AUL American Series Fund, Inc.
Annual Report
December 31, 1996
asxc
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>
A Message
From
The Chairman of the Board
and President
The U.S. economy continued its moderate expansion during 1996. Investors began
the year fearing that the economic growth
rate would accelerate, forcing the Federal Reserve to tighten monetary policy.
However, GDP (gross domestic product) grew
at a sustainable pace during the year while core inflation remained subdued.
This seemed to have the effect of calming
investors and reduced prospects for monetary tightening by the Federal
Reserve in the near term.
The stock market experienced another rewarding year in 1996 with the Dow
Jones Industrial Average and the S&P 500
(commonly quoted equity indices) establishing new highs throughout the year.
During 1996, investors continued to react
positively to the combination of slow growth and moderate inflation.
However, not all stocks had identical performance.
These major equity indices were driven by the superior returns of large
capitalization growth companies while small and
medium size companies lagged conspicuously.
Long maturity Treasury bonds yielded just below 6% at the beginning of 1996.
By midyear, however, investors were
increasingly concerned about the inflationary impact of rapid employment
growth in the U.S. economy. Long maturity
Treasury bond yields increased to more than 7%. Although a brief market rally
occurred in the fourth quarter, year-end
intermediate and longer maturity bond yields remained seventy to eighty basis
points above levels at the beginning of the
year. Because of the move to higher interest rates and lower bond prices in
1996, bond market returns were modest, especially
relative to stock market returns.
Equity investors have now experienced two back-to-back years of excellent
stock performance. Even after the exuberance of
the last two years, the major stock averages could still post further gains
during 1997, but the gains are expected to be on a
more modest scale. The market could also experience increased volatility as
equity concerns heighten. Good bond
performance is likely to be highly dependent on investors' comfort level with
the pace of economic growth and continued
moderate inflation.
Investment performance for the AUL American Series Fund, Inc. for the year
1996 was:
Equity Portfolio 19.2% Managed Portfolio 11.8%
Money Market Portfolio 4.6%Tactical Asset Allocation 15.7%
Bond Portfolio 2.2%
We suggest your careful review of the Portfolio Manager comments found on the
following pages comparing these returns to
other indices. 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 risk charges
which may be incurred when investing in a variable annuity contract.
James W. Murphy
Chairman of the Board of Directors and President
Indianapolis, Indiana
January 15, 1997
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 Dr. Leslie Lenkowsky, Director
Professor, School of Business President, Hudson Institute
Indiana University, Indianapolis, Indiana Indianapolis, Indiana
Leonard D. Schutt, Director Richard A. Wacker, Secretary
<PAGE>
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 to their own historic valuation levels.
Other important considerations include
management ability, free cashflow, insider ownership and industry dominance.
Equity investors were the obvious winners in 1996 compared to other traditional
asset classes. Except for brief resistance
during July and December, the S&P 500 marched confidently to new highs. Investor
enthusiasm was fueled by the possibility
of continued moderate economic growth coupled with subdued inflation. This
allowed the Federal Reserve to remain on the
sidelines instead of tightening monetary policy. Another major factor supporting
the stock market during 1996 was its overall
liquidity as investors poured record amounts of money into equity mutual funds.
As a result, 1996 was another impressive year for stocks with the S&P 500
advancing 23%. After considering 1995's
investment return, this represents the largest two-year advance since the
mid-1950's. However, not all segments of the stock
market performed as well as the S&P 500. This equity index is dominated by
the returns of large capitalization, or blue chip,
companies. During 1996, it became apparent that profit growth was decelerating.
In response, investors focused almost
exclusively on companies with consistent and visible earnings growth. This
resulted in massive purchases of large
capitalization growth companies which pushed the prices of this small group of
stocks to extreme valuation levels.
Unfortunately, the rest of the market trailed dramatically. Therefore, size
became an overriding equity theme during 1996.
The Equity Portfolio achieved a 19.2% investment return for calendar 1996
which is much higher than the long-term average
return for stocks. The Portfolio benefitted from its concentration in
technology, pharmaceutical and merchandising
companies. The return of the Portfolio was also propelled by several merger
situations and share repurchase programs.
However, since the Equity Portfolio utilizes a value approach, it did not invest
heavily in large capitalization companies as
this area of the market was overvalued and became more extended as the year
progressed.
Equity investors have experienced two successive years of phenomenal returns.
The obvious debate is whether enough
positive information exists to keep equity momentum moving forward. Investors
are generally expecting another year of
moderate growth and subdued inflation. Any deviation from this expectation will
cause increased volatility for the stock
market. Earnings momentum and mutual fund flows have slowed since the first of
the year. Even Federal Reserve Chairman
Alan Greenspan commented on the "irrational exuberance" of the stock market,
which raised concerns that the Federal
Reserve might intervene and tighten monetary policy. While economic fundamentals
remain attractive, equity investing will
remain challenging during 1997.
<PAGE>
AUL American Series Fund, Inc. Equity Portfolio
Equity S&P 500
Portfolio
One Year 19.2% 23.0%
Five Years 13.0% 15.2%
Since Inception (4/10/90) 13.2% 15.3%
Value of a hypothetical $10,000
investment made 4/10/90 $22,915 $26,223
The charts show the Equity Portfolio's 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 & Poor's 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>
A Message
From
Kent Adams,
Portfolio Manager
of Bond Portfolio
The 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 Bond Portfolio's total return was 2.2% in 1996. This return represents
interest income and the price change of the fixed
income securities held in the Portfolio. The Bond Portfolio experienced price
declines on bond holdings in 1996 due to the
increase in interest rates that occurred. The total return for the Lehman
Government/Corporate Bond Index was 2.9% in 1996.
At the beginning of 1996 the Bond Portfolio's average duration was slightly
shorter than the Lehman Government/Corporate
Index's average duration. As interest rates increased and bond prices decreased
during the first half of the year, the portfolio
was lengthened to an average duration longer than the Index's duration. When
interest rates for intermediate and longer
maturity Treasury bonds declined sharply in the fourth quarter of 1996, the
average duration of the Portfolio was reduced to a
level slightly shorter than that of the Lehman Government/Corporate Index.
More than one-half of the Portfolio at year-end 1996 was invested in high
quality U.S. Treasury and Agency holdings. Less
than 30 percent of the Portfolio was invested in corporate bonds at year-end due
to the historically low yield spreads available
relative to Treasuries. The percentage of investments in residential
mortgage-backed securities declined slightly during the
year to approximately 14% of the Portfolio. Residential mortgage-backed
securities generally offer high yields but can
perform poorly during periods of interest rate volatility due to the option of
the homeowner to refinance when interest rates
decline.
