Aon Funds
Semi-Annual Report
April 30, 1998
unaudited
<PAGE>
AON FUNDS
1-800-AON-FUNDS
June 29, 1998
Dear Fellow Shareholder:
The U.S. financial markets, on balance, provided positive returns since the
beginning of the fiscal year, November 1, 1997. Internationally, stock
markets have been strong in Europe and weak in Asia during the past six
months. The Aon Funds share performance, detailed on the following pages,
reflect these trends.
It is an ongoing management goal that shareholders benefit from expense
control. Aon Advisors, the Fund's investment advisor, waived a portion of its
advisory fee during the six months ended April 30, 1998, helping to achieve
that goal. This "no frills" semi-annual report reflects the commitment to
expense control.
Thank you for your continued support.
Sincerely,
/s/ Michael A. Conway
Michael A. Conway
President
<PAGE>
AON FUNDS
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TABLE OF CONTENTS
Government Securities Fund Commentary Pages 3 - 4
Asset Allocation Fund Commentary Pages 5 - 6
S&P 500 Index Fund Commentary Pages 7 - 8
International Equity Fund Commentary Pages 9 - 10
REIT Index Fund Commentary Pages 11 - 12
Financial Statements Pages 13 - 83
Money Market Fund
Statement of Assets and Liabilities Page 13
Statement of Operations Page 14
Statement of Changes in Net Assets Page 15
Schedule of Investments Pages 16 - 19
Financial Highlights Pages 20 - 22
Government Securities Fund
Statement of Assets and Liabilities Page 23
Statement of Operations Page 24
Statement of Changes in Net Assets Page 25
Schedule of Investments Page 26
Financial Highlights Page 27
Asset Allocation Fund
Statement of Assets and Liabilities Page 28
Statement of Operations Page 29
Statement of Changes in Net Assets Page 30
Schedule of Investments Pages 31 - 37
Financial Highlights Pages 38 - 39
S&P 500 Index Fund
Statement of Assets and Liabilities Page 40
Statement of Operations Page 41
Statement of Changes in Net Assets Page 42
Schedule of Investments Pages 43 - 54
Financial Highlights Page 55
International Equity Fund
Statement of Assets and Liabilities Page 56
Statement of Operations Page 57
Statement of Changes in Net Assets Page 58
Schedule of Investments Pages 59 - 65
Industry Diversification Pages 66 - 67
Financial Highlights Page 68
REIT Index Fund
Statement of Assets and Liabilities Page 69
Statement of Operations Page 70
Statement of Changes in Net Assets Page 71
Schedule of Investments Pages 72 - 74
Financial Highlights Page 75
Notes to the Financial Statements Pages 76 - 83
2
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AON FUNDS
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GOVERNMENT SECURITIES FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
Government Securities Fund and an investment in the Lehman Brothers Government
Index from the inception of the Fund to April 30, 1998. The illustration
assumes that all dividends and distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon Government Securities Fund $10,000 $10,279 $11,189 $11,644
Lehman Brothers Government Index $10,000 $10,365 $11,262 $11,662
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- -------------------------------------------------------------------------------
Aon Government Securities Fund1 Fund Fund(1) 4.06% 12.26% 16.44%
Lehman Brothers Government Index(2) 3.55% 11.05% 16.62%
1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Government Securities Fund
and the return on investment will fluctuate, and redemption proceeds may be
higher or lower than an investor's original cost.
2) The Lehman Brothers Government Index is an unmanaged index generally
considered to be representative of bond market activity. This data is derived
by Aon Funds and includes reinvestment of all dividends and capital gain
distributions.
3) Cumulative total return.
3
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AON FUNDS
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GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
U.S. Treasury yields fell during late 1997 and early 1998 as economic turmoil
in Asia caused investors to seek a safe haven in U.S. Government securities.
During March and April, investor focus shifted to rapid domestic GDP growth
and possible increases in inflation which caused yields to rise. During the
period, the yield curve continued to flatten as the Federal Funds rate
remained unchanged at 5.50%.
The total return of the Fund for the six months ending April 30, 1998 was
4.06%. For comparison, the Lehman Government Bond Index returned 3.55%. The
higher performance of the Fund relative to the index is attributable to 1) the
modestly longer duration and convexity of the portfolio during late 1997 and
early 1998 and 2) the shortening of the portfolio in early 1998 before rates
increased.
The Fund started the second half of the fiscal year shorter in duration than
the benchmark in anticipation of stabilization in Asia and renewed focus on
the strong domestic economy.
Francis P. Wren
Portfolio Manager
4
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AON FUNDS
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ASSET ALLOCATION FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
Asset Allocation Fund and an investment in the Lipper Flexible Portfolio Index
from the inception of the Fund to April 30, 1998. The illustration assumes
that all dividends and distributions are reinvested.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
3/3/94 10/31/94 10/31/95 10/31/96 10/31/97 4/30/98
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aon Asset Allocation Fund $10,000 $10,184 $12,926 $14,356 $19,037 $21,680
Lipper Flexible Portfolio Index $10,000 $ 9,958 $11,618 $13,331 $15,797 $17,890
</TABLE>
Six One Three 3/3/94 to
COMPARISON OF RETURNS Months Year Year(3) 4/30/98(4)
- -----------------------------------------------------------------------------
Aon Asset Allocation Fund(1) 13.88% 41.87% 25.72% 116.80%
Lipper Flexible Portfolio Index(2) 13.24% 26.87% 19.24% 78.90%
1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Asset Allocation Fund and
the return on investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
2) The Lipper Flexible Portfolio Index is an unmanaged index prepared by
Lipper Analytical Services which includes asset allocation funds.
3) Average annual total return.
4) Cumulative total return.
5
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AON FUNDS
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ASSET ALLOCATION FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The Aon Asset Allocation Fund returned 13.88% for the six months ended April
30, 1998, primarily attributable to gains in the equity portion of the
portfolio. For the same period, the Lipper Flexible Portfolio Index, which
consists of the 30 largest flexible funds, returned 13.24%.
This time period was characterized by a high degree of volatility in the
equity markets. Uncertainty over the impact of the Asian financial crises
coupled with concerns regarding the trend in corporate profit growth led to
market declines in October 1997 and the beginning of this year. The stock
market rallied strongly in the first quarter of 1998 as it appeared that
overseas markets would stabilize.
During this period, we have favored equities over bonds while maintaining a
cash reserve in order to cushion the impact of the volatility of the markets
and to take advantage of market dips. In the first four months of 1998, profit
growth has been modest yet stock prices appreciated sharply. The net result is
that price/earnings multiples have expanded, particularly for large
capitalization stocks.
We continue to focus on those equities which have attractive characteristics
in terms of margins, cash flow and returns on capital and which we can acquire
at reasonable multiples. Sectors which significantly contributed to the
performance of the Fund during this period included broadcasting, media and
entertainment, communications, and certain technology and health care issues.
The outlook for the balance of this year is mixed. Asia remains a concern and
the valuation of many large capitalization stocks is unattractive. On the
positive side, we continue to see opportunities where profit growth is strong,
particularly in midsize and small capitalization stocks. Furthermore, it
appears that interest rates will remain stable. On balance, we continue to
favor equities over bonds
Thank you for your continued support of the Fund.
John Lagedrost
Portfolio Manager
6
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AON FUNDS
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S&P 500 INDEX FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the S&P
500 Index Fund and an investment in the S & P 500 index from the inception of
the Fund to April 30, 1998. The illustration assumes that all dividends and
distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon S&P 500 Index Fund $10,000 $10,809 $14,280 $17,491
S&P 500 Index $10,000 $10,786 $14,192 $17,388
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- ----------------------------------------------------------------------
Aon S&P 500 Index Fund(1) 22.53% 40.84% 73.88%
S&P 500 Index(2) 22.49% 41.07% 74.91%
1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the S&P 500 Index Fund and the
return on investment will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2) The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. This data is derived by Aon Funds and
includes reinvestment of all dividends and capital gains distributions.
3) Cumulative total return.
7
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AON FUNDS
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S&P 500 INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The S&P 500 Index Fund had a total return of 22.53% for the six months ended
April 30, 1998 compared to the S&P 500 Index return of 22.49%.
Several factors contributed to the sharp rise in equity prices during the six
months ended April 30, 1998. Fears of the impact of the Asian crisis abated.
Interest rates were held steady during the period and thirty-year bond yields
declined from 6.15% to 5.95%. First quarter reported earnings were mostly in
line with analyst expectations, which caused investors to favor stocks over
bonds during the period. Mutual fund cash flows into equity funds continued to
set new records which provided the fuel for rising stock market prices.
Our outlook for the next twelve months is one of caution. Export orders have
declined and our trade deficit with Japan has widened. Asia continues in
crisis mode. A slowdown in exports may impact earnings in the second half of
1998. We don't believe the S&P 500 will deliver a return rivaling those seen
in the last three years.
The Fund continues to minimize expenses and replicate the performance of the
S&P 500 Index. The Aon S&P 500 Index Fund remains fully invested in the stock
market and is well-positioned to meet its objectives in 1998.
Melissa A. Aton
Portfolio Manager
8
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AON FUNDS
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INTERNATIONAL EQUITY FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the
International Equity Fund and an investment in the Morgan Stanley Capital
International (MSCI) Non-U.S. Equity Index from the inception of the Fund to
April 30, 1998. The illustration assumes that all dividends and distributions
are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon International Equity Fund $10,000 $10,232 $11,393 $12,859
MSCI Non-U.S. Index $10,000 $10,202 $10,725 $12,364
9/3/96 to
COMPARISON OF RETURNS Six months One Year 4/30/98(3)
- ----------------------------------------------------------------------------
Aon International Equity Fund(1) 12.87% 17.75% 28.59%
MSCI Non-U.S. Index(2) 15.29% 19.08% 23.64%
1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the International Equity Fund
and the return on investment will fluctuate, and redemption proceeds may be
higher or lower than an investor's original cost.
2) The MSCI Non-U.S. Index is an unmanaged index generally considered to be
representative of international equity market activity. This data is derived
by Aon Funds and includes reinvestment of all dividends and capital gain
distributions.
3) Cumulative total return.
9
<PAGE>
AON FUNDS
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INTERNATIONAL EQUITY FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
PERFORMANCE
For the six months ended April 30, 1998, the International Equity Fund had a
total return of 12.87%. The Fund underperformed the Morgan Stanley Capital
International (MSCI) Non-US Equity Index return of 15.29%.
For the six months ended April 30, 1998, unhedged equity returns in Europe
were strong, almost 30%. In contrast, unhedged market returns in Japan and
Southeast Asia were weak, less than 1%. On a hedged basis, the returns for
Europe and the Pacific regions would be higher, reflecting the U.S. dollar's
appreciation against most foreign currencies since October.
For the first half of the fiscal year, the Fund was underweight in Japan and
held a 5% strategic allocation to cash. The underweight in Japan added to
performance but the negative contribution from the cash hedge dominates the
performance relative to the benchmark. The contributions from security
selection and currency were flat during the six month period.
STRATEGY
The International Equity Fund currently maintains a defensive posture,
reflecting the view that the Japanese equity market, the largest component of
the index, is significantly overpriced. Given our valuation analyses and
fundamental considerations, we are underweight Japan by almost 6%. The other
markets in the index are only modestly attractive and thus the portfolio
maintains a modest overweight to these markets. The Fund continues to hold a
5% strategic cash position as the offset to the underweight to the Japanese
market.
Most currencies are near their fair value, with the Hong Kong dollar and
British pound being the exceptions. The fund is underweight the Japanese yen
due to significantly higher U.S. dollar interest rates compared to those of
Japan. The underweight to the British pound is based on its overvaluation
while the lack of exposure to the Hong Kong dollar stems primarily from
concerns about the sustainability of the peg. The degree of uncertainty over
China's future attitude towards the territory and the maintenance of the peg
provides an unfavorable backdrop to holding the Hong Kong dollar.
Industry and stock selection favor more defensive issues, food, beverage and
household product companies. The portfolio continues to be underweight
Japanese banks, but overweight the high quality exporters and several stock
specific holdings in the auto sector.
Brinson Partners, Inc. Aon Advisors, Inc.
Subadvisor Portfolio Manager
10
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AON FUNDS
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REIT INDEX FUND
COMPARISON OF A $10,000 INVESTMENT
The following graph illustrates the growth of a $10,000 investment in the REIT
Index Fund and an investment in the Morgan Stanley REIT Index from the
inception of the Fund to April 30, 1998. The illustration assumes that all
dividends and distributions are reinvested.
[CHART APPEARS HERE]
9/3/96 10/31/96 10/31/97 4/30/98
------------------------------------
Aon REIT Index $10,000 $10,440 $13,862 $13,813
Morgan Stanley REIT Index $10,000 $10,482 $13,991 $13,906
9/3/96 to
COMPARISON OF RETURNS Six Months One Year 4/30/98(3)
- ----------------------------------------------------------------------
Aon REIT Index(1) -0.35% 16.99% 38.13%
Morgan Stanley REIT Index(2) -0.61% 17.11% 39.06%
1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the REIT Index Fund and the
return on investment will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2) The Morgan Stanley REIT Index is an unmanaged index generally considered to
be representative of REIT market activity. This data is derived by Aon Funds
and includes reinvestment of all dividends and capital gains distributions.
3) Cumulative total return.
11
<PAGE>
AON FUNDS
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REIT INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The REIT Index Fund had a total return of -0.35% compared to the Morgan
Stanley REIT Index Return of -0.61% for the six months ended April 30, 1998.
Real estate stocks have underperformed the broader stock market this year by a
material margin. There are three possible reasons for this underperformance.
1) In a bull-market environment, money managers are willing to take on more
risk and invest in high-growth momentum oriented stocks rather than defensive
dividend stocks. 2) New real estate construction is expected to create an
excess supply situation in 1999 and beyond which may cause property values to
decline and inhibit the ability to raise rents. 3) Fund flows into real estate
mutual funds have significantly decreased..
We do not believe real estate stocks will match the broad markets this year.
Our outlook for the next twelve months is one of caution. However, increased
worry about the broader markets earnings growth and volatility could cause
investors to move back into REITs. Also, REITs have an average dividend yield
of 6.07%, approximately four times that of the S&P 500.
The Aon REIT Index Fund remains fully invested in the REIT market and
continues to closely replicate the performance of the Morgan Stanley REIT
Index.
Melissa A. Aton
Portfolio Manager
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at amortized cost which approximates fair value............. $829,243
Receivable for fund shares sold.......................................... 1,634
Interest receivable...................................................... 768
Cash..................................................................... 1
--------
Total Assets................................................................... 831,646
LIABILITIES
Dividends payable........................................................ 3,674
Investment advisory fees payable......................................... 201
Accrued expenses payable................................................. 192
--------
Total Liabilities.............................................................. 4,067
--------
Net Assets..................................................................... $827,579
========
Net Asset Value Per Share (based on net assets of $827,579 and 827,579 shares
issued and outstanding).................................................. $ 1.00
========
</TABLE>
13
<PAGE>
STATEMENT OF OPERATIONS
MONEY MARKET FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest.......................... $ 21,583
--------
Total Investment Income................. 21,583
EXPENSES
Investment advisory fees.......... 1,152
Fund administration fees.......... 192
Registration fees................. 55
Fund accounting fees.............. 36
Custodian fees.................... 35
Audit fees........................ 26
Legal fees........................ 25
Trustees fees..................... 14
Printing fees..................... 10
Transfer agent fees............... 8
--------
Total Expenses.......................... 1,553
Less: Fee Waiver....................... 768
--------
Net Expenses............................ 785
--------
Net Investment Income................... $ 20,798
========
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR
In thousands THROUGH ENDED
04/30/98 10/31/97
----------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income...................................... $ 20,798 31,683
Net realized gain.......................................... 0 0
Change in net unrealized appreciation...................... 0 0
----------- ----------
Increase in net assets from operations..................... 20,798 31,683
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................... (20,798) (31,683)
Net realized gain.......................................... 0 0
----------- ----------
Total distributions........................................ (20,798) (31,683)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................... 3,845,965 6,575,729
Reinvestment of distributions.............................. 8,777 12,754
Cost of shares redeemed ................................... (3,793,519) (6,217,231)
----------- ----------
Increase in net assets from capital transactions........... 61,223 371,252
----------- ----------
Increase in net assets........................................... 61,223 371,252
Net assets at beginning of year.................................. 766,356 395,104
----------- ----------
Net assets at end of period...................................... $ 827,579 766,356
=========== ==========
Undistributed net investment income.............................. $ 0 0
=========== ==========
</TABLE>
15
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PRINCIPAL PRINCIPAL
In thousands AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
COMMERCIAL PAPER Canadian Imperial
AEROSPACE AIRCRAFT - 0.3% 5.500% due 05/21/98 $ 10,000 $ 9,969
--------
International Lease Finance Corp. 15,195
5.520% due 05/01/98 $ 2,000 $ 2,000 BROKERAGE SERVICES - 8.4%
Goldman Sachs Group
AUTO & TRUCK - 0.6% 5.500% due 05/13/98 20,000 19,963
Ford Motor Credit Merrill Lynch and Company
0.500% due 05/27/98 5,000 4,980 5.450% due 05/04/98 10,000 9,995
5.530% due 05/15/98 15,000 14,968
ASSET BACKED SECURITIES - 8.4% 5.400% due 06/26/98 5,000 4,957
Asset Securitization Corp. Morgan Stanley Group
5.500% due 05/15/98 10,000 9,978 5.490% due 07/23/98 20,000 19,747
--------
5.500% due 05/27/98 10,000 9,961 69,630
Corporate Asset Funding Co. COMPUTERS - 4.8%
5.530% due 05/01/98 30,000 30,000 Avnet Inc.
