Aon Funds
Annual Report
October 31, 1997
<PAGE>
Aon Funds
1-800-AON-FUNDS
December 31, 1997
Dear Fellow Shareholder:
Fiscal 1997 was a year of growth for the Aon Funds as assets more than
doubled. Aggregate net assets at October 31, 1997 exceeded $1.3 billion.
Share performance, detailed on the following pages, reflects equity
market strength and a declining interest rate environment during the
year.
It is a management goal that shareholders benefit from expense control.
Aon Advisors, the Fund's investment advisor, waived a portion of its
advisory fee during 1997, helping to achieve that goal. The Funds are
now pure no-load with elimination earlier this year of the Fund's
distribution fee charged to former C Class shareholders. Finally, this
"no frills" annual report reflects the commitment to expense control.
Thank you for your continued support.
Sincerely,
/s/ Michael A. Conway
Michael A. Conway
President
<PAGE>
TABLE OF CONTENTS
Government Securities Fund Commentary Pages 2 - 3
Asset Allocation Fund Commentary Pages 4 - 5
S&P 500 Index Fund Commentary Pages 6 - 7
International Equity Fund Commentary Pages 8 - 9
REIT Index Fund Commentary Pages 10 - 11
Financial Statements Pages 12 - 77
Audit Opinion Page 12
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 - 18
Financial Highlights Pages 19 - 20
Government Securities Fund
Statement of Assets and Liabilities Page 21
Statement of Operations Page 22
Statement of Changes in Net Assets Page 23
Schedule of Investments Page 24
Financial Highlights Page 25
Asset Allocation Fund
Statement of Assets and Liabilities Page 26
Statement of Operations Page 27
Statement of Changes in Net Assets Page 28
Schedule of Investments Pages 29 - 34
Financial Highlights Pages 35 - 36
S&P 500 Index Fund
Statement of Assets and Liabilities Page 37
Statement of Operations Page 38
Statement of Changes in Net Assets Page 39
Schedule of Investments Pages 40 - 50
Financial Highlights Page 51
International Equity Fund
Statement of Assets and Liabilities Page 52
Statement of Operations Page 53
Statement of Changes in Net Assets Page 54
Schedule of Investments Pages 55 - 60
Industry Diversification Page 61
Financial Highlights Page 62
REIT Index Fund
Statement of Assets and Liabilities Page 63
Statement of Operations Page 64
Statement of Changes in Net Assets Page 65
Schedule of Investments Pages 66 - 68
Financial Highlights Page 69
Notes to the Financial Statements Pages 70 - 77
<PAGE>
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 October 31, 1997.
The illustration assumes that all dividends and distributions are
reinvested.
[GRAPH APPEARS BELOW]
09/03/96 10/31/96 10/31/97
Government Securities $10,000 $10,279 $11,189
Lehman Brothers Government Index $10,000 $10,365 $11,262
9/3/96 to
COMPARISON OF RETURNS One Year 10/31/97(3)
- ------------------------------------------------------------------------
Aon Government Securities Fund(1) 8.86% 11.89%
Lehman Brothers Government Index(2) 8.66% 12.62%
(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.
2
<PAGE>
GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
U.S. Treasury yields fell during the six months ended October 31, 1997 as
inflation remained subdued in spite of strong gross domestic product (GDP)
growth. Investor concern over rapid GDP growth caused interest rates to rise
during the first six months of the fiscal year. Increased productivity
coupled with greater global competitiveness continues to allow for an
environment of low inflation with an expanding economy.
During October, economic turmoil in Asia caused a "flight to quality" rally in
U.S. Treasuries. Spread product could not keep pace and widened across the
board. Callable agencies and mortgage backed securities were the most
negatively impacted. The yield curve flattened as an unchanged Federal Funds
rate and fears of Asian selling held back the short end.
The total return for the Fund for the year ended October 31, 1997 was 8.86%.
For comparison, the Lehman Government Bond Index returned 8.66% for the year.
The higher performance of the Fund relative to the Index during the year was
essentially attributable to longer duration and emphasis on non-callable
issues during a period of falling rates.
We continue to look for lower interest rates. As a result, the portfolio
remains longer in duration than the benchmark and more convex.
Francis P. Wren
Portfolio Manager
3
<PAGE>
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 October 31, 1997. The
illustration assumes that all dividends and distributions are
reinvested.
[GRAPH APPEARS BELOW]
<TABLE>
<CAPTION>
03/03/94 10/31/94 10/31/95 10/31/96 10/31/97
<S> <C> <C> <C> <C> <C>
Aon Asset Allocation Fund $10,000 $10,184 $12,926 $14,356 $19,037
Lipper Flexible Portfolio Index $10,000 $ 9,958 $11,618 $13,325 $15,848
</TABLE>
3/3/94
to
COMPARISON OF RETURNS 1 Year 3 Year(2) 0/31/97(3)
- ------------------------------------------------------------------
Asset Allocation Fund(1) 32.61% 23.16% 90.37%
Lipper Flexible Portfolio(4) 18.94% 16.75% 58.48%
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) Average annual total return.
3) Cumulative total return.
4) The Lipper Flexible Portfolio Index is an unmanaged index prepared by
Lipper Analytical Services which includes asset allocation funds.
4
<PAGE>
ASSET ALLOCATION FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The year ended October 31, 1997 was an excellent one for the Aon Asset
Allocation Fund. The Fund generated a total return of 32.61% for the
year. This compares favorably to the Lipper Flexible Portfolio Index,
which returned 18.94% for the same period. The Fund's return placed it
in the top 2% of all flexible portfolio funds tracked by Lipper
Analytical Services.
The Fund performed well because our asset allocation strategy was
weighted towards common stocks and the stocks in the portfolio provided
attractive returns. Over the course of the year we maintained an asset
allocation strategy in which a range of approximately 70-80% of the
Fund's assets were invested in common stocks. Our rationale has been
that steady economic growth and a favorable interest rate environment
should support continued growth in corporate profits. The success of
this strategy was reflected in the performance of equities relative to
bonds. For this period equities, as measured by the S&P 500 returned
32.1%, while bonds, as measured by the Lehman Aggregate Index returned
8.9%.
The favorable macro view of equities was supported by the attractive
prospects and the performance of many of our portfolio companies. We
seek to invest in businesses which have a strong market position as
evidenced by attractive margins and high returns on capital, and which
generate substantial cash flow. We value prospective investments in
terms of the price in relation to historical and projected earnings and
cash flow.
The equity portion of the portfolio generated returns which exceeded
that of the S&P 500. Sectors which provided strong returns were
broadcasting, environmental services, technology, energy, and financial
services. Major individual contributors to the Fund's performance
included Fort Howard (up 137%, prior to its merger with James River),
Compaq Computer (up 130%), Allied Waste (up 124 %), Petroleum Geo-
Services (up 102%), Clear Channel Communications (up 80%), Interface (up
71%), Pfizer (up 71%), and Time Warner (up 54%).
Our outlook for the coming year remains positive for equities, although
it is unlikely returns in the stock market will continue at the level
achieved over the past few years. We continue to see companies with
attractive track records and good growth opportunities which are
consistent with our investment approach. Those factors which concern us
are the impact of the Southeast Asian crisis on corporate profits,
valuation levels (particularly for large capitalization stocks), and
volatility as evidenced by the market's intolerance of earnings
shortfalls and sudden changes in sentiment with respect to entire
industries. As a result, individual security selection will remain of
paramount importance. We will continue to hold a blend of bonds, real
estate investment trusts, and money market investments to provide
current income and cushion against the volatility inherent in the equity
markets.
John G. Lagedrost, Portfolio Manager
5
<PAGE>
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 October 31, 1997. The illustration assumes that all dividends and
distributions are reinvested.
[GRAPH APPEARS BELOW]
09/03/96 10/31/96 10/31/97
S&P 500 Index Fund $10,000 $10,786 $14,192
S&P 500 Index $10,000 $10,809 $14,280
9/3/96 to
COMPARISON OF RETURNS One Year 10/31/97(3)
- ---------------------------------------------------------
Aon S&P 500 Index Fund(1) 31.58% 41.92%
S&P 500 Index(2) 32.11% 42.80%
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.
6
<PAGE>
S&P 500 INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The S&P 500 Index Fund had a total return of 31.58% compared to the S&P 500
Index return of 32.11% for the year ended October 31, 1997. The under
performance of the Fund relative to the Index was essentially attributable to
expenses of the Fund and short-term cash investments.
Several factors contributed to the S&P's sharp rise. Thirty year bond yields
declined from 6.64% to 6.15% as the Federal Reserve held rates steady for most
of the year due to declining inflation rates. The continuation of low
inflation and moderate growth kept mutual fund cash flows positive which
provided the fuel for rising stock market prices.
Our outlook for the next twelve months is one of caution. Reported earnings
have begun to fall short of expectations and the Asian economic crises may
affect the bottom line for U.S. corporations next year. We don't believe that
the S&P will be able to repeat the strong performance it has shown since the
end of 1994.
As the Fund enters its second full year of operation we will continue to
minimize expenses and replicate the performance of the S&P 500 Index. The Aon
S&P 500 Index Fund remains fully invested in the stock market and is
well-positioned to meet its objectives in 1998.
Melissa A. Aton
Portfolio Manager
7
<PAGE>
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
October 31, 1997. The illustration assumes that all dividends and
distributions are reinvested.
[GRAPH APPEARS BELOW]
09/03/96 10/31/96 10/31/97
International Equity Fund $10,000 $10,232 $11,393
MSCI Non-U.S. Index $10,000 $10,202 $10,725
9/3/96 to
COMPARISON OF RETURNS One Year 10/31/97(3)
- ----------------------------------------------------------------
International Equity Fund(1) 11.34% 13.93%
MSCI Non-U.S. Index(2) 5.14% 7.25%
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.
8
<PAGE>
INTERNATIONAL EQUITY FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
PERFORMANCE
For the twelve months ended October 31, 1997, the International Equity Fund
had a total return of 11.34%. The Fund significantly outperformed the Morgan
Stanley Capital International (MSCI) Non-US Equity Index return of 5.14%.
In the twelve months ended October 31, 1997, unhedged equity returns in Europe
were strong, almost 18%. In contrast, unhedged market returns in Japan and
south-east Asia were significantly negative, almost -18%. On a hedged basis,
the returns for Europe and the Pacific regions would be almost 8% higher,
reflecting the U.S. dollar's appreciation against most foreign currencies in
the past twelve months.
For the year ended October 31, 1997, security selection generated over half of
the positive performance, especially in Japan, France and the U.K. In Japan,
the strategy to underweight the banks and emphasize the electrical and
electronics stocks added handsomely to performance. The currency strategy
also added significantly to performance over the past twelve months. The
market strategy to tilt the portfolio away from the Pacific region, in favor
of the European markets added to performance. The 5% strategic allocation to
cash lowered the risk of the portfolio but did not add significantly to
performance.
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 4%. The other markets
in the index are only modestly attractive and thus the portfolio maintains an
underweight of 1%. The Fund holds a 5% strategic cash position as the offset
to the underweight to the non-U.S. markets.
The International Equity Fund is neutrally positioned in most currencies, with
the Japanese yen, Hong Kong dollar and British pound being the exceptions.
There is no exposure to the Hong Kong currency. The degree of uncertainty
over China's future attitude towards the territory provides an unfavorable
risk-reward tradeoff.
Industry and stock selection favor more defensive issues, food, beverage and
household product companies. The portfolio is underweight European and
Japanese banks. The portfolio is also tilted towards value and size common
factors.
Brinson Partners, Inc. Aon Advisors, Inc.
Subadvisor Portfolio Manager
9
<PAGE>
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 October 31, 1997. The illustration assumes that all
dividends and distributions are reinvested.
[GRAPH APPEARS BELOW]
09/03/96 10/31/96 10/31/97
REIT Index Fund $10,000 $10,482 $13,991
Morgan Stanley REIT Index $10,000 $10,440 $13,862
9/3/96 to
COMPARISON OF RETURNS One Year 10/31/97(3)
- ----------------------------------------------------------------
REIT Index Fund(1) 32.78% 38.62%
Morgan Stanley REIT Index(2) 33.48% 39.91%
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 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.
10
<PAGE>
REIT INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The REIT Index Fund had a total return of 32.78% compared to the Morgan
Stanley REIT Index return of 33.48% for the year ended October 31, 1997. The
under performance of the Fund relative to the Index was essentially
attributable to expenses of the Fund and short-term cash investments.
Several factors contributed to the sharp rise in REIT equity prices. Thirty
year bond yields declined from 6.64% to 6.15% as the Federal Reserve held
rates steady for most of the year due to declining inflation rates. REITs
benefitted from both a strong broad equity market and a favorable interest
rate environment. During 1997, REIT stocks have attracted defensive minded S&P
investors who consider the broader market to be overvalued by traditional
value ratios.
Our outlook for the next twelve months is one of caution. Thirty-year bond
yields have been unable to stay below 6% for an extended period and job growth
and wage pressures may prompt the Federal Reserve to raise interest rates next
year. This would negatively impact equities but may have a stronger impact on
REIT stocks.
The Aon REIT Index Fund remains fully invested in the REIT market and
continues to be positioned to closely replicate the performance of the Morgan
Stanley REIT Index.
Melissa A. Aton
Portfolio Manager
11
<PAGE>
ERNST & YOUNG LLP LETTERHEAD
The Board of Trustees and Shareholders Aon Funds -
Money Market Fund
Government Securities Fund
Asset Allocation Fund
S&P 500 Index Fund
International Equity Fund
RElT Index Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Aon Funds - Money Market Fund,
Government Securities Fund, Asset Allocation Fund, S&P 500 Index Fund,
International Equity Fund and RElT Index Fund as of October 31, 1997, the
related statements of operations, changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Aon Funds - Money Market Fund, Government Securities Fund, Asset Allocation
Fund S&P 500 Index Fund, International Equity Fund and RElT Index Fund at
October 31, 1997, the results of their operations, changes in their net assets
and the financial higlights for the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
December 12, 1997
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MONEY MARKET FUND
OCTOBER 31, 1997
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at amortized cost which approximates fair value.................. $ 768,265
Receivable for fund shares sold............................................... 1,536
Interest receivable........................................................... 684
Cash.......................................................................... 2
---------------
Total Assets.......................................................................... 770,487
LIABILITIES
Dividends payable............................................................. 3,953
Accrued expenses payable...................................................... 105
Investment advisory fees payable.............................................. 73
---------------
Total Liabilities..................................................................... 4,131
---------------
Net Assets............................................................................ $ 766,356
===============
Net Asset Value Per Share (based on net assets of $766,356 and 766,356 shares
issued and outstanding)....................................................... $ 1.00
===============
</TABLE>
See accompanying notes to the financial statements 13
<PAGE>
STATEMENT OF OPERATIONS
MONEY MARKET FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
In thousands
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................... $ 32,972
--------------
Total Investment Income........................................ 32,972
EXPENSES
Investment advisory fees............................... 1,780
Fund administration fees............................... 297
Fund accounting fees................................... 59
Audit fees............................................. 58
Legal fees............................................. 50
Custodian fees......................................... 39
Registration fees...................................... 33
Trustees fees.......................................... 29
Printing fees.......................................... 10
Transfer agent fees.................................... 7
--------------
Total Expenses................................................. 2,362
Less: Fee Waiver.............................................. 1,073
--------------
Net Expenses................................................... 1,289
--------------
Net Investment Income.......................................... $ 31,683
==============
</TABLE>
See accompanying notes to the financial statements 14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year
In thousands ended ended
10/31/97 10/31/96
-------- --------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................................... $ 31,683 21,478
Net realized gain................................................... 0 0
Change in net unrealized appreciation............................... 0 0
-------------- -------------
Increase in net assets from operations.............................. 31,683 21,478
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... (31,683) (21,478)
Net realized gain................................................... 0 0
-------------- -------------
Total distributions................................................. (31,683) (21,478)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................................ 6,575,729 4,625,263
Reinvestment of distributions....................................... 12,754 6,166
Cost of shares redeemed ............................................ (6,217,231) (4,656,418)
-------------- -------------
Increase (decrease) in net assets from capital transactions......... 371,252 (24,989)
-------------- -------------
Increase (decrease) in net assets........................................... 371,252 (24,989)
Net assets at beginning of year............................................. 395,104 420,093
-------------- -------------
Net assets at end of year................................................... $ 766,356 395,104
============== =============
Undistributed net investment income......................................... $ 0 0
============== =============
</TABLE>
See accompanying notes to the financial statements 15
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands AMOUNT VALUE
--------- -----
COMMERCIAL PAPER
AEROSPACE AIRCRAFT - 2.6%
International Lease Finance Corp.
