<PAGE>
AHA INVESTMENT FUNDS, INC.
Semi-Annual Report to Shareholders
As of December 31, 1997
<PAGE>
Contents
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PAGE
PORTFOLIO OF INVESTMENTS 1
FULL MATURITY FIXED INCOME PORTFOLIO
LIMITED MATURITY FIXED INCOME PORTFOLIO
DIVERSIFIED EQUITY PORTFOLIO
BALANCED PORTFOLIO
FINANCIAL STATEMENTS 33
NOTES TO FINANCIAL STATEMENTS 37
- -------------------------------------------------------------------------------
i 12/31/97
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
- -----------
LONG-TERM OBLIGATIONS 92.8% MARKET VALUE
- --------------------- -------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 57.3%
- --------------------------------------
<S> <C> <C>
United States Treasury Bonds Stripped
$ 700,000 0.000% 02/15/20 effective yield 6.25% $ 184,895
United States Treasury Bonds
4,475,000 9.250% 02/15/16 6,070,619
3,559,000 6.625% 02/15/27 3,863,743
100,000 6.125% 11/15/27 102,781
United States Treasury Notes
350,000 7.750% 12/31/99 363,782
400,000 5.625% 11/30/00 399,375
2,010,000 6.625% 03/31/02 2,075,954
616,000 6.500% 05/31/02 634,288
530,000 5.875% 09/30/02 533,313
470,000 5.750% 10/31/02 470,734
200,000 5.750% 11/30/02 200,250
695,000 5.750% 08/15/03 695,869
1,930,000 6.625% 05/15/07 2,043,991
60,000 6.125% 08/15/07 61,688
United States Treasury Inflation Index
1,499,238 3.375% 01/15/07 1,460,822
Federal Home Loan Mortgage Corporation
165,424 8.750% 04/01/09 169,217
81,042 10.500% 01/01/10 89,761
355,361 9.300% 04/15/19 375,831
700,000 7.000% 06/15/21 710,201
1,390,000 7.000% 09/15/21 1,405,726
416,620 7.000% 05/01/24 422,524
458,939 6.500% 03/01/26 454,313
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
1
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- --------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (CONTINUED)
- ---------------------------------------------------
<S> <C> <C>
Federal National Mortgage Association
(mortgage-backed securities)
$ 300,000 7.500% 03/25/03 $ 308,750
774,825 9.500% 07/25/19 833,157
589,924 7.600% 11/25/19 607,049
900,000 7.000% 04/25/20 911,014
632,519 6.500% 09/25/20 628,702
502,763 7.500% 09/25/20 507,798
761,197 8.500% 09/25/20 795,732
713,309 7.000% 10/25/20 721,889
1,508,599 7.000% 01/25/21 1,518,050
800,000 8.000% 02/25/21 829,494
787,063 8.500% 09/25/21 825,717
279,745 9.500% 02/01/25 302,328
600,000 6.500% 01/01/28 592,686
4,340,000 7.000% 01/01/28 4,372,550
900,000 7.500% 01/01/28 921,375
Government National Mortgage Association
(mortgage-backed securities)
393,422 9.500% 12/15/17 432,387
380,000 6.500% 01/01/27 376,200
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 38,274,555
ASSET BACKED OBLIGATIONS 14.3%
- --------------------------
AT&T Universal Card Master
272,000 5.950% 10/17/00 272,068
Advanta Credit Card Master Trust
675,000 6.050% 08/01/03 Series 1995-F 676,897
Asset Security Corporation
195,543 7.100% 08/13/29 Series 1996-D 201,537
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
2
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- -------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
ASSET BACKED OBLIGATIONS (CONTINUED)
- ------------------------------------
<S> <C> <C>
Banc One Credit Card Trust
$ 650,000 6.300% 09/15/00 Series 1995-B $ 655,896
Capital Equipment Trust
600,000 6.280% 06/15/00 Series 1996-1 603,222
Chase Commingled Mortgage Security
508,000 7.370% 02/19/07 Series 1995-2 532,450
Chevy Chase Home Loan
457,853 7.150% 05/15/15 Series 1996-1 464,542
First Chicago Master Trust
600,000 7.150% 02/15/00 Series 1994-L 610,014
Ford Motor Credit Company
180,000 7.700% 05/15/97 Series 1995-A 199,378
796,964 7.300% 10/15/99 Series 1994-B 800,622
500,000 6.500% 08/15/00 Series 1995-A 505,860
250,000 9.500% 09/15/11 Series 1996-A 316,723
Green Tree Financial Corporation
395,646 6.900% 02/15/04 399,927
315,276 7.850% 07/15/04 324,472
Nomura Asset Securities Corporation
200,000 7.120% 04/13/36 Series 1996-M 208,656
Premier Auto Trust
228,630 4.900% 12/15/98 Series 1993-30A 228,822
Resolution Trust Corporation
472,696 6.674% 04/25/22 Series 1992-9 469,240
334,277 7.500% 08/25/23 Series 1992-1 337,487
500,024 7.015% 06/25/24 504,400
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
3
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- ------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ---------------------------------
ASSET BACKED OBLIGATIONS (CONTINUED)
- --------------------------------------
<S> <C> <C>
Rural Housing Trust
$ 98,918 3.330% 04/01/26 Series 1987-1 $ 94,793
Student Loan Marketing Association
1,100,000 5.690% 04/25/06 1,098,625
Standard Credit Card Trust Series 1993-2
65,000 8.250% 11/07/01 69,369
---------
TOTAL ASSET BACKED OBLIGATIONS 9,575,000
CORPORATE OBLIGATIONS 21.2%
- ----------------------
BANKS 2.0%
- ------
Chase Manhattan Bank
610,000 8.500% 02/15/02 659,077
National Bank of Detroit
220,000 8.250% 11/01/24 261,234
NCNB Corporation
325,000 10.200% 07/15/15 437,147
---------
1,357,458
CHEMICAL 0.4%
- ---------
Rohm & Haas
250,000 9.500% 04/01/21 286,315
COMMUNICATION 1.3%
- -------------
Continental Cablevision Incorporated
200,000 8.875% 09/15/05 225,074
200,000 9.000% 09/01/08 233,029
325,000 9.500% 08/01/13 387,750
--------
845,853
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
4
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ------------ -------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
- -----------------------------------
DISTRIBUTION 0.6%
- ----------------
<S> <C> <C>
Federal Express
$ 300,000 9.650% 06/15/12 $ 386,593
FINANCIAL 6.0%
- ----------
Auburn Hills Trust
280,000 12.000% 05/01/20 452,218
British Aerospace Financial
650,000 7.500% 07/01/27 697,139
GEICO Corporation
125,000 9.150% 09/15/21 142,091
General Motors Acceptance Corporation
800,000 0.000% 06/15/15 effective yield 6.35% 250,052
227,000 9.625% 05/15/00 244,484
JPM Capital Trust
50,000 7.950% 02/01/27 53,514
Lehman Brothers Incorporated
375,000 11.625% 05/15/05 480,055
Paine Webber Incorporated
150,000 6.730% 01/20/04 150,902
Security Pacific Corporation
200,000 11.000% 03/01/01 226,956
Western Mortgage Financial
750,000 6.360% 08/26/20 769,538
Zurich Capital Trust
500,000 8.376% 06/01/37 548,290
---------
4,015,239
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
5
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- -------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ---------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
- -----------------------------------
INDUSTRIAL 1.6%
- ----------
<S> <C> <C>
Caterpillar Incorporated
$ 1,000,000 9.750% 06/01/19 $ 1,083,215
PAPER 0.6%
- -----
Georgia Pacific Corporation
75,000 9.875% 11/01/21 84,167
200,000 9.625% 03/15/22 228,957
50,000 9.500% 05/15/22 56,892
------------
370,016
RAILROAD 1.8%
- --------
Hocking Valley Railway
670,000 4.500% 07/01/99 654,889
Louisville & Nashville Railroad
600,000 3.375% 04/01/03 517,053
------------
1,171,942
RETAIL STORES 1.0%
- ---------------
Dayton Hudson Corporation
286,000 10.000% 01/01/11 367,319
J.C. Penney Incorporated
250,000 9.750% 06/15/21 279,705
------------
647,024
TELECOMMUNICATION 0.4%
- -----------------
TCI Communications Incorporated
220,000 8.750% 08/01/15 254,692
UTILITIES 1.6%
- ----------
Commonwealth Edison
250,000 9.875% 06/15/20 292,212
Long Island Lighting Financial
400,000 9.625% 07/01/24 412,628
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
6
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- ------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
- -----------------------------------
UTILITIES (CONTINUED)
- ----------------------
<S> <C> <C>
System Energy Resources
$ 370,352 7.430% 01/15/11 $ 374,377
----------
1,079,217
MISCELLANEOUS 0.9%
- --------------
News American Holdings
100,000 8.250% 10/17/96 110,712
400,000 8.875% 04/26/23 476,946
----------
587,658
INTERNATIONAL 3.0%
- -------------
Hydro-Quebec
800,000 11.750% 02/01/12 1,171,320
Korea Development Bank
95,000 7.125% 09/17/01 80,939
Korea Electric Power
95,000 7.750% 04/01/13 67,026
75,000 6.750% 08/01/27 56,156
Midland Bank
375,000 6.950% 03/15/11 382,500
National Bank Hungry
75,000 8.875% 11/01/13 85,809
Pohang Iron & Steel
65,000 7.125% 07/15/04 46,608
Wharf Capital International
175,000 7.625% 03/13/07 165,232
