AAL VARIABLE PRODUCT SERIES FUND, INC.
Semi-Annual Report
June 30, 1998
AAL Variable Product
Money Market Portfolio
AAL Variable Product
Bond Portfolio
[LOGO] AAL Variable Product
Balanced Portfolio
AAL Variable Product
Large Company Stock Portfolio
AAL Variable Product
Small Company Stock Portfolio
AAL Variable Product
International Stock Portfolio
AAL Variable Product
High Yield Bond Portfolio
<PAGE>
YOUR LINK TO AID ASSOCIATION FOR LUTHERANS
800-CALL AAL
(800-225-5225)
Calls May Be Recorded
<TABLE>
<CAPTION>
<S> <C>
GREETING
Hello and welcome to Aid Association for Lutherans. Please select from
the following three options:
To speak with a customer service representative PRESS 1
If you know the 4-digit extension number of the person you are calling PRESS 2
For daily unit values PRESS 3
</TABLE>
Customer Service To Reach Someone
Representative in the Office Daily Unit Values
PRESS 1 PRESS 2 PRESS 3
Insurance or Fixed Annuity
PRESS 1 Enter the extension Variable Annuity
------- number of the person Unit Values
you are calling. PRESS 1
Variable Annuity -------
& Variable Universal Life
Products Variable Universal Life
PRESS 2 Unit Values
------- PRESS 2
-------
Mutual Funds &
Brokerage Services
PRESS 3
-------
Fraternal
PRESS 4
-------
Member Credit Union
PRESS 5
Please be prepared to give your name, certificate
number and Social Security number. Thank you!
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
President's Letter.......................................................... 2
Portfolio Perspectives
AAL Variable Product Money Market Portfolio............................ 4
AAL Variable Product Bond Portfolio.................................... 6
AAL Variable Product Balanced Portfolio................................ 8
AAL Variable Product Large Company Stock Portfolio..................... 10
AAL Variable Product Small Company Stock Portfolio..................... 12
AAL Variable Product International Stock Portfolio..................... 14
AAL Variable Product High Yield Bond Portfolio......................... 16
Schedule of Investments
AAL Variable Product Money Market Portfolio............................ 18
AAL Variable Product Bond Portfolio.................................... 20
AAL Variable Product Balanced Portfolio................................ 24
AAL Variable Product Large Company Stock Portfolio..................... 39
AAL Variable Product Small Company Stock Portfolio..................... 48
AAL Variable Product International Stock Portfolio..................... 58
AAL Variable Product High Yield Bond Portfolio......................... 61
Statement of Assets and Liabilities......................................... 64
Statement of Operations..................................................... 66
Statement of Changes in Net Assets.......................................... 68
Notes to Financial Statements............................................... 70
Financial Highlights
AAL Variable Product Money Market Portfolio............................ 74
AAL Variable Product Bond Portfolio.................................... 75
AAL Variable Product Balanced Portfolio................................ 75
AAL Variable Product Large Company Stock Portfolio..................... 76
AAL Variable Product Small Company Stock Portfolio..................... 77
AAL Variable Product International Stock Portfolio..................... 77
AAL Variable Product High Yield Bond Portfolio......................... 77
</TABLE>
Table of Contents 1
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
JUNE 30,1998
[PHOTO OF JOHN O. GILBERT AND STEVEN A. WEBER]
Dear Member:
We are pleased to provide you with the semi-annual report for the AAL Variable
Product Series Fund, Inc., the underlying investment for our AAL Variable
Annuity and AAL Variable Universal Life products. Specific details on the
performance, holdings and financial information for each Portfolio are outlined
on the following pages. We encourage you to read on and hope you find it
informative.
Overall, the first half of 1998 was a good investment environment! 1997's low
consumer-price inflation, strong U.S. economy and low unemployment continued
right through June 30, 1998. This environment, combined with another slight
decline in interest rates earlier in the year, sparked even more investor
enthusiasm. U.S. financial markets remain the strongest in the world.
Although this is good news, we feel it necessary to caution you about the
unrealistic expectations that have recently overcome many stock investors.
Returns over 20 percent, as we've enjoyed from our stock market for three
consecutive years now, are not commonplace and should not be mistaken as a
2 Presidents' Letter
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
guarantee of future results. Please keep in mind that financial markets are
volatile. We continue to encourage our members to invest with a disciplined,
diversified, long-term approach.
In March, we made it easier for our members to diversify their investments with
the introduction of the AAL Variable Product International Stock and High Yield
Bond Portfolios. Both have been met with great approval and we are excited about
their progress.
All of us at AAL would like to thank you for your continued loyalty. As always,
we look forward to serving you and encourage you to take full advantage of the
financial services and benefits we offer to Lutherans and their families. If you
have any questions regarding your variable annuity or variable life
certificates, please call 800-CALL AAL to speak to an AAL Variable Products
Service Center Representative. You should also feel free to call your local
Registered Representative, who is always happy to help you.
Best regards,
/s/ John O. Gilbert /s/ Steven A. Weber
John O. Gilbert Steven A. Weber
President & Chief Executive Officer President
Aid Association for Lutherans AAL Variable Product Series Fund, Inc.
June 30, 1998 3
<PAGE>
[LOGO] AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . . . . Total Net Assets . . . . . . . $29,594,751. . . . . . . . NAV .
Money Market Portfolio
How did the Portfolio perform over the period ended June 30, 1998?
Portfolio returns were quite stable. Contributing factors to this stability were
1) that returns on commercial paper were essentially unchanged over the period
and 2) that the Federal Reserve Board (Fed) left rates unchanged during the
first six months of 1998.
What economic factors are likely to affect performance in the coming months?
The primary factor affecting performance would be actions triggered by the Fed.
Any action by the Fed to raise or lower rates can have an impact. If the Asian
crisis causes a slowdown of the U.S. economy, the Fed would most likely consider
lowering rates. Lower rates would lead to lower rates of return on the
Portfolio.
If concerns regarding wage inflation became more prominent over the second half
of 1998, the Fed would most likely consider raising rates. This would lead to
higher Portfolio returns.
[PHOTO]
This Portfolio is neither insured nor guaranteed by the U.S. government and
there can be no assurance that the Portfolio will be able to maintain a stable
net asset value.
Value of a $10,000 Investment
-----------------------------
Fund Portfolio/2/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Money Market
<S> <C>
6/14/95 10,000.00
6/30/95 10,024.80
7/31/95 10,069.00
8/31/95 10,118.50
9/30/95 10,163.10
10/31/95 10,211.70
11/30/95 10,257.50
12/31/95 10,302.20
1/31/96 10,352.10
2/29/96 10,393.90
3/31/96 10,435.00
4/30/96 10,481.40
5/31/96 10,524.90
6/30/96 10,565.50
7/31/96 10,613.80
8/31/96 10,657.70
9/30/96 10,700.50
10/31/96 10,749.70
11/30/96 10,789.70
12/31/96 10,840.50
1/31/97 10,887.30
2/28/97 10,929.10
3/31/97 10,970.90
4/30/97 11,022.40
5/31/97 11,069.80
6/30/97 11,116.30
7/31/97 11,169.20
8/31/97 11,215,70
9/30/97 11,267,30
10/31/97 11,317.40
11/30/97 11,360,00
12/31/97 11,418.50
1/31/98 11,469.10
2/28/98 11,515.40
3/31/98 11,568.80
4/30/98 11,618.50
5/31/98 11,667.10
6/30/98 11,721.00
</TABLE>
Average Annual Total Returns/1/
As of June 30, 1998
<TABLE>
<CAPTION>
From Inception
Year-To-Date 1-Year Inception Date
----------------------------------------------
<S> <C> <C> <C> <C>
Fund Portfolio/2/............... 2.65% 5.44% 5.35% 6/14/95
- ------------------------------------------------------------------------
Variable Annuity
Subaccount/3/................... 2.02% 4.11% 4.06% 6/15/95
- ------------------------------------------------------------------------
Variable Life
Subaccount/3/................... NA NA 0.67% 5/15/98
- ------------------------------------------------------------------------
SEC Variable
Annuity Subaccount/4/...........(4.41%) (2.45%) 2.81% 6/15/95
</TABLE>
Past performance is not an indication of future results.
/1/ Total Returns - Total returns and unit values are subject to fluctuation.
Accumulation units, when redeemed, may be worth more or less than their original
value. Periods less than one year are not annualized.
/2/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distributions but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a 0.35%
annual management fee, but do not reflect Portfolio expenses which are
voluntarily paid by AAL or reimbursed by AAL. Without the payment and
reimbursement of expenses by AAL, which can be changed on 30-days' notice, these
total returns would have been lower.
/3/ Variable Subaccounts - Annuity returns reflect the deduction of the 1.25%
mortality and expense risk fee, but do not reflect the $25 annual maintenance
charge (for accounts under $5,000) or surrender charges. Life returns do not
reflect charges assessed to individual certificate owners.
/4/ SEC Variable Annuity Subaccount - Reflects all fees and expenses and the
maximum surrender charge of 7% for the first contract year, declining by 1% each
year through the seventh.
4 Money Market Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
..........$1.00 ...............Number of Securities in Portfolio.........36.....
What quality is the commercial paper that has been purchased for the Portfolio?
All commercial paper purchased for the Portfolio is of the highest quality. In
addition, all issuers are monitored regularly to ensure their continued high
quality and safety of principal. To ensure these standards on a day-to-day
basis, AAL compiles an "approved list" which includes all issuers of commercial
paper from which investments can be made. The Portfolio will purchase securities
only from the issuers on the approved list.
/s/ Alan D. Onstad
Alan D. Onstad
PORTFOLIO MANAGER
Sector Allocations
[PIE CHART]
<TABLE>
<CAPTION>
% of Portfolio
6/30/98 12/31/97
------- --------
<S> <C> <C>
Utilities.....................27% 26%
Consumer Non-Durables.........26% 27%
Finance.......................25% 21%
Technology....................12% 14%
Consumer Durables............. 6% 6%
Materials & Services.......... 4% 6%
----------------------
Total 100% 100%
</TABLE>
<TABLE>
<CAPTION>
5 Largest Holdings
Interest Maturity % of Portfolio
Security Rate* Date 6/30/98
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Bell South Telecommunications..............5.490% 7/23/98 4.3%
Type: Telephone
Industry: Telecom Services
H.J. Heinz Company.........................5.530% 8/11/98 4.3%
Type: Industrial
Industry: Food-Misc./Diversified
Merrill Lynch & Company, Inc...............5.530% 7/2/98 4.2%
Type: Financial
Industry: Finance-Investment Banker
Carolina Power & Light, Inc................5.510% 7/6/98 4.2%
Type: Utility-Electric
Industry: Electric-Integrated
Colgate-Palmolive Company..................5.500% 7/8/98 4.2%
Type: Industrial
Industry: Cosmetics & Toiletries
</TABLE>
* The interest rate shown reflects the coupon rate, or, for the securities
purchased at a discount, the discount rate at the date of purchase.
Credit Quality
Average Quality: First Tier
Maturity
Average Maturity: 18 Days
June 30, 1998 5
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . . Total Net Assets . . . . . . . $30,207,267 . . . . . . NAV . . . . .
Bond Portfolio
How did the U.S. bond market perform over the period ended June 30, 1998?
The bond market performed well over the period. The return, as reflected by the
Lehman Brothers Aggregate Bond Index*, was 3.93% for the period, while the
Portfolio came in at 3.91%. The reason we kept up with the index over the period
was due to a favorable mix of U.S. Treasury, corporate and mortgage-backed
securities. Mortgage-backed and U.S. Treasury securities performed better than
corporate bonds during the first half of 1998.
* An unmanaged index that encompasses four major classes of fixed-income
securities in the United States: U.S. Treasury and U.S. government agency
securities, corporate debt obligations, mortgage-backed securities and asset-
backed securities.
[PHOTO]
How has the performance of the U.S. stock market over the last few years
affected the U.S. bond market, if at all?
For the past several years economic growth has been fairly strong resulting in
good corporate earnings and higher stock valuations. However, economic growth
has not been strong enough to result in higher inflation and subsequently higher
interest rates and lower bond prices. Bond prices have moved in a rather tight
range and appear to be unable to move lower until economic growth slows.
Value of a $10,000 Investment
-----------------------------
Fund Portfolio/2/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
6/14/95 $10,000.00
12/31/95 10,580.30
6/30/96 10,426.80
12/31/96 10,908.60
6/30/97 11,232.40
12/31/97 11,930.20
6/30/98 12,397.10
</TABLE>
Average Annual Total Returns/1/
-------------------------------
As of June 30, 1998
<TABLE>
<CAPTION>
From Inception
Year-To-Date 1-Year Inception Date
<S> <C> <C> <C> <C>
Fund Portfolio/2/............... 3.91% 10.37% 7.31% 6/14/95
Variable Annuity
Subaccount/3/................... 3.27% 9.00% 6.05% 6/15/95
Variable Life
Subaccount/3/................... NA NA 1.66% 5/15/98
SEC Variable
Annuity Subaccount/4/........... (3.23%) 2.13% 4.78% 6/15/95
</TABLE>
Past performance is not an indication of future results.
/1/ Total Returns - Total returns and unit values are subject to fluctuation.
Accumulation units, when redeemed, may be worth more or less than their
original value. Periods less than one year are not annualized.
/2/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distributions but do not reflect separate
account expenses or charges. However, these values reflect the deduction of
a 0.35% annual management fee, but do not reflect Portfolio expenses which
are voluntarily paid by AAL or reimbursed by AAL. Without the payment and
reimbursement of expenses by AAL, which can be changed on 30-days' notice,
these total returns would have been lower.
/3/ Variable Subaccounts - Annuity returns reflect the deduction of the 1.25%
mortality and expense risk fee, but do not reflect the $25 annual
maintenance charge (for accounts under $5,000) or surrender charges. Life
returns do not reflect charges assessed to individual certificate owners.
/4/ SEC Variable Annuity Subaccount - Reflects all fees and expenses and the
maximum surrender charge of 7% for the first contract year, declining by 1%
each year through the seventh.
6 Bond Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . $10.22 . . . . Number of Securities in Portfolio . . . . 122 . . . . .
Is the Asian financial crisis still affecting the U.S. bond market? If so, in
what way?
There has been some direct impact on the prices of all domestic bonds as a
result of the problems in Asia. The significant deterioration in the net
exporting of U.S. goods to Asia is expected to be a drag on economic growth in
1998. Slower economic growth and virtually no pricing flexibility for U.S.
produced goods should continue to keep inflation and interest rates relatively
low with bonds continuing to trade in a narrow range. The slow growth could
hurt the U.S. manufacturing sector by lowering corporate profits. The Asian
financial crisis is not over yet.
/s/ R. Jerry Scheel
R. Jerry Scheel
PORTFOLIO MANAGER
Sector Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Portfolio
6/30/98 12/31/97
------- --------
<S> <C> <C>
U.S. Government Obligations..... 39% 43%
U.S. Government Agency
Obligations..................... 36% 35%
Corporate Obligations........... 17% 14%
Other Government Securities..... 3% 4%
Utility Bonds................... 2% 2%
Short-Term Obligations.......... 2% 1%
Asset-Backed Securities......... 1% 1%
-----------------
Total 100% 100%
</TABLE>
Maturity
Average Maturity: 7.83 Years
5 Largest Holdings
<TABLE>
<CAPTION>
Interest Maturity % of Portfolio
Security Rate Date 6/30/98 12/31/97
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond....... 9.875% 11/15/15 1.2% 1.3%
U.S. Treasury Bond....... 7.625% 11/15/22 1.2% 1.3%
U.S. Treasury Bond....... 7.875% 2/15/21 1.2% 1.3%
U.S. Treasury Bond....... 6.750% 8/15/26 1.1% NA
U.S. Treasury Bond....... 8.750% 5/15/17 1.1% NA
</TABLE>
Credit Quality
Average Quality: AAA
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of Portfolio
6/30/98 12/31/97
------- --------
<S> <C> <C>
AAA...................... 79% 81%
AA....................... 4% 2%
A........................ 12% 11%
BBB...................... 5% 6%
-------------------
Total 100% 100%
</TABLE>
June 30, 1998 7
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . . .Total Net Assets . . . . . . . . $445,268,344 . . . . NAV . . . . .
Balanced Portfolio
How would you summarize the performance of the U.S. stock and
bond markets over the period ended June 30, 1998?
The U.S. stock and bond markets performed very well over the first six months of
1998. The S&P 500 Index* rose by 17.7% and the Lehman Aggregate Bond Index**
provided a total return of 3.9%. Even though the return from bonds paled in
comparison to stocks, bonds have benefited from a "flight-to-quality" effect
into U.S. Treasury securities, given the ongoing turmoil in Asia and emerging
markets. Over the period, 10-year Treasury note yields declined from 5.79% to
5.45% and 30-year Treasury bond yields declined from 5.97% to 5.63%.
* An unmanaged index composed of 500 common stocks representative of the stock
market as a whole. "S&P 500" is a trademark of The McGraw-Hill Companies,
Inc. and has been licensed for use by AAL. The product is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes
no representation regarding the advisability of investing in the product.
** An unmanaged index that encompasses four major classes of fixed-income
securities in the United States: U.S. Treasury and U.S. government agency
securities, corporate debt obligations, mortgage-backed securities and asset-
backed securities.
[PHOTO]
Has the great performance of the U.S. stock market caused you to change the
investment mix of the Portfolio over the period?
The performance of the U.S. stock market over the last three years has been
truly remarkable. The S&P 500 has generated a total return of 121% with
dividends reinvested, which equates to a 30% compound annual return. It is
highly unlikely that returns of this magnitude will continue. As a result, we
reduced our stock exposure to 53% versus a neutral weighting of 55%. Equity
returns historically have exceeded
Value of a $10,000 Investment
Fund Portfolio/2/
[GRAPH APPEARS HERE]
<TABLE>
Balanced
----------
<S> <C>
6/14/95 $10,000.00
12/31/95 11,145.50
6/30/96 11,695.10
12/31/96 12,666.50
6/30/97 14,225.20
12/31/97 15,415.80
6/30/98 17,130.90
</TABLE>
Average Annual Total Returns/1/
As of June 30, 1998
<TABLE>
<CAPTION>
From Inception
Year-To-Date 1-Year Inception Date
----------------------------------------------
<S> <C> <C> <C> <C>
Fund Portfolio/2/........... 11.13% 20.43% 19.33% 6/14/95
- ---------------------------------------------------------------------------
Variable Annuity
Subaccount/3/............... 10.44% 18.93% 17.82% 6/15/95
- ---------------------------------------------------------------------------
Variable Life
Subaccount/3/............... NA NA 1.97% 5/15/98
- ---------------------------------------------------------------------------
SEC Variable
Annuity Subaccount/4/....... 3.48% 11.44% 16.41% 6/15/95
- ---------------------------------------------------------------------------
</TABLE>
Past performance is not an indication of future results.
/1/ Total Returns - Total returns and unit values are subject to fluctuation.
Accumulation units, when redeemed, may be worth more or less than their
original value. Periods less than one year are not annualized.
/2/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distributions but do not reflect separate
account expenses or charges. However, these values reflect the deduction of
a 0.33% annual management fee, but do not reflect Portfolio expenses which
are voluntarily paid by AAL or reimbursed by AAL. Without the payment and
reimbursement of expenses by AAL, which can be changed on 30-days' notice,
these total returns would have been lower.
/3/ Variable Subaccounts - Annuity returns reflect the deduction of the 1.25%
mortality and expense risk fee, but do not reflect the $25 annual
maintenance charge (for accounts under $5,000) or surrender charges. Life
returns do not reflect charges assessed to individual certificate owners.
/4/ SEC Variable Annuity Subaccount - Reflects all fees and expenses and the
maximum surrender charge of 7% for the first contract year, declining by 1%
each year through the seventh.
8 Balanced Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
.....$15.36.............Number of Securities in Portfolio...........784.........
bond and money market returns over the long term, which is why our stock
exposure will generally remain between 50-60%.
What is the advantage to own this Portfolio if I have already diversified my
investments in similar proportions of common stocks and bonds?
The advantage of owning this Portfolio is the benefit you receive from the
active and ongoing asset allocation decisions that we are responsible for
making. Rather than having to decide regularly yourself whether to change your
personal portfolio's weightings in stocks, bonds or money market funds, this
decision is made within the Portfolio by investment professionals who are active
in the financial markets daily and on an ongoing basis. Our objective for the
Portfolio is to be invested in the ideal mix of investments, given our
assessment of expected return and risk. We expect to generate better returns
than would otherwise be achievable under a less active approach to asset
allocation.
/s/ Reginald L. Pfeifer
Reginald L. Pfeifer
PORTFOLIO MANAGER
Asset Mix
---------
<TABLE>
<CAPTION>
[PIE CHART]
% of Portfolio
6/30/98 12/31/97
------- --------
<S> <C> <C>
Common Stocks..................53% 55%
Long-Term Obligations..........34% 35%
Short-Term Obligations.........13% 10%
---------------------
Total 100% 100%
</TABLE>
5 Largest Bond Holdings
------------------------
<TABLE>
<CAPTION>
Interest Maturity % of Portfolio
Security Rate Date 6/30/98 12/31/97
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes........7.125% 9/30/99 0.38% 0.35%
U.S. Treasury Notes........6.625% 5/15/07 0.36% 0.32%
U.S. Treasury Notes........7.875% 8/15/01 0.36% 0.31%
U.S. Treasury Notes........6.750% 8/15/26 0.35% 0.34%
U.S. Treasury Notes........7.750% 12/31/99 0.35% 0.41%
</TABLE>
5 Largest Common Stock Holdings
-------------------------------
<TABLE>
<CAPTION>
% of Portfolio
Security 6/30/98 12/31/97
- ------------------------------------------------
<S> <C> <C>
General Electric Company.........1.8% 2.0%
Microsoft Corporation............1.6% 1.1%
Coca-Cola Company................1.3% 1.7%
Exxon Corporation................1.0% 1.1%
Merck & Company, Inc.............1.0% 0.9%
</TABLE>
5 Largest Money Market Holdings
-------------------------------
<TABLE>
<CAPTION>
Interest Maturity % of Portfolio
Security Rate* Date 6/30/98
- --------------------------------------------------------------------
<S> <C> <C> <C>
Ford Motor Credit Company..........5.500% 7/9/98 1.59%
New England Power Company..........5.560% 7/30/98 1.02%
Goldman, Sachs & Company...........5.510% 8/17/98 0.94%
Carolina Power & Light, Inc........5.500% 7/7/98 0.92%
General Motors Acceptance
Corporation........................5.510% 8/6/98 0.84%
</TABLE>
* The interest rate reflects the discount rate at the date of purchase.
June 30, 1998 9
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . .Total Net Assets . . . . . . $473,750,302 . . . . . . . . . NAV . . . . . .
Large Company Stock Portfolio
How did large-cap stocks perform over the period ended June 30, 1998?
Large-cap stocks significantly outperformed mid-cap and small-cap stocks with
the S&P 500 Index* up 17.7%, while the S&P MidCap 400 Index** was up 8.6% and
the S&P SmallCap 600 Index*** was up 6.1%. Large company stocks were market
leaders, especially the top 50 to 100 large-cap stocks. This market looks very
similar to the "nifty-fifty" type of market last seen in the early 1970s where a
small group of about 50 blue-chip stocks led the market to new heights and
achieved extraordinarily high price-earnings ratios.
* An unmanaged index comprised of 500 common stocks representative of the
stock market as a whole. "S&P 500" is a trademark of The McGraw-Hill
Companies, Inc. and has been licensed for use by AAL. The product is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in
the product.
** An unmanaged index comprised of 400 stocks designed to represent
performance of the mid-cap segment of the U.S. equity markets.
*** An unmanaged index comprised of 600 stocks designed to represent
performance of the small-cap segment of the U.S. equity markets.
[PHOTO]
Why is this type of market activity occurring?
It is most likely a function of three factors: liquidity, investor confidence
and acquisition activity. The largest companies in the S&P 500 Index are the
most liquid. They are very recognizable, and thus are most easily bought and
sold. Next, with corporate profits slowing currently, there is a flight to the
safety of well-established blue-chip companies. Investors have confidence that
these types of companies are able to weather an economic slowdown. The third
factor is the amount of merger and acquisition activity. Corporate
restructurings have been a major source of profit growth in the 1990s and the
largest companies have been doing some of the biggest deals--often boosting the
stock prices of the participants.
Value of a $10,000 Investment
Fund Portfolio/2/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Large Co
<S> <C>
6/14/95 10,000.00
12/31/95 11,638.60
6/30/96 12,793.10
12/31/96 14,254.20
6/30/97 17,149.90
12/31/97 18,900.00
6/30/98 22,182.10
</TABLE>
Average Annual Total Returns/1/
As of June 30, 1998
<TABLE>
<CAPTION>
From Inception
Year-To-Date 1-Year Inception Date
---------------------------------------------
<S> <C> <C> <C> <C>
Fund Portfolio/2/...............17.37% 29.34% 29.89% 6/14/95
Variable Annuity
Subaccount/3/...................16.64% 27.74% 28.18% 6/15/95
Variable Life
Subaccount/3/................... NA NA 2.41% 5/15/98
SEC Variable
Annuity Subaccount/4/........... 9.29% 19.69% 26.65% 6/15/95
</TABLE>
Past performance is not an indication of future results.
/1/ Total Returns - Total returns and unit values are subject to fluctuation.
Accumulation units, when redeemed, may be worth more or less than their original
value. Periods less than one year are not annualized.
/2/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distributions but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a 0.33%
annual management fee, but do not reflect Portfolio expenses which are
voluntarily paid by AAL or reimbursed by AAL. Without the payment and
reimbursement of expenses by AAL, which can be changed on 30-days' notice, these
total returns would have been lower.
/3/ Variable Subaccounts - Annuity returns reflect the deduction of the 1.25%
mortality and expense risk fee, but do not reflect the $25 annual maintenance
charge (for accounts under $5,000) or surrender charges. Life returns do not
reflect charges assessed to individual certificate owners.
/4/ SEC Variable Annuity Subaccount - Reflects all fees and expenses and the
maximum surrender charge of 7% for the first contract year, declining by 1% each
year through the seventh.
10 Large Company Stock Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . . .$21.08. . . . . . . . Number of Securities in Portfolio. . . 506. .
Were there any market sectors that had a large impact on performance over the
period?
With the consumer in the best financial shape in many years based on low
unemployment, low interest rates and a soaring stock market, retailing led the
way during the first half of 1998. Technology, especially hot areas like
communication equipment, computer software and health care, where a host of new
drugs continue to increase corporate profits, were also sectors which had
positive performance over the period. With oil prices reaching new lows for this
economic cycle, energy had the largest negative impact on performance.
I have been hearing quite a bit from the news media about investors having
unrealistic performance expectations for the U.S. stock market due to the
"outperformance" over the last few years. Many of these stories suggest that now
is a good time for investors to make sure their investments are allocated among
several types of securities. Would you agree with this strategy?
Given that the S&P 500 Index has more than doubled in the past three years,
generating a compound annual return of approximately 30% over that time period,
and has quadrupled over the past 10 years, generating a return of almost 18% per
year, the investing public has become conditioned to expect an unreasonably high
rate of return from their stock investments. Market historians realize that a
return closer to 10% is a more reasonable long-term expectation. Keep in mind
that returns below 10% would not be unexpected sometime in the future as a "give
back" to the unusually strong returns of the past 16 years (1982 is thought by
some to be the start of this latest bull market). Given this outlook, if someone
wanted to reduce risk, it would be prudent to reallocate some current domestic
equity holdings to a variety of different asset classes, including international
equities, bonds and money market securities.
/s/ David J. Schnarsky
David J. Schnarsky
PORTFOLIO MANAGER
Sector Allocations
[PIE CHART]
<TABLE>
<CAPTION>
% of Portfolio
6/30/98 12/31/97
------- ---------
<S> <C> <C>
Consumer Non-Durables..........33% 33%
Finance........................17% 17%
Technology.....................13% 13%
Utilities......................12% 12%
Energy......................... 7% 8%
Materials & Services........... 7% 7%
Capital Goods.................. 6% 6%
Consumer Durables.............. 3% 2%
Transportation................. 1% 1%
Short-Term Obligations......... 1% 1%
----------------------
Total 100% 100%
</TABLE>
5 Largest Holdings
<TABLE>
<CAPTION>
%of Portfolio
Security 6/30/98 12/31/97
- ----------------------------------------------------
<S> <C> <C>
General Electric Company............. 3.3% 3.2%
Microsoft Corporation................ 2.9% 2.1%
Coca-Cola Company.................... 2.3% 2.2%
Exxon Corporation.................... 1.9% 2.0%
Phillip Morris Companies, Inc........ 1.0% 1.4%
</TABLE>
June 30, 1998 11
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . . Total Net Assets . . . . . . $199,935,422 . . . . . NAV . . . . . .
Small Company Stock Portfolio
How did small-cap stocks perform over the period ended June 30, 1998, and what
factors affected performance?
Small-capitalization stocks had a strong first quarter; however, the second
quarter was somewhat weak. After finishing up 11.0% in the first quarter, the
S&P SmallCap 600 Index* declined 4.9% in the second quarter. The result was a
respectable 6.1% return for the first half of 1998. While this is a good
absolute return, small-cap stocks continued to lag large-cap stocks over the
period. This is illustrated by the 17.7% return for the S&P 500 Index** for the
six-month period. Although small-cap stocks offer better relative valuations and
growth characteristics than large-cap stocks, the market currently prefers the
lower risk and better liquidity of large-cap stocks.
* An unmanaged index comprised of 600 stocks designed to represent performance
of the small-cap segment of the U.S. equity markets.
** An unmanaged index comprised of 500 common stocks representative of the stock
market as a whole. "S&P 500" is a trademark of The McGraw-Hill Companies,
Inc. and has been licensed for use by AAL. The product is not sponsored,
endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes
no representation regarding the advisability of investing in the product.
[PHOTO]
How has the change from the Wilshire Small Cap 250 Index to the S&P SmallCap 600
Index as the Portfolio's benchmark portfolio affected performance?
The change went very well and the benefits have already begun for you, our
members. The change was made to lower turnover, receive index changes in a
timely manner and lower tracking variance (performance more closely matches the
index). Since making the change in February of this year, the Portfolio's
tracking variance has decreased considerably. The lower turnover and better
communication of index changes should continue to benefit members in the future
through lower tracking variance and, therefore, higher returns.
Value of a $10,000 Investment
-----------------------------
Fund Portfolio/2/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
6/14/95 $10,000.00
12/31/95 11,070.40
6/30/96 12,046.50
12/31/96 13,084.20
6/30/97 14,779.20
12/31/97 16,403.10
6/30/98 17,627.50
</TABLE>
Average Annual Total Returns/1/
-------------------------------
As of June 30, 1998
<TABLE>
<CAPTION>
From Inception
Year-To-Date 1-Year Inception Date
-------------------------------------------
<S>............................... <C> <C> <C> <C>
Fund Portfolio/2/................. 7.46% 19.27% 20.45% 6/14/95
- -------------------------------------------------------------------------------
Variable Annuity
Subaccount/3/..................... 6.80% 17.79% 18.82% 6/15/95
- -------------------------------------------------------------------------------
Variable Life
Subaccount/3/..................... NA NA (2.65%) 5/15/98
- -------------------------------------------------------------------------------
SEC Variable
Annuity Subaccount/4/............. 0.07% 10.37% 17.40% 6/15/95
</TABLE>
Past performance is not an indication of future results.
