As filed with the Securities and Exchange Commission on
April 20, 1998
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. 21 X
------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 21 X
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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 (248) 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 20, 1998
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It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
X 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
If appropriate, check the following box:
this post-effective amendment designates a new
effective date for a previously filed post-
effective amendment.
Title of Securities Being Registered Class A,B,C,E
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<PAGE>
CROSS REFERENCE SHEET
Form N-1A Part A Item Prospectus Caption
- ---------------------- -----------------------
1. Cover Page Cover Page
2. Synopsis The Expense Table
3. Condensed Financial Financial Highlights
Information
4. General Description of General 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
Securities 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 FOUR FUNDS Southfield, MI 48037
Michigan (248) 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 four 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 and the RETIREMENT INCOME FUND 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 either 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.
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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 (248) 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 20, 1998
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........................ 8
Investment Risks of Lower Rated Securities....... 11
Investment Limitations........................... 12
DISTRIBUTION OF SHARES....................................... 12
NET ASSET VALUE.............................................. 12
INVESTING IN THE FUNDS....................................... 12
Purchases By Mail................................ 13
Purchases By Wire................................ 13
Minimum Investment Required...................... 13
What Shares Cost................................. 13
Certificates and Confirmations................... 13
Dividends........................................ 13
Capital Gains.................................... 14
TRANSFERRING SHARES.......................................... 14
REDEEMING SHARES............................................. 14
Written Requests................................. 14
Signatures....................................... 14
Telephone Requests............................... 14
Receiving Payment................................ 15
Redemption Before Purchase Instruments Clear..... 15
Accounts With Low Balances....................... 15
Redemption In Kind............................... 15
DISTRIBUTION PLAN............................................ 16
MANAGEMENT OF THE COMPANY.................................... 16
EXPENSES OF THE COMPANY...................................... 17
TAX INFORMATION.............................................. 18
DESCRIPTION OF CAPITAL STOCK................................. 18
MISCELLANEOUS................................................ 18
<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 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 RETIREMENT
GROWTH BOND BALANCED INCOME
------ ---- -------- ----------
<S> <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%
Deferred Sales Load (as a percentage of
original purchase price)................................ 0% 0% 0% 0%
Redemption Fee............................................ None None None None
Exchange Fee.............................................. None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets):
Management Fees........................................... .70% .40% .70% .50%
12b-1 Fees (A)............................................ .25% .00% .25% .25%
Other Expenses............................................ .12% .14% .09% .07%
---- ---- ---- ----
Total Fund Operating Expenses............................. 1.07% .54% 1.04% .82%
===== ==== ===== ====
</TABLE>
<TABLE>
<C> <C> <C> <C> <C>
Example:
You would pay the following expenses on a $ 11 $ 6 $ 11 $ 8 1 Year
$1,000 investment, assuming (1) a 5% $ 34 $ 17 $ 33 $ 26 3 Years
annual return and (2) redemption at the $ 59 $ 30 $ 57 $ 45 5 Years
end of each period. $131 $ 68 $127 $100 10 Years
</TABLE>
(A) Annual 12b-1 fees of .25% have been authorized for all FUNDS
and suspended indefinitely in the Bond Fund. (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, 1995
through December 31, 1997 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 years ended December 31, 1988 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,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
EQUITY GROWTH FUND (a) ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
SELECTED PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $14.72 $12.53 $9.08 $9.46 $9.94 $9.83 $8.89 $9.79 $8.79 $7.46
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income
(loss) (0.09) (0.07) (0.03) (0.03) 0.12 0.10 0.14 0.19 0.26 0.24
Net realized and unrealized
gain (loss) on investments 2.69 2.26 3.48 (0.35) 0.07 0.11 1.78 (0.90) 1.85 1.47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 2.60 2.19 3.45 (0.38) 0.19 0.21 1.92 (0.71) 2.11 1.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income 0.00 0.00 0.00 0.00 (0.12) (0.10) (0.14) (0.19) (0.26) (0.24)
Net realized gain on
investments (0.07) 0.00 0.00 0.00 (0.55) 0.00 (0.84) 0.00 (0.85) (0.14)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.07) 0.00 0.00 0.00 (0.67) (0.10) (0.98) (0.19) (1.11) (0.38)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year $17.25 $14.72 $12.53 $9.08 $9.46 $9.94 $9.83 $8.89 $9.79 $8.79
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 17.68% 17.48% 38.00% -4.02% 2.13% 2.22% 20.94% -7.47% 23.81% 22.48%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(in thousands) $54,332 $38,767 $25,625 $12,634 $7,577 $7,094 $6,275 $4,310 $2,405 $692
Ratio of expenses to
average net assets 1.07% 1.09% 1.12% 1.21% 1.16% 1.22% 1.38% 1.46% 1.31% 0.74%
Ratio of net investment
income (loss) to average
net assets -0.58% -0.50% -0.29% -0.30% 1.27% 1.05% 1.37% 2.04% 2.59% 2.75%
Portfolio turnover rate 20.53% 24.75% 13.86% 18.05% 135.55% 96.05% 86.48% 81.13% 112.31% 156.56%
Average commission rate
per share (b) $0.0259 $0.0261
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
BOND FUND ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
SELECTED PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $10.37 $10.79 $9.61 $10.82 $10.51 $10.52 $9.91 $9.90 $9.54 $9.83
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.69 0.70 0.70 0.71 0.72 0.70 0.74 0.77 0.78 0.80
Net realized and unrealized
gain (loss) on investments 0.24 (0.42) 1.18 (1.21) 0.45 0.01 0.62 0.02 0.36 (0.28)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.93 0.28 1.88 (0.50) 1.17 0.71 1.36 0.79 1.14 0.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income (0.69) (0.70) (0.70) (0.71) (0.72) (0.70) (0.74) (0.78) (0.78) (0.81)
Net realized gain on
investments (0.09) 0.00 0.00 0.00 (0.14) (0.02) (0.01) 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.78) (0.70) (0.70) (0.71) (0.86) (0.72) (0.75) (0.78) (0.78) (0.81)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year $10.52 $10.37 $10.79 $9.61 $10.82 $10.51 $10.52 $9.91 $9.90 $9.54
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 9.41% 2.81% 20.15% -4.64% 11.48% 7.04% 14.26% 8.52% 12.64% 4.87%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(in thousands) $4,203 $4,430 $4,527 $3,999 $4,741 $5,793 $2,439 $1,488 $778 $565
Ratio of expenses to
average net assets 0.54% 0.55% 0.55% 0.60% 0.61% 0.75% 0.85% 0.87% 0.86% 0.45%
Ratio of net investment
income to average net assets 6.65% 6.71% 6.80% 7.06% 6.57% 6.69% 7.36% 8.00% 7.93% 8.14%
Portfolio turnover rate 21.95% 19.77% 6.69% 21.92% 35.99% 38.22% 25.47% 7.41% 2.25% 63.69%
</TABLE>
(a) 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 responsibilty for the daily security
investment decisions.
(b) 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,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
BALANCED FUND (a) ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
SELECTED PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $13.68 $12.57 $9.97 $10.58 $10.36 $10.38 $9.55 $10.10 $9.35 $8.33
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.45 0.41 0.35 0.32 0.29 0.33 0.39 0.44 0.48 0.43
Net realized and unrealized
gain (loss) on investments 2.32 1.37 2.75 (0.61) 0.22 (0.02) 1.39 (0.55) 1.24 1.01
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 2.77 1.78 3.10 (0.29) 0.51 0.31 1.78 (0.11) 1.72 1.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
Net investment income (0.45) (0.41) (0.35) (0.32) (0.29) (0.33) (0.39) (0.44) (0.47) (0.42)
Net realized gain on
investments (0.31) (0.26) (0.15) 0.00 0.00 0.00 (0.56) 0.00 (0.50) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.76) (0.67) (0.50) (0.32) (0.29) (0.33) (0.95) (0.44) (0.97) (0.42)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of year $15.69 $13.68 $12.57 $9.97 $10.58 $10.36 $10.38 $9.55 $10.10 $9.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 20.50% 14.48% 31.53% -2.72% 4.97% 3.07% 18.32% -1.08% 18.59% 17.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(in thousands) $99,421 $75,202 $59,299 $44,221 $46,690 $42,440 $22,677 $14,128 $3,948 $745
Ratio of expenses to
average net assets 1.04% 1.06% 1.07% 1.10% 1.08% 1.13% 1.38% 1.35% 1.29% 0.53%
Ratio of net investment
income to average net assets 3.02% 3.17% 3.11% 3.18% 2.77% 3.24% 3.75% 4.56% 4.68% 4.62%
Portfolio turnover rate 10.13% 12.79% 22.72% 34.97% 101.29% 42.39% 50.94% 46.72% 83.79% 106.94%
Average commission rate
per share (b) $0.0266 $0.0278
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995 1994 1993
RETIREMENT INCOME FUND ----- ----- ----- ----- -----
SELECTED PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $10.20 $10.51 $9.22 $10.54 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.74 0.75 0.76 0.76 0.82
Net realized and unrealized
gain (loss) on investments 0.45 (0.31) 1.29 (1.32) 0.61
------ ------ ------ ------ ------
Total from investment
operations 1.19 0.44 2.05 (0.56) 1.43
------ ------ ------ ------ ------
Less distributions
Net investment income (0.74) (0.75) (0.76) (0.76) (0.82)
Net realized gain on
investments 0.00 0.00 0.00 0.00 (0.07)
------ ------ ------ ------ ------
Total distributions (0.74) (0.75) (0.76) (0.76) (0.89)
------ ------ ------ ------ ------
Net asset value, end
of year $10.65 $10.20 $10.51 $9.22 $10.54
====== ====== ====== ====== ======
TOTAL RETURN 12.20% 4.54% 22.96% -5.34% 13.92%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year
(in thousands) $200,511 $170,799 $139,299 $84,162 $47,343
Ratio of expenses to
average net assets 0.82% 0.82% 0.84% 0.88% 0.88%
Ratio of net investment
income to average net assets 7.21% 7.45% 7.64% 7.89% 7.41%
Portfolio turnover rate 16.60% 8.34% 15.63% 12.27% 37.59%
</TABLE>
(a) 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.
(b) 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>
GENERAL INFORMATION
Advance Capital I, Inc. (the COMPANY) is a mutual fund
consisting of four 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 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
5
<PAGE>
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
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
6
<PAGE>
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 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.
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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 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 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 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 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
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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 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 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
9
<PAGE>
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 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 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 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.
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<PAGE>
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.
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.
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<PAGE>
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:
o borrow money or pledge securities;
o 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;
o 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 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;
o 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;
o invest more than 25% of each respective FUND's total assets
in any one industry;
o 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.
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<PAGE>
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 (248) 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.
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 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 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 four 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.
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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 three 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 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:
o a trust company or commercial bank that is a member of
the FDIC; or
o 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
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<PAGE>
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 (248) 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. 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 four 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.
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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 Fund. Shareholders of
the Bond Fund will be notified 30 days prior to any increase in
the 12b-1 fees charged to this Fund.
During the fiscal year ended December 31, 1997, the COMPANY
paid or accrued distribution expenses of $118,253, $0, $220,704
and $460,525 for the Equity Growth, Bond, Balanced 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 .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
16
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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, 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 inception
(August, 1987 for the Equity Growth, Bond and Balanced Funds and
October 6, 1992 for the Retirement Income Fund). Mr. Cappelli
has been a portfolio manager for the Bond Fund and the Balanced
Fund since 1991 and for the 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 and
the Retirement Income Fund since 1995, and has been involved in the
administration, research and investment of these 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
17
<PAGE>
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.
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 four
classes of shares, each representing shares in one of four
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 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
18
<PAGE>
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 FOUR FUNDS
INVESTMENT ADVISER:
Advance Capital Management, Inc. Equity Growth Fund
One Towne Square, Suite 444 Bond Fund
Southfield, Michigan 48076 Balanced Fund
Retirement Income Fund
SUB-ADVISER: (Equity Growth and Balanced Funds)
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
2050 North Woodward
Suite 200
Bloomfield Hills, Michigan 48304
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 20, 1998
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF ADDITIONAL INFORMATION
April 20, 1998
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 20, 1998 (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 (248)
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................................................... 13
DESCRIPTION OF BOND RATINGS..................................... 14
FINANCIAL STATEMENTS............................................ 14
<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 four
separate portfolios (the FUNDS). The four portfolios are:
Equity Growth Fund
Bond Fund
Balanced Fund
Retirement Income Fund
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS:
GENERAL
As stated in the Prospectus, the COMPANY offers Shares
representing interests in four 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
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 adjustment or the time the COMPANY can
recover payment of principal as specified in the instrument.
2
<PAGE>
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 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 Growth Fund
or the Balanced Fund from purchasing publicly traded securities of
companies engaging in whole or in part in such activities.
3
<PAGE>
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
Fund.
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 Retirement Income Fund,
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, 1997,
the COMPANY paid or accrued distribution expenses of $118,253,
$0, $220,704, and $460,525 for the Equity Growth, Bond, Balanced
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 four classes of Shares,
each representing interests in one of four separate investment
portfolios - the Equity Growth Fund, the Bond Fund, the Balanced
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 connection therewith, to cause all outstanding
Shares of the FUND involved to be redeemed at a
5
<PAGE>
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.
- -------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------------
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
4291 Maitland Road Telephone Company; Director, Executive
P.O. Box 87 Service Corp of Chicago; Director,
Acme, MI 49610 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 $2,500
plus $250.00 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 $1,886,987 for 1997. 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
8
<PAGE>
for a portion of any such excess to the extent required by such
regulations up to the amount of fees 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 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
9
<PAGE>
responsibilities of the Investment Adviser to the accounts as to
which it exercises investment 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 National Bank 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 2050 North Woodward,
Suite 200, Bloomfield Hills, Michigan 48304 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 through December 31, 1997 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 * 17.68% N/A N/A
Bond 9.41% 7.52% 8.46%
Balanced ** 20.50% 13.13% 12.04%
Retirement Income 12.20% 9.08% 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 March 10, 1998, 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 March 10, 1998 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 22,258 5.63%
13558 Ward Street
Southgate, MI 48195
Orchard Furniture Company 20,291 5.13%
7395 Camelot
West Bloomfield, MI 48322
William E. Ross 21,717 5.49%
95 Spring Run Drive
RR#2 Box 3303-A
Grayling, MI 49738
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES (DIRECTORS AND OFFICERS)
As of March 10, 1998, all directors and officers as a group (8
persons) owned 74,072 Class A shares (2.3%), 3,703 Class B
shares (0.9%), 12,398 Class C shares (.2%), 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.
13
<PAGE>
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 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, 1997. 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.
14
<PAGE>
ANNUAL REPORT
December 31, 1997
ADVANCE Capital I, Inc.
An investment company with four funds
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------
Page
A Letter to Our Shareholders ..................2
Investment Performance.........................4
Financial Highlights..........................11
PORTFOLIO OF INVESTMENTS
Equity Growth Fund.......................15
Bond Fund................................21
Balanced Fund............................24
Retirement Income Fund...................36
Statement of Assets and Liabilities...........44
Statement of Operations.......................45
Statement of Changes in Net Assets............46
Notes to Financial Statements.................48
Report of Independent Accountants.............52
Additional Information........................53
<PAGE>
Dear Shareholders,
There were many investment highlights in 1997, including
the third consecutive year of double-digit stock returns and
above average bond returns. Incredibly, for the three year
period ended December 31, the S&P 500 Index has returned 132
percent, the Nasdaq Composite has returned 126 percent and long
government bonds have returned about 49 percent. In the past
70 years these three asset classes have never realized such
tremendous returns at the same time, illustrating just how unusual
the period has been.
As we began 1997, inflation was low, consumer confidence was
high and corporate profits were strong. Investors viewed the
prosperity as justification for continuing to propel stock values
to new highs in January. Corporations, becoming increasingly
nervous about the unrealistic earnings expectations of investors,
began advising Wall Street of earnings short falls from consensus
estimates. Investors heeded the warnings and began to push stocks
lower toward the end of the first quarter and into the second
quarter. By summer, however, actual earnings reports showed better
than expected growth across most industries. This good news,
combined with falling interest rates, signaled a buying frenzy and
stocks quickly rebounded to prior levels.
As domestic investment sentiment flip-flopped, the now
infamous Asian crisis was beginning. The economic problems of
the once prosperous region symbolize the effects of rapid growth
without proper regulation. Most of the 1990's witnessed Asian
economies and stock markets among the fastest growing in the world.