----------
2,055,590
TOTAL CORPORATE OBLIGATIONS 14,140,812
----------
TOTAL LONG-TERM OBLIGATIONS (COST $60,469,211) 61,990,367
----------
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
7
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- ------------
SHORT-TERM OBLIGATIONS 18.5%
- -----------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 0.3%
- --------------------------------------
<S> <C> <C>
U.S. Treasury Bills
(A) $ 200,000 5.523% 03/05/98 $ 198,236
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 198,236
DEMAND NOTES 18.2%
- -------------
American Family Demand Note
3,295,079 5.639% 12/31/31 3,295,079
General Mills Demand Note
477,145 5.327% 12/31/31 477,145
Johnson Controls Demand Note
2,451,724 5.327% 12/31/31 2,451,724
Pitney Bowes Demand Note
716,217 5.327% 12/31/31 716,217
Sara Lee Demand Note
609,000 5.322% 12/31/31 609,000
Warner Lambert Demand Note
2,818,164 5.489% 12/31/31 2,818,164
Wisconsin Electric Demand Note
1,787,732 5.488% 12/31/31 1,787,732
----------
TOTAL DEMAND NOTES 12,155,061
----------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST $12,353,297) 12,353,297
----------
TOTAL INVESTMENTS
(COST BASIS $72,822,508) 111.3% 74,343,664
CASH AND OTHER ASSETS, LESS
LIABILITIES (11.3%) (7,530,593)
----------
TOTAL NET ASSETS 100.0% $ 66,813,071
----------
----------
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
8
<PAGE>
FULL MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
(A) $100,000 OF U.S. TREASURY BILLS PLEDGED AS MARGIN FOR FUTURES
CONTRACTS. THE PORTFOLIO HAD THE FOLLOWING OPEN FUTURES CONTRACTS
AT DECEMBER 31, , 1997:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS:
UNREALIZED
NUMBER OF PRINCIPAL GAINS (LOSSES)
TYPE CONTRACTS AMOUNT POSITION EXPIRATION DECEMBER 31, 1997
------ --------- ------- -------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
5 Year Treasury Notes 5 5,000 Short March 1998 ($2,581)
10 Year U.S. Treasury Notes 17 17,000 Short March 1998 (1,190)
Bond Futures 12 12,000 Short March 1998 (12,255)
----------
($16,026)
----------
----------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
9
<PAGE>
LIMITED MATURITY FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
LONG-TERM OBLIGATIONS 98.1% MARKET VALUE
- --------------------- ------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 60.1%
- --------------------------------------
<S> <C> <C>
United States Treasury Notes
$ 11,545,000 5.125% 12/31/98 $ 11,494,501
2,280,000 5.000% 02/15/99 2,264,327
8,795,000 5.875% 03/31/99 8,822,492
4,334,000 6.250% 03/31/99 4,366,509
4,740,000 6.375% 05/15/99 4,784,442
2,575,000 6.000% 06/30/99 2,588,681
3,935,000 6.875% 08/31/99 4,010,013
4,610,000 7.875% 11/15/99 4,788,642
4,805,000 5.625% 11/30/99 4,802,001
9,335,000 7.750% 01/31/00 9,711,321
551,000 6.875% 03/31/00 564,947
1,636,000 5.750% 10/31/00 1,638,557
Federal Home Loan Mortgage Corporation
941,557 6.000% 07/01/01 936,378
Federal National Mortgage Association
(mortgage-backed securities)
880,000 5.280% 03/01/99 875,256
500,000 5.830% 11/12/99 500,307
1,900,000 6.200% 06/06/00 1,915,933
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 64,064,307
ASSET BACKED OBLIGATIONS 8.9%
- --------------------------
Chase Credit Card Master Trust
2,100,000 6.300% 04/15/03 Series 1997-2 2,118,711
Chase Manhattan Grantor
860,000 6.730% 02/15/02 Series 1996-4 869,314
Navistar Financial
2,210,000 6.330% 04/21/03 1996-B 2,225,183
Premier Auto Trust
1,230,000 6.340% 01/06/02 1997-3 1,239,438
The accompanying notes to the financial statements are an integral part of this
schedule.
10
<PAGE>
LIMITED MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- -------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
ASSET BACKED OBLIGATIONS (CONTINUED)
- ------------------------------------
<S> <C> <C>
Toyota Auto Lease Trust
$ 1,100,000 6.350% 04/26/04 1997A $ 1,109,078
Western Financial Grantor Trust
650,000 6.400% 07/20/02 651,923
World Omni Auto Lease
1,300,000 6.850% 06/25/03 1997-A 1,311,193
-----------
TOTAL ASSET BACKED OBLIGATIONS 9,524,840
CORPORATE OBLIGATIONS 29.1%
- ----------------------
COMPUTER & OFFICE EQUIPMENT 1.9%
- ---------------------------
International Business Machines Corporation
2,000,000 6.375% 06/15/00 2,015,678
FINANCIAL 21.0%
- ----------
Associates Corporation
2,050,000 6.680% 09/17/99 2,070,535
700,000 7.450% 03/30/00 719,014
Caterpillar Financial Service
670,000 6.110% 07/15/99 670,791
1,400,000 6.320% 09/01/00 1,407,075
Chrysler Financial Corporation
1,500,000 6.375% 01/28/00 1,512,212
Citicorp Capital
1,570,000 6.650% 05/15/00 1,584,558
Commercial Credit
2,100,000 6.750% 05/15/00 2,127,699
Ford Credit Grantor Trust
2,000,000 7.900% 05/17/99 Series 1996-1 2,050,662
525,000 7.470% 07/29/99 Series 1996-1 536,649
810,000 7.600% 03/29/00 Series 1996-1 836,075
The accompanying notes to the financial statements are an integral part of this
schedule.
11
<PAGE>
LIMITED MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- --------- -------------
LONG-TERM OBLIGATIONS (CONTINUED)
- ----------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
- ----------------------------------
FINANCIAL (CONTINUED)
- -----------------------
<S> <C> <C>
General Motors Acceptance Corporation Grantor Trust
$ 430,000 6.450% 04/15/99 $ 431,910
1,150,000 7.375% 06/09/99 1,170,027
Household Financial Corporation
2,300,000 6.250% 04/01/99 2,303,238
International Lease Financial Corporation
1,000,000 6.600% 07/06/99 1,008,412
Norwest Financial Corporation
2,050,000 7.250% 03/15/00 2,100,192
Travelers/Aetna P&C
1,780,000 6.750% 09/01/99 1,801,356
-----------
22,330,405
RETAIL STORES 6.2%
- -------------
J.C. Penney Incorporated
1,750,000 6.950% 04/01/00 1,782,256
1,600,000 6.375% 09/15/00 1,612,122
Walmart Stores
3,000,000 9.100% 07/15/00 3,215,910
-----------
6,610,288
TOTAL CORPORATE OBLIGATIONS 30,956,371
-----------
TOTAL LONG-TERM OBLIGATIONS
(COST $104,006,063) 104,545,518
-----------
The accompanying notes to the financial statements are an integral part of this
schedule.
12
<PAGE>
LIMITED MATURITY FIXED INCOME PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- ------------
SHORT-TERM OBLIGATIONS 2.7%
- ----------------------
COMMERCIAL PAPER 2.7%
- -------------------
<S> <C> <C>
American Express Credit Corporation
$ 2,450,000 5.500% 01/02/98 $ 2,449,561
402,000 6.100% 01/05/98 401,732
------------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST $2,851,293) 2,851,293
------------
TOTAL INVESTMENTS
(COST BASIS $106,857,356) 100.8% 107,396,811
Cash and Other Assets, Less
Liabilities -0.8% (850,291)
------------
TOTAL NET ASSETS 100.0% $ 106,546,520
------------
------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
13
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
EQUITIES 98.1% MARKET VALUE
- -------- --------------
<S> <C> <C>
AEROSPACE & DEFENSE 0.3%
- --------------------
300 General Dynamics Corporation $ 25,931
800 Lockheed Martin Corporation 78,800
1,357 Raytheon Company 68,104
300 Textron Incorporated 11,906
------------
184,741
AUTOMOTIVE 4.0%
- --------------
200 Aeroquip-Vickers, Incorporated 9,813
600 Autozone Incorporated 17,400
2,700 Chrysler Corporation 95,006
600 Cummins Engine 35,438
300 Eaton Corporation 26,775
22,300 Ford Motor Company 1,085,731
5,600 General Motors Corporation 339,500
700 Genuine Parts Company 23,756
25,000 Lear Corporation 1,187,500
------------
2,820,919
BANKS 6.7%
- ------
1,500 Bank of New York Corporation 86,719
8,700 BankAmerica Corporation 635,100
600 Bank Boston Corporation 56,363
400 Bankers Trust New York 44,975
900 Barnett Banks Incorporated 64,688
1,700 Chase Manhattan 186,150
10,100 Citicorp 1,277,019
40,700 Corporation Bancaria Espana ADR 1,243,894
200 Golden West Financial 19,563
1,200 First Chicago NBD Corporation 100,200
2,300 First Union Corporation 117,875
1,100 Fleet Financial Group, Incorporated 82,431
6,300 NationsBank Corporation 383,119
3,100 Norwest Corporation 119,738
1,300 PNC Financial Corporation 74,181
200 Republic New York Corporation 22,838
900 Sun Trust Banks, Incorporated 64,238
800 U.S Bancorp 89,550
1,100 Washington Mutual, Incorporated 70,194
------------
4,738,835
The accompanying notes to the financial statements are an integral part of this
schedule.
