AID ASSOCIATION FOR LUTHERANS
---------------------------------
A FRATERNAL BENEFIT SOCIETY
Semi-Annual
Report
June 30, 1997
<PAGE>
Table of Contents
President's Letter 2
Portfolio Perspectives
The AAL Money Market Portfolio 3
The AAL Bond Portfolio 5
The AAL Balanced Portfolio 7
The AAL Large Company Stock Portfolio 9
The AAL Small Company Stock Portfolio 11
Schedule of Investments
The AAL Money Market Portfolio 13
The AAL Bond Portfolio 14
The AAL Balanced Portfolio 17
The AAL Large Company Stock Portfolio 32
The AAL Small Company Stock Portfolio 41
Statement of Assets and Liabilities 47
Statement of Operations 48
Statement of Changes in Net Assets 49
Notes to Financial Statements 51
Financial Highlights 53
1 Table of Contents
<PAGE>
AUGUST 1997
Dear Member:
It just doesn't get much better than this! The performance of the U.S. economy
and financial markets for the first half of 1997 has been quite strong. The
economy continues to roll along at a good pace, recording a 4.9% growth in gross
domestic product (GDP) in the first quarter followed by a slower but healthy
estimated 2.2% in the second quarter of 1997. This vibrant economy continues to
develop new jobs, forcing the unemployment-rate down to its lowest level in
recent decades. Despite this economic strength, the inflation rate has remained
low in check at less than 3%, as strong productivity gains and global
competition has helped keep price increases in check.
This environment has left investors in a favorable state of mind. Interest rates
moved upward in the first quarter in response to a Federal Reserve tightening of
monetary policy. However, by the end of the second quarter, interest rates
retreated back to early-year levels, leaving total return for bonds in the 3%
area for the six-month period. Common stocks had a great second quarter after a
slow start in the first quarter. Large company stocks did particularly well with
the S&P 500 being up 20.6% for the first six months of the year. Small company
stocks lagged the performance of their large company counterparts, but still
produced good returns late in the half, reaching 13.9% year-to-date as measured
by the Wilshire 250.
We are pleased with the performance of all of the portfolios in the AAL Variable
Product Series Fund, Inc. Additional details on the performance of each
portfolio are given in this report.
Sincerely,
/s/ John O. Gilbert /s/ Steven A. Weber
[PHOTO]
John O. Gilbert
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
AID ASSOCIATION FOR LUTHERANS
[PHOTO]
Steven A. Weber
PRESIDENT
AAL VARIABLE PRODUCT
SERIES FUND, INC.
Presidents' Letter 2
<PAGE>
Money Market Portfolio
Q: What factors affected the performance of the portfolio over the past six
months?
The main factors affecting the performance of the portfolio were changes in
interest rates as a result of actions triggered by the Federal Reserve Board
(Fed). Early in 1997, it was anticipated that the Fed would raise the Fed Funds
rate in order to slow economic growth and the possible threat of inflation. The
Fed did raise rates by 25 basis points in March, which in turn caused short-term
interest rates to increase. During the second quarter, the Fed kept the rate
unchanged.
Total Net Assets
[CHART]
[PHOTO]
Alan D. Onstad
PORTFOLIO MANAGER
Q: What investment approach do you use to pursue the portfolio's goals?
The primary focus of the portfolio is to achieve the highest possible return
while reducing risk. Preservation of principal is of the utmost importance for
the portfolio. This means investing in short-term commercial paper of highly
rated companies. The portfolio holdings are monitored daily to assess and manage
the risk from any changes in the commercial paper issuers within the portfolio.
Q: What economic factors do you think will have a significant impact on the
portfolio in the next six months?
The largest single factor affecting the portfolio would be a change in the Fed
Funds rate. This action is not currently anticipated, however, a strengthening
economy coupled with signs of rising inflation could cause a rate increase.
Should this occur, the investments of the portfolio would be positioned to take
advantage of the changing rate environment.
3 Portfolio Perspective
<PAGE>
Total Returns/1/
-------------------
As of June 30, 1997
SEC
Fund Variable Variable
Portfolio/3/ Subaccount/4/ Subaccount/5/
-------------------------------------------------
6 Months/2/........ 2.54% 1.94% N/A
-------------------------------------------------
1 Year............. 5.21% 3.94% (2.61)%
-------------------------------------------------
Inception ......... 5.31% 4.03% 1.71%
/1/ Total Returns - Past performance is not an indication of future results.
Total return and unit values are subject to fluctuation. Accumulation units,
when redeemed, may be worth more or less than their original value.
Investments in the Portfolio are neither insured nor guaranteed by the U.S.
government or any financial institution. There is no assurance that the
Portfolio will be able to maintain a net asset value of $1.00 per share.
/2/ 6 Months - Returns for periods less than one year are not annualized.
/3/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distribution but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a .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.
/4/ Variable Subaccount - These values 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.
/5/ SEC Variable Subaccount - Reflects all fees and expenses and the maximum
surrender charge of 7% for the first contract year, 5% for "since inception"
return.
Sector Allocations
[PIE CHART]
% of
Portfolio
---------
. Utilities.................................................... 29.3%
. Finance...................................................... 22.6%
. Consumer Non-Durables........................................ 20.8%
. Technology................................................... 12.0%
. Energy....................................................... 6.6%
. Consumer Durables............................................ 5.2%
. Materials & Services......................................... 3.5%
-------------
Total 100%
10 Largest Holdings
-------------------
Interest Maturity % of
Security Rate Date Portfolio
- ------------------------------------------------------------------------------
American Express
Credit Corporation......... 5.54% 8/4/97 3.9%
Sears Roebuck
Acceptance Corporation..... 5.57% 7/21/97 3.8%
Cargill, Inc............... 5.48% 7/22/97 3.8%
Bell Atlantic Network
Funding.................... 5.53% 7/7/97 3.7%
Merrill Lynch &
Company, Inc............... 5.63% 7/14/97 3.7%
Baltimore Gas &
Electric Company........... 5.54% 7/29/97 3.7%
Carolina Power &
Light, Inc................. 5.55% 8/28/97 3.7%
Exxon Imperial, Inc........ 5.57% 7/24/97 3.5%
Associates Corporation
of North America........... 5.48% 7/2/97 3.5%
Pacific Bell............... 5.50% 7/17/97 3.5%
Money Market Portfolio 4
<PAGE>
Bond Portfolio
[PHOTO R. JERRY SCHEEL]
PORTFOLIO MANAGER
Q: What factors affected the performance of the portfolio over the last six
months?
The major factors affecting performance include: strong economic growth in the
first quarter of 1997; more modest growth in the second quarter; the lowest
unemployment rate in nearly two decades; an inflation rate approaching an 11-
year low; and strong consumer confidence. This environment provided a negative
impact on bonds in the first quarter and a positive impact in the second
quarter.
Total Net Assets
[CHART APPEARS HERE]
Q: How does the portfolio seek to emulate the Lehman Brothers Aggregate Bond
Index, which is composed of nearly 6,000 investment grade securities?
As opposed to stocks, where individual companies in the same sector can move
independently based on each company's performance, bonds tend to move together.
For example, AAA-rated bonds move up and down pretty much in sync, reflecting
changes in the interest rate. This enables us to buy a representative sample of
bonds and have it track an index much more closely than you could with a
representative sample of stocks. By using a computer model, we can purchase
about 90 issues and have it closely reflect the Lehman Index without incurring
the expenses that would be required to purchase all 6,000 bonds that make up the
index.
5 Portfolio Perspective
<PAGE>
Total Returns/1/
-------------------
As of June 30, 1997
<TABLE>
<CAPTION>
SEC
Fund Variable Variable
Portfolio/3/ Subaccount/4/ Subaccount/5/
<S> <C> <C> <C>
6 Months/2/.......... 2.97% 2.33% N/A
---------------------------------
1 Year............... 7.73% 6.38% (0.32)%
---------------------------------
Inception............ 5.84% 4.64% 2.31%
</TABLE>
/1/ Total Returns - Past performance is not an indication of future results.
Total return and unit values are subject to fluctuation. Accumulation units,
when redeemed, may be worth more or less than their original value.
/2/ 6 Months - Returns for periods less than one year are not annualized.
/3/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distribution but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a .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.
/4/ Variable Subaccount - These values 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.
/5/ SEC Variable Subaccount - Reflects all fees and expenses and the maximum
surrender charge of 7% for the first contract year, 5% for "since inception"
return.
Q: What economic factors do you think will have a significant impact on the
portfolio in the next six months?
Focus will be on Federal Reserve policy. The issues that the Fed will be
addressing concern the impact of economic growth on inflation. Recently, rising
employee productivity, fueled by new technology as well as global competition
have kept inflation dormant. However, if this environment changes later this
year, the Fed may begin raising interest rates.
Sector Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
% of
Portfolio
---------
<S> <C>
. U.S. Treasury Securities............ 43.2%
. U.S. Government
Agency Securities................... 35.2%
. Corporate Obligations............... 13.4%
. Other Government Securities......... 3.6%
. Utility Bonds....................... 2.3%
. Asset-Backed Securities............. 1.2%
. Short-Term Investments.............. 1.1%
------------
Total 100%
</TABLE>
10 Largest Holdings
-------------------
<TABLE>
<CAPTION>
Interest Maturity % of
Security Rate Date Portfolio
- ------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Bonds...... 9.875% 11/15/15 1.6%
U.S. Treasury Bonds......10.375% 11/15/12 1.6%
U.S. Treasury Bonds...... 7.625% 11/15/22 1.6%
IBM Corporation Notes.... 7.250% 11/1/02 1.5%
U.S. Treasury Bonds...... 7.875% 2/15/21 1.5%
U.S. Treasury Notes...... 6.875% 7/31/99 1.5%
U.S. Treasury Bonds...... 7.000% 7/15/06 1.4%
Province of Quebec
Global Bonds.............11.000% 6/15/15 1.4%
U.S. Treasury Bonds...... 8.125% 8/15/19 1.4%
U.S. Treasury Bonds...... 7.500% 11/15/24 1.4%
</TABLE>
Bond Portfolio 6
<PAGE>
Balanced Portfolio
[PHOTO OF JOHN A. LARSON]
PORTFOLIO MANAGER
Q: What factors affected the performance of the portfolio over the past six
months?
Throughout the first half of 1997, the portfolio was slightly over-weighted in
stocks and bonds and under-weighted in money market investments as compared to
our benchmark. During the first quarter, stocks were up modestly and bonds
declined because of concerns about rising inflation resulting from a very strong
economy and low unemployment. During the second quarter, evidence indicating
less robust economic growth and no signs of higher inflation resulted in rising
stock and bond markets. This portfolio mix of stocks, bonds, and money market
investments proved to be the correct decision overall as the performance was
good in relation to the level of risk.
Total Net Assets
[CHART APPEARS HERE]
Q: Since this portfolio has no direct index to emulate, how do you determine
what target performance is?
Performance is evaluated in two ways. First the common stock and bond portions
of the portfolio are evaluated respectively against the S&P 500/(R)/ and the
Lehman Aggregate Bond Index. Second, total portfolio performance is measured
against the benchmark mix of 55% stocks, 35% bonds, and 10% money market
investments. For the first six months of 1997, the performance exceeded the
calculated target by 19 basis points.
7 Portfolio Perspective
<PAGE>
Total Returns/1/
As of June 30, 1997
<TABLE>
<CAPTION>
SEC
Fund Variable Variable
Portfolio/3/ Subaccount/4/ Subaccount/5/
--------------------------------------------
<S> <C> <C> <C>
6 Months/2/........ 12.31% 11.61% N/A
--------------------------------------------
1 Year............. 21.63% 20.12% 12.55%
--------------------------------------------
Inception.......... 18.79% 17.29% 14.67%
</TABLE>
/1/ Total Returns - Past performance is not an indication of future results.
Total return and unit values are subject to fluctuation. Accumulation units,
when redeemed, may be worth more or less than their original value.
/2/ 6 Months - Returns for periods less than one year are not annualized.
/3/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distribution but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a .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.
/4/ Variable Subaccount - These values 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.
/5/ SEC Variable Subaccount - Reflects all fees and expenses and the maximum
surrender charge of 7% for the first contract year, 5% for "since inception"
return.
Q: What economic factors do you think will have a significant impact on the
portfolio in the next six months?
The two economic factors we plan to watch most closely are economic growth and
inflation. The Federal Reserve Board appears to be effectively keeping inflation
at current low levels. If we begin to see signs of higher future inflation, we
would increase investment in the money market component of the portfolio.
Moderate economic growth would be most desirable for stocks and bonds. A high
economic growth rate is favorable for company earnings and therefore common
stock prices. However, high growth ultimately leads to higher inflation and
higher interest rates. As long as economic growth is moderate and non-
inflationary, over-weighting stocks and bonds compared to the benchmark is
appropriate.
[PIE CHART APPEAR HERE]
% of
Portfolio
----------
.Common Stocks............................................ 55.8%
.Bonds.................................................... 36.9%
.Short-Term Obligations................................... 7.3%
------------
Total 100%
10 Largest Holdings
-------------------
% of Net
Security Assets
- ------------------------------------------------------------------
General Electric Company.................................... 1.8%
Coca-Cola Company........................................... 1.4%
Exxon Corporation .......................................... 1.3%
Microsoft Corporation ...................................... 1.3%
Merck &Company, Inc......................................... 1.0%
Intel Corporation........................................... 1.0%
Royal Dutch Petroleum Company............................... 1.0%
Philip Morris Companies, Inc. .............................. 0.9%
Proctor & Gamble Company.................................... 0.8%
International Business Machines
Corporation................................................. 0.8%
Balanced Portfolio 8
<PAGE>
Large Company Stock Portfolio
Q: What factors affected the performance of the portfolio over the past six
months?
The portfolio performed well in the first half of the year with a 20.31%
total return. This performance reflects several of the factors that impacted the
stock market favorably: inflation remained subdued, economic growth was
moderate, the Federal Reserve (Fed) raised interest rates modestly and only in
the first quarter, and attraction of the public to investing in stocks is very
high.
[PIE CHART APPEAR HERE]
[PHOTO APPEAR HERE]
David J. Schnarsky
PORTFOLIO MANAGER
Q: What is fueling the public's attraction to the stock market?
The attraction may be due to the "baby boom" generation coming of age (middle
age) and focusing more on saving for retirement. This interest in investing has
resulted in a record amount of money flowing into equities over the past few
years. As the stock market has performed well over the past 15 years, the public
seems to be gaining greater confidence. This confidence feeds upon itself, thus
helping the market rise.
9 Portfolio Perspective
<PAGE>
Total Returns/1/
As of June 30, 1997
<TABLE>
<CAPTION>
SEC
Fund Variable Variable
Portfolio/3/ Subaccount/4/ Subaccount/5/
=============================================
<S> <C> <C> <C>
6 Months/2/... 20.31% 19.57% N/A
--------------------------------------------
1 Year........ 34.06% 32.38% 24.04%
--------------------------------------------
Inception..... 30.16% 28.40% 25.54%
</TABLE>
/1/ Total Returns - Past performance is not an indication of future results.
Total return and unit values are subject to fluctuation. Accumulation units,
when redeemed, may be worth more or less than their original value.
/2/ 6 Months - Returns for periods less than one year are not annualized.
/3/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distribution but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a .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.
/4/ Variable Subaccount - These values 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.
/5/ SEC Variable Subaccount - Reflects all fees and expenses and the maximum
surrender charge of 7% for the first contract year, 5% for "since inception"
return.
Q: What economic factors do you think will have a significant impact on the
portfolio in the next six months?
Two major factors to focus on are: the strength of the economy and the impact of
a capital gains tax cut. The economy could be quite strong in the second half of
the year, given the healthy position of the consumer who is experiencing solid
growth in personal income, low unemployment and high confidence. Interest rates
could rise if the Federal Reserve fears that strong economic growth could
stimulate inflation. Rising rates often hurt equity returns by making bonds an
attractive alternative to stocks. A capital gains tax cut, as is proposed in the
current federal budget, would seem to be good for investing in stocks.
Sector Allocations
[PIE CHART GOES HERE]
% of
Portfolio
---------
. Consumer Non-Durables...................................32.8%
. Finance.................................................15.0%
. Technology..............................................14.1%
. Utilities...............................................10.4%
. Energy...................................................8.7%
. Materials & Services.....................................8.0%
. Capital Goods............................................5.7%
. Consumer Durables........................................2.5%
. Short-Term Obligations...................................1.5%
. Transportation...........................................1.3%
-----------
Total 100%
10 Largest Holdings
% of Net
Security Assets
- -----------------------------------------------------------------
General Electric Company...................................3.1%
Coca-Cola Company..........................................2.4%
Exxon Corporation .........................................2.2%
Microsoft Corporation .....................................2.2%
Merck & Company, Inc.......................................1.8%
Intel Corporation..........................................1.7%
Royal Dutch Petroleum Company..............................1.7%
Philip Morris Companies, Inc.. ............................1.6%
Proctor & Gamble Company...................................1.4%
International Business Machines
Corporation................................................1.4%
Large Company Stock Portfolio 10
<PAGE>
Small Company Stock Portfolio
Q: What factors affected the performance of the portfolio over the past six
months?
The first and second quarters of 1997 were like night and day for small company
stocks. Performance plummeted in the first quarter due to numerous negative
earnings surprises. The negative trend took a dramatic turn in the second
quarter as low inflation, falling interest rates, and strong money flows into
stocks all combined to benefit small company stocks. The AAL Variable Product
Small Company
Total Net Assets
----------------
[CHART APPEARS HERE]
[PHOTO APPEARS HERE]
Brian J. Flanagan
PORTFOLIO MANAGER
Stock Portfolio followed this same down-and-up trend as it ended the first
quarter down 0.88% and rebounded in the second quarter to end the first half of
1997 up 12.95%.
Q: What exactly is the Wilshire Small Cap Index?
The index, also known as the Wilshire 250, is comprised of 250 stocks
representing performance attributes of the smaller capitalization segment of the
U.S. equity markets. The process of selecting stocks to include in the Wilshire
250 begins with the Wilshire 5000, an all-inclusive list of stocks ranging from
large cap to micro cap stocks. First, the bottom 2500 stocks are dropped from
the list of 5000 stocks, eliminating the more illiquid stocks in the market.
Next, the top 750, considered large-cap or mid-cap stocks, are dropped from the
remaining 2500 stocks. The remaining 1750 stocks are known as the Wilshire Next
1750. No stocks in the top 10 or bottom 20 percentiles of the Wilshire Next 1750
are included in the Wilshire 250. Removing these stocks eliminates stocks that
may soon become
11 Portfolio Perspective
<PAGE>
Total Returns/1/
As of June 30, 1997
<TABLE>
<CAPTION>
SEC
Fund Variable Variable
Portfolio/3/ Subaccount/4/ Subaccount/5/
---------------------------------------------
<S> <C> <C> <C>
6 Months/2/.. 12.95% 12.26% N/A
---------------------------------------------
1 Year....... 22.68% 21.15% 13.52%
---------------------------------------------
Inception 21.03% 19.32% 16.67%
</TABLE>
/1/ Total Returns - Past performance is not an indication of future results.
Total return and unit values are subject to fluctuation. Accumulation units,
when redeemed, may be worth more or less than their original value.
/2/ 6 Months - Returns for periods less than one year are not annualized.
/3/ Fund Portfolio - Average annual total returns reflect reinvestment of all
dividends and capital gains distribution but do not reflect separate account
expenses or charges. However, these values reflect the deduction of a .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.
/4/ Variable Subaccount - These values 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.
/5/ SEC Variable Subaccount - Reflects all fees and expenses and the maximum
surrender charge of 7% for the first contract year, 5% for "since inception"
return.
too large or too small for the Wilshire 250. Finally, 250 stocks are chosen from
the remaining list to replicate the industry composition of the Wilshire Next
1750. Thus, the Wilshire 250 is a representation of this Wilshire Next 1750.
Q: Which of the portfolio's holdings made the most significant contributions
over the past six months?
A number of excellent individual performances as well as a long list of
takeovers propelled the portfolio's performance through the first half of 1997.
Some of the portfolio's top performing securities includes Verifone Inc., US Air
Group Inc., and Quantum Corp. with total returns of 84.32%, 49.73%, and 41.92%,
respectively.
