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AQUINAS FUNDS
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ANNUAL REPORT
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DECEMBER 31, 1997
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DEAR JANUARY 1998
SHAREHOLDER:
WE HAD WONDERFUL FINANCIAL RETURNS AND WONDERFUL SOCIAL RETURNS IN 1997. The
Aquinas Funds story is an impressive example of how to achieve excellent returns
while investing with Catholic values. The securities markets provided the
opportunity to allow our investment styles to accomplish their objectives in the
manner that we planned. I will get to numbers in a minute; but first, I want to
explain our general investment philosophy. History has shown that the financial
markets continue to rise over longer periods and that they go up and down like a
roller coaster over shorter periods. Therefore, our long term investment
strategy is to stay fully invested in the market, and not try to time the market
by periodically selling securities and placing a large portion of funds into
cash. WE WANT TO BE PRESENT IN THE MARKET WHEN THE ROLLER COASTER TAKES OFF AND
THE MARKET IS MOVING UP. We do not want to miss those early days when it is
climbing because that is when the major gains are made. We also realize that our
shareholders are investing with us because we have a disciplined securities
selection process for our equity stocks and a quality view in our debt
selection. We may be more conservative than others; but our shareholders can
sleep well at night because we are consistent. Our portfolio is very diversified
because we use at least two different money managers for each fund. This usually
results in more securities in our portfolios than the average fund and we like
the diversification that this process provides. We even use an outside
consulting firm, LCG, to monitor ourselves and assure that we stick to our
philosophy and do not drift from our objectives. Our consistent financial
returns have earned us high ratings by the financial press and we are proud of
our accomplishments.
1997 was an excellent year for the U.S. economy and our equity securities
participated in that success. The Dow Jones industrial average was up 22.6%.
Economic growth was up, inflation was low and unemployment was down to record
lows. Interest rates declined as the U.S. government deficit was forecast to be
significantly less than expected. (In fact, the prospect of U.S. government
budget surpluses for the first time in 30 years could happen.) Our forecast for
1998 is optimistic. While the crisis in Asian markets will influence primarily
companies that rely on exports to Asia, overall we believe it may provide a mild
cooling effect to our economy, which
1
could be near to overheating. However, if cost-push or demand-pull inflation
occurs, then the Federal Reserve would quickly raise interest rates and this
could adversely effect companies in the U.S. We do not expect the equity markets
to rise at the pace of 1997; but we believe that reasonable growth prospects
exist for the economy and the companies in our portfolios. Please refer to The
Funds in Review section beginning on page 6 for our comments relative to each
Fund.
The AQUINAS EQUITY INCOME FUND RETURNED 27.8% for the year ended December 31,
1997 and has an average annual total return of 27.8% for three years. The EQUITY
GROWTH FUND RETURNED 29.0% in 1997 and has an average annual total return of
27.3% for three years. These two Funds have different styles and different types
of stocks in their portfolios, yet their returns were competitive with each
other. The FIXED INCOME FUND RETURNED 8.5% with a 3-year average annual total
return of 9.1%. This is exactly the type of return that we expect from this
relatively conservative investment fund. The BALANCED FUND RETURNED 19.9% in
1997 and an average annual total return of 19.4% for the last three years. This
Fund has five managers and shares the same general investment style of the first
three Funds. We expect its returns to approximately average that of the other
three Funds. We are pleased with all of these returns and encourage you to read
this report to learn more about each Fund and review financial comparisons. WE
BELIEVE THAT WE HAVE DEMONSTRATED THAT YOU CAN EARN IMPRESSIVE RETURNS
WHILE INVESTING WITH CATHOLIC VALUES. We hope that you agree.
Catholic values are clearly defined for us. While some do not agree with Church
teachings, or believe that something should be added to the teachings that is
not present, we readily admit our role is not to debate theology or challenge
the collective wisdom of the hundreds of United States Bishops who unanimously
adopted the investment guidelines that we use. We simply wanted to offer an
efficient, low cost method to allow concerned Catholics to invest their
money where their values are and to accomplish some good. We are not concerned
that some Catholic organizations may give "lip service" to their faith by
ignoring their responsibilities in this area; we are delighted to work with
truly dedicated Catholics and Catholic organizations that do "put their money
where their mouth is." If you are associated with a Catholic organization and
embarrassed by their lack of responsibility, we are willing to work with you to
foster a
2
more objective review of their investment policy. While we do work on other
issues beyond the Bishop's main issues that are of concern to Catholic religious
organizations pro-active in the areas of social justice, we do not screen
companies from our portfolio because their response to change does not meet the
timetable of vocal factions for that change. The Catholic Church has been around
for almost two thousand years and has a history of patience while accomplishing
change and we use that philosophy as we work with corporations. Our Funds have
been officially in existence for four years and we have accomplished quite a lot
by ourselves and in participation with other like-minded investors, in the area
of social responsibility. Our process is similar to the old PAC-man video game.
We just march along with a series of small actions, expecting to achieve much
greater results over time.
The following is a short recap of some of the accomplishments that have occurred
at companies. We do not take credit by ourselves for all of these actions
because it takes the work of many to influence corporations to make changes. We
have been involved in a number of ways with these changes:
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 under the guidance of the Clinton administration. Additionally,
the international rights to produce the pill have been given away by Hoescht,
the German drug giant, as a result of a consumer boycott in which we
participated. The drug companies in our portfolios will not be involved. We are
reviewing a hospital chain for their possible involvement in abortion
procedures. The December 9, 1997 issue of NATIONAL RIGHT TO LIFE NEWS reports
THAT ABORTION NUMBERS HAVE DROPPED FOR THE FIFTH CONSECUTIVE YEAR.
CONTRACEPTION - We are reviewing the companies in our portfolio for
contributions to Planned Parenthood.
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. We are communicating with them
about providing additional information to us.
3
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 have only a few companies in our
portfolios that are involved in producing military weapons of mass destruction.
We are encouraging mergers of these companies in order to allow defensive
weapons production capacity to remain strong. We also support the migration to
peaceful uses of military technology, such as global positioning satellites to
guide cars to destinations.
GENDER DISCRIMINATION - We participated in the promotion of five females to
senior positions within a food services company. We have had communications with
a number of companies on this topic.
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 of November 1996. At a
meeting in April 1997 with ourselves and other concerned investors that are
members of the ICCR, Texaco made a presentation which included the fact that
achieving diversity is worth 20% of an employee's performance appraisal.
THE MEDIA - More success here! Congress has passed the Violence (V)-chip law to
develop a TV ratings system. NBC-TV (owned by GE) has the lowest level of
violence on TV_ and has the highest rating! The annual UCLA study on violence
states that violence on TV is at its lowest level in years! We will give the
ratings system time to allow parents to use it in their best interest.
SWEATSHOPS - We participated in persuading a major company to allow a
shareholder proposal on this topic to be voted upon by the shareholders. The
company had previously petitioned the SEC to allow them to leave it off the
proxy statement.
4
TOBACCO - American Brands has totally divested all tobacco manufacture. 3M
Corporation (the second largest provider of billboards in the U.S.) will
discontinue selling space to advertise tobacco. Dayton-Hudson is discontinuing
the sale of cigarettes in their TARGET 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.
The race discrimination and tobacco activities listed above have been
accomplished through our initiative and through our fellow ICCR member
initiatives that we support in multiple ways.
Sincerely,
/s/ Frank Rauscher
President
5
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.
The Fund invests in small, medium and large corporations. We do not expect these
companies to pay dividends because many of these companies will build for the
future by reinvesting in themselves. Many of our holdings are listed in the
Russell 3000, which is also a benchmark for the Fund. While our Fund did very
well (29.0%), we trailed the Russell 3000 by 2.8%. One reason for this is that
the smaller stocks in our portfolio did not recover fully from the severe market
drop in October 1997. However, we are invested in solid companies with good
long-term prospects that will continue to be rewarded by patience. The Fund is
widely diversified and short-term volatility is tempered in both directions.
TOTAL RETURNS
For Period Ended December 31, 1997
Average
Annual
One Since
Year Inception*
- --------------------------------------------------
AQUINAS EQUITY
GROWTH FUND 28.97% 17.82%
- --------------------------------------------------
S&P 500 Stock Index 33.36% 23.00%
- --------------------------------------------------
Russell 3000 Index 31.78% 21.82%
- --------------------------------------------------
*January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997
--------------------------------------------------------------
AQUINAS EQUITY
GROWTH FUND $10,000 $ 9,322 $12,145 $14,927 $19,252
S&P 500
Stock Index $10,000 $10,132 $13,939 $17,140 $22,859
Russell
3000 Index $10,000 $10,178 $13,705 $16,695 $22,001
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends. Perform
ance 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.
6
AQUINAS EQUITY INCOME FUND
The Fund seeks growth of capital and a high level of current income by investing
principally in income producing equity securities (typically, dividend paying
common stocks). We use two separate portfolio managers, which results in a
larger number of stocks in our portfolio than one might find in a similar type
of mutual fund. It also increases diversification and reduces concentrations in
any industry group. The Fund performed below its S&P 500 benchmark, which
returned 33.35% in 1997. The S&P 500 was greatly influenced by a small number of
stocks with exceptional performance. According to the February 1998 issue of
Money magazine, "All domestic fund categories except junk bond funds lagged
their relevant indexes in 1997" and the diversified U.S. stock fund category
returned 24.5% for the year. As you can see, Aquinas Equity Income Fund was over
3% better. We believe that over time the diversity of our holdings will create
returns that compare favorably with this benchmark or the performance of our
peers. Our total return of 27.9% in 1997 and average annual total return of
27.8% over the last three years are very good returns. This is considerably
higher than the historic returns for these types of equities. We caution our
investors to refrain from the expectation of exuberant returns in 1998.
