Aon Funds
Semi-Annual Report
April 30, 2000
unaudited
<PAGE>
[LETTERHEAD OF AON FUNDS]
June 29, 2000
Dear Fellow Shareholder:
The six months ended April 30, 2000 produced mixed results for U.S. capital
markets and Aon Funds. Strong U.S. equity market returns, led by the technology
sector during the first two months of the period, strong corporate
profitability, and rising REIT equity prices throughout the period combined to
enhance the stock performance of the Asset Allocation and REIT Index Funds.
Rising interest rates from sustained economic growth in the United States
hindered the Government Securities Fund stock performance.
The financial statements are presented on the following pages. Thank you for
your continued support.
Sincerely,
/s/ Michael A. Conway
Michael A. Conway
President
<PAGE>
Aon Funds
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Money Market Fund
Statement of Assets and Liabilities Page 3
Statement of Operations Page 4
Statements of Changes in Net Assets Page 5
Schedule of Investments Pages 6 - 8
Financial Highlights Pages 9 - 10
Government Securities Fund
Statement of Assets and Liabilities Page 11
Statement of Operations Page 12
Statements of Changes in Net Assets Page 13
Schedule of Investments Page 14
Financial Highlights Pages 15 - 16
Asset Allocation Fund
Statement of Assets and Liabilities Page 17
Statement of Operations Page 18
Statements of Changes in Net Assets Page 19
Schedule of Investments Pages 20 - 25
Financial Highlights Pages 26 - 27
REIT Index Fund
Statement of Assets and Liabilities Page 28
Statement of Operations Page 29
Statements of Changes in Net Assets Page 30
Schedule of Investments Pages 31 - 33
Financial Highlights Pages 34 - 35
Notes to the Financial Statements Pages 36 - 40
<PAGE>
Money Market Fund
Statement of Assets and Liabilities
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
Assets
Investments, at amortized cost which approximates fair value............. $ 918,940
Receivable for fund shares sold.......................................... 2,924
Interest receivable...................................................... 38
--------------
Total Assets.................................................................. 921,902
Liabilities
Dividends payable........................................................ 4,347
Accrued expenses payable................................................. 217
Investment advisory fees payable......................................... 170
Payable for fund shares redeemed......................................... 1
--------------
Total Liabilities............................................................. 4,735
--------------
Net Assets.................................................................... $ 917,167
==============
Net Asset Value Per Share (based on net assets of $917,167 and 917,167
shares issued and outstanding)........................................... $ 1.00
==============
</TABLE>
See accompanying notes to the financial statements
3
<PAGE>
Money Market Fund
Statement of Operations
For the six months ended April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands
<S> <C>
Investment Income
Interest................................................................. $ 32,245
--------------
Total Investment Income....................................................... 32,245
Expenses
Investment advisory fees................................................. 1,659
Fund administration fees................................................. 276
Professional fees........................................................ 45
Custodian fees........................................................... 42
Fund accounting fees..................................................... 41
Trustees fees............................................................ 21
Transfer agent fees...................................................... 12
--------------
Total Expenses................................................................ 2,096
Less: Fee Waiver............................................................. 1,106
--------------
Net Expenses.................................................................. 990
--------------
Net Investment Income......................................................... $ 31,255
==============
</TABLE>
See accompanying notes to the financial statements
4
<PAGE>
Money Market Fund
Statements of Changes in Net Assets
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year
In thousands through ended
04/30/00 10/31/99
------------- ------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 31,255 38,831
Distributions to shareholders from:
Net investment income...................................... (31,255) (38,831)
Net realized gain.......................................... 0 0
------------- ------------
Total distributions........................................ (31,255) (38,831)
Capital share transactions
Proceeds from sale of shares............................... 3,853,635 7,682,976
Reinvestment of distributions.............................. 22,110 22,647
Cost of shares redeemed ................................... (4,103,420) (7,254,448)
------------- ------------
Change in net assets from capital transactions............. (227,675) 451,175
------------- ------------
Change in net assets............................................ (227,675) 451,175
Net assets at beginning of period............................... 1,144,842 693,667
------------- ------------
Net assets at end of period..................................... $ 917,167 1,144,842
============= ============
Undistributed net investment income............................. $ 0 0
============= ============
</TABLE>
See accompanying notes to the financial statements
5
<PAGE>
Money Market Fund
Schedule of Investments
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
Principal Principal
In thousands Amount Value Amount Value
--------- ----- --------- -----
<S> <C> <C> <S> <C> <C>
COMMERCIAL PAPER Banking - Domestic - 1.8%
Aerospace & Defense - 0.5% Bank One Financial Corp.
International Lease Finance Corp. 5.950% due 5/31/00 $ 8,000 $ 7,960
6.050% due 05/31/2000 $ 5,000 $ 4,975 6.100% due 6/21/00 800 793
6.210% due 8/1/00 8,000 7,873
Asset Backed Securities - 8.2% -----------
Asset Securitization Corp. 16,626
5.880% due 05/01/2000 5,000 5,000 Banking - Foreign - 2.2%
Corporate Asset Funding Co. Canadian Imperial Bank
5.910% due 05/10/2000 5,000 4,993 5.940% due 6/8/00 20,000 19,875
6.040% due 06/02/2000 5,000 4,973
6.090% due 06/15/2000 5,000 4,962 Beverages - (Non-Alcoholic) - 2.7%
6.120% due 07/10/2000 19,300 19,070 Coca-Cola Company
Preferred Receivables Funding Corp. 5.920% due 6/2/00 25,000 24,868
6.040% due 05/25/2000 14,000 13,944
6.100% due 06/01/2000 2,112 2,101 Chemicals Manufacturing - 1.1%
6.180% due 07/20/2000 10,368 10,226 E.I. DuPont de Nemours
6.160% due 07/25/2000 10,000 9,855 5.350% due 8/16/00 10,000 9,822
---------
75,124 Communications Equipment - 3.8%
Auto & Truck - 11.6% Motorola Credit Co.
Ford Motor Credit 5.880% due 5/26/00 10,000 9,959
5.800% due 05/24/2000 10,000 9,963 6.090% due 7/5/00 15,000 14,835
5.980% due 07/06/2000 10,000 9,890 6.120% due 7/24/00 10,000 9,857
6.000% due 08/21/2000 15,000 14,720 -----------
General Motors Acceptance Corp. 34,651
5.840% due 05/17/2000 30,000 29,922 Drugs - 5.5%
5.880% due 05/18/2000 5,000 4,986 Abbott Laboratories
PACCAR Inc. 5.980% due 5/9/00 11,000 10,985
5.900% due 05/02/2000 8,900 8,899 American Home Products
5.870% due 05/10/2000 20,000 19,971 5.880% due 5/12/00 15,000 14,973
6.150% due 07/18/2000 8,000 7,893 Schering-Plough Corporation
--------- 6.110% due 7/12/00 25,000 24,695
106,244 -----------
50,653
See accompanying notes to the financial statements
6
<PAGE>
Money Market Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal Principal
In thousands Amount Value Amount Value
--------- ----- --------- -----
Electrical Equipment - 6.7% 6.060% due 6/12/00 $ 14,400 $ 14,298
General Electric Capital Corp. 6.080% due 6/19/00 6,000 5,950
5.900% due 06/09/2000 $ 10,000 $ 9,936 ----------
5.980% due 07/10/2000 5,000 4,942 35,706
6.220% due 10/10/2000 20,000 19,440 Forestry & Wood Products - 1.1%
Emerson Electric Co. Weyerhaeuser Real Estate Co.
