Aon Funds
Annual Report
October 31, 2000
<PAGE>
[LETTERHEAD OF AON FUNDS]
December 29, 2000
Dear Fellow Shareholder:
Attached are the financial statements for the fiscal year ended October 31, 2000
including management's discussion and analysis of Fund performance. Thank you
for your support of Aon Funds.
Sincerely,
Michael A. Conway
President
<PAGE>
AON FUNDS
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TABLE OF CONTENTS
Government Securities Fund Commentary Pages 2 - 3
Asset Allocation Fund Commentary Pages 4 - 5
REIT Index Fund Commentary Pages 6 - 7
Audited Financial Statements Pages 8 - 46
Report of Independent Auditors Page 8
Money Market Fund
Statement of Assets and Liabilities Page 9
Statement of Operations Page 10
Statements of Changes in Net Assets Page 11
Schedule of Investments Pages 12 - 15
Financial Highlights Pages 16 - 17
Government Securities Fund
Statement of Assets and Liabilities Page 18
Statement of Operations Page 19
Statements of Changes in Net Assets Page 20
Schedule of Investments Page 21
Financial Highlights Pages 22 - 23
Asset Allocation Fund
Statement of Assets and Liabilities Page 24
Statement of Operations Page 25
Statements of Changes in Net Assets Page 26
Schedule of Investments Pages 27 - 31
Financial Highlights Pages 32 - 33
REIT Index Fund
Statement of Assets and Liabilities Page 34
Statement of Operations Page 35
Statements of Changes in Net Assets Page 36
Schedule of Investments Pages 37 - 39
Financial Highlights Pages 40 - 41
Notes to the Financial Statements Pages 42 - 46
<PAGE>
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 U.S.
Government Bond Index from the inception of the Fund to October 31, 2000. The
illustration assumes that all dividends and distributions are reinvested.
[GRAPH APPEARS HERE]
Government Securities Fund
Performance of a $10,000 Investment
<TABLE>
<CAPTION>
9/3/96 10/31/96 10/31/97 10/31/98 10/31/99 10/31/00
<S> <C> <C> <C> <C> <C> <C>
Government Securities Fund $10,000 $10,279 $11,189 $12,501 $12,188 $13,005
Lehman Brothers U.S. Government Bond Index $10,000 $10,365 $11,262 $12,532 $12,380 $13,375
</TABLE>
<TABLE>
<CAPTION>
9/3/96 to
Comparison of Returns 1 Year 3 Years(3) 10/31/00(4)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Securities Fund(1) 6.70% 5.13% 30.05%
Lehman Brothers U.S. Government Bond Index(2) 8.04% 5.90% 33.75%
</TABLE>
(1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Government Securities Fund and
the return on investment will fluctuate, and redemption proceeds may be higher
or lower than an investor's original cost.
(2) The Lehman Brothers U.S. Government Bond Index is an unmanaged index
generally considered to be representative of U.S. Government bond market
activity.
(3) Average annual total return.
(4) Cumulative total return. September 3, 1996 was the inception date of the
Fund.
2
<PAGE>
AON FUNDS
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GOVERNMENT SECURITIES FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
U. S. Treasury rates declined during the year ended October 31, 2000. Fears of
an overheating economy and higher oil prices leading to rampant inflation caused
rates to rise throughout 1999 and early 2000. Inflation fears gradually gave way
to the realization that the Federal Reserve's cumulative 175 basis point
increase in the Fed Funds rate to 6.50% was significantly slowing the growth
rate of the U. S. economy.
The total return of the Fund for the year ending October 31, 2000 was 6.70%. For
comparison, the Lehman Government Bond Fund Index returned 8.04%. The Fund
underperformance was due to an overweighting in U. S. Government Agency issues
which underperformed similar duration Treasuries and the funds relatively short
duration when longer issues outperformed in the first quarter of 2000. The Fund
has improved relative to the benchmark in recent months by maintaining a
portfolio duration longer than the benchmark during this period of rate declines
and from exposure to Agency issues which have begun to outperform Treasuries.
The sharp Treasury rate declines of 2000 suggest that economic growth is slowing
further and threatening to turn negative. Fed Funds rate cuts appear necessary
to prevent recession. Until an upturn in the economy becomes evident, interest
rates can be expected to trend lower.
Francis P. Wren
Portfolio Manager
3
<PAGE>
AON FUNDS
--------------------------------------------------------------------------------
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 Fund Average
from the inception of the Fund to October 31, 2000. The illustration assumes
that all dividends and distributions are reinvested.
[GRAPH APPEARS HERE]
Asset Allocation Fund
Performance of a $10,000 Investment
<TABLE>
<CAPTION>
3/3/94 10/31/94 10/31/95 10/31/96 10/31/97 10/31/98 10/31/99 10/31/00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Fund $10,000 $10,184 $12,926 $14,356 $19,037 $19,076 $21,920 $24,511
Lipper Flexible Portfolio Fund Average $10,000 $9,927 $11,697 $13,425 $16,005 $17,453 $19,816 $21,667
</TABLE>
<TABLE>
<CAPTION>
3/3/94 to
Comparison of Returns 1 Year 3 Years(2) 5 Years(2) 10/31/00(3)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Allocation Fund(1) 11.82% 8.78% 13.64% 145.11%
Lipper Flexible Portfolio Fund Average(4) 9.34% 10.61% 13.11% 116.67%
</TABLE>
(1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the Asset Allocation Fund and the
return on investment will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
(2) Average annual total return.
(3) Cumulative total return. March 3, 1994 was the inception date of the Fund.
(4) The Lipper Flexible Portfolio Fund Average is the average of the returns for
the flexible portfolio funds tracked by Lipper Inc.
4
<PAGE>
AON FUNDS
--------------------------------------------------------------------------------
ASSET ALLOCATION FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The Aon Asset Allocation Fund earned a 11.82% total return compared to the
average Lipper flexible portfolio fund return of 9.34% for the year ended
October 31, 2000. For the year the Fund placed in the top 27% of all flexible
funds tracked by Lipper.
During the fiscal year, Fund assets were allocated more to common stocks than
bonds, based on strong corporate earnings and the number of attractive
opportunities we felt existed in the stock market.
The equity portion of the portfolio was the primary driver of the Fund's returns
this year. Those sectors which were significant contributors to performance
included Technology, Healthcare, Finance, Energy, and Capital Goods. In
Technology the Fund has focused on communications equipment, computer servers
and storage, and those companies providing computer-related services. These
areas provided attractive returns, without the volatility experienced in some
other areas of Technology. The Fund strives to seek a balance in the portfolio
by holding a blend of Technology investments and holdings in other segments of
the economy.
Healthcare was an area of strength, as the Fund's investments in companies such
as Pfizer and Cardinal Health generated strong returns. Energy was been an
increasing area of focus for the Fund, as we believe energy prices will continue
to benefit exploration and production firms. In Capital Goods, firms such as GE
generated significant gains.
Areas where results did not meet our expectations included Communication
Services, where falling revenues in some segments hurt earnings, and Media,
which was impacted by a slowdown in ad spending.
The Fund holds a blend of Treasuries and corporate bonds. During the year, the
Fund increased the allocation to bonds relative to stocks and increased the
percentage invested in Treasury securities.
Recent signs of economic slowing have led to reduced equity valuations in many
segments of the market. In this environment, the Fund has attempted to focus on
those investments where the fundamentals remain solid and on those areas which
may do well in a slower growth environment. The Federal Reserve's recent shift
in bias towards a reduction in interest rates may help stabilize economic growth
going forward.
