As filed with the Securities and Exchange Commission on
April 30, 1997
Registration No. 33-13754
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO.
------
POST-EFFECTIVE AMENDMENT NO. 20 X
------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 20 X
------
ADVANCE CAPITAL I, INC.
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(Exact Name of Registrant as Specified in its Charter)
One Towne Square, Suite 444, Southfield, Michigan 48076
- ------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (810) 350-8543
----------------
John C. Shoemaker, President
Advance Capital I, Inc., One Towne Square, Suite 444, Southfield, Michigan 48076
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering April 30, 1997
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It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b) of Rule 485
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph a(ii)
on (date) pursuant to paragraph a(ii) of rule 485
The Registrant has previously registered an indefinite number of
securities under the Securities Act of 1933, pursuant to (a)(1) of Rule 24f-2.
The Rule 24f-2 Notice for the Registrant's fiscal year ending December 31, 1996
was filed on February 20, 1997.
<PAGE>
CROSS REFERENCE SHEET
Form N-1A Part A Item Prospectus Caption
- --------------------- --------------------
1. Cover Page Cover Page
2. Synopsis Inapplicable
3. Condensed Financial Expense Table and Selected Financial
Information
4. General Description of Investment Information - Registrant
Investment Objectives - Growth
Funds; Investment Objectives -
Income Funds; Investment Policies of
the Funds; Other Investment Policies;
Investment Risks of Lower Rated
Securities; Investment Limitations;
Description of Capital Stock
5. Management of the Fund Distribution Plan; Management of the
Company; Expenses of the Company
6. Capital Stock and Other Investing in the Funds; Redeeming
Shares; Tax Information; Description
of Capital Stock; Miscellaneous
7. Purchase of Securities Investing in the Funds;
Being Offered Redeeming Shares; Distribution Plan
8. Redemption or Repurchase Redeeming Shares
9. Pending Legal Proceedings Inapplicable
<PAGE>
ADVANCE CAPITAL I, INC. P.O. Box 3144
AN INVESTMENT COMPANY WITH FIVE FUNDS Southfield, MI 48037
Michigan (810) 350-8543
Toll Free (800) 345-4783
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PROSPECTUS
ADVANCE CAPITAL I, INC. (the COMPANY) is an open-end,
diversified management investment company (a mutual fund)
offering shares in five investment portfolios.
INVESTMENT OBJECTIVES:
THE GROWTH PORTFOLIOS:
The EQUITY GROWTH FUND seeks to provide long-term growth of
capital through investment primarily in common stocks of small,
rapidly growing companies. Total return will consist primarily
of capital appreciation (or depreciation). Current income is
not an objective of the EQUITY GROWTH FUND. The BALANCED FUND
seeks to provide capital appreciation, current income, and
preservation of capital by investing in a diversified portfolio
of common stocks and bonds. Common stocks are generally
expected to represent approximately 60% of total assets, and
fixed income securities, including cash reserves, will represent
the remaining assets. There is no assurance that either Fund
will achieve its investment objective.
THE INCOME PORTFOLIOS:
The BOND FUND, the LONG TERM INCOME FUND and the RETIREMENT
INCOME FUND all seek to provide investors with high current
income. Each Fund invests in fixed income securities within
prescribed maturity and credit quality standards. There is no
assurance that any of these Funds will achieve its investment
objective. Up to 33 percent of the RETIREMENT INCOME FUND may
be invested in fixed income securities which carry quality
ratings below investment grade from the major rating agencies.
Securities with such ratings are commonly referred to as "high
yield bonds" or "junk bonds" and are considered speculative by
these agencies. See "Investment Risks of Lower Rated
Securities".
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THIS PROSPECTUS PROVIDES KEY INFORMATION YOU NEED TO KNOW ABOUT
THE COMPANY BEFORE INVESTING. WHILE THE PROSPECTUS IS DESIGNED
TO BE CONCISE AND STRAIGHTFORWARD, YOU MAY HAVE QUESTIONS OR
REQUIRE ADDITIONAL INFORMATION. PLEASE DO NOT HESITATE TO
CONTACT US DIRECTLY.
SET THIS INFORMATION ASIDE FOR FUTURE REFERENCE.
- -----------------------------------------------------------------
Additional information about the COMPANY, contained in the
Statement of Additional Information, has been filed with the
Securities and Exchange Commission and is available upon request
without charge by writing to the COMPANY at the above address or
by calling (810) 350-8543 or (800) 345-4783. The Statement of
Additional Information bears the same date as this Prospectus
and is incorporated by reference in its entirety into this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
April 30, 1997
TABLE OF CONTENTS
Page
----
THE EXPENSE TABLE....................................... 2
FINANCIAL HIGHLIGHTS.................................... 2
GENERAL INFORMATION..................................... 5
INVESTMENT INFORMATION.................................. 5
Investment Objectives - Growth Funds............... 5
Investment Objectives - Income Funds............... 5
Investment Policies of the Funds................... 6
Other Investment Policies.......................... 9
Investment Risks of Lower Rated Securities......... 11
Investment Limitations............................. 12
DISTRIBUTION OF SHARES.................................. 13
NET ASSET VALUE......................................... 13
INVESTING IN THE FUNDS.................................. 13
Purchases By Mail.................................. 13
Purchases By Wire.................................. 13
Minimum Investment Required........................ 14
What Shares Cost................................... 14
Certificates and Confirmations..................... 14
Dividends.......................................... 14
Capital Gains...................................... 14
TRANSFERRING SHARES..................................... 14
REDEEMING SHARES........................................ 15
Written Requests................................... 15
Signatures......................................... 15
Telephone Requests................................. 15
Receiving Payment.................................. 16
Redemption Before Purchase Instruments Clear....... 16
Accounts With Low Balances......................... 16
Redemption In Kind................................. 16
DISTRIBUTION PLAN....................................... 16
MANAGEMENT OF THE COMPANY............................... 17
EXPENSES OF THE COMPANY................................. 18
TAX INFORMATION......................................... 18
DESCRIPTION OF CAPITAL STOCK............................ 19
MISCELLANEOUS........................................... 19
<PAGE>
THE EXPENSE TABLE
The purpose of the Expense Table is to assist in
understanding the various fees and expenses, both direct and
indirect, that will accompany an investment in the Advance
Capital I, Inc. Equity Growth, Bond, Balanced, Long Term Income
and Retirement Income Funds (the FUNDS). This information may
be useful when comparing these FUNDS to other investment
alternatives. See MANAGEMENT OF THE COMPANY and EXPENSES OF THE
COMPANY for more information.
<TABLE>
<CAPTION>
EQUITY LONG TERM RETIREMENT
GROWTH BOND BALANCED INCOME INCOME
------ ---- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
and Reinvested Dividends
(as a percentage of offering price).. 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price).......... 0% 0% 0% 0% 0%
Redemption Fee........................ None None None None None
Exchange Fee.......................... None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets):
Management Fees....................... .70% .40% .70% .40% .50%
12b-1 Fees (A)........................ .25% .00% .25% .00% .25%
Other Expenses........................ .14% .15% .11% .24% .07%
---- ---- ---- ---- ----
Total Fund Operating Expenses......... 1.09% .55% 1.06% .64% .82%
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<C> <C> <C> <C> <C> <C>
Example:
You would pay the following expenses $ 11 $ 6 $ 11 $ 7 $ 8 1 Year
on a $1,000 investment, assuming $ 35 $ 18 $ 34 $ 20 $ 26 3 Years
(1) a 5% annual return and (2) $ 60 $ 31 $ 58 $ 36 $ 45 5 Years
redemption at the end of each period. $133 $ 69 $129 $ 80 $100 10 Years
</TABLE>
(A) Annual 12b-1 fees of .25% have been authorized for all FUNDS
and suspended indefinitely in the Bond and Long Term Income
Funds. (See DISTRIBUTION PLAN for additional information)
THE AMOUNTS SHOWN IN THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The financial highlights for the years ended December 31, 1996 and 1995
have been audited by Price Waterhouse LLP, independent accountants, whose
report covering those years is included in the Statement of Additional
Information. The financial highlights for the periods ended December 31, 1987
through December 31, 1994 were audited by other independent accountants whose
reports for those periods expressed unqualified opinions.
2
<PAGE>
The tables below give you information about each fund's financial history.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------
EQUITY GROWTH FUND(c) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 (b)
----- ----- ----- ----- ----- ----- ----- ----- ----- --------
Selected Per-Share Data
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.53 $9.08 $9.46 $9.94 $9.83 $8.89 $9.79 $8.79 $7.46 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income
(loss) (0.07) (0.03) (0.03) 0.12 0.10 0.14 0.19 0.26 0.24 0.11
Net realized and unrealized
gain (loss) on investments 2.26 3.48 (0.35) 0.07 0.11 1.78 (0.90) 1.85 1.47 (2.54)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 2.19 3.45 (0.38) 0.19 0.21 1.92 (0.71) 2.11 1.71 (2.43)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income 0.00 0.00 0.00 (0.12) (0.10) (0.14) (0.19) (0.26) (0.24) (0.11)
Net realized gain on
investments 0.00 0.00 0.00 (0.55) 0.00 (0.84) 0.00 (0.85) (0.14) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions 0.00 0.00 0.00 (0.67) (0.10) (0.98) (0.19) (1.11) (0.38) (0.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period $14.72 $12.53 $9.08 $9.46 $9.94 $9.83 $8.89 $9.79 $8.79 $7.46
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 17.48% 38.00% -4.02% 2.13% 2.22% 20.94% -7.47% 23.81% 22.48% -50.23% (a)
Ratios and Supplemental Data
Net assets, end of period
(in thousands) $38,767 $25,625 $12,634 $7,577 $7,094 $6,275 $4,310 $2,405 $692 $122
Ratio of expenses to
average net assets 1.09% 1.12% 1.21% 1.16% 1.22% 1.38% 1.46% 1.31% 0.74% 0.58% (a)
Ratio of net investment
income (loss) to average
net assets -0.50% -0.29% -0.30% 1.27% 1.05% 1.37% 2.04% 2.59% 2.75% 3.30% (a)
Portfolio turnover rate 24.75% 13.86% 18.05% 135.55% 96.05% 86.48% 81.13% 112.31% 156.56% 165.87% (a)
Average commission rate
per share (d) $0.0261
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------
BOND FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 (b)
----- ----- ----- ----- ----- ----- ----- ----- ----- --------
Selected Per-Share Data
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.79 $9.61 $10.82 $10.51 $10.52 $9.91 $9.90 $9.54 $9.83 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.70 0.70 0.71 0.72 0.70 0.74 0.77 0.78 0.80 0.29
Net realized and unrealized
gain (loss) on investments (0.42) 1.18 (1.21) 0.45 0.01 0.62 0.02 0.36 (0.28) (0.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.28 1.88 (0.50) 1.17 0.71 1.36 0.79 1.14 0.52 0.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income (0.70) (0.70) (0.71) (0.72) (0.70) (0.74) (0.78) (0.78) (0.81) (0.36)
Net realized gain on
investments 0.00 0.00 0.00 (0.14) (0.02) (0.01) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.70) (0.70) (0.71) (0.86) (0.72) (0.75) (0.78) (0.78) (0.81) (0.36)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period $10.37 $10.79 $9.61 $10.82 $10.51 $10.52 $9.91 $9.90 $9.54 $9.83
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 2.81% 20.15% -4.64% 11.48% 7.04% 14.26% 8.52% 12.64% 4.87% 5.59% (a)
Ratios and Supplemental Data
Net assets, end of period
(in thousasands) $4,430 $4,527 $3,999 $4,741 $5,793 $2,439 $1,488 $778 $565 $143
Ratio of expenses to
average net assets 0.55% 0.55% 0.60% 0.61% 0.75% 0.85% 0.87% 0.86% 0.45% 0.29% (a)
Ratio of net investment
income to average net assets 6.71% 6.80% 7.06% 6.57% 6.69% 7.36% 8.00% 7.93% 8.14% 7.25% (a)
Portfolio turnover rate 19.77% 6.69% 21.92% 35.99% 38.22% 25.47% 7.41% 2.25% 63.69% 0.00% (a)
</TABLE>
(a) Annualized.
(b) The period August 5, 1987 (commencement of operations) to December 31, 1987.
(c) Effective December 29, 1993, the investment objectives of the Equity Growth
Fund were changed by shareholder vote and T. Rowe Price Associates, Inc.
became the sub-investment adviser with the primary responsibility for the
daily security investment decisions.
(d) For fiscal years beginning after September 1, 1995, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged.
3
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------
BALANCED FUND (c) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 (b)
----- ----- ----- ----- ----- ----- ----- ----- ----- --------
Selected Per-Share Data
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.57 $9.97 $10.58 $10.36 $10.38 $9.55 $10.10 $9.35 $8.33 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.41 0.35 0.32 0.29 0.33 0.39 0.44 0.48 0.43 0.18
Net realized and unrealized
gain (loss) on investments 1.37 2.75 (0.61) 0.22 (0.02) 1.39 (0.55) 1.24 1.01 (1.60)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 1.78 3.10 (0.29) 0.51 0.31 1.78 (0.11) 1.72 1.44 (1.42)
------ ------ ------- ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income (0.41) (0.35) (0.32) (0.29) (0.33) (0.39) (0.44) (0.47) (0.42) (0.25)
Net realized gain on
investments (0.26) (0.15) 0.00 0.00 0.00 (0.56) 0.00 (0.50) 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.67) (0.50) (0.32) (0.29) (0.33) (0.95) (0.44) (0.97) (0.42) (0.25)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period $13.68 $12.57 $9.97 $10.58 $10.36 $10.38 $9.55 $10.10 $9.35 $8.33
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 14.48% 31.53% -2.72% 4.97% 3.07% 18.32% -1.08% 18.59% 17.52% -14.98% (a)
Ratios and Supplemental Data
Net assets, end of period
(in thousands) $75,202 $59,299 $44,221 $46,690 $42,440 $22,677 $14,128 $3,948 $745 $243
Ratio of expenses to
average net assets 1.06% 1.07% 1.10% 1.08% 1.13% 1.38% 1.35% 1.29% 0.53% 0.51% (a)
Ratio of net investment
income to average net assets 3.17% 3.11% 3.18% 2.77% 3.24% 3.75% 4.56% 4.68% 4.62% 5.08% (a)
Portfolio turnover rate 12.79% 22.72% 34.97% 101.29% 42.39% 50.94% 46.72% 83.79% 106.94% 90.43% (a)
Average commission rate
per share (d) $0.0278
</TABLE>
<TABLE>
<CAPTION>
LONG TERM INCOME FUND 1996 1995 1994 1993 RETIREMENT INCOME FUND 1996 1995 1994 1993
----- ----- ----- ----- ----- ----- ----- -----
Selected Per-Share Data Selected Per-Share Data
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
Net asset value, Net Asset Value,
beginning of year $10.78 $9.20 $10.60 $10.00 beginning of year $10.51 $9.22 $10.54 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Income from investment Income from investment
operations operations
Net investment income 0.70 0.70 0.72 0.74 Net investment income 0.75 0.76 0.76 0.82
Net realized and un- Net realized and un-
realized gain (loss) realized gain (loss)
on investments (0.51) 1.58 (1.40) 0.77 on investments (0.31) 1.29 (1.32) 0.61
------ ------ ------ ------ ------ ------ ------ ------
Total from investment Total from investment
operations 0.19 2.28 (0.68) 1.51 operations 0.44 2.05 (0.56) 1.43
------ ------ ------ ------ ------ ------ ------ ------
Less distributions Less distributions
Net investment income (0.70) (0.70) (0.72) (0.74) Net investment income (0.75) (0.76) (0.76) (0.82)
Net realized gain on Net realized gain on
investments 0.00 0.00 0.00 (0.17) investments 0.00 0.00 0.00 (0.07)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.70) (0.70) (0.72) (0.91) Total distributions (0.75) (0.76) (0.76) (0.89)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of Net asset value, end of
year $10.27 $10.78 $9.20 $10.60 year $10.20 $10.51 $9.22 $10.54
====== ====== ====== ====== ====== ====== ====== ======
Total Return 2.09% 25.57% -6.53% 14.43% Total Return 4.54% 22.96% -5.34% 13.92%
Ratios and Supplemental Ratios and Supplemental
Data Data
Net assets, end of year Net assets, end of year
(in thousands) $1,395 $1,450 $1,163 $1,079 (in thousands) $170,799 $139,299 $84,162 $47,343
Ratio of expenses to Ratio of expenses to
average net assets 0.64% 0.63% 0.63% 0.64% average net assets 0.82% 0.84% 0.88% 0.88%
Ratio of net investment Ratio of net investment
income to average net income to average net
assets 6.86% 6.93% 7.37% 6.60% assets 7.45% 7.64% 7.89% 7.41%
Portfolio turnover rate 6.38% 1.74% 15.39% 75.72% Portfolio turnover rate 8.34% 15.63% 12.27% 37.59%
</TABLE>
(a) Annualized.
(b) The period August 5, 1987 (commencement of operations) to December 31, 1987.
(c) Effective December 29, 1993, T. Rowe Price Associates, Inc. became the
sub-investment adviser with the primary responsibility for the daily equity
investment decisions for the Balanced Fund.
(d) For fiscal years beginning after September 1, 1995, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged.
4
<PAGE>
GERERAL INFORMATION
Advance Capital I, Inc. (the COMPANY) is a mutual fund
consisting of five separate portfolios. Each FUND has a
specific investment objective and may be used independently or
in combination with the other FUNDS, to serve different
investment needs. The minimum initial aggregate investment in
the COMPANY is $10,000 ($2,000 for IRA Accounts). The initial
investment may be distributed among any of the FUNDS as long as
a minimum $1,000 investment is maintained in each FUND selected.
COMPANY shares are sold, exchanged and redeemed at net asset
value. There are no sales commissions or deferred sales charges
imposed by the COMPANY.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES - GROWTH FUNDS:
The EQUITY GROWTH FUND seeks to provide long-term growth of
capital through investment primarily in common stocks of small,
rapidly growing companies. Total return will consist primarily
of capital appreciation (or depreciation). Current income is
not an objective of the EQUITY GROWTH FUND.
The EQUITY GROWTH FUND'S share price will fluctuate with
changing market conditions, and any investment in it may be
worth more or less when redeemed than when purchased. The Fund
should not be relied upon as a complete investment program, nor
used to play short-term swings in the stock market. In
addition, stocks of small companies generally are subject to
more abrupt or erratic price movements than securities of larger
companies or of the market averages in general. There is no
assurance that the Fund will achieve its investment objective.
The BALANCED FUND seeks to provide capital appreciation,
current income, and preservation of capital by investing in a
diversified portfolio of common stocks and bonds. Common stocks
are generally expected to represent approximately 60% of total
assets. Fixed income securities, including cash reserves, will
represent the remaining assets.
The Fund's share price will fluctuate with changing market
conditions, and any investment in it may be worth more or less
when redeemed than when purchased. The Fund should not be
relied upon for short-term financial needs, nor used to play
short-term swings in the stock market. There is no assurance
that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVES - INCOME FUNDS:
The BOND FUND seeks to provide investors with a high level
of current interest income consistent with relative stability of
principal and liquidity. In pursuit of this objective, the BOND
FUND will invest in debt securities rated no lower than A3 by
Moody's Investors Service, Inc. (Moody's) or A- by Standard &
Poor's Corporation (S&P) and in U.S. Government obligations and
other debt securities of the types listed under OTHER INVESTMENT
POLICIES. The average weighted maturity of the portfolio
securities will be between 3 and 10 years. There is no
assurance that the Fund will achieve its investment objective.
The LONG TERM INCOME FUND seeks to provide investors with a
higher level of current income than that of the BOND FUND, yet
still provide consistency relative to stability of principal and
liquidity. In pursuit of this objective, the LONG TERM INCOME
FUND will invest in debt securities rated no lower than Baa3 by
Moody's or BBB- by S&P and in U.S. Government obligations and
other debt securities of the types listed under OTHER INVESTMENT
POLICIES. The average weighted maturity of the portfolio
5
<PAGE>
securities will be between 15 and 30 years. There is no
assurance that the Fund will achieve its investment objective.
The RETIREMENT INCOME FUND seeks to provide investors with
the highest level of current income without undue risk of
principal. In pursuit of this objective, the RETIREMENT INCOME
FUND will invest at least half of the portfolio in government
and corporate fixed income securities rated no lower than Baa3
by Moody's or BBB- by S&P. The average weighted maturity of the
portfolio securities in the RETIREMENT INCOME FUND will be
between 5 and 22 years. The RETIREMENT INCOME FUND seeks to
maximize income with respect to a portion of its assets which
may be as much as 33 percent of the Fund. Such maximum return
is ordinarily associated with high yield, high risk bonds and
similar securities in the lower rating categories of the
recognized rating agencies. Such high yield, high risk or "junk
bonds" generally involve greater price volatility as well as
risk of principal and income than do bonds in the higher rating
categories. High yield bonds are considered predominately
speculative. See INVESTMENT RISKS OF LOWER RATED SECURITIES.
There is no assurance that the Fund will achieve its investment
objective.
While the COMPANY will use its best efforts to achieve the
investment objective of each FUND, their achievement cannot be
assured. No investment objective of any FUND may be changed
without a vote of a majority of the particular FUND's
outstanding shares (as defined under MISCELLANEOUS). Except as
noted below in INVESTMENT LIMITATIONS, none of the investment
policies of any FUND may be changed without a vote of the
holders of a majority of the outstanding shares of the FUND.
INVESTMENT POLICIES OF THE FUNDS:
INVESTMENT POLICIES OF THE EQUITY GROWTH FUND: To achieve
its objective, the Equity Growth Fund invests primarily in a
diversified group of small growth companies (generally under
$1.5 billion in market capitalization). These are companies in
the development stage of their corporate life cycle, yet have
demonstrated or are expected to achieve long-term earnings
growth which reaches new highs per share during each major
business cycle. Also, companies are sought which are early
enough in their corporate life cycle not to have been widely
recognized by the investment community. The Equity Growth Fund
may also invest in companies which offer the possibility of
accelerating earnings growth due to rejuvenated management, new
products, or structural changes in the economy. Current income
is not a factor in the selection of stocks. The Equity Growth
Fund may invest in securities not listed on a national
securities exchange, but such securities generally will have an
established over-the-counter market.
While companies in the Equity Growth Fund may offer greater
opportunity for capital appreciation than larger, more
established companies, investments in small and emerging growth
companies involve greater risks. Such companies, for example,
may have limited markets, product lines, management or financial
resources. Further, stocks traded over-the-counter may trade
less frequently and in smaller volume than exchange-listed
stocks. These securities may also be more sensitive to market
changes than larger, more established companies or the market
averages in general. The Equity Growth Fund is suitable only
for those investors who are willing and able to assume the risks
inherent in its investment program.
The Equity Growth Fund will have at least 65% of its total
assets invested in equity securities, not including stock index
futures and options. The Equity Growth Fund invests primarily
in common stocks but also may invest in preferred stocks,
convertible debt securities, stock index futures and may
purchase or write options. The Equity Growth Fund may invest in
preferred stocks or convertible debt securities when, in the
opinion of the investment adviser, these securities provide a
better relationship of risk and expected return
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than the common stock alone. The Equity Growth Fund may also hold as
a temporary defensive measure other types of securities including
obligations issued or guaranteed by the U.S. Government, money
market instruments, repurchase agreements collateralized by such
obligations and cash at such times and in such proportions as,
in the opinion of the Investment Adviser or Sub-Adviser,
prevailing market conditions may warrant. See OTHER INVESTMENT
POLICIES.
INVESTMENT POLICIES OF THE BALANCED FUND: To achieve its
objective, the Balanced Fund invests in common stocks which will
consist primarily of larger, established companies, but will
also include small and medium-sized companies which are believed
by the investment adviser to exhibit good prospects for growth.
Bond and fixed income investments will include U.S. Government
and agency securities, investment grade corporate securities
(rated Baa3 or better by Moody's or BBB- or better by S&P at the
time of purchase) and other debt securities of the types listed
under OTHER INVESTMENT POLICIES. In the event that a security
held by the Balanced Fund is downgraded, the Fund may continue
to hold such security until such time as the investment adviser
deems it advantageous to dispose of the security. The average
maturity of the Fund's fixed income investments will vary with
economic conditions.
The Balanced Fund will generally be invested approximately
60% in equity securities and 40% in debt securities. Equity
securities will not represent less than 25% and fixed-income
debt securities may represent as much as 75%, but not less than
25%, of the portfolio, with the percentage varying as market
conditions change. As the anticipated return from dividends and
internal growth of equity securities approaches the expected
return available from high-quality fixed-income securities, the
incremental return from the more speculative and less senior
equity securities declines. As this occurs, the Balanced Fund
would increase the portion of its assets invested in
fixed-income securities and decrease the portion of the assets
invested in equities. Conversely, as the incremental
anticipated return from equities exceeds that for fixed-income
securities, the Balanced Fund can be expected to increase the
portion of its assets invested in equities and decrease that
portion invested in fixed-income securities. In the event such
movements in anticipated returns from equity and debt securities
occur, they are expected to take place gradually over 3 to 5
year periods and may not reach extreme variations. Adjustments
in the proportion of the Balanced Fund invested in fixed-income
securities may cause an increase in portfolio turnover and an
increase in expenses to the Balanced Fund.
The Balanced Fund may invest in preferred stocks or
convertible debt securities when, in the opinion of the
investment adviser, these securities provide a better
relationship of risk and expected return than the common stock
alone, and may also invest in stock index futures and may
purchase or write options. The Balanced Fund may also hold as a
temporary defensive measure other types of securities including
obligations issued or guaranteed by the U.S. Government, money
market instruments, repurchase agreements collateralized by such
obligations and cash at such time and in such proportions as, in
the opinion of the Investment Adviser or Sub-Adviser, prevailing
market conditions may warrant. See OTHER INVESTMENT POLICIES.
INVESTMENT POLICIES OF THE BOND FUND: The Bond Fund will
invest at least 65% of its assets in corporate or U.S.
Government bonds. The remainder of the Bond Fund may be
invested in the following types of securities: preferred stocks,
U.S. Government agency securities, U.S. Government obligations
and money market instruments (See OTHER INVESTMENT POLICIES for
definitions of these types of securities). At no time will more
than 50% of the assets be invested in obligations issued or
guaranteed by the U.S. Government.
The Bond Fund will invest in corporate debt obligations and
preferred stock rated no lower than A3 by Moody's or A- by S&P.
If the quality rating criteria are met at the time of
investment, a later decline in the
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rating by either or both of the rating agencies shall not be a
violation of the investment policies of the Bond Fund. At no
time will bonds rated below BBB- by S&P and Baa3 by Moody's be
held in the Bond Fund. The Investment Adviser supplements the
rating and the maturity information with internal credit analysis
and security research. These analyses take into consideration such
factors as a corporation's present and potential liquidity, profitability,
internal capability to generate funds, and adequacy of capital.
Unrated obligations will be considered, if based on the
Investment Adviser's analysis of the financial merits of the
obligations, it concludes they are of comparable investment
quality to the rated instruments. No more than 5% of the
portfolio may consist of unrated obligations.
When, in the opinion of the Investment Adviser, a defensive
investment posture is warranted, the Bond Fund may invest
temporarily and without limitation in high-grade, short-term
money market instruments.
The Bond Fund's average weighted maturity will be adjusted
according to the interest rate outlook. During periods of
anticipated rising interest rates and falling bond prices, a
shorter average maturity may be adopted to cushion the effect of
price declines on the Bond Fund's net asset value. When rates
are expected to fall and bond prices rise, a longer average
maturity may be expected. An adjustment in the average maturity
of the Bond Fund holdings, due to anticipated changes in
interest rates, may cause an increase in portfolio turnover and
may result in an increase in expenses to the Bond Fund.
INVESTMENT POLICIES OF THE LONG TERM INCOME FUND: The Long
Term Income Fund will invest at least 65% of its assets in
corporate or U.S. Government bonds. The remainder of the Long
Term Income Fund may be invested in the following types of
securities: preferred stocks, U.S. Government agency securities,
U.S. Government obligations and money market instruments (See
OTHER INVESTMENT POLICIES for definitions of these types of
securities). At no time will more than 50% of the assets be
invested in obligations issued or guaranteed by the U.S.
Government.
The Long Term Income Fund will invest in corporate debt
obligations and preferred stock rated no lower than Baa3 by
Moody's or BBB- by S&P. If the quality rating criteria are met
at the time of investment, a later decline in the rating by
either or both of the rating agencies shall not be a violation
of the investment policies of the Long Term Income Fund. At no
time will securities rated below BB by S&P and Ba2 by Moody's be
held in the Long Term Income Fund. The Investment Adviser
supplements the rating and the maturity information for the Long
Term Income Fund in a manner similar to that for the Bond Fund.
Unrated obligations will be considered, if based on the
Investment Adviser's analysis of the financial merits of the
obligations, it concludes they are of comparable investment
quality to the rated instruments. No more than 5% of the
portfolio may consist of unrated obligations.
When, in the opinion of the Investment Adviser, a defensive
investment posture is warranted, the Long Term Income Fund may
invest temporarily and without limitation in high-grade,
short-term money market instruments.
The Long Term Income Fund's average weighted maturity will
be adjusted according to the interest rate outlook in a manner
similar to the Bond Fund as described above. An adjustment in
the average maturity of the Long Term Income Fund holdings, due
to anticipated changes in interest rates, may cause an increase
in portfolio turnover and may result in an increase in expenses
to the Fund.