14
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
EQUITIES (CONTINUED) MARKET VALUE
- -------------------- -------------
<S> <C> <C>
BASIC INDUSTRIES 0.4%
- -----------------
300 Asarco Incorporated $ 6,731
1,000 Alcan Aluminum Ltd. 27,625
200 Crane Company 8,675
1,700 3M Company 139,506
1,200 Phelps Dodge 74,700
------------
257,237
BUSINESS SERVICE 4.0%
- -----------------
17,200 Autodesk Incorporated 636,400
4,700 Computer Associates International Incorporated 248,513
36,300 Moore Corporation 549,038
200 National Service Ind. Incorporated 9,913
35,200 Wallace Computer Services Incorporated 1,368,400
------------
2,812,264
CHEMICALS 1.9%
- ----------
4,400 Dow Chemical Company 446,600
300 Eastman Chemical Company 17,869
12,000 E.I. duPont de Nemours and Company 720,750
400 Hercules 20,025
500 Morton International Incorporated 17,188
900 PPG Industries 51,413
300 Rohm & Haas Company 28,725
200 Safety Kleen 5,488
400 Sigma-Aldrich Corporation 15,900
------------
1,323,958
COMMUNICATION 0.9%
- --------------
500 Interpublic Group Companies 24,906
5,000 New York Times 330,625
4,750 Compaq Computers Corporation 268,078
------------
623,609
COMPUTERS & OFFICE EQUIPMENT 7.1%
- -----------------------------
300 Adobe Systems Incorporated 12,375
50,001 Astra ADR 859,392
The accompanying notes to the financial statements are an integral part of this
schedule.
15
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
EQUITIES (CONTINUED) MARKET VALUE
- -------------------- -------------
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT (CONTINUED)
- -----------------------------------------
20,100 International Business Machines Corporation $ 2,101,706
110,000 Novell 825,000
600 Pitney Bowes Incorporated 53,963
1,000 Seagate Technology Incorporated 19,250
15,500 Xerox Corporation 1,144,094
------------
5,015,780
CONSTRUCTION 1.0%
- ---------------
300 Johnson Controls 14,325
14,200 Masco Corporation 722,425
------------
736,750
CONSUMER DURABLES 0.1%
- ------------------
200 Armstrong World Industry 14,950
400 Maytag Corporation 14,925
300 Snap-on Tools, Incorporated 13,088
------------
42,963
CONSUMER NON-DURABLES 2.7%
- -------------------------
22,300 American Greetings Company 872,488
500 Avon Products Incorporated 30,688
14,300 Bandag Incorporated 764,156
400 Clorox 31,625
1,200 Colgate Palmolive Company 88,200
1,100 Warner-Lambert Company 136,400
------------
1,923,557
CONTAINER 3.0%
- ----------
200 Bemis Company 8,813
22,000 Crown Cork & Seal 1,102,750
27,000 Owens Illinois Incorporated* 1,024,313
------------
2,135,876
The accompanying notes to the financial statements are an integral part of this
schedule.
16
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- -------------------- --------------
<S> <C> <C>
ELECTRONICS 4.7%
- -------------
22,100 AMP Incorporated $ 928,200
5,000 General Electric Company 366,875
200 Grainger WW Incorporated 19,438
15,300 Intel Corporation 1,074,825
38,000 Vishay Intertechnology Incorporated 897,750
------------
3,287,088
ENERGY & RELATED (RAW MATERIALS) 0.1%
- ---------------------------------
1,400 Occidental Petroleum Corporation 41,038
ENTERTAINMENT & LEISURE 0.7%
- ------------------------
4,600 Brunswick Corporation 139,438
3,100 King World Productions Incorporated 179,025
2,800 McDonalds Corporation 133,700
1,200 Service Corporation International 44,325
500 Wendys International 12,031
------------
508,519
FINANCIAL COMPANY 2.0%
- ------------------
400 Ahmanson H.F. & Company 26,775
2,100 American Express Company 187,425
4,200 Merrill Lynch Company 306,338
900 National City Corporation 59,175
16,034 Travelers Group Incorporated 863,832
------------
1,443,545
FINANCIAL SERVICE 4.0%
- ------------------
800 Conseco Incorporated 36,350
20,600 Equifax 730,013
18,000 Fannie Mae 1,027,125
400 MBIA Corporation 26,725
3,970 Morgan Stanley Group Incorporated 234,726
15,500 Student Loan Corporation 765,313
------------
2,820,252
The accompanying notes to the financial statements are an integral part of this
schedule.
17
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- ---------------------- --------------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO 5.3%
- -----------------------------
18,500 Adolph Coors $ 615,125
13,500 Anheuser-Busch Companies, Incorporated 594,000
300 Brown Foreman Class B 16,575
500 Coca-Cola Company 33,313
20,800 Conagra Incorporated 682,500
700 Fortune Brands Incorporated 25,944
700 Loews Companies 33,381
41,500 McCormick and Company 1,162,000
700 Sysco Corporation 31,894
20,300 Whitman Corporation 529,069
------------
3,723,801
GOLD & PRECIOUS METALS 0.1%
- ------------------------
400 Cyprus Amax Mineral Company 6,150
2,900 Freeport McMoran Copper 45,675
------------
51,825
HEALTH CARE 7.5%
- -------------
13,200 Abbott Labs Company 865,425
6,300 American Home Products Corporation 481,950
20,100 Baxter International Incorporated 1,013,794
6,800 Bristol Meyers/ Squibb 643,450
5,500 Johnson & Johnson 362,313
4,500 Lilly Eli & Company 313,313
4,900 Merck & Company 520,625
5,300 Pfizer Incorporated 395,181
6,300 Schering Plough Corporation 391,388
10,000 St. Jude Medical * 305,000
------------
5,292,439
INSURANCE 2.2%
- -----------
7,001 Allstate Corporation 636,216
5,250 American International Group Incorporated 570,938
600 CIGNA Corporation 103,838
300 General Re Corporation 63,600
The accompanying notes to the financial statements are an integral part of this
schedule.
18
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- ------------------- --------------
<S> <C> <C>
INSURANCE (CONTINUED)
- -----------------------
300 Jefferson Pilot $ 23,363
400 Lincoln National Corporation 31,250
400 Providian Financial Corporation 18,075
600 Safeco Corporation 29,250
300 St. Paul Companies 24,619
600 Torchmark Corporation 25,238
300 Transamerica Corporation 31,950
------------
1,558,337
METAL & MINERAL 2.4%
- ---------------
700 Allegheny Teledyne Incorporated 18,113
24,800 Inland Steel Industries 424,700
25,000 Minerals Technologies, Incorporated 1,135,938
3,300 USX- US Steel 103,125
------------
1,681,876
PAPER & FOREST PRODUCTS 2.3%
- ------------------------
59,000 Asia Pulp & Paper Company * 593,688
400 Georgia Pacific Company 24,300
15,276 International Paper 658,778
4,400 Kimberly Clark 216,975
400 Mead Corporation 11,200
100 Potlatch Corporation 4,300
200 Temple Inland 10,463
300 Union Camp Corporation 16,106
400 Westvaco Corporation 12,575
1,200 Weyerhaeuser Company 58,875
------------
1,607,260
PETROLEUM 10.2%
- ----------
9,500 Amoco Corporation 808,688
5,700 Atlantic Richfield 456,713
300 Columbia Gas System, Incorporated 23,569
35,400 Falcon Drilling Company Incorporated 1,241,213
400 Exxon Corporation 24,475
3,600 Mobil Corporation 259,875
The accompanying notes to the financial statements are an integral part of this
schedule.
19
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- -------------------- -------------
<S> <C> <C>
PETROLEUM (CONTINUED)
- ----------------------
1,100 Phillips Petroleum Company $ 53,488
12,000 Texaco 652,500
30,000 Transocean Offshore, Incorporated 1,445,625
5,500 USX Marathon Group 185,625
46,000 Western Gas Resource, Incorporated 1,017,750
30,000 YPF S.A. ADR 1,025,625
------------
7,195,146
POLLUTION CONTROL 0.8%
- ------------------
19,500 Waste Management Incorporated 536,250
PRINTING & PUBLISHING 1.5%
- ----------------------
39,500 Journal Register Company 829,500
3,400 McGraw Hill Company 251,600
------------
1,081,100
RAILROADS 0.7%
- ----------
600 Burlington Northern Incorporated 55,763
2,800 CSX Corporation 151,200
8,400 Norfolk Southern Company 258,825
------------
465,788
RESTAURANTS 1.5%
- ------------
87,000 Darden Restaurants, Incorporated 1,087,500
RETAIL STORES 5.1%
- ----------------
1,000 Albertson's Incorporated 47,375
4,200 Dayton Hudson Corporation 283,500
400 Dillard's Incorporated 14,100
900 Federated Department Stores 38,756
200 Jostens 4,613
2,300 K Mart 26,594
1,000 Kroger 36,938
1,000 May Department Stores 52,688
The accompanying notes to the financial statements are an integral part of this
schedule.
20
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- -----------
EQUITIES (CONTINUED) MARKET VALUE
- --------------------- --------------
<S> <C> <C>
RETAIL STORES (CONTINUED)
- --------------------------
200 Mercantile Stores Company $ 12,175
48,000 Office Depot 1,149,000
6,200 Sears Roebuck & Company 280,550
1,300 Supervalu Incorporated 54,438
43,100 The Limited LTD. 1,099,050
1,300 TJX Cos Incorporated 44,688
1,100 Toys R Us Incorporated 34,581
9,300 Wal-Mart Stores Incorporated 366,769
600 Woolworth Corporation 12,225
-----------
3,558,040
SERVICES 3.1%
- ---------
14,300 Caterpillar Incorporated 694,443
200 Cincinnati Milacron Incorporated 5,188
21,900 Cooper Industries 1,073,100
650 Ingersoll Rand Company 26,325
6,100 John Deere & Company 355,706
300 Raychem 12,919
300 Timken Company 10,313
-----------
2,177,994
SOFTWARE 0.1%
- ---------
2,100 Sun Microsystems* 83,738
TECHNOLOGY 0.7%
- ----------
300 Harris Corporation 13,763
5,900 Hewlett-Packard Company 368,750
600 LSI Logic Corporation 11,850
900 Micron Technology Incorporated 23,400
1,000 Northern Telecom 89,000
-----------
506,763
The accompanying notes to the financial statements are an integral part of this
schedule.
