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Previous: ALTEON INC /DE, SC 13D, 1997-01-09 |
Next: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT, S-1/A, 1997-01-09 |
<PAGE> 1
Michael A. Conway
President, Aon Funds
[AONFUNDS LETTERHEAD]
1-800-AON-FNDS
To All Shareholders of the Aon Funds:
The U.S. stock market improved in 1996 to new market highs as short-term
interest rates held stable and intermediate to longer term rates increased in
yield. The stock market euphoria has largely been the result of relatively
stable interest rates, low inflationary pressures, positive earnings
fundamentals, and a tremendous flow of money into equity mutual funds. The
Federal Reserve's decision to leave interest rates unchanged at the September
FOMC meeting, along with respectable third quarter corporate earnings reports
helped push the S&P 500 to record highs in late October.
The bond market was less favorable, as conflicting signals regarding the level
of economy growth resulted in a high degree of volatility. Though a new entry
into the market for four of its' funds, Aon Funds' actively managed portfolios
were well positioned to identify investment opportunities not already
discounted in the market. This, along with strong general market performance,
resulted in impressive returns for all of the Funds.
September 3, 1996 marked the inception date for the reorganization of the Aon
Funds. With this restructuring came four new investment options, the Government
Securities, S&P 500 Index, International Equity and REIT Index Funds. The funds
were well positioned to take advantage of market opportunities.
The Money Market Fund has consistently outperformed the average return of the
IBC money fund report which represents over 600 money market mutual funds. The
Money Market Fund continued to rank as one of the top ten performing money
market funds throughout the year as reported by the Wall Street Journal.
The Asset Allocation Fund generated positive returns for the period, as
equities performed well. Financial stocks were a significant contributor to the
Fund's return this year.
The Government Securities Fund showed positive performance during the period
due to declines in interest rates as evidence mounted that the economy was
continuing to experience moderate growth without significant inflationary
pressures.
The S&P 500 Index Fund owns all 500 stocks included in the index in
approximately the same weightings. The S&P 500 Index Fund was fully invested
during this period and remains well-positioned to capture further market gains.
Strong performance in the REIT markets continued during the September 3 -
October 31, 1996 period. There are several reasons for the record strong
performance of REITs. These include high current yields, the opportunity for
capital appreciation, and the chance to participate in real estate on a
diversified basis.
The Aon Funds International Equity is currently invested in 19 countries.
Non-U.S. equity markets, on balance, provided positive hedged returns for the
period. European markets rose 4.74%, while Japan was up a modest 1.99%. The
equity market in Singapore provided the only negative return of -4.18%. The
portfolios underweight in Japan and Singapore contributed modestly to portfolio
value added.
As we look forward to the future of Aon Funds, we realize that you, our
shareholders, are our greatest assets. Thank you for your continued support. If
you have any questions about the funds, please contact us at (312) 701-3300.
Sincerely,
/s/ Mike Conway
<PAGE> 2
[AONFUNDS LETTERHEAD]
- - Money Market Fund
- - Government Securities Fund
- - Asset Allocation Fund
- - S&P 500 Index Fund
- - International Equity Fund
- - REIT Index Fund
Please be reminded, as voted by shareholders, Class C and Class Y shares
of each Fund are being offered. Class C shares of each Fund are offered
without a sales charge, but are subject to a charge imposed pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as described
herein. Class Y shares are offered without a sales charge and are
currently sold only to (i) the shareholders of record of outstanding
shares of any Fund immediately prior to the commencement of distribution
under the multiple-class program (including additional investments by
such holders), (ii) investment advisory clients of Aon Advisors Inc.
("AAI"), and (iii) affiliates of Aon or AAI. Other differences between
the classes of shares include the services offered to and expenses borne
by each class and certain voting rights, as described in the Aon Funds
prospectus.
<PAGE> 3
Comparison of a $10,000 Investment
[AON FUNDS LOGO]
AON GOVERNMENT SECURITIES FUND
CLASS Y SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon Government Securities Fund $10,000 $10,279
Merrill Lynch Government/Treasury Index(2) $10,000 $10,365
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- -------------------------------------------------------------------
<S> <C>
Aon Government Securities Fund 2.79%
Merrill Lynch Government/Treasury Index(2) 3.65%
</TABLE>
CLASS C SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon Government Securities Fund $10,000 $10,276
Merrill Lynch Government/Treasury Index(2) $10,000 $10,365
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (1) Life of Portfolio(1)
- -------------------------------------------------------------------
<S> <C>
Aon Government Securities Fund 2.76%
Merrill Lynch Government/Treasury Index(2) 3.65%
</TABLE>
(1) "Total Return" is calculated including reinvestment of all income and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Government
Securities Fund and the return on investment will fluctuate, and redemption
proceeds may be higher or lower than an investor's original cost. Life of
Portfolio is from September 3, 1996.
(2) The Merrill Lynch Government/Treasury Index is an unmanaged index generally
considered to be representative of bond market activity. This data is derived
by Aon Funds and includes reinvestment of all dividends and capital gain
distributions.
<PAGE> 4
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON GOVERNMENT SECURITIES FUND
Since its inception, the Aon Government Securities Fund has participated in a
positive interest rate environment. Rates on the bellweather thirty-year U.S.
Treasury declined from 7.06% to 6.65% during the September 3 to October 31,
1996 period. Rates on three-month U.S. Treasury Bills were fourteen basis
points lower over the same period.
From September 3, to October 31, 1996, the bond market, as measured by the
Merrill Lynch Government/Treasury Index, returned 3.65%. During the same
period the Aon Government Securities Fund had a total return of 2.79% on the
institutional Class Y shares and a 2.76% return on the retail Class C shares.
A portion of the Fund's under performance can be explained by its shorter
duration (4.5 years) versus the Index duration of 4.9 years. This was a
reflection of our overly cautious outlook for interest rates. The lower return
reported on the retail Class C shares from that of the institutional Class Y
shares was due to the 12 b-1 fee charged on the retail portion of the Fund.
The Fund is invested 100% in U.S. Treasury and Agency securities. Spreads
between corporate bonds and Treasuries are at historically low levels. There
is, therefore, no incentive to incur specific credit risk without adequate
compensation in the form of higher yields.
With GDP growth currently a modest 2.20% and inflation, as measured by the CPI,
at a manageable 3.00%, concerns that the Federal Reserve will be compelled to
raise interest rates appear unwarranted. As long as these conditions persist,
we intend to keep the Aon Government Securities Fund fully invested in
longer-maturity securities in order to capture the higher rates that are
available from the positively sloped yield curve and the price appreciation
that will occur if interest rates continue to decline.
Janet S. Henry
Portfolio Manager
<PAGE> 5
Comparison of a $10,000 Investment
[AON FUNDS LOGO]
AON ASSET ALLOCATION FUND
CLASS Y SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
March 1 October 31 October 31 October 31
1994 1994 1995 1996
<S> <C> <C> <C> <C>
Aon Asset Allocation Fund $10,000 $10,184 $12,926 $14,356
Lipper Flexible Portfolio Index(3) $10,000 $ 9,958 $11,618 $13,325
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Return over
Life of
TOTAL RETURN(1) 1 Year 3 Year 5 Year Portfolio(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aon Asset Allocation Fund 11.06% n/a n/a 43.56%
Lipper Flexible Portfolio Index(3) 14.69% n/a n/a 33.25%
</TABLE>
CLASS C SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon Asset Allocation Fund $10,000 $10,551
Lipper Flexible Portfolio Index(3) $10,000 $10,597
</TABLE>
<TABLE>
TOTAL RETURN(1) Life of Portfolio(4)
- -----------------------------------------------------------------------------------------
<S> <C>
Aon Asset Allocation Fund 5.51%
Lipper Flexible Portfolio Index(3) 5.97%
</TABLE>
(1) "Total Return" is calculated including reinvestment of all income and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Asset Allocation
Fund and the return on investment will fluctuate, and redemption proceeds may
be higher or lower than an investor's original cost.
(2) Life of Portfolio is from March 1, 1994 through October 31, 1996. This
figure is the cumulative return over this time period.
(3) The Lipper Flexible Portfolio Index is an unmanaged index prepared by
Lipper Analytical Services which includes flexible asset allocation funds.
(4) Life of Portfolio is from September 3, 1996 through October 31, 1996.
<PAGE> 6
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON ASSET ALLOCATION FUND
The fiscal year ending October 31, 1996 was a favorable one for equities. For
this period, the S&P 500 Index returned 24.1% and the S&P 400 Mid Cap Index
returned 17.4%, including reinvestment of dividends. The tone of the equity
markets was generally positive throughout this period. Corporate profits
continued to expand. Firms utilized strong cash flows to finance growth and
repurchase shares. The equity markets underwent a correction in June and July,
but rebounded over the balance of the fiscal year. As evidenced by the
relative performance of the indices, the market generally favored larger
capitalization issues over smaller stocks during this period.
The bond market was not as attractive as the equity market, as bond prices
exhibited great volatility throughout the year. The thirty year Treasury Bond
began the fiscal year starting October 1, 1995 at 6.3%. The yield dropped to
slightly under 6% by the end of December. However, between the end of December
1995 and early July 1996, the yield on the long term bond rose nearly 125 basis
points. Economic growth substantially exceeded expectations and concerns over
inflation led to this substantial increase in interest rates in a short period
of time. After peaking in July and again in September, the 30 year Treasury
Bond recovered somewhat, ending the fiscal year at a yield of approximately
6.6%. For the year ended October 31, 1996 the Merrill Lynch Intermediate Term
(5 - 9.99 years) Government Bond Index returned 4.9%.
For the year ended October 31, 1996 the Aon Asset Allocation Fund returned
11.06%, as measured by Lipper Analytical Services. The Lipper Flexible
Portfolio Index returned 14.69% for the same period.
Early in the fiscal year, the Fund was positioned with a significant investment
in bonds, including longer-maturity Treasuries, with the expectation that
slowing economic growth would lead to further declines in interest rates. As
noted above, interest rates did decline early in the fiscal year, but then rose
rapidly, adversely impacting the performance of the Fund relative to the Lipper
Index. In response to signs of continued economic growth, we reduced both the
asset allocation to bonds and the duration of the bond portfolio and shifted
assets into equities. As of October 31, 1996, approximately 69% of the
portfolio was invested in common stocks.
Equities provided attractive returns to the portfolio over the past year. In
terms of equity selection, we seek companies which exhibit a franchise value as
demonstrated by attractive margins, strong cash flow, reasonable growth
prospects, and high-quality management. We invest in companies where the
valuation is attractive, taking into account absolute and relative measures of
value, and projected growth in earnings and cash flow. We look to invest in
companies we would be comfortable with a multi-year holding period.
<PAGE> 7
During the course of the year we reduced exposure to the technology sector and
increased exposure to the financial sector. We substantially increased equity
exposure to the aerospace/aircraft, environmental service, and agricultural
equipment industries. These are industries which we believe have very
favorable long-term trends.
Financial stocks performed very well this year. Examples of financial holdings
which appreciated substantially include Green Tree Financial, and NationsBank,
both of which were up in excess of 40% for the year. In the technology sector,
Saville Systems, which makes customer billing systems for service providers in
the telecommunications industry, more than tripled in value in the past year.
Equities which adversely impacted our performance include stocks in the
communications and health care industries.
An investment theme which we continue to favor is growth through the
consolidation of fragmented industries. In an economy which may be slowing,
companies which can successfully consolidate their respective industries
through acquisition at reasonable multiples of cash flow should continue to
prosper. Examples of industries where we believe there continue to be
attractive consolidation opportunities include radio broadcasting, outdoor
advertising, and environmental services. Portfolio holdings which have
successfully implemented consolidation strategies include Clear Channel
Communications, Philip Environmental, and Watsco.
Our asset allocation continues to favor equities over bonds and cash
equivalents. Clearly it will be more difficult to grow corporate profits at the
same rate as in the past two years. However, we continue to see opportunities
within industries with attractive fundamental growth prospects. The bond
market continues to exhibit volatility as expectations fluctuate between
continued economic growth and higher inflation on the one hand and an economic
slowdown on the other.
Over the coming year we will continue to seek attractive returns for our
shareholders. Thank you for your continued investment in the fund.
John G. Lagedrost
Portfolio Manager
<PAGE> 8
Comparison of a $10,000 Investment
[AON FUNDS LOGO]
AON S&P 500 INDEX FUND
CLASS Y SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon S&P 500 Index Fund $10,000 $10,786
S&P 500 Index(2) $10,000 $10,809
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- ----------------------------------------------------------
<S> <C>
Aon S&P 500 Index Fund 7.86%
S&P 500 Index(2) 8.09%
</TABLE>
CLASS C SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon S&P 500 Index Fund $10,000 $10,782
S&P 500 Index(2) $10,000 $10,809
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- ----------------------------------------------------------
<S> <C>
Aon S&P 500 Index Fund 7.82%
S&P 500 Index(2) 8.09%
</TABLE>
(1) "Total Return is calculated including reinvestment of all income and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the S&P 500 Index Fund
and the return on investment will fluctuate, and redemption proceeds may be
higher or lower than an investor's original cost. Life of Portfolio is from
September 3, 1996.
(2) The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. This data is derived by Aon Funds and
includes reinvestment of all dividends and capital gain distributions.
<PAGE> 9
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON S&P 500 INDEX FUND
The Aon S&P 500 Index Fund was launched with exceptional timing on September 3,
1996. From September 1, 1996 to October 31, 1996, the S&P 500 Index returned
8.09%, generating its highest two-month total return since a 9.5% gain for the
two months of December 1991 and January 1992. The Aon S&P 500 Index Fund
produced similar results. The institutional Class Y shares of the Fund gained
7.86% while the retail Class C shares rose 7.82%. The lower return reported on
the retail Class C shares from that of the institutional Class Y shares was
primarily due to the 12 b-1 fees charged on the retail portion of the Fund.
Several factors which contributed to the S&P 500's sharp rise during 1995 have
remained in place during 1996 and were the foundation for the market's 16.6%
gain year-to-date. The investment climate for owning equities has been very
favorable. The Federal Reserve has maintained an accommodative monetary policy
with no increase in short-term interest rates. Against this backdrop of low
inflation and moderate economic growth, mutual fund cash inflows have continued
to be strong and have provided the fuel for rising stock prices.
Our outlook for the next twelve months is one of caution. We favor
investments in common stocks over other asset classes as long-term investment
vehicles, however, we don't believe that the S&P 500 will be able to repeat the
strong performance it has shown since the end of 1994. Since December 31, 1994,
the S&P 500 Index has gained 60.45% through October 31, 1996. While a repeat of
this performance is possible it is not likely and therefore, we emphasize that
our investors take a cautious approach during 1997.
As the Fund enters its first full year of operation, we will continue to
minimize expenses and replicate the performance of the S&P 500 Index. The Aon
S&P 500 Index Fund remains fully invested in the stock market and is
well-positioned to meet its objectives in 1997.
John C. DeCaro, II
Portfolio Manager
<PAGE> 10
Comparison of a $10,000 Investment
[AON FUNDS LOGO]
AON INTERNATIONAL EQUITY FUND
CLASS Y SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon International Equity Fund $10,000 $10,233
MCSI EAFE Index(2) $10,000 $10,202
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- ---------------------------------------------------------------
<S> <C>
Aon International Equity Fund 2.33%
MCSI EAFE Index(2) 2.02%
</TABLE>
CLASS C SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon International Equity Fund $10,000 $10,229
MCSI EAFE Index(2) $10,000 $10,202
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- ---------------------------------------------------------------
<S> <C>
Aon International Equity Fund 2.29%
MCSI EAFE Index(2) 2.02%
</TABLE>
(1) "Total Return is calculated including reinvestment of all income and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the International
Equity Fund and the return on investment will fluctuate, and redemption
proceeds may be higher or lower than an investor's original cost. Life of
Portfolio is from September 3, 1996.
(2) The MCSI EAFE Index is an unmanaged index generally considered to be
representative of International equity market activity. This data is derived
by Aon Funds and includes reinvestment of all dividends and capital gain
distributions.
<PAGE> 11
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON INTERNATIONAL EQUITY FUND
The Aon International Equity Fund invests primarily in the common stocks of
companies headquartered outside the U.S. We believe that in a non-U.S.
investment program, market allocation is the most important factor. Currency
strategies are separately developed and coordinated with market allocations.
Our industry strategies and individual security selections are determined by
fundamental research.
MARKET STRATEGY
The Aon International Equity Fund holds a 5% strategic cash position reflecting
our view that, with very few exceptions, non-U.S. equity markets are modestly
attractive. The Japanese equity market, the largest component of the Morgan
Stanley EAFE Index, is somewhat more overpriced than most of the other non-U.S.
markets. Given our valuation analyses and fundamental considerations, we are
underweight Japan by 6.5%. The other markets in the index are accordingly
overweight by 1.5%.
CURRENCY STRATEGY
Currency strategy continues to emphasize those currencies that offer the
highest expected cash returns in U.S. dollar terms. The International Equity
fund is underweight the Japanese Yen by 10%. We continue to have limited
exposure to the overvalued DM-bloc currencies. Offsetting these underweights
is a large overweight in the U.S. dollar (36%). Our position is near neutral in
the Australian dollar, Belgium franc and British pound.
INDUSTRY AND FACTOR STRATEGIES
Industry and stock selection favors more interest-rate sensitive issues,
"dollar-earners", and a small portfolio-wide overweight in energy. The
portfolio is overweight in European banks but underweight in Japanese
banks. The portfolio emphasizes Japanese electrical and electronic firms.
PERFORMANCE
Since its inception on September 3, 1996, the institutional Class Y shares and
the retail Class C shares of the Aon International Equity Fund have earned
2.32% and 2.29% respectively. Both classes of stock outperformed the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index return of 2.02%.
<PAGE> 12
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON INTERNATIONAL EQUITY FUND
(Continued)
In the two months ending October 31, 1996, with the exception of Singapore,
non-U.S. equity markets provided positive returns on a dollar hedged basis. In
the aggregate, the non-U.S. markets returned 4.02% on a dollar hedged basis.
Canada, France, Hong Kong, the Netherlands, Spain and Sweden provided strong
returns ranging from about 7.5% to 11.3%. Japan, in contrast, which accounts
for about 34% of the MSCI Index, returned a relatively weak 2%.
Market allocation had a slight positive impact on returns. The underweights to
equity markets in Japan and Singapore added to performance. The strategic
allocation to cash partially offset this positive contribution.
Currency management had a significant positive impact on
the Fund. Our defensive strategy of a large underweight to Japanese Yen and
minimal exposure to the DM-related currencies dominated the positive
performance relative to the MSCI Index.
Overall, stock selection detracted slightly from performance for the two months
ended October 31, 1996. An underweight to the momentum driven consumer stocks
in France and stock specific events in the U.K. dominated the stock selection
results.
Brinson Partners, Inc. Aon Advisors, Inc.