5.570% due 01/08/98 $ 10,000 $ 9,895
5.500% due 01/26/98 10,000 9,869
-------------
19,764
AUTO & TRUCK - 2.6%
Ford Motor Credit
5.510% due 01/09/98 15,000 14,841
5.500% due 01/16/98 5,000 4,942
-------------
19,783
ASSET BACKED SECURITIES - 6.4%
Asset Securitization Corp.
5.500% due 11/13/97 10,000 9,982
5.520% due 11/13/97 10,000 9,982
Corporate Asset Funding Co.
5.570% due 01/27/98 20,000 19,731
Preferred Receivables Funding Corp.
5.550% due 11/21/97 9,000 8,972
-------------
48,667
BANKING - DOMESTIC - 3.2%
Norwest Financial
5.590% due 01/16/98 5,000 4,941
5.530% due 02/13/98 15,000 14,760
Sun Trust Bank
5.510% due 12/29/97 5,000 4,956
-------------
24,657
BANKING - FOREIGN - 2.6%
Canadian Imperial
5.500% due 11/04/97 10,000 9,995
5.530% due 12/01/97 10,000 9,954
-------------
19,949
PRINCIPAL
AMOUNT VALUE
--------- -----
BROKERAGE SERVICES - 5.7%
Goldman Sachs Group
5.500% due 11/28/97 $ 5,000 $ 4,979
Merrill Lynch and Company
5.560% due 01/06/98 5,000 4,949
5.570% due 01/15/98 10,000 9,884
5.560% due 02/06/98 5,000 4,925
Morgan Stanley Group
5.510% due 01/16/98 10,000 9,884
5.600% due 01/21/98 9,000 8,887
-------------
43,508
BUILDING AND HOUSING - 2.0%
Fluor Corp
5.490% due 11/5/97 15,000 14,991
BUSINESS SERVICES - 2.8%
PHH Corp.
5.500% due 01/06/98 6,847 6,778
5.530% due 01/23/98 14,775 14,587
-------------
21,365
COMMUNICATIONS AND MEDIA - 0.8%
Gannett Inc.
5.500% due 11/03/97 6,000 5,998
Computers - 3.9%
Avnet Inc.
5.530% due 11/14/97 5,000 4,990
5.580% due 01/22/98 5,000 4,936
IBM Credit Corp.
5.510% due 11/6/97 10,000 9,992
5.470% due 11/7/97 10,000 9,991
-------------
29,909
See accompanying notes to the financial statements 16
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands AMOUNT VALUE
--------- -----
CHEMICAL - 4.4%
Du Pont
5.470% due 11/12/97 $ 19,000 $ 18,968
Nalco Chemical Co.
5.510% due 11/12/97 5,000 4,992
5.500% due 11/20/97 10,000 9,971
-------------
33,931
COSMETICS AND SOAP - 5.5%
Colgate-Palmolive
5.480% due 12/31/97 20,000 19,817
Proctor & Gamble Co.
5.480% due 11/24/97 15,000 14,947
5.500% due 01/02/98 7,235 7,166
-------------
41,930
ELECTRONICS AND ELECTRICAL EQUIPMENT - 3.6%
General Electric Capital Corp.
5.510% due 01/20/98 10,000 9,877
5.560% due 01/30/98 10,000 9,861
Motorola Credit Co.
5.480% due 11/18/97 8,150 8,129
-------------
27,867
FINANCE - 13.8%
American Express
5.500% due 11/10/97 20,000 19,972
American General Finance Corp.
5.510% due 11/21/97 10,000 9,969
5.500% due 11/24/97 10,100 10,065
Associates Corp. North America
5.480% due 11/20/97 10,000 9,971
5.500% due 11/21/97 7,000 6,979
5.510% due 11/21/97 5,000 4,985
PRINCIPAL
AMOUNT VALUE
--------- -----
AVCO Financial Services, Inc.
5.480% due 12/10/97 $ 3,500 $ 3,479
5.490% due 12/01/97 6,000 5,973
Beneficial Corp.
5.480% due 01/05/98 13,000 12,871
5.580% due 02/17/98 7,000 6,883
Household Financial Corp.
5.510% due 11/07/97 5,000 4,995
5.530% due 01/14/98 10,000 9,886
-------------
106,028
FOOD - 5.1%
Campbell Soup Co.
5.500% due 01/08/98 20,000 19,792
Hershey Foods Corp.
5.490% due 12/12/97 19,750 19,626
-------------
39,418
INSURANCE - 2.6%
Prudential Funding Corp.
5.550% due 01/22/98 15,000 14,810
5.510% due 01/23/98 5,000 4,936
-------------
19,746
PRINTING & PUBLISHING - 1.3%
McGraw - Hill Inc.
5.500% due 12/04/97 10,000 9,950
RETAIL - 2.6%
May Department Store
5.480% due 12/22/97 20,000 19,845
TELECOMMUNICATION - 3.9%
AT&T Capital Corp.
5.460% due 11/17/97 20,000 19,951
See accompanying notes to the financial statements 17
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands AMOUNT VALUE
--------- -----
SBC Corp.
5.460% due 12/15/97 $ 10,000 $ 9,933
-------------
29,884
UTILITIES - 4.2%
Florida Power Corp.
5.530% due 11/05/97 5,000 4,997
Northern Illinois Gas
5.520% due 01/15/98 7,670 7,582
Pacific Gas and Electric
5.470% due 12/04/97 20,000 19,900
-------------
32,479
-------------
TOTAL COMMERCIAL PAPER - 79.6% 609,669
U.S. GOVERNMENT SECURITIES
U.S. Government Agencies - 19.8%
Federal Farm Credit Bank
5.500% due 11/03/97 10,000 10,000
Federal Home Loan Bank
5.790% due 10/02/98 10,000 10,000
5.730% due 10/20/98 5,000 5,000
-------------
15,000
Federal Home Loan Mortgage Corp.
5.420% due 11/03/97 3,465 3,464
5.400% due 11/17/97 30,000 29,928
5.400% due 11/28/97 19,000 18,923
5.310% due 04/29/98 10,000 9,991
-------------
62,306
PRINCIPAL
AMOUNT VALUE
--------- -----
Federal National Mortgage Association
5.410% due 12/30/97 $ 20,000 $ 19,823
5.070% due 02/23/98 10,000 9,982
5.350% due 03/10/98 4,500 4,492
5.250% due 04/22/98 4,400 4,387
5.410% due 06/25/98 5,700 5,693
5.330% due 06/26/98 5,000 4,989
5.100% due 07/22/98 6,000 5,975
4.950% due 09/30/98 9,000 8,949
-------------
64,290
-------------
Total U.S. Government Securities - 19.8% 151,596
CERTIFICATES OF DEPOSIT
BANKING - DOMESTIC - 0.9%
Comerica Bank
5.247% due 01/12/98 5,000 5,000
First of America
5.350% due 01/12/98 2,000 2,000
-------------
Total Certificates of Deposit - 0.9% 7,000
-------------
TOTAL INVESTMENTS -100.3% 768,265
Liabilities, less cash and
other assets - (0.3%) (1,909)
-------------
TOTAL NET ASSETS - 100.0% $ 766,356
=============
See accompanying notes to the financial statements 18
<PAGE>
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Selected per share data 10/31/97 10/31/96 10/31/95
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period..................... 1.00 1.00 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.05 0.05 0.06
Net realized and unrealized gain................. 0.00 0.00 **
------- ------- -------
Total income from investment operations.................. 0.05 0.05 0.06
LESS DISTRIBUTIONS:
Dividends from net investment income............. 0.05 0.05 0.06
Distributions from net realized gain............. 0.00 0.00 **
------- ------- -------
Total distributions...................................... 0.05 0.05 0.06
------- ------- -------
Net asset value, end of period........................... 1.00 1.00 1.00
======= ======= =======
Total return ............................................ 5.44% 5.43% 5.93%
======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. 766,356 395,104 420,094
Ratio to average net assets of:
Expenses, net of waivers and reimbursements...... 0.22% 0.23% 0.14%
Expenses, before waivers and reimbursements...... 0.40% 0.46% 0.39%
Net investment income, net of waivers
and reimbursements....................... 5.34% 5.30% 5.79%
Net investment income, before waivers
and reimbursements....................... 5.16% 5.07% 5.54%
</TABLE>
** Less than 1 cent per share
See accompanying notes to the financial statements 19
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 1/23/92
ended ended through
Selected per share data 10/31/94 10/31/93 10/31/92
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period..................... 1.00 1.00 1.00
Income from investment operations:
Net investment income............................ 0.04 0.03 0.03
Net realized and unrealized gain................. ** ** **
------- ------- -------
Total income from investment operations.................. 0.04 0.03 0.03
Less distributions:
Dividends from net investment income............. 0.04 0.03 0.03
Distributions from net realized gain............. ** ** **
------- ------- -------
Total distributions...................................... 0.04 0.03 0.03
------- ------- -------
Net asset value, end of period........................... 1.00 1.00 1.00
======= ======= =======
Total return............................................. 3.77% 3.14% 2.99%***
======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................. 410,912 412,068 399,076
Ratio to average net assets of:
Expenses, net of waivers and reimbursements...... 0.15% 0.17% 0.25%*
Expenses, before waivers and reimbursements...... 0.40% 0.42% 0.50%*
Net investment income, net of waivers
and reimbursements....................... 3.73% 3.10% 3.57%*
Net investment income, before waivers
and reimbursements....................... 3.48% 2.85% 3.32%*
</TABLE>
* Annualized
** Less than 1 cent per share
*** Not annualized
See accompanying notes to the financial statements 20
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT SECURITIES FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $99,913)....................... $ 102,975
Interest receivable........................................................ 1,445
Receivable for fund shares sold............................................ 475
------------
Total Assets....................................................................... 104,895
LIABILITIES
Dividends payable.......................................................... 473
Accrued expenses payable................................................... 29
Investment advisory fees payable........................................... 8
------------
Total Liabilities.................................................................. 510
------------
Net Assets......................................................................... $ 104,385
============
ANALYSIS OF NET ASSETS:
Paid in capital............................................................ $ 101,757
Accumulated net realized loss.............................................. (443)
Net unrealized appreciation................................................ 3,062
Undistributed net investment income........................................ 9
------------
Net Assets......................................................................... $ 104,385
============
Net Asset Value Per Share (based on net assets of $104,385 and 9,954 shares
issued and outstanding).................................................... $ 10.49
============
</TABLE>
See accompanying notes to the financial statements 21
<PAGE>
STATEMENT OF OPERATIONS
GOVERNMENT SECURITIES FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
In thousands
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................................. $ 4,697
-------------
Total Investment Income....................................................... 4,697
EXPENSES
Investment advisory fees.............................................. 330
Fund administration fees.............................................. 37
Fund accounting fees.................................................. 35
Registration fees..................................................... 27
Transfer agent fees................................................... 15
Audit fees............................................................ 11
Legal fees............................................................ 8
Custodian fees........................................................ 7
Trustees fees......................................................... 4
Other................................................................. 3
-------------
Total Expenses................................................................ 477
Less: Fee Waiver............................................................. 137
-------------
Net Expenses.................................................................. 340
-------------
Net Investment Income......................................................... 4,357
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on sale of investments.............................. (412)
Change in net unrealized appreciation on investments.................. 2,580
-------------
Net realized and unrealized gain (loss)............................... 2,168
-------------
Net Increase in Net Assets from Operations.................................... $ 6,525
=============
</TABLE>
See accompanying notes to the financial statements 22
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Year 09/03/96
ended through
In thousands 10/31/97 10/31/96
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................... $ 4,357 207
Net realized loss....................................... (412) (31)
Change in net unrealized appreciation................... 2,580 482
--------- --------
Increase in net assets from operations.................. 6,525 658
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (4,350) (205)
Net realized gain....................................... 0 0
--------- --------
Total distributions..................................... (4,350) (205)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................ 60,676 40,000
Reinvestment of distributions........................... 4,504 52
Cost of shares redeemed................................. (3,475) 0
--------- --------
Increase in net assets from capital transactions........ 61,705 40,052
--------- --------
Increase in net assets.......................................... 63,880 40,505
Net assets at beginning of period............................... 40,505 0
--------- --------
Net assets at end of period..................................... $ 104,385 40,505
========= ========
Undistributed net investment income............................. $ 9 2
========= ========
</TABLE>
See accompanying notes to the financial statements 23
<PAGE>
SCHEDULE OF INVESTMENTS
GOVERNMENT SECURITIES FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands AMOUNT VALUE
--------- -----
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCIES - 48.1%
Federal Home Loan Bank
6.240% due 6/23/00 $ 10,000 $ 10,105
Federal Home Loan Mortgage Corp.
5.380% due 11/13/97 1,590 1,587
5.410% due 12/22/97 1,490 1,478
6.700% due 01/05/07 10,000 10,411
7.100% due 04/10/07 10,000 10,703
-------------
24,179
Federal National Mortgage Association
5.875% due 02/02/06 10,000 9,836
Private Export Funding Corp.