Bond investors will be closely monitoring the Federal Reserve Bank's reaction to
economic trends in 1997. Over a longer term
time horizon, bonds should perform well given the likelihood of moderate
economic growth and low inflation. In the short
run, however, a market-disrupting hike in the federal funds rate target might
be necessary before improved bond
performance can become a reality.
Beginning in 1997, the bond fund will use the Lehman Aggregate Bond Index as its
benchmark instead of the Lehman
Government/Corporate Bond Index which has been used in the past. The Lehman
Aggregate Bond Index includes one-year
and longer government, corporate, Yankee, and U.S. Agency mortgage-backed bonds
and has an average maturity of 8 3_4
years. This Index is a better match to the Bond Portfolio for comparative
purposes because this Index includes
mortgage-backed securities, while the Lehman Government/Corporate Index does
not.
<PAGE>
AUL American Series Fund, Inc. Bond Portfolio
Bond Lehman Brothers
Portfolio Bond Index
One Year 2.2% 2.9%
Five Years 6.6% 7.2%
Since Inception (4/10/90) 8.7% 9.0%
Value of a hypothetical $10,000
investment made 4/10/90 $17,468 $17,887
The charts show the Bond Portfolio's 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>
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.
The current economic expansion is well into its sixth year which makes it one of
the longest expansions in post war history.
Despite its longevity, it has been characterized as extremely moderate. The U.S.
economy has succeeded in expanding for
almost six years without a serious threat of excessive inflation or any major
setback to the stock market.
After achieving above average returns for both equities and fixed income
securities during 1995, the markets experienced a
change of direction during 1996. Interest rates increased dramatically during
the first quarter of 1996 as economic statistics
indicated that the economy was advancing faster than expected. The rise in
interest rates took an obvious toll on the bond
market as bond prices declined. The stock market ignored the negative
implications of higher rates and reached ever higher
valuations.
Stock investors remained positive throughout the year with only minor setbacks
occurring in July and December. As a result,
stock prices rose dramatically and rewarded equity investors handsomely.
However, the equity advance became increasingly
narrow as investors emphasized large capitalization companies with stable
earnings trends.
Halfway through 1996, the Portfolio managers became concerned about the relative
valuation between the stock and bond
markets. At that point, the equity concentration of the Portfolio was reduced.
Subsequently, the stock market experienced a
sell-off in July creating a better balance between the two markets. The asset
allocation became more aggressive after the July
sell-off and by the end of 1996, 55% of the Managed Portfolio was invested in
stocks, while 42% was invested in high quality
bonds and 3% was invested in money market instruments. This can be compared to
an asset allocation of 54% stocks, 41%
bonds and 5% cash equivalents at year-end 1995.
The Managed Portfolio finished 1996 with an investment return of 11.8% compared
to 2.9% for the Lehman Brothers
Government/Corporate Bond Index and 23.0% for the S&P 500.
At the present time, most economists are projecting another year of moderate
growth and low inflation for 1997. Although
the stock market has experienced two consecutive years of above average returns,
the major equity indices could still post
further gains. Bonds should also do well in 1997 if the economists are correct
in their projections. If, however, the Federal
Reserve Bank determines that a hike in short-term interest rates is necessary to
control economic growth, then both bonds and
stocks could experience some near-term price volatility.
<PAGE>
AUL American Series
Fund, Inc. Managed Portfolio
Managed S&P 500 Lehman Brothers
Portfolio Bond Index
One Year 11.8% 23.0% 2.9%
Five Years 10.0% 15.2% 7.2%
Since Inception (4/10/90) 10.8% 15.3% 9.0%
Value of a hypothetical $10,000
investment made 4/10/90 $19,913 $26,223 $17,887
The charts show the Managed Portfolio's 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 & Poor's
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 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, 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>
A Message
From
John Riazzi,
Portfolio Manager
of Tactical Asset Allocation Portfolio
Needless to say, 1996 was a terrific year for the stock market and for the
Tactical Asset Allocation Portfolio.
There is an old adage, who's author or origin we do not know "the third time
is the charm." Well, in terms of the stock
market, it's hard to imagine 1997 being any more charming than the past two
years. In fact 1995 and 1996 provided equity
investors with the strongest two year period in nearly 40 years. For 1996, the
S&P 500 finished +23%, while bonds, as
measured by the Lehman Intermediate Government/Corporate Index, finished the
year +4%. The Tactical Asset Allocation
Portfolio advanced a solid +15.7% for 1996. The results are very much in keeping
with our stated objective of competitive
investment returns, while attempting to provide downside risk protection and
preservation of capital.
As of the end of 1996, and for the greater part of the year, the portfolio
maintained stock exposure ranging between 48% and
55%. The fixed income portion of the portfolio, represented by a conservative
"cover the downside" profile, was split between
short term (less than 31_2 year average maturity) U.S. Government securities and
agencies (a total of 30% of the portfolio, and
short-term cash investments (15% of the portfolio).
The fact that 45% of the total portfolio has been positioned to provide
stability and consistency, as stated in the prospectus,
may bring into question our ability to chalk up competitive results. One factor,
however, which has allowed us to show
investment returns comparable to other portfolio options invested 70% - 100% in
stock, has been our superior industry and
security selection.
The portfolio maintained its discipline of not exceeding 10% in any one
industry, so no one "industry bet" distorted
performance. With this in mind, however, the Tactical Asset Allocation portfolio
had exposure in numerous industries which
outperformed the S&P 500 by double digit margins: Data Storage +43% greater
relative return , Energy +29% greater
relative return, Retail +129% greater relative return, Insurance +26%
greater relative return, and Financial Services +23%
greater relative return.
As we look to 1997, we do not believe investors can continue to enjoy the
"rising tide" for all equity holdings. The current
valuations for the overall stock market are relatively poor. The dividend yield
on the S&P 500 is the lowest in history, and the
price-to-book value ratio is at an all time high. Likewise, technical divergence
in the market as portrayed by the narrowing of
leadership among individual stockholdings, provides some evidence of a
vulnerable marketplace. This however, does not
have to spell disaster. 1996 displayed a number of these same characteristics,
yet the market sustained its advance, with the
help of strong corporate earnings, a low (relative) interest rate environment
and a benign inflation level (the Consumer Price
Index increased just over 3%).
Continuation of these favorable macro trends could allow 1997 to shrug off a
number of the negatives, just as 1996 did.
