File No. 33-30156
As filed with the Securities and Exchange Commission on April 30, 1996
--------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
[X] SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 8
and/or
REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 9
(Check appropriate box or boxes)
AUL AMERICAN SERIES FUND, INC.
(Exact Name of Registrant)
One American Square, Indianapolis, Indiana 46204
(Address of Principal Executive Offices)
Insurance Company's Telephone Number: (317) 263-1877
Richard A. Wacker, One American Square, Indianapolis, Indiana 46204
(Name and Address of Agent for Service)
Title of Securities Being Registered: Shares of common stock
Declaration Pursuant to Rule 24f-2: Registrant has registered an indefinite
number of shares of common stock under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Registrant will file its
notice pursuant to Rule 24f-2 for its fiscal year ending December 31, 1996 on or
before February 28, 1997.
It is proposed that this filing will become effective (Check appropriate Space)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
- ------- --------------
60 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) of Rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed amendment.
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2
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CROSS REFERENCE SHEET
Required by Rule 404 under the Securities Act of 1933
Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-1A
PART A - PROSPECTUS
Heading of Item Prospectus Caption
<S> <C>
1. Cover Page........................................................ Cover Page
2. Synopsis.......................................................... General Description of the Fund
3. Condensed Financial Information................................... Condensed Financial Information
4. General Description of Registrant................................. General Description of the Fund;
General Description of the Fund;
Investment Objectives and Policies;
Investment Restrictions; Description
of Securities and Investment Techniques
5. Management of the Fund............................................ Management of the Fund
6. Capital Stock and Other Securities................................ Portfolio Transactions; Description of
the Fund's Shares; Dividends, Distributions
and Taxes
7. Purchase of Securities............................................ Purchase and Redemption of Shares
8. Redemption or Repurchase of Securities Being Offered.............. Purchase and Redemption of Shares
9. Legal Proceedings................................................. Not Applicable
PART B - STATEMENT OF ADDITIONAL INFORMATION
Heading of Item Statement of Additional Information Caption
10. Cover Page........................................................ Cover Page
11. Table of Contents................................................. Table of Contents
12. General Information and History................................... Management of the Fund
13. Investment Objectives and Policies................................ Not Applicable
14. Management of the Registrant...................................... Management of the Fund
15. Control Persons and Principal Holders of Securities............... Not Applicable
16. Investment Advisory and Other Services............................ Management of the Fund
17. Brokerage Allocation and Other Practices.......................... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities................................ Capitalization; Voting Rights
19. Purchase, Redemption and Pricing of Securities Being
Offered........................................................ Net Asset Value
20. Tax Status........................................................ Taxation
21. Underwriters...................................................... Not Applicable
22. Calculation of Yield Quotations of Money Market Funds............. Performance Information
23. Financial Statements.............................................. Financial Statements
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1
AUL American Series Fund, Inc.
One American Square
Indianapolis, Indiana 46204
(800) 634-1629
AUL American Series Fund, Inc. (the "Fund") is an open-end, diversified
management investment company currently consisting of five separate investment
portfolios (the "Portfolios"), each of which has its own investment objectives
and policies. The five Portfolios of the Fund are the AUL American Equity
Portfolio ("Equity Portfolio"), the AUL American Bond Portfolio ("Bond
Portfolio"), the AUL American Money Market Portfolio ("Money Market Portfolio"),
the AUL American Managed Portfolio ("Managed Portfolio"), and the AUL American
Tactical Asset Allocation Portfolio ("Tactical Asset Allocation Portfolio").
Shares of the Portfolios are sold to one or more separate accounts of American
United Life Insurance Company(R) ("AUL") to serve as the investment medium for
variable annuity contracts issued by AUL (the "Contracts"). The separate
accounts invest in shares of one or more of the Portfolios in accordance with
allocation instructions received from owners or participants in the Contracts.
Such allocation rights are described further in the Contract (or the Certificate
thereunder) and, if applicable, in the prospectus offering the Contract.
Information about the investment objective or objectives and policies of each
Portfolio, along with a detailed description of the types of securities in which
each Portfolio may invest, are set forth in this Prospectus. There can be no
assurance that the investment objective or objectives for any Portfolio will be
achieved.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information,
dated May 1, 1996, containing additional and more detailed information about the
Fund has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. The Statement of Additional
Information is available without charge and may be obtained by writing to or
calling the Fund at the address or telephone number printed above.
SHARES OF THE FUND ARE AVAILABLE EXCLUSIVELY TO INSURANCE COMPANY SEPARATE
ACCOUNTS AS AN INVESTMENT VEHICLE FOR VARIABLE ANNUITY CONTRACTS. THIS
PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE VARIABLE ANNUITY CONTRACT (OR
CERTIFICATE THEREUNDER) AND, IF APPLICABLE, THE PROSPECTUS OFFERING THE VARIABLE
ANNUITY CONTRACT. THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
INVESTMENT IN THE AUL AMERICAN MONEY MARKET PORTFOLIO (OR IN ANY OTHER
PORTFOLIO) IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN
BE NO ASSURANCE THAT THE AUL AMERICAN MONEY MARKET PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES OR INSURANCE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES OR INSURANCE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1996.
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TABLE OF CONTENTS
Description Page
<S> <C>
GENERAL DESCRIPTION OF THE FUND........................................ 3
CONDENSED FINANCIAL INFORMATION........................................ 3-5
THE FUND'S PERFORMANCE................................................. 6
INVESTMENT OBJECTIVES AND POLICIES........................................ 6-9
The Equity Portfolio.................................................... 6
The Bond Portfolio...................................................... 7
The Money Market Portfolio.............................................. 7
The Managed Portfolio................................................... 8
The Tactical Asset Allocation Portfolio................................. 8
MANAGEMENT OF THE FUND..................................................... 9-11
Investment Adviser-American United Life Insurance Company(R)............. 9
The Sub-Advisor to the Tactical Asset Allocation Portfolio............... 10
Other Expenses........................................................... 10
Portfolio Expenses....................................................... 11
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES........................11-15
U.S. Government Securities............................................... 11
Mortgage-Related Securities.............................................. 11
GNMA Certificates....................................................... 11
FNMA and FHLMC Mortgage-Backed Obligations.............................. 11
Other Mortgage-Backed Securities........................................ 12
Risks of Mortgage-Related Securities.................................... 12
Zero Coupon Bonds........................................................ 12
Foreign Securities....................................................... 12
Repurchase Agreements.................................................... 12
Reverse Repurchase Agreements............................................ 13
Banking Industry and Savings Industry Obligations........................ 13
Options.................................................................. 13
Risks of Options Transactions........................................... 14
Futures Contracts........................................................ 14
Risks of Futures........................................................ 14
Other Investment Companies............................................... 14
INVESTMENT RESTRICTIONS.................................................... 15
PORTFOLIO TRANSACTIONS AND TURNOVER........................................ 15
DESCRIPTION OF THE FUND'S SHARES........................................... 16
DIVIDENDS, DISTRIBUTION AND TAXES.......................................... 16
Federal Income Tax Status................................................ 16
Distributions and Dividends.............................................. 16
PURCHASE AND REDEMPTION OF SHARES.......................................... 16
NET ASSET VALUE............................................................ 17
PERFORMANCE INFORMATION.................................................... 17
LEGAL COUNSEL.............................................................. 17
INDEPENDENT ACCOUNTANTS.................................................... 17
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS...................... 18
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3
GENERAL DESCRIPTION OF THE FUND
The Fund was incorporated under the laws of Maryland on July 26, 1989, and
is registered under the Investment Company Act of 1940 (the "1940 Act") as an
open-end, diversified management investment company.
As a "series" type of mutual fund, the Fund issues shares of common stock
relating to separate investment portfolios (the "Portfolios") currently
consisting of the Equity Portfolio, Bond Portfolio, Money Market Portfolio,
Managed Portfolio, and Tactical Asset Allocation Portfolio. Additional
portfolios may be established in the future. An interest in the Fund is limited
to the assets of the particular Portfolio in which shares are held, and
shareholders of each Portfolio are entitled to a pro rata share of all dividends
and distributions paid by the Portfolio.
The Fund's shares currently are offered only to one or more separate
accounts of American United Life Insurance Company(R) ("AUL") to serve as an
investment medium for variable annuity contracts issued by AUL. Shares of each
Portfolio may be offered in the future to separate accounts of other affiliated
or unaffiliated insurance companies to serve as an underlying investment vehicle
for variable annuity contracts. The separate accounts invest in shares of the
Fund in accordance with allocation instructions received from owners and
participants of the Contracts.
CONDENSED FINANCIAL INFORMATION
Per Share Data and Ratios for the Year Ended December 31, 1995
The following are selected per share data and ratios. Per share amounts
presented are based on a share outstanding throughout the period from the
commencement of operations, April 10, 1990, through December 31, 1995. The
ratios for the period from April 10, 1990 through December 31, 1990 are
annualized. The information in the tables is included in the Fund's financial
statements that have been audited by Coopers & Lybrand L.L.P., the Fund's
independent accountants. The tables should be read in conjunction with the
Fund's financial statements, which are included in the Fund's Annual Report as
of December 31, 1995.
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<CAPTION>
EQUITY PORTFOLIO
----------------
April 10, 1990
through
1995 1994 1993 1992 1991 December 31, 1990
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.27 $ 12.68 $ 11.49 $ 10.49 $ 9.58 $ 10.00
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.28 0.24 0.18 0.23 0.31 0.27
Net Realized and Unrealized
gain (loss) on securities 2.12 0.26 1.58 0.92 2.23 (0.39)
---- ---- ---- ---- ---- -----
Total from Investment Operations 2.40 0.50 1.76 1.15 2.54 (0.12)
---- ---- ---- ---- ---- -----
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.27 0.24 0.18 0.23 0.31 0.27
Distributions (from capital gains) 0.19 0.67 0.39 0.32 0.92 0.03
---- ---- ---- ---- ---- ----
Total Distributions 0.46 0.91 0.57 0.55 1.23 0.30
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 14.21 $ 12.27 $ 12.68 $ 11.49 $ 10.89 $ 9.58
======== ======== ======= ======== ======= ========
TOTAL RETURN 19.45% 2.64% 14.80% 10.03% 25.58% (1.60%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period
(in thousands) $ 35,299 $ 20,563 $ 11,468 $ 6,969 $ 4,128 $ 2,969
Ratio of expenses to
average net assets 0.70% 0.73% 0.82% 0.84% 0.80% 1.00%(1)
Ratio of net investment
income to average net assets 2.08% 1.85% 1.46% 2.04% 2.75% 3.93%(1)
Portfolio Turnover Rate 10% 20% 10% 15% 43% 9%
<FN>
(1) In 1990, the ratios were favorably affected by a guarantee of expenses
by the Adviser that the ordinary operating expenses shall not exceed
1% of each Portfolio's average daily net assets. This guarantee
continues month to month unless the Investment Advisory Agreement is
terminated by either party on 30 days prior written notice.
</FN>
<CAPTION>
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4
CONDENSED FINANCIAL INFORMATION (CONTINUED)
BOND PORTFOLIO
--------------
April 10, 1990
through
1995 1994 1993 1992 1991 December 31, 1990
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 11.00 $ 10.65 $ 10.90 $ 10.32 $ 10.00
-------- -------- --------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.67 0.64 0.66 0.70 0.79 0.55
Net Realized and Unrealized
gain (loss) on securities 1.07 (1.01) 0.49 0.06 0.85 0.33
---- ----- ---- ---- ---- ----
Total from Investment Operations 1.74 (0.37) 1.15 0.76 1.64 0.88
---- ----- ---- ---- ---- ----
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.66 0.64 0.66 0.70 0.79 0.55
Distributions (from capital gains) 0.01 --- 0.14 0.31 0.27 0.01
---- ---- ---- ---- ----
Total Distributions 0.67 0.64 0.80 1.01 1.06 0.56
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 11.06 $ 9.99 $ 11.00 $ 10.65 $ 10.90 $ 10.32
======== ======== ======== ======== ======= =======
TOTAL RETURN 17.79% (3.56%) 10.69% 7.19% 16.36% 12.07%
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period
(in thousands) $ 25,429 $ 20,453 $ 14,721 $ 11,966 $11,749 $10,897
Ratio of expenses to average
net assets 0.70% 0.73% 0.80% 0.79% 0.71% 1.00%(1)
Ratio of net investment income to
average net assets 6.28% 6.19% 5.95% 6.47% 7.46% 7.46%(1)
Portfolio Turnover Rate 55% 50% 29% 41% 61% 5%
MONEY MARKET PORTFOLIO
----------------------
April 10, 1990
through
1995 1994 1993 1992 1991 December 31, 1990
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.04 0.02 0.03 0.05 0.05
Net Realized and Unrealized
gain (loss) on securities --- --- --- --- --- ---
-------- -------- -------- -------- ------- -------
Total from Investment Operations 0.05 0.04 0.02 0.03 0.05 0.05
---- ---- ---- ---- ---- ----
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.05 0.04 0.02 0.03 0.05 0.05
Distributions (from capital gains) --- --- --- --- --- ---
-------- -------- -------- ------- ------ ------
Total Distributions 0.05 0.04 0.02 0.03 0.05 0.05
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======= =======
TOTAL RETURN 5.09% 3.38% 2.33% 3.01% 5.53% 7.13%
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period
(in thousands) $ 24,290 $ 15,496 $ 6,153 $ 5,480 $ 5,420 $ 5,269
Ratio of expenses to average
net assets 0.73% 0.75% 0.84% 0.85% 0.85% 1.00%(1)
Ratio of net investment income to
average net assets 5.13% 3.71% 2.30% 2.98% 5.35% 7.10%(1)
Portfolio Turnover Rate --- --- --- --- --- ---
<FN>
(1) In 1990, the ratios were favorably affected by a guarantee of expenses by
the Adviser that the ordinary operating expenses shall not exceed 1% of each
Portfolio's average daily net assets. This guarantee continues month to month
unless the Investment Advisory Agreement is terminated by either party on 30
days prior written notice.
</FN>
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5
<CAPTION>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
MANAGED PORTFOLIO
-----------------
April 10, 1990
through
1995 1994 1993 1992 1991 December 31, 1990
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.00 $ 11.75 $ 10.92 $ 10.86 $ 10.11 $ 10.00
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.46 0.42 0.40 0.49 0.61 0.47
Net Realized and Unrealized
gain (loss) on securities 1.62 (0.45) 1.07 0.41 1.06 0.12
---- ----- ---- ---- ---- ----
Total from Investment Operations 2.08 (0.03) 1.47 0.90 1.67 0.59
---- ----- ---- ---- ---- ----
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.46 0.42 0.40 0.49 0.61 0.47
Distributions (from capital gains) 0.20 0.30 0.24 0.35 0.31 0.01
---- ---- ---- ---- ---- ----
Total Distributions 0.66 0.72 0.64 0.84 0.92 0.48
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 12.42 $ 11.00 $ 11.75 $ 10.92 $ 10.86 $ 10.11
======== ======== ======== ======== ======= =======
TOTAL RETURN 19.13% (0.93%) 12.98% 7.95% 16.73% 7.67%
RATIOS/SUPPLEMENTAL DATA
Net Assets, end of period
(in thousands) $ 30,844 $ 24,558 $ 14,070 $ 8,300 $ 6,185 $ 5,302
Ratio of expenses to
average net assets 0.70% 0.73% 0.81% 0.82% 0.94% 0.98%
Ratio of net investment
income to average net assets 3.86% 3.63% 3.49% 4.46% 5.74% 6.15%
Portfolio Turnover Rate 35% 34% 9% 33% 36% 2%
<CAPTION>
TACTICAL ASSET ALLOCATION PORTFOLIO
-----------------------------------
April 10, 1990
through
1995 1994 1993 1992 1991 December 31, 1990
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 N.A. N.A. N.A. N.A. N.A.
--------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.16 N.A. N.A. N.A. N.A. N.A.
Net Realized and Unrealized
gain (loss) on securities 0.49 N.A. N.A. N.A. N.A. N.A.
--------
Total from Investment Operations 0.65 N.A. N.A. N.A. N.A. N.A.
--------
LESS DISTRIBUTIONS
Dividends (from net investment income) 0.16 N.A. N.A. N.A. N.A. N.A.
Distributions (from capital gains) 0.05 N.A. N.A. N.A. N.A. N.A.
--------
Total Distributions 0.21 N.A. N.A. N.A. N.A. N.A.
--------
NET ASSET VALUE, END OF PERIOD $ 10.44 N.A. N.A. N.A. N.A. N.A.
========
TOTAL RETURN(1) 6.49% N.A. N.A. N.A. N.A. N.A.
RATIOS/SUPPLEMENTAL DATA(1)
Net Assets, end of period (in thousands)$ 1,139 N.A. N.A. N.A. N.A. N.A.
Ratio of expenses to average net assets 1.00% N.A. N.A. N.A. N.A. N.A.
Ratio of net investment income
to average net assets 3.70% N.A. N.A. N.A. N.A. N.A.
Portfolio Turnover Rate 4% N.A. N.A. N.A. N.A. N.A.
<FN>
(1) Ratios calculated for period July 31, 1995 through December 31,1995 on annualized basis.
</FN>
</TABLE>
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6
THE FUND'S PERFORMANCE
The following table presents the total return for each Portfolio of the Fund.
Total return represents a change in the value of an investment in the Fund, and
includes reinvestments of dividends and distributions. Total Return for a
Portfolio does not include deductions from a separate account for mortality and
expense risk charges or for charges made under the terms of the Contracts, which
are described in the Contracts (or Certificates thereunder), and if applicable,
the prospectus for the separate account. Further information on Fund performance
including Management's Discussion and Analysis is contained in the Fund's Annual
Report, which is available without charge and may be obtained by writing to the
Fund at One American Square, Indianapolis, IN 46204 or by calling the Fund at
(800) 634-1629.
<TABLE>
<CAPTION>
Average Annual
Cumulative Total Total Return
4/10/90 Year Year Year Year Year Since Inception on Investment
through Ending Ending Ending Ending Ending through Since Inception
Portfolio 12/31/90* 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/95 through 12/31/95
- --------- --------- -------- -------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity ........... (1.16%) 25.58% 10.03% 14.80% 2.64% 19.45% 92.60% 12.13%
Bond ............. 8.76% 16.36% 7.19% 10.69% (3.56%) 17.79% 71.14% 9.84%
Money Market ..... 5.19% 5.53% 3.01% 2.33% 3.38% 5.09% 27.33% 4.31%
Managed .......... 5.57% 16.73% 7.95% 12.98% (0.93%) 19.13% 78.40% 10.64%
Tactical Asset
Allocation ..... N.A. N.A. N.A. N.A. N.A. N.A. 2.68% N.A.
<FN>
*These figures are not annualized.
</FN>
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund currently offers five Portfolios with separate investment
objectives as described below. There can be no assurance that any of the
Portfolios will achieve its investment objective or objectives. Each Portfolio
is subject to the general risk of changes in economic, business, or other
financial conditions. As with any security, a risk of loss is inherent in an
investment in Fund shares.
The different types of securities and investment techniques used by the
individual Portfolios all have attendant risks of varying degrees. For examples,
with respect to equity securities, there can be no assurance of capital
appreciation and there is a risk of market decline. With respect to debt
securities, there is the risk that the issuer of a security may not be able to
meet its obligation to make scheduled interest or principal payments. Because
each Portfolio seeks different investment objectives, each is subject to varying
degrees of financial and market risks.
Certain types of investments and investment techniques common to one or
more Portfolios are described in greater detail, including the risks of each, in
this Prospectus under "Description of Securities and Investment Techniques" and
in the Statement of Additional Information (the "SAI").
The Portfolios are subject to investment restrictions that are summarized
under "Investment Restrictions" and that are set forth in the SAI. Those
investment restrictions so designated in the SAI and the investment objective or
objectives of each Portfolio are "fundamental policies" of the pertinent
Portfolio, which means that they may not be changed without a majority vote of
shareholders of the affected Portfolio. Except for the investment objective or
objectives and those restrictions specifically identified as fundamental, all
investment policies and practices described in this Prospectus and in the SAI
are not fundamental, and may be changed by the Fund's Board of Directors without
shareholder approval.
THE EQUITY PORTFOLIO
The primary investment objective of the Equity Portfolio is long-term
capital appreciation. The Portfolio seeks current investment income as a
secondary objective. To achieve these objectives, the Portfolio invests
primarily in equity securities selected on the basis of fundamental investment
research for their long-term growth prospects.
Typically, at least 65% of the Portfolio's assets will be invested in
common stocks listed on a national securities exchange or actively traded
over-the-counter on the NASDAQ national market system. The Portfolio may invest
up to 35% of its assets in American Depository Receipts, preferred stock,
debentures convertible into common stocks or which are accompanied by warrants
for the purchase of common stock, nonconvertible debt securities, U.S.
Government securities, commercial paper and other money market instruments,
repurchase agreements and reverse repurchase agreements.
When, in the judgment of the Adviser, financial, economic, and/or market
conditions warrant a defensive strategy, the Portfolio may invest to a greater
degree in nonconvertible debt securities, U.S. Government securities, commercial
paper and other money market instruments, repurchase agreements and reverse
repurchase agreements. In furtherance of its secondary objective of current
income, the Portfolio may also write (i.e.,
<PAGE>
7
sell) covered call options and secured put options on securities and securities
indices. The Portfolio may purchase a put or call only to effect a "closing
purchase transaction." The Portfolio will not invest in options for speculative
purposes.
The day-to-day management of the Equity Portfolio is the responsibility of
Kathryn Hudspeth, CFA, Vice President, Equities. Ms. Hudspeth has been the
Portfolio Manager of the Equity Portfolio since its inception and has been with
AUL since 1989. Previously, Ms. Hudspeth has held positions with AUL which
include Assistant Vice President, Equities, Equity Portfolio Manager and
Director of Equity Investments. Before coming to AUL, she was employed by Bank
One, Indianapolis, as a Vice President and Trust Officer in the Personal Trust
Division.
THE BOND PORTFOLIO
The primary investment objective of the Bond Portfolio is to provide a high
level of income consistent with prudent investment risk. As a secondary
objective, the Portfolio seeks to provide capital appreciation to the extent
consistent with the primary objective. To achieve these objectives, the
Portfolio invests primarily in corporate bonds and other debt securities. The
corporate bonds in which the Portfolio may invest will be rated BBB or better by
Standard & Poor's ("S&P") or Baa or better by Moody's Investors Service, Inc.
("Moody's") or, if not rated, of equivalent quality in the judgment of the
Adviser. The Portfolio may also invest in U.S. Government securities,
convertible debentures and privately issued mortgage-backed securities.
The Portfolio may invest in debt securities whose maturity is considered
long (10 years or more), intermediate (1-10 years), or short-term (1 year or
less). The dollar-weighted average maturity of the Portfolio will vary from time
to time, depending upon the judgment of the Adviser as to prevailing market
conditions including the prospects for interest rate changes among different
categories of fixed-income securities.
It is intended that the portfolio securities will be of sufficient credit
quality to provide a high level of protection against loss of principal or
interest. In addition, the Portfolio will, under normal circumstances, be
positioned to take advantage of any extra yield available on bonds rated below
AAA or Aaa when the higher yield of such instruments is considered by the
Adviser to be sufficient compensation for the risk involved. However, the
Portfolio will not invest in securities rated less than BBB or Baa.
The Portfolio may also invest in money market instruments, repurchase
agreements, and reverse repurchase agreements. In addition, the Portfolio may
invest in dollar-denominated foreign securities, including corporate bonds and
other debt securities that are consistent with the maturity and credit quality
criteria described above. In pursuing its investment objectives, the Portfolio
may engage in the writing (i.e., selling) of covered call and secured put
options and the purchase of call options on debt securities to the extent
described under "Options." The Portfolio will purchase a put option only to
effect a closing purchase transaction. In addition, the Portfolio may purchase
or sell interest rate futures contracts for hedging purposes as described under
"Futures Contracts."
The investment return on a debt security reflects interest earnings and
changes in the market value of the security. The market value of the Portfolio's
securities may be affected by, among other things, changes in interest rates
since the price of debt obligations generally will rise and fall inversely with
interest rates. Longer term debt obligations will generally have greater price
volatility than shorter term obligations. Since shares of the Portfolio normally
represent an investment primarily in debt securities with market prices that
will vary, the value of the Portfolio's shares will vary as the aggregate value
of the Portfolio's investments increases or decreases.
A debt security also presents the risk that the issuer of the security may
not be able to meet its obligations on interest or principal payments at the
time called for by the instrument. Bonds rated BBB or Baa, which are considered
medium-grade category bonds, do not have economic characteristics that provide
the high degree of security with respect to payment of principal and interest
associated with higher rated bonds, and generally have some speculative
characteristics. A bond will be placed in this rating category where interest
payments and principal security appear adequate for the present, but economic
characteristics that provide longer term protection may be lacking. Any bond,
and particularly those rated BBB or Baa, may be susceptible to changing
conditions, particularly to economic downturns, which could lead to a weakened
capacity to pay interest and principal.
The day-to-day management of the Bond Portfolio is the responsibility of
Kent Adams, CFA, Vice President, Fixed Income Securities. Mr. Adams has been the
Portfolio Manager of the Bond Portfolio since its inception and has been with
AUL since 1977. Previously, Mr. Adams has held positions with AUL which include
Senior Securities Analyst, Investment Officer, and Assistant Vice President,
Securities.
THE MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to provide a high
level of current income while preserving assets and maintaining liquidity and
investment quality. The Portfolio attempts to achieve this objective by
investing in short-term money market instruments that are of the highest
quality. The Portfolio invests only in money market instruments denominated in
U.S. dollars.
The Portfolio will invest only in money market instruments that, at the
time of acquisition, present minimal credit risk, are of the highest quality,
and have a maturity or remaining maturity of 13 months or less (or that are
subject to a repurchase agreement requiring repurchase from the Portfolio within
13 months or less). Such instruments may include the following: U.S. Government
securities, repurchase agreements maturing
<PAGE>
8
in seven days or less with Federal Reserve System banks or with dealers in U.S.
Government securities, reverse repurchase agreements, certificates of deposit
and other obligations of banks or other depository institutions, debt
securities, commercial paper, and variable amount floating rate notes and master
notes.
The Adviser shall determine whether a money market instrument presents
minimal credit risk under procedures adopted by the Fund's Board of Directors.
An instrument shall be considered to be of the highest quality under the
following circumstances: (1) it is a U.S. Government security; (2) it (or
another comparable short-term debt obligation of the same issuer) is rated (i)
in the highest rating category (i.e., AAA or A-1 by S&P, Aaa or P-1 by Moody's,
or AAA or D-1 by Duff & Phelps, Inc.) by any nationally recognized statistical
rating organizations ("NRSROs"), or (ii) if rated by only one NRSRO, by that
NRSRO if the acquisition is approved or ratified by the Board of Directors; or
(3) it is not rated but it is of comparable quality as determined by the Adviser
and the acquisition is approved or ratified by the Board of Directors. In the
event that an instrument acquired by the Portfolio is downgraded or otherwise
ceases to be of the highest quality, the Adviser, under procedures approved by
the Board of Directors (or the Board of Directors itself under certain
circumstances) shall promptly reassess whether such security presents minimal
credit risk and determine whether or not to retain the instrument.