John Lagedrost
Portfolio Manager
5
<PAGE>
AON FUNDS
--------------------------------------------------------------------------------
REIT INDEX FUND
Comparison of a $10,000 Investment
The following graph illustrates the growth of a $10,000 investment in the REIT
Index Fund and an investment in the Morgan Stanley REIT Index from the inception
of the Fund to October 31, 2000. The illustration assumes that all dividends and
distributions are reinvested.
[GRAPH APPEARS HERE]
REIT Index Fund
Performance of a $10,000 Investment
<TABLE>
<CAPTION>
9/3/96 10/31/96 10/31/97 10/31/98 10/31/99 10/31/00
<S> <C> <C> <C> <C> <C> <C>
REIT Index Fund $10,000 $10,440 $13,862 $12,023 $11,265 $13,249
Morgan Stanley REIT Index $10,000 $10,482 $13,991 $12,096 $11,339 $13,402
</TABLE>
<TABLE>
<CAPTION>
9/3/96 to
Comparison of Returns 1 Year 3 Years(3) 10/31/00(4)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REIT Index Fund(1) 17.62% -1.49% 32.49%
Morgan Stanley REIT Index(2) 18.20% -1.42% 34.02%
</TABLE>
(1) Total return is calculated including reinvestment of all income and capital
gain distributions. Results represent past performance and do not indicate
future results. The value of an investment in the 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.
(3) Average annual total return.
(4) Cumulative total return. September 3, 1996 was the inception date of the
Fund.
6
<PAGE>
AON FUNDS
--------------------------------------------------------------------------------
REIT INDEX FUND
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The REIT Index Fund total return for the year ended October 31, 2000 was 17.62%
compared to the Morgan Stanley REIT Index total return of 18.20%. REIT stock
returns in general were positively impacted during the year by their attractive
yields and defensive nature compared to the NASDAQ and broader indices.
The REIT Index Fund remains fully invested in the REIT market and continues to
closely replicate the performance of the Morgan Stanley REIT Index.
Andrew T. Ward
Portfolio Manager
7
<PAGE>
The Board of Trustees and Shareholders
Aon Funds --
Money Market Fund
Government Securities Fund
Asset Allocation Fund
REIT Index Fund
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Aon Funds - Money Market Fund, Government
Securities Fund, Asset Allocation Fund and REIT Index Fund as of October 31,
2000, and the related statements of operations for the year then ended, changes
in net assets for each of the two years in the period then ended, and the
financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 2000, by correspondence with the custodian and other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Aon Funds - Money Market Fund, Government Securities Fund, Asset Allocation Fund
and REIT Index Fund at October 31, 2000, the results of their operations,
changes in their net assets and the financial highlights for the periods
indicated therein, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
December 12, 2000
8
<PAGE>
Money Market Fund
Statement of Assets and Liabilities
October 31, 2000
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at amortized cost which approximates fair value............. $ 1,389,185
Receivable for fund shares sold.......................................... 4,247
Interest receivable...................................................... 45
--------------
Total Assets.................................................................. 1,393,477
Liabilities
Dividends payable........................................................ 7,200
Accrued expenses ........................................................ 320
Investment advisory fees payable......................................... 314
--------------
Total Liabilities............................................................. 7,834
--------------
Net Assets.................................................................... $ 1,385,643
==============
Net Asset Value Per Share (based on net assets of $1,385,643 and 1,385,643
shares issued and outstanding)........................................... $ 1.00
==============
</TABLE>
See accompanying notes to the financial statements
9
<PAGE>
Money Market Fund
Statement of Operations
For the year ended October 31, 2000
In thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest................................................................. $ 70,827
--------------
Total Investment Income....................................................... 70,827
Expenses
Investment advisory fees................................................. 2,801
Fund administration fees................................................. 568
Custodian fees........................................................... 96
Fund accounting fees..................................................... 95
Professional fees........................................................ 89
Trustees fees............................................................ 43
Other fees............................................................... 23
--------------
Total Expenses................................................................ 3,715
Less: Fee Waiver............................................................. 1,664
--------------
Net Expenses.................................................................. 2,051
--------------
Net Investment Income......................................................... $ 68,776
==============
</TABLE>
See accompanying notes to the financial statements
10
<PAGE>
Money Market Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
In thousands ended ended
10/31/00 10/31/99
------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 68,776 38,831
Distributions to shareholders from:
Net investment income...................................... (68,776) (38,831)
Capital share transactions
Proceeds from sale of shares............................... 8,181,724 7,682,976
Reinvestment of distributions.............................. 47,693 22,647
Cost of shares redeemed ................................... (7,988,616) (7,254,448)
------------- -------------
Change in net assets from capital transactions............. 240,801 451,175
------------- -------------
Change in net assets............................................ 240,801 451,175
Net assets at beginning of period............................... 1,144,842 693,667
------------- -------------
Net assets at end of period..................................... $ 1,385,643 1,144,842
============= =============
Undistributed net investment income............................. $ 0 0
============= =============
</TABLE>
See accompanying notes to the financial statements
11
<PAGE>
<TABLE>
<CAPTION>
Money Market Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands Amount Value Amount Value
------------ -------------- ------------ --------------
<S> <C> <C> <S> <C> <C>
COMMERCIAL PAPER Chemical Manufacturing - 3.2%
Aerospace & Defense - 3.2% E.I. DuPont de Nemours
International Lease Finance Corp. 6.500% due 11/08/2000 $ 15,000 $ 14,981
6.500% due 01/10/2001 $ 15,000 $ 14,811 6.460% due 11/30/2000 30,000 29,844
6.500% due 01/17/2001 25,000 24,652 --------------
6.500% due 02/05/2001 5,000 4,913 44,825
-------------- Communications Equipment - 3.1%
44,376 Motorola Credit Co.
Asset Backed Securities - 2.5% 6.470% due 11/28/2000 13,100 13,036
Asset Securitization Corp. 6.490% due 12/08/2000 12,700 12,615
6.510% due 11/01/2000 25,000 25,000 6.490% due 12/21/2000 18,005 17,843
Corporate Asset Funding Co. --------------
6.490% due 11/20/2000 10,000 9,966 43,494
-------------- Computer Hardware - 3.2%
34,966 IBM
Auto & Truck - 8.1% 6.480% due 11/10/2000 15,000 14,976
Ford Motor Credit 6.470% due 11/29/2000 30,000 29,849
6.520% due 01/05/2001 25,000 24,706 --------------
6.530% due 01/16/2001 11,000 10,848 44,825
6.500% due 01/17/2001 10,000 9,861 Construction Services - 1.7%
General Motors Acceptance Corp. Fluor Corporation
6.560% due 01/09/2001 10,000 9,874 6.520% due 11/08/2000 11,000 10,986
6.520% due 01/19/2001 5,000 4,928 6.510% due 11/15/2000 10,123 10,097
6.520% due 01/29/2001 30,000 29,516 6.510% due 11/16/2000 2,000 1,995
PACCAR Inc. --------------
6.470% due 12/28/2000 7,692 7,613 23,078
6.470% due 12/29/2000 5,000 4,948 Drugs - 3.5%
6.500% due 01/16/2001 10,000 9,863 American Home Products
-------------- 6.470% due 11/02/2000 15,000 14,997
112,157 6.470% due 11/06/2000 23,500 23,479
Banking/Foreign - 1.8% 6.480% due 11/10/2000 10,000 9,984
Canadian Imperial Bank --------------
6.550% due 01/02/2001 25,000 24,718 48,460
See accompanying notes to the financial statements
12
<PAGE>
Money Market Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands Amount Value Amount Value
------------ -------------- ------------ --------------
Electrical Equipment - 3.2% Food Producers - 7.6%
General Electric Capital Corp. Campbell Soup Co.