/1/ Total Returns - Total returns and unit values are subject to fluctuation.
Accumulation units, when redeemed, may be worth more or less than their
original value. Periods less than one year are not annualized.
/2/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distributions but do not reflect separate
account expenses or charges. However, these values reflect the deduction of
a 0.35% annual management fee, but do not reflect Portfolio expenses which
are voluntarily paid by AAL or reimbursed by AAL. Without the payment and
reimbursement of expenses by AAL, which can be changed on 30-days' notice,
these total returns would have been lower.
/3/ Variable Subaccounts - Annuity returns reflect the deduction of the 1.25%
mortality and expense risk fee, but do not reflect the $25 annual
maintenance charge (for accounts under $5,000) or surrender charges. Life
returns do not reflect charges assessed to individual certificate owners.
/4/ SEC Variable Annuity Subaccount - Reflects all fees and expenses and the
maximum surrender charge of 7% for the first contract year, declining by 1%
each year through the seventh.
12 Small Company Stock Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . .$15.95. . . . . . . .Number of Securities in Portfolio. . . . .605. . .
How does a company's common stock become included in the S&P SmallCap 600 Index?
Standard & Poor's has an Index Committee that is responsible for the management
of their indexes which includes deciding which names are added to or removed
from the index. A stock must meet many criteria before it is considered for
inclusion in the index. Some of the criteria include: certain market
capitalization criteria; listing on the NYSE, American Stock Exchange or NASDAQ;
stock trading activity for at least six months; and certain liquidity
requirements. Companies that meet the criteria are then classified into 10
economic sectors. Stocks are then selected from each sector so that the index
reflects the economic breakdown of all the stocks that make up the small-cap
universe.
Has the Asian financial crisis continued to take its toll over the period?
While many companies have blamed this crisis for the decline in their earnings,
three industries in particular have been most affected. The semiconductor
industry has seen decreased demand as many consumers in the Far East are not
buying electronic products. The wireless telephone industry has seen
dramatically slower growth in the build out of networks into the Far East, as
companies are not able to finance growth. The oil and oil-field service
industry has been beaten up as the price of a barrel of oil had declined sharply
since last fall. While there have been a number of reasons for the declining
oil prices, one major reason has been the lack of demand for oil from the Far
East. Many uncertainties remain in the Pacific Rim and many more industries may
be affected in the future as the crisis continues to be felt around the world.
/s/ Brian J. Flanagan
Brian J. Flanagan
PORTFOLIO MANAGER
Sector Allocations
[PIE CHART]
<TABLE>
<CAPTION>
% of Portfolio
6/30/98 12/31/97
------- --------
<S> <C> <C>
.Consumer Non-Durables....... 28% 25%
.Materials & Services........ 19% 19%
.Finance..................... 17% 20%
.Technology.................. 11% 9%
.Capital Goods............... 6% 5%
.Consumer Durables........... 6% 4%
.Utilities................... 5% 9%
.Energy...................... 3% 5%
.Transportation.............. 3% 3%
.Short-Term Obligations...... 2% 1%
------------------------------
Total...... 100% 100%
</TABLE>
<TABLE>
<CAPTION>
5 Largest Holdings
% of Portfolio
Security 6/30/98
- ---------------------------------------------
<S> <C>
DEKALB Genetics Corporation....... 0.8%
First Commercial Corporation...... 0.7%
Lincare Holdings, Inc............. 0.6%
Platinum Technology, Inc.......... 0.6%
KN Energy, Inc.................... 0.6%
</TABLE>
June 30, 1998 13
<PAGE>
[LOGO] AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . Total Net Assets . . . . . $13,158,498 . . . . . . . . NAV . . . . . .
International Stock Portfolio
AAL chose Oechsle International Advisors, L.P. (Oechsle) as sub-adviser for this
Portfolio. What do you think made your investment management firm stand out?
Oechsle is an independent firm focused exclusively on managing money in
international markets. The investment team has built a reputation in this
specialty area for stability and consistency with an unusually low turnover of
employees. We believe that a solid organizational structure and a disciplined
investment approach has been the key to our success.
How is Oechsle International Advisors, L.P.'s investment team organized?
Oechsle's investment professionals undertake research predominantly according to
regional assignments. Their analysis is brought together to determine the
country allocations and specific security purchases that we believe will capture
the best return opportunities while remaining well diversified. The team meets
on a daily basis in order to ensure that investment opportunities are
appropriately evaluated.
How have international markets performed since inception of the Portfolio,
March 2, 1998?
From March through the end of June, a composite of international markets has
gained about 5%, but there have been wide variations among regions. Over the
same period Europe has gained around 17% while Asia is 12% lower. Europe has
continued its strong performance with interest rates generally trending
downwards as inflation expectations have been dampened by weaker activity in
Asia and as corporate profits have exceeded most expectations. Asia, meanwhile,
has suffered another bout of weakness due to unrest in Indonesia, concerns
regarding policy in Japan and rumors surrounding a possible devaluation of the
Chinese currency.
[PHOTO]
[PHOTO]
How did the Portfolio perform over the same period and what factors affected
performance?
Over the same period, the Portfolio gained 9.50%*. Performance was positively
impacted by our overweight positions in European markets, particularly France,
the Netherlands and Spain. The Portfolio also benefited from being underweight
in weak Asian markets, and in the United Kingdom which lagged Europe. Stock
selection overall added significantly to performance.
Have you approached Southeast Asia with caution over the period, or have you
viewed it more as a good opportunity for investment?
Our ongoing analysis has caused us to remain cautious on Southeast Asia in
recent months. We have intensified our scrutiny of potential investments as
these markets have declined, but we have generally concluded that the risks will
continue to outweigh the rewards for the time being.
* Past performance is not an indication of future results. Total Returns - Total
returns and unit values are subject to fluctuation. Accumulation units, when
redeemed, may be worth more or less than their original value. Periods less
than one year are not annualized. Fund Portfolio - Average annual total
returns reflect reinvestment of all dividends and capital gains distributions
but do not reflect separate account expenses or charges. However, these values
reflect the deduction of a 0.54% annual management fee, but do not reflect
Portfolio expenses which are voluntarily paid by AAL or reimbursed by AAL.
Without the payment and reimbursement of expenses by AAL, which can be changed
on 30-days' notice, these total returns would have been lower.
14 International Stock Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Distribution of Common Stock Holdings
[world map]
Canada 1.4% Germany 5.3%
$178,082 $696,661
Mexico 1.9% Switzerland 4.4%
$246,633 $584,448
Brazil 0.6% India 0.6%
$76,431 $80,446
Sweden 1.9% Japan 11.7%
$248,120 $1,535,490
United Kingdom 17.7% Hong Kong 1.1%
$2,327,003 $137,601
Netherlands 14.2% Philipines 0.4%
$1,869,618 $52,988
Belgium 1.7% Australia 2.0%
$221,940 $266,723
France 14.6% New Zealand 1.0%
$1,924,666 $136,826
Portugal 0.9% Italy 7.9%
$123,223 $1,037,823
Spain 5.3%
$702,836
International investing involves additional risks including currency
fluctuations, economic and political instability, and accounting standards.
How does the development of a single currency (the "Euro") affect the outlook
for Europe?
Efforts to coordinate government policies and financial efficiency across Europe
have led to lower interest rates as the introduction of a single currency
approaches. In contrast to Southeast Asia, Europe has therefore presented more
immediate investment opportunities as interest rates have trended lower,
underpinning economic growth, corporate earnings and equity valuations. The
single currency should facilitate more efficiency in production and trade across
the European markets. Because companies will be able to shift production more
easily across the single currency area, it should also encourage governments to
maintain sound financial policies in order to foster economic enterprise and
employment within their boundaries.
/s/ Kathleen M. Harris
- ----------------------
Kathleen M. Harris
PORTFOLIO MANAGER
/s/ L. Sean Roche
- ----------------------
L. Sean Roche
PORTFOLIO MANAGER
Asset Mix
[pie chart]
% of Portfolio
6/30/98
Common Stocks................ 95.4%
Short-Term Obligations....... 4.6%
------------
Total 100%
International Stock Portfolio
<TABLE>
<CAPTION>
5 Largest Holdings
<S> <C> <C> <C>
% of Portfolio
Security Country Industry 6/30/98
- --------------------------------------------------------------------------------
VNU Netherlands Publishing/Printing 3.1%
Telefonica SA Spain Telephone 3.0%
Group Danone France Food & Beverage 2.9%
Suez Lyonnaise des Eaux France Construction 2.9%
Glaxo Wellcome plc United Kingdom Drugs 2.8%
</TABLE>
June 30, 1998 15
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . .Total Net Assets . . . . . . . $24,525,624 . . . . .NAV . . . . . . .
High Yield Bond Portfolio
How have high yield bonds performed over the period ended June 30, 1998, and
what factors affected performance?
The high yield bond market, as measured by the Merrill Lynch High Yield Master
Index*, had a total return of 1.7% for the quarter ended June 30, 1998. The
primary factor driving this performance was the overall decline in interest
rates. Ten-year government bond yields declined to 5.45% on June 30, 1998, from
5.67% on March 31, 1998. Lower interest rates have been beneficial to equity
valuations. The stock market, as measured by the S&P 500, advanced 3.3% over the
past three months. This strong equity market has allowed high yield companies to
issue equity and use the proceeds to reduce debt, resulting in financially
healthier credits and ratings upgrades. When a company's credit ratings are
upgraded (e.g., from "B" to "BB"), the prices of its bonds usually respond
favorably. The Portfolio itself registered a total return of 2.19% since
inception and 1.28% for the quarter ended June 30, 1998.
* An unmanaged index comprised of over 900 "cash-pay" high yield bonds
representative of the high yield market as a whole.
[PHOTO APPEARS HERE]
What's the difference between yield and total return?
Yield is the annual return on an investment (from dividends or interest)
expressed as a percentage of either cost or current price. In the case of this
Portfolio, yield is the percentage return from monthly dividend payments
received. Total return is comprised of both income and price change of the
investment over a certain period of time, which is then expressed as a
percentage of the original investment.
I was happy to see that AAL added this Portfolio in March, as I viewed it as a
chance to further diversify my holdings. How are you managing this new
Portfolio?
I also manage The AAL High Yield Bond Fund and I'm managing this Portfolio in a
similar manner. The investment objectives are identical with the primary
objective being a high level of income and capital appreciation being secondary.
The current Portfolio is comprised of 57 investments across 20 different
industries. All of these investments are also held in The AAL High Yield Bond
Fund. The major risk facing high yield bond investors is that of default. The
effect on the value of the bonds of a company in default can be quite negative.
In order to reduce this risk, we continually monitor our investments by talking
to management, research analysts and industry experts. We also take a
diversified approach to the market. With
<TABLE>
<CAPTION>
Beginning NAV Annual Income Yield Ending NAV Price Change Total Return
<S> <C> <C> <C> <C> <C>
Example 1
$10.00/per share $1.00 10% $10.50 +5% 15%
Example 2
$10.00/per share $1.00 10% $ 9.50 -5% 5%
</TABLE>
This hypothetical example shows the yield and total return on an investment in a
bond fund over a one-year period based on initial $10.00 NAV.
16 High Yield Bond Portfolio Perspective
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
. . . . . $9.93 . . . . . Number of Securities in Portfolio . . . . . 57 . . . .
over 50 positions in the Portfolio, the effect of one default will not seriously
hurt the performance of the entire Portfolio. The default rate for the market
over the past year was 2.6%, which compares to the historic average of 3.7%.**
As the Portfolio's assets grow, I will diversify the Portfolio by increasing the
number of positions from the current level to between 80 and 100.
** Moody's, Merrill Lynch, Credit Suisse First Boston.
I've heard that high yield bonds act more like stocks than bonds. Is this true?
High yield bonds are generally viewed as a hybrid between stocks and bonds. They
have debt-like characteristics, such as fixed interest rates and a final
maturity, but they trade on specific company news, as do stocks. The credit
quality rating of the bond also can be a factor. Higher-quality bonds rated BB
are a notch below investment grade, and are more sensitive to the movement in
overall interest rates. Lower-quality bonds rated B or CCC are most affected by
a company's fundamentals such as profitability and sales growth.
/s/ David G. Carroll
David G. Carroll
PORTFOLIO MANAGER
5 Largest Holdings
------------------
<TABLE>
<CAPTION>
Interest Maturity % of Portfolio
Security Rate Date 6/30/98
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Algoma Steel Corporation................ 12.375% 7/15/05 2.3%
Grand Casinos, Inc...................... 10.125% 12/1/03 2.2%
Day International Group, Inc............ 11.125% 6/1/05 2.2%
Spanish Broadcasting Systems, Inc....... 11.000% 3/15/04 2.2%
Trident Automotive Group, Inc........... 10.000% 12/15/05 2.2%
</TABLE>
Asset Mix
---------
[PIE CHART]
% of Portfolio
6/30/98
-------
. Long-Term Obligations......................... 97.5%
. Short-Term Obligations........................ 2.5%
----------
Total 100%
Credit Quality
--------------
Average Quality: B+
[PIE CHART]
% of Portfolio
6/30/98
-------
. BB............................................ 22%
. B............................................. 76%
. CCC........................................... 2%
----------
Total 100%
Maturity
--------
Average Maturity: 8.0 Years
June 30, 1998 17
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
AAL Variable Product Money Market Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
The Portfolio seeks to provide maximum current income, to the extent consistent
with liquidity and a stable net asset value of $1.00 per share, by investing in
a diversified portfolio of high-quality, short-term money market instruments.
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (101.7%) Rate* Date Value
======================================================================
<S> <C> <C> <C> <C>
$1,000,000 Abbott Laboratories........5.490% 7/1/98 $1,000,000
450,000 Alabama Power
Company....................5.500 7/8/98 449,519
767,000 Bell Atlantic
Network Funding............5.520 7/13/98 765,589
1,300,000 Bell South
Telecommunications.........5.490 7/23/98 1,295,639
1,189,000 Beneficial
Corporation................5.590 7/22/98 1,185,123
1,250,000 Carolina Power &
Light, Inc.................5.510 7/6/98 1,249,044
1,250,000 Colgate-Palmolive
Company....................5.500 7/8/98 1,248,663
1,036,000 Consolidated
Natural Gas................5.500 7/10/98 1,034,576
300,000 CountryWide
Home, Inc..................5.580 7/31/98 298,605
1,000,000 CountryWide
Home, Inc..................5.520 8/14/98 993,253
123,000 E.I. Dupont de Nemours
& Company..................5.510 7/9/98 122,850
629,000 E.I. Dupont de Nemours
& Company..................5.520 7/15/98 627,650
462,000 E.I. Dupont de Nemours
& Company..................5.540 7/16/98 460,934
618,000 Ford Motor Credit
Company....................5.520 7/15/98 616,673
635,000 Ford Motor Credit
Company....................5.520 7/21/98 633,053
1,250,000 Gannett Company............5.480 7/14/98 1,247,526
$ 942,000 General Electric Capital
Corporation................5.530% 7/16/98 $ 939,830
411,000 General Electric Capital
Corporation................5.550 7/23/98 409,606
665,000 General Motors Acceptance
Corporation................5.540 7/13/98 663,772
525,000 General Signal
Corporation................5.700 7/16/98 523,753
1,250,000 Goldman, Sachs &
Company....................5.510 7/9/98 1,248,470
1,000,000 GTE Corporation............5.660 7/8/98 998,899
1,297,000 H.J. Heinz Company.........5.530 8/11/98 1,288,832
1,200,000 Household Finance
Corporation................5.560 7/27/98 1,195,181
365,000 IBM Credit
Corporation................5.510 7/10/98 364,497
855,000 IBM Credit
Corporation................5.500 7/28/98 851,473
1,250,000 J.C. Penney Funding
Corporation................5.520 7/20/98 1,246,358
603,000 Kellogg Company............5.520 7/24/98 600,874
1,250,000 Merrill Lynch &
Company, Inc...............5.530 7/2/98 1,249,808
439,000 Motorola, Inc..............5.550 7/21/98 437,646
500,000 Motorola, Inc..............5.500 9/18/98 493,965
1,200,000 New England Power
Company....................5.530 7/17/98 1,197,051
1,000,000 SBC
Communications, Inc........5.440 7/7/98 999,092
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
18 Money Market Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Money Market Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (101.7%) Rate* Date Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$785,000 Sears Roebuck Acceptance
Corporation..............5.520% 7/28/98 $781,750
363,000 Walt Disney Company......5.580 7/7/98 362,662
1,027,000 Xerox Corporation........5.520 7/24/98 1,023,377
-------------------------------------------------------
Total Short-Term Obligations (101.7%)
(amortized cost $30,105,593).................30,105,593
=======================================================
Other Assets,
Less Liabilities (-1.7%).......................(510,842)
=======================================================
Net Assets (100.0%).........................$29,594,751
=======================================================
</TABLE>
*The interest rate shown reflects the coupon rate, or, for the securities
purchased at a discount, the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 19
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
AAL Variable Product Bond Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
....................
The Portfolio seeks to achieve investment results that approximate the
total return of the Lehman Brothers Aggregate Bond Index by investing
primarily in bonds and other debt securities included in the index.
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (97.0%) Rate Date Value
========================================================================
<C> <S> <C> <C>
U.S. Government Obligations (39.1%)
...................................
$300,000 U.S. Treasury Notes........6.750% 5/31/99 $303,188
315,000 U.S. Treasury Notes........6.750 6/30/99 318,740
300,000 U.S. Treasury Notes........6.875 7/31/99 304,125
300,000 U.S. Treasury Notes........5.875 8/31/99 301,031
300,000 U.S. Treasury Notes........7.125 9/30/99 305,625
250,000 U.S. Treasury Notes........7.500 10/31/99 256,172
275,000 U.S. Treasury Notes........7.750 11/30/99 283,164
275,000 U.S. Treasury Notes........7.750 12/31/99 283,594
250,000 U.S. Treasury Notes........7.750 1/31/00 258,203
260,000 U.S. Treasury Notes........7.125 2/29/00 266,500
100,000 U.S. Treasury Notes........6.875 3/31/00 102,219
250,000 U.S. Treasury Notes........5.875 6/30/00 251,797
300,000 U.S. Treasury Notes........6.125 9/30/00 303,750
250,000 U.S. Treasury Notes........8.500 11/15/00 266,328
240,000 U.S. Treasury Notes........7.750 2/15/01 252,825
285,000 U.S. Treasury Notes........8.000 5/15/01 303,436
200,000 U.S. Treasury Notes........7.875 8/15/01 213,125
150,000 U.S. Treasury Notes........5.875 11/30/01 151,500
175,000 U.S. Treasury Notes........6.500 5/31/02 180,797
250,000 U.S. Treasury Notes........5.750 10/31/02 252,031
200,000 U.S. Treasury Notes........6.250 2/15/03 205,812
250,000 U.S. Treasury Notes........5.750 8/15/03 252,656
265,000 U.S. Treasury Notes........7.250 5/15/04 287,525
250,000 U.S. Treasury Notes........7.250 8/15/04 272,109
160,000 U.S. Treasury Notes........7.500 2/15/05 177,150
280,000 U.S. Treasury Notes........7.000 7/15/06 305,900
250,000 U.S. Treasury Notes........6.500 10/15/06 265,547
200,000 U.S. Treasury Notes........6.250 2/15/07 209,500
250,000 U.S. Treasury Bonds.......10.375 11/15/12 334,844
250,000 U.S. Treasury Bonds........9.875 11/15/15 364,219
250,000 U.S. Treasury Bonds........7.250 5/15/16 292,969
275,000 U.S. Treasury Bonds........7.500 11/15/16 330,172
250,000 U.S. Treasury Bonds........8.750 5/15/17 336,719
250,000 U.S. Treasury Bonds........8.125 8/15/19 322,656
100,000 U.S. Treasury Bonds........8.250 2/15/20 134,062
275,000 U.S. Treasury Bonds........7.875 2/15/21 348,992
80,000 U.S. Treasury Bonds........8.125 5/15/21 104,175
290,000 U.S. Treasury Bonds........7.625 11/15/22 361,503
250,000 U.S. Treasury Bonds........7.125 2/15/23 295,703
250,000 U.S. Treasury Bonds........6.250 8/15/23 267,578
260,000 U.S. Treasury Bonds........7.500 11/15/24 322,481
250,000 U.S. Treasury Bonds........6.875 8/15/25 289,609
300,000 U.S. Treasury Bonds........6.750 8/15/26 343,500
200,000 U.S. Treasury Bonds........6.625 2/15/27 225,937
---------------------------------------------------------
Total U.S. Government
Obligations....................................11,809,468
=========================================================
U.S. Government Agency Obligations (35.9%)
..........................................
245,000 Federal Home Loan
Bank Debentures............5.440 10/15/03 242,075
250,000 Federal Home Loan
Bank Debentures............6.500 11/29/05 262,103
255,000 Federal Home Loan
Mortgage Corporation
Gold 7-Yr. Balloon.........6.520 1/2/02 261,797
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
20 Bond Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Bond Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (97.0%) Rate Date Value
================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
.............................................
$142,363 Federal Home Loan
Mortgage Corporation
Gold 7-Yr. Balloon.......7.000% 7/1/02 $144,649
143,989 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through......7.000 1/1/11 146,623
247,085 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through......7.000 5/1/28 250,836
207,229 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through......7.000 6/1/26 210,410
210,831 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through......7.500 10/1/27 216,064
242,836 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.6.500 1/1/13 244,424
193,185 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.6.500 4/1/24 193,382
174,972 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.7.500 8/1/25 179,421
214,356 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.8.500 11/1/25 224,008
132,989 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.8.000 1/1/26 137,528
232,808 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.7.000 4/1/27 236,353
247,065 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.9.000 3/15/28 261,446
250,000 Federal National
Mortgage Association
Global Bond..............7.875 2/24/05 279,641
250,000 Federal National
Mortgage Association
Notes....................9.050 4/10/00 264,044
250,000 Federal National
Mortgage Association
Notes....................6.450 4/23/01 255,015
250,000 Federal National
Mortgage Association
Notes....................7.500 2/11/02 264,719
237,685 Federal National
Mortgage Association
7-Yr. Balloon............6.500 10/1/03 239,919
216,212 Federal National
Mortgage Association
15-Yr. Pass Through......6.000 4/1/11 214,033
197,805 Federal National
Mortgage Association
15-Yr. Pass Through......7.500 7/1/11 203,256
188,454 Federal National
Mortgage Association
15-Yr. Pass Through......8.000 7/1/12 194,460
146,753 Federal National
Mortgage Association
15-Yr. Pass Through......7.000 9/1/12 149,401
138,232 Federal National
Mortgage Association
30-Yr. Pass Through.....10.500 8/1/20 153,577
78,739 Federal National
Mortgage Association
30-Yr. Pass Through......9.000 2/1/25 83,140
123,249 Federal National
Mortgage Association
30-Yr. Pass Through......8.500 12/1/25 128,650
190,642 Federal National
Mortgage Association
30-Yr. Pass Through......7.500 1/1/26 195,524
233,028 Federal National
Mortgage Association
30-Yr. Pass Through......7.000 2/1/26 236,413
222,274 Federal National
Mortgage Association
30-Yr. Pass Through......6.500 5/1/26 221,779
191,549 Federal National
Mortgage Association
30-Yr. Pass Through......8.000 9/1/26 198,276
204,219 Federal National
Mortgage Association
30-Yr. Pass Through......7.500 2/1/27 209,516
211,126 Federal National
Mortgage Association
30-Yr. Pass Through......7.000 3/1/27 214,193
247,487 Federal National
Mortgage Association
30-Yr. Pass Through......6.500 8/1/27 246,569
236,405 Federal National
Mortgage Association
30-Yr. Pass Through......7.500 11/1/27 242,516
221,795 Federal National
Mortgage Association
30-Yr. Pass Through......7.000 1/1/28 224,991
249,760 Federal National
Mortgage Association
30-Yr. Pass Through......6.000 5/1/28 243,096
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 21
<PAGE>
AAL Variable Product Bond Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (97.0%) Rate Date Value
=================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
.............................................
$184,537 Government National
Mortgage Association
30-Yr. Pass Through......6.500% 6/15/09 $186,543
195,245 Government National
Mortgage Association
30-Yr. Pass Through......7.500 3/15/23 200,995
189,595 Government National
Mortgage Association
30-Yr. Pass Through......7.000 1/15/24 193,095
153,345 Government National
Mortgage Association
30-Yr. Pass Through......9.000 9/15/24 164,557
173,906 Government National
Mortgage Association
30-Yr. Pass Through......8.000 6/15/25 180,344
242,076 Government National
Mortgage Association
30-Yr. Pass Through......6.000 5/15/26 236,767
213,805 Government National
Mortgage Association
30-Yr. Pass Through......8.000 9/15/26 221,552
222,597 Government National
Mortgage Association
30-Yr. Pass Through......8.000 10/15/26 230,663
140,556 Government National
Mortgage Association
30-Yr. Pass Through......8.500 12/15/26 148,240
203,828 Government National
Mortgage Association
30-Yr. Pass Through......7.500 3/15/27 209,476
240,241 Government National
Mortgage Association
30-Yr. Pass Through......7.500 10/15/27 246,898
248,401 Government National
Mortgage Association
30-Yr. Pass Through......7.000 11/15/27 252,420
250,000 Private Export Funding
Corporation..............6.240 5/15/02 255,012
250,000 Tennessee Valley
Authority................6.000 11/1/00 251,907
----------------------------------------------------
Total U.S. Government
Agency Obligations........................10,852,316
====================================================
Asset-Backed Securities (0.8%)
..............................
250,000 NationsBank Credit Card
Trust Certificate........6.000 12/15/05 252,208
----------------------------------------------------
Total Asset-Backed Securities................252,208
====================================================
Corporate Obligations (16.3%)
.............................
225,000 Abbott
Laboratories Notes.......6.800 5/15/05 236,507
250,000 American Express
Company Senior Notes.....6.750 6/1/01 255,917
250,000 Archer-Daniels-Midland
Company..................8.125 6/1/12 295,203
250,000 Browning-Ferris
Industries, Inc.
Senior Notes.............6.375 1/15/08 251,491
250,000 Columbia Gas
Systems Notes............7.320 11/28/10 263,640
250,000 Commercial Credit
Company Notes............6.625 11/15/06 256,777
250,000 Crown Cork &
Seal Notes...............6.750 4/15/03 255,361
250,000 Enron Corporation
Notes....................6.875 10/15/07 258,425
250,000 Enterprise Oil Notes.....6.500 5/1/05 253,951
250,000 First Bank System
Notes....................7.625 5/1/05 270,879
250,000 Ford Motor Credit
Corporation Notes........8.200 2/15/02 266,826
250,000 Foster Wheeler
Corporation Notes........6.750 11/15/05 252,342
250,000 General Electric
Corporation Notes........8.750 5/21/07 296,439
200,000 General Motors
Acceptance
Corporation Notes........9.625 12/15/01 222,102
250,000 Household Finance
Corporation Notes........6.875 3/1/03 256,763
300,000 IBM Corporation Notes....7.250 11/1/02 314,686
250,000 PepsiCo, Inc. Notes......5.700 11/1/08 244,557
200,000 Tosco Corporation
First Mortgage Bonds.....9.625 3/15/02 221,975
225,000 Xerox
Corporation Notes........9.750 3/15/00 238,403
----------------------------------------------------
Total Corporate Obligations................4,912,244
====================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
22 Bond Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Bond Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (97.0%) Rate Date Value
=================================================================
<S> <C> <C> <C> <C>
Utility Bonds (1.6%)
....................
$200,000 Baltimore Gas &
Electric Company
First Refunding
Mortgage Bonds...........7.500% 1/15/07 $217,663
250,000 Texas Utilities
Company First
Mortgage Bonds...........7.375 8/1/01 258,824
----------------------------------------------------
Total Utility Bonds..........................476,487
====================================================
Canadian Government Securities (3.3%)
.....................................
250,000 Province of Manitoba
Debentures...............6.125 1/19/04 251,107
250,000 Province of Nova
Scotia Debentures........7.250 7/27/13 272,232
200,000 Province of Ontario
Senior Global Bond.......6.125 6/28/00 201,066
250,000 Province of Quebec
Global Bond.............11.000 6/15/15 280,363
----------------------------------------------------
Total Canadian
Government Securities......................1,004,768
====================================================
----------------------------------------------------
Total Long-Term Obligations
(amortized cost basis $25,880,246)........29,307,491
====================================================
</TABLE>
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (1.9%) Rate* Date Value
=================================================================
<S> <C> <C> <C> <C>
$556,000 Merrill Lynch &
Company, Inc............6.120% 7/1/98 $556,000
----------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $556,000)..............556,000
====================================================
----------------------------------------------------
Total Investments (98.9%)
(amortized cost basis $29,194,702)........29,863,491
====================================================
----------------------------------------------------
Other Assets,
Less Liabilities (1.1%)......................343,776
====================================================
----------------------------------------------------
Net Assets (100.0%)......................$30,207,267
====================================================
</TABLE>
*The interest rate shown reflects the coupon rate, or, for the securities
purchased at a discount, the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 23
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUALREPORT
AAL Variable Product Balanced Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
The Portfolio seeks to achieve investment results that reflect investment in
common stocks, bonds and money market instruments, each of which will be
selected consistent with the investment policies of the Large Company Stock,
Bond and Money Market Portfolios, respectively.
Shares Common Stocks (53.1%) Market Value
============================================================
Aerospace (0.9%)
1,900 BF Goodrich Company................... $ 94,288
26,428 Boeing Company........................ 1,177,698
3,300 General Dynamics Corporation.......... 153,450
5,200 Lockheed Martin Corporation........... 550,550
1,800 Northrop Grumman Corporation.......... 185,625
8,900 Raytheon Company...................... 526,212
5,300 Rockwell International Corporation.... 254,731
4,400 Textron, Inc.......................... 315,425
3,200 TRW, Inc.............................. 174,800
6,200 United Technologies Corporation....... 573,500
--------------------------------------------------
Total Aerospace....................... 4,006,279
==================================================
Air Transportation (0.3%)
4,900 AMR Corporation*...................... 407,925
2,000 Delta Air Lines, Inc.................. 258,500
4,220 Federal Express Corporation*.......... 264,805
5,750 Southwest Airlines Company............ 170,344
2,500 USAir Group, Inc.*.................... 198,125
--------------------------------------------------
Total Air Transportation.............. 1,299,699
==================================================
Apparel (0.2%)
1,900 Fruit of the Loom, Inc.*.............. 63,056
1,700 Liz Claiborne, Inc.................... 88,825
7,600 Nike, Inc............................. 370,025
1,400 Reebok International, Ltd............. 38,763
900 Russell Corporation................... 27,169
500 Springs Industries, Inc............... 23,062
3,200 V F Corporation....................... $164,800
--------------------------------------------------
Total Apparel................................... 775,700
==================================================
Banking (4.9%)
9,195 Associates First Capital Corporation.. 706,866
18,507 Banc One Corporation.................. 1,032,922
18,400 BankAmerica Corporation............... 1,590,450
7,800 BankBoston Corporation................ 433,875
2,600 Bankers Trust New York Corporation.... 301,763
9,900 Bank of New York Company, Inc......... 600,806
3,800 BB&T Corporation...................... 256,975
22,380 Chase Manhattan Corporation........... 1,689,690
12,100 Citicorp.............................. 1,805,925
4,200 Comerica, Inc......................... 278,250
2,800 Countrywide Credit Industries, Inc.... 142,100
6,100 Fifth Third Bancorp................... 384,300
7,743 First Chicago NBD Corporation......... 686,223
25,510 First Union Corporation............... 1,485,958
7,256 Fleet Financial Group, Inc............ 605,876
6,600 Franklin Resources, Inc............... 356,400
5,000 Huntington Bancshares, Inc............ 167,500
4,800 J.P. Morgan & Company, Inc............ 562,200
11,600 Keycorp............................... 413,250
6,800 Mellon Bank Corporation............... 473,450
3,400 Mercantile Bancorporation, Inc........ 171,275
8,700 National City Corporation............. 617,700
24,935 NationsBank Corporation............... 1,907,528
3,000 Northern Trust Corporation............ 228,750
19,900 Norwest Corporation................... 743,762
The accompanying notes to the financial statements are an integral part of this
schedule.
