AUL American Series Fund, Inc.
Annual Report
December 31, 1997
This report and the financial statements contained herein are submitted for the
general information of the Participants. The report is not to be distributed to
prospective investors as sales literature unless accompanied or preceded by an
effective prospectus of AUL American Series Fund, Inc. and AUL American Unit
Trust or AUL American Individual Unit Trust, which contains further information
concerning the sales expenses and other pertinent information.
<PAGE>
A Message From The Chairman of the Board and President
The U.S. economy continued to surprise investors with its performance during
1997. The current seven year expansion has been unique in that economic growth
has remained moderate while inflationary pressures have been subdued. The
inflation rate actually declined during 1997, allowing the Federal Reserve to
hold monetary policy steady during the last nine months of the year. Other
positive economic factors during the year included lower interest rates, higher
productivity and improved corporate profit margins.
Equity investors were richly rewarded during the past year with the Dow Jones
Industrial Average and the S&P 500 (commonly quoted equity indices) both
achieving double digit returns. During 1997, equity investors reacted positively
to the combination of slow growth and moderate inflation. However, the
volatility of returns increased dramatically during the second half of the year
as investors became fearful that corporations would experience a decline in
profit growth during 1998. Severe weakness in Asia and Latin America was another
principal catalyst causing increased volatility.
Bond yields moved higher in the first quarter of 1997 in reaction to the Federal
Reserve Bank''s 25 basis point increase in the Federal Funds rate target but
declined over the remainder of the year. Moderate inflation, a declining federal
deficit, and turmoil in the Asian markets caused the Federal Reserve Bank to
withhold any further intervention, despite strong economic growth and low
unemployment. As a result, bonds returns, especially for bonds with longer
maturities, were competitive with common stocks in the last six months of 1997
although they still trailed well behind equity returns for the entire year.
Equity investors have now experienced three years of phenomenal equity returns,
returns which are substantially higher than the long-term averages. The major
stock indices could still post further gains during 1998, but the opportunity to
dramatically outperform the long-term averages becomes extremely limited. Good
bond performance will depend on declining interest rates, continued moderate
inflation and bonds being viewed as an ""alternative investment"" for equity
investors.
Investment performance for the AUL American Series Fund, Inc. for the year 1997
was:
Equity Portfolio 29.6% Managed Portfolio 21.0%
Money Market Portfolio 4.9% Tactical Asset Portfolio 15.5%
Bond Portfolio 7.9%
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.
/s/James W. Murphy
James W. Murphy
Chairman of the Board of Directors and President
Indianapolis, Indiana
January 20, 1998
Directors and Officers of AUL American Series Fund, Inc.
James W. Murphy, Chairman of the Board and President
R. Stephen Radcliffe, Director
James P. Shanahan, Director, Vice President and Treasurer
Dr. Ronald D. Anderson, Director
Professor, School of Business Indiana University, Indianapolis, Indiana
Dr. Leslie Lenkowsky, Director
Indiana University, Center of Philanthropy Indianapolis, Indiana
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 their own historic valuation levels.
Other important considerations include management ability, free cashflow,
insider ownership and industry dominance.
The year 1997 was another impressive
year for the stock market with domestic equity returns easily outpacing bonds,
cash and international market indices. Although the Federal Reserve did
intervene in March 1997, it remained on the sidelines for the rest of the year.
Sustainable economic growth continued, inflation fears subsided, and corporate
profits remained intact.
As a result, the Dow Jones Industrial Average (DJIA) advanced 24.9% during the
year. This represents a record seven consecutive year advance for the DJIA and
the first time in its history that this blue chip index has risen 20% or more
during three consecutive years. During 1997, the S&P 500 advanced 33.4% with a
majority of this performance occurring during the first seven months of the
year.
Investor sentiment changed frequently throughout the year. As we began 1997,
investors focused on large global growth companies that could provide consistent
earnings either from domestic markets or abroad. As a result, smaller
capitalization companies lagged the overall market by a wide margin. Because of
the noticeable disparity in returns, many investors shifted their interest to
smaller companies during May. However, this interest was short lived. Investors
panicked in October in response to the Asian crisis, at which time market
leadership changed again with performance favoring large defensive growth
companies with limited exposure to developing countries. The Equity Portfolio
achieved a 29.6% investment return for calendar 1997 which is higher than the
long-term average return for stocks.
The Equity Portfolio also outperformed the average diversified U.S. stock fund
which returned 24.4%, according to Lipper Analytical Services Inc. The Portfolio
benefitted from its holdings in technology, pharmaceutical, and financial
industries. The return of the Portfolio was also propelled by several merger
situations and share repurchase programs.
U.S. fundamentals remain solid, but the economy is expected to slow down in
1998. The present bull market has narrowed its focus considerably to those
stocks perceived as "safe havens". At current levels, the U.S. stock market
could be vulnerable to any disruption in corporate profits or fallout from the
weakness in Asia.
<PAGE>
AUL American Series Fund, Inc. Equity Portfolio
Equity S&P 500
Portfolio
One Year 29.6% 33.4%
Five Years 16.8% 20.2%
Since Inception (4/10/90) 15.2% 17.6%
Value of a hypothetical $10,000
investment made 4/10/90 $29,664 $34,972
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 the Portfolio's 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 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 Bond Portfolio's total return was 7.9% in 1997. This return represents
interest income and the price change of the fixed income securities held in the
portfolio. On average the Bond Fund holdings experienced price increases in 1997
due to declines in interest rates. The total return for the Lehman Brothers
Aggregate Bond Index (the "Index") was 9.7% in 1997.
At the beginning of 1997 the Bond Portfolio's average
duration was very close to the level of the Lehman Brothers Aggregate Index. 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. The duration of the portfolio was gradually shortened during
the remainder of the year as interest rates declined. At year-end the duration
of the portfolio closely matched the duration of the benchmark.
Approximately 35% of the portfolio was invested in U. S. Treasury and Agency
holdings at year-end 1997. The remainder of the portfolio was allocated to
corporate bonds (37%), high quality GNMA Pass-Through and asset-backed
securities (24%), and cash equivalents (4%).
Declining inflation, a shrinking budget deficit, and a relatively inactive
Federal Reserve resulted in falling interest rates and rising bond prices in the
second half of 1997. Although U.S. economic growth remains strong with low
unemployment, collapsing currencies and the potential for significant weakness
in Asian economies should result in some moderating of U.S. growth as well as
keeping a lid on import prices. Although treasury bond yields along the entire
yield curve have declined to below 6%, most analysts remain positive on the
near-term outlook for bonds.
The currency crisis in Asia during the second half of 1997 negatively affected
the performance of two of the bond portfolio's holdings, Korea Development Bank
and Petronas (Malaysia). Although prices for these two holdings declined
significantly in reaction to the negative news from Asia, these bonds are now
priced at levels that represent opportunity in 1998. The credit characteristics
and prices of these bond holdings are being closely monitored in anticipation of
taking advantage of any turnaround.