However, as a prudent investor we will not ignore the caution signals present
and we will keep one eye on the exit door (as is
reflected by our asset allocation). At the same time, in an effort to build on
our successes of 1996, our equity research team will
work aggressively to uncover superior investment opportunities.
Rest assured, as 1997 develops consistence and competitiveness remain at the
heart of our decision making.
<PAGE>
AUL American Series Fund, Inc. Tactical Asset Allocation Portfolio
Tactical Asset S&P 500 Lehman Brothers
Allocation Portfolio Bond Index
One Year 15.7% 23.0% 15.2%
Since Inception (7/31/95) 15.9% 24.3% 16.9%
Value of a hypothetical $10,000
investment made 7/31/95 $12,320 $13,609 $12,479
The charts show the Tactical Asset Allocation Portfolio's 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 &
Poor's 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 Tactical Asset Allocation 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>
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<PAGE>
Report of Independent Accountants
The Shareholders and Board of Directors
AUL American Series Fund, Inc.
We have audited the accompanying statements of net assets, including the
schedules of investments, of the AUL
American Series Fund, Inc. (comprising, respectively, the Equity, Money Market,
Bond, Managed, and Tactical
Asset Allocation Portfolios) as of December 31, 1996, the related statements of
operations for the year then ended,
and, except for the Tactical Asset Allocation Portfolio, the statements of
changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the five
years in the period then ended, and for
the Tactical Asset Allocation Portfolio the statement of changes in net assets,
and financial highlights for the year
ended December 31, 1996 and the period July 31, 1995 through December 31, 1995.
These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion
on these financial statements and financial highlights 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 and
financial highlights 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, 1996, 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 and financial highlights 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, 1996; the results of their operations for the year
then ended, and, except for the Tactical
Asset Allocation Portfolio, the changes in their net assets for each of the two
years in the period then ended, and
financial highlights for each of the five years in the period then ended; and
for the Tactical Asset Allocation
Portfolio changes in net assets and financial highlights for the year ended
December 31, 1996 and for the period
July 31, 1995 through December 31, 1995, in conformity with generally accepted
accounting principles.
Indianapolis, Indiana
January 31, 1997
<PAGE>
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<PAGE>
AUL American Series Fund, Inc.
statementS of net assets
December 31, 1996
Portfolio
Equity Money Market Bond Managed
Tactical Asset
Assets:
Investments in securities
at market value $ 50,679,067 $ 40,351,959 $ 27,813,660 $42,708,728
$2,154,548
(cost: $39,000,971, $40,351,959,
$27,169,794, $36,664,068,
and $1,921,705, respectively)
Cash 50,865
13
Receivable for shares sold, net 32,375
86
Dividends and interest receivable 86,281 58,419 403,354 334,844
12,817
Prepaid expense 89 89 89 89
89
Deferred organization costs
5,774
Total assets 50,765,437 40,410,467 28,217,103 43,126,901
2,173,327
Liabilities:
Distributions payable to AUL 18,251
10,440
Distributions payable to Dean
10,440
Payable for portfolio shares
redeemed, net 4,711 150,841 5,950
Payable for investments purchased 50,863
Investment advisory fees payable 22,669 18,489 13,317 20,129
611
Accrued expenses 16,837 13,662 9,956 15,155
522
Organization costs payable to AUL
6,441
Total liabilities 113,331 182,992 29,223 35,284
28,454
Net Assets $ 50,652,106 $40,227,475 $28,187,880 $43,091,617
$ 2,144,873
Shares outstanding 3,042,989 40,227,475 2,648,089 3,215,189
184,046
Net Asset Value per share $ 16.65 $ 1.00 $ 10.65 $ 13.40
$ 11.65
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
statementS of operations
For the year ended December 31, 1996
Portfolio
Equity Money Market Bond Managed
Tactical Asset
Investment Income:
Income:
Dividends $ 759,611 $ $ $395,677
$ 15,506
Interest 308,565 1,778,244 1,803,030 1,135,753
44,662
1,068,176 1,778,244 1,803,030 1,531,430
60,168
Expenses:
Investment advisory fee 212,114 166,215 137,536 184,974
11,644
Custodian and service agent fees 57,271 44,878 37,135 49,942
2,297
Professional fees 7,049 5,494 4,607 6,126
312
Amortization of deferred
organization costs
1,602
Director fees 5,248 4,145 3,406 4,550
210
Other expenses 16,644 13,093 11,237 14,746
1,017
298,326 233,825 193,921 260,338
17,082
Net investment income 769,850 1,544,419 1,609,109 1,271,092
43,086
Gain (Loss) on Investments:
Net realized gain (loss) (217,011) 18,492 77,781
26,150
Net change in
unrealized gain (loss) 6,974,701 (1,021,212) 2,961,892
188,464
Net gain (loss) 6,757,690 (1,002,720) 3,039,673
214,614
Net Increase in
Net Assets from Operations $ 7,527,540 $ 1,544,419 $ 606,389 $ 4,310,765
$ 257,700
The accompanying notes are an integral part of the financial statement
AUL American Series Fund, Inc.