21
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- --------------------- --------------
<S> <C> <C>
TELECOMMUNICATION 3.5%
- --------------------
26,700 Airtouch Communications $ 1,109,718
32,000 COMSAT Corporation 776,000
5,337 Lucent Technologies 426,293
2,500 Motorola Incorporated 142,656
600 National Semiconductor 15,563
300 Scientific Atlanta Incorporated 5,025
-----------
2,475,255
TEXTILE & APPAREL 0.1%
- -----------------
700 CVS Corporation 44,844
500 VF Corporation 22,969
-----------
67,813
TRAVEL & RECREATION 1.6%
- -------------------
30,000 Budget Group Incorporated 1,036,875
100 Fleetwood Enterprises 4,244
500 Marriott International 34,625
700 Mirage Resorts Incorporated 34,625
-----------
1,110,369
UTILITIES-ELECTRIC 0.6%
- ------------------
8,300 Consolidated Edison 340,300
500 General Public Utilities Corporation 21,063
1,200 Pacificorp 32,775
1,000 People's Energy Corporation 39,375
-----------
433,513
UTILITIES-ENERGY 0.5%
- ----------------
900 American Electric Power Company 46,463
500 Coastal Corporation 30,969
600 DTE Energy Company 20,813
3,500 Entergy Corporation 104,781
800 First Energy Corporation 23,200
800 FPL Group Incorporated 47,350
300 Pacific Enterprises 11,288
900 PECO Energy Company 21,825
1,600 PG&E Corporation 48,700
900 Unicom Corporation 27,675
-----------
383,064
The accompanying notes to the financial statements are an integral part of this
schedule.
22
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- --------------------- --------------
<S> <C> <C>
UTILITIES-TELEPHONE 4.0%
- --------------------
17,600 Ameritech Corporation $ 1,416,800
3,800 Bell Atlantic Corporation 345,800
500 DSC Communication Corporation 12,000
7,100 GTE Corporation 370,975
14,800 US West Incorporated 667,850
-----------
2,813,425
MISCELLANEOUS 0.7%
- --------------
700 Cognizant Corporation 31,194
7,700 Unilever 462,042
-----------
493,236
TOTAL COMMON STOCK (COST $54,896,205) 69,101,463
SHORT-TERM OBLIGATIONS 5.6%
- ----------------------
DEMAND NOTES 5.6%
- -------------
American Family Demand Note
940,703 5.639% 12/31/31 940,703
General Mills Demand Note
499,585 5.327% 12/31/31 499,585
Johnson Controls Demand Note
491,694 5.327% 12/31/31 491,694
Pitney Bowes Demand Note
332,134 5.327% 12/31/31 332,134
Warner Lambert Demand Note
1,521,843 5.489% 12/31/31 1,521,843
Wisconsin Electric Demand Note
139,254 5.487% 12/31/31 139,254
-----------
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST $3,925,213) 3,925,213
-----------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
23
<PAGE>
DIVERSIFIED EQUITY PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET VALUE
- ---------- --------------
<S> <C> <C>
TOTAL INVESTMENTS
(COST BASIS $58,821,418) 103.7% 73,026,676
CASH AND OTHER ASSETS, LESS
LIABILITIES (3.7%) (2,601,011)
-----------
TOTAL NET ASSETS 100.0% $ 70,425,665
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING STOCKS.
The accompanying notes to the financial statements are an integral part of
this schedule.
24
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES 65.1% MARKET VALUE
- ---------- ------------
<S> <C> <C>
AUTOMOTIVE 3.0%
- ----------
10,000 Ford Motor Company $ 584,250
22,700 Lear Seating Corporation * 1,078,250
-----------
1,662,500
BANKS 2.9%
- ------
4,700 Citicorp 594,256
33,000 Corp Bancaria Espana ADR 1,008,563
-----------
1,602,819
BUSINESS SERVICES 2.1%
- -----------------
30,500 Wallace Computer Services Incorporated 1,185,688
COMMUNICATION 0.6%
- -------------
5,000 New York Times 330,625
COMPUTERS & OFFICE EQUIPMENT 6.1%
- ----------------------------
45,500 Astra ADR 782,031
10,000 International Business Machines
Corporation 1,045,625
90,000 Novell 675,000
12,000 Xerox Corporation 885,750
-----------
3,388,406
CONSTRUCTION 1.6%
- -------------
17,000 Masco Corporation 864,875
CONSUMER NON-DURABLES 2.6%
- ---------------------
19,000 American Greetings Company 743,375
13,000 Bandag Incorporated 694,688
-----------
1,438,063
CONTAINER 3.2%
- -----------
20,000 Crown Cork & Seal 1,002,500
20,000 Owens Illinois Incorporated * 758,750
-----------
1,761,250
ELECTRONICS 3.4%
- ------------
24,500 AMP Incorporated 1,029,000
36,375 Vishay Intertechnology Incorporated 859,359
-----------
1,888,359
The accompanying notes to the financial statements are an integral part of this
schedule.
25
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- -----------
EQUITIES (CONTINUED) MARKET VALUE
- ------------------- ------------
<S> <C> <C>
FINANCIAL SERVICES 4.8%
- -------------------
30,000 Equifax $ 1,063,125
17,400 Fannie Mae 992,888
12,000 Student Loan Corporation 592,500
-----------
2,648,513
FOOD, BEVERAGES & TOBACCO 2.9%
- -------------------------
17,000 Anheuser-Busch Companies, Incorporated 748,000
30,800 McCormick and Company 862,400
-----------
1,610,400
HEALTH CARE 4.4%
- ------------
17,000 Abbott Labs 1,114,563
20,000 Baxter International Incorporated 1,008,750
10,500 St. Jude Medical* 320,250
-----------
2,443,563
INSURANCE 1.1%
- ---------
5,850 American International Group Incorporated 636,188
METAL & MINERAL 1.3%
- ---------------
15,300 Minerals Technologies, Incorporated 695,194
PAPER & FOREST PRODUCTS 0.9%
- ------------------------
50,000 Asia Pulp & Paper Company * 503,125
PETROLEUM 7.0%
- ------------
27,140 Falcon Drilling Company Incorporated 951,596
22,000 Transocean Offshore, Incorporated 1,060,125
38,000 Western Gas Resources, Incorporated 840,750
30,000 YPF S.A. ADR 1,025,625
-----------
3,878,096
POLLUTION CONTROL 1.7%
- -----------------
34,000 Waste Management Incorporated 935,000
The accompanying notes to the financial statements are an integral part of this
schedule.
26
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
EQUITIES (CONTINUED) MARKET VALUE
- -------------------- --------------
<S> <C> <C>
PRINTING & PUBLISHING 1.8%
- ---------------------
48,000 Journal Register Company $ 1,008,000
RESTAURANTS 1.8%
- ------------
80,000 Darden Restaurants, Incorporated 1,000,000
RETAIL STORES 3.6%
- --------------
47,500 Office Depot 1,137,031
34,000 The Limited LTD 867,000
-----------
2,004,031
SERVICES 1.8%
- ----------
20,700 Cooper Industries 1,014,300
TELECOMMUNICATION 2.9%
- -----------------
22,300 Airtouch Communications 926,844
28,500 COMSAT Corporation 691,125
-----------
1,617,969
TRAVEL & RECREATION 1.7%
- -------------------
27,000 Budget Group Incorporated 933,188
UTILITIES -TELEPHONE 1.9%
- --------------------
13,000 Ameritech Corporation 1,052,084
TOTAL COMMON STOCK (COST $26,880,584) 36,102,236
The accompanying notes to the financial statements are an integral part of this
schedule.
27
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
TOTAL LONG-TERM OBLIGATIONS 33.8% MARKET VALUE
- --------------------------- ------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 27.4%
- --------------------------------------
United States Treasury Bonds
$ 390,000 6.000% 02/15/26 $ 389,635
170,000 6.500% 11/15/26 181,528
3,187,000 6.625% 02/15/27 3,459,890
1,570,000 6.375% 08/15/27 1,655,860
United States Treasury Inflation Index
122,387 3.375% 01/15/07 119,251
United States Treasury Notes
320,000 6.000% 06/30/99 321,700
2,390,000 6.500% 05/31/02 2,460,954
300,000 5.875% 09/30/02 301,875
740,000 6.625% 05/15/07 783,707
40,000 6.125% 08/15/07 41,125
Federal Home Loan Mortgage Corporation
183,576 6.500% 03/01/26 181,725
Federal National Mortgage Association
332,092 9.000% 08/01/07 346,847
1,400,000 6.500% 01/01/28 1,382,934
2,400,000 7.000% 01/01/28 2,418,000
400,000 7.500% 01/01/28 409,500
Government National Mortgage Association
126,919 10.000% 12/15/20 139,435
Student Loan Marketing Association
570,000 5.690% 04/25/06 569,288
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 15,163,254
The accompanying notes to the financial statements are an integral part of this
schedule.
28
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
TOTAL LONG-TERM OBLIGATIONS (CONTINUED) MARKET VALUE
- --------------------------------------- ------------
<S> <C> <C>
ASSET BACKED OBLIGATIONS 2.9%
Chase Commingled Mortgage Security
$ 287,000 7.370% 02/19/07 $ 300,813
Chevy Chase Home Loan
200,000 7.150% 05/15/15 Series 1996-1 185,817
Ford Motor Company
180,000 7.700% 05/15/97 199,378
Green Tree Financial Corporation
171,944 6.900% 02/15/04 155,527
130,411 7.850% 07/15/04 119,834
Merrill Lynch Mortgage Investors
100,000 6.960% 11/21/28 Series 1996-C2 103,094
Nomura Asset Securities Corporation
70,000 7.120% 04/13/36 Series 1996-M 73,030
Resolution Trust Corporation
234,328 6.674% 04/25/22 Series 1992-9 232,615
250,012 7.015% 06/25/24 252,200
----------
TOTAL ASSET BACKED OBLIGATIONS 1,622,308
CORPORATE OBLIGATIONS 3.5%
- ---------------------
COMMUNICATION 0.2%
- -------------
Continental Cablevision Incorporated
100,000 9.000% 09/01/08 116,514
ELECTRIC 0.3%
- ---------
System Energy
134,252 7.430% 01/15/11 135,712
The accompanying notes to the financial statements are an integral part of this
schedule.
