Aon Funds
Semi-Annual Report
April 30, 1998
unaudited
<PAGE>
AON FUNDS
1-800-AON-FNDS
June 29, 1998
Dear Fellow Shareholder:
The U.S. financial markets, on balance, provided positive returns since the
beginning of the fiscal year, November 1, 1997. Internationally, stock
markets have been strong in Europe and weak in Asia during the past six
months. The Aon Funds share performance, detailed on the following pages,
reflect these trends.
It is an ongoing management goal that shareholders benefit from expense
control. Aon Advisors, the Fund's investment advisor, waived a portion of its
advisory fee during the six months ended April 30, 1998, helping to achieve
that goal. This "no frills" semi-annual report reflects the commitment to
expense control.
Thank you for your continued support.
Sincerely,
/s/ Michael A. Conway
Michael A. Conway
President
<PAGE>
AON FUNDS
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TABLE OF CONTENTS
Government Securities Fund Commentary Pages 3 - 4
Asset Allocation Fund Commentary Pages 5 - 6
S&P 500 Index Fund Commentary Pages 7 - 8
International Equity Fund Commentary Pages 9 - 10
REIT Index Fund Commentary Pages 11 - 12
Financial Statements Pages 13 - 83
Money Market Fund
Statement of Assets and Liabilities Page 13
Statement of Operations Page 14
Statement of Changes in Net Assets Page 15
Schedule of Investments Pages 16 - 19
Financial Highlights Pages 20 - 22
Government Securities Fund
Statement of Assets and Liabilities Page 23
Statement of Operations Page 24
Statement of Changes in Net Assets Page 25
Schedule of Investments Page 26
Financial Highlights Page 27
Asset Allocation Fund
Statement of Assets and Liabilities Page 28
Statement of Operations Page 29
Statement of Changes in Net Assets Page 30
Schedule of Investments Pages 31 - 37
Financial Highlights Pages 38 - 39
S&P 500 Index Fund
Statement of Assets and Liabilities Page 40
Statement of Operations Page 41
Statement of Changes in Net Assets Page 42
Schedule of Investments Pages 43 - 54
Financial Highlights Page 55
International Equity Fund
Statement of Assets and Liabilities Page 56
Statement of Operations Page 57
Statement of Changes in Net Assets Page 58
Schedule of Investments Pages 59 - 65
Industry Diversification Pages 66 - 67
Financial Highlights Page 68
REIT Index Fund
Statement of Assets and Liabilities Page 69
Statement of Operations Page 70
Statement of Changes in Net Assets Page 71
Schedule of Investments Pages 72 - 74
Financial Highlights Page 75
Notes to the Financial Statements Pages 76 - 83
2
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AON FUNDS
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GOVERNMENT SECURITIES FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
Government Securities Fund and an investment in the Lehman Brothers Government
Index from the inception of the Fund to April 30, 1998. The illustration
assumes that all dividends and distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon Government Securities Fund $10,000 $10,279 $11,189 $11,644
Lehman Brothers Government Index $10,000 $10,365 $11,262 $11,662
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- -------------------------------------------------------------------------------
Aon Government Securities Fund(1) 4.06% 12.26% 16.44%
Lehman Brothers Government Index(2) 3.55% 11.05% 16.62%
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.
2) The Lehman Brothers Government 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.
3) Cumulative total return.
3
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AON FUNDS
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GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
U.S. Treasury yields fell during late 1997 and early 1998 as economic turmoil
in Asia caused investors to seek a safe haven in U.S. Government securities.
During March and April, investor focus shifted to rapid domestic GDP growth
and possible increases in inflation which caused yields to rise. During the
period, the yield curve continued to flatten as the Federal Funds rate
remained unchanged at 5.50%.
The total return of the Fund for the six months ending April 30, 1998 was
4.06%. For comparison, the Lehman Government Bond Index returned 3.55%. The
higher performance of the Fund relative to the index is attributable to 1) the
modestly longer duration and convexity of the portfolio during late 1997 and
early 1998 and 2) the shortening of the portfolio in early 1998 before rates
increased.
The Fund started the second half of the fiscal year shorter in duration than
the benchmark in anticipation of stabilization in Asia and renewed focus on
the strong domestic economy.
Francis P. Wren
Portfolio Manager
4
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AON FUNDS
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ASSET ALLOCATION FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
Asset Allocation Fund and an investment in the Lipper Flexible Portfolio Index
from the inception of the Fund to April 30, 1998. The illustration assumes
that all dividends and distributions are reinvested.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
3/3/94 10/31/94 10/31/95 10/31/96 10/31/97 4/30/98
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aon Asset Allocation Fund $10,000 $10,184 $12,926 $14,356 $19,037 $21,680
Lipper Flexible Portfolio Index $10,000 $ 9,958 $11,618 $13,331 $15,797 $17,890
</TABLE>
Six One Three 3/3/94 to
COMPARISON OF RETURNS Months Year Year(3) 4/30/98(4)
- -----------------------------------------------------------------------------
Aon Asset Allocation Fund(1) 13.88% 41.87% 25.72% 116.80%
Lipper Flexible Portfolio Index(2) 13.24% 26.87% 19.24% 78.90%
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) The Lipper Flexible Portfolio Index is an unmanaged index prepared by
Lipper Analytical Services which includes asset allocation funds.
3) Average annual total return.
4) Cumulative total return.
5
<PAGE>
AON FUNDS
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ASSET ALLOCATION FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The Aon Asset Allocation Fund returned 13.88% for the six months ended April
30, 1998, primarily attributable to gains in the equity portion of the
portfolio. For the same period, the Lipper Flexible Portfolio Index, which
consists of the 30 largest flexible funds, returned 13.24%.
This time period was characterized by a high degree of volatility in the
equity markets. Uncertainty over the impact of the Asian financial crises
coupled with concerns regarding the trend in corporate profit growth led to
market declines in October 1997 and the beginning of this year. The stock
market rallied strongly in the first quarter of 1998 as it appeared that
overseas markets would stabilize.
During this period, we have favored equities over bonds while maintaining a
cash reserve in order to cushion the impact of the volatility of the markets
and to take advantage of market dips. In the first four months of 1998, profit
growth has been modest yet stock prices appreciated sharply. The net result is
that price/earnings multiples have expanded, particularly for large
capitalization stocks.
We continue to focus on those equities which have attractive characteristics
in terms of margins, cash flow and returns on capital and which we can acquire
at reasonable multiples. Sectors which significantly contributed to the
performance of the Fund during this period included broadcasting, media and
entertainment, communications, and certain technology and health care issues.
The outlook for the balance of this year is mixed. Asia remains a concern and
the valuation of many large capitalization stocks is unattractive. On the
positive side, we continue to see opportunities where profit growth is strong,
particularly in midsize and small capitalization stocks. Furthermore, it
appears that interest rates will remain stable. On balance, we continue to
favor equities over bonds
Thank you for your continued support of the Fund.
John Lagedrost
Portfolio Manager
6
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AON FUNDS
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S&P 500 INDEX FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the S&P
500 Index Fund and an investment in the S & P 500 index from the inception of
the Fund to April 30, 1998. The illustration assumes that all dividends and
distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon S&P 500 Index Fund $10,000 $10,786 $14,192 $17,388
S&P 500 Index $10,000 $10,809 $14,280 $17,491
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- ----------------------------------------------------------------------
Aon S&P 500 Index Fund(1) 22.53% 40.84% 73.88%
S&P 500 Index(2) 22.49% 41.07% 74.91%
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.
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 gains distributions.
3) Cumulative total return.
7
<PAGE>
AON FUNDS
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S&P 500 INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The S&P 500 Index Fund had a total return of 22.53% for the six months ended
April 30, 1998 compared to the S&P 500 Index return of 22.49%.
Several factors contributed to the sharp rise in equity prices during the six
months ended April 30, 1998. Fears of the impact of the Asian crisis abated.
Interest rates were held steady during the period and thirty-year bond yields
declined from 6.15% to 5.95%. First quarter reported earnings were mostly in
line with analyst expectations, which caused investors to favor stocks over
bonds during the period. Mutual fund cash flows into equity funds continued to
set new records which provided the fuel for rising stock market prices.
Our outlook for the next twelve months is one of caution. Export orders have
declined and our trade deficit with Japan has widened. Asia continues in
crisis mode. A slowdown in exports may impact earnings in the second half of
1998. We don't believe the S&P 500 will deliver a return rivaling those seen
in the last three years.
The Fund continues 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 1998.
Melissa A. Aton
Portfolio Manager
8
<PAGE>
AON FUNDS
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INTERNATIONAL EQUITY FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
International Equity Fund and an investment in the Morgan Stanley Capital
International (MSCI) Non-U.S. Equity Index from the inception of the Fund to
April 30, 1998. The illustration assumes that all dividends and distributions
are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon International Equity Fund $10,000 $10,232 $11,393 $12,859
MSCI Non-U.S. Index $10,000 $10,202 $10,725 $12,364
9/3/96 to
COMPARISON OF RETURNS Six months One Year 4/30/98(3)
- ----------------------------------------------------------------------------
Aon International Equity Fund(1) 12.87% 17.75% 28.59%
MSCI Non-U.S. Index(2) 15.29% 19.08% 23.64%
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.
2) The MSCI Non-U.S. 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.
3) Cumulative total return.
9
<PAGE>
AON FUNDS
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INTERNATIONAL EQUITY FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
PERFORMANCE
For the six months ended April 30, 1998, the International Equity Fund had a
total return of 12.87%. The Fund underperformed the Morgan Stanley Capital
International (MSCI) Non-US Equity Index return of 15.29%.
For the six months ended April 30, 1998, unhedged equity returns in Europe
were strong, almost 30%. In contrast, unhedged market returns in Japan and
Southeast Asia were weak, less than 1%. On a hedged basis, the returns for
Europe and the Pacific regions would be higher, reflecting the U.S. dollar's
appreciation against most foreign currencies since October.
For the first half of the fiscal year, the Fund was underweight in Japan and
held a 5% strategic allocation to cash. The underweight in Japan added to
performance but the negative contribution from the cash hedge dominates the
performance relative to the benchmark. The contributions from security
selection and currency were flat during the six month period.
STRATEGY
The International Equity Fund currently maintains a defensive posture,
reflecting the view that the Japanese equity market, the largest component of
the index, is significantly overpriced. Given our valuation analyses and
fundamental considerations, we are underweight Japan by almost 6%. The other
markets in the index are only modestly attractive and thus the portfolio
maintains a modest overweight to these markets. The Fund continues to hold a
5% strategic cash position as the offset to the underweight to the Japanese
market.
Most currencies are near their fair value, with the Hong Kong dollar and
British pound being the exceptions. The fund is underweight the Japanese yen
due to significantly higher U.S. dollar interest rates compared to those of
Japan. The underweight to the British pound is based on its overvaluation
while the lack of exposure to the Hong Kong dollar stems primarily from
concerns about the sustainability of the peg. The degree of uncertainty over
China's future attitude towards the territory and the maintenance of the peg
provides an unfavorable backdrop to holding the Hong Kong dollar.
Industry and stock selection favor more defensive issues, food, beverage and
household product companies. The portfolio continues to be underweight
Japanese banks, but overweight the high quality exporters and several stock
specific holdings in the auto sector.
Brinson Partners, Inc. Aon Advisors, Inc.
Subadvisor Portfolio Manager
10
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AON FUNDS
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REIT INDEX FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the REIT
Index Fund and an investment in the Morgan Stanley REIT Index from the
inception of the Fund to April 30, 1998. The illustration assumes that all
dividends and distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon REIT Index $10,000 $10,440 $13,862 $13,813
Morgan Stanley REIT Index $10,000 $10,482 $13,991 $13,906
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- ----------------------------------------------------------------------
Aon REIT Index(1) -0.35% 16.99% 38.13%
Morgan Stanley REIT Index(2) -0.61% 17.11% 39.06%
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.
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 gains distributions.
3) Cumulative total return.
11
<PAGE>
AON FUNDS
- ------------------------------------------------------------------------------
REIT INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The REIT Index Fund had a total return of -0.35% compared to the Morgan
Stanley REIT Index Return of -0.61% for the six months ended April 30, 1998.
Real estate stocks have underperformed the broader stock market this year by a
material margin. There are three possible reasons for this underperformance.
1) In a bull-market environment, money managers are willing to take on more
risk and invest in high-growth momentum oriented stocks rather than defensive
dividend stocks. 2) New real estate construction is expected to create an
excess supply situation in 1999 and beyond which may cause property values to
decline and inhibit the ability to raise rents. 3) Fund flows into real estate
mutual funds have significantly decreased..
We do not believe real estate stocks will match the broad markets this year.
Our outlook for the next twelve months is one of caution. However, increased
worry about the broader markets earnings growth and volatility could cause
investors to move back into REITs. Also, REITs have an average dividend yield
of 6.07%, approximately four times that of the S&P 500.
The Aon REIT Index Fund remains fully invested in the REIT market and
continues to closely replicate the performance of the Morgan Stanley REIT
Index.
Melissa A. Aton
Portfolio Manager
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at amortized cost which approximates fair value............. $829,243
Receivable for fund shares sold.......................................... 1,634
Interest receivable...................................................... 768
Cash..................................................................... 1
--------
Total Assets................................................................... 831,646
LIABILITIES
Dividends payable........................................................ 3,674
Investment advisory fees payable......................................... 201
Accrued expenses payable................................................. 192
--------
Total Liabilities.............................................................. 4,067
--------
Net Assets..................................................................... $827,579
========
Net Asset Value Per Share (based on net assets of $827,579 and 827,579 shares
issued and outstanding).................................................. $ 1.00
========
</TABLE>
See accompanying notes to the financial statements
13
<PAGE>
STATEMENT OF OPERATIONS
MONEY MARKET FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest.......................... $ 21,583
--------
Total Investment Income................. 21,583
EXPENSES
Investment advisory fees.......... 1,152
Fund administration fees.......... 192
Registration fees................. 55
Fund accounting fees.............. 36
Custodian fees.................... 35
Audit fees........................ 26
Legal fees........................ 25
Trustees fees..................... 14
Printing fees..................... 10
Transfer agent fees............... 8
--------
Total Expenses.......................... 1,553
Less: Fee Waiver....................... 768
--------
Net Expenses............................ 785
--------
Net Investment Income................... $ 20,798
========
See accompanying notes to the financial statements
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR
In thousands THROUGH ENDED
04/30/98 10/31/97
----------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income...................................... $ 20,798 31,683
Net realized gain.......................................... 0 0
Change in net unrealized appreciation...................... 0 0
----------- ----------
Increase in net assets from operations..................... 20,798 31,683
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................... (20,798) (31,683)
Net realized gain.......................................... 0 0
----------- ----------
Total distributions........................................ (20,798) (31,683)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................... 3,845,965 6,575,729
Reinvestment of distributions.............................. 8,777 12,754
Cost of shares redeemed ................................... (3,793,519) (6,217,231)
----------- ----------
Increase in net assets from capital transactions........... 61,223 371,252
----------- ----------
Increase in net assets........................................... 61,223 371,252
Net assets at beginning of year.................................. 766,356 395,104
----------- ----------
Net assets at end of period...................................... $ 827,579 766,356
=========== ==========
Undistributed net investment income.............................. $ 0 0
=========== ==========
</TABLE>
See accompanying notes to the financial statements
15
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
COMMERCIAL PAPER
AEROSPACE AIRCRAFT - 0.3%
International Lease Finance Corp.
5.520% due 05/01/98 $ 2,000 $ 2,000
AUTO & TRUCK - 0.6%
Ford Motor Credit
0.500% due 05/27/98 5,000 4,980
ASSET BACKED SECURITIES - 8.4%
Asset Securitization Corp.
5.500% due 05/15/98 10,000 9,978
5.500% due 05/27/98 10,000 9,961
Corporate Asset Funding Co.
5.530% due 05/01/98 30,000 30,000
Preferred Receivables Funding Corp.