Within certain limits, the Portfolio may invest in securities of registered
investment companies with investment policies not substantially broader than
those of the Portfolio.
The Portfolio may invest up to 10% of its total assets in repurchase
agreements maturing in more than seven days or in portfolio securities not
readily marketable.
The Portfolio will be managed so as to maintain a dollar-weighted average
maturity of 90 days or less.
THE MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to provide a high
total return consistent with prudent investment risk. The Portfolio attempts to
achieve this objective through a fully managed investment policy utilizing
publicly traded common stock, debt securities (including convertible
debentures), and money market securities. Total return is the sum of dividend
and interest income and capital changes in the assets of the Portfolio. The
composition of the Portfolio will vary from time to time, based upon the
Adviser's evaluation of economic and market trends and the anticipated relative
total return available from a particular type of security. Accordingly, at any
given time, up to 100% of the Portfolio may be invested in any one sector such
as common stocks, debt securities (including convertible debentures), or money
market instruments.
The Portfolio may invest in the common stock and debt securities which are
also eligible for purchase by the Equity Portfolio and Bond Portfolio,
respectively, and may invest in high quality money market instruments, i.e.
money market instruments rated AA or A-2 or better by S&P, Aa or P-2 or better
by Moody's, or AA or D-2 or better by Duff & Phelps, or if not rated, deemed of
equivalent quality by the Adviser. In pursuing its investment objectives, the
Portfolio may engage in the writing of covered call and secured put options on
equity and debt securities, and may purchase call options on debt securities to
the extent described in "Options." In addition, the Portfolio may purchase or
sell interest rate future contracts for hedging purposes as described in
"Futures Contracts." The Portfolio may also enter into repurchase agreements and
reverse repurchase agreements.
The day-to-day management of the Managed Portfolio is the joint
responsibility of Kathryn Hudspeth, Vice President, Equities and Kent Adams,
Vice President, Fixed Income Securities, AUL. Biographical information for these
individuals is listed in the descriptions of the AUL American Equity Portfolio
and the AUL American Bond Portfolio.
THE TACTICAL ASSET ALLOCATION PORTFOLIO
The investment objective of the Tactical Asset Allocation Portfolio is
preservation of capital and competitive investment returns. The Portfolio seeks
to achieve its objective by investing primarily in stocks, United States
Treasury bonds, notes and bills, and money market funds. The Portfolio's
approach seeks positive investment performance during advancing markets, and
maintenance of positive investment performance in declining markets through
reduction in equity exposure. For this purpose, the Portfolio's Sub-Adviser
utilizes forecasting models which evaluate risk versus reward relationships of
different asset classes. These models enable the Sub-Adviser to determine when
to "tactically" adjust the asset allocation through a gradual shifting of assets
among the various categories of investments. The Portfolio will seek to achieve
income yield in excess of the dividend income yield of the Standard & Poor's
Index of 500 Common Stocks.
The principles by which the Sub-Adviser makes its stock selection are based
on value investing combining the attempt to preserve principal while seeking
above average returns. The Sub-Adviser seeks to identify companies whose stocks
are reasonably priced and that the Sub-Adviser believes will perform better than
the current expectations for earnings/cash flow over the next several years.
The Sub-Adviser's focus is on primarily high quality, liquid, large
capitalization stocks. The selection process starts with a "bottoms up"
screening of the market to identify stocks that are statistically undervalued
based on financial characteristics such as Price to Cash Flow, Price to Sales,
Price to Earnings, Dividend Yield, and Return on Equity relative to the stock's
historical norms. The Sub-Adviser seeks to preserve a "margin of safety" which
is critical to the preservation of capital. However, the Sub-Adviser believes
that investors' expecta-
<PAGE>
9
tions and the company's operating performance ultimately determine which
statistically "undervalued" stocks make good investments. The Sub-Adviser's
research staff looks to the future to see which stocks are likely to provide
investors with positive surprises, while avoiding negative surprises, taking
into account projected future cash flows, earnings, and dividends. The
Sub-Adviser's goal is to choose stocks which the market has undervalued based on
"over reaction" to perceived risks.
A stock's fundamentals dominate the selection process. However, technical
analysis is used to improve the timeliness of the Sub-Adviser's trading
decisions. The Sub-Adviser utilizes a series of linear statistical models that
attempt to forecast total stock market returns for both short (12 to 18 months)
and long (36 to 60 months) run time periods. These time series models assist the
Sub-Adviser in comparing the risks and rewards of holding stocks versus treasury
notes and money market funds, and assist the Sub-Adviser in determining when to
"tactically" adjust the asset allocation through a gradual shifting of assets
among stocks, U.S. Treasury bonds and notes, and money market funds. A
combination of fundamental, technical, sentimental, and monetary variables are
used in the forecasting models.
The Portfolio seeks to invest its assets primarily in income producing
common or preferred stock when the Sub-Adviser believes that the relevant market
environment favors profitable investing in those securities. The Portfolio does
not presently intend to invest more than 20% of its total assets in equity
securities which do not pay a dividend. It is anticipated that almost all of the
equity securities in which the Portfolio invests will be listed on a national
securities exchange or on NASDAQ or will be traded in the U.S. over-the-counter
market. The Portfolio may invest up to 25% of its total assets in equity
securities of foreign issuers. It is anticipated that most of the Portfolio's
investments in securities of foreign issuers will be American Depositary
Receipts (ADRs). See "Foreign Securities" for a discussion of some of the risks
involved in foreign investment.
The portion of the Portfolio not invested in equity securities, which will
vary from time to time, will be invested in debt obligations, including U.S.
Government securities, corporate bonds and debentures, high-grade commercial
paper, convertible securities, and certificates of deposit. The Portfolio may
increase its investment in such securities when the Sub-Adviser determines that
equity investment opportunities with desirable risk/reward characteristics are
unavailable, or for temporary defensive purposes. The Portfolio may only invest
in debt securities of U.S. issuers. The Portfolio may also invest in zero coupon
bonds or "strips," which are described under "Zero Coupon Bonds" below.
The Portfolio may invest in corporate debt securities that are rated within
the four highest grades by Moody's (Aaa, Aa, A, or Baa) or S&P (AAA, AA, A, or
BBB). Bonds rated Baa by Moody's or BBB by S&P may have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade bonds. In the event that ratings
decline after the Portfolio's investment in securities, the Sub-Adviser will
consider all such factors as it deems relevant to the advisability of retaining
such securities. Investments in commercial paper are limited to obligations
rated P-1 by Moody's or A-1 by S&P. See Appendix I in the Statement of
Additional Information for further information concerning bond and commercial
paper ratings.
Dean Investment Associates serves as Sub-Adviser to the Portfolio, as
described below under "The Sub-Adviser to the Tactical Asset Allocation
Portfolio." The Portfolio is managed by a team of 10 senior investment
professionals (Central Investment Committee).
John C. Riazzi, CFA, serves as the Senior Portfolio Manager of the
Portfolio and Arvind Sachdeva, CFA, serves as Senior Equity Strategist. Mr.
Riazzi joined the Sub-Adviser in March of 1989. Before being promoted to Vice
President and Director of Consulting Services at the Sub-Adviser, Mr. Riazzi was
responsible for client servicing, portfolio execution and trading operations.
Mr. Riazzi has been a member of the Central Investment Committee and a Senior
Institutional Portfolio Manager since 1990. He received a B.A. in Economics from
Kenyon College in 1985 and was awarded the Chartered Financial Analyst
designation in 1993.
Mr. Sachdeva joined the Sub-Adviser in 1993. Prior to working at the
Sub-Adviser, he was the Senior Security Analyst and Equity Portfolio Manager for
Carillon Advisors, Inc., from January 1985 to September 1993. Carillon Advisors,
Inc., is an investment subsidiary of the Union Central Life Insurance Co.
Because of the Portfolio's flexible investment policy, portfolio turnover
may be greater than for a portfolio that does not allocate assets among various
types of securities.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of its
Board of Directors according to applicable laws of the State of Maryland and the
Fund's Articles of Incorporation and Bylaws. The Fund's directors are James W.
Murphy, Ronald D. Anderson, Leslie Lenkowsky, Leonard D Schutt, and James P.
Shanahan. Information about the directors and the Fund's executive officers may
be found in the Statement of Additional Information under the heading
"Management of the Fund."
INVESTMENT ADVISER-AMERICAN UNITED LIFE INSURANCE COMPANY(R)
The Fund has entered into an Investment Advisory Agreement (the
"Agreement") with AUL (the "Adviser"). The Adviser is a
<PAGE>
10
legal reserve mutual life insurance company existing under the laws of the State
of Indiana. It was originally incorporated as a fraternal society on November 7,
1877, under the laws of the federal government, and reincorporated under the
laws of the State of Indiana in 1933. It is qualified to do business in 46
states and the District of Columbia. As a mutual company, it is owned by and
operated exclusively for the benefit of its policyowners. The Adviser has its
principal business office located at One American Square, Indianapolis, IN
46204.
The Adviser conducts a conventional life insurance, reinsurance, and
annuity business, and manages pension and other accounts. At December 31, 1995,
the Adviser had admitted assets of $6,453,558,834 and had a policyowners'
surplus of $289,363,821. The Adviser is registered with the SEC as an investment
adviser. Such registration does not involve supervision by the Securities and
Exchange Commission (the "SEC") over investment advice.
Subject to overall supervision of the Board of Directors, the Adviser
exercises overall responsibility for the investment and reinvestment of the
Fund's assets. In so doing, the Adviser manages the day-to-day investment
operations of each Portfolio, except the Tactical Asset Allocation Portfolio,
and the composition of the investment portfolio of such Portfolios, including
the purchase, retention, and disposition of the investments, securities, and
cash contained therein in accordance with the Portfolios' investment objectives
and policies as stated in the Fund's Prospectus as may be from time to time in
effect.
AUL has engaged a Sub-Adviser to manage the assets of the Tactical Asset
Allocation Portfolio, as described below.
At the Fund's request, the Adviser provides, without charge, personnel (who
may be the Fund's officers) to render certain clerical, accounting,
administrative and other services to the Fund as may from time to time be
requested. Also, the Adviser furnishes to the Fund, without additional charge,
such administrative and management supervision and office facilities (which may
be the Adviser's own offices) as the Adviser may believe appropriate or as the
Fund may reasonably request. However, the Fund may also hire its own employees
and contract for services to be performed by third parties.
Under the Investment Advisory Agreement, the Adviser is compensated for its
services, by a monthly fee based on an annual percentage of the average daily
net assets of each Portfolio. For each Portfolio, the Fund pays the Adviser a
fee at an annual rate of .50% of the Portfolio's average daily net assets,
except for the Tactical Asset Allocation Portfolio, the fee for which is an
annual rate of .80% of the Portfolio's average daily net assets.
THE SUB-ADVISER TO THE TACTICAL ASSET ALLOCATION PORTFOLIO
AUL has engaged Dean Investment Associates, a Division of C.H. Dean and
Associates, Inc., to serve as Sub-Adviser to the Tactical Asset Allocation
Portfolio. Dean Investment Associates is located at 2480 Kettering Tower,
Dayton, Ohio 45423-2480, and is a registered investment adviser with the
Securities and Exchange Commission. Dean Investment Associates is wholly-owned
by C.H. Dean and Associates, Inc. Founded in 1972, Dean Investment Associates
manages portfolios for individuals and institutional clients worldwide. Dean
Investment Associates provides a full range of investment advisory services and
currently has over $4 billion of assets under management.
Subject to the supervision of the Investment Adviser and the Fund's Board
of Directors, the Sub-Adviser is responsible for the actual management of the
Portfolio and for making decisions to buy, sell or hold any particular security,
and it places orders to buy or sell securities on behalf of the Portfolio.
For its services, the Sub-Adviser receives fees from the Investment Adviser
(and not the Portfolio) in the amount of (i) 68.75% of the advisory fees
received by the Investment Adviser with respect to the Tactical Asset Allocation
Portfolio, less (ii) 50% of the amount of any excess expenses paid by the
Investment Adviser on behalf of the Portfolio pursuant to the expense guarantee
described below.
OTHER EXPENSES
The Fund is responsible for bearing all costs of its operations. Such costs
include fees to the Adviser, shareholder servicing costs, directors' fees and
expenses, legal and auditing fees, custodian fees, registration fees, and
others. Sub-Advisory fees paid to Dean Investment Associates with respect to the
Tactical Asset Allocation Portfolio are borne by the Adviser and not the
Portfolio. Fund expenses directly attributable to a Portfolio are charged to
that Portfolio; other expenses are allocated proportionately among all the
Portfolios in relation to the net assets of each Portfolio. The Adviser has
currently agreed to reduce its fee with respect to a Portfolio to the extent
necessary to prevent the Portfolio's ordinary operating expenses from exceeding
1.0% of the Portfolio's average daily net assets during the year. In the event
that this fee arrangement is insufficient to prevent a Portfolio's aggregate
ordinary operating expenses from exceeding 1.0% of the Portfolio's average daily
net assets during the year, the Adviser has further agreed to assume a
Portfolio's expenses to the extent necessary to limit such expenses to 1.0% of
the Portfolio's average daily net assets during the year. Ordinary operating
expenses include the advisory fee but do not include interest, taxes, brokerage
commissions and other transactional expenses and, if any, legal claims and
liabilities, litigation costs and indemnification payments in connection with
litigation, and other extraordinary expenses. If the Adviser has reduced its fee
with respect to a Portfolio in any given year, in any of the next five
succeeding years in which the Portfolio's ordinary operating expenses do not
exceed 1.0% of average daily net assets, the Adviser's fee will be increased
with respect to that Portfolio by an amount equal to any prior fee reduction;
provided that such fee increase does not cause the Portfolio's expenses to
exceed 1.0% of the Portfolio's average daily net assets in that year. The
<PAGE>
11
Adviser may terminate the policy of reducing its fee and/or assuming Fund
expenses upon 30 days written notice to the Fund and such policy will be
terminated automatically by the termination of the Investment Advisory
Agreement.
PORTFOLIO EXPENSES
On December 31 of the years 1995, 1994, 1993, 1992, 1991, and for the
period from April 10, 1990 (the date the Fund commenced operations) through
December 31, 1990, the total expenses of each Portfolio of the Fund were the
following percentages of average daily net assets for the periods shown. The
Tactical Asset Allocation Portfolio commenced operations July 31, 1995.
<TABLE>
<CAPTION>
Tactical(1)
Year Equity Bond Money Market Managed Asset
---- ------ ---- ------------ ------- -----
<S> <C> <C> <C> <C> <C>
1995 .70% .70% .73% .70% 1.00%
1994 .73% .73% .75% .73% N.A.
1993 .82% .80% .84%. .81% N.A.
1992 .84% .79% .85% .82% N.A.
1991 .80% .71% .85% .94% N.A.
1990 1.00% 1.00% 1.00% .98% N.A.
<FN>
(1) Ratio calculated for period July 31, 1995 through December 31, 1995 on an
annualized basis.
</FN>
</TABLE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES
All of the Portfolios may invest in U.S. Government securities. U.S.
Government securities are obligations of or obligations guaranteed by the U.S.
Government, its agencies or instrumentalities. Securities guaranteed by the U.S.
Government include: (1) direct obligations of the U.S. Treasury (such as
Treasury bills, notes, and bonds) and (2) federal agency obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA certificates).
With respect to these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. Government, and thus they are of the
highest credit quality. Such securities are subject to variations in market
value due to fluctuations in interest rates, but, if held to maturity, are
guaranteed by the U.S. Government to be paid in full. Securities issued by U.S.
Government instrumentalities and certain federal agencies are neither direct
obligations of nor obligations guaranteed by the Treasury. However, they involve
federal sponsorship in one way or another: some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; others are supported only by the credit of the issuing government agency
or instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, and Federal Home Loan Banks.
MORTGAGE-RELATED SECURITIES
The Bond Portfolio, Managed Portfolio, and Tactical Asset Allocation
Portfolio may invest in GNMA certificates, FNMA and FHLMC mortgage-backed
obligations and privately issued mortgage-backed securities.
GNMA Certificates: Government National Mortgage Association (GNMA)
certificates are mortgage-backed securities representing part ownership of a
pool of mortgage loans on which timely payment of interest and principal is
guaranteed by the full faith and credit of the U.S. Government. GNMA
certificates differ from typical bonds since principal is repaid monthly over
the term of the loan rather than returned in a lump-sum at maturity. Although
GNMA guarantees timely payment even if homeowners delay or default, tracking the
"pass-through" payments may, at times, be difficult. Expected payments may be
delayed due to the delays in registering the newly traded paper securities. The
Custodian's policies for crediting missed payments while errant receipts are
tracked down may vary. Although the mortgage loans in the pool will have
maturities of up to 30 years, the actual average life of the GNMA certificates,
typically, will be substantially less, since the mortgages will be subject to
normal principal amortization and may be prepaid prior to maturity.
FNMA and FHLMC Mortgage-Backed Obligations: The Federal National Mortgage
Association ("FNMA"), a federally chartered and privately-owned corporation,
issues pass-through securities representing interests in a pool of conventional
mortgage loans. FNMA guarantees the timely payment of principal and interest but
this guarantee is not backed by the full faith and credit of the U.S.
Government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the United States, issues participation certificates which
represent interests in a pool of conventional mortgage loans. FHLMC guarantees
the timely payment of interest and the ultimate collection of principal and
maintains reserves to protect holders against losses due to default, but the
certificates are not backed by the full faith and credit of the U.S. Government.
As in the case with GNMA certificates, the actual maturity of and realized yield
on particular FNMA and FHLMC pass-through securities will vary based on the
prepayment experience of the underlying pool of mortgages.
<PAGE>
12
Other Mortgage-Backed Securities: Mortgage-backed securities are also
issued by financial institutions such as commercial banks, savings and loan
associations, mortgage banks, and securities broker-dealers (or affiliates of
such institutions established to issue these securities) in the form of either
collateralized mortgage obligations ("CMOs") or mortgage-backed bonds. CMOs are
obligations fully collateralized directly or indirectly by a pool of mortgages
on which payments of principal and interest are dedicated to payment of
principal and interest on the CMOs. Payments are passed through to the holders,
although not necessarily on a pro rata basis, on the same schedule as they are
received. Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMOs). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
It is expected that governmental, government-related, or private entities
may create mortgage loan pools and other mortgage-backed securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-backed securities are developed
and offered to investors, investments in such new types of mortgage-backed
securities will be considered.
Risks of Mortgage-Related Securities: In the case of mortgage pass-through
securities such as GNMA certificates or FNMA and FHLMC mortgage-backed
obligations, early repayment of principal arising from prepayments of principal
on the underlying mortgage loans due to the sale of the underlying property, the
refinancing of the loan, or foreclosure may expose a Portfolio to a lower rate
of return upon reinvestment of principal. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-related security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-related security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the certificates. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-related securities will vary
based upon the prepayment experience on the underlying pool of mortgages.
ZERO COUPON BONDS
The Tactical Asset Allocation Portfolio may invest in zero coupon bonds or
"strips." Zero coupon bonds do not make regular interest payments; rather, they
are sold at a discount from face value. Principal and accredit discount
(representing interest accrued but not paid) are paid at maturity. "Strips" are
debt securities that are stripped of their interest after the securities are
issued, but otherwise are comparable to zero coupon bonds. The issuers of all
zero coupon bonds, and the obligor of all "strips" purchased by the Portfolio,
will be the U.S. Government and its agencies or instrumentalities. The market
value of "strips" and zero coupon bonds generally fluctuates in response to
changes in interest rates to a greater degree than interest-paying securities of
comparable term and quality. The Tactical Asset Allocation Portfolio may also
invest in step coupon securities. For a description of these securities, see
"Zero Coupon and Step Coupon Securities" in the Statement of Additional
Information.
FOREIGN SECURITIES
The Tactical Asset Allocation Portfolio may invest up to 25% of its total
assets in equity securities of foreign issuers. It is anticipated that most of
the Portfolio's investments in securities of foreign issuers will be American
Depositary Receipts (ADRs). The Equity Portfolio may also invest in ADRs. ADRs
are dollar-denominated receipts issued generally by domestic banks and represent
the deposit with the bank of a security of a foreign issuer. ADRs are publicly
traded on exchanges or over-the-counter in the United States.
Foreign securities may be subject to foreign government taxes which would
reduce the income yield on such securities. Foreign investments involve certain
risks, such as political or economic instability of the issuer or of the country
of issue, the difficulty of predicting international trade patterns, fluctuating
exchange rates and the possibility of imposition of exchange controls. Such
securities may also be subject to greater fluctuations in price than securities
of domestic corporations or of the U.S. Government. In addition, there may be
less publicly available information about a foreign company than about a
domestic company. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. There is generally less government regulation
of stock exchanges, brokers and listed companies abroad than in the United
States, and, with respect to certain foreign countries, there is a possibility
of expropriation or confiscatory taxation, or diplomatic developments which
could affect investment in those countries. Finally, in the event of a default
on any such foreign securities, it may be more difficult for the Portfolio to
obtain or to enforce a judgment against the issuers of such securities. See the
Statement of Additional Information regarding additional risks associated with
foreign countries.
REPURCHASE AGREEMENTS
All of the Portfolios may invest in repurchase agreements. Repurchase
agreements are agreements by which a Portfolio purchases a security and obtains
a simultaneous commitment from the seller (a member bank of the Federal Reserve
System or a recognized securities dealer) to repurchase the security at
<PAGE>
13
an agreed upon price and date. The resale price is in excess of the purchase
price and reflects an agreed upon market rate of return unrelated to the coupon
rate on the purchased security. Such transactions afford an opportunity for a
Portfolio to maintain liquidity and earn income over periods of time as short as
overnight.
The underlying securities on repurchase agreements are ordinarily U.S.
Government securities, but may be other securities in which the Portfolio might
otherwise invest. A Portfolio will enter into repurchase agreements only if they
are fully collateralized. The market value of the collateral, including accrued
interest, will equal or exceed the repurchase price, and the collateral will be
in the actual or constructive possession of the Portfolio.
A repurchase agreement subjects a Portfolio to the risk of the inability of
the seller to pay the repurchase price on the delivery date; however, the
underlying security constitutes the collateral for the seller's obligation. In
addition, a Portfolio will enter into repurchase agreements only with parties
that the Adviser considers creditworthy. In the event the seller does default,
the Portfolio may incur (i) a loss if the value of the collateral declines and
(ii) disposition costs in connection with liquidating the collateral. In the
event bankruptcy proceedings are commenced with respect to the seller,
realization of the collateral by the Portfolio may be delayed or limited and a
loss may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceedings.
REVERSE REPURCHASE AGREEMENTS
All of the Portfolios may invest in reverse repurchase agreements. A
reverse repurchase agreement involves the sale of a security by a Portfolio and
its agreement to repurchase the instrument at a specified time and price. A
Portfolio will maintain a segregated account consisting of cash, U.S. Government
securities, or high-grade debt obligations to cover its obligations under
reverse repurchase agreements. A portfolio will limit its investments in reverse
repurchase agreements and other borrowings to no more than one-third of the
current market value of the Portfolio's total assets, as reverse repurchase
agreements may be considered borrowings by a Portfolio under the 1940 Act. The
use of reverse repurchase agreements by a Portfolio creates leverage which
increases a Portfolio's investment risk. If the income and gains on securities
purchased with the proceeds of reverse repurchase agreements exceed the cost of
the agreements, the Portfolio's earnings or net asset value will increase faster
than otherwise would be the case; conversely, if the income and gains fail to
exceed the costs, earnings or net asset value would decline faster than
otherwise would be the case.
BANKING INDUSTRY AND SAVINGS INDUSTRY OBLIGATIONS
All Portfolios may invest in certificates of deposit, time deposits,
bankers' acceptances, and other short-term debt obligations issued by commercial
banks and in certificates of deposit, time deposits, and other short-term
obligations issued by savings and loan associations ("S&Ls"). Certificates of
deposit are receipts from a bank or an S&L for funds deposited for a specified
period of time at a specified rate of return. Bankers' acceptances are time
drafts drawn on commercial banks by borrowers, usually in connection with
international commercial transactions. The Portfolios may also invest in
obligations of foreign branches of commercial banks and foreign banks so long as
the securities are U.S. dollar-denominated. See "Foreign Securities" discussion
in this section for further information regarding risks associated with
investment in foreign securities.
The Portfolios will not invest in obligations issued by a commercial bank
or S&L unless the bank or S&L has total assets of at least $1 billion, or the
equivalent in other currencies, and the institution has outstanding securities
rated A or better by S&P or Moody's, or, if the institution has no outstanding
securities rated by S&P or Moody's, such institution, in the determination of
the Adviser, has creditworthiness similar to institutions having outstanding
securities so rated.
See the Statement of Additional Information "Description of Securities and
Investment Techniques" for further information regarding these obligations.
OPTIONS
In pursuing their investment objectives, the Equity Portfolio, Bond
Portfolio, and Managed Portfolio may engage in certain transactions in put and
call options.
The Equity Portfolio, the Bond Portfolio, and the Managed Portfolio may
each write (i.e., sell) call options ("calls") in furtherance of its respective
investment objective or objectives if (i) after any sale, not more than 25% of
that Portfolio's total as- sets are subject to calls; (ii) the calls are traded
on a domestic securities exchange or board of trade; and (iii) the calls are
"covered."
The Equity Portfolio, the Bond Portfolio, and the Managed Portfolio may
also write put options ("puts") if (i) after any sale, the aggregate of the
exercise prices of all outstanding puts written by the Portfolio do not exceed
25% of the Portfolio's total assets; (ii) the puts are traded on a domestic
securities exchange or board of trade; and (iii) the puts are "secured." Each of
these Portfolios may purchase a put only in a closing purchase transaction to
terminate an obligation on a put which it has written.
A Portfolio may write a call or put option only if the option is "covered"
or "secured" by the Portfolio holding a position in the underlying securities.
The Bond Portfolio and Managed Portfolio may each purchase call options
("calls") on securities to protect against substantial increases in prices of
securities the Portfolio may wish to purchase pending its ability to invest in
such securities in an orderly manner. The Equity Portfolio may purchase a call
only
<PAGE>
14
in a closing purchase transaction to terminate its obligation on a call which it
has written. a portfolio may sell calls it has previously purchased, which could
result in a net gain or loss depending on whether the amount realized on the
sale is more or less than the premium and other transaction costs paid on the
call which is sold.