5.870% due 05/03/2000 20,000 19,993 6.060% due 5/18/00 9,925 9,897
6.120% due 07/17/2000 7,500 7,402
--------- Insurance - 3.8%
61,713 Prudential Funding Corp.
Finance - 12.7% 5.860% due 5/25/00 5,000 4,980
American Express Company 5.910% due 6/1/00 15,000 14,924
6.000% due 05/04/2000 10,000 9,995 5.800% due 6/8/00 15,000 14,908
American General Finance ----------
6.050% due 05/01/2000 17,600 17,600 34,812
6.270% due 09/13/2000 10,000 9,765 Manufacturing - Diversified - 2.2%
Associaies First Capital Corp Illinois Tool Works
5.900% due 05/23/2000 10,000 9,964 5.870% due 5/9/00 20,000 19,974
Household Finance Corp.
5.920% due 05/26/2000 5,000 4,979 Office Equipment - 2.7%
6.030% due 08/07/2000 25,000 24,590 Pitney Bowes, Inc.
6.200% due 10/06/2000 5,000 4,864 6.040% due 5/30/00 25,000 24,878
Norwest Financial
5.900% due 05/02/2000 10,000 9,998 Personal & Household Products - 1.6%
5.900% due 05/08/2000 20,000 19,977 Gillette Company
5.900% due 06/12/2000 5,000 4,966 6.040% due 5/1/00 15,000 15,000
---------
116,698 Photography - 3.9%
Food Producers - 3.9% Eastman Kodak Company
Dean Foods Co. 5.860% due 5/8/00 5,000 4,994
6.020% due 05/04/2000 5,500 5,497 5.860% due 5/10/00 9,000 8,987
5.400% due 05/12/2000 5,000 4,991 6.120% due 7/18/00 12,398 12,234
6.100% due 06/05/2000 5,000 4,970 6.150% due 7/20/00 10,000 9,863
----------
36,078
See accompanying notes to the financial statements
7
<PAGE>
Money Market Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal Principal
In thousands Amount Value Amount Value
--------- ----- --------- -----
Printing & Publishing - 2.9% Florida Power & Light
Gannett Co., Inc. 6.010% due 5/15/00 $ 13,000 $ 12,970
6.050% due 05/22/2000 $ 15,000 $ 14,947 IPALCO Enterprises
McGraw-Hill Companies, Inc. 6.050% due 5/15/00 5,100 5,088
5.900% due 05/08/2000 11,600 11,587 6.080% due 5/22/00 4,600 4,584
--------- Northern States Power Co.
26,534 6.110% due 7/6/00 20,000 19,776
Recreational Activities - 2.7% ----------
Walt Disney Company 80,476
5.790% due 05/10/2000 25,000 24,964 ----------
Telecommunication - 8.2% Total Commercial Paper - 99.7% 914,667
AT&T Corp
5.840% due 05/08/2000 5,000 4,994 CERTIFICATES OF DEPOSIT
Bell Atlantic Financial Banking - Domestic - 0.2%
5.870% due 05/05/2000 5,100 5,097 Huntington National Bank
6.020% due 05/05/2000 5,000 4,997 5.750% due 7/5/00 2,000 2,000
6.020% due 05/24/2000 11,000 10,958
6.050% due 06/14/2000 15,000 14,889 REPURCHASE AGREEMENTS - 0.3%
SBC Communications, Inc. Nesbitt Burns*
6.140% due 08/09/2000 10,000 9,829 5.500% due 5/1/00 2,273 2,273
6.200% due 10/02/2000 25,000 24,337 ----------
--------- TOTAL INVESTMENTS - 100.2% 918,940
75,101
Tobacco - 1.1%
Philip Morris Companies, Inc. Liabilities, less other assets - (0.2%) (1,773)
6.030% due 05/02/2000 10,000 9,998 ----------
TOTAL NET ASSETS - 100.0% $ 917,167
Utilities - Electric - 8.8% ==========
Alliant Energy Corp.
6.040% due 05/03/2000 8,227 8,224 *Collateralized by U.S. Treasury Note
5.950% due 06/01/2000 15,000 14,923 (6.375% due September 30, 2001) held by custodian
6.110% due 06/05/2000 15,000 14,911
</TABLE>
See accompanying notes to the financial statements
8
<PAGE>
Money Market Fund
Financial Highlights
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year Year
through ended ended
Selected per share data 04/30/00 10/31/99 10/31/98
------------- ------------ ------------
<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 ..................................... 2.86%** 5.03% 5.54%
============= ============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 917,167 1,144,842 693,667
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.18%* 0.19% 0.20%
Expenses, before waivers and reimbursements.. 0.38%* 0.39% 0.40%
Net investment income, net of waivers
and reimbursements........................ 5.67%* 4.93% 5.40%
Net investment income, before waivers
and reimbursements........................ 5.47%* 4.73% 5.20%
----------------------------------------------------------------------------------------------
</TABLE>
*Annualized
** Not annualized
See accompanying notes to the financial statements
9
<PAGE>
Money Market Fund
Financial Highlights (continued)
Unaudited
<TABLE>
<CAPTION>
Year Year
ended ended
Selected per share data 10/31/97 10/31/96
------------ ------------
<S> <C> <C>
Net asset value, beginning of period................................ $ 1.00 1.00
Income from investment operations:
Net investment income.......................................... 0.05 0.05
Net realized and unrealized gain............................... 0.00 0.00
------------ ------------
Total income from investment operations............................. 0.05 0.05
Less distributions:
Dividends from net investment income........................... 0.05 0.05
Distributions from net realized gain........................... 0.00 0.00
------------ ------------
Total distributions................................................. 0.05 0.05
------------ ------------
Net asset value, end of period...................................... $ 1.00 1.00
============ ============
Total return........................................................ 5.44% 5.43%
============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands)............................ $ 766,356 395,104
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.................... 0.22% 0.23%
Expenses, before waivers and reimbursements.................... 0.40% 0.46%
Net investment income, net of waivers and reimbursements....... 5.34% 5.30%
Net investment income, before waivers and reimbursements....... 5.16% 5.07%
</TABLE>
See accompanying notes to the financial statements
10
<PAGE>
Government Securities Fund
Statement of Assets and Liabilities
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
Assets
Investments in securities, at value (cost - $141,642).................... $ 135,462
Receivable for securities sold........................................... 10,109
Interest receivable...................................................... 1,985
Receivable for fund shares sold.......................................... 659
--------------
Total Assets.................................................................. 148,215
Liabilities
Payable for securities purchased......................................... 9,994
Dividends payable........................................................ 629
Payable for fund shares redeemed......................................... 52
Accrued expenses payable................................................. 47
Investment advisory fees payable......................................... 23
--------------
Total Liabilities............................................................. 10,745
--------------
Net Assets.................................................................... $ 137,470
==============
Analysis of Net Assets:
Paid in capital.......................................................... $ 151,310
Accumulated net realized loss............................................ (7,729)
Net unrealized depreciation.............................................. (6,180)
Undistributed net investment income...................................... 69
--------------
Net Assets.................................................................... $ 137,470
==============
Net Asset Value Per Share (based on net assets of $137,470 and 14,481 shares
issued and outstanding).................................................. $ 9.49
==============
</TABLE>
See accompanying notes to the financial statements
11
<PAGE>
Government Securities Fund
Statement of Operations
For the six months ended April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands
<S> <C>
Investment Income
Interest................................................................. $ 4,371
--------------
Total Investment Income....................................................... 4,371
Expenses
Investment advisory fees................................................. 308
Fund administration fees................................................. 36
Fund accounting fees..................................................... 25
Transfer agent fees...................................................... 10
Professional fees........................................................ 8
Custodian fees........................................................... 6
Trustees fees............................................................ 4
--------------
Total Expenses................................................................ 397
Less: Fee Waiver............................................................. 238
--------------
Net Expenses.................................................................. 159
--------------
Net Investment Income......................................................... 4,212
Net Realized and Unrealized Gain (Loss)
Net realized loss on sale of investments................................. (7,729)
Change in net unrealized depreciation on investments..................... 3,122