5.550% due 05/05/98 5,000 4,997
5.520% due 05/11/98 2,500 2,496
5.500% due 05/27/98 5,000 4,980
5.510% due 07/02/98 7,500 7,429
---------
69,841
BANKING - DOMESTIC - 4.2%
Bankers Trust
5.430% due 07/09/98 15,000 14,844
Norwest Financial
5.530% due 05/07/98 20,000 19,981
--------
34,825
BANKING - FOREIGN - 1.8%
Abbey National
5.480% due 05/18/98 5,240 5,226
PRINCIPAL
AMOUNT VALUE
---------- ---------
Canadian Imperial
5.500% due 05/21/98 $ 10,000 $ 9,969
--------
15,195
BROKERAGE SERVICES - 8.4%
Goldman Sachs Group
5.500% due 05/13/98 20,000 19,963
Merrill Lynch and Company
5.450% due 05/04/98 10,000 9,995
5.530% due 05/15/98 15,000 14,968
5.400% due 06/26/98 5,000 4,957
Morgan Stanley Group
5.490% due 07/23/98 20,000 19,747
--------
69,630
COMPUTERS - 4.8%
Avnet Inc.
5.500% due 05/29/98 5,000 4,978
5.510% due 06/22/98 5,000 4,960
5.470% due 07/02/98 5,000 4,953
5.490% due 07/24/98 5,000 4,936
IBM Credit
5.480% due 05/13/98 8,000 7,985
5.490% due 05/26/98 12,000 11,954
--------
39,766
CHEMICAL - 3.6%
Du Pont (E.I.)
5.500% due 06/22/98 10,000 9,920
5.470% due 06/25/98 10,000 9,916
Nalco Chemical Co.
5.510% due 05/13/98 10,000 9,982
--------
29,818
See accompanying notes to the financial statements
16
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
ELECTRONICS AND ELECTRICAL EQUIPMENT - 1.3%
General Electric Capital Corp.
5.530% due 05/14/98 $ 5,500 $ 5,489
5.470% due 06/17/98 5,000 4,964
--------
10,453
FINANCE - 13.3%
American Express
5.510% due 05/04/98 10,000 9,995
5.510% due 05/22/98 20,000 19,936
American General Finance
5.510% due 05/14/98 5,000 4,990
5.500% due 05/19/98 10,000 9,972
5.500% due 06/05/98 5,000 4,973
Associates Corp. North America
5.500% due 05/20/98 10,000 9,971
5.480% due 06/15/98 10,000 9,931
AVCO Financial Services, Inc.
5.430% due 05/04/98 15,000 14,993
5.470% due 07/28/98 5,000 4,933
Beneficial Corp.
5.510% due 05/05/98 20,000 19,988
--------
109,682
FOOD AND BEVERAGES- 2.4%
Sara Lee Corp.
5.500% due 05/07/98 20,000 19,982
HEALTH CARE - 0.4%
Abbott Labs
5.520% due 07/02/98 3,375 3,343
PRINCIPAL
AMOUNT VALUE
---------- ---------
HOUSEHOLD PRODUCTS - 3.3%
Colgate-Palmolive
5.510% due 06/04/98 $ 20,000 $ 19,896
Protor & Gamble Co
5.500% due 05/21/98 7,000 6,978
--------
26,874
INSURANCE - 2.4%
Prudential Funding Corp.
5.520% due 05/01/98 5,000 5,000
5.510% due 05/27/98 15,000 14,940
--------
19,949
OIL - INTERNATIONAL - 1.2%
Mobil Corp
5.510% due 05/01/98 10,000 10,000
PAPER & PAPER PRODUCTS - 2.4%
Kimberly Clark
5.460% due 05/29/98 20,000 19,915
PUBLISHING - 3.0%
Gannett Inc.
5.500% due 05/04/98 5,000 4,998
5.500% due 05/14/98 15,000 14,970
Times Mirror Co.
5.500% due 05/08/98 5,000 4,995
--------
24,963
RETAIL - 1.8%
Wal-Mart Stores, Inc.
5.480% due 05/04/98 15,000 14,993
See accompanying notes to the financial statements
17
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
TELECOMMUNICATION - 7.0%
Bell Atlantic Network
5.500% due 05/06/98 $ 9,350 $ 9,343
5.480% due 05/18/98 6,000 5,984
Bell South Telecommunication
5.500% due 05/08/98 20,000 19,978
SBC Corp.
5.500% due 05/01/98 10,000 10,000
5.500% due 06/02/98 13,000 12,936
--------
58,241
UTILITIES - 9.6%
Atlantic Richfield
5.490% due 05/12/98 20,000 19,966
Florida Power Corp.
5.510% due 06/04/98 10,000 9,948
5.500% due 06/16/98 9,300 9,235
Potomac Electric Power Co.
5.510% due 05/01/98 10,000 10,000
5.510% due 05/18/98 10,000 9,974
Union Electric Co
5.550% due 05/01/98 5,000 5,000
5.510% due 05/06/98 15,000 14,988
--------
79,111
--------
Total Commercial Paper - 80.2% 663,561
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCIES - 18.6%
Federal Home Loan Bank
5.625% due 03/12/99 10,000 9,995
PRINCIPAL
AMOUNT VALUE
---------- ---------
5.770% due 04/15/99 $ 10,000 $ 10,000
5.632% due 03/04/99 10,000 10,000
--------
29,995
Federal Home Loan Mortgage Corp.
5.470% due 05/08/98 4,820 4,815
5.440% due 05/28/98 35,000 34,858
5.390% due 06/10/98 15,085 14,995
5.390% due 06/19/98 10,000 9,927
--------
64,595
Federal National Mortgage Association
5.410% due 05/11/98 20,000 19,970
5.410% due 06/25/98 5,700 5,698
5.330% due 06/26/98 5,000 4,997
5.100% due 07/22/98 6,000 5,992
5.300% due 08/25/98 5,000 4,999
4.950% due 09/30/98 9,000 8,976
5.750% due 12/10/98 5,000 5,000
5.450% due 02/16/99 3,700 3,696
--------
59,328
--------
Total U.S. Government Securities - 18.6% 153,918
CERTIFICATES OF DEPOSIT
BANKING - DOMESTIC - 1.1%
Comerica Bank
5.109% due 06/12/98 5,000 5,000
First Of America
5.310% due 08/18/98 2,000 2,000
Huntington National Bank
5.550% due 06/12/98 2,000 2,000
--------
Total Certificates of Deposit - 1.1% 9,000
See accompanying notes to the financial statements
18
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
REPURCHASE AGREEMENT - 0.3%
Harris Nesbit Thompson*
5.150% due 05/01/98 $ 2,764 $ 2,764
--------
TOTAL INVESTMENTS -100.2% 829,243
Liabilities, less other assets - (0.2%) (1,664)
--------
TOTAL NET ASSETS - 100.0% $827,579
========
</TABLE>
*Collateralized by U.S. Treasury Note (6.375% due May 15, 2000); held by
custodian
See accompanying notes to the financial statements
19
<PAGE>
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR YEAR
THROUGH ENDED ENDED
Selected per share data 04/30/98 10/31/97 10/31/96
---------- --------- --------
<S> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 1.00 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.03 0.05 0.05
Net realized and unrealized gain..................... 0.00 0.00 0.00
--------- --------- --------
Total income from investment operations.................... 0.03 0.05 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income................. 0.03 0.05 0.05
Distributions from net realized gain................. 0.00 0.00 0.00
--------- --------- --------
Total distributions........................................ 0.03 0.05 0.05
--------- --------- --------
Net asset value, end of period............................. $ 1.00 1.00 1.00
========= ========= ========
Total return .............................................. 2.72%** 5.44% 5.43%
========= ========= ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $ 827,579 766,356 395,104
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.......... 0.20%* 0.22% 0.23%
Expenses, before waivers and reimbursements.......... 0.40%* 0.40% 0.46%
Net investment income, net of waivers
and reimbursements.............................. 5.42%* 5.34% 5.30%
Net investment income, before waivers
and reimbursements.............................. 5.22%* 5.16% 5.07%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
20
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
Selected per share data 10/31/95 10/31/94 10/31/93
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 1.00 1.00 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.06 0.04 0.03
Net realized and unrealized gain................ ** ** **
-------- -------- --------
Total income from investment operations............... 0.06 0.04 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.06 0.04 0.03
Distributions from net realized gain............ ** ** **
-------- -------- --------
Total distributions................................... 0.06 0.04 0.03
-------- -------- --------
Net asset value, end of period........................ $ 1.00 1.00 1.00
======== ======== ========
Total return.......................................... 5.93% 3.77% 3.14%
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $420,094 410,912 412,068
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 0.14% 0.15% 0.17%
Expenses, before waivers and reimbursements..... 0.39% 0.40% 0.42%
Net investment income, net of waivers
and reimbursements......................... 5.79% 3.73% 3.10%
Net investment income, before waivers
and reimbursements......................... 5.54% 3.48% 2.85%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
** Less than 1 cent per share
See accompanying notes to the financial statements
21
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
UNAUDITED
01/23/92
THROUGH
Selected per share data 10/31/92
--------
Net asset value, beginning of period.............................. $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.03
Net realized and unrealized gain............................ **
--------
Total income from investment operations........................... 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income........................ 0.03
Distributions from net realized gain........................ **
--------
Total distributions............................................... 0.03
--------
Net asset value, end of period.................................... $ 1.00
========
Total return...................................................... 2.99%***
========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).......................... $399,076
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................. 0.25%*
Expenses, before waivers and reimbursements................. 0.50%*
Net investment income, net of waivers and reimbursements.... 3.57%*
Net investment income, before waivers and reimbursements.... 3.32%*
- -------------------------------------------------------------------------------
* Annualized
** Less than 1 cent per share
*** Not annualized
See accompanying notes to the financial statements
22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
ASSETS
Investments in securities, at value (cost - $98,998)....................... $100,041
Receivable for securities sold............................................. 29,051
Interest receivable........................................................ 1,071
Receivable for fund shares sold............................................ 591
--------
Total Assets..................................................................... 130,754
LIABILITIES
Dividends payable.......................................................... 591
Accrued expenses payable................................................... 44
Investment advisory fees payable........................................... 31
--------
Total Liabilities................................................................ 666
--------
Net Assets....................................................................... $130,088
========
ANALYSIS OF NET ASSETS:
Paid in capital............................................................ $126,235
Accumulated net realized gain.............................................. 2,789
Net unrealized appreciation................................................ 1,043
Undistributed net investment income........................................ 21
--------
Net Assets....................................................................... $130,088
========
Net Asset Value Per Share (based on net assets of $130,088 and 12,262 shares
issued and outstanding).................................................... $ 10.61
========
</TABLE>
See accompanying notes to the financial statements
23
<PAGE>
STATEMENT OF OPERATIONS
GOVERNMENT SECURITIES FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest............................................... $ 3,564
-------
Total Investment Income...................................... 3,564
EXPENSES
Investment advisory fees............................... 262
Fund administration fees............................... 30
Fund accounting fees................................... 20
Registration fees...................................... 7
Transfer agent fees.................................... 6
Custodian fees......................................... 5
Legal fees............................................. 3
Audit fees............................................. 3
Trustees fees.......................................... 2
Other.................................................. 1
-------
Total Expenses............................................... 339
Less: Fee Waiver............................................ 203
-------
Net Expenses................................................. 136
-------
Net Investment Income........................................ 3,428
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on sale of investments............... 3,232
Change in net unrealized appreciation on investments... (2,019)
-------
Net realized and unrealized gain (loss)................ 1,213
-------
Net Increase in Net Assets from Operations................... $ 4,641
=======
See accompanying notes to the financial statements
24
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 3,428 4,357
Net realized gain (loss)............................ 3,232 (412)
Change in net unrealized appreciation............... (2,019) 2,580
-------- -------
Increase in net assets from operations.............. 4,641 6,525
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (3,416) (4,350)
Net realized gain................................... 0 0
-------- -------
Total distributions................................. (3,416) (4,350)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 24,980 60,676
Reinvestment of distributions....................... 3,415 4,504
Cost of shares redeemed............................. (3,917) (3,475)
-------- -------
Increase in net assets from capital transactions.... 24,478 61,705
-------- -------
Increase in net assets.................................... 25,703 63,880
Net assets at beginning of period......................... 104,385 40,505
-------- -------
Net assets at end of period............................... $130,088 104,385
======== =======
Undistributed net investment income....................... $ 21 9
======== =======
See accompanying notes to the financial statements
25
<PAGE>
SCHEDULE OF INVESTMENTS
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCIES - 64.8%
Federal Home Loan Bank
5.625% due 03/19/01 $ 10,000 $ 9,953
Federal Home Loan Mortgage Corp.
5.460% due 05/07/98 650 649
5.440% due 05/28/98 2,555 2,545
5.345% due 05/29/98 1,035 1,031
--------
4,225
Federal National Mortgage Association
5.900% due 11/20/00 4,000 4,010
5.625% due 03/15/01 20,000 19,981
6.440% due 06/21/05 10,000 10,296
5.875% due 02/02/06 10,000 9,963
5.750% due 02/15/08 20,000 19,734
--------
63,984
Private Export Funding Corp.