Subadvisor Portfolio Manager
<PAGE> 13
Comparison of a $10,000 Investment
[AON FUNDS LOGO]
AON REIT INDEX FUND
CLASS Y SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon REIT Index Fund $10,000 $10,440
Morgan Stanley REIT Index(2) $10,000 $10,480
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- -----------------------------------------------------------
<S> <C>
Aon REIT Index Fund 4.40%
Morgan Stanley REIT Index(2) 4.80%
</TABLE>
CLASS C SHARES
[LINE GRAPH]
<TABLE>
<CAPTION>
September 3 October 31
1996 1996
<S> <C> <C>
Aon REIT Index Fund $10,000 $10,440
Morgan Stanley REIT Index(2) $10,000 $10,480
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1) Life of Portfolio(1)
- -----------------------------------------------------------
<S> <C>
Aon REIT Index Fund 4.40%
Morgan Stanley REIT Index(2) 4.80%
</TABLE>
(1) "Total Return is calculated including reinvestment of all income and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the REIT Index Fund and
the return on investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost. Life of Portfolio is from September
3, 1996.
(2) The Morgan Stanley REIT Index is an unmanaged index generally considered
to be representative of REIT market activity. This data is derived by Aon
Funds and includes reinvestment of all dividends and capital gain
distributions.
<PAGE> 14
Management Discussion of Fund Performance
[AON FUNDS LOGO]
AON REIT INDEX FUND
Since its inception on September 3, 1996, the Aon REIT Index Fund has
participated in the recent strong performance of REIT stocks. There are
several reasons for this recent strong performance. The trend toward
securitizing real estate in the form of REITs allows investors easier, more
liquid access to real estate exposure.
REIT stocks have benefited from an economy in 1996 that has been strong, but
not strong enough to move the Federal Reserve to raise short term interest
rates. With the exception of the first quarter, the interest rate environment
has been stable in 1996, which has been favorable for REITs. The yield on the
bellweather thirty year Treasury Bond remained between 6.60% and 7.20% from
April through October. Higher personal incomes and higher corporate profits
have allowed individual and corporate tenants to more easily meet rent payments
and rent increases, which helps REIT stocks.
There have been strong inflows into REIT funds throughout 1996. Some of the
reasons include:
- - A portion of the money flowing into REITs has come from utility funds as
some utility investors feel that REITs offer a greater potential for
capital appreciation than utilities.
- - High REIT dividend yields also have attracted defensive minded S&P
investors who consider the S&P 500 overvalued by traditional
price-to-earnings and price-to-book ratios.
- - As the market capitalization of the REIT sector grows, fund managers that
track broader market indices such as the Russell 2000, must add REITs to
their portfolios.
- - Finally, there has been widespread favorable press on the REIT sector
which has helped spur inflows into REIT stocks.
From September 3, to October 31, 1996, the Morgan Stanley REIT Index returned
4.80%. During the same period, the Aon REIT Index Fund had a total return of
4.40% on the institutional Class Y shares and a 4.40% return on the retail
Class C shares.
We favor REIT stocks in the long-term, especially as a portfolio
diversification vehicle. In the short term, however, we are concerned that the
recent increase in REIT prices, as evidenced by a 31.3% increase in the Morgan
Stanley REIT Index from December 31, 1994 to October 31, 1996, may cause some
investors to take profits.
The Aon REIT Index Fund remains fully invested in the REIT market and continues
to be positioned to closely replicate the performance of the Morgan Stanley
REIT Index.
Robert E. Dunn
Portfolio Manager
<PAGE> 15
AON ASSET MANAGEMENT FUNDS, INC. ("THE FUND") REPORT OF SHAREHOLDER MEETINGS
On July 10, 1996 a special meeting of shareholders was held. There were
292,151,194.350 outstanding shares of the Class A Money Market Portfolio
eligible to vote at the meeting and 85,562.61 outstanding shares of the Class B
Flexible Asset Allocation Portfolio eligible to vote
at the meeting.
At the meeting the following Directors were elected by the shareholders of both
Portfolios voting together.
<TABLE>
<CAPTION>
VOTES
-----
Broker
------
For Against Withheld Non-Votes
--- ------- -------- ---------
<S> <C> <C> <C> <C>
Michael Cavataio 286,374,057.038 36,177.8 0 0
Michael A. Conway 286,374,057.038 36,177.8 0 0
Carleton D. Pearl 286,374,057.038 36,177.8 0 0
Richard J. Peters 286,374,057.038 36,177.8 0 0
Donald W. Phillips 286,374,057.038 36,177.8 0 0
</TABLE>
These gentlemen comprise the entire Board of Directors of the Fund and
following the reorganization discussed below will comprise the entire Board of
Trustees of Aon Funds.
Other matters voted on at the meeting were as follows:
Approval of an Agreement and Plan of Reorganization providing for the
acquisition of all of the assets of each Portfolio of the Fund by a
corresponding series of Aon Funds, a Delaware business trust (the "Trust") in
exchange for shares of beneficial interest in each such series of the Trust,
the distribution of such shares of each series of the Trust to shareholders of
the corresponding Portfolio of the Fund, and the subsequent dissolution of the
Fund, with the shareholders of each such portfolio of the Fund voting
separately with respect to the approval of the Agreement and Plan of
Reorganization.
<TABLE>
<CAPTION>
VOTES
-----
Broker
------
For Against Withheld Non-Votes
--- ------- -------- ---------
<S> <C> <C> <C> <C>
Money Market Portfolio 279,152,583.038 36,177.8 0 0
Flexible Asset Allocation 85,562.61 0 0 0
Portfolio
</TABLE>
Approval of the proposed amended Investment Advisory Agreement with Aon
Advisors, Inc., with the shareholders of each Portfolio of the Fund voting
separately with respect to such approval.
<TABLE>
<CAPTION>
VOTES
-----
Broker
------
For Against Withheld Non-Votes
--- ------- -------- ---------
<S> <C> <C> <C> <C>
Money Market Portfolio 279,152,583.038 36,177.8 0 0
Flexible Asset Allocation 85,562.61 0 0 0
Portfolio
</TABLE>
<PAGE> 16
The Board of Trustees and Shareholders
Aon Funds --
Money Market Fund
Government Securities Fund
Asset Allocation Fund
S&P 500 Index Fund
International Equity Fund
REIT Index Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Aon Funds - Money Market Fund,
Government Securities Fund, Asset Allocation Fund, S&P 500 Index Fund,
International Equity Fund and REIT Index Fund as of October 31, 1996, the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Aon Funds - Money Market Fund, Government Securities Fund, Asset Allocation
Fund, S&P 500 Index Fund, International Equity Fund and REIT Index Fund at
October 31, 1996, the results of their operations, changes in their net assets
and the financial highlights for the periods indicated therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 19, 1996
<PAGE> 17
STATEMENT OF ASSETS AND LIABILITIES
MONEY MARKET FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities at amortized cost which approximates fair value $ 433,649,538
Cash 94
Receivable for fund shares sold 11,542,510
Interest receivable 86,492
-----------
Total Assets 445,278,634
LIABILITIES
Payable for fund shares redeemed 47,808,000
Dividends payable 1,982,947
Investment advisory fees payable 221,231
Accrued expenses payable 162,202
-----------
Total Liabilities 50,174,380
-----------
NET ASSETS $ 395,104,254
===========
Net Asset Value Per Share:
Class Y (based on net assets of $393,096,650 and 393,096,650 shares issued
and outstanding) $ 1.00
===========
Class C (based on net assets of $2,007,604 and 2,007,604 shares issued
and outstanding) $ 1.00
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 18
STATEMENT OF OPERATIONS
MONEY MARKET FUND
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest $ 22,411,781
----------
Total Investment Income 22,411,781
EXPENSES
Investment advisory fees 1,402,293
Custodian fees 183,784
Fund accounting fees 105,476
Audit 55,481
Transfer agent fees 53,982
Fund administration fees 32,585
Registration fees 13,266
Distribution fees 285
Other 46,766
----------
Total Expenses 1,893,918
Less: Fee Waiver 959,734
----------
Net Expenses 934,184
----------
NET INVESTMENT INCOME $ 21,477,597
==========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 19
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
INCREASE IN NET ASSETS FROM OPERATIONS
<S> <C> <C>
Net investment income $ 21,477,597 $ 28,244,205
Net realized gain (loss) on sale of investments 0 4,758
Change in unrealized appreciation on investments 0 0
---------------- -----------------
Net increase in net assets resulting from operations 21,477,597 28,248,963
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (21,477,597) (28,244,205)
Net realized gain 0 (4,758)
Distributions in excess of realized gain 0 0
---------------- -----------------
Total distributions (21,477,597) (28,248,963)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 4,625,262,667 4,368,158,454
Net asset value of shares issued upon reinvestment of divdends 6,166,458 7,851,993
Cost of redemption of shares (4,656,418,504) (4,366,829,092)
---------------- -----------------
Increase (decrease) in net assets from capital transactions (24,989,379) 9,181,355
---------------- -----------------
Increase (decrease) in net assets (24,989,379) 9,181,355
Net assets at beginning of year 420,093,633 410,912,278
---------------- -----------------
Net assets at end of year $ 395,104,254 $ 420,093,633
================ =================
Undistributed net investment income $ 0 $ 0
================ =================
DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Class Y $ 21,461,344 $ 28,244,205
Class C 16,253 0
---------------- -----------------
Total distributions from net investment income 21,477,597 28,244,205
---------------- -----------------
Distributions from realized gain:
Class Y 0 4,758
Class C 0 0
---------------- -----------------
Total distributions from realized gain 0 4,758
---------------- -----------------
Total distributions $ 21,477,597 $ 28,248,963
================ =================
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 20
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
---------- ----------- ------ ----------
<S> <C> <C> <C> <C>
Commercial Paper
Auto & Truck 2.53%
PHH Corp.
5.30% due November 13, 1996 $ 10,000,000 $ 9,982,333 $ 9,982,333
Banking - Foreign 7.53%
Canadian Imperial CP
5.43% due December 10, 1996 15,000,000 14,911,762 14,911,762
International Lease Finance Corp.
5.42% due January 14, 1997 10,000,000 9,888,589 9,888,589
5.48% due January 16, 1997 5,000,000 4,942,155 4,942,155
---------- ----------
29,742,506 29,742,506
Building and Housing 3.53%
Fluor Corp.
5.25% due November 21, 1996 14,000,000 13,959,167 13,959,167
Chemical 1.77%
Nalco Chemical Co. CP
5.30% due November 12, 1996 7,000,000 6,988,664 6,988,664
Conglomerate 3.03%
Philip Morris
5.58% due November 1, 1996 7,000,000 7,000,000 7,000,000
5.43% due December 3, 1996 5,000,000 4,975,867 4,975,867
---------- ----------
11,975,867 11,975,867
Finance 25.10%
American Express
5.28% due November 1, 1996 5,000,000 5,000,000 5,000,000
5.31% due January 7, 1997 10,000,000 9,901,175 9,901,175
American General Finance
5.41% due January 13, 1997 15,000,000 14,835,446 14,835,446
Associates Corp. North America
5.40% due November 12, 1996 5,000,000 4,991,750 4,991,750
5.32% due February 21, 1997 10,000,000 9,834,489 9,834,489
Beneficial Corp.
5.40% due December 16, 1996 5,000,000 4,966,250 4,966,250
5.25% due December 23, 1996 10,000,000 9,924,167 9,924,167
Comerica Bank
5.0661% due November 14, 1996 5,000,000 5,000,000 5,000,000
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 21
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
----------- --------------- ------------- ------------------
<S> <C> <C> <C> <C>
First of America
5.1159% due November 4, 1996 $ 2,000,000 $ 2,000,000 $ 2,000,000
Ford Motor Credit Co.
5.26% due December 9, 1996 5,000,000 4,972,239 4,972,239
General Electric Capital Corp.
5.42% due November 29, 1996 8,600,000 8,563,746 8,563,746
5.31% due January 10, 1997 6,400,000 6,333,920 6,333,920
Household Financial Corp.
5.53% due January 21, 1997 10,000,000 9,875,575 9,875,575
Sun Trust Bank
5.31% due January 27, 1997 3,000,000 2,961,503 2,961,503
---------- ----------
99,160,260 99,160,260
Finance - Service 14.17%
AVCO Financial Services
5.35% due November 27, 1996 5,625,000 5,603,266 5,603,266
First Chicago Financial Corp.
5.57% due January 2, 1997 5,793,000 5,737,429 5,737,429
Goldman Sachs Group
5.25% due November 22, 1996 5,000,000 4,984,688 4,984,688
5.28% due November 29, 1996 10,000,000 9,958,933 9,958,933
Merrill Lynch and Co.
5.42% due December 6, 1996 10,000,000 9,947,306 9,947,306
5.44% due January 21, 1997 5,000,000 4,938,800 4,938,800
Morgan Stanley Group
5.52% due January 22, 1997 15,000,000 14,811,400 14,811,400
---------- ----------
55,981,822 55,981,822
Insurance 3.78%
Prudential Funding Corp.
5.40% due November 12, 1996 10,000,000 9,983,500 9,983,500
5.40% due January 6, 1997 5,000,000 4,950,500 4,950,500
---------- ----------
14,934,000 14,934,000
Miscellaneous 7.57%
Asset Securitization Corp.
5.31% due November 8, 1996 10,000,000 9,989,675 9,989,675
5.25% due December 3, 1996 5,000,000 4,976,667 4,976,667
Preferred Receivables Funding Corp.
5.40% due November 7, 1996 10,000,000 9,991,000 9,991,000
5.42% due January 8, 1997 5,000,000 4,948,811 4,948,811
---------- ----------
29,906,153 29,906,153
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 22
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COST VALUE
----------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Oil & Gas 3.79%
Baltimore Gas and Electric Company
5.29% due November 19, 1996 $ 15,000,000 $ 14,960,325 $ 14,960,325
Paper and Forest Product 2.52%
Weyerhauser
5.35% due November 21, 1996 10,000,000 9,970,278 9,970,278
Printing & Publishing 0.76%
McGraw-Hill, Inc. CP
5.43% due November 26, 1996 3,000,000 2,988,688 2,988,688
Technology 10.34%
IBM Credit
5.38% due November 4, 1996 15,000,000 14,993,275 14,993,275
Motorola Credit Co.
5.23% due November 14, 1996 10,900,000 10,879,414 10,879,414
Raytheon Co.
5.23% due November 14, 1996 15,000,000 14,971,671 14,971,671
-------------- --------------
40,844,360 40,844,360
Telecommunication 3.77%
Ameritech Corp.
5.32% due December 2, 1996 5,000,000 4,977,094 4,977,094
5.34% due December 2, 1996 5,000,000 4,977,008 4,977,008
Ameritech Capital Corp.
5.53% due January 8, 1997 5,000,000 4,947,772 4,947,772
-------------- --------------
14,901,874 14,901,874
Utility - Communication 2.53%
BellSouth Capital Funding
5.22% due November 5, 1996 10,000,000 9,994,200 9,994,200
Utility - Electric 1.26%
Potomac Electric Power Company
5.25% due November 8, 1996 5,000,000 4,994,896 4,994,896
-------------- --------------
Total Commercial Paper 93.97% 371,285,393 371,285,393
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 23
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF PRINCIPAL
NET ASSETS AMOUNT COAST VALUE
------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C>
Repurchase Agreement
Harris Nesbit Thompson Repo * 0.71%
5.25% due November 1, 1996 $ 2,816,000 $ 2,816,000 $ 2,816,000
US Government Securities
Fed Home Loan Mortgage Corp 3.78%
FHLMC Disc Notes
5.40% due December 6, 1996 15,000,000 14,921,250 14,921,250
Fed National Mortgage Assn 7.51%
FNMA Disc Notes
5.185% due November 13, 1996 9,730,000 9,713,182 9,713,182
5.38% due November 19, 1996 15,000,000 14,959,650 14,959,650
5.45% due February 13, 1997 5,000,000 5,000,000 5,000,000
-------------- --------------
29,672,832 29,672,832
-------------- --------------
Total US Government Securities 11.29% 44,594,082 44,594,082
Corporate Bond
Asset Backed Security 3.78%
Corporate Asset Funding Co. CP
5.25% due November 22, 1996 15,000,000 14,954,063 14,954,063
-------------- --------------
TOTAL INVESTMENTS 109.76% $ 433,649,538 433,649,538
-------------- --------------
Liabilities, less cash and other assets -9.76% (38,545,284)
--------------
TOTAL NET ASSETS 100.00% $ 395,104,254
==============
</TABLE>
* Collateralized by U.S. Treasury Note (7.25% due November, 15, 1996);
held by custodian.
See accompanying notes to the financial statements.
<PAGE> 24
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND - CLASS Y
<TABLE>
<CAPTION>
PERIOD FROM
The table below sets forth financial data for one YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED JANUARY 23, 1992
share of capital stock outstanding throughout the OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
periods presented. 1996 1995 1994 1993 1992
---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period 1.00 1.00 1.00 1.00 1.00
Income from investment operations:
Net investment income 0.05 0.06 0.04 0.03 0.03
Net realized and unrealized gain on securities 0.00 ** ** ** **
---- ---- ---- ---- ----
Total income from investment operations 0.05 0.06 0.04 0.03 0.03
Less distributions:
Dividends from net investment income 0.05 0.06 0.04 0.03 0.03
Distributions from capital gains 0.00 ** ** ** **
------- ------- ------ ------ ------
Total distributions 0.05 0.06 0.04 0.03 0.03
------- ------- ------ ------ ------
Net asset value at end of period 1.00 1.00 1.00 1.00 1.00
======= ======= ====== ====== ======
Total return 5.43% 5.79% 3.73% 3.10% 3.57%*
Ratios and supplemental data:
Net assets at end of period (in thousands) 393,097 420,094 410,912 412,068 399,076
Ratio of operating expenses to average net assets*** 0.23% 0.14% 0.15% 0.17% 0.25%*
Ratio of net investment income to average net assets*** 5.30% 5.79% 3.73% 3.10% 3.57%*
</TABLE>
- ------------------------------
* Annualized
** Less than 1 cent per share
*** The Investment Advisor has agreed to waive a portion of its advisory fees.
Absent this agreement, the ratio of operating expenses to average net assets
and the ratio of net investment income to average net assets would have been
0.46% and 5.07% for 1996, 0.39% and 5.54% for 1995, 0.40% and 3.48% for 1994,
0.42% and 2.85% for 1993 and 0.50% and 3.32% for 1992, respectively.
See accompanying notes to the financial statements.
<PAGE> 25
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 1.00
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gain on securities 0.00
--------
Total income from investment operations 0.01
Less distributions:
Dividends from net investment income 0.01
Distributions from capital gains 0.00
--------
Total distributions 0.01
--------
Net asset value at end of period 1.00
========
Total return 5.13%**
========
Ratios and supplemental data:
Net assets at end of period (in thousands) 2,008
Ratio of operating expenses to average net assets 0.37%*
Ratio of net investment income to average net assets 5.02%*
</TABLE>
- --------------------------------------------------
* The Investment Advisor has agreed to waive a portion of its advisory fees.
Absent this agreement, the ratio of operating expenses to average net assets
and the ratio of net investment income to average net assets would have been
.52% and 4.87% respectively. Annualized.