INVESTMENT POLICIES OF THE RETIREMENT INCOME FUND: The
Retirement Income Fund will invest at least 65% of its assets in
corporate or U.S. Government bonds. The remainder of the
Retirement Income Fund may be invested in the following types of
securities: preferred stocks, U.S. Government agency securities,
U.S. Government obligations and money market instruments (See
OTHER INVESTMENT POLICIES for
8
<PAGE>
definitions of these types of securities). At no time will more than
50% of the assets be invested in obligations issued or guaranteed by
the U.S. Government.
The Retirement Income Fund will invest at least 50 percent
of the portfolio in obligations of, or guaranteed by, the U.S.
Government or its agencies or corporate debt securities or
preferred stock rated no lower than Baa3 by Moody's or BBB- by
S&P. The Fund may invest as much as 33 percent of the portfolio
in lower rated, high-yielding securities, rated between Ba1 and
B2 by Moody's or between BB+ and B by S&P, which may provide
poor protection for payment of principal and interest. These
bonds are commonly referred to as "junk bonds". If the quality
rating criteria are met at the time of investment, a later
decline in the rating by either or both of the rating agencies
shall not be a violation of the investment policies of the
Retirement Income Fund. At no time will bonds rated below B- by
S&P and B3 by Moody's be held in the Retirement Income Fund.
See "Investment Risks of Lower Rated Securities". The
Investment Adviser supplements the rating and the maturity
information for the Retirement Income Fund in a manner similar
to that for the Bond and Long Term Income Funds. Unrated
obligations will be considered, if based on the Investment
Adviser's analysis of the financial merits of the obligations,
it concludes they are of comparable investment quality to the
rated instruments. No more than 5% of the portfolio may consist
of unrated obligations. When, in the opinion of the Investment
Adviser, a defensive investment posture is warranted, the
Retirement Income Fund may invest temporarily and without
limitation in high-grade, short-term money market instruments.
The Retirement Income Fund has a flexible investment policy
which allows the Investment Adviser to adjust the maturity and
the quality of the securities held in the portfolio. The
average weighted maturity will be adjusted according to the
interest rate outlook in a manner similar to the Bond Fund as
described above. The mix of the quality of the securities held
in the portfolio will similarly be adjusted by the Investment
Adviser. The degree to which the Retirement Income Fund holds
high yield, high risk securities will be based on the Adviser's
forecast of the economy and its judgment concerning the
comparative value of high yield, high risk securities and higher
quality issues. Any adjustment in the maturity or the quality
of the Retirement Income Fund holdings may cause an increase in
portfolio turnover and may result in an increase in expenses to
the Fund.
OTHER INVESTMENT POLICIES:
GOVERNMENT OBLIGATIONS: Each FUND may invest in
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. U.S. Government agencies that
are supported by the full faith and credit of the U.S.
Government include securities of the Federal Housing
Administration, the Department of Housing and Urban Development,
the Export-Import Bank, the Farmers Home Administration, the
General Services Administration, the Maritime Administration,
and the Small Business Administration. Generally less than 50%
of the Bond Fund, the Long Term Income Fund, the Retirement
Income Fund or the bonds in the Balanced Fund will be invested
in obligations of the U.S. Government or agencies supported by
the full faith and credit of the U.S. Government. The Equity
Growth Fund will have less than 5% of its assets invested in
obligations of the U.S. Government or agencies supported by the
full faith and credit of the U.S. Government except when in the
opinion of the Investment Adviser a temporary defensive
investment posture is warranted.
Each FUND may invest on a limited basis in obligations of
certain agencies or instrumentalities which do not carry the
full faith and credit of the U.S. Government, such as the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation securities. Each FUND will invest in the
obligations of such agencies or instrumentalities only when the
Investment Adviser believes the credit risk with respect to the
agency or instrumentality is minimal. No more than 20% of the
assets of the Bond Fund, the Long Term
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Income Fund or the bonds in the Balanced Fund will be invested in
these types of securities. No more than 5% of the Equity Growth Fund
will be invested in these types of securities.
MONEY MARKET INSTRUMENTS: Each FUND, consistent with its
primary investment objective, anticipates under normal
conditions that no more than 20% of its assets will be invested
in high-quality money market instruments. Under unusual market
or economic conditions (e.g., if short-term interest rates
exceed long term rates) and for temporary defensive purposes
each FUND may invest up to 100% of its assets in money market
instruments. Money market instruments are defined as commercial
paper and bank obligations. Bank obligations include bankers'
acceptances, negotiable certificates of deposit and
non-negotiable time deposits earning a specified return and
issued by a U.S. bank which is a member of the Federal Reserve
System or insured by the Federal Deposit Insurance Corporation,
or by a savings and loan association or savings bank that is
insured by the Federal Savings and Loan Insurance Corporation.
Investment in bank obligations is limited to the obligations of
financial institutions having more than $2 billion in total
assets at the time of purchase. Investment in time deposits is
limited to no more than 5% of the value of a FUND's total assets
at the time of purchase.
Investments in commercial paper will be limited to issues
within the highest rating, at the time of purchase, of S&P or
Moody's or, if not rated, are determined by the Investment
Adviser to be of comparable quality.
REPURCHASE AGREEMENTS: The U.S. Government obligations in
which the FUNDS invest may be purchased pursuant to repurchase
agreements. Repurchase agreements are arrangements in which
banks, brokers, dealers, and other recognized financial
institutions sell U.S. Government securities (limited to those
with remaining maturities of five years or less) to the FUNDS
and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. The FUNDS or their Custodian will
take possession of the securities subject to repurchase
agreements. Repurchase agreements may also be viewed as loans
made by the FUNDS which are collateralized by the securities
subject to repurchase. Advance Capital Management, Inc., the
Investment Adviser, will monitor such transactions to ensure
that the value of the underlying securities will be at least
equal at all times to the total amount of the repurchase
obligation, including the interest factor. In the event of a
bankruptcy or default of certain sellers of repurchase
agreements, the FUNDS could experience costs and delays in
liquidating the underlying security which is held as collateral,
and the FUNDS might incur a loss if the value of the collateral
held declines during this period.
VARIABLE AND FLOATING RATE INSTRUMENTS: Unrated variable
or floating rate instruments will make up not more than 5% of
any FUND's assets. These instruments require the Investment
Adviser to monitor closely the earning power, cash flows and
other liquidity ratios of the issuers to insure they can meet
payment on demand. These instruments often provide a higher
yield than money market rates because they are viewed by the
issuer and purchaser as longer-term obligations whose pricing
may be based on shorter-term rates.
NON-INTEREST-BEARING SECURITIES: The Bond Fund has not
invested in non-income-producing securities in the past.
Further, there are no present plans to invest in
non-income-producing securities in the Bond Fund, the Long Term
Income Fund or the Retirement Income Fund. Non-income-producing
securities include zero coupon bonds, which pay interest only at
maturity and payment in kind ("PIK") bonds, which pay interest
in the form of additional bonds. Although there are no plans to
do so, the Retirement Income Fund may invest up to 5 percent of
its assets in such securities. Should non-interest-bearing
securities be held in the Retirement Income Fund, there are
special tax considerations associated with them. The Retirement
Income Fund will report interest on these securities as income
even though it receives no cash interest until the security's
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<PAGE>
maturity or payment date. Therefore, the Retirement Income Fund
may have to dispose of some portfolio securities under
disadvantageous circumstances to generate cash to satisfy
distribution requirements.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS: The Equity
Growth Fund and the Balanced Fund (the Growth Portfolios) may
enter into stock index futures contracts (or options thereon) to
hedge all or a portion of its equity portfolio, or as an
efficient means of regulating its exposure to the equity
markets. The Growth Portfolios will not use futures contracts
for speculation. The Funds will limit the use of futures
contracts so that: (1) no more than 5% of the Growth Portfolios'
assets would be committed to initial margin deposits or premiums
on such contracts and (2) immediately after entering into such
contracts, no more than 30% of the Equity Growth Fund's total
assets or no more than 20% of the Balanced Fund's assets would
be represented by such contracts. The Growth Portfolios may
also write covered call options and purchase put options on
securities and financial indices. The aggregate market value of
each Fund's portfolio securities covering call options will not
exceed 25% of the Equity Growth Fund's net assets or 15% of the
Balanced Fund's net assets. Futures contracts and options can
be highly volatile and could reduce each Fund's total return,
and a Fund's attempt to use such investment for hedging purposes
may not be successful. Successful futures strategies require
the ability of the investment adviser to predict future
movements in securities prices, interest rates and other
economic factors. Each Fund's potential losses from the use of
futures extends beyond its initial investment in such contracts.
Also, losses from options and futures could be significant if a
Fund is unable to close out its position due to disruptions in
the market or lack of liquidity.
PORTFOLIO TRANSACTIONS: Although the FUNDS do not intend
to invest for the purpose of seeking short-term profits,
securities in the portfolios will be sold whenever the
Investment Adviser or Sub-Adviser believes it is appropriate to
do so in light of the respective FUND's investment objectives,
without regard to the length of time a particular security may
have been held. Although it is not possible to predict the
annual portfolio turnover rate, it is not expected to exceed
125% for the Equity Growth Fund, the Retirement Income Fund or
the equity portion of the Balanced Fund and not expected to
exceed 75% for the Bond Fund, the Long Term Income Fund or the
bond portion of the Balanced Fund when measured over any
extended number of years. Portfolio trading and turnover
involve transaction costs which reduce investor returns. Higher
portfolio turnover rates will further increase costs. In
addition, higher portfolio turnover may increase distributions
of taxable capital gains and ordinary income to shareholders.
The Investment Adviser and Sub-Adviser use various
brokerage firms to carry out portfolio transactions. The
COMPANY has authorized the Investment Adviser and Sub-Adviser to
place brokerage orders with some brokers who help to distribute
shares of the FUNDS. The Investment Adviser or Sub-Adviser will
do so only when it reasonably believes that the commissions and
the transaction quality are comparable to that available from
other qualified brokers.
The COMPANY has authorized the Investment Adviser or
Sub-Adviser to pay higher commissions to those firms that
provide research services. The Investment Adviser and
Sub-Adviser may use this research information in managing the
FUNDS' assets, as well as assets of other clients.
INVESTMENT RISKS OF LOWER RATED SECURITIES:
The Retirement Income Fund may invest as much as 33 percent
of the Fund in lower rated, high-yielding securities (rated Ba
or lower by Moody's or BB or lower by S&P) which may provide
poor protection for payment of principal and interest. These
bonds are commonly referred to as "junk bonds". These
securities are considered to be speculative and involve greater
risk of default or volatility in price changes due to the credit
worthiness of the issuer than do securities assigned higher
quality ratings.
11
<PAGE>
The fixed income market has experienced a dramatic increase
in the large scale use of such securities to fund highly
leveraged corporate acquisitions and restructurings. The high
yield, high risk bond market is relatively new and many of the
outstanding high yield bonds have not endured a major business
recession. A long term track record on bond default rates, such
as that for investment grade corporate bonds, does not exist for
the high yield market. It may be that future default rates on
high yield, high risk bonds will be more widespread and higher
than in the past, especially during periods of deteriorating
economic conditions.
High yield, high risk bonds may also carry call risk, or
the risk that bonds will be redeemed by the issuer during
periods of declining interest rates. Replacing the called bonds
with a lower yielding security will reduce the return for
investors. Conversely, in periods of rising interest rates, the
value of high yield bonds will decline, thereby reducing the
value of the Funds assets.
Credit quality in the high yield, high risk bond market can
change suddenly and unexpectedly, and even recently-issued
credit ratings may not fully reflect the actual risks posed by a
particular high-yield security. For these reasons it is the
Retirement Income Fund's policy not to rely primarily on ratings
issued by established credit rating agencies, but to utilize
such ratings in conjunction with the investment adviser's own
independent and ongoing review of credit quality.
The market for lower rated securities may be less active
and thinner than that for higher quality securities. This may
adversely affect the price at which these securities can be
sold. The market prices of lower rated securities may fluctuate
more than higher rated securities and may decline significantly
in periods of general economic decline and also following
periods of rising interest rates. During a period of economic
downturn or a prolonged period of rising interest rates, the
ability of issuers of lower quality debt to continue to service
their payment obligations, meet projected goals or obtain
additional financing may be seriously impaired. Under such
conditions, it may become difficult to value these securities
accurately. The Fund may also be forced to sell securities at a
significant loss in order to meet shareholder redemptions.
Overall, investors should expect that the lower quality
bonds in the Retirement Income Fund may fluctuate in price
independently of the broad bond market and prevailing interest
rate trends, and that price volatility at times may be very
high, especially as a result of credit concerns, market
liquidity and anticipated or actual adverse changes in economic
activity.
The Retirement Income Fund's policies regarding lower rated
debt securities are not fundamental and may be changed at any
time without shareholder approval.
INVESTMENT LIMITATIONS:
The following investment limitations are matters of
fundamental policy and may not be changed with respect to a FUND
without the vote of the holders of a majority of the FUND's
outstanding shares (as defined under MISCELLANEOUS).
The FUNDS will not:
- borrow money or pledge securities;
- commit more than 10% of their respective net assets to
non-liquid securities, including repurchase agreements with
maturities longer than seven days, or to securities subject to
restrictions on resale;
- purchase the securities of any one issuer, other than the
U.S. Government or any of its instrumentalities, if immediately
after such purchase more than 5% of the value of its total
assets would be invested
12
<PAGE>
in such issuer, except that up to 15%
of the value of each FUND's total assets may be invested without
regard to the 5% limitation;
- invest more than 5% of each respective FUND's total assets in
securities of issuers that have records of less than three years
of continuous operations;
- invest more than 25% of each respective FUND's total assets
in any one industry;
- acquire more than 10% of the voting securities of any one
issuer.
If a percentage limitation is satisfied at the time of the
investment, a later increase or decrease in such percentage
resulting from a change in the value of a FUND's portfolio
securities will not constitute a violation of such limitation.
DISTRIBUTION OF SHARES
Advance Capital Services, Inc., a wholly-owned subsidiary
of Advance Capital Group, Inc., is the principal distributor for
shares of the COMPANY. It is a Michigan corporation organized
on August 5, 1986 and a registered broker-dealer with the
National Association of Securities Dealers, Inc. The
distributor is responsible for soliciting orders for the sale of
shares of the FUNDS and will undertake such advertising and
promotion as it believes reasonable in connection with such
solicitation.
NET ASSET VALUE
Each FUND's net asset value per share is determined by
dividing the sum of the market or appraised value of all
securities and all other assets less liabilities by the number
of shares of the FUND outstanding. Each FUND's net asset value
per share is calculated on days that the New York Stock Exchange
is open.
INVESTING IN THE FUNDS
Shares of the COMPANY are sold on days on which the New
York Stock Exchange is open. Shares may be purchased either by
mail or wire. The COMPANY reserves the right to reject any
purchase request.
PURCHASES BY MAIL: Shares may be purchased initially by
completing the Application for Purchase of Shares accompanying
this prospectus. Mail the Application and a check payable to
Advance Capital I, Inc. to:
Advance Capital Group, Inc.
P.O. Box 3144
Southfield, Michigan 48037
Orders by mail are considered received the day the check is
received by Advance Capital Group.
Subsequent purchases by mail need only to include a check,
the investor's account number, and the amount of money to be
invested in each FUND.
PURCHASES BY WIRE: A completed and signed Application must
be on file with Advance Capital Group in order to purchase
shares by Federal Reserve wire. For instructions to initiate a
wire purchase, call Advance Capital Group on (810) 350-8543 or
(800) 345-4783. The order is considered received immediately.
The shares will be priced at the Net Asset Value as next
determined after the order is received. Payment by Federal
Funds must be received before the close of business on the next
business day following the order.
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<PAGE>
MINIMUM INVESTMENT REQUIRED: The minimum initial aggregate
investment in the COMPANY is $10,000 ($2,000 for IRA Accounts).
This investment may be distributed in any of the FUNDS as long
as a $1,000 minimum investment is maintained in each FUND
selected. An institutional investor's minimum investment will
be calculated by combining all accounts it maintains with the
COMPANY.
WHAT SHARES COST: Shares of each FUND are purchased or
sold at their net asset value, as next determined after an order
is received by Advance Capital Group. There are no sales
commissions or charges imposed by the COMPANY. Investors who
purchase or sell shares through a non-affiliated broker or bank
may be charged an additional service fee by that broker or bank.
The net asset value of each FUND is determined at the close
of business of the New York Stock Exchange (currently 4:00 PM
Eastern Time), Monday through Friday, on each day the New York
Stock Exchange is open for trading.
CERTIFICATES AND CONFIRMATIONS: As transfer agent for the
COMPANY, Advance Capital Group maintains a share account for
each shareholder of each FUND. Share certificates are not
issued.
Detailed confirmations of each purchase, exchange or
redemption are sent to each shareholder. Monthly confirmations
are sent to report dividends declared during that month to Bond
Fund, Balanced Fund, Long Term Income Fund, and Retirement
Income Fund shareholders. Confirmations are sent to report
dividends declared at year end to Equity Growth Fund
shareholders.
DIVIDENDS: Bond Fund, Balanced Fund, Long Term Income
Fund, and Retirement Income Fund dividends are declared daily,
except on Saturdays, Sundays, and holidays and are paid monthly
on the last business day of the month. Dividends are declared
just prior to determining net asset value. Dividends declared
on Fridays and on days preceding holidays are proportionally
larger to adjust for the FUND's income for the following
Saturday and Sunday, or holiday.
Equity Growth Fund dividends are declared annually and paid
on the last business day of the year.
Dividends for each FUND may be received in cash by
selecting the appropriate option on the Application for Purchase
of Shares when an account is opened. Otherwise, dividends of
all five FUNDS are automatically reinvested in additional shares
of the respective FUND unless cash distributions are requested
subsequently, in writing, to the transfer agent, Advance Capital
Group.
CAPITAL GAINS: Capital gains, if any, of each FUND will be
distributed annually and normally be paid on the last business
day of the COMPANY's fiscal year. Capital gains may be received
in cash by selecting the appropriate option on the Application
for Purchase of Shares when an account is opened. Otherwise,
capital gains are paid in the form of additional shares unless
cash distributions are requested subsequently, in writing, to
the transfer agent, Advance Capital Group.
TRANSFERRING SHARES
EXCHANGING SHARES AMONG FUNDS: An exchange of a FUND's
shares can be made for shares in any of the other four FUNDS of
the COMPANY. For tax purposes an exchange is treated as a
redemption and a purchase.
Exchanges by telephone or in writing, are subject to the
same authorizations and restrictions as redemptions (See
REDEEMING SHARES and TELEPHONE REQUESTS). All requests must
include; the shareholder's name and account number, the name of
the FUND being redeemed and the FUND being
14
<PAGE>
purchased and the number of shares or dollar amount being exchanged.
If share certificates have been issued, they must be properly endorsed
and sent by registered or certified mail along with the written
request. The Company reserves the right to modify or terminate
these exchange procedures or required authorizations in the
future. Shareholders will be given at least 60 days notice
before any such changes or termination becomes
effective.
REDEEMING SHARES
The COMPANY redeems shares at their net asset value next
determined after Advance Capital Group receives the redemption
request. There are no deferred sales charges or redemption
fees. Redemptions may be made on days on which the New York
Stock Exchange is open for business. The redemption request
must be received before 4:00 PM Eastern Time for same day
processing. Redemption requests must be received in proper form
and can be made by written request or by telephone request.
Redemption requests for IRA accounts require a signed IRA
Distribution Form.
WRITTEN REQUESTS: Shares may be redeemed by sending a
written request to:
Advance Capital Group, Inc.
P.O. Box 3144
Southfield, Michigan 48037
The request must provide the shareholder's name and account
number, the name of the FUND and the share or dollar amount of
the redemption. If share certificates have been issued, they
must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES: Signatures on redemption requests and share
certificates must be guaranteed by:
- a trust company or commercial bank that is a member of the
FDIC; or
- a member firm of the New York, American, Boston, Midwest, or
Pacific Stock Exchange.
The COMPANY does not accept signatures guaranteed by a
savings bank, savings and loan association or notary public.
TELEPHONE REQUESTS: Share amounts less than $25,000 may be
redeemed or exchanged by telephone if the Telephone Redemption
or Exchange Option was completed on the initial Application for
Purchase of Shares. For amounts over $25,000, or if the
Telephone Redemption or Exchange Option was not completed on the
initial application, a written redemption or exchange request
must be made with Advance Capital Group and must be signature
guaranteed (See REDEEMING SHARES and SIGNATURES). Redemption
requests for IRA accounts may not be made by telephone. Shares
may be redeemed by calling (810) 350-8543 or (800) 345-4783 any
business day between the hours 8:00 AM and 4:00 PM, Eastern Time.
By establishing the telephone redemption service you
authorize Advance Capital Group to: (1) act upon instruction of
any person by telephone to redeem or exchange shares from any
account for which such service has been authorized; and (2)
honor any written instructions pertaining to a redemption for an
amount $25,000 or less or for a change of address regardless of
whether such request was accompanied by a signature guarantee.
You also agree that neither the FUNDS nor Advance Capital Group,
Inc. will be liable for following instructions communicated by
telephone reasonably believed to be genuine and a loss to the
shareholder may result due to an unauthorized transaction. The
FUNDS and Advance Capital Group, Inc. will employ reasonable
procedures which may include one or more of the following:
verifying authorization and requiring some form of personal
identification prior to acting upon instructions, and sending a
statement each time a telephone exchange is made to confirm that
instructions communicated by telephone are genuine.
15
<PAGE>
The Transfer Agent and the COMPANY reserve the right to change,
modify, or terminate these services at any time.
RECEIVING PAYMENT: Normally, a check for the proceeds of a
redemption is mailed within one business day, but in no event
more than seven days, after receipt of a proper redemption
request.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR: When shares
are purchased by check, those shares are not available for
redemption, except by letter, until the Custodian collects
payment for those shares. It is the COMPANY's policy to allow
up to 15 calendar days from the date those shares were purchased
for such collection.
ACCOUNTS WITH LOW BALANCES: Due to the high cost of
maintaining accounts with low balances, the COMPANY may redeem
shares in all FUNDS and pay the proceeds to the shareholder if
the total of the account balances in the five FUNDS falls below
a required minimum net asset value of $10,000 ($2,000 for IRA
accounts) or redeem shares of the specific FUND if that one FUND
falls below the $1,000 minimum. This requirement does not
apply, however, if the aggregate account balance falls below
$10,000 ($2,000 for IRA accounts) because of changes in the net
asset values of the FUNDS.
Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to
purchase additional shares to meet the minimum aggregate
requirement.
REDEMPTION IN KIND: Each FUND of the COMPANY is obligated
to redeem shares solely in cash up to $250,000 or 1% of the
FUND's net asset value, whichever is less, for any one
shareholder within a 90 day period.
Any redemption beyond this amount will also be cash unless
the Board of Directors of the COMPANY determine that further
cash payments will have a material adverse effect on remaining
shareholders. In such a case, the FUND will pay all or a
portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the FUND's net asset
value is determined. The portfolio instruments will be selected
in a manner that the Board of Directors deems fair and
reasonable.
Redemption in kind is not as liquid as a cash redemption.
If redemption is made in kind, shareholders receiving their
securities and selling them could receive less than the
redemption value of their securities and could incur certain
transaction costs.
DISTRIBUTION PLAN
The COMPANY has adopted a Plan of Distribution under which
each FUND is permitted to spend up to .25% of its average daily
net assets for activities primarily intended to result in sales
of shares of any of the FUNDS that comprise the COMPANY, which
activities include but are not limited to, compensation of sales
personnel; compensation to and expenses, including the cost of
equipment, telephones, travel, seminars, stationary, and
supplies, of employees of the Distributor who engage in or
support distribution of the FUNDS' shares or who service
shareholder accounts; development and implementation of direct
mail promotions and advertising; and preparation, printing and
distribution of company prospectuses and reports for recipients
other than existing shareholders. The Plan does not permit non
reimbursed expenses incurred in a particular year to be carried
over to or reimbursed in subsequent years. The terms of the
Plan are incorporated into the COMPANY's distribution agreement
with the Distributor. The Board of Directors has suspended
indefinitely the 12b-1 fees for the Bond and Long Term Income
Funds. Shareholders of the Bond and Long Term Income Funds will
be notified 30 days prior to any increase in the 12b-1 fees
charged to these Funds.
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During the fiscal year ended December 31, 1996, the COMPANY
paid or accrued distribution expenses of $81,923, $0, $166,293,
$0 and $392,882 for the Equity Growth, Bond, Balanced, Long Term
Income and Retirement Income Funds respectively, to the
COMPANY's distributor, Advance Capital Services.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS: The COMPANY is managed by a Board of
Directors. The Directors are responsible for managing the
COMPANY's business affairs and for exercising all the COMPANY's
powers except those reserved for the shareholders.
INVESTMENT ADVISER: Advance Capital Management, Inc., a
wholly-owned subsidiary of Advance Capital Group, Inc., a
financial services and holding company, serves as the Investment
Adviser to the COMPANY. The principal business address of
Advance Capital Management, Inc. is in Southfield, Michigan.
Subject to the general supervision of the COMPANY's Directors
and in accordance with each FUND's investment objectives and
policies, the Investment Adviser continually conducts investment
research and furnishes an investment program for each of the
FUNDS of the COMPANY, is responsible for the purchase and sale
of each FUND's portfolio securities and maintains the COMPANY's
records relating to such purchases and sales.
SUB-ADVISER: T. Rowe Price Associates, Inc. (TRPA) serves
as the investment adviser for that portion of the portfolio
assets of the Equity Growth Fund and Balanced Fund which are
determined by the Investment Adviser to be invested in common
stocks. TRPA is a Maryland Corporation with its principal
business address in Baltimore, Maryland. Their primary business
is the investment management of assets for no-load mutual funds
and other large investment accounts. TRPA is one of the largest
100 percent no-load mutual fund managers in the nation.
ADVISORY FEES: For services provided and expenses assumed
pursuant to the Investment Advisory Agreement, the Investment
Adviser receives a fee, computed daily and paid monthly, at the
annual rate of .7% of the average daily net assets of the Equity
Growth Fund and the Balanced Fund, .4% of the average daily net
assets of the Bond Fund and the Long Term Income Fund and .5% of
the average daily net assets of the Retirement Income Fund. The
Sub-Advisory Agreements do not provide for any increase in the
level of fees payable by the Company. For its services, the
Sub-Adviser is paid a fee by the Investment Adviser, payable
over the same time periods and calculated in the same manner as
the investment advisory fee, of .2% percent annually of the
average daily net assets of the Equity Growth Fund and of that
portion of the Balanced Fund so designated by the Investment
Adviser to be invested in common stocks. From time to time, as
it may deem appropriate in its sole discretion, the Investment
Adviser may waive a portion or all of its advisory fee.
PORTFOLIO MANAGERS: John C. Shoemaker, President, Robert
J. Cappelli, Vice President, and Christopher M. Kostiz of
Advance Capital Management, Inc., have responsibility for the
day-to-day management of the Bond Fund, Long Term Income Fund,
Retirement Income Fund and the fixed-income portion of the
Balanced Fund. Mr. Shoemaker has been the portfolio manager for
all of the funds since their inception (August, 1987 for the
Equity Growth, Bond and Balanced Funds and October 6, 1992 for
the Long Term Income Fund and Retirement Income Fund). Mr.
Cappelli has been a portfolio manager for the Bond Fund and the
Balanced Fund since 1991 and for the Long Term Income Fund and
Retirement Income Fund since inception. Prior to that, Mr.
Cappelli had been actively involved in the investment research
and strategy for all of the Advance Capital I Funds since
inception. Mr. Kostiz has been a portfolio manager of the Bond
Fund, the fixed-income portion of the Balanced Fund, the Long
Term Income Fund and the Retirement Income Fund since 1995, and
has been involved in the administration, research and investment
of these
17
<PAGE>
portfolios since 1993. Richard T. Whitney, Managing
Director, T. Rowe Price Associates, Inc. has had responsibility
for the day-to-day management of the common stock portions of
the Equity Growth and Balanced Funds since December 29, 1993.
Mr. Whitney has been at T. Rowe Price Associates, Inc. since
1985 where he has been actively involved in the development and
management of their systematic equity process. He is President
of the T. Rowe Price Equity Index Fund and the T. Rowe Price
Balanced Fund.
ADMINISTRATIVE SERVICES: Advance Capital Group, the
COMPANY's Transfer Agent, also provides the administrative
personnel and services necessary to handle the clerical,
accounting, and bookkeeping functions required to operate the
COMPANY. In its capacity as Transfer Agent, Advance Capital
Group arranges for the processing of share purchase and
redemption orders, maintains shareholder account records, and
serves as dividend disbursing agent. These combined
administrative and transfer agent services are provided to the
COMPANY at cost.
TRANSFER AGENT: Advance Capital Group is the transfer
agent and dividend disbursing agent for shares of the COMPANY.
EXPENSES OF THE COMPANY
Except as noted below, the Investment Adviser bears all
expenses in connection with the performance of its services.
The COMPANY bears the expenses incurred in its operations.
Expenses of the COMPANY include: taxes; fees, including fees
paid to its Directors, investment advisory fees, transfer agent
and dividend disbursing fees, Securities and Exchange Commission
fees, and state qualification fees; costs of preparing and
printing prospectuses for regulatory purposes and for
distribution to shareholders; charges of the Custodian; certain
insurance premiums; outside auditing and legal expenses; costs
of independent pricing services; costs of shareholder reports
and meetings; and extraordinary expenses. The COMPANY also pays
for brokerage fees and commissions in connection with portfolio
securities transactions.