Sector Allocations
% of
Portfolio
---------
. Consumer Non-Durables.................................................. 24.5%
. Materials & Services................................................... 20.0%
. Finance................................................................ 17.2%
. Technology............................................................. 10.4%
. Utilities.............................................................. 8.3%
. Capital Goods.......................................................... 5.7%
. Energy................................................................. 5.1%
. Consumer Durables...................................................... 4.3%
. Transportation......................................................... 2.4%
. Short-Term Obligations................................................. 2.1%
--------------
Total 100%
10 Largest Holdings
% of Net
Security Assets
- -------------------------------------------------------------------------------
Catellus Development
Corporation............................................................... 0.9%
First Commerce Corporation................................................ 0.9%
Alex Brown Incorporated .................................................. 0.9%
Western National Corporation.............................................. 0.9%
Money Store, Inc.......................................................... 0.9%
Advanta Corporation-Class A .............................................. 0.9%
Ross Stores, Inc.......................................................... 0.9%
Peoples Bank of
Bridgeport, Connecticut .................................................. 0.8%
Chris Craft Industries, Inc............................................... 0.8%
Extended Stay America..................................................... 0.8%
Small Company Stock Portfolio 12
<PAGE>
Money Market Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
The Portfolio Seeks: To provide maximum current income 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.
The Portfolio Is: A diversified portfolio of high-quality, short-term money
market instruments.
<TABLE>
<CAPTION>
Principal Interest Maturity Market
Amount Rate Date Value
==========================================================================
<S> <C> <C> <C>
Commercial Paper (96.3%)
$210,000 Abbott Laboratories................ 5.520% 8/05/97 $208,873
670,000 Alabama Power
Company.......................... 5.550 7/25/97 667,521
801,000 American Express
Credit Corporation............... 5.540 8/04/97 796,809
711,000 Associates Corporation
of North America................. 5.480 7/02/97 710,892
750,000 Baltimore Gas &
Electric Company................. 5.540 7/29/97 746,768
750,000 Bell Atlantic Network
Funding.......................... 5.530 7/07/97 749,309
509,000 Beneficial Corporation............. 5.480 7/10/97 508,303
780,000 Cargill, Inc....................... 5.480 7/22/97 777,507
750,000 Carolina Power &
Light, Inc....................... 5.550 8/28/97 743,294
308,000 CountryWide
Home, Inc........................ 5.540 7/03/97 307,905
646,000 Donnelley R.R. & Sons
Company.......................... 5.560 7/08/97 645,301
127,000 Dresser Industries, Inc............ 5.530 7/18/97 126,668
500,000 Dresser Industries, Inc............ 5.540 7/18/97 498,692
706,000 E.I. DuPont de Nemours
& Company........................ 5.530 7/28/97 703,289
714,000 Exxon Imperial, Inc................ 5.570 7/24/97 711,459
554,000 Ford Motor Credit
Company.......................... 5.540 7/16/97 552,721
317,000 General Electric
Capital Corporation.............. 5.520 7/15/97 316,320
288,000 General Electric Capital
Corporation...................... 5.570 7/15/97 287,376
100,000 General Electric
Capital Corporation.............. 5.570 7/15/97 99,783
496,000 General Motors
Acceptance
Corporation...................... 5.590 7/23/97 494,306
600,000 General Signal
Corporation...................... 5.550 7/09/97 599,260
529,000 Household International
Corporation...................... 5.580 7/07/97 528,508
290,000 Household International
Corporation...................... 5.470 7/01/97 290,000
700,000 IBM Credit Corporation............. 5.520 7/11/97 698,927
250,000 MCI Communications
Corporation...................... 5.550 7/17/97 249,383
750,000 Merrill Lynch &
Company, Inc..................... 5.630 7/14/97 748,475
465,000 Motorola, Inc...................... 5.550 7/16/97 463,925
250,000 Pacific Gas & Electric
Company.......................... 5.530 7/07/97 249,769
480,000 Pacific Gas & Electric
Company.......................... 5.540 8/26/97 475,863
709,000 Pacific Bell....................... 5.500 7/17/97 707,267
440,000 PepsiCo, Inc....................... 5.500 7/10/97 439,395
700,000 Pitney-Bowes, Inc.................. 5.500 7/03/97 699,786
360,000 Schering Corporation............... 5.560 7/01/97 360,000
339,000 Schering Corporation............... 5.510 7/01/97 339,000
784,000 Sears Roebuck Acceptance
Corporation...................... 5.570 7/21/97 781,574
700,000 Southern California
Edison Company................... 5.510 7/09/97 699,143
692,000 Southwestern Bell.................. 5.500 7/15/97 690,520
683,000 Warner-Lambert
Company.......................... 5.520 9/03/97 676,297
-------------------------------------------------------------
Total Investments (96.3%)
(amortized cost $20,350,188) 20,350,188
=============================================================
-------------------------------------------------------------
Other Assets, less
Liabilities (3.7%) 789,316
=============================================================
-------------------------------------------------------------
NET ASSETS (100.0%) $21,139,504
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
13 AAL Variable Annuity Semi-Annual Report
<PAGE>
Bond Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
The Portfolio Seeks: To achieve investment results that approximate the total
return of the Lehman Brothers Aggregate Bond Index ("Lehman Index") by investing
primarily in bonds and other debt securities included in the Index.
The Portfolio Is: A diversified portfolio consisting of a representative sample
of fixed income and mortgage-backed securities included in the Lehman Index.
<TABLE>
<CAPTION>
Principal Interest Maturity Market
Amount Rate Date Value
==========================================================================
<S> <C> <C> <C>
U.S. Government Obligations (42.6%)
$250,000 U.S. Treasury Bonds................. 10.375% 11/15/12 $317,422
250,000 U.S. Treasury Bonds................. 9.875 11/15/15 328,828
250,000 U.S. Treasury Bonds................. 7.250 5/15/16 260,703
175,000 U.S. Treasury Bonds................. 7.500 11/15/16 187,031
250,000 U.S. Treasury Bonds................. 8.125 8/15/19 285,078
275,000 U.S. Treasury Bonds................. 7.875 2/15/21 306,453
290,000 U.S. Treasury Bonds................. 7.625 11/15/22 315,738
250,000 U.S. Treasury Bonds................. 7.125 2/15/23 257,344
250,000 U.S. Treasury Bonds................. 6.250 8/15/23 231,328
260,000 U.S. Treasury Bonds................. 7.500 11/15/24 280,394
170,000 U.S. Treasury Bonds................. 6.875 8/15/25 170,531
205,000 U.S. Treasury Notes................. 6.250 6/30/98 205,897
250,000 U.S. Treasury Notes................. 5.875 8/15/98 249,922
250,000 U.S. Treasury Notes................. 7.125 10/15/98 253,672
250,000 U.S. Treasury Notes................. 5.125 11/30/98 247,188
200,000 U.S. Treasury Notes................. 5.750 12/31/98 199,375
250,000 U.S. Treasury Notes................. 6.375 1/15/99 251,484
250,000 U.S. Treasury Notes................. 5.875 3/31/99 249,375
200,000 U.S. Treasury Notes................. 7.000 4/15/99 203,187
250,000 U.S. Treasury Notes................. 6.750 5/31/99 252,891
215,000 U.S. Treasury Notes................. 6.750 6/30/99 217,620
300,000 U.S. Treasury Notes................. 6.875 7/31/99 304,406
250,000 U.S. Treasury Notes................. 7.500 10/31/99 257,109
200,000 U.S. Treasury Notes................. 7.750 11/30/99 206,937
175,000 U.S. Treasury Notes................. 7.750 12/31/99 181,234
160,000 U.S. Treasury Notes................. 7.125 2/29/00 163,500
250,000 U.S. Treasury Notes................. 5.875 6/30/00 247,656
250,000 U.S. Treasury Notes................. 8.500 11/15/00 266,563
240,000 U.S. Treasury Notes................. 7.750 2/15/01 251,100
185,000 U.S. Treasury Notes................. 8.000 5/15/01 195,464
200,000 U.S. Treasury Notes................. 6.250 2/15/03 198,437
250,000 U.S. Treasury Notes................. 5.750 8/15/03 241,406
265,000 U.S. Treasury Notes................. 7.250 5/15/04 276,180
60,000 U.S. Treasury Notes................. 7.500 2/15/05 63,488
280,000 U.S. Treasury Notes................. 7.000 7/15/06 $288,050
250,000 U.S. Treasury Notes................. 6.500 10/15/06 248,906
100,000 U.S. Treasury Notes................. 6.250 2/15/07 97,812
-------------------------------------
Total U.S. Government
Obligations............... 8,759,709
=====================================
U.S. Government Agency Obligations (34.7%)
245,000 Federal Home Loan Bank
Debentures........................ 5.440 10/15/03 230,269
250,000 Federal Home Loan
Bank Notes........................ 9.250 11/25/98 260,548
182,549 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through............... 7.000 2/01/11 182,541
246,790 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through............... 7.000 6/01/26 242,378
197,755 Federal Home Loan Mortgage
Corporation Gold
30-Yr. Pass Through............... 8.000 1/01/26 202,643
207,195 Federal Home Loan Mortgage
Corporation Gold
30-Yr. Pass Through............... 6.500 4/01/24 200,055
220,584 Federal Home Loan Mortgage
Corporation Gold
30-Yr. Pass Through............... 7.500 8/01/25 221,768
144,112 Federal Home Loan Mortgage
Corporation Gold
7-Yr. Balloon..................... 7.000 7/01/02 145,210
250,000 Federal National Mortgage
Association 15-Yr.
Pass Through...................... 6.450 4/23/01 249,884
236,733 Federal National Mortgage
Association 15-Yr.
Pass Through...................... 6.000 4/01/11 228,383
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 14
<PAGE>
Bond Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
Principal Interest Maturity Market
Amount Rate Date Value
==========================================================================
U.S. Government Agency Obligations (34.7%)--Continued
- -----------------------------------------------------
$233,220 Federal National Mortgage
Association 15-Yr.
Pass Through...................... 7.500% 7/01/11 $236,601
247,500 Federal National Mortgage
Association 15-Yr.
Pass Through...................... 8.000 2/15/12 254,770
241,943 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 6.500 5/01/26 231,563
181,983 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 10.500 8/01/20 200,931
107,616 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 9.000 2/01/25 113,724
184,161 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 8.500 11/15/25 191,291
225,283 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 7.500 1/01/26 226,266
246,391 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 7.000 2/01/26 241,643
244,438 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 7.500 2/01/27 245,205
247,500 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 7.000 3/01/27 242,731
243,959 Federal National Mortgage
Association 30-Yr.
Pass Through...................... 8.000 9/01/26 249,585
243,217 Federal National
Mortgage Association
7-Yr. Balloon..................... 6.500 10/01/03 240,989
221,731 Government National
Mortgage Association
15-Yr. Pass Through............... 6.500 3/01/09 218,747
214,143 Government National
Mortgage Association
30-Yr. Pass Through............... 7.500 3/15/23 215,892
221,457 Government National
Mortgage Association
30-Yr. Pass Through............... 7.000 1/15/24 218,586
197,681 Government National
Mortgage Association
30-Yr. Pass Through............... 9.000 9/15/24 209,492
224,415 Government National
Mortgage Association
30-Yr. Pass Through............... 8.000 6/15/25 229,749
245,121 Government National
Mortgage Association
30-Yr. Pass Through............... 6.000 5/15/26 228,021
226,746 Government National
Mortgage Association
30-Yr. Pass Through............... 8.500 12/15/26 236,022
251,806 Government National
Mortgage Association
30-Yr. Pass Through............... 7.500 3/15/27 252,672
250,000 Private Export Funding
Corporation....................... 6.240 5/15/02 247,005
250,000 Tennessee Valley
Authority......................... 6.000 11/01/00 246,578
-------------------------------------------------------------
Total U.S. Government
Agency Obligations 7,141,742
=============================================================
Asset-Backed Securities (1.2%)
- ------------------------------
250,000 NationsBank Credit
Card Trust Certificate............ 6.000 12/15/05 240,647
-------------------------------------------------------------
Total Asset-Backed
Securities 240,647
=============================================================
Corporate Obligations (13.2%)
- -----------------------------
225,000 Abbott Laboratories
Notes............................. 6.800 5/15/05 225,789
250,000 American Express Company
Senior Notes...................... 6.750 6/01/01 250,319
250,000 Browning-Ferris Industries,
Inc. Senior Notes................. 7.875 3/15/05 261,929
250,000 Columbia Gas Systems
Notes............................. 7.320 11/28/10 248,601
250,000 Ford Motor Credit
Corporation Notes................. 8.200 2/15/02 263,041
200,000 General Motors Acceptance
Corporation Notes................. 9.625 12/15/01 221,300
The accompanying notes to the financial statements are an integral part of this
schedule.
15 AAL Variable Annuity Semi-Annual Report
<PAGE>
Bond Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Interest Maturity Market
Amount Rate Date Value
==========================================================================
<S> <C> <C> <C>
Corporate Obligations (13.2%)--Continued
$250,000 Household Finance
Corporation Notes.................. 6.875% 3/01/03 $249,006
300,000 IBM Corporation Notes............... 7.250 11/01/02 306,848
250,000 PepsiCo Inc. Notes.................. 5.700 11/01/08 224,788
200,000 Tosco Corporation First
Mortgage Bonds..................... 9.625 3/15/02 221,925
225,000 Xerox Corporation
Notes.............................. 9.750 3/15/00 242,812
-------------------------------------------------------------
Total Corporate
Obligations 2,716,358
=============================================================
Utility Bonds (2.2%)
200,000 Baltimore Gas & Electric
Company First Refunding
Mortgage Bonds..................... 7.500 1/15/07 206,558
250,000 Texas Utilities Company
First Mortgage Bonds............... 7.375 8/1/01 254,596
-------------------------------------------------------------
Total Utility Bonds 461,154
=============================================================
Other Government Securities (3.5%)
250,000 Province of Manitoba
Debentures......................... 6.125 1/19/04 241,070
200,000 Province of Ontario
Senior Global Bonds................ 6.125 6/28/00 198,642
250,000 Province of Quebec
Global Bonds....................... 11.000 6/15/15 285,477
-------------------------------------------------------------
Total Other Government
Securities 725,189
=============================================================
-------------------------------------------------------------
Total Long-Term Securities
(cost basis $20,234,716) 20,044,799
=============================================================
-------------------------------------------------------------
Short-Term Investments (1.1%)
229,000 Merrill Lynch & Company, Inc........ 6.20 7/01/97 229,000
-------------------------------------------------------------
Total Short-Term investments
(cost basis $229,000) 229,000
=============================================================
-------------------------------------------------------------
Total Investments (98.5%)
(cost basis $20,463,716) 20,273,799
=============================================================
-------------------------------------------------------------
Other Assets, less
Liabilities (1.5%) 302,563
=============================================================
-------------------------------------------------------------
NET ASSETS (100.0%) $20,576,362
=============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 16
<PAGE>
Balanced Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
The Portfolio Seeks: To achieve investment results that reflect investment in
common stocks, bonds and money market instruments, each of which will be
selected consistent with the investment policies of the AAL Variable Product
Large Company Stock, Bond and Money Market Portfolios, respectively.
The Portfolio Is: A diversified portfolio comprised of three asset classes:
common stocks, including the securities in which the AAL Variable Product Large
Company Stock Portfolio may invest; bonds and other debt securities with
maturities generally exceeding one year, including securities in which the AAL
Variable Product Bond Portfolio may invest; and money market instruments and
other debt securities with maturities generally not exceeding 397 days,
including securities in which the AAL Variable Product Money Market Portfolio
may invest.
