N-30D 1 n30dfndb.txt N-30D, FUND B American United Life Pooled Equity Fund B R. STEPHEN RADCLIFFE Chairman of the Board of Managers, Executive Vice President, AUL RONALD D. ANDERSON Professor, Kelley School of Business, Indiana University, Indianapolis, Indiana DONALD J. STUHLDREHER Former President, The Huntington Company JAMES W. MURPHY, Former Senior Vice President, Corporate Finance, AUL ALPHA C. BLACKBURN President and CEO, Blackburn Architects, Inc. RICHARD A. WACKER Secretary to the Board, Associate General Counsel, AUL CUSTODIAN National City Bank Indianapolis, Indiana LEGAL COUNSEL Ice Miller Indianapolis, Indiana INVESTMENT MANAGER American United Life Insurance Company Indianapolis, Indiana G. David Sapp, Senior Vice President, Investments This Report and the financial statements contained herein are for the general information of the Participants. American United Life Pooled Equity Fund B Semi-Annual Report as of June 30, 2002 A Message From The Chairman of the Board of Managers To All Participants in American United Life Pooled Equity Fund B The longest expansion in U.S. history finally came to a close as the United States experienced negative economic growth during the first nine months of 2001. Despite the tragic events of last year, our economy has performed far better than expected during the first quarter of 2002. GDP advanced at a robust 5.0% annualized rate during the first quarter of 2002, buoyed by strong consumer spending, fiscal stimulus and inventory rebuilding. However, second quarter GDP slowed to a 1.1% annual growth rate, much less than the consensus forecast, due in large part to a decline in consumer spending. The Federal Reserve maintained an accommodative stance during the first half of 2002, keeping the Federal Funds rate at 1.75%, a 40-year low. They have stated they will be patient about easing interest rates as they await evidence of a more sustainable recovery. Although the Federal Reserve is expected to eventually raise short-term rates, this action is not expected to occur until 2003. The likelihood of an economic recovery during the second half of this year has now become more uncertain, which has caused downward pressure on the stock market. The S&P 500 (a commonly used broad equity index) experienced a return of -13.2% during the first half of 2002 and is currently trading at five-year lows. The NASDAQ Composite declined 24.8% during the first six months and has lost over 70% of its value since its peak in March 2000. Although investors are still concerned about renewed terrorism threats and recession implications, we also have to contend with a "crisis of confidence". Investors have lost their confidence in the integrity of corporate management, corporate auditors, and Wall Street's objectivity in analyzing company financials. Value investing continued to outperform growth investing during the first half of this year. This benefited Fund B, which provided an investment return of 3.7% for the first six months of 2002. The performance for Fund B is net of investment advisory rates but does not reflect mortality and expense risk charges. The overall equity market has provided disappointing investment returns for the past 2 1/2 years. A turnaround for the remainder of the year will be contingent on several factors. The economy needs to maintain a strong growth pattern, which should lead to a much-needed rebound in corporate earnings. We also need to deal with the corporate scandals that are negatively impacting the investment markets. Addressing these factors should restore investor confidence and provide a more positive outlook for the stock market. /s/R. Stephen Radcliffe R. Stephen Radcliffe Chairman of the Board of Managers Indianapolis, Indiana August 15, 2002 1 (This page is intentionally blank) 2 American United Life Pooled Equity Fund B STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (unaudited) Assets: Investments at value (cost: $3,865,530) Common stock $ 4,288,267 Money market mutual funds 261,707 Dividends and interest receivable 5,416 Total assets 4,555,390 Liabilities: 0 Net assets: $ 4,555,390 Units outstanding 216,447 Accumulation unit value $ 21.05 The accompanying notes are an integral part of the financial statements. 