Expenses of the COMPANY may also include
distribution-related expenses which the COMPANY is permitted to
bear under a Plan of Distribution complying with the provisions
of Rule 12b-1 under the Investment Company Act of 1940. Such
Plan was approved by the Board of Directors, including a
majority of the Directors who are not interested persons of the
COMPANY and who have no direct or indirect financial interest in
the operation of the Plan. Under the Plan, up to .25% of each
FUND's average daily net assets, for any fiscal year, may be
expended for preparation, reproduction and distribution of sales
literature and prospectuses used for sales purposes; public
relations and communications with investors and prospective
investors; and compensation of sales personnel.
TAX INFORMATION
FEDERAL INCOME TAX: The COMPANY will distribute to
shareholders all capital gains and income earned. As such, the
COMPANY will pay no federal income tax because it expects to
meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax
treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay
federal income tax on any dividends and other distributions
received. This applies whether dividends are received in cash
or as additional shares. Information on the tax status of
dividends is provided annually.
The Internal Revenue Code of 1986 treats each FUND in a
series mutual fund as a separate corporation.
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<PAGE>
STATE AND LOCAL TAXES: Shareholders are urged to consult
their own tax advisers regarding the status of their accounts
under state and local tax laws.
DESCRIPTION OF CAPITAL STOCK
The COMPANY was organized as a Maryland Corporation on
March 6, 1987. The COMPANY is a series fund offering five
classes of shares, each representing shares in one of five
separate Funds. Class A common shares represent interests in the
Equity Growth Fund, Class B common shares represent interests in
the Bond Fund, Class C common shares represent interests in the
Balanced Fund, Class D common shares represent interests in the
Long Term Income Fund and Class E common shares represent
interests in the Retirement Income Fund. Each share has a par
value of $.001, which represents an equal proportionate interest
in the FUND with other shares of the same class, and is entitled
to such dividends and distributions out of the income earned on
the assets belonging to such FUND as are declared in the
discretion of the COMPANY's Board of Directors. The COMPANY's
Articles of Incorporation authorizes the Board of Directors to
classify or reclassify any class of shares into one or more
portfolios.
Shareholders are entitled to one vote for each full share
held, and fractional votes for fractional shares held, and will
vote in the aggregate and not by class, except as otherwise
expressly required by law, or when otherwise permitted by the
Board of Directors acting in its sole discretion. At such time
shares of capital stock of the COMPANY shall be voted by
individual class and only shares of capital stock of the
respective class or classes affected by a matter shall be
entitled to vote on such a matter. The COMPANY holds an Annual
Meeting of Shareholders.
Certificates for shares will not be issued unless expressly
requested in writing to the COMPANY's Transfer Agent, Advance
Capital Group, Inc. and will not be issued for fractional shares
or for IRA(s) held by a Custodian.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports
describing the COMPANY's investment operations and annual
financial statements audited by independent accountants.
As used in this Prospectus, a "vote of the holders of a
majority of the outstanding shares" of the COMPANY or a
particular FUND means the affirmative vote of the lesser of (a)
50% of the outstanding shares of the COMPANY or such FUND, or
(b) 67% or more of the shares of the COMPANY or such FUND
present at a meeting if the holders of more than 50% of the
outstanding shares of the COMPANY or such FUND are represented
at the meeting in person or by proxy.
Inquiries regarding the COMPANY or any of its FUNDS may be
directed to the address or telephone number listed on the cover
of this Prospectus.
19
<PAGE>
ADVANCE CAPITAL I, INC. ADVANCE Capital I, Inc.
An investment company with five funds.
INVESTMENT ADVISER:
Advance Capital Management, Inc. Equity Growth Fund
One Towne Square, Suite 444 Bond Fund
Southfield, Michigan 48076 Balanced Fund
Long Term Income Fund
SUB-ADVISER: (Equity Growth and Balanced Funds) Retirement Income Fund
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
DISTRIBUTOR:
Advance Capital Services, Inc.
P.O. Box 3144
Southfield, Michigan 48037
ADMINISTRATOR AND TRANSFER AGENT:
Advance Capital Group, Inc.
P.O. Box 3144
Southfield, Michigan 48037
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
200 Renaissance Center
Suite 3900
Detroit, Michigan 48243
OFFICERS:
John C. Shoemaker, President
Robert J. Cappelli, Vice President & Treasurer
Charles J. Cobb, Vice President
Kathy J. Harkleroad, Secretary
BOARD OF DIRECTORS:
Joseph A. Ahern
Richard W. Holtcamp
Harry Kalajian
John C. Shoemaker Prospectus
Frank R. Zimmerman April 30, 1997
<PAGE>
ADVANCE CAPITAL I, INC.
Statement of Additional Information
April 30, 1997
This statement of Additional Information is not a prospectus
and should be read in conjunction with the current Prospectus as
updated to reflect filing of updated condensed financial
information for Advance Capital I, Inc. (the COMPANY), dated
April 30, 1997 (the Prospectus). Much of the information
contained in this Statement of Additional Information expands
upon the subjects discussed in the Prospectus. No investment in
shares of the COMPANY (the Shares) should be made without first
reading the Prospectus. A copy of the Prospectus for the
COMPANY may be obtained by writing Advance Capital I, Inc. at
P.O. Box 3144, Southfield, Michigan 48037 or by calling (810)
350-8543 or (800) 345-4783.
TABLE OF CONTENTS
Page
GENERAL INFORMATION ABOUT THE COMPANY...................... 2
INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS............................................. 2
General................................................. 2
Additional Information on Portfolio Instruments......... 2
Additional Investment Limitations....................... 3
DISTRIBUTION PLAN.......................................... 4
DESCRIPTION OF SHARES...................................... 5
OFFICERS AND DIRECTORS..................................... 6
INVESTMENT ADVISORY AND ADMINISTRATION AND TRANSFER
AGENT AGREEMENTS......................................... 8
PORTFOLIO TRANSACTIONS..................................... 9
CUSTODIAN.................................................. 10
INDEPENDENT ACCOUNTANTS.................................... 10
COUNSEL.................................................... 10
PERFORMANCE INFORMATION.................................... 11
SECURITY VALUATION......................................... 12
ADDITIONAL TAX INFORMATION................................. 12
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........ 12
MISCELLANEOUS.............................................. 14
DESCRIPTION OF BOND RATINGS................................ 14
FINANCIAL STATEMENTS....................................... 15
<PAGE>
General Information About the COMPANY:
ADVANCE CAPITAL I, Inc. (the COMPANY) is a Maryland Corporation
organized on March 6, 1987. The COMPANY offers shares in five
separate portfolios (the FUNDS). The five portfolios are:
Equity Growth Fund
Bond Fund
Balanced Fund
Long Term Income Fund
Retirement Income Fund
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS:
General
As stated in the Prospectus, the COMPANY offers Shares
representing interests in five different investment portfolios.
The investment objective of the Equity Growth Fund is to provide
long-term growth of capital through investment primarily in
common stocks of small, rapidly growing companies. The Balanced
Fund's investment objective is to provide capital appreciation,
current income and preservation of capital by investing in a
diversified portfolio of common stocks and bonds. Common stocks
are generally expected to represent approximately 60% of total
assets, and fixed income securities, including cash reserves,
will represent the remaining assets. The investment objective
of the Bond Fund is to seek a high level of current interest
income consistent with the relative stability of principal and
liquidity. To achieve this objective, the Bond Fund invests
primarily in high-quality, intermediate-term bonds. The Long
Term Income Fund seeks a higher level of current interest income
than does the Bond Fund, yet still consistent with the relative
stability of principal and liquidity. To achieve this
objective, the Long Term Income Fund invests in investment
grade, long term fixed income securities. The Retirement Income
Fund seeks the highest level of current income without undue
risk of principal. To achieve this objective, the Retirement
Income Fund invests at least half of the portfolio in U.S.
Government and investment grade fixed income securities and up
to 33 percent of the portfolio in fixed income securities with
ratings below investment grade. These high yield, high risk or
"junk bonds" generally involve greater price volatility and
greater risks to principal and income than do bonds in the
higher rating categories. Such high yield bonds are considered
predominately speculative.
Additional Information on Portfolio Instruments
Variable and Floating Rate Instruments
With respect to unrated variable and floating rate instruments,
the Investment Adviser will consider the earning power, cash
flows and other liquidity ratios of the issuers of such
instruments and will continuously monitor their financial status
to meet payment on demand. In determining average weighted
portfolio maturity and whether a variable or floating rate
instrument has a remaining maturity of one year or less, a
variable and floating rate instrument will usually be deemed to
have a maturity equal to the longer of the period remaining to
the next interest rate
2
<PAGE>
adjustment or the time the COMPANY can recover payment of principal
as specified in the instrument.
Repurchase Agreements
Repurchase agreements are considered to be loans by the COMPANY
under the Investment Company Act of 1940 (1940 Act). The
repurchase agreements described in the COMPANY's Prospectus are
fully collateralized which means that the value of the
collateral security is, and during the entire term of the
agreement remains, at least equal to the amount of the "loan"
including accrued interest. Securities subject to repurchase
agreements are held by the COMPANY's custodian or in the Federal
Reserve/Treasury book entry system. The Board of Directors
shall establish guidelines and standards of review for the
Investment Adviser to follow for purposes of determining the
credit worthiness of the broker or dealer issuing the repurchase
agreement. The Board of Directors will monitor the Investment
Adviser's actions in engaging in repurchase agreements for the
COMPANY.
Additional Investment Limitations
In addition to the investment limitations disclosed in the
Prospectus, the FUNDS are subject to the following investment
limitations which may be changed with respect to a particular
FUND only by a vote of a majority of the holders of such FUND
(as defined under MISCELLANEOUS in the Prospectus).
The FUNDS will not:
1. Invest in bank obligations having remaining maturities in
excess of one year, except that (1) securities subject to
repurchase agreements may have longer maturities and (2) the
Bond Fund, the Long Term Income Fund, the Retirement Income Fund
or the Balanced Fund may invest in bank obligations without
regard to maturity.
2. Make loans, except that each FUND may purchase or hold debt
securities in accordance with its investment objectives and
policies and may enter into repurchase agreements with respect
to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
3. Purchase securities on margin, make short sales of
securities or maintain a short position.
4. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as it might be deemed
to be an underwriter upon disposition of certain portfolio
securities acquired within the limitation on purchases of
restricted securities.
5. Purchase or sell real estate, except that each FUND may
purchase securities of issuers which deal in real estate and may
purchase securities which are secured by interests in real
estate.
6. Purchase or sell commodities futures contracts or invest in
oil, gas, or other mineral exploration or development programs;
provided, however, this shall not prohibit the Equity
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<PAGE>
Growth Fund or the Balanced Fund from purchasing publicly traded
securities of companies engaging in whole or in part in such
activities.
7. Issue any senior securities.
8. Invest in companies for the purpose of exercising
management or control.
9. Invest more than five percent of its total assets in
securities issued by companies which, together with any
predecessor, have been in continuous operation for fewer than
three years.
10. Acquire any other investment company or investment company
security except in connection with a merger, consolidation,
reorganization or acquisition of assets.
11. Permit the purchase or retention of the securities of any
issuer if the officers, directors or trustees of the COMPANY,
its advisers or managers owning beneficially more than one-half
of one percent of the securities of such issuer together own
beneficially more than five percent of such securities.
DISTRIBUTION PLAN:
As stated in the Prospectus, the COMPANY has adopted a Plan of
Distribution (the Plan) under Section 12(b) of the 1940 Act and
Rule 12b-1 thereunder (the Rule). Under the Plan, each FUND is
authorized to spend up to 0.25% of its average daily net assets
on activities primarily intended to result in the sale of the
Shares of any of the FUNDS comprising the COMPANY, which
activities are summarized in the Prospectus. The Board of
Directors has suspended indefinitely the 12b-1 fees for the Bond
and Long Term Income Funds.
Under the Distribution Agreement with Distributor discussed
above, each FUND is authorized to reimburse Distributor for its
distribution activities (which are the same as those authorized
by the Plan) on behalf of each FUND on a monthly basis, provided
that any payment by a fund to Distributor, together with any
other payments made by such FUND pursuant to the Plan, shall not
exceed .02083% of its average daily net assets for the prior
month (.25% on an annualized basis).
The plan was initially approved on July 17, 1987, by the
Directors of the COMPANY, including a majority of the Directors
who were not "interested persons" (as defined in the 1940 Act)
of the COMPANY and who had no direct or indirect financial
interest in the operation of the Plan or in any agreement
related to the Plan (the Qualified Directors). In approving the
Plan, the Directors determined that the Plan was in the best
interest of the shareholders of each FUND. At the first Annual
Meeting of Shareholders held on July 22, 1988 for the
shareholders of the Equity Growth, Bond and Balanced Funds and
July 23, 1993 for the shareholders of the Long Term Income and
Retirement Income Funds, the Plan of Distribution was approved.
A modification of the plan to reduce the aggregate fees charged
under the plan to .25% annually, was approved by the Board of
Directors on April, 24, 1992. During the fiscal year ended
December 31, 1996, the COMPANY paid or accrued distribution
expenses of $81,923, $0, $166,293, $0 and $392,882 for the
Equity Growth, Bond, Balanced, Long Term Income and Retirement
Income Funds, respectively, to the COMPANY's distributor,
Advance Capital Services, Inc.
4
<PAGE>
The Plan requires that, at least quarterly, the Directors must
review a written report prepared by the Treasurer of the COMPANY
enumerating the amounts expended and purposes therefor under the
Plan. The Rule also requires that the selection and nomination
of Directors who are not "interested persons" of the COMPANY be
made by such disinterested Directors.
DESCRIPTION OF SHARES:
The COMPANY's Articles of Incorporation authorize the Board of
Directors to issue up to one billion shares of capital stock,
and to classify or reclassify any unissued shares of the COMPANY
into one or more additional classes by setting or changing in
any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption. All of the COMPANY's authorized
capital is currently classified into five classes of Shares,
each representing interests in one of five separate investment
portfolios - the Equity Growth Fund, the Bond Fund, the Balanced
Fund, the Long Term Income Fund and the Retirement Income Fund.
Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Directors may grant in its
discretion. When issued for payment as described in the
Prospectus, the COMPANY's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of
the COMPANY or an individual FUND, shareholders of a FUND are
entitled to receive the assets available for distribution
belonging to the particular FUND, and a proportionate
distribution, based upon the relative asset values of the
respective FUNDS, of any general assets of the COMPANY not
belonging to any particular FUND which are available for
distribution.
Shareholders are entitled to one vote for each full Share held,
and fractional votes for fractional Shares held, and will vote
in the aggregate and not by class except as otherwise required
by the 1940 Act or other applicable law or when the matter to be
voted upon affects only the interest of the shareholders of a
particular class. Voting rights are not cumulative and,
accordingly, the holders of more than 50% of the aggregate of
the COMPANY's Shares may elect all of the directors,
irrespective of the votes of other shareholders.
Rule 18f-2 under the 1940 Act provides that any matter required
to be submitted to the holders of the outstanding voting
securities of an investment company such as the COMPANY shall
not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding Shares
of each FUND affected by the matter. A FUND is affected by a
matter unless it is clear that the interests of each FUND in the
matter are substantially identical or that the matter does not
effect any interest of the FUND. Under the Rule, the approval
of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon
with respect to a FUND only if approved by a majority of the
outstanding Shares of such FUND. However, the Rule also
provides that the ratification of the appointment of independent
public accountants, the approval of principal underwriting
contracts, and the election of directors may be effectively
acted upon by shareholders of the COMPANY voting without regard
to class.
The COMPANY's Articles of Incorporation authorize the Board of
Directors, with shareholder approval, to (a) sell and convey the
assets of a FUND to another management investment company for
consideration which may include securities issued by the
purchaser and, in
5
<PAGE>
connection therewith, to cause all outstanding
Shares of the FUND involved to be redeemed at a price which is
equal to their net asset value and which may be paid in cash or
by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a
FUND's assets into money and, in connection therewith, to cause
all outstanding Shares of the FUND involved to be redeemed at
their net asset value; or (c) combine the assets belonging to a
FUND with the assets belonging to another FUND, if the Board of
Directors reasonably determines that such combination will not
have material adverse effect on shareholders of any FUND
participating in such combination, and, in connection therewith,
to cause all outstanding Shares of any FUND to be redeemed at
their net asset value or converted Shares of another class of
capital stock at net asset value. In the event that Shares are
redeemed in cash at their net asset value, a shareholder may
receive in payment for such shares an amount that is more or
less than his original investment due to changes in the market
price of the FUND's portfolio securities. The exercise of such
authority by the Board of Directors will be subject to the
provisions of the 1940 Act, and the Board of Directors will not
take any action described in this paragraph unless the proposed
action has been disclosed in writing to the FUND's shareholders
at least 30 days prior thereto.
Notwithstanding any provision of Maryland law requiring a
greater vote of the COMPANY's common stock (or of the Shares of
a FUND voting separately as a class) in connection with any
corporate action, unless otherwise provided by law (for example,
by Rule 18f-2 discussed above) or by the COMPANY's Articles of
Incorporation, the COMPANY may take or authorize such action
upon the favorable vote of the holders of more than 50% of the
outstanding common stock of the COMPANY voting without regard to
class.
OFFICERS AND DIRECTORS:
Officers and Directors of the COMPANY, their addresses,
principal occupations during the last five years, and other
affiliations are as follows:
Positions Principal Occupations
Name and Address & Offices During Past 5 Years
- ---------------------------------------------------------------------
*John C. Shoemaker Director and President & Director, Advance
One Towne Square President Capital I, Inc.; President,
Suite 444 Advance Capital Management, Inc.
Southfield, MI 48076
- ---------------------------------------------------------------------
Robert J. Cappelli Vice-President President, Advance Capital
One Towne Square and Treasurer Services, Inc.; Vice President
Suite 444 & Treasurer, Advance Capital I, Inc.
Southfield, MI 48076
- ---------------------------------------------------------------------
Charles J. Cobb Vice President Vice President, Advance Capital
One Towne Square I, Inc.; Regional Representative,
Suite 444 Advance Capital Services, Inc.;
Southfield, MI 48076 Controller, Advance Capital I, Inc.,
Advance Capital Group, Inc.
- ---------------------------------------------------------------------
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Positions Principal Occupations
Name and Address & Offices During Past 5 Years
- ----------------------------------------------------------------------
Kathy J. Harkleroad Secretary Secretary, Advance Capital I, Inc.;
One Towne Square Director of Client Services,
Suite 444 Advance Capital Services, Inc.
Southfield, MI 48076
- ----------------------------------------------------------------------
Joseph A. Ahern Director Attorney and Partner, Stark, Reagan &
3208 E. Breckenridge Finnerty, P.C.
Bloomfield Hills, MI 48301
- ----------------------------------------------------------------------
Richard W. Holtcamp Director Retired General Manager - Marketing,
27 Oyster Rake Lane Michigan Bell Telephone; Director of
Hilton Head Is., SC 29926 Marketing and Consultant,
Fishburne & Co., Inc.
- ----------------------------------------------------------------------
Harry Kalajian Director Retired Executive Vice President -
2401 Eimen Road Finance & External Affairs, Michigan
Traverse City, MI 49686 Bell Telephone; Treasurer, WTVS
Public Television, Channel 56
Detroit; Vice Chairman, Board of
Trustees, Grace Hospital, Detroit
- ----------------------------------------------------------------------
Frank R. Zimmerman Director Retired President, Illinois Bell
175 N. Harbor Drive Telephone Company; Director, Executive
Apt. 2506 Service Corp. of Chicago; Director,
Chicago, IL 60601 First Methodist Episcopal Aid Society
- ----------------------------------------------------------------------
*"Interested person" of the COMPANY as defined in the
Investment Company Act of 1940.
Advance Capital Management, Inc., Investment Adviser, and
Advance Capital Services, Inc., Distributor, are wholly owned
subsidiaries of Advance Capital Group, Inc., Administrator and
Transfer Agent. Directors who are not affiliated with any of
the Advance Capital companies are paid an annual fee of $1,000
plus $100.00 for each meeting attended plus reimbursement of
expenses incurred in attending such meetings. No officer or
director received any other compensation directly from the
COMPANY. Messrs. Shoemaker and Cappelli, who are shareholders
of Advance Capital Group, Inc., may be deemed to receive
indirect remuneration by virtue of their participation, if any,
in the fees paid to its subsidiaries. The Company was charged
investment management fees totaling $1,503,599 for 1996. For
the same period all administrative fees were waived.
7
<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATION AND TRANSFER AGENT
AGREEMENTS:
Advance Capital Management, Inc. serves as Investment Adviser
to the FUNDS. Under Asset Manager's Agreements, signed December
21, 1993 and December 17, 1993, T. Rowe Price Associates, Inc.,
has been hired as a Sub-Adviser to the Equity Growth and
Balanced Funds. These agreements were approved at a Special
Meeting of Shareholders on October 28, 1993. The Investment
Adviser and Sub-Adviser have agreed to provide to the COMPANY
the advisory services described in the Prospectus and in the
Investment Advisory Agreement. The Investment Adviser has also
agreed to pay certain expenses, including the fees associated
with hiring of a Sub-Adviser, incurred in connection with its
activities under the Investment Advisory Agreement other than
the cost of securities, including brokerage commissions,
purchased for the COMPANY.
Specifically, the Investment Adviser will pay in full for (a)
the salaries and employment benefits of all of its employees who
are engaged in providing these services, (b) adequate office
space and suitable office equipment for such employees, (c) all
telephone and postage costs relating to such functions.
The Investment Advisory Agreement provides that the Investment
Adviser shall not be held liable for any error of judgment or
mistake of law or for any loss suffered by the COMPANY in
connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or
a loss resulting from willful misfeasance, bad-faith, or gross
negligence on the part of the Investment Adviser in the
performance of their duties or from reckless disregard by them
of their duties and obligations thereunder.
Advance Capital Group, Inc. serves as the COMPANY's
Administrator and Transfer Agent. Under the Administration and
Transfer Agent Agreement, Advance Capital Group, Inc. as
Administrator agrees to maintain office facilities for the
COMPANY, furnish the COMPANY with statistical and research data,
clerical, accounting, and bookkeeping services, and certain
other services required by the COMPANY, and to compute the net
asset value, net income and realized capital gains or losses, if
any, of the respective FUNDS. The Administrator prepares
semi-annual reports to the Securities and Exchange Commission,
prepares Federal and state tax returns, prepares filings with
the state commissions, maintains financial accounts and records
and generally assists in all aspects of the COMPANY's
operations. Advance Capital Group, Inc., acting in its capacity
as Transfer Agent, arranges for and bears the cost of processing
share purchase and redemption orders, maintains shareholder
record accounts and serves as dividend disbursing agent, with
duties involving calculation of dividends and capital gains
distributions, issuing dividend and capital gains checks,
authorizing payment by the Custodian, and maintaining dividend
and capital gains payment records. The Transfer Agent is also
responsible for preparing and mailing to shareholders periodic
account statements, federal tax information, daily confirmations
of transactions in FUND Shares and issuing Share certificates
upon request by shareholders. In addition, the Transfer Agent
will respond to telephone and mail inquiries concerning the
status of shareholder accounts.
If the expenses borne by any FUND in any fiscal year exceed
expense limitations imposed by applicable state regulations,
Advance Capital Management, Inc. will reimburse the COMPANY for
a portion of any such excess to the extent required by such
regulations up to the amount of fees
8
<PAGE>
payable to it or it may effect such reimbursement regardless of the
fees payable to it. Such amount, if any, will be estimated, reconciled
and paid on a monthly basis.
PORTFOLIO TRANSACTIONS:
Subject to the general control of the COMPANY's Board of
Directors, the Investment Adviser and Sub-Adviser, are
responsible for, make decisions with respect to, and place
orders for all purchases and sales of portfolio securities.
Although the FUNDS do not intend to invest for the purpose of
seeking short-term profits, securities in the portfolios will be
sold whenever the Investment Advisor believes it is appropriate
to do so in light of the respective FUND's investment
objectives, without regard to the length of time a particular
security may have been held. Portfolio turnover may vary from
year to year as well as within a particular year, and may also
be affected by cash requirements for redemptions of Shares and
by regulatory provisions which enable the COMPANY to receive
certain favorable tax treatment. Although it is not possible to
predict the annual portfolio turnover rates, it is not expected
to exceed 125% for the Equity Growth Fund, the Retirement Income
Fund and the equity portion of the Balanced Fund and not
expected to exceed 75% for the Bond Fund, the Long Term Income
Fund and the bond portion of the Balanced Fund when measured
over any extended number of years. Portfolio turnover will not
be a limiting factor in making portfolio decisions.
Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary
among different brokers.
Transactions in the over-the-counter market are generally
principal transactions with dealers and the costs of such
transactions involve dealer spreads rather than brokerage
commissions. With respect to over-the-counter transactions, the
COMPANY, where possible, will deal directly with the dealers who
make a market in the securities involved except in those
circumstances where better prices and execution are available
elsewhere.
The Investment Advisory Agreement between the COMPANY and the
Investment Adviser and the Asset Manager's Agreement between the
Investment Adviser and the Sub-Adviser, both provide that, in
executing portfolio transactions and selecting brokers or
dealers, the Investment Adviser and Sub-Adviser will seek to
obtain the best net price and the most favorable execution. The
Investment Adviser and Sub-Adviser shall consider factors deemed
relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of
the commission, if any, for the specific transaction and on a
continuing basis. In addition, the Investment Advisory
Agreement authorizes the Investment Adviser, to the extent
permitted by law and subject to the review of the COMPANY's
Board of Directors from time to time with respect to the extent
and continuation of this policy, to cause any of the FUNDS to
pay a broker-dealer which furnishes brokerage and research
services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction,
provided that the Investment Adviser determines in good faith
that such commission is reasonable in relation to the value of
the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Investment
Adviser to the accounts as to which it exercises investment
9
<PAGE>
direction. Such brokerage and research services might consist
of reports and statistics on specific companies or industries,
general summaries of groups of stocks and their comparative
earnings, yields or broad overviews of the stock market and the
economy.
Supplementary research information so received is in addition
to and not in lieu of services required to be performed by the
Investment Adviser or Sub-Adviser and does not reduce the
investment advisory fee payable to the Investment Adviser by the
COMPANY. Such information may be useful to the Investment
Adviser or Sub-Adviser in servicing both the COMPANY and other
clients, and, conversely, supplemental information obtained by
the placement of business of other clients may be useful to the
Investment Adviser or Sub-Adviser in carrying out its
obligations to the COMPANY.
The COMPANY has authorized the Investment Adviser to place
brokerage orders with some brokers who distribute the COMPANY's
Shares. The Investment Adviser will do so only when it
reasonably believes that the commissions and the transaction
quality are comparable to that available from other qualified
brokers.
Portfolio securities will not be purchased from or sold to the
Investment Adviser, the Sub-Adviser, the Distributor or any
affiliated person of any of them (as such term is defined in the
1940 Act) acting as principal, except to the extent permitted by
the Securities and Exchange Commission.
CUSTODIAN:
Huntington Banks of Michigan is "Custodian" of the Company's
assets. Under the custodian agreement, Custodian has agreed to
(i) maintain separate accounts in the name of the Company; (ii)
make receipts and disbursements of money on behalf of the
Company; (iii) collect and receive all income and other payments
and distributions on account of the Company's portfolio
securities; (iv) respond to correspondence from securities
brokers and other relating to its duties; (v) maintain certain
financial accounts and records; (vi) make periodic reports to
the Company's Board of Directors concerning the Company's
operations. Under the custodian agreement, Custodian is
entitled to monthly fees for furnishing custodial services and
is entitled to reimbursement for its out of pocket expenses in
connection with the above services.
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP, with offices at 200 Renaissance Center,
Suite 3900, Detroit, Michigan 48243 serve as independent
accountants for the COMPANY. The financial highlights and
financial statements of the COMPANY included in the Prospectus
and the Statement of Additional Information, respectively, have
been audited by Price Waterhouse LLP for the years ended
December 31, 1995 and 1996 referred to in their report thereon.
COUNSEL:
Berry Moorman, 600 Woodbridge Place, Detroit, Michigan 48226,
are counsel to the COMPANY and will pass upon the legality of the
Shares offered in the Prospectus.
10
<PAGE>
PERFORMANCE INFORMATION:
From time to time, each FUND may state its total return in
advertisements and other types of literature. Any statements of
total return performance data will be accompanied by information
on the Fund's average annual compounded rate of return over the
most recent 1 year period or life of the FUND.
Each FUND's average annual compounded rate of return is based
on a hypothetical $1,000 investment that includes capital
appreciation and depreciation during the stated periods. The
following formula will be used for the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
from which the maximum sales load ( 0 ) is deducted
T = average annual total return
n = number of years
ERV= redeemable value of the hypothetical $1,000 purchase at
the end of the period
Aggregate total return is calculated in a similar manner,
except that the results are not annualized.
The performance for each of the FUNDS, as shown below, is the
average annual return for the FUNDS for the periods listed;
Security prices fluctuate during the period covered and the past
results should not be considered as representative of future
performance.