24 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
================================================================================
<C> <S> <C>
Banking--continued
8,000 PNC Bank Corporation .................................... $ 430,500
2,600 Providian Financial Corporation ......................... 204,262
3,000 Republic New York Corporation ........................... 188,812
4,600 Summit Bancorp .......................................... 218,500
5,600 Suntrust Banks, Inc. .................................... 455,350
6,950 Synovus Financial Corp. ................................. 165,062
19,489 U.S. Bancorp ............................................ 838,027
5,500 Wachovia Corporation .................................... 464,750
10,205 Washington Mutual, Inc. ................................. 443,280
2,366 Wells Fargo & Company ................................... 873,054
-----------------------------------------------------------------------
Total Banking ........................................... 21,925,391
=======================================================================
Brokerage (0.6%)
6,950 Charles Schwab Corporation .............................. 225,875
2,700 Lehman Brothers Holdings, Inc. .......................... 209,419
8,900 Merrill Lynch & Company, Inc. ........................... 821,025
15,695 Morgan Stanley, Dean Witter, Discover and Company ....... 1,434,130
-----------------------------------------------------------------------
Total Brokerage ......................................... 2,690,449
=======================================================================
Business Machines (4.5%)
9,300 3Com Corporation* ....................................... 285,394
3,500 Apple Computer, Inc. .................................... 100,406
1,200 Autodesk, Inc. .......................................... 46,350
5,800 Bay Networks, Inc.* ..................................... 187,050
4,100 Cabletron Systems, Inc.* ................................ 55,094
1,900 Ceridian Corporation* ................................... 111,625
26,950 Cisco Sytems, Inc.* ..................................... 2,481,084
43,700 Compaq Computers, Inc. .................................. 1,239,988
1,200 Data General Corporation* ............................... 17,925
17,300 Dell Computer Corporation* .............................. 1,605,656
4,000 Gateway 2000, Inc.* ..................................... 202,500
11,100 HBO & Company ........................................... 391,275
3,400 Honeywell, Inc. ......................................... 284,113
3,500 Ikon Office Solutions ................................... 50,969
25,800 International Business Machines Corporation ............. 2,962,162
64,500 Microsoft Corporation* .................................. 6,990,188
9,200 Novell, Inc.* ........................................... 117,300
26,050 Oracle Systems Corporation* ............................. 639,853
6,700 Parametric Technology Company* .......................... 181,737
7,400 Pitney-Bowes, Inc. ...................................... 356,125
6,400 Seagate Technology, Inc.* ............................... 152,400
4,900 Silicon Graphics, Inc.* ................................. 59,412
9,900 Sun Microsystems, Inc.* ................................. 430,031
6,600 Unisys Corporation* ..................................... 186,450
8,700 Xerox Corporation ....................................... 884,138
-----------------------------------------------------------------------
Total Business Machines ................................. 20,019,225
=======================================================================
Business Services (1.0%)
8,000 Automatic Data Processing, Inc. ......................... 583,000
4,978 Browning-Ferris Industries, Inc. ........................ 172,986
4,200 Cognizant Corporation ................................... 264,600
14,375 Computer Associates International, Inc. ................. 798,711
4,100 Computer Sciences Corporation* .......................... 262,400
2,100 Deluxe Corporation ...................................... 75,206
4,500 Dun & Bradstreet Corporation ............................ 162,563
3,400 Ecolab, Inc. ............................................ 105,400
11,300 First Data Corporation .................................. 376,431
3,900 General Instrument Corporation* ......................... 106,031
2,700 H.R. Block, Inc. ........................................ 113,737
3,300 Interpublic Group of Companies, Inc. .................... 200,269
8,700 Laidlaw, Inc. ........................................... 106,031
2,300 Moore Corporation, Ltd. ................................. 30,475
1,100 National Service Industries, Inc. ....................... 55,963
4,200 Omnicom Group, Inc. ..................................... 209,475
700 Shared Medical Systems Corporation ...................... 51,406
4,300 State Street Corporation ................................ 298,850
11,983 Waste Management, Inc. .................................. 419,405
-----------------------------------------------------------------------
Total Business Services ................................. 4,392,939
=======================================================================
Chemicals (1.4%)
6,300 Air Products & Chemicals, Inc. .......................... 252,000
2,100 Eastman Chemical Company ................................ 130,725
30,000 E.I. Du Pont de Nemours & Company ....................... 2,238,750
1,500 Great Lakes Chemical Corporation ........................ 59,156
2,500 Hercules, Inc. .......................................... 102,813
10,900 Minnesota Mining and Manufacturing Company .............. 895,844
15,600 Monsanto Company ........................................ 871,650
3,400 Morton International, Inc. .............................. 85,000
1,700 Nalco Chemical Company .................................. 59,712
4,800 PPG Industries, Inc. .................................... 333,900
4,100 Praxair, Inc. ........................................... 191,931
1,700 Rohm & Haas Company ..................................... 176,694
</TABLE>
The accompanying notes to the financial statements
are an integral part of this schedule.
June 30, 1998 25
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
================================================================================
<C> <S> <C>
Chemicals--continued
2,600 Sigma-Aldrich Corporation ............................... $ 91,325
6,100 The Dow Chemical Company ................................ 589,794
3,200 Union Carbide Corporation ............................... 170,800
1,900 W.R. Grace & Company .................................... 32,419
-----------------------------------------------------------------------
Total Chemicals ......................................... 6,282,513
=======================================================================
Construction (0.2%)
1,100 Armstrong World Industries, Inc. ........................ 74,113
1,500 Centex Corporation ...................................... 56,625
1,200 Crane Company ........................................... 58,275
2,200 Fluor Corporation ....................................... 112,200
1,000 Kaufman & Broad Home Corporation ........................ 31,750
4,300 Masco Corporation ....................................... 260,150
1,400 Owens-Corning Fiberglass Corporation .................... 57,137
1,200 Pulte Corporation ....................................... 35,850
4,500 Sherwin-Williams Company ................................ 149,062
2,300 Stanley Works ........................................... 95,594
-----------------------------------------------------------------------
Total Construction ...................................... 930,756
=======================================================================
Consumer Durables (0.1%)
2,500 Black & Decker Corporation .............................. 152,500
2,500 Maytag Corporation ...................................... 123,437
4,200 Newell Company .......................................... 209,213
1,600 Tupperware Corporation .................................. 45,000
2,000 Whirlpool Corporation ................................... 137,500
-----------------------------------------------------------------------
Total Consumer Durables ................................. 667,650
=======================================================================
Containers (0.1%)
700 Ball Corporation ........................................ 28,131
1,400 Bemis Company, Inc. ..................................... 57,225
3,300 Crown Cork & Seal Company, Inc. ......................... 156,750
4,000 Owens-Illinois, Inc.* ................................... 179,000
2,164 Sealed Air Corporation* ................................. 79,527
2,600 Stone Container Corporation ............................. 40,625
-----------------------------------------------------------------------
Total Containers ........................................ 541,258
=======================================================================
Cosmetics (1.4%)
1,500 Alberto-Culver Company .................................. 43,500
3,500 Avon Products, Inc. ..................................... 271,250
2,800 Clorox Company .......................................... 267,050
7,900 Colgate-Palmolive Company ............................... 695,200
29,600 Gillette Company ........................................ 1,677,950
2,800 International Flavors and Fragrances, Inc. .............. 121,625
35,600 Procter & Gamble Company ................................ 3,241,825
-----------------------------------------------------------------------
Total Cosmetics ......................................... 6,318,400
=======================================================================
Credit Cards (0.1%)
3,900 Equifax, Inc............................................. 141,619
-----------------------------------------------------------------------
Total Credit Cards ...................................... 141,619
=======================================================================
Drugs & Medicine (6.3%)
40,400 Abbott Laboratories ..................................... 1,651,350
1,700 Allergan, Inc. .......................................... 78,837
2,200 Alza Corporation* ....................................... 95,150
34,300 American Home Products Corporation ...................... 1,775,025
6,900 Amgen, Inc.* ............................................ 451,088
1,400 Bausch & Lomb, Inc. ..................................... 70,175
7,400 Baxter International, Inc. .............................. 398,212
3,300 Becton, Dickinson and Company ........................... 256,163
2,900 Biomet, Inc. ............................................ 95,881
5,100 Boston Scientific Corporation ........................... 365,288
26,400 Bristol-Myers Squibb Company ............................ 3,034,350
3,000 Cardinal Health, Inc. ................................... 281,250
17,050 Columbia/HCA Healthcare Corporation ..................... 496,581
1,500 C.R. Bard, Inc. ......................................... 57,094
29,400 Eli Lilly & Company ..................................... 1,942,238
4,000 Guidant Corporation ..................................... 285,250
10,400 HEALTHSOUTH Corporation* ................................ 277,550
4,300 Humana, Inc.* ........................................... 134,106
35,700 Johnson & Johnson ....................................... 2,632,875
1,900 Mallinckrodt Group, Inc. ................................ 56,406
1,600 Manor Care, Inc. ........................................ 61,500
12,400 Medtronic, Inc. ......................................... 790,500
31,800 Merck & Company, Inc. ................................... 4,253,250
34,300 Pfizer, Inc. ............................................ 3,727,981
13,380 Pharmacia & Upjohn, Inc. ................................ 617,153
19,400 Schering-Plough Corporation ............................. 1,777,525
2,195 St. Jude Medical, Inc.* ................................. 80,803
</TABLE>
The accompanying notes to the financial statements
are an integral part of this schedule.
26 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
- --------------------------------------------------------------------
<C> <S> <C>
Drugs & Medicine--continued
- ---------------------------
8,100 Tenet Healthcare Corporation*......... $253,125
5,000 United Healthcare Corporation......... 317,500
2,000 U.S. Surgical Corporation............. 91,250
21,600 Warner-Lambert Company................ 1,498,500
-----------------------------------------------------
Total Drugs & Medicine................ 27,903,956
=====================================================
Electronics (1.9%)
- ------------------
2,100 Adobe Systems, Inc.................... 89,119
3,700 Advanced Micro Devices, Inc.*......... 63,131
5,728 AMP, Inc.............................. 196,900
9,600 Applied Materials, Inc.*.............. 283,200
1,100 EG&G, Inc............................. 33,000
13,100 EMC Corporation*...................... 587,044
1,200 General Signal Corporation............ 43,200
2,100 Harris Corporation.................... 93,844
27,500 Hewlett-Packard Company............... 1,646,562
43,400 Intel Corporation..................... 3,217,025
3,700 LSI Logic Corporation*................ 85,331
5,600 Micron Technology, Inc................ 138,950
15,800 Motorola, Inc......................... 830,488
4,300 National Semiconductor Corporation*... 56,706
1,300 Perkin Elmer Corporation.............. 80,844
2,000 Scientific-Atlanta, Inc............... 50,750
1,250 Tektronix, Inc........................ 44,219
4,900 Tellabs, Inc.*........................ 350,962
10,300 Texas Instruments, Inc................ 600,619
4,200 Thermo Electron Corporation*.......... 143,587
1,400 Thomas & Betts Corporation............ 68,950
-----------------------------------------------------
Total Electronics..................... 8,704,431
=====================================================
Energy & Utilities (1.6%)
- -------------------------
3,600 Ameren Corporation.................... 143,100
5,000 American Electric Power Company....... 226,875
3,900 Baltimore Gas & Electric Company...... 121,144
3,900 Carolina Power & Light Company........ 169,163
5,600 Central & Southwest Corporation....... 150,500
4,100 CINergy Corporation................... 143,500
2,900 Coastal Corporation................... 202,456
2,250 Columbia Gas System, Inc.............. 125,156
6,200 Consolidated Edison, Inc.............. 285,588
2,500 Consolidated Natural Gas Company...... 147,187
5,100 Dominion Resources, Inc............... 207,825
3,800 DTE Energy Company.................... 153,425
9,611 Duke Energy Corporation............... 569,452
10,000 Edison International.................. 295,625
8,600 Enron Corporation..................... 464,938
6,400 Entergy Corporation................... 184,000
6,000 FirstEnergy Corporation............... 184,500
4,900 FPL Group, Inc........................ 308,700
3,300 General Public Utilities Corporation.. 124,781
7,424 Houston Industries, Inc............... 229,216
3,800 Niagara Mohawk Power Corporation...... 56,763
1,200 Nicor, Inc............................ 48,150
3,900 Northern States Power Company......... 111,637
800 ONEOK, Inc............................ 31,900
11,100 Pacific Gas & Electric Company........ 350,344
7,800 PacifiCorp............................ 176,475
5,800 Peco Energy Company................... 169,288
900 Peoples Energy Corporation............ 34,762
4,300 P P & L Resources, Inc................ 97,556
6,100 Public Service Enterprise............. 210,069
2,900 Sonat, Inc............................ 112,012
18,200 Southern Company...................... 503,912
6,470 Texas Utilities Company............... 269,314
5,700 Unicom Corporation.................... 199,856
10,800 Williams Companies, Inc............... 364,500
-----------------------------------------------------
Total Utilities & Energy.............. 7,173,669
=====================================================
Energy--Raw Materials (0.5%)
- ----------------------------
4,400 Baker Hughes, Inc..................... 152,075
4,667 Burlington Resources, Inc............. 200,973
4,600 Dresser Industries, Inc............... 202,688
500 Eastern Enterprises................... 21,437
6,900 Halliburton Company................... 307,481
1,500 McDermott International, Inc.......... 51,656
8,900 Occidental Petroleum Corporation...... 240,300
13,200 Schlumberger, Ltd..................... 901,725
6,632 Union Pacific Resources Group, Inc.... 116,475
1,500 Western Atlas, Inc.*.................. 127,312
-----------------------------------------------------
Total Energy--Raw Materials........... 2,322,122
=====================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 27
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
======================================================================
<C> <S> <C>
Entertainment (0.1%)
....................
6,700 Marriott International, Inc.......... $216,912
4,700 Mirage Resorts, Inc.*................ 100,169
----------------------------------------------------
Total Entertainment.................. 317,081
====================================================
Food & Agriculture (3.1%)
.........................
15,072 Archer-Daniels-Midland Company....... 292,020
7,600 BestFoods............................ 441,275
12,000 Campbell Soup Company................ 637,500
65,500 Coca-Cola Company.................... 5,600,250
12,500 ConAgra, Inc......................... 396,094
4,200 General Mills, Inc................... 287,175
3,800 Hershey Foods Corporation............ 262,200
9,650 H.J. Heinz Company................... 541,606
10,800 Kellogg Company...................... 405,675
40,100 PepsiCo, Inc......................... 1,651,619
6,400 Pioneer Hi-Bred International, Inc... 264,800
3,600 Quaker Oats Company.................. 197,775
2,900 Ralston Purina Corporation........... 338,756
12,500 Sara Lee Corporation................. 699,219
1,500 Supervalu, Inc....................... 66,562
9,000 Sysco Corporation.................... 230,625
3,930 Tricon Global Restaurants, Inc.*..... 124,532
17,000 Unilever N.V......................... 1,341,938
3,100 Wm Wrigley Jr. Company............... 303,800
----------------------------------------------------
Total Food & Agriculture............. 14,083,421
====================================================
Gas Utilities (0.1%)
....................
3,308 Sempra Energy*....................... 91,807
----------------------------------------------------
Total Gas Utilities.................. 91,807
====================================================
Gold (0.1%)
...........
9,800 Barrick Gold Corporation............. 188,038
6,000 Battle Mountain Gold Company......... 35,625
5,500 Homestake Mining Company............. 57,062
4,117 Newmont Mining Corporation........... 97,264
6,500 Placer Dome, Inc..................... 76,375
----------------------------------------------------
Total Gold........................... 454,364
====================================================
Insurance (2.2%)
................
4,014 Aetna Life & Casualty Company........ 305,566
11,448 Allstate Corporation................. 1,048,208
6,808 American General Corporation......... 484,644
18,650 American International Group, Inc.... 2,722,900
4,500 Aon Corporation...................... 316,125
4,600 Chubb Corporation.................... 369,725
5,900 Cigna Corporation.................... 407,100
4,300 Cincinnati Financial Corporation..... 165,012
4,900 Conseco, Inc......................... 229,075
2,100 General Re Corporation............... 532,350
3,200 ITT Hartford Group, Inc.............. 366,000
2,800 Jefferson-Pilot Corporation.......... 162,225
2,800 Lincoln National Corporation......... 255,850
2,600 MBIA, Inc............................ 194,675
3,000 MGIC Investment Corporation.......... 171,188
6,750 Marsh & McLennan Companies, Inc...... 407,953
2,000 Progressive Corporation.............. 282,000
3,700 Safeco Corporation................... 168,119
7,622 St. Paul Companies, Inc.............. 320,600
5,100 SunAmerica, Inc...................... 292,931
3,700 Torchmark Corporation................ 169,275
1,700 Transamerica Corporation............. 195,713
3,600 Unum Corporation..................... 199,800
----------------------------------------------------
Total Insurance...................... 9,767,034
====================================================
Liquor (0.2%)
.............
900 Adolph Coors Company................. 30,600
12,900 Anheuser-Busch Companies, Inc........ 608,719
1,800 Brown-Foreman Corporation............ 115,650
9,400 Seagram Company, Ltd................. 384,812
----------------------------------------------------
Total Liquor......................... 1,139,781
====================================================
Media (1.2%)
............
18,800 CBS Corporation...................... 596,900
3,300 Clear Channel Communications, Inc.*.. 360,112
9,200 Comcast Corporation, Class A......... 373,462
2,500 Dow Jones & Company, Inc............. 139,375
7,600 Gannett Company, Inc................. 540,075
1,900 King World Productions, Inc.......... 48,450
2,100 Knight-Ridder, Inc................... 115,631
2,700 McGraw-Hill, Inc..................... 220,219
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
28 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
=================================================================
Media-continued
- ---------------
<S> <C> <C> <C>
1,300 Meredith Corporation................. $ 61,019
2,600 New York Times Company............... 206,050
3,800 R.R. Donnelley & Sons Company........ 173,850
13,400 Tele-Communications, Inc.*........... 515,063
15,400 Time Warner, Inc..................... 1,315,738
2,400 Times Mirror Company................. 150,900
3,300 Tribune Company...................... 227,081
9,300 Viacom, Inc.*........................ 541,725
----------------------------------------------------
Total Media.......................... 5,585,650
====================================================
Miscellaneous Finance (1.7%)
- ----------------------------
12,400 American Express Company................ 1,413,600
1,500 Beneficial Corporation.................. 229,781
18,300 Federal Home Loan Mortgage Corporation.. 861,244
28,000 Federal National Mortgage Association... 1,701,000
1,600 Golden West Financial Corporation....... 170,100
3,600 Green Tree Financial Corporation........ 154,125
2,900 H.F. Ahmanson & Company................. 205,900
8,400 Household International Corporation..... 417,900
13,225 MBNA Corporation........................ 436,425
30,348 Travelers Group, Inc.................... 1,839,847
----------------------------------------------------
Total Miscellaneous Finance............. 7,429,922
====================================================
Motor Vehicles (1.1%)
- ---------------------
17,100 Chrysler Corporation.................... 964,013
1,000 Cummins Engine Company, Inc............. 51,250
2,700 Dana Corporation........................ 144,450
2,000 Eaton Corporation....................... 155,500
1,600 Echlin, Inc............................. 78,500
900 Fleetwood Enterprises, Inc.............. 36,000
31,700 Ford Motor Company...................... 1,870,300
18,800 General Motors Corporation.............. 1,256,075
4,700 Genuine Parts Company................... 162,444
3,100 ITT Industries, Inc..................... 115,862
1,900 Navistar International Corporation*..... 54,862
2,000 PACCAR, Inc............................. 104,500
----------------------------------------------------
Total Motor Vehicles.................... 4,993,756
====================================================
Non-Durables & Entertainment (0.6%)
- -----------------------------------
1,900 American Greetings Corporation, Class A.. $ 96,781
3,900 Darden Restaurants, Inc.................. 61,913
1,800 Harcourt General, Inc.................... 107,100
3,500 Hasbro, Inc.............................. 137,594
1,000 Jostens, Inc............................. 24,125
7,625 Mattel, Inc.............................. 322,633
18,300 McDonald's Corporation................... 1,262,700
3,900 Rubbermaid, Inc.......................... 129,431
6,600 Service Corporation International........ 282,975
3,400 Wendy's International, Inc............... 79,900
----------------------------------------------------
Total Non-Durables &
Entertainment............................ 2,505,152
====================================================
Non-Ferrous Metals (0.2%)
- ------------------------
6,000 Alcan Aluminium, Ltd..................... 165,750
4,600 Aluminium Company of America............. 303,313
1,000 Asarco, Inc.............................. 22,250
2,400 Cyprus Minerals Company.................. 31,800
3,750 Engelhard Corporation.................... 75,938
5,100 Freeport-McMoran Copper & Gold, Class B.. 77,456
4,400 Inco, Ltd................................ 59,950
1,500 Phelps Dodge Corporation................. 85,781
1,900 Reynolds Metals Company.................. 106,281
----------------------------------------------------
Total Non-Ferrous Metals................. 928,519
====================================================
Oil-Domestic (0.5%)
- -------------------
2,400 Amerada Hess Corporation................. 130,350
1,600 Anadarko Petroleum Corporation........... 107,500
2,500 Apache Corporation....................... 78,750
1,900 Ashland Oil, Inc......................... 98,088
8,500 Atlantic Richfield Company............... 664,062
1,300 Helmerich & Payne, Inc................... 28,925
1,300 Kerr-McGee Corporation................... 75,237
2,700 Oryx Energy Company*..................... 59,738
1,200 Pennzoil Corporation..................... 60,750
6,900 Phillips Petroleum Company............... 332,494
2,200 Rowan Companies, Inc.*................... 42,762
2,500 Sun Company, Inc......................... 97,031
6,500 Unocal Corporation....................... 232,375
7,600 USX-Marathon Group, Inc.................. 260,775
----------------------------------------------------
Total Oil-Domestic....................... 2,268,837
====================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 29
<PAGE>
AAL Variable Product Balanced Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
================================================================
<C> <S> <C>
Oil-International (2.9%)
- ------------------------
25,700 Amoco Corporation.......................$ 1,069,763
17,400 Chevron Corporation..................... 1,445,287
65,300 Exxon Corporation....................... 4,656,706
20,800 Mobil Corporation....................... 1,593,800
56,700 Royal Dutch Petroleum Company........... 3,107,869
14,500 Texaco, Inc............................. 865,469
---------------------------------------------------
Total Oil-International................. 12,738,894
===================================================
Optical & Photo ( 0.2%)
6,100 Corning, Inc............................ 211,975
8,700 Eastman Kodak Company................... 635,644
1,100 Polaroid Corporation.................... 39,119
---------------------------------------------------
Total Optical & Photo................... 886,738
===================================================
Paper & Forest Products (0.5%)
1,400 Boise Cascade Corporation............... 45,850
2,500 Champion International Corporation...... 122,969
5,500 Fort James Corporation.................. 244,750
2,400 Georgia-Pacific Corporation............. 141,450
8,002 International Paper Company............. 344,086
14,680 Kimberly-Clark Corporation.............. 673,445
2,900 Louisiana-Pacific Corporation........... 52,925
2,700 Mead Corporation........................ 85,725
700 Potlatch Corporation.................... 29,400
1,400 Temple-Inland, Inc...................... 75,425
1,800 Union Camp Corporation.................. 89,325
2,600 Westvaco Corporation.................... 73,450
5,200 Weyerhaeuser Company.................... 240,175
2,900 Willamette Industries, Inc.............. 92,800
---------------------------------------------------
Total Paper & Forest Products........... 2,311,775
===================================================
Producers Goods (3.0%)
700 Aeroquip-Vickers, Inc................... 40,862
14,900 Allied-Signal, Inc...................... 661,188
2,700 Avery Dennison Corporation.............. 145,125
600 Briggs & Stratton Corporation........... 22,463
1,900 Case Corporation........................ 91,675
9,800 Caterpillar, Inc........................ 518,175
1,000 Cincinnati Milacron, Inc................ 24,312
3,200 Cooper Industries, Inc.................. 175,800
6,600 Deere & Company......................... 348,975
5,800 Dover Corporation....................... 198,650
11,700 Emerson Electric Company................ 706,388
1,000 FMC Corporation*........................ 68,187
1,000 Foster Wheeler Corporation.............. 21,437
86,700 General Electric Company................ 7,889,700
1,200 Harnischfeger Industries, Inc........... 33,975
6,700 Illinois Tool Works, Inc................ 446,806
4,300 Ingersoll-Rand Company.................. 189,469
2,200 Johnson Controls, Inc................... 125,813
2,200 KLA Instruments Corporation*............ 60,912
1,100 Millipore Corporation................... 29,975
305 NACCO Industries, Inc................... 39,421
3,300 Pall Corporation........................ 67,650
2,900 Parker Hannifin Corporation............. 110,563
2,200 Raychem Corporation..................... 65,038
1,600 Snap-On, Inc............................ 58,000
4,500 Tenneco, Inc............................ 171,281
1,600 Timken Company.......................... 49,300
15,100 Tyco International Ltd.................. 951,300
2,600 W.W. Grainger, Inc...................... 129,512
---------------------------------------------------
Total Producers Goods................... 13,441,952
===================================================
Railroad & Shipping (0.3%)
4,164 Burlington Northern, Inc................ 408,853
5,700 CSX Corporation......................... 259,350
9,900 Norfolk Southern Corporation............ 295,144
6,500 Union Pacific Corporation............... 286,812
---------------------------------------------------
Total Railroad & Shipping............... 1,250,159
===================================================
Retail Stores (3.0%)
94 Abercrombie & Fitch Company*............ 4,132
6,500 Albertson's, Inc........................ 336,781
7,200 American Stores Company................. 174,150
4,000 Autozone, Inc.*......................... 127,750
21,360 Cendant Corporation*.................... 445,890
2,600 Circuit City Stores, Inc................ 121,875
2,800 Consolidated Stores Corporation*........ 101,500
5,600 Costco Companies, Inc.*................. 353,150
10,100 CVS Corporation......................... 393,269
11,500 Dayton Hudson Corporation............... 557,750
2,900 Dillard's Inc........................... 120,169
5,500 Federated Department Stores, Inc.*...... 295,969
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
30 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (53.1%) Market Value
- ----------------------------------------------------------------------------
<S> <C> <C>
Retail Stores--continued
- ------------------------
1,500 Giant Food, Inc., Class A.................. $ 64,594
1,000 Great Atlantic & Pacific Tea Company, Inc.. 33,062
19,400 Home Depot, Inc............................ 1,611,413
6,700 J.C. Penney Company, Inc................... 484,494
12,900 Kmart Corporation.......................... 248,325
6,700 Kroger Corporation*........................ 287,262
1,000 Long's Drug Stores, Inc.................... 28,875
9,400 Lowe's Companies, Inc...................... 381,287
6,200 May Department Stores Company.............. 406,100
1,000 Mercantile Stores Company, Inc............. 78,937
2,100 Nordstrom, Inc............................. 162,225
1,600 Pep Boys-Manny, Moe, & Jack................ 30,300
6,800 Rite Aid Corporation....................... 255,425
10,300 Sears Roebuck & Company.................... 628,944
2,700 Tandy Corporation.......................... 143,269
10,400 The Gap, Inc............................... 640,900
6,870 The Limited, Inc........................... 227,569
8,400 TJX Companies, Inc......................... 202,650
7,500 Toys "R" Us, Inc.*......................... 176,719
3,500 Venator Group, Inc.*....................... 66,937
13,100 Walgreen Company........................... 541,194
59,400 Wal-Mart Stores, Inc....................... 3,608,550
3,900 Winn-Dixie Stores, Inc..................... 199,631
---------------------------------------------------------
Total Retail Stores........................ 13,541,047
=========================================================
Steel (0.1%)
- ------------
5,162 Allegheny Teledyne, Inc.................... 118,081
2,800 Armco, Inc.*............................... 17,850
3,300 Bethlehem Steel Corporation*............... 41,044
1,200 Inland Steel Industries, Inc............... 33,825
2,300 Nucor Corporation.......................... 105,800
2,200 USX-US Steel Group, Inc.................... 72,600
2,500 Worthington Industries, Inc................ 37,656
---------------------------------------------------------
Total Steel................................ 426,856
=========================================================
Telephone (4.6%)
- -----------------
14,900 Airtouch Communications, Inc.*............. 870,719
4,800 ALLTEL Corporation......................... 223,200
28,900 Ameritech Corporation...................... 1,296,888
2,300 Andrew Corporation*........................ 41,544
5,100 Ascend Communication, Inc.*................ 252,769
43,000 AT&T Corporation........................... 2,456,375
41,180 Bell Atlantic Corporation.................. 1,878,837
26,300 BellSouth Corporation...................... 1,765,387
3,100 DSC Communications Corporation*............ 93,000
4,300 Frontier Corporation....................... 135,450
25,300 GTE Corporation............................ 1,407,312
34,500 Lucent Technologies, Inc................... 2,869,969
18,400 MCI Communications Corporation............. 1,069,500
16,000 Mediaone Group, Inc.*...................... 703,000
6,900 Nextel Communication, Inc.*................ 171,637
13,700 Northern Telecom, Ltd...................... 777,475
48,522 SBC Communications, Inc.................... 1,940,880
11,400 Sprint Corporation......................... 803,700
13,126 U.S. West, Inc............................. 616,924
26,800 WorldCom, Inc.............................. 1,298,125
---------------------------------------------------------
Total Telephone............................ 20,672,691
=========================================================
Tires & Rubber (0.1%)
- ---------------------
2,000 Cooper Tire & Rubber Company............... 41,250
4,200 Goodyear Tire & Rubber Company............. 270,637
---------------------------------------------------------
Total Tires & Rubber....................... 311,887
=========================================================
Tobacco (0.7%)
- -------------
4,500 Fortune Brands, Inc........................ 172,969
3,100 Loews Corporation.......................... 270,087
64,100 Philip Morris Companies, Inc............... 2,523,938
4,800 UST, Inc................................... 129,600
---------------------------------------------------------
Total Tobacco.............................. 3,096,594
=========================================================
Travel & Recreation (0.5%)
- --------------------------
2,600 Brunswick Corporation...................... 64,350
2,600 Harrah's Entertainment*.................... 60,450
6,600 Hilton Hotels Corporation.................. 188,100
17,929 Walt Disney Company....................... 1,883,666
---------------------------------------------------------
Total Travel & Recreation.................. 2,196,566
=========================================================
Trucking & Freight (0.1%)
- -------------------------
2,000 Ryder Systems, Inc......................... 63,125
---------------------------------------------------------
Total Trucking & Freight................... 63,125
=========================================================
Total Common Stocks
(cost basis $167,655,960)....................$236,599,664
=========================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 31
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
<C> <S> <C> <C> <C>
U.S. Government Obligations (13.5%)
...................................