Preferred Receivables Funding Corp. 5.500% due 05/29/98 5,000 4,978
5.550% due 05/05/98 5,000 4,997 5.510% due 06/22/98 5,000 4,960
5.520% due 05/11/98 2,500 2,496 5.470% due 07/02/98 5,000 4,953
5.500% due 05/27/98 5,000 4,980 5.490% due 07/24/98 5,000 4,936
5.510% due 07/02/98 7,500 7,429 IBM Credit
---------
69,841 5.480% due 05/13/98 8,000 7,985
BANKING - DOMESTIC - 4.2% 5.490% due 05/26/98 12,000 11,954
--------
Bankers Trust 39,766
5.430% due 07/09/98 15,000 14,844 CHEMICAL - 3.6%
Norwest Financial Du Pont (E.I.)
5.530% due 05/07/98 20,000 19,981 5.500% due 06/22/98 10,000 9,920
--------
34,825 5.470% due 06/25/98 10,000 9,916
BANKING - FOREIGN - 1.8% Nalco Chemical Co.
Abbey National 5.510% due 05/13/98 10,000 9,982
--------
5.480% due 05/18/98 5,240 5,226 29,818
16
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL PRINCIPAL
In thousands AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
ELECTRONICS AND ELECTRICAL EQUIPMENT - 1.3% HOUSEHOLD PRODUCTS - 3.3%
General Electric Capital Corp. Colgate-Palmolive
5.530% due 05/14/98 $ 5,500 $ 5,489 5.510% due 06/04/98 $ 20,000 $ 19,896
5.470% due 06/17/98 5,000 4,964 Protor & Gamble Co
--------
10,453 5.500% due 05/21/98 7,000 6,978
--------
FINANCE - 13.3% 26,874
American Express INSURANCE - 2.4%
5.510% due 05/04/98 10,000 9,995 Prudential Funding Corp.
5.510% due 05/22/98 20,000 19,936 5.520% due 05/01/98 5,000 5,000
American General Finance 5.510% due 05/27/98 15,000 14,940
--------
5.510% due 05/14/98 5,000 4,990 19,949
5.500% due 05/19/98 10,000 9,972 OIL - INTERNATIONAL - 1.2%
5.500% due 06/05/98 5,000 4,973 Mobil Corp
Associates Corp. North America 5.510% due 05/01/98 10,000 10,000
5.500% due 05/20/98 10,000 9,971
5.480% due 06/15/98 10,000 9,931 PAPER & PAPER PRODUCTS - 2.4%
AVCO Financial Services, Inc. Kimberly Clark
5.430% due 05/04/98 15,000 14,993 5.460% due 05/29/98 20,000 19,915
5.470% due 07/28/98 5,000 4,933
Beneficial Corp. PUBLISHING - 3.0%
5.510% due 05/05/98 20,000 19,988 Gannett Inc.
--------
109,682 5.500% due 05/04/98 5,000 4,998
FOOD AND BEVERAGES- 2.4% 5.500% due 05/14/98 15,000 14,970
Sara Lee Corp. Times Mirror Co.
5.500% due 05/07/98 20,000 19,982 5.500% due 05/08/98 5,000 4,995
--------
24,963
HEALTH CARE - 0.4% RETAIL - 1.8%
Abbott Labs Wal-Mart Stores, Inc.
5.520% due 07/02/98 3,375 3,343 5.480% due 05/04/98 15,000 14,993
17
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL PRINCIPAL
In thousands AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
TELECOMMUNICATION - 7.0% 5.770% due 04/15/99 $ 10,000 $ 10,000
Bell Atlantic Network 5.632% due 03/04/99 10,000 10,000
--------
5.500% due 05/06/98 $ 9,350 $ 9,343 29,995
5.480% due 05/18/98 6,000 5,984 Federal Home Loan Mortgage Corp.
Bell South Telecommunication 5.470% due 05/08/98 4,820 4,815
5.500% due 05/08/98 20,000 19,978 5.440% due 05/28/98 35,000 34,858
SBC Corp. 5.390% due 06/10/98 15,085 14,995
5.500% due 05/01/98 10,000 10,000 5.390% due 06/19/98 10,000 9,927
--------
5.500% due 06/02/98 13,000 12,936 64,595
--------
58,241 Federal National Mortgage Association
UTILITIES - 9.6% 5.410% due 05/11/98 20,000 19,970
Atlantic Richfield 5.410% due 06/25/98 5,700 5,698
5.490% due 05/12/98 20,000 19,966 5.330% due 06/26/98 5,000 4,997
Florida Power Corp. 5.100% due 07/22/98 6,000 5,992
5.510% due 06/04/98 10,000 9,948 5.300% due 08/25/98 5,000 4,999
5.500% due 06/16/98 9,300 9,235 4.950% due 09/30/98 9,000 8,976
Potomac Electric Power Co. 5.750% due 12/10/98 5,000 5,000
5.510% due 05/01/98 10,000 10,000 5.450% due 02/16/99 3,700 3,696
--------
5.510% due 05/18/98 10,000 9,974 59,328
--------
Union Electric Co
5.550% due 05/01/98 5,000 5,000 Total U.S. Government Securities - 18.6% 153,918
5.510% due 05/06/98 15,000 14,988
--------
79,111 CERTIFICATES OF DEPOSIT
--------
BANKING - DOMESTIC - 1.1%
Total Commercial Paper - 80.2% 663,561 Comerica Bank
5.109% due 06/12/98 5,000 5,000
U.S. GOVERNMENT SECURITIES First Of America
U.S. GOVERNMENT AGENCIES - 18.6% 5.310% due 08/18/98 2,000 2,000
Federal Home Loan Bank Huntington National Bank
5.625% due 03/12/99 10,000 9,995 5.550% due 06/12/98 2,000 2,000
--------
Total Certificates of Deposit - 1.1% 9,000
18
<PAGE>
SCHEDULE OF INVESTMENTS
MONEY MARKET FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands AMOUNT VALUE
---------- ---------
REPURCHASE AGREEMENT - 0.3%
Harris Nesbit Thompson*
5.150% due 05/01/98 $ 2,764 $ 2,764
--------
TOTAL INVESTMENTS -100.2% 829,243
Liabilities, less other assets - (0.2%) (1,664)
--------
TOTAL NET ASSETS - 100.0% $827,579
========
</TABLE>
*Collateralized by U.S. Treasury Note (6.375% due May 15, 2000); held by
custodian
<PAGE>
FINANCIAL HIGHLIGHTS
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR YEAR
THROUGH ENDED ENDED
Selected per share data 04/30/98 10/31/97 10/31/96
---------- --------- --------
<S> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 1.00 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................ 0.03 0.05 0.05
Net realized and unrealized gain..................... 0.00 0.00 0.00
--------- --------- --------
Total income from investment operations.................... 0.03 0.05 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income................. 0.03 0.05 0.05
Distributions from net realized gain................. 0.00 0.00 0.00
--------- --------- --------
Total distributions........................................ 0.03 0.05 0.05
--------- --------- --------
Net asset value, end of period............................. $ 1.00 1.00 1.00
========= ========= ========
Total return .............................................. 2.72%** 5.44% 5.43%
========= ========= ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $ 827,579 766,356 395,104
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.......... 0.20%* 0.22% 0.23%
Expenses, before waivers and reimbursements.......... 0.40%* 0.40% 0.46%
Net investment income, net of waivers
and reimbursements.............................. 5.42%* 5.34% 5.30%
Net investment income, before waivers
and reimbursements.............................. 5.22%* 5.16% 5.07%
- -------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
20
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
UNAUDITED
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
Selected per share data 10/31/95 10/31/94 10/31/93
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 1.00 1.00 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.06 0.04 0.03
Net realized and unrealized gain................ ** ** **
-------- -------- --------
Total income from investment operations............... 0.06 0.04 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.06 0.04 0.03
Distributions from net realized gain............ ** ** **
-------- -------- --------
Total distributions................................... 0.06 0.04 0.03
-------- -------- --------
Net asset value, end of period........................ $ 1.00 1.00 1.00
======== ======== ========
Total return.......................................... 5.93% 3.77% 3.14%
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $420,094 410,912 412,068
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 0.14% 0.15% 0.17%
Expenses, before waivers and reimbursements..... 0.39% 0.40% 0.42%
Net investment income, net of waivers
and reimbursements......................... 5.79% 3.73% 3.10%
Net investment income, before waivers
and reimbursements......................... 5.54% 3.48% 2.85%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
** Less than 1 cent per share
21
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET FUND
UNAUDITED
01/23/92
THROUGH
Selected per share data 10/31/92
--------
Net asset value, beginning of period.............................. $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.03
Net realized and unrealized gain............................ **
--------
Total income from investment operations........................... 0.03
LESS DISTRIBUTIONS:
Dividends from net investment income........................ 0.03
Distributions from net realized gain........................ **
--------
Total distributions............................................... 0.03
--------
Net asset value, end of period.................................... $ 1.00
========
Total return...................................................... 2.99%***
========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).......................... $399,076
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................. 0.25%*
Expenses, before waivers and reimbursements................. 0.50%*
Net investment income, net of waivers and reimbursements.... 3.57%*
Net investment income, before waivers and reimbursements.... 3.32%*
- -------------------------------------------------------------------------------
* Annualized
** Less than 1 cent per share
*** Not annualized
22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
ASSETS
Investments in securities, at value (cost - $98,998)....................... $100,041
Receivable for securities sold............................................. 29,051
Interest receivable........................................................ 1,071
Receivable for fund shares sold............................................ 591
--------
Total Assets..................................................................... 130,754
LIABILITIES
Dividends payable.......................................................... 591
Accrued expenses payable................................................... 44
Investment advisory fees payable........................................... 31
--------
Total Liabilities................................................................ 666
--------
Net Assets....................................................................... $130,088
========
ANALYSIS OF NET ASSETS:
Paid in capital............................................................ $126,235
Accumulated net realized gain.............................................. 2,789
Net unrealized appreciation................................................ 1,043
Undistributed net investment income........................................ 21
--------
Net Assets....................................................................... $130,088
========
Net Asset Value Per Share (based on net assets of $130,088 and 12,262 shares
issued and outstanding).................................................... $ 10.61
========
</TABLE>
23
<PAGE>
STATEMENT OF OPERATIONS
GOVERNMENT SECURITIES FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest............................................... $ 3,564
-------
Total Investment Income...................................... 3,564
EXPENSES
Investment advisory fees............................... 262
Fund administration fees............................... 30
Fund accounting fees................................... 20
Registration fees...................................... 7
Transfer agent fees.................................... 6
Custodian fees......................................... 5
Legal fees............................................. 3
Audit fees............................................. 3
Trustees fees.......................................... 2
Other.................................................. 1
-------
Total Expenses............................................... 339
Less: Fee Waiver............................................ 203
-------
Net Expenses................................................. 136
-------
Net Investment Income........................................ 3,428
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on sale of investments............... 3,232
Change in net unrealized appreciation on investments... (2,019)
-------
Net realized and unrealized gain (loss)................ 1,213
-------
Net Increase in Net Assets from Operations................... $ 4,641
=======
24
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT SECURITIES FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 3,428 4,357
Net realized gain (loss)............................ 3,232 (412)
Change in net unrealized appreciation............... (2,019) 2,580
-------- -------
Increase in net assets from operations.............. 4,641 6,525
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (3,416) (4,350)
Net realized gain................................... 0 0
-------- -------
Total distributions................................. (3,416) (4,350)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 24,980 60,676
Reinvestment of distributions....................... 3,415 4,504
Cost of shares redeemed............................. (3,917) (3,475)
-------- -------
Increase in net assets from capital transactions.... 24,478 61,705
-------- -------
Increase in net assets.................................... 25,703 63,880
Net assets at beginning of period......................... 104,385 40,505
-------- -------
Net assets at end of period............................... $130,088 104,385
======== =======
Undistributed net investment income....................... $ 21 9
======== =======
25
<PAGE>
SCHEDULE OF INVESTMENTS
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
In thousands AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES DEMAND NOTE
U.S. GOVERNMENT AGENCIES - 64.8% UTILITY-ELECTRICAL - 0.0%
Federal Home Loan Bank Wisconsin Electric
5.625% due 03/19/01 $ 10,000 $ 9,953 5.235% due 05/01/98 $ 31 $ 31
(cost - $31)
---------
Federal Home Loan Mortgage Corp.
5.460% due 05/07/98 650 649 TOTAL INVESTMENTS - 76.9%
5.440% due 05/28/98 2,555 2,545 (cost - $98,998) 100,041
5.345% due 05/29/98 1,035 1,031
--------
4,225 Other assets, less liabilities - 23.1% 30,047
---------
Federal National Mortgage Association
5.900% due 11/20/00 4,000 4,010 TOTAL NET ASSETS - 100.0% $ 130,088
=========
5.625% due 03/15/01 20,000 19,981
6.440% due 06/21/05 10,000 10,296
5.875% due 02/02/06 10,000 9,963
5.750% due 02/15/08 20,000 19,734
--------
63,984
Private Export Funding Corp.