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
===========================================================================
<C> <S> <C>
Aerospace (1.2%)
11,818 Boeing Company..........................................$ 627,093
1,000 General Dynamics Corporation............................ 75,000
900 Goodrich (B.F.) Company................................. 38,981
3,200 Lockheed Martin Corporation............................. 331,400
3,500 McDonnell Douglas Corporation........................... 239,750
1,000 Northrop Grumman Corporation............................ 87,812
3,900 Raytheon Company........................................ 198,900
3,500 Rockwell International Corporation...................... 206,500
2,100 TRW, Inc................................................ 119,306
2,700 Textron, Inc............................................ 179,213
3,900 United Technologies Corporation......................... 323,700
------------------------------------------------------------
Total Aerospace 2,427,655
============================================================
Air Transportation (0.2%)
1,500 AMR Corporation*........................................ 138,750
1,200 Delta Air Lines, Inc.................................... 98,400
1,900 Federal Express Corporation*............................ 109,725
2,300 Southwest Airlines Company.............................. 59,513
1,200 USAir Group, Inc.*...................................... 42,000
------------------------------------------------------------
Total Air Transportation 448,388
============================================================
Apparel (0.3%)
1,200 Fruit of the Loom, Inc.*................................ 37,200
1,100 Liz Claiborne, Inc...................................... 51,288
4,800 Nike, Inc............................................... 280,200
900 Reebok International, Ltd............................... 42,075
600 Russell Corporation..................................... 17,775
400 Springs Industries, Inc................................. 21,100
800 Stride Rite Corporation................................. 10,300
1,000 V F Corporation......................................... 84,750
------------------------------------------------------------
Total Apparel 544,688
============================================================
Banking (4.2%)
7,070 Banc One Corporation.................................... 342,453
2,500 Bank of Boston Corporation.............................. 180,156
6,300 Bank of New York Company, Inc........................... 274,050
11,700 BankAmerica Corporation................................. 755,381
1,400 Bankers Trust New York Corporation...................... 121,800
3,400 Barnett Banks, Inc...................................... 178,500
7,140 Chase Manhattan Corporation............................. 693,026
7,600 Citicorp................................................ 916,275
1,700 Comerica, Inc........................................... 115,600
3,600 Corestates Financial Corporation........................ 193,500
1,700 Countrywide Credit Industries, Inc...................... 53,019
1,700 Fifth Third Bancorp..................................... 139,453
2,200 First Bank System, Inc.................................. 187,825
5,143 First Chicago NBD Corporation........................... 311,152
4,705 First Union Corporation................................. 435,213
4,356 Fleet Financial Group, Inc.............................. 275,517
3,000 J.P. Morgan & Company, Inc.............................. 313,125
3,700 Keycorp................................................. 206,738
4,200 Mellon Bank Corporation................................. 189,525
3,600 National City Corporation............................... 189,000
12,010 NationsBank Corporation................................. 774,645
6,100 Norwest Corporation..................................... 343,125
5,400 PNC Bank Corporation.................................... 224,775
1,500 Providian Financial Corporation......................... 48,187
900 Republic New York Corporation........................... 96,750
3,600 Suntrust Banks, Inc..................................... 198,225
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
17 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
=============================================================================
<C> <S> <C>
Banking (4.2%)--Continued
2,400 U S Bancorp.............................................$ 153,900
2,700 Wachovia Corporation.................................... 157,444
1,566 Wells Fargo & Company................................... 422,036
------------------------------------------------------------
Total Banking 8,490,395
============================================================
Brokerage (0.5%)
2,800 Charles Schwab Corporation.............................. 113,925
5,400 Merrill Lynch & Company, Inc............................ 321,975
9,395 Morgan Stanley, Dean Witter,
Discover and Company.................................. 404,572
1,800 Salomon, Inc............................................ 100,125
------------------------------------------------------------
Total Brokerage 940,597
============================================================
Business Machines (4.0%)
5,400 3Com Corporation*....................................... 243,000
2,000 Amdahl Corporation*..................................... 17,500
2,000 Apple Computer, Inc.*................................... 28,500
800 Autodesk, Inc........................................... 30,650
3,200 Bay Networks, Inc.*..................................... 85,000
2,500 Cabletron Systems, Inc.*................................ 70,780
1,400 Ceridian Corporation*................................... 59,150
11,000 Cisco Systems, Inc.*.................................... 738,375
4,500 Compaq Computers, Inc.*................................. 446,625
600 Data General Corporation*............................... 15,600
2,900 Dell Computer Corporation*.............................. 340,569
2,500 Digital Equipment Corporation*.......................... 88,594
2,100 Honeywell, Inc.......................................... 159,338
2,100 Ikon Office Solutions, Inc.............................. 52,369
700 Intergraph Corporation*................................. 5,950
16,900 International Business Machines
Corporation........................................... 1,524,169
19,800 Microsoft Corporation*.................................. 2,502,225
5,700 Novell, Inc.*........................................... 39,544
10,900 Oracle Systems Corporation*............................. 549,088
2,100 Parametric Technology Company*.......................... 89,380
2,500 Pitney-Bowes, Inc....................................... 173,750
4,000 Seagate Technology, Inc.*............................... 140,750
2,900 Silicon Graphics, Inc.*................................. 43,500
6,000 Sun Microsystems, Inc.*................................. 223,312
1,900 Tandem Computers, Inc.*................................. 38,475
2,800 Unisys Corporation*..................................... 21,350
5,300 Xerox Corporation....................................... 418,038
------------------------------------------------------------
Total Business Machines 8,145,581
============================================================
Business Services (0.9%)
4,800 Automatic Data Processing, Inc.......................... 225,600
1,700 Block (H.R.), Inc....................................... 54,825
3,500 Browning-Ferris Industries, Inc......................... 116,375
2,800 Cognizant Corporation................................... 113,400
5,950 Computer Associates International, Inc.................. 331,341
1,300 Computer Sciences Corporation*.......................... 93,763
1,300 Deluxe Corporation...................................... 44,363
1,000 Ecolab, Inc............................................. 47,750
7,400 First Data Corporation.................................. 325,138
1,300 Interpublic Group of Companies, Inc..................... 79,706
500 John H. Harland Company................................. 11,406
5,100 Laidlaw, Inc............................................ 70,444
1,500 Moore Corporation, Ltd.................................. 29,530
800 National Service Industries, Inc........................ 38,950
900 Safety Kleen Corporation................................ 15,188
400 Shared Medical Systems Corporation...................... 21,600
2,800 The Dun & Bradstreet Corporation........................ 73,500
4,983 Waste Management Inc.................................... 160,078
------------------------------------------------------------
Total Business Services 1,852,957
============================================================
Chemicals (1.9%)
1,800 Air Products & Chemicals, Inc........................... 146,250
18,600 E.I. Du Pont de Nemours & Company....................... 1,169,475
1,300 Eastman Chemical Company................................ 82,550
1,000 Great Lakes Chemical Corporation........................ 52,375
1,600 Hercules, Inc........................................... 76,600
6,900 Minnesota Mining and
Manufacturing Company................................. 703,800
9,700 Monsanto Company........................................ 417,706
2,300 Morton International, Inc............................... 69,430
1,100 Nalco Chemical Company.................................. 42,488
3,000 PPG Industries, Inc..................................... 174,375
2,600 Praxair, Inc............................................ 145,600
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 18
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
=========================================================================
<C> <S> <C>
Chemicals (1.9%)--Continued
1,100 Rohm & Haas Company....................................$ 99,069
1,600 Sigma-Aldrich Corporation.............................. 56,100
4,000 The Dow Chemical Company............................... 348,500
2,000 Union Carbide Corporation.............................. 94,125
1,300 W.R. Grace & Company................................... 71,663
----------------------------------------------------------
Total Chemicals 3,750,106
==========================================================
Construction (0.2%)
700 Armstrong World Industries, Inc........................ 51,363
500 Centex Corporation..................................... 20,312
700 Crane Company.......................................... 29,269
1,400 Fluor Corporation...................................... 77,262
600 Kaufman & Broad Home Corporation....................... 10,538
2,600 Masco Corporation...................................... 108,550
800 Owens-Corning Fiberglass Corporation................... 34,500
300 Pulte Corporation...................................... 10,369
2,800 Sherwin-Williams Company............................... 86,450
1,400 Stanley Works.......................................... 56,000
----------------------------------------------------------
Total Construction 484,613
==========================================================
Consumer Durables (0.1%)
1,500 Black & Decker Corporation............................. 55,781
1,600 Maytag Corporation..................................... 41,800
2,600 Newell Company......................................... 103,025
1,000 Tupperware Corporation................................. 36,500
1,200 Whirlpool Corporation.................................. 65,475
----------------------------------------------------------
Total Consumer Durables 302,581
==========================================================
Containers (0.1%)
400 Ball Corporation....................................... 12,025
800 Bemis Company, Inc..................................... 34,600
2,100 Crown Cork & Seal Company, Inc......................... 112,219
1,600 Stone Container Corporation............................ 22,900
----------------------------------------------------------
Total Containers 181,744
==========================================================
Cosmetics (1.6%)
900 Alberto-Culver Company................................. 25,200
2,200 Avon Products, Inc..................................... 155,238
900 Clorox Company......................................... 118,800
4,900 Colgate-Palmolive Company.............................. 319,725
9,200 Gillette Company....................................... 871,700
1,800 International Flavors and Fragrances, Inc.............. 90,900
11,200 Procter & Gamble Company............................... 1,582,000
----------------------------------------------------------
Total Cosmetics 3,163,563
==========================================================
Credit Cards (0.1%)
2,400 Equifax, Inc........................................... 89,250
----------------------------------------------------------
Total Credit Cards 89,250
==========================================================
Drugs & Medicine (6.3%)
12,800 Abbott Laboratories.................................... 854,400
1,000 Allergan, Inc.......................................... 31,813
1,300 Alza Corporation*...................................... 37,700
10,600 American Home Products Corporation..................... 810,900
4,400 Amgen, Inc.*........................................... 255,750
900 Bard (C.R.), Inc....................................... 32,681
900 Bausch & Lomb, Inc..................................... 42,413
4,600 Baxter International, Inc.............................. 240,350
2,000 Becton, Dickinson and Company.......................... 101,250
1,600 Beverly Enterprises, Inc.*............................. 26,000
1,800 Biomet, Inc............................................ 33,525
3,200 Boston Scientific Corporation*......................... 196,600
16,500 Bristol-Myers Squibb Company........................... 1,336,500
1,800 Cardinal Health Inc.................................... 103,050
10,950 Columbia/HCA Healthcare Corporation.................... 430,472
9,200 Eli Lilly & Company.................................... 1,005,675
1,200 Guidant Corporation.................................... 102,000
5,600 HEALTHSOUTH Corporation*............................... 139,650
2,600 Humana, Inc.*.......................................... 60,125
22,000 Johnson & Johnson...................................... 1,416,250
1,200 Mallinckrodt Group, Inc................................ 45,600
1,000 Manor Care, Inc........................................ 32,625
4,000 Medtronic, Inc......................................... 324,000
19,900 Merck & Company, Inc................................... 2,059,650
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
19 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
=============================================================================
<C> <S> <C>
Drugs & Medicine (6.3%)--Continued
10,600 Pfizer, Inc..............................................$ 1,266,700
8,280 Pharmacia & Upjohn, Inc.................................. 287,730
12,000 Schering-Plough Corporation.............................. 574,500
1,450 St. Jude Medical, Inc.*.................................. 56,550
4,900 Tenet Healthcare Corporation*............................ 144,855
1,200 U.S. Surgical Corporation................................ 44,700
3,100 United Healthcare Corporation............................ 161,200
4,500 Warner-Lambert Company................................... 559,125
--------------------------------------------------------------
Total Drugs & Medicine 12,814,339
==============================================================
Electronics (2.7%)
3,528 AMP, Inc................................................. 147,294
2,100 Adobe Systems, Inc....................................... 73,631
2,300 Advanced Micro Devices, Inc.*............................ 82,800
3,000 Applied Materials, Inc.*................................. 212,438
700 EG&G, Inc................................................ 15,750
4,000 EMC Corporation*......................................... 156,000
2,200 General Instrument Corporation*.......................... 55,000
800 General Signal Corporation............................... 34,900
700 Harris Corporation....................................... 58,800
16,700 Hewlett-Packard Company.................................. 935,200
13,500 Intel Corporation........................................ 1,914,469
2,300 LSI Logic Corporation*................................... 73,600
3,400 Micron Technology, Inc.*................................. 135,787
9,800 Motorola, Inc............................................ 744,800
2,300 National Semiconductor Corporation*...................... 70,438
800 Perkin Elmer Corporation................................. 63,650
1,200 Scientific-Atlanta, Inc.................................. 26,250
500 Tektronix, Inc........................................... 30,000
3,000 Tellabs, Inc.*........................................... 167,625
3,100 Texas Instruments, Inc................................... 260,594
2,400 Thermo Electron Corporation*............................. 82,500
900 Thomas & Betts Corporation............................... 47,306
--------------------------------------------------------------
Total Electronics 5,388,832
==============================================================
Energy-Raw Materials (0.7%)
2,400 Baker Hughes, Inc........................................ 92,850
2,000 Burlington Resources, Inc................................ 88,250
2,900 Dresser Industries, Inc.................................. 108,025
300 Eastern Enterprises...................................... 10,405
2,100 Halliburton Company...................................... 166,425
600 Louisiana Land and Exploration
Company................................................ 34,275
900 McDermott International, Inc............................. 26,269
5,400 Occidental Petroleum Corporation......................... 135,338
4,100 Schlumberger, Ltd........................................ 512,500
4,132 Union Pacific Resources Group Inc........................ 102,784
900 Western Atlas, Inc.*..................................... 65,925
--------------------------------------------------------------
Total Energy-Raw Materials 1,343,046
==============================================================
Food & Agriculture (3.6%)
8,702 Archer-Daniels-Midland Company........................... 204,496
2,400 CPC International, Inc................................... 221,550
7,600 Campbell Soup Company.................................... 380,000
40,900 Coca-Cola Company........................................ 2,760,750
3,900 ConAgra, Inc............................................. 250,088
600 Fleming Companies, Inc................................... 10,800
2,700 General Mills, Inc....................................... 175,838
6,050 H.J. Heinz Company....................................... 279,055
2,500 Hershey Foods Corporation................................ 138,281
3,400 Kellogg Company.......................................... 291,125
25,200 PepsiCo, Inc............................................. 946,575
1,400 Pioneer Hi-Bred International, Inc....................... 112,000
2,200 Quaker Oats Company...................................... 98,725
1,800 Ralston Purina Corporation............................... 147,938
7,900 Sara Lee Corporation..................................... 328,838
1,100 Supervalu, Inc........................................... 37,950
2,800 Sysco Corporation........................................ 102,200
2,600 Unilever N.V............................................. 566,800
1,600 Whitman Corporation...................................... 38,400
1,900 Wrigley (Wm) Jr. Company................................. 127,300
--------------------------------------------------------------
Total Food & Agriculture 7,218,709
==============================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 20
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
===========================================================================
<C> <S> <C>
Gold (0.2%)
6,100 Barrick Gold Corporation............................ $ 134,200
3,700 Battle Mountain Gold Company........................ 21,044
2,400 Homestake Mining Company............................ 31,350
2,517 Newmont Mining Corporation.......................... 98,162
3,900 Placer Dome, Inc.................................... 63,863
------------------------------------------------------------
Total Gold 348,619
============================================================
Insurance (2.1%)
1 Aegon N.V........................................... 44
2,514 Aetna Life & Casualty Company....................... 257,370
7,248 Allstate Corporation................................ 529,104
4,009 American General Corporation........................ 191,420
7,700 American International Group, Inc................... 1,150,188
2,700 Aon Corporation..................................... 139,725
2,900 Chubb Corporation................................... 193,938
1,200 Cigna Corporation................................... 213,000
3,100 Conseco, Inc........................................ 114,700
1,400 General Re Corporation.............................. 254,800
1,900 ITT Hartford Group, Inc............................. 157,225
1,200 Jefferson-Pilot Corporation......................... 83,850
1,700 Lincoln National Corporation........................ 109,438
700 MBIA, Inc........................................... 78,969
1,900 MGIC Investment Corporation......................... 91,080
2,800 Marsh & McLennan Companies, Inc..................... 199,850
2,000 Safeco Corporation.................................. 93,375
1,400 St. Paul Companies, Inc............................. 106,750
1,300 Torchmark Corporation............................... 92,625
1,100 Transamerica Corporation............................ 102,919
1,800 USF&G Corporation................................... 43,200
2,400 Unum Corporation.................................... 100,800
------------------------------------------------------------
Total Insurance 4,304,370
============================================================
Liquor (0.3%)
8,100 Anheuser-Busch Companies, Inc....................... 339,694
1,100 Brown-Foreman Corporation........................... 53,694
600 Coors (Adolph) Company.............................. 15,975
6,100 Seagram Company, Ltd................................ 245,525
------------------------------------------------------------
Total Liquor 654,888
============================================================
Media (1.0%)
5,300 Comcast Corporation, Class A........................ 113,288
2,400 Donnelley (R.R.) & Sons Company..................... 87,900
1,500 Dow Jones & Company, Inc............................ 60,280
2,300 Gannett Company, Inc................................ 227,125
600 King World Productions, Inc......................... 21,000
1,500 Knight-Ridder, Inc.................................. 73,594
1,600 McGraw-Hill, Inc.................................... 94,100
800 Meredith Corporation................................ 23,200
1,600 New York Times Company.............................. 79,200
10,900 Tele-Communications, Inc.*.......................... 162,138
9,200 Time Warner, Inc.................................... 443,900
1,600 Times Mirror Company................................ 88,400
2,000 Tribune Company..................................... 96,125
5,800 Viacom, Inc.*....................................... 174,000
10,400 Westinghouse Electric Corporation................... 240,500
------------------------------------------------------------
Total Media 1,984,750
============================================================
Miscellaneous Finance (1.6%)
1,700 Ahmanson (H.F.) & Company........................... 73,100
7,800 American Express Company............................ 581,100
900 Beneficial Corporation.............................. 63,956
17,700 Fannie Mae.......................................... 772,163
11,400 Federal Home Loan Mortgage
Corporation....................................... 391,875
900 Golden West Financial Corporation................... 63,000
2,300 Great Western Financial Corporation................. 123,625
2,200 Green Tree Financial Corporation.................... 78,375
1,800 Household International Corporation................. 211,388
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
21 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
==============================================================================
<C> <S> <C>
Total Miscellaneous Finance----Continued
5,450 MBNA Corporation........................................... $199,605
10,600 Travelers Group, Inc. ..................................... 668,463
----------------------------------------------------------------
Total Miscellaneous
Finance 3,226,650
================================================================
Motor Vehicles (1.1%)
11,400 Chrysler Corporation....................................... 374,063
700 Cummins Engine Company, Inc................................ 49,394
1,700 Dana Corporation........................................... 64,600
1,300 Eaton Corporation.......................................... 113,506
1,000 Echlin, Inc................................................ 36,000
500 Fleetwood Enterprises, Inc................................. 14,906
19,600 Ford Motor Company......................................... 739,900
12,300 General Motors Corporation................................. 684,955
2,900 Genuine Parts Company...................................... 98,238
1,900 ITT Industries, Inc........................................ 48,925
1,200 Navistar International Corporation*........................ 20,700
1,300 PACCAR, Inc................................................ 60,369
----------------------------------------------------------------
Total Motor Vehicles 2,305,556
================================================================
Non-Durables & Entertainment (0.6%)
1,200 American Greetings Corporation,
Class A................................................... 44,550
2,500 Darden Restaurants, Inc.................................... 22,656
1,100 Harcourt General, Inc...................................... 52,388
2,100 Hasbro, Inc................................................ 59,588
600 Jostens, Inc............................................... 16,050
4,725 Mattel, Inc................................................ 160,059
11,300 McDonald's Corporation..................................... 545,930
2,400 Rubbermaid, Inc............................................ 71,400
3,900 Service Corporation International.......................... 128,213
2,100 Wendy's International, Inc................................. 54,469
----------------------------------------------------------------
Total Non-Durables
& Entertainment 1,155,303
================================================================
Non-Ferrous Metals (0.4%)
3,700 Alcan Aluminum, Ltd........................................ 128,343
2,900 Aluminum Company of America................................ 218,588
700 Asarco, Inc................................................ 21,438
1,500 Cyprus Minerals Company.................................... 36,750
2,200 Echo Bay Mines, Ltd........................................ 12,650
2,350 Engelhard Corporation...................................... 49,203
3,300 Freeport-McMoran Copper &
Gold, Class B............................................. 102,713
2,700 Inco, Ltd.................................................. 81,169
1,100 Phelps Dodge Corporation................................... 93,705
1,200 Reynolds Metals Company.................................... 85,500
----------------------------------------------------------------
Total Non-Ferrous Metals 830,059
================================================================
Oil-Domestic (0.6%)
1,500 Amerada Hess Corporation................................... 83,344
1,200 Ashland Oil, Inc........................................... 55,650
5,300 Atlantic Richfield Company................................. 373,650
400 Helmerich & Payne, Inc..................................... 23,050
800 Kerr-McGee Corporation..................................... 50,700
1,700 Oryx Energy Company*....................................... 35,913
800 Pennzoil Corporation....................................... 61,400
4,300 Phillips Petroleum Company................................. 188,125
1,400 Rowan Companies, Inc.*..................................... 39,463
1,600 Santa Fe Energy Resources, Inc.*........................... 23,500
1,200 Sun Company, Inc........................................... 37,200
4,700 USX-Marathon Group, Inc.................................... 135,713
4,100 Unocal Corporation......................................... 159,130
----------------------------------------------------------------
Total Oil-Domestic 1,266,838
================================================================
Oil-International (3.6%)
8,100 Amoco Corporation.......................................... 704,193
10,800 Chevron Corporation........................................ 798,525
40,900 Exxon Corporation.......................................... 2,515,350
13,000 Mobil Corporation.......................................... 908,375
35,200 Royal Dutch Petroleum Company.............................. 1,914,000
4,300 Texaco, Inc................................................ 467,625
----------------------------------------------------------------
Total Oil 7,308,068
================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 22
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
==============================================================================
<C> <S> <C>
Optical & Photo (0.3%)
3,800 Corning, Inc. .......................................... $ 211,375
5,500 Eastman Kodak Company................................... 422,125
700 Polaroid Corporation.................................... 38,850
--------------------------------------------------
Total Optical & Photo................. 672,350
==================================================
Paper & Forest Products (0.7%)
800 Boise Cascade Corporation............................... 28,250
1,500 Champion International Corporation...................... 82,875
1,500 Georgia-Pacific Corporation............................. 128,063
4,902 International Paper Company............................. 238,053
1,400 James River Corporation of Virginia..................... 51,800
9,180 Kimberly-Clark Corporation.............................. 456,705
1,800 Louisiana-Pacific Corporation........................... 38,025
800 Mead Corporation........................................ 49,800
500 Potlatch Corporation.................................... 22,625
900 Temple-Inland, Inc...................................... 48,600
1,200 Union Camp Corporation.................................. 60,000
1,600 Westvaco Corporation.................................... 50,300
3,200 Weyerhaeuser Company.................................... 166,400
900 Willamette Industries, Inc.............................. 63,000
--------------------------------------------------
Total Paper & Forest
Products.............................. 1,484,496
==================================================
Producers Goods (3.2%)
400 Aeroquip-Vickers Inc.*.................................. 18,900
4,700 Allied-Signal, Inc...................................... 394,800
1,700 Avery Dennison Corporation.............................. 68,213
1,300 Case Corporation........................................ 89,538
3,200 Caterpillar, Inc........................................ 343,600
600 Cincinnati Milacron, Inc................................ 15,563
1,900 Cooper Industries, Inc.................................. 94,525
4,200 Deere & Company......................................... 230,475
1,800 Dover Corporation....................................... 110,700
7,300 Emerson Electric Company................................ 401,956
600 FMC Corporation*........................................ 47,663
600 Foster Wheeler Corporation.............................. 24,300
54,100 General Electric Company................................ 3,536,788
500 Giddings & Lewis, Inc................................... 10,438
800 Harnischfeger Industries, Inc........................... 33,200
4,100 Illinois Tool Works, Inc................................ 204,744
1,800 Ingersoll-Rand Company.................................. 111,150
1,300 Johnson Controls, Inc................................... 53,381
700 Millipore Corporation................................... 30,800
105 NACCO Industries, Inc................................... 5,926
2,000 Pall Corporation........................................ 46,500
1,200 Parker Hannifin Corporation............................. 72,824
700 Raychem Corporation..................................... 52,062
1,000 Snap-On, Inc............................................ 39,375
2,800 Tenneco, Inc............................................ 126,525
1,000 Timken Company.......................................... 35,563
2,800 Tyco International Ltd.................................. 194,775
900 W.W. Grainger, Inc...................................... 70,368
--------------------------------------------------
Total Producers Goods................. 6,464,652
==================================================
Railroad & Shipping (0.5%)
2,564 Burlington Northern, Inc................................ 230,440
3,600 CSX Corporation......................................... 199,800
2,100 Norfolk Southern Corporation............................ 211,575
4,100 Union Pacific Corporation............................... 289,050
--------------------------------------------------
Total Railroad & Shipping............. 930,865
==================================================
Retail Stores (2.6%)
4,100 Albertson's, Inc........................................ 149,650
2,400 American Stores Company................................. 118,500
2,400 Autozone, Inc.*......................................... 56,550
6,650 CUC International, Inc.*................................ 171,653
2,700 CVS Corporation......................................... 138,375
1,700 Charming Shoppes, Inc.*................................. 8,871
1,600 Circuit City Stores, Inc................................ 56,900
3,400 Costco Companies, Inc.*................................. 111,775
3,500 Dayton Hudson Corporation............................... 186,156
1,800 Dillard's Inc........................................... 62,325
3,400 Federated Department Stores, Inc.*...................... 118,150
4,500 Gap, Inc................................................ 174,938
900 Giant Food, Inc., Class A............................... 29,363
600 Great Atlantic & Pacific Tea
Company, Inc.......................................... 16,313
8,000 Home Depot, Inc......................................... 551,500
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
23 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
===========================================================================================
Retail Stores (2.6%)-Continued
..............................