$1,105,000 U.S. Treasury Notes........ 6.750% 6/30/99 $1,118,122
1,300,000 U.S. Treasury Notes........ 6.875 7/31/99 1,317,875
1,500,000 U.S. Treasury Notes........ 8.000 8/15/99 1,539,843
1,675,000 U.S. Treasury Notes........ 7.125 9/30/99 1,706,406
1,460,000 U.S. Treasury Notes........ 7.500 10/31/99 1,496,043
1,400,000 U.S. Treasury Notes........ 7.750 11/30/99 1,441,562
1,500,000 U.S. Treasury Notes........ 7.750 12/31/99 1,546,875
1,150,000 U.S. Treasury Notes........ 7.750 1/31/00 1,187,734
1,225,000 U.S. Treasury Notes........ 7.125 2/29/00 1,255,625
1,350,000 U.S. Treasury Notes........ 6.875 3/31/00 1,379,952
1,225,000 U.S. Treasury Notes........ 6.750 4/30/00 1,250,648
1,500,000 U.S. Treasury Notes........ 6.250 5/31/00 1,519,687
1,500,000 U.S. Treasury Notes........ 6.125 7/31/00 1,517,812
900,000 U.S. Treasury Notes........ 6.125 9/30/00 911,250
1,050,000 U.S. Treasury Notes........ 8.500 11/15/00 1,118,578
1,000,000 U.S. Treasury Notes........ 5.500 12/31/00 999,375
575,000 U.S. Treasury Notes........ 5.250 1/31/01 571,406
900,000 U.S. Treasury Notes........ 8.000 2/15/01 948,093
750,000 U.S. Treasury Notes........ 6.375 3/31/01 765,703
1,175,000 U.S. Treasury Notes........ 8.000 5/15/01 1,251,007
1,500,000 U.S. Treasury Notes........ 7.875 8/15/01 1,598,437
1,055,000 U.S. Treasury Notes........ 7.500 11/15/01 1,117,310
625,000 U.S. Treasury Notes........ 6.250 1/31/02 638,867
750,000 U.S. Treasury Notes........ 7.500 5/15/02 800,390
725,000 U.S. Treasury Notes........ 6.500 5/31/02 749,016
1,000,000 U.S. Treasury Notes........ 6.375 8/15/02 1,030,312
1,425,000 U.S. Treasury Notes........ 5.750 11/30/02 1,436,578
375,000 U.S. Treasury Notes........ 6.250 2/15/03 453,164
1,000,000 U.S. Treasury Notes........ 5.750 8/15/03 1,010,625
850,000 U.S. Treasury Notes........ 5.875 2/15/04 865,937
1,010,000 U.S. Treasury Notes........ 7.250 5/15/04 1,095,850
705,000 U.S. Treasury Notes........ 6.500 5/15/05 744,216
450,000 U.S. Treasury Notes........ 9.375 2/15/06 555,890
575,000 U.S. Treasury Notes........ 7.000 7/15/06 628,188
875,000 U.S. Treasury Notes........ 6.500 10/15/06 929,414
1,500,000 U.S. Treasury Notes........ 6.625 5/15/07 1,612,030
850,000 U.S. Treasury Notes........ 5.500 2/15/08 849,734
200,000 U.S. Treasury Bonds........ 10.375 11/15/12 267,875
250,000 U.S. Treasury Bonds........ 9.875 11/15/15 364,219
1,125,000 U.S. Treasury Bonds........ 7.250 5/15/16 1,318,359
1,150,000 U.S. Treasury Bonds........ 7.500 11/15/16 1,380,719
1,050,000 U.S. Treasury Bonds........ 8.750 5/15/17 1,414,219
200,000 U.S. Treasury Bonds........ 8.875 3/15/19 275,562
1,025,000 U.S. Treasury Bonds........ 8.125 8/15/19 1,322,891
950,000 U.S. Treasury Bonds........ 8.250 2/15/20 1,273,594
400,000 U.S. Treasury Bonds........ 7.875 2/15/21 507,625
700,000 U.S. Treasury Bonds........ 8.125 8/15/21 912,406
300,000 U.S. Treasury Bonds........ 8.000 11/15/21 386,719
400,000 U.S. Treasury Bonds........ 7.250 8/15/22 478,750
250,000 U.S. Treasury Bonds........ 7.625 11/15/22 311,641
625,000 U.S. Treasury Bonds........ 7.125 2/15/23 739,258
1,000,000 U.S. Treasury Bonds........ 6.250 8/15/23 1,070,312
900,000 U.S. Treasury Bonds........ 7.500 11/15/24 1,116,281
1,170,000 U.S. Treasury Bonds........ 7.625 2/15/25 1,473,102
1,050,000 U.S. Treasury Bonds........ 6.875 8/15/25 1,216,359
1,325,000 U.S. Treasury Bonds........ 6.000 2/15/26 1,378,413
1,375,000 U.S. Treasury Bonds........ 6.750 8/15/26 1,574,375
475,000 U.S. Treasury Bonds........ 6.125 11/15/27 508,992
--------------------------------------------------------------------
Total U.S. Government Obligations.........................60,251,225
====================================================================
U.S. Government Agency Obligations (12.6%)
..........................................
1,000,000 Federal Home Loan
Bank Notes Debentures...... 5.565 3/17/00 998,110
250,000 Federal Home Loan
Bank Notes Debentures...... 7.260 9/6/01 261,415
580,000 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through........ 5.990 12/1/03 587,434
154,113 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through........ 7.000 11/1/10 156,931
473,230 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through........ 6.500 11/1/12 476,423
458,993 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through........ 7.000 12/1/12 467,273
453,387 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through........ 8.000 6/1/12 467,505
418,483 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through........ 7.500 4/1/27 428,869
466,483 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through........ 7.000 5/1/27 473,587
653,298 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through........ 7.500 1/15/28 669,512
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
32 Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
- ---------------------------------------------
$182,575 Federal Home Loan
Mortgage Corporation
Gold 15-Yr. Pass Through.... 6.500% 4/1/09 $184,139
153,258 Federal Home Loan
Mortgage Corporation
Gold 15-Yr. Pass Through.... 7.500 8/1/10 157,623
472,677 Federal Home Loan
Mortgage Corporation
Gold 15-Yr. Pass Through.... 6.000 5/1/12 468,285
430,104 Federal Home Loan
Mortgage Corporation
Gold 15-Yr. Pass Through.... 7.000 8/1/12 437,915
172,480 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.500 4/1/24 172,780
102,493 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 9.000 4/1/25 108,479
199,456 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.000 9/1/25 202,498
120,186 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.500 9/1/25 125,598
242,830 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.500 11/1/25 249,004
238,885 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.000 1/1/26 247,038
229,451 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.000 5/1/26 232,972
236,535 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.000 7/1/26 230,829
175,897 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.500 7/1/26 180,270
214,607 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.500 8/1/26 219,942
222,550 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.500 11/1/26 222,207
196,962 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.000 11/1/26 203,589
201,621 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.500 1/1/27 206,633
$472,285 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.500% 2/1/27 $ 470,873
456,678 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.000 2/1/27 463,633
300,401 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.000 3/1/27 310,509
360,621 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.500 7/1/27 376,690
466,019 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.000 9/1/27 473,116
410,162 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 8.000 10/1/27 423,951
438,228 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.500 11/1/27 449,104
493,639 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.500 12/1/27 492,162
1,008,492 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 7.000 3/1/28 1,023,800
999,152 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.000 5/1/28 973,942
990,159 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through 7.500 5/1/28 1,014,733
1,010,000 Federal Home Loan
Mortgage Corporation
Gold 30-Yr. Pass Through.... 6.500 6/1/28 1,006,605
74,151 Federal Home Loan
Mortgage Corporation
Gold 5-Yr Balloon........... 5.500 12/1/99 74,023
113,890 Federal Home Loan
Mortgage Corporation
Gold 7-Yr. Balloon.......... 7.000 7/1/02 115,719
500,000 Federal Home Loan
Mortgage Corporation
Gold REMIC Trust............ 7.750 11/7/01 531,295
250,000 Federal Home Loan
Mortgage Corporation
Medium Term Note............ 6.395 5/16/00 253,212
250,000 Federal National
Mortgage Association
10-Yr. Pass Through......... 6.700 11/10/05 253,945
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 33
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
- ---------------------------------------------
$1,000,000 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.450% 4/23/01 $1,020,062
500,000 Federal National
Mortgage Association
15-Yr. Pass Through.......... 5.800 2/22/06 503,037
60,801 Federal National
Mortgage Association
15-Yr. Pass Through.......... 9.000 4/1/10 63,828
31,643 Federal National
Mortgage Association
15-Yr. Pass Through.......... 9.000 4/1/10 33,218
189,369 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.000 2/1/11 187,460
198,622 Federal National
Mortgage Association
15-Yr. Pass Through.......... 8.000 5/1/11 204,980
215,513 Federal National
Mortgage Association
15-Yr. Pass Through.......... 7.000 6/1/11 219,428
174,509 Federal National
Mortgage Association
15-Yr. Pass Through.......... 7.500 6/1/11 179,327
198,561 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.500 7/1/11 199,770
466,337 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.500 7/1/12 469,004
1,068,624 Federal National
Mortgage Association
15-Yr. Pass Through.......... 7.000 10/1/12 1,087,901
978,819 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.000 3/19/13 968,002
1,005,166 Federal National
Mortgage Association
15-Yr. Pass Through.......... 6.500 6/1/13 1,010,703
345,000 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.100 8/12/19 435,087
138,232 Federal National
Mortgage Association
30-Yr. Pass Through.......... 10.500 8/1/20 153,577
180,494 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.500 10/1/24 185,285
137,050 Federal National
Mortgage Association
30-Yr. Pass Through.......... 9.500 4/1/25 146,593
203,066 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.500 9/1/25 208,266
153,876 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.500 11/1/25 160,619
186,606 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.000 1/1/26 189,278
181,663 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.000 1/1/26 188,103
225,070 Federal National
Mortgage Association
30-Yr. Pass Through.......... 6.500 2/1/26 224,568
218,805 Federal National
Mortgage Association
30-Yr. Pass Through.......... 6.500 3/1/26 218,317
200,819 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.000 3/1/26 203,737
230,088 Federal National
Mortgage Association
30-Yr. Pass Through.......... 6.000 5/1/26 224,718
116,563 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.500 5/1/26 121,652
206,200 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.500 7/1/26 211,549
169,672 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.000 8/1/26 175,631
215,592 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.500 9/1/26 221,184
302,512 Federal National
Mortgage Association
30-Yr. Pass Through.......... 9.000 9/1/26 319,391
246,113 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.000 11/1/26 249,689
178,005 Federal National
Mortgage Association
30-Yr. Pass Through.......... 8.000 11/1/26 184,257
176,786 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.500 12/1/26 181,371
436,037 Federal National
Mortgage Association
30-Yr. Pass Through.......... 7.000 1/1/27 442,373
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
34 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
==========================================================================================
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
.............................................
$ 184,231 Federal National
Mortgage Association
30-Yr. Pass Through...........7.500% 2/1/27 $ 189,010
389,202 Federal National
Mortgage Association
30-Yr. Pass Through...........7.500 5/1/27 399,262
494,213 Federal National
Mortgage Association
30-Yr. Pass Through...........6.500 7/1/27 492,379
471,601 Federal National
Mortgage Association
30-Yr. Pass Through...........7.000 7/1/27 478,396
283,294 Federal National
Mortgage Association
30-Yr. Pass Through...........8.000 7/1/27 293,223
881,034 Federal National
Mortgage Association
30-Yr. Pass Through...........7.500 8/1/27 903,808
473,050 Federal National
Mortgage Association
30-Yr. Pass Through...........7.000 10/1/27 479,866
426,663 Federal National
Mortgage Association
30-Yr. Pass Through...........7.500 12/1/27 437,692
923,865 Federal National
Mortgage Association
30-Yr. Pass Through...........8.000 12/1/27 956,246
930,377 Federal National
Mortgage Association
30-Yr. Pass Through...........7.000 2/1/28 943,783
986,600 Federal National
Mortgage Association
30-Yr. Pass Through...........6.500 3/1/28 982,356
211,629 Federal National
Mortgage Association
7-Yr. Balloon.................6.500 10/1/03 213,619
438,658 Federal National
Mortgage Association
7-Yr. Balloon.................6.000 12/1/03 437,596
365,496 Federal National
Mortgage Association
7-Yr. Balloon.................7.000 6/1/04 370,623
461,894 Federal National
Mortgage Association
Gold 30-Yr. Pass Through......7.000 3/1/27 468,605
1,000,000 Federal National
Mortgage Association
Medium Term Note..............6.375 1/16/02 1,022,286
250,000 Federal National
Mortgage Association
Medium Term Note..............6.720 8/1/05 264,922
500,000 Federal National
Mortgage Association
Notes.........................8.250% 12/18/00 529,443
1,000,000 Federal National
Mortgage Association
Notes.........................7.050 11/12/02 1,052,253
500,000 Federal National
Mortgage Association
Notes.........................7.650 3/10/05 553,455
117,115 Government National
Mortgage Association
15-Yr. Pass Through...........6.500 5/15/09 118,388
211,363 Government National
Mortgage Association
15-Yr. Pass Through...........6.000 4/15/11 210,242
198,593 Government National
Mortgage Association
15-Yr. Pass Through...........6.500 6/15/11 200,597
195,897 Government National
Mortgage Association
15-Yr. Pass Through...........7.500 7/15/11 202,238
461,068 Government National
Mortgage Association
15-Yr. Pass Through...........7.000 4/15/12 472,073
73,646 Government National
Mortgage Association
30-Yr. Pass Through...........9.500 12/15/24 79,755
433,330 Government National
Mortgage Association
30-Yr. Pass Through...........9.000 3/15/25 464,633
116,835 Government National
Mortgage Association
30-Yr. Pass Through...........8.000 6/1/25 121,160
166,695 Government National
Mortgage Association
30-Yr. Pass Through...........7.500 8/15/25 171,312
216,359 Government National
Mortgage Association
30-Yr. Pass Through...........7.000 1/15/26 219,903
458,570 Government National
Mortgage Association
30-Yr. Pass Through...........7.000 1/15/26 466,081
230,004 Government National
Mortgage Association
30-Yr. Pass Through...........6.500 3/15/26 229,626
476,658 Government National
Mortgage Association
30-Yr. Pass Through...........7.000 4/15/26 484,466
194,328 Government National
Mortgage Association
30-Yr. Pass Through...........7.500 4/15/26 199,733
The accompanying notes to the financial statements are an integral part of this schedule.
June 30, 1998 35
</TABLE>
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Agency Obligations--continued
$123,486 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.000% 4/15/26 $ 127,961
234,738 Government National
Mortgage Association
30-Yr. Pass Through.......................... 6.000 5/15/26 229,590
221,258 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.000 5/15/26 224,882
228,672 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 5/15/26 235,031
1,000,001 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.000 6/15/26 1,016,380
159,033 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.500 6/15/26 167,727
155,833 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.500 7/15/26 164,352
116,142 Government National
Mortgage Association
30-Yr. Pass Through.......................... 9.000 8/15/26 124,403
222,551 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 10/15/26 228,740
447,171 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 10/15/26 459,607
345,640 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.000 11/15/26 358,166
164,829 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.500 11/15/26 173,840
331,948 Government National
Mortgage Association
30-Yr. Pass Through.......................... 9.000 12/15/26 355,559
229,906 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 1/15/27 236,276
720,527 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 4/15/27 740,492
400,266 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.000 6/20/27 411,661
380,067 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.000 8/15/27 393,859
501,297 Government National
Mortgage Association
30-Yr. Pass Through.......................... 6.500 10/15/27 500,264
976,806 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.000 10/15/27 992,609
502,482 Government National
Mortgage Association
30-Yr. Pass Through.......................... 7.500 11/15/27 516,405
407,792 Government National
Mortgage Association
30-Yr. Pass Through.......................... 9.500 2/15/28 441,516
995,821 Government National
Mortgage Association
30-Yr. Pass Through.......................... 8.000 3/15/28 1,031,799
845,000 Private Export Funding
Corporation.................................. 8.400 7/31/01 909,705
150,000 Private Export Funding
Corporation.................................. 6.240 5/15/02 153,008
500,000 Student Loan
Marketing Association........................ 6.050 9/14/00 504,045
800,000 Student Loan
Marketing Association........................ 7.300 8/1/12 909,455
1,000,000 Tennesee Valley
Authority.................................... 6.375 6/15/05 1,038,208
- -----------------------------------------------------------------------------------------
Total U.S. Government
Agency Obligations................................................. 56,090,707
- -----------------------------------------------------------------------------------------
Asset-Backed Securities (0.2%)
250,000 Chemical Mastercard
Trust
Series 1996-1 Class A........................ 5.550 9/15/03 248,868
200,000 NationsBank Credit
Card Trust Certificate....................... 6.000 12/15/05 201,766
500,000 Premier Auto Trust........................... 6.750 11/6/00 505,145
38,582 Western Financial
Grantor Trust................................ 7.100 1/1/00 38,678
- -----------------------------------------------------------------------------------------
Total Asset-Backed
Securities............................................................. 994,457
- -----------------------------------------------------------------------------------------
Corporate Obligations (6.0%)
200,000 Abbott Laboratories
Notes........................................ 6.800 5/15/05 210,229
250,000 American Express Credit
Corporation Notes............................ 6.125 11/15/01 252,045
350,000 American General
Finance Corporation
Senior Notes................................. 6.875 7/1/99 352,836
375,000 Associates Corporation
N.A. Senior Notes............................ 6.000 12/1/02 374,006
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
36 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
===========================================================================
Corporate Obligations--continued
................................
<C> <S> <C> <C> <C>
$500,000 Avco Financial
Services Notes..............6.000% 8/15/02 $499,265
325,000 Baker Hughes, Inc.
Notes.......................8.000 5/15/04 353,396
500,000 BankAmerica
Corporation Notes...........6.625 8/1/07 510,868
1,000,000 Bank One-Texas Notes........6.250 2/15/08 995,479
500,000 Boeing Company Notes........8.100 11/15/06 564,597
1,000,000 Browning-Ferris
Industries Inc.
Senior Notes................6.375 1/15/08 1,005,965
1,000,000 Cable and Wireless
Notes.......................6.375 3/6/03 1,005,928
500,000 CIT Group
Holdings, Inc. Notes........6.375 10/1/02 506,416
250,000 Columbia Gas
Systems Notes...............7.320 11/28/10 263,640
250,000 Commercial Credit
Company Notes...............6.750 5/15/00 253,379
500,000 Crown Cork &
Seal Notes..................6.750 4/15/03 510,723
250,000 E.I. Dupont de Nemours
and Company Notes...........8.125 3/15/04 275,794
510,000 Eli Lilly & Company
Notes.......................6.570 1/1/16 524,711
1,000,000 Enron Corporation
Notes.......................6.875 10/15/07 1,033,701
1,000,000 Enterprise Oil Notes........6.500 5/1/05 1,015,804
1,000,000 First Bank System Notes.....7.625 5/1/05 1,083,515
1,000,000 Ford Motor Credit
Corporation Notes...........7.750 11/15/02 1,062,816
500,000 General Electric Capital
Corporation Notes...........8.090 4/1/04 555,938
500,000 General Motors
Acceptance
Corporation Notes...........9.625 12/15/01 555,255
1,000,000 General Motors
Acceptance
Corporation Notes...........7.100 3/15/06 1,062,550
500,000 Hertz Corporation
Notes.......................7.000 7/1/04 520,337
250,000 Honeywell, Inc.
Debentures..................8.625 4/15/06 288,050
250,000 Household Finance
Company Notes...............7.250 7/15/03 261,100
500,000 Houston Industries, Inc.
Notes.......................9.375 6/1/01 543,106
500,000 IBM Corporation Notes.......7.500 6/15/13 571,124
$250,000 J.C. Penney &
Company, Inc. Notes.........6.375% 9/15/00 $252,149
500,000 Johnson Controls Notes......7.125 7/15/17 535,344
340,000 J.P. Morgan Notes...........6.250 12/15/05 342,944
250,000 NorAm Energy
Corporation Notes...........7.500 8/1/00 257,254
250,000 Noranda, Inc. Notes.........8.000 6/1/03 265,076
500,000 Northern Trust
Company Notes...............6.700 9/15/05 517,681
250,000 Norwest Financial, Inc.
Senior Notes................7.000 1/15/03 259,870
250,000 Penzoil Company
Notes................ 10.125 11/15/09 316,090
250,000 Pepsico, Inc. Medium
Term Notes..................5.875 6/1/00 250,604
1,000,000 Raytheon Company............6.750 3/15/28 1,024,793
250,000 Rhone-Poulenc
SA Notes....................7.750 1/15/02 262,578
420,000 Service Corporation
International Notes.........6.875 10/1/07 434,417
1,000,000 Temple-Inland, Inc.
Notes.......................7.250 9/15/04 1,060,176
1,000,000 Texaco Capital, Inc.
Notes.......................8.500 2/15/03 1,103,865
500,000 Texas Utilities Company
First Mortgage Bond.........8.250 4/1/04 548,001
1,000,000 Tosco Corporation
First Mortgage Bonds........9.625 3/15/02 1,109,874
1,000,000 Virginia Electric & Power
Company Notes...............6.625 4/1/03 1,024,479
------------------------------------------------------------
Total Corporate Obligations.......................26,577,768
============================================================
Utility Bonds (0.4%)
....................
500,000 Baltimore Gas & Electric
Company First
Refunding
Mortgage Bonds..............7.500 1/15/07 544,158
1,000,000 California
Infrastructure
PG&E Bonds..................6.480 12/26/09 1,041,890
250,000 Pacificorp First
Mortgage Bonds..............6.750 4/1/05 256,634
------------------------------------------------------------
Total Utility Bonds................................1,842,682
============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 37
<PAGE>
AAL Variable Product Balanced Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (33.6%) Rate Date Value
==============================================================================
Canadian Government Obligations (0.8%)
......................................
<C> <S> <C> <C> <C>
$500,000 British Columbia
Government Notes..............7.250% 9/1/36 $568,025
1,000,000 Ontario Hydro.................7.450 3/31/13 1,117,920
500,000 Province of
Newfoundland..................8.650 10/22/22 630,120
200,000 Province of Ontario
Senior Global Bond............6.125 6/28/00 201,066
500,000 Province of Quebec............7.500 7/15/02 524,564
500,000 Province of
Saskatchewan..................8.000 7/15/04 548,895
---------------------------------------------------------------
Total Canadian Government
Obligations...........................................3,590,590
===============================================================
Canadian Corporate Securities (0.1%)
....................................
250,000 Petro-Canada Ltd..............8.600 1/15/10 302,885
---------------------------------------------------------------
Total Canadian Corporate Securities.....................302,885
===============================================================
---------------------------------------------------------------
Total Long-Term Obligations
(amortized cost basis $146,540,462).................149,650,314
===============================================================
</TABLE>
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (12.7%) Rate** Date Value
==============================================================================
<C> <S> <C> <C> <C>
$2,838,000 American Express
Credit
Corporation...................5.510% 7/7/98 $2,834,911
4,084,000 Carolina Power &
Light, Inc....................5.500 7/7/98 4,080,256
705,000 CountryWide Home
Inc...........................5.600 7/13/98 703,684
1,685,000 CountryWide Home
Inc...........................5.530 7/21/98 1,679,823
901,000 CountryWide Home
Inc...........................5.580 8/21/98 893,878
2,910,000 CountryWide Home
Inc...........................5.540 8/25/98 2,885,370
500,000 CountryWide Home
Inc...........................5.530 8/27/98 495,622
232,000 Ford Motor Credit
Company.......................5.540 7/1/98 232,000
$7,101,000 Ford Motor Credit
Company.......................5.500% 7/9/98 $7,092,321
1,327,000 General Electric
Capital Corporation...........5.510 7/7/98 1,325,781
3,746,000 General Motors
Acceptance
Corporation...................5.510 8/6/98 3,725,360
531,000 General Signal
Corporation...................5.580 7/17/98 529,683
2,706,000 General Signal
Corporation...................5.600 7/17/98 2,699,265
2,500,000 Goldman, Sachs
& Company.....................5.520 7/14/98 2,495,017
4,194,000 Goldman, Sachs
& Company.....................5.510 8/17/98 4,163,830
1,074,000 GTE Corporation...............5.660 7/8/98 1,072,818
1,948,000 GTE Corporation...............5.680 7/31/98 1,938,779
2,277,000 J.C. Penney Funding
Corporation...................5.500 7/10/98 2,273,869
1,427,000 Merrill Lynch &
Company, Inc..................6.120 7/1/98 1,427,000
3,207,000 Merrill Lynch &
Company, Inc..................5.530 7/28/98 3,193,699
1,487,000 Merrill Lynch &
Company, Inc..................5.520 8/3/98 1,479,476
680,000 Merrill Lynch &
Company, Inc..................5.530 8/4/98 676,449
421,000 Merrill Lynch &
Company, Inc..................5.520 8/19/98 417,837
2,848,000 New England Power
Company.......................5.530 7/6/98 2,845,812
771,000 New England Power
Company.......................5.520 7/24/98 768,281
4,559,000 New England Power
Company.......................5.560 7/30/98 4,538,581
---------------------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $56,469,402)...................56,469,402
===============================================================
---------------------------------------------------------------
Total Investments (99.4%)
(amortized cost basis $370,665,824).................442,719,380
===============================================================
---------------------------------------------------------------
Other Assets,
Less Liabilities (0.6%)...............................2,548,964
---------------------------------------------------------------
Net Assets (100.0%)................................$445,268,344
===============================================================
</TABLE>
* Non-income producing security
**The interest rate shown reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
38 Balanced Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUALREPORT
AAL Variable Product Large Company
Stock Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
....................
The Portfolio seeks to achieve investment results that approximate the
performance of the Standard & Poor's 500 Composite Stock Price Index by
investing primarily in common stocks included in the index.
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
================================================================================
<C> <S> <C>
Aerospace (1.7%)
................
3,700 BF Goodrich Company...........................................$183,613
52,160 Boeing Company...............................................2,324,380
6,500 General Dynamics Corporation...................................302,250
10,200 Lockheed Martin Corporation..................................1,079,925
3,500 Northrop Grumman Corporation...................................360,937
17,600 Raytheon Company.............................................1,040,600
10,400 Rockwell International Corporation.............................499,850
8,600 Textron, Inc...................................................616,513
6,400 TRW, Inc.......................................................349,600
12,200 United Technologies Corporation..............................1,128,500
----------------------------------------------------------------------
Total Aerospace..............................................7,886,168
======================================================================
Air Transportation (0.5%)
.........................
9,600 AMR Corporation*...............................................799,200
3,900 Delta Air Lines, Inc...........................................504,075
7,580 Federal Express Corporation*...................................475,645
11,500 Southwest Airlines Company.....................................340,688
4,800 USAir Group, Inc.*.............................................380,400
----------------------------------------------------------------------
Total Air Transportation.....................................2,500,008
======================================================================
Apparel (0.3%)
..............
3,800 Fruit of the Loom, Inc.*.......................................126,113
3,400 Liz Claiborne, Inc.............................................177,650
15,100 Nike, Inc......................................................735,181
2,900 Reebok International, Ltd...................................... 80,294
1,900 Russell Corporation............................................ 57,356
1,000 Springs Industries, Inc.........................................46,125
6,300 V F Corporation...............................................$324,450
----------------------------------------------------------------------
Total Apparel................................................1,547,169
======================================================================
Banking (9.1%)
..............
18,150 Associates First Capital Corporation.........................1,395,281
36,595 Banc One Corporation.........................................2,042,458
36,200 BankAmerica Corporation......................................3,129,037
15,200 BankBoston Corporation.........................................845,500
5,200 Bankers Trust New York Corporation.............................603,525
19,600 Bank of New York Company, Inc................................1,189,475
7,500 BB&T Corporation...............................................507,188
44,012 Chase Manhattan Corporation..................................3,322,906
23,900 Citicorp.....................................................3,567,075
8,250 Comerica, Inc..................................................546,563
5,600 Countrywide Credit Industries, Inc.............................284,200
12,075 Fifth Third Bancorp............................................760,725
15,224 First Chicago NBD Corporation................................1,349,227
50,432 First Union Corporation......................................2,937,664
14,235 Fleet Financial Group, Inc...................................1,188,623
13,100 Franklin Resources, Inc........................................707,400
9,900 Huntington Bancshares, Inc.....................................331,650
9,300 J.P. Morgan & Company, Inc...................................1,089,262
22,900 Keycorp........................................................815,813
13,300 Mellon Bank Corporation........................................926,012
6,800 Mercantile Bancorporation, Inc.................................342,550
17,200 National City Corporation....................................1,221,200
49,162 NationsBank Corporation......................................3,760,893
5,900 Northern Trust Corporation.....................................449,875
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 39
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
====================================================================
<C> <S> <C>
Banking--continued
..................
39,400 Norwest Corporation...................... $ 1,472,575
15,900 PNC Bank Corporation..................... 855,619
5,000 Providian Financial Corporation.......... 392,812
5,800 Republic New York Corporation............ 365,038
9,100 Summit Bancorp........................... 432,250
11,100 Suntrust Banks, Inc...................... 902,569
13,700 Synovus Financial Corp................... 325,375
38,397 U.S. Bancorp............................. 1,651,071
10,800 Wachovia Corporation..................... 912,600
20,105 Washington Mutual, Inc................... 873,311
4,600 Wells Fargo & Company.................... 1,697,400
-------------------------------------------------------
Total Banking............................ 43,194,722
=======================================================
Brokerage (1.1%)
................
13,850 Charles Schwab Corporation............... 450,125
5,400 Lehman Brothers Holding, Inc............. 418,837
17,400 Merrill Lynch & Company, Inc............. 1,605,150
30,925 Morgan Stanley, Dean Witter,
Discover and Company..................... 2,825,772
-------------------------------------------------------
Total Brokerage.......................... 5,299,884
=======================================================
Business Machines (8.3%)
........................
