[Cover page]
[Graphics: Background picture of currency from different countries]
U.S. GLOBAL INVESTORS FUNDS
Annual Report
June 30, 1998 [Graphic: USGI Logo]
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U.S. GLOBAL INVESTORS FUNDS
June 30, 1998
ANNUAL REPORT
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U.S. GLOBAL INVESTORS FUNDS June 30, 1998
ANNUAL REPORT
Contents
Letter to Shareholders 5
Fund Manager's Perspective 9
Portfolios of Investments 43
Statements of Assets and Liabilities 90
Statements of Operations 94
Statements of Changes in Net Assets 98
Notes to Financial Statements 106
Financial Highlights 114
Report of Independent Accountants 125
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[Graphic: USGI Logo]
(C) U.S. GLOBAL INVESTORS, INC. 1998
P.O. Box 781234
San Antonio, Texas 78278-1234
Tel 1-800-US-FUNDS
Fax 210-308-1217
net www.usfunds.com
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[Graphic: Picture of Frank E. Holmes, Chairman of USGI]
Dear Shareholder,
The past twelve months have been challenging ones for markets at home and
abroad. While domestic equities have generally trended upward, occasionally in
dramatic fashion, reflecting robust economic growth and nominal inflation, the
performances of overseas stock markets have been more erratic. Ranging from the
truly abysmal (Southeast Asia) to above average (Western Europe), these markets
have fallen or risen largely in tandem with employment and exchange rate
concerns.
On the fixed income side, growth was less pronounced, although the old adage
that stocks perform inversely relative to bonds did not hold true. In fact, the
bond market on the whole rose slightly, albeit nothing like what has been seen
on the equity side. Money markets remained fundamentally unchanged throughout
the past twelve months, reflecting long-term consumer and corporate satisfaction
and absence of liquidity concerns. In this regard, near-term instruments fared
far better than mid- or long-range investments.
Low inflation and declining interest rates are expected to support the U.S.
stock market going forward, although industry experts agree that a correction is
inevitable at some point. However, domestic growth may be tempered by lingering
Asian economic woes and currency erosion, as well as the possibility of more
work stoppages at home. The next two quarters may lag in comparison to the last
four, which underscores U.S. Global Investors' emphases on intelligent,
long-term investing and use of asset allocation as a means of furthering
investors' financial goals.
This year marks the low point in the Presidential Election cycle, a four-year
market oscillation with fairly regular patterns seen over the course of each
presidential term. As a rule, the first two years after an election tend to be
subdued ones for the markets, while the third and fourth generally post much
higher returns. The reason for this is quite simple: the incumbent party wants
to stay in power. As a result, money supply and government program expenditures
increase, while taxes decrease in the two years before an election. In sum,
whatever it takes to keep the economy moving. As everyone knows, a healthy
business and economic environment overall are strong incentives for keeping the
powers that be in power.
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LETTER TO SHAREHOLDER
Since World War II, the vast majority of these cycles have operated as
predicted; 92% of market lows were in the first two years of the cycle and 85%
of market highs occurred in the third and fourth years. The bottom line for
investors is that the stock market likely will correct itself this year,
positioning equities, and micro- and small-caps in particular, for a strong
recovery next year.
Another point to consider in this complex market environment is the importance
of small- cap stocks. Much is made of the explosive growth of the large-cap
equities, but it is really a handful of "super-caps" that is driving this trend.
Small-caps may have lagged relative to their larger brethren for the past few
years, but their time is coming. We expect returns in this sector to improve
before year's end. Our analysis of the more volatile small-cap market indicates
that over the long run, small-caps hold an impressive two-to-one outperformance
ratio over large caps.For the past quarter-century as a whole, small- and micro-
cap equities have been the place to be. To put it another way: for every dollar
invested in large-cap stocks since 1973, the return is $18. For small-caps, it
is $33, and for micro-caps an astounding $61.
Keeping these thoughts in mind, I urge you to remember that the key to
successful investing is not so much when you start, but the length of time you
stay invested. At U.S. Global Investors, we practice what we preach and offer
programs and services to help in this regard. Our ABC Investment Plan(R) uses
dollar-cost averaging to reduce the risk of buying when the market is high and
helps maintain regular periodic investments. We use asset allocation to target
optimal growth for our investors' portfolios, regardless of what stage of life
they may be in. In addition, our shareholder reports offer a wealth of timely
information regarding wise investing four times a year.
We suggest you diversify your portfolio in accordance with your investment
expectations. Remember to avoid overweighting in highly volatile sectors. For
example, recent gold performance has been poor, while large-caps have turned in
impressive results. Ironically, only five years ago, our Gold Shares Fund was up
by 120%, whereas the S&P 500 Index gained just 8%. As always, we suggest a
maximum allocation of no more than 10% to gold. Similarly, we urge a cautious
approach to emerging markets, with a single-digit weighting.
U.S. Global Investors' tax free funds, the Tax Free Fund and the Near-Term Tax
Free Fund, make excellent core portfolio holdings; both hold high spots on
third-party ranking lists. On the equity side, our All American Equity Fund has
been awarded accolades, including five stars from Morningstar for the three-year
period ending June 30, 1998. We are proud of the fact that our family of funds
covers all asset classes and was created with the idea of providing optimal
allocation for our shareholders.
In our continuous effort to better serve investors, we have made revisions to
our portfolio management team. Gil Atzmon, a seasoned gold and natural resource
expert, has recently joined our team as portfolio team leader for the World Gold
Fund and Gold Shares Fund.
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LETTER TO SHAREHOLDERS
In the following pages, you will find a fund-by-fund analysis of the factors
that impacted your investments' performance over the past year. Also included
are reports on portfolio holdings, fund diversification and financial activity.
Remember that you don't have to limit yourself to just an annual report to keep
track of your U.S. Global Investors investment portfolio. You can call our
Portfolio Direct service to hear our portfolio managers' market insights and
expectations, as well as Investor Alert, which provides weekly commentary on
market activity. These two services are available 24 hours a day on our
toll-free line, 1-800-US-FUNDS. You also can learn more from our quarterly
reports, which are sent to all shareholders.
As we move forward, our overall economic outlook and approach remain prudent.
Mindful of the lessons of history and our obligations to our shareholders, we
will continue to employ an investment strategy designed to fulfill our mandate
of maximizing the growth, protection and service of our shareholders' wealth
with the highest ethical standards.
Sincerely,
/s/ Frank E. Holmes
Frank E. Holmes
President & CEO
U.S. Global Investors
P.S. Don't forget U.S. Global Investors offers 15 no-load funds to help you
invest in China, real estate, natural resources, precious metals, tax-free bonds
and blue- chip stocks. Our money market funds offer free, unlimited checkwriting
and competitive yields. For more information please call 1-800-US-FUNDS or visit
us on the Web at www.usfunds.com
Past performance does not guarantee future results. Investment return and
principal value will fluctuate. You may have a gain or a loss when you sell
shares. The ABC Investment Plan does not assure profit and does not protect
against loss in a declining market. For more information, including charges and
expenses call 1- 800-US-FUNDS. Please read the prospectus carefully before
investing.
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FUND MANAGER'S PERSPECTIVE
MONEY MARKET FUNDS
U.S. TREASURY SECURITIES CASH FUND
U.S. GOVERNMENT SECURITIES SAVINGS FUND
INTRODUCTION
The U.S. Treasury Securities Cash Fund invests short-term in U.S. Treasury
Securities which are protected by the "full faith and credit" of the United
States government, and repurchase agreements backed by U.S. Treasury
Securities, which are short-term borrowings collateralized by treasury
securities.
The U.S. Government Securities Savings Fund seeks to preserve capital and
generate income by investing exclusively in short-term securities backed by
the United States government or its agencies. Typically, these government
agency securities carry a higher yield than United States Treasury
Securities.
PERFORMANCE
For the fiscal year ended June 30, 1998, the U.S. Government Securities
Savings Fund maintained its ranking in the top ten in the government only
money market fund category as ranked by both IBC Data and Lipper. The Fund
continued to pay dividends that were 100% tax-exempt at the state and local
level. The U.S. Treasury Securities Cash Fund provided excellent value to
our shareholders through free unlimited checkwriting and informative
statements that rivaled even a full-service commercial bank checking
account. In addition, shareholders were treated to a daily dividend
superior to that offered by most banks.
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U.S. TREASURY SECURITIES CASH FUND
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7-Day Yield 4.39%
7-Day Effective Yield 4.48%
Weighted Average Days to Maturity 45
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U.S. GOVERNMENT SECURITIES SAVINGS FUND
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7-Day Yield 5.23%
7-Day Effective Yield 5.36%
Weighted Average Days to Maturity 63
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An investment in a money market fund is neither insured nor guaranteed by the
U.S. Government and there can be no assurance that the fund will be able to
maintain a stable net asset value (NAV) of $1.00 per share. A fund's yield
fluctuates, and past performance is no guarantee of future results.
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FUND MANAGER'S PERSPECTIVE
MONEY MARKET FUNDS
THE YEAR IN REVIEW
A comparison of the yields for the three-month Treasury bill at the end
and beginning of the fiscal year reveals the two to be much the same (5.17%
vs. 5.08%). Little happened over the course of the term to affect rates.
Most important, the Federal Reserve did not change interest rates at any
time during the year. The Funds took advantage of the inversion in the
yield curve for the overnight rate versus the three-month Treasury bill
rate (5.50% vs. 5.08%). The Asian crisis and the yen-dollar relationship
were the two dominating factors affecting the U.S. Treasury Security
environment: if the yen gained strength, the bond prices would fall, and
vice versa.
INVESTMENT HIGHLIGHTS
For the U.S. Treasury Securities Cash Fund, we kept most of our investments
in shorter-term Treasuries that enabled us to buy any sell offs in the
market. At the end of each quarter we held at least 50% of our portfolio
in Treasuries. The U.S. Treasury began cutting back on its issuance of
Treasury bills as its coffers were filled with the budget surplus. As a
result, we began to see more agency issues and a corresponding tightening
in spreads. A small portion of the portfolio was dedicated to purchasing
one-year final maturity paper with a quarterly call. These issues offered
spreads of up to thirty-five basis points over the one-year Treasury bill.
We shortened our average maturity to less than 70 days, and focused on
maintaining a larger cash position to take advantage of the higher
overnight interest rates.
CURRENT OUTLOOK
We expect that the Federal Reserve will leave interest rates unchanged for
the rest of the year. We believe October will be a month of corrections
and the market will rebound strongly going into the Christmas season. We
also anticipate the Asian crisis dampening the world economy and hope the
Federal Reserve will consider lowering short-term interest rates.
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FUND MANAGER'S PERSPECTIVE
TAX FREE FUNDS
NEAR-TERM TAX FREE FUND
TAX FREE FUND
INTRODUCTION
Both of U.S. Global Investors' tax-free funds are focused on providing a
high level of current income exempt from federal income taxation and
preserving capital. The Near-Term Tax Free Fund focuses on investing in the
five-year sector of the municipal yield curve, while the Tax Free Fund is
oriented more toward the intermediate- to long-term sector of the municipal
yield curve.
PERFORMANCE
Both funds performed well during the year due to credit quality and good
sector rotation. Both funds grew slightly in size, despite lack of investor
interest in tax-free bonds during the long stock market rally.