6.600% due 01/09/2001 $ 5,000 $ 4,937 6.500% due 11/07/2000 $ $ 10,000 $ 9,989
6.500% due 01/10/2001 10,000 9,874 6.540% due 01/03/2001 6,000 5,931
6.520% due 01/19/2001 10,000 9,857 6.560% due 01/05/2001 10,000 9,882
6.510% due 02/08/2001 20,000 19,642 H.J. Heinz Company
-------------- 6.500% due 01/30/2001 25,000 24,594
44,310 6.500% due 02/07/2001 10,000 9,823
Finance - 16.3% Unilever N.V.
AEGON N.V. 6.500% due 11/03/2000 40,000 39,986
6.470% due 11/13/2000 10,000 9,978 6.480% due 11/16/2000 5,000 4,987
6.460% due 12/05/2000 20,000 19,878 --------------
American Express Company 105,192
6.703% due 11/01/2000 10,000 10,000 Insurance - 3.2%
6.590% due 11/02/2000 10,000 9,998 Prudential Funding Corp.
6.480% due 11/17/2000 10,000 9,971 6.530% due 11/15/2000 10,000 9,975
6.490% due 11/24/2000 20,000 19,917 6.540% due 01/08/2001 20,000 19,753
American General Finance 6.520% due 01/12/2001 15,000 14,804
6.530% due 01/18/2001 5,000 4,929 --------------
6.540% due 01/18/2001 15,000 14,787 44,532
6.520% due 01/19/2001 15,450 15,229 Misc. Capital Goods - 2.6%
6.500% due 01/26/2001 10,000 9,845 Illinois Tool Works, Inc.
American International Group, Inc 6.480% due 11/28/2000 20,500 20,400
6.500% due 11/16/2000 13,200 13,164 6.490% due 12/05/2000 15,000 14,908
Associates First Capital Corp --------------
6.520% due 01/09/2001 15,000 14,813 35,308
6.530% due 01/18/2001 10,000 9,859 Office Equipment - 0.9%
6.500% due 01/26/2001 20,000 19,689 Pitney Bowes, Inc.
Household Finance Corp. 6.460% due 11/22/2000 11,900 11,855
6.540% due 01/12/2001 15,000 14,804 Personal & Household Products - 0.5%
6.500% due 01/25/2001 30,000 29,539 Gillette Company
-------------- 6.470% due 12/12/2000 7,000 6,948
226,400
See accompanying notes to the financial statements
13
<PAGE>
Money Market Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands Amount Value Amount Value
------------ -------------- ------------ --------------
Printing & Publishing - 3.0% Verizon Network Funding
Gannett Co., Inc. 6.530% due 11/06/2000 $ 10,000 $ 9,991
6.480% due 11/13/2000 $ 20,000 $ 19,957 6.500% due 11/07/2000 9,000 8,990
6.500% due 11/21/2000 10,000 9,964 6.500% due 11/09/2000 10,000 9,986
McGraw-Hill Companies, Inc. 6.470% due 12/01/2000 7,000 6,962
6.470% due 11/09/2000 12,000 11,983 6.480% due 12/05/2000 10,000 9,939
-------------- 6.520% due 01/16/2001 5,000 4,931
41,904 --------------
Regional Banks - 2.2% 144,916
Wells Fargo & Company Tobacco - 2.7%
6.500% due 01/03/2001 30,000 29,659 Philip Morris Companies, Inc.
6.500% due 11/01/2000 20,000 20,000
Retail - 1.8% 6.470% due 12/14/2000 13,091 12,990
May Department Stores 6.520% due 01/31/2001 5,000 4,918
6.480% due 11/03/2000 5,000 4,998 --------------
Walmart Stores 37,908
6.470% due 11/28/2000 20,000 19,903 Utilities/Electric - 10.1%
-------------- Alliant Energy Corp.
24,901 6.490% due 11/03/2000 4,300 4,298
Telecommunication - 10.5% 6.490% due 11/07/2000 8,491 8,482
AT&T Corp 6.480% due 12/08/2000 5,000 4,967
6.540% due 01/04/2001 25,000 24,709 Baltimore Gas & Electric
6.520% due 01/05/2001 10,000 9,882 6.500% due 11/08/2000 10,440 10,427
6.530% due 01/12/2001 10,000 9,870 FPL Group, Inc.
SBC Communications, Inc. 6.480% due 11/06/2000 9,500 9,491
6.470% due 11/22/2000 20,000 19,925 IPALCO Enterprises
6.500% due 11/29/2000 1,445 1,438 6.500% due 11/20/2000 10,675 10,638
6.480% due 12/01/2000 5,000 4,973 6.470% due 12/12/2000 12,000 11,912
6.500% due 12/06/2000 3,600 3,577 6.480% due 12/14/2000 14,000 13,892
6.510% due 01/11/2001 20,000 19,743 Pacific Gas & Electric
6.480% due 11/02/2000 13,100 13,098
6.480% due 11/08/2000 19,900 19,875
6.480% due 11/09/2000 10,000 9,986
6.480% due 12/07/2000 7,650 7,600
See accompanying notes to the financial statements
14
<PAGE>
Money Market Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands Amount Value Amount Value
------------ -------------- ------------ --------------
Potomac Electric Power Co. CERTIFICATE OF DEPOSIT
6.490% due 11/17/2000 $ 15,240 $ 15,196 Banking/Domestic - 0.2%
-------------- Huntington National Bank
139,862 6.750% due 01/03/2001 $ 2,000 $ 2,000
--------------
REPURCHASE AGREEMENT - 0.2%
Total Commercial Paper - 94.9% 1,314,594 Nesbitt Burns Repo*
6.000% due 11/01/2000 3,046 3,046
U.S. GOVERNMENT SECURITIES --------------
U.S. Government Agency - 5.0%
Federal Home Loan Bank TOTAL INVESTMENTS - 100.3% 1,389,185
6.380% due 11/22/2000 10,000 9,963
6.440% due 01/11/2001 25,000 24,682
-------------- Liabilities, less other assets - (0.3%) (3,542)
34,645 --------------
Federal Home Loan Mortgage Corp. TOTAL NET ASSETS - 100.0% $ 1,385,643
6.410% due 11/07/2000 10,000 9,989 ==============
6.400% due 11/21/2000 25,000 24,911
-------------- *Collateralized by U.S. Treasury Note (5.625% due
34,900 September 30, 2001); held by custodian
--------------
Total U.S. Government Securities - 5.0% 69,545
</TABLE>
See accompanying notes to the financial statements
15
<PAGE>
Money Market Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Selected per share data 10/31/00 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........................ 0.06 0.05 0.05
Net realized and unrealized gain............. 0.00 0.00 0.00
------------- ------------ -------------
Total income from investment operations........... 0.06 0.05 0.05
Less distributions:
Dividends from net investment income......... 0.06 0.05 0.05
Distributions from net realized gain......... 0.00 0.00 0.00
------------- ------------ -------------
Total distributions............................... 0.06 0.05 0.05
------------- ------------ -------------
Net asset value, end of period.................... $ 1.00 1.00 1.00
============= ============ =============
Total return ..................................... 6.21% 5.03% 5.54%
============= ============ =============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 1,385,643 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.. 0.33% 0.39% 0.40%
Net investment income, net of waivers
and reimbursements........................ 6.05% 4.93% 5.40%
Net investment income, before waivers
and reimbursements........................ 5.90% 4.73% 5.20%
</TABLE>
See accompanying notes to the financial statements
16
<PAGE>
Money Market Fund
Financial Highlights (continued)
<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
17
<PAGE>
Government Securities Fund
Statement of Assets and Liabilities
October 31, 2000
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value (cost - $171,126).................... $ 171,330
Interest receivable...................................................... 2,553
Receivable for fund shares sold.......................................... 918
--------------
Total Assets.................................................................. 174,801
Liabilities
Dividends payable........................................................ 915
Payable for fund shares redeemed......................................... 148
Accrued expenses ........................................................ 57
Investment advisory fees payable......................................... 40
--------------
Total Liabilities............................................................. 1,160
--------------
Net Assets.................................................................... $ 173,641
==============
Analysis of Net Assets:
Paid in capital.......................................................... $ 182,402
Accumulated net realized loss............................................ (8,985)
Net unrealized appreciation.............................................. 204
Undistributed net investment income...................................... 20
--------------
Net Assets.................................................................... $ 173,641
==============
Net Asset Value Per Share (based on net assets of $173,641 and 17,662 shares
issued and outstanding).................................................. $ 9.83
==============
</TABLE>
See accompanying notes to the financial statements
18
<PAGE>
Government Securities Fund
Statement of Operations
For the year ended October 31, 2000
In thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest................................................................. $ 9,142