18,500 3Com Corporation*........................ 567,719
6,900 Apple Computer, Inc...................... 197,944
2,400 Autodesk, Inc............................ 92,700
11,400 Bay Networks, Inc.*...................... 367,650
8,200 Cabletron Systems, Inc.*................. 110,188
3,700 Ceridian Corporation*.................... 217,375
53,200 Cisco Sytems, Inc.*...................... 4,897,725
86,193 Compaq Computers, Inc.................... 2,445,726
2,500 Data General Corporation*................ 37,344
34,100 Dell Computer Corporation*............... 3,164,906
8,000 Gateway 2000, Inc.*...................... 405,000
22,000 HBO & Company............................ 775,500
6,700 Honeywell, Inc........................... 559,869
7,000 Ikon Office Solutions.................... 101,937
50,800 International Business Machines
Corporation.............................. 5,832,475
127,100 Microsoft Corporation*................... 13,774,462
18,300 Novell, Inc.*............................ 233,325
51,325 Oracle Systems Corporation*.............. 1,260,670
13,300 Parametric Technology Company*........... 360,762
14,700 Pitney-Bowes, Inc........................ 707,439
12,600 Seagate Technology, Inc.*................ 300,037
9,700 Silicon Graphics, Inc.*.................. 117,613
19,700 Sun Microsystems, Inc.*.................. 855,719
13,000 Unisys Corporation*...................... 367,250
17,100 Xerox Corporation........................ 1,737,787
-------------------------------------------------------
Total Business Machines.................. 39,489,122
=======================================================
Business Services (1.8%)
........................
15,700 Automatic Data Processing, Inc........... 1,144,137
9,783 Browning-Ferris Industries, Inc.......... 339,959
8,400 Cognizant Corporation.................... 529,200
28,412 Computer Associates International, Inc... 1,578,642
8,100 Computer Sciences Corporation*........... 518,400
4,200 Deluxe Corporation....................... 150,413
8,800 Dun & Bradstreet Corporation............. 317,900
6,700 Ecolab, Inc.............................. 207,700
22,300 First Data Corporation................... 742,869
7,700 General Instrument Corporation*.......... 209,344
5,400 H.R. Block, Inc.......................... 227,475
6,500 Interpublic Group of Companies, Inc...... 394,469
17,100 Laidlaw, Inc............................. 208,406
4,600 Moore Corporation, Ltd................... 60,950
2,200 National Service Industries, Inc......... 111,925
8,400 Omnicom Group, Inc....................... 418,950
1,400 Shared Medical Systems Corporation....... 102,812
8,400 State Street Corporation................. 583,800
23,740 Waste Management, Inc.................... 830,900
-------------------------------------------------------
Total Business Services.................. 8,678,251
=======================================================
Chemicals (2.6%)
................
12,300 Air Products & Chemicals, Inc............ 492,000
4,100 Eastman Chemical Company................. 255,225
59,100 E.I. Du Pont de Nemours & Company........ 4,410,337
3,100 Great Lakes Chemical Corporation......... 122,256
5,000 Hercules, Inc............................ 205,625
21,400 Minnesota Mining and
Manufacturing Company 1,758,813
30,900 Monsanto Company......................... 1,726,537
6,800 Morton International, Inc................ 170,000
3,400 Nalco Chemical Company................... 119,425
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
40 Large Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
===================================================================
<C> <S> <C>
Chemicals--continued
....................
9,300 PPG Industries, Inc........................$ 646,931
8,200 Praxair, Inc............................... 383,863
3,200 Rohm & Haas Company........................ 332,600
5,200 Sigma-Aldrich Corporation.................. 182,650
11,900 The Dow Chemical Company................... 1,150,581
6,400 Union Carbide Corporation.................. 341,600
3,800 W.R. Grace & Company....................... 64,838
------------------------------------------------------
Total Chemicals............................ 12,363,281
======================================================
Construction (0.4%)
...................
2,200 Armstrong World Industries, Inc............ 148,225
3,000 Centex Corporation......................... 113,250
2,300 Crane Company.............................. 111,694
4,300 Fluor Corporation.......................... 219,300
2,000 Kaufman & Broad Home Corporation........... 63,500
8,600 Masco Corporation.......................... 520,300
2,700 Owens-Corning Fiberglass Corporation....... 110,194
2,200 Pulte Corporation.......................... 65,725
9,000 Sherwin-Williams Company................... 298,125
4,600 Stanley Works.............................. 191,187
------------------------------------------------------
Total Construction......................... 1,841,500
======================================================
Consumer Durables (0.3%)
........................
4,900 Black & Decker Corporation................. 298,900
4,900 Maytag Corporation......................... 241,937
8,300 Newell Company............................. 413,444
3,100 Tupperware Corporation..................... 87,188
4,000 Whirlpool Corporation...................... 275,000
------------------------------------------------------
Total Consumer Durables.................... 1,316,469
======================================================
Containers (0.2%)
.................
1,500 Ball Corporation........................... 60,281
2,700 Bemis Company, Inc......................... 110,362
6,600 Crown Cork & Seal Company, Inc............. 313,500
8,000 Owens-Illinois, Inc.*...................... 358,000
4,376 Sealed Air Corporation*.................... 160,818
5,100 Stone Container Corporation................ 79,688
------------------------------------------------------
Total Containers........................... 1,082,649
======================================================
Cosmetics (2.6%)
................
2,900 Alberto-Culver Company..................... 84,100
6,900 Avon Products, Inc......................... 534,750
5,400 Clorox Company............................. 515,025
15,500 Colgate-Palmolive Company.................. 1,364,000
58,400 Gillette Company........................... 3,310,550
5,600 International Flavors and Fragrances, Inc.. 243,250
70,100 Procter & Gamble Company................... 6,383,481
------------------------------------------------------
Total Cosmetics............................ 12,435,156
======================================================
Credit Cards (0.1%)
...................
7,800 Equifax, Inc............................... 283,237
------------------------------------------------------
Total Credit Cards......................... 283,237
======================================================
Drugs & Medicine (11.6%)
........................
79,800 Abbott Laboratories........................ 3,261,825
3,400 Allergan, Inc.............................. 157,675
4,400 Alza Corporation*.......................... 190,300
67,800 American Home Products Corporation......... 3,508,650
13,800 Amgen, Inc*................................ 902,175
2,800 Bausch & Lomb, Inc......................... 140,350
14,600 Baxter International, Inc.................. 785,662
6,400 Becton, Dickinson and Company.............. 496,800
5,800 Biomet, Inc................................ 191,762
10,200 Boston Scientific Corporation.............. 730,575
51,900 Bristol-Myers Squibb Company............... 5,965,256
5,800 Cardinal Health, Inc....................... 543,750
33,700 Columbia/HCA Healthcare Corporation........ 981,512
2,900 C.R. Bard, Inc............................. 110,381
57,900 Eli Lilly & Company........................ 3,825,019
7,900 Guidant Corporation........................ 563,369
20,500 HEALTHSOUTH Corporation*................... 547,094
8,500 Humana, Inc.*.............................. 265,094
70,200 Johnson & Johnson.......................... 5,177,250
3,800 Mallinckrodt Group, Inc.................... 112,812
3,300 Manor Care, Inc............................ 126,844
24,400 Medtronic, Inc............................. 1,555,500
62,600 Merck & Company, Inc....................... 8,372,750
67,500 Pfizer, Inc................................ 7,336,406
26,415 Pharmacia & Upjohn, Inc.................... 1,218,392
38,300 Schering-Plough Corporation................ 3,509,238
4,321 St. Jude Medical, Inc.*.................... 159,067
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 41
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
===================================================================
<C> <S> <C>
Drugs & Medicine--continued
15,900 Tenet Healthcare Corporation*..............$ 496,875
9,900 United Healthcare Corporation.............. 628,650
3,900 U.S. Surgical Corporation.................. 177,938
42,600 Warner-Lambert Company..................... 2,955,375
------------------------------------------------------
Total Drugs & Medicine..................... 54,994,346
======================================================
Electronics (3.6%)
3,500 Adobe Systems, Inc......................... 148,531
7,300 Advanced Micro Devices, Inc.*.............. 124,556
11,428 AMP, Inc................................... 392,837
19,100 Applied Materials, Inc.*................... 563,450
2,300 EG&G, Inc.................................. 69,000
25,800 EMC Corporation*........................... 1,156,163
2,400 General Signal Corporation................. 86,400
4,100 Harris Corporation......................... 183,219
54,200 Hewlett-Packard Company.................... 3,245,225
85,400 Intel Corporation.......................... 6,330,275
7,300 LSI Logic Corporation*..................... 168,356
11,000 Micron Technology, Inc..................... 272,937
31,100 Motorola, Inc.............................. 1,634,694
8,500 National Semiconductor Corporation*........ 112,094
2,600 Perkin Elmer Corporation................... 161,688
4,100 Scientific-Atlanta, Inc.................... 104,037
2,550 Tektronix, Inc............................. 90,206
9,500 Tellabs, Inc.*............................. 680,438
20,300 Texas Instruments, Inc..................... 1,183,744
8,300 Thermo Electron Corporation*............... 283,756
2,800 Thomas & Betts Corporation................. 137,900
------------------------------------------------------
Total Electronics.......................... 17,129,506
======================================================
Energy & Utilities (3.0%)
7,100 Ameren Corporation......................... 282,225
9,800 American Electric Power Company............ 444,675
7,700 Baltimore Gas & Electric Company........... 239,181
7,800 Carolina Power & Light Company............. 338,325
11,000 Central & Southwest Corporation............ 295,625
8,200 CINergy Corporation........................ 287,000
5,600 Coastal Corporation........................ 390,950
4,350 Columbia Gas System, Inc................... 241,969
12,200 Consolidated Edison, Inc................... 561,962
4,900 Consolidated Natural Gas Company........... 288,488
10,000 Dominion Resources, Inc.................... 407,500
7,500 DTE Energy Company......................... 302,812
18,808 Duke Energy Corporation.................... 1,114,374
19,900 Edison International....................... 588,294
17,100 Enron Corporation.......................... 924,469
12,700 Entergy Corporation........................ 365,125
12,000 FirstEnergy Corporation.................... 369,000
9,500 FPL Group, Inc............................. 598,500
6,600 General Public Utilities Corporation....... 249,562
14,673 Houston Industries, Inc.................... 453,029
7,500 Niagara Mohawk Power Corporation........... 112,031
2,500 Nicor, Inc................................. 100,313
7,700 Northern States Power Company.............. 220,412
1,600 ONEOK, Inc................................. 63,800
21,600 Pacific Gas & Electric Company............. 681,750
15,400 PacifiCorp................................. 348,425
11,600 Peco Energy Company........................ 338,575
1,800 Peoples Energy Corporation................. 69,525
8,600 P P & L Resources, Inc..................... 195,113
12,100 Public Service Enterprise.................. 416,694
5,700 Sonat, Inc................................. 220,162
36,000 Southern Company........................... 996,750
12,817 Texas Utilities Company.................... 533,508
11,200 Unicom Corporation......................... 392,700
21,400 Williams Companies, Inc.................... 722,250
------------------------------------------------------
Total Energy & Utilities................... 14,155,073
======================================================
Energy - Raw Materials (1.0%)
8,800 Baker Hughes, Inc.......................... 304,150
9,135 Burlington Resources, Inc.................. 393,376
9,100 Dresser Industries, Inc.................... 400,969
1,000 Eastern Enterprises........................ 42,875
13,600 Halliburton Company........................ 606,050
3,100 McDermott International, Inc............... 106,756
17,600 Occidental Petroleum Corporation........... 475,200
26,000 Schlumberger, Ltd.......................... 1,776,125
13,172 Union Pacific Resources Group, Inc......... 231,333
2,900 Western Atlas, Inc.*....................... 246,138
------------------------------------------------------
Total Energy - Raw Materials............... 4,582,972
======================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
42 Large Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Large Company Stock Portfoliocontinued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
- -----------------------------------------------------------------------
Entertainment (0.1%)
- --------------------
<S> <C> <C>
13,300 Marriott International, Inc.......... $ 430,587
9,300 Mirage Resorts, Inc.*................ 198,206
-----------------------------------------------------
Total Entertainment.................. 628,793
=====================================================
Food & Agriculture (5.9%)
- -------------------------
29,739 Archer-Daniels-Midland Company....... 576,193
15,000 BestFoods............................ 870,937
23,800 Campbell Soup Company................ 1,264,375
129,100 Coca-Cola Company.................... 11,038,050
24,800 ConAgra, Inc......................... 785,850
8,300 General Mills, Inc................... 567,513
7,500 Hershey Foods Corporation............ 517,500
19,000 H.J. Heinz Company................... 1,066,375
21,400 Kellogg Company...................... 803,837
79,100 PepsiCo, Inc......................... 3,257,931
12,700 Pioneer Hi-Bred International, Inc... 525,463
7,200 Quaker Oats Company.................. 395,550
5,600 Ralston Purina Corporation........... 654,150
24,600 Sara Lee Corporation................. 1,376,062
3,100 Supervalu, Inc....................... 137,563
17,700 Sysco Corporation.................... 453,563
7,920 Tricon Global Restaurants, Inc.*..... 250,965
33,500 Unilever N.V......................... 2,644,406
6,100 Wm Wrigley Jr. Company............... 597,800
-----------------------------------------------------
Total Food & Agriculture............. 27,784,083
=====================================================
Gas Utilities (0.1%)
- --------------------
6,466 Sempra Energy*....................... 179,440
-----------------------------------------------------
Total Gas Utilities.................. 179,440
=====================================================
Gold (0.2%)
- -----------
19,400 Barrick Gold Corporation............. 372,237
11,900 Battle Mountain Gold Company......... 70,656
11,000 Homestake Mining Company............. 114,125
8,148 Newmont Mining Corporation........... 192,497
12,800 Placer Dome, Inc..................... 150,400
-----------------------------------------------------
Total Gold........................... 899,915
=====================================================
Insurance (4.0%)
- ----------------
7,849 Aetna Life & Casualty Company........ $ 597,505
22,441 Allstate Corporation................. 2,054,754
13,262 American General Corporation......... 944,089
36,650 American International Group, Inc.... 5,350,900
8,850 Aon Corporation...................... 621,712
8,900 Chubb Corporation.................... 715,337
11,600 Cigna Corporation.................... 800,400
8,500 Cincinnati Financial Corporation..... 326,188
9,800 Conseco, Inc......................... 458,150
4,100 General Re Corporation............... 1,039,350
6,200 ITT Hartford Group, Inc.............. 709,125
5,500 Jefferson-Pilot Corporation.......... 318,656
5,400 Lincoln National Corporation......... 493,425
13,350 Marsh & McLennan Companies, Inc...... 806,841
5,200 MBIA, Inc............................ 389,350
5,900 MGIC Investment Corporation.......... 336,669
3,800 Progressive Corporation.............. 535,800
7,300 Safeco Corporation................... 331,694
12,046 St. Paul Companies, Inc.............. 506,685
10,150 SunAmerica, Inc...................... 582,991
7,300 Torchmark Corporation................ 333,975
3,300 Transamerica Corporation............. 379,912
7,200 Unum Corporation..................... 399,600
-----------------------------------------------------
Total Insurance...................... 19,033,108
=====================================================
Liquor (0.5%)
- -------------
1,900 Adolph Coors Company................. 64,600
25,500 Anheuser-Busch Companies, Inc........ 1,203,281
3,600 Brown-Foreman Corporation............ 231,300
18,600 Seagram Company, Ltd................. 761,437
-----------------------------------------------------
Total Liquor......................... 2,260,618
=====================================================
Media (2.3%)
- ------------
37,100 CBS Corporation...................... 1,177,925
6,500 Clear Channel Communications, Inc.*.. 709,313
18,200 Comcast Corporation, Class A......... 738,805
5,000 Dow Jones & Company, Inc............. 278,750
14,900 Gannett Company, Inc................. 1,058,831
3,800 King World Productions, Inc.......... 96,900
4,100 Knight Ridder, Inc................... 225,756
5,200 McGraw-Hill, Inc..................... 424,125
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 43
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
===============================================================================
<C> <S> <C>
Media--continued
- ----------------
2,700 Meredith Corporation.................................. $ 126,731
5,100 New York Times Company................................ 404,175
7,600 R.R. Donnelley & Sons Company......................... 347,700
26,400 Tele-Communications, Inc.*............................ 1,014,750
30,200 Time Warner, Inc...................................... 2,580,213
4,700 Times Mirror Company.................................. 295,513
6,500 Tribune Company....................................... 447,281
18,400 Viacom, Inc.*......................................... 1,071,800
-------------------------------------------------------------------
Total Media........................................... 10,998,568
===================================================================
Miscellaneous Finance (3.1%)
- ----------------------------
24,300 American Express Company.............................. 2,770,200
2,800 Beneficial Corporation................................ 428,925
55,300 Federal Home Loan Mortgage Corporation................ 3,359,475
36,200 Federal National Mortgage Association................. 1,703,662
3,000 Golden West Financial Corporation..................... 318,938
7,100 Green Tree Financial Corporation...................... 303,969
5,800 H. F. Ahmanson & Company.............................. 411,800
16,700 Household International Corporation................... 830,825
26,112 MBNA Corporation...................................... 861,696
59,758 Travelers Group, Inc.................................. 3,622,829
-------------------------------------------------------------------
Total Miscellaneous Finance........................... 14,612,319
===================================================================
Motor Vehicles (2.1%)
- ---------------------
33,800 Chrysler Corporation.................................. 1,905,475
1,900 Cummins Engine Company, Inc........................... 97,375
5,400 Dana Corporation...................................... 288,900
3,900 Eaton Corporation..................................... 303,225
3,200 Echlin, Inc........................................... 157,000
1,900 Fleetwood Enterprises, Inc............................ 76,000
62,600 Ford Motor Company.................................... 3,693,400
37,000 General Motors Corporation............................ 2,472,062
9,300 Genuine Parts Company................................. 321,431
6,100 ITT Industries, Inc................................... 227,988
3,700 Navistar International Corporation*................... 106,838
4,000 PACCAR, Inc........................................... 209,000
-------------------------------------------------------------------
Total Motor Vehicles.................................. 9,858,694
===================================================================
Non-Durables & Entertainment (1.0%)
- -----------------------------------
3,700 American Greetings Corporation, Class A............... 188,469
7,700 Darden Restaurants, Inc............................... 122,237
3,600 Harcourt General, Inc................................. 214,200
6,900 Hasbro, Inc........................................... 271,256
2,000 Jostens, Inc.......................................... 48,250
15,150 Mattel, Inc........................................... 641,034
36,000 McDonald's Corporation................................ 2,484,000
7,800 Rubbermaid, Inc....................................... 258,863
13,100 Service Corporation International..................... 561,663
6,800 Wendy's International, Inc............................ 159,800
-------------------------------------------------------------------
Total Non-Durables & Entertainment.................... 4,949,772
===================================================================
Non-Ferrous Metals (0.4%)
- -------------------------
11,800 Alcan Aluminium, Ltd.................................. 325,975
9,100 Aluminum Company of America........................... 600,031
2,100 Asarco, Inc........................................... 46,725
4,800 Cyprus Minerals Company............................... 63,600
7,500 Engelhard Corporation................................. 151,875
10,000 Freeport-McMoran Copper & Gold, Class B............... 151,875
8,700 Inco, Ltd............................................. 118,537
3,000 Phelps Dodge Corporation.............................. 171,563
3,800 Reynolds Metals Company............................... 212,563
-------------------------------------------------------------------
Total Non-Ferrous Metals.............................. 1,842,744
===================================================================
Oil--Domestic (0.9%)
- --------------------
4,700 Amerada Hess Corporation.............................. 255,269
3,200 Anadarko Petroleum Corporation........................ 215,000
4,900 Apache Corporation.................................... 154,350
3,900 Ashland Oil, Inc...................................... 201,337
16,800 Atlantic Richfield Company............................ 1,312,500
2,600 Helmerich & Payne, Inc................................ 57,850
2,400 Kerr-McGee Corporation................................ 138,900
5,500 Oryx Energy Company*.................................. 121,688
2,400 Pennzoil Corporation.................................. 121,500
13,700 Phillips Petroleum Company............................ 660,169
4,500 Rowan Companies, Inc.*................................ 87,469
4,900 Sun Company, Inc...................................... 190,181
12,800 Unocal Corporation.................................... 457,600
15,000 USX-Marathon Group, Inc............................... 514,687
-------------------------------------------------------------------
Total Oil--Domestic................................... 4,488,500
===================================================================
</TABLE>
The accompanying notes to the financial statements are an
integral part of this schedule.
44 Large Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
=========================================================
<C> <S> <C>
Oil--International (5.3%)
.........................
50,800 Amoco Corporation...................$2,114,550
34,300 Chevron Corporation..................2,849,044
128,800 Exxon Corporation....................9,185,050
41,000 Mobil Corporation....................3,141,625
111,900 Royal Dutch Petroleum Company........6,133,519
28,600 Texaco, Inc..........................1,707,062
----------------------------------------------
Total International Oil.............25,130,850
==============================================
Optical & Photo (0.4%)
......................
12,000 Corning, Inc...........................417,000
17,000 Eastman Kodak Company................1,242,062
2,300 Polaroid Corporation....................81,794
----------------------------------------------
Total Optical & Photo................1,740,856
==============================================
Paper & Forest Products (1.0%)
..............................
2,900 Boise Cascade Corporation...............94,975
5,000 Champion International Corporation.....245,937
10,800 Fort James Corporation.................480,600
4,800 Georgia-Pacific Corporation............282,900
15,703 International Paper Company............675,229
28,992 Kimberly-Clark Corporation...........1,330,008
5,700 Louisiana-Pacific Corporation..........104,025
5,400 Mead Corporation.......................171,450
1,500 Potlatch Corporation....................63,000
2,900 Temple-Inland, Inc.....................156,238
3,600 Union Camp Corporation.................178,650
5,300 Westvaco Corporation...................149,725
10,400 Weyerhaeuser Company...................480,350
5,800 Willamette Industries, Inc.............185,600
----------------------------------------------
Total Paper & Forest Products........4,598,687
==============================================
Producers Goods (5.6%)
......................
1,500 Aeroquip-Vickers, Inc...................87,563
29,400 Allied-Signal, Inc...................1,304,625
5,300 Avery Dennison Corporation.............284,875
1,200 Briggs & Stratton Corporation...........44,925
3,900 Case Corporation.......................188,175
19,400 Caterpillar, Inc.....................1,025,775
2,000 Cincinnati Milacron, Inc................48,625
6,400 Cooper Industries, Inc.................351,600
13,000 Deere & Company........................687,375
11,600 Dover Corporation......................397,300
23,200 Emerson Electric Company.............1,400,700
1,900 FMC Corporation*.......................129,556
2,100 Foster Wheeler Corporation..............45,019
170,900 General Electric Company............15,551,900
2,400 Harnischfeger Industries, Inc...........67,950
13,100 Illinois Tool Works, Inc...............873,606
8,550 Ingersoll-Rand Company.................376,734
4,300 Johnson Controls, Inc..................245,906
4,300 KLA Instruments Corporation*...........119,056
2,200 Millipore Corporation...................59,950
510 NACCO Industries, Inc...................65,918
6,500 Pall Corporation.......................133,250
5,750 Parker Hannifin Corporation............219,219
4,400 Raychem Corporation....................130,075
3,100 Snap-On, Inc...........................112,375
8,800 Tenneco, Inc...........................334,950
3,200 Timken Company..........................98,600
29,800 Tyco International Ltd...............1,877,400
5,200 W.W. Grainger, Inc.....................259,025
----------------------------------------------
Total Producers Goods...............26,522,027
==============================================
Railroad & Shipping (0.5%)
..........................
8,164 Burlington Northern, Inc...............801,603
11,300 CSX Corporation........................514,150
19,600 Norfolk Southern Corporation...........584,325
12,900 Union Pacific Corporation..............569,212
----------------------------------------------
Total Railroad & Shipping............2,469,290
==============================================
Retail Stores (5.6%)
....................
188 Abercrombie & Fitch Company*.............8,261
12,800 Albertson's, Inc.......................663,200
14,200 American Stores Company................343,462
7,900 Autozone, Inc.*........................252,306
42,260 Cendant Corporation*...................882,178
5,100 Circuit City Stores, Inc...............239,062
5,600 Consolidated Stores Corporation*.......203,000
11,100 Costco Companies, Inc.*................699,994
19,900 CVS Corporation........................774,856
22,800 Dayton Hudson Corporation............1,105,800
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 45
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
================================================================================
<S> <C> <C>
Retail Stores--continued
........................
5,700 Dillard's Inc...............................................$ 236,194
10,900 Federated Department Stores, Inc.*.......................... 586,556
3,100 Giant Food, Inc., Class A................................... 133,494
1,900 Great Atlantic & Pacific Tea Company, Inc................... 62,819
38,200 Home Depot, Inc............................................. 3,172,987
13,100 J.C. Penney Company, Inc.................................... 947,294
25,400 Kmart Corporation........................................... 488,950
13,300 Kroger Corporation*......................................... 570,238
2,000 Long's Drug Stores, Inc..................................... 57,750
18,400 Lowe's Companies, Inc....................................... 746,350
12,100 May Department Stores Company............................... 792,550
2,000 Mercantile Stores Company, Inc.............................. 157,875
4,100 Nordstrom, Inc.............................................. 316,725
3,300 Pep Boys-Manny, Moe, & Jack................................. 62,494
13,400 Rite Aid Corporation........................................ 503,338
20,500 Sears Roebuck & Company..................................... 1,251,781
5,300 Tandy Corporation........................................... 281,231
20,650 The Gap, Inc................................................ 1,272,556
13,705 The Limited, Inc............................................ 453,978
16,800 TJX Companies, Inc.......................................... 405,300
14,800 Toys "R" Us, Inc.*.......................................... 348,725
7,000 Venator Group, Inc.*........................................ 133,875
25,800 Walgreen Company............................................ 1,065,863
117,200 Wal-Mart Stores, Inc........................................ 7,119,900
7,700 Winn-Dixie Stores, Inc...................................... 394,144
----------------------------------------------------------------------
Total Retail Stores.........................................26,735,086
======================================================================
Steel (0.2%)
............
10,139 Allegheny Teledyne, Inc..................................... 231,930
5,600 Armco, Inc.*................................................ 35,700
6,600 Bethlehem Steel Corporation*................................ 82,087
2,500 Inland Steel Industries, Inc................................ 70,469
4,500 Nucor Corporation........................................... 207,000
4,400 USX-US Steel Group, Inc..................................... 145,200
5,000 Worthington Industries, Inc................................. 75,312
----------------------------------------------------------------------
Total Steel................................................. 847,698
======================================================================
Telephone (8.6%)
................
29,400 Airtouch Communications, Inc.*.............................. 1,718,063
9,600 ALLTEL Corporation.......................................... 446,400
57,100 Ameritech Corporation....................................... 2,562,362
4,575 Andrew Corporation*......................................... 82,636
10,000 Ascend Communications, Inc.*................................ 495,625
84,700 AT&T Corporation............................................ 4,838,487
40,596 Bell Atlantic Corporation................................... 3,704,385
51,800 BellSouth Corporation....................................... 3,477,075
6,100 DSC Communications Corporation*............................. 183,000
8,500 Frontier Corporation........................................ 267,750
49,900 GTE Corporation............................................. 2,775,688
67,946 Lucent Technologies, Inc.................................... 5,652,258
36,300 MCI Communications Corporation.............................. 2,109,937
31,600 Mediaone Group, Inc.*....................................... 1,388,425
13,700 Nextel Communication Inc.*.................................. 340,788
27,100 Northern Telecom, Ltd....................................... 1,537,925
95,644 SBC Communications, Inc..................................... 3,825,760
22,500 Sprint Corporation.......................................... 1,586,250
26,055 U.S. West, Inc.............................................. 1,224,576
52,800 WorldCom, Inc............................................... 2,557,500
----------------------------------------------------------------------
Total Telephone.............................................40,774,890
======================================================================
Tires & Rubber (0.1%)
.....................
4,100 Cooper Tire & Rubber Company................................ 84,562
8,200 Goodyear Tire & Rubber Company.............................. 528,388
----------------------------------------------------------------------
Total Tires & Rubber........................................ 612,950
======================================================================
Tobacco (1.3%)
..............
8,900 Fortune Brands.............................................. 342,094
6,100 Loews Corporation........................................... 531,462
126,500 Philip Morris Companies, Inc................................ 4,980,938
9,600 UST, Inc.................................................... 259,200
----------------------------------------------------------------------
Total Tobacco............................................... 6,113,694
======================================================================
Travel & Recreation (0.9%)
..........................
5,200 Brunswick Corporation....................................... 128,700
5,200 Harrah's Entertainment*..................................... 120,900
13,000 Hilton Hotels Corporation................................... 370,500
35,249 Walt Disney Company......................................... 3,703,348
----------------------------------------------------------------------
Total Travel & Recreation................................... 4,323,448
======================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
46 Large Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Large Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (98.4%) Market Value
================================================================================
<S> <C> <C>
Trucking & Freight (0.1%)
.........................
3,900 Ryder Systems, Inc....................................$ 123,094
------------------------------------------------------------------
Total Trucking & Freight.............................. 123,094
==================================================================
------------------------------------------------------------------
Total Common Stocks
(cost basis $341,409,714).............................$466,308,637
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (1.4%) Rate** Date Value
==================================================================
<S> <C> <C> <C> <C>
$ 506,000 Ford Motor
Credit Company............. 5.540% 7/1/98 $ 506,000
2,215,000 Ford Motor
Credit Company............. 5.580 7/1/98 2,215,000
740,000 Ford Motor
Credit Company............. 5.640 7/1/98 740,000
1,275,000 Merrill Lynch &
Company, Inc............... 5.530 7/2/98 1,274,790
1,830,000 Merrill Lynch &
Company, Inc............... 5.820 7/6/98 1,828,521
------------------------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $6,564,311)..................... 6,564,311
==================================================================
------------------------------------------------------------------
Total Investments (99.8%)
(amortized cost basis $347,974,025)................... 472,872,948
==================================================================
------------------------------------------------------------------
Other Assets,
Less Liabilities (0.2%)............................... 877,354
==================================================================
------------------------------------------------------------------
Net Assets (100.0%)...................................$473,750,302
==================================================================
</TABLE>
*Non-income producing security
**The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of
this schedule.
June 30, 1998 47
<PAGE>
[LOGO]
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
AAL Variable Product Small Company
Stock Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
The Portfolio seeks to achieve investment results that approximate the
performance of the Standard & Poor's SmallCap 600 Index by investing primarily
in common stocks included in the index.