Beginning in 1997, the Portfolio will use the Lehman Brothers Aggregate Bond
Index as its benchmark instead of the Lehman Brothers Government/Corporate Bond
Index which has been used in the past. The Lehman Brothers Aggregate Bond Index
includes one-year and longer government, corporate, Yankee, and U.S. Agency
mortgage-backed bonds and has an average maturity of 81/2 years. This Index is a
better match to the Portfolio for comparative purposes because this Index
includes mortgage-backed securities, while the Lehman Brothers
Government/Corporate Index does not.
<PAGE>
AUL American Series Fund, Inc. Bond Portfolio
Bond Lehman Brothers Lehman Brothers
Portfolio Govt./Corp. Index Aggregate Index
One Year 7.9% 9.8% 9.7%
Five Years 6.8% 7.6% 75.%
Since Inception (4/10/90) 8.6% 9.2% 9.1%
Value of a hypothetical $10,000
investment made 4/10/90 $18,841 $19,631 $19,514
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 and the Lehman Brothers Aggregate
Index, are unmanaged indices 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 the Portfolio's
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.
Bond and stock investors enjoyed positive returns during 1997. Although bond
yields rose during the first quarter, rates eased during the remainder of the
year resulting in positive bond performance. The stock market began the year on
a strong note despite forecasts that stocks were overvalued. However, concern
began to mount in August in response to disappointing corporate earnings
announcements and turmoil in Southeast Asia. Large swings or point changes in
the major stock indices became almost a common occurrence by the end of the
year.
Although stocks achieved above average returns during 1995 and 1996, we believed
that the equity market would still offer superior returns to bonds and cash
during 1997. As a result, the Managed Portfolio continued to be overweighted in
stocks compared to bonds and cash. By the end of 1997, 54% of the Portfolio was
invested in stocks, while 41% was invested in bonds and 5% was invested in cash
equivalents. This can be compared to an asset allocation of 55% stocks, 42%
bonds and 3% cash equivalents at year-end 1996.
Bonds, especially issues with longer maturities, performed well in the second
half of 1997. Returns for the entire year, however, lagged well behind the
impressive performance of the stock market. Bond returns exceeded money market
returns by several percentage points in 1997.
Stocks held in the Managed Portfolio typically have a value orientation. During
1997, several of these undervalued stocks were "recognized" and were purchased
by competitors or were involved in share repurchase programs. These factors
enhanced the Portfolio's return. The Portfolio also benefitted from its holdings
in the technology, pharmaceutical and financial industries.
The Managed Portfolio finished 1997 with an investment return of 21.0% compared
to 9.6% for the Lehman Brothers Aggregate Bond Index and 33.4% for the S&P 500.
At the present time, most economists are still trying to gauge the impact that
Asia will have on our economy and markets. If the U.S. economy weakens and
interest rates decline, the bond market should have positive returns. However,
downward pressure on economic growth and corporate earnings will cause concern
among equity investors and increase overall volatility. As a result, the stock
market may face a more difficult road in 1998.
Beginning in 1997, the Managed Portfolio will use the Lehman Brothers Aggregate
Bond Index as its benchmark instead of the Lehman Brothers Government/Corporate
Bond Index which has been used in the past. The Lehman Brothers Aggregate Bond
Index includes one-year and longer government, corporate, Yankee, and U.S.
Agency mortgage-backed bonds and has an average maturity of 81/2 years. This
Index is a better match to the Managed Portfolio for comparative purposes
because this Index includes mortgage-backed securities, while the Lehman
Brothers Government/Corporate Index does not.
AUL American Series Fund, Inc. Managed Portfolio
Managed S&P 500 Lehman Brothers Lehman Brothers
Portfolio Govt./Corp. Index Aggregate Index
One Year 21.0% 33.4% 9.8% 9.7%
Five Years 12.5% 20.2% 7.6% 7.5%
Since Inception (4/10/90) 12.1% 17.6% 9.2% 9.1%
Value of a hypothetical $10,000
investment made 4/10/90 $24,083 $34,972 $19,631 $19,514
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 and
the Lehman Brothers Aggregate Index, unmanaged indices of government and
corporate bonds, which are broad measures of the performance of the U.S. bond
market, include reinvestment of income and capital gains. The inception figures
are from the Portfolio's 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
Stock market returns remained strong in the past year, with a 33.4% increase for
the S&P 500 during the period. These returns were far higher than historical
averages, as many of the fundamentals that have driven the 7 year bull market
(e.g., favorable interest rate outlook, higher corporate productivity, mutual
fund inflows) have remained intact. At the same time, investors were faced with
record-breaking volatility. Fueled by news of an economic crisis in developing
Asian markets, investors pushed the DJIA 554 points lower on October 27, only to
turn around the next day and drive the DJIA 337 points higher. Clearly,
investors are trying to assess the potential impact of a recession in southeast
Asia, with a focus on the possibility of a deflationary economy (i.e., one in
which aggregate prices decline) and lower growth expectations. As the year drew
to a close, investor focus had shifted toward Asia and away from concerns over
higher interest rates. The possibility of an interest rate tightening by the
Federal Reserve - such a dominant theme earlier in the year in terms of
understanding market behavior - now appears remote. Indeed, bonds rallied
strongly in the latter half of the year, in part due to speculation that
interest rates were more likely to go down.
In our view, the current market environment is likely to remain positive for
bonds and for the more "interest-rate-sensitive" sectors of the stock market.
The valuations on many of these securities are quite compelling, and the
exposure to overseas uncertainties is limited. Finding a "safe harbor" for
assets during 1998 is likely to be a dominant theme in what we feel is a highly
uncertain, volatile stock market; one that is characterized by dampened growth
expectations and valuations well ahead of historical norms. Our top investment
objective is preservation of client capital. By investing in the fixed income
markets, and by maintaining a prominent exposure to high-yielding "defensive"
stocks such as REITs (real estate investment trusts), and electric utilities, we
are most likely to achieve this objective.
Our allocation to stocks was 59% at mid-year, which we consider a "neutral"
positioning. As the year progressed, our asset allocation models indicated an
even more cautious intermediate term outlook. By year end we reduced the equity
allocation in the portfolio to 51.6%. Some positions reached full valuations and
were sold, while others were reduced in line with the revised equity targets. We
also rotated our industry weightings to emphasize REIT's and electric utilities,
which provide greater price stability and a healthy dividend yield, and are more
likely to outperform in an uncertain market. At period end we had built our
total electric utility position to 1.4% of the portfolio, while REIT's comprised
2.6% of the fund. Meantime, the portfolio's exposure to technology stocks, and
companies that manufacture "commodity" products such as chemicals and metals,
was reduced. These firms are more vulnerable to deflation pressures, as well as
an economic recession in southeast Asia, factors which may lead to earnings
disappointments in the near term.