Average Annual Performance Inception 5 Year 1 Year
[blue] Near-Term Tax Free
Inception 12/1/90 5.96% 4.51% 6.02%
[gray] Lehman Municipal
3-Year Bond Index 5.92% 4.82% 5.39%
December 1990 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Near Term Tax Free Lehman Municipal
3-Year Bond Index
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12/4/90 $10,000.00 $10,000.00
12/31/90 $10,010.00 $10,059.01
1/31/91 $10,040.00 $10,186.40
2/28/91 $9,989.90 $10,278.19
3/28/91 $9,969.78 $10,282.88
4/30/91 $10,151.78 $10,383.10
5/31/91 $10,233.24 $10,449.61
6/28/91 $10,151.46 $10,458.97
7/31/91 $10,315.85 $10,542.34
8/30/91 $10,491.22 $10,647.25
9/30/91 $10,615.75 $10,736.23
10/31/91 $10,751.31 $10,813.04
11/29/91 $10,740.83 $10,876.73
12/31/91 $10,983.03 $11,094.04
1/31/92 $10,961.83 $11,141.81
2/28/92 $10,951.16 $11,145.56
3/31/92 $10,951.16 $11,120.27
4/30/92 $11,037.31 $11,204.57
5/29/92 $11,199.62 $11,298.24
6/30/92 $11,395.34 $11,435.93
7/31/92 $11,778.10 $11,658.86
8/31/92 $11,503.43 $11,606.41
9/30/92 $11,558.63 $11,701.01
10/30/92 $11,248.03 $11,655.11
11/30/92 $11,560.17 $11,736.61
12/31/92 $11,705.65 $11,807.79
1/29/93 $11,829.46 $11,896.78
2/26/93 $12,338.37 $12,082.24
3/31/93 $12,156.59 $12,046.65
4/30/93 $12,282.15 $12,116.90
5/28/93 $12,270.69 $12,148.74
6/30/93 $12,431.99 $12,227.43
7/30/93 $12,466.72 $12,233.05
8/31/93 $12,594.40 $12,347.32
9/30/93 $12,687.52 $12,401.65
10/29/93 $12,722.60 $12,427.87
11/30/93 $12,687.39 $12,411.02
12/31/93 $12,852.47 $12,542.15
1/31/94 $12,936.08 $12,643.31
2/28/94 $12,804.33 $12,525.29
3/31/94 $12,599.94 $12,374.48
4/29/94 $12,624.07 $12,447.55
5/31/94 $12,672.54 $12,505.62
6/30/94 $12,684.70 $12,509.37
7/29/94 $12,794.57 $12,613.34
8/31/94 $12,831.31 $12,658.30
9/30/94 $12,819.01 $12,626.45
10/31/94 $12,794.36 $12,595.54
11/30/94 $12,757.28 $12,573.06
12/30/94 $12,844.15 $12,627.39
1/31/95 $12,931.27 $12,732.30
2/28/95 $13,006.16 $12,866.24
3/31/95 $13,093.87 $12,981.45
4/28/95 $13,131.60 $13,025.48
5/31/95 $13,270.50 $13,224.99
6/30/95 $13,321.19 $13,256.84
7/31/95 $13,397.53 $13,396.40
8/31/95 $13,461.33 $13,501.31
9/29/95 $13,499.76 $13,539.72
10/31/95 $13,551.18 $13,604.35
11/30/95 $13,641.53 $13,691.46
12/29/95 $13,680.39 $13,747.66
1/31/96 $13,784.62 $13,855.38
2/29/96 $13,784.62 $13,858.19
3/29/96 $13,719.04 $13,824.47
4/30/96 $13,719.04 $13,841.33
5/31/96 $13,732.25 $13,853.50
6/28/96 $13,811.78 $13,935.93
7/31/96 $13,891.61 $14,013.68
8/30/96 $13,931.69 $14,034.28
9/30/96 $14,025.55 $14,119.52
10/31/96 $14,119.77 $14,217.87
11/29/96 $14,268.40 $14,350.88
12/31/96 $14,268.40 $14,357.44
1/31/97 $14,322.91 $14,420.19
2/28/97 $14,402.25 $14,490.45
3/31/97 $14,306.15 $14,415.51
4/30/97 $14,376.44 $14,477.33
5/30/97 $14,510.65 $14,595.35
6/30/97 $14,620.35 $14,681.53
7/31/97 $14,864.26 $14,855.75
8/29/97 $14,787.35 $14,826.71
9/30/97 $14,926.24 $14,932.56
10/31/97 $14,991.02 $14,999.06
11/28/97 $15,039.06 $15,042.15
12/31/97 $15,196.39 $15,144.25
1/30/98 $15,318.76 $15,244.47
2/27/98 $15,354.45 $15,276.32
3/31/98 $15,305.75 $15,300.67
4/30/98 $15,285.63 $15,280.07
5/29/98 $15,451.47 $15,421.51
6/30/98 $15,500.66 $15,473.02
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FUND MANAGER's PERSPECTIVE
Average Annual Performance, 10 Year 5 Year 1 Year
[blue] Tax Free Fund 7.27% 5.80% 7.71%
[gray] Lehman Municipal
10-Year Bond Index 8.24% 6.55% 8.48%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Tax Free Lehman Municipal
10-Year Bond Index
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6/30/88 $10,186.05 $10,000.00
7/29/88 $10,261.85 $10,094.72
8/31/88 $10,309.23 $10,092.22
9/30/88 $10,508.21 $10,244.27
10/31/88 $10,739.80 $10,403.29
11/30/88 $10,633.65 $10,284.15
12/30/88 $10,768.74 $10,327.02
1/31/89 $10,896.36 $10,555.83
2/28/89 $10,827.64 $10,460.12
3/31/89 $10,817.83 $10,421.24
4/28/89 $11,056.67 $10,620.14
5/31/89 $11,215.91 $10,834.99
6/30/89 $11,355.23 $10,961.61
7/31/89 $11,455.99 $11,119.64
8/31/89 $11,355.23 $11,053.84
9/29/89 $11,304.86 $11,001.99
10/31/89 $11,437.73 $11,127.62
11/30/89 $11,601.28 $11,313.06
12/29/89 $11,652.38 $11,429.71
1/31/90 $11,538.35 $11,395.31
2/28/90 $11,631.65 $11,480.06
3/30/90 $11,631.65 $11,461.61
4/30/90 $11,410.80 $11,385.34
5/31/90 $11,727.76 $11,632.10
6/29/90 $11,844.51 $11,741.28
7/31/90 $12,047.07 $11,904.29
8/31/90 $11,661.56 $11,733.30
9/28/90 $11,736.80 $11,735.79
10/31/90 $11,941.95 $11,994.02
11/30/90 $12,332.78 $12,238.78
12/31/90 $12,354.61 $12,268.69
1/31/91 $12,508.22 $12,471.09
2/28/91 $12,541.25 $12,578.27
3/28/91 $12,519.15 $12,571.78
4/30/91 $12,707.66 $12,745.26
5/31/91 $12,785.62 $12,841.48
6/28/91 $12,696.13 $12,826.52
7/31/91 $12,886.97 $12,960.62
8/30/91 $13,033.54 $13,135.59
9/30/91 $13,169.30 $13,336.99
10/31/91 $13,271.57 $13,445.66
11/29/91 $13,260.15 $13,468.10
12/31/91 $13,580.78 $13,755.23
1/31/92 $13,545.66 $13,784.15
2/28/92 $13,557.43 $13,763.21
3/31/92 $13,545.61 $13,742.27
4/30/92 $13,652.55 $13,872.88
5/29/92 $13,831.56 $14,035.39
6/30/92 $14,095.47 $14,278.66
7/31/92 $14,626.01 $14,746.76
8/31/92 $14,335.43 $14,572.28
9/30/92 $14,384.06 $14,693.92
10/30/92 $14,066.32 $14,543.87
11/30/92 $14,385.73 $14,809.57
12/31/92 $14,558.46 $14,982.05
1/29/93 $14,670.35 $15,234.30
2/26/93 $15,182.25 $15,791.62
3/31/93 $14,981.66 $15,561.32
4/30/93 $15,183.09 $15,709.37
5/28/93 $15,233.66 $15,764.21
6/30/93 $15,500.25 $16,075.27
7/30/93 $15,525.74 $16,115.65
8/31/93 $15,845.73 $16,449.65
9/30/93 $16,038.50 $16,652.04
10/29/93 $16,090.15 $16,679.46
11/30/93 $15,934.44 $16,542.87
12/31/93 $16,273.47 $16,895.81
1/31/94 $16,446.31 $17,103.19
2/28/94 $16,085.88 $16,634.60
3/31/94 $15,482.16 $15,999.50
4/29/94 $15,536.10 $16,175.47
5/31/94 $15,685.23 $16,304.59
6/30/94 $15,617.09 $16,234.30
7/29/94 $15,863.68 $16,506.98
8/31/94 $15,946.23 $16,570.79
9/30/94 $15,752.61 $16,347.96
10/31/94 $15,447.00 $16,109.17
11/30/94 $15,070.24 $15,804.59
12/30/94 $15,421.04 $16,089.23
1/31/95 $15,845.86 $16,505.98
2/28/95 $16,187.25 $16,973.08
3/31/95 $16,401.55 $17,202.39
4/28/95 $16,444.60 $17,223.33
5/31/95 $16,862.56 $17,769.69
6/30/95 $16,790.19 $17,659.02
7/31/95 $16,877.41 $17,918.24
8/31/95 $17,037.87 $18,161.52
9/29/95 $17,155.07 $18,277.67
10/31/95 $17,361.05 $18,488.53
11/30/95 $17,582.68 $18,736.79
12/29/95 $17,745.89 $18,851.45
1/31/96 $17,850.19 $19,042.37
2/29/96 $17,760.42 $18,964.11
3/29/96 $17,550.06 $18,728.31
4/30/96 $17,504.83 $18,662.01
5/31/96 $17,519.97 $18,609.67
6/28/96 $17,672.05 $18,786.64
7/31/96 $17,824.66 $18,966.60
8/30/96 $17,824.66 $18,967.10
9/30/96 $18,040.16 $19,162.01
10/31/96 $18,194.61 $19,404.29
11/29/96 $18,473.81 $19,797.11
12/31/96 $18,427.08 $19,707.88
1/31/97 $18,489.65 $19,785.64
2/28/97 $18,643.60 $19,972.08
3/31/97 $18,468.52 $19,704.39
4/30/97 $18,625.33 $19,849.45
5/30/97 $18,860.73 $20,130.61
6/30/97 $19,073.14 $20,352.94
7/31/97 $19,546.36 $20,924.73
8/29/97 $19,380.52 $20,721.83
9/30/97 $19,592.26 $20,984.55
10/31/97 $19,684.79 $21,095.71
11/28/97 $19,800.48 $21,193.42
12/31/97 $20,101.33 $21,527.92
1/30/98 $20,277.06 $21,766.70
2/27/98 $20,316.62 $21,765.20
3/31/98 $20,230.59 $21,750.25
4/30/98 $20,145.88 $21,630.61
5/29/98 $20,472.75 $21,998.50
6/30/98 $20,543.06 $22,079.26
THE YEAR IN REVIEW
Supply dominated the municipal market throughout the year. Contracting
supply during the third and fourth quarters of 1997 led to a very sluggish
secondary market. The only buyers of new issues were insurance companies,
who were replacing called bonds in their portfolios. By the time the Asian
crisis took center stage on the world financial markets, Treasuries had
rallied strongly, leaving municipal bonds flat to unchanged for the period.
On a relative value basis municipal bonds were cheap, and many arbitrage
and institutional buyers crossed over from the Treasury market to the
municipal market.
It was not until after the new year began that the supply picture changed
dramatically. Longer municipal rates fell from above five percent to below
five percent, triggering a number of new money financings. In Texas, school
districts were big issuers, coming to market with issue sizes of
$100,000,000 and more. By the end of the fiscal year the municipal yield
curve was quite flat, showing a spread of only slightly more than one
percent from the two-year yield to the thirty-year yield.
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FUND MANAGER'S PERSPECTIVE
TAX FREE FUNDS
INVESTMENT HIGHLIGHTS
Assets grew nicely in the Tax Free Fund and slightly in the Near-Term Tax
Free Fund. We sought to improve our credit quality and pick up higher
yielding bonds whenever possible. We were very active in Texas municipals,
adding new issue positions and selling off older ones. We also had some
bonds with call and pre-refunding features in the Tax Free Fund, which we
sold to keep our average maturity at the ten-year sector. In the Tax Free
Fund, the yield declined somewhat over the year, due to the rising prices
of the issues held in the portfolio.
The Near-Term Tax Free Fund saw some growth and sought to purchase mostly
five-year non-callable paper.This helped keep our weighted average maturity
at five years.The Fund continues to offer a very competitive tax-free yield
with low volatility. This Fund remains an excellent alternative to a
short-term taxable bond fund for those investors in need of tax free
income.
MUNICIPAL BOND RATINGS - BASED ON TOTAL INVESTMENTS
NEAR-TERM TAX FREE FUND TAX FREE FUND
AAA (59.4%) [Graphic: Pie Chart] AAA (54.1%) [Graphic: Pie Chart]
AA (15.9%) AA (15.0%0
A (22.8%) A (21.7%)
BBB (1.9%) BBB (9.2%)
- -13-
<PAGE>
FUND MANAGER'S PERSPECTIVE
TAX FREE FUNDS
<TABLE>
MUNICIPAL BOND SECTORS - BASED ON TOTAL INVESTMENTS
NEAR-TERM TAX FREE SECTORS
<S> <C>
School/Education 27.1%
General Improvements 23.6%
Hospital/Healthcare 23.0%
Water & Power 15.6%
Housing 9.6%
</TABLE>
<TABLE>
TAX FREE SECTORS
<S> <C>
General Improvements 40.7%
Water & Power 18.8%
School/Education 17.3%
Hospital/Healthcare 12.4%
Housing 6.8%
</TABLE>
CURRENT OUTLOOK
We do not expect any significant interest rate changes for the rest of 1998
and forecast a chance of a slowdown going into the first quarter of 1999.
The Asian crisis will become bigger than expected and will cause the U.S.
economy to slow. The chance of any tax reform will depend on the November
elections and will not have much impact on municipal yield levels. We will
seek to extend our maturities selectively in expectation of a longer-term
trend toward lower interest rates overall.
- -14-
<PAGE>
FUND MANAGER'S PERSPECTIVE
INCOME FUND
INTRODUCTION
The Fund invests in a broad range of equity and debt securities, at least
80% of which are income-producing securities. The Fund focuses on issuers
that have an established record of paying cash dividends, including com-
panies that provide essentials such as electricity, gas and telephone
services.
PERFORMANCE
For the fiscal year ended June 30, 1998, the Income Fund had a total return
of 23.92%, while the S&P 500 Index returned 30.14% and the S&P 40 Utilities
Index returned 30.26%. The average return for utility funds, according to
Lipper Analytical Services, was 26.18%. The average return for the equity
income universe of funds, again according to Lipper, was 21.25%. The S&P
Barra Value Index, which is made up of approximately 250 of the lowest
price-to-book value stocks in the S&P 500, returned 25.00% for the year.