statementS of changes in net assets
for the years ended December 31, 1996 and 1995
Portfolio
Equity Money Market
1996 1995 1996 1995
Increase (Decrease) in Net Assets
from Operations:
Net investment income $ 769,850 $ 601,923 $ 1,544,419 $ 986,482
Net realized gain (loss) (217,011) 398,786
Net change in
unrealized gain (loss) 6,974,701 4,083,680
Increase in Assets
from Operations 7,527,540 5,084,389 1,544,419 986,482
Dividends and Distributions:
From net investment income (760,627) (599,497) (1,544,419)(986,482)
From net realized gain (398,786)
Decrease (760,627) (998,283) (1,544,419) (986,482)
Shareholder Transactions:
Proceeds from shares sold 14,831,799 14,809,942 82,650,126 51,157,189
Reinvested distributions 677,401 864,872 1,544,419 986,482
Cost of shares redeemed (6,923,532) (5,024,617)(68,257,076)(43,349,308)
Increase 8,585,668 10,650,197 15,937,469 8,794,363
Net increase 15,352,581 14,736,303 15,937,469 8,794,363
Net Assets at beginning of year 35,299,525 20,563,222 24,290,006 15,495,643
Net Assets at end of year $ 50,652,106 $ 35,299,525 $40,227,475$ 24,290,006
Shares sold 965,142 1,118,147 82,650,126 51,157,189
Reinvested distributions 43,359 62,363 1,544,419 986,482
Shares redeemed (449,474) (372,202) (68,257,076) (43,349,308)
Net Increase 559,027 808,308 15,937,469 8,794,363
Shares outstanding
at beginning of year 2,483,962 1,675,654 24,290,006 15,495,643
Shares outstanding
at end of year 3,042,989 2,483,962 40,227,475 24,290,006
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
statementS of changes in net assets (continued)
for the years ended December 31, 1996 and 1995
Portfolio
Bond Managed
1996 1995 1996 1995
Increase (Decrease) in Net Assets
from Operations:
Net investment
income $ 1,609,109 $ 1,479,745 $ 1,271,092 $ 1,097,910
Net realized
gain 18,492 263,778 77,781 475,564
Net change in
unrealized
gain (loss) (1,021,212) 2,110,855 2,961,892 3,392,949
Increase in Assets
from Operations 606,389 3,854,378 4,310,765 4,966,423
Dividends and Distributions:
From net investment
income (1,616,520) (1,471,732) (1,269,322) (1,093,207)
From net realized
gain (18,491) (19,580) (77,781) (475,564)
Decrease (1,635,011) (1,491,312) (1,347,103) (1,568,771)
Shareholder Transactions:
Proceeds from shares
sold 14,086,640 10,212,753 15,341,831 9,524,234
Reinvested
distributions 1,495,931 938,396 1,316,098 1,378,654
Cost of shares
redeemed (11,795,234) (8,537,765) (7,374,576) (8,014,116)
Increase 3,787,337 2,613,384 9,283,353 2,888,772
Net increase 2,758,715 4,976,450 12,247,015 6,286,424
Net Assets at
beginning of year 25,429,165 20,452,715 30,844,602 24,558,178
Net Assets at
end of year $28,187,880 $ 25,429,165 $ 43,091,617 $ 30,844,602
Shares sold 1,316,217 952,961 1,203,357 798,921
Reinvested
distributions 141,513 87,346 101,708 113,420
Shares redeemed (1,108,222) (788,087) (573,913) (661,602)
Net Increase 349,508 252,220 731,152 250,739
Shares outstanding
at beginning of year 2,298,581 2,046,361 2,484,037 2,233,298
Shares outstanding
at end of year 2,648,089 2,298,581 3,215,189 2,484,037
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
statementS of changes in net assets (continued)
for the years ended December 31, 1996 and 1995
Portfolio
Tactical Asset
1996 1995(1)
Increase (Decrease) in Net Assets
from Operations:
Net investment income $ 43,086 $ 16,139
Net realized gain 26,150 5,349
Net change in
unrealized gain (loss) 188,464 44,379
Increase in Assets
from Operations 257,700 65,867
Dividends and Distributions:
From net investment income (42,732) (16,384)
From net realized gain (26,150) (5,349)
Decrease (68,882) (21,733)
Shareholder Transactions:
Proceeds from shares sold 874,893 1,104,684
Reinvested distributions 28,262 1,374
Cost of shares redeemed (86,556) (10,736)
Increase 816,599 1,095,322
Net increase 1,005,417 1,139,456
Net Assets at beginning of year 1,139,456
Net Assets at end of year $ 2,144,873 $ 1,139,456
Shares sold 80,409 110,034
Reinvested distributions 2,488 132
Shares redeemed (7,998) (1,019)
Net Increase 74,899 109,147
Shares outstanding at beginning of year 109,147
Shares outstanding at end of year 184,046 109,147
<PAGE>
(1) for the period from July 31, 1995 through December 31, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
equity portfolio
December 31, 1996
Market Market
Description Shares Value Description Shares Value
Common Stock (90.5%)
Banks & Financial (10.7%)
American Express Co. 21,300 $ 1,203,450
Banc One Corp. 34,630 1,489,090
Great Western Financial 33,100 959,900
Ohio Casualty Corp. 21,600 766,800
Salomon, Inc. 21,400 1,008,475
5,427,715
Broadcasting & Publishing (9.6%)
Chris-Craft Industries, Inc.* 20,420 855,088
Deluxe Corp. 28,500 933,375
Gibson Greetings, Inc. 44,300 869,387
Harland (John H.) Co. 19,300 636,900
Meredith Corp. 15,100 796,525
Moore Corp., Ltd. 36,600 745,725
4,837,000
Chemicals (1.7%)
Carlisle Companies, Inc. 8,700 526,350
Quaker Chemical Corp. 20,400 334,050
860,400
Electrical Equipment &
Electronics (9.1%)
Baldor Electric Co. 60,110 1,480,209
Dynatech Corp.* 55,500 2,455,875
General Electric Co. 6,900 682,237
4,618,321
Entertainment & Leisure (4.3%)
CPI Corp. 69,700 1,167,475
Fleetwood Enterprises, Inc. 37,600 1,034,000
2,201,475
Furniture and Apparel (13.2%)
Hillenbrand Industries, Inc. 30,900 1,120,125
Kellwood Co. 39,600 792,000
La Z Boy Chair Co. 35,600 1,050,200
Liz Claiborne, Inc. 40,500 1,564,312
Oshkosh B'Gosh, Inc. 42,100 642,025
Class A
Reebok International 36,400 1,528,800
6,697,462
<PAGE>
Health Care (7.6%)
Acuson Corp. 37,300 $ 909,188
Guidant Corp. 5,983 341,031
Lilly (Eli) & Co. 6,770 494,210
Merck & Co. 12,200 966,850
McKesson Corporation 19,900 1,114,400
3,825,679
Industrial Services (2.4%)
Fluor Daniel 19,206 151,247
Kelly Services, Inc. 38,600 1,042,200
1,193,447
Information Processing &
Telecommunications (7.6%)
Apple Computer, Inc.* 15,200 317,300
International Business 6,900 1,041,900
Machines Corp.
Novell, Inc.* 42,000 397,687
Sun Microsystems, Inc.* 49,600 1,274,100
Telxon Corp. 67,500 826,875
3,857,862
Machinery (1.5%)
Lawson Products, Inc. 10,300 225,312
Precision Castparts Corp. 10,300 511,138
736,450
Merchandising (6.4%)
Longs Drug Stores Corp. 25,500 1,252,687
Mac Frugal's Bargains 16,500 431,063
Close-outs, Inc.