** Annualized.
See accompanying notes to the financial statements.
<PAGE> 26
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT SECURITIES FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost - $39,536,778) $ 40,018,456
Receivable for fund shares sold 10,000,000
Interest receivable 649,520
------------
Total Assets 50,667,976
LIABILITIES
Payable for securities purchased 9,980,733
Dividends payable 152,374
Investment advisory fees payable 15,342
Accrued expenses payable 14,575
------------
Total Liabilities 10,163,024
------------
NET ASSETS $ 40,504,952
============
Net Asset Value Per Share:
Class Y (based on net assets of $38,459,352 and 3,765,478 shares issued and outstanding) $ 10.21
============
Class C (based on net assets of $2,045,600 and 200,322 shares issued and outstanding) $ 10.21
============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 27
STATEMENT OF OPERATIONS
GOVERNMENT SECURITIES FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 240,651
----------
Total Investment Income 240,651
EXPENSES
Investment advisory fees 15,342
Registration fees 6,919
Fund accounting fees 5,372
Transfer agent fees 2,180
Fund administration fees 1,760
Custodian fees 723
Distribution fees 709
Other 867
----------
Total Expenses 33,872
----------
NET INVESTMENT INCOME $ 206,779
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on sale of investments (31,132)
Change in net unrealized appreciation on investments 481,678
----------
Net realized and unrealized gain (loss) on investments 450,546
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 657,325
==========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 28
STATEMENT OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 206,779
Net realized loss (31,132)
Change in net unrealized appreciation 481,678
------------
Net increase in net assets resulting from operations 657,325
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (204,378)
Net realized gain 0
Distributions in excess of realized gain 0
------------
Total distributions (204,378)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 40,000,000
Net asset value of shares issued upon reinvestment of dividends 52,005
Cost of redemption of shares
------------
Increase in net assets from capital transactions 40,052,005
------------
Increase in net assets 40,504,952
Net assets at beginning of period 0
------------
Net assets at end of period $ 40,504,952
============
Undistributed net investment income $ 2,401
============
DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Class Y $ 191,317
Class C 13,061
------------
Total distributions from net investment income $ 204,378
============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 29
SCHEDULE OF INVESTMENTS
GOVERNMENT SECURITIES FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
US GOVERNMENT SECURITIES
Government Agency 28.03%
FNMA Medium Term Note
7.125% due October 6, 2003 $2,000,000 $ 2,000,000 $ 2,007,970
GNMA Pool 389288
8.50% due October 15, 2026 216,372 221,369 224,689
GNMA Pool 423843
8.50% due August 15, 2026 8,783,628 8,986,470 9,121,252
----------- -----------
11,207,839 11,353,911
US Government Notes 67.76%
US Treasury Note
6.25% due August 31, 2000 17,868,000 17,796,878 17,997,701
US Treasury Bonds
11.875% due November 15, 2003 5,042,000 6,543,420 6,619,984
7.25% due May 15, 2016 2,682,000 2,771,014 2,829,510
----------- -----------
27,111,312 27,447,195
----------- -----------
Total US Government Securities 95.79% 38,319,151 38,801,106
CORPORATE BOND
Foreign 2.99%
Quebec Province CDA
13.25% due September 15, 2014 1,000,000 1,212,167 1,211,890
DEMAND NOTE
Utility - Electrical 0.02%
Wisconsin Electric Demand Note
5.0641% due on demand 5,460 5,460 5,460
----------- -----------
TOTAL INVESTMENTS 98.80% $39,536,778 40,018,456
===========
Other assets, less liabilities 1.20% 486,496
-----------
TOTAL NET ASSETS 100.00% $40,504,952
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 30
FINANCIAL HIGHLIGHTS
GOVERNMENT SECURITIES FUND - CLASS Y
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.07
Net realized and unrealized gain on securities 0.21
--------
Total income from investment operations 0.28
Less distributions:
Dividends from net investment income 0.07
Distributions from capital gains 0.00
--------
Total distributions 0.07
--------
Net asset value at end of period 10.21
========
Total return (not annualized) 2.79%
========
Ratios and supplemental data:
Net assets at end of period (in thousands) 38,459
Ratio of operating expenses to average net assets 0.89%*
Ratio of net investment income to average net assets 5.59%*
Portfolio turnover rate 3.93%
</TABLE>
-----------------------------------------------------------
* Annualized
See accompanying notes to the financial statements.
<PAGE> 31
FINANCIAL HIGHLIGHTS
GOVERNMENT SECURITIES FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.09
Net realized and unrealized gain on securities 0.19
-------
Total income from investment operations 0.28
Less distributions:
Dividends from net investment income 0.07
Distributions from capital gains 0.00
-------
Total distributions 0.07
-------
Net asset value at end of period 10.21
=======
Total return (not annualized) 2.76%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 2,046
Ratio of operating expenses to average net assets 1.10%*
Ratio of net investment income to average net assets 5.35%*
Portfolio turnover rate 3.93%
</TABLE>
---------------------------------------------------
* Annualized
See accompanying notes to the financial statments.
<PAGE> 32
STATEMENT OF ASSETS AND LIABILITIES
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost - $82,314,867) $ 91,805,055
Receivable for securities sold 1,040,806
Interest receivable 298,174
Dividends receivable 74,386
-------------
Total Assets 93,218,421
LIABILITIES
Dividends payable 2,560,513
Payable for securities purchased 2,085,987
Investment advisory fees payable 252,065
Accrued expenses payable 39,976
-------------
Total Liabilities 4,938,541
-------------
NET ASSETS $ 88,279,880
=============
Net Asset Value Per Share:
Class Y (based on net assets of $86,229,073 and 6,763,621
shares issued and outstanding) $ 12.75
=============
Class C (based on net assets of $2,050,807 and 160,901
shares issued and outstanding $ 12.75
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 33
STATEMENT OF OPERATIONS
ASSET ALLOCATION FUND
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,221,290
Dividends 735,620
-------------
Total Investment Income 2,956,910
EXPENSES
Investment advisory fees 609,643
Custodian fees 35,765
Fund accounting fees 33,696
Registration fees 29,859
Transfer agent fees 18,473
Fund administration fees 6,404
Distribution fees 744
Other 37,211
-------------
Total Expenses 771,795
-------------
NET INVESTMENT INCOME $ 2,185,115
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments 2,255,386
Change in net unrealized appreciation on investments 4,522,511
-------------
Net realized and unrealized gain on investments 6,777,897
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 8,963,012
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 34
STATEMENTS OF CHANGES IN NET ASSETS
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
------------------ ------------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,185,115 $ 839,757
Net realized gain or loss 2,255,386 1,835,265
Change in net unrealized appreciation or depreciation 4,522,511 4,907,281
--------------- --------------
Net increase in net assets resulting from operations 8,963,012 7,582,303
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,184,388) (835,923)
Net realized gain (2,070,780) (1,835,265)
Distributions in excess of realized gain 0 (162,706)
--------------- --------------
Total distributions (4,255,168) (2,833,894)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 18,179,173 56,003,807
Net asset value of shares issued upon reinvestment of dividends 1,694,654 2,833,894
Cost of redemption of shares (10,077,026) 0
--------------- --------------
Increase in net assets from capital transactions 9,796,801 58,837,701
--------------- --------------
Increase in net assets 14,504,645 63,586,110
Net assets at beginning of year 73,775,235 10,189,125
--------------- --------------
Net assets at end of year $ 88,279,880 $ 73,775,235
=============== ==============
Undistributed net investment income $ 4,561 $ 3,834
=============== ==============
DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Class Y $ 2,173,721 $ 835,923
Class C 10,667 0
--------------- --------------
Total distributions from net investment income 2,184,388 835,923
--------------- --------------
Distributions from and in excess of realized gain:
Class Y 2,022,662 1,997,971
Class C 48,118 0
--------------- --------------
Total distributions from realized gain 2,070,780 1,997,971
--------------- --------------
Total distributions $ 4,255,168 $ 2,833,894
=============== ==============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 35
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
COMMON STOCKS
<S> <C> <C> <C> <C>
COMMON STOCKS - BANKING & FINANCIAL SERVICE
Bank & Bank Holding Company 3.44%
Barnett Bank, Inc. 20,000 $ 577,894 $ 762,500
Citicorp 7,500 584,200 742,500
Nations Bank Corp. 12,000 729,107 1,131,000
Texas Regional Bancshares - A 12,500 278,125 403,125
---------- -----------
2,169,326 3,039,125
Finance Company 1.21%
Household International 8,000 510,144 708,000
Southern Pacific Funding Corp. * 11,300 203,950 355,950
---------- -----------
714,094 1,063,950
Financial Service 3.37%
Associates First Capital Corp. 10,000 334,659 433,750
Cityscape Financial Corp. * 15,000 135,000 386,250
Financial Federal Corp. * 19,000 315,875 266,000
Green Tree Financial Corp. 34,000 939,466 1,347,250
Onyx Acceptance Corp. * 12,500 144,375 128,125
Student Loan Marketing Assn Com New VT 5,000 408,669 413,750
---------- -----------
2,278,044 2,975,125
Insurance 2.17%
American International Group 14,000 1,059,598 1,520,750
FBL Financial Group, Inc. - A * 17,500 306,250 395,938
---------- -----------
1,365,848 1,916,688
Real Estate 2.70%
Colonial Properties Trust 31,000 770,600 821,500
First Industrial Realty Trust 27,500 587,764 711,563
Health Care REIT, Inc. 20,500 451,000 484,313
Spieker Properties, Inc. 11,900 303,450 365,925
---------- -----------
2,112,814 2,383,301
---------- -----------
Total Common Stocks - Banking & Financial Service 12.89% 8,640,126 11,378,189
COMMON STOCKS - CAPITAL GOODS
Electrical Equipment 0.66%
General Electric 6,000 493,610 580,500
Machinery - Agriculture & Construction 1.19%
AGCO Corp. 20,000 578,178 507,500
Case Equipment 11,600 626,898 539,400
---------- -----------
1,205,076 1,046,900
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 36
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Machinery - Industrial 0.37%
Triumph Group, Inc. * 14,600 $ 282,776 $ 328,500
Pollution Control 1.97%
Allied Waste Industries, Inc. * 77,100 652,646 698,719
Philip Environmental Control * 100,000 780,844 1,037,500
----------- -----------
1,433,490 1,736,219
Production 1.42%
Deere & Co. 25,000 933,688 1,043,750
Illinois Tool Works 3,000 134,805 210,750
----------- -----------
1,068,493 1,254,500
Waste Management 0.02%
Newpark Resources, Inc. * 500 15,000 18,750
----------- -----------
Total Common Stocks - Capital Goods 5.62% 4,498,445 4,965,369
COMMON STOCKS - CONSUMER CYCLICAL
Appliance 0.99%
Interface, Inc. 51,800 640,853 874,125
Building Material 0.62%
Home Depot 10,000 515,000 547,500
Retail - General 1.59%
Kroger * 29,000 1,035,952 1,294,125
Walgreen Co. 3,000 67,144 113,250
----------- -----------
1,103,096 1,407,375
----------- -----------
TOTAL COMMON STOCKS - CONSUMER CYCLICAL 3.20% 2,258,949 2,829,000
COMMON STOCKS - CONSUMER NON-DURABLE
Communications & Media 6.78%
American Telecating, Inc. * 25,000 315,625 240,625
Clear Channel Communications * 10,000 840,000 730,000
Cox Communications, Inc. A * 35,000 707,130 647,500
Cox Radio, Inc. * 17,500 345,038 317,188
Evergreen Media Corp. A * 25,650 577,221 692,550
Harcourt General, Inc. 12,500 639,200 621,875
Outdoor Systems, Inc. * 7,500 258,750 335,625
Paging Network, Inc. * 27,300 709,867 467,513
Panamsat Corp. * 22,000 356,500 643,500
Time Warner, Inc. 22,750 818,028 847,438
</TABLE>
See accompanying notes to the financial statements
<PAGE> 37
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
----------- --------- ---- -----
<S> <C> <C> <C> <C>
Tribune Co. 5,200 $ 328,594 $ 425,100
Univision Communications, Inc. * 500 11,500 16,875
----------- -----------
5,907,453 5,985,789
Cosmetic & Soap 0.97%
Colgate Palmolive Co. 5,500 407,704 506,000
Proctor & Gamble 3,500 245,249 346,500
----------- -----------
652,953 852,500
Drugs 6.92%
Abbott Labs 16,000 625,336 810,000
Becton Dickenson Co. 20,000 574,350 870,000
Humana, Inc. 23,000 600,714 419,750
Johnson & Johnson Co. 32,000 1,067,710 1,576,000
Merck & Co. 12,000 587,847 889,500
Pfizer, Inc. 14,000 672,167 1,158,500
Schering Plough Corp. 6,000 230,805 384,000
----------- -----------
4,358,929 6,107,750
Entertainment & Leisure 0.48%
Viacom, Inc. A * 1,960 88,521 63,945
Viacom, Inc. B * 11,000 515,135 358,875
----------- -----------
603,656 422,820
Food, Beverage & Tobacco 1.59%
Archer-Daniels-Midland Co. 13,781 237,621 299,737
Panamerican Beverages * 5,000 217,062 218,125
Pepsico, Inc. 30,000 711,886 888,750
----------- -----------
1,166,569 1,406,612
Health Care 0.81%
Nationwide Health PPTYS, Inc. 10,000 211,250 225,000
Nellcor Puritan Bennett, Inc. * 25,000 636,800 487,500
----------- -----------
848,050 712,500
Health Care Service 1.76%
Meditrust 30,000 1,020,600 1,080,000
United Healthcare Corp. 12,500 648,146 473,438
----------- -----------
1,668,746 1,553,438
Hospital Supply & Service 0.08%
Pronet, Inc. * 10,400 260,425 68,900
Retail - Food & Drugs 1.00%
Dominick's Supermarkets, Inc. * 7,500 144,050 149,063
General Nutrition Co. * 40,000 591,969 730,000
----------- -----------
736,019 879,063
Travel & Recreation 1.19%
Walt Disney Co. 16,000 879,968 1,054,000
----------- -----------
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 38
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Total Common Stocks - Consumer Non-Durable 21.57% $ 17,082,768 $ 19,043,372
COMMON STOCKS - ENERGY
Oil & Gas - Domestic 0.60%
Amoco Corp. 7,000 447,983 530,250
Oil & Gas International 0.36%
Mobil Corp. 2,000 178,745 233,500
Royal Dutch Petroleum, Corp. ADR 500 53,030 82,688
------------- -------------
231,775 316,188
Miscellaneous 0.66%
Petroleum Geo Services ADR * 17,000 494,088 582,250
Raw Material 0.04%
American Exploration Co 2,500 32,187 32,187
------------- -------------
Total Common Stocks - Energy 1.65% 1,206,033 1,460,875
COMMON STOCKS - MANUFACTURING
Building & Housing 0.37%
Fluor Corp. 5,000 335,340 327,500
Capital Goods 0.31%
Bway Corp. * 15,000 271,250 270,000
Chemical 1.69%
Dupont De Nemours & Co. 12,000 765,795 1,113,000
Polymer Group, Inc. * 30,000 595,735 382,500
------------- -------------
1,361,530 1,495,500
Computer 0.54%
EMC Corp Massachusetts, Inc. * 18,000 305,768 472,500
Metal & Mineral 1.28%
AK Steel Holding Corp. 9,100 364,695 323,050
Century Aluminum Corp. 23,900 310,700 322,650
Worthington Industries, Inc. 23,500 489,215 487,625
------------- -------------
1,164,610 1,133,325
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 39
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
----------- --------- ---- -----
<S> <C> <C> <C> <C>
Miscellaneous 1.08%
Watsco, Inc. 26,825 $ 374,434 $ 519,734
Watsco, Inc. B 9,000 63,740 172,125
York Group, Inc. 15,800 234,450 264,650
----------- -----------
672,624 956,509
Paper & Forest Products 0.94%
Fort Howard Corp. * 32,500 660,937 832,813
----------- -----------
Total Common Stocks - Manufacturing 6.22% 4,772,059 5,488,147
COMMON STOCKS - SERVICE
Business 0.57%
International Data Systems * 7,250 125,000 117,813
Universal Outdoor Holdings * 13,000 481,000 381,875
----------- -----------
606,000 499,688
Distributor 0.58%
ALCO Standard Corp. 11,000 392,080 510,125
Miscelleneous 0.47%
Canwest Global Communications Corp. 39,000 377,000 414,375
Pollution Control 0.72%
USA Waste Services, Inc. * 20,000 582,756 640,000
----------- -----------
Total Common Stocks - Service 2.34% 1,957,836 2,064,188
COMMON STOCKS - TECHNOLOGY
Aerospace Aircraft 2.58%
Boeing 10,000 816,553 953,750
Sundstrand Corp. 15,000 537,150 603,750
United Technologies Corp. 5,600 635,036 721,000
----------- -----------
1,988,739 2,278,500
Business - Mechanics & Software 4.43%
Compaq Computers Corp. * 16,500 839,741 1,148,813
Digital Equipment * 5,000 316,865 147,500
Industru-Matematik International * 20,000 200,000 195,000
International Business Machines 4,000 397,740 516,000
Network General Corp. * 10,500 158,490 253,313
Sun Microsystems * 10,600 405,950 646,600
Techforce Corp. * 17,500 192,500 112,656
Xerox Corp. 19,200 780,334 890,400
---------- ----------
3,291,620 3,910,282
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 40
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Business - Service 1.29%
First Data 14,273 $ 709,409 $ 1,138,272
Electronic 2.17%
Bolder Technologies Corp. * 12,500 131,250 185,938
Hewlett-Packard Co. 19,200 806,581 847,200
Tektronix, Inc. 22,500 1,009,475 880,313
----------- -----------
1,947,306 1,913,451
Software 0.86%
Saville Systems Ireland ADR * 17,100 233,505 737,438
USCS International, Inc. * 1,000 17,000 18,000
----------- -----------
250,505 755,438
Telecommunications 1.62%
Clearnet Communications A * 25,000 480,000 368,750
Echostar Communications A * 18,800 344,900 554,600
Glenayre Technologies * 19,800 426,340 509,850
----------- -----------
1,251,240 1,433,200
----------- -----------
Total Common Stocks - Technology 12.95% 9,438,819 11,429,143
Common Stocks - Transportation
Miscellaneous 0.94%
Coach USA, Inc. * 14,000 196,000 381,500
Harley Davidson 10,000 267,475 451,250
----------- -----------
463,475 832,750
Trucking 0.57%
Heartland Express, Inc. * 10,000 182,500 220,000
Knight Transportation, Inc. * 12,500 231,250 281,250
----------- -----------
413,750 501,250
----------- -----------
Total Common Stocks - Transportation 1.51% 877,225 1,334,000
COMMON STOCKS - UTILITY
Telephone 0.39%
Billing Information Concepts * 10,000 255,763 261,250
US Long Distance * 10,000 89,862 83,750
----------- -----------
345,625 345,000
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 41
SCHEDULE OF INVESTMENTS
ASSETS ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Miscellaneous 0.53%
Vanguard Cellular Sys A * 28,000 $ 600,191 $ 463,750
------------ -----------
Total Common Stocks - Utility 0.92% 945,816 808,750
------------ -----------
COMMON STOCKS -GRAND TOTAL 68.87% 51,678,076 60,801,033
US Government Securities
Fed Home Loan Mortgage Corp 5.19%
FHLMC Disc Note
5.22% due November 14, 1996 $ 1,320,000 1,317,512 1,317,512
5.185% due November 19, 1996 1,085,000 1,082,190 1,082,190
5.18% due December 17, 1996 2,200,000 2,185,438 2,185,438
------------ -----------
4,585,140 4,585,140
US Government Notes 18.05%
US Treasury Notes
6.00% due August 31, 1997 2,500,000 2,504,209 2,509,375
5.125% due February 28, 1998 4,000,000 3,964,183 3,972,967
6.00% due May 31, 1998 3,500,000 3,486,116 3,517,500
7.125% due September 30, 1999 200,000 199,249 206,250
7.75% due January 31, 2000 500,000 501,598 525,957
6.50% due August 31, 2001 3,000,000 3,011,261 3,049,334
6.375% due September 30, 2001 1,000,000 1,001,705 1,011,406
6.375% due August 15, 2002 100,000 97,880 101,082
7.00% due July 15, 2006 1,000,000 1,024,601 1,044,687
------------ -----------
15,790,802 15,938,558
------------ -----------
Total US Government Securities 23.25% 20,375,942 20,523,698
Corporate Bonds
Auto Parts 0.11%
Pep Boys
6.625% due May 15, 2003 100,000 92,923 99,378
Bank & Bank Holding Co 1.40%
Citicorp
7.125% due March 15, 2004 100,000 99,013 101,709
Huntington National
6.75% due June 15, 2003 100,000 94,583 99,626
Nations Bank Corp.