Average Annual Performance 10 Year 5 Year 1 Year
[blue] Income Fund 12.36% 11.44% 23.92%
[gray] S&P 40 Utilities Index 14.43% 12.63% 30.26%
[black] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Income S&P 40 S&P 500 (Composite)
Utilities Index
---------- --------------- -------------------
6/30/88 $10,124.48 $10,000.00 $10,000.00
7/29/88 $10,082.47 $10,016.56 $9,961.90
8/31/88 $10,071.97 $9,877.81 $9,624.36
9/30/88 $10,418.55 $10,284.02 $10,033.96
10/31/88 $10,621.17 $10,551.86 $10,313.16
11/30/88 $10,653.16 $10,468.03 $10,165.84
12/30/88 $10,759.80 $10,533.43 $10,343.04
1/31/89 $11,169.49 $11,127.25 $11,099.70
2/28/89 $11,094.02 $10,879.16 $10,823.80
3/31/89 $11,288.08 $11,161.55 $11,076.02
4/28/89 $11,898.25 $11,866.11 $11,650.50
5/31/89 $12,453.94 $12,550.56 $12,120.11
6/30/89 $12,759.02 $12,748.45 $12,051.89
7/31/89 $13,473.35 $13,769.77 $13,139.10
8/31/89 $13,627.20 $13,688.10 $13,395.10
9/29/89 $13,803.04 $13,917.42 $13,340.56
10/31/89 $13,670.10 $13,980.00 $13,031.18
11/30/89 $14,113.22 $14,449.66 $13,295.85
12/29/89 $14,833.28 $15,506.11 $13,614.70
1/31/90 $13,859.32 $14,249.48 $12,701.19
2/28/90 $13,836.93 $14,091.06 $12,864.49
3/30/90 $13,814.54 $14,350.30 $13,205.13
4/30/90 $13,047.70 $13,796.28 $12,876.18
5/31/90 $13,882.21 $14,736.11 $14,129.12
6/29/90 $13,893.48 $14,426.42 $14,033.88
7/31/90 $13,779.88 $14,377.44 $13,989.04
8/31/90 $12,973.31 $13,236.39 $12,726.11
9/28/90 $12,950.59 $13,777.43 $12,107.68
10/31/90 $13,420.48 $14,683.01 $12,056.49
11/30/90 $13,615.31 $14,972.83 $12,834.29
12/31/90 $13,546.55 $15,109.26 $13,191.45
1/31/91 $13,522.80 $14,646.62 $13,764.50
2/28/91 $14,009.57 $15,151.19 $14,747.66
3/28/91 $13,950.21 $15,443.53 $15,104.43
4/30/91 $13,950.21 $15,198.96 $15,140.34
5/31/91 $14,093.29 $15,005.65 $15,791.25
6/28/91 $13,604.44 $14,800.52 $15,068.34
7/31/91 $13,928.93 $15,256.73 $15,770.08
8/30/91 $14,277.45 $15,652.09 $16,142.61
9/30/91 $14,650.01 $15,968.42 $15,872.36
10/31/91 $14,831.62 $16,291.42 $16,085.28
11/29/91 $14,892.16 $16,136.28 $15,438.94
12/31/91 $15,485.42 $17,323.75 $17,201.64
1/31/92 $14,983.92 $16,391.08 $16,881.48
2/28/92 $15,338.64 $15,939.80 $17,100.02
3/31/92 $15,081.77 $15,706.13 $16,767.84
4/30/92 $15,327.81 $16,717.86 $17,259.63
5/29/92 $15,893.68 $16,694.34 $17,344.03
6/30/92 $15,647.65 $16,930.31 $17,086.09
7/31/92 $16,414.57 $18,267.14 $17,783.53
8/31/92 $16,327.98 $18,131.31 $17,420.24
9/30/92 $16,402.20 $18,263.90 $17,625.02
10/30/92 $16,476.87 $18,096.93 $17,685.51
11/30/92 $16,439.53 $18,074.30 $18,286.06
12/31/92 $16,738.21 $18,725.52 $18,510.40
1/29/93 $16,884.68 $19,015.82 $18,664.99
2/26/93 $17,736.91 $20,381.33 $18,919.29
3/31/93 $18,309.49 $20,745.50 $19,318.22
4/30/93 $18,149.24 $20,690.08 $18,851.29
5/28/93 $18,402.98 $20,295.75 $19,354.32
6/30/93 $18,883.75 $21,234.93 $19,410.81
7/30/93 $19,125.51 $21,715.73 $19,332.65
8/31/93 $20,119.39 $22,766.37 $20,064.58
9/30/93 $19,971.65 $22,721.20 $19,910.70
10/29/93 $20,039.03 $22,678.71 $20,322.30
11/30/93 $19,082.22 $21,534.60 $20,128.60
12/31/93 $19,702.13 $21,426.25 $20,371.95
1/31/94 $20,177.89 $21,576.47 $21,063.89
2/28/94 $19,310.32 $20,348.69 $20,492.69
3/31/94 $18,176.89 $19,655.22 $19,600.98
4/29/94 $18,570.51 $20,142.20 $19,852.10
5/31/94 $18,190.95 $19,605.68 $20,176.62
6/30/94 $17,783.27 $19,650.55 $19,682.88
7/29/94 $18,392.09 $20,312.84 $20,328.74
8/31/94 $18,703.58 $20,256.43 $21,160.28
9/30/94 $18,321.30 $19,742.42 $20,643.26
10/31/94 $18,534.83 $19,912.01 $21,106.37
11/30/94 $17,780.34 $19,620.62 $20,338.65
12/30/94 $17,680.69 $19,721.28 $20,639.95
1/31/95 $18,083.18 $21,252.19 $21,174.84
2/28/95 $18,399.42 $21,215.68 $21,999.25
3/31/95 $18,485.67 $21,082.27 $22,647.36
4/28/95 $18,919.27 $21,851.65 $23,313.75
5/31/95 $19,569.66 $22,543.00 $24,244.15
6/30/95 $19,439.58 $22,647.77 $24,806.29
7/31/95 $19,774.50 $23,219.39 $25,628.55
8/31/95 $19,803.62 $23,682.27 $25,692.52
9/29/95 $20,473.45 $25,187.63 $26,776.18
10/31/95 $20,210.03 $25,792.53 $26,680.52
11/30/95 $20,853.94 $26,150.44 $27,850.42
12/29/95 $21,629.56 $28,006.72 $28,386.89
1/31/96 $22,018.74 $28,362.48 $29,351.93
2/29/96 $22,063.65 $27,234.99 $29,624.99
3/29/96 $22,108.55 $26,675.66 $29,910.22
4/30/96 $22,304.47 $26,969.20 $30,350.79
5/31/96 $22,319.54 $26,901.84 $31,132.19
6/28/96 $22,666.17 $28,019.23 $31,250.88
7/31/96 $21,862.08 $26,259.54 $29,870.98
8/30/96 $22,226.19 $26,819.46 $30,502.01
9/30/96 $22,362.74 $27,076.44 $32,217.21
10/31/96 $22,698.56 $28,454.64 $33,105.43
11/29/96 $23,690.76 $29,055.27 $35,605.60
12/31/96 $23,889.20 $28,883.14 $34,900.28
1/31/97 $24,480.16 $29,069.57 $37,079.51
2/28/97 $24,533.89 $28,784.19 $37,370.62
3/31/97 $23,493.44 $27,910.47 $35,837.98
4/30/97 $23,782.14 $27,491.86 $37,975.56
5/30/97 $25,045.23 $28,654.65 $40,285.92
6/30/97 $26,196.45 $29,551.02 $42,089.74
7/31/97 $27,028.08 $30,233.72 $45,436.89
8/29/97 $26,232.60 $29,683.70 $42,893.34
9/30/97 $27,704.23 $30,970.41 $45,241.13
10/31/97 $27,231.90 $31,273.72 $43,731.90
11/28/97 $28,503.57 $33,487.64 $45,754.68
12/31/97 $29,402.82 $36,006.97 $46,539.89
1/30/98 $29,402.82 $34,576.72 $47,054.15
2/27/98 $30,557.93 $35,744.96 $50,445.93
3/31/98 $32,584.62 $38,032.20 $53,027.11
4/30/98 $32,584.62 $37,300.87 $53,560.35
5/29/98 $32,163.09 $37,118.13 $52,640.99
6/30/98 $32,462.38 $38,492.19 $54,777.67
- -15-
<PAGE>
FUND MANAGER'S PERSPECTIVE
INCOME FUND
The underperformance of the Fund relative to the Utility Index was caused
by the Fund's diversification outside the utility sector. For instance,
the S&P International Oil Index rose only 8.80% for the year, while the
Morgan Stanley REIT Index rose 7.03%. The Fund is not strictly a utility
fund and is structured more along the lines of an equity income fund. The
Fund outperformed the average equity income fund due to its weighting in
utilities and several strong individual stock performances.
THE YEAR IN REVIEW
The S&P 500 had another stellar year as the large-capitalization growth
stocks that comprise the lion's share of the index produced exceptional
returns. The two biggest large-cap stocks in the Index, General Electric
and Microsoft, had annual returns of 42.02% and 71.51%, respectively.
Investors who were not exposed to the largest of the large caps had a tough
year. The Income Fund had a median market capitalization of approximately
$8 billion at the end of the fiscal year, and therefore was exposed to only
a few of the "super-cap" stocks.
The market's strong performance was a function of several factors. First
and foremost was a benign interest rate environment. As interest rates
declined over the year, valuations ascribed to equities rose. The S&P 500
boasted a generous price-to-earnings ratio of approximately 26. A second
factor supporting the valuations was the flow of investors' money into
index funds. These index funds, by virtue of their investment philosophy,
invested their money in the large-cap stocks that make up the majority of
the Index. As money chases these large cap stocks, their valuations
increase. Finally, the Asian crisis shook investors' confidence in emerging
markets. This lack of confidence in small volatile investments persuaded
investors to look at the large, steady, predictable stocks that produce
consistent growth. All these factors combined to create an environment
where large-cap growth stocks prospered.
The utility sector had a surprisingly strong year in fiscal 1998, caused
primarily by a falling interest rate environment. As yields fell on fixed
income products, utilities and their high-dividend yields attracted
investors. There were also several company-specific stories that drove the
utility index higher. Niagara Mohawk led the group with a 74% return
for the year as a result of settling several regulatory concerns. Unicom
was the second-best performer with a 66% return, the result of the market's
belief that the company's turnaround was successful. Consolidation
continued as the power companies prepared themselves to compete in a
deregulated environment. Several electric utilities purchased gas com-
panies to broaden their customer base and product offerings. Enron, a
holding of the Fund, continued to add to its product mix and position
itself as an energy trading, generating and distributing supermarket.
Their business model continues to be the modus operandi for many of the
consolidators in the industry. Weak companies will continue to be snapped
up in this rationalizing environment.
- -16-
<PAGE>
FUND MANAGER'S PERSPECTIVE
INCOME FUND
In the telecommunications arena, consolidation remains the major trend.
Several large mergers and acquisitions occurred during the last year.
British Telecom and MCI initially struck a deal; however, regulatory
hurdles prevented its consummation. When the deal fell apart WorldCom swept
in to buy MCI and propel itself into the big leagues of telecommunications.
AT&T was reported to be in talks to buy Southwestern Bell, one of the Baby
Bells. However, anti-trust concerns thwarted the deal. AT&T then decided to
buy Telecommunications, Inc.in an attempt to gain access to more households
and become a full service telecommunications provider. These deals were
driven by telecommunication companies' desires to provide all services to
customers, including cable, local, long distance and wireless communica-
tions. This consolidation proved positive for valuations and produced solid
returns for most companies in the sector.
The energy sector, including oil producers, explorers and refiners had a
more difficult year, as oil prices slipped as a glut engulfed the market.
Oil inventories were left high after a mild winter influenced by the ubi-
quitous El Nino. The high inventories and slowed consumption from Asia put
oil prices into a slump.
INVESTMENT HIGHLIGHTS
Lucent Technologies, Inc., our largest holding during much of the period,
had a phenomenal year, providing a 131% return. Earnings for Lucent
increased 42% for the year and are expected to increase an additional 44%
in 1998. Given Lucent's outstanding performance and its weighting in the
Fund, the decision was made to take some profits. It remains a top ten
holding of the Fund, but the demanding forward price-earnings ratio enticed
us to take some money off the table by selling a portion of the fund's
Lucent holdings.
Another strong performer for the year was PECO Energy. The Fund purchased
a large position in PECO during a slight dip in the share price in January.
Since then, the stock has returned 45% for the Fund and is now our second-
largest holding.
On the negative side, our sole holding in the steel industry has been a
disappointment. LTV Corp. was purchased based on a strong balance sheet and
cheap valuation. It was trading below book and replacement value and still
earning money. However the specter of the Asian crisis turned investors
sour on steel stocks, and LTV Corp. turned in a dismal performance, losing
34%. RJR Nabisco was also a loser for the Fund in stock price, but still
yields an amazingly high 9%. Our intent is to hold both stocks, as we
believe the market rewards value investors over time.
- -17-
<PAGE>
FUND MANAGER'S PERSPECTIVE
INCOME FUND
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
Illinova Corp. 2.72%
Electric Services
PECO Energy 2.65%
Electric Services
Duke Energy Capital Trust 2.28%
Electric Services
Lucent Technologies, Inc. 2.27%
Telecommunications
Fleet Capital Trust 2.22%
Real Estate Investment Trusts
Bell Atlantic Corp. 2.20%
Telecommunications
Lyondell Petrochemical Co. 2.19%
Petrochemical & Coal Products
Century Telephone Enterprises 2.19%
Telecommunications
Korea Development Bank 2.17%
Banks
US West, Inc. 2.13%
Telecommunications
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Electric Services 21.34%
Telecommunications 20.19%
Real Estate Investment Trusts 9.34%
Natural Gas Transmission & Distribution 8.38%
Petroleum Refining 3.82%
</TABLE>
- -18-
<PAGE>
FUND MANAGER'S PERSPECTIVE
CURRENT OUTLOOK
The Income Fund invests the vast majority of its assets in dividend paying
securities with capital appreciation potential. The Fund cannot invest more
than 25%of its assets in any one sector and therefore follows a diversified
investment approach. The two largest sectors for investment for the Fund
are the Electric Services category, which consists of electric utilities;
and the Telecommunications category, which is made up of local and long-
distance phone companies and companies that supply equipment to that
sector. We are moving away from a heavy focus on utilities and telecommuni-
cation stocks. We plan to reduce our weighting in those sectors in favor of
financial and consumer stocks. This move will put the Fund on a more level
playing ground with equity income funds, the sector we will compete against
in the future.
The Fund will continue to screen stocks using fundamental valuation
criteria, such as price-to-cashflow, price-to-book, price-to-earnings
ratios and dividend yields. For a stock to be considered for purchase it
must have at least a 2.0% dividend yield and be trading at least 20% below
market multiples for either price-to-cashflow, price-to-book, or price-to-
earnings ratios. Preferably, stocks will meet the 20% below market multiple
for all screens. Stocks that do not meet these criteria are scaled out of
the portfolio.
- -19-
<PAGE>
FUND MANAGER'S PERSPECTIVE
ALL AMERICAN EQUITY FUND
INTRODUCTION
The Fund's portfolio is primarily invested in American large-cap stocks,
with a minor component of stocks with pure growth potential. The Fund's
objective is to outperform the stock market average by maintaining diver-
sification similar to the S&P 500, while having the flexibility to seek out
promising individual stock opportunities.
PERFORMANCE
The All American Equity Fund finished the year with a 27.31% gain. Our
benchmark, the S&P 500 had a slightly higher return of 30.14%. Our
underperformance was largely due to our somewhat more conservative style
that we practiced in the portfolio in response to the lofty valuations that
were being achieved in the market.