6.310% due 09/30/04 6,000 6,121
--------
84,283
U.S. GOVERNMENT OBLIGATIONS - 12.1%
U.S. Treasury Notes
6.500% due 10/15/06 15,000 15,727
--------
Total U.S. Government Securities - 76.9%
(cost - $98,967) 100,010
PRINCIPAL
AMOUNT VALUE
---------- ---------
DEMAND NOTE
UTILITY-ELECTRICAL - 0.0%
Wisconsin Electric
5.235% due 05/01/98 $ 31 $ 31
(cost - $31)
--------
TOTAL INVESTMENTS - 76.9%
(cost - $98,998) 100,041
Other assets, less liabilities - 23.1% 30,047
--------
TOTAL NET ASSETS - 100.0% $130,088
========
</TABLE>
See accompanying notes to the financial statements
26
<PAGE>
FINANCIAL HIGHLIGHTS
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................... $ 10.49 10.21 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.30 0.59 0.07
Net realized and unrealized gain.................. 0.12 0.28 0.21
-------- -------- --------
Total income from investment operations................. 0.42 0.87 0.28
LESS DISTRIBUTIONS:
Dividends from net investment income.............. 0.30 0.59 0.07
Distributions from net realized gain.............. 0.00 0.00 0.00
-------- -------- --------
Total distributions..................................... 0.30 0.59 0.07
-------- -------- --------
Net asset value, end of period.......................... $ 10.61 10.49 10.21
======== ======== ========
Total return ........................................... 4.06%** 8.86% 2.79%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $130,088 104,385 40,505
Ratio to average net assets of:
Expenses, net of waivers and reimbursements....... 0.23%* 0.46% 0.89%*
Expenses, before waivers and reimbursements....... 0.58%* 0.65% 0.89%*
Net investment income, net of waivers
and reimbursements........................... 5.77%* 5.92% 5.59%*
Net investment income, before waivers
and reimbursements........................... 5.42%* 5.73% 5.59%*
Portfolio turnover rate................................. 120% 136% 4%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
27
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $214,192).................... $276,106
Interest receivable...................................................... 714
Receivable for securities sold........................................... 426
Dividends receivable..................................................... 74
Cash..................................................................... 24
--------
Total Assets................................................................... 277,344
LIABILITIES
Payable for securities purchased......................................... 1,309
Investment advisory fees payable......................................... 145
Accrued expenses payable................................................. 74
--------
Total Liabilities.............................................................. 1,528
--------
Net Assets..................................................................... $275,816
========
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... $210,074
Accumulated net realized gain ........................................... 3,244
Net unrealized appreciation.............................................. 61,914
Undistributed net investment income...................................... 584
--------
Net Assets..................................................................... $275,816
========
Net Asset Value Per Share (based on net assets of $275,816 and 15,247 shares
issued and outstanding).................................................. $ 18.09
========
</TABLE>
See accompanying notes to the financial statements
28
<PAGE>
STATEMENT OF OPERATIONS
ASSET ALLOCATION FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest............................................... $ 1,876
Dividends.............................................. 1,071
-------
Total Investment Income...................................... 2,947
EXPENSES
Investment advisory fees............................... 677
Fund administration fees............................... 52
Fund accounting fees................................... 21
Custodian fees......................................... 9
Legal fees............................................. 6
Transfer agent fees.................................... 6
Audit fees............................................. 6
Registration fees...................................... 5
Trustees fees.......................................... 3
Other.................................................. 3
-------
Total Expenses............................................... 788
Less: Fee Waiver............................................ 417
-------
Net Expenses................................................. 371
-------
Net Investment Income........................................ 2,576
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments............... 2,672
Change in net unrealized appreciation on investments... 23,179
-------
Net realized and unrealized gain ...................... 25,851
-------
Net Increase in Net Assets from Operations................... $28,427
=======
See accompanying notes to the financial statements
29
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
ASSET ALLOCATION FUND
UNAUDITED
11/01/97 YEAR
In thousands THROUGH ENDED
04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 2,576 2,545
Net realized gain................................... 2,672 6,331
Change in net unrealized appreciation............... 23,179 29,245
-------- -------
Increase in net assets from operations.............. 28,427 38,121
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (2,263) (2,279)
Net realized gain................................... (5,607) (290)
-------- -------
Total distributions................................. (7,870) (2,569)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 112,479 72,743
Reinvestment of distributions....................... 7,815 5,130
Cost of shares redeemed ............................ (29,920) (36,820)
-------- -------
Increase in net assets from capital transactions.... 90,374 41,053
-------- -------
Increase in net assets.................................... 110,931 76,605
Net assets at beginning of year........................... 164,885 88,280
-------- -------
Net assets at end of year................................. $275,816 164,885
======== =======
Undistributed net investment income....................... $ 584 271
======== =======
See accompanying notes to the financial statements
30
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE
---------- ---------
<S> <C> <C>
COMMON STOCKS
COMMON STOCKS - BASIC MATERIALS
CHEMICAL - 0.8%
Dupont De Nemours & Co. 21,716 $ 1,581
Polymer Group, Inc.* 47,274 579
--------
2,160
PAPER & FOREST PRODUCTS - 0.9%
Caraustar Industries 40,000 1,370
Fibermark, Inc.* 60,000 1,238
--------
2,608
--------
Total Common Stocks - Basic
Materials - 1.7% 4,768
COMMON STOCKS - CAPITAL GOODS
AEROSPACE & DEFENSE - 2.5%
Boeing 36,516 1,828
DeCrane Aircraft Holdings* 38,000 682
GM Hughes Electronics* 25,000 1,381
Kellstrom Industries, Inc.* 40,000 1,035
United Technologies Corp. 19,021 1,872
--------
6,798
CONSTRUCTION -1.3%
Interface, Inc. 87,251 3,703
ELECTRICAL EQUIPMENT - 1.9%
General Electric 42,712 3,636
Triumph Group, Inc.* 36,649 1,658
--------
5,294
ENVIRONMENTAL - 3.6%
Allied Waste Industries, Inc.* 118,318 3,254
Newpark Resources, Inc.* 99,184 2,387
Philip Services Corp.* 190,000 1,437
Tyco International Ltd. 3,000 164
SHARES VALUE
---------- ---------
USA Waste Services, Inc.* 41,516 $ 2,037
Waste Industries, Inc.* 25,000 511
--------
9,790
MACHINERY/EQUIPMENT - 2.7%
AGCO Corp. 64,016 1,712
Deere & Co. 49,395 2,887
Illinois Tool Works 16,364 1,154
Sundstrand Corp. 23,637 1,632
--------
7,385
--------
Total Common Stocks - Capital
Goods - 12.0% 32,970
COMMON STOCKS - COMMUNICATION SERVICES
CELLULAR AND WIRELESS - 1.8%
Echostar Communications* 29,625 780
Paging Network, Inc.* 99,779 1,403
Panamsat Corp.* 34,668 2,026
Vanguard Cellular Systems* 42,971 816
--------
5,025
LONG DISTANCE - 0.2%
Star Telecommunications* 17,000 460
TELEPHONE - 0.8%
Cincinnati Bell 35,000 1,339
Clearnet Communications* 30,728 428
Premiere Technologies* 12,500 398
--------
2,165
--------
Total Common Stocks - Communication
Services - 2.8% 7,650
COMMON STOCKS - CONSUMER CYCLICAL
FURNITURE - 0.9%
Meadowcraft, Inc.* 107,500 1,680
See accompanying notes to the financial statements
31
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ---------
Miller Herman, Inc. 30,000 $ 906
--------
2,586
PRINTING & PUBLISHING - 2.0%
Getty Images, Inc.* 56,000 1,281
Harcourt General, Inc. 17,998 939
Journal Register Co.* 35,700 806
Scholastic Corp.* 36,800 1,371
Tribune Co. 16,388 1,082
--------
5,479
RESTAURANTS AND LODGING - 0.6%
Host Marriot Corp.* 80,000 1,555
RETAIL - GENERAL - 0.8%
Home Depot 23,637 1,646
Petsmart, Inc.* 45,000 529
--------
2,175
--------
Total Common Stocks - Consumer
Cyclical - 4.3% 11,795
COMMON STOCKS - CONSUMER STAPLES
BEVERAGES - 1.3%
Coca-Cola Enterprises 45,000 1,699
Panamerican Beverages 45,758 1,825
--------
3,524
BROADCASTING - 7.9%
American Radio Systems Corp.* 7,000 464
Canwest Global Comm Corp. 81,456 1,527
Chancellor Media Corp.* 80,550 3,821
Clear Channel Communications* 62,338 5,875
Cox Radio, Inc.* 31,516 1,525
Jacor Communications* 15,000 853
Outdoor Systems, Inc.* 69,138 2,195
Time Warner, Inc. 37,577 2,950
SHARES VALUE
---------- ---------
TV Azteca SA ADR 62,500 $ 1,164
Young Broadcasting Corp.* 30,000 1,500
--------
21,874
CONTAINER - 1.0%
Bway Corp.* 35,455 933
Crown Cork & Seal 10,000 521
Libbey, Inc. 35,000 1,321
--------
2,775
COSMETICS/TOILETRIES - 1.0%
Fort James Corp. 53,651 2,662
ENTERTAINMENT - 1.6%
Viacom, Inc. A* 11,912 688
Viacom, Inc. B* 14,490 840
Walt Disney Co. 23,682 2,944
--------
4,472
FOOD PRODUCERS - 0.3%
Dean Foods Co 15,000 703
Omega Protein Corp.* 5,000 88
--------
791
FOOD RETAILERS - 2.0%
Dominick's Supermarkets, Inc.* 27,261 1,092
Kroger* 82,184 3,441
Safeway, Inc.* 30,000 1,148
--------
5,681
--------
Total Common Stocks -
Consumer Staples - 15.1% 41,779
COMMON STOCKS - ENERGY
EXPLORATION/DRILLING - 2.1%
Core Laboratories N.V.* 86,000 2,440
Pride International, Inc.* 45,000 1,094
TransCoastal Marine Svcs, Inc.* 40,000 460
See accompanying notes to the financial statements
32
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ---------
Transocean Offshore, Inc. 31,258 $ 1,747
--------
5,741
OIL & GAS - DOMESTIC - 0.4%
Oryx Energy* 25,000 653
R & B Falcon Corp.* 20,000 641
--------
1,294
OIL & GAS SERVICE - 2.2%
Eagle Geophysical, Inc.* 40,000 745
Petroleum Geo Services ADR * 36,789 2,419
Schlumberger 17,500 1,450
Superior Energy Services, Inc.* 130,000 1,446
--------
6,060
--------
Total Common Stocks - Energy - 4.7% 13,095
COMMON STOCKS - FINANCE
BANKS - 3.4%
Banc One Corp. 20,570 1,210
BankAmerica Corp. 10,000 850
Bankboston Corp. 10,000 1,079
Bankers Trust Corp. 10,000 1,291
Chase Manhattan 7,450 1,032
NationsBank Corp. 36,626 2,774
State Street Corp. 3,400 243
Texas Regional Bancshares 29,547 975
--------
9,454
FINANCIAL SERVICES - 3.8%
Amresco, Inc.* 35,000 1,269
Associates First Capital Corp. 25,758 1,925
Household International 10,000 1,314
Morgan Stanley Dean Witter 17,500 1,380
PMI Group, Inc. 20,000 1,625
Sirrom Capital Corp. 51,400 1,536
SHARES VALUE
---------- ---------
Student Loan Marketing Assn. 27,576 $ 1,177
United PanAm Financial Co.* 10,000 133
--------
10,359
INSURANCE - 0.9%
American International Group 17,952 2,362
REAL ESTATE/REITS - 5.2%
Chastain Capital Corp.* 50,000 744
Colonial Properties Trust 51,350 1,524
Excel Legacy Corp.* 50,300 264
Excel Realty Trust 50,300 1,346
First Industrial Realty Trust 43,335 1,408
Hanover Capital Mortgage 55,500 957
Hanover Capital Mortgage Wts 55,500 194
Health Care REIT, Inc. 41,375 1,151
Imperial Credit Commercial 90,000 1,299
Kilroy Realty 40,000 1,060
LaSalle Hotel Properties* 30,000 548
Mack-Cali Realty Corp. 33,122 1,244
Ocwen Asset Investment Corp. 82,000 1,507
Spieker Properties, Inc. 26,416 1,047
--------
14,293
SAVINGS AND LOAN - 0.5%
Washington Mutual, Inc. 21,200 1,485
--------
Total Common Stocks - Finance - 13.8% 37,953
COMMON STOCKS - HEALTH CARE
DRUGS - 1.5%
Lilly Eli & Co. 10,000 696
Merck & Co. 14,758 1,778
Schering Plough Corp. 21,904 1,755
--------
4,229
See accompanying notes to the financial statements
33
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ---------
MEDICAL PRODUCTS & SUPPLIES - 3.1%
Abbott Labs 24,061 $ 1,759
Becton Dickenson Co. 30,758 2,142
Johnson & Johnson Co. 49,516 3,534
Ocular Sciences, Inc.* 35,000 980
--------
8,415
MEDICAL SERVICES - 0.3%
Atria Communities, Inc.* 50,000 963
--------
Total Common Stocks -
Health Care - 4.9% 13,607
COMMON STOCKS - MISCELLANEOUS
PROFESSIONAL SERVICES - 1.4%
Billing Information Concepts* 65,316 1,829
Rental Service Group* 68,000 1,976
--------
Total Common Stocks -
Miscellaneous - 1.4% 3,805
COMMON STOCKS - TECHNOLOGY
COMMUNICATION EQUIPMENT - 0.6%
Amerilink Corp.* 16,500 382
Glenayre Technologies * 46,143 724
Powerwave Technologies, Inc.* 33,637 635
--------
1,741
COMPUTER RELATED- 3.8%
Compaq Computers Corp. 85,004 2,385
Dell Computer Corp.* 15,000 1,211
EMC Corp Massachusetts, Inc.* 68,728 3,170
Hewlett-Packard Co. 29,334 2,209
International Business Machines 6,000 695
SHARES VALUE
---------- ---------
Sun Microsystems* 18,874 $ 777
--------
10,447
COMPUTER SERVICES - 0.2%
Quanta Services, Inc.* 30,000 441
COMPUTER SOFTWARE - 2.0%
CSG Systems Intl, Inc.* 39,700 1,806
DSET Corp.* 23,000 385
First Data 37,677 1,276
Saville Systems Ireland ADR* 32,684 1,630
Simulation Sciences, Inc.* 30,000 299
--------
5,396
PHOTOGRAPHY/IMAGING - 1.1%
Splash Technology Holdings* 36,500 680
Xerox Corp. 21,800 2,474
--------
3,154
SEMICONDUCTORS - 0.5%
Intel Corp 17,500 1,414
--------
Total Common Stocks - Technology - 8.2% 22,593
COMMON STOCKS - TRANSPORTATION
MISCELLANEOUS - 0.2%
C.H. Robinson Worldwide, Inc. 25,000 572
TRUCKING & SHIPPING - 0.3%
Heartland Express, Inc.* 35,758 890
--------
Total Common Stocks
- Transportation - 0.5% 1,462
--------
Total Common Stocks - 69.4%
(cost - $130,582) 191,477
See accompanying notes to the financial statements
34
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
---------- ---------
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCY - 4.0%
Federal Home Loan Mortgage Corp.
5.470% due 05/08/98 $ 570 $ 569
5.440% due 05/28/98 10,500 10,457
--------
11,026
U.S. GOVERNMENT OBLIGATIONS - 4.7%
U.S. Treasury Notes
6.000% due 05/31/98 1,843 1,844
7.125% due 09/30/99 661 674
7.750% due 01/31/00 1,508 1,561
5.750% due 11/15/00 7,000 7,022
6.500% due 08/31/01 1,727 1,770
--------
12,871
--------
Total U.S. Government Securities - 8.7%
(cost - $23,851) 23,897
CORPORATE BONDS
AUTO & TRUCK - 0.4%
Chrysler Finance Corp.
6.950% due 03/25/02 1,000 1,024
BANKS - 0.6%
NationsBank Corp.
7.500% due 09/15/06 1,576 1,687
BEVERAGES - 0.0%
Canandaigua Wine
8.750% due 02/15/03 100 103
PRINCIPAL
AMOUNT VALUE
---------- ---------
BROADCASTING - 0.3%
Clear Channel Communications
2.625% due 04/01/03 $ 750 $ 750
CELLULAR & WIRELESS - 0.2%
Airtouch Communications
7.000% due 10/01/03 788 813
COMPUTER SOFTWARE - 0.3%
Oracle Corp.
6.720% due 02/15/04 750 762
CONSTRUCTION - 0.7%
Case Corp.
6.750% due 10/21/07 1,000 1,018
Southdown, Inc.
10.00% due 03/01/06 788 877
--------
1,895
FOOD PRODUCERS - 1.1%
Nabisco Inc.
6.125% due 02/01/33 3,000 2,960
FOOD RETAILERS - 0.4%
Kroger
7.650% due 04/15/07 1,000 1,073
LEISURE TIME - 0.9%
Brunswick Corp.
6.750% due 12/15/06 300 305
See accompanying notes to the financial statements
35
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
---------- ---------
Hilton Hotels Corp.
7.000% due 07/15/04 $ 1,000 $ 992
Royal Caribbean Cruises
7.000% due 10/15/07 1,000 1,018
--------
2,315
MACHINERY - 0.7%
John Deere Capital Co.
5.850% due 01/15/01 2,000 1,992
METALS & MINING - 0.4%
Phelps Dodge
6.375% due 11/01/04 1,000 1,002
PRINTING & PUBLISHING - 0.2%
Tribune Company
6.875% due 11/01/06 800 827
REITS - 0.4%
Omega Healthcare Investors
6.950% due 08/01/07 1,000 994
TELEPHONE - 0.3%
US West Capital Funding
6.850% due 01/15/02 800 812
UTILITIES - ELECTRIC - 0.3%
Korea Electric Power
7.000% due 10/01/02 1,000 912
UTILITIES - NATURAL GAS - 0.7%
Enron Corp
6.625% due 11/15/05 1,000 1,009
PRINCIPAL
AMOUNT
OR SHARES VALUE
---------- ---------
6.500% due 12/01/07 $ 1,000 $ 1,008
--------
2,017
--------
Total Corporate Bonds - 7.9%
(cost - $21,632) 21,938
CONVERTIBLE SECURITIES
CONVERTIBLE BOND - 1.9%
General Motors Acceptance Corp.
5.625% due 01/22/03 1,300 1,282
Panamsat
6.000% due 01/15/03 3,000 2,953
Waste Management, Inc.
6.625% due 07/15/02 1,000 1,007
--------
5,242
CONVERTIBLE PREFERRED STOCKS - 1.9%
Evergreen Media Corp. 10,000 978
Merrill Lynch STRYPES 22,243 1,625
Merrill Lynch Trust 80,000 1,965
Microsoft Corp. 6,700 624
--------
5,192
--------
Total Convertible Securities - 3.8%
(cost - $9,767) 10,434
COMMERCIAL PAPER
ASSET BACKED SECURITIES - 4.8%
Asset Securitization Corp.