--------------
Net realized and unrealized gain (loss).................................. (4,607)
--------------
Net Decrease in Net Assets from Operations.................................... $ (395)
==============
</TABLE>
See accompanying notes to the financial statements
12
<PAGE>
Government Securities Fund
Statements of Changes in Net Assets
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year
through ended
In thousands 04/30/00 10/31/99
-------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 4,212 8,721
Net realized gain (loss) .................................. (7,729) 1,649
Change in net unrealized appreciation...................... 3,122 (14,607)
-------------- -------------
Change in net assets from operations....................... (395) (4,237)
Distributions to shareholders from:
Net investment income...................................... (4,198) (8,695)
Net realized gain.......................................... (1,649) (5,263)
-------------- -------------
Total distributions........................................ (5,847) (13,958)
Capital share transactions
Proceeds from sale of shares............................... 7,153 17,389
Reinvestment of distributions.............................. 5,846 13,958
Cost of shares redeemed.................................... (24,291) (14,460)
-------------- -------------
Change in net assets from capital transactions............. (11,292) 16,887
-------------- -------------
Change in net assets............................................ (17,534) (1,308)
Net assets at beginning of period............................... 155,004 156,312
-------------- -------------
Net assets at end of period..................................... $ 137,470 155,004
============== =============
Undistributed net investment income............................. $ 69 55
============== =============
</TABLE>
See accompanying notes to the financial statements
13
<PAGE>
Government Securities Fund
Schedule of Investments
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
Principal Principal
In thousands Amount Value Amount Value
--------- ----- --------- -----
<S> <C> <C> <S> <C> <C>
U.S. GOVERNMENT SECURITIES Small Business Administration
U.S. Government Agencies - 83.7% 6.500% due 7/25/13 $ 1,916 $ 1,916
A.I.D. Israel ----------
5.890% due 08/15/2005 $ 6,500 $ 6,149 Total U.S. Government Agency 115,111
Federal Farm Credit Bank U.S. Government Obligations - 14.8%
6.875% due 05/01/2002 10,000 9,956 U.S. Treasury Note
6.875% due 5/15/06 20,000 20,325
Federal Home Loan Bank ----------
5.880% due 05/01/2000 525 525 Total U.S. Government Securities
(cost - $141,616) 135,436
Federal Home Loan Mortgage Corp.
5.969% due 06/20/2000 5,715 5,668 DEMAND NOTE
7.000% due 02/15/2003 20,000 19,882 Utility-Electric - 0.0%
5.750% due 03/15/2009 10,000 8,964 Wisconsin Electric Demand Note
6.625% due 09/15/2009 10,000 9,527 5.760% due 5/1/00
--------- (cost - $26) 26 26
44,041 ----------
Federal National Mortgage Association
4.750% due 11/14/2003 10,000 9,239 TOTAL INVESTMENTS - 98.5%
5.125% due 02/13/2004 5,000 4,648 (cost - $141,642) 135,462
5.750% due 02/15/2008 20,000 18,134
6.625% due 09/15/2009 5,000 4,763 Other assets, less liabilities - 1.5% 2,008
7.250% due 01/15/2010 10,000 9,957 ----------
---------
46,741 TOTAL NET ASSETS - 100.0% $ 137,470
Private Export Funding Corp. ==========
6.310% due 09/30/2004 6,000 5,783
</TABLE>
See accompanying notes to the financial statements
14
<PAGE>
Government Securities Fund
Financial Highlights
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year Year
ended ended ended
Selected per share data 04/30/00 10/31/99 10/31/98
------------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.91 11.09 10.49
Income (loss) from investment operations:
Net investment income........................ 0.29 0.56 0.59
Net realized and unrealized gain (loss)...... (0.31) (0.82) 0.60
------------- ------------ ------------
Total gain (loss) from investment operations...... (0.02) (0.26) 1.19
Less distributions:
Dividends from net investment income......... 0.29 0.56 0.59
Distributions from net realized gain......... 0.11 0.36 0.00
------------- ------------ ------------
Total distributions............................... 0.40 0.92 0.59
------------- ------------ ------------
Net asset value, end of period.................... $ 9.49 9.91 11.09
============= ============ ============
Total return ..................................... (0.14%)** (2.50%) 11.72%
============= ============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 137,470 155,004 156,312
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.22%* 0.22% 0.23%
Expenses, before waivers and reimbursements.. 0.56%* 0.55% 0.57%
Net investment income, net of waivers
and reimbursements...................... 5.96%* 5.38% 5.54%
Net investment income, before waivers
and reimbursements...................... 5.62%* 5.05% 5.20%
Portfolio turnover rate........................... 60% 77% 219%
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
15
<PAGE>
Government Securities Fund
Financial Highlights (continued)
Unaudited
<TABLE>
<CAPTION>
Year 09/03/96
ended through
Selected per share data 10/31/97 10/31/96
------------- ------------
<S> <C> <C>
Net asset value, beginning of period........................... $ 10.21 10.00
Income from investment operations:
Net investment income..................................... 0.59 0.07
Net realized and unrealized gain.......................... 0.28 0.21
------------- ------------
Total income from investment operations........................ 0.87 0.28
Less distributions:
Dividends from net investment income...................... 0.59 0.07
Distributions from net realized gain...................... 0.00 0.00
------------- ------------
Total distributions............................................ 0.59 0.07
------------- ------------
Net asset value, end of period................................. $ 10.49 10.21
============= ============
Total return .................................................. 8.86% 2.79%**
============= ============
Ratios and supplemental data:
Net assets, end of period (in thousands)....................... $ 104,385 40,505
Ratio to average net assets of:
Expenses, net of waivers and reimbursements............... 0.46% 0.89%*
Expenses, before waivers and reimbursements............... 0.65% 0.89%*
Net investment income, net of waivers and reimbursements.. 5.92% 5.59%*
Net investment income, before waivers and reimbursements.. 5.73% 5.59%*
Portfolio turnover rate........................................ 136% 4%
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
16
<PAGE>
Asset Allocation Fund
Statement of Assets and Liabilities
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
Assets
Investments in securities, at value (cost - $155,437).................... $ 191,226
Receivable for securities sold........................................... 1,703
Interest receivable...................................................... 520
Receivable for fund shares sold.......................................... 110
Dividends receivable..................................................... 95
Cash..................................................................... 1
--------------
Total Assets.................................................................. 193,655
Liabilities
Written covered call options (premiums - $40)............................ 88
Investment advisory fees payable......................................... 80
Payable for securities purchased......................................... 47
Accrued expenses payable................................................. 47
Payable for fund shares redeemed......................................... 42
--------------
Total Liabilities............................................................. 304
--------------
Net Assets.................................................................... $ 193,351
==============
Analysis of Net Assets
Paid in capital.......................................................... $ 149,707
Accumulated net realized gain ........................................... 7,552
Net unrealized appreciation.............................................. 35,741
Undistributed net investment income...................................... 351
--------------
Net Assets.................................................................... $ 193,351
==============
Net Asset Value Per Share (based on net assets of $193,351 and 11,559 shares
issued and outstanding).................................................. $ 16.73
==============
</TABLE>
See accompanying notes to the financial statements
17
<PAGE>
Asset Allocation Fund
Statement of Operations
For the six months ended April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands
<S> <C>
Investment Income
Interest................................................................. $ 1,774