--------------
Total Investment Income....................................................... 9,142
Expenses
Investment advisory fees................................................. 504
Fund administration fees................................................. 73
Fund accounting fees..................................................... 46
Transfer agent fees...................................................... 21
Custodian fees........................................................... 14
Professional fees........................................................ 12
Other fees............................................................... 5
--------------
Total Expenses................................................................ 675
Less: Fee Waiver............................................................. 358
--------------
Net Expenses.................................................................. 317
--------------
Net Investment Income......................................................... 8,825
Net Realized and Unrealized Gain (Loss)
Net realized loss on sale of investments................................. (8,985)
Change in net unrealized appreciation on investments..................... 9,506
--------------
Net realized and unrealized gain (loss).................................. 521
--------------
Net Change in Net Assets from Operations...................................... $ 9,346
==============
</TABLE>
See accompanying notes to the financial statements
19
<PAGE>
Government Securities Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
ended ended
In thousands 10/31/00 10/31/99
------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 8,825 8,721
Net realized gain (loss) .................................. (8,985) 1,649
Change in net unrealized appreciation...................... 9,506 (14,607)
------------- -------------
Change in net assets from operations....................... 9,346 (4,237)
Distributions to shareholders from:
Net investment income...................................... (8,860) (8,695)
Net realized gain.......................................... (1,649) (5,263)
------------- -------------
Total distributions........................................ (10,509) (13,958)
Capital share transactions
Proceeds from sale of shares............................... 42,629 17,389
Reinvestment of distributions.............................. 10,508 13,958
Cost of shares redeemed.................................... (33,337) (14,460)
------------- -------------
Change in net assets from capital transactions............. 19,800 16,887
------------- -------------
Change in net assets............................................ 18,637 (1,308)
Net assets at beginning of period............................... 155,004 156,312
------------- -------------
Net assets at end of period..................................... $ 173,641 155,004
============= =======
Undistributed net investment income............................. $ 20 55
============= =======
</TABLE>
See accompanying notes to the financial statements
20
<PAGE>
<TABLE>
<CAPTION>
Government Securities Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands Amount Value Amount Value
------------ -------------- ------------ --------------
<S> <C> <C> <S> <C> <C>
U.S. GOVERNMENT SECURITIES U.S. Department of HUD
U.S. Government Agency - 70.0% 7.001% due 08/01/2001 $ 5,000 $ 5,013
A.I.D. Israel --------------
5.890% due 08/15/2005 $ 6,500 $ 6,358
6.600% due 02/15/2008 18,000 18,065 Total U.S. Government Agency 121,442
--------------
24,423
Federal Home Loan Bank U.S. Government Obligations - 28.7%
6.370% due 11/01/2000 9,000 9,000 U.S. Treasury Bond
Federal Home Loan Mortgage Corp. 5.250% due 02/15/2029 20,000 18,226
6.360% due 11/17/2000 18,000 17,949 6.250% due 05/15/2030 10,000 10,652
6.420% due 12/12/2000 3,650 3,623 U.S. Treasury Note
6.750% due 03/15/2031 10,000 10,018 6.875% due 05/15/2006 20,000 20,965
-------------- --------------
31,590
Federal National Mortgage Association Total U.S. Government Obligations 49,843
6.430% due 01/11/2001 1,500 1,481 --------------
5.750% due 02/15/2008 20,000 19,026
-------------- Total U.S. Government Securities - 98.7% 171,285
20,507 (cost - $171,081)
Financial Assistance Corp
9.375% due 07/21/2003 6,830 7,321 DEMAND NOTE
8.800% due 06/10/2005 14,500 15,784 Utilities/Electric - 0.0%
-------------- Wisconsin Electric Demand Note
23,105 6.215% due 11/01/2000
(cost - $45) 45 45
Private Export Funding Corp. --------------
6.310% due 09/30/2004 6,000 5,953
TOTAL INVESTMENTS - 98.7%
Small Business Administration (cost - $171,126) 171,330
7.500% due 07/25/2013 1,851 1,851
Other assets, less liabilities 1.3% 2,311
--------------
TOTAL NET ASSETS - 100.0% $ 173,641
==============
</TABLE>
See accompanying notes to the financial statements
21
<PAGE>
Government Securities Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Selected per share data 10/31/00 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........................ 0.59 0.56 0.59
Net realized and unrealized gain (loss)...... 0.03 (0.82) 0.60
------------- ------------ -------------
Total income (loss) from investment operations.... 0.62 (0.26) 1.19
Less distributions:
Dividends from net investment income......... 0.59 0.56 0.59
Distributions from net realized gain......... 0.11 0.36 0.00
------------- ------------ -------------
Total distributions............................... 0.70 0.92 0.59
------------- ------------ -------------
Net asset value, end of period.................... $ 9.83 9.91 11.09
============= ============ =============
Total return ..................................... 6.70% (2.50%) 11.72%
============= ============ =============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 173,641 155,004 156,312
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.22% 0.22% 0.23%
Expenses, before waivers and reimbursements.. 0.46% 0.55% 0.57%
Net investment income, net of waivers
and reimbursements...................... 6.05% 5.38% 5.54%
Net investment income, before waivers
and reimbursements...................... 5.81% 5.05% 5.20%
Portfolio turnover rate........................... 163% 77% 219%
</TABLE>
See accompanying notes to the financial statements
22
<PAGE>
Government Securities Fund
Financial Highlights (continued)
<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
23
<PAGE>
Asset Allocation Fund
Statement of Assets and Liabilities
October 31, 2000
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value (cost - $155,084).................... $ 186,325
Interest receivable...................................................... 794
Receivable for fund shares sold.......................................... 288
Dividends receivable..................................................... 14
--------------
Total Assets.................................................................. 187,421
Liabilities
Payable for securities purchased......................................... 213
Payable for fund shares redeemed......................................... 123
Investment advisory fees payable......................................... 119
Accrued expenses ........................................................ 65
--------------
Total Liabilities............................................................. 520
--------------
Net Assets.................................................................... $ 186,901
==============
Analysis of Net Assets
Paid in capital.......................................................... $ 139,716
Accumulated net realized gain ........................................... 15,589
Net unrealized appreciation.............................................. 31,241
Undistributed net investment income...................................... 355
--------------
Net Assets.................................................................... $ 186,901
==============
Net Asset Value Per Share (based on net assets of $186,901 and 10,966 shares
issued and outstanding)....................................................$ 17.04
==============
</TABLE>
See accompanying notes to the financial statements
24
<PAGE>
Asset Allocation Fund
Statement of Operations
For the year ended October 31, 2000
In thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest................................................................. $ 3,822
Dividends................................................................ 1,033
--------------
Total Investment Income....................................................... 4,855
Expenses
Investment advisory fees................................................. 1,041
Fund administration fees................................................. 94
Fund accounting fees..................................................... 47
Transfer agent fees...................................................... 24
Custodian fees........................................................... 19
Professional fees........................................................ 15
Trustees fees............................................................ 7
Registration fees........................................................ 7
Other fees............................................................... 1
--------------
Total Expenses................................................................ 1,255
Less: Fee Waiver............................................................. 570
--------------
Net Expenses.................................................................. 685
--------------
Net Investment Income......................................................... 4,170
Net Realized and Unrealized Gain
Net realized gain on sale of investments................................. 15,799
Net realized gain on written options..................................... 236
Change in net unrealized appreciation on investments..................... 277
--------------
Net realized and unrealized gain ........................................ 16,312
--------------
Net Increase in Net Assets from Operations.................................... $ 20,482
==============
</TABLE>
See accompanying notes to the financial statements
25
<PAGE>
Asset Allocation Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
In thousands ended ended
10/31/00 10/31/99
------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 4,170 4,108
Net realized gain ......................................... 16,035 23,175
Change in net unrealized appreciation...................... 277 414
------------- -------------
Change in net assets from operations....................... 20,482 27,697
Distributions to shareholders from:
Net investment income...................................... (4,112) (4,660)
Net realized gain.......................................... (21,997) 0
------------- -------------
Total distributions........................................ (26,109) (4,660)
Capital share transactions
Proceeds from sale of shares............................... 78,568 13,415
Reinvestment of distributions.............................. 26,083 4,659
Cost of shares redeemed ................................... (76,552) (86,312)
------------- -------------
Change in net assets from capital transactions............. 28,099 (68,238)
------------- -------------
Change in net assets............................................ 22,472 (45,201)
Net assets at beginning of period............................... 164,429 209,630
------------- -------------
Net assets at end of period..................................... $ 186,901 164,429
============= =============
Undistributed net investment income............................. $ 355 297
============= =============
</TABLE>
See accompanying notes to the financial statements
26
<PAGE>
Asset Allocation Fund
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
In thousands, except shares Shares Value Shares Value
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS Common Stocks - Consumer Cyclical
Common Stocks - Basic Materials Auto Parts - 0.1%
Container - 0.3% Gentex Corporation* 10,000 $ 247
Ivex Packaging Corp.* 63,900 $ 627
Leisure Time - 1.0%
Electrical Equipment - 3.9% Carnival Corporation 30,000 744
Emerson Electric Co. 25,000 1,836 Six Flags, Inc.* 70,000 1,094
General Electric 98,136 5,379 --------------
-------------- 1,838
7,215
Environmental - 1.3% Printing & Publishing - 1.1%
Allied Waste Industries, Inc.* 115,018 1,064 Scholastic Corp.* 25,000 2,000
Newpark Resources, Inc.* 150,684 1,356
-------------- Rental & Leasing - 0.1%
2,420 United Rentals, Inc.* 10,000 215
Manufacturing - Diversified - 1.8%
Tyco International Ltd 32,000 1,814 Retail Specialty - 2.4%
United Technologies Corp. 23,042 1,609 Home Depot 44,661 1,920
--------------
3,423 Insight Enterprises, Inc.* 22,500 731
Paper & Forest Products - 0.3% RadioShack Corporation 30,000 1,789
Fibermark, Inc.* 60,000 484 --------------
-------------- 4,440
--------------
Total Common Stocks - Basic Total Common Stocks - Consumer
Materials - 7.6% 14,169 Cyclical - 4.7% 8,740
Common Stocks - Communication Services Common Stocks - Consumer Staples
Long Distance - 0.8% Beverages - 2.2%
MCI Worldcom, Inc.* 60,000 1,425 Anheuser-Busch Co. 90,000 4,118
Telephone - 1.7% Drug Stores - 1.1%
Alltel Corp. 50,000 3,222 CVS Corporation 40,000 2,117
--------------
Entertainment - 1.1%
Total Common Stocks - Communication Cinar Corporation* 40,000 125
Services - 2.5% 4,647 Viacom, Inc. A* 23,824 1,364
See accompanying notes to the financial statements
27
<PAGE>
Asset Allocation Fund
Schedule of Investments
October 31, 2000
In thousands, except shares Shares Value Shares Value
------------ -------------- ------------ --------------
Viacom, Inc. B* 8,980 $ 511 Exxon Mobil Corporation 36,403 $ 3,247
-------------- --------------
2,000 5,924
Food Retailers - 1.1% Oil & Gas Service - 0.5%
Kroger Company* 94,368 2,129 Petroleum Geo Services ADR* 65,000 890
--------------
Media - TV/Radio/Cable - 4.8%
AT&T - Liberty Media-A* 110,000 1,980
Canwest Global Comm Corp. 66,166 831 Total Common Stocks - Energy - 7.4% 13,768
Clear Channel Comms.* 45,393 2,726
Time Warner, Inc. 28,554 2,168 Common Stocks - Finance
Young Broadcasting Corp.* 49,500 1,228 Banks - 1.0%
-------------- State Street Corp. 15,000 1,871
8,933
Personal & Household Products - 0.3% Financial Services - 3.2%
Westpoint Stevens, Inc. 70,000 503 Associates First Capital 41,516 1,541
--------------
Citigroup, Inc. 28,666 1,509
Total Common Stocks - Fannie Mae 30,000 2,310
Consumer Staples - 10.6% 19,800 Stilwell Financial, Inc. 15,000 672
--------------
Common Stocks - Energy 6,032
Coal, Gas & Pipe - 0.4% --------------
Talisman Energy, Inc.* 25,000 777
Total Common Stocks - Finance - 4.2% 7,903
Exploration/Drilling - 1.7%
Kerr-McGee Corporation 27,500 1,796 Common Stocks - Health Care
Rio Alto Exploration Limited* 80,000 1,357 Drugs - 6.5%
-------------- Cardinal Health, Inc. 25,000 2,369
3,153 Eli Lilly & Co. 25,000 2,234
Oil & Gas Domestic - 1.6%
Devon Energy Corporation 60,000 3,024 Pfizer, Inc. 67,500 2,915
Schering-Plough Corp. 63,808 3,298
Oil & Gas International - 3.2% Watson Pharmaceuticals, Inc.* 20,000 1,251
BP Amoco p.l.c. 41,000 2,088 --------------
Canadian Natural Res. Ltd* 20,000 589 12,067
Medical Products & Supplies - 1.3%
Johnson & Johnson Co. 27,016 2,489
See accompanying notes to the financial statements
28
<PAGE>
Asset Allocation Fund
Schedule of Investments
October 31, 2000
Principal
Amount
In thousands, except shares Shares Value or Shares Value
------------ -------------- ------------ --------------
Medical Services - 0.6% Semiconductors - 1.5%
Tenet Healthcare Corp.* 30,000 $ 1,179 Intel Corp. 40,000 $ 1,800
-------------- Texas Instruments 20,000 981
--------------
2,781
Total Common Stocks - --------------
Health Care - 8.4% 15,735 Total Common Stocks -
Technology - 16.8% 31,387
Common Stocks - Technology
Communication Equipment - 6.9% Common Stocks - Utilities - 0.8%
ADC Telecommunications* 57,260 1,224 Natural Gas
Com21, Inc.* 30,000 324 Coastal Corp. 20,000 1,509
Corning Incorporated 37,000 2,831 --------------
L-3 Communications Hldgs* 29,200 1,925
Nokia Corp. 54,000 2,308 Total Common Stocks - 63.0%
Powerwave Technologies, Inc.* 20,000 963 (cost - $86,066) 117,658
Tellabs, Inc.* 56,500 2,821
Tut Systems, Inc.* 15,000 499 U.S. GOVERNMENT SECURITIES
-------------- U.S. Government Agency - 5.3%
12,895
Computer Related - 3.4% Federal Home Loan Mortgage Corp.