<TABLE>
<CAPTION>
Average Annual Return
---------------------
Past 1 Past 5 Past 10
Year Years Years
------ ------- -------
<S> <C> <C> <C>
Equity Growth * 17.48% N/A N/A
Bond 2.81% 7.05% N/A
Balanced ** 14.48% 9.64% N/A
Long Term Income 2.09% N/A N/A
Retirement Income 4.54% N/A N/A
</TABLE>
* Effective December 29, 1993, the investment objectives of the
Equity Growth Fund were changed by shareholder vote and T. Rowe
Price Associates, Inc. became the sub-investment adviser with
the primary responsibility for the daily security investment
decisions.
** Effective December 29, 1993, T. Rowe Price Associates, Inc.
became the sub-investment adviser with the primary
responsibility for the daily equity security investment
decisions for the Balanced Fund.
11
<PAGE>
SECURITY VALUATION:
The FUNDS' assets are valued as follows: (a) stocks which are
traded on the New York Stock Exchange are valued at the last
sale price on that Exchange on the valuation day or, if no sale
occurs, at the mean between the closing bid and asked price; (b)
other stocks are valued in the manner described in (a) if traded
on any other exchange or on the National Association of
Securities Dealers NASDAQ; (c) over-the-counter stocks quoted on
the National Association of Securities Dealers NASDAQ system are
valued at the bid price supplied through such system; (d)
over-the-counter common and preferred stocks not quoted on the
NASDAQ system are valued at the mean between the last bid and
asked price, and (e) all other securities are valued at fair
value as determined in good faith by the Board of Directors,
although the actual calculation may be done by others. Money
market instruments held by the FUNDS with a remaining maturity
of sixty days or less will be valued at amortized cost.
ADDITIONAL TAX INFORMATION:
The Internal Revenue Code of 1986 treats each FUND in a series
mutual fund as a separate corporation. As such, each FUND
intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1954. The
COMPANY intends to distribute to shareholders of each FUND all
capital gains and income earned.
Unless otherwise exempt, shareholders are required to pay
Federal income tax on any dividends and other distributions
received. This applies whether dividends are received in cash
or as additional shares. Information on the tax status of
dividends is provided annually.
At the time of your purchase, the FUND's net asset value may
reflect undistributed income or capital gains or net unrealized
appreciation of securities held by the FUND. A subsequent
distribution to you of such amounts, although constituting a
return of your investment, would be taxable as described above.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES:
Controlling Persons
As of April 9, 1997, no individual owned of record or
beneficially 25% or more of any Class of stock or, in any other
manner, represents a controlling interest in the COMPANY.
12
<PAGE>
Principal Holders of Securities
As of April 9, 1997 the following individuals were known to own
of record or beneficially 5% or more of the outstanding shares
of a particular class of Shares of the COMPANY:
CLASSES A,C, and E
NOTHING TO REPORT
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS SHARES OF CLASS
---------------- ------ --------
<S> <C> <C>
CLASS B
Dezena Mary Houghton 23,558 5.89%
13558 Ward Street
Southgate, MI 48195
CLASS D
Sarah M. Beechler 5,832 5.16%
2814 Briarcliff
Ann Arbor, MI 48105
Russell A. Bobcean 8,823 7.81%
Donna Marie Bobcean
7071 Reams Road
Alanson, MI 49706
Cecile E. Carter 8,050 7.13%
365 Sand Point
Mead, OK 73449
Dennis J. Casey 6,272 5.55%
811 East Pointe
Port Huron, MI 48060
Ann F. Mienaltowski 8,361 7.40%
13573 Kingsville
Sterling Heights, MI 48312
Gerald R. Rice 8,569 7.59%
1912 Norwood Drive
Midland, MI 48640
Elden A. Rutenbar 6,341 5.62%
17300 Delaware
Redford, MI 48240
13
<PAGE>
Susan M. Willmer 6,601 5.84%
5811 Cabrena
Lansing, MI 48917
</TABLE>
Principal Holders of Securities (Directors and Officers)
As of April 9, 1997, all directors and officers as a group (8
persons) owned 65,884 Class A shares (2.2%), 6,892 Class B
shares (1.7%), 16,856 Class C shares (.3%), 0 Class D shares,
and 671 Class E shares (.0%).
MISCELLANEOUS:
As used in the Prospectus, "assets belonging to a FUND" means
the consideration received by the COMPANY upon the issuance of
Shares in that particular FUND, together with all income,
earnings, profits, and proceeds derived from the investment
thereof, including any proceeds from the sale of such
investments, any funds or payments derived from any reinvestment
of such proceeds, and a portion of any general assets of the
COMPANY not belonging to a particular FUND. In determining a
FUND's net asset value, assets and liabilities of the COMPANY
are normally allocated in proportion to the relative asset
values of the respective FUNDS. Subject to the provisions of
the COMPANY's Articles of Incorporation, determinations by the
Board of Directors as to the direct and allocable liabilities,
and the allocable portion of any general assets with respect to
a particular FUND, are conclusive.
DESCRIPTION OF BOND RATINGS:
Excerpts from Moody's Investors Service, Inc. ("Moody's")
description of its bond ratings: AAA - judged to be the best
quality. They carry the smallest degree of investment risk; AA
- - judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high
grade bonds; A - possess many favorable investment attributes
and are to be considered as "upper medium grade obligations";
BAA - considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; BA
- - judged to have speculative elements; their future cannot be
considered as well assured; B - generally lack characteristics
of the desirable investment; CAA - are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest; CA - speculative
in a high degree; often in default; C - lowest rated class of
bonds; regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in
the higher end of its rating category; the modifier 2 indicates
a mid-range ranking; and 3 indicates a ranking toward the lower
end of the category.
Excerpts from Standard & Poors Corporation ("S&P") description
of its bond ratings: AAA - highest grade obligations. Capacity
to pay interest and repay principal is extremely strong; AA -
also qualify as high grade obligation. A very strong capacity
to pay interest and repay principal and differs from AAA issues
only in small degree; A - regarded as upper medium grade. They
have a strong capacity to pay interest and repay principal
although it is somewhat susceptible to the adverse
14
<PAGE>
effects of changes in circumstances and economic conditions than debt in
higher rated categories; BBB - regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. This
group is the lowest which qualifies for commercial bank
investment. BB, B, CCC and CC are predominately speculative
with respect to capacity to pay interest and repay principal in
accordance with terms of the obligation; BB indicates the lowest
degree of speculation and CC the highest.
S&P applies indicators "+", no character, and "-" to its rating
categories. The indicators show relative standing within the
major rating categories.
FINANCIAL STATEMENTS:
The following is attached:
(1) Annual Report for year ended December 31, 1996. The Annual
Report includes: Investment Performance, Financial Highlights,
Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets,
Notes to Financial Statements, the Independent Accountants'
Report, and Additional Information.
<PAGE>
ANNUAL REPORT
December 31, 1996
ADVANCE CAPITAL I, Inc.
An investment company with five funds
<PAGE>
TABLE OF CONTENTS
- ----------------------------------------
Page
A letter to our shareholders..........2
Investment Performance................4
Financial Highlights.................11
PORTFOLIO OF INVESTMENTS
Equity Growth Fund..............16
Bond Fund.......................21
Balanced Fund...................24
Long Term Income Fund...........34
Retirement Income Fund..........37
Statement of Assets and Liabilities..44
Statement of Operations..............45
Statement of Changes in Net Assets...46
Notes to Financial Statements........49
Report of Independent Accountants....53
Additional Information...............54
<PAGE>
Dear Shareholders,
The year 1996 marked the second consecutive year of double
digit stock returns. It was also one of the best performing
back-to-back-year periods in history. After a rather
uninteresting 1994, these two years could not have better
reinforced the concepts of staying the course and investing for
the long term. Those late-1994 investors who, tempted by the
headlines, reallocated their portfolios from stocks have paid a
high price for their lesson. In the two years since, the S&P
500 Index has returned 61.3 percent and the Dow Jones Industrial
Average has returned 68.2 percent. Long term history continues
to be the best guide for long term investing. Headlines can be
a great distraction and, if heeded, a great detriment to
performance.
Today factories are operating near capacity, corporate
profits are strong, unemployment is low and consumer confidence
and spending remain high. The Federal Reserve's three year
commitment to control inflation and produce the proverbial "soft
landing" appears to have worked. This record-setting prosperity
continues to encourage investors to move stocks to higher and
higher levels. This very success itself is now worrying an
increasing number of investors. One can argue, and many do,
that stocks are ten to fifteen percent overpriced, that a
correction is in the future and, perhaps, is imminent. For the
long term investor this caution, even if accurate, is not
relevant. One can never tell exactly when to exit and, having
done so, when to reenter. Avoiding stock corrections is highly
desirable but the potential cost (of an error) is too high to
warrant the attempt.
For the year 1996 the Advance Capital I Funds produced
returns that were in-line with most averages. The Equity Growth
Fund, in its third year as a small to mid-cap growth stock fund,
increased 17.5 percent in value while the Lipper Analytical
Services Index of Mid-Cap Stock funds increased 16.3 percent.
The Balanced Fund with its 60-40 mix of stocks and bonds,
increased 14.5 percent compared to a 13.0 percent increase in
the Lipper Balanced Fund Index. The Bond and Long Term Income
Funds returned 2.8 and 2.1 percent respectively, while the
Lipper Index of A-Rated bond Funds increased 2.6 percent.
Finally, the Retirement Income Fund returned 4.5 percent
compared with the Lipper Index of BBB-Rated Bond Funds which
returned 4.1 percent.
Our view of 1997 is that the economic status quo will
continue, at least for the first half of the year. Economic
signals continue to be mixed and the pace of the economy is high
but relatively stable. Signs of pending inflation continue to
be elusive, which is good for both stocks and bonds. We do
anticipate a moderate slowing in eco-
2
<PAGE>
nomic activity in the second half of the year. Such a slowdown
could discourage stock investors and trigger a long-anticipated
correction. This, in our view, is part of the normal progress
of the stock market. We see no signs of doom on the horizon for
either stocks or bonds. After the blistering pace set by stocks
in 1995 and 1996 it would be foolhardy not to anticipate a
cooler, calmer 1997. In fact a "normal year" of 12 percent or
so for stocks would be very calm, indeed, by comparison to the
recent past. For bonds we expect a coupon-clipping year in the
six to eight percent range. Dramatic pressures on inflation and
interest rates, in either direction, are just not visible and we
do not anticipate any.
At December 31, 1996, the five Advance Capital I, Inc.
Funds held about $290 million in total assets, a 26 percent
increase from the prior year. Our focus has been and will
remain on the long term. Proper investment decisions and broad
diversification in respective categories is the cornerstone to
our investment philosophy. We fully expect this approach,
combined with our careful attention to costs, will continue to
serve our investors well, over time. We thank you for your
continued confidence and look forward to providing you and
others with service and results designed to meet or exceed your
long term investment objectives. If you have questions or if we
may be of service , please call us. We appreciate the
opportunity to answer your questions or to discuss financial or
investment matters that may be of interest to you. Our
toll-free number is (800) 345-4783.
Sincerely,
/s/ Robert J. Cappelli /s/ John C.Shoemaker
Robert J. Cappelli John C. Shoemaker
February 7, 1997
3
<PAGE>
INVESTMENT PERFORMANCE
Advance Capital I, Inc. is an open-end, diversified
management investment company offering investment opportunities
in five mutual fund portfolios.
<TABLE>
<CAPTION>
1996 FUND RESULTS
<S> <C>
Equity Growth 17.48%
Bond 2.81%
Balanced 14.48%
Long Term Income 2.09%
Retirement Income 4.54%
</TABLE>
The accompanying comments are intended to help investors
evaluate the dynamics of mutual fund performance. The charts
and tables that follow show the average annual return of each
Fund as well as selected measures of general stock and bond
market returns. The Consumer Price Index (CPI) is also shown to
illustrate the impact inflation has on investment returns.
Figures for the life of the Bond and Balanced Funds begin
August 31, 1987, a few days after the funds started. The Long
Term Income Fund and Retirement Income Fund figures begin
January 1, 1993, the start date for those funds. The historical
figures for the Equity Growth Fund begin January 1, 1994, a few
days after the substantial change in the investment objectives
and the addition of T. Rowe Price as a sub-investment advisor to
the Fund.
THE EQUITY GROWTH FUND IN 1996
The Advance Capital I Equity Growth Fund seeks long-term
growth of capital by investing primarily in common stocks of
small, rapidly growing companies.
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES
<S> <C>
Computer Software 11.7%
Retail Store 6.6%
Medical Services 6.4%
Medical Supplies 5.1%
Computer Peripherals 4.8%
</TABLE>
The Equity Growth Fund returned 17.48 percent in 1996 while
the NASDAQ Composite Index returned 22.71 percent and the S&P
500 Index (with dividends reinvested) returned 22.95 percent.
The accompanying graph shows the cumulative performance of the
Equity Growth Fund, the S&P 500 Index, the NASDAQ Composite
Index and the Consumer Price Index (CPI) since the beginning of
1994. The dramatic performance of the largest companies, which
dominate these indices, accounts for the difference in
performance with the Equity Growth Fund, which is broadly
diversified across the mid-cap stock universe.
For a second straight year, low inflation, sound economic
growth and record inflows into stock mutual funds has produced
dramatic stock returns. Market indices dominated by stocks with
the largest market capitalization returned 20 percent or better
for the year, hitting record highs along the way. As the five
year expansion and two plus years of record stock returns enters
another year, the forces that determine stock values point
toward stable, but unnerving fundamentals.
In a normal business cycle, wage and commodity inflation
become issues as the expansion matures. The Federal Reserve
Board, however, has been able to hold both consumer and producer
price inflation at the average for the last five years. Wage
growth, adjusted for inflation, has been flat for the last
decade. Stock investing has
4
<PAGE>
now entered unchartered territory. The continuation of a five
year expansion with no significant signs of inflation has
produced fertile ground for the massive growth in stocks values.
The challenge ahead for the Federal Reserve is to moderate
late-expansion period excesses such as higher wages or higher
commodity prices.
For the last five years corporations have down sized their
work forces and upgraded their technology in efforts to increase
productivity and reduce expenses. These decisions have produced
strong corporate earnings and correspondingly higher stock
prices. In select industries further cost reduction is
possible, but future earnings will be driven by improvements in
technology and the general prosperity of the economy. In the
absence of a domestic or global recession, corporate earnings in
1997 should hold no real surprises that would prove detrimental
to the stock market.
In the near term the market's success, not higher inflation
or lower earnings, may prove to be its biggest risk. As
investors scramble to participate in record stock returns, they
have poured millions into mutual funds. Portfolio managers,
flush with cash, have been forced to choose between holding
money market instruments or investing in a stock market that has
appeared overpriced. Because the penalty for holding cash in a
rising market is great, most portfolio managers have been forced
to invest. This increased demand for stocks has created a
market that is somewhat overpriced by historical measures.
Although economic fundamentals remain strong, rational investors
realize that record setting stock returns will not last
indefinitely. The year ahead may prove erratic for stocks. If
economic fundamentals remain sound, and cash flows into mutual
funds continue at a strong pace, stocks should provide average
returns for the full year 1997.
THE EQUITY GROWTH FUND
[EDGAR REFERENCE - S & P 500, NASDAQ, EQUITY GROWTH AND CPI
INDEX LINE CHART FOR 1994-1996]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1996
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Equity Growth Fund 17.48% N/A 15.87%
NASDAQ Composite Index 22.71% N/A 18.42%
S&P 500 Index 22.95% N/A 19.63%
Consumer Price Index (CPI) 3.45% N/A 2.90%
</TABLE>
Past performance should not be used to attempt to predict
future performance.
5
<PAGE>
THE BOND FUND IN 1996
The Advance Capital I Bond Fund seeks to provide investors
with stable income from high quality investment grade bonds and
U.S. government bonds.
<TABLE>
<CAPTION>
As of 12/31/96
<S> <C>
Average Maturity 7.8 Years
Average Quality A+
Average Duration 5.5 Years
Size $4.4 Million
</TABLE>
The Bond Fund returned 2.81 percent for 1996. This return
represents 6.70 percent income distributed to shareholders and a
3.89 percent decrease in share price. The accompanying graph
shows the cumulative performance of the Bond Fund, the Balanced
Fund, the Lehman Brothers Government-Corporate Bond Index, the
Consumer Price Index and the S&P 500 Index (with dividends
reinvested).
The fixed income market in 1996 was a roller coaster ride.
At the end of 1995, the ten-year government bond was yielding
around 5.60 percent. By mid year 1996, it had risen to 7.07
percent and by year end it was back down to 6.05 percent. This
swing was the result of conflicting economic signals throughout
the year. Some economic data pointed to low unemployment,
strong consumer confidence and average inflation. Other data
pointed to possible wage inflation, rising energy and food
prices and rising consumer debt. Combined with election year
politics, the fixed income market in 1996 was anything but dull.
At the end of the year, the average maturity of the Bond
Fund was about 7.8 years, slightly lower than the prior year,
but within its target range of 5 to 10 years. Duration, which
measures the sensitivity of the portfolio to changes in interest
rates, declined from 5.8 in 1995 to 5.5 in 1996. The reduction
in these categories was less the result of a strategic decision
than the passage of time. Quality remains strong with a solid
A+ average rating for the bonds in the Fund.
Today the economy is growing about 2.5 to 3.0 percent
annually. Both consumer and producer price inflation are at
their historical average and federal deficit spending continues
to decline. The year ahead looks stable for fixed income
investments. Although not exciting, fixed income securities
should return about their historical average for the coming
year. The Bond Fund, with an overall maturity of about 8 years,
is well positioned for this stable view in 1997.
6
<PAGE>
THE BALANCED FUND IN 1996
The Advance Capital I Balanced Fund seeks to provide
capital appreciation, current income and preservation of capital
by investing in a diversified portfolio of common stocks and
bonds.
<TABLE>
<CAPTION>
As of 12/31/96
<S> <C>
Bonds 37%
Small Stocks 20%
Large Stocks 43%
Size $75 Million
</TABLE>
The Balanced Fund increased 14.48 percent in 1996. The
Lehman Brothers Government-Corporate Bond Index increased .40
percent and the S&P 500 Index (with dividends reinvested)
increased 22.95 percent. The accompanying graph illustrates the
cumulative performance of the Balanced Fund, the Bond Fund, the
Lehman Brothers Government-Corporate Bond Index, the S&P 500
Index (with dividends reinvested) and the Consumer Price Index
(CPI) since August 1987, the Fund's inception. The Fund
averages about 60 percent stocks and 40 percent bonds. The
stocks are comprised of both small-to-midsized company growth
stocks as well as large company value stocks. The bonds consist
of investment grade issues and United States Treasury bonds
and/or notes. Bond returns fluctuated from slightly negative to
slightly positive during the year, in reaction to inconsistent
economic data. These inconsistencies are a direct result of
today's global nature of business. Global competition has
forced companies to hold the line on prices to maintain market
share. As profit margins get squeezed, companies look to
streamline operations and reduce expenses to maintain profit
margins. Most expense reductions in recent years have come from
layoffs. The resulting feelings of job insecurity among
employees has caused the growth in real wages to remain stagnant
for the last decade. This may be starting to change. With the
current unemployment rate at 5.3 percent, the pool of qualified
candidates is shrinking. This may force corporations to offer
more lucrative employment packages to entice potential
candidates, a scenario which could spark renewed inflation or
concerns about inflation.
Stocks in the Balanced Fund performed well for a second
consecutive year. Strong fundamentals and enthusiastic
investors lifted stocks generally to record highs. In contrast
to 1995 large-company stocks outperformed smaller-company stocks
in 1996. The momentum that stocks have been riding for the last
two years may be slowing. As the market hits new highs,
investors become increasingly nervous and negative news puts
downward pressure on stocks.
Today, the Balanced Fund holds about 20 percent
small-company stocks, 43 percent large-company stocks and 37
percent corporate and government bonds. The Fund is well
diversified with 429 stocks and 64 bond holdings.
7
<PAGE>
[EDGAR REFERENCE - S & P 500, LBGC, BALANCED, BOND AND CPI INDEX
LINE CHART FOR 1987-1996]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1996
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Bond Fund 2.81% 7.05% 8.23%
Balanced Fund 14.48% 9.64% 8.72%
Lehman Brothers Government
Corporate Bond Index (LBGC) .40% 7.69% 9.27%
S&P 500 Index 22.95% 15.19% 12.72%
Consumer Price Index (CPI) 3.45% 2.88% 3.61%
</TABLE>
Past performance should not be used to attempt to predict
future performance.
THE LONG TERM INCOME FUND IN 1996
The Advance Capital I Long Term Income fund seeks to
provide investors with current income by investing in investment
grade bonds with long maturities.
<TABLE>
<CAPTION>
As of 12/31/96
<S> <C>
Average Maturity 19 Years
Average Quality A
Average Duration 9.0 Years
Size $1.4 Million
</TABLE>
The Long Term Income Fund returned 2.09 percent for the
year. This return reflects 6.82 percent from income distributed
to shareholders and a 4.73 percent decrease in share price. By
comparison the Lehman Brothers Government-Corporate Bond Index
returned .40 percent for the year. The accompanying graph shows
the cumulative return of the Long Term Income Fund, the
Retirement Income Fund, the Lehman Brothers Government-Corporate
Bond Index and the Consumer Price Index (CPI) since
8
<PAGE>
January 1993.
Throughout the year, economic data was erratic even though
inflation was under control and economic growth was moderate.
Each time the market began to rally in response to a piece of
good news, a new piece of data would appear which would spark
renewed inflation concerns. One week inflation seemed under
control and the next it appeared on the verge of increase. This
constant seesaw of news lead to a volatile bond market in 1996.
As Treasury Bond yields fluctuated throughout the year, so did
the performance of the Long Term Income Fund. The 30-year
Treasury Bond's yield began the year at about 5.95 percent. By
mid year it had risen to 7.26 percent and by year end it was
down to 6.45 percent. This volatility moved the Long Term
Income Fund to minus five percent by May, then to plus four
percent by November before closing the year at plus 2.09
percent. The fluctuation in return is a direct result of the
long average maturity of the Fund.
Today, the market appears to have settled into a trading
range, but remains uneasy about the long term prospects for
inflation. Although most data continues to reflect subdued
inflation and a moderately expanding economy, employment and
consumer confidence remain very strong and are possible
inflationary signals. The SEC yield of the Long Term Income
Fund was 6.77 percent at year end.
THE RETIREMENT INCOME FUND IN 1996
The Advance Capital I Retirement Income Fund seeks to
provide investors with current income by investing at least 65%
in investment grade corporate and U.S. Government bonds and as
much as 33% in lower-rated higher-yielding instruments.
<TABLE>
<CAPTION>
As of 12/31/96
<S> <C>
Average Maturity 17 Years
Average Quality BBB
Average Duration 8.3 Years
Size $170 Million
</TABLE>
The Retirement Income Fund returned 4.54 percent for the
year. This return was comprised of 7.49 percent from income
distributed to shareholders and a 2.95 percent decrease in share
price. The Fund's performance was helped by the presence of its
high yield bonds. Throughout the year the high yield portion of
the fund was maintained above 30 percent of the total portfolio.
The accompanying graph shows the cumulative performance of the
Retirement Income Fund, the Long Term Income Fund, the Lehman
Brothers Government-Corporate Bond Index and the Consumer Price
Index (CPI) since January 1993, the Fund's inception.
The investment grade portion of the Fund was negatively
affected by a volatile bond market. The prospect of lending
long term money in an uncertain inflation environment was the
impetus for this volatility. Investors believed the prospects
for short term inflation were bright, but questioned the long
term outlook. Early in the first quarter economic growth
unexpectedly accelerated and long maturing bonds fell about four
percent in value from January to May. By summer, the fear had
waned and signs were pointing to stable growth and average
inflation. By the third quarter, however, low unemployment
brought fears of possible wage inflation. As the market rocked
back and forth from positive to negative, so did the returns of
the investment grade portion of the Fund.
The high yield bonds comprise about one third of the Fund.
The balance
9
<PAGE>
between investment grade and high yield bonds served investors
well during the year. The same strong economic growth that
threatened inflation and hurt the performance of investment
grade bonds helped the performance of those companies issuing
high yield debt. High yield bonds are obligations of riskier
and/or start up businesses. When the economy grows, the
performance and the prospect of long term success for these
companies grows right along with it. Because of the strong
economy, fixed income portfolio managers were willing to hold
more of these bonds and, as the demand increased for high yield
bonds, so did the price.
Today, the Retirement Income Fund holds 86 investment grade
issues and 115 high yield issues. The structure and goal of the
Fund continues to emphasis broad diversification among issuers,
quality, maturity and industries to ensure high current income
at a reasonable risk level. Looking ahead, both the investment
grade and high yield markets appear stable and headed for an
average year in 1997. The SEC yield of the Retirement Income
Fund was 7.44 percent at year-end.
[EDGAR REFERENCE - RETIREMENT INCOME, LONG TERM, LBGC AND CPI
INDEX LINE CHART FOR 1993-1996]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1996
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Long Term Income Fund 2.09% N/A 8.20%
Retirement Income Fund 4.54% N/A 8.51%
Lehman Brothers Government
Corporate Bond Index (LBGC) .40% N/A 7.71%
Consumer Price Index (CPI) 3.45% N/A 2.86%
</TABLE>
Past performance should not be used to attempt to predict
future performance.
10
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . $12.53 $9.08 $9.46 $9.94 $9.83
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income (loss) . . . . . . (0.07) (0.03) (0.03) 0.12 0.10
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . 2.26 3.48 (0.35) 0.07 0.11
--------- --------- --------- --------- ---------
Total from investment operations . . . . 2.19 3.45 (0.38) 0.19 0.21
--------- --------- --------- --------- ---------
Less distributions
Net investment income . . . . . . . . . . 0.00 0.00 0.00 (0.12) (0.10)
Net realized gain on investments . . . . 0.00 0.00 0.00 (0.55) 0.00
--------- --------- --------- --------- ---------
Total distributions . . . . . . . . . . . 0.00 0.00 0.00 (0.67) (0.10)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . $14.72 $12.53 $9.08 $9.46 $9.94
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . 17.48% 38.00% -4.02% 2.13% 2.22%
Ratios and Supplemental Data
Net assets, end of year (in thousands). . $38,767 $25,625 $12,634 $7,577 $7,094
Ratio of expenses to average net assets . 1.09% 1.12% 1.21% 1.16% 1.22%
Ratio of net investment income (loss)
to average net assets . . . . . . . . . -0.50% -0.29% -0.30% 1.27% 1.05%
Portfolio turnover rate . . . . . . . . . 24.75% 13.86% 18.05% 135.55% 96.05%
Average commission rate per share* . . . $0.0261
</TABLE>
*For fiscal years beginning after September 1, 1996, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged.
See Notes To Financial Statements
11
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . $10.79 $9.61 $10.82 $10.51 $10.52
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income . . . . . . . . . 0.70 0.70 0.71 0.72 0.70
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . (0.42) 1.18 (1.21) 0.45 0.01
--------- --------- --------- --------- ---------
Total from investment operations . . . . 0.28 1.88 (0.50) 1.17 0.71
--------- --------- --------- --------- ---------
Less distributions
Net investment income . . . . . . . . . . (0.70) (0.70) (0.71) (0.72) (0.70)
Net realized gain on investments . . . . 0.00 0.00 0.00 (0.14) (0.02)
--------- --------- --------- --------- ---------
Total distributions . . . . . . . . . . . (0.70) (0.70) (0.71) (0.86) (0.72)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . $10.37 $10.79 $9.61 $10.82 $10.51
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . 2.81% 20.15% -4.64% 11.48% 7.04%
Ratios and Supplemental Data
Net assets, end of year (in thousands). . $4,430 $4,527 $3,999 $4,741 $5,793
Ratio of expenses to average net assets . 0.55% 0.55% 0.60% 0.61% 0.75%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . 6.71% 6.80% 7.06% 6.57% 6.69%
Portfolio turnover rate . . . . . . . . . 19.77% 6.69% 21.92% 35.99% 38.22%
</TABLE>
See Notes To Financial Statements
12
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . $12.57 $9.97 $10.58 $10.36 $10.38
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income . . . . . . . . . . 0.41 0.35 0.32 0.29 0.33
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . 1.37 2.75 (0.61) 0.22 (0.02)
--------- --------- --------- --------- ---------
Total from investment operations . . . . 1.78 3.10 (0.29) 0.51 0.31
--------- --------- --------- --------- ---------
Less distributions
Net investment income . . . . . . . . . . (0.41) (0.35) (0.32) (0.29) (0.33)
Net realized gain on investments . . . . (0.26) (0.15) 0.00 0.00 0.00
--------- --------- --------- --------- ---------
Total distributions . . . . . . . . . . . (0.67) (0.50) (0.32) (0.29) (0.33)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . $13.68 $12.57 $9.97 $10.58 $10.36
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . 14.48% 31.53% -2.72% 4.97% 3.07%
Ratios and Supplemental Data
Net assets, end of year (in thousands). . $75,202 $59,299 $44,221 $46,690 $42,440
Ratio of expenses to average net assets . 1.06% 1.07% 1.10% 1.08% 1.13%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . 3.17% 3.11% 3.18% 2.77% 3.24%
Portfolio turnover rate . . . . . . . . . 12.79% 22.72% 34.97% 101.29% 42.39%
Average commission rate per share* . . . $0.0278
</TABLE>
*For fiscal years beginning after September 1, 1996, a fund is required to
disclose its average commission rate per share for security trades on which
commissions are charged.
