SUNSTONE FINANCIAL GROUP, INC.
207 E. Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
(414) 271-5885
Fax: (414) 271-5910
February 21, 1997
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
Re: The Aquinas Funds, Inc.
(33-70978; 811-8122)
Filing Pursuant to Rule 30b2-1 and Section 24(b) under the Investment
Company Act of 1940
Ladies and Gentlemen:
On behalf of the above-referenced registered investment company, transmitted
herewith for filing pursuant to Rule 30b2-1 and Section 24(b) under the
Investment Company Act of 1940, as amended, is the Funds' Annual Report for the
year ending December 31, 1996. Questions regarding this filing may be directed
to the undersigned at (414) 271-5885.
Sincerely,
/s/ Constance Dye Shannon
Constance Dye Shannon
Legal and Compliance Manager
cc: Richard L. Teigen, Esq.
Encl.
(LOGO)
AQUINAS FUNDS
ANNUAL REPORT
December 31, 1996
DEAR February 1997
SHAREHOLDER:
Thank you for your continued confidence in the Aquinas Funds. We are pleased to
report on the financial performance and the social responsibility results for
1996 and we believe that you will be quite happy with the results. You have
given us your investments in order for us to achieve returns commensurate with
reasonable risk and we achieved that goal. As you are aware, we remain fully
invested which means that we only hold enough cash to meet anticipated
redemptions. We do not attempt to time the markets and we feel that the long
term view for equities is very good.
Your equity focused funds did very well in 1996. Equity Growth was our top
performer with a total return of 22.9%. (Please refer to the Total Return table
and $10,000 Investment chart on page 4.) This compares to 17.48% for the Lipper
Growth Fund Index<F1>. This portfolio invests in growth companies that range
from regionally established smaller companies to some of the largest
corporations in America. In order to reduce risk, we maintain over 100 companies
in this portfolio and diversify them through a wide range of industries. We do
not concentrate on a specific sector. Two different portfolio management
companies apply different investing styles to achieve these solid returns. In
general, small and medium size stocks in this portfolio were outperformed by the
larger size stocks in this portfolio this year and our investment styles, which
allocate 50% of the portfolio to larger capitalization stocks and 50% to small
and medium cap stocks, allowed us to realize the rewards of this fact. This is
one of the reasons for our diversification and why we outperformed the Russell
3000 benchmark and almost equaled the S&P 500 benchmark.
Your Equity Income Fund had a total return of 20.4% compared to 17.89% for the
Lipper Equity Income Fund Index<F2>. (Please refer to the Total Return table and
$10,000 Investment chart on page 5.) This fund also has two different portfolio
managers which use different value approaches in a wide range of industry
sectors. Companies in this portfolio all pay dividends and are primarily the
larger companies in the United States stock markets.
Your Balanced Fund has five different portfolio managers and achieved a total
return of 15.3% compared to 13.01% for the Lipper Balanced Fund Index<F3>.
(Please refer to the Total Return table and $10,000 Investment chart on page 6.)
The current asset allocation would generally be divided into two major
categories: Equities 60% and Fixed Income 40%. The quality of fixed income is
investment grade and the equities are widely diversified among large, medium and
small companies with growth and income integrated into the corporate mix.
Your Fixed Income Fund was designed for conservative investors who desired
immediate access to their funds if it was needed. The Fund returned 3% compared
to 2.61% for the Lipper Corporate Debt Funds A-Rated Index<F4>. in 1996 but has
earned 9.3% on average over the last two years. (Please refer to the Total
Return table and $10,000 Investment chart on page 7.) As you are aware, the last
few years of interest rate movement have been dramatic and this Fund provides a
solid return with the opportunity for capital gains and lower volatility.
Your investments also accomplished some major results as socially responsible
investments. The following is a partial list of some major results:
ABORTION - We obtained a statement from six major drug companies in our
portfolio that they would not be involved in the production or distribution of
the RU-486 French Abortion pill that was approved by the Food & Drug
Administration.
CONTRACEPTION - We have reviewed all companies in our portfolio for their
contributions to Planned Parenthood. Companies that have given in the past have
been asked to rethink their past donation rationale and we believe that we will
see fewer contributions in the future.
AFFORDABLE HOUSING - We are working in this area by examining the Community
Reinvestment Act records of the banks and thrifts in our portfolios, reviewing
their loan records, and low income product lines. As a result, we are in
detailed conversations with major banks about improving their records in this
area.
MILITARY WEAPONS OF MASS DESTRUCTION - We believe that a strong national defense
is important to the U.S. and the free world. Our strong national defense
resulted in the overthrow of communism and a breakup of the Soviet Union.
Currently, the defense industry is downsizing and developing more commercial
applications of military technology. We are encouraging mergers of these
companies in order to allow some defensive weapons production capacity to
remain; and, we support the migration to peaceful uses of military technology
such as global positioning satellites to guide cars to destinations. We will be
looking at the production of landmines in 1997 in order to assure that they only
have a limited life. After wars are over, landmines are still a major source of
injury to innocent civilians.
GENDER DISCRIMINATION - We obtained a commitment from a major bank to add female
directors in the future. We have had communications with a number of companies
on this topic. We expect that companies will be gender neutral in their
decisions regarding directors and senior officers of the corporations.
RACE DISCRIMINATION - Texaco is a terrible story about racism at high levels in
a major company. As a shareholder, we are intent on holding Texaco's feet to the
fire on this issue. The head of Texaco, Peter Bijur, has appeared at a meeting
of the Interfaith Center for Corporate Responsibility (ICCR), of which we are a
member, to explain their response to the revelations in November. Shareholder
proposals are being coordinated by ICCR. We are reserving part of our Texaco
holdings to support these proposal initiatives.
VIOLENCE IN THE MEDIA - The annual UCLA study on violence states that violence
on TV is at its lowest level in years! Congress has passed the Violence (V)-chip
law, which we supported, to develop a TV ratings system. NBC-TV (owned by GE)
has the lowest level of violence on TV and is highest in the ratings. Disney
acquired ABC-TV and they have added a Jesuit priest to their board of directors
as a result of pressure from us and others because of our concerns about the
lack of internal controls and guidance in production standards. In 1997, we will
work with the advertising departments of companies in our portfolio that
advertise on television. With a ratings system now in place, advertising will
impact programming.
TOBACCO - American Brands has totally divested all tobacco manufacture. The
second largest provider of billboards in the U.S. will discontinue selling space
to advertise tobacco in 1998. A major retailer is stopping the sale of
cigarettes in their department stores, and a number of gasoline station chains
are reviewing the sale of cigarettes in the convenience stores that are part of
the gas station complex.
SWEATSHOP LABOR - A major entertainment corporation withdrew their objection to
placing a shareholder proposal on their proxy regarding sweatshop labor being
used in the production of items they sell.
The race discrimination, tobacco and sweatshop labor activities listed above
have been accomplished through our initiative and through our fellow ICCR member
initiatives which we support in multiple ways.
As an investor, you can be proud of the total performance of your funds. The
results prove that you can achieve financial objectives and improve corporate
standards on issues of major importance to the well being of our communities.
Every day when you look in a mirror, you know where you stand. Your investments
are supporting a process that allows you, a partial owner of major corporations,
to have a say in what the corporation stands for. And you can influence the
impact of a corporation on its shareholders, customers, community and employees.
As an investor in the Aquinas Funds, you are achieving impressive results. We
look forward to a successful 1997.
Sincerely,
/s/Bernard P. DiFiore
Bernard P. DiFiore
President and Treasurer
<F1> The Lipper Growth Fund Index is an unmanaged index comprised of the
largest 30 of the 673 funds in the Lipper Growth Fund category. Funds
included in the category are, by definition, those which normally invest
in companies whose long-term earnings are expected to grow significantly
faster than the stocks represented in the major unmanaged stock indices.
<F2> The Lipper Equity Income Fund Index is an unmanaged index comprised of
the largest 30 of the 164 funds in the Lipper Equity Income Fund
category. Funds included in the category are, by definition, those that
seek relatively high current income and growth of income through
investing 60% or more of its portfolio assets in equities.
<F3> The Lipper Balanced Fund Index is an unmanaged index comprised of the
largest 30 of the 227 funds in the Lipper Balanced Fund category. Funds
included in the category are, by definition, those whose primary
objective is to conserve principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Typically, the stock/bond ratio
ranges around 60%/40%.
<F4> The Lipper Corporate Debt Fund A-Rated Index is an unmanaged index
comprised of the 30 largest of the 110 funds in the Lipper Corporate Debt
Fund A-Rated category. Funds included in the category are, by definition,
those which invest 65% of its assets in corporate debt issues rated "A"
or better or government issues.
THE FUNDS IN REVIEW
AQUINAS EQUITY GROWTH FUND
The Fund seeks capital appreciation by investing in a diversified portfolio of
equity securities (primarily common stocks) that are believed to offer above-
average potential for growth in revenues, profits or cash flow. Dividend and
interest income are not important considerations in selecting investments. This
Fund is designed for investors wishing to capitalize on the growth in companies
with reasonable levels of risk.
TOTAL RETURNS
For Period Ended December 31, 1996
Average
Annual
One Since
Year Inception<F5>
- -------------------------------------------------------------------
Aquinas Equity
Growth Fund 22.90% 14.31%
S&P 500 Stock Index 22.96% 19.71%
Russell 3000 Index 21.82% 18.67%
- -------------------------------------------------------------------
<F5>January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996
--------------------------------------------------
AQUINAS EQUITY
GROWTH FUND $10,000 $ 9,322 $12,145 $14,927
S&P 500 Stock Index $10,000 $10,132 $13,939 $17,140
Russell 3000 Index $10,000 $10,178 $13,705 $16,695
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends.