7.50% due September 15, 2006 1,000,000 1,000,000 1,030,861
------------ -----------
1,193,596 1,232,196
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 42
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Communications & Media 2.40%
Airtouch Communications
7.00% due October 1, 2003 $ 500,000 $ 499,480 $ 505,561
Bell Atlantic
5.37% due July 13, 1998 120,000 116,717 118,685
Tribune Co.
6.875% due November 1, 2006 1,500,000 1,494,750 1,494,750
----------- -----------
2,110,947 2,118,996
Chemical 0.11%
Rhone-Poulenc
6.75% due October 15, 1999 100,000 97,917 101,000
Entertainment and Leisure 0.58%
Cobb Theatres
10.625% due March 1, 2003 500,000 500,000 512,500
Finance Company 0.28%
Commercial Credit
6.00% due June 15, 2000 150,000 144,150 148,161
Norwest Financial, Inc.
6.25% due February 15, 1997 100,000 99,897 100,170
----------- -----------
244,047 248,331
Food, Beverage & Tobacco 0.11%
Canandaigua Wine
8.75% due December 15, 2003 100,000 98,902 96,000
Health Care 0.11%
Gillette Co.
5.75% due October 15, 2005 100,000 88,782 94,056
Investment Company 1.41%
Cityscape Financial Corp.
6.00% due May 1, 2006 570,000 626,798 621,300
Dean Witter Discover
6.875% due March 1, 2003 100,000 94,772 100,598
Southdown, Inc.
10.00% due March 1, 2006 500,000 500,000 525,625
----------- -----------
1,221,570 1,247,523
Metal & Mineral 0.11%
Aluminum Co. of America
5.75% due February 1, 2001 100,000 94,600 97,528
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 43
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
Paper & Forest Product 0.12%
International Paper Co.
7.50% due May 15, 2004 $ 100,000 $ 98,905 $ 104,258
Retail Trade 0.11%
Black & Decker
6.625% due November 15, 2000 100,000 96,040 100,371
Transportation - Railroad 0.17%
Union Pacific
7.00% due June 15, 2000 150,000 149,170 152,811
---------- ----------
Total Corporate Bonds 7.03% 6,087,399 6,204,948
COMMERCIAL PAPER
Finance - Miscellaneous 0.82%
American Express Credit Corp.
5.3769% due November 14, 1996 295,000 295,000 295,000
Ford Motor Credit Corp.
5.2607% due November 14, 1996 195,000 195,000 195,000
5.2668% due November 14, 1996 100,000 100,000 100,000
5.2606% due November 19, 1996 135,000 135,000 135,000
---------- ----------
725,000 725,000
Finance - Service 1.30%
Merrill Lynch and Co.
5.26% due December 5, 1996 500,000 497,516 497,516
5.26% due December 20, 1996 655,000 650,311 650,311
---------- ----------
1,147,827 1,147,827
Technology 1.27%
Raytheon Co.
5.26% due November 18, 1996 1,120,000 1,117,218 1,117,218
---------- ----------
Total Commercial Paper 3.39% 2,990,045 2,990,045
CONVERTIBLE SECURITIES
Merrill Lynch 7.25% Strypes 8,500 516,585 528,063
Morgan Stanley 7.0% "CSCO" PFD 7,500 252,670 343,118
SunAmerica Inc. Conv PFD 10,000 375,000 375,000
---------- ----------
Total Convertible Securities 1.41% 1,144,255 1,246,181
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 44
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ---- -----
<S> <C> <C> <C> <C>
DEMAND NOTE
Utility - Electrical 0.04%
Wisconsin Electric Demand Note
5.0641% due on demand $ 39,150 $ 39,150 $ 39,150
------------ ------------
TOTAL INVESTMENTS 103.99% $ 82,314,867 91,805,055
============
Liabilities, less other assets -3.99% (3,525,175)
------------
TOTAL NET ASSETS 100.00% $ 88,279,880
============
</TABLE>
*Non-income producing security
See accompanying notes to the financial statements.
<PAGE> 45
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND - CLASS Y
<TABLE>
<CAPTION>
PERIOD FROM
The table below sets forth financial date for one YEAR ENDED YEAR ENDED MARCH 1, 1994
share of capital stock outstanding throughout the OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
periods presented. 1996 1995 1994
----------- ----------- --------------
<S> <C> <C> <C>
Net asset value at beginning of period 12.04 9.97 10.00
Income from investment operations:
Net investment income 0.31 0.24 0.17
Net realized and unrealized gain on securities 1.01 2.41 0.01
-------- ------- ----------
Total income from investment operations 1.32 2.65 0.18
Less distributions:
Dividends from net investment income 0.31 0.24 0.16
Distributions from capital gains 0.30 0.34 0.05
-------- ------- ----------
Total distributions 0.61 0.58 0.21
-------- ------- ----------
Net asset value at end of period 12.75 12.04 9.97
======== ======= ==========
Total return 11.06% 26.92% 1.84% **
======== ======= ==========
Ratios and supplemental data:
Net assets at end of period (in thousands) 86,229 73,775 10,189
Ratio of operating expenses to average net assets 0.87% 0.96% 1.25% *
Ratio of net investment income to average net assets 2.48% 2.73% 2.63% *
Portfolio turnover rate 119.79% 95.17% 64.36%
Average commission rate paid per share $0.0585 - -
</TABLE>
- --------------------------------------------------------
* Annualized
** Not annualized
See accompanying notes to the financial statements.
<PAGE> 46
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 12.43
Income from investment operations:
Net investment income 0.04
Net realized and unrealized gain on securities 0.65
-------
Total income from investment operations 0.69
Less distributions:
Dividends from net investment income 0.07
Distributions from capital gains 0.30
-------
Total distributions 0.37
-------
Net asset value at end of period 12.75
=======
Total return (not annualized) 5.51%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 2,051
Ratio of operating expenses to average net assets 1.16%*
Ratio of net investment income to average net assets 1.79%*
Portfolio turnover rate 119.79%
Average commission rate paid per share $0.0585
</TABLE>
* Annualized
See accompanying notes to the financial statements.
<PAGE> 47
STATEMENT OF ASSETS AND LIABILITIES
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost - $25,025,735) $25,875,555
Dividends receivable 25,923
Interest receivable 96
Receivable from advisor 6,699
-----------
Total Assets 25,908,273
LIABILITIES
Dividends payable 36,944
Accrued expenses payable 19,583
-----------
Total Liabilities 56,527
-----------
NET ASSETS $25,851,746
===========
Net Asset Value Per Share:
Class Y (based on net assets of $23,697,794 and 2,200,153 shares issued and outstanding) $ 10.77
===========
Class C (based on net assets of $2,153,952 and 200,000 shares issued and outstanding) $ 10.77
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 48
STATEMENT OF OPERATIONS
S&P 500 INDEX FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 45,985
Interest 10,860
-------------
Total Investment Income 56,845
EXPENSES
Investment advisory fees 7,035
Custodian fees 6,780
Fund accounting fees 6,358
Registration fees 6,230
Transfer agent fees 2,180
Fund administration fees 1,173
Distribution fees 739
Other 1,184
-------------
Total Expenses 31,679
Less: Expense reimbursement from Advisor 13,734
-------------
Net Expenses 17,945
-------------
NET INVESTMENT INCOME $ 38,900
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on sale of investments (30)
Change in net unrealized appreciation on investments 849,820
-------------
Net realized and unrealized gain (loss) on investments 849,790
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 888,690
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 49
STATEMENT OF CHANGES IN NET ASSETS
S&P 500 INDEX FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 38,900
Net realized loss (30)
Change in net unrealized appreciation 849,820
-----------
Net increase in net assets resulting from operations 888,690
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (36,944)
Net realized gain 0
Distributions in excess of realized gain 0
-----------
Total distributions (36,944)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 25,000,000
Net asset value of shares issued upon reinvestment of dividends 0
Cost of redemption of shares 0
-----------
Increase in net assets from capital transactions 25,000,000
-----------
Increase in net assets 25,851,746
Net assets at beginning of period 0
-----------
Net assets at end of period $25,851,746
===========
Undistributed net investment income $ 1,956
===========
DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Class Y $ 34,529
Class C 2,415
-----------
Total distributions from net investment income $ 36,944
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 50
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
COMMON STOCKS
COMMON STOCKS - BANKING & FINANCIAL SERVICE
Bank & Bank Holding Company 7.50%
Banc One Corp. 2,100 $ 84,596 $ 88,988
Bank of Boston 700 38,874 44,800
Bank of New York 1,900 55,214 62,938
Bankamerica Corp. 1,700 139,945 155,550
Bankers Trust of New York 400 32,413 33,800
Barnett Bank, Inc. 900 32,248 34,313
Boatmens Bancshares 800 43,900 48,600
Chase Manhattan 2,100 165,345 180,075
Citicorp 2,300 204,565 227,700
Comerica, Inc. 600 30,757 31,875
Corestates Financial 1,100 48,212 53,488
Fifth Third Bancorp 500 28,775 31,313
First Bank System, Inc. 700 44,860 46,200
First Chicago NBD Corp. 1,500 68,201 76,500
First Union Corp. 1,300 85,707 94,575
Fleet Financial Group, Inc. 1,300 57,980 64,838
Mellon Bank 600 35,620 39,075
Morgan (J.P.) & Co., Inc. 900 77,581 77,738
Nations Bank Corp. 1,400 120,697 131,950
Norwest Corp. 1,800 72,523 78,975
PNC Financial Corp. 1,600 53,653 58,000
Republic New York Corp. 300 21,022 22,875
Suntrust Banks, Inc. 1,100 45,362 51,288
U.S. Bancorp 700 27,487 28,000
Wachovia Corp. 800 38,527 43,000
Wells Fargo & Co. 500 127,429 133,563
----------- -----------
1,781,493 1,940,017
Finance Company 1.77%
Ahmanson H. F. & Co. 500 13,555 15,688
American Express Co. 2,300 104,027 108,100
Beneficial Corp. 300 17,210 17,550
Great Western Financial 700 18,598 19,600
Household International 500 41,379 44,250
Merrill Lynch 800 52,352 56,200
National City Corp. 1,100 44,674 47,713
Saloman, Inc. 500 23,255 22,563
Travelers Group, Inc. 2,300 112,251 124,775
----------- -----------
427,301 456,439
Financial Service 1.39%
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 51
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Dean Witter Discover & Co. 800 $ 43,627 $ 47,100
Federal National Mortgage 5,300 178,065 207,363
Green Tree Financial Corp. 700 25,985 27,738
MBNA Corp. 1,100 37,424 41,525
Morgan Stanley Group, Inc. 700 34,724 35,175
----------- -----------
319,825 358,901
Insurance 3.73%
Aetna, Inc. 700 46,187 46,813
Alexander & Alexander Services, Inc. 200 3,131 3,050
Allstate Corp. 2,100 101,796 117,863
American General Corp. 1,000 37,334 37,250
American International Group 2,300 229,039 249,838
Aon Corporation 500 26,092 28,875
CHUBB Group 800 37,277 40,000
Cigna Corp. CI 400 48,188 52,200
General RE Corp. 400 57,788 58,900
ITT Hartford Group 600 34,233 37,800
Jefferson Pilot 300 15,948 17,063
Keycorp New 1,100 46,800 51,288
Lincoln National Corp. 500 22,779 24,250
Marsh & McLennan Co. 300 28,510 31,238
MGIC Investment 300 19,672 20,588
Providian Corp. 500 21,804 23,500
Safeco Corp. 600 21,075 22,650
St. Paul Companies 400 21,539 21,750
Torchmark Corp. 300 13,498 14,513
Transamerica Corp. 300 20,985 22,763
Unum Corp. 400 25,701 25,150
USF&G 600 10,470 11,400
USLife Corp. 200 6,045 6,250
----------- -----------
895,891 964,992
Savings & Loan 0.43%
Fed Home Loan Marketing Corp. 900 84,342 90,900
Golden West Financial 300 17,672 19,463
----------- -----------
102,014 110,363
----------- -----------
Total Common Stocks - Banking & Financial Service 14.82% 3,526,524 3,830,712
COMMON STOCKS - CAPITAL GOODS
Conglomerate 0.15%
Tenneco, Inc. 800 39,377 39,600
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 52
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Electrical Equipment 3.61%
AMP, Inc. 1,100 $ 42,199 $ 37,263
Emerson Electric Co. 1,100 96,724 97,900
General Electric 7,900 710,165 764,325
General Instrument Corp. * 700 18,898 14,088
Grainger WW, Inc. 200 13,669 14,825
Scientific-Atlanta, Inc. 400 6,226 5,800
----------- -----------
887,881 934,201
Machinery - Agricultural 0.07%
Case Equipment 400 19,139 18,600
Machinery - Industrial 0.04%
Giddings & Lewis, Inc 200 2,465 2,350
Harnischfeger 200 7,669 8,000
----------- -----------
10,134 10,350
Pollution Control 0.32%
WMX Technologies, Inc. 2,400 79,468 82,500
Production 1.47%
Briggs & Stratton 100 4,479 4,000
Caterpillar, Inc. 900 65,243 61,763
Cincinnati Milacron, Inc. 200 3,894 3,825
Cooper Industries 500 20,355 20,125
Deere & Co. 1,200 50,690 50,100
Dover Co. 600 28,182 30,825
FMC Corp. * 200 13,482 14,725
Foster Wheeler Corp. 200 8,606 8,200
Illinois Tool Works 600 42,308 42,150
Ingersoll Rand Co. 500 21,954 20,813
Pall Corp. 600 14,970 15,375
Parker Hannifin 400 15,551 15,150
Raychem 200 13,907 15,625
Timken Co. 200 7,744 8,925
Tyco International Ltd. 700 31,212 34,738
Westinghouse Electric 2,000 35,167 34,250
----------- -----------
377,744 380,589
Transportation Equipment 0.03%
Cummins Engine 200 7,856 8,325
----------- -----------
Total Common Stocks - Capital Goods 5.69% 1,421,599 1,474,165
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 53
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
COMMON STOCKS - CONSUMER CYCLICAL
Appliance .26%
Armstong World Industries 200 $ 12,707 $ 13,350
Black & Decker 400 16,226 14,950
Maytag Corp. 500 10,080 9,938
Snap On, Inc. 300 9,664 9,638
Whirlpool Corp. 400 19,664 18,900
----------- -----------
68,341 66,776
Auto & Truck 2.42%
Chrysler Corp. 3,500 108,505 117,688
Dana 500 15,079 14,813
Eaton Corp. 400 23,051 23,900
Echlin Corp. 300 9,522 9,788
Ford Motor Co. 5,700 185,229 178,125
General Motors Corp. 3,700 188,723 199,338
Genuine Parts Co. 600 26,158 26,250
ITT Industries, Inc. 600 13,745 13,950
Paccar, Inc. 200 10,194 11,150
Trinova Corp. 100 3,216 3,288
TRW, Inc. 300 27,848 27,150
----------- -----------
611,270 625,440
Building Material 0.54%
Home Depot 2,300 127,239 125,925
Johnson Controls 200 14,556 14,600
----------- -----------
141,795 140,525
Household Product 0.19%
Federated Department Stores * 1,000 33,446 33,000
Tupperware Corp. 300 14,135 15,413
----------- -----------
47,581 48,413
Housing 0.01%
Kaufman & Broad Home Corp. 200 2,494 2,400
Lodging 0.17%
HFS, Inc. * 600 40,082 43,950
Retail - General 3.73%
American Greetings Co. 400 11,125 11,725
American Stores Comp. 700 28,124 28,963
Charming Shoppes, Inc. * 500 2,944 2,313
Circuit City Stores, Inc. 500 17,191 16,375
Dayton Hudson Corp. 1,000 33,634 34,625
Dillard Dept. Stores Class A 500 16,579 15,875
Gap, Inc. 1,400 44,160 40,600
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 54
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Giant Foods 300 $ 10,247 $ 10,125
Great Atlantic & Pacific 200 5,581 6,000
Jostens 200 4,094 4,300
Kroger * 600 25,858 26,775
Lowes Companies 800 31,452 32,300
May Dept. Stores 1,200 56,478 56,850
Mercantile Stores Co. 200 10,494 9,925
Nordstrom, Inc. 400 15,537 14,425
Penny JC Co. 1,100 59,699 57,750
Pep Boys - Manny, Mo, Jack 300 10,797 10,500
Rite Aid Corp. 400 13,101 13,600
Sears Roebuck & Co. 1,900 90,076 91,913
Supervalu, Inc. 300 8,536 8,925
Tandy Corp. 300 12,322 11,288
The Limited Ltd. 1,300 24,955 23,888
TJX Cos, Inc. 400 14,914 16,000
Toys "R" Us, Inc. * 1,300 39,881 44,038
Wal-Mart Stores, Inc. 11,000 295,882 292,875
Walgreen Co. 1,200 42,828 45,300
Winn-Dixie Stores, Inc. 700 23,836 23,363
Woolworth Corp. * 600 12,816 12,600
----------- -----------
963,141 963,216
Shoes 0.01%
Footstar, Inc. * 86 1,756 1,892
Textile & Apparel 0.61%
Liz Claiborne, Inc. 400 15,176 16,900
Melville Corp. 500 19,004 18,625
Nike Class B 1,400 81,423 82,425
Reebok International Ltd. 300 10,209 10,725
Russell Co. 200 6,107 5,675
Spring Industries 100 4,328 4,513
VF Corp. 300 18,086 19,613
----------- -----------
154,333 158,476
Tire & Rubber 0.20%
Cooper Tire & Rubber Co. 400 7,713 7,850
Goodrich BF Co. 300 12,460 12,713
Goodyear Tire & Rubber 700 31,949 32,113
----------- -----------
52,122 52,676
----------- -----------
Total Common Stocks - Consumer Cyclical 8.14% 2,082,915 2,103,764
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 55
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
COMMON STOCKS - CONSUMER NON-DURABLE
Apparel 0.06%
Fruit Of The Loom, Inc. * 400 $ 11,801 $ 14,550
Stide Rite Corp. 200 1,644 1,650
----------- -----------
13,445 16,200
Business Service 1.97%
Autodesk, Inc. 200 4,603 4,575
Automatic Data Processing, Inc. 1,400 59,272 58,275
Browning Ferris 1,000 25,658 26,250
Cisco Systems, Inc. * 3,100 185,800 191,813
Computer Associates 1,800 105,748 106,425
Computer Sciences * 400 30,201 29,700
Deluxe Corp. 400 14,951 13,050
Dun & Bradstreet 800 47,727 46,300
H & R Block 500 13,167 12,375
Harland John H Co. 100 2,666 3,113
Moore Corp. 500 9,417 10,125
National Service Inds 200 7,319 6,900
----------- -----------
506,529 508,901
Communications & Media 1.41%
Andrew Corp. * 300 14,866 14,625
Comcast Corp. CL A Special 1,100 17,237 16,225
Dow Jones & Co. 500 18,104 16,500
Gannett Co., Inc. 700 49,511 53,113
Harcourt General, Inc. 400 20,689 19,900
Interpublic GRP Companies, Inc. 400 19,026 19,400
Knight Ridder, Inc. 500 17,766 18,688
New York Times Class A 500 16,792 18,063
Tele Communications, Inc. Ser A * 3,200 44,737 39,800
Time Warner, Inc. 2,700 106,038 100,575
Times Mirror Co. Class A-New 500 22,142 23,125
Tribune Co. 300 23,372 24,525
----------- -----------
370,280 364,539
Consumer Product 0.09%
Newell Co. 800 24,452 22,700
Cosmetic & Soap 2.46%
Alberto-Culver Co. CL B 100 4,179 4,575