During 1997, the Tactical Asset portfolio provided a return of 15.5%, stronger
than the Lipper Analytical Services, Inc. index of similarly-managed mutual
funds, although lagging a 60/40 market index. Why have the majority of fund
managers trailed the market-wide index? The S&P 500 is weighted by market
capitalization, and its strong returns have largely been driven by a relatively
small number of "mega-cap" stocks - essentially, the largest companies with the
largest capitalizations and highest amount of market liquidity. A "price
momentum" philosophy would emphasize these "mega-caps," and thus would be
successful in this particular market environment. Our philosophy, on the other
hand, is to adhere to a value discipline. Companies will be scrutinized for
their growth potential, market positioning and strategic planning, but only
companies with lower and/or reasonable valuations (i.e., price to earnings,
prices to cash flow, price to book value) are candidates to be included in the
portfolio. Research suggests that, over the longer-term (i.e., over a series of
market environments), a disciplined approach that emphasizes value will be
competitive with other investment management philosophies. We are not critical
of high-flying "mega-cap" firms. They are often very well-managed, with
impressive strategics for further expansion. They are simply too expensive,
based on out criteria, to be appropriately included in this portfolio.
Our stock selection process and asset allocation models have provided long-term
clients with relatively stable returns that have been competitive with the
market indexes. Going forward, we expect our approach to continue to reward
investors with solid risk-adjusted returns, while providing downside protection
in times of market instability.
<PAGE>
AUL American Series Fund, Inc. Tactical Asset Allocation Portfolio
Tactical Asset S&P 500 Lehman Brothers
Allocation Portfolio Inter. Govt. Index
One Year 15.5% 33.4% 7.7%
Since Inception (7/31/95) 15.7% 28.0% 6.9%
Value of a hypothetical $10,000
investment made 7/31/95 $14,228 $18,147 $11,757
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 Intermediate
Government 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 the
Portfolio's 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, 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>
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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, 1997, the related statements of
operations for the year then ended, 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 periods presented. 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 held by the
custodian as of December 31, 1997, 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, 1997, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
/s/Coopers and Lybrand, L.L.P.
Indianapolis, Indiana
February 2, 1998
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<PAGE>
AUL American Series Fund, Inc.
Statements of Net Assets
December 31, 1997
Portfolio
Equity Money Bond Managed Tactical
Market Asset
Assets:
Investments at value $80,751,960 $55,168,462 $33,560,233 $60,353,173 $4,429,945
(cost: $54,669,337
$55,168,462, $32,943,514,
$47,730,241, and
$4,066,700, respectively)
Receivable for
shares sold, net 536,493
Receivable for
investment sold 720,000
Dividends and
interest receivable 135,493 102,873 491,891 396,805 31,379
Prepaid expense 33 33 33 33 33
Deferred
organization costs 4,165
Total assets 80,887,486 55,807,861 34,772,157 60,750,011 4,465,522
Liabilities:
Payable for portfolio
shares redeemed, net 15,596 24,231 33,647 3,536
Payable for investments
purchased 525,062 183,567
Investment advisory
fees payable 38,742 26,598 16,999 29,451 1,921
Accrued expenses 32,130 24,321 13,007 26,336 3,000
Organization costs payable to AUL 4,830
Total liabilities 611,530 50,919 54,237 273,001 13,287
Net Assets $ 80,275,956$ 55,756,942$ 34,717,920$ 60,477,010$ 4,452,235
Shares outstanding 3,816,406 55,756,942 3,252,044 3,945,223 357,897
Net Asset Value
per share $ 21.03$ 1.00$ 10.68$ 15.33$ 12.44
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, 1997
Portfolio
Equity Money Bond Managed Tactical
Market Asset
Investment Income:
Income:
Dividends $ 994,398$ $ $ 436,958$ 23,527
Interest 438,298 2,580,200 1,915,146 1,594,333 86,847
1,432,696 2,580,200 1,915,146 2,031,291 110,374
Expenses:
Investment advisory
fee 328,408 235,394 154,861 258,903 16,830
Custodian and
service agent fees 68,404 48,829 33,015 55,772 7,774
Professional fees 8,096 6,201 3,975 6,395 5,212
Amortization of deferred
organization costs 1,610
Director fees 6,552 4,755 3,163 5,220 332
Printing 13,913 10,098 6,719 11,087 702
Proxy 6,708 5,385 3,471 5,567 362
Other expenses 1,279 1,279 1,279 1,279 1,279
433,360 311,941 206,483 344,223 34,101
Net investment income 999,336 2,268,259 1,708,663 1,687,068 76,273
Gain (Loss) on Investments:
Net realized gain 1,058,100 687,635 1,443,799 257,170
Net change in unrealized
gain (loss) 14,404,527 (27,147) 6,578,271 130,402
Net gain 15,462,627 660,488 8,022,070 387,572
Net Increase in Net Assets
from Operations $ 16,461,963$ 2,268,259$ 2,369,151$ 9,709,138$ 463,845
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Statements of Changes in Net Assets
for the years ended December 31, 1997 and 1996
Portfolio
Equity Money Market
1997 1996 1997 1996
Increase in Net Assets
from Operations:
Net investment income $ 999,336$ 769,850$ 2,268,259$ 1,544,419
Net realized gain (loss) 1,058,100 (217,011)
Net change in
unrealized gain (loss) 14,404,527 6,974,701
Increase in Net Assets
from Operations 16,461,963 7,527,540 2,268,259 1,544,419
Dividends and Distributions:
From net investment income (1,011,139) (760,627) (2,268,259) (1,544,419)
From net realized gain (841,088)
Decrease (1,852,227) (760,627) (2,268,259) (1,544,419)
Shareholder Transactions:
Proceeds from shares sold 23,646,772 14,831,799 89,738,967 82,650,126
Reinvested distributions 1,693,617 677,401 2,268,259 1,544,419
Cost of shares redeemed (10,326,275) (6,923,532)(76,477,759)(68,257,076)
Increase 15,014,114 8,585,668 15,529,467 15,937,469
Net increase 29,623,850 15,352,581 15,529,467 15,937,469
Net Assets at beginning of year 50,652,106 35,299,525 40,227,475 24,290,006
Net Assets at end of year $ 80,275,956$ 50,652,106$ 55,756,942$ 40,227,475