Mercantile Stores Co. 17,800 878,875
Stanhome, Inc. 26,200 694,300
3,256,925
Metals & Mining (2.6%)
Aluminum Company of 16,700 1,064,625
America
Oregon Steel Mills, Inc. 14,800 247,900
1,312,525
Oil & Oil Services (4.1%)
Royal Dutch Petroleum Co. 5,100 870,825
Valero Energy Crop. 42,700 1,222,288
2,093,113
Transportation (4.0%)
Alexander & Baldwin, Inc. 41,300 1,032,500
Norfolk Southern Corp. 11,400 997,500
2,030,000
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
equity portfolio (continued)
December 31, 1996
Market
Description Shares Value
Common Stock (90.5%), continued
Miscellaneous (5.7%)
Boeing Co. 8,500 $ 904,188
Ford Motor Co. 34,000 1,083,750
Michael Foods, Inc. 49,300 628,575
Sealright, Inc. 27,000 283,500
2,900,013
Total common stock (cost: $34,169,893) 45,848,387
Money Market Mutual Funds (4.4%)
Riverfront U.S. Government Security 762,808 762,808
Merrill Lynch Institutional Fund 1,469,579 1,469,579
Total mutual funds (cost: $2,232,387) 2,232,387
Interest Maturity Principal
Rate Date Amount
Short-term Notes (5.1%)
Associates Corporation
of North America 5.290% 11/22/96 $ 1,000,000 997,050
GE Capital 5.380% 01/10/97 1,000,000 998,675
U.S. Treasury Note 6.500% 05/15/97 600,000 602,568
Total short-term notes (cost: $2,598,691) 2,598,293
Total Investments (cost: $39,000,971) $ 50,679,067
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
money market portfolio
December 31, 1996
Interest Maturity Principal Market
Description Rate Date Amount Value
Short-term Notes (49.4%)
U.S. Government & Agency Obligations (49.4%)
Federal Home Loan Bank Notes 5.260% 01/16/97 $4,000,000 $3,991,233
Federal Home Loan Bank Notes 5.250% 02/18/97 5,000,000 4,965,000
Federal Home Loan Mortgage
Corporation Notes 5.240% 01/13/97 4,500,000 4,492,125
Federal Home Loan Bank Notes 5.250% 01/24/97 3,500,000 3,488,260
Federal Home Loan Bank Notes 5.370% 01/30/97 3,000,000 2,987,023
Total short-term notes (cost: $19,923,641) 19,923,641
Corporate Obligations (37.9%)
Automotive (4.7%)
Ford Motor Credit Corporation 5.380% 01/10/97 1,900,000 1,900,000
Electrical Equipment (9.6%)
General Electric Capital Corporation 5.500% 01/29/97 1,900,000 1,900,000
General Electric Capital Corporation 5.500% 01/30/97 2,000,000 2,000,000
Financial (8.9%)
Norwest Financial Corporation 5.530% 01/24/97 1,800,000 1,800,000
Prudential Funding Corporation 5.400% 01/17/97 1,800,000 1,800,000
Machinery (5.0%)
John Deere Capital Corporation 5.450% 01/30/97 2,000,000 2,000,000
Oil and Gas (5.0%)
Chevron Oil Finance Company 5.430% 01/17/97 2,000,000 2,000,000
Real Estate and Leasing (4.7%)
Associates Corporation of North America 5.480% 01/28/97 1,900,000 1,900,000
Total corporate obligations (cost: $15,300,000) 15,300,000
Shares
Money Market Mutual Funds(12.7%)
Dreyfus Masternote Account 1,220,292 1,220,292
Merrill Lynch Institutional Fund 1,927,172 1,927,172
Riverfront U.S. Government Security 1,980,854 1,980,854
Total money market mutual funds (cost: $5,128,318) 5,128,318
Total Investments (cost: $40,351,959) $ 40,351,959
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
bond portfolio
December 31, 1996
Interest Maturity Principal Market
Description Rate Date Amount Value
Long-term Notes and Bonds (97.9%)
U.S. Government & Agency Obligations (53.8%)
Federal Home Loan Bank Notes 8.375% 10/25/99 $ 1,300,000 $ 1,375,556
Federal Home Loan Bank Notes 5.040% 08/20/98 750,000 739,582
U.S. Treasury Bonds 8.750% 05/15/17 2,750,000 3,355,413
U.S. Treasury Notes 8.000% 05/15/01 700,000 747,880
U.S. Treasury Notes 7.500% 05/15/02 500,000 528,695
U.S. Treasury Notes 7.250% 08/15/04 1,300,000 1,368,042
U.S. Treasury Notes 8.875% 02/15/99 1,850,000 1,957,171
U.S. Treasury Bonds 9.375% 02/15/06 1,350,000 1,625,265
U.S. Treasury Notes 6.125% 08/31/98 1,400,000 1,406,300
U.S. Treasury Notes 6.750% 04/30/00 600,000 611,328
U.S. Treasury Bonds 8.000% 11/15/21 500,000 573,775
U.S. Treasury Strips 02/15/07 1,300,000 674,505
14,963,512
Collateralized Mortgage Obligations (14.5%)
American Southwest Financial
Corporation CMO 8.900% 03/01/18 187,551 195,353
Federal National Mortgage
Association Notes CMO 7.500% 12/25/09 600,000 596,622
Federal National Mortgage
Association Notes CMO 6.500% 05/25/08 800,000 786,168
Fleet Mortgage
Securities, Inc. CMO 7.950% 06/01/19 562,205 569,738
Merrill Lynch CMO Trust XXXVIID 8.150% 11/01/18 720,000 738,144
Prudential -Bache Trust CMO 12D 5.350% 10/20/09 1,127,510 1,117,002
4,003,027
Corporate Obligations (29.6%)
Allstate Corporation Notes 5.875% 06/15/98 625,000 622,656
Associates Corporation of
North America Notes 5.600% 01/15/01 1,600,000 1,542,000
El Paso Natural Gas
Company Notes 7.750% 01/15/02 200,000 208,250
General Motors Acceptance
Corporation Notes 5.450% 03/01/99 1,000,000 983,750
Hydro-Quebec Debenture Bonds 8.050% 07/07/24 400,000 438,500
Eli Lilly & Company Notes 8.375% 12/01/06 850,000 945,625
Providence of Ontario Notes 7.625% 06/22/04 950,000 999,875
Service Company International Notes 6.750% 06/01/01 900,000 895,500
Smith Barney Holdings Notes 7.500% 05/01/02 900,000 931,500
Sun Inc. Debenture Bonds 9.000% 11/01/24 600,000 678,750
8,246,406
Total long-term notes and bonds (cost: $26,569,079) 27,212,945
Shares
Money Market Mutual Funds (2.1%)
Riverfront U.S. Government Security 540,949 540,949
Merrill Lynch Institutional Fund 59,766 59,766
Total mutual funds (cost: $600,715) 600,715
Total Investments (cost: $27,169,794) $ 27,813,660
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
managed portfolio
December 31, 1996