<S> <C> <C>
4,000 J.C. Penney Company, Inc. ....................................... $ 208,750
7,900 Kmart Corporation*............................................... 96,775
4,100 Kroger Corporation*.............................................. 118,900
600 Long's Drug Stores, Inc.......................................... 15,713
2,800 Lowe's Companies, Inc............................................ 103,950
4,000 May Department Stores Company.................................... 189,000
600 Mercantile Stores Company, Inc................................... 37,763
1,300 Nordstrom, Inc................................................... 63,780
1,000 Pep Boys-Manny, Moe, & Jack...................................... 34,063
2,000 Rite Aid Corporation............................................. 99,750
6,500 Sears Roebuck & Company.......................................... 349,375
2,800 TJX Companies, Inc............................................... 73,850
1,000 Tandy Corporation................................................ 56,000
4,370 The Limited, Inc................................................. 88,493
4,700 Toys "R" Us, Inc.*............................................... 164,500
37,300 Wal-Mart Stores, Inc............................................. 1,261,205
4,000 Walgreen Company................................................. 214,500
2,500 Winn-Dixie Stores, Inc........................................... 93,125
2,200 Woolworth Corporation*........................................... 52,800
------------------------------------------------------------------------
Total Retail Stores......................................... 5,273,311
========================================================================
Steel (0.1%)
............
2,862 Allegheny Teledyne, Inc........................................... 77,274
1,700 Armco, Inc.*...................................................... 6,588
1,800 Bethlehem Steel Corporation*...................................... 18,788
800 Inland Steel Industries, Inc...................................... 20,900
1,400 Nucor Corporation................................................. 79,100
1,400 USX-US Steel Group, Inc........................................... 49,087
1,500 Worthington Industries, Inc....................................... 27,468
------------------------------------------------------------------------
Total Steel.................................................. 279,205
========================================================================
Telephone (4.1%)
................
3,000 ALLTEL Corporation................................................ 100,313
26,700 AT&T Corporation.................................................. 936,169
8,200 Airtouch Communications, Inc.*.................................... 224,475
9,100 Ameritech Corporation............................................. 618,230
1,500 Andrew Corporation*............................................... 42,188
7,200 Bell Atlantic Corporation......................................... 546,300
16,300 BellSouth Corporation............................................. 755,913
1,900 DSC Communications Corporation*................................... 42,275
2,700 Frontier Corporation.............................................. 53,830
15,700 GTE Corporation................................................... 688,838
10,550 Lucent Technologies, Inc.......................................... 760,259
11,300 MCI Communications Corporation.................................... 432,578
4,300 Northern Telecom Ltd.............................................. 391,300
7,200 Nynex Corporation................................................. 414,900
15,061 SBC Communications, Inc........................................... 931,899
7,100 Sprint Corporation................................................ 373,638
10,100 U.S. West Media Group*............................................ 204,525
7,900 U.S. West, Inc.................................................... 297,731
14,700 WorldCom, Inc.*................................................... 470,400
------------------------------------------------------------------------
Total Telephone.............................................. 8,285,761
========================================================================
Tires & Rubber (0.1%)
.....................
1,200 Cooper Tire & Rubber Company...................................... 26,400
2,600 Goodyear Tire & Rubber Company.................................... 164,612
------------------------------------------------------------------------
Total Tires & Rubber......................................... 191,012
========================================================================
Tobacco (1.1%)
..............
2,800 American Brands, Inc.............................................. 104,475
1,900 Loews Corporation................................................. 190,237
40,000 Phillip Morris Companies, Inc..................................... 1,775,000
3,000 UST, Inc.......................................................... 83,250
------------------------------------------------------------------------
Total Tobacco................................................ 2,152,962
========================================================================
Travel & Recreation (0.7%)
..........................
1,600 Brunswick Corporation............................................. 50,000
11,129 Disney (Walt) Company............................................. 893,102
2,600 HFS, Inc.*........................................................ 150,800
1,600 Harrah's Entertainment*........................................... 28,800
4,100 Hilton Hotels Corporation......................................... 108,906
1,900 ITT Corporation*.................................................. 116,019
2,100 Marriott International, Inc....................................... 128,888
------------------------------------------------------------------------
Total Travel & Recreation.................................... 1,476,515
========================================================================
The accompanying notes to the financial statements are an integral part of this schedule.
AAL Variable Annuity Semi-Annual Report 24
</TABLE>
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (55.3%) Market Value
==============================================================================
<C> <S> <C>
Trucking & Freight (0.1%)
600 Caliber System, Inc. ....................................$ 22,350
1,200 Ryder Systems, Inc. ..................................... 39,600
---------------------------------------------------------------
Total Trucking & Freight 61,950
===============================================================
Utilities & Energy (1.7%)
3,100 American Electric Power Company.......................... 130,200
2,400 Baltimore Gas & Electric Company......................... 64,050
2,500 CINergy Corporation...................................... 87,031
2,400 Carolina Power & Light Company........................... 86,100
3,400 Central & Southwest Corporation.......................... 72,250
1,700 Coastal Corporation...................................... 90,418
900 Columbia Gas System, Inc................................. 58,725
3,800 Consolidated Edison Company
of New York............................................ 111,862
1,600 Consolidated Natural Gas Company......................... 86,100
2,300 DTE Energy Company....................................... 63,538
3,000 Dominion Resources, Inc.................................. 109,875
5,911 Duke Energy Corporation.................................. 283,359
6,900 Edison International..................................... 171,638
4,200 Enron Corporation........................................ 171,413
1,100 Enserch Corporation...................................... 24,475
3,900 Entergy Corporation...................................... 106,763
3,000 FPL Group, Inc........................................... 138,188
1,900 GPU, Inc................................................. 68,163
3,800 Houston Industries, Inc.................................. 81,463
2,300 Niagara Mohawk Power Corporation*........................ 19,694
800 Nicor, Inc............................................... 28,700
1,800 NorAm Energy Corporation................................. 27,450
1,100 Northern States Power Company............................ 56,925
400 ONEOK, Inc............................................... 12,875
2,500 Ohio Edison Company...................................... 54,530
2,700 PP&L Resources, Inc...................................... 53,830
1,300 Pacific Enterprises...................................... 43,713
6,700 Pacific Gas & Electric Company........................... 162,475
4,800 PacifiCorp............................................... 105,600
3,600 Peco Energy Company...................................... 75,600
600 Peoples Energy Corporation............................... 22,462
3,800 Public Service Enterprise................................ 95,000
1,400 Sonat, Inc............................................... 71,750
11,200 Southern Company......................................... 245,000
3,700 Texas Utilities Company.................................. 127,418
3,500 Unicom Corporation....................................... 77,875
1,600 Union Electric Company................................... 60,300
2,550 Williams Companies, Inc.................................. 111,563
---------------------------------------------------------------
Total Utilities & Energy 3,458,371
===============================================================
---------------------------------------------------------------
Total Common Stocks
(cost basis $86,025,887) 111,703,595
===============================================================
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
==================================================================================
U.S. Government Obligations (15.9%)
$200,000 U.S. Treasury Bonds.........................10.375% 11/15/12 253,937
250,000 U.S. Treasury Bonds......................... 9.875 11/15/15 328,828
700,000 U.S. Treasury Bonds......................... 7.250 5/15/16 729,968
600,000 U.S. Treasury Bonds......................... 7.500 11/15/16 641,250
500,000 U.S. Treasury Bonds......................... 8.750 5/15/17 601,563
425,000 U.S. Treasury Bonds......................... 8.125 8/15/19 484,633
250,000 U.S. Treasury Bonds......................... 8.500 2/15/20 296,016
400,000 U.S. Treasury Bonds......................... 7.875 2/15/21 445,750
700,000 U.S. Treasury Bonds......................... 8.125 8/15/21 801,281
300,000 U.S. Treasury Bonds......................... 8.000 11/15/21 339,281
400,000 U.S. Treasury Bonds......................... 7.250 8/15/22 417,375
250,000 U.S. Treasury Bonds......................... 7.625 11/15/22 272,188
400,000 U.S. Treasury Bonds......................... 7.125 2/15/23 411,750
500,000 U.S. Treasury Bonds......................... 6.250 8/15/23 462,656
550,000 U.S. Treasury Bonds......................... 7.500 11/15/24 593,140
595,000 U.S. Treasury Bonds......................... 7.625 2/15/25 651,153
500,000 U.S. Treasury Bonds......................... 6.875 8/15/25 501,563
600,000 U.S. Treasury Notes......................... 6.250 6/30/98 602,625
450,000 U.S. Treasury Notes......................... 8.250 7/15/98 460,828
400,000 U.S. Treasury Notes......................... 5.250 7/31/98 397,500
600,000 U.S. Treasury Notes......................... 5.875 8/15/98 599,812
725,000 U.S. Treasury Notes......................... 6.000 9/30/98 725,679
800,000 U.S. Treasury Notes......................... 7.125 10/15/98 811,750
500,000 U.S. Treasury Notes......................... 5.500 11/15/98 496,875
325,000 U.S. Treasury Notes......................... 8.875 11/15/98 337,289
800,000 U.S. Treasury Notes......................... 5.125 12/31/98 790,500
775,000 U.S. Treasury Notes......................... 6.375 1/15/99 779,600
650,000 U.S. Treasury Notes......................... 8.875 2/15/99 678,234
450,000 U.S. Treasury Notes......................... 5.500 2/28/99 446,203
500,000 U.S. Treasury Notes......................... 5.875 3/31/99 498,750
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
25 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
===============================================================================
<C> <S> <C> <C> <C>
U.S. Government Obligations (15.9%)----Continued
$600,000 U.S. Treasury Notes................... 7.000% 4/15/99 $609,562
650,000 U.S. Treasury Notes................... 6.750 5/31/99 657,515
675,000 U.S. Treasury Notes.................... 6.750 6/30/99 683,226
700,000 U.S. Treasury Notes.................... 6.875 7/31/99 710,280
500,000 U.S. Treasury Notes.................... 8.000 8/15/99 518,438
400,000 U.S. Treasury Notes.................... 7.125 9/30/99 408,250
500,000 U.S. Treasury Notes.................... 7.500 10/31/99 514,219
750,000 U.S. Treasury Notes.................... 7.750 11/30/99 776,015
600,000 U.S. Treasury Notes.................... 7.750 12/31/99 621,375
500,000 U.S. Treasury Notes.................... 7.750 1/31/00 518,125
575,000 U.S. Treasury Notes.................... 7.125 2/29/00 587,578
700,000 U.S. Treasury Notes.................... 6.750 4/30/00 709,188
750,000 U.S. Treasury Notes.................... 6.125 7/31/00 747,656
375,000 U.S. Treasury Notes.................... 8.500 11/15/00 399,844
300,000 U.S. Treasury Notes.................... 5.500 12/31/00 292,500
575,000 U.S. Treasury Notes.................... 5.250 1/31/01 556,313
500,000 U.S. Treasury Notes.................... 7.750 2/15/01 523,125
450,000 U.S. Treasury Notes.................... 6.375 3/31/01 450,844
775,000 U.S. Treasury Notes.................... 8.000 5/15/01 818,836
200,000 U.S. Treasury Notes.................... 7.875 8/15/01 210,875
350,000 U.S. Treasury Notes.................... 7.500 11/15/01 364,765
750,000 U.S. Treasury Notes.................... 7.500 5/15/02 784,688
175,000 U.S. Treasury Notes.................... 6.500 5/31/02 175,656
125,000 U.S. Treasury Notes....................10.750 2/15/03 150,156
300,000 U.S. Treasury Notes.................... 6.250 2/15/03 297,656
250,000 U.S. Treasury Notes.................... 5.750 8/15/03 241,406
600,000 U.S. Treasury Notes.................... 5.875 2/15/04 581,250
200,000 U.S. Treasury Notes.................... 7.250 5/15/04 208,437
230,000 U.S. Treasury Notes.................... 6.500 5/15/05 229,641
450,000 U.S. Treasury Notes.................... 9.000 2/15/06 533,390
575,000 U.S. Treasury Notes.................... 7.000 7/15/06 591,531
300,000 U.S. Treasury Notes.................... 6.500 10/15/06 298,688
450,000 U.S. Treasury Notes.................... 6.750 8/15/26 445,219
---------------------------------------------------------------
Total U.S. Government
Obligations 32,074,224
===============================================================
U.S. Government Agency Obligations (13.4%)
250,000 Federal Home Loan
Bank Notes........................... 9.250 11/25/98 260,548
250,000 Federal Home Loan Bank
Notes Debentures..................... 7.260 9/06/01 256,721
580,000 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through.................. 5.990 12/01/03 560,795
193,237 Federal Home Loan
Mortgage Corporation
15-Yr. Pass Through.................. 7.000 11/10/10 193,229
498,412 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through.................. 7.500 4/15/27 500,435
499,637 Federal Home Loan
Mortgage Corporation
30-Yr. Pass Through.................. 7.000 5/01/27 490,528
226,032 Federal Home Loan
Mortgage Corporation
Gold 15-Yr.
Pass Through......................... 6.500 4/01/09 223,039
180,858 Federal Home Loan
Mortgage Corporation
Gold 15-Yr.
Pass Through......................... 7.500 8/01/10 183,766
493,378 Federal Home Loan
Mortgage Corporation
Gold 15-Yr.
Pass Through......................... 6.000 5/01/12 476,006
190,289 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through......................... 6.500 4/01/24 183,842
160,861 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through......................... 9.000 4/01/25 170,308
232,668 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through......................... 7.000 9/01/25 228,894
168,222 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through......................... 8.500 9/01/25 175,030
245,907 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through......................... 7.500 11/01/25 247,227
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 26
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
===============================================================================
<C> <S> <C> <C> <C>
U.S. Government Agency Obligations (13.4%)--Continued
$241,030 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through........................ 8.000% 1/01/26 $246,988
249,882 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through........................ 7.000 5/01/26 245,414
237,840 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 7.500 7/01/26 238,917
248,518 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 6.000 7/01/26 231,730
241,156 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 7.500 8/01/26 242,248
243,137 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 8.000 11/01/26 249,093
241,126 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 6.500 11/01/26 231,247
249,427 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 7.500 1/01/27 250,557
494,431 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 6.500 1/15/27 473,986
497,267 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 7.000 2/01/27 488,201
445,998 Federal Home Loan
Mortgage Corporation
Gold 30-Yr.
Pass Through....................... 8.000 3/01/27 456,925
194,193 Federal Home Loan
Mortgage Corporation
Gold 5-Yr. Balloon................. 5.500 12/01/99 193,315
115,290 Federal Home Loan
Mortgage Corporation
Gold 7-Yr. Balloon................. 7.000 7/01/02 116,168
250,000 Federal Home Loan
Mortgage Corporation
Medium Term Note................... 6.395 5/16/00 250,298
250,000 Federal National Mortgage
Association 10-Yr.
Pass Through....................... 6.700 11/10/05 245,862
500,000 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 6.450 4/23/01 499,768
74,036 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 9.000 4/01/10 77,144
49,158 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 9.000 4/01/10 51,221
222,430 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 6.000 2/01/11 214,585
236,538 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 8.000 5/01/11 242,628
224,221 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 7.500 6/01/11 227,846
500,000 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 5.800 2/22/06 469,906
244,699 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 7.000 6/01/11 244,325
233,035 Federal National Mortgage
Association 15-Yr.
Pass Through....................... 6.500 7/01/11 228,446
221,088 Federal National Mortgage
Association 30-Yr.
Conventional....................... 7.000 1/01/26 217,148
345,000 Federal National Mortgage
Association 30-Yr.
Pass Through....................... 8.100 8/12/19 379,342
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
27 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
================================================================================
<C> <S> <C> <C> <C>
U.S. Government Agency Obligations (13.4%)--Continued
$181,983 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 10.500% 8/01/20 $200,931
201,259 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 10/01/24 202,523
204,328 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 8.000 1/01/26 209,142
239,520 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.000 3/01/26 234,904
195,542 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 8.500 5/01/26 203,196
239,726 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 8.000 8/01/26 245,254
216,837 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 9.500 4/01/25 232,636
230,142 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 9/01/25 231,145
227,238 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 8.500 11/01/25 236,036
247,024 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 6.500 2/01/26 236,427
240,016 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 6.500 3/01/26 229,719
233,168 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 6.000 5/01/26 217,076
499,677 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 9.000 6/01/26 528,193
242,075 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 7/01/26 242,835
247,566 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 9/01/26 248,343
248,690 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.000 11/01/26 243,898
243,203 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 8.000 11/01/26 248,811
233,425 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 12/01/26 234,158
495,000 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.000 1/01/27 485,461
246,947 Federal National Mortgage
Association 30-Yr.
Pass Through........................ 7.500 2/01/27 247,722
243,457 Federal National Mortgage
Association 7-Yr.
Balloon............................. 6.500 10/01/03 241,227
490,421 Federal National Mortgage
Association 7-Yr.
Balloon............................. 6.000 12/01/03 477,925
495,000 Federal National Mortgage
Association 7-Yr.
Balloon............................. 7.000 6/01/04 496,960
250,000 Federal National Mortgage
Association Medium
Term Note........................... 6.720 8/01/05 250,109
132,903 Government National
Mortgage Association
15-Yr. Pass Through................. 6.500 5/15/09 131,114
497,595 Government National
Mortgage Association
15-Yr. Pass Through................. 7.000 4/15/12 498,789
242,260 Government National
Mortgage Association
15-Yr. Pass Through................. 6.000 4/15/11 234,641
239,271 Government National
Mortgage Association
15-Yr. Pass Through................. 6.500 6/15/11 235,988
243,458 Government National
Mortgage Association
15-Yr. Pass Through................. 7.500 7/15/11 248,039
183,109 Government National
Mortgage Association
30-Yr. Pass Through................. 8.000 6/01/25 187,460
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 28
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
===============================================================================
<C> <S> <C> <C> <C>
U.S. Government Agency Obligations (13.4%)----Continued
$179,675 Government National
Mortgage Association
30-Yr. Pass Through.................. 9.500% 12/15/24 $194,253
232,080 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.000 1/15/26 228,063
500,000 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.000 1/15/26 491,344
227,308 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.000 4/15/26 232,716
246,714 Government National
Mortgage Association
30-Yr. Pass Through.................. 6.000 5/15/26 229,503
233,307 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.000 5/15/26 229,268
248,199 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.500 6/15/26 258,352
494,647 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.000 11/15/26 506,414
183,775 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.500 8/15/25 184,638
251,189 Government National
Mortgage Association
30-Yr. Pass Through.................. 6.500 3/15/26 240,463
496,873 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.000 4/15/26 488,272
252,342 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.500 4/15/26 253,235
248,650 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.500 5/15/26 249,530
234,831 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.500 7/15/26 244,437
211,322 Government National
Mortgage Association
30-Yr. Pass Through.................. 9.000 8/15/26 223,435
245,973 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.500 10/15/26 246,844
242,293 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.500 11/15/26 252,205
487,072 Government National
Mortgage Association
30-Yr. Pass Through.................. 9.000 12/15/26 514,990
249,110 Government National
Mortgage Association
30-Yr. Pass Through.................. 7.500 1/15/27 249,966
500,000 Government National
Mortgage Association
30-Yr. Pass Through.................. 8.000 6/20/27 509,585
345,000 Private Export Funding
Corporation.......................... 8.400 7/31/01 368,247
150,000 Private Export Funding
Corporation.......................... 6.240 5/15/02 148,203
250,000 Student Loan Marketing
Association.......................... 6.050 9/14/00 247,514
500,000 Student Loan Marketing
Association.......................... 7.300 8/01/12 515,922
500,000 Tennessee Valley
Authority............................ 6.375 6/15/05 489,184
----------------------------------------------------------------
Total U.S. Government
Agency Obligations 27,120,921
================================================================
Asset-Backed Securities (0.5%)
250,000 Chemical Mastercard
Trust Series 1996-1
Class A.............................. 5.550 9/15/03 242,795
200,000 NationsBank Credit Card
Trust Certificate.................... 6.000 12/15/05 192,518
500,000 Premier Auto Trust..................... 6.750 11/06/00 504,560
115,038 Western Financial
Grantor Trust........................ 7.100 1/01/00 116,105
----------------------------------------------------------------
Total Asset-Backed
Securities 1,055,978
================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
29 AAL Variable Annuity Semi-Annual Report
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
================================================================================
<C> <S> <C> <C> <C>
Corporate Obligations (5.2%)
$200,000 Abbott Laboratories
Notes................................. 6.800% 5/15/05 $200,702
250,000 American Express
Credit Corporation
Senior Notes.......................... 6.125 11/15/01 244,350
350,000 American General
Finance Corporation
Senior Notes.......................... 6.875 7/01/99 353,037
375,000 Associates Corporation
N.A. Senior Notes..................... 6.000 12/01/02 361,741
500,000 Avco Financial Services
Senior Notes.......................... 6.000 8/15/02 482,175
325,000 Baker Hughes, Inc.