6.310% due 09/30/04 6,000 6,121
--------
84,283
U.S. GOVERNMENT OBLIGATIONS - 12.1%
U.S. Treasury Notes
6.500% due 10/15/06 15,000 15,727
--------
Total U.S. Government Securities - 76.9%
(cost - $98,967) 100,010
</TABLE>
26
<PAGE>
FINANCIAL HIGHLIGHTS
GOVERNMENT SECURITIES FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................... $ 10.49 10.21 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.30 0.59 0.07
Net realized and unrealized gain.................. 0.12 0.28 0.21
-------- -------- --------
Total income from investment operations................. 0.42 0.87 0.28
LESS DISTRIBUTIONS:
Dividends from net investment income.............. 0.30 0.59 0.07
Distributions from net realized gain.............. 0.00 0.00 0.00
-------- -------- --------
Total distributions..................................... 0.30 0.59 0.07
-------- -------- --------
Net asset value, end of period.......................... $ 10.61 10.49 10.21
======== ======== ========
Total return ........................................... 4.06%** 8.86% 2.79%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $130,088 104,385 40,505
Ratio to average net assets of:
Expenses, net of waivers and reimbursements....... 0.23%* 0.46% 0.89%*
Expenses, before waivers and reimbursements....... 0.58%* 0.65% 0.89%*
Net investment income, net of waivers
and reimbursements........................... 5.77%* 5.92% 5.59%*
Net investment income, before waivers
and reimbursements........................... 5.42%* 5.73% 5.59%*
Portfolio turnover rate................................. 120% 136% 4%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
27
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $214,192).................... $276,106
Interest receivable...................................................... 714
Receivable for securities sold........................................... 426
Dividends receivable..................................................... 74
Cash..................................................................... 24
--------
Total Assets................................................................... 277,344
LIABILITIES
Payable for securities purchased......................................... 1,309
Investment advisory fees payable......................................... 145
Accrued expenses payable................................................. 74
--------
Total Liabilities.............................................................. 1,528
--------
Net Assets..................................................................... $275,816
========
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... $210,074
Accumulated net realized gain ........................................... 3,244
Net unrealized appreciation.............................................. 61,914
Undistributed net investment income...................................... 584
--------
Net Assets..................................................................... $275,816
========
Net Asset Value Per Share (based on net assets of $275,816 and 15,247 shares
issued and outstanding).................................................. $ 18.09
========
</TABLE>
28
<PAGE>
STATEMENT OF OPERATIONS
ASSET ALLOCATION FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Interest............................................... $ 1,876
Dividends.............................................. 1,071
-------
Total Investment Income...................................... 2,947
EXPENSES
Investment advisory fees............................... 677
Fund administration fees............................... 52
Fund accounting fees................................... 21
Custodian fees......................................... 9
Legal fees............................................. 6
Transfer agent fees.................................... 6
Audit fees............................................. 6
Registration fees...................................... 5
Trustees fees.......................................... 3
Other.................................................. 3
-------
Total Expenses............................................... 788
Less: Fee Waiver............................................ 417
-------
Net Expenses................................................. 371
-------
Net Investment Income........................................ 2,576
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments............... 2,672
Change in net unrealized appreciation on investments... 23,179
-------
Net realized and unrealized gain ...................... 25,851
-------
Net Increase in Net Assets from Operations................... $28,427
=======
29
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
ASSET ALLOCATION FUND
UNAUDITED
11/01/97 YEAR
In thousands THROUGH ENDED
04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 2,576 2,545
Net realized gain................................... 2,672 6,331
Change in net unrealized appreciation............... 23,179 29,245
-------- -------
Increase in net assets from operations.............. 28,427 38,121
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (2,263) (2,279)
Net realized gain................................... (5,607) (290)
-------- -------
Total distributions................................. (7,870) (2,569)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 112,479 72,743
Reinvestment of distributions....................... 7,815 5,130
Cost of shares redeemed ............................ (29,920) (36,820)
-------- -------
Increase in net assets from capital transactions.... 90,374 41,053
-------- -------
Increase in net assets.................................... 110,931 76,605
Net assets at beginning of year........................... 164,885 88,280
-------- -------
Net assets at end of year................................. $275,816 164,885
======== =======
Undistributed net investment income....................... $ 584 271
======== =======
30
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE SHARES VALUE
---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS USA Waste Services, Inc.* 41,516 $ 2,037
COMMON STOCKS - BASIC MATERIALS Waste Industries, Inc.* 25,000 511
--------
CHEMICAL - 0.8% 9,790
Dupont De Nemours & Co. 21,716 $ 1,581 MACHINERY/EQUIPMENT - 2.7%
Polymer Group, Inc.* 47,274 579 AGCO Corp. 64,016 1,712
--------
2,160 Deere & Co. 49,395 2,887
PAPER & FOREST PRODUCTS - 0.9% Illinois Tool Works 16,364 1,154
Caraustar Industries 40,000 1,370 Sundstrand Corp. 23,637 1,632
--------
Fibermark, Inc.* 60,000 1,238 7,385
-------- --------
2,608 Total Common Stocks - Capital
--------
Total Common Stocks - Basic Goods - 12.0% 32,970
Materials - 1.7% 4,768
COMMON STOCKS - COMMUNICATION SERVICES
COMMON STOCKS - CAPITAL GOODS CELLULAR AND WIRELESS - 1.8%
AEROSPACE & DEFENSE - 2.5% Echostar Communications* 29,625 780
Boeing 36,516 1,828 Paging Network, Inc.* 99,779 1,403
DeCrane Aircraft Holdings* 38,000 682 Panamsat Corp.* 34,668 2,026
GM Hughes Electronics* 25,000 1,381 Vanguard Cellular Systems* 42,971 816
--------
Kellstrom Industries, Inc.* 40,000 1,035 5,025
United Technologies Corp. 19,021 1,872 LONG DISTANCE - 0.2%
--------
6,798 Star Telecommunications* 17,000 460
CONSTRUCTION -1.3%
Interface, Inc. 87,251 3,703 TELEPHONE - 0.8%
Cincinnati Bell 35,000 1,339
ELECTRICAL EQUIPMENT - 1.9% Clearnet Communications* 30,728 428
General Electric 42,712 3,636 Premiere Technologies* 12,500 398
--------
Triumph Group, Inc.* 36,649 1,658 2,165
-------- --------
5,294 Total Common Stocks - Communication
ENVIRONMENTAL - 3.6% Services - 2.8% 7,650
Allied Waste Industries, Inc.* 118,318 3,254
Newpark Resources, Inc.* 99,184 2,387 COMMON STOCKS - CONSUMER CYCLICAL
Philip Services Corp.* 190,000 1,437 FURNITURE - 0.9%
Tyco International Ltd. 3,000 164 Meadowcraft, Inc.* 107,500 1,680
31
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- --------- ---------- ---------
Miller Herman, Inc. 30,000 $ 906 TV Azteca SA ADR 62,500 $ 1,164
--------
2,586 Young Broadcasting Corp.* 30,000 1,500
--------
PRINTING & PUBLISHING - 2.0% 21,874
Getty Images, Inc.* 56,000 1,281 CONTAINER - 1.0%
Harcourt General, Inc. 17,998 939 Bway Corp.* 35,455 933
Journal Register Co.* 35,700 806 Crown Cork & Seal 10,000 521
Scholastic Corp.* 36,800 1,371 Libbey, Inc. 35,000 1,321
--------
Tribune Co. 16,388 1,082 2,775
--------
5,479 COSMETICS/TOILETRIES - 1.0%
RESTAURANTS AND LODGING - 0.6% Fort James Corp. 53,651 2,662
Host Marriot Corp.* 80,000 1,555
ENTERTAINMENT - 1.6%
RETAIL - GENERAL - 0.8% Viacom, Inc. A* 11,912 688
Home Depot 23,637 1,646 Viacom, Inc. B* 14,490 840
Petsmart, Inc.* 45,000 529 Walt Disney Co. 23,682 2,944
-------- --------
2,175 4,472
--------
Total Common Stocks - Consumer FOOD PRODUCERS - 0.3%
Cyclical - 4.3% 11,795 Dean Foods Co 15,000 703
Omega Protein Corp.* 5,000 88
--------
COMMON STOCKS - CONSUMER STAPLES 791
BEVERAGES - 1.3% FOOD RETAILERS - 2.0%
Coca-Cola Enterprises 45,000 1,699 Dominick's Supermarkets, Inc.* 27,261 1,092
Panamerican Beverages 45,758 1,825 Kroger* 82,184 3,441
--------
3,524 Safeway, Inc.* 30,000 1,148
--------
BROADCASTING - 7.9% 5,681
--------
American Radio Systems Corp.* 7,000 464 Total Common Stocks -
Canwest Global Comm Corp. 81,456 1,527 Consumer Staples - 15.1% 41,779
Chancellor Media Corp.* 80,550 3,821
Clear Channel Communications* 62,338 5,875 COMMON STOCKS - ENERGY
Cox Radio, Inc.* 31,516 1,525 EXPLORATION/DRILLING - 2.1%
Jacor Communications* 15,000 853 Core Laboratories N.V.* 86,000 2,440
Outdoor Systems, Inc.* 69,138 2,195 Pride International, Inc.* 45,000 1,094
Time Warner, Inc. 37,577 2,950 TransCoastal Marine Svcs, Inc.* 40,000 460
32
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- --------- ---------- ---------
Transocean Offshore, Inc. 31,258 $ 1,747 Student Loan Marketing Assn. 27,576 $ 1,177
--------
5,741 United PanAm Financial Co.* 10,000 133
--------
OIL & GAS - DOMESTIC - 0.4% 10,359
Oryx Energy* 25,000 653 INSURANCE - 0.9%
R & B Falcon Corp.* 20,000 641 American International Group 17,952 2,362
--------
1,294
OIL & GAS SERVICE - 2.2% REAL ESTATE/REITS - 5.2%
Eagle Geophysical, Inc.* 40,000 745 Chastain Capital Corp.* 50,000 744
Petroleum Geo Services ADR * 36,789 2,419 Colonial Properties Trust 51,350 1,524
Schlumberger 17,500 1,450 Excel Legacy Corp.* 50,300 264
Superior Energy Services, Inc.* 130,000 1,446 Excel Realty Trust 50,300 1,346
--------
6,060 First Industrial Realty Trust 43,335 1,408
--------
Hanover Capital Mortgage 55,500 957
Total Common Stocks - Energy - 4.7% 13,095 Hanover Capital Mortgage Wts 55,500 194
Health Care REIT, Inc. 41,375 1,151
COMMON STOCKS - FINANCE Imperial Credit Commercial 90,000 1,299
BANKS - 3.4% Kilroy Realty 40,000 1,060
Banc One Corp. 20,570 1,210 LaSalle Hotel Properties* 30,000 548
BankAmerica Corp. 10,000 850 Mack-Cali Realty Corp. 33,122 1,244
Bankboston Corp. 10,000 1,079 Ocwen Asset Investment Corp. 82,000 1,507
Bankers Trust Corp. 10,000 1,291 Spieker Properties, Inc. 26,416 1,047
--------
Chase Manhattan 7,450 1,032 14,293
NationsBank Corp. 36,626 2,774 SAVINGS AND LOAN - 0.5%
State Street Corp. 3,400 243 Washington Mutual, Inc. 21,200 1,485
--------
Texas Regional Bancshares 29,547 975
--------
9,454 Total Common Stocks - Finance - 13.8% 37,953
FINANCIAL SERVICES - 3.8%
Amresco, Inc.* 35,000 1,269 COMMON STOCKS - HEALTH CARE
Associates First Capital Corp. 25,758 1,925 DRUGS - 1.5%
Household International 10,000 1,314 Lilly Eli & Co. 10,000 696
Morgan Stanley Dean Witter 17,500 1,380 Merck & Co. 14,758 1,778
PMI Group, Inc. 20,000 1,625 Schering Plough Corp. 21,904 1,755
--------
Sirrom Capital Corp. 51,400 1,536 4,229
33
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- --------- ---------- ---------
MEDICAL PRODUCTS & SUPPLIES - 3.1% Sun Microsystems* 18,874 $ 777
--------
Abbott Labs 24,061 $ 1,759 10,447
Becton Dickenson Co. 30,758 2,142 COMPUTER SERVICES - 0.2%
Johnson & Johnson Co. 49,516 3,534 Quanta Services, Inc.* 30,000 441
Ocular Sciences, Inc.* 35,000 980
--------
8,415 COMPUTER SOFTWARE - 2.0%
MEDICAL SERVICES - 0.3% CSG Systems Intl, Inc.* 39,700 1,806
Atria Communities, Inc.* 50,000 963 DSET Corp.* 23,000 385
--------
First Data 37,677 1,276
Total Common Stocks - Saville Systems Ireland ADR* 32,684 1,630
Health Care - 4.9% 13,607 Simulation Sciences, Inc.* 30,000 299
--------
5,396
COMMON STOCKS - MISCELLANEOUS PHOTOGRAPHY/IMAGING - 1.1%
PROFESSIONAL SERVICES - 1.4% Splash Technology Holdings* 36,500 680
Billing Information Concepts* 65,316 1,829 Xerox Corp. 21,800 2,474
--------
Rental Service Group* 68,000 1,976 3,154
--------
SEMICONDUCTORS - 0.5%
Total Common Stocks - Intel Corp 17,500 1,414
--------
Miscellaneous - 1.4% 3,805
Total Common Stocks - Technology - 8.2% 22,593
COMMON STOCKS - TECHNOLOGY
COMMUNICATION EQUIPMENT - 0.6% COMMON STOCKS - TRANSPORTATION
Amerilink Corp.* 16,500 382 MISCELLANEOUS - 0.2%
Glenayre Technologies * 46,143 724 C.H. Robinson Worldwide, Inc. 25,000 572
Powerwave Technologies, Inc.* 33,637 635
--------
1,741 TRUCKING & SHIPPING - 0.3%
COMPUTER RELATED- 3.8% Heartland Express, Inc.* 35,758 890
--------
Compaq Computers Corp. 85,004 2,385
Dell Computer Corp.* 15,000 1,211 Total Common Stocks
EMC Corp Massachusetts, Inc.* 68,728 3,170 - Transportation - 0.5% 1,462
--------
Hewlett-Packard Co. 29,334 2,209
International Business Machines 6,000 695 Total Common Stocks - 69.4%
(cost - $130,582) 191,477
34
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL PRINCIPAL
In thousands, except shares AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
U.S. GOVERNMENT SECURITIES BROADCASTING - 0.3%
U.S. GOVERNMENT AGENCY - 4.0% Clear Channel Communications
Federal Home Loan Mortgage Corp. 2.625% due 04/01/03 $ 750 $ 750
5.470% due 05/08/98 $ 570 $ 569
5.440% due 05/28/98 10,500 10,457 CELLULAR & WIRELESS - 0.2%
--------
11,026 Airtouch Communications
U.S. GOVERNMENT OBLIGATIONS - 4.7% 7.000% due 10/01/03 788 813
U.S. Treasury Notes
6.000% due 05/31/98 1,843 1,844 COMPUTER SOFTWARE - 0.3%
7.125% due 09/30/99 661 674 Oracle Corp.
7.750% due 01/31/00 1,508 1,561 6.720% due 02/15/04 750 762
5.750% due 11/15/00 7,000 7,022
6.500% due 08/31/01 1,727 1,770 CONSTRUCTION - 0.7%
--------
12,871 Case Corp.
--------
Total U.S. Government Securities - 8.7% 6.750% due 10/21/07 1,000 1,018
(cost - $23,851) 23,897 Southdown, Inc.
10.00% due 03/01/06 788 877
--------
CORPORATE BONDS 1,895
AUTO & TRUCK - 0.4% FOOD PRODUCERS - 1.1%
Chrysler Finance Corp. Nabisco Inc.
6.950% due 03/25/02 1,000 1,024 6.125% due 02/01/33 3,000 2,960
BANKS - 0.6% FOOD RETAILERS - 0.4%
NationsBank Corp. Kroger
7.500% due 09/15/06 1,576 1,687 7.650% due 04/15/07 1,000 1,073
BEVERAGES - 0.0% LEISURE TIME - 0.9%
Canandaigua Wine Brunswick Corp.
8.750% due 02/15/03 100 103 6.750% due 12/15/06 300 305
35
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
PRINCIPAL AMOUNT
In thousands, except shares AMOUNT VALUE OR SHARES VALUE
---------- --------- ---------- ---------
Hilton Hotels Corp. 6.500% due 12/01/07 $ 1,000 $ 1,008
--------
7.000% due 07/15/04 $ 1,000 $ 992 2,017
--------
Royal Caribbean Cruises
7.000% due 10/15/07 1,000 1,018 Total Corporate Bonds - 7.9%
--------
2,315 (cost - $21,632) 21,938
MACHINERY - 0.7%
John Deere Capital Co. CONVERTIBLE SECURITIES
5.850% due 01/15/01 2,000 1,992 CONVERTIBLE BOND - 1.9%
General Motors Acceptance Corp.
METALS & MINING - 0.4% 5.625% due 01/22/03 1,300 1,282
Phelps Dodge Panamsat
6.375% due 11/01/04 1,000 1,002 6.000% due 01/15/03 3,000 2,953
Waste Management, Inc.
PRINTING & PUBLISHING - 0.2% 6.625% due 07/15/02 1,000 1,007
--------
Tribune Company 5,242
6.875% due 11/01/06 800 827 CONVERTIBLE PREFERRED STOCKS - 1.9%
Evergreen Media Corp. 10,000 978
REITS - 0.4% Merrill Lynch STRYPES 22,243 1,625
Omega Healthcare Investors Merrill Lynch Trust 80,000 1,965
6.950% due 08/01/07 1,000 994 Microsoft Corp. 6,700 624
--------
5,192
--------
TELEPHONE - 0.3% Total Convertible Securities - 3.8%
US West Capital Funding (cost - $9,767) 10,434
6.850% due 01/15/02 800 812
COMMERCIAL PAPER
UTILITIES - ELECTRIC - 0.3% ASSET BACKED SECURITIES - 4.8%
Korea Electric Power Asset Securitization Corp.
7.000% due 10/01/02 1,000 912 5.520% due 05/08/98 5,000 4,995
Preferred Receivables Funding
UTILITIES - NATURAL GAS - 0.7% 5.500% due 05/22/98 8,115 8,089
--------
Enron Corp 13,084
6.625% due 11/15/05 1,000 1,009
36
<PAGE>
SCHEDULE OF INVESTMENTS
ASSET ALLOCATION FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL PRINCIPAL
In thousands, except shares AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- ---------
AUTO & TRUCK - 0.1% DEMAND NOTE
Ford Motor Credit Corp. UTILITY - ELECTRICAL - 0.0%
5.536% due 05/28/98 $ 350 $ 350 Wisconsin Electric
5.235% due 05/01/98
ELECTRICAL EQUIPMENT - 0.8% (cost - $74) $ 74 $ 74
--------
General Electric Capital Corp.