See Notes To Financial Statements
13
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM INCOME
---------------------------------------
Years ended December 31
---------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . $10.78 $9.20 $10.60 $10.00
--------- --------- --------- ---------
Income from investment operations
Net investment income . . . . . . . . . . 0.70 0.70 0.72 0.74
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . (0.51) 1.58 (1.40) 0.77
--------- --------- --------- ---------
Total from investment operations . . . . 0.19 2.28 (0.68) 1.51
--------- --------- --------- ---------
Less distributions
Net investment income . . . . . . . . . . (0.70) (0.70) (0.72) (0.74)
Net realized gain on investments . . . . 0.00 0.00 0.00 (0.17)
--------- --------- --------- ---------
Total distributions . . . . . . . . . . . (0.70) (0.70) (0.72) (0.91)
--------- --------- --------- ---------
Net asset value, end of year . . . . . . . $10.27 $10.78 $9.20 $10.60
========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . 2.09% 25.57% -6.53% 14.43%
Ratios and Supplemental Data
Net assets, end of year (in thousands). . $1,395 $1,450 $1,163 $1,079
Ratio of expenses to average net assets . 0.64% 0.63% 0.63% 0.64%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . 6.86% 6.93% 7.37% 6.60%
Portfolio turnover rate . . . . . . . . . 6.38% 1.74% 15.39% 75.72%
</TABLE>
See Notes To Financial Statements
14
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETIREMENT INCOME
---------------------------------------
Years ended December 31
---------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . $10.51 $9.22 $10.54 $10.00
--------- --------- --------- ---------
Income from investment operations
Net investment income . . . . . . . . . 0.75 0.76 0.76 0.82
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . (0.31) 1.29 (1.32) 0.61
--------- --------- --------- ---------
Total from investment operations . . . . 0.44 2.05 (0.56) 1.43
--------- --------- --------- ---------
Less distributions
Net investment income . . . . . . . . . . (0.75) (0.76) (0.76) (0.82)
Net realized gain on investments . . . . 0.00 0.00 0.00 (0.07)
--------- --------- --------- ---------
Total distributions . . . . . . . . . . . (0.75) (0.76) (0.76) (0.89)
--------- --------- --------- ---------
Net asset value, end of year . . . . . . . $10.20 $10.51 $9.22 $10.54
========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . 4.54% 22.96% -5.34% 13.92%
Ratios and Supplemental Data
Net assets, end of year (in thousands). .$170,799 $139,299 $84,162 $47,343
Ratio of expenses to average net assets . 0.82% 0.84% 0.88% 0.88%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . 7.45% 7.64% 7.89% 7.41%
Portfolio turnover rate . . . . . . . . . 8.34% 15.63% 12.27% 37.59%
</TABLE>
See Notes To Financial Statements
15
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------- ------- ------------
<S> <C> <C>
ADVERTISING - 0.9%
Catalina Marketing Corporation* 3,600 $ 198,450
CKS Group, Inc.* 4,000 111,500
Heritage Media Corporation* 5,000 56,250
AIR TRANSPORT - 0.9%
Air Express International Corp. 4,100 132,225
Atlantic Southeast Airlines, Inc. 4,500 98,437
Comair Holdings, Inc. 4,500 108,000
APPAREL - 0.7%
Jones Apparel Group, Inc.* 3,500 130,813
Nautica Enterprises, Inc.* 6,000 151,500
BANK - 3.0%
Bank of New York Company, Inc. 4,600 155,250
City National Corporation 7,000 151,375
First American Corporation 3,700 213,213
First Bank Systems, Inc. 2,000 136,500
Northern Trust Corporation 4,600 166,750
Norwest Corporation 2,576 112,056
Roosevelt Financial Group, Inc. 3,800 79,800
State Street Boston Corporation 2,300 148,637
BEVERAGE - 0.5%
Robert Mondavi Corporation* 5,000 182,500
BIOTECHNOLOGY - 0.3%
Human Genome Sciences, Inc.* 3,200 130,400
BROADCASTING / CABLE TV - 2.6%
A.H. Belo Corporation 3,000 104,625
Clear Channel Communications* 9,000 325,125
Cox Communications, Inc.* 6,000 138,750
Emmis Broadcasting Corporation* 3,000 98,250
Evergreen Media Corporation* 3,000 75,000
Heartland Wireless Commun., Inc.* 4,500 59,063
Jacor Communications, Inc.* 4,000 109,500
Westwood One, Inc.* 5,000 83,125
CHEMICAL - 1.5%
Airgas, Inc.* 7,600 167,200
Lilly Industries, Inc. 5,500 100,375
Raychem Corporation 2,000 160,250
Sherwin-Williams Company 2,500 140,000
COMPUTER & PERIPHERALS - 4.8%
3COM Corporation, Inc.* 3,000 220,125
Cabletron Systems, Inc.* 4,000 133,000
Cisco Systems, Inc.* 5,000 318,125
Compaq Computer Corporation* 2,500 185,937
EMC Corporation* 4,300 142,438
Microchip Technology, Inc.* 2,950 150,081
PairGain Technologies, Inc.* 6,000 182,625
SCI Systems, Inc.* 3,000 133,875
Sun Microsystems, Inc.* 10,400 267,150
Xilinx, Inc.* 3,300 121,481
COMPUTER SOFTWARE & SERVICES - 11.7%
Adobe Systems, Inc. 3,000 112,125
Applix, Inc.* 4,000 87,500
BMC Software, Inc.* 5,600 231,700
Broderbund Software, Inc.* 1,900 56,525
Cadence Design Systems, Inc.* 4,500 177,750
CBT Group PLC* 2,500 135,625
Ceridian Corporation* 3,500 141,750
Cognos, Inc.* 4,800 135,000
Compuware Corporation* 2,500 125,312
Electronics for Imaging, Inc.* 1,500 123,375
First Data Corporation 3,612 131,838
HBO & Company 4,000 237,500
Hummingbird Communications Ltd.* 2,500 70,938
Informix Corporation* 4,500 91,688
Intuit, Inc.* 2,200 69,300
McAfee Associates, Inc.* 3,900 171,600
Medic Computer Systems, Inc.* 3,400 137,063
Microsoft Corporation* 3,800 313,975
National Data Corporation 3,000 130,500
Network General Corporation* 5,000 151,250
Oracle Corporation* 5,000 208,750
</TABLE>
See Notes To Financial Statements
16
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------- ------- ------------
<S> <C> <C>
COMPUTER SOFTWARE & SERVICES - 11.7% (Continued)
Peoplesoft, Inc.* 4,000 $ 191,750
PMT Services, Inc.* 5,000 87,500
Rational Software Corporation* 4,000 158,250
Remedy Corporation* 3,000 161,250
Security Dynamics Tech., Inc.* 5,000 157,500
Shared Medical Systems Corp. 2,500 123,125
Shiva Corporation* 4,000 139,500
Sterling Commerce, Inc.* 3,500 123,375
Symantec Corporation* 6,300 91,350
Synopsys, Inc.* 2,400 111,000
Visio Corporation* 2,800 138,600
DIVERSIFIED - 1.6%
Alco Standard Corporation 3,000 154,875
Danaher Corporation 4,000 186,500
Service Corp. International 5,200 145,600
Thermo Electron Corporation* 3,000 123,750
DRUG - 3.5%
Amgen, Inc.* 5,600 304,500
BioChem Pharma, Inc.* 2,500 125,625
Biogen, Inc.* 3,400 131,750
Dura Pharmaceuticals, Inc.* 3,500 167,125
Genetics Institute, Inc.* 1,500 127,125
Gilead Sciences, Inc.* 4,000 100,000
Guilford Pharmaceuticals, Inc.* 4,500 104,625
Isis Pharmaceuticals, Inc.* 5,500 99,000
SEQUUS Pharmaceuticals, Inc.* 4,500 72,000
TheraTech, Inc.* 10,200 135,150
DRUGSTORE - 0.2%
Eckerd Corporation* 2,160 69,120
ELECTRICAL EQUIPMENT - 0.7%
FORE Systems, Inc.* 5,000 164,375
Littlefuse, Inc.* 2,500 121,250
ELECTRONICS - 3.3%
ADT Ltd.* 5,500 125,812
Altera Corporation* 2,700 196,256
Checkpoint Systems, Inc.* 4,500 111,375
Harman International Industries 2,100 116,813
Lam Research Corporation* 2,300 64,688
Macromedia* 4,500 81,000
Molex, Inc. 3,750 133,594
S3, Inc.* 4,900 79,625
Symbol Technologies, Inc.* 2,600 115,050
Teradyne, Inc.* 3,100 75,562
Thermedics, Inc.* 6,000 108,750
Ultratech Stepper, Inc.* 3,000 71,250
ENVIRONMENTAL - 1.4%
Superior Services, Inc.* 7,000 142,625
United Waste Systems, Inc.* 3,500 120,312
U.S. Filter Corporation* 3,500 111,125
USA Waste Services, Inc.* 5,750 183,281
FINANCIAL SERVICES - 4.7%
Aames Financial Corporation 3,000 107,625
Advanta Corporation 3,000 122,625
Concord EFS, Inc.* 4,500 127,125
CUC International, Inc.* 8,022 194,534
Finova Group, Inc. 2,500 160,625
First USA, Inc. 5,000 173,125
Franklin Resources, Inc. 3,100 211,963
Green Tree Financial Corporation 4,000 154,500
Mercury Finance Company 7,000 85,750
Mutual Risk Management, Ltd. 5,066 187,442
Paychex, Inc. 3,000 154,313
United Asset Management Corp. 5,200 138,450
FOOD PROCESSING - 0.6%
Goodmark Foods, Inc. 5,000 82,500
Tootsie Roll Industries, Inc. 3,560 141,065
FOREIGN TELECOMMUNICATIONS - 1.6%
Ericsson Telephone 10,000 301,875
Reuters Holdings PLC 2,000 153,000
Vodafone Group PLC 4,000 165,500
GROCERY - 0.5%
Safeway, Inc.* 4,400 188,100
</TABLE>
See Notes To Financial Statements
17
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------- ------- ------------
<S> <C> <C>
HOMEBUILDING - 0.7%
Lennar Corporation 4,100 $ 111,725
Rouse Company 4,900 155,575
HOTEL / GAMING - 1.1%
HFS, Inc.* 4,000 239,000
Homestead Village, Inc.* 1 11
Homestead Village, Inc./Warrants* 1 4
La Quinta Inns, Inc. 4,500 86,063
Mirage Resorts, Inc.* 5,000 108,125
HOUSEHOLD PRODUCTS - 0.9%
Amway Asia Pacific Ltd. 3,500 148,312
Lancaster Colony Corporation 4,000 184,000
INDUSTRIAL SERVICES - 4.4%
AccuStaff, Inc.* 5,000 105,625
APAC Teleservices, Inc.* 3,000 115,125
Apollo Group, Inc.* 3,500 117,031
Equifax, Inc. 6,200 189,875
Interim Services* 3,000 106,500
ITT Educational Services, Inc.* 5,200 120,250
Kelly Services, Inc. 2,300 62,100
Manpower, Inc. 3,900 126,750
Primark Corporation* 4,500 111,375
Quintiles Transnational Corporation* 2,500 165,625
Robert Half International, Inc.* 4,500 153,562
Romac International, Inc.* 3,500 77,000
Sitel Corporation* 5,400 76,950
Sylvan Learning Systems, Inc.* 3,000 85,500
Unitog Company 4,050 110,362
INSURANCE - 3.8%
Ace, Ltd. 2,300 138,287
AMBAC, Inc. 2,600 172,575
Compdent Corporation* 3,500 123,375
Equitable of Iowa Companies 3,100 142,213
MGIC Investment Corporation 2,000 152,000
Oxford Health Plans, Inc.* 3,200 187,400
Progressive Corporation of Ohio 2,800 188,650
UICI* 4,500 146,250
Vesta Insurance Group, Inc. 3,750 117,656
Zurich Reinsurance Centre Hold.* 3,100 96,875
MACHINERY - 1.3%
AGCO Corporation 5,000 143,125
Alamo Group, Inc. 5,000 85,625
Cognex Corporation* 2,500 46,250
Greenfield Industries, Inc. 4,000 122,500
Parker-Hannifin Corporation 2,500 96,875
MANUFACTURED HOUSING - 0.4%
Oakwood Homes Corporation 7,000 160,125
MEDICAL SERVICES - 6.4%
ABR Information Services, Inc.* 2,000 78,750
Access Health, Inc.* 3,500 156,625
Apria Healthcare Group, Inc.* 4,000 75,000
Health Care & Retirement Corp.* 5,550 158,869
Health Management Associates* 7,425 167,063
IDX Systems Corporation* 4,600 131,675
Lincare Holdings, Inc.* 3,300 135,300
MedPartners/Mullikin, Inc.* 5,151 106,883
Omnicare, Inc. 4,000 128,500
OrNda HealthCorp* 4,500 131,625
Orthodontic Ctrs. of America, Inc.* 6,000 96,000
PacifiCare Health Systems, Inc.* 1,500 127,875
PhyCor, Inc.* 4,500 127,688
Quorum Health Group, Inc.* 5,000 148,750
Renal Treatment Centers, Inc.* 4,000 102,000
Sierra Health Services, Inc.* 3,500 86,187
United HealthCare Corporation 2,900 130,500
Universal Health Services, Inc.* 4,800 137,400
Vencor, Inc.* 5,400 170,775
Vivra, Inc.* 3,000 82,875
MEDICAL SUPPLIES - 5.1%
Boston Scientific Corporation* 2,500 150,000
Cardinal Health, Inc. 4,125 240,281
Guidant Corporation 3,000 171,000
</TABLE>
See Notes To Financial Statements
18
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------- ------- ------------
<S> <C> <C>
MEDICAL SUPPLIES - 5.1% (Continued)
Henry Schein, Inc.* 3,500 $ 120,313
IDEXX Laboratories, Inc.* 5,000 180,000
Life Technologies, Inc. 5,250 131,250
Medtronic, Inc. 2,000 136,000
Physio-Control International Corp.* 5,500 123,750
Sola International, Inc.* 4,000 152,000
Steris Corporation* 2,570 111,795
Sybron Corporation* 5,000 165,000
Target Therapeutics, Inc.* 3,500 147,000
Uromed Corporation* 5,000 48,750
VISX, Inc.* 4,000 88,500
METAL FABRICATING - 0.3%
Kennametal, Inc. 2,500 97,188
NATURAL GAS - 0.4%
Sonat, Inc. 3,000 154,500
NEWSPAPER - 0.3%
Central Newspapers, Inc. 2,500 110,000
OFFICE EQUIPMENT & SUPPLIES - 0.4%
Reynolds & Reynolds Company 5,400 140,400
OILFIELD SERVICES - 2.0%
BJ Services Company/Warrants* 1,160 31,175
Camco International, Inc. 3,500 161,437
Noble Drilling Corporation* 4,700 93,413
Pride Petroleum Services, Inc.* 8,000 186,000
Smith International, Inc.* 4,300 192,962
Triton Energy Corporation* 2,500 121,250
PACKAGING & CONTAINER - 0.4%
Sealed Air Corporation* 3,400 141,525
PAPER & FOREST PRODUCTS - 0.4%
Williamette Industries, Inc. 2,300 160,137
PETROLEUM - 2.3%
Apache Corporation 4,000 140,500
Devon Energy Corporation 4,500 156,375
Noble Affiliates, Inc. 3,900 186,713
Tosco Corporation 2,500 197,812
United Meridian Corporation* 4,200 212,100
PRECISION INSTRUMENT - 1.1%
Coherent, Inc.* 3,000 126,750
Dionex Corporation* 2,000 70,000
KLA Instruments Corporation* 2,600 92,300
Teleflex, Inc. 2,500 130,312
PUBLISHING - 0.3%
Scholastic Corporation* 2,000 134,500
RAILROAD - 0.7%
Kansas City Southern Ind., Inc. 2,300 103,500
Wisconsin Central Transportation* 4,500 178,312
REAL ESTATE INVESTMENT TRUST - 0.7%
National Health Investors, Inc. 3,700 140,138
Security Capital Pacific Trust 5,500 125,812
RECREATION - 1.8%
Callaway Golf Company 2,400 69,000
Carmike Cinemas, Inc.* 6,000 152,250
Carnival Corporation 4,500 148,500
Gaylord Entertainment Company 4,610 105,454
Harley-Davidson, Inc. 3,000 141,000
Sturm, Ruger & Company, Inc. 4,000 77,500
RESTAURANT - 0.8%
Applebee's International, Inc. 3,200 88,000
Outback Steakhouse, Inc.* 3,750 100,313
Sbarro, Inc. 4,500 114,750
RETAIL STORE - 6.6%
AutoZone, Inc.* 3,800 104,500
Bed Bath & Beyond, Inc.* 7,000 169,750
Borders Group, Inc.* 4,000 143,500
Circuit City Stores, Inc. 2,800 84,350
CompUSA, Inc.* 5,600 116,200
Corporate Express, Inc.* 4,700 138,356
</TABLE>
See Notes To Financial Statements
19
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------- ------- ------------
<S> <C> <C>
RETAIL STORE - 6.6% (Continued)
Dollar General Corporation 7,616 $ 243,712
Gymboree Corporation* 4,000 91,500
Lands' End, Inc.* 6,200 164,300
Men's Wearhouse, Inc.* 4,250 104,125
MSC Industrial Direct Co., Inc.* 3,000 111,000
OfficeMax, Inc.* 9,000 96,750
Pep Boys-Manny, Moe & Jack 2,500 76,875
Starbucks Corporation* 4,000 114,500
The Sports Authority, Inc.* 5,000 108,750
Tiffany & Company 4,000 146,500
U.S. Office Products Company* 3,000 102,375
Viking Office Products, Inc.* 6,400 170,800
Williams-Sonoma, Inc.* 5,000 181,875
Zale Corporation* 5,500 105,875
SECURITIES BROKERAGE - 1.2%
Charles Schwab Corporation 6,000 192,000
Investment Technology Group* 7,800 150,150
Raymond James Financial, Inc. 4,500 135,563
SEMICONDUCTOR - 2.5%
Atmel Corporation* 4,400 145,750
International Rectifier Corp.* 4,600 70,150
Linear Technology Corporation 5,400 236,925
LSI Logic Corporation* 2,000 53,500
Maxim Integrated Products, Inc.* 9,000 389,250
SDL, Inc.* 3,000 78,750
SHOE - 0.3%
Wolverine World Wide, Inc. 4,500 130,500
STEEL - 0.2%
Commercial Metals Company 3,000 90,375
TELECOMMUNICATIONS EQUIPMENT - 4.6%
Andrew Corporation* 3,938 208,934
Ascend Communications, Inc.* 4,000 248,500
Aspect Telecommunications Corp.* 2,000 127,000
Cascade Communications Corp.* 4,500 248,062
Coherent Commun. Systems Corp.* 5,000 97,500
DSP Communications, Inc.* 6,000 116,250
Glenayre Technologies, Inc.* 2,700 58,219
PictureTel Corporation* 3,000 78,000
Premisys Communications, Inc.* 2,000 67,500
Tellabs, Inc.* 6,400 240,800
U.S. Robotics, Inc.* 4,000 288,000
TELECOMMUNICATIONS SERVICE - 1.5%
360 Communications Company* 5,000 116,250
Cellular Commun. of Puerto Rico* 3,000 59,250
Centennial Cellular Corporation* 4,500 54,562
CommNet Cellular, Inc.* 4,000 111,500
InterCel, Inc.* 6,100 74,725
LCI International, Inc.* 4,000 86,500
United States Cellular Corporation* 3,000 83,625
TEXTILE - 0.2%
Unifi, Inc. 3,000 96,375
THRIFT - 0.3%
JSB Financial Corporation 3,500 133,000
TOYS - 0.3%
Mattel, Inc. 4,125 114,469
TRUCKING & TRANSPORT LEASING - 0.3%
Werner Enterprise, Inc. 6,000 108,750
-----------
TOTAL COMMON STOCK - 99.0%
(Cost $27,124,597) $38,393,985
===========
</TABLE>
* Securities are non-income producing
See Notes To Financial Statements
20
<PAGE>
ADVANCE CAPITAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------------- --------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BANK - 10.2%
Banc One Corporation A+ 8.740 09/15/03 $ 100,000 $ 109,969
First Chicago NBD Corporation A 8.100 03/01/02 100,000 105,531
Harris Bankcorp, Inc. A+ 9.375 06/01/01 75,000 82,884
Morgan, J.P. & Company AA 8.500 08/15/03 100,000 108,969
Security Pacific Corporation A 9.750 05/15/99 40,000 42,858
CHEMICAL - 2.5%
duPont, E.I. de Nemours & Co. AA- 6.000 12/01/01 115,000 111,979
COMPUTER & PERIPHERALS - 1.7%
International Business Machines Corp. A 7.250 11/01/02 75,000 77,274
ELECTRIC & GAS UTILITIES - 11.5%
Baltimore Gas & Electric Company A+ 6.125 07/01/03 150,000 145,266
Florida Power Corporation AA- 6.875 02/01/08 70,000 69,803
Northern States Power Co. Minn. AA- 7.375 03/01/02 40,000 40,437
Ontario Hydro AA- 7.450 03/31/13 150,000 153,997
Public Service Co. of Oklahoma A+ 7.250 01/01/99 50,000 50,352
Public Service Electric & Gas A- 7.000 09/01/24 50,000 46,328
ENVIRONMENTAL - 1.1%
Waste Management, Inc. A+ 7.650 03/15/11 45,000 47,166
FINANCIAL SERVICES - 4.7%
BHP Finance USA Ltd. A 7.875 12/01/02 100,000 104,985
General Electric Capital Corporation AAA 7.750 03/15/02 100,000 105,263
FOOD PROCESSING - 2.3%
Archer Daniels Midland Company AA- 7.125 03/01/13 100,000 100,375
FOREIGN GOVERNMENT - 6.1%
Province of Ontario AA- 7.625 06/22/04 100,000 105,469
Province of Quebec A+ 8.800 04/15/03 150,000 164,766
GOVERNMENTAL AGENCY - 1.1%
Tennessee Valley Authority AAA 6.125 07/15/03 50,000 48,563
INSURANCE - 6.0%
Allstate Corporation A 7.500 06/15/13 100,000 101,500
CIGNA Corporation A- 8.250 01/01/07 100,000 108,271
Travelers, Inc. A+ 7.625 01/15/97 57,000 57,035
</TABLE>
See Notes To Financial Statements
21
<PAGE>
ADVANCE CAPITAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------------- --------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
MACHINERY - 5.1%
Caterpillar, Inc. A 9.000 04/15/06 $ 100,000 $ 113,569
Deere & Company A 8.950 06/15/19 100,000 114,269
MEDICAL SERVICES - 2.3%
Columbia/HCA Healthcare Corporation A- 7.250 05/20/08 100,000 101,906
METALS & MINING - 2.8%
Alcan Aluminum Ltd. A- 5.875 04/01/00 125,000 122,720
NEWSPAPER - 1.4%
Knight-Ridder, Inc. AA- 9.875 04/15/09 50,000 61,951
OFFICE EQUIPMENT & SUPPLIES - 0.7%
Xerox Corporation A 9.750 03/15/00 30,000 32,728
PETROLEUM - 3.3%
Kerr-McGee Corporation A- 7.000 11/01/11 150,000 145,403
RAILROAD - 2.5%
Missouri Pacific Railroad Co. A 9.400 12/15/00 100,000 109,157
RETAIL STORE - 6.4%
Sears, Roebuck & Company A- 9.250 08/01/97 200,000 203,797
Wal-Mart Stores, Inc. AA 8.625 04/01/01 75,000 80,789
SECURITIES BROKERAGE - 7.0%
Lehman Brothers Holdings, Inc. A 8.875 03/01/02 150,000 160,594
Merrill Lynch & Company, Inc. AA- 8.230 04/30/02 150,000 151,529
SEMICONDUCTOR - 3.2%
Texas Instruments, Inc. A 8.750 04/01/07 125,000 140,521
TELECOMMUNICATIONS SERVICE - 6.7%
AT&T Corporation AA- 7.750 03/01/07 90,000 95,484
GTE Southwest, Inc. A+ 5.820 12/01/99 100,000 98,344
Pacific Bell Telephone Co. AA- 7.000 07/15/04 100,000 101,104
TOBACCO - 2.1%
Philip Morris Companies, Inc. A 6.375 02/01/06 100,000 94,344
</TABLE>
See Notes To Financial Statements
22
<PAGE>
ADVANCE CAPITAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------------- --------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT - 7.1%
U.S. Treasury 6.875 05/15/06 $ 155,000 $ 159,722
U.S. Treasury 7.000 07/15/06 150,000 155,836
-----------
TOTAL FIXED-INCOME SECURITIES - 97.8%
(Cost $4,181,736) $4,332,807
===========
</TABLE>
See Notes To Financial Statements
23
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
ADVERTISING - 0.2%
Catalina Marketing Corporation* 2,000 $ 110,250
CKS Group, Inc.* 1,000 27,875
Heritage Media Corporation* 2,000 22,500
AEROSPACE / DEFENSE - 1.1%
Boeing Company 1,700 181,050
General Motors Corp. - Class H 1,500 84,375
Lockheed Martin Corporation 2,000 183,000
McDonnell Douglas Corporation 4,800 315,000
Raytheon Company 1,700 81,812
AIR TRANSPORT - 0.2%
Air Express International Corp. 700 22,575
Atlantic Southeast Airlines, Inc. 1,000 21,875
Comair Holdings, Inc. 1,575 37,800
Pittston Brink's Group 3,000 81,000
APPAREL - 0.2%
Nautica Enterprises, Inc.* 1,800 45,450
VF Corporation 1,300 87,750
AUTO PARTS - 0.3%
Borg-Warner Automotive, Inc. 2,000 77,000
Dana Corporation 1,600 52,200
Genuine Parts Company 2,000 89,000
AUTO & TRUCK - 0.3%
Ford Motor Company 3,500 112,875
General Motors Corporation 2,400 133,800
BANK - 5.5%
Bank of Boston Corporation 2,540 163,195
Bank of New York Company, Inc. 2,800 94,500
BankAmerica Corporation 1,000 99,750
Barnett Banks, Inc. 10,400 427,700
Chase Manhattan Corporation 4,840 432,575
City National Corporation 1,600 34,600
First American Corporation 2,200 126,775
First Bank Systems, Inc. 1,300 88,725
First Chicago NBD Corporation 3,500 188,125
First Tennessee National Corp. 5,800 217,500
First Union Corporation 5,800 429,200
J.P. Morgan & Company 2,000 195,250
KeyCorp 4,000 202,000
Mellon Bank Corporation 2,700 191,700
Mercantile Bancorporation, Inc. 2,050 105,319
National City Corporation 2,000 89,750
NationsBank Corporation 4,000 391,000
Northern Trust Corporation 1,200 43,500
Norwest Corporation 900 39,150
PNC Bank Corporation 4,000 150,500
State Street Boston Corporation 1,200 77,550
Wells Fargo & Company 933 251,676
BEVERAGE - 0.7%
Anheuser-Busch Companies, Inc. 7,400 296,000
Coca-Cola Company 1,000 52,625
PepsiCo, Inc. 3,000 87,750
Robert Mondavi Corporation* 1,500 54,750
BIOTECHNOLOGY - 0.1%
Human Genome Sciences, Inc.* 1,200 48,900
BROADCASTING / CABLE TV - 0.5%
A.H. Belo Corporation 1,400 48,825
Clear Channel Communications* 3,200 115,600
Cox Communications, Inc.* 1,500 34,688
Evergreen Media Corporation* 1,200 30,000
Heartland Wireless Commun., Inc.* 1,500 19,688
Jacor Communications, Inc.* 1,500 41,063
U.S. West Media Group* 4,000 73,500
Westwood One, Inc.* 1,700 28,262
BUILDING MATERIALS - 0.1%
Armstrong World Industries, Inc. 1,500 104,250
</TABLE>
See Notes To Financial Statements
24
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
CHEMICAL - 2.7%
A. Schulman, Inc. 2,000 $ 49,000
Airgas, Inc.* 4,000 88,000
B.F. Goodrich Company 2,000 81,000
duPont, E.I. de Nemours & Co. 3,500 329,438
Lilly Industries, Inc. 1,500 27,375
Minnesota Mining & Manufacturing 2,000 166,000
Monsanto Company 15,500 602,563
Olin Corporation 1,400 52,675
Raychem Corporation 500 40,062
Rohm & Haas Company 1,000 81,625
Sherwin-Williams Company 2,000 112,000
Union Carbide Corporation 2,100 85,837
WD-40 Company 2,800 142,843
Witco Corporation 2,700 82,350
COMPUTER & PERIPHERALS - 1.3%
3COM Corporation, Inc.* 1,600 117,400
Cabletron Systems, Inc.* 2,000 66,500
Cisco Systems, Inc.* 2,000 127,250
Compaq Computer Corporation* 1,000 74,375
EMC Corporation* 2,000 66,250
Hewlett-Packard Company 2,600 130,650
Microchip Technology, Inc.* 1,000 50,875
PairGain Technologies, Inc.* 4,000 121,750
SCI Systems, Inc.* 1,000 44,625
Sun Microsystems, Inc.* 3,200 82,200
Xilinx, Inc.* 2,100 77,306
COMPUTER SOFTWARE & SERVICES - 2.4%
Adobe Systems, Inc. 1,200 44,850
Automatic Data Processing, Inc. 4,000 171,500
BMC Software, Inc.* 2,000 82,750
Broderbund Software, Inc.* 1,400 41,650
Cadence Design Systems, Inc.* 1,350 53,325
CBT Group PLC* 1,000 54,250
Ceridian Corporation* 2,000 81,000
Cognos, Inc.* 2,100 59,063
Compuware Corporation* 1,000 50,125
First Data Corporation 1,488 54,312
HBO & Company 2,000 118,750
Hummingbird Communications Ltd.* 1,000 28,375
Informix Corporation* 1,500 30,563
Intuit, Inc.* 900 28,350
McAfee Associates, Inc.* 1,200 52,800
Medic Computer Systems, Inc.* 1,000 40,313
Microsoft Corporation* 2,000 165,250
Oracle Corporation* 2,525 105,419
Peoplesoft, Inc.* 1,600 76,700
PMT Services, Inc.* 2,000 35,000
Rational Software Corporation* 1,400 55,387
Remedy Corporation* 1,200 64,500
Security Dynamics Tech., Inc.* 1,400 44,100
Shared Medical Systems Corp. 900 44,325
Shiva Corporation* 1,200 41,850
Sterling Commerce, Inc.* 1,300 45,825
Symantec Corporation* 1,000 14,500
Synopsys, Inc.* 2,000 92,500
Visio Corporation* 1,300 64,350
DIVERSIFIED - 1.4%
Alco Standard Corporation 1,800 92,925
AlliedSignal, Inc. 5,100 341,700
Danaher Corporation 1,000 46,625
Service Corp. International 4,200 117,600
Textron, Inc. 1,500 141,375
Thermo Electron Corp.* 1,350 55,687
TRW, Inc. 2,000 99,000
United Technologies Corporation 2,200 145,750
DRUG - 3.2%
American Home Products Corp. 3,400 199,325
Amgen, Inc.* 2,200 119,625
BioChem Pharma, Inc.* 1,100 55,275
Biogen, Inc.* 2,000 77,500
Bristol-Myers Squibb Company 6,200 675,800
Genetics Institute, Inc.* 500 42,375