Notes................................. 8.000 5/15/04 341,176
500,000 Boeing Company
Debentures............................ 8.100 11/15/06 542,522
250,000 Browning-Ferris Industries,
Inc. Senior Notes..................... 6.375 1/15/08 236,291
250,000 Columbia Gas Systems
Note.................................. 7.320 11/28/10 248,600
500,000 Columbia/HCA
Healthcare Medium
Term Notes............................ 8.850 1/01/07 558,473
250,000 Commercial Credit
Company Notes......................... 6.750 5/15/00 251,068
250,000 E.I. Dupont de Nemours
and Company Notes..................... 8.125 3/15/04 268,623
125,000 Eaton Corporation
Notes................................. 6.375 4/01/99 125,258
510,000 Eli Lilly & Company
Notes................................. 6.570 1/01/16 475,698
500,000 General Electric Capital
Corporation Medium
Term Notes............................ 8.090 4/01/04 534,345
500,000 General Motors
Acceptance
Corporation Notes..................... 9.625 12/15/01 553,249
250,000 Honeywell, Inc.
Debentures............................ 8.625 4/15/06 275,555
250,000 Household Finance
Corporation Notes..................... 7.250 7/15/03 253,905
500,000 Houston Industries, Inc.
Debentures............................ 9.375 6/01/01 542,274
250,000 J.C. Penney & Company,
Inc. Notes............................ 6.375 9/15/00 247,738
340,000 J.P. Morgan Notes....................... 6.250 12/15/05 324,243
250,000 NorAm Energy
Corporation Notes..................... 7.500 8/01/00 255,517
250,000 Noranda, Inc.
Debentures............................ 8.000 6/01/03 260,440
250,000 Norwest Financial, Inc.
Senior Notes.......................... 7.000 1/15/03 251,327
250,000 Penzoil Company
Notes.................................10.125 11/15/09 305,713
250,000 Pepsico, Inc. Medium Term
Notes................................. 5.875 6/01/00 245,988
250,000 Rhone-Poulenc SA
Notes................................. 7.750 1/15/02 257,752
420,000 Service Corporation
International Notes................... 6.875 10/01/07 411,691
500,000 Tosco Corporation First
Mortgage Bonds........................ 9.625 3/15/02 554,812
500,000 U.S. West Capital Funding,
Inc. Notes............................ 6.750 10/01/05 485,828
-----------------------------------------------------------------
Total Corporate
Obligations 10,450,091
=================================================================
Utility Bonds (0.4%)
500,000 Baltimore Gas & Electric
Company First
Refunding Mortgage
Bonds................................. 7.500 1/15/07 516,395
250,000 Pacificorp First Mortgage
Bonds................................. 6.750 4/01/05 244,969
-----------------------------------------------------------------
Total Utility Bonds 761,364
=================================================================
Canadian Government (1.1%)
500,000 Ontario Hydro........................... 7.450 3/31/13 510,865
500,000 Province of
Newfoundland.......................... 8.650 10/22/22 557,604
200,000 Province of Ontario Senior
Global Bond........................... 6.125 6/28/00 198,642
500,000 Province of Quebec...................... 7.500 7/15/02 513,085
500,000 Province of
Saskatchewan.......................... 8.000 7/15/04 531,585
-----------------------------------------------------------------
Total Canadian
Government 2,311,781
=================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 30
<PAGE>
Balanced Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Principal Long-Term Interest Maturity Market
Amount Debt Securities (36.6%) Rate Date Value
===============================================================================
<C> <S> <C> <C> <C>
Canadian Corporate Securities (0.1%)
$ 250,000 Petro-Canada Ltd...................... 8.600% 1/15/10 $ 282,957
-------------------------------------------------
Total Canadian Corporate
Securities......................... 282,957
=================================================
Total Long-Term Debt Securities
(amortized cost
basis $74,369,610)................. 74,057,316
=================================================
Short-Term Notes (7.2%)
620,000 Alabama Power
Company............................. 5.580 7/08/97 619,327
1,338,000 Alabama Power
Company............................. 5.570 7/11/97 1,335,930
273,000 Donnelley R.R. & Sons
Company............................. 5.520 7/07/97 272,749
2,679,000 Dresser Industries, Inc............... 5.540 7/18/97 2,671,991
1,785,000 General Electric Capital
Corporation......................... 5.550 7/21/97 1,780,047
377,000 General Motors
Acceptance
Corporation......................... 5.580 7/28/97 375,422
1,389,000 General Motors
Acceptance
Corporation......................... 5.590 7/01/97 1,389,000
578,000 General Motors
Acceptance
Corporation......................... 5.700 7/07/97 577,451
805,000 General Motors
Acceptance
Corporation......................... 5.580 8/11/97 799,884
601,000 Merrill Lynch &
Company, Inc........................ 5.550 7/07/97 600,444
1,252,000 Merrill Lynch &
Company, Inc........................ 5.570 7/31/97 1,246,189
367,000 Merrill Lynch &
Company, Inc........................ 5.580 8/08/97 364,838
646,000 Merrill Lynch &
Company, Inc........................ 5.560 8/18/97 641,211
1,888,000 Sears Roebuck
Acceptance
Corporation......................... 5.570 7/21/97 1,882,158
-------------------------------------------------
Total Short-Term Investments
(amortized cost basis
$14,556,641)....................... 14,556,641
=================================================
-------------------------------------------------
Total Investments (99.1%)
(amortized cost basis
$174,952,138)...................... 200,317,552
=================================================
-------------------------------------------------
Other Assets, less
Liabilities (0.9%)................. 1,766,827
=================================================
-------------------------------------------------
NET ASSETS (100.0%)................ $202,084,379
=================================================
</TABLE>
* Non-income producing securities
The accompanying notes to the financial statements are an integral part of this
schedule.
31 AAL Variable Annuity Semi-Annual Report
<PAGE>
Large Company Stock Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
The Portfolio Seeks: To achieve investment results that approximate the
performance of the Standard & Poor's 500(R) Composite Stock Price Index ("S&P
500(R) Index") by investing primarily in common stocks included in the index.
The Portfolio Is: A diversified portfolio of larger company common stocks held
approximately in proportion to their capitalization weight in the S&P 500(R)
Index.
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===============================================================================
<C> <S> <C>
Aerospace (2.1%)
22,460 Boeing Company..............................................$1,191,784
2,000 General Dynamics Corporation................................ 150,000
1,700 Goodrich (B.F.) Company..................................... 73,631
6,100 Lockheed Martin Corporation................................. 631,731
6,700 McDonnell Douglas Corporation............................... 458,950
1,900 Northrop Grumman Corporation................................ 166,844
7,400 Raytheon Company............................................ 377,400
6,900 Rockwell International Corporation.......................... 407,100
4,000 TRW, Inc.................................................... 227,250
5,200 Textron, Inc................................................ 345,150
7,500 United Technologies Corporation............................. 622,500
-----------------------------------------------------------------
Total Aerospace........................................ 4,652,340
=================================================================
Air Transportation (0.4%)
2,900 AMR Corporation*............................................ 268,250
2,300 Delta Air Lines, Inc........................................ 188,600
3,600 Federal Express Corporation*................................ 207,900
4,500 Southwest Airlines Company.................................. 116,438
2,400 USAir Group, Inc.*.......................................... 84,000
-----------------------------------------------------------------
Total Air Transportation............................... 865,188
=================================================================
Apparel (0.5%)
2,400 Fruit of the Loom, Inc.*.................................... 74,400
2,200 Liz Claiborne, Inc.......................................... 102,575
9,000 Nike, Inc................................................... 525,375
1,700 Reebok International, Ltd................................... 79,475
1,100 Russell Corporation......................................... 32,587
600 Springs Industries, Inc..................................... 31,650
1,500 Stride Rite Corporation..................................... 19,313
2,000 V F Corporation............................................. 169,500
-----------------------------------------------------------------
Total Apparel.......................................... 1,034,875
=================================================================
Banking (7.5%)
13,350 Banc One Corporation........................................ 646,641
4,800 Bank of Boston Corporation.................................. 345,900
12,300 Bank of New York Company, Inc............................... 535,050
22,600 BankAmerica Corporation..................................... 1,459,113
2,600 Bankers Trust New York Corporation.......................... 226,200
6,500 Barnett Banks, Inc.......................................... 341,250
13,856 Chase Manhattan Corporation................................. 1,344,898
14,600 Citicorp.................................................... 1,760,212
3,400 Comerica, Inc............................................... 231,200
7,000 Corestates Financial Corporation............................ 376,250
3,200 Countrywide Credit Industries, Inc.......................... 99,800
3,400 Fifth Third Bancorp......................................... 278,906
4,300 First Bank System, Inc...................................... 367,112
10,024 First Chicago NBD Corporation............................... 606,452
8,940 First Union Corporation..................................... 826,950
8,235 Fleet Financial Group, Inc.................................. 520,863
5,900 J.P. Morgan & Company, Inc.................................. 615,813
7,100 Keycorp..................................................... 396,713
8,100 Mellon Bank Corporation..................................... 365,512
7,000 National City Corporation................................... 367,500
23,006 NationsBank Corporation..................................... 1,483,887
11,600 Norwest Corporation......................................... 652,500
10,500 PNC Bank Corporation........................................ 437,063
2,900 Providian Financial Corporation............................. 93,162
1,800 Republic New York Corporation............................... 193,500
7,000 Suntrust Banks, Inc......................................... 385,438
</TABLE>
The accompanying notes to the financial statements
are an integral part of this schedule.
AAL Variable Annuity Semi-Annual Report 32
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===========================================================================================
Banking (7.5%)----Continued
...........................
<S> <C> <C>
4,800 U S Bancorp...................................................... $ 307,800
5,200 Wachovia Corporation............................................. 303,225
2,900 Wells Fargo & Company............................................ 781,550
------------------------------------------------------------------------
Total Banking............................................... 16,350,460
========================================================================
Brokerage (0.8%)
................
5,500 Charles Schwab Corporation........................................ 223,781
10,300 Merrill Lynch & Company, Inc...................................... 614,138
17,925 Morgan Stanley, Dean Witter,
Discover and Company............................................ 771,895
3,400 Salomon, Inc...................................................... 189,125
------------------------------------------------------------------------
Total Brokerage.............................................. 1,798,939
========================================================================
Business Machines (7.2%)
........................
10,400 3Com Corporation*................................................. 468,000
3,800 Amdahl Corporation*............................................... 33,250
3,900 Apple Computer, Inc.*............................................. 55,575
1,500 Autodesk, Inc..................................................... 57,469
6,100 Bay Networks, Inc.*............................................... 162,031
4,800 Cabletron Systems, Inc.*.......................................... 135,900
2,500 Ceridian Corporation*............................................. 105,625
20,700 Cisco Systems, Inc.*.............................................. 1,389,488
8,500 Compaq Computers, Inc.*........................................... 843,625
1,200 Data General Corporation*......................................... 31,200
5,500 Dell Computer Corporation*........................................ 645,906
4,900 Digital Equipment Corporation*.................................... 173,644
4,000 Honeywell, Inc.................................................... 303,500
4,200 Ikon Office Solutions, Inc........................................ 104,737
1,400 Intergraph Corporation*........................................... 11,900
32,500 International Business Machines
Corporation..................................................... 2,931,094
37,800 Microsoft Corporation*............................................ 4,776,975
10,800 Novell, Inc.*..................................................... 74,925
21,150 Oracle Systems Corporation*....................................... 1,065,431
4,000 Parametric Technology Company*.................................... 170,250
4,700 Pitney-Bowes, Inc................................................. 326,650
7,700 Seagate Technology, Inc.*......................................... 270,944
5,500 Silicon Graphics, Inc.*........................................... 82,500
11,500 Sun Microsystems, Inc.*........................................... 428,015
3,700 Tandem Computers, Inc.*........................................... 74,925
5,400 Unisys Corporation*............................................... 41,175
10,200 Xerox Corporation................................................. 804,525
------------------------------------------------------------------------
Business Machines........................................... 15,569,259
========================================================================
Business Services (1.6%)
........................
9,100 Automatic Data Processing, Inc................................... 427,700
3,200 Block (H.R.), Inc................................................ 103,200
6,600 Browning-Ferris Industries, Inc.................................. 219,450
5,300 Cognizant Corporation............................................ 214,650
11,375 Computer Associates International, Inc........................... 633,445
2,400 Computer Sciences Corporation*................................... 173,100
2,500 Deluxe Corporation............................................... 85,312
2,000 Ecolab, Inc...................................................... 95,500
14,000 First Data Corporation........................................... 615,125
2,500 Interpublic Group of Companies, Inc.............................. 153,281
900 John H. Harland Company.......................................... 20,531
9,800 Laidlaw, Inc..................................................... 135,363
2,800 Moore Corporation, Ltd........................................... 55,125
1,400 National Service Industries, Inc................................. 68,163
1,800 Safety Kleen Corporation......................................... 30,375
800 Shared Medical Systems Corporation............................... 43,200
5,300 The Dun & Bradstreet Corporation................................. 139,125
9,740 Waste Management Inc............................................. 312,898
------------------------------------------------------------------------
Total Business Services..................................... 3,525,543
========================================================================
Chemicals (3.3%)
................
3,600 Air Products & Chemicals, Inc..................................... 292,500
35,300 E.I. Du Pont de Nemours & Company................................. 2,219,487
2,400 Eastman Chemical Company.......................................... 152,400
1,900 Great Lakes Chemical Corporation.................................. 99,512
3,200 Hercules, Inc..................................................... 153,200
13,200 Minnesota Mining and Manufacturing
Company......................................................... 1,346,400
18,400 Monsanto Company.................................................. 792,350
4,400 Morton International, Inc......................................... 132,825
2,100 Nalco Chemical Company............................................ 81,113
5,700 PPG Industries, Inc............................................... 331,313
4,900 Praxair, Inc...................................................... 274,400
The accompanying notes to the financial statements are an integral part of this schedule.
33 AAL Variable Annuity Semi-Annual Report
</TABLE>
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===============================================================================
<C> <S> <C>
Chemicals (3.3%)--Continued
2,100 Rohm & Haas Company..................................... $189,131
3,100 Sigma-Aldrich Corporation............................... 108,694
7,700 The Dow Chemical Company................................ 670,862
4,000 Union Carbide Corporation............................... 188,250
2,300 W.R. Grace & Company.................................... 126,788
-----------------------------------------------------------------
Total Chemicals.................................... 7,159,225
=================================================================
Construction (0.4%)
1,300 Armstrong World Industries, Inc......................... 95,387
900 Centex Corporation...................................... 36,562
1,400 Crane Company........................................... 58,537
2,600 Fluor Corporation....................................... 143,488
1,200 Kaufman & Broad Home Corporation........................ 21,075
5,000 Masco Corporation....................................... 208,750
1,600 Owens-Corning Fiberglass Corporation.................... 69,000
600 Pulte Corporation....................................... 20,738
5,300 Sherwin-Williams Company................................ 163,638
2,700 Stanley Works........................................... 108,000
-----------------------------------------------------------------
Total Construction................................. 925,175
=================================================================
Consumer Durables (0.3%)
2,900 Black & Decker Corporation.............................. 107,844
3,100 Maytag Corporation...................................... 80,987
4,900 Newell Company.......................................... 194,163
1,900 Tupperware Corporation.................................. 69,350
2,300 Whirlpool Corporation................................... 125,494
-----------------------------------------------------------------
Total Consumer Durables............................ 577,838
=================================================================
Containers (0.2%)
900 Ball Corporation........................................ 27,056
1,600 Bemis Company, Inc...................................... 69,200
4,000 Crown Cork & Seal Company, Inc.......................... 213,750
3,100 Stone Container Corporation............................. 44,369
-----------------------------------------------------------------
Total Containers................................... 354,375
=================================================================
Cosmetics (2.8%)
1,700 Alberto-Culver Company................................. 47,600
4,200 Avon Products, Inc..................................... 296,363
1,600 Clorox Company......................................... 211,200
9,300 Colgate-Palmolive Company.............................. 606,825
17,500 Gillette Company....................................... 1,658,125
3,400 International Flavors and Fragrances, Inc.............. 171,700
21,300 Procter & Gamble Company............................... 3,008,625
-----------------------------------------------------------------
Total Cosmetics.................................... 6,000,438
=================================================================
Credit Cards (0.1%)
4,700 Equifax, Inc........................................... 174,781
-----------------------------------------------------------------
Total Credit Cards................................. 174,781
=================================================================
Drugs & Medicine (11.2%)
24,400 Abbott Laboratories.................................... 1,628,700
2,000 Allergan, Inc.......................................... 63,625
2,600 Alza Corporation*...................................... 75,400
20,100 American Home Products Corporation..................... 1,537,650
8,300 Amgen, Inc.*........................................... 482,438
1,700 Bard (C.R.), Inc....................................... 61,731
1,700 Bausch & Lomb, Inc..................................... 80,112
8,500 Baxter International, Inc.............................. 444,125
3,900 Becton, Dickinson and Company.......................... 197,437
3,100 Beverly Enterprises, Inc.*............................. 50,375
3,500 Biomet, Inc............................................ 65,187
6,100 Boston Scientific Corporation*......................... 374,769
31,500 Bristol-Myers Squibb Company........................... 2,551,500
3,400 Cardinal Health, Inc................................... 194,650
21,000 Columbia/HCA Healthcare
Corporation.......................................... 825,562
17,400 Eli Lilly & Company.................................... 1,902,037
2,400 Guidant Corporation.................................... 204,000
10,700 HEALTHSOUTH Corporation*............................... 266,831
5,100 Humana, Inc.*.......................................... 117,938
41,800 Johnson & Johnson...................................... 2,690,875
2,300 Mallinckrodt Group, Inc................................ 87,400
1,900 Manor Care, Inc........................................ 61,988
7,600 Medtronic, Inc......................................... 615,600
</TABLE>
The accompanying notes to the financial statements
are an integral part of this schedule.
AAL Variable Annuity Semi-Annual Report 34
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
============================================================================================
<S> <C> <C>
Drugs & Medicine (11.2%)--Continued
37,900 Merck & Company, Inc. ........................................... $ 3,922,650
20,300 Pfizer, Inc. .................................................... 2,425,850
15,915 Pharmacia & Upjohn, Inc.......................................... 553,046
23,100 Schering-Plough Corporation...................................... 1,105,913
2,800 St. Jude Medical, Inc.*.......................................... 109,200
9,400 Tenet Healthcare Corporation*.................................... 277,888
2,100 U.S. Surgical Corporation........................................ 78,225
5,800 United Healthcare Corporation.................................... 301,600
8,500 Warner-Lambert Company........................................... 1,056,125
-------------------------------------------------------------------------
Total Drugs & Medicine...................................... 24,410,427
=========================================================================
Electronics (4.7%)
6,828 AMP, Inc......................................................... 285,069
2,200 Adobe Systems, Inc............................................... 77,138
4,200 Advanced Micro Devices, Inc.*.................................... 151,200
5,700 Applied Materials, Inc.*......................................... 403,631
1,400 EG&G, Inc........................................................ 31,500
7,700 EMC Corporation*................................................. 300,300
4,200 General Instrument Corporation*.................................. 105,000
1,500 General Signal Corporation....................................... 65,438
1,300 Harris Corporation............................................... 109,200
31,800 Hewlett-Packard Company.......................................... 1,780,800
25,800 Intel Corporation................................................ 3,658,762
4,400 LSI Logic Corporation*........................................... 140,800
6,500 Micron Technology, Inc.*......................................... 259,594
18,600 Motorola, Inc.................................................... 1,413,600
4,300 National Semiconductor Corporation*.............................. 131,688
1,400 Perkin Elmer Corporation......................................... 111,387
2,400 Scientific-Atlanta, Inc.......................................... 52,500
1,000 Tektronix, Inc................................................... 60,000
5,600 Tellabs, Inc.*................................................... 312,900
6,000 Texas Instruments, Inc........................................... 504,375
4,600 Thermo Electron Corporation*..................................... 158,125
1,600 Thomas & Betts Corporation....................................... 84,100
-------------------------------------------------------------------------
Total Electronics........................................... 10,197,107
=========================================================================
Energy-Raw Materials (1.2%)
4,500 Baker Hughes, Inc................................................ 174,094
3,900 Burlington Resources, Inc........................................ 172,087
5,500 Dresser Industries, Inc.......................................... 204,875
600 Eastern Enterprises.............................................. 20,812
4,000 Halliburton Company.............................................. 317,000
1,100 Louisiana Land and Exploration
Company........................................................ 62,838
1,700 McDermott International, Inc..................................... 49,619
10,300 Occidental Petroleum Corporation................................. 258,144
7,800 Schlumberger, Ltd................................................ 975,000
7,772 Union Pacific Resources Group Inc................................ 193,328
1,700 Western Atlas, Inc.*............................................. 124,525
-------------------------------------------------------------------------
Total Energy-Raw Materials.................................. 2,552,322
=========================================================================
Food & Agriculture (6.4%)
17,028 Archer-Daniels-Midland Company................................... 400,158
4,600 CPC International, Inc........................................... 424,638
14,600 Campbell Soup Company............................................ 730,000
78,100 Coca-Cola Company................................................ 5,271,750
7,500 ConAgra, Inc..................................................... 480,937
1,100 Fleming Companies, Inc........................................... 19,800
5,100 General Mills, Inc............................................... 332,137
11,500 H.J. Heinz Company............................................... 530,437
4,800 Hershey Foods Corporation........................................ 265,500
6,700 Kellogg Company.................................................. 573,688
48,700 PepsiCo, Inc..................................................... 1,829,294
2,600 Pioneer Hi-Bred International, Inc............................... 208,000
4,200 Quaker Oats Company.............................................. 188,475
3,400 Ralston Purina Corporation....................................... 279,438
15,000 Sara Lee Corporation............................................. 624,375
2,000 Supervalu, Inc................................................... 69,000
5,500 Sysco Corporation................................................ 200,750
5,000 Unilever N.V..................................................... 1,090,000
3,200 Whitman Corporation.............................................. 76,800
3,700 Wrigley (Wm) Jr. Company......................................... 247,900
-------------------------------------------------------------------------
Total Food & Agriculture.................................... 13,843,077
=========================================================================
Gold (0.3%)
11,200 Barrick Gold Corporation......................................... 246,400
7,000 Battle Mountain Gold Company..................................... 39,812
4,600 Homestake Mining Company......................................... 60,087
The accompanying notes to the financial statements are an integral part of this schedule.