Shares sold 1,225,237 965,142 89,738,967 82,650,126
Reinvested distributions 83,382 43,359 2,268,259 1,544,419
Shares redeemed (535,202) (449,474)(76,477,759)(68,257,076)
Net Increase 773,417 559,027 15,529,467 15,937,469
Shares outstanding at
beginning of year 3,042,989 2,483,962 40,227,475 24,290,006
Shares outstanding at end of year 3,816,406 3,042,989 55,756,942 40,227,475
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, 1997 and 1996
Portfolio
Bond Managed
1997 1996 1997 1996
Increase in Net Assets
from Operations:
Net investment income $ 1,708,663$ 1,609,109$ 1,687,068$ 1,271,092
Net realized gain 687,635 18,492 1,443,799 77,781
Net change in
unrealized gain (loss) (27,147) (1,021,212) 6,578,271 2,961,892
Increase in Net Assets
from Operations 2,369,151 606,389 9,709,138 4,310,765
Dividends and Distributions:
From net investment income (1,707,647) (1,616,520) (1,691,973) (1,269,322)
From net realized gain (633,130) (18,491) (1,443,799) (77,781)
Decrease (2,340,777) (1,635,011) (3,135,772) (1,347,103)
Shareholder Transactions:
Proceeds from shares sold 13,713,183 14,086,640 15,228,291 15,341,831
Reinvested distributions 2,340,777 1,495,931 3,135,773 1,316,098
Cost of shares redeemed (9,552,294)(11,795,234) (7,552,037) (7,374,576)
Increase 6,501,666 3,787,337 10,812,027 9,283,353
Net increase 6,530,040 2,758,715 17,385,393 12,247,015
Net Assets at beginning of year 28,187,880 25,429,165 43,091,617 30,844,602
Net Assets at end of year $ 34,717,920$ 28,187,880$ 60,477,010$ 43,091,617
Shares sold 1,268,900 1,316,217 1,035,603 1,203,357
Reinvested distributions 219,241 141,513 208,366 101,708
Shares redeemed (884,186) (1,108,222) (513,935) (573,913)
Net Increase 603,955 349,508 730,034 731,152
Shares outstanding at
beginning of year 2,648,089 2,298,581 3,215,189 2,484,037
Shares outstanding at end of year 3,252,044 2,648,089 3,945,223 3,215,189
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, 1997 and 1996
Portfolio
Tactical Asset
1997 1996
Increase in Net Assets
from Operations:
Net investment income $ 76,273$ 43,086
Net realized gain 57,170 26,150
Net change in
unrealized gain (loss) 130,402 188,464
Increase in Net Assets
from Operations 463,845 257,700
Dividends and Distributions:
From net investment income (76,151) (42,732)
From net realized gain (257,170) (26,150)
Decrease (333,321) (68,882)
Shareholder Transactions:
Proceeds from shares sold 2,246,655 874,893
Reinvested distributions 232,373 28,262
Cost of shares redeemed (302,190) (86,556)
Increase 2,176,838 816,599
Net increase 2,307,362 1,005,417
Net Assets at beginning of year 2,144,873 1,139,456
Net Assets at end of year $ 4,452,235$ 2,144,873
Shares sold 178,777 80,409
Reinvested distributions 18,622 2,488
Shares redeemed (23,548) (7,998)
Net Increase 173,851 74,899
Shares outstanding at
beginning of year 184,046 109,147
Shares outstanding at end of year 357,897 184,046
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Schedule of Investments
Equity portfolio
December 31, 1997
Market
Description Shares Value
Common Stock (87.8%)
Aerospace (1.7%)
Boeing Co. 15,300$ 748,744
Precision Castparts Corp. 10,300 621,219
1,369,963
Auto and Auto Parts (4.7%)
Bandag, Inc. 32,200 1,720,687
Ford Motor Co. 44,500 2,166,594
3,887,281
Banks & Financial (11.8%)
American Express Co. 22,200 1,981,350
Ohio Casualty Corp. 29,300 1,307,513
Banc One Corp. 36,330 1,973,173
Travelers Group, Inc. 43,900 2,365,113
Washington Mutual, Inc. 29,790 1,900,974
9,528,123
Broadcasting & Publishing (7.6%)
Chris-Craft Industries, Inc.* 25,971 1,358,608
Deluxe Corp. 32,500 1,121,250
Gibson Greetings, Inc. 39,500 864,062
Harland (John H.) Co. 34,600 726,600
Meredith Corp. 32,800 1,170,550
Moore Corp., Ltd. 58,000 877,250
6,118,320
Electrical Equipment & Electronics (7.6%)
Baldor Electric Co. 95,680 2,075,060
Dynatech Corp.* 64,200 3,009,375
General Electric Co. 13,800 1,012,575
6,097,010
Entertainment & Leisure (4.7%)
CPI Corp. 56,200 1,271,525
Fleetwood Enterprises, Inc. 59,800 2,537,763
3,809,288
Furniture and Apparel (9.8%)
Hillenbrand Industries, Inc. 36,000 1,842,750
Kellwood Co. 50,100 1,503,000
La Z Boy Chair Co. 53,800 2,320,125
Liz Claiborne, Inc. 33,000 1,379,813
Reebok International 29,300 844,206
7,889,894
Health Care (6.8%)
Acuson Corp. 40,700 674,094
Guidant Corp. 6,800 423,300
Lilly (Eli) & Co. 13,540 942,723
Merck & Co. 10,400 1,105,000
McKesson Corporation 21,800 2,358,487
5,503,604
Information Processing & Telecommunications (9.8%)
AT & T Corp. 36,500 2,235,624
International Business 14,300 1,495,244
Machines Corp.
Novell, Inc.* 62,500 468,750
Sun Microsystems, Inc.* 50,300 2,005,713
Telxon Corp. 70,900 1,692,738
7,898,069
Merchandising (5.2%)
Longs Drug Stores Corp. 66,700 2,142,737
Mercantile Stores Co. 20,800 1,266,200
Stanhome, Inc. 32,100 824,569
4,233,506
Metals & Mining (5.5%)
AK Steel Holding Corp. 48,900 864,918
Aluminum Company of 22,200 1,562,325
America
Cleveland-Cliffs, Inc. 27,100 1,241,519
Oregon Steel Mills, Inc. 35,900 765,119
4,433,881
Oil & Oil Services (4.1%)
Royal Dutch Petroleum Co. 29,400 1,593,112
Valero Energy Crop. 55,000 1,729,063
3,322,175
Transportation (3.4%)
Alexander & Baldwin, Inc. 61,800 1,687,912
Norfolk Southern Corp. 34,200 1,053,788
2,741,700
*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, 1997
Market
Description Shares Value
Common Stock (87.8%), continued
Miscellaneous (5.1%)
Carlisle Companies, Inc. 18,500$ 790,875
Kelly Services, Inc. 53,000 1,590,000
Michael Foods, Inc. 38,600 940,875
PG & E Corporation 25,594 779,017
4,100,767
Total common stock (cost: $44,851,191) 70,933,581
Money Market Mutual Funds (3.5%)
Federated Investors Prime Obligation Account 2,856,287 2,856,287
Total mutual funds (cost: $2,856,287) 2,856,287
Interest Maturity Principal
Rate Date Amount
Short-term Notes (5.6%)
Associates Corporation of
North America 5.620% 01/09/98$ 1,500,000 1,498,215
Beneficial Corporation 5.580% 01/06/98 1,000,000 999,310
GE Capital 5.700% 01/13/98 2,000,000 1,996,260
Total short-term notes (cost: $4,493,552) 4,493,785
Cash and Cash Equivalent (3.1%)
BONY Cash Reserve 2,468,307
Total Cash and Cash Equivalent (cost: $2,468,307) 2,468,307
Total Investments (cost: $54,669,337) $ 80,751,960
*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, 1997