3 American United Life Pooled Equity Fund B STATEMENT OF OPERATIONS for the six months ended June 30, 2002 (unaudited) Net investment income: Income Dividends and interest $ 33,937 33,937 Expenses Investment management services 7,512 Mortality and expense charges 22,535 30,047 Net investment income 3,890 Gains on investments: Net realized gains 327,728 Net change in unrealized appreciation (depreciation) (155,908) Net Gain 171,820 Increase in net assets from operations $ 175,710 The accompanying notes are an integral part of the financial statements. 4 American United Life Pooled Equity Fund B STATEMENTS OF CHANGES IN NET ASSETS Six months ended June 30, 2002 Year ended (unaudited) Dec. 31, 2001 Operations: Net investment income $ 3,890 $ 30,489 Net realized gain 327,728 486,813 Net change in unrealized appreciation (depreciation) (155,908) 23,908 Increase in net assets from operations 175,710 541,210 Changes from contract owner transactions: Proceeds from units sold - - Payments for units withdrawn (560,860) (2,274,115) Decrease (560,860) (2,274,115) Net decrease in net assets (385,150) (1,732,905) Net assets at beginning year 4,940,540 6,673,445 Net assets at end of year $ 4,555,390 $ 4,940,540 Units sold - - Units withdrawn (25,810) (117,558) Net decrease in units outstanding (25,810) (117,558) Units outstanding at beginning of year 242,257 359,815 Units outstanding at end of year 216,447 242,257 The accompanying notes are an integral part of the financial statements. 5 American United Life Pooled Equity Fund B SCHEDULE OF INVESTMENTS June 30, 2002 (unaudited) Market Description Shares Value Common Stock (94.2%) Aerospace (4.9%) Boeing Co. 3,000 $ 135,000 Precision Castparts Corp. 2,800 92,400 227,400 Apparel (10.4%) Columbia Sportswear Co.* 400 12,800 Kellwood Co. 4,550 147,875 Liz Claiborne, Inc. 1,750 135,150 Reebok International* 4,500 132,750 Wolverine World Wide, Inc. 2,900 50,605 479,180 Automotive & Auto Parts (9.3%) Carlisle Companies, Inc. 3,400 152,932 Ford Motor Co. 5,050 80,800 TBC Corp.* 11,900 188,972 422,704 Banks & Financial Services (7.6%) Bank One Corp. 3,132 120,519 Citigroup, Inc. 2,736 106,020 Washington Mutual, Inc. 3,232 119,940 346,479 Cement & Aggregates (2.4%) Lafarge North America, Inc. 3,050 107,208 107,208 Chemicals (1.6%) Dow Chemical 2,100 72,198 72,198 Computer Hardware & Software (5.0%) Autodesk, Inc. 7,200 95,400 Hewlett-Packard Co. 6,199 94,705 International Business Machines Corp. 500 36,000 226,015 *does not pay cash dividends The accompanying notes are an integral part of the financial statements. 6 American United Life Pooled Equity Fund B SCHEDULE OF INVESTMENTS (continued) June 30, 2002 (unaudited) Market Description Shares Value Common Stock (94.2%), continued Electrical Equipment & Electronics (7.1%) American Power Conversion* 5,200 $ 65,676 Baldor Electric Co. 6,740 169,848 Kemet Corp.* 4,950 88,407 322,931 Furniture (3.4%) Kimball International, Inc. Class "B" 2,800 45,892 La Z Boy, Inc. 4,300 108,446 154,338 Health Care & Pharmaceuticals (3.6%) McKesson Corp. 2,800 91,560 Schering-Plough Corp. 2,900 71,340 162,900 Housing (3.2%) Fleetwood Enterprises, Inc.* 5,000 43,500 Toll Brothers, Inc.* 3,450 101,085 144,585 Manufacturing (3.8%) Crane Co. 2,600 65,988 Trinity Industries 5,200 107,744 173,732 Metals & Mining (6.8%) AK Steel Holding Corp.* 3,700 47,397 ALCOA, Inc. 3,200 106,080 Cleveland Cliffs, Inc.* 2,950 81,420 Phelps Dodge Corp.* 1,800 74,160 309,057 Oil & Oil Services (7.0%) Royal Dutch Petroleum Co. 2,200 121,594 Tidewater, Inc. 3,000 98,760 Valero Energy Corp. 2,600 97,292 317,646 *does not pay cash dividends The accompanying notes are an integral part of the financial statements. 7 American United Life Pooled Equity Fund B SCHEDULE OF INVESTMENTS (continued) June 30, 2002 (unaudited) Market Description Shares Value Common Stock (94.2%), continued Paper and Forest Products (2.0%) Wausau-Mosinee Paper Corp. 7,400 $ 89,170 89,170 Retail (3.1%) Longs Drug Stores, Inc. 5,000 141,450 141,450 Telecommunication Services & Equipment (4.1%) Scientific-Atlanta, Inc. 4,000 65,800 Sprint Corp. (FON Group) 5,000 53,050 Telefonos de Mexico Class "L" - Sponsored ADR 2,100 67,368 186,218 Transportation (4.6%) Alexander & Baldwin, Inc. 4,700 119,991 Norfolk Southern Corp. 3,750 87,675 207,666 Miscellaneous (4.3%) Brunswick Corp. 3,250 91,000 Outback Steakhouse, Inc.