35 AAL Variable Annuity Semi-Annual Report
</TABLE>
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
=============================================================================
<C> <S> <C>
Gold (0.3%)----Continued
- ------------------------
4,848 Newmont Mining Corporation............................ $ 189,072
7,500 Placer Dome, Inc...................................... 122,813
-------------------------------------------------------------
Total Gold 658,184
=============================================================
Insurance (3.8%)
- -----------------
1 Aegon N.V.............................................. 57
4,749 Aetna Life & Casualty Company.......................... 486,179
14,041 Allstate Corporation................................... 1,024,993
7,562 American General Corporation........................... 361,097
14,800 American International Group, Inc...................... 2,210,750
5,050 Aon Corporation........................................ 261,337
5,500 Chubb Corporation...................................... 367,812
2,400 Cigna Corporation...................................... 426,000
5,900 Conseco, Inc........................................... 218,300
2,600 General Re Corporation................................. 473,200
3,700 ITT Hartford Group, Inc................................ 306,175
2,300 Jefferson-Pilot Corporation............................ 160,713
3,300 Lincoln National Corporation........................... 212,438
1,400 MBIA, Inc.............................................. 157,938
3,700 MGIC Investment Corporation............................ 177,369
5,200 Marsh & McLennan Companies, Inc........................ 371,150
3,900 Safeco Corporation..................................... 182,081
2,700 St. Paul Companies, Inc................................ 205,875
2,300 Torchmark Corporation.................................. 163,875
2,100 Transamerica Corporation............................... 196,481
3,600 USF&G Corporation...................................... 86,400
4,600 Unum Corporation....................................... 193,200
-------------------------------------------------------------
Total Insurance 8,243,420
=============================================================
Liquor (0.6%)
- -------------
15,600 Anheuser-Busch Companies, Inc.......................... 654,225
2,100 Brown-Foreman Corporation.............................. 102,506
1,100 Coors (Adolph) Company................................. 29,288
11,600 Seagram Company, Ltd................................... 466,900
-------------------------------------------------------------
Total Liquor 1,252,919
=============================================================
Media (1.8%)
- ------------
10,200 Comcast Corporation, Class A........................... 218,025
4,700 Donnelley (R.R.) & Sons Company........................ 172,137
3,000 Dow Jones & Company, Inc............................... 120,562
4,500 Gannett Company, Inc................................... 444,375
1,100 King World Productions, Inc............................ 38,500
2,900 Knight-Ridder, Inc..................................... 142,281
3,100 McGraw-Hill, Inc....................................... 182,319
1,600 Meredith Corporation................................... 46,400
3,000 New York Times Company................................. 148,500
20,800 Tele-Communications, Inc.*............................. 309,400
17,800 Time Warner, Inc....................................... 858,850
2,900 Times Mirror Company................................... 160,225
3,800 Tribune Company........................................ 182,638
11,000 Viacom, Inc.*.......................................... 330,000
19,900 Westinghouse Electric Corporation...................... 460,188
-------------------------------------------------------------
Total Media 3,814,400
=============================================================
Miscellaneous Finance (2.8%)
- -----------------------------
3,300 Ahmanson (H.F.) & Company.............................. 141,900
14,900 American Express Company............................... 1,110,050
1,700 Beneficial Corporation................................. 120,806
34,200 Fannie Mae............................................. 1,491,975
22,400 Federal Home Loan Mortgage
Corporation.......................................... 770,000
1,800 Golden West Financial Corporation...................... 126,000
4,300 Great Western Financial Corporation.................... 231,125
4,300 Green Tree Financial Corporation....................... 153,188
3,100 Household International Corporation.................... 364,056
10,475 MBNA Corporation....................................... 383,647
20,000 Travelers Group, Inc................................... 1,261,250
-------------------------------------------------------------
Total Miscellaneous
Finance 6,153,997
=============================================================
Motor Vehicles (2.0%)
- ---------------------
22,000 Chrysler Corporation................................... 721,875
1,300 Cummins Engine Company, Inc............................ 91,731
3,200 Dana Corporation....................................... 121,600
2,500 Eaton Corporation...................................... 218,281
</TABLE>
The accompanying notes to the financial statements are an integral part of
this schedule.
AAL Variable Annuity Semi-Annual Report 36
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===============================================================================
<S> <C> <C>
Motor Vehicles (2.0%) -- Continued
1,900 Echlin, Inc. .......................................... $ 68,400
1,100 Fleetwood Enterprises, Inc. ........................... 32,794
37,100 Ford Motor Company..................................... 1,400,525
23,700 General Motors Corporation............................. 1,319,794
5,600 Genuine Parts Company.................................. 189,700
3,700 ITT Industries, Inc.................................... 95,275
2,300 Navistar International Corporation*.................... 39,675
2,500 PACCAR, Inc............................................ 116,094
---------------------------------------------------------------
Total Motor Vehicles.............................. 4,415,744
===============================================================
Non-Durables & Entertainment (1.0%)
2,300 American Greetings Corporation, Class A................ 85,387
5,000 Darden Restaurants, Inc................................ 45,312
2,200 Harcourt General, Inc.................................. 104,775
4,000 Hasbro, Inc............................................ 113,500
1,200 Jostens, Inc........................................... 32,100
9,050 Mattel, Inc............................................ 306,569
21,900 McDonald's Corporation................................. 1,058,044
4,600 Rubbermaid, Inc........................................ 136,850
7,300 Service Corporation International...................... 239,988
4,000 Wendy's International, Inc............................. 103,750
---------------------------------------------------------------
Total Non-Durables & Entertainment................ 2,226,275
===============================================================
Non-Ferrous Metals (0.7%)
7,100 Alcan Aluminum, Ltd.................................... 246,281
5,500 Aluminum Company of America............................ 414,562
1,300 Asarco, Inc............................................ 39,813
2,900 Cyprus Minerals Company................................ 71,050
4,300 Echo Bay Mines, Ltd.................................... 24,725
4,500 Engelhard Corporation.................................. 94,219
6,000 Freeport-McMoran Copper & Gold, Class B................ 186,750
5,200 Inco, Ltd.............................................. 156,325
2,100 Phelps Dodge Corporation............................... 178,894
2,300 Reynolds Metals Company................................ 163,875
---------------------------------------------------------------
Total Non-Ferrous Metal........................... 1,576,494
===============================================================
Oil - Domestic (1.1%)
2,900 Amerada Hess Corporation............................... 161,131
2,300 Ashland Oil, Inc....................................... 106,663
10,200 Atlantic Richfield Company............................. 719,100
800 Helmerich & Payne, Inc................................. 46,100
1,500 Kerr-McGee Corporation................................. 95,062
3,200 Oryx Energy Company*................................... 67,600
1,500 Pennzoil Corporation................................... 115,125
8,200 Phillips Petroleum Company............................. 358,750
2,600 Rowan Companies, Inc.*................................. 73,287
3,100 Santa Fe Energy Resources, Inc.*....................... 45,531
2,200 Sun Company, Inc....................................... 68,200
9,000 USX-Marathon Group, Inc................................ 259,875
7,800 Unocal Corporation..................................... 302,738
---------------------------------------------------------------
Total Oil - Domestic.............................. 2,419,162
===============================================================
Oil - International (6.4%)
15,600 Amoco Corporation...................................... 1,356,225
20,500 Chevron Corporation.................................... 1,515,719
77,900 Exxon Corporation...................................... 4,790,850
24,800 Mobil Corporation...................................... 1,732,900
67,200 Royal Dutch Petroleum Company.......................... 3,654,000
8,300 Texaco, Inc............................................ 902,625
---------------------------------------------------------------
Total Oil - International......................... 13,952,319
===============================================================
Optical & Photo (0.6%)
7,100 Corning, Inc........................................... 394,938
10,500 Eastman Kodak Company.................................. 805,875
1,400 Polaroid Corporation................................... 77,700
---------------------------------------------------------------
Total Optical & Photo............................. 1,278,513
================================================================
Paper & Forest Products (1.3%)
1,500 Boise Cascade Corporation.............................. 52,969
3,000 Champion International Corporation..................... 165,750
2,900 Georgia-Pacific Corporation............................ 247,588
9,403 International Paper Company............................ 456,633
2,600 James River Corporation of Virginia.................... 96,200
17,692 Kimberly-Clark Corporation............................. 880,177
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
37 AAL Variable Annuity Semi-Annual Report
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
==========================================================================
<C> <S> <C>
Paper & Forest Products (1.3%)----Continued
3,400 Louisiana-Pacific Corporation......................... $ 71,825
1,600 Mead Corporation...................................... 99,600
900 Potlatch Corporation.................................. 40,725
1,700 Temple-Inland, Inc.................................... 91,800
2,200 Union Camp Corporation................................ 110,000
3,100 Westvaco Corporation.................................. 97,456
6,300 Weyerhaeuser Company.................................. 327,600
1,800 Willamette Industries, Inc............................ 126,000
----------------------------------------------------------
Total Paper
& Forest Products.............................. 2,864,323
==========================================================
Producers Goods (5.7%)
800 Aeroquip-Vickers Inc.*................................ 37,800
8,900 Allied-Signal, Inc.................................... 747,600
3,200 Avery Dennison Corporation............................ 128,400
2,300 Case Corporation...................................... 158,412
6,100 Caterpillar, Inc...................................... 654,987
1,200 Cincinnati Milacron, Inc.............................. 31,125
3,700 Cooper Industries, Inc................................ 184,075
8,000 Deere & Company....................................... 439,000
3,600 Dover Corporation..................................... 221,400
14,000 Emerson Electric Company.............................. 770,875
1,200 FMC Corporation*...................................... 95,325
1,200 Foster Wheeler Corporation............................ 48,600
103,300 General Electric Company.............................. 6,753,237
1,000 Giddings & Lewis, Inc................................. 20,875
1,500 Harnischfeger Industries, Inc......................... 62,250
7,700 Illinois Tool Works, Inc.............................. 384,519
3,400 Ingersoll-Rand Company................................ 209,950
2,600 Johnson Controls, Inc................................. 106,762
1,300 Millipore Corporation................................. 57,200
210 NACCO Industries, Inc................................. 11,852
3,900 Pall Corporation...................................... 90,675
2,300 Parker Hannifin Corporation........................... 139,581
1,500 Raychem Corporation................................... 111,563
1,900 Snap-On, Inc.......................................... 74,813
5,300 Tenneco, Inc.......................................... 239,494
1,900 Timken Company........................................ 67,569
5,300 Tyco International, Ltd............................... 368,681
1,700 W.W. Grainger, Inc.................................... 132,919
----------------------------------------------------------
Total Producers Goods.......................... 12,349,539
==========================================================
Railroad & Shipping (0.8%)
4,864 Burlington Northern, Inc............................. 437,152
6,800 CSX Corporation...................................... 377,400
4,000 Norfolk Southern Corporation......................... 403,000
7,700 Union Pacific Corporation............................ 542,850
----------------------------------------------------------
Total Railroad & Shipping...................... 1,760,402
==========================================================
Retail Stores (4.6%)
7,800 Albertson's, Inc..................................... 284,700
4,600 American Stores Company.............................. 227,125
4,700 Autozone, Inc.*...................................... 110,744
12,400 CUC International, Inc.*............................. 320,075
5,200 CVS Corporation...................................... 266,500
3,300 Charming Shoppes, Inc.*.............................. 17,222
3,000 Circuit City Stores, Inc............................. 106,687
6,500 Costco Companies, Inc.*.............................. 213,687
6,800 Dayton Hudson Corporation............................ 361,675
3,500 Dillard's Inc........................................ 121,188
6,500 Federated Department Stores, Inc.*................... 225,875
8,700 Gap, Inc............................................. 338,212
1,800 Giant Food, Inc., Class A............................ 58,725
1,100 Great Atlantic & Pacific Tea Company, Inc............ 29,906
15,100 Home Depot, Inc...................................... 1,040,956
7,700 J.C. Penney Company, Inc............................. 401,844
15,100 Kmart Corporation*................................... 184,975
7,900 Kroger Corporation*.................................. 229,100
1,200 Long's Drug Stores, Inc.............................. 31,425
5,400 Lowe's Companies, Inc................................ 200,475
7,700 May Department Stores Company........................ 363,825
1,100 Mercantile Stores Company, Inc....................... 69,231
2,500 Nordstrom, Inc....................................... 122,656
1,900 Pep Boys-Manny, Moe, & Jack.......................... 64,719
3,800 Rite Aid Corporation................................. 189,525
12,300 Sears Roebuck & Company.............................. 661,125
4,800 TJX Companies, Inc................................... 126,600
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 38
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===============================================================================
<C> <S> <C>
Retail Stores (4.6%)--Continued
1,800 Tandy Corporation....................................... $100,800
8,405 The Limited, Inc........................................ 170,201
9,100 Toys "R" Us, Inc.*...................................... 318,500
71,900 Wal-Mart Stores, Inc.................................... 2,431,119
7,700 Walgreen Company........................................ 412,913
4,700 Winn-Dixie Stores, Inc.................................. 175,075
4,200 Woolworth Corporation*.................................. 100,800
-----------------------------------------------------------------
Total Retail Stores................................ 10,078,185
=================================================================
Steel (0.2%)
5,439 Allegheny Teledyne, Inc................................. 146,853
3,300 Armco, Inc.*............................................ 12,787
3,500 Bethlehem Steel Corporation*............................ 36,531
1,500 Inland Steel Industries, Inc............................ 39,187
2,700 Nucor Corporation....................................... 152,550
2,600 USX-US Steel Group, Inc................................. 91,163
3,000 Worthington Industries, Inc............................. 54,938
-----------------------------------------------------------------
Total Steel........................................ 534,009
=================================================================
Telephone (7.3%)
5,800 ALLTEL Corporation...................................... 193,937
50,800 AT&T Corporation........................................ 1,781,175
15,700 Airtouch Communications, Inc.*.......................... 429,787
17,300 Ameritech Corporation................................... 1,175,319
2,775 Andrew Corporation*..................................... 78,047
13,800 Bell Atlantic Corporation............................... 1,047,075
31,100 BellSouth Corporation................................... 1,442,262
3,600 DSC Communications Corporation*......................... 80,100
5,100 Frontier Corporation.................................... 101,681
30,100 GTE Corporation......................................... 1,320,638
20,023 Lucent Technologies, Inc................................ 1,442,907
21,400 MCI Communications Corporation.......................... 819,218
8,200 Northern Telecom Ltd.................................... 746,200
13,800 Nynex Corporation....................................... 795,225
28,772 SBC Communications, Inc................................. 1,780,268
13,500 Sprint Corporation...................................... 710,438
19,500 U.S. West Media Group*.................................. 394,875
15,000 U.S. West, Inc.......................................... 565,312
27,100 WorldCom, Inc.*......................................... 867,200
-----------------------------------------------------------------
Total Telephone.................................... 15,771,664
=================================================================
Tires & Rubber (0.2%)
2,400 Cooper Tire & Rubber Company............................ 52,800
4,900 Goodyear Tire & Rubber Company.......................... 310,231
-----------------------------------------------------------------
Total Tires & Rubber............................... 363,031
=================================================================
Tobacco (1.9%)
5,300 American Brands, Inc.................................... 197,756
3,600 Loews Corporation....................................... 360,450
76,600 Phillip Morris Companies, Inc........................... 3,399,125
5,800 UST, Inc................................................ 160,950
-----------------------------------------------------------------
Total Tobacco...................................... 4,118,281
=================================================================
Travel & Recreation (1.3%)
3,000 Brunswick Corporation................................... 93,750
21,249 Disney (Walt) Company................................... 1,705,232
5,000 HFS, Inc.*.............................................. 290,000
3,200 Harrah's Entertainment*................................. 57,600
7,700 Hilton Hotels Corporation............................... 204,531
3,600 ITT Corporation*........................................ 219,825
4,000 Marriott International, Inc............................. 245,500
-----------------------------------------------------------------
Total Travel & Recreation.......................... 2,816,438
=================================================================
Trucking & Freight (0.1%)
1,200 Caliber System, Inc..................................... 44,700
2,300 Ryder Systems, Inc...................................... 75,900
-----------------------------------------------------------------
Total Trucking & Freight........................... 120,600
=================================================================
Utilities & Energy (3.0%)
5,900 American Electric Power Company......................... 247,800
4,600 Baltimore Gas & Electric Company........................ 122,762
4,900 CINergy Corporation..................................... 170,581
4,700 Carolina Power & Light Company.......................... 168,612
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
39 AAL Variable Annuity Semi-Annual Report
<PAGE>
Large Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (98.2%) Market Value
===============================================================================
<C> <S> <C>
Utilities & Energy (3.0%)--Continued
6,600 Central & Southwest Corporation.......................... $140,250
3,300 Coastal Corporation...................................... 175,519
1,800 Columbia Gas System, Inc................................. 117,450
7,300 Consolidated Edison Company
of New York............................................ 214,894
3,000 Consolidated Natural Gas Company......................... 161,437
4,500 DTE Energy Company....................................... 124,312
5,600 Dominion Resources, Inc.................................. 205,100
11,209 Duke Energy Corporation.................................. 537,316
13,200 Edison International..................................... 328,350
7,900 Enron Corporation........................................ 322,419
2,100 Enserch Corporation...................................... 46,725
7,200 Entergy Corporation...................................... 197,100
5,700 FPL Group, Inc........................................... 262,556
3,700 GPU, Inc................................................. 132,737
7,300 Houston Industries, Inc.................................. 156,494
4,500 Niagara Mohawk Power Corporation*........................ 38,531
1,500 Nicor, Inc............................................... 53,813
4,300 NorAm Energy Corporation................................. 65,575
2,200 Northern States Power Company............................ 113,850
800 ONEOK, Inc............................................... 25,750
4,700 Ohio Edison Company...................................... 102,519
5,000 PP&L Resources, Inc...................................... 99,688
2,600 Pacific Enterprises...................................... 87,425
12,900 Pacific Gas & Electric Company........................... 312,825
9,200 PacifiCorp............................................... 202,400
6,900 Peco Energy Company...................................... 144,900
1,000 Peoples Energy Corporation............................... 37,438
7,400 Public Service Enterprise................................ 185,000
2,700 Sonat, Inc............................................... 138,375
21,100 Southern Company......................................... 461,563
7,000 Texas Utilities Company.................................. 241,063
6,700 Unicom Corporation....................................... 149,075
3,200 Union Electric Company................................... 120,600
4,900 Williams Companies, Inc.................................. 214,375
--------------------------------------------
Total Utilities & Energy 6,627,179
============================================
--------------------------------------------
Total Common Stocks
(cost basis $169,240,157) 213,386,447
============================================
Principal Short-term Interest Maturity Market
Amount Investments (1.5%) Rate Date Value
==============================================================================
$ 643,000 General Motors
Acceptance
Corporation................. 5.56% 7/01/97 643,000
624,000 Merrill Lynch &
Company, Inc............... 5.56 7/02/97 623,901
1,442,000 Merrill Lynch &
Company, Inc............... 5.75 7/02/97 1,441,772
533,000 Walt Disney Company.......... 5.50 7/01/97 533,000
--------------------------------------------
Total Short-Term Investments
(cost basis $3,241,673) 3,241,673
============================================
--------------------------------------------
Total Investments (99.7%)
(cost basis $172,481,830) 216,628,120
============================================
--------------------------------------------
Other Assets,
less Liabilities (0.3%) 709,964
============================================
--------------------------------------------
NET ASSETS (100.0%) $217,338,084
============================================
</TABLE>
*Non-income producing security
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 40
<PAGE>
Small Company Stock Portfolio
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
The Portfolio Seeks: To achieve investment results that approximate the
performance of the Wilshire Small Cap Index by investing primarily in common
stocks included in the index.
