<TABLE>
<S> <C>
TABLE OF CONTENTS
President's Letter........................................................ 1
CAPITAL APPRECIATION FUNDS:
Investment Review......................................................... 3
Portfolios of Investments:
Aetna Growth Fund....................................................... 14
Aetna International Fund................................................ 16
Aetna Mid Cap Fund...................................................... 19
Aetna Small Company Fund................................................ 21
Aetna Value Opportunity Fund............................................ 23
Statements of Assets and Liabilities...................................... 24
Statements of Operations.................................................. 26
Statements of Changes in Net Assets....................................... 28
Notes to Financial Statements............................................. 33
Financial Highlights...................................................... 39
GROWTH AND INCOME FUNDS:
Investment Review......................................................... 49
Portfolios of Investments:
Aetna Balanced Fund..................................................... 58
Aetna Growth and Income Fund............................................ 68
Aetna Real Estate Securities Fund....................................... 77
Statements of Assets and Liabilities...................................... 78
Statements of Operations.................................................. 79
Statements of Changes in Net Assets....................................... 80
Notes to Financial Statements............................................. 83
Financial Highlights...................................................... 89
INCOME FUNDS:
Investment Review......................................................... 95
Portfolios of Investments:
Aetna Bond Fund......................................................... 104
Aetna Government Fund................................................... 106
Aetna High Yield Fund................................................... 107
Aetna Money Market Fund................................................. 108
Statements of Assets and Liabilities...................................... 110
Statements of Operations.................................................. 112
Statements of Changes in Net Assets....................................... 114
Notes to Financial Statements............................................. 118
Financial Highlights...................................................... 122
</TABLE>
<PAGE>
PRESIDENT'S LETTER
Dear Valued Shareholder,
Thank you for investing in the Aetna Series Fund, Inc. We are pleased to send
this semi-annual report on the funds you have chosen to help pursue your
investment goals.
It has been a good six months for the U.S. economy, delivering solid GDP growth
well in excess of most expectations. Meanwhile, inflation and interest rates
remained subdued and the U.S. dollar maintained a lofty valuation. The federal
deficit disappeared and the Federal Reserve maintained an unchanged monetary
policy. This favorable environment enabled the stock market to continue its
record-breaking climb despite a deceleration in reported corporate earnings.
The past six months have proven to be equally exciting for Aetna Series Fund
investors.
In February, we introduced seven new funds: AETNA MID CAP FUND, AETNA VALUE
OPPORTUNITY FUND, AETNA REAL ESTATE SECURITIES FUND, AETNA HIGH YIELD FUND,
AETNA INDEX PLUS BOND FUND, AETNA INDEX PLUS MID CAP FUND AND AETNA INDEX PLUS
SMALL CAP FUND. This further rounds out our family of funds to a total of
nineteen, providing you with a variety of options for diversifying your
portfolio.
The Aetna International Fund and the Aetna Small Company Fund significantly
outperformed their benchmarks, returning 21.64% and 15.92%, respectively, for
the six month period ending April 30, 1998.
Investors will now have increasingly greater access to the Aetna Series Fund.
Aetna acquired Financial Network Investment Corporation (FNIC) in July 1997.
FNIC is one of America's most respected financial planning firms, with 2,400
independent investment representatives ready to serve Aetna clients across
the country. We intend to continue building our distribution capabilities
during 1998, reaching out to investors with our well-engineered products and
services.
Aeltus' investment professionals have continued to command substantial media
recognition. Loyal followers of Louis Rukeyser's Wall $treet Week, aired on
PBS, have become better acquainted with John Kim, President and Chief Investment
Officer of Aeltus Investment Management, Inc., adviser to Aetna Series Fund,
through his regularly scheduled appearances on this program. And Jim Griffin,
Aeltus' Investment Strategist, was recently featured in Barron's where he
provided an overview of the U.S. markets as well as world economies.
With assets under management in excess of $47 billion, Aeltus has built the size
and strength that will allow us to continue refining existing products and
services, adding new ones, and growing our staff to better serve you.
Thank you for your continued confidence in the Aetna Series Fund and Aeltus
Investment Management.
Sincerely,
[J. Scott Fox signature]
J. Scott Fox
President
Aetna Series Fund, Inc.
1
<PAGE>
AETNA GROWTH FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA
GROWTH
FUND (CLASS I) S&P 500 INDEX
<S> <C> <C>
12/93 10,000 10,000
10,250 9,621
9,900 9,661
10,552 10,134
10,559 10,132
11,343 11,119
12,682 12,180
13,883 13,149
14,181 13,940
15,048 14,689
15,638 15,347
16,322 15,821
16,622 16,258
17,845 18,651
21,435 21,479
21,613 22,469
4/98 25,877 25,579
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
for the Period Ended April 30, 1998*
1 year Inception+
<S> <C> <C>
Class I 45.00% 24.61%
Class A 44.16% 23.76%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
23, 1993. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA GROWTH FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Growth Fund (Growth) Class I shares generated a total return of
20.72%, net of fund expenses, for the six month period ended April 30, 1998. The
Fund underperformed the Standard & Poor's (S&P) 500 Index(a) which returned
22.50%. Class I shares' performance over the one year period ended April 30,
1998, placed it in the top 6% (out of 692 funds) among large blend funds tracked
by Morningstar, Inc. Class A shares generated a return for the same six month
period of 20.42%, (performance does not reflect the deduction of the front end
sales charge). Class A shares' performance over the one year period ended April
30, 1998, placed it in the top 8% (out of 692 funds) among large blend funds
tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The performance of the Fund differed considerably over the period. Returns early
in the period were affected significantly by the financial crisis in Asia. For
example, uncertainty about the extent to which the developments in Asia would
impact the U.S. economy raised questions about the ability of U.S. companies to
sustain earnings growth rates. As a result, there was a move in the market to a
relatively small group of very large capitalization companies that appeared to
offer better earnings visibility in an uncertain market. This emphasis on size
disadvantaged our more diversified portfolio relative to the returns of the S&P
500.
Second, the crisis hit hard several of the industries to which the Fund was most
exposed. Returns early in the period reflected, in particular, our exposure to
the technology and oil service industries. Technology, with strong ties to the
Asian economies, underperformed sharply in the first quarter of the year. Oil
service, with lower demand affecting oil prices, also trailed market
performance.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A number of changes made to the Fund's portfolio during the period helped
performance over the balance of the first half. As an example, our exposure to
the technology sector was reduced slightly as the quarter progressed, and a
number of changes were made within the sector. Holdings with the greatest
exposure to Asian economic developments were eliminated. We took advantage of
the weakness in the sector to add to the portfolio companies with more
consistent growth records such as Dell Computer Corp. and Microsoft Corp. Fund
performance benefited from these changes as the technology group rallied later
in the period.
Positions in the oil service group were reduced and the funds generated were
used to expand our holdings in health care, a group that offers a potential for
sustainable earnings growth. These additional holdings, along with existing
holdings in
See Definition of Indices. 3
<PAGE>
Warner Lambert Co. and Schering Plough, performed well over the
period. Performance was also helped in the second quarter by the addition of
Allied Waste Industries in the commercial services sector. Positions in the
capital goods and retail sectors added to results.
WHAT IS YOUR OUTLOOK GOING FORWARD?
A number of the factors that have supported equity valuations over the last
several years remain in place. Inflation and interest rates remain at relatively
low and stable levels, and liquidity in the equity markets continues to support
prices. Earnings momentum slowed in the first quarter and probably needs to
reaccelerate for the equity market to maintain its momentum. In this environment
our strategy is unchanged. We will continue to own companies with good earnings
momentum at reasonable prices.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 2.0% 5.6% (3.6)%
Commercial Services 5.9% 2.5% 3.4 %
Consumer Discretionary 14.9% 14.0% 0.9 %
Consumer Non-Discretionary 0.6% 10.7% (10.1)%
Energy 5.8% 8.5% (2.7)%
Finance 14.1% 13.1% 1.0 %
Healthcare 19.9% 9.1% 10.8 %
Manufacturing 16.8% 11.1% 5.7 %
Technology 13.3% 12.2% 1.1 %
Utilities 6.7% 13.2% (6.5)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Sofamor Danek Group, Inc. 3.53%
Allied Waste Industries, Inc. 3.49%
Lucent Technologies, Inc. 3.41%
Warner Lambert Co. 3.29%
Walt Disney Co. (The) 3.00%
United Technologies Corp. 2.93%
General Electric Co. 2.83%
McKesson Corp. 2.80%
HBO & Co. 2.79%
Northern Telecom Ltd. 2.77%
</TABLE>
4
<PAGE>
AETNA INTERNATIONAL FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA
INTERNATIONAL MSCI EAFE
FUND (CLASS I) INDEX
<S> <C> <C>
12/91 10,000 10,000
9,311 8,821
9,521 9,016
9,171 9,161
8,921 8,816
9,401 9,881
10,011 10,883
10,821 11,612
11,620 11,720
11,460 12,137
11,571 12,766
11,829 12,786
11,627 12,665
11,347 12,910
11,484 13,015
12,384 13,568
12,437 14,128
13,104 14,547
13,806 14,788
13,856 14,781
13,927 14,633
16,099 14,884
17,554 15,352
18,271 16,041
4/98 21,352 17,746
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 YEAR 5 YEAR INCEPTION+
<S> <C> <C> <C>
Class I 32.62% 16.38% 12.75%
Class A 31.75% 15.52% 11.91%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
27, 1991. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA INTERNATIONAL FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna International Fund (International, formerly International Growth)
Class I shares generated a total return of 21.64%, net of fund expenses, for the
six month period ended April 30, 1998. The Fund outperformed the Morgan Stanley
Capital International-Europe, Australia and Far East (MSCI EAFE) Index(b) which
returned 15.59% for the same period. Class I shares' performance over the one
and five year periods ended April 30, 1998, placed it in the top 11% (out of 451
funds) and 11% (out of 130 funds), respectively, among foreign stock funds
tracked by Morningstar, Inc. Class A shares generated a return for the same six
month period of 21.36%, (performance does not reflect the deduction of front end
sales charge). Class A shares' performance over the one year period ended April
30, 1998, placed it in the top 12% (out of 451 funds) among foreign stock funds
tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The past six months were marked by continued volatility in Asia and moderate
growth in Europe. During the last two months of 1997, a meltdown in the Asian
economy and financial markets caused equity markets to weaken worldwide. Hong
Kong led decliners as higher interest rates and concern over currency
devaluation rocked the banking and property sectors. Japan suffered as well,
falling almost 15% as news of bankruptcies and corruption led the Nikkei Index
below the 15,000 mark for the first time since June 1995. Japan began 1998 on a
strong note with the Nikkei Index rallying 13%, but closed out the six month
period falling 5% as government stimulus packages failed to restore consumer
confidence.
In contrast, Europe outpaced all major markets over the last six months -
including the U.S. Corporate restructuring, global consolidation and lower
interest rates fueled earnings growth which more than offset exposure to the
weak Asian economies. Gains were widespread with Spain and Italy up by 50%,
followed by Ireland, France and Finland whose markets were up over 40%. The Fund
favors these countries which all have lower interest rates and upward earnings
estimate revisions, and avoids Asia where all earnings revisions point downward.
In addition, the Fund has decreased its exposure to Latin America as growing
deficits and heavy oil exposure have increased volatility and slowed growth in
the region.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
The outperformance versus the benchmark was primarily due to country allocation
and currency hedging. Overall, Fund performance was enhanced by an underweight
exposure to Hong Kong and Japan and an overweight position in European holdings,
while exposure to Latin American stocks hurt performance modestly. Sector
selection also benefited performance in Europe as financial stocks were
emphasized and technology stocks were avoided.
See Definition of Indices. 5
<PAGE>
During the last six months, the Fund remained partially hedged versus the
Japanese Yen and German Deutschemark. Currency hedging added to performance
versus our unhedged benchmark, the MSCI EAFE Index, as the U.S. Dollar
strengthened relative to both currencies.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We will continue to favor Europe as low interest rates, corporate restructuring
and economic monetary union provide a favorable environment for equities. In
addition, we will maintain a low equity exposure to Asia until we see some signs
of economic growth.
International investments involve risks not present in U.S. securities,
including currency fluctuations, less public information and political and
economic uncertainty.
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
COUNTRY WEIGHTINGS PORTFOLIO MSCI EAFE WEIGHTING
<S> <C> <C> <C>
United Kingdom 14.4% 21.7% (7.3)%
Japan 11.1% 22.0% (10.9)%
France 10.4% 8.9% 1.5 %
Germany 9.7% 10.3% (0.6)%
Norway 6.9% 0.6% 6.3 %
Switzerland 6.0% 7.8% (1.8)%
Netherlands 5.7% 5.8% (0.1)%
Italy 4.3% 4.7% (0.4)%
Sweden 4.2% 3.2% 1.0 %
Finland 3.8% 1.0% 2.8 %
Other 23.5% 14.0% 9.5 %
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
ING Groep NV 1.66%
Accor SA 1.44%
Credit Suisse Group 1.43%
Granada Group Plc 1.29%
Novo-Nordisk A/S 1.26%
Lafarge SA 1.26%
Alcatel Alsthom 1.18%
Volkswagon AG 1.17%
Nokia Oyj AB 1.16%
Credito Italiano 1.16%
</TABLE>
6
<PAGE>
AETNA MID CAP FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA S&P 400
MID CAP MIDCAP
FUND (CLASS I) INDEX
<S> <C> <C>
2/98 10,000 10,000
4/98 11,410 11,229
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
Inception+
<S> <C>
Class I 14.10%
Class A 14.10%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for both the Class I and Class A shares was February 4,
1998. Class I and Class A shares participate in the same portfolio of
securities.
AETNA MID CAP FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Mid Cap Fund (Mid Cap) Class I and Class A shares generated a total
return of 14.10%, net of fund expenses, between its inception on February 4,
1998 and April 30, 1998 (Class A performance does not reflect the deduction of
the front end sales charge). During the three month period ended April 30, 1998,
the Standard & Poor's (S&P) Midcap 400 Index(c) returned 12.29%.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Mid Cap emphasizes risk control as well as return enhancement, which can at
times result in underperformance during strong upward market movements. Despite
a strong mid cap market during the three months of the fund's existence, the
Fund was able to add value over the benchmark. Superior stock selection had the
most positive impact on our results.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST THREE MONTHS?
The Fund held very little cash during the period, which proved to be a benefit
as the mid cap equity market was strong. Overall, stock selection positively
influenced performance. The Fund benefited from several holdings in the
financial services industry, such as Lehman Brothers Holdings, Inc., Bear
Stearns Co., Inc. and Equitable Co., Inc. The Fund's decision not to hold
America OnLine or AES Corp. detracted from total performance relative to the
benchmark.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Mid Cap continues to look neutral to attractive. The Fund looks at the forward
earnings yield of mid cap to measure its valuation and compare it to the yield
on the ten year government bond. Based on this measure, Mid Cap looks somewhat
overvalued relative to history. Earnings estimate revision activity for Mid Cap
has been strongly positive, leading us to believe that Mid Cap returns may be
strong in the short run, while somewhat below average in the longer term.
See Definition of Indices. 7
<PAGE>
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO S&P MIDCAP 400 WEIGHTING
<S> <C> <C> <C>
Basic Materials 13.3% 6.9% 6.4 %
Commercial Services 7.9% 6.5% 1.4 %
Consumer Discretionary 17.4% 15.1% 2.3 %
Consumer Non-Discretionary 3.3% 5.3% (2.0)%
Energy --% 8.2% (8.2)%
Finance 21.4% 13.4% 8.0 %
Healthcare 13.1% 9.6% 3.5 %
Manufacturing 6.8% 9.9% (3.1)%
Technology 9.5% 12.0% (2.5)%
Utilities 7.3% 13.1% (5.8)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Compuware Corp. 3.61%
Bear Stearns Co., Inc. 3.52%
SouthTrust Corp. 3.04%
Century Telephone Enterprises 2.81%
Millennium Chemicals, Inc. 2.78%
Thiokol Corp. 2.66%
AccuStaff, Inc. 2.65%
New York State Electric & Gas Corp. 2.65%
Lehman Brothers Holdings, Inc. 2.50%
Equitable Co., Inc. 2.48%
</TABLE>
8
<PAGE>
AETNA SMALL COMPANY FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA
SMALL COMPANY RUSSELL
FUND (CLASS I) 2000 INDEX
<S> <C> <C>
12/93 10,000 10,000
10,070 9,735
9,650 9,356
10,320 10,006
10,130 9,819
11,162 10,271
12,525 11,234
14,138 12,343
15,010 12,611
16,227 13,254
16,459 13,917
16,448 13,965
16,228 13,749
16,711 13,971
22,363 17,783
22,556 17,692
4/98 25,925 19,893
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 year Inception+
<S> <C> <C>
Class I 55.13% 24.66%
Class A 54.29% 23.81%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
23, 1993. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA SMALL COMPANY FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Small Company Fund (Small Company) Class I shares generated a total
return of 15.92%, net of fund expenses, for the six month period ended April 30,
1998. The Fund outperformed the Russell 2000 Index(d) which returned 11.86% for
the same period. Class I shares' performance over the one year period ending
April 30, 1998, placed it in the top 19% (out of 142 funds) among small blend
funds tracked by Morningstar, Inc. Class A shares generated a return for the
same six month period of 15.72%, (performance does not reflect the deduction of
the front end sales charge). Class A shares' performance over the one year
period ended April 30, 1998, placed it in the top 22% (out of 142 funds) among
small blend funds tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The most important event impacting the Fund for the last six months was the
Asian currency crisis. This caused the market to decline significantly in late
October but persuaded the Federal Reserve not to raise interest rates even in
the face of a strong economy. A continued low inflation rate further reinforced
the Fed's decision to keep rates down. These events created investment
opportunities in technology stocks, capital goods stocks and interest sensitive
stocks such as financial, housing and building materials.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
The Fund received strong performance from investments in technology and capital
goods. Holdings in consumer cyclicals, energy and finance were also strong;
selected healthcare holdings also enhanced returns.
In the fall we moved more money into technology after the Asian crisis had
leveled most technology stocks indiscriminately. This resulted in strong returns
from this sector. Three separate holdings each rose by 35% or more, and one
holding rose more than 80% during the six month period. In capital goods, three
holdings each advanced by 40% or more. Healthcare was led by Twin Labs Corp. and
Bindley Western, while consumer cyclicals received strong performance from
Clearview Cinema Group Inc. and Jones Intercable.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The investment climate remains challenging. In general, the market must
acknowledge slowing profit growth and interest rates which have probably
bottomed for the intermediate term. Due to slowing corporate profits, the Fund
will put added emphasis on quality of earnings, cash flow growth and balance
sheet quality. The Fund's investment strategy remains the same: select those
companies with the strongest earnings momentum and selling at reasonable prices.
See Definition of Indices. 9
<PAGE>
Small company stocks offer greater potential for growth, but there are
additional market and business risks associated with them. Such risks are low
trading volumes, greater degrees of change in earnings and greater short-term
volatility.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO RUSSELL 2000 WEIGHTING
<S> <C> <C> <C>
Basic Materials 11.0% 4.7% 6.3 %
Commercial Services 6.9% 7.5% (0.6)%
Consumer Discretionary 15.8% 20.2% (4.4)%
Consumer Non-Discretionary 7.0% 2.3% 4.7 %
Energy 7.0% 6.2% 0.8 %
Finance 14.7% 12.7% 2.0 %
Healthcare 6.4% 11.0% (4.6)%
Manufacturing 16.3% 10.2% 6.1 %
Real Estate Investment Trusts 2.0% 5.7% (3.7)%
Technology 11.0% 13.3% (2.3)%
Utilities 1.9% 6.2% (4.3)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Alpine Group, Inc. 2.69%
Jones Intercable, Inc. 2.55%
Medallion Financial Corp. 2.46%
McDermott International, Inc. 2.15%
Knightsbridge Tankers Ltd. 2.11%
Global Industrial Technologies, Inc. 2.11%
Royal Olympic Cruise Lines 2.10%
Mueller Industries, Inc. 2.07%
LandAmerica Financial Group, Inc. 2.05%
QLogic Corp. 1.98%
</TABLE>
10
<PAGE>
AETNA VALUE OPPORTUNITY FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA VALUE
OPPORTUNITY S&P 500
FUND (CLASS I) INDEX
<S> <C> <C>
2/98 10,000 10,000
4/98 11,330 11,384
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
Inception+
<S> <C>
Class I 13.30%
Class A 13.20%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for both the Class I and Class A shares was February 2,
1998. Class I and Class A shares participate in the same portfolio of
securities.
AETNA VALUE OPPORTUNITY FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Value Opportunity Fund (Value Opportunity) Class I shares generated a
total return of 13.30%, net of fund expenses, between its inception on February
2, 1998 and April 30, 1998. During the three month period ended April 30, 1998,
the Fund underperformed Standard & Poor's (S&P) 500 Index(a) which returned
13.84%. Class A shares generated a return for the same period of 13.20%
(performance does not reflect the deduction of the front end sales charge).
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Economic and market conditions that impacted the Fund included strong U.S.
economic growth tempered by Asian economic weakness, remarkably subdued
inflationary trends and unexpected strength in the U.S. equity markets.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST THREE MONTHS?
Strong U.S. real economic growth overcame the fear surrounding Asian weakness,
improving investor psychology which helped the technology, basic material and
consumer cyclical sectors rebound in price. The Fund's substantial position and
good security selection in these groups contributed to performance.
Corporate profits rose modestly compared to first quarter 1997, but once again
outpaced reduced investor expectations. With little evident pricing power
despite robust real economic growth, true growth stocks outperformed
value-oriented issues in the first months of 1998. This worked to the
portfolio's disadvantage as an under-weighted position in the important but
pricey health care sector was a drag on performance. Several companies in this
group produced solid earnings results and the announcement of new drug
configurations produced sizable price gains.
Security selection has added to performance since the Fund's inception.
Excellent price returns were achieved from positions in Kansas City Southern
Industries Inc., Centocor Inc., Federated Department Stores Inc., Officemax and
Walt Disney Co. Portfolio positions in AT&T, Deere, Eaton Corp. and Boeing Co.
detracted from performance.
The Fund's investment philosophy is keyed to the principle that favorable
valuation is only one reason to own a particular security. Superior long term
portfolio performance can be achieved by purchasing quality companies with
reduced investor expectations. In many cases, we look for a catalyst to spur
price appreciation. While most value-based issues reflect low expectations,
increasing investor recognition of positive change can lead to improved price
performance.
See Definition of Indices. 11
<PAGE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
Given the strong market returns thus far in 1998, where stock market gains have
already exceeded the annual expectation, it is difficult to project more of the
same. In reality, the S&P 500's robust advance through April 30, 1998 is not
consistent with modest profit growth and slightly higher interest rates. On the
other hand, the absence of inflation, growing profits and reasonable interest
rates suggest that a pause, rather than a correction, would be reasonable.
Seasonal liquidity flows may be diminishing but the attraction of financial
assets over real assets such as gold remains in place. The Fund's approach will
continue to take advantage of temporary valuation disparities due to market
volatility to supplement a core of traditional value-oriented portfolio
investments.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 9.3% 5.6% 3.7 %
Commercial Services 4.7% 2.5% 2.2 %
Consumer Discretionary 10.7% 14.0% (3.3)%
Consumer Non-Discretionary 5.9% 10.7% (4.8)%
Energy 15.3% 8.5% 6.8 %
Finance 17.2% 13.1% 4.1 %
Healthcare 3.6% 9.1% (5.5)%
Manufacturing 14.3% 11.1% 3.2 %
Technology 14.5% 12.2% 2.3 %
Utilities 4.5% 13.2% (8.7)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
IBM Corp. 4.42%
McDermott International, Inc. 4.30%
Federated Department Stores, Inc. 4.00%
Noble Drilling Corp. 3.69%
Deere & Co. 3.64%
PRI Automation, Inc. 3.52%
Owen-Illinois, Inc. 3.43%
Eaton Corp. 3.36%
Amgen, Inc. 3.30%
Hilton Hotels Corp. 3.15%
</TABLE>
12
<PAGE>
DEFINITION OF INDICES
(a) The Standard & Poor's (S&P) 500 Index is a value-weighted, unmanaged index
of 500 widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
(b) The Morgan Stanley Capital International-Europe, Australia and Far East
(MSCI EAFE) Index is a market value-weighted average of the performance of more
than 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East.
(c) The Standard & Poor's Midcap (S&P) 400 Index is a value-weighted, unmanaged
index of 400 common stocks that assumes the reinvestment of all dividends, and
is considered to be representative of the stock market in general.
(d) The Russell 2000 Index consists of the smallest 2000 companies in the
Russell 3000 Index and represents approximately 10% of the Russell 3000 total
market capitalization. The 3000 largest U.S. companies by market capitalization,
representing nearly 98% of the U.S. equity market, comprise the Russell 3000
Index. Both indices assume reinvestment of all dividends and are unmanaged.
13
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (90.0%)
BIOTECH AND MEDICAL PRODUCTS (6.7%)
Biomet, Inc.+........................ 54,100 $1,623,000
Mylan Laboratories, Inc.............. 43,700 1,185,363
Sofamor Danek Group, Inc.+........... 48,600 4,264,649
Watson Pharmaceuticals, Inc.+........ 28,700 1,234,100
----------
8,307,112
----------
COMMERCIAL SERVICES (1.9%)
Omnicom Group, Inc................... 50,500 2,392,438
----------
COMPUTERS (2.2%)
Dell Computer Corp.+................. 20,800 1,679,600
Sun Microsystems, Inc.+.............. 25,600 1,054,400
----------
2,734,000
----------
CONGLOMERATE AND AEROSPACE (8.1%)
General Electric Co.................. 40,100 3,413,512
Sundstrand Corp...................... 45,800 3,163,063
United Technologies Corp............. 35,900 3,533,905
----------
10,110,480
----------
DATA AND IMAGING SERVICES (9.8%)
BMC Software, Inc.+.................. 29,800 2,788,163
Computer Associates
International, Inc................ 41,000 2,401,063
Compuware Corp.+..................... 50,700 2,477,963
EMC/MASS Corp.+...................... 54,200 2,499,975
Microsoft Corp.+..................... 22,800 2,054,850
----------
12,222,014
----------
DISCRETIONARY RETAIL (5.3%)
Consolidated Stores Corp.+........... 54,200 2,168,000
TJX Companies, Inc................... 47,500 2,101,875
Wal-Mart Stores, Inc................. 44,500 2,250,031
----------
6,519,906
----------
DIVERSIFIED FINANCIAL SERVICES (2.5%)
Travelers Group, Inc................. 50,100 3,065,494
----------
DRUGS (5.8%)
Schering Plough...................... 41,100 3,293,138
Warner Lambert Co.................... 21,000 3,972,937
----------
7,266,075
----------
ELECTRICAL MACHINERY AND INSTRUMENTS (4.5%)
Herman Miller, Inc................... 72,000 2,173,500
Lexmark International Group, Inc.+... 29,700 1,718,888
SCI Systems, Inc.+................... 38,900 1,602,194
Steelcase Inc........................ 2,700 93,488
----------
5,588,070
----------
ELECTRONIC MEDIA (2.9%)
Walt Disney Co. (The)................ 29,100 3,617,493
----------
FOOD AND BEVERAGE (0.5%)
Dean Foods Co........................ 14,100 660,938
----------
FOOD AND DRUG RETAIL (1.4%)
CVS Corp............................. 22,900 1,688,875
----------
FOREST PRODUCTS AND BUILDING MATERIALS (1.8%)
Owens-Illinois, Inc.+................ 57,300 $2,266,931
----------
HEALTH SERVICES (5.4%)
HBO & Co............................. 56,200 3,361,463
McKesson Corp........................ 47,800 3,378,862
----------
6,740,325
----------
INDUSTRIAL SERVICES (3.4%)
Allied Waste Industries, Inc.+....... 153,100 4,210,249
----------
INSURANCE (6.0%)
American International Group, Inc.... 18,400 2,420,750
MGIC Investment Corp................. 39,600 2,494,800
SunAmerica, Inc...................... 51,200 2,556,800
----------
7,472,350
----------
INVESTMENT SERVICES (4.2%)
Franklin Resources, Inc.............. 42,900 2,295,150
T. Rowe Price Associates............. 38,400 2,899,200
Waddell & Reed Financial............. 1,900 47,025
----------
5,241,375
----------
OIL SERVICES (5.2%)
BJ Services Co.+..................... 37,100 1,391,250
Friede Goldman International, Inc.+.. 69,800 2,809,450
Santa Fe International Corp.......... 57,900 2,268,956
----------
6,469,656
----------
OTHER TELECOMMUNICATIONS (6.0%)
Lucent Technologies, Inc............. 54,100 4,118,362
Northern Telecom Ltd................. 54,900 3,342,038
----------
7,460,400
----------
PRINT MEDIA (3.9%)
McGraw-Hill Co., Inc................. 24,000 1,858,500
New York Times Co.................... 42,500 3,014,844
----------
4,873,344
----------
PRODUCER GOODS (2.5%)
Tyco International Ltd............... 57,700 3,144,650
-----------
TOTAL COMMON STOCKS (COST 112,052,175
$84,311,681) -----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.9%)
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.45%, 05/01/98....... $8,344,000 8,344,000
U.S. Treasury, Comm. Paper, 4.94%,
08/20/98@.......................... 100,000 98,482
U.S. Treasury, Comm. Paper, 5.03%,
08/20/98@.......................... 200,000 196,964
------------
TOTAL SHORT-TERM INVESTMENTS (COST $8,639,378) 8,639,446
------------
TOTAL INVESTMENTS (COST $92,951,059)(A) 120,691,621
OTHER ASSETS LESS LIABILITIES 3,797,796
============
TOTAL NET ASSETS $124,489,417
============
</TABLE>
14 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$94,783,437. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains .................... $27,163,571
Unrealized losses ................... (1,255,387)
-----------
Net unrealized gain ............... $25,908,184
===========
</TABLE>
Information concerning open futures contracts at April 30, 1998 is shown below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
LONG CONTRACTS
S & P 500 Index Futures... 28 $7,659,547 June 98 $ 174,601
========== ==========
</TABLE>
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 1998.
Category percentages are based on net assets.
See Notes to Financial Statements. 15
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
INTERNATIONAL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (91.4%)
AUSTRALIA (3.2%)
Goodman Fielder Ltd. (Food and
Beverage) ......................... 372,145 $ 577,480
Mayne Nickless Ltd. (Commercial
Services) ......................... 44,800 241,914
Westpac Banking Corp. Ltd. (Banks
and Thrifts) 84,100 564,782
Woolworth Ltd. (Food and Beverage) .. 163,055 561,327
----------
TOTAL AUSTRALIA 1,945,503
----------
BELGIUM (1.2%)
Delhaize-Le Lion, SA (Food and
Beverage) +........................ 2,000 132,314
Societe Generale De Belgique
(Investment Services) +............ 4,050 624,457
----------
TOTAL BELGIUM 756,771
----------
BRAZIL (0.6%)
Telecomunicaciones Brasileiras SA
(Other Telecommunications) ........ 2,900 353,256
----------
CANADA (2.0%)
Canadian Imperial Bank of Commerce
(Banks and Thrifts) ............... 16,100 572,367
Canadian National Railway Co.
(Surface Transport) ............... 10,000 650,608
----------
TOTAL CANADA 1,222,975
----------
CHILE (0.3%)
Cia. de Telecomuncaciones de Chile
S.A. (Other Telecommunications) ... 7,500 187,969
----------
DENMARK (2.7%)
Carli Gry International A/S
(Textiles and Apparel) +........... 7,200 541,856
Novo-Nordisk A/S (Drugs) ............ 4,550 738,037
Olicom A/S (Computers) +............. 8,000 236,149
Tele Danmark A/S
(Major Telecommunications) ........ 1,200 100,831
----------
TOTAL DENMARK 1,616,873
----------
FINLAND (3.7%)
Huhtamaki Group (Diversified) ....... 7,400 427,860
Oy Nokia Corp., ADR
(Other Telecommunications) ........ 10,200 682,125
Sampo Insurance Co. (Insurance) ..... 6,000 270,923
UPM-Kymmene Corp.
(Forest Products and Building
Materials) ........................ 15,600 468,168
Valmet Oyj (Consumer Services) ...... 22,000 364,644
----------
TOTAL FINLAND 2,213,720
----------
FRANCE (10.1%)
Accor SA (Consumer Services) +....... 3,100 844,319
Alcatel Alsthom (Other
Telecommunications) +.............. 3,731 691,299
FRANCE (CONTINUED)
Credit Commercial de France
(Banks and Thrifts) +.............. 7,700 $ 614,183
Danone (Food and Beverage) +......... 1,830 431,823
Elf Aquitaine SA (Oil) +............. 4,900 642,449
Eridania Beghin-Say SA (Food and
Beverage) +........................ 1,500 325,038
Gemini Sogeti SA (Insurance) ........ 2,650 343,924
Lafarge SA
(Forest Products and Building
Materials) ........................ 7,800 736,222
Pernod Ricard (Food and Beverage) ... 4,300 296,539
Rhone-Poulenc
(Biotech and Medical Products) +... 12,400 606,014
Union des Assurances Federales
(Insurance) +...................... 3,600 562,935
----------
TOTAL FRANCE 6,094,745
----------
GERMANY (7.2%)
BASF AG (Chemicals) +................ 7,500 334,355
Bayerische Hypotheken-und
Wechsel-Bank AG (Banks and
Thrifts) +......................... 7,700 433,380
Daimler-Benz AG (Automotive) +....... 3,000 293,731
Deutsche Pfandbrief & Hypothekenbank
AG (Banks and Thrifts) +........... 7,000 541,042
Gehe AG (Health Services) +.......... 9,000 468,933
MAN AG (Diversified) ................ 1,150 386,431
Mannesmann AG (Heavy Machinery) +.... 815 642,190
VEBA AG (Electric Utilities) +....... 6,500 428,504
Viag AG (Consumer Services) +........ 350 178,735
Volkswagen AG (Automotive) +......... 861 686,833
----------
TOTAL GERMANY 4,394,134
----------
HONG KONG (1.2%)
Hutchison Whampoa Ltd.
(Consumer Services) +.............. 74,000 457,604
National Mutual Asia Ltd.
(Insurance) ....................... 298,000 238,523
Peregrine Investments Holdings Ltd.
(Investment Services) +++........... 285,000 3,164
----------
TOTAL HONG KONG 699,291
----------
INDIA (0.4%)
Videsh Sanchar Nigam Ltd.
(Other Telecommunications) +....... 20,700 253,575
----------
IRELAND (2.9%)
Allied Irish Banks (Banks and
Thrifts) .......................... 26,812 369,043
CRH Plc
(Forest Products and Building
Materials) ........................ 21,000 299,959
Iona Technologies Plc, ADR
(Data and Imaging Services) +...... 7,600 236,550
Irish Life Plc (Insurance) .......... 36,102 335,162
Waterford Wedgewood
(Housing and Furnishings) ......... 308,082 514,914
----------
TOTAL IRELAND 1,755,628
----------
</TABLE>
16 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -----------
<S> <C> <C>
ITALY (4.1%)
Banca Commerciale Italiana
(Banks and Thrifts) +.............. 95,000 $ 480,375
Credito Italiano (Banks and Thrifts)
+.................................. 128,800 676,728
Istituto Nazionale delle
Assicurazioni (Insurance) +........ 123,000 367,553
La Rinascente S.p.A. (Discretionary
Retail) +.......................... 43,600 436,750
Telecom Italia S.p.A.
(Major Telecommunications) +....... 73,600 550,354
----------
TOTAL ITALY 2,511,760
----------
JAPAN (10.7%)
Exedy Corp. (Automotive) ............ 19,500 103,307
Fuji Photo Film (Chemicals) ......... 17,000 605,994
Kao Corp. (Consumer Products) ....... 42,800 630,031
Minebea Co. Ltd.
(Semiconductors and Electronics) .. 53,000 593,658
Mizuno Corp. (Consumer Products) .... 110,000 375,464
Nintendo Co. Ltd.
(Semiconductors and Electronics) .. 6,300 578,839
Nippon Telegraph & Telephone
(Major Telecommunications) ........ 62 544,312
Onward Kashiyama Co., Ltd.
(Textiles and Apparel) ............ 31,000 398,850
Orix Corp. (Investment Services) .... 7,000 484,750
Santen Pharmaceutical Co., Ltd.
(Drugs) ........................... 42,000 422,765
Seino Transportation Co., Ltd.
(Surface Transport) ............... 60,000 346,477
Sony Corp. (Semiconductors and
Electronics) ...................... 6,200 516,628
Takefuji Corp. (Banks and Thrifts) .. 8,600 452,358
Terumo Corp. (Biotech and Medical
Products) ......................... 29,000 425,354
----------
TOTAL JAPAN 6,478,787
----------
MEXICO (1.6%)
Grupo Financiero Banamex Accival
(Investment Services) +............ 100,200 312,775
Panamerican Beverages, Inc.
(Food and Beverage) ............... 16,000 638,000
----------
TOTAL MEXICO 950,775
----------
NETHERLANDS (5.5%)
Akzo Nobel NV (Chemicals) ........... 2,800 569,562
Hunter Douglas NV (Consumer
Services) +........................ 6,300 307,127
ING Groep NV (Banks and Thrifts) +... 14,973 973,004
KLM Royal Dutch Air Line (Surface
Transport) +....................... 7,000 275,080
Philips Electronics NV
(Semiconductors and Electronics) .. 6,800 599,060
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Print Media) ..................... 19,100 618,233
----------
TOTAL NETHERLANDS 3,342,066
----------
NEW ZEALAND (0.4%)
Fernz Corp., Ltd. (Chemicals) ....... 83,100 249,342
----------
NORWAY (6.6%)
Christiania Bank Og Kredkasse
(Banks and Thrifts) ............... 91,600 $ 421,274
ContextVision AB
(Biotech and Medical Products) +... 22,000 412,977
Merkantildata ASA
(Data and Imaging Services) ....... 51,500 649,097
Ocean Rig ASA (Oil) +................ 531,000 516,187
Saga Petroleum ASA (Oil) +........... 19,700 390,933
Seateam Technology AS (Oil) +........ 21,100 509,248
Tandberg Television ASA
(Other Telecommunications) +....... 36,200 478,101
Tomra Systems ASA
(Forest Products and Building
Materials) ........................ 19,900 640,382
----------
TOTAL NORWAY 4,018,199
----------
SPAIN (3.2%)
Banco Santander (Banks and Thrifts) . 8,000 422,531
Cortefiel SA (Discretionary Retail) . 12,600 298,435
Iberdrola SA (Electric Utilities) ... 36,200 581,898
Telefonica de Espana
(Major Telecommunications) ........ 15,500 646,787
----------
TOTAL SPAIN 1,949,651
----------
SWEDEN (4.1%)
Celsius AB (Conglomerate and
Aerospace) +....................... 20,500 455,626
Industrial & Financial Systems
(Data and Imaging Services) +...... 29,500 310,675
Mo Och Domsjoe AB
(Forest Products and Building
Materials) ........................ 13,700 424,872
Skandinaviska Enskilda Banken
(Banks and Thrifts) ............... 20,800 346,720
Svenska Handelsbanken (Investment
Services) 9,300 421,810
WM-Data AB (Computers) +............. 17,300 520,869
----------
TOTAL SWEDEN 2,480,572
----------
SWITZERLAND (5.8%)
Credit Suisse Group (Banks and
Thrifts) +......................... 3,800 836,056
Fischer (Georg) AG (Auto Parts and
Hardware) ......................... 1,350 522,035
Kuoni Reisen AG (Commercial
Services) +........................ 100 536,702
Nestle SA Registered Shares
(Food and Beverage) +.............. 275 533,536
Novartis AG Registered Shares
(Health Services) ................. 285 471,231
Union Bank of Switzerland (Banks and
Thrifts) .......................... 370 595,986
----------
TOTAL SWITZERLAND 3,495,546
----------
UNITED KINGDOM (13.9%)
Bank of Scotland (Banks and Thrifts) 37,751 463,930
Cadbury Schweppes Plc (Food and
Beverage) ......................... 37,000 540,382
Glaxo Wellcome Plc (Drugs) .......... 19,194 542,361
Granada Group Plc (Consumer
Services) +........................ 43,817 754,599
Kingfisher Plc (Discretionary
Retail) ........................... 33,500 608,290
</TABLE>
17
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
INTERNATIONAL (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Lonrho Plc (Manufacturing) .......... 69,447 $ 500,457
Mckechnie Plc (Consumer Services) ... 24,400 203,168
National Westminster Bank Plc
(Banks and Thrifts) ............... 24,600 492,340
NFC Plc (Surface Transport) ......... 116,700 350,245
Pearson Plc (Print Media) ........... 25,300 396,366
Peninsular & Oriental Steam
Navigation Co. (Surface
Transport) +....................... 40,200 593,167
Royal & Sun Alliance Insurance Group
Plc (Insurance) +.................. 16,800 187,639
Schroders (Banks and Thrifts) ....... 10,000 478,192
Shell Transport & Trading Co. (Oil) . 41,500 308,777
Siebe Plc (Diversified) ............. 9,700 219,571
Tesco Plc (Discretionary Retail) .... 44,400 415,726
Tomkins Plc (Consumer Services) ..... 57,473 338,254
Unilever Plc (Consumer Products) .... 47,900 510,166
Vodafone Group Plc
(Other Telecommunications) ........ 49,411 541,130
----------
TOTAL UNITED KINGDOM 8,444,760
----------
TOTAL COMMON STOCKS (COST $44,306,023) 55,415,898
----------
PREFERRED STOCKS (2.1%)
GERMANY (2.1%)
Henkel KGAA (Chemicals) +............ 6,050 471,998
Hugo Boss AG (Textiles and Apparel) + 170 312,622
SAP AG (Data and Imaging Services) +. 950 474,868
----------
TOTAL PREFERRED STOCKS (COST $1,023,195) 1,259,488
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.1%)
Federal Home Loan Mortgage Corp.,
Comm. Paper, 0.00%, 05/01/98....... $1,707,000 1,707,000
U.S. Treasury Bill, 5.02%, 08/20/98. 200,000 196,948
-----------
TOTAL SHORT-TERM BONDS AND NOTES (COST $1,903,889) 1,903,948
-----------
TOTAL INVESTMENTS (COST $47,233,107)(A) 58,579,334
OTHER ASSETS LESS LIABILITIES 2,061,715
-----------
TOTAL NET ASSETS $60,641,049
===========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$49,744,836. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
Unrealized gains .................... $12,227,949
Unrealized losses ................... (3,393,451)
-----------
Net unrealized gain ............... $8,834,498
===========
</TABLE>
+ Non-income producing security.