5.520% due 05/08/98 5,000 4,995
Preferred Receivables Funding
5.500% due 05/22/98 8,115 8,089
--------
13,084
See accompanying notes to the financial statements
36
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
---------- ---------
AUTO & TRUCK - 0.1%
Ford Motor Credit Corp.
5.536% due 05/28/98 $ 350 $ 350
ELECTRICAL EQUIPMENT - 0.8%
General Electric Capital Corp.
5.573% due 06/19/98 2,200 2,200
FINANCIAL SERVICES - 4.6%
American Express Credit Corp.
5.511% due 05/01/98 150 150
5.513% due 05/04/98 500 500
5.536% due 05/28/98 1,000 1,000
5.537% due 06/03/98 300 300
Merrill Lynch and Co.
5.510% due 05/29/98 6,100 6,074
5.510% due 06/08/98 4,655 4,628
--------
12,652
--------
Total Commercial Paper - 10.3%
(cost - $28,286) 28,286
PRINCIPAL
AMOUNT VALUE
---------- ---------
DEMAND NOTE
UTILITY - ELECTRICAL - 0.0%
Wisconsin Electric
5.235% due 05/01/98
(cost - $74) $ 74 $ 74
--------
TOTAL INVESTMENTS - 100.1%
(cost - $214,192) 276,106
Liabilities, less cash
and other assets - (0.1%) (290)
--------
TOTAL NET ASSETS - 100.0% $275,816
========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements
37
<PAGE>
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR YEAR
THROUGH ENDED ENDED
Selected per share data 04/30/98 10/31/97 10/31/96
---------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 16.60 12.75 12.04
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.20 0.27 0.31
Net realized and unrealized gain............... 2.03 3.85 1.01
---------- -------- --------
Total income from investment operations.............. 2.23 4.12 1.32
LESS DISTRIBUTIONS:
Dividends from net investment income........... 0.19 0.24 0.31
Distributions from net realized gain........... 0.55 0.03 0.30
---------- -------- --------
Total distributions.................................. 0.74 0.27 0.61
---------- -------- --------
Net asset value, end of period....................... $ 18.09 16.60 12.75
========== ======== ========
Total return......................................... 13.88%** 32.61% 11.06%
========== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............. $ 275,816 164,885 88,280
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.... 0.36%* 0.56% 0.87%
Expenses, before waivers and reimbursements.... 0.76%* 0.78% 0.87%
Net investment income, net of waivers
and reimbursements........................ 2.46%* 1.90% 2.48%
Net investment income, before waivers
and reimbursements........................ 2.06%* 1.68% 2.48%
Portfolio turnover rate.............................. 13% 64% 120%
Average commission rate paid per share............... $ 0.0599 0.0593 0.0585
- --------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
38
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
ASSET ALLOCATION FUND
UNAUDITED
YEAR 03/03/94
ENDED THROUGH
Selected per share data 10/31/95 10/31/94
--------- --------
Net asset value, beginning of period..................... $ 9.97 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................. 0.24 0.17
Net realized and unrealized gain................... 2.41 0.01
--------- -------
Total income from investment operations.................. 2.65 0.18
LESS DISTRIBUTIONS:
Dividends from net investment income............... 0.24 0.16
Distributions from net realized gain............... 0.34 0.05
--------- -------
Total distributions...................................... 0.58 0.21
--------- -------
Net asset value, end of period........................... $ 12.04 9.97
========= =======
Total return............................................. 26.92% 1.84%**
========= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. $ 73,775 10,189
Ratio of expenses to average net assets.................. 0.96% 1.25%*
Ratio of net investment income to average net assets..... 2.73% 2.63%*
Portfolio turnover rate.................................. 95% 64%
- -------------------------------------------------------------------------------
* Annualized
** Not annualized
See accompanying notes to the financial statements
39
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $193,841).................... $250,146
Dividends receivable..................................................... 226
Variation margin......................................................... 33
Interest receivable...................................................... 21
--------
Total Assets................................................................... 250,426
LIABILITIES
Payable for fund shares redeemed......................................... 16,249
Payable for securities purchased......................................... 352
Payable to custodian..................................................... 81
Accrued expenses payable................................................. 76
Investment advisory fees payable......................................... 61
--------
Total Liabilities.............................................................. 16,819
--------
Net Assets..................................................................... $233,607
========
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... 174,198
Accumulated net realized gain ........................................... 1,801
Net unrealized appreciation.............................................. 56,284
Undistributed net investment income...................................... 1,324
--------
Net Assets..................................................................... $233,607
========
Net Asset Value Per Share (based on net assets of $233,607 and 14,138 shares
issued and outstanding).................................................. $ 16.52
========
</TABLE>
See accompanying notes to the financial statements
40
<PAGE>
STATEMENT OF OPERATIONS
S&P 500 INDEX FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Dividends.................................................... $ 1,360
Interest..................................................... 546
Other ....................................................... 1
-------
Total Investment Income............................................ 1,907
EXPENSES
Investment advisory fees..................................... 296
Fund administration fees..................................... 49
Fund accounting fees......................................... 26
Custodian fees............................................... 8
Transfer agent fees.......................................... 7
Registration fees............................................ 5
Audit fees................................................... 5
Legal fees................................................... 4
Trustees fees................................................ 3
Other........................................................ 2
-------
Total Expenses..................................................... 405
Less: Fee Waiver.................................................. 197
-------
Net Expenses....................................................... 208
-------
Net Investment Income.............................................. 1,699
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments..................... 188
Net realized gain on futures contracts....................... 1,529
Change in net unrealized appreciation on investments......... 35,961
Change in net unrealized appreciation on futures contracts... 76
-------
Net realized and unrealized gain ............................ 37,754
-------
Net Increase in Net Assets from Operations......................... $39,453
=======
See accompanying notes to the financial statements
41
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
S&P 500 INDEX FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 1,699 1,725
Net realized gain................................... 1,717 4,249
Change in net unrealized appreciation............... 36,037 19,397
-------- --------
Increase in net assets from operations.............. 39,453 25,371
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (1,957) (145)
Net realized gain................................... (4,165) 0
-------- --------
Total distributions................................. (6,122) (145)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 124,347 92,357
Reinvestment of distributions....................... 6,122 182
Cost of shares redeemed ............................ (48,805) (25,005)
-------- --------
Increase in net assets from capital transactions.... 81,664 67,534
-------- --------
Increase in net assets.................................... 114,995 92,760
Net assets at beginning of period......................... 118,612 25,852
-------- --------
Net assets at end of period............................... $233,607 118,612
======== ========
Undistributed net investment income....................... $ 1,324 1,582
======== ========
See accompanying notes to the financial statements
42
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE
--------- ---------
<S> <C> <C>
COMMON STOCKS
COMMON STOCKS - BASIC MATERIALS
CHEMICALS - 2.3%
Air Products & Chemicals, Inc. 2,939 $ 256
Dow Chemical 5,948 575
DuPont De Nemours & Co. 29,718 2,164
Eastman Chemical Co. 2,062 142
Ecolab, Inc. 3,402 108
FMC Corp.* 1,031 80
Goodrich BF Co. 1,593 86
Hercules, Inc. 2,599 124
Monsanto Co. 15,628 826
Nalco Chemical Co. 1,754 70
PPG Industries 4,702 332
Praxair, Inc. 4,178 210
Rohm & Haas Co. 1,654 178
Union Carbide Corp. 3,255 158
--------
5,309
CHEMICALS-SPECIALTY - 0.2%
Englehard Corp. 3,744 79
Great Lakes Chemical 1,601 80
International Flavors & Fragrance 2,939 144
Morton International, Inc. 3,517 113
Sigma-Aldrich Corp. 2,632 105
W.R. Grace & Co.* 1,924 39
--------
560
METALS & MINING - 0.7%
Alcan Aluminum Ltd. 6,033 196
Aluminum Co. of America 4,594 356
Asarco, Inc. 1,012 25
Barrick Gold Corp. 9,842 221
Battle Mountain Gold Co. 6,033 43
SHARES VALUE
--------- ---------
Cyprus Amax Mineral Co. 2,478 $ 43
Freeport McMoran Copper 5,109 96
Homestake Mining Co. 3,871 45
Inco Ltd. 4,386 77
Newmont Mining Corp. 4,132 133
Phelps Dodge 1,554 104
Placer Dome, Inc. 6,294 93
Reynolds Metals 1,901 125
--------
1,557
PAPER & FOREST PRODUCT - 0.8%
Bemis Co. 1,393 62
Boise Cascade 1,539 58
Champion International 2,578 139
Georgia Pacific Co. 2,424 187
International Paper 8,000 417
Louisiana-Pacific Co. 2,939 64
Mead Corp. 2,686 93
Potlatch Corp. 750 36
Stone Container Corp. 2,632 43
Temple Inland 1,547 100
Union Camp Corp. 1,854 112
Westvaco Corp. 2,659 81
Weyerhaeuser Co. 5,263 303
Willamette Industries 2,894 112
--------
1,807
STEEL - 0.2%
Allegheny Teledyne, Inc. 5,121 130
Armco, Inc.* 2,886 20
Bethlehem Steel 2,939 46
Inland Steel Industries 1,339 39
Nucor Corp. 2,370 142
USX-US Steel 2,270 89
See accompanying notes to the financial statements
43
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Worthington Inds, Inc. 2,624 $ 47
--------
513
--------
Total Common Stocks - Basic
Materials - 4.2% 9,746
COMMON STOCKS - CAPITAL GOODS
AEROSPACE & DEFENSE - 1.4%
Boeing Co. 26,320 1,318
General Dynamics Corp. 3,202 135
Lockheed Martin Corp. 5,071 565
Northrop Grumman Corp. 1,774 187
Rockwell International Corp. 5,279 295
United Technologies Corp. 6,202 611
--------
3,111
CONSTRUCTION - 0.4%
Case Equipment Corp. 1,908 121
Centex Corp. 1,646 57
Crane Co. 1,275 69
Fluor Corp. 2,170 103
Kaufman & Broad Home Corp. 1,031 30
Masco Co. 4,332 251
McDermott International 1,493 62
Owens Corning 1,393 58
Pulte Corp. 569 29
--------
780
ELECTRICAL EQUIPMENT - 3.8%
AMP, Inc. 5,759 226
Emerson Electric Co. 11,666 742
General Electric 86,098 7,329
Grainger WW, Inc. 1,320 144
Honeywell 3,355 312
Raychem 2,270 91
SHARES VALUE
--------- ---------
Thomas & Betts Co. 1,431 $ 84
--------
8,928
ENVIRONMENTAL - 0.8%
Browning Ferris 5,125 175
Johnson Controls 2,170 129
Laidlaw, Inc. 8,357 116
Millipore Corp. 1,112 38
Thermo Electron Corp.* 4,000 159
Tyco International Ltd 15,048 820
Waste Management, Inc. 11,950 400
--------
1,837
MACHINERY - EQUIPMENT - 1.1%
Aeroquip - Vickers, Inc. 750 48
Briggs & Stratton 650 29
Caterpillar, Inc. 9,912 564
Cincinnati Milacron, Inc. 1,031 32
Cooper Industries 3,239 217
Cummins Engine 1,031 56
Deere & Co. 6,610 386
Dover Co. 5,886 232
Foster Wheeler Corp. 1,085 30
General Signal Co. 1,339 59
Harnischfeger 1,266 36
Illinois Tool Works 6,602 465
Ingersoll Rand Co. 4,308 198
NACCO Industries 194 33
Pall Corp. 3,393 67
Parker Hannifin 2,893 129
Timken Co. 1,608 64
--------
2,645
OFFICE SUPPLIES - 0.2%
Avery Dennison Co. 2,686 141
See accompanying notes to the financial statements
44
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Moore Corp. 2,332 $ 37
Pitney Bowes, Inc. 7,542 362
--------
540
--------
Total Common Stocks - Capital
Goods - 7.7% 17,841
COMMON STOCKS - COMMUNICATION SERVICES
CELLULAR & WIRELESS - 0.4%
Airtouch Communications* 13,258 704
Nextel Communications, Inc.* 7,650 219
--------
923
LONG DISTANCE - 2.2%
AT & T Corp. 42,730 2,566
MCI Communications 18,360 924
Sprint Corp. 11,350 775
Worldcom, Inc.* 23,765 1,017
--------
5,282
TELEPHONE - 4.0%
Alltel Corp. 4,856 208
Ameritech Corp. 28,794 1,226
Bell Atlantic 20,378 1,907
Bell South Corp. 26,063 1,673
Frontier Corp. 4,300 129
GTE Corp. 25,139 1,469
SBC Communications, Inc. 48,162 1,996
US West, Inc. - Comm Group 12,689 669
--------
9,277
--------
Total Common Stocks -
Communication Services - 6.6% 15,482
COMMON STOCKS - CONSUMER CYCLICAL
APPAREL & TEXTILE - 0.4%
Fruit of The Loom, Inc.* 1,862 70
SHARES VALUE
--------- ---------
Liz Claiborne, Inc. 1,808 $ 89
National Service Inds. 1,139 62
Nike, Inc. 7,633 364
Reebok International Ltd. 1,547 45
Russell Corp. 1,031 28
Spring Industries 602 33
VF Corp. 3,154 164
--------
855
AUTO & TRUCK - 1.6%
Chrysler Corp. 17,133 689
Ford Motor Co. 31,564 1,446
General Motors Corp. 18,568 1,251
ITT Industries, Inc. 3,147 115
Navistar International* 1,862 56
Paccar, Inc. 2,062 122
--------
3,679
AUTO PARTS - 0.5%
Cooper Tire & Rubber Co. 2,070 49
Dana 2,732 162
Eaton Corp. 2,062 190
Echlin, Inc. 1,601 76
Genuine Parts Co. 4,720 170
Goodyear Tire & Rubber 4,178 292
Snap on Tools, Inc. 1,601 68
TRW, Inc. 3,209 169
--------
1,176
FURNITURE & APPLIANCES - 0.4%
Armstrong World Industries 1,031 88
Black & Decker 2,470 128