The potential for huge rewards from this region attracted investors,
headlines and most importantly, foreign capital. The inflow of
capital into the region not only spurred business growth, a real
estate boom and the development of much needed infrastructure, but
eventually stifled the very prosperity it helped create. As money
poured into foreign banks, regulation and control systems were not
in place to prevent bankers from eventually lending frivolously to
enormously leveraged and questionable ventures. Foreign investors,
sensing increased investment risk and lower potential returns, began
to exit. This increased the pressure on banks to produce hard
currency. A credit crunch quickly followed and one by one the
weakest Asian currencies began to tumble. Faced with a liquidity
crisis and falling currency values, Asia's remaining defense to
retain foreign capital was to raise interest rates. The higher
rates burst the real estate bubble and sparked a tumble in world
stock markets, including the largest one day point decline in the
U.S. market on October 27th. The whole scenario clearly illustrates
the interdependencies among world economies and, more than ever,
shows the risks and the realities of our global economy.
Within this investment environment, the Advance Capital I,
Funds produced returns that were in-line with the averages for
funds with similar objectives. The Equity Growth Fund increased
17.7 percent for the year while the Lipper Mid Cap Fund Index
increased 17.6 percent. The Balanced Fund with its 60-40 mix of
stocks and bonds, increased 20.5 percent compared to a 20.1 percent
increase in the Lipper Balanced Fund Index. The Bond and Retirement
Income Funds returned 9.4 and 12.2 percent respectively, compared to
the Lipper Intermediate Bond Index return of 8.5 percent and the
Lipper BBB Bond Index return of 9.9 percent.
2
<PAGE>
Looking ahead to 1998, it appears that the problems in Asia are
far from over. Although the International Monetary Fund (IMF) has
put together a "bailout" package for the region, it will take months,
if not years, to strengthen the economic foundation necessary to
return to prosperity and regain the confidence of foreign investors.
We know that Asia's problems will eventually affect our own economic
growth. What we don't know is when and by how much. The most
immediate impact has started with those U.S. companies that rely on
Asia for a major component of sales growth. As the region contracts
and currency values remain weak, total U.S. sales to the area will
decline markedly. This will lead to lower overall corporate earnings
and slower growth in domestic GDP. It also means that Asian goods
sold in the U.S. will become cheaper and force domestic companies to
hold the line or even lower prices to remain competitive. Falling
consumer prices and declining corporate profits can produce an
unpleasant investment and economic environment. In our view,
investment returns for 1998 will not match the prior year results.
We expect positive to average results for 1998 and negative returns
are certainly possible. The issues ahead of us will test the resolve
of the investment community and the power of the Federal Reserve Board
to maintain adequate growth and low inflation in what has become an
extremely uncertain global environment.
At December 31, 1997, the four Advance Capital I, Inc. Funds held
about $356 million in total assets, a 23 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/ John C. Shoemaker /s/ Robert J. Cappelli
John C. Shoemaker Robert J. Cappelli
February 12, 1998
3
<PAGE>
INVESTMENT PERFORMANCE
Advance Capital I, Inc. is an open-end, diversified
management investment company offering investment opportunities
in four mutual fund portfolios.
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.
<TABLE>
<CAPTION>
1997 FUND RESULTS
<S> <C>
Equity Growth 17.68%
Bond 9.41%
Balanced 20.50%
Retirement Income 12.20%
</TABLE>
Figures for the life of the Bond and Balanced Funds begin
August 31, 1987. The Retirement Income Fund figures begin on
January 1, 1993, the start date for the fund. The historical
figures for the Equity Growth Fund begin January 1, 1994,
immediately following a 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 1997
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 10.6%
Retail Store 7.6%
Medical Services 5.6%
Financial Services 4.2%
Industrial Services 4.1%
</TABLE>
The Equity Growth Fund returned 17.68 percent in 1997 while
the NASDAQ Composite Index returned 21.64 percent and the S&P 500
Index (with dividends reinvested) returned 33.36 percent. The
accompanying graph shows the cumulative performance of the Equity
Growth Fund, the S&P 500 Index (with dividends reinvested), the
NASDAQ Composite Index and the Consumer Price Index (CPI) since the
beginning of 1994.
The solid investment foundation that has driven the seven year
bull market was tested several times during the past year. Late in
the first quarter, fear of declining corporate earnings lead investors
to reduce their long term outlook for stocks and returns turned negative.
In the second and third quarters surprisingly solid earnings announcements
and continued low inflation lifted stocks back to record levels. By the
fourth quarter economic and financial troubles in Asia jolted investor
confidence and world stock markets were sent into a tailspin.
As the events in Asia unfolded, the ripple effect throughout world
stock markets was immediate. In one day the U.S. stock market declined
about five percent, Europe was down between 4 and 6 percent and Latin
America was off about 14 percent. This rapid decline in world stocks
was quickly followed by corporate warnings of the adverse effects Asia's
troubles would have on earnings. Shortly therafter economists began
raising the specter of possible world deflation and stagnant economic
growth.
4
<PAGE>
These events bring to the forefront the realities of our global economy
and the added risk of investing heavily in one specific region of the
world.
During most of the 1990's, many domestic companies such as computer
makers and suppliers, found success selling in the booming Asian market.
High growth translated into above average earnings and skyrocketing
stock prices. Some equity fund managers rode this trend and invested a
large portion of their fund's assets in these high growth, high risk
stocks. When Asian currency values and growth declined late in 1997,
many once high-flying stocks paid the price. The same managers held
portfolios that were under diversified and heavily invested in declining
stocks. In contrast, the Equity Growth Fund's objective of diversifying
between industries and issuers, remained intact throughout the period.
By maintaining a well diversified portfolio, the Fund's return did not
rise or fall disproportionately as the events in Asia unfolded. Making
big bets in one specific industry may payoff periodically, but historical
lessons prove that the key to successful long term investing is maintaining
a well diversified portfolio throughout the entire investment cycle.
In the near term, we expect world stock markets to remain volatile
as the events in Asia continue to unfold. Investors remain cautious of
companies with a large Asian exposure, especially computer, semiconductor
and networking companies. Investors whose holdings have limited Asian
exposure and a consistent record of strong earnings, have been cushioned.
The stock market will eventually digest the Asian problem and stocks will
stabilize, assuming inflation remains low. The combination of weak
corporate earnings and rising inflation would not bode well for stocks.
This is a scenario we deem highly unlikely. It is apparent, however,
that stock returns in 1998 will most likely not set records on the plus
side. Volatility, especially in small cap stocks, should bring returns
back toward the historical average for the year ahead.
THE EQUITY GROWTH FUND
[EDGAR REFERENCE - S & P 500, NASDAQ, EQUITY GROWTH AND CPI
INDEX LINE CHART FOR 1994-1997]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1997
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Equity Growth Fund 17.68% N/A 16.36%
NASDAQ Composite Index 21.64% N/A 19.21%
S&P 500 Index 33.36% N/A 22.93%
Consumer Price Index (CPI) 1.81% N/A 2.63%
</TABLE>
Past performance should not be used to attempt to predict future
performance.
5
<PAGE>
THE BOND FUND IN 1997
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 12/31/97
<S> <C>
Average Maturity 9.5 Years
Average Quality A+
Average Duration 6.0 Years
Size $4.2 Million
</TABLE>
The Bond Fund returned 9.41 percent for 1997 compared to the
Lipper Intermediate Bond Index return of 8.47 percent. The Bond
Fund's return represents 6.65 percent from income distributed to
shareholders and a 2.76 percent increase in share price. The
accompanying graph shows the cumulative performance of the Bond
Fund, the Balanced Fund, the Lipper Intermediate Bond Index, the
Consumer Price Index (CPI) and the Lipper Balanced Index since
August 1987, the Fund's inception.
The bond market remained volatile throughout 1997 as inflation
and world economic turmoil remained in question. The beginning of
the year brought signs of robust economic growth and a continuation
of moderate inflation. As the economic and inflation pictures
brightened, the confidence among bond investors about corporate
profits grew. By mid summer this sentiment helped push the yield on
both government and corporate bonds to historically low levels. The
fourth quarter brought foreign market turmoil and general discontent
which left many bond investors feeling skittish about the stability
of corporate profits and economic growth. As investors moved out of
corporate bonds and back into government bonds, corporate yields
increased while government bond yields continued to decline. By year
end, the yield on the thirty year government bond was about 6 percent
and the ten year was under 6 percent.
At December 31, the Bond Fund was fully invested with an overall
portfolio maturity of about 9.5 years. This maturity is within the
allowed range of 5 to 10 years and significantly longer than the year
earlier figure of 7.8 years. Strategically, as bonds were called or
matured, they were replaced with bonds having maturities longer than
the Fund's average. As interest rates continued to decline, this
strategy proved beneficial to the Fund's return. Although average
maturity changed, overall quality remained an A+ and diversification
was maintained.
Today, it appears 1998 will produce a moderately expanding economy
with continued low inflation. Combined with stagnant to declining
foreign growth and weak currency values, fixed income securities should
return about their historical average for the year ahead. The Bond
Fund's structure of maintaining a well diversified portfolio of high
quality bonds is well positioned for this view in 1998.
6
<PAGE>
THE BALANCED FUND IN 1997
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 12/31/97
<S> <C>
Bonds 39%
Small Stocks 19%
Large Stocks 42%
Size $ 98 Million
</TABLE>
The Balanced Fund increased 20.50 percent in 1997 while the
Lipper Balanced Index increased 20.05 percent. The accompanying
graph illustrates the cumulative performance of the Balanced Fund,
the Bond Fund, the Lipper Intermediate Bond Index, the Lipper
Balanced Index and the Consumer Price Index (CPI) since August 1987,
the Fund's inception. Although the Fund began in August of 1987, the
investment objectives and policies were changed at the end of 1993
and T. Rowe Price Associates was added as sub-investment advisor to
the Fund at the same time.
The Balanced Fund consists of fixed income securities, small
company growth stocks and large company value stocks. The mix
between these three asset classes served the Fund well as each
returned above their historical average for the year. The bonds in
the Fund account for about 40 percent of the Fund's total and are
structurally similar to those in the Bond Fund. The bonds average
about ten years in maturity and A in quality. Throughout the year,
economic uncertainty and erratic inflationary concerns produced
significant volatility in fixed income prices. As foreign economic
turmoil unfolded in the fourth quarter, many investors sought comfort
in fixed income instruments, particularly government bonds. The
increased buying pressure resulted in historically above average
returns for the bonds in the Fund.
Stocks in the Fund consist of both small-to-midsized company
growth stocks as well as large company value stocks. Although each
sector performed well, large company value stocks outperformed smaller
company growth stocks for the third consecutive year. The stability of
earnings and solid dividend policies of large company stocks was
comforting to investors, particularly as interest rates declined and
foreign market turmoil began. If world economies remain in question
and inflation begins to rise, large company stocks should continue to
outperform smaller company stocks in the year ahead.
In contrast, smaller company stocks usually do not pay dividends
or have consistent earnings. Investors' only reward comes from stock
appreciation. This usually occurs when a company obtains a significant
market niche or a technological advancement propels an entire industry.
In the 1990's, improvements in all forms of technology have been the
cornerstone to much of the success in small cap stocks. The stock of
companies that make or design software programs, computer components or
microprocessors have risen dramatically through the decade. These
technological breakthroughs have also led the way for rapid transformations
within other industries. For example, most banks and manufacturing
facilities have been able to reduce operating costs and improve worker
productivity by utilizing new technology. As costs decreased and earnings
grew, the investment community has responded by doubling or tripling the
price of most of these companies in a short amount of time.
7
<PAGE>
Today, although the general health of the economy is strong,
inflation concerns and foreign uncertainty may dampen investment
returns in 1998. With this in mind, the Balanced Fund's investment
policy of diversifying between asset classes and industries remains
intact. Adhering to this strategy coupled with continued sound
investment decision making will provide Fund returns consistent with
its objectives.
THE BOND AND BALANCED FUNDS
[EDGAR REFERENCE - LIPPER BALANCED, BALANCED, LIPPER BOND, BOND
AND CPI INDEX LINE CHART FOR 1987-1997]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1997
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Bond Fund 9.41% 7.52% 8.53%
Balanced Fund 20.50% 13.13% 9.85%
Lipper Intermediate
Bond Index 8.47% 6.56% 8.85%
Lipper Balanced Index 20.05% 13.19% 12.96%
Consumer Price Index (CPI) 1.81% 2.63% 3.40%
</TABLE>
Past performance should not be used to attempt to predict
future performance.
The investment objectives and policies of the Balanced Fund
were changed at the end of 1993 and T. Rowe Price Associates was
added as sub-investment advisor to the Fund at that time.
8
<PAGE>
THE RETIREMENT INCOME FUND IN 1997
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 12/31/97
<S> <C>
Average Maturity 16.3 Years
Average Quality BBB
Average Duration 8.3 Years
Size $201 Million
</TABLE>
The Retirement Income Fund returned 12.20 percent for the
year. The return was comprised of 7.25 percent for the year.
The return was comprised of 7.25 percent from income distributed
to shareholders and a 4.95 percent increase in share price. The
accompanying graph shows the cumulative performance of the Retirement
Income Fund, the Lipper BBB Index and the Consumer Price Index (CPI)
since January 1993, the Fund's inception.
Although the year proved turbulent for bond returns, the final
outcome was sharply positive. The first quarter began with bold
remarks by Fed Chairman Alan Greenspan followed by an increase in the
Federal Funds rate. Fearing more increases by the Fed, investors began
to sell bonds. This selling pressure pushed the yield on the thirty
year government bond above seven percent by the end of the first quarter.
The quick judgment about the direction of inflation and sentiment of the
Federal Reserve Board didn't last long. By the third quarter solid
economic statistics comforted investors and reinforced the fact that
inflation remained under control. As Asia's troubles mounted and
inflation remained in-check, fixed income securities continued to attract
investors. By the end of December the thirty year government bond yield
was slightly under 6 percent, sharply lower than the 7.2 percent peak in
April. Because the Retirement Income Fund holds about 67 percent investment
grade bonds with long maturities, this portion of the Fund realized above
average returns as interest rates declined through the year.
The remaining 33 percent of the Fund is invested in high yield
securities. Like investment grade bonds, this portion of the Fund also
performed well during the year. As interest rates declined and corporate
profitability remained strong, many companies with "junk bond" status
refinanced existing debt or issued new bonds to capitalize on the favorable
interest rate environment. The investment community's appetite for the
newly issued high yield debt seemed insatiable. By summer, stronger than
expected earnings and continued low inflation increased demand further and
the buying continued. Investors were eager to accept the higher credit
risk associated with high yield bonds in exchange for higher nominal
returns. The growing acceptance of high yield bonds as a valid investment
instrument, combined with solid corporate earnings, should keep demand and
returns positive for the year ahead.
Today, the Fund holds a well diversified portfolio of about 127
investment grade and 83 high yield securities. The structure continues
to emphasis high current income at a reasonable level of risk. Looking
ahead to 1998, turmoil in Asia and low global inflation should keep
interest rates stable and prove beneficial to most fixed income securities.
9
<PAGE>
THE RETIREMENT INCOME FUND
[EDGAR REFERENCE - RETIREMENT INCOME, LIPPER BBB INDEX AND CPI
INDEX LINE CHART FOR 1993-1997]
<TABLE>
<CAPTION>
Average Annual Returns for Periods Ended December 31, 1997
Past 1 Past 5 Life of
Year Years Fund
------ ------ -------
<S> <C> <C> <C>
Retirement Income Fund 12.20% 9.08% 9.08%
Lipper BBB Index 9.90% 8.02% 8.02%
Consumer Price Index (CPI) 1.81% 2.63% 2.63%
</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
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . . . $14.72 $12.53 $9.08 $9.46 $9.94
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income (loss) . . . . . . . . (0.09) (0.07) (0.03) (0.03) 0.12
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . . . 2.69 2.26 3.48 (0.35) 0.07
--------- --------- --------- --------- ---------
Total from investment operations . . . . . . 2.60 2.19 3.45 (0.38) 0.19
--------- --------- --------- --------- ---------
Less distributions
Net investment income. . . . . . . . . . . . 0.00 0.00 0.00 0.00 (0.12)
Net realized gain on investments . . . . . . (0.07) 0.00 0.00 0.00 (0.55)
--------- --------- --------- --------- ---------
Total distributions. . . . . . . . . . . . . (0.07) 0.00 0.00 0.00 (0.67)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . . . $17.25 $14.72 $12.53 $9.08 $9.46
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . . . 17.68% 17.48% 38.00% -4.02% 2.13%
Ratios and Supplemental Data
Net assets, end of year (in thousands) . . .$54,332 $38,767 $25,625 $12,634 $7,577
Ratio of expenses to average net assets. . . 1.07% 1.09% 1.12% 1.21% 1.16%
Ratio of net investment income (loss)
to average net assets. . . . . . . . . . . -0.58% -0.50% -0.29% -0.30% 1.27%
Portfolio turnover rate. . . . . . . . . . . 20.53% 24.75% 13.86% 18.05% 135.55%
Average commission rate per share* . . . . .$0.0259 $0.0261
</TABLE>
*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.