Average Annual Performance 10 Year 5 Year 1 Year
[blue] All American Equity Fund 12.95% 19.67% 27.31%
[gray] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
All American Equity S&P 500 (Composite)
------------------- -------------------
6/30/88 $10,097.32 $10,000.00
7/29/88 $9,992.91 $9,961.90
8/31/88 $9,519.98 $9,624.36
9/30/88 $9,661.25 $10,033.96
10/31/88 $9,661.25 $10,313.16
11/30/88 $9,513.84 $10,165.84
12/30/88 $9,593.69 $10,343.04
1/31/89 $10,147.77 $11,099.70
2/28/89 $9,904.97 $10,823.80
3/31/89 $10,122.86 $11,076.02
4/28/89 $10,471.50 $11,650.50
5/31/89 $10,720.52 $12,120.11
6/30/89 $10,546.21 $12,051.89
7/31/89 $11,507.83 $13,139.10
8/31/89 $12,323.94 $13,395.10
9/29/89 $12,273.33 $13,340.56
10/31/89 $11,305.38 $13,031.18
11/30/89 $11,311.71 $13,295.85
12/29/89 $11,204.16 $13,614.70
1/31/90 $10,374.46 $12,701.19
2/28/90 $10,503.09 $12,864.49
3/30/90 $10,644.59 $13,205.13
4/30/90 $10,348.73 $12,876.18
5/31/90 $10,747.50 $14,129.12
6/29/90 $10,503.09 $14,033.88
7/31/90 $10,620.37 $13,989.04
8/31/90 $9,812.44 $12,726.11
9/28/90 $9,499.70 $12,107.68
10/31/90 $9,232.56 $12,056.49
11/30/90 $9,721.23 $12,834.29
12/31/90 $9,942.76 $13,191.45
1/31/91 $10,362.50 $13,764.50
2/28/91 $11,090.50 $14,747.66
3/28/91 $11,346.28 $15,104.43
4/30/91 $11,333.17 $15,140.34
5/31/91 $11,779.15 $15,791.25
6/28/91 $11,221.67 $15,068.34
7/31/91 $11,713.56 $15,770.08
8/30/91 $11,969.35 $16,142.61
9/30/91 $11,726.68 $15,872.36
10/31/91 $11,857.85 $16,085.28
11/29/91 $11,372.52 $15,438.94
12/31/91 $12,592.41 $17,201.64
1/31/92 $12,374.61 $16,881.48
2/28/92 $12,500.01 $17,100.02
3/31/92 $12,236.02 $16,767.84
4/30/92 $12,572.61 $17,259.63
5/29/92 $12,612.21 $17,344.03
6/30/92 $12,401.01 $17,086.09
7/31/92 $12,869.60 $17,783.53
8/31/92 $12,579.21 $17,420.24
9/30/92 $12,698.00 $17,625.02
10/30/92 $12,724.46 $17,685.51
11/30/92 $13,141.11 $18,286.06
12/31/92 $13,299.84 $18,510.40
1/29/93 $13,399.94 $18,664.99
2/26/93 $13,573.44 $18,919.29
3/31/93 $13,853.72 $19,318.22
4/30/93 $13,518.28 $18,851.29
5/28/93 $13,867.14 $19,354.32
6/30/93 $13,907.39 $19,410.81
7/30/93 $13,839.88 $19,332.65
8/31/93 $14,339.46 $20,064.58
9/30/93 $14,224.69 $19,910.70
10/29/93 $14,496.29 $20,322.30
11/30/93 $14,319.75 $20,128.60
12/31/93 $14,632.08 $20,371.95
1/31/94 $15,006.02 $21,063.89
2/28/94 $14,742.88 $20,492.69
3/31/94 $14,022.70 $19,600.98
4/29/94 $14,266.76 $19,852.10
5/31/94 $14,120.32 $20,176.62
6/30/94 $13,674.05 $19,682.88
7/29/94 $14,143.40 $20,328.74
8/31/94 $14,591.73 $21,160.28
9/30/94 $14,178.42 $20,643.26
10/31/94 $14,312.12 $21,106.37
11/30/94 $13,728.09 $20,338.65
12/30/94 $13,854.75 $20,639.95
1/31/95 $14,100.88 $21,174.84
2/28/95 $14,497.86 $21,999.25
3/31/95 $14,863.09 $22,647.36
4/28/95 $15,302.35 $23,313.75
5/31/95 $15,813.49 $24,244.15
6/30/95 $16,132.96 $24,806.29
7/31/95 $16,542.71 $25,628.55
8/31/95 $16,470.40 $25,692.52
9/29/95 $17,177.42 $26,776.18
10/31/95 $17,225.90 $26,680.52
11/30/95 $17,864.20 $27,850.42
12/29/95 $18,130.83 $28,386.89
1/31/96 $18,690.07 $29,351.93
2/29/96 $18,892.69 $29,624.99
3/29/96 $19,038.58 $29,910.22
4/30/96 $19,315.21 $30,350.79
5/31/96 $19,917.29 $31,132.19
6/28/96 $20,055.60 $31,250.88
7/31/96 $19,361.21 $29,870.98
8/30/96 $19,630.80 $30,502.01
9/30/96 $20,627.45 $32,217.21
10/31/96 $21,054.11 $33,105.43
11/29/96 $22,539.22 $35,605.60
12/31/96 $22,170.00 $34,900.28
1/31/97 $23,691.63 $37,079.51
2/28/97 $23,717.14 $37,370.62
3/31/97 $22,802.45 $35,837.98
4/30/97 $24,355.03 $37,975.56
5/30/97 $25,728.47 $40,285.92
6/30/97 $26,811.01 $42,089.74
7/31/97 $28,453.55 $45,436.89
8/29/97 $26,990.66 $42,893.34
9/30/97 $28,223.42 $45,241.13
10/31/97 $27,356.99 $43,731.90
11/28/97 $28,437.89 $45,754.68
12/31/97 $28,888.26 $46,539.89
1/30/98 $29,455.04 $47,054.15
2/27/98 $31,294.89 $50,445.93
3/31/98 $32,744.10 $53,027.11
4/30/98 $33,242.34 $53,560.35
5/29/98 $32,761.58 $52,640.99
6/30/98 $34,133.06 $54,777.67
THE YEAR IN REVIEW
The performance of the stock market during the last 12 months disguised the
fact that it was achieved at the expense of higher volatility. This arose
from the uncertainty brought about by the Asian economic crisis, the weak-
ening of the Japanese yen, and the slowdown of some of the technology
sectors. The market struggled from time to time and was undecided as to
which economic force would gain the upper hand: the
- -20-
<PAGE>
FUND MANAGER'S PERSPECTIVE
ALL AMERICAN EQUITY FUND
strong domestic economy or the rapidly deteriorating Asian economies and
their ripple effect on the rest of the world. During this period of
uncertainty, large-cap stocks definitely benefited, as they had broader
product lines and geographic distribution. Although many of them had ex-
posure to Asia, they profited from a resurgent Europe, which in many cases
more than offset the "Asian flu" effect.
The "super" blue chips, such as General Electric, Microsoft and Coca Cola,
displayed great earnings persistence and resilience. The Fund's good
performance had much to do with its significant positions in these stocks.
We felt that in times of uncertainty superior earnings consistency would be
greatly sought after, and that equities with these characteristics deserved
a premium. Investors felt so as well, thus the market witnessed a huge
differentiation between large-cap and small-cap stocks. To a large degree,
the market for the past year may be characterized as one given over to the
large caps, as small cap stocks significantly lagged in performance.
There is no doubt the stock market, especially large caps, benefited from
continued money inflows and an increasing trend toward index investing.
Significant new inflows and the popularity of index investing have created
an especially favorable environment for large-cap stocks.However, they also
outperformed due to their solid fundamentals and relative safety compared
to smaller-cap companies. On the other hand, there were occasions where
some large-cap stocks dropped by 20%-30% in a day when disappointing earn-
ings were announced. Index investing alone does not create superior earn-
ings performance. However, it does mean companies that report better than
expected earnings will be rewarded, as a higher stock price means higher
market capitalization and a bigger role in the index.
The stock market also benefited from a very low interest rate environment
and steady economic growth. Economists usually associate a robust economy
with a higher rate of inflation, as strong demand will chase goods and
manufacturers have the tendency to charge higher prices. However, this
economic boom has been accompanied by a rapid increase in productivity
because of the rapid deployment of new technologies and the improved
quality of the labor force. Companies have not needed to charge a higher
price to increase returns. An example of this is the telephone companies.
Because of technological innovations, they have cut back employees and
improved productivity without an increase in rates or visible inconvenience
to consumers. As a result, telephone companies financial performance has
prospered.
INVESTMENT HIGHLIGHTS
In terms of sector weightings relative to the S&P 500 Index, we maintained
overweighted positions in pharmaceuticals, communications, and beverages.
We held underweighted positions in the oil and semiconductor sectors
because of concern over the price of crude oil and reduced demand by Asian
semiconductor manufacturers. Our con-
- -21-
<PAGE>
FUND MANAGER'S PERSPECTIVE
ALL AMERICAN EQUITY FUND
cern proved justified as both sectors underperformed the S&P 500 Index on a
twelve-month basis. On average, the Fund did much better than sector
averages.
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
General Electric Co. 3.71%
Household Appliances
Microsoft Corp. 3.53%
Data Processing & Software
Coca Cola Co. 3.23%
Beverages
Fannie Mae 2.48%
Financial Services
Merck & Co., Inc. 2.34%
Pharmaceuticals
Pfizer, Inc. 2.15%
Pharmaceuticals
American International Group 1.95%
Insurance
Johnson & Johnson Co. 1.93%
Healthcare & Equipment
IBM Corp. 1.87%
Computer & Office Equipment
SBC Communications, Inc. 1.86%
Telecommunications
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Pharmaceuticals 10.57%
Telecommunications 8.91%
Financial Services 7.24%
Data Processing & Software 6.85%
Computer & Office Equipment 4.97%
</TABLE>
- -22-
<PAGE>
FUND MANAGER'S PERSPECTIVE
ALL AMERICAN EQUITY FUND
CURRENT OUTLOOK
Going forward, we think the market will see higher volatility, as high val-
uations may be under pressure from time to time because of concern over
slowing earnings growth.We think the demographic trends and index investing
we have seen to date will continue, which will favor large-cap stocks. The
key factors to watch are the impact of the Asian economic crisis and
interest rates. The Asian economic crisis has yet to stabilize, and will
continue to retard global economic growth. As a result, we expect domestic
interest rates to remain low, as economic growth likely will not reach an
unsustainable level, and inflation likely will be contained. Regarding
the general market, we are still positive, but we believe being selective
is key. We do not expect to change our sector weightings significantly in
the near future.
- -23-
<PAGE>
FUND MANAGER'S PERSPECTIVE
REAL ESTATE FUND
INTRODUCTION
The Fund's primary investment objective is long-term capital appreciation.
Current income is a secondary consideration. The Fund invests primarily in
companies that derive at least 50% of their revenues from the ownership,
construction, management or sale of residential, commercial or industrial
real estate. The real estate sector is a hybrid asset class that
embodies characteristics of both the equity and fixed income markets.
Independent research also indicates this asset class may be a hedge against
gold prices and inflation.
PERFORMANCE
During the twelve-month period ending June 30, 1998, the S&P 500 Index pro-
duced a total return of 30.14%, the Morgan Stanley Real Estate Fund Index
one of 7.03% and the Real Estate Fund one of 1.39%.