6.310% due 9/30/04 6,000 6,076
-------------
50,196
U.S. GOVERNMENT OBLIGATIONS - 50.5%
U.S. Treasury Notes
6.250% due 08/31/00 10,000 10,141
6.500% due 10/15/06 15,000 15,600
6.250% due 02/15/07 10,000 10,247
-------------
35,988
U.S. Treasury Bonds
7.250% due 05/15/16 15,000 16,739
-------------
52,727
-------------
Total U.S. Government Securities - 98.6%
(cost - $99,861) 102,923
PRINCIPAL
AMOUNT VALUE
--------- -----
DEMAND NOTE
Utility-Electrical - 0.0%
Wisconsin Electric
5.205% due 11/03/97
(cost - $52) $ 52 $ 52
-------------
TOTAL INVESTMENTS - 98.6%
(cost - $99,913) 102,975
Other assets, less liabilities - 1.4% 1,410
-------------
TOTAL NET ASSETS - 100.0% $ 104,385
=============
See accompanying notes to the financial statements 24
<PAGE>
FINANCIAL HIGHLIGHTS
GOVERNMENT SECURITIES FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
YEAR 09/03/96
ENDED THROUGH
Selected per share data 10/31/97 10/31/96
-------- --------
<S> <C> <C>
Net asset value, beginning of period............................... $ 10.21 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... 0.59 0.07
Net realized and unrealized gain........................... 0.28 0.21
---------- ---------
Total income from investment operations............................ 0.87 0.28
LESS DISTRIBUTIONS:
Dividends from net investment income....................... 0.59 0.07
Distributions from net realized gain....................... 0.00 0.00
---------- ---------
Total distributions................................................ 0.59 0.07
---------- ---------
Net asset value, end of period..................................... $ 10.49 10.21
========== =========
Total return ...................................................... 8.86% 2.79%**
========== =========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (in thousands)......................... $ 104,385 40,505
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 0.46% 0.89%*
Expenses, before waivers and reimbursements................ 0.65% 0.89%*
Net investment income, net of waivers and reimbursements... 5.92% 5.59%*
Net investment income, before waivers and reimbursements... 5.73% 5.59%*
Portfolio turnover rate............................................ 136% 4%
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements 25
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
ASSET ALLOCATION FUND
OCTOBER 31, 1997
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Investments in securities, at value (cost - $125,624).................. $ 164,251
Receivable for securities sold......................................... 1,641
Interest receivable.................................................... 297
Dividends receivable................................................... 88
Cash................................................................... 36
Receivable for fund shares sold........................................ 11
-------------
Total Assets................................................................... 166,324
Liabilities
Payable for securities purchased....................................... 1,351
Accrued expenses payable............................................... 38
Investment advisory fees payable....................................... 36
Written covered call options (premiums - $122)......................... 14
-------------
Total Liabilities.............................................................. 1,439
-------------
Net Assets..................................................................... $ 164,885
=============
Analysis of Net Assets
Paid in capital........................................................ $ 119,700
Accumulated net realized gain ......................................... 6,179
Net unrealized appreciation............................................ 38,735
Undistributed net investment income.................................... 271
-------------
Net Assets..................................................................... $ 164,885
=============
Net Asset Value Per Share (based on net assets of $164,885 and 9,934 shares
issued and outstanding)................................................. $ 16.60
=============
</TABLE>
See accompanying notes to the financial statements 26
<PAGE>
STATEMENT OF OPERATIONS
ASSET ALLOCATION FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
In thousands
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest..................................................... $ 1,971
Dividends.................................................... 1,326
-------------
Total Investment Income.............................................. 3,297
EXPENSES
Investment advisory fees..................................... 870
Fund administration fees..................................... 67
Fund accounting fees......................................... 41
Custodian fees............................................... 17
Transfer agent fees.......................................... 13
Audit fees................................................... 13
Legal fees................................................... 12
Trustees fees................................................ 6
Registration fees............................................ 4
Other........................................................ 4
-------------
Total Expenses....................................................... 1,047
Less: Fee Waiver.................................................... 295
-------------
Net Expenses......................................................... 752
-------------
Net Investment Income................................................ 2,545
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments..................... 6,331
Change in net unrealized appreciation on investments......... 29,245
-------------
Net realized and unrealized gain ............................ 35,576
-------------
Net Increase in Net Assets from Operations........................... $ 38,121
=============
</TABLE>
See accompanying notes to the financial statements 27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
ASSET ALLOCATION FUND
In thousands
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
10/31/97 10/31/96
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income.................................... $ 2,545 2,185
Net realized gain........................................ 6,331 2,255
Change in net unrealized appreciation.................... 29,245 4,523
------------- ------------
Increase in net assets from operations................... 38,121 8,963
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................... (2,279) (2,184)
Net realized gain........................................ (290) (2,071)
------------- ------------
Total distributions...................................... (2,569) (4,255)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................. 72,743 18,179
Reinvestment of distributions............................ 5,130 1,695
Cost of shares redeemed ................................. (36,820) (10,077)
------------- ------------
Increase in net assets from capital transactions......... 41,053 9,797
------------- ------------
Increase in net assets........................................... 76,605 14,505
Net assets at beginning of year.................................. 88,280 73,775
------------- ------------
Net assets at end of year........................................ $ 164,885 88,280
============= ============
Undistributed net investment income.............................. $ 271 5
============= ============
</TABLE>
See accompanying notes to the financial statements 28
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
COMMON STOCKS
COMMON STOCKS - BANKING & FINANCIAL SERVICES
BANK & BANK HOLDING COMPANY - 4.0%
Banc One Corp. 18,700 $ 975
Barnett Bank, Inc. 20,000 1,380
Chase Manhattan 7,450 860
Citicorp 9,819 1,228
NationsBank Corp. 21,626 1,295
Texas Regional Bancshares 29,547 842
-----------
6,580
FINANCIAL SERVICES - 5.3%
Associates First Capital Corp. 15,758 1,003
Green Tree Financial Corp. 55,480 2,337
Hanover Capital Mortgage* 55,500 978
Moneygram Payment Systems* 40,013 573
Morgan Stanley Dean Witter 17,500 858
Ocwen Asset Investment Corp. 47,000 934
Sirrom Capital Corp. 20,700 1,043
Student Loan Marketing Assn. 7,879 1,106
-----------
8,832
INSURANCE - 1.1%
American International Group 17,952 1,832
REAL ESTATE - 3.8%
Cali Realty Corp. 23,122 936
Colonial Properties Trust 41,350 1,173
First Industrial Realty Trust 43,335 1,500
Health Care REIT, Inc. 41,375 1,078
Kilroy Realty 20,000 530
Spieker Properties, Inc. 26,416 1,034
-----------
6,251
SHARES VALUE
------ -----
SAVINGS AND LOAN - 0.6%
Washington Mutual, Inc. 13,700 $ 938
-----------
Total Common Stocks - Banking &
Financial Services - 14.8% 24,433
COMMON STOCKS - BASIC MATERIALS
CHEMICAL - 1.0%
Dupont De Nemours & Co. 21,716 1,235
Polymer Group, Inc. * 47,274 458
-----------
1,693
PAPER & FOREST PRODUCTS -1.9%
Caraustar Industries 30,000 1,031
Fort James Corp. 53,651 2,129
-----------
3,160
-----------
Total Common Stocks - Basic
Materials - 2.9% 4,853
COMMON STOCKS - CAPITAL GOODS
AEROSPACE & DEFENSE - 3.1%
Boeing 31,516 1,509
Kellstrom Industries Inc.* 25,000 527
Sundstrand Corp. 23,637 1,285
Triumph Group Inc.* 22,949 746
United Technologies Corp. 14,021 981
-----------
5,048
BUILDING SUPPLIES - 0.5%
Watsco, Inc. 19,850 466
Watsco, Inc. B 14,830 378
-----------
844
ELECTRICAL EQUIPMENT - 1.3%
General Electric 32,712 2,112
See accompanying notes to the financial statements 29
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
ENGINEERING & CONSTRUCTION -1.3%
Interface, Inc. 77,251 $ 2,231
MACHINERY - AGRICULTURE & CONSTRUCTION - 2.2%
AGCO Corp. 54,016 1,566
Deere & Co. 39,395 2,073
-----------
3,639
MACHINERY - INDUSTRIAL - 0.5%
Illinois Tool Works 16,364 805
WASTE MANAGEMENT - 4.8%
Allied Waste Industries, Inc. * 118,318 2,411
Newpark Resources, Inc. * 28,092 1,166
Philip Environmental Control * 153,800 2,692
Waste Industries, Inc.* 25,000 528
USA Waste Services, Inc. * 31,516 1,166
-----------
7,963
-----------
Total Common Stocks - Capital
Goods - 13.7% 22,642
COMMON STOCKS - COMMUNICATION SERVICES
Clearnet Communications* 30,728 488
Echostar Communications* 29,625 563
Getty Communications PLC ADR* 36,000 531
Paging Network, Inc.* 74,779 925
Panamsat Corp.* 34,668 1,452
Vanguard Cellular Systems* 42,971 594
-----------
Total Common Stocks - Communication
Services - 2.8% 4,553
SHARES VALUE
------ -----
COMMON STOCKS - CONSUMER CYCLICAL
PRINTING & PUBLISHING - 2.2%
Harcourt General, Inc. 17,998 $ 901
Journal Register Co.* 35,700 623
Scholastic Corp.* 29,300 1,187
Tribune Co. 16,388 903
-----------
3,614
RESTAURANTS AND LODGING - 0.1%
Bridgestreet Accomodations* 20,000 230
RETAIL - GENERAL - 0.8%
Home Depot 23,637 1,315
-----------
Total Common Stocks - Consumer
Cyclical - 3.1% 5,159
COMMON STOCKS - CONSUMER STAPLES
COMMUNICATIONS & MEDIA - 8.4%
American Telecasting, Inc.* 39,395 74
Canwest Global Comm Corp.* 61,456 1,175
Chancellor Media Corp.* 40,275 2,210
Clear Channel Communications* 26,499 1,749
Cox Radio Inc.* 31,516 1,074
Outdoor Systems, Inc. * 46,092 1,417
Time Warner, Inc. 37,577 2,168
TV Azteca SA ADR* 47,500 908
Universal Outdoor Holdings* 54,985 2,323
Young Broadcasting Corp.* 20,000 725
-----------
13,823
CONTAINER - 0.4%
Bway Corp.* 35,455 680
See accompanying notes to the financial statements 30
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
ENTERTAINMENT & LEISURE - 1.2%
Viacom, Inc. A* 6,912 $ 206
Viacom, Inc. B* 14,490 438
Walt Disney Co. 16,182 1,331
-----------
1,975
FOOD, BEVERAGE & TOBACCO - 1.4%
Coca-Cola Enterprises 45,000 1,266
Panamerican Beverages 30,758 953
-----------
2,219
RETAIL - FOOD & DRUGS - 2.2%
Dominick's Supermarkets, Inc. 27,261 995
Kroger * 82,184 2,681
-----------
3,676
-----------
Total Common Stocks -
Consumer Staples - 13.6% 22,373
COMMON STOCKS - ENERGY
OIL & GAS - DOMESTIC - 0.4%
Oryx Energy 25,000 689
OIL & GAS INTERNATIONAL - 0.7%
British Petroleum PLC ADR 7,000 614
Mobil Corp. 6,648 484
-----------
1,098
OIL & GAS SERVICE - 3.0%
Pride International, Inc.* 40,000 1,320
Petroleum Geo Services ADR * 26,789 1,855
Superior Energy Services Inc.* 40,000 470
Transocean Offshore, Inc. 23,758 1,283
-----------
4,928
-----------
Total Common Stocks - Energy - 4.1% 6,715
SHARES VALUE
------ -----
COMMON STOCKS - HEALTH CARE
DRUGS - 3.6%
Lilly Eli & Co. 22,500 $ 1,505
Merck & Co. 14,758 1,317
Pfizer, Inc. 25,864 1,830
Schering Plough Corp. 21,904 1,228
-----------
5880
LONG TERM CARE - 0.5%
Atria Communities Inc.* 50,000 831
MEDICAL PRODUCTS & SUPPLIES - 3.1%
Abbott Labs 24,061 1,475
Becton Dickenson Co. 25,758 1,186
Johnson & Johnson Co. 43,516 2,497
-----------
5,158
-----------
Total Common Stocks - Health Care - 7.2% 11,869
COMMON STOCKS - PROFESSIONAL SERVICES
Billing Information Concepts* 27,658 1,086
-----------
Total Common Stocks - Professional
Services - 0.7% 1,086
COMMON STOCKS - TECHNOLOGY
BUSINESS - SERVICE - 1.1%
CSG Systems International, Inc.* 20,000 784
First Data 37,677 1,095
-----------
1,879
COMMUNICATION EQUIPMENT - 1.1%
Amerilink Corp.* 18,000 473
Glenayre Technologies * 46,143 600
See accompanying notes to the financial statements 31
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Powerwave Technologies, Inc.* 23,637 $ 730
-----------
1,803
COMPUTERS - 5.8%
Axiom, Inc.* 27,500 193
Compaq Computers Corp. 60,002 3,825
Cisco Systems, Inc. 10,100 829
EMC Corp Massachusetts, Inc.* 28,364 1,588
Hewlett-Packard Co. 29,334 1,810
International Business Machines 6,000 588
Sun Microsystems* 18,874 646
-----------
9,479
OFFICE EQUIPMENT - 1.3%
Splash Technology Holdings* 20,000 833
Xerox Corp. 16,800 1,332
-----------
2,165
SOFTWARE - 0.6%
Saville Systems Ireland ADR* 16,342 976
-----------
Total Common Stocks - Technology - 9.9% 16,302
COMMON STOCKS - TRANSPORTATION
TRUCKING - 0.6%
Heartland Express, Inc. * 15,758 433
Knight Transportation, Inc. * 19,698 563
-----------
996
MISCELLANEOUS - 0.3%
C.H. Robinson Worldwide Inc.* 25,000 550
-----------
Total Common Stocks - Transportation - 0.9% 1,546
-----------
Total Common Stocks - 73.7%
(cost - $83,563) 121,531
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCY - 4.8%
Federal Home Loan Mortgage Corp.
5.380% due 11/13/97 $ 7,930 $ 7,916
U.S. GOVERNMENT OBLIGATIONS - 3.6%
U.S. Treasury Notes
6.000% due 05/31/98 1,843 1,847
7.125% due 09/30/99 661 679
7.750% due 01/31/00 1,508 1,573
6.500% due 08/31/01 1,727 1,771
-----------
5,870
-----------
Total U.S. Government Securities - 8.4%
(cost - $13,711) 13,786
CORPORATE BONDS
AGRICULTURAL & INDUSTRIAL EQUIPMENT - 0.6%
Case Corp.
6.750% due 10/21/07 1,000 989
AUTO & TRUCK - 0.6%
Chrysler Finance Corp.
6.950% due 03/25/02 1,000 1,028
BANK AND BANK HOLDING COMPANY - 1.0%
NationsBank Corp.
7.500% due 09/15/06 1,576 1,670
COMMUNICATIONS & MEDIA - 1.5%
Airtouch Communications
7.000% due 10/01/03 788 807
See accompanying notes to the financial statements 32
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands, except shares AMOUNT VALUE
--------- -----
Tribune Company
6.875% due 11/01/06 $ 800 $ 824
US West Capital Funding
6.850% due 01/15/02 800 812
-----------
2,443
COMPUTER - 0.5%
Oracle Corp.