See Notes To Financial Statements
11
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . . . $10.37 $10.79 $9.61 $10.82 $10.51
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income. . . . . . . . . . . . 0.69 0.70 0.70 0.71 0.72
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . 0.24 (0.42) 1.18 (1.21) 0.45
--------- --------- --------- --------- ---------
Total from investment operations . . . . . . 0.93 0.28 1.88 (0.50) 1.17
--------- --------- --------- --------- ---------
Less distributions
Net investment income. . . . . . . . . . . . (0.69) (0.70) (0.70) (0.71) (0.72)
Net realized gain on investments . . . . . . (0.09) 0.00 0.00 0.00 (0.14)
--------- --------- --------- --------- ---------
Total distributions. . . . . . . . . . . . . (0.78) (0.70) (0.70) (0.71) (0.86)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . . . $10.52 $10.37 $10.79 $9.61 $10.82
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . . . 9.41% 2.81% 20.15% -4.64% 11.48%
Ratios and Supplemental Data
Net assets, end of year (in thousands) . . . $4,203 $4,430 $4,527 $3,999 $4,741
Ratio of expenses to average net assets. . . 0.54% 0.55% 0.55% 0.60% 0.61%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . 6.65% 6.71% 6.80% 7.06% 6.57%
Portfolio turnover rate. . . . . . . . . . . 21.95% 19.77% 6.69% 21.92% 35.99%
</TABLE>
See Notes To Financial Statements
12
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . . . $13.68 $12.57 $9.97 $10.58 $10.36
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income. . . . . . . . . . . . 0.45 0.41 0.35 0.32 0.29
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . 2.32 1.37 2.75 (0.61) 0.22
--------- --------- --------- --------- ---------
Total from investment operations . . . . . . 2.77 1.78 3.10 (0.29) 0.51
--------- --------- --------- --------- ---------
Less distributions
Net investment income. . . . . . . . . . . . (0.45) (0.41) (0.35) (0.32) (0.29)
Net realized gain on investments . . . . . . (0.31) (0.26) (0.15) 0.00 0.00
--------- --------- --------- --------- ---------
Total distributions. . . . . . . . . . . . . (0.76) (0.67) (0.50) (0.32) (0.29)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . . . $15.69 $13.68 $12.57 $9.97 $10.58
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . . . 20.50% 14.48% 31.53% -2.72% 4.97%
Ratios and Supplemental Data
Net assets, end of year (in thousands) . . .$99,421 $75,202 $59,299 $44,221 $46,690
Ratio of expenses to average net assets. . . 1.04% 1.06% 1.07% 1.10% 1.08%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . 3.02% 3.17% 3.11% 3.18% 2.77%
Portfolio turnover rate. . . . . . . . . . . 10.13% 12.79% 22.72% 34.97% 101.29%
Average commission rate per share* . . . . .$0.0266 $0.0278
</TABLE>
*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.
See Notes To Financial Statements
13
<PAGE>
ADVANCE CAPITAL I, INC.
FINANCIAL HIGHLIGHTS - Continued
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETIREMENT INCOME
-------------------------------------------------
Years ended December 31
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Selected Per-Share Data
Net asset value, beginning of year . . . . . $10.20 $10.51 $9.22 $10.54 $10.00
--------- --------- --------- --------- ---------
Income from investment operations
Net investment income. . . . . . . . . . . . 0.74 0.75 0.76 0.76 0.82
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . 0.45 (0.31) 1.29 (1.32) 0.61
--------- --------- --------- --------- ---------
Total from investment operations . . . . . . 1.19 0.44 2.05 (0.56) 1.43
--------- --------- --------- --------- ---------
Less distributions
Net investment income. . . . . . . . . . . . (0.74) (0.75) (0.76) (0.76) (0.82)
Net realized gain on investments . . . . . . 0.00 0.00 0.00 0.00 (0.07)
--------- --------- --------- --------- ---------
Total distributions. . . . . . . . . . . . . (0.74) (0.75) (0.76) (0.76) (0.89)
--------- --------- --------- --------- ---------
Net asset value, end of year . . . . . . . . . $10.65 $10.20 $10.51 $9.22 $10.54
========= ========= ========= ========= =========
Total Return . . . . . . . . . . . . . . . . . 12.20% 4.54% 22.96% -5.34% 13.92%
Ratios and Supplemental Data
Net assets, end of year (in thousands) . . .$200,511 $170,799 $139,299 $84,162 $47,343
Ratio of expenses to average net assets. . . 0.82% 0.82% 0.84% 0.88% 0.88%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . 7.21% 7.45% 7.64% 7.89% 7.41%
Portfolio turnover rate. . . . . . . . . . . 16.60% 8.34% 15.63% 12.27% 37.59%
</TABLE>
See Notes To Financial Statements
14
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
ADVERTISING - 1.5%
Catalina Marketing Corporation* 2,600 $ 120,738
Interpublic Group of Companies, Inc. 3,200 159,400
Omnicom Group, Inc. 5,000 211,875
Outdoor Systems, Inc.* 8,100 313,875
AEROSPACE / DEFENSE - 0.5%
BE Aerospace, Inc.* 6,000 160,500
Gulfstream Aerospace Corporation* 4,500 131,625
AIR TRANSPORT - 1.2%
Air Express International Corp. 7,650 233,325
ASA Holdings, Inc. 5,500 156,406
Comair Holdings, Inc. 9,750 235,219
APPAREL - 1.2%
Gucci Group 2,600 108,875
Jones Apparel Group, Inc.* 3,000 129,000
Nautica Enterprises, Inc.* 6,000 139,500
Quiksilver, Inc.* 4,000 114,500
Warnaco Group, Inc. 4,500 142,313
AUTO PARTS - 0.3%
SPX Corporation 2,700 186,300
BANK - 3.8%
Bank of New York Company, Inc. 4,600 266,225
City National Corporation 7,000 258,125
First American Corporation 7,400 368,150
Mercantile Bancorporation, Inc. 3,124 191,931
Northern Trust Corporation 4,600 320,850
State Street Corporation 4,600 267,663
TCF Financial Corporation 5,500 187,000
U.S. Bancorp 2,000 223,875
BEVERAGE - 0.3%
Robert Mondavi Corporation* 3,000 146,250
BIOTECHNOLOGY - 1.3%
Human Genome Sciences, Inc.* 3,200 127,200
Incyte Pharmaceuticals, Inc.* 4,000 180,000
Pioneer Hi-Bred International, Inc. 2,000 214,500
Protein Design Labs, Inc.* 4,000 160,000
BROADCASTING / CABLE TV - 3.4%
A.H. Belo Corporation 4,000 224,000
Chancellor Media Corporation* 3,000 223,875
Clear Channel Communications* 6,000 476,625
Cox Communications, Inc.* 6,000 240,750
Emmis Broadcasting Corporation* 4,000 182,500
Jacor Communications, Inc.* 5,000 265,625
Westwood One, Inc.* 6,000 222,750
BUILDING MATERIALS - 0.2%
American Standard Companies, Inc.* 3,000 114,938
CHEMICAL - 2.5%
Airgas, Inc.* 9,100 127,400
Ecolab, Inc. 4,000 221,500
Lilly Industries, Inc. 7,000 144,375
Raychem Corporation 5,000 215,313
Sherwin-Williams Company 5,500 152,625
Sigma-Aldrich Corporation 7,000 276,500
Valspar Corporation 7,000 224,000
COMPUTER & PERIPHERALS - 3.5%
3COM Corporation, Inc.* 2,700 94,163
Adaptec, Inc.* 4,000 148,500
Cisco Systems, Inc.* 4,500 250,875
Comverse Technology, Inc.* 3,000 117,000
EMC Corporation* 8,600 235,963
Gateway 2000, Inc.* 3,500 114,188
Microchip Technology, Inc.* 4,425 132,750
SCI Systems, Inc.* 6,000 261,375
Stratus Computer, Inc.* 2,000 75,500
</TABLE>
See Notes To Financial Statements
15
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------------------- -------- ----------
<S> <C> <C>
COMPUTER & PERIPHERALS - 3.5% (Continued)
Sun Microsystems, Inc.* 8,500 $ 338,938
Xilinx, Inc.* 4,300 150,769
COMPUTER SOFTWARE & SERVICES - 10.6%
Adobe Systems, Inc. 4,000 165,000
Affiliated Computer Services, Inc.* 7,000 183,750
America Online, Inc.* 2,500 222,969
Baan Company, N.V.* 4,600 151,800
BMC Software, Inc.* 5,600 367,500
Cadence Design Systems, Inc.* 11,000 270,875
Cambridge Technology Partners, Inc.* 6,000 249,750
CBT Group PLC* 2,500 205,313
Citrix Systems, Inc.* 3,500 266,000
Cognizant Corporation 4,500 201,094
Compuware Corporation* 10,000 320,000
DST Systems, Inc.* 3,500 149,406
Electronics for Imaging, Inc.* 4,000 66,500
First Data Corporation 3,612 105,651
HBO & Company 8,000 383,500
Intuit, Inc.* 4,200 173,250
Network Associates, Inc.* 5,983 316,351
Oracle Corporation* 7,500 166,875
Parametric Technology Company* 3,500 165,813
Peoplesoft, Inc.* 8,000 312,000
Remedy Corporation* 3,000 63,000
Security Dynamics Tech., Inc.* 5,000 178,750
Shared Medical Systems Corporation 3,500 230,563
Sterling Commerce, Inc.* 6,500 250,250
SunGard Data Systems, Inc.* 4,500 139,500
Symantec Corporation* 7,800 171,113
Synopsys, Inc.* 3,400 121,550
Visio Corporation* 5,600 214,900
DIVERSIFIED - 1.8%
Danaher Corporation 4,000 253,500
Equity Corporation International* 5,000 114,688
Service Corp. International 5,200 192,075
Thermo Electron Corporation* 4,000 178,000
Tyco International, Ltd. 5,294 238,561
DRUG - 2.4%
Agouron Pharmaceuticals, Inc.* 2,400 70,500
Amgen, Inc.* 3,300 178,613
BioChem Pharma, Inc.* 5,000 104,375
Biogen, Inc.* 3,400 123,675
Dura Pharmaceuticals, Inc.* 3,500 160,563
Elan Corporation PLC* 3,200 164,000
Gilead Sciences, Inc.* 4,000 153,000
Guilford Pharmaceuticals, Inc.* 4,500 92,250
Isis Pharmaceuticals, Inc.* 5,500 67,719
Watson Pharmaceuticals, Inc.* 5,600 183,750
ELECTRIC & GAS UTILITIES - 0.6%
AES Corporation* 6,800 317,900
ELECTRICAL EQUIPMENT - 0.2%
Littlefuse, Inc.* 5,000 124,375
ELECTRONICS - 2.2%
Altera Corporation* 5,400 178,875
Harman International Industries 3,100 131,556
Lam Research Corporation* 2,300 66,988
Molex, Inc. 7,421 213,354
Symbol Technologies, Inc. 6,650 253,947
Teradyne, Inc.* 3,100 99,200
Thermedics, Inc.* 7,000 115,500
Waters Corporation* 4,000 151,000
ENVIRONMENTAL - 1.1%
Superior Services, Inc.* 7,000 202,125
USA Waste Services, Inc.* 7,312 286,996
U.S. Filter Corporation* 3,500 105,000
FINANCIAL SERVICES - 4.2%
Aames Financial Corporation 4,500 58,219
Cendant Corporation* 15,612 536,676
Finova Group, Inc. 5,000 248,438
Franklin Resources, Inc. 4,650 405,131
Green Tree Financial Corporation 5,000 130,938
ING Groep N.V. 1 28
</TABLE>
See Notes To Financial Statements
16
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- --------------------------------------------------- -------- ---------
<S> <C> <C>
FINANCIAL SERVICES - 4.2% (Continued)
Mutual Risk Management, Ltd. 10,132 $ 303,327
Paychex, Inc. 4,500 227,813
SunAmerica, Inc. 4,900 209,475
United Asset Management Corp. 6,200 151,900
FOOD PROCESSING - 0.9%
Goodmark Foods, Inc. 5,000 92,500
International Multifoods Corporation 6,000 169,500
Tootsie Roll Industries, Inc. 3,666 232,333
FOREIGN TELECOMMUNICATIONS - 1.2%
Ericsson Telephone 4,000 149,250
Reuters Holdings PLC 2,500 165,625
Vodafone Group PLC 4,500 326,813
GROCERY - 1.2%
Quality Food Centers, Inc.* 2,800 187,600
Richfood Holdings, Inc. 6,500 183,625
Safeway, Inc.* 4,400 277,750
HOMEBUILDING - 0.5%
Lennar Corporation 4,600 99,188
Rouse Company 4,900 160,781
HOTEL / GAMING - 0.7%
Extended Stay America, Inc.* 6,500 81,250
Host Marriott Corporation* 7,500 147,656
Mirage Resorts, Inc.* 6,000 135,750
HOUSEHOLD PRODUCTS - 1.1%
First Brands Corporation 5,000 135,313
Lancaster Colony Corporation 4,000 225,500
Sunbeam Corporation, Inc. 5,000 211,563
INDUSTRIAL SERVICES - 4.1%
AccuStaff, Inc.* 6,000 138,750
Apollo Group, Inc.* 4,500 212,625
Equifax, Inc. 6,200 219,713
Interim Services* 6,000 153,375
Manpower, Inc. 3,900 136,988
Primark Corporation* 5,500 224,125
Quintiles Transnational Corporation* 5,000 191,250
Registry, Inc.* 3,520 162,800
Robert Half International, Inc.* 6,750 267,891
Romac International, Inc.* 10,000 245,000
Sylvan Learning Systems, Inc.* 3,000 117,000
Vincam Group, Inc.* 6,750 179,719
INSURANCE - 3.8%
Ace, Ltd. 2,800 270,200
Ambac Financial Group, Inc. 5,200 239,525
Compdent Corporation* 4,500 91,266
Mercury General Corporation 4,400 244,200
MGIC Investment Corporation 4,000 267,250
Progressive Corporation of Ohio 2,800 335,475
Protective Life Corporation 3,400 203,150
UICI* 4,500 156,938
Vesta Insurance Group, Inc. 4,250 252,875
MACHINERY - 1.8%
AGCO Corporation 5,000 146,250
Alamo Group, Inc. 5,000 108,438
Cognex Corporation* 5,000 136,250
Donaldson Company, Inc. 3,800 171,238
IDEX Corporation 5,500 191,813
Parker-Hannifin Corporation 4,500 207,563
MANUFACTURED HOUSING - 0.4%
Oakwood Homes Corporation 7,000 232,313
MEDICAL SERVICES - 5.6%
ABR Information Services, Inc.* 5,800 138,475
Genesis Health Ventures, Inc.* 4,500 120,938
Health Care & Retirement Corp.* 5,550 223,734
Health Management Associates* 11,137 281,209
HEALTHSOUTH Corporation* 6,500 180,375
IDX Systems Corporation* 4,600 170,200
Lincare Holdings, Inc.* 3,300 188,100
</TABLE>
See Notes To Financial Statements
17
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
MEDICAL SERVICES - 5.6% (Continued)
MedPartners/Mullikin, Inc.* 6,651 $ 147,153
Omnicare, Inc. 4,500 137,813
Orthodontic Centers of America, Inc.* 6,000 99,750
PacifiCare Health Systems, Inc.* 1,500 78,563
PhyCor, Inc.* 6,000 162,000
Quorum Health Group, Inc.* 7,500 195,938
Renal Treatment Centers, Inc.* 5,500 198,688
Tenet Healthcare Corporation* 6,075 200,855
Total Renal Care Holdings, Inc.* 2,000 55,000
United HealthCare Corporation 3,900 194,269
Universal Health Services, Inc.* 5,300 266,988
MEDICAL SUPPLIES - 4.0%
Arterial Vascular Engineering, Inc.* 3,500 227,500
Boston Scientific Corporation* 3,000 137,625
Cardinal Health, Inc. 4,125 310,406
Guidant Corporation 6,000 373,500
Henry Schein, Inc.* 4,500 157,500
Life Technologies, Inc. 5,250 177,188
Medtronic, Inc. 4,000 209,500
Physio-Control International Corp.* 5,500 85,594
Sola International, Inc.* 4,000 131,000
Sybron International Corp.* 5,000 234,688
VISX, Inc.* 5,000 110,625
METAL FABRICATING - 0.3%
Kennametal, Inc. 3,500 181,781
NATURAL GAS - 0.3%
Sonat, Inc. 3,000 137,250
NEWSPAPER - 0.3%
Central Newspapers, Inc. 2,500 185,000
OFFICE EQUIPMENT & SUPPLIES - 1.0%
Diebold, Inc. 4,500 227,813
Ikon Office Solutions, Inc. 5,500 154,000
Wallace Computer Services, Inc. 4,500 174,375
OILFIELD SERVICES - 2.8%
BJ Services Company* 2,500 179,844