5.573% due 06/19/98 2,200 2,200 TOTAL INVESTMENTS - 100.1%
(cost - $214,192) 276,106
FINANCIAL SERVICES - 4.6%
American Express Credit Corp. Liabilities, less cash
5.511% due 05/01/98 150 150 and other assets - (0.1%) (290)
--------
5.513% due 05/04/98 500 500
5.536% due 05/28/98 1,000 1,000 TOTAL NET ASSETS - 100.0% $275,816
========
5.537% due 06/03/98 300 300
Merrill Lynch and Co. *Non-income producing security
5.510% due 05/29/98 6,100 6,074
5.510% due 06/08/98 4,655 4,628
--------
12,652
--------
Total Commercial Paper - 10.3%
(cost - $28,286) 28,286
</TABLE>
37
<PAGE>
FINANCIAL HIGHLIGHTS
ASSET ALLOCATION FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR YEAR
THROUGH ENDED ENDED
Selected per share data 04/30/98 10/31/97 10/31/96
---------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 16.60 12.75 12.04
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.20 0.27 0.31
Net realized and unrealized gain............... 2.03 3.85 1.01
---------- -------- --------
Total income from investment operations.............. 2.23 4.12 1.32
LESS DISTRIBUTIONS:
Dividends from net investment income........... 0.19 0.24 0.31
Distributions from net realized gain........... 0.55 0.03 0.30
---------- -------- --------
Total distributions.................................. 0.74 0.27 0.61
---------- -------- --------
Net asset value, end of period....................... $ 18.09 16.60 12.75
========== ======== ========
Total return......................................... 13.88%** 32.61% 11.06%
========== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............. $ 275,816 164,885 88,280
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.... 0.36%* 0.56% 0.87%
Expenses, before waivers and reimbursements.... 0.76%* 0.78% 0.87%
Net investment income, net of waivers
and reimbursements........................ 2.46%* 1.90% 2.48%
Net investment income, before waivers
and reimbursements........................ 2.06%* 1.68% 2.48%
Portfolio turnover rate.............................. 13% 64% 120%
Average commission rate paid per share............... $ 0.0599 0.593 0.0585
- --------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
38
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
ASSET ALLOCATION FUND
UNAUDITED
YEAR 03/03/94
ENDED THROUGH
Selected per share data 10/31/95 10/31/94
--------- --------
Net asset value, beginning of period..................... $ 9.97 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................. 0.24 0.17
Net realized and unrealized gain................... 2.41 0.01
--------- -------
Total income from investment operations.................. 2.65 0.18
LESS DISTRIBUTIONS:
Dividends from net investment income............... 0.24 0.16
Distributions from net realized gain............... 0.34 0.05
--------- -------
Total distributions...................................... 0.58 0.21
--------- -------
Net asset value, end of period........................... $ 12.04 9.97
========= =======
Total return............................................. 26.92% 1.84%**
========= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. $ 73,775 10,189
Ratio of expenses to average net assets.................. 0.96% 1.25%*
Ratio of net investment income to average net assets..... 2.73% 2.63%*
Portfolio turnover rate.................................. 95% 64%
- -------------------------------------------------------------------------------
* Annualized
** Not annualized
39
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $193,841).................... $250,146
Dividends receivable..................................................... 226
Variation margin......................................................... 33
Interest receivable...................................................... 21
--------
Total Assets................................................................... 250,426
LIABILITIES
Payable for fund shares redeemed......................................... 16,249
Payable for securities purchased......................................... 352
Payable to custodian..................................................... 81
Accrued expenses payable................................................. 76
Investment advisory fees payable......................................... 61
--------
Total Liabilities.............................................................. 16,819
--------
Net Assets..................................................................... $233,607
========
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... 174,198
Accumulated net realized gain ........................................... 1,801
Net unrealized appreciation.............................................. 56,284
Undistributed net investment income...................................... 1,324
--------
Net Assets..................................................................... $233,607
========
Net Asset Value Per Share (based on net assets of $233,607 and 14,138 shares
issued and outstanding).................................................. $ 16.52
========
</TABLE>
40
<PAGE>
STATEMENT OF OPERATIONS
S&P 500 INDEX FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Dividends.................................................... $ 1,360
Interest..................................................... 546
Other ....................................................... 1
-------
Total Investment Income............................................ 1,907
EXPENSES
Investment advisory fees..................................... 296
Fund administration fees..................................... 49
Fund accounting fees......................................... 26
Custodian fees............................................... 8
Transfer agent fees.......................................... 7
Registration fees............................................ 5
Audit fees................................................... 5
Legal fees................................................... 4
Trustees fees................................................ 3
Other........................................................ 2
-------
Total Expenses..................................................... 405
Less: Fee Waiver.................................................. 197
-------
Net Expenses....................................................... 208
-------
Net Investment Income.............................................. 1,699
NET REALIZED AND UNREALIZED GAIN
Net realized gain on sale of investments..................... 188
Net realized gain on futures contracts....................... 1,529
Change in net unrealized appreciation on investments......... 35,961
Change in net unrealized appreciation on futures contracts... 76
-------
Net realized and unrealized gain ............................ 37,754
-------
Net Increase in Net Assets from Operations......................... $39,453
=======
41
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
S&P 500 INDEX FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income............................... $ 1,699 1,725
Net realized gain................................... 1,717 4,249
Change in net unrealized appreciation............... 36,037 19,397
-------- --------
Increase in net assets from operations.............. 39,453 25,371
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................... (1,957) (145)
Net realized gain................................... (4,165) 0
-------- --------
Total distributions................................. (6,122) (145)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares........................ 124,347 92,357
Reinvestment of distributions....................... 6,122 182
Cost of shares redeemed ............................ (48,805) (25,005)
-------- --------
Increase in net assets from capital transactions.... 81,664 67,534
-------- --------
Increase in net assets.................................... 114,995 92,760
Net assets at beginning of period......................... 118,612 25,852
-------- --------
Net assets at end of period............................... $233,607 118,612
======== ========
Undistributed net investment income....................... $ 1,324 1,582
42
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS Cyprus Amax Mineral Co. 2,478 $ 43
COMMON STOCKS - BASIC MATERIALS Freeport McMoran Copper 5,109 96
CHEMICALS - 2.3% Homestake Mining Co. 3,871 45
Air Products & Chemicals, Inc. 2,939 $ 256 Inco Ltd. 4,386 77
Dow Chemical 5,948 575 Newmont Mining Corp. 4,132 133
DuPont De Nemours & Co. 29,718 2,164 Phelps Dodge 1,554 104
Eastman Chemical Co. 2,062 142 Placer Dome, Inc. 6,294 93
Ecolab, Inc. 3,402 108 Reynolds Metals 1,901 125
--------
FMC Corp.* 1,031 80 1,557
Goodrich BF Co. 1,593 86 PAPER & FOREST PRODUCT - 0.8%
Hercules, Inc. 2,599 124 Bemis Co. 1,393 62
Monsanto Co. 15,628 826 Boise Cascade 1,539 58
Nalco Chemical Co. 1,754 70 Champion International 2,578 139
PPG Industries 4,702 332 Georgia Pacific Co. 2,424 187
Praxair, Inc. 4,178 210 International Paper 8,000 417
Rohm & Haas Co. 1,654 178 Louisiana-Pacific Co. 2,939 64
Union Carbide Corp. 3,255 158 Mead Corp. 2,686 93
--------
5,309 Potlatch Corp. 750 36
CHEMICALS-SPECIALTY - 0.2% Stone Container Corp. 2,632 43
Englehard Corp. 3,744 79 Temple Inland 1,547 100
Great Lakes Chemical 1,601 80 Union Camp Corp. 1,854 112
International Flavors & Fragrance 2,939 144 Westvaco Corp. 2,659 81
Morton International, Inc. 3,517 113 Weyerhaeuser Co. 5,263 303
Sigma-Aldrich Corp. 2,632 105 Willamette Industries 2,894 112
--------
W.R. Grace & Co.* 1,924 39 1,807
--------
560 STEEL - 0.2%
METALS & MINING - 0.7% Allegheny Teledyne, Inc. 5,121 130
Alcan Aluminum Ltd. 6,033 196 Armco, Inc.* 2,886 20
Aluminum Co. of America 4,594 356 Bethlehem Steel 2,939 46
Asarco, Inc. 1,012 25 Inland Steel Industries 1,339 39
Barrick Gold Corp. 9,842 221 Nucor Corp. 2,370 142
Battle Mountain Gold Co. 6,033 43 USX-US Steel 2,270 89
43
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Worthington Inds, Inc. 2,624 $ 47 Thomas & Betts Co. 1,431 $ 84
-------- --------
513 8,928
--------
Total Common Stocks - Basic ENVIRONMENTAL - 0.8%
Materials - 4.2% 9,746 Browning Ferris 5,125 175
Johnson Controls 2,170 129
COMMON STOCKS - CAPITAL GOODS Laidlaw, Inc. 8,357 116
AEROSPACE & DEFENSE - 1.4% Millipore Corp. 1,112 38
Boeing Co. 26,320 1,318 Thermo Electron Corp.* 4,000 159
General Dynamics Corp. 3,202 135 Tyco International Ltd 15,048 820
Lockheed Martin Corp. 5,071 565 Waste Management, Inc. 11,950 400
--------
Northrop Grumman Corp. 1,774 187 1,837
Rockwell International Corp. 5,279 295 MACHINERY - EQUIPMENT - 1.1%
United Technologies Corp. 6,202 611 Aeroquip - Vickers, Inc. 750 48
--------
3,111 Briggs & Stratton 650 29
CONSTRUCTION - 0.4% Caterpillar, Inc. 9,912 564
Case Equipment Corp. 1,908 121 Cincinnati Milacron, Inc. 1,031 32
Centex Corp. 1,646 57 Cooper Industries 3,239 217
Crane Co. 1,275 69 Cummins Engine 1,031 56
Fluor Corp. 2,170 103 Deere & Co. 6,610 386
Kaufman & Broad Home Corp. 1,031 30 Dover Co. 5,886 232
Masco Co. 4,332 251 Foster Wheeler Corp. 1,085 30
McDermott International 1,493 62 General Signal Co. 1,339 59
Owens Corning 1,393 58 Harnischfeger 1,266 36
Pulte Corp. 569 29 Illinois Tool Works 6,602 465
--------
780 Ingersoll Rand Co. 4,308 198
ELECTRICAL EQUIPMENT - 3.8% NACCO Industries 194 33
AMP, Inc. 5,759 226 Pall Corp. 3,393 67
Emerson Electric Co. 11,666 742 Parker Hannifin 2,893 129
General Electric 86,098 7,329 Timken Co. 1,608 64
--------
Grainger WW, Inc. 1,320 144 2,645
Honeywell 3,355 312 OFFICE SUPPLIES - 0.2%
Raychem 2,270 91 Avery Dennison Co. 2,686 141
44
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Moore Corp. 2,332 $ 37 Liz Claiborne, Inc. 1,808 $ 89
Pitney Bowes, Inc. 7,542 362 National Service Inds. 1,139 62
--------
540 Nike, Inc. 7,633 364
--------
Total Common Stocks - Capital Reebok International Ltd. 1,547 45
Goods - 7.7% 17,841 Russell Corp. 1,031 28
Spring Industries 602 33
COMMON STOCKS - COMMUNICATION SERVICES VF Corp. 3,154 164
--------
CELLULAR & WIRELESS - 0.4% 855
Airtouch Communications* 13,258 704 AUTO & TRUCK - 1.6%
Nextel Communications, Inc.* 7,650 219 Chrysler Corp. 17,133 689
--------
923 Ford Motor Co. 31,564 1,446
LONG DISTANCE - 2.2% General Motors Corp. 18,568 1,251
AT & T Corp. 42,730 2,566 ITT Industries, Inc. 3,147 115
MCI Communications 18,360 924 Navistar International* 1,862 56
Sprint Corp. 11,350 775 Paccar, Inc. 2,062 122
--------
Worldcom, Inc.* 23,765 1,017 3,679
--------
5,282 AUTO PARTS - 0.5%
TELEPHONE - 4.0% Cooper Tire & Rubber Co. 2,070 49
Alltel Corp. 4,856 208 Dana 2,732 162
Ameritech Corp. 28,794 1,226 Eaton Corp. 2,062 190
Bell Atlantic 20,378 1,907 Echlin, Inc. 1,601 76
Bell South Corp. 26,063 1,673 Genuine Parts Co. 4,720 170
Frontier Corp. 4,300 129 Goodyear Tire & Rubber 4,178 292
GTE Corp. 25,139 1,469 Snap on Tools, Inc. 1,601 68
SBC Communications, Inc. 48,162 1,996 TRW, Inc. 3,209 169
--------
US West, Inc. - Comm Group 12,689 669 1,176
--------
9,277 FURNITURE & APPLIANCES - 0.4%
--------
Total Common Stocks - Armstrong World Industries 1,031 88
Communication Services - 6.6% 15,482 Black & Decker 2,470 128
Maytag Corp. 2,532 130
COMMON STOCKS - CONSUMER CYCLICAL Newell Co. 4,205 203
APPAREL & TEXTILE - 0.4% Rubbermaid, Inc. 3,971 114
Fruit of The Loom, Inc.* 1,862 70 Stanley Works 2,324 119
45
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Whirlpool Corp. 1,962 $ 141 K Mart 12,797 $ 223
--------