6.720% due 02/15/04 750 757
ENTERTAINMENT & LEISURE - 0.8%
Brunswick Corp.
6.750% due 12/15/06 300 304
Royal Caribbean
7.000% due 10/15/07 1,000 1,004
-----------
1,308
FOOD , BEVERAGE & TOBACCO - 0.1%
Canandaigua Wine
8.750% due 12/15/03 100 100
HEALTH CARE - 0.6%
Omega Healthcare Investors
6.950% due 08/01/07 1,000 991
METAL & MINERAL - 0.5%
Southdown, Inc.
10.000% due 03/01/06 788 871
NON FERROUS METAL - 0.6%
Phelps Dodge
6.375% due 11/01/04 1,000 994
PRINCIPAL
AMOUNT VALUE
--------- -----
RESTAURANTS & LODGING - 0.6%
Hilton Hotels Corp.
7.000% due 07/15/04 $ 1,000 $ 1,007
RETAIL - FOOD AND DRUGS - 0.6%
Kroger
7.650% due 04/15/07 1,000 1,066
UTILITIES - 0.6%
Korea Electric Power
7.000% due 10/01/02 1,000 957
-----------
Total Corporate Bonds - 8.6%
(cost - $13,904) 14,181
CONVERTIBLE SECURITIES
CONVERTIBLE BOND - 0.6%
Waste Management, Inc.
6.625% due 07/15/02 1,000 1,010
CONVERTIBLE PREFERRED STOCKS - 1.7%
Evergreen Media Corp. 10,000 616
Merrill Lynch STRYPES 22,243 1,563
Microsoft Corp. 6,700 591
-----------
2,770
-----------
Total Convertible Securities - 2.3%
(cost - $3,473) 3,780
COMMERCIAL PAPER
AUTO & TRUCK - 1.4%
Ford Motor Credit Corp.
5.540% due 12/08/97 2,285 2,285
See accompanying notes to the financial statements 33
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
OCTOBER 31, 1997
PRINCIPAL
In thousands, except shares AMOUNT VALUE
--------- -----
BROKERAGE SERVICES - 0.9%
Merrill Lynch and Co.
5.520% due 11/14/97 $ 1,440 $ 1,437
COMPUTERS - 2.5%
Avnet Inc.
5.560% due 12/12/97 4,255 4,228
ELECTRICAL EQUIPMENT - 1.8%
General Electric Capital Corp.
5.552% due 11/21/97 3,000 3,000
-----------
Total Commercial Paper - 6.6%
(cost - $10,950) 10,950
PRINCIPAL
AMOUNT VALUE
--------- -----
DEMAND NOTE
UTILITY - ELECTRICAL - 0.0%
Wisconsin Electric
5.205% due 11/03/97
(cost - $23) $ 23 $ 23
-----------
TOTAL INVESTMENTS - 99.6%
(cost - $125,624) 164,251
Cash and other assets, less liabilities - 0.4% 634
-----------
TOTAL NET ASSETS - 100.0% $ 164,885
===========
* Non-income producing security.
See accompanying notes to the financial statements 34
<PAGE>
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Year Year
ended ended
Selected per share data 10/31/97 10/31/96
-------- --------
<S> <C> <C>
Net asset value, beginning of period................................. $ 12.75 12.04
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.27 0.31
Net realized and unrealized gain............................. 3.85 1.01
------------- -------------
Total income from investment operations.............................. 4.12 1.32
LESS DISTRIBUTIONS:
Dividends from net investment income......................... 0.24 0.31
Distributions from net realized gain......................... 0.03 0.30
------------- -------------
Total distributions.................................................. 0.27 0.61
------------- -------------
Net asset value, end of period....................................... $ 16.60 12.75
============= =============
Total return......................................................... 32.61% 11.06%
============= =============
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................. $ 164,885 88,280
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.................. 0.56% 0.87%
Expenses, before waivers and reimbursements.................. 0.78% 0.87%
Net investment income, net of waivers and reimbursements..... 1.90% 2.48%
Net investment income, before waivers and reimbursements..... 1.68% 2.48%
Portfolio turnover rate.............................................. 64% 120%
Average commission rate paid per share............................... $ 0.0593 0.0585
</TABLE>
See accompanying notes to the financial statements 35
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Year 03/03/94 AM
ended through
Selected per share data 10/31/95 10/31/94
-------- --------
<S> <C> <C>
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%
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements 36
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
S&P 500 INDEX FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $98,165)..................... $ 118,508
Receivable for securities sold........................................... 798
Dividends receivable..................................................... 137
Receivable for fund shares sold.......................................... 19
Cash..................................................................... 3
---------------
Total Assets..................................................................... 119,465
LIABILITIES
Payable for securities purchased......................................... 796
Accrued expenses payable................................................. 45
Investment advisory fees payable......................................... 10
Variation margin......................................................... 2
---------------
Total Liabilities................................................................ 853
---------------
Net Assets....................................................................... $ 118,612
===============
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... 92,534
Accumulated net realized gain ........................................... 4,249
Net unrealized appreciation.............................................. 20,247
Undistributed net investment income...................................... 1,582
---------------
Net Assets....................................................................... $ 118,612
===============
Net Asset Value Per Share (based on net assets of $118,612 and 8,382 shares
issued and outstanding).................................................. $ 14.15
===============
</TABLE>
See accompanying notes to the financial statements 37
<PAGE>
STATEMENT OF OPERATIONS
S&P 500 INDEX FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................................................ $ 1,740
Interest......................................................................... 366
-------------
Total Investment Income.................................................................. 2,106
EXPENSES
Investment advisory fees......................................................... 310
Fund administration fees......................................................... 52
Fund accounting fees............................................................. 51
Registration fees................................................................ 34
Custodian fees................................................................... 19
Transfer agent fees.............................................................. 15
Audit fees....................................................................... 11
Legal fees....................................................................... 10
Trustees fees.................................................................... 4
Other............................................................................ 3
-------------
Total Expenses........................................................................... 509
Less: Fee Waiver........................................................................ 128
-------------
Net Expenses............................................................................. 381
-------------
Net Investment Income.................................................................... 1,725
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on sale of investments......................................... 2,780
Net realized gain on futures contracts........................................... 1,469
Change in net unrealized appreciation on investments............................. 19,493
Change in net unrealized depreciation on futures contracts....................... (96)
-------------
Net realized and unrealized gain (loss).......................................... 23,646
-------------
Net Increase in Net Assets from Operations............................................... $ 25,371
=============
</TABLE>
See accompanying notes to the financial statements 38
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
Year 09/03/96
ended through
In thousands 10/31/97 10/31/96
-------- --------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income.................................................. $ 1,725 39
Net realized gain...................................................... 4,249 0
Change in net unrealized appreciation.................................. 19,397 850
------------ ----------
Increase in net assets from operations................................. 25,371 889
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................. (145) (37)
Net realized gain...................................................... 0 0
------------ ----------
Total distributions.................................................... (145) (37)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................................... 92,357 25,000
Reinvestment of distributions.......................................... 182 0
Cost of shares redeemed ............................................... (25,005) 0
------------ ----------
Increase in net assets from capital transactions....................... 67,534 25,000
------------ ----------
Increase in net assets......................................................... 92,760 25,852
Net assets at beginning of period.............................................. 25,852 0
------------ ----------
Net assets at end of period.................................................... $ 118,612 25,852
============ ==========
Undistributed net investment income............................................ $ 1,582 2
============ ==========
</TABLE>
See accompanying notes to the financial statements 39
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
COMMON STOCKS
COMMON STOCKS - BASIC MATERIALS
CHEMICALS - 2.3%
Air Products & Chemicals, Inc. 1,739 $ 132
Dow Chemical 3,648 331
DuPont De Nemours & Co. 18,318 1,042
Eastman Chemical Co. 1,262 75
Ecolab, Inc. 1,001 48
FMC Corp.* 631 51
Goodrich BF Co. 893 40
Hercules Inc. 1,599 73
Monsanto Co. 9,528 407
Nalco Chemical Co. 1,054 42
PPG Industries 2,902 164
Praxair, Inc. 2,578 112
Rohm & Haas Co. 954 80
Union Carbide Corp. 2,055 94
-----------
2,691
CHEMICALS-SPECIALTY - 0.4%
Avery Dennison Co. 1,686 67
Englehard Corp. 2,344 41
Grace WR & Co. 1,224 83
Great Lakes Chemical 1,001 47
International Flavors & Fragrance 1,739 84
Morton International, Inc. 2,317 76
Sigma-Aldrich Corp. 1,632 57
-----------
455
METALS & MINING - 0.8%
Alcan Aluminum Ltd. 3,633 104
Aluminum Co. of America 2,794 204
Asarco, Inc. 712 20
Barrick Gold Corp. 6,042 124
SHARES VALUE
------ -----
Battle Mountain Gold Co. 3,733 $ 23
Cyprus Amax Mineral Co. 1,478 31
Echo Bay Mines Ltd. 2,263 9
Freeport McMoran Copper 3,209 77
Homestake Mining Co. 2,371 29
Inco Ltd. 2,686 55
Newmont Mining Corp. 2,532 89
Phelps Dodge 954 71
Placer Dome, Inc. 3,894 60
Reynolds Metals 1,201 73
-----------
969
PAPER & FOREST PRODUCT - 0.8%
Boise Cascade 939 33
Champion International 1,578 87
Georgia Pacific Co. 1,524 129
International Paper 4,900 221
Louisiana-Pacific Co. 1,739 37
Mead Corp. 893 54
Potlatch Corp. 450 22
Stone Container Corp. 1,632 20
Temple Inland 947 54
Union Camp Corp. 1,154 63
Westvaco Corp. 1,659 54
Weyerhaeuser Co. 3,263 156
Willamette Industries 1,794 59
-----------
989
STEEL - 0.2%
Allegheny Teledyne, Inc. 2,821 74
Armco, Inc.* 1,786 10
Bethlehem Steel 1,839 18
Inland Steel Industries 839 16
Nucor Corp. 1,470 77
See accompanying notes to the financial statements 40
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
USX-US Steel 1,370 $ 47
Worthington Inds, Inc. 1,524 32
-----------
274
-----------
Total Common Stocks - Basic
Materials - 4.5% 5,378
COMMON STOCKS - CAPITAL GOODS
AEROSPACE & DEFENSE - 1.5%
Boeing Co. 16,220 777
General Dynamics Corp. 1,001 81
Lockheed Martin Corp 3,171 301
Northrop Grumman Corp. 1,074 117
Rockwell International Corp. 3,379 166
TRW, Inc. 2,009 115
United Technologies Corp. 3,802 266
-----------
1,823
CONSTRUCTION - 0.3%
Case Equipment Corp. 1,208 72
Centex Corp. 423 25
Crane Co. 775 32
Fluor Corp. 1,370 56
Kaufman & Broad Home Corp. 631 13
Masco Co. 2,632 116
McDermott International 893 32
Owens Corning 893 31
Pulte Corp. 369 14
-----------
391
ELECTRICAL EQUIPMENT - 3.9%
AMP, Inc. 3,559 160
Emerson Electric Co. 7,166 376
General Electric 53,098 3,428
SHARES VALUE
------ -----
Grainger WW, Inc. 820 $ 72
Honeywell 2,055 140
Raychem 685 62
Thomas & Betts Co. 931 46
Westinghouse Electric 10,442 276
-----------
4,560
ENVIRONMENTAL - 0.8%
Browning Ferris 3,425 111
Johnson Controls 1,370 62
Laidlaw, Inc. 5,657 80
Millipore Corp. 712 28
Safety Kleen 947 21
Thermo Electron Corp.* 2,400 90
Tyco International Ltd 8,648 326
Waste Management, Inc. 7,350 172
-----------
890
MACHINERY - EQUIPMENT - 1.2%
Aeroquip - Vickers, Inc. 450 23
Briggs & Stratton 450 22
Caterpillar, Inc. 6,112 313
Cincinnati Milacron, Inc. 631 18
Cooper Industries 1,939 101
Cummins Engine 631 38
Deere & Co. 4,110 216
Dover Co. 1,793 121
Foster Wheeler Corp. 685 23
General Signal Co. 839 34
Harnischfeger 766 30
Illinois Tool Works 4,002 197
Ingersoll Rand Co. 3,608 141
NACCO Industries 94 10
See accompanying notes to the financial statements 41
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Pall Corp. 2,093 $ 43
Parker Hannifin 1,893 79
Timken Co. 1,008 34
-----------
1,443
OFFICE SUPPLIES - 0.2%
Moore Corp. 1,432 23
Pitney Bowes, Inc. 2,371 188
-----------
211
-----------
Total Common Stocks - Capital
Goods - 7.9% 9,318
COMMON STOCKS - COMMUNICATION SERVICES
CELLULAR & WIRELESS - 0.3%
Airtouch Communications* 8,158 315
LONG DISTANCE - 2.1%
AT & T Corp. 26,330 1,289
MCI Communications 11,260 400
Sprint Corp. 6,950 361
Worldcom Inc.* 14,665 493
-----------
2,543
TELEPHONE - 3.7%
Alltel Corp. 3,056 108
Ameritech Corp. 8,897 578
Bell Atlantic 12,578 1,005
Bell South Corp. 16,063 760
Frontier Corp. 2,700 58
GTE Corp. 15,539 659
SBC Communications, Inc. 14,781 940
US West, Inc. - Comm Group* 7,789 310
-----------
4,418
-----------
Total Common Stocks -
Communication Services - 6.1% 7,276
SHARES VALUE
------ -----
COMMON STOCKS - CONSUMER CYCLICAL
APPAREL & TEXTILE - 0.4%
Fruit of The Loom, Inc.* 1,162 $ 30
Liz Claiborne, Inc. 1,108 56
National Service Inds. 739 33
Nike, Inc. 4,633 218
Reebok International Ltd. 947 35
Russell Corp. 631 19
Spring Industries 402 19
VF Corp. 1,027 92
-----------
502
AUTO & TRUCK - 1.8%
Chrysler Corp. 10,933 385
Ford Motor Co. 19,364 846