Camco International, Inc. 3,500 222,906
Cooper Cameron Corporation* 2,400 146,400
Noble Drilling Corporation* 6,700 204,769
Pride International, Inc.* 8,000 199,500
Smith International, Inc.* 4,300 263,913
Tidewater, Inc. 2,500 137,813
Weatherford Enterra, Inc.* 3,300 144,375
PACKAGING & CONTAINER - 0.4%
Sealed Air Corporation* 3,400 210,800
PETROLEUM - 2.1%
Apache Corporation 4,500 157,781
Barrett Resources Corporation* 4,000 120,000
Devon Energy Corporation 4,500 174,094
Noble Affiliates, Inc. 4,400 155,375
Nuevo Energy Company* 3,000 122,250
Tosco Corporation 7,500 284,063
United Meridian Corporation* 4,200 118,125
PRECISION INSTRUMENT - 1.3%
Coherent, Inc.* 3,000 105,375
Dionex Corporation* 3,000 150,750
KLA-Tencor Corporation* 2,600 100,750
Roper Industries, Inc. 6,000 173,250
Teleflex, Inc. 5,000 188,750
PRINTING - 0.4%
Valassis Communications, Inc.* 5,500 203,500
PUBLISHING - 0.6%
Harcourt General, Inc. 3,000 164,438
Meredith Corporation 5,000 178,438
RAILROAD - 0.3%
Kansas City Southern Ind., Inc. 6,000 189,750
</TABLE>
See Notes To Financial Statements
18
<PAGE>
ADVANCE CAPTIAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
REAL ESTATE INVESTMENT MANAGEMENT - 0.8%
LaSalle Partners, Inc.* 4,000 $ 142,500
LNR Property Corporation 4,600 109,250
Security Capital Group Incorporated* 5,000 162,500
REAL ESTATE INVESTMENT TRUST - 0.6%
National Health Investors, Inc. 3,700 155,169
Security Capital Pacific Trust 6,500 158,031
RECREATION - 1.3%
Callaway Golf Company 3,400 97,113
Carmike Cinemas, Inc.* 6,000 172,500
Carnival Corporation 4,500 249,188
Harley-Davidson, Inc. 6,000 164,625
RESTAURANT - 0.5%
Outback Steakhouse, Inc.* 4,750 136,563
Sbarro, Inc. 5,500 145,406
RETAIL STORE - 7.6%
AutoZone, Inc.* 5,300 153,369
Bed Bath & Beyond, Inc.* 7,000 268,625
Borders Group, Inc.* 8,000 250,500
CDW Computer Centers, Inc.* 2,500 130,313
Circuit City Stores, Inc. 4,300 153,456
CompUSA, Inc.* 6,600 206,663
Consolidated Stores Corporation* 4,300 189,200
CVS Corporation 3,000 192,375
Dollar General Corporation 11,900 431,375
Gymboree Corporation* 4,000 109,500
Lands' End, Inc.* 6,200 217,775
Men's Wearhouse, Inc.* 5,250 182,438
MSC Industrial Direct Co., Inc.* 4,000 169,500
OfficeMax, Inc.* 9,000 127,688
Petco Animal Supplies, Inc.* 5,500 132,000
Starbucks Corporation* 4,000 153,500
The Sports Authority, Inc.* 7,000 103,250
Tiffany & Company 4,000 144,000
TJX Companies, Inc. 6,000 206,250
U.S. Office Products Company* 6,000 116,250
Viking Office Products, Inc.* 6,400 139,600
Williams-Sonoma, Inc.* 5,000 209,375
Zale Corporation* 7,000 161,000
SECURITIES BROKERAGE - 1.6%
Charles Schwab Corporation 9,000 377,438
Investment Technology Group* 7,800 218,400
Raymond James Financial, Inc. 6,750 269,578
SEMICONDUCTOR - 2.3%
Analog Devices, Inc.* 5,500 151,594
ASM Lithography Holding N.V.* 1,500 101,250
Atmel Corporation* 4,400 81,950
Lattice Semiconductor Corporation* 2,500 118,438
Linear Technology Corporation 5,400 310,500
Maxim Integrated Products, Inc.* 12,000 414,000
SDL, Inc.* 5,000 72,500
SHOE - 0.3%
Wolverine World Wide, Inc. 6,750 153,141
TELECOMMUNICATIONS EQUIPMENT - 1.9%
ADC Telecommunications, Inc.* 4,000 167,000
Andrew Corporation* 5,906 141,744
Ascend Communications, Inc.* 4,850 119,431
Aspect Telecommunications Corp.* 6,000 125,250
Coherent Commun. Systems Corp.* 5,000 141,250
Tellabs, Inc.* 6,400 337,200
TELECOMMUNICATIONS SERVICE - 2.7%
360 Communications Company* 6,500 131,219
Centennial Cellular Corporation* 4,500 92,250
CommNet Cellular, Inc.* 5,500 195,594
DSP Communications, Inc.* 6,000 72,000
Intermedia Communications, Inc.* 3,500 212,188
Powertel, Inc.* 8,100 135,675
Saville Systems PLC* 8,000 332,000
</TABLE>
See Notes To Financial Statements
19
<PAGE>
ADVANCE CAPITAL I, INC. - EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
TELECOMMUNICATIONS SERVICE - 2.7% (Continued)
United States Cellular Corporation* 3,500 $ 107,625
WorldCom, Inc.* 6,500 196,625
TEXTILE - 0.3%
Unifi, Inc. 4,500 183,094
THRIFT - 0.4%
JSB Financial, Inc. 4,500 227,531
TOILETRIES / COSMETICS - 0.3%
Alberto-Culver Company 4,500 144,281
TOYS - 0.4%
Mattel, Inc. 5,625 210,938
TRUCKING & TRANSPORT LEASING - 0.2%
Werner Enterprise, Inc. 6,000 123,000
-----------
TOTAL COMMON STOCK - 99.1%
(Cost $34,686,446) $53,838,950
===========
</TABLE>
* Securities are non-income producing
See Notes To Financial Statements
20
<PAGE>
ADVANCE CAPITAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------- --------- ------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
BANK - 12.7%
Banc One Corporation A+ 8.740 09/15/03 $ 100,000 $ 111,002
Citicorp A 7.250 10/15/11 100,000 106,485
Harris Bankcorp, Inc. A+ 9.375 06/01/01 75,000 82,073
Morgan, J.P. & Company AA 8.500 08/15/03 100,000 110,542
Security Pacific Corporation A 9.750 05/15/99 40,000 41,853
Swiss Bank Corp.-NY AA 7.375 07/15/15 75,000 80,141
CHEMICAL - 2.7%
duPont, E.I. de Nemours & Co. AA- 6.000 12/01/01 115,000 114,081
COMPUTER & PERIPHERALS - 1.9%
International Business Machines Corp. A 7.250 11/01/02 75,000 78,349
ELECTRIC & GAS UTILITIES - 10.8%
Duke Energy Corporation AA- 6.375 03/01/08 75,000 74,531
Florida Power Corporation AA- 6.875 02/01/08 70,000 72,859
Northern States Power Co. Minn. AA 7.375 03/01/02 40,000 40,431
Ontario Hydro AA- 7.450 03/31/13 150,000 165,364
Public Service Co. of Oklahoma AA- 7.250 01/01/99 50,000 50,169
Public Service Electric & Gas A- 7.000 09/01/24 50,000 49,216
ENVIRONMENTAL - 1.1%
Waste Management, Inc. A- 7.650 03/15/11 45,000 46,506
FINANCIAL SERVICES - 5.0%
BHP Finance USA Ltd. A 7.875 12/01/02 100,000 105,973
General Electric Capital Corporation AAA 7.750 03/15/02 100,000 106,233
FOOD PROCESSING - 2.5%
Archer Daniels Midland Company AA- 7.125 03/01/13 100,000 105,366
FOREIGN GOVERNMENT - 6.5%
Province of Ontario AA- 7.625 06/22/04 100,000 107,612
Province of Quebec A+ 8.800 04/15/03 150,000 166,053
GOVERNMENTAL AGENCY - 1.2%
Tennessee Valley Authority AAA 6.125 07/15/03 50,000 50,062
</TABLE>
See Notes To Financial Statements
21
<PAGE>
ADVANCE CAPTIAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
CREDIT PRINCIPAL MARKET
FIXED INCOME SECURITIES RATING COUPON MATURITY AMOUNT VALUE
- ------------------------------------- --------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C>
INSURANCE - 7.7%
Aetna Services, Inc. A 7.125 08/15/06 $ 100,000 $ 103,325
Allstate Corporation A+ 7.500 06/15/13 100,000 108,245
CIGNA Corporation A 8.250 01/01/07 100,000 111,275
MACHINERY - 5.6%
Caterpillar, Inc. A+ 9.000 04/15/06 100,000 116,661
Deere & Company A+ 8.950 06/15/19 100,000 118,062
MEDICAL SERVICES - 2.4%
Columbia/HCA Healthcare Corporation BBB 7.250 05/20/08 100,000 99,620
MEDICAL SUPPLIES - 5.5%
Johnson & Johnson AAA 8.720 11/01/24 200,000 229,917
METALS & MINING - 2.9%
Alcan Aluminum Ltd. A- 5.875 04/01/00 125,000 123,974
NEWSPAPER - 1.5%
Knight-Ridder, Inc. A 9.875 04/15/09 50,000 64,255
OFFICE EQUIPMENT & SUPPLIES - 0.8%
Xerox Corporation A 9.750 03/15/00 30,000 32,193
PETROLEUM - 3.5%
Kerr-McGee Corporation A- 7.000 11/01/11 150,000 147,780
RAILROAD - 2.6%
Missouri Pacific Railroad Co. A 9.400 12/15/00 100,000 108,861
RETAIL STORE - 1.9%
Wal-Mart Stores, Inc. AA 8.625 04/01/01 75,000 80,241
SECURITIES BROKERAGE - 7.3%
Lehman Brothers Holdings, Inc. A 8.875 03/01/02 150,000 163,489
Merrill Lynch & Company, Inc. AA- 7.375 05/15/06 135,000 143,043
</TABLE>
See Notes To Financial Statements
22
<PAGE>
ADVANCE CAPTIAL I, INC. - BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
CREDIT PRINCIPAL MARKET
FIXED INCOME SECURITIES RATING COUPON MATURITY AMOUNT VALUE
- ------------------------------------- ------ ------ -------- --------- ------
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS SERVICE - 7.2%
AT&T Corporation AA- 7.750 03/01/07 $ 90,000 $ 98,535
GTE Southwest, Inc. AA- 5.820 12/01/99 100,000 99,527
Pacific Bell Telephone Co. AA- 7.000 07/15/04 100,000 103,958
TOBACCO - 2.3%
Philip Morris Companies, Inc. A 6.375 02/01/06 100,000 97,956
U.S. GOVERNMENT - 2.5%
U.S. Treasury 6.625 05/15/07 100,000 105,844
-----------
TOTAL FIXED-INCOME SECURITIES - 98.1%
(Cost $3,906,202) $4,121,662
===========
</TABLE>
See Notes To Financial Statements
23
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
ADVERTISING - 0.2%
Catalina Marketing Corporation* 1,100 $ 51,081
Outdoor Systems, Inc.* 3,000 116,250
AEROSPACE / DEFENSE - 0.8%
BE Aerospace, Inc.* 2,000 53,500
Boeing Company 5,740 280,901
General Motors Corp. - Class H 1,500 55,406
Gulfstream Aerospace Corporation* 1,700 49,725
Lockheed Martin Corporation 2,000 197,000
Raytheon Company - Class A 997 49,334
Raytheon Company - Class B 1,700 85,850
AIR TRANSPORT - 0.3%
Air Express International Corp. 2,400 73,200
ASA Holdings, Inc. 1,800 51,188
Comair Holdings, Inc. 2,362 56,983
Pittston Brink's Group 3,000 120,750
APPAREL - 0.3%
Gucci Group 1,100 46,063
Nautica Enterprises, Inc.* 1,800 41,850
Quiksilver, Inc.* 1,500 42,938
VF Corporation 3,600 165,600
Warnaco Group, Inc. 1,500 47,438
AUTO PARTS - 0.3%
Borg-Warner Automotive, Inc. 2,000 104,000
Dana Corporation 2,600 123,175
Genuine Parts Company 3,000 101,625
AUTO & TRUCK - 0.3%
Ford Motor Company 3,500 170,406
General Motors Corporation 2,400 145,350
BANK - 5.6%
Banc One Corporation 3,264 177,276
Bank of Boston Corporation 2,540 238,601
Bank of New York Company, Inc. 2,800 162,050
BankAmerica Corporation 2,000 146,000
Barnett Banks, Inc. 10,400 748,800
Chase Manhattan Corporation 4,840 529,980
City National Corporation 1,600 59,000
First American Corporation 4,400 218,900
First Chicago NBD Corporation 3,500 292,250
First Tennessee National Corp. 5,800 387,150
First Union Corporation 11,600 594,500
J.P. Morgan & Company 2,000 225,875
KeyCorp 2,500 177,031
Mellon Bank Corporation 5,400 327,375
Mercantile Bancorporation, Inc. 3,075 188,920
National City Corporation 2,000 131,500
Northern Trust Corporation 1,200 83,700
Norwest Corporation 1,800 69,413
PNC Bank Corporation 4,000 228,250
State Street Corporation 2,400 139,650
U.S. Bancorp 1,300 145,519
Wells Fargo & Company 933 316,695
BEVERAGE - 0.6%
Anheuser-Busch Companies, Inc. 7,400 325,600
Coca-Cola Company 1,000 66,625
PepsiCo, Inc. 3,000 109,313
Robert Mondavi Corporation* 1,000 48,750
BIOTECHNOLOGY - 0.2%
Human Genome Sciences, Inc.* 1,200 47,700
Incyte Pharmaceuticals, Inc.* 1,400 63,000
Protein Design Labs, Inc.* 1,100 44,000
BROADCASTING / CABLE TV - 0.7%
A.H. Belo Corporation 1,400 78,400
Chancellor Media Corporation* 1,200 89,550
Clear Channel Communications* 2,200 174,763
Cox Communications, Inc.* 1,500 60,188
</TABLE>
See Notes To Financial Statements
24
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
BROADCASTING / CABLE TV - 0.7% (Continued)
Emmis Broadcasting Corporation* 1,500 $ 68,438
Jacor Communications, Inc.* 1,500 79,688
U.S. West Media Group* 4,000 115,500
Westwood One, Inc.* 1,700 63,113
BUILDING MATERIALS - 0.2%
American Standard Companies, Inc.* 1,100 42,144
Armstrong World Industries, Inc. 1,500 112,125
CHEMICAL - 1.9%
A. Schulman, Inc. 2,000 50,250
Airgas, Inc.* 4,000 56,000
B.F. Goodrich Company 2,000 83,125
duPont, E.I. de Nemours & Co. 7,000 421,313
Lilly Industries, Inc. 2,500 51,563
Minnesota Mining & Manufacturing 2,000 164,250
Monsanto Company 8,000 336,000
Raychem Corporation 2,000 86,125
Rohm & Haas Company 1,000 95,000
Sherwin-Williams Company 4,000 111,000
Sigma-Aldrich Corporation 2,600 102,700
Union Carbide Corporation 2,100 90,169
Valspar Corporation 2,600 83,200
WD-40 Company 5,600 162,400
Witco Corporation 2,700 110,363
COMPUTER & PERIPHERALS - 1.0%
3COM Corporation, Inc.* 1,550 54,056
Adaptec, Inc.* 1,400 51,975
Cisco Systems, Inc.* 1,950 108,713
Comverse Technology, Inc.* 800 31,200
EMC Corporation* 4,000 109,750
Gateway 2000, Inc.* 1,200 39,150
Hewlett-Packard Company 4,100 256,250
Microchip Technology, Inc.* 1,500 45,000
SCI Systems, Inc.* 2,000 87,125
Stratus Computer, Inc.* 1,100 41,525
Sun Microsystems, Inc.* 2,200 87,725
Xilinx, Inc.* 2,100 73,631
COMPUTER SOFTWARE & SERVICES - 2.3%
Adobe Systems, Inc. 1,200 49,500
Affiliated Computer Services, Inc.* 2,000 52,500
America Online, Inc.* 1,000 89,188
Automatic Data Processing, Inc. 4,000 245,500
Baan Company, N.V.* 1,000 33,000
BMC Software, Inc.* 2,000 131,250
Cadence Design Systems, Inc.* 2,700 66,488
Cambridge Technology Partners, Inc.* 2,000 83,250
CBT Group PLC* 1,000 82,125
Citrix Systems, Inc.* 1,200 91,200
Cognizant Corporation 1,600 71,500
Compuware Corporation* 4,000 128,000
DST Systems, Inc.* 1,500 64,031
Electronics for Imaging, Inc.* 1,400 23,275
First Data Corporation 1,488 43,524
HBO & Company 4,000 191,750
Intuit, Inc.* 1,700 70,125
Network Associates, Inc.* 1,200 63,450
Oracle Corporation* 3,787 84,261
Parametric Technology Company* 1,000 47,375
Peoplesoft, Inc.* 3,200 124,800
Remedy Corporation* 1,200 25,200
Security Dynamics Tech., Inc.* 1,400 50,050
Shared Medical Systems Corporation 900 59,288
Sterling Commerce, Inc.* 2,300 88,550
Symantec Corporation* 2,400 52,650
Synopsys, Inc.* 2,000 71,500
Visio Corporation* 2,600 99,775
DIVERSIFIED - 1.2%
AlliedSignal, Inc. 10,200 396,525
Danaher Corporation 1,000 63,375
Service Corp. International 2,700 99,731
</TABLE>
See Notes To Financial Statements
25
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
DIVERSIFIED - 1.2% (Continued)
Textron, Inc. 3,000 $ 188,063
Thermo Electron Corporation* 1,350 60,075
Tomkins PLC 4,900 93,713
TRW, Inc. 2,000 106,875
United Technologies Corporation 2,200 160,188
DRUG - 3.7%
American Home Products Corp. 3,400 260,313
Amgen, Inc.* 1,100 59,538
BioChem Pharma, Inc.* 2,200 45,925
Biogen, Inc.* 2,000 72,750
Bristol-Myers Squibb Company 12,400 1,168,700
Dura Pharmaceuticals, Inc.* 1,300 59,638