Comverse Technology* 15,000 1,676 6.400% due 11/21/2000 $ 5,000 4,982
Dell Computer Corporation* 30,000 885 6.370% due 12/05/2000 5,000 4,970
EMC Corp Mass., Inc.* 20,112 1,791 --------------
Sun Microsystems* 18,496 2,051
-------------- Total U.S. Government Agency 9,952
6,403
Computer Software/Services - 5.0% U.S. Government Obligations - 11.9%
CSG Systems Intl, Inc.* 20,000 929 U.S. Treasury Notes
Citrix Systems, Inc.* 29,000 642 6.500% due 08/31/2001 1,727 1,729
Concord EFS, Inc.* 40,000 1,653 6.125% due 08/31/2002 5,000 5,012
First Data 27,677 1,387 6.750% due 05/15/2005 10,000 10,367
Microsoft Corp.* 30,000 2,066 5.750% due 08/15/2010 5,000 4,995
Sungard Data Systems, Inc.* 40,000 2,045 --------------
Symantec Corporation* 15,000 586 Total U.S. Government Obligations 22,103
-------------- --------------
9,308
Total U.S. Government Securities -17.2% 32,055
(cost - $31,971)
See accompanying notes to the financial statements
29
<PAGE>
Asset Allocation Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands, except shares Amount Value Amount Value
------------ -------------- ------------ --------------
CORPORATE BONDS Exploration/Drilling - 0.8%
Aerospace & Defense - 1.0% Kerr-McGee Corporation
Boeing Capital Corp. 5.250% due 02/15/2010 $ 1,150 $ 1,409
5.960% due 05/25/2004 $ 2,000 $ 1,942
Financial Services - 1.1%
Agricultural & Industrial Equipment - 0.5% USAA Capital Corp.
Case Corp. 7.540% due 03/30/2005 2,000 2,037
6.750% due 10/21/2007 1,000 860
Food , Beverage & Tobacco - 1.5%
Auto & Truck - 2.3% Nabisco, Inc.
Chrysler Finance Corp. 6.125% due 02/01/2033 3,000 2,869
6.950% due 03/25/2002 1,000 1,002
Ford Motor Credit Corp Food Retailers - 0.5%
7.500% due 06/15/2003 2,000 2,011 Kroger Company
General Motors Acceptance Corp. 7.650% due 04/15/2007 1,000 995
5.875% due 01/22/2003 1,300 1,270
-------------- Health Care - 0.4%
4,283 Omega Healthcare Investors
Bank and Bank Holding Company -1.1% 6.950% due 08/01/2007 1,000 749
Northern Trust Company
7.500% due 02/11/2005 2,000 2,034 Metal & Mineral - 0.5%
Southdown, Inc.
Communications & Media - 0.4% 10.000% due 03/01/2006 788 833
Tribune Company
6.875% due 11/01/2006 800 785 Oil & Gas International - 1.5%
Devon Energy Corporation
Entertainment & Leisure - 0.6% 4.950% due 08/15/2008 2,000 1,877
Brunswick Corp. Enron Corp
6.750% due 12/15/2006 300 289 6.625% due 11/15/2005 1,000 977
Royal Caribbean --------------
7.000% due 10/15/2007 1,000 888 2,854
--------------
1,177
See accompanying notes to the financial statements
30
<PAGE>
Asset Allocation Fund
Schedule of Investments
October 31, 2000
Principal Principal
In thousands, except shares Amount Value Amount Value
------------ -------------- ------------ --------------
Waste Management Services - 0.5% DEMAND NOTE
Waste Management, Inc. Utility/Electric - 0.0%
6.625% due 07/15/2002 $ 1,000 $ 969 Wisconsin Electric
-------------- 6.215% due 11/01/2000
(cost - $41) $ 41 $ 41
Total Corporate Bonds - 12.7% --------------
(cost - $24,231) 23,796
TOTAL INVESTMENTS - 99.7%
COMMERCIAL PAPER (cost - $155,084) 186,325
Personal & Household Products - 0.2%
Gillette Company Other assets, less liabilities - 0.3% 576
6.540% due 11/01/2000 325 325 --------------
TOTAL NET ASSETS - 100.0% $ 186,901
Retail - 3.2% ==============
May Department Stores
6.480% due 11/03/2000 6,000 5,998 * Non-income producing security
Utilities/Electric - 3.4%
IPALCO Enterprises
6.470% due 12/12/2000 6,500 6,452
--------------
Total Commercial Paper - 6.8%
(cost - $12,775) 12,775
</TABLE>
See accompanying notes to the financial statements
31
<PAGE>
Asset Allocation Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Selected per share data 10/31/00 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........................ 0.38 0.40 0.39
Net realized and unrealized gain (loss) ..... 1.61 1.93 (0.32)
------------- ------------ ------------
Total income from investment operations........... 1.99 2.33 0.07
Less distributions:
Dividends from net investment income......... 0.38 0.43 0.35
Distributions from net realized gain......... 2.19 0.00 0.60
------------- ------------ ------------
Total distributions............................... 2.57 0.43 0.95
------------- ------------ ------------
Net asset value, end of period.................... $ 17.04 17.62 15.72
============= ============ ============
Total return...................................... 11.82% 14.91% 0.21%
============= ============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 186,901 164,429 209,630
Ratio to average net assets of:
Expenses, net of waivers and reimbursements.. 0.36% 0.36% 0.36%
Expenses, before waivers and reimbursements.. 0.66% 0.76% 0.76%
Net investment income, net of waivers
and reimbursements........................ 2.21% 2.14% 2.33%
Net investment income, before waivers
and reimbursements........................ 1.91% 1.74% 1.93%
Portfolio turnover rate........................... 63% 46% 64%
</TABLE>
See accompanying notes to the financial statements
32
<PAGE>
Asset Allocation Fund
Financial Highlights (continued)
<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
33
<PAGE>
REIT Index Fund
Statement of Assets and Liabilities
October 31, 2000
In thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value (cost - $24,371)..................... $ 26,776
Dividends receivable..................................................... 56
Receivable for fund shares sold.......................................... 31
--------------
Total Assets.................................................................. 26,863
Liabilities
Payable for fund shares redeemed......................................... 38
Accrued expenses ........................................................ 27
Investment advisory fees payable......................................... 7
--------------
Total Liabilities............................................................. 72
--------------
Net Assets.................................................................... $ 26,791
==============
Analysis of Net Assets
Paid in capital.......................................................... $ 29,345
Accumulated net realized loss............................................ (6,287
Net unrealized appreciation.............................................. 2,405
Undistributed net investment income...................................... 1,328
--------------
Net Assets.................................................................... $ 26,791
==============
Net Asset Value Per Share (based on net assets of $26,791 and 2,532 shares
issued and outstanding).................................................. $ 10.58
==============
</TABLE>
See accompanying notes to the financial statements
34
<PAGE>
REIT Index Fund
Statement of Operations
For the year ended October 31, 2000
In thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends................................................................ $ 1,604
Interest................................................................. 32
--------------