Maytag Corp. 2,532 130
Newell Co. 4,205 203
Rubbermaid, Inc. 3,971 114
Stanley Works 2,324 119
See accompanying notes to the financial statements
45
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Whirlpool Corp. 1,962 $ 141
--------
923
PRINTING & PUBLISHING - 1.0%
American Greetings Co. 1,962 91
Deluxe Corp. 2,116 71
Donnelley RR & Sons 3,824 168
Dow Jones & Co. 2,578 126
Dun & Bradstreet 4,540 161
Gannett Co., Inc. 7,488 509
Harcourt General, Inc. 1,908 100
Jostens, Inc. 1,031 24
Knight Ridder, Inc. 2,178 127
McGraw Hill Cos,, Inc.. 2,632 204
Meredith Corp. 1,346 58
New York Times 2,532 180
Omnicom Group 4,340 206
Times Mirror Co. 2,586 158
Tribune Co. 3,202 211
--------
2,394
LEISURE TIME - 0.3%
Brunswick Corp. 2,632 86
Fleetwood Enterprises 977 45
Harrah's Entertainment, Inc.* 2,686 70
Hasbro, Inc. 3,355 123
Mattel, Inc. 7,688 295
Mirage Resorts, Inc.* 4,700 104
--------
723
RESTAURANTS & LODGING - 0.2%
Hilton Hotels Corp. 6,602 211
Marriott International 6,710 221
--------
432
RETAIL - DISCOUNT - 1.6%
Consolidated Stores* 2,900 116
SHARES VALUE
--------- ---------
K Mart 12,797 $ 223
TJX Cos, Inc. 4,316 191
Toys "R" Us, Inc.* 7,472 206
Wal-Mart Stores, Inc. 59,320 2,999
Woolworth Corp. 3,509 81
--------
3,816
RETAIL - GENERAL - 1.1%
Costco Companies, Inc.* 5,609 313
Dayton Hudson Corp. 5,725 500
Dillard Dept. Stores 2,893 106
Federated Department Stores* 5,571 274
May Department Stores 6,129 378
Mercantile Stores Co. 958 70
Penny JC Co. 6,533 464
Sears Roebuck & Co. 10,319 612
--------
2,717
RETAIL SPECIALTY - 1.6%
Autozone, Inc.* 4,000 121
Cendant Corp.* 21,353 534
Circuit City Stores, Inc. 2,632 107
Gap, Inc. 10,449 537
Home Depot, Inc. 19,214 1,338
The Limited Ltd. 7,146 240
Lowes Companies 4,540 318
Nordstrom, Inc. 2,016 132
Pep Boys - Manny, Mo, Jack 1,601 35
Sherwin Williams 4,540 162
Tandy Corp. 2,694 134
--------
3,658
--------
Total Common Stocks -
Consumer Cyclical - 8.7% 20,373
See accompanying notes to the financial statements
46
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
COMMON STOCKS - CONSUMER STAPLES
BEVERAGES - 3.3%
Anheuser-Busch Companies, Inc. 13,004 $ 596
Brown Foremann 1,854 105
Coca-Cola Co. 65,107 4,940
Coors, Adolph, Inc. 1,031 37
Pepsico, Inc. 39,929 1,585
Seagrams Co. Ltd. 9,357 399
--------
7,662
BROADCASTING - 1.5%
CBS, Inc. 18,542 661
Clear Channel Communications* 3,100 292
Comcast Corp. 9,172 328
Tele Communications, Inc.* 13,333 430
Time Warner, Inc. 15,267 1,198
US West Media Group, Inc.* 16,067 607
--------
3,516
CONTAINERS - 0.2%
Ball Corp. 823 32
Crown Cork & Seal 3,355 175
Owens-Illinois, Inc.* 3,700 146
Sealed Air Corp.* 2,281 143
Tupperware Corp. 1,601 43
--------
539
COSMETIC & TOILETRIES - 3.5%
Alberto-Culver Co. 1,500 44
Avon Products, Inc. 3,509 288
Cardinal Health, Inc. 2,900 279
Clorox Co. 2,686 225
Colgate Palmolive Co. 7,742 694
CVS Corp. 4,986 368
Fort James Corp. 5,570 276
Gillette Co. 14,812 1,710
SHARES VALUE
--------- ---------
Kimberly Clark 14,500 $ 736
Longs Drug Stores 1,084 31
Procter & Gamble 35,320 2,903
Rite Aid Corp. 6,540 210
Walgreen Co. 13,004 449
--------
8,213
ENTERTAINMENT - 1.2%
King World Productions, Inc.* 2,062 55
Walt Disney Co. 17,759 2,208
Viacom, Inc. Class B* 9,242 536
--------
2,799
FOOD PRODUCERS - 2.7%
Archer-Daniels-Midland Co. 15,035 323
BestFoods 7,434 408
Campbell Soup 12,074 620
Conagra, Inc. 12,496 365
General Mills 4,178 282
H J Heinz Co. 9,630 525
Hershey Foods 3,724 273
Kellogg Co. 10,842 447
Pioneer Hi-Bred International 5,448 206
Quaker Oats 3,609 188
Ralston-Purina Group 2,886 306
Sara Lee Corp. 12,697 756
Unilever ADR 16,928 1,263
Vlasic Foods International* 1,207 28
Wrigley WM JR Co. 3,093 275
--------
6,265
FOOD RETAILERS - 0.6%
Albertson's, Inc. 6,383 319
American Stores Co. 7,142 171
Giant Foods 1,601 60
Great Atlantic & Pacific 1,031 32
See accompanying notes to the financial statements
47
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Kroger* 6,702 $ 281
Super-Valu, Inc. 1,554 68
Sysco Corp. 9,096 217
Winn-Dixie Stores, Inc. 3,924 148
--------
1,296
RESTAURANTS - 0.6%
Dardeen Restaurants 3,978 64
McDonalds Corp. 18,022 1,115
Tricon Global Restaurants* 3,982 126
Wendys International 3,455 83
--------
1,388
TOBACCO - 1.1%
Fortune Brands, Inc. 4,540 167
Philip Morris Co., Inc. 63,807 2,381
UST, Inc. 4,802 132
--------
2,680
--------
Total Common Stock - Consumer
Staples - 14.7% 34,358
COMMON STOCKS - ENERGY
COAL, GAS & PIPE - 0.1%
Anadarko Petroleum Corp. 1,600 117
EXPLORATION & DRILLING - 0.2%
Burlington Resources, Inc. 4,661 219
Helmerich & Payne 1,166 36
Union Pacific Resources Group 6,612 158
--------
413
OIL & GAS-DOMESTIC - 1.5%
Amerada Hess Corp. 2,378 137
Amoco Corp. 25,608 1,133
Apache Corp. 2,400 85
Ashland, Inc. 1,954 103
SHARES VALUE
--------- ---------
Atlantic Richfield 8,464 $ 660
Kerr-McGee Co. 1,266 84
Occidental Petroleum 8,964 264
Oryx Energy* 2,686 70
Pennzoil Co. 1,239 79
Phillips Petroleum Co. 6,964 345
Sun Co. 1,862 75
Unocal Corp 6,402 262
USX-Marathon 7,633 273
--------
3,570
OIL & GAS-INTERNATIONAL - 5.0%
Chevron Corp. 17,183 1,421
Exxon Corp. 65,030 4,743
Mobil Corp. 20,646 1,631
Royal Dutch Petroleum ADR 56,456 3,193
Texaco, Inc. 14,428 887
--------
11,875
OIL & GAS-SERVICE - 0.9%
Baker Hughes, Inc. 4,417 179
Dresser Industries 4,548 240
Halliburton Co. 6,886 379
Rowan Companies, Inc.* 2,270 67
Schlumberger 12,996 1,077
Western Atlas, Inc.* 1,393 110
--------
2,052
--------
Total Common Stocks - Energy - 7.7% 18,027
COMMON STOCKS - FINANCE
BANK & BANK HOLDING COMPANY - 8.7%
Banc One Corp. 16,937 996
Bank of New York 9,865 583
BankAmerica Corp. 18,292 1,555
See accompanying notes to the financial statements
48
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Bankboston Corporation 3,824 $ 413
Bankers Trust of New York 2,616 338
BB&T Corp. 3,600 242
Chase Manhattan 11,171 1,548
Citicorp 12,043 1,812
Comerica, Inc. 4,039 270
Fifth Third Bancorp 6,043 332
First Chicago NBD Corp. 7,752 720
First Union Corp. 25,511 1,540
Fleet Financial Group, Inc. 6,878 594
Huntington Bancshares 5,000 178
Key Corp. 11,474 455
Mellon Bank 6,710 483
Mercantile Bancorp 3,400 188
Morgan (J.P.) & Co., Inc. 4,702 617
Nations Bank Corp. 24,860 1,883
National City Corp. 8,633 598
Northern Trust Co. 2,900 212
Norwest Corp. 19,906 790
PNC Bank Corp. 7,980 482
Republic New York Corp. 1,447 194
State Street Corp. 4,200 300
Sun Trust Banks, Inc. 5,633 459
Summit Bancorp 4,600 231
Synovus Financial Corp. 4,600 162
US Bancorp 6,447 819
Wachovia Corp. 5,386 457
Wells Fargo & Co. 2,359 869
--------
20,320
FINANCIAL SERVICES - 4.2%
American Express Co. 12,289 1,253
American General Corp. 6,363 424
Associates First Capital Corp. 8,272 618
SHARES VALUE
--------- ---------
Beneficial Corp. 1,393 $ 182
Charles Schwab Corp. 6,900 241
Countrywide Credit Ind, Inc. 2,900 140
Fannie Mae 27,840 1,667
Fed Home Loan Mortgage Corp. 18,292 847
Franklin Resources, Inc. 6,600 353
Green Tree Financial Corp. 3,663 149
Household International 2,878 378
Lehman Brothers Holdings 2,700 192
Marsh & McLennan Co. 4,516 412
MBNA Corp. 13,173 446
Merrill Lynch 8,772 770
Morgan Stanley Dean Witter, Inc. 15,563 1,228
SunAmerica, Inc. 5,100 255
Transamerica Corp. 1,654 191
--------
9,746
INSURANCE - 4.2%
Allstate Corp. 11,312 1,089
American International Group 18,452 2,428
Aon Corp. 4,408 284
CHUBB Group 4,494 355
Cigna Corp. 1,962 406
Cincinnati Financial Corp. 1,400 178
Conseco, Inc. 5,000 248
General RE Corp. 2,062 461
Hartford Financial Services 3,147 349
Jefferson Pilot 2,842 167
Lincoln National Corp. 2,686 239
Loews Corp. 2,993 299
MBIA, Inc. 2,370 177
MGIC Investment 2,994 189
Progressive Corp. 1,900 257
Providian Corp. 2,478 149
See accompanying notes to the financial statements
49
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Safeco Corp. 3,301 $ 165
St. Paul Companies 2,170 184
Torchmark Corp. 3,716 166
Travelers Group, Inc. 30,161 1,845
Unum Corp. 3,716 200
--------
9,835
REAL ESTATE - 0.0%
Franchise Finance Corp. 2,300 62
SAVINGS & LOAN - 0.4%
Ahmanson H. F. & Co. 2,939 224
Golden West Financial 1,547 163
Washington Mutual, Inc. 6,836 479
--------
866
--------
Total Common Stocks -
Finance - 17.5% 40,829
COMMON STOCKS - HEALTH CARE
BIO-TECHNOLOGY - 0.2%
Allergan Specialty Therapy* 82 1
Amgen* 6,918 412
--------
413
DRUGS - 7.5%
ALZA Corp.* 2,170 104
American Home Products Corp. 17,067 1,589
Bristol-Meyer/Squibb 26,216 2,776
Lilly Eli & Co. 29,194 2,031
Merck & Co. 31,542 3,801
Pfizer, Inc. 33,950 3,864
Pharmacia & Upjohn, Inc. 13,361 562
Schering Plough Corp. 19,306 1,547
Warner-Lambert Co. 7,172 1,357
--------
17,631
SHARES VALUE
--------- ---------
MEDICAL PRODUCTS & SUPPLIES - 2.7%
Abbott Labs 20,238 $ 1,480
Allergan 1,654 69
Bard C.R., Inc. 1,547 55
Bausch & Lomb, Inc. 1,447 72
Baxter International, Inc. 7,372 409
Becton Dickinson Co. 3,201 223
Biomet, Inc. 2,893 87
Boston Scientific Corp.* 5,094 368
Guidant Corp. 3,932 263
Johnson & Johnson Co. 35,289 2,519
Mallinckrodt, Inc. 1,862 60
Medtronic, Inc. 12,388 652
St. Jude Medical 2,403 85
US Surgical Corp. 2,001 63
--------
6,405
MEDICAL SERVICES - 0.9%
Aetna Life and Casualty Co. 3,998 323
Columbia/HCA Healthcare Corp. 16,998 560
Healthsouth Corp.* 10,200 308
Humana, Inc.* 4,232 114
Manor Care, Inc. 1,601 56
Tenet Healthcare Corp.* 8,025 300
United Healthcare Corp. 5,002 351
--------
2,012
--------
Total Common Stocks -
Health Care - 11.3% 26,461
COMMON STOCKS - MISCELLANEOUS
DIVERSIFIED - 1.1%
Allied Signal, Inc. 14,858 651
Cognizant Corp. 4,240 218
Corning Corporation 6,087 243
See accompanying notes to the financial statements
50
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
3M Co. 10,842 $ 1,023
Tenneco, Inc. 4,440 191
Textron, Inc. 4,332 339
--------
2,665
PROFESSIONAL SERVICES - 0.3%
H & R Block 2,686 121
Interpublic GRP Companies, Inc. 3,274 209
Service Corp. International 6,641 274
--------
604
--------
Total Common Stocks -
Miscellaneous - 1.4% 3,269
COMMON STOCKS - TECHNOLOGY
COMMUNICATION EQUIPMENT - 1.7%
Andrew Corp.* 2,336 53
DSC Communications Corp.* 3,093 56
Lucent Technologies 33,790 2,572
Northern Telecom 13,820 841
Scientific - Atlanta, Inc. 2,062 49
Tellabs, Inc.* 4,748 337
--------
3,908
COMPUTER RELATED - 5.0%
3 Com Corp.* 9,086 311
Apple Computer, Inc.* 3,401 93
Cisco Systems, Inc.* 26,843 1,966
Compaq Computers Corp. 39,704 1,114
Data General Corp.* 1,331 20
Dell Computer Corp.* 17,192 1,388
Digital Equipment* 3,978 221
EMC Corp. Massachusetts* 12,982 599
Gateway 2000, Inc.* 4,000 235
Hewlett-Packard Co. 27,386 2,063
International Business Machines 25,564 2,962
SHARES VALUE
--------- ---------
Seagate Technology, Inc.* 6,371 $ 170
Silicon Graphics, Inc.* 4,940 65
Sun Microsystems* 9,804 404
Unisys Corp.* 6,540 147
--------
11,758
COMPUTER - SERVICES - 0.8%
Automatic Data Processing, Inc. 7,687 515
Ceridian Corporation* 2,054 116
Computer Associates 14,344 840
Computer Sciences* 4,178 220
Equifax 4,000 155
--------
1,846
COMPUTER - SOFTWARE - 3.4%
Adobe Systems, Inc. 1,900 95
Autodesk, Inc. 1,266 59
Bay Networks* 5,502 129
Cabletron Systems* 4,224 56
First Data 11,166 378
General Instrument Co.* 3,963 89
HBO & Co. 5,700 341
Microsoft Corp.* 64,260 5,791
Novell, Inc.* 9,188 92
Oracle Systems Corp.* 25,803 668
Parametric Tech Co.* 6,800 217
Shared Medical System 556 41
--------
7,956
ELECTRONICS - 1.0%
Applied Materials, Inc.* 9,596 347
EG&G 1,139 34
Harris Corp. 2,062 100
LSI Logic Corp.* 3,755 102
Motorola, Inc. 15,682 872
National Semiconductor* 4,263 94
See accompanying notes to the financial statements
51
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
--------- ---------
Perkin-Elmer Corp. 1,185 $ 81
Raytheon Co - Class B 8,994 510
Tektronix, Inc. 1,356 58
--------
2,198
PHOTOGRAPHY & IMAGING - 0.7%
Eastman Kodak 8,526 615
Ikon Office Solution 3,455 84
Polaroid Corp. 1,166 51
Xerox 8,564 972
--------
1,722
SEMICONDUCTOR - 1.9%
Advanced Micro Devices* 3,709 103
Intel Corp. 43,046 3,479
KLA-Tencor Corp.* 2,200 89
Micron Technology, Inc. 5,571 173
Texas Instruments 10,312 661
--------
4,505
--------
Total Common Stocks -
Technology - 14.5% 33,893
COMMON STOCKS - TRANSPORTATION
AIR TRANSPORTATION - 0.4%
AMR Corp.* 2,424 369
Delta Airlines 1,916 223
Southwest Airlines Co. 5,825 160
US Airways Group, Inc.* 2,401 171
--------
923
RAILROAD - 0.6%
Burlington Northern Santa Fe 4,026 399
CSX Corp. 5,771 303
Norfolk Southern Co. 9,903 331
Union Pacific Corp. 6,548 358
--------
1,391
SHARES VALUE
--------- ---------
TRUCKING - 0.1%
Federal Express* 3,017 $ 205
Ryder System Co. 2,116 74
--------
279
--------
Total Common Stocks -
Transportation - 1.1% 2,593
COMMON STOCKS - UTILITIES
ELECTRIC - 2.3%
Ameren Corp. 3,632 144
American Electric Power Co. 5,002 239
Baltimore Gas & Electric 3,871 122
Carolina Power & Light 4,024 173
Central & Southwest Corp. 5,571 145
Cinergy Corp. 4,183 146
Consolidated Edison 6,141 278
Dominion Resources 4,894 194
DTE Energy Co. 3,817 150
Duke Power 9,448 547
Edison International 10,058 300
Entergy Corp. 6,387 159
First Energy Corp. 6,024 182
FPL Group, Inc. 4,748 295
General Public Utilities, Inc. 3,147 125
Houston Industries 7,460 217
Niagara Mohawk Power 3,717 46
Northern States Power 1,954 110
Pacificorp 7,741 180
Peco Energy Co. 5,833 139
PP & L Resources, Inc. 4,332 100
PG & E Corp. 11,488 372
Public Service Enterprises 6,148 206
Southern, Co. 18,098 480
See accompanying notes to the financial statements
52
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
AMOUNT
In thousands, except shares OR SHARES VALUE
--------- ---------
Texas Utilities Co. 6,392 $ 256
Unicom Corp. 5,625 195
--------
5,500
NATURAL GAS - 0.7%
Coastal Corp. 2,886 206
Columbia Energy Group 1,474 120
Consolidated Natural Gas 2,478 142
Eastern Enterprises 542 23
Enron Corp. 8,456 416
Nicor 1,293 53
Oneok, Inc. 850 34
Pacific Enterprises 2,170 84
People's Energy Corp. 904 33
Sonat, Inc. 2,270 101
Williams Companies 11,058 350
--------
1,562
--------
Total Common Stocks - Utilities - 3.0% 7,062
--------
Total Common Stocks - 98.4%
(cost - $173,629) 229,934
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCY - 2.4%
Federal Home Loan Mortgage Corp.
