 4,734,062
===============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
54 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
Principal Amount Long-Term Fixed-Income Obligations (98.8%) Interest Rate Maturity Date Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Metals-Diversified (3.9%)
$1,000,000 Algoma Steel Corporation.....................................12.375% 7/15/2005 $ 1,180,000
1,000,000 AmeriSteel Corporation*...................................... 8.750 4/15/2008 1,006,250
750,000 Earle Jorgensen Company*..................................... 9.500 4/1/2005 750,000
750,000 Sheffield Steel Corporation..................................11.500 12/1/2005 776,250
500,000 WHX Corporation*.............................................10.500 4/15/2005 506,875
--------------------------------------------------
Total Metals-Diversified 4,219,375
==================================================
Miscellaneous Manufacturing (11.8%)
1,000,000 AEP Industries, Inc.*........................................ 9.875 11/15/2007 1,050,000
1,000,000 Applied Extrusion Technologies, Inc..........................11.500 4/1/2002 1,065,000
500,000 Atlantis Plastics, Inc.......................................11.000 2/15/2003 512,500
500,000 Brand Scaffolding Service, Inc.*.............................10.250 2/15/2008 512,500
500,000 Day International Group, Inc.................................11.125 6/1/2005 540,000
1,000,000 Glasstech, Inc...............................................12.750 7/1/2004 985,000
500,000 High Voltage Engineering Corporation*........................10.500 8/15/2004 520,000
1,000,000 High Voltage Engineering Corporation.........................10.500 8/15/2004 1,040,000
1,000,000 IMPAQ Group, Inc.*...........................................10.125 3/15/2008 1,020,000
750,000 Indesco International, Inc.*................................. 9.750 4/15/2008 750,000
500,000 Interlake Corporation........................................12.125 3/1/2002 515,000
750,000 Morris Materials Handling Corporation*....................... 9.500 4/1/2008 744,375
1,000,000 Paragon Corporate Holdings*.................................. 9.625 4/1/2008 985,000
500,000 Precise Technologies, Inc....................................11.125 6/15/2007 512,500
1,000,000 RBX Corporation*.............................................12.000 1/15/2003 1,010,000
1,000,000 W.R. Carpenter North America, Inc............................10.625 6/15/2007 1,065,000
--------------------------------------------------
Total Miscellaneous Manufacturing 12,826,875
==================================================
Pollution Control (1.4%)
1,000,000 Envirosource, Inc............................................ 9.750 6/15/2003 1,015,000
500,000 HydroChem Industrial Services, Inc...........................10.375 8/1/2007 520,000
--------------------------------------------------
Total Pollution Control 1,535,000
==================================================
Restaurants/Food Services (2.8%)
1,000,000 American Restaurant Group, Inc.*.............................11.500 2/15/2003 1,000,000
1,000,000 AmeriServe Food Distribution, Inc............................ 8.875 10/15/2006 1,020,000
1,000,000 Tricon Global................................................ 7.650 5/15/2008 997,750
--------------------------------------------------
Total Restaurants/Food Services 3,017,750
==================================================
Retail Stores (3.3%)
750,000 Brown Group, Inc............................................. 9.500 10/15/2006 789,375
1,000,000 Frank's Nursery & Crafts, Inc.*..............................10.250 3/1/2008 987,500
750,000 PhillipsVan-Heusen Corporation*.............................. 9.500 5/1/2008 746,250
1,000,000 The Pantry, Inc..............................................10.250 10/15/2007 1,025,000
--------------------------------------------------
Total Retail Stores 3,548,125
==================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 55
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (98.8%) Interest Rate Maturity Date Market Value
========================================================================================================================
<S> <C> <C> <C> <C>
Technology (1.0%)
$1,000,000 Viasystems, Inc.*...................................... 9.750% 6/1/2007 $1,040,000
--------------------------------------------------------
Total Technology 1,040,000
--------------------------------------------------------
Telecommunications (5.4%)
750,000 BTI Telecom Corporation................................10.500 9/15/2007 781,875
1,000,000 Comcast Cellular Holdings, Inc......................... 9.500 5/1/2007 1,041,250
750,000 Globalstar L.P.........................................11.375 2/15/2004 770,625
1,000,000 Iridium Capital Corporation*...........................11.250 7/15/2005 1,032,500
500,000 Level 3 Communications, Inc.*.......................... 9.125 5/1/2008 492,500
500,000 Powertel, Inc..........................................11.125 6/1/2007 545,000
500,000 PSInet, Inc.*..........................................10.000 2/15/2005 512,500
500 Unifi Communications, Inc. (Warrants).................. 125
750,000 USA Mobile Communications, Inc......................... 9.500 2/1/2004 710,625
--------------------------------------------------------
Total Telecommunications 5,887,000
--------------------------------------------------------
Textiles (2.1%)
750,000 Anvil Knitwear, Inc....................................10.875 3/15/2007 772,500
1,000,000 Polysindo International Finance Company
B.V. Guaranteed Secured Notes.......................... 9.375 7/30/2007 550,000
1,000,000 WorldTex, Inc.*........................................ 9.625 12/15/2007 1,005,000
--------------------------------------------------------
Total Textiles 2,327,500
--------------------------------------------------------
Transportation (4.5%)
1,000,000 Allied Holdings, Inc................................... 8.625 10/1/2007 1,015,000
1,000,000 Moran Transportation Company...........................11.750 7/15/2004 1,115,000
1,000,000 Panoceanic Bulk Carriers Limited*......................12.000 12/15/2007 935,000
750,000 Petro Stopping Center, L.P.............................10.500 2/1/2007 806,250
1,000,000 Transportation Maritima Mexicana S.A. de C.V...........10.000 11/15/2006 1,002,500
--------------------------------------------------------
Total Transportation 4,873,750
--------------------------------------------------------
Utilities (1.8%)
1,000,000 Cathay International Ltd.*.............................13.000 4/15/2008 1,000,000
1,000,000 Energy Corporation of America.......................... 9.500 5/15/2007 992,500
--------------------------------------------------------
Total Utilities 1,992,500
--------------------------------------------------------
--------------------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $106,232,513) 107,005,934
--------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral
part of this schedule.
56 The AAL Mutual Funds Annual Report
<PAGE>
The AAL High Yield Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Short-Term Variable Rate Obligations (1.2%) Interest Rate Maturity Date Market Value
=============================================================================================================
<C> <S> <C> <C> <C>
$ 119,802 General Mills Corporation**.................................................. $ 119,802
1,192,746 Pitney Bowes Credit Corporation**............................................ 1,192,746
--------------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $1,312,548) 1,312,548
--------------------------------------------------------
--------------------------------------------------------
TOTAL INVESTMENTS (100%)
(amortized cost basis $107,545,061) $108,318,482
--------------------------------------------------------
</TABLE>
*144A security
**Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 57
<PAGE>
The AAL Municipal Bond Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
=================================================================================================================
<S> <C> <C> <C>
Alabama (0.9%)
$4,200,000 Alabama Special Care Facility Finance Authority
Revenue Bonds (Daughters of Charity System) ......... 5.000% 11/1/2025 $ 3,984,750
-------------------------------------------------------
Total Alabama 3,984,750
-------------------------------------------------------
Arizona (2.5%)
1,000,000 Mohave County Arizona School District No.
1-Series A (FGIC Insured) General Obligation Bonds... 5.900 7/1/2015 1,067,500
10,000,000 Salt River, Arizona Project Revenue Bonds
Certificates of Participation........................ 5.500 1/1/2019 10,137,500
450,000 University of Arizona Certificates Partion
Administrative & Parking Facility (MBIA Insured)..... 6.000 7/15/2023 475,875
------------------------------------------------------
Total Arizona 11,680,875
------------------------------------------------------
California (17.4%)
3,915,000 California Rural Home Finance Authority
Single Family Mortgage Revenue Bonds
(GNMA Insured) (Subject to `AMT').................... 6.250 9/1/2029 4,453,313
2,000,000 California Rural Home Mortgage Financial
Authority Single Family Mortgage Revenue
Bonds (Subject to `AMT')............................. 5.500 5/1/2029 2,260,000
2,250,000 California Rural Home Mortgage Financial Authority
Single Family Mortgage Revenue Series A
(GNMA/FNMA/FHLMC Insured)............................ 5.750 12/1/2029 2,438,438
1,015,000 California Rural Home Single Family Mortgage
Revenue Bonds (GNMA/FHLMC Insured)................... 7.250 12/1/2024 1,124,113
4,855,000 Contra Costa County, California Home Mortgage
Revenue Bonds (Escrowed to Maturity)................. 7.500 5/1/2014 5,941,306
7,780,000 East Bay Municipal Utility District California
Water System Revenue Bonds (FGIC Insured)............ 5.000 6/1/2026 7,400,725
200,000 Fallbrook California High School District San Diego
County Revenue Bonds, Series A (MBIA Insured)........ 6.250 9/1/2019 218,250
1,335,000 Foothill/Eastern Transportation California
Toll Road Revenue Bonds, Series A.................... 0.000 1/1/2005 951,188
5,000,000 Foothill/Eastern Transportation California
Toll Road Revenue Bonds, Series A**.................. 0.000 1/1/2009 3,725,000
5,000,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A......................... 0.000 1/1/2010 3,750,000
5,000,000 Foothill/Eastern Transportation California
Toll Road Revenue Bonds, Series A**.................. 0.000 1/1/2011 3,781,250
605,000 Foothill/Eastern Transportation California
Toll Road Revenue Bonds, Series A.................... 0.000 1/1/2012 459,044
6,000,000 Foothill/Eastern Transportation California
Toll Road Revenue Bonds, Series A.................... 0.000 1/1/2013 4,582,500
7,145,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A......................... 0.000 1/1/2014 5,465,925
10,135,000 Foothill/Eastern Transportation California Toll
Road Revenue Bonds, Series A**....................... 5.000 1/1/2035 9,222,850
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
58 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
========================================================================================================================
California (17.4%) - continued
<S> <C> <C> <C> <C>
$4,200,000 Fresno, California Sewer Revenue Bonds,
Series 1993 A-1 (AMBAC Insured)........................ 6.250% 9/1/2014 $4,767,000
390,000 Fresno California University School District Series A
General Obligation Bonds (MBIA Insured)................ 6.550 8/1/2020 450,938
1,580,000 Kern California High School District-Series A
(MBIA Insured) General Obligation Bonds................ 6.600 2/1/2016 1,818,975
120,000 Los Angeles California Department of
Water & Power Revenue Bonds............................ 6.500 4/15/2032 127,350
185,000 Los Angeles California Wastewater
Revenue Bonds Series B (MBIA Insured).................. 5.700 6/1/2023 191,244
4,200,000 Pomona, California Single Family Housing Revenue
Bonds (Escrowed to Maturity)........................... 7.600 5/1/2023 5,433,750
2,075,000 Pomona, California Unified School District
General Obligation Bonds (MBIA Insured)................ 6.500 8/1/2019 2,404,406
4,630,000 Suisun-Soland, California Water Authority
Revenue Bonds (FSA Insured)............................ 5.550 5/1/2017 4,832,563
3,500,000 Orange County California Transit Authority,
Sales Tax Revenue Bonds,
Series 1992 M (MBIA Insured)........................... 6.000 2/15/2009 3,880,625
--------------------------------------------------------------------
Total California 79,680,753
--------------------------------------------------------------------
Colorado (1.0%)
1,000,000 Colorado Housing Finance Authority
Revenue Bonds.......................................... 6.500 5/1/2016 1,095,000
2,500,000 Colorado Housing Finance Authority
Revenue Bonds.......................................... 6.600 5/1/2028 2,759,375
1,000,000 Jefferson County Colorado School District-
Series A General Obligation Unlimited Bonds
(FGIC Insured)......................................... 5.000 12/15/17 972,500
--------------------------------------------------------------------
Total Colorado 4,826,875
--------------------------------------------------------------------
Florida (4.5%)
240,000 Florida Board of Education General
Obligation Bonds....................................... 5.875 6/1/2024 248,700
355,000 Florida State Board of Education Capital Outlay
General Obligation Unlimited Bonds..................... 6.100 6/1/2024 374,525
225,000 Florida State Board Education Capital Outlay
Public Education General Obligation
Unlimited Revenue Bonds................................ 6.000 6/1/2022 234,281
1,000,000 Halifax Hospital Medical Center of Florida
Revenue Bonds (ACA Insured)............................ 5.000 4/1/2011 1,003,750
1,000,000 Hialeah Florida Housing Authorities Revenue
Bonds (GNMA Collaterallized Insured)................... 5.300 12/20/2018 1,000,000
475,000 Hillsborough County Florida Aviation
Revenue Bonds Tampa International Airport
Series B (FGIC Insured)................................ 5.875 10/1/2023 502,906
565,000 Jacksonville, Florida Capital Improvements, Gator
Bowl Project Revenue Bonds (AMBAC Insured)............. 6.000 10/1/2025 605,963
6,760,000 Jacksonville, Florida Electric Authority
Water & Sewer System Series A Revenue Bonds............ 5.625 10/1/2037 6,878,300
1,715,000 Manatee County, Florida Revenue Bonds
(Subject to AMT)....................................... 7.200 5/1/2028 1,933,663
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 59
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
=========================================================================================================================
<S> <C> <C> <C> <C>
Florida (4.5%) - continued
$2,000,000 Orange County, Florida Health Facilities
Authority Bonds (MBIA Insured)........................... 6.250% 10/1/2018 $ 2,275,000
2,000,000 Pinellas County Florida Housing Finance Authority
Revenue Bonds (FNMA/GNMA Insured)
(Subject to AMT)......................................... 5.950 3/1/2030 2,120,000
2,250,000 Polk County Florida Utilities System