General Motors Corp. 11,868 762
ITT Industries, Inc. 1,947 61
Navistar International* 1,162 27
Paccar, Inc. 1,262 57
-----------
2,138
AUTO PARTS - 0.5%
Autoliv, Inc. 790 31
Cooper Tire & Rubber Co. 1,270 27
Dana 1,732 81
Eaton Corp. 1,262 122
Echlin Inc. 1,001 33
Genuine Parts Co. 2,920 91
Goodyear Tire & Rubber 2,578 161
Snap On Tools, Inc. 1,001 43
-----------
589
FURNITURE & APPLIANCES - 0.4%
Armstrong World Industries 631 42
Black & Decker 1,570 60
Maytag Corp. 1,632 54
See accompanying notes to the financial statements 42
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Newell Co. 2,605 $ 100
Rubbermaid, Inc. 2,471 59
Stanley Works 1,424 60
Whirlpool Corp. 1,162 70
-----------
445
PRINTING & PUBLISHING - 1.0%
American Greetings Co. 1,262 44
Deluxe Corp. 1,316 43
Donnelley RR & Sons 2,324 76
Dow Jones & Co. 1,578 73
Dun & Bradstreet 2,740 78
Gannett Co., Inc. 4,688 246
Harcourt General, Inc. 1,108 56
Harland John H Co. 550 12
Jostens Inc. 631 15
Knight Ridder, Inc. 1,378 72
McGraw Hill Cos, Inc. 1,632 107
Meredith Corp. 846 29
New York Times 1,532 84
Times Mirror Co. 1,586 86
Tribune Co. 2,002 110
-----------
1,131
RECREATION - 1.3%
Brunswick Corp. 1,632 55
Fleetwood Enterprises 577 18
Harrah's Entertainment, Inc.* 1,686 33
Hasbro, Inc. 2,055 60
King World Productions, Inc. 631 30
Mattel Inc. 4,688 182
Mirage Resorts, Inc.* 2,900 73
Walt Disney Co. 10,959 901
Viacom, Inc.* Class B 5,742 174
-----------
1,526
SHARES VALUE
------ -----
RESTAURANTS & LODGING - 1.0%
Dardeen Restaurants 2,478 $ 28
HFS, Inc. * 2,601 183
Hilton Hotels Corp. 4,102 126
ITT Corp.* 1,847 138
Marriott International 2,055 143
McDonalds Corp. 11,122 498
Tricon Global Restaurants* 2,482 75
Wendys International 2,155 45
-----------
1,236
RETAIL - DISCOUNT - 1.5%
K Mart 7,897 104
Rite Aid Corp. 1,970 117
TJX Cos, Inc. 2,616 78
Toys "R" Us, Inc. * 4,672 159
Wal-Mart Stores, Inc. 36,720 1,290
Woolworth Corp. 2,209 42
-----------
1,790
RETAIL - GENERAL - 1.1%
Costco Companies, Inc. * 3,409 131
Dayton Hudson Corp. 3,525 221
Dillard Dept. Stores 1,793 69
Federated Department Stores* 3,371 148
May Department Stores 3,729 201
Mercantile Stores Co. 558 33
Penny JC Co. 4,033 237
Sears Roebuck & Co. 6,319 265
-----------
1,305
RETAIL SPECIALTY - 1.8%
Autozone Inc.* 2,400 71
Charming Shoppes, Inc. 1,686 9
Circuit City Stores, Inc. 1,632 65
CUC International, Inc.* 6,603 195
See accompanying notes to the financial statements 43
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
CVS Corp. 2,686 $ 165
Gap, Inc. 4,333 230
Home Depot Inc. 11,814 657
The Limited Ltd. 4,446 105
Longs Drug Stores 684 17
Lowes Companies 2,840 118
Nordstrom, Inc. 1,216 75
Pep Boys - Manny, Mo, Jack 1,001 25
Sherwin Williams 2,840 79
Tandy Corp. 1,694 58
Walgreen Co. 8,004 225
-----------
2,094
-----------
Total Common Stocks -
Consumer Cyclical - 10.8% 12,756
COMMON STOCKS - CONSUMER STAPLES
BEVERAGES - 3.2%
Anheuser-Busch Companies, Inc. 8,004 320
Brown Foremann 1,154 57
Coca-Cola Co. 40,207 2,272
Coors, Adolph, Inc. 631 22
Pepsico, Inc. 24,829 914
Seagrams Co. Ltd. 6,057 204
-----------
3,789
BROADCASTING - 1.0%
Clear Channel Communications* 1,600 106
Comcast Corp. 5,672 156
Tele Communications, Inc.* 8,233 189
Time Warner, Inc. 9,067 523
US West Media Group Inc. * 9,967 252
-----------
1,226
SHARES VALUE
------ -----
CONTAINERS - 0.2%
Ball Corp. 523 $ 18
Bemis Co. 893 34
Crown Cork & Seal 2,055 93
Owens-Illinois, Inc.* 2,300 79
Tupperware Corp. 1,001 25
-----------
249
COSMETIC & TOILETRIES - 3.0%
Alberto-Culver Co. 900 27
Avon Products, Inc. 2,109 138
Cardinal Health, Inc. 1,800 134
Clorox Co. 1,686 118
Colgate Palmolive Co. 4,842 314
Fort James Corp. 3,070 122
Gillette Co. 9,112 812
Kimberly Clark 9,000 467
Procter & Gamble 21,920 1,491
-----------
3,623
FOOD PRODUCERS - 2.9%
Archer-Daniels-Midland Co. 9,035 201
Campbell Soup 7,474 385
Conagra, Inc. 7,696 232
CPC International, Inc. 2,317 229
General Mills 2,578 170
H J Heinz Co. 6,030 280
Hershey Foods 2,324 128
Kellogg Co. 6,742 290
Pioneer Hi-Bred International 1,316 121
Quaker Oats 2,209 106
Ralston-Purina Group 1,686 151
Sara Lee Corp. 7,797 399
See accompanying notes to the financial statements 44
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Unilever ADR 10,528 $ 562
Wrigley WM JR Co. 1,893 137
-----------
3,391
FOOD RETAILERS - 0.6%
Albertson's, Inc. 3,983 147
American Stores Co. 4,442 114
Fleming Companies, Inc. 631 11
Giant Foods 1,001 31
Great Atlantic & Pacific 631 19
Kroger* 4,102 134
Super-Valu, Inc. 954 35
Sysco Corp. 2,848 114
Winn-Dixie Stores, Inc. 2,424 90
-----------
695
TOBACCO - 1.5%
Fortune Brands, Inc. 2,740 91
Philip Morris Co., Inc. 39,307 1,558
UST, Inc. 3,002 90
-----------
1,739
-----------
Total Common Stock - Consumer
Staples - 12.4% 14,712
COMMON STOCKS - ENERGY
COAL, GAS & PIPE - 0.1%
Anadarko Petroleum Corp. 1,000 73
EXPLORATION & DRILLING - 0.2%
Burlington Resources, Inc. 2,861 140
Helmerich & Payne 383 31
Union Pacific Resources Group 4,112 101
-----------
272
SHARES VALUE
------ -----
OIL & GAS-DOMESTIC - 1.9%
Amerada Hess Corp. 1,478 $ 91
Amoco Corp. 8,004 734
Apache Corp. 1,500 63
Ashland, Inc. 1,254 60
Atlantic Richfield 5,164 425
Kerr-McGee Co. 766 52
Occidental Petroleum 5,364 150
Oryx Energy * 1,686 47
Pennzoil Co. 739 55
Phillips Petroleum Co. 4,264 206
Sun Co. 1,162 47
Unocal Corp. 4,002 165
USX-Marathon 4,633 166
-----------
2,261
OIL & GAS-INTERNATIONAL - 5.6%
Chevron Corp. 10,583 878
Exxon Corp. 40,130 2,466
Mobil Corp. 12,746 928
Royal Dutch Petroleum ADR 34,756 1,829
Texaco Inc. 8,528 486
-----------
6,587
OIL & GAS-SERVICE - 1.1%
Baker Hughes, Inc. 2,717 125
Dresser Industries 2,848 120
Halliburton Co. 4,086 244
Rowan Companies, Inc.* 1,370 53
Schlumberger 7,996 700
Western Atlas, Inc.* 893 77
-----------
1,319
-----------
Total Common Stocks - Energy - 8.9% 10,512
See accompanying notes to the financial statements 45
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
COMMON STOCKS - FINANCE
BANK & BANK HOLDING COMPANY - 7.9%
Banc One Corp. 9,498 $ 495
Bank of New York 6,165 290
Bankamerica Corp. 11,292 807
Bankboston Corporation 2,324 188
Bankers Trust of New York 1,616 191
Barnett Bank, Inc. 3,256 225
Chase Manhattan 6,871 793
Citicorp 7,443 931
Comerica, Inc. 1,693 134
Corestates Financial 3,233 235
Fifth Third Bancorp 2,529 162
First Chicago NBD Corp. 4,752 346
First Union Corp. 9,134 448
Fleet Financial Group, Inc. 4,078 262
Huntington Bancshares 2,600 84
Key Corp. 3,487 213
Mellon Bank 4,110 212
Morgan (J.P.) & Co., Inc. 2,902 319
Nations Bank Corp. 11,538 691
National City Corp. 3,533 211
Norwest Corp. 12,206 391
PNC Bank Corp. 4,980 237
Republic New York Corp. 847 90
State Street Corp. 2,600 145
Sun Trust Banks, Inc. 3,433 223
US Bancorp 3,947 401
Wachovia Corp. 2,586 195
Wells Fargo & Co. 1,459 425
-----------
9,344
FINANCIAL SERVICES - 3.6%
American Express Co. 7,589 592
SHARES VALUE
------ -----
American General Corp. 4,063 $ 207
Beneficial Corp. 893 68
Charles Schwab Corp. 4,300 147
Countrywide Credit Ind, Inc. 1,700 58
Equifax 2,400 75
Fannie Mae 17,240 835
Fed Home Loan Mortgage Corp. 11,292 428
Green Tree Financial Corp. 2,163 91
Household International 1,778 201
Marsh & McLennan Co. 2,716 193
MBNA Corp. 8,173 215
Merrill Lynch 5,372 363
Morgan Stanley Dean Witter, Inc. 9,563 469
Salomon, Inc. 1,786 139
SunAmerica, Inc. 3,200 115
Transamerica Corp. 1,054 106
-----------
4,302
INSURANCE - 4.0%
Allstate Corp. 7,012 582
American International Group 11,352 1,159
Aon Corp. 2,708 146
Choice Point Inc.* 260 10
CHUBB Group 2,794 185
Cigna Corp. 1,162 180
Conseco, Inc. 3,000 131
General RE Corp. 1,262 249
Hartford Financial Services 1,947 158
Jefferson Pilot 1,195 92
Lincoln National Corp. 1,686 116
Loews Corp. 1,893 211
MBIA Inc. 1,370 82
MGIC Investment 1,894 114
Progressive Corp. 1,200 125
See accompanying notes to the financial statements 46
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Providian Corp. 1,478 $ 55
Safeco Corp. 2,001 95
St. Paul Companies 1,370 110
Torchmark Corp. 2,216 88
Travelers Group, Inc. 10,423 730
Unum Corp. 2,216 108
USF&G Corp. 1,847 37
-----------
4,763
SAVINGS & LOAN - 0.4%
Ahmanson H. F. & Co. 1,539 91
Golden West Financial 947 82
Washington Mutual, Inc. 4,036 276
-----------
449
-----------
Total Common Stocks - Finance - 15.9% 18,858
COMMON STOCKS - HEALTH CARE
BIO-TECHNOLOGY - 0.2%
Amgen* 4,318 213
DRUGS - 6.9%
Alza Corp.* 1,370 36
American Home Products Corp. 10,567 783
Bristol-Meyer/Squibb 16,116 1,414
Lilly Eli & Co. 17,994 1,203
Merck & Co. 19,542 1,744
Pfizer, Inc. 20,950 1,482
Pharmacia & Upjohn, Inc. 8,261 262
Schering Plough Corp. 11,906 668
Warner-Lambert Co. 4,372 626
-----------
8,218
SHARES VALUE
------ -----
MEDICAL PRODUCTS & SUPPLIES - 2.7%
Abbott Labs 12,438 $ 763
Allergan 1,054 35
Bard C.R., Inc. 947 26
Bausch & Lomb, Inc. 947 37
Baxter International, Inc. 4,572 211
Becton Dickinson Co. 2,001 92
Biomet, Inc. 1,793 45
Boston Scientific Corp.* 3,194 145
Guidant Corp. 2,432 140
Johnson & Johnson Co. 21,589 1,239
Mallinckrodt, Inc. 1,162 44
Medtronic, Inc. 7,588 330
St. Jude Medical 1,503 46
US Surgical Corp. 1,201 32
-----------
3,185
MEDICAL SERVICES - 0.9%
Aetna Life and Casualty Co. 2,398 170
Beverly Enterprises* 1,832 27
Columbia/HCA Healthcare Corp. 10,598 299
Healthsouth Corp.* 5,600 143
Humana, Inc.* 2,632 55
Manor Care, Inc. 1,001 34
Tenet Healthcare Corp.* 4,925 151
United Healthcare Corp. 3,002 139
-----------
1,018
-----------
Total Common Stocks -
Health Care - 10.7% 12,634
COMMON STOCKS - MISCELLANEOUS
DIVERSIFIED - 1.3%
Allied Signal, Inc. 9,158 330
See accompanying notes to the financial statements 47
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Cognizant Corp. 2,640 $ 103
Corning Corporation 3,787 171
3M Co. 6,742 617
Tenneco, Inc. 2,740 123
Textron, Inc. 2,632 152
Whitman Corp. 1,686 44
-----------
1,540
PROFESSIONAL SERVICES - 0.2%
H & R Block 1,686 62
Interpublic GRP Companies, Inc. 1,974 94
Service Corp. International 4,041 123
-----------
279
-----------
Total Common Stocks -
Miscellaneous - 1.5% 1,819
COMMON STOCKS - TECHNOLOGY
COMMUNICATION EQUIPMENT - 1.2%
Andrew Corp.* 1,436 33
DSC Communications Corp.* 1,893 46
Lucent Technologies 10,395 857
Northern Telecom 4,210 378
Scientific - Atlanta Inc. 1,262 23
Tellabs, Inc.* 2,948 159
-----------
1,496
COMPUTER RELATED - 4.8%
3 Com Corp.* 5,586 231
Apple Computer, Inc.* 2,101 36
Cisco Systems, Inc.* 10,829 888
Compaq Computers Corp.* 12,252 781
Data General Corp.* 731 14
Dell Computer Corp.* 5,396 432
Digital Equipment* 2,478 124
SHARES VALUE
------ -----
EMC Corp. Massachusetts* 4,041 $ 226
Hewlett-Packard Co. 16,886 1,042
International Business Machines 15,964 1,565
Seagate Technology, Inc.* 3,971 108
Silicon Graphics, Inc.* 2,840 42
Sun Microsystems* 6,004 206
Unisys Corp.* 2,840 38
-----------
5,733
COMPUTER - SERVICES - 0.7%
Automatic Data Processing, Inc. 4,787 245
Ceridian Corporation* 1,354 53
Computer Associates 5,896 440
Computer Sciences* 1,289 91
-----------
829
COMPUTER - SOFTWARE - 3.3%
Adobe Systems, Inc. 1,200 57
Autodesk, Inc. 766 28
Bay Networks* 3,202 101
Cabletron Systems* 2,524 73
First Data 7,166 208
HBO & Co. 3,300 144
Microsoft Corp.* 19,480 2,532
Nextlevel Systems Inc.* 2,363 32
Novell, Inc.* 5,688 48
Oracle Systems Corp.* 15,903 569
Parametric Tech Co.* 2,100 93
Shared Medical System 356 19
-----------
3,904
ELECTRONICS - 1.1%
Applied Materials, Inc.* 5,896 197
EG&G 739 15
Harris Corp. 1,262 55
LSI Logic Corp.* 2,255 49
See accompanying notes to the financial statements 48
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Motorola, Inc. 9,682 $ 598
National Semiconductor* 2,363 85
Perkin-Elmer Corp. 685 43
Raytheon Co. 3,794 206
Tektronix, Inc. 504 30
-----------
1,278
PHOTOGRAPHY & IMAGING - 0.7%
Eastman Kodak 5,326 319
Ikon Office Solution 2,155 61
Polaroid Corp. 766 34
Xerox 5,264 418
-----------
832
SEMICONDUCTOR - 2.2%
Advanced Micro Devices* 2,309 53
Intel Corp. 26,446 2,036
KLA-Tencor Corp.* 1,400 62
Micron Technology, Inc. 3,371 90
Texas Instruments 3,156 337
-----------
2,578
-----------
Total Common Stocks -
Technology - 14.0% 16,650
COMMON STOCKS - TRANSPORTATION
AIR TRANSPORTATION - 0.4%
AMR Corp.* 1,524 177
Delta Airlines 1,216 123
Southwest Airlines Co. 2,417 79
US Airways Group, Inc.* 1,301 61
-----------
440
RAILROAD - 0.7%
Burlington Northern Santa Fe Co. 2,526 240
CSX Corp. 3,571 195
Norfolk Southern Co. 6,003 193
SHARES VALUE
------ -----
Union Pacific Corp. 4,048 $ 248
-----------
876
TRUCKING - 0.2%
Caliber System, Inc. 631 33
Federal Express* 1,893 126
Ryder System Co. 1,216 43
-----------
202
-----------
Total Common Stocks -
Transportation - 1.3% 1,518
COMMON STOCKS - UTILITIES
ELECTRIC - 2.4%
American Electric Power Co. 3,102 147
Baltimore Gas & Electric 2,371 65
Carolina Power & Light 2,424 87
Central & Southwest Corp. 3,471 75
Cinergy Corp. 2,583 85
Consolidated Edison 3,841 132
Dominion Resources 2,994 111
DTE Energy Co. 2,317 71
Duke Power 5,848 282
Edison International 6,458 166
Entergy Corp. 3,887 95
FPL Group, Inc. 2,948 152
General Public Utilities, Inc. 1,947 70
Houston Industries 4,660 101
Niagara Mohawk Power 2,317 22
Northern States Power 1,154 58
Ohio Edison 2,524 62
Pacificorp 4,841 105
Peco Energy Co. 3,633 82
PP & L Resources, Inc. 2,632 57
PG & E Corp. 7,088 181
See accompanying notes to the financial statements 49
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
OCTOBER 31, 1997
Principal
Amount
In thousands, except shares or Shares Value
--------- -----
Public Service Enterprises 3,748 $ 97
Southern, Co. 11,098 255
Texas Utilities Co. 3,892 140
Unicom Corp. 3,525 99
Union Electric Co. 1,632 62
-----------
2,859
NATURAL GAS - 0.6%
Coastal Corp. 1,686 101
Columbia Gas System, Inc. 874 63
Consolidated Natural Gas 1,578 85
Eastern Enterprises 342 13
Enron 4,956 188
Nicor 793 31
Oneok, Inc. 450 15
Pacific Enterprises 1,370 45
People's Energy Corp. 604 22
Sonat, Inc. 1,370 63
Williams Companies 2,529 129
-----------
755
-----------
Total Common Stocks - Utilities - 3.0% 3,614
-----------
Total Common Stocks - 97.0%
(cost - $94,702) 115,045
-----------
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCY - 0.2%
Federal Home Loan Mortgage Corp
5.380% due 11/13/97 $ 175 175
5.390% due 11/13/97 30 30
-----------
205
Principal
Amount Value
--------- -----
U.S. GOVERNMENT OBLIGATIONS - 0.2%
U.S. Treasury Bills
4.920% due 01/02/98 $ 200 $ 198
4.967% due 01/15/98 100 99
-----------
297
-----------
Total U.S. Government Securities - 0.4%
(cost - $502) 502
COMMERCIAL PAPER
Merrill Lynch and Co.