29
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ---------
TOTAL LONG-TERM OBLIGATIONS (CONTINUED) MARKET VALUE
- --------------------------------------- ------------
CORPORATE OBLIGATIONS (CONTINUED)
- ----------------------------------
<S> <C> <C>
FINANCIAL 2.0%
- -----------
British Aerospace Financial
$ 350,000 7.500% 07/01/27 $ 375,383
General Electric Capital Corporation
260,000 8.200% 10/30/03 290,478
General Motors Acceptance Corporation
250,000 0.000% 06/15/15 effective yield 6.54% 78,141
JPM Capital Trust
20,000 7.950% 02/01/27 21,405
Zurich Capital Trust
300,000 8.376% 06/01/37 328,974
----------
1,094,381
TELECOMMUNICATION 0.2%
- -----------------
TCI Communications Incorporated
20,000 8.750% 08/01/15 23,154
100,000 9.250% 01/15/23 112,384
----------
135,538
UTILITIES 0.4%
- ----------
Long Island Lighting
240,000 9.625% 07/01/24 247,577
MISCELLANEOUS 0.4%
- -------------
News American Holdings
200,000 8.875% 04/26/23 233,822
----------
TOTAL CORPORATE OBLIGATIONS 1,963,544
TOTAL LONG-TERM OBLIGATIONS
(COST $18,243,310) 18,749,106
----------
The accompanying notes to the financial statements are an integral part of this
schedule.
30
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
<CAPTION>
SHARES OR
PRINCIPAL
- ----------
SHORT-TERM OBLIGATIONS 15.5% MARKET VALUE
- ---------------------- --------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS 0.2%
- --------------------------------------
United States Treasury Bills
(A) $ 100,000 5.523% 03/05/98 $ 99,118
---------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 99,118
DEMAND NOTES 15.3%
- ------------
American Family Demand Note
1,438,266 5.256% 12/31/31 1,438,266
General Mills Demand Note
1,183,268 5.245% 12/31/31 1,183,268
Johnson Controls Demand Note
1,268,552 5.276% 12/31/31 1,268,552
Pitney Bowes Demand Note
126,033 5.255% 12/31/31 911,393
Sara Lee Demand Note
306,162 5.255% 12/31/31 306,162
Warner Lambert Demand Note
260,000 5.226% 12/31/31 2,861,785
Wisconsin Electric Demand Note
123,196 5.296% 12/31/31 510,000
---------
TOTAL DEMAND NOTES 8,479,426
TOTAL SHORT-TERM OBLIGATIONS
(AMORTIZED COST $8,578,544) 8,578,544
---------
TOTAL INVESTMENTS
(COST BASIS $53,702,438) 114.4% 63,429,886
CASH AND OTHER ASSETS, LESS
LIABILITIES (14.4%) (7,982,711)
-----------
TOTAL NET ASSETS 100.0% $ 55,447,175
-----------
-----------
</TABLE>
* Non-income producing stocks.
The accompanying notes to the financial statements are an integral part of this
schedule.
31
<PAGE>
BALANCED PORTFOLIO (CONTINUED)
PORTFOLIO OF INVESTMENTS
(A) $100,000 OF U.S. TREASURY BILLS PLEDGED AS MARGIN FOR FUTURES CONTRACTS.
THE PORTFOLIO HAD THE FOLLOWING OPEN FUTURES CONTRACTS AT DECEMBER 31, 1997:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS:
UNREALIZED
NUMBER OF PRINCIPAL GAINS (LOSSES)
TYPE CONTRACTS AMOUNT POSITION EXPIRATION DECEMBER 31, 1997
------ ------------ ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
5 Year Treasury Note 11 11,000 Long March 1998 $ 1,308
10 Year U.S. Treasury Notes 1 1,000 Short March 1998 (70)
Bond Futures 27 27,000 Long March 1998 (29,309)
-------
$28,071
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
32
<PAGE>
AHA INVESTMENT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FULL MATURITY LIMITED MATURITY DIVERSIFIED
FIXED INCOME FIXED INCOME EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at market value $ 74,343,664 $ 107,396,811 $ 73,026,676 $ 63,429,886
Receivable for investments sold 3,162,828 0 10,222,077 2,273,959
Cash 3,610 77,939 82,190 3,161
Dividends and interest receivable 822,423 1,428,218 97,645 307,148
Mark-to Market (13,609) 0 0 (19,703)
Prepaid Insurance 4,086 11,359 5,507 4,129
------------- ------------- ------------- -------------
Total Assets $ 78,323,002 $ 108,914,327 $ 83,434,095 $ 65,998,580
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investments purchased $ 9,170,340 $ 0 $ 6,174,336 $ 4,201,670
Payable for shares redeemed 2,320,247 2,325,072 6,821,737 6,323,667
Payable for dividends 164 11,327 0 1,688
Payable for options 3,000 0 0 0
Accrued expenses and other liabilities 16,180 31,408 12,357 24,380
------------- ------------- ------------- -------------
Total Liabilities 11,509,931 2,367,807 13,008,430 10,551,405
------------- ------------- ------------- -------------
NET ASSETS $ 66,813,071 $ 106,546,520 $ 70,425,665 $ 55,447,175
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net Assets consist of:
Capital Stock ($0.01 par value and 200
million shares authorized) and
Paid-in Capital $ 67,028,018 $ 109,352,226 $ 52,629,022 $ 44,564,543
Undistributed
net investment income 0 0 59,869 777,150
Accumulated net realized gain (loss)
on investments sold (1,736,103) (3,345,161) 3,531,516 378,034
Net unrealized appreciation of
investments and futures 1,521,156 539,455 14,205,258 9,727,448
------------- ------------- ------------- -------------
Total Net Assets $ 66,813,071 $ 106,546,520 $ 70,425,665 $ 55,447,175
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Number of Shares Outstanding
at the end of period 6,624,715 10,436,297 3,802,020 3,956,440
------------- ------------- ------------- -------------
NET ASSET VALUE
Per Share $ 10.09 $ 10.21 $ 18.52 $ 14.01
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The accompanying notes to the financial statements are an integral part of these statements.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
AHA INVESTMENT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FULL MATURITY LIMITED MATURITY DIVERSIFIED
FIXED INCOME FIXED INCOME EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,922,979 $ 3,622,122 $ 36,535 $ 634,047
Dividends 0 0 582,482 242,094
------------- ------------- ------------- -------------
Total investment income $ 1,922,979 $ 3,622,122 $ 619,017 $ 876,141
EXPENSES:
Custody fees $ 6,629 $ 10,444 $ 8,762 $ 13,081
Accounting fees 21,035 22,889 17,101 15,187
Transfer agent fees 4,883 9,656 6,067 4,727
Legal fees 6,794 6,794 6,794 6,794
Audit and tax return fees 6,088 6,088 6,088 6,088
Director fees and expenses 2,941 2,941 2,941 2,941
Officers and directors insurance 4,086 11,358 5,506 4,129
Administrative and other fees 534 530 534 1,545
------------- ------------- ------------- -------------
Total Expenses $ 52,990 $ 70,700 $ 53,793 $ 54,492
NET INVESTMENT INCOME $ 1,869,989 $ 3,551,422 $ 565,224 $ 821,649
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain
on investments sold 154,575 385,536 10,201,608 4,462,829
Net realized (loss) on
closed futures and options contracts (56,635) 0 0 (192,221)
Net change in unrealized
(depreciation) of investments, futures
and options 1,567,239 221,822 (2,003,380) 957,052
------------- ------------- ------------- -------------
NET GAIN ON INVESTMENTS 1,665,179 607,358 8,198,228 5,227,660
------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPTIONS $ 3,535,168 $ 4,158,780 $ 8,763,452 $ 6,049,309
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The accompanying notes to the financial statements are an integral part of these statements.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
AHA INVESTMENT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FULL MATURITY LIMITED MATURITY
FIXED INCOME PORTFOLIO FIXED INCOME PORTFOLIO
----------------------------------------------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 3,644,349 $ 1,869,989 $ 9,244,472 $ 3,551,422
Net realized gain (loss) on investments
sold and closed futures and options
contracts 439,748 97,940 (497,904) 385,536
Net change in unrealized appreciation
of investments, futures and options 246,747 1,567,239 1,347,681 221,822
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations 4,330,844 3,535,168 10,094,249 4,158,780
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (3,644,349) (1,869,989) (9,244,472) (3,551,422)
Capital gains distribution -- -- -- --
------------- ------------- ------------- -------------
Net decrease in net assets resulting
from distributions $ (3,644,349) $ (1,869,989) $ (9,244,472) $ (3,551,422)
SHARE TRANSACTIONS:
Subscriptions of fund shares 7,167,137 15,120,912 41,527,272 20,255,244
Investment income dividends reinvested 3,194,795 1,869,825 7,817,387 3,304,402
Capital gains distribution reinvested -- -- -- --
------------- ------------- ------------- -------------
Gross increase in fund shares 10,361,932 16,990,737 49,344,659 23,559,646
Redemptions of fund shares (13,544,206) (2,639,130) (110,367,401) (58,643,859)
------------- ------------- ------------- -------------
Net increase (decrease) from
share transactions (3,182,274) 14,351,607 (61,022,742) (35,084,213)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets $ (2,495,779) $ 16,016,786 $(60,172,965) $(34,476,855)
TOTAL NET ASSETS:
Beginning of period 53,292,064 50,796,285 201,196,340 141,023,375
------------- ------------- ------------- -------------
End of period $ 50,796,285 $ 66,813,071 $141,023,375 $106,546,520
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed net investment income $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The accompanying notes to the financial statements are an integral part of these statements.