Gilead Sciences, Inc.* 1,000 25,000
Guilford Pharmaceuticals, Inc.* 1,500 34,875
</TABLE>
See Notes To Financial Statements
25
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
DRUG - 3.2% (Continued)
Merck & Company, Inc. 6,000 $ 477,750
Pfizer, Inc. 3,000 249,000
Schering-Plough Corporation 2,000 129,500
SEQUUS Pharmaceuticals, Inc.* 1,500 24,000
TheraTech, Inc.* 3,500 46,375
Warner-Lambert Company 3,800 285,000
DRUGSTORE - 0.1%
Eckerd Corporation* 785 25,120
Rite Aid Corporation 2,000 79,500
ELECTRIC & GAS UTILITIES - 2.6%
Baltimore Gas & Electric Company 5,700 152,475
CMS Energy Corporation 2,300 77,338
Consolidated Edison Co. of N.Y. 1,900 55,338
Duke Power Company 3,400 157,250
Edison International 6,500 129,188
Entergy Corporation 4,000 110,500
Florida Progress Corporation 5,500 177,375
General Public Utilities Corp. 3,600 121,050
Hawaiian Electric Industries, Inc. 2,300 83,088
Northern States Power Company 2,500 114,688
PacifiCorp 8,400 172,200
Public Service of Colorado 4,700 182,712
TECO Energy, Inc. 7,700 185,762
Texas Utilities Company 3,500 142,625
Unicom Corporation* 3,500 94,937
ELECTRICAL EQUIPMENT - 2.1%
Duracell International, Inc. 4,000 279,500
Emerson Electric Company 2,500 242,188
FORE Systems, Inc.* 2,000 65,750
General Electric Company 8,200 810,775
Hubbell, Inc. 3,200 138,400
Littlefuse, Inc.* 1,000 48,500
ELECTRONICS - 0.6%
Altera Corporation* 1,000 72,688
Checkpoint Systems, Inc.* 1,500 37,125
Harman International Industries 1,050 58,406
Lam Research Corporation* 1,300 36,563
Macromedia* 1,500 27,000
Molex, Inc. 1,875 66,797
Symbol Technologies, Inc.* 2,000 88,500
Thermedics, Inc.* 2,000 36,250
Ultratech Stepper, Inc.* 1,000 23,750
ENVIRONMENTAL - 0.5%
Browning-Ferris Industries, Inc. 3,000 78,750
Superior Services, Inc.* 3,100 63,162
U.S. Filter Corporation* 1,200 38,100
USA Waste Services, Inc.* 1,800 57,375
WMX Technologies, Inc. 4,500 146,250
FINANCIAL SERVICES - 2.1%
Advanta Corporation 800 32,700
American Express Company 5,000 282,500
Countrywide Credit Industries, Inc. 4,000 114,500
CUC International, Inc.* 3,432 83,226
Dean Witter, Discover & Company 2,000 132,500
Echelon International Corp., Inc.* 0.7 10
Finova Group, Inc. 1,000 64,250
First USA, Inc. 2,800 96,950
Franklin Resources, Inc. 1,000 68,375
Green Tree Financial Corporation 2,000 77,250
H & R Block, Inc. 1,300 37,700
Household International, Inc. 1,000 92,250
Mercury Finance Company 3,000 36,750
Mutual Risk Management, Ltd. 3,333 123,321
Paychex, Inc. 1,500 77,156
Student Loan Marketing Association 800 74,500
Travelers, Inc. 3,600 163,350
United Asset Management Corp. 2,000 53,250
FOOD PROCESSING - 0.8%
Goodmark Foods, Inc. 5,200 85,800
Hershey Foods Corp. 2,800 122,500
Kellogg Company 1,500 98,438
Quaker Oats Company 2,000 76,250
</TABLE>
See Notes To Financial Statements
26
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
FOOD PROCESSING - 0.8% (Continued)
Sara Lee Corporation 4,500 $ 167,625
Tootsie Roll Industries, Inc. 1,200 47,550
FOREIGN TELECOMMUNICATIONS - 0.6%
BCE, Inc. 2,200 105,050
Ericsson Telephone 6,400 193,200
Reuters Holdings PLC 1,000 76,500
Vodafone Group PLC 2,100 86,887
GROCERY - 0.2%
Safeway, Inc.* 3,200 136,800
HOMEBUILDING - 0.4%
Lennar Corporation 1,700 46,325
Rouse Company 7,000 222,250
HOTEL / GAMING - 0.2%
HFS, Inc.* 1,500 89,625
Homestead Village, Inc.* 1 7
Homestead Village, Inc./Warrants* 1 5
La Quinta Inns, Inc. 1,500 28,688
Mirage Resorts, Inc.* 2,000 43,250
HOUSEHOLD PRODUCTS - 1.4%
Amway Asia Pacific Ltd. 1,000 42,375
Clorox Company 1,900 190,713
Colgate-Palmolive Company 3,100 285,975
Kimberly-Clark Corporation 2,900 276,225
Lancaster Colony Corporation 1,000 46,000
Proctor & Gamble Company 1,200 129,150
Tupperware Corporation* 2,000 107,250
INDUSTRIAL SERVICES - 0.8%
AccuStaff, Inc.* 2,000 42,250
Apollo Group, Inc.* 1,500 50,156
Equifax, Inc. 4,600 140,875
Interim Services* 1,116 39,618
Kelly Services, Inc. 700 18,900
Manpower, Inc. 1,500 48,750
Primark Corporation* 1,800 44,550
Quintiles Transnational Corporation 1,000 66,250
Robert Half International, Inc.* 1,500 51,187
Sylvan Learning Systems, Inc.* 3,450 98,325
Unitog Company 1,000 27,250
INSURANCE - 2.0%
Ace, Ltd. 1,000 60,125
AFLAC, Inc. 2,400 102,600
Allstate Corporation 3,615 209,218
AMBAC, Inc. 1,300 86,288
American International Group, Inc. 4,125 446,531
Equitable of Iowa Companies 2,100 96,338
MBIA, Inc. 1,500 151,875
MGIC Investment Corporation 1,000 76,000
Oxford Health Plans, Inc.* 1,600 93,700
Progressive Corporation of Ohio 1,000 67,375
St. Paul Companies, Inc. 1,500 87,937
Vesta Insurance Group, Inc. 1,000 31,375
Zurich Reinsurance Centre Hold.* 1,000 31,250
MACHINERY - 1.1%
AGCO Corporation 2,000 57,250
Alamo Group, Inc. 1,500 25,688
Briggs & Stratton Corporation 1,200 52,800
Caterpillar, Inc. 1,800 135,450
Deere & Company 4,200 170,100
Dover Corporation 5,200 262,600
Greenfield Industries, Inc. 1,400 42,875
Parker-Hannifin Corporation 1,050 40,688
Trinova Corporation 2,100 76,387
MANUFACTURED HOUSING - 0.1%
Oakwood Homes Corporation 2,000 45,750
MEDICAL SERVICES - 1.3%
ABR Information Services, Inc.* 800 31,500
Apria Healthcare Group, Inc.* 1,000 18,750
Health Care & Retirement Corp.* 5,850 167,456
</TABLE>
See Notes To Financial Statements
27
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
MEDICAL SERVICES - 1.3% (Continued)
Health Management Associates* 3,712 $ 83,520
Lincare Holdings, Inc.* 1,000 41,000
MedPartners/Mullikin, Inc.* 2,000 41,500
Omnicare, Inc. 2,800 89,950
OrNda HealthCorp* 1,500 43,875
Orthodontic Ctrs. of America, Inc.* 1,400 22,400
PacifiCare Health Systems, Inc.* 700 59,675
PhyCor, Inc.* 1,500 42,562
Quorum Health Group, Inc.* 1,000 29,750
Renal Treatment Centers, Inc.* 1,700 43,350
Sierra Health Services, Inc.* 1,200 29,550
United HealthCare Corporation 1,300 58,500
Universal Health Services, Inc.* 2,200 62,975
Vencor, Inc.* 3,100 98,037
Vivra, Inc.* 800 22,100
MEDICAL SUPPLIES - 1.4%
Abbott Laboratories 3,600 182,700
Baxter International, Inc. 2,000 82,000
Boston Scientific Corporation* 1,000 60,000
Cardinal Health, Inc. 1,800 104,850
Guidant Corporation 1,000 57,000
Johnson & Johnson 2,560 127,360
Life Technologies, Inc. 1,800 45,000
Medtronic, Inc. 1,800 122,400
Sola International, Inc.* 1,500 57,000
Steris Corporation* 690 30,015
Sybron Corporation* 2,000 66,000
Target Therapeutics, Inc.* 1,400 58,800
VISX, Inc.* 1,000 22,125
METAL FABRICATING - 0.1%
Kennametal, Inc. 1,000 38,875
Trinity Industries, Inc. 800 30,000
METALS & MINING - 0.5%
Aluminum Company of America 4,000 255,000
Inco Limited 2,000 63,750
Placer Dome, Inc. 2,500 54,375
NATURAL GAS - 0.8%
Enron Corporation 5,400 232,875
PanEnergy Corporation 5,300 238,500
Sonat, Inc. 1,800 92,700
NEWSPAPER - 0.2%
Central Newspapers, Inc. 1,000 44,000
Gannett Company, Inc. 1,900 142,263
OFFICE EQUIPMENT & SUPPLIES - 0.3%
Pitney Bowes, Inc. 2,000 109,500
Reynolds & Reynolds Company 5,600 145,600
OILFIELD SERVICES - 1.0%
Baker Hughes, Inc. 4,000 138,000
BJ Services Company/Warrants* 1,200 32,250
Camco International, Inc. 1,000 46,125
Halliburton Company 3,500 210,875
Pride Petroleum Services, Inc.* 2,800 65,100
Schlumberger, Ltd. 1,000 99,875
Smith International, Inc.* 2,300 103,212
Triton Energy Corporation* 700 33,950
PACKAGING & CONTAINER - 0.1%
Sealed Air Corporation* 2,000 83,250
PAPER & FOREST PRODUCTS - 0.9%
Georgia Pacific Corporation 1,400 100,800
International Paper Company 8,000 324,000
James River Corporation 3,000 99,375
Weyerhaeuser Company 2,200 104,225
Williamette Industries, Inc. 800 55,700
PETROLEUM - 4.4%
Amerada Hess Corporation 1,300 75,238
Amoco Corporation 2,400 193,500
Apache Corporation 1,800 63,225
Ashland Oil, Inc. 1,800 78,975
Atlantic Richfield Company 1,000 132,500
British Petroleum Co. PLC 2,000 282,750
</TABLE>
See Notes To Financial Statements
28
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
PETROLEUM - 4.4% (Continued)
Devon Energy Corporation 1,500 $ 52,125
Exxon Corporation 6,300 617,400
Mobil Corporation 5,000 611,250
Noble Affiliates, Inc. 2,800 134,050
Repsol SA 2,500 95,312
Royal Dutch/Shell Transport Group 3,400 580,550
Tosco Corporation 1,000 79,125
Union Texas Petroleum Holdings 6,700 149,912
United Meridian Corporation* 1,000 50,500
USX-Marathon Group 4,500 107,437
PRECISION INSTRUMENT - 0.5%
Coherent, Inc.* 1,100 46,475
Dionex Corporation* 1,000 35,000
Eastman Kodak Company 2,900 232,725
Teleflex, Inc. 1,000 52,125
PUBLISHING - 0.5%
McGraw-Hill, Inc. 4,000 184,500
Reader's Digest Association, Inc. 1,000 40,250
Scholastic Corporation* 1,000 67,250
Value Line, Inc. 2,500 110,625
RAILROAD - 0.4%
Kansas City Southern Ind., Inc. 2,000 90,000
Union Pacific Corporation 2,000 120,250
Wisconsin Central Transportation* 3,000 118,875
REAL ESTATE INVESTMENT TRUST - 2.0%
CarrAmerica Realty Corporation 5,000 146,250
Federal Realty Investment Trust 4,800 130,200
Meditrust Corporation 4,500 180,000
National Health Investors, Inc. 1,600 60,600
Nationwide Health Properties, Inc. 7,500 181,875
Security Capital Industrial Trust 7,908 169,033
Security Capital Pacific Trust 2,000 45,750
Simon DeBartolo Group, Inc. 3,400 105,400
South West Property Trust 7,500 126,562
Starwood Lodging Trust 4,600 253,575
Weingarten Realty Investors 3,200 130,000
RECREATION - 1.0%
Brunswick Corporation 3,000 72,000
Callaway Golf Company 1,400 40,250
Carmike Cinemas, Inc.* 3,000 76,125
Carnival Corporation 2,000 66,000
Gaylord Entertainment Company 1,102 25,208
Harley-Davidson, Inc. 2,000 94,000
Time Warner, Inc. 2,200 82,500
Walt Disney Company 4,298 299,786
RESTAURANT - 0.2%
McDonald's Corporation 2,500 113,438
Outback Steakhouse, Inc.* 2,250 60,188
RETAIL STORE - 1.8%
AutoZone, Inc.* 1,000 27,500
Bed Bath & Beyond, Inc.* 4,000 97,000
Borders Group, Inc.* 1,500 53,813
Circuit City Stores, Inc. 2,200 66,275
Corporate Express, Inc.* 1,600 47,100
Dayton Hudson Corporation 4,000 157,000
Dollar General Corporation 4,000 128,000
Gymboree Corporation* 1,400 32,025
J.C. Penney Company 1,100 53,625
Men's Wearhouse, Inc.* 1,500 36,750
MSC Industrial Direct Co., Inc.* 900 33,300
OfficeMax, Inc.* 2,000 21,500
Pep Boys-Manny, Moe & Jack 1,000 30,750
Sears, Roebuck & Company 3,900 179,400
Starbucks Corporation* 4,000 114,500
Tandy Corporation 1,600 70,400
The Sports Authority, Inc.* 2,000 43,500
Tiffany & Company 800 29,300
Viking Office Products, Inc.* 2,200 58,712
Williams-Sonoma, Inc.* 1,500 54,562
Zale Corporation* 1,500 28,875
SECURITIES BROKERAGE - 0.4%
Bear Stearns Companies, Inc. 2,659 74,120
Charles Schwab Corporation 3,000 96,000
</TABLE>
See Notes To Financial Statements
29
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ------------------------------------ ------- ------------
<S> <C> <C>
SECURITIES BROKERAGE - 0.4% (Continued)
Investment Technology Group* 2,900 $ 55,825
Merrill Lynch & Company, Inc. 1,200 97,800
SEMICONDUCTOR - 1.1%
Atmel Corporation* 2,000 66,250
Intel Corporation 2,400 314,250
International Rectifier Corp.* 2,000 30,500
Linear Technology Corporation 2,200 96,525
Maxim Integrated Products, Inc.* 3,400 147,050
SDL, Inc.* 1,500 39,375
Texas Instruments, Inc. 2,400 153,000
SHOE - 0.1%
Wolverine World Wide, Inc. 1,575 45,675
STEEL - 0.3%
Nucor Corporation 2,300 117,300
Worthington Industries 4,000 72,500
TELECOMMUNICATIONS EQUIPMENT - 0.8%
Andrew Corporation* 1,575 83,573
Ascend Communications, Inc.* 1,500 93,188
Aspect Telecommunications Corp.* 1,000 63,500
Cascade Communications Corp.* 1,500 82,688
Coherent Commun. Systems Corp.* 1,500 29,250
DSP Communications, Inc.* 1,600 31,000
Glenayre Technologies, Inc.* 1,000 21,563
PictureTel Corporation* 1,000 26,000
Tellabs, Inc.* 2,400 90,300
U.S. Robotics, Inc.* 1,400 100,800
TELECOMMUNICATIONS SERVICE - 3.1%
360 Communications Company* 1,800 41,850
ALLTEL Corporation 4,000 125,500
Ameritech Corporation 3,000 181,875
AT&T Corporation 1,500 65,063
Bell Atlantic Corporation 4,100 265,475
BellSouth Corporation 10,000 405,000
Cellular Commun. of Puerto Rico* 1,000 19,750
Centennial Cellular Corporation* 1,000 12,125
Cincinnati Bell Inc. 2,000 123,250
CommNet Cellular, Inc.* 1,000 27,875
Frontier Corporation 1,600 36,200
GTE Corporation 11,500 521,813
InterCel, Inc.* 2,500 30,625
LCI International, Inc.* 1,500 32,438
SBC Communications, Inc. 5,900 306,062
Southern New England Tele. Corp. 2,000 77,750
United States Cellular Corporation* 1,100 30,662
TEXTILES - 0.1%
Unifi, Inc. 1,300 41,762
THRIFT - 0.5%
Federal Home Loan Mortgage Corp. 1,000 110,375
Federal National Mortgage Assoc. 6,800 255,850
JSB Financial Corporation 1,000 38,000
TIRE & RUBBER - 0.2%
Goodyear Tire & Rubber Company 2,600 133,575
TOBACCO - 0.8%
American Brands, Inc. 2,000 99,250
Philip Morris Companies, Inc. 4,300 485,900
TOILETRIES / COSMETICS - 0.5%
Gillette Company 1,600 124,400
Int'l Flavors & Fragrances, Inc. 5,000 225,000
TOYS - 0.1%
Mattel, Inc. 3,125 86,719
TRUCKING & TRANSPORT LEASING - 0.1%
Werner Enterprise, Inc. 3,150 57,093
WATER UTILITY - 0.1%
American Water Works Co., Inc. 3,500 72,188
-----------
TOTAL COMMON STOCK - 61.4%
(Cost $29,925,295) $46,168,966
-----------
</TABLE>
* Securities are non-income producing
See Notes To Financial Statements
30
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ------------------------------------------- --------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
AEROSPACE / DEFENSE - 1.0%
Lockheed Corporation BBB+ 9.375 10/15/99 $ 100,000 $ 107,426
Lockheed Martin Corporation BBB+ 7.650 05/01/16 500,000 516,876
Rockwell International Corp. AA 8.875 09/15/99 100,000 106,000
AUTO PARTS - 0.6%
Eaton Corporation A 7.000 04/01/11 500,000 480,313
AUTO & TRUCK - 0.7%
General Motors Corporation A- 9.125 07/15/01 500,000 545,626
BANK - 4.4%
Bankers Trust New York Corp. A- 9.500 06/14/00 250,000 272,982
Chase Manhattan Corp. A- 6.750 08/15/08 400,000 388,500
First Chicago NBD Corporation A 8.100 03/01/02 500,000 527,657
First Union Corporation A- 9.450 06/15/99 100,000 106,375
First Union Corporation A- 8.000 08/15/09 500,000 521,163
Morgan, J.P. & Company AA 8.500 08/15/03 500,000 544,844
NationsBank Corporation A 6.500 03/15/06 500,000 481,251
Royal Bank of Scotland A+ 6.375 02/01/11 500,000 460,640
CHEMICAL - 0.8%
Monsanto Company A 8.875 12/15/09 500,000 575,307
DIVERSIFIED - 0.7%
Whitman Corporation BBB+ 8.250 02/15/07 500,000 540,879
ELECTRIC & GAS UTILITIES - 5.6%
Alabama Power Company A+ 8.500 05/01/22 500,000 520,924
Duke Power Company AA- 6.375 03/01/08 500,000 470,794
Florida Power & Light Company AA- 7.875 01/01/13 500,000 509,219
Georgia Power Company A+ 7.625 03/01/23 450,000 443,592
Hydro Quebec AAA 7.000 03/01/05 500,000 494,986
Monongahela Power A+ 8.500 06/01/22 500,000 520,965
Potomac Edison Company A+ 7.750 05/01/25 500,000 504,240
Public Service Electric & Gas A- 7.000 09/01/24 200,000 185,313
Virginia Electric & Power Company A 8.000 03/01/04 500,000 533,598
FINANCIAL SERVICES - 4.4%
Associated Corporation of North America AA- 8.700 01/01/97 200,000 199,966
Deere, John Capital Corporation A- 8.625 08/01/19 500,000 527,636
Fairfax Financial Holdings BBB+ 8.250 10/01/15 500,000 522,030
Fletcher Challenge Capital Canada, Inc. BBB 8.250 06/20/16 500,000 528,282
</TABLE>
See Notes To Financial Statements
31
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ------------------------------------------- --------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
FINANCIAL SERVICES - 4.4% (Continued)
Ford Holdings, Inc. A+ 9.250 03/01/00 $ 475,000 $ 510,477
General Electric Capital Corporation AAA 7.750 03/15/02 500,000 526,313
Loews Corporation AA- 8.250 01/15/07 500,000 519,215
FOOD PROCESSING - 1.0%
Kraft, Inc. A 8.500 02/15/17 250,000 258,617
Nabisco, Inc. BBB 7.050 07/15/07 500,000 491,251
FOREIGN GOVERNMENT - 2.0%
Province of Nova Scotia A- 7.250 07/27/13 500,000 494,923
Province of Quebec A+ 8.800 04/15/03 350,000 384,453
Province of Saskatchewan A- 9.375 12/15/20 500,000 603,274
GOVERNMENTAL AGENCY - 0.7%
Federal National Mortgage Association Not Rated 5.520 04/13/98 500,000 496,269
HOTEL / GAMING - 0.6%
ITT Corporation BBB 7.375 11/15/15 500,000 483,346
INSURANCE - 1.4%
Chubb Corporation AA+ 8.750 11/15/99 59,000 61,543
CIGNA Corporation A- 8.250 01/01/07 500,000 541,357
Metropolitan Life Insurance Co.* A+ 7.450 11/01/23 450,000 424,714
MACHINERY - 0.6%
Case Corporation BBB 7.250 01/15/16 500,000 486,407
MEDICAL SUPPLIES - 0.6%
Cardinal Health, Inc. A- 6.000 01/15/06 500,000 466,859
METALS & MINING - 0.6%
Placer Dome, Inc. BBB 7.750 06/15/15 500,000 483,498
NATURAL GAS - 0.6%
Enron Corporation BBB+ 7.000 08/15/23 500,000 462,397
NEWSPAPER - 0.6%
Knight-Ridder, Inc. AA- 9.875 04/15/09 100,000 123,901
Tribune Company A 8.450 02/25/98 300,000 307,658
OFFICE EQUIPMENT & SUPPLIES - 0.3%
Xerox Corporation A 9.750 03/15/00 200,000 218,188
</TABLE>
See Notes To Financial Statements
32
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ------------------------------------------- --------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
PACKAGING & CONTAINER - 0.6%
Crown Cork & Seal Company, Inc. BBB+ 8.375 01/15/05 $ 390,000 $ 423,154
PETROLEUM - 1.7%
Atlantic Richfield Company A 8.500 04/01/12 250,000 281,016
Louisiana Land & Exploration Co. BBB 7.625 04/15/13 500,000 506,563
OXY USA, Inc. BBB 7.000 04/15/11 500,000 472,969
RESTAURANT - 0.6%
Darden Restaurants, Inc. BBB 7.125 02/01/16 500,000 467,500
RETAIL STORE - 0.9%
Dayton Hudson Corporation BBB+ 9.625 02/01/08 200,000 236,557
Kmart Corporation B+ 8.125 12/01/06 500,000 471,250
SECURITIES BROKERAGE - 1.1%
Lehman Brothers Holdings, Inc. A 8.500 08/01/15 500,000 531,407
Salomon, Inc. BBB 9.450 03/15/98 300,000 310,452
TELECOMMUNICATIONS SERVICE - 2.3%
AT&T Corporation AA- 7.125 01/15/02 500,000 510,782
Michigan Bell Telephone AAA 7.500 02/15/23 500,000 496,345
NYNEX Corporation A 7.375 12/15/11 250,000 246,889
Southwestern Bell Telephone Company AA 7.375 05/01/12 500,000 497,034
TOBACCO - 0.6%
Philip Morris Companies, Inc. A 9.000 01/01/01 400,000 430,761
U.S. GOVERNMENT - 1.4%
U.S. Treasury 6.500 08/15/05 500,000 503,200
U.S. Treasury 7.875 11/15/04 500,000 545,625
TOTAL FIXED-INCOME SECURITIES - 36.4%
(Cost $26,987,108) 27,413,548
-------------
TOTAL INVESTMENTS IN SECURITIES - 97.8%
(Cost $56,912,403) $ 73,582,514
=============
</TABLE>
* Security exempt from registration under Rule 144A of the Securities
Act of 1933
See Notes To Financial Statements
33
<PAGE>
ADVANCE CAPITAL I, INC. - LONG TERM INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ---------------------------------------- --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AIR TRANSPORT - 2.1%
Federal Express Corporation BBB 9.650 06/15/12 $ 25,000 $ 29,519
BANK - 5.7%
Chase Manhattan Corp. A- 7.625 01/15/03 25,000 25,977
NationsBank Corporation A 7.750 08/15/15 25,000 25,555
Westpac Banking Corporation A+ 9.125 08/15/01 25,000 27,469
BEVERAGE - 1.9%
Coca-Cola Enterprises, Inc. AA- 8.000 09/15/22 25,000 26,641
CHEMICAL - 2.1%
Monsanto Company A 8.700 10/15/21 25,000 28,695
COMPUTERS & PERIPHERALS - 1.9%
Digital Equipment Corporation BB+ 8.625 11/01/12 25,000 25,808
DIVERSIFIED - 4.3%
AlliedSignal, Inc. A 9.500 06/01/16 25,000 30,807
United Technologies Corporation A+ 8.750 03/01/21 25,000 29,050
ELECTRIC & GAS UTILITIES - 17.3%
Consolidated Edison Co. of N.Y., Inc. A+ 7.375 09/01/05 25,000 25,206
Florida Power Corporation AA- 8.625 11/01/21 50,000 53,351
FPL Group Capital, Inc. A+ 7.625 05/01/13 25,000 25,078
Houston Lighting & Power Co. A- 8.750 03/01/22 30,000 32,032
Hydro Quebec A+ 8.400 01/15/22 50,000 54,781
Nevada Power Company BBB 8.500 01/01/23 25,000 26,308
Texas Utilities Company BBB+ 6.750 03/01/03 25,000 24,922
ELECTRICAL EQUIPMENT - 3.6%
Philips Electronics N.V. BBB+ 7.250 08/15/13 25,000 24,569
Westinghouse Electric Corp. BB 8.625 08/01/12 25,000 25,063
ENVIRONMENTAL - 1.9%
Laidlaw, Inc. BBB+ 8.250 05/15/23 25,000 26,496
FINANCIAL SERVICES - 7.9%
Barclays North American Capital Corp. AA- 9.750 05/15/21 25,000 27,926
Dean Witter Discover & Company A 6.750 10/15/13 40,000 37,500
Ford Motor Credit Corporation A+ 6.375 11/05/08 25,000 23,383
Loews Corporation AA- 7.000 10/15/23 25,000 22,905
</TABLE>
See Notes To Financial Statements
34
<PAGE>
ADVANCE CAPITAL I, INC. - LONG TERM INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ---------------------------------------- --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FOOD PROCESSING - 4.7%
Borden, Inc. BB+ 9.250 06/15/19 $ 25,000 $ 25,589
Dole Food Company, Inc. BBB- 7.875 07/15/13 40,000 40,487
FOREIGN GOVERNMENT - 4.0%
Province of Ontario AA- 7.375 01/27/03 25,000 25,938
Province of Saskatchewan A- 9.375 12/15/20 25,000 30,164
INSURANCE - 5.2%
CIGNA Corporation A- 7.400 01/15/03 25,000 25,742
Metropolitan Life Insurance Co.* A+ 7.450 11/01/23 50,000 47,190
MACHINERY - 1.9%
Caterpillar, Inc. A 9.750 06/01/19 25,000 27,169
METALS & MINING - 1.9%
Alcan Aluminum Ltd. A- 8.875 01/15/22 25,000 27,080
PAPER & FOREST PRODUCTS - 1.9%
Georgia-Pacific Corporation BBB- 9.125 07/01/22 25,000 26,625
PETROLEUM - 3.6%
NOVA Gas Transmission A- 7.875 04/01/23 25,000 25,917
OXY USA, Inc. BBB 7.000 04/15/11 25,000 23,648
RECREATION - 1.8%
Brunswick Corporation BBB+ 7.375 09/01/23 25,000 24,520
RETAIL STORE - 3.9%
Dayton Hudson Corporation BBB+ 10.000 01/01/11 20,000 24,578
Sears, Roebuck & Company A- 9.375 11/01/11 25,000 29,707
SECURITIES BROKERAGE - 3.9%
Lehman Brothers Holdings, Inc. A 7.625 07/15/99 25,000 25,531
Salomon, Inc. BBB 6.750 01/15/06 30,000 28,379
TELECOMMUNICATIONS SERVICE - 11.1%
Bell Telephone Co. Pennsylvania AA 7.500 05/01/13 50,000 49,911
GTE Corporation A- 7.830 05/01/23 50,000 50,545
NYNEX Corporation A 7.000 06/15/13 30,000 29,463
Southwestern Bell Telephone Company AA 7.375 05/01/12 25,000 24,852
</TABLE>
See Notes To Financial Statements
35
<PAGE>
ADVANCE CAPITAL I, INC. - LONG TERM INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ---------------------------------------- --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U. S. GOVERNMENT - 5.0%
U.S. Treasury 5.750 08/15/03 $ 35,000 $ 33,950
U.S. Treasury 6.750 08/15/26 35,000 35,263
-----------
TOTAL FIXED-INCOME SECURITIES - 97.6%
(Cost $1,354,162) $1,361,289
===========
</TABLE>
* Security exempt from registration under Rule 144A of the Securities
Act of 1933
See Notes To Financial Statements
36
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ADVERTISING - 0.7%
Heritage Media Corporation B 02/15/06 8.750 $ 500,000 $ 485,000
Heritage Media Corporation BB- 06/15/02 11.000 500,000 537,500
Lamar Advertising Company B 12/01/06 9.625 200,000 205,500
AEROSPACE / DEFENSE - 1.3%
AAR Corporation BBB- 10/15/03 7.250 500,000 486,382
Lockheed Corporation BBB+ 03/15/23 7.875 500,000 519,988
McDonnell Douglas Corporation A- 04/01/12 9.750 1,000,000 1,240,626
AIR TRANSPORT - 2.4%
AMR Corporation BB+ 08/01/12 9.000 1,000,000 1,121,876
AMR Corporation BB+ 03/15/00 9.750 100,000 108,500
Delta Air Lines, Inc. BB+ 02/01/11 10.375 500,000 611,407
Federal Express Corporation BBB+ 01/01/15 7.630 1,000,000 1,028,708
United Airlines, Inc. BB 08/15/21 9.750 500,000 587,813
United Airlines, Inc. BB 07/15/21 10.250 500,000 615,000
APPAREL - 1.3%
Fruit of the Loom, Inc. BBB 03/15/11 7.000 1,000,000 931,319
Phillips-Van Heusen Corp. BB+ 11/15/23 7.750 1,000,000 817,677
Platex Family Products Corp. B 12/15/03 9.000 500,000 496,250
AUTO PARTS - 0.6%
JPS Automotive Products Corp. B 06/15/01 11.125 500,000 537,500
Walbro Corporation B+ 07/15/05 9.875 500,000 515,613
AUTO & TRUCK - 1.7%
Ford Motor Company A+ 11/15/22 8.875 2,000,000 2,187,628
General Motors Corporation A- 04/15/16 8.125 700,000 714,490
BANK - 6.1%
Banc One Corporation A+ 07/15/25 7.750 1,000,000 1,025,001
Bank of Boston Corporation BBB 12/01/05 6.625 1,000,000 965,001
Bankers Trust New York Corp. A- 11/15/15 7.500 1,500,000 1,485,470
Chase Manhattan Corp. A- 10/15/08 6.125 1,000,000 913,951
Citicorp A 02/01/16 10.500 199,000 208,347
Comerica Bank A- 12/01/13 7.125 1,000,000 951,876
KeyCorp BBB+ 03/15/06 6.750 1,000,000 975,314
NCNB Corporation A 07/15/15 10.200 1,000,000 1,282,695
Republic New York Corporation AA 05/15/21 9.125 1,000,000 1,182,189
Royal Bank of Scotland A+ 02/01/11 6.375 1,000,000 921,279
Westpac Banking Corporation A+ 08/15/01 9.125 500,000 549,376
</TABLE>
See Notes To Financial Statements
37
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BEVERAGE - 0.2%