Performance reflects fee waivers in effect. Absent fee waivers, total returns
would be reduced. Past performance is not predictive of future performance.
Investment return and principal value will fluctuate, so that your shares, when
redeemed, may be worth more or less than the original cost.
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Index is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
The Russell 3000 Index is composed of the 3,000 largest U.S. securities, as
determined by total market capitalization. This portfolio of securities
represents approximately 98% of the investable U.S. equity market.
AQUINAS EQUITY INCOME FUND
The Fund seeks growth of capital and a high level of current income by investing
principally in conservative income-producing equity securities (typically,
dividend-paying common stocks).
TOTAL RETURNS
For Period Ended December 31, 1996
Average
Annual
One Since
Year Inception<F6>
- -------------------------------------------------------------------
Aquinas Equity
Income Fund 20.43% 16.64%
S&P 500 Stock Index 22.96% 19.71%
- -------------------------------------------------------------------
<F6>January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996
--------------------------------------------------
AQUINAS EQUITY
INCOME FUND $10,000 $ 9,707 $13,165 $15,854
S&P 500 Stock Index $10,000 $10,132 $13,939 $17,140
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends.
Performance reflects fee waivers in effect. Absent fee waivers, total returns
would be reduced. Past performance is not predictive of future performance.
Investment return and principal value will fluctuate, so that your shares, when
redeemed, may be worth more or less than the original cost.
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Index is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
AQUINAS BALANCED FUND
The Fund seeks long-term growth of capital consistent with reasonable risk to
principal by investing in a diversified portfolio of common stocks of
established companies and investment-grade fixed income securities. The Fund
expects to maintain approximately 65% of its assets in common stocks and 35% in
fixed income securities. At year end 1996, the Fund had an asset allocation of
40% fixed income, 30% income equity and 30% growth equity segments. The duration
of the fixed income components is 4.51 years. If the Fund had invested a greater
percentage in equities versus fixed income, the performance probably would have
improved. However, we believe that the current asset allocation is appropriate
when viewed against an equities market that has been increasing in value
dramatically in 1995 and 1996.
TOTAL RETURNS
For Period Ended December 31, 1996
Average
Annual
One Since
Year Inception<F7>
- -------------------------------------------------------------------
Aquinas
Balanced Fund 15.29% 11.25%
Lehman Bros. Gov't./
Corp. Bond Index 2.91% 5.80%
S&P 500 Stock Index 22.96% 19.71%
- -------------------------------------------------------------------
<F7>January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996
--------------------------------------------------
AQUINAS BALANCED FUND $10,000 $ 9,694 $11,937 $13,763
Lehman Bros. Gov't./
Corp. Bond Index $10,000 $ 9,649 $11,505 $11,840
S&P 500 Stock Index $10,000 $10,132 $13,939 $17,140
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends.
Performance reflects fee waivers in effect. Absent fee waivers, total returns
would be reduced. Past performance is not predictive of future performance.
Investment return and principal value will fluctuate, so that your shares, when
redeemed, may be worth more or less than the original cost.
The Lehman Brothers Government/Corporate Bond Index includes all public
obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted
issues; all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government; and all
publicly issued, fixed rate, nonconvertible, investment grade, dollar-
denominated, SEC-registered corporate debt (including debt issued or guaranteed
by foreign sovereign governments, municipalities, or governmental agencies, or
international agencies).
The S&P 500 Stock Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Index is heavily
weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
AQUINAS FIXED INCOME FUND
The Fund seeks to provide a high level of current income, with a reasonable
opportunity for capital appreciation. The Fixed Income Fund is designed for
investors with current income needs. This Fund invests primarily in a
diversified portfolio of investment-grade fixed income securities. This
portfolio had a duration of 4.42 years. This means that the value of the
securities will go down as the interest rates rise; and, conversely, the
securities' values will go up when interest rates decline. Because our duration
is relatively short, the effect on securities values would not be very dramatic
in either direction.
TOTAL RETURNS
For Period Ended December 31, 1996
Average
Annual
One Since
Year Inception<F8>
- -------------------------------------------------------------------
Aquinas Fixed
Income Fund 2.83% 5.04%
Lehman Bros. Gov't./
Corp. Bond Index 2.91% 5.80%
- -------------------------------------------------------------------
<F8>January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996
-------------------------------------------------
AQUINAS FIXED
INCOME FUND $10,000 $ 9,691 $11,266 $11,585
Lehman Bros. Gov't./
Corp. Bond Index $10,000 $ 9,649 $11,505 $11,840
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends.
Performance reflects fee waivers in effect. Absent fee waivers, total returns
would be reduced. Past performance is not predictive of future performance.
Investment return and principal value will fluctuate, so that your shares, when
redeemed, may be worth more or less than the original cost.
The Lehman Brothers Government/Corporate Bond Index includes all public
obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted
issues; all publicly issued debt of U.S. government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. government; and all
publicly issued, fixed rate, nonconvertible, investment grade, dollar-
denominated, SEC-registered corporate debt (including debt issued or guaranteed
by foreign sovereign governments, municipalities, or governmental agencies, or
international agencies).
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Principal
Amount Value
--------- -----
FIXED INCOME BONDS 90.75%
ASSET-BACKED SECURITIES 9.48%
$825,000 Amresco Residential Securities
Mortgage Loan Trust,
8.075%, 04/25/26 $ 855,391
275,000 Amresco Residential Securities
Mortgage Loan Trust,
7.05%, 4/25/27 269,345
375,000 Chase Manhattan Auto Owner Trust,
5.95%, 11/15/00 373,671
350,000 Chase Manhattan Credit Card Master
Trust, 7.04%, 2/15/04 358,505
375,000 EQCC Home Equity Loan Trust,
8.95%, 1/15/15 407,205
300,000 Ford Credit Auto Trust,
6.50%, 11/15/99 302,680
250,000 Green Tree Financial Corp.,
6.35%, 12/15/26 249,144
350,000 Premier Auto Trust,
6.50%, 03/6/00 352,575
175,000 UCFC Home Equity Loan Trust,
7.825%, 12/15/27 179,856
183,589 Union Federal Savings Bank Trust,
4.875%, 2/15/00 181,716
----------
3,530,088
----------
CORPORATE BONDS 44.44%
467,000 American Express Credit Corp.,
8.50%, 6/15/99 490,934
525,000 Associates Corp. of North America,
7.75%, 2/15/05 553,875
500,000 BarclaysAmerican Corp.,
7.875%, 8/15/98 511,875
500,000 Bellsouth Capital Funding,
6.04%, 11/15/26 495,625
600,000 Citicorp,
8.00%, 2/1/03 637,500
CORPORATE BONDS 44.44% (CONT'D.)
$375,000 Coca-Cola Enterprises, Inc.,
7.00%, 10/1/26 $382,500
600,000 Commercial Credit Co.,
7.875%, 2/1/25 648,750
350,000 Commonwealth Edison Co.,
8.375%, 10/15/06 376,250
350,000 El Paso Natural Gas Co.,
6.75%, 11/15/03 348,250
440,000 Endesa-Chile Overseas,
7.20%, 4/1/06 437,800
800,000 Ford Motor Credit,
8.375%, 1/15/00 842,000
629,000 General Electric Capital Corp.,
8.30%, 9/20/09 706,839
600,000 General Motors Acceptance Corp.,
8.875%, 6/1/10 695,250
500,000 Grace (W.R.) & Co.,
8.00%, 8/15/04 520,625
550,000 Grand Metropolitan Investment PLC,
7.45%, 4/15/35 576,125
600,000 Heller Financial Corp.,
9.375%, 3/15/98 622,500
550,000 Household Finance Corp.,
7.125%, 4/30/99 558,938
650,000 Lehman Brothers, Inc.,
8.80%, 3/1/15 734,500
400,000 Lockheed Martin Corp.,
6.85%, 5/15/01 404,000
200,000 Motorola, Inc.,
8.40%, 8/15/31 235,750
650,000 Nabisco, Inc.,
6.80%, 9/1/01 652,515
350,000 Nabisco, Inc.,
7.55%, 6/15/15 345,188
300,000 NationsBank Corp.,
8.57%, 11/15/24 346,125
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Principal
Amount Value
--------- -----
CORPORATE BONDS 44.44% (CONT'D.)
$590,000 New Jersey Bell Telephone Co.,
7.85%, 11/15/29 $ 646,050
500,000 Pacific Gas & Electric Co.,
7.67%, 12/15/98 513,125
750,000 Quebec Province,
6.29%, 3/6/26 732,345
385,000 Rodamco NV,
7.30%, 5/15/05 391,256
400,000 Rollins Truck Leasing Corp.,
7.00%, 3/15/01 405,000
650,000 Southern California Edison Co.,
5.60%, 12/15/98 643,500
400,000 Union Pacific Resources,
7.00%, 10/15/06 403,500
680,000 WMX Technologies, Inc.,
6.65%, 5/15/05 685,100
----------
16,543,590
----------
U.S. GOVERNMENT AGENCIES 17.35%
405,980 FHLMC, Pool 50361,
9.00%, 11/1/05 425,137
455,287 FHLMC, Pool 303084,
9.00%, 8/1/07 476,770
750,000 FHLMC, Series 1576, Class PH,
6.00%, 1/15/08 718,988
863,613 FHLMC, Pool 555316,
9.00%, 3/1/15 912,461
725,000 FHLMC, Series 1577, Class PH,
6.30%, 3/15/23 702,819
475,000 FNMA, 4.875%, 10/15/98 466,421
400,000 FNMA, 6.08%, 9/3/03 383,476
177,714 FNMA, Pool 70497,
9.00%, 12/1/04 186,100
400,000 FNMA, 6.89%, 4/25/06 406,256
850,000 FNMA, Series 1994-59, Class PE,
5.00%, 3/25/22 807,854
U.S. GOVERNMENT AGENCIES 17.35% (CONT'D.)