Risks of Options Transactions: The purchase and writing of options involves
certain risks. During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit from a price
increase in the underlying securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of loss should the
price of the underlying security decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. If a call option purchased by a Portfolio is not sold when it has
remaining value, and if the market price of the underlying security remains less
than or equal to the exercise price, the Portfolio will lose its entire
investment in the option.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Portfolio may be unable to
close out a position. If a Portfolio cannot effect a closing transaction, it
will not be able to sell the underlying security while the previously written
option remains outstanding, even if it might otherwise be advantageous to do so.
Since option premiums paid or received by a Portfolio, as compared to
underlying investments, are small in relation to the market value of such
investments, buying call options offers large amounts of leverage, which could
result in the Portfolios' net asset value being more sensitive to changes in the
value of the underlying securities.
FUTURES CONTRACTS
The Bond Portfolio and the Managed Portfolio may invest in interest rate
futures contracts. These investments may be made solely for the purpose of
hedging against changes in the value of a Portfolio's securities or securities
intended to be purchased due to anticipated changes in interest rates and market
conditions, and not for purposes of speculation.
As a hedging strategy, a Portfolio might purchase an interest rate futures
contract when it is not fully invested in long-term debt securities but wishes
to defer their purchase for some time until it can invest in such securities or
because short-term yields are higher than long-term yields. Such purchase would
enable a Portfolio to earn the income on a short-term security while at the same
time minimizing the effect of all or part of an increase of the market price of
the long-term debt security which the Portfolio intended to purchase in the
future. A Portfolio would sell an interest rate futures contract in order to
continue to receive the income from a long-term debt security while endeavoring
to avoid part or all of the decline in market value of that security which would
accompany an increase in interest rates.
Risks of Futures: There are several risks associated with the use of
futures for hedging purposes. While a Portfolio's hedging transactions may
protect the Portfolio against adverse movements in the general level of interest
rates, such transactions could also preclude the opportunity to benefit from
favorable movements in the level of interest rates. There can be no guarantee
that there will be a correlation between price movements in the hedging vehicle
and in the securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in a Portfolio and the hedging vehicle so
that the Portfolio return might have been better had hedging not been attempted.
The successful use of futures is dependent on the Adviser's ability to predict
correctly movements in the direction of the stock market and no assurance can be
given that the Adviser's judgment in this respect will be correct.
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures contract. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent the Portfolio from liquidating an unfavorable position
and the Portfolio would remain obligated to meet margin requirements until the
position is closed.
A Portfolio will only enter into futures contracts which are standardized
and traded on a U.S. exchange or board of trade. A Portfolio will not enter into
a futures contract if immediately thereafter the initial margin deposits for
futures contracts held by the Portfolio plus premiums paid by it for open
futures option positions, less the amount by which any such positions are
"in-the-money," would exceed 5% of the Portfolio's total assets.
OTHER INVESTMENT COMPANIES
Each of the Fund's Portfolios may invest in shares issued by other
investment companies. The Tactical Asset Allocation Portfolio may invest up to
10% of its total assets in money market funds, within limits imposed by the 1940
Act upon investment by the Portfolio in other investment companies. If the
forecasting models employed by the Sub-Adviser predict a decline in the stock
market, the Sub-Adviser expects to reduce equity exposure and increase the
Portfolio's cash position, including investment in money market funds. A
Portfolio is limited in the degree to which it may invest in shares of another
investment company in that it may not, at the time of the purchase, (1) acquire
more than 3% of the outstanding voting shares of the investment company, (2)
invest more than 5% of
<PAGE>
15
the Portfolio's total assets in the investment company, or (3) invest more than
10% of the Portfolio's total assets in all investment company holdings. As a
shareholder in any investment company, a Portfolio will bear its ratable share
of the investment company's expenses, including management fees in the case of a
management investment company.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions applicable to each of
the Portfolios. The restrictions are stated in the SAI, and some are briefly
described in this paragraph. A Portfolio will not, with respect to 75% of its
assets, invest more than 5% of its assets in securities of any one issuer,
except that this restriction does not apply to U.S. Government securities. A
Portfolio will not, with respect to 75% of its assets, invest in more than 10%
of any one issuer's outstanding voting securities. No Portfolio will concentrate
more than 25% of its assets in any particular industry, except that this
restriction does not apply to U.S. Government securities and, with respect to
the Money Market Portfolio, to securities or obligations (other than commercial
paper) issued by domestic branches of U.S. banks. In addition, no Portfolio will
borrow money or pledge its assets, with certain exceptions that are set forth
under "Investment Restrictions" in the SAI.
Each Portfolio is subject to the above-referenced and other investment
restrictions, all of which are stated in the SAI. Those restrictions, together
with each Portfolio's investment objective or objectives as set forth under
"Investment Objectives and Policies," are fundamental policies of each existing
Portfolio and may not be changed with respect to any Portfolio without the
approval of a majority of the outstanding voting shares of that Portfolio. The
vote of a majority of the outstanding voting shares of a Portfolio means the
vote at an annual or special meeting of: (i) 67% or more of the voting
securities present at such meeting, if the holders of more than 50% of the
outstanding voting shares of such Portfolio are present or represented by proxy;
or (ii) more than 50% of the outstanding voting securities of such Portfolio,
whichever is less.
PORTFOLIO TRANSACTIONS AND TURNOVER
Pursuant to the Investment Advisory Agreement (and the Sub-Advisory
Agreement with respect to the Tactical Asset Allocation Portfolio), the Adviser
or Sub-Adviser places orders for the purchase and sale of portfolio investments
for the Fund's Portfolios with brokers or dealers selected by it in its
discretion. In executing transactions, the Adviser or Sub-Adviser will attempt
to obtain the best execution for a Portfolio taking into account such factors
deemed appropriate by the Adviser or Sub-Adviser. In effecting purchases and
sales of portfolio securities for the account of the Fund, the Adviser or
Sub-Adviser may pay higher commission rates than the lowest available when the
Adviser or Sub-Adviser believes it is reasonable to do so in light of the value
of the brokerage and research services provided by the broker effecting the
transaction. In the case of securities traded on the over-the-counter markets,
there is generally no stated commission, but the price includes an undisclosed
commission or markup. For a more complete description of procedures on effecting
portfolio transactions, see the SAI.
Some securities considered for investment by the Fund may also be
appropriate for other accounts served by the Adviser or Sub-Adviser, including
the Adviser's or Sub-Adviser's general account. If a purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these other accounts served by the Adviser or Sub-Adviser is considered
at or about the same time, it is the policy of AUL and the Sub-Advisor not to
favor any one account or Portfolio over another, and any purchase or sale orders
executed contemporaneously are allocated at the average price and as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each account or Portfolio. While it is conceivable that in
certain instances this Procedure could adversely affect the price or number of
shares involved in a particular Portfolio transaction, it is believed that the
procedure generally contributes to better overall execution of the Fund's
portfolio transactions. This allocation method and the results of such
allocations, are subject to periodic review by the Fund's Adviser, Sub-Adviser,
and Board of Directors.
For reporting purposes, each Portfolio's turnover rate is calculated by
dividing the value of the lesser of purchases or sales of portfolio securities
for the fiscal year by the monthly average of the value of portfolio securities
owned by the Portfolio during the fiscal year. In determining such portfolio
turnover, all securities whose maturities at the time of acquisition were one
year or less are excluded. A 100% portfolio turnover rate would occur, for
example, if all of the securities in the Portfolio (other than short-term
securities) were replaced once during the fiscal year. The turnover rate for
each of the Portfolios is listed in the section titled "Condensed Financial
Information" in this Prospectus.
The turnover rate for each of the Portfolios will vary from year to year,
and, depending on market conditions, turnover could be greater in periods of
unusual market movement and volatility. A higher turnover rate would result in
greater brokerage commissions or other transactional expenses which must be
borne, directly or indirectly, by a Portfolio and ultimately by the Portfolio's
shareholders.
<PAGE>
16
DESCRIPTION OF THE FUND'S SHARES
The Fund was organized as a Maryland Corporation on July 26, 1989, and
currently consists of five separately managed Portfolios. The Board of Directors
may establish additional portfolios in the future. The capitalization of the
Fund consists of 125,000,000 authorized shares of common stock, par value $0.001
per share with 10,000,000 unallocated shares. When issued, shares of the Fund
are fully paid, non-assessable, and freely transferable. Maryland corporate law
does not require the Fund to hold annual shareholder meetings, although special
meetings may be called for a specific Portfolio, or for the Fund as a whole, for
purposes such as electing or removing directors, changing fundamental policies,
or approving an advisory contract.
In accordance with current law, it is anticipated that AUL will request
voting instructions from owners or participants of any Contracts that are funded
by separate accounts that are registered investment companies under the
Investment Company Act of 1940 and will vote shares in any such separate account
attributable to the Contracts in proportion to the voting instructions received.
AUL may vote shares of any Portfolio, if any, that it owns beneficially in its
own discretion. In connection with the organization of the Fund, AUL invested in
shares of the Portfolios to provide the initial capital. Thus, until a
significant number of shares of the Portfolios are sold in connection with
Contracts funded by registered separate accounts, AUL may control the
Portfolios. It is anticipated that AUL and one or more of its separate accounts
will be the sole record shareholders of the Fund.
DIVIDENDS, DISTRIBUTION AND TAXES
FEDERAL INCOME TAX STATUS
Each Portfolio intends to qualify and to elect to be treated each year as a
regulated investment company under Sub-chapter M of the Internal Revenue Code
(the "Code"). Each Portfolio that qualifies as a regulated investment company
will not be subject to Federal income tax on the net income (including capital
gains) distributed by it. Such income and capital gains distributions are
automatically reinvested in additional shares of the Portfolio unless the
shareholder (separate account) elects otherwise.
Distributions of any net investment income and of any net realized
short-term capital gains are treated as ordinary income for tax purposes in the
hands of the shareholder (separate account). The excess of any net long-term
capital gains over the short-term capital losses will, to the extent
distributed, be treated as long-term capital gains in the hands of the separate
account regardless of the length of time the separate account may have held the
shares.
Reference is made to the Prospectus for the separate account or accounts
that invest in the Fund and/or the applicable contract for information regarding
the federal income tax treatment of distributions to the separate account or
accounts.
DISTRIBUTIONS AND DIVIDENDS
Any distributions made by a Portfolio will be automatically reinvested in
additional shares of that Portfolio, unless an election is made on behalf of a
separate account to receive distributions in cash. Dividends or distributions by
a Portfolio other than the Money Market Portfolio will reduce the per-share net
asset value by the per-share amount so paid.
PURCHASE AND REDEMPTION OF SHARES
As of the date of this Prospectus, shares of the Fund are offered only
for purchase by one or more separate accounts of AUL to serve as an investment
medium for the Contracts issued by AUL. Shares of each Portfolio may be offered
in the future to separate accounts of other affiliated or unaffiliated insurance
companies to serve as the underlying investments for variable annuity contracts.
Shares of each Portfolio are sold at their respective net asset values (without
a sales charge) next computed after receipt of a purchase order by AUL at its
Home Office, on behalf of a separate account. Redemptions will be effected by
the separate accounts to meet obligations under the Contracts. Owners of the
Contracts do not deal directly with the Fund with respect to acquisition,
redemption, or transfer of shares, and should refer to the Contract (or
Certificate thereunder), or if applicable, the prospectus for the separate
account for information on allocation of premiums and on transfers of account
value.
Shares of a Portfolio may be redeemed on any day that AUL is open for
business. Redemptions are effected at the per share net asset value next
determined after receipt of the redemption request by AUL at its home office, on
behalf of a separate account. Redemption proceeds normally will be paid within
seven days following receipt of instructions in proper form. The right of
redemption may be suspended by the Fund (i) when the New York Stock Exchange is
closed (other than customary weekend and holiday closings) or for any period
during which trading thereon is restricted; (ii) because an emergency exists, as
determined by the Securities and Exchange Commission, making disposal of
portfolio securities or valuation of new assets not reasonably practicable; and
(iii) whenever the Securities and Exchange Commission has by order permitted
such suspension or postponement for the protection of shareholders.
<PAGE>
17
NET ASSET VALUE
The net asset value is determined by dividing the value of each Portfolio's
net assets by the number of its shares outstanding. That determination is made
once each business day, Monday through Friday, at or about 4 p.m., eastern
standard time ("EST"). The determination may be made earlier than 4 p.m. EST if
the markets close earlier than 4 p.m. EST and it is possible to determine the
net asset value at that time. Net asset value will not be determined on days
that the New York Stock Exchange is closed, on any federal holidays or on days
when AUL is not open for business. Traditionally, in addition to federal
holidays, AUL is not open for business on the day after Thanksgiving and either
the day before or after Christmas or Independence Day. The value of the assets
of each Portfolio other than the Money Market Portfolio is based on actual or
estimated market value, with special provisions for assets not having readily
available market quotations and for short-term debt securities. The net asset
value per share of each Portfolio except the Money Market Portfolio will
fluctuate in response to changes in market conditions and other factors. The
Money Market Portfolio will attempt to maintain a constant net asset value per
share of $1.00, which will not fluctuate in response to changes in market
conditions, although there can be no assurance that this will be achieved.
The Money Market Portfolio attempts to maintain a constant net asset value
per share by using the amortized cost method of valuation for its portfolio
securities. This involves valuing a security at cost on the date of acquisition
and thereafter assuming a constant accretion of a discount or amortization of a
premium to maturity. See the Statement of Additional Information for a
description of certain conditions and procedures followed by the Portfolio in
connection with amortized cost valuation.
PERFORMANCE INFORMATION
The Fund may, from time to time, include the yield and effective yield of
the Money Market Portfolio, the yield of the remaining Portfolios, and the total
return of all Portfolios in advertisements and sales literature. Performance
information for the Fund will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account
to which the Fund offers its shares.
Current yield for the Money Market Portfolio will be based on income
received by a hypothetical investment over a given 7-day period (less expenses
accrued during the period), and then "annualized" (i.e., assuming that the 7-day
yield would be received for 52 weeks, stated in terms of an annual percentage
return on the investment). "Effective yield" for the Money Market Portfolio is
calculated in a manner similar to that used to calculate yield, but reflects the
compounding effect of earnings on reinvested dividends.
For the remaining Portfolios, any quotations of yield will be based on all
investment income per share earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the maximum public offering price per share on the last day of the period.
Quotations of average annual total return for any Portfolio will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in the Portfolio over periods of one, five and ten years
(or if less, up to the life of the Portfolio), will reflect the deduction of a
proportional share of Portfolio expenses (on an annual basis), and will assume
that all dividends and distributions are reinvested when paid. Quotations of
total return may also be shown for other periods.
Quotations of yield or total return for the Fund will not take into account
charges or deductions against any separate account to which Fund shares are sold
or charges and deductions against the Contracts issued by AUL. Performance
information for any Portfolio reflects only the performance of a hypothetical
investment in the Portfolio during the particular time period on which the
calculations are based. Performance information should be considered in light of
the Portfolio's investment objective or objectives, policies and
characteristics, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future. For a description of the methods used to determine yield and total
return for the Portfolio, see "Performance Information" in the Statement of
Additional Information.
LEGAL COUNSEL
Dechert Price & Rhoads, Washington, D.C., has passed upon certain legal
matters in connection with the shares offered by this Prospectus, and also acts
as outside counsel to the Fund.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One American Square, Indianapolis, Indiana, serve
as independent accountants of the Fund.
<PAGE>
18
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
relating to the AUL American Series Fund, Inc. A summary of the Table of
Contents of the Statement of Additional Information is set forth below:
<TABLE>
<CAPTION>
Description Page
<S> <C>
INTRODUCTION............................................................................................................. 3
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES...................................................................... 3-9
INVESTMENT RESTRICTIONS.................................................................................................. 9-10
MANAGEMENT OF THE FUND................................................................................................... 10-11
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................................................................... 11-12
NET ASSET VALUE.......................................................................................................... 12
PERFORMANCE INFORMATION.................................................................................................. 13
TAXATION................................................................................................................. 14
OTHER INFORMATION........................................................................................................ 14-15
FINANCIAL STATEMENTS..................................................................................................... 15
APPENDIX I............................................................................................................... 16
</TABLE>
A Statement of Additional Information may be obtained by calling or writing to
AUL at the telephone number and address in the front of this Prospectus.
<PAGE>
19
================================================================================
No dealer, salesman or any other person is authorized by the AUL
American Series Fund to give any information or to make any
representation other than as contained in this Prospectus in connection
with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended,
with respect to the offering herein described. For further information
with respect to the AUL American Series Fund, reference is made thereto
and the exhibits filed therewith or incorporated therein, which include
all contracts or documents referred to herein.
================================================================================
AUL AMERICAN SERIES FUND, INC.
Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46204
PROSPECTUS
Dated: May 1, 1996
================================================================================
<PAGE>
1
STATEMENT OF ADDITIONAL INFORMATION
AUL AMERICAN SERIES FUND, INC.
May 1, 1996
- --------------------------------------------------------------------------------
AUL American Series Fund, Inc. (the "Fund") is an open-end, diversified
management investment company currently consisting of five separate
investment portfolios: the AUL American Equity Portfolio ("Equity
Portfolio"), the AUL American Bond Portfolio ("Bond Portfolio"), the
AUL American Money Market Portfolio ("Money Market Portfolio"), the AUL
American Managed Portfolio ("Managed Portfolio"), and the AUL American
Tactical Asset Allocation Portfolio ("Tactical Asset Allocation
Portfolio")
This Statement of Additional Information is intended to supplement the
information provided to investors in the Prospectus dated May 1, 1996,
of AUL American Series Fund, Inc., and has been filed with the
Securities and Exchange Commission as part of the Fund's Registration
Statement. Investors should note, however, that this Statement of
Additional Information is not itself a prospectus and should be read
carefully in conjunction with the Fund's Prospectus and retained for
future reference. The contents of this Statement of Additional
Information are incorporated by reference in the Prospectus in their
entirety. A copy of the Prospectus may be obtained free of charge from
the Fund at the address and telephone number listed below.
- --------------------------------------------------------------------------------
AUL American Series Fund, Inc.
One American Square
Indianapolis, Indiana 46204
(800) 634-1629
<PAGE>
2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Description Page
INTRODUCTION............................................................................................................... 3
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES........................................................................ 3-9
U.S. Government Securities............................................................................................... 3
Mortgage-Related Securities.............................................................................................. 3
GNMA Certificates....................................................................................................... 3
FNMA and FHLMC Obligations.............................................................................................. 4
Collateralized Mortgage Obligations..................................................................................... 4
Other Mortgage-Backed Securities........................................................................................ 4
Repurchase Agreements.................................................................................................... 5
Reverse Repurchase Agreements............................................................................................ 5
Banking Industry and Savings Industry Obligations........................................................................ 5
Options.................................................................................................................. 6
Risks Associated with Options........................................................................................... 6
Futures Contracts........................................................................................................ 7
Limitations............................................................................................................. 7
Risks Associated with Futures........................................................................................... 8
INVESTMENT RESTRICTIONS.................................................................................................... 9-10
MANAGEMENT OF THE FUND..................................................................................................... 11-12
Directors and Officers................................................................................................... 11
Compensation of Directors................................................................................................ 11
The Investment Adviser................................................................................................... 11
The Sub-Adviser.......................................................................................................... 12
Purchases and Redemptions................................................................................................ 12
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................................................................... 12-13
Brokerage and Research Services.......................................................................................... 12
NET ASSET VALUE............................................................................................................ 13
PERFORMANCE INFORMATION.................................................................................................... 13-14
TAXATION................................................................................................................... 14-15
Distributions............................................................................................................ 15
OTHER INFORMATION.......................................................................................................... 15
Capitalization........................................................................................................... 15
Voting Rights............................................................................................................ 15
Custodian, Transfer Agent, and Dividend Disbursing Agent................................................................. 15
Independent Accountants.................................................................................................. 15
Counsel.................................................................................................................. 15
FINANCIAL STATEMENTS....................................................................................................... 16
APPENDIX I................................................................................................................. 16
Corporate Bonds.......................................................................................................... 16
Commercial Paper......................................................................................................... 16
</TABLE>
<PAGE>
3
INTRODUCTION
This Statement of Additional Information is designed to elaborate upon the
discussion of certain securities and investment techniques which are described
in the Prospectus. The more detailed information contained herein is intended
solely for investors who have read the Prospectus and are interested in a more
detailed explanation of certain aspects of the Fund's securities and investment
techniques. Captions and defined terms in this Statement of Additional
Information generally correspond to like captions and terms in the Prospectus.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES
All of the Portfolios may invest in U.S. Government securities. U.S.
Government securities are obligations of, or obligations guaranteed by, the U.S.
Government, its agencies or instrumentalities. Direct obligations of the U.S.
Government include a variety of Treasury securities which differ with respect to
coupons, maturities, and dates of issue. Treasury bills have a maturity of one
year or less. Treasury notes have maturities of one to ten years, and Treasury
bonds generally have a maturity of greater than ten years. Securities guaranteed
by the U.S. Government include federal agency obligations guaranteed as to
principal and interest by the U.S. Treasury (such as Government National
Mortgage Association ("GNMA") certificates and Federal Housing Administration
debentures). The payment of principal and interest of these securities is
unconditionally guaranteed by the U.S. Government. They are thus of the highest
credit quality. Such securities are subject to variations in market value due to
fluctuations in interest rates but, if held to maturity, the United States is
directly obligated or guarantees to pay them in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor obligations guaranteed by, the
U.S. Treasury. However, they involve federal sponsorship in one way or another:
some are supported by the issuer's right to borrow from the U.S. Government;
others are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal National Mortgage Association ("FNMA"), Federal Home Loan
Bank, Federal Land Banks, Farmers Financing Bank, Farm Credit Banks, and the
Tennessee Valley Authority.
MORTGAGE-RELATED SECURITIES
The Bond Portfolio, the Managed Portfolio, and the Tactical Allocation
Portfolio may invest in GNMA certificates and FNMA and Federal Home Loan
Mortgage Corporation ("FHLMC") mortgage-backed obligations. Mortgage-related
securities are interests in pools of mortgage loans made to residential home
buyers, including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks, and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental and government-related
organizations.
GNMA Certificates: GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks, and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.
Interests in pools of mortgage loans differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities provide a periodic payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
periodic payments made by the individual borrowers on the residential mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
refinancing, foreclosure or sale of the underlying residential property, net of
fees or costs which may be incurred. Mortgage-related securities issued by GNMA
are described as "modified pass-through" securities. These securities entitle
the holder to receive all interest and principal payments owed on the mortgage
pool, net of certain fees, at the scheduled payment dates, regardless of whether
or not the mortgagor actually makes the payment. Although GNMA guarantees timely
payment even if homeowners delay or default, tracking the "pass-through"
payments may, at times, be difficult.
Although the mortgage loans in the pool will have maturities of up to 30
years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Early repayments of principal
on the underlying mortgages may expose a Portfolio to a lower rate of return
upon reinvestment of principal. Prepayment rates vary widely and may be affected
by changes in market interest rates. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of the GNMA certificates. Conversely, when interest rates are rising, the rate
of prepayment tends to decrease, thereby lengthening the actual average life of
the GNMA certificates. Accordingly, it is not possible to accurately predict the
average life of a particular pool. Reinvestment of prepayments may
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4
occur at higher or lower rates than the original yield on the certificates. Due
to the prepayment feature and the need to reinvest prepayments of principal at
current rates, GNMA certificates can be less effective than typical bonds of
similar maturities at "locking in" yields during periods of declining interest
rates, although they may have comparable risks of decline in value during
periods of rising interest rates.
FNMA and FHLMC Obligations: FNMA, a federally-chartered and privately-owned
corporation, issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. Government. FNMA is a government sponsored corporation owned entirely by
private stockholders. It is subject to general regulation by the Secretary of
Housing and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks, credit unions,
and mortgage bankers.
FHLMC, a corporate instrumentality of the United States, was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the 12 Federal Home Loan
Banks. FHLMC issues Participation Certificates ("PCs") which represent interests
in conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal and maintains
reserves to protect holders against losses due to default, but PCs are not
backed by the full faith and credit of the U.S. Government. As is the case with
GNMA certificates, the actual maturity of and realized yield on particular FNMA
and FHLMC pass-through securities will vary based on the prepayment experience
of the underlying pool of mortgages.
Collateralized Mortgage Obligations (CMOs): A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal are paid, in most cases, semi-annually. CMOs may
be collateralized by whole mortgage loans, but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying investors, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner-than-desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
portfolios (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond
offering are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The portfolio A, B, and C
Bonds all bear current interest. Interest on the portfolio Z Bond is accrued and
added to the principal; a like amount is paid as principal on the portfolio A,
B, or C Bond currently being paid off. When the portfolio A, B, and C Bonds are
paid in full, interest and principal on the portfolio Z Bond begin to be paid
currently. With some CMOs, the issuer acts as a conduit to allow loan
originators (usually builders or savings and loan associations) to borrow
against their loan portfolios.
Certain classes of CMOs pay the holders only the interest paid on the
underlying mortgages or mortgage pass-through securities ("interest-only
class"). Other classes pay the holders only the principal paid on the underlying
mortgages or mortgage pass-through securities ("principal-only class").
Interest-only and principal-only classes of CMOs purchased by a Portfolio are
currently considered to be illiquid securities subject to the 10% limitation on
investment in illiquid securities. See "Investment Restrictions."
Other Mortgage-Backed Securities: Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and other
secondary market issuers also create pass-through pools of conventional
residential mortgage loans. In addition, such issuers may be the originators
and/or servicers of underlying mortgage loans as well as the guarantors of the
mortgage-backed securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and government-related
pools, because there are no direct or indirect government or agency guarantees
of payments in the former pools. Timely payment of interest and principal of
these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit. The insurance and guarantees are issued by governmental entities,
private insurers, and the mortgage poolers. Such insurance, guarantees, and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-backed security meets a Portfolio's investment quality
standards. There can be no assurance that the private insurers or guarantors can
meet their obligations under the insurance policies or guarantee arrangements.
All Portfolios may buy mortgage-backed securities without insurance or
guarantees, if the Adviser determines that the securities meet a Portfolio's
quality standards. Although the market for such securities is becoming
increasingly liquid, securities by certain private organizations may not be
readily
<PAGE>
5
marketable. A Portfolio will not purchase mortgage-backed securities or any
other assets which, in the opinion of the Adviser, are illiquid if, as a result,
more than 10% of the value of a Portfolio's total assets will be illiquid. As
new types of mortgage-backed securities are developed and offered to investors,
the Adviser will, consistent with a Portfolio's investment objectives, policies,
and quality standards, consider making investments in such new types of
mortgage-backed securities.