Avon Products, Inc. 600 29,107 32,550
Clorox 200 19,456 21,825
Colgate Palmolive Co. 700 59,662 64,400
Gillette Co. 2,200 151,999 164,450
Int'l Flavors & Fragrance 500 21,505 20,688
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 56
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Procter & Gamble 3,300 $ 306,760 $ 326,700
----------- -----------
592,668 635,188
Drugs 8.80%
Abbott Labs 3,800 184,915 192,375
Allegiance Corp. * 140 2,294 2,625
Allergan 300 11,185 9,150
Alza Corp. Class A 400 10,876 10,350
Amer Home Products Corp. 3,100 194,104 189,875
Bard C.R., Inc. 300 9,547 8,475
Baxter International, Inc. 1,300 55,288 54,113
Becton Dickinson Co. 600 25,695 26,100
Bristol-Meyer/Squibb 2,400 228,355 253,800
Community Psychiatric 100 829 888
Humana, Inc. * 800 15,777 14,600
Johnson & Johnson Co. 6,400 321,577 315,200
Lilly Eli & Co. 2,600 164,349 183,300
Medtronic, Inc. 1,200 72,228 77,250
Merck & Co. 5,900 407,310 437,338
Pfizer, Inc. 3,100 241,341 256,525
Pharmacia & Upjohn, Inc. 2,500 98,459 90,000
Schering Plough Corp. 1,800 109,073 115,200
St. Jude Medical * 400 15,600 15,800
Tenet Healthcare Corp. * 1,000 21,983 20,875
----------- -----------
2,190,785 2,273,839
Entertainment & Leisure 1.22%
Bally Entertainment Corp. * 200 5,531 6,000
Brunswick Corp. 500 11,416 11,750
Hasbro, Inc. 400 15,101 15,550
King World Productions, Inc. * 200 7,219 7,200
Mattel CS 1,300 35,407 37,538
McDonalds Corp. 3,400 157,039 150,875
Price/Costco, Inc. * 900 19,088 17,888
Shoney's, Inc. * 200 1,806 1,475
Viacom, Inc.-CL B * 1,700 57,120 55,463
Wendys International 600 12,970 12,375
----------- -----------
322,697 316,114
Food, Beverage, & Tobacco 7.77%
American Brands 800 35,777 38,200
Archer-Daniels-Midland Co. 2,600 50,750 56,550
Campbell Soup 1,000 74,735 80,000
Coca-Cola Co. 11,900 595,112 600,950
Conagra, Inc. 1,200 54,565 59,850
CPC International, Inc. 700 51,585 55,213
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 57
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Dardeen Restaurants 800 $ 6,602 $ 6,700
Fleming Companies, Inc. 200 3,319 3,475
General Mills 800 45,427 45,700
H J Heinz Co. 1,800 60,523 63,900
Hershey Foods 700 32,029 33,863
Kellogg Co. 1,000 68,134 63,500
Loews Corp. 600 46,970 49,575
Pepsico, Inc. 7,500 218,190 222,188
Philip Morris Co., Inc. 4,000 372,784 370,500
Pioneer Hi-Bred International 400 24,338 26,850
Quaker Oats 700 24,785 24,850
Ralston-Ralston Purina Group 500 32,818 33,063
Sara Lee Corp. 2,300 78,953 81,650
Sysco Corp. 900 29,767 30,600
UST, Inc. 900 26,905 25,988
Wrigley WM JR Co. 600 34,607 36,150
----------- -----------
1,968,675 2,009,315
Health Care 0.47%
Bausch & Lomb, Inc. 300 10,472 10,125
Beverly Enterprises * 500 5,354 6,188
Biomet, Inc. * 600 9,534 9,675
Manor Care 300 11,035 11,775
Warner-Lambert Co. 1,300 81,831 82,713
----------- -----------
118,226 120,476
Health Care Service 0.62%
Columbia/HCA Healthcare Corp. 3,200 119,488 114,400
Ecolab, Inc. 300 9,673 10,950
United Healthcare Corp. 900 35,042 34,088
----------- -----------
164,203 159,438
Hospital Supply & Service 0.24%
Boston Scientific Corp. * 900 46,355 48,938
US Surgical Corp. 300 12,572 12,563
----------- -----------
58,927 61,501
Liquor 0.69%
Anheuser-Busch Companies, Inc. 2,400 91,683 92,400
Brown Foremann Class B 300 11,623 12,975
Coors (Adolph) 200 4,181 3,900
Seagrams LTD 1,800 62,336 68,175
----------- -----------
169,823 177,450
Office Product 0.08%
Avery Dennison Co. 300 16,897 19,763
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 58
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Printing & Publishing 0.19%
Donnelley RR & Sons 700 $ 22,949 $ 21,263
McGraw Hill Cos, Inc. 500 21,816 23,438
Meredith Corp. 100 4,604 5,025
----------- -----------
49,369 49,726
Restaurant 0.01%
Luby's Cafeterias, Inc. 100 2,417 2,100
Ryan's Family Steak House * 200 1,569 1,475
----------- -----------
3,986 3,575
Retail-Food and Drugs 0.26%
Albertson's, Inc. 1,200 45,940 41,250
K Mart * 2,300 23,840 22,425
Longs Drug Stores 100 4,315 4,488
----------- -----------
74,095 68,163
Travel & Recreation 1.31%
CUC International, Inc. * 1,800 44,928 44,100
Fleetwood Enterprises 200 6,145 6,750
Harrahs Entertainment, Inc. * 500 9,229 8,375
Hilton Hotels Corp. 900 24,943 27,338
Marriott International 600 34,245 34,125
Walt Disney Co. 3,300 203,373 217,388
----------- -----------
322,863 338,076
----------- -----------
Total Common Stocks - Consumer Non- 27.65% 6,967,920 7,144,964
Durable
COMMON STOCKS - ENERGY
Energy Raw Material 0.57%
Baker Hughes, Inc. 700 22,986 24,938
Dresser Industries 900 27,867 29,588
Eastern Enterprises 100 3,965 3,850
Halliburton Co. 600 33,495 33,975
Louisiana Land & Exploration 200 11,270 11,375
McDermott International 300 5,647 5,325
Occidental Petroleum 1,600 38,754 39,200
----------- -----------
143,984 148,251
Natural Gas 0.23%
Enron 1,200 49,915 55,800
Oneok, Inc. 100 2,829 2,688
----------- -----------
52,744 58,488
Oil & Gas-Domestic 2.01%
Amerada Hess Corp. 400 21,601 22,150
Amoco Corp. 2,400 172,068 181,800
Ashland, Inc. 300 11,710 12,750
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 59
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Atlantic Richfield 800 $ 101,077 $ 106,000
Burlington Resources, Inc. 600 27,095 30,225
Columbia Gas System, Inc. 300 17,410 18,225
Helmerich & Payne 100 4,091 5,413
Kerr-McGee Co. 200 12,244 12,550
Oryx Energy * 500 9,180 9,625
Pennzoil 200 10,969 10,200
Phillips Petroleum Co. 1,300 53,956 53,300
Santa Fe Energy Res. * 400 5,439 5,700
Sun Co. 400 9,638 8,950
Unocal Corp. 1,200 43,878 43,950
----------- -----------
500,356 520,838
Oil & Gas-International 5.90%
Chevron Corp. 3,200 203,258 210,400
Exxon Corp. 6,000 512,501 531,750
Mobil Corp. 1,900 222,238 221,825
Royal Dutch Petroleum ADR 2,600 413,537 429,975
Texaco 1,300 125,643 132,113
----------- -----------
1,477,177 1,526,063
Oil & Gas-Service 0.62%
Rowan Cos, Inc. * 400 7,489 8,950
Schlumberger 1,200 108,490 118,950
Union Pacific Resources Group 1,200 33,616 33,000
----------- -----------
149,595 160,900
----------- -----------
Total Common Stocks - Energy 9.33% 2,323,856 2,414,540
COMMON STOCKS - MANUFACTURING
Building & Housing 0.48%
Centex Corp. 100 3,279 3,013
Corning Corp. 1,100 42,225 42,625
Crane Co. 100 4,141 4,650
Fluor Corp. 400 25,164 26,200
Masco Co. 800 23,977 25,100
Owens Corning 200 7,406 7,750
Pulte Corp. 100 2,479 2,650
Stanley Works 400 11,014 11,300
----------- -----------
119,685 123,288
Chemical 3.10%
Air Products & Chemicals, Inc. 500 28,279 30,000
Dow Chemical 1,200 95,490 93,300
DuPont De Nemours & Co. 2,700 242,190 250,425
Fresenius Medical Care ADR * 209 4,382 6,218
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 60
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Fresenius Medical Care PRD * 200 $ 41 $ 28
Grace WR & Co. (New) 400 19,773 21,200
Great Lakes Chemical 300 16,786 15,638
Hercules 500 25,279 23,813
Monsanto Co. 2,800 103,219 110,950
Morton International, Inc. 700 27,274 27,563
Nalco Chemical Co. 300 10,248 10,913
PPG Industries 900 47,531 51,300
Praxair, Inc. 800 34,827 35,400
Rohm & Haas Co. 300 19,448 21,413
Rubbermaid, Inc. 700 17,187 16,275
Safety Kleen 300 5,072 4,688
Sherwin Williams 400 19,251 20,050
Sigma-Aldrich Corp. 200 11,228 11,750
Union Carbide Corp. 600 26,195 25,575
Williams Cos 500 25,855 26,125
----------- -----------
779,555 802,624
Computer 0.44%
Data General Corp. * 200 2,669 2,975
Dell Computer Corp. * 400 31,093 32,550
EMC Corp. Massachusetts * 1,100 24,875 28,875
Seagate Technology, Inc. * 500 27,493 33,375
Silicon Graphics, Inc. * 800 18,052 14,800
----------- -----------
104,182 112,575
Consumer Durable 0.61%
Eastman Chemical Co. 400 21,976 21,100
Eastman Kodak 1,600 120,829 127,600
Polaroid Corp. 200 8,606 8,125
----------- -----------
151,411 156,825
Container 0.19%
Ball Corp. 100 2,417 2,413
Bemis Co. 300 10,022 10,500
Crown Cork & Seal 600 28,570 28,800
Stone Container Corp. 500 7,116 7,625
----------- -----------
48,125 49,338
Diversified 0.57%
ITT Corp. * 600 28,470 25,200
Unilever (New York Shares) ADR 800 121,952 122,300
----------- -----------
150,422 147,500
Gold & Precious Metal 0.55%
Barrick Gold Corp. 1,700 45,507 44,413
Battle Mountain Gold Co. 1,100 8,987 8,388
Cyprus Amax Mineral Co. 500 10,904 11,313
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 61
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Echo Bay Mines Ltd. 700 $ 6,242 $ 5,469
Freeport McMoran Copper-B 900 27,480 27,338
Homestake Mining Co. 700 10,849 9,975
Placer Dome, Inc. 1,200 28,916 28,800
Santa Fe Pacific Gold Corp. 600 7,607 7,125
----------- -----------
146,492 142,821
Metal & Mineral 0.37%
Allegheny Teledyne, Inc. 800 17,027 17,100
Armco, Inc. * 500 2,204 1,875
Bethlehem Steel * 500 4,830 4,063
Inland Steel Industries 200 3,569 3,225
Nucor Corp. 400 19,738 18,950
USX-Marathon 1,400 31,422 30,625
USX-US Steel 400 11,351 10,900
Worthington INDS, Inc. 400 8,225 8,300
----------- -----------
98,366 95,038
Miscellaneous 0.75%
3M Co. 2,000 140,417 153,250
Applied Materials, Inc. * 900 24,200 23,794
Mallincrokdt, Inc. 400 16,789 17,400
----------- -----------
181,406 194,444
Non Ferrous Metal 0.67%
Alcan Aluminum Ltd. 1,100 34,461 36,163
Aluminum Co. of America 600 36,721 35,175
Asarco, Inc. 200 5,032 5,250
Englehard Corp. 700 13,348 12,775
Inco Ltd. 800 24,577 25,400
Newmont Mining Corp. 500 24,566 23,125
Phelps Dodge 300 18,311 18,863
Reynolds Metals 300 16,235 16,875
----------- -----------
173,251 173,626
Paper & Forest Product 1.56%
Boise Cascade 200 6,519 6,200
Champion International 500 21,154 21,750
Georgia Pacific Co. 400 29,901 30,000
International Paper 1,400 58,122 59,850
James River of Virginia 400 10,863 12,600
Kimberly Clark 1,400 115,172 130,550
Louisiana-Pacific Co. 500 10,905 10,438
Mead Corp. 300 16,959 17,025
Potlatch Corp. 100 3,842 4,275
Temple Inland 300 14,822 15,375
Union Camp Corp. 300 14,510 14,625
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 62
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Westvaco Corp. 500 $ 14,279 $ 14,250
Weyerhaeuser Co. 1,000 45,159 45,875
Willamette Industries 300 19,225 20,250
----------- -----------
381,432 403,063
----------- -----------
Total Common Stocks - Manufacturing 9.29% 2,334,327 2,401,142
COMMON STOCKS - SERVICE
Consumer 0.19%
Laidlaw, Inc. CL B 1,500 16,150 17,625
Service Corp. International 1,100 31,637 31,350
----------- -----------
47,787 48,975
Distributor 0.11%
Alco Standard Corp. 600 27,433 27,825
Miscelleneous 0.07%
PP & L Resources, Inc. 800 17,902 18,700
----------- -----------
Total Common Stocks - Service 0.37% 93,122 95,500
COMMON STOCKS - TECHNOLOGY
Aerospace Aircraft 2.04%
Alliedsignal, Inc. 1,400 89,247 91,700
Boeing 1,700 159,856 162,138
General Dynamics Corp. 300 19,848 20,588
McDonnell-Douglas Corp. 1,000 51,984 54,500
Northrop Grumman Corp. 300 22,959 24,225
Rockwell International Corp. 1,100 59,524 60,500
Textron, Inc. 400 34,814 35,500
United Technologies Corp. 600 71,370 77,250
----------- -----------
509,602 526,401
Aerospace Defense 0.56%
Lockheed Martin Corp. 1,000 89,846 89,625
Raytheon Co. 1,100 55,537 54,175
----------- -----------
145,383 143,800
Bio-Technology 0.34%
Amgen * 1,300 75,788 79,706
Millipore Corp. 200 7,581 7,000
----------- -----------
83,369 86,706
Business - Mechanics & Software 3.20%
Amdahl Corp. * 600 5,726 6,150
Apple Computer, Inc. 600 14,734 13,800
Ceridian Corp. * 300 13,873 14,888
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 63
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Compaq Computers Corp. * 1,300 $ 85,681 $ 90,513
Digital Equip. * 800 28,927 23,600
Honeywell 600 36,945 37,275
International Business Machines 2,500 305,397 322,500
Intergraph * 200 2,015 1,875
Oracle Systems * 3,200 131,175 135,400
Pitney Bowes, Inc. 700 36,011 39,113
Sun Microsystems * 900 53,463 54,900
Tandem Computer, Inc. * 600 6,845 7,575
Unisys Corp. * 800 5,352 5,000
Xerox 1,600 90,278 74,200
----------- -----------
816,422 826,789
Business - Service 0.36%
First Data 1,100 89,487 87,725
Shared Medical System 100 5,300 4,825
----------- -----------
94,787 92,550
Electronic 3.81%
EG&G 200 3,656 3,525
General Signal Co. 200 8,207 8,150
Harris Corp. 200 12,557 12,525
Hewlett-Packard Co. 4,900 225,151 216,213
Intel Corp. 3,900 379,825 428,513
Motorola, Inc. 2,900 146,747 133,400
National Semiconductor * 700 13,098 13,475
Northern Telecom 1,200 66,690 78,150
Perkin-Elmer Corp. 200 10,757 10,725
Tektronix, Inc. 200 7,969 7,825
Texas Instruments 900 44,443 43,313
Thomas & Betts Co. 200 7,669 8,475
Western Atlas, Inc. * 300 19,135 20,813
----------- -----------
945,904 985,102
Miscellaneous 0.21%
3 Com Corp. * 800 45,225 54,100
Office Equipment 0.06%
Novell * 1,700 18,213 15,725
Semiconductor 0.21%
Advanced Micro Devices * 700 10,911 12,425
LSI Logic Corp. * 600 14,145 15,900
Micron Technology, Inc. 1,000 26,446 25,375
----------- -----------
51,502 53,700
Software 1.61%
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 64
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Bay Networks * 900 $ 21,568 $ 18,225
Microsoft Corp. * 2,900 380,587 398,025
----------- -----------
402,155 416,250
Telecommunication 1.03%
Airtouch Communications * 2,400 63,168 62,700
Cabletron Systems * 400 24,301 24,950
Lucent Technologies 3,100 145,624 145,700
Tellabs, Inc. * 400 29,038 34,050
----------- -----------
262,131 267,400
----------- -----------
Total Common Stocks - Technology 13.43% 3,374,693 3,468,523
COMMON STOCKS - TRANSPORTATION
Air Transportation 0.41%
AMR Corp. * 400 32,539 33,600
Delta Airlines 400 27,688 28,350
Federal Express * 300 23,547 24,150
Southwest Airlines Co. 700 15,661 15,750
USAir Group, Inc. * 300 5,135 5,213
----------- -----------
104,570 107,063
Railroad 1.05%
Burlington Northern Santa Fe Co. 700 56,999 57,663
Conrail, Inc. 400 31,064 38,050
CSX Corp. 1,000 48,171 43,125
Norfolk Southern Co. 600 53,170 53,475
Union Pacific Corp. 1,200 60,224 67,350
Whitman Corp. 500 11,793 12,125
----------- -----------
261,421 271,788
Trucking 0.10%
Caliber System, Inc. 200 3,331 3,375
Consol Freightways * 200 4,594 4,800
Navistar International * 400 3,814 3,700
Ryder System 400 11,551 11,900
Yellow Corp. * 100 1,325 1,306
----------- -----------
24,615 25,081
----------- -----------
Total Common Stocks - Transportation 1.56% 390,606 403,932
COMMON STOCKS - UTILITY
Electric 1.04%
Cinenrgy Corp. 800 24,952 26,500
Consolidated Edison 1,100 30,125 32,175
Duke Power 1,000 46,896 48,875
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 65
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Edison International 2,100 $ 37,858 $ 41,475
GPU, Inc. 600 18,970 19,725
Pacificorp 1,400 29,060 29,575
People's Energy Corp. 200 6,857 7,050
Texas Utilities Co. 1,100 43,724 44,550
Union Electric Co. 500 18,591 19,313
----------- -----------
257,033 269,238
Energy 2.46%
American Electric Power Co. 900 36,717 37,350
Baltimore Gas & Electric 700 18,137 19,075
Carolina Power & Light 700 24,249 25,288
Central & S/W Corp. 1,000 25,921 26,500
Coastal Corp. 500 21,180 21,500
Consolidated Natural Gas 500 26,866 26,563
Dominion Resources 900 33,718 33,975
DTE Energy Co. 700 19,923 21,088
Enserch 300 6,298 6,450
Entergy Corp. New 1,100 29,486 30,800
FPL Group, Inc. 900 39,930 41,400
Houston Industries 1,300 29,218 29,738
Niagara Mohawk Power 700 5,848 5,950
Nicor 200 6,656 6,975
Noram Energy Corp. 700 10,523 10,763
Northern States Power 300 13,698 14,100
Ohio Edison 700 14,337 14,613
Pacific Enterprises 400 12,351 12,300
Pacific Gas & Electric 2,000 46,292 47,000
Panenergy Corp. 700 24,511 26,950
Peco Energy Co. 1,100 26,424 27,775
Public Service Enterprises 1,200 32,478 32,250
Sonat, Inc. 400 17,901 19,700
Southern, Co. 3,300 73,261 73,013
Unicom Corp. 1,000 24,221 26,000
----------- -----------
620,144 637,116
Telephone 6.17%
Alltell Corp. 900 25,468 27,450
American Telephone and Telegraph 7,700 299,284 268,538
Ameritech Corp. 2,700 144,690 147,825
Bell Atlantic 2,100 123,058 126,525
Bell South Corp. 4,800 181,461 195,600
DSC Communications Corp. * 600 13,525 8,325
GTE Corp. 4,700 190,332 197,988
MCI Communications 3,300 82,775 82,913
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 66
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Nynex Corp. 2,100 $ 91,620 $ 93,450
Pacific Telesis Group 2,100 70,532 71,400
SBC Communications, Inc. 2,900 139,035 141,013
Sprint Corp. Common 2,100 83,883 82,425
US West, Inc. - Communication Group 2,300 70,401 69,863
US West Media Group, Inc. * 2,300 40,189 35,938
Worldcom, Inc. * 1,900 40,288 46,251
----------- -----------
1,596,541 1,595,504
----------- -----------
Total Common Stocks - Utility 9.67% 2,473,718 2,501,858
----------- -----------
COMMON STOCKS -GRAND TOTAL 99.96% 24,989,280 25,839,100
----------- -----------
DEMAND NOTE
Utility - Electrical 0.13%
Wisconsin Electric Demand Note
5.0641% due on demand $ 36,455 36,455 36,455
----------- -----------
TOTAL INVESTMENTS 100.09% $25,025,735 25,875,555
===========
Liabilities, less other assets -0.09% (23,809)
-----------
TOTAL NET ASSETS 100.00% $25,851,746
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 67
FINANCIAL HIGHLIGHTS
S&P 500 INDEX FUND - CLASS Y
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
The table below sets forth financial data for one share of capital stock outstanding
throughout the period presented.