++ This security has been determined to be illiquid under guidelines established
by the Board of Directors.
Category percentages are based on net assets.
18 See Notes to Financial Statements.
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
MID CAP
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------
<S> <C> <C>
COMMON STOCKS (99.0%)
AIR TRANSPORT (5.1%)
Airborne Freight Corp...................... 3,400 $134,725
Northwest Airlines Corp.+.................. 2,000 105,000
UAL Corp.+................................. 600 52,313
--------
292,038
--------
AUTOMOTIVE (1.4%)
Meritor Automotive, Inc.................... 3,100 80,019
--------
BANKS AND THRIFTS (8.9%)
AmSouth Bancorporation..................... 2,000 124,750
Dime Bancorp, Inc.......................... 3,400 104,338
SouthTrust Corp............................ 4,050 172,883
Washington Federal......................... 3,900 109,688
--------
511,659
--------
BIOTECH AND MEDICAL PRODUCTS (7.9%)
Arterial Vascular Engineering, Inc.+....... 400 14,150
Centocor, Inc.+............................ 700 29,531
Datascope Corp.+........................... 4,800 135,000
Genentech, Inc.+........................... 1,200 83,100
Hillenbrand Industries, Inc................ 1,700 106,038
Quintiles Transnational Corp.+............. 1,700 84,150
--------
451,969
--------
COMMERCIAL SERVICES (2.6%)
AccuStaff, Inc.+........................... 4,200 150,675
--------
CONGLOMERATE AND AEROSPACE (2.7%)
Gulfstream Aerospace Corp.+................ 100 4,194
Thiokol Corp............................... 2,800 150,850
--------
155,044
--------
CONSUMER PRODUCTS (1.5%)
Blyth Industries, Inc.+.................... 2,400 88,050
--------
CONSUMER SERVICES (4.8%)
Brinker International, Inc.+............... 2,100 50,400
Carnival Corp.............................. 1,200 83,475
Promus Hotel Corp.+........................ 3,100 140,081
--------
273,956
--------
DATA AND IMAGING SERVICES (7.3%)
Cadence Design Systems, Inc.+.............. 2,800 101,675
Compuware Corp.+........................... 4,200 205,274
J.D. Edwards & Co.+........................ 1,400 49,875
Symantec Corp.+............................ 2,200 63,800
--------
420,624
--------
DISCRETIONARY RETAIL (8.7%)
Dollar Tree Stores, Inc.+.................. 2,500 135,625
Family Dollar Stores, Inc.................. 4,000 136,000
Fingerhut Companies, Inc................... 3,500 103,688
Office Depot, Inc.+........................ 3,800 125,875
--------
501,188
--------
DIVERSIFIED FINANCIAL SERVICES (2.5%)
Equitable Co., Inc. (The).................. 2,300 $141,163
--------
DRUGS (1.6%)
Rexall Sundown, Inc.+...................... 2,900 92,619
--------
ELECTRIC UTILITIES (2.6%)
New York State Electric & Gas Corp......... 3,600 150,300
--------
ELECTRONIC MEDIA (1.1%)
Chancellor Media Corp.+.................... 1,300 61,669
--------
FOOD AND BEVERAGE (1.6%)
Interstate Bakeries Corp................... 3,000 95,063
--------
FOREST PRODUCTS AND BUILDING MATERIALS (5.4%)
Georgia-Pacific Corp....................... 3,800 97,375
Lafarge Corp............................... 2,000 80,000
Southdown, Inc............................. 1,900 134,425
--------
311,800
--------
HEALTH SERVICES (3.3%)
Beverly Enterprises, Inc.+................. 4,000 63,000
NovaCare, Inc.+............................ 9,100 126,831
--------
189,831
--------
INSURANCE (3.6%)
AMBAC, Inc................................. 1,700 96,369
Old Republic International Corp............ 2,400 108,600
--------
204,969
--------
INVESTMENT SERVICES (6.0%)
Bear Stearns Co., Inc. (The)............... 3,500 199,718
Lehman Brothers Holdings, Inc.............. 2,000 142,125
--------
341,843
--------
OTHER TELECOMMUNICATIONS (4.5%)
360 Communications Co.+.................... 800 24,450
ADC Telecommunications, Inc.+.............. 2,400 71,850
Century Telephone Enterprises, Inc......... 3,750 159,608
--------
255,908
--------
PRINT MEDIA (1.5%)
Media General, Inc......................... 1,800 85,500
--------
PRODUCER GOODS (2.5%)
Kaydon Corp................................ 200 8,763
Trinity Industries, Inc.................... 2,700 137,700
--------
146,463
--------
SEMICONDUCTORS AND ELECTRONICS (1.9%)
Maxim Integrated Products, Inc.+........... 2,700 109,013
--------
SPECIALTY CHEMICALS (4.4%)
International Specialty Products, Inc.+.... 4,700 93,706
Millennium Chemicals, Inc.................. 4,400 157,849
--------
251,555
--------
</TABLE>
See Notes to Portfolio of Investments. 19
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
MID CAP (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------
<S> <C> <C>
STEEL (3.2%)
AK Steel Holding Corp...................... 4,200 $ 88,200
Alumax, Inc................................ 1,900 93,813
----------
182,013
----------
TEXTILES AND APPAREL (2.4%)
Burlington Industries, Inc.+............... 7,800 136,500
----------
TOTAL INVESTMENTS (COST $5,064,759)(A) 5,681,431
OTHER ASSETS LESS LIABILITIES 55,422
----------
TOTAL NET ASSETS $5,736,853
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at April 30, 1998, are
as follows:
Unrealized gains ...................... $ 665,111
Unrealized losses ..................... (48,439)
----------
Net unrealized gain ................. $ 616,672
==========
</TABLE>
+ Non-income producing security.
Category percentages are based on net assets.
20 See Notes to Financial Statements.
<PAGE>
CAPITAL APPRECTIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
SMALL COMPANY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (91.0%)
AIR TRANSPORT (1.5%)
ASA Holdings, Inc..................... 15,800 $ 600,400
---------
AUTOMOTIVE (1.1%)
Arvin Industries, Inc................. 10,700 438,031
---------
BANKS AND THRIFTS (2.8%)
Cullen/Frost Bankers, Inc............. 9,600 561,600
Heritage Financial Corp............... 13,200 206,250
Life Financial Corp.+................. 3,800 86,450
Timberland Bancorp, Inc.+............. 14,700 266,438
---------
1,120,738
---------
BIOTECH AND MEDICAL PRODUCTS (2.5%)
CNS, Inc.+............................ 83,900 419,500
Hologic, Inc.+........................ 24,000 564,000
---------
983,500
---------
CHEMICALS (0.5%)
Borden Chemicals and Plastics......... 28,600 191,263
---------
COMPUTERS (1.1%)
Dunn Computer Corp.+.................. 47,200 413,000
---------
CONSUMER FINANCE (2.4%)
Medallion Financial Corp.............. 31,800 950,024
---------
CONSUMER PRODUCTS (4.8%)
Church & Dwight, Inc.................. 17,100 526,894
Suprema Specialties, Inc.+............ 65,300 234,672
Twinlab Corp.+........................ 11,400 447,450
Vlasic Foods International, Inc.+..... 29,400 678,038
---------
1,887,054
---------
CONSUMER SERVICES (2.9%)
Dollar Thrifty Automotive Group, Inc.+ 28,200 532,275
Primadonna Resorts, Inc.+............. 33,300 595,238
---------
1,127,513
---------
DATA AND IMAGING SERVICES (10.0%)
Diamond Multimedia Systems, Inc.+..... 35,600 413,850
Harbinger Corp.+...................... 13,100 476,513
Mapics, Inc.+......................... 39,500 701,124
Netspeak Corp.+....................... 13,100 318,494
Proxim, Inc.+......................... 26,200 393,000
QLogic Corp.+......................... 17,200 765,399
Radiant Systems, Inc.+................ 20,000 450,000
Wall Data, Inc.+...................... 26,600 408,975
---------
3,927,355
---------
DISCRETIONARY RETAIL (3.8%)
Elder-Beerman Stores Corp. (The)+..... 15,700 423,900
Marks Brothers Jewelers, Inc.+........ 31,400 569,125
Mens Wearhouse, Inc.+................. 12,100 509,713
---------
1,502,738
---------
ELECTRONIC MEDIA (6.0%)
Clearview Cinema Group, Inc.+......... 19,800 398,475
Jones Intercable, Inc.+............... 48,900 984,112
ELECTRONIC MEDIA (CONTINUED)
Paxson Communications Corp.+.......... 48,200 $ 647,688
TCI Music, Inc. - Class A+............ 39,300 338,963
---------
2,369,238
---------
FOOD AND BEVERAGE (1.5%)
Lance, Inc............................ 17,900 384,850
Unimark Group, Inc.+.................. 41,300 201,338
---------
586,188
---------
FOREST PRODUCTS AND BUILDING MATERIALS (6.8%)
Centex Construction Products, Inc..... 10,300 378,525
Lone Star Industries, Inc............. 5,000 413,125
Pope & Talbot, Inc.................... 47,200 734,549
Triangle Pacific Corp.+............... 10,500 456,750
Unisource Worldwide, Inc.............. 55,500 704,155
---------
2,687,104
---------
GAS UTILITIES (3.5%)
Kaneb Services, Inc.+................. 117,500 690,313
KN Energy, Inc........................ 11,700 686,644
---------
1,376,957
---------
HEALTH SERVICES (3.2%)
Bindley Western Industries, Inc....... 13,100 509,263
Paragon Health Network, Inc.+......... 29,600 553,150
Renex Corp.+.......................... 34,700 208,200
---------
1,270,613
---------
HEAVY MACHINERY (1.1%)
Terex Corp.+.......................... 13,800 422,625
---------
HOUSING AND FURNISHINGS (2.6%)
Schuler Homes, Inc.+.................. 52,500 465,938
Winsloew Furniture, Inc.+............. 20,700 556,313
---------
1,022,251
---------
INDUSTRIAL SERVICES (0.5%)
CET Environmental Services, Inc.+..... 35,400 210,188
---------
INSURANCE (5.7%)
LandAmerica Financial Group, Inc...... 15,000 791,249
LaSalle Re Holdings Ltd............... 10,300 376,594
Reliastar Financial Corp.............. 12,700 579,438
State Auto Financial Corp............. 13,300 483,788
---------
2,231,069
---------
INVESTMENT SERVICES (1.0%)
Waddell & Reed Financial.............. 15,500 383,625
---------
OIL (2.8%)
Core Laboratories N.V.+............... 21,100 598,713
Triton Energy Ltd.+................... 12,500 501,563
---------
1,100,276
---------
OIL SERVICES (2.1%)
McDermott International, Inc.......... 20,100 831,637
---------
OTHER TELECOMMUNICATIONS (3.1%)
Cidco, Inc.+.......................... 78,400 676,200
Price Communications Corp.+........... 34,900 532,225
---------
1,208,425
---------
</TABLE>
See Notes to Portfolio of Investments. 21
<PAGE>
CAPITAL APPRECTIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
SMALL COMPANY (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
PRODUCER GOODS (7.4%)
Alpine Group, Inc. (The)+............. 49,900 $1,038,543
Global Industrial Technologies, Inc.+. 45,400 814,362
Kuhlman Corp.......................... 5,700 279,300
Mueller Industries, Inc.+............. 11,800 798,712
----------
2,930,917
----------
REAL ESTATE INVESTMENT TRUSTS (1.8%)
Equity Inns, Inc...................... 24,100 355,475
Glenborough Realty Trust, Inc......... 12,600 337,838
----------
693,313
----------
SPECIALTY CHEMICALS (4.4%)
Agribiotech, Inc.+.................... 25,900 394,975
Alcide Corp.+......................... 10,200 469,200
Crompton & Knowles Corp.+............. 11,600 347,275
Eco Soil Systems, Inc.+............... 52,300 503,388
----------
1,714,838
----------
SURFACE TRANSPORT (4.1%)
Knightsbridge Tankers Ltd............. 28,400 816,499
Royal Olympic Cruise Lines, Inc.+..... 44,200 812,174
----------
1,628,673
----------
TOTAL COMMON STOCKS (COST $31,360,393) 35,809,553
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (7.2%)
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.45%, 05/01/98........ $2,741,000 2,741,000
U.S. Treasury, Comm. Paper, 5.03%,
08/20/98@........................... 100,000 98,482
-----------
TOTAL SHORT-TERM INVESTMENTS (COST 2,839,482
$2,839,451) -----------
TOTAL INVESTMENTS (COST $34,199,844)(A) 38,649,035
OTHER ASSETS LESS LIABILITIES 711,314
-----------
TOTAL NET ASSETS $39,360,349
===========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$34,373,594. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
Unrealized gains ..................... $5,399,692
Unrealized losses .................... (1,124,251)
----------
Net unrealized gain ................ $4,275,441
==========
Information concerning open futures contracts at April 30, 1998 is shown below:
</TABLE>
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Russell 2000 Index Future 5 $1,196,311 June 98 $21,144
========== ===========
</TABLE>
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 1998.
Category percentages are based on net assets.
22 See Notes to Financial Statements.
<PAGE>
CAPITAL APPRECIATION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
VALUE OPPORTUNITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------
<S> <C> <C>
COMMON STOCKS (89.6%)
AIR TRANSPORT (1.9%)
UAL Corp.+.............................. 1,300 $113,344
--------
AUTOMOTIVE (3.3%)
Eaton Corp.............................. 2,100 193,988
--------
BANKS AND THRIFTS (5.1%)
Citicorp................................ 1,000 150,500
Wells Fargo & Co........................ 400 147,400
--------
297,900
--------
BIOTECH AND MEDICAL PRODUCTS (3.3%)
Amgen, Inc.+............................ 3,200 190,800
--------
CHEMICALS (5.0%)
Du Pont (E.I.) de Nemours............... 2,500 182,031
Rohm & Haas Co.......................... 1,000 107,813
--------
289,844
--------
COMPUTERS (6.7%)
Compaq Computer Corp.................... 5,000 140,313
International Business Machines, Inc.... 2,200 254,924
--------
395,237
--------
CONGLOMERATE AND AEROSPACE (1.6%)
Boeing Co.+............................. 1,900 95,119
--------
CONSUMER FINANCE (2.4%)
Federal Home Loan Mortgage Corp......... 3,000 138,938
--------
CONSUMER PRODUCTS (2.6%)
Kimberly-Clark Corp..................... 3,000 152,250
--------
CONSUMER SERVICES (3.1%)
Hilton Hotels Corp...................... 5,700 182,044
--------
DATA AND IMAGING SERVICES (2.8%)
Quantum Corp.+.......................... 7,000 164,500
--------
DISCRETIONARY RETAIL (6.5%)
Federated Department Stores, Inc.+...... 4,700 231,180
Officemax, Inc.+........................ 8,000 150,500
--------
381,680
--------
DIVERSIFIED FINANCIAL SERVICES (5.4%)
American Express Co..................... 1,500 153,000
Travelers Group, Inc.................... 2,700 165,206
--------
318,206
--------
FOOD AND BEVERAGE (2.7%)
PepsiCo, Inc............................ 4,000 158,750
--------
FOREST PRODUCTS AND BUILDING MATERIALS (3.4%)
Owens-Illinois, Inc.+................... 5,000 197,813
--------
GAS UTILITIES (2.9%)
Enron Corp.............................. 3,500 172,156
--------
HEAVY MACHINERY (3.6%)
Deere & Co.............................. 3,600 210,374
--------
INSURANCE (2.5%)
Annuity And Life Re (Hldgs)+............ 6,100 145,638
--------
MAJOR TELECOMMUNICATIONS (4.0%)
AT&T Corp............................... 2,300 $138,144
Bell Atlantic Corp...................... 1,000 93,563
--------
231,707
--------
OIL (7.1%)
Amerada Hess Corp....................... 1,700 97,750
Lyondell Petrochemical Co............... 5,000 164,375
Murphy Oil Corp......................... 3,000 154,313
--------
416,438
--------
OIL SERVICES (7.9%)
McDermott International, Inc............ 6,000 248,249
Noble Drilling Corp.+................... 6,600 213,262
--------
461,511
--------
SEMICONDUCTORS AND ELECTRONICS (3.5%)
PRI Automation, Inc.+................... 7,600 203,300
--------
SURFACE TRANSPORT (2.3%)
Kansas City Southern Industries, Inc.... 3,000 135,563
--------
TOTAL COMMON STOCKS (COST $4,905,654) 5,247,100
---------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
--------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.0%)
Federal Home Loan Mortgage Corp., Comm.
Paper, 5.45%, 05/01/98................ $526,000 526,000
----------
TOTAL SHORT-TERM INVESTMENTS (COST
$526,000) 526,000
----------
TOTAL INVESTMENTS (COST $5,431,654)(A) 5,773,100
OTHER ASSETS LESS LIABILITIES 82,571
----------
TOTAL NET ASSETS $5,855,671
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$5,436,696. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
Unrealized gains ...................... $418,329
Unrealized losses ..................... (81,925)
---------
Net unrealized gain ................. $336,404
=========
+ Non-income producing security.
Category percentages are based on net assets.
</TABLE>
See Notes to Financial Statements. 23
<PAGE>
CAPITAL APPRECIATION FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at market value ................................................................................................
Cash ........................................................................................................................
Cash denominated in foreign currencies ......................................................................................
Receivable for:
Dividends and interest ....................................................................................................
Investments sold ..........................................................................................................
Fund shares sold ..........................................................................................................
Recoverable foreign taxes .................................................................................................
Variation margin ..........................................................................................................
Reimbursment from Investment Adviser ......................................................................................
Prepaid expenses ............................................................................................................
Other assets ................................................................................................................
Gross unrealized gain on forward foreign currency exchange contracts ........................................................
Total assets .......................................................................................................
LIABILITIES:
Payable for:
Investments purchased .....................................................................................................
Fund shares redeemed ......................................................................................................
Other liabilities ...........................................................................................................
Gross unrealized loss on forward foreign currency exchange contracts ........................................................
Total liabilities ..................................................................................................
NET ASSETS ................................................................................................................
NET ASSETS REPRESENTED BY:
Paid-in capital .............................................................................................................
Net unrealized gain (loss) on investments, open futures contracts and foreign currency related transactions .................
Undistributed (distributions in excess of) net investment income ............................................................
Accumulated net realized gain on investments ................................................................................
NET ASSETS ................................................................................................................
CAPITAL SHARES:
Class I:
Outstanding ...............................................................................................................
Net Assets ................................................................................................................
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) .......................
Class A:
Outstanding ...............................................................................................................
Net Assets ................................................................................................................
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) .......................
Cost of investments .........................................................................................................
Cost of cash denominated in foreign currencies ..............................................................................
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL VALUE
GROWTH INTERNATIONAL MID CAP COMPANY OPPORTUNITY
------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
$120,691,621 $58,579,334 $5,681,431 $38,649,035 $5,773,100
748 1,203 98,163 1,912 232
-- 2,158,583 -- -- --
21,205 204,349 2,610 30,443 4,914
3,651,993 2,552,727 -- 1,358,495 569,096
169,355 36,346 -- 20,891 100
-- 59,321 -- -- --
156,800 -- -- 22,500 --
-- 8,753 9,739 4,062 9,737
-- -- 4,900 -- 5,160
1,483 660 -- 533 --
-- 62,732 -- -- --
------------ ------------ ----------- ------------ -----------
124,693,205 63,664,008 5,796,843 40,087,871 6,362,339
------------ ------------ ----------- ------------ -----------
98,477 2,759,637 59,990 682,569 506,668
9,208 6,048 -- 9,394 -
96,103 126,889 -- 35,559 --
-- 130,385 -- -- --
------------ ------------ ----------- ------------ -----------
203,788 3,022,959 59,990 727,522 506,668
------------ ------------ ----------- ------------ -----------
$124,489,417 $60,641,049 $5,736,853 $39,360,349 $5,855,671
============ ============ =========== ============ ===========
$ 93,395,413 $48,593,496 $5,028,111 $29,867,489 $5,185,267
27,915,163 11,248,454 616,672 4,470,335 341,446
(66,762) 95,608 (1,228) 12,113 5,039
3,245,603 703,491 93,298 5,010,412 323,919
------------ ------------ ----------- ------------ -----------
$124,489,417 $60,641,049 $5,736,853 $39,360,349 $5,855,671
============ ============ =========== ============ ===========
6,465,180 3,132,328 492,376 2,257,118 495,085
$113,005,089 $41,050,660 $5,619,618 $29,527,626 $5,608,742
$ 17.48 $ 13.11 $ 11.41 $ 13.08 $ 11.33
666,241 1,497,368 10,278 771,756 21,809
$ 11,484,328 $19,590,389 $ 117,235 $ 9,832,723 $ 246,929
$ 17.24 $ 13.08 $ 11.41 $ 12.74 $ 11.32
$ 92,951,059 $47,233,107 $5,064,759 $34,199,844 $5,431,654
-- $ 2,150,508 -- -- --
</TABLE>
25
<PAGE>
CAPITAL APPRECIATION FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends ...................................................................................................................
Interest ....................................................................................................................
Foreign taxes withheld on dividends .........................................................................................
Total investment income ............................................................................................
INVESTMENT EXPENSES:
Investment advisory fee .....................................................................................................
Administrative services fees ................................................................................................
12b-1 and shareholder services fees .........................................................................................
Printing and postage ........................................................................................................
Custody fees ................................................................................................................
Transfer agent fees .........................................................................................................
Audit fees ..................................................................................................................
Directors' fees .............................................................................................................
Registration fees ...........................................................................................................
Miscellaneous expenses ......................................................................................................
Expenses before reimbursement and waiver from Adviser .......................................................................
Expenses reimbursement and waiver from Adviser ..............................................................................
Total expenses .....................................................................................................
Net investment income (loss).................................................................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Sale of investments .......................................................................................................
Futures and forward foreign currency exchange contracts ...................................................................
Foreign currency related transactions .....................................................................................
Net realized gain on investments ...................................................................................
Net change in unrealized gain or loss on:
Investments ...............................................................................................................
Futures and forward foreign currency exchange contracts ...................................................................
Foreign currency related transactions .....................................................................................
Net change in unrealized gain or loss on investments ...............................................................
Net realized and change in unrealized gain or loss on investments ...........................................................
Net increase in net assets resulting from operations ........................................................................
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP VALUE OPPORTUNITY
PERIOD FROM PERIOD FROM
GROWTH INTERNATIONAL FEBRUARY 4, 1998 SMALL COMPANY FEBRUARY 2, 1998
SIX MONTH SIX MONTH (COMMENCEMENT OF SIX MONTH (COMMENCEMENT OF
PERIOD ENDED PERIOD ENDED OPERATIONS) PERIOD ENDED OPERATIONS)
APRIL 30, 1998 APRIL 30, 1998 TO APRIL 30, 1998 APRIL 30, 1998 TO APRIL 30, 1998
---------------- ----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
$ 262,700 $ 463,824 $ 9,420 $ 182,216 $ 13,499
207,308 50,812 4,324 64,653 6,213
------------- ------------ ----------- ------------ ----------
470,008 514,636 13,744 246,869 19,712
(1,110) (58,539) (99) -- --
------------- ------------ ----------- ------------ ----------
468,898 456,097 13,645 246,869 19,712
------------- ------------ ----------- ------------ ----------
345,015 253,971 9,688 132,751 9,312
83,142 53,991 1,292 26,099 1,330
19,112 37,328 65 16,020 84
5,561 4,368 1,317 1,210 1,317
3,731 141,582 3,435 3,800 3,435
36,298 24,448 6,193 27,776 6,194
10,011 10,374 4,413 9,044 4,413
1,480 159 35 173 35
29,532 19,002 18,939 21,289 18,971
1,778 2,744 27 650 18
------------- ------------ ----------- ------------ ----------
535,660 547,967 45,404 238,812 45,109
-- (27,385) (30,531) (4,056) (30,436)
------------- ------------ ----------- ------------ ----------
535,660 520,582 14,873 234,756 14,673
------------- ------------ ----------- ------------ ----------
(66,762) (64,485) (1,228) 12,113 5,039
------------- ------------ ----------- ------------ ----------
3,223,079 2,767,972 93,298 4,900,316 323,919
66,188 524,464 -- 90,355 --
-- (106,990) -- -- --
------------- ------------ ----------- ------------ ----------
3,289,267 3,185,446 93,298 4,990,671 323,919
------------- ------------ ----------- ------------ ----------
16,583,545 7,263,057 616,672 (91,331) 341,446
174,601 222,649 -- 13,644 --
-- (993) -- -- --
------------- ------------ ----------- ------------ ----------
16,758,146 7,484,713 616,672 (77,687) 341,446
------------- ------------ ----------- ------------ ----------
20,047,413 10,670,159 709,970 4,912,984 665,365
------------- ------------ ----------- ------------ ----------
$ 19,980,651 $10,605,674 $ 708,742 $ 4,925,097 $ 670,404
============= ============ =========== ============ ==========
</TABLE>
27
<PAGE>
CAPITAL APPRECIATION FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
--------------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)...................................................... $ (66,762) $ 6,696
Net realized gain on investments ................................................. 3,289,267 13,674,563
Net change in unrealized gain or loss on investments ............................. 16,758,146 2,952,774
------------ -----------
Net increase in net assets resulting from operations ........................... 19,980,651 16,634,033
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income ................................................... -- (105,591)
From net realized gains on investments ....................................... (12,310,889) (4,009,137)
Class A:
From net realized gains on investments ....................................... (1,306,575) (397,394)
------------ -----------
Decrease in net assets from distributions to shareholders ...................... (13,617,464) (4,512,122)
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold .................................................... 20,188,776 31,803,299
Net asset value of shares issued upon reinvestment of distributions .......... 12,292,734 4,107,903
Cost of shares redeemed ...................................................... (7,401,018) (10,259,791)
Class A:
Proceeds from shares sold .................................................... 1,762,385 3,877,854
Net asset value of shares issued upon reinvestment of distributions .......... 1,299,155 394,605
Cost of shares redeemed ...................................................... (849,391) (1,300,776)
------------ -----------
Net increase in net assets from fund share transactions ....................... 27,292,641 28,623,094
------------ -----------
Change in net assets ............................................................. 33,655,828 40,745,005
NET ASSETS:
Beginning of period .............................................................. 90,833,589 50,088,584
------------ -----------
End of period .................................................................... $124,489,417 $90,833,589
============ ===========
End of period net assets includes distributions in excess of net investment income $ (66,762) $ --
============ ===========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ........................................................ 1,239,573 2,008,535
Number of shares issued upon reinvestment of distributions ................... 863,254 294,473
Number of shares redeemed .................................................... (465,339) (642,569)
------------ -----------
Net increase ................................................................... 1,637,488 1,660,439
============ ===========
Class A:
Number of shares sold ........................................................ 111,165 244,633
Number of shares issued upon reinvestment of distributions ................... 92,401 28,553
Number of shares redeemed .................................................... (53,419) (82,842)
------------ -----------
Net increase ................................................................... 150,147 190,344
============ ===========
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
-------------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
--------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss ............................................................... $ (64,485) $ (28,189)
Net realized gain on investments .................................................. 3,185,446 17,124,520
Net change in unrealized gain or loss on investments .............................. 7,484,713 (438,764)
------------ -----------
Net increase in net assets resulting from operations ............................ 10,605,674 16,657,567
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income .................................................... (1,662,586) (638,500)
From net realized gains on investments ........................................ (10,150,005) (3,470,621)
Class A:
From net investment income .................................................... (440,511) (234,230)
From net realized gains on investments ........................................ (3,463,760) (1,729,395)
------------ -----------
Decrease in net assets from distributions to shareholders ....................... (15,716,862) (6,072,746)
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ..................................................... 4,156,428 8,286,965
Net asset value of shares issued upon reinvestment of distributions ........... 6,766,091 2,046,351
Cost of shares redeemed ....................................................... (21,637,660) (7,135,984)
Class A:
Proceeds from shares sold ..................................................... 955,755 2,003,620
Net asset value of shares issued upon reinvestment of distributions ........... 918,001 183,050
Cost of shares redeemed ....................................................... (837,432) (9,217,016)
------------ -----------
Net decrease in net assets from fund share transactions ......................... (9,678,817) (3,833,014)
------------ -----------
Change in net assets .............................................................. (14,790,005) 6,751,807
NET ASSETS:
Beginning of period ............................................................... 75,431,054 68,679,247
------------ -----------
End of period ..................................................................... $ 60,641,049 $75,431,054
============ ===========
End of period net assets includes undistributed net investment income ............. $ 95,608 $ 2,263,190
============ ===========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ......................................................... 391,767 630,372
Number of shares issued upon reinvestment of distributions .................... 578,793 172,688
Number of shares redeemed ..................................................... (1,968,624) (556,978)
------------ ------------
Net increase (decrease) ......................................................... (998,064) 246,082
------------ -----------
Class A:
Number of shares sold ......................................................... 87,569 151,961
Number of shares issued upon reinvestment of distributions .................... 78,529 15,434
Number of shares redeemed ..................................................... (73,592) (707,347)
------------ -----------
Net increase (decrease) ......................................................... 92,506 (539,952)
============ ===========
</TABLE>
29
<PAGE>
CAPITAL APPRECIATION FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP
---------------
PERIOD FROM
FEBRUARY 4, 1998 TO
APRIL 30, 1998
(UNAUDITED)
---------------
<S> <C>
FROM OPERATIONS:
Net investment loss ............................................................................. $ (1,228)
Net realized gain on investments ................................................................ 93,298
Net change in unrealized gain or loss on investments ............................................ 616,672
----------
Net increase in net assets resulting from operations .......................................... 708,742
----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ................................................................... 4,925,000
Class A:
Proceeds from shares sold ................................................................... 103,111
----------
Net increase in net assets from fund share transactions ...................................... 5,028,111
----------
Change in net assets ............................................................................ 5,736,853
NET ASSETS:
Beginning of period ............................................................................. --
----------
End of period ................................................................................... $5,736,853
==========
End of period net assets includes distributions in excess of net investment income .............. $ (1,228)
==========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ....................................................................... 492,376
----------
Net increase .................................................................................. 492,376
==========
Class A:
Number of shares sold ....................................................................... 10,278
----------
Net increase .................................................................................. 10,278
==========
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY
-------------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)....................................................... $ 12,113 $ (154,521)
Net realized gain on investments .................................................. 4,990,671 8,002,725
Net change in unrealized gain or loss on investments .............................. (77,687) 979,948
------------ -----------
Net increase in net assets resulting from operations ............................ 4,925,097 8,828,152
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net realized gains on investments ........................................ (5,681,438) (7,329,361)
Class A:
From net realized gains on investments ........................................ (2,106,331) (972,925)
------------ -----------
Decrease in net assets from distributions to shareholders ....................... (7,787,769) (8,302,286)
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ..................................................... 11,358,347 16,815,478
Net asset value of shares issued upon reinvestment of distributions ........... 5,093,693 1,837,628
Cost of shares redeemed ....................................................... (7,556,709) (28,092,572)
Class A:
Proceeds from shares sold ..................................................... 2,510,545 2,870,705
Net asset value of shares issued upon reinvestment of distributions ........... 2,020,034 911,095
Cost of shares redeemed ....................................................... (940,783) (1,139,498)
------------ -----------
Net increase (decrease) in net assets from fund share transactions .............. 12,485,127 (6,797,164)
------------ -----------
Change in net assets .............................................................. 9,622,455 (6,271,298)
NET ASSETS:
Beginning of period ............................................................... 29,737,894 36,009,192
------------ -----------
End of period ..................................................................... $39,360,349 $29,737,894
============ ===========
End of period net assets includes undistributed net investment income ............. $ 12,113 $ --
============ ===========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ......................................................... 887,731 1,328,482
Number of shares issued upon reinvestment of distributions .................... 447,994 157,196
Number of shares redeemed ..................................................... (535,920) (2,218,247)
------------ -----------
Net increase (decrease) ......................................................... 799,805 (732,569)
============ ===========
Class A:
Number of shares sold ......................................................... 198,616 203,638
Number of shares issued upon reinvestment of distributions .................... 182,314 79,225
Number of shares redeemed ..................................................... (74,745) (86,725)
------------ -----------
Net increase .................................................................... 306,185 196,138
============ ===========
</TABLE>
31
<PAGE>
CAPITAL APPRECIATION FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
OPPORTUNITY
-------------------
PERIOD FROM
FEBRUARY 2, 1998 to
APRIL 30, 1998
(UNAUDITED)
-------------------
<S> <C>
FROM OPERATIONS:
Net investment income ........................................................................... $ 5,039
Net realized gain on investments ................................................................ 323,919
Net change in unrealized gain or loss on investments ............................................ 341,446
----------
Net increase in net assets resulting from operations .......................................... 670,404
----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ................................................................... 4,953,990
Class A:
Proceeds from shares sold ................................................................... 246,647
Cost of shares redeemed ..................................................................... (15,370)
----------
Net increase in net assets from fund share transactions ...................................... 5,185,267
----------
Change in net assets ............................................................................ 5,855,671
NET ASSETS:
Beginning of period ............................................................................. --
----------
End of period ................................................................................... $5,855,671
==========
End of period net assets includes undistributed net investment income ........................... $ 5,039
==========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ....................................................................... 495,085
----------
Net increase .................................................................................. 495,085
==========
Class A:
Number of shares sold ....................................................................... 23,202
Number of shares redeemed ................................................................... (1,393)
----------
Net increase .................................................................................. 21,809
==========
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
CAPITAL APPRECIATION FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds (Funds), each of which
has its own investment objective, policies and restrictions.
The Company currently offers nineteen funds. This report covers Aetna Growth
Fund, Aetna International Fund, Aetna Mid Cap Fund, Aetna Small Company Fund and
Aetna Value Opportunity Fund.
Shares of each Fund are available to all investors including employers and
employees who utilize the Funds as investment options under retirement plans.
The Funds are authorized to offer two classes of shares, Class I (formerly
Select Class shares) and Class A (formerly Adviser Class shares). Class I is
offered principally to institutions and is not subject to sales charges or
distribution fees. Class I shares were first made available as follows:
International on December 27, 1991, Growth and Small Company on December 23,
1993, Value Opportunity on February 2, 1998, and Mid Cap on February 4, 1998.
Class A shares are offered to all others and generally are subject to front end
sales charges payable upon purchase. Additionally, Class A shares are subject to
a distribution fee pursuant to Rule 12b-1 of the Act. Class A shares were first
made available to the public on April 15, 1994 for all Funds except Value
Opportunity and Mid Cap, which were made available to the public February 2,
1998 and February 4, 1998, respectively.
The following is each Fund's investment objective:
AETNA GROWTH FUND (Growth) seeks growth of capital through investment in a
diversified portfolio consisting primarily of common stocks and securities
convertible into common stocks believed to offer growth potential.
AETNA INTERNATIONAL FUND (International, formerly International Growth
Fund) seeks long-term capital growth primarily through investment in a
diversified portfolio of common stocks principally traded in countries
outside of North America. International will not target any given level of
current income.
AETNA MID CAP FUND (Mid Cap) seeks growth of capital primarily through
investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies having medium market
capitalizations.
AETNA SMALL COMPANY FUND (Small Company) seeks growth of capital primarily
through investment in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with smaller market
capitalizations.
AETNA VALUE OPPORTUNITY FUND (Value Opportunity) seeks growth of capital
primarily through investment in a diversified portfolio of common stocks
and securities convertible into common stock. Value Opportunity will use a
value-oriented approach to stock selection.
Aeltus Investment Management, Inc. (Aeltus) serves as the Investment
Adviser to each Fund. Prior to February 2, 1998, the Investment Adviser was
Aetna Life Insurance and Annuity Company (ALIAC). Aetna Investment Services,
Inc. (AISI) was the principal underwriter for each Fund through April 30, 1998.
On May 1, 1998, Aeltus Capital, Inc. became each Fund's principal underwriter
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Funds have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Funds.
33
<PAGE>
CAPITAL APPRECIATION FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATION OF INVESTMENTS
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost, which when combined with accrued interest,
approximates market value. Securities and fixed income investments for which
market quotations are not considered to be readily available are valued using
methods approved by the Board of Directors.
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange at the end
of each day. Purchases and sales of securities, income receipts, and expense
payments are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
B. FUTURES AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds "sell" futures
contracts as a hedge against declines in the value of portfolio securities. The
Funds may enter into futures contracts to manage the risk of changes in interest
rates, equity prices, currency exchange rates or in anticipation of future
purchases and sales of portfolio securities.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Funds equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by the Funds as
unrealized gains or losses. When a contract is closed, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Funds are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Funds, where authorized, may use forward
foreign currency exchange contracts to hedge certain foreign currency assets.
Contracts are recorded at market value and marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in market
value of the securities held by the Funds and the price of the contracts. Risks
may also arise from an illiquid secondary market or from the inability of
counterparties to meet the terms of the contracts.
Realized and unrealized gains or losses on futures and forward foreign currency
exchange contracts are reflected in the accompanying financial statements. The
amounts at risk under such futures and forward foreign currency exchange
contracts may exceed the amounts reflected in the financial statements. The
notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere in the Notes to Financial Statements.
For federal income tax purposes, any futures contracts and forward foreign
currency exchange contracts which remain open at year end are marked-to-market
and the resultant net gain or loss is reported to shareholders as federal
taxable income.
34
<PAGE>
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Funds to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A under the
Securities Act of 1933 (1933 Act) or are securities offered pursuant to Section
4(2) of the 1933 Act, and are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board of Directors. Each Fund may invest up to 15% of its total assets in
illiquid securities. The Funds will not pay the costs of disposition of
restricted securities other than ordinary brokerage fees, if any.
D. FEDERAL INCOME TAXES
As a qualified regulated investment company, each Fund is relieved of federal
income and excise taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code.
E. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions,
investments in certain foreign issuers that derive a majority of their income
from passive investments (e.g., interest or dividends) and deferred losses on
wash sales.
F. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are accreted or amortized, respectively, using an effective yield
method over the life of the security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays the Investment Adviser a monthly fee expressed as a percentage of
the average daily net assets of each Fund. As each Fund's net assets exceed
predetermined thresholds, lower advisory fees are applied. Below are the Funds'
Investment Advisory fee ranges and the effective rates as of April 30, 1998:
<TABLE>
<CAPTION>
FEE EFFECTIVE
RANGE RATE
------------------- -----------------
<S> <C> <C>
Growth 0.70%-0.550% 0.70%
International 0.85%-0.700% 0.85%
Mid Cap 0.75%-0.600% 0.75%
Small Company 0.85%-0.725% 0.85%
Value Opportunity 0.70%-0.550% 0.70%
</TABLE>
35
<PAGE>
CAPITAL APPRECIATION FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES (CONTINUED)
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Fund in
exchange for fees, payable by Aeltus, of up to 0.25% of the average daily Class
I net assets. For the period February 1, 1998 through April 30, 1998, Aeltus
paid ALIAC $152,024.
Aeltus has served as the Investment Adviser for all Funds since February 2,
1998. Prior to February 2, 1998, ALIAC served as Growth, International and Small
Company's Investment Adviser and Aeltus served as Sub-Adviser. As Sub-Adviser,
Aeltus supervised the investment and reinvestment of cash and securities and
provided certain related administrative services. For the period November 1,
1997 through February 1, 1998, ALIAC collected $357,735 from the Funds, of which
it paid $230,807 to Aeltus.