Anheuser Busch Companies, Inc. AA- 03/01/17 8.500 $ 386,000 $ 401,923
BROADCASTING / CABLE TV - 4.9%
Cablevision Systems Corp. B 05/15/06 9.875 750,000 770,625
Century Communications Corp. BB- 03/01/05 9.500 1,000,000 1,011,251
Century Communications Corp. BB- 02/15/02 9.750 250,000 256,875
Comcast Corporation BB- 05/15/05 9.375 500,000 520,000
Comcast Corporation BB- 01/15/08 9.500 500,000 513,126
Continental Cablevision, Inc. BBB+ 08/01/13 9.500 500,000 571,719
Jones Intercable, Inc. B+ 07/15/04 11.500 250,000 271,875
Jones Intercable, Inc. B+ 03/01/08 10.500 200,000 215,518
Lenfest Communications, Inc. BB+ 11/01/05 8.375 750,000 720,000
Rogers Cablesystems Ltd. BB+ 03/15/05 10.000 500,000 515,315
Sinclair Broadcast Group, Inc. B 09/30/05 10.000 500,000 510,000
Sinclair Broadcast Group, Inc. B 12/15/03 10.000 575,000 592,401
Tele-Communications, Inc. BBB- 02/15/23 8.750 500,000 470,157
Tele-Communications, Inc. BBB- 01/15/23 9.250 760,000 742,426
Turner Broadcasting System, Inc. BBB- 07/01/13 8.375 750,000 767,727
BUILDING - 2.1%
Continental Homes Holding Corporation B+ 04/15/06 10.000 500,000 516,857
Ryland Group B+ 07/15/02 10.500 1,050,000 1,081,787
Standard Pacific Corporation BB 03/01/00 10.500 300,000 303,000
Toll Corporation BB- 03/15/02 10.500 550,000 570,528
U.S. Home Corporation BB 06/15/03 9.750 1,000,000 1,040,000
BUILDING MATERIALS - 0.3%
Schuller International Group BB- 12/15/04 10.875 500,000 557,500
CHEMICAL - 1.6%
Arcadian Partners, L.P. BB- 05/01/05 10.750 500,000 555,000
Borden Chemicals and Plastics, L.P. BB+ 05/01/05 9.500 500,000 512,500
duPont, E.I. de Nemours & Co. AA- 01/15/22 8.250 1,000,000 1,060,001
Union Carbide Chemicals & Plastics Co. BBB 04/01/23 7.875 600,000 623,764
COMPUTER & PERIPHERALS - 1.4%
Digital Equipment Corporation BB+ 11/01/12 8.625 1,200,000 1,238,801
International Business Machines Corp. A 11/01/19 8.375 1,000,000 1,117,814
DIVERSIFIED - 0.7%
Tenneco, Inc. BBB 11/15/12 9.200 500,000 583,241
Textron, Inc. BBB 07/01/22 8.750 581,000 605,200
</TABLE>
See Notes To Financial Statements
38
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ELECTRIC & GAS UTILITIES - 11.5%
Alabama Power Company A+ 12/01/24 9.000 $1,000,000 $ 1,082,501
Cleveland Electric Illuminating Company BB 03/01/17 9.375 500,000 509,931
Duke Power Company AA- 03/01/22 8.625 500,000 526,956
Florida Power & Light Company AA- 01/01/13 7.875 1,000,000 1,018,439
FPL Group Capital, Inc. A+ 05/01/13 7.625 500,000 501,563
Georgia Power Company A+ 02/01/23 7.950 1,000,000 1,006,603
Hydro Quebec A+ 01/15/22 8.400 800,000 876,501
Illinois Power Co. BBB 02/15/23 8.000 1,000,000 993,056
Indianapolis Power & Light Co. AA- 02/01/24 7.050 1,000,000 952,252
Long Island Lighting Company BB+ 07/15/19 8.900 473,000 465,758
Midland Cogeneration Venture BB- 07/23/02 10.330 387,909 416,033
Monongahela Power Company A+ 06/01/22 8.500 1,500,000 1,562,895
New Orleans Public Service, Inc. BBB 03/01/23 8.000 600,000 604,359
Northern Illinois Gas Company AA 08/15/21 8.875 1,000,000 1,060,814
Philadelphia Electric Company BBB+ 09/01/22 8.250 1,000,000 1,005,939
Potomac Edison Company A+ 06/01/24 8.000 1,000,000 1,029,666
Potomac Electric Power Company A 06/01/21 9.000 1,000,000 1,089,137
Public Service Electric & Gas A- 09/01/24 7.000 1,000,000 926,564
Southern Cal Edison A+ 12/01/17 8.375 655,000 668,944
Southern California Gas Company AA- 10/01/21 8.750 1,000,000 1,067,090
Virginia Electric & Power Company A 10/01/24 8.625 1,000,000 1,065,001
West Penn Power Company A+ 08/01/24 8.125 1,000,000 1,066,242
ELECTRIC EQUIPMENT - 1.6%
Essex Group, Inc. B+ 05/01/03 10.000 1,000,000 1,040,000
Philips Electronics N.V. BBB+ 08/15/13 7.250 1,000,000 982,779
Westinghouse Electric Corp. BB 08/01/12 8.625 750,000 751,876
ELECTRONICS - 0.6%
ADT Operations, Inc. BB+ 08/01/03 9.250 500,000 535,000
Rogers Communications, Inc. BB- 04/15/04 10.875 500,000 527,500
ENVIRONMENTAL - 0.6%
Laidlaw, Inc. BBB+ 05/15/23 8.250 1,000,000 1,059,840
FINANCIAL SERVICES - 3.5%
Auburn Hills Trust A- 05/01/20 12.000 400,000 609,875
CRA Finance USA, Ltd. AA- 12/01/13 7.125 500,000 492,630
Dean Witter Discover & Company A 10/15/13 6.750 1,250,000 1,171,869
Fairfax Financial Holdings BBB+ 10/01/15 8.250 1,500,000 1,566,090
Fletcher Challenge Capital Canada, Inc. BBB 06/20/16 8.250 500,000 528,282
</TABLE>
See Notes To Financial Statements
39
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
FINANCIAL SERVICES - 3.5% (Continued)
Keystone Group, Inc. A+ 09/01/03 9.750 $ 500,000 $ 542,500
SunAmerica Inc. A 04/28/23 8.125 1,000,000 1,030,155
FOOD PROCESSING - 1.5%
Chiquita Brands Int'l, Inc. B+ 01/15/04 9.625 1,000,000 1,032,500
ConAgra, Inc. BBB 03/01/21 9.750 500,000 618,844
Nabisco, Inc. BBB 06/15/15 7.550 1,000,000 985,496
FOREIGN GOVERNMENT - 3.1%
Province of Newfoundland BBB+ 10/22/22 8.650 1,000,000 1,121,620
Province of Nova Scotia A- 07/27/13 7.250 1,000,000 989,845
Province of Quebec A+ 12/01/26 8.625 1,000,000 1,120,001
Province of Saskatchewan A- 02/01/13 8.000 1,000,000 1,062,283
Republic of Finland AA 04/01/28 9.625 1,000,000 1,070,404
GROCERY - 0.3%
Safeway, Inc. BBB- 03/15/07 9.875 450,000 508,701
HOTEL / GAMING - 3.4%
Aztar Corporation B 10/01/02 11.000 500,000 487,500
California Hotel Finance Corp. BB- 12/01/02 11.000 400,000 416,000
Circus Circus Enterprises BBB 07/15/13 7.625 450,000 432,000
Empress River Casino Finance Corp. BB 04/01/02 10.750 500,000 527,879
Grand Casinos, Inc. BB 12/01/03 10.125 500,000 502,500
Host Marriott Travel Plaza BB- 05/15/05 9.500 1,000,000 1,040,000
ITT Corporation BBB 11/15/15 7.375 1,000,000 966,691
Prime Hospitality Corp. BB 01/15/06 9.250 500,000 508,665
Showboat, Inc. BB- 05/01/08 9.250 400,000 392,000
Station Casinos B+ 06/01/03 9.625 500,000 492,500
HOUSEHOLD PRODUCTS - 0.4%
American Standard, Inc. B+ 06/01/01 9.875 350,000 371,000
Owens Illinois, Inc. B+ 08/15/04 9.750 250,000 256,294
INSURANCE - 6.5%
Aetna Life & Casualty Company A- 01/15/17 8.000 1,500,000 1,486,212
CIGNA Corporation A- 03/01/23 7.650 500,000 493,438
CNA Financial Corporation A- 11/15/23 7.250 1,000,000 942,397
Continental Corporation BBB- 08/15/12 8.375 600,000 635,932
Kaufman & Broad Home Corp. B+ 05/01/03 9.375 1,000,000 1,010,000
Leucadia National Corporation BBB+ 08/15/13 7.750 910,000 914,550
MBIA, Inc. AA 10/01/22 8.200 2,000,000 2,157,743
</TABLE>
See Notes To Financial Statements
40
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INSURANCE - 6.5% (Continued)
Metropolitan Life Insurance Co.* A+ 11/01/23 7.450 $ 500,000 $ 471,904
New York Life Insurance Company AA 12/15/23 7.500 1,000,000 981,580
Penncorp Financial Group, Inc. BB+ 12/15/03 9.250 500,000 477,500
Reliance Group Holdings, Inc. BB+ 11/15/00 9.000 1,000,000 1,030,000
Vesta Insurance Group BBB+ 07/15/25 8.750 500,000 539,824
MEDICAL SERVICES - 1.6%
Abbey Healthcare Group, Inc. BB+ 11/01/02 9.500 500,000 524,832
Beverly Enterprises Inc. B+ 02/15/06 9.000 500,000 500,000
Columbia/HCA Healthcare Corporation A- 12/15/14 9.000 1,000,000 1,165,754
HEALTHSOUTH Rehabilitation BB- 04/01/01 9.500 500,000 535,000
MEDICAL SUPPLIES - 0.4%
Cardinal Health, Inc. A- 02/15/04 6.500 700,000 684,601
METALS & MINING - 1.5%
Alcan Aluminum Ltd. A- 01/15/22 8.875 1,000,000 1,083,190
Inco Ltd. BBB- 06/15/22 9.600 500,000 563,048
Placer Dome, Inc. BBB 06/15/15 7.750 1,000,000 966,996
NATURAL GAS - 1.1%
Consolidated Natural Gas Company AA- 12/01/11 8.625 845,000 884,390
Seagull Energy BB- 08/01/05 8.625 1,000,000 1,020,000
NEWSPAPER - 0.3%
Hollinger International, Inc. BB- 02/01/06 9.250 500,000 492,500
OILFIELD SERVICES - 0.2%
Rowan Companies, Inc. B+ 12/01/01 11.875 250,000 267,500
PACKAGING & CONTAINERS - 1.6%
Container Corp. of America B+ 04/01/03 9.750 400,000 423,000
Crown Cork & Seal Company, Inc. BBB+ 04/15/23 8.000 1,500,000 1,505,627
Stone Container Corporation B+ 02/01/01 9.875 750,000 757,500
PAPER & FOREST PRODUCTS - 2.8%
Bowater, Inc. BBB 10/15/12 9.500 700,000 821,728
Champion International Corporation BBB 09/01/23 7.625 1,500,000 1,447,289
Fort Howard Corporation B 03/15/03 10.000 400,000 417,465
Georgia-Pacific Corporation BBB- 07/01/22 9.125 1,000,000 1,065,000
Sweetheart Corporation, Inc. B+ 09/01/00 9.625 1,000,000 1,037,500
</TABLE>
See Notes To Financial Statements
41
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
PETROLEUM - 7.3%
Amoco Company AAA 12/15/16 8.625 $2,000,000 $ 2,092,202
ANR Pipeline Company BBB- 11/01/21 9.625 1,000,000 1,214,459
Clark Oil & Refining Corporation BB 09/15/04 9.500 650,000 666,250
Clark USA, Inc. B+ 12/01/05 10.875 500,000 522,257
Diamond Shamrock R & M, Inc. BBB 04/01/23 8.000 600,000 606,306
Louisiana Land & Exploration Co. BBB 04/15/13 7.625 1,000,000 1,013,126
Maxus Energy Corporation BB- 02/15/03 9.500 1,000,000 1,023,050
Maxus Energy Corporation BB- 11/01/03 9.375 750,000 768,750
NOVA Gas Transmission A- 04/01/23 7.875 600,000 621,996
OXY USA, Inc. BBB 04/15/11 7.000 1,000,000 945,939
Phillips Petroleum Company A- 01/01/23 8.490 1,000,000 1,066,381
USX Corporation BBB- 02/15/12 9.375 750,000 859,335
Vintage Petroleum, Inc. B+ 12/15/05 9.000 1,000,000 981,327
PUBLISHING - 1.1%
K-III Communications Corporation BB- 06/01/04 10.250 750,000 791,250
News America Holdings BBB 08/10/18 8.250 1,000,000 1,012,814
RAILROAD - 1.2%
Kansas City Southern Industries, Inc. BBB+ 07/01/22 8.800 500,000 531,089
Union Pacific Corporation BBB 05/01/25 8.350 1,500,000 1,557,225
REAL ESTATE INVESTMENT TRUST - 0.4%
Taubman Realty Group Ltd. BBB 10/01/03 7.000 750,000 726,329
RECREATION - 1.2%
Brunswick Corporation BBB+ 09/01/23 7.375 975,000 956,281
Time Warner, Inc. BBB- 01/15/13 9.125 1,000,000 1,095,000
RESTAURANT - 0.8%
Darden Restaurants, Inc. BBB 02/01/16 7.125 1,500,000 1,402,500
RETAIL STORE - 2.9%
Best Buy, Inc. B- 10/01/00 8.625 1,000,000 910,000
Dayton Hudson Corporation BBB+ 08/01/23 7.650 750,000 716,954
Genesco, Inc. B 02/01/03 10.375 425,000 419,241
Kmart Corporation B+ 10/01/12 7.750 1,000,000 844,190
Rite-Aid Corporation BBB+ 08/15/13 6.875 1,000,000 940,314
Sears, Roebuck & Company A- 11/01/11 9.375 1,000,000 1,188,272
</TABLE>
See Notes To Financial Statements
42
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ------------------------------------------- -------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
SECURITIES BROKERAGE - 3.1%
Bear Stearns Companies, Inc. A 01/15/04 6.625 $1,000,000 $ 976,876
Goldman Sachs Group A+ 03/01/13 8.000 1,000,000 1,029,503
Lehman Brothers, Inc. A 05/15/05 11.625 1,023,000 1,290,944
Morgan Stanley Group, Inc. A+ 10/01/13 7.000 1,000,000 961,312
Paine Webber Group, Inc. BBB+ 02/15/14 7.625 1,000,000 976,370
STEEL - 0.9%
AK Steel Corporation BB- 04/01/04 10.750 500,000 545,000
Jorgensen, Earle M. Company B 03/01/00 10.750 500,000 510,000
Wheeling-Pittsburgh Corporation BB- 11/15/03 9.375 500,000 490,000
TELECOMMUNICATIONS SERVICE - 4.2%
GTE Corporation A- 11/01/21 8.750 1,000,000 1,151,251
NYNEX Corporation A 12/15/11 7.375 500,000 493,779
Paging Network, Inc. B 02/01/06 8.875 1,000,000 953,554
Panamsat L.P. BB- 08/01/00 9.750 500,000 528,750
Southern Bell Telephone & Telegraph Co. AAA 03/15/13 7.625 3,000,000 3,030,817
Southwestern Bell Telephone Company AA 05/01/12 7.375 1,000,000 994,068
TEXTILES - 1.4%
Dominion Textile, Inc. BB 04/01/06 9.250 500,000 506,250
Fieldcrest Cannon, Inc. B+ 06/15/04 11.250 1,000,000 1,040,000
WestPoint Stevens, Inc. BB- 12/15/01 8.750 750,000 776,250
TOBACCO - 0.8%
Philip Morris Companies, Inc. A 01/15/17 8.375 500,000 503,021
RJR Nabisco, Inc. BBB- 04/15/04 8.750 775,000 780,329
U.S. GOVERNMENT - 2.3%
U.S. Treasury 08/15/23 6.250 1,000,000 937,500
U.S. Treasury 08/15/05 6.500 1,000,000 1,006,402
U.S. Treasury 08/15/26 6.750 2,000,000 2,015,000
-------------
TOTAL FIXED INCOME SECURITIES - 95.4%
(Cost $158,107,243) $162,937,383
=============
</TABLE>
* Security exempt from registration under Rule 144A of the Securities
Act of 1933
See Notes To Financial Statements
43
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY LONG TERM RETIREMENT
GROWTH BOND BALANCED INCOME INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities . . . . . . . . $ 38,393,985 $ 4,332,807 $ 73,582,514 $ 1,361,289 $162,937,383
Cash . . . . . . . . . . . . . . . . . . . 408,054 18,889 1,005,304 5,000 4,386,032
Receivables
Dividends and interest . . . . . . . . . 15,768 84,231 717,190 28,658 3,590,692
Securities Sold . . . . . . . . . . . . 0 0 0 0 0
Prepaid expenses . . . . . . . . . . . . . 4,078 1,559 6,989 1,075 13,987
------------- ------------- ------------- ------------- -------------
Total assets . . . . . . . . . . . . . . . 38,821,885 4,437,486 75,311,997 1,396,022 170,928,094
LIABILITIES
Payable to affiliated entities
Investment advisory fees . . . . . . . . 22,398 1,481 43,537 467 71,085
Distribution fees . . . . . . . . . . . 261 0 510 0 1,150
Accounts payable and accrued expenses . . 14,229 1,408 23,474 72 45,072
Securities purchased . . . . . . . . . . . 18,104 0 32,587 0 0
Distributions payable . . . . . . . . . . 0 4,111 10,216 687 11,596
------------- ------------- ------------- ------------- -------------
Total liabilities . . . . . . . . . . . . 54,992 7,000 110,324 1,226 128,903
------------- ------------- ------------- ------------- -------------
Net assets . . . . . . . . . . . . . . . . $ 38,766,893 $ 4,430,486 $ 75,201,673 $ 1,394,796 $170,799,191
============= ============= ============= ============= =============
NET ASSETS
Paid-in capital . . . . . . . . . . . . . $ 27,625,290 $ 4,280,485 $ 58,531,562 $ 1,394,325 $166,940,004
Accumulated undistributed net realized
loss on investments . . . . . . . . . . (127,785) (1,070) 0 (6,656) (970,953)
Net unrealized appreciation in value of
investments . . . . . . . . . . . . . . 11,269,388 151,071 16,670,111 7,127 4,830,140
------------- ------------- ------------- ------------- -------------
Net assets . . . . . . . . . . . . . . . . $ 38,766,893 $ 4,430,486 $ 75,201,673 $ 1,394,796 $170,799,191
============= ============= ============= ============= =============
SHARES OUTSTANDING . . . . . . . . . . . . . 2,633,924 427,193 5,497,973 135,750 16,747,398
============= ============= ============= ============= =============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE . . . . . . . . $ 14.72 $ 10.37 $ 13.68 $ 10.27 $ 10.20
============= ============= ============= ============= =============
</TABLE>
See Notes To Financial Statements
44
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY LONG TERM RETIREMENT
GROWTH BOND BALANCED INCOME INCOME
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . $ 25,491 $ 317,386 $ 1,888,004 $ 102,556 $ 13,007,779
Dividends . . . . . . . . . . . . . . . . . . 169,376 0 925,704 0 0
------------- ------------- ------------- ------------- -------------
Total investment income . . . . . . . . . . . 194,867 317,386 2,813,708 102,556 13,007,779
EXPENSES
Paid to affiliates:
Investment advisory fees . . . . . . . . . . 229,385 17,394 465,621 5,436 785,763
Administration fees . . . . . . . . . . . . . 0 0 0 0 0
Distribution fees . . . . . . . . . . . . . . 81,923 0 166,293 0 392,882
Transfer and dividend disbursing
agent fees . . . . . . . . . . . . . . . . 0 0 0 0 0
Paid to others:
Custodial fees . . . . . . . . . . . . . . . 21,841 2,659 27,206 1,777 9,417
Directors fees and expenses . . . . . . . . . 977 131 1,987 0 4,702
Professional fees . . . . . . . . . . . . . . 5,860 784 11,923 0 28,213
Shareholder reporting costs . . . . . . . . . 8,532 1,194 17,689 74 40,752
Registration and filing fees . . . . . . . . 4,630 1,464 4,728 1,400 12,942
Other operating expenses . . . . . . . . . . 4,408 610 9,436 42 20,806
------------- ------------- ------------- ------------- -------------
Total expenses . . . . . . . . . . . . . . . 357,556 24,236 704,883 8,729 1,295,477
------------ ------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) . . . . . . . . . . (162,689) 293,150 2,108,825 93,827 11,712,302
REALIZED GAIN (LOSS) ON INVESTMENTS
Proceeds from securities sold . . . . . . . . 7,991,824 845,746 8,370,070 84,582 12,719,017
Cost of securities sold . . . . . . . . . . . (7,862,959) (830,856) (6,948,023) (85,479) (13,175,690)
------------- ------------- ------------- ------------- -------------
Net realized gain (loss) on investments . . . 128,865 14,890 1,422,047 (897) (456,673)
UNREALIZED GAIN (LOSS) ON INVESTMENTS
Appreciation, Beginning of year . . . . . . . 6,131,147 340,412 10,985,562 72,955 8,496,965
Appreciation, End of year . . . . . . . . . . 11,269,388 151,071 16,670,111 7,127 4,830,140
------------- ------------- ------------- ------------- -------------
Net unrealized gain (loss) on investments . . 5,138,241 (189,341) 5,684,549 (65,828) (3,666,825)
------------- ------------- ------------- ------------- -------------
NET GAIN (LOSS) ON INVESTMENTS . . . . . . . . . 5,267,106 (174,451) 7,106,596 (66,725) (4,123,498)
------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . . . $ 5,104,417 $ 118,699 $ 9,215,421 $ 27,102 $ 7,588,804
============= ============= ============= ============= =============
</TABLE>
See Notes To Financial Statements
45
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH BOND
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) . . . . . . . . . . . $ (162,689) $ (56,945) $ 293,150 $ 293,799
Net realized gain (loss) on investments . . . . . . 128,865 316,515 14,890 11,845
Net unrealized gain (loss) on investments . . . . . 5,138,241 5,990,202 (189,341) 483,876
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 5,104,417 6,249,772 118,699 789,520
Distributions to Shareholders:
Net investment income . . . . . . . . . . . . . . . 0 0 (293,150) (293,799)
Net realized gain on investments . . . . . . . . . 0 0 0 0
------------- ------------- ------------- -------------
Total distributions to shareholders . . . . . . . . 0 0 (293,150) (293,799)
Share Transactions:
Net proceeds from sale of shares . . . . . . . . . 10,814,068 8,534,816 747,478 654,515
Reinvestment of distributions . . . . . . . . . . . 0 0 246,917 250,365
Cost of shares reacquired . . . . . . . . . . . . . (2,776,738) (1,793,152) (916,571) (872,964)
------------- ------------- ------------- -------------
Net increase derived from share transactions . . . 8,037,330 6,741,664 77,824 31,916
------------- ------------- ------------- -------------
Net increase (decrease) in net assets . . . . . . . 13,141,747 12,991,436 (96,627) 527,637
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . 25,625,146 12,633,710 4,527,113 3,999,476
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . $ 38,766,893 $ 25,625,146 $ 4,430,486 $ 4,527,113
============= ============= ============= =============
NUMBER OF SHARES
Sold . . . . . . . . . . . . . . . . . . . . . . . 792,133 822,812 71,788 63,642
Shares issued from reinvestment of distributions . 0 0 23,856 24,367
Reacquired . . . . . . . . . . . . . . . . . . . . (202,707) (169,448) (88,198) (84,347)
------------- ------------- ------------- -------------
Net increase in shares outstanding . . . . . . . . 589,426 653,364 7,446 3,662
Outstanding:
Beginning of year . . . . . . . . . . . . . . . . 2,044,498 1,391,134 419,747 416,085
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . 2,633,924 2,044,498 427,193 419,747
============= ============= ============= =============
</TABLE>
See Notes To Financial Statements
46
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF CHANGES IN NET ASSETS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED LONG TERM INCOME
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) . . . . . . . . . . . $ 2,108,825 $ 1,600,391 $ 93,827 $ 91,770
Net realized gain (loss) on investments . . . . . . 1,422,047 1,455,272 (897) 687
Net unrealized gain (loss) on investments . . . . . 5,684,549 10,850,004 (65,828) 204,161
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations 9,215,421 13,905,667 27,102 296,618
Distributions to Shareholders:
Net investment income . . . . . . . . . . . . . . . (2,108,825) (1,600,391) (93,827) (91,770)
Net realized gain on investments . . . . . . . . . (1,422,047) (675,694) 0 0
------------- ------------- ------------- -------------
Total distributions to shareholders . . . . . . . . (3,530,872) (2,276,085) (93,827) (91,770)
Share Transactions:
Net proceeds from sale of shares . . . . . . . . . 14,712,818 6,216,671 43,803 88,084
Reinvestment of distributions . . . . . . . . . . . 3,500,989 2,254,669 86,013 90,571
Cost of shares reacquired . . . . . . . . . . . . . (7,995,453) (5,022,865) (118,662) (95,945)
------------- ------------- ------------- -------------
Net increase derived from share transactions . . . 10,218,354 3,448,475 11,154 82,710
------------- ------------- ------------- -------------
Net increase (decrease) in net assets . . . . . . . 15,902,903 15,078,057 (55,571) 287,558
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . 59,298,770 44,220,713 1,450,367 1,162,809
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . $ 75,201,673 $ 59,298,770 $ 1,394,796 $ 1,450,367
============= ============= ============= =============
NUMBER OF SHARES
Sold . . . . . . . . . . . . . . . . . . . . . . . 1,132,445 537,704 4,368 8,833
Shares issued from reinvestment of distributions . 262,475 190,968 8,433 8,984
Reacquired . . . . . . . . . . . . . . . . . . . . (615,458) (445,049) (11,587) (9,616)
------------- ------------- ------------- -------------
Net increase in shares outstanding . . . . . . . . 779,462 283,623 1,214 8,201
Outstanding:
Beginning of year . . . . . . . . . . . . . . . . 4,718,511 4,434,888 134,536 126,335
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . 5,497,973 4,718,511 135,750 134,536
============= ============= ============= =============
</TABLE>
See Notes To Financial Statements
47
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF CHANGES IN NET ASSETS - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETIREMENT INCOME
---------------------------
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) . . . . . . . . . . . $ 11,712,302 $ 9,158,774
Net realized gain (loss) on investments . . . . . . (456,673) (309,780)
Net unrealized gain (loss) on investments . . . . . (3,666,825) 15,790,332
------------- -------------
Net increase (decrease) in net assets
resulting from operations . . . . . . . . . . . . 7,588,804 24,639,326
Distributions to Shareholders:
Net investment income . . . . . . . . . . . . . . . (11,712,302) (9,158,774)
Net realized gain on investments . . . . . . . . . 0 0
------------- -------------
Total distributions to shareholders . . . . . . . . (11,712,302) (9,158,774)
Share Transactions:
Net proceeds from sale of shares . . . . . . . . . 39,730,156 41,855,679
Reinvestment of distributions . . . . . . . . . . . 11,592,633 9,090,489
Cost of shares reacquired . . . . . . . . . . . . . (15,699,328) (11,289,892)
------------- -------------
Net increase (decrease) derived from share
transactions . . . . . . . . . . . . . . . . . . 35,623,461 39,656,276
------------- -------------
Net increase (decrease) in net assets . . . . . . . 31,499,963 55,136,828
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . 139,299,228 84,162,400
------------- -------------
End of period . . . . . . . . . . . . . . . . . . . $170,799,191 $139,299,228
============= =============
NUMBER OF SHARES
Sold . . . . . . . . . . . . . . . . . . . . . . . 3,902,770 4,342,406
Shares issued from reinvestment of distributions . 1,150,356 907,982
Reacquired . . . . . . . . . . . . . . . . . . . . (1,557,136) (1,130,935)
------------- -------------
Net increase (decrease) in shares outstanding . . . 3,495,990 4,119,453
Outstanding:
Beginning of year . . . . . . . . . . . . . . . . 13,251,408 9,131,955
------------- -------------
End of period . . . . . . . . . . . . . . . . . . 16,747,398 13,251,408
============= =============
</TABLE>
See Notes To Financial Statements
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION OF THE COMPANY
Advance Capital I, Inc. (the COMPANY) is a Maryland
Corporation organized on March 6, 1987 and commenced operations
on August 5, 1987. The COMPANY is registered under the
Investment Company Act of 1940, as amended, as an open-end,
diversified management investment company (a mutual fund)
offering shares in the Equity Growth Fund, Bond Fund, Balanced
Fund, Long Term Income Fund and Retirement Income Fund.