</TABLE>
35
<PAGE>
AHA INVESTMENT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY PORTFOLIO BALANCED PORTFOLIO
----------------------------------------------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 1,089,534 $ 565,224 $ 1,315,989 $ 821,649
Net realized gain on investments
sold and closed futures and options
contracts 9,896,588 10,201,608 6,202,694 4,270,608
Net change in unrealized appreciation
(depreciation) of investments,
futures and options 6,641,228 (2,003,380) 2,988,361 957,052
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations 17,627,350 8,763,452 10,507,044 6,049,309
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (1,087,240) (551,078) (1,333,326) (814,639)
Capital gains distribution (6,206,933) (14,645,221) (3,710,927) (7,943,151)
------------- ------------- ------------- -------------
Net decrease in net assets resulting
from distributions $ (7,294,173) $ (15,196,299) $ (5,044,253) $ (8,757,790)
SHARE TRANSACTIONS
Subscriptions of fund shares 11,595,747 4,994,281 10,056,065 6,902,099
Investment income dividends reinvested 1,087,240 551,078 1,139,292 675,610
Capital gains distribution reinvested 6,206,933 14,645,221 3,180,507 6,594,632
------------- ------------- ------------- -------------
Gross increase in fund shares 18,889,920 20,190,580 14,375,864 14,172,341
Redemptions of fund shares (13,067,587) (13,922,466) (10,831,841) (8,153,923)
------------- ------------- ------------- -------------
Net increase from
share transactions 5,822,333 6,268,114 3,544,023 6,018,418
------------- ------------- ------------- -------------
Net increase (decrease) in net assets $ 16,155,510 $ (164,733) $ 9,006,814 $ 3,309,937
TOTAL NET ASSETS
Beginning of period 54,434,888 70,590,398 43,130,424 52,137,238
------------- ------------- ------------- -------------
End of period $ 70,590,398 $ 70,425,665 $ 52,137,238 $ 55,447,175
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed net investment income $ 45,273 $ 59,869 $ 770,140 $ 777,150
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
The accompanying notes to the financial statements are an integral part of these statements.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
AHA INVESTMENT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies of Full Maturity Fixed
Income, Limited Maturity Fixed Income, Diversified Equity and Balanced
Portfolios (the "Portfolios"), each a series of AHA Investment Funds, Inc., a
Maryland corporation, ("Fund").
SECURITY VALUATIONS
All securities are recorded at fair market value as of December 31, 1997.
Securities traded on national securities exchanges are valued at last
reported sales prices or, if there are no sales, at the latest bid quotation.
Each over-the-counter security for which the last sale price is available
from NASDAQ is valued at that price. All other over-the-counter securities
for which reliable quotations are available are valued at the latest bid
quotation. Securities convertible into equity securities are valued at the
greater of latest bid valuation or net conversion value. Other assets and
securities are valued by a method that the Board of Directors believes
represents a fair value.
ACCOUNTING FOR FUTURES
The Fund may enter into long or short positions in futures contracts in order to
hedge against the effect of changing values on portfolio securities held. When
the Fund enters into a futures contract, it is required to deposit, into a
segregated account at its custodian bank, U.S. Government securities as a
guarantee that it will meet the futures commitment. Each day the Fund receives
or pays cash, called "variation margin", equal to the daily change in the market
value of the futures contracts. Such receipts and payments are recorded as
unrealized gains or losses until the futures contracts expire or are closed out.
Risks of entering into futures contracts include the possibility that there may
be an illiquid market at the time the Portfolios seek to close out a contract
and changes in the value of the futures contract may not correlate with changes
in the value of the portfolio securities being hedged. The Full Maturity Fixed
Income and Balanced Portfolios had open futures contracts as of December 31,
1997.
ACCOUNTING FOR OPTIONS
The Fund may purchase and write (sell) put and call options on U.S. securities,
stock indices, and futures contracts that are traded on U.S. securities
exchanges and over-the-counter markets. The risk associated with purchasing an
option is that the Fund pays a premium whether or not the option is exercised.
Additionally, the Fund bears the risk of loss of premium and change in market
value should the counterparty not perform under the contract. Put and call
options purchased are accounted for in the same manner as portfolio securities.
The cost of securities acquired through the exercise of call options is
increased by premiums paid. The proceeds from securities sold through the
exercise of put options are decreased by the premiums paid.
- -------------------------------------------------------------------------------
37
<PAGE>
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a close purchase transaction, including brokerage commissions, is also
treated as a realized gain, or if the premium is less than the amount paid for
the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund bears
the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value. Transactions in put options
written for the six months ended December 31, 1997 for the Fund were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FULL MATURITY
FIXED INCOME PORTFOLIO BALANCED PORTFOLIO
----------------------- --------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTACTS (000's) CONTRACTS (000's)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options Outstanding at 0 $ 0 0 $ 0
Beginning of Period
Options Written 39 $35,801 21 $20,327
Option Terminated in 18 $14,615 9 $ 7,308
Closing Purchase
Transactions
Options Expired 6 $ 2,017 3 $ 1,009
Options Outstanding at 15 $19,169 9 $12,010
12/31/97
</TABLE>
- ------------------------------------------------------------------------------
The Limited Maturity and Diversified Equity Portfolios did not purchase or hold
any options during the six months ended December 31, 1997.
- -------------------------------------------------------------------------------
38
<PAGE>
INVESTMENTS OBJECTIVES
FULL MATURITY FIXED INCOME PORTFOLIO
Seeks over the long term the highest level of income consistent with
preservation of capital. Invests primarily in high quality fixed income
securities. There is no restriction on the maximum maturity of the securities
purchased. The average dollar-weighted maturity will vary and may exceed 20
years.
LIMITED MATURITY FIXED INCOME PORTFOLIO
Seeks a high level of current income, consistent with preservation of capital
and liquidity. Invests primarily in high quality fixed income securities and
maintains an average dollar-weighted portfolio maturity of five years or less.
DIVERSIFIED EQUITY PORTFOLIO
Seeks long-term capital growth. Invests primarily in equity securities and
securities having equity characteristics.
BALANCED PORTFOLIO
Seeks a combination of growth of capital and income. Invests varying proportions
of its assets in equity and fixed income securities, with not less than 25
percent of total assets invested in fixed income securities.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to any of the types
of securities in which they are authorized to invest without regard to the
maturity of the underlying security. Repurchase agreements will be effected only
with banks, savings institutions and broker-dealers. They involve the purchase
by a Portfolio of a debt security with the condition that, after a stated period
of time, the original seller will buy back the same security at a predetermined
price or yield. Repurchase agreements are used to enhance liquidity and to earn
income for periods as short as overnight. To minimize risk, the securities
underlying each repurchase agreement will be maintained with the Fund's
custodian, or a subcustodian, in an amount at least equal in value to the
repurchase price under the agreement (including accrued interest thereunder),
and such agreements will only be effected with parties that meet certain
creditworthiness standards. However, in the event the other party to the
repurchase agreement fails to repurchase the securities subject to such
agreement, a Portfolio could suffer a loss to the extent it is precluded from
selling the securities or, if due to delays, proceeds from the sale are less
than the repurchase price. The Fund had no outstanding repurchase agreements as
of December 31, 1997.
FEDERAL INCOME TAXES
No provision is made for Federal Income Taxes since the Portfolios elect to be
taxed as "regulated investment companies" and make such distributions to their
shareholders as to be relieved of all Federal income taxes under provisions of
current Federal tax law. At June 30, 1997, the Fund' most recent fiscal year
end, the approximate capital loss carryforwards for U.S. Federal income tax
purposes for the Full Maturity Fixed Income Portfolio and the Limited Maturity
Fixed Income Portfolio were approximately $1,800,000 and $3,700,000
respectively. This capital loss carryforward expires beginning in the year
ending June 30, 2003 and is available to offset future capital gains.
- -------------------------------------------------------------------------------
39
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
OTHER INFORMATION
The accounts of the Fund are kept on the accrual basis of accounting. Securities
transactions are recorded on the trade date. Realized gains or losses from sales
of securities are determined on the specific identification cost basis. Dividend
income is recognized on the ex-dividend date.
NOTE 2.
FUND DISTRIBUTIONS
The Full Maturity Fixed Income Portfolio and the Limited Maturity Fixed Income
Portfolio declare income dividends from net investment income daily and pay
these dividends monthly, on the last day of every month.
In the Diversified Equity Portfolio and Balanced Portfolio, dividends from net
investment income are declared on the thirteenth day of the last month of each
quarter; the ex-dividend date is the fourteenth; and payment is made on the
fifteenth. The aggregate distributions of net investment income for the
Diversified Equity Portfolio and Balanced Portfolio were $0.17 and $0.23 per
share, respectively, during the six months ended December 31, 1997.
During the six months ended December 31, 1997, the Diversified Equity and
Balanced Portfolios made a long-term capital gain distribution of $3.2112 and
$1.5195 per share, respectively.
During the six months ended December 31, 1997, the Diversified Equity and
Balanced Portfolios made a short-term capital gain distribution of $1.2829 and
$0.7135 per share, respectively.
- -------------------------------------------------------------------------------
40
<PAGE>
NOTE 3.
DIRECTORS' FEES AND TRANSACTIONS WITH AFFILIATES
Directors not affiliated with Hewitt Associates LLC ("Hewitt") or American
Hospital Association ("AHA") receive $1,000 for each quarterly meeting and $500
for each special meeting from the Board of Directors, or committee thereof,
(plus travel expenses). No remuneration has been paid to any principal or
employee of the Fund's investment consultant, Hewitt, or any director or officer
of AHA. The investments of the Portfolios are managed by various advisory
organizations which serve as the investment managers. The Fund pays no fees to
Hewitt or to the investment managers.