Interest Maturity Principal Market
Description Rate Date Amount Value
Short-term Notes (86.4%)
U.S. Government & Agency Obligations (58.4%)
Federal Home Loan Bank Notes 5.450% 01/09/98$ 3,000,000$ 2,996,367
Federal Home Loan Mortgage
Corporation Notes 5.500% 02/06/98 5,200,000 5,171,140
Federal Home Loan Mortgage
Corporation Notes 5.600% 02/20/98 6,000,000 5,953,333
Federal National Mortgage
Association Notes 5.450% 02/05/98 2,100,000 2,088,873
Federal National Mortgage
Association Notes 5.600% 01/21/98 4,000,000 3,987,556
Federal National Mortgage
Association Notes 5.500% 01/13/98 5,500,000 5,489,990
Federal National Mortgage
Association Notes 5.400% 01/12/98 6,500,000 6,489,275
32,176,534
Corporate Obligations (28.0%)
Automotive (3.6%)
Ford Motor Credit Corporation 5.780% 01/09/98 2,000,000 2,000,000
2,000,000
Electrical Equipment (13.4%)
General Electric Company 5.620% 01/23/98 2,400,000 2,400,000
General Electric Capital Corporation 5.900% 01/30/98 2,700,000 2,700,000
General Electric Capital Corporation 5.830% 01/09/98 2,300,000 2,300,000
7,400,000
Financial (6.5%)
Associates Corporation of
North America 5.690% 01/20/98 1,800,000 1,800,000
Prudential Funding Corporation 5.700% 01/16/98 1,800,000 1,800,000
3,600,000
Machinery (4.5%)
John Deere Capital Corporation 5.820% 01/23/98 2,500,000 2,500,000
2,500,000
Total short-term notes (cost: $47,676,534) 47,676,534
Shares
Money Market Mutual Funds (8.9%)
Dreyfus Masternote Account 2,892,040 2,892,040
Federated Investors Prime Obligation 2,010,531 2,010,531
Total money market mutual funds (cost: $4,902,571) 4,902,571
Cash and Cash Equivalent (4.7%)
BONY Cash Reserve 2,589,357
Total cash and cash equivalent (cost: $2,589,357) 2,589,357
Total Investments (cost: $55,168,462) $ 55,168,462
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Schedule of Investments
Bond Portfolio
December 31, 1997
Interest Maturity Principal Market
Description Rate Date Amount Value
Long-term Notes and Bonds (97.2%)
U.S. Government & Agency Obligations (35.7%)
Federal Home Loan Bank Notes 8.375% 10/25/99$ 1,300,000$ 1,355,300
Federal National Mortgage
Association Notes 6.640% 07/12/99 1,450,000 1,465,820
U.S. Treasury Bonds 6.625% 02/15/27 1,150,000 1,247,555
U.S. Treasury Bonds 8.000% 11/15/21 425,000 529,899
U.S. Treasury Notes 8.000% 05/15/01 1,950,000 2,082,444
U.S. Treasury Notes 6.250% 02/28/02 1,900,000 1,933,972
U.S. Treasury Notes 6.750% 04/30/00 3,300,000 3,374,151
11,989,141
Collateralized Mortgage Obligations (24.0%)
American Southwest Financial
Corporation CMO 8.900% 03/01/18 180,200 188,110
Federal National Mortgage
Association Notes CMO 7.500% 12/25/09 600,000 621,438
Federal National Mortgage
Association Notes CMO 6.500% 05/25/08 800,000 810,624
GNMA Pass-Through 8.000% 07/15/27 660,188 684,417
GNMA Pass-Through 8.000% 07/15/27 332,136 344,319
GNMA Pass-Through 7.000% 05/15/26 247,185 249,180
GNMA Pass-Through 7.000% 01/15/27 2,908,199 2,931,726
GNMA Pass-Through 7.500% 01/15/27 693,001 710,056
Green Tree Manufactured Housing CMO 7.290% 03/15/28 1,200,000 1,240,332
Prudential -Bache Trust CMO 12D 5.350% 10/20/09 242,432 241,259
8,021,461
Corporate Obligations (37.5%)
Associates Corporation of North
America Notes 5.600% 01/15/01 1,600,000 1,576,000
California Infrastructure Bonds 6.220% 03/25/04 400,000 399,788
California Infrastructure Bonds 6.320% 09/25/05 700,000 700,504
Carlisle Companies, Inc. 7.250% 01/15/07 950,000 992,750
El Paso Natural Gas Company Notes 7.750% 01/15/02 200,000 209,750
Enron Corporation 6.450% 11/15/01 400,000 401,500
General Electric Capital Corporation 8.850% 04/01/05 600,000 694,500
General Motors Acceptance
Corporation Notes 5.450% 03/01/99 1,000,000 993,750
Hydro-Quebec Debenture Bonds 8.050% 07/07/24 400,000 463,000
ICI Investments BV 6.750% 08/07/02 800,000 809,520
Korean Development Bank 7.375% 09/17/04 800,000 634,000
Eli Lilly & Company Notes 8.375% 12/01/06 850,000 971,125
Petroliam National Berhd. 7.125% 10/18/06 500,000 470,000
Salomon Smith Barney Holdings Notes 6.625% 11/15/03 900,000 906,750
Service Corporation 6.750% 06/01/01 900,000 913,500
U.S. West Capital Funding 7.900% 02/01/27 1,350,000 1,469,813
12,606,250
Total long-term notes and bonds (cost: $32,000,133) 32,616,852
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Schedule of Investments
Bond Portfolio (continued)
December 31, 1997
Principal Market
Description Amount Value
Money Market Mutual Funds (0.3%)
Federated Investors Prime Obligation 84,206$ 84,206
Total mutual funds (cost: $84,206) 84,206
Cash and Cash Equivalents (2.5%)
BONY Cash Reserve 859,175
Total cash and cash equivalents (cost: $859,175) 859,175
Total Investments (cost: $32,943,514) $ 33,560,233
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Schedule of Investments
managed portfolio
December 31, 1997
Market
Description Shares Value
Common Stock (53.5%)
Aerospace (1.0%)
Boeing Co. 6,900$ 337,668
Precision Castparts Corp. 5,100 307,594
645,262
Auto and Auto Parts (2.9%)
Bandag, Inc. 13,700 732,094
Ford Motor Co. 20,300 988,356
1,720,450
Banks & Financial (7.1%)
American Express Co. 9,900 883,575
Banc One Corp. 16,350 888,009
Ohio Casualty Corp. 13,400 597,975
Travelers Group, Inc. 20,509 1,104,923
Washington Mutual, Inc. 13,070 834,029
4,308,511
Broadcasting & Publishing (4.8%)
Chris-Craft Industries, Inc.* 11,629 608,342
Deluxe Corp. 15,000 517,500
Gibson Greetings, Inc. 19,000 415,625
Harland (John H.) Co. 16,900 354,900
Meredith Corp. 14,900 531,744
Moore Corp., Ltd. 26,600 402,325
2,830,436
Electrical Equipment & Electronics (4.6%)
Baldor Electric Co. 43,400 941,238
Dynatech Corp.* 29,000 1,359,374
General Electric Co. 6,100 447,588
2,748,200
Entertainment & Leisure (3.0%)
CPI Corp. 27,300 617,663
Fleetwood Enterprises 28,100 1,192,493
1,810,156
Furniture and Apparel (5.9%)
Hillenbrand Industries, Inc. 15,700 803,644
Kellwood Co. 22,600 678,000
La Z Boy Chair Co. 24,500 1,056,563
Liz Claiborne, Inc. 15,100 631,369
Reebok International 13,400 386,087
3,555,663
Health Care (4.1%)
Acuson Corp.* 18,800 311,375
Guidant Corp. 3,400 211,650
Lilly (Eli) & Co. 5,904 411,066
Merck & Co. 4,900 520,625
McKesson Corporation 9,700 1,049,419
2,504,135
Information Processing & Telecommunications (5.9%)
AT & T Corporation 15,100 924,875
International Business 7,000 731,938
Machines Corp.