REPURCHASE AGREEMENTS
All Portfolios may invest in repurchase agreements. If a Portfolio acquires
a security from a bank or broker-dealer, it may simultaneously enter into a
repurchase agreement with the seller wherein the seller agrees at the time of
sale to repurchase the security at a mutually agreed upon time and price. The
term of such an agreement is generally quite short, possibly overnight or for a
few days, although it may extend over a number of months (up to one year) from
the date of delivery. The resale price is in excess of the purchase price by an
amount which reflects an agreed upon market rate of return, effective for the
period of time the Portfolio is invested in the security. This results in a
fixed rate of return protected from market fluctuations during the term of the
agreement. This rate is not tied to the coupon rate on the security subject to
the repurchase agreement.
Under the Investment Company Act of 1940 (the "1940 Act"), repurchase
agreements are considered to be loans by the purchaser collateralized by the
underlying securities. The Fund's Adviser (or Sub-Adviser, in the case of the
Tactical Asset Allocation Portfolio) will monitor the value of the underlying
securities at the time a repurchase agreement is entered into and at all times
during the term of the agreement to ensure that its value always equals or
exceeds the agreed upon repurchase price to be paid to the Portfolio. The
Adviser or Sub-Adviser will also evaluate the creditworthiness and financial
responsibility of the banks and broker-dealers with which the Portfolios enter
into repurchase agreements.
A Portfolio may not enter into a repurchase agreement having more than
seven days remaining to maturity if, as a result, such agreements together with
any other securities which are not readily marketable, would exceed ten percent
(10%) of the net assets of the Portfolio. If the seller should become bankrupt
or default on its obligations to repurchase the securities, a Portfolio may
experience delay or difficulties in exercising its rights to the securities held
as collateral and might incur a loss if the value of the securities should
decline. A Portfolio also might incur disposition costs in connection with
liquidation of the securities.
REVERSE REPURCHASE AGREEMENTS
All of the Portfolios may invest in reverse repurchase agreements. Reverse
repurchase agreements involve the sale of a security by a Portfolio and its
agreement to repurchase the instrument at a specified time and price.
A Portfolio will use the proceeds of a reverse repurchase agreement to
purchase other money market instruments which either mature at a date
simultaneous with or prior to the expiration of the reverse repurchase agreement
or which are held under an agreement to resell maturing as of that time. A
Portfolio will enter into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction. However, reverse
repurchase agreements involve the risk that the market value of securities
retained by the Portfolio may decline below the repurchase price of the
securities sold by the Portfolio which it is obligated to repurchase.
Under the 1940 Act, reverse repurchase agreements may be considered to be
borrowings by the seller. A Portfolio may not enter into a reverse repurchase
agreement if, as a result, its current obligations under such agreements would
exceed, when combined with the total borrowings, one-third of the current market
value of the Portfolio's total assets (less all its liabilities other than
obligations under such agreements).
A Portfolio may enter into reverse repurchase agreements with banks or
broker-dealers. Entry into such agreements with broker-dealers requires the
creation and maintenance of a segregated account consisting of U.S. Government
securities or cash or cash equivalents equal to its obligations under reverse
repurchase agreements.
BANKING INDUSTRY AND SAVINGS INDUSTRY OBLIGATIONS
All Portfolios may invest in (i) certificates of deposit, time deposits,
bankers' acceptances, and other short-term debt obligations issued by commercial
banks; and (ii) certificates of deposit, time deposits, and other short-term
obligations issued by savings and loan associations ("S&L").
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or S&L for a definite period of time and earning
a specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, which are normally drawn by an importer or exporter to pay for
specific merchandise, and which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Fixed-time deposits are bank obligations payable at a stated maturity
date and bearing interest at a fixed rate. Fixed-time deposits may be withdrawn
on demand by the investor, but may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed-time deposit to a third party, because there is
no market for such deposits. A Portfolio will not invest in fixed-time deposits
(i) which are not subject to prepayment or (ii) which provide for withdrawal
penalties upon prepayment (other than overnight deposits), if, in the aggregate,
more than
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6
10% of its assets would be invested in such deposits, in repurchase agreements
maturing in more than seven days, and in other illiquid assets.
The Money Market, Managed, and Tactical Asset Allocation Portfolios may
invest in U.S. dollar-denominated obligations of foreign branches of U.S. banks
and foreign banks. Obligations of foreign banks involve somewhat different
investment risks than those affecting obligations of U.S. banks, which include:
(i) the possibility that their liquidity could be impaired because of future
political and economic developments; (ii) their obligations may be less
marketable than comparable obligations of U.S. banks; (iii) a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations; (iv) foreign deposits may be seized or nationalized; (v) foreign
governmental restrictions, such as exchange controls, may be adopted which might
adversely affect the payment of principal and interest on those obligations; and
(vi) the selection of those obligations may be more difficult because there may
be less publicly available information concerning foreign banks and/or because
the accounting, auditing, and financial reporting standards, practices, and
requirements applicable to foreign banks may differ from those applicable to
U.S. banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
OPTIONS
In pursuing their investment objectives, the Equity Portfolio, the Bond
Portfolio, and the Managed Portfolio may engage in the writing (i.e., selling)
of put options ("puts") and call options ("calls") on securities. The Bond
Portfolio and the Managed Portfolio may also purchase calls on securities to
protect against substantial increases in prices of securities the Portfolio
intends to purchase pending its ability to invest in such securities in an
orderly manner. The Equity Portfolio may purchase a call only in a closing
purchase transaction to terminate its obligation on a call which it has written.
The Equity Portfolio, the Bond Portfolio and the Managed Portfolio may purchase
a put only in a closing purchase transaction to terminate its obligation on a
put which it has written.
An option on a security is a contract that gives the holder of the option,
in return for a premium, the right to buy from (in the case of a call) or sell
to (in the case of a put) the writer of the option the underlying security at a
specified exercise price at any time during the term of the option. The writer
of an option on a security has the obligation upon exercise of the option to
deliver the underlying security (in the case of a call) upon payment of the
exercise price or to pay the exercise price (in the case of a put) upon delivery
of the underlying security.
A Portfolio may write calls and puts only if they are "covered" or
"secured." In the case of a call on a security, the option is "covered" if the
Portfolio owns the security underlying the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or, if
additional cash consideration is required, cash or cash equivalents in such
amount are placed in a segregated account by its Custodian) upon conversion or
exchange of other securities held by the Portfolio. A put is secured if the
Portfolio maintains cash, cash equivalents or U.S. Government securities with a
value equal to the exercise price in a segregated account or holds a put on the
same underlying security at an equal or greater exercise price.
If an option written by a Portfolio expires unexercised, the Portfolio
realizes a capital gain equal to the premium received at the time the option was
written. If an option purchased by a Portfolio expires unexercised, the
Portfolio realizes a capital loss equal to the premium paid. Prior to the
earlier of exercise or expiration of a call, it may be closed out by an
offsetting purchase of a call option of the same series (type, exchange,
underlying security, exercise price and expiration).
A Portfolio will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from writing
the option. If the cost of closing the option is more, the Portfolio will
realize a capital loss. The principal factors affecting the market value of a
call include supply and demand, interest rates, the current market price of the
underlying security in relation to the exercise price of the option, the
volatility of the underlying security, and the time remaining until the
expiration date.
The premium received for an option written by a Portfolio is recorded as a
deferred credit. The value of the option is marked-to-market daily and is valued
at the closing price on the exchange or board of trade on which it is traded,
or, if no closing price is available, at the mean between the last bid and asked
prices.
Risks Associated with Options: There are several risks associated with
transactions in options. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when, and how to use an option involves
the exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. If a Portfolio were unable to close out a
covered call option it had written on a security, it would not be able to sell
the underlying security unless the option expired without exercise. As a writer
of a covered call option, a Portfolio forgoes, during the option's life, the
opportunity to profit from increases in the market value of the security
covering the call option above the sum of the premium and the exercise price of
the call.
If trading were suspended in an option written by a Portfolio, the
Portfolio would not be able to close out the option. If restrictions on exercise
were imposed, the Portfolio might be unable to exercise an option it has
purchased.
<PAGE>
7
FUTURES CONTRACTS
The Bond Portfolio and the Managed Portfolio may invest in interest rate
futures contracts. An interest rate futures contract provides for the future
sale by one party and purchase by another party of a specified quantity of a
financial instrument at a specified price and time. A public market exists in
futures contracts covering various financial instruments including U.S. Treasury
bonds, U.S. Treasury notes, GNMA certificates, three-month U.S. Treasury bills,
90-day commercial paper, bank certificates of deposit, and Eurodollar
certificates of deposit.
To the extent required by regulatory authorities, each investing Portfolio
will limit its use of futures contracts to hedging and related transactions so
that a Portfolio will not be deemed a commodity pool. For example, the Bond
Portfolio and the Managed Portfolio each might use futures contracts to hedge
against anticipated changes in interest rates that might adversely affect either
the value of the Portfolio's securities or the price of the securities which the
Portfolio may wish to purchase. The hedging techniques used by these Portfolios
may include sales of futures contracts as an offset against the effect of
expected increases in interest rates, and purchases of futures contracts an
offset against the effect of expected declines in interest rates. Although other
techniques could be used to reduce a Portfolio's exposure to interest rate
fluctuations, a Portfolio may be able to hedge its exposure more effectively and
perhaps at a lower cost by using futures contracts.
A Portfolio will only enter into futures contracts which are standardized
and traded on a U.S. exchange, board of trade, or similar entity.
If a purchase or sale of a futures contract is made by a Portfolio, the
Portfolio is required to deposit with its Custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. Each investing Portfolio expects to earn interest income on its
initial margin deposits. A futures contract held by a Portfolio is valued daily
at the official settlement price of the exchange on which it is traded. Each day
the Portfolio pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking-to-market." Variation margin does not represent a borrowing or loan by
a Portfolio but is instead settlement between the Portfolio and the broker of
the amount one would owe the other if the futures contract expired. In computing
daily net asset value, each Portfolio will mark-to-market its open futures
positions.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security, and delivery month). If an offsetting purchase
price is less than the original sale price, the Portfolio realizes a capital
gain, or if it is more, the Portfolio realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Portfolio
realizes a capital gain, or if it is less, the Portfolio realizes a capital
loss. The transaction costs must also be included in these calculations.
Limitations: A Portfolio will not enter into a futures contract if,
immediately thereafter, the initial margin deposits for futures contracts held
by that Portfolio would exceed 5% of the Portfolios' total assets.
When purchasing a futures contract, a Portfolio must maintain with its
Custodian (or broker, if legally permitted) cash, U.S. Government securities, or
other liquid high grade debt obligations (including any margin) equal to the
market value of such contract. When writing a futures contract, a Portfolio must
maintain with its Custodian cash, U.S. Government securities, or other liquid
high grade debt obligations that, when added to the amounts deposited with a
futures commission merchant or broker as margin, are equal to the market value
of the instruments underlying the contract. Alternatively, a Portfolio may
"cover" its position by owning the instruments underlying the contract, or
holding a call permitting the Portfolio to purchase the same futures contract at
a price no higher than the price of the contract written by the Portfolio (or at
a higher price if the difference is maintained in liquid assets with its
Custodian).
A Portfolio may not maintain open short positions in futures contracts if,
in the aggregate, the market value of all such open positions exceeds the
current value of its portfolio securities, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative volatility of
the relationship between the Portfolio and the positions.
The Fund will comply with certain regulations of the Commodity Futures
Trading Commission, under which an in vestment company may engage in futures
transactions and qualify for an exclusion from being a "commodity pool," which
require a Portfolio to invest in futures contracts for bona fide hedging
purposes, or alternatively, to set aside cash and short-term obligations with
respect to long positions in a futures contract. Under these regulations, the
"underlying commodity value" (the size of the contract multiplied by the daily
settlement price of the contract) of each long position in a commodity futures
contract in which a Portfolio may invest may not at any time exceed the sum of:
(i) the value of short-term U.S. debt obligations or other U.S.
dollar-denominated high quality short-term money market instruments and
cash set aside in an identifiable manner, plus any funds deposited as
margin on the contract;
(ii) unrealized appreciation on the contract held by the broker; and
(iii)cash proceeds from existing investments due in not more than 30 days.
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8
The Fund reserves the right to engage in other types of futures
transactions in the future and to use futures for other than hedging purposes to
the extent permitted by regulatory authorities. If other types of futures
contracts are traded in the future, a Portfolio may also use such investment
techniques, provided that the Board of Directors determines that their use is
consistent with the Portfolio's investment objective or objectives.
Risks Associated with Futures: There are several risks associated with the
use of futures contracts as hedging techniques. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. There can be significant differences between the securities and
futures markets that could result in an imperfect correlation between the
markets, causing a given hedge not to achieve its objective. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures on securities, including technical
influences in futures trading, and differences between the portfolio securities
being hedged and the instruments underlying the hedging vehicle in such respects
as interest rate levels, maturities, conditions affecting particular industries
and creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
The price of futures contracts may not correlate perfectly with movement in
the underlying security or stock index, due to certain market distortions. This
might result from decisions by a significant number of market participants
holding stock index futures positions to close out their futures contracts
through offsetting transactions rather than to make additional margin deposits.
Also, increased participation by speculators in the futures market may cause
temporary price distortions. These factors may increase the difficulty of
effecting a fully successful hedging transaction, particularly over a short time
frame. If a hedging transaction is not successful, the Portfolio might
experience losses which it would not have incurred if it had not established
futures positions.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures position. When such a market does not
exist, the Portfolio remains obligated to meet margin requirements until the
position is closed.
LENDING OF PORTFOLIO SECURITIES
The Tactical Asset Allocation Portfolio from time to time may lend
securities from its portfolio to brokers, dealers and financial institutions and
receive as collateral cash or U.S. Treasury securities which at all times while
the loan is outstanding will be maintained in amounts equal to at least 100% of
the current market value of the loaned securities. Any cash collateral will be
invested in short-term securities. Such loans may not have terms longer than 30
days and will be terminable at any time. The Portfolio may also pay reasonable
fees to persons unaffiliated with the Portfolio for services in arranging such
loans.
FOREIGN SECURITIES
The Tactical Asset Allocation Portfolio may purchase certain foreign
securities and American Depositary Receipts ("ADRs"), although the Portfolio may
not hold more than 25% of its total assets in such securities. ADRs are
dollar-denominated receipts issued generally by domestic banks and represent the
deposit with the bank of a security of a foreign issuer. ADRs are publicly
traded on exchanges or over-the-counter in the United States. Investments in
foreign securities, particularly those of non-governmental issuers, involve
considerations which are not ordinarily associated with investing in domestic
issuers. These considerations include changes in currency rates, currency
exchange control regulations, the possibility of expropriation, the
unavailability of financial information or the difficulty of interpreting
financial information prepared under foreign accounting standards, less
liquidity and more volatility in foreign securities markets, the impact of
political, social or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It is possible that market quotations for
foreign securities will not be readily available. In such event, these
securities shall be valued at fair market value as determined in good faith by
Dean Investment Associates under the supervision of the Board of Directors of
the Fund. If it should become necessary, the Portfolio could encounter greater
difficulties in invoking legal processes abroad than would be the case in the
United States. Transaction costs with respect to foreign securities may be
higher. Dean Investment Associates will consider these and other factors before
investing in foreign securities. The Portfolio may concentrate its investments
in ADRs in securities of issuers of one or more foreign countries.
OTHER INVESTMENT COMPANIES
The Tactical Asset Allocation Portfolio may invest up to 10% of its total
assets, calculated at the time of purchase, in the securities of money market
funds, which are investment com-
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9
panies. The Portfolio may not invest (i) more than 5% of its total assets in the
securities of any one investment company; or (ii) in more than 3% of the voting
securities of any other investment company. The Portfolio will indirectly bear
its proportionate share of any investment advisory fees and expenses paid by the
funds in which it invests, in addition to the investment advisory fee and
expenses paid by the Portfolio.
ZERO COUPON AND STEP COUPON SECURITIES
The Tactical Asset Allocation Portfolio may invest in zero coupon and step
coupon securities. Zero coupon and step coupon bonds are issued and traded at a
discount from their face amounts. They do not entitle the holder to any periodic
payment of interest prior to maturity or prior to a specified date when the
securities begin paying current interest. The discount from the face amount or
par value depends on the time remaining until cash payments begin, prevailing
interest rates, liquidity of the security, and the perceived credit quality of
the issuer.
Current Federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues that year as interest income, even though the
holders receive no cash payments of interest during the year. In order to
qualify as a "regulated investment company" under the Internal Revenue Code of
1986, as amended ("Code"), the Tactical Asset Allocation Portfolio must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds.
Generally, the market prices of zero coupon and step coupon securities are
more volatile than the prices of securities that pay interest periodically and
in cash and are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having similar maturities and credit
quality.
INVESTMENT RESTRICTIONS
Each Portfolio's investment objective or objectives as set forth in the
Prospectus under "Investment Objectives and Policies," together with the
investment restrictions set forth below, are fundamental policies of each
existing Portfolio and may not be changed with respect to any Portfolio without
the approval of a majority of the outstanding voting shares of that Portfolio.
The vote of a majority of the outstanding voting shares of a Portfolio means the
vote at an annual or special meeting of the lesser of: (i) 67% or more of the
voting securities present at such meeting, if the holders of more than 50% of
the outstanding voting shares of such Portfolio are present or represented by
proxy; or (ii) more than 50% of the outstanding voting securities of such
Portfolio. Under these restrictions, an existing Portfolio may not:
(1) Invest in a security if, with respect to 75% of its total assets, more than
5% of its total assets (taken at market value at the time of such
investment) would be invested in the securities of any one issuer, except
that this restriction does not apply to U.S. Government securities.
(2) Invest in a security if, with respect to 75% of its assets, it would hold
more than 10% (taken at the time of such investment) of the outstanding
voting securities of any one issuer, except that this restriction does not
apply to U.S. Government securities.
(3) Invest in a security if more than 25% of its total assets (taken at market
value at the time of such investment) would be invested in the securities
of issuers in any particular industry, except that this restriction does
not apply (a) to U.S. Government securities (or repurchase agreements with
respect thereto), and (b) with respect to the Money Market and Managed
Portfolios, to securities or obligations (other than commercial paper)
issued by domestic branches of U.S. banks.
(4) Purchase or sell real estate, except that a Portfolio may invest in
securities secured by real estate or real estate interests or issued by
companies in the real estate industry or which invest in real estate or
real estate interests.
(5) Purchase securities on margin (except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities),
except a Portfolio engaged in transactions in options and futures, and
options on futures may make margin deposits in connection with those
transactions.
(6) Issue senior securities, except insofar as a Portfolio may be deemed to
have issued a senior security by reason of borrowing money in accordance
with that Portfolio's borrowing policies. For purposes of this investment
restriction, the writing of stock options, and collateral arrangements with
respect to margin or other deposits respecting futures contracts, and
related options, are not deemed to be an issuance of a senior security.
(7) Act as an underwriter of securities of other issuers, except, when in
connection with the disposition of portfolio securities, a Portfolio may be
deemed to be an underwriter under the federal securities laws.
(8) Make short sales of securities, except short sales against the box.
(9) Borrow money or pledge, mortgage, or hypothecate its assets, except that a
Portfolio may (a) borrow from banks for temporary purposes, but any such
borrowing is limited to an amount equal to 25% of a Portfolio's net assets
and a Portfolio will not purchase additional securities while borrowing
funds in excess of 5% of that Portfolio's net assets; and (b) enter into
reverse repurchase agreements and transactions in options, and interest
rate futures contracts, stock index futures contracts, other futures
contracts based on other financial instruments, and options on such futures
contracts. For these purposes, the deposit of assets in escrow in
connection with the writing of covered put and call options and the
purchase of securities on a "when-issued" or delayed delivery basis and
collateral
<PAGE>
10
arrangements with respect to initial or variation margin and other deposits
for futures contracts, and options on futures contracts, will not be deemed
to be pledges of a Portfolio's assets.
(10) Invest in securities that are illiquid because they are subject to legal
or contractual restrictions on resale, in repurchase agreements maturing
in more than seven days, or other securities which in the determination of
the Adviser are illiquid if, as a result of such investment, more than 10%
of the total assets of the Portfolio (taken at market value at the time of
such investment) would be invested in such securities.
(11) Purchase or sell commodities or commodities contracts, except that any
Portfolio may engage in transactions in interest rate futures contracts,
stock index futures contracts, and other futures contracts based on other
financial instruments, and on options on such futures contracts.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
Information pertaining to the directors and officers of the Fund is set
forth below.
Principal Occupation During
Name and Position the Past Five Years
----------------- ---------------------------
James W. Murphy,* Senior Vice President
Chairman of the Board and President Corporate Finance, AUL
Dr. Ronald D. Anderson, Director Professor: School of Business,
Indiana University, Indianapolis Indiana University,
801 W. Michigan St. Indianapolis
Indianapolis, IN 46223
Dr. Leslie Lenkowsky, Director President, Hudson Institute
Hudson Institute
5395 Emerson Way
Indianapolis, IN 46226
Leonard D Schutt,* Director Director, AUL (2/91 to present);
Senior Vice President, Invest-
ments, AUL (3/75 to 12/91)
James P. Shanahan,* Senior Vice President, Pension
Director, Vice President and Treasurer Operations, AUL
Richard A. Wacker,* Secretary Associate General Counsel, AUL,
(10/92 to present); Senior
Counsel, AUL,(11/87 to 10/92)
*Because of their positions as stated above, Messrs. Murphy, Shanahan, Schutt
and Wacker are "interested persons" of the Fund, as defined in the 1940 Act.
Their business address is One American Square, Indianapolis, Indiana 46204.
COMPENSATION OF DIRECTORS
The Fund pays those directors who are not officers or employees of AUL a
fee of $4,500 per year plus $450.00 per board meeting attended. The Fund also
pays travel expenses incurred by all directors to attend meetings of the board
or of the audit committee. During the fiscal year ended December 31, 1995, the
Fund paid to all directors who are not "interested persons" of the Fund fees
aggregating $5,080. AUL pays all salaries, fees, and expenses of any officer or
director of the Fund who is an officer or employee of AUL. As of the end of the
1995 fiscal year, the officers and directors, as a group, have no interest in
any contracts which would entitle them to give voting instructions for any
Portfolio.
THE INVESTMENT ADVISER
American United Life Insurance Company(R) serves as Adviser to the Fund
pursuant to an Investment Advisory Agreement (the "Advisory Agreement") between
it and the Fund. The Adviser is responsible for administering affairs of the
Fund and supervising the investment program for the Portfolios in accordance
with applicable laws and regulations. The Adviser also furnishes to the Board of
Directors, which has overall responsibility for the business and affairs of the
Fund, periodic reports on the investment performance of each Portfolio.
The Investment Advisory Agreement with the Adviser, dated March 8, 1990,
was originally approved by a majority of the Fund's directors, including a
majority of the directors who are not parties to the agreement or interested
persons of any such party (the "independent directors"). Subsequently, on May
10, 1991, the Agreement was approved by a majority of the Fund's shareholders at
a meeting called for the purpose of voting on the approval of the Agreement.
From year to year thereafter, the Agreement will continue in effect, provided
such continuance is approved at least annually by (i) the holders of a majority
of the outstanding voting securities of the
<PAGE>
11
Fund or by the Board and (ii) a majority of the independent directors. The
Agreement will terminate automatically in the event of its assignment, and it
may be terminated without penalty on sixty days' written notice by the Adviser,
the Board, or pursuant to a majority vote, in accordance with the 1940 Act, of
the persons entitled to vote in respect to the Fund. The Agreement was last
approved by the Board, including a majority of the independent directors, on
March 6, 1996 for the period March 8, 1996 to March 8, 1997.
The Fund pays the Adviser for its services under the Advisory Agreement a
fee based on an annual percentage of the average daily net assets of each
Portfolio. For each Portfolio, the Fund pays the Adviser a monthly fee at an
annual rate of 0.50% (0.80% for the Tactical Asset Allocation Portfolio) of the
average daily net assets of the Portfolio. For the years ending December 31,
1995, 1994, and 1993, respectively, the Advisor was entitled to receive (or did
receive) the following advisory fees from the Portfolios: $144,456, $80,105, and
$44,816 from the Equity Portfolio; $117,761, $88,991, and $65,098 from the Bond
Portfolio; $96,175, $48,589, and $27,375 from the Money Market Portfolio; and
$142,020, $102,277, and $51,253 from the Managed Portfolio. The Tactical Asset
Allocation Portfolio was entitled to receive (or did receive) $2,399 for the
year ending December 31, 1996.
As of December 31, 1995, the percentage of the outstanding voting shares
owned by AUL and held in its general account were as follows: 12.46% of the
Equity Portfolio, 25.18% of the Bond Portfolio, 0% of the Money Market
Portfolio, 6.08% of the Managed Portfolio, and 45.81% of the Tactical Asset
Allocation Portfolio. As a result of this ownership, as of December 31, 1995,
AUL may be able to control the outcome of any issue submitted generally to the
vote of Fund shareholders and probably would be able to control the outcome of
any issue submitted to the vote of shareholders of the Tactical Asset Portfolio.
THE SUB-ADVISER
Dean Investment Associates (the "Sub-Adviser"), a division of C.H. Dean and
Associates, Inc., serves as the Sub-Adviser for the Tactical Asset Allocation
Portfolio pursuant to a Sub-Advisory Agreement dated May 15, 1995. The
Sub-Advisory Agreement was approved by the Board of Directors of the Fund,
including a majority of the Directors who are not parties to the agreement or
"interested persons" of any such party (as defined in the 1940 Act) on May 12,
1995. The Sub-Advisory Agreement provides that it will continue in effect for an
initial term ending May 15, 1997, and from year to year thereafter if approved
annually (a) by the Board of Directors of the Fund or by a majority of the
outstanding shares of the Portfolio, and (b) by a majority of the Directors who
are not parties to such agreement or "interested persons" of any such party. The
Sub-Advisory Agreement may be terminated without penalty on 60 days' written
notice at the option of the Fund or AUL and upon six months written notice at
the option of Dean, and terminates automatically in the event of its assignment.
Subject to the supervision of the Investment Adviser and the Fund's Board
of Directors, the Sub-Adviser is responsible for the actual management of the
Tactical Asset Allocation Portfolio and for making decisions to buy, sell, or
hold any particular security, and it places orders to buy or sell securities on
behalf of the Portfolio.
PURCHASES AND REDEMPTIONS
For information on purchase and redemption of shares, see "Purchase and
Redemption of Shares" in the Prospectus. The Fund may suspend the right of
redemption of shares of any Portfolio for any period: (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday closings
or during which trading on the New York Stock Exchange is restricted; (ii) when
the Securities and Exchange Commission determines that a state of emergency
exists which may make payment or transfer not reasonably practicable; (iii) as
the Securities and Exchange Commission may by order permit for the protection of
the security holders of the Fund; or (iv) at any other time when the Fund may,
under applicable laws and regulations, suspend payment on the redemption of its
shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
BROKERAGE AND RESEARCH SERVICES
The Portfolios generally pay a fee or incur an expense in connection with
effecting transactions in securities. Transactions on national stock exchanges
and other agency transactions involve the payment by a Portfolio of brokerage
commissions. Such commissions may be negotiable and may vary among different
brokers. Also, a particular broker may charge different commissions according to
such factors as the difficulty and size of the transaction. There is generally
no stated commission in the case of fixed-income securities, most of which are
traded in the over-the-counter markets, but the price paid by a Portfolio
usually includes an undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by a Portfolio includes a disclosed, fixed commission
or discount retained by the underwriter or dealer.