Dividends................................................................ 500
--------------
Total Investment Income....................................................... 2,274
Expenses
Investment advisory fees................................................. 601
Fund administration fees................................................. 46
Fund accounting fees..................................................... 22
Transfer agent fees...................................................... 11
Professional fees........................................................ 9
Custodian fees........................................................... 9
Trustees fees............................................................ 4
Registration fees........................................................ 3
--------------
Total Expenses................................................................ 705
Less: Fee Waiver............................................................. 370
--------------
Net Expenses.................................................................. 335
--------------
Net Investment Income......................................................... 1,939
Net Realized and Unrealized Gain
Net realized gain on sale of investments................................. 7,968
Net realized gain on written options..................................... 30
Change in net unrealized appreciation on investments..................... 4,777
--------------
Net realized and unrealized gain ........................................ 12,775
--------------
Net Increase in Net Assets from Operations.................................... $ 14,714
==============
</TABLE>
See accompanying notes to the financial statements
18
<PAGE>
Asset Allocation Fund
Statements of Changes in Net Assets
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year
In thousands through ended
04/30/00 10/31/99
------------- ------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 1,939 4,108
Net realized gain ......................................... 7,998 23,175
Change in net unrealized appreciation...................... 4,777 414
------------- ------------
Change in net assets from operations....................... 14,714 27,697
Distributions to shareholders from:
Net investment income...................................... (1,885) (4,660)
Net realized gain.......................................... (21,997) 0
------------- ------------
Total distributions........................................ (23,882) (4,660)
Capital share transactions
Proceeds from sale of shares............................... 49,492 13,415
Reinvestment of distributions.............................. 23,882 4,659
Cost of shares redeemed ................................... (35,284) (86,312)
------------- ------------
Change in net assets from capital transactions............. 38,090 (68,238)
------------- ------------
Change in net assets............................................ 28,922 (45,201)
Net assets at beginning of period............................... 164,429 209,630
------------- ------------
Net assets at end of period..................................... $ 193,351 164,429
============= ============
Undistributed net investment income............................. $ 351 297
============= ============
</TABLE>
See accompanying notes to the financial statements
19
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except shares Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <S> <C> <C>
COMMON STOCKS Common Stocks - Communication Services
Common Stocks - Basic Materials Cellular & Wireless - 0.5%
Chemical - 0.4% PanAmSat Corporation* 10,000 $ 431
PPG Industries 15,000 $ 816 Pinnacle Holdings, Inc.* 10,000 562
----------
Paper & Forest Products - 0.4% 993
Fibermark, Inc.* 60,000 720 Long Distance - 1.2%
--------- MCI Worldcom, Inc.* 50,000 2,272
Total Common Stocks - Basic Telephone - 2.5%
Materials - 0.8% 1,536 Alltel Corp. 45,000 2,998
Broadwing, Inc.* 35,000 991
Common Stocks - Capital Goods Centurytel, Inc. 35,000 858
Aerospace & Defense - 0.1% ----------
Kellstrom Industries, Inc.* 33,000 134 4,847
----------
Container - 0.5% Total Common Stocks - Communication
AptarGroup, Inc. 15,000 427 Services - 4.2% 8,112
Ivex Packaging Corp.* 56,000 504
--------- Common Stocks - Consumer Cyclical
931 Auto Parts - 0.2%
Electrical Equipment - 3.2% Gentex Corporation* 10,000 323
Emerson Electric Co. 20,000 1,098
General Electric 32,712 5,144 Printing & Publishing - 0.6%
--------- Scholastic Corp.* 25,000 1,167
6,242
Environmental - 0.9% Leisure Time - 1.2%
Allied Waste Industries, Inc.* 75,018 459 Carnival Corporation 30,000 746
Newpark Resources, Inc.* 150,684 1,243 Premier Parks, Inc.* 70,000 1,509
--------- ----------
1,702 2,255
Manufacturing - Diversified - 1.6%
Tyco International Ltd 32,000 1,470 Lodging/Hotels - 0.2%
United Technologies Corp. 28,042 1,744 Host Marriot Corp. 46,960 502
---------
3,214 Retail Specialty - 2.1%
--------- Home Depot 49,661 2,784
Total Common Stocks - Capital
Goods - 6.3% 12,223
See accompanying notes to the financial statements
20
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
In thousands, except shares Shares Value Shares Value
------ ----- ------ -----
Insight Enterprises, Inc.* 30,000 $ 1,254 Common Stocks - Energy
--------- Coal, Gas & Pipe - 0.4%
4,038 Talisman Energy, Inc.* 25,000 $ 747
---------
Total Common Stocks - Consumer Exploration/Drilling - 1.0%
Cyclical - 4.3% 8,285 Burlington Resources, Inc. 25,000 983
Kerr-McGee Corp. 20,000 1,035
Common Stocks - Consumer Staples ----------
Beverages - 1.3% 2,018
Anheuser-Busch Co. 35,000 2,470
Natural Gas - 0.5%
Drug Stores - 0.9% Coastal Corp. 20,000 1,004
CVS Corporation 40,000 1,740
Oil & Gas International - 3.6%
Entertainment - 1.1% BP Amoco Plc 41,000 2,091
Cinar Corporation* 40,000 329 Devon Energy Corporation 10,000 482
Viacom, Inc. A* 23,824 1,306 Exxon Mobil Corporation 31,403 2,440
Viacom, Inc. B* 8,980 488 Shell Transport & Trading 40,000 1,930
--------- ----------
2,123 6,943
Food Retailers - 0.9% Oil & Gas Service - 0.6%
Kroger Co.* 94,368 1,752 Petroleum Geo Services ADR* 65,000 1,056
----------
Media - TV/Radio/Cable - 8.0%
AMFM, Inc.* 20,550 1,364 Total Common Stocks - Energy - 6.1% 11,768
AT&T - Liberty Media-A* 40,000 1,997
Canwest Global Comm Corp. 65,356 703 Common Stocks - Finance
Clear Channel Comms.* 55,076 3,965 Banks - 1.0%
Emmis Broadcasting Corp.* 36,000 1,530 State Street Corp. 20,000 1,937
Time Warner, Inc. 48,054 4,322
TV Azteca SA ADR* 72,500 797 Financial Services - 3.1%
Young Broadcasting Corp.* 38,500 828 Associates First Capital Corp. 61,516 1,365
--------- Citigroup, Inc. 21,500 1,278
15,506 Fannie Mae 30,000 1,809
--------- Morgan Stanley Dean Witter 20,000 1,535
Total Common Stocks - ----------
Consumer Staples - 12.2% 23,591 5,987
See accompanying notes to the financial statements
21
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
In thousands, except shares Shares Value Shares Value
------ ----- ------ -----
Real Estate/REITs - 0.3% Corning Incorporated 14,000 $ 2,765
Excel Legacy Corp.* 50,300 $ 145 L-3 Communications Hldgs* 36,700 1,954
Health Care REIT, Inc. 31,375 500 Lucent Technologies 40,000 2,488
--------- Nokia Corp. 44,000 2,503
645 Powerwave Technologies, Inc.* 4,000 832
--------- TEKELEC* 10,000 350
Tellabs, Inc.* 49,000 2,686
Total Common Stocks - Finance - 4.4% 8,569 Tut Systems, Inc.* 23,000 1,104
----------
Common Stocks - Health Care 17,968
Bio-Technology - 0.9%
Amgen, Inc.* 27,500 1,540 Computer Related - 4.9%
Biogen, Inc.* 3,000 176 Comverse Technology* 20,000 1,784
--------- Dell Computer Corporation* 25,000 1,253
1,716 EMC Corp Mass., Inc.* 17,556 2,439
Drugs - 5.9% Int'L Business Machines 15,000 1,674
Eli Lilly & Co. 20,000 1,546 Sun Microsystems* 25,496 2,344
Cardinal Health, Inc. 25,000 1,377 ----------
Merck & Co. 24,516 1,704 9,494
Schering-Plough Corp. 63,808 2,572 Computer-Internet Related - 0.3%
Warner-Lambert Co. 30,000 3,414 DSL.net, Inc.* 42,250 422
Watson Pharmaceuticals, Inc.* 20,000 899
---------
11,512 Computer Software/Services - 5.3%
Medical Products & Supplies - 1.6% Citrix Systems, Inc.* 24,000 1,465
Johnson & Johnson Co. 27,016 2,229 Compuware Corporation* 37,000 465
Ocular Sciences, Inc.* 50,000 828 Concord EFS, Inc.* 50,000 1,119
--------- CSG Systems Intl, Inc.* 35,000 1,614
3,057 First Data 27,677 1,348
--------- Jack Henry & Associates 20,000 790
Total Common Stocks - Microsoft Corp.* 30,000 2,093
Health Care - 8.4% 16,285 Sungard Data Systems, Inc.* 40,000 1,383
----------
Common Stocks - Technology 10,277
Communication Equipment - 9.3%
ADC Telecommunications* 44,880 2,726 Semiconductors - 1.9%
Com21, Inc.* 20,000 560 Intel Corp. 20,000 2,536
See accompanying notes to the financial statements
22
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal
Amount Principal
In thousands, except shares or Shares Value Amount Value
--------- ----- --------- -----
Texas Instruments 7,000 $ 1,140 General Motors Acceptance Corp.