Novell, Inc.* 30,200 226,500
Sun Microsystems, Inc.* 22,600 901,175
Telxon Corp. 32,400 773,550
3,558,038
Merchandising (3.2%)
Longs Drug Stores Corp. 30,300 973,387
Mercantile Stores Co. 9,300 566,138
Stanhome, Inc. 14,500 372,469
1,911,994
Metals & Mining (3.3%)
AK Steel Holding Corp. 22,800 403,275
Aluminum Company of 10,000 703,750
America
Cleveland Cliffs, Inc. 12,200 558,913
Oregon Steel Mills, Inc. 15,900 338,868
2,004,806
Oil & Oil Services (2.5%)
Royal Dutch Petroleum Co. 13,400 726,113
Valero Energy Crop. 24,800 779,650
1,505,763
Transportation (2.1%)
Alexander & Baldwin, Inc. 27,200 742,900
Norfolk Southern Corp. 17,100 526,894
1,269,794
*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, 1997
Market
Description Shares Value
Common Stock (53.5%), continued
Miscellaneous (3.1%)
Carlisle Companies, Inc. 9,000$ 384,750
Kelly Services 24,100 723,000
Michael Foods, Inc. 16,900 411,938
PG & E Corporation 12,354 376,022
1,895,710
Total common stock (cost: $20,053,029) 32,268,918
Money Market Mutual Funds (1.7%)
Federated Investors Prime Obligation 1,023,272 1,023,272
Total money market mutual funds (cost: $1,023,272) 1,023,272
Interest Maturity Principal
Rate Date Amount
Long-term Notes and Bonds (41.4%)
U.S. Government and Agency Obligations 16.3%)
Federal Home Loan Bank Bonds 8.600% 06/25/99$ 500,000 519,500
Federal Home Loan Bank Bonds 8.375% 10/25/99 900,000 938,286
Federal National Mortgage
Association Bonds 8.350% 11/10/99 500,000 521,345
Federal National Mortgage
Association Bonds 6.640% 07/12/99 850,000 859,274
U.S. Treasury Bonds 8.000% 11/15/21 350,000 436,387
U.S. Treasury Bonds 6.625% 02/15/27 700,000 759,381
U.S. Treasury Notes 8.000% 05/15/01 2,400,000 2,563,008
U.S. Treasury Notes 6.250% 02/28/02 1,550,000 1,577,714
U.S. Treasury Notes 6.750% 04/30/00 1,700,000 1,738,199
9,913,094
Collateralized Mortgage Obligations (11.6%)
Federal National Mortgage
Association Notes CMO 6.500% 05/25/08 500,000 506,640
GNMA Pass-Through 6.500% 05/15/26 389,857 385,876
GNMA Pass-Through 6.500% 01/15/26 210,361 208,282
GNMA Pass-Through 6.500% 04/15/26 572,382 566,824
GNMA Pass-Through 6.500% 03/15/26 280,516 277,717
GNMA Pass-Through 7.000% 01/15/27 1,902,628 1,917,982
GNMA Pass-Through 7.500% 01/15/27 693,001 710,063
GNMA Pass-Through 7.500% 12/15/27 396,000 405,773
GNMA Pass-Through 8.000% 07/15/27 345,343 358,017
GNMA Pass-Through 8.000% 07/15/27 295,641 306,535
GNMA Pass-Through 7.000% 05/15/26 499,849 503,903
Green Tree Notes
Manufacturing Housing CMO 7.290% 03/15/28 800,000 826,889
6,974,501
*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, 1997
Interest Maturity Principal Market
Description Rate Date Amount Value
Corporate Obligations (13.5%)
Associates Corporation of
North America 5.600% 01/15/01$ 400,000$ 394,000
California Infrastructure 6.220% 03/25/04 300,000 299,841
California Infrastructure 6.320% 09/25/05 400,000 400,288
Carlisle Companies, Inc. 7.250% 01/15/07 550,000 574,750
El Paso Natural Gas Co. Notes 7.750% 01/15/02 100,000 104,875
Enron Corp. 6.450% 11/15/01 300,000 301,125
General Electric Capital
Corporation 8.850% 04/01/05 600,000 694,500
GMAC Notes 5.450% 03/01/99 800,000 795,000
Hydro-Quebec Debenture Bonds 8.050% 07/07/24 250,000 289,375
Korean Development Bank 7.375% 09/17/04 600,000 475,500
Eli Lilly & Co. Bonds 8.375% 12/01/06 450,000 514,125
ICI Investments BV 6.750% 08/07/02 600,000 607,140
Petroleum National Berhd. 7.375% 09/17/04 400,000 376,000
Service Company International Note 6.750% 06/01/01 700,000 710,500
Salomon Smith Barney Holding Note 6.625% 11/15/03 600,000 604,500
U.S. West Capital Funding 7.900% 02/01/27 900,000 979,875
8,121,394
Total long-term notes and bonds (cost: $24,602,056) 25,008,989
Short-term Notes (1.6%)
Associates Corporation 8.450% 02/02/98 1,000,000 994,400
Total short-term notes (cost: $994,290) 994,400
Cash and Cash Equivalent (1.8%)
BONY Cash Reserve 1,057,594
Total cash and cash equivalent (cost: $1,057,594) 1,057,594
Total Investments (cost: $47,730,241) $ 60,353,173
*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, 1997
Market
Description Shares Value
Common Stock (50.7%)
Automotive (2.9%)
Chrysler Corp. 2,000$ 70,375
Ford Motor Co. 1,200 58,425
128,800
Banks & Financial (18.3%)
AFLAC, Inc. 1,500 76,688
AMBAC, Inc. 2,000 92,000
American National Insurance 500 46,500
Chase Manhattan Corp. 300 32,850
Countrywide Credit Ind. 1,000 42,875
Fannie Mae 1,000 57,063
Frontier Insurance Group, Inc. 4,000 91,500
Green Tree Financial Corp. 3,500 91,656
Imperial Credit Commercial 5,000 73,125
Lawyers Title Corp. 1,000 31,436
Lehman Brothers Holding, Inc. 1,000 51,000
MGIC Investment Group 800 53,200
PMI Group, Inc. 1,000 72,313
812,206
Electric Utility (1.4%)
Illinova Corp 1,000 26,938
Nipsco 700 34,606
61,544
Information Processing & Telecommunications (11.5%)
360 Communications Company 4,000 80,750
Applied Materials, Inc. 3,000 90,375
Arrow Electronics, Inc. 1,000 32,438
Cabletron Systems, Inc. 2,500 37,500
Cox Communications, Inc. 1,500 60,093
ECI Telecommunications Limited Designs 2,000 51,000
Intel Corp. 800 56,200
MEMC Electronic Materials, Inc. 1,000 15,250
Seagate Technology, Inc. 2,000 38,500
Sprint Corp. 800 46,900
509,006
Manufactured Housing (2.4%)
Clayton Homes, Inc. 4,000 72,000
Oakwood Homes Corp. 1,000 33,188
105,188
Merchandising (2.6%)
Fingerhut Companies, Inc. 1,500 32,062
Payless Shoesource, Inc. 764 51,284
Toys R Us 1,000 31,438
114,784
Metals & Mining (3.1%)
Alumax, Inc. 700 23,800
Aluminum Co. of America 400 28,150
Potash Corp. of Saskatchewan 1,000 83,000
134,950
Real Estate (2.6%)
Simon Debartolo Group, Inc. 1,000 32,688
Storage USA 1,000 39,938
Trizec Hahn Corp 2,000 46,374
119,000
Miscellaneous (5.9%)
AGCo Corp. 2,000 58,500
Comair Holdings, Inc. 2,250 54,281
Dow Chemical Co. 400 40,600
Philip Morris Cos., Inc. 1,000 45,311
R.P. Scherer Corp. 1,000 61,000
259,692
Total common stock (cost: $1,894,616) 2,245,170
Preferred Stock (0.9%)
News Corp LTD 2,000 39,750
Total preferred stock (cost: $35,535) 39,750
*does not pay cash dividends
The accompanying notes are an integral part of the financial statements.