The Adviser or Sub-Adviser for a Portfolio places orders for the purchase
and sale of portfolio securities and options for a Portfolio through a
substantial number of broker-dealers. In executing transactions, the Adviser or
Sub-Adviser will attempt to obtain the best execution for a Portfolio taking
into account such factors as price (including the applicable brokerage
commission or dollar spread), size of order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the service,
the difficulty of execution and operational facilities of the firms involved,
and the
<PAGE>
12
firm's risk in positioning a block of securities. In effecting purchases and
sales of portfolio securities in transactions on national stock exchanges for
the account of a Portfolio, the Adviser or Sub-Adviser may pay higher commission
rates than the lowest available when the Adviser or Sub-Adviser believes it is
reasonable to do so in light of the value of the brokerage and research services
provided by the broker-dealer effecting the transaction, as described below. In
the case of securities traded on the over-the-counter markets, there is
generally no stated commission, but the price includes an undisclosed commission
or mark-up.
Some securities considered for investment by the Fund's Portfolios may also
be appropriate for other accounts served by the Adviser or Sub-Adviser,
including the Adviser's or Sub-Adviser's general account. If a purchase or sale
of securities consistent with the investment policies of a Portfolio and one or
more of these accounts served by the Adviser or Sub-Adviser is considered at or
about the same time, it is the policy of AUL and the Sub-Adviser not to favor
any one account or Portfolio over another, and any purchase or sale orders
executed contemporaneously are allocated at the average price and as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each account or portfolio. While it is conceivable that in
certain instances this procedure could adversely affect the price or number of
shares involved in a particular portfolio transaction, it is believed that the
procedure generally contributes to better overall execution of the Fund's
portfolio transactions. This allocation method, and the results of such
allocations, are subject to periodic review by the Fund's Adviser, Sub-Adviser,
and Board of Directors.
For many years, it has been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Adviser or Sub-Adviser may receive research services from many
broker-dealers with which the Adviser or Sub-Adviser places portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities, and recommendations as
to the purchase and sale of securities. Some of these services may be of value
to the Adviser or Sub-Adviser in advising its various clients (including the
Fund), although not all of these services are necessarily useful and of value in
managing the Fund. The management fee paid by the Fund is not reduced because
the Adviser, Sub-Adviser, and their affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Adviser or Sub-Adviser may cause the Fund to pay a broker-dealer, which provides
"brokerage and research services" (as defined in that Act) to the Adviser or
Sub-Adviser, an amount of disclosed commission for effecting the commission
which another broker-dealer would have charged for effecting that transaction.
During the fiscal years ended December 31, 1995, 1994, and 1993,
respectively, brokerage commissions in the amount of $25,122, $19,789, and
$9,093 were paid for transactions in the Equity Portfolio and brokerage
commissions in the amount of $14,437,$14,080, and $5,964 were paid for
transactions involving the Managed Portfolio. During the fiscal year ended
December 31, 1995 brokerage commissions in the amount of $1,534 were paid for
transactions involving the Tactical Asset Allocation Portfolio. The Tactical
Asset Allocation Portfolio was not in existence for the years 1994 and 1993.
There were no brokerage commissions paid for the Bond and Money Market
Portfolios. The aggregate dollar value of equity transactions (net of
commissions and SEC charges) on which brokerage commissions were paid for the
years ended December 31, 1995, 1994, and 1993, respectively, were as follows:
$9,735,024, $8,031,772, and $3,191,242 for the Equity Portfolio and $5,663,294,
$5,669,202, and $2,104,157 for the Managed Portfolio, respectively. The
aggregate dollar value of equity transactions (net of commissions and SEC
charges) on which brokerage commissions were paid for the year ended December
31, 1995 was $1,068,342 for the Tactical Asset Allocation Portfolio. All of the
broker-dealers through which brokerage transactions were executed provided
research services to AUL.
NET ASSET VALUE
As indicated under "Net Asset Value" in the Prospectus, the Fund's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at or about 4:00 P.M. eastern standard time, on each day the New
York Stock Exchange is open for trading. The determination may be made earlier
than 4:00 P.M. EST if the markets close earlier than 4:00 P.M. and it is
possible to determine the Net asset value at that time. Net asset value will not
be determined on days that the New York Stock Exchange is closed, on any federal
holidays or on days when AUL is not open for business. Traditionally, in
addition to federal holidays, AUL is not open for business on the day after
Thanksgiving and either the day before or after Christmas or Independence Day.
The Money Market Portfolio's securities are valued using the amortized cost
method of valuation. This involves valuing a money market security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument. During such periods the yield
to investors in the Portfolio may differ somewhat from that obtained in a
similar investment company which uses available market quotations to value all
of its portfolio securities.
<PAGE>
13
The Securities and Exchange Commission's regulations require the Money
Market Portfolio to adhere to certain conditions in connection with using the
amortized cost method of valuation. The Portfolio is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, to limit its
investments to instruments having remaining maturities of 13 months or less
(except securities held subject to repurchase agreements having 13 months or
less to maturity), and to invest only in securities determined by the Adviser to
be of the highest quality with minimal credit risks.
PERFORMANCE INFORMATION
The Fund may, from time to time, include the yield and effective yield of
the Money Market Portfolio, the yield of the remaining Portfolios, and the total
return of all Portfolios in advertisements or sales literature. Performance
information for the Portfolios will not be advertised or included in sales
literature unless accompanied by comparable performance information for a
Separate Account to which the Fund offers its shares.
Current yield for the Money Market Portfolio will be based on the change in
the value of a hypothetical investment (exclusive of capital charges) over a
particular 7-day period, less a pro rata share of Portfolio expenses accrued
over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" for the Money Market Portfolio assumes that all dividends
received during an annual period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" used in the calculation of
yield, which is then annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return + 1)**365/7]-1
For the 7-day period ending December 31, 1995, the current yield for the
Money Market Portfolio was 4.88% and the effective yield was 5.00%.
Quotations of yield for the remaining Portfolios will be based on all
investment income per share earned during a particular 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
maximum offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[(a-b/cd + 1)**6 - 1]
where
a = dividends and interests earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
For the period ending December 31, 1995, the yield for the Equity Portfolio
was 1.23%, for the Bond Portfolio was 5.56%, for the Managed Portfolio was
2.89%, and 5.21% for the Tactical Asset Allocation Portfolio.
Quotations of average annual total return for a Portfolio will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Portfolio over certain periods that will include periods of
one, five, and ten years (or, if less, up to the life of the Portfolio),
calculated pursuant to the following formula: P (1 + T)**n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). Quotations of total return
may also be shown for other periods. All total return figures reflect the
deduction of a proportional share of Portfolio expenses on an annual basis, and
assume that all dividends and distributions are reinvested when paid. The
average annual total return for each of the Portfolios for the year ending
December 31, 1995, was 19.45% for the Equity Portfolio, 17.79% for the Bond
Portfolio, 5.09% for the Money Market Portfolio, and 19.13% for the Managed
Portfolio. The average annual total return for the period from April 10, 1990
(the date the Fund commenced operations) through December 31, 1995 for each of
the Portfolios was 12.13% for the Equity Portfolio, 9.84% for the Bond
Portfolio, 4.31% for the Money Market Portfolio, and 10.64% for the Managed
Portfolio. The Tactical Asset Allocation Portfolio commenced operation July 31,
1995, and therefore, there are no annual average returns available.
Performance information for a Portfolio may be compared, in advertisements,
sales literature, and reports to shareholders to: (i) the Standard & Poor's 500
Stock Index ("S&P 500"), the Dow Jones Industrial Average ("DJIA"), the Lehman
Brothers Government Bond Index, the Donoghue Money Market Institutional
Averages, the Lehman Brothers Government Corporation Index, the Salomon High
Yield Index, or other indices that measure performance of a pertinent group of
securities; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets, or tracked by other
services, companies, publications or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the
Portfolio. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.
Quotations of yield or total return for the Fund will not take into account
charges and deductions against any Separate Account or Accounts to which the
Fund shares are sold or charges and deductions against the annuity contracts
issued by AUL.
<PAGE>
14
Performance information for any Portfolio reflects only the performance of
a hypothetical investment in the Portfolio during the particular time period on
which the calculations are based. Performance information should be considered
in light of the Portfolio's investment objectives and policies, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
TAXATION
Each Portfolio intends to qualify annually and elects to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").
To qualify as a regulated investment company, each Portfolio must, among
other things: (i) derive in each taxable year at least ninety percent (90%) of
its gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive in each taxable
year less than thirty percent (30%) of its gross income from the sale or other
disposition of stocks, securities, and certain other assets held less than three
months; (iii) diversify its holdings so that, at the end of each quarter of the
taxable year, (a) at least fifty percent (50%) of the market value of the
Portfolio's assets are represented by cash, U.S. Government securities, the
securities of other regulated investment companies with such other securities
any one issuer limited for the purposes of this calculation to an amount not
greater than five percent (5%) of the value of the Portfolio's total assets and
ten percent (10%) of the outstanding voting securities of such issuer, and (b)
not more than twenty-five percent (25%) of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies); and (iv)
distribute at least ninety percent (90%) of its net investment income (which
includes dividends, interest, and net short-term capital gains in excess of any
net long-term capital losses) each taxable year. Certain hedging transactions
that may be undertaken by one or more Portfolios may be limited by the
requirements relating to a Portfolio's status as a regulated investment company.
As a regulated investment company, a Portfolio will not be subject to U.S.
federal income tax on its net investment income and net capital gains (any net
long-term capital gains in excess of the sum of net short-term capital losses
and capital loss carryovers from prior years), if any, that it distributes to
shareholders. Each Portfolio intends to distribute to its shareholders, at least
annually, substantially all of its net investment income and any net capital
gains. In addition, amounts not distributed by a Portfolio on a timely basis in
accordance with a calendar year distribution requirement may be subject to a
nondeductible four percent (4%) excise tax. To avoid the tax, a Portfolio must
distribute during each calendar year, (i) at least ninety-eight percent (98%) of
its ordinary income (not taking into account any capital gains or losses) for
the calendar year, (ii) at least ninety-eight percent (98%) of its capital gains
in excess of its capital losses (adjusted for certain ordinary losses) for the
twelve-month period ending on October 31 of the calendar year, and (iii) all
ordinary income and capital gains for previous years that were not distributed
during such years. Each year, each Portfolio will determine whether it may be
subject to the calendar year distribution requirement. If a Portfolio determines
that it is subject to this distribution requirement, it intends to make its
distributions in accordance with the calendar year distribution requirement. A
distribution will be treated as paid December 31 if it is declared by a
Portfolio in October, November, or December of the year and paid by the
Portfolio by January 31 of the following year. Such distributions will be
taxable to shareholders in the year in which the distributions are declared,
rather than the year in which the distributions are received.
DISTRIBUTIONS
Distributions of any net investment income by a Portfolio are taxable to
the shareholder as ordinary income. Net capital gains will be treated, to the
extent distributed, as long-term capital gains in the hands of the shareholder.
OTHER INFORMATION
CAPITALIZATION
The Fund was incorporated under the laws of Maryland on July 26, 1989. The
capitalization of the Fund consists of 125,000,000 authorized shares of common
stock with a par value of $0.001 each with 10,000,000 unallocated shares. The
Board of Directors may establish additional Portfolios (with different
investment objectives and fundamental policies) at any time in the future.
Establishment and offering of additional Portfolios will not alter the rights of
the Fund's shareholders. When issued, shares are fully paid, nonassessable,
redeemable, and freely transferable. Shares do not have preemptive rights or
subscription rights. In liquidation of a Portfolio of the Fund, each shareholder
is entitled to receive his or her pro rata share of the net assets of that
Portfolio.
Expenses incurred by the Fund in connection with the organization of the
Tactical Asset Allocation Portfolio aggregated approximately $8,688. These costs
have been deferred and are being amortized over a period of 5 years beginning
with the commencement of operations.
VOTING RIGHTS
Shareholders of the Fund are given certain voting rights. Each share of
each Portfolio will be given one vote, and each
<PAGE>
15
fractional share will be given a proportionate fractional vote, unless a
different allocation of voting rights is required under applicable law for a
mutual fund that is an investment medium for variable insurance products.
Under the Fund's charter, the Fund is not required to hold annual meetings
of shareholders to elect directors or for other purposes and it is not
anticipated that the Fund will hold shareholders' meetings unless required by
law or the Fund's charter. In this regard, the Fund will be required to hold a
meeting to elect directors to fill any existing vacancies on the Board if, at
any time, fewer than a majority of the directors have been elected by the
shareholders of the Fund. In addition, the charter provides that the holders of
not less than two-thirds of the outstanding shares of the Fund may remove a
person serving as director either by declaration in writing or at a meeting
called for such purpose. The Fund's shares do not have cumulative voting rights.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
The Provident Bank, Cincinnati, Ohio, serves as the Fund's Custodian,
Transfer Agent and Dividend Disbursing Agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. serves as independent accountants of the Fund.
COUNSEL
Dechert Price & Rhoads, Washington, D.C., has passed upon certain legal
matters in connection with the shares offered by the Fund and acts as outside
counsel to the Fund.
FINANCIAL STATEMENTS
The Financial Statements of the Fund, as of December 31, 1995, including the
Notes thereto, are incorporated by reference in the Statement of Additional
Information from the Annual Report of the Fund as of December 31, 1995. The
Financial Statements have been audited by Coopers & Lybrand L.L.P., the
independent accountants for the Fund. Management's Discussion and Analysis is
contained in the Fund's Annual Report, which is available without charge and may
be obtained by writing to the Fund at One American Square, Indianapolis, IN
46204 or by calling the Fund at (800) 634-1629.
<PAGE>
16
APPENDIX I
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
CORPORATE BONDS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's to be of high quality by all standards. Together with bonds rated Aaa
(Moody's highest rating) they comprise what are generally known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection may
not be as large as those of Aaa bonds, or fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make the
long-term risks appear somewhat larger than those applicable to Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Moody's Baa rated bonds are 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. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Bonds rated AA by Standard & Poor's Corporation ("Standard & Poor's") are
judged by Standard & Poor's to be high-grade obligations and in the majority of
instances differ only in small degree from issues rated AAA (Standard & Poor's
highest rating). Bonds rated AAA are considered by Standard & Poor's to be the
highest grade obligations and possess the ultimate degree of protection as to
principal and interest. With AA bonds, as with AAA bonds, prices move with the
long-term money market. Bonds rated A by Standard & Poor's have a strong
capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
Standard & Poor's BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and those where the speculative
elements begin to predominate. These bonds have adequate asset coverage and
normally are protected by satisfactory earnings. Their susceptibility to
changing conditions, particularly to depressions, necessitates constant
watching. These bonds generally are more responsive to business and trade
conditions than to interest rates. This group is the lowest which qualifies for
commercial bank investment.
COMMERCIAL PAPER
The prime rating is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers within this prime
category may be given ratings 1, 2 or 3, depending on the relative strengths of
these factors.
Commercial paper rated A by Standard & Poor's has the following
characteristics: (1) liquidity ratios are adequate to meet cash requirements;
(2) long-term senior debt rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh the BBB; (3) the issuer
should have access to at least two additional channels of borrowing; (4) basic
earnings and cash flow should have an upward trend with allowances made for
unusual circumstances; and (5) typically the issuer's industry should be well
established and the issuer should have a strong position within its industry and
the reliability and quality of management should be unquestioned. Issuers rated
A are further referred to by use of numbers 1, 2 and 3 to denote relative
strength within this highest classification.
- --------------------------------------------------------------------------------
<PAGE>
17
================================================================================
No dealer, salesman or any other person is authorized by the AUL
American Series Fund to give any information or to make any
representation other than as contained in this Statement of Additional
Information in connection with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended,
with respect to the offering herein described. For further information
with respect to the AUL American Series Fund, reference is made thereto
and the exhibits filed therewith or incorporated therein, which include
all contracts or documents referred to herein.
================================================================================
AUL AMERICAN SERIES FUND, INC.
Variable Annuity Contracts
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46204
STATEMENT OF ADDITIONAL INFORMATION
Dated: May 1, 1996
================================================================================
<PAGE>
1
Part C: Other Information
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
1. Included in Prospectus (Part A):
Condensed Financial Information
2. Included in Statement of Additional Information (Part B):
Registrant's Annual Report is incorporated by reference
thereto and contains the following Financial Statements:
Management's Discussion of Fund Performance
Report of Independent Accountants
Statement of Net Assets for the year ended December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the years ended December 31,
1995 and 1994
Schedule of Investments--Equity Portfolio--December 31, 1995
Schedule of Investments--Money Market Portfolio--December 31, 1995
Schedule of Investments--Bond Portfolio--December 31, 1995
Schedule of Investments--Managed Portfolio--December 31, 1995
Schedule of Investments-- Tactical Asset Allocation Portfolio--
December 31, 1995
Notes to Financial Statements
(b) Exhibits (the number of each exhibit relates to the exhibit designation
in Form N-1A):
1. Articles of Incorporation(1)
2. By-laws(1)
3. Not applicable
4. Not applicable
5. Form in Investment Advisory Agreement(2)
6. Not applicable
7. Not applicable
8. Form of Custodian Agreement(3)
9. Form of Agency Agreement(3)
10. Opinion and Consent of Counsel(2)
11. (a) Consent of Independent Accountants(5)
(b) Powers of Attorney(2)(5)
12. Financial Statements(5)
13. Not applicable
14. Not applicable
15. Not applicable
16. Computation of Performance Quotations(5)
17. Financial Data Schedules(2)(5)
(1) Filed with the Registrant's Registration Statement (File No. 33-30156)
on July 27, 1989, and incorporated by reference herein.
(2) Filed with Pre-Effective Amendment No. 2, dated January 16, 1990, to
the Registrant's Registration Statement, and incorporated by reference herein.
(3) Filed with Pre-Effective Amendment No. 3, dated January 26, 1990, to
the Registrant's Registration Statement, and incorporated by reference herein.
(4) Filed as an Exhibit with Post-Effective Amendment No. 6, dated April
28, 1995, to the Registrant's Registration Statement, and incorporated by
reference herein.
(5) Filed as an Exhibit with Post-Effective Amendment No. 8, dated May 1,
1996, to the Registrant's Registration Statement, and incorporated by reference
herein.
<PAGE>
2
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
In accordance with current law, it is anticipated that American United Life
Insurance Company(R) ("AUL") will request voting instructions from owners or
participants of any Contracts that are funded by separate accounts that are
registered investment companies under the Investment Company Act of 1940 and
will vote shares in any such separate account attributable to the Contracts in
proportion to the voting instructions received. AUL may vote shares of any
Portfolio, if any, that it owns beneficially in its own discretion. As a result
of providing the initial capital for the Portfolios, on December 31, 1995, AUL
owned 12.5% of the outstanding shares of Registrant's Equity Portfolio, 25.2% of
the Registrant's Bond Portfolio, 6.1% of the Registrant's Managed Portfolio,
0.0% of the Registrant's Money Market Portfolio, and 45.8% of the Registrant's
Tactical Asset Allocation Portfolio. Therefore, AUL may be able to control the
outcome of any issue submitted generally to the vote of Fund shareholders and
would be able to control the outcome of any issue submitted to the vote of
shareholders of the Tactical Asset Allocation Portfolio. As a mutual insurance
company organized under the laws of the state of Indiana, AUL has no
shareholders and therefore, no one individual controls as much as 10% of AUL.
AUL American Unit Trust and AUL American Individual Unit Trust are separate
accounts of AUL, organized for the purpose of the respective sale of group and
individual variable annuity contracts.
American United Life Pooled Equity Fund B is a separate account of AUL organized
for the purpose of the sale of group variable annuity contracts.
AUL Equity Sales Corp. is a wholly owned subsidiary of AUL, organized under the
laws of the State of Indiana in 1969 for the purpose of the sale of mutual funds
on an "application-way" basis only.
AUL may also be deemed to control State Life Insurance Company(R) ("State Life")
since a majority of AUL's Directors also serve as Directors of State Life. By
virtue of an agreement between AUL and State Life, AUL provides investment and
other support services for State Life on a contractual basis.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES.
As of the date of this Post-Effective Amendment to the Registration Statement,
AUL, the AUL American Unit Trust, the AUL American Individual Unit Trust, and
the AUL Group Retirement Annuity Separate Account II, separate accounts of AUL,
are the sole record holders of securities registered pursuant to this
Registration Statement.
ITEM 27: INDEMNIFICATION.
Reference is made to Article VIII of the Registrant's Articles of Incorporation
and to Article XI of the Registrant's By-laws, both of which are incorporated by
reference herein.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Fund's Articles of Incorporation,
its By-laws or otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act, and therefore, is unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such directors, officers or
controlling persons in connection with the shares being registered, the
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
issues.
<PAGE>
3
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The business and other connections of Registrant's investment adviser are
described in Part B of this Registrations Statement and in Item 25 above.
Information relating to the Adviser's officers and directors is provided herein.
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
John H. Barbre* Senior Vice President
Steven C. Beering M.D. Director
Purdue University
West Lafayette, Indiana
William R. Brown* General Counsel and Secretary, AUL
Secretary, State Life
Arthur L. Bryant Director
P.O. Box 406
Indianapolis, Indiana
James E. Cornelius Director
P.O. Box 44906
Indianapolis, Indiana
James E. Dora Director
P.O. Box 42908
Indianapolis, Indiana
Otto N. Frenzel III Director and Chairman of the
101 W. Washington St., Suite 400E Audit Committee
Indianapolis, Indiana
David W. Goodrich Director
Box 82055
Indianapolis, Indiana
William P. Johnson Director
P.O. Box 517
Goshen, Indiana
Charles D. Lineback* Senior Vice President
James T. Morris Director
1220 Waterway Boulevard
Indianapolis, Indiana
James W. Murphy* Senior Vice President
Jerry L. Plummer* Senior Vice President
R. Stephen Radcliffe* Director and Executive
Vice President
Jack E. Reich* Emeritus Chairman of the Board
Thomas E. Reilly Jr. Director
300 N. Meridian St., Suite 1500
Indianapolis, Indiana
- ----------------------------------------------
*One American Square, Indianapolis, Indiana
<PAGE>
4
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. (CONTINUED)
Name and Address Positions and Offices with AUL
- ---------------- ------------------------------
William R. Riggs* Director
G. David Sapp* Senior Vice President
Leonard D Schutt Director and Chairman of the
5853 Wycombe Lane Finance Committee
Indianapolis, Indiana
Jerry D. Semler* Chairman of the Board, President,
Chief Executive Officer and
Chairman of the Executive
Committee, AUL; Chairman of the
Board, Chief Executive Officer,
State Life
Yvonne H. Shaheen Director
1310 S. Franklin Road
Indianapolis, Indiana
James P. Shanahan* Senior Vice President
Frank D. Walker Director
P.O. Box 80432
Indianapolis, Indiana
Gerald T. Walker* Senior Vice President
James R. Zapapas Director
5025 Plantation Drive
Indianapolis, Indiana
- ----------------------------------------------
*One American Square, Indianapolis, Indiana
ITEM 29: PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS.
The Registrant and its Adviser maintain at the Fund's principal office located
at One American Square, Indianapolis, Indiana, 46204, physical possession of
each account, book or other document, and shareholder records as required by
Section 31(a) of the 1940 Act and rules thereunder. Certain records with respect
to the Portfolios of the Fund may be kept by the Fund's custodian.
ITEM 31: MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 32: UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to provide Management's Discussion of Fund
Performance, which is provided in Registrant's latest Annual Report, to
each person to whom a Prospectus is given upon request and without
charge.
<PAGE>
5
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 Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) of the Securities Act of 1933 and
has duly caused this Post-Effective Amendment to the Registration Statement
(Form N-1A) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis and the State of Indiana on this
twenty-ninth day of April, 1996.
AUL AMERICAN SERIES FUND, INC.
----------------------------------------
By: James W. Murphy*, President
/s/ Richard A. Wacker
*By: Richard A. Wacker as Attorney-in-fact
Date: April 29, 1996
Pursuant to the requirements of the Securities Act of 1933,this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
- --------------------------------- Chairman of the Board April ___, 1996
James W. Murphy* and President (Chief
Executive Officer)
- --------------------------------- Director, Vice-President April ___, 1996
James P. Shanahan* and Treasurer (Chief
Financial Officer)
- --------------------------------- Director April ___, 1996
Ronald D. Anderson*
- --------------------------------- Director April ___, 1996
Leslie Lenkowsky*
- --------------------------------- Director April ___, 1996
Leonard D Schutt*
/s/ Richard A. Wacker
--- -----------------
By: Richard A. Wacker as Attorney-in-fact
Date: April 29, 1996
<PAGE>
6
EXHIBIT LIST
Exhibit Number Name of Exhibit
-------------- ---------------
11(a) Consent of Independent Accountants
11(b) Power of Attorney
12 Financial Statements
16 Computation of Performance Quotations
17 Financial Data Schedule
<PAGE>
1
EXHIBIT 11(a)
Consent of Independent Accountants
Board of Directors
AUL American Series Fund, Inc.
Indianapolis, Indiana
We consent to the incorporation by reference in Post Effective Amendment No. 8
to the Registration Statement of the AUL American Series Fund, Inc. (the "Fund")
on Form N-1A (File No. 33-30156) of our report dated January 27, 1996, of our
audit of the statement of net assets, including the schedule of investments of
the Fund as of December 31, 1995, the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years then ended, and the selected per share data and ratios for each of the
five years then ended, of the Equity, Money Market, Bond and Managed Portfolios,
and the statement of changes in net assets and selected per share data and
ratios for the period from July 31, 1995 through December 31, 1995 of the
Tactical Asset Portfolio.
We also consent to the reference to our Firm as the independent public
accountants for the "Fund."
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
April 23, 1996
<PAGE>
1
EXHIBIT 11(b)
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Wacker and William R. Brown, and each of them his true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity contracts of American United Life Insurance Company(R) and any
Amendments or supplements thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Dated: February 13, 1996
/s/ Leslie Lenkowsky
- -----------------------
Printed: Leslie Lenkowsky
<PAGE>
1
EXHIBIT 12
Financial Statements
AUL American Series Fund, Inc.
Annual Report
December 31, 1995
AUL(R)
This report may be used as sales literature only when accompanied or preceded by
effective prospectuses of AUL American Series Fund, Inc. and AUL American Unit
Trust or AUL American Individual Unit Trust, which relate sales expense and
other pertinent information.