TOTAL RETURNS
For Period Ended DECEMBER 31, 1997
Average
Annual
One Since
Year Inception*
- -------------------------------------------------
AQUINAS EQUITY
- -------------------------------------------------
Income Fund 27.85% 19.35%
- -------------------------------------------------
S&P 500 Stock Index 33.36% 23.00%
- -------------------------------------------------
*January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997
----------------------------------------------------------------
AQUINAS EQUITY
INCOME FUND $10,000 $ 9,707 $13,165 $15,854 $20,269
S&P 500
Stock Index $10,000 $10,132 $13,939 $17,140 $22,859
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 perform ance.
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.
7
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 1997, the Fund's asset allocation was 40% fixed income, 40% large
cap value equities and 20% small and medium cap growth equities. If the Fund had
invested a greater percentage in equities versus fixed income, the performance
may have been better. We believe that the current asset allocation favors a
conservative view because of the tremendous appreciation in the equity markets
for the last three years.
TOTAL RETURNS
For Period Ended DECEMBER 31, 1997
Average
Annual
One Since
Year Inception*
- -------------------------------------------------
AQUINAS
BALANCED FUND 19.91% 13.36%
- -------------------------------------------------
Lehman Bros. Gov't./
Corp. Bond Index 9.76% 6.83%
- -------------------------------------------------
S&P 500 Stock Index 33.36% 23.00%
- -------------------------------------------------
*January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997
---------------------------------------------------------------
AQUINAS
BALANCED FUND $10,000 $ 9,694 $11,937 $13,763 $16,502
Lehman Bros.
Gov't./Corp.
Bond Index $10,000 $ 9,649 $11,505 $11,840 $13,021
S&P 500
Stock Index $10,000 $10,132 $13,939 $17,140 $22,859
This chart assumes an initial gross investment of $10,000 made on 1/3/94
(inception). Returns shown include the reinvestment of all dividends. Perform
ance 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.
8
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 and pays a monthly dividend. The Fund
invests primarily in a diversified portfolio of investment-grade fixed income
securities.
The Fund had a total return of 8.5% for the year and an average annual total
return of 9.1% over the last three years. Two separate portfolio managers with
different strategies manage the portfolio. The objective is to combine their
expertise and provide a high quality, investment-grade portfolio with
intermediate term duration. We are well positioned if interest rates increase,
which may occur if monetary policy of the Federal Reserve is being used to slow
the growth rate. This approach is designed to provide lower volatility and it
resulted in a solid return just below the Lehman Brothers Government/Corporate
Bond Index after Fund expenses.
TOTAL RETURNS
For Period ENDED DECEMBER 31, 1997
Average
Annual
One Since
Year Inception*
- -------------------------------------------------
AQUINAS FIXED
INCOME FUND 8.54% 5.90%
- -------------------------------------------------
Lehman Bros. Gov't./
Corp. Bond Index 9.76% 6.83%
- -------------------------------------------------
*January 3, 1994 inception
Jan. 3, 1994 Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997
--------------------------------------------------------------
AQUINAS FIXED
INCOME FUND $10,000 $9,691 $11,266 $11,585 $12,574
Lehman Bros.
Gov't./Corp.
Bond Index $10,000 $9,649 $11,505 $11,840 $13,021
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).
9
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
FIXED INCOME EQUITY INCOME EQUITY GROWTH BALANCED
FUND FUND FUND FUND
----- ----- ----- -----
ASSETS:
Investments at value
(cost $39,010,743,
$55,960,776,
$29,140,016 and
$24,832,896,
respectively) $40,139,943 $73,534,207 $36,103,991 $29,219,635
Interest and
dividends receivable 591,191 267,887 18,950 227,286
Receivable for
securities sold -- -- 33,920 --
Prepaid expenses 11,270 17,658 10,972 5,239
Organizational expenses,
net of accumulated
amortization 2,927 2,927 2,927 2,927
----------- ----------- ----------- -----------
Total Assets 40,745,331 73,822,679 36,170,760 29,455,087
----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities
purchased -- -- 36,189 13,931
Accrued expenses 35,071 167,433 115,230 253,767
Accrued investment
advisory fee 10,853 61,472 29,541 22,956
----------- ----------- ----------- -----------
Total Liabilities 45,924 228,905 180,960 290,654
----------- ----------- ----------- -----------
NET ASSETS $40,699,407 $73,593,774 $35,989,800 $29,164,433
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital stock $400 $494 $238 $252
Paid-in capital in
excess of par 39,700,520 55,967,600 29,001,287 24,748,931
Undistributed net
investment income 2,079 3,162 -- 1,947
Undistributed net
realized (loss) gain
on investments (132,792) 49,087 24,300 26,564
Net unrealized
appreciation on
investments 1,129,200 17,573,431 6,963,975 4,386,739
----------- ----------- ----------- -----------
NET ASSETS $40,699,407 $73,593,774 $35,989,800 $29,164,433
=========== =========== =========== ===========
CAPITAL STOCK,
$.0001 PAR VALUE:
Authorized 125,000,000 125,000,000 125,000,000 125,000,000
Issued and outstanding 4,002,347 4,943,119 2,381,034 2,519,030
NET ASSET VALUE,
REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $10.17 $14.89 $15.12 $11.58
====== ====== ====== ======
See notes to financial statements.
10
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
FIXED INCOME EQUITY INCOME EQUITY GROWTH BALANCED
FUND FUND FUND FUND
----- ----- ----- -----
INVESTMENT INCOME:
Interest $2,528,661 $ 135,731 $ 74,032 $ 773,885
Dividends -- 1,832,246 167,111 350,081
----------- ----------- ----------- -----------
2,528,661 1,967,977 241,143 1,123,966
----------- ----------- ----------- -----------
EXPENSES:
Investment
advisory fees 232,718 633,726 291,466 289,730
Administration and
fund accounting
fees 66,698 108,782 49,986 49,816
Shareholder
servicing fees 31,793 35,581 30,207 29,510
Federal and state
registration fees 23,113 20,139 17,305 12,825
Pricing fees 11,076 3,267 4,863 15,536
Legal fees 9,690 15,081 6,799 6,912
Other 7,749 13,019 5,929 6,201
Audit fees 7,159 14,586 7,334 5,283
Reports to
shareholders 6,976 11,704 5,451 5,222
Custody fees 6,494 6,718 11,308 14,135
Amortization of
organization
expenses 2,930 2,930 2,930 2,930
Insurance 554 817 342 441
----------- ----------- ----------- -----------
Total expenses
before waiver 406,950 866,350 433,920 438,541
Waiver of fees (22,939) -- -- (19,189)
----------- ----------- ----------- -----------
Net Expenses 384,011 866,350 433,920 419,352
----------- ----------- ----------- -----------
NET INVESTMENT
INCOME (LOSS) 2,144,650 1,101,627 (192,777) 704,614
----------- ----------- ----------- -----------
REALIZED AND
UNREALIZED GAIN:
Net realized gain
on investments 312,887 7,883,317 4,823,830 4,158,125
Change in unrealized
appreciation/
depreciation
on investments 751,968 6,152,105 2,770,587 341,855
----------- ----------- ----------- -----------
Net Gain on
Investments 1,064,855 14,035,422 7,594,417 4,499,980
----------- ----------- ----------- -----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $3,209,505 $15,137,049 $7,401,640 $5,204,594
=========== =========== =========== ===========
See notes to financial statements.
11
STATEMENTS OF CHANGES IN NET ASSETS
FIXED INCOME EQUITY INCOME
FUND FUND
------ ------
Year Year Year Year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1997 1996
-------- -------- -------- --------
OPERATIONS:
Net investment
income (loss) $ 2,144,650 $ 1,942,653 $ 1,101,627 $ 855,841
Net realized gain
investments 312,887 41,413 7,883,317 2,920,709
Change in
unrealized
preciation/
depreciation
investments 751,968 (940,079) 6,152,105 5,216,409
----------- ----------- ----------- -----------
Net Increase in
Net sets
Resulting from
Operations 3,209,505 1,043,987 15,137,049 8,992,959
----------- ----------- ----------- -----------
DISTRIBUTIONS OF:
Net investment
income (2,134,527) (1,957,366) (1,102,951) (849,533)
Net realized
gains -- -- (7,778,616) (2,896,588)
----------- ----------- ----------- -----------
Total
Distributions (2,134,527) (1,957,366) (8,881,567) (3,746,121)
----------- ----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 12,103,388 4,792,119 18,210,707 8,087,479
Shares issued to
holders in
reinvestment of
distributions 1,989,387 1,821,795 8,413,974 3,659,747
Shares redeemed (11,697,340) (4,088,392) (13,470,678) (4,912,154)
----------- ----------- ----------- -----------
Net Increase
(Decrease) 2,395,435 2,525,522 13,154,003 6,835,072
----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS 3,470,413 1,612,143 19,409,485 12,081,910
NET ASSETS:
Beginning of
period 37,228,994 35,616,851 54,184,289 42,102,379
----------- ----------- ----------- -----------
End of period $40,699,407 $37,228,994 $73,593,774 $54,184,289
=========== =========== =========== ===========
12
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D.)