Effective February 2, 1998, the Company and Aeltus entered into an
administrative services agreement under which Aeltus acts as administrator and
provides certain administrative and shareholder services and is responsible for
the supervision of other service providers for each Fund. Each Fund pays Aeltus
an administrative services fee at an annual rate of 0.10% of its average daily
net assets. Prior to February 2, 1998, ALIAC acted as administrator for each
Fund and was paid an administrative services fee at an annual rate of 0.25% of
each Fund's average daily net assets. For the period November 1, 1997 through
February 1, 1998, ALIAC collected $115,235 in administrative services fees from
the Funds.
The Shareholder Services Plan for the Class A (formerly Adviser Class) shares
terminated on December 31, 1997. Under the Shareholder Services Plan, AISI was
paid a service fee at an annual rate of 0.25% of the average daily net assets of
Class A of each Fund. This fee was used as compensation for expenses incurred in
servicing shareholders' accounts. For the period November 1, 1997 through
December 31, 1997, the Funds paid AISI $14,273 in service fees.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act
for Class A shares. The Distribution Plan provides for payments to the principal
underwriter at an annual rate of 0.25% (prior to January 1, 1998, the 12b-1 fee
was 0.50%) of the average daily net assets of Class A shares of each Fund.
Amounts paid by the Funds are used to pay expenses incurred by the principal
underwriter in promoting the sale of Class A shares. For the period ended April
30, 1998, the Funds paid AISI $58,336 in Rule 12b-1 fees. The plan may be
terminated upon a majority vote of the Company's independent directors.
Presently, the Funds' class-specific expenses are limited to Rule 12b-1 fees
incurred by Class A shares.
4. REIMBURSEMENT FROM INVESTMENT ADVISER
The Investment Adviser may, from time to time, make reimbursements to a Fund for
some or all of its operating expenses or it may waive fees. Reimbursement and
waiver arrangements, which may be terminated at any time without notice, will
increase a Fund's yield and total return. For the period ended April 30, 1998,
the reimbursements were as follows:
<TABLE>
<CAPTION>
FUND TOTAL
----------
<S> <C>
International $27,385
Mid Cap 30,531
Small Company 4,056
Value Opportunity 30,436
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the period ended April 30, 1998 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Growth $ 78,703,778 $ 70,644,558
International 44,597,812 68,679,292
Mid Cap 6,499,719 1,528,258
Small Company 34,291,600 29,374,439
Value Opportunity 8,169,099 3,587,891
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
On September 13, 1996, International acquired all of the assets and liabilities
of Aetna Asian Growth Fund (Asian Growth). In connection with the acquisition,
International assumed approximately $3,000,000 in capital loss carryforward
which can be used by International, subject to certain limitations, to offset
future capital gains. As of April 30, 1998, International had approximately
$1,400,000 of the original carryforward remaining to offset future capital
gains, if any. This carryforward will expire in the year 2002, if not applied
against future capital gains.
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At April 30, 1998, International had the following open forward foreign currency
exchange contracts that obligate the Fund to deliver currencies at specified
future dates. The net unrealized loss of $67,653 on these contracts, are
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
INTERNATIONAL
- -------------
EXCHANGE CURRENCY TO U.S. $ VALUE CURRENCY TO U.S. $ VALUE UNREALIZED
DATE BE DELIVERED APRIL 30, 1998 BE RECEIVED APRIL 30, 1998 GAIN (LOSS)
-------- ------------ -------------- ----------- -------------- -----------
CONTRACTS TO SELL
- -----------------
<S> <C> <C> <C> <C> <C>
5/18/1998 490,000 $818,966 814,772 $814,772 ($4,194)
British Pound U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/18/1998 485,000 240,300 237,822 237,822 (2,478)
Dutch Guilder U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/18/1998 839,000 409,848 410,753 410,753 905
Dutch Guilder U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
6/22/1998 1,620,000 803,439 792,564 792,564 (10,875)
Dutch Guilder U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/13/1998 9,071,000 1,510,607 1,485,850 1,485,850 (24,757)
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/13/1998 1,918,000 314,715 315,201 315,201 486
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
6/17/1998 11,079,000 1,845,894 1,843,428 1,843,428 (2,466)
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
6/17/1998 509,000 84,806 84,947 84,947 141
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
CAPITAL APPRECIATION FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL (CONTINUED)
- -------------------------
EXCHANGE CURRENCY TO U.S. $ VALUE CURRENCY TO U.S. $ VALUE UNREALIZED
DATE BE DELIVERED APRIL 30, 1998 BE RECEIVED APRIL 30, 1998 GAIN (LOSS)
-------- ------------ -------------- ----------- -------------- -----------
CONTRACTS TO SELL (CONTINUED)
- -----------------------------
<S> <C> <C> <C> <C> <C>
5/8/1998 86,000 $47,944 47,970 $47,970 $26
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/8/1998 2,490,000 1,387,792 1,361,209 1,361,209 (26,583)
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
6/5/1998 1,036,300 578,667 574,127 574,127 (4,540)
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
7/9/1998 1,063,000 594,697 580,874 580,874 (13,823)
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/26/1998 211,820,000 1,649,537 1,670,103 1,670,103 20,566
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/26/1998 117,790,000 894,761 888,110 888,110 (6,651)
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
6/17/1998 161,056,200 1,227,260 1,256,747 1,256,747 29,487
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
7/27/1998 104,430,000 800,301 811,422 811,422 11,121
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
5/5/1998 2,585,000 1,733,619 1,699,601 1,699,601 (34,018)
Swiss Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------------------------
($67,653)
=================
</TABLE>
8. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 6.8 billion shares. Of those 6.8
billion shares, 100 million shares each of Class I and Class A shares have been
designated to all the Funds, except International, which has been allocated 200
million shares each of Class I and Class A shares. As of April 30, 1998, the
following shares of the Funds were owned by Aetna and its affiliates:
<TABLE>
<CAPTION>
CLASS I CLASS A
--------------- -------------
<S> <C>
Growth 693,706 --
International 680,045 --
Mid Cap 490,000 10,000
Small Company 1,408,425 --
Value Opportunity 490,000 10,000
</TABLE>
38
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS
GROWTH
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH TEN MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- ------------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 17.02 $ 14.36 $ 13.75 $ 10.78 $ 10.00
----------- ------------ ----------- ------------ ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... (0.01) 0.01 0.03 0.04 0.09
Net realized and change in unrealized gain or
loss on investments .......................... 2.97 3.88 2.39 3.02 0.69
----------- ------------ ----------- ------------ ----------
Total from investment operations ......... 2.96 3.89 2.42 3.06 0.78
----------- ------------ ----------- ------------ ----------
LESS DISTRIBUTIONS:
From net investment income ..................... -- (0.03) (0.05) (0.08) --
From net realized gains on investments ......... (2.50) (1.20) (1.76) (0.01) --
----------- ------------ ----------- ------------ ----------
Total distributions ...................... (2.50) (1.23) (1.81) (0.09) --
----------- ------------ ----------- ------------ ----------
Net asset value, end of period ................... $ 17.48 $ 17.02 $ 14.36 $ 13.75 $ 10.78
=========== ============ =========== ============ ==========
Total return ..................................... 20.72% 28.95% 19.82% 28.79% 7.70%
Net assets, end of period (000's) ................ $ 113,005 $ 82,186 $ 45,473 $ 36,936 $ 27,188
Ratio of total expenses to average net assets .... 1.05% (1) 1.17% 1.28% 1.20% 0.92%(1)
Ratio of net investment income to average net
assets ......................................... (0.10)%(1) 0.08% 0.20% 0.36% 1.10%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 1.05% (1) 1.17% 1.28% 1.30% 1.42%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . (0.10)%(1) 0.08% 0.20% 0.26% 0.60%(1)
Portfolio turnover rate .......................... 75.15% 141.07% 144.19% 171.75% 120.32%
Average commission rate paid per share on equity
securities traded .............................. $ 0.0577 $ 0.0605 $ 0.0598 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
39
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
GROWTH
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED APRIL 15,
APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED 1994 TO
1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 16.76 $ 14.17 $ 13.63 $ 10.74 $ 10.26
--------- -------- --------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... (0.04) (0.11) (0.08) (0.06) (0.02)
Net realized and change in unrealized gain or
loss on investments .......................... 2.92 3.84 2.38 3.00 0.50
--------- -------- --------- -------- -------
Total from investment operations ......... 2.88 3.73 2.30 2.94 0.48
--------- -------- --------- -------- -------
LESS DISTRIBUTIONS:
From net investment income ..................... -- -- -- (0.05) --
From net realized gains on investments ......... (2.40) (1.14) (1.76) -- --
--------- -------- --------- -------- -------
Total distributions ...................... (2.40) (1.14) (1.76) (0.05)
--------- -------- --------- -------- -------
Net asset value, end of period ................... $ 17.24 $ 16.76 $ 14.17 $ 13.63 $ 10.74
========= ======== ========= ======== =======
Total return (does not reflect applicable sales
charges) ....................................... 20.42% 28.05% 18.97% 27.92% 4.58%
Net assets, end of period (000's) ................ $ 11,484 $ 8,647 $ 4,615 $ 1,727 $ 417
Ratio of total expenses to average net assets .... 1.45% (1) 1.92% 2.03% 2.03% 1.72%(1)
Ratio of net investment income to average net
assets ......................................... (0.50)%(1) (0.67)% (0.59)% (0.47)% (0.25)%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 1.45% (1) 1.92% 2.03% 2.14% 2.17%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . (0.50)%(1) (0.67)% (0.59)% (0.58)% (0.71)%(1)
Portfolio turnover rate .......................... 75.15% 141.07% 144.19% 171.75% 120.32%
Average commission rate paid per share on equity
securities traded .............................. $ 0.0577 $0.0605 $ 0.0598 -- --
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding throughout the period.
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
TEN MONTH
SIX MONTH PERIOD
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994 1993
- -------------------------------------------------- -------------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 13.65 $ 11.79 $ 10.62 $ 11.56 $ 11.17 $ 8.88
---------- --------- ---------- ---------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... (0.01) 0.02 0.03 0.11 0.06 0.05
Net realized and change in unrealized gain or
loss on investments ......................... 2.33 2.89 1.59 (0.09) 0.33 2.65
---------- --------- ---------- ---------- --------- --------
Total from investment operations ........ 2.32 2.91 1.62 0.02 0.39 2.70
---------- --------- ---------- ---------- --------- --------
LESS DISTRIBUTIONS:
From net investment income .................... (0.40) (0.16) (0.19) (0.40) -- (0.05)
In excess of net investment income ............ -- -- -- -- -- (0.34)
From net realized gains on investments ........ (2.46) (0.89) (0.26) (0.56) -- (0.02)
---------- --------- ---------- ---------- --------- --------
Total distributions ..................... (2.86) (1.05) (0.45) (0.96) -- (0.41)
---------- --------- ---------- ---------- --------- --------
Net asset value, end of period .................. $ 13.11 $ 13.65 $ 11.79 $ 10.62 $ 11.56 $ 11.17
========== ========= ========== ========== ========= ========
Total return .................................... 21.64% 26.02% 15.61% (0.04)% 3.49% 30.37%
Net assets, end of period (000's) ............... $ 41,051 $ 56,369 $ 45,786 $ 25,102 $ 31,479 $ 39,847
Ratio of total expenses to average net assets ... 1.60% (1) 1.72% 2.17% 1.37% 1.66%(1) 1.48%
Ratio of net investment income to average net
assets ........................................ (0.09)%(1) 0.18% 0.40% 1.02% 0.71%(1) 0.50%
Ratio of net expense before reimbursement and
waiver to average net assets .................. 1.69% (1) 1.72% 2.17% 1.50% 1.80%(1) 1.77%
Ratio of net investment income before
reimbursement and waiver to average net assets (0.18)%(1) 0.18% 0.40% 0.88% 0.57%(1) 0.20%
Portfolio turnover rate ......................... 75.53% 194.41% 135.92% 32.91% 81.67% 110.38%
Average commission rate paid per share on
purchases of equity securities ................ $ 0.0181 $ 0.0115 $ 0.0178 -- -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
41
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 15, 1994
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- -------------------------------------------------- -------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 13.57 $ 11.77 $ 10.59 $ 11.51 $ 11.24
--------- -------- --------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... (0.03) (0.07) (0.05) 0.03 0.01
Net realized and change in unrealized gain or
loss on investments ......................... 2.31 2.88 1.57 (0.20) 0.26
--------- -------- --------- -------- -------
Total from investment operations ........ 2.28 2.81 1.52 (0.17) 0.27
--------- -------- --------- -------- -------
LESS DISTRIBUTIONS:
From net investment income .................... (0.31) (0.12) (0.08) (0.27) --
From net realized gains on investments ........ (2.46) (0.89) (0.26) (0.48) --
--------- -------- --------- -------- -------
Total distributions ..................... (2.77) (1.01) (0.34) (0.75) --
--------- -------- --------- -------- -------
Net asset value, end of period .................. $ 13.08 $ 13.57 $ 11.77 $ 10.59 $ 11.51
========= ======== ========= ======== =======
Total return (does not reflect applicable sales
charges) ...................................... 21.36% 25.07% 14.67% (0.81)% 2.40%
Net assets, end of period (000's) ............... $ 19,590 $19,063 $ 22,893 $26,464 $26,647
Ratio of total expenses to average net assets ... 2.02% (1) 2.47% 2.94% 2.12% 2.27%(1)
Ratio of net investment income to average net
assets ........................................ (0.51)%(1) (0.57)% (0.42)% 0.27% 0.17%(1)
Ratio of net expense before reimbursement and
waiver to average net assets .................. 2.11% (1) 2.47% 2.94% 2.25% 2.41%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets (0.60)%(1) (0.57)% (0.42)% 0.14% 0.02%(1)
Portfolio turnover rate ......................... 75.53% 194.41% 135.92% 32.91% 81.67%
Average commission rate paid per share on of
equity securities traded ...................... $ 0.0181 $0.0115 $ 0.0178 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
42
<PAGE>
MID CAP
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 4, 1998
TO APRIL 30, 1998
CLASS I (UNAUDITED)
- ---------------------------------------------------------------------------------------------------- ----------------
<S> <C>
Net asset value, beginning of period .............................................................. $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net realized and change in unrealized gain or loss on investments ............................... 1.41
--------
Total from investment operations .......................................................... 1.41
--------
Net asset value, end of period .................................................................... $ 11.41
========
Total return ...................................................................................... 14.10 %
Net assets, end of period (000's) ................................................................. $ 5,620
Ratio of total expenses to average net assets ..................................................... 1.15 %(1)
Ratio of net investment income to average net assets .............................................. (0.09)%(1)
Ratio of net expense before reimbursement and waiver to average net assets ........................ 3.51 %(1)
Ratio of net investment income before reimbursement and waiver to average net assets (2.45)%(1)
Portfolio turnover rate ........................................................................... 27.53%
Average commission rate paid per share on equity securities traded ................................ $ 0.0353
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
43
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
MID CAP
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 4, 1998
TO APRIL 30, 1998
CLASS A (UNAUDITED)
- ------------------------------------------------------------------------------------------------ -----------------
<S> <C>
Net asset value, beginning of period ........................................................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................................................................ (0.01)
Net realized and change in unrealized gain or loss on investments ............................ 1.42
-------
Total from investment operations ....................................................... 1.41
-------
Net asset value, end of period ................................................................. $ 11.41
=======
Total return (does not reflect applicable sales charges) ....................................... 14.10%
Net assets, end of period (000's) .............................................................. $ 117
Ratio of total expenses to average net assets .................................................. 1.40% (1)
Ratio of net investment income to average net assets ........................................... (0.34)%(1)
Ratio of net expense before reimbursement and waiver to average net assets ..................... 3.76% (1)
Ratio of net investment income before reimbursement and waiver to average net assets ........... (2.70)%(1)
Portfolio turnover rate ........................................................................ 27.53%
Average commission rate paid per share on equity securities traded ............................. $0.0353
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
44
<PAGE>
SMALL COMPANY
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH TEN MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 15.55 $ 14.67 $ 13.52 $ 10.39 $ 10.00
----------- ----------- ----------- ------------ ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.01 (0.06) (0.08) -- 0.02
Net realized and change in unrealized gain or
loss on investments .......................... 1.82 4.45 2.64 3.15 0.37
----------- ----------- ----------- ------------ ----------
Total from investment operations ......... 1.83 4.39 2.56 3.15 0.39
----------- ----------- ----------- ------------ ----------
LESS DISTRIBUTIONS:
From net investment income ..................... -- -- -- (0.02) --
From net realized gains on investments ......... (4.30) (3.51) (1.41) -- --
----------- ----------- ----------- ------------ ----------
Total distributions ...................... (4.30) (3.51) (1.41) (0.02) --
----------- ----------- ----------- ------------ ----------
Net asset value, end of period ................... $ 13.08 $ 15.55 $ 14.67 $ 13.52 $ 10.39
=========== =========== =========== ============ ==========
Total return ..................................... 15.92% 37.80% 19.78% 30.39% 3.90%
Net assets, end of period (000's) ................ $ 29,528 $ 22,661 $ 32,125 $ 33,511 $ 25,879
Ratio of total expenses to average net assets .... 1.40%(1) 1.58% 1.44% 1.41% 1.15%(1)
Ratio of net investment income to average net
assets ......................................... 0.18%(1) (0.42)% (0.53)% (0.01)% 0.21%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 1.43%(1) 1.58% 1.44% 1.49% 1.58%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . 0.15%(1) (0.42)% (0.53)% (0.08)% (0.22)%(1)
Portfolio turnover rate .......................... 99.10% 150.43% 163.21% 156.43% 116.28%
Average commission rate paid per share on equity
securities traded .............................. $ 0.0536 $ 0.0575 $ 0.0575 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
45
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
SMALL COMPANY
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH APRIL 15, 1994
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- -------------------------------------------------- -------------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 15.20 $ 14.42 $ 13.39 $ 10.35 $ 10.24
--------- -------- --------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... -- (0.16) (0.18) (0.11) (0.04)
Net realized and change in unrealized gain or
loss on investments ......................... 1.76 4.36 2.62 3.15 0.15
--------- -------- --------- -------- -------
Total from investment operations ........ 1.76 4.20 2.44 3.04 0.11
--------- -------- --------- -------- -------
LESS DISTRIBUTIONS:
From net realized gains on investments ........ (4.22) (3.42) (1.41) -- --
--------- -------- --------- -------- -------
Total distributions ..................... (4.22) (3.42) (1.41) -- --
--------- -------- --------- -------- -------
Net asset value, end of period .................. $ 12.74 $ 15.20 $ 14.42 $ 13.39 $ 10.35
========= ======== ========= ======== =======
Total return (does not reflect applicable sales
charges) ...................................... 15.72% 36.73% 19.02% 29.44% 0.98%
Net assets, end of period (000's) ............... $ 9,833 $ 7,077 $ 3,884 $ 1,285 $ 205
Ratio of total expenses to average net assets ... 1.80% (1) 2.33% 2.20% 2.23% 1.78%(1)
Ratio of net investment income to average net
assets ........................................ (0.22)%(1) (1.17)% (1.26)% (0.89)% (0.72)%(1)
Ratio of net expense before reimbursement and
waiver to average net assets .................. 1.83% (1) 2.33% 2.20% 2.30% 2.14% (1)
Ratio of net investment income before
reimbursement and waiver to average net assets (0.25)%(1) (1.17)% (1.26)% (0.97)% (1.07)%(1)
Portfolio turnover rate ......................... 99.10% 150.43% 163.21% 156.43% 116.28%
Average commission rate paid per share on equity
securities traded ............................. $ 0.0536 $0.0575 $ 0.0575 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
46
<PAGE>
VALUE OPPORTUNITY
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998 TO
APRIL 30, 1998
CLASS I (UNAUDITED)
- -------------------------------------------------------------------------------------------------- ------------------
<S> <C>
Net asset value, beginning of period ............................................................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................................................................... 0.01
Net realized and change in unrealized gain or loss on investments ............................. 1.32
-------
Total from investment operations ........................................................ 1.33
-------
Net asset value, end of period .................................................................. $ 11.33
=======
Total return .................................................................................... 13.30%
Net assets, end of period (000's) ............................................................... $ 5,609
Ratio of total expenses to average net assets ................................................... 1.10% (1)
Ratio of net investment income to average net assets ............................................ 0.39% (1)
Ratio of net expense before reimbursement and waiver to average net assets ...................... 3.39% (1)
Ratio of net investment income before reimbursement and waiver to average net assets ............ (1.90)%(1)
Portfolio turnover rate ......................................................................... 69.12%
Average commission rate paid per share on equity securities traded .............................. $0.0446
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
47
<PAGE>
CAPITAL APPRECIATION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
VALUE OPPORTUNITY
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998 TO
APRIL 30, 1998
CLASS A (UNAUDITED)
- ----------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Net asset value, beginning of period ............................................................... $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net realized and change in unrealized gain or loss on investments ................................ 1.32
--------
Total from investment operations ........................................................... 1.32
--------
Net asset value, end of period ..................................................................... $ 11.32
========
Total return (does not reflect applicable sales charges) ........................................... 13.20%
Net assets, end of period (000's) .................................................................. $ 247
Ratio of total expenses to average net assets ...................................................... 1.35% (1)
Ratio of net investment income to average net assets ............................................... 0.14% (1)
Ratio of net expense before reimbursement and waiver to average net assets ......................... 3.64% (1)
Ratio of net investment income before reimbursement and waiver to average net assets ............... (2.15)%(1)
Portfolio turnover rate ............................................................................ 69.12%
Average commission rate paid per share on equity securities traded ................................. $ 0.0446
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
48
<PAGE>
AETNA BALANCED FUND
Growth of $10,000
<TABLE>
<CAPTION>
60% S&P
500/40%
BALANCED LEHMAN
FUND (CLASS I) AGGREGATE
<S> <C> <C>
12/91 10,000 10,000
10,020 9,797
10,309 10,068
10,459 10,433
10,669 10,758
10,989 11,219
11,119 11,373
11,449 11,668
11,709 11,833
11,398 11,429
11,268 11,412
11,531 11,775
11,509 11,794
12,053 12,720
13,078 13,758
13,890 14,520
14,522 15,294
14,907 15,671
15,460 16,127
16,066 16,553
16,394 16,974
17,041 18,578
19,604 20,811
20,419 21,989
4/98 22,147 23,862
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 YEAR 5 YEAR INCEPTION+
<S> <C> <C> <C>
Class I 29.95% 15.16% 13.39%
Class A 29.20% 14.28% 12.53%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
27, 1991. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA BALANCED FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Balanced Fund (Balanced, formerly The Aetna Fund) Class I shares
generated a total return of 12.97%, net of fund expenses, for the six month
period ended April 30, 1998. The benchmark of 60% Standard & Poor's (S&P) 500
Index(a)/40% Lehman Brothers Aggregate Bond Index(b), returned 14.67% for the
same period. Class I shares' performance over the one and five year periods
ended April 30, 1998, placed it in the top 15% (out of 611 funds) and 29%
(out of 212 funds), respectively, among domestic hybrid funds tracked by
Morningstar, Inc. Class A shares generated a return for the same six month
period of 12.65%, (performance does not reflect the deduction of the front
end sales charge). Class A shares' performance over the one year period ended
April 30, 1998 placed it in the top 18% (out of 611 funds) among domestic
hybrid funds tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Over the past six months the U.S. economy has continued to show strength coupled
with benign inflation. These conditions, combined with strong money flows
into mutual funds, has provided a backdrop for continued solid market
performance. November and December 1997 began with generally volatile
performance as concern over the impact of Asian economic turmoil and its impact
on the U.S. economy weighed heavy on investors. During these two months
investors sought the safety of Treasuries, which rallied to the middle of
January 1998 when the 30-year Treasury fell to below 5.7%. As concern over the
impact of the Asian crisis waned, the equity markets staged a strong rally
amid generally encouraging economic data, low inflation, and moderate interest
rates which have traded in the range of 5.8% and 6.1% since hitting lows in
early January.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
The main driver of underperformance of the Fund over the past six months has
been an underweight position in large cap stocks in favor of small cap stocks
versus its benchmark. Though small cap stocks turned in solid returns since the
beginning of November, they have been handily outpaced by large cap stocks.
On the fixed income portion, the Fund benefited from having a long duration
going into November which was largely reduced to neutral by late January.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Recent economic data suggests the economy is still in good shape. Continued
expansion of the economy, combined with little sign of inflation, should keep
interest rates down. To the extent rates remain low, corporate profits should do
fairly
See Definition of Indices. 49
<PAGE>
well. Given the recent run up in large cap stocks versus small caps, the latter
appear poised to outperform over the near term. Rates at this point will likely
trade within a limited range until there is clear economic data that suggests
that either inflation is on the rise or the economy is beginning to slow.
Current target allocations are 45% large cap, 10% small cap, 30% bonds and 15%
cash.
<TABLE>
<CAPTION>
LARGE CAP PORTFOLIO SECTOR BREAKDOWN:
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 3.5% 5.6% (2.1)%
Commercial Services 2.1% 2.5% (0.4)%
Consumer Discretionary 11.2% 14.0% (2.8)%
Consumer Non-Discretionary 7.4% 10.7% (3.3)%
Energy 5.4% 8.5% (3.1)%
Finance 21.7% 13.1% 8.6 %
Healthcare 11.4% 9.1% 2.3 %
Manufacturing 12.7% 11.1% 1.6 %
Technology 12.6% 12.2% 0.4 %
Utilities 12.0% 13.2% (1.2)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Microsoft Corp. 1.59%
General Electric Co. 1.45%
Wal-Mart Stores, Inc. 1.07%
Lucent Technologies, Inc. 0.90%
Exxon Corp. 0.89%
Pfizer, Inc. 0.81%
Merck & Co., Inc. 0.77%
AT&T Corp. 0.73%
American International Group, Inc. 0.67%
IBM Corp. 0.63%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP FIVE INCOME HOLDINGS PORTFOLIO
<S> <C>
U.S. Treasury Note, 5.75%, 10/31/00 4.88%
U.S. Treasury Note, 6.38%, 03/31/01 3.40%
U.S. Treasury Bond, 6.75%, 08/15/26 1.72%
U.S. Treasury Note, 5.75%, 09/30/99 1.57%
African Development Bank, 8.80%, 09/01/19 0.99%
</TABLE>
50
<PAGE>
AETNA GROWTH AND INCOME FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA
GROWTH AND
INCOME FUND S&P
FUND (CLASS I) 500 INDEX
<S> <C> <C>
12/91 10,000 10,000
9,940 9,747
9,940 9,932
10,299 10,245
10,779 10,760
11,060 11,231
10,929 11,286
11,199 11,577
11,489 11,845
11,149 11,396
11,093 11,444
11,413 12,004
11,449 12,002
12,127 13,170
13,225 14,428
14,350 15,575
15,056 16,513
15,884 17,400
16,701 18,179
17,397 18,741
17,945 19,258
20,226 22,093
24,678 25,442
25,128 26,615
4/98 28,460 30,299
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 YEAR 5 YEAR INCEPTION+
<S> <C> <C> <C>
Class I 40.70% 21.40% 17.99%
Class A 39.84% 20.59% 17.18%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
27, 1991. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA GROWTH AND INCOME FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Growth and Income Fund (Growth and Income) Class I shares generated a
total return of 15.31%, net of fund expenses, for the six month period ended
April 30, 1998. The Standard & Poor's (S&P) 500 Index(a) returned 22.50%. Class
I shares' performance over the one and five year periods ended April 30,
1998, placed it in the top 27% (out of 692 funds) and 35% (out of 303 funds),
respectively, among large blend funds tracked by Morningstar, Inc. Class A
shares generated a return for the same six month period of 15.00%,
(performance does not reflect the deduction of front end sales charge). Class A
shares' performance over the one year period April 30, 1998, placed it in the
top 40% (out of 692 funds) among large blend funds tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
A conservatively managed fund such as the Aetna Growth and Income Fund is likely
to underperform in a tremendously strong market environment, such as we
experienced during the six months ended April 30, 1998.
The primary reason that the Fund's performance fell short of the S&P 500 was
asset allocation. In a sense, asset allocation did its job--returns were
smoothed out and volatility reduced. The Fund's strategic decision to diversify
by investing in a variety of asset classes is designed to dampen volatility and
boost returns over the long-run. Unfortunately, the diversified asset classes in
which we invested fell far short of the S&P 500 return. The large-cap dominated
S&P 500 posted a return of 22.50%, compared to 11.86% for the Russell 2000
Index(c) and 15.59% for the MSCI EAFE Index(d).
In addition to our long-term strategic commitment to diversification, the Fund's
asset mix is guided by the relative valuation of the various asset classes in
the shorter-term. For the entire six month period under review, U.S. large cap
stocks appeared expensive compared to other equity alternatives, causing us to
hold a smaller allocation of S&P 500 type stocks than normal.
At the same time, the Fund held a modest amount of cash, not only to provide
liquidity to meet withdrawals and fund new purchases, but also to help fortify
our defenses in case of a market correction. Again, the U.S. stock market was
overvalued by our criteria, and holding a bit more cash than average seemed to
be a good hedge against a downturn.
See Definition of Indices. 51
<PAGE>
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
The factors favored in our stock selection disciplines--attractive value,
positive earnings momentum, and pro-shareholder management--were out of synch
with the market during much of the past six months. We have kept track of how
well our predicted returns for stocks correlated with actual returns for the
past several years on a calendar quarterly basis, and as displayed in the
attached graph, the fourth quarter of 1997 and the first quarter of 1998 were
two of the poorest performing quarters for our models. Recent results have been
more encouraging.
AVERAGE CORRELATION OF
LARGE CAP MODEL VS ACTUAL RETURNS
1Q 1995 -0.3%
2Q 1995 2.0%
3Q 1995 8.9%
4Q 1995 7.2%
1Q 1996 3.1%
2Q 1996 5.2%
3Q 1996 10.1%
4Q 1996 12.9%
1Q 1997 2.9%
2Q 1997 4.9%
3Q 1997 13.1%
4Q 1997 -7.0%
1Q 1998 2.6%
No model will work well every quarter, but we continue to invest heavily in our
ongoing investment modeling efforts, always striving to make our disciplines,
which we believe are among the very best, even better.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The U.S. stock market still looks high to us. We use essentially the same method
to measure equity market valuation as does Alan Greenspan, Chairman of the
Federal Reserve. For us, the relevant question is, how much can you expect to
receive in earnings for each dollar invested in the S&P 500, and how does this
"earnings yield" compare to the yield on the 10-year government bond? As shown
below, this measure of the "equity risk premium" is unusually low--more than one
standard deviation below the trailing five-year standard deviation of the
relationship.
RELATIVE VALUE:
LARGE CAP STOCKS VS. BONDS
The purpose of the graph is to show the time frames when large cap stocks are
attractive or unattractive in comparison to bonds. The comparison is made using
the S&P 500 FWD E/P and the 10 Year Government. The graph charts the comparison
starting in January 1987 through April 1998.
Small cap stocks remain relatively attractive to us compared to large cap
stocks. Using the same "earnings yield" measurement method for both large cap
and small cap stocks, we find that small cap stocks are unusually inexpensive
now.
52
<PAGE>
Also, although earnings growth has slowed down for most large companies, it has
not for most small companies, which are expected to grow their earnings at
rates higher than large companies.
RELATIVE VALUE:
LARGE CAP VS. SMALL CAP STOCKS
The purpose of the graph is to show the time frames when large cap stocks are
attractive or small cap stocks are attractive. The comparison is made using
the S&P 500 FWD E/P and the Russell 2000 FWD E/P. The graph charts the
comparison starting in January 1987 through April 1998.
In response to current relative values, we continue to hold above average cash
reserves and to be heavily weighted in asset classes other than U.S. large cap
stocks, including small cap, real estate, and international stocks.
LARGE CAP PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
% OF % OF OVER/(UNDER)
SECTOR PORTFOLIO S&P 500 WEIGHTING
<S> <C> <C> <C>
Basic Materials 2.5% 5.6% (3.1)%
Commercial Services 4.4% 2.5% 1.9 %
Consumer Discretionary 21.3% 14.0% 7.3 %
Consumer Non-Discretionary 2.4% 10.7% (8.3)%
Energy 5.6% 8.5% (2.9)%
Finance 22.8% 13.1% 9.7 %
Healthcare 7.5% 9.1% (1.6)%
Manufacturing 20.8% 11.1% 9.7 %
Technology 7.9% 12.2% (4.3)%
Utilities 4.8% 13.2% (8.4)%
</TABLE>
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Pfizer, Inc. 1.49%
Allstate Corp. 1.44%
Microsoft Corp. 1.12%
Travelers, Inc. 1.04%
Bellsouth Corp. 0.96%
CVS Corp. 0.95%
Dell Computer Corp. 0.90%
Eli Lilly & Co. 0.89%
Merck & Co., Inc. 0.89%
Morgan Stanley, Dean Witter, Discover & Co. 0.87%
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
ASSET ALLOCATION:
% OF NOTIONAL VALUE* ECONOMIC EXPOSURE*
ASSET CLASS INVESTMENTS OF FUTURES OF OPTIONS 04/30/98 10/31/97
<S> <C> <C> <C> <C> <C>
Large Cap Stocks 55.2% 6.5% -- 61.7% 45.6%
Mid Cap Stocks 10.5% -- (3.3)% 7.2% 13.8%
Small Cap Stocks 20.7% -- (4.0)% 16.7% 21.0%
Real Estate Stocks 3.1% -- -- 3.1% 2.3%
U.S. Dollar Bonds 1.2% -- -- 1.2% 1.5%
International Stocks 6.2% -- -- 6.2% 5.7%
Special Situations** 2.6% -- -- 2.6% 3.1%
Cash Equivalents 0.5% (6.5)% 7.3 % 1.3% 7.0%
----- ---- ---- ----- -----
100.0% -- -- 100.0% 100.0%
===== ==== ==== ===== =====
</TABLE>
* Notional value refers to the economic value at risk or the exposure to the
financial instruments underlying the options and futures positions. Economic
exposure reflects the Fund's exposure to both changes in the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
** The special situations category was created to take advantage of investment
opportunities which are "special" in the sense that they do not fit well into
our normal valuation and modeling framework. The largest category within this
group is initial public offerings, but other categories include spin-offs, newly
created securities, and stocks of companies which derive their value from
something other than current assets, earnings and dividends.
54
<PAGE>
<TABLE>
<CAPTION>
AETNA
REAL ESTATE
SECURITIES NAREIT
FUND (CLASS I) INDEX
<S> <C> <C>
2/98 10,000 10,000
4/98 9,660 9,680
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
INCEPTION+
<S> <C>
Class I -3.40%
Class A -3.50%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for both the Class I and Class A shares was February 2,
1998. Class I and Class A shares participate in the same portfolio of
securities.
AETNA REAL ESTATE SECURITIES FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Real Estate Securities Fund (Real Estate) Class I shares generated a
total return of -3.40%, net of fund expenses, from its inception on February
2, 1998 to April 30, 1998. During the three month period ended April 30, 1998,
the National Association of Real Estate Investment Trusts Equity REIT
Index(e) returned -3.20% during the same period. Class A shares generated a
return for the same period of -3.50%, (performance does not reflect the
deduction of front end sales charge).
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Real estate securities suffered a slow start this year, especially compared to
the broader markets, for various reasons. First and foremost, the sector was
significantly impacted by certain legislative proposals which targeted a very
specific type of REIT called "paired share"; only five such REITs exist today.
Secondly, as one would expect, investors showed general apathy toward defensive
low volatility stocks such as REITs in this very bullish market environment;
cash inflows into real estate mutual funds slowed modestly while stock
issuance at the company level remained brisk. Finally, stock multiples
contracted on early investor concern about the completeness of the real
estate recovery and the sense that most of the inexpensive acquisitions and
early growth have passed.
Most real estate companies continued to be relatively unaffected by the Asian
crisis due to the domestic nature of the majority of their holdings, as well
as the contractual and credit nature of their leases.
REITs are attractive investments not only for growth potential but income
potential as well. Since the Fund's inception, interest rates have fluctuated
within a 0.40% range, but increased only moderately over the period. The 10-year
treasury bond tends to be the most appropriate benchmark, both in terms of
competing with REITs for fixed-income yield-oriented capital, as well as being
the best indicator for REITs' cost of long-term debt. The generic 10-year
treasury increased from 5.57% to 5.67%. However, increasing competition to
provide credit on commercial real estate (such as banks, insurance companies,
and other institutions all seem to be increasing their lending volumes), and new
financing sources, have brought down the cost of credit, making debt less
expensive for REITs.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST THREE MONTHS?
Relative to its benchmark in March and April, all of the Fund's underperformance
came in February, its first month of trading. In February, the Fund was held
back by high cash holdings as the Fund's initial investments were made during a
REIT rally. The rally was biased towards the larger capitalization names,
while the Fund generally prefers smaller growth stocks for their longer term
growth potential. Most of the negative impact came from real estate securities
not owned, with such large names as Simon Debartolo Group, Spieker Properties
and Patriot American.
See Definition of Indices. 55
<PAGE>
Good performance can be attributed to favorable industry selection, particularly
with overweight positions in the Diversified and Multi-Family industries. There
was especially good stock selection in Multi-Family industry, where positions in
Essex Apartment Communities, Apartment Investment & Management and Post
Properties performed well, as investors rotated away from growth-oriented
sectors seeking shelter from the Office industry. The Fund also benefited from
its position in Golf Trust of America, Inc. and outperformed in other REITs
which are fixed income in nature because they allow some property level expenses
to be passed through to tenants. Underweighting the hotel industry boosted
performance, as did underweighting of the paired-share REITs as negative news of
legislative changes dragged down their pricing.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We believe equity REITs are now very attractively valued both relative to their
own history and on a growth-to-multiple basis relative to other asset classes.
After accounting for somewhat lower acquisition yields and volumes, we believe
secular trends and strong internal growth should support 11-13% growth. We
believe REITs will deliver higher growth than the broader markets, at lower
multiples, which in part supports our positive outlook from a stock valuation
standpoint.
The strength of the underlying property fundamentals should underpin near-term
stock performance. Cash flows are growing as older leases roll into stronger
rental markets, and REITs are able to achieve both occupancy gains and improved
margins. In terms of their balance sheets, pay out ratios are dropping,
suggesting the continuing need for REITs to boost their dividends, at least
consistent with growth, in order to observe their minimum distribution
requirements. (REITs are legally required to pay out at least 95% of their
taxable income to investors each year.)
We look for large levels of new construction, or an extended rise in interest
rates, as potential signs of softness -- neither of which seem to be at hand.
Ultimately, we believe the robust fundamentals, defensive yield, domestic nature
of the real estate, and the sector's ability to provide defense and
diversification during an extended bull cycle will make for a more positive
trend going forward.
Real estate securities involve certain risks, including dependency on a firm's
management skills, general and regional economic impact on the industry, changes
in the value of properties owned, refinancing and risks similar to those linked
to small company investing.
<TABLE>
<CAPTION>
% OF
TOP TEN EQUITY HOLDINGS PORTFOLIO
<S> <C>
Post Properties, Inc. 5.28%
Weeks Corp. 4.91%
Crescent Real Estate Equities, Inc. 4.90%
Camden Property Trust 4.75%
Apartment Investment & Management 4.68%
Essex Property Trust, Inc. 4.60%
Regency Realty Corp. 4.60%
Brandywine Realty Trust 4.57%
Burnham Pacific Properties, Inc. 4.35%
Vornado Realty Trust 4.27%
</TABLE>
56
<PAGE>
DEFINITION OF INDICES
(a) The Standard & Poor's (S&P) 500 Index is a value-weighted, unmanaged index
of 500 widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
(b) The Lehman Brothers Aggregate Bond Index is an unmanaged index of corporate,
government and mortgage bonds.
(c) The Russell 2000 Index consists of the smallest 2000 companies in the
Russell 3000 Index and represents approximately 10% of the Russell 3000 total
market capitalization. The 3000 largest U.S. companies by market capitalization,
representing nearly 98% of the U.S. equity market, comprise the Russell 3000
Index. Both indices assume reinvestment of all dividends and are unmanaged.
(d) The Morgan Stanley Capital International-Europe, Australia and Far East
(MSCI EAFE) Index is a market value-weighted unmanaged average of the
performance of more than 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East.
(e) The National Association of Real Estate Investment Trusts (NAREIT) Equity
REIT Index is an unmanaged, market-weighted average of the performance for
tax-qualified real estate investment trusts listed on the New York Stock
Exchange, American Stock Exchange and the NASDAQ National Market System.