<PAGE>
1
A Message From The Chairman of the Board and President
Last year was a spectacular year for the equity and bond markets. Domestic
stocks were driven by modest economic growth, low inflation, declining interest
rates and profit expansion. Meanwhile, baby boomers helped contribute to the
market surge by investing in retirement products. Near the end of 1995, the
stock market cheered as the Federal Reserve lowered short-term interest rates,
thereby providing an extra boost to the economy during 1996.
Although 1995 was an impressive year for stocks, the stock market became
highly rotational as investors shifted rapidly from one sector to another during
the year. This meant that if an investor did not keep rotating from sector to
sector with perfect timing, his or her performance would have lagged the overall
market.
The bond market also enjoyed a solid performance in 1995 following one of
the worst years ever in 1994. Yields declined dramatically at every point on the
yield curve resulting in double digit returns for most bond funds. Aggressive
buying by bond investors in 1995 was fueled by prospects for a reduction in the
federal deficit, signs of economic weakness, moderate inflation, and the
likelihood of more easing by the Federal Reserve.
Now in the fifth year of an economic expansion, economists are projecting
this trend will continue into 1996. The Federal Reserve has been successful at
keeping inflationary pressures in check during this prolonged expansion.
Interest rates could decline during 1996, but the move will be much smaller than
in 1995. Corporate profits should continue to expand, but the rate of earnings
growth is expected to decline.
After experiencing such a phenomenal year in 1995, equity investors have
become complacent with above average returns. However, it is not likely that
1996 will be a repeat of 1995s banner year. Achieving double digit bond
performance may also be difficult given todays much lower level of interest
rates. Yet bonds could still perform well if this low inflation, low growth, low
interest rate scenario persists throughout 1996.
Investment performance for the AUL American Series Fund, Inc. for the year
1995 was:
Equity Portfolio 19.5% Managed Portfolio 19.1%
Money Market Portfolio 5.1% Tactical Asset Allocation(1) 6.5%
Bond Portfolio 17.8% (1)For the period 7/31/95 to 12/31/95
We suggest your careful review of the Portfolio Manager comments found in
the following pages comparing these returns to other indices. Tactical Asset
Allocation Portfolio Manager comments and comparisons have not been included
since the portfolio was in operation for less than six months during 1995.
The performance numbers for the AUL American Series Fund, Inc. are net of
investment advisory fees and other expenses paid by each portfolio but do not
reflect specified contract charges and mortality and expense risks charges which
may be incurred when investing in a variable annuity contract.
/s/ James W. Murphy
Chairman of the Board of Directors and President
Indianapolis, Indiana
January 19, 1996
================================================================================
Directors and Officers of AUL American Series Fund, Inc.
James W. Murphy, Chairman of the Board and President
James P. Shanahan, Director, Vice President and Treasurer
Dr. Ronald D. Anderson, Director
Professor, School of Business
Indiana University, Indianapolis, Indiana
Dr. H. Raymond Swenson, Director
Professor, College of Business
Butler University, Indianapolis, Indiana
Leonard D. Schutt, Director
Richard A. Wacker, Secretary
<PAGE>
2
A Message From Kathryn Hudspeth,
Portfolio Manager of Equity Portfolio
The Equity Portfolio invests primarily in equity securities selected on the
basis of fundamental investment research for their long-term growth prospects.
Using a bottom-up approach, the Portfolio concentrates on companies which appear
undervalued compared to the market and their own historic valuation levels.
Other important considerations include management ability, free cash flow,
insider ownership and dominance within its industry.
The stock market exhibited an impressive upward advance during 1995 with major
stock indices establishing new all-time highs repeatedly as the year progressed.
It appeared that all news was good news to the equity market and nothing was
able to dampen the enthusiasm. However, the phenomenal returns of the S&P 500 (a
commonly used stock benchmark) masked the underlying volatility of the
marketplace.
During the first quarter of 1995, large growth companies easily outperformed the
rest of the market. This trend eased during the second quarter as investors
rotated into smaller companies and technology names. As investors shifted into
financial stocks in July, the technology sector began to falter. Beginning in
September, investors shifted their focus again by moving out of small
capitalization stocks, causing this area to vastly underperform the rest of the
market.
Overall, 1995 was an impressive year for stocks with the S&P 500 advancing
37.5%. No single investment theme prevailed throughout the year due to rapid
sector rotation. However, big growth companies with high price/earnings ratios
tended to outperform smaller value companies trading at lower price/earnings
ratios.
The Equity Portfolio utilizes a value approach which was out of favor in 1995.
Even though absolute performance of 19.5% was attractive versus historic market
averages, relative returns lagged in 1995.
The Equity Portfolio benefitted from its concentration in technology and
pharmaceutical companies. However, exposure to the technology sector was reduced
during the second half of 1995 as many of these stocks became expensive compared
to the rest of the market. The consumer cyclical sector was the worst performing
sector during 1995. As this area appeared the most undervalued versus the rest
of the market, additional investments were made in this area throughout the
year.
After experiencing such phenomenal returns during 1995, one has to wonder what
lies ahead for the stock market during 1996. Investors are concerned about the
longevity of the current economic expansion and the likelihood of another
dramatic decline in interest rates. Corporations have been extremely active in
cutting costs and improving productivity. However, corporations may be at the
peak of their profit cycle. Considering these factors, it is unlikely that 1996
market performance will be a repeat of 1995.
<PAGE>
3
AUL American Series Fund, Inc. Equity Portfolio
Average Annual Total Returns for the period ended December 31, 1995
Equity
Portfolio S&P 500
One Year 19.5% 37.5%
Five Years 14.2% 16.6%
Since Inception (4/10/90) 12.1% 14.2%
Value of a hypothetical $10,000
investment made 4/10/90 $19,228 $21,313
The charts show the Equity Portfolios total returns, which include changes in
share price and reinvestment of dividends and capital gains. Figures for the S&P
500, an unmanaged index of common stocks, include reinvestment of dividends and
capital gains. S&P 500 is a registered trademark of Standard & Poors
Corporation. The inception figures are from commencement of operations.
Performance numbers for the Equity Portfolio are net of all portfolio operating
expenses, but do not include separate account or contract charges. If the
performance data included the effect of these charges, the returns would be
lower. Past performance is no guarantee of future results. Principal and
investment return will vary so shares may be worth more or less than their
original cost when redeemed.
<PAGE>
4
A Message From Kent Adams,
Portfolio Manager of Bond Portfolio
The AUL American Bond Portfolio invests primarily in U.S. Treasury and Agency
bonds and notes, investment grade corporate bonds, and U.S. Agency-backed
residential mortgage obligations. Portfolio holdings may range in maturity from
overnight money market investments to bonds with maturities as long as 30 years.
The average maturity of the portfolio is shortened or lengthened depending on
the outlook for interest rates. The mix of corporate bonds, U.S. Agencies and
Treasuries, and mortgage-backed securities in the Portfolio is varied depending
on the relative attractiveness of these sectors.
The total return for the Bond Portfolio in 1995 was 17.8%. This return
represents interest income plus the price increase of the fixed income
securities held in the Portfolio. The Bond Fund experienced a high return in
1995 because of significant price appreciation in intermediate and longer term
bonds resulting from the large decline in interest rates during the year. The
total return for the Lehman Government/Corporate Index was 19.2% for 1995.
At the beginning of 1995 the Bond Portfolios average duration was slightly
longer than the Lehman Government/Corporate Index in recognition of the higher
level of interest rates available at that time. As interest rates declined and
bond prices increased during the year, the average duration of the Portfolio was
shortened somewhat. When the Federal Reserve Bank reduced the Federal Funds rate
to 5.75% in July, the percentage of the Portfolio invested in cash and
short-term Treasuries was decreased while the percentage invested in
intermediate maturity Treasuries and Agencies was increased, especially when
yields in excess of 6% were available. In the fourth quarter, purchases of
intermediate and longer maturity Treasury bonds increased the average duration
of the Portfolio to slightly longer than that of the Lehman Government/Corporate
Index.
Over one-half of the portfolio at year-end 1995 was invested in U.S. Treasury
and Agency holdings. Although corporate bond yields were, in general, not
particularly attractive relative to Treasuries and Agencies throughout most of
the year, two bonds issued by companies with improving prospects Sun Company and
Western National Corporation were purchased at yields well over 100 basis points
higher than similar maturity Treasuries. The percentage of investments in
mortgage-backed securities was allowed to decline during the year.
Mortgage-backed securities tend to underperform during periods of interest rate
volatility due to the option of the homeowner to refinance when interest rates
decline.
A repeat of the excellent bond market returns earned in 1995 may prove difficult
in 1996. As we begin the year, however, bond market participants can look
forward to the likelihood that economic growth will be moderate and inflation
subdued. This could prove to be a positive environment for bondholders,
especially if the Fed continues to lower short-term interest rates in an attempt
to maintain reasonable, non-inflationary growth in the U.S. economy.
<PAGE>
5
AUL American Series Fund, Inc. Bond Portfolio
Average Annual Total Returns for the period ended December 31, 1995
Bond Lehman Brothers
Portfolio Bond Index
One Year 17.8% 19.2%
Five Years 9.4% 9.8%
Since Inception (4/10/90) 9.8% 10.2%
Value of a hypothetical $10,000
investment made 4/10/90 $17,086 $17,382
The charts show the Bond Portfolios total returns, which include changes in
share price and reinvestment of income and capital gains. Figures for the Lehman
Brothers Government/Corporate Bond Index, an unmanaged index of government and
corporate bonds, which is a broad measure of the performance of the U.S. bond
market, include reinvestment of income and capital gains. The inception figures
are from commencement of operations.
Performance numbers for the Bond Portfolio are net of all portfolio operating
expenses, but do not include separate account or contract charges. If the
performance data included the effect of these charges, the returns would be
lower. Past performance is no guarantee of future results. Principal and
investment return will vary so shares may be worth more or less than their
original cost when redeemed.
<PAGE>
6
A Message From Kathryn Hudspeth and Kent Adams,
Portfolio Managers of Managed Portfolio
The Managed Portfolio utilizes a fully managed investment policy by allocating
assets among publicly traded common stocks, debt securities, and money market
instruments. Asset allocation decisions are based on economic factors and the
valuation of each asset class compared to historic levels.
Investors experienced a dramatic improvement in investment performance during
1995 compared to 1994. The U.S. economy continued its moderate growth, low
inflation trend. Labor pressures remained calm while consumer spending continued
to be sluggish.
The stock market in 1995 could be characterized as a two tiered market as
investors repeatedly rotated violently between big, blue chip companies and
smaller secondary stocks during the year. Money poured into the marketplace as
investors eagerly chased equity returns.
Bond returns were among the highest in history in 1995. Although long maturity
bonds were the best performers, registering returns that rivaled those of the
major stock indices, even bonds as short as two years earned returns in the
double digits.
The Managed Portfolios bond investments in 1995 consisted primarily of U.S.
Treasury and Agency obligations with maturities ranging from one to over twenty
years. Good quality corporate bonds and residential mortgage-backed securities
with attractive yields were also included in the Portfolio.
The Managed Portfolio finished 1995 with an investment return of 19.1% versus
19.2% for the Lehman Brothers Government/Corporate Bond Index and 37.5% for the
S&P 500.
As the year progressed, the asset allocation of the Managed Portfolio became
slightly more aggressive as the outlook for the equity market improved. At
year-end 1995, 54% of the Portfolio was invested in stocks, while 41% was
invested in high quality bonds and 5% in money market instruments. This can be
compared to an asset allocation of 42% stocks, 52% bonds and 6% cash equivalents
at year-end 1994.
Slow growth with no recession is currently the favored scenario for 1996. The
Federal Reserve lowered short-term interest rates by twenty-five basis points in
December 1995. It is anticipated that the Fed will provide additional rate cuts
in 1996.
However, it is extremely unlikely that 1996 investment returns will be a repeat
of those experienced in 1995. Interest rates may decline, but not as
dramatically as in 1995. As a result, bond returns should be more subdued. The
growth rate in corporate profits is expected to decline, tempering the
enthusiasm from equity investors. Performance for 1996 could very well "trend
back to the mean."
<PAGE>
7
AUL American Series Fund, Inc. Managed Portfolio
Average Annual Total Returns for the period ended December 31, 1995
Managed S&P 500 Lehman Brothers
Portfolio Bond Index
One Year 19.1% 37.5% 19.2%
Five Years 10.9% 16.6% 9.8%
Since Inception (4/10/90) 10.6% 14.2% 10.2%
Value of a hypothetical $10,000
investment made 4/10/90 $17,811 $21,313 $17,382
The charts show the Managed Portfolios total returns, which include changes in
share price and reinvestment of dividends and capital gains. Figures for the S&P
500, an unmanaged index of common stocks, include reinvestment of dividends and
capital gains. S&P 500 is a registered trademark of Standard & Poors
Corporation. Figures for the Lehman Brothers Government/Corporate Bond Index, an
unmanaged index of government and corporate bonds, which is a broad measure of
the performance of the U.S. bond market, include reinvestment of income and
capital gains. The inception figures are from commencement of operations.
Performance numbers for the Managed account are net of all portfolio operating
expenses, but do not include separate account or contract charges. If the
performance data included the effect of these charges, it would be lower. Past
performance is no guarantee of future results. Principal and investment return
will vary so shares may be worth more or less than their original cost when
redeemed.
<PAGE>
8
(This page is intentionally blank.)
<PAGE>
9
Report of Independent Accountants
The Shareholders and Board of Directors
AUL American Series Fund, Inc.
We have audited the accompanying statement of net assets, including the schedule
of investments, of AUL American Series Fund, Inc. (comprising, respectively, the
Equity, Money Market, Bond, Managed, and Tactical Asset Portfolios) as of
December 31, 1995, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years then ended, and
the selected per share data and ratios for each of the five years then ended of
the Equity, Money Market, Bond and Managed Portfolios, and the statement of
operations, the statement of changes in net assets, and the selected per share
data and ratios for the period from July 31, 1995 through December 31, 1995 of
the Tactical Asset Portfolio. These financial statements, per share data and
ratios are the responsibility of the Funds management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. Our procedures included
confirmation of investments and cash held by the custodian as of December 31,
1995, confirmation by correspondence with brokers as to securities purchased but
not received at that date, or other auditing procedures where confirmations from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements, selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the AUL American
Series Fund, Inc., as of December 31, 1995; the results of their operations for
the year then ended, the changes in their net assets for the each of two years
then ended, and selected per share data and ratios for the five years then ended
of the Equity, Money Market, Bond and Managed Portfolios; and the results of
operations, changes in net assets and selected per share data and ratios for the
period from July 31, 1995 through December 31, 1995 of the Tactical Asset
Portfolio, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
January 27, 1996
<PAGE>
10
(This page is intentionally blank.)
<PAGE>
11
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF NET ASSETS
December 31, 1995
Portfolio
Equity Money Market Bond Managed Tactical Asset
------ ------------ ---- ------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at market value $ 35,357,455 $ 23,737,170 $ 24,961,616 $ 30,544,844 $ 1,142,637
(cost: $30,654,061, $23,737,170
$23,296,539, $27,462,076
and $1,098,258, respectively)
Receivable for shares sold, net --- 518,459 241,646 137,837 2
Dividends and interest receivable 62,541 49,610 343,638 228,042 11,509
Prepaid expense 106 106 106 106 327
Deferred organization costs --- --- --- --- 7,340
------------- ------------ ------------- ------------- -----------
Total assets 35,420,102 24,305,345 25,547,006 30,910,829 1,161,815
------------- ------------ ------------- ------------- -----------
Liabilities:
Distributions payable to AUL 70,725 --- 100,803 45,826 6,994
Distributions payable to Dean --- --- --- --- 6,994
Payable for portfolio shares
redeemed, net 26,435 --- --- --- ---
Investment advisory fees payable 14,932 9,736 10,682 12,828
Accrued expenses 8,485 5,603 6,356 7,573 357
Organization costs payable to AUL --- --- --- --- 8,014
------------ ----------- -------------- ------------- -----------
Total liabilities 120,577 15,339 117,841 66,227 22,359
------- ------ ------- ------ ------
Net Assets $ 35,299,525 $ 24,290,006 $ 25,429,165 $ 30,844,602 $ 1,139,456
============= ============ ============ ============= ============
Shares outstanding 2,483,962 24,290,006 2,298,581 2,484,037 109,147
========= ========== ========= ========= =======
Net Asset Value per share $ 14.21 $ 1.00 $ 11.06 $ 12.42 $ 10.44
============= ============ ============ ============= =============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
Portfolio
Tactical
Equity Money Market Bond Managed Asset(1)
------ ------------ ---- ------- --------
<S> <C> <C> <C> <C> <C>
Investment Income:
Income:
Dividends $ 517,791 $ --- $ --- $ 282,964 $ 6,239
Interest 286,073 1,126,274 1,645,503 1,013,999 14,254
---------- ---------- ---------- ---------- -------
803,864 1,126,274 1,645,503 1,296,963 20,493
---------- ---------- ---------- ---------- -------
Expenses:
Investment advisory fee 144,456 96,175 117,761 142,020 2,399
Custodian and service agent fee 39,003 25,967 31,795 38,345 585
Professional fees 8,068 9,899 7,391 8,596 83
Amortization of deferred
organization costs 769 769 769 769 674
Director fees 1,159 1,159 1,159 1,159 443
Other expenses 8,486 5,823 6,883 8,164 170
---------- ---------- ---------- ---------- -------
201,941 139,792 165,758 199,053 4,354
---------- ---------- ---------- ---------- -------
Net investment income 601,923 986,482 1,479,745 1,097,910 16,139
---------- ---------- ---------- ---------- -------
Gain on Investments:
Net realized gain 398,786 --- 263,778 475,564 5,349
Net unrealized gain 4,083,680 --- 2,110,855 3,392,949 44,379
---------- ---------- ---------- ---------- -------
Net gain 4,482,466 --- 2,374,633 3,868,513 49,728
---------- ---------- ---------- ---------- -------
Net Increase in Net Assets
from Operations $5,084,389 $ 986,482 $3,854,378 $4,966,423 $65,867
========== ========== ========== ========== =======
<FN>
(1) for the period from July 31, 1995 through December 31, 1995
The accompanying notes are an integral part of the financial statement.
</FN>
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1995 and 1994
Portfolio
Equity Money Market
------ ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 601,923 $ 297,314 $ 986,482 $ 361,013
Net realized gain (loss) 398,786 847,029 --- ---
Net unrealized gain (loss) 4,083,680 (760,306) --- ---
--------- -------- ------- -------
Increase (Decrease) in Assets
from Operations 5,084,389 384,037 986,482 361,013
--------- ------- ------- -------
Distributions:
From net investment income (599,497) (297,111) (986,482) (361,013)
From net realized gain (398,786) (847,029) --- ---
-------- -------- ------- -------
Decrease (998,283) (1,144,140) (986,482) (361,013)
-------- ---------- -------- --------
Shareholder Transactions:
Proceeds from shares sold 14,809,942 11,014,515 51,157,189 20,034,943
Reinvested distributions 864,872 913,493 986,482 361,013
Cost of shares redeemed (5,024,617) (2,073,178) (43,349,308) (11,053,614)
---------- ---------- ----------- -----------
Increase 10,650,197 9,854,830 8,794,363 9,342,342
---------- --------- --------- ---------
Net increase 14,736,303 9,094,727 8,794,363 9,342,342
Net Assets at beginning of year 20,563,222 11,468,495 15,495,643 6,153,301
---------- ---------- ---------- ---------
Net Assets at end of year $ 35,299,525 $ 20,563,222 $ 24,290,006 $ 15,495,643
============ ============== ============== ============
Shares sold 1,118,147 858,805 51,157,189 20,034,943
Reinvested distributions 62,363 74,060 986,482 361,013
Shares redeemed (372,202) (161,347) (43,349,308) (11,053,614)
-------- -------- ----------- -----------
Net Increase 808,308 771,518 8,794,363 9,342,342
Shares outstanding at beginning of year 1,675,654 904,136 15,495,643 6,153,301
--------- ------- ---------- ---------
Shares outstanding at end of year 2,483,962 1,675,654 24,290,006 15,495,643
========= ========= ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS (continued)
for the years ended December 31, 1995 and 1994
Portfolio
Bond Managed
---- -------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 1,479,745 $ 1,102,015 $ 1,097,910 $ 744,976
Net realized gain (loss) 263,778 (244,198) 475,564 562,447
Net unrealized gain (loss) 2,110,855 (1,457,895) 3,392,949 (1,470,115)
--------- ---------- --------- ----------
Increase (Decrease) in Assets
from Operations 3,854,378 (600,078) 4,966,423 (162,692)
--------- -------- --------- --------
Distributions:
From net investment income (1,471,732) (1,098,149) (1,093,207) (742,652)
From net realized gain (19,580) --- (475,564) (562,447)
------- ---------- -------- --------
Decrease (1,491,312) (1,098,149) (1,568,771) (1,305,099)
---------- ---------- ---------- ----------
Shareholder Transactions:
Proceeds from shares sold 10,212,753 8,707,785 9,524,234 13,055,470
Reinvested distributions 938,396 451,272 1,378,654 965,890
Cost of shares redeemed (8,537,765) (1,728,801) (8,014,116) (2,065,166)
---------- ---------- ---------- ----------
Increase 2,613,384 7,430,256 2,888,772 11,956,194
--------- --------- --------- ----------
Net increase 4,976,450 5,732,029 6,286,424 10,488,403
Net Assets at beginning of year 20,452,715 14,720,686 24,558,178 14,069,775
---------- ---------- ---------- ----------
Net Assets at end of year $ 25,429,165 $ 20,452,715 $ 30,844,602 $ 24,558,178
============ ============ ============ ============
Shares sold 952,961 829,984 798,921 1,129,652
Reinvested distributions 87,346 44,410 113,420 86,879
Shares redeemed (788,087) (166,393) (661,602) (180,298)
-------- -------- -------- --------
Net Increase 252,220 708,001 250,739 1,036,233
Shares outstanding at beginning of year 2,046,361 1,338,360 2,233,298 1,197,065
--------- --------- --------- ---------
Shares outstanding at end of year 2,298,581 2,046,361 2,484,037 2,233,298
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
15
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS (continued)
for the years ended December 31, 1995 and 1994
Portfolio
Tactical Asset (1)
------------------
1995
----
Operations:
Net investment income $ 16,139
Net realized gain (loss) 5,349
Net unrealized gain (loss) 44,379
------
Increase (Decrease) in Assets
from Operations 65,867
------
Distributions:
From net investment income (16,384)
From net realized gain (5,349)
------
Decrease (21,733)
-------
Shareholder Transactions:
Proceeds from shares sold 1,104,684
Reinvested distributions 1,374
Cost of shares redeemed (10,736)
-------
Increase 1,095,322
---------
Net increase 1,139,456
Net Assets at beginning of year ---
---------
Net Assets at end of year $ 1,139,456
===========
Shares sold 110,034
Reinvested distributions 132
Shares redeemed (1,019)
------
Net Increase 109,147
Shares outstanding at beginning of year ---
--------
Shares outstanding at end of year 109,147
=======
(1) for the period from July 31, 1995 through December 31, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
16
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
EQUITY PORTFOLIO
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (87.4%)
Banks & Financial (7.7%)
American Express Co. 19,500 $ 806,813
Banc One Corp. 26,300 992,825
Ohio Casualty Corp. 16,700 647,125
Salomon, Inc. 7,600 269,800
-------
2,716,563
---------
Broadcasting & Publishing (10.2%)
Chris-Craft Industries, Inc.* 18,126 783,949
Deluxe Corp. 21,900 635,100
Gibson Greetings, Inc. 43,200 691,200
Harland (John H.) Co. 19,300 402,888
Meredith Corp. 13,400 561,125
Moore Corp., Ltd. 28,300 527,087
-------
3,601,349
---------
Chemicals (1.5%)
Carlisle Companies, Inc. 5,000 201,875
Quaker Chemical Corp. 24,800 334,800
-------
536,675
-------
Electrical Equipment &
Electronics (5.8%)
Baldor Electric Co. 29,610 595,901
Dynatech Corp.* 62,000 1,054,000
General Electric Co. 5,600 403,200
-------
2,053,101
---------
Entertainment & Leisure (4.3%)
CPI Corp. 48,800 780,800
Fleetwood Enterprises, Inc. 25,200 648,900
Huffy Corp. 10,600 107,325
-------
1,537,025
---------
Furniture and Apparel (12.5%)
Blair Corp. 4,400 138,600
Hillenbrand Industries, Inc. 23,100 782,513
Kellwood Co. 26,700 544,012
La Z Boy Chair Co. 21,400 660,725
Liz Claiborne, Inc. 39,300 1,090,575
Oshkosh BGosh, Inc. 34,100 596,750
Class A
Reebok International 21,000 593,250
-------
4,406,425
---------
Health Care (5.2%)
Acuson Corp. 27,700 342,788
Community Psychiatric 9,800 120,050
Centers, Inc.
Guidant Corp. 5,983 $ 252,782
Lilly (Eli) & Co. 6,770 380,812
Merck & Co. 11,500 756,125
-------
1,852,557
---------
Information Processing &
Telecommunications (9.4%)
Apple Computer, Inc. 20,200 643,875
Cray Research, Inc.* 7,200 178,200
Hunt Manufacturing Co. 9,900 172,013
International Business 7,100 651,425
Machines Corp.
Software Publishing Corp.* 14,900 49,356
Sun Microsystems, Inc.* 28,200 1,286,625
Telxon Corp. 15,600 352,950
-------
3,334,444
---------
Machinery (2.6%)
Lawson Products, Inc. 21,300 521,850
Precision Castparts Corp. 10,300 409,425
-------
931,275
-------
Merchandising (5.4%)
Longs Drug Stores Corp. 19,000 909,625
Mac Frugals Bargains 36,500 511,000
Close-outs, Inc.