EQUITY GROWTH BALANCE
FUND FUND
------ ------
Year Year Year Year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1997 1996
-------- -------- -------- --------
OPERATIONS:
Net investment
income (loss) $ (192,777) $ (104,488) $ 704,614 $ 620,320
Net realized gain
on investments 4,823,830 2,335,310 4,158,125 2,202,647
Change in unrealized
appreciation/
depreciation on
investments 2,770,587 1,597,211 341,855 1,145,135
----------- ----------- ----------- -----------
Net Increase in Net
Assets Resulting
from Operations 7,401,640 3,828,033 5,204,594 3,968,102
----------- ----------- ----------- -----------
DISTRIBUTIONS OF:
Net investment income -- -- (702,886) (625,655)
Net realized gains (4,594,461) (2,224,193) (4,125,005) (2,179,125)
----------- ----------- ----------- -----------
Total Distributions (4,594,461) (2,224,193) (4,827,891) (2,804,780)
----------- ----------- ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 10,876,722 4,869,180 5,618,053 2,339,062
Shares issued to
holders in
reinvestment of
distributions 4,482,036 2,190,052 4,470,988 2,785,184
Shares redeemed (4,769,299) (1,981,568) (10,971,318) (3,396,378)
----------- ----------- ----------- -----------
Net Increase
(Decrease) 10,589,459 5,077,664 (882,277) 1,727,868
----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE) IN
NET ASSETS 13,396,638 6,681,504 (505,574) 2,891,190
NET ASSETS:
Beginning of period 22,593,162 15,911,658 29,670,007 26,778,817
----------- ----------- ----------- -----------
End of period $35,989,800 $22,593,162 $29,164,433 $29,670,007
=========== =========== =========== ===========
See notes to financial statements.
13
FINANCIAL HIGHLIGHTS
FIXED INCOME
FUND
-----
Jan. 3,
Year Year Year 1994<F1>
ended ended ended through
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
------ ------ ------ ------
Net Asset Value,
Beginning of Period $9.90 $10.17 $9.24 $10.00
Income from Investment
Operations:
Net investment
income (loss) 0.55 0.54 0.54 0.46
Net realized and
unrealized gains
(losses) on
investments 0.27 (0.27) 0.93 (0.77)
------- ------- ------- -------
Total from
Investment
Operations 0.82 0.27 1.47 (0.31)
------- ------- ------- -------
Less Distributions:
Dividends from net
investment
income (0.55) (0.54) (0.54) (0.45)
Distributions
from net
realized gains -- -- -- --
------- ------- ------- -------
Total
Distributions (0.55) (0.54) (0.54) (0.45)
------- ------- ------- -------
Net Asset Value,
End of Period $10.17 $9.90 $10.17 $9.24
======= ======= ======= =======
Total Return<F2> 8.54% 2.83% 16.26% (3.09)%
Supplemental Data
and Ratios:
Net assets, end of
period (in
thousands) $40,699 $37,229 $35,617 $28,147
Ratio to Average
Net Assets of:<F3>
Expenses, net of
waivers and
reimbursements 0.99% 1.00% 0.98% 1.00%
Expenses, before
waivers and
reimbursements 1.05% 1.03% 0.98% 1.11%
Net investment
income (loss),
net of waivers
and reimbursements 5.54% 5.44% 5.46% 4.84%
Net investment
income (loss),
before waivers
and reimbursements 5.48% 5.41% 5.46% 4.73%
Portfolio turnover
rate<F2> 02% 169% 126% 139%
Average commission rate
paid on portfolio
investment
transactions<F4> N/A N/A N/A N/A
<F1> Commencement of operations.
<F2> Not annualized for the period January 3, 1994 through December 31, 1994.
<F3> Annualized for the period January 3, 1994 through December 31, 1994.
<F4> Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning in 1996.
See notes to financial statements.
14
FINANCIAL HIGHLIGHTS (CONT'D.)
EQUITY INCOME
FUND
-----
Jan. 3,
Year Year Year 1994<F1>
ended ended ended through
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
------- ------- ------- -------
Net Asset Value,
Beginning of Period $13.26 $11.83 $9.39 $10.00
Income from Investment
Operations:
Net investment
income (loss) 0.26 0.23 0.28 0.32
Net realized and
unrealized gains
(losses) on
investments 3.40 2.18 3.03 (0.61)
------- ------- ------- -------
Total from
Investment
Operations 3.66 2.41 3.31 (0.29)
------- ------- ------- -------
Less Distributions:
Dividends from net
investment income (0.26) (0.23) (0.28) (0.32)
Distributions from net
realized gains (1.77) (0.75) (0.59) --
------- ------- ------- -------
Total Distributions (2.03) (0.98) (0.87) (0.32)
------- ------- ------- -------
Net Asset Value,
End of Period $14.89 $13.26 $11.83 $9.39
======= ======= ======= =======
Total Return<F2> 27.85% 20.43% 35.62% (2.93)%
Supplemental Data
and Ratios:
Net assets, end of
period (in thousands) $73,594 $54,184 $42,102 $32,217
Ratio to Average
Net Assets of:<F3>
Expenses, net
of waivers
and reimbursements 1.37% 1.40% 1.37% 1.45%
Expenses, before
waivers and
reimbursements 1.37% 1.40% 1.37% 1.45%
Net investment
income (loss),
net of waivers
and reimbursements 1.74% 1.79% 2.47% 3.33%
Net investment
income (loss),
before waivers
and reimbursements 1.74% 1.79% 2.47% 3.33%
Portfolio turnover
rate<F2> 42% 32% 40% 106%
Average commission rate
paid on portfolio
investment
transactions<F4> $0.0562 $0.0554 N/A N/A
EQUITY GROWTH
FUND
-----
Jan. 3,
Year Year Year 1994<F1>
ended ended ended through
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
------- ------- ------- -------
Net Asset Value,
Beginning of Period $13.45 $12.13 $9.31 $10.00
Income from Investment
Operations:
Net investment
income (loss) 0.06 (0.06) (0.01) 0.01
Net realized and
unrealized gains
(losses) on
investments 3.81 2.84 2.83 (0.69)
------- ------- ------- -------
Total from
Investment
Operations 3.87 2.78 2.82 (0.68)
------- ------- ------- -------
Less Distributions:
Dividends from net
investment income -- -- -- (0.01)
Distributions from
net realized gains (2.20) (1.46) -- --
------- ------- ------- -------
Total Distributions (2.20) (1.46) -- (0.01)
------- ------- ------- -------
Net Asset Value,
End of Period $15.12 $13.45 $12.13 $9.31
======= ======= ======= =======
Total Return<F2> 28.97% 22.90% 30.29% (6.78)%
Supplemental Data
and Ratios:
Net assets, end of
period (in
thousands) $35,990 $22,593 $15,912 $10,104
Ratio to Average
Net Assets of:<F3>
Expenses, net
of waivers
and reimbursements 1.49% 1.50% 1.50% 1.50%
Expenses, before
waivers and
reimbursements 1.49% 1.54% 1.61% 1.76%
Net investment income
(loss), net
of waivers
and reimbursements (0.66)% (0.55)% (0.10)% 0.14%
Net investment
income (loss),
before waivers
and reimbursements (0.66)% (0.59)% (0.21)% (0.12)%
Portfolio turnover
rate<F2> 104% 112% 102% 98%
Average commission rate
paid on portfolio
investment
transactions<F4> $0.0624 $0.0649 N/A N/A
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (CONT'D.)
BALANCED
FUND
-----
Jan. 3,
Year Year Year 1994<F1>
ended ended ended through
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1995 1994
------- ------- ------- -------
Net Asset Value,
Beginning of Period $11.53 $11.03 $9.43 $10.00
Income from Investment
Operations:
Net investment
income (loss) 0.31 0.26 0.32 0.26
Net realized and
unrealized gains
(losses) on
investments 1.95 1.41 1.84 (0.57)
------- ------- ------- -------
Total from
Investment
Operations 2.26 1.67 2.16 (0.31)
------- ------- ------- -------
Less Distributions:
Dividends from net
investment income (0.30) (0.26) (0.33) (0.26)
Distributions from
net realized gains (1.91) (0.91) (0.23) --
------- ------- ------- -------
Total Distributions (2.21) (1.17) (0.56) (0.26)
------- ------- ------- -------
Net Asset Value,
End of Period $11.58 $11.53 $11.03 $9.43
======= ======= ======= =======
Total Return<F2> 19.91% 15.29% 23.14% (3.06)%
Supplemental Data
and Ratios:
Net assets, end of
period (in
thousands) $29,164 $29,670 $26,779 $30,114
Ratio to Average Net
Assets of:<F3>
Expenses, net
of waivers
and reimbursements 1.45% 1.44% 1.46% 1.49%
Expenses, before
waivers and
reimbursements 1.52% 1.49% 1.46% 1.49%
Net investment income,
net of waivers and
reimbursements 2.44% 2.23% 2.93% 2.75%
Net investment income,
before waivers and
reimbursements 2.37% 2.18% 2.93% 2.75%
Portfolio turnover
rate<F2> 94% 111% 118% 111%
Average commission rate
paid on portfolio
investment
transactions<F4> $0.0586 $0.0635 N/A N/A
<F1> Commencement of operations.
<F2> Not annualized for the period January 3, 1994 through December 31, 1994.