Elan Corporation PLC* 1,000 51,250
Gilead Sciences, Inc.* 1,000 38,250
Guilford Pharmaceuticals, Inc.* 1,500 30,750
Merck & Company, Inc. 6,000 633,750
Pfizer, Inc. 6,000 447,375
Schering-Plough Corporation 4,000 248,750
Warner-Lambert Company 3,800 471,200
Watson Pharmaceuticals, Inc.* 1,600 52,500
DRUGSTORE - 0.1%
Rite Aid Corporation 2,000 117,375
ELECTRIC & GAS UTILITIES - 2.8%
AES Corporation* 1,700 79,475
Baltimore Gas & Electric Company 5,700 193,800
CMS Energy Corporation 2,300 101,200
Consolidated Edison Co. of N.Y. 1,900 77,900
Duke Energy Corporation 8,935 494,217
Edison International 6,500 177,125
Entergy Corporation 4,000 119,750
FirstEnergy Corp. 4,500 130,219
Florida Progress Corporation 5,500 215,875
GPU, Inc. 3,600 151,650
Hawaiian Electric Industries, Inc. 2,300 94,013
New Century Energies, Inc. 4,700 225,306
Northern States Power Company 2,500 144,531
PacifiCorp 8,400 228,900
TECO Energy, Inc. 7,700 216,563
Texas Utilities Company 3,500 145,250
ELECTRICAL EQUIPMENT - 1.6%
Corning, Inc. 2,500 92,813
Emerson Electric Company 5,000 282,188
General Electric Company 14,000 1,027,250
Hubbell, Inc. 3,200 158,600
Littlefuse, Inc.* 2,000 49,750
ELECTRONICS - 0.4%
Altera Corporation* 2,000 66,250
Harman International Industries 1,050 44,559
Lam Research Corporation* 1,300 37,863
Molex, Inc. 2,928 84,180
Symbol Technologies, Inc. 3,000 114,563
Thermedics, Inc.* 2,000 33,000
ENVIRONMENTAL - 0.5%
Browning-Ferris Industries, Inc. 4,500 166,500
Superior Services, Inc.* 3,100 89,513
U.S. Filter Corporation* 1,200 36,000
USA Waste Services, Inc.* 1,700 66,725
Waste Management, Inc. 5,500 151,250
FINANCIAL SERVICES - 2.0%
American Express Company 5,000 446,250
Cendant Corporation* 5,605 192,660
Countrywide Credit Industries, Inc. 4,000 171,250
Finova Group, Inc. 2,000 99,375
Franklin Resources, Inc. 1,500 130,688
Green Tree Financial Corporation 2,000 52,375
Household International, Inc. 1,000 127,563
ING Groep N.V. 1 32
</TABLE>
See Notes To Financial Statements
26
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
FINANCIAL SERVICES - 2.0% (Continued)
Mutual Risk Management, Ltd. 6,666 $ 199,563
Paychex, Inc. 2,250 113,906
SLM Holding Corporation 800 111,600
Travelers Group, Inc. 5,400 290,588
United Asset Management Corp. 2,000 49,000
FOOD PROCESSING - 1.1%
Goodmark Foods, Inc. 5,200 96,200
Heinz (H.J) Company 3,500 178,063
Hershey Foods Corp. 2,800 173,425
International Multifoods Corporation 1,500 42,375
Kellogg Company 3,000 149,063
Quaker Oats Company 2,000 105,500
Sara Lee Corporation 4,500 253,406
Tootsie Roll Industries, Inc. 1,236 78,332
FOREIGN TELECOMMUNICATIONS - 0.5%
BCE, Inc. 4,400 146,575
Ericsson Telephone 1,800 67,163
Reuters Holdings PLC 2,000 132,500
Vodafone Group PLC 2,100 152,513
GROCERY - 0.3%
Albertson's, Inc. 2,900 137,569
Richfood Holdings, Inc. 2,000 56,500
Safeway, Inc.* 2,000 126,250
HOMEBUILDING - 0.3%
Lennar Corporation 1,700 36,656
Rouse Company 7,000 229,688
HOTEL / GAMING - 0.0%
Mirage Resorts, Inc.* 2,000 45,250
HOUSEHOLD PRODUCTS - 1.4%
Amway Asia Pacific Ltd. 1,000 19,438
Clorox Company 3,800 300,438
Colgate-Palmolive Company 6,200 455,700
First Brands Corporation 2,000 54,125
Kimberly-Clark Corporation 5,800 286,375
Lancaster Colony Corporation 1,000 56,375
Proctor & Gamble Company 2,400 191,550
Sunbeam Corporation, Inc. 1,600 67,700
INDUSTRIAL SERVICES - 0.7%
AccuStaff, Inc.* 2,000 46,250
Apollo Group, Inc.* 1,500 70,875
Equifax, Inc. 2,600 92,138
Interim Services* 2,232 57,056
Manpower, Inc. 1,500 52,688
Primark Corporation* 1,800 73,350
Quintiles Transnational Corporation* 2,000 76,500
Robert Half International, Inc.* 2,250 89,297
Sylvan Learning Systems, Inc.* 2,050 79,950
Vincam Group, Inc.* 1,800 47,925
INSURANCE - 2.2%
Ace, Ltd. 1,000 96,500
AFLAC, Inc. 2,400 122,700
Allstate Corporation 3,615 328,513
Ambac Financial Group, Inc. 2,600 119,763
American International Group, Inc. 3,000 326,250
Hartford Financial Services Group, Inc. 2,000 187,125
Marsh & McLennan Companies, Inc. 2,000 148,875
MBIA, Inc. 3,000 199,500
Mercury General Corporation 1,400 77,700
MGIC Investment Corporation 2,000 133,625
Progressive Corporation of Ohio 1,000 119,813
St. Paul Companies, Inc. 2,700 221,569
Vesta Insurance Group, Inc. 1,500 89,250
MACHINERY - 1.2%
Aeroquip-Vickers, Inc. 2,100 103,031
AGCO Corporation 2,000 58,500
Alamo Group, Inc. 1,500 32,531
Caterpillar, Inc. 3,600 175,050
</TABLE>
See Notes To Financial Statements
27
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
MACHINERY - 1.2% (Continued)
Cognex Corporation* 1,500 $ 40,875
Deere & Company 4,200 244,125
Donaldson Company, Inc. 1,400 63,088
Dover Corporation 10,400 375,700
IDEX Corporation 2,000 69,750
Parker-Hannifin Corporation 1,575 72,647
MANUFACTURED HOUSING - 0.1%
Oakwood Homes Corporation 2,000 66,375
MEDICAL SERVICES - 1.1%
ABR Information Services, Inc.* 1,600 38,200
Health Care & Retirement Corp.* 3,700 149,156
Health Management Associates* 5,568 140,592
HEALTHSOUTH Corporation* 2,000 55,500
Lincare Holdings, Inc.* 1,000 57,000
MedPartners/Mullikin, Inc.* 2,000 44,250
Omnicare, Inc. 2,800 85,750
Orthodontic Centers of America, Inc.* 2,200 36,575
PacifiCare Health Systems, Inc.* 700 36,663
PhyCor, Inc.* 2,000 54,000
Quorum Health Group, Inc.* 2,250 58,781
Renal Treatment Centers, Inc.* 1,700 61,413
Tenet Healthcare Corporation* 2,025 66,952
United HealthCare Corporation 1,300 64,756
Universal Health Services, Inc.* 2,200 110,825
MEDICAL SUPPLIES - 1.3%
Abbott Laboratories 3,600 236,700
Baxter International, Inc. 3,000 151,313
Boston Scientific Corporation* 1,400 64,225
Cardinal Health, Inc. 1,800 135,450
Guidant Corporation 2,000 124,500
Johnson & Johnson 2,560 168,480
Life Technologies, Inc. 1,800 60,750
Medtronic, Inc. 3,600 188,550
Sola International, Inc.* 1,500 49,125
Sybron International Corp.* 2,000 93,875
VISX, Inc.* 1,000 22,125
METAL FABRICATING - 0.1%
Kennametal, Inc. 1,000 51,938
METALS & MINING - 0.4%
Aluminum Company of America 4,000 281,500
Inco Limited 2,000 34,000
Placer Dome, Inc. 4,000 50,750
NATURAL GAS - 0.3%
Enron Corporation 5,400 224,100
Sonat, Inc. 1,800 82,350
NEWSPAPER - 0.3%
Central Newspapers, Inc. 1,000 74,000
Gannett Company, Inc. 3,800 233,938
OFFICE EQUIPMENT & SUPPLIES - 0.6%
Diebold, Inc. 1,400 70,875
Ikon Office Solutions, Inc. 1,800 50,400
Pitney Bowes, Inc. 3,500 314,563
Wallace Computer Services, Inc. 1,500 58,125
Xerox Corporation 1,400 103,338
OILFIELD SERVICES - 1.2%
Baker Hughes, Inc. 4,000 174,500
Camco International, Inc. 1,000 63,688
Cooper Cameron Corporation* 900 54,900
Halliburton Company 7,000 363,563
Noble Drilling Corporation* 2,000 61,125
Pride International, Inc.* 2,800 69,825
Schlumberger, Ltd. 2,000 161,000
Smith International, Inc.* 2,300 141,163
Tidewater, Inc. 1,000 55,125
PACKAGING & CONTAINER - 0.1%
Sealed Air Corporation* 2,000 124,000
PAPER & FOREST PRODUCTS - 0.7%
Fort James Corporation 3,000 114,563
Georgia Pacific Corporation 1,400 85,050
</TABLE>
See Notes To Financial Statements
28
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
PAPER & FOREST PRODUCTS - 0.7% (Continued)
Georgia Pacific Corp. (Timber Group) 1,400 $ 31,850
International Paper Company 8,000 345,000
Weyerhaeuser Company 2,200 107,938
PETROLEUM - 4.4%
Amerada Hess Corporation 1,300 71,256
Amoco Corporation 3,700 315,656
Apache Corporation 1,800 63,113
Ashland Oil, Inc. 1,800 96,525
Atlantic Richfield Company 3,000 240,375
Barrett Resources Corporation* 1,400 42,000
British Petroleum Co. PLC 4,000 318,750
Devon Energy Corporation 1,500 58,031
Exxon Corporation 12,600 770,963
Mobil Corporation 10,000 721,250
Noble Affiliates, Inc. 2,800 98,875
Phillips Petroleum Company 4,100 199,619
Repsol SA 3,400 144,713
Royal Dutch/Shell Transport Group 13,600 736,100
Texaco Inc. 2,300 125,063
Tosco Corporation 3,000 113,625
Union Texas Petroleum Holdings 4,000 83,250
United Meridian Corporation* 1,500 42,188
USX-Marathon Group 7,000 236,250
PRECISION INSTRUMENT - 0.3%
Coherent, Inc.* 1,600 56,200
Dionex Corporation* 1,000 50,250
KLA-Tencor Corporation* 900 34,875
Roper Industries, Inc. 2,000 57,750
Teleflex, Inc. 2,000 75,500
PRINTING - 0.2%
R. R. Donnelley & Sons Company 2,500 93,125
Valassis Communications, Inc.* 1,600 59,200
PUBLISHING - 0.5%
Harcourt General, Inc. 1,200 65,775
McGraw-Hill, Inc. 4,000 296,000
Meredith Corporation 1,800 64,238
Value Line, Inc. 2,500 98,750
RAILROAD - 0.3%
Kansas City Southern Ind., Inc. 4,500 142,313
Union Pacific Corporation 2,000 125,000
REAL ESTATE INVESTMENT MANAGEMENT - 0.1%
LNR Property Corporation 1,700 40,375
Security Capital Group Incorporated* 2,000 65,000
REAL ESTATE INVESTMENT TRUST - 1.6%
CarrAmerica Realty Corporation 5,000 159,688
Federal Realty Investment Trust 4,800 123,900
Meditrust Corporation 5,407 198,707
National Health Investors, Inc. 1,600 67,100
Nationwide Health Properties, Inc. 7,500 192,188
Security Capital Industrial Trust 7,908 196,712
Security Capital Pacific Trust 2,000 48,625
Simon DeBartolo Group, Inc. 3,400 111,138
Starwood Lodging Trust 5,000 289,375
United Dominion Realty Trust, Inc. 8,124 113,736
Weingarten Realty Investors 3,200 143,800
RECREATION - 0.9%
Brunswick Corporation 3,000 90,938
Callaway Golf Company 1,400 39,988
Carmike Cinemas, Inc.* 3,000 86,250
Carnival Corporation 2,000 110,750
Harley-Davidson, Inc. 4,000 109,750
Time Warner, Inc. 2,200 136,263
Walt Disney Company 3,000 297,188
RESTAURANT - 0.2%
McDonald's Corporation 2,500 118,438
Outback Steakhouse, Inc.* 2,250 64,688
</TABLE>
See Notes To Financial Statements
29
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
RETAIL STORE - 2.2%
AutoZone, Inc.* 1,500 $ 43,406
Bed Bath & Beyond, Inc.* 4,000 153,500
Borders Group, Inc.* 3,000 93,938
CDW Computer Centers, Inc.* 1,000 52,125
Circuit City Stores, Inc. 2,200 78,513
CompUSA, Inc.* 2,200 68,888
Consolidated Stores Corporation* 1,400 61,600
Dayton Hudson Corporation 4,000 270,000
Dollar General Corporation 6,250 226,563
Gymboree Corporation* 1,400 38,325
J.C. Penney Company 1,618 97,485
Lands' End, Inc.* 2,200 77,275
Men's Wearhouse, Inc.* 1,500 52,125
MSC Industrial Direct Co., Inc.* 1,500 63,563
OfficeMax, Inc.* 3,400 48,238
Sears, Roebuck & Company 3,900 176,475
Starbucks Corporation* 4,000 153,500
Tandy Corporation 3,200 123,400
The Sports Authority, Inc.* 2,600 38,350
Tiffany & Company 1,300 46,800
TJX Companies, Inc. 2,200 75,625
Viking Office Products, Inc.* 2,200 47,988
Williams-Sonoma, Inc.* 1,500 62,813
Zale Corporation* 2,200 50,600
SECURITIES BROKERAGE - 0.8%
Bear Stearns Companies, Inc. 2,791 133,270
Charles Schwab Corporation 4,500 188,719
Investment Technology Group* 2,900 81,200
Merrill Lynch & Company, Inc. 2,400 175,050
Morgan Stanley, Dean Witter and Co. 4,000 235,750
SEMICONDUCTOR - 1.2%
Analog Devices, Inc.* 1,700 46,856
ASM Lithography Holding N.V.* 600 40,500
Atmel Corporation* 2,000 37,250
Intel Corporation 4,800 337,500
Lattice Semiconductor Corporation* 800 37,900
Linear Technology Corporation 2,200 126,500
Maxim Integrated Products, Inc.* 4,800 165,600
Motorola, Inc. 2,500 142,656
SDL, Inc.* 1,500 21,750
Texas Instruments, Inc. 4,800 216,000
SHOE - 0.1%
Wolverine World Wide, Inc. 2,362 53,588
STEEL - 0.2%
Nucor Corporation 2,300 110,975
Worthington Industries 4,000 66,000
TELECOMMUNICATIONS EQUIPMENT - 0.3%
Andrew Corporation* 1,862 44,688
Ascend Communications, Inc.* 2,050 50,481
Aspect Telecommunications Corp.* 2,000 41,750
Coherent Commun. Systems Corp.* 1,500 42,375
DSP Communications,Inc.* 1,600 19,200
Tellabs, Inc.* 2,400 126,450
TELECOMMUNICATIONS SERVICE - 3.1%
360 Communications Company* 2,400 48,450
ALLTEL Corporation 4,500 185,063
Ameritech Corporation 3,000 242,063
AT&T Corporation 1,500 91,875
Bell Atlantic Corporation 4,100 372,588
BellSouth Corporation 10,000 563,125
Centennial Cellular Corporation* 1,000 20,500
Cincinnati Bell Inc. 5,000 155,313
CommNet Cellular, Inc.* 1,000 35,563
GTE Corporation 11,500 599,438
Intermedia Communications, Inc.* 1,200 72,750
Powertel, Inc.* 2,500 41,875
SBC Communications, Inc. 5,900 432,175
Southern New England Tele. Corp. 2,700 135,675
United States Cellular Corporation* 1,100 33,825
WorldCom, Inc.* 2,700 81,675
</TABLE>
See Notes To Financial Statements
30
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stock Shares Value
- ---------------------------------------------------- -------- ----------
<S> <C> <C>
TEXTILE - 0.1%
Unifi, Inc. 1,300 $ 52,894
THRIFT - 0.6%
Fannie Mae 6,800 388,450
Freddie Mac 4,000 168,000
JSB Financial, Inc. 1,500 75,844
TIRE & RUBBER - 0.2%
Goodyear Tire & Rubber Company 2,600 165,588
TOBBACO - 0.8%
Fortune Brands, Inc. 2,000 74,125
Philip Morris Companies, Inc. 12,900 584,531
UST, Inc. 3,000 110,813
TOILETRIES / COSMETICS - 0.6%
Alberto-Culver Company 1,400 44,888
Gillette Company 3,000 301,313
Int'l Flavors & Fragrances, Inc. 5,000 257,188
TOYS - 0.1%
Mattel, Inc. 3,125 117,188
TRUCKING & TRANSPORT LEASING - 0.1%
Werner Enterprise, Inc. 3,150 64,575
WATER UTILITY - 0.2%
American Water Works Co., Inc. 5,500 150,563
----------
TOTAL COMMON STOCK - 59.9%
(Cost $32,781,892) $59,536,279
===========
</TABLE>
*Securities are non-income producing
See Notes To Financial Statements
31
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------- --------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
AEROSPACE / DEFENSE - 0.8%
Lockheed Martin Corporation BBB+ 9.375 10/15/99 $ 100,000 $ 105,349
Lockheed Martin Corporation BBB+ 7.650 05/01/16 500,000 545,778
Rockwell International Corp. AA+ 8.875 09/15/99 100,000 104,507
AIR TRANSPORT - 0.4%
Federal Express Corporation BBB+ 8.760 05/22/15 350,000 401,828
AUTO & TRUCK - 0.6%
General Motors Corporation A 9.125 07/15/01 500,000 545,454