$ 375,000 Guaranteed Export Certificates,
6.28%, 6/15/04 $ 372,488
600,000 Tennessee Valley Authority,
6.235%, 7/15/45 601,500
----------
6,460,270
----------
U.S. TREASURY OBLIGATIONS 19.48%
385,000 U.S. Treasury Bond,
8.875%, 8/15/17 475,814
740,000 U.S. Treasury Bond,
8.00%, 11/15/21 849,653
500,000 U.S. Treasury Note,
6.125%, 5/15/98 502,585
1,960,000 U.S. Treasury Note,
5.50%, 11/15/98 1,947,515
280,000 U.S. Treasury Note,
7.75%, 1/31/00 293,093
1,000,000 U.S. Treasury Note,
7.125%, 2/29/00 1,029,790
1,500,000 U.S. Treasury Note,
6.25%, 8/31/00 1,506,150
400,000 U.S. Treasury Note,
7.50%, 2/15/05 427,744
610,000 U.S. Treasury Strips, 2/15/20 125,983
500,000 U.S. Treasury Strips, 11/15/21 92,085
----------
7,250,412
----------
Total Fixed Income Bonds
(cost $33,407,128) 33,784,360
----------
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Principal
Amount Value
--------- -----
SHORT-TERM INVESTMENTS 7.95%
$2,961,961 UMB Bank n.a. Money Market
Fiduciary $ 2,961,961
-----------
Total Short-term Investments
(cost $2,961,961) 2,961,961
-----------
Total Investments 98.70%
(cost $36,369,089) 36,746,321
Other assets
less liabilities 1.30% 482,673
-----------
NET ASSETS 100.00% $37,228,994
===========
See notes to financial statements.
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Number
of Shares Value
--------- -----
COMMON STOCKS 96.13%
AEROSPACE 1.85%
12,100 Northrop Grumman Corp. $1,001,275
-----------
AUTOMOTIVE RELATED INDUSTRIES 2.73%
15,400 Chrysler Corp. 508,200
30,500 Ford Motor Co. 972,188
-----------
1,480,388
-----------
BANKING 7.79%
16,100 Bankers Trust New York Corp. 1,388,625
6,400 Chase Manhattan Corp. 571,200
23,700 Mellon Bank Corp. 1,682,700
15,400 PNC Bank Corp. 579,425
-----------
4,221,950
-----------
BREWERIES 0.93%
12,600 Anheuser-Busch Cos., Inc. 504,000
-----------
CHEMICALS 5.30%
10,000 Chemed Corp. 365,000
33,000 Crompton & Knowles Corp. 635,250
5,300 Dow Chemical Co. 415,387
5,800 du Pont (E.I.) de Nemours and Co. 547,375
8,000 Eastman Chemical Co. 442,000
10,000 Great Lakes Chemical Corp. 467,500
-----------
2,872,512
-----------
COMPUTER EQUIPMENT 1.39%
5,000 International Business Machines
Corp. 755,000
-----------
CONSTRUCTION 0.92%
8,200 Vulcan Materials Co. 499,175
-----------
CONSUMER PRODUCTS 0.97%
10,600 American Brands, Inc. 526,025
-----------
Number
of Shares Value
--------- -----
CONSUMER SERVICES 0.86%
22,116 Jostens, Inc. $ 467,201
-----------
DRUGS 2.92%
8,400 American Home Products Corp. 492,450
5,000 Bristol-Myers Squibb Co. 543,750
13,700 Pharmacia & Upjohn, Inc. 542,862
-----------
1,579,062
-----------
ELECTRIC UTILITIES 3.26%
15,500 DTE Energy Co. 501,813
8,000 FPL Group, Inc. 368,000
19,500 PP&L Resources, Inc. 448,500
24,000 Washington Water Power Co. 447,000
-----------
1,765,313
-----------
ELECTRONICS 4.71%
22,600 AMP, Inc. 867,275
8,000 General Electric Co. 791,000
14,000 Texas Instruments, Inc. 892,500
-----------
2,550,775
-----------
FINANCIAL SERVICES 2.05%
39,900 Bear Stearns Cos., Inc. 1,112,212
-----------
FOOD 1.93%
14,900 Supervalu, Inc. 422,788
19,050 Sysco Corp. 621,506
-----------
1,044,294
-----------
FOREST AND PAPER PRODUCTS 0.83%
10,500 Potlatch Corp. 451,500
-----------
HEALTH CARE EQUIPMENT
AND SUPPLIES 1.72%
19,000 Bard (C. R.), Inc. 532,000
9,700 Baxter International, Inc. 397,700
-----------
929,700
-----------
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
HOLDING COMPANIES 1.68%
26,700 RJR Nabisco Holdings Corp. $ 907,800
-----------
HOSPITAL MANAGEMENT & SERVICES 1.02%
13,500 Columbia/HCA Healthcare Corp. 550,125
-----------
HOUSEHOLD APPLIANCES 0.95%
26,100 Maytag Corp. 515,475
-----------
HOUSEHOLD PRODUCTS 2.11%
26,850 Dial Corp. 396,038
7,500 Tambrands, Inc. 306,562
26,850 Viad Corp. 443,025
-----------
1,145,625
-----------
INSURANCE 5.51%
7,800 Aetna Life and Casualty Co. 624,000
18,800 American General Corp. 768,450
3,450 General Re Corp. 544,238
4,700 MBIA, Inc. 475,875
11,200 Provident Cos., Inc. 575,400
-----------
2,987,963
-----------
LEISURE 1.09%
24,600 Brunswick Corp. 590,400
-----------
METAL PRODUCTS 0.89%
7,600 Aluminum Company of America 484,500
-----------
MINING 2.87%
13,000 Newmont Mining Corp. 581,750
14,400 Phelps Dodge Corp. 972,000
-----------
1,553,750
-----------
NATURAL GAS UTILITIES 5.29%
17,000 Equitable Resources, Inc. 505,750
16,300 NICOR, Inc. 582,725
19,300 Pacific Gas & Electric Co. 405,300
20,000 PanEnergy Corp. 900,000
Number
of Shares Value
--------- -----
NATURAL GAS UTILITIES 5.29% (CONT'D.)
14,000 Peoples Energy Corp. $ 474,250
-----------
2,868,025
-----------
OFFICE EQUIPMENT 2.01%
8,500 Harris Corp. 583,313
9,600 Xerox Corp. 505,200
-----------
1,088,513
-----------
OIL AND GAS 11.26%
10,000 Amerada Hess Corp. 578,750
6,300 Amoco Corp. 507,150
3,800 Atlantic Richfield Co. 503,500
8,000 Camco International, Inc. 369,000
9,000 Chevron Corp. 585,000
8,000 Louisiana Land & Exploration Co. 429,000
12,700 Repsol SA-ADR 484,187
10,100 Texaco, Inc. 991,063
32,700 Ultramar Diamond Shamrock Corp. 1,034,137
16,500 Williams Cos., Inc. 618,750
-----------
6,100,537
-----------
PERSONAL SERVICES 1.14%
22,000 Service Corp. International 616,000
-----------
PRINTING AND PUBLISHING 2.44%
15,000 Deluxe Corp. 491,250
6,875 Dun & Bradstreet Corp. 163,281
20,300 Harland (John H.) Co. 669,900
-----------
1,324,431
-----------
REAL ESTATE 0.99%
13,400 Meditrust Corp. 536,000
-----------
RETAIL 1.59%
8,700 Penney (J.C.) Co., Inc. 424,125
19,000 Wal-Mart Stores, Inc. 434,625
-----------
858,750
-----------
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
SEMICONDUCTORS 1.62%
6,700 Intel Corp. $ 877,281
-----------
STEEL/IRON 0.38%
4,000 Nucor Corp. 204,000
-----------
TELECOMMUNICATIONS 7.19%
21,400 AT&T Corp. 930,900
18,200 GTE Corp. 828,100
13,200 Pacific Telesis Group 485,100
12,700 Southern New England Telecommunications Corp. 493,713
15,800 Sprint Corp. 630,025
16,400 US West Communications Group 528,900
-----------
3,896,738
-----------
TEXTILES 0.52%
6,600 Springs Industries, Inc., Class A 283,800
-----------
TOBACCO PRODUCTS 2.87%
6,600 Philip Morris Cos., Inc. 743,325
25,100 UST, Inc. 812,612
-----------
1,555,937
-----------
TRANSPORTATION 2.55%
18,000 Alexander & Baldwin, Inc. 450,000
9,400 GATX Corp. 455,900
11,000 PHH Corp. 473,000
-----------
1,378,900
-----------
Total Common Stocks
(cost $40,663,606) 52,084,932
-----------
Principal
Amount Value
- --------- -----
SHORT-TERM INVESTMENTS 3.63%
$1,967,322 UMB Bank n.a. Money Market
Fiduciary $ 1,967,322
-----------
Total Short-term Investments
(cost $1,967,322) 1,967,322
-----------
Total Investments 99.76%
(cost $42,630,928) 54,052,254
Other assets
less liabilities 0.24% 132,035
-----------
NET ASSETS 100.00% $54,184,289
===========
See notes to financial statements.