<F3> Annualized for the period January 3, 1994 through December 31, 1994.
<F4> Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning in 1996.
See notes to financial statements.
16
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
Principal
Amount Value
- ----------- ---------
FIXED INCOME BONDS 90.65%
ASSET-BACKED SECURITIES 13.75%
$850,000 Amresco Residential Securities
Mortgage Loan Trust,
8.075%, 4/25/26 $916,878
300,000 Amresco Residential Securities
Mortgage Loan Trust,
7.615%, 3/25/27 310,122
275,000 Amresco Residential Securities
Mortgage Loan Trust,
7.05%, 4/25/27 285,211
300,000 California Infrastructure SCA 97-1A5,
6.28%, 9/25/05 301,290
375,000 Chase Manhattan Auto Owner Trust,
6.25%, 11/15/00 376,568
375,000 Citibank Credit Card Master Trust,
6.55%, 2/16/04 380,186
300,000 Ford Credit Auto Trust,
6.50%, 11/15/99 305,046
372,494 IMC Home Equity Loan Trust
1997-4 A, 6.1837%, 10/20/27 372,382
375,000 MBNA Master Credit Card Trust,
6.60%, 11/15/04 383,130
400,000 Olympic Auto Trust,
6.625%, 12/15/02 406,000
375,000 Providian Master Trust, 97-4A,
6.25%, 6/15/07 375,937
500,000 Saxon Asset Securities Trust 97-3 AF6,
6.73%, 2/25/27 502,578
375,000 UCFC Home Equity Loan Trust,
7.825%, 12/15/27 394,830
286,918 UFSB Trust 1993-C A,
4.875%, 2/15/00 284,212
-----------
5,594,370
-----------
CORPORATE BONDS 52.11%
$467,000 American Express Credit Corp.,
8.50%, 6/15/99 $483,191
525,000 Associates Corp. of North America,
7.75%, 2/15/05 565,467
500,000 BarclaysAmerican Corp.,
7.875%, 8/15/98 505,570
400,000 Bear Stearns Corp.,
6.75%, 12/15/07 404,172
655,000 Bellsouth Capital Funding,
6.04%, 11/15/26 661,203
600,000 Citicorp, 8.00%, 2/1/03 642,402
375,000 Coca-Cola Enterprises, Inc.,
7.00%, 10/1/26 398,441
600,000 Commercial Credit Co.,
7.875%, 2/1/25 692,688
420,000 Compania Telecom Chile,
7.625%, 7/15/06 429,626
400,000 Corporation Andina de Fomento,
7.10%, 2/1/03 410,032
350,000 El Paso Natural Gas Co.,
6.75%, 11/15/03 355,845
350,000 First Maryland Bancorp,
7.20%, 7/1/07 364,753
800,000 Ford Motor Credit,
8.375%, 1/15/00 835,392
629,000 General Electric Capital Corp.,
8.30%, 9/20/09 726,432
600,000 General Motors Acceptance Corp.,
8.875%, 6/1/10 715,080
400,000 Global Marine Inc.,
7.125%, 9/1/07 411,464
500,000 Grace (W.R.) & Co.,
8.00%, 8/15/04 539,025
550,000 Grand Metropolitan Investment PLC,
7.45%, 4/15/35 606,942
600,000 Heller Financial Corp.,
9.375%, 3/15/98 603,894
17
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Principal
Amount Value
- ----------- ----------
CORPORATE BONDS 52.11% (CONT'D.)
$850,000 Household Finance Corp.,
7.125%, 4/30/99 $ 861,509
725,000 Hydro Quebec,
8.05%, 7/7/24 838,774
190,000 Lasmo, Inc.,
7.30%, 11/15/27 callable 194,665
850,000 Lehman Brothers, Inc.,
8.80%, 3/1/15 1,001,045
400,000 Lockheed Martin Corp.,
6.85%, 5/15/01 406,400
350,000 Nabisco, Inc.,
7.55%, 6/15/15 366,513
300,000 NationsBank Corp.,
8.57%, 11/15/24 361,341
590,000 New Jersey Bell Telephone Co.,
7.85%, 11/15/29 693,215
200,000 Norfolk Southern Corp.,
6.95%, 5/1/02 205,464
500,000 Norwest Financial, Inc.,
6.00%, 8/1/99 500,120
500,000 Pacific Gas & Electric Co.,
7.67%, 12/15/98 507,685
380,000 Penney (J.C.) & Co.,
7.40%, 4/1/37 411,259
385,000 Rodamco NV,
7.30%, 5/15/05 407,322
400,000 Rollins Truck Leasing Corp.,
7.00%, 3/15/01 407,928
400,000 Salomon, Inc.,
7.30%, 5/15/02 413,072
650,000 Southern California Edison Co.,
5.60%, 12/15/98 647,563
420,000 Tenneco, Inc.,
8.075%, 10/1/02 446,708
380,000 US West Capital Funding, Inc.,
6.85%, 1/15/02 386,099
$880,000 WMX Technologies, Inc.,
6.65%, 5/15/05 892,144
900,000 Xerox Corp.,
5.875%, 6/15/37 908,055
-----------
21,208,500
-----------
U.S. GOVERNMENT AGENCIES 11.66%
400,000 Federal Farm Credit,
6.35%, 10/22/01 400,384
699,083 FHLMC, Pool 555316,
9.00%, 6/1/19 742,559
475,000 FNMA, 4.875%, 10/15/98 472,312
400,000 FNMA, 6.08%, 9/3/03 395,316
850,000 FNMA, Series 1994-59, Class PE,
5.00%, 3/25/22 821,721
975,000 FNR 1994-30E,
5.75%, 11/25/17 966,118
325,000 Guaranteed Export Certificates,
6.28%, 6/15/04 327,106
600,000 Tennessee Valley Authority,
6.235%, 7/15/45 619,776
-----------
4,745,292
-----------
U.S. TREASURY OBLIGATIONS 13.13%
785,000 U.S. Treasury Bond,
8.875%, 8/15/17 1,041,514
680,000 U.S. Treasury Bond,
8.00%, 11/15/21 847,844
400,000 U.S. Treasury Note,
5.625%, 11/30/98 400,064
1,400,000 U.S. Treasury Note,
6.25%, 8/31/00 1,418,298
40,000 U.S. Treasury Note,
6.50%, 5/31/02 41,159
425,000 U.S. Treasury Note,
7.25%, 8/15/04 459,378
18
FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Principal
Amount Value
----------- ----------
U.S. TREASURY OBLIGATIONS 13.13%
(CONT'D.)
$ 500,000 U.S. Treasury Note,
7.50%, 2/15/05 $ 549,560
270,000 U.S. Treasury Strips, 2/15/20 71,623
2,160,000 U.S. Treasury Strips, 11/15/21 515,894
-----------
5,345,334
-----------
Total Fixed Income Bonds
(cost $35,764,295) 36,893,496
-----------
SHORT-TERM INVESTMENTS 7.98%
2,000,000 Associates Corp., Commercial Paper,
6.25%, 1/2/98 2,000,000
1,246,447 UMB Bank, n.a., Money Market
Fiduciary, Demand Deposit, 4.4% 1,246,447
-----------
Total Short-term Investments
(cost $3,246,447) 3,246,447
-----------
Total Investments 98.63%
(cost $39,010,743) 40,139,943
Other assets
less liabilities 1.37% $ 559,464
-----------
Net Assets 100.00% $40,699,407
===========
See notes to financial statements.