923 TJX Cos, Inc. 4,316 191
PRINTING & PUBLISHING - 1.0% Toys "R" Us, Inc.* 7,472 206
American Greetings Co. 1,962 91 Wal-Mart Stores, Inc. 59,320 2,999
Deluxe Corp. 2,116 71 Woolworth Corp. 3,509 81
--------
Donnelley RR & Sons 3,824 168 3,816
Dow Jones & Co. 2,578 126 RETAIL - GENERAL - 1.1%
Dun & Bradstreet 4,540 161 Costco Companies, Inc.* 5,609 313
Gannett Co., Inc. 7,488 509 Dayton Hudson Corp. 5,725 500
Harcourt General, Inc. 1,908 100 Dillard Dept. Stores 2,893 106
Jostens, Inc. 1,031 24 Federated Department Stores* 5,571 274
Knight Ridder, Inc. 2,178 127 May Department Stores 6,129 378
McGraw Hill Cos,, Inc.. 2,632 204 Mercantile Stores Co. 958 70
Meredith Corp. 1,346 58 Penny JC Co. 6,533 464
New York Times 2,532 180 Sears Roebuck & Co. 10,319 612
--------
Omnicom Group 4,340 206 2,717
Times Mirror Co. 2,586 158 RETAIL SPECIALTY - 1.6%
Tribune Co. 3,202 211 Autozone, Inc.* 4,000 121
--------
2,394 Cendant Corp.* 21,353 534
LEISURE TIME - 0.3% Circuit City Stores, Inc. 2,632 107
Brunswick Corp. 2,632 86 Gap, Inc. 10,449 537
Fleetwood Enterprises 977 45 Home Depot, Inc. 19,214 1,338
Harrah's Entertainment, Inc.* 2,686 70 The Limited Ltd. 7,146 240
Hasbro, Inc. 3,355 123 Lowes Companies 4,540 318
Mattel, Inc. 7,688 295 Nordstrom, Inc. 2,016 132
Mirage Resorts, Inc.* 4,700 104 Pep Boys - Manny, Mo, Jack 1,601 35
--------
723 Sherwin Williams 4,540 162
RESTAURANTS & LODGING - 0.2% Tandy Corp. 2,694 134
--------
Hilton Hotels Corp. 6,602 211 3,658
--------
Marriott International 6,710 221 Total Common Stocks -
--------
432 Consumer Cyclical - 8.7% 20,373
RETAIL - DISCOUNT - 1.6%
Consolidated Stores* 2,900 116
46
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
COMMON STOCKS - CONSUMER STAPLES Kimberly Clark 14,500 $ 736
BEVERAGES - 3.3% Longs Drug Stores 1,084 31
Anheuser-Busch Companies, Inc. 13,004 $ 596 Procter & Gamble 35,320 2,903
Brown Foremann 1,854 105 Rite Aid Corp. 6,540 210
Coca-Cola Co. 65,107 4,940 Walgreen Co. 13,004 449
--------
Coors, Adolph, Inc. 1,031 37 8,213
Pepsico, Inc. 39,929 1,585 ENTERTAINMENT - 1.2%
Seagrams Co. Ltd. 9,357 399 King World Productions, Inc.* 2,062 55
--------
7,662 Walt Disney Co. 17,759 2,208
BROADCASTING - 1.5% Viacom, Inc. Class B* 9,242 536
--------
CBS, Inc. 18,542 661 2,799
Clear Channel Communications* 3,100 292 FOOD PRODUCERS - 2.7%
Comcast Corp. 9,172 328 Archer-Daniels-Midland Co. 15,035 323
Tele Communications, Inc.* 13,333 430 BestFoods 7,434 408
Time Warner, Inc. 15,267 1,198 Campbell Soup 12,074 620
US West Media Group, Inc.* 16,067 607 Conagra, Inc. 12,496 365
--------
3,516 General Mills 4,178 282
CONTAINERS - 0.2% H J Heinz Co. 9,630 525
Ball Corp. 823 32 Hershey Foods 3,724 273
Crown Cork & Seal 3,355 175 Kellogg Co. 10,842 447
Owens-Illinois, Inc.* 3,700 146 Pioneer Hi-Bred International 5,448 206
Sealed Air Corp.* 2,281 143 Quaker Oats 3,609 188
Tupperware Corp. 1,601 43 Ralston-Purina Group 2,886 306
--------
539 Sara Lee Corp. 12,697 756
COSMETIC & TOILETRIES - 3.5% Unilever ADR 16,928 1,263
Alberto-Culver Co. 1,500 44 Vlasic Foods International* 1,207 28
Avon Products, Inc. 3,509 288 Wrigley WM JR Co. 3,093 275
--------
Cardinal Health, Inc. 2,900 279 6,265
Clorox Co. 2,686 225 FOOD RETAILERS - 0.6%
Colgate Palmolive Co. 7,742 694 Albertson's, Inc. 6,383 319
CVS Corp. 4,986 368 American Stores Co. 7,142 171
Fort James Corp. 5,570 276 Giant Foods 1,601 60
Gillette Co. 14,812 1,710 Great Atlantic & Pacific 1,031 32
47
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Kroger* 6,702 $ 281 Atlantic Richfield 8,464 $ 660
Super-Valu, Inc. 1,554 68 Kerr-McGee Co. 1,266 84
Sysco Corp. 9,096 217 Occidental Petroleum 8,964 264
Winn-Dixie Stores, Inc. 3,924 148 Oryx Energy* 2,686 70
--------
1,296 Pennzoil Co. 1,239 79
RESTAURANTS - 0.6% Phillips Petroleum Co. 6,964 345
Dardeen Restaurants 3,978 64 Sun Co. 1,862 75
McDonalds Corp. 18,022 1,115 Unocal Corp 6,402 262
Tricon Global Restaurants* 3,982 126 USX-Marathon 7,633 273
--------
Wendys International 3,455 83 3,570
--------
1,388 OIL & GAS-INTERNATIONAL - 5.0%
TOBACCO - 1.1% Chevron Corp. 17,183 1,421
Fortune Brands, Inc. 4,540 167 Exxon Corp. 65,030 4,743
Philip Morris Co., Inc. 63,807 2,381 Mobil Corp. 20,646 1,631
UST, Inc. 4,802 132 Royal Dutch Petroleum ADR 56,456 3,193
--------
2,680 Texaco, Inc. 14,428 887
-------- --------
Total Common Stock - Consumer 11,875
Staples - 14.7% 34,358 OIL & GAS-SERVICE - 0.9%
Baker Hughes, Inc. 4,417 179
COMMON STOCKS - ENERGY Dresser Industries 4,548 240
COAL, GAS & PIPE - 0.1% Halliburton Co. 6,886 379
Anadarko Petroleum Corp. 1,600 117 Rowan Companies, Inc.* 2,270 67
Schlumberger 12,996 1,077
EXPLORATION & DRILLING - 0.2% Western Atlas, Inc.* 1,393 110
--------
Burlington Resources, Inc. 4,661 219 2,052
--------
Helmerich & Payne 1,166 36
Union Pacific Resources Group 6,612 158 Total Common Stocks - Energy - 7.7% 18,027
--------
413
OIL & GAS-DOMESTIC - 1.5% COMMON STOCKS - FINANCE
Amerada Hess Corp. 2,378 137 BANK & BANK HOLDING COMPANY - 8.7%
Amoco Corp. 25,608 1,133 Banc One Corp. 16,937 996
Apache Corp. 2,400 85 Bank of New York 9,865 583
Ashland, Inc. 1,954 103 BankAmerica Corp. 18,292 1,555
48
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Bankboston Corporation 3,824 $ 413 Beneficial Corp. 1,393 $ 182
Bankers Trust of New York 2,616 338 Charles Schwab Corp. 6,900 241
BB&T Corp. 3,600 242 Countrywide Credit Ind, Inc. 2,900 140
Chase Manhattan 11,171 1,548 Fannie Mae 27,840 1,667
Citicorp 12,043 1,812 Fed Home Loan Mortgage Corp. 18,292 847
Comerica, Inc. 4,039 270 Franklin Resources, Inc. 6,600 353
Fifth Third Bancorp 6,043 332 Green Tree Financial Corp. 3,663 149
First Chicago NBD Corp. 7,752 720 Household International 2,878 378
First Union Corp. 25,511 1,540 Lehman Brothers Holdings 2,700 192
Fleet Financial Group, Inc. 6,878 594 Marsh & McLennan Co. 4,516 412
Huntington Bancshares 5,000 178 MBNA Corp. 13,173 446
Key Corp. 11,474 455 Merrill Lynch 8,772 770
Mellon Bank 6,710 483 Morgan Stanley Dean Witter, Inc. 15,563 1,228
Mercantile Bancorp 3,400 188 SunAmerica, Inc. 5,100 255
Morgan (J.P.) & Co., Inc. 4,702 617 Transamerica Corp. 1,654 191
--------
Nations Bank Corp. 24,860 1,883 9,746
National City Corp. 8,633 598 INSURANCE - 4.2%
Northern Trust Co. 2,900 212 Allstate Corp. 11,312 1,089
Norwest Corp. 19,906 790 American International Group 18,452 2,428
PNC Bank Corp. 7,980 482 Aon Corp. 4,408 284
Republic New York Corp. 1,447 194 CHUBB Group 4,494 355
State Street Corp. 4,200 300 Cigna Corp. 1,962 406
Sun Trust Banks, Inc. 5,633 459 Cincinnati Financial Corp. 1,400 178
Summit Bancorp 4,600 231 Conseco, Inc. 5,000 248
Synovus Financial Corp. 4,600 162 General RE Corp. 2,062 461
US Bancorp 6,447 819 Hartford Financial Services 3,147 349
Wachovia Corp. 5,386 457 Jefferson Pilot 2,842 167
Wells Fargo & Co. 2,359 869 Lincoln National Corp. 2,686 239
--------
20,320 Loews Corp. 2,993 299
FINANCIAL SERVICES - 4.2% MBIA, Inc. 2,370 177
American Express Co. 12,289 1,253 MGIC Investment 2,994 189
American General Corp. 6,363 424 Progressive Corp. 1,900 257
Associates First Capital Corp. 8,272 618 Providian Corp. 2,478 149
49
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Safeco Corp. 3,301 $ 165 MEDICAL PRODUCTS & SUPPLIES - 2.7%
St. Paul Companies 2,170 184 Abbott Labs 20,238 $ 1,480
Torchmark Corp. 3,716 166 Allergan 1,654 69
Travelers Group, Inc. 30,161 1,845 Bard C.R., Inc. 1,547 55
Unum Corp. 3,716 200 Bausch & Lomb, Inc. 1,447 72
--------
9,835 Baxter International, Inc. 7,372 409
REAL ESTATE - 0.0% Becton Dickinson Co. 3,201 223
Franchise Finance Corp. 2,300 62 Biomet, Inc. 2,893 87
Boston Scientific Corp.* 5,094 368
SAVINGS & LOAN - 0.4% Guidant Corp. 3,932 263
Ahmanson H. F. & Co. 2,939 224 Johnson & Johnson Co. 35,289 2,519
Golden West Financial 1,547 163 Mallinckrodt, Inc. 1,862 60
Washington Mutual, Inc. 6,836 479 Medtronic, Inc. 12,388 652
--------
866 St. Jude Medical 2,403 85
--------
Total Common Stocks - US Surgical Corp. 2,001 63
--------
Finance - 17.5% 40,829 6,405
MEDICAL SERVICES - 0.9%
COMMON STOCKS - HEALTH CARE Aetna Life and Casualty Co. 3,998 323
BIO-TECHNOLOGY - 0.2% Columbia/HCA Healthcare Corp. 16,998 560
Allergan Specialty Therapy* 82 1 Healthsouth Corp.* 10,200 308
Amgen* 6,918 412 Humana, Inc.* 4,232 114
--------
413 Manor Care, Inc. 1,601 56
DRUGS - 7.5% Tenet Healthcare Corp.* 8,025 300
ALZA Corp.* 2,170 104 United Healthcare Corp. 5,002 351
--------
American Home Products Corp. 17,067 1,589 2,012
--------
Bristol-Meyer/Squibb 26,216 2,776 Total Common Stocks -
Lilly Eli & Co. 29,194 2,031 Health Care - 11.3% 26,461
Merck & Co. 31,542 3,801
Pfizer, Inc. 33,950 3,864 COMMON STOCKS - MISCELLANEOUS
Pharmacia & Upjohn, Inc. 13,361 562 DIVERSIFIED - 1.1%
Schering Plough Corp. 19,306 1,547 Allied Signal, Inc. 14,858 651
Warner-Lambert Co. 7,172 1,357 Cognizant Corp. 4,240 218
--------
17,631 Corning Corporation 6,087 243
50
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
3M Co. 10,842 $ 1,023 Seagate Technology, Inc.* 6,371 $ 170
Tenneco, Inc. 4,440 191 Silicon Graphics, Inc.* 4,940 65
Textron, Inc. 4,332 339 Sun Microsystems* 9,804 404
--------
2,665 Unisys Corp.* 6,540 147
--------
PROFESSIONAL SERVICES - 0.3% 11,758
H & R Block 2,686 121 COMPUTER - SERVICES - 0.8%
Interpublic GRP Companies, Inc. 3,274 209 Automatic Data Processing, Inc. 7,687 515
Service Corp. International 6,641 274 Ceridian Corporation* 2,054 116
--------
604 Computer Associates 14,344 840
--------
Total Common Stocks - Computer Sciences* 4,178 220
Miscellaneous - 1.4% 3,269 Equifax 4,000 155
--------
1,846
COMMON STOCKS - TECHNOLOGY COMPUTER - SOFTWARE - 3.4%
COMMUNICATION EQUIPMENT - 1.7% Adobe Systems, Inc. 1,900 95
Andrew Corp.* 2,336 53 Autodesk, Inc. 1,266 59
DSC Communications Corp.* 3,093 56 Bay Networks* 5,502 129
Lucent Technologies 33,790 2,572 Cabletron Systems* 4,224 56
Northern Telecom 13,820 841 First Data 11,166 378
Scientific - Atlanta, Inc. 2,062 49 General Instrument Co.* 3,963 89
Tellabs, Inc.* 4,748 337 HBO & Co. 5,700 341
--------
3,908 Microsoft Corp.* 64,260 5,791
COMPUTER RELATED - 5.0% Novell, Inc.* 9,188 92
3 Com Corp.* 9,086 311 Oracle Systems Corp.* 25,803 668
Apple Computer, Inc.* 3,401 93 Parametric Tech Co.* 6,800 217
Cisco Systems, Inc.* 26,843 1,966 Shared Medical System 556 41
--------
Compaq Computers Corp. 39,704 1,114 7,956
Data General Corp.* 1,331 20 ELECTRONICS - 1.0%
Dell Computer Corp.* 17,192 1,388 Applied Materials, Inc.* 9,596 347
Digital Equipment* 3,978 221 EG&G 1,139 34
EMC Corp. Massachusetts* 12,982 599 Harris Corp. 2,062 100
Gateway 2000, Inc.* 4,000 235 LSI Logic Corp.* 3,755 102
Hewlett-Packard Co. 27,386 2,063 Motorola, Inc. 15,682 872
International Business Machines 25,564 2,962 National Semiconductor* 4,263 94
51
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
--------- --------- --------- ---------
Perkin-Elmer Corp. 1,185 $ 81 TRUCKING - 0.1%
Raytheon Co - Class B 8,994 510 Federal Express* 3,017 $ 205
Tektronix, Inc. 1,356 58 Ryder System Co. 2,116 74
-------- --------
2,198 279
--------
PHOTOGRAPHY & IMAGING - 0.7% Total Common Stocks -
Eastman Kodak 8,526 615 Transportation - 1.1% 2,593
Ikon Office Solution 3,455 84
Polaroid Corp. 1,166 51 COMMON STOCKS - UTILITIES
Xerox 8,564 972 ELECTRIC - 2.3%
--------
1,722 Ameren Corp. 3,632 144
SEMICONDUCTOR - 1.9% American Electric Power Co. 5,002 239
Advanced Micro Devices* 3,709 103 Baltimore Gas & Electric 3,871 122
Intel Corp. 43,046 3,479 Carolina Power & Light 4,024 173
KLA-Tencor Corp.* 2,200 89 Central & Southwest Corp. 5,571 145
Micron Technology, Inc. 5,571 173 Cinergy Corp. 4,183 146
Texas Instruments 10,312 661 Consolidated Edison 6,141 278
--------
4,505 Dominion Resources 4,894 194
--------
Total Common Stocks - DTE Energy Co. 3,817 150
Technology - 14.5% 33,893 Duke Power 9,448 547
Edison International 10,058 300
COMMON STOCKS - TRANSPORTATION Entergy Corp. 6,387 159
AIR TRANSPORTATION - 0.4% First Energy Corp. 6,024 182
AMR Corp.* 2,424 369 FPL Group, Inc. 4,748 295
Delta Airlines 1,916 223 General Public Utilities, Inc. 3,147 125
Southwest Airlines Co. 5,825 160 Houston Industries 7,460 217
US Airways Group, Inc.* 2,401 171 Niagara Mohawk Power 3,717 46
--------
923 Northern States Power 1,954 110
RAILROAD - 0.6% Pacificorp 7,741 180
Burlington Northern Santa Fe 4,026 399 Peco Energy Co. 5,833 139
CSX Corp. 5,771 303 PP & L Resources, Inc. 4,332 100
Norfolk Southern Co. 9,903 331 PG & E Corp. 11,488 372
Union Pacific Corp. 6,548 358 Public Service Enterprises 6,148 206
--------
1,391 Southern, Co. 18,098 480
52
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
AMOUNT PRINCIPAL
In thousands, except shares OR SHARES VALUE AMOUNT VALUE
--------- --------- --------- ---------
Texas Utilities Co. 6,392 $ 256 4.960% due 07/02/98 $ 2,800 $ 2,776
Unicom Corp. 5,625 195 4.930% due 07/16/98 100 99
-------- -------
5,500 3,174
--------
NATURAL GAS - 0.7% Total U.S. Government Securities - 3.8%
Coastal Corp. 2,886 206 (cost - $8,692) 8,692
Columbia Energy Group 1,474 120
Consolidated Natural Gas 2,478 142 COMMERCIAL PAPER
Eastern Enterprises 542 23 AUTOMOBILES - 0.4%
Enron Corp. 8,456 416 Ford Motorcredit Corp.
Nicor 1,293 53 5.536% due 05/28/98 870 870
Oneok, Inc. 850 34
Pacific Enterprises 2,170 84 COMPUTERS - 2.1%
People's Energy Corp. 904 33 Avnet, Inc.
Sonat, Inc. 2,270 101 5.500% due 05/14/98 5,000 4,990
Williams Companies 11,058 350
--------
1,562 FINANCIAL - 2.4%
--------
American Express Credit Corp.