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
<C> <S> <C>
Aerospace (0.6%)
14,400 AAR Corporation........................ $ 425,700
11,900 BE Aerospace, Inc.*.................... 346,588
12,000 Kaman Corporation...................... 228,374
11,900 Trimble Navigation Limited*............ 192,631
---------------------------------------------------
Total Aerospace........................ 1,193,293
===================================================
Air Transportation (1.1%)
18,100 Air Express International Corporation.. 484,175
34,700 Comair Holdings, Inc................... 1,071,362
14,800 Mesa Air Group, Inc.*.................. 120,250
10,600 Pittston BAX Group..................... 164,963
12,100 SkyWest, Inc........................... 338,800
---------------------------------------------------
Total Air Transportation............... 2,179,550
===================================================
Apparel (3.3%)
7,300 Ashworth, Inc.*........................ 101,288
7,300 J. Baker, Inc.......................... 84,406
7,300 Bell Sports Corporation*............... 70,034
9,400 Brown Group, Inc....................... 186,825
13,600 Cone Mills Corporation*................ 117,300
7,700 Cyrk, Inc.*............................ 84,700
12,800 Delta Woodside Industries, Inc......... 66,400
5,900 Dixie Group, Inc....................... 56,050
9,800 Fabri-Centers of America*.............. 268,275
10,900 Filene's Basement Corporation*......... 59,439
6,100 Galey & Lord, Inc.*.................... 90,738
13,500 Guilford Mills, Inc.................... 270,000
12,900 Gymboree Corporation*.................. 195,515
4,500 Haggar Corporation..................... 57,375
17,900 Hartmax Corporation*................... 135,369
13,500 Jan Bell Marketing, Inc.*.............. 87,750
15,700 Just For Feet, Inc.*................... 447,450
3,000 K-Swiss Inc............................ 58,875
11,200 Kellwood Corporation................... 400,400
17,300 Men's Wearhouse, Inc.*................. 570,900
20,500 Nautica Enterprises, Inc.*............. 549,654
5,200 Oshkosh B'Gosh, Inc.................... 231,400
4,600 Oxford Industries, Inc................. 160,713
14,200 Phillips-Van Heusen Corporation........ 209,450
7,300 Pillowtex Corporation.................. 292,913
8,500 St. John Knits, Inc.................... 328,313
24,600 Stride Rite Corporation................ 370,538
12,000 The Dress Barn Corporation*............ 298,500
6,000 Timberland Company*.................... 431,625
15,600 Tultex Corporation*.................... 38,025
22,300 Wolverine World Wide, Inc.............. 483,631
---------------------------------------------------
Total Apparel.......................... 6,803,851
===================================================
Banking (6.9%)
13,800 Astoria Financial Corporation.......... 738,300
13,900 Centura Banks, Inc..................... 868,750
9,400 Commerce Bancorp, Inc.................. 549,900
11,600 Cullen/Frost Bankers, Inc.............. 629,300
19,600 First Commercial Corporation........... 1,360,975
10,500 First Midwest Bancorp, Inc............. 461,671
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
48 Small Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Small Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
======================================================================
<C> <S> <C>
Banking--continued
15,800 FirstBank Puerto Rico........................ $ 410,800
34,000 FirstMerit Corporation....................... 990,250
15,500 HUBCO, Inc................................... 555,094
26,800 Keystone Financial, Inc...................... 991,600
18,600 Magna Group, Inc............................. 1,050,900
22,500 Provident Financial Group, Inc............... 1,026,563
7,800 Queens County Bancorp Inc.................... 340,275
15,900 Rigs National Corporation - Washington....... 464,577
10,700 Silicon Valley Bancshares*................... 380,853
17,900 St. Paul Bancorp, Inc........................ 404,427
11,800 Susquehanna Bancshares, Inc.................. 441,025
10,000 U.S. Trust Corporation....................... 762,500
15,400 UST Corporation.............................. 408,100
20,300 United Bankshares, Inc....................... 692,738
10,900 Whitney Holding Corporation.................. 553,175
----------------------------------------------------------
Total Banking................................ 14,081,773
==========================================================
Brokerage (0.2%)
- ----------------
20,300 E*TRADE Group, Inc.*......................... 465,631
----------------------------------------------------------
Total Brokerage.............................. 465,631
==========================================================
Business Machines (3.7%)
- ------------------------
6,600 Analogic Corporation......................... 295,350
12,600 Applied Magnetics Corporation*............... 96,075
13,300 Auspex Systems, Inc.*........................ 72,319
11,300 BancTec, Inc.*............................... 261,313
14,550 Boole & Babbage, Inc.*....................... 347,381
10,900 Broderbund Software, Inc.*................... 248,656
3,800 Centigram Communications Corporation*........ 42,750
7,100 Digi International Inc.*..................... 143,775
11,700 Exabyte Corporation*......................... 97,621
7,300 Fair, Isaac and Company, Inc................. 277,400
23,100 Input/Output, Inc.*.......................... 411,469
7,600 InterVoice, Inc.*............................ 134,900
27,500 Komag, Inc.*................................. 146,952
10,200 MicroAge, Inc.*.............................. 144,713
27,600 Microchip Technology, Inc.*.................. 721,050
16,000 National Computer Systems, Inc............... 384,000
17,600 Novellus Systems, Inc.*...................... 628,100
19,900 Picturetel Corporation*...................... 184,075
42,200 Platinum Technology, Inc.*................... 1,205,338
25,300 Read-Rite Corporation*....................... 229,281
24,800 Tech Data Corporation*....................... 1,063,298
8,300 Telxon Corporation........................... 268,713
11,900 Xircom, Inc.*................................ 185,194
----------------------------------------------------------
Total Business Machines...................... 7,589,723
==========================================================
Business Services (11.0%)
- -------------------------
10,800 ABM Industries, Inc.......................... 301,050
11,800 ADVO, Inc.*.................................. 332,613
9,900 Access Health, Inc.*......................... 252,450
22,000 American Management Systems, Inc.*........... 658,625
11,600 Analysts International Corporation........... 329,150
4,800 Angelica Corporation......................... 100,800
13,705 The BISYS Group, Inc.*....................... 561,905
17,500 Billing Concepts Corporation*................ 271,250
9,600 Bowne & Co, Inc.............................. 432,000
10,400 CDI Corporation*............................. 278,200
17,000 Cerner Corporation*.......................... 481,313
24,200 Ciber, Inc.*................................. 919,600
10,800 Computer Task Group, Inc..................... 361,800
9,400 Dames & Moore Group.......................... 121,025
36,000 DeVry, Inc.*................................. 789,750
8,400 Dialogic Corporation*........................ 249,900
11,000 Envoy Corporation*........................... 521,125
16,100 FileNet Corporation*......................... 464,888
12,800 Franklin Covey Company*...................... 246,400
10,700 G & K Services, Inc.......................... 466,788
13,100 HA-LO Industries, Inc.*...................... 407,738
21,400 Harbinger Corporation*....................... 517,613
9,900 Hyperion Software Corporation*............... 282,150
11,900 Immune Response Corporation*................. 178,500
4,400 Insteel Industries, Inc...................... 27,775
6,500 Integrated Circuit Systems, Inc.*............ 108,063
23,200 Integrated Health Services, Inc.............. 870,000
24,400 Interim Services, Inc.*...................... 783,850
16,200 John H. Harland Company*..................... 274,388
4,300 Kronos, Inc.................................. 155,875
13,000 Mentor Corporation........................... 315,250
3,500 Nashua Corporation*.......................... 54,688
17,600 National Data Corporation.................... 770,000
7,200 New England Business Service, Inc............ 232,200
11,100 NFO Worldwide, Inc.*......................... 197,719
</TABLE>
The accompanying notes to the financial statements are an
integral part of this schedule.
June 30, 1998 49
<PAGE>
AAL Variable Product Small Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
======================================================================
<C> <S> <C>
Business Services--continued
- ----------------------------
14,200 Norrell Corporation......................... $ 283,113
11,300 Offshore Logistics, Inc.*................... 200,575
19,100 Orbital Sciences Corporation*............... 713,863
24,900 PMT Services, Inc.*......................... 633,394
25,200 Paxar Corporation*.......................... 289,800
13,500 Platinum Software Corporation*.............. 329,063
13,400 Primark Corporation*........................ 419,588
6,100 Progress Software Corporation*.............. 250,100
9,600 Protein Design Labs, Inc.*.................. 231,300
7,000 Rural/Metro Corporation*.................... 91,000
26,500 S3, Inc.*................................... 134,156
9,400 SEI Investments Company..................... 582,800
24,700 System Software Associate, Inc.*............ 175,988
11,300 TCSI Corporation*........................... 66,388
13,800 Technology Solutions Company*............... 437,288
7,100 TETRA Technologies, Inc.*................... 117,150
23,200 True North Communications, Inc.............. 678,600
22,500 Vanstar Corporation*........................ 327,656
13,300 Vantive Corporation*........................ 272,650
7,800 Volt Information Sciences, Inc.*............ 211,575
5,200 Wall Data, Inc.*............................ 83,200
12,200 Whittman-Hart, Inc.*........................ 590,175
20,000 World Color Press, Inc.*.................... 700,000
22,400 Xylan Corporation*.......................... 667,791
12,700 Zebra Technologies Corporation*............. 542,925
---------------------------------------------------------
Total Business Services..................... 22,346,579
=========================================================
Chemicals (1.7%)
- ----------------
11,700 W.H. Brady Company.......................... 325,406
12,600 Cambrex Corporation......................... 330,750
10,500 Chemfirst, Inc.............................. 265,125
8,300 Commonwealth Industries, Inc................ 83,000
12,200 Geon Company................................ 279,838
5,400 Hauser, Inc.*............................... 31,388
12,100 Lilly Industries, Inc....................... 261,663
13,100 MacDermid, Inc.............................. 370,075
5,400 McWhorter Technologies, Inc.*............... 142,763
11,400 OM Group, Inc............................... 470,250
4,600 Quaker Chemical Corporation................. 87,113
6,300 Tredegar Industries, Inc.................... 534,710
8,170 WD-40 Company............................... 221,611
---------------------------------------------------------
Total Chemicals............................. 3,403,692
=========================================================
Construction (3.6%)
- -------------------
14,500 Apogee Enterprises, Inc..................... 222,031
19,500 Blount International, Inc................... 555,750
6,500 Building Materials Holding Corporation*..... 89,781
27,500 D.R. Horton, Inc............................ 574,063
7,700 Dravo Corporation*.......................... 70,744
14,100 Insituform Technologies, Inc.*.............. 195,196
27,200 Interface, Inc.............................. 549,100
13,800 Justin Industries, Inc...................... 222,525
5,800 Lawson Products, Inc........................ 149,350
5,700 Lone Star Industries, Inc................... 439,256
8,700 Medusa Corporation.......................... 545,925
28,200 Morrison Knudsen Corporation*............... 396,563
24,200 Oakwood Homes Corporation................... 726,000
6,100 Republic Group, Inc......................... 128,100
7,800 Ryland Group, Inc........................... 204,750
7,500 Southern Energy Homes, Inc.*................ 73,594
15,500 Standard-Pacific Corporation................ 319,688
6,700 Stone & Webster, Inc........................ 265,488
10,900 Texas Industries, Inc....................... 577,698
8,900 TJ International, Inc....................... 268,113
19,200 Toll Brothers, Inc.*........................ 550,800
6,200 U.S. Home Corporation*...................... 255,750
---------------------------------------------------------
Total Construction.......................... 7,380,265
=========================================================
Consumer Durables (3.2%)
- ------------------------
6,800 Bassett Furniture Industries, Inc........... 191,675
24,800 Champion Enterprises, Inc.*................. 725,400
15,000 Ethan Allen Interiors, Inc.................. 749,063
7,800 Flow International Corporation*............. 90,675
16,000 Griffon Corporation*........................ 205,000
9,700 Harman International Industries, Inc........ 373,450
9,300 La Z Boy Chair Company...................... 525,450
20,200 Linens `N Things, Inc.*..................... 617,363
27,250 Mohawk Industries, Inc.*.................... 863,484
3,900 National Presto Industries, Inc............. 151,856
4,900 Rival Company............................... 66,150
12,000 Royal Appliance Manufacturing Company*...... 75,000
14,100 Shorewood Packaging Corporation*............ 223,838
</TABLE>
The accompanying notes to the financial statements are an
integral part of this schedule.
50 Small Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Small Company Stock Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
====================================================================
Consumer Durables-continued
<S> <C> <C>
- --------------------------------------------------------------------
4,900 Skyline Corporation............................$ 159,863
14,000 Sturm Ruger & Company, Inc..................... 234,500
4,300 Swiss Army Brands, Inc.*....................... 49,450
8,300 Thomas Industries, Inc......................... 202,831
6,700 Toro Company................................... 229,475
26,900 Williams-Sonoma, Inc.*......................... 855,756
--------------------------------------------------------
Total Consumer Durables 6,590,279
========================================================
Cosmetics (0.1%)
- ----------------
5,300 Chemed Corporation............................. 180,531
7,200 USA Detergents, Inc.*.......................... 119,250
--------------------------------------------------------
Total Cosmetics................................ 299,781
========================================================
Drugs & Medicine (9.8%)
- -----------------------
10,200 ADAC Laboratories, Inc.*...................... 229,500
20,500 Advanced Tissue Sciences, Inc.*............... 90,969
16,700 Alliance Pharmaceutical Corporation*.......... 69,931
13,200 Alpharma, Inc................................. 290,400
16,900 American Oncology Resources, Inc.*............ 206,496
15,800 Ballard Medical Products...................... 284,400
25,100 Bio-Technology General Corporation*........... 178,052
14,800 Cephalon, Inc.*............................... 116,550
4,700 Collagen Corporation.......................... 85,188
5,300 CompDent Corporation*......................... 82,813
7,800 Cooper Companies, Inc.*....................... 284,213
12,600 COR Therapeutics, Inc.*....................... 174,825
30,400 Coventry Health Care Inc.*.................... 452,200
6,600 Curative Health Services, Inc.*............... 188,100
10,400 Cygnus, Inc.*................................. 108,550
17,800 DEKALB Genetics Corporation.................. 1,684,325
7,200 Diagnostic Products Corporation............... 207,450
12,800 Enzo Biochem, Inc.*........................... 171,200
7,000 Hologic, Inc.*................................ 127,313
20,000 Idexx Laboratories, Inc.*..................... 497,500
13,800 Incyte Pharmaceuticals, Inc.*................. 470,925
15,600 Invacare Corporation.......................... 399,750
15,000 Jones Pharma, Inc............................. 496,875
30,100 Lincare Holdings, Inc.*...................... 1,266,081
19,800 Liposome Company, Inc.*....................... 107,043
16,400 Magellan Health Services, Inc.*............... 416,150
15,400 Mariner Health Group, Inc.*................... 256,025
9,300 Marquette Medical Systems, Inc*............... 238,603
13,800 MedImmune, Inc.*.............................. 860,775
9,300 Molecular Biosystems, Inc.*................... 66,844
9,700 Nature's Sunshine Products, Inc............... 218,856
29,100 NBTY, Inc.*................................... 534,713
10,200 NCS HealthCare, Inc.*......................... 290,700
16,700 North American Vaccine, Inc.*................. 258,850
10,700 Noven Pharmaceuticals, Inc.*.................. 63,531
24,800 Orthodontic Centers of America, Inc.*......... 519,250
16,900 Owens & Minor, Inc. Holding Company........... 169,000
21,600 Paragon Health Network, Inc.*................. 348,300
12,800 PAREXEL International Corporation*............ 465,600
17,350 Patterson Dental Company*..................... 635,444
8,000 Pediatrix Medical Group, Inc.*................ 297,500
6,500 Pharmaceutical Marketing Services, Inc.*...... 92,625
34,800 PhyCor, Inc.*................................. 576,375
16,200 Regeneron Pharmaceuticals, Inc.*.............. 149,343
13,800 Renal Care Group, Inc.*....................... 608,063
16,900 Respironics, Inc.*............................ 263,006
15,900 Roberts Pharmaceutical Corporation*........... 365,700
16,400 SEQUUS Pharmaceuticals, Inc.*................. 186,550
14,300 Sierra Health Services, Inc.*................. 360,181
12,800 Sola International, Inc.*..................... 418,400
5,000 Spacelabs Medical, Inc.*...................... 83,750
17,600 STERIS Corporation*.......................... 1,119,249
16,100 Summit Technology, Inc.*...................... 87,544
10,600 Sunrise Medical, Inc.*........................ 159,000
5,500 Syncor International Corporation*............. 94,875
10,900 TheraTech, Inc.*.............................. 110,363
12,700 U.S. Bioscience, Inc.*........................ 103,981
16,900 Universal Services, Inc.*..................... 986,534
13,200 Vertex Pharmaceuticals, Inc.*................. 297,000
-------------------------------------------------------
Total Drugs & Medicine...................... 19,973,329
=======================================================
Electronics (7.0%)
- ------------------
27,200 Acxiom Corporation*............................ 678,300
14,200 Allen Group, Inc.*............................. 165,075
6,900 Alliant Techsystems, Inc.*..................... 436,425
8,900 Amtech Corporation*............................ 42,275
24,500 Anixter International, Inc.*................... 467,031
12,100 Avid Technology, Inc.*......................... 405,350
13,600 Belden, Inc.................................... 416,500
4,900 Bell Industries, Inc.*......................... 55,738
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
51
June 30, 1998
<PAGE>
AAL Variable Product Small Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
================================================================================
<C> <S> <C>
Electronics--continued
6,100 Benchmark Electronics, Inc.*.............................$ 122,000
14,300 BMC Industries, Inc...................................... 125,125
7,000 BroadBand Technologies, Inc.*............................ 28,875
19,050 Burr-Brown Corporation*.................................. 400,050
5,100 C-COR Electronics, Inc.*................................. 96,900
19,000 C-Cube Microsystems, Inc.*............................... 352,688
8,000 CTS Corporation.......................................... 236,000
15,100 Cable Design Technologies Corporation*................... 311,438
8,600 California Microwave, Inc.*.............................. 150,500
17,500 Checkpoint Systems, Inc.*................................ 247,188
6,900 Circon Corporation*...................................... 106,950
12,200 Coherent, Inc.*.......................................... 209,306
25,600 CommScope, Inc.*......................................... 414,400
14,600 Dallas Semiconductor Corporation......................... 452,600
23,900 Digital Microwave Corporation*........................... 173,275
11,800 Dionex Corporation*...................................... 311,225
5,900 Electro Scientific Industries, Inc.*..................... 186,219
10,300 Electroglas, Inc.*....................................... 134,544
11,500 Etec Systems, Inc.*...................................... 404,656
9,600 Fluke Corporation........................................ 315,600
19,200 General Semiconductor, Inc.*............................. 189,600
37,160 Gentex Corporation*...................................... 673,525
11,800 Gerber Scientific, Inc................................... 268,450
6,900 Hadco Corporation*....................................... 160,856
5,350 Harmon Industries, Inc................................... 127,063
10,300 Hutchinson Technology, Inc.*............................. 280,675
7,700 Innovex, Inc............................................. 100,581
6,600 Intermagnetics General Corporation*...................... 60,225
26,700 International Rectifier Corporation*..................... 226,950
7,600 Itron, Inc.*............................................. 96,900
20,900 Kemet Corporation*....................................... 274,965
14,200 Kent Electronics Corporation*............................ 260,038
12,100 Kulicke and Soffa Industries, Inc.*...................... 205,700
8,700 Marshall Industries, Inc.*............................... 237,075
18,500 Methode Electronics, Inc................................. 286,750
22,500 P-COM, Inc.*............................................. 206,015
6,000 Park Electrochemical Corporation......................... 126,750
12,700 Photronics, Inc.*........................................ 280,194
13,700 Pioneer-Standard Electronics, Inc........................ 131,863
7,700 Plexus Corporation*...................................... 153,038
10,600 ReSound Corporation*..................................... 69,563
8,300 SpeedFam International, Inc.*............................ 153,031
8,300 Standard Microsystems Corporation*....................... 73,144
8,300 SymmetriCom, Inc.*....................................... 49,800
8,400 Technitrol, Inc.......................................... 335,475
4,200 Three-Five Systems, Inc.*................................ 73,237
12,600 Unitrode Corporation*.................................... 144,900
12,400 Valence Technology, Inc.*................................ 70,525
22,300 Vicor Corporation*....................................... 309,410
8,000 VISX, Inc.*.............................................. 476,000
6,700 Vital Signs, Inc......................................... 122,275
24,200 VLSI Technology, Inc.*................................... 406,103
4,300 Watkins-Johnson Company.................................. 111,800
5,076 Zilog, Inc.*............................................. 25,278
--------------------------------------------------------------------
Total Electronics........................................ 14,213,987
====================================================================
Energy & Utilities (4.4%)
3,900 Aquarion Company......................................... 133,331
15,700 Atmos Energy Corporation................................. 478,850
3,900 Bangor Hydro-Electric Company*........................... 35,100
5,800 Cascade Natural Gas Corporation.......................... 90,988
9,000 Central Hudson Gas & Electric Company.................... 412,875
6,000 Central Vermont Public Service Corporation............... 89,625
7,100 Cilcorp, Inc............................................. 340,800
11,200 Commonwealth Energy Systems.............................. 422,800
5,400 Connecticut Energy Corporation........................... 150,525
4,700 Consumers Water Company.................................. 129,838
10,700 Eastern Utilities Associates............................. 280,875
15,200 Energen Corporation...................................... 305,900
11,700 Global Industrial Technologies, Inc.*.................... 168,188
2,800 Green Mountain Power Corporation......................... 40,075
21,900 KN Energy, Inc........................................... 1,186,706
9,300 New Jersey Resources Corporation......................... 331,894
12,900 Northwest Natural Gas Company............................ 360,796
7,100 Orange & Rockland Utilities, Inc......................... 381,181
5,200 Pennsylvania Enterprises, Inc............................ 140,075
14,300 Philadelphia Suburban Corporation........................ 312,813
15,800 Piedmont Natural Gas Company, Inc........................ 531,275
10,500 Public Service Company of North Carolina................. 228,375
16,100 Sierra Pacific Resources Corporation..................... 584,628
4,700 Southern California Water Company........................ 127,488
14,400 Southwest Gas Corporation................................ 351,900
6,900 TNP Enterprises, Inc..................................... 213,038
7,500 United Illuminating Company.............................. 379,688
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
52 Small Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Small Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
================================================================================
<C> <S> <C>
Energy & Utilities-continued
19,200 United Water Resources, Inc..............................$ 345,600
19,400 WICOR, Inc............................................... 448,625
--------------------------------------------------------------------
Total Energy & Utilities................................. 9,003,852
====================================================================
Energy-Raw Materials (1.0%)
14,800 AMCOL International Corporation.......................... 178,525
12,900 Cabot Oil & Gas Corporation.............................. 258,000
16,800 Devon Energy Corporation................................. 586,949
15,300 KCS Energy, Inc.......................................... 174,994
11,200 Kirby Corporation*....................................... 282,800
8,800 Plains Resources, Inc.*.................................. 157,850
11,700 Seitel, Inc.*............................................ 189,394
13,000 Southwestern Energy Company.............................. 119,438
4,700 Wiser Oil Company........................................ 51,994
--------------------------------------------------------------------
Total Energy-Raw Materials............................... 1,999,944
====================================================================
Food & Agriculture (3.3%)
33,500 Chiquita Brands International, Inc....................... 471,094
4,400 Coca-Cola Bottling Company Consolidated.................. 290,950
18,500 Corn Products International, Inc.*....................... 626,688
19,800 Delta & Pine Land Company................................ 881,100
23,200 DIMON, Inc............................................... 261,000
11,200 Earthgrains Company...................................... 625,800
19,900 Fleming Companies, Inc................................... 349,494
3,700 GoodMark Foods, Inc...................................... 109,613
4,600 J & J Snack Foods Corporation*........................... 96,025
15,800 Landry's Seafood Restaurants, Inc.*...................... 285,880
7,350 Lindsay Manufacturing Company............................ 199,369
14,200 Mississippi Chemical Corporation......................... 233,413
5,900 Nash-Finch Company....................................... 88,869
24,700 Richfood Holdings, Inc................................... 510,981
9,800 Scotts Company*.......................................... 365,050
19,500 Smithfield Foods, Inc.*.................................. 594,750
13,700 Whole Foods Market, Inc.*................................ 828,848
--------------------------------------------------------------------
Total Food & Agriculture................................. 6,818,924
====================================================================
Gold (0.1%)
16,000 Getchell Gold Corporation*............................... 240,000
16,300 Glamis Gold, Ltd.*....................................... 57,050
--------------------------------------------------------------------
Total Gold............................................... 297,050
====================================================================
Health Care (0.1%)
8,200 Datascope Corporation*................................... 217,813
--------------------------------------------------------------------
Total Health Care........................................ 217,813
====================================================================
Insurance (5.5%)
15,800 Allied Group, Inc........................................ 739,638
8,200 Capital Re Corporation................................... 587,325
9,984 Delphi Financial Group, Inc.*............................ 562,224
19,600 Enhance Financial Services Group, Inc.................... 661,500
5,700 Executive Risk, Inc...................................... 420,375
9,400 First American Financial Corporation..................... 846,000
18,100 Fremont General Corporation.............................. 980,794
19,470 Frontier Insurance Group, Inc............................ 439,292
8,900 Arthur J. Gallagher & Company............................ 398,275
18,300 Genesis Health Ventures, Inc.*........................... 457,500
6,600 Hilb, Rogal and Hamilton Company......................... 103,125
5,900 Insurance Auto Auctions, Inc.*........................... 83,338
9,000 Life Re Corporation...................................... 738,000
20,300 Mutual Risk Management Ltd............................... 739,681
9,600 NAC Re Corporation....................................... 512,400
14,400 Orion Capital Corporation................................ 804,600
32,100 Protective Life Corporation.............................. 1,177,669
15,400 Selective Insurance Group, Inc........................... 345,055
6,300 Trenwick Group, Inc...................................... 244,715
9,200 Zenith National Insurance Corporation.................... 259,325
--------------------------------------------------------------------
Total Insurance.......................................... 11,100,831
====================================================================
Liquor (0.2%)
9,800 Canandaigua Brands, Inc.*................................ 482,038
--------------------------------------------------------------------
Total Liquor............................................. 482,038
====================================================================
Media (2.5%)
10,700 Capital Cities/ABC, Inc................................. 1,136,875
6,000 Carmike Cinemas, Inc.*.................................. 161,625
6,700 Consolidated Graphics, Inc.*............................ 395,300
8,800 Express Scripts, Inc.*.................................. 709,500
4,100 GC Companies, Inc.*..................................... 212,688
8,500 Merrill Corporation..................................... 187,531
8,700 Metro Networks, Inc.*................................... 375,188
8,900 Thomas Nelson, Inc...................................... 119,038
11,100 Network Equipment Technologies, Inc.*................... 174,131
9,400 Oak Industries, Inc.*................................... 332,525
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 53
<PAGE>
AAL Variable Product Small Company Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
================================================================================
<C> <S> <C>
Media-continued
1,900 Plenum Publishing Corporation.............................$ 139,175
20,400 Valassis Communications, Inc.*............................ 786,675
16,400 Westwood One, Inc.*....................................... 413,585
--------------------------------------------------------------------
Total Media............................................... 5,143,836
====================================================================
Miscellaneous Finance (3.9%)
22,300 Amresco, Inc.*............................................ 649,488
12,800 Cash America International, Inc........................... 195,200
11,800 CMAC Investment Corporation............................... 725,700
21,000 Commercial Federal Corporation............................ 664,125
6,500 Dain Rauscher Corporation................................. 355,875
14,665 Downey Financial Corporation.............................. 479,362
9,600 Eaton Vance Corporation................................... 444,600
12,000 Fidelity National Financial, Inc.......................... 477,750
9,900 Jack Henry & Associates, Inc.............................. 340,313
5,200 JSB Financial, Inc........................................ 304,525
14,300 Legg Mason, Inc........................................... 823,144
9,400 M.D.C. Holdings, Inc...................................... 185,650
3,800 Penford Corporation....................................... 114,950
13,200 Pioneer Group, Inc........................................ 347,325
25,150 Raymond James Financial, Inc.............................. 752,928
69,540 Sovereign Bancorp, Inc.................................... 1,136,540
--------------------------------------------------------------------
Total Miscellaneous Finance............................... 7,997,475
====================================================================
Motor Vehicles (2.0%)
14,900 Arctic Cat, Inc........................................... 147,138
19,100 Breed Technologies Inc.*.................................. 292,469
8,700 Discount Auto Parts, Inc.*................................ 226,200
2,700 Global Motorsport Group, Inc.*............................ 56,531
5,600 Johnston Industries, Inc.*................................ 25,900
9,600 Myers Industries, Inc..................................... 230,400
10,900 O'Reilly Automotive, Inc.*................................ 392,400
13,700 Polaris Industries, Inc................................... 515,463
6,600 SPX Corporation........................................... 424,875
9,600 Simpson Industries, Inc................................... 131,400
8,500 A.O. Smith Corporation.................................... 439,342
6,600 Spartan Motors, Inc....................................... 47,025
6,800 Standard Motor Products, Inc.*............................ 151,300
8,800 Standard Products Corporation............................. 247,500
12,100 TBC Corporation*.......................................... 80,163
6,400 Thor Industries, Inc...................................... 177,200
11,300 Titan International, Inc.................................. 192,100
12,300 Winnebago Industries, Inc................................. 156,825
10,100 Wynn's International, Inc................................. 194,425
--------------------------------------------------------------------
Total Motor Vehicles...................................... 4,128,656
====================================================================
Non-Durables & Entertainment (3.4%)
8,600 A.T. Cross Company........................................ 127,925
16,300 Applebee's International, Inc............................. 364,713
6,200 Au Bon Pain Company, Inc.*................................ 68,200
4,500 Bertucci's, Inc.*......................................... 46,125
5,200 CPI Corporation........................................... 123,825
9,600 Catalina Marketing Corporation*........................... 498,600
24,200 Cke Restaurants, Inc...................................... 998,250
10,900 Consolidated Products, Inc.*.............................. 230,263
20,500 Foodmaker, Inc.*.......................................... 345,938
8,600 Gibson Greetings, Inc.*................................... 215,000
6,600 Huffy Corp................................................ 119,625
5,100 IHOP Corporation*......................................... 211,013
8,900 Lechters, Inc.*........................................... 43,665
9,500 Galoob Toys, Inc.*........................................ 95,000
12,100 Luby's Cafeterias, Inc.................................... 212,506
15,800 Marcus Corporation........................................ 282,425
20,051 Midway Games Inc.*........................................ 313,297
12,400 Regis Corporation......................................... 366,575
17,200 Ruby Tuesday, Inc......................................... 266,600
11,600 Russ Berrie & Company..................................... 290,000
24,400 Ryan's Family Steak Houses, Inc.*......................... 250,100
25,300 Shoneys, Inc.*............................................ 88,550
9,700 Showbiz Pizza Time, Inc.*................................. 391,031
10,050 Sonic Corporation*........................................ 224,869
7,700 Taco Cabana, Inc.*........................................ 48,606
12,300 TCBY Enterprises, Inc..................................... 113,006
10,450 The Cheesecake Factory, Inc.*............................. 236,431
16,300 Triarc Companies, Inc.*................................... 357,580
--------------------------------------------------------------------
Total Non-Durables &
Entertainment............................................. 6,929,718
====================================================================
Non-Ferrous Metals (1.0%)
7,300 Castle (A.M.) & Company................................... 160,600
11,400 Coeur D Alene Mines Corporation*.......................... 76,950
7,800 Commercial Metals Company................................. 239,850
28,700 Helca Mining Company*..................................... 152,469
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
54 Small Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Small Company Stock Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
================================================================================
<C> <S> <C>
Non-Ferrous Metals-continued
8,700 IMCO Recycling, Inc......................................$ 160,950
18,300 Mueller Industries, Inc.*................................ 679,388
10,700 Stillwater Mining Company*............................... 290,238
7,400 Wolverine Tube, Inc.*.................................... 281,199
--------------------------------------------------------------------
Total Non-Ferrous Metals................................. 2,041,644
====================================================================
Oil-Domestic (2.5%)
16,500 Barrett Resources Corporation*........................... 617,719
15,400 Benton Oil & Gas Company*................................ 163,625
24,300 Cross Timbers Oil Company................................ 463,219
9,700 HS Resources, Inc.*...................................... 141,256
18,800 Newfield Exploration Company*............................ 467,650
19,600 Pogo Producing Corporation............................... 492,450
11,000 Pool Energy Services Company*............................ 162,250
26,100 Pride International, Inc.*............................... 442,069
10,600 Remington Oil & Gas Corporation*......................... 56,975
53,400 Santa Fe Energy Resources, Inc.*......................... 574,050
17,400 Snyder Oil Corporation................................... 346,913
5,700 St. Mary Land & Exploration Company...................... 137,513
23,100 Tuboscope, Inc.*......................................... 456,225
26,900 Vintage Petroleum, Inc................................... 507,736
--------------------------------------------------------------------
Total Oil-Domestic....................................... 5,029,650
====================================================================
Paper & Forest Products (0.6%)
19,200 Buckeye Technologies, Inc.*.............................. 452,400
13,300 Caraustar Industries, Inc................................ 384,038
8,500 Lydall, Inc.*............................................ 123,781
7,100 Pope & Talbot, Inc....................................... 82,981
10,800 Universal Forest Products, Inc........................... 176,850
--------------------------------------------------------------------
Total Paper & Forest Products............................ 1,220,050