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gain on securities 0.77
---------
Total income from investment operations 0.79
Less distributions:
Dividends from net investment income 0.02
Distributions from capital gains 0.00
---------
Total distributions 0.02
---------
Net asset value at end of period 10.77
=========
Total return (not annualized) 7.86%
=========
Ratios and supplemental data:
Net assets at end of period (in thousands) 23,698
Ratio of operating expenses to average net assets 0.71%*
Ratio of net investment income to average net assets 1.60%*
Portfolio turnover rate 0.05%
Average commission rate paid per share $0.0338
</TABLE>
- -------------------------------------------------------------------------------
* Absent an expense waiver by the investment advisor the ratio of operating
expenses to average net assets and the ratio of net investment income to
average net assets would be 1.26% and 1.05% respectively. Annualized.
See accompanying notes to the financial statements.
<PAGE> 68
FINANCIAL HIGHLIGHTS
S&P 500 INDEX FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
The table below sets forth financial data for one share of capital stock outstanding
throughout the period presented.
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gain on securities 0.76
-------
Total income from investment operations 0.78
Less distributions:
Dividends from net investment income 0.01
Distributions from capital gains 0.00
-------
Total distributions 0.01
-------
Net asset value at end of period 10.77
=======
Total return (not annualized) 7.82%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 2,154
Ratio of operating expenses to average net assets 0.88%*
Ratio of net investment income to average net assets 1.48%*
Portfolio turnover rate 0.05%
Average commission rate paid per share $0.0338
</TABLE>
- -------------------------------------------------------------
* Absent an expense waiver by the investment advisor the ratio of operating
expenses to average net assets and the ratio of net investment income to
average net assets would be 1.50% and .86% respectively. Annualized.
See accompanying notes to the financial statements.
<PAGE> 69
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost - $25,645,849) $ 25,788,226
Cash 13,880
Foreign currency at value (cost - $4,644) 4,705
Dividends receivable 40,631
Net unrealized appreciation on forward currency contracts 35,767
-------------
Total Assets 25,883,209
LIABILITIES
Payable for securities purchased 587,010
Dividends payable 79,496
Investment advisory fees payable 27,876
Accrued expenses payable 11,869
-------------
Total Liabilities 706,251
-------------
NET ASSETS $ 25,176,958
=============
Net Asset Value Per Share:
Class Y (based on net assets of $23,136,973 and 2,268,934 shares issued and outstanding) $ 10.20
=============
Class C (based on net assets of $2,039,985 and 200,000 shares issued and outstanding) $ 10.20
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 70
STATEMENT OF OPERATIONS
INTERNATIONAL EQUITY FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (net of $9,292 for foreign taxes withheld) $ 53,125
Interest 42,087
-------------
Total Investment Income 95,212
EXPENSES
Investment advisory fees 27,877
Fund accounting fees 5,372
Registration fees 5,195
Transfer agent fees 2,180
Custodian fees 1,781
Fund administration fees 1,477
Distribution fees 716
Other 1,660
-------------
Total Expenses 46,258
-------------
NET INVESTMENT INCOME $ 48,954
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments 19
Net realized gain on foreign currency transactions 29,276
Change in net unrealized appreciation on investments and foreign currency 142,438
Change in net unrealized appreciation on forward contracts 35,767
-------------
Net realized and unrealized gain (loss) on investments 207,500
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 256,454
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 71
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 48,954
Net realized gain 29,295
Change in net unrealized appreciation 178,205
-------------
Net increase in net assets resulting from operations 256,454
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (48,954)
Net realized gain 0
Distributions in excess of net investment income (30,542)
-------------
Total distributions (79,496)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 25,000,000
Net asset value of shares issued upon reinvestment of dividends 0
Cost of redemption of shares 0
-------------
Increase in net assets from capital transactions 25,000,000
-------------
Increase in net assets 25,176,958
Net assets at beginning of period 0
-------------
Net assets at end of period $ 25,176,958
=============
Undistributed net investment income $ (1,266)
=============
DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income:
Class Y $ 73,702
Class C 5,794
-------------
Total distributions from net investment income $ 79,496
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 72
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
COMMON STOCKS - U.S.
Manufacturing - Chemicals 0.01%
Millennium Chemicals Inc 171 $ 4,048 $ 3,463
COMMON STOCKS - FOREIGN
Australia 4.92%
Amcor Limited 9,000 54,838 55,956
Australia & New Zealand Bk Grp 5,000 25,803 29,223
Boral Limited 12,000 28,847 29,881
Broken Hill Proprietary Co 19,500 257,294 259,022
CRA Limited 7,000 105,627 109,802
David Jones Limited 34,000 46,072 46,646
Lend Lease Corp Ltd 6,000 98,167 101,777
M.i.m. Holdings Ltd 24,202 30,627 31,476
National Autrlia Bank Lts 12,000 122,595 131,801
News Corporation Ltd 24,000 130,796 136,654
Pacific Dunlop 16,000 34,892 35,528
Qantas Airways Limited 13,000 20,240 18,969
Santos Limited 14,000 57,246 55,956
Westpac Bank 22,000 113,215 125,615
Wmc Limited 11,000 73,054 69,176
------------ ------------
1,199,313 1,237,482
Belgium 3.01%
Delhaize-Le Lion 800 44,698 44,758
Electrabel Cap 600 135,201 139,275
Fortis Ag 600 85,138 84,258
Groupe Bruxelles Lambert 400 50,222 49,695
Kredietbank Npv 300 96,408 96,906
Petrofina Sa 300 94,754 92,241
Societe Generale Belgique 600 47,623 44,822
Sovay et Cie Npv 100 58,736 59,875
Tractabel Inv Intl Npv 200 92,008 95,223
Union Miniere Npv * 700 52,546 49,936
------------ ------------
757,334 756,989
Canada 3.75%
Alcan Aluminum Ltd 1,700 53,592 55,776
Bank of Montreal 3,800 98,634 114,901
Barrick Gold Corp 1,600 43,293 41,877
BCE Inc 1,000 42,136 45,896
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 73
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Canadian Pacific Ltd 4,900 $ 112,064 $ 124,229
Imperial Oil Ltd 2,000 86,851 88,064
Moore Corp Ltd 1,000 18,882 20,133
Noranda 2,000 42,099 43,920
Norcen Energy Resources Inc 1,100 20,556 23,541
Northern Telecom Ltd 900 49,985 58,587
Nova Corp 2,300 20,394 19,895
Royal Bank of Canada 2,900 79,293 95,797
Seagram Co Ltd 1,800 63,150 67,782
Thomson Corp 4,800 86,741 96,460
Trans Canada Pipeline 2,800 45,784 47,499
---------- ----------
863,454 944,357
Finland 1.28%
Merita Ltd * 10,000 21,726 29,570
Nokia Ab - A 3,700 160,101 170,974
Outokumpu 2,000 35,642 33,763
Sampo Insurance Co 300 19,952 21,119
Upm-Kymmene Oym * 3,300 71,525 66,997
---------- ----------
308,946 322,423
France 9.04%
Accor Sa 700 86,872 87,976
Alcatel-Alsthom 900 72,989 76,818
Banque Nationale De Paris 3,300 121,719 123,584
Cie De Suez 1,200 43,876 51,705
Compagnie Bancaire Sa 800 81,871 79,871
Compagnie De Saint-Gobain 1,100 141,447 148,585
Compagnie Generale Des Eaux 1,600 164,059 191,378
Credit Locale De France 1,500 126,970 129,145
Gruope Danone 100 13,639 13,703
L'oreal 100 30,989 33,887
Lafarge 800 46,399 48,048
Lvmh Moet Hennessy 700 150,172 160,467
Michelin (Cgde) Class B 1,900 91,591 91,686
Pechiney Sa 1,600 66,675 68,752
Peugeot Sa 1,600 180,599 166,947
Rhone-Poulenc - A 3,800 101,876 112,701
Seita 1,100 44,004 44,338
Soc Natl Elf Aquit 1,600 122,898 128,045
Societe Generale 1,500 166,742 161,799
Total Sa - B 2,400 186,324 187,886
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 74
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
UAP - Union Assured De Paris 2,800 $ 57,798 $ 58,212
Unisor Sacilor 7,400 111,276 109,880
----------- -----------
2,210,785 2,275,413
Hong Kong 2.02%
Cheung Kong (Hldgs) 6,000 46,345 48,217
China Light & Power 8,000 35,672 37,205
Guoco Group Ltd 6,000 30,825 31,982
Hang Seng Bank 3,100 36,968 36,968
Hong Kong Telecomm 18,400 32,008 32,580
Hutchison Whampoa Ltd 11,000 72,178 76,812
New World Development 7,000 38,959 40,863
Resorts World Berhad 4,000 21,887 22,955
Sun Hung Kai Properties 4,000 42,796 45,548
Swire Pacific A 6,000 53,579 53,454
Telekom Malaysia 5,000 43,133 44,130
Wharf Holdings 9,000 36,019 37,209
----------- -----------
490,369 507,923
Italy 1.12%
Assicurazioni Generali 4,200 86,591 81,155
Danieli Risp (Savings) 6,000 18,927 19,072
Hang Seng Bank 1,200 12,222 14,239
Italgas (Soc Ital) 12,000 43,588 44,317
Mediobanca 4,000 22,957 20,905
Montedison * 101,000 64,107 66,074
Rinascente Savings (Risp) 9,000 22,073 18,607
Sai (Soc Assic) Di Risp 6,000 21,051 18,756
----------- -----------
291,516 283,125
Japan 29.31%
Fujitsu Ltd 7,000 64,146 61,544
Amada Co 12,000 108,819 103,394
Asahi Glass Co Ltd 14,000 154,227 147,705
Canon Inc 10,000 194,699 191,665
Citizen Watch Co 11,000 87,765 83,656
Dai Nippon Printing Co Ltd 11,000 196,576 185,687
Daikin Industries 12,000 117,706 113,944
Ente Nazionale Idrocarburi 28,000 129,654 134,151
Fiat Spa-Priv 29,000 43,030 41,118
Hitachi 24,000 222,082 213,118
Ina - Istitut Naz Assicur 16,000 22,692 22,106
Inax 15,000 137,162 127,660
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 75
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Istituto Mobiliare Italinao 10,000 $ 78,673 $ 79,170
Keio Teito Electric Railway 14,000 77,958 73,853
Kinki Nippon Railway 14,000 97,223 92,931
Kirin Brewery Co Ltd 13,000 138,095 133,726
Kuraray Co Ltd 11,000 111,674 106,383
Matsushita Electric Indl Co 19,000 316,219 304,027
Mitsubishi Paper 15,000 78,782 72,270
Ngk Insulators 1st Section 20,000 210,388 202,215
Okumura 12,000 90,361 84,403
Osaka Gas 49,000 162,378 151,644
Sekisui House Ltd Fir Sec 23,000 247,684 242,659
Shinmaywa Inds 11,000 100,078 95,261
Sumitomo Bank 13,000 232,535 228,591
Sumitomo Electric 10,000 133,514 131,880
Telecom Italia Mobile Di Risp 50,000 58,205 57,045
Telecom Italia-RNC 53,000 88,229 101,012
The Bank of Tokyo-Mitsubishi 11,000 223,302 224,371
Tokio Marine & Fire 11,000 127,283 120,890
Canon Sales Co Inc 4,000 104,185 101,635
Daiichi Pharm Co 8,000 122,325 115,351
Daiwa House 6,000 84,445 83,348
Denso Corporation 8,000 168,029 165,993
Edison SPA 9,000 53,338 53,566
Fanuc Co 4,900 175,697 157,245
Honda Motor Co 3,000 71,540 71,743
Isetan 4,000 54,929 53,455
Ito-yokado Co Ltd 4,000 212,639 199,754
Kaneka Corp 4,000 24,094 22,507
Kokuyo 2,000 51,613 49,587
Kyocera Corp 1st Sec 1,000 71,190 66,028
Maeda Road Const 2,000 30,720 28,838
Nintendo 700 43,133 44,804
Nippon Meat Packer 8,000 108,943 104,800
Nippon Steel Co First Sec 8,000 25,674 23,351
Rinascente 3,000 18,594 17,747
Sankyo Co Ltd 9,000 222,685 223,140
Sanwa Bank 6,000 105,980 102,339
Secom 3,000 187,830 178,829
Seino Transportation 4,000 58,689 55,565
Sony Corp 3,200 200,820 192,157
</TABLE>
See accompanying notes to financial statements.
<PAGE> 76
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Takeda Chemical 9,000 $ 157,928 $ 154,299
Tdk Corp 2,000 121,178 117,461
Tokyo Elec Pwr First Sec 5,000 119,818 114,735
Tokyo Steel Mfg 9,000 159,114 139,265
Tonen Corp 9,000 123,505 115,527
Toray Industries Inc 47,000 292,709 283,884
Toshiba Corp 1st Sec 28,000 183,772 175,277
Toyo Suisan Kaisha 7,000 74,854 72,006
Toyota Motor Corporation 3,000 72,721 70,951
Yamazaki Baking Co Ltd 6,000 100,723 95,481
----------- -----------
7,654,553 7,378,747
Netherlands 5.70%
Abn-amro Holdings 2,300 127,562 130,061
Akzo Nobel 200 22,930 25,214
DSM 400 37,242 38,328
ING Groep 5,500 171,762 171,561
Koninklijke Hoogovens 600 21,144 21,369
KPN 3,400 118,862 123,097
Philips Electronics 1,800 62,832 63,471
Royal Dutch Petrol 3,300 520,580 545,233
Unilever 1,200 184,846 182,558
Vendex Intl 2,004 78,157 80,945
Vnu-ver Ned Uitgev Ver Bezit 2,900 54,219 52,668
----------- -----------
1,400,136 1,434,505
New Zealand 1.86%
Carter Holt Harvey Ltd 41,000 93,799 92,225
Fletcher Challenge Building 10,000 23,129 27,092
Fletcher Challenge Energy 9,000 21,575 25,656
Fletcher Challenge Paper 26,000 50,589 47,081
Fletcher Forestry Shares 35,000 53,295 58,427
Telecom Corp of New Zealand 42,000 203,074 218,360
----------- -----------
445,461 468,841
Singapore/Malaysia 1.56%
Hume Inds. 7,000 43,108 43,108
Jardine Matheson 4,400 25,732 24,911
Kuala Lumpur Kepon Berhad 16,000 40,119 40,399
Land and General BHD 16,000 35,162 35,162
Malaysia Int Ship 9,000 27,285 27,285
Nestle Malaysia 2,000 15,880 15,880
Public Bank BHD-Foreign Mkt 16,000 30,414 30,066
</TABLE>
See accompanying notes to financial statements.