57
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BALANCED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (55.2%)
AIR TRANSPORT (0.6%)
Alaska Air Group, Inc.+.............. 700 $ 39,288
America West Holdings Corp.+......... 1,700 51,425
AMR Corp.+........................... 1,100 167,613
ASA Holdings, Inc.................... 1,000 38,000
Comair Holdings, Inc................. 1,500 40,969
Delta Air Lines, Inc................. 800 93,000
Expeditors International of
Washington, Inc.................... 1,300 55,250
Midwest Express Holdings, Inc.+...... 800 38,050
SkyWest, Inc......................... 1,400 56,700
Southwest Airlines Co................ 2,700 74,081
US Airways Group, Inc.+.............. 900 64,013
----------
718,389
----------
ALUMINUM (0.1%)
Alcan Aluminum Ltd................... 1,600 52,000
Aluminum Co. of America.............. 1,200 93,000
Reynolds Metals Co................... 500 33,000
----------
178,000
----------
AUTO PARTS AND HARDWARE (0.4%)
Black & Decker Corp.................. 700 36,138
Carlisle Co., Inc.................... 2,000 101,500
CLARCOR, Inc......................... 1,800 40,388
Genuine Parts Co..................... 1,300 46,800
Goodyear Tire & Rubber Co. (The)..... 1,600 112,000
Motorcar Parts and Accesories, Inc.+. 1,800 33,075
Snap-On, Inc......................... 600 25,388
SPX Corp.+........................... 600 43,425
Standard Motor Products, Inc......... 1,500 35,531
Stanley Works........................ 600 30,713
Wynn's International, Inc............ 1,350 30,375
----------
535,333
----------
AUTOMOTIVE (1.3%)
Arvin Industries, Inc................ 1,500 61,406
Chrysler Corp........................ 5,100 204,956
Dana Corp............................ 1,300 76,863
Dura Automotive Systems, Inc.+....... 500 19,500
Eaton Corp........................... 500 46,188
Ford Motor Co........................ 14,700 673,443
General Motors Corp.................. 6,700 451,412
Gentex Corp.+........................ 1,300 43,875
Johnson Controls, Inc................ 600 35,625
Standard Products Co................. 1,200 38,400
TRW, Inc............................. 900 47,531
----------
1,699,199
----------
BANKS AND THRIFTS (5.3%)
Ahmanson (H. F.) & Co................ 1,100 83,875
Banc One Corp........................ 4,840 284,652
Bank of New York Co., Inc............ 2,900 171,281
BANKS AND THRIFTS (CONTINUED)
BankAmerica Corp..................... 6,500 $ 552,499
BankBoston Corp...................... 1,100 118,731
Bankers Trust New York Corp.......... 700 90,388
BB&T Corp............................ 900 60,525
Charter One Financial, Inc........... 1,337 90,498
Chase Manhattan Corp................. 3,000 415,687
CitFed Bancorp, Inc.................. 150 7,950
Citicorp............................. 3,400 511,699
City National Corp................... 1,500 55,781
Comerica, Inc........................ 1,650 110,447
Community First Bankshares, Inc...... 2,000 100,750
Cullen/Frost Bankers, Inc............ 1,900 111,150
Fifth Third Bancorp.................. 1,800 99,000
First Chicago NBD Corp............... 2,100 195,038
First Republic Bank+................. 800 27,500
First Union Corp..................... 6,306 380,724
Firstfed Financial Corp.+............ 1,000 45,750
Fleet Financial Group, Inc........... 2,400 207,300
Flushing Financial Corp.............. 1,500 39,938
Golden West Financial Corp........... 600 63,188
HUBCO, Inc........................... 2,652 97,461
Huntington Bancshares................ 1,300 46,231
Imperial Bancorp+.................... 3,960 116,078
J.P. Morgan & Co..................... 1,300 170,625
KeyCorp.............................. 3,200 127,000
Mellon Bank Corp..................... 2,400 172,800
Mercantile Bancorporation, Inc....... 900 49,838
National City Corp................... 1,600 110,800
NationsBank Corp..................... 6,602 500,101
North Fork Bancorp, Inc.............. 3,112 115,533
Northern Trust Corp.................. 800 58,400
Norwest Corp......................... 5,000 198,438
PNC Bank Corp........................ 2,300 139,006
Provant, Inc.+....................... 800 14,900
Republic Banking..................... 2,000 35,250
Republic New York Corp............... 500 66,875
Silicon Valley Bancshares+........... 900 58,725
State Street Corp.................... 1,900 135,850
Summit Bancorporation................ 1,200 60,150
Suntrust Banks, Inc.................. 1,400 114,013
Synovus Financial Corp............... 1,200 42,225
Trans Financial, Inc................. 900 49,950
U.S. Bancorp......................... 1,900 241,300
Wachovia Corp........................ 1,100 93,431
Washington Mutual, Inc............... 1,900 133,119
Webster Financial Corp............... 1,600 54,200
----------
6,826,650
----------
BIOTECH AND MEDICAL PRODUCTS (0.4%)
Alpharma, Inc........................ 1,500 34,125
</TABLE>
58 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
BIOTECH AND MEDICAL PRODUCTS (CONTINUED)
Alza Corp.+.......................... 400 $ 19,175
Becton, Dickinson & Co............... 900 62,663
Cooper Companies, Inc.+.............. 1,000 38,438
ESC Medical Systems Ltd.+............ 1,500 48,750
Guidant Corp......................... 1,600 107,000
Medtronic, Inc....................... 3,000 157,875
Warner Chilcott Laboratories+........ 200 2,300
----------
470,326
----------
CHEMICALS (0.7%)
Dow Chemical Co...................... 1,800 174,038
Du Pont (E.I.) de Nemours............ 7,700 560,655
Eastman Chemical Co.................. 600 41,250
Hercules, Inc........................ 700 33,469
Rohm & Haas Co....................... 600 64,688
----------
874,100
----------
COMMERCIAL SERVICES (0.7%)
ADVO, Inc.+.......................... 1,400 40,075
Big Flower Holdings, Inc.+........... 1,500 45,469
Bowne & Co., Inc.+................... 900 37,181
Cognizant Corp....................... 1,200 61,725
Consolidated Graphics, Inc.+......... 400 23,075
Day Runner, Inc.+.................... 1,600 38,400
Denison International Plc+........... 2,200 39,600
HA-LO Industries, Inc.+.............. 1,200 40,275
Interpublic Group of Co., Inc........ 900 57,488
Mail-Well, Inc.+..................... 1,400 67,725
Merrill Corp......................... 2,200 45,650
Omnicom Group, Inc................... 1,500 71,063
Romac International+................. 1,600 42,400
RR Donnelley & Sons Co............... 1,000 44,063
SOS Staffing Services, Inc.+......... 1,900 41,800
Staff Leasing, Inc.+................. 1,000 29,250
Staffmark, Inc.+..................... 1,200 51,000
Valassis Communications, Inc.+....... 1,600 62,800
Wackenhut Corp., Class B............. 2,200 47,575
----------
886,614
----------
COMPUTERS (2.0%)
Compaq Computer Corp................. 10,200 286,237
Dell Computer Corp.+................. 7,600 613,699
Digital Equipment Corp.+............. 1,600 89,000
Hewlett Packard Co................... 7,000 527,187
International Business Machines, Inc. 6,900 799,537
Micrel, Inc.+........................ 1,000 39,250
Stratus Computer, Inc.+.............. 1,000 43,563
Sun Microsystems, Inc.+.............. 4,500 185,344
Unisys Corp.+........................ 1,200 26,925
----------
2,610,742
----------
CONGLOMERATE AND AEROSPACE (2.3%)
AAR Corp............................. 1,350 $ 35,353
Alliant Techsystems, Inc.+........... 900 57,544
Aviall, Inc.+........................ 2,400 33,600
Boeing Co.+.......................... 2,700 135,169
Computer Sciences Corp.+............. 600 31,650
General Dynamics Corp................ 1,000 42,250
General Electric Co.................. 21,800 1,855,724
Goodrich (B.F.) Co................... 200 10,763
Intelligent Polymers Ltd.+........... 800 20,300
Kroll O' Gara Co. (The)+............. 300 6,394
Lockheed Martin Corp................. 1,400 155,925
National Service Industries, Inc..... 200 10,825
Northrop Grumman Corp................ 400 42,275
Raytheon Co.......................... 2,300 130,381
Tenneco, Inc......................... 900 38,756
Textron, Inc......................... 1,200 93,900
Thiokol Corp......................... 600 32,325
United Technologies Corp............. 2,200 216,563
----------
2,949,697
----------
CONSUMER FINANCE (1.6%)
Associates First Capital Corp........ 2,353 175,861
Avis Rent A Car, Inc.+............... 900 23,569
Beneficial Corp...................... 400 52,150
Countrywide Credit Industries, Inc... 800 38,700
Electro Rent Corp.+.................. 2,000 95,500
Federal Home Loan Mortgage Corp...... 8,400 389,024
Federal National Mortgage Association 12,900 772,387
FIRSTPLUS Financial Group, Inc.+..... 900 43,650
Green Tree Financial Corp............ 1,300 52,975
Household International, Inc......... 700 92,006
MBNA Corp............................ 3,500 118,563
Medallion Financial Corp............. 1,400 41,825
Ocwen Financial Corp.+............... 1,600 41,400
Rollins Truck Leasing Corp........... 2,850 37,763
U.S. Rentals, Inc.+.................. 1,100 32,725
----------
2,008,098
----------
CONSUMER PRODUCTS (1.5%)
Avon Products, Inc................... 900 73,969
Beringer Wine Estates Holdings, Inc.+ 800 37,200
Bestfoods............................ 2,000 109,750
Clorox Co............................ 800 67,100
Colgate-Palmolive Co................. 2,100 188,344
Eastman Kodak Co..................... 900 64,969
Fossil, Inc.+........................ 1,800 41,625
Gillette Co.......................... 3,600 415,574
International Flavors &
Fragrances, Inc.................... 700 34,256
Michael Foods, Inc................... 1,700 49,725
Omega Protein Corp.+................. 1,100 19,250
</TABLE>
59
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BALANCED (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
CONSUMER PRODUCTS (CONTINUED)
Procter & Gamble Co.................. 8,500 $ 698,593
Steinway Musical Instruments, Inc.+.. 1,400 42,788
Tricon Global Restaurants, Inc.+..... 580 18,415
Twinlab Corp.+....................... 1,300 51,025
----------
1,912,583
----------
CONSUMER SERVICES (0.7%)
Bob Evans Farms, Inc................. 2,500 50,938
Cendant Corp.+....................... 5,343 133,575
CKE Restaurants, Inc................. 730 25,276
Dollar Thrifty Automotive Group,
Inc.+.............................. 2,000 37,750
Dover Downs Entertainment, Inc....... 2,000 65,500
Education Management Corp.+.......... 1,500 52,125
Foodmaker, Inc.+..................... 2,000 38,000
H & R Block, Inc..................... 1,300 58,500
Hilton Hotels Corp................... 1,800 57,488
McDonald's Corp...................... 1,800 111,375
Metris Companies, Inc................ 800 45,350
Mirage Resorts, Inc.................. 500 11,031
Rio Hotel and Casino, Inc.+.......... 1,100 24,888
Ruby Tuesday, Inc.................... 1,400 46,900
Service Corp. International.......... 1,700 70,125
Showbiz Pizza Time, Inc.+............ 1,500 57,938
Wendy's International, Inc........... 800 19,250
----------
906,009
----------
CONSUMER SPECIALTIES (0.2%)
Action Performance Co., Inc.+........ 1,200 41,550
Brunswick Corp....................... 700 22,750
Coastcast Corp.+..................... 2,200 47,300
Hasbro, Inc.......................... 900 33,131
Jostens, Inc......................... 300 7,106
Mattel, Inc.......................... 2,300 88,119
Russ Berrie & Co., Inc............... 1,600 45,800
----------
285,756
----------
DATA AND IMAGING SERVICES (3.1%)
Adobe Systems, Inc................... 200 10,013
Autodesk, Inc........................ 400 18,800
Automatic Data Processing, Inc....... 2,000 133,875
Bay Networks, Inc.+.................. 1,600 37,500
Cisco Systems, Inc.+................. 7,100 520,074
Computer Associates
International, Inc................. 6,550 383,583
Computer Horizons Corp.+............. 1,200 45,525
EMC/MASS Corp.+...................... 4,700 216,788
First Data Corp...................... 2,900 98,238
Learning Company, Inc. (The)+........ 1,500 42,938
Microsoft Corp.+..................... 22,500 2,027,812
Mobius Management Solutions+......... 300 5,550
Netspeak Corp.+...................... 700 17,019
Oracle Corp.+........................ 9,100 235,463
Parametric Technology Co.+........... 800 25,575
QAD, Inc.+........................... 2,400 33,300
DATA AND IMAGING SERVICES (CONTINUED)
Symantec Corp.+...................... 1,500 $ 43,500
Symbol Technologies, Inc............. 2,250 86,625
----------
3,982,178
----------
DISCRETIONARY RETAIL (3.4%)
99 Cents Only Stores+................ 1,400 53,375
AutoZone, Inc.+...................... 1,100 33,206
Buckle, Inc. (The)+.................. 1,400 70,875
Central Garden and Pet Co.+.......... 1,100 37,675
Consolidated Stores Corp.+........... 1,000 40,000
Costco Companies, Inc.+.............. 2,600 145,275
Csk Auto Corp.+...................... 500 13,500
Dayton Hudson Corp................... 2,000 174,625
Dillards, Inc........................ 800 29,300
Dress Barn, Inc.+.................... 1,400 40,775
Federated Department Stores, Inc.+... 1,400 68,863
Fingerhut Companies, Inc............. 1,700 50,363
Footstar, Inc.+...................... 1,200 47,775
Fred's, Inc.......................... 1,900 47,500
Gap, Inc............................. 4,750 244,328
Genesco, Inc.+....................... 2,200 37,263
Goody's Family Clothing, Inc.+....... 1,500 74,250
Home Depot, Inc...................... 4,900 341,162
Hot Topic, Inc.+..................... 1,100 31,763
J.C. Penney Co., Inc................. 1,800 127,913
Kmart Corp.+......................... 3,600 62,775
Linens 'n Things, Inc.+.............. 1,100 66,275
Lowe's Co., Inc...................... 1,200 83,925
May Department Stores Co............. 2,000 123,375
Mens Wearhouse, Inc.+................ 1,700 71,613
Nordstrom, Inc....................... 600 39,263
Pacific Sunwear of California+....... 1,200 52,950
Pier 1 Imports, Inc.................. 2,100 55,388
Renters Choice, Inc.+................ 1,700 46,538
Sears, Roebuck & Co.................. 2,900 172,006
Shopko Stores, Inc.+................. 900 31,163
Stein Mart, Inc.+.................... 1,300 45,825
Tandy Corp........................... 800 39,800
The Limited, Inc..................... 1,800 60,413
TJX Companies, Inc................... 2,100 92,925
Toys "R" Us, Inc.+................... 2,700 74,419
Wal-Mart Stores, Inc................. 27,000 1,365,187
Williams-Sonoma, Inc.+............... 900 49,444
Woolworth Corp.+..................... 700 16,100
Zale Corp.+.......................... 1,300 39,163
----------
4,298,333
----------
DIVERSIFIED FINANCIAL SERVICES (1.3%)
American Express Co.................. 4,300 438,599
American General Corp................ 1,800 119,925
AMRESCO, Inc.+....................... 1,200 43,500
</TABLE>
60 See Notes to Portfolio of Investments.
<PAGE>
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Morgan Stanley, Dean Witter,
Discover & Co...................... 7,200 $ 567,899
Signature Resorts, Inc.+............. 1,200 21,450
Transamerica Corp.................... 500 57,750
Travelers Group, Inc................. 7,633 467,043
----------
1,716,166
----------
DRUGS (4.2%)
Abbott Laboratories.................. 5,200 380,249
American Home Products Corp.......... 4,100 381,812
Baxter International, Inc............ 2,100 116,419
Bristol-Myers Squibb Co.............. 7,000 741,124
Eli Lilly & Co....................... 7,800 542,587
IDEC Pharmaceuticals Corp.+.......... 900 32,400
Johnson & Johnson.................... 3,600 256,950
Merck & Co., Inc..................... 8,100 976,049
Pfizer, Inc.......................... 9,100 1,035,693
Schering Plough...................... 6,800 544,849
Warner Lambert Co.................... 2,100 397,293
----------
5,405,425
----------
ELECTRIC UTILITIES (1.2%)
Ameren Corp.......................... 700 27,738
American Electric Power Co.+......... 1,400 66,850
Baltimore Gas & Electric Co.......... 1,100 34,650
Carolina Power & Light Co............ 1,100 47,369
Central & South West Corp............ 1,500 39,094
Central Hudson Gas & Electric Co..... 1,800 72,563
Central Vermont Public Service....... 4,300 63,963
Cinergy Corp......................... 1,200 41,850
Cleco Corp........................... 1,200 38,550
Commonwealth Energy System Co........ 2,000 76,500
Consolidated Edison.................. 1,800 81,450
Dominion Resources, Inc.............. 1,400 55,388
DTE Energy Co........................ 800 31,350
Edison International................. 2,900 86,456
Entergy Corp......................... 1,700 42,288
FirstEnergy Corp..................... 1,500 45,375
GPU, Inc............................. 900 35,663
Houston Industries, Inc.............. 1,800 52,313
Interstate Energy Corp............... 2,922 92,226
KU Energy Corp....................... 2,000 88,500
Northern States Power Co............. 500 28,188
PacifiCorp........................... 1,500 34,875
Peco Energy Co.+..................... 1,100 26,194
PG&E Corp............................ 1,100 35,613
PP&L Resources, Inc.................. 1,200 27,675
Public Service Co. of New Mexico..... 1,400 32,288
Public Service Enterprise Group, Inc. 1,600 53,700
Southern Co.......................... 5,300 140,450
Texas Utilities Co................... 1,200 48,000
Unicom Corp.......................... 1,600 55,600
----------
1,602,719
----------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.7%)
Harris Corp.......................... 800 $ 38,700
IFR Systems, Inc..................... 1,100 23,375
Knoll, Inc.+......................... 1,500 52,219
Perkin-Elmer Corp.................... 300 20,513
Pitney Bowes, Inc.................... 2,800 134,400
Technitrol, Inc...................... 4,000 163,500
Tektronix, Inc....................... 450 19,350
Virco Manufacturing Corp............. 1,200 30,150
Waters Corp.+........................ 1,900 101,650
Xerox Corp........................... 3,100 351,849
----------
935,706
----------
ELECTRONIC MEDIA (0.5%)
CBS Corp............................. 1,900 67,688
Clear Channel Communications, Inc.+.. 700 65,975
Tele-Communications, Inc.+........... 3,200 103,200
Time Warner, Inc..................... 1,600 125,600
Walt Disney Co. (The)................ 1,800 223,763
----------
586,226
----------
ENGINEERING SERVICES (0.0%)
American Disposal Services, Inc.+.... 1,100 44,103
----------
FOOD AND BEVERAGE (2.2%)
Anheuser-Busch Co., Inc.............. 3,100 142,019
Archer-Daniels-Midland Co............ 1,700 36,550
Brown-Forman Corp.................... 500 28,313
Campbell Soup Co..................... 3,300 169,331
Canandaigua Brands, Inc.+............ 800 41,900
Coca-Cola Co......................... 7,000 531,124
Conagra, Inc......................... 3,700 107,994
Coors (Adolph) Co.................... 300 10,725
Earthgrains Co....................... 1,000 46,750
Fortune Brands, Inc.................. 600 22,125
General Mills, Inc................... 1,200 81,075
Heinz (H.J.) Co...................... 2,800 152,600
Herbalife International, Inc......... 1,900 47,500
Hershey Foods Corp................... 1,100 80,575
Kellogg Co........................... 2,800 115,500
Lance, Inc........................... 700 15,050
PepsiCo, Inc......................... 9,700 384,968
Pioneer Hi-Bred International, Inc... 1,800 67,950
Quaker Oats Co....................... 1,000 52,000
Ralston-Ralston Purina Group......... 300 31,800
Sara Lee Corp........................ 3,400 202,513
Suiza Foods Corp.+................... 400 23,700
Unilever NV.......................... 4,400 328,349
Wrigley (Wm.) Jr. Co................. 600 53,400
----------
2,773,811
----------
</TABLE>
61
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BALANCED (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
FOOD AND DRUG RETAIL (0.5%)
Albertson's, Inc..................... 1,800 $ 90,000
American Stores Co................... 1,900 45,600
CVS Corp............................. 1,700 125,391
Great Atlantic & Pacific Tea Co.,
Inc................................ 200 6,225
Kroger Co. (The)+.................... 1,800 75,375
Rite Aid Corp........................ 1,800 57,825
SUPERVALU, INC....................... 700 30,581
Sysco Corp........................... 1,800 42,863
Walgreen Co.......................... 3,800 131,100
Winn-Dixie Stores, Inc............... 1,000 37,625
----------
642,585
----------
FOREST PRODUCTS AND BUILDING MATERIALS (0.8%)
Ameron, Inc.......................... 700 43,138
AptarGroup, Inc...................... 600 37,500
Armstrong World Industries, Inc...... 300 25,725
Centex Construction Products, Inc.... 1,300 47,775
Champion International Corp.......... 700 37,669
Crown Cork & Seal Co., Inc........... 500 26,031
Elcor Corp........................... 1,400 38,938
Fort James Corp...................... 1,900 94,288
International Paper Co............... 2,100 109,594
Ivex Packaging Corp.+................ 900 21,825
Lone Star Industries, Inc............ 600 49,575
Masco Corp........................... 1,100 63,800
Owens-Illinois, Inc.+................ 1,500 59,344
Sealed Air Corp.+.................... 268 16,769
Simpson Manufacturing Co., Inc.+..... 1,000 41,625
Southdown, Inc....................... 800 56,600
Triangle Pacific Corp.+.............. 500 21,750
Union Camp Corp...................... 500 30,188
Wausau-Mosinee Paper Corp............ 1,820 38,561
Westvaco Corp........................ 700 21,219
Weyerhaeuser Co...................... 1,400 80,675
----------
962,589
----------
GAS UTILITIES (0.3%)
Coastal Corp. (The).................. 800 57,150
Columbia Gas System, Inc............. 400 32,500
Consolidated Natural Gas Co.......... 500 28,750
Energen Corp......................... 2,000 44,625
Laclede Gas Co....................... 1,200 29,700
NUI Corp............................. 2,200 56,375
Piedmont Natural Gas, Inc............ 500 17,031
Wicor, Inc........................... 1,500 71,906
Williams Co., Inc. (The)............. 2,200 69,575
----------
407,612
----------
HEALTH SERVICES (0.7%)
Cardinal Health, Inc................. 800 77,000
Carematrix Corp.+.................... 1,000 27,125
Columbia/HCA Healthcare Corp......... 4,200 138,338
HEALTH SERVICES (CONTINUED)
HBO & Co............................. 2,600 $ 155,513
HEALTHSOUTH Corp.+................... 3,300 99,619
Humana, Inc.+........................ 1,100 29,700
Mariner Health Group, Inc.+.......... 2,300 41,688
Medical Manager Corp.+............... 1,700 50,256
Shared Medical Systems Corp.......... 100 7,294
Sun Healthcare Group, Inc.+.......... 1,900 31,825
Tenet Healthcare Corp.+.............. 2,100 78,619
United Healthcare Corp............... 1,300 91,325
Universal Health Services, Inc.+..... 1,000 57,563
----------
885,865
----------
HEAVY MACHINERY (0.6%)
Advanced Energy Industries, Inc.+.... 300 4,463
Case Corp............................ 700 44,494
Caterpillar, Inc..................... 4,300 244,831
Cummins Engine Company, Inc.......... 500 27,188
Deere & Co........................... 2,900 169,469
Gardner Denver Machinery, Inc.+...... 1,600 45,100
Manitowoc Co., Inc. (The)............ 1,200 55,950
Navistar International Corp.......... 900 26,888
PACCAR, Inc.......................... 900 53,438
Terex Corp.+......................... 1,700 52,063
----------
723,884
----------
HOUSING AND FURNISHINGS (0.8%)
American Homestar Corp.+............. 2,550 52,913
Centex Corp.......................... 600 20,850
Champion Enterprises, Inc.+.......... 1,700 42,288
D.R. Horton, Inc..................... 2,100 38,981
Department 56, Inc.+................. 1,000 35,938
Ethan Allen Interiors, Inc........... 1,000 50,938
Fairfield Communities, Inc.+......... 1,100 25,713
Furniture Brands International, Inc.+ 1,700 49,938
Helen of Troy Ltd.+.................. 4,400 90,200
Kaufman & Broad Home Corp............ 1,600 46,500
La-Z-Boy, Inc........................ 800 41,850
Maytag Corp.......................... 1,000 51,500
MDC Holdings, Inc.................... 2,100 36,094
Mohawk Industries, Inc.+............. 2,400 74,100
Newell Co............................ 1,100 53,144
Oneida, Ltd.......................... 1,300 38,919
Pillowtex Corp....................... 700 35,131
Rent-Way, Inc.+...................... 1,900 59,613
Rubbermaid, Inc...................... 1,100 31,488
Ryland Group, Inc.................... 1,800 37,688
Standard Pacific Corp................ 2,500 43,125
Whirlpool Corp....................... 500 36,000
----------
992,911
----------
INDUSTRIAL SERVICES (0.1%)
Browning-Ferris Industries, Inc...... 1,500 51,188
</TABLE>
62 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
INDUSTRIAL SERVICES (CONTINUED)
Granite Construction, Inc............ 500 $ 14,781
Laidlaw, Inc......................... 2,300 32,056
Waste Management, Inc................ 1,400 46,900
----------
144,925
----------
INSURANCE (3.2%)
Alfa Corp............................ 700 12,513
Allstate Corp. (The)................. 4,000 384,999
American Annuity Group, Inc.......... 1,500 35,344
American Bankers Insurance Group..... 900 55,294
American International Group, Inc.... 6,500 855,155
Amerus Life Holdings, Inc............ 1,000 32,000
Aon Corp............................. 1,200 77,400
Capital RE Corp...................... 1,200 88,575
Chartwell Re Corp.................... 1,000 30,813
Chubb Corp........................... 1,200 94,725
CIGNA Corp........................... 500 103,469
Cincinnati Financial Corp............ 400 50,950
CMAC Investment Corp................. 1,600 103,300
Conseco, Inc......................... 2,100 104,213
Enhance Financial Services Group,
Inc................................ 600 41,175
ESG Re Ltd........................... 1,000 25,750
FBL Financial Group, Inc............. 2,600 74,750
Fidelity National Financial, Inc..... 1,430 52,731
First American Financial Corp........ 700 49,744
FPIC Insurance Group, Inc.+.......... 700 24,150
Gallagher (Arthur J.) & Co........... 900 39,488
General Re Corp...................... 700 156,494
Hartford Financial Services
Group, Inc......................... 1,300 143,975
Hooper Holmes, Inc................... 2,100 49,481
Horace Mann Educators Corp........... 3,200 110,000
Jefferson-Pilot Corp................. 750 44,016
LandAmerica Financial Group, Inc..... 1,300 68,575
LaSalle Re Holdings Ltd.............. 900 32,906
Life Re Corp......................... 700 50,400
Lincoln National Corp................ 1,000 88,813
Marsh & McLennan Co., Inc............ 1,600 145,800
MBIA, Inc............................ 800 59,700
MGIC Investment Corp................. 1,500 94,500
Mutual Risk Management Ltd........... 1,200 40,650
Orion Capital Corp................... 2,200 122,650
Progressive Corp..................... 500 67,719
Safeco Corp.......................... 900 44,944
Selective Insurance Group, Inc....... 2,600 71,500
St. Paul Co., Inc.................... 826 69,976
State Auto Financial Corp............ 1,000 36,375
SunAmerica, Inc...................... 1,250 62,422
Torchmark Corp....................... 1,800 80,213
UNUM Corp............................ 1,000 53,750
Vesta Insurance Group, Inc........... 400 22,650
----------
4,054,047
----------
INVESTMENT SERVICES (0.5%)
Charles Schwab Corp.................. 1,800 $ 63,000
Conning Corp......................... 1,400 28,700
Doral Financial Corp................. 1,000 35,125
Duff & Phelps Credit Rating Co....... 600 34,200
Everen Capital Corp.................. 400 21,275
Lehman Brothers Holdings, Inc........ 1,400 99,488
Merrill Lynch & Co., Inc............. 3,100 272,025
Providian Financial Corp............. 700 42,131
----------
595,944
----------
LEISURE TIME & SERVICES (0.0%)
Marriott International, Inc.......... 900 29,700
----------
MAJOR TELECOMMUNICATIONS (2.8%)
Alltel Corp.......................... 1,400 59,850
Ameritech Corp....................... 8,200 349,012
AT&T Corp............................ 15,400 924,962
Bell Atlantic Corp................... 5,300 495,880
BellSouth Corp....................... 6,800 436,474
GTE Corp............................. 6,000 350,624
SBC Communications, Inc.............. 12,600 522,112
U.S. West Communications Group....... 3,400 179,350
WorldCom, Inc.+...................... 6,900 295,190
----------
3,613,454
----------
MISCELLANEOUS METALS (0.1%)
Amcol International Corp............. 2,550 34,903
Titanium Metals Corp.+............... 1,100 29,288
----------
64,191
----------
OIL (2.0%)
Ashland Oil, Inc..................... 900 47,588
Atlantic Richfield Co................ 2,400 187,200
Chevron Corp......................... 1,700 140,569
Exxon Corp........................... 15,500 1,130,530
Giant Industries, Inc................ 1,800 38,925
Houston Exploration Co. (The)+....... 2,000 46,750
Mobil Corp........................... 2,100 165,900
Oryx Energy Co.+..................... 200 5,225
Pennzoil Co.......................... 400 25,625
Phillips Petroleum Co................ 1,700 84,256
Royal Dutch Petroleum Co.+........... 5,700 322,405
Sun Company, Inc.+................... 900 36,394
Swift Energy Co.+.................... 2,420 48,249
Texaco, Inc.......................... 1,500 92,250
USX-Marathon Group................... 2,000 71,625
Vintage Petroleum, Inc............... 2,800 54,600
----------
2,498,091
----------
OIL SERVICES (0.9%)
Baker Hughes, Inc.................... 1,000 40,500
Cliffs Drilling Co.+................. 700 34,519
Coflexip SA+......................... 1,000 71,250
Cooper Cameron Corp.+................ 1,000 66,438
</TABLE>
63
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BALANCED (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
OIL SERVICES (CONTINUED)
Friede Goldman International, Inc.+.. 1,200 $ 48,300
Global Industries Ltd.+.............. 3,200 72,600
Halliburton Co....................... 2,500 137,500
Input/Output, Inc.+.................. 1,200 29,850
Oceaneering International, Inc.+..... 2,300 52,756
Pool Energy Services Co.+............ 1,000 26,375
Rowan Co., Inc.+..................... 1,000 29,438
Schlumberger Ltd..................... 3,500 290,062
SEACOR SMIT Holdings+................ 700 41,038
Superior Energy Services, Inc.+...... 2,800 31,150
Tuboscope Vetco International Corp.+. 3,900 92,381
Veritas DGC, Inc.+................... 800 43,350
Western Atlas, Inc.+................. 300 23,700
----------
1,131,207
----------
OTHER TELECOMMUNICATIONS (1.7%)
AirTouch Communications, Inc.+....... 3,600 191,250
Cidco, Inc.+......................... 2,200 18,975
Comverse Technology, Inc.+........... 1,000 47,375
Davox Corp.+......................... 800 17,900
DSC Communications Corp.+............ 1,200 21,600
General Instrument Corp.+............ 1,000 22,438
ITC Deltacom, Inc.+.................. 1,100 31,488
Lucent Technologies, Inc............. 15,000 1,141,874
Mobile Telecommunications
Technologies Corp.+................ 2,400 61,200
Northern Telecom Ltd................. 3,500 213,063
P-Com, Inc.+......................... 1,800 35,438
Scientific Atlanta, Inc.............. 600 14,325
Tekelec+............................. 2,600 130,650
Tellabs, Inc.+....................... 2,200 155,925
US LEC Corp.+........................ 1,700 41,225
Vimpel Communications ADR+........... 800 43,200
----------
2,187,926
----------
PRINT MEDIA (0.4%)
Dun & Bradstreet Corp................ 1,600 56,800
Equifax, Inc......................... 1,100 42,556
Gannett Co., Inc..................... 1,900 129,081
Knight-Ridder, Inc................... 700 40,819
McGraw-Hill Co., Inc................. 700 54,206
New York Times Co.................... 900 63,844
Times Mirror Co...................... 700 42,831
Tribune Co........................... 900 59,400
----------
489,537
----------
PRODUCER GOODS (2.4%)
AFC Cable Systems, Inc.+............. 1,200 41,700
Allegheny Teledyne, Inc.............. 1,300 32,988
Allied Signal, Inc................... 4,300 188,394
Alpine Group, Inc. (The)+............ 1,900 39,544
PRODUCER GOODS (CONTINUED)
Applied Power, Inc................... 1,400 $ 52,325
Avery Dennison Corp.................. 900 47,138
Avondale Industries, Inc.+........... 2,000 53,750
C & D Technologies, Inc.............. 700 38,675
Cable Design Technologies+........... 800 21,300
Chart Industries, Inc................ 1,600 45,000
Citation Corp.+...................... 1,200 25,050
Cooper Industries, Inc............... 1,500 100,313
Corning, Inc......................... 1,700 68,000
Daisytek International Corp.+........ 2,200 53,350
Dover Corp........................... 1,600 63,200
Dresser Industries, Inc.............. 1,200 63,450
Ecolab, Inc.......................... 1,000 31,688
Emerson Electric Co.................. 3,100 197,238
Encore Wire Corp.+................... 900 34,875
FMC Corp.+........................... 300 23,269
Grainger (W. W.), Inc................ 400 43,575
Harnischfeger Industries, Inc........ 300 8,475
Hexcel Corp.+........................ 1,400 39,113
Honeywell, Inc....................... 900 83,813
Hughes Supply, Inc................... 1,500 58,125
Illinois Tool Works, Inc............. 2,400 169,200
Ingersoll-Rand Co.................... 1,500 69,094
Intermet Corp........................ 4,000 84,000
ITT Industries, Inc.................. 800 29,150
Kaydon Corp.......................... 1,400 61,338
Kaynar Technologies, Inc.+........... 800 27,600
Kuhlman Corp......................... 500 24,500
Minnesota Mining and Manufacturing
Co................................. 1,200 113,250
Motivepower Industries, Inc.+........ 1,400 36,050
Mueller Industries, Inc.+............ 1,300 87,994
Parker-Hannifin Corp................. 1,300 58,013
PPG Industries, Inc.................. 1,400 98,963
Raychem Corp......................... 600 24,113
Robbins & Myers, Inc................. 300 9,938
Shaw Group, Inc.+.................... 1,500 35,250
Sherwin-Williams Co.................. 1,300 46,313
Spartech Corp........................ 2,300 48,731
Superior Telecom..................... 900 37,969
Thermo Electron Corp.+............... 1,100 43,794
Thomas Industries, Inc............... 300 7,781
Timken Co............................ 700 27,956
Tower Automotive, Inc.+.............. 1,400 74,638
Tredegar Industries, Inc............. 600 46,988
Tyco International Ltd............... 5,400 294,299
United Stationers, Inc.+............. 700 44,188
Westinghouse Air Brake Co............ 1,500 42,094
ZERO Corp............................ 1,200 36,975
----------
3,134,527
----------
</TABLE>
64 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (0.6%)
American General Hospitality Corp.... 2,100 $ 52,631
Apartment Investment & Management Co. 1,100 41,113
Boykin Lodging Co.................... 1,500 35,250
BRE Properties, Inc.................. 900 23,625
CBL & Associates Properties, Inc..... 1,000 24,563
Developers Diversified Realty Corp... 700 27,781
Duke Realty Investments, Inc......... 1,200 28,575
Eastgroup Properties, Inc............ 1,600 31,900
Equity Inns, Inc..................... 2,200 32,450
Essex Property Trust, Inc............ 1,000 33,000
General Growth Properties............ 900 32,288
Glenborough Realty Trust, Inc........ 1,300 34,856
Health Care REIT, Inc................ 1,000 27,813
Healthcare Realty Trust, Inc......... 1,200 33,750
Hospitality Properties Trust......... 1,100 35,338
Impac Mortgage Holdings, Inc......... 2,100 34,650
INMC Mortgage Holding, Inc........... 2,000 48,500
Koger Equity, Inc.................... 1,200 25,725
National Golf Properties, Inc........ 600 18,638
Prentiss Properties Trust............ 1,500 38,063
Security Capital Group, Inc.+........ 400 12,100
Sunstone Hotel Investors, Inc........ 2,300 35,650
----------
708,259
----------
SEMICONDUCTORS AND ELECTRONICS (1.2%)
AMP, Inc............................. 1,600 62,900
Applied Materials, Inc.+............. 2,500 90,313
Asyst Technologies, Inc.+............ 1,600 33,700
Berg Electronics Corp.+.............. 3,000 71,438
Brightpoint, Inc.+................... 2,200 42,900
C.P. Clare Corp.+.................... 2,600 33,475
Cellstar Corp.+...................... 800 26,100
CHS Electronics, Inc.+............... 1,600 33,400
CTS Corp............................. 900 33,244
Electro Scientific Industries, Inc.+. 800 30,400
Essex International, Inc.+........... 1,100 39,463
Esterline Technologies+.............. 1,800 41,400
Flextronics International Ltd.+...... 900 42,750
General Scanning, Inc.+.............. 1,800 41,063
Inacom Corp.+........................ 1,900 68,044
Integrated Circuit Systems, Inc.+.... 1,400 21,175
Intel Corp........................... 4,400 355,574
KLA Instruments Corp.+............... 1,100 44,344
Level One Communications, Inc.+...... 1,350 42,019
Mettler-Toledo International, Inc.+.. 1,800 36,225
National Semiconductor Corp.+........ 1,700 37,400
Phototronics, Inc.+.................. 1,200 44,250
Power-One, Inc.+..................... 900 11,306
SEMICONDUCTORS AND ELECTRONICS (CONTINUED)
Sanmina Corp.+....................... 900 $ 81,000
Texas Instruments, Inc............... 2,700 172,969
Viacom, Inc.+........................ 1,000 58,000
----------
1,594,852
----------
SPECIALTY CHEMICALS (0.2%)
Air Products and Chemicals, Inc...... 900 78,244
Dexter Corp.......................... 1,200 49,575
Engelhard Corp....................... 700 14,788
Grace (W.R.) & Co.................... 500 10,156
Morton International, Inc............ 1,000 32,000
Praxair, Inc......................... 1,100 55,344
Sigma-Aldrich Corp................... 700 27,913
----------
268,020
----------
STEEL (0.1%)
Inland Steel Industries, Inc......... 600 17,588
Ispat International+................. 100 2,800
Nucor Corp........................... 400 23,975
Reliance Steel & Aluminum Co........ 1,100 44,413
Texas Industries, Inc................ 700 45,106
USX-US Steel Group, Inc.............. 1,000 39,125
Worthington Industries............... 300 5,391
----------
178,398
----------
SURFACE TRANSPORT (0.5%)
Burlington Northern Santa Fe Corp.... 1,200 118,800
Consolidated Freightways Corp.+...... 2,200 39,463
CSX Corp............................. 1,600 84,000
FDX Corp. Holding Co.+............... 1,800 122,400
Knightsbridge Tankers Ltd............ 1,200 34,500
Norfolk Southern Corp................ 2,700 90,281
Roadway Express, Inc................. 1,600 39,700
Royal Olympic Cruise Lines, Inc.+.... 1,100 20,213
Swift Transportation Co., Inc.+...... 1,800 41,175
U.S. Freightways Corp................ 1,400 50,050
Werner Enterprises, Inc.............. 1,600 38,600
----------
679,182
----------
TEXTILES AND APPAREL (0.4%)
Brylane, Inc.+....................... 700 41,125
Dan River, Inc.+..................... 1,500 28,969
Liz Claiborne, Inc................... 500 24,594
Maxwell Shoe Co., Inc.+.............. 1,600 28,400
Nautica Enterprises, Inc.+........... 1,400 34,825
North Face, Inc. (The)+.............. 1,400 31,413
Novel Denim Holdings Ltd.+........... 1,500 37,875
Oshkosh B'Gosh, Inc.................. 1,100 42,350
Reebok International Ltd.+........... 300 8,813
Stride Rite Corp..................... 1,600 20,100
</TABLE>
65
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BALANCED (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
TEXTILES AND APPAREL (CONTINUED)
VF Corp.............................. 1,000 $ 52,000
WestPoint Stevens, Inc.+............. 1,800 60,300
Wolverine World Wide, Inc............ 2,100 60,638
----------
471,402
----------
TOTAL COMMON STOCKS (COST 70,665,271
$54,126,919) ----------
PREFERRED STOCKS (0.5%)
California Federal Preferred Capital
Corp. (Banks and Thrifts) +........ 12,000 323,999
Duke Energy Corp. (Electric
Utilities) ........................ 2,500 144,688
FPL Group, Inc. (Electric Utilities) 1,400 86,888
Union Carbide Corp. (Chemicals) ..... 900 43,650
----------
TOTAL PREFERRED STOCKS (COST
$537,272) 599,225
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C>
LONG-TERM BONDS AND NOTES (24.8%)
U.S. GOVERNMENT OBLIGATIONS (13.0%)
U.S. Treasury Bond, 6.75%, 08/15/26.. $2,000,000 2,194,064
U.S. Treasury Bond, 7.25%, 08/15/04.. 750,000 810,116
U.S. Treasury Bond, 7.25%, 05/15/16.. 500,000 568,280
U.S. Treasury Note, 5.75%, 09/30/99.. 2,000,000 2,004,835
U.S. Treasury Note, 5.75%, 10/31/00.. 6,200,000 6,219,382
U.S. Treasury Note, 6.38%, 03/31/01.. 4,250,000 4,333,666
U.S. Treasury Note, 6.50%, 10/15/06.. 500,000 523,982
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST
$16,169,365) 16,654,325
----------
NON-AGENCY MORTGAGE-BACKED SECURITIES (0.8%)
DLJ Mortgage Acceptance Corp.,
8.10%, 06/18/04.................... 350,000 346,062
Merrill Lynch Mortgage Investors,
Inc., 7.71%, 06/15/21.............. 671,149 688,137
----------
TOTAL NON-AGENCY MORTGAGE-BACKED
SECURITIES (COST $1,007,226) 1,034,199
----------
FOREIGN AND SUPRANATIONALS (2.0%)
African Development Bank, 8.80%,
09/01/19........................... 1,000,000 1,261,229
Argent-Global Bond (Republic of
Argentina), 11.38%, 01/30/17....... 400,000 443,499
Transport De Gas Del Sur, 7.75%,
12/23/98........................... 400,000 399,691
United Mexican States Government,
11.38%, 09/15/16................... 400,000 469,999
----------
TOTAL FOREIGN AND SUPRANATIONALS (COST
$2,306,049) 2,574,418
----------
CORPORATE AND CONVERTIBLE BONDS (9.0%)
American General Finance, 8.45%,
10/15/09........................... $1,000,000 $1,146,709
BCH Cayman Islands Ltd., 7.70%,
07/15/06........................... 900,000 961,370
Centennial Cellular Corp., 10.13%,
05/15/05........................... 450,000 503,999
Comcast Cellular, 9.50%, 05/01/07.... 1,000,000 1,039,999
Exide Corp., 10.00%, 04/15/05++...... 525,000 549,937
First Empire Capital Trust II,
8.23%, 06/01/27.................... 500,000 536,249
Flag Ltd., 8.25%, 01/30/08++++....... 375,000 380,624
Fred Meyer, Inc., 7.38%, 03/01/05.... 700,000 696,492
HSBC America, 7.81%, 12/15/26++++.... 750,000 756,498
Kaman Corp., 6.00%, 03/15/12......... 449,000 440,019
Panama (Republic of), 7.88%,
02/13/02++++....................... 400,000 399,999
Raytheon Co., 6.75%, 08/15/07........ 1,000,000 1,020,954
Riggs Capital Trust, 8.62%,
12/31/26++++....................... 300,000 318,572
Rogers Cantel, Inc., 9.38%, 06/01/08. 400,000 415,999
Russia-Interest Notes, 6.72%,
12/15/15........................... 700,000 504,874
TCI Communications, Inc., 6.38%,
09/15/99........................... 1,000,000 1,001,189
Tenet Healthcare Corp., 7.88%,
01/15/03........................... 300,000 306,872
Tenet Healthcare Corp., 8.00%,
01/15/05........................... 200,000 204,750
Worldcom, Inc., 8.88%, 01/15/06...... 258,000 276,088
----------
TOTAL CORPORATE AND CONVERTIBLE BONDS (COST
$10,983,492) 11,461,193
----------
TOTAL LONG-TERM BONDS AND NOTES (COST
$30,466,132) 31,724,135
----------
SHORT-TERM INVESTMENTS (19.2%)
Crown Cork & Seal Co., Comm. Paper,
5.65%, 05/06/98.................... 4,000,000 3,996,861
Enron Oil & Gas Co., Comm. Paper,
5.70%, 05/01/98.................... 2,637,000 2,637,000
Mid Atlantic Fuel Comp, Comm. Paper,
5.70%, 05/01/98.................... 4,153,000 4,153,000
Occidental Petroleum, Comm. Paper,
5.75%, 05/04/98++++................ 1,250,000 1,249,401
Raytheon Co., Comm. Paper, 5.89%,
08/31/98++++....................... 4,000,000 4,004,280
Renaissance Energy Co., Comm. Paper,
5.63%, 05/04/98.................... 4,000,000 3,998,123
Textron Financial Corp., Comm.