Revenue Bonds (FGIC Insured)............................. 6.000 10/1/2008 2,497,500
850,000 Tallahassee, Florida Municipal Electric
Series B Revenue Bonds................................... 6.200 10/1/2012 911,625
------------------------------------------------------------------------
Total Florida 20,586,213
------------------------------------------------------------------------
Georgia (3.7%)
750,000 Atlanta, Georgia Series A General Obligation
Unlimited Bonds.......................................... 6.100 12/1/2019 811,875
5,000,000 Cherokee County, Georgia Water and Sewer
Authority Revenue Bonds.................................. 5.200 8/1/2025 5,075,000
4,000,000 Georgia Municipal Electric Authority Power
Revenue Bonds, Series Z (FGIC Insured)................... 5.500 1/1/2012 4,175,000
2,690,000 Georgia Municipal Electric Authority Special
Obligation Bonds, Series 1993 (AMBAC Insured)............ 7.000 1/1/2008 3,143,938
3,500,000 Municipal Electric Authority Georgia
Revenue Bonds (MBIA Insured)............................. 6.500 1/1/2012 3,994,375
------------------------------------------------------------------------
Total Georgia 17,200,188
------------------------------------------------------------------------
Illinois (13.5%)
790,000 Chicago Illinois Board of Education General
Obligation Unlimited Bonds (MBIA Insured)................ 6.000 12/1/2026 838,388
5,000,000 Chicago, Illinois O'Hare International Airport
Revenue Bonds (MBIA Insured)............................. 5.700 1/1/2008 5,193,750
325,000 Chicago, Illinois Public Building, Chicago Transit
Authority Revenue Bonds (AMBAC Insured).................. 6.100 1/1/2007 349,375
2,500,000 Chicago, Illinois Single Family Mortgage Revenue
Bonds (GNMA Collateral) (Subject to `AMT')............... 7.250 9/1/2028 2,834,375
2,250,000 Chicago Illinois Single Family Mortgage Revenue
Bonds Collection Series A-1
(GNMA/FNMA/FHLMC Insured)................................ 6.450 9/1/2029 2,432,813
2,250,000 Cook County, Illinois General Obligation
Bonds (FGIC Insured)..................................... 5.500 11/15/2022 2,266,875
880,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGIC Insured)......................... 8.500 12/1/2006 1,112,100
1,250,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGIC Insured)......................... 8.500 12/1/2011 1,695,313
1,565,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGIC Insured)......................... 8.500 12/1/2014 2,153,831
1,815,000 Cook County, Illinois School District #99 -
Cicero G.O. Bonds (FGIC Insured)......................... 8.500 12/1/2016 2,529,656
640,000 Cook County, Illinois School District No. 100
Berwyn South General Obligation Bonds
Unlimited (FSA Insured).................................. 8.200 12/1/2006 795,200
695,000 Cook County, Illinois School District No. 100
Berwyn South General Obligation Bonds
Unlimited (FSA Insured).................................. 8.200 12/1/2007 876,569
755,000 Cook County, Illinois School District No. 100
Berwyn South General Obligation Bonds
Unlimited (FSA Insured).................................. 8.200 12/1/2008 964,513
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
60 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Illinois (13.5%) - continued
$ 765,000 Cook County, Illinois School District No. 100
Berwyn South General Obligation Bonds
Unlimited (FSA Insured)......................... 8.200% 12/1/2009 $ 1,000,238
3,620,000 Du Page County, Illinois Stormwater Project,
General Obligation Bonds........................ 5.600 1/1/2021 3,859,825
9,400,000 Hoffman Estates, Illinois Tax Increment
Revenue Bonds................................... 0.000 5/15/2003 7,449,500
3,500,000 Illinois Educational Facilities Authority
Northwestern University Revenue Bonds........... 5.200 11/1/2032 3,530,625
2,475,000 Illinois Educational Facility Authority
Revenue Bonds-Medium Term....................... 5.150 11/1/2032 2,493,563
3,000,000 Illinois Regional Transit Authority
Revenue Bonds, Series A (FGIC Insured).......... 6.700 11/1/2021 3,633,750
250,000 Illinois State General Obligation Bonds
(MBIA Insured).................................. 6.000 2/1/2016 267,188
10,650,000 Metropolitan Pier and Exposition Center,
Illinois Revenue Bonds.......................... 7.000 7/1/2026 12,806,625
1,375,000 Will County Illinois Community High School
District No. 210 Lincoln-Way General
Obligation Unlimited Bonds (FSA Insured)*....... 6.250 1/1/2012 1,541,719
1,615,000 Will County Illinois Community High School
District No. 210 Lincoln-Way General
Obligation Unlimited Bonds (FSA Insured)*....... 6.250 1/1/2013 1,812,838
----------------------------------------------------------
Total Illinois 62,438,629
----------------------------------------------------------
Indiana (2.3%)
530,000 Indiana Municipal Power Revenue Bonds
(MBIA Insured).................................. 5.500 1/1/2016 549,875
100,000 Indiana State Toll Road Revenue Bonds
(Escrowed to Maturity).......................... 9.000 1/1/2015 140,250
1,000,000 Indiana Transportation Finance Authority
Airport Facilities Lease Revenue Bonds
Unrefunded Balance Series A..................... 6.250 11/1/2016 1,071,250
4,550,000 Indiana Transportation Finance Authority
Revenue Bonds (MBIA Insured).................... 7.250 6/1/2015 5,642,000
1,240,000 Indianapolis, Indiana Utilities District
Revenue Bonds (FGIC Insured).................... 3.500 6/1/2018 981,150
2,000,000 Lawrence Township, Indiana Metropolitan
School District General Obligation Bonds........ 6.875 7/5/2011 2,325,000
----------------------------------------------------------
Total Indiana 10,709,525
----------------------------------------------------------
Kansas (0.6%)
500,000 Labette County Kansas Single Family
Revenue Bonds................................... 7.650 12/1/2011 535,000
2,000,000 Sedgwick and Shawnee Counties, Kansas
Single Family Revenue Mortgage Bonds
Series A-1 (Subject to `AMT')................... 5.500 6/1/2029 2,197,500
----------------------------------------------------------
Total Kansas 2,732,500
----------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 61
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) 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 $1,579,763
-----------------------------------------------------------------
Total Louisiana 1,579,763
-----------------------------------------------------------------
Michigan (1.6%)
6,500,000 Michigan Public Power Agency Revenue Refunding
Bonds (Belle River Project) (MBIA Insured).......... 5.000 1/1/2019 6,191,250
1,000,000 Ypsilanti, Michigan School District General
Obligation Unlimited Bonds (FGIC Insured)........... 5.750 5/1/2020 1,037,500
-----------------------------------------------------------------
Total Michigan 7,228,750
-----------------------------------------------------------------
Minnesota (0.2%)
2,500,000 Farmington Minneapolis Independent School
District Number 192 General Obligation Unlimited
Bonds Series B (FSA Insured)*....................... 0.000 2/1/2017 918,750
-----------------------------------------------------------------
Total Minnesota 918,750
-----------------------------------------------------------------
Missouri (2.1%)
5,710,000 Missouri State Housing Development
Community Single Family Mortgage
Revenue Bonds (Subject to 'AMT').................... 7.300 3/1/2028 6,487,988
2,000,000 Missouri State Housing Development
Community Single Family Mortgage Series
C-1 Revenue Bonds................................... 6.550 9/1/2028 2,202,500
880,000 Missouri State Housing Development
Revenue Bonds....................................... 9.375 4/1/2016 938,300
-----------------------------------------------------------------
Total Missouri 9,628,788
-----------------------------------------------------------------
Montana (0.1%)
1,000,000 Montana State Housing Revenue Bonds................. 6.400 12/1/2012 1,062,500
-----------------------------------------------------------------
Total Montana 1,062,500
-----------------------------------------------------------------
Nebraska (0.3%)
1,000,000 Nebraska Public Power District Revenue Bonds........ 6.125 1/1/2015 1,072,500
145,000 Omaha Nebraska Airport Authorities
Airport Revenue Bonds............................... 8.375 1/1/2014 165,300
-----------------------------------------------------------------
Total Nebraska 1,237,800
-----------------------------------------------------------------
New Hampshire (1.1%)
4,960,000 New Hampshire Higher Educational & Health
Facilities Authority Revenue Bonds
(AMBAC Insured)..................................... 6.250 10/1/2021 5,270,000
-----------------------------------------------------------------
Total New Hampshire 5,270,000
-----------------------------------------------------------------
New Mexico (1.6%)
4,650,000 Bernalillo County New Mexico Gross Receipts
Tax Revenue Bonds................................... 5.250 4/1/2027 4,650,000
2,275,000 New Mexico Mortgage Finance Authority
Revenue Bonds, Series 1995 F........................ 7.000 1/1/2026 2,755,594
-----------------------------------------------------------------
Total New Mexico 7,405,594
-----------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
62 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (14.6%)
$5,000,000 New York Dormitory Authority State University
Educational Facilities Revenue Bonds........................ 5.250% 5/15/2019 $4,987,500
3,500,000 New York Dormitory Authority State
University Revenue Bonds.................................... 5.875 5/15/2011 3,758,125
2,000,000 New York Dormitory Authority State
University Revenue Bonds.................................... 7.500 5/15/2013 2,490,000
5,000,000 New York Dormitory Authority State
University Revenue Bonds.................................... 5.875 5/15/2017 5,450,000
5,000,000 New York, New York-Series F General
Obligation Unlimited Bonds.................................. 5.125 8/1/2011 4,912,500
1,000,000 New York State Dormitory Authority
Revenues Insured-Sam Hospital Sufferen
(Asset Guarantee Insured)................................... 5.500 7/1/2011 1,007,500
3,000,000 New York State Local Government Assistance
Corporation, Refunding Revenue Bonds
(MBIA Insured).............................................. 5.250 4/1/2016 3,030,000
4,795,000 New York State Local Government Assistance
Corporation, Refunding Revenue Bonds
(MBIA Insured).............................................. 5.000 4/1/2021 4,573,231
3,000,000 New York State Medical Care Facilities,
Finance Agency Revenue Bonds, Mental Health
Services (FSA Insured)...................................... 5.375 2/15/2014 3,011,250
4,830,000 New York State Power Authority Series A
Revenue Bonds............................................... 5.000 2/15/2015 4,703,213
285,000 New York State Thruway Authority General
Revenue Bonds, Series C..................................... 6.000 1/1/2025 304,594
9,000,000 New York State Thruway Revenue Bonds........................ 5.600 4/1/2005 9,315,000
7,625,000 Triborough Bridge & Tunnel Authority, New York
Convention Center Project Bonds, Series 1990 E.............. 7.250 1/1/2010 8,968,906
5,000,000 Triborough Bridge & Tunnel Authority
Revenue Bonds............................................... 5.000 1/1/2017 4,787,500
6,915,000 Triborough Bridge & Tunnel Authority
Revenue Bonds............................................... 5.000 1/1/2020 6,664,331
---------------------------------------------------
Total New York 67,963,650
===================================================
North Carolina (1.0%)
1,320,000 North Carolina Eastern Municipal Power Agency
Power System Revenue Bonds.................................. 4.500 1/1/2024 1,221,000
1,845,000 North Carolina Eastern Municipal Power Agency
Revenue Bonds (FSA Insured)................................. 7.500 1/1/2010 2,269,350
700,000 North Carolina Eastern Municipal Power Agency-
Series A-(FGIC Insured)..................................... 6.125 1/1/2011 752,500
325,000 North Carolina Eastern Municipal Power Agency-
Series A.................................................... 6.400 1/1/2021 338,813
---------------------------------------------------
Total North Carolina 4,581,663
===================================================
Oklahoma (0.1%)
100,000 Tulsa Oklahoma Industrial Authorities Hospital
Revenue Bonds Saint Johns Medical Center Project............ 6.250 2/15/2014 107,250
---------------------------------------------------
Total Oklahoma 107,250
===================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 63
<PAGE>
The AAL Municipal Bond Fund - continued
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
===============================================================================================================================
<C> <S> <C> <C> <C>
Ohio (0.2%)
$1,000,000 Akron Ohio Waterworks Revenue
Mortgage (FGIC Insured)............................... 5.900% 3/1/2009 $1,072,500
100,000 Ohio State Higher Education Facility
Revenue Bonds......................................... 6.000 10/1/2022 103,625
---------------------------------------------------------------------
Total Ohio 1,176,125
=====================================================================
Pennsylvania (1.2%)
250,000 Media Boro Pennsylvania Guaranteed Water
Revenue Bonds (MBIA Insured).......................... 6.550 1/1/2017 268,125
1,365,000 Pennsylvania Housing Finance Agency
Revenue Bonds (Subject to `AMT')...................... 6.750 10/1/2009 1,532,213
1,455,000 Pennsylvania Housing Finance Agency
Revenue Bonds (Subject to `AMT')...................... 6.750 10/1/2010 1,627,781
2,235,000 Philadelphia, Pennsylvania Hospital Authority
Children's Hospital Revenue Bonds..................... 5.000 2/15/2021 2,117,660
---------------------------------------------------------------------
Total Pennsylvania 5,545,779
=====================================================================
Puerto Rico (1.8%)
3,000,000 Puerto Rico Commonwealth Highway and
Transportation Authorities Transportation
Revenue Bonds, Series A............................... 5.000 7/1/2038 2,808,750
3,000,000 Puerto Rico Electric Power Authorities Power
Revenue Bonds, Series DD (FSA Insured)................ 4.500 7/1/2019 2,752,500
3,000,000 Puerto Rico Electric Power Authorities Power
Revenue Bonds, Series EE(MBIA Insured)................ 4.500 7/1/2018 2,737,500
---------------------------------------------------------------------
Total Puerto Rico 8,298,750
=====================================================================
Tennessee (0.4%)
2,000,000 Metropolitan Government Nashville & Davidson
County Tennessee Water & Sewer Revenue
Bonds Series A (FGIC Insured)......................... 4.750 1/1/2022 1,842,500
---------------------------------------------------------------------
Total Tennessee 1,842,500
=====================================================================
Texas (6.7%)
2,000,000 Houston, Texas Airport System Special Facilities
Revenue Bonds (Subject to `AMT') (FSA Insured)........ 5.375 7/15/2010 2,047,500
3,300,000 Houston, Texas Airport Systems Special Facilities
Revenue Bonds (FSA Insured)........................... 5.375 7/15/2011 3,366,000
5,000,000 Keller, Texas Independent School District G.O.