19
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
COMMON STOCKS 91.56%
APPAREL 0.94%
15,000 VF Corp. $ 689,063
-----------
AUTOMOTIVE RELATED
INDUSTRIES 3.85%
17,800 Chrysler Corp. 626,337
32,500 Ford Motor Co. 1,582,344
15,100 B.F. Goodrich Co. 625,706
-----------
2,834,387
-----------
BANKING 5.43%
16,100 Bankers Trust New York Corp. 1,810,244
5,600 Chase Manhattan Corp. 613,200
27,500 PNC Bank Corp. 1,569,219
-----------
3,992,663
-----------
BREWERIES 0.96%
16,000 Anheuser-Busch Cos., Inc. 704,000
-----------
CHEMICALS 4.80%
21,000 Chemed Corp. 870,188
6,800 Dow Chemical Co. 690,200
12,600 du Pont (E.I.) de Nemours and Co. 756,788
14,400 Union Carbide Corp. 618,300
18,900 Westvaco Corp. 594,169
-----------
3,529,645
-----------
COMPUTER EQUIPMENT 2.46%
17,300 International Business Machines Corp. 1,808,931
-----------
COMPUTER SERVICES 1.18%
19,800 Electronic Data Systems Corp. 869,962
-----------
CONSTRUCTION 1.25%
9,000 Vulcan Materials Corp. 919,125
-----------
CONSUMER PRODUCTS 0.98%
18,500 American Greetings Corp., Class A 723,812
-----------
CONSUMER SERVICES 1.03%
32,916 Jostens, Inc. 759,125
-----------
DRUGS 1.88%
8,400 American Home Products Corp. 642,600
20,200 Pharmacia & Upjohn, Inc. 739,825
-----------
1,382,425
-----------
ELECTRIC UTILITIES 6.13%
21,700 DTE Energy Co. 752,719
27,610 Duke Energy Corp. 1,528,904
11,700 FPL Group, Inc. 692,494
30,600 PP&L Resources, Inc. 732,487
32,900 Washington Water Power Co. 799,881
-----------
4,506,485
-----------
ELECTRONICS 3.48%
32,400 AMP, Inc. 1,360,800
16,300 General Electric Co. 1,196,012
-----------
2,556,812
-----------
FINANCIAL SERVICES 0.68%
25,200 Capstead Mortgage Corp. 502,425
-----------
FOOD 3.16%
34,300 Supervalu, Inc. 1,436,312
19,550 Sysco Corp. 890,747
-----------
2,327,059
-----------
HOLDING COMPANIES 2.37%
10,600 Fortune Brands, Inc. 392,862
36,100 RJR Nabisco Holdings Corp. 1,353,750
-----------
1,746,612
-----------
20
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
HOSPITAL MANAGEMENT AND
SERVICES 0.54%
13,500 Columbia/HCA Healthcare Corp. $ 399,938
-----------
HOUSEHOLD APPLIANCES 1.08%
21,400 Maytag Corp. 798,487
-----------
HOUSEHOLD PRODUCTS 0.82%
28,950 Dial Corp. 602,522
-----------
INSURANCE 5.84%
18,800 American General Corp. 1,016,375
4,000 CIGNA Corp. 692,250
3,450 General Re Corp. 731,400
17,800 MBIA, Inc. 1,189,263
14,900 Ohio Casualty Corp. 664,912
-----------
4,294,200
-----------
LEISURE 2.34%
56,800 Brunswick Corp. 1,721,750
-----------
MANUFACTURING 0.88%
11,800 Whirlpool Corp. 649,000
-----------
METAL PRODUCTS 0.73%
7,600 Aluminum Company of America 534,850
-----------
MINING 0.69%
8,200 Phelps Dodge Corp. 510,450
-----------
NATURAL GAS UTILITIES 5.24%
15,600 El Paso Natural Gas Co. 1,037,400
17,000 Equitable Resources, Inc. 601,375
17,100 NICOR, Inc. 721,406
25,300 Pacific Gas & Electric Co. 770,069
18,400 Peoples Energy Corp. 724,500
-----------
3,854,750
-----------
OFFICE EQUIPMENT 0.87%
14,000 Harris Corp. $ 642,250
-----------
OIL AND GAS 12.66%
10,600 Amerada Hess Corp. 581,675
7,200 Amoco Corp. 612,900
9,000 Atlantic Richfield Co. 721,125
20,892 Burlington Resources, Inc.* 936,223
9,000 Chevron Corp. 693,000
25,200 Occidental Petroleum Corp. 738,675
15,900 Repsol SA-ADR 676,744
20,900 Texaco, Inc. 1,136,437
10,000 Tidewater, Inc. 551,250
22,000 Transocean Offshore, Inc. 1,060,125
21,100 Ultramar Diamond Shamrock Corp. 672,563
33,000 Williams Cos., Inc. 936,375
-----------
9,317,092
-----------
PERSONAL SERVICES 1.10%
22,000 Service Corp. International 812,625
-----------
PRINTING AND PUBLISHING 1.54%
20,600 Deluxe Corp. 710,700
20,300 Harland (John H.) Co. 426,300
-----------
1,137,000
-----------
RAILROADS 0.85%
18,400 Illinois Central Corp., Series A 626,750
-----------
REAL ESTATE 1.59%
20,400 Excel Realty Trust, Inc. 642,600
31,900 Thornburg Mortgage Asset Corp. 526,350
-----------
1,168,950
-----------
RETAIL 0.93%
11,400 Penney (J.C.) Co., Inc. 687,563
-----------
SEMICONDUCTORS 1.16%
12,100 Intel Corp. 850,025
-----------
21
EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
STEEL/IRON 1.72%
13,600 Nucor Corp. $ 657,050
19,500 USX-US Steel Group, Inc. 609,375
-----------
1,266,425
-----------
TELECOMMUNICATIONS 6.55%
8,100 Bell Atlantic Corp. 737,100
18,200 GTE Corp. 950,950
10,000 SBC Communications, Inc. 732,500
33,000 Southern New England
Telecommunications Corp. 1,660,313
16,400 US West Communications Group 740,050
-----------
4,820,913
-----------
TEXTILES 1.00%
14,100 Springs Industries, Inc., Class A 733,200
-----------
TOBACCO PRODUCTS 1.16%
18,800 Philip Morris Cos., Inc. 851,875
-----------
TRANSPORTATION 1.69%
18,000 Alexander & Baldwin, Inc. 491,625
10,400 GATX Corp. 754,650
-----------
1,246,275
-----------
Total Common Stocks
(cost $49,750,327) $67,379,421
-----------
CONVERTIBLE BONDS 0.75%
$ 610,000 Quantum Corp.,
7.00%, 8/1/04 $ 554,337
-----------
Total Convertible Bonds
(cost $610,000) 554,337
-----------
SHORT-TERM INVESTMENTS 7.61%
5,600,449 UMB Bank, n.a., Money Market
Fiduciary, Demand Deposit, 4.4% 5,600,449
-----------
Total Short-term Investments
(cost $5,600,449) 5,600,449
-----------
Total Investments 99.92%
(cost $55,960,776) 73,534,207
Other assets
less liabilities 0.08% 59,567
-----------
Net Assets 100.00% $73,593,774
===========
See notes to financial statements.
22
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
Number
of Shares Value
--------- -----------
COMMON STOCKS 95.00%
ADVERTISING 2.07%
3,400 Catalina Marketing Corp.* $ 157,250
15,325 Outdoor Systems, Inc.* 588,097
-----------
745,347
-----------
APPAREL 0.79%
4,700 Nordstrom, Inc. 283,762
-----------
AUTOMOTIVE RELATED
INDUSTRIES 0.62%
5,500 Federal-Mogul Corp. 222,750
-----------
BANKING 4.84%
3,800 BankAmerica Corp. 277,400
2,800 Chase Manhattan Corp. 306,600
1,100 Citicorp 139,081
2,600 First American Corp. 129,350
2,500 Peoples Heritage Financial Group, Inc. 115,000
6,150 Travelers Group, Inc. 331,331
3,200 U.S. Bancorp 358,200
2,679 Washington Federal, Inc. 84,221
-----------
1,741,183
-----------
BUSINESS SERVICES 8.47%
19,100 Accustaff, Inc.* 439,300
7,700 Adminstaff, Inc.* 199,238
5,600 Cognizant Corp. 249,550
6,700 Data Processing Resources Corp.* 170,850
8,800 Fiserv, Inc.* 432,300
12,000 Maximus, Inc.* 290,250
5,950 Paychex, Inc. 301,219
11,900 Pittson Brink's Group 478,975
12,800 Republic Industries, RII, Inc. 298,400
5,100 Snyder Communications, Inc.* 186,150
-----------
3,046,232
-----------
CHEMICALS 1.51%
6,300 Allied-Signal, Inc. $ 245,306
12,600 Millennium Chemicals, Inc. 296,888
-----------
542,194
-----------
COMMERCIAL SERVICES 0.48%
4,700 Corrections Corp. of America* 174,194
-----------
COMMUNICATIONS 1.10%
13,100 WorldCom, Inc.* 396,275
-----------
COMPUTER EQUIPMENT 1.55%
4,500 Adaptec, Inc.* 167,063
4,600 Comverse Technology, Inc.* 179,400
5,000 Iomega Corp. 62,188
7,500 Sequent Computer Systems, Inc.* 150,000
-----------
558,651
-----------
COMPUTER SERVICES 7.03%
8,600 Complete Business Solutions, Inc.* 374,100
9,300 Computer Associates
International, Inc. 491,738
10,550 Computer Horizons Corp.* 480,025
5,600 Equifax, Inc. 198,450
11,400 Keane, Inc.* 463,125
16,900 Sungard Data Systems, Inc.* 523,900
-----------
2,531,338
-----------
COMPUTER SOFTWARE 4.95%
2,200 BMC Software, Inc.* 144,375
5,100 CBT Group PLC-ADR* 418,838
5,400 Cisco Systems, Inc.* 301,050
6,100 HBO & Company 292,800
2,300 Microsoft Corp.* 297,275
4,400 Transaction Systems Architects, Inc. 167,200
4,200 Visio Corp. 161,175
-----------
1,782,713
-----------
23
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
CONSUMER PRODUCTS 0.72%
5,500 Westpoint Stevens, Inc. $ 259,875
-----------
DRUGS 5.65%
5,400 Abbott Laboratories 354,038
9,700 Dura Pharmaceuticals, Inc.* 444,987
4,600 Jones Medical Industries, Inc. 175,950
1,800 Merck & Co., Inc. 191,250
3,900 Pfizer, Inc. 290,794
4,500 Schering-Plough Corp. 279,563
6,300 Teva Pharmaceutical Industries
Ltd.-ADR 298,069
-----------
2,034,651
-----------
ELECTRONICS 2.17%
3,200 Amphenol Corp., CL-A* 178,200
4,700 General Electric Co. 344,862
4,100 Hewlett-Packard Co. 256,250
-----------
779,312
-----------
ELECTRONICS-COMP & MFG. 1.09%
8,800 Thermo Electron Corp. 391,600
-----------
ENTERTAINMENT 0.28%
1,000 WALT Disney Co. 99,062
-----------
ENVIRONMENTAL SERVICES 0.93%
11,200 U.S. Filter Corp.* 335,300
-----------
FINANCIAL SERVICES 2.05%
8,100 Finova Group, Inc. 402,469
1,800 Merrill Lynch & Co., Inc. 131,287
4,750 SunAmerica, Inc. 203,062
-----------
736,818
-----------
FOOD 1.54%
4,700 ConAgra, Inc. 154,219
1,800 CPC International, Inc. 193,950
7,400 International Home Foods, Inc.* 207,200
-----------
555,369
-----------
HEALTH CARE EQUIPMENT AND
SUPPLIES 0.98%
8,600 Omnicare, Inc. 266,600
1,800 Steris Corp. 86,850
-----------
353,450
-----------
HOME FURNISHINGS 1.80%
15,400 Furniture Brands International, Inc.* 315,700
6,100 Miller (Herman), Inc. 332,831
-----------
648,531
-----------
HOSPITAL MANAGEMENT AND
SERVICES 2.61%
10,228 Concentra Managed Care, Inc.* 345,195
11,400 Healthsouth Corp. 316,350
8,400 Tenet Healthcare Corp.* 278,250
-----------
939,795
-----------
HOTELS 1.37%
8,200 Host Marriott Corp.* 160,925
1,300 Marriott International, Inc. 90,025
5,742 Promus Hotel Corp.* 241,164
-----------
492,114
-----------
HOUSEHOLD PRODUCTS 1.17%
3,300 Clorox Co. 260,906
2,000 Procter & Gamble Co. 159,625
-----------
420,531
-----------
INFORMATION SYSTEMS 0.76%
10,400 Affiliated Computer Services, Inc.* 273,650
-----------
INSURANCE 4.64%
3,200 American International Group, Inc. 348,000
6,800 Conseco, Inc. 308,975
24
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
INSURANCE 4.64% (cont'd.)