Average Annual Performance 10 Year 5 Year 1 Year
[blue] Real Estate Fund 7.63% 8.01% 1.39%
[gray] Morgan Stanley Real Estate n/a n/a 7.03%
(reindexed beginning 12/30/94)
[black] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Real Estate Morgan Stanley S&P 500 (Composite)
R.E. Index
(Re-indexed
beginning 12/30/94)
---------- ------------- ----------
6/30/88 $10,247.58 $10,000.00
7/29/88 $10,390.98 $9,961.90
8/31/88 $10,357.89 $9,624.36
9/30/88 $10,457.16 $10,033.96
10/31/88 $10,402.01 $10,313.16
11/30/88 $10,126.24 $10,165.84
12/30/88 $10,313.76 $10,343.04
1/31/89 $10,506.23 $11,099.70
2/28/89 $10,630.76 $10,823.80
3/31/89 $10,925.12 $11,076.02
4/28/89 $11,276.08 $11,650.50
5/31/89 $11,842.15 $12,120.11
6/30/89 $11,728.93 $12,051.89
7/31/89 $12,074.24 $13,139.10
8/31/89 $12,131.79 $13,395.10
9/29/89 $11,936.12 $13,340.56
10/31/89 $11,326.07 $13,031.18
11/30/89 $11,107.38 $13,295.85
12/29/89 $11,072.85 $13,614.70
1/31/90 $10,286.25 $12,701.19
2/28/90 $10,346.76 $12,864.49
3/30/90 $10,322.56 $13,205.13
4/30/90 $10,213.64 $12,876.18
5/31/90 $10,286.25 $14,129.12
6/29/90 $10,249.95 $14,033.88
7/31/90 $9,858.08 $13,989.04
8/31/90 $8,915.13 $12,726.11
9/28/90 $8,266.09 $12,107.68
10/31/90 $7,910.95 $12,056.49
11/30/90 $8,400.79 $12,834.29
12/31/90 $8,878.39 $13,191.45
1/31/91 $9,461.00 $13,764.50
2/28/91 $10,423.56 $14,747.66
3/28/91 $11,120.15 $15,104.43
4/30/91 $11,487.45 $15,140.34
5/31/91 $11,639.43 $15,791.25
6/28/91 $11,196.14 $15,068.34
7/31/91 $11,208.81 $15,770.08
8/30/91 $11,183.48 $16,142.61
9/30/91 $11,702.76 $15,872.36
10/31/91 $11,614.10 $16,085.28
11/29/91 $11,500.11 $15,438.94
12/31/91 $13,792.54 $17,201.64
1/31/92 $14,900.06 $16,881.48
2/28/92 $14,797.03 $17,100.02
3/31/92 $14,410.69 $16,767.84
4/30/92 $13,895.56 $17,259.63
5/29/92 $13,972.83 $17,344.03
6/30/92 $13,290.29 $17,086.09
7/31/92 $13,943.69 $17,783.53
8/31/92 $12,780.63 $17,420.24
9/30/92 $13,028.92 $17,625.02
10/30/92 $13,460.17 $17,685.51
11/30/92 $13,826.08 $18,286.06
12/31/92 $14,440.28 $18,510.40
1/29/93 $14,810.89 $18,664.99
2/26/93 $14,665.29 $18,919.29
3/31/93 $15,181.49 $19,318.22
4/30/93 $14,254.98 $18,851.29
5/28/93 $14,069.68 $19,354.32
6/30/93 $14,546.17 $19,410.81
7/30/93 $14,479.81 $19,332.65
8/31/93 $14,851.43 $20,064.58
9/30/93 $15,833.56 $19,910.70
10/29/93 $15,528.30 $20,322.30
11/30/93 $14,373.63 $20,128.60
12/31/93 $14,466.54 $20,371.95
1/31/94 $14,926.65 $21,063.89
2/28/94 $15,143.18 $20,492.69
3/31/94 $13,925.23 $19,600.98
4/29/94 $14,141.75 $19,852.10
5/31/94 $13,965.82 $20,176.62
6/30/94 $13,424.51 $19,682.88
7/29/94 $13,261.13 $20,328.74
8/31/94 $13,478.97 $21,160.28
9/30/94 $13,111.36 $20,643.26
10/31/94 $12,525.91 $21,106.37
11/30/94 $11,940.46 $20,338.65
12/30/94 $12,784.60 $10,000.00 $20,639.95
1/31/95 $12,357.07 $9,651.00 $21,174.84
2/28/95 $12,839.77 $9,812.50 $21,999.25
3/31/95 $12,688.06 $9,838.00 $22,647.36
4/28/95 $12,770.81 $9,741.50 $23,313.75
5/31/95 $13,336.26 $10,163.50 $24,244.15
6/30/95 $13,570.71 $10,386.50 $24,806.29
7/31/95 $13,819.97 $10,503.00 $25,628.55
8/31/95 $14,207.70 $10,589.00 $25,692.52
9/29/95 $14,456.96 $10,813.50 $26,776.18
10/31/95 $14,138.46 $10,475.50 $26,680.52
11/30/95 $14,318.48 $10,609.50 $27,850.42
12/29/95 $15,204.73 $11,290.50 $28,386.89
1/31/96 $15,275.26 $11,393.50 $29,351.93
2/29/96 $15,261.15 $11,528.00 $29,624.99
3/29/96 $15,430.41 $11,517.50 $29,910.22
4/30/96 $15,571.45 $11,512.50 $30,350.79
5/31/96 $15,867.65 $11,788.50 $31,132.19
6/28/96 $15,924.07 $12,009.50 $31,250.88
7/31/96 $15,866.00 $12,034.00 $29,870.98
8/30/96 $16,533.74 $12,505.00 $30,502.01
9/30/96 $17,012.77 $12,789.00 $32,217.21
10/31/96 $17,462.77 $13,132.50 $33,105.43
11/29/96 $18,174.05 $13,754.00 $35,605.60
12/31/96 $20,003.07 $15,343.00 $34,900.28
1/31/97 $20,237.19 $15,362.00 $37,079.51
2/28/97 $20,222.56 $15,303.50 $37,370.62
3/31/97 $20,281.09 $15,377.00 $35,837.98
4/30/97 $19,534.82 $14,877.50 $37,975.56
5/30/97 $20,061.60 $15,324.50 $40,285.92
6/30/97 $21,090.29 $16,134.50 $42,089.74
7/31/97 $22,009.83 $16,572.50 $45,436.89
8/29/97 $21,846.69 $16,460.50 $42,893.34
9/30/97 $23,967.58 $18,016.50 $45,241.13
10/31/97 $23,196.35 $17,481.00 $43,731.90
11/28/97 $23,537.47 $17,789.50 $45,754.68
12/31/97 $23,859.31 $18,193.50 $46,539.89
1/30/98 $23,475.48 $17,933.50 $47,054.15
2/27/98 $23,199.11 $17,645.00 $50,445.93
3/31/98 $23,751.84 $18,062.50 $53,027.11
4/30/98 $22,753.86 $17,423.00 $53,560.35
5/29/98 $22,293.26 $17,271.00 $52,640.99
6/30/98 $21,384.33 $17,269.00 $54,777.67
THE YEAR IN REVIEW
During the second half of 1997, real estate stocks performed well relative
to the overall market. This outperformance was attributable to attractive
yields and impressive cashflow growth of the group. Over the last six
months, however, the real estate industry has underperformed the overall
market.
- -24-
<PAGE>
FUND MANAGER'S PERSPECTIVE
REAL ESTATE
Several factors have contributed to this second-half underperformance. The
real estate recovery has attracted new capital. The favorable economic en-
vironment means discounts to replacement costs have narrowed markedly, and
development is occurring in all sectors. There has been more aggressive
lending and development throughout the sector. Public companies issued sig-
nificant amounts of new equity, and private capital came back as well. More
capital and fewer opportunities equaled moderate returns. In turn, this
caused investors to become nervous and funds to flow out of the real estate
sector.
INVESTMENT HIGHLIGHTS
We have three main criteria that drive our buy and sell decisions. First,
we look for visionary leadership. Our portfolio is dominated by companies
led by innovative and powerful management. The most important actions of
these companies were elimination of conflicts of interest, pursuit of a
structure that satisfied fiduciary concerns, and implementation of a disci-
plined approach to management. Earlier this year, with many of the more
aggressively growing real estate companies, we were concerned regarding the
dilution of earnings as these companies sought higher returns from casinos
and ice warehouses. We sold those stocks, as their performance has been
worse than the general market.
Second, we look for low long-term capital costs.Capital costs rose for real
estate companies over the past year. In this environment, we looked for
companies that manage their capital in a disciplined manner.
Third,we consider the conventional yardsticks used to measure any business:
revenue opportunities, low overhead costs, and successful risk management.
- -25-
<PAGE>
FUND MANAGER'S PERSPECTIVE
REAL ESTATE
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
Simon Debartolo Group, Inc. 6.91%
Regional Malls
Boston Properties, Inc. 6.90%
Office Property Management
Equity Office Properties Trust 6.86%
Office Property Management
Apartment Investment & Management Co. 5.95%
Apartments
Equity Resident Property Trust 5.63%
Apartments
Merry Land & Investment Co., Inc 5.61%
Apartments
Reckson Associates Realty Corp. 4.38%
Warehouse/Industrial
Hilton Hotels Corp. 4.06%
Hotel/Restaurant
Capital Trust 3.64%
Financial Services
Spieker Properties, Inc. 3.40%
Diversified
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Office Property Management 19.57%
Apartments 19.46%
Diversified 12.42%
Regional Malls 6.91%
Warehouse/Industrial 6.64%
</TABLE>
- -26-
<PAGE>
FUND MANAGER'S PERSPECTIVE
<TABLE>
PORTFOLIO PROFILE JUNE 30, 1998
<S> <C>
Country Distribution % of Investments
U.S. 73.93%
Canada 11.40%
Argentina 1.36%
Mexico 1.27%
U.S. Repurchase Agreements 12.04%
Number of Stocks 27
</TABLE>
CURRENT OUTLOOK
Fundamentals of the real estate industry remain healthy. Rents are rolling
at higher levels, vacancy rates continue to decline, and cash flows are
growing. For the most part, companies are well capitalized. Real estate
has a relatively long business cycle. Our studies suggest one of approxi-
mately 18 years duration. We believe we are currently at the midpoint of
this cycle. Property values have risen to a level where not every acquisi-
tion is accretive, as existing properties are no longer available at signi-
ficant discounts to replacement cost. But rents have not yet risen to a
level where new development offers an attractive risk-adjusted rate of
return. As a result, this will be a volatile period for the near- and mid-
term.
Valuations on real estate securities are attractive. Cashflow multiples are
low both on a historical and relative basis. The average dividend yield is
more than 7%, the highest since late 1996, and the spread is wide relative
to ten-year Treasuries.The prospect for dividend growth is good, as payouts
are historically low.
Real estate stocks are trading below their net asset values and companies
are announcing share repurchases. We believe that public real estate
companies should trade at a premium to their net asset values, given the
liquidity of their real estate, the quality of their management, and their
growth potential. The recent market correction provides more and varied
opportunities for the larger, better capitalized names. The market likely
will see more Darwinian consolidations with the strong getting much
stronger.
We expect that the intrinsic value of real estate and stable nature of its
cashflow will soon attract the attention of non-real estate dedicated value
buyers. Pension funds and other direct investors who have been late to
portfolio investing may find this an ideal time to allocate funds to real
estate securities. At this point, real estate is cheaper on Wall Street
than on Main Street.
Not all real estate companies are created equally. As many property sectors
have reached equilibrium, pure sector plays are increasingly difficult.
Security selection will become more important.The Fund is invested in high-
ly liquid, cycle-tested companies with above-average management teams and
that have assets with good prospects.
- -27-
<PAGE>
FUND MANAGER'S PERSPECTIVE
CHINA REGION OPPORTUNITY FUND
INTRODUCTION
The Fund invests in the stocks of companies of the People's Republic of
China, Hong Kong and neighboring countries.
PERFORMANCE
The China Region Opportunity Fund was down 52.06% for the year. However,
our benchmark, the International Finance Corporation Investible (IFCI)
China TR Index was down 55.12% for the year. We outperformed our benchmark
largely through our more conservative stock selection criteria.
Average Annual Performance Inception 1 Year
[blue] China Region Opportunity Fund (17.42)% (52.06)%
(2/10/94 Effective date of original registration)
[gray] IFCI China TR Index (22.70)% (55.12)%
February 1994 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
China Region Opportunity IFCI China TR
(02/11/94 effective
date of original
registration)
----------------- ------------
2/10/94 $10,000.00 $10,000.00
2/28/94 $9,465.73 $9,499.49
3/31/94 $8,155.24 $7,780.03
4/29/94 $8,094.61 $7,383.05
5/31/94 $8,417.99 $7,811.94
6/30/94 $7,852.07 $6,846.73
7/29/94 $8,267.47 $7,713.08
8/31/94 $8,774.06 $8,243.17
9/30/94 $8,834.85 $8,451.00
10/31/94 $8,662.41 $8,348.25
11/30/94 $7,698.79 $7,095.04
12/30/94 $7,191.63 $6,089.36
1/31/95 $6,430.88 $5,174.75
2/28/95 $6,735.18 $5,760.10
3/31/95 $6,714.89 $5,854.28
4/28/95 $6,441.02 $5,129.60
5/31/95 $7,019.19 $5,897.87
6/30/95 $6,846.75 $5,744.53
7/31/95 $7,072.58 $6,006.85
8/31/95 $6,990.46 $5,728.96
9/29/95 $6,939.14 $5,605.20
10/31/95 $6,692.41 $5,291.51
11/30/95 $6,312.05 $4,786.33
12/29/95 $6,178.40 $4,534.13
1/31/96 $6,642.56 $4,977.82
2/29/96 $6,766.33 $5,304.74
3/29/96 $6,580.67 $5,025.30
4/30/96 $6,549.73 $4,962.25
5/31/96 $6,621.93 $5,097.69
6/28/96 $6,704.44 $5,109.36
7/31/96 $6,621.03 $4,970.81
8/30/96 $6,631.46 $5,142.06
9/30/96 $6,662.74 $5,120.26
10/31/96 $6,683.69 $5,071.22
11/29/96 $7,207.49 $5,548.38
12/31/96 $7,898.91 $6,389.04
1/31/97 $7,877.95 $6,333.00
2/28/97 $8,097.95 $6,430.30
3/31/97 $7,982.71 $6,302.64
4/30/97 $8,454.13 $7,219.58
5/30/97 $8,894.13 $7,121.51
6/30/97 $9,009.36 $7,205.57
7/31/97 $9,679.83 $8,320.23
8/29/97 $9,795.06 $9,643.50
9/30/97 $9,239.83 $7,651.59
10/31/97 $7,018.92 $6,274.62
11/28/97 $6,337.98 $4,963.03
12/31/97 $6,125.32 $4,863.39
1/30/98 $4,784.09 $3,457.62
2/27/98 $6,114.76 $4,755.97
3/31/98 $6,114.76 $4,464.86
4/30/98 $5,618.40 $3,914.53
5/29/98 $4,984.74 $3,614.85
6/30/98 $4,319.41 $3,234.22
THE YEAR IN REVIEW
What a difference a year can make. After an euphoric period surrounding
the return of Hong Kong to China, the market took a sharp turn for the
worse. One country after another in Southeast Asia yielded to the currency
pressure started by the devaluation of the Thai baht. Investors began
questioning the sustainability of high real estate prices in Hong Kong and
the premium built into some Chinese stocks. After South Korea and
Taiwan devalued their currencies, the Hong Kong dollar suffered repeated
attacks and interest rates there skyrocketed, which quickly translated into
a bursting of its real estate bubble. For the past twelve month period,
Hong Kong real estate prices
- -28-
<PAGE>
FUND MANAGER'S PERSPECTIVE
CHINA REGION OPPORTUNITY FUND
dropped more than 40% from their peak. As a regional hub in Asia, Hong Kong
was greatly affected by the collapsed economies in other Southeastern Asian
countries. Tourism dropped by double digits over the last 12 months, which
in turn affected tourist-related and retail sectors, sending Hong Kong
through one of the most trying periods in its history. GDP growth suffered
its first decline in 15 years, and is expected to remain in a downward
trend for the near future. Since the Hong Kong dollar remained pegged
in place, asset prices dropped significantly to stay competitive. Although
we were underweighted in real estate stocks, we were invariably affected to
a significant degree because the economic contraction was across the board.
We expect the difficulties will stay for a while.
The Chinese market also was quite poor for the last 12 months. Although
China is not as directly exposed to Asian woes as Hong Kong is, the drastic
devaluation of other currencies put significant competitive pressure on
Chinese companies. The euphoria over the drastic reform measures taken by
the Chinese government was superceded quickly by the harsh reality of com-
petitive pressure and growing pains from restructuring. Chinese shares
turned from the darlings of the stock market to pariahs that nobody wanted.