Total Investment Income....................................................... 1,636
Expenses
Investment advisory fees................................................. 114
Fund accounting fees..................................................... 31
Transfer agent fees...................................................... 21
Fund administration fees................................................. 12
Custodian fees........................................................... 9
Registration fees........................................................ 7
Professional fees........................................................ 2
Trustees fees............................................................ 1
Other fees............................................................... 1
--------------
Total Expenses................................................................ 198
Less: Fee Waiver............................................................. 90
--------------
Net Expenses.................................................................. 108
--------------
Net Investment Income......................................................... 1,528
Net Realized and Unrealized Gain (Loss)
Net realized loss on sale of investments................................. (309)
Change in net unrealized appreciation on investments..................... 2,368
--------------
Net realized and unrealized gain (loss).................................. 2,059
--------------
Net Increase in Net Assets from Operations.................................... $ 3,587
==============
</TABLE>
See accompanying notes to the financial statements
35
<PAGE>
REIT Index Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
ended ended
In thousands 10/31/00 10/31/99
------------- -------------
<S> <C> <C>
Change in net assets from operations
Net investment income...................................... $ 1,528 2,870
Net realized loss ......................................... (309) (5,565)
Change in net unrealized appreciation...................... 2,368 642
------------- -------------
Change in net assets from operations....................... 3,587 (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............................... 11,778 11,301
Reinvestment of distributions.............................. 2,523 3,441
Cost of shares redeemed.................................... (12,261) (46,551)
------------- -------------
Change in net assets from capital transactions............. 2,040 (31,809)
------------- -------------
Change in net assets............................................ 3,104 (37,303)
Net assets at beginning of period............................... 23,687 60,990
------------- -------------
Net assets at end of period..................................... $ 26,791 23,687
============= =============
Undistributed net investment income............................. $ 1,328 2,323
============= =============
</TABLE>
See accompanying notes to the financial statements
36
<PAGE>
REIT Index Fund
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
In thousands, except shares Shares Value Shares Value
------------ -------------- ------------ --------------
<S> <C> <C> <S> <C> <C>
COMMON STOCKS - Washington REIT 8,070 $ 161
REAL ESTATE INVESTMENT TRUSTS (REITS) --------------
Apartments - 21.4% 1,728
AMLI Residential Properties 3,845 $ 89 Hotel - 6.0%
Apartment Invest & Mgmt Co. 15,513 709 Boykin Lodging Co. 3,800 34
Archstone Communities Trust 27,330 644 Equity Inns, Inc. 8,225 51
Associated Estates Realty 4,370 35 Felcor Lodging Trust, Inc. 12,290 270
Avalon Bay Communities 14,962 687 Hospitality Properties Trust 12,665 273
BRE Properties 10,180 322 Host Marriott Corp. 49,200 523
Camden Property Trust 8,594 246 Innkeepers USA Trust 7,850 80
Cornerstone Realty Income 8,000 84 Jameson Inns, Inc. 2,555 18
Equity Residential Properties 29,363 1,382 LaSalle Hotel Properties 3,800 55
Essex Property Trust, Inc. 4,105 213 Meristar Hospitality Corp 10,283 197
Gables Residential Trust 5,175 132 RFS Hotel Investors, Inc. 5,525 71
Home Properties of New York 4,700 128 Winston Hotels 3,735 28
Mid-America Apt. Community 3,995 88 --------------
Post Properties, Inc. 8,895 311 1,600
Smith, Charles E. Residential 4,795 211 Manufactured Homes - 1.6%
Summit Properties, Inc. 5,915 142 Chateau Properties, Inc. 6,390 180
Town & Country Trust 3,535 65 Manufact. Home Community 4,915 122
United Dominion Realty Trust 23,185 243 Sun Communities, Inc. 3,935 120
-------------- --------------
5,731 422
Diversified - 6.4% Miscellaneous - 0.9%
Boston Properties, Inc. 15,400 624 Entertainment Properties Trust 3,300 36
Colonial Properties Trust 4,610 113 Pinnacle Holdings Inc.* 10,800 170
Eastgroup Properties 3,495 71 US Restaurant Properties 3,400 35
Glenborough Realty Trust, Inc. 6,395 103 --------------
Investors Real Estate Trust 5,100 41 241
Pacific Gulf Properties 4,720 125 Office Property - 29.2%
Penn Real Estate Invest Trust 3,055 53 Alexandria Real Estate Equities 3,200 108
Prime Group Realty Trust 3,500 52 Arden Realty Group, Inc. 14,200 341
Rouse Co. 15,600 385 Brandywine Realty Trust 8,155 156
Carramerica Realty Corp. 14,815 438
Corporate Office Properties 4,200 41
Cousins Properties, Inc. 10,910 284
See accompanying notes to the financial statements
37
<PAGE>
REIT Index Fund
Schedule of Investments
October 31, 2000
In thousands, except shares Shares Value Shares Value
------------ -------------- ------------ --------------
Crescent Real Estate 24,515 $ 493 Urban Shopping Centers, Inc. 4,010 $ 192
Duke-Weeks Realty Corp. 28,423 673 --------------
Equity Office Properties 67,689 2,039 1,928
Great Lakes REIT, Inc. 3,700 63 Shopping Center - 13.7%
HRPT Properties Trust 29,500 190 AMB Property Corp 18,800 442
Highwoods Properties, Inc. 13,120 284 Burnham Pacific Properties 7,310 40
Kilroy Realty Corp. 5,900 154 Center Trust, Inc. 6,030 35
Koger Equity, Inc. 6,000 96 Developers Diversified 12,300 147
Liberty Property Trust 15,185 401 Equity One, Inc. 2,700 25
Mack-Cali Realty Corp. 13,195 358 Federal Realty Inv. Trust 8,860 171
Mission West Properties 3,800 51 First Washington Realty Trust 2,300 58
PSB Business Parks, Inc. 5,200 136 Glimcher Realty Trust 5,350 70
Parkway Properties, Inc. 2,200 63 IRT Property Co. 7,080 58
Prentiss Properties Trust 8,200 208 JDN Realty Corp. 7,305 80
Reckson Assoc Realty Corp. 12,370 280 Kimco Realty Corp. 14,050 566
SL Green Realty Corp. 5,500 147 Kramont Realty Trust 4,230 38
Spieker Properties, Inc. 14,650 811 Mid Atlantic Realty Trust 3,100 35
-------------- New Plan Excel Realty Trust 19,622 242
7,815 Pan Pacific Retail Properties 4,800 98
Outlet Centers - 0.9% Phillips International Realty 1,600 27
Chelsea GCA Realty, Inc. 3,595 116 Regency Realty Corp. 12,805 288
Mills Corp. 5,445 93 Saul Centers, Inc. 3,095 47
Tanger Factory Outlet Center 1,800 38 Vornado Realty Trust 19,378 675
-------------- Weingarten Realty Investment 5,965 250
247 Western Properties Trust 3,845 49
Regional Mall - 7.2% Westfield America, Inc. 16,400 230
CBL & Associates Properties 5,625 130 --------------