====================================================================
Producers Goods (5.9%)
11,500 Applied Industrial Technologies, Inc..................... 236,469
14,600 Applied Power Inc........................................ 501,875
9,400 AptarGroup, Inc.......................................... 584,563
4,900 Astec Industries, Inc.*.................................. 169,050
19,300 Baldor Electric Company.................................. 470,438
10,600 Barnes Group, Inc........................................ 286,863
4,000 Butler Manufacturing Company............................. 136,250
12,700 Clarcor, Inc............................................. 266,700
21,800 Cognex Corporation*...................................... 403,300
9,100 Daniel Industries, Inc................................... 172,900
21,900 Fedders Corporation...................................... 146,456
13,500 Graco Inc................................................ 470,813
11,600 Helix Technology Corporation............................. 174,000
12,000 Hughes Supply, Inc....................................... 439,500
8,400 Ionics, Inc.*............................................ 309,750
22,900 JLG Industries, Inc...................................... 463,725
9,700 Juno Lighting, Inc....................................... 229,163
8,500 Kuhlman Corporation...................................... 336,281
12,200 Lattice Semiconductor Corporation*....................... 346,556
6,600 LSB Industries, Inc...................................... 25,163
9,000 Manitowoc Company, Inc................................... 362,813
8,000 Material Sciences Corporation*........................... 93,000
12,000 Oceaneering International, Inc.*......................... 213,000
7,400 Quanex Corporation....................................... 224,313
10,900 Regal-Beloit Corporation................................. 310,650
5,800 Robbins & Myers, Inc..................................... 168,563
16,200 Roper Industries, Inc.................................... 423,225
21,700 Sanmina Corporation*..................................... 941,236
9,700 Scott Technologies, Inc.*................................ 141,863
6,300 SPS Technologies, Inc.*.................................. 368,550
6,900 Standex International Corporation........................ 204,413
10,900 Ultratech Stepper, Inc.*................................. 215,275
14,400 Valmont Industries, Inc.................................. 287,549
37,800 Vitesse Seiconductor Corporation*........................ 1,167,070
4,600 Walbro Corporation....................................... 64,975
8,000 Watsco, Inc.............................................. 281,500
5,900 Whittaker Corporation*................................... 78,175
11,000 X-Rite, Inc.............................................. 150,563
6,500 ZERO Corporation......................................... 184,436
--------------------------------------------------------------------
Total Producers Goods.................................... 12,050,984
====================================================================
Railroad & Shipping (0.1%)
14,900 Halter Marine Group, Inc.*............................... 224,431
4,800 RailTex, Inc.*........................................... 63,600
--------------------------------------------------------------------
Total Railroad & Shipping................................ 288,031
====================================================================
Real Property (0.1%)
13,700 Hollywood Park, Inc.*.................................... 172,963
--------------------------------------------------------------------
Total Real Property...................................... 172,963
====================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 55
<PAGE>
AAL Variable Product Small Company Stock Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Shares Common Stocks (99.4%) Market Value
================================================================================
<C> <S> <C>
Retail Stores (3.2%)
13,400 AnnTaylor Stores Corporation*...........................$ 283,913
11,800 Authentic Fitness Corporation........................... 186,588
19,800 The Bombay Company, Inc.*............................... 94,050
9,100 Books-A-Million, Inc.*.................................. 42,088
27,300 Casey's General Stores, Inc............................. 452,156
14,400 Cato Corporation........................................ 250,649
4,100 DAMARK International, Inc.*............................. 34,850
15,100 Eagle Hardware & Garden, Inc.*.......................... 349,188
14,600 Footstar, Inc.*......................................... 700,800
5,500 Gottschalks, Inc.*...................................... 48,813
10,900 Hancock Fabrics, Inc.................................... 136,250
4,900 Lillian Vernon Corporation.............................. 81,463
15,000 Michaels Stores, Inc.................................... 529,218
35,100 Pier 1 Imports, Inc.*................................... 838,013
25,000 Ross Stores, Inc........................................ 1,075,000
13,400 ShopKo Stores, Inc.*.................................... 455,600
24,100 Stein Mart, Inc.*....................................... 325,350
18,600 Zale Corporation*....................................... 591,710
--------------------------------------------------------------------
Retail Stores........................................... 6,475,699
====================================================================
Steel (0.4%)
6,100 Acme Metals, Inc.*...................................... 30,500
4,800 Amcast Industrial Corporation........................... 89,400
15,500 Birmingham Steel Corporation............................ 191,813
13,300 Intermet Corporation.................................... 241,063
12,800 Northwestern Steel and Wire Company*.................... 44,800
6,200 Steel Technologies, Inc................................. 63,550
10,200 WHX Corporation*........................................ 131,324
--------------------------------------------------------------------
Total Steel............................................. 792,450
====================================================================
Telephone (1.0%)
26,200 Aspect Telecommunications Corporation*.................. 717,225
27,000 Brightpoint, Inc.*...................................... 391,500
25,700 General Communication, Inc.*............................ 155,806
14,000 Inter-Tel, Inc.......................................... 224,000
34,400 Tel-Save Holdings, Inc.*................................ 507,400
--------------------------------------------------------------------
Total Telephone......................................... 1,995,931
====================================================================
Tires & Rubber (0.6%)
8,200 O'Sullivan Corporation.................................. 79,950
27,900 Safeskin Corporation*................................... 1,147,388
--------------------------------------------------------------------
Total Tires & Rubber.................................... 1,227,338
====================================================================
Tobacco (0.1%)
8,400 Schweitzer-Mauduit International, Inc................... 243,600
--------------------------------------------------------------------
Total Tobacco........................................... 243,600
====================================================================
Travel & Recreation (1.4%)
23,500 Aztar Corporation*...................................... 160,094
13,000 CapStar Hotel Company*.................................. 364,000
14,900 Central Parking Corporation............................. 677,950
21,600 Grand Casinos, Inc.*.................................... 361,800
8,600 K2, Inc................................................. 151,575
16,600 Players International, Inc.*............................ 82,480
15,100 Primadonna Resorts, Inc.*............................... 216,590
28,100 Prime Hospitality Corporation*.......................... 489,994
16,400 Sports Authority, Inc.*................................. 244,975
--------------------------------------------------------------------
Total Travel & Recreation............................... 2,749,458
====================================================================
Trucking & Freight (1.8%)
16,200 American Freightways Corporation*....................... 162,000
10,200 Arkansas Best Corporation*.............................. 95,625
12,800 Expeditors International of Washington, Inc............. 563,200
18,700 Fritz Companies, Inc.*.................................. 250,113
8,800 Frozen Food Express Industries, Inc..................... 86,900
15,600 Heartland Express, Inc.*................................ 315,900
6,300 Landstar System, Inc.*.................................. 220,106
6,300 M.S. Carriers, Inc.*.................................... 170,888
31,650 Rollins Truck Leasing Corporation....................... 391,669
13,600 USFreightways Corporation............................... 446,674
12,000 Wabash National Corporation............................. 309,000
24,875 Werner Enterprises, Inc................................. 474,180
14,700 Yellow Corporation*..................................... 272,868
--------------------------------------------------------------------
Total Trucking & Freight................................ 3,759,123
====================================================================
--------------------------------------------------------------------
Total Common Stocks
(cost basis $197,381,286)............................... 198,688,791
====================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
56 Small Company Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product Small Company Stock Portfolio-continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (2.3%) Rate** Date Value
================================================================================
<S> <C> <C> <C> <C>
$2,524,000 Ford Motor Credit
Company..................................5.580%...7/1/98..$2,524,000
389,000 Ford Motor Credit
Company..................................5.640....7/1/98.....389,000
183,000 Ford Motor Credit
Company..................................5.380....7/1/98.....183,000
1,006,000 G.E. Capital
Corporation..............................5.800....7/2/98...1,005,190
497,000 Merrill Lynch &
Company, Inc.............................5.530....7/2/98.....496,917
--------------------------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $4,598,107)..........................4,598,107
====================================================================
--------------------------------------------------------------------
Total Investments (101.7%)
(amortized cost basis $201,979,394)......................203,286,898
====================================================================
--------------------------------------------------------------------
Other Assets
Less Liabilities (1.7%)...................................(3,351,476)
====================================================================
--------------------------------------------------------------------
Net Assets (100.0%).....................................$199,935,422
====================================================================
</TABLE>
*Non-income producing security
**The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 57
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUALREPORT
AAL Variable Product International Stock Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
The Portfolio seeks long-term capital growth by investing primarily in a
diversified portfolio of foreign stocks.
<TABLE>
<CAPTION>
<C> <S> <C> <C>
Market
Shares Common Stocks (94.6%) Industry Value
==========================================================================
Australia (2.0%)
21,600 Australia & New Zealand
Banking Group............ Banking $149,012
17,600 Coca-Cola Amatil Ltd..... Food & Beverage 117,711
17,600 Coca-Cola Beverages
plc*..................... Food & Beverage 0
------------------------------------------------------
Total Australia............................ 266,723
======================================================
Belgium (1.7%)
2,480 KBC Bancassurance........ Banking 221,940
------------------------------------------------------
Total Belgium.............................. 221,940
======================================================
Brazil (0.6%)
700 Telecomunicacoes Brazil.. Telephone 76,431
----------------------------------------------------
Total Brazil.............................. 76,431
====================================================
Canada (1.4%)
4,200 BCE Inc.................. Telephone 178,082
----------------------------------------------------
Total Canada.............................. 178,082
====================================================
France (14.6%)
1,806 Banque Nationale de Paris.. Banking 147,563
1,400 Group Danone............... Food & Beverage 386,007
5,760 Renault SA................. Automotive 327,632
2,030 Schneider SA............... Machinery 161,870
2,289 Suez Lyonnaise des Eaux.... Construction 376,704
2,060 Thomson CSF................ Electronics 78,366
8,090 Usinor, SA................. Steel 124,976
2,283 Valeo SA................... Automotive 233,360
413 Vivendi.................... Utility 88,188
-----------------------------------------------------
Total France.............................. 1,924,666
=====================================================
Germany (5.3%)
1,700 Daimler-Benz AG........... Automotive 167,175
2,730 Mannesmann AG............. Machinery 276,932
262 Volkswagen AG............. Automotive 252,554
-----------------------------------------------------
Total Germany............................. 696,661
=====================================================
Hong Kong (1.1%)
18,000 Hutchinson Whampoa
Limited................... Holding Company 95,012
22,000 New World Development
Company Ltd............... Real Estate 42,589
-----------------------------------------------------
Total Hong Kong.......................... 137,601
=====================================================
India (0.6%)
1,000 Gedeon Richter............ Drugs & Medicine 80,446
-----------------------------------------------------
Total India............................. 80,446
=====================================================
Italy (7.9%)
58,399 Banca Di Roma*............ Banking 121,559
4,130 Banca Popolare di Bergamo. Banking 85,037
57,500 Credito Italiano.......... Banking 300,997
27,600 Mediaset SpA............. Media 176,154
48,100 Telecom Italia SpA....... Telephone 354,076
----------------------------------------------------
Total Italy.......................... 1,037,823
====================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
58 International Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product International Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Market
Shares Common Stocks (94.6%) Industry Value
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Japan (11.7%)
- -------------
12,000 Denso Corporation.............Motor Vehicles....$198,869
3,000 Ito-Yokado Co., Ltd. .................Retail.....141,154
16,000 Matsushita Electric
Industrial Company.....................Media.....257,088
8,000 Mitsui Fudosan Co. Ltd. .........Real Estate......63,177
3,000 Murata Manufacturing Co., Ltd. ..Electronics......97,273
10,000 Nomura Securities Company............Banking.....146,377
25 NTT Corporation....................Telephone.....207,155
3,000 Rohm Company Ltd. ...............Electronics.....116,367
1,700 Sony Corporation.......................Media.....308,030
--------------------------------------------------------
Total Japan....................................1,535,490
========================================================
Mexico (1.9%)
- -------------
3,000 Grupo Televisa S.A.*...........Entertainment.....112,875
2,783 Telefonos de Mexico................Telephone.....133,758
--------------------------------------------------------
Total Mexico.....................................246,633
========================================================
Netherlands (14.2%)
- -------------------
3,995 Gucci Group...........................Retail.....211,735
1,804 ING Groep N.V. ......................Banking.....118,126
2,216 Philips Electronics N.V. ........Electronics.....186,283
2,930 Royal Dutch Petroleum
Company....................International Oil.....162,474
8,622 Royal Kpn N.V. ....................Telephone.....331,876
8,622 TNT Post Group N.V.*..........Transportation.....220,403
3,427 Vedior..............................Services..... 96,874
3,473 Vendex International N.V. ............Retail.....133,511
11,240 VNU......................Publishing/Printing.....408,336
--------------------------------------------------------
Total Netherlands..............................1,869,618
========================================================
New Zealand (1.0%)
- ------------------
17,468 Telecom Corporation
of New Zealand.....................Telephone......71,998
30,312 Telecom Corporation of
New Zealand........................Telephone......64,828
--------------------------------------------------------
Total New Zealand................................136,826
========================================================
Philippines (0.4%)
- ------------------
4,800 Metropolitan Bank &
Trust Company........................Banking......28,201
1,088 Philippines Long Distance..........Telephone......24,787
--------------------------------------------------------
Total Philippines.................................52,988
========================================================
Portugal (0.9%)
- ---------------
2,325 Portugal Telecom...................Telephone.....123,223
--------------------------------------------------------
Total Portugal...................................123,223
========================================================
Spain (5.3%)
- ------------
3,479 Argentaria SA........................Banking.....312,699
8,424 Telefonica SA......................Telephone.....390,137
--------------------------------------------------------
Total Spain......................................702,836
========================================================
Sweden (1.9%)
- -------------
2,080 Hennes & Mauritz AB...................Retail.....132,757
6,740 Skandinaviska Enskil da Banken.......Banking.....115,363
--------------------------------------------------------
Total Sweden.....................................248,120
========================================================
Switzerland (4.4%)
- ------------------
100 Nestle SA..................Consumer Products.....214,003
140 Novartis.................Healthcare Products.....232,964
14 Roche Holding AG............Drugs & Medicine.....137,481
--------------------------------------------------------
Total Switzerland................................584,448
========================================================
United Kingdom (17.7%)
- ----------------------
21,914 B.A.T. Industries............Holding Company.....218,848
42,800 British Aerospace..............Manufacturing.....328,517
29,527 Diageo plc.................Consumer Products.....351,536
12,300 Glaxo Wellcome plc.....................Drugs.....370,252
11,600 Imperial Chemical Industries plc...Chemicals.....186,978
52,400 LucasVarity plc................Manufacturing.....209,626
2,807 Railtrack Group plc..........Holding Company..... 68,992
39,423 Somerfield plc........................Retail.....251,944
26,800 Vodafone Group plc.................Telephone.....340,310
--------------------------------------------------------
Total United Kingdom...........................2,327,003
========================================================
--------------------------------------------------------
Total Common Stocks
(cost basis $11,573,064)......................12,447,558
========================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 59
<PAGE>
AAL Variable Product International Stock Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Short-Term Interest Maturity Market
Amount Obligations (4.6%) Rate** Date Value
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
$600,000 Nomura Holding
Company..............6.30%....7/1/98....$600,000
------------------------------------------------
Total Short-Term Obligations
(amortized cost $600,000)................600,000
================================================
------------------------------------------------
TOTAL INVESTMENTS (99.2%)
(amortized cost basis $12,173,064)....13,047,558
================================================
------------------------------------------------
Other Assets,
Less Liabilities (0.8%)..................110,941
================================================
------------------------------------------------
Net Assets (100.0%)..................$13,158,499
================================================
</TABLE>
*Non-income producing security
**The interest rate reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of this
schedule.
60 International Stock Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
AAL Variable Product High Yield Bond Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
Investment Objective
- --------------------
The Portfolio seeks high current income and secondarily capital growth by
investing primarily in a diversified portfolio of high risk, high yield bonds
commonly referred to as junk bonds.
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (96.8%) Rate Date Value
- -----------------------------------------------------------------------------------------
Consumer Durables (2.0%)
- ------------------------
<S> <C> <C> <C> <C>
$500,000 Revlon Consumer
Products Corporation*..........8.625% 2/1/08 $500,625
-----------------------------------------------------------
Total Consumer Durables.............................500,625
-----------------------------------------------------------
Chemicals (4.1%)
- ----------------
500,000 LaRoche Industries, Inc. ......9.500 9/15/07 487,500
500,000 Trans-Resources, Inc.*........10.750 3/15/08 515,000
----------------------------------------------------------
Total Chemicals...................................1,002,500
-----------------------------------------------------------
Consumer Cyclical (1.0%)
- ------------------------
250,000 Samsonite
Corporation*..................10.750 6/15/08 248,125
-----------------------------------------------------------
Total Consumer Cyclical.............................248,125
-----------------------------------------------------------
Construction (5.1%)
- -------------------
500,000 American Standard, Inc.........7.625 2/15/10 491,250
250,000 JTM Industries, Inc.*.........10.000 4/15/08 252,500
500,000 Omega Cabinets, Ltd...........10.500 6/15/07 500,000
-----------------------------------------------------------
Total Construction................................1,243,750
-----------------------------------------------------------
Energy--Raw Materials (10.0%)
- -----------------------------
500,000 Abraxas Petro
Corporation*..................11.500 11/1/04 516,250
500,000 Clark Refining &
Marketing Corporation .........8.375 11/15/07 500,000
500,000 Energy Corporation of
America........................9.500 5/15/07 490,000
250,000 Northern Offshore
ASA*..........................10.000 5/15/05 238,750
250,000 Pen Holdings, Inc.*............9.875 6/15/08 250,625
500,000 Transamerican Energy
Corporation...................11.500 6/15/02 465,000
-----------------------------------------------------------
Total Energy--Raw Materials.......................2,460,625
-----------------------------------------------------------
Entertainment (4.1%)
- --------------------
500,000 Livent, Inc....................9.375 10/15/04 498,750
500,000 Riviera Holdings
Corporation...................10.000 8/15/04 502,500
-----------------------------------------------------------
Total Entertainment...............................1,001,250
-----------------------------------------------------------
Financial (2.0%)
- ----------------
500,000 Imperial Credit
Industries.....................9.875 1/15/07 500,000
-----------------------------------------------------------
Total Financial.....................................500,000
-----------------------------------------------------------
Food & Agriculture (11.2%)
- -------------------------
250,000 American Restaurant
Group, Inc.*..................11.500 2/15/03 250,000
500,000 DiGiorgio Corporation.........10.000 6/15/07 497,500
500,000 Envirodyne
Industries, Inc. .............10.250 12/1/01 502,500
500,000 Fleming
Companies, Inc. ..............10.500 12/1/04 520,000
500,000 Specialty Foods
Corporation...................10.250 8/15/01 485,000
500,000 Tricon Global..................7.650 5/15/08 507,871
-----------------------------------------------------------
Total Food & Agriculture..........................2,762,871
-----------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 61
<PAGE>
AAL Variable Product High Yield Bond Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (96.8%) Rate Date Value
================================================================================
<S> <C> <C> <C> <C>
Health Care (4.2%)
$500,000 Paragon Health
Network, Inc.................. 9.500% 11/1/07 $508,750
500,000 Tenet Healthcare
Corporation................... 8.625 1/15/07 515,625
--------------------------------------------------------------
Total Health Care................................... 1,024,375
==============================================================
Leisure (3.2%)
500,000 Grand Casinos, Inc............ 10.125 12/1/03 547,500
250,000 Regal Cinemas, Inc.*.......... 9.500 6/1/08 251,562
--------------------------------------------------------------
Total Leisure....................................... 799,062
==============================================================
Media (11.9%)
250,000 Allbritton
Communications, Inc........... 9.750 11/30/07 275,000
500,000 Cablevision Systems
Corporation................... 7.875 2/15/18 526,250
500,000 Century Communications
Corporation................... 8.750 10/1/07 527,500
500,000 James Cable
Partners, L.P................. 10.750 8/15/04 530,000
500,000 Spanish Broadcasting
Systems, Inc.................. 11.000 3/15/04 540,000
500,000 T/SF Communications
Corporation................... 10.375 11/1/07 508,750
--------------------------------------------------------------
Total Media......................................... 2,907,500
==============================================================
Manufacturing--Auto (3.2%)
250,000 Talon Automotive*............. 9.625 5/1/08 246,250
500,000 Trident Automotive
Group, Inc.*.................. 10.000 12/15/05 540,000
--------------------------------------------------------------
Total Manufacturing - Auto.......................... 786,250
==============================================================
Miscellaneous Manufacturing (10.0%)
500,000 Day International
Group, Inc.................... 11.125 6/1/05 543,125
250,000 High Voltage Engineering
Corporation*.................. 10.500 8/15/04 257,500
440,000 HydroChem Industrial
Services, Inc................. 10.375 8/1/07 451,000
250,000 IMPAQ Group, Inc.*............ 10.125 3/15/08 249,375
250,000 Indesco
International, Inc.*.......... 9.750 4/15/08 247,500
250,000 Morris Materials
Handling Corporation*......... 9.500 4/1/08 233,125
500,000 Paragon Corporate
Holdings*..................... 9.625 4/1/08 462,500
--------------------------------------------------------------
Total Miscellaneous Manufacturing................... 2,444,125
==============================================================
Non-Ferrous Metals (5.3%)
500,000 Algoma Steel
Corporation................... 12.375 7/15/05 560,000
500,000 Bayou Steel
Corporation*.................. 9.500 5/15/08 495,625
250,000 Sheffield Steel
Corporation................... 11.500 12/1/05 252,500
--------------------------------------------------------------
Total Non-Ferrous Metals............................ 1,308,125
==============================================================
Paper & Forest Products (3.0%)
250,000 Millar Western Forest
Products Ltd.*................ 9.875 5/15/08 243,750
500,000 Sweetheart Cup
Company, Inc.................. 9.625 9/1/00 495,000
--------------------------------------------------------------
Total Paper & Forest Products....................... 738,750
==============================================================
Retail Stores (3.1%)
250,000 PhillipsVan-Heusen
Corporation*.................. 9.500 5/1/08 249,688
500,000 The Pantry, Inc............... 10.250 10/15/07 510,000
--------------------------------------------------------------
Total Retail Stores................................. 759,688
==============================================================
Technology (3.0%)
250,000 Globalstar L.P................ 11.375 2/15/04 242,500
500,000 Viasystems, Inc.*............. 9.750 6/1/07 493,750
--------------------------------------------------------------
Total Technology.................................... 736,250
==============================================================
Telephone (4.2%)
500,000 Comcast Cellular
Holdings, Inc................. 9.500 5/1/07 521,250
500,000 Iridium Capital
Corporation*.................. 11.250 7/15/05 501,250
--------------------------------------------------------------
Total Telephone..................................... 1,022,500
==============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
62 Money Market Portfolio Schedule of Investments (Unaudited)
<PAGE>
AAL Variable Product High Yield Bond Portfolio--continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Obligations (96.8%) Rate Date Value
================================================================================
<S> <C> <C> <C> <C>
Textile (4.1%)
$250,000 Anvil Knitwear, Inc........... 10.875% 3/15/07 $ 256,250
250,000 NTEX Incorporated*............ 11.500 6/1/06 247,500
500,000 WorldTex, Inc.*............... 9.625 12/15/07 500,000
--------------------------------------------------------------
Total Textile..................................... 1,003,750
==============================================================
Transportation (2.1%)
500,000 Allied Holdings, Inc.......... 8.625 10/1/07 505,000
--------------------------------------------------------------
Total Transportation.............................. 505,000
==============================================================
--------------------------------------------------------------
Total Long-Term Obligations
(amortized cost basis $23,947,984)................ 23,755,121
==============================================================
$103,000 Merrill Lynch &
Company, Inc.................. 6.120% 7/1/98 $ 103,000
--------------------------------------------------------------
Total Short-Term Obligations
(amortized cost basis $103,000)................... 103,000
==============================================================
--------------------------------------------------------------
Total Investments (97.3%)
(amortized cost basis $24,050,984)................ 23,858,121
==============================================================
--------------------------------------------------------------
Other Assets, less Liabilities (2.7%)............. 667,503
==============================================================
--------------------------------------------------------------
Net Assets (100.0%)............................... $24,525,624
==============================================================
</TABLE>
*144A security
**The interest rate shown reflects the discount rate at the date of purchase.
The accompanying notes to the financial statements are an integral part of
this schedule.
June 30, 1998 63
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Statement of Assets and Liabilities
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Money
Market Bond Balanced
Portfolio Portfolio Portfolio
==========================================================================================================================
<S> <C> <C> <C>
Assets
......
Investments, at value (Cost: $30,105,593,
$29,194,702, $370,665,824, $3347,974,025,
$201,979,394, $12,173,064 and $24,050,984, respectively.................... $30,105,593 $29,863,491 $442,719,380
Cash....................................................................... 162 662 1,948
Dividends and interest receivable.......................................... -- 369,802 2,256,510
Receivable for investments sold............................................ -- -- 956,353
Receivable for fund shares sold............................................ 434,059 25,132 10,350
Receivable for forward contracts........................................... -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Assets............................................................... $30,539,814 $30,259,087 $445,944,541
==========================================================================================================================
Liabilities
...........
Payable for investments purchased.......................................... $ -- $ -- $ --
Payable for forward contracts.............................................. -- -- --
Income distributions payable............................................... 4,346 -- --
Payable for fund shares reaquired.......................................... 931,239 42,528 552,241
Investment advisory fee payable............................................ 9,478 9,292 123,956
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities.......................................................... 945,063 51,820 676,197
==========================================================================================================================
Net Assets
..........
Capital stock -- par value ($0.001/share).................................. 29,595 2,958 28,966
Capital stock -- additional paid-in capital................................ 29,565,156 29,575,690 373,059,364
Undistributed net investment income........................................ -- 7,094 105,260
Undistributed net realized gain (loss)..................................... -- (47,264) 21,198
Net unrealized appreciation (depreciation) on investments.................. -- 668,789 72,053,556
Net unrealized appreciation on foreign currency contracts.................. -- -- --
Net unrealized depreciation on currency related transactions............... -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Net Assets........................................................... 29,594,751 30,207,267 445,268,344
==========================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Net Assets........................................... $30,539,814 $30,259,087 $445,944,541
==========================================================================================================================
Capital Shares Outstanding (2 billion shares authorized)................... 29,594,751 2,956,103 28,992,026
Net Asset Value Per Share.................................................. $1.00 $10.22 $15.36
</TABLE>
64 Statement of Assets and Liabilities (Unaudited)
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Statement of Assets and Liabilities
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Large Small
Company Company International High Yield
Stock Stock Stock Bond
Portfolio Portfolio Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C>
Assets
......
Investments, at value (Cost: $30,105,593,
$29,194,702, $370,665,824, $3347,974,025,
$201,979,394, $12,173,064 and $24,050,984, respectively.......... $472,872,948 $203,286,898 $13,047,558 $23,858,121
Cash............................................................. 266 857 59,859 979
Dividends and interest receivable................................ 465,947 83,588 32,678 518,018
Receivable for investments sold.................................. 1,120,435 423,835 -- --
Receivable for fund shares sold.................................. -- 312,614 12,762 161,267
Receivable for forward contracts................................. -- -- 761,456 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets..................................................... $474,459,596 $204,107,792 $13,914,313 $24,538,385
====================================================================================================================================
Liabilities
...........
Payable for investments purchased................................ $ -- $ 3,882,024 $ -- $ --
Payable for forward contracts.................................... -- -- 744,820 --
Income distributions payable..................................... -- -- -- --
Payable for fund shares reaquired................................ 578,901 231,339 2,102 4,379
Investment advisory fee payable.................................. 130,393 59,007 8,892 8,382
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities................................................ 709,294 4,172,370 755,814 12,761
====================================================================================================================================
Net Assets
..........
Capital stock -- par value ($0.001/share)........................ 22,479 12,533 1,201 2,469
Capital stock -- additional paid-in capital...................... 348,465,755 168,813,221 12,146,735 24,695,328
Undistributed net investment income.............................. 135,780 16,370 92,981 6,940
Undistributed net realized gain (loss)........................... 227,365 29,785,794 26,824 13,750
Net unrealized appreciation (depreciation) on investments........ 124,898,923 1,307,504 874,494 (192,863)
Net unrealized appreciation on foreign currency contracts........ -- -- 16,636 --
Net unrealized depreciation on currency related transactions..... -- -- (372) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets................................................. 473,750,302 199,935,422 13,158,499 24,525,624
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Net Assets................................. $474,459,596 $204,107,792 $13,914,313 $24,538,385
====================================================================================================================================
Capital Shares Outstanding (2 billion shares authorized)......... 22,479,035 12,538,507 1,201,213 2,469,305
Net Asset Value Per Share........................................ $21.08 $15.95 $10.95 $9.93
</TABLE>
June 30, 1998 65
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Statement of Operations
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Money
Market Bond Balanced
Portfolio Portfolio Portfolio
================================================================================================================
<S> <C> <C> <C>
Investment Income
.................
Dividends................................. $ -- $ -- $ 1,509,093
Interest.................................. 817,490 959,067 5,506,675
Foreign dividend
withholding.............................. -- -- --
- ----------------------------------------------------------------------------------------------------------------
Total Investment Income................... 817,490 959,067 7,015,768
================================================================================================================
Expenses
........
Adviser fees.............................. 50,793 49,661 617,392
Sub-Adviser fees.......................... -- -- --
Professional fees......................... 5,062 7,084 15,110
Custody fees.............................. 3,060 3,254 31,750
Registration fees......................... 50 50 50
Printing and postage expense.............. 5,084 4,992 65,154
Pricing of investments.................... 402 4,402 13,011
Director fees............................. 283 278 3,628
Director and officer insurance
fees..................................... 289 284 3,709
Fidelity bond insurance fees.............. 114 113 1,468
- ----------------------------------------------------------------------------------------------------------------
Total Expenses Before
Reimbursement........................... 65,137 70,118 751,272
- ----------------------------------------------------------------------------------------------------------------
Less expenses reimbursed
by Adviser (Note 3)...................... (14,344) (20,457) (133,880)
- ----------------------------------------------------------------------------------------------------------------
Net Expenses.............................. 50,793 49,661 617,392
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
Net Investment Income..................... 766,697 909,406 6,398,376
================================================================================================================
Realized and Unrealized Gains (Losses) on Investments
.....................................................