5.440% due 05/28/98 $ 5,540 5,518
U.S. GOVERNMENT OBLIGATIONS - 1.4%
U.S. Treasury Bills
5.190% due 06/04/98 300 299
PRINCIPAL
AMOUNT VALUE
--------- ---------
4.960% due 07/02/98 $ 2,800 $ 2,776
4.930% due 07/16/98 100 99
-------
3,174
-------
Total U.S. Government Securities - 3.8%
(cost - $8,692) 8,692
COMMERCIAL PAPER
AUTOMOBILES - 0.4%
Ford Motorcredit Corp.
5.536% due 05/28/98 870 870
COMPUTERS - 2.1%
Avnet, Inc.
5.500% due 05/14/98 5,000 4,990
FINANCIAL - 2.4%
American Express Credit Corp.
5.511% due 05/01/98 150 150
5.512% due 05/01/98 365 365
5.567% due 05/14/98 200 200
5.567% due 05/15/98 2,860 2,860
5.536% due 05/22/98 200 200
5.536% due 05/28/98 150 150
5.525% due 05/29/98 990 990
5.537% due 06/03/98 710 710
-------
5,625
-------
Total Commercial Paper - 4.9%
(cost - $11,485) 11,485
See accompanying notes to the financial statements
53
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
--------- ---------
DEMAND NOTE
UTILITY - ELECTRICAL - 0.0%
Wisconsin Electric
5.235% due 05/01/98
(cost - $35) $ 35 $ 35
--------
TOTAL INVESTMENTS - 107.1%
(cost - $193,841) 250,146
Liabilities, less
other assets - (7.1%) (16,539)
--------
TOTAL NET ASSETS - 100.0% $233,607
========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements
54
<PAGE>
FINANCIAL HIGHLIGHTS
S&P 500 INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/30/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $ 14.15 10.77 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.13 0.21 0.02
Net realized and unrealized gain.................... 2.95 3.19 0.77
-------- -------- --------
Total income from investment operations................... 3.08 3.40 0.79
LESS DISTRIBUTIONS:
Dividends from net investment income................ 0.23 0.02 0.02
Distributions from net realized gain................ 0.48 0.00 0.00
-------- -------- --------
Total distributions....................................... 0.71 0.02 0.02
-------- -------- --------
Net asset value, end of period............................ $ 16.52 14.15 10.77
======== ======== ========
Total return ............................................. 22.53%** 31.58% 7.86%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $233,607 118,612 25,852
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.... 0.21%* 0.37% 0.71%*
Expenses, before waivers and reimbursements.... 0.41%* 0.49% 1.26%*
Net investment income, net of waivers
and reimbursements........................ 1.71%* 1.66% 1.60%*
Net investment income, before waivers
and reimbursements........................ 1.51%* 1.54% 1.05%*
Portfolio turnover rate............................. 1% 13% 0%
Average commission rate paid per share.............. $ 0.0361 0.0551 0.0338
- ---------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
55
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $57,661)..................... $65,395
Foreign currency (cost - $583) .......................................... 584
Receivable for securities sold........................................... 327
Dividends receivable..................................................... 240
-------
Total Assets................................................................... 66,546
LIABILITIES
Payable for securities purchased......................................... 675
Payable to custodian..................................................... 248
Net unrealized depreciation on forward foreign currency contracts........ 181
Accrued expenses payable................................................. 150
Investment advisory fees payable......................................... 88
-------
Total Liabilities.............................................................. 1,342
-------
Net Assets..................................................................... 65,204
=======
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... $ 57,135
Accumulated net realized gain............................................ 620
Net unrealized appreciation.............................................. 7,554
Distributions in excess of net investment income......................... (105)
--------
Net Assets..................................................................... $ 65,204
========
Net Asset Value Per Share (based on net assets of $65,204 and 5,354 shares
issued and outstanding).................................................. $ 12.18
========
</TABLE>
See accompanying notes to the financial statements
56
<PAGE>
STATEMENT OF OPERATIONS
INTERNATIONAL EQUITY FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands
<S> <C>
INVESTMENT INCOME
Dividends (net of $68 for foreign taxes withheld)............................... $ 528
Interest........................................................................ 110
------
Total Investment Income............................................................... 638
EXPENSES
Investment advisory fees........................................................ 268
Custodian fees.................................................................. 82
Fund accounting fees............................................................ 36
Fund administration fees........................................................ 14
Transfer agent fees............................................................. 6
Registration fees............................................................... 4
Legal fees...................................................................... 3
Audit fees...................................................................... 2
Trustees fees................................................................... 1
------
Total Expenses........................................................................ 416
Less: Fee Waiver..................................................................... 99
------
Net Expenses.......................................................................... 317
------
Net Investment Income................................................................. 321
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on sale of investments and foreign currency transactions...... 570
Net realized gain on forward foreign currency contracts......................... 47
Change in net unrealized appreciation on investments and foreign currency....... 6,468
Change in net unrealized depreciation on forward foreign currency contracts..... (280)
------
Net realized and unrealized gain (loss)......................................... 6,805
------
Net Increase in Net Assets from Operations............................................ $7,126
======
</TABLE>
See accompanying notes to the financial statements
57
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................ $ 321 506
Net realized gain.................................... 617 1,691
Change in net unrealized appreciation................ 6,188 1,188
-------- -------
Increase in net assets from operations............... 7,126 3,385
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................ (2,001) (55)
Net realized gain.................................... (563) 0
Distributions in excess of net investment income..... 0 0
-------- -------
Total distributions.................................. (2,564) (55)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares......................... 18,443 27,669
Reinvestment of distributions........................ 2,564 134
Cost of shares redeemed ............................. (13,508) (3,167)
-------- -------
Increase in net assets from capital transactions..... 7,499 24,636
-------- -------
Increase in net assets..................................... 12,061 27,966
Net assets at beginning of period.......................... 53,143 25,177
-------- -------
Net assets at end of period................................ $ 65,204 53,143
======== =======
Undistributed net investment income........................ $ (105) 1,577
======== =======
See accompanying notes to the financial statements
58
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE
---------- ----------
<S> <C> <C>
COMMON STOCKS - FOREIGN
AUSTRALIA - 4.8%
Amcor Limited 14,000 $ 63
Boral Limited 40,000 92
Brambles Industries Ltd 7,000 144
Broken Hill Proprietary Co 41,500 406
Coca-Cola Amatil 8,000 61
CSR Limited Ord 27,000 86
David Jones Limited 75,000 86
Lend Lease Corp Ltd 6,000 138
M.I.M. Holdings Ltd 26,809 17
Mayne Nickless Ltd 21,000 113
National Australia Bank Lts 29,000 412
News Corporation Ltd 41,152 276
News Corporation Ltd Preferred 33,140 187
Orica Limited 2,200 16
Pacific Dunlop 41,000 76
Qantas Airways Limited 40,538 62
Rio Tinto Limited 13,000 180
Santos Limited 17,000 61
Telstra Corporation-Ins Recp 61,300 144
Westpac Bank 48,000 322
WMC Limited 33,000 117
Woolworths Ltd 15,000 52
---------
3,111
BELGIUM - 4.1%
Delhaize-Le Lion 2,850 189
Eaux Compagnie Gen Warrant 1,300 2
Electrabel Cap 1,600 425
Fortis Ag 1,375 388
Fortis Ag - Strip Vvpr 75 0
Generale de Banquenpv 400 231
Groupe Bruxelles Lambert 800 160
SHARES VALUE
---------- ----------
Kredietbank Npv 450 $ 254
Kredietbank Vvpr 7 4
Petrofina Sa 675 266
Royale Belge 300 125
Soc Gen De Belgique Put/Wts 200 0
Societe Generale Belgique 800 123
Solvay Sa 2,360 177
Tractabel Inv Intl Npv 1,800 215
Union Miniere Npv* 1,264 95
---------
2,654
CANADA - 3.0%
Agrium Inc. 4,500 70
Alcan Aluminum Ltd 3,200 104
Bank of Montreal 2,400 131
Barrick Gold Corp 2,200 49
Canadian National Railway Co. 2,200 143
Canadian Pacific Ltd 7,300 214
Hudsons Bay Co 3,000 65
Imasco Ltd 1,800 68
Imperial Oil Ltd 2,600 143
Magna International 1,000 75
Moore Corp. Ltd 3,500 55
Newbridge Networks Corp.* 1,000 29
Noranda 3,300 68
Nova Corp 9,000 101
Potash Corp. 1,000 89
Royal Bank of Canada 2,900 173
Seagram Co Ltd 1,400 60
Shaw Communications, Inc. 5,300 86
Telus Corp. 2,000 54
Trans Canada Pipeline 4,400 98
Westcoast Energy 2,200 52
---------
1,927
See accompanying notes to the financial statements
59
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
FINLAND - 2.7%
Cultor Oy 600 $ 35
Merita Ltd 30,900 207
Metsa Serla - B 4,900 51
Nokia Ab - A 14,800 994
Outokumpu 5,900 83
Rauma Oy 1 0
Sampo Insurance Co 2,300 104
Upm-Kymmene Oy 8,100 243
Valmet Oy 3,800 63
---------
1,780
FRANCE - 7.8%
Alcatel-Alsthom 1,200 222
Axa Uap 2,600 305
Banque Nationale De Paris 2,800 236
Carrefour 300 172
Cie Fin Paribas 1,860 198
Clf - Dexia France 1,300 157
Compagnie De Saint-Gobain 1,425 237
Compagnie Generale Des Eaux 1,800 334
Eridania Beghin Say Sa 500 108
France Telecom Sa 5,300 288
Gruope Danone 800 189
L'Air Liquide 590 109
Lafarge 1,191 112
Lagardere SCA 4,000 153
Michelin (Cgde) 2,421 152
Pechiney Sa 2,147 96
Peugeot Sa 1,200 208
Pinault Printemps Redoute Sa 180 134
Rhone-Poulenc 4,682 229
Seita 4,500 202
Soc Natl Elf Aquit 2,100 275
SHARES VALUE
---------- ---------
Societe Generale 1,187 $ 247
Suez Lyonnaise Des Eaux 1,936 328
Thomson CSF 3,800 150
Total Sa 1,600 190
Unisor Sacilor 3,800 57
---------
5,088
GERMANY - 8.8%
Allianz Ag 1,800 554
Allianz Ag Rights 251 77
Basf Ag 2,940 131
Bayer Ag 7,240 322
Bayerische Motoren Werke Ag 170 188
Commerzbank Ag 1,560 60
Continental Ag 6,500 185
Daimler Benz Ag 2,870 280
Deutsche Bank Ag 4,090 315
Deutsche Telekom Ag 20,100 509
Dresdner Bank Ag 5,900 319
Hochtief Ag 1,700 71
Hoechst Ag 2,300 93
Man Ag 340 115
Mannesmann Ag 320 254
Metro Ag 4,050 200
Muenchener Rueckver Ag-reg 1,000 457
Preussag Ag 550 196
Rwe Ag 3,570 182
Schering Ag 1,800 193
Siemens Ag 5,820 341
Thyssen Ag 700 160
Veba Ag 4,220 279
Volkswagen Ag 355 283
---------
5,764
See accompanying notes to the financial statements
60
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
HONG KONG - 0.4%
Cheung Kong (Hldgs) 6,000 $ 40
China Light & Power 4,000 19
Citic Pacific Ltd 7,000 21
Hang Seng Bank 3,300 28
Hong Kong Telecomm 19,600 37
Hong Kong & China Gas 20,900 28
Hong Kong & China Gas Wts 950 0
Hutchison Whampoa Ltd 9,000 56
Johnson Electric (Hldgs) 4,000 14
Sun Hung Kai Properties 4,000 24
---------
267
ITALY - 4.8%
Aeroporti Di Roma
Assicurazioni Generali 10,092 304
Banca Commerciale Italiana 20,000 101
Credito Italiano ITL 36,000 189
Danieli Rights 17,000 5
Danieli Risp (Savings) 17,000 90
Edison Spa 9,000 76
Ente Nazionale Idrocarburi 77,000 517
Fiat Spa-Priv 74,890 185
Ina - Istitut Naz Assicur 41,000 123
Instituto Bancario Sa 8,000 116
Instituto Mobiliare Italinao 12,000 196
Italgas (Soc Ital) 16,600 77
Montedison 146,300 185
Parmalat Finanziaria Spa 44,000 99
Rinascente 10,800 108
Telecom Italia Mobile Di Risp 46,300 168
Telecom Italia Spa 29,665 222
Telecom Italia-RNC 27,300 144
SHARES VALUE
---------- ---------
Tim SPA 37,000 $ 211
---------
3,116
JAPAN - 15.6%
Amada Co 21,000 85
Canon Inc 17,000 403
Cannon Sales Co Inc 7,000 94
Citizen Watch Co 20,000 135
Dai Nippon Printing Co Ltd 19,000 324
Daiichi Pharm Co 17,000 244
Daikin Industries 21,000 103
Daiwa House 11,000 89
Denso Corporation 11,000 189
Fanuc Co 8,900 329
Fujitsu Ltd 13,000 152
Hitachi 41,000 294
Honda Motor Co 8,000 291
Hoya Corp. 5,000 166
Inax 10,000 37
Ito-Yokado Co Ltd 8,000 415
Kaneka Corp 21,000 111
Keio Teito Electric Railway 24,000 92
Kinki Nippon Railway 24,000 123
Kirin Brewery Co Ltd 23,000 201
Kokuyo 7,000 120
Kuraray Co Ltd 26,000 220
Kyocera Corp 1st Sec 2,700 142
Marui Co. 11,000 174
Matsushita Electric Indl Co 31,000 497
Ngk Insulators 1st Section 34,000 300
Nintendo 2,100 193
Nippon Meat Packer 14,000 191
Nippon Steel Co 1st Sec 17,000 27
See accompanying notes to the financial statements
61
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
Okumura 23,000 $ 85
Omron Corp. 6,000 94
Osaka Gas 40,000 90
Sankyo Co Ltd 15,000 372
Secom 5,000 295
Sega Enterprises 3,000 50
Seino Transportation 14,000 81
Sekisui House Ltd 1st Sec 19,000 149
Sony Corp 5,200 433
Sumitomo Bank 13,000 123
Sumitomo Chemical Co. 25,000 66
Sumitomo Electric 17,000 203
Takeda Chemical 13,000 372
TDK Corp 4,000 317
The Bank of Tokyo-Mitsubishi 19,000 236
Tokio Marine & Fire 19,000 207
Tokyo Elec Pwr First Sec 5,000 96
Tonen Corp 15,000 84
Toray Industries Inc 53,000 286
Toshiba Corp 1st Sec 49,000 228
Toyo Suisan Kaisha 11,000 71
Toyota Motor Corporation 14,000 366
Yamazaki Baking Co Ltd 10,000 101
---------
10,146
MALAYSIA - 1.0%
Berjaya Group BHD 4,000 9
Hume Industries BHD 22,000 18
Kuala Lumpur Kepon Berhad 40,000 93
Land & General Bhd 22,000 5
Malayan Banking 12,000 35
Malaysia Int Shipping 20,000 35
Nestle (Malaysia) BHD 12,000 64
SHARES VALUE
---------- ----------
New Straits Times Press 21,000 $ 24
Perusahaan Otomobil Nasional 10,000 12
Petronas Gas BHD 12,000 29
Public Bank BHD 7,800 3
Public Bank BHD-Foreign Mkt 24,600 12
Resorts World BHD 15,000 29
Rothmans of Pall Mall BHD 9,000 74
Sime Darby Malay Regd 35,000 31
Telekom Malaysia 34,000 102
Tenaga Nasional BHD 35,000 70
UWM Holdings Berhad 7,000 6
YTL Corp BHD 18,000 28
YTL Power Intl* 10,500 9
---------
688
NETHERLANDS - 4.5%
Abn-Amro Holdings 9,833 239
Akzo Nobel 300 61
Elsevier 10,200 154
Heineken NV 800 186
ING Groep 5,699 370
KLM 1,723 68
Koninklijke Hoogovens 1,237 56
KPN 4,943 255
Nordbanken Holding Ab 20,800 153
Philips Electronics 3,100 273
Polygram NV 2,000 83
Royal Dutch Petrol 13,400 739
Unilever 4,400 313
---------
2,950
NEW ZEALAND - 3.6%
Brierley Investments Ltd 499,000 288
Carter Holt Harvey Ltd 173,000 230
See accompanying notes to the financial statements
62
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
Fletcher Challenge Building 57,000 $ 115
Fletcher Challenge Energy 63,000 215
Fletcher Challenge Paper 113,000 166
Fletcher Forestry Shares 122,880 80
Lion Nathan Ltd 64,000 170
Telecom Corp of New Zealand 236,000 1,121
---------
2,385
SINGAPORE - 1.4%
City Developments 12,000 52
Creative Technology Limited* 2,000 42
Dbs Land 22,000 33
Dev Bank 12,100 80
Elec & Eltek Intl Co. Ltd 2,200 13
Faser & Neave 4,000 18
Hotel Properties 39,000 20
Keppel Corporation 5,750 15
Keppel Land Ltd 15,000 18
Natsteel Ltd 8,000 10