--------- 5.875% due 1/22/03 $ 1,300 $ 1,243
3,676 ----------
--------- 2,233
Total Common Stocks - Bank and Bank Holding Company - 1.8%
Technology - 21.7% 41,837 NationsBank Corp.
--------- 7.500% due 9/15/06 1,576 1,544
Northern Trust Company
Total Common Stocks - 68.4% 7.500% due 2/11/05 2,000 1,990
(cost - $94,942) 132,206 ----------
3,534
U.S. GOVERNMENT SECURITIES Communications & Media - 1.8%
U.S. Government Agency - 3.1% PanAmSat Corporation
Federal Home Loan Mortgage Corp. 6.000% due 1/15/03 3,000 2,824
5.930% due 6/6/00 $ 6,000 5,965 Tribune Company
6.875% due 11/1/06 800 755
U.S. Government Obligations - 0.9% ----------
U.S. Treasury Notes 3,579
6.500% due 8/31/01 1,727 1,723 Entertainment & Leisure - 0.6%
--------- Brunswick Corp.
6.750% due 12/15/06 300 278
Total U.S. Government Securities - 4.0% Royal Caribbean
(cost - $7,693) 7,688 7.000% due 10/15/07 1,000 884
----------
CORPORATE BONDS 1,162
Aerospace & Defense - 1.0% Financial Services - 1.0%
Boeing Capital Corp. USAA Capital Corp.
5.960% due 5/25/04 2,000 1,883 7.540% due 3/30/05 2,000 1,977
Agricultural & Industrial Equipment - 0.5% Food , Beverage & Tobacco - 1.5%
Case Corp. Canandaigua Wine
6.750% due 10/21/07 1,000 885 8.750% due 12/15/03 100 96
Nabisco, Inc.
Auto & Truck - 1.2% 6.125% due 2/1/33 3,000 2,785
Chrysler Finance Corp. ----------
6.950% due 3/25/02 1,000 990 2,881
See accompanying notes to the financial statements
23
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal
Principal Amount
In thousands, except shares Amount Value or Shares Value
--------- ----- --------- -----
Health Care - 0.3% Retail - Food and Drugs - 0.5%
Omega Healthcare Investors Kroger
6.950% due 8/1/07 $ 1,000 $ 570 7.650% due 4/15/07 $ 1,000 $ 950
Machinery - 1.0% Waste Management Services - 0.5%
John Deere Capital Co. Waste Management, Inc.
5.850% due 1/15/01 2,000 1,981 6.625% due 7/15/02 1,000 929
Metal & Mineral - 0.4% Utilities - 0.5%
Southdown, Inc. Korea Electric Power
10.00% due 3/1/06 788 839 7.000% due 10/1/02 1,000 969
----------
Non Ferrous Metal - 0.5%
Phelps Dodge Total Corporate Bonds - 16.5%
6.375% due 11/1/04 1,000 931 (cost - $33,411) 31,831
Oil & Gas International - 2.1% CONVERTIBLE BOND - 0.2%
Devon Energy Corporation Media - TV/Radio/Cable
4.950% due 8/15/08 2,000 1,943 Clear Channel Communications
Kerr-McGee Corp. 1.500% due 12/1/02
5.250% due 2/15/10 1,150 1,242 (cost - $450) 450 429
Enron Corp
6.625% due 11/15/05 1,000 938 CONVERTIBLE PREFERRED STOCK - 0.5%
--------- Media - TV/Radio/Cable
4,123 Cox Communications, Inc.
Printing & Publishing - 0.8% (cost - $885) 10,000 1,016
Times Mirror Co.
6.650% due 10/15/01 1,500 1,479 COMMERCIAL PAPER
Auto Manufacturers - 1.7%
Restaurants & Lodging - 0.5% Ford Motor Credit Co.
Hilton Hotels Corp. 5.880% due 5/5/00 $ 3,280 3,280
7.000% due 7/15/04 1,000 926
See accompanying notes to the financial statements
24
<PAGE>
Asset Allocation Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal Principal
In thousands, except shares Amount Value Amount Value
--------- ----- --------- -----
Capital Goods - 0.7% DEMAND NOTE
Illinois Tool Works Utility-Electric - 0.0%
6.040% due 5/1/00 $ 1,440 $ 1,440 Wisconsin Electric $
5.760% due 5/1/00
Communication Services - 2.6% (cost - $41) $ 41 $ 41
Bell Atlantic Financial Services, Inc. ----------
6.030% due 6/1/00 5,000 4,974
TOTAL INVESTMENTS - 98.9%
Drugs - 3.1% (cost - $155,437) 191,226
American Home Products
5.780% due 5/16/00 5,935 5,921 Cash and other assets,
less liabilities - 1.1% 2,125
Finance - 1.2% ----------
American Express Corp.
6.020% due 6/1/00 2,400 2,400 TOTAL NET ASSETS - 100.0% $ 193,351
--------- ==========
*Non-income producing security.