The Portfolio Is: A diversified portfolio of smaller company common stocks held
approximately in proportion to their capitalization weight in the Wilshire Small
Cap Index.
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
===============================================================================
<C> <S> <C>
Aerospace (1.2%)
18,100 Gencorp, Inc. ...........................................$ 418,562
10,000 Kaman Corporation........................................ 153,750
10,000 Thiokol Corporation...................................... 700,000
-------------------------------------------------------------
Total Aerospace.................................... 1,272,312
=============================================================
Air Transportation (0.7%)
11,700 Airborne Freight Corporation............................. 489,937
8,000 Alaska Airgroup, Inc.*................................... 205,000
-------------------------------------------------------------
Total Air Transportation........................... 694,937
=============================================================
Apparel (1.3%)
9,900 Brown Group, Inc......................................... 185,006
13,900 Gymboree Corporation*.................................... 333,600
11,400 Kellwood Corporation..................................... 316,350
26,700 Stride Rite Corporation.................................. 343,763
12,500 The Dress Barn Corporation*.............................. 243,750
-------------------------------------------------------------
Total Apparel...................................... 1,422,469
=============================================================
Banking (6.4%)
11,500 Astoria Financial Corporation............................ 546,250
25,200 City Steel National Corporation.......................... 606,375
21,300 First Commerce Corporation............................... 937,200
21,000 Imperial Credit Industries, Inc.*........................ 431,813
13,300 Long Island Bancorp, Inc................................. 482,956
17,900 Magna Group, Inc......................................... 622,025
31,600 Money Store Inc. (The)................................... 906,525
6,700 ONBANCorp, Inc........................................... 341,700
33,200 Peoples Bank of Bridgeport,
Connecticut............................................ 859,050
16,600 Rigs National Corp. - Washington......................... 342,375
23,065 Valley National Bancorp.................................. 625,638
-------------------------------------------------------------
Total Banking...................................... 6,701,907
=============================================================
Brokerage (0.9%)
13,150 Alex Brown, Inc.......................................... 928,719
-------------------------------------------------------------
Total Brokerage.................................... 928,719
=============================================================
Business Machines (3.0%)
11,400 Broderbund Software, Inc.*............................... 281,438
10,800 Cyrix Corporation*....................................... 230,850
22,100 Data General Corporation*................................ 574,600
12,200 Exabyte Corporation*..................................... 156,312
43,500 Integrated Device Technology, Inc.*...................... 456,750
15,825 Shiva Corporation*....................................... 165,173
18,100 Structural Dynamic Research Corporation*................. 475,125
41,800 Sybase, Inc.*............................................ 621,775
12,500 Xircom, Inc.*............................................ 155,469
-------------------------------------------------------------
Total Business Machines............................ 3,117,492
=============================================================
Business Services (10.3%)
22,600 American Management Systems, Inc.*....................... 604,550
17,800 Cerner Corporation*...................................... 373,800
14,800 Citrix Systems, Inc.*.................................... 649,350
34,700 Computervision Corporation*.............................. 160,488
11,900 Credence Systems Corporation*............................ 356,256
25,100 Credit Acceptance Corporation*........................... 323,162
15,400 Information Resources, Inc.*............................. 217,525
13,600 Integrated Health Services, Inc.......................... 523,600
25,400 Intuit, Inc.*............................................ 582,612
13,400 Medic Computer Systems, Inc.*............................ 298,150
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
41 AAL Variable Annuity Semi-Annual Report
<PAGE>
Small Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
===============================================================================
<S> <C> <C>
Business Services (10.3%) -- Continued
18,800 Micro Warehouse, Inc.*................................. $ 321,950
23,600 Network General Corporation*........................... 351,050
7,400 New England Business Service, Inc...................... 194,713
22,100 Oak Technology, Inc.*.................................. 215,475
22,400 Pittston Company....................................... 672,000
21,900 Pixar, Inc.*........................................... 344,925
22,000 Psinet Inc.*........................................... 165,000
26,900 S3, Inc.*.............................................. 295,900
13,600 Shared Medical Systems Corporation..................... 734,400
15,600 Standard Register Company.............................. 477,750
30,200 Symantec Corporation*.................................. 588,900
9,200 The Profit Recovery Group
International, Inc.*................................. 127,650
23,600 Wallace Computer Services, Inc......................... 709,475
16,900 Westpoint Stevens, Inc.*............................... 661,213
18,500 World Color Press, Inc.*............................... 439,375
22,900 Xylan Corporation*..................................... 389,300
---------------------------------------------------------------
Total Business Services........................... 10,778,569
===============================================================
Chemicals (2.3%)
15,300 ACX Technologies, Inc.*................................ 344,250
21,700 Calgon Carbon Corporation.............................. 301,088
7,700 H.B. Fuller Company.................................... 423,500
24,800 Lawter International, Inc.............................. 313,100
3,900 NCH Corporation........................................ 243,750
5,900 Petrolite Corporation.................................. 365,062
18,600 Rollins, Inc........................................... 374,325
---------------------------------------------------------------
Total Chemicals................................... 2,365,075
===============================================================
Construction (2.6%)
15,800 Centex Corporation..................................... 641,875
20,900 Kaufman & Broad Home Corporation....................... 367,056
6,200 Lawson Products Inc.................................... 167,400
19,700 Lennar Corporation..................................... 629,169
11,500 Pulte Corporation...................................... 397,469
11,700 Southdown, Inc......................................... 510,412
---------------------------------------------------------------
Total Construction................................ 2,713,381
===============================================================
Consumer Durables (1.6%)
7,200 Bassett Furniture Industries, Inc...................... 203,850
11,300 Kimball International, Inc............................. 454,825
9,800 La Z Boy Chair Company................................. 352,800
18,900 Mohawk Industries, Inc.*............................... 429,975
9,900 Shorewood Packaging Corporation*....................... 225,225
---------------------------------------------------------------
Total Consumer Durables........................... 1,666,675
===============================================================
Containers (0.2%)
28,800 Gaylord Container Corporation* ........................ 221,400
---------------------------------------------------------------
Total Containers.................................. 221,400
===============================================================
Cosmetics (0.4%)
5,500 Chemed Corporation..................................... 205,906
27,800 Playtex Products, Inc.*................................ 260,625
---------------------------------------------------------------
Total Cosmetics................................... 466,531
===============================================================
Drugs & Medicine (7.3%)
15,800 Acuson Corporation*.................................... 363,400
7,500 Advanced Technology Labs, Inc.*........................ 322,500
20,500 Advanced Tissue Sciences, Inc.*........................ 263,937
16,700 Alliance Pharmaceutical Corporation*................... 168,044
15,600 Ballard Medical Products............................... 312,975
15,600 Beckman Instruments, Inc............................... 752,700
27,450 Bergen Brunswig Corporation............................ 765,169
10,883 Block Drug Company..................................... 476,131
13,600 Cephalon, Inc.*........................................ 156,400
18,100 Coventry Corporation*.................................. 273,762
7,500 Diagnostic Products Corporation........................ 236,719
15,900 Gilead Sciences Inc.*.................................. 439,238
14,800 Haemonetics Corporation*............................... 283,050
16,700 Herbalife International, Inc........................... 271,375
18,800 ICN Pharmaceuticals, Inc............................... 539,325
15,200 Lincare Holdings Inc.*................................. 653,600
20,400 Liposome Company, Inc.*................................ 182,325
The accompanying notes to the financial statements are an integral part of this schedule.
AAL Variable Annuity Semi-Annual Report 42
</TABLE>
<PAGE>
Small Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
===============================================================================
<C> <S> <C>
Drugs & Medicine (7.3%)--Continued
29,900 Mid Atlantic Medical Services, Inc.*.................... $465,319
41,800 Perrigo Company*........................................ 522,500
8,900 West, Inc............................................... 254,762
-----------------------------------------------------------------
Total Drugs & Medicine............................. 7,703,231
=================================================================
Electronics (6.2%)
25,500 APAC Teleservices, Inc.*................................ 495,656
11,500 Avid Technology, Inc.*.................................. 303,313
24,500 DSP Communications Inc.*................................ 269,500
20,900 ESS Technology, Inc.*................................... 280,844
32,100 Geotek Industries, Inc.*................................ 174,544
12,800 Gerber Scientific, Inc.................................. 252,800
32,900 Glenayre Technologies, Inc.*............................ 538,738
10,700 Hutchinson Technology, Inc.*............................ 260,813
21,200 Kemet Corporation*...................................... 527,350
16,700 Lam Research Corporation*............................... 618,944
20,500 Macromedia, Inc.*....................................... 176,812
25,800 Rational Software Corporation*.......................... 433,762
19,100 Sequent Computer Systems, Inc.*......................... 402,294
16,900 Silicon Valley Group, Inc.* ............................ 445,737
21,500 Symbol Technologies, Inc................................ 722,937
25,100 VLSI Technology, Inc.*.................................. 592,987
-----------------------------------------------------------------
Total Electronics.................................. 6,497,031
=================================================================
Energy-Raw Materials (1.7%)
57,100 Harken Energy Corporation*.............................. 399,700
11,100 Lomak Petroleum, Inc.................................... 197,719
4,700 Maxxam, Inc.*........................................... 219,725
13,500 Southwestern Energy Company............................. 175,500
8,400 Swift Energy Company*................................... 200,550
17,300 Varco International, Inc.*.............................. 557,925
-----------------------------------------------------------------
Total Energy Raw-Materials......................... 1,751,119
=================================================================
Food & Agriculture (2.2%)
30,700 Chiquita Brands International, Inc...................... 422,125
7,400 Dreyers Grand Ice Cream, Inc............................ 292,300
48,075 Flowers Industries, Inc................................. 808,261
9,900 International Multifoods Corporation.................... 248,737
18,100 Ralcorp Holding, Inc.*.................................. 266,975
14,400 Savannah Foods and Industries, Inc...................... 252,900
-----------------------------------------------------------------
Total Food & Agriculture........................... 2,291,298
=================================================================
Gold (0.1%)
22,500 Pegasus Gold, Inc.*..................................... 137,813
-----------------------------------------------------------------
Total Gold......................................... 137,813
=================================================================
Insurance (5.5%)
28,200 20th Century Industries - California.................... 592,200
11,200 American Bankers Insurance - Group, Inc................. 708,400
5,300 Foremost Corporation of America......................... 317,338
13,900 John Alden Financial Corporation........................ 291,031
11,100 Liberty Corporation..................................... 452,325
7,400 Life Re Corporation..................................... 345,025
10,100 NAC Re Corporation...................................... 488,588
62,400 Reliance Group Holdings, Inc............................ 741,000
15,200 United Companies Financial Corporation.................. 429,400
6,800 Washington National Corporation......................... 193,800
34,100 Western National Corporation............................ 914,306
9,500 Zenith National Insurance Corporation................... 256,500
-----------------------------------------------------------------
Total Insurance.................................... 5,729,913
=================================================================
Media (3.6%)
16,700 Banta Corporation....................................... 452,987
17,140 Chris Craft Industries, Inc.*........................... 827,005
14,400 Golden Books Family - Entertainment, Inc.*.............. 180,000
8,200 Houghton Mifflin Company................................ 547,350
12,066 Pulitzer Publishing Company............................. 639,498
18,100 Regal Cinemas, Inc.*.................................... 597,300
13,550 TCA Cable TV, Inc....................................... 509,819
-----------------------------------------------------------------
Total Media........................................ 3,753,959
=================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
43 AAL Variable Annuity Semi-Annual Report
<PAGE>
Small Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
===============================================================================
<S> <C> <C>
Miscellaneous Finance (4.3%)
24,100 Advanta Corporation, Class A........................... $ 885,675
15,900 Americredit Corporation*............................... 333,900
18,900 Amresco, Inc.*......................................... 406,350
20,800 Arcadia Financial Ltd.*................................ 191,100
10,200 Coast Savings Financial*............................... 463,463
11,183 Collective Bancorp, Inc................................ 501,837
27,200 Glendale Federal Bank, FSB*............................ 710,600
7,600 Great Financial Corporation............................ 266,950
94,000 Mercury Finance Company*............................... 229,125
35,800 Sovereign Bancorp, Inc................................. 545,950
---------------------------------------------------------------
Total Miscellaneous Finance 4,534,950
===============================================================
Motor Vehicles (2.1%)
13,200 Arvin Industries, Inc.................................. 359,700
13,700 Donaldson Company, Inc................................. 520,600
19,200 Federal Mogul Corporation.............................. 672,000
9,200 Standard Products Corporation.......................... 232,300
15,300 Superior Industries International, Inc................. 405,450
---------------------------------------------------------------
Total Motor Vehicles 2,190,050
===============================================================
Non-Durables & Entertainment (3.3%)
14,900 Duty Free International, Inc........................... 279,375
8,500 Gibson Greetings, Inc.*................................ 191,250
12,010 International Dairy Queen, Inc., Class A*.............. 288,240
22,400 Lone Star Steakhouse & Saloon, Inc.*................... 582,400
12,600 Luby's Cafeterias, Inc................................. 251,212
15,600 Papa John's International, Inc.*....................... 573,300
9,550 Ruby Tuesday, Inc...................................... 214,278
12,200 Russ Berrie & Company.................................. 267,638
11,200 Sbarro, Inc............................................ 310,800
30,500 Sothebys Holdings, Inc................................. 514,688
---------------------------------------------------------------
Total Non-Durables & Entertainment 3,473,181
===============================================================
Non-Ferrous Metals (0.9%)
8,900 Brush Wellman, Inc..................................... 186,344
12,000 Coeur D' Alene Mines Corporation*...................... 155,250
76,100 Echo Bay Mines, Ltd.................................... 437,575
30,100 Helca Mining Company*.................................. 161,787
---------------------------------------------------------------
Total Non-Ferrous Metals 940,956
===============================================================
Oil-Domestic (3.3%)
17,100 Barrett Resources Corporation*......................... 511,931
15,900 Benton Oil & Gas Company*.............................. 238,500
12,400 Forcenergy, Inc.*...................................... 376,650
28,100 Marine Drilling Company, Inc.*......................... 551,463
18,200 Pogo Producing Corporation............................. 704,113
25,400 Pride International, Inc.*............................. 609,600
19,400 Quaker State Corporation............................... 295,850
14,500 Tesoro Petroleum Corporation*.......................... 214,781
---------------------------------------------------------------
Total Oil-Domestic 3,502,888
===============================================================
Optical & Photo (0.7%)
14,700 Dentsply International, Inc............................ 720,300
---------------------------------------------------------------
Total Optical & Photo 720,300
===============================================================
Paper & Forest Products (1.4%)
12,800 Chesapeake Corporation................................. 432,000
20,700 Pentair Industries, Inc................................ 680,513
19,950 Wausau Paper Mills Corporation......................... 376,556
---------------------------------------------------------------
Total Paper & Forest Products 1,489,069
===============================================================
Producers Goods (5.7%)
16,400 Albany International Corporation, Class A.............. 369,000
17,900 Ametek, Inc............................................ 420,650
13,300 BW/IP Holding, Inc..................................... 270,156
14,400 Baldor Electric Company................................ 425,700
21,800 Cincinnati Milacron, Inc............................... 565,438
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
Variable Annuity Semi-Annual Report 44
<PAGE>
Small Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
==============================================================================
Producers Goods (5.7%)--Continued
<S> <C> <C>
8,700 Clarcor, Inc. ............................................. $215,325
15,800 HON INDUSTRIES, Inc. ...................................... 699,150
14,300 Kennametal, Inc............................................ 614,900
12,400 Lattice Semiconductor Corporation*......................... 700,600
4,369 NACCO Industries, Inc...................................... 246,575
19,800 Teleflex, Inc.............................................. 618,750
19,100 Vitesse Seiconductor Corporation*.......................... 624,331
6,800 Zurn Industries, Inc....................................... 195,500
-----------------------------------------------
Total Producers Goods 5,966,075
===============================================
Railroad & Shipping (0.6%)
23,100 OMI Corporation*........................................... 220,894
19,800 Overseas Shipholding Group, Inc............................ 388,575
-----------------------------------------------
Total Railroad & Shipping 609,469
===============================================
Real Property (0.9%)
53,700 Catellus Development Corporation*.......................... 973,313
-----------------------------------------------
Total Real Property 973,313
===============================================
Retail Stores (3.9%)
23,600 Best Buy Company, Inc.*.................................... 351,050
57,600 Charming Shoppes, Inc.*.................................... 300,597
15,800 Eagle Hardware & Garden, Inc.*............................. 361,425
17,700 Lands End, Inc.*........................................... 524,362
13,900 MacFrugals Bargains Close-Outs, Inc.*...................... 378,775
14,200 Meyer (Fred), Inc.*........................................ 733,962
27,000 Ross Stores, Inc........................................... 882,563
9,800 Stanhome, Inc.............................................. 322,175
29,900 Sunglass Hut International, Inc.*.......................... 188,744
-----------------------------------------------
Total Retail Stores 4,043,653
===============================================
Steel (1.3%)
14,600 AK Steel Holding Corporation............................... 644,225
16,200 Birmingham Steel Corporation............................... 251,100
10,700 Carpenter Technology Corporation........................... 489,525
-----------------------------------------------
Total Steel 1,384,850
===============================================
Telephone (2.6%)
12,200 Brightpoint, Inc.*......................................... 397,263
29,700 Mobile Telecommunication Technologies
Corporation*.............................................. 425,081
17,533 NTL Inc.*.................................................. 436,133
28,600 Octel Communications Corporation*.......................... 670,313
56,000 Paging Network, Inc.*...................................... 491,747
21,700 Vanguard Cellular Systems, Inc.*........................... 295,662
-----------------------------------------------
Total Telephone 2,716,199
===============================================
Tires & Rubber (0.5%)
16,600 Carlisle Corporation....................................... 578,925
-----------------------------------------------
Total Tires & Rubber 578,925
===============================================
Travel & Recreation(1.6%)
24,700 Aztar Corporation*......................................... 174,444
52,000 Extended Stay America, Inc.*............................... 819,000
22,900 Grand Casinos, Inc.*....................................... 337,775
8,800 Showboat, Inc.............................................. 153,450
19,300 Station Casinos, Inc.*..................................... 161,637
-----------------------------------------------
Total Travel & Recreation 1,646,306
===============================================
Trucking & Freight(1.2%)
13,900 Arnold Industries, Inc..................................... 236,300
19,900 J.B. Hunt Transport Services, Inc.......................... 296,012
22,900 Rollins Truck Leasing Corporation.......................... 340,638
15,400 Yellow Corporation*........................................ 344,575
-----------------------------------------------
Total Trucking & Freight 1,217,525
===============================================
Utilities & Energy (5.7%)
9,500 Central Hudson Gas & Electric Company...................... 327,156
</TABLE>
The accompanying notes to the financial statements are an integral
part of this schedule.