Paper, 5.75%, 05/05/98............. 4,520,000 4,517,112
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $24,551,497) 24,555,777
-----------
TOTAL INVESTMENTS (COST $109,681,820)(A) 127,544,408
OTHER ASSETS LESS LIABILITIES 573,626
------------
TOTAL NET ASSETS $128,118,034
============
</TABLE>
66 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$110,174,450. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains .................... $18,204,438
Unrealized losses ................... (834,480)
-----------
Net unrealized gain ............... $17,369,958
===========
</TABLE>
+ Non-income producing security.
++ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
++++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements. 67
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH AND INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (97.1%)
UNITED STATES (91.2%)
AIR TRANSPORT (2.6%)
Airborne Freight Corp................ 45,300 $1,795,013
Alaska Air Group, Inc.+.............. 12,100 679,113
America West Holdings Corp.+......... 115,200 3,484,800
AMR Corp.+........................... 37,000 5,637,874
Delta Air Lines, Inc................. 35,700 4,150,124
Northwest Airlines Corp.+............ 15,900 834,750
UAL Corp.+........................... 22,200 1,935,563
US Airways Group, Inc.+.............. 5,100 362,738
----------
18,879,975
----------
AUTO PARTS AND HARDWARE (0.8%)
Black & Decker Corp.................. 80,500 4,155,812
Echlin, Inc.......................... 30,800 1,457,225
----------
5,613,037
----------
AUTOMOTIVE (1.2%)
Chrysler Corp........................ 144,800 5,819,149
Dura Automotive Systems, Inc.+....... 4,100 159,900
Ford Motor Co........................ 29,700 1,360,631
General Motors Corp.................. 24,000 1,617,000
----------
8,956,680
----------
BANKS AND THRIFTS (8.1%)
Ahmanson (H. F.) & Co................ 56,700 4,323,374
AmSouth Bancorporation............... 26,850 1,674,769
Banc One Corp........................ 20,600 1,211,538
Bank United Corp..................... 3,500 181,125
BankAmerica Corp..................... 67,100 5,703,499
Centura Banks, Inc................... 20,500 1,476,000
City National Corp................... 35,200 1,309,000
Comerica, Inc........................ 60,750 4,066,452
Commerce Bancshares, Inc............. 28,400 1,391,600
Dime Bancorp, Inc.................... 61,400 1,884,213
Fifth Third Bancorp.................. 57,300 3,151,500
First Chicago NBD Corp............... 4,600 427,225
Firstfed Financial Corp.+............ 8,300 379,725
Fleet Financial Group, Inc........... 56,500 4,880,187
Golden West Financial Corp........... 54,400 5,728,999
Life Financial Corp.+................ 2,100 47,775
Meridian Industrial Trust, Inc....... 1,000 23,125
NationsBank Corp..................... 72,400 5,484,299
Popular, Inc......................... 4,700 330,175
Prime Bancshares, Inc................ 5,000 133,750
Provant, Inc.+....................... 12,500 232,813
Republic New York Corp............... 32,800 4,386,999
Security Capital Group, Inc.,
Warrants+.......................... 749 2,107
SouthTrust Corp...................... 43,300 1,848,369
State Street Corp.................... 51,300 3,667,949
Suntrust Banks, Inc.................. 50,500 4,112,593
TR Financial Corp.................... 6,300 226,406
BANKS AND THRIFTS (CONTINUED)
Umb Financial Corp................... 9,000 $ 531,000
Webster Financial Corp............... 7,300 247,288
----------
59,063,854
----------
BIOTECH AND MEDICAL PRODUCTS (3.2%)
ADAC Laboratories+................... 18,500 402,375
Alpharma, Inc........................ 106,700 2,427,425
Arterial Vascular Engineering, Inc.+. 45,000 1,591,875
ATL Ultrasound, Inc.+................ 33,700 1,630,238
Biogen, Inc.+........................ 6,000 266,250
Centocor, Inc.+...................... 11,300 476,719
Conmed Corp.+........................ 92,100 2,106,788
Datascope Corp.+..................... 53,600 1,507,500
Genentech, Inc.+..................... 12,400 858,700
Hanger Orthopedic Group, Inc.+....... 146,200 2,732,113
Hillenbrand Industries, Inc.......... 7,600 474,050
OEC Medical Systems, Inc.+........... 28,000 635,250
Osteotech, Inc.+..................... 70,900 1,564,231
Quintiles Transnational Corp.+....... 30,000 1,485,000
Safeskin Corp.+...................... 62,600 2,230,125
Trex Medical Corp.+.................. 13,900 264,100
Visx, Inc.+.......................... 62,500 2,757,813
Watson Pharmaceuticals, Inc.+........ 3,400 146,200
----------
23,556,752
----------
CHEMICALS (0.2%)
Monsanto Co.......................... 5,000 264,375
Rohm & Haas Co....................... 13,900 1,498,594
----------
1,762,969
----------
COMMERCIAL SERVICES (2.4%)
AccuStaff, Inc.+..................... 59,700 2,141,738
Bowne & Co., Inc.+................... 25,100 1,036,944
Day Runner, Inc.+.................... 75,400 1,809,600
Deluxe Corp.......................... 89,400 2,994,900
Engineering Animation, Inc.+......... 10,350 487,744
Galileo International, Inc........... 80,700 3,258,263
Mail-Well, Inc.+..................... 9,100 440,213
Valassis Communications, Inc.+....... 92,100 3,614,924
Viad Corp............................ 1,700 43,881
Western Staff Services, Inc.+........ 35,800 937,513
World Access, Inc.+.................. 19,400 749,325
----------
17,515,045
----------
COMPUTERS (3.0%)
Aspec Technology, Inc.+.............. 2,500 34,688
Cabletron Systems, Inc.+............. 152,400 2,019,300
Ceridian Corp.+...................... 75,700 4,281,780
Dell Computer Corp.+................. 80,900 6,532,674
Digital Equipment Corp.+............. 22,000 1,223,750
FactSet Research Systems, Inc.+...... 7,000 245,000
Hewlett Packard Co................... 44,000 3,313,750
Micron Electronics, Inc.+............ 7,000 97,563
</TABLE>
68 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED STATES (CONTINUED)
COMPUTERS (CONTINUED)
Sun Microsystems, Inc.+.............. 105,300 $4,337,043
----------
22,085,548
----------
CONGLOMERATE AND AEROSPACE (2.3%)
General Dynamics Corp................ 25,800 1,090,050
Goodrich (B.F.) Co................... 72,000 3,874,499
Gulfstream Aerospace Corp.+.......... 18,200 763,263
Lockheed Martin Corp................. 8,500 946,688
Loews Corp........................... 40,300 4,032,518
Thiokol Corp......................... 34,200 1,842,525
United Technologies Corp............. 44,900 4,419,843
----------
16,969,386
----------
CONSUMER FINANCE (1.1%)
Associates First Capital Corp........ 31,791 2,376,371
ContiFinancial Corp.+................ 7,000 225,750
Countrywide Credit Industries, Inc... 73,600 3,560,400
Crescent Operating, Inc.+............ 1,800 39,375
Leasing Solutions, Inc.+............. 28,700 792,838
Money Store, Inc. (The).............. 23,600 775,850
----------
7,770,584
----------
CONSUMER PRODUCTS (1.3%)
American Greetings Corp.............. 42,450 1,963,313
Blyth Industries, Inc.+.............. 48,800 1,790,350
Dial Corp............................ 9,200 224,250
M & F Worldwide Corp.+............... 28,100 266,950
National R.V. Holdings, Inc.+........ 72,300 2,774,513
Procter & Gamble Co.................. 24,500 2,013,594
Twinlab Corp.+....................... 7,800 306,150
----------
9,339,120
----------
CONSUMER SERVICES (2.3%)
Anchor Gaming+....................... 8,500 716,125
Brinker International, Inc.+......... 10,600 254,400
Darden Restaurants, Inc.............. 254,700 4,075,199
Foodmaker, Inc.+..................... 50,200 953,800
Grand Casinos, Inc.+................. 176,201 3,094,534
Promus Hotel Corp.+.................. 31,080 1,404,428
Red Roof Inns, Inc.+................. 34,600 611,988
Service Corp. International.......... 96,500 3,980,624
Silverleaf Resorts, Inc.+............ 3,500 83,125
Sonic Corp.+......................... 60,000 1,920,000
----------
17,094,223
----------
CONSUMER SPECIALTIES (0.8%)
Brunswick Corp....................... 107,500 3,493,750
Hasbro, Inc.......................... 6,700 246,644
Huffy Corp........................... 21,600 353,700
Jostens, Inc......................... 12,600 298,463
Russ Berrie & Co., Inc............... 46,000 1,316,750
----------
5,709,307
----------
DATA AND IMAGING SERVICES (4.6%)
Aspen Technology, Inc.+.............. 3,800 $ 185,725
BMC Software, Inc.+.................. 22,000 2,058,375
Box Hill Systems Corp.+.............. 10,000 106,250
Cadence Design Systems, Inc.+........ 72,700 2,639,919
Computer Horizons Corp.+............. 1,200 45,525
Compuware Corp.+..................... 42,300 2,067,413
Edify Corp.+......................... 2,200 23,925
Geotel Communications Corp.+......... 3,000 82,875
JDA Software Group, Inc.+............ 27,500 1,390,469
Keane, Inc.+......................... 23,000 1,155,750
Manugistics Group, Inc.+............. 51,200 3,072,000
Microsoft Corp.+..................... 89,700 8,084,212
Mobius Management Solutions+......... 3,700 68,450
Oracle Corp.+........................ 47,600 1,231,650
Progress Software Corp.+............. 86,800 2,777,600
QLogic Corp.+........................ 42,200 1,877,900
Quantum Corp.+....................... 13,800 324,300
Siebel Systems, Inc.+................ 54,400 1,407,600
Symantec Corp.+...................... 63,400 1,838,600
Visio Corp.+......................... 60,100 2,974,950
----------
33,413,488
----------
DISCRETIONARY RETAIL (6.2%)
American Eagle Outfitters, Inc.+..... 52,000 3,042,000
Ames Department Stores, Inc.+........ 59,200 1,450,400
Barnes & Noble, Inc.+................ 7,400 250,675
Costco Companies, Inc.+.............. 80,500 4,497,937
Csk Auto Corp.+...................... 7,700 207,900
Dayton Hudson Corp................... 51,200 4,470,399
Dress Barn, Inc.+.................... 15,600 454,350
Federated Department Stores, Inc.+... 92,500 4,549,843
Fingerhut Companies, Inc............. 78,700 2,331,488
Footstar, Inc.+...................... 32,000 1,274,000
Kmart Corp.+......................... 14,200 247,613
Linens 'n Things, Inc.+.............. 2,800 168,700
Lowe's Co., Inc...................... 69,700 4,874,643
Maxim Group, Inc. (The)+............. 128,800 2,318,400
Micro Warehouse, Inc.+............... 6,600 103,125
Office Depot, Inc.+.................. 62,200 2,060,375
Payless ShoeSource, Inc.+............ 3,476 248,534
Renters Choice, Inc.+................ 64,000 1,752,000
Ross Stores, Inc..................... 71,500 3,311,344
Sears, Roebuck & Co.................. 21,300 1,263,356
Sports Authority, Inc. (The)+........ 13,300 233,581
Stage Stores, Inc.+.................. 7,000 360,063
TJX Companies, Inc................... 141,000 6,239,249
----------
45,709,975
----------
DIVERSIFIED FINANCIAL SERVICES (1.9%)
Morgan Stanley, Dean Witter,
Discover & Co...................... 79,980 6,308,422
Tower Realty Trust, Inc.............. 1,800 42,525
Travelers Group, Inc................. 122,863 7,517,679
----------
13,868,626
----------
</TABLE>
69
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH AND INCOME (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED STATES (CONTINUED)
DRUGS (5.0%)
Abbott Laboratories.................. 84,900 $6,208,312
Eli Lilly & Co....................... 92,700 6,448,443
Medicis Pharmaceutical Corp.+........ 58,800 2,513,700
Merck & Co., Inc..................... 53,500 6,446,749
Pfizer, Inc.......................... 94,900 10,800,805
Rexall Sundown, Inc.+................ 39,700 1,267,919
Roberts Pharmaceutical Corp.+........ 130,900 2,225,300
Schering Plough...................... 500 40,063
Theragenics Corp.+................... 33,900 966,150
----------
36,917,441
----------
ELECTRIC UTILITIES (0.0%)
DTE Energy Co........................ 5,100 199,856
----------
ELECTRICAL MACHINERY AND INSTRUMENTS (1.7%)
Harris Corp.......................... 17,300 836,888
Steelcase Inc........................ 6,200 214,675
Technitrol, Inc...................... 43,000 1,757,625
Tektronix, Inc....................... 67,200 2,889,600
Waters Corp.+........................ 7,000 374,500
Xerox Corp........................... 53,100 6,026,849
----------
12,100,137
----------
ELECTRONIC MEDIA (1.6%)
Cablevision Systems Corp.+........... 4,400 270,325
CBS Corp............................. 12,800 456,000
Chancellor Media Corp.+.............. 7,900 374,756
Gaylord Entertainment Co............. 82,600 2,808,400
Jacor Communications, Inc.+.......... 10,000 568,750
Midway Games, Inc.+.................. 123,600 2,286,600
Speedway Motorsports, Inc.+.......... 51,200 1,398,400
Univision Communications, Inc.+...... 9,100 348,644
Walt Disney Co. (The)................ 27,900 3,468,319
----------
11,980,194
----------
FOOD AND BEVERAGE (2.1%)
Anheuser-Busch Co., Inc.............. 11,800 540,588
Canandaigua Brands, Inc.+............ 46,700 2,445,913
Coors (Adolph) Co.................... 36,000 1,287,000
Earthgrains Co....................... 10,700 500,225
NBTY, Inc.+.......................... 23,600 472,000
Quaker Oats Co....................... 73,300 3,811,599
Ralcorp Holdings, Inc.+.............. 900 17,888
Smithfields Foods, Inc.+............. 104,800 3,183,300
Suiza Foods Corp.+................... 51,200 3,033,600
----------
15,292,113
----------
FOOD AND DRUG RETAIL (2.1%)
Casey's General Stores, Inc.......... 10,000 163,750
CVS Corp............................. 92,900 6,851,374
Duane Reade, Inc.+................... 2,700 64,125
FOOD AND DRUG RETAIL (CONTINUED)
Fleming Companies, Inc............... 153,700 $2,881,875
Kroger Co. (The)+.................... 126,200 5,284,624
SUPERVALU, INC....................... 1,500 65,531
----------
15,311,279
----------
FOREST PRODUCTS AND BUILDING MATERIALS (2.0%)
Ball Corp............................ 27,000 1,042,875
Centex Construction Products, Inc.... 27,100 995,925
Florida Rock Industries, Inc......... 40,600 1,116,500
Georgia-Pacific Corp................. 60,300 3,880,968
Lafarge Corp......................... 41,400 1,656,000
Lone Star Industries, Inc............ 44,000 3,635,499
Masco Corp........................... 7,900 458,200
Owens Corning........................ 10,200 423,938
Sonosight, Inc.+..................... 11,233 91,970
Southdown, Inc....................... 16,600 1,174,450
----------
14,476,325
----------
GAS UTILITIES (1.4%)
Columbia Gas System, Inc............. 41,600 3,380,000
Energen Corp......................... 114,200 2,548,088
Enron Corp........................... 6,500 319,719
Pacific Enterprises.................. 91,900 3,578,355
Southwestern Energy Co............... 24,600 284,438
----------
10,110,600
----------
HEALTH SERVICES (0.6%)
Beverly Enterprises, Inc.+........... 130,700 2,058,525
Integrated Health Services, Inc...... 25,400 979,488
NovaCare, Inc.+...................... 102,600 1,429,988
Trigon Healthcare, Inc.+............. 7,000 212,625
----------
4,680,626
----------
HEAVY MACHINERY (1.8%)
Case Corp............................ 38,700 2,459,869
NACCO Industries, Inc................ 36,200 6,088,387
Navistar International Corp.......... 46,100 1,377,238
PACCAR, Inc.......................... 56,700 3,366,563
----------
13,292,057
----------
HOUSING AND FURNISHINGS (3.0%)
Centex Corp.......................... 147,000 5,108,249
Department 56, Inc.+................. 75,500 2,713,281
Ethan Allen Interiors, Inc........... 52,800 2,689,500
Fleetwood Enterprises, Inc........... 38,500 1,778,219
Kaufman & Broad Home Corp............ 16,400 476,625
Lennar Corp.......................... 97,000 2,661,438
Pulte Corp........................... 83,700 4,284,393
Ryland Group, Inc.................... 12,400 259,625
Standard Pacific Corp................ 97,600 1,683,600
U.S. Home Corp.+..................... 5,500 228,250
----------
21,883,180
----------
</TABLE>
70 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED STATES (CONTINUED)
INSURANCE (3.8%)
Allstate Corp. (The)................. 108,200 $10,414,249
AMBAC, Inc........................... 10,000 566,875
Annuity And Life Re (Hldgs)+......... 4,300 102,663
Conseco, Inc......................... 88,000 4,366,999
Equitable Co., Inc. (The)............ 24,800 1,522,100
ESG Re Ltd........................... 6,100 157,075
FBL Financial Group, Inc............. 19,800 569,250
First American Financial Corp........ 8,200 582,713
Guarantee Life Companies, Inc........ 15,000 406,875
Hartford Life, Inc................... 9,800 484,488
LandAmerica Financial Group, Inc..... 4,500 237,375
LaSalle Re Holdings Ltd.............. 4,700 171,844
MGIC Investment Corp................. 15,700 989,100
Mutual Risk Management Ltd........... 15,732 532,922
Nationwide Financial Services, Inc... 4,800 208,200
Old Republic International Corp...... 35,500 1,606,375
Orion Capital Corp................... 17,100 953,325
Reliance Group Holdings, Inc......... 4,600 79,638
SunAmerica, Inc...................... 51,900 2,591,756
Torchmark Corp....................... 23,200 1,033,850
----------
27,577,672
----------
INVESTMENT SERVICES (1.5%)
Bear Stearns Co., Inc. (The)......... 36,570 2,086,776
Donaldson, Lufkin & Jenrette, Inc.... 3,000 284,438
Edwards (A.G.), Inc.................. 35,700 1,606,500
Investors Financial Services Corp.... 5,200 280,150
Lehman Brothers Holdings, Inc........ 53,600 3,808,949
Paine Webber Group, Inc.............. 44,750 2,005,359
Providian Financial Corp............. 17,300 1,041,244
Waddell & Reed Financial............. 3,700 91,575
----------
11,204,991
----------
MAJOR TELECOMMUNICATIONS (2.6%)
AT&T Corp............................ 25,600 1,537,600
BellSouth Corp....................... 107,700 6,912,993
MCI Communications Corp.............. 103,400 5,202,312
U.S. West Communications Group....... 102,800 5,422,699
----------
19,075,604
----------
OIL (2.0%)
Ashland Oil, Inc..................... 77,900 4,118,962
Clayton Williams Energy, Inc.+....... 36,800 423,200
Comstock Resources, Inc.+............ 33,000 424,875
Domain Energy Corp.+................. 12,000 156,000
Lyondell Petrochemical Co............ 39,400 1,295,275
Mobil Corp........................... 6,100 481,900
Occidental Petroleum Corp............ 1,300 38,269
Phillips Petroleum Co................ 29,000 1,437,313
OIL (CONTINUED)
Sun Company, Inc.+................... 131,200 $5,305,399
Tesoro Petroleum Corp.+.............. 9,100 180,863
USX-Marathon Group................... 27,900 999,169
----------
14,861,225
----------
OIL SERVICES (1.9%)
Cal Dive International, Inc.+........ 8,000 264,000
Cliffs Drilling Co.+................. 28,600 1,410,338
Eagle Geophysical, Inc.+............. 20,000 372,500
Helmerich & Payne, Inc............... 84,600 2,580,300
McDermott International, Inc......... 23,100 955,763
Santa Fe International Corp.......... 5,200 203,775
SEACOR SMIT Holdings+................ 43,700 2,561,913
Trico Marine Services, Inc.+......... 96,700 2,187,838
Veritas DGC, Inc.+................... 60,000 3,251,250
----------
13,787,677
----------
OTHER TELECOMMUNICATIONS (0.9%)
ADC Telecommunications, Inc.+........ 55,000 1,646,563
Aerial Communications, Inc.+......... 16,100 116,725
Century Telephone Enterprises, Inc... 44,350 1,887,647
Comverse Technology, Inc.+........... 8,774 415,668
General Instrument Corp.+............ 2,500 56,094
Southern New England
Telecommunications Corp............ 34,600 2,422,000
----------
6,544,697
----------
PRINT MEDIA (2.0%)
Gannett Co., Inc..................... 66,800 4,538,224
Hollinger International, Inc......... 13,000 201,500
Knight-Ridder, Inc................... 72,500 4,227,655
McClatchy Newspapers, Inc............ 45,725 1,368,892
Meredith Corp........................ 42,000 1,806,000
Tribune Co........................... 40,900 2,699,400
----------
14,841,671
----------
PRODUCER GOODS (6.3%)
Aeroquip-Vickers, Inc.+.............. 69,800 4,436,662
Buckeye Technologies, Inc.+.......... 7,200 167,400
C & D Technologies, Inc.............. 32,200 1,779,050
Chicago Miniature Lamp, Inc.+........ 11,700 448,988
Cincinnati Milacron, Inc............. 127,000 3,944,937
Cooper Industries, Inc............... 41,300 2,761,938
FMC Corp.+........................... 25,900 2,008,869
Gleason Corp......................... 11,300 374,313
Graco, Inc........................... 83,350 2,870,366
Hanover Compressor Co.+.............. 15,000 388,125
Honeywell, Inc....................... 50,300 4,684,187
Ingersoll-Rand Co.................... 84,600 3,896,887
ITT Industries, Inc.................. 112,500 4,099,218
Kaydon Corp.......................... 23,400 1,025,213
</TABLE>
71
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH AND INCOME (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED STATES (CONTINUED)
PRODUCER GOODS (CONTINUED)
Parker-Hannifin Corp................. 42,400 $1,892,100
RMI Titanium Co.+.................... 94,300 2,104,069
Special Metals Corp.+................ 6,600 103,125
Thomas & Betts Corp.................. 65,100 3,800,212
Timken Co............................ 102,800 4,105,574
Tyco International Ltd............... 11,936 650,512
U.S. Filter Corp.+................... 5,500 179,438
Varlen Corp.......................... 15,000 521,250
----------
46,242,433
----------
REAL ESTATE INVESTMENT TRUSTS (3.1%)
Alexandria Real Estate Equities, Inc. 2,100 69,169
AMB Property Corp.................... 1,700 39,100
American Residential Investment
Trust, Inc......................... 1,700 21,038
Apartment Investment & Management Co. 29,200 1,091,350
Arden Realty Group, Inc.............. 10,100 283,431
Bay Apartment Communities, Inc....... 3,700 136,900
Beacon Capital+++.................... 26,000 533,000
Bedford Property Investors, Inc...... 3,000 58,313
Berkshire Realty Co., Inc............ 5,800 70,688
Boston Properties, Inc............... 8,600 284,338
Boykin Lodging Co.................... 5,800 136,300
Brandywine Realty Trust.............. 37,400 850,850
Burnham Pacific Properties, Inc...... 6,200 87,575
Cabot Industrial Trust............... 4,100 92,763
Camden Property Trust................ 10,777 315,901
Capstone Capital Trust, Inc.......... 4,200 100,275
Captec Net Lease Realty, Inc......... 4,200 67,463
Carramerica Realty Corp.............. 7,900 231,075
CBL & Associates Properties, Inc..... 10,900 267,731
Colonial Properties Trust............ 14,500 430,469
Cornerstone Properties, Inc.......... 18,200 327,600
Cousins Properties, Inc.............. 4,600 139,150
Crescent Real Estate Equities, Inc... 27,300 931,613
Criimi Mae, Inc...................... 9,900 147,881
Crown America Realty Trust........... 16,800 170,100
Duke Realty Investments, Inc......... 34,400 819,150
Eastgroup Properties, Inc............ 5,050 100,684
Equity Inns, Inc..................... 19,900 293,525
Equity Office Properties Trust....... 11,000 312,813
Equity Residential Properties Trust.. 13,700 673,013
Essex Property Trust, Inc............ 12,500 412,500
Glenborough Realty Trust, Inc........ 34,800 933,075
Glimcher Realty Trust................ 4,800 102,000
Health and Retirement Property Trust. 28,000 546,000
Health Care REIT, Inc................ 36,200 1,006,813
Healthcare Realty Trust, Inc......... 6,600 185,625
Home Properties of New York, Inc..... 4,800 128,700
Hospitality Properties Trust......... 29,000 931,625
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Imperial Credit Commercial Mortgage
Investment Corp.................... 2,800 $ 40,425
JDN Realty Corp...................... 9,600 305,400
Kimco Realty Corp.................... 26,250 972,891
Lexington Corporate Properties Trust. 3,800 55,100
LTC Properties, Inc.................. 35,100 684,450
Mack-Cali Realty Corp................ 5,000 187,813
Meditrust Companies.................. 11,400 342,713
MGI Properties, Inc.................. 4,600 111,550
National Health Investors, Inc....... 2,900 97,513
OMEGA Healthcare Investors, Inc...... 3,200 111,200
Parkway Properties, Inc.............. 7,900 259,713
Post Properties, Inc................. 26,600 1,085,613
Prentiss Properties Trust............ 10,400 263,900
Prime Retail, Inc.................... 11,900 168,831
Public Storage, Inc.................. 13,000 399,750
Ramco-Gerhenson Properties Trust..... 1,225 25,955
Reckson Associates Realty Corp....... 7,800 191,100
Regency Realty Corp.................. 4,400 113,300
Security Capital Industrial Trust.... 16,100 393,444
Simon Debartolo Group, Inc........... 6,000 197,625
SL Green Realty Corp................. 2,300 55,200
Spieker Properties, Inc.............. 5,500 217,938
Starwood Lodging Trust............... 20,200 1,013,788
Sun Communities, Inc................. 5,500 192,500
Sunstone Hotel Investors, Inc........ 4,100 63,550
Tanger Factory Outlet Centers, Inc... 7,100 214,331
United Dominion Realty Trust, Inc.... 17,167 232,827
Universal Health Realty Income Trust. 2,100 42,131
Urban Shopping Centers, Inc.......... 14,500 473,063
Vornado Realty Trust................. 7,800 312,488
Walden Residential Properties, Inc... 6,300 153,563
Weeks Corp........................... 2,300 72,450
Weingarten Realty Investors.......... 5,100 217,388
----------
22,599,099
----------
SEMICONDUCTORS AND ELECTRONICS (1.2%)
Berg Electronics Corp.+.............. 20,000 476,250
Cymer, Inc.+......................... 5,000 111,563
Intel Corp........................... 5,200 420,225
JLK Direct Distribution, Inc.+....... 10,000 327,500
Maxim Integrated Products, Inc.+..... 53,100 2,143,913
Sawtek, Inc.+........................ 900 27,338
Solectron Corp.+..................... 4,700 208,269
Viacom, Inc.+........................ 85,700 4,970,599
VLSI Technology, Inc.+............... 6,000 123,750
----------
8,809,407
----------
SPECIALTY CHEMICALS (0.2%)
Solutia, Inc......................... 7,800 221,325
Wellman, Inc......................... 48,501 1,097,342
----------
1,318,667
----------
</TABLE>
72 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
UNITED STATES (CONTINUED)
STEEL (0.4%)
Bethlehem Steel Corp.+............... 98,800 $1,537,575
USX-US Steel Group, Inc.............. 30,200 1,181,575
----------
2,719,150
----------
SURFACE TRANSPORT (1.3%)
Amerus Life Holdings, Inc............ 10,000 320,000
Continental Airlines, Inc.+.......... 25,400 1,495,425
Norfolk Southern Corp................ 128,700 4,303,405
Tidewater, Inc....................... 42,200 1,672,175
U.S. Freightways Corp................ 42,300 1,512,225
----------
9,303,230
----------
TEXTILES AND APPAREL (0.7%)
Burlington Industries, Inc.+......... 105,500 1,846,250
Timberland Co. (The)+................ 39,000 3,339,375
----------
5,185,625
----------
TOTAL UNITED STATES 667,623,525
----------
FOREIGN COMMON STOCKS (5.9%)
AUSTRALIA (0.2%)
Goodman Fielder Ltd. (Food and
Beverage) ......................... 317,091 492,049
Mayne Nickless Ltd. (Commercial
Services) ......................... 52,200 281,873
Westpac Banking Corp. Ltd.
(Banks and Thrifts) ............... 66,700 447,931
Woolworth Ltd. (Food and Beverage) .. 153,055 526,901
----------
TOTAL AUSTRALIA 1,748,754
----------
BELGIUM (0.1%)
Delhaize-Le Lion, SA (Food and
Beverage) +........................ 5,300 350,633
Societe Generale De Belgique
(Investment Services) +............ 2,940 453,309
----------
TOTAL BELGIUM 803,942
----------
BRAZIL (0.0%)
Telecomunicaciones Brasileiras SA
(Other Telecommunications) ........ 1,200 146,175
----------
CANADA (0.1%)
Canadian Imperial Bank of Commerce
(Banks and Thrifts) ............... 5,044 179,298
Canadian National Railway Co.
(Surface Transport) ............... 7,000 455,418
----------
TOTAL CANADA 634,716
----------
CHILE (0.0%)
Cia. de Telecomuncaciones de Chile
S.A. (Other Telecommunications) ... 5,200 130,325
----------
DENMARK (0.2%)
Carli Gry International A/S
(Textiles and Apparel) +........... 6,000 451,544
Novo-Nordisk A/S (Drugs) ............ 3,700 600,159
Olicom A/S (Computers) +............. 4,000 118,074
DENMARK (CONTINUED)
Tele Danmark A/S
(Major Telecommunications) ........ 1,000 $ 84,025
----------
TOTAL DENMARK 1,253,802
----------
FINLAND (0.2%)
Huhtamaki Group (Diversified) ....... 7,800 450,984
Oy Nokia Corp., ADR
(Other Telecommunications) ........ 6,400 428,000
Sampo Insurance Co. (Insurance) ..... 3,000 135,460
Valmet Oyj (Consumer Services) ...... 15,800 261,879
----------
TOTAL FINLAND 1,276,323
----------
FRANCE (0.5%)
Accor SA (Consumer Services) +....... 2,000 544,721
Alcatel Alsthom (Other
Telecommunications) +.............. 3,100 574,383
Credit Commercial de France
(Banks and Thrifts) +.............. 5,000 398,819
Elf Aquitaine SA (Oil) +............. 3,400 445,780
Gemini Sogeti SA (Insurance) ........ 2,400 311,478
Lafarge SA
(Forest Products and Building
Materials) ........................ 5,000 471,936
Pernod Ricard (Food and Beverage) ... 4,400 303,435
Rhone-Poulenc
(Biotech and Medical Products) +... 5,000 244,360
Union des Assurances Federales
(Insurance) +...................... 3,100 484,748
----------
TOTAL FRANCE 3,779,660
----------
GERMANY (0.4%)
BASF AG (Chemicals) +................ 5,000 222,904
Bayerische Hypotheken-und
Wechsel-Bank AG (Banks and
Thrifts) +......................... 4,800 273,904
Deutsche Pfandbrief & Hypothekenbank
AG (Banks and Thrifts) +........... 5,100 393,620
Gehe AG (Health Services) +.......... 7,100 367,958
Mannesmann AG (Heavy Machinery) +.... 400 317,415
VEBA AG (Electric Utilities) +....... 4,400 290,065
Viag AG (Consumer Services) +........ 700 354,584
Volkswagen AG (Automotive) +......... 538 429,172
----------
TOTAL GERMANY 2,649,622
----------
HONG KONG (0.1%)
Hutchison Whampoa Ltd.
(Consumer Services) +.............. 56,000 346,295
National Mutual Asia Ltd.
(Insurance) ....................... 246,000 196,902
Peregrine Investments Holdings Ltd.
(Investment Services) +++++........ 300,000 3,486
----------
TOTAL HONG KONG 546,683
----------
INDIA (0.0%)
Videsh Sanchar Nigam Ltd.
(Other Telecommunications) +....... 31,000 379,750
----------
</TABLE>
73
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH AND INCOME (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
IRELAND (0.2%)
Allied Irish Banks (Banks and
Thrifts) .......................... 14,165 $ 194,962
CRH Plc
(Forest Products and Building
Materials) ........................ 18,000 257,099
Iona Technologies Plc, ADR
(Data and Imaging Services) +...... 13,800 429,525
Irish Life Plc (Insurance) .......... 28,920 268,477
Waterford Wedgewood
(Housing and Furnishings) ......... 318,879 532,941
----------
TOTAL IRELAND 1,683,004
----------
ISRAEL (0.1%)
Tefron Ltd. (Textiles and Apparel) +. 20,000 536,250
----------
ITALY (0.3%)
Banca Commerciale Italiana
(Banks and Thrifts) +.............. 54,000 273,055
Credito Italiano (Banks and Thrifts)
+.................................. 136,100 715,083
Istituto Nazionale delle
Assicurazioni (Insurance) +........ 78,000 233,082
La Rinascente S.p.A. (Discretionary
Retail) +.......................... 33,500 335,577
Telecom Italia S.p.A.
(Major Telecommunications) +....... 44,000 329,016
----------
TOTAL ITALY 1,885,813
----------
JAPAN (0.6%)
Exedy Corp. (Automotive) ............ 20,200 107,016
Fuji Photo Film (Chemicals) ......... 13,000 463,407
Hoya Corp. (Biotech and Medical
Products) +........................ 12,000 397,790
Kao Corp. (Consumer Products) ....... 26,000 382,729
Minebea Co. Ltd.
(Semiconductors and Electronics) .. 34,000 380,837
Mizuno Corp. (Consumer Products) .... 90,000 307,197
Nintendo Co. Ltd.
(Semiconductors and Electronics) .. 5,000 459,396
Nippon Telegraph & Telephone
(Major Telecommunications) ........ 200 175,585
Onward Kashiyama Co., Ltd.
(Textiles and Apparel) ............ 18,000 231,590
Orix Corp. (Investment Services) .... 3,000 207,750
Santen Pharmaceutical Co., Ltd.
(Drugs) ........................... 17,000 171,119
Seino Transportation Co., Ltd.
(Surface Transport) ............... 67,000 386,899
Sony Corp. (Semiconductors and
Electronics) ...................... 3,700 308,310
Takefuji Corp. (Banks and Thrifts) .. 5,800 305,078
Terumo Corp. (Biotech and Medical
Products) ......................... 18,000 264,013
----------
TOTAL JAPAN 4,548,716
----------
MEXICO (0.2%)
Cifra SA (Discretionary Retail) +.... 150,000 259,025
Grupo Financiero Banamex Accival
(Investment Services) +............ 90,000 279,344
Panamerican Beverages, Inc.
(Food and Beverage) ............... 16,000 638,000
----------
TOTAL MEXICO 1,176,369
----------
NETHERLANDS (0.3%)
Akzo Nobel NV (Chemicals) ........... 1,800 $ 366,144
Hunter Douglas NV (Consumer
Services) +........................ 2,000 97,500
ING Groep NV (Banks and Thrifts) +... 8,897 578,158
KLM Royal Dutch Air Line
(Surface Transport) +.............. 3,000 117,891
Philips Electronics NV
(Semiconductors and Electronics) .. 5,200 458,101
Vendex International NV
(Discretionary Retail) +........... 3,200 205,255
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Print Media) ..................... 13,700 443,442
----------
TOTAL NETHERLANDS 2,266,491
----------
NEW ZEALAND (0.0%)
Fernz Corp., Ltd. (Chemicals) ....... 50,000 150,039
----------
NORWAY (0.5%)
Christiania Bank Og Kredkasse
(Banks and Thrifts) ............... 92,800 426,791
Det Sondenfjelds-Norske
Dampskibsselskab (Oil) +........... 10,000 248,053
Merkantildata ASA
(Data and Imaging Services) ....... 33,000 415,925
Ocean Rig ASA (Oil) +................ 650,000 631,866
Saga Petroleum ASA (Oil) +........... 16,600 329,415
Seateam Technology AS (Oil) +........ 13,700 330,648
Tandberg Data ASA (Computers) +...... 14,000 137,033
Tandberg Television ASA
(Other Telecommunications) +....... 26,600 353,094
Tomra Systems ASA
(Forest Products and Building
Materials) ........................ 14,100 453,736
----------
TOTAL NORWAY 3,326,561
----------
SPAIN (0.2%)
Banco Santander (Banks and Thrifts) . 8,400 443,657
Cortefiel SA (Discretionary Retail) . 15,200 360,017
Iberdrola SA (Electric Utilities) ... 31,000 498,311
Telefonica de Espana
(Major Telecommunications) ........ 12,900 538,293
----------
TOTAL SPAIN 1,840,278
----------
SWEDEN (0.2%)
Astra AB (Drugs) .................... 13,100 269,150
Celsius AB (Conglomerate and
Aerospace) +....................... 11,300 251,150
Ericsson ADR (Other
Telecommunications) ............... 2,700 138,881
Industrial & Financial Systems
(Data and Imaging Services) +++++++ 17,000 178,483
Mo Och Domsjoe AB
(Forest Products and Building
Materials) ........................ 8,200 254,303
Svenska Handelsbanken
(Investment Services) ............. 5,300 240,386
WM-Data AB (Computers) +............. 11,200 337,209
----------
TOTAL SWEDEN 1,669,562
----------
</TABLE>
74 See Notes to Portfolio of Investments.
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
SWITZERLAND (0.4%)
Credit Suisse Group (Banks and
Thrifts) +......................... 2,400 $ 528,021
Fischer (Georg) AG (Auto Parts and
Hardware) 750 290,012
Kuoni Reisen AG (Commercial
Services) +........................ 110 590,357
Nestle SA Registered Shares
(Food and Beverage) +.............. 320 620,825
Novartis AG Registered Shares
(Health Services) ................ 235 388,549
Union Bank of Switzerland (Banks and
Thrifts) .......................... 250 402,683
----------
TOTAL SWITZERLAND 2,820,447
----------
UNITED KINGDOM (1.1%)
Bank of Scotland (Banks and Thrifts) 40,086 492,625
Cadbury Schweppes Plc (Food and
Beverage) ......................... 30,300 441,769
Glaxo Wellcome Plc (Drugs) .......... 8,490 239,900
Granada Group Plc (Consumer
Services) +........................ 32,811 565,058
Kingfisher Plc (Discretionary
Retail) ........................... 21,700 394,027
Lonrho Plc (Manufacturing) .......... 51,850 376,465
Millennium Chemicals, Inc.