Total Common Stocks - Utilities - 3.0% 7,062 5.511% due 05/01/98 150 150
--------
5.512% due 05/01/98 365 365
Total Common Stocks - 98.4% 5.567% due 05/14/98 200 200
(cost - $173,629) 229,934 5.567% due 05/15/98 2,860 2,860
5.536% due 05/22/98 200 200
U.S. GOVERNMENT SECURITIES 5.536% due 05/28/98 150 150
U.S. GOVERNMENT AGENCY - 2.4% 5.525% due 05/29/98 990 990
Federal Home Loan Mortgage Corp. 5.537% due 06/03/98 710 710
--------
5.440% due 05/28/98 $ 5,540 5,518 5,625
--------
Total Commercial Paper - 4.9%
U.S. GOVERNMENT OBLIGATIONS - 1.4% (cost - $11,485) 11,485
U.S. Treasury Bills
5.190% due 06/04/98 300 299
53
<PAGE>
SCHEDULE OF INVESTMENTS
S&P 500 INDEX FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
--------- ---------
DEMAND NOTE
UTILITY - ELECTRICAL - 0.0%
Wisconsin Electric
5.235% due 05/01/98
(cost - $35) $ 35 $ 35
--------
TOTAL INVESTMENTS - 107.1%
(cost - $193,841) 250,146
Liabilities, less
other assets - (7.1%) (16,539)
--------
TOTAL NET ASSETS - 100.0% $233,607
========
*Non-income producing security
</TABLE>
54
<PAGE>
FINANCIAL HIGHLIGHTS
S&P 500 INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/30/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $ 14.15 10.77 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.13 0.21 0.02
Net realized and unrealized gain.................... 2.95 3.19 0.77
-------- -------- --------
Total income from investment operations................... 3.08 3.40 0.79
LESS DISTRIBUTIONS:
Dividends from net investment income................ 0.23 0.02 0.02
Distributions from net realized gain................ 0.48 0.00 0.00
-------- -------- --------
Total distributions....................................... 0.71 0.02 0.02
-------- -------- --------
Net asset value, end of period............................ $ 16.52 14.15 10.77
======== ======== ========
Total return ............................................. 22.53%** 31.58% 7.86%**
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $233,607 118,612 25,852
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.... 0.21%* 0.37% 0.71%*
Expenses, before waivers and reimbursements.... 0.41%* 0.49% 1.26%*
Net investment income, net of waivers
and reimbursements........................ 1.71%* 1.66% 1.60%*
Net investment income, before waivers
and reimbursements........................ 1.51%* 1.54% 1.05%*
Portfolio turnover rate............................. 1% 13% 0%
Average commission rate paid per share.............. $ 0.0361 0.0551 0.0338
- ---------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
55
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $57,661)..................... $65,395
Foreign currency (cost - $583) .......................................... 584
Receivable for securities sold........................................... 327
Dividends receivable..................................................... 240
-------
Total Assets................................................................... 66,546
LIABILITIES
Payable for securities purchased......................................... 675
Payable to custodian..................................................... 248
Net unrealized depreciation on forward foreign currency contracts........ 181
Accrued expenses payable................................................. 150
Investment advisory fees payable......................................... 88
-------
Total Liabilities.............................................................. 1,342
-------
Net Assets..................................................................... 65,204
=======
ANALYSIS OF NET ASSETS
Paid in capital.......................................................... $ 57,135
Accumulated net realized gain............................................ 620
Net unrealized appreciation.............................................. 7,554
Distributions in excess of net investment income......................... (105)
--------
Net Assets..................................................................... $ 65,204
========
Net Asset Value Per Share (based on net assets of $65,204 and 5,354 shares
issued and outstanding).................................................. $ 12.18
========
</TABLE>
56
<PAGE>
STATEMENT OF OPERATIONS
INTERNATIONAL EQUITY FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands
<S> <C>
INVESTMENT INCOME
Dividends (net of $68 for foreign taxes withheld)............................... $ 528
Interest........................................................................ 110
------
Total Investment Income............................................................... 638
EXPENSES
Investment advisory fees........................................................ 268
Custodian fees.................................................................. 82
Fund accounting fees............................................................ 36
Fund administration fees........................................................ 14
Transfer agent fees............................................................. 6
Registration fees............................................................... 4
Legal fees...................................................................... 3
Audit fees...................................................................... 2
Trustees fees................................................................... 1
------
Total Expenses........................................................................ 416
Less: Fee Waiver..................................................................... 99
------
Net Expenses.......................................................................... 317
------
Net Investment Income................................................................. 321
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on sale of investments and foreign currency transactions...... 570
Net realized gain on forward foreign currency contracts......................... 47
Change in net unrealized appreciation on investments and foreign currency....... 6,468
Change in net unrealized depreciation on forward foreign currency contracts..... (280)
------
Net realized and unrealized gain (loss)......................................... 6,805
------
Net Increase in Net Assets from Operations............................................ $7,126
======
</TABLE>
57
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY FUND
UNAUDITED
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................ $ 321 506
Net realized gain.................................... 617 1,691
Change in net unrealized appreciation................ 6,188 1,188
-------- -------
Increase in net assets from operations............... 7,126 3,385
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................ (2,001) (55)
Net realized gain.................................... (563) 0
Distributions in excess of net investment income..... 0 0
-------- -------
Total distributions.................................. (2,564) (55)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares......................... 18,443 27,669
Reinvestment of distributions........................ 2,564 134
Cost of shares redeemed ............................. (13,508) (3,167)
-------- -------
Increase in net assets from capital transactions..... 7,499 24,636
-------- -------
Increase in net assets..................................... 12,061 27,966
Net assets at beginning of period.......................... 53,143 25,177
-------- -------
Net assets at end of period................................ $ 65,204 53,143
======== =======
Undistributed net investment income........................ $ (105) 1,577
======== =======
58
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS - FOREIGN Kredietbank Npv 450 $ 254
AUSTRALIA - 4.8% Kredietbank Vvpr 7 4
Amcor Limited 14,000 $ 63 Petrofina Sa 675 266
Boral Limited 40,000 92 Royale Belge 300 125
Brambles Industries Ltd 7,000 144 Soc Gen De Belgique Put/Wts 200 0
Broken Hill Proprietary Co 41,500 406 Societe Generale Belgique 800 123
Coca-Cola Amatil 8,000 61 Solvay Sa 2,360 177
CSR Limited Ord 27,000 86 Tractabel Inv Intl Npv 1,800 215
David Jones Limited 75,000 86 Union Miniere Npv* 1,264 95
---------
Lend Lease Corp Ltd 6,000 138 2,654
M.I.M. Holdings Ltd 26,809 17 CANADA - 3.0%
Mayne Nickless Ltd 21,000 113 Agrium Inc. 4,500 70
National Australia Bank Lts 29,000 412 Alcan Aluminum Ltd 3,200 104
News Corporation Ltd 41,152 276 Bank of Montreal 2,400 131
News Corporation Ltd Preferred 33,140 187 Barrick Gold Corp 2,200 49
Orica Limited 2,200 16 Canadian National Railway Co. 2,200 143
Pacific Dunlop 41,000 76 Canadian Pacific Ltd 7,300 214
Qantas Airways Limited 40,538 62 Hudsons Bay Co 3,000 65
Rio Tinto Limited 13,000 180 Imasco Ltd 1,800 68
Santos Limited 17,000 61 Imperial Oil Ltd 2,600 143
Telstra Corporation-Ins Recp 61,300 144 Magna International 1,000 75
Westpac Bank 48,000 322 Moore Corp. Ltd 3,500 55
WMC Limited 33,000 117 Newbridge Networks Corp.* 1,000 29
Woolworths Ltd 15,000 52 Noranda 3,300 68
---------
3,111 Nova Corp 9,000 101
BELGIUM - 4.1% Potash Corp. 1,000 89
Delhaize-Le Lion 2,850 189 Royal Bank of Canada 2,900 173
Eaux Compagnie Gen Warrant 1,300 2 Seagram Co Ltd 1,400 60
Electrabel Cap 1,600 425 Shaw Communications, Inc. 5,300 86
Fortis Ag 1,375 388 Telus Corp. 2,000 54
Fortis Ag - Strip Vvpr 75 0 Trans Canada Pipeline 4,400 98
Generale de Banquenpv 400 231 Westcoast Energy 2,200 52
---------
Groupe Bruxelles Lambert 800 160 1,927
59
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ----------
FINLAND - 2.7% Societe Generale 1,187 $ 247
Cultor Oy 600 $ 35 Suez Lyonnaise Des Eaux 1,936 328
Merita Ltd 30,900 207 Thomson CSF 3,800 150
Metsa Serla - B 4,900 51 Total Sa 1,600 190
Nokia Ab - A 14,800 994 Unisor Sacilor 3,800 57
---------
Outokumpu 5,900 83 5,088
Rauma Oy 1 0 GERMANY - 8.8%
Sampo Insurance Co 2,300 104 Allianz Ag 1,800 554
Upm-Kymmene Oy 8,100 243 Allianz Ag Rights 251 77
Valmet Oy 3,800 63 Basf Ag 2,940 131
---------
1,780 Bayer Ag 7,240 322
FRANCE - 7.8% Bayerische Motoren Werke Ag 170 188
Alcatel-Alsthom 1,200 222 Commerzbank Ag 1,560 60
Axa Uap 2,600 305 Continental Ag 6,500 185
Banque Nationale De Paris 2,800 236 Daimler Benz Ag 2,870 280
Carrefour 300 172 Deutsche Bank Ag 4,090 315
Cie Fin Paribas 1,860 198 Deutsche Telekom Ag 20,100 509
Clf - Dexia France 1,300 157 Dresdner Bank Ag 5,900 319
Compagnie De Saint-Gobain 1,425 237 Hochtief Ag 1,700 71
Compagnie Generale Des Eaux 1,800 334 Hoechst Ag 2,300 93
Eridania Beghin Say Sa 500 108 Man Ag 340 115
France Telecom Sa 5,300 288 Mannesmann Ag 320 254
Gruope Danone 800 189 Metro Ag 4,050 200
L'Air Liquide 590 109 Muenchener Rueckver Ag-reg 1,000 457
Lafarge 1,191 112 Preussag Ag 550 196
Lagardere SCA 4,000 153 Rwe Ag 3,570 182
Michelin (Cgde) 2,421 152 Schering Ag 1,800 193
Pechiney Sa 2,147 96 Siemens Ag 5,820 341
Peugeot Sa 1,200 208 Thyssen Ag 700 160
Pinault Printemps Redoute Sa 180 134 Veba Ag 4,220 279
Rhone-Poulenc 4,682 229 Volkswagen Ag 355 283
---------
Seita 4,500 202 5,764
Soc Natl Elf Aquit 2,100 275
60
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ----------
HONG KONG - 0.4% Tim SPA 37,000 $ 211
---------
Cheung Kong (Hldgs) 6,000 $ 40 3,116
China Light & Power 4,000 19 JAPAN - 15.6%
Citic Pacific Ltd 7,000 21 Amada Co 21,000 85
Hang Seng Bank 3,300 28 Canon Inc 17,000 403
Hong Kong Telecomm 19,600 37 Cannon Sales Co Inc 7,000 94
Hong Kong & China Gas 20,900 28 Citizen Watch Co 20,000 135
Hong Kong & China Gas Wts 950 0 Dai Nippon Printing Co Ltd 19,000 324
Hutchison Whampoa Ltd 9,000 56 Daiichi Pharm Co 17,000 244
Johnson Electric (Hldgs) 4,000 14 Daikin Industries 21,000 103
Sun Hung Kai Properties 4,000 24 Daiwa House 11,000 89
---------
267 Denso Corporation 11,000 189
ITALY - 4.8% Fanuc Co 8,900 329
Aeroporti Di Roma Fujitsu Ltd 13,000 152
Assicurazioni Generali 10,092 304 Hitachi 41,000 294
Banca Commerciale Italiana 20,000 101 Honda Motor Co 8,000 291
Credito Italiano ITL 36,000 189 Hoya Corp. 5,000 166
Danieli Rights 17,000 5 Inax 10,000 37
Danieli Risp (Savings) 17,000 90 Ito-Yokado Co Ltd 8,000 415
Edison Spa 9,000 76 Kaneka Corp 21,000 111
Ente Nazionale Idrocarburi 77,000 517 Keio Teito Electric Railway 24,000 92
Fiat Spa-Priv 74,890 185 Kinki Nippon Railway 24,000 123
Ina - Istitut Naz Assicur 41,000 123 Kirin Brewery Co Ltd 23,000 201
Instituto Bancario Sa 8,000 116 Kokuyo 7,000 120
Instituto Mobiliare Italinao 12,000 196 Kuraray Co Ltd 26,000 220
Italgas (Soc Ital) 16,600 77 Kyocera Corp 1st Sec 2,700 142
Montedison 146,300 185 Marui Co. 11,000 174
Parmalat Finanziaria Spa 44,000 99 Matsushita Electric Indl Co 31,000 497
Rinascente 10,800 108 Ngk Insulators 1st Section 34,000 300
Telecom Italia Mobile Di Risp 46,300 168 Nintendo 2,100 193
Telecom Italia Spa 29,665 222 Nippon Meat Packer 14,000 191
Telecom Italia-RNC 27,300 144 Nippon Steel Co 1st Sec 17,000 27
61
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ----------
Okumura 23,000 $ 85 New Straits Times Press 21,000 $ 24
Omron Corp. 6,000 94 Perusahaan Otomobil Nasional 10,000 12
Osaka Gas 40,000 90 Petronas Gas BHD 12,000 29
Sankyo Co Ltd 15,000 372 Public Bank BHD 7,800 3
Secom 5,000 295 Public Bank BHD-Foreign Mkt 24,600 12
Sega Enterprises 3,000 50 Resorts World BHD 15,000 29
Seino Transportation 14,000 81 Rothmans of Pall Mall BHD 9,000 74
Sekisui House Ltd 1st Sec 19,000 149 Sime Darby Malay Regd 35,000 31
Sony Corp 5,200 433 Telekom Malaysia 34,000 102
Sumitomo Bank 13,000 123 Tenaga Nasional BHD 35,000 70
Sumitomo Chemical Co. 25,000 66 UWM Holdings Berhad 7,000 6
Sumitomo Electric 17,000 203 YTL Corp BHD 18,000 28
Takeda Chemical 13,000 372 YTL Power Intl* 10,500 9
---------
TDK Corp 4,000 317 688
The Bank of Tokyo-Mitsubishi 19,000 236 NETHERLANDS - 4.5%
Tokio Marine & Fire 19,000 207 Abn-Amro Holdings 9,833 239
Tokyo Elec Pwr First Sec 5,000 96 Akzo Nobel 300 61
Tonen Corp 15,000 84 Elsevier 10,200 154
Toray Industries Inc 53,000 286 Heineken NV 800 186
Toshiba Corp 1st Sec 49,000 228 ING Groep 5,699 370
Toyo Suisan Kaisha 11,000 71 KLM 1,723 68
Toyota Motor Corporation 14,000 366 Koninklijke Hoogovens 1,237 56
Yamazaki Baking Co Ltd 10,000 101 KPN 4,943 255
---------
10,146 Nordbanken Holding Ab 20,800 153
MALAYSIA - 1.0% Philips Electronics 3,100 273
Berjaya Group BHD 4,000 9 Polygram NV 2,000 83
Hume Industries BHD 22,000 18 Royal Dutch Petrol 13,400 739
Kuala Lumpur Kepon Berhad 40,000 93 Unilever 4,400 313
---------
Land & General Bhd 22,000 5 2,950
Malayan Banking 12,000 35 NEW ZEALAND - 3.6%
Malaysia Int Shipping 20,000 35 Brierley Investments Ltd 499,000 288
Nestle (Malaysia) BHD 12,000 64 Carter Holt Harvey Ltd 173,000 230
62
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ----------
Fletcher Challenge Building 57,000 $ 115 Ericsson Lm 4,900 $ 258
Fletcher Challenge Energy 63,000 215 Hennes & Mauritz Ab 1,300 68
Fletcher Challenge Paper 113,000 166 Skandia Forsakrings Ab 800 56
Fletcher Forestry Shares 122,880 80 Skanska AS 1,200 56
Lion Nathan Ltd 64,000 170 Svenska Handelsbanken 1,900 86
Telecom Corp of New Zealand 236,000 1,121 Swedish Match Ab 32,200 111
---------
2,385 Volvo Ab 3,300 96
---------
SINGAPORE - 1.4% 1,035
City Developments 12,000 52 SWITZERLAND - 5.8%
Creative Technology Limited* 2,000 42 Abb Ag 60 98
Dbs Land 22,000 33 Credit Suisse Group 2,097 461
Dev Bank 12,100 80 Holderbank Fn Glarus 111 118
Elec & Eltek Intl Co. Ltd 2,200 13 Julius Baer Holding Ag 53 146
Faser & Neave 4,000 18 Nestle Sa 255 495
Hotel Properties 39,000 20 Novartis -Reg Shs 548 906
Keppel Corporation 5,750 15 Roche Holding Ag0 Regd 65 659
Keppel Land Ltd 15,000 18 Sairgroup 63 82
Natsteel Ltd 8,000 10 Saurer Ag 117 118
Overseas Chinese Bank 19,600 103 Schw Ruckversicherungs 149 329
Rothmans Industries 2,000 10 Schweiz Leb & Rentenanst 105 89
Singapore Int'l Airlines, Regd 19,000 124 Sulzer Gebuder Ag 117 84
Singapore Press Hds 8,932 99 Ubs (Schw Bankgesellsch) Br 115 185
---------
Singapore Tech Engineering 21,000 18 3,770
Singapore Telecom 88,000 151 UNITED KINGDOM - 23.4%
UTD Overseas Bank 16,000 76 Abbey National Ord 15,000 279
Venture Manufacturing 3,000 11 Barclays Plc 11,000 316
Wing Tai Hldgs Sg 16,000 13 Bass Plc 7,482 144
---------
906 Bat Industries 71,000 678
SWEDEN - 1.6% Bg Plc 33,676 179
Abb As 3,900 63 Billiton Plc 70,000 201
Astra As 9,000 185 BOC Group Plc 5,000 86
Electrolux Ab 600 56 Booker Plc 31,000 138
63
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
AMOUNT
In thousands, except shares SHARES VALUE OR SHARES VALUE
---------- ---------- ---------- ----------
British Petroleum Ord 53,897 $ 851 Reckitt & Colman Plc 7,800 $ 157
British Sky Broadcasting 24,500 179 Reed International Plc 23,000 203
British Steel Plc 132,000 351 Reuters Holdings Ord 13,300 144
British Telecommunciations 58,000 630 Rio Tinto Plc 17,500 251
BTR Ord 28,000 93 RJB Mining Plc 41,000 82
Cable and Wireless Ord 15,000 172 Royal Sun Alliance 20,966 233
Cadbury Schweppes Plc 20,000 293 Scottish Hydro-electric Plc 21,500 212
Centrica Plc* 5,000 9 Sears Ord 97,000 98
Charter Plc 19,846 223 Sedgwick Group Plc 64,000 165
Coats Viyella Plc 134,000 208 Smithkline Beecham Plc 38,000 455
Diageo Plc 26,920 322 Tate & Lyle Ord 23,500 192
Fki Plc 85,000 293 Tesco 27,500 258
General Electric Co 57,000 466 Thames Water Plc 18,500 304
Glaxo Holdings Ord 31,500 891 Unilever Ord 40,000 428
Great Universal Stores 12,000 183 United News & Media Plc 14,000 190
Greenalls Group Plc 21,500 174 Vodafone Group Ord 21,708 239
Hanson Plc 30,750 181 Williams Holding Plc 43,000 329
---------
Hillsdown Holdings 100,000 298 15,236
---------
House of Fraser Plc 77,000 207
Hsbc Holdings Ord 16,000 503 Total Common Stocks -
Inchcape 40,000 149 Foreign - 93.3 % (cost - $53,039) 60,823
Jefferson Smurfit Group Plc 66,702 245
Legal & General Group Plc 17,000 202 COMMERCIAL PAPER
Lloyds TSB Group Plc 51,000 765 ASSET BACKED SECURITY - 3.2%
Marks & Spencer Plc 40,500 385 Ciesco L.P.