BANK - 4.5%
Bankers Trust New York Corp. A- 9.500 06/14/00 250,000 268,919
Chase Manhattan Corp. A- 6.750 08/15/08 400,000 405,621
Comerica Bank A- 7.125 12/01/13 500,000 497,065
First Chicago NBD Corporation A 8.100 03/01/02 500,000 531,458
First Union Corporation A- 8.000 08/15/09 500,000 539,885
First Union Corporation A- 9.450 06/15/99 100,000 104,722
Morgan, J.P. & Company AA 8.500 08/15/03 500,000 552,713
NationsBank Corporation A 6.500 03/15/06 500,000 503,420
Royal Bank of Scotland A+ 6.375 02/01/11 500,000 486,928
Swiss Bank Corp.-NY AA 7.375 07/15/15 500,000 534,275
BEVERAGE - 0.6%
Anheuser Busch Companies, Inc. A+ 7.125 07/01/17 350,000 360,358
Anheuser Busch Companies, Inc. A+ 8.500 03/01/17 220,000 228,289
BUILDING MATERIALS - 0.5%
Masco Corporation BBB+ 7.125 08/15/13 500,000 517,070
CHEMICAL - 0.6%
Monsanto Company A 8.875 12/15/09 500,000 600,063
DIVERSIFIED - 2.2%
Service Corp. International BBB+ 7.700 04/15/09 500,000 544,580
Tenneco, Inc. BBB 7.625 06/15/17 500,000 533,463
Textron, Inc. A- 8.750 07/01/22 500,000 548,654
Whitman Corporation BBB+ 8.250 02/15/07 500,000 556,847
</TABLE>
See Notes To Financial Statements
32
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------- --------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
ELECTRIC & GAS UTILITIES - 6.1%
Alabama Power Company A+ 8.500 05/01/22 $ 500,000 $ 529,385
Dayton Power & Light Company AA- 8.150 01/15/26 500,000 538,651
Delmarva Power & Light Co. A 8.500 02/01/22 500,000 546,118
Duke Energy Corporation AA- 6.375 03/01/08 500,000 496,875
Florida Power & Light Company AA- 7.875 01/01/13 500,000 518,795
Georgia Power Company A+ 7.625 03/01/23 450,000 461,192
Hydro Quebec A+ 7.000 03/01/05 500,000 522,420
Monongahela Power A+ 8.500 06/01/22 500,000 529,316
Potomac Edison Company A+ 7.750 05/01/25 500,000 526,987
Public Service Electric & Gas A- 7.000 09/01/24 200,000 196,864
Union Electric Company AA- 8.750 12/01/21 500,000 552,655
Virginia Electric & Power Company A 8.000 03/01/04 500,000 543,302
FINANCIAL SERVICES - 4.1%
Deere, John Capital Corporation A 8.625 08/01/19 500,000 545,625
Dow Capital BV A 8.700 05/15/22 250,000 308,377
Fairfax Financial Holdings BBB+ 8.250 10/01/15 500,000 548,910
Fletcher Challenge Capital Canada,Inc. BBB 8.250 06/20/16 500,000 564,391
Ford Holdings, Inc. A 9.250 03/01/00 475,000 503,424
General Electric Capital Corporation AAA 7.750 03/15/02 500,000 531,164
IBM Credit Corporation A 6.750 12/24/07 500,000 493,742
SunAmerica, Inc. A 8.125 04/28/23 500,000 557,469
FOOD PROCESSING - 0.8%
Kraft, Inc. A 8.500 02/15/17 250,000 258,042
Nabisco, Inc. BBB 7.050 07/15/07 500,000 515,482
FOREIGN GOVERNMENT - 1.6%
Province of Nova Scotia A- 7.250 07/27/13 500,000 525,717
Province of Quebec A+ 8.800 04/15/03 350,000 387,458
Province of Saskatchewan A 9.375 12/15/20 525,000 681,792
GOVERNMENTAL AGENCY - 0.5%
Fannie Mae Not Rated 5.520 04/13/98 500,000 500,315
HOTEL / GAMING - 0.5%
ITT Corporation BBB 7.375 11/15/15 500,000 485,628
</TABLE>
See Notes To Financial Statements
33
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------- --------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
INSURANCE - 2.2%
Chubb Corporation AA+ 8.750 11/15/99 $ 39,000 $ 40,349
CIGNA Corporation A 8.250 01/01/07 500,000 556,374
Leucadia National Corporation BBB+ 7.750 08/15/13 500,000 515,000
MBIA, Inc. AA 9.375 02/15/11 500,000 627,257
Metropolitan Life Insurance Co.* A+ 7.450 11/01/23 450,000 487,233
MACHINERY - 0.5%
Case Corporation A- 7.250 01/15/16 500,000 523,825
MEDICAL SUPPLIES - 1.1%
Cardinal Health, Inc. A- 6.000 01/15/06 500,000 485,345
Johnson & Johnson AAA 8.720 11/01/24 550,000 632,271
METALS & MINING - 0.6%
Placer Dome, Inc. BBB 7.750 06/15/15 500,000 537,975
NATURAL GAS - 0.5%
Enron Corporation BBB+ 7.000 08/15/23 500,000 486,657
NEWSPAPER - 0.4%
Knight-Ridder, Inc. A 9.875 04/15/09 100,000 128,509
Tribune Company A 8.450 02/25/98 300,000 301,006
OFFICE EQUIPMENT & SUPPLIES - 0.2%
Xerox Corporation A 9.750 03/15/00 200,000 214,619
PACKAGING & CONTAINER - 0.4%
Crown Cork & Seal Company, Inc. BBB+ 8.375 01/15/05 390,000 429,727
PAPER & FOREST PRODUCTS - 0.5%
Weyerhaeuser Co. A 6.950 08/01/17 500,000 509,613
PETROLEUM - 1.9%
Atlantic Richfield Company A 8.500 04/01/12 250,000 299,598
Louisiana Land & Exploration Co. A- 7.625 04/15/13 500,000 541,012
OXY USA, Inc. BBB 7.000 04/15/11 525,000 515,409
Phillips Petroleum Company A- 8.860 05/15/22 500,000 547,500
</TABLE>
See Notes To Financial Statements
34
<PAGE>
ADVANCE CAPITAL I, INC. - BALANCED FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Principal Market
Fixed Income Securities Rating Coupon Maturity Amount Value
- ----------------------------------- --------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
PUBLISHING - 0.5%
News America Holdings BBB- 8.000 10/17/16 $ 500,000 $ 541,075
RESTAURANT - 0.5%
Darden Restaurants, Inc. BBB 7.125 02/01/16 500,000 475,000
RETAIL STORE - 0.2%
Dayton Hudson Corporation BBB+ 9.625 02/01/08 200,000 243,776
SECURITIES BROKERAGE - 1.7%
Bear Stearns Companies, Inc. A 7.250 10/05/06 500,000 522,631
Lehman Brothers Holdings, Inc. A 8.500 08/01/15 500,000 578,598
Merrill Lynch & Company, Inc. AA- 7.190 08/07/12 300,000 302,105
Salomon, Inc. A 9.450 03/15/00 300,000 301,946
TELECOMMUNICATIONS SERVICE - 1.8%
AT&T Corporation AA- 7.125 01/15/02 500,000 518,003
Michigan Bell Telephone AAA 7.500 02/15/23 500,000 520,991
NYNEX Corporation A+ 7.375 12/15/11 250,000 251,875
Southwestern Bell Telephone Company AA 7.375 05/01/12 525,000 528,937
TOBACCO - 0.4%
Philip Morris Companies, Inc. A 9.000 01/01/01 400,000 427,380
U.S. GOVERNMENT - 1.0%
U.S. Treasury 6.500 08/15/05 1,000,000 1,043,281
--------------
TOTAL FIXED-INCOME SECURITIES - 38.2%
(Cost $36,200,523) 38,022,219
TOTAL COMMON STOCK - 59.9%
(Cost $32,781,892) 59,536,279
--------------
TOTAL INVESTMENTS IN SECURITIES - 98.1%
(Cost $68,982,415) $ 97,558,498
==============
</TABLE>
* Security exempt from registration under Rule 144A of
the Securities Act of 1933
See Notes To Financial Statements
35
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
ADVERTISING - 0.9%
Heritage Media Corporation BB+ 02/15/06 8.750 $ 500,000 $ 506,180
Lamar Advertising Company B 12/01/06 9.625 700,000 752,500
Universal Outdoor, Inc. B 10/15/06 9.750 500,000 562,500
AEROSPACE / DEFENSE - 1.2%
AAR Corporation BBB 10/15/03 7.250 500,000 517,477
Lockheed Martin Corporation BBB+ 03/15/23 7.875 500,000 523,084
McDonnell Douglas Corporation AA+ 04/01/12 9.750 1,000,000 1,314,488
AIR TRANSPORT - 2.7%
AMR Corporation BBB- 08/01/12 9.000 1,000,000 1,191,021
AMR Corporation BBB- 03/15/00 9.750 100,000 106,250
Delta Air Lines, Inc. BBB- 02/01/11 10.375 500,000 634,415
Federal Express Corporation BBB+ 01/01/15 7.630 1,000,000 1,083,556
Northwest Airlines Corporation BB- 03/15/07 8.700 1,000,000 1,057,500
United Airlines, Inc. BB+ 07/15/21 10.250 500,000 663,750
United Airlines, Inc. BB+ 08/15/21 9.750 500,000 645,328
APPAREL - 1.5%
Fruit of the Loom, Inc. BBB- 03/15/11 7.000 1,000,000 950,000
Phillips-Van Heusen Corp. BB+ 11/15/23 7.750 1,000,000 1,064,722
Platex Family Products Corp. B 12/15/03 9.000 1,000,000 1,017,500
AUTO PARTS - 0.8%
JPS Automotive Products Corp. B 06/15/01 11.125 500,000 555,000
Titan International, Inc. BB- 04/01/07 8.750 500,000 515,000
Walbro Corporation B+ 07/15/05 9.875 500,000 524,319
AUTO & TRUCK - 1.7%
Ford Motor Company A 11/15/22 8.875 2,000,000 2,235,675
General Motors Corporation A 06/15/24 8.100 1,000,000 1,102,255
BANK - 5.7%
Banc One Corporation A+ 07/15/25 7.750 1,000,000 1,106,146
Bank of Boston Corporation BBB+ 12/01/05 6.625 1,000,000 1,005,651
Bankers Trust New York Corp. A- 11/15/15 7.500 1,500,000 1,580,767
</TABLE>
See Notes To Financial Statements
36
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
BANK - 5.7% (Continued)
Chase Manhattan Corp. A- 10/15/08 6.125 $1,000,000 $ 966,215
Comerica Bank A- 12/01/13 7.125 1,000,000 994,130
First Union Corporation A- 08/15/09 8.000 500,000 539,885
KeyCorp BBB+ 03/15/06 6.750 1,000,000 1,011,078
NCNB Corporation A 07/15/15 10.200 1,000,000 1,360,077
Republic New York Corporation AA- 05/15/21 9.125 1,000,000 1,273,374
Royal Bank of Scotland A+ 02/01/11 6.375 1,000,000 973,856
Westpac Banking Corporation A+ 08/15/01 9.125 500,000 546,193
BEVERAGE - 0.2%
Anheuser Busch Companies, Inc. A+ 03/01/17 8.500 386,000 400,543
BROADCASTING / CABLE TV - 5.5%
Cablevision Systems Corporation BB- 05/15/06 9.875 750,000 821,250
Century Communications Corp. BB- 02/15/02 9.750 250,000 264,375
Century Communications Corp. BB- 03/01/05 9.500 1,000,000 1,060,000
Comcast Cablevision BB+ 01/15/08 9.500 500,000 531,050
Comcast Cablevision BB+ 05/15/05 9.375 500,000 535,000
Continental Cablevision, Inc. BBB+ 08/01/13 9.500 500,000 591,166
Jacor Communications Company B 12/15/06 9.750 750,000 806,250
Jones Intercable, Inc. BB 04/01/07 8.875 500,000 523,750
Jones Intercable, Inc. B+ 03/01/08 10.500 700,000 772,415
Lenfest Communications, Inc. BB+ 11/01/05 8.375 1,000,000 1,030,000
Rogers Cablesystems Ltd. BB+ 03/15/05 10.000 500,000 547,380
Sinclair Broadcast Group, Inc. B 09/30/05 10.000 500,000 535,000
Tele-Communications, Inc. BBB- 01/15/23 9.250 760,000 838,552
Tele-Communications, Inc. BBB- 02/15/23 8.750 500,000 538,519
Turner Broadcasting System, Inc. BBB- 07/01/13 8.375 750,000 836,267
Young Broadcasting, Inc. B 06/15/07 8.750 750,000 742,500
BUILDING - 2.1%
Continental Homes Holding Corporation B+ 04/15/06 10.000 500,000 538,077
Hovnanian Enterprises, Inc. B 06/01/05 9.750 500,000 497,500
Ryland Group B+ 07/15/02 10.500 1,050,000 1,098,436
Standard Pacific Corporation BB 06/15/07 8.500 1,000,000 1,010,109
U.S. Home Corporation BB- 08/15/07 8.880 1,000,000 1,020,000
</TABLE>
See Notes To Financial Statements
37
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
BUILDING MATERIALS - 0.3%
Johns Manville Corporation BB- 12/15/04 10.875 $ 500,000 $ 556,250
CHEMICAL - 1.6%
Borden Chemicals and Plastics, L.P. BB+ 05/01/05 9.500 500,000 530,000
duPont, E.I. de Nemours & Co. AA- 01/15/22 8.250 1,000,000 1,079,330
Eastman Chemical Company BBB+ 01/15/24 7.250 1,000,000 1,036,467
Union Carbide Chemicals & Plastics Co. BBB 04/01/23 7.875 600,000 671,644
COMPUTER & PERIPHERALS - 1.3%
Digital Equipment Corporation BB+ 11/01/12 8.625 1,200,000 1,388,398
International Business Machines Corp. A 11/01/19 8.375 1,000,000 1,191,032
DIVERSIFIED - 1.2%
Tenneco, Inc. BBB 11/15/12 9.200 500,000 609,260
Textron, Inc. A- 07/01/22 8.750 581,000 637,536
Whitman Corporation BBB+ 06/15/15 7.625 1,000,000 1,081,320
ELECTRIC & GAS UTILITIES - 10.5%
Alabama Power Company A+ 12/01/24 9.000 1,000,000 1,097,762
Cleveland Electric Illuminating Company BB+ 08/01/12 8.375 500,000 509,600
Dayton Power & Light Company AA- 01/15/26 8.150 1,000,000 1,077,302
Florida Power & Light Company AA- 01/01/13 7.875 1,000,000 1,037,591
FPL Group Capital, Inc. A+ 05/01/13 7.625 1,025,000 1,057,308
Georgia Power Company A+ 02/01/23 7.950 1,000,000 1,038,425
Hydro Quebec A+ 01/15/22 8.400 850,000 1,013,222
Illinois Power Co. BBB 02/15/23 8.000 1,000,000 1,035,000
Indianapolis Power & Light Co. AA- 02/01/24 7.050 1,000,000 1,003,667
Long Island Lighting Company BB+ 07/15/19 8.900 473,000 503,051
Midland Cogeneration Venture BB- 07/23/02 10.330 338,054 359,337
Monongahela Power A+ 06/01/22 8.500 1,500,000 1,587,947
New Orleans Public Service, Inc. BBB 03/01/23 8.000 600,000 615,366
Northern Illinois Gas Company AA 08/15/21 8.875 1,000,000 1,063,987
Philadelphia Electric Company BBB+ 09/01/22 8.250 1,000,000 1,048,967
Potomac Edison Company A+ 06/01/24 8.000 1,000,000 1,076,225
Potomac Electric Power Company A 06/01/21 9.000 1,000,000 1,106,238
Public Service Electric & Gas A- 09/01/24 7.000 1,000,000 984,320
Southern Cal Edison A+ 12/01/17 8.375 655,000 672,020
</TABLE>
See Notes To Financial Statements
38
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<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 - 10.5% (Continued)
Southern California Gas Company AA- 10/01/21 8.750 $1,000,000 $ 1,099,484
Virginia Electric & Power Company A 10/01/24 8.625 1,000,000 1,126,254
West Penn Power Company A+ 08/01/24 8.125 1,000,000 1,076,491
ELECTRIC EQUIPMENT - 1.4%
Essex Group, Inc. BB- 05/01/03 10.000 1,000,000 1,050,000
Philips Electronics N.V. BBB+ 08/15/13 7.250 1,000,000 1,008,960
Westinghouse Electric Corp. BB 08/01/12 8.625 750,000 787,500
ENVIRONMENTAL - 0.6%
Laidlaw, Inc. BBB+ 05/15/23 8.250 1,000,000 1,135,300
FINANCIAL SERVICES - 4.7%
AMRESCO, Inc. B 03/15/04 10.000 1,000,000 1,040,000
Auburn Hills Trust A 05/01/20 12.000 400,000 640,710
CRA Finance USA, Ltd. AA- 12/01/13 7.125 500,000 525,070
Dean Witter Discover & Company A+ 10/15/13 6.750 1,250,000 1,240,098
Dow Capital BV A 05/15/22 8.700 1,000,000 1,233,508
Fairfax Financial Holdings BBB+ 10/01/15 8.250 1,500,000 1,646,730
Fletcher Challenge Capital Canada, Inc. BBB 06/20/16 8.250 1,000,000 1,128,782
Imperial Credit Industries, Inc. B+ 01/15/07 9.875 500,000 496,689
SunAmerica, Inc. A 04/28/23 8.125 1,250,000 1,393,672
FOOD PROCESSING - 0.8%
Chiquita Brands Int'l, Inc. B+ 01/15/04 9.625 1,000,000 1,062,500
ConAgra, Inc. BBB 03/01/21 9.750 500,000 657,988
FOREIGN GOVERNMENT - 2.8%
Province of Newfoundland BBB+ 10/22/22 8.650 1,000,000 1,184,350
Province of Nova Scotia A- 07/27/13 7.250 1,000,000 1,051,434
Province of Quebec A+ 12/01/26 8.625 1,000,000 1,228,105
Province of Saskatchewan A 02/01/13 8.000 1,000,000 1,121,923
Republic of Finland AA 04/01/28 9.625 1,000,000 1,051,243
HOTEL / GAMING - 3.6%
Boyd Gaming Corporation BB 10/01/03 9.250 1,000,000 1,050,000