<PAGE>
AUL American Series Fund, Inc.
Schedule of Investments
Tactical Asset Allocation Portfolio (continued)
December 31, 1997
Interest Maturity Principal Market
Description Rate Date Amount Value
Long Term Notes (31.9%)
U.S. Government and Agency Obligations 21.7%)
Federal Home Loan Bank Bonds 0.000% 01/21/03$ 100,000$ 70,940
Federal National Mortgage
Association Bonds 7.760% 08/02/06 100,000 102,568
U.S. Treasury Note 6.500% 05/15/05 100,000 104,198
U.S. Treasury Note 6.000% 10/15/99 100,000 100,593
U.S. Treasury Note 5.500% 04/15/00 100,000 99,629
U.S. Treasury Note 5.250% 07/31/98 100,000 99,847
U.S. Treasury Note 5.875% 02/15/04 150,000 151,313
U.S. Treasury Note 6.375% 01/15/00 100,000 101,429
U.S. Treasury Note 7.500% 11/15/01 125,000 132,478
962,995
Corporate Obligations (10.2%)
E.I. Dupont De Nemours 6.500% 09/01/02 150,000 152,063
Countrywide Funding Corporation 6.280% 01/15/03 150,000 149,812
Hilton Hotels 7.000% 01/15/04 150,000 150,000
451,875
Total long-term notes and bonds (cost: $1,407,077) 1,414,870
Short Term Notes (11.5%)
GTE Funding 01/08/98 110,000 109,887
Industrial Funding 01/05/98 400,000 399,796
Total short-term notes and bonds (cost: $509,563) 509,683
Certificates of Deposit (3.4%)
Potomac Capital 09/12/01 150,000 150,563
Total certificates of deposit (cost: $150,000) 150,563
Cash and Cash Equivalents (1.6%)
BONY Cash Reserve 69,909 69,909
Total cash and cash equivalent (cost: $69,909) 69,909
Total Investments (cost: $4,066,700) $ 4,429,945
The accompanying notes are an integral part of the financial statements.
<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, Tactical Asset Allocation
Portfolio (Tactical Asset), Conservative Investor Portfolio, Moderate Investor
Portfolio and Aggressive Investor Portfolio, hereinafter, referred to as
portfolios. 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. The Conservative Investor Portfolio, Moderate Investor
Portfolio and Aggressive Investor Portfolio have not commenced operations as of
December 31, 1997 and as such are not included in the financial statements.
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,
short-term obligations maturing in 60 days or less, when purchased, 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
Advisor 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 the 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decrease in net assets from operations
during the reporting period. Actual results could differ from those estimates.
<PAGE>
Notes to Financial Statements (continued)
2. Transactions with AUL
As of December 31, 1997. AUL's investment at value in the Fund is:
Equity Portfolio $ 6,511,077
Tactical Asset Portfolio 622,012
$ 7,133,089
The Fund has an investment advisory agreement with AUL to act as its investment
advisor. AUL has a sub-advisory agreement with Dean Associates under which Dean
acts as the Sub-Advisor to the Tactical Asset Portfolio. For its services, AUL
receives a fee at an annual rate of .50% of the Portfolio's average daily net
assets, except for Tactical Asset where the fee is .80%. 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. As of
December 31, 1997, AUL's investment advisory fee was reduced for Tactical Asset.
To the extent that AUL has reduced its advisory fees to prevent the Portfolio's
aggregate ordinary operating expenses from exceeding 1% of average daily net
asset, 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.
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, 1997 and
1996, were $994,396 and $712,483, respectively. Certain directors of the Fund
are officers of AUL.
3. Agreements with Banks
The Fund has agreements with The Bank of New York (Bank) whereby the Bank serves
as custodian of the securities and other assets of the Fund and as the fund's
accountant.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term securities
and money market mutual funds) during the year ended December 31, 1997, were:
Portfolio
Equity Money Bond Managed Tactical
Market Asset
Common Stock:
Purchases $ 14,814,315$ $ $ 4,751,130$ 1,673,834
Proceeds from sales 5,191,117 4,342,621 1,030,048
Corporate Bonds:
Purchases 10,257,516 7,117,480 597,482
Proceeds from sales 6,452,612 1,959,972
Government Bonds:
Purchases 25,687,099 20,905,139 868,166
Proceeds from sales 23,940,975 6,423,982 450,000
5. Authorized Capital Shares
The Fund has 325,000,000 authorized shares of $.001 par value capital stock,
which includes 20,000,000 unallocated shares. The remaining shares are allocated
to each of the Fund's portfolios as follows:
Equity Portfolio 20,000,000
Money Market Portfolio 125,000,000
Bond Portfolio 20,000,000
Managed Portfolio 40,000,000
Tactical Asset 25,000,000
Conservative Investor Portfolio 25,000,000
Moderate Investor Portfolio 25,000,000
Aggressive Investor Portfolio 25,000,000
305,000,000
<PAGE>
Notes to Financial Statements (continued)
6. Net Assets
Net Assets at December 31, 1997, are:
Portfolio
Equity Money Bond Managed Tactical
Market Asset
Proceeds from shares
sold and reinvested
distributions $ 80,202,566$256,056,630$ 66,042,092$ 73,830,956$ 4,488,240
Cost of shares
redeemed (26,009,282)(200,299,688)(32,000,880)(25,980,770) (399,481)
Undistributed net
investment income 49 5,484 3,892 231
Undistributed net
realized gain (loss) 54,505
Unrealized gain (loss)26,082,623 616,719 12,622,932 363,245
$ 80,275,956$ 55,756,942$ 34,717,920$ 60,477,010$ 4,452,235
7. Unrealized Gain
Unrealized Gain (Loss) at December 31, 1997, is:
Portfolio
Equity Money Bond Managed Tactical
Market Asset
Common Stock:
Appreciation $ 26,760,626$ $ $ 12,526,486$ 506,592
Depreciation (678,236) (310,596) (151,822)
Notes and Bonds:
Appreciation 233 825,719 564,361 9,987
Depreciation (209,000) (157,319) (1,512)
$ 26,082,623$ $ 616,719$ 12,622,932$ 363,245
8. Shares Outstanding
Shares Outstanding at December 31, 1997, are:
Portfolio
Equity Money Bond Managed Tactical
Market Asset
AUL 309,609 50,001
Dean Investments 50,000
AUL American Unit
Trust 1,614,297 7,349,731 795,328 1,550,349 9
AUL Group Retirement Annuity
Separate Account II 1,465,751 43,314,846 2,235,017 1,991,812 3,165
AUL American Individual
Unit Trust 426,749 5,092,365 221,699 403,062 254,722
3,816,406 55,756,942 3,252,044 3,945,223 357,897
<PAGE>
FINANCIAL HIGHLIGHTS
The per share amounts are based on average shares outstanding throughout the
year.