Mirror Group Plc 63,000 194 5.530% due 05/01/98 $ 2,073 2,073
National Westminster Bank Plc 11,500 230
Northern Foods Ord 15,000 56 FINANCIAL SERVICES - 3.8%
Peninsular & Orient Steam Nav 27,000 401 Lehman Brothers Holdings
Prudential Corp. 8,500 121 5.550% due 05/04/98 2,500 2,499
---------
64
<PAGE>
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
UNAUDITED
PRINCIPAL
In thousands, except shares AMOUNT VALUE
---------- ----------
Total Commercial Paper - 7.0%
(cost - $4,572) $ 4,572
---------
TOTAL INVESTMENTS - 100.3%
(cost - $57,611) 65,395
Liabilities, less foreign currency
and other assets - (0.3%) (191)
---------
TOTAL NET ASSETS - 100.0% $ 65,204
=========
*Non-income producing security
</TABLE>
65
<PAGE>
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
4/30/98
UNAUDITED
As a percentage of net assets
NON - U.S. EQUITIES
Aerospace & military technology.............. 0.23
Appliances and household durable............. 1.93
Automobiles.................................. 2.92
Banking...................................... 11.51
Beverages and tobacco........................ 2.61
Broadcasting and publishing.................. 2.46
Building materials and components............ 1.53
Business and public services................. 3.95
Chemicals.................................... 2.67
Construction and housing..................... 0.74
Data processing and reproduction............. 0.85
Electrical and electronics................... 5.20
Electronic components........................ 1.56
Energy sources............................... 5.86
Financial services........................... 1.22
Food and household products.................. 4.31
Forest products and paper.................... 1.64
Gold mines................................... 0.07
Health and personal care..................... 7.04
Industrial components........................ 1.69
Insurance.................................... 5.89
Leisure and tourism.......................... 0.57
Machinery and engineering.................... 1.05
Merchandising................................ 4.27
Metals - steel............................... 1.02
Metals - non ferrous......................... 1.93
Miscellaneous materials and commodities...... 0.14
Multi-industry............................... 3.95
Real estate.................................. 0.50
Recreation and other consumer goods.......... 0.71
Telecommunications........................... 7.19
Textiles and apparel......................... 0.35
Transportation - airlines.................... 0.51
Transportation - road and rail............... 0.67
Transportation - shipping.................... 0.67
66
<PAGE>
INDUSTRY DIVERSIFICATION
INTERNATIONAL EQUITY FUND
4/30/98
UNAUDITED
Utilities - electrical and gas............... 3.43
Wholesale and international trade............ 0.46
------
93.30
COMMERCIAL PAPER
Asset backed security........................ 3.20
Finance - miscellaneous...................... 3.80
------
TOTAL INVESTMENTS..................................100.30
Liabilities, less foreign currency and other assets (0.30%)
------
TOTAL NET ASSETS...................................100.00%
=======
67
<PAGE>
FINANCIAL HIGHLIGHTS
INTERNATIONAL EQUITY FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 09/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 11.34 10.20 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.07 0.11 0.02
Net realized and unrealized (loss) gain......... 1.32 1.05 0.21
------- -------- --------
Total income from investment operations............... 1.39 1.16 0.23
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.43 0.02 0.03
Distributions from net realized gain............ 0.12 0.00 0.00
------- -------- --------
Total distributions................................... 0.55 0.02 0.03
------- -------- --------
Net asset value, end of period........................ $ 12.18 11.34 10.20
======= ======== ========
Total return ......................................... 12.87%** 11.34% 2.32%**
======= ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $65,204 53,143 25,177
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 1.12%* 1.40% 1.46%*
Expenses, before waivers and reimbursements..... 1.47%* 1.61% 1.46%*
Net investment income, net of waivers
and reimbursements......................... 1.13%* 1.14% 1.52%*
Net investment income, before waivers
and reimbursements......................... 0.78%* 0.93% 1.52%*
Portfolio turnover rate............................... 25% 27% 0%
Average commission rate paid per share................ $0.0246 0.0262 0.0264
- ----------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
68
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $63,217)................... $ 73,521
Dividends receivable................................................... 145
--------
Total Assets................................................................. 73,666
LIABILITIES
Payable for fund shares redeemed....................................... 550
Accrued expenses payable............................................... 40
Investment advisory fees payable....................................... 22
--------
Total Liabilities............................................................ 612
--------
Net Assets................................................................... $ 73,054
========
ANALYSIS OF NET ASSETS
Paid in capital........................................................ $ 61,688
Accumulated net realized loss.......................................... (138)
Net unrealized appreciation............................................ 10,304
Undistributed net investment income.................................... 1,200
--------
Net Assets................................................................... $ 73,054
========
Net Asset Value Per Share (based on net assets of $73,054 and 5,566 shares
issued and outstanding)................................................ $ 13.12
========
</TABLE>
69
<PAGE>
STATEMENT OF OPERATIONS
REIT INDEX FUND
FOR THE SIX MONTHS ENDED APRIL 30, 1998
UNAUDITED
In thousands
INVESTMENT INCOME
Dividends.................................... $ 2,375
Interest..................................... 9
-------
Total Investment Income......................... 2,384
EXPENSES
Investment advisory fees..................... 290
Fund administration fees..................... 24
Fund accounting fees......................... 16
Custodian fees............................... 9
Registration fees............................ 6
Transfer agent fees.......................... 6
Audit fees................................... 3
Legal fees................................... 3
Trustees fees................................ 2
Other........................................ 1
-------
Total Expenses.................................. 360
Less: Fee Waiver............................... 242
-------
Net Expenses.................................... 118
-------
Net Investment Income........................... 2,266
NET REALIZED AND UNREALIZED LOSS
Net realized loss on sale of investments..... (60)
Change in net unrealized appreciation on
investments.................................. (2,894)
-------
Net realized and unrealized loss.......... (2,954)
-------
Net Decrease in Net Assets from Operations...... $ (688)
=======
70
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
REIT INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR
THROUGH ENDED
In thousands 04/30/98 10/31/97
-------- --------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................................... $ 2,266 2,825
Net realized (loss) gain...................................... (60) 598
Change in net unrealized appreciation......................... (2,894) 12,744
-------- --------
(Decrease) increase in net assets from operations............. (688) 16,167
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................... (3,388) (639)
Net realized gain............................................. (672) (4)
-------- --------
Total distributions........................................... (4,060) (643)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares.................................. 13,454 66,295
Reinvestment of distributions................................. 4,059 643
Cost of shares redeemed....................................... (39,610) (8,253)
-------- --------
(Decrease) increase in net assets from capital transactions... (22,097) 58,685
-------- --------
(Decrease) Increase in net assets................................... (26,845) 74,209
Net assets at beginning of period................................... 99,899 25,690
-------- --------
Net assets at end of period......................................... $ 73,054 99,899
======== ========
Undistributed net investment income................................. $ 1,200 2,322
======== ========
</TABLE>
71
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
In thousands, except shares SHARES VALUE SHARES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS - REAL ESTATE Colonial Properties Trust 12,310 $ 365
INVESTMENT TRUSTS (REITS) Eastgroup Properties 9,295 185
APARTMENTS - 18.6% First Union Real Estate 16,200 167
Ambassador Apartments, Inc. 6,155 $ 126 Glenborough Realty Trust, Inc. 17,795 477
AMLI Residential Prop 9,445 217 Pacific Gulf Properties 11,420 251
Apartment Invest & Mgmt Co 23,310 871 Penn Real Estate Invest Trust 7,555 179
Associated Estates Realty 9,670 185 Rouse Co. 37,700 1,164
Avalon Properties, Inc. 24,270 683 Washington REIT 20,170 347
--------
Bay Apartments Communities 14,785 547 4,286
Berkshire Realty Co 20,890 255 HOTEL - 14.0%
BRE Properties 23,680 622 American General Hospitality 13,760 345
Camden Property Trust 24,794 727 Boykin Lodging Co. 8,000 188
Cornerstone Realty Income 20,200 239 Equity Inns, Inc. 20,225 298
Equity Residential Properties 54,001 2,653 Felcor Suite Hotels 20,590 721
Essex Property Trust, Inc. 9,505 314 Hospitality Properties Trust 22,965 738
Gables Residential Trust 12,475 340 Innkeepers USA Trust 18,850 285
Home Properties of New York 5,600 150 Jameson Inns, Inc. 5,555 64
Irvine Apartment Community 11,185 342 Patriot American Hospitality 62,398 1,576
Lexford Residential Trust* 5,300 117 RFS Hotel Investors, Inc. 13,825 295
Merry Land & Investment Co 24,095 507 Sunstone Hotel Investors, Inc. 21,245 329
MGI Properties, Inc. 7,820 190 Starwood Lodging Trust 105,900 5,315
Mid-America Apart Community 10,595 282 Winston Hotels 9,235 115
--------
Post Properties, Inc. 19,295 787 10,269
Security Capital Atlantic 27,000 596 MANUFACTURED HOMES - 1.6%
Security Capital Pacific 52,430 1,173 Chateau Properties, Inc. 15,390 455
Smith, Charles E. Residential 8,695 270 Manufactured Home Community 14,115 356
Summit Properties, Inc. 13,615 278 Sun Communities, Inc. 9,335 327
--------
Town & Country Trust 8,935 155 1,138
United Dominion Realty Trust 54,185 735 OFFICE PROPERTY - 25.0%
Walden Residential Props, Inc. 10,435 254 Alexandria Real Estate Equities 6,500 214
---------
13,615 Arden Realty Group, Inc. 34,500 968
DIVERSIFIED - 5.9% Brandywine Realty Trust 21,155 481
Boston Properties, Inc. 34,800 1,151 Carramerica Realty Corp 34,515 1,010
72
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ---------
Cornerstone Properties 55,300 $ 995 Macerich Co 16,275 $ 457
Cousins Properties, Inc. 17,840 540 Prime Retail, Inc. 15,535 220
Crescent Real Estate 67,115 2,290 Simon Debartolo Group, Inc. 60,195 1,983
Duke Realty Investments, Inc. 43,560 1,037 Taubman Centers, Inc. 28,780 390
Equity Office Properties 141,589 4,026 Urban Shopping Centers, Inc. 9,810 320
--------
Great Lakes REIT, Inc. 9,000 165 4,956
Highwoods Properties, Inc. 28,520 970 SHOPPING CENTER - 12.6%
Kilroy Realty Corp. 14,800 392 Alexander Haagen Properties 10,830 175
Koger Equity, Inc 14,360 308 Bradley Real Estate, Inc. 13,450 280
Liberty Property Trust 31,985 818 Burnham Pacific Properties, Inc. 18,010 254
Mack-Cali Realty Corp. 31,495 1,183 Developers Diversified 15,700 623
Parkway Properties, Inc. 6,300 207 FAC Realty, Inc. 6,800 63
Prentiss Properties Trust 23,500 596 Federal Realty Investment Trust 22,160 539
Reckson Assoc Realty Corp 21,870 536 First Washington Realty Trust 4,200 111
SL Green Realty Corp. 7,000 168 Glimcher Realty Trust 13,450 286
Spieker Properties, Inc. 34,450 1,365 IRT Property Co. 18,480 215
---------
18,269 JDN Realty Corp 11,370 362
OUTLET CENTERS - 1.3% Kimco Realty Corp 22,820 846
Chelsea GCA Realty, Inc. 8,695 332 Kranzco Realty Trust 5,930 106
Horizon Group, Inc. 13,725 167 Mark Centers Trust 4,855 39
Mills Corp 13,045 325 Mid Atlantic Realty Trust 8,300 116
Tanger Factory Outlet Center 4,500 136 New Plan Realty Trust 33,470 818
----------
960 Pan Pacific Retail Properties 9,600 203
PRISONS - 0.6% The Price REIT, Inc. 6,630 304
CCA Prison Realty Trust 12,200 432 Regency Realty Corp 13,705 353
Saul Centers, Inc. 7,095 129
REGIONAL MALL - 6.8% Vornado Realty Trust 46,378 1,858
CBL & Associates Properties 13,625 335 Weingarten Realty Investment 14,965 638
Crown American Realty 15,065 153 Western Investment REIT 9,745 139
General Growth Industries 20,105 721 Westfield America, Inc. 41,400 724
--------
JP Realty, Inc. 9,910 240 9,181
Lexington Corp Prop 9,445 137 STORAGE - 4.6%
Public Storage, Inc. 63,105 1,940
73
<PAGE>
SCHEDULE OF INVESTMENTS
REIT INDEX FUND
APRIL 30, 1998
UNAUDITED
In thousands, except shares SHARES VALUE SHARES VALUE
---------- ---------- ---------- ---------
Shurgard Storage Centers 16,065 $ 452 U.S. GOVERNMENT SECURITIES
Sovran Self Storage, Inc. 7,020 194 U.S. GOVERNMENT AGENCIES - 0.9%
Storage Trust Realty 8,695 211 Federal Home Loan Mortgage Corp
Storage USA 15,665 593 5.450% due 05/01/98 $ 550 $ 550
---------
3,390 5.450% due 05/22/98 125 125
--------
TRIPLE NET LEASE - 3.6%
Commercial Net Lease Realty 16,315 266 (cost - $675) 675
Excel Legacy Corp.* 13,510 71
Excel Realty Trust, Inc. 13,110 351 DEMAND NOTE
Franchise Finance Corp 25,660 688 UTILITY - ELECTRICAL - 0.1%
Golf Trust of America 4,400 144 Wisconsin Electric
National Golf Properties 7,095 220 5.235% due 05/01/98
Realty Income Corp 14,950 391 (cost - $46) 46 46
--------
Trinet Corporate Realty Trust 13,585 487
---------
2,618 TOTAL INVESTMENTS - 100.6%
WAREHOUSE / INDUSTRIAL - 5.0% (cost - $63,217) 73,521
Bedford Property Investors 12,820 249
Centerpoint Properties Corp 10,985 358 Liabilities, less other assets - (0.6%) (467)
--------
First Industrial Realty Trust 20,605 670
Meridian Industrial Trust 17,095 395 TOTAL NET ASSETS - 100.0% $ 73,054
========
Security Capital Industrial 68,630 1,677
Weeks Corp 10,695 337 *Non-income producing security
---------
3,686
---------
Total Common Stocks - Real Estate
Investment Trusts - 99.6%
(cost - $62,496) 72,800
</TABLE>
74
<PAGE>
FINANCIAL HIGHLIGHTS
REIT INDEX FUND
UNAUDITED
<TABLE>
<CAPTION>
11/01/97 YEAR 9/03/96
THROUGH ENDED THROUGH
Selected per share data 04/30/98 10/31/97 10/31/96
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 13.69 10.44 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.35 0.41 0.10
Net realized and unrealized gain................ (0.37) 2.99 0.34
------- ------- -------
Total income from investment operations............... (0.02) 3.40 0.44
LESS DISTRIBUTIONS:
Dividends from net investment income............ 0.46 0.15 0.00
Distributions from net realized gain............ 0.09 0.00 0.00
------- ------- -------
Total distributions................................... 0.55 0.15 0.00
------- ------- -------
Net asset value, end of period........................ $ 13.12 13.69 10.44
======= ======= =======
Total return.......................................... -0.35%** 32.78% 4.40%**
======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............. $73,054 99,899 25,690
Ratio to average net assets of:
Expenses, net of waivers and reimbursements..... 0.24%* 0.51% 1.20%*
Expenses, before waivers and reimbursements..... 0.74%* 0.82% 1.20%*
Net investment income, net of waivers
and reimbursements......................... 4.67%* 4.42% 5.97%*
Net investment income, before waivers
and reimbursements......................... 4.17%* 4.11% 5.97%*
Portfolio turnover rate............................... 35% 22% 0%
Average commission rate paid per share................ $0.0358 0.0367 0.0270
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
75
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
1. DESCRIPTION OF ENTITY
Aon Funds (the "Trust"), a Delaware business trust organized on May 16, 1996,
is registered under the Investment Company Act of 1940, as an open-end,
diversified, management investment company. The Trust consists of six Funds:
the Money Market Fund, the Government Securities Fund, the Asset Allocation
Fund, the S&P 500 Index Fund, the International Equity Fund, and the REIT
Index Fund. For the period September 3, 1996 to February 28, 1997, the Funds
operated with two share classes: Class Y, a no-load institutional class, and
Class C, a no-load retail class. On February 28, 1997, Class C shares were
exchanged for Class Y shares in proportion to their relative net asset value
in a non-taxable transaction.