Circus Circus Enterprises BBB- 07/15/13 7.625 450,000 460,125
</TABLE>
See Notes To Financial Statements
39
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
HOTEL / GAMING - 3.6% (Continued)
Empress River Casino Finance Corp. BB 04/01/02 10.750 $ 500,000 $ 518,500
Grand Casinos, Inc. BB 12/01/03 10.125 1,000,000 1,082,500
Host Marriott Travel Plaza BB- 05/15/05 9.500 1,000,000 1,062,500
ITT Corporation BBB 11/15/15 7.375 1,000,000 971,256
Prime Hospitality Corp. BB 01/15/06 9.250 1,000,000 1,065,096
Showboat, Inc. BB- 05/01/08 9.250 400,000 430,000
Station Casinos B+ 06/01/03 9.625 500,000 516,250
INSURANCE - 6.6%
Aetna Services, Inc. A 01/15/17 8.000 1,275,000 1,318,736
American Financial Group, Inc. BBB 12/15/07 7.125 1,000,000 1,005,232
CIGNA Corporation A 03/01/23 7.650 500,000 526,766
CNA Financial Corporation A- 11/15/23 7.250 1,000,000 1,005,373
Continental Corporation BBB- 08/15/12 8.375 600,000 676,655
Kaufman & Broad Home Corp. B+ 05/01/03 9.375 1,000,000 1,030,000
Leucadia National Corporation BBB+ 08/15/13 7.750 910,000 937,300
MBIA, Inc. AA 10/01/22 8.200 2,000,000 2,126,945
Metropolitan Life Insurance Co.* A+ 11/01/23 7.450 550,000 595,507
New York Life Insurance Company AA- 12/15/23 7.500 1,000,000 1,040,000
Penncorp Financial Group, Inc. BB+ 12/15/03 9.250 500,000 515,830
Reliance Group Holdings, Inc. BB+ 11/15/00 9.000 1,000,000 1,047,500
Torchmark Corporation A 03/01/17 8.625 900,000 938,916
Vesta Insurance Group BBB+ 07/15/25 8.750 500,000 587,836
MEDICAL SERVICES - 1.4%
Abbey Healthcare Group, Inc. B+ 11/01/02 9.500 500,000 528,871
Beverly Enterprises Inc. B+ 02/15/06 9.000 500,000 520,000
Columbia/HCA Healthcare Corporation BBB 12/15/14 9.000 1,000,000 1,163,060
HEALTHSOUTH Corporation BB- 04/01/01 9.500 500,000 525,000
MEDICAL SUPPLIES - 0.4%
Cardinal Health, Inc. A- 02/15/04 6.500 700,000 705,941
METALS & MINING - 1.4%
Alcan Aluminum Ltd. A- 01/15/22 8.875 1,000,000 1,094,433
Inco Ltd. BBB- 06/15/22 9.600 500,000 563,413
Placer Dome, Inc. BBB 06/15/15 7.750 1,000,000 1,075,951
</TABLE>
See Notes To Financial Statements
40
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
NATURAL GAS - 1.0%
AmeriGas Partners, L.P. BB+ 04/15/07 10.125 $ 300,000 $ 326,070
Consolidated Natural Gas Company AA- 12/01/11 8.625 154,000 157,850
Ferrellgas Partners, L.P. B+ 06/15/06 9.375 500,000 530,000
Seagull Energy BB+ 08/01/05 8.625 1,000,000 1,050,000
NEWSPAPER - 0.5%
Hollinger International, Inc. BB- 02/01/06 9.250 500,000 530,000
Hollinger International, Inc. BB- 03/15/07 9.250 500,000 528,605
OILFIELD SERVICES - 2.7%
Dawson Production Services, Inc. B+ 02/01/07 9.375 1,000,000 1,050,000
Husky Oil, Ltd. BBB 11/15/16 7.550 1,000,000 983,000
J. Ray McDermott, S.A. BB- 07/15/06 9.375 500,000 535,000
Lomak Petroleum, Inc. B 01/15/07 8.750 1,000,000 1,020,893
Trico Marine Services Inc. BB- 08/01/05 8.500 1,000,000 1,032,467
Veritas DGC, Inc. BB 10/15/03 9.750 750,000 816,517
PACKAGING & CONTAINERS - 1.4%
Container Corp. of America B+ 04/01/03 9.750 400,000 428,000
Crown Cork & Seal Company, Inc. BBB+ 04/15/23 8.000 1,500,000 1,571,948
Stone Container Corporation B 02/01/01 9.875 750,000 750,000
PAPER & FOREST PRODUCTS - 2.2%
Bowater, Inc. BBB 10/15/12 9.500 700,000 878,451
Champion International Corporation BBB 09/01/23 7.625 1,500,000 1,535,797
Georgia-Pacific Corporation BBB- 07/01/22 9.125 1,000,000 1,114,734
Sweetheart Corporation, Inc. B+ 09/01/00 9.625 1,000,000 992,500
PETROLEUM - 4.5%
ANR Pipeline Company BBB 11/01/21 9.625 1,000,000 1,306,349
Clark Oil & Refining Corporation BB 09/15/04 9.500 650,000 672,750
Clark USA, Inc. B+ 12/01/05 10.875 500,000 546,942
Diamond Shamrock R & M, Inc. BBB 04/01/23 8.000 600,000 631,650
Louisiana Land & Exploration Co. A- 04/15/13 7.625 1,000,000 1,082,024
NOVA Gas Transmission A- 04/01/23 7.875 600,000 674,724
OXY USA, Inc. BBB 04/15/11 7.000 1,000,000 981,732
Phillips Petroleum Company A- 01/01/23 8.490 1,000,000 1,084,453
</TABLE>
See Notes To Financial Statements
41
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
PETROLEUM - 4.5% (Continued)
USX Corporation BBB- 02/15/12 9.375 $ 750,000 $ 917,334
Vintage Petroleum, Inc. B+ 12/15/05 9.000 1,000,000 1,051,879
PUBLISHING - 0.9%
K-III Communications Corporation BB- 06/01/04 10.250 750,000 813,750
News America Holdings BBB- 08/10/18 8.250 1,000,000 1,099,147
RAILROAD - 1.1%
Kansas City Southern Industries, In BBB- 07/01/22 8.800 500,000 545,506
Union Pacific Corporation BBB 05/01/25 8.350 1,500,000 1,637,257
REAL ESTATE INVESTMENT MANAGEMENT - 0.5%
Rodamco N.V. AA 05/15/15 7.750 1,000,000 1,114,576
REAL ESTATE INVESTMENT TRUST - 0.4%
Taubman Realty Group Ltd. BBB 10/01/03 7.000 750,000 759,210
RECREATION - 1.3%
Brunswick Corporation BBB+ 09/01/23 7.375 975,000 1,033,089
Speedway Motorsports, Inc. B+ 08/15/07 8.500 500,000 508,750
Time Warner, Inc. BBB- 01/15/13 9.125 1,000,000 1,190,000
RESTAURANT - 0.7%
Darden Restaurants, Inc. BBB 02/01/16 7.125 1,500,000 1,425,000
RETAIL STORE - 4.3%
Dayton Hudson Corporation BBB+ 12/01/22 8.500 1,500,000 1,623,378
Genesco, Inc. B+ 02/01/03 10.375 425,000 439,835
J.C. Penney Company A 04/01/17 7.950 1,000,000 1,118,004
The Limited, Inc. BBB+ 03/15/23 7.500 1,000,000 997,703
May Department Stores A 07/15/26 8.300 1,000,000 1,105,918
Michaels Stores, Inc. BB- 06/15/06 10.875 1,000,000 1,088,330
Rite-Aid Corporation BBB+ 08/15/13 6.875 1,000,000 1,005,322
Sears, Roebuck & Company A- 11/01/11 9.375 1,000,000 1,240,993
SECURITIES BROKERAGE - 2.8%
Bear Stearns Companies, Inc. A 01/15/04 6.625 1,000,000 999,392
Goldman Sachs Group A+ 03/01/13 8.000 1,000,000 1,129,474
</TABLE>
See Notes To Financial Statements
42
<PAGE>
ADVANCE CAPITAL I, INC. - RETIREMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
S & P
Credit Maturity Principal Market
Fixed Income Securities Rating Date Coupon Amount Value
- ----------------------------------- -------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
SECURITIES BROKERAGE - 2.8% (Continued)
Lehman Brothers, Inc. A 05/15/05 11.625 $1,023,000 $ 1,328,881
Morgan Stanley Group, Inc. A+ 10/01/13 7.000 1,000,000 1,038,773
Paine Webber Group, Inc. BBB+ 02/15/14 7.625 1,000,000 1,063,128
SEMICONDUCTOR - 0.5%
Advanced Micro Devices, Inc. BB- 08/01/03 11.000 1,000,000 1,075,000
STEEL - 0.5%
AK Steel Corporation BB- 12/15/06 9.125 1,000,000 1,029,321
TELECOMMUNICATIONS SERVICE - 3.3%
AT&T Corporation AA- 01/15/22 8.125 750,000 799,399
Bell Atlantic Corporation A+ 06/15/17 7.875 500,000 511,250
Comcast Cellular Communications, In BB+ 05/01/07 9.500 500,000 525,000
GCI, Inc. B+ 08/01/07 9.750 1,000,000 1,035,214
GTE Corporation A 11/01/21 8.750 1,000,000 1,215,339
NYNEX Corporation A+ 12/15/11 7.375 500,000 503,750
Paging Network, Inc. B 02/01/06 8.875 1,000,000 980,401
Southwestern Bell Telephone Company AA 05/01/12 7.375 1,000,000 1,007,500
TEXTILES - 1.5%
Dominion Textile, Inc. BB 04/01/06 9.250 1,000,000 1,122,500
Fieldcrest Cannon, Inc. B+ 06/15/04 11.250 1,000,000 1,055,000
WestPoint Stevens, Inc. BB- 12/15/01 8.750 750,000 780,000
TOBACCO - 0.9%
Philip Morris Companies, Inc. A 01/15/17 8.375 1,000,000 1,027,388
RJR Nabisco, Inc. BBB- 04/15/04 8.750 775,000 821,568
U.S. GOVERNMENT - 3.7%
U.S. Treasury 08/15/26 6.750 2,000,000 2,202,813
U.S. Treasury 10/15/06 6.500 500,000 523,594
U.S. Treasury 11/15/12 10.375 3,500,000 4,651,172
----------------
TOTAL FIXED INCOME SECURITIES - 95.6%
(Cost $179,340,720) $ 191,712,180
================
</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, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY RETIREMENT
GROWTH BOND BALANCED INCOME
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities. . . . . . . . . $ 53,838,950 $ 4,121,662 $ 97,558,498 $ 191,712,180
Cash . . . . . . . . . . . . . . . . . . . 514,568 17,610 1,064,560 4,952,367
Receivables
Dividends and interest. . . . . . . . . . 24,057 69,572 884,587 3,981,295
Securities sold . . . . . . . . . . . . . 0 0 0 0
Prepaid expenses . . . . . . . . . . . . . 4,046 1,516 6,690 13,838
------------ ----------- ------------ -------------
Total assets . . . . . . . . . . . . . . . . 54,381,621 4,210,360 99,514,335 200,659,680
LIABILITIES
Payable to affiliated entities
Investment advisory fees. . . . . . . . . 30,653 1,398 57,032 82,702
Distribution fees . . . . . . . . . . . . 368 0 670 1,332
Accounts payable and accrued expenses. . . 18,304 1,350 29,414 52,918
Securities purchased . . . . . . . . . . . 0 0 0 0
Distributions payable. . . . . . . . . . . 68 4,617 5,760 11,622
------------ ----------- ------------ -------------
Total liabilities. . . . . . . . . . . . . 49,393 7,365 92,876 148,574
------------ ----------- ------------ -------------
Net assets . . . . . . . . . . . . . . . . $ 54,332,228 $ 4,202,995 $ 99,421,459 $ 200,511,106
============ =========== ============ =============
NET ASSETS
Paid-in capital. . . . . . . . . . . . . . $ 35,179,724 $ 3,987,535 $ 70,845,376 $ 188,180,866
Accumulated undistributed net realized
loss on investments . . . . . . . . . . . 0 0 0 (41,220)
Net unrealized appreciation in value of
investments . . . . . . . . . . . . . . . 19,152,504 215,460 28,576,083 12,371,460
------------ ----------- ------------ -------------
Net assets . . . . . . . . . . . . . . . . $ 54,332,228 $ 4,202,995 $ 99,421,459 $ 200,511,106
============ =========== ============ =============
SHARES OUTSTANDING . . . . . . . . . . . . . 3,150,443 399,375 6,336,730 18,824,383
============ =========== ============ =============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE . . . . . . . . $ 17.25 $ 10.52 $ 15.69 $ 10.65
============ =========== ============ =============
</TABLE>
See Notes To Financial Statements
44
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY RETIREMENT
GROWTH BOND BALANCED INCOME
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . $ 24,600 $ 305,052 $ 2,603,199 $ 14,807,711
Dividends. . . . . . . . . . . . . . . . . 210,189 0 978,862 0
------------ ----------- ------------ -------------
Total investment income. . . . . . . . . . 234,789 305,052 3,582,061 14,807,711
EXPENSES
Paid to affiliates:
Investment advisory fees . . . . . . . . 331,108 16,856 617,972 921,051
Administration fees. . . . . . . . . . . 0 0 0 0
Distribution fees. . . . . . . . . . . . 118,253 0 220,704 460,525
Transfer and dividend disbursing
agent fees . . . . . . . . . . . . . . 0 0 0 0
Paid to others:
Custodial fees . . . . . . . . . . . . . 22,623 2,245 21,292 9,475
Directors fees and expenses. . . . . . . 1,926 178 3,624 7,623
Professional fees. . . . . . . . . . . . 8,631 764 16,176 33,709
Shareholder reporting costs. . . . . . . 12,219 1,133 23,029 47,501
Registration and filing fees . . . . . . 4,478 1,416 6,319 10,018
Other operating expenses . . . . . . . . 5,981 455 10,415 20,344
------------ ----------- ------------ -------------
Total expenses . . . . . . . . . . . . . . 505,219 23,047 919,531 1,510,246
------------ ----------- ------------ -------------
NET INVESTMENT INCOME (LOSS) . . . . . . . . (270,430) 282,005 2,662,530 13,297,465
REALIZED GAIN ON INVESTMENTS
Proceeds from securities sold. . . . . . . 9,559,297 1,218,525 8,780,765 29,757,980
Cost of securities sold. . . . . . . . . . (9,202,743) (1,180,335) (6,878,349) (28,828,247)
------------ ----------- ------------ -------------
Net realized gain on investments . . . . . 356,554 38,190 1,902,416 929,733
UNREALIZED GAIN ON INVESTMENTS
Appreciation, Beginning of year. . . . . . 11,269,388 151,070 16,670,110 4,830,140
Appreciation, End of year. . . . . . . . . 19,152,504 215,460 28,576,083 12,371,460
------------ ----------- ------------ ------------
Net unrealized gain on investments . . . . 7,883,116 64,390 11,905,973 7,541,320
------------ ----------- ------------ ------------
NET GAIN ON INVESTMENTS. . . . . . . . . . . 8,239,670 102,580 13,808,389 8,471,053
------------ ----------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . $ 7,969,240 $ 384,585 $ 16,470,919 $ 21,768,518
============ =========== ============ =============
</TABLE>
See Notes To Financial Statements
45
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH BOND
----------------------------- ----------------------------
1997 1996 1997 1996
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) . . . . . . . . . . . $ (270,430) $ (162,689) $ 282,005 $ 293,150
Net realized gain (loss) on investments. . . . . . 356,554 128,865 38,190 14,890
Net unrealized gain (loss) on investments. . . . . 7,883,116 5,138,241 64,390 (189,341)
-------------- ------------- ------------ --------------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . . . 7,969,240 5,104,417 384,585 118,699
Distributions to Shareholders:
Net investment income. . . . . . . . . . . . . . 0 0 (282,005) (293,150)
Net realized gain on investments . . . . . . . . (228,769) 0 (37,120) 0
-------------- ------------- ------------ --------------
Total distributions to shareholders. . . . . . . (228,769) 0 (319,125) (293,150)
Share Transactions:
Net proceeds from sale of shares . . . . . . . . 11,871,517 10,814,068 665,380 747,478
Reinvestment of distributions. . . . . . . . . . 228,701 0 267,980 246,917
Cost of shares reacquired. . . . . . . . . . . . (4,275,354) (2,776,738) (1,226,311) (916,571)
-------------- ------------- ------------ --------------
Net increase (decrease) derived from share
transactions . . . . . . . . . . . . . . . . . 7,824,864 8,037,330 (292,951) 77,824
-------------- ------------- ------------ --------------
Net increase (decrease) in net assets. . . . . . 15,565,335 13,141,747 (227,491) (96,627)
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . 38,766,893 25,625,146 4,430,486 4,527,113