Total Commercial Paper - 9.3%
(cost - $18,015) 18,015
</TABLE>
See accompanying notes to the financial statements
25
<PAGE>
Asset Allocation Fund
Financial Highlights
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year Year
through ended ended
Selected per share data 04/30/00 10/31/99 10/31/98
------------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 17.62 15.72 16.60
Income from investment operations:
Net investment income........................ 0.18 0.40 0.39
Net realized and unrealized gain (loss) ..... 1.30 1.93 (0.32)
------------- ------------ ------------
Total income from investment operations........... 1.48 2.33 0.07
Less distributions:
Dividends from net investment income......... 0.18 0.43 0.35
Distributions from net realized gain......... 2.19 0.00 0.60
------------- ------------ ------------
Total distributions............................... 2.37 0.43 0.95
------------- ------------ ------------
Net asset value, end of period.................... $ 16.73 17.62 15.72
============= ============ ============
Total return...................................... 8.53%** 14.91% 0.21%
============= ============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 193,351 164,429 209,630
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.36%* 0.36% 0.36%
Expenses, before waivers and reimbursements.. 0.76%* 0.76% 0.76%
Net investment income, net of waivers
and reimbursements........................ 2.10%* 2.14% 2.33%
Net investment income, before waivers
and reimbursements........................ 1.70%* 1.74% 1.93%
Portfolio turnover rate........................... 29% 46% 64%
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
26
<PAGE>
Asset Allocation Fund
Financial Highlights (continued)
Unaudited
<TABLE>
<CAPTION>
Year Year
ended ended
Selected per share data 10/31/97 10/31/96
------------- ------------
<S> <C> <C>
Net asset value, beginning of period............................ $ 12.75 12.04
Income from investment operations:
Net investment income...................................... 0.27 0.31
Net realized and unrealized gain........................... 3.85 1.01
------------- ------------
Total income from investment operations......................... 4.12 1.32
Less distributions:
Dividends from net investment income....................... 0.24 0.31
Distributions from net realized gain....................... 0.03 0.30
------------- ------------
Total distributions............................................. 0.27 0.61
------------- ------------
Net asset value, end of period.................................. $ 16.60 12.75
============= ============
Total return.................................................... 32.61% 11.06%
============= ============
Ratios and supplemental data:
Net assets, end of period (in thousands)........................ $ 164,885 88,280
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 0.56% 0.87%
Expenses, before waivers and reimbursements................ 0.78% 0.87%
Net investment income, net of waivers and reimbursements... 1.90% 2.48%
Net investment income, before waivers and reimbursements... 1.68% 2.48%
Portfolio turnover rate......................................... 64% 120%
</TABLE>
See accompanying notes to the financial statements
27
<PAGE>
REIT Index Fund
Statement of Assets and Liabilities
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except per share data
<S> <C>
Assets
Investments in securities, at value (cost - $20,969)..................... $ 23,296
Dividends receivable..................................................... 52
Receivable for fund shares sold.......................................... 6
Interest receivable...................................................... 1
--------------
Total Assets.................................................................. 23,355
Liabilities
Accrued expenses payable................................................. 17
Payable for fund shares redeemed......................................... 7
Investment advisory fees payable......................................... 4
--------------
Total Liabilities............................................................. 28
--------------
Net Assets.................................................................... $ 23,327
==============
Analysis of Net Assets
Paid in capital.......................................................... $ 27,101
Accumulated net realized loss............................................ (6,629)
Net unrealized appreciation.............................................. 2,327
Undistributed net investment income...................................... 528
--------------
Net Assets.................................................................... $ 23,327
==============
Net Asset Value Per Share (based on net assets of $23,327 and 2,334 shares
issued and outstanding).................................................. $ 9.99
==============
</TABLE>
See accompanying notes to the financial statements
28
<PAGE>
REIT Index Fund
Statement of Operations
For the six months ended April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands
<S> <C>
Investment Income
Dividends................................................................ $ 766
Interest................................................................. 13
--------------
Total Investment Income....................................................... 779
Expenses
Investment advisory fees................................................. 69
Fund accounting fees..................................................... 14
Transfer agent fees...................................................... 10
Fund administration fees................................................. 6
Custodian fees........................................................... 5
Registration fees........................................................ 3
Professional fees........................................................ 1
Trustees fees............................................................ 1
--------------
Total Expenses................................................................ 109
Less: Fee Waiver............................................................. 58
--------------
Net Expenses.................................................................. 51
--------------
Net Investment Income......................................................... 728
Net Realized and Unrealized Gain (Loss)
Net realized loss on sale of investments................................. (651)
Change in net unrealized appreciation on investments..................... 2,290
--------------
Net realized and unrealized gain (loss).................................. 1,639
--------------
Net Increase in Net Assets from Operations.................................... $ 2,367
==============
</TABLE>
See accompanying notes to the financial statements
29
<PAGE>
REIT Index Fund
Statements of Changes in Net Assets
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year
through ended
In thousands 04/30/00 10/31/99
-------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 728 2,870
Net realized loss ......................................... (651) (5,565)
Change in net unrealized appreciation...................... 2,290 642
-------------- -------------
Change in net assets from operations....................... 2,367 (2,053)
Distributions to shareholders from:
Net investment income...................................... (2,523) (3,441)
Net realized gain.......................................... 0 0
-------------- -------------
Total distributions........................................ (2,523) (3,441)
Capital share transactions
Proceeds from sale of shares............................... 4,087 11,301
Reinvestment of distributions.............................. 2,523 3,441
Cost of shares redeemed.................................... (6,814) (46,551)
-------------- -------------
Change in net assets from capital transactions............. (204) (31,809)
-------------- -------------
Change in net assets............................................ (360) (37,303)
Net assets at beginning of period............................... 23,687 60,990
-------------- -------------
Net assets at end of period..................................... $ 23,327 23,687
============== =============
Undistributed net investment income............................. $ 528 2,323
============== =============
</TABLE>
See accompanying notes to the financial statements
30
<PAGE>
REIT Index Fund
Schedule of Investments
April 30, 2000
Unaudited
<TABLE>
<CAPTION>
In thousands, except shares Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <S> <C> <C>
COMMON STOCKS - REAL ESTATE Washington REIT 6,870 $ 110
INVESTMENT TRUSTS (REITs) ----------
Apartments - 19.8% 1,357
AMLI Residential Properties 3,245 $ 74 Entertainment - 0.2%
Apartment Invest & Mgmt Co. 12,913 513 Entertainment Properties Trust$ 3,000 41
Archstone Communities Trust 26,930 582
Associated Estates Realty 4,170 35 Hotel - 6.2%
Avalon Bay Communities 12,762 499 Boykin Lodging Co. 3,300 41
BRE Properties 8,680 243 Equity Inns, Inc. 7,225 48