There are an unlimited number of shares authorized with no par value.
The Trust was reorganized on September 3, 1996, prior to this date the Trust
conducted business as Aon Asset Management Fund, Inc. Prior to the
reorganization, Aon Asset Management Fund, Inc. consisted of two Funds: the
Money Market Fund, and the Flexible Asset Allocation Fund. Upon
reorganization, the shares of each existing Fund were designated Class Y
shares and the Flexible Asset Allocation Fund was renamed the Asset Allocation
Fund.
The Money Market Fund of the Trust is designated as a "Money Market Fund", and
must adhere to the guidelines governing such funds as described in Rule 2a-7
under the Investment Company Act of 1940. Pursuant to that rule, the Money
Market Fund seeks to maintain a constant net asset value of $1.00 per share on
a daily basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds used in the preparation of their financial statements.
a) Security Valuation - Securities for which quotations are readily
available are valued at the last reported sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the
last available bid price on the exchange or market on which they are
principally traded. Securities for which market quotations are not
available are stated at fair value as determined in good faith under
procedures established by the Board of Trustees. Debt securities are valued
by an independent pricing service that utilizes electronic data processing
techniques, including a "matrix system", to derive evaluated bid prices.
Stock index futures are valued daily at the settlement price established
each day on the exchange on which they are traded. Forward contracts are
valued daily using quoted forward exchange rates. The investments held by
the Money Market Fund and other debt instruments that mature in 60 days or
less are stated at amortized cost, which approximates fair value.
b) Investment Transactions and Income - Security transactions are accounted
for on the trade date (the date the order to buy or sell is executed).
Interest income, which includes amortization of premiums and discounts, is
recorded on the accrual basis and dividend income is recorded on the
ex-dividend date, except for foreign dividends which are recorded when the
information becomes available. Realized gains and losses on investments are
determined based on an identified cost basis.
76
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
c) Foreign Currency Translation - Investment securities and other assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars using the last reported exchange rate on the London Stock Exchange
on the day of the valuation. Purchases and sales of portfolio securities,
commitments under forward foreign currency contracts, and income receipts
are translated into U.S. dollars using the last reported exchange rate at
the close of the London Stock Exchange on the day of each transaction.
Realized and unrealized foreign exchange gains or losses on investments are
included as a component of net realized and unrealized gain or loss on the
statement of operations.
d) Distributions to Shareholders - Distributions of net investment income
and net realized gain are determined in accordance with income tax
regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions. Dividends are declared daily and paid
monthly for the Money Market Fund, declared and paid monthly for the
Government Securities Fund, declared and paid quarterly for the Asset
Allocation Fund, and declared and paid annually for the REIT Index Fund,
the International Equity Fund, and the S&P 500 Index Fund.
e) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
f) Repurchase Agreement - During the term of the repurchase agreement, the
market value of the underlying collateral, including accrued interest is
required to be at least equal to the market value of the repurchase
agreement. The Fund, through its custodian holds the underlying U.S
Treasury Obligations as collateral
3. INCOME TAXES
Each Fund intends to qualify as a "regulated investment company" under the
provision of Sub-chapter M of the Internal Revenue Code of 1986, as amended,
and thereby, under the provisions of the income tax laws available to
regulated investment companies, be relieved of substantially all income taxes.
Therefore, no provision has been made for Federal or State income taxes. The
Government Securities Fund had capital loss carryovers of $31,132 for the tax
year ended October 31, 1996 and $411,855 for the tax year ended October 31,
1997 available for federal income tax purposes to be applied against future
capital gains, if any. If not applied, they will expire in the year 2004 and
2005, respectively.
77
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement with Aon Advisors, Inc.
(the "Investment Advisor"), a subsidiary of Aon Corporation, investment
advisory fees will be accrued daily and paid monthly at the following annual
rates, stated as a percentage of average daily net assets:
Money Market Fund .30%
Government Securities Fund .45% of the first $100 million;
.40% of the next $100 million;
.35% of the next $100 million;
.30% of the next $100 million;
and .25% of amounts in excess of $400 million
Asset Allocation Fund .65% of the first $250 million;
.55% of the next $250 million;
and .45% of amounts in excess of $500 million
S&P 500 Index Fund .30%
International Equity Fund .95% of the first $100 million;
.90% of the next $100 million;
and .85% of amounts in excess of $200 million
REIT Index Fund .60% of the first $100 million;
.55% of the next $100 million;
and .50% of amounts in excess of $200 million
The Investment Advisor has voluntarily agreed to waive sufficient investment
advisory fees to result in a net effective annual rate of .10% of the average
daily net assets of the Money Market Fund, the Government Securities Fund, the
S&P 500 Index Fund, and the REIT Index Fund, .25% of the average daily net
assets of the Asset Allocation Fund, and between .55% and .60% of the average
daily net assets of the International Equity Fund until February 28, 1999.
The Investment Advisor has also agreed to waive its fees and reimburse each
Fund to the extent total annualized expenses exceed the following amounts,
stated as a percentage of average daily net assets:
Money Market Fund 1.00%
Government Securities Fund 1.50% of the first $30 million;
and 1.25% in excess of $30 million
Asset Allocation Fund 1.25%
S&P 500 Index Fund .75%
International Equity Fund 1.75% of the first $30 million;
and 1.50% in excess of $30 million
REIT Index Fund 1.50% of the first $30 million;
and 1.25% in excess of $30 million
78
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
To assist in the administration of the Trust, the Trust has entered into an
administration agreement with Aon Securities Corporation, an affiliate of Aon
Corporation, to provide certain administrative services for the Trust. Under
this agreement, the Trust pays Aon Securities Corporation an annual fee of
0.05% of the average daily net assets of each Fund.
Certain officers and trustees of the Trust are also officers and directors of
the Investment Advisor and Aon Securities Corporation. These officers and
trustees serve without direct compensation from the Trust. During the six
months ending April 30, 1998, the Trust incurred expenses totaling $24,277 for
compensation of unaffiliated trustees.
5. FUTURES CONTRACTS
The S&P 500 Index Fund invests in stock index futures contracts to rapidly
adjust exposure to the S&P 500 Index in anticipation of investing cash
balances or cash flow into the Fund in appropriate common stocks or in
anticipation of liquidating appropriate common stocks to meet expected
redemption requests. The use of stock index futures also lowers the
transaction costs of the Fund. The Fund bears the market risk arising from
changes in the value of the futures. At the time the Fund enters into a
futures contact, it is required to make a margin deposit with the broker of a
specified amount of cash or eligible securities. Subsequently, as the market
price of the futures contract fluctuates, gains or losses are recorded and
payments are made between the Fund and the broker on a periodic basis. The
statement of operations reflects gains and losses as realized for closed
futures contracts and as unrealized for open futures contracts.
At April 30, 1998, the S&P 500 Index Fund had the following open futures
contracts:
CONTRACT UNREALIZED
AMOUNT VALUE LOSS
----------- ----------- ----------
Index Futures Buy Contracts
S&P 500 Index June 98; 11 contracts $ 3,098,500 3,077,800 $ 20,700
==========
The value of U.S. Government Treasury Bills pledged to cover margin
requirements for open futures contracts at April 30, 1998 was $2,082,859.
79
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
6. CAPITAL SHARE TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
MONEY MARKET GOVERNMENT SECURITIES ASSET ALLOCATION
In thousands FUND FUND FUND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996 395,104 $ 395,104 3,966 $ 40,052 6,925 $ 78,647
Shares sold 6,575,729 6,575,729 5,890 60,676 5,318 72,743
Dividend reinvestments 12,754 12,754 442 4,504 377 5,130
------------ ------------- ----------- ----------- ------------ -----------
Total issued 6,588,483 6,588,483 6,332 65,180 5,695 77,873
Shares redeemed (6,217,231) (6,217,231) (344) (3,475) (2,686) (36,820)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 371,252 371,252 5,988 61,705 3,009 41,053
------------ ------------- ----------- ----------- ------------ -----------
Balance at October 31, 1997 766,356 766,356 9,954 101,757 9,934 119,700
Shares sold 3,845,965 3,845,965 2,355 24,980 6,573 112,479
Dividend reinvestments 8,777 8,777 322 3,415 469 7,815
------------ ------------- ----------- ----------- ------------ -----------
Total issued 3,854,742 3,854,742 2,677 28,395 7,042 120,294
Shares redeemed (3,793,519) (3,793,519) (369) (3,917) (1,729) (29,920)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 61,223 61,223 2,308 24,478 5,313 90,374
------------ ------------- ----------- ----------- ------------ -----------
Balance at April 30, 1998 827,579 $ 827,579 12,262 $ 126,235 15,247 $ 210,074
============ ============= =========== =========== ============ ===========
S&P 500 INDEX INTERNATIONAL EQUITY REIT INDEX
FUND FUND FUND
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ ------------ ------------- ------------
Balance at October 31, 1996 2,400 $ 25,000 2,469 $ 25,000 2,460 $ 25,100
Shares sold 7,854 92,357 2,493 27,669 5,486 66,295
Dividend reinvestments 16 182 13 134 53 643
------------ ------------- ----------- ----------- ------------ -----------
Total issued 7,870 92,539 2,506 27,803 5,539 66,938
Shares redeemed (1,888) (25,005) (288) (3,167) (700) (8,253)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 5,982 67,534 2,218 24,636 4,839 58,685
------------ ------------- ----------- ----------- ------------ -----------
Balance at October 31, 1997 8,382 92,534 4,687 49,636 7,299 83,785
Shares sold 8,334 124,347 1,559 18,443 988 13,454
Dividend reinvestments 427 6,122 238 2,564 296 4,059
------------ ------------- ----------- ----------- ------------ -----------
Total issued 8,761 130,469 1,797 21,007 1,284 17,513
Shares redeemed (3,005) (48,805) (1,130) (13,508) (3,017) (39,610)
------------ ------------- ----------- ----------- ------------ -----------
Net change in shares 5,756 81,664 667 7,499 (1,733) (22,097)
------------ ------------- ----------- ----------- ------------ -----------
Balance at April 30, 1998 14,138 $ 174,198 5,354 $ 57,135 5,566 $ 61,688
============ ============= =========== =========== ============ ===========
</TABLE>
80
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
7. INVESTMENTS
Investment transactions for the six months ending April 30, 1998, including
maturities and excluding short-term investments, were as follows:
PROCEEDS
In Thousands PURCHASES FROM SALES
-------------- ------------
Government Securities Fund $ 120,290 125,552
Asset Allocation Fund 89,174 23,882
S&P 500 Index Fund 80,102 1,313
International Equity Fund 17,982 13,165
REIT Index Fund 33,258 56,754
------------- -----------
Total $ 340,806 220,666
============= ===========
Gross unrealized appreciation and gross unrealized depreciation of investments
at April 30, 1998 were as follows:
<TABLE>
<CAPTION>
GOVERNMENT ASSET S&P 500 INTERNATIONAL REIT
In Thousands SECURITIES ALLOCATION INDEX EQUITY INDEX
FUND FUND FUND FUND FUND
---------------------------- --------------------------- ------------
<S> <C> <C> <C> <C> <C>
Gross unrealized appreciation $ 1,181 65,973 58,342 12,224 11,347
Gross unrealized depreciation (138) (4,059) (2,037) (4,490) (1,043)
------------- ----------- ----------- ------------ -----------
Net unrealized appreciation $ 1,043 61,914 56,305 7,734 10,304
============= =========== =========== ============ ===========
</TABLE>
At April 30, 1998, the identified cost of investments for federal income tax
purposes was as follows:
In Thousands
Money Market Fund $ 829,243
Government Securities Fund 98,998
Asset Allocation Fund 214,241
S&P 500 Index Fund 193,853
International Equity Fund 57,681
REIT Index Fund 63,311
-------------
Total $ 1,457,327
=============
81
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
8. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund engages in portfolio hedging with respect to
changes in currency exchange rates by entering into forward foreign currency
contracts to purchase or sell currencies. Forward foreign currency contracts
are also used to achieve currency allocation strategies. A forward foreign
currency contract is a commitment to purchase or sell a foreign currency at a
future date at a negotiated forward rate. Risks associated with such contracts
include movement in the value of the foreign currency relative to the U.S.
dollar and the ability of the counterparty to perform. The unrealized gain, if
any, represents the credit risk to the Fund on a forward foreign currency
contract. Fluctuations in the value of forward foreign currency contracts are
recorded daily as net unrealized gains or losses. The Fund realizes a gain or
loss upon settlement of the contracts. The statement of operations reflects
net realized and net unrealized gains and losses on these contracts. The
counterparty to all forward foreign currency contracts, at and for the six
months ending April 30, 1998, was the Fund's custodian.
The International Equity Fund had the following open forward foreign currency
contracts at April 30, 1998, settling on September 14, 1998:
<TABLE>
<CAPTION>
UNREALIZED
LOCAL CONTRACT APPRECIATION
In Thousands CURRENCY AMOUNT VALUE (DEPRECIATION)
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Forward Foreign Currency Sale Contracts:
Belgian Franc 59,700 1,597 1,623 (26)
British Pound 2,350 3,829 3,907 (78)
Finish Marks 5,400 983 999 (16)
Hong Kong Dollar 2,000 256 256 0
Italian Lira 552,000 307 313 (6)
Malaysian Ringgit 1,450 364 384 (20)
Singapore Dollar 800 484 504 (20)
Forward Foreign Currency Buy Contracts:
Australian Dollar 1,300 $ 873 $ 851 $ (22)
Canadian Dollar 1,400 995 980 (15)
Danish Kronor 3,700 535 545 10
French Franc 1,700 280 285 5
German Deutschemark 750 414 422 8
Japanese Yen 139,000 1,118 1,074 (44)
Netherlands Guilder 1,000 490 499 9
Spanish Peseta 304,000 1,977 2,006 29
Swedish Kronor 2,900 364 376 12
Swiss Franc 900 617 610 (7)
------------
Total $ (181)
============
</TABLE>
82
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
AON FUNDS
UNAUDITED
9. WRITTEN COVERED CALL OPTIONS
The Asset Allocation Fund and S&P 500 Index Fund engage in portfolio hedging
with respect to declining stock and futures prices by trading covered call
options. The premiums received when a covered call option is written provide a
partial hedge against declining prices and enable each Fund to generate a
higher return. Transactions in options for the six months ended April 30, 1998
were as follows:
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 INDEX
FUND FUND
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Options outstanding, beginning of period 200 $ 121,696 0 $ 0
Options written 0 0 20 94,895
Options expired (200) (121,696) 0 0
Options closed 0 0 (20) (94,895)
Options assigned 0 0 0 0
----------- ----------- ------------ -----------
Options outstanding, end of period 0 $ 0 0 $ 0
=========== =========== ============ ===========
</TABLE>
83