Market Market
Description Shares Value Description Shares
Common Stock (55.1%)
Banks & Financial (6.4%)
American Express Co. 10,300 $ 581,950
Banc One Corp. 17,750 763,250
Great Western Financial 17,300 501,700
Ohio Casualty Corp. 9,900 351,450
Salomon, Inc. 11,200 527,800
2,726,150
Broadcasting & Publishing (5.1%)
Chris-Craft Industries, Inc.* 10,611 444,336
Deluxe Corp. 15,000 491,250
Gibson Greetings, Inc. 23,400 459,225
Harland (John H.) Co. 9,700 320,100
Meredith Corp. 8,000 422,000
2,136,911
Chemicals (0.9%)
Carlisle Companies, Inc. 4,500 272,250
Quaker Chemical Corp. 8,100 132,637
404,887
Electrical Equipment &
Electronics (5.6%)
Baldor Electric Co. 30,950 762,144
Dynatech Corp.* 28,300 1,252,275
General Electric Co. 3,800 375,725
2,390,144
Entertainment & Leisure (2.7%)
CPI Corp. 36,200 606,350
Fleetwood Enterprises 19,400 533,500
1,139,850
Furniture and Apparel (8.1%)
Hillenbrand Industries, Inc. 15,700 569,125
Kellwood Co. 21,000 420,000
La Z Boy Chair Co. 18,400 542,800
Liz Claiborne, Inc. 20,700 799,537
Oshkosh B'Gosh, Inc. 22,300 340,075
Class A
Reebok International 18,800 789,600
3,461,137
<PAGE>
Health Care (4.5%)
Acuson Corp.* 19,000 $ 463,125
Guidant Corp. 3,050 173,850
Lilly (Eli) & Co. 3,252 237,396
Merck & Co. 6,300 499,275
McKesson Corporation 10,300 576,800
1,950,446
Industrial Services (1.5%)
Fluor Daniel 10,555 83,121
Kelly Services 20,000 540,000
623,121
Information Processing &
Telecommunications (4.7%)
Apple Computer, Inc.* 8,600 179,525
International Business 3,600 543,600
Machines Corp.
Novell, Inc.* 21,600 204,525
Sun Microsystems, Inc.* 25,400 652,462
Telxon Corp. 34,800 426,300
2,006,412
Machinery (0.9%)
Lawson Products, Inc. 6,600 144,375
Precision Castparts Corp. 5,100 253,087
397,462
Merchandising (3.9%)
Longs Drug Stores Corp. 13,200 648,450
Mac Frugal's Bargains 8,200 214,225
Close-outs, Inc.
Mercantile Stores Co. 9,300 459,188
Stanhome, Inc. 13,500 357,750
1,679,613
Metals & Mining (1.6%)
Aluminum Company of 8,800 561,000
America
Oregon Steel Mills, Inc. 8,000 134,000
695,000
Oil & Oil Services (2.5%)
Royal Dutch Petroleum Co. 2,500 426,875
Valero Energy Crop. 22,300 638,338
1,065,213
Transportation (2.5%)
Alexander & Baldwin, Inc. 21,300 532,500
Norfolk Southern Corp. 5,900 516,250
1,048,750
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
managed portfolio (continued)
December 31, 1996
Market
Description Shares Value
Common Stock (55.1%), continued
Miscellaneous (4.2%)
Boeing Co. 4,100 $ 436,137
Ford Motor Co. 17,500 557,813
Michael Foods, Inc. 23,400 298,350
Moore Corp., Ltd. 18,900 385,088
Sealright, Inc. 11,300 118,650
1,796,038
Total common stock (cost: $17,784,415) 23,521,134
Money Market Mutual Funds (2.7%)
Riverfront U.S. Government Security 808,586 808,586
Merrill Lynch Institutional Fund 342,472 342,472
Total money market mutual funds (cost: $1,151,058) 1,151,058
Interest Maturity Principal
Rate Date Amount
Notes and Bonds (42.2%)
U.S. Government and Agency Obligations (31.3%)
Federal Home Loan
Bank Bonds 8.600% 06/25/99 $ 500,000 528,480
Federal Home Loan
Bank Bonds 8.375% 10/25/99 900,000 952,307
Federal Home Loan
Banks Notes 5.040% 08/20/98 250,000 246,528
Federal National
Mortgage Association Bonds 8.350% 11/10/99 500,000 529,145
Federal National
Mortgage Association CMO 6.500% 05/25/08 500,000 491,355
U.S. Treasury Bonds 9.375% 02/15/06 1,500,000 1,805,850
U.S. Treasury Bonds 8.750% 05/15/17 1,450,000 1,769,218
U.S. Treasury Notes 8.000% 02/15/01 1,125,000 1,201,950
U.S. Treasury Notes 7.500% 02/15/02 700,000 740,173
U.S. Treasury Notes 7.250% 08/15/04 2,000,000 2,104,680
U.S. Treasury Notes 8.875% 02/15/99 1,150,000 1,216,620
U.S. Treasury Bonds 8.000% 11/15/21 200,000 229,510
U.S. Treasury Notes 6.125% 08/31/98 1,000,000 1,004,500
U.S. Treasury Notes 6.750% 04/30/00 200,000 203,776
U.S. Treasury Strips 02/15/07 700,000 363,195
13,387,287
Corporate Obligations (10.9%)
Allstate Corporation
Notes 5.875% 06/15/98 250,000 249,062
Associates Corporation
of North America 5.600% 01/15/01 400,000 385,500
El Paso Natural Gas
Company Notes 7.750% 01/15/02 100,000 104,125
General Motors Acceptance
Corporation Notes 5.450% 03/01/99 800,000 787,000
Hydro-Quebec Debenture
Bonds 8.050% 07/07/24 250,000 274,062
Eli Lilly & Company Notes 8.375% 12/01/06 450,000 500,625
Providence of
Ontario Notes 7.625% 06/22/04 550,000 578,875
Service Company
International Notes 6.750% 06/01/01 700,000 696,500
Smith Barney Holding Notes 7.500% 05/01/02 600,000 621,000
Sun Inc. Debenture Bonds 9.000% 11/01/24 400,000 452,500
Total notes and bonds (cost: $17,728,595) 18,036,536
Total Investments (cost: $36,664,068) $ 42,708,728
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
tactical asset allocation portfolio
December 31, 1996
Market Market
Description Shares Value
Common Stock (55.8%)
Automotive & Truck (2.9%)
Chrysler Corp. 1,200 $ 39,600
Ford Motor Co. 700 22,312
61,912
Bank & Financial (11.1%)
AFLAC, Inc. 800 34,200
AMBAC, Inc. 400 26,550
Countrywide Credit Ind. 1,000 28,625
Federal Home Loan
Mortgage Corp. 200 22,025
Federal National Mortgage
Association 1,000 37,250
Lehman Brothers Holding, Inc. 1,000 31,375
MGIC Investment Group 400 30,400
PMI Group, Inc. 500 27,688
238,113
Chemicals (2.7%)
Dow Chemical Co. 400 31,350
Georgia Gulf Corp. 1,000 26,875
58,225
Information Processing &
Telecommunications (12.4%)
Applied Materials, Inc. 1,000 35,938
Arrow Electronics, Inc. 700 37,450
Digi International, Inc. 2,000 19,000
Intel Corp. 300 39,281
Novell, Inc. 2,500 23,672