Camden Property Trust 7,794 221 Felcor Lodging Trust, Inc. 12,790 251
Cornerstone Realty Income 7,500 76 Hospitality Properties Trust 10,965 244
Equity Residential Properties 24,463 1,113 Host Marriott Corp. 44,400 475
Essex Property Trust, Inc. 3,405 132 Innkeepers USA Trust 6,750 61
Gables Residential Trust 4,875 117 Jameson Inns, Inc. 2,255 17
Home Properties of New York 3,700 104 LaSalle Hotel Properties 3,300 50
Mid-America Apt. Community 3,595 86 Meristar Hospitality Corp 9,283 183
Post Properties, Inc. 7,495 315 RFS Hotel Investors, Inc. 4,825 59
Smith, Charles E. Residential 3,795 143 Winston Hotels 3,235 25
Summit Properties, Inc. 5,515 110 ----------
Town & Country Trust 3,035 52 1,454
United Dominion Realty Trust 19,985 200 Manufactured Homes - 1.6%
--------- Chateau Properties, Inc. 5,490 143
4,615 Manufact. Home Community 4,615 115
Diversified - 5.8% Sun Communities, Inc. 3,335 110
Boston Properties, Inc. 13,200 460 ----------
Colonial Properties Trust 4,410 110 368
Eastgroup Properties 3,095 64 Office Property - 27.3%
Glenborough Realty Trust, Inc. 5,895 87 Alexandria Real Estate Equities 2,700 86
Investors Real Estate Trust 4,300 34 Arden Realty Group, Inc. 12,300 274
Pacific Gulf Properties 3,920 84 Brandywine Realty Trust 7,255 126
Penn Real Estate Invest Trust 2,555 44 Carramerica Realty Corp. 12,915 307
Prime Group Realty Trust 2,900 43 Cornerstone Properties 25,100 458
Rouse Co. 13,700 321 Corporate Office Properties 3,400 29
Cousins Properties, Inc. 6,240 245
Crescent Real Estate 23,315 399
See accompanying notes to the financial statements
31
<PAGE>
REIT Index Fund
Schedule of Investments
April 30, 2000
Unaudited
In thousands, except shares Shares Value Shares Value
------ ----- ------ -----
Duke-Weeks Realty Corp. 24,323 $ 528 Simon Property Group, Inc. 33,695 $ 855
Equity Office Properties 48,889 1,329 Taubman Centers, Inc. 10,280 123
Great Lakes REIT, Inc. 3,200 48 Urban Shopping Centers, Inc. 3,510 113
Highwoods Properties, Inc. 12,020 273 ----------
Hrpt Properties Trust 25,600 195 1,810
Kilroy Realty Corp. 5,400 130 Restaurants - 0.2%
Koger Equity, Inc. 5,200 91 US Restaurant Properties 3,000 38
Liberty Property Trust 12,985 321
Mack-Cali Realty Corp. 11,295 291 Shopping Center - 14.1%
Mission West Properties 3,300 28 AMB Property Corp 16,800 371
Parkway Properties, Inc. 1,900 57 Bradley Real Estate, Inc. 4,650 84
Prentiss Properties Trust 7,300 173 Burnham Pacific Properties 6,210 46
PSB Business Parks, Inc. 4,600 102 Center Trust, Inc. 5,130 37
Reckson Assoc Realty Corp. 9,870 198 Developers Diversified 11,600 176
SL Green Realty Corp. 4,700 121 Equity One, Inc. 2,200 20
Spieker Properties, Inc. 12,550 556 Federal Realty Inv. Trust 7,860 167
--------- First Washington Realty Trust 1,900 40
6,365 Glimcher Realty Trust 4,650 64
Outlet Centers - 1.1% IRT Property Co. 6,480 54
Chelsea GCA Realty, Inc. 3,095 101 JDN Realty Corp. 6,605 64
Konover Property Trust 6,000 35 Kimco Realty Corp. 11,750 468
Mills Corp. 4,645 84 Kranzco Realty Trust 2,030 18
Tanger Factory Outlet Center 1,500 33 Mid Atlantic Realty Trust 2,700 26
--------- New Plan Excel Realty Trust 17,122 246
253 Pan Pacific Retail Properties 4,100 78
Prisons - 0.1% Phillips International Realty 1,400 23
Correctionial Properties Trust 1,400 17 Ramco - Gershenson Prop. 1,400 20
Regency Realty Corp. 11,005 243
Regional Mall - 7.8% Saul Centers, Inc. 2,595 40
CBL & Associates Properties 4,825 113 Vornado Realty Trust 16,678 575
Crown American Realty 5,065 28 Weingarten Realty Investment 5,165 209
General Growth Industries 10,005 329 Western Properties Trust 3,345 38
JP Realty, Inc. 3,310 59 Westfield America, Inc. 14,200 194
Lexington Corp. Properties 3,345 38 ----------
Macerich Co. 6,575 152 3,301
See accompanying notes to the financial statements
32
<PAGE>
REIT Index Fund
Schedule of Investments
April 30, 2000
Unaudited
Principal
In thousands, except shares Shares Value Amount Value
------ ----- --------- -----
Storage - 4.1% U.S. GOVERNMENT SECURITIES
Public Storage, Inc. 27,353 $ 612 U.S. Government Agency - 1.1%
Shurgard Storage Centers 5,665 148 Federal Home Loan Mortgage Corp.
Sovran Self Storage, Inc. 2,420 50 5.980% due 6/8/00 $ 156 $ 155
Storage USA 5,465 160 Federal National Mortgage Association
--------- 5.970% due 5/22/00
970 (cost - $255) 100 100
Triple Net Lease - 2.5% ----------
Capital Automotive Reit 4,100 57 255
Captec Net Lease Realty, Inc. 1,800 16 DEMAND NOTE
Commercial Net Lease Realty 5,915 65 Utility - Electrical - 0.4%
Franchise Finance Corp. 10,860 258 Wisconsin Electric
Golf Trust of America 1,500 26 5.760% due 5/1/00
National Golf Properties 2,395 46 (cost - $95) 95 95
Realty Income Corp. 5,150 112 ----------
---------
580 TOTAL INVESTMENTS - 99.9%
Warehouse / Industrial - 5.3% (cost - $20,969) 23,296
American Industrial Properties 4,100 51
Bedford Property Investors 3,620 64 Other assets, less liabilities - 0.1% 31
Cabot Industrial Trust 7,900 152 ----------
Centerpoint Properties Corp. 3,985 143
First Industrial Realty Trust 7,405 223 TOTAL NET ASSETS - 100.0% $ 23,327
Prologis Trust 31,274 616 ==========
--------- *Non-income producing security.
1,249
Wireless Communications Sites - 2.3%
Pinnacle Holdings, Inc.* 9,400 528
---------
Total Common Stocks - Real Estate
Investment Trusts - 98.4%
(cost - $20,619) 22,946
</TABLE>
See accompanying notes to the financial statements
33
<PAGE>
REIT Index Fund
Financial Highlights
Unaudited
<TABLE>
<CAPTION>
11/01/99 Year Year
through ended ended
Selected per share data 04/30/00 10/31/99 10/31/98
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.08 11.42 13.69
Income (loss) from investment operations:
Net investment income........................ 0.33 1.11 0.68
Net realized and unrealized gain (loss) ..... 0.68 (1.79) (2.40)
------------- ------------- -------------
Total income (loss) from investment operations.... 1.01 (0.68) (1.72)
Less distributions:
Dividends from net investment income......... 1.10 0.66 0.46
Distributions from net realized gain......... 0.00 0.00 0.09
------------- ------------- -------------
Total distributions............................... 1.10 0.66 0.55
------------- ------------- -------------
Net asset value, end of period.................... $ 9.99 10.08 11.42
============= ============= =============
Total return...................................... 11.06%** (6.31%) (13.27%)
============= ============= =============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 23,327 23,687 60,990
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.44%* 0.27% 0.24%
Expenses, before waivers and reimbursements.. 0.94%* 0.77% 0.74%
Net investment income, net of waivers
and reimbursements...................... 6.32%* 5.47% 4.80%
Net investment income, before waivers
and reimbursements...................... 5.82%* 4.97% 4.30%
Portfolio turnover rate........................... 5% 33% 50%
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
See accompanying notes to the financial statements
34
<PAGE>
REIT Index Fund
Financial Highlights (continued)
Unaudited
<TABLE>
<CAPTION>
Year 09/03/96
ended through
Selected per share data 10/31/97 10/31/96
------------- ------------
<S> <C> <C>
Net asset value, beginning of period............................ $ 10.44 10.00
Income from investment operations:
Net investment income...................................... 0.41 0.10***
Net realized and unrealized gain........................... 2.99 0.34
------------- ------------
Total income from investment operations......................... 3.40 0.44
Less distributions:
Dividends from net investment income....................... 0.15 0.00
Distributions from net realized gain....................... 0.00 0.00
------------- ------------
Total distributions............................................. 0.15 0.00
------------- ------------
Net asset value, end of period.................................. $ 13.69 10.44
============= ============
Total return.................................................... 32.78% 4.40%**
============= ============
Ratios and supplemental data:
Net assets, end of period (in thousands)........................ $ 99,899 25,690
Ratio to average net assets of:
Expenses, net of waivers and reimbursements................ 0.51% 1.20%*
Expenses, before waivers and reimbursements................ 0.82% 1.20%*
Net investment income, net of waivers and reimbursements... 4.42% 5.97%*
Net investment income, before waivers and reimbursements... 4.11% 5.97%*
Portfolio turnover rate......................................... 22% 0%
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
*** Calculated based on average shares outstanding throughout the period.
See accompanying notes to the financial statements
35
<PAGE>
Aon Funds
Notes to the Financial Statements
Unaudited
1. Description of Entity
Aon Funds (the "Trust"), a Delaware business trust, is registered under the
Investment Company Act of 1940, as an open-end, diversified, management
investment company. The Trust consists of four Funds: the Money Market Fund, the
Government Securities Fund, the Asset Allocation Fund, and the REIT Index Fund.