Bonds (PSF Guaranteed)................................ 5.125 8/15/2025 4,825,000
2,500,000 Lower Neches Valley Authority Industrial
Development Corporation Revenue Bonds
(Subject to `AMT').................................... 5.550 3/1/2033 2,496,875
100,000 North Central Texas Health Facilities Insured Bonds... 5.750 6/1/2026 105,125
7,880,000 Waco, Texas Health Facilities Development
Corporation (Daughters of Charity System)
Revenue Bonds......................................... 5.000 11/1/2020 7,505,700
5,080,000 Wylie Texas Independent School District
Non-Refunded/ Non-Defeased Portion
(PSF-GTD Insured)..................................... 7.000 8/15/2024 6,038,850
3,770,000 Wylie Texas Independent School District Refunded/
Defeased Portion (PSF-GTD Insured).................... 7.000 8/15/2024 4,528,710
---------------------------------------------------------------------
Total Texas 30,913,760
=====================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
64 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Utah (1.4%)
$ 5,360,000 Intermountain Power Agency Special Obligation
Revenue Bonds, Series 1986 A (MBIA Insured).................. 5.000% 7/1/2021 $ 5,018,300
1,190,000 Utah State Housing Finance Agency............................ 7.250 7/1/2011 1,298,585
-------------------------------------------------------------------------
Total Utah 6,316,885
=========================================================================
Virginia (2.5%)
3,000,000 Fairfax County, Virginia Development Authority
Revenue Bonds................................................ 5.250 8/15/2019 3,011,250
4,300,000 Metropolitan Washington D.C. Airport Authority,
Virginia Revenue Bonds (Subject to 'AMT').................... 5.250 10/1/2011 4,359,125
4,000,000 Virginia College Building Authorities Educational
Facilities Revenue Washington & Lee University
(MBIA Insured)............................................... 5.250 1/1/2026 4,090,000
-------------------------------------------------------------------------
Total Virginia 11,460,375
=========================================================================
Vermont (0.3%)
1,250,000 Vermont Educational & Health Buildings
Financing Revenue Bonds...................................... 6.000 9/1/2006 1,317,185
-------------------------------------------------------------------------
Total Vermont 1,317,185
=========================================================================
Washington (11.4%)
1,330,000 Chelan County, Washington Public
District Number 1 Revenue Bonds.............................. 4.850 7/1/2032 1,339,975
10,000,000 Kitsap County Washington Conservatory
Housing Authority Revenue (ACA-CBI Insured).................. 5.600 12/1/2028 10,025,000
2,275,000 Pierce County, Washington School District
G.O. Bonds (AMBAC Insured)................................... 5.450 12/1/2013 2,408,656
440,000 Seattle, Washington Municipality-Series W
Sewer Revenue Bonds (MBIA Insured)........................... 6.300 1/1/2033 466,950
5,000,000 Washington Public Power Supply Revenue Bonds................. 5.000 7/1/2010 4,950,000
5,000,000 Washington Public Power Supply Revenue Bonds................. 5.125 7/1/2018 4,787,500
5,000,000 Washington State G.O. Bonds.................................. 6.750 2/1/2015 5,906,250
300,000 Washington State Motor Vehicle Fuel Tax-
Series B (FGIC Insured)...................................... 5.875 7/1/2021 313,500
10,000,000 Washington State Public Power Supply System
Project #2, Revenue Bonds, Series 1994 A..................... 6.000 7/1/2007 10,800,000
6,195,000 Washington State Public Power Supply System
Project #3 Revenue Bonds (AMBAC Insured)..................... 5.700 7/1/2009 6,589,931
1,000,000 Washington State Series A General
Obligation Bonds............................................. 5.750 2/1/2017 1,026,250
4,000,000 Washington State Series A General
Obligation Unlimited Bonds................................... 5.750 9/1/2019 4,165,000
-------------------------------------------------------------------------
Total Washington 52,779,012
=========================================================================
Wisconsin (0.5%)
1,990,000 Wisconsin Housing and Economic Development
Authority Home Ownership Revenue Bonds,
Series 1990 D................................................ 7.750 9/1/2010 2,096,963
-------------------------------------------------------------------------
Total Wisconsin 2,096,963
=========================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 65
<PAGE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
Principal Amount Municipal Bonds (98.3%) Interest Rate Maturity Date Market Value
================================================================================================================
<S> <C> <C> <C> <C>
Wyoming (2.5%)
$3,930,000 Wyoming Community Development
Authority Single Family Mortgage Revenue
Bonds, Series B............................... 6.650% 6/1/2013 $4,239,488
1,000,000 Wyoming State Farm Loan Board Capital
Projects Facilities Revenue Bonds............. 6.300 10/1/2010 1,093,750
5,785,000 Wyoming State Farm Loan Board Capital
Projects Facilities Revenue Bonds............. 5.750 10/1/2020 6,161,025
-------------------------------------------------------------
Total Wyoming 11,494,263
-------------------------------------------------------------
-------------------------------------------------------------
Total Municipal Bonds
(amortized cost basis $424,724,365) 454,066,413
-------------------------------------------------------------
Short-Term Tax-Exempt Variable Rate Obligations (1.7%)
===============================================================================
7,659,006 Strong Municipal Money Market.................................................. 7,659,006
-------------------------------------------------------------
Total Short-Term Tax-Exempt Variable
Rate Obligations (cost basis $7,659,006) 7,659,006
-------------------------------------------------------------
-------------------------------------------------------------
TOTAL INVESTMENTS (100%)
(amortized cost basis $432,383,371) $461,725,419
-------------------------------------------------------------
*When issued security
**Pledged as security for when issued securities
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
66 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Bond Fund SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
Investment Objective:
The Fund seeks a high level of current income, consistent with capital
preservation by investing primarily in a diversified portfolio of investment
grade bonds.
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (99.6%) Interest Rate Maturity Date Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations (29.2%)
$112,000,000 Federal National Mortgage Association...................... 5.750% 4/15/2003 $111,352,304
--------------------------------------------------
Total U.S. Government
Agency Obligations 111,352,304
--------------------------------------------------
U.S. Government Obligations (4.1%)
6,500,000 U.S. Treasury Bonds........................................ 6.125 3/31/2003 6,656,403
7,000,000 U.S. Treasury Notes........................................ 5.500 2/15/2008 6,908,125
2,000,000 U.S. Treasury Notes........................................ 5.500 11/15/2027 1,986,250
--------------------------------------------------
Total U.S. Government
Obligations 15,550,778
--------------------------------------------------
Asset-Backed Securities (20.2%)
10,000,000 Aesop Funding 1997-1 A2.................................... 6.400 10/20/2003 10,130,500
10,000,000 American Express 1997-1 A.................................. 6.400 4/15/2005 10,163,600
3,000,000 Associates Housing Services Series 1996-1.................. 7.900 3/15/2027 3,249,510
10,000,000 Citibank Credit Card Master Trust I
Series 1998-3 Class A...................................... 5.800 2/7/2005 9,870,100
5,000,000 Dayton Hudson Credit....................................... 6.250 8/15/2005 5,053,100
5,000,000 Green Tree Financial Corporation Series 1996-6............. 7.950 9/20/2027 5,286,090
5,000,000 Green Tree Financial Corporation Series 1996-7............. 7.650 10/15/2027 5,320,790
5,000,000 Green Tree Financial Corporation Series 1997-6............. 7.140 1/15/2029 5,158,960
5,250,000 Green Tree Financial Corporation Series 1997-6............. 6.680 1/30/2029 5,335,103
4,539,074 Green Tree Home Equity Loans 1997-C A-2.................... 6.380 8/15/2028 4,554,325
3,000,000 Green Tree Home Equity Loans Series 1996-D................. 8.100 9/15/2027 3,186,678
10,000,000 Providian Master Trust Series 1997-4 A..................... 6.250 6/15/2007 10,106,300
--------------------------------------------------
Total Asset-Backed Securities 77,415,056
--------------------------------------------------
Collateralized Mortgage Obligations (11.4%)
12,900,000 Citicorp Mortgage Securities, Inc. Series 1994-8........... 6.250 5/25/2024 12,874,587
15,360,000 Countrywide Home Loans 1997-6 A-3.......................... 6.750 11/25/2027 15,513,492
15,000,000 PNC Mortgage Securities Corporation 1997-5 A-2............. 6.750 10/25/2027 15,104,400
--------------------------------------------------
Total Collateralized
Mortgage Obligations 43,492,479
--------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 67
<PAGE>
The AAL Bond Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
Principal Amount Long-Term Fixed-Income Obligations (99.6%) Interest Rate Maturity Date Market Value
===============================================================================================================================
<C> <S> <C> <C> <C>
Corporate Obligations (34.7%)
$ 5,000,000 Aetna Services, Inc.................................... 6.970% 8/15/2036 $ 5,163,000
5,000,000 CNA Financial Corporation.............................. 6.500 4/15/2005 4,990,315
11,500,000 Computer Associates International*..................... 6.375 4/15/2005 11,434,324
5,000,000 Equitable Companies, Inc............................... 7.000 4/1/2028 4,978,285
10,000,000 First National Bank of Chicago......................... 8.080 1/5/2018 11,366,690
5,000,000 First Union Corporation................................ 6.300 4/15/2008 4,930,930
5,000,000 Ford Motor Credit Corporation.......................... 6.125 1/14/2003 4,976,690
5,000,000 Global Marine, Inc..................................... 7.125 9/1/2007 5,171,050
5,000,000 GTE Corporation........................................ 6.940 4/15/2028 4,968,670
10,000,000 Heller Financial, Inc.................................. 6.250 3/1/2001 9,982,680
5,000,000 Lehman Brothers Holdings, Inc.......................... 6.050 4/28/2000 4,992,645
3,000,000 Lehman Brothers Holdings, Inc.......................... 6.250 4/1/2003 2,983,140
5,000,000 MCI Communications Corporation......................... 6.125 4/15/2005 4,967,900
10,250,000 MCI Communications Corporation......................... 6.500 4/15/2010 10,099,755
5,000,000 Metropolitan Life Insurance Company.................... 6.300 11/1/2003 4,945,340
5,075,000 Pennzoil Company....................................... 10.625 6/1/2001 5,308,247
5,000,000 Salomon, Inc........................................... 6.700 7/5/2000 5,055,660
10,500,000 Sears Roebuck Acceptance Corporation................... 6.000 6/20/2003 10,371,732
5,000,000 Transocean Offshore, Inc............................... 7.450 4/15/2027 5,441,820
5,000,000 USA Waste Services..................................... 7.000 10/1/2004 5,108,395
5,000,000 WMX Technologies, Inc.................................. 7.100 8/1/2026 5,192,895
-----------------------------------------------------------
Total Corporate Obligations 132,430,163
-----------------------------------------------------------
-----------------------------------------------------------
Total Long-Term Fixed-Income Obligations
(amortized cost basis $377,369,087) 380,240,780
-----------------------------------------------------------
Short-Term Variable Rate Obligations (0.4%)
===================================================================================
346,000 Pitney Bowes Credit Corporation**.................................................. 346,000
687,370 Sara Lee Corporation**............................................................. 687,370
338,475 Warner Lambert Incorporated**...................................................... 338,475
-----------------------------------------------------------
Total Short-Term Variable Rate Obligations
(amortized cost basis $1,371,845) 1,371,845
-----------------------------------------------------------
-----------------------------------------------------------
TOTAL INVESTMENTS (100%)
(amortized cost basis $378,740,932) $381,612,625
-----------------------------------------------------------
</TABLE>
* 144A security
** Variable rate demand note
The accompanying notes to the financial statements are an integral part of this
schedule.
68 The AAL Mutual Funds Annual Report
<PAGE>
The AAL Money Market Fund SCHEDULE OF INVESTMENTS AS OF APRIL 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>
Principal Amount Commercial Paper (99.1%) Interest Rate Range* Maturity Date Range Market Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$11,000,000 American Express Credit Corporation.................5.35-5.57% 5/15-9/1/98 $ 10,878,421
11,000,000 American General Finance Corporation................5.35-5.50 6/18-9/2/98 10,851,678
11,000,000 Associates Corporation of North America.............5.40-5.55 5/7-8/14/98 10,900,648
4,000,000 AT&T Company........................................5.58-5.59 5/20-5/22/98 3,987,894
11,000,000 Beneficial Corporation..............................5.40-5.55 5/19-8/31/98 10,929,208
11,000,000 Cargill Incorporated**..............................5.42-5.43 6/11-7/20/98 10,906,438
11,000,000 Chrysler Financial Corporation......................5.40-5.64 5/8-9/14/98 10,921,823
1,500,000 CIT Group Holdings, Inc............................. 5.42 8/11/98 1,476,965
10,500,000 Coca-Cola Company...................................5.39-5.44 5/22-6/12/98 10,448,191
1,500,000 Commercial Credit Company........................... 5.50 5/13/98 1,497,250
6,500,000 Countrywide Home Loans, Inc.........................5.53-5.55 5/14-5/19/98 6,484,310
11,000,000 Eaton Corporation**.................................5.35-5.47 5/28-7/10/98 10,925,078
4,500,000 Federal National Mortgage Association............... 5.385 7/28/98 4,440,765
11,000,000 Ford Motor Credit Corporation.......................5.40-5.55 6/2-9/3/98 10,829,093
11,000,000 General Electric Capital Corporation................5.40-5.62 5/29-9/4/98 10,856,865
11,000,000 General Motors Acceptance Corporation...............5.42-5.48 5/14-9/11/98 10,867,415
1,000,000 GTE Corporation..................................... 5.40 6/2/98 995,076
7,000,000 Household Finance Corporation.......................5.43-5.53 5/26-7/24/98 6,937,798
11,000,000 International Business Machines Credit Corporation..5.40-5.61 5/1-8/28/98 10,954,204
10,500,000 International Lease Finance Corporation.............5.35-5.45 5/6-8/19/98 10,436,580
11,000,000 John Deere Capital Corporation......................5.42-5.47 6/2-8/27/98 10,877,903
6,000,000 Lucent Technologies, Inc............................5.45-5.46 5/27-7/23/98 5,946,164
10,500,000 Merrill Lynch & Co., Inc............................5.32-5.43 6/9-6/26/98 10,419,640
11,000,000 Norwest Financial, Inc..............................5.43-5.50 5/18-7/31/98 10,943,138
10,500,000 Sears Roebuck Acceptance Corporation................5.46-5.60 5/4-7/15/98 10,428,958
11,000,000 Toyota Motor Credit Corporation.....................5.43-5.64 5/14-8/20/98 10,896,627
3,500,000 Transamerica Finance Corporation.................... 5.54 5/15/98 3,492,459
10,800,000 Walt Disney Company.................................5.36-5.46 6/22-9/18/98 10,653,316
------------------------------------------------------------
Total Commercial Paper 240,183,905
------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
The AAL Mutual Funds Annual Report 69
<PAGE>
The AAL Money Market Fund - continued SCHEDULE OF INVESTMENTS AS OF APRIL 30,
1998
<TABLE>
<CAPTION>
Principal Amount Variable Rate Demand Notes (0.9%) Market Value
================================================================================
<C> <S> <C>
$ 216,500 General Mills Corporation....................... $ 216,500
71,557 Sara Lee Corporation............................ 71,557
1,929,455 Warner Lambert Incorporated..................... 1,929,455
-------------------------------------------------
Total Variable Rate Obligations 2,217,512
=================================================
-------------------------------------------------
TOTAL INVESTMENTS (100%)
(amortized cost basis $242,401,417) $242,401,417
=================================================
</TABLE>
* The interest rate shown reflects the coupon rate, or, for the securities
purchased at a discount, the discount rate at the date of purchase.