INVESTMENT HIGHLIGHTS
We underestimated the potential impact from the worsening situation in
Asia, especially in Japan and Korea, and did not anticipate the complete
loss of confidence in Chinese shares by the market. As a result, the Fund
was impacted significantly. We focused on cheap valuation of Chinese
shares without allocating enough weight to the fact that market appetite
for them had changed completely. Market fear about the possible devaluation
of Chinese currency caused foreign investors to refrain from purchasing
Chinese shares. As a result, liquidity virtually dried up. Although we do
not think China will devalue its currency, the market sentiment was ex-
tremely negative and ignored the long-term value of viable businesses. Al-
though we expect the market will eventually realize the competitive
strength of the Chinese economy, investors are in for a difficult period in
the near-term.
- -29-
<PAGE>
FUND MANAGER'S PERSPECTIVE
CHINA REGION OPPORTUNITY FUND
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
HSBC Holdings, Ltd. 9.36%
Banking/Financial Services
Guangdong Kelon Electronics Holding 4.94%
Household Appliances
Varitronix International 3.57%
Electronic Equipment
Shanghai Dazhong 3.45%
Motor Vehicles & Transportation
Qingling Motors Co. Ltd 3.17%
Motor Vehicles & Transportation
Hutchinson Whampoa 2.85%
Conglomerates
China International Marine Container 2.65%
Water Transportation & Services
Li & Fung Ltd. 2.42%
Apparel
NG Fung Hong Ltd. 2.37%
Groceries - Wholesale
Citic Pacific Ltd. 2.30%
Conglomerates
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Conglomerates 10.52%
Banking/Financial Services 9.36%
Household Appliances 7.08%
Real Estate Developers 7.03%
Motor Vehicles & Transportation 6.62%
</TABLE>
- -30-
<PAGE>
FUND MANAGER'S PERSPECTIVE
CHINA REGION OPPORTUNITY FUND
<TABLE>
PORTFOLIO PROFILE JUNE 30, 1998
<S> <C>
Country Distribution % of Investments
Hong Kong 49.47%
People's Republic of China 33.52%
United Kingdom 9.36%
Taiwan 2.74%
Other Foreign 2.06%
U.S. Repurchase Agreements 2.85%
Number of Stocks 101
</TABLE>
CURRENT OUTLOOK
Although we expect the market to remain difficult for a while, we think the
current sell-off has created extremely attractive investment opportunities
in the long run. For example, even the best Chinese companies are selling
at approximately six times earnings, while their U.S. counterparts current-
ly are selling at more than 25 times earnings. Many Chinese companies have
proven they can compete with the best companies in the world, yet investors
put very different valuations on similar quality companies. Since the
valuation gap between good Chinese companies and poor Chinese companies has
narrowed so much we have increased the Fund's position in strong companies.
We believe these firms will be the crown jewels of Chinese companies. They
will be able to deal with economic difficulties better, and they will
emerge from the current turmoil stronger than ever.
Overall, we expect the Chinese economy to fare better than Hong Kong in the
short-term, and have been adding to our exposure to Chinese stocks.Although
we are suffering from the side effect of this strategy, namely the lower
liquidity offered by Chinese shares, we expect stock prices to reflect
fundamental values on a long-term basis.
- -31-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GLOBAL RESOURCES FUND
INTRODUCTION
The Fund is a diversified natural resource fund with the principal ob-
jective of achieving long-term growth of capital while providing protection
against inflation and monetary instability. The Fund invests in natural
resource-related companies around the globe. Small, mid and large-cap
companies involved in the production and processing of petroleum, natural
gas, industrial commodities, metals, minerals, paper and forest products
are considered for inclusion in the Fund.
PERFORMANCE
For the fiscal year ending June 30, 1998, the Global Resources Fund was
down 29.79%. We started the year off strongly with a 24.39% gain for the
first quarter ending September 30, 1997. However, with each ensuing day the
financial turmoil that began to unravel in Asia led investors to take a
much more bearish stance on natural resources-related investments. Energy
and international investments bore the brunt of the correction. No one
anticipated the magnitude of the affects that the Asian crisis would have
on the financial markets. Even now, almost one year later, there is still
a high degree of uncertainty.
Average Annual Performance 10 Year 5 Year 1 Year
[blue] Global Resources Fund 1.09% .90% (29.79)%
[gray] Mpal U.S.-Equity Natural Resource Index 8.29% 7.51% (8.92)%
[black] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Global Resources Mpal US-Equity S&P 500 (Composite)
Natural Resrce
------------ ------------ ------------
6/30/88 $10,000.00 $10,000.00 $10,000.00
7/29/88 $9,870.13 $9,995.02 $9,961.90
8/31/88 $9,350.65 $9,752.03 $9,624.36
9/30/88 $8,701.30 $9,646.18 $10,033.96
10/31/88 $9,090.91 $9,781.78 $10,313.16
11/30/88 $9,090.91 $9,681.84 $10,165.84
12/30/88 $9,350.65 $9,896.87 $10,343.04
1/31/89 $10,038.20 $10,606.77 $11,099.70
2/28/89 $10,038.20 $10,563.34 $10,823.80
3/31/89 $10,038.20 $10,787.07 $11,076.02
4/28/89 $9,900.69 $11,115.26 $11,650.50
5/31/89 $9,763.18 $11,176.62 $12,120.11
6/30/89 $9,763.18 $11,190.03 $12,051.89
7/31/89 $10,313.22 $11,800.99 $13,139.10
8/31/89 $10,863.25 $12,300.84 $13,395.10
9/29/89 $10,863.25 $12,231.58 $13,340.56
10/31/89 $10,588.24 $11,805.57 $13,031.18
11/30/89 $11,550.80 $12,425.76 $13,295.85
12/29/89 $11,413.29 $13,034.45 $13,614.70
1/31/90 $11,104.83 $12,489.11 $12,701.19
2/28/90 $10,796.36 $12,724.79 $12,864.49
3/30/90 $10,487.89 $12,853.76 $13,205.13
4/30/90 $9,408.25 $12,192.80 $12,876.18
5/31/90 $10,025.19 $13,162.69 $14,129.12
6/29/90 $9,716.72 $12,879.19 $14,033.88
7/31/90 $10,487.89 $13,522.35 $13,989.04
8/31/90 $10,333.66 $13,072.24 $12,726.11
9/28/90 $10,179.42 $12,831.58 $12,107.68
10/31/90 $9,269.44 $12,063.50 $12,056.49
11/30/90 $9,284.87 $12,177.32 $12,834.29
12/31/90 $9,593.34 $12,054.20 $13,191.45
1/31/91 $8,960.44 $11,838.77 $13,764.50
2/28/91 $9,376.82 $12,854.62 $14,747.66
3/28/91 $9,276.89 $12,690.86 $15,104.43
4/30/91 $9,376.82 $12,742.66 $15,140.34
5/31/91 $9,876.47 $13,054.71 $15,791.25
6/28/91 $9,593.34 $12,426.82 $15,068.34
7/31/91 $10,009.71 $12,917.18 $15,770.08
8/30/91 $9,926.44 $13,110.02 $16,142.61
9/30/91 $9,909.78 $12,866.57 $15,872.36
10/31/91 $10,192.92 $13,152.92 $16,085.28
11/29/91 $9,859.82 $12,327.34 $15,438.94
12/31/91 $10,076.33 $12,485.59 $17,201.64
1/31/92 $10,128.27 $12,414.13 $16,881.48
2/28/92 $10,232.15 $12,497.81 $17,100.02
3/31/92 $9,955.14 $12,056.99 $16,767.84
4/30/92 $10,093.65 $12,484.06 $17,259.63
5/29/92 $10,336.03 $12,880.65 $17,344.03
6/30/92 $10,007.08 $12,449.00 $17,086.09
7/31/92 $10,128.27 $13,011.08 $17,783.53
8/31/92 $9,833.95 $12,985.51 $17,420.24
9/30/92 $9,816.63 $13,094.75 $17,625.02
10/30/92 $9,695.44 $12,844.19 $17,685.51
11/30/92 $9,660.81 $12,680.23 $18,286.06
12/31/92 $9,799.32 $12,825.60 $18,510.40
1/29/93 $9,590.08 $13,066.66 $18,664.99
2/26/93 $9,764.45 $13,716.66 $18,919.29
3/31/93 $10,200.36 $14,456.58 $19,318.22
4/30/93 $10,374.73 $14,807.68 $18,851.29
5/28/93 $10,514.22 $15,338.68 $19,354.32
6/30/93 $10,653.71 $15,448.12 $19,410.81
7/30/93 $10,758.33 $15,492.55 $19,332.65
8/31/93 $11,107.06 $16,167.65 $20,064.58
9/30/93 $11,054.75 $15,745.83 $19,910.70
10/29/93 $11,542.97 $15,965.64 $20,322.30
11/30/93 $11,019.88 $15,085.93 $20,128.60
12/31/93 $11,612.72 $15,444.74 $20,371.95
1/31/94 $12,166.55 $16,152.05 $21,063.89
2/28/94 $11,737.78 $15,769.47 $20,492.69
3/31/94 $11,058.88 $14,923.03 $19,600.98
4/29/94 $10,808.76 $15,286.29 $19,852.10
5/31/94 $10,808.76 $15,545.48 $20,176.62
6/30/94 $10,254.92 $15,457.82 $19,682.88
7/29/94 $10,558.64 $15,942.40 $20,328.74
8/31/94 $10,880.22 $16,103.17 $21,160.28
9/30/94 $11,309.00 $16,186.12 $20,643.26
10/31/94 $11,130.34 $16,288.32 $21,106.37
11/30/94 $10,487.18 $15,114.16 $20,338.65
12/30/94 $10,487.18 $15,069.20 $20,639.95
1/31/95 $9,940.18 $14,495.56 $21,174.84
2/28/95 $10,053.36 $15,009.16 $21,999.25
3/31/95 $10,336.28 $15,754.66 $22,647.36
4/28/95 $10,619.21 $16,348.95 $23,313.75
5/31/95 $10,751.24 $16,634.24 $24,244.15
6/30/95 $10,864.41 $16,633.57 $24,806.29
7/31/95 $11,166.20 $17,163.98 $25,628.55
8/31/95 $11,335.96 $17,266.78 $25,692.52
9/29/95 $11,298.24 $17,216.50 $26,776.18
10/31/95 $10,788.97 $16,365.09 $26,680.52
11/30/95 $10,902.14 $17,122.20 $27,850.42
12/29/95 $11,430.27 $17,946.60 $28,386.89
1/31/96 $11,850.78 $18,592.35 $29,351.93
2/29/96 $11,984.58 $18,938.13 $29,624.99
3/29/96 $12,653.58 $19,885.38 $29,910.22
4/30/96 $13,399.03 $20,981.51 $30,350.79
5/31/96 $13,609.28 $21,311.10 $31,132.19
6/28/96 $13,341.69 $20,941.07 $31,250.88
7/31/96 $12,768.26 $20,018.26 $29,870.98
8/30/96 $13,227.00 $21,246.55 $30,502.01
9/30/96 $13,762.20 $21,717.98 $32,217.21
10/31/96 $14,412.08 $22,586.66 $33,105.43
11/29/96 $15,176.64 $23,543.87 $35,605.60
12/31/96 $15,329.56 $23,608.49 $34,900.28
1/31/97 $15,892.51 $24,101.30 $37,079.51
2/28/97 $15,026.43 $23,234.14 $37,370.62
3/31/97 $14,918.17 $22,751.42 $35,837.98
4/30/97 $14,528.44 $22,445.15 $37,975.56
5/30/97 $15,914.16 $24,310.29 $40,285.92
6/30/97 $15,870.86 $24,357.10 $42,089.74
7/31/97 $17,213.27 $25,788.93 $45,436.89
8/29/97 $18,165.96 $26,225.36 $42,893.34
9/30/97 $19,768.20 $27,932.56 $45,241.13
10/31/97 $18,728.91 $26,391.60 $43,731.90
11/28/97 $15,719.29 $24,261.96 $45,754.68
12/31/97 $14,907.35 $24,045.42 $46,539.89
1/30/98 $13,137.41 $23,124.61 $47,054.15
2/27/98 $13,436.55 $23,998.62 $50,445.93
3/31/98 $13,411.63 $24,792.72 $53,027.11
4/30/98 $13,062.62 $25,520.74 $53,560.35
5/29/98 $11,890.98 $23,548.14 $52,640.99
6/30/98 $11,143.12 $22,184.43 $54,777.67
- -32-
<PAGE>
FUND MANAGER'S PERSPECTIVE
THE YEAR IN REVIEW
In November of 1997, Boris Yeltsin removed a major restriction on the
energy sector by signing a decree allowing foreigners to own 100% stakes in
Russian oil companies. Both British Petroleum and Royal Dutch/Shell quickly
announced major capital investment programs in Russia. In light of the
dramatic fall in Russian oil production over the last ten years, from 11.4
million barrels per day (bpd) in 1987 to a current production level of 5.9
million bpd, the industry was in dire need of capital. OPEC also exerted
its influence in the oil market by raising its production quota by 10% in
response to forecasted growth in world demand led by Asia. Perhaps OPEC
feared losing market share to the Russians; regardless, they were quick
to act.
As the Asian financial crises began to unfold the market was still somewhat
unsure of how much of a decline in oil demand would be realized. Another
factor looming over the oil market was the discussions in February concern-
ing the U.N.-brokered oil-for-food deal with Iraq that would take Iraq's
oil export limit from $2 billion over the next six months to$5.256 billion.
These agreements did not limit the number of barrels sold into the market,
just the dollar amount.At that point, it became increasingly clear that the
oil markets were in trouble, and energy analysts began to cut Asian oil
demand growth in their financial models.
By March, the painful loss of revenues began to weigh heavily on the oil
producers. Saudi Arabia, Venezuela and Mexico finally agreed to forge the
Riyadh Pact after oil prices hit nine-year lows. Cuts totaling about 1.5
million barrels of daily production were pledged. Crude oil prices surged
in response to the announcement, but over the following weeks optimism
began to wane as traders watched patiently for the promises of production
cuts to show up in shipping numbers.