Merchantile Stores Co. 10,900 504,125
-------
1,924,750
---------
Metals & Mining (2.3%)
Aluminum Company of 8,200 433,575
America
Oregon Steel Mills, Inc. 26,000 364,000
-------
797,575
-------
Oil & Oil Services (3.4%)
Royal Dutch Petroleum Co. 3,400 479,825
Valero Energy Crop 29,300 717,850
-------
1,197,675
---------
Paper Products & Containers (1.6%)
Sealright, Inc. 32,500 361,562
Zero Corp. 10,900 193,475
-------
555,037
-------
Transportation (3.4%)
Alexander & Baldwin, Inc. 29,100 669,300
Norfolk Southern Corp. 6,500 515,938
-------
1,185,238
---------
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
17
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
EQUITY PORTFOLIO (continued)
December 31, 1995
Market
Description Shares Value
Common Stock (87.4%), continued
Miscellaneous (12.1%)
Boeing Co. 8,800 $ 689,700
Cross (A.T.) Co. Class A 23,700 358,462
Ford Motor Co. 23,500 681,500
Groundwater Technology, Inc.* 42,400 593,600
Kelly Services, Inc. 27,000 749,250
Michael Foods, Inc. 46,100 535,913
Seagram Company, Ltd. 4,600 159,275
Stanhome, Inc. 17,800 518,425
-------
4,286,125
---------
Total common stock (cost: $26,212,420) 30,915,814
----------
Money Market Mutual Funds (3.6%)
Merrill Lynch Institutional Fund 559,453 559,453
Dreyfus U.S. Treasury Prime 712,661 712,661
-------
Total mutual funds (cost: $1,272,114) $1,272,114
---------
Interest Maturity Principal Market
Rate Date Amount Value
---- ---- ------ -----
<S> <C> <C> <C> <C>
Short-term Notes (9.0%)
General Electric Capital Corporation 5.800 1/16/96 1,000,000 $ 990,095
Associates Corporation of North America 5.700 1/26/96 1,000,000 990,500
Ford Motor Credit Corporation 5.620 1/30/96 600,000 594,380
American General Finance Corp. 5.660 2/23/96 600,000 594,552
Total short-term notes (cost: $3,169,527) 3,169,527
---------
Total Investments (cost: $30,654,061) $35,357,455
===========
<FN>
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
18
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF INVESTMENTS
MONEY MARKET PORTFOLIO
December 31, 1995
Interest Maturity Principal Market
Description Rate Date Amount Value
- ----------- ---- ---- ------ -----
<S> <C> <C> <C> <C>
Short-term Notes (55.0%)
U.S. Government & Agency Obligations (55.0%)
Federal Home Loan Bank Notes 5.570% 1/10/96 $ 3,500,000 $ 3,494,043
Federal Home Loan Bank Notes 5.550% 1/25/96 2,000,000 1,991,984
Federal Home Loan Bank Notes 5.540% 2/01/96 6,000,000 5,969,530
Federal Home Loan Bank Notes* 5.400% 2/12/96 1,600,000 1,589,440
---------
Total short-term notes (cost: $13,044,997) 13,044,997
----------
Corporate Obligations (41.6%)
Automotive (4.2%)
Ford Motor Credit Corpor 5.760% 1/05/96 1,000,000 1,000,000
Electrical Equipment (8.4%)
General Electric Company 5.690% 1/05/96 1,000,000 1,000,000
General Electric Capital Corporation 5.706% 1/12/96 1,000,000 1,000,000
Financial (16.4%)
American General Finance Corporation 5.690% 1/08/96 900,000 900,000
General Electric Capital Services Corporation 5.760% 1/11/96 1,000,000 1,000,000
Prudential Funding Corporation 5.750% 1/12/96 1,000,000 1,000,000
Norwest Financial Corporation 5.750% 1/19/96 1,000,000 1,000,000
Machinery (4.2%)
John Deere Capital Corporation 5.760% 1/11/96 1,000,000 1,000,000
Oil and Gas (4.2%)
Chevron Oil Finance Company 5.760% 1/25/96 1,000,000 1,000,000
Real Estate and Leasing (4.2%)
Associates Corporation of North America 5.750% 1/26/96 1,000,000 1,000,000
---------
Total corporate obligations (cost: $9,900,000) 9,900,000
---------
Certificates of Deposit (1.7%)
Fifth Third Bank of Indiana 5.350% 1/05/96 400,000 400,000
-------
Total certificates of deposit (cost: $400,000) 400,000
-------
Shares
------
Money Market Mutual Funds(1.7%)
Dreyfus U.S. Treasury Prime 392,173 392,173
-------
Total money market mutual funds (cost: $392,173) 392,173
-------
Total Investments (cost: $23,737,170) $ 23,737,170
==============
<FN>
*variable rate note
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
19
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
BOND PORTFOLIO
December 31, 1995
Interest Maturity Principal Market
Description Rate Date Amount Value
- ----------- ---- ---- ------ -----
<S> <C> <C> <C> <C>
Notes and Bonds (97.6%)
U.S. Government & Agency Obligations (62.1%)
Federal Home Loan Bank Notes 5.040% 8/20/98 $ 750,000 $ 743,400
U.S. Treasury Notes 8.875% 2/15/99 2,900,000 3,195,945
Federal National Mortgage Association Notes 6.200% 7/17/00 1,300,000 1,309,542
U.S. Treasury Notes 8.000% 5/15/01 3,350,000 3,750,560
U.S. Treasury Notes 7.500% 5/15/02 650,000 720,791
U.S. Treasury Strips --- 2/15/07 1,300,000 686,894
Federal National Mortgage Association CMO 6.500% 5/25/08 800,000 805,296
Federal National Mortgage Association CMO 7.500% 12/25/09 600,000 632,460
U.S. Treasury Bonds 8.750% 5/15/17 2,750,000 3,635,803
---------
15,480,691
Corporate Obligations (35.5%)
Associates Corporation of North America Notes 8.750% 4/04/96 550,000 554,180
General Motors Acceptance Corporation Notes 7.700% 1/24/97 1,000,000 1,022,500
Allstate Corporation Notes 5.875% 6/15/98 625,000 626,562
El Paso Natural Gas Company Notes 7.750% 1/15/02 200,000 217,250
Western National Corp. Notes 7.125% 2/15/04 800,000 822,000
Eli Lilly & Company Notes 8.375% 12/01/06 850,000 1,007,250
Prudential-Bache Trust CMO 12D 5.350% 10/20/09 1,700,000 1,683,034
American Southwest Financial Corporation CMO 8.900% 3/01/18 200,073 211,972
Merrill Lynch CMO Trust XXXVIID 8.150% 11/01/18 720,000 763,207
Fleet Mortgage Securities, Inc. CMO 7.950% 6/01/19 750,000 779,850
Hydro-Quebec Debenture Bonds 8.050% 7/07/24 400,000 457,500
Sun, Inc., Debenture Bonds 9.000% 11/01/24 600,000 728,250
-------
Total notes and bonds (cost: $22,689,169) 24,354,246
----------
Shares
------
Money Market Mutual Funds (2.4%)
Dreyfus U.S. Treasury Prime 554,367 554,367
Merrill Lynch Institutional Fund 53,003 53,003
------
Total mutual funds (cost: $607,370) 607,370
-------
Total Investments (cost: $23,296,539) $ 24,961,616
=============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
20
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (54.5%)
Banks & Financial (4.7%)
American Express Co. 10,700 $ 442,713
Banc One Corp. 13,900 348,750
Ohio Casualty Corp. 9,000 145,550
Salomon, Inc. 4,100 524,725
-------
1,461,738
---------
Broadcasting & Publishing (6.5%)
Chris-Craft Industries, Inc.* 9,794 423,590
Deluxe Corp. 12,200 353,800
Gibson Greetings, Inc. 22,900 366,400
Harland (John H.) Co. 11,200 233,800
Meredith Corp. 7,000 293,125
Moore Corp., Ltd. 15,200 283,100
-------
1,953,815
---------
Chemicals (1.0%)
Carlisle Companies, Inc. 3,100 125,163
Quaker Chemical Corp. 14,000 189,000
-------
314,163
-------
Electrical Equipment &
Electronics (3.6%)
Baldor Electric Co. 14,850 298,856
Dynatech Corp.* 33,500 569,500
General Electric Co. 3,200 230,400
-------
1,098,756
---------
Entertainment & Leisure (2.7%)
CPI Corp. 26,000 416,000
Fleetwood Enterprises 13,400 345,050
Huffy Corp. 6,100 61,763
-------
822,813
-------
Furniture and Apparel (7.7%)
Blair Corp. 2,800 88,200
Hillenbrand Industries, Inc. 12,100 409,887
Kellwood Co. 14,600 297,475
La Z Boy Chair Co. 11,500 355,063
Liz Claiborne, Inc. 20,700 574,425
Oshkosh BGosh, Inc. 17,300 302,750
Class A
Reebok International 11,300 319,225
-------
2,347,025
---------
Health Care (3.2%)
Acuson Corp. 14,800 183,150
Community Psychiatric 6,900 84,525
Centers, Inc.
Guidant Corp. 3,050 128,863
Lilly (Eli) & Co. 3,452 194,175
Merck & Co. 5,900 387,925
-------
978,638
-------
Information Processing &
Telecommunications (5.9%)
Apple Computer, Inc. 11,100 353,812
Cray Research, Inc.* 3,000 74,250
Hunt Manufacturing Co. 4,700 81,663
International Business 3,900 357,825
Machines Corp.
Software Publishing Corp.* 11,500 38,094
Sun Microsystems, Inc.* 15,800 720,875
Telxon Corp. 7,900 178,737
-------
1,805,256
---------
Machinery (1.6%)
Lawson Products, Inc. 11,600 284,200
Precision Castparts Corp. 5,100 202,725
-------
486,925
-------
Merchandising (3.4%)
Longs Drug Stores Corp. 10,100 483,538
Mac Frugals Bargains 19,700 275,800
Close-outs, Inc.
Mercantile Stores Co. 5,900 272,875
-------
1,032,213
---------
Metals & Mining (1.5%)
Aluminum Company of 4,700 248,512
America
Oregon Steel Mills, Inc. 14,500 203,000
-------
451,512
-------
Oil & Oil Services (2.1%)
Royal Dutch Petroleum Co. 1,900 268,137
Valero Energy Crop 15,800 387,100
-------
655,237
-------
Paper Products & Containers (1.2%)
Sealright, Inc. 19,600 218,050
Zero Corp. 8,800 156,200
-------
374,250
-------
Transportation (2.0%)
Alexander & Baldwin, Inc. 15,400 354,200
Norfolk Southern Corp. 3,100 246,063
-------
600,263
-------
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
13
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1995 and 1994
Portfolio
Equity Money Market
------ ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 601,923 $ 297,314 $ 986,482 $ 361,013
Net realized gain (loss) 398,786 847,029 --- ---
Net unrealized gain (loss) 4,083,680 (760,306) --- ---
--------- -------- ------- -------
Increase (Decrease) in Assets
from Operations 5,084,389 384,037 986,482 361,013
--------- ------- ------- -------
Distributions:
From net investment income (599,497) (297,111) (986,482) (361,013)
From net realized gain (398,786) (847,029) --- ---
-------- -------- ------- -------
Decrease (998,283) (1,144,140) (986,482) (361,013)
-------- ---------- -------- --------
Shareholder Transactions:
Proceeds from shares sold 14,809,942 11,014,515 51,157,189 20,034,943
Reinvested distributions 864,872 913,493 986,482 361,013
Cost of shares redeemed (5,024,617) (2,073,178) (43,349,308) (11,053,614)
---------- ---------- ----------- -----------
Increase 10,650,197 9,854,830 8,794,363 9,342,342
---------- --------- --------- ---------
Net increase 14,736,303 9,094,727 8,794,363 9,342,342
Net Assets at beginning of year 20,563,222 11,468,495 15,495,643 6,153,301
---------- ---------- ---------- ---------
Net Assets at end of year $ 35,299,525 $ 20,563,222 $ 24,290,006 $ 15,495,643
============ ============== ============== ============
Shares sold 1,118,147 858,805 51,157,189 20,034,943
Reinvested distributions 62,363 74,060 986,482 361,013
Shares redeemed (372,202) (161,347) (43,349,308) (11,053,614)
-------- -------- ----------- -----------
Net Increase 808,308 771,518 8,794,363 9,342,342
Shares outstanding at beginning of year 1,675,654 904,136 15,495,643 6,153,301
--------- ------- ---------- ---------
Shares outstanding at end of year 2,483,962 1,675,654 24,290,006 15,495,643
========= ========= ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS (continued)
for the years ended December 31, 1995 and 1994
Portfolio
Bond Managed
---- -------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 1,479,745 $ 1,102,015 $ 1,097,910 $ 744,976
Net realized gain (loss) 263,778 (244,198) 475,564 562,447
Net unrealized gain (loss) 2,110,855 (1,457,895) 3,392,949 (1,470,115)
--------- ---------- --------- ----------
Increase (Decrease) in Assets
from Operations 3,854,378 (600,078) 4,966,423 (162,692)
--------- -------- --------- --------
Distributions:
From net investment income (1,471,732) (1,098,149) (1,093,207) (742,652)
From net realized gain (19,580) --- (475,564) (562,447)
------- ---------- -------- --------
Decrease (1,491,312) (1,098,149) (1,568,771) (1,305,099)
---------- ---------- ---------- ----------
Shareholder Transactions:
Proceeds from shares sold 10,212,753 8,707,785 9,524,234 13,055,470
Reinvested distributions 938,396 451,272 1,378,654 965,890
Cost of shares redeemed (8,537,765) (1,728,801) (8,014,116) (2,065,166)
---------- ---------- ---------- ----------
Increase 2,613,384 7,430,256 2,888,772 11,956,194
--------- --------- --------- ----------
Net increase 4,976,450 5,732,029 6,286,424 10,488,403
Net Assets at beginning of year 20,452,715 14,720,686 24,558,178 14,069,775
---------- ---------- ---------- ----------
Net Assets at end of year $ 25,429,165 $ 20,452,715 $ 30,844,602 $ 24,558,178
============ ============ ============ ============
Shares sold 952,961 829,984 798,921 1,129,652
Reinvested distributions 87,346 44,410 113,420 86,879
Shares redeemed (788,087) (166,393) (661,602) (180,298)
-------- -------- -------- --------
Net Increase 252,220 708,001 250,739 1,036,233
Shares outstanding at beginning of year 2,046,361 1,338,360 2,233,298 1,197,065
--------- --------- --------- ---------
Shares outstanding at end of year 2,298,581 2,046,361 2,484,037 2,233,298
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
15
AUL American Series Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS (continued)
for the years ended December 31, 1995 and 1994
Portfolio
Tactical Asset (1)
------------------
1995
----
Operations:
Net investment income $ 16,139
Net realized gain (loss) 5,349
Net unrealized gain (loss) 44,379
------
Increase (Decrease) in Assets
from Operations 65,867
------
Distributions:
From net investment income (16,384)
From net realized gain (5,349)
------
Decrease (21,733)
-------
Shareholder Transactions:
Proceeds from shares sold 1,104,684
Reinvested distributions 1,374
Cost of shares redeemed (10,736)
-------
Increase 1,095,322
---------
Net increase 1,139,456
Net Assets at beginning of year ---
---------
Net Assets at end of year $ 1,139,456
===========
Shares sold 110,034
Reinvested distributions 132
Shares redeemed (1,019)
------
Net Increase 109,147
Shares outstanding at beginning of year ---
--------
Shares outstanding at end of year 109,147
=======
(1) for the period from July 31, 1995 through December 31, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
16
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
EQUITY PORTFOLIO
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (87.4%)
Banks & Financial (7.7%)
American Express Co. 19,500 $ 806,813
Banc One Corp. 26,300 992,825
Ohio Casualty Corp. 16,700 647,125
Salomon, Inc. 7,600 269,800
-------
2,716,563
---------
Broadcasting & Publishing (10.2%)
Chris-Craft Industries, Inc.* 18,126 783,949
Deluxe Corp. 21,900 635,100
Gibson Greetings, Inc. 43,200 691,200
Harland (John H.) Co. 19,300 402,888
Meredith Corp. 13,400 561,125
Moore Corp., Ltd. 28,300 527,087
-------
3,601,349
---------
Chemicals (1.5%)
Carlisle Companies, Inc. 5,000 201,875
Quaker Chemical Corp. 24,800 334,800
-------
536,675
-------
Electrical Equipment &
Electronics (5.8%)
Baldor Electric Co. 29,610 595,901
Dynatech Corp.* 62,000 1,054,000
General Electric Co. 5,600 403,200
-------
2,053,101
---------
Entertainment & Leisure (4.3%)
CPI Corp. 48,800 780,800
Fleetwood Enterprises, Inc. 25,200 648,900
Huffy Corp. 10,600 107,325
-------
1,537,025
---------
Furniture and Apparel (12.5%)
Blair Corp. 4,400 138,600
Hillenbrand Industries, Inc. 23,100 782,513
Kellwood Co. 26,700 544,012
La Z Boy Chair Co. 21,400 660,725
Liz Claiborne, Inc. 39,300 1,090,575
Oshkosh BGosh, Inc. 34,100 596,750
Class A
Reebok International 21,000 593,250
-------
4,406,425
---------
Health Care (5.2%)
Acuson Corp. 27,700 342,788
Community Psychiatric 9,800 120,050
Centers, Inc.
Guidant Corp. 5,983 $ 252,782
Lilly (Eli) & Co. 6,770 380,812
Merck & Co. 11,500 756,125
-------
1,852,557
---------
Information Processing &
Telecommunications (9.4%)
Apple Computer, Inc. 20,200 643,875
Cray Research, Inc.* 7,200 178,200
Hunt Manufacturing Co. 9,900 172,013
International Business 7,100 651,425
Machines Corp.
Software Publishing Corp.* 14,900 49,356
Sun Microsystems, Inc.* 28,200 1,286,625
Telxon Corp. 15,600 352,950
-------
3,334,444
---------
Machinery (2.6%)
Lawson Products, Inc. 21,300 521,850
Precision Castparts Corp. 10,300 409,425
-------
931,275
-------
Merchandising (5.4%)
Longs Drug Stores Corp. 19,000 909,625
Mac Frugals Bargains 36,500 511,000
Close-outs, Inc.
Merchantile Stores Co. 10,900 504,125
-------
1,924,750
---------
Metals & Mining (2.3%)
Aluminum Company of 8,200 433,575
America
Oregon Steel Mills, Inc. 26,000 364,000
-------
797,575
-------
Oil & Oil Services (3.4%)
Royal Dutch Petroleum Co. 3,400 479,825
Valero Energy Crop 29,300 717,850
-------
1,197,675
---------
Paper Products & Containers (1.6%)
Sealright, Inc. 32,500 361,562
Zero Corp. 10,900 193,475
-------
555,037
-------
Transportation (3.4%)
Alexander & Baldwin, Inc. 29,100 669,300
Norfolk Southern Corp. 6,500 515,938
-------
1,185,238
---------
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
17
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
EQUITY PORTFOLIO (continued)
December 31, 1995
Market
Description Shares Value
Common Stock (87.4%), continued
Miscellaneous (12.1%)
Boeing Co. 8,800 $ 689,700
Cross (A.T.) Co. Class A 23,700 358,462
Ford Motor Co. 23,500 681,500
Groundwater Technology, Inc.* 42,400 593,600
Kelly Services, Inc. 27,000 749,250
Michael Foods, Inc. 46,100 535,913
Seagram Company, Ltd. 4,600 159,275
Stanhome, Inc. 17,800 518,425
-------
4,286,125
---------
Total common stock (cost: $26,212,420) 30,915,814
----------
Money Market Mutual Funds (3.6%)
Merrill Lynch Institutional Fund 559,453 559,453
Dreyfus U.S. Treasury Prime 712,661 712,661
-------
Total mutual funds (cost: $1,272,114) $1,272,114
---------
Interest Maturity Principal Market
Rate Date Amount Value
---- ---- ------ -----
<S> <C> <C> <C> <C>
Short-term Notes (9.0%)
General Electric Capital Corporation 5.800 1/16/96 1,000,000 $ 990,095
Associates Corporation of North America 5.700 1/26/96 1,000,000 990,500
Ford Motor Credit Corporation 5.620 1/30/96 600,000 594,380
American General Finance Corp. 5.660 2/23/96 600,000 594,552
Total short-term notes (cost: $3,169,527) 3,169,527
---------
Total Investments (cost: $30,654,061) $35,357,455
===========
<FN>
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
18
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
STATEMENT OF INVESTMENTS
MONEY MARKET PORTFOLIO
December 31, 1995
Interest Maturity Principal Market
Description Rate Date Amount Value
- ----------- ---- ---- ------ -----
<S> <C> <C> <C> <C>
Short-term Notes (55.0%)
U.S. Government & Agency Obligations (55.0%)
Federal Home Loan Bank Notes 5.570% 1/10/96 $ 3,500,000 $ 3,494,043
Federal Home Loan Bank Notes 5.550% 1/25/96 2,000,000 1,991,984
Federal Home Loan Bank Notes 5.540% 2/01/96 6,000,000 5,969,530
Federal Home Loan Bank Notes* 5.400% 2/12/96 1,600,000 1,589,440
---------
Total short-term notes (cost: $13,044,997) 13,044,997
----------
Corporate Obligations (41.6%)
Automotive (4.2%)
Ford Motor Credit Corpor 5.760% 1/05/96 1,000,000 1,000,000
Electrical Equipment (8.4%)
General Electric Company 5.690% 1/05/96 1,000,000 1,000,000
General Electric Capital Corporation 5.706% 1/12/96 1,000,000 1,000,000
Financial (16.4%)
American General Finance Corporation 5.690% 1/08/96 900,000 900,000
General Electric Capital Services Corporation 5.760% 1/11/96 1,000,000 1,000,000
Prudential Funding Corporation 5.750% 1/12/96 1,000,000 1,000,000
Norwest Financial Corporation 5.750% 1/19/96 1,000,000 1,000,000
Machinery (4.2%)
John Deere Capital Corporation 5.760% 1/11/96 1,000,000 1,000,000
Oil and Gas (4.2%)
Chevron Oil Finance Company 5.760% 1/25/96 1,000,000 1,000,000
Real Estate and Leasing (4.2%)
Associates Corporation of North America 5.750% 1/26/96 1,000,000 1,000,000
---------
Total corporate obligations (cost: $9,900,000) 9,900,000
---------
Certificates of Deposit (1.7%)
Fifth Third Bank of Indiana 5.350% 1/05/96 400,000 400,000
-------
Total certificates of deposit (cost: $400,000) 400,000
-------
Shares
------
Money Market Mutual Funds(1.7%)
Dreyfus U.S. Treasury Prime 392,173 392,173
-------
Total money market mutual funds (cost: $392,173) 392,173
-------
Total Investments (cost: $23,737,170) $ 23,737,170
==============
<FN>
*variable rate note
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
19
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
BOND PORTFOLIO
December 31, 1995
Interest Maturity Principal Market
Description Rate Date Amount Value
- ----------- ---- ---- ------ -----
<S> <C> <C> <C> <C>
Notes and Bonds (97.6%)
U.S. Government & Agency Obligations (62.1%)
Federal Home Loan Bank Notes 5.040% 8/20/98 $ 750,000 $ 743,400
U.S. Treasury Notes 8.875% 2/15/99 2,900,000 3,195,945
Federal National Mortgage Association Notes 6.200% 7/17/00 1,300,000 1,309,542
U.S. Treasury Notes 8.000% 5/15/01 3,350,000 3,750,560
U.S. Treasury Notes 7.500% 5/15/02 650,000 720,791
U.S. Treasury Strips --- 2/15/07 1,300,000 686,894
Federal National Mortgage Association CMO 6.500% 5/25/08 800,000 805,296
Federal National Mortgage Association CMO 7.500% 12/25/09 600,000 632,460
U.S. Treasury Bonds 8.750% 5/15/17 2,750,000 3,635,803
---------
15,480,691
Corporate Obligations (35.5%)
Associates Corporation of North America Notes 8.750% 4/04/96 550,000 554,180
General Motors Acceptance Corporation Notes 7.700% 1/24/97 1,000,000 1,022,500
Allstate Corporation Notes 5.875% 6/15/98 625,000 626,562
El Paso Natural Gas Company Notes 7.750% 1/15/02 200,000 217,250
Western National Corp. Notes 7.125% 2/15/04 800,000 822,000
Eli Lilly & Company Notes 8.375% 12/01/06 850,000 1,007,250
Prudential-Bache Trust CMO 12D 5.350% 10/20/09 1,700,000 1,683,034
American Southwest Financial Corporation CMO 8.900% 3/01/18 200,073 211,972
Merrill Lynch CMO Trust XXXVIID 8.150% 11/01/18 720,000 763,207
Fleet Mortgage Securities, Inc. CMO 7.950% 6/01/19 750,000 779,850
Hydro-Quebec Debenture Bonds 8.050% 7/07/24 400,000 457,500
Sun, Inc., Debenture Bonds 9.000% 11/01/24 600,000 728,250
-------
Total notes and bonds (cost: $22,689,169) 24,354,246
----------
Shares
------
Money Market Mutual Funds (2.4%)
Dreyfus U.S. Treasury Prime 554,367 554,367
Merrill Lynch Institutional Fund 53,003 53,003
------
Total mutual funds (cost: $607,370) 607,370
-------
Total Investments (cost: $23,296,539) $ 24,961,616
=============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
20
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (54.5%)
Banks & Financial (4.7%)
American Express Co. 10,700 $ 442,713
Banc One Corp. 13,900 348,750
Ohio Casualty Corp. 9,000 145,550
Salomon, Inc. 4,100 524,725
-------
1,461,738
---------
Broadcasting & Publishing (6.5%)
Chris-Craft Industries, Inc.* 9,794 423,590
Deluxe Corp. 12,200 353,800
Gibson Greetings, Inc. 22,900 366,400
Harland (John H.) Co. 11,200 233,800
Meredith Corp. 7,000 293,125
Moore Corp., Ltd. 15,200 283,100
-------
1,953,815
---------
Chemicals (1.0%)
Carlisle Companies, Inc. 3,100 125,163
Quaker Chemical Corp. 14,000 189,000
-------
314,163
-------
Electrical Equipment &
Electronics (3.6%)
Baldor Electric Co. 14,850 298,856
Dynatech Corp.* 33,500 569,500
General Electric Co. 3,200 230,400
-------
1,098,756
---------
Entertainment & Leisure (2.7%)
CPI Corp. 26,000 416,000
Fleetwood Enterprises 13,400 345,050
Huffy Corp. 6,100 61,763
-------
822,813
-------
Furniture and Apparel (7.7%)
Blair Corp. 2,800 88,200
Hillenbrand Industries, Inc. 12,100 409,887
Kellwood Co. 14,600 297,475
La Z Boy Chair Co. 11,500 355,063
Liz Claiborne, Inc. 20,700 574,425
Oshkosh BGosh, Inc. 17,300 302,750
Class A
Reebok International 11,300 319,225
-------
2,347,025
---------
Health Care (3.2%)
Acuson Corp. 14,800 183,150
Community Psychiatric 6,900 84,525
Centers, Inc.
Guidant Corp. 3,050 128,863
Lilly (Eli) & Co. 3,452 194,175
Merck & Co. 5,900 387,925
-------
978,638
-------
Information Processing &
Telecommunications (5.9%)
Apple Computer, Inc. 11,100 353,812
Cray Research, Inc.* 3,000 74,250
Hunt Manufacturing Co. 4,700 81,663
International Business 3,900 357,825
Machines Corp.
Software Publishing Corp.* 11,500 38,094
Sun Microsystems, Inc.* 15,800 720,875
Telxon Corp. 7,900 178,737
-------
1,805,256
---------
Machinery (1.6%)
Lawson Products, Inc. 11,600 284,200
Precision Castparts Corp. 5,100 202,725
-------
486,925
-------
Merchandising (3.4%)
Longs Drug Stores Corp. 10,100 483,538
Mac Frugals Bargains 19,700 275,800
Close-outs, Inc.