**4(2) commercial paper
The accompanying notes to the financial statements are an integral part of this
schedule.
70 The AAL Mutual Funds Annual Report
<PAGE>
This Page Intentionally Left Blank
The AAL Mutual Funds Annual Report 71
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities AS OF APRIL 30, 1998
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: $118,268,936,
$559,026,647, $151,027,064, $1,566,940,020,
$169,143,915, $30,917,680, $107,545,061,
$432,383,371, $378,740,932 and $242,401,417,
respectively)........................................ $135,331,035 $676,194,561 $150,088,026 $2,840,856,436
Unamortized organization & initial
registration expenses................................ 22,999 817 33,139 --
Dividend and interest receivable..................... 49,415 297,454 651,446 1,869,820
Prepaid expenses..................................... 42,455 62,304 45,128 72,793
Receivable from securities sold...................... 585,605 15,985,396 1,057,528 --
Receivable for forward contracts held................ -- -- 48,441,910 --
Cash................................................. 216,674 67,867 51,360 610,630
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $136,248,183 $692,608,399 $200,368,537 $2,843,409,679
==================================================================================================================================
Liabilities
Payable for forward currency contracts held.......... $ -- $ -- $47,268,372 $ --
Payable for investment purchase...................... 969,531 5,581,750 171,631 16,462,630
Income distributions payable......................... -- -- -- --
Redemptions payable.................................. -- -- 131,083 --
Payable to affiliate................................. 125,053 558,449 145,311 1,927,286
Accrued expenses..................................... 60,930 268,892 129,139 423,967
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,155,514 6,409,091 47,845,536 18,813,883
==================================================================================================================================
Net Assets
Trust capital (beneficial interest).................. 114,599,301 537,642,520 148,368,880 1,516,039,441
Accumulated undistributed net investment income
(loss).............................................. 9,359 27,822 2,793,271 1,389,567
Accumulated net realized gain (loss) on
investments......................................... 3,421,910 31,361,052 1,129,209 33,250,372
Net unrealized appreciation (depreciation) on:
Investments........................................ 17,062,099 117,167,914 (939,038) 1,273,916,416
Foreign currency contracts......................... -- -- 1,173,538 --
Foreign currency related transactions.............. -- -- (2,859) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets 135,092,669 686,199,308 152,523,001 2,824,595,796
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Capital $136,248,183 $692,608,399 $200,368,537 $2,843,409,679
==================================================================================================================================
Total Net Assets Class A............................. $120,285,342 $671,479,580 $144,152,707 $2,766,709,385
Shares of beneficial interest outstanding (Class A).. 8,689,794 42,156,519 12,930,549 93,331,807
Net asset value per share............................ $13.84 $15.93 $11.15 $29.64
Maximum public offering price........................ $14.42 $16.59 $11.61 $30.88
Total Net Assets Class B............................. $14,389,944 $13,555,367 $7,910,025 $54,900,438
Shares of beneficial interest outstanding (Class B).. 1,047,930 858,826 715,910 1,868,704
Net asset value per share............................ $13.73 $15.78 $11.05 $29.38
Total Net Assets Class I............................. $417,383 $1,164,361 $460,269 $2,985,973
Shares of beneficial interest outstanding (Class I).. 30,103 72,934 41,212 100,652
Net asset value per share............................ $13.87 $15.96 $11.17 $29.67
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
72 The AAL Mutual Funds Annual Report
<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>
$207,958,344 $31,901,446 $108,318,482 $461,725,419 $381,612,625 $242,401,417
-- 72,980 24,414 -- -- --
490,046 128,280 2,688,936 6,680,568 2,587,215 1,635
44,434 4,250 46,037 40,162 32,571 74,699
-- -- 3,128,380 19,958,421 -- --
-- -- -- -- -- --
266,142 123,280 124,307 202,921 579,707 1,095,711
- ------------------------------------------------------------------------------------------------------------------------
$208,758,966 $32,230,236 $114,330,556 $488,607,491 $384,812,118 $243,573,462
========================================================================================================================
$ -- $ -- $ -- $ -- $ -- $ --
-- 1,044,488 3,269,750 17,067,969 -- --
-- -- 231,588 325,952 397,118 16,179
-- -- -- -- -- 1,180,223
133,648 14,084 59,383 289,348 234,389 82,254
65,998 94,597 47,784 118,397 93,874 122,239
- ------------------------------------------------------------------------------------------------------------------------
199,646 1,153,169 3,608,505 17,801,666 725,381 1,400,895
========================================================================================================================
156,109,760 30,085,771 109,109,163 438,613,197 391,670,281 242,137,356
324,789 41,102 8,630 (47,081) 96,451 35,211
13,310,342 (33,572) 830,837 2,897,661 (10,551,688) --
38,814,429 983,766 773,421 29,342,048 2,871,693 --
-- -- -- -- -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
208,559,320 31,077,067 110,722,051 470,805,825 384,086,737 242,172,567
- ------------------------------------------------------------------------------------------------------------------------
$208,758,966 $32,230,236 $114,330,556 $488,607,491 $384,812,118 $243,573,462
========================================================================================================================
$197,653,829 $27,674,985 $100,828,858 $467,145,934 $353,405,552 $240,737,453
13,816,053 2,559,097 9,778,939 40,974,450 35,388,155 240,737,453
$ 14.31 $ 10.81 $ 10.31 $ 11.40 $ 9.99 $ 1.00
$ 14.91 $ 11.26 $ 10.74 $ 11.88 $ 10.41 $ --
$ 3,818,315 $ 2,325,727 $ 9,714,463 $ 3,609,800 $ 1,431,449 $ 1,200,622
266,796 215,470 941,909 316,724 143,249 1,200,622
$ 14.31 $ 10.79 $ 10.31 $ 11.40 $ 9.99 $ 1.00
$ 7,087,176 $ 1,076,355 $ 178,730 $ 50,091 $ 29,249,736 $ 234,492
495,048 99,724 17,344 4,393 2,928,651 234,492
$ 14.32 $ 10.79 $ 10.31 $ 11.40 $ 9.99 $ 1.00
</TABLE>
The AAL Mutual Funds Annual Report 73
<PAGE>
Statement of Operations FOR THE YEAR ENDED APRIL 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>
Investment Income
Dividends............................................ $ 414,834 $ 4,723,476 $ 2,712,151 $ 25,735,290
Taxable interest..................................... 193,471 1,376,271 2,178,545 5,514,325
Tax exempt interest.................................. -- -- -- --
Foreign dividend withholding......................... -- -- (311,087) --
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Income.............................. 608,305 6,099,747 4,579,609 31,249,615
- ------------------------------------------------------------------------------------------------------------------------------
Expenses
Adviser fees......................................... 690,590 4,070,582 349,634 12,742,588
Sub-Adviser fees..................................... -- -- 930,467 --
Audit fees and legal fees............................ 20,313 24,605 27,564 27,328
Custody fees......................................... 12,368 42,754 183,659 125,444
Administrative service and pricing fees.............. 43,902 42,076 73,391 41,721
Amortization of organizational costs
& registration fees.................................. 7,249 7,333 14,691 --
Printing and postage expense......................... 55,267 255,609 107,023 284,696
Distribution expense Class A......................... 208,815 1,468,211 335,876 5,672,597
Distribution expense Class B......................... 85,071 80,734 54,549 291,921
SEC and state registration expense................... 64,552 122,153 81,462 168,284
Transfer agent fees (a).............................. 196,006 857,241 280,038 1,634,953
Transfer agent fees Class A.......................... 136,942 423,058 143,567 893,477
Transfer agent fees Class B.......................... 22,061 21,350 15,100 48,027
Transfer agent fees Class I.......................... 7 11 8 12
Shareholder maintenance fees Class A................. 77,770 345,476 110,982 693,441
Shareholder maintenance fees Class B................. 13,198 12,865 9,244 27,952
Shareholder maintenance fees Class I................. 3 3 2 4
Trustees fees and expenses........................... 10,758 10,758 10,758 10,758
Other expenses....................................... 1,413 8,454 2,741 27,993
- ------------------------------------------------------------------------------------------------------------------------------
Total Expenses....................................... 1,646,285 7,793,273 2,730,756 22,691,196
- ------------------------------------------------------------------------------------------------------------------------------
Less reimbursement from Adviser...................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Net Expenses................................... 1,646,285 7,793,273 2,730,756 22,691,196
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)......................... (1,037,980) (1,693,526) 1,848,853 8,558,419
- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains (Losses) on Investments
Net realized gains (losses) on investments........... 9,736,718 66,674,556 5,389,493 107,878,390
Net realized gains on
foreign currency transactions........................ -- -- 5,840,769 --
Increase (decrease) in unrealized
appreciation on investments.......................... 20,348,718 118,067,392 (1,606,668) 714,923,258
Decrease in unrealized appreciation
on currency transactions............................. -- -- (2,406,763) --
- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains
on Investments....................................... 30,085,436 184,741,948 7,216,831 822,801,648
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations............................ $29,047,456 $183,048,422 $ 9,065,684 $831,360,067
- ------------------------------------------------------------------------------------------------------------------------------
(a) Transfer agent fees were accrued as shared expense before December 29, 1997
The accompanying notes to the financial statements are an integral part of this schedule.
</TABLE>
74 The AAL Mutual Funds Annual Report
<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>
$ 4,342,834 $ 25,598 $ -- $ -- $ -- $ --
953,977 138,370 8,647,495 265,278 25,832,095 12,328,328
-- -- -- 24,027,117 -- --
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
5,296,811 163,968 8,647,495 24,292,395 25,832,095 12,328,328
- ----------------------------------------------------------------------------------------------------------------
809,233 27,618 522,217 2,163,729 1,921,733 1,088,957
-- -- -- -- -- --
24,381 6,685 25,793 23,249 21,720 14,346
11,209 700 5,122 17,667 27,212 13,884
41,504 12,056 52,682 57,209 47,618 40,938
8,353 -- 6,647 -- -- --
61,520 7,107 33,440 8,815 46,147 120,855
395,772 9,989 202,248 1,119,722 939,383 270,879
15,738 2,780 60,906 20,561 8,419 9,266
61,846 502 52,374 71,527 64,987 99,474
183,877 -- 38,687 175,798 270,911 293,994
94,318 5,282 37,606 79,912 140,130 197,988
3,521 735 7,138 1,818 1,384 2,248
12 11 11 6 13 12
75,806 1,052 19,735 68,253 112,453 103,084
1,854 199 3,572 791 744 672
5 2 3 2 5 4
10,758 3,124 10,758 10,758 10,758 10,758
2,750 468 1,426 7,033 6,703 3,379
- ----------------------------------------------------------------------------------------------------------------
1,802,457 78,310 1,080,365 3,826,850 3,620,320 2,270,738
- ----------------------------------------------------------------------------------------------------------------
-- (11,418) (173,649) -- -- (775,071)
- ----------------------------------------------------------------------------------------------------------------
1,802,457 66,892 906,716 3,826,850 3,620,320 1,495,667
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
3,494,354 97,076 7,740,779 20,465,545 22,211,775 10,832,661
- ----------------------------------------------------------------------------------------------------------------
19,250,254 (33,572) 1,860,676 7,482,803 9,902,653 --
-- -- -- -- -- --
24,269,617 983,766 1,260,221 15,997,733 4,006,350 --
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
43,519,871 950,194 3,120,897 23,480,536 13,909,003 --
================================================================================================================
$47,014,225 $1,047,270 $10,861,676 $43,946,081 $36,120,778 $10,832,661
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds Annual Report 75
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund The AAL Mid Cap Stock Fund
Period Ended Year Ended Year Ended Year Ended
4/30/1997(a) 4/30/98 4/30/97 4/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income (loss)............................................ $ (259,744) (1,037,980) $ (4,314,133) $ (1,693,526)
Net realized gains (losses) on
investment transactions................................................. 356,648 9,736,718 57,272,939 66,674,556
Net realized gains (losses) on
foreign currency transactions........................................... -- -- -- --
Increase (decrease) in unrealized appreciation
on investments.......................................................... (3,286,619) 20,348,718 (105,788,808) 118,067,392
Increase (decrease) in unrealized appreciation on
foreign currency........................................................ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations............................................... (3,189,715) 29,047,456 (52,830,002) 183,048,422
===================================================================================================================================
Distributions to Shareholders
Distributions from net investment income
Class A................................................................. -- -- -- --
Capital gains distributions Class A..................................... (726,525) (4,330,010) (78,919,695) (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..................................... (726,525) (4,759,291) (78,919,695) (56,445,294)
===================================================================================================================================
Trust Shares Transactions
Purchase of trust shares................................................ 53,019,419 68,657,418 152,186,004 99,347,772
Income dividends reinvested............................................. -- -- -- --
Capital gains distributions reinvested.................................. 721,583 4,741,670 78,042,123 56,185,767
Redemption of trust shares.............................................. (1,942,828) (10,476,518) (58,449,728) (60,940,889)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Trust Capital................................ 51,798,174 62,922,570 171,778,399 94,592,650
===================================================================================================================================
Net Increase in Net Assets.............................................. 47,881,934 87,210,735 40,028,702 221,195,778
===================================================================================================================================
Net Assets Beginning of Period.......................................... -- 47,881,934 424,974,828 465,003,530
===================================================================================================================================
Net Assets End of Period (1)............................................ $47,881,934 $135,092,669 $ 465,003,530 $686,199,308
===================================================================================================================================
</TABLE>
(a) Since inception July 1, 1996.