-------------- ------------- ------------ --------------
End of year. . . . . . . . . . . . . . . . . . . $ 54,332,228 $ 38,766,893 $ 4,202,995 $ 4,430,486
============== ============= ============ ==============
NUMBER OF SHARES
Sold . . . . . . . . . . . . . . . . . . . . . . 774,840 792,133 64,974 71,788
Shares issued from reinvestment of distributions 13,258 0 25,755 23,856
Reacquired . . . . . . . . . . . . . . . . . . . (271,579) (202,707) (118,547) (88,198)
-------------- ------------- ------------ -------------
Net increase (decrease) in shares outstanding. . 516,519 589,426 (27,818) 7,446
Outstanding:
Beginning of year. . . . . . . . . . . . . . . 2,633,924 2,044,498 427,193 419,747
-------------- ------------- ------------ --------------
End of year. . . . . . . . . . . . . . . . . . 3,150,443 2,633,924 399,375 427,193
============== ============= ============ ==============
</TABLE>
See Notes To Financial Statements
46
<PAGE>
ADVANCE CAPITAL I, INC.
STATEMENT OF CHANGES IN NET ASSETS - Continued
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETIREMENT
BALANCED INCOME
---------------------------- ----------------------------
1997 1996 1997 1996
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) . . . . . . . . . . . $ 2,662,530 $ 2,108,825 $13,297,465 $ 11,712,302
Net realized gain (loss) on investments. . . . . . 1,902,416 1,422,047 929,733 (456,673)
Net unrealized gain (loss) on investments. . . . . 11,905,973 5,684,549 7,541,320 (3,666,825)
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . . . . 16,470,919 9,215,421 21,768,518 7,588,804
Distributions to Shareholders:
Net investment income. . . . . . . . . . . . . . . (2,662,530) (2,108,825) (13,297,465) (11,712,302)
Net realized gain on investments . . . . . . . . . (1,902,416) (1,422,047) 0 0
-------------- ------------- ------------ -------------
Total distributions to shareholders. . . . . . . . (4,564,946) (3,530,872) (13,297,465) (11,712,302)
Share Transactions:
Net Proceeds from sale of shares . . . . . . . . . 17,779,709 14,712,818 28,904,791 39,730,156
Reinvestment of distributions. . . . . . . . . . . 4,535,246 3,500,989 13,134,267 11,592,633
Cost of shares reacquired. . . . . . . . . . . . . (10,001,142) (7,995,453) (20,798,196) (15,699,328)
-------------- ------------- ------------ -------------
Net increase (decrease) derived from share
transactions . . . . . . . . . . . . . . . . . . 12,313,813 10,218,354 21,240,862 35,623,461
-------------- ------------- ------------ -------------
Net increase (decrease) in net assets. . . . . . . 24,219,786 15,902,903 29,711,915 31,499,963
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . 75,201,673 59,298,770 170,799,191 139,299,228
-------------- ------------- ------------ -------------
End of year. . . . . . . . . . . . . . . . . . . . $ 99,421,459 $ 75,201,673 $200,511,106 $170,799,191
============== ============= ============ =============
NUMBER OF SHARES
Sold . . . . . . . . . . . . . . . . . . . . . . . 1,211,965 1,132,445 2,825,132 3,902,770
Shares issued from reinvestment of distributions . 298,348 262,475 1,275,428 1,150,356
Reacquired . . . . . . . . . . . . . . . . . . . . (671,556) (615,458) (2,023,575) (1,557,136)
-------------- ------------- ------------ -------------
Net increase (decrease) in shares outstanding. . . 838,757 779,462 2,076,985 3,495,990
Outstanding:
Beginning of year. . . . . . . . . . . . . . . . 5,497,973 4,718,511 16,747,398 13,251,408
-------------- ------------- ------------ -------------
End of year. . . . . . . . . . . . . . . . . . . 6,336,730 5,497,973 18,824,383 16,747,398
============== ============= ============ =============
</TABLE>
See Notes To Financial Statements
47
<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 and Retirement Income Fund.
On August 15, 1997, the shareholders of the Advance Capital
I, Inc. Long Term Income Fund approved the liquidation and
dissolution of the Fund. The Fund was dissolved and all assets
were distributed in 1997.
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.
48
<PAGE>
Note 2. ACCOUNTING POLICIES (Continued)
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 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 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
Fund. 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
49
<PAGE>
Note 3. TRANSACTIONS WITH AFFILIATES (Continued)
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
$1,886,987 by MANAGEMENT for 1997. The COMPANY was charged
distribution fees of $799,482 by SERVICES for 1997. At
December 31, 1997 an employee retirement plan sponsored by SERVICES
owned 52,746 shares (1.7%) of the Equity Growth Fund and
7,132 shares (0.1%) of the Balanced Fund.
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 $2,500 annual retainer and an additional $250 per meeting.
Note 4. INVESTMENT PORTFOLIO TRANSACTIONS
The cost of purchases and proceeds from sales of
investments, other than short-term obligations, for 1997
were as follows:
<TABLE>
<CAPTION>
Equity Retirement
Growth Bond Balanced Income
------ ---- -------- ------
<S> <C> <C> <C> <C>
Purchases $16,764,592 $908,419 $18,961,364 $50,091,523
Sales 9,559,297 1,218,525 8,780,765 29,757,980
</TABLE>
The cost of purchases and proceeds from sales of U.S.
Government securities included above were as follows:
<TABLE>
<CAPTION>
Equity Retirement
Growth Bond Balanced Income
------ ---- -------- ------
<S> <C> <C> <C> <C>
Purchases None $207,817 $992,188 $8,479,219
Sales None 418,169 1,044,531 5,507,344
</TABLE>
50
<PAGE>
Note 4. INVESTMENT PORTFOLIO TRANSACTIONS (Continued)
Gross unrealized appreciation and depreciation of
investments for book and tax purposes as of December 31, 1997
were as follows:
<TABLE>
<CAPTION>
Equity Retirement
Growth Bond Balance Income
------ ---- -------- ------
<S> <C> <C> <C> <C>
Appreciation $20,379,035 $223,214 $29,320,504 $12,537,716
Depreciation 1,226,531 7,754 744,421 166,256
</TABLE>
Note 5. CASH
As of December 31, 1997, substantially all cash was
invested in the Monitor Money Market Fund, bearing interest at a
variable rate (approximately 5.2%).
Note 6. CAPITAL LOSS CARRYOVERS
For 1997, the Company utilized $127,785, $1,070 and $929,733
of capital loss carryovers in the Equity Growth, Bond
and Retirement Income Funds respectively. At December 31, 1997,
capital loss carryovers and their expiration dates were as follows:
<TABLE>
<CAPTION>
Retirement
Income
------
<S> <C>
December 31, 2004 $41,220
</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 four
portfolios has 200 million shares authorized.
51
<PAGE>
Report of Independent Accountants
To the Trustees and Shareholders of
Advance Captial I, Inc.
In our opinion, the accompaning 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, and Retirement Income Fund (constituting
Advance Captial I, Inc., hereafter referred to as the "Company")
at December 31, 1997, the results of each of their operations for
the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial
highlights for each of their net assets for each of the two years
in the period then ended and the financial highlights for each of
the three years in the period 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 audits. We conducted our audits
in accordance with gennerally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31,
1997 by correspondence with the custodian and brokers, provides a
reasonable basis for the opinion expressed above. The financial
statements of Advance Captial I, Inc. for the years ended December
31, 1994 and 1993 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 4, 1998
52
<PAGE>
ADDITIONAL INFORMATION (Unaudited)
RESULTS OF ANNUAL SHAREHOLDER VOTE
An Annual Meeting of Shareholders of the COMPANY was held
at the Novi Hilton, 21111 Haggerty Road, Novi, Michigan,
on July 25, 1997 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 16,341,683
Richard W. Holtcamp 16,205,318
Harry Kalajian 16,314,374
John C. Shoemaker 16,336,172
Frank R. Zimmerman 16,281,470
</TABLE>
2. To ratify the selection of Price Waterhouse LLP as
independent accountants of the COMPANY for the fiscal year
ending December 31,1997.
<TABLE>
<S> <C>
Votes For: 16,318,398
Votes Against: 25,691
Votes to Abstain: 99,115
</TABLE>
53
<PAGE>
ADVANCE CAPTIAL I, INC. ADVANCE CAPTIAL I INC
An investment company with four funds
INVESTMENT ADVISER:
Advance Capital Management, Inc.
One Towne Square, Suite 444
Southfield, Michigan 48076
SUB-ADVISER:
(Equity Growth and Balanced Funds) EQUITY GROWTH FUND
T. Rowe Price Associates, Inc. BOND FUND
100 East Pratt Street BALANCED FUND
Baltimore, Maryland 21202 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 National Bank
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, 1997
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, 1997.
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 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 National Bank dated June 17, 1992
for Class A, Class B and Class C and August 5, 1992
for 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 March 10, 1998 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 March 10, 1998
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Class A 1,730
Class B 103
Class C 1,346
Class E 1,323
</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 National Bank, 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. 21 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 4/14/98
----------------------------------------- -------
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 4/14/98
- --------------------------------------------- -------
John C. Shoemaker - President and Director Date
Principal Financial Officer:
\s\ Robert J. Cappelli 4/14/98
- --------------------------------------------- -------
Robert J. Cappelli - Treasurer Date
Directors:
\s\ Joseph A. Ahern 3/30/98
- --------------------------------------------- -------
Joseph A. Ahern Date
\s\ Richard W. Holtcamp 3/30/98
- --------------------------------------------- -------
Richard W. Holtcamp Date
\s\ Harry Kalajian 3/31/98
- --------------------------------------------- -------
Harry Kalajian Date
\s\ Frank R. Zimmerman 4/06/98
- --------------------------------------------- -------
Frank R. Zimmerman Date
<PAGE>
[Berry Moorman Letterhead]
Detroit Office
April 15, 1998
Ms. Julie Katynski
Advance Capital
1 Towne Square
Suite 444
Southfield, MI 48076
Dear Ms. Katynski:
We hereby consent to the reference to our firm's name as legal
counsel to Advance Capital I, Inc. included in the April 20, 1998
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. 21 to the registration statement on Form N-1A
(the "Registration Statement") of our report dated February 4,
1998, relating to the financial statements and financial
highlights of Advance Capital I, Inc., which appears in such
Statement of Additional Information, and to the incorporation
by reference of our report into the Prospectus which constitutes
part of this Registration Statement. We also consent to the
reference to us under the heading "Independent Accountants"
in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights"
in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
April 15, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> EQUITY GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 35,201,014
<INVESTMENTS-AT-VALUE> 54,353,518
<RECEIVABLES> 24,057
<ASSETS-OTHER> 4,046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,381,621
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,393
<TOTAL-LIABILITIES> 49,393
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35,179,724
<SHARES-COMMON-STOCK> 3,150,443
<SHARES-COMMON-PRIOR> 2,633,924
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,152,504
<NET-ASSETS> 54,332,228
<DIVIDEND-INCOME> 210,189
<INTEREST-INCOME> 24,600
<OTHER-INCOME> 0
<EXPENSES-NET> 505,219
<NET-INVESTMENT-INCOME> (270,430)
<REALIZED-GAINS-CURRENT> 356,554
<APPREC-INCREASE-CURRENT> 7,883,116
<NET-CHANGE-FROM-OPS> 7,969,240
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 228,769
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 774,840
<NUMBER-OF-SHARES-REDEEMED> 271,579
<SHARES-REINVESTED> 13,258
<NET-CHANGE-IN-ASSETS> 15,565,335
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (127,785)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 331,108
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 505,219
<AVERAGE-NET-ASSETS> 47,015,303
<PER-SHARE-NAV-BEGIN> 14.72
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.25
<EXPENSE-RATIO> 1.07
<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-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,923,812
<INVESTMENTS-AT-VALUE> 4,139,272
<RECEIVABLES> 69,572
<ASSETS-OTHER> 1,516
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,210,360
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,365
<TOTAL-LIABILITIES> 7,365
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,987,535
<SHARES-COMMON-STOCK> 399,375
<SHARES-COMMON-PRIOR> 427,193
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 215,460
<NET-ASSETS> 4,202,995
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 305,052
<OTHER-INCOME> 0
<EXPENSES-NET> 23,047
<NET-INVESTMENT-INCOME> 282,005
<REALIZED-GAINS-CURRENT> 38,190
<APPREC-INCREASE-CURRENT> 64,390
<NET-CHANGE-FROM-OPS> 384,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 282,005
<DISTRIBUTIONS-OF-GAINS> 37,120
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64,974
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<NAME> BALANCED FUND
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<NAME> RETIREMENT INCOME FUND
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