3,400 MGIC Investment Corp. $ 226,100
9,300 Reliastar Financial Corp. 383,044
4,300 The Equitable Companies, Inc. 213,925
3,500 UNUM Corp. 190,312
-----------
1,670,356
-----------
MANUFACTURING 6.04%
6,700 Danaher Corp. 422,938
2,700 Gentex Corporation* 72,562
4,600 Johnson Controls, Inc. 219,650
8,800 Oregon Steel Mills, Inc. 187,550
6,500 Sybron International Corp.* 305,094
11,600 Tyco International Ltd. 522,725
7,800 Varlen Corp. 191,222
6,700 Waters Corp.* 252,087
-----------
2,173,828
-----------
MEDIA 1.06%
4,800 Clear Channel
Communications, Inc.* 381,300
-----------
OFFICE EQUIPMENT 1.11%
8,300 United Stationers, Inc.* 399,437
-----------
OIL AND GAS 6.76%
5,600 Barrett Resources Corp.* 169,400
4,700 BJ Services Co.* 338,106
3,400 Columbia Gas System, Inc. 267,113
18,400 Global Industries, Ltd.* 312,800
3,900 Halliburton Co. 202,556
1,800 Mobil Corp. 129,937
3,300 Santa Fe International Corp. 134,269
3,000 Schlumberger Ltd. 241,500
4,600 Tidewater, Inc. 253,575
1,500 Veritas DGC, Inc.* 59,250
11,400 Williams Cos., Inc. 323,475
-----------
2,431,981
-----------
REAL ESTATE 1.25%
6,100 FelCor Suite Hotels, Inc. $ 216,550
7,200 Security Capital Group,
Inc. Class B* 234,000
-----------
450,550
-----------
RESTAURANTS 0.77%
7,200 Starbucks Corp.* 276,300
-----------
RETAIL 12.06%
10,300 Bed Bath and Beyond, Inc.* 396,550
15,700 Borders Group, Inc.* 491,606
10,093 Cendant Corp. 346,948
10,300 Costco Companies, Inc.* 459,638
23,000 Filene's Basement Corp.* 92,000
9,300 Fred Meyer, Inc. 338,287
10,100 General Nutrition Cos., Inc. 343,400
8,050 Home Depot, Inc. 473,944
9,300 Michaels Stores, Inc.* 272,025
8,300 Office Depot, Inc. 198,681
11,200 Renters Choice, Inc.* 229,600
6,200 Rent-Way, Inc.* 114,700
4,700 Safeway, Inc.* 297,275
7,200 Staples, Inc. 199,800
1,700 Whole Food Market, Inc.* 86,912
-----------
4,341,366
-----------
SEMICONDUCTORS 0.45%
2,300 Intel Corp. 161,575
-----------
TELECOMMUNICATIONS 2.74%
9,000 ADC Telecommunications, Inc.* 375,750
9,300 Airtouch COMMUNICATIONS, Inc. 386,531
2,800 Lucent Technologies, Inc. 223,650
-----------
985,931
-----------
WASTE DISPOSAL 0.87%
8,015 U.S.A. Waste Services, Inc. 314,589
-----------
25
EQUITY GROWTH FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
WHOLESALE 0.72%
3,450 Cardinal Health, Inc. $ 259,181
-----------
Total Common Stock
(cost $27,257,116) 34,191,091
-----------
Principal
Amount
-----------
SHORT-TERM INVESTMENTS 5.32%
$1,912,900 UMB Bank, n.a., Money Market
Fiduciary, Demand Deposit, 4.4% 1,912,900
-----------
Total Short-term Investments
(cost $1,912,900) 1,912,900
-----------
Total Investments 100.32%
(cost $29,140,016) 36,103,991
Liabilities less
other assets (0.32%) (114,191)
-----------
Net Assets 100.00% $35,989,800
===========
*Non-income producing security
See notes to financial statements.
26
BALANCED FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
COMMON STOCKS 58.11%
ADVERTISING 0.87%
1,300 Catalina Marketing Corp.* $ 60,125
5,075 Outdoor Systems, Inc.* 194,753
-----------
254,878
-----------
APPAREL 0.41%
2,600 VF Corp. 119,438
-----------
AUTOMOTIVE RELATED
INDUSTRIES 1.85%
3,300 Chrysler Corp. 116,119
1,700 Federal-Mogul Corp. 68,850
5,100 Ford Motor Co. 248,306
2,600 B.F. Goodrich Co. 107,737
-----------
541,012
-----------
BANKING 2.78%
3,500 Bankers Trust New York Corp. 393,531
1,000 Chase Manhattan Corp. 109,500
4,700 PNC Bank Corp. 268,194
900 Peoples Heritage Financial Group, Inc. 41,400
-----------
812,625
-----------
BREWERIES 0.38%
2,500 ANHEUSER-BUSCH COS., INC. 110,000
-----------
BUSINESS SERVICES 2.63%
3,600 Accustaff, Inc.* 82,800
2,500 Adminstaff, Inc.* 64,688
2,400 Data Processing Resources Corp.* 61,200
2,900 Fiserv, Inc.* 142,463
4,400 Maximus, Inc.* 106,425
1,855 Paychex, Inc. 93,909
3,900 Pittston Brink's Group 156,975
1,600 Snyder Communications, Inc.* 58,400
-----------
766,860
-----------
CHEMICALS 2.44%
3,300 Chemed Corp. $136,744
1,300 Dow Chemical Co. 131,950
2,000 du Pont (E.I.) de Nemours and Co. 120,125
4,600 Millennium Chemicals, Inc. 108,388
2,500 Union Carbide Corp. 107,344
3,400 Westvaco Corp. 106,888
-----------
711,439
-----------
COMPUTER EQUIPMENT 1.48%
1,500 Comverse Technology, Inc.* 58,500
3,100 International Business
Machines Corp. 324,144
2,500 Sequent Computer Systems, Inc.* 50,000
-----------
432,644
-----------
COMPUTER SERVICES 2.63%
3,000 Complete Business Solutions, Inc.* 130,500
3,800 Computer Horizons Corp.* 172,900
2,700 Electronic Data Systems Corp. 118,631
4,200 Keane, Inc.* 170,625
5,600 Sungard Data Systems, Inc.* 173,600
-----------
766,256
-----------
COMPUTER SOFTWARE 0.66%
1,700 CBT Group PLC-ADR* 139,613
1,400 Transaction Systems Architects, Inc.* 53,200
-----------
192,813
-----------
CONSTRUCTION 0.39%
1,100 Vulcan Materials Co. 112,338
-----------
CONSUMER PRODUCTS 0.79%
3,200 American Greetings Corp., Class A 125,200
2,200 Westpoint Stevens, Inc.* 103,950
-----------
229,150
-----------
CONSUMER SERVICES 0.50%
6,368 Jostens, Inc. 146,862
-----------
27
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
DRUGS 1.83%
1,500 American Home Products Corp. $114,750
3,100 Dura Pharmaceuticals, Inc.* 142,213
1,700 Jones Medical Instruments, Inc. 65,025
2,900 Pharmacia & Upjohn, Inc. 106,213
2,200 Teva Pharmaceutical Industries
Ltd. ADR 104,088
-----------
532,289
-----------
ELECTRIC UTILITIES 2.80%
3,700 DTE Energy Co. 128,344
4,386 Duke Energy Corp. 242,875
3,000 FPL Group, Inc. 177,562
5,300 PP&L Resources, Inc. 126,869
5,800 Washington Water Power Co. 141,012
-----------
816,662
-----------
ELECTRONICS 1.48%
5,300 AMP, Inc. 222,600
1,100 Amphenol Corp., Class A 61,256
2,000 General Electric Co. 146,750
-----------
430,606
-----------
FINANCIAL SERVICES 0.78%
4,400 Capstead Mortgage Corp. 87,725
2,800 Finova Group, Inc. 139,125
----------
226,850
----------
FOOD 1.67%
2,500 International Home Foods, Inc.* 70,000
5,900 Supervalu, Inc. 247,063
3,750 Sysco Corp. 170,859
-----------
487,922
-----------
HEALTH CARE EQUIPMENT
AND SUPPLIES 0.38%
2,600 Omnicare, Inc. 80,600
600 Steris Corp.* 28,950
-----------
109,550
-----------
HOLDING COMPANIES 0.82%
6,400 RJR Nabisco Holdings Corp. $240,000
-----------
HOME FURNISHINGS 0.62%
5,100 Furniture Brands International, Inc.* 104,550
1,400 Miller (Herman), Inc. 76,388
-----------
180,938
-----------
HOSPITAL MANAGEMENT
AND SERVICES 0.63%
2,400 Columbia/HCA Healthcare Corp. 71,100
3,335 Concentra Managed Care, Inc.* 112,556
-----------
183,656
-----------
HOTELS 0.54%
2,700 Host Marriott Corp.* 52,988
400 Marriott International, Inc. 27,700
1,847 Promus Hotel Corp.* 77,574
-----------
158,262
-----------
HOUSEHOLD APPLIANCES 0.46%
3,600 Maytag Corp. 134,325