* 3,000 105,300 196,300 Total common stock (cost: $3,603,823) 4,288,267 Money Market Mutual Funds (5.8%) Armada Money Market Fund 20,908 20,908 Dreyfus Cash Management 120,266 120,266 Merrill Lynch Institutional Fund 120,534 120,534 Total money market mutual funds (cost: $261,707) 261,707 Total Investments (cost: $3,865,530) $ 4,549,974 *does not pay cash dividends Percentages shown are based on total investments at market value. The accompanying notes are an integral part of the financial statements. 8 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies American United Life Pooled Equity Fund B (Fund B) is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. Fund B was established by and is managed by American United Life Insurance Company (AUL) for the purpose of issuing group and individual variable annuities. As of May 1, 2000, AUL stopped accepting contributions or transfers into Fund B. Investments are valued at closing prices for those securities traded on organized exchanges or listed on the NASDAQ National Market System, and at bid prices for securities traded over-the-counter. Gains and losses on the sale of investments are determined on a first-in, first-out (FIFO) basis. Investment transactions are accounted for on a trade date basis. Dividends are included in income as of the ex-dividend date. Interest income is accrued daily. Operations of Fund B are part of, and are taxed with, the operations of AUL, which is taxed as a "life insurance company" under the Internal Revenue Code. Under current law, investment income, including realized and unrealized capital gains of Fund B, is not taxed to AUL to the extent it is applied to increase reserves under the contracts. Fund B has not been charged for federal and state income taxes since none have been imposed. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Investment Transactions Purchases and sales of investment securities (excluding short-term securities and U.S. government obligations) for the six months ended June 30, 2002 and the year ended December 31, 2001 were $537,152 and $1,094,930, respectively. 3. Transactions With AUL Fund B pays AUL an annual fee of 1.2% of its average daily net assets for providing investment management services and for mortality and expense charges. The expense incurred during the six months ended June 30, 2002 was $30,047. AUL withholds a portion of the proceeds obtained from contract owners to pay commissions and certain expenses under a sales and administrative services agreement with Fund B. The amount AUL retained during the six months ended June 30, 2002 and the year ended December 31, 2001 were $0 and $0, respectively. 4. Net Assets Net assets as of June 30, 2002: Proceeds from units sold less payments for units withdrawn and redeemed $ (19,992,816) Net investment income 4,482,770 Net realized gains 19,380,992 Unrealized appreciation 684,444 $ 4,555,390 The unrealized appreciation of $684,444 consists of common stock appreciation and depreciation of $984,207 and $299,763, respectively. 9 FINANCIAL HIGHLIGHTS Per Unit Operating Performance (for a unit outstanding for the entire year) Year Ended December 31 Six months ended June 30, 2002 (unaudited) 2001 2000 1999 1998 Net investment income $ 0.02 $ 0.10 $ 0.23 $ 0.16 $ 0.14 Net realized and unrealized gain (loss) on investments 0.64 1.74 2.28 (0.44) 0.87 Net increase (decrease) 0.66 1.84 2.51 (0.28) 1.01 Accumulation unit value: Beginning of year 20.39 18.55 16.04 16.32 15.31 End of year $ 21.05 $ 20.39 $ 18.55 $ 16.04 $ 16.32 Total Return 3.7% 11.0% 16.6% (0.8%) 7.6% Supplemental Data: Net assets, end of period (000) $ 4,555 $ 4,941 $ 6,673 $ 10,471 $ 13,733 Ratio to Average Net Assets:* Expenses 1.20% 1.20% 1.20% 1.20% 1.20% Net investment income 0.16% 0.54% 1.34% 0.97% 0.90% Portfolio Turnover Rate 12% 12% 19% 37% 29% Units outstanding 216 242 360 653 841 (in 000's) *Annualized The accompanying notes are an integral part of the financial statements. 10 (This page is intentionally blank) 11 (This page is intentionally blank) 12