NOTE 2. ACCOUNTING POLICIES
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts and
disclosures in the financial statements. Actual results could
differ from these estimates.
The following is a summary of significant accounting
policies followed by the COMPANY.
Security Valuation
Securities for which exchanged quotations are readily
available are valued at the last sale price, or if no sale
price, at the closing bid price. Securities (including
restricted securities) for which exchange quotations are not
readily available (and in certain cases debt securities which
trade on an exchange), are valued primarily using dealer
supplied valuations or at their fair value as determined in good
faith under consistently applied procedures under the general
supervision of the Board of Directors. Money market instruments
held by the Funds with a remaining maturity of sixty days or
less will be valued at cost which approximates market.
Expenses
Most expenses of the COMPANY can be directly attributed to
a fund. Expenses which cannot be directly attributed are
generally apportioned between the Funds on the basis of average
net assets.
Federal Income Taxes
It is the COMPANY'S policy to meet the requirements of the
Internal Revenue Code that are applicable to regulated
investment companies and intends to distribute all of its
taxable income to its shareholders. Therefore, no federal
income tax provision is provided.
Dividends
Income dividends in the Bond, Balanced, Long Term Income
and Retirement Income Funds are declared daily, except on
Saturdays, Sundays and holidays and are paid monthly on the last
business day of the month. Income dividends in the Equity
Growth Fund, if any, are declared
49
<PAGE>
NOTE 2. ACCOUNTING POLICIES (CONTINUED)
annually and paid on the last business day of the year. Capital
gain dividends, if any, are declared annually on the last
business day of the year and are normally paid within 45 days.
Other
Security transactions are accounted for on the trade date,
the date the order to buy or sell is executed. Interest income
is recorded on the accrual basis. Dividend income is recorded
on the ex-dividend date. Premium and discount on fixed income
securities are amortized using the effective interest method.
Realized gains and losses on security transactions are
determined on the first-in, first-out method for book and tax
purposes. Net investment losses, for which no carryover is
permitted, are offset against paid in capital.
NOTE 3. TRANSACTIONS WITH AFFILIATES
Advance Capital Management, Inc. (MANAGEMENT) (a wholly
owned subsidiary of Advance Capital Group, Inc.) is the
COMPANY'S investment adviser. T. Rowe Price Associates, Inc.
(TRPA) serves as sub-adviser for that portion of the portfolio
of assets of the Equity Growth Fund and Balanced Fund which are
determined by MANAGEMENT to be invested in common stocks.
Advance Capital Services, Inc. (SERVICES) (also a wholly owned
subsidiary of Advance Capital Group, Inc.) is the distributor of
the Company's shares. Advance Capital Group, Inc. (GROUP) is
the Company's Administrator, Transfer Agent and Dividend
Disbursing Agent. For services provided by MANAGEMENT, the
COMPANY pays a fee equal on an annual basis to .70% of the
average daily net assets of the Equity Growth and Balanced
Funds, .50% of the average daily net assets of the Retirement
Income Fund, and .40% of the average daily net assets of the
Bond and Long Term Income Funds. For its services, TRPA is paid
a fee by MANAGEMENT equal on an annual basis to .20% of the
average daily net assets of the Equity Growth Fund and that
portion of the Balanced Fund invested in common stocks. GROUP
provides administrative, transfer agent and dividend disbursing
agent services to the COMPANY. The COMPANY will reimburse
SERVICES for actual expenses incurred in connection with the
distribution of fund shares of the Equity Growth, Balanced and
Retirement Income Funds, at a rate not to exceed .25% of each
fund's average daily net assets.
The COMPANY was charged investment advisory fees of
$1,503,599 by MANAGEMENT for 1996. The COMPANY was charged
distribution fees of $641,098 by SERVICES for 1996. SERVICES
paid or accrued to brokerage firms a total of $15,127 for
distributing COMPANY shares for 1996. At December 31, 1996 an
employee retirement plan sponsored by SERVICES owned 52,675
shares (2.0%) of the Equity Growth Fund and 14,650 shares (0.3%)
of the Balanced Fund.
50
<PAGE>
NOTE 3. TRANSACTIONS WITH AFFILIATES (Continued)
Certain officers and directors of GROUP, MANAGEMENT, and
SERVICES, are also officers and directors of the COMPANY.
Directors fees are only paid to outside directors and consist of
a $1,000 annual retainer and an additional $100 per meeting.
NOTE 4. INVESTMENT PORTFOLIO TRANSACTIONS
The cost of purchases and proceeds from sales of
investments, other than short-term obligations, for 1996 were as
follows:
<TABLE>
<CAPTION>
Equity Long Term Retirement
Growth Bond Balanced Income Income
------ ---- -------- ---------- ---------
<S> <C> <C> <C> <C>
Purchases $15,945,323 $919,113 $16,353,198 $112,125 $43,539,878
Sales 7,991,824 845,746 8,370,070 84,582 12,719,017
</TABLE>
The cost of purchases and proceeds from sales of U.S.
Government securities included above were as follows:
<TABLE>
<CAPTION>
Equity Long Term Retirement
Growth Bond Balanced Income Income
------ ---- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Purchases None $516,538 None $36,313 $3,086,328
Sales None 317,854 None 38,432 2,380,813
</TABLE>
Gross unrealized appreciation and depreciation of
investments for book and tax purposes as of December 31, 1996
were as follows:
<TABLE>
<CAPTION>
Equity LongTerm Retirement
Growth Bond Balanced Income Income
------ ---- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Appreciation $12,371,787 $175,234 $17,505,183 $32,826 $6,589,985
Depreciation 1,102,399 24,163 835,072 25,699 1,759,845
</TABLE>
NOTE 5. CASH
As of December 31, 1996, substantially all cash was
invested in the Monitor Money Market Fund, bearing interest at a
variable rate (approximately 4.9%).
51
<PAGE>
NOTE 6. CAPITAL LOSS CARRYOVERS
For 1996, the Company utilized $128,865 and $14,890 of
capital loss carryovers in the Equity Growth and Bond Funds
respectively. At December 31, 1996, capital loss carryovers and
their expiration dates were as follows:
<TABLE>
<CAPTION>
Equity Long Term Retirement
Growth Bond Income Income
-------- ------ --------- ----------
<S> <C> <C> <C> <C>
December 31, 2002 $127,785 $1,070 $5,759 $204,500
December 31, 2003 0 0 0 309,780
December 31, 2004 0 0 0 456,673
-------- ------ --------- ----------
$127,785 $1,070 $5,759 $970,953
======== ====== ========= ==========
</TABLE>
NOTE 7. AUTHORIZED SHARES
The Fund has one billion authorized shares of common stock,
par value of $.001 per share. Each of the Fund's five
portfolios has 200 million shares authorized.
52
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Advance Capital I, Inc.
In our opinion, the accompanying statements of assets and
liabilities, including the portfolios 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 Equity Growth Fund, Bond
Fund, Balanced Fund, Long Term Income Fund and Retirement Income
Fund (constituting Advance Capital I, Inc., hereafter referred
to as the "Company") at December 31, 1996, and the results of
each of their operations for the year ended and the changes in
each of their net assets and the financial highlights for each
of the two years in the periods then ended, in conformity with
generally accepted accounting principles. These financial
statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the
Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. 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 our
audits, which included confirmation of securities at December
31, 1996 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above. The
financial statements of Advance Capital I, Inc. for the years
ended December 31, 1992 through December 31, 1994 were audited
by other independent accountants whose report dated February 15,
1995 expressed an unqualified opinion on those statements.
/s/ Price Waterhouse LLP
Detroit, Michigan
February 10, 1997
53
<PAGE>
ADDITIONAL INFORMATION (Unaudited)
CHANGE OF ACCOUNTANTS
Effective May 22, 1995, Correll Porvin & Associates
declined to stand for reelection as the Fund's independent
accountants. For the period of August 5, 1987 (commencement of
operations) to December 31, 1987 and for the years ended
December 31, 1988 through December 31, 1994 for the Equity
Growth Fund, Bond Fund and Balanced Fund and the years ended
December 31, 1993 through December 31, 1994 for the Long Term
Income Fund and Retirement Income Fund, Correll Porvin &
Associates expressed an unqualified opinion on the Fund's
financial statements. There were no disagreements between Fund
management and Correll Porvin & Associates prior to their
decision not to stand for reelection. On July 27, 1995, the
Board of Directors approved Price Waterhouse, LLP as the Fund's
independent accountants.
RESULTS OF ANNUAL SHAREHOLDER VOTE
An Annual Meeting of Shareholders of the COMPANY was held
at the Radisson Hotel, 1500 Town Center, Southfield, Michigan,
on July 26, 1996 for the following purposes:
1. To elect five Directors to hold office until the next
Annual Meeting of Shareholders or until their successors have
been elected and qualified.
<TABLE>
<CAPTION>
Directors Elected at Meeting Votes For
---------------------------- ---------
<S> <C>
Joseph A. Ahern 14,407,210
Richard W. Holtcamp 14,367,406
Harry Kalajian 14,410,527
John C. Shoemaker 14,491,427
Frank R. Zimmerman 14,471,339
</TABLE>
2. To ratify the selection of Price Waterhouse LLP as
independent accountants of the COMPANY for the fiscal year
ending December 31,1996.
<TABLE>
<S> <C>
Votes For: 14,461,039
Votes Against: 30,110
Votes to Abstain: 94,407
</TABLE>
54
<PAGE>
ADVANCE CAPITAL I, Inc.
ADVANCE CAPITAL I Inc.
An investment company with five funds
INVESTMENT ADVISER:
Advance Capital Management, Inc.
One Towne Square, Suite 444
Southfield, Michigan 48076
SUB-ADVISER: EQUITY GROWTH FUND
(Equity Growth and Balanced Funds) BOND FUND
T. Rowe Price Associates, Inc. BALANCED FUND
100 East Pratt Street LONG TERM INCOME FUND
Baltimore, Maryland 2102 RETIREMENT INCOME FUND
DISTRIBUTOR:
Advance Capital Services, Inc.
P.O. Box 3144
Southfield, Michigan 48037
ADMINISTRATOR AND TRANSFER AGENT:
Advance Capital Group, Inc.
P.O. Box 3144
Southfield, Michigan 48037
CUSTODIAN:
Huntington Banks of Michigan
220 Park Street, Suite 100
Birmingham, Michigan 48009
INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
200 Renaissance Center
Suite 3900
Detroit, MI 48243
OFFICERS:
John C. Shoemaker, President
Robert J. Cappelli, Vice President & Treasurer
Charles J. Cobb, Vice President
Kathy J. Harkleroad, Secretary
ANNUAL REPORT
BOARD OF DIRECTORS: DECEMBER 31, 1996
Joseph A. Ahern
Richard W. Holtcamp
Harry Kalajian
John C. Shoemaker
Frank R. Zimmerman
<PAGE>
FORM N-1A
Part C - Other Information
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements. Included with the Statement of Additional
--------------------
Information is the following:
# (1) Annual Report for the year ended December 31, 1996.
All required financial statements are included in Part B.
(b) Exhibits.
---------
(1) Articles of Incorporation filed March 6, 1987.
(i) Amendment to Articles of Incorporation approved by shareholder
vote July 24, 1992.
(2) By-laws as approved and adopted by Registrant's Board of Directors.
(3) None.
(4) Specimen copy of each security issued by Registrant.
(i) Class A Common Shares.
(ii) Class B Common Shares.
(iii) Class C Common Shares.
(iv) Class D Common Shares.
(v) Class E Common Shares.
(5) Investment Advisory Agreement between Registrant and Advance Capital
Management, Inc. dated August 3, 1987 and amended July 24, 1992.
(i) Board Resolution dated July 24, 1992.
(ii) Sub-Investment Advisory Agreements between Advance Capital
Management, Inc. and T. Rowe Price Associates, Inc. dated
December 21, 1993 for Class A and December 17, 1993 for Class C.
(6) Distribution Agreement between Registrant and Advance Capital
Services, Inc. dated August 3, 1987.
(i) Board Resolution dated July 24, 1992.
(7) None.
(8) Custodian Agreements between Registrant and Huntington Banks of
Michigan dated June 17, 1992 for Class A, Class B and Class C and
August 5, 1992 for Class D and Class E.
(9) Administration and Transfer Agent Agreement between Registrant and
Advance Capital Services, Inc. dated April 28, 1987 and amended July
9, 1992.
(i) Board Resolution dated July 24, 1992.
(ii) Administration and Transfer Agent Agreement between Registrant and
Advance Capital Group, Inc. dated December 23, 1993.
* (10) Opinion and consent of counsel.
(11) Other consents.
# (i) Consent of Price Waterhouse LLP.
# (ii) Consent of Messrs. Berry Moorman.
(12) None.
(13) Purchase Agreement between Registrant and Investors dated August 3,
1987.
(14) Not applicable.
(15) Plan of Distribution dated August 3, 1987, approved by shareholders
July 22, 1988 and amended January 2, 1992.
(i) Board Resolution Dated April 24, 1992.
(ii) Board Resolution Dated July 24, 1992.
(16) Not applicable.
* Filed under Rule 24f-2 as part of Registrant's Rule 24f-2
notice.
# Filed with this amendment.
Item 25. Persons Controlled By or Under Common Control with Registrant.
--------------------------------------------------------------
Included in Part B - Statement of Additional Information under the
heading of Control Persons and Principal Holders of Securities is a
detailed description of the principal holders of securities,
including those that own more than 5% and the detailed holdings of
directors and officers of the Company.
The holdings as of April 9, 1997 for Messrs. Raymond Rathka,
John C. Shoemaker and Robert J. Cappelli, who are directors and
officers of the Registrant's Investment Adviser, Advance Capital
Management, Inc. and of the Registrant's transfer agent and
administrator, Advance Capital Services, Inc., are included in
that section of Part B mentioned in the preceding paragraph.
Item 26. Number of Holders of Securities
-------------------------------
As of April 9, 1997
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Class A 1,466
Class B 108
Class C 1,168
Class D 24
Class E 1,242
</TABLE>
Item 27. Indemnification
---------------
Article VII, Section 3 of Registrant's Articles of
Incorporation, incorporated by reference as Exhibit (1) hereto,
and Article VI, Section 2 of Registrant's Bylaws, incorporated
by reference as Exhibit (2) hereto, provides for the
indemnification of Registrant's directors and officers.
Indemnification of the Registrant's principal underwriter is
provided for in Section 4 of the Distribution Agreement,
incorporated by reference as Exhibit (6) hereto. In no event
will Registrant indemnify any of its directors, officers,
employees, or agents against any liability to which said person
would otherwise be subject by reason of his willful misfeasance,
bad faith, or gross negligence in the performance of his duties,
or by reason of his reckless disregard of the duties involved in
the conduct of his office or under his agreement with
Registrant. Registrant will comply with Rule 484 under the
Securities Act of 1933 and Release No. 11330 under the
Investment Company Act of 1940 in connection with any
indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers,
and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnifications against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a director,
officer, or controlling person of Registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
-----------------------------------------------------
Advance Capital Management, Inc. ("Management") is a Michigan
corporation established in 1986 for the purpose of providing
investment management services. Management, a registered
investment adviser with the Securities and Exchange Commission
and the State of Michigan, is a wholly owned subsidiary of
Advance Capital Group, Inc.("Group"). Group also owns Advance
Capital Services, Inc. ("Services") a financial services company
that is a licensed National Association of Securities Dealers,
Inc. broker-dealer. The owners of Group and the directors and
officers of Services and Management are the same three
individuals, Raymond A. Rathka, John C. Shoemaker, and Robert J.
Cappelli. The address for all three companies is One Towne
Square, Suite 444, Southfield, Michigan, 48076. The chart below
shows the ownership and control of these three firms and of the
Registrant as well.
Position Group Services Management Registrant
- -------- ----- -------- ---------- ----------
Owner(s) Cappelli Group Group Shareholders
Rathka
Shoemaker
Directors Cappelli Cappelli Cappelli Ahern, J.A.
Rathka Rathka Rathka Holtcamp, R.W.
Shoemaker Shoemaker Kalajian, H.
Shoemaker
Zimmerman, F.R.
President Rathka Cappelli Shoemaker Shoemaker
Vice President Shoemaker Shoemaker Cappelli Cappelli
Cobb
Treasurer Cappelli Rathka Rathka Cappelli
Secretary Shoemaker Shoemaker Shoemaker Harkleroad
Item 29. Principal Underwriters.
-----------------------
Advance Capital Services, Inc.("Services") is a Michigan
corporation which was established in 1986 to provide financial
services and broker-dealer services. Currently, it is not
distributing securities for any other investment companies. The
directors and officers of Services are identified in Item 28
above.
Item 30. Location of Accounts and Records
--------------------------------
(1) Advance Capital Management, Inc., One Towne Square, Suite 444,
Southfield, Michigan, 48076 (records relating to its functions as
investment adviser).
(2) Advance Capital Services, Inc., One Towne Square, Suite 444,
Southfield, Michigan 48076 (records relating to its functions as
distributor)
(3) Advance Capital Group, Inc., One Towne Square, Suite 444,
Southfield, Michigan 48076 (records relating to its functions as
administrator and transfer agent)
(4) Huntington Banks of Michigan, 220 Park Street, Suite 100,
Birmingham, Michigan 48009 (records relating to its functions as
custodian).
(5) Berry Moorman, 600 Woodbridge Place, Place, Detroit, Michigan 48226
(Registrant's Articles of Incorporation and Bylaws).
Item 31. Management Services.
-------------------
Inapplicable.
Item 32. Undertakings.
-------------
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 20 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ADVANCE CAPITAL I, INC.
Registrant
By /s/ Kathy J. Harkleroad 4/22/97
------------------------------- -----------
Kathy J. Harkleroad - Secretary Date
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Principal Executive Officer:
\s\ John C. Shoemaker 4/22/97
- ------------------------------ ---------
John C. Shoemaker - President and Director Date
Principal Financial Officer:
\s\ Robert J. Cappelli 4/21/97
- ------------------------------ ---------
Robert J. Cappelli - Vice President and Treasurer Date
Directors:
\s\ Joseph A. Ahern 4/30/97
- ------------------------------ ---------
Joseph A. Ahern Date
\s\ Richard W. Holtcamp 4/23/97
- ------------------------------ ---------
Richard W. Holtcamp Date
\s\ Harry Kalajian 4/25/97
- ------------------------------ ---------
Harry Kalajian Date
\s\ Frank R. Zimmerman 4/24/97
- ------------------------------ ---------
Frank R. Zimmerman Date
<PAGE>
[Berry Moorman Letterhead]
Detroit Office
April 30, 1997
Ms. Melanie Bascom-Keller
Advance Capital
1 Towne Square
Suite 444
Southfield, MI 48076
Dear Ms. Bascom-Keller:
We hereby consent to the reference to our firm's name as legal
counsel to Advance Capital I, Inc. included in the April 30,
1997 amendment to the Company's Registration Statement on Form
N-1A filed with the Securities and Exchange Commission.
Very truly yours,
BERRY MOORMAN P.C.
By: /s/ Robert A. Hudson
- --------------------------
Robert A. Hudson
RAH:gam
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the
registration statement on Form N-1A (the "Registration Statement") of our
report dated February 10, 1997, relating to the financial statements and
financial highlights of Advance Capital I, Inc., which appears in the
Statement of Additional Information. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Detroit, Michigan
April 22, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> EQUITY GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27,532,651
<INVESTMENTS-AT-VALUE> 38,802,039
<RECEIVABLES> 15,768
<ASSETS-OTHER> 4,078
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,821,885
<PAYABLE-FOR-SECURITIES> 18,104
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,888
<TOTAL-LIABILITIES> 54,992
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,625,290
<SHARES-COMMON-STOCK> 2,633,924
<SHARES-COMMON-PRIOR> 2,044,498
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (127,785)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,269,388
<NET-ASSETS> 38,766,893
<DIVIDEND-INCOME> 169,376
<INTEREST-INCOME> 25,491
<OTHER-INCOME> 0
<EXPENSES-NET> 357,556
<NET-INVESTMENT-INCOME> (162,689)
<REALIZED-GAINS-CURRENT> 128,865
<APPREC-INCREASE-CURRENT> 5,138,241
<NET-CHANGE-FROM-OPS> 5,104,417
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 792,133
<NUMBER-OF-SHARES-REDEEMED> 202,707
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,141,747
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (256,650)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 229,385
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 357,556
<AVERAGE-NET-ASSETS> 32,731,306
<PER-SHARE-NAV-BEGIN> 12.53
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 2.26
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.72
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,200,625
<INVESTMENTS-AT-VALUE> 4,351,696
<RECEIVABLES> 84,231
<ASSETS-OTHER> 1,559
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,437,486
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,000
<TOTAL-LIABILITIES> 7,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,280,485
<SHARES-COMMON-STOCK> 427,193
<SHARES-COMMON-PRIOR> 419,747
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,070)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 151,071
<NET-ASSETS> 4,430,486
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 317,386
<OTHER-INCOME> 0
<EXPENSES-NET> 24,236
<NET-INVESTMENT-INCOME> 293,150
<REALIZED-GAINS-CURRENT> 14,890
<APPREC-INCREASE-CURRENT> (189,341)
<NET-CHANGE-FROM-OPS> 118,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 293,150
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 71,788
<NUMBER-OF-SHARES-REDEEMED> 88,198
<SHARES-REINVESTED> 23,856
<NET-CHANGE-IN-ASSETS> (96,627)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15,960)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,394
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24,236
<AVERAGE-NET-ASSETS> 4,369,521
<PER-SHARE-NAV-BEGIN> 10.79
<PER-SHARE-NII> .70
<PER-SHARE-GAIN-APPREC> (.42)
<PER-SHARE-DIVIDEND> .70
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.37
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 57,917,707
<INVESTMENTS-AT-VALUE> 74,587,818
<RECEIVABLES> 717,190
<ASSETS-OTHER> 6,989
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75,311,997
<PAYABLE-FOR-SECURITIES> 32,587
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,737
<TOTAL-LIABILITIES> 110,324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,531,562
<SHARES-COMMON-STOCK> 5,497,973
<SHARES-COMMON-PRIOR> 4,718,511
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,670,111
<NET-ASSETS> 75,201,673
<DIVIDEND-INCOME> 925,704
<INTEREST-INCOME> 1,888,004
<OTHER-INCOME> 0
<EXPENSES-NET> 704,883
<NET-INVESTMENT-INCOME> 2,108,825
<REALIZED-GAINS-CURRENT> 1,422,047
<APPREC-INCREASE-CURRENT> 5,684,549
<NET-CHANGE-FROM-OPS> 9,215,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,108,825
<DISTRIBUTIONS-OF-GAINS> 1,422,047
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,132,445
<NUMBER-OF-SHARES-REDEEMED> 615,458
<SHARES-REINVESTED> 262,475
<NET-CHANGE-IN-ASSETS> 15,902,903
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 465,621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 704,883
<AVERAGE-NET-ASSETS> 66,575,311
<PER-SHARE-NAV-BEGIN> 12.57
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> 1.37
<PER-SHARE-DIVIDEND> .41
<PER-SHARE-DISTRIBUTIONS> .26
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.68
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> LONG TERM INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,359,162
<INVESTMENTS-AT-VALUE> 1,366,289
<RECEIVABLES> 28,658
<ASSETS-OTHER> 1,075
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,396,022
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,226
<TOTAL-LIABILITIES> 1,226
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,394,325
<SHARES-COMMON-STOCK> 135,750
<SHARES-COMMON-PRIOR> 134,536
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,656)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,127
<NET-ASSETS> 1,394,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 102,556
<OTHER-INCOME> 0
<EXPENSES-NET> 8,729
<NET-INVESTMENT-INCOME> 93,827
<REALIZED-GAINS-CURRENT> (897)
<APPREC-INCREASE-CURRENT> (65,828)
<NET-CHANGE-FROM-OPS> 27,102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 93,827
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,368
<NUMBER-OF-SHARES-REDEEMED> 11,587
<SHARES-REINVESTED> 8,433
<NET-CHANGE-IN-ASSETS> (55,571)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5,759)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,436
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,729
<AVERAGE-NET-ASSETS> 1,366,896
<PER-SHARE-NAV-BEGIN> 10.78
<PER-SHARE-NII> .70
<PER-SHARE-GAIN-APPREC> (.51)
<PER-SHARE-DIVIDEND> .70
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> .64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 005
<NAME> RETIREMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 162,493,275
<INVESTMENTS-AT-VALUE> 167,323,415
<RECEIVABLES> 3,590,692
<ASSETS-OTHER> 13,987
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 170,928,094
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,903
<TOTAL-LIABILITIES> 128,903
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166,940,004
<SHARES-COMMON-STOCK> 16,747,398
<SHARES-COMMON-PRIOR> 13,251,408
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (970,953)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,830,140
<NET-ASSETS> 170,799,191
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,007,779
<OTHER-INCOME> 0
<EXPENSES-NET> 1,295,477
<NET-INVESTMENT-INCOME> 11,712,302
<REALIZED-GAINS-CURRENT> (456,673)
<APPREC-INCREASE-CURRENT> 3,666,825
<NET-CHANGE-FROM-OPS> 7,588,804
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,712,302
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,902,770
<NUMBER-OF-SHARES-REDEEMED> 1,557,136
<SHARES-REINVESTED> 1,150,356
<NET-CHANGE-IN-ASSETS> 31,499,963
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (514,280)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 785,763
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,295,477
<AVERAGE-NET-ASSETS> 157,109,224
<PER-SHARE-NAV-BEGIN> 10.51
<PER-SHARE-NII> .75
<PER-SHARE-GAIN-APPREC> (.31)
<PER-SHARE-DIVIDEND> .75
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.20
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