-----------
HOUSEHOLD PRODUCTS 0.33%
4,600 Dial Corp. 95,737
-----------
INFORMATION SYSTEMS 0.31%
3,400 Affiliated Computer Services, Inc.* 89,462
-----------
INSURANCE 3.19%
4,650 American General Corp. 251,391
700 CIGNA Corp. 121,144
600 General Re Corp. 127,200
2,800 MBIA, Inc. 187,075
2,600 Ohio Casualty Corp. 116,025
3,100 Reliastar Financial Corp. 127,681
-----------
930,516
-----------
28
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
LEISURE 0.93%
8,900 Brunswick Corp. $269,781
-----------
MANUFACTURING 2.02%
2,300 Danaher Corp. 145,187
900 Gentex Corporation* 24,187
2,800 Oregon Steel Mills, Inc. 59,675
2,100 Sybron International Corp.* 98,569
2,850 Varlen Corp. 69,869
2,200 Waters Corp.* 82,775
2,000 Whirlpool Corp. 110,000
-----------
590,262
-----------
MEDIA 0.44%
1,600 Clear Channel
Communications, Inc.* 127,100
-----------
METAL PRODUCTS 0.34%
1,400 Aluminum Company of America 98,525
-----------
MINING 0.23%
1,100 Phelps Dodge Corp. 68,475
-----------
NATURAL GAS Utilities 2.29%
3,000 El Paso Natural Gas Co. 199,500
2,300 Equitable Resources, Inc. 81,362
2,900 NICOR, Inc. 122,344
4,700 Pacific Gas & Electric Co. 143,056
3,100 Peoples Energy Corp. 122,063
-----------
668,325
-----------
OFFICE EQUIPMENT 0.94%
2,600 Harris Corp. 119,275
3,200 United Stationers, Inc.* 154,000
-----------
273,275
-----------
OIL AND GAS 6.29%
1,200 Amoco Corp. 102,150
1,400 Atlantic Richfield Co. 112,175
1,500 Barrett Resources Corp.* 45,375
3,660 Burlington Resources, Inc.* 164,014
1,500 BJ Services Co.* 107,906
1,500 Chevron Corp. 115,500
6,600 Global Industries, Ltd.* 112,200
4,200 Occidental Petroleum Corp. 123,112
2,700 Repsol SA-ADR 114,919
1,100 Santa Fe International Corp. 44,756
3,000 Texaco, Inc. 163,125
2,000 Tidewater, Inc. 110,250
4,500 Transocean Offshore, Inc. 216,844
3,400 Ultramar Diamond Shamrock Corp. 108,375
600 Veritas DGC, Inc.* 23,700
6,000 Williams Cos., Inc. 170,250
-----------
1,834,651
-----------
PERSONAL SERVICES 0.25%
2,000 Service Corp. International 73,875
-----------
PRINTING AND Publishing 0.74%
4,000 Deluxe Corp. 138,000
3,700 Harland (John H.) Co. 77,700
-----------
215,700
-----------
RAILROADS 0.37%
3,200 Illinois Central Corp., Series A 109,000
-----------
REAL ESTATE 1.32%
4,500 Excel Realty Trust, Inc. 141,750
2,000 FelCor Suite Hotels, Inc. 71,000
2,600 Security Capital Group, Inc. Class B* 84,500
5,300 Thornburg Mortgage Asset Corp. 87,450
-----------
384,700
-----------
RESTAURANTS 0.28%
2,100 Starbucks Corp.* 80,587
-----------
29
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
RETAIL 2.31%
3,300 Bed Bath and Beyond, Inc.* $127,050
2,900 Borders Group, Inc.* 90,806
3,300 General Nutrition Cos., Inc.* 112,200
3,000 Michaels Stores, Inc.* 87,750
1,900 Penney (J.C.) Co., Inc. 114,594
3,900 Renters Choice, Inc.* 79,950
2,000 Rent-Way, Inc.* 37,000
500 Whole Foods Market, Inc.* 25,562
-----------
674,912
-----------
SEMICONDUCTORS 0.67%
2,800 Intel Corp. 196,700
-----------
STEEL/IRON 0.53%
1,200 Nucor Corp. 57,975
3,100 USX-US Steel Group, Inc. 96,875
-----------
154,850
-----------
TELECOMMUNICATIONS 3.26%
2,900 ADC Telecommunications, Inc.* 121,075
1,400 Bell Atlantic Corp. 127,400
3,100 GTE Corp. 161,975
2,000 SBC Communications, Inc. 146,500
5,200 Southern New England
Telecommunications Corp. 261,625
2,900 US West Communications Group 130,862
-----------
949,437
-----------
TEXTILES 0.41%
2,300 Springs Industries, Inc., Class A 119,600
-----------
TOBACCO PRODUCTS 0.39%
2,500 Philip Morris Cos., Inc. 113,281
-----------
TRANSPORTATION 0.45%
1,800 GATX Corp. 130,612
-----------
Total Common Stocks
(cost $12,869,574) $16,946,738
-----------
Principal
Amount
-----------
FIXED INCOME BONDS 37.56%
ASSET-BACKED SECURITIES 5.87%
$225,000 Amresco Residential Securities
Mortgage Loan Trust,
8.075%, 4/25/26 242,703
150,000 Amresco Residential Securities
Mortgage Loan Trust,
7.615%, 3/25/27 155,061
100,000 Amresco Residential Securities
Mortgage Loan Trust,
7.05%, 4/25/27 103,713
80,000 California Infrastructure SCA 97-1A5,
6.28%, 9/25/05 80,344
120,000 Citibank Credit Card Master Trust,
6.35%, 8/15/02 120,562
120,000 Citibank Credit Card Master Trust,
6.55%, 2/16/04 121,660
125,000 Ford Credit Auto Trust,
6.50%, 11/15/99 127,102
93,124 IMC Home Equity Loan Trust 1997-4 A,
6.1837%, 10/20/27 93,096
150,000 The Money Store Home Equity
7.55%, 2/15/20 154,636
125,000 Olympic Auto Trust,
6.625%, 12/15/02 126,875
125,000 Providian Master Trust 97-4,
6.25%, 6/15/07 125,312
30
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
ASSET-BACKED Securities 5.87% (CONT'D.)
$100,000 Saxon Asset Securities Trust 97-3 AF6,
6.73%, 2/25/27 $ 100,516
50,000 UCFC Home Equity Loan Trust,
7.825%, 12/15/27 52,644
109,739 UFSB Trust 1993-C A,
4.875%, 2/15/00 108,705
-----------
1,712,929
-----------
CORPORATE BONDS 22.07%
225,000 Associates Corp. of North America,
7.75%, 2/15/05 242,343
225,000 BarclaysAmerican Corp.,
7.875%, 8/15/98 227,506
120,000 Bear Stearns Corp.,
6.75%, 12/15/07 121,252
150,000 Bellsouth Capital Funding,
6.04%, 11/15/26 151,420
200,000 Citicorp, 8.11%, 11/4/04 219,774
281,000 Coca-Cola Enterprises, Inc.,
7.00%, 10/1/26 298,565
130,000 Commercial Credit Co.,
7.875%, 2/1/25 150,082
120,000 Compania Telecom Chile,
7.625%, 7/15/06 122,750
100,000 Corporation Andina de Fomento,
7.10%, 2/1/03 102,509
100,000 El Paso Natural Gas Co.,
6.75%, 11/15/03 101,670
100,000 First Maryland Bancorp,
7.20%, 7/1/07 104,215
150,000 General Motors Acceptance Corp.,
8.875%, 6/1/10 178,770
100,000 Global Marine, Inc.,
7.125%, 9/1/07 102,866
100,000 Grace (W.R.) & Co.,
8.00%, 8/15/04 107,805
225,000 Grand Metropolitan Investment PLC,
7.45%, 4/15/35 $248,294
150,000 GTE Florida, Inc.,
6.31%, 12/15/02 149,679
250,000 Heller Financial Corp.,
9.375%, 3/15/98 251,623
260,000 Household Finance Corp.,
7.125%, 4/30/99 263,520
100,000 Lasmo, Inc.,
7.30%, 11/15/27 Callable 102,455
220,000 Lehman Brothers, Inc.,
8.80%, 3/1/15 259,094
120,000 Lockheed Martin Corp.,
6.85%, 5/15/01 121,920
100,000 Nabisco, Inc.,
7.55%, 6/15/15 104,718
150,000 NationsBank Corp.,
8.57%, 11/15/24 180,671
175,000 New Jersey Bell Telephone Co.,
7.85%, 11/15/29 205,615
60,000 Norfolk Southern Corp.,
6.95%, 5/1/02 61,639
200,000 Norwest Financial, Inc.,
6.00%, 8/1/99 200,048
250,000 Pacific Gas & Electric Co.,
7.67%, 12/15/98 253,843
165,000 Private Export Funding,
5.50%, 3/15/01 162,551
115,000 Rodamco NV,
7.30%, 5/15/05 121,668
150,000 Rollins Truck Leasing Corp.,
7.00%, 3/15/01 152,973
100,000 Salomon, Inc.,
7.30%, 5/15/02 103,268
300,000 Southern California Edison Co.,
5.60%, 12/15/98 298,875
31
BALANCED FUND
SCHEDULE OF INVESTMENTS (CONT'D.)