(b) Prior to September 1, 1997 formerly The AAL Utilities Fund.
(c) Since inception December 29, 1997.
(d) Since inception January 8, 1997.
(1) Including undistributed income of $4,720 and $9,359 for The AAL Small Cap
Stock Fund; $23,600 and $27,822 for The AAL Mid Cap Stock Fund; $(584,861)
and $2,793,271 for The AAL International Fund; $0 and $1,389,567 for The
AAL Capital Growth Fund; $447,037 and $324,789 for The AAL Equity Income
Fund; for each period, respectively.
The accompanying notes to the financial statements are an integral part of this
schedule.
76 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL International Fund The AAL Capital Growth Fund The AAL Equity Income Fund
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
4/30/97 4/30/98 4/30/97 4/30/98 4/30/97 4/30/98 (b)
============================================================================================================================
<S> <C> <C> <C> <C> <C>
$ 765,721 $ 1,848,853 $ 9,778,642 $ 8,558,419 $ 4,594,264 $ 3,494,354
4,041,492 5,389,493 63,871,032 107,878,390 487,429 19,250,254
843,337 5,840,769 -- -- -- --
(2,584,263) (1,606,668) 221,360,237 714,923,258 4,767,805 24,269,617
3,285,289 (2,406,763) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
6,351,576 9,065,684 295,009,911 831,360,067 9,849,498 47,014,225
- ----------------------------------------------------------------------------------------------------------------------------
(2,818,054) (4,680,366) (9,778,642) (7,150,934) (4,697,577) (3,574,397)
(509,864) (6,818,663) (74,870,516) (98,647,241) -- (5,528,978)
-- (192,611) -- (17,918) (837) (21,149)
-- (310,653) -- (1,384,876) -- (60,243)
-- -- -- -- -- (26,918)
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
(3,327,918) (12,002,293) (84,649,158) (107,200,969) (4,698,414) (9,211,685)
- ----------------------------------------------------------------------------------------------------------------------------
63,370,618 49,533,709 249,270,564 363,179,248 32,639,353 52,747,159
2,756,776 4,800,618 11,253,149 7,099,757 4,372,914 3,344,008
498,910 7,021,201 72,686,041 99,155,028 -- 5,225,719
(8,013,407) (24,649,658) (119,475,445) (174,444,619) (21,932,369) (25,251,474)
- ----------------------------------------------------------------------------------------------------------------------------
58,612,897 36,705,870 213,734,309 294,989,414 15,079,898 36,065,412
- ----------------------------------------------------------------------------------------------------------------------------
61,636,555 33,769,261 424,095,062 1,019,148,512 20,230,982 73,867,952
- ----------------------------------------------------------------------------------------------------------------------------
57,117,185 118,753,740 1,381,352,222 1,805,447,284 114,460,386 134,691,368
- ----------------------------------------------------------------------------------------------------------------------------
$118,753,740 $152,523,001 $1,805,447,284 $2,824,595,796 $134,691,368 $208,559,320
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds 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 Period Ended
4/30/1998 (c) 4/30/97 (d) 4/30/98
============================================================================================================
<S> <C> <C> <C>
Operations
Net investment income (loss)...................... $ 97,076 $ 912,510 $ 7,740,779
Net realized gains (losses) on
investment transactions........................... (33,572) (58,339) 1,860,676
Net realized gains (losses) on
foreign currency transactions..................... -- -- --
Increase (decrease) in unrealized
appreciation on investments....................... 983,766 (486,800) 1,260,221
Increase (decrease) in unrealized
appreciation on foreign currency.................. -- -- --
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations......................... 1,047,270 367,371 10,861,676
============================================================================================================
Distributions from net investment income
Class A........................................... (50,767) (879,944) (7,235,858)
Capital gains distributions Class A............... -- -- (904,721)
Distributions from net investment income
Class B........................................... (2,521) (32,566) (500,450)
Capital gains distributions Class B............... -- -- (66,779)
Distributions from net investment income
Class I........................................... (2,686) -- (4,471)
Capital gains distributions Class I............... -- -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders............... (55,974) (912,510) (8,712,279)
============================================================================================================
Trust Shares Transactions
Purchase of trust shares.......................... 30,286,303 48,042,384 85,083,040
Income dividends reinvested....................... 54,955 281,381 4,442,780
Capital gains distributions reinvested............ -- -- 614,901
Redemption of trust shares........................ (255,487) (437,680) (28,909,013)
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Trust Capital.......... 30,085,771 47,886,085 61,231,708
============================================================================================================
Net Increase in Net Asset......................... 31,077,067 47,340,946 63,381,105
============================================================================================================
Net Assets Beginning of Period.................... -- -- 47,340,946
============================================================================================================
Net Assets End of Period (1)...................... $31,077,067 $47,340,946 $110,722,051
============================================================================================================
</TABLE>
(a) Since inception July 1, 1996.
(c) Since inception December 29, 1997.
(d) Since inception January 8, 1997.
(1) Including undistributed income of $41,102 for The AAL Balanced Fund; $2,019
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;
$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
schedule.
78 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund The AAL Bond Fund The AAL Money Market Fund
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
4/30/97 4/30/98 4/30/97 4/30/98 4/30/97 4/30/98
==========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 19,810,749 $ 20,465,545 $ 25,509,886 $ 22,211,775 $ 7,658,318 $ 10,832,661
2,734,930 7,482,803 (4,679,871) 9,902,653 -- --
-- -- -- -- -- --
4,568,598 15,997,733 5,711,712 4,006,350 -- --
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
27,114,277 43,946,081 26,541,727 36,120,778 7,658,318 10,832,661
- ----------------------------------------------------------------------------------------------------------
(19,805,296) (20,389,290) (25,506,598) (21,676,538) (7,656,186) (10,788,522)
(7,015,210) (5,191,075) -- -- -- --
(5,453) (75,468) (3,288) (39,897) (2,132) (42,662)
-- (26,807) -- -- -- --
-- (787) -- (495,340) -- (1,477)
-- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
(26,825,959) (25,683,427) (25,509,886) (22,211,775) (7,658,318) (10,832,661)
- ----------------------------------------------------------------------------------------------------------
42,811,680 58,635,631 38,659,955 62,304,932 298,188,613 332,575,912
16,258,819 16,598,508 20,213,589 17,287,957 7,658,318 10,627,301
5,824,183 4,353,818 -- -- -- --
(55,527,221) (49,477,885) (101,018,460) (99,148,766) (231,675,023) (291,216,645)
- ----------------------------------------------------------------------------------------------------------
9,367,461 30,110,072 (42,144,916) (19,555,877) 74,171,908 51,986,568
- ----------------------------------------------------------------------------------------------------------
9,655,779 48,372,726 (41,113,075) (5,646,874) 74,171,908 51,986,568
- ----------------------------------------------------------------------------------------------------------
412,777,320 422,433,099 430,846,686 389,733,611 116,014,091 190,185,999
- ----------------------------------------------------------------------------------------------------------
$422,433,099 $470,805,825 $ 389,733,611 $384,086,737 $ 190,185,999 $ 242,172,567
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The AAL Mutual Funds Annual Report 79
<PAGE>
Notes to Financial Statements AS OF APRIL 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 Small Cap Stock, Mid Cap
Stock, International, Capital Growth, Equity Income (formerly known as The AAL
Utilities Fund), Balanced, High Yield Bond, Municipal Bond, 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 Small Cap Stock, Mid Cap Stock, International, Capital Growth, Equity
Income, High Yield Bond, Municipal Bond, Bond and Money Market Funds. The Series
A shares are subject to a maximum 4.00% sales charge of the offering price and a
0.25% annual service fee. Series 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 offered both Class A and
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 Small Cap Stock, Mid Cap Stock, International,
Capital Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond
and Money Market Funds. The Series 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.
Effective September 1, 1997, shareholders of The AAL Utilities Fund changed its
name to The AAL Equity Income Fund and the Funds' fundamental objective and
industry concentration policy.
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 equity 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 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, 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 in proportion to their respective net
assets, number of shareholder accounts or other reasonable basis. Total
investment income, expenses, and realized and unrealized gains or losses are
allocated 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. Each class is charged directly for expenses specifically attributed
to that class.
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 Small Cap Stock, Mid 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 High Yield Bond, Municipal Bond, 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
80 The AAL Mutual Funds Annual Report
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
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 International, Equity Income, Balanced, High Yield Bond and Bond
Funds. Realized gains or losses on sales are determined on a specific cost
identification basis. The Funds have no right to require registration of
unregistered securities (Noted as 144A Securities on the Schedule of
Investments). The cost incurred with the organization and initial registration
of shares for The AAL Small Cap Stock, Mid 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 Advisor"), under which each of the mutual fund
portfolios pay a fee for investment advisory services.
For the period May 1, 1997 to August 31, 1997, the annual rates of fees under
the Investment Advisory Agreement are calculated at the following rates: 0.75 of
1% on the first $200 million of average daily net assets and 0.65 of 1% on
average daily net assets over $200 million for The AAL Small Cap Stock and Mid
Cap Stock Funds; 1% of the Funds average daily net assets for The AAL
International Fund; 0.70 of 1% on the first $250 million of average daily net
assets, 0.65 of 1% on the next $250 million, 0.575 of 1% on the next $500
million and 0.50 of 1% on average daily net assets over $1 billion for The AAL
Capital Growth Fund; 0.50 of 1% on the first $250 million and 0.45 of 1% on
average daily net assets over $250 million for The AAL Equity Income Fund; 0.60
of 1% on average daily net assets for The AAL High Yield Bond Fund; 0.55 of 1%
on the first $250 million of average daily net assets, 0.50 of 1% on the next
$250 million and 0.45 of 1% on average daily net assets over $500 million for
The AAL Municipal Bond and Bond Funds; and 0.50 of 1% on the first $500 million
and 0.45 of 1% on average daily net assets over $500 million for The AAL Money
Market Fund. In addition, The AAL International Fund has entered into a Sub-
Advisory Agreement with Societe Generale Asset Management Corp., which is
paid 0.75 of 1% on average daily net assets.
Effective September 1, 1997, the annual rates of fees under the Investment
Advisory Agreement changed for The AAL Municipal Bond and Bond Funds only. The
rates are the same for both funds and are calculated as follows: 0.50 of 1% on
the first $250 million of average daily net assets and 0.45 of 1% on average
daily net assets over $250 million.
Effective December 1, 1997, the annual rates of fees under the Investment
Advisory Agreement changed for The AAL International Fund. The rate is
calculated as follows: 0.80 of 1% of average daily net assets. In addition, the
sub-advisory fee paid to Societe Generale Asset Management Corp. was amended to
0.55 of 1% on average daily net assets (payable from the Annual Advisory Fee
paid to the Adviser).
Effective December 29, 1998, with the inception of The AAL Balanced Fund, the
annual fees under the Investment Advisory Agreement were set at 0.60 of 1% on
average daily net assets.
The Trust has entered into an Administrative Services Agreement with the Adviser
pursuant to which the Adviser provides certain administrative services. The
Adviser earned the following fees from the respective Funds for the year ended
April 30, 1998: $40,000 for The AAL Small Cap Stock, Mid Cap Stock, Capital
Growth, Equity Income, High Yield Bond, Municipal Bond, Bond and Money Market
Funds, respectively; $11,667 for The AAL Balanced Fund; and $45,000 for The AAL
International 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 Small Cap Stock, Mid Cap Stock, International, Capital
Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond and 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 0.75 of 1% for The AAL Small Cap
Stock, Mid Cap Stock, International, Capital Growth, Equity Income, Balanced,
High Yield Bond, Municipal Bond and 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 $85,751 in
fees for fiscal 1997-98. 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
April 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.
The AAL Mutual Funds Annual Report 81
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
D: Security Transaction
During the years ended April 30, 1997, and 1998, purchases and sales of
securities other than short-term obligations were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------- -----------------------------
Years Ended Years Ended
4/30/97 4/30/98 4/30/97 4/30/98
=================================================================================================
<S> <C> <C> <C> <C>
The AAL Small Cap Stock Fund $ 82,807,470 $ 147,796,741 $ 32,623,815 $ 94,896,968
The AAL Mid Cap Stock Fund 586,304,570 634,736,099 499,728,977 597,740,432
The AAL International Fund 63,954,615 37,362,229 13,112,616 22,491,590
The AAL Capital Growth Fund 511,839,315 489,194,062 367,734,996 394,294,099
The AAL Equity Income Fund 33,256,370 122,835,962 6,189,126 98,863,905
The AAL Balanced Fund N/A 27,104,073 N/A 1,430,608
The AAL High Yield Bond Fund 55,060,147 152,446,699 9,837,171 93,287,589
The AAL Municipal Bond Fund 470,376,617 664,361,670 493,033,170 607,497,985
The AAL Bond Fund 859,392,631 1,782,756,237 927,975,869 1,762,774,060
</TABLE>
For the year ended April 30, 1997, and 1998, The AAL Bond Fund purchased
$353,792,852 and $985,955,124 and sold $375,639,422 and $1,010,603,182 in U.S.
government obligations.
For the period ended April 30, 1998, The AAL Balanced Fund purchased $6,710,502
and sold $617,844 in U.S. government obligations.