(Specialty Chemicals) ............. 65,000 2,331,875
National Westminster Bank Plc
(Banks and Thrifts) ............... 19,800 396,274
NFC Plc (Surface Transport) ......... 120,100 360,449
Pearson Plc (Print Media) ........... 21,400 335,266
Peninsular & Oriental Steam
Navigation Co. (Surface
Transport) +....................... 10,000 148,474
Royal & Sun Alliance Insurance Group
Plc (Insurance) +.................. 10,000 111,188
Schroders (Banks and Thrifts) ....... 3,500 171,639
Shell Transport & Trading Co. (Oil) . 49,300 366,812
Tesco Plc (Discretionary Retail) .... 40,400 379,624
Tomkins Plc (Consumer Services) ..... 63,880 375,962
Unilever Plc (Consumer Products) .... 28,100 299,283
Vodafone Group Plc
(Other Telecommunications) ........ 27,922 305,791
----------
TOTAL UNITED KINGDOM 8,092,481
----------
TOTAL FOREIGN COMMON STOCKS 43,345,763
----------
TOTAL COMMON STOCKS (COST
$587,847,985) 710,969,288
----------
PREFERRED STOCKS (0.3%)
UNITED STATES (0.2%)
Case Corp. (Heavy Machinery) +++++++. 800 118,800
Chancellor Media Corp.
(Semiconductors and Electronics) +. 1,400 188,125
Corning Delaware L.P. (Food and
Beverage) +........................ 1,100 69,438
Equity Residential Properties
(Real Estate Investment Trusts) +.. 2,100 57,225
International Paper Co.
(Forest Products and Building
Materials) +++++++ 700 38,500
Salomon, Inc. (Investment Services) . 5,200 356,850
Sea Containers Ltd. (Consumer
Services) +........................ 1,500 97,500
UNITED STATES (CONTINUED)
Tanger Factory Outlet Centers, Inc.
(Real Estate Investment Trusts) +.. 4,200 $ 114,713
Union Planters Co. (Food and
Beverage) ......................... 1,400 105,700
-----------
TOTAL UNITED STATES 1,146,851
-----------
FOREIGN PREFERRED STOCKS (0.1%)
GERMANY (0.1%)
Henkel KGAA (Chemicals) +............ 6,300 491,503
Hugo Boss AG (Textiles and Apparel) + 100 178,323
SAP AG (Data and Imaging Services) +. 600 299,248
TOTAL FOREIGN PREFERRED STOCKS 969,074
-----------
TOTAL PREFERRED STOCKS (COST
$1,611,805) 2,115,925
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (1.1%)
CORPORATE AND CONVERTIBLE BONDS (1.1%)
Agnico-Eagle Mines Ltd., 3.50%,
01/27/04........................... $100,000 67,802
Alza Corp., 5.00%, 05/01/06.......... 70,000 97,038
American Express Credit, 1.13%,
02/19/03........................... 180,000 179,775
Automatic Data Processing, Inc.,
Zero Coupon, 02/20/12.............. 30,000 25,374
Baker Hughes, Inc., Zero Coupon,
05/05/08........................... 175,000 145,423
Boston Chicken, Inc., Zero Coupon,
06/01/15........................... 270,000 21,600
Brightpoint Convertible, Zero
Coupon, 03/11/18................... 245,000 108,413
Career Horizons, Inc., 7.00%,
11/01/02........................... 70,000 222,950
Checkpoint Systems, Inc., 5.25%,
11/01/05........................... 88,000 99,770
Comverse Technology, Inc., 5.75%,
10/01/06++++++..................... 400,000 488,000
Continental Airlines, Inc., 6.75%,
04/15/06++++++..................... 140,000 283,413
Credence Systems Corp., 5.25%,
09/15/02++++++..................... 300,000 257,250
Dovatron International, 6.00%,
10/15/02........................... 70,000 89,075
Dr. Horton, 6.88%, 11/01/02.......... 50,000 107,688
Einstein/Noah Bagel Corp., 7.25%,
06/01/04++++++..................... 370,000 177,954
EMC/Mass Corp., 3.25%, 03/15/02++++++ 340,000 698,700
FPA Medical Management, Inc., 6.50%,
12/15/01........................... 140,000 116,375
Fremont General Corp., Zero Coupon,
10/12/13........................... 370,000 405,150
Hewlett Packard Co., Zero Coupon,
10/14/17++++++..................... 630,000 349,253
Home Depot, Inc., 3.25%, 10/01/01.... 140,000 217,700
Homebase, Inc., 5.25%, 11/01/04...... 210,000 214,200
Ingersoll-Rand, 6.75%, 12/31/49...... 4,200 102,900
Integrated Health Services, 5.75%,
01/01/01........................... 105,000 123,638
Marriott International, Inc., Zero
Coupon, 03/25/11++++++............. 270,000 176,850
Merrill CBR, 7.88%, 02/01/01....... 2,100 131,775
NAC Re Corp., 5.25%, 12/15/02++++++.. 70,000 76,650
National Semiconductor Corp., 6.50%,
10/01/02++++++..................... 350,000 339,500
Office Depot, Inc., Zero Coupon,
12/11/07........................... 275,000 271,906
Ogden Corp., 5.75%, 10/20/02++++..... 70,000 68,950
</TABLE>
75
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
GROWTH AND INCOME (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
CORPORATE AND CONVERTIBLE BONDS
(CONTINUED)
Ogden Corp., 6.00%, 06/01/02++++..... $ 25,000 $ 24,875
Oryx Energy Co., 7.50%, 05/15/14..... 50,000 50,000
Pennzoil Co., 6.50%, 01/15/03........ 35,000 69,431
Phycor, Inc., 4.50%, 02/15/03........ 105,000 94,238
Phymatrix Corp., 6.75%, 06/15/03..... 200,000 163,750
Pioneer Financial Services, 6.50%,
04/01/03........................... 105,000 187,031
Potomac Electric Power, 7.00%,
01/15/18........................... 250,000 255,000
Richey Electronics, Inc., 7.00%,
03/01/06++++++..................... 141,000 136,594
Roche Holdings, Zero Coupon,
05/06/12++++++..................... 875,000 412,234
Sanmina Corp., 5.50%, 08/15/02++++++. 70,000 223,300
SCI Systems, Inc., 5.00%, 05/01/06++++++ 55,000 97,625
Tel-Save Holding, Inc., 5.00%,
12/15/04++++++..................... 100,000 106,250
Thermo Instrument System, 4.50%,
10/15/03++++++..................... 70,000 73,150
U.S. Cellular Corp., Zero Coupon,
06/15/15........................... 175,000 66,938
Vantive Corp., 4.75%, 09/01/02++++++. 70,000 71,925
Veterinary Centers of America,
5.25%, 05/01/06++++++............... 35,000 30,450
-----------
TOTAL LONG-TERM BONDS AND NOTES (COST $6,442,947) 7,727,863
-----------
PUT OPTIONS PURCHASED (0.1%)
Russell 2000 Index, Strike $470,
June 98............................ 6,500 49,563
Russell 2000 Index, Strike $480,
June 98............................ 52,900 542,225
S&P 400 Mid Cap Index, Strike $365,
June 98............................ 5,000 29,375
S&P 400 Mid Cap Index, Strike $370,
June 98............................ 59,000 427,750
-----------
TOTAL PUT OPTIONS PURCHASED (COST $1,616,250) 1,048,913
-----------
SHORT-TERM INVESTMENTS (0.5%)
U.S. Treasury, Comm. Paper, 5.03%,
08/20/98@.......................... 3,510,000 3,456,718
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $3,455,617) 3,456,718
-----------
TOTAL INVESTMENTS (COST $600,974,604)(A) 725,318,707
OTHER ASSETS LESS LIABILITIES 6,833,645
------------
TOTAL NET ASSETS $732,152,352
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$606,949,877. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
Unrealized gains .................... $131,658,805
Unrealized losses ................... (13,289,975)
------------
Net unrealized gain ............... $118,368,830
============
</TABLE>
Information concerning open futures contracts at April 30, 1998 is shown below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
--------- ---------- ---------- -----------
LONG CONTRACTS
- --------------------
<S> <C> <C> <C> <C>
S & P 500 Index
Futures 169 $47,037,927 June 98 $248,273
============ ========
</TABLE>
Information concerning options written at April 30, 1998 is shown below:
<TABLE>
<CAPTION>
NO. OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
--------- ---------- ---------- -----------
CALL OPTIONS
- -------------------
<S> <C> <C> <C> <C>
Biogen, Inc. ..... 60 $ 50.00 June 98 $ (8,625)
General Dynamics
Corp. .......... 36 45.00 Aug 98 (6,300)
Russell 2000
Index .......... 65 470.00 June 98 (151,938)
Russell 2000
Index .......... 529 480.00 June 98 (872,850)
S & P 400 Mid Cap
Index .......... 50 365.00 June 98 (91,875)
S & P 400 Mid Cap
Index .......... 590 370.00 June 98 (877,625)
-----------
$(2,009,213)
===========
</TABLE>
+ Non-income producing security.
++ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
++++ This security has been determined to be illiquid under guidelines
established by the Board of Directors.
++++++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securities have been
determined to be liquid under guidelines established by the Board of
Directors.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 1998.
Category percentages are based on net assets.
76 See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
REAL ESTATE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
COMMON MARKET
SHARES VALUE
---------- ---------
<S> <C> <C>
COMMON STOCKS (91.5%)
REAL ESTATE INVESTMENT TRUSTS (91.5%)
Apartment Investment & Management Co.... 6,100 $227,988
Arden Realty Group, Inc................. 600 16,838
Beacon Capital+++........................ 6,600 135,300
Bedford Property Investors, Inc......... 4,000 77,750
Boston Properties, Inc.................. 2,200 72,738
Boykin Lodging Co....................... 1,500 35,250
Brandywine Realty Trust................. 9,800 222,950
Burnham Pacific Properties, Inc......... 15,000 211,875
Camden Property Trust................... 7,900 231,569
Carramerica Realty Corp................. 2,000 58,500
CBL & Associates Properties, Inc........ 4,100 100,706
Colonial Properties Trust............... 2,700 80,156
Cornerstone Properties, Inc............. 4,000 72,000
Cousins Properties, Inc................. 1,100 33,275
Crescent Real Estate Equities, Inc...... 7,000 238,874
Criimi Mae, Inc......................... 7,400 110,538
Equity Office Properties Trust.......... 7,300 207,594
Equity Residential Properties Trust..... 4,000 196,500
Essex Property Trust, Inc............... 6,800 224,400
Glenborough Realty Trust, Inc........... 7,700 206,456
Golf Trust of America, Inc.............. 2,800 91,350
Kimco Realty Corp....................... 2,300 85,244
Koger Equity, Inc....................... 5,700 122,194
Parkway Properties, Inc................. 2,400 78,900
Post Properties, Inc.................... 6,300 257,118
Public Storage, Inc..................... 2,800 86,100
Regency Realty Corp..................... 8,700 224,025
Security Capital Industrial Trust....... 3,200 78,200
Starwood Lodging Trust.................. 3,930 197,237
Sun Communities, Inc.................... 1,400 49,000
Vornado Realty Trust.................... 5,200 208,325
Weeks Corp.............................. 7,600 239,399
---------
4,478,349
---------
TOTAL COMMON STOCKS (COST $4,637,398) 4,478,349
---------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
--------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.1%)
Federal Home Loan Mortgage Corp., Comm.
Paper, 5.45%, 05/01/98................ $395,000 395,000
---------
TOTAL SHORT-TERM INVESTMENTS (COST
$395,000) 395,000
---------
TOTAL INVESTMENTS (COST $5,032,398)(A) 4,873,349
OTHER ASSETS LESS LIABILITIES 20,115
----------
TOTAL NET ASSETS $4,893,464
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$5,043,424. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
Unrealized gains ...................... $ 30,694
Unrealized losses ..................... (200,769)
---------
Net unrealized loss ................. $(170,075)
=========
</TABLE>
+ Non-income producing security.
++ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements. 77
<PAGE>
GROWTH AND INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND
BALANCED INCOME REAL ESTATE
------------- ------------- ----------
<S> <C> <C> <C>
ASSETS:
Investments, at market value .......................................... $127,544,408 $725,318,707 $4,873,349
Cash .................................................................. 176,786 -- 4,316
Cash denominated in foreign currencies ................................ -- 1,750,384 --
Receivable for:
Dividends and interest ............................................ 473,217 710,963 8,544
Investments sold .................................................. 143,207 15,314,981 --
Fund shares sold .................................................. 44,583 58,619 2,000
Recoverable foreign taxes ......................................... -- 30,503 --
Variation margin .................................................. -- 946,400 --
Other assets........................................................... -- -- 5,255
Prepaid expenses ...................................................... 1,994 10,469 --
Gross unrealized gain on forward foreign currency exchange contracts -- 164,787 --
------------- ------------- -----------
Total assets ................................................. 128,384,195 744,305,813 4,893,464
------------- ------------- -----------
LIABILITIES:
Payable for:
Investments purchased ............................................. 128,592 5,846,180 --
Fund shares redeemed .............................................. 5,236 696,043 --
Other liabilities ..................................................... 132,333 3,457,222 --
Gross unrealized loss on forward foreign currency exchange contracts .. -- 144,803 --
Deferred premiums on written options, at market value ................. -- 2,009,213 --
------------ ------------- -----------
Total liabilities ........................................... 266,161 12,153,461 --
------------ ------------- -----------
NET ASSETS .......................................................... $128,118,034 $732,152,352 $4,893,464
============ ============= ===========
NET ASSETS REPRESENTED BY:
Paid-in capital ....................................................... $105,654,588 $538,244,385 $5,066,345
Net unrealized gain (loss) on investments, open futures contracts and
foreign currency related transactions ............................... 17,862,588 124,723,440 (159,049)
Undistributed net investment income ................................... 1,040,612 2,110,480 27,218
Accumulated net realized gain (loss) on investments ................... 3,560,246 67,074,047 (41,050)
------------ ------------- -----------
NET ASSETS .......................................................... $128,118,034 $732,152,352 $4,893,464
============ ============= ===========
CAPITAL SHARES, $.001 PAR VALUE:
Class I:
Outstanding ....................................................... 9,111,238 41,769,767 495,369
Net Assets ........................................................ $120,332,607 $709,936,450 $4,783,334
Net Asset Value, offering and redemption price per share (net
assets divided by shares outstanding) ........................... $ 13.21 $ 17.00 $ 9.66
Class A:
Outstanding ....................................................... 589,630 1,310,552 11,412
Net Assets ........................................................ $ 7,785,427 $ 22,215,902 $ 110,130
Net Asset Value, offering and redemption price per share (net
assets divided by shares outstanding) ........................... $ 13.20 $ 16.95 $ 9.65
Cost of investments ................................................... $109,681,820 $600,974,604 $5,032,398
Cost of cash denominated in foreign currencies ........................ -- $ 1,745,029 --
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
GROWTH AND INCOME FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED GROWTH AND REAL ESTATE
SIX MONTH PERIOD INCOME PERIOD FROM FEBRUARY 2,
ENDED SIX MONTH PERIOD 1998 (COMMENCEMENT OF
APRIL 30, ENDED OPERATIONS)
1998 APRIL 30, 1998 TO APRIL 30, 1998
------------ ---------------- ----------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends .......................................................... $ 482,648 $ 3,968,666 $ 68,114
Interest ........................................................... 1,664,091 1,214,578 4,198
------------ ------------ ----------
2,146,739 5,183,244 72,312
Foreign taxes withheld on dividends ................................ (469) (42,570) --
------------ ------------ ----------
Total investment income ...................................... 2,146,270 5,140,674 72,312
------------ ------------ ----------
INVESTMENT EXPENSES:
Investment advisory fee ............................................ 466,335 2,240,494 9,502
Administrative services fees ....................................... 100,718 559,034 1,188
12b-1 and shareholder service fees ................................. 13,967 37,294 62
Printing and postage fees .......................................... 6,123 35,053 1,317
Custody fees ....................................................... 21,267 44,338 3,435
Transfer agent fees ................................................ 35,077 97,124 6,175
Audit fees ......................................................... 12,138 20,042 4,413
Directors' fees .................................................... 1,305 9,497 35
Registration fees .................................................. 25,362 63,355 18,949
Miscellaneous expenses ............................................. 2,483 12,506 18
------------ ------------ ----------
Total expenses ............................................... 684,775 3,118,737 45,094
------------ ------------ ----------
Net investment income .............................................. 1,461,495 2,021,937 27,218
------------ ------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Sale of investments .............................................. 3,529,805 67,136,436 (41,050)
Written options .................................................. -- 23,606 --
Futures and forward currency exchange contracts .................. (31,538) 736,253 --
Foreign currency related transactions ............................ -- (86,416) --
------------ ------------ ----------
Net realized gain (loss) on investments ................... 3,498,267 67,809,879 (41,050)
------------ ------------ ----------
Net change in unrealized gain or loss on:
Investments ...................................................... 9,377,924 25,468,650 (159,049)
Written Options .................................................. -- 95,253 --
Futures and forward currency exchange contracts .................. 81,575 424,119 --
Foreign currency related transactions ............................ -- 10,724 --
------------ ------------ ----------
Net change in unrealized gain or loss on investments ...... 9,459,499 25,998,746 (159,049)
------------ ------------ ----------
Net realized and change in unrealized gain or loss on investments .. 12,957,766 93,808,625 (200,099)
------------ ------------ ----------
Increase (decrease) in net assets resulting from operations ........ $14,419,261 $95,830,562 $(172,881)
============ ============ ==========
See Notes to Financial Statements.
</TABLE>
79
<PAGE>
GROWTH AND INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED
-------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED
APRIL 30 1998 OCTOBER 31,
(UNAUDITED] 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ............................................................ $ 1,461,495 $ 2,428,888
Net realized gain on investments ................................................. 3,498,267 18,297,657
Net change in unrealized gain or loss on investments ............................. 9,459,499 (2,736,577)
------------- -------------
Net increase in net assets resulting from operations ........................... 14,419,261 17,989,968
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income ................................................... (1,454,461) (2,069,845)
From net realized gains ...................................................... (17,098,126) (9,749,919)
Class A:
From net investment income ................................................... (57,108) (67,543)
From net realized gains ...................................................... (1,050,028) (460,490)
------------- -------------
Decrease in net assets from distributions to shareholders ...................... (19,659,723) (12,347,797)
------------- -------------
FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold .................................................... 8,528,422 15,726,792
Net asset value of shares issued upon reinvestment of distributions .......... 18,372,090 11,705,785
Payments for shares redeemed ................................................. (7,405,994) (15,578,642)
Class A:
Proceeds from shares sold .................................................... 1,416,913 2,469,631
Net asset value of shares issued upon reinvestment of distributions .......... 1,026,161 472,425
Payments for shares redeemed ................................................. (680,689) (744,656)
------------- -------------
Net increase in net assets from fund share transactions ........................ 21,256,903 14,051,335
------------- -------------
Change in net assets ............................................................. 16,016,441 19,693,506
NET ASSETS:
Beginning of period .............................................................. 112,101,593 92,408,087
------------- -------------
End of period .................................................................... $128,118,034 $112,101,593
============= =============
End of period net assets includes undistributed net investment income ............ $ 1,040,612 $ 1,090,686
============= =============
SHARE TRANSACTIONS:
Class I:
Number of shares sold ........................................................ 652,875 1,194,562
Number of shares issued upon reinvestment of distributions ................... 1,520,868 950,985
Number of shares redeemed .................................................... (571,924) (1,188,932)
------------- -------------
Net increase ................................................................... 1,601,819 956,615
============= =============
Class A:
Number of shares sold ........................................................ 108,841 185,352
Number of shares issued upon reinvestment of distributions ................... 84,877 38,485
Number of shares redeemed .................................................... (51,751) (56,646)
------------- -------------
Net increase ................................................................... 141,967 167,191
============= =============
</TABLE>
See Notes to Financial Statements.
80
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME
-------------------------------------
SIX MONTH
PERIOD ENDED YEAR ENDED
APRIL 30 1998 OCTOBER 31,
(UNAUDITED] 1997
------------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ........................................................... $ 2,021,937 $ 4,607,981
Net realized gain on investments ................................................ 67,809,879 116,644,162
Net change in unrealized gain or loss on investments ............................ 25,998,746 30,507,974
-------------- -------------
Net increase in net assets resulting from operations .......................... 95,830,562 151,760,117
-------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income .................................................. (2,811,536) (5,489,380)
From net realized gains ..................................................... (111,685,312) (62,913,602)
Class A:
From net investment income .................................................. (9,086) (48,234)
From net realized gains ..................................................... (3,276,091) (1,192,597)
-------------- -------------
Decrease in net assets from distributions to shareholders ..................... (117,782,025) (69,643,813)
-------------- -------------
FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ................................................... 52,104,225 99,302,839
Net asset value of shares issued upon reinvestment of distributions ......... 114,304,015 68,298,587
Payments for shares redeemed ................................................ (30,984,585) (29,637,734)
Class A:
Proceeds from shares sold ................................................... 5,880,988 8,639,437
Net asset value of shares issued upon reinvestment of distributions ......... 3,209,705 1,190,765
Payments for shares redeemed ................................................ (2,334,588) (2,407,633)
-------------- -------------
Net increase in net assets from fund share transactions ....................... 142,179,760 145,386,261
-------------- -------------
Change in net assets ............................................................ 120,228,297 227,502,565
NET ASSETS:
Beginning of period ............................................................. 611,924,055 384,421,490
-------------- -------------
End of period ................................................................... $ 732,152,352 $611,924,055
============== =============
End of period net assets includes undistributed net investment income ........... $ 2,110,480 $ 2,909,165
============== =============
SHARE TRANSACTIONS:
Class I:
Number of shares sold ....................................................... 3,075,828 6,028,007
Number of shares issued upon reinvestment of distributions .................. 7,610,121 4,758,866
Number of shares redeemed ................................................... (1,871,014) (1,833,650)
-------------- -------------
Net increase .................................................................. 8,814,935 8,953,223
============== =============
Class A:
Number of shares sold ....................................................... 351,689 520,948
Number of shares issued upon reinvestment of distributions .................. 214,123 83,377
Number of shares redeemed ................................................... (141,296) (141,258)
-------------- -------------
Net increase .................................................................. 424,516 463,067
============== =============
</TABLE>
81
<PAGE>
GROWTH AND INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REAL ESTATE
----------------
PERIOD FROM
FEBRUARY 2,
1998 TO
APRIL 30, 1998
(UNAUDITED)
----------------
<S> <C>
FROM OPERATIONS:
Net investment income ........................................................................... $ 27,218
Net realized loss on investments ................................................................ (41,050)
Net change in unrealized gain or loss on investments ............................................ (159,049)
-----------
Net decrease in net assets resulting from operations .......................................... (172,881)
-----------
FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ................................................................... 4,952,649
Class A:
Proceeds from shares sold ................................................................... 113,696
-----------
Net increase in net assets from fund share transactions ....................................... 5,066,345
-----------
Change in net assets ............................................................................ 4,893,464
NET ASSETS:
Beginning of period ............................................................................. --
-----------
End of period ................................................................................... $4,893,464
===========
End of period net assets includes undistributed net investment income ........................... $ 27,218
===========
SHARE TRANSACTIONS:
Class I:
Number of shares sold ....................................................................... 495,369
-----------
Net increase .................................................................................. 495,369
===========
Class A:
Number of shares sold ....................................................................... 11,412
-----------
Net increase .................................................................................. 11,412
===========
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds (Funds), each of which
has its own investment objective, policies and restrictions.
The Company currently offers nineteen funds. This report covers Aetna Balanced
Fund, Aetna Growth and Income Fund and Aetna Real Estate Securities Fund.
Shares of each Fund are available to all investors including employers and
employees who utilize the Funds as investment options under retirement plans.
The Fund's are authorized to offer two classes of shares, Class I (formerly
Select Class shares) and Class A (formerly Adviser Class shares). Class I is
offered principally to institutions and is not subject to sales charges or
distribution fees. Class I shares were first made available as follows: Balanced
and Growth and Income on December 27, 1991, and Real Estate on February 2, 1998.
Class A shares are offered to all others and generally are subject to front end
sales charges payable upon purchase. Additionally, Class A shares are subject to
a distribution fee pursuant to Rule 12b-1 of the Act. Class A shares were first
made available to the public on April 15, 1994 for all Funds except Real Estate,
which was made available to the public on February 2, 1998.
The following is each Fund's investment objective:
AETNA BALANCED FUND (Balanced, formerly The Aetna Fund) seeks to maximize
total return with reasonable safety of principal by investing in a
diversified portfolio of stocks, bonds and money market instruments.
AETNA GROWTH AND INCOME FUND (Growth and Income) seeks long-term growth of
capital and income through investment in a diversified portfolio consisting
primarily of common stocks and securities convertible into common stocks
believed to offer above-average growth potential.
AETNA REAL ESTATE SECURITIES FUND (Real Estate) seeks maximum total return
primarily through investment in a diversified portfolio of equity
securities of real estate companies, the majority of which are real estate
investment trusts.
Aeltus Investment Management, Inc. (Aeltus) serves as the Investment Adviser to
each Fund. Prior to February 2, 1998 the Investment Adviser was Aetna Life
Insurance and Annuity Company (ALIAC). Aetna Investment Services, Inc. (AISI)
was the principal underwriter for each Fund through April 30, 1998. On May 1,
1998, Aeltus Capital, Inc. became each Fund's principal underwriter.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Funds have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Funds.
A. VALUATION OF INVESTMENTS
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost, which when combined with accrued interest,
approximates market value. Securities and fixed income investments for which
market quotations are not considered to be readily available are valued using
methods approved by the Board of Directors.
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange at the end
of each day.
83
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATION OF INVESTMENTS (CONTINUED)
Purchases and sales of securities, income receipts, and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the respective
dates of the transactions.
B. OPTIONS CONTRACTS
The Funds may purchase and write (sell) put options, purchase call options and
write (sell) covered call options as a hedge against adverse movements in the
value of portfolio holdings or to increase market exposure.
Option contracts are valued daily and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded.
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales of the
underlying security for a written call option, the purchase cost of the security
for a written put option, or the cost of the security for a purchased put or
call option is adjusted by the amount of premium received or paid. Realized and
unrealized gains or losses on option contracts are reflected in the
accompanying Financial Statements.
The risk in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. Risks may also arise from an illiquid secondary market or
from the inability of counterparties to meet the terms of the contract.
C. FUTURES AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds "sell" futures
contracts as a hedge against declines in the value of portfolio securities.
The Funds may enter into futures contracts to manage the risk of changes in
interest rates, equity prices, currency exchange rates or in anticipation of
future purchases and sales of portfolio securities.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Funds equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by the Funds as
unrealized gains or losses. When a contract is closed, the Funds record a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Generally, futures contracts held by the Funds are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another
currency at an agreed upon exchange rate. The Funds, where authorized, may use
forward foreign currency exchange contracts to hedge certain foreign currency
assets. Contracts are recorded at market value and marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in market
value of the securities held by the Funds and the price of the contracts. Risks
may also arise from an illiquid secondary market or from the inability of
counterparties to meet the terms of the contracts. Realized and unrealized gains
or losses on futures and forward foreign currency exchange contracts are
reflected in the accompanying financial statements. The amounts at risk under
such futures and forward foreign currency exchange contracts may exceed the
amounts reflected in the financial statements. The notional amounts (economic
exposure) of these contracts are disclosed in the Portfolios of Investments
and elsewhere in the Notes to Financial Statements. For
84
<PAGE>
- ------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FUTURES AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (CONTINUED)
federal income tax purposes, any futures and forward foreign currency exchange
contracts which remain open at the end of the fiscal year are marked-to-market
and the resultant net gain or loss is reported to shareholders as federal
taxable income.
D. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Funds to sell them
promptly at an acceptable price. Restricted securities are those sold under
rule 144A under the Securities Act of 1933 (1933 Act) or are securities offered
pursuant to Section 4(2) of the 1933 Act, and are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. Each Fund may invest up to 15% of its total
assets in illiquid securities. Illiquid and restricted securities are valued
using market quotations when readily available. In the absence of market
quotations, the securities are valued based upon their fair value determined
under procedures approved by the Board of Directors. The Funds will not pay
the costs of disposition of restricted securities other than ordinary brokerage
fees, if any.
E. FEDERAL INCOME TAXES
As a qualified regulated investment company, each Fund is relieved of federal
income and excise taxes by distributing all of its net taxable investment
income and capital gains, if any, in compliance with the applicable provisions
of the Internal Revenue Code.
F. DISTRIBUTIONS
Distributions from net investment income are based on taxable net income.
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions,
investments in certain foreign issuers that derive a majority of their income
from passive investments (e.g., interest or dividends) and deferred losses on
wash sales.
G. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date.
Interest income is recorded on an accrual basis. Discounts and premiums on
securities purchased are accreted or amortized, respectively, using an
effective yield method over the life of the security. Dividend income and stock
splits are recorded on the ex-dividend date. Realized gains and losses from
investment transactions are determined on an identified cost basis.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays the Investment Adviser a monthly fee expressed as a percentage of
the average daily net assets of each Fund. As the Funds' net assets exceed
predetermined thresholds, lower advisory fees are applied. Below are the Funds'
Investment Advisory fee ranges and the effective rates as of April 30, 1998:
<TABLE>
<CAPTION>
FEE EFFECTIVE
RANGE RATE
------------------ --------------------
<S> <C> <C>
Balanced 0.80%-0.65% 0.800%
Growth and Income 0.70%-0.55% 0.625%
Real Estate 0.80%-0.65% 0.800%
</TABLE>
85
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES (CONTINUED)
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Fund in
exchange for fees, payable by Aeltus, of up to 0.40% of the average daily net
assets of Class I. For the period February 1, 1998 through April 30, 1998,
Aeltus paid ALIAC $662,628.
Aeltus has served as the Investment Adviser for all Funds since February 2,
1998. Prior to February 2, 1998, ALIAC served as Growth and Income and
Balanced Funds' Investment Adviser and Aeltus served as Sub-Advisor. As
Sub-Adviser, Aeltus supervised the investment and reinvestment of cash and
securities and provided certain related administrative services. For the period
November 1, 1997 through February 1, 1998, ALIAC collected $1,263,833 from the
Funds, of which it paid $810,740 to Aeltus.
Effective February 2, 1998, the Company and Aeltus entered into an
administrative services agreement under which Aeltus acts as administrator and
provides certain administrative and shareholder services and is responsible for
the supervision of other service providers for each Fund. Each Fund pays
Aeltus an administrative services fee at an annual rate of 0.10% of its average
daily net assets. Prior to February 2, 1998 ALIAC acted as administrator for
each Fund and was paid an administrative services fee at an annual rate of
0.25% of each Fund's average daily net assets. For the period November 1, 1997
through February 1, 1998, ALIAC collected $448,226 in administrative services
fees from the Funds.
The Shareholder Services Plan for the Class A (formerly Adviser Class) shares
terminated on December 31, 1997. Under the Shareholder Services Plan, AISI was
paid a service fee at an annual rate of 0.25% of the average daily net assets of
Class A of each Fund. This fee was used as compensation for expenses incurred in
servicing shareholders' accounts. For the period November 1, 1997 through
December 31, 1997, the Funds paid AISI $9,556 in service fees.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act
for the Class A shares. The Distribution Plan provides for payments to the
principal underwriter at an annual rate of 0.25% (prior to January 1, 1998, the
12b-1 fee was 0.50%) of the average daily net assets of Class A shares of each
Fund. Amounts paid by the Funds are used to pay expenses incurred by the
principal underwriter in promoting the sale of Class A shares. For the period
ended April 30, 1998, the Funds paid AISI $41,767 in Rule 12b-1 fees. The plan
may be terminated upon a majority vote of the Company's independent directors.