5.520% due 12/05/97 1,760 1,751
5.530% due 12/05/97 1,170 1,164
-----------
Total Commercial Paper - 2.5%
(cost - $2,915) 2,915
DEMAND NOTE
UTILITY - ELECTRICAL - 0.0%
Wisconsin Electric
5.205% due 11/03/97
(cost - $46) 46 46
-----------
TOTAL INVESTMENTS - 99.9%
(cost - $98,165) 118,508
Cash and other assets, less liabilities - 0.1% 104
-----------
TOTAL NET ASSETS - 100.0% $ 118,612
===========
* Non-income producing security
See accompanying notes to the financial statements 50
<PAGE>
FINANCIAL HIGHLIGHTS
S&P 500 INDEX FUND
<TABLE>
<CAPTION>
Year 09/03/96
ended through
Selected per share data 10/31/97 10/31/96
-------- --------
<S> <C> <C>
Net asset value, beginning of period....................................... $ 10.77 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................................. 0.21 0.02
Net realized and unrealized gain................................... 3.19 0.77
----------- ----------
Total income from investment operations.................................... 3.40 0.79
LESS DISTRIBUTIONS:
Dividends from net investment income............................... 0.02 0.02
Distributions from net realized gain............................... 0.00 0.00
----------- ----------
Total distributions........................................................ 0.02 0.02
----------- ----------
Net asset value, end of period............................................. $ 14.15 10.77
=========== ==========
Total return .............................................................. 31.58% 7.86%**
=========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........................... $ 118,612 25,852
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 0.37% 0.71%*
Expenses, before waivers and reimbursements................ 0.49% 1.26%*
Net investment income, net of waivers and reimbursements... 1.66% 1.60%*
Net investment income, before waivers and reimbursements... 1.54% 1.05%*
Portfolio turnover rate............................................ 13% 0%
Average commission rate paid per share............................. $ 0.0551 0.0338
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements 51
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $51,255)............................... $ 52,514
Foreign currency at value (cost - $519)............................................ 528
Dividends receivable............................................................... 116
Net unrealized appreciation on forward foreign currency contracts.................. 98
Receivable for securities sold..................................................... 13
Cash............................................................................... 10
Receivable for fund shares sold.................................................... 5
----------
Total Assets............................................................................... 53,284
LIABILITIES
Payable for securities purchased................................................... 62
Accrued expenses payable........................................................... 50
Investment advisory fees payable................................................... 29
----------
Total Liabilities.......................................................................... 141
----------
Net Assets................................................................................. $ 53,143
==========
ANALYSIS OF NET ASSETS
Paid in capital.................................................................... $ 49,636
Accumulated net realized gain...................................................... 564
Net unrealized appreciation........................................................ 1,366
Undistributed net investment income................................................ 1,577
----------
Net Assets................................................................................. $ 53,143
==========
Net Asset Value Per Share (based on net assets of $53,143 and 4,687 shares
issued and outstanding)............................................................ $ 11.34
==========
</TABLE>
See accompanying notes to the financial statements 52
<PAGE>
STATEMENT OF OPERATIONS
INTERNATIONAL EQUITY FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of $126 for foreign taxes withheld)................................. $ 953
Interest........................................................................... 171
-----------
Total Investment Income.................................................................... 1,124
EXPENSES
Investment advisory fees........................................................... 419
Custodian fees..................................................................... 147
Fund accounting fees............................................................... 74
Fund administration fees........................................................... 22
Registration fees.................................................................. 20
Transfer agent fees................................................................ 14
Audit fees......................................................................... 5
Legal fees......................................................................... 5
Trustees fees...................................................................... 2
Other.............................................................................. 3
-----------
Total Expenses............................................................................. 711
Less: Fee Waiver.......................................................................... 93
-----------
Net Expenses............................................................................... 618
-----------
Net Investment Income...................................................................... 506
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments and foreign currency transactions......... 564
Net realized gain on forward foreign currency contracts............................ 1,127
Change in net unrealized appreciation on investments and foreign currency.......... 1,126
Change in net unrealized appreciation on forward foreign currency contracts........ 62
-----------
Net realized and unrealized gain .................................................. 2,879
-----------
Net Increase in Net Assets from Operations................................................. $ 3,385
===========
</TABLE>
See accompanying notes to the financial statements 53
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
YEAR 09/03/96
ENDED THROUGH
In thousands 10/31/97 10/31/96
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................................... $ 506 49
Net realized gain....................................................... 1,691 29
Change in net unrealized appreciation................................... 1,188 178
----------- ----------
Increase in net assets from operations.................................. 3,385 256
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................... (55) (49)
Net realized gain....................................................... 0 0
Distributions in excess of net investment income........................ 0 (30)
----------- ----------
Total distributions..................................................... (55) (79)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................................ 27,669 25,000
Reinvestment of distributions........................................... 134 0
Cost of shares redeemed ................................................ (3,167) 0
----------- ----------
Increase in net assets from capital transactions........................ 24,636 25,000
----------- ----------
Increase in net assets.......................................................... 27,966 25,177
Net assets at beginning of period............................................... 25,177 0
----------- ----------
Net assets at end of period..................................................... $ 53,143 25,177
=========== ==========
Undistributed net investment income............................................. $ 1,577 (1)
=========== ==========
</TABLE>
See accompanying notes to the financial statements 54
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
COMMON STOCKS - FOREIGN
AUSTRALIA - 4.5%
Amcor Limited 11,000 $ 52
Boral Limited 27,000 71
Brambles Industries Ltd 5,000 96
Broken Hill Proprietary Co 37,500 373
Coca-Cola Amatil 7,000 53
CSR Limited Ord 19,000 66
David Jones Limited 67,000 85
Lend Lease Corp Ltd 5,000 103
M.I.M. Holdings Ltd 41,521 37
Mayne Nickless Ltd 9,000 41
National Australia Bank Lts 27,000 370
News Corporation Ltd 58,152 279
News Corporation Ltd Preferred 18,140 81
Pacific Dunlop 32,000 68
Qantas Airways Limited 31,494 57
Rio Tinto Limited 13,000 159
Santos Limited 7,000 32
Westpac Bank 41,000 239
WMC Limited 21,000 75
Woolworths Ltd 14,000 45
----------
2,382
BELGIUM - 3.6%
Delhaize-Le Lion 2,100 100
Eaux Compagnie Gen Warrant 1,300 1
Electrabel Cap 1,500 337
Fortis Ag 1,375 261
Fortis Ag - Strip Vvpr 75 0
Generale de Banquenpv 300 123
Groupe Bruxelles Lambert 800 124
Kredietbank Npv 450 189
Kredietbank Vvpr 7 3
SHARES VALUE
------ -----
Petrofina Sa 800 $ 294
Soc Gen De Belgique Put/Wts 200 1
Societe Generale Belgique 1,400 127
Sovay et Cie Npv 1,980 119
Tractabel Inv Intl Npv 1,500 128
Union Miniere Npv * 1,364 100
----------
1,907
CANADA - 3.1%
Agrium Inc. 4,100 46
Alcan Aluminum Ltd 3,000 85
Bank of Montreal 2,400 104
Barrick Gold Corp 1,800 37
Canadian National Railway Co. 2,100 113
Canadian Pacific Ltd 6,900 205
Imasco Ltd 2,300 73
Imperial Oil Ltd 2,500 155
Magna International 800 53
Newbridge Networks Corp.* 1,000 53
Noranda 3,100 55
Northern Telecom Ltd 600 54
Nova Corp 8,900 80
Potash Corp. 1,000 82
Royal Bank of Canada 2,800 150
Seagram Co Ltd 1,900 64
Telus Corp. 4,400 88
Thomson Corp 2,500 60
Trans Canada Pipeline 4,100 76
Westcoast Energy 2,200 45
----------
1,678
FINLAND - 0.8%
Merita Ltd 8,900 44
Metsa Serla - B 2,300 20
Nokia Ab - A 2,500 219
See accompanying notes to the financial statements 55
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Outokumpu 1,800 $ 27
Pohjola Insurance 400 15
Rauma Oy 78 1
Sampo Insurance Co 800 24
Upm-Kymmene Oy 3,300 74
----------
424
FRANCE - 4.7%
Accor Sa 500 93
Alcatel-Alsthom 900 109
Axa Uap 1,800 124
Banque Nationale De Paris 2,500 111
Cie Fin Paribas 700 51
Clf - Dexia France 800 80
Compagnie Bancaire Sa 340 44
Compagnie De Saint-Gobain 1,025 147
Compagnie Generale Des Eaux 1,100 129
France Telecom Sa* 1,000 38
Gruope Danone 400 61
Lafarge 900 56
Lagardere SCA 2,600 75
Michelin (Cgde) 1,821 94
Pechiney Sa 2,147 88
Peugeot Sa 1,100 125
Pinault Printemps Redoute Sa 100 46
Rhone-Poulenc 3,082 135
Seita 3,200 102
Soc Natl Elf Aquit 1,400 174
Societe Generale 1,037 142
Suez Lyonnaise Des Eaux 1,236 129
Thomson CSF 2,800 76
Total Sa 1,300 145
Unisor Sacilor 6,900 114
----------
2,488
SHARES VALUE
------ -----
GERMANY - 9.1%
Allianz Ag 2,100 $ 468
Basf Ag 5,740 195
Bayer Ag 7,640 269
Bayerische Motoren Werke Ag 270 196
Commerzbank Ag 6,460 220
Daimler Benz Ag 2,920 196
Deutsche Bank Ag 6,090 399
Deutsche Telekom Ag 15,000 281
Henkel KGAA - Vorzug 2,330 121
Hochtief Ag 1,900 82
Hoechst Ag 2,500 95
Man Ag 390 118
Mannesmann Ag 420 178
Metro Ag 4,200 185
Muenchener Rueckver Ag-reg 1,050 306
Preussag Ag 600 156
Rwe Ag 4,470 194
Schering Ag 2,440 237
Siemens Ag 4,770 294
Thyssen Ag 560 124
Veba Ag 5,070 283
Volkswagen Ag 380 225
----------
4,822
HONG KONG - 1.2%
Cheung Kong (Hldgs) 14,000 97
China Light & Power 8,000 42
Citic Pacific Ltd 7,000 34
Guoco Group Ltd 13,000 28
Hang Seng Bank 8,300 72
Hong Kong Telecomm 35,600 68
Hong Kong & China Gas 30,000 57
Hutchison Whampoa Ltd 20,000 138
See accompanying notes to the financial statements 56
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Sun Hung Kai Properties 7,000 $ 52
Swire Pacific 4,000 21
Wharf Holdings 7,000 14
----------
623
ITALY - 3.8%
Aeroporti Di Roma* 2,000 18
Assicurazioni Generali 8,700 195
Banca Commerciale Italiana 25,000 68
Credito Italiano ITL 45,000 120
Danieli Risp (Savings) 17,000 66
Edison Spa 9,000 47
Ente Nazionale Idrocarburi 50,000 282
Fiat Spa-Priv 76,890 127
Ina - Istitut Naz Assicur 41,000 66
Istituto Mobiliare Italinao 12,000 107
Italgas (Soc Ital) 16,600 59
Mediobanca 4,000 27
Montedison 161,300 131
Rinascente 13,800 103
Rinascente Savings (Risp) 9,000 30
Sai (Soc Assic) Di Risp 11,000 40
Telecom Italia Mobile Di Risp 76,300 157
Telecom Italia Spa 11,665 73
Telecom Italia-RNC 53,314 216
Tim SPA 27,000 100
----------
2,032
JAPAN - 23.1%
Amada Co 23,000 122
Asahi Glass Co Ltd 27,000 182
Canon Inc 19,000 461
Cannon Sales Co Inc 7,000 127
Citizen Watch Co 21,000 134
Dai Nippon Printing Co Ltd 21,000 419
SHARES VALUE
------ -----
Daiichi Pharm Co 20,000 $ 284
Daikin Industries 23,000 137
Daiwa House 11,000 106
Denso Corporation 11,000 238
Fanuc Co 8,900 360
Fujitsu Ltd 14,000 154
Hitachi 45,000 346
Honda Motor Co 7,000 236
Hoya Corp. 3,000 104
Inax 10,000 44
Ito-Yokado Co Ltd 9,000 447
Kaneka Corp 23,000 134
Keio Teito Electric Railway 26,000 109
Kinki Nippon Railway 26,000 148
Kirin Brewery Co Ltd 25,000 210
Kokuyo 7,000 165
Kuraray Co Ltd 27,000 242
Kyocera Corp 1st Sec 2,700 155
Marui Co. 12,000 203
Matsushita Electric Indl Co 34,000 571
Mitsubishi Paper 29,000 77
Ngk Insulators 1st Section 37,000 320
Nintendo 2,100 182
Nippon Meat Packer 15,000 210
Nippon Steel Co 1st Sec 18,000 37
Okumura 23,000 109
Osaka Gas 44,000 97
Sankyo Co Ltd 17,000 561
Sanwa Bank 6,000 60
Secom 5,000 323
Seino Transportation 16,000 138
Sekisui House Ltd 1st Sec 37,000 317
Sony Corp 5,200 432
See accompanying notes to the financial statements 57