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
COMMON STOCKS 95.87%
ADVERTISING 1.72%
4,200 Catalina Marketing Corp.<F9> $231,525
5,550 Outdoor Systems, Inc.<F9> 156,094
-----------
387,619
-----------
AEROSPACE 1.08%
4,900 Precision Castparts Corp. 243,163
-----------
APPAREL 2.90%
1,900 Gap, Inc. 57,238
2,500 Jones Apparel Group, Inc.<F9> 93,437
3,600 Liz Claiborne, Inc. 139,050
3,900 Nautica Enterprises, Inc.<F9> 98,475
1,800 Nike, Inc., Class B 107,550
2,200 St. Johns Knits, Inc. 95,700
2,200 Wolverine World Wide, Inc. 63,800
-----------
655,250
-----------
BANKING 2.47%
1,700 BankAmerica Corp. 169,575
1,900 Chase Manhattan Corp. 169,575
800 Citicorp 82,400
2,000 First Bank System, Inc. 136,500
-----------
558,050
-----------
BUSINESS SERVICES 3.76%
3,500 APAC Teleservices, Inc.<F9> 134,312
4,600 Cincinnati Bell, Inc. 283,475
8,400 National Education Corp.<F9> 128,100
5,900 Paychex, Inc. 303,481
-----------
849,368
-----------
CHEMICALS 1.83%
3,500 Allied-Signal, Inc. 234,500
3,900 Praxair, Inc. 179,887
-----------
414,387
Number
of Shares Value
--------- -----
COMMERCIAL SERVICES 0.30%
2,400 Sabre Group Holdings, Inc.<F9> $ 66,900
-----------
COMMUNICATIONS 0.29%
2,500 WorldCom, Inc.<F9> 65,156
-----------
COMPUTER COMPONENTS AND
SOFTWARE 6.78%
3,800 BMC Software, Inc.<F9> 157,225
6,100 Cisco Systems, Inc.<F9> 388,113
1,800 Concord EFS, Inc.<F9> 50,850
5,200 FORE Systems, Inc.<F9> 170,950
2,400 Microsoft Corp.<F9> 198,300
3,200 Parametric Technology Corp.<F9> 164,400
9,300 Sterling Commerce, Inc.<F9> 327,825
2,200 Transaction Systems
Architects, Inc.<F9> 73,150
-----------
1,530,813
-----------
COMPUTER SERVICES 6.01%
2,300 BDM International, Inc.<F9> 124,775
2,700 Computer Associates
International, Inc. 134,325
4,400 Computer Horizons Corp.<F9> 169,400
8,500 Equifax, Inc. 260,313
4,600 First Data Corp. 167,900
5,600 Keane, Inc.<F9> 177,800
3,950 Oracle Systems Corp.<F9> 164,912
4,000 Sungard Data Systems, Inc.<F9> 158,000
-----------
1,357,425
-----------
CONSUMER SERVICES 0.85%
8,050 CUC International, Inc.<F9> 191,187
-----------
DRUGS 5.62%
3,900 Abbott Laboratories 197,925
2,100 Amgen, Inc.<F9> 114,187
5,400 Dura Pharmaceuticals, Inc.<F9> 257,850
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
DRUGS 5.62% (CONT'D.)
3,100 Johnson & Johnson Corp. $ 154,225
1,300 Merck & Co., Inc. 103,025
1,800 Pfizer, Inc. 149,175
1,500 Schering-Plough Corp. 97,125
3,900 Teva Pharmaceutical Industries
Ltd. ADR 195,975
-----------
1,269,487
-----------
ELECTRONICS 3.70%
4,200 Diebold, Inc. 264,075
3,000 General Electric Co. 296,625
1,700 Hewlett-Packard Co. 85,425
2,900 Honeywell, Inc. 190,675
-----------
836,800
-----------
ENTERTAINMENT 0.65%
2,200 MGM Grand, Inc.<F9> 76,725
1,000 Walt Disney Co. 69,625
-----------
146,350
-----------
ENVIRONMENTAL SERVICES 0.33%
2,400 U.S. Filter Corp.<F9> 76,200
-----------
FINANCIAL SERVICES 4.37%
5,000 Capital One Financial Corp. 180,000
4,500 Finova Group, Inc. 289,125
1,300 Household International, Inc. 119,925
1,300 Merrill Lynch & Co., Inc. 105,950
5,100 Money Store (The), Inc. 140,887
3,400 SunAmerica, Inc. 150,875
-----------
986,762
-----------
FOOD 0.84%
2,100 ConAgra, Inc. 104,475
1,100 CPC International, Inc. 85,250
-----------
189,725
-----------
HEALTHCARE EQUIPMENT AND
SUPPLIES 2.66%
3,100 Boston Scientific Corp.<F9> $186,000
5,600 Omnicare, Inc. 179,900
7,100 Sybron International Corp.<F9> 234,300
-----------
600,200
-----------
HOME FURNISHINGS 2.82%
20,000 Furniture Brands International, Inc.<F9> 280,000
6,300 Miller (Herman), Inc. 356,737
-----------
636,737
-----------
HOSPITAL MANAGEMENT AND
SERVICES 0.62%
6,400 Tenet Healthcare Corp.<F9> 140,000
-----------
HOTELS 2.89%
10,200 Host Marriott Corp.<F9> 163,200
4,500 Marriott International, Inc. 248,625
3,300 Promus Hotel Corp.<F9> 97,763
2,600 Starwood Lodging Trust 143,325
-----------
652,913
-----------
HOUSEHOLD PRODUCTS 1.86%
800 Clorox Co. 80,300
3,000 Gillette Co. 233,250
1,000 Procter & Gamble Co. 107,500
-----------
421,050
-----------
INFORMATION SYSTEMS 0.58%
4,400 Affiliated Computer Services, Inc.<F9> 130,900
-----------
INSURANCE 4.96%
1,600 American International Group, Inc. 173,200
1,500 MGIC Investment Corp. 114,000
3,500 Oxford Health Plans, Inc.<F9> 204,969
5,300 Reliastar Financial Corp. 306,075
3,600 Travelers Group, Inc. 163,350
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
INSURANCE 4.96% (CONT'D.)
2,200 UNUM Corp. $ 158,950
-----------
1,120,544
-----------
MACHINERY AND EQUIPMENT 2.22%
1,800 Black & Decker Corp. 54,225
2,300 Caterpillar, Inc. 173,075
3,600 Cooper Cameron Corp.<F9> 275,400
-----------
502,700
-----------
MANUFACTURING 2.23%
3,100 Danaher Corp. 144,538
5,000 Federal Signal Corp. 129,375
800 Johnson Controls, Inc. 66,300
3,100 Tyco International Ltd. 163,913
-----------
504,126
-----------
MEDIA 0.67%
4,200 Clear Channel
Communications, Inc.<F9> 151,725
-----------
MINING 0.64%
1,700 Potash Corp. of Saskatchewan, Inc. 144,500
-----------
OIL AND GAS 10.34%
6,200 Baker Hughes, Inc. 213,900
4,000 Barrett Resources Corp.<F9> 170,500
6,300 BJ Services Co.<F9> 321,300
1,700 Columbia Gas System, Inc. 108,162
5,200 ENSCO International, Inc.<F9> 252,200
5,500 Falcon Drilling Co., Inc.<F9> 215,875
3,600 Halliburton Co. 216,900
1,700 Mobil Corp. 207,825
3,600 Noble Affiliates, Inc. 172,350
8,800 Rowan Cos., Inc.<F9> 199,100
6,900 Williams Cos., Inc. 258,750
-----------
2,336,862
-----------
RESTAURANTS 2.03%
3,100 Boston Chicken, Inc.<F9> $ 111,213
3,200 McDonald's Corp. 144,800
7,100 Starbucks Corp.<F9> 203,237
-----------
459,250
-----------
RETAIL 7.60%
7,800 Borders Group, Inc.<F9> 279,825
2,400 Corporate Express, Inc.<F9> 70,650
5,400 Footstar, Inc.<F9> 134,325
4,000 Home Depot, Inc. 200,500
7,000 PETsMART, Inc.<F9> 153,125
5,600 Price/Costco, Inc.<F9> 140,700
4,700 Safeway, Inc.<F9> 200,925
6,000 Staples, Inc.<F9> 108,375
5,200 Tiffany & Co. 190,450
5,000 Viking Office Products, Inc.<F9> 133,438
2,600 Walgreen Co. 104,000
-----------
1,716,313
-----------
SAVINGS AND LOANS 0.28%
2,436 Washington Federal, Inc. 64,554
-----------
TELECOMMUNICATIONS 6.01%
12,200 ADC Telecommunications, Inc.<F9> 379,725
5,300 Andrew Corp.<F9> 281,231
3,200 Aspect Telecommunications Corp.<F9> 203,200
4,900 Lucent Technologies, Inc. 226,625
4,400 Tellabs, Inc.<F9> 165,550
1,400 U.S. Robotics Corp.<F9> 100,800
-----------
1,357,131
-----------
WASTE DISPOSAL 2.07%
3,200 United Waste Systems, Inc.<F9> 110,000
11,200 U.S.A. Waste Services, Inc.<F9> 357,000
-----------
467,000
-----------
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
WHOLESALE 1.89%
7,350 Cardinal Health, Inc. $ 428,138
-----------
515,936 Total Common Stock
(cost $17,465,897) 21,659,285
-----------
Principal
Amount
- ----------
SHORT-TERM INVESTMENTS 4.63%
$1,046,482 UMB Bank n.a. Money Market
Fiduciary 1,046,482
-----------
Total Short-term Investments
(cost $1,046,482) 1,046,482
-----------
Total Investments 100.50%
(cost $18,512,379) 22,705,767
Liabilities less
other assets (0.50%) (112,605)
-----------
NET ASSETS 100.00% $22,593,162
===========
<F9>Non-income producing security
See notes to financial statements.