Overseas Chinese Bank 19,600 103
Rothmans Industries 2,000 10
Singapore Int'l Airlines, Regd 19,000 124
Singapore Press Hds 8,932 99
Singapore Tech Engineering 21,000 18
Singapore Telecom 88,000 151
UTD Overseas Bank 16,000 76
Venture Manufacturing 3,000 11
Wing Tai Hldgs Sg 16,000 13
---------
906
SWEDEN - 1.6%
Abb As 3,900 63
Astra As 9,000 185
Electrolux Ab 600 56
SHARES VALUE
---------- ----------
Ericsson Lm 4,900 $ 258
Hennes & Mauritz Ab 1,300 68
Skandia Forsakrings Ab 800 56
Skanska AS 1,200 56
Svenska Handelsbanken 1,900 86
Swedish Match Ab 32,200 111
Volvo Ab 3,300 96
---------
1,035
SWITZERLAND - 5.8%
Abb Ag 60 98
Credit Suisse Group 2,097 461
Holderbank Fn Glarus 111 118
Julius Baer Holding Ag 53 146
Nestle Sa 255 495
Novartis -Reg Shs 548 906
Roche Holding Ag0 Regd 65 659
Sairgroup 63 82
Saurer Ag 117 118
Schw Ruckversicherungs 149 329
Schweiz Leb & Rentenanst 105 89
Sulzer Gebuder Ag 117 84
Ubs (Schw Bankgesellsch) Br 115 185
---------
3,770
UNITED KINGDOM - 23.4%
Abbey National Ord 15,000 279
Barclays Plc 11,000 316
Bass Plc 7,482 144
Bat Industries 71,000 678
Bg Plc 33,676 179
Billiton Plc 70,000 201
BOC Group Plc 5,000 86
Booker Plc 31,000 138
See accompanying notes to the financial statements
63
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
British Petroleum Ord 53,897 $ 851
British Sky Broadcasting 24,500 179
British Steel Plc 132,000 351
British Telecommunciations 58,000 630
BTR Ord 28,000 93
Cable and Wireless Ord 15,000 172
Cadbury Schweppes Plc 20,000 293
Centrica Plc* 5,000 9
Charter Plc 19,846 223
Coats Viyella Plc 134,000 208
Diageo Plc 26,920 322
Fki Plc 85,000 293
General Electric Co 57,000 466
Glaxo Holdings Ord 31,500 891
Great Universal Stores 12,000 183
Greenalls Group Plc 21,500 174
Hanson Plc 30,750 181
Hillsdown Holdings 100,000 298
House of Fraser Plc 77,000 207
Hsbc Holdings Ord 16,000 503
Inchcape 40,000 149
Jefferson Smurfit Group Plc 66,702 245
Legal & General Group Plc 17,000 202
Lloyds TSB Group Plc 51,000 765
Marks & Spencer Plc 40,500 385
Mirror Group Plc 63,000 194
National Westminster Bank Plc 11,500 230
Northern Foods Ord 15,000 56
Peninsular & Orient Steam Nav 27,000 401
Prudential Corp. 8,500 121
PRINCIPAL
AMOUNT
OR SHARES VALUE
---------- ----------
Reckitt & Colman Plc 7,800 $ 157
Reed International Plc 23,000 203
Reuters Holdings Ord 13,300 144
Rio Tinto Plc 17,500 251
RJB Mining Plc 41,000 82
Royal Sun Alliance 20,966 233
Scottish Hydro-electric Plc 21,500 212
Sears Ord 97,000 98
Sedgwick Group Plc 64,000 165
Smithkline Beecham Plc 38,000 455
Tate & Lyle Ord 23,500 192
Tesco 27,500 258
Thames Water Plc 18,500 304
Unilever Ord 40,000 428
United News & Media Plc 14,000 190
Vodafone Group Ord 21,708 239
Williams Holding Plc 43,000 329
---------
15,236
---------
Total Common Stocks -
Foreign - 93.3 % (cost - $53,039) 60,823
COMMERCIAL PAPER
ASSET BACKED SECURITY - 3.2%
Ciesco L.P.
5.530% due 05/01/98 $ 2,073 2,073
FINANCIAL SERVICES - 3.8%
Lehman Brothers Holdings
5.550% due 05/04/98 2,500 2,499
---------
See accompanying notes to the financial statements
64
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
---------- ----------
Total Commercial Paper - 7.0%
(cost - $4,572) $ 4,572
---------
TOTAL INVESTMENTS - 100.3%
(cost - $57,611) 65,395
Liabilities, less foreign currency
and other assets - (0.3%) (191)
---------
TOTAL NET ASSETS - 100.0% $ 65,204
=========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements
65
<PAGE>
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
4/30/98
UNAUDITED
As a percentage of net assets
NON - U.S. EQUITIES
Aerospace & military technology.............. 0.23
Appliances and household durable............. 1.93
Automobiles.................................. 2.92
Banking...................................... 11.51
Beverages and tobacco........................ 2.61
Broadcasting and publishing.................. 2.46
Building materials and components............ 1.53
Business and public services................. 3.95
Chemicals.................................... 2.67
Construction and housing..................... 0.74
Data processing and reproduction............. 0.85
Electrical and electronics................... 5.20
Electronic components........................ 1.56
Energy sources............................... 5.86
Financial services........................... 1.22
Food and household products.................. 4.31
Forest products and paper.................... 1.64
Gold mines................................... 0.07
Health and personal care..................... 7.04
Industrial components........................ 1.69
Insurance.................................... 5.89
Leisure and tourism.......................... 0.57
Machinery and engineering.................... 1.05
Merchandising................................ 4.27
Metals - steel............................... 1.02
Metals - non ferrous......................... 1.93
Miscellaneous materials and commodities...... 0.14
Multi-industry............................... 3.95
Real estate.................................. 0.50
Recreation and other consumer goods.......... 0.71
Telecommunications........................... 7.19
Textiles and apparel......................... 0.35
Transportation - airlines.................... 0.51
Transportation - road and rail............... 0.67
Transportation - shipping.................... 0.67
See accompanying notes to the financial statements
66
<PAGE>
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
4/30/98
UNAUDITED
Utilities - electrical and gas............... 3.43
Wholesale and international trade............ 0.46
------
93.30
COMMERCIAL PAPER
Asset backed security........................ 3.20
Finance - miscellaneous...................... 3.80
------
TOTAL INVESTMENTS..................................100.30
Liabilities, less foreign currency and other assets (0.30%)
------
TOTAL NET ASSETS...................................100.00%
=======
See accompanying notes to the financial statements
67
<PAGE>
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 09/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 11.34 10.20 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.07 0.11 0.02
Net realized and unrealized (loss) gain......... 1.32 1.05 0.21
------- -------- --------
Total income from investment operations............... 1.39 1.16 0.23
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.43 0.02 0.03
Distributions from net realized gain............ 0.12 0.00 0.00
------- -------- --------
Total distributions................................... 0.55 0.02 0.03
------- -------- --------
Net asset value, end of period........................ $ 12.18 11.34 10.20
======= ======== ========
Total return ......................................... 12.87%** 11.34% 2.32%**
======= ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $65,204 53,143 25,177
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 1.12%* 1.40% 1.46%*
Expenses, before waivers and reimbursements..... 1.47%* 1.61% 1.46%*
Net investment income, net of waivers
and reimbursements......................... 1.13%* 1.14% 1.52%*
Net investment income, before waivers
and reimbursements......................... 0.78%* 0.93% 1.52%*
Portfolio turnover rate............................... 25% 27% 0%
Average commission rate paid per share................ $0.0246 0.0262 0.0264
- ----------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
68
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $63,217)................... $ 73,521
Dividends receivable................................................... 145
--------
Total Assets................................................................. 73,666
LIABILITIES
Payable for fund shares redeemed....................................... 550
Accrued expenses payable............................................... 40
Investment advisory fees payable....................................... 22
--------
Total Liabilities............................................................ 612
--------
Net Assets................................................................... $ 73,054
========
ANALYSIS OF NET ASSETS
Paid in capital........................................................ $ 61,688
Accumulated net realized loss.......................................... (138)
Net unrealized appreciation............................................ 10,304
Undistributed net investment income.................................... 1,200
--------
Net Assets................................................................... $ 73,054
========
Net Asset Value Per Share (based on net assets of $73,054 and 5,566 shares
issued and outstanding)................................................ $ 13.12
========
</TABLE>
See accompanying notes to the financial statements
69
<PAGE>
STATEMENT OF OPERATIONS
REIT INDEX FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Dividends.................................... $ 2,375
Interest..................................... 9
-------
Total Investment Income......................... 2,384
EXPENSES
Investment advisory fees..................... 290
Fund administration fees..................... 24
Fund accounting fees......................... 16
Custodian fees............................... 9
Registration fees............................ 6
Transfer agent fees.......................... 6
Audit fees................................... 3
Legal fees................................... 3
Trustees fees................................ 2
Other........................................ 1
-------
Total Expenses.................................. 360
Less: Fee Waiver............................... 242
-------
Net Expenses.................................... 118
-------
Net Investment Income........................... 2,266
NET REALIZED AND UNREALIZED LOSS
Net realized loss on sale of investments..... (60)
Change in net unrealized appreciation on
investments.................................. (2,894)
-------
Net realized and unrealized loss.......... (2,954)
-------
Net Decrease in Net Assets from Operations...... $ (688)
=======
See accompanying notes to the financial statements
70
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
REIT INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................................... $ 2,266 2,825
Net realized (loss) gain...................................... (60) 598
Change in net unrealized appreciation......................... (2,894) 12,744
-------- --------
(Decrease) increase in net assets from operations............. (688) 16,167
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................... (3,388) (639)
Net realized gain............................................. (672) (4)
-------- --------
Total distributions........................................... (4,060) (643)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares.................................. 13,454 66,295
Reinvestment of distributions................................. 4,059 643
Cost of shares redeemed....................................... (39,610) (8,253)
-------- --------
(Decrease) increase in net assets from capital transactions... (22,097) 58,685
-------- --------
(Decrease) Increase in net assets................................... (26,845) 74,209
Net assets at beginning of period................................... 99,899 25,690
-------- --------
Net assets at end of period......................................... $ 73,054 99,899
======== ========
Undistributed net investment income................................. $ 1,200 2,322
======== ========
</TABLE>
See accompanying notes to the financial statements
71
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS - REAL ESTATE
INVESTMENT TRUSTS (REITS)
APARTMENTS - 18.6%
Ambassador Apartments, Inc. 6,155 $ 126
AMLI Residential Prop 9,445 217
Apartment Invest & Mgmt Co 23,310 871
Associated Estates Realty 9,670 185
Avalon Properties, Inc. 24,270 683
Bay Apartments Communities 14,785 547
Berkshire Realty Co 20,890 255
BRE Properties 23,680 622
Camden Property Trust 24,794 727
Cornerstone Realty Income 20,200 239
Equity Residential Properties 54,001 2,653
Essex Property Trust, Inc. 9,505 314
Gables Residential Trust 12,475 340
Home Properties of New York 5,600 150
Irvine Apartment Community 11,185 342
Lexford Residential Trust* 5,300 117
Merry Land & Investment Co 24,095 507
MGI Properties, Inc. 7,820 190
Mid-America Apart Community 10,595 282
Post Properties, Inc. 19,295 787
Security Capital Atlantic 27,000 596
Security Capital Pacific 52,430 1,173
Smith, Charles E. Residential 8,695 270
Summit Properties, Inc. 13,615 278
Town & Country Trust 8,935 155
United Dominion Realty Trust 54,185 735
Walden Residential Props, Inc. 10,435 254
---------
13,615
DIVERSIFIED - 5.9%
Boston Properties, Inc. 34,800 1,151
SHARES VALUE
---------- ---------
Colonial Properties Trust 12,310 $ 365
Eastgroup Properties 9,295 185
First Union Real Estate 16,200 167
Glenborough Realty Trust, Inc. 17,795 477
Pacific Gulf Properties 11,420 251
Penn Real Estate Invest Trust 7,555 179
Rouse Co. 37,700 1,164
Washington REIT 20,170 347
--------
4,286
HOTEL - 14.0%
American General Hospitality 13,760 345
Boykin Lodging Co. 8,000 188
Equity Inns, Inc. 20,225 298
Felcor Suite Hotels 20,590 721
Hospitality Properties Trust 22,965 738
Innkeepers USA Trust 18,850 285
Jameson Inns, Inc. 5,555 64
Patriot American Hospitality 62,398 1,576
RFS Hotel Investors, Inc. 13,825 295
Sunstone Hotel Investors, Inc. 21,245 329
Starwood Lodging Trust 105,900 5,315
Winston Hotels 9,235 115
--------
10,269
MANUFACTURED HOMES - 1.6%
Chateau Properties, Inc. 15,390 455
Manufactured Home Community 14,115 356
Sun Communities, Inc. 9,335 327
--------
1,138
OFFICE PROPERTY - 25.0%
Alexandria Real Estate Equities 6,500 214
Arden Realty Group, Inc. 34,500 968
Brandywine Realty Trust 21,155 481
Carramerica Realty Corp 34,515 1,010
See accompanying notes to the financial statements
72
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
Cornerstone Properties 55,300 $ 995
Cousins Properties, Inc. 17,840 540
Crescent Real Estate 67,115 2,290
Duke Realty Investments, Inc. 43,560 1,037
Equity Office Properties 141,589 4,026
Great Lakes REIT, Inc. 9,000 165
Highwoods Properties, Inc. 28,520 970
Kilroy Realty Corp. 14,800 392
Koger Equity, Inc 14,360 308
Liberty Property Trust 31,985 818
Mack-Cali Realty Corp. 31,495 1,183
Parkway Properties, Inc. 6,300 207
Prentiss Properties Trust 23,500 596
Reckson Assoc Realty Corp 21,870 536
SL Green Realty Corp. 7,000 168
Spieker Properties, Inc. 34,450 1,365
---------
18,269
OUTLET CENTERS - 1.3%
Chelsea GCA Realty, Inc. 8,695 332
Horizon Group, Inc. 13,725 167
Mills Corp 13,045 325
Tanger Factory Outlet Center 4,500 136
----------
960
PRISONS - 0.6%
CCA Prison Realty Trust 12,200 432
REGIONAL MALL - 6.8%
CBL & Associates Properties 13,625 335
Crown American Realty 15,065 153
General Growth Industries 20,105 721
JP Realty, Inc. 9,910 240
Lexington Corp Prop 9,445 137
SHARES VALUE
---------- ---------
Macerich Co 16,275 $ 457
Prime Retail, Inc. 15,535 220
Simon Debartolo Group, Inc. 60,195 1,983
Taubman Centers, Inc. 28,780 390
Urban Shopping Centers, Inc. 9,810 320
---------
4,956
SHOPPING CENTER - 12.6%
Alexander Haagen Properties 10,830 175
Bradley Real Estate, Inc. 13,450 280
Burnham Pacific Properties, Inc. 18,010 254
Developers Diversified 15,700 623
FAC Realty, Inc. 6,800 63
Federal Realty Investment Trust 22,160 539
First Washington Realty Trust 4,200 111
Glimcher Realty Trust 13,450 286
IRT Property Co. 18,480 215
JDN Realty Corp 11,370 362
Kimco Realty Corp 22,820 846
Kranzco Realty Trust 5,930 106
Mark Centers Trust 4,855 39
Mid Atlantic Realty Trust 8,300 116
New Plan Realty Trust 33,470 818
Pan Pacific Retail Properties 9,600 203
The Price REIT, Inc. 6,630 304
Regency Realty Corp 13,705 353
Saul Centers, Inc. 7,095 129