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Sumitomo Bank 24,000 $ 255
Sumitomo Chemical Co. 37,000 132
Sumitomo Electric 19,000 251
Sumitomo Trust and Bkg 13,000 99
Takeda Chemical 14,000 382
TDK Corp 4,000 332
The Bank of Tokyo-Mitsubishi 21,000 274
Tokio Marine & Fire 21,000 210
Tokyo Elec Pwr First Sec 5,000 96
Tokyo Steel Mfg 17,000 120
Tonen Corp 17,000 127
Toray Industries Inc 82,000 457
Toshiba Corp 1st Sec 53,000 240
Toyo Suisan Kaisha 12,000 108
Toyota Motor Corporation 12,000 334
Yamazaki Baking Co Ltd 11,000 152
----------
12,270
MALAYSIA - 1.3%
Hume Industries BHD 16,000 31
Kuala Lumpur Kepon Berhad 32,000 76
Land & General Bhd 22,000 10
Malayan Banking 16,000 62
Malaysia Int Shipping 9,000 15
Nestle (Malaysia) BHD 7,000 35
New Straits Times Press 13,000 28
Perusahaan Otomobil Nasional 10,000 24
Petronas Gas BHD 18,000 48
Public Bank BHD 14,000 8
Public Bank BHD-Foreign Mkt 16,000 10
Resorts World BHD 15,000 27
Rothmans of Pall Mall BHD 6,000 48
Sime Darby Malay Regd 47,000 67
Telekom Malaysia 34,000 88
SHARES VALUE
------ -----
Tenaga Nasional BHD 40,000 $ 86
United Engineers 12,000 28
UWM Holdings Berhad 7,000 8
YTL Corp. 6,000 6
YTL Corp BHD 12,000 13
YTL Power Intl* 500 0
----------
718
NETHERLANDS - 4.3%
Abn-Amro Holdings 9,833 198
Akzo Nobel 300 53
Elsevier 12,000 189
Heineken NV 800 130
ING Groep 5,799 243
KLM 1,523 52
Koninklijke Hoogovens 1,037 47
KPN 5,743 220
Philips Electronics 3,000 235
Royal Dutch Petrol 13,300 704
Unilever 4,400 234
----------
2,305
NEW ZEALAND - 3.0%
Brierley Investments Ltd 314,000 243
Carter Holt Harvey Ltd 108,000 189
Fletcher Challenge Building 36,000 109
Fletcher Challenge Energy 40,000 180
Fletcher Challenge Paper 71,000 117
Fletcher Forestry Shares 76,880 74
Telecom Corp of New Zealand 144,000 699
----------
1,611
SINGAPORE - 1.8%
City Developments 12,000 50
Dbs Land 22,000 37
Dev Bank 11,000 103
See accompanying notes to the financial statements 58
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Elec & Eltek Intl Co. Ltd 2,000 $ 14
Faser & Neave 4,000 20
Hotel Properties 39,000 30
Keppel Corporation 13,750 44
Keppel Land Ltd 15,000 21
Natsteel Ltd 8,000 13
Overseas Chinese Bank 19,600 109
Singapore Int'l Airlines, Regd 19,000 143
Singapore Press Hds 7,000 97
Singapore Telecom 88,000 140
UTD Overseas Bank 20,000 111
Wing Tai Hldgs Sg 16,000 20
----------
952
SPAIN - 2.1%
Acerinox Sa 200 30
Banco Bilbao Vizcaya Sa 4,500 121
Banco Central Hispanoamericano 3,000 56
Banco Popular Espanol 1,200 71
Banco Santander 3,600 101
Endesa Sa 8,800 166
Fomento De Construcciones Y Ct 1,600 59
Gas Natural Sdg-E Sa 1,600 74
Iberdrola 7,700 92
Mapfre 800 37
Repsol Sa 1,900 80
Tabacalera Sa 200 14
Telefonica De Espana Ord 5,500 150
Vallehermoso Sa 1,100 28
Viscofan Envolturas 1,500 31
----------
1,110
SWITZERLAND - 4.3%
Abb Ag 46 60
Alusuisse - Lonza 65 58
SHARES VALUE
------ -----
Ciba Spezialitaten 145 $ 14
Credit Suisse Group 1,582 224
Nestle Sa 186 263
Navartis - Reg Shs 396 622
Roche Holding Ag0 Regd 45 397
Sairgroup* 47 63
Schw Ruckversicherungs 113 171
Schweiz Leb & Rentenanst 108 73
Sulzer Gebuder Ag 86 63
Ubs (Schw Bankgesellsch) Br 116 134
Zurich Versicherungs 310 128
----------
2,270
UNITED KINGDOM - 21.5%
Abbey National Ord 13,000 207
Bass Plc 8,000 111
Bat Industries 62,000 544
Bg Plc 75,000 328
Billiton Plc* 38,000 110
Booker Plc 29,000 152
British Energy 33,000 215
British Petroleum Ord 37,303 548
British Steel Plc 100,000 265
British Telecommunciations 58,000 439
BTR Ord 24,000 82
Cable and Wireless Ord 14,000 111
Centrica Plc* 53,000 74
Charter Plc 12,846 180
Coats Viyella Plc 52,000 95
Fki Plc 64,000 210
General Electric Co 57,000 363
Glaxo Holdings Ord 33,500 717
Grand Metropolitan Ord 24,000 216
Great Universal Stores 11,000 131
See accompanying notes to the financial statements 59
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
In thousands, except shares SHARES VALUE
------ -----
Guinness Ord 23,000 $ 206
Hanson Plc 21,750 112
Hillsdown Holdings 63,000 179
House of Fraser Plc 68,000 244
Hsbc Holdings Ord 14,000 351
Imperial Chemical Inds Ord 5,000 75
Inchcape 36,000 131
Jefferson Smurfit Group Plc 51,702 153
Legal & General Group Plc 32,500 264
Lloyds TSB Group Plc 51,000 623
Marks & Spencer Plc 38,500 400
Mirror Group Plc 45,000 149
National Westminster Bank Plc 13,000 188
Northern Foods Ord 37,000 143
Peninsular & Orient Steam Nav 24,500 284
Reckitt & Colman Plc 6,800 104
Redland Plc 12,000 68
Reuters Holdings Ord 14,000 152
Rio Tinto Plc 14,000 182
RJB Mining Plc 37,000 110
Royal Sun Alliance 37,000 356
Sainsbury (J) Plc 7,000 58
Scottish Hydro-electric Plc 15,000 108
Sears Ord 87,000 88
Sedgwick Group Plc 57,000 119
Smithkline Beecham Plc 34,000 322
Tate & Lyle Ord 16,000 122
Tesco 25,000 198
Thames Water Plc 17,000 258
Unilever Ord 16,000 119
Vodafone Group Ord 23,000 126
Williams Holding Plc 40,000 237
PRINCIPAL
AMOUNT
OR SHARES VALUE
--------- -----
Yorshire Water Plc 13,259 $ 103
----------
11,430
----------
Total Common Stocks -
Foreign - 92.2 % (cost - $47,763) 49,022
COMMERCIAL PAPER - 6.6%
AUTO & TRUCK - 2.9%
Toyota Motor Credit
5.550% due 11/19/97 $ 1,557 1,553
BEVERAGE - 3.7%
Anheuser Busch Co.
5.650% due 11/03/97 1,940 1,939
----------
Total Commercial Paper - 6.6%
(cost - $3,492) 3,492
----------
TOTAL INVESTMENTS - 98.8%
(cost - $51,255) 52,514
Cash, foreign currency and other assets,
less liabilities - 1.2% 629
----------
TOTAL NET ASSETS - 100.0% $ 53,143
==========
* Non-income producing security.
See accompanying notes to the financial statements 60
<PAGE>
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
OCTOBER 31, 1997
As a percentage of net assets
NON - U.S. EQUITIES
Aerospace & military technology 0.15%
Appliances and household durable 2.33
Automobiles 2.75
Banking 10.91
Beverages and tobacco 1.59
Broadcasting and publishing 1.65
Building materials and components 1.20
Business and public services 4.15
Chemicals 3.66
Construction and housing 1.30
Data processing and reproduction 1.15
Electrical and electronics 3.69
Electronic components 1.79
Energy sources 6.02
Financial services 0.92
Food and household products 3.68
Forest products and paper 1.42
Gold mines 0.07
Health and personal care 7.05
Industrial components 1.80
Insurance 5.39
Leisure and tourism 0.49
Machinery and engineering 1.05
Merchandising 4.43
Metals - steel 1.41
Metals - non ferrous 1.72
Miscellaneous materials and commodities 0.55
Multi-industry 4.59
Real estate 0.79
Recreation and other consumer goods 0.59
Telecommunications 5.95
Textiles and apparel 0.18
Transportation - airlines 0.59
Transportation - road and rail 0.96%
Transportation - shipping 0.57
Utilities - electrical and gas 5.16
Wholesale and international trade 0.55
-------
92.25
COMMERCIAL PAPER
Finance - Miscellaneous 6.57
TOTAL INVESTMENTS 98.82
Cash, foreign currency and other assets,
less liabilities 1.18
TOTAL NET ASSETS 100.00%
See accompanying notes to the financial statements 61
<PAGE>
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
YEAR 09/03/96
ENDED THROUGH
Selected per share data 10/31/97 10/31/96
-------- --------
<S> <C> <C>
Net asset value, beginning of period............................... $ 10.20 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... 0.11 0.02
Net realized and unrealized gain........................... 1.05 0.21
---------- ---------
Total income from investment operations............................ 1.16 0.23
LESS DISTRIBUTIONS:
Dividends from net investment income....................... 0.02 0.03
Distributions from net realized gain....................... 0.00 0.00
---------- ---------
Total distributions................................................ 0.02 0.03
---------- ---------
Net asset value, end of period..................................... $ 11.34 10.20
========== =========
Total return ...................................................... 11.34% 2.32%**
========== =========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........................... $ 53,143 25,177
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 1.40% 1.46%*
Expenses, before waivers and reimbursements................ 1.61% 1.46%*
Net investment income, net of waivers and reimbursements... 1.14% 1.52%*
Net investment income, before waivers and reimbursements... 0.93% 1.52%*
Portfolio turnover rate............................................ 27% 0%
Average commission rate paid per share............................. $ 0.0262 0.0264
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements 62
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
REIT INDEX FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C> <C>
ASSETS
Investments in securities, at value (cost - $86,555).......................... $ 99,753
Dividends receivable.......................................................... 179
Receivable for fund shares sold............................................... 5
-----------
Total Assets.......................................................................... 99,937
LIABILITIES
Accrued expenses payable...................................................... 30
Investment advisory fees payable.............................................. 8
-----------
Total Liabilities..................................................................... 38
-----------
Net Assets............................................................................ $ 99,899
===========
ANALYSIS OF NET ASSETS
Paid in capital............................................................... $ 83,785
Accumulated net realized gain................................................. 594
Net unrealized appreciation................................................... 13,198
Undistributed net investment income........................................... 2,322
-----------
Net Assets............................................................................ $ 99,899
===========
Net Asset Value Per Share (based on net assets of $99,899 and 7,299 shares
issued and outstanding)....................................................... $ 13.69
===========
</TABLE>
See accompanying notes to the financial statements 63
<PAGE>
STATEMENT OF OPERATIONS
REIT INDEX FUND
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
In thousands
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................ $ 3,122
Interest................................................. 33
-----------
Total Investment Income 3,155
EXPENSES
Investment advisory fees................................. 382
Fund administration fees................................. 32
Fund accounting fees..................................... 31
Registration fees........................................ 25
Custodian fees........................................... 23
Transfer agent fees...................................... 14
Audit fees............................................... 7
Legal fees............................................... 6
Trustees fees............................................ 3
Other.................................................... 3
-----------
Total Expenses................................................... 526
Less: Fee Waiver................................................ 196
-----------
Net Expenses..................................................... 330
-----------
Net Investment Income............................................ 2,825
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments................. 598
Change in net unrealized appreciation on investments..... 12,744
-----------
Net realized and unrealized gain......................... 13,342
-----------
Net Increase in Net Assets from Operations....................... $ 16,167
===========
</TABLE>
See accompanying notes to the financial statements 64
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
REIT INDEX FUND
<TABLE>
<CAPTION>
YEAR 09/03/96
ENDED THROUGH
In thousands 10/31/97 10/31/96
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income....................................... $ 2,825 136
Net realized gain........................................... 598 0
Change in net unrealized appreciation....................... 12,744 454
---------- ---------
Increase in net assets from operations...................... 16,167 590
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income....................................... (639) 0
Net realized gain........................................... (4) 0
---------- ---------
Total distributions......................................... (643) 0
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................................ 66,295 25,100
Reinvestment of distributions............................... 643 0
Cost of shares redeemed..................................... (8,253) 0
---------- ---------
Increase in net assets from capital transactions............ 58,685 25,100
---------- ---------
Increase in net assets.............................................. 74,209 25,690
Net assets at beginning of period................................... 25,690 0
---------- ---------
Net assets at end of period......................................... $ 99,899 25,690
========== =========
Undistributed net investment income................................. $ 2,322 136
========== =========
</TABLE>
See accompanying notes to the financial statements 65
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31,1997
In thousands, except shares SHARES VALUE
------ ------
COMMON STOCKS - REAL ESTATE
INVESTMENT TRUSTS (REITs)
APARTMENTS - 22.3%
Ambassador Apartments, Inc 10,755 $ 231
AMLI Residential Prop 16,945 394
Apartment Invest & Mgmt Co 29,610 1,049
Associated Estates Realty 17,570 403