DECEMBER 31, 1997
Number
of Shares Value
----------- -----------
CORPORATE BONDS 22.07% (CONT'D.)
$130,000 Tenneco, Inc.,
8.075%, 10/1/02 $ 138,267
50,000 U.S. West Capital Funding, Inc.,
6.85%, 1/15/02 50,802
250,000 Virginia Electric & Power Co.,
9.30%, 6/9/99 260,808
250,000 Wal-Mart Stores,
6.125%, 10/1/99 250,522
250,000 WMX Technologies, Inc.,
7.10%, 8/1/26 261,015
-----------
6,435,395
-----------
U.S. GOVERNMENT Agencies 4.33%
125,000 Federal Farm Credit,
6.35%, 10/22/01 125,120
100,000 FHLMC, Series 1563, Class E,
4.75%, 3/15/06 97,935
239,686 FHLMC, Pool 555316,
9.00%, 6/1/19 254,592
50,000 FNMA, Series 1993-191, Class PH,
6.00%, 5/25/08 49,722
200,000 FNMA, Series 1993-96, Class PE,
5.60%, 11/25/16 198,332
250,000 FNMA, Series 1994-59, Class PE,
5.00%, 3/25/22 241,683
5,833 GNMA, Pool 031096,
9.50%, 6/15/09 6,311
133,824 Guaranteed Export Certificates,
6.28%, 6/15/04 134,690
150,000 Tennessee Valley Authority,
6.235%, 7/15/45 154,944
-----------
1,263,329
-----------
U.S. TREASURY OBLIGATIONS 5.29%
285,000 U.S. Treasury Bond,
8.875%, 8/15/17 378,129
$210,000 U.S. Treasury Bond,
8.00%, 11/15/21 261,834
80,000 U.S. Treasury Note,
6.50%, 5/31/02 82,318
650,000 U.S. Treasury Note,
7.50%, 2/15/05 714,428
450,000 U.S. Treasury Strips, 11/15/21 107,478
-----------
1,544,187
-----------
Total Fixed Income Bonds
(cost $10,800,753) 10,955,840
-----------
CONVERTIBLE BONDS 0.53%
170,000 Quantum Corp.,
7.00%, 8/1/04 154,488
-----------
SHORT-TERM INVESTMENTS 3.99%
500,000 Associates Corp. Commercial Paper,
6.25%, 1/2/98 500,000
662,569 UMB Bank, n.a., Money Market
Fiduciary, Demand Deposit, 4.4% 662,569
-----------
Total Short-term Investments
(cost $1,162,569) 1,162,569
-----------
Total Investments 100.19%
(cost $24,832,896) 29,219,635
Liabilities, less
other assets (0.19)% (55,202)
-----------
Net Assets 100.00% $29,164,433
===========
*Non-income producing security
See notes to financial statements.
32
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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. 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, 1997, the Fixed Income Fund
had a federal income tax capital loss carryforward of $128,045 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, 1997, the Fixed Income Fund
utilized
Page 33
$245,355 of their previous capital loss carryforward.
d) Distributions to Shareholders - All of the Funds, except the Fixed Income
Fund, pay dividends of net investment income quarterly. The Fixed Income Fund
pays dividends of net investment income monthly. Distributions of net realized
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, 1997, reclassifications
were recorded to increase (decrease) undistributed net investment income by
$(12,571), $(2,772), $192,777 and $(2,759); increase (decrease) accumulated net
realized gain on investments by $13,978, $4,176, $(191,371) and $4,165; and
decrease paid-in capital in excess of par by $1,407, $1,404, $1,406 and $1,406
for the Fixed Income, Equity Income, Equity Growth and Balanced Funds,
respectively. For the year ended December 31, 1997, 0%, 100%, 0% and 46% 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 maturity method.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Each Fund 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 percentages of 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 waive 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 daily
net assets of the Fixed Income Fund and 1.50% of the average daily net assets of
the Equity Income, Equity Growth and Balanced Funds, respectively, computed on a
daily basis. For the year ended December 31, 1997, fees of $22,939 were waived
by the Adviser in the Fixed Income Fund.
Sunstone Financial Group, Inc. (the "Administrator") may periodically volunteer
to waive 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, 1997, administrative fees of
$19,189 were waived in the Balanced Fund.
Page 34
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the year ended December 31, 1997, were
as follows:
Fixed Equity Equity
Income Income Growth Balanced
Fund Fund Fund Fund
---- ---- ---- -----
Shares sold 1,210,288 1,147,801 702,133 450,990
Shares issued to holders
In reinvestment of
distributions 199,942 569,804 299,005 373,535
Shares redeemed (1,167,624) (861,145) (299,619) (878,695)
----------- ---------- --------- ---------
Net Increase (Decrease) 242,606 856,460 701,519 (54,170)
=========== ========== ========= =========
Transactions in shares of the Funds for the year ended December 31, 1996,
were as follows:
Fixed Equity Equity
Income Income 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
=========== ========== ========== =========
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the year ended December 31, 1997, were as
follows:
Fixed Equity Equity
Income Income Growth Balanced
Fund Fund Fund Fund
---- ---- ---- ----
Purchases
U.S. Government $20,163,776 - - $7,588,536
Other 18,339,652 $27,046,339 $33,278,367 18,382,621
Sales
U.S. Government 22,444,581 8,459,569
Other 13,982,348 25,232,935 28,340,978 22,542,475
At December 31, 1997, gross unrealized appreciation and depreciation on
investments, based on cost for federal income tax purposes of $39,015,490,
$55,990,170, $29,167,206 and $24,845,614 were as follows:
Fixed Equity Equity
Income Income Growth Balanced
Fund Fund Fund Fund
---- ---- ---- ----
Appreciation $1,149,435 $18,497,670 $7,675,040 $4,645,155
(Depreciation) (24,982) (953,633) (738,255) (271,134)
----------- ------------ ----------- -----------
Net Appreciation
on Investments $1,124,453 $17,544,037 $6,936,785 $4,374,021
=========== ============ =========== ===========
Page 35
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 Income Fund, Aquinas Equity Growth Fund, and Aquinas
Balanced Fund, collectively the "Funds"), including the schedules of
investments, as of December 31, 1997, and the related statements of operations
for the year then ended, statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods presented. 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, 1997, 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 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
Aquinas Funds, Inc. as of December 31, 1997, and the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 23, 1998
Page 36
RESULTS OF THE SHAREHOLDER MEETING
A meeting of the shareholders of the Funds was held on August 14, 1997.
Directors elected by the shareholders at the meeting were as follows: Michael R.
Corboy, Thomas J. Marquez, Sr. Imelda Gonzalez CDP, John L. Strauss, and Charles
Clark, Jr. The matters voted on by the shareholders of record as of June 20,
1997 and the results of the shareholders' vote at the August 14, 1997 meeting
were as follows:
A. Election of Directors
For Withheld
Michael R. Corboy
Fixed Income Fund 3,739,081 -
Equity Income Fund 3,659,691 75,634
Equity Growth Fund 1,503,273 43,421
Balanced Fund 2,116,485 -
Thomas J. Marquez
Fixed Income Fund 3,739,081 -
Equity Income Fund 3,659,691 75,634
Equity Growth Fund 1,503,273 43,421
Balanced Fund 2,116,485 -
Sr. Imelda Gonzalez CDP
Fixed Income Fund 3,739,055 26
Equity Income Fund 3,659,766 75,559
Equity Growth Fund 1,487,789 58,905
Balanced Fund 2,116,113 372
John L. Strauss
Fixed Income Fund 3,739,081 -
Equity Income Fund 3,734,988 337
Equity Growth Fund 1,543,000 3,694
Balanced Fund 2,116,485 -
Charles Clark, Jr.
Fixed Income Fund 3,739,081 -
Equity Income Fund 3,734,988 337
Equity Growth Fund 1,543,000 3,694
Balanced Fund 2,116,485 -
B.Proposal to approve a new portfolio management (sub-advisory) agreement
between the Company, Aquinas Investment Advisers, Inc. and Atlantic Asset
Management Partners, L.L.C. for each of the Aquinas Fixed Income Fund
and the Aquinas Balanced Fund.
For Against Abstain
Fixed Income Fund 3,739,055 - 26
Balanced Fund 2,110,197 192 6,096
Page 37
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.