As of April 30, 1998, the cost of investments for federal income tax purposes
for each of the Funds was as follows:
<TABLE>
<CAPTION>
<S> <C>
The AAL Small Cap Stock Fund $ 118,510,160
The AAL Mid Cap Stock Fund 559,907,469
The AAL International Fund 153,128,655
The AAL Capital Growth Fund 1,566,940,020
The AAL Equity Income Fund 169,115,034
The AAL Balanced Fund 30,930,164
The AAL High Yield Bond Fund 107,545,061
The AAL Municipal Bond Fund 432,407,954
The AAL Bond Fund 378,950,966
The AAL Money Market Fund 242,401,417
</TABLE>
Any differences between book and tax are due primarily to wash sale losses and
REIT return of capital distributions. In addition, the cost basis differences in
The AAL International Fund are due to mark to market adjustments for passive
foreign investment companies.
The AAL Balanced and High Yield Bond Funds realized, on a tax basis, post-
October losses of $21,088 and $132,359, respectively. Such amounts may be used
to offset future capital gains.
At April 30, 1998, The AAL Bond Fund had accumulated net realized capital loss
carryovers of $7,527,823 expiring in 2004 and $2,813,831 expiring in 2005. To
the extent The AAL Bond Fund realizes future net capital gains, taxable
distributions to shareholders will be offset by any unused capital loss
carryover.
82 The AAL Mutual Funds Annual Report
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
The gross unrealized appreciation and depreciation on investments at years ended
April 30, 1997, and 1998, were as follows:
<TABLE>
<CAPTION>
4/30/97 4/30/98
Net Unrealized Net Unrealized
Appreciation Appreciation
Appreciation (Depreciation) (Depreciation) Appreciation (Depreciation) (Depreciation)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
The AAL Small Cap
Stock Fund $ 2,002,184 $ (5,288,803) $ (3,286,619) $ 20,805,961 $ (3,743,862) $ 17,062,099
The AAL Mid Cap
Stock Fund 43,560,575 (44,460,053) (899,478) 132,609,100 (15,441,186) 117,167,914
The AAL
International Fund 13,348,307 (9,088,073) 4,260,234 23,333,826 (23,099,326) 234,500
The AAL Capital
Growth Fund 587,689,407 (28,696,249) 558,993,158 1,285,921,272 (12,004,856) 1,273,916,416
The AAL Equity
Income Fund 18,968,225 (4,423,413) 14,544,812 40,487,563 (1,673,134) 38,814,429
The AAL Balanced Fund N/A N/A N/A 1,193,311 (209,545) 983,766
The AAL High Yield
Bond Fund 211,334 (698,134) (486,800) 2,117,499 (1,344,078) 773,421
The AAL Municipal
Bond Fund 13,710,118 (365,803) 13,344,315 29,840,546 (498,498) 29,342,048
The AAL Bond Fund 1,834,241 (2,968,898) (1,134,657) 4,001,527 (1,129,834) 2,871,693
</TABLE>
E: Trust Transaction
Transactions in trust shares for the years ended April 30, 1997, and 1998, were
as follows:
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund
-----------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
-------------------------- ------------------------ ---------------
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Shares purchased 4,637,506 4,581,398 345,998 707,744 30,103
Income dividends reinvested -- -- -- -- --
Capital gains reinvested 65,191 359,191 -- 35,879 --
Shares redeemed (182,675) (770,817) (171) (41,520) --
---------- --------- ------- ------- ------
Net increase of trust shares 4,520,022 4,169,772 345,827 702,103 30,103
========== ========= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
The AAL Mid Cap Stock Fund
-------------------------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
----------------------------- ----------------------- ----------------
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Shares purchased 9,684,073 5,854,933 257,913 566,630 73,106
Income dividends reinvested -- -- -- -- --
Capital gains reinvested 5,777,146 3,957,823 -- 59,255 --
Shares redeemed (3,973,092) (3,985,235) (130) (24,842) (172)
---------- --------- ------- ------- ------
Net increase of trust shares 11,488,127 5,827,521 257,783 601,043 72,934
========== ========= ======= ======= ======
</TABLE>
The AAL Mutual Funds Annual Report 83
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
The AAL International Fund
---------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
------------------------ ------------------- ----------------
<S> <C> <C> <C> <C> <C>
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===============================================================================================
Shares purchased 5,486,739 3,772,173 229,431 479,030 41,212
Income dividends reinvested 45,809 456,456 -- 19,125 --
Capital gains reinvested 252,387 644,791 -- 30,027 --
Shares redeemed (720,333) (2,164,121) (92) (41,612) --
---------- ---------- ------- ------- -------
Net increase of trust shares 5,064,602 2,709,299 229,339 486,570 41,212
========== ========== ======= ======= =======
The AAL Capital Growth Fund
---------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
------------------------ ------------------- --------------
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===============================================================================================
Shares purchased 11,764,223 12,378,718 516,710 1,344,950 104,072
Income dividends reinvested 569,065 288,468 -- 748 --
Capital gains reinvested 3,513,100 3,818,058 -- 54,225 --
Shares redeemed (5,906,836) (6,622,943) (2,797) (45,132) (3,420)
---------- ---------- ------- --------- -------
Net increase of trust shares 9,939,552 9,862,301 513,913 1,354,791 100,652
========== ========== ======= ========= =======
The AAL Equity Income Fund
---------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
------------------------- ----------------- --------------
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===============================================================================================
Shares purchased 2,906,152 3,285,078 43,457 221,116 494,961
Income dividends reinvested 393,768 258,113 74 1,588 87
Capital gains reinvested -- 401,552 -- 4,591 --
Shares redeemed (1,958,613) (1,967,090) (2) (4,028) --
--------- --------- ------ ------- -------
Net increase of trust shares 1,341,307 1,977,653 43,529 223,267 495,048
========= ========= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
The AAL Balanced Fund
---------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
----------------------- ------------------ -----------------
<S> <C> <C> <C>
4/30/98 4/30/98 4/30/98
===============================================================================================
Shares purchased 2,577,656 216,251 99,473
Income dividends reinvested 4,577 234 251
Capital gains reinvested -- -- --
Shares redeemed (23,136) (1,015) --
--------- ------- ------
Net increase of trust shares 2,559,097 215,470 99,724
========= ======= ======
</TABLE>
84 The AAL Mutual Funds Annual Report
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
The AAL High Yield Bond Fund
-----------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===========================================================================================
Shares purchased 4,536,334 7,562,713 271,056 664,944 16,914
Income dividends reinvested 26,252 399,044 2,140 30,318 430
Capital gains reinvested -- 54,806 -- 4,779 --
Shares redeemed (40,257) (2,759,953) (4,051) (27,277) --
--------- ---------- ------- ------- -------
Net increase of trust shares 4,522,329 5,256,610 269,145 672,764 17,344
========= ========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund
-----------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===========================================================================================
Shares purchased 3,803,846 4,874,442 71,756 244,779 4,325
Income dividends reinvested 1,469,699 1,447,260 453 5,354 68
Capital gains reinvested 521,880 376,282 -- 1,982 --
Shares redeemed (5,033,038) (4,333,958) (2,178) (5,422) --
--------- ---------- ------- ------- -------
Net increase of trust shares 762,387 2,364,026 70,031 246,693 4,393
========= ========== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
The AAL Bond Fund
-----------------------------------------------------------
Class A Shares Class B Shares Class I Shares
---------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===========================================================================================
Shares purchased 3,970,015 3,202,810 40,256 104,248 2,928,980
Income dividends reinvested 2,091,671 1,727,721 325 3,370 11,357
Capital gains reinvested -- -- -- -- --
Shares redeemed (10,449,930) (9,960,597) (10) (4,940) (11,686)
----------- ---------- ------- ------- --------
Net increase of trust shares (4,388,244) (5,030,066) 40,571 102,678 2,928,651
=========== ========== ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
The AAL Money Market Fund
-------------------------------------------------------------
Class A Shares Class B Shares Class I Shares
----------------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
4/30/97 4/30/98 4/30/97 4/30/98 4/30/98
===========================================================================================
Shares purchased 297,511,853 328,956,368 676,761 3,114,103 505,441
Income dividends reinvested 7,656,532 10,583,981 1,786 41,867 1,453
Capital gains reinvested -- -- -- -- --
Shares redeemed (231,565,574)(288,419,798) (109,450)(2,524,445) (272,402)
------------ ----------- -------- ---------- ---------
Net increase of trust shares 73,602,811 51,120,551 569,097 631,525 234,492
============ ========== ======== ========== =========
</TABLE>
The AAL Mutual Funds Annual Report 85
<PAGE>
Notes to Financial Statements - continued AS OF APRIL 30, 1998
F: Forward Currency Contracts
As of April 30, 1998, The AAL International Fund had entered into forward
currency contracts, as summarized below, resulting in net unrealized
depreciation of $1,173,538.
<TABLE>
<CAPTION>
Settlement Date Currency to U.S. Value at Currency to U.S. Value at
Through Be Delivered April 30, 1998 Be Received April 30, 1998
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
05/04/98 18,299 U.S. Dollar $ 18,290 677,341 Belgium Franc $ 18,299
05/04/98 85,588 U.S. Dollar 85,627 13,050,787 Spanish Peseta 85,588
05/04/98 (3,066) U.S. Dollar (3,066) (23,750) Hong Kong Dollar (3,066)
05/05/98 27,600 U.S. Dollar 27,538 16,468 British Pound Sterling 27,600
05/06/98 94,327 U.S. Dollar 94,266 3,490,959 Belgium Franc 94,327
05/06/98 168,962 U.S. Dollar 169,000 299,459,100 Italian Lira 168,962
05/06/98 (65,693) U.S. Dollar (65,894) (118,590) New Zealand Dollar (65,693)
05/07/98 32,211 U.S. Dollar 32,293 19,311 British Pound Sterling 32,211
05/07/98 79,213 U.S. Dollar 79,579 10,514,822 Japanese Yen 79,213
05/07/98 (22,667) U.S. Dollar (22,675) (35,904) Singapore Dollar (22,667)
05/08/98 149,671 U.S. Dollar 149,733 89,541 British Pound Sterling 149,671
05/29/98 322,059 U.S. Dollar 321,206 1,932,924 French Franc 322,059
06/03/98 37,294,000 French Franc 6,207,597 6,207,597 U.S. Dollar 6,061,675
06/10/98 308,000 Swiss Franc 206,199 206,199 U.S. Dollar 222,463
06/11/98 2,681,000 Australian Dollar 1,747,377 1,747,377 U.S. Dollar 1,841,955
06/17/98 2,183,000 Deutsche Mark 1,219,349 1,219,349 U.S. Dollar 1,252,611
06/24/98 854,429,000 Japanese Yen 6,510,431 6,510,431 U.S. Dollar 7,265,570
09/10/98 8,831,000 Swiss Franc 5,973,754 5,973,754 U.S. Dollar 6,145,485
09/17/98 14,234,500 Deutsche Mark 7,990,625 7,990,625 U.S. Dollar 7,929,511
09/22/98 28,553,600 French Franc 4,781,887 4,781,886 U.S. Dollar 4,692,980
09/29/98 1,099,266,000 Japanese Yen 8,495,100 8,495,100 U.S. Dollar 8,985,395
10/01/98 221,000 British Pound Sterling 376,362 376,362 U.S. Dollar 365,866
10/06/98 5,153,000 New Zealand Dollar 2,873,794 2,873,794 U.S. Dollar 2,791,895
----------- -----------
$47,268,372 $48,441,910
=========== ===========
</TABLE>
G: Federal Income Tax Information (unaudited)
In early 1998, shareholders received information regarding all distributions
paid to them by the Funds, during the calendar year 1997. The Funds hereby
designate the following amounts as long-term capital gains:
<TABLE>
<CAPTION>
The The The The The The
AAL Small Cap AAL Mid Cap AAL International AAL Capital Growth AAL Equity Income AAL Municipal
Stock Fund Stock Fund Fund Fund Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C>
Capital Gains Taxed at 20% $ -- $11,574,780 $1,855,940 $ 74,623,959 $5,589,221 $1,789,066
Capital Gains Taxed at 28% 21,377 24,370,368 2,500,726 25,408,158 -- 651,668
Total Long-term Capital Gains 21,377 35,945,148 4,356,666 100,032,117 5,589,221 2,440,734
</TABLE>
For The AAL Capital Growth, Equity Income and Balanced Funds, the
percentage of ordinary income distributions which is eligible for the corporate
dividend received deduction for the fiscal year ended April 30, 1998, was 100%,
100% and 99.65%, respectively. (unaudited)
During the fiscal year ended April 30, 1998, The AAL International Fund
generated $4,890,696 of foreign source income and paid $311,087 of foreign
taxes. The Fund elects to pass foreign taxes through to the Fund's shareholders
for their 1998 tax returns. Updated data will be sent with 1998 Form 1099s to
enable shareholders to have information to claim either a foreign tax credit or
to take a foreign tax deduction on their 1998 income tax returns.
For the fiscal year ended April 30, 1998, The AAL Municipal Bond Fund designates
98.9% of its income distributions as tax exempt income distributions.
H: Shareholder Meeting
On August 15, 1997, a special shareholder meeting was held at which time a
majority vote of The AAL Utilities Fund shareholders agreed to change The AAL
Utilities Fund's fundamental objective and the industry concentration policy.
The AAL Utilities Fund's name was also changed to The AAL Equity Income Fund
(unaudited).