Avalon Properties, Inc 39,570 1,162
Bay Apartments Communities 25,685 1,005
Berkshire Realty Co 26,490 295
BRE Properties 38,480 1,056
Camden Property Trust 32,609 978
Equity Residential Properties 76,947 3,886
Essex Property Trust Inc 15,405 528
Evans Withycombe Residential 21,110 533
Gables Residential Trust 20,775 549
Home Properties of New York 7,400 202
Irvine Apartment Community 20,485 630
Merry Land & Investment Co 40,395 881
MGI Properties Inc 14,320 329
Mid-America Apart Community 13,895 393
Oasis Residential Inc 16,635 372
Post Properties Inc 31,595 1,143
Security Capital Atlantic 49,100 1,071
Security Capital Group Warrants 11,824 57
Security Capital Pacific 95,480 2,136
Smith, Charles E. Residential 13,595 464
Summit Properties Inc 23,915 495
Town & Country Trust 16,235 295
United Dominion Realty Trust 91,435 1,269
Walden Residential Props Inc 18,035 440
-----------
22,246
SHARES VALUE
------ ------
DIVERSIFIED - 3.1%
Colonial Properties Trust 22,010 $ 624
Eastgroup Properties 16,695 334
First Union Real Estate 28,600 456
Glenborough Realty Trust Inc 20,895 535
Pacific Gulf Properties 14,920 338
Penn Real Estate Invest Trust 8,955 219
Washington REIT 36,870 604
-----------
3,110
HOTEL - 10.4%
American General Hospitality 15,260 416
Boykin Lodging Co. 9,700 259
Equity Inns Inc 33,125 522
Felcor Suite Hotels 37,690 1,380
Hospitality Properties Trust 28,265 1,005
Innkeepers USA Trust 34,050 568
Jameson Inns Inc 10,055 116
Patriot American Hospitality 68,498 2,260
RFS Hotel Investors Inc 25,225 495
Sunstone Hotel Investors Inc 21,345 375
Starwood Lodging Trust 46,700 2,793
Winston Hotels 16,835 229
-----------
10,418
MANUFACTURED HOMES - 2.0%
Chateau Properties Inc 26,190 779
Manufactured Home Community 25,515 638
Sun Communities Inc 16,835 587
-----------
2,004
OFFICE PROPERTY - 23.0%
Arden Realty Group Inc. 36,700 1,119
Beacon Office Property 57,215 2,410
Brandywine Realty Trust 24,755 580
See accompanying notes to the financial statements 66
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31,1997
In thousands, except shares SHARES VALUE
------ ------
Cali Realty Corp 51,395 $ 2,081
Carramerica Realty Corp 68,715 2,049
Cousins Properties Inc 30,240 949
Crescent Real Estate 115,965 4,175
Duke Realty Investments Inc 76,960 1,732
Highwoods Properties Inc 47,220 1,629
Kilroy Realty Corp. 24,500 649
Koger Equity, Inc 21,760 471
Liberty Property Trust 42,485 1,190
Parkway Properties Inc. 9,600 326
Prentiss Properties Trust 27,100 771
Reckson Assoc Realty Corp 35,270 924
Spieker Properties Inc. 48,750 1,907
-----------
22,962
OUTLET CENTERS - 1.8%
Chelsea GCA Realty Inc 15,795 646
Horizon Group Inc 24,625 328
Mills Corp 23,745 594
Tanger Factory Outlet Center 7,800 222
-----------
1,790
REGIONAL MALL - 8.5%
Arbor Property Trust 12,300 129
CBL & Associates Properties 25,025 604
Crown American Realty 28,665 271
General Growth Industries 36,705 1,266
JP Realty Inc 18,310 446
Lexington Corp Prop 13,245 200
Macerich Co 26,875 712
Prime Retail Inc 26,735 399
Simon Debartolo Group Inc 104,095 3,220
Taubman Centers Inc 52,780 660
Urban Shopping Centers Inc 17,410 564
-----------
8,471
SHARES VALUE
------ ------
SHOPPING CENTER - 13.1%
Alexander Haagen Properties 14,130 $ 237
Bradley Real Estate Inc. 22,450 441
Burnham Pacific Properties Inc 24,610 360
Developers Diversified 27,900 1,102
FAC Realty Inc. 13,000 102
Federal Realty Investment Trust 40,860 1,034
First Washington Realty Trust 7,500 187
Glimcher Realty Trust 22,650 503
IRT Property Co. 33,580 411
JDN Realty Corp 16,070 548
Kimco Realty Corp 41,920 1,341
Kranzco Realty Trust 10,530 205
Mark Centers Trust 8,755 78
Mid Atlantic Realty Trust 8,000 108
New Plan Realty Trust 60,970 1,456
The Price REIT, Inc. 11,130 438
Regency Realty Corp 23,005 592
Saul Centers Inc 12,695 224
Vornado Realty Trust 54,180 2,418
Weingarten Realty Investment 27,865 1,109
Western Investment REIT 17,945 250
-----------
13,144
STORAGE - 5.6%
Public Storage Inc 106,505 2,929
Shurgard Storage Centers 29,565 835
Sovran Self Storage Inc 12,720 374
Storage Trust Realty 13,195 337
Storage USA 28,365 1,076
-----------
5,551
TRIPLE NET LEASE - 4.1%
Commercial Net Lease Realty 25,415 407
Excel Realty Trust Inc 21,610 651
See accompanying notes to the financial statements 67
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
OCTOBER 31,1997
In thousands, except shares SHARES VALUE
------ ------
Franchise Finance Corp 43,160 $ 1,114
National Golf Properties 12,695 412
Realty Income Corp 26,550 694
Trinet Corporate Realty Trust 21,385 774
-----------
4,052
WAREHOUSE / INDUSTRIAL - 5.8%
Bedford Property Investors 11,720 240
Centerpoint Properties Corp 19,885 669
First Industrial Realty Trust 37,405 1,295
Meridian Industrial Trust 14,095 325
Security Capital Industrial 112,630 2,766
Weeks Corp 18,295 549
-----------
5,844
-----------
Total Common Stocks- Real Estate
Investment Trusts - 99.7% (cost - $86,394) 99,592
PRINCIPAL
AMOUNT VALUE
--------- -----
U.S. GOVERNMENT SECURITIES
U.S. GOVERNMENT AGENCY - 0.1%
Federal Home Loan Mortgage Corp
5.470% due 12/11/97
(cost - $100) $ 100 $ 99
DEMAND NOTE
UTILITY - ELECTRICAL -0.0%
Wisconsin Electric
5.205% due 11/03/97
(cost - $61) 61 61
-----------
TOTAL INVESTMENTS - 99.8%
(cost - $86,555) 99,752
Other assets less liabilities - 0.2% 147
-----------
TOTAL NET ASSETS - 100.0% $ 99,899
===========
See accompanying notes to the financial statements 68
<PAGE>
FINANCIAL HIGHLIGHTS
REIT INDEX FUND
<TABLE>
<CAPTION>
YEAR 09/03/96
ENDED THROUGH
Selected per share data 10/31/97 10/31/96
-------- --------
<S> <C> <C>
Net asset value, beginning of period............................... $ 10.44 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... 0.41 0.10
Net realized and unrealized gain........................... 2.99 0.34
------------- ------------
Total income from investment operations............................ 3.40 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income....................... 0.15 0.00
Distributions from net realized gain....................... 0.00 0.00
------------- ------------
Total distributions................................................ 0.15 0.00
------------- ------------
Net asset value, end of period..................................... $ 13.69 10.44
============= ============
Total return....................................................... 32.78% 4.40%**
============= ============
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........................... $ 99,899 25,690
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 0.51% 1.20%*
Expenses, before waivers and reimbursements................ 0.82% 1.20%*
Net investment income, net of waivers and reimbursements... 4.42% 5.97%*
Net investment income, before waivers and reimbursements... 4.11% 5.97%*
Portfolio turnover rate............................................ 22% 0%
Average commission rate paid per share............................. $ 0.0367 0.0270
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements 69
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
1. DESCRIPTION OF ENTITY
Aon Funds (the "Trust"), a Delaware business trust organized on May 16, 1996,
is registered under the Investment Company Act of 1940, as an open-end,
diversified, management investment company. The Trust consists of six Funds:
the Money Market Fund, the Government Securities Fund, the Asset Allocation
Fund, the S&P 500 Index Fund, the International Equity Fund, and the REIT
Index Fund. 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. Fixed income /
debt securities are valued by a pricing service that utilizes
computerized pricing models which 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
reported 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.
70
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
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.
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.
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
71
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
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 voluntarily agreed to waive 0.15% of the investment
advisory fee for the Money Market Fund for a net effective annual rate of .15%
until April 30, 1997. Effective May 1, 1997, 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, 1998.
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
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 year
ended October 31, 1997, the Trust incurred expenses totaling $47,210 for
compensation of unaffiliated trustees.
72
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
5. 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, 1995 420,094 $ 420,094 0 $ 0 6,127 $ 68,850
Shares sold 4,625,263 4,625,263 3,961 40,000 1,464 18,179
Dividend reinvestments 6,166 6,166 5 52 135 1,695
---------- ------------- ----- --------- ------ -----------
Total issued 4,631,429 4,631,429 3,966 40,052 1,599 19,874
Shares redeemed (4,656,419) (4,656,419) 0 0 (801) (10,077)
---------- ------------- ----- --------- ------ -----------
Net change in shares (24,990) (24,990) 3,966 40,052 798 9,797
---------- ------------- ----- --------- ------ -----------
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
========== ============= ===== ========= ====== ===========
</TABLE>
<TABLE>
<CAPTION>
S&P 500 INDEX INTERNATIONAL EQUITY REIT INDEX
FUND FUND FUND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1995 0 $ 0 0 $ 0 0 $ 0
Shares sold 2,400 25,000 2,469 25,000 2,460 25,100
Dividend reinvestments 0 0 0 0 0 0
------ --------- ------ --------- ------ ---------
Total issued 2,400 25,000 2,469 25,000 2,460 25,100
Shares redeemed 0 0 0 0 0 0
------ --------- ------ --------- ------ ---------
Net change in shares 2,400 25,000 2,469 25,000 2,460 25,100
------ --------- ------ --------- ------ ---------
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
====== ========= ====== ========= ====== =========
</TABLE>
73
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
6. INVESTMENTS
Investment transactions for the year ended October 31, 1997, including
maturities and excluding short-term investments, were as follows:
PROCEEDS
In Thousands PURCHASES FROM SALES
--------- ----------
Government Securities Fund $ 153,003 95,114
Asset Allocation Fund 103,273 77,549
S&P 500 Index Fund 78,652 11,721
International Equity Fund 37,606 14,178
REIT Index Fund 75,013 13,743
Total $ 447,547 212,305
Gross unrealized appreciation and gross unrealized depreciation of investments
at October 31, 1997 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 $ 3,062 41,424 22,390 5,736 13,567
Gross unrealized depreciation 0 (2,689) (2,047) (4,477) (369)
------- ------ ------ ------ ------
Net unrealized appreciation $ 3,062 38,735 20,343 1,259 13,198
======= ====== ====== ====== ======
</TABLE>
At October 31, 1997, the identified cost of investments for federal income tax
purposes was as follows:
In Thousands
Money Market Fund $ 768,265
Government Securities Fund 99,913
Asset Allocation Fund 125,673
S&P 500 Index Fund 98,177
International Equity Fund 51,275
REIT Index Fund 86,701
----------
Total $1,230,004
==========
74
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
7. WRITTEN COVERED CALL OPTIONS
The Asset Allocation Fund wrote covered call options during the year ended
October 31, 1997 receiving premiums that provide a partial hedge against
declining stock prices. Transactions in options written for the year ended
October 31, 1997 for the Asset Allocation Fund were as follows:
CONTRACTS PREMIUMS
--------- --------
Options outstanding, beginning of year 0 $ 0
Options written 200 121,696
Options expired 0 0
Options closed 0 0
Options assigned 0 0
----- ----------
Options outstanding, end of year 200 $ 121,696
===== ==========
At October 31, 1997, common stock valued at $617,600 was held by the custodian
in connection with the following covered call options written by the Asset
Allocation Fund.
SHARES
EXERCISE SUBJECT
Common Stock EXPIRATION PRICE TO CALL VALUE
---------- -------- ------- -----
Powerwave Technology, Inc. 11/21/97 $ 35 10,000 $ 11,875
Powerwave Technology, Inc. 11/21/97 45 10,000 1,875
---------
Total $ 13,750
=========
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 year ended October 31, 1997, was the Fund's custodian.
75
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
The International Equity Fund had the following open forward foreign currency
contracts at October 31, 1997, settling on March 12, 1998:
<TABLE>
<CAPTION>
UNREALIZED
LOCAL CONTRACT APPRECIATION
In Thousands CURRENCY AMOUNT VALUE (DEPRECIATION)
-------- -------- ----- --------------
<S> <C> <C> <C> <C>
Forward Foreign Currency Sale Contracts:
Australian Dollar 1,700 $ 1,247 $ 1,199 $ 48
Belgian Franc 44,000 1,186 1,248 (62)
British Pound 2,000 3,152 3,335 (183)
German Deutschemark 650 363 380 (17)
Hong Kong Dollar 5,900 756 748 8
Malaysinan Ringgit 1,450 493 428 65
Singapore Dollar 800 535 507 28
Forward Foreign Currency Buy Contracts:
Canadian Dollar 1,250 912 893 (19)
Danish Kronor 3,400 497 523 26
French Franc 6,400 1,061 1,118 57
Hong Kong Dollar 1,200 153 153 0
Netherlands Guilder 950 476 494 18
Swedish Kronor 10,400 1,342 1,393 51
Swiss Franc 1,900 1,302 1,380 78
-----
Total $ 98
=====
</TABLE>
9. 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.
76
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
At October 31, 1997, 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 December 97; 7 contracts $3,330,244 3,234,000 $ 96,244
The value of U.S. Government Treasury Bills pledged to cover margin
requirements for open futures positions at October 31, 1997 was $297,282.
77