Phillips Electronics NV 1,000 40,000
Seagate Technology, Inc. 1,000 39,500
Sprint Corp. 800 31,900
266,741
<PAGE>
Merchandising (8.6%)
Fingerhut Companies, Inc. 1,500 $ 18,375
May Department Store, Inc. 1,000 46,750
Payless Shoesource, Inc. 764 28,650
TJX Companies, Inc. 1,000 47,375
Toys R Us 1,500 45,000
186,150
Metals & Mining (5.2%)
Alumax, Inc. 1,000 33,375
Aluminum Co. of America 400 25,500
Birmingham Steel Corp. 1,400 26,600
Potash Corp. of Saskatchewan 300 25,500
110,975
Oil & Oil Services (1.6%)
Ashland, Inc. 400 17,550
Valero Energy Corp. 600 17,175
34,725
Paper & Containers (1.1%)
International Paper Co. 600 24,225
24,225
Tobacco (3.1%)
Philip Morris Cos., Inc. 400 45,050
UST, Inc. 700 22,662
67,712
Miscellaneous (7.1%)
Clayton Homes, Inc. 2,500 33,750
Cracker Barrel
Old Country Store 1,500 38,062
Teleflex, Inc. 500 26,063
Trizec Hahn Corp. 2,500 55,000
152,875
Total common stock (cost: $965,702) 1,201,653
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
schedule of investments
tactical asset allocation portfolio (continued)
December 31, 1996
Market
Description Shares Value
Money Market Mutual Funds (0.6%)
Riverfront U.S. Government Security 12,402 $ 12,402
Total mutual funds (cost: $12,402) 12,402
Interest Maturity Principal
Rate Date Amount
Notes and Bonds (43.6%)
Long Term Notes (24.6%)
U.S. Treasury Note 6.000% 10/15/99 $ 100,000 100,064
U.S. Treasury Note 5.500% 04/15/00 100,000 98,284
U.S. Treasury Note 5.250% 07/31/98 100,000 99,219
U.S. Treasury Note 7.500% 11/15/01 125,000 131,595
Federal National
Mortgage Association Note 7.600% 08/02/06 100,000 101,550
Short Term Notes (19.0%)
FingerHut Coupon 5.500% 01/07/97 105,000 104,904
J.P. Morgan Coupon 5.400% 01/10/97 105,000 104,858
Merrill Lynch
Commercial Paper 5.800% 01/03/97 100,000 99,968
U.S. Treasury Note 5.500% 07/31/97 100,000 100,051
Total notes and bonds (cost: $943,601) 940,493
Total Investments (cost: $1,921,705) $ 2,154,548
The accompanying notes are an integral part of the financial statements.
<PAGE>
(This page is intentionally blank.)
<PAGE>
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 Fund's
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 plus one. 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 Section M of
the Internal Revenue Code. The Fund's policy is
to distribute all income to shareholders, therefore, no provision has been
made for income taxes.
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. As of December 31,
1996. AUL's investment in the Fund is:
Equity Portfolio $ 3,091,634
Tactical Asset Portfolio 500,000
$ 3,591,634
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 Portfolio's 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 Portfolio's
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 AUL's fees will not exceed the prior fee reduction.
<PAGE>
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 years ended December 31, 1996 and
1995, were $712,483 and $502,811,
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, as fund accountant, transfer and disbursing agent for
the Fund. The Bank informed The Fund that
they are discontinuing fund accounting services. Accordingly, the Fund is
currently in the process of negotiating with The
Bank of New York with regard to performing the services previously provided by
The Provident Bank.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term
securities and money market mutual funds) during the
year ended December 31, 1996, were:
Portfolio
Equity Money Market Bond Managed
Tactical Asset
Common Stock:
Purchases $ 12,290,803 $ $ $ 6,579,670
$ 811,486
Proceeds from sales 4,116,316 3,218,744
365,560
Corporate Bonds:
Purchases 5,341,657 3,063,069
Proceeds from sales 2,582,262 1,408,104
Government Bonds:
Purchases 609,844 14,969,320 12,373,813
239,652
Proceeds from sales 13,809,278 7,215,867
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 Fund's 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
Net Assets at December 31, 1996, are:
Portfolio
Equity Money Market Bond Managed
Tactical Asset
Proceeds from shares sold
and reinvested
distributions $ 54,862,176 $ 164,049,404 $ 49,988,132 $ 55,466,892
$ 2,009,212
Cost of shares
redeemed (15,683,007) (123,821,929) (22,448,586) (18,428,733)
(97,291)
Undistributed net investment
income 11,852 4,468 8,798
109
Undistributed net realized
gain (loss) (217,011)
Unrealized gain
(loss) 11,678,096 643,866 6,044,660
232,843
$ 50,652,106 $ 40,227,475 $ 28,187,880 $ 43,091,617
$ 2,144,873
<PAGE>
notes to financial statements (continued)
7. Unrealized Gain
Unrealized Gain (Loss) at December 31, 1996, is:
Portfolio
Equity Money Market Bond Managed
Tactical Asset
Common Stock:
Appreciation $ 12,416,226 $ $ $ 6,140,335
$ 261,406
Depreciation (737,732) (403,616)
(25,455)
Notes and Bonds:
Appreciation 743,659 371,457
1,549
Depreciation (398) (99,793) (63,516)
(4,657)
$ 11,678,096 $ $ 643,866 $ 6,044,660
$ 232,843
8. Shares Outstanding
Shares Outstanding at December 31, 1996, are:
Portfolio
Equity Money Market Bond Managed
Tactical Asset
AUL 309,609
50,001
Dean Investments
50,000
AUL American Unit Trust 1,340,827 4,836,248 688,306 1,383,450
AUL Group Retirement Annuity
Separate Account II 1,171,791 32,704,457 1,776,976 1,588,086
AUL American Individual
Unit Trust 220,762 2,686,770 182,807 243,653
84,045
3,042,989 40,227,475 2,648,089 3,215,189
184,046
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<PAGE>
FINANCIAL HIGHLIGHTS
The per share amounts are based on average shares outstanding throughout the
year.