BALANCED FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
COMMON STOCKS 58.41%
ADVERTISING 1.15%
3,800 Catalina Marketing Corp.<F10> $209,475
4,650 Outdoor Systems, Inc.<F10> 130,781
-----------
340,256
-----------
AEROSPACE 1.27%
2,100 Northrop Grumman Corp. 173,775
4,100 Precision Castparts Corp. 203,463
-----------
377,238
-----------
APPAREL 1.08%
2,000 Jones Apparel Group, Inc.<F10> 74,750
2,900 Liz Claiborne, Inc. 112,013
1,400 Nike, Inc., Class B 83,650
1,700 Wolverine World Wide, Inc. 49,300
-----------
319,713
-----------
AUTOMOTIVE RELATED INDUSTRIES 0.82%
2,500 Chrysler Corp. 82,500
5,000 Ford Motor Co. 159,375
-----------
241,875
-----------
BANKING 2.35%
3,000 Bankers Trust New York Corp. 258,750
1,000 Chase Manhattan Corp. 89,250
3,700 Mellon Bank Corp. 262,700
2,300 PNC Bank Corp. 86,538
-----------
697,238
-----------
BREWERIES 0.30%
2,200 Anheuser-Busch Cos., Inc. 88,000
-----------
BUSINESS SERVICES 2.38%
2,800 APAC Teleservices, Inc.<F10> 107,450
4,100 Cincinnati Bell, Inc. 252,663
6,700 National Education Corp.<F10> 102,175
4,737 Paychex, Inc. 243,659
-----------
705,947
-----------
Number
of Shares Value
---------- -------
CHEMICALS 1.75%
2,000 Chemed Corp. $ 73,000
5,500 Crompton & Knowles Corp. 105,875
1,000 Dow Chemical Co. 78,375
1,000 du Pont (E.I.) de Nemours and Co. 94,375
1,600 Eastman Chemical Co. 88,400
1,700 Great Lakes Chemical Corp. 79,475
-----------
519,500
-----------
COMPUTER COMPONENTS AND SOFTWARE 1.85%
2,100 Cisco Systems, Inc.<F10> 133,613
1,400 Concord EFS, Inc.<F10> 39,550
3,000 Parametric Technology Corp.<F10> 154,125
4,700 Sterling Commerce, Inc.<F10> 165,675
1,700 Transaction Systems
Architects, Inc.<F10> 56,525
-----------
549,488
-----------
COMPUTER EQUIPMENT 0.41%
800 International Business
Machines Corp. 120,800
-----------
COMPUTER SERVICES 1.68%
1,900 BDM International, Inc.<F10> 103,075
3,500 Computer Horizons Corp.<F10> 134,750
4,400 Keane, Inc.<F10> 139,700
3,100 Sungard Data Systems, Inc.<F10> 122,450
-----------
499,975
-----------
CONSTRUCTION 0.29%
1,400 Vulcan Materials Co. 85,225
-----------
CONSUMER PRODUCTS 0.17%
1,000 American Brands, Inc. 49,625
-----------
CONSUMER SERVICES 0.25%
3,568 Jostens, Inc. 75,374
-----------
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
DRUGS 2.08%
1,400 American Home Products Corp. $ 82,075
800 Bristol-Myers Squibb Co. 87,000
4,300 Dura Pharmaceuticals, Inc.<F10> 205,325
2,200 Pharmacia & Upjohn, Inc. 87,175
3,100 Teva Pharmaceutical Industries
Ltd. ADR 155,775
-----------
617,350
-----------
ELECTRIC UTILITIES 1.13%
2,900 DTE Energy Co. 93,888
1,700 FPL Group, Inc. 78,200
3,700 PP&L Resources, Inc. 85,100
4,200 Washington Water Power Co. 78,225
-----------
335,413
-----------
ELECTRONICS 1.81%
3,000 AMP, Inc. 115,125
3,000 Diebold, Inc. 188,625
800 General Electric Co. 79,100
2,400 Texas Instruments, Inc. 153,000
-----------
535,850
-----------
ENTERTAINMENT 0.25%
2,100 MGM Grand, Inc.<F10> 73,238
-----------
FINANCIAL SERVICES 1.49%
6,930 Bear Stearns Cos., Inc. 193,174
3,900 Finova Group, Inc. 250,575
-----------
443,749
-----------
FOOD 0.61%
2,600 Supervalu, Inc. 73,775
3,250 Sysco Corp. 106,031
-----------
179,806
-----------
FOREST AND PAPER PRODUCTS 0.26%
1,800 Potlatch Corp. 77,400
-----------
Number
of Shares Value
--------- -----
HEALTH CARE EQUIPMENT
AND SUPPLIES 1.95%
3,000 Bard (C.R.), Inc. $ 84,000
1,800 Baxter International, Inc. 73,800
7,600 Omnicare, Inc. 244,150
5,400 Sybron International Corp. 178,200
-----------
580,150
-----------
HOLDING COMPANIES 0.48%
4,200 RJR Nabisco Holdings Corp. 142,800
-----------
HOME FURNISHINGS 1.51%
13,500 Furniture Brands International, Inc.<F10> 189,000
4,600 Miller (Herman), Inc. 260,475
-----------
449,475
-----------
HOSPITAL MANAGEMENT
AND SERVICES 0.33%
2,400 Columbia/HCA Healthcare Corp. 97,800
-----------
HOTELS 1.47%
8,900 Host Marriott Corp.<F10> 142,400
1,500 Marriott International, Inc. 82,875
2,800 Promus Hotel Corp.<F10> 82,950
2,300 Starwood Lodging Trust 126,787
-----------
435,012
-----------
HOUSEHOLD APPLIANCES 0.30%
4,500 Maytag Corp. 88,875
-----------
HOUSEHOLD PRODUCTS 0.48%
4,600 Dial Corp. 67,850
4,600 Viad Corp. 75,900
-----------
143,750
-----------
INFORMATION SYSTEMS 0.32%
3,200 Affiliated Computer Services, Inc.<F10> 95,200
-----------
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
INSURANCE 2.43%
1,200 Aetna Life and Casualty Co. $ 96,000
3,200 American General Corp. 130,800
600 General Re Corp. 94,650
800 MBIA, Inc. 81,000
1,600 Providian Corp. 82,200
4,100 Reliastar Financial Corp. 236,775
-----------
721,425
-----------
LEISURE 0.30%
3,700 Brunswick Corp. 88,800
-----------
MACHINERY & EQUIPMENT 0.72%
2,800 Cooper Cameron Corp.<F10> 214,200
-----------
MANUFACTURING 1.00%
4,100 Danaher Corp. 191,163
4,000 Federal Signal Corp. 103,500
-----------
294,663
-----------
MEDIA 0.41%
3,400 Clear Channel Communications, Inc.<F10> 122,825
-----------
METAL PRODUCTS 0.30%
1,400 Aluminum Company of America 89,250
-----------
MINING 0.95%
2,700 Newmont Mining Corp. 120,825
2,400 Phelps Dodge Corp. 162,000
-----------
282,825
-----------
NATURAL GAS UTILITIES 1.52%
3,300 Equitable Resources, Inc. 98,175
2,400 NICOR, Inc. 85,800
3,300 Pacific Gas & Electric Co. 69,300
2,500 PanEnergy Corp. 112,500
2,500 Peoples Energy Corp. 84,688
-----------
450,463
-----------
Number
of Shares Value
--------- -----
OFFICE EQUIPMENT 0.56%
1,200 Harris Corp. $ 82,350
1,600 Xerox Corp. 84,200
-----------
166,550
-----------
OIL AND GAS 7.61%
2,000 Amerada Hess Corp. 115,750
1,100 Amoco Corp. 88,550
600 Atlantic Richfield Co. 79,500
5,500 Baker Hughes, Inc. 189,750
3,100 Barrett Resources Corp.<F10> 132,138
5,600 BJ Services Co.<F10> 285,600
1,000 Chevron Corp. 65,000
4,400 ENSCO International, Inc.<F10> 213,400
4,300 Falcon Drilling Co., Inc.<F10> 168,775
1,500 Louisiana Land & Exploration Co. 80,437
3,000 Noble Affiliates, Inc. 143,625
2,400 Repsol SA-ADR 91,500
7,100 Rowan Cos., Inc.<F10> 160,637
1,500 Texaco, Inc. 147,188
5,800 Ultramar Diamond Shamrock Corp. 183,425
3,000 Williams Cos., Inc. 112,500
-----------
2,257,775
-----------
PERSONAL SERVICES 0.34%
3,600 Service Corp. International 100,800
-----------
PRINTING AND PUBLISHING 0.76%
3,000 Deluxe Corp. 98,250
1,500 Dun & Bradstreet Corp. 35,625
2,800 Harland (John H.) Co. 92,400
-----------
226,275
-----------
REAL ESTATE 0.30%
2,200 Meditrust Corp. 88,000
-----------
RESTAURANT 0.53%
5,500 Starbucks Corp.<F10> 157,437
-----------
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Number
of Shares Value
- --------- -----
RETAIL 2.39%
2,900 Borders Group, Inc.<F10> $ 104,037
4,200 Footstar, Inc.<F10> 104,475
1,500 Penney (J.C.) Co., Inc. 73,125
6,000 PETsMART, Inc.<F10> 131,250
3,200 Tiffany & Co. 117,200
3,900 Viking Office Products, Inc.<F10> 104,081
3,300 Wal-Mart Stores, Inc. 75,487
-----------
709,655
-----------
SEMICONDUCTORS 0.40%
900 Intel Corp. 117,844
-----------
STEEL/IRON 0.14%
800 Nucor Corp. 40,800
-----------
TELECOMMUNICATIONS 4.47%
7,400 ADC Telecommunications, Inc.<F10> 230,325
1,400 Andrew Corp.<F10> 74,287
2,500 Aspect Telecommunications Corp.<F10> 158,750
3,600 AT&T Corp. 156,600
3,100 GTE Corp. 141,050
2,300 Pacific Telesis Group 84,525
2,200 Southern New England Telecommunications Corp. 85,525
2,300 Sprint Corp. 91,712
3,600 Tellabs, Inc.<F10> 135,450
1,100 U.S. Robotics Corp.<F10> 79,200
2,800 US West Communications Group 90,300
-----------
1,327,724
-----------
TEXTILES 0.25%
1,700 Springs Industries, Inc., Class A 73,100
-----------
TOBACCO PRODUCTS 0.91%
1,200 Philip Morris Cos., Inc. 135,150
4,200 UST, Inc. 135,975
-----------
271,125
-----------
Number
of Shares Value
--------- -----
TRANSPORTATION 0.88%
3,500 Alexander & Baldwin, Inc. $ 87,500
1,800 GATX Corp. 87,300
2,000 PHH Corp. 86,000
-----------
260,800
-----------
WASTE DISPOSAL 0.40%
3,700 U.S.A. Waste Services, Inc.<F10> 117,937
-----------
WHOLESALE 0.62%
3,150 Cardinal Health, Inc. 183,487
-----------
Total Common Stocks
(cost $13,414,886) 17,329,882
-----------
Principal
Amount
- ---------
FIXED INCOME BONDS 37.99%
ASSET-BACKED SECURITIES 4.29%
$225,000 Amresco Residential Securities
Mortgage Loan Trust,
8.075%, 4/25/26 233,288
100,000 Amresco Residential Securities
Mortgage Loan Trust,
7.05%, 4/25/27 97,944
125,000 Chase Manhattan Auto Owner Trust,
5.95%, 11/15/00 124,557
100,000 Chase Manhattan Credit Card Master
Trust, 7.04%, 2/15/04 102,430
100,000 EQCC Home Equity Loan Trust,
8.95%, 1/15/15 108,588
125,000 Ford Credit Auto Trust,
6.50%, 11/15/99 126,117
75,000 Green Tree Financial Corp.,
6.35%, 12/15/26 74,743
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Principal
Amount Value
- --------- -----
ASSET-BACKED SECURITIES 4.29% (CONT'D.)