There are an unlimited number of shares authorized with no par value.
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.
Investments held by the Money Market Fund, and short-term debt instruments
held by other Funds, 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.
c) Distributions to Shareholders - Distributions of net investment income
and net realized gain are determined in accordance with income tax
regulations. 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.
d) 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.
See accompanying notes to the financial statements
36
<PAGE>
Aon Funds
Notes to the Financial Statements
Unaudited
e) Repurchase Agreement - During the term of a repurchase agreement,
collateral with a market value greater than or equal to the market value of
the repurchase agreement is held by the Fund's custodian.
3. Investment Advisory Fees 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
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 permanently 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, and the REIT Index Fund, and .25% of the average daily net assets of the
Asset Allocation Fund.
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%
REIT Index Fund 1.50% of the first $30 million;
and 1.25% in excess of $30 million
To assist in the administration of the Trust, the Trust has entered into an
administration agreement with Aon Securities Corporation, an affiliate of Aon
Corporation, to provide certain administrative services for the Trust. Under
this agreement, the Trust pays Aon Securities Corporation an annual fee of .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 period
ended April 30, 2000 the Trust incurred expenses totaling $29,835 for
compensation of unaffiliated trustees.
See accompanying notes to the financial statements
37
<PAGE>
Aon Funds
Notes to the Financial Statements
Unaudited
4. Income Taxes
Each Fund intends to qualify as a "regulated investment company" under the
provision of Subchapter 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 REIT Index
Fund has capital loss carryovers of $79,105, for the year ended October 31, 1998
and $5,454,201 for the year ended October 31, 1999 available for federal income
tax purposes to be applied against future capital gains, if any. If not applied,
they will expire in the year 2006 and 2007 respectively.
At April 30, 2000, the identified cost of investments for federal income tax
purposes was as follows:
In Thousands
Money Market Fund $ 918,940
Government Securities Fund $ 141,642
Asset Allocation Fund $ 156,060
REIT Index Fund $ 21,318
The gross unrealized appreciation and gross unrealized depreciation of
investments for federal income tax purposes at April 30, 2000, were as follows:
<TABLE>
<CAPTION>
Government Asset REIT
In Thousands Securities Allocation Index
Fund Fund Fund
------------- ------------ ----------
<S> <C> <C> <C>
Gross unrealized appreciation $ 0 46,151 2,809
Gross unrealized depreciation (6,180) (11,033) (831)
------------- ------------ ----------
Net unrealized appreciation (depreciation) $ (6,180) 35,118 1,978
============= ============ ==========
</TABLE>
5. Investments
Investment transactions for the period ended April 30, 2000, including
maturities and excluding short-term investments, were as follows:
<TABLE>
<CAPTION>
Proceeds
In Thousands Purchases from sales
------------- -----------
<S> <C> <C>
Government Securities Fund $ 79,212 97,605
Asset Allocation Fund $ 63,096 46,640
REIT Index Fund $ 1,067 3,076
</TABLE>
See accompanying notes to the financial statements
38
<PAGE>
Aon Funds
Notes to the Financial Statements
Unaudited
6. Capital Share Transactions
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Money Market Government Securities
In thousands Fund Fund
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance at October 31, 1998 693,667 $ 693,667 14,092 $ 145,715
Shares sold 7,682,976 7,682,976 1,639 17,389
Dividend reinvestments 22,647 22,647 1,338 13,958
--------------- --------------- --------------- ---------------
Total issued 7,705,623 7,705,623 2,977 31,347
Shares redeemed (7,254,448) (7,254,448) (1,432) (14,460)
--------------- --------------- --------------- ---------------
Net change in shares 451,175 451,175 1,545 16,887
--------------- --------------- --------------- ---------------
Balance at October 31, 1999 1,144,842 1,144,842 15,637 162,602
Shares sold 3,853,635 3,853,635 744 7,153
Dividend reinvestments 22,110 22,110 611 5,846
--------------- --------------- --------------- ---------------
Total issued 3,875,745 3,875,745 1,355 12,999
Shares redeemed (4,103,420) (4,103,420) (2,511) (24,291)
--------------- --------------- --------------- ---------------
Net change in shares (227,675) (227,675) (1,156) (11,292)
--------------- --------------- --------------- ---------------
Balance at April 30, 2000 917,167 $ 917,167 14,481 $ 151,310
=============== =============== =============== ===============
Asset Allocation REIT Index
Fund Fund
Shares Amount Shares Amount
--------------- --------------- --------------- ---------------
Balance at October 31, 1998 13,337 $ 179,855 5,340 $ 59,114
Shares sold 777 13,415 1,039 11,301
Dividend reinvestments 270 4,659 321 3,441
--------------- --------------- --------------- ---------------
Total issued 1,047 18,074 1,360 14,742
Shares redeemed (5,052) (86,312) (4,351) (46,551)
--------------- --------------- --------------- ---------------
Net change in shares (4,005) (68,238) (2,991) (31,809)
--------------- --------------- --------------- ---------------
Balance at October 31, 1999 9,332 111,617 2,349 27,305
Shares sold 2,849 49,492 436 4,087
Dividend reinvestments 1,438 23,882 277 2,523
--------------- --------------- --------------- ---------------
Total issued 4,287 73,374 713 6,610
Shares redeemed (2,060) (35,284) (728) (6,814)
--------------- --------------- --------------- ---------------
Net change in shares 2,227 38,090 (15) (204)
--------------- --------------- --------------- ---------------
Balance at April 30, 2000 11,559 $ 149,707 2,334 $ 27,101
=============== =============== =============== ===============
</TABLE>
See accompanying notes to the financial statements
39
<PAGE>
Aon Funds
Notes to the Financial Statements
Unaudited
7. Written Covered Call Options
The Asset Allocation Fund engages in portfolio hedging with respect to declining
stock prices by writing covered call options. The premiums received when a
covered call option is written provide a partial hedge against declining prices
and enable the Fund to generate a higher return.
Transactions in options for the period ending April 30, 2000, were as follows:
<TABLE>
<CAPTION>
Contracts Premiums
--------------- ---------------
<S> <C> <C>
Options outstanding, beginning of period 0 $ 0
Options written 770 591,828
Options exercised (640) (458,907)
Options expired (40) (5,315)
Options closed (50) (87,247)
Options assigned 0 0
--------------- ---------------
Options outstanding, end of period 40 $ 40,359
=============== ===============
</TABLE>
At April 30, 1999, common stock valued at $832,250 was held by the custodian in
connection with the following covered call options written by the Asset
Allocation Fund.
<TABLE>
<CAPTION>
Shares
Exercise Subject
Expiration Price to Call Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Powerwave Technology, Inc. May-00 $ 210 4,000 $ 88,000
---------------
$ 88,000
===============
</TABLE>
See accompanying notes to the financial statements
40