Hewitt is compensated for its services by the shareholders pursuant to The
Program Services Agreement it has with each shareholder, under which Hewitt
Provides asset allocation consulting and certain other services. Fees of the
investment managers are paid by Hewitt.
Hewitt has voluntarily undertaken to pay certain expenses of the Portfolios (or
to reimburse the Portfolios for certain expenses) as may be necessary to limit
total expenses of the Portfolios to specified amounts. American Hospital
Association Services, Inc. has, in this regard, agreed to reimburse Hewitt for
one-half of the amounts incurred by Hewitt pursuant to this undertaking. The
maximum expense as a percent of average net assets for the Full Maturity Fixed
Income Portfolio, the Limited Maturity Fixed Income Portfolio, the Diversified
Equity Portfolio, and the Balanced Portfolio is 0.50% (annual percentage). The
Portfolios have reached asset levels which allow the reduction of expenses to
percentage amounts below that set forth above. The Portfolios may reimburse
Hewitt for the expenses of the Portfolios it voluntarily has absorbed on or
after September 1, 1989, provided that such reimbursement does not cause the
percentage expense limitations set forth above to be exceeded and is approved by
the Board of Directors of the Fund. There is no commitment, however, by the Fund
to make any such reimbursement. As of December 31, 1997, approximate expensed
paid on behalf of or reimbursed to the Portfolio by Hewitt since September 1,
1989 were: $101,400 for the Full maturity Fixed Income Portfolio; $41,000 for
the Limited Maturity Fixed Income Portfolio; $116,000 for the Diversified Equity
Portfolio; and $10,900 for the Balanced Portfolio.
NOTE 4.
SHORT-TERM DEBT
To facilitate portfolio liquidity, each Portfolio is authorized to borrow
against portfolio securities. During the six months ended December 31, 1997,
there were no borrowings.
- -------------------------------------------------------------------------------
41
<PAGE>
NOTE 5.
INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of securities (exclusive
of short-term obligations) for the six months ended December 31, 1997, is
presented below:
<TABLE>
<CAPTION>
- ------------------------------------------------------
PORTFOLIO PURCHASES SALES
- ------------------------------------------------------
<S> <C> <C>
Full Maturity Fixed $30,1114,615 $ 21,365,627
Income
Limited Maturity $ 74,196,943 $108,453,115
Fixed Income
Diversified Equity $ 27,451,043 $ 35,871,240
Balanced $ 32,374,241 $ 31,762,599
- ------------------------------------------------------
</TABLE>
At December 31, 1997, gross unrealized appreciation and depreciation of
investments and futures on a tax basis and the cost of investments for
financial reporting purposes and for Federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
COST OF INVESTMENTS
----------------------------
FINANCIAL FEDERAL
PORTFOLIO APPRECIATION DEPRECIATION REPORTING INCOME TAX
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Full Maturity $ 1,705,133 $ 183,977 $ 72,822,508 $ 72,822,508
Fixed Income
Limited Maturity $ 542,545 $ 3,090 $106,857,356 $106,857,356
Fixed Income
Diversified $15,380,863 $1,175,605 $ 58,821,418 $ 58,821,418
Equity
Balanced $10,433,634 $ 706,186 $ 53,702,438 $ 53,702,438
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
42
<PAGE>
NOTE 6.
TRANSACTIONS IN CAPITAL STOCK SHARES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
----------------------------------------------------------------------------
FULL MATURITY LIMITED MATURITY DIVERSIFIED
FIXED INCOME FIXED INCOME EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transactions in capital stock shares
were as follows:
Subscriptions of fund shares 1,509,265 1,987,564 241,719 487,824
Investment income dividends reinvested 186,982 323,905 24,618 42,788
Capital gains distribution reinvested 0 0 822,304 484,187
--------- ---------- --------- ---------
Gross increase in fund shares 1,696,247 2,311,469 1,088,641 1,014,799
Redemptions of fund shares (261,956) (5,749,072) (694,079) (565,888)
--------- ---------- --------- ---------
Net increase (decrease) in fund shares 1,434,291 (3,437,603) 394,562 448,911
Beginning of Period 5,190,424 13,873,900 3,407,458 3,507,529
--------- ---------- --------- ---------
End of Period 6,624,715 10,436,297 3,802,020 3,956,440
--------- ---------- --------- ---------
--------- ---------- --------- ---------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JUNE 30, 1997
----------------------------------------------------------------------------
FULL MATURITY LIMITED MATURITY DIVERSIFIED
FIXED INCOME FIXED INCOME EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transactions in capital stock shares
were as follows:
Subscriptions of fund shares 728,559 4,085,237 626,127 749,529
Investment income dividends reinvested 328,533 770,472 57,517 81,362
Capital gains distribution reinvested 0 0 354,075 238,777
---------- ----------- --------- ---------
Gross increase in fund shares 1,057,092 4,855,709 1,037,719 1,069,668
Redemptions of fund shares (1,402,731) (10,872,326) (724,547) (784,519)
Net increase (decrease) in fund shares (345,639) (6,016,617) 313,172 285,149
---------- ----------- --------- ---------
Beginning of Year 5,536,063 19,890,517 3,094,286 3,222,380
---------- ----------- --------- ---------
End of Year 5,190,424 13,873,900 3,407,458 3,507,529
---------- ----------- --------- ---------
---------- ----------- --------- ---------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
NOTE 7:
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
FULL MATURITY FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED JUNE 30
-------------------------------------------------------------------------------------
1989(1) 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00 $10.30 $10.01 $10.03 $10.58
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.55(2) 0.78(2) 0.79(2) 0.75 0.72
Net realized and unrealized
gain (loss) on
investments and futures 0.30 (0.29) 0.02 0.64 0.53
------ ------ ------ ------ ------
Total from Investment
Operations 0.85 0.49 0.81 1.39 1.25
LESS DISTRIBUTIONS:
Net investment income (0.55) (0.78) (0.79) (0.75) (0.72)
Net realized capital gains (0.00) (0.00) (0.00) (0.09) (0.35)
------ ------ ------ ------ ------
Total Distributions (0.55) (0.78) (0.79) (0.84) (1.07)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.30 $10.01 $10.03 $10.58 $10.76
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 8.60% 4.62% 7.87% 13.66% 11.98%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $1,422 $11,134 $19,893 $47,500 $52,094
Ratio of Expenses to Average
Net Assets 0.50%(2) 0.50%(2) 0.50%(2) 0.42% 0.27%
Ratio of Net Investment Income
to Average Net Assets 8.12%(2) 8.44%(2) 8.06%(2) 7.37% 6.77%
Ratio of Expenses to Average
Net Assets(4) 1.94% 1.36% 0.89% 0.42% 0.27%
Ratio of Net Investment Income
to Average Net Assets(4) 6.67% 7.56% 7.68% 7.37% 6.77%
Portfolio turnover rate 234.20% 203.83% 411.24% 252.89% 266.03%
<CAPTION>
PERIOD ENDED JUNE 30 6 MOS.
------------------------------------------------------------------- ENDED
1994 1995 1996 1997 12/31/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.76 $9.48 $9.88 $9.63 $9.79
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.59 0.65 0.65 0.65 0.32
Net realized and unrealized
gain (loss) on
investments and futures (0.64) 0.40 (0.25) 0.16 0.30
------ ------ ------ ------ ------
Total from Investment
Operations (0.05) 1.05 0.40 0.81 0.62
LESS DISTRIBUTIONS:
Net investment income (0.59) (0.65) (0.65) (0.65) (0.32)
Net realized capital gains (0.64) (0.00) (0.00) (0.00) (0.00)
------ ------ ------ ------ ------
Total Distributions (1.23) (0.65) (0.65) (0.65) (0.32)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.48 $9.88 $9.63 $9.79 $10.09
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) -1.43% 10.99% 3.58% 8.09% 6.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $48,752 $39,874 $53,292 $50,796 $66,813
Ratio of Expenses to Average
Net Assets 0.24% 0.21% 0.21% 0.21% 0.18%
Ratio of Net Investment Income
to Average Net Assets 5.67% 6.88% 6.52% 6.63% 6.30%
Ratio of Expenses to Average
Net Assets(4) 0.24% 0.21% 0.21% 0.21% 0.18%
Ratio of Net Investment Income
to Average Net Assets(4) 5.67% 6.88% 6.52% 6.63% 6.30%
Portfolio turnover rate 331.63% 279.42% 283.13% 304.93% 39.73%
</TABLE>
- -----------------------
(1) Commencement date for the Full Maturity Fixed Income Portfolio was
October 20, 1988.
(2) Reflects the waiver of certain management fees and reimbursement of
certain other expenses by the Investment Advisor.
(3) Total Return on Net Asset Value is net of the management fee of 0.50% per
annum.
(4) Ratios include all management fees and expenses.
- -------------------------------------------------------------------------------
44
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
LIMITED MATURITY FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED JUNE 30
-------------------------------------------------------------------------------------
1989(1) 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00 $10.07 $9.98 $10.11 $10.48
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.43(2) 0.77(2) 0.74(2) 0.64 0.49
Net realized and unrealized
gain (loss) on
investments and futures 0.07 (0.09) 0.13 0.45 0.12
------ ------ ------ ------ ------
Total from Investment
Operations 0.50 0.68 0.87 1.09 0.61
LESS DISTRIBUTIONS:
Net investment income (0.43) (0.77) (0.74) (0.64) (0.49)
Net realized capital gains 0.00 0.00 0.00 (0.08) (0.08)
------ ------ ------ ------ ------
Total Distributions (0.43) (0.77) (0.74) (0.72) (0.57)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.07 $9.98 $10.11 $10.48 $10.52
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 5.01% 6.52% 8.49% 10.46% 5.49%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $6,284 $18,522 $30,151 $101,881 $162,694
Ratio of Expenses to Average
Net Assets 0.50%(2) 0.50%(2) 0.50%(2) 0.29% 0.17%
Ratio of Net Investment Income
to Average Net Assets 8.49%(2) 8.04%(2) 7.49%(2) 6.02% 4.66%
Ratio of Expenses to Average
Net Assets(4) 1.97% 0.88% 0.55% 0.29% 0.17%
Ratio of Net Investment Income
to Average Net Assets(4) 7.01% 7.66% 7.45% 6.02% 4.66%
Portfolio turnover rate 0.00% 137.50% 279.16% 99.86% 167.38%
<CAPTION>
PERIOD ENDED JUNE 30 6 MOS.