$159,497 Old Stone Credit Corp. Home
Equity Trust, 5.85%, 3/15/08 $ 155,439
125,000 Premier Auto Trust,
6.50%, 3/6/00 125,920
50,000 UCFC Home Equity Loan Trust,
7.825% 12/15/27 51,387
75,083 Union Federal Savings Bank Trust,
4.875%, 2/15/00 74,317
-----------
1,274,730
-----------
CORPORATE BONDS 19.02%
225,000 Associates Corp. of North America,
7.75%, 2/15/05 237,375
225,000 BarclaysAmerican Corp.,
7.875%, 8/15/98 230,344
150,000 Bellsouth Capital Funding,
6.04%, 11/15/26 148,688
200,000 Citicorp, 8.11%, 11/4/04 216,500
225,000 Coca-Cola Enterprises, Inc.,
7.00%, 10/1/26 229,500
130,000 Commercial Credit Co.,
7.875%, 2/1/25 140,563
100,000 Commonwealth Edison Co.,
8.375%, 10/15/06 107,500
100,000 El Paso Natural Gas Co.,
6.75%, 11/15/03 99,500
130,000 Endesa-Chile Overseas,
7.20%, 4/1/06 129,350
250,000 Ford Motor Credit,
8.375%, 1/15/00 263,125
150,000 General Motors Acceptance Corp.,
8.875%, 6/1/10 173,813
100,000 Grace (W.R.) & Co.,
8.00%, 8/15/04 104,125
225,000 Grand Metropolitan Investment PLC,
7.45%, 4/15/35 235,687
Principal
Amount Value
--------- -----
CORPORATE BONDS 19.02% (CONT'D.)
$250,000 Heller Financial Corp.,
9.375%, 3/15/98 $ 259,375
260,000 Household Finance Corp.,
7.125%, 4/30/99 264,225
220,000 Lehman Brothers, Inc.,
8.80%, 3/1/15 248,600
120,000 Lockheed Martin Corp.,
6.85%, 5/15/01 121,200
100,000 Nabisco, Inc.,
7.55%, 6/15/15 98,625
150,000 NationsBank Corp.,
8.57%, 11/15/24 173,062
175,000 New Jersey Bell Telephone Co.,
7.85%, 11/15/29 191,625
250,000 Pacific Gas & Electric Co.,
7.67%, 12/15/98 256,562
250,000 Quebec Province,
6.29%, 3/6/26 244,115
115,000 Rodamco NV,
7.30%, 5/15/05 116,869
150,000 Rollins Truck Leasing Corp.,
7.00%, 3/15/01 151,875
175,000 Southern California Edison Co.,
5.60%, 12/15/98 173,250
100,000 Tenneco, Inc.,
10.20%, 3/15/08 121,625
130,000 Union Pacific Resources,
7.00%, 10/15/06 131,137
250,000 Virginia Electric & Power Co.,
9.30%, 6/9/99 266,875
250,000 Wal-Mart Stores,
6.125%, 10/1/99 249,375
250,000 WMX Technologies, Inc.,
7.10%, 8/1/26 258,125
-----------
5,642,590
-----------
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1996
Principal
Amount Value
- --------- -----
U.S. GOVERNMENT AGENCIES 6.89%
$100,000 FHLMC, Series 1563, Class E,
4.75%, 3/15/06 $ 96,535
250,000 FHLMC, Series 1576, Class PH,
6.00%, 1/15/08 239,663
296,096 FHLMC, Pool 555316,
9.00%, 3/1/15 312,844
75,000 FHLMC, Series 1577, Class PH,
6.30%, 3/15/23 72,705
100,000 FNMA, 6.29%, 10/4/00 100,086
100,000 FNMA, 5.72%, 3/8/01 97,849
120,000 FNMA, 6.15%, 12/14/01 117,844
90,218 FNMA Pool 50361,
9.00%, 11/1/05 94,475
100,000 FNMA, 6.89%, 4/25/06 101,564
50,000 FNMA, Series 1993-191, Class PH,
6.00%, 5/25/08 47,838
175,000 FNMA, Series 1996-21, Class PG,
6.00%, 2/25/10 167,035
300,000 FNMA, Series 1994-59, Class PE,
5.00%, 3/25/22 285,125
6,787 GNMA, Pool 031096,
9.50%, 6/15/09 7,336
154,412 Guaranteed Export Certificates,
6.28%, 6/15/04 153,377
150,000 Tennessee Valley Authority,
6.235%, 7/15/45 150,375
-----------
2,044,651
-----------
U.S. TREASURY OBLIGATIONS 7.79%
240,000 U.S. Treasury Bond,
8.875%, 8/15/17 296,611
170,000 U.S. Treasury Bond,
8.00%, 11/15/21 195,191
550,000 U.S. Treasury Note,
5.50%, 11/15/98 546,496
130,000 U.S. Treasury Note,
7.75%, 12/31/99 136,048
Principal
Amount Value
- --------- -----
U.S. TREASURY OBLIGATIONS 7.79% (CONT'D.)