Presently, the Funds' class-specific expenses are limited to Rule 12b-1 fees
incurred by Class A shares.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the period ended April 30, 1998 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Balanced $ 37,811,477 $ 41,188,907
Growth and Income 559,942,365 505,598,237
Real Estate 5,848,671 1,170,224
</TABLE>
5. OPTIONS
All Funds may use options. For the period ended April 30, 1998, the following
reflects the written covered call activity:
<TABLE>
<CAPTION>
CALL OPTIONS WRITTEN
-----------------------------------------------
NUMBER OF DEFERRED PREMIUM REALIZED
GROWTH AND INCOME CONTRACTS RECEIVED GAIN (LOSS)
-------------- -------------------- --------------
<S> <C> <C> <C>
Outstanding October 31, 1997......... 136 $ 23,606 $ --
Written.......................... 1,330 2,115,622 --
Canceled......................... -- -- --
Exercised........................ -- -- --
Expired.......................... (136) (23,606) 23,606
------------- ----------------------- ------------
Outstanding April 30, 1998........... 1,330 $2,115,622 $ 23,606
============= ======================= ============
</TABLE>
86
<PAGE>
- ------------------------------------------------------------------------------
6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At April 30, 1998, Growth and Income had open forward foreign currency exchange
contracts that obligate the Fund to deliver currencies at specified future
dates. The net unrealized gain of $19,984 on these contracts are included in the
accompanying financial statements. The terms of the open contracts are as
follows:
GROWTH & INCOME
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO U.S. $ VALUE CURRENCY TO U.S. $ VALUE UNREALIZED
DATE BE DELIVERED APRIL 30, 1998 BE RECEIVED APRIL 30, 1998 GAIN (LOSS)
-------- ------------ -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY
5/18/98 333,038 $ 333,038 680,000 $ 337,041 $4,003
U.S. Dollar Dutch Guilder
- ----------------------------------------------------------------------------------------------------------------
5/5/98 48,494 48,494 265,000 48,691 197
U.S. Dollar Finnish Markka
- ----------------------------------------------------------------------------------------------------------------
5/13/98 592,186 592,186 3,589,000 597,053 4,867
U.S. Dollar French Franc
- ----------------------------------------------------------------------------------------------------------------
5/13/98 421,655 421,655 2,520,000 419,218 (2,437)
U.S. Dollar French Franc
- ----------------------------------------------------------------------------------------------------------------
5/8/98 595,370 595,370 1,070,000 596,765 1,395
U.S. Dollar German Deutschemark
- ----------------------------------------------------------------------------------------------------------------
5/26/98 630,228 630,228 79,630,000 605,062 (25,166)
U.S. Dollar Japanese Yen
- ----------------------------------------------------------------------------------------------------------------
5/26/98 26,996 26,996 3,570,000 27,126 130
U.S. Dollar Japanese Yen
- ----------------------------------------------------------------------------------------------------------------
5/5/98 288,846 288,846 430,000 287,838 (1,008)
U.S. Dollar Swiss Franc
- ----------------------------------------------------------------------------------------------------------------
5/5/98 652 652 1,000 669 17
U.S. Dollar Swiss Franc
- ----------------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
5/18/98 345,000 576,585 568,381 568,381 (8,204)
British Pound U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
6/15/98 175,000 292,403 291,900 291,900 (503)
British Pound U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
5/18/98 2,306,000 1,142,965 1,129,417 1,129,417 (13,548)
Dutch Guilder U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
6/22/98 215,000 106,791 105,186 105,186 (1,605)
Dutch Guilder U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
5/5/98 682,000 125,311 125,186 125,186 (125)
Finnish Markka U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
1/14/98 8,156,000 1,356,801 1,335,295 1,335,295 (21,506)
French Franc U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
6/17/98 11,509,000 1,918,570 1,914,975 1,914,975 (3,595)
French Franc U.S. Dollar
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
GROWTH & INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------
6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (CONTINUED)
GROWTH & INCOME (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE CURRENCY TO U.S. $ VALUE CURRENCY TO U.S. $ VALUE UNREALIZED
DATE BE DELIVERED APRIL 30, 1998 BE RECEIVED APRIL 30, 1998 GAIN (LOSS)
-------- ------------ -------------- ----------- -------------- -----------
CONTRACTS TO SELL (CONTINUED)
<S> <C> <C> <C> <C> <C>
5/8/98 1,310,000 $ 730,619 716,395 $ 716,395 ($14,224)
German Deutschemark U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
6/5/98 1,636,000 913,905 906,371 906,371 (7,534)
German Deutschemark U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
7/9/98 1,735,000 971,354 948,087 948,087 (23,267)
German Deutschemark U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/26/98 219,600,000 1,668,613 1,731,922 1,731,922 63,309
Japanese Yen U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
6/17/98 255,880,000 1,949,809 2,014,809 2,014,809 65,000
Japanese Yen U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
6/17/98 35,640,000 271,577 268,768 268,768 (2,809)
Japanese Yen U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
7/27/98 152,620,000 1,169,556 1,185,859 1,185,859 16,303
Japanese Yen U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/5/98 552,000 74,058 73,993 73,993 (65)
Norwegian Krone U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/4/98 1,800,000 11,814 11,812 11,812 (2)
Spanish Peseta U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/5/98 2,211,000 285,291 284,981 284,981 (310)
Swedish Krona U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/5/98 655,000 438,450 448,016 448,016 9,566
Swiss Franc U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
5/5/98 1,445,000 967,269 948,374 948,374 (18,895)
Swiss Franc U.S. Dollar
- --------------------------------------------------------------------------------------------------------------
$19,984
============
</TABLE>
7. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 6.8 billion shares. Of those 6.8
billion shares, 100 million shares each of Class I and Class A shares have
been designated to the Funds listed below. As of April 30, 1998, the following
shares of the Funds were owned by Aetna and its affiliates:
<TABLE>
<CAPTION>
CLASS I CLASS A
----------------- ----------------
<S> <C> <C>
Balanced 986,720 --
Growth and Income 3,506,537 --
Real Estate 490,000 10,000
</TABLE>
88
<PAGE>
GROWTH AND INCOME FUNDS
FINANCIAL HIGHLIGHTS
BALANCED
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED TEN MONTH
APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994 1993
- ---------------------------------------------------- ------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 14.09 $ 13.52 $ 12.36 $ 10.65 $ 10.82 $ 10.18
---------- --------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.17 0.33 0.31 0.35 0.23 0.34
Net realized and change in unrealized gain or
loss on investments ............................ 1.42 2.04 1.77 1.69 (0.28) 0.64
---------- --------- --------- --------- ---------- ---------
Total from investment operations ........... 1.59 2.37 2.08 2.04 (0.05) 0.98
---------- --------- --------- --------- ---------- ---------
LESS DISTRIBUTIONS:
From net investment income ....................... (0.19) (0.30) (0.35) (0.33) (0.12) (0.30)
In excess of net investment income ............... -- -- -- -- -- (0.01)
From net realized gains on investments ........... (2.28) (1.50) (0.57) -- -- (0.03)
---------- --------- --------- --------- ---------- ---------
Total distributions ........................ (2.47) (1.80) (0.92) (0.33) (0.12) (0.34)
---------- --------- --------- --------- ---------- ---------
Net asset value, end of period ..................... $ 13.21 $ 14.09 $ 13.52 $ 12.36 $ 10.65 $ 10.82
========== ========= ========= ========= ========== =========
Total return ....................................... 12.97% 19.57% 17.63% 19.45% (0.42)% 9.84%
Net assets, end of period (000's) .................. $ 120,333 $105,813 $ 88,625 $ 83,941 $ 76,267 $ 63,982
Ratio of total expenses to average net assets ...... 1.15%(1) 1.24% 1.31% 1.27% 1.09%(1) 0.93%
Ratio of net investment income to average net
assets ........................................... 2.53%(1) 2.43% 2.42% 3.14% 2.65%(1) 3.21%
Ratio of net expense before reimbursement and
waiver to average net assets ..................... 1.15%(1) 1.24% 1.31% 1.30% 1.32%(1) 1.34%
Ratio of net investment income before reimbursement
and waiver to average net assets ................. 2.53%(1) 2.43% 2.42% 3.11% 2.42%(1) 2.79%
Portfolio turnover rate ............................ 38.94% 116.69% 117.88% 129.05% 86.10% 19.95%
Average commission rate paid per share on equity
securities traded ................................ $ 0.0413 $ 0.0493 $ 0.0557 -- -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
89
<PAGE>
GROWTH AND INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
BALANCED
- -------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED APRIL 15, 1994
APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED TO
1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- -------------------------------------------------------------- ------------ ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 14.05 $ 13.49 $ 12.34 $ 10.62 $ 10.54
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................................... 0.14 0.23 0.20 0.23 0.19
Net realized and change in unrealized gain or loss on
investments .............................................. 1.41 2.03 1.79 1.91 --
--------- -------- -------- -------- --------
Total from investment operations ..................... 1.55 2.26 1.99 2.14 0.19
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income ................................. (0.12) (0.20) (0.27) (0.42) (0.11)
From net realized gains on investments ..................... (2.28) (1.50) (0.57) -- --
--------- -------- -------- -------- --------
Total distributions .................................. (2.40) (1.70) (0.84) (0.42) (0.11)
--------- -------- -------- -------- --------
Net asset value, end of period ............................... $ 13.20 $ 14.05 $ 13.49 $ 12.34 $ 10.62
========= ======== ======== ======== ========
Total return (does not reflect applicable sales charges) ..... 12.65% 18.64% 16.83% 18.32% 1.84%
Net assets, end of period (000's) ............................ $ 7,785 $ 6,289 $ 3,783 $ 1,362 $26,396
Ratio of total expenses to average net assets ................ 1.56%(1) 1.99% 2.07% 2.04% 1.87%(1)
Ratio of net investment income to average net assets ......... 2.12%(1) 1.68% 1.60% 2.61% 1.90%(1)
Ratio of net expense before reimbursement and waiver to
average net assets ......................................... 1.56%(1) 1.99% 2.07% 2.07% 2.06%(1)
Ratio of net investment income before reimbursement and
waiver to average net assets ............................... 2.12%(1) 1.68% 1.60% 2.58% 1.67%(1)
Portfolio turnover rate ...................................... 38.94% 116.69% 117.88% 129.05% 86.10%
Average commission rate paid per share on equity securities
traded ..................................................... $ 0.0413 $0.0493 $0.0557 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
90
<PAGE>
GROWTH AND INCOME
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED TEN MONTH
APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, DECEMBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994 1993
- ---------------------------------------------------- ------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 18.08 $ 15.74 $ 13.46 $ 11.11 $ 11.03 $ 10.51
---------- --------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.05 0.15 0.19 0.21 0.12 0.19
Net realized and change in unrealized gain or
loss on investments ............................ 2.27 5.00 3.09 2.27 0.04 0.50
---------- --------- --------- --------- ---------- ---------
Total from investment operations ........... 2.32 5.15 3.28 2.48 0.16 0.69
---------- --------- --------- --------- ---------- ---------
LESS DISTRIBUTIONS:
From net investment income ....................... (0.08) (0.21) (0.24) (0.13) (0.08) (0.16)
From net realized gains on investments ........... (3.32) (2.60) (0.76) -- -- (0.01)
---------- --------- --------- --------- ---------- ---------
Total distributions ........................ (3.40) (2.81) (1.00) (0.13) (0.08) (0.17)
---------- --------- --------- --------- ---------- ---------
Net asset value, end of period ..................... $ 17.00 $ 18.08 $ 15.74 $ 13.46 $ 11.11 $ 11.03
========== ========= ========= ========= ========== =========
Total return ....................................... 15.31% 37.44% 25.69% 22.58% 1.40% 6.58%
Net assets, end of period (000's) .................. $ 709,936 $595,969 $377,784 $356,803 $ 301,360 $ 60,127
Ratio of total expenses to average net assets ...... 0.94%(1) 1.00% 1.08% 1.10% 0.92%(1) 1.13%
Ratio of net investment income to average net
assets ........................................... 0.63%(1) 0.93% 1.35% 1.73% 1.51%(1) 1.77%
Ratio of net expense before reimbursement and
waiver to average net assets ..................... 0.94%(1) 1.00% 1.08% 1.10% 1.03%(1) 1.27%
Ratio of net investment income before reimbursement
and waiver to average net assets ................. 0.63%(1) 0.93% 1.35% 1.73% 1.39%(1) 1.55%
Portfolio turnover rate ............................ 80.31% 157.92% 106.09% 127.43% 54.13% 23.60%
Average commission rate paid per share on equity
securities traded ................................ $ 0.0444 $ 0.0474 $ 0.0505 -- -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
91
<PAGE>
GROWTH AND INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
GROWTH AND INCOME
- -------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED APRIL 15, 1994
APRIL 30, YEAR ENDED YEAR ENDED YEAR ENDED TO
1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- ---------------------------------------------------------------- ------------ ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................... $ 18.01 $ 15.69 $ 13.43 $ 11.08 $10.75
--------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................................ 0.02 0.03 0.08 0.12 0.11
Net realized and change in unrealized gain or loss on
investments ................................................ 2.25 4.99 3.08 2.31 0.30
--------- -------- -------- -------- -------
Total from investment operations ....................... 2.27 5.02 3.16 2.43 0.41
--------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment income ................................... (0.01) (0.10) (0.14) (0.08) (0.08)
From net realized gains on investments ....................... (3.32) (2.60) (0.76) -- --
--------- -------- -------- -------- -------
Total distributions .................................... (3.33) (2.70) (0.90) (0.08) (0.08)
--------- -------- -------- -------- -------
Net asset value, end of period ................................. $ 16.95 $ 18.01 $ 15.69 $ 13.43 $11.08
========= ======== ======== ======== =======
Total return (does not reflect applicable sales charges) ....... 15.00% 36.49% 24.70% 21.90% 3.71%
Net assets, end of period (000's) .............................. $ 22,216 $15,955 $ 6,638 $ 2,217 $5,740
Ratio of total expenses to average net assets .................. 1.34%(1) 1.75% 1.83% 1.84% 2.32%(1)
Ratio of net investment income to average net assets ........... 0.23%(1) 0.18% 0.55% 1.14% 1.74%(1)
Ratio of net expense before reimbursement and waiver to average
net assets ................................................... 1.34%(1) 1.75% 1.83% 1.84% 2.42%(1)
Ratio of net investment income before reimbursement and waiver
to average net assets ........................................ 0.23%(1) 0.18% 0.55% 1.14% 1.65%(1)
Portfolio turnover rate ........................................ 80.31% 157.92% 106.09% 127.43% 54.13%
Average commission rate paid per share on equity securities
traded ....................................................... $ 0.0444 $0.0474 $0.0505 -- --
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
92
<PAGE>
REAL ESTATE
- -------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998
TO
APRIL 30, 1998
CLASS I (UNAUDITED)
- ----------------------------------------------------------------------------------------------- ------------------
<S> <C>
Net asset value, beginning of period ......................................................... $ 10.00
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................................................................... 0.05
Net realized and change in unrealized gain or loss on investments .......................... (0.39)
---------
Total from investment operations ..................................................... (0.34)
---------
Net asset value, end of period ............................................................... $ 9.66
=========
Total return ................................................................................. (3.40)%
Net assets, end of period (000's) ............................................................ $ 4,783
Ratio of total expenses to average net assets ................................................ 3.79%(1)
Ratio of net investment income to average net assets ......................................... 2.30%(1)
Ratio of net expense before reimbursement and waiver to average net assets ................... 3.79%(1)
Ratio of net investment income before reimbursement and waiver to average net assets ......... 2.30%(1)
Portfolio turnover rate ...................................................................... 24.37%
Average commission rate paid per share on equity securities traded ........................... $ 0.0585
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
93
<PAGE>
GROWTH AND INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
REAL ESTATE
- -------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998
TO
APRIL 30, 1998
CLASS A (UNAUDITED)
- --------------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Net asset value, beginning of period ................................................................... $ 10.00
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................................................................ 0.05
Net realized and change in unrealized gain or loss on investments .................................... (0.40)
---------
Total from investment operations ............................................................... (0.35)
---------
Net asset value, end of period ......................................................................... $ 9.65
=========
Total return (does not reflect applicable sales charges) ............................................... (3.50)%
Net assets, end of period (000's) ...................................................................... $ 110
Ratio of total expenses to average net assets .......................................................... 4.04%(1)
Ratio of net investment income to average net assets ................................................... 2.05%(1)
Ratio of net expense before reimbursement and waiver to average net assets ............................. 4.04%(1)
Ratio of net investment income before reimbursement and waiver to average net assets ................... 2.05%(1)
Portfolio turnover rate ................................................................................ 24.37%
Average commission rate paid per share on equity securities traded ..................................... $ 0.0585
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
</TABLE>
See Notes to Financial Statements.
94
<PAGE>
AETNA BOND FUND
Growth of $10,000
<TABLE>
<CAPTION>
LEHMAN
AETNA BROTHERS
BOND AGGREGATE
FUND (CLASS I) BOND INDEX
<S> <C> <C>
12/91 10,000 10,000
9,900 9,872
10,290 10,271
10,860 10,712
10,670 10,741
11,160 11,185
11,470 11,481
11,771 11,781
11,820 11,788
11,530 11,450
11,333 11,332
11,428 11,401
11,432 11,444
11,921 12,021
12,610 12,753
12,827 13,003
13,379 13,557
13,171 13,317
13,225 13,393
13,463 13,641
13,696 13,944
13,985 14,181
14,751 15,183
15,069 15,604
4/98 15,261 15,727
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 YEAR 5 YEAR INCEPTION+
<S> <C> <C> <C>
Class I 9.14% 6.31% 6.91%
Class A 8.57% 5.55% 6.15%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
27, 1991. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA BOND FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Bond Fund (Bond) Class I shares generated a total return of 3.45%, net
of fund expenses, for the six month period ended April 30, 1998. The Lehman
Brothers Aggregate Bond Index(a) returned 3.59% during the same period. Class I
shares' performance over the one and five year periods ended April 30, 1998,
placed it in the top 77% (out of 412 funds) and 48% (out of 183 funds),
respectively, among intermediate-term bond funds tracked by Morningstar, Inc.
Class A shares generated a return for the same six month period of 3.24%,
(performance does not reflect the deduction of front end sales charge), placing
it in the top 88% (out of 412 funds) for the one year period among
intermediate-term bond funds tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The U.S. economy has behaved remarkably well with better than expected growth
and little to no inflation. Low interest rates, strong employment gains, real
income growth and lower commodity prices set the stage for strong domestic
demand during the period. Interest rates trended modestly lower but remained
within a relatively narrow band. The Asian crisis sparked a bond market rally
early this year as investors sought refuge from the turmoil overseas. Yields on
30-year Treasury bonds fell to historic lows in mid-January. Bonds also
responded favorably to progress made towards a balanced Federal budget and
deficit reduction. Treasuries later retraced some of the gains as the Asian
financial markets began to stabilize and concerns resurfaced over robust
domestic growth.
Corporations took advantage of the low interest rate environment to issue new
debt. The record supply of new issuance early this year widened spreads and
increased yield premiums for corporate bonds. Mortgages outperformed other
investment grade sectors on a duration equivalent basis as interest rates
stabilized and volatility levels declined. Strong cash inflows absorbed much of
the new supply and provided support to the domestic high yield market.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
The Fund's shorter duration profile detracted from performance as the bond
market rallied towards the end of 1997. Since then, the Fund has adjusted the
portfolio duration to reflect a neutral posture relative to the competitive peer
group.
The mortgage component of the Fund, particularly holdings of premium
GNMAs and current coupon pass-throughs, contributed to performance as volatility
levels declined and prepayment fears abated. The Fund increased its exposure to
the sector as spreads widened with the decline in rates earlier in the year.
See Definition of Indices. 95
<PAGE>
Improving credit fundamentals and industry consolidations helped to narrow
spread differentials in many of the Fund's corporate holdings. Bank and finance
bonds performed well as merger activity accelerated. Balance sheet improvements
and rating agency upgrades improved returns for issuers in the media and
telecommunications industries. However, Yankee* bond holdings significantly
underperformed as a result of the volatility overseas.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We expect that the bond market will remain in the recent trading range. Growth
in the first quarter has been robust, but some of the strength may have been
exaggerated due to the mild weather. Inflation remains muted with deflationary
forces at work through falling commodity prices and lower cost imports. This low
volatility environment should bode well for mortgage securities. We expect the
Asian markets to remain volatile and growth to slow dramatically in those
economies. Recent trade data has confirmed that exports to those countries have
decreased. Continued dollar strength and reduced Treasury issuance should
provide support to the bond market. We intend to maintain the neutral duration
position and overweight allocation to spread product.
* Yankee bonds are bonds issued by foreign corporations denominated in U.S.
dollars and sold in the United States.
<TABLE>
<CAPTION>
QUALITY RATINGS
<S> <C>
AAA 54.6%
AA 10.1%
A 15.9%
BBB 6.7%
BB 2.8%
B 3.4%
CCC 0.8%
N/R 5.7%
</TABLE>
<TABLE>
<CAPTION>
MATURITY DISTRIBUTION
<S> <C>
0-1 years 24.8%
1-5 years 16.0%
5-10 years 11.2%
10-20 years 16.1%
20 + years 31.9%
</TABLE>
96
<PAGE>
AETNA GOVERNMENT FUND
GROWTH OF $10,000
<TABLE>
<CAPTION>
LEHMAN
AETNA BROTHERS
GOVERNMENT FUND INTERMEDIATE
(CLASS I) GOVERNMENT INDEX
<S> <C> <C>
12/93 10,000 10,000
9,790 9,815
9,739 9,760
9,784 9,835
9,811 9,825
10,254 10,234
10,779 10,712
10,932 10,878
11,380 11,241
11,173 11,165
11,196 11,240
11,382 11,433
11,583 11,621
11,738 11,826
12,311 12,238
12,555 12,468
12,895 12,758
4/98 12,959 12,845
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
1 YEAR INCEPTION+
<S> <C> <C>
Class I 10.41% 6.18%
Class A 9.73% 5.43%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
22, 1993. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I, adjusted for fees and expenses
charged to Class A. Class I and Class A shares participate in the same portfolio
of securities.
AETNA GOVERNMENT FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Government Fund Class I shares generated a total return of 3.23%, net
of fund expenses, for the six month period ended April 30, 1998. The Fund
outperformed the Lehman Brothers Intermediate Government Index(b) which returned
3.11% for the same period. Class I shares' performance over the one year period
ending April 30, 1998, placed it in the top 20% (out of 346 funds) among
intermediate government funds tracked by Morningstar, Inc. Class A shares
generated a return for the same six month period of 3.00%, (performance does not
reflect the deduction of front end sales charge), placing it in the top 43% (out
of 346 funds) for the one year period among intermediate government funds
tracked by Morningstar, Inc.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The Fund's favorable performance over the last six months was partly
attributable to a 49% weighting in mortgage pass-through securities.
Pass-throughs outperformed Treasuries as they benefited from stable interest
rates which lessened prepayment fears. Two year Treasury yields fell only 0.04%,
while 30-year Treasury yields fell 0.20% during the period. Interest rates
changed little because the Federal Reserve is maintaining a steady monetary
policy until it can determine the impact of Asian weakness on the U.S.
economy.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
Fund performance was also assisted by a 23% weighting in government agency
securities. Stable agency spreads caused agencies to modestly outperform
Treasuries over the last six months.
Both the Fund's average duration and its allocation to agencies, mortgage
pass-throughs, and Treasuries are based on fundamental economic analysis and on
internal computer models designed to identify both favorable market trends and
expensiveness/inexpensiveness of individual securities.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Two strong cross-currents are likely to keep interest rates in a trading range.
The first force -- which will put downward pressure on interest rates -- is the
likelihood of slower economic growth in the second quarter. Growth should slow
due to declining exports to Asia, moderation in consumer demand, a pay-back for
growth that was accelerated to the first quarter due to abnormally warm weather
and a decline in business capital investment in response to lower earnings
growth. U.S. economic growth should not collapse, because unemployment is low,
real wage gains are strong, and a robust housing sector will stimulate demand
for durables. Bonds will benefit from the general trend towards lower growth.
See Definition of Indices. 97
<PAGE>
Working against this favorable force is the possibility that inflation will rise
over the second half of the year. Overall inflation has benefited from a decline
in commodity prices and an appreciating U.S. dollar which has made imports
inexpensive. Core inflation shows signs of increasing due to the pressures that
the rapidly growing economy is placing on the labor market. If the favorable
dollar and commodity price trends cease, overall inflation will quickly rise
towards the higher core inflation rate. Historically, bond yields have been very
sensitive to increases in inflation.
Continuation of this fine balance between positive and negative forces should
allow mortgage pass-throughs to continue to perform well. Thus the Fund is
likely to maintain exposure to the sector. Nevertheless, mortgage pass-through
investments will continue to focus on both seasoning and coupon sectors which
are less vulnerable to increasing prepayments.
QUALITY RATINGS
AAA 82.0%
N/R 18.0%
MATURITY DISTRIBUTION
0- 1 years 27.0%
1- 5 years 1.8%
5-10 years 13.8%
10-20 years 27.1%
20 + years 30.3%
98
<PAGE>
AETNA HIGH YIELD FUND
GROWTH OF $10,000
<TABLE>
<CAPTION>
2/98 4/98
---- ----
<S> <C> <C>
Aetna High Yield Fund (Class I) $10,000 $10,304
Merrill Lynch High Yield Master Trust Index $10,000 $10,176
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED APRIL 30, 1998*
<TABLE>
<CAPTION>
INCEPTION+
<S> <C>
Class I 3.04%
Class A 2.96%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for both the Class I and Class A shares was February 2,
1998. Class I and Class A shares participate in the same portfolio of
securities.
AETNA HIGH YIELD FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna High Yield Fund (High Yield) Class I shares generated a total return
of 3.04%, net of fund expenses, from its inception on February 2, 1998 to April
30, 1998. During the three month period ended April 30, 1998, the Fund
outperformed the Merrill Lynch High Yield Master Trust Index(c) which returned
1.76%. Class A shares generated a return for the same period of 2.96%
(performance does not reflect the deduction of the front end sales charge).
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Equity market volatility affected Fund performance somewhat in April, but the
strong demand for high yield products nevertheless brought buyers into the
market. Demand continues to increase from pension funds and insurance accounts
as well as traditional mutual funds. New products, such as collateralized bond
obligations and closed-end mutual funds, have supplemented demand for high yield
debt in the last month and are expected to continue in the following months.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST THREE MONTHS?
Outperformance since inception was attributable to overweighting single B's and
the telecommunication sector, both of which have outperformed. This
outperformance was offset slightly by underperformance in the shipping and
mining sectors.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The deluge of new high yield offerings is likely to continue and may cause
back-up in spreads for new issues and secondary offerings. Given the relatively
strong economic fundamentals and low interest rate environment, high yield
credits should continue to do well and we look for opportunities to add to
strong credits at wider spreads. We continue to like single B's when priced
appropriately, as well as the high growth telecommunications sector.
High yielding fixed income securities are subject to greater market fluctuations
and risk of loss of income and principal than investments in lower yielding
fixed income securities.
See Definition of Indices. 99
<PAGE>
QUALITY RATINGS
BB 4.7%
B 72.8%
CCC 4.1%
N/R 18.4%
MATURITY DISTRIBUTION
0- 1 years 3.7%
1- 5 years 8.1%
5-10 years 87.2%
10-20 years 1.0%
100
<PAGE>
AETNA MONEY MARKET FUND
Growth of $10,000
<TABLE>
<CAPTION>
AETNA
MONEY MARKET
FUND (CLASS I) IBC
<S> <C> <C>
12/91 $10,000 $10,000
10,104 10,096
10,210 10,184
10,308 10,263
10,404 10,334
10,488 10,404
10,572 10,472
10,656 10,541
10,744 10,611
10,834 10,684
10,934 10,773
11,057 10,878
11,205 11,003
11,365 11,148
11,536 11,299
11,706 11,446
11,875 11,592
12,031 11,731
12,187 11,869
12,347 12,009
12,402 12,056
12,732 12,201
13,083 12,503
13,260 12,659
4/98 13,427 12,816
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
for the Period Ended April 30, 1998*
1 year 5 Year Inception+
<S> <C> <C> <C>
Class I 5.46% 5.02% 4.78%
Class A 5.46% 5.02% 4.78%
</TABLE>
* Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results.
+ Date of inception for the Class I (formerly Select Class) shares was December
27, 1991. The date of inception for the Class A (formerly Adviser Class) shares
was April 15, 1994. For periods prior to that date, Class A performance is
calculated by using the performance of Class I. Class I and Class A shares
participate in the same portfolio of securities.
AETNA MONEY MARKET FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Money Market Fund (Money Market) Class I and Class A shares generated
a total return of 2.63%, net of fund expenses, for the six month period ended
April 30, 1998. As of April 30, 1998, the Fund reported a 7-day yield of 5.20%
with an average weighted maturity of 62 days. The Fund outperformed the IBC's
Money Fund Report Average/All Taxable Index(d) which returned 2.49%.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Despite the robust pace in the U.S. economy, the lack of inflation has thus far
kept monetary policy on hold. The turmoil in the Asian financial markets may
have also contributed to the Federal Reserve's reluctance to act. Reduced growth
and demand from Asia is expected to act as a drag on the U.S. economy. A hike in
U.S. interest rates would also add to the difficulties in Asia and reduce the
chances for a recovery. However, minutes from the Federal Open Market Committee
meeting in March 1998, indicated a return to a tightening bias. Concerns arose
over potential inflationary pressures from tight labor market conditions and
continued strong domestic demand.
A strong dollar and progress towards a balanced fiscal budget have made the U.S.
attractive in comparison to other global markets. Strong tax receipts and a
reduction in Treasury issuance will likely move the Federal budget into a
surplus position for the first time since 1969.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
Average portfolio maturity was extended as the yield curve steepened and longer
maturities became attractive. Returns were enhanced by an increase in asset
backed security holdings in the Fund. Additional asset backed issuance early in
the period provided opportunities to purchase securities as new supply pushed
yields higher. Adjustable rate securities were selected that utilized London
Interbank Offered Rate (LIBOR) as the index to reset coupons, as the LIBOR
remained relatively stable where other yields fell.
WHAT IS YOUR OUTLOOK GOING FORWARD?
While the Federal Reserve has shifted its bias towards higher interest rates, we
believe that monetary policy will remain unchanged over the next several months.
Inflation remains benign as tight labor market conditions and strong housing
activity have yet to lead to higher prices. There is still much uncertainty
surrounding the severity of the Asian crisis and its potential impact on the
U.S. economy. Given our relatively neutral bias, we will continue to maintain
the current investment strategy and allocations.
See Definition of Indices. 101
<PAGE>
An investment in Money Market is neither insured nor guaranteed by the United
States Government, and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
QUALITY RATINGS*
Tier 1 100.0%
Tier 2 --
MATURITY DISTRIBUTION
1- 30 days 49.8%
31- 60 days 7.8%
61- 90 days 11.0%
91-120 days 3.1%
121-180 days 7.0%
181-397 days 21.3%
* Tier 1 securities are securities which are rated in the highest short-term
rating category by at least two nationally recognized statistical rating
organizations (NRSROs) or by the only NRSRO that has rated the security or
comparable unrated securities. Tier 2 securities are securities that are not
rated as Tier 1.
102
<PAGE>
DEFINITION OF INDICES
(a) The Lehman Brothers Aggregate Bond Index is an unmanaged index of corporate,
government and mortgage bonds.
(b) The Lehman Brothers Intermediate Government Index, an unmanaged index,
includes those indices found in the Lehman Brothers Government Index which have
a maturity of one to three years.
(c) The Merrill Lynch High Yield Master Trust Index is an unmanaged, broad gauge
of the high yield bond market and do not take into account any fees and expenses
of the individual securities that they track.
(d) IBC's Money Funds Report Average/All Taxable Index (IBC) is an average of
the returns of over 250 money market mutual funds surveyed each month by IBC.
103
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
BOND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (85.3%)
U.S. TREASURIES (19.4%)
U.S. Treasury Bond, 6.13%, 11/15/27.......... $ 750,000 $ 767,457
U.S. Treasury Bond, 6.38%, 08/15/27.......... 1,000,000 1,052,503
U.S. Treasury Bond, 6.63%, 02/15/27.......... 250,000 270,663
U.S. Treasury Bond, 6.75%, 08/15/26.......... 500,000 548,516
U.S. Treasury Bond, 10.38%, 11/15/12......... 500,000 661,718
U.S. Treasury Note, 5.75%, 11/30/02.......... 250,000 250,664
U.S. Treasury Note, 5.88%, 04/30/98.......... 1,000,000 1,000,078
U.S. Treasury Note, 6.63%, 03/31/02.......... 1,000,000 1,032,966
U.S. Treasury Note, 6.88%, 03/31/00(ss)(ss).. 2,000,000 2,045,934
-----------
7,630,499
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.8%)
Private Export Funding Corp., 5.48%,
09/15/03ss................................. 1,100,000 1,086,459
Small Business Administration 92-20K,
7.55%, 11/01/12............................ 757,075 795,080
-----------
1,881,539
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(20.8%)
Federal Home Loan Mortgage Corp.,
7.81%, 11/01/22 .......................... 264,930 267,168
Federal National Mortgage
Association, 6.50%, 06/10/28(ss)(ss)(ss).. 1,000,000 989,375
Federal National Mortgage
Association, 7.00%, 12/01/28(ss)(ss)(ss).. 1,500,000 1,515,470
Federal National Mortgage
Association, 90-34 C, Zero Coupon,
06/25/19 ................................. 85,829 83,752
Government National Mortgage
Association, 6.50%, 02/01/28(ss)(ss)(ss).. 1,000,000 990,625
Government National Mortgage
Association, 7.00%, 04/15/26 ............. 885,781 897,412
Government National Mortgage
Association, 7.50%, 10/15/26 ............. 957,976 984,924
Government National Mortgage
Association, 9.50%, 07/15/18 ............. 174,545 189,000
Marine Midland 1992-1, 8.00%, 04/25/23 ..... 914,453 932,742
Prudential Home Mortgage, 7.00%,
12/25/07 ................................. 743,024 747,551
Prudential Home Mortgage, 7.50%,
06/25/07 ................................. 545,825 547,615
-----------
8,145,634
-----------
ASSET-BACKED SECURITIES (1.0%)
First Security Auto Grantor Trust,
6.10%, 04/15/03 ......................... 399,493 400,741
-----------
ELECTRIC AND TELEPHONE BONDS (1.3%)
Level 3 Communications, 9.13%,
05/01/08++ .............................. 500,000 493,750
-----------
FINANCIAL BONDS (12.7%)
American Express Credit Corp., 8.50%,
06/15/99 ................................ 1,000,000 1,027,390
Associates Corp. N.A., 8.55%, 07/15/09 .... 1,000,000 1,165,245
Commercial Credit Co., 8.70%, 06/15/09 .... 1,000,000 1,167,520
EOP Operating L.P., 6.38%, 02/15/03++ ..... 250,000 249,049
First Empire Capital Trust II, 8.23%,
06/01/27 ................................ 350,000 375,375
Heller Financial, 6.35%, 08/15/99++ ....... 500,000 500,250
HSBC America, 7.81%, 12/15/26++ ........... 500,000 504,332
-----------
4,989,161
-----------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
FOREIGN AND SUPRANATIONALS (18.5%)
Bayerische Landesbank, 6.25%, 03/15/00 .... $ 500,000 $ 502,715
Hutchison Whampoa Financial, 6.95%,
08/01/07++............................... 500,000 473,240
Inter-American Development Bank,
12.25%, 12/15/08......................... 500,000 737,130
International Bank For Reconstruction
& Development, 9.25%, 07/15/17ss......... 1,000,000 1,333,725
KFW International Finance, 8.85%,
06/15/99................................. 500,000 515,687
Panama (Republic of), 7.88%, 02/13/02++ ... 400,000 400,000
Rogers Cablesystem, 10.00%, 03/15/05 ...... 500,000 551,250
Skanidinavinska Enskilda Bank, 6.69%,
06/29/49................................. 700,000 703,500
Svenska Handlesbanken, 6.18%, 03/29/49 .... 1,500,000 1,500,000
Zurich Capital Trust, 8.38%, 06/01/37++.... 500,000 546,130
-----------
7,263,377
-----------
OTHER PUBLIC CORPORATE BONDS (6.8%)
Echostar Satellite Broadcast, Zero
Coupon, 03/15/04......................... 300,000 274,125
Enron Oil & Gas, 6.50%, 12/01/07......... 500,000 502,282
Flag Ltd., 8.25%, 01/30/08++............... 470,000 477,050
PSINET, Inc., 10.00%, 02/15/05++........... 150,000 154,688
Time Warner, Inc., 9.13%, 01/15/13......... 500,000 601,600
TRW, Inc., 9.35%, 06/04/20................. 500,000 642,595
-----------
2,652,340
-----------
TOTAL LONG-TERM BONDS AND NOTES
(COST $32,477,555) ...................... 33,457,041
-----------
SHORT-TERM INVESTMENTS (24.7%)
Baxter International, Inc., Comm.
Paper, 5.57%, 05/13/98++................. 1,000,000 998,143
Conagra, Inc., Comm. Paper, 5.65%,
05/05/98................................. 1,506,000 1,505,055
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.45%, 05/01/98............. 3,896,000 3,896,000
Occidental Petroleum, Comm. Paper,
5.67%, 05/04/98++........................ 1,600,000 1,599,244
Textron Financial Corp., Comm. Paper,
5.75%, 05/05/98.......................... 1,700,000 1,698,914
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $9,697,356) 9,697,356
-----------
TOTAL INVESTMENTS (COST $42,174,911)(a) 43,154,397
OTHER ASSETS LESS LIABILITIES (3,924,647)
-----------
TOTAL NET ASSETS $39,229,750
===========
</TABLE>
104 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at April 30, 1998, are
as follows:
<TABLE>
<S> <C>
Unrealized gains ..................... $1,048,913
Unrealized losses .................... (69,427)
----------
Net unrealized gain ................ $ 979,486
==========
</TABLE>
(ss) Segregated securities for purchases of delayed delivery or
when-issued securities held at April 30, 1998.
(ss)(ss) Partially segregated securities for purchases of delayed delivery
or when-issued securities held at April 30, 1998.
(ss)(ss)(ss) When-issued or delayed delivery security.
++ Securities that may be resold to "qualified institutional buyers"
under Rule 144A or securities offered pursuant to section 4(2) of
the Securities Act of 1933, as amended. These securities have been
determined to be liquid under guidelines established by the Board
of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements. 105
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
AETNA GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (79.5%)
U.S. TREASURIES (16.4%)
U.S. Treasury Bond, 6.63%, 02/15/27 ......... $ 100,000 $ 108,265
U.S. Treasury Note, 5.88%, 01/31/99 ......... 100,000 100,258
U.S. Treasury Note, 6.50%, 05/15/05 ......... 300,000 313,220
U.S. Treasury Note, 6.50%, 08/15/05(ss)...... 1,000,000 1,043,905
U.S. Treasury Note, 8.75%, 05/15/17 ......... 400,000 522,813
-----------
2,088,461
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (18.5%)
Federal National Mortgage
Association, 5.75%, 04/15/03 .............. 250,000 249,141
Private Export Funding Corp., 5.48%,
09/15/03(ss) .............................. 550,000 543,230
Small Business Administration 91-20K,
8.25%, 11/01/11 ........................... 727,896 777,487
Small Business Administration 92-20K,
7.55%, 11/01/12 ........................... 757,075 795,080
-----------
2,364,938
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (41.1%)
Federal Home Loan Mortgage
Association, 11.50%, 02/01/16 ............. 316,777 361,348
Federal Home Loan Mortgage Corp.,
9.50%, 07/01/20 ........................... 180,984 194,273
Federal National Mortgage
Association, 6.50%, 06/10/28(ss)(ss) ...... 400,000 395,750
Federal National Mortgage Corp.,
10.50%, 04/01/19 .......................... 109,397 119,858
Government National Mortgage
Association, 6.50%, 04/15/26 .............. 656,084 650,960
Government National Mortgage
Association, 7.00%, 02/01/23 - ............ 2,147,928 2,174,777
04/15/26(ss)(ss)
Government National Mortgage
Association, 9.00%, 05/15/16 -
07/15/16 .................................. 767,094 822,230
Government National Mortgage
Association, 9.50%, 11/15/21 .............. 222,269 240,676
Government National Mortgage
Association - II, 9.50%, 09/20/19 ......... 253,561 272,341
-----------
5,232,213
-----------
FOREIGN AND SUPRANATIONALS (3.5%)
Inter-American Development Bank,
12.25%, 12/15/08 .......................... 300,000 442,278
----------
TOTAL LONG-TERM BONDS AND NOTES
(COST $9,939,279) 10,127,890
-----------
SHORT-TERM INVESTMENTS (28.3%)
Federal Home Loan Bank, Comm. Paper,
5.41%, 05/13/98 ........................... $400,000 $ 399,279
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.41%, 06/10/98(ss)........... 400,000 397,596
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.45%, 05/01/98 .............. 2,809,000 2,809,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $3,605,875) 3,605,875
-----------
TOTAL INVESTMENTS (COST $13,545,154)(a) ..... 13,733,765
OTHER ASSETS LESS LIABILITIES ............... (998,218)
-----------
TOTAL NET ASSETS ............................ $12,735,547
===========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$13,612,323. Unrealized gains and losses, based on identified tax cost at April
30, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains ..................... $ 148,248
Unrealized losses .................... (26,806)
----------
Net unrealized gain ................ $ 121,442
==========
</TABLE>
(ss) Segregated securities for purchases of delayed delivery or when-issued
securities held at April 30, 1998.
(ss)(ss) When-issued or delayed delivery security.
Category percentages are based on net assets.
106 See Notes to Financial Statements.
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
HIGH YIELD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-------- --------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (93.8%)
CORPORATE BONDS (93.8%)
Accuride Corp., 9.25%, 02/01/08 ............. $250,000 $ 248,750
American Banknote Corp., 11.25%,
12/01/07++ ................................ 250,250 251,878
American Reefer Co. Ltd., 10.25%,
03/01/08++ ................................ 250,000 250,000
Anker Coal Group, Inc., 9.75%, 10/01/07 ..... 400,000 384,000
Chesapeake Energy Corp., 9.63%,
05/01/05++ ................................ 150,000 150,750
Convergent Communication, 13.00%,
04/01/08++ ................................ 200,000 198,000
Crown Castle International Corp., Zero
Coupon, 11/15/07++ ........................ 500,000 345,000
Drypers Corp., 10.25%, 06/15/07++ ........... 300,000 309,000
Echostar Communications, Zero Coupon,
06/01/04 .................................. 250,000 240,938
Firstworld Communication, Zero Coupon,
04/15/08++ ................................ 250,000 126,875
FWT, Inc., 9.88%, 11/15/07 .................. 200,000 188,000
Geneva Steel, 9.50%, 01/15/04 ............... 150,000 139,500
Indesco International, Inc., 9.75%,
04/15/08 .................................. 100,000 100,000
Intermedia Communication, 8.50%,
01/15/08 .................................. 250,000 256,250
Iridium LLC/Capital Corp., 11.25%,
07/15/05++ ................................ 250,000 258,125
IXC Communications, Inc., 9.00%,
04/15/08++ ................................ 150,000 150,000
KMC Telcom Holdings, Inc., Zero
Coupon, 02/15/08++ ........................ 500,000 301,250
Majestic Star Casino LLC, 12.75%,
05/15/03ss ................................ 250,000 272,500
McLeod USA, Inc., 8.38%, 03/15/08 ........... 200,000 204,000
Michael Petroleum Corp., 11.50%,
04/01/05++ ................................ 200,000 198,000
Microcell Telecommunications, Zero
Coupon, 06/01/06 .......................... 300,000 225,000
Mohegan Tribal Gaming, 13.50%,
11/15/02 .................................. 350,000 446,249
National Fiberstock Corp., 11.63%,
06/15/02 .................................. 350,000 369,250
Nextel Communications, Zero Coupon,
08/15/04 .................................. 250,000 240,625
NTLI, Inc., Zero Coupon, 04/01/08++ ......... 200,000 127,500
Outsourcing Services Group, 10.88%,
03/01/06++ ................................ 400,000 408,000
Plainwell, Inc., 11.00%, 03/01/08++ ......... 350,000 360,927
PSINET, Inc., 10.00%, 02/15/05++ ............ 200,000 206,250
Purina Mills, Inc., 9.00%, 03/15/10++ ....... 100,000 102,750
RAB Enterprises, Inc., 10.50%,
05/01/05++ ................................ 150,000 150,750
SBA Communications Corp., Zero Coupon,
03/01/08++ ................................ 500,000 300,000
Simcala, Inc., 9.63%, 04/15/06++ ............ 200,000 202,000
Sitel Corp., 9.25%, 03/15/06++ .............. 350,000 356,125
TBS Shipping International Ltd.,
10.00%, 05/01/05++(ss)(ss) ................ 200,000 187,500
Trans-Resources, 10.75%, 03/15/08++ ......... 250,000 256,250
Verio, Inc., 10.38%, 04/01/05++ ............. 250,000 258,750
Viasystems, Inc., 9.75%, 06/01/07++ ......... 400,000 418,000
Winstar Communications, Inc., 10.00%,
03/15/08++ ................................ 200,000 195,500
Winstar Communications, Inc., 11.00%,
03/15/08++ ................................ 150,000 146,625
TOTAL LONG-TERM BONDS AND NOTES (COST $9,476,855) 9,530,867
-----------
PREFERRED STOCKS (1.5%)
Nebco Evans Holding Co., 11.25%,
03/01/08++ ................................ 150,000 155,250
-----------
TOTAL PREFERRED STOCKS (COST $150,000)....... 155,250
-----------
SHORT-TERM INVESTMENTS (3.6%)
Federal Home Loan Mortgage Corp.,
Comm. Paper, 5.45%, 05/01/98 .............. $367,000 $ 367,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $367,000) 367,000
-----------
TOTAL INVESTMENTS (COST $9,993,855)(a) ...... 10,053,117
OTHER ASSETS LESS LIABILITIES ............... 103,533
-----------
TOTAL NET ASSETS ............................ $10,156,650
===========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at April 30, 1998, are
as follows:
<TABLE>
<S> <C>
Unrealized gains ..................... $ 114,660
Unrealized losses .................... (55,398)
----------
Net unrealized gain ................ $ 59,262
==========
</TABLE>
++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securities have been
determined to be liquid under guidelines established by the Board of
Directors.
(ss) Segregated securities for purchases of delayed delivery or when-issued
securities held at April 30, 1998.
(ss)(ss) When-issued or delayed delivery security.
Category percentages are based on net assets.