Net realized gains
(losses) on investments.................. -- (4,067) (3,727)
Net realized gains on
currency transactions.................... -- -- --
Change in net unrealized
appreciation (depreciation)
on investments........................... -- 203,950 31,822,713
Change in net unrealized
depreciation on currency
transactions............................. -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net Realized and
Unrealized Gains (Losses)
on Investments........................... -- 199,883 31,818,986
- ----------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations................ $766,697 $1,109,289 $38,217,362
================================================================================================================
66 Statement of Operations (Unaudited)
The accompanying notes to the financial statements are an integral part of this schedule.
</TABLE>
<PAGE>
Large Small International High Yield
Company Company Stock Bond
Stock Portfolio Stock Portfolio Portfolio Portfolio
================================================================
$ 2,910,011 $ 711,393 $ 121,519 $ --
129,176 81,767 17,118 678,933
-- -- (15,421) --
- ----------------------------------------------------------------
3,039,187 793,160 123,216 678,933
================================================================
648,986 313,641 9,826 10,725
-- -- 20,409 17,875
15,340 10,572 7,459 6,625
40,849 39,795 13,649 1,168
50 50 50 50
68,904 31,542 1,328 2,562
4,024 2,012 1,260 1,078
3,837 1,758 74 142
3,923 1,796 76 146
1,552 711 30 58
- ----------------------------------------------------------------
787,465 401,877 54,161 40,429
- ----------------------------------------------------------------
(138,479) (88,236) (23,926) (11,829)
- ----------------------------------------------------------------
648,986 313,641 30,235 28,600
================================================================
- ----------------------------------------------------------------
2,390,201 479,519 92,981 650,333
================================================================
118,320 29,291,544 (18,421) 13,750
-- -- 45,245 --
58,019,788 (18,485,877) 1,021,446 (192,863)
-- -- (130,688) --
- ----------------------------------------------------------------
58,138,108 10,805,667 917,582 (179,113)
- ----------------------------------------------------------------
$60,528,309 $ 11,285,186 $1,010,563 $ 471,220
================================================================
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 67
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Money Market Bond
Portfolio Portfolio
--------------------------- ---------------------------
Year Ended Period Ended Year Ended Period Ended
12/31/97 6/30/98 12/31/97 6/30/98
====================================================================== ===========================
<S> <C> <C> <C> <C>
Operations
- ----------
Net investment income...................$ 1,122,333 $ 766,697 $ 1,380,310 $ 909,406
Net realized gains (losses)
on investments......................... -- -- (29,923) (4,067)
Net realized gains on
currency transactions.................. -- -- -- --
Change in net unrealized
appreciation/(depreciation)
on investments......................... -- -- 603,559 203,950
Change in net unrealized
depreciation on currency transactions.. -- -- -- --
- -------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations.............. 1,122,333 766,697 1,953,946 1,109,289
=======================================================================================================
Distributions to Shareholders
- -----------------------------
From net investment income.............. (1,122,333) (766,697) (1,379,645) (903,795)
From net realized gains................. -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders..... (1,122,333) (766,697) (1,379,645) (903,795)
=======================================================================================================
Fund Share Transactions
- -----------------------
Net proceeds from shares sold........... 159,245,610 117,053,989 10,281,056 9,210,808
Reinvested distributions................ 1,100,286 766,154 1,058,145 799,090
Cost of shares redeemed................. (152,010,636) (113,685,685) (2,870,211) (6,717,785)
- -------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Fund Share Transactions........... 8,335,260 4,134,458 8,468,990 3,292,113
=======================================================================================================
Total Increase in Net Assets............ 8,335,260 4,134,458 9,043,291 3,497,607
=======================================================================================================
Net Assets Beginning of Year............ 17,125,033 25,460,293 17,666,369 26,709,660
=======================================================================================================
Net Assets End of Year..................$ 25,460,293 $ 29,594,751 26,709,660 $30,207,267
=======================================================================================================
Accumulated Undistributed Net
Investment Income......................$ -- $ -- $ 1,483 $ 7,094
=======================================================================================================
</TABLE>
(a) Since inception March 2, 1998.
68 Statement of Changes in Net Assets (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
Balanced Large Company Small Company International High Yield
Portfolio Stock Portfolio Stock Portfolio Stock Portfolio Bond Portfolio
- ---------------------------- ---------------------------- ---------------------------- --------------- --------------
Year Ended Period Ended Year Ended Period Ended Year Ended Period Ended Period Ended Period Ended
12/31/97 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 6/30/98 (a) 6/30/98 (a)
============================ ============================ ============================ =============== ==============
<S> <C> <C> <C> <C> <C> <C> <C>
$ 7,513,161 $ 6,398,376 $ 3,216,560 $ 2,390,201 $ 884,984 $ 479,519 $ 92,981 $ 650,333
137,837 (3,727) 434,187 118,320 7,349,423 29,291,544 (18,421) 13,750
-- -- -- -- -- -- 45,245 --
30,989,614 31,822,713 52,537,005 58,019,788 14,034,350 (18,485,877) 1,021,446 (192,863)
-- -- -- -- -- -- (130,688) --
- ----------------------------------------------------------------------------------------------------------------------------------
38,640,612 38,217,362 56,187,752 60,528,309 22,268,757 11,285,186 1,010,563 471,220
==================================================================================================================================
(7,513,493) (6,297,035) (3,209,032) (2,268,433) (878,381) -- -- (643,393)
(101,264) -- (327,630) -- (6,934,221) (473,485) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
(7,614,757) (6,297,035) (3,536,662) (2,268,433) (7,812,602) (473,485) -- (643,393)
==================================================================================================================================
167,791,417 110,750,094 160,771,504 102,478,676 71,181,154 39,911,877 12,185,473 24,840,856
7,505,192 6,297,035 3,512,734 2,268,434 7,800,139 473,486 -- 69,393
(26,338,793) (10,200,452) (18,548,828) (7,731,874) (10,719,186) (4,189,294) (37,537) (212,452)
- ----------------------------------------------------------------------------------------------------------------------------------
148,957,816 106,846,677 145,735,410 97,015,236 68,262,107 36,196,069 12,147,936 24,697,797
==================================================================================================================================
179,983,671 138,767,004 198,386,500 155,275,112 82,718,262 47,007,770 13,158,499 24,525,624
==================================================================================================================================
126,517,669 306,501,340 120,088,690 318,475,190 70,209,390 152,927,652 -- --
==================================================================================================================================
$306,501,340 $445,268,344 $318,475,190 $473,750,302 $152,927,652 $199,935,422 $ 13,158,499 $ 24,525,624
==================================================================================================================================
$ 3,919 $ 105,260 $ 14,012 $ 135,780 $ 10,336 $ 16,370 $ 92,981 $ 6,940
==================================================================================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
June 30, 1998 69
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Notes to Financial Statements
AS OF JUNE 30, 1998
(A) Organization
The AAL Variable Product Series Fund, Inc. (the "Fund") is a corporation
organized under the laws of the State of Maryland and registered under the
Investment Company Act of 1940, as amended, as an open-end diversified
management company. The Fund is a "series" fund consisting of seven separate
investment portfolios (known as the Money Market, Bond, Balanced, Large Company
Stock, Small Company Stock, International Stock and High Yield Bond Portfolios,
collectively the "Portfolios"). Shares of the Fund are currently sold only to
the AAL Variable Annuity Account I and the AAL Variable Life Account I (the
"Variable Accounts") to fund benefits under certificates of membership related
to the flexible premium variable annuity and variable life insurance
certificates issued by Aid Association for Lutherans ("AAL").
On February 13, 1998, the shareholders of the Small Company Stock Portfolio
changed its tracking index to the S&P SmallCap 600 Index.
On March 2, 1998, the International Stock Portfolio and High Yield Bond
Portfolio commenced operations.
(B) Significant Accounting Policies
Valuation of Investment Securities traded on national securities exchanges and
NASDAQ are valued at the last reported sales price. Fixed income securities are
valued at market using quotations provided by an independent pricing service.
The Money Market Portfolio, and other Portfolios which hold money market
instruments with a remaining maturity of 60 days or less, value securities at
amortized cost, which approximates market value. The International Stock
Portfolio invests in foreign securities whose values are subject to change in
market conditions, as well as changes in political and regulatory environments.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Investment Adviser under the
supervision of the Board of Directors.
Foreign Currency Translation The market values of securities that are not
traded in U.S. currency are recorded in the financial statements after
translation to U.S. dollars using the exchange quotation in effect at the time
net assets value is calculated. The costs of such securities are translated at
exchange rates prevailing when acquired. Additionally, other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars.
The International Stock Portfolio does not isolate that portion of realized
gains and losses on equity that is due to changes in foreign exchange rates from
that which is due to changes in market prices of equity securities. However, for
federal income tax purposes the portfolio does treat as ordinary income the
effect of changes in foreign exchange arising from actual foreign currency
transaction and the effect of changes in foreign exchange rates from the
fluctuations arising from trade date and settlement date differences.
Foreign Currency Contracts In connection with purchases and sales of securities
denominated in foreign currencies, the International Stock Portfolio may enter
into forward currency contracts. Additionally, the Portfolio may enter into such
contracts to hedge certain other foreign currency denominated investments. These
contracts are recorded at market value, and the related realized and unrealized
foreign exchange gains and losses are included in the statement of operations.
In the event that counter parties fail to settle these forward contracts, the
International Stock Portfolio could be exposed to foreign currency fluctuations.
Federal Income Taxes No provision for federal income taxes has been made since
the Fund has elected to be taxed as a regulated investment company under the
Internal Revenue Code and intends to distribute to shareholders as dividends,
substantially all the net investment income and net realized capital gains, if
any, of the Fund. As of June 30, 1998, the Bond Portfolio has capital loss
carryforwards of $2,187 expiring in 2003, $7,782 expiring in 2004 and $29,922
expiring in 2005. It is management's intention to make no distribution of any
future realized capital gains until the federal income tax capital loss
carryforwards are exhausted.
Distributions to Shareholders All of the Portfolios intend to distribute all
their net investment income and net realized capital gains, if any, as
dividends. The Bond, Balanced, Large Company Stock, Small Company Stock and High
Yield Bond Portfolios expect to pay any net investment income dividends monthly
and net realized capital gains, if any, annually. The Money Market Portfolio
declares a daily dividend equal to its net investment income for that day,
payable monthly. The International Stock Portfolio expects to pay income and
capital gains annually. Dividends to shareholders are recorded on the ex-
dividend date.
Other For financial statement purposes investment transactions are accounted
for on the trade date. Dividend income is recognized on the ex-dividend date,
and interest income is recognized on the accrual basis and includes amortization
of premiums and discounts. Realized gains and losses from investment
transactions are determined on a specific cost identification basis.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent 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.
(C) Investment Advisory Fees and Transactions with Related Parties
The Fund has entered into an Investment Advisory Agreement with AAL relating to
the management of the Portfolios and the investment of their assets. Pursuant to
this agreement, the Fund pays AAL an investment advisory fee as compensation for
its services to the Fund. The fee is a daily charge equal to an annual rate of:
0.35%
70 Notes to Financial Statements (Unaudited)
<PAGE>
of the average daily net assets up to $250,000,000 and 0.30% of the average
daily net assets in excess of that amount for the Money Market, Bond, Balanced,
Large Company Stock and Small Company Stock Portfolios; 0.80% of the average
daily assets for the International Stock Portfolio and 0.40% of the average
daily assets for the High Yield Bond Portfolio.
The Fund has also entered into an Investment Sub-Advisory Agreement with AAL
Capital Management Corporation (Sub-Adviser), an affiliate of AAL, for the High
Yield Bond Portfolio. The sub-advisory fee, which is paid by the Adviser, is
equal to an annual fee of 0.25% of average daily net assets. Additionally, the
Adviser has entered into a Sub-Advisory Agreement with Oeschsle International
Advisors, L.P. (Sub-Adviser) for the International Stock Portfolio. The sub-
advisory fee, which is paid by the Adviser, is equal to an annual fee of 0.54%
of assets under management for the first $20 million, 0.45% of assets under
management for the next $30 million and 0.36% for assets under management over
$50 million. In addition, AAL has agreed to either pay on behalf of the Fund or
reimburse the Fund for substantially all of its operating expenses, other than
the aforementioned investment advisory fees, brokerage commissions, and certain
extraordinary items such as litigation expenses or income tax liabilities. AAL
may withdraw this reimbursement agreement on 30-days' written notice to the
Fund.
The Investment Advisory Agreement anticipates that AAL will provide certain
administrative and accounting services to the Fund, or that AAL will arrange for
such services to be provided by a third party. AAL has entered into an
Administrative Service Agreement with AAL Capital Management Corporation
("CMC"), an affiliate of AAL, pursuant to which CMC agrees to provide these
administrative and accounting services on behalf of the Fund. Fees which CMC is
entitled to receive for providing such services under the terms of the
Administrative Service Agreement are paid by AAL out of the advisory fees it
receives from the Fund, and therefore do not result in any additional expense to
the Fund.
Certain officers and directors for the Fund are also officers of AAL and CMC.
For the period ended June 30, 1998, directors of the Fund not affiliated with
AAL or CMC received directors fees in the amount of $10,000. No remuneration has
been paid by the Fund to any of the officers or directors of the Fund affiliated
with AAL or CMC. At June 30, 1998, all of the shares of each Portfolio are owned
by AAL and the Variable Accounts.
(D) Line of Credit
...................
The Fund has an available line of credit of $5,000,000 and a standby line of
credit of $15,000,000. However, each Portfolio's borrowings, by investment
restriction, cannot exceed 10% of the total net assets, and must be only from a
bank as a temporary measure for extraordinary or emergency purposes. The Fund
pays a facility fee related to the line of credit equal to five basis points per
annum on the average amount of the available line of credit, such fee to be paid
quarterly in arrears on the last day of each and every March, June, September
and December. Borrowings under this agreement bear interest prior to maturity
either at a floating rate per annum which approximates the then current prime
commercial rate with changes in the interest rate by virtue of a change in such
prime commercial rate or at the Fund's request, if the bank so agrees, at a
short-term fixed rate of interest. Interest expense incurred in connection with
such borrowings was not material during the year.
(E) Capital Share Transactions
...............................
Transactions in Fund shares for the year ended December 31, 1997, and the period
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
Money Market Portfolio
-----------------------------
Year Ended Period Ended
12/31/97 6/30/98
==========================================================
<S> <C> <C>
Shares sold................. 159,245,610 117,053,989
Reinvested distributions.... 1,100,286 766,154
Shares redeemed............. (152,010,636) (113,685,685)
- ----------------------------------------------------------
Net Increase................ 8,335,260 4,134,458
==========================================================
Bond Portfolio
-----------------------------
Year Ended Period Ended
12/31/97 6/30/98
==========================================================
Shares sold................. 1,030,031 902,784
Reinvested distributions.... 106,366 78,647
Shares redeemed............. (288,321) (657,743)
- ----------------------------------------------------------
Net Increase................ 848,076 323,688
==========================================================
Balanced Portfolio
------------------
Year Ended Period Ended
12/31/97 6/30/98
==========================================================
Shares Sold................. 12,757,483 7,441,002
Reinvested distributions.... 563,775 421,610
Shares redeemed............. (2,089,461) (684,907)
Net Increase................ 11,231,797 7,177,705
==========================================================
Large Company Stock Portfolio
-----------------------------
Year Ended Period Ended
12/31/97 6/30/98
==========================================================
Shares sold................. 9,946,832 5,121,552
Reinvested distributions.... 209,770 112,317
Shares redeemed............. (1,203,965) (388,621)
- ----------------------------------------------------------
Net Increase................ 8,952,637 4,845,248
==========================================================
Small Company Stock Portfolio
------------------------------
Year Ended Period Ended
12/31/97 6/30/98
==========================================================
Shares sold................. 4,949,038 2,494,741
Reinvested distributions.... 529,743 29,467
Shares redeemed............. (804,537) (260,412)
- ----------------------------------------------------------
Net Increase................ 4,674,244 2,263,796
==========================================================
</TABLE>
June 30, 1998 71
<PAGE>
<TABLE>
<CAPTION>
International Stock Portfolio
-----------------------------
Year Ended Period Ended
12/31/97 6/30/98
=========================================================================
<S> <C> <C>
Shares sold -- 1,204,885
Reinvested distributions -- --
Shares redeemed -- (3,672)
- -------------------------------------------------------------------------
Net Increase -- 1,201,213
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
High Yield Bond Portfolio
-----------------------------
Year Ended Period Ended
12/31/97 6/30/98
=========================================================================
<S> <C> <C>
Shares sold -- 2,483,514
Reinvested distributions -- 6,974
Shares redeemed -- (21,183)
- -------------------------------------------------------------------------
Net Increase -- 2,469,305
=========================================================================
</TABLE>
(F) Investment Transactions
- --------------------------
For the period ended June 30, 1998, the cost of investment securities purchased
and the proceeds from investment securities sold (not including short-term
investments) were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
=========================================================================
<S> <C> <C>
Bond $ 5,074,010 $ 2,056,675
Balanced 95,049,639 15,129,702
Large Company Stock 92,358,923 1,291,492
Small Company Stock 194,587,989 157,457,100
International Stock 13,476,542 1,888,058
High Yield Bond 26,079,433 2,146,250
=========================================================================
</TABLE>
For the period ended June 30, 1998, the Bond Portfolio purchased $1,454,461 and
sold $1,206,703 in U.S. government obligations.
For the period ended June 30, 1998, the Balanced Portfolio purchased $21,673,192
and sold $8,083,389 in U.S. government obligations.
The gross and net unrealized appreciation and depreciation on investments for
the year ended December 31, 1997, and the period June 30, 1998, were as follows:
<TABLE>
<CAPTION>
12/31/97
---------------------------------------------
Net Unrealized
Appreciation
Portfolio Appreciation (Depreciation) (Depreciation)
============================================================================
<S> <C> <C> <C>
Bond $ 525,574 $ (60,735) $ 464,839
Balanced 42,238,912 (2,008,069) 40,230,843
Large Company Stock 70,713,930 (3,834,795) 66,879,135
Small Company Stock 29,931,334 (10,137,953) 19,793,831
International Stock N/A N/A N/A
High Yield Bond N/A N/A N/A
============================================================================
</TABLE>
<TABLE>
<CAPTION>
6/30/98
---------------------------------------------
Net Unrealized
Appreciation
Portfolio Appreciation (Depreciation) (Depreciation)
============================================================================
<S> <C> <C> <C>
Bond $ 751,772 $ (82,983) $ 668,789
Balanced 74,723,002 (2,669,446) 72,053,556
Large Company Stock 130,237,847 (5,338,924) 124,898,923
Small Company Stock 17,785,065 (16,477,561) 1,307,504
International Stock 1,354,207 (463,077) 891,130
High Yield Bond 141,813 (334,676) (192,863)
============================================================================
</TABLE>
The book and federal income tax basis of securities were the same for all
Portfolios.
Notes to Financial Statements (Unaudited) 72
<PAGE>
(G) Forward Currency Contracts
- ------------------------------
As of June 30, 1998, the International Stock Portfolio had entered into forward
currency contracts, as summarized below, resulting in net unrealized
appreciation of $16,636.
<TABLE>
<CAPTION>
Settlement Date Currency to U.S. Value at Currency to Be U.S. Value at
Through Be Delivered 6/30/98 Received 6/30/98
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
07/01/98 317,000 New Zealand Dollar $ 164,539 174,169 U.S. Dollar $ 174,169
07/01/98 (317,000) New Zealand Dollar (164,539) (317,000) U.S. Dollar (164,127)
08/27/98 84,602,000 Japanese Yen 614,549 621,571 U.S. Dollar 621,571
09/03/98 252,000 New Zealand Dollar 130,271 129,843 U.S. Dollar 129,843
--------- ---------
$ 744,820 $ 761,456
========= =========
</TABLE>
Special Shareholder Meeting-Unaudited
- -------------------------------------
A Special Meeting of Shareholders of the AAL Variable Product Small Company
Stock Portfolio of the AAL Variable Product Series Fund, Inc. was held February
13, 1998, at which time a proposal to change the Portfolio's fundamental
investment objective was approved.
<TABLE>
<CAPTION>
Votes Total
For Votes %
======================================================
<S> <C> <C> <C>
Actual Votes Received from Contract Owners........................... 4,074,401.795 4,181,132.818 97.447%
Echo Vote of Unvoted Units........................................... 4,949,959.584 5,079,626.288 97.447%
Unit Summary......................................................... 9,024,361.379 9,260,759.106 97.447%
Echo Vote of Fund Shares............................................. 9,163,183.377 9,403,217.616 97.447%
</TABLE>
June 30, 1998 73
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC. SEMI-ANNUAL REPORT
Financial Highlights
The following table presents per share information for each Portfolio of the AAL
Variable Product Series Fund, Inc. for the period presented, which should be
read in conjunction with the financial statements and the related notes.
<TABLE>
<CAPTION>
Money Market Portfolio
--------------------------------------------------------
Period Ended Year Ended Year Ended Period Ended
12/31/95 (a) 12/31/96 12/31/97 6/30/98
==========================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value: Beginning of Period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
Income from Investment Operations
Net investment income ......................................... 0.03 0.05 0.05 0.03
Net realized and unrealized gains (losses) on investments ..... -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.03 0.05 0.05 0.03
==========================================================================================================================
Less Distributions
From investment income ........................................ (0.03) (0.05) (0.05) (0.03)
From realized gains ........................................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.05) (0.05) (0.03)
==========================================================================================================================
Net increase (decrease) in net asset value .................... -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value: End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================================================
Total return (c) .............................................. 3.02% 5.23% 5.33% 2.65%
Net assets, end of period (in thousands) ...................... $7,045 $17,125 $25,460 $29,595
Ratios and Supplemental Data
Ratio of expenses to average net assets (d) ................... 0.35% 0.35% 0.35% 0.35%
Ratio of net investment income to average net assets (d) (e) .. 5.71% 5.10% 5.24% 5.28%
Portfolio turnover rate ....................................... N/A N/A N/A N/A
=====================================================
(a) From commencement of operations on June 14, 1995.
(b) Since inception on March 2, 1998.
(c) Total return does not reflect expenses that apply at the Variable Account level. Inclusion of these expenses would
reduce the total return for the periods shown. The Portfolios are reported as period-to-date cumulative total returns.
(d) Calculated on an annualized basis.
(e) Without reimbursements the above ratios, on an annualized basis, would have been:
Ratio of expenses to average net assets .................. 1.40% 0.65% 0.46% 0.45%
Ratio of net investment income to average net assets ..... 4.66% 4.80% 5.13% 5.18%
(f) Amount shown reflects the average brokerage commission paid on each share of stock traded by the Portfolio during the
period presented.
</TABLE>
74 Financial Highlights (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
Bond Portfolio Balanced Portfolio
- -------------------------------------------------------- --------------------------------------------------------
Period Ended Year Ended Year Ended Period Ended Period Ended Year Ended Year Ended Period Ended
12/31/95 (a) 12/31/96 12/31/97 6/30/98 12/31/95 (a) 12/31/96 12/31/97 6/30/98
============ ========== ========== ============ ============ ========== ========== ============
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 10.23 $ 9.90 $ 10.15 $ 10.00 $ 10.92 $ 11.96 $ 14.05
============ ========== ========== ============ ============ ========== ========== ============
0.34 0.63 0.64 0.31 0.22 0.41 0.46 0.26
0.23 0.33 0.25 0.07 0.92 1.05 2.09 1.31
- ------------ ---------- ---------- ------------ ------------ ---------- ---------- ------------
0.57 0.30 0.89 0.38 1.14 1.46 2.55 1.57
============ ========== ========== ============ ============ ========== ========== ============
(0.34) (0.63) (0.64) (0.31) (0.21) (0.41) (0.46) (0.26)
-- -- -- -- (0.01) (0.01) -- --
- ------------ ---------- ---------- ------------ ------------ ---------- ---------- ------------
(0.34) (0.63) (0.64) (0.31) (0.22) (0.42) (0.46) (0.26)
============ ========== ========== ============ ============ ========== ========== ============
0.23 (0.33) 0.25 0.07 0.92 1.04 2.09 1.31
- ------------ ---------- ---------- ------------ ------------ ---------- ---------- ------------
$ 10.23 $ 9.90 $ 10.15 $ 10.22 $ 10.92 $ 11.96 $ 14.05 $ 15.36
============ ========== ========== ============ ============ ========== ========== ============
5.80% 3.10% 9.37% 3.91% 11.46% 13.65% 21.71% 11.13%
$ 9,363 $ 17,666 $ 26,710 $ 30,207 $ 28,759 $ 126,518 $ 306,501 $ 445,268
0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
6.54% 6.51% 6.55% 6.41% 4.07% 3.89% 3.62% 3.45%
6.51% 11.65% 18.41% 7.39% 2.29% 5.43% 6.86% 4.57%
===========================================
1.25% 0.68% 0.52% 0.46% 1.15% 0.60% 0.43% 0.44%
5.64% 6.18% 6.38% 6.30% 3.27% 3.65% 3.53% 3.34%
</TABLE>
June 30, 1998 75
<PAGE>
Financial Highlights--continued
The following table presents per share information for each Portfolio of the AAL
Variable Product Series Fund, Inc. for the period presented and should be read
in conjunction with the financial statements and the related notes.
<TABLE>
<CAPTION>
Large Company Stock Portfolio
--------------------------------------------------------------
Period Year Year Period
Ended Ended Ended Ended
December 31, December 31, December 31, June 30,
1995 (a) 1996 1997 1998
=================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value: Beginning
of Period....................... $ 10.00 $ 11.51 $ 13.83 $ 18.06
=================================================================================================
Income from Investment
Operations
......................
Net investment income............ 0.11 0.23 0.23 0.12
Net realized and
unrealized gains (losses)
on investments.................. 1.52 2.34 4.25 3.01
- -------------------------------------------------------------------------------------------------
Total from Investment
Operations...................... 1.63 2.57 4.48 3.13
=================================================================================================
Less Distributions
..................
From investment income........... (0.11) (0.23) (0.23) (0.11)
From realized gains.............. (0.01) (0.02) (0.02) --
- -------------------------------------------------------------------------------------------------
Total Distributions.............. (0.12) (0.25) (0.25) (0.11)
=================================================================================================
Net increase (decrease) in
net asset value................. 1.51 2.32 4.23 3.02
- -------------------------------------------------------------------------------------------------
Net Asset Value:
End of Period................... $ 11.51 $ 13.83 $ 18.06 $ 21.08
=================================================================================================
Total return (c)................ 16.39% 22.47% 32.59% 17.37%
Net assets, end of period
(in thousands).................. $23,138 $120,089 $318,475 $473,750
Ratios and Supplemental Data
............................
Ratio of expenses to
average net assets (d).......... 0.35% 0.35% 0.35% 0.33%
Ratio of net investment
income to average net
assets (d) (e).................. 2.27% 1.97% 1.48% 1.22%
Portfolio turnover rate.......... 0.47% 1.77% 1.00% 0.33%
============================
(a) From commencement of operations on June 14, 1995.
(b) Since inception on March 2, 1998.
(c) Total return does not reflect expenses that apply at the Variable Account
level. Inclusion of these expenses would reduce the total return for
the periods shown. The Portfolios are reported as period-to-date cumulative
total returns.
(d) Calculated on an annualized basis.
(e) Without reimbursements the above ratios, on an annualized basis, would have
been:
Ratio of expenses to
average net assets........ 1.26% 0.63% 0.43% 0.41%
Ratio of net investment income
to average net assets...... 1.37% 1.69% 1.39% 1.14%
Amount shown reflects the average brokerage commission paid on each share of
stock traded by the Portfolio during the period presented.
</TABLE>
76 Financial Highlights (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
International High Yield
Small Company Stock Portfolio Stock Portfolio Bond Portfolio
- ------------------------------------------------------------------- --------------- --------------
Period Ended Year Ended Year Ended Period Ended Period Ended Period Ended
December 31, December 31, December 31, June 30, June 30, June 30,
1995 (a) 1996 1997 1998 1998 (b) 1998 (b)
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
$10.00 $10.99 $12.54 $14.88 $10.00 $10.00
=============================================================================================================================
0.08 0.12 0.11 0.04 0.08 0.29
0.99 1.86 3.05 1.07 0.87 (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
1.07 1.98 3.16 1.11 0.95 0.22
=============================================================================================================================
(0.07) (0.12) (0.11) (0.04) -- (0.29)
(0.01) (0.31) (0.71) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(0.08) (0.43) (0.82) (0.04) 0.00 (0.29)
=============================================================================================================================
0.99 1.55 2.34 1.07 0.95 (0.07)
- -----------------------------------------------------------------------------------------------------------------------------
$10.99 $12.54 $14.88 $15.95 $10.95 $9.93
=============================================================================================================================
10.70% 18.19% 25.37% 7.46% 9.50% 2.19%
$15,666 $70,209 $152,928 $199,935 $13,158 $24,526
0.35% 0.35% 0.35% 0.35% 0.80% 0.40%
1.43% 1.14% 0.81% 0.54% 2.46% 9.10%
2.85% 20.14% 29.65% 88.97% 20.76% 12.36%
=====================================================
1.37% 0.75% 0.45% 0.45% 1.47% 0.57%
0.41% 0.74% 0.71% 0.44% 1.79% 8.93%
</TABLE>
June 30, 1998 77
<PAGE>
Board of Directors
John O. Gilbert Chairman of the Board
Ronald G. Anderson
F. Gregory Campbell
Richard L. Gady
D. W. Russler
Steven A. Weber
Lawrence M. Woods
Officers
Steven A. Weber President
Daniel L. Shinnick Vice President
Carl J. Rudolph Treasurer
James H. Abitz Assistant Treasurer
Kathleen A. Brost Secretary
Woodrow E. Eno Assistant Secretary
Robert G. Same Assistant Secretary
Joseph F. Wreschnig Assistant Secretary
Investment Adviser & Transfer Agent
Aid Association for Lutherans
4321 North Ballard Road . Appleton, WI 54919-0001
Sub-Adviser (International Stock Portfolio)
Oechsle International Advisors, L.P.
One International Place . Boston, MA 02110
Sub-Adviser (High Yield Bond Portfolio)
& Distributor
AAL Capital Management Corporation
222 West College Avenue . Appleton, WI 54919-0007
Custodian
Citibank, N. A.
111 Wall Street . New York, NY 10043
Legal Counsel
Quarles & Brady
411 East Wisconsin Avenue . Milwaukee, WI 53202
Independent Auditors
Ernst & Young LLP
111 East Kilbourn Avenue . Milwaukee, WI 53202
This report is submitted for the information of the certificate owners of the
AAL Variable Annuity Account I and the AAL Variable Life Account I. It is not
authorized for distribution to prospective certificate owners unless preceded or
accompanied by a current prospectus for the AAL Variable Annuity Account I, the
AALVariable Life Account I and the AAL Variable Product Series Fund, Inc.
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