<PAGE> 77
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Resorts World 4,000 $ 23,014 $ 23,014
Sime Darby Malay Regd 15,000 51,456 53,460
Tenaga Naasional BHD 18,000 71,386 71,386
YTL Corp 5,000 27,731 27,731
----------- -----------
391,287 392,402
Spain 3.16%
Banco Bilbao Vizcaya S.a. 1,300 58,034 63,228
Banco Central Hispanoamericano 1,000 20,129 23,377
Banco Intercon 200 22,141 23,989
Banco Popular Espanol 300 53,782 57,399
Banco Santander 1,300 66,556 66,797
Emp Nac Electricid 1,600 93,100 98,027
Fomento De Construcciones Y Ct 600 48,814 48,763
Iberdrola 10,500 98,184 111,610
Mapfre 400 19,183 19,769
Repsol Sa 2,300 77,646 75,148
Sevillana De Electricidad 5,500 45,894 52,638
Telefonica De Espana Ord 5,500 103,349 110,453
Vallehermoso Sa 1,100 19,919 21,745
Viscofan Envolturas 1,500 20,423 21,416
----------- -----------
747,154 794,359
Switzerland 2.12%
Abb Ag 35 43,296 43,433
Ciba Geigy Ag Szf100 (Rd) 80 102,544 98,958
Cs Holdings 250 25,764 25,075
Nestle Sa 150 172,005 163,619
Roche Holding Ag0 Regd 11 82,932 83,545
Sandoz Ag-r 20 24,034 23,214
Soc Gen Surveillance 10 23,027 22,801
Ubs (Schw Bankgesellsch) Br 25 24,046 23,913
Zurich Versicherungs 180 49,889 49,479
----------- -----------
547,537 534,037
United Kingdom 18.55%
Bass Plc 6,000 75,418 76,991
Bat Industries 19,000 130,691 132,421
Booker Plc 3,000 18,398 19,785
British Gas Plc 48,000 146,652 149,682
British Petroleum Ord 27,000 281,596 290,620
British Steel Plc 40,000 119,513 111,220
British Telecommunciations 45,000 260,999 260,503
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 78
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
---------- --------- ----------- -----------
<S> <C> <C> <C>
Charter Plc 6,000 $ 79,259 $ 79,873
Coats Viyella Plc 27,000 65,630 67,269
Fki Plc 22,000 70,268 75,232
General Electric Co 46,000 281,649 284,270
Glaxo Holdings Ord 7,000 105,479 109,884
Grand Metropolitanord 30,000 224,495 226,429
Guinness Ord 24,000 172,502 171,959
Hanson Plc - Ord 28,000 40,488 36,818
Hillsdown Holdings 18,000 52,707 51,441
House of Fraser Plc 38,000 99,166 87,868
HSBC Holdings 2,000 35,320 41,003
HSBC Holdings Ord 6,000 112,189 126,038
Imperial Chemical Inds Ord 2,000 26,012 25,696
Imperial Tobacco 10p Ord * 1,200 7,874 7,005
Jefferson Smurfit Group Plc 16,000 43,954 43,641
Legal & General Group Plc 17,500 87,170 92,188
Lloyds Abbey Life Ord 9,000 85,269 91,817
Lloyds Tsb Group Plc 39,000 234,172 247,680
Marks & Spencer Plc 14,000 109,266 117,522
Mirror Group Plc 16,000 53,657 60,576
National Power Ord 11,000 68,994 72,903
National Westminster Bank Plc 13,000 140,181 148,502
Peninsular & Orient Steam Nav 19,000 178,136 186,720
Reckitt & Colman Plc 4,000 44,716 46,312
Redland Plc 6,000 42,408 41,133
RJB Mining Plc 11,000 93,076 98,429
Rolls Royce Plc Ord 20,000 77,368 82,723
Royal Sun Alliance 11,000 71,546 75,501
Rtz Corp Reg 7,000 106,098 111,993
Sainsbury (J) Plc 13,000 77,608 77,056
Scottish Hydro-electric Plc 11,000 50,879 49,259
Sears Ord 46,000 68,615 65,543
Sedgwick Group Plc 31,000 59,926 62,848
Smith (Wh) Group Ord 3,000 24,168 22,447
Smithkline Beecham Plc 9,000 111,726 111,163
Tesco 11,000 52,698 59,559
Thames Water Plc 9,000 79,631 81,265
Unilever Ord 4,000 84,460 84,091
Vodafone Group Ord 12,000 43,961 46,409
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 79
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Yorshire Water Plc 6,000 $ 61,596 $ 60,625
----------- -----------
4,557,584 4,669,912
West Germany 7.10%
Allianz Ag Rldg Reg 90 161,109 161,954
Basf Ag 1,900 56,658 60,772
Bayer Ag 3,200 118,428 120,962
Bayerische Motoren Werke Ag 170 98,826 99,650
Bayerische Vereinsbank Ag 1,700 59,366 64,036
Brierley Investments Ltd 149,000 146,307 135,961
Commerzbank Ag 2,500 57,105 56,090
Daimler Benz Ag * 1,350 73,581 79,490
Deutsche Bank Ag 3,800 181,988 176,665
Hochtief Ag 1,000 47,760 41,303
Hoechst Ag 1,600 59,010 60,270
Man Ag 180 46,029 44,132
Mannesmann Ag 240 87,619 93,576
Metro Ag * 700 65,151 57,547
Muenchener Rueckver Ag-reg 50 114,329 121,068
Preussag Ag 300 71,978 72,561
Rwe Ag 1,400 50,591 57,639
Schering Ag 700 54,590 56,252
Siemens Ag 800 42,267 41,401
Thyssen Ag 450 82,677 80,085
Veba Ag 2,000 105,003 106,834
----------- -----------
1,780,372 1,788,248
----------- -----------
TOTAL COMMON STOCKS - FOREIGN 94.50% 23,645,801 23,788,763
COMMERCIAL PAPER
Finance - Miscellaneous 7.93%
Bell Comm Research
5.65% due November 1, 1996 $ 1,996,000 1,996,000 1,996,000
----------- -----------
TOTAL INVESTMENTS 102.44% $25,645,849 25,788,226
===========
Liabilities, less cash and
other assets -2.44% (611,268)
-----------
TOTAL NET ASSETS 100.00% $25,176,958
===========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 80
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
AS A PERCENTAGE OF NET ASSETS
U.S. Equities
Manufacturing - Chemicals 0.01 %
Non - U.S. Equities
Aerospace and military technology 0.33
Appliances and household durable 2.22
Automobiles 2.49
Banking 12.45
Beverages and tobacco 2.32
Broadcasting and publishing 1.37
Building materials and components 1.85
Business and public services 3.54
Chemicals 4.04
Construction and housing 2.20
Data processing and reproduction 1.00
Electrical and electronics 4.53
Electronic components 1.35
Energy sources 8.43
Financial services 1.00
Food and household products 4.20
Forest products and paper 1.74
Gold mines 0.17
Health and personal care 3.62
Industrial components 2.35
Insurance 4.29
Leisure and tourism 0.84
Machinery and engineering 1.48
Merchandising 3.78
Metals - non ferrous 2.28
Metals - steel 1.93
Miscellaneous materials and commodities 0.83
Multi-industry 4.51
Real estate 1.17
Recreation and other consumer goods 0.51
Telecommunications 4.12
Textiles and apparel 0.26
Transportation - airlines 0.08
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 81
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
Transportation - road and rail 0.88 %
Transportation - shipping 0.85
Utilities - electrical and gas 5.49
---------
94.50
Commercial Paper
Finance - Miscellaneous 7.93
---------
Total Investments 102.44
Liabilities, less cash and other assets -2.44
---------
TOTAL NET ASSETS 100.00 %
=========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 82
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND - CLASS Y
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.02
Net realized and unrealized gain on securities 0.21
-------
Total income from investment operations 0.23
Less distributions:
Dividends from and in excess of net investment income 0.03
Distributions from capital gains 0.00
-------
Total distributions 0.03
-------
Net asset value at end of period 10.20
=======
Total return (not annualized) 2.32%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 23,137
Ratio of operating expenses to average net assets 1.46%*
Ratio of net investment income to average net assets 1.52%*
Portfolio turnover rate 0%
Average commission rate paid per share $0.0264
</TABLE>
- ------------------------
* Annualized
See accompanying notes to the financial statements.
<PAGE> 83
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income 0.03
Net realized and unrealized gain on securities 0.20
-------
Total income from investment operations 0.23
Less distributions:
Dividends from net investment income 0.03
Distributions from capital gains 0.00
-------
Total distributions 0.03
-------
Net asset value at end of period 10.20
=======
Total return (not annualized) 2.29%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 2,040
Ratio of operating expenses to average net assets 1.65%*
Ratio of net investment income to average net assets 1.93%*
Portfolio turnover rate 0%
Average commission rate paid per share $0.0264
</TABLE>
- -----------------------
* Annualized
See accompanying notes to the financial statements.
<PAGE> 84
STATEMENT OF ASSETS AND LIABILITIES
REIT INDEX FUND
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities at value (cost - $25,198,813) $ 25,653,149
Dividends receivable 60,441
Interest receivable 81
-------------
Total Assets 25,713,671
LIABILITIES
Investment advisory fees payable 10,094
Accrued expenses payable 13,516
-------------
Total Liabilities 23,610
-------------
NET ASSETS $ 25,690,061
=============
Net Asset Value Per Share:
Class Y (based on net assets of $24,123,758 and 2,309,830 shares
issued and outstanding) $ 10.44
=============
Class C (based on net assets of $1,566,303 and 150,000 shares
issued and outstanding) $ 10.44
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 85
STATEMENT OF OPERATIONS
REIT INDEX FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 152,996
Interest 10,190
-------------
Total Investment Income 163,186
EXPENSES
Investment advisory fees 10,094
Registration fees 7,609
Fund accounting fees 4,849
Transfer agent fees 2,180
Fund administration fees 1,075
Custodian fees 568
Distribution fees 536
Other 550
-------------
Total Expenses 27,461
-------------
NET INVESTMENT INCOME $ 135,725
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain (loss) on sale of investments 0
Change in net unrealized appreciation on investments 454,336
-------------
Net realized and unrealized gain on investments 454,336
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 590,061
=============
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 86
STATEMENT OF CHANGES IN NET ASSETS
REIT INDEX FUND
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 135,725
Net realized gain 0
Change in net unrealized appreciation 454,336
-----------
Net increase in net assets resulting from operations 590,061
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income 0
Net realized gain 0
Distributions in excess of realized gain 0
-----------
Total distributions 0
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 25,100,000
Net asset value of shares issued upon reinvestment 0
of dividends
Cost of redemption of shares 0
-----------
Increase in net assets from capital transactions 25,100,000
-----------
Increase in net assets 25,690,061
Net assets at beginning of period 0
-----------
Net assets at end of period $25,690,061
===========
Undistributed net investment income $ 135,725
===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 87
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
--------- --------- -------- ------
<S> <C> <C> <C> <C>
COMMON STOCKS - REAL ESTATE INVESTMENT
TRUSTS (REITs)
Apartments 27.35%
Ambassador Apartments, Inc 4,700 $ 88,129 $ 95,175
Amli Residential Prop 6,100 127,787 134,200
Apartment Investment & Mgmt Co 6,600 139,716 153,450
Associated Estates Realty 7,200 148,983 147,600
Avalon Properties, Inc 16,200 380,625 374,625
Bay Apartments Communities 7,000 200,737 210,000
Berkshire Realty Co 13,100 132,116 129,363
BRE Properties Class A 17,100 352,773 393,300
Camden Property Trust 7,700 203,257 209,825
Columbus Realty Trust 6,100 125,788 128,100
Equity Residential Properties Trust 22,000 797,295 808,500
Evans Withycombe Residential 9,500 200,254 200,688
Gables Residential Trust 8,500 205,941 206,125
Irvine Apartment Community 8,900 201,364 204,700
Merry Land & Investment Co 19,100 411,300 401,100
MGI Properties Inc 6,100 115,938 116,663
Mid-America Apartment Comm 5,700 142,654 144,638
Oasis Residential Inc 8,500 185,478 180,625
Paragon Group Inc 7,700 124,094 123,200
Post Properties Inc 11,200 412,691 442,400
Security Capital Pacific 37,800 826,359 850,500
Smith, Charles E. Residential 5,200 126,690 126,750
South West Property Trust 10,600 151,873 159,000
Summit Properties Inc 8,600 169,531 168,775
Town & Country Trust 8,200 117,134 118,900
United Dominion Realty Trust 29,400 408,585 415,275
Walden Residential Props Inc 7,500 157,940 175,313
Wellsford Residential Prop 9,000 202,218 207,000
------------ ---------
6,857,250 7,025,790
Diversified 2.37%
Colonial Properties Trust 9,200 239,925 243,800
Penn Real Estate Invest Trust 4,600 100,122 102,925
Washington REIT 16,500 261,708 261,938
------------ ---------
601,755 608,663
Factory Outlet 2.46%
Chelsea GCA Realty Inc 6,100 184,051 183,763
Factory Stores Realty Inc 6,200 53,815 51,150
Horizon Group Inc 10,100 211,960 213,363
</TABLE>
See accomnpanying notes to the financial statements.
<PAGE> 88
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Mills Corp 8,800 $ 178,237 $ 183,700
---------- -----------
628,063 631,976
Hotel 5.89%
Equity Inns Inc 11,500 140,660 133,688
Felcor Suite Hotels 12,200 381,393 399,550
Innkeepers USA Trust 5,600 60,601 65,800
Patriot American Hospitality 7,700 251,445 270,463
RFS Hotel Investors Inc 12,600 202,226 204,750
Starwood Lodging Trust 8,300 344,649 373,500
Winston Hotels 5,200 65,942 65,000
---------- -----------
1,446,916 1,512,751
Manufactured Homes 2.45%
Manufactured Home Communities 12,800 247,847 249,600
ROC Communities 6,500 157,113 158,438
Sun Communities Inc 7,700 219,633 220,413
---------- -----------
624,593 628,451
Office Property 14.05%
Beacon Office Property 14,400 421,437 423,000
Cali Realty Corp 8,000 210,318 215,000
Carramerica Realty Corp 13,100 329,317 329,138
Cousins Properties Inc 14,700 337,323 336,263
Crescent Real Estate 12,300 510,108 513,525
Duke Realty Investments Inc 14,800 488,298 510,600
Highwoods Properties Inc 10,400 308,370 299,000
Koger Equity Inc * 9,300 147,300 145,313
Liberty Property Trust 15,000 327,178 324,375
Spieker Properties Inc. 16,700 495,737 513,525
---------- -----------
3,575,386 3,609,739
Regional Mall 11.39%
CBL & Associates Properties 10,800 252,142 255,150
Crown American Realty 14,200 113,418 110,050
General Growth Industries 14,200 350,931 358,550
JP Realty Inc 8,400 184,901 191,100
Lexington Corp Prop 4,900 62,907 61,250
Macerich Co 10,500 235,297 231,000
Simon Debartlolo Group Inc 48,600 1,252,353 1,281,825
Taubman Centers Inc 22,900 249,869 257,625
Urban Shopping Centers Inc 7,000 172,703 180,250
---------- -----------
2,874,521 2,926,800
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 89
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSETS SHARES COST VALUE
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Shopping Center 16.66%
Alexander Haagen Properties 6,200 $ 87,907 $ 91,450
Bradley Real Estate Inc. 9,800 161,439 162,925
Burnham Pacific Properties Inc 9,000 109,680 111,375
Developers Diversified 11,200 368,942 376,600
Federal Realty Investment Trust 17,700 416,543 418,163
Glimcher Realty Trust 11,400 218,209 219,450
IRT Property Co. 13,300 126,370 128,013
JDN Realty Corp 5,700 136,742 142,500
Kimco Realty Corp 18,900 556,361 545,738
Kranzco Realty Trust 5,400 82,648 82,350
Mark Centers Trust 4,500 49,608 50,063
New Plan Realty Trust 30,400 661,858 657,400
Saul Centers Inc 6,200 86,227 90,675
Vornado Realty Trust 12,900 533,025 554,700
Weingarten Realty Inv 14,000 543,815 537,250
Western Invt Real Estate Trust 8,800 111,450 112,200
----------- ----------
4,250,824 4,280,852
Storage 6.47%
Public Storage Inc 38,500 864,775 885,500
Shurgard Storage Centers 12,000 304,424 315,000
Storage Trust Realty 4,600 101,988 106,375
Storage USA 10,200 339,960 354,450
----------- ----------
1,611,147 1,661,325
Triple Net Lease 4.52%
Commercial Net Lease Realty 8,200 114,059 112,750
Excel Realty Trust Inc 7,000 153,763 153,125
Franchise Finance Corp of America 21,000 488,766 504,000
National Golf Properties 5,500 154,800 159,500
Trinet Corporate Realty Trust 7,200 228,419 232,200
----------- ----------
1,139,807 1,161,575
Warehouse / Industrial 6.14%
Centerpoint Properties Corp 7,200 193,732 198,000
First Industrial Realty Trust 12,500 314,224 323,438
Security Capital Industrial 49,100 886,105 889,938
Weeks Corp 5,800 166,656 166,014
----------- ----------
1,560,717 1,577,390
Total Common Stocks - Real Estate
Investment Trusts 99.75% 25,170,976 25,625,312
</TABLE>
See accompanying notes to the financial statements.
<PAGE> 90
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF AMOUNT OR
NET ASSET SHARES COST VALUE
--------- --------- ------------ ----------
<S> <C> <C> <C> <C>
DEMAND NOTE
Utility - Electrical 0.11%
Wisconsin Electric Demand Note
5.0641% due on demand $ 27,837 $ 27,837 $ 27,837
------------ -----------
TOTAL INVESTMENTS 99.86% $ 25,198,813 25,653,149
============
Other assets, less liabilities 0.14% 36,912
-----------
TOTAL NET ASSETS 100.00% $25,690,061
===========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements
<PAGE> 91
FINANCIAL HIGHLIGHTS
REIT INDEX FUND - CLASS Y
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income ** 0.10
Net realized and unrealized gain on securities 0.34
-------
Total income from investment operations 0.44
Less distributions:
Dividends from net investment income 0.00
Distributions from capital gains 0.00
-------
Total distributions 0.00
-------
Net asset value at end of period 10.44
=======
Total return (not annualized) 4.40%
=======
Ratios and supplemental data:
Net assets at end of period (in thousands) 24,124
Ratio of operating expenses to average net assets 1.20%*
Ratio of net investment income to average net assets 5.97%*
Portfolio turnover rate 0%
Average commission rate paid per share $0.0270
</TABLE>
- ------------------------------------------------------------------
* Annualized
** Net Investment Income per share calculated using average shares outstanding
during the period.