Vornado Realty Trust 46,378 1,858
Weingarten Realty Investment 14,965 638
Western Investment REIT 9,745 139
Westfield America, Inc. 41,400 724
---------
9,181
STORAGE - 4.6%
Public Storage, Inc. 63,105 1,940
See accompanying notes to the financial statements
73
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE
---------- ----------
Shurgard Storage Centers 16,065 $ 452
Sovran Self Storage, Inc. 7,020 194
Storage Trust Realty 8,695 211
Storage USA 15,665 593
---------
3,390
TRIPLE NET LEASE - 3.6%
Commercial Net Lease Realty 16,315 266
Excel Legacy Corp.* 13,510 71
Excel Realty Trust, Inc. 13,110 351
Franchise Finance Corp 25,660 688
Golf Trust of America 4,400 144
National Golf Properties 7,095 220
Realty Income Corp 14,950 391
Trinet Corporate Realty Trust 13,585 487
---------
2,618
WAREHOUSE / INDUSTRIAL - 5.0%
Bedford Property Investors 12,820 249
Centerpoint Properties Corp 10,985 358
First Industrial Realty Trust 20,605 670
Meridian Industrial Trust 17,095 395
Security Capital Industrial 68,630 1,677
Weeks Corp 10,695 337
---------
3,686
---------
Total Common Stocks - Real Estate
Investment Trusts - 99.6%
(cost - $62,496) 72,800
SHARES VALUE
---------- ---------
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCIES - 0.9%
Federal Home Loan Mortgage Corp
5.450% due 05/01/98 $ 550 $ 550
5.450% due 05/22/98 125 125
---------
(cost - $675) 675
DEMAND NOTE
UTILITY - ELECTRICAL - 0.1%
Wisconsin Electric
5.235% due 05/01/98
(cost - $46) 46 46
---------
TOTAL INVESTMENTS - 100.6%
(cost - $63,217) 73,521
Liabilities, less other assets - (0.6%) (467)
---------
TOTAL NET ASSETS - 100.0% $ 73,054
=========
*Non-income producing security
</TABLE>
See accompanying notes to the financial statements
74
<PAGE>
FINANCIAL HIGHLIGHTS
REIT INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 13.69 10.44 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.35 0.41 0.10
Net realized and unrealized gain................ (0.37) 2.99 0.34
------- ------- -------
Total income from investment operations............... (0.02) 3.40 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.46 0.15 0.00
Distributions from net realized gain............ 0.09 0.00 0.00
------- ------- -------
Total distributions................................... 0.55 0.15 0.00
------- ------- -------
Net asset value, end of period........................ $ 13.12 13.69 10.44
======= ======= =======
Total return.......................................... -0.35%** 32.78% 4.40%**
======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $73,054 99,899 25,690
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 0.24%* 0.51% 1.20%*
Expenses, before waivers and reimbursements..... 0.74%* 0.82% 1.20%*
Net investment income, net of waivers
and reimbursements......................... 4.67%* 4.42% 5.97%*
Net investment income, before waivers
and reimbursements......................... 4.17%* 4.11% 5.97%*
Portfolio turnover rate............................... 35% 22% 0%
Average commission rate paid per share................ $0.0358 0.0367 0.0270
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
75
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
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. For the period September 3, 1996 to February 28, 1997, the Funds
operated with two share classes: Class Y, a no-load institutional class, and
Class C, a no-load retail class. On February 28, 1997, Class C shares were
exchanged for Class Y shares in proportion to their relative net asset value
in a non-taxable transaction.
There are an unlimited number of shares 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 Funds: the
Money Market Fund, and the Flexible Asset Allocation Fund. Upon
reorganization, the shares of each existing Fund were designated Class Y
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. Debt securities are valued
by an independent pricing service that utilizes electronic data processing
techniques, including a "matrix system", to derive evaluated bid prices.
Stock index futures are valued daily at the settlement price established
each day on the exchange on which they are traded. 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 recorded on the
ex-dividend date, except for foreign dividends which are recorded when the
information becomes available. Realized gains and losses on investments are
determined based on an identified cost basis.
76
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
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 at
the close of 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.
d) Distributions to Shareholders - Distributions of net investment income
and net realized gain are determined in accordance with income tax
regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions. 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) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles 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.
f) Repurchase Agreement - During the term of the repurchase agreement, the
market value of the underlying collateral, including accrued interest is
required to be at least equal to the market value of the repurchase
agreement. The Fund, through its custodian holds the underlying U.S
Treasury Obligations as collateral
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 had capital loss carryovers of $31,132 for the tax
year ended October 31, 1996 and $411,855 for the tax year ended October 31,
1997 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 and
2005, respectively.
77
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement with Aon Advisors, Inc.
(the "Investment Advisor"), a subsidiary of Aon Corporation, investment
advisory fees will be accrued daily and paid monthly at the following annual
rates, stated as a percentage of average daily net assets:
Money Market Fund .30%
Government Securities Fund .45% of the first $100 million;
.40% of the next $100 million;
.35% of the next $100 million;
.30% of the next $100 million;
and .25% of amounts in excess of $400 million
Asset Allocation Fund .65% of the first $250 million;
.55% of the next $250 million;
and .45% of amounts in excess of $500 million
S&P 500 Index Fund .30%
International Equity Fund .95% of the first $100 million;
.90% of the next $100 million;
and .85% of amounts in excess of $200 million
REIT Index Fund .60% of the first $100 million;
.55% of the next $100 million;
and .50% of amounts in excess of $200 million
The Investment Advisor has voluntarily agreed to waive sufficient investment
advisory fees to result in a net effective annual rate of .10% of the average
daily net assets of the Money Market Fund, the Government Securities Fund, the
S&P 500 Index Fund, and the REIT Index Fund, .25% of the average daily net
assets of the Asset Allocation Fund, and between .55% and .60% of the average
daily net assets of the International Equity Fund until February 28, 1999.
The Investment Advisor has also agreed to waive its fees and reimburse each
Fund to the extent total annualized expenses exceed the following amounts,
stated as a percentage of average daily net assets:
Money Market Fund 1.00%
Government Securities Fund 1.50% of the first $30 million;
and 1.25% in excess of $30 million
Asset Allocation Fund 1.25%
S&P 500 Index Fund .75%
International Equity Fund 1.75% of the first $30 million;
and 1.50% in excess of $30 million
REIT Index Fund 1.50% of the first $30 million;
and 1.25% in excess of $30 million
78
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
To assist in the administration of the Trust, the Trust has 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 Trust pays Aon Securities Corporation an annual fee of
0.05% of the average daily net assets of each Fund.
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 six
months ending April 30, 1998, the Trust incurred expenses totaling $24,277 for
compensation of unaffiliated trustees.
5. FUTURES CONTRACTS
The S&P 500 Index Fund invests in stock index futures contracts to rapidly
adjust exposure to the S&P 500 Index in anticipation of investing cash
balances or cash flow into the Fund in appropriate common stocks or in
anticipation of liquidating appropriate common stocks to meet expected
redemption requests. The use of stock index futures also lowers the
transaction costs of the Fund. The Fund bears the market risk arising from
changes in the value of the futures. At the time the Fund enters into a
futures contact, it is required to make a margin deposit with the broker of a
specified amount of cash or eligible securities. Subsequently, as the market
price of the futures contract fluctuates, gains or losses are recorded and
payments are made between the Fund and the broker on a periodic basis. The
statement of operations reflects gains and losses as realized for closed
futures contracts and as unrealized for open futures contracts.
At April 30, 1998, the S&P 500 Index Fund had the following open futures
contracts:
CONTRACT UNREALIZED
AMOUNT VALUE LOSS
----------- ----------- ----------
Index Futures Buy Contracts
S&P 500 Index June 98; 11 contracts $ 3,098,500 3,077,800 $ 20,700
==========
The value of U.S. Government Treasury Bills pledged to cover margin
requirements for open futures contracts at April 30, 1998 was $2,082,859.
79
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
6. CAPITAL SHARE TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
MONEY MARKET GOVERNMENT SECURITIES ASSET ALLOCATION
In thousands FUND FUND FUND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996 395,104 $ 395,104 3,966 $ 40,052 6,925 $ 78,647
Shares sold 6,575,729 6,575,729 5,890 60,676 5,318 72,743
Dividend reinvestments 12,754 12,754 442 4,504 377 5,130
------------ ------------- ----------- ----------- ------------ -----------
Total issued 6,588,483 6,588,483 6,332 65,180 5,695 77,873
Shares redeemed (6,217,231) (6,217,231) (344) (3,475) (2,686) (36,820)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 371,252 371,252 5,988 61,705 3,009 41,053
------------ ------------- ----------- ----------- ------------ -----------
Balance at October 31, 1997 766,356 766,356 9,954 101,757 9,934 119,700
Shares sold 3,845,965 3,845,965 2,355 24,980 6,573 112,479
Dividend reinvestments 8,777 8,777 322 3,415 469 7,815
------------ ------------- ----------- ----------- ------------ -----------
Total issued 3,854,742 3,854,742 2,677 28,395 7,042 120,294
Shares redeemed (3,793,519) (3,793,519) (369) (3,917) (1,729) (29,920)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 61,223 61,223 2,308 24,478 5,313 90,374
------------ ------------- ----------- ----------- ------------ -----------
Balance at April 30, 1998 827,579 $ 827,579 12,262 $ 126,235 15,247 $ 210,074
============ ============= =========== =========== ============ ===========
S&P 500 INDEX INTERNATIONAL EQUITY REIT INDEX
FUND FUND FUND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ ------------ ------------- ------------
Balance at October 31, 1996 2,400 $ 25,000 2,469 $ 25,000 2,460 $ 25,100
Shares sold 7,854 92,357 2,493 27,669 5,486 66,295
Dividend reinvestments 16 182 13 134 53 643
------------ ------------- ----------- ----------- ------------ -----------
Total issued 7,870 92,539 2,506 27,803 5,539 66,938
Shares redeemed (1,888) (25,005) (288) (3,167) (700) (8,253)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 5,982 67,534 2,218 24,636 4,839 58,685
------------ ------------- ----------- ----------- ------------ -----------
Balance at October 31, 1997 8,382 92,534 4,687 49,636 7,299 83,785
Shares sold 8,334 124,347 1,559 18,443 988 13,454
Dividend reinvestments 427 6,122 238 2,564 296 4,059
------------ ------------- ----------- ----------- ------------ -----------
Total issued 8,761 130,469 1,797 21,007 1,284 17,513
Shares redeemed (3,005) (48,805) (1,130) (13,508) (3,017) (39,610)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 5,756 81,664 667 7,499 (1,733) (22,097)
------------ ------------- ----------- ----------- ------------ -----------
Balance at April 30, 1998 14,138 $ 174,198 5,354 $ 57,135 5,566 $ 61,688
============ ============= =========== =========== ============ ===========
</TABLE>
80
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
7. INVESTMENTS
Investment transactions for the six months ending April 30, 1998, including
maturities and excluding short-term investments, were as follows:
PROCEEDS
In Thousands PURCHASES FROM SALES
-------------- ------------
Government Securities Fund $ 120,290 125,552
Asset Allocation Fund 89,174 23,882
S&P 500 Index Fund 80,102 1,313
International Equity Fund 17,982 13,165
REIT Index Fund 33,258 56,754
------------- -----------
Total $ 340,806 220,666
============= ===========
Gross unrealized appreciation and gross unrealized depreciation of investments
at April 30, 1998 were as follows:
<TABLE>
<CAPTION>
GOVERNMENT ASSET S&P 500 INTERNATIONAL REIT
In Thousands SECURITIES ALLOCATION INDEX EQUITY INDEX
FUND FUND FUND FUND FUND
---------------------------- --------------------------- ------------
<S> <C> <C> <C> <C> <C>
Gross unrealized appreciation $ 1,181 65,973 58,342 12,224 11,347
Gross unrealized depreciation (138) (4,059) (2,037) (4,490) (1,043)
------------- ----------- ----------- ------------ -----------
Net unrealized appreciation $ 1,043 61,914 56,305 7,734 10,304
============= =========== =========== ============ ===========
</TABLE>
At April 30, 1998, the identified cost of investments for federal income tax
purposes was as follows:
In Thousands
Money Market Fund $ 829,243
Government Securities Fund 98,998
Asset Allocation Fund 214,241
S&P 500 Index Fund 193,853
International Equity Fund 57,681
REIT Index Fund 63,311
-------------
Total $ 1,457,327
=============
81
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
8. 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 six
months ending April 30, 1998, was the Fund's custodian.
The International Equity Fund had the following open forward foreign currency
contracts at April 30, 1998, settling on September 14, 1998:
<TABLE>
<CAPTION>
UNREALIZED
LOCAL CONTRACT APPRECIATION
In Thousands CURRENCY AMOUNT VALUE (DEPRECIATION)
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Forward Foreign Currency Sale Contracts:
Belgian Franc 59,700 1,597 1,623 (26)
British Pound 2,350 3,829 3,907 (78)
Finish Marks 5,400 983 999 (16)
Hong Kong Dollar 2,000 256 256 0
Italian Lira 552,000 307 313 (6)
Malaysian Ringgit 1,450 364 384 (20)
Singapore Dollar 800 484 504 (20)
Forward Foreign Currency Buy Contracts:
Australian Dollar 1,300 $ 873 $ 851 $ (22)
Canadian Dollar 1,400 995 980 (15)
Danish Kronor 3,700 535 545 10
French Franc 1,700 280 285 5
German Deutschemark 750 414 422 8
Japanese Yen 139,000 1,118 1,074 (44)
Netherlands Guilder 1,000 490 499 9
Spanish Peseta 304,000 1,977 2,006 29
Swedish Kronor 2,900 364 376 12
Swiss Franc 900 617 610 (7)
------------
Total $ (181)
============
</TABLE>
82
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
9. WRITTEN COVERED CALL OPTIONS
The Asset Allocation Fund and S&P 500 Index Fund engage in portfolio hedging
with respect to declining stock and futures prices by trading covered call
options. The premiums received when a covered call option is written provide a
partial hedge against declining prices and enable each Fund to generate a
higher return. Transactions in options for the six months ended April 30, 1998
were as follows:
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 INDEX
FUND FUND
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period 200 $ 121,696 0 $ 0
Options written 0 0 20 94,895
Options expired (200) (121,696) 0 0
Options closed 0 0 (20) (94,895)
Options assigned 0 0 0 0
----------- ----------- ------------ -----------
Options outstanding, end of period 0 $ 0 0 $ 0
=========== =========== ============ ===========
</TABLE>
83