------------------------------------------------------------------- ENDED
1994 1995 1996 1997 12/31/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.52 $10.09 $10.22 $10.12 $10.16
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.49 0.62 0.62 0.61 0.17
Net realized and unrealized
gain (loss) on
investments and futures (0.32) 0.13 (0.10) 0.04 0.05
------ ------ ------ ------ ------
Total from Investment
Operations 0.17 0.75 0.52 0.65 0.22
LESS DISTRIBUTIONS:
Net investment income (0.49) (0.62) (0.62) (0.61) (0.17)
Net realized capital gains (0.11) 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (0.60) (0.62) (0.62) (0.61) (0.17)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.09 $10.22 $10.12 $10.16 $10.21
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 1.14% 7.19% 4.66% 6.03% 3.30%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $189,542 $186,856 $201,196 $141,023 $106,547
Ratio of Expenses to Average
Net Assets 0.14% 0.12% 0.10% 0.12% 0.12%
Ratio of Net Investment Income
to Average Net Assets 4.73% 6.17% 6.03% 6.04% 6.09%
Ratio of Expenses to Average
Net Assets(4) 0.14% 0.12% 0.10% 0.12% 0.12%
Ratio of Net Investment Income
to Average Net Assets(4) 4.73% 6.17% 6.03% 6.04% 6.09%
Portfolio turnover rate 178.01% 155.12% 132.75% 121.70% 64.39%
</TABLE>
- -----------------------
(1) Commencement date for the Limited Maturity Fixed Income Portfolio was
December 22, 1988.
(2) Reflects the waiver of certain management fees and reimbursement of
certain other expenses by the Investment Advisor.
(3) Total Return on Net Asset Value is net of the management fee of 0.50% per
annum.
(4) Ratios include all management fees and expenses.
- -------------------------------------------------------------------------------
45
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
DIVERSIFIED EQUITY PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED JUNE 30
-------------------------------------------------------------------------------------
1989(1) 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00 $11.16 $11.42 $11.47 $12.95
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.35(2) 0.43(2) 0.35(2) 0.31(2) 0.25(2)
Net realized and unrealized
gain (loss) on
investments and futures 1.12 0.52 0.08 1.52 1.70
------ ------ ------ ------ ------
Total from Investment
Operations 1.47 0.95 0.43 1.83 1.95
LESS DISTRIBUTIONS:
Net investment income (0.31) (0.44) (0.34) (0.31) (0.25)
Net realized capital gains (0.00) (0.25) (0.04) (0.04) (0.70)
------ ------ ------ ------ ------
Total Distributions (0.31) (0.69) (0.38) (0.35) (0.95)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.16 $11.42 $11.47 $12.95 $13.95
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 14.45% 7.76% 3.24% 15.14% 14.47%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $3,556 $7,920 $10,725 $13,878 $21,087
Ratio of Expenses to Average
Net Assets 0.50%(2) 0.50%(2) 0.50%(2) 0.50%(2) 0.50%(2)
Ratio of Net Investment Income
to Average Net Assets 4.88%(2) 4.45%(2) 3.37%(2) 2.13%(2) 1.90%(2)
Ratio of Expenses to Average
Net Assets(4) 2.68% 1.33% 1.08% 0.66% 0.53%
Ratio of Net Investment Income
to Average Net Assets(4) 2.70% 3.61% 2.80% 1.97% 1.87%
Portfolio turnover rate 29.99% 33.57% 72.49% 65.89% 45.87%
Average commission rate(5) N/A N/A N/A N/A N/A
<CAPTION>
PERIOD ENDED JUNE 30 6 MOS.
------------------------------------------------------------------- ENDED
1994 1995 1996 1997 12/31/97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.95 $13.90 $14.76 $17.59 $20.72
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.26 0.29 0.35 0.34 0.17
Net realized and unrealized
gain (loss) on
investments and futures 0.45 2.34 3.57 5.18 2.29
------ ------ ------ ------ ------
Total from Investment
Operations 0.71 2.63 3.92 5.52 2.46
LESS DISTRIBUTIONS:
Net investment income (0.26) (0.29) (0.35) (0.34) (0.17)
Net realized capital gains (0.50) (1.48) (0.74) (2.05) (4.49)
------ ------ ------ ------ ------
Total Distributions (0.76) (1.77) (1.09) (2.39) (4.66)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.90 $14.76 $17.59 $20.72 $18.52
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 4.21% 20.11% 26.42% 32.97% 12.37%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $22,547 $39,634 $54,435 $70,590 $70,426
Ratio of Expenses to Average
Net Assets 0.40% 0.31% 0.18% 0.17% 0.15%
Ratio of Net Investment Income
to Average Net Assets 1.83% 2.30% 2.09% 1.83% 1.53%
Ratio of Expenses to Average
Net Assets(4) 0.40% 0.31% 0.18% 0.17% 0.15%
Ratio of Net Investment Income
to Average Net Assets(4) 1.83% 2.30% 2.09% 1.83% 1.53%
Portfolio turnover rate 100.45% 68.12% 57.76% 67.31% 39.10%
Average commission rate(5) N/A N/A N/A 0.0368 0.0357
</TABLE>
- -----------------------
(1) Commencement date for the Diversified Equity Portfolio was
October 20, 1988.
(2) Reflects the waiver of certain management fees and reimbursement of
certain other expenses by the Investment Advisor.
(3) Total Return on Net Asset Value is net of the management fee of 0.75% per
annum.
(4) Ratios include all management fees and expenses.
(5) Disclosure not applicable to prior periods.
- -------------------------------------------------------------------------------
46
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED JUNE 30
-------------------------------------------------------------------------------------
1989(1) 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00 $10.68 $10.69 $10.87 $12.03
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.39(2) 0.56(2) 0.54(2) 0.44 0.44
Net realized and unrealized
gain (loss) on
investments and futures 0.64 0.11 0.21 1.16 1.18
------ ------ ------ ------ ------
Total from Investment
Operations 1.03 0.67 0.75 1.60 1.62
LESS DISTRIBUTIONS:
Net investment income (0.35) (0.56) (0.57) (0.44) (0.44)
Net realized capital gains (0.00) (0.10) (0.00) (0.00) (0.45)
------ ------ ------ ------ ------
Total Distributions (0.35) (0.66) (0.57) (0.44) (0.89)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $10.68 $10.69 $10.87 $12.03 $12.76
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 9.96% 5.34% 6.62% 13.99% 13.02%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $13,545 $ 34,565 $33,547 $34,853 $41,313
Ratio of Expenses to Average
Net Assets 0.50%(2) 0.50%(2) 0.50%(2) 0.38% 0.31%
Ratio of Net Investment Income
to Average Net Assets 6.06%(2) 6.12%(2) 4.92%(2) 3.73% 3.51%
Ratio of Expenses to Average
Net Assets(4) 1.27% 0.52% 0.52% 0.38% 0.31%
Ratio of Net Investment Income
to Average Net Assets(4) 5.29% 6.11% 4.89% 3.73% 3.51%
Portfolio turnover rate 106.23% 132.60% 201.36% 201.93% 132.14%
Average commission rate(5) N/A N/A N/A N/A N/A
<CAPTION>
PERIOD ENDED JUNE 30 6 MOS.
------------------------------------------------------------------- ENDED
1994 1995 1996 1997 12/31/97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $12.76 $11.66 $12.63 $13.38 $14.86
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.42 0.32 0.41 0.37 0.23
Net realized and unrealized
gain (loss) on
investments and futures (0.26) 1.44 1.98 2.65 2.24
------ ------ ------ ------ ------
Total from Investment
Operations 0.16 1.76 2.39 3.02 2.47
LESS DISTRIBUTIONS:
Net investment income (0.42) (0.32) (0.41) (0.39) (0.23)
Net realized capital gains (0.84) (0.47) (1.23) (1.15) (2.23)
------ ------ ------ ------ ------
Total Distributions (1.26) (0.79) (1.64) (1.54) (2.46)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.66 $12.63 $13.38 $14.86 $14.87
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN ON NET ASSET
VALUE(3) 0.29% 14.97% 19.20% 23.23% 10.82%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(in thousands) $46,523 $46,646 $43,130 $52,137 $55,447
Ratio of Expenses to Average
Net Assets 0.26% 0.21% 0.23% 0.23% 0.19%
Ratio of Net Investment Income
to Average Net Assets 3.39% 4.12% 3.08% 2.81% 2.86%
Ratio of Expenses to Average
Net Assets(4) 0.26% 0.21% 0.23% 0.23% 0.19%
Ratio of Net Investment Income
to Average Net Assets(4) 3.39% 4.12% 3.08% 2.81% 2.86%
Portfolio turnover rate 208.31% 160.41% 146.69% 173.60% 61.47%
Average commission rate(5) N/A N/A N/A 0.0571 0.0512
</TABLE>
- -----------------------
(1) Commencement date for the Balanced Portfolio was October 20, 1988.
(2) Reflects the waiver of certain management fees and reimbursement of
certain other expenses by the Investment Advisor.
(3) Total Return on Net Asset Value is net of the management fee of 0.75% per
annum.
(4) Ratios include all management fees and expenses.
(5) Disclosure not applicable to prior periods.
- -------------------------------------------------------------------------------
47