See accompanying notes to the financial statements.
<PAGE> 92
FINANCIAL HIGHLIGHTS
REIT INDEX FUND - CLASS C
FOR THE PERIOD SEPTEMBER 3, 1996 TO OCTOBER 31, 1996
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<S> <C>
Net asset value at beginning of period 10.00
Income from investment operations:
Net investment income ** 0.11
Net realized and unrealized gain on securities 0.33
------
Total income from investment operations 0.44
Less distributions:
Dividends from net investment income 0.00
Distributions from capital gains 0.00
------
Total distributions 0.00
------
Net asset value at end of period 10.44
======
Total return (not annualized) 4.40%
======
Ratios and supplemental data:
Net assets at end of period (in thousands) 1,566
Ratio of operating expenses to average net assets 1.38%*
Ratio of net investment income to average net assets 6.37%*
Portfolio turnover rate 0%
Average commission rate paid per share $0.0270
</TABLE>
- ----------------------------------------------------------------
* Annualized
** Net Investment Income per share calculated using average shares outstanding
during the period.
See accompanying notes to the financial statements.
<PAGE> 93
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
1. DESCRIPTION OF ENTITY
Aon Funds (the "Trust"), a Delaware business trust organized on May 16, 1996,
is registered under the Investment Company Act of 1940, as an open-end,
diversified management investment company. The Trust consists of six Funds:
the Money Market Fund, the Government Securities Fund, the Asset Allocation
Fund, the S&P 500 Index Fund, the International Equity Fund, and the REIT
Index Fund. Each Fund has two classes of shares: Class Y, a no-load
institutional class, and Class C, a no-load retail class. There are an
unlimited number of shares of each class authorized with no par value.
The Trust was reorganized on September 3, 1996, prior to this date the Trust
conducted business as Aon Asset Management Fund, Inc. Prior to the
reorganization, Aon Asset Management Fund, Inc. consisted of two single class
Funds: the Money Market Fund and the Flexible Asset Allocation Fund. Upon
reorganization, the shares of each existing Fund were designated Y class shares
and the Flexible Asset Allocation Fund was renamed the Asset Allocation Fund.
The Money Market Fund of the Trust is designated as a "Money Market Fund", and
must adhere to the guidelines governing such funds as described in Rule 2a-7
under the Investment Company Act of 1940. Pursuant to that rule, the Money
Market Fund seeks to maintain a constant net asset value of $1.00 per share on
a daily basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds used in the preparation of their financial statements.
a) Security Valuation - Securities for which quotations are readily
available are valued at the last reported sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the
last available bid price on the exchange or market on which they are
principally traded. Securities for which market quotations are not
available are stated at fair value as determined in good faith under
procedures established by the Board of Trustees. Fixed income / debt
securities are valued by a pricing service that utilizes computerized
pricing models which derive evaluated bid prices. Forward contracts are
valued daily using quoted forward exchange rates. The investments held by
the Money Market Fund and other debt instruments that mature in 60 days or
less are stated at amortized cost, which approximates fair value.
b) Investment Transactions and Income - Security transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Interest income, which includes amortization of premiums and
discounts, is recorded on the accrual basis and dividend income is
reported on the ex-dividend date. Realized gains and losses on investments
are determined based on an identified cost basis.
c) Foreign Currency Translation - Investment securities and other assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars using the last reported exchange rate on the London Stock Exchange
on the day of the valuation. Purchases and sales of portfolio securities,
commitments under forward foreign currency contracts, and income receipts
are translated into U.S. dollars using the last reported exchange rate on
the London Stock Exchange on the day of each transaction. Realized and
unrealized foreign exchange gains or losses on investments are included as
a component of net realized and unrealized gain or loss on the statement of
operations.
<PAGE> 94
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
d) Distributions to Shareholders - Distributions of net investment income
and capital gains are determined in accordance with income tax regulations,
which may differ from generally accepted accounting principals. These
differences are primarily due to differing treatments for foreign currency
transactions. Differences in dividends per share between the classes are
due to distribution expenses. Dividends are declared daily and paid
monthly for the Money Market Fund, declared and paid monthly for the
Government Securities Fund, declared and paid quarterly for the Asset
Allocation Fund, and declared and paid annually for the REIT Index Fund,
the International Equity Fund, and the S&P 500 Index Fund.
e) Income and Expense Allocation - All income earned and expense incurred
by the Funds will be allocated to each of the classes based on relative net
assets, except that the Y Class shares will not incur any of the
distribution expenses.
f) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
3. Income Taxes
Each Fund intends to qualify as a "regulated investment company" under the
provision of Sub-chapter M of the Internal Revenue Code of 1986, as amended,
and thereby, under the provisions of the income tax laws available to regulated
investment companies, be relieved of substantially all income taxes.
Therefore, no provision has been made for Federal or State income taxes. The
Government Securities Fund and the S&P 500 Index Fund had capital loss
carryovers of $31,132 and $30, respectively, available for federal income tax
purposes to be applied against future capital gains, if any. If not applied,
they will expire in the year 2004.
4. Investment Advisory Fee and Other Transactions with Affiliates
Effective September 3, 1996, under the terms of investment advisory agreements
with Aon Advisors, Inc. (the "Investment Advisor"), a subsidiary of Aon
Corporation, investment advisory fees will be accrued daily and paid monthly at
a rate of 0.30% of average daily net assets of the Money Market Fund, 0.45% of
average daily net assets up to $100 million, 0.40% of average daily net assets
on the next $100 million, 0.35% of average daily net assets on the next $100
million, 0.30% of average daily net assets on the next $100 million, and 0.25%
of average daily net assets in excess of $400 million of the Government
Securities Fund, 0.65% of average daily net assets up to $250 million, 0.55% of
average daily net assets on the next $250 million, and 0.45% of average daily
net assets in excess of $500 million of the Asset Allocation Fund, 0.30% of
average daily net assets of the S&P 500 Index Fund, 0.95% of average daily net
assets up to $100 million, 0.90% of average daily net assets on the next $100
million, and 0.85% of average daily net assets in excess of $200 million of
the International Equity Fund, and 0.60% of average daily net assets up to
$100 million, 0.55% of average daily net assets on the next $100 million, and
0.50% of average daily net assets in excess of $200 million of the REIT Index
Fund. The Investment Advisor has agreed to waive 0.15% of the advisory fee for
the Money Market Portfolio for a net rate of 0.15%.
Prior to September 3, 1996, investment advisory fees were accrued daily and
paid quarterly at a rate of 0.35% of average daily net assets of the Money
Market Fund and 0.70% of average daily net assets up to $250 million, 0.60% of
average daily net assets on the next $250 million, and 0.50% of average daily
net assets in excess of $500 million of the Asset Allocation Fund. The
Investment Advisor agreed to waive 0.25% of the advisory fee for the Money
Market Portfolio for a net rate of 0.10%.
<PAGE> 95
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
Effective September 3, 1996, the Investment Advisor has agreed to waive its
fees and reimburse each Fund to the extent total annualized expenses exceed
1.00% of the average daily net assets of the Money Market Fund Class Y, 1.10%
of the average daily net assets of the Money Market Fund Class C, 1.50% of the
average daily net assets up to $30 million, and 1.25% of the average daily net
assets above $30 million of the Government Securities Fund Class Y, 1.75% of
the average daily net assets up to $30 million, and 1.50% of the average daily
net assets above $30 million of the Government Securities Fund Class C, 1.25%
of the average daily net assets of the Asset Allocation Fund Class Y, 1.50% of
the average daily net assets of the Asset Allocation Fund Class C, 0.75% of the
average daily net assets of the S&P 500 Index Fund Class Y, 1.00% of the
average daily net assets of the S&P 500 Index Fund Class C, 1.75% of the
average daily net assets up to $30 million, and 1.50% of the average daily net
assets above $30 million of the International Equity Fund Class Y, 2.00% of the
average daily net assets up to $30 million, and 1.75% of the average daily net
assets above $30 million of the International Equity Fund Class C, 1.50% of the
average daily net assets up to $30 million, and 1.25% of the average daily net
assets above $30 million of the REIT Index Fund Class Y, and 1.75% of the
average daily net assets up to $30 million, and 1.50% of the average daily net
assets above $30 million of the REIT Index Fund Class C. For the period ended
October 31, 1996, the Investment Advisor waived fees of $13,734 for the S&P 500
Index Fund.
Prior to September 3, 1996, the Investment Advisor provided administrative
services to the Trust and managed its business affairs, including personnel,
facilities and equipment and all legal, accounting and other costs incurred in
the organization of the Trust. To assist in the administration of the Fund,
the Investment Advisor entered into an administration agreement with Aon
Securities Corporation, an affiliate of Aon Corporation, to provide certain
administrative services for the Trust. Under this agreement, the Investment
Advisor paid Aon Securities Corporation an annual fee of $25,000 plus 0.05% of
the average daily net assets of each Fund. As of September 3, 1996, the Trust
has engaged Aon Securities Corporation directly to perform administration
services under the same terms. The Trust has also engaged Aon Securities
Corporation as its distributor pursuant to a distribution agreement.
Certain officers and trustees of the Trust are also officers and directors of
the Investment Advisor and Aon Securities Corporation. These officers and
trustees serve without direct compensation from the Trust. During the period
ended October 31, 1996, the Trust incurred expenses totaling $26,286 for
compensation of unaffiliated trustees.
<TABLE>
<CAPTION>
5. Composition of Net Assets GOVERNMENT INTERNATIONAL
SECURITIES ASSET ALLOCATION S&P 500 INDEX EQUITY REIT INDEX
At October 31, 1996, net assets consisted of: FUND FUND FUND FUND FUND
-------------- ---------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Paid in capital $ 40,052,005 78,646,756 25,000,000 25,000,000 25,100,000
Accumulated net realized gain (loss) (31,132) 138,375 (30) 19 0
Net unrealized appreciation 481,678 9,490,188 849,820 178,205 454,336
Undistributed net investment income 2,401 4,561 1,956 (1,266) 135,725
-------------- ---------------- ------------- ------------- ------------
Net Assets $ 40,504,952 88,279,880 25,851,746 25,176,958 25,690,061
============== ================ ============= ============ ============
</TABLE>
<PAGE> 96
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
6. CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Capital stock transactions were as follows: MONEY MARKET FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at October 31, 1994 410,912,278 $ 410,912,278
Shares sold 4,368,158,454 4,368,158,454
Dividend Reinvestment 7,851,993 7,851,993
--------------- ----------------
Total issued 4,376,010,447 4,376,010,447
Shares redeemed (4,366,829,092) (4,366,829,092)
--------------- ----------------
Net change in shares 9,181,355 9,181,355
--------------- ----------------
Balance at October 31, 1995 420,093,633 420,093,633 0 $ 0
Shares sold 4,623,262,647 4,623,262,647 2,000,020 2,000,020
Dividend Reinvestment 6,158,874 6,158,874 7,584 7,584
--------------- ---------------- -------------- --------------
Total issued 4,629,421,521 4,629,421,521 2,007,604 2,007,604
Shares redeemed (4,656,418,504) (4,656,418,504) 0 0
--------------- ---------------- -------------- --------------
Net change in shares (26,996,983) (26,996,983) 2,007,604 2,007,604
--------------- ---------------- -------------- --------------
Balance at October 31, 1996 393,096,650 $ 393,096,650 2,007,604 $ 2,007,604
=============== ================ ============== ==============
<CAPTION> GOVERNMENT SECURITIES FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at October 31, 1995 0 0 0 0
Shares sold 3,760,650 38,000,000 200,000 2,000,000
Dividend Reinvestment 4,828 48,760 322 3,245
--------------- ---------------- -------------- --------------
Total issued 3,765,478 38,048,760 200,322 2,003,245
Shares redeemed 0 0 0 0
--------------- ---------------- -------------- --------------
Net change in shares 3,765,478 38,048,760 200,322 2,003,245
--------------- ---------------- -------------- --------------
Balance at October 31, 1996 3,765,478 38,048,760 200,322 2,003,245
=============== ================ ============== ==============
</TABLE>
<PAGE> 97
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
6. Capital Share Transactions (continued)
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at October 31, 1994 1,021,494 $ 10,048,295
Shares sold 4,865,218 55,967,766
Dividend Reinvestment 240,115 2,833,894
--------------- ----------------
Total issued 5,105,333 58,801,660
Shares redeemed - 0
--------------- ----------------
Net change in shares 5,105,333 58,801,660
--------------- ----------------
Balance at October 31, 1995 6,126,827 68,849,955 0 $ 0
Shares sold 1,302,640 16,179,173 160,901 2,000,000
Dividend Reinvestment 134,937 1,694,654 0 0
--------------- ---------------- -------------- --------------
Total issued 1,437,577 17,873,827 160,901 2,000,000
Shares redeemed (800,783) (10,077,026) 0 0
--------------- ---------------- -------------- --------------
Net change in shares 636,794 7,796,801 160,901 2,000,000
--------------- ---------------- -------------- --------------
Balance at October 31, 1996 6,763,621 $ 76,646,756 160,901 $ 2,000,000
=============== ================ ============== ===============
<CAPTION>
S&P 500 INDEX FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at October 31, 1995 0 $ 0 0 $ 0
Shares sold 2,200,153 23,000,000 200,000 2,000,000
Dividend Reinvestment 0 0 0 0
--------------- ---------------- -------------- --------------
Total issued 2,200,153 23,000,000 200,000 2,000,000
Shares redeemed 0 0 0 0
Net change in shares 2,200,153 23,000,000 200,000 2,000,000
--------------- ---------------- -------------- --------------
Balance at October 31, 1996 2,200,153 $ 23,000,000 200,000 $ 2,000,000
=============== ================ ============== ==============
<CAPTION>
INTERNATIONAL EQUITY FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at October 31, 1995 0 0 0 0
Shares sold 2,268,934 23,000,000 200,000 2,000,000
Dividend Reinvestment 0 0 0 0
--------------- ---------------- -------------- --------------
Total issued 2,268,934 23,000,000 200,000 2,000,000
Shares redeemed 0 0 0 0
--------------- ---------------- -------------- --------------
Net change in shares 2,268,934 23,000,000 200,000 2,000,000
--------------- ---------------- -------------- --------------
Balance at October 31, 1996 2,268,934 23,000,000 200,000 2,000,000
=============== ================ ============== ==============
</TABLE>
<PAGE> 98
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
6. Capital Share Transactions (continued)
<TABLE>
<CAPTION>
REIT INDEX FUND
CLASS Y CLASS C
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Balance at October 31, 1995 0 0 0 0
Shares sold 2,309,830 23,600,000 150,000 1,500,000
Dividend Reinvestment 0 0 0 0
--------- ---------- ------- ---------
Total issued 2,309,830 23,600,000 150,000 1,500,000
Shares redeemed 0 0 0 0
--------- ---------- ------- ---------
Net change in shares 2,309,830 23,600,000 150,000 1,500,000
--------- ---------- ------- ---------
Balance at October 31, 1996 2,309,830 23,600,000 150,000 1,500,000
========= ========== ======= =========
</TABLE>
7. Investments
Investment transactions for the period ended October 31, 1996, including
maturities and excluding short-term investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
-------------- ----------------
<S> <C> <C>
Asset Allocation Fund $ 108,657,896 94,142,591
Government Securities Fund 40,551,182 980,800
S&P 500 Index Fund 24,997,392 8,081
International Equity Fund 23,649,447 19
REIT Index Fund 25,170,976 0
------------- --------------
Total $ 223,026,893 95,131,491
============= ==============
</TABLE>
Gross unrealized appreciation and gross unrealized depreciation of investments
at October 31, 1996 were as follows:
<TABLE>
<CAPTION>
GOVERNMENT INTERNATIONAL
ASSET ALLOCATION SECURITIES S&P 500 INDEX EQUITY REIT INDEX
FUND FUND FUND FUND FUND
--------------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Gross unrealized appreciation $ 12,242,365 484,228 1,227,225 652,619 593,507
Gross unrealized depreciation (2,752,177) (2,550) (377,405) (510,242) (139,171)
------------- ---------- ------------- ------------- ----------
Net unrealized appreciation $ 9,490,188 481,678 849,820 142,377 454,336
============= ========== ============= ============= ==========
</TABLE>
At October 31, 1996, the identified cost of investments for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
<PAGE> 99
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
8. Distribution Plan
The Trust has adopted a distribution plan (the "Plan") pursuant to rule 12b-1
under the Investment Company Act of 1940. The Plan governs payments made for
the expenses incurred in the promotion and distribution of the C Class shares.
Annual fees under the Plan are 0.10% of the average daily net assets of Class C
shares of the Money Market Fund and 0.25% of the average daily net assets of
Class C shares of all other Funds.
9. Forward Foreign Currency Contracts
The International Equity Fund engages in portfolio hedging with respect to
changes in currency exchange rates by entering into forward foreign currency
contracts to purchase or sell currencies. Forward foreign currency contracts
are also used to achieve currency allocation strategies. A forward foreign
currency contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. Risks associated with such contracts
include movement in the value of the foreign currency relative to the U.S.
dollar and the ability of the counterparty to perform. The unrealized gain, if
any, represents the credit risk to the Fund on a forward foreign currency
contract. Fluctuations in the value of forward foreign currency contracts are
recorded daily as net unrealized gains or losses. The Fund realizes a gain or
loss upon settlement of the contracts. The statement of operations reflects
net realized and net unrealized gains and losses on these contracts. The
counterparty to all forward foreign currency contracts, at and for the period
ended October 31, 1996, was the Fund's custodian.
The International Equity Fund had the following open forward foreign currency
contracts as of October 31, 1996:
<TABLE>
<CAPTION> UNREALIZED
Forward Foreign Currency Sale Contracts: SETTLEMENT LOCAL CONTRACT CURRENT APPRECIATION
DATE CURRENCY AMOUNT VALUE (DEPRECIATION)
---------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Australian Dollar 03/11/97 650,000 $ 514,496 $ 513,591 $ 905
Belgian Franc 03/11/97 16,000,000 517,226 513,621 3,605
Hong Kong Dollar 03/11/97 3,350,000 433,069 433,102 (33)
German Deutschemarks 03/11/97 1,350,000 904,386 899,449 4,937
Spanish Peseta 03/11/97 49,000,000 382,913 382,452 461
Swiss Francs 03/11/97 640,000 521,729 514,732 6,997
Netherlands Guilder 03/11/97 2,400,000 1,437,526 1,426,272 11,254
French Franc 03/11/97 11,000,000 2,158,749 2,169,085 (10,336)
British Pound 03/11/97 250,000 390,500 405,586 (15,086)
Japanese Yen 03/11/97 99,000,000 919,059 885,996 33,063
Forward Foreign Currency Buy Contracts:
Hong Kong Dollar 11/04/96 2,080,800 $ 269,081 $ 269,081 0
------------
Total $ 35,767
============
</TABLE>
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