$180,000 U.S. Treasury Note,
7.75%, 1/31/00 $ 188,417
700,000 U.S. Treasury Note,
7.125%, 2/29/00 720,853
150,000 U.S. Treasury Note,
7.50%, 2/15/05 160,404
320,000 U.S. Treasury Strips, 2/15/20 66,090
-----------
2,310,110
-----------
Total Fixed Income Bonds
(cost $11,142,193) 11,272,081
-----------
SHORT-TERM INVESTMENTS 2.88%
855,400 UMB Bank n.a. Money Market
Fiduciary 855,400
-----------
Total Short-term Investments
(cost $855,400) 855,400
-----------
Total Investments 99.28%
(cost $25,412,479) 29,457,363
Other assets
less liabilities 0.72% 212,644
-----------
NET ASSETS 100.00% $29,670,007
===========
<F10>Non-income producing security
See notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
FIXED INCOME EQUITY INCOME EQUITY GROWTH BALANCED
FUND FUND FUND FUND
---- ---- ---- ----
ASSETS:
Investments at value
(cost $36,369,089,
$42,630,928, $18,512,379
and $25,412,479,
respectively) $36,746,321 $54,052,254 $22,705,767 $29,457,363
Interest and dividends
receivable 504,786 147,184 13,773 207,345
Cash -- -- -- 88,035
Receivable for
securities sold -- 43,939 -- 8,788
Prepaid expenses 12,873 10,689 12,316 9,273
Organizational expenses,
net of accumulated
amortization 5,857 5,857 5,857 5,857
---------- ---------- ---------- ----------
Total Assets 37,269,837 54,259,923 22,737,713 29,776,661
---------- ---------- ---------- ----------
LIABILITIES:
Payable for securities
purchased -- -- 110,225 62,176
Accrued expenses 22,959 29,863 16,369 19,381
Accrued investment
advisory fee 17,884 45,771 17,957 25,097
---------- ---------- ---------- ----------
Total Liabilities 40,843 75,634 144,551 106,654
---------- ---------- ---------- ----------
NET ASSETS $37,228,994 $54,184,289 $22,593,162 $29,670,007
========== ========== ========== ==========
NET ASSETS CONSIST OF:
Capital stock $ 376 $ 409 $ 168 $ 257
Paid-in-capital in
excess of par 37,306,516 42,815,086 18,413,304 25,632,608
Undistributed net
investment income 4,527 7,258 -- 2,979
Undistributed net
realized loss
on investments (459,657) (59,790) (13,698) (10,721)
Net unrealized
appreciation
on investments 377,232 11,421,326 4,193,388 4,044,884
---------- ---------- ---------- ----------
NET ASSETS $37,228,994 $54,184,289 $22,593,162 $29,670,007
========== ========== ========== ==========
CAPITAL STOCK,
$.0001 PAR VALUE
Authorized 125,000,000 125,000,000 125,000,000 125,000,000
Issued and outstanding 3,759,741 4,086,659 1,679,515 2,573,200
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE
PER SHARE $9.90 $13.26 $13.45 $11.53
===== ====== ====== ======
See notes to financial statements.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
FIXED INCOME EQUITY INCOME EQUITY GROWTH BALANCED
FUND FUND FUND FUND
---- ---- ---- ----
INVESTMENT INCOME:
Interest $2,299,180 $ 102,993 $ 46,330 $ 734,275
Dividends -- 1,424,720 132,749 286,767
---------- ---------- ---------- ----------
2,299,180 1,527,713 179,079 1,021,042
---------- ---------- ---------- ----------
EXPENSES:
Investment advisory
fees 214,268 479,210 189,186 278,719
Administration and
fund accounting fees 67,228 90,155 35,579 52,460
Shareholder servicing
fees 32,364 35,451 28,427 30,268
Federal and state
registration fees 15,457 22,577 12,038 8,799
Audit fees 9,350 13,344 2,892 6,415
Pricing fees 9,042 3,191 4,701 14,608
Legal fees 6,893 9,234 3,433 5,372
Other 4,255 5,597 2,116 3,099
Amortization of
organization expenses 2,936 2,936 2,936 2,936
Custody fees 2,828 5,678 8,445 10,928
Reports to shareholders 1,393 2,498 1,357 580
Insurance 629 748 278 474
Directors' fees 391 1,253 20 --
---------- ---------- ---------- ----------
Total expenses
before waiver 367,034 671,872 291,408 414,658
Waiver of fees (10,507) -- (7,841) (13,936)
---------- ---------- ---------- ----------
Net Expenses 356,527 671,872 283,567 400,722
---------- ---------- ---------- ----------
NET INVESTMENT
INCOME (LOSS) 1,942,653 855,841 (104,488) 620,320
---------- ---------- ---------- ----------
REALIZED AND UNREALIZED
(LOSS) GAIN:
Net realized gain on
investments 41,413 2,920,709 2,335,310 2,202,647
Change in unrealized
appreciation/
depreciation on
investments (940,079) 5,216,409 1,597,211 1,145,135
---------- ---------- ---------- ----------
Net (Loss) Gain on
Investments (898,666) 8,137,118 3,932,521 3,347,782
---------- ---------- ---------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $1,043,987 $8,992,959 $3,828,033 $3,968,102
========== ========== ========== ==========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (PART 1)
FIXED INCOME EQUITY INCOME
FUND FUND
---- ----
Year Year Year Year
ended ended ended ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
------------- ------------- ------------- -------------
OPERATIONS:
Net investment
income (loss) $ 1,942,653 $ 1,827,396 $ 855,841 $ 907,779
Net realized gain
on investments 41,413 387,462 2,920,709 2,568,064
Change in
unrealized
appreciation/
depreciation on
investments (940,079) 2,799,242 5,216,409 7,585,055
---------- ---------- ---------- ----------
Net Increase in Net
Assets Resulting
from Operations 1,043,987 5,014,100 8,992,959 11,060,898
---------- ---------- ---------- ----------
DISTRIBUTIONS OF:
Net investment
income (1,957,366) (1,835,221) (849,533) (919,555)
Net realized gains -- -- (2,896,588) (1,995,841)
---------- ---------- ---------- ----------
Total Distributions (1,957,366) (1,835,221) (3,746,121) (2,915,396)
---------- ---------- ---------- ----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 4,792,119 8,894,331 8,087,479 5,469,235
Shares issued to
holders in
reinvestment of
distributions 1,821,795 1,816,185 3,659,747 3,116,750
Shares redeemed (4,088,392) (6,419,602) (4,912,154) (6,845,993)
---------- ---------- ---------- ----------
Net Increase
(Decrease) 2,525,522 4,290,914 6,835,072 1,739,992
---------- ---------- ---------- ----------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS 1,612,143 7,469,793 12,081,910 9,885,494
NET ASSETS:
Beginning of period 35,616,851 28,147,058 42,102,379 32,216,885
---------- ---------- ---------- ----------
End of period $37,228,994 $35,616,851 $54,184,289 $42,102,379
========== ========== ========== ==========
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (PART 2)
EQUITY GROWTH BALANCED
FUND FUND
---- ----
Year Year Year Year
ended ended ended ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
------------- ------------- ------------- -------------
OPERATIONS:
Net investment
income (loss) $ (104,488) $ (12,422) $ 620,320 $ 869,085
Net realized gain
on investments 2,335,310 907,467 2,202,647 1,793,984
Change in
unrealized
appreciation/
depreciation on
investments 1,597,211 2,318,801 1,145,135 3,484,654
---------- ---------- ---------- ----------
Net Increase in
Net Assets Resulting
from Operations 3,828,033 3,213,846 3,968,102 6,147,723
---------- ---------- ---------- ----------
DISTRIBUTIONS OF:
Net investment income -- -- (625,655) (878,699)
Net realized gains (2,224,193) -- (2,179,125) (568,623)
---------- ---------- ---------- ----------
Total Distributions (2,224,193) -- (2,804,780) (1,447,322)
---------- ---------- ---------- ----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 4,869,180 3,722,084 2,339,062 1,867,499
Shares issued to
holders in
reinvestment of
distributions 2,190,052 11,612 2,785,184 1,562,410
Shares redeemed (1,981,568) (1,140,257) (3,396,378) (11,465,880)
---------- ---------- ---------- ----------
Net Increase
(Decrease) 5,077,664 2,593,439 1,727,868 (8,035,971)
---------- ---------- ---------- ----------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS 6,681,504 5,807,285 2,891,190 (3,335,570)
NET ASSETS:
Beginning of period 15,911,658 10,104,373 26,778,817 30,114,387
---------- ---------- ---------- ----------
End of period $22,593,162 $15,911,658 $29,670,007 $26,778,817
========== ========== ========== ==========
See notes to financial statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (PART 1)
FIXED INCOME EQUITY INCOME
FUND FUND
---- ----
Year Year Jan. 3, 1994<F11> Year Year Jan. 3, 1994 <F11>
ended ended through ended ended through
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.17 $9.24 $10.00 $11.83 $9.39 $10.00
Income from Investment
Operations:
Net investment income (loss) 0.54 0.54 0.46 0.23 0.28 0.32
Net realized and unrealized
(losses) gains on
investments (0.27) 0.93 (0.77) 2.18 3.03 (0.61)
------- ------- -------- ------- ------- -------
Total from Investment
Operations 0.27 1.47 (0.31) 2.41 3.31 (0.29)
------- ------- -------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (0.54) (0.54) (0.45) (0.23) (0.28) (0.32)
Distributions from net
realized gains -- -- -- (0.75) (0.59) --
------- ------- -------- ------- ------- -------
Total Distributions (0.54) (0.54) (0.45) (0.98) (0.87) (0.32)
------- ------- -------- ------- ------- -------
Net Asset Value, End of
Period $9.90 $10.17 $9.24 $13.26 $11.83 $9.39
===== ====== ===== ====== ====== =====
Total Return <F12> 2.83% 16.26% (3.09)% 20.43% 35.62% (2.93)%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $37,229 $35,617 $28,147 $54,184 $42,102 $32,217
Ratio of net expenses
to average
net assets <F13> <F14> 1.00% 0.98% 1.00% 1.40% 1.37% 1.45%
Ratio of net investment
income to
average net
assets <F13> <F14> 5.44% 5.46% 4.84% 1.79% 2.47% 3.33%
Portfolio turnover rate 169% 126% 139% 32% 40% 106%
Average commission rate
paid on
portfolio investment
transactions<F15> N/A N/A N/A $0.0554 N/A N/A
FINANCIAL HIGHLIGHTS (PART 2)
EQUITY GROWTH BALANCED
FUND FUND
---- ----
Year Year Jan. 3, 1994<F11> Year Year Jan. 3, 1994<F11>
ended ended through ended ended through
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.13 $9.31 $10.00 $11.03 $9.43 $10.00
Income from Investment
Operations:
Net investment income (loss) (0.06) (0.01) 0.01 0.26 0.32 0.26
Net realized and unrealized
(losses) gains on
investments 2.84 2.83 (0.69) 1.41 1.84 (0.57)
------- ------- -------- ------- ------- -------
Total from Investment
Operations 2.78 2.82 (0.68) 1.67 2.16 (0.31)
------- ------- -------- ------- ------- -------
Less Distributions:
Dividends from net investment
income -- -- (0.01) (0.26) (0.33) (0.26)
Distributions from net
realized gains (1.46) -- -- (0.91) (0.23) --
------- ------- -------- ------- ------- -------
Total Distributions (1.46) -- (0.01) (1.17) (0.56) (0.26)
------- ------- -------- ------- ------- -------
Net Asset Value,
End of Period $13.45 $12.13 $9.31 $11.53 $11.03 $9.43
======= ======= ======== ======= ======= =======
Total Return <F12> 22.90% 30.29% (6.78)% 15.29% 23.14% (3.06)%
Supplemental Data and Ratios:
Net assets, end of period
(in thousands) $22,593 $15,912 $10,104 $29,670 $26,779 $30,114
Ratio of net expenses
to average net
assets <F13> <F14> 1.50% 1.50% 1.50% 1.44% 1.46% 1.49%
Ratio of net investment
income to average
net assets <F13> <F14> (0.55)% (0.10)% 0.14% 2.23% 2.93% 2.75%
Portfolio turnover rate 112% 102% 98% 111% 118% 111%
Average commission rate
paid on portfolio investment
transactions<F15> $0.0649 N/A N/A $0.0635 N/A N/A
<FN>
<F11> Commencement of operations.
<F12> Not annualized for the period from January 3, 1994 through December 31, 1994.
<F13> Annualized for the period from January 3, 1994 through December 31, 1994.