See Notes to Financial Statements. 107
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 1998 (UNAUDITED)
MONEY MARKET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
ASSET-BACKED SECURITIES (28.7%)
Amercredit Automobile Receivables
Trust 1998-A, 5.56%, 03/05/99 ................ $17,622,294 $17,622,294
Asset Backed Securities Investment
Trust 1997-C, 5.66%, 06/15/98++ .............. 16,000,000 16,000,000
Asset Backed Securities Investment
Trust 1997-E, 5.66%, 08/15/98++ .............. 12,000,000 12,000,000
Barnett Auto Trust 1997-A, 5.65%,
10/15/98 ..................................... 380,331 380,331
Capita Equipment Receivables Trust
1997-1, 5.79%, 12/15/98 ...................... 10,097,679 10,097,679
CARCO Auto Loan Master Trust
1993-2, 5.61%, 11/15/98 ...................... 4,500,000 4,500,000
Case Equipment Loan Trust 1998-A,
5.55%, 03/15/99 .............................. 4,638,897 4,638,897
Chase Manhattan Auto Owner Trust
1998-A, 5.55%, 03/12/99 ...................... 13,738,435 13,738,435
Chase Manhattan Auto Owner Trust
1998-B, 5.58%, 05/10/99 ...................... 4,000,000 4,000,000
ContiMortgage Home Equity Loan
Trust
1998-1, 5.65%, 03/15/99 ..................... 5,234,227 5,234,227
Ford Credit Auto Owner Trust
1997-B, 5.75%, 10/15/98 ...................... 5,091,053 5,091,053
Green Tree Financial Corp., 5.69%,
05/01/99 ..................................... 4,500,000 4,500,000
Long Lane Master Trust III 1997-C,
5.68%, 11/02/98++++ .......................... 7,200,000 7,200,000
Long Lane Master Trust III 1998-B,
5.71%, 04/30/99++++ .......................... 8,700,000 8,700,000
MMCA Auto Owner Trust 1997-1,
5.63%, 11/15/98 .............................. 6,320,707 6,320,707
Navistar Financial Owner Trust
1997-B, 5.72%, 11/15/98 ...................... 2,653,152 2,653,152
------------
TOTAL ASSET-BACKED SECURITIES .................. 122,676,775
------------
CERTIFICATES OF DEPOSIT (4.5%)
Deutsche Bank AG (NY), 5.70%,
03/30/99 ..................................... 9,500,000 9,495,018
Svenska Handelsbanken, Inc., 5.72%,
03/31/99 ..................................... 9,700,000 9,697,449
------------
TOTAL CERTIFICATES OF DEPOSIT .................. 19,192,467
------------
COMMERCIAL PAPER - DOMESTIC (42.1%)
AVCO Financial Services, Inc.,
5.52%, 07/06/98 .............................. 6,000,000 5,939,280
Bankers Trust New York Corp.,
5.58%, 09/23/98 .............................. 2,600,000 2,541,565
Baxter International, Inc., 5.60%,
05/05/98++ ................................... 5,000,000 4,996,889
Bridgestone Firestone Master Trust
1992-B, 5.65%, 05/07/98++++ .................. 8,500,000 8,500,000
BT Alex Brown, Inc., 5.64%, 07/13/98 ........... 4,000,000 3,954,253
Ciesco L.P., 5.50%, 06/16/98++ ................. 8,000,000 7,943,778
Cooper Industries, Inc., 5.60%,
05/01/98++ ................................... 18,775,000 18,775,000
Cooperative Assoc. of Tractor
Dealers, Inc., 5.40%, 07/27/98 ............... 3,100,000 3,059,545
Cooperative Assoc. of Tractor
Dealers, Inc., 5.40%, 07/31/98 ............... 2,000,000 1,972,700
Cooperative Assoc. of Tractor
Dealers, Inc., 5.47%, 09/02/98 ............... 1,500,000 1,471,738
COMMERCIAL PAPER - DOMESTIC (CONTINUED)
Cooperative Assoc. of Tractor
Dealers, Inc., 5.52%, 07/22/98 ............... $2,400,000 $2,369,824
Country Wide Home Loans, Inc.,
5.56%, 05/26/98 .............................. 7,000,000 6,972,972
Country Wide Home Loans, Inc.,
5.70%, 05/01/98 .............................. 2,303,000 2,303,000
CSW Credit, Inc., 5.54%, 07/17/98++ ............ 3,000,000 2,964,452
Dakota Certificates - Standard
Credit Card Master Trust 1,
5.53%, 07/27/98++ ............................ 6,000,000 5,919,815
Dealers Capital Access Trust, Inc.,
5.50%, 08/31/98 .............................. 7,400,000 7,262,072
Dealers Capital Access Trust, Inc.,
5.60%, 05/26/98 .............................. 6,500,000 6,474,722
EG&G, Inc., 5.54%, 05/19/98++++ ................ 4,800,000 4,786,704
Eureka Securitization, Inc., 5.51%,
05/27/98++ ................................... 3,000,000 2,988,062
Eureka Securitization, Inc., 5.52%,
06/22/98++ ................................... 7,200,000 7,142,592
Eureka Securitization, Inc., 5.53%,
07/22/98++ ................................... 4,000,000 3,949,616
Finova Capital Corp., 5.48%,
09/14/98 ..................................... 4,000,000 3,917,191
Finova Capital Corp., 5.68%,
06/24/98 ..................................... 6,000,000 5,948,880
Finova Capital Corp., 5.70%,
05/13/98 ..................................... 4,000,000 3,992,400
Frontier Corp., 5.55%, 05/05/98++ .............. 5,444,000 5,440,643
Frontier Corp., 5.62%, 05/14/98++ .............. 9,178,000 9,159,374
General Electric Capital Corp.,
5.50%, 07/29/98 .............................. 10,000,000 9,864,028
Jefferson Smurfit Finance Corp.,
5.52%, 06/02/98 .............................. 1,800,000 1,791,168
Jefferson Smurfit Finance Corp.,
5.52%, 06/09/98 .............................. 3,200,000 3,180,864
Jefferson Smurfit Finance Corp.,
5.56%, 05/19/98 .............................. 2,800,000 2,792,216
Republic Industries Funding Corp.,
5.53%, 05/20/98 .............................. 11,400,000 11,366,728
Republic Industries Funding Corp.,
5.60%, 05/01/98 .............................. 8,000,000 8,000,000
TRW, Inc., 5.55%, 05/29/98++ ................... 2,600,000 2,588,777
------------
TOTAL COMMERCIAL PAPER - DOMESTIC .............. 180,330,848
------------
COMMERCIAL PAPER - FOREIGN (4.5%)
Province of British Columbia,
5.48%, 10/09/98 .............................. 5,500,000 5,365,207
Skandinaviska Enskilda Banken
Funding, 5.54%, 09/28/98 ..................... 5,000,000 4,884,583
Svenska Handelsbanken, Inc., 5.44%,
08/24/98 ..................................... 6,000,000 5,895,733
Xerox Mexicana S.A., 5.55%, 05/13/98 ........... 3,000,000 2,994,450
------------
TOTAL COMMERCIAL PAPER - FOREIGN ............... 19,139,973
------------
CORPORATE NOTES (7.5%)
BankBoston Corp., 5.82%, 06/10/98 .............. 4,000,000 4,000,000
First National Bank Commerce,
5.68%, 07/31/98 .............................. 20,000,000 19,998,890
First USA Bank, 5.75%, 01/15/99 ................ 2,000,000 1,997,793
GMAC International Finance, 5.69%,
09/11/98 ..................................... 4,700,000 4,699,651
International Lease Finance Corp.,
7.50%, 03/01/99 .............................. 1,200,000 1,216,557
------------
TOTAL CORPORATE NOTES .......................... 31,912,891
------------
108 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
----------- -----------
MEDIUM-TERM NOTES (16.1%)
American Honda Finance Corp, 5.63%,
04/08/99 ..................................... $15,500,000 $15,499,999
American Honda Finance Corp.,
5.67%, 05/07/99 .............................. 6,000,000 6,000,000
AmSouth Bank of Alabama, 5.53%,
10/15/98 ..................................... 20,000,000 19,992,722
Chrysler Financial Corp., 7.26%,
07/01/98 ..................................... 1,700,000 1,703,663
Countrywide Funding Corp., 5.87%,
08/28/98 ..................................... 4,000,000 4,003,470
Finova Capital Corp., 6.38%,
04/15/99 ..................................... 2,700,000 2,714,019
PHH Corp., 5.57%, 08/04/98 ..................... 14,000,000 13,998,939
PHH Corp., 5.59%, 02/10/99 ..................... 5,000,000 4,998,101
------------
TOTAL MEDIUM-TERM NOTES ........................ 68,910,913
------------
TOTAL INVESTMENTS (COST $442,163,867) .......... 442,163,867
OTHER ASSETS LESS LIABILITIES .................. (14,315,393)
------------
TOTAL NET ASSETS ............................... $427,848,474
============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical. There
were no unrealized gains and losses as of April 30, 1998.
++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be
liquid under guidelines established by the Board of Directors.
++++ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements. 109
<PAGE>
INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at market value ...................................................................................
Cash ...........................................................................................................
Receivable for:
Dividends and interest .......................................................................................
Investments sold .............................................................................................
Fund shares sold .............................................................................................
Reimbursment from Investment Adviser .........................................................................
Other assets ...................................................................................................
Prepaid expenses ...............................................................................................
Total assets ..........................................................................................
LIABILITIES:
Payable for:
Dividends to shareholders ....................................................................................
Investments purchased ........................................................................................
Fund shares redeemed .........................................................................................
Other liabilities ..............................................................................................
Total liabilities .....................................................................................
NET ASSETS ...................................................................................................
NET ASSETS REPRESENTED BY:
Paid-in capital ................................................................................................
Net unrealized gain (loss) on investments.......................................................................
Undistributed net investment income ............................................................................
Accumulated net realized gain (loss) on investments ............................................................
NET ASSETS ...................................................................................................
CAPITAL SHARES:
Class I:
Outstanding ..................................................................................................
Net Assets ...................................................................................................
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) ..........
Class A:
Outstanding ..................................................................................................
Net Assets ...................................................................................................
Net Asset Value, offering and redemption price per share (net assets divided by shares outstanding) ..........
Cost of investments ............................................................................................
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AETNA
GOVERNMENT MONEY
BOND FUND HIGH YIELD MARKET
------------ ---------------- ------------- -------------
<S> <C> <C> <C>
$43,154,397 $13,733,765 $10,053,117 $442,163,867
30,176 231 860 313
660,430 150,282 153,717 1,450,237
2,474,918 1,127,083 339,063 --
22,326 11,242 1,071 4,712,658
7,394 8,350 9,645 72,947
-- 563 -- --
693 248 -- 7,852
------------ ------------ ------------- -------------
46,350,334 15,031,764 10,557,473 448,407,874
------------ ------------ ------------- -------------
20,312 23,652 64,975 70,239
7,006,729 2,255,057 335,848 14,700,000
70,390 17,508 -- 5,519,398
23,153 -- -- 269,763
------------ ------------ ------------- -------------
7,120,584 2,296,217 400,823 20,559,400
------------ ------------ ------------- -------------
$39,229,750 $12,735,547 $10,156,650 $427,848,474
============ ============ ============= =============
$38,903,910 $12,907,669 $10,026,743 $427,848,474
979,486 188,611 59,262 --
1,318 8,811 4,131 --
(654,964) (369,544) 66,514 --
------------ ------------ ------------- -------------
$39,229,750 $12,735,547 $10,156,650 $427,848,474
============ ============ ============= =============
3,667,743 1,216,490 991,073 268,130,627
$37,590,829 $12,208,687 $10,039,500 $268,130,627
$ 10.25 $ 10.04 $ 10.13 $ 1.00
159,941 52,494 11,564 159,717,847
$ 1,638,921 $ 526,860 $ 117,150 $159,717,847
$ 10.25 $ 10.04 $ 10.13 $ 1.00
$42,174,911 $13,545,154 $ 9,993,855 $442,163,867
</TABLE>
111
<PAGE>
INCOME FUNDS
STATEMENTS OF OPERATIONS
PERIOD ENDED APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends ...............................................................
Interest ................................................................
Total investment income ........................................
INVESTMENT EXPENSES:
Investment advisory fee .................................................
Administrative services fees ............................................
12b-1 and shareholder services fees .....................................
Printing and postage ....................................................
Custody fees ............................................................
Transfer agent fees .....................................................
Audit fees ..............................................................
Directors' fees .........................................................
Registration fees .......................................................
Miscellaneous ...........................................................
Expenses before reimbursement and waiver from Adviser ...................
Expenses reimbursement and waiver from Adviser ..........................
Total expenses .................................................
Net investment income ...................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Sale of investments ...................................................
Net realized gain on investments ...............................
Net change in unrealized gain or loss on:
Investments ...........................................................
Net change in unrealized gain or loss on investments ...........
Net realized and change in unrealized gain or loss on investments .......
Net increase in net assets resulting from operations ....................
</TABLE>
See Notes to Financial Statements.
112
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AETNA HIGH YIELD
BOND GOVERNMENT FUND PERIOD FROM FEBRUARY 2, MONEY MARKET
SIX MONTH PERIOD SIX MONTH PERIOD 1998 (COMMENCEMENT OF SIX MONTH PERIOD
ENDED APRIL 30, 1998 ENDED APRIL 30, 1998 OPERATIONS) TO APRIL 30, 1998 ENDED APRIL 30, 1998
-------------------- -------------------- ----------------------------- --------------------
<S> <C> <C> <C>
$ 4,563 $ -- $ -- $ --
1,223,689 355,835 200,042 12,120,673
------------ ------------ ------------ ------------
1,228,252 355,835 200,042 12,120,673
------------ ------------ ------------ ------------
91,944 29,265 15,871 843,169
31,975 10,056 2,442 366,228
2,344 1,095 63 26,009
2,148 762 1,333 24,045
4,145 2,076 3,456 6,675
19,554 13,107 6,360 254,861
9,605 8,714 4,413 12,391
388 103 78 1,641
20,126 19,807 20,369 58,617
840 286 37 10,083
------------ ------------ ------------ ------------
183,069 85,271 54,422 1,603,719
(42,938) (43,280) (31,175) (648,311)
------------ ------------ ------------ ------------
140,131 41,991 23,247 955,408
------------ ------------ ------------ ------------
1,088,121 313,844 176,795 11,165,265
------------ ------------ ------------ ------------
117,143 54,295 66,514 --
------------ ------------ ------------ ------------
117,143 54,295 66,514 --
------------ ------------ ------------ ------------
60,312 (13,241) 59,262 --
------------ ------------ ------------ ------------
60,312 (13,241) 59,262 --
------------ ------------ ------------ ------------
177,455 41,054 125,776 --
------------ ------------ ------------ ------------
$ 1,265,576 $ 354,898 $ 302,571 $11,165,265
============ ============ ============ ============
</TABLE>
113
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND
--------------------------------------
SIX MONTH
PERIOD
ENDED
APRIL 30, YEAR ENDED
1998 OCTOBER 31,
(UNAUDITED) 1997
------------ --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .............................................................. $ 1,088,121 $ 1,976,800
Net realized gain on investments ................................................... 117,143 157,360
Net change in unrealized gain or loss on investments ............................... 60,312 299,928
------------ ------------
Net increase in net assets resulting from operations ............................. 1,265,576 2,434,088
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income ..................................................... (1,124,758) (1,953,173)
Class A:
From net investment income ..................................................... (37,182) (42,360)
------------ ------------
Decrease in net assets from distributions to shareholders ........................ (1,161,940) (1,995,533)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ...................................................... 7,710,912 12,026,343
Net asset value of shares issued upon reinvestment of distributions ............ 829,902 1,654,636
Cost of shares redeemed ........................................................ (5,132,989) (8,892,172)
Class A:
Proceeds from shares sold ...................................................... 881,212 382,105
Net asset value of shares issued upon reinvestment of distributions ............ 28,711 40,263
Cost of shares redeemed ........................................................ (277,838) (304,568)
------------ ------------
Net increase in net assets from fund share transactions ......................... 4,039,910 4,906,607
------------ ------------
Change in net assets ............................................................... 4,143,546 5,345,162
NET ASSETS:
Beginning of period ................................................................ 35,086,204 29,741,042
------------ ------------
End of period ...................................................................... $39,229,750 $35,086,204
============ ============
End of period net assets includes undistributed net investment income .............. $ 1,318 $ 75,137
============ ============
SHARE TRANSACTIONS:
Class I:
Number of shares sold .......................................................... 736,019 1,188,904
Number of shares issued upon reinvestment of distributions ..................... 96,840 163,888
Number of shares redeemed ...................................................... (500,097) (878,448)
------------ ------------
Net increase ..................................................................... 332,762 474,344
============ ============
Class A:
Number of shares sold .......................................................... 85,742 37,594
Number of shares issued upon reinvestment of distributions ..................... 2,803 3,991
Number of shares redeemed ...................................................... (27,119) (30,070)
------------ ------------
Net increase ..................................................................... 61,426 11,515
============ ============
</TABLE>
See Notes to Financial Statements.
114
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AETNA GOVERNMENT FUND
--------------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .............................................................. $ 313,844 $ 622,911
Net realized gain (loss) on investments ............................................ 54,295 (47,229)
Net change in unrealized gain or loss on investments ............................... (13,241) 276,527
------------ ------------
Net increase in net assets resulting from operations ............................. 354,898 852,209
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income ..................................................... (308,115) (615,272)
Class A:
From net investment income ..................................................... (13,245) (28,652)
------------ ------------
Decrease in net assets from distributions to shareholders ........................ (321,360) (643,924)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ...................................................... 2,493,083 1,947,425
Net asset value of shares issued upon reinvestment of distributions ............ 185,084 287,395
Cost of shares redeemed ........................................................ (717,009) (2,879,647)
Class A:
Proceeds from shares sold ...................................................... 94,969 281,300
Net asset value of shares issued upon reinvestment of distributions ............ 11,883 26,438
Cost of shares redeemed ........................................................ (113,730) (311,704)
------------ ------------
Net increase (decrease) in net assets from fund share transactions ............... 1,954,280 (648,793)
------------ ------------
Change in net assets ............................................................... 1,987,818 (440,508)
NET ASSETS:
Beginning of period ................................................................ 10,747,729 11,188,237
------------ ------------
End of period ...................................................................... $12,735,547 $10,747,729
============ ============
End of period net assets includes undistributed net investment income .............. $ 8,811 $ 16,327
============ ============
SHARE TRANSACTIONS:
Class I:
Number of shares sold .......................................................... 240,528 199,244
Number of shares issued upon reinvestment of distributions ..................... 18,432 29,485
Number of shares redeemed ...................................................... (64,813) (294,789)
------------ ------------
Net increase (decrease) .......................................................... 194,147 (66,060)
============ ============
Class A:
Number of shares sold .......................................................... 9,447 28,673
Number of shares issued upon reinvestment of distributions ..................... 1,183 2,716
Number of shares redeemed ...................................................... (11,288) (31,992)
------------ ------------
Net decrease ..................................................................... (658) (603)
============ ============
</TABLE>
115
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD
-------------------
PERIOD FROM
FEBRUARY 2, 1998 TO
APRIL 30, 1998
(UNAUDITED)
-------------------
<S> <C>
FROM OPERATIONS:
Net investment income ........................................................................... $ 176,795
Net realized gain on investments ................................................................ 66,514
Net change in unrealized gain or loss on investments ............................................ 59,262
------------
Net increase in net assets resulting from operations .......................................... 302,571
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income .................................................................. (170,907)
Class A:
From net investment income .................................................................. (1,757)
------------
Decrease in net assets from distributions to shareholders ..................................... (172,664)
------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold ................................................................... 9,910,650
Net asset value of shares issued upon reinvestment of distributions ......................... 132
Class A:
Proceeds from shares sold ................................................................... 115,854
Net asset value of shares issued upon reinvestment of distributions ......................... 107
------------
Net increase in net assets from fund share transactions ...................................... 10,026,743
------------
Change in net assets ............................................................................ 10,156,650
NET ASSETS:
Beginning of period ............................................................................. --
------------
End of period ................................................................................... $10,156,650
============
End of period net assets includes undistributed net investment income ........................... $ 4,131
============
SHARE TRANSACTIONS:
Class I:
Number of shares sold ....................................................................... 991,060
Number of shares issued upon reinvestment of distributions .................................. 13
------------
Net increase .................................................................................. 991,073
============
Class A:
Number of shares sold ....................................................................... 11,553
Number of shares issued upon reinvestment of distributions .................................. 11
------------
Net increase .................................................................................. 11,564
============
</TABLE>
See Notes to Financial Statements.
116
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET
----------------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .......................................................... $ 11,165,265 $ 23,676,989
------------- -------------
Net increase in net assets resulting from operations ......................... 11,165,265 23,676,989
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income ................................................. (6,997,543) (16,169,711)
Class A:
From net investment income ................................................. (4,167,722) (7,507,278)
------------- -------------
Decrease in net assets from distributions to shareholders .................... (11,165,265) (23,676,989)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold .................................................. 162,002,374 294,751,229
Net asset value of shares issued upon reinvestment of distributions ........ 6,567,754 13,987,672
Cost of shares redeemed .................................................... (174,149,332) (358,309,949)
Class A:
Proceeds from shares sold .................................................. 293,987,800 488,605,394
Net asset value of shares issued upon reinvestment of distributions ........ 4,031,998 7,255,936
Cost of shares redeemed .................................................... (294,832,194) (459,180,366)
------------- -------------
Net decrease in net assets from fund share transactions ...................... (2,391,600) (12,890,084)
------------- -------------
Change in net assets ........................................................... (2,391,600) (12,890,084)
NET ASSETS:
Beginning of period ............................................................ 430,240,074 443,130,158
------------- -------------
End of period .................................................................. $427,848,474 $430,240,074
============= =============
End of period net assets includes undistributed net investment income .......... $ -- $ --
============= =============
SHARE TRANSACTIONS:
Class I:
Number of shares sold ...................................................... 162,002,374 294,751,229
Number of shares issued upon reinvestment of distributions ................. 6,567,754 13,987,672
Number of shares redeemed .................................................. (174,149,332) (358,309,949)
------------- -------------
Net decrease ................................................................. (5,579,204) (49,571,048)
============= =============
Class A:
Number of shares sold ...................................................... 293,987,800 488,605,394
Number of shares issued upon reinvestment of distributions ................. 4,031,998 7,255,936
Number of shares redeemed .................................................. (294,832,194) (459,180,366)
------------- -------------
Net increase ................................................................. 3,187,604 36,680,964
============= =============
</TABLE>
117
<PAGE>
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds (Funds), each of
which has its own investment objective, policies and restrictions.
The Company currently offers nineteen funds. This report covers Aetna Bond Fund,
Aetna Government Fund, Aetna High Yield Fund and Aetna Money Market Fund.
Shares of each Fund are available to all investors including employers and
employees who utilize the Funds as investment options under retirement plans.
The Funds are authorized to offer two classes of shares, Class I (formerly
Select Class shares) and Class A (formerly Adviser Class shares). Class I is
offered principally to institutions and is not subject to sales charges or
distribution fees. Class I shares were first made available as follows: Bond
and Money Market on December 27, 1991, Aetna Government Fund on December 22,
1993, and High Yield on February 2, 1998. Class A shares are offered to all
others and generally are subject to front end sales charges payable upon
purchase. Additionally, Class A shares are subject to a distribution fee
pursuant to Rule 12b-1 of the Act. Class A shares were first made available to
the public on April 15, 1994 for all Funds except High Yield, which were made
available to the public February 2, 1998.
The following is each Fund's investment objective:
AETNA BOND FUND (Bond) seeks to provide as high a level of total return
(i.e., income and capital appreciation) as is consistent with reasonable
risk, primarily through investment in a diversified portfolio of
investment-grade corporate bonds, and securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
AETNA GOVERNMENT FUND seeks to provide income consistent with the
preservation of capital through investment in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
AETNA HIGH YIELD FUND (High Yield) seeks high current income and growth of
capital primarily through investment in a diversified portfolio of fixed
income securities rated lower than BBB- by Standard and Poor's Corporation
or lower than Baa3 by Moody's Investors Services, Inc.
AETNA MONEY MARKET FUND (Money Market) seeks to provide high current
return, consistent with the preservation of capital and liquidity, through
investment in high-quality money market instruments.
Aeltus Investment Management, Inc. (Aeltus) serves as the Investment Adviser to
each Fund. Prior to February 2, 1998, the Investment Adviser was Aetna Life
Insurance and Annuity Company (ALIAC). Aetna Investment Services, Inc. (AISI)
was the principal underwriter for each Fund through April 30, 1998. On May 1,
1998, Aeltus Capital, Inc. became each Fund's principal underwriter.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Funds have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Funds.
A. VALUATION OF INVESTMENTS
Except in Money Market, investments are stated at market values based upon
closing sales prices as reported on national securities exchanges or, for
over-the-counter securities, at the mean of the bid and asked prices. Short-term
investments maturing in more than sixty days for which market quotations are
readily available are valued at current market value.
118
<PAGE>
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. VALUATION OF INVESTMENTS (CONTINUED)
Short-term investments maturing in less than sixty days are valued at amortized
cost, which when combined with accrued interest, approximates market value.
Securities and fixed income investments for which market quotations are not
considered to be readily available are valued using methods approved by the
Board of Directors. Money Market, as permitted by Rule 2a-7 under the Act,
carries all investments at amortized cost, which approximates market value.
B. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Funds to sell them
promptly at an acceptable price. Restricted securities are those sold under
Rule 144A under the Securities Act of 1933 (1933 Act) or are securities offered
pursuant to Section 4(2) of the 1933 Act, and are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. Each Fund may invest up to 15% of its total
assets in illiquid securities (except Money Market which may invest up to
10%). Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board of Directors. The Funds will not pay the costs of disposition of
restricted securities other than ordinary brokerage fees, if any.
C. DELAYED DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. The price of the underlying securities and date when the securities
will be delivered and paid for are fixed at the time the transaction is
negotiated. The market value of the securities purchased or sold are
identified in the Funds' Portfolio of Investments. Losses may arise due to
changes in the market value of the securities or from the inability of
counterparties to meet the terms of the contract.
D. FEDERAL INCOME TAXES
As a qualified regulated investment company, each Fund is relieved of federal
income and excise taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code.
E. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for deferred losses on wash sales.
F. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date.
Interest income is recorded on an accrual basis. Discounts and premiums on
securities purchased are accreted or amortized, respectively, using an
effective yield method over the life of the security. Dividend income and stock
splits are recorded on the ex-dividend date. Realized gains and losses from
investment transactions are determined on an identified cost basis.
119
<PAGE>
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays the Investment Adviser a monthly fee expressed as a percentage of
the average daily net assets of each Fund. As each Fund's net assets exceed
predetermined thresholds, lower advisory fees are applied. Below are the Funds'
Investment Advisory fee ranges and the effective rates as of April 30, 1998:
<TABLE>
<CAPTION>
FEE EFFECTIVE
RANGE RATE
--------------- -------------
<S> <C> <C>
Bond 0.50%-0.40% 0.50%
Aetna Government Fund 0.50%-0.40% 0.50%
High Yield 0.65%-0.50% 0.65%
Money Market 0.40%-0.30% 0.35%
</TABLE>
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Fund (except
Money Market) in exchange for fees, payable by Aeltus, of up to 0.325% of the
average daily net assets of Class I. For the period February 1, 1998 through
April 30, 1998, Aeltus paid ALIAC $37,491.
Aeltus has served as the Investment Adviser for all Funds since February 2,
1998. Prior to February 2, 1998, ALIAC served as Bond, Aetna Government Fund and
Money Market's Investment Adviser and Aeltus served as Sub-Adviser. As
Sub-Adviser, Aeltus supervised the investment and reinvestment of cash and
securities and provided certain related administrative services. For the period
November 1, 1997 through February 1, 1998, ALIAC collected $16,653, net of
reimbursement, from the Funds, and paid $143,164 to Aeltus.
Effective February 2, 1998, the Company has entered into an administrative
services agreement under which Aeltus acts as administrator and provides certain
administrative and shareholder services and is responsible for the supervision
of other service providers for each Fund. Each Fund pays Aeltus an
administrative services fee at an annual rate of 0.10% of its average daily net
assets. Prior to February 2, 1998, ALIAC acted as administrator for each Fund
and was paid an administrative services fee at an annual rate of 0.25% of each
Fund's average daily net assets. For the period November 1, 1997 through
February 1, 1998, ALIAC collected $269,675 in administrative services fees from
the Funds.
The Shareholder Services Plan for the Class A (formerly Adviser Class) shares
terminated on December 31, 1997. Under the Shareholder Services Plan, AISI was
paid a service fee at an annual rate of 0.25% (0.10% for Money Market) of the
average daily net assets of Class A of each Fund. This fee was used as
compensation for expenses incurred in servicing shareholders' accounts. For the
period November 1, 1997 through December 31, 1997, the Funds paid AISI $631, net
of reimbursement, in service fees.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act
for the Class A shares. The Distribution Plan provides for payments to the
principal underwriter at an annual rate of 0.25% (prior to February 2, 1998, the
12b-1 fee was 0.50%) of the average daily net assets of Class A shares of each
Fund (except Money Market). Amounts paid by the Funds are used to pay expenses
incurred by the principal underwriter in promoting the sale of Class A shares.
For the period ended April 30, 1998, the Funds paid AISI $2,870 in Rule 12b-1
fees. The plan may be terminated upon a majority vote of the Company's
independent directors.
Presently, the Funds' class-specific expenses are limited to Rule 12b-1 fees
incurred by Class A shares.
120
<PAGE>
4. REIMBURSEMENT FROM INVESTMENT ADVISER
The Investment Adviser may, from time to time, make reimbursements to a Fund for
some or all of its operating expenses or it may waive fees. Reimbursement and
waiver arrangements, which may be terminated at any time without notice, will
increase a Fund's yield and total return. For the period ended April 30, 1998,
the reimbursements were as follows:
<TABLE>
<CAPTION>
NON-CLASS SPECIFIC CLASS SPECIFIC (CLASS A) FUND TOTAL
------------------ ----------------------- ----------
<S> <C> <C> <C>
Bond $ 42,938 $ -- $ 42,938
Aetna Government Fund 43,280 -- 43,280
High Yield 31,175 -- 31,175
Money Market 622,302 26,009 648,311
</TABLE>
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the period ended April 30, 1998 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Bond $24,407,072 $20,705,954
Aetna Government Fund 13,083,989 12,530,584
High Yield 24,502,315 14,976,781
Money Market -- --
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At April 30, 1998, for federal income tax purposes, Aetna Government Fund and
Bond had capital loss carryforwards:
<TABLE>
<CAPTION>
CAPITAL LOSS YEAR OF
FUND CARRYFORWARD EXPIRATION
------------------------------------------------------------------------
<S> <C> <C>
Aetna Government Fund $376,611 2003
47,228 2005
------------------------------------------------------------------------
Bond 456,141 2002
315,964 2003
------------------------------------------------------------------------
</TABLE>
The Board of Directors will not distribute any realized gains until the above
capital loss carryforwards have been offset or expired.
7. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 6.8 billion shares. Of those 6.8
billion shares, the following have been designated to the Funds described in
this report as follows: all of the Funds, except Money Market, have been
allocated 100 million shares each of Class I and Class A shares. Money Market
has been allocated one billion shares each of Class I and Class A shares. As of
April 30, 1998, the following shares of the Funds were owned by Aetna and its
affiliates:
<TABLE>
<CAPTION>
CLASS I CLASS A
----------------- ----------------
<S> <C> <C>
Bond 1,673,159 --
Aetna Government Fund 1,047,841 --
High Yield 990,000 10,000
Money Market 112,883,222 --
</TABLE>
121
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS
BOND
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH TEN MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 10.22 $ 10.09 $ 10.27 $ 9.58 $ 10.37
----------- ----------- ----------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.30 0.62 0.65 0.65 0.52
Net realized and change in unrealized gain or
loss on investments .......................... 0.05 0.13 (0.15) 0.65 0.86
----------- ----------- ----------- ------------ -----------
Total from investment operations ......... 0.35 0.75 0.50 1.30 (0.34)
----------- ----------- ----------- ------------ -----------
LESS DISTRIBUTIONS:
From net investment income ..................... (0.32) (0.62) (0.68) (0.61) (0.45)
----------- ----------- ----------- ------------ -----------
Total distributions ...................... (0.32) (0.62) (0.68) (0.61) (0.45)
----------- ----------- ----------- ------------ -----------
Net asset value, end of period ................... $ 10.25 $ 10.22 $ 10.09 $ 10.27 $ 9.58
=========== =========== =========== ============ ===========
Total return ..................................... 3.45% 7.72% 5.09% 14.06% (3.31)%
Net assets, end of period (000's) ................ $ 37,591 $ 34,080 $ 28,864 $ 32,778 $ 27,584
Ratio of total expenses to average net assets .... 0.75%(1) 0.75% 0.75% 0.79% 0.76%(1)
Ratio of net investment income to average net
assets ......................................... 5.92%(1) 6.07% 6.16% 6.56% 6.29%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 0.98%(1) 1.14% 1.16% 1.06% 1.06%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . 5.69%(1) 5.68% 5.75% 6.25% 5.98%(1)
Portfolio turnover rate .......................... 64.85% 48.56% 42.33% 56.99% 51.80%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
122
<PAGE>
BOND
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 15, 1994
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $10.22 $10.09 $10.27 $ 9.58 $ 9.92
------- ------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.28 0.54 0.62 0.56 0.28
Net realized and change in unrealized gain or
loss on investments .......................... 0.05 0.13 (0.20) 0.66 (0.35)
------- ------- -------- ------- --------
Total from investment operations ......... 0.33 0.67 0.42 1.22 (0.07)
------- ------- -------- ------- --------
LESS DISTRIBUTIONS:
From net investment income ..................... (0.30) (0.54) (0.60) (0.53) (0.27)
------- ------- -------- ------- --------
Total distributions ...................... (0.30) (0.54) (0.60) (0.53) (0.27)
------- ------- -------- ------- --------
Net asset value, end of period ................... $10.25 $10.22 $10.09 $10.27 $ 9.58
======= ======= ======== ======= ========
Total return (does not reflect applicable sales
charges) ....................................... 3.24% 6.89% 4.27% 13.28% (0.68)%
Net assets, end of period (000's) ................ $1,639 $1,006 $ 877 $7,340 $25,405
Ratio of total expenses to average net assets .... 1.13%(1) 1.50% 1.50% 1.50% 1.49%(1)
Ratio of net investment income to average net
assets ......................................... 5.54%(1) 5.32% 5.47% 5.91% 5.36%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 1.36%(1) 1.89% 1.91% 1.82% 1.81%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . 5.31%(1) 4.93% 5.06% 5.60% 5.04%(1)
Portfolio turnover rate .......................... 64.85% 48.56% 42.33% 56.99% 51.80%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
123
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
AETNA GOVERNMENT FUND
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH TEN MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------------- ------------- ------------ ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 9.99 $ 9.80 $ 10.01 $ 9.41 $ 10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.27 0.58 0.56 0.64 0.40
Net realized and change in unrealized gain or loss on
investments ......................................... 0.05 0.21 (0.13) 0.59 (0.63)
--------- --------- --------- --------- ---------
Total from investment operations ................ 0.32 0.79 0.43 1.23 (0.23)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From net investment income ............................ (0.27) (0.60) (0.64) (0.63) (0.36)
--------- --------- --------- --------- ---------
Total distributions ............................. (0.27) (0.60) (0.64) (0.63) (0.36)
--------- --------- --------- --------- ---------
Net asset value, end of period .......................... $ 10.04 $ 9.99 $ 9.80 $ 10.01 $ 9.41
========= ========= ========= ========= =========
Total return ............................................ 3.23% 8.39% 4.43% 13.58% (2.37)%
Net assets, end of period (000's) ....................... $ 12,209 $ 10,217 $ 10,662 $ 19,154 $ 26,110
Ratio of total expenses to average net assets ........... 0.70%(1) 0.70% 0.70% 0.70% 0.41%(1)
Ratio of net investment income to average net assets .... 5.38%(1) 5.91% 5.67% 6.79% 5.29%(1)
Ratio of net expense before reimbursement and waiver to
average net assets .................................... 1.44%(1) 1.70% 1.57% 1.30% 1.16%(1)
Ratio of net investment income before reimbursement and
waiver to average net assets .......................... 4.64%(1) 4.91% 4.80% 6.19% 4.54%(1)
Portfolio turnover rate ................................. 126.92% 147.78% 50.48% 117.31% 43.63%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
124
<PAGE>
AETNA GOVERNMENT FUND
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 15, 1994
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 9.99 $ 9.79 $10.00 $ 9.41 $ 9.67
-------- -------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.24 0.51 0.48 0.60 0.24
Net realized and change in unrealized gain or
loss on investments ......................... 0.06 0.21 (0.13) 0.56 (0.24)
-------- -------- ------- -------- -------
Total from investment operations ........ 0.30 0.72 0.35 1.16 --
-------- -------- ------- -------- -------
LESS DISTRIBUTIONS:
From net investment income .................... (0.25) (0.52) (0.56) (0.57) (0.26)
-------- -------- ------- -------- -------
Total distributions ..................... (0.25) (0.52) (0.56) (0.57) (0.26)
-------- -------- ------- -------- -------
Net asset value, end of period .................. $ 10.04 $ 9.99 $ 9.79 $ 10.00 $ 9.41
======== ======== ======= ======== =======
Total return (does not reflect applicable sales
charges) ...................................... 3.00% 7.67% 3.75% 12.60% (0.06)%
Net assets, end of period (000's) ............... $ 527 $ 531 $ 526 $ 405 $ 151
Ratio of total expenses to average net assets ... 1.11%(1) 1.45% 1.45% 1.51% 1.28%(1)
Ratio of net investment income to average net
assets ........................................ 4.97%(1) 5.16% 4.96% 6.02% 4.68%(1)
Ratio of net expense before reimbursement and
waiver to average net assets .................. 1.85%(1) 2.45% 2.32% 2.11% 2.11%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets 4.23%(1) 4.16% 4.09% 5.42% 3.85%(1)
Portfolio turnover rate ......................... 126.92% 147.78% 50.48% 117.31% 43.63%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
125
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
HIGH YIELD
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998
TO APRIL 31, 1998
CLASS I (UNAUDITED)
- --------------------------------------------------------------------------------------------------- ------------------
<S> <C>
Net asset value, beginning of period ............................................................. $ 10.00
---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................................................................... 0.18
Net realized and change in unrealized gain or loss on investments .............................. 0.12
---------
Total from investment operations ......................................................... 0.30
---------
LESS DISTRIBUTIONS:
From net investment income ..................................................................... (0.17)
---------
Total distributions ...................................................................... (0.17)
---------
Net asset value, end of period ................................................................... $ 10.13
=========
Total return ..................................................................................... 3.04%
Net assets, end of period (000's) ................................................................ $ 10,040
Ratio of total expenses to average net assets .................................................... 0.95%(1)
Ratio of net investment income to average net assets ............................................. 7.24%(1)
Ratio of net expense before reimbursement and waiver to average net assets ....................... 2.23%(1)
Ratio of net investment income before reimbursement and waiver to average net assets ............. 5.96%(1)
Portfolio turnover rate .......................................................................... 153.92%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
126
<PAGE>
HIGH YIELD
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1998
TO APRIL 30, 1998
CLASS A (UNAUDITED)
- ----------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Net asset value, beginning of period ............................................................... $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................................................................ 0.17
Net realized and change in unrealized gain or loss on investments ................................ 0.13
--------
Total from investment operations ........................................................... 0.30
--------
LESS DISTRIBUTIONS:
From net investment income ....................................................................... (0.17)
--------
Total distributions ........................................................................ (0.17)
--------
Net asset value, end of period ..................................................................... $ 10.13
========
Total return (does not reflect applicable sales charges) ........................................... 2.96%
Net assets, end of period (000's) .................................................................. $ 117
Ratio of total expenses to average net assets ...................................................... 1.20%(1)
Ratio of net investment income to average net assets ............................................... 6.99%(1)
Ratio of net expense before reimbursement and waiver to average net assets ......................... 2.48%(1)
Ratio of net investment income before reimbursement and waiver to average net assets ............... 5.71%(1)
Portfolio turnover rate ............................................................................ 153.92%
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
127
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH TEN MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.03 0.05 0.05 0.06 0.03
----------- ----------- ----------- ------------ -----------
Total from investment operations ......... 0.03 0.05 0.05 0.06 0.03
----------- ----------- ----------- ------------ -----------
LESS DISTRIBUTIONS:
From net investment income ..................... (0.03) (0.05) (0.05) (0.06) (0.03)
----------- ----------- ----------- ------------ -----------
Total distributions ...................... (0.03) (0.05) (0.05) (0.06) (0.03)
----------- ----------- ----------- ------------ -----------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ============ ===========
Total return ..................................... 2.63% 5.49% 5.44% 5.95% 3.33%
Net assets, end of period (000's) ................ $ 268,131 $ 273,710 $ 323,281 $ 275,524 $ 161,756
Ratio of total expenses to average net assets .... 0.45%(1) 0.37% 0.30% 0.27% 0.21%(1)
Ratio of net investment income to average net
assets ......................................... 5.30%(1) 5.31% 5.30% 5.78% 4.05%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 0.75%(1) 0.81% 0.83% 0.88% 0.85%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . 5.00%(1) 4.87% 4.78% 5.17% 3.38%(1)
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
128
<PAGE>
MONEY MARKET
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH PERIOD FROM
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 15, 1994
APRIL 30, 1998 OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
CLASS A (UNAUDITED) 1997 1996 1995 1994
- --------------------------------------------------- -------------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.03 0.05 0.05 0.06 0.03
--------- --------- --------- -------- --------
Total from investment operations ......... 0.03 0.05 0.05 0.06 0.03
--------- --------- --------- -------- --------
LESS DISTRIBUTIONS:
From net investment income ..................... (0.03) (0.05) (0.05) (0.06) (0.03)
--------- --------- --------- -------- --------
Total distributions ...................... (0.03) (0.05) (0.05) (0.06) (0.03)
--------- --------- --------- -------- --------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ======== ========
Total return (does not reflect applicable sales
charges) ....................................... 2.63% 5.49% 5.44% 5.95% 2.41%
Net assets, end of period (000's) ................ $159,718 $156,530 $119,849 $78,726 $47,350
Ratio of total expenses to average net assets .... 0.45%(1) 0.37% 0.30% 0.26% 0.21%(1)
Ratio of net investment income to average net
assets ......................................... 5.30%(1) 5.31% 5.30% 5.79% 4.27%(1)
Ratio of net expense before reimbursement and
waiver to average net assets ................... 0.78%(1) 0.91% 0.93% 0.87% 0.92%(1)
Ratio of net investment income before
reimbursement and waiver to average net assets . 4.97%(1) 4.77% 4.67% 5.19% 3.67%(1)
</TABLE>
(1) Annualized.
Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
129
<PAGE>
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