Equity Portfolio
1997 1996 1995 1994 1993
Per Share Data:
Investment Income $ 0.42$ 0.39$ 0.37$ 0.33$ 0.28
Expense 0.13 0.11 0.09 0.09 0.10
Net investment income 0.29 0.28 0.28 0.24 0.18
Net gain (loss) on
investments 4.64 2.44 2.12 0.26 1.58
Shareholder distributions:
Net investment income (0.30) (0.28) (0.27) (0.24) (0.18)
Realized gain (0.25) (0.19) (0.67) (0.39)
Net increase (decrease) 4.38 2.44 1.94 (0.41) 1.19
Net asset value at
beginning of year 16.65 14.21 12.27 12.68 11.49
Net asset value at
end of year $ 21.03$ 16.65$ 14.21$ 12.27$ 12.68
Ratio to average net assets:
Expense 0.66% 0.70% 0.70% 0.73% 0.82%
Net investment income 1.52% 1.81% 2.08% 1.85% 1.46%
Total return 29.59% 19.17% 19.45% 2.64% 14.80%
Portfolio turnover rate 9% 11% 10% 20% 10%
Average commission
rate paid* $ 0.0719$ 0.0666 N/A N/A N/A
Shares outstanding 3,816,406 3,042,989 2,483,962 1,675,654 904,136
*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
1997 1996 1995 1994 1993
Per Share Data:
Investment Income $ 0.06$ 0.06$ 0.06$ 0.05$ 0.03
Expense 0.01 0.01 0.01 0.01 0.01
Net investment income 0.05 0.05 0.05 0.04 0.02
Net gain (loss) on investments
Shareholder distributions:
Net investment income (0.05) (0.05) (0.05) (0.04) (0.02)
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 0.66% 0.70% 0.73% 0.75% 0.84%
Net investment income 4.83% 4.64% 5.13% 3.71% 2.30%
Total return 4.85% 4.63% 5.09% 3.38% 2.33%
Portfolio turnover rate
Average commission
rate paid* N/A N/A N/A N/A N/A
Shares outstanding 55,756,942 40,227,475 24,290,006 15,495,643 6,153,301
*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
1997 1996 1995 1994 1993
Per Share Data:
Investment Income $ 0.67$ 0.70$ 0.75$ 0.72$ 0.75
Expense 0.07 0.08 0.08 0.08 0.09
Net investment income 0.60 0.62 0.67 0.64 0.66
Net gain (loss)
on investments 0.25 (0.39) 1.07 (1.01) 0.49
Shareholder distributions:
Net investment income (0.59) (0.63) (0.66) (0.64) (0.66)
Realized gain (0.23) (0.01) (0.01) (0.14)
Net increase (decrease) 0.03 (0.41) 1.07 (1.01) 0.35
Net asset value at
beginning of year 10.65 11.06 9.99 11.00 10.65
Net asset value at
end of year $ 10.68$ 10.65$ 11.06$ 9.99$ 11.00
Ratio to average net assets:
Expense 0.67% 0.71% 0.70% 0.73% 0.80%
Net investment income 5.53% 5.85% 6.28% 6.19% 5.95%
Total return 7.85% 2.23% 17.79% (3.56%) 10.69%
Portfolio turnover rate 107% 62% 55% 50% 29%
Average commission
rate paid* N/A N/A N/A N/A N/A
Shares outstanding 3,252,044 2,648,089 2,298,581 2,046,361 1,338,361
*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
1997 1996 1995 1994 1993
Per Share Data:
Investment Income $ 0.58$ 0.53$ 0.54$ 0.50$ 0.49
Expense 0.10 0.09 0.08 0.08 0.09
Net investment income 0.48 0.44 0.46 0.42 0.40
Net gain (loss)
on investments 2.34 1.01 1.62 (0.45) 1.07
Shareholder distributions:
Net investment income (0.48) (0.44) (0.46) (0.42) (0.40)
Realized gain (0.41) (0.03) (0.20) (0.30) (0.24)
Net increase (decrease) 1.93 0.98 1.42 (0.75) 0.83
Net asset value at
beginning of year 13.40 12.42 11.00 11.75 10.92
Net asset value at
end of year $ 15.33$ 13.40$ 12.42$ 11.00$ 11.75
Ratio to average net assets:
Expense 0.67% 0.70% 0.70% 0.73% 0.81%
Net investment income 3.27% 3.43% 3.86% 3.63% 3.49%
Total return 20.95% 11.79% 19.13% (0.92%) 12.98%
Portfolio turnover rate 27% 34% 35% 34% 9%
Average commission
rate paid* $ 0.0716$ 0.0668 N/A N/A N/A
Shares outstanding 3,945,223 3,215,189 2,484,037 2,233,298 1,197,065
*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
1997 1996 1995(1)
Per Share Data:
Investment Income $ 0.41$ 0.39$ 0.20
Expense 0.13 0.11 0.04
Net investment income 0.28 0.28 0.16
Net gain (loss)
on investments 1.75 1.38 0.49
Shareholder distributions:
Net investment income (0.28) (0.28) (0.16)
Realized gain (0.96) (0.17) (0.05)
Net increase (decrease) 0.79 1.21 0.44
Net asset value at
beginning of year 11.65 10.44 10.00
Net asset value at
end of year $ 12.44$ 11.65$ 10.44
Ratio to average net assets:
Expense 1.00% 1.00% 1.00%
Net investment income 2.24% 2.62% 3.70%
Total return 15.48% 15.67% 6.49%
Portfolio turnover rate 52% 25% 4%
Average commission
rate paid* $ 0.0733$ 0.0799 N/A
Shares outstanding 357,897 184,046 109,147
*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.
(1) Ratios calculated for period July 31, 1995 through December 31, 1995 on
annualized basis
The accompanying notes are an integral part of the financial statements.
<PAGE>
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<PAGE>
American United Life Insurance Company
P.O. Box 368
Indianapolis, Indiana 46206-0368
P-12757
1/98