Crown American Realty 5,865 33 3,671
General Growth Industries 11,605 342 Storage - 3.9%
JP Realty, Inc. 3,610 58 Public Storage, Inc. 29,398 661
Lexington Corp. Properties 3,845 43 Shurgard Storage Centers 6,665 151
Macerich Co. 7,675 151 Sovran Self Storage, Inc. 2,720 51
Simon Property Group, Inc. 38,095 850 Storage USA 6,065 169
Taubman Centers, Inc. 11,780 129 --------------
1,032
See accompanying notes to the financial statements
38
<PAGE>
REIT Index Fund
Schedule of Investments
October 31, 2000
Principal
In thousands, except shares Shares Value Amount Value
------------ -------------- ------------ --------------
Triple Net Lease - 2.3% U.S. GOVERNMENT SECURITIES
Capital Automotive Reit 4,600 $ 59 U.S. Government Agency - 0.4%
Captec Net Lease Realty, Inc. 2,100 22 Federal National Mortgage Association
Commercial Net Lease Realty 6,815 69 6.450% due 11/22/2000 $ 108 $ 108
Franchise Finance Corp. 12,660 257 (cost - $108)
Golf Trust of America 1,800 20
National Golf Properties 2,995 60 DEMAND NOTE
Realty Income Corp. 6,050 139 Utility/Electric - 0.4%
--------------
626 Wisconsin Electric
Warehouse / Industrial - 5.6% 6.215% due 11/01/2000
Bedford Property Investors 4,120 81 (cost - $120) 120 120
Cabot Industrial Trust 9,100 172 --------------
Centerpoint Properties Corp. 4,685 208
First Industrial Realty Trust 8,805 272 TOTAL INVESTMENTS - 99.9% 26,776
Prologis Trust 36,774 772 (cost - $24,371)
--------------
1,505
--------------
Total Common Stocks - Real Estate Other assets, less liabilities - 0.1% 15
Investment Trusts (Reits) - 99.1% 26,546 --------------
TOTAL NET ASSETS - 100.0% $ 26,791
Common Stocks - Technology ==============
Internet Related - 0.0%
VelocityHSI, Inc.* 1,896 2 * Non-income producing security
--------------
Total Common Stocks - 99.1%
(cost - $24,143) 26,548
</TABLE>
See accompanying notes to the financial statements
39
<PAGE>
REIT Index Fund
Financial Highlights
<TABLE>
<CAPTION>
Year Year Year
ended ended ended
Selected per share data 10/31/00 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........................ 0.63 1.11 0.68
Net realized and unrealized gain (loss) ..... 0.97 (1.79) (2.40)
------------- ------------ ------------
Total income (loss) from investment operations.... 1.60 (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.................... $ 10.58 10.08 11.42
============= ============ ============
Total return...................................... 17.62% (6.31%) (13.27%)
============= ============ ============
Ratios and supplemental data:
Net assets, end of period (in thousands).......... $ 26,791 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.. 0.81% 0.77% 0.74%
Net investment income, net of waivers
and reimbursements...................... 6.23% 5.47% 4.80%
Net investment income, before waivers
and reimbursements...................... 5.86% 4.97% 4.30%
Portfolio turnover rate........................... 19% 33% 50%
----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the financial statements
40
<PAGE>
REIT Index Fund
Financial Highlights (continued)
<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
41
<PAGE>
Aon Funds
Notes to the Financial Statements
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.
42
<PAGE>
Aon Funds
Notes to the Financial Statements
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.
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 .10%
Government Securities Fund .10%
Asset Allocation Fund .25%
REIT Index Fund .10%
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 October 31, 2000 the Trust incurred expenses totaling $57,832 for
compensation of unaffiliated trustees.
43
<PAGE>
Aon Funds
Notes to the Financial Statements
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 $79,104 for the year ended October 31, 1998,
$5,454,201 for the year ended October 31, 1999 and $312,627 for the year ended
October 31, 2000 and the Government Securities Fund has a capital loss carryover
of $8,984,903 for the year ending October 31, 2000 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, 2007 and 2008 respectively.
At October 31, 2000, the identified cost of investments for federal income tax
purposes was as follows:
In Thousands
Money Market Fund $ 1,389,185
Government Securities Fund $ 171,126
Asset Allocation Fund $ 155,902
REIT Index Fund $ 24,717
The gross unrealized appreciation and gross unrealized depreciation of
investments for federal income tax purposes at October 31, 2000 were as follows:
<TABLE>
<CAPTION>
Government Asset REIT
In Thousands Securities Allocation Index
Fund Fund Fund
------------------- ------------------ ------------------
<S> <C> <C> <C>
Gross unrealized appreciation $ 1,995 40,693 3,745
Gross unrealized depreciation (1,791) (10,270) (1,686)
------------------- ------------------ ------------------
Net unrealized appreciation $ 204 30,423 2,059
=================== ================== ==================
</TABLE>
5. Investments
Investment transactions for the period ended October 31, 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 $ 220,617 234,054
Asset Allocation Fund $ 112,687 102,917
REIT Index Fund $ 5,829 4,563
</TABLE>
44
<PAGE>
Aon Funds
Notes to the Financial Statements
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 8,181,724 8,181,724 4,379 42,629
Dividend reinvestments 47,693 47,693 1,092 10,508
------------------ ------------------- ------------------ ------------------
Total issued 8,229,417 8,229,417 5,471 53,137
Shares redeemed (7,988,616) (7,988,616) (3,446) (33,337)
------------------ ------------------- ------------------ ------------------
Net change in shares 240,801 240,801 2,025 19,800
------------------ ------------------- ------------------ ------------------
Balance at October 31, 2000 1,385,643 $ 1,385,643 17,662 $ 182,402
================== =================== ================== ==================
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 4,538 78,568 1,143 11,778
Dividend reinvestments 1,565 26,083 277 2,523
------------------ ------------------- ------------------ ------------------
Total issued 6,103 104,651 1,420 14,301
Shares redeemed (4,469) (76,552) (1,237) (12,261)
------------------ ------------------- ------------------ ------------------
Net change in shares 1,634 28,099 183 2,040
------------------ ------------------- ------------------ ------------------
Balance at October 31, 2000 10,966 $ 139,716 2,532 $ 29,345
================== =================== ================== ==================
</TABLE>
45
<PAGE>
Aon Funds
Notes to the Financial Statements
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 October 31, 2000, were as follows:
<TABLE>
<CAPTION>
Contracts Premiums
------------------- ------------------
<S> <C> <C>
Options outstanding, beginning of period 0 $ 0
Options written 2,900 1,448,802
Options exercised (1,200) (703,409)
Options expired (550) (144,004)
Options closed (1,150) (601,389)
Options assigned 0 0
------------------- ------------------
Options outstanding, end of period 0 $ 0
=================== ==================
</TABLE>
46