U.S. industry crude stocks reached a five-year high in May 1998. By June,
crude oil prices traded at $12.44, the lowest since October of 1988. The
production cuts announced in March took a couple of months to work their
way through the physical market, but despite the cuts, the market was
still over-supplied with crude oil. Excess inventories in the US and weak
Asian demand for oil led most analysts to conclude that oil prices may
still languish for another six months. In response, Saudi Arabia, Mexico,
and Venezuela announced another round of production cuts totaling 450,000
bpd. Oil prices jumped about fifty cents per barrel on the news but quickly
sold off. Oil traders were negative on the news saying the markets needed
at least one million barrels cut from daily production levels.
Other commodity prices have also suffered substantial damage from the Asian
meltdown. On a total cash cost basis, a significant amount of current
Western world production for metals is operating at a loss. While physical
inventories of oil are nearly overflowing from their storage tanks, metal
inventories on the London Metal Exchange
- -33-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GLOBAL RESOURCES FUND
actually have decreased, one of the few positives in the natural resources
market. Gold continued to remain at depressed pricing levels over most of
the year. Uncertainty over gold's role in the European Central Bank's
reserves was a major factor as was the preference of some institutions to
hold U.S. dollars rather than gold.The culmination of these events resulted
in a sharp correction in natural resource equities.
INVESTMENT HIGHLIGHTS
The single most important factor that affected portfolio returns for
natural resource funds over the past year was the economic turmoil in Asia.
Uncertainty over the depth of the financial troubles that Korea and Japan
were facing led many investors to liquidate their positions in any company
that had financial ties to the region. As the market began to digest the
economic implications of each news story, investor sentiment turned sour
towards commodity-related investments.
Small to mid-cap stocks were the outperformers in the first half of the
year as measured by the S&P 500 Index, relative to the S&P Small-cap 600
Index. However, this trend dramatically reversed itself in the second
half of the year as investors reined in their investments in the Asian
markets in favor of putting their money to work in the large-cap liquid
names in the U.S. market.
The most significant changes in the Global Resources Fund over the past
three quarters were a shift out of lower-tiered market capitalization com-
panies and a readjustment of portfolio sector weights. Our exposure to
Canadian natural resource stocks was reduced significantly. The cash raised
was partly put to work in the domestic oil-refining sector, which benefits
from an expansion of their margins as feedstock prices drop.We also lowered
our exposure to the oil and gas drilling and service companies. As we
entered the final month of the past quarter we brought our cash position
down from nearly 30% to slightly less than 20% by putting the money to work
in the major international oil companies. As we prepare to enter 1999, we
are starting to see signs of improved earnings. The international oil
stocks appear attractive on their current earnings outlook, and there may
be some room for rationalization within the industry.
- -34-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GLOBAL RESOURCES FUND
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
Exxon Corp. 4.45%
Petroleum Production & Refining
British Petroleum plc 3.76%
Petroleum Production & Refining
Total S.A. 3.10%
Petroleum Production & Refining
Sharpe Resources Corp. 3.10%
Oil & Gas Extraction
Enron Corp. 2.88%
Natural Gas Production & Distribution
Dynatec Corp. 2.83%
Mining Services
Texaco, Inc. 2.71%
Petroleum Production & Refining
Chevron Corp. 2.66%
Petroleum Production & Refining
Mobil Corp. 2.66%
Petroleum Production & Refining
Brunswick Technologies, Inc. 2.54%
Chemicals & Allied Products
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Petroleum Production & Refining 28.51%
Oil & Gas Extraction 14.06%
Chemicals & Allied Products 9.11%
Natural Gas Production & Distribution 6.15%
Metal Mining 5.53%
</TABLE>
- -35-
<PAGE>
FUND MANAGER'S PERSPECTIVE
<TABLE>
PORTFOLIO PROFILE JUNE 30, 1998
<S> <C>
Country Distribution % of Investments
U.S. 46.98%
Canada 17.25%
United Kingdom 6.11%
Australia 5.81%
France 5.54%
Other Foreign 3.53%
U.S. Repurchase Agreements 14.78%
Number of Stocks 70
</TABLE>
CURRENT OUTLOOK
The outlook for the oil sector for the remainder of 1998 continues to be
guarded. The June 24th OPEC meeting in Vienna resulted in 1.4 million bpd of
pledged cuts, in addition to the 1.5 million bpd cut announced earlier this year
in Riyadh. OPEC members are now motivated to cut back on production. Roughly,
every $1 per barrel rise in oil equates to roughly $10 billion in additional
revenue for the cartel's members. It will probably take another six months for
the world to work through the current oil glut. From a macroeconomic standpoint,
lower oil prices will be needed to accommodate the Asian economies. Some of
their currencies lost more than 50% of their value, significantly reducing their
ability to purchase oil, which is priced in U.S. dollars. While some analysts
are forecasting an increase in oil prices to about $19.00 per barrel by
year-end, this is probably too optimistic. A price target of $15.00 to $16.00
per barrel would be more realistic. Most commodity traders are looking for oil
to trade above $15.00 per barrel before they assign confidence to any type of
sustained recovery.
- -36-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
WORLD GOLD FUND
GOLD SHARES FUND
INTRODUCTION
The World Gold Fund includes exploration and junior mining companies, while the
Gold Shares Fund focuses on large-capitalization senior gold producers. In this
difficult year for the gold market, the funds made an effort to focus on
low-cost producers with strong cash flow, and explorers with cash reserves and
high-quality properties. In both cases, effective management is essential.
PERFORMANCE
We understand the frustration of gold investors this past year. For the fiscal
year ended June 30, 1998, the Gold Shares Fund and the World Gold Fund returned
- - 58.83% and -37.41%, respectively. For the same period, gold fell by 11.43 %
and the Lipper Gold Fund Index fell by 38.40%. All of the various global market
gold indices posted negative returns as well. It was truly a bad year for the
gold equity markets.
Average Annual Performance 10 Year 5 Year 1 Year
[blue] World Gold Fund (2.69)% (6.22)% (37.41)%
[gray] Canada Toronto Stock Exchange
Gold Total Return 1.09% (10.05)% (30.82)%
[black] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
World Gold Canada TSE S&P 500
Gold TR (Composite)
---------- ---------- ----------
6/30/88 $10,000.00 $10,000.00 $10,000.00
7/29/88 $10,071.43 $9,938.18 $9,961.90
8/31/88 $9,428.57 $11,633.57 $9,624.36
9/30/88 $8,571.43 $12,873.74 $10,033.96
10/31/88 $8,857.14 $15,339.08 $10,313.16
11/30/88 $9,000.00 $16,689.77 $10,165.84
12/30/88 $8,642.86 $15,397.15 $10,343.04
1/31/89 $8,928.57 $14,705.88 $11,099.70
2/28/89 $9,000.00 $18,017.98 $10,823.80
3/31/89 $8,785.71 $18,334.58 $11,076.02
4/28/89 $8,428.57 $19,065.19 $11,650.50
5/31/89 $8,000.00 $12,384.79 $12,120.11
6/30/89 $8,357.14 $14,672.16 $12,051.89
7/31/89 $8,714.29 $14,106.41 $13,139.10
8/31/89 $9,000.00 $11,213.94 $13,395.10
9/29/89 $9,142.86 $11,307.61 $13,340.56
10/31/89 $9,142.86 $12,409.14 $13,031.18
11/30/89 $10,428.57 $12,442.86 $13,295.85
12/29/89 $10,071.43 $12,337.95 $13,614.70
1/31/90 $10,287.24 $12,204.95 $12,701.19
2/28/90 $9,783.67 $12,146.87 $12,864.49
3/30/90 $9,136.22 $11,508.06 $13,205.13
4/30/90 $7,985.20 $10,498.31 $12,876.18
5/31/90 $8,344.90 $10,749.34 $14,129.12
6/29/90 $7,769.39 $10,586.36 $14,033.88
7/31/90 $8,272.96 $10,164.86 $13,989.04
8/31/90 $8,129.08 $10,526.41 $12,726.11
9/28/90 $8,057.14 $11,483.70 $12,107.68
10/31/90 $6,711.89 $10,886.10 $12,056.49
11/30/90 $6,683.11 $10,262.27 $12,834.29
12/31/90 $7,265.82 $10,153.62 $13,191.45
1/31/91 $6,265.87 $10,871.11 $13,764.50
2/28/91 $6,618.37 $11,258.90 $14,747.66
3/28/91 $6,575.20 $11,671.04 $15,104.43
4/30/91 $6,438.52 $11,856.50 $15,140.34
5/31/91 $6,726.28 $12,154.36 $15,791.25
6/28/91 $7,222.65 $13,911.58 $15,068.34
7/31/91 $7,244.23 $13,536.91 $15,770.08
8/30/91 $6,524.85 $14,599.10 $16,142.61
9/30/91 $6,625.56 $13,557.51 $15,872.36
10/31/91 $7,294.59 $12,856.88 $16,085.28
11/29/91 $7,337.76 $11,114.65 $15,438.94
12/31/91 $7,021.22 $12,111.28 $17,201.64
1/31/92 $7,193.88 $11,378.79 $16,881.48
2/28/92 $7,093.16 $12,146.87 $17,100.02
3/31/92 $6,596.79 $12,128.14 $16,767.84
4/30/92 $5,970.92 $12,083.18 $17,259.63
5/29/92 $6,438.52 $10,230.42 $17,344.03
6/30/92 $6,834.18 $9,915.70 $17,086.09
7/31/92 $7,222.65 $10,799.93 $17,783.53
8/31/92 $7,050.00 $9,080.18 $17,420.24
9/30/92 $7,050.00 $9,773.32 $17,625.02
10/30/92 $6,762.24 $9,704.01 $17,685.51
11/30/92 $6,229.90 $9,200.07 $18,286.06
12/31/92 $6,690.31 $9,288.12 $18,510.40
1/29/93 $6,373.78 $10,537.11 $18,664.99
2/26/93 $6,891.73 $11,940.21 $18,919.29
3/31/93 $7,690.26 $13,380.31 $19,318.22
4/30/93 $8,812.50 $15,585.11 $18,851.29
5/28/93 $9,999.49 $17,473.83 $19,354.32
6/30/93 $10,495.87 $18,918.02 $19,410.81
7/30/93 $12,481.38 $20,487.40 $19,332.65
8/31/93 $11,488.62 $18,902.82 $20,064.58
9/30/93 $10,049.85 $16,536.90 $19,910.70
10/29/93 $11,704.44 $19,782.48 $20,322.30
11/30/93 $11,488.62 $19,543.01 $20,128.60
12/31/93 $12,697.19 $21,112.16 $20,371.95
1/31/94 $13,136.02 $21,312.86 $21,063.89
2/28/94 $12,452.60 $19,920.79 $20,492.69
3/31/94 $12,474.18 $20,391.79 $19,600.98
4/29/94 $11,474.23 $18,023.63 $19,852.10
5/31/94 $12,020.97 $19,366.83 $20,176.62
6/30/94 $11,244.03 $18,106.10 $19,682.88
7/29/94 $11,258.42 $18,011.62 $20,328.74
8/31/94 $11,776.38 $18,911.60 $21,160.28
9/30/94 $12,481.38 $21,436.86 $20,643.26
10/31/94 $11,797.96 $19,374.24 $21,106.37
11/30/94 $10,308.83 $16,761.68 $20,338.65
12/30/94 $10,546.22 $17,980.83 $20,639.95
1/31/95 $9,436.10 $15,746.34 $21,174.84
2/28/95 $9,637.94 $16,862.36 $21,999.25
3/31/95 $10,748.07 $19,135.05 $22,647.36
4/28/95 $11,043.62 $19,200.80 $23,313.75
5/31/95 $11,021.99 $20,030.67 $24,244.15
6/30/95 $11,396.84 $20,186.53 $24,806.29
7/31/95 $11,894.24 $20,151.35 $25,628.55
8/31/95 $12,218.63 $20,536.89 $25,692.52
9/29/95 $12,211.42 $20,760.34 $26,776.18
10/31/95 $10,957.12 $18,248.28 $26,680.52
11/30/95 $11,894.24 $20,257.88 $27,850.42
12/29/95 $12,225.84 $20,235.97 $28,386.89
1/31/96 $14,201.00 $23,229.11 $29,351.93
2/29/96 $14,583.06 $24,086.94 $29,624.99
3/29/96 $15,361.59 $24,280.40 $29,910.22
4/30/96 $15,837.36 $24,069.29 $30,350.79
5/31/96 $17,452.09 $25,580.11 $31,132.19
6/28/96 $15,311.13 $21,528.96 $31,250.88
7/31/96 $14,835.36 $21,637.37 $29,870.98
8/30/96 $16,190.58 $22,802.63 $30,502.01
9/30/96 $15,714.81 $21,596.96 $32,217.21
10/31/96 $15,303.92 $21,936.28 $33,105.43
11/29/96 $15,058.83 $22,606.02 $35,605.60
12/31/96 $14,611.89 $21,980.02 $34,900.28
1/31/97 $13,795.88 $21,030.85 $37,079.51
2/28/97 $15,199.11 $22,514.03 $37,370.62
3/31/97 $13,384.07 $18,263.09 $35,837.98
4/30/97 $12,728.21 $16,786.98 $37,975.56
5/30/97 $13,414.57 $18,177.49 $40,285.92
6/30/97 $12,163.87 $16,102.79 $42,089.74
7/31/97 $11,584.27 $16,041.43 $45,436.89
8/29/97 $11,858.82 $15,808.36 $42,893.34
9/30/97 $12,362.15 $17,532.70 $45,241.13
10/31/97 $10,287.81 $14,353.12 $43,731.90
11/28/97 $8,160.09 $10,696.58 $45,754.68
12/31/97 $8,609.27 $11,967.35 $46,539.89
1/30/98 $9,350.52 $12,510.59 $47,054.15
2/27/98 $8,856.35 $12,225.05 $50,445.93
3/31/98 $9,458.62 $13,111.46 $53,027.11
4/30/98 $9,852.40 $14,056.52 $53,560.35
5/29/98 $8,454.85 $12,023.95 $52,640.99
6/30/98 $7,613.22 $11,139.63 $54,777.67
- -37-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
Average Annual Performance 10 Year 5 Year 1 Year
[blue] Gold Shares Fund (17.75)% (29.37)% (58.83)%
[gray] South Africa Johannesburg
Stock Exchange All Gold (12.39)% (23.67)% (30.39)%
[black] S&P 500 18.54% 23.06% 30.14%
June 1988 to June 1998
Past performance is not predictive of future results.