<TABLE>
<CAPTION>
<S> <C> <C>
For 6,026,629.223.................. 95.16%
Against 97,267.076.................. 1.54%
Abstained 209,078.883.................. 3.30%
------------- ------
Total 6,332,975.182..................100.00%
</TABLE>
86 The AAL Mutual Funds Annual Report
<PAGE>
Financial Highlights PER SHARE INFORMATION
<TABLE>
<CAPTION>
The AAL Small Cap Stock Fund
Class A Class B Class A Class B Class I
Period Ended Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98 (e)
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period......................... $ 10.00 $ 11.17 $ 9.84 $ 9.81 $ 12.45
Income from Investment Operations
Net investment income....................... (0.055) (0.032) (0.101) (0.158) (0.006)
Net realized and unrealized gain (loss)
on investments.............................. 0.162 (1.328) 4.726 4.667 1.426
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.107 (1.360) 4.625 4.509 1.420
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from:
Net investment income....................... -- -- -- -- --
Net realized capital gains.................. (0.267) -- (0.625) (0.589) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.267) -- (0.625) (0.589) --
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value.. (0.160) (1.360) 4.000 3.920 1.420
Net asset value:
End of period............................... $ 9.84 $ 9.81 $ 13.84 $ 13.73 $ 13.87
===============================================================================================================================
Total return (d)............................ (0.78)% (12.18)% 47.97% 46.86% 11.41%
Net assets, end of period................... $ 44,487,852 $ 3,394,082 $120,285,342 $14,389,944 $417,383
Ratio of expenses to average
net assets (a) (b).......................... 2.06% 3.20% 1.71% 2.60% 1.19%
Ratio of net investment income
to average net assets (a) (c)............... (1.20)% (2.39)% (1.05)% (1.94)% (0.39)%
Portfolio turnover rate..................... 138.50% 138.50% 105.60% 105.60% 105.60%
Average commission paid per share........... $ 0.059 $ 0.059 $ 0.055 $ 0.055 $ 0.057
</TABLE>
The AAL Mutual Funds Annual Report 87
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
<TABLE>
<CAPTION>
The AAL Mid Cap Stock Fund
Class A Class A Class A Class A
Period Ended Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97
=====================================================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period......................... $ 10.00 $ 10.38 $ 10.92 $ 17.11
Income from Investment Operations
Net investment income....................... (0.044) (0.054) (0.100) (0.119)
Net realized and unrealized gain (loss) on
investments................................. 0.424 0.594 6.290 (1.628)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.380 0.540 6.190 (1.747)
- ---------------------------------------------------------------------------------------------------------------------
Distributions from:
Net investment income....................... -- -- -- --
Net realized capital gains.................. -- -- -- (2.653)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (2.653)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value.. 0.380 0.540 6.190 (4.400)
Net asset value:
End of period............................... $ 10.38 $ 10.92 $ 17.11 $ 12.71
=====================================================================================================================
Total return (d)............................ 3.80% 5.20% 56.59% (11.08)%
Net assets, end of period................... $142,529,469 $220,792,070 $424,974,829 $461,732,660
Ratio of expenses to average net
assets (a) (b).............................. 1.72% 1.54% 1.39% 1.35%
Ratio of net investment income to average
net assets (a) (c).......................... (1.14)% (0.77)% (0.82)% (0.94)%
Portfolio turnover rate..................... 55.49% 88.18% 90.14% 112.60%
Average commission per share................ -- -- $ 0.055 $ 0.060
</TABLE>
88 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class B Class A Class B Class I
Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/98 4/30/98 4/30/98 (e)
===============================================================================
<S> <C> <C> <C>
$13.67 $12.71 $12.69 $14.40
(0.026) (0.037) (0.123) 0.002
(0.954) 4.743 4.656 1.558
- -------------------------------------------------------------------------------
(0.980) 4.706 4.533 1.560
- -------------------------------------------------------------------------------
-- -- -- --
-- (1.486) (1.443) --
- -------------------------------------------------------------------------------
-- (1.486) (1.443) --
- -------------------------------------------------------------------------------
(0.980) 3.220 3.090 1.560
$12.69 $15.93 $15.78 $15.96
===============================================================================
(7.17)% 38.73% 37.41% 10.83%
$3,270,870 $671,479,580 $13,555,367 $1,164,361
2.29% 1.30% 2.33% 0.86%
(1.41)% (0.27)% (1.30)% 0.18%
112.60% 104.73% 104.73% 104.73%
$0.060 $0.060 $0.060 $0.060
</TABLE>
The AAL Mutual Funds Annual Report 89
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
<TABLE>
<CAPTION>
The AAL International Fund
Class A Class A Class B Class A Class B Class I
Period Ended Year Ended Period Ended Year Ended Year Ended Period Ended
4/30/96 4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.......................... $10.00 $11.08 $10.98 $11.37 $11.34 $10.11
Income from Investment Operations
Net investment income........................ 0.046 0.005 -- 0.168 0.126 0.027
Net realized and unrealized
gain (loss) on investments................... 1.058 0.680 0.360 0.564 0.494 1.033
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.104 0.685 0.360 0.732 0.620 1.060
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from:
Net investment income........................ (0.024) (0.335) -- (0.375) (0.333) --
Net realized capital gains................... -- (0.060) -- (0.577) (0.577) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.024) (0.395) -- (0.952) (0.910) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value... 1.080 0.290 0.360 (0.220) (0.290) 1.060
Net asset value:
End of period................................ $11.08 $11.37 $11.34 $11.15 $11.05 $11.17
====================================================================================================================================
Total return (d)............................. 11.07% 6.32% 3.28% 7.34% 6.30% 10.48%
Net assets, end of period.................... $57,117,185 $116,153,782 $2,599,958 $144,152,707 $7,910,025 $460,269
Ratio of expenses
to average net assets (a) (b)................ 2.15% 2.10% 2.94% 1.91% 2.90% 1.19%
Ratio of net investment income
to average net assets (a) (c)................ 0.94% 0.88% (0.03)% 1.36% 0.34% 2.38%
Portfolio turnover rate...................... 1.30% 12.95% 12.95% 19.90% 19.90% 19.90%
Average commission per share................. $0.018 $0.013 $0.013 $0.009 $0.009 $0.009
</TABLE>
90 The AAL Mutual Funds Annual Report
<PAGE>
Page Intentionally Left Blank
The AAL Mutual Funds Annual Report 91
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Capital Growth Fund
<TABLE>
<CAPTION>
Class A Class A Class A
Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96
==================================================================================
<S> <C> <C> <C>
Net asset value:
Beginning of period.......... $14.83 $14.49 $15.56
Income from Investment
Operations
Net investment income........ 0.296 0.274 0.201
Net realized and unrealized
gain (loss) on investments.. (0.287) 1.699 3.756
- ----------------------------------------------------------------------------------
Total from Investment
Operations 0.009 1.973 3.957
- ----------------------------------------------------------------------------------
Distributions from:
Net investment income........ (0.286) (0.298) (0.217)
Net realized capital gains... (0.063) (0.605) (0.510)
- -----------------------------------------------------------------------------------
Total Distributions (0.349) (0.903) (0.727)
- ----------------------------------------------------------------------------------
Net increase (decrease) in
net asset value.............. (0.340) 1.070 3.230
Net asset value:
End of period................ $14.49 $15.56 $18.79
===================================================================================
Total return (d)............. -- 14.37% 25.85%
Net assets, end of period.... $868,850,190 $1,032,168,121 $1,381,352,221
Ratio of expenses to
average net assets (a) (b)... 1.18% 1.17% 1.12%
Ratio of net investment
income to average
net assets (a) (c)........... 2.07% 1.89% 1.16%
Portfolio turnover rate...... 40.60% 33.34% 44.26%
Average commission per
share........................ -- -- $0.053
</TABLE>
92 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class I
Year Ended Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
=============================================================================
<S> <C> <C> <C> <C>
$18.79 $ 20.66 $21.50 $21.45 $26.05
0.125 (0.011) 0.098 0.041 0.015
3.682 0.801 9.264 9.054 3.605
- -----------------------------------------------------------------------------
3.807 0.790 9.362 9.095 3.62
- -----------------------------------------------------------------------------
(0.150) -- (0.083) (0.026) --
(0.947) -- (1.139) (1.139) --
- -----------------------------------------------------------------------------
(1.097) -- (1.222) (1.165) --
- -----------------------------------------------------------------------------
2.710 0.790 8.140 7.930 3.620
$ 21.50 $21.45 $29.64 $29.38 $29.67
=============================================================================
20.55% 3.82% 44.48% 43.25% 13.90%
$1,794,422,211 $11,025,073 $2,766,709,385 $54,900,438 $2,985,982
1.06% 1.89% 0.98% 1.90% 0.58%
0.62% (0.39)% 0.39% (0.58)% 0.52%
24.30% 24.30% 17.96% 17.96% 17.96%
$0.057 $0.057 $0.054 $0.054 $0.054
</TABLE>
The AAL Mutual Funds Annual Report 93
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Equity Income Fund
<TABLE>
<CAPTION>
Class A Class A Class A Class A
Period Ended Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96 4/30/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.........$ 10.00 $ 9.95 $ 9.47 $ 10.90
Income from Investment
Operations
Net investment income....... 0.022 0.338 0.360 0.390
Net realized and
unrealized gain (loss)
on investments.............. (0.072) (0.498) 1.420 0.455
- ------------------------------------------------------------------------------------
Total from Investment
Operations (0.050) (0.160) 1.780 0.845
====================================================================================
Distributions from:
Net investment income....... -- (0.320) (0.350) (0.405)
Net realized capital gains.. -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions -- (0.320) (0.350) (0.405)
====================================================================================
Net increase (decrease) in
net asset value............. (0.050) (0.480) 1.430 0.440
Net asset value:
End of period...............$ 9.95 $ 9.47 $ 10.90 $ 11.34
====================================================================================
Total return (d)............ (0.50)% (1.51)% 18.90% 7.88%
Net assets, end of period...$15,423,861 $70,861,404 $114,460,386 $134,196,399
Ratio of expenses to
average net assets (a) (b).. 1.60% 1.19% 1.20% 1.15%
Ratio of net investment
income to average net
assets (a) (c).............. 5.12% 4.08% 3.58% 3.57%
Portfolio turnover rate..... -- 24.65% 21.79% 5.14%
Average commission per share -- -- $ 0.056 $ 0.060
</TABLE>
94 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class B Class A Class B Class I
Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/98 4/30/98 4/30/98(e)
- ---------------------------------------------------
<S> <C> <C> <C>
$ 11.40 $ 11.34 $ 11.37 $ 13.14
0.051 0.275 0.194 0.077
(0.056) 3.436 3.406 1.160
- ---------------------------------------------------
(0.005) 3.711 3.600 1.237
===================================================
(0.025) (0.291) (0.210) (0.057)
-- (0.450) (0.450) --
- ---------------------------------------------------
(0.025) (0.741) (0.660) (0.057)
===================================================
(0.030) 2.970 2.940 1.180
$ 11.37 $ 14.31 $ 14.31 $ 14.32
===================================================
(0.04)% 33.50% 32.42% 9.34%
$494,969 $197,653,829 $3,818,315 $7,087,176
1.99% 1.11% 2.04% 0.68%
2.36% 2.17% 0.96% 2.10%
5.14% 64.00% 64.00% 64.00%
$ 0.060 $ 0.060 $ 0.060 $ 0.060
</TABLE>
The AAL Mutual Funds Annual Report 95
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
<TABLE>
<CAPTION>
The AAL Balanced Fund
Class A Class B Class I
Period Ended Period Ended Period Ended
4/30/98(e) 4/30/98(e) 4/30/98(e)
===========================================================================================================
<S> <C> <C> <C>
Net asset value:
Beginning of period ............................................ $ 10.00 $ 10.00 $ 10.00
Income from Investment Operations
Net investment income .......................................... 0.041 0.034 0.042
Net realized and unrealized gain (loss) on investments ......... 0.796 0.776 0.775
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.837 0.810 0.817
==========================================================================================================
Distributions From:
Net investment income .......................................... (0.027) (0.020) (0.027)
Net realized capital gains ..................................... -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.027) (0.020) (0.027)
==========================================================================================================
Net increase (decrease) in net asset value ..................... 0.810 0.790 0.790
Net asset value:
End of period .................................................. $ 10.81 $ 10.79 $ 10.79
==========================================================================================================
Total return (d) ............................................... 8.37% 8.10% 8.17%
Net assets, end of period ...................................... $27,674,985 $2,325,727 $1,076,355
Ratio of expenses to average net assets (a) (b) ................ 1.37% 2.11% 1.95%
Ratio of net investment income to average net assets (a) (c) ... 2.19% 1.45% 1.73%
Portfolio turnover rate ........................................ 11.52% 11.52% 11.52%
Average commission per share ................................... $0.030 $0.030 $0.030
</TABLE>
96 The AAL Mutual Funds Annual Report
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL High Yield Bond Fund
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class I
Period Ended Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period......................... $10.00 $10.00 $9.88 $9.88 $10.29
Income from Investment Operations
Net investment income....................... 0.270 0.251 0.919 0.843 0.312
Net realized and unrealized gain (loss)
on investments.............................. (0.120) (0.120) 0.528 0.528 0.020
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.150 0.131 1.447 1.371 0.332
- --------------------------------------------------------------------------------------------------------------------
Distributions From:
Net investment income....................... (0.270) (0.251) (0.919) (0.843) (0.312)
Net realized capital gains.................. -- -- (0.098) (0.098) --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.270) (0.251) (1.017) (0.941) (0.312)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value.. (0.120) (0.120) 0.430 0.430 0.020
Net asset value:
End of period............................... $9.88 $9.88 $10.31 $10.31 $10.31
====================================================================================================================
Total return (d)............................ 1.51% 1.31% 15.12% 14.27% 3.28%
Net assets, end of period................... $44,680,637 $2,660,309 $100,828,858 $9,714,463 $178,730
Ratio of expenses to average
net assets (a) (b).......................... 1.00% 1.75% 0.99% 1.74% 0.75%
Ratio of net investment income