Equity Portfolio
1996 1995 1994 1993 1992
Per Share Data:
Investment Income $ 0.39 $ 0.37 $ 0.33 $ 0.28 $ 0.32
Expense 0.11 0.09 0.09 0.10 0.09
Net investment income 0.28 0.28 0.24 0.18 0.23
Net gain (loss) on investments 2.44 2.12 0.26 1.58 0.92
Shareholder distributions:
Net investment income (0.28) (0.27) (0.24) (0.18) (0.23)
Realized gain (0.19) (0.67) (0.39) (0.32)
Net increase (decrease) 2.44 1.94 (0.41) 1.19 0.60
Net asset value at
beginning of year 14.21 12.27 12.68 11.49 10.89
Net asset value at end of year $16.65 $ 14.21 $ 12.27 $ 12.68 $ 11.49
Ratio to average net assets:
Expense 0.70% 0.70% 0.73% 0.82% 0.84%
Net investment income 1.81% 2.08% 1.85% 1.46% 2.04%
Total return 19.17% 19.45% 2.64% 14.80% 10.03%
Portfolio turnover rate 11% 10% 20% 10% 15%
Average commision rate
paid* $ 0.0666 N/A N/A N/A N/A
Shares outstanding 3,042,989 2,483,962 1,675,654 904,136 606,686
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
The per share amounts are based on average shares outstanding throughout the
year.
Money Market Portfolio
1996 1995 1994 1993 1992
Per Share Data:
Investment Income $ 0.06 $ 0.06 $ 0.05 $ 0.03 $ 0.04
Expense 0.01 0.01 0.01 0.01 0.01
Net investment income 0.05 0.05 0.04 0.02 0.03
Net gain (loss) on investments
Shareholder distributions:
Net investment income (0.05) (0.05) (0.04) (0.02) (0.03)
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 0.70% 0.73% 0.75% 0.84% 0.85%
Net investment income 4.64% 5.13% 3.71% 2.30% 2.98%
Total return 4.63% 5.09% 3.38% 2.33% 3.01%
Portfolio turnover rate
Average commision rate paid* $ N/A N/A N/A N/A N/A
Shares outstanding 40,227,475 24,290,006 15,495,643 6,153,301 5,480,206
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
The per share amounts are based on average shares outstanding throughout the
year.
Bond Portfolio
1996 1995 1994 1993 1992
Per Share Data:
Investment Income $ 0.70 $ 0.75 $ 0.72 $ 0.75 $ 0.79
Expense 0.08 0.08 0.08 0.09 0.09
Net investment income 0.62 0.67 0.64 0.66 0.70
Net gain (loss) on investments (0.39) 1.07 (1.01) 0.49 0.06
Shareholder distributions:
Net investment income (0.63) (0.66) (0.64) (0.66) (0.70)
Realized gain (0.01) (0.01) (0.14) (0.31)
Net increase (decrease)(0.41) 1.07 (1.01) 0.35 (0.25)
Net asset value at
beginning of year 11.06 9.99 11.00 10.65 10.90
Net asset value at end of year $10.65 $11.06 $ 9.99 $ 11.00 $ 10.65
Ratio to average net assets:
Expense 0.71% 0.70% 0.73% 0.80% 0.79%
Net investment income 5.85% 6.28% 6.19% 5.95% 6.47%
Total return 2.23% 17.79% (3.56%) 10.69% 7.19%
Portfolio turnover rate 62% 55% 50% 29% 41%
Average commision rate paid* $ N/A N/A N/A N/A N/A
Shares outstanding 2,648,089 2,298,581 2,046,361 1,338,361 1,123,783
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
The per share amounts are based on average shares outstanding throughout the
year.
Managed Portfolio
1996 1995 1994 1993 1992
Per Share Data:
Investment Income $ 0.53 $ 0.54 $ 0.50 $ 0.49 $ 0.58
Expense 0.09 0.08 0.08 0.09 0.09
Net investment income 0.44 0.46 0.42 0.40 0.49
Net gain (loss) on
investments 1.01 1.62 (0.45) 1.07 0.41
Shareholder distributions:
Net investment income (0.44) (0.46) (0.42) (0.40) (0.49)
Realized gain (0.03) (0.20) (0.30) (0.24) (0.35)
Net increase (decrease) 0.98 1.42 (0.75) 0.83 0.06
Net asset value at
beginning of year 12.42 11.00 11.75 10.92 10.86
Net asset value at
end of year $ 13.40 $ 12.42 $ 11.00 $ 11.75 $ 10.92
Ratio to average net assets:
Expense 0.70% 0.70% 0.73% 0.81% 0.82%
Net investment income 3.43% 3.86% 3.63% 3.49% 4.46%
Total return 11.79% 19.13% (0.92%) 12.98% 7.95%
Portfolio turnover rate 34% 35% 34% 9% 33%
Average commision rate paid* $ 0.0668 N/A N/A N/A N/A
Shares outstanding 3,215,189 2,484,037 2,233,298 1,197,065 760,101
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
The per share amounts are based on average shares outstanding throughout the
year.
Tactical Asset Allocation Portfolio
1996 1995(1)
Per Share Data:
Investment Income $ 0.39 $ 0.20
Expense 0.11 0.04
Net investment income 0.28 0.16
Net gain (loss) on investments 1.38 0.49
Shareholder distributions:
Net investment income (0.28) (0.16)
Realized gain (0.17) (0.05)
Net increase (decrease) 1.21 0.44
Net asset value at
beginning of year 10.44 10.00
Net asset value at end of year $ 11.65 $ 10.44
Ratio to average net assets:
Expense 1.00% 1.00%
Net investment income 6.03% 3.70%
Total return( 15.67% 6.49%
Portfolio turnover rate 25% 4%
Average commision rate paid* $ 0.0799 N/A
Shares outstanding 184,046 109,147
*Computed by dividing the total amount of commission paid by the total number of
shares purchased and sold during the
period for which there was a commission. This disclosure is required by the SEC
beginning in 1996.
<PAGE>
(1) Ratios calculated for period July 31, 1995 through December 31, 1955 on
annualized basis
The accompanying notes are an integral part of the financial statements.
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<PAGE>
American United Life Insurance Company
P.O. Box 368
Indianapolis, Indiana 46206-0368
SA-12757K