Mercantile Stores Co. 5,900 272,875
-------
1,032,213
---------
Metals & Mining (1.5%)
Aluminum Company of 4,700 248,512
America
Oregon Steel Mills, Inc. 14,500 203,000
-------
451,512
-------
Oil & Oil Services (2.1%)
Royal Dutch Petroleum Co. 1,900 268,137
Valero Energy Crop 15,800 387,100
-------
655,237
-------
Paper Products & Containers (1.2%)
Sealright, Inc. 19,600 218,050
Zero Corp. 8,800 156,200
-------
374,250
-------
Transportation (2.0%)
Alexander & Baldwin, Inc. 15,400 354,200
Norfolk Southern Corp. 3,100 246,063
-------
600,263
-------
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
21
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (continued)
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (54.5%), continued
Miscellaneous (7.4%)
Boeing Co. 4,600 $ 360,525
Cross (A.T.) Co. Class A 12,300 186,037
Fort Motor Co. 12,500 362,500
Groundwater Technology, Inc.* 23,100 323,400
Kelly Services, Inc. 14,800 410,700
Michael Foods, Inc. 24,700 287,138
Seagram Company, Ltd. 2,200 76,175
Stanhome, Inc. 9,100 265,037
-------
2,271,512
---------
Total common stock (cost: $14,406,565) 16,654,116
----------
Money Market Mutual Funds (4.9%)
Dreyfus U.S. Treasury Prime 917,445 917,445
Merrill Lynch Institutional Fund 571,627 571,627
Total money market mutual funds
(cost: $1,489,072) $1,489,072
---------
Interest Maturity Principal Market
Rate Date Amount Value
---- ---- ------ -----
<S> <C> <C> <C> <C>
Notes and Bonds (40.6%)
U.S. Government and Agency Obligations (30.0%)
Federal Home Loan Bank Notes 8.250% 9/25/96 $ 500,000 $ 510,070
Federal Home Loan Bank Notes 5.040% 8/20/98 250,000 247,800
U.S. Treasury Notes 8.875% 2/15/99 2,300,000 2,534,715
Federal Home Loan Banks Bonds 8.600% 6/25/99 500,000 547,650
Federal National Mortgage Association Bonds 8.350% 11/10/99 500,000 548,475
Federal National Mortgage Association Bonds 6.200% 7/17/00 400,000 402,936
U.S. Treasury Notes 8.000% 2/15/01 1,425,000 1,595,387
U.S. Treasury Strips --- 2/15/07 700,000 369,866
Federal National Mortgage Association CMO 6.500% 5/25/08 500,000 503,310
U.S. Treasury Bonds 8.750% 5/15/17 1,450,000 1,917,060
---------
9,177,269
Corporate Obligations (10.6%)
Associates Corporation of North America 8.750% 4/04/96 125,000 125,950
General Motors Acceptance Corporation Notes 7.700% 1/24/97 800,000 818,000
Allstate Corporation Notes 5.875% 6/15/98 250,000 250,625
El Paso Natural Gas Company Notes 7.750% 1/15/02 100,000 108,625
Western National Corp. Notes 7.125% 2/15/04 600,000 616,500
Eli Lilly & Company Notes 8.375% 12/01/06 450,000 533,250
Hydro-Quebec Debenture Bonds 8.050% 7/07/24 250,000 285,937
Sun, Inc. Debenture Bonds 9.000% 11/1/24 400,000 485,500
-------
Total notes and bonds (cost: $11,566,439) 12,401,656
----------
Total Investments (cost: $27,462,076) $ 30,544,844
============
<FN>
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
22
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
TACTICAL ASSET PORTFOLIO
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Common Stock (47.3%)
Automotive & Truck (4.9%)
Chrysler Corp. 100 $ 5,538
Ford Motor Co. 700 20,300
PACCAR, Inc. 400 16,850
TBC Corp. 1,500 12,937
------
55,625
------
Bank & Financial (10.0%)
AFLAC, Inc. 400 17,350
AMBAC, Inc. 400 18,750
Federal Home Loan
Mortgage Corp. 200 16,700
Federal National Mortgage
Association 100 12,413
Integon Corp. 1,000 20,625
John Alden Financial Corp. 200 4,175
Lehman Brothers Holding, Inc. 500 10,625
PMI Group, Inc. 300 13,575
------
114,213
-------
Chemicals (3.7%)
Dow Chemical Co. 200 14,075
Eastman Chemical Co. 300 18,787
Georgia Gulf Corp. 300 9,225
-----
42,087
------
Entertainment & Leisure (1.8%)
Fleetwood Enterprises, Inc. 800 20,600
------
20,600
------
Furniture and Apparel (1.4%)
VF Corp. 300 15,825
------
15,825
------
Health Care (3.5%)
Humana, Inc. 800 21,900
U.S. Healthcare, Inc. 400 18,600
------
40,500
------
Information Processing &
Telecommunications (4.1%)
American Power 1,000 9,500
EMC Corp. 800 12,300
Seagate Technology, Inc. 200 9,500
Sprint Corp. 400 15,950
------
47,250
------
Merchandising (4.0%)
May Department Store, Inc. 400 16,900
TJX Companies, Inc. 1,000 18,875
Value City Department Store 1,500 10,125
------
45,900
------
Metals & Mining (0.9%)
Birmingham Steel Corp. 700 10,413
------
10,413
------
Oil & Oil Services (3.6%)
Ashland, Inc. 400 14,050
Southwestern Energy, Inc. 1,000 12,750
Valero Energy Corp. 600 14,700
------
41,500
------
Paper & Containers (3.3%)
International Paper Co. 600 22,725
Louisiana-Pacific Corp. 600 14,550
------
37,275
------
Transportation (0.8%)
Arnold Industries, Inc. 500 8,687
-----
8,687
-----
Miscellaneous (5.3%)
Philip Morris Cos., Inc. 200 18,100
Teleflex, Inc. 300 12,300
UST, Inc. 900 30,038
------
60,438
------
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
23
<TABLE>
<CAPTION>
AUL American Series Fund, Inc.
SCHEDULE OF INVESTMENTS
TACTICAL ASSET PORTFOLIO (CONTINUED)
December 31, 1995
Market
Description Shares Value
- ----------- ------ -----
Total common stock (cost: $505,590) $ 540,313
-------
Money Market Mutual Funds (8.6%)
Dreyfus U.S. Treasury Prime 98,118 98,118
------
Total mutual funds (cost: $98,118) 98,118
------
Interest Maturity Principal Market
Rate Date Amount Value
---- ---- ------ -----
<S> <C> <C> <C> <C>
Notes and Bonds (44.1%)
U.S. Treasury Note 6.125% 7/31/96 100,000 $ 100,498
U.S. Treasury Note 5.500% 7/31/97 100,000 100,504
U.S. Treasury Note 5.250% 7/31/98 100,000 100,043
U.S. Treasury Note 6.000% 10/15/99 100,000 102,362
U.S. Treasury Note 5.500% 4/15/00 100,000 100,799
-------
Total notes and bonds (cost: $494,550) 504,206
-------
Total Investments (cost: $1,098,258) $ 1,142,637
===========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
<PAGE>
24
(This page is intentionally blank.)
<PAGE>
25
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The AUL American Series Fund, Inc. (Fund) was incorporated under the laws of
Maryland on July 26, 1989, and is registered under the Investment Company Act of
1940, as amended, as an open-end, diversified management investment company. As
a series type of mutual fund, the Fund issues shares of common stock relating to
separate investment portfolios consisting of the Equity Portfolio, Money Market
Portfolio, Bond Portfolio, Managed Portfolio, and Tactical Asset Allocation
Portfolio (Tactical Asset). Currently, the Fund offers shares only to separate
accounts of American United Life Insurance Company (AUL) to serve as an
underlying investment vehicle for variable annuity contracts. The Fund commenced
operations on April 10, 1990.
INVESTMENTS
Securities traded on a national securities exchange are valued at the last trade
price. Listed securities for which no sale was reported on the valuation date
are valued at the latest bid price. Short-term notes are valued at amortized
cost which approximates market value. Fixed income securities for which
representative market quotes are readily available are valued at the latest bid
price as quoted by one or more dealers who make a market in such securities.
U.S. Government obligations are valued at the latest bid price; however, such
obligations maturing in 60 days or less are valued at amortized cost which
approximates market value.
The Money Market Portfolio securities are valued at amortized cost. The Funds
use of the amortized cost method is conditioned on its compliance with certain
provisions of Rule 2a-7 of the Investment Company Act of 1940. The Investment
Manager reviews this method of valuation to ensure that the portfolio securities
are reflected at their fair value.
Security transactions are recorded on the trade date. Realized gains and losses
are determined on specific identification basis
INCOME AND EXPENSE
Dividend income is recorded on the ex-dividend date, and interest income is
accrued daily. Portfolio expenses are recorded on an accrual basis.
DEFERRED ORGANIZATION COSTS
Expenses incurred by the Fund in connection with its organization have been
capitalized and are amortized over five years on a straight-line basis.
TAXES
The fund qualifies as a regulated investment company under the Internal Revenue
Code; thus, no tax provision is required. The Funds policy is to distribute all
income to shareholders.
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
For the Money Market Portfolio, dividends from net investment income are
declared and paid daily. For all other portfolios, dividends from net investment
income are declared and paid quarterly. Distributions from net realized gains on
investments are declared and paid at least annually for all portfolios.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
2. TRANSACTIONS WITH AUL
AUL invested $23,000,000 to established the Fund. AULs investment in the Fund
is:
Equity Portfolio $ 3,091,634
Bond Portfolio 5,792,572
Managed Portfolio 1,507,985
Tactical Asset Portfolio 500,000
---------
$ 10,892,191
=============
The Fund has an investment advisory agreement with AUL to act as its investment
advisor. For its services, AUL receives a fee at an annual rate of .50% of the
Portfolios average daily net assets. AUL has also agreed that its fee may be
reduced if the aggregate ordinary operating expenses of the Portfolios exceed 1%
of the average daily net assets during the year. To the extent that AUL has
reduced its advisory fees to prevent the Portfolios aggregate ordinary operating
expenses from exceeding 1%, it may increase its advisory fee during any of the
next succeeding 5 years, provided that the aggregate ordinary operating expenses
in any given year do not exceed 1% of the average daily net assets in that year.
The total amount of any increase in AULs fees will not exceed the prior fee
reduction.
<PAGE>
26
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
2. TRANSACTIONS WITH AUL,continued:
AUL may terminate the policy of reducing its fee and/or assuming Fund expenses
upon 30 days prior written notice to the Fund, and in any event, the policy will
automatically terminate if the Investment Advisory Agreement is terminated. The
investment advisory fees incurred during the year ended December 31, 1995, and
1994, were $502,811 and $319,962, respectively.
Certain directors of the Fund are officers of AUL.
3. AGREEMENTS WITH BANKS
The Fund has agreements with The Provident Bank (Bank) whereby the Bank serves
as custodian of the securities and other assets of the Fund, and as bookkeeping,
transfer and disbursing agent for the Fund.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term securities
and money market mutual funds) during the year ended December 31, 1995, were:
Portfolio
---------
Tactical
Equity Money Market Bond Managed Asset
------ ------------ ---- ------- -------
Common Stock:
Purchases $11,744,350 $ --- $ --- $6,180,678 $537,970
Proceeds from sales 2,316,251 --- --- 2,109,943 37,730
Corporate Bonds:
Purchases --- --- 1,717,960 1,188,454 ---
Proceeds from sales --- --- 834,125 47,411 ---
Government Bonds:
Purchases --- --- 13,111,649 3,909,608 494,063
Proceeds from sales --- --- 11,449,933 6,957,773 ---
5. AUTHORIZED CAPITAL SHARES
The Fund has 125,000,000 authorized shares of $.001 par value capital stock,
which includes 10,000,000 unallocated shares. The remaining shares are allocated
to each of the Funds portfolios as follows:
Equity Portfolio 10,000,000
Money Market Portfolio 50,000,000
Bond Portfolio 10,000,000
Managed Portfolio 20,000,000
Tactical Asset 25,000,000
----------
115,000,000
-----------
6. NET ASSETS
Portfolio
---------
Equity Money Market Bond Managed Tactical Asset
------ ------------ ---- ------- --------------
<S> <C> <C> <C> <C> <C>
Proceeds from shares sold
and reinvested distributions $ 39,352,977 $ 79,854,859 $ 34,405,561 $ 38,808,962 $ 1,106,057
Cost of shares redeemed (8,759,475) (55,564,853) (10,653,352) (11,054,156) (10,736)
Undistributed net investment
income 2,629 --- 11,879 7,028 (244)
Undistributed net realized
gain (loss) --- --- --- ---
Unrealized gain (loss) 4,703,394 --- 1,665,077 3,082,768 44,379
--------- --------- --------- --------- ------
$ 35,299,525 $ 24,290,006 $ 25,429,165 $ 30,844,602 $ 1,139,456
============ ============ ============ ============ ===========
</TABLE>
<PAGE>
27
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
7. SELECTED PER SHARE DATA AND RATIOS
The per share amounts are based on shares outstanding throughout the years.
Equity Portfolio
----------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income ............ $ 0.37 $ 0.33 $ 0.28 $ 0.32 $ 0.40
Expense ...................... 0.09 0.09 0.10 0.09 0.09
------------ ------------ ---------- ---------- ----------
Net investment income ........ 0.28 0.24 0.18 0.23 0.31
Net gain (loss) on investments 2.12 0.26 1.58 0.92 2.23
Shareholder distributions:
Net investment income ....... (0.27) (0.24) (0.18) (0.23) (0.31)
Realized gain ............... (0.19) (0.67) (0.39) (0.32) (0.92)
------------ ------------ ---------- ---------- ----------
Net increase (decrease) ...... 1.94 (0.41) 1.19 0.60 1.31
Net asset value at
beginning of year ........... 12.27 12.68 11.49 10.89 9.58
------------ ------------ ---------- ---------- ----------
Net asset value at end of year $ 14.21 $ 12.27 $ 12.68 $ 11.49 $ 10.89
============ ============ ========== ========== ==========
Ratio to average net assets:
Expense ..................... 0.70% 0.73% 0.82% 0.84% 0.80%
Net investment income ....... 2.08% 1.85% 1.46% 2.04% 2.75%
Total return ................. 19.45% 2.64% 14.80% 10.03% 25.58%
Portfolio turnover rate ...... 10% 20% 10% 15% 43%
Shares outstanding ........... 2,483,962 1,675,654 904,136 606,686 379,027
</TABLE>
<PAGE>
28
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
7. SELECTED PER SHARE DATA AND RATIOS, continued
Money Market Portfolio
----------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income ............ $ 0.06 $ 0.05 $ 0.03 $ 0.04 $ 0.06
Expense ...................... 0.01 0.01 0.01 0.01 0.01
------------- ------------- ----------- ------------ ------------
Net investment income ........ 0.05 0.04 0.02 0.03 0.05
Net gain (loss) on investments --- --- --- --- ---
Shareholder distributions:
Net investment income ....... (0.05) (0.04) (0.02) (0.03) (0.05)
Realized gain --- --- --- --- ---
------------- ------------- ------------ ------------ ------------
Net increase --- --- --- --- ---
Net asset value at
beginning of year ........... 1.00 1.00 1.00 1.00 1.00
------------- ------------- ------------ ------------ ------------
Net asset value at end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============ ============ ============
Ratio to average net assets:
Expense ..................... 0.73% 0.75% 0.84% 0.85% 0.85%
Net investment income ....... 5.13% 3.71% 2.30% 2.98% 5.35%
Total return ................. 5.09% 3.38% 2.33% 3.01% 5.53%
Portfolio turnover rate --- --- --- --- ---
Shares outstanding ........... 24,290,006 15,495,643 6,153,301 5,480,206 5,149,563
</TABLE>
<PAGE>
29
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
7. SELECTED PER SHARE DATA AND RATIOS, continued
Bond Portfolio
--------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income ............ $ 0.75 $ 0.72 $ 0.75 $ 0.79 $ 0.87
Expense ...................... 0.08 0.08 0.09 0.09 0.08
------------ ------------ ------------ ------------ ------------
Net investment income ........ 0.67 0.64 0.66 0.70 0.79
Net gain (loss) on investments 1.07 (1.01) 0.49 0.06 0.85
Shareholder distributions:
Net investment income ....... (0.66) (0.64) (0.66) (0.70) (0.79)
Realized gain ............... (0.01) --- (0.14) (0.31) (0.27)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) ...... 1.07 (1.01) 0.35 (0.25) 0.58
Net asset value at
beginning of year ........... 9.99 11.00 10.65 10.90 10.32
------------ ------------ ------------ ------------ ------------
Net asset value at end of year $ 11.06 $ 9.99 $ 11.00 $ 10.65 $ 10.90
============ ============ ============ ============ ============
Ratio to average net assets:
Expense ..................... 0.70% 0.73% 0.80% 0.79% 0.71%
Net investment income ....... 6.28% 6.19% 5.95% 6.47% 7.46%
Total return ................. 17.79% (3.56%) 10.69% 7.19% 16.36%
Portfolio turnover rate ...... 55% 50% 29% 41% 61%
Shares outstanding ........... 2,298,581 2,046,361 1,338,361 1,123,783 1,078,041
</TABLE>
<PAGE>
30
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
7. SELECTED PER SHARE DATA AND RATIOS, continued
Managed Portfolio
-----------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment Income ............ $ 0.54 $ 0.50 $ 0.49 $ 0.58 $ 0.71
Expense ...................... 0.08 0.08 0.09 0.09 0.10
------------ ------------ ------------ ---------- ----------
Net investment income ........ 0.46 0.42 0.40 0.49 0.61
Net gain (loss) on investments 1.62 (0.45) 1.07 0.41 1.06
Shareholder distributions:
Net investment income ....... (0.46) (0.42) (0.40) (0.49) (0.61)
Realized gain ............... (0.20) (0.30) (0.24) (0.35) (0.31)
------------ ------------ ------------ ---------- ----------
Net increase (decrease) ...... 1.42 (0.75) 0.83 0.06 0.75
Net asset value at
beginning of year ........... 11.00 11.75 10.92 10.86 10.11
------------ ------------ ------------ ---------- ----------
Net asset value at end of year $ 12.42 $ 11.00 $ 11.75 $ 10.92 $ 10.86
============ ============ ============ ========== ==========
Ratio to average net assets:
Expense ..................... 0.70% 0.73% 0.81% 0.82% 0.94%
Net investment income ....... 3.86% 3.63% 3.49% 4.46% 5.74%
Total return ................. 19.13% (0.92%) 12.98% 7.95% 16.73%
Portfolio turnover rate ...... 35% 34% 9% 33% 36%
Shares outstanding ........... 2,484,037 2,233,298 1,197,065 760,101 569,323
</TABLE>
<PAGE>
31
NOTES TO FINANCIAL STATEMENTS (continued)
7. SELECTED PER SHARE DATA AND RATIOS, continued
Tactical Asset
--------------
1995
----
Investment Income $ 0.20
Expense 0.04
----------
Net investment income 0.16
Net gain (loss) on investments 0.49
Shareholder distributions:
Net investment income (0.16)
Realized gain (0.05)
----------
Net increase (decrease) 0.44
Net asset value at
beginning of year 10.00
----------
Net asset value at end of year $ 10.44
==========
Ratio to average net assets(1):
Expense 1.00%
Net investment income 3.70%
Total return(1) 6.49%
Portfolio turnover rate 4%
Shares outstanding 109,147
(1) Ratios calculated for period July 31, 1995 through December 31, 1955 on
annualized basis
<PAGE>
32
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
8. UNREALIZED GAIN (Loss)
Portfolio
---------
Equity Money Market Bond Managed Tactical Asset
------ ------------ ---- ------- --------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Appreciation $ 5,957,649 $ --- $ --- $ 3,020,289 $ 51,555
Depreciation (1,254,255) --- --- (772,738) (16,832)
Notes and Bonds:
Appreciation --- --- 1,666,068 835,613 9,656
Depreciation --- --- (991) (396)
------------ ----------- ------------ ------------ ----------
$ 4,703,394 $ $ 1,665,077 $ 3,082,768 $ 44,379
============ =========== ============ ============ ==========
6. NET SHAREHOLDERS
Portfolio
---------
Equity Money Market Bond Managed Tactical Asset
------ ------------ ---- ------- --------------
AUL 309,609 --- 578,768 150,952 50,001
Dean Investments --- --- --- --- 50,000
AUL American Unit Trust 1,181,632 2,457,397 522,681 1,239,217 ---
AUL Group Retirement Annuity
Separate Account II 922,123 20,180,783 1,153,520 1,037,056 ---
AUL American Individual
Unit Trust 70,598 1,651,826 43,612 56,812 9,146
------------ ----------- ------------ ------------ ----------
2,483,962 24,290,006 2,298,581 2,484,037 109,147
============ =========== ============ ============ ===========
</TABLE>
<PAGE>
1
EXHIBIT 16
Computation of Performance Quotations
1.Current Yield for the Money Market Portfolio:
As stated in the Statement of Additional Information, current yield for the
Money Market Portfolio will be based on the change in the value of a
hypothetical investment (exclusive of capital charges) over a particular seven
day period ending December 31, 1994 [$26,268.67] less a pro rata share of
Portfolio expenses [$3,534.81] accrued over that period (the "base period")
[$22,733.86] and stated as a percentage of the investment at the start of the
base period (the "base period return") [$22,733.86/24,258,074.65 or
0.0009371667]. The "base period return" is then annualized by multiplying by
365/7 with the resulting yield figure carried to at least the nearest hundredth
of one percent [.0009371667 X 365/7 = 0.04886 or 4.88%].
2. Effective Yield for the Money Market Portfolio assumes that all dividends
received during an annual period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" [$22,733.86] used in the
calculation of current yield in calculation 1 above, which is then annualized to
reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)**365/7] - 1
Effective Yield = [(.000937167 + 1)**365/7] -1
Effective Yield = [(1.0009371667)**365/7] -1
Effective Yield = 1.050028 - 1 = 0.050028 or 5.00%
3.Yield Calculations:
Yield is based on all investment income per share earned during a
particular 30 day period (including dividends and interest), less expenses
accrued during the period ["b" in the formula below] which equals "Net
Investment Income" or "a" in the formula below] divided by the maximum offering
price per share on the last day of the 30 day period ["d" in the formula below]
times the average daily number of shares outstanding during the period that were
entitled to receive dividends ["c"] according to the following formula:
Yield = 2[(a-b/cd +1)**6 -1] where
"a" = net investment income earned during the period attributable to shares
owned by the Investment Account;
"b" = expenses accrued for the period (net of reimbursements);
"c" = the average daily number of shares outstanding during the period; and
"d" = the maximum offering price per share on December 31, 1995.
(a) For the Equity Investment Account:
According to the formula stated above, where:
"a" = $55,163.79; "b" = $19,568.81; "c" = 2,445,759.523; and "d" = $14.2109
Yield = 2[(35,594.98/34,756,444.01 + 1)**6 -1]
Yield = 2[(1.00102412606)**6 -1]
Yield = 2[..00616051036] = 0.012321 or 1.23%
(b) For the Bond Portfolio:
According to the formula stated in 3(a)above, where:
"a" = $130,854.19; "b" = $14,076.48; "c" = 2,303,240.657; and "d" = $11.0594
Yield = 2[(116,777.71/25,472,459.72 +1)**6 -1]
Yield = 2[(1.00458446932)**6 -1]
Yield = 2[.0.2782400999] = 0.55648 or 5.56%
<PAGE>
2
(c) For the Managed Portfolio:
According to the formula stated in 3(a) above, where:
"a" = $88,698.74; "b" = $16,845.67; "c" = 2,420,691.300; and "d" = $12.4154
Yield = 2[(71,853.07/30,053,850.77 + 1)**6 -1]
Yield = 2[(1.00239081077)**6 -1]
Yield = 2[0.01443087805] = 0.28862 or 2.89%
(c) For the Tactical Asset Allocation Portfolio:
According to the formula stated in 3(a) above, where:
"a" = $4,986.98; "b" = $240.79; "c" = 105,911.312; and "d" = $10.4425
Yield = 2[(4746.19/1,105,978.87 + 1)**6 -1]
Yield = 2[(1.00429139302)**6 -1]
Yield = 2[0.02602618461] = 0.052052 or 5.21%
4. Quotations of average annual total return for a Portfolio will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Portfolio for periods of one, five, and ten
years, or since the Fund's inception, if less. The average annual total return
for a Portfolio will be calculated pursuant to the following formula: P (1 +
T)**n = ERV (where P = a hypothetical initial payment of $1,000, T = the total
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period.) All total
return figures reflect the deduction of a proportional share of Portfolio
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid.
FOR THE PERIOD APRIL 10, 1990 THROUGH DECEMBER 31, 1995
(a) For the Equity Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,926; and n = 5.7250
ERV = $1,000 (1 + T)**5.7250
T = 0.1213 or 12.13%
(b)For the Bond Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,711; and n = 5.7250
ERV = $1,000 (1 + T)**5.7250
T = 0.0984 or 9.84%
(c)For the Money Market Portfolio, according to the formula expressed above,
where:
P = $1,000; ERV = $1,273; and n = 5.7250
ERV = $1,000 (1 + T)**5.7250
T = 0.0431 or 4.31%
(d)For the Managed Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,784; and n = 5.7250
ERV = $1,000 (1 + T)**5.7250
T = 0.1064 or 10.64%
<PAGE>
3
(e)For the Tactical Asset Allocation Portfolio, the data is not available due to
the fund's inception date occuring after the beginning of the time period under
consideration.
FOR THE YEAR ENDING DECEMBER 31, 1995
(a) For the Equity Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,195; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1945 or 19.45%
(b) For the Bond Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,178 and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1779 or 17.79%
(c) For the Money Market Portfolio, according to the formula expressed above,
where:
P = $1,000; ERV = $1,051; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.0509 or 5.09%
(d)For the Managed Portfolio, according to the formula expressed above, where:
P = $1,000; ERV = $1,191; and n = 1
ERV = $1,000 (1 + T)**1
T = 0.1913 or 19.13%
(e)For the Tactical Asset Allocation Portfolio, the data is not available due to
the fund's inception date occuring after the beginning of the time period under
consideration.
<TABLE> <S> <C>
<ARTICLE>6
<CIK> 0000853618
<NAME> AUL AMERICAN SERIES FUND
<SERIES>
<NUMBER> 01
<NAME> EQUITY PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 30,654,061
<INVESTMENTS-AT-VALUE> 35,357,455
<RECEIVABLES> 62,541
<ASSETS-OTHER> 106
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,420,102
<PAYABLE-FOR-SECURITIES> 0
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