to average net assets (a) (c)............... 9.11% 8.66% 8.94% 8.22% 9.53%
Portfolio turnover rate..................... 36.90% 36.90% 112.37% 112.37% 112.37%
</TABLE>
The AAL Mutual Funds Annual Report 97
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
<TABLE>
<CAPTION>
The AAL Municipal Bond Fund
Class A Class A Class A
Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96
===============================================================================================================
<S> <C> <C> <C>
Net asset value:
Beginning of period......................................... $10.99 $10.56 $10.69
Income from Investment Operations
Net investment income....................................... 0.539 0.523 0.521
Net realized and unrealized gain (loss) on investments...... (0.410) 0.186 0.300
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.129 0.709 0.821
===============================================================================================================
Distributions From:
Net investment income....................................... (0.539) (0.523) (0.521)
Net realized capital gains.................................. (0.020) (0.056) (0.080)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.559) (0.579) (0.601)
===============================================================================================================
Net increase (decrease) in net asset value.................. (0.430) 0.130 0.220
Net asset value
End of period............................................... $10.56 $10.69 $10.91
===============================================================================================================
Total return (d)............................................ 1.04% 7.01% 7.74%
Net assets, end of period................................... $370,568,847 $377,764,861 $412,777,320
Ratio of expenses to average net assets (a) (b)............. 0.99% 0.98% 0.95%
Ratio of net investment income to average
net assets (a) (c).......................................... 4.87% 5.01% 4.69%
Portfolio turnover rate..................................... 10.15% 172.49% 130.52%
</TABLE>
98 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class I
Year Ended Period Ended Year Ended Year Ended Year Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
================================================================================
<S> <C> <C> <C> <C>
$10.91 $11.02 $10.92 $10.92 $11.59
0.521 0.137 0.519 0.423 0.180
0.194 (0.100) 0.613 0.613 (0.190)
- --------------------------------------------------------------------------------
0.715 0.037 1.132 1.036 (0.010)
================================================================================
(0.521) (0.137) (0.519) (0.423) (0.180)
(0.184) -- (0.133) (0.133) --
- --------------------------------------------------------------------------------
(0.705) (0.137) (0.652) (0.556) (0.180)
================================================================================
0.010 (0.100) 0.480 0.480 (0.190)
$10.92 $10.92 $11.40 $11.40 $11.40
================================================================================
6.64% 0.34% 10.50% 9.58% (0.09)%
$421,668,316 $764,783 $467,145,934 $3,609,800 $50,091
0.89% 1.69% 0.85% 1.74% 0.60%
4.69% 4.09% 4.55% 3.67% 4.79%
119.79% 119.79% 139.18% 139.18% 139.18%
</TABLE>
The AAL Mutual Funds Annual Report 99
<PAGE>
Financial Highlights - continued PER SHARE INFORMATION
The AAL Bond Fund
<TABLE>
<CAPTION>
Class A Class A Class A
Year Ended Year Ended Year Ended
4/30/94 4/30/95 4/30/96
===============================================================================================================
<S> <C> <C> <C>
Net asset value:
Beginning of period............................................ $10.61 $9.69 $ $9.61
Income from Investment Operations
Net investment income.......................................... 0.584 0.580 0.584
Net realized and unrealized gain (loss) on investments......... (0.660) (0.078) 0.010
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.076) 0.502 0.594
- ---------------------------------------------------------------------------------------------------------------
Distributions From:
Net investment income.......................................... (0.584) (0.580) (0.584)
Net realized capital gains..................................... (0.260) (0.002) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.844) (0.582) (0.584)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value..................... (0.920) (0.080) 0.010
Net asset value:
End of period.................................................. $9.69 $9.61 $9.62
===============================================================================================================
Total return (d)............................................... (0.99)% 5.47% 6.18%
Net assets, end of period...................................... $442,962,543 $429,355,163 $430,846,686
Ratio of expenses to average net assets (a) (b)................ 1.02% 1.03% 1.01%
Ratio of net investment income to average net assets (a) (c)... 5.61% 6.12% 5.89%
Portfolio turnover rate........................................ 27.75% 44.57% 125.77%
</TABLE>
100 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class I
Year Ended Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
====================================================================
<S> <C> <C> <C> <C>
$9.62 $9.71 $9.63 $9.64 $10.06
0.595 0.175 0.570 0.480 0.197
0.010 (0.070) 0.360 0.350 (0.070)
- --------------------------------------------------------------------
0.605 0.105 0.930 0.830 0.127
- --------------------------------------------------------------------
(0.595) (0.175) (0.570) (0.480) (0.197)
-- -- -- -- --
- --------------------------------------------------------------------
(0.595) (0.175) (0.570) (0.480) (0.197)
- --------------------------------------------------------------------
0.010 (0.070) 0.360 0.350 (0.070)
$9.63 $9.64 $9.99 $9.99 $9.99
====================================================================
6.43% 0.96% 9.86% 8.75% 1.24%
$389,342,652 $390,959 $353,405,552 $1,431,449 $29,249,736
0.98% 1.86% 0.95% 1.92% 0.56%
6.10% 5.51% 5.77% 4.74% 6.29%
212.49% 212.49% 483.76% 483.76% 483.76%
</TABLE>
The AAL Mutual Funds Annual Report 101
<PAGE>
Financial Highlights--continued PER SHARE INFORMATION
The AAL Money Market Fund
<TABLE>
<CAPTION>
Class A Class A Class A Class A
Year Ended Year Ended Year Ended Year Ended
4/30/93 4/30/94 4/30/95 4/30/96
==============================================================================================================================
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period......................................... $1.00 $1.00 $1.00 $ 1.00
Income from Investment Operations
Net investment income....................................... 0.025 0.019 0.038 0.048
Net realized and unrealized gain (loss) on investments...... -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations............................ 0.025 0.019 0.038 0.048
- -------------------------------------------------------------------------------------------------------------------------------
Distributions From:
Net investment income....................................... (0.025) (0.019) (0.038) (0.048)
Net realized capital gains.................................. -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions......................................... (0.025) (0.019) (0.038) (0.048)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value................. -- -- -- --
Net asset value:
End of period............................................... $1.00 $1.00 $1.00 $1.00
================================================================================================================================
Total return (d)............................................ 2.53% 1.95% 3.92% 4.94%
Net assets, end of period................................... $83,274,493 $65,008,303 $70,210,675 $116,014,091
Ratio of expenses to average net assets (a) (b)............. 1.13% 1.26% 1.17% 0.83%
Ratio of net investment income to average
net assets (a) (c).......................................... 2.53% 2.00% 3.95% 4.89%
Portfolio turnover rate..................................... N/A N/A N/A N/A
</TABLE>
102 The AAL Mutual Funds Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class I
Year Ended Period Ended Year Ended Year Ended Period Ended
4/30/97 4/30/97 4/30/98 4/30/98 4/30/98(e)
===============================================================================
<S> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00
0.051 0.013 0.050 0.038 0.017
-- -- -- -- --
- -------------------------------------------------------------------------------
0.051 0.013 0.050 0.038 0.017
- -------------------------------------------------------------------------------
(0.051) (0.013) (0.050) (0.038) (0.017)
-- -- -- -- --
- -------------------------------------------------------------------------------
(0.051) (0.013) (0.050) (0.038) (0.017)
- -------------------------------------------------------------------------------
-- -- -- -- --
$1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================
5.21% 1.32% 5.12% 4.26% 1.67%
$189,616,902 $569,097 $240,737,453 $1,200,622 $234,492
0.55% 1.78% 0.68% 1.65% 0.67%
4.91% 3.81% 4.98% 4.02% 5.11%
N/A N/A N/A N/A N/A
</TABLE>
The AAL Mutual Funds Annual Report 103
<PAGE>
Financial Highlights - continued
(a) Calculated on an annualized basis.
(b) Computed after giving effect to Adviser's expense limitation undertaking.
If the Funds had paid all of their expenses, the ratios would have been
as follows:
<TABLE>
<CAPTION>
Class A
Year Year Year Year Year
Ended Ended Ended Ended Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
=======================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Small Cap Stock
Fund.......................... -- -- -- -- 2.06%
The AAL Mid Cap Stock Fund..... -- 1.73% 1.54% 1.39% 1.35%
The AAL International Fund..... -- -- -- 2.32% 2.10%
The AAL Capital Growth Fund.... 1.20% 1.18% 1.17% 1.12% 1.06%
The AAL Equity Income Fund..... -- 2.91% 1.19% 1.20% 1.15%
The AAL Balanced Fund.......... -- -- -- -- --
The AAL High Yield Bond
Fund.......................... -- -- -- -- 1.28%
The AAL Municipal Bond Fund.... 1.00% 0.99% 0.98% 0.95% 0.89%
The AAL Bond Fund.............. 1.03% 1.02% 1.03% 1.01% 0.98%
The AAL Money Market Fund...... 1.27% 1.51% 1.42% 1.28% 1.10%
</TABLE>
(c) If the Funds had paid all of their expenses the ratios would have been as
follows:
<TABLE>
<CAPTION>
Class A
Year Year Year Year Year
Ended Ended Ended Ended Ended
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
=======================================================================================
<S> <C> <C> <C> <C> <C>
The AAL Small Cap Stock
Fund.......................... -- -- -- -- (1.20)%
The AAL Mid Cap Stock Fund..... -- (1.14)% (0.77)% (0.82)% (0.94)%
The AAL International Fund..... -- -- -- 0.77% 0.88%
The AAL Capital Growth Fund.... 2.15% 2.07% 1.89% 1.16% 0.62%
The AAL Equity Income Fund..... -- 3.81% 4.08% 3.58% 3.57%
The AAL Balanced Fund.......... -- -- -- -- --
The AAL High Yield Bond
Fund.......................... -- -- -- -- 8.83%
The AAL Municipal Bond Fund.... 5.32% 4.87% 5.01% 4.69% 4.69%
The AAL Bond Fund.............. 6.35% 5.61% 6.12% 5.89% 6.10%
The AAL Money Market Fund...... 2.38% 1.75% 3.70% 4.46% 4.36%
</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 operation December 29, 1997.
104 The AAL Mutual Funds Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Class B Class A Class B Class I
Period Year Year Period
Ended Ended Ended Ended
4/30/97 4/30/98 4/30/98 4/30/98
-------- -------- -------- --------
<S> <C> <C> <C>
3.21% 1.71% 2.60% 1.19%
2.29% 1.30% 2.33% 0.86%
2.94% 1.91% 2.90% 1.19%
1.89% 0.98% 1.90% 0.58%
1.99% 1.11% 2.04% 0.68%
-- 1.63% 2.50% 1.95%
2.00% 1.18% 2.05% 0.75%
1.69% 0.85% 1.74% 0.60%
1.86% 0.95% 1.92% 0.56%
3.54% 1.04% 2.01% 1.43%
Class B Class A Class B Class I
Year Year Year Year
Ended Ended Ended Ended
4/30/97 4/30/98 4/30/98 4/30/98
-------- ------- -------- --------
(2.40)% (1.05)% (1.94)% (0.39)%
(1.41)% (0.27)% (1.30)% 0.18%
(0.03)% 1.36% 0.34% 2.38%
(0.39)% 0.39% (0.58)% 0.52%
2.36% 2.17% 0.96% 2.10%
-- 1.93% 1.06% 1.73%
8.41% 8.75% 7.90% 9.53%
4.09% 4.55% 3.67% 4.79%
5.51% 5.77% 4.74% 6.29%
2.05% 4.62% 3.67% 4.36%
</TABLE>
The AAL Mutual Funds Semi-Annual Report 105
<PAGE>
Report of Independent Accountants
100 East Wisconsin Avenue Telephone 414 276 9500
Suite 1500
Milwaukee, WI 53202
Price Waterhouse LLP [LOGO PRICE WATERHOUSE]
To the Shareholders and Trustees of
The AAL Mutual Funds
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The AAL 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 High Yield Bond Fund,
The AAL Municipal Bond Fund, The AAL Bond Fund and The AAL Money Market Fund
(ten of the portfolios constituting The AAL Mutual Funds, the "Funds") at April
30, 1998, the results of each of their operations, the changes in each of their
net assets, and the financial highlights for the periods indicated, all in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 1998, by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
May 15, 1998
106 The AAL Mutual Funds Annual Report
<PAGE>
A Note on Forward-Looking Statements
Except for the historical information contained in the foregoing reports on each
of the Funds, the matters discussed in those reports may constitute
forward-looking statements that are made pursuant to the safe harbor provisions
of the Securities Litigation Reform Act of 1995. These include discussion about
each portfolio manager's predictions, assessments, analyses and outlooks for
relevant securities and investment markets, market sectors, industries and
individual stocks or other investment securities. These statements involve risks
and uncertainties. In addition to the general risks described for each Fund in
its current prospectus, other factors bearing on these reports include the
accuracy of each portfolio manager's forecasts and predictions, the
appropriateness of the investment strategies designed by the portfolio managers
to capitalize on their forecasts and predictions should they prove true, and the
ability of the portfolio managers to implement their strategies efficiently and
effectively. Any one or more of these factors, as well as other risks affecting
the securities markets and investment instruments generally, could cause the
actual results of any Fund to differ materially from the projected results for
the Fund, either on an overall basis or on a relative basis as compared to the
benchmark index selected for the particular Fund.
The AAL Mutual Funds Annual Report 107
<PAGE>
Board of Trustees
John H. Pender - Chairman of the Board
Ronald G. Anderson
F. Gregory Campbell
Richard L. Gady
John O. Gilbert
D.W. Russler
Lawrence M. Woods
Officers
Ronald G. Anderson - President
Terrance P. Gallagher - Treasurer
Charles D. Gariboldi, Jr. - Assistant Treasurer
Robert G. Same - Vice President & Secretary
Joseph E. Wreschnig - Assistant Secretary
Investment Adviser & Distributor
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
Sub-Adviser (The AAL International Fund Only)
Societe Generale Asset Management Corp.
1221 Avenue of the Americas
New York, NY 10020
Custodian Transfer Agent & Disbursing Agent
Firstar Trust Company
615 East Michigan Street
P.O. Box 2981
Milwaukee, WI 53201-2981
Custodian (The AAL International Fund Only)
The Chase Manhattan Bank, N.A.
Chase Metro Tech Center
Brooklyn, NY 11245
Legal Counsel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Independent Accountants
Price Waterhouse LLP
Suite 1500
100 East Wisconsin Avenue
Milwaukee, WI 53202
This report is submitted for the information of shareholders of The AAL Mutual
Funds. It is not authorized for distribution to prospective investors unless
preceded or accompanied by the current prospectus for The AAL Mutual Funds which
contains more complete information about the Funds, including investment
policies, charges and expenses.
[AAL LOGO]
The AAL Mutual Funds
---------------------
222 West College Avenue, Appleton, WI 54919-0007
800-553-6319
World Wide Web: http://www.aal.org
e-mail address: [email protected]
C-50032AR 6/98