<F14> Net of waivers. Absent waivers, the ratio of net expenses to average net assets would be 1.03%, 0.98% and 1.11% for the
Fixed Income Fund; 1.40%, 1.37% and 1.45% for the Equity Income Fund; 1.54%, 1.61% and 1.76% for the Equity Growth Fund and
1.49%, 1.46% and 1.49% for the Balanced Fund, respectively. The ratio of net investment income would be 5.41%, 5.46% and
4.73% for the Fixed Income Fund; 1.79%, 2.47% and 3.33% for the Equity Income Fund; (0.59)%, (0.21)% and (0.12)% for the
Equity Growth Fund and 2.18%, 2.93% and 2.75% for the Balanced Fund, respectively.
<F15> Disclosure of this rate is required by the Securities and Exchange Commission on a prospective basis beginning in 1996.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
The Aquinas Funds, Inc. was incorporated on October 20, 1993 as a Maryland
Corporation and is registered as a diversified open-end management investment
company under the Investment Company Act of 1940. The Fixed Income, Equity
Income, Equity Growth and Balanced Funds (the "Funds") are separate,
diversified portfolios of The Aquinas Funds, Inc. The Funds are managed by
Aquinas Investment Advisers, Inc. (the "Adviser") and commenced operations on
January 3, 1994.
Costs incurred with the organization, initial registration and public offering
of shares aggregating $12,959 for each of the Fixed Income, Equity Income,
Equity Growth and Balanced Funds have been paid by the Funds. These costs were
deferred and are being amortized over a period of not more than five years from
the Funds' commencement of operations. The proceeds of any redemption of the
initial shares by the original shareholder or any transferee will be reduced by
a pro rata portion of any then unamortized deferred organizational expenses in
the same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.
a) Investment Valuation - Securities traded over-the-counter or on a national
securities exchange are valued on the basis of market value in their principal
and most representative market. Securities where the principal and most
representative market is a national securities exchange are valued at the latest
reported sale price on such exchange. Exchange-traded securities for which
there were no transactions are valued at the latest reported bid price.
Securities traded on only over-the-counter markets are valued at the latest bid
prices. Debt securities (other than short-term obligations) are valued at
prices furnished by a pricing service, subject to review by the Funds' Adviser
and determination of the appropriate price whenever a furnished price is
significantly different from the previous day's furnished price. Short-term
obligations (maturing within 60 days) are valued on an amortized cost basis,
which approximates value. Securities for which quotations are not readily
available and other assets are valued at fair value as determined in good faith
by the Adviser under the supervision of the Board of Directors.
b) Delayed Delivery Transactions - The Funds may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. Losses may arise
due to changes in the market value of the underlying securities or if the
counterparty does not perform under the contract.
c) Federal Income Taxes - No provision for federal income taxes has been made
since the Funds have complied to date with the provisions of the Internal
Revenue Code available to regulated investment companies and intend to continue
to so comply in future years. As of December 31, 1996, the Fixed Income Fund
had a federal income tax capital loss carryforward of $373,400 expiring in 2002.
To the extent the Fixed Income Fund realizes future net capital gains, taxable
distributions to its shareholders will be offset by any unused capital loss
carryforward. During the year ended December 31, 1996, the Fixed Income and
Equity Growth Funds utilized $114,653 and $17,121, of their previous capital
loss carryforwards, respectively.
d) Distributions to Shareholders - All of the Funds except the Fixed Income
Fund pay dividends of net investment income quarterly. The Fixed Income Fund
declares and pays dividends of net investment income monthly. Distributions of
net realized capital gains, if any, will be declared at least annually.
Distributions to shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from the characterization for federal income
tax purposes due to differences in the recognition of income, expense or gain
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such differences that
are permanent in nature. Accordingly, at December 31, 1996, reclassifications
were recorded to increase undistributed net investment income by $13,325, $631,
$104,488, and $5,673; increase (decrease) accumulated net realized loss on
investments by $(11,916), $778, $(103,074), and $(4,264); and decrease paid-in-
capital in excess of par by $1,409, $1,409, $1,414 and $1,409 for the Fixed
Income, Equity Income, Equity Growth and Balanced Funds, respectively.
For the year ended December 31, 1996, 0%, 100%, 0% and 44% of dividends paid
from net investment income, excluding short-term capital gains, qualifies for
the dividends received deduction available to corporate shareholders of the
Fixed Income, Equity Income, Equity Growth and Balanced Funds, respectively.
e) Expenses - Each Fund is charged for those expenses that are directly
attributable to it, such as investment advisory and custody fees. Expenses that
are not directly attributable to a Fund are typically allocated among the Funds
in proportion to their respective net assets.
f) Other - Investment transactions are accounted for on the trade date plus
one. The Funds determine the gain or loss realized from investment transactions
by comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and interest
income is recognized on an accrual basis. Premiums and discounts on securities
purchased are amortized using the level yield to maturity method.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Each of the Funds has entered into an agreement with the Adviser, with whom
certain officers and directors of the Funds are affiliated, to furnish
investment advisory services to the Funds. Under the terms of this agreement,
the Funds will pay the Adviser a fee, computed daily and payable monthly, at the
annual rate of the following percentage on average daily net assets: 0.60% for
the Fixed Income Fund; and 1.00% for the Equity Income, Equity Growth and
Balanced Funds.
The Adviser voluntarily agreed to reimburse its management fee to the extent
that total annual operating expenses (exclusive of interest, taxes, brokerage
commissions and other costs incurred in connection with the purchase or sale of
portfolio securities, and extraordinary items) exceed 1.00% of the average net
assets of the Fixed Income Fund and 1.50% of the average net assets of the
Equity Income, Equity Growth and Balanced Funds, respectively, computed on a
daily basis. For the year ended December 31, 1996, expenses of $10,507 and
$7,841 were waived by the Adviser in the Fixed Income and Equity Growth Funds,
respectively.
Sunstone Financial Group, Inc. (the "Administrator") may periodically
volunteer to reduce all or a portion of its administrative fee with respect to
one or more of the Funds. These waivers may be terminated at any time at the
Administrator's discretion. The Administrator may not seek reimbursement of
such voluntarily reduced fees at a later date. The reduction of such fee will
cause the yield of that Fund to be higher than it would be in the absence of
such reduction. For the year ended December 31, 1996, administrative fees of
$13,936 were waived in the Balanced Fund.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the year ended December 31, 1996, were
as follows:
Fixed Income Equity Income Equity Growth Balanced
Fund Fund Fund Fund
------------- ------------- -------------- ----------
Shares sold 483,744 641,027 353,769 193,954
Shares issued to holders
in reinvestment
of distributions 185,223 275,606 162,226 240,268
Shares redeemed (412,722) (387,771) (148,566) (288,492)
----------- ----------- ----------- -----------
Net Increase 256,245 528,862 367,429 145,730
=========== =========== =========== ===========
Transactions in shares of the Funds for the year ended December 31, 1995, were
as follows:
Fixed Income Equity Income Equity Growth Balanced
Fund Fund Fund Fund
------------- ------------- -------------- ----------
Shares sold 918,743 478,079 330,069 177,937
Shares issued to holders
in reinvestment
of distributions 186,127 273,398 1,247 147,765
Shares redeemed (649,025) (625,087) (104,622) (1,090,677)
----------- ----------- ----------- -----------
Net Increase
(Decrease) 455,845 126,390 226,694 (764,975)
=========== =========== =========== ===========
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the year ended December 31, 1996, were as
follows:
Fixed Income Equity Income Equity Growth Balanced
Fund Fund Fund Fund
------------ ------------- -------------- ---------
Purchases
U.S. Government $20,400,774 -- -- $ 5,404,020
Other 37,376,340 $18,962,259 $22,736,970 24,143,702
Sales
U.S. Government 19,064,509 -- -- 3,993,073
Other 37,491,921 14,709,420 20,215,803 26,354,621
At December 31, 1996, gross unrealized appreciation and depreciation on
investments, based on cost for federal income tax purposes of $36,455,346,
$42,690,636, $18,526,151, and $25,456,633, were as follows:
Fixed Income Equity Income Equity Growth Balanced
Fund Fund Fund Fund
------------- ------------- -------------- ---------
Appreciation $550,879 $11,833,196 $4,405,479 $4,233,070
(Depreciation) (259,904) (471,578) (225,863) (232,340)
---------- ----------- ---------- ----------
Net Appreciation
on Investments $290,975 $11,361,618 $4,179,616 $4,000,730
========== =========== ========== ==========
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
The Aquinas Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of The
Aquinas Funds, Inc. (a Maryland corporation, which includes the Aquinas Fixed
Income Fund, Aquinas Equity Growth Fund, Aquinas Equity Income Fund, and Aquinas
Balanced Fund, collectively the "Funds"), including the schedules of
investments, as of December 31, 1996, and the related statements of operations
for the year then ended, statements of changes in net assets for the year then
ended and the year ended December 31, 1995, and the financial highlights for the
year then ended, the year ended December 31, 1995 and the period from January 3,
1994 (commencement of operations) through December 31, 1994. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodians and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative 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 audit provides 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
Aquinas Funds, Inc. as of December 31, 1996, and the results of its operations
for the year then ended, the changes in its net assets for the year then ended
and the year ended December 31, 1995 and its financial highlights for the year
then ended, the year ended December 31, 1995 and the period from January 3, 1994
(commencement of operations) through December 31, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 24, 1997
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(LOGO)
THE AQUINAS FUNDS, INC.
P.O. Box 419533
Kansas City, MO 64141-6533
Telephone: 1 (800) 423-6369
This report is submitted for the general information of shareholders of The
Aquinas Funds. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for the Funds. The
prospectus includes more complete information about management fees and
expenses. Please read the prospectus carefully.