45 AAL Variable Annuity Semi-Annual Report
<PAGE>
Small Company Stock Portfolio -- continued
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Shares Common Stock (97.5%) Market Value
=============================================================================
<C> <S> <C>
Utilities & Energy (5.7%)--Continued
7,500 Cilcorp, Inc. ......................................... $308,906
11,200 Eastern Utilities Associates........................... 204,400
16,500 IES Industries, Inc.................................... 486,750
15,600 MDU Resources Group, Inc............................... 374,400
70,000 Northeast Utilities*................................... 669,375
15,000 ONEOK, Inc............................................. 482,812
7,500 Orange & Rockland Utilities, Inc....................... 252,188
22,800 Public Service Company of
New Mexico............................................. 407,550
12,900 SIGCORP, Inc........................................... 327,338
34,600 Seagull Energy Corporation*............................ 605,500
16,900 Sierra Pacific Resources............................... 540,800
14,800 Southwest Gas Corporation.............................. 294,150
17,620 Tucson Electric Power Company*......................... 255,490
18,100 UGI Corporation........................................ 400,463
---------------------------------------------------------------
Total Utilities & Energy 5,937,278
===============================================================
---------------------------------------------------------------
Total Common Stocks
(cost basis $90,908,730) 102,138,818
===============================================================
Principal Short-Term Interest Maturity Market
Amount Investments (21%) Rate Date Value
=============================================================================
1,222,000 General Motors
Acceptance
Corporation.........................5.56% 7/01/97 $1,222,000
766,000 Merrill Lynch &
Company, Inc........................5.56 7/02/97 765,881
196,000 Merrill Lynch &
Company, Inc........................5.75 7/02/97 195,969
---------------------------------------------------------------
Total Short-Term Investments
(cost basis $2,183,850) 2,183,850
===============================================================
---------------------------------------------------------------
Total Investments (99.6%)
(cost basis $93,092,581) 104,322,668
===============================================================
---------------------------------------------------------------
Other Assets,
less Liabilities (0.4%) 395,503
===============================================================
---------------------------------------------------------------
NET ASSETS (100.0%) $104,718,171
===============================================================
</TABLE>
*Non-income producing security
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 46
<PAGE>
Statement of Assets and Liabilities
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
Large Small
Money Company Company
Market Bond Balanced Stock Stock
Portfolio Portfolio Portfolio Portfolio Portfolio
=================================================================================================================
Assets
<S> <C> <C> <C> <C> <C>
Investments, at value (Cost: $20,350,188,
$20,463,716, $174,952,138, $172,481,830,
and $93,092,581 respectively)............... $20,350,188 $20,273,799 $200,317,552 $216,628,120 $104,322,668
Dividends and interest receivable........... - 247,887 1,165,988 250,746 82,373
Receivable for investments sold............. - - - - 854,855
Receivable for fund shares sold............. 1,270,883 76,749 918,654 746,532 223,529
Cash........................................ 495 897 4,259 949 790
- -----------------------------------------------------------------------------------------------------------------
Total Assets $21,621,566 $20,599,332 $202,406,453 $217,626,347 $105,484,215
=================================================================================================================
Liabilities
Payable for investments purchased........... $ - $ - $ - $ - $ 622,820
Income distributions payable................ 8,775 - - - -
Payable for fund shares reaquired........... 467,349 17,016 264,210 226,240 113,275
Investment advisory fee payable............. 5,938 5,954 57,864 62,023 29,949
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities 482,062 22,970 322,074 288,263 766,044
- -----------------------------------------------------------------------------------------------------------------
Net Assets
Capital stock - par value ($0.001/share)... 21,139 2,085 15,308 13,159 7,425
Capital stock - additional paid-in capital.. 21,118,365 20,781,806 176,629,232 172,994,736 88,274,580
Undistributed net investment income......... - 11,993 73,566 54,576 14,760
Undistributed net realized gain (loss)...... - (29,605) 859 129,323 5,191,319
Net unrealized appreciation (depreciation)
on investments.............................. - (189,917) 25,365,414 44,146,290 11,230,087
- -----------------------------------------------------------------------------------------------------------------
Total Net Assets 21,139,504 20,576,362 202,084,379 217,338,084 104,718,171
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities and Net Assets $21,621,566 $20,599,332 $202,406,453 $217,626,347 $105,484,215
==================================================================================================================
Capital Shares Outstanding
(2 billion shares authorized)............... 21,139,504 2,085,351 15,307,666 13,159,357 7,425,184
Net Asset Value Per Share................... $1.00 $9.87 $13.20 $16.52 $14.10
The accompanying notes to the financial statements are an integral part of this schedule.
</TABLE>
47 AAL Variable Annuity Semi-Annual Report
<PAGE>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Large Small
Money Company Company
Market Bond Balanced Stock Stock
Portfolio Portfolio Portfolio Portfolio Portfolio
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Investment Income
Dividends.............................................. $ - $ - $ 819,503 $ 1,501,488 $ 526,041
Interest............................................... 547,002 653,331 2,424,285 82,142 34,963
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Income 547,002 653,331 3,243,788 1,583,630 561,004
- ------------------------------------------------------------------------------------------------------------------------
Expenses
Adviser fees........................................... 34,702 32,511 277,739 283,647 147,345
Professional Fees...................................... 4,510 6,477 8,556 8,301 7,338
Custody fees........................................... 2,704 2,335 20,461 31,598 21,248
Registration fees...................................... 45 45 45 45 45
Printing and postage expense........................... 2,029 1,902 16,268 16,624 8,628
Pricing of investments................................. 359 4,402 13,010 4,024 2,012
Director fees.......................................... 638 598 5,114 5,226 2,712
Director and Officer Insurance fees.................... 416 390 3,332 3,405 1,767
Fidelity Bond Insurance fees........................... 122 114 975 996 517
- ------------------------------------------------------------------------------------------------------------------------
Total Expenses Before Reimbursement 45,525 48,774 345,500 353,866 191,612
- ------------------------------------------------------------------------------------------------------------------------
Less expenses reimbursed by Adviser (See Note C)...... (10,823) (16,263) (67,761) (70,219) (44,267)
- ------------------------------------------------------------------------------------------------------------------------
Net Expenses 34,702 32,511 277,739 283,647 147,345
- ------------------------------------------------------------------------------------------------------------------------
========================================================================================================================
Net Investment Income 512,300 620,820 2,966,049 1,299,983 413,659
========================================================================================================================
Realized and Unrealized Gains
(Losses) on Investments
Net realized gains (losses) on investments............. - (16,331) 12,507 126,835 5,112,271
Change in net unrealized appreciation or depreciation
on investments......................................... - (51,197) 16,124,185 29,804,160 5,471,056
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments - (67,528) 16,136,692 29,930,995 10,583,327
- ------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations $512,300 $553,292 $19,102,741 $31,230,978 $10,996,986
========================================================================================================================
The accompanying notes to the financial statements are an integral part of this schedule.
AAL Variable Annuity Semi-Annual Report 48
</TABLE>
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Money Market
Portfolio Bond Portfolio
Year Ended Six Months Ended Year Ended Six Months Ended
12/31/96 6/30/97 12/31/96 6/30/97
============================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income....................... $ 632,562 $ 512,300 $ 894,882 $ 620,820
Net realized gains (losses) on investments.. - - (11,087) (16,331)
Change in net unrealized appreciation or
depreciation on investments................. - - (329,337) (51,197)
Net Increase in Net Assets Resulting from
Operations.................................. 632,562 512,300 554,458 553,292
- ----------------------------------------------------------------------------------------------------------------------------
Disributions to Shareholders
From net investment income.................. (632,562) (512,300) (895,834) (609,645)
From net realized gains..................... - - - -
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders......... (632,562) (512,300) (895,834) (609,645)
- ----------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from shares sold............... 90,853,453 73,383,996 9,674,088 3,815,724
Reinvested distributions.................... 531,130 485,282 582,334 451,145
Cost of shares redeemed..................... (81,304,192) (69,854,807) (1,611,509) (1,300,523)
- ----------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Fund Share
Transactions................................ 10,080,391 4,014,471 8,644,913 2,966,346
============================================================================================================================
Total Increase in Net Assets................ 10,080,391 4,014,471 8,303,537 2,909,993
============================================================================================================================
Net Assets Beginning of Period.............. 7,044,642 17,125,033 9,362,832 17,666,369
============================================================================================================================
Net Assets End of Period.................... $ 17,125,033 $ 21,139,504 $17,666,369 $20,576,362
===========================================================================================================================
Undistributed Net
Investment Income at June 30, 1997.......... $ - $ - $ 818 $ 11,993
============================================================================================================================
The accompanying notes to the financial statements are an integral part of this schedule.
</TABLE>
49 AAL Variable Annuity Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Large Company Small Company
Balanced Portfolio Stock Portfolio Stock Portfolio
Year Ended Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended
12/31/96 6/30/97 12/31/96 6/30/97 12/31/96 6/30/97
==============================================================================================================
<S> <C> <C> <C> <C> <C>
$2,866,168 $ 2,966,049 $ 1,250,151 $1,299,983 $ 455,081 $ 413,659
68,259 12,507 134,531 126,835 1,776,380 5,112,271
7,588,007 16,124,185 12,453,248 29,804,160 5,052,970 5,471,056
10,522,434 19,102,741 13,837,930 31,230,978 7,284,431 10,996,986
- --------------------------------------------------------------------------------------------------------------
(2,864,993) (2,896,734) (1,244,640) (1,251,891) (451,567) (402,632)
(80,741) -- (133,477) -- (1,709,031) --
- --------------------------------------------------------------------------------------------------------------
(2,945,734) (2,896,734) (1,378,117) (1,251,891) (2,160,598) (402,632)
- --------------------------------------------------------------------------------------------------------------
91,170,554 76,382,692 85,666,241 79,831,464 48,998,038 31,463,416
2,419,867 2,787,170 1,194,738 1,227,963 1,941,548 390,168
(3,408,174) (19,809,159) (2,370,480) (13,789,120) (1,519,893) (7,939,157)
- --------------------------------------------------------------------------------------------------------------
90,182,247 59,360,703 84,490,499 67,270,307 49,419,693 23,914,427
==============================================================================================================
97,758,947 75,566,710 96,950,312 97,249,394 54,543,526 34,508,781
==============================================================================================================
28,758,722 126,517,669 23,138,378 120,088,690 15,665,864 70,209,390
==============================================================================================================
$126,517,669 $202,084,379 $120,088,690 $217,338,084 $70,209,390 $104,718,171
==============================================================================================================
$ 4,251 $ 73,566 $ 6,484 $ 54,576 $ 3,733 $ 14,760
==============================================================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of this
schedule.
AAL Variable Annuity Semi-Annual Report 50
<PAGE>
Notes to Financial Statements
AS OF JUNE 30, 1997
A: Description of Fund
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 investment company. The Fund is a "series" fund consisting of five
separate investment portfolios (known as the Money Market, Bond, Balanced, Large
Company Stock, and Small Company Stock Portfolios, collectively the
"Portfolios"). Shares of the Fund are currently sold only to the AAL Variable
Annuity Account I (the "Variable Account") to fund benefits under certificates
of membership and the flexible premium deferred variable annuity issued by Aid
Association for Lutherans ("AAL"). The Fund commenced operations on June 14,
1995, with the sale of 2,000,000; 500,000; 1,250,000; 750,000; and 500,000
shares of the Money Market, Bond, Balanced, Large Company Stock and Small
Company Stock Portfolios, respectively, to AAL.
B: Summary of Significant Accounting Policies
Valuation of Investments 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. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by AAL under the supervision of the Fund's Board of Directors.
Federal Income Taxes No provision for federal income taxes has been made since
each Portfolio 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 respective Portfolios. As of June 30, 1997, the Bond
Portfolio has capital loss carryforwards of $2,187 expiring in 2003 and $11,087
expiring in 2004. It is management's intention to make no distribution of any
future net realized capital gains until the Federal income tax capital loss
carryforwards are exhausted.
Distributions to Shareholders The Bond, Balanced, Large, and Small Company
Stock 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. 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.
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
.35% of the average daily net assets of each Portfolio up to $250,000,000 and
.30% of the average daily net assets of each Portfolio in excess of that amount.
In addition, AAL has agreed to 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 Services 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 Services 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 of the Fund are also officers of AAL and CMC. So
far for the period ended June 30, 1997, directors of the Fund not affiliated
with AAL or CMC received directors fees in the aggregate amount of $12,000. 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, 1997, all of the shares of each
Portfolio are owned by AAL and the Variable Account I.
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 its 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 or at a short-term fixed rate of interest. There were no line of
credit borrowings for the period ended June 30, 1997.
51 AAL Variable Annuity Semi-Annual Report
<PAGE>
Notes to Financial Statements -- continued
AS OF JUNE 30, 1997
E: Capital Share Transactions
Transactions in Portfolio shares for the year ended December 31, 1996 and the
period ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
Reinvested
Shares Sold Distributions Shares Redeemed Net Increase
---------------------- ----------------------- ------------------------- ------------------------
Year Period Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
12/31/96 6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 12/31/96 6/30/97
---------- ---------- --------- ----------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market......... 90,853,453 73,383,996 531,130 485,282 (81,304,192) (69,854,807) 10,080,391 4,014,471
Bond................. 973,525 387,267 59,044 46,068 (162,989) (132,323) 869,580 301,012
Balanced............. 8,037,428 6,119,201 210,391 221,267 (297,655) (1,615,326) 7,950,164 4,725,142
Large Company
Stock................ 6,764,808 5,330,577 91,308 80,147 (184,960) (932,517) 6,671,156 4,478,207
Small Company
Stock................ 4,146,639 2,420,808 156,387 29,567 (128,125) (625,658) 4,174,901 1,824,717
</TABLE>
F: Investment Transactions
For the year ended December 31, 1996 and the period ended June 30, 1997, the
cost of investment securities purchased and the proceeds from investment
securities sold (not including short-term investments) were as follows:
<TABLE>
<CAPTION>
Purchases Sales
-------------------------- --------------------------
Year Period Year Period
Ended Ended Ended Ended
Portfolio 12/31/96 6/30/97 12/31/96 6/30/97
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Bond Portfolio................................... $10,136,218 $4,552,689 $15,599,089 $1,857,011
Balanced Portfolio............................... 83,247,800 60,911,227 3,651,217 5,018,405
Large Company Stock Portfolio.................... 83,656,350 66,300,287 1,117,810 862,209
Small Company Stock Portfolio.................... 55,313,910 45,376,928 8,005,283 23,313,818
</TABLE>
The gross and net unrealized appreciation (depreciation) on investments for the
year ended December 31, 1996 and the period ended June 30, 1997, were as
follows:
<TABLE>
<CAPTION>
12/31/96 Net Unrealized 6/30/97 Net Unrealized
Appreciation or Appreciation or
Portfolio Appreciation (Depreciation) Depreciation Appreciation (Depreciation) Depreciation
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Bond Portfolio........................ $59,913 $(198,633) $(138,720) $75,383 $(265,300) $(189,917)
Balanced Portfolio.................... 10,318,558 (1,077,329) 9,241,229 27,114,957 (1,749,543) 25,365,414
Large Company Stock Portfolio......... 15,468,246 (1,126,116) 14,342,130 46,306,387 (2,160,097) 44,146,290
Small Company Stock Portfolio......... 9,792,828 (4,033,797) 5,759,031 16,411,540 (5,181,453) 11,230,087
</TABLE>
The book and federal income tax basis of securities were the same for all
Portfolios.
AAL Variable Annuity Semi-Annual Report 52
<PAGE>
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 Bond Portfolio
-------------------------------------------- ---------------------------------------------
Period Ended Year Ended Six Months Ended Period Ended Year Ended Six Months Ended
12/31/95 (a) 12/31/96 6/30/97 12/31/95 (a) 12/31/96 6/30/97
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value: Beginning of
Period.............................. $1.00 $1.00 $1.00 $10.00 $10.23 $9.90
Income from Investment Operations
Net investment income................ 0.03 0.05 0.02 0.34 0.63 0.32
Net realized and unrealized
gains (losses) on investments........ 0.00 0.00 0.00 0.23 (0.33) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations........................... 0.03 0.05 0.02 0.57 0.30 0.29
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions From:
Net investment income................ (0.03) (0.05) (0.02) (0.34) (0.63) (0.32)
Net realized gains................... 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions.................. (0.03) (0.05) (0.02) (0.34) (0.63) (0.32)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value......................... 0.00 0.00 0.00 0.23 (0.33) (0.03)
Net asset value:
End of period........................ $1.00 $1.00 $1.00 $10.23 $9.90 $9.87
==================================================================================================================================
Total Return (b).................... 3.02% 5.23% 2.54% 5.80% 3.10% 2.97%
Net Assets, End of Period............ $7,044,642 $7,125,033 $21,139,504 $9,362,832 $17,666,369 $20,576,362
Ratios and Supplemental Data:
Ratio of expenses to average net
assets (c) (d)....................... 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Ratio of net investment income to
average net assets (c) (d)........... 5.71% 5.10% 5.17% 6.54% 6.51% 6.68%
Portfolio turnover rate.............. N/A N/A N/A 6.51% 11.65% 10.09%
Average commission rate paid (e)..... N/A N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
(a) From commencement of operations on June 14, 1995.
(b) Total return does not reflect expenses that apply at the Variable Account level. Inclusion of these expenses would reduce the
total return for the period shown. The portfolios are reported as period-to-date cumulative total returns.
(c) Calculated on an annualized basis.
(d) 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% 1.25% 0.68% 0.53%
Ratio of net investment income to average
net assets................................ 4.66% 4.80% 5.06% 5.64% 6.18% 6.51%
(e) Amount shown reflects the average brokerage commission paid on each share of stock traded by the Portfolio during the period
presented.
</TABLE>
53 AAL Variable Annuity Semi-Annual Report
<PAGE>
<TABLE>
<CAPTION>
Large Company
Balanced Portfolio Stock Portfolio
--------------------------------------------------- ---------------------------------------------------
Six Months Period Six Months
Period Ended Year Ended Ended Ended Year Ended Ended
12/31/95 (a) 12/31/96 6/30/97 12/31/95 (a) 12/31/96 6/30/97
==================================================================================================================
<S> <C> <C> <C> <C> <C>
$10.00 $ 10.92 $ 11.96 $ 10.00 $ 11.51 $ 13.83
0.22 0.41 0.22 0.11 0.23 0.11
0.92 1.05 1.24 1.52 2.34 2.69
------------------------------------------------------------------------------------------------------------------
1.14 1.46 1.46 1.63 2.57 2.80
------------------------------------------------------------------------------------------------------------------
(0.21) (0.41) (0.22) (0.11) (0.23) (0.11)
(0.01) (0.01) 0.00 (0.01) (0.02) 0.00
------------------------------------------------------------------------------------------------------------------
(0.22) (0.42) (0.22) (0.12) (0.25) (0.11)
------------------------------------------------------------------------------------------------------------------
0.92 1.04 1.24 1.51 2.32 2.69
$10.92 $ 11.96 $ 13.20 $ 11.51 $ 13.83 $ 16.52
==================================================================================================================
11.46% 13.65% 12.31% 16.39% 22.47% 20.31%
$28,758,722 $126,517,669 $202,084,379 $23,138,378 $120,088,690 $217,338,084
0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
4.07% 3.89% 3.74% 2.27% 1.97% 1.60%
2.29% 5.43% 3.41% 0.47% 1.77% 0.54%
$0.0400 $0.0400 $0.0400 $ 0.0400 $0.0400 $0.0400
------------------------------------------------------------------------------------------------------------------
1.15% 0.60% 0.44% 1.26% 0.63% 0.44%
3.27% 3.65% 3.65% 1.37% 1.69% 1.52%
</TABLE>
<TABLE>
<CAPTION>
Small Company
Stock Portfolio
--------------------------------------------------
Six Months
Period Ended Year Ended Ended
12/31/95 (a) 12/31/96 6/30/97
==================================================
<S> <C> <C>
$ 10.00 $ 10.99 $ 12.54
0.08 0.12 0.06
0.99 1.86 1.56
--------------------------------------------------
1.07 1.98 1.62
--------------------------------------------------
(0.07) (0.12) (0.06)
(0.01) (0.31) 0.00
--------------------------------------------------
(0.08) (0.43) (0.06)
--------------------------------------------------
0.99 1.55 1.56
$ 10.99 $ 12.54 $ 14.10
==================================================
10.70% 18.19% 12.95%
$15,665,864 $70,209,390 $104,718,171
0.35% 0.35% 0.35%
1.43% 1.14% 0.98%
2.85% 20.14% 27.83%
$ 0.0400 $0.0400 $0.0400
--------------------------------------------------
1.37% 0.75% 0.46%
0.41% 0.74% 0.88%
AAL Variable Annuity Semi-Annual Report 54
</TABLE>
<PAGE>
Service Center
AAL Variable Annuity Service Center
P.O. Box 419108
Kansas City, Missouri 64141-6108
Telephone 800-778-1762
Investment Adviser and Transfer Agent
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
------
Custodian
Citibank, N.A.
111 Wall Street
New York, New York 10043
This report is submitted for the information of the certificate
owners of the AAL Variable Annuity 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 and the AAL Variable Product Series Fund, Inc.
------
222 West College Avenue, Appleton, WI 54919-0007
800-778-1762 920-734-7633
AAL Capital Management Corporation
is the distributor of the AAL Variable Annuity
and is a wholly-owned subsidiary of:
Aid Association for Lutherans
4321 North Ballard Road, Appleton, WI 54919-0001
13017SAR 8/97 PRODUCT FORMS #4460, #4461