[Graphic: Mountain chart comparing annual performance.
Information taken from the following points.]
Gold Shares S&P 500 South Africa
(Composite) JSE All Gold
---------- ---------- ----------
6/30/88 $10,000.00 $10,000.00 $10,000.00
7/29/88 $9,866.31 $9,961.90 $9,732.23
8/31/88 $9,331.55 $9,624.36 $9,144.24
9/30/88 $8,556.15 $10,033.96 $9,125.89
10/31/88 $9,144.39 $10,313.16 $9,656.43
11/30/88 $10,080.21 $10,165.84 $10,517.68
12/30/88 $9,358.29 $10,343.04 $9,893.40
1/31/89 $9,330.27 $11,099.70 $9,907.16
2/28/89 $9,918.67 $10,823.80 $10,286.61
3/31/89 $10,731.21 $11,076.02 $11,136.46
4/28/89 $10,479.04 $11,650.50 $10,551.03
5/31/89 $9,582.44 $12,120.11 $9,019.52
6/30/89 $10,703.19 $12,051.89 $9,839.91
7/31/89 $10,930.32 $13,139.10 $10,821.73
8/31/89 $10,845.14 $13,395.10 $10,213.45
9/29/89 $11,867.20 $13,340.56 $11,063.69
10/31/89 $11,952.37 $13,031.18 $12,049.40
11/30/89 $14,110.04 $13,295.85 $14,023.17
12/29/89 $15,416.00 $13,614.70 $14,400.95
1/31/90 $16,896.64 $12,701.19 $15,339.27
2/28/90 $14,545.04 $12,864.49 $13,501.76
3/30/90 $13,528.92 $13,205.13 $13,321.54
4/30/90 $12,077.32 $12,876.18 $11,751.64
5/31/90 $12,367.64 $14,129.12 $11,011.73
6/29/90 $11,293.46 $14,033.88 $10,310.17
7/31/90 $11,943.87 $13,989.04 $10,912.20
8/31/90 $11,796.05 $12,726.11 $11,768.68
9/28/90 $11,234.33 $12,107.68 $11,235.27
10/31/90 $10,465.66 $12,056.49 $10,108.57
11/30/90 $10,051.77 $12,834.29 $9,040.66
12/31/90 $10,140.46 $13,191.45 $8,444.65
1/31/91 $9,020.47 $13,764.50 $7,700.76
2/28/91 $9,777.22 $14,747.66 $7,473.31
3/28/91 $8,959.93 $15,104.43 $6,405.65
4/30/91 $9,171.82 $15,140.34 $6,761.78
5/31/91 $10,291.81 $15,791.25 $7,857.41
6/28/91 $10,866.94 $15,068.34 $8,557.28
7/31/91 $10,501.67 $15,770.08 $8,316.05
8/30/91 $8,675.29 $16,142.61 $6,743.66
9/30/91 $9,192.76 $15,872.36 $7,258.73
10/31/91 $9,497.16 $16,085.28 $7,476.81
11/29/91 $9,923.31 $15,438.94 $7,919.16
12/31/91 $8,553.53 $17,201.64 $7,412.75
1/31/92 $8,522.43 $16,881.48 $8,192.95
2/28/92 $7,682.63 $17,100.02 $7,774.66
3/31/92 $7,558.21 $16,767.84 $7,088.50
4/30/92 $7,029.45 $17,259.63 $6,313.96
5/29/92 $7,496.00 $17,344.03 $6,934.36
6/30/92 $6,905.03 $17,086.09 $7,108.58
7/31/92 $6,559.78 $17,783.53 $6,948.42
8/31/92 $5,994.82 $17,420.24 $6,138.37
9/30/92 $5,398.48 $17,625.02 $5,741.51
10/30/92 $4,645.20 $17,685.51 $4,959.66
11/30/92 $4,331.34 $18,286.06 $5,123.43
12/31/92 $4,205.79 $18,510.40 $4,703.56
1/29/93 $4,430.53 $18,664.99 $5,277.36
2/26/93 $4,815.79 $18,919.29 $5,560.66
3/31/93 $5,714.74 $19,318.22 $6,822.52
4/30/93 $6,645.79 $18,851.29 $8,305.88
5/28/93 $7,930.00 $19,354.32 $10,425.45
6/30/93 $8,058.43 $19,410.81 $10,280.42
7/30/93 $9,158.77 $19,332.65 $11,163.58
8/31/93 $7,508.25 $20,064.58 $9,293.47
9/30/93 $7,152.26 $19,910.70 $7,891.15
10/29/93 $8,026.06 $20,322.30 $9,397.26
11/30/93 $7,961.34 $20,128.60 $9,773.84
12/31/93 $9,417.68 $20,371.95 $11,400.10
1/31/94 $8,469.37 $21,063.89 $10,181.22
2/28/94 $7,946.17 $20,492.69 $10,333.52
3/31/94 $7,848.07 $19,600.98 $10,400.11
4/29/94 $8,076.97 $19,852.10 $10,215.91
5/31/94 $7,815.37 $20,176.62 $9,495.54
6/30/94 $8,207.77 $19,682.88 $10,280.33
7/29/94 $8,505.63 $20,328.74 $10,454.97
8/31/94 $9,432.31 $21,160.28 $11,469.69
9/30/94 $10,557.57 $20,643.26 $12,307.79
10/31/94 $9,994.94 $21,106.37 $11,428.10
11/30/94 $8,737.30 $20,338.65 $9,992.50
12/30/94 $9,167.55 $20,639.95 $10,265.76
1/31/95 $7,018.38 $21,174.84 $7,672.22
2/28/95 $7,421.35 $21,999.25 $7,616.12
3/31/95 $7,757.16 $22,647.36 $7,388.27
4/28/95 $7,387.77 $23,313.75 $7,246.48
5/31/95 $7,186.28 $24,244.15 $6,778.38
6/30/95 $7,287.03 $24,806.29 $7,118.32
7/31/95 $7,865.90 $25,628.55 $7,474.25
8/31/95 $7,831.85 $25,692.52 $7,529.06
9/29/95 $7,763.75 $26,776.18 $7,455.17
10/31/95 $6,571.94 $26,680.52 $6,265.56
11/30/95 $6,640.05 $27,850.42 $6,369.22
12/29/95 $6,708.15 $28,386.89 $6,627.43
1/31/96 $8,195.01 $29,351.93 $8,366.56
2/29/96 $7,952.96 $29,624.99 $8,299.47
3/29/96 $7,503.45 $29,910.22 $8,050.15
4/30/96 $7,538.02 $30,350.79 $8,078.30
5/31/96 $7,745.49 $31,132.19 $8,304.64
6/28/96 $6,431.52 $31,250.88 $7,149.75
7/31/96 $6,361.62 $29,870.98 $7,065.37
8/30/96 $6,326.66 $30,502.01 $7,161.01
9/30/96 $5,767.40 $32,217.21 $6,552.49
10/31/96 $5,662.54 $33,105.43 $6,637.86
11/29/96 $5,278.04 $35,605.60 $5,950.66
12/31/96 $4,998.41 $34,900.28 $5,790.63
1/31/97 $4,498.57 $37,079.51 $5,315.89
2/28/97 $5,141.23 $37,370.62 $6,282.61
3/31/97 $4,427.17 $35,837.98 $5,294.93
4/30/97 $4,070.14 $37,975.56 $4,800.12
5/30/97 $4,141.54 $40,285.92 $4,724.84
6/30/97 $3,441.76 $42,089.74 $3,826.09
7/31/97 $3,514.99 $45,436.89 $3,829.31
8/29/97 $3,551.61 $42,893.34 $3,895.13
9/30/97 $3,478.38 $45,241.13 $3,954.86
10/31/97 $2,709.47 $43,731.90 $3,349.93
11/28/97 $2,087.03 $45,754.68 $2,693.04
12/31/97 $2,130.96 $46,539.89 $2,962.77
1/30/98 $2,130.96 $47,054.15 $3,209.36
2/27/98 $1,944.04 $50,445.93 $2,846.16
3/31/98 $1,981.42 $53,027.11 $2,905.01
4/30/98 $2,093.58 $53,560.35 $3,840.15
5/29/98 $1,682.34 $52,640.99 $3,257.54
6/30/98 $1,416.90 $54,777.67 $2,663.52
THE YEAR IN REVIEW
The gold market was shaken early in the fiscal year by news of the Australian
Central Bank selling two-thirds of its gold reserves. This news so soon after
the Bre-X scandal, caused gold prices to fall to 12-year lows. In October 1997,
the gold market was shaken again as it was revealed that an advisory to the
Swiss National Bank recommended gold be sold to raise money for a Swiss
humanitarian fund. While this recommendation was not ratified, these events
profoundly affected the price of gold. Further selling from the central banks of
Argentina, Belgium and the Netherlands caused gold prices to fall to 18-year
lows in January 1998. Interestingly, approximately 50 percent of these sales
were to other central banks.
Gold prices rebounded in April to $314.95, but later fell below the
psychologically significant $300 level. The decision by the European Monetary
Union to hold 15 percent of its reserves in gold had little effect on the gold
price, with gold trading between $290 and $300 throughout June. This tight
trading range, set against the backdrop of a bull market in the general markets,
heightened pessimism towards gold's future. The negative sentiment toward gold
shares led to an undervaluation of share prices. In some extreme cases, junior
exploration companies traded at a discount to the per share cash value.
- -38-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
The decline in value of Asian currencies versus the U.S. dollar had a negative
impact on gold price. In June 1998, we saw the development of a strong correla-
tion between the price of gold and the yen versus the dollar. Japan and other
Asian nations are traditionally large consumers of gold. As their currencies
declined against the dollar, gold became too expensive for Asian consumers to
purchase. This weaker demand led to weaker prices.
The weakness of the currencies of South Africa and Australia, both large
gold-producing nations, increased the profitability of their mines. Producing
companies sold gold forward to lock in higher prices in their local currencies.
The forward selling contributed to the weakness in gold price as the additional
supply of metal reached the market.
In an attempt to reduce corporate overheads and lower costs, the South African
mining industry underwent consolidation. As a result, two new gold mining
companies were created, Anglogold and Goldfields Limited. Anglogold is now the
world's largest producer of gold, and Goldfields Limited is among the top five
producers.
INVESTMENT HIGHLIGHTS
As stated above, gold price last year reached 18 year lows. In spite of the
funds' strategy to invest in companies with sufficient cash to finance
development, low debt, and hedged production to insulate against dropping gold
price, the negative sentiment in the gold sector was too great to overcome.
Unfortunate for gold funds, gold equity prices dropped in part due to selling by
non-gold oriented funds as they divested from the sector. In addition, the
losses in the sector caused an unusually high degree of tax loss selling towards
the end of December leading to the lowest prices of the year.
- -39-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
WORLD GOLD FUND
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
The Pioneer Group, Inc. 10.41%
Investment Advisors
Barrick Gold Corp. 8.09%
Senior Gold Producers
Delta Gold, NL 7.75%
Intermediate Gold Producers
Franco-Nevada Mining Corp. 7.07%
Mining Finance
Euro-Nevada Mining Corp. 6.49%
Mining Finance
Ashanti Goldfields Co. Ltd. 4.53%
Senior Gold Producers
Ranger Minerals NL 3.76%
Junior Gold Producers
Meridian Gold Inc 3.60%
Intermediate Gold Producers
Getchell Gold Corp. 3.42%
Intermediate Gold Producers
Newmont Mining Corp. 3.29%
Senior Gold Producers
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Senior Gold Producers 24.54%
Intermediate Gold Producers 19.03%
Mining Finance 14.02%
Investment Advisors 10.41%
Junior Gold Producers 10.26%
</TABLE>
- -40-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
GOLD SHARES FUND
<TABLE>
TOP 10 HOLDINGS-BASED ON TOTAL INVESTMENTS
<S> <C>
Franco-Nevada Mining Corp. 9.97%
Gold Mining - North America
Meridian Gold Inc. 9.79%
Gold Mining - North America
The Pioneer Group, Inc. 9.18%
Investment Advisors
Freeport-McMoRan Copper & Gold 6.12%
Mining Services
Anglogold Ltd. 5.80%
Gold Mining - Africa
Barrick Gold Corp. 5.54%
Gold Mining - North America
Placer Dome, Inc. 5.30%
Gold Mining - North America
Normandy Mining Ltd. 4.88%
Gold Mining - Australia
Newmont Mining Corp. 4.82%
Gold Mining - North America
Homestake Mining 4.73%
Gold Mining - North America
</TABLE>
<TABLE>
TOP 5 INDUSTRIES - BASED ON TOTAL INVESTMENTS
<S> <C>
Gold Mining - North America 52.17%
Gold Mining - Australia 14.21%
Gold Mining - Africa 13.14%
Investment Advisors 9.18%
Mining Services 2.95%
</TABLE>
- -41-
<PAGE>
FUND MANAGER'S PERSPECTIVE
GOLD FUNDS
WORLD GOLD FUND
<TABLE>
PORTFOLIO PROFILE JUNE 30, 1998
<S> <C>
Country Distribution % of Investments
Canada 47.26%
U.S. 20.68%
Australia 16.87%
Ghana 4.26%
Zimbabwe 1.28%
Other Foreign 3.02%
U.S. Repurchase Agreements 6.63%
Number of Stocks 99
</TABLE>
GOLD SHARES FUND
<TABLE>
PORTFOLIO PROFILE JUNE 30, 1998
<S> <C>
Country Distribution % of Investments
U.S. 34.58%
Canada 31.89%
Australia 14.21%
South Africa 11.62%
Other Foreign 2.30%
U.S. Repurchase Agreements 5.40%
Number of Stocks 38
</TABLE>
CURRENT OUTLOOK
The gold market is both cyclical and volatile. Within a given cycle, regardless
of the direction of price, daily volatility exists. Gold metal has strong price
fundamentals. In spite of recent sales, current demand exceeds new mine supply.
Unfortunately, recent negative sentiments have outweighed the fundamentals of
supply and demand, causing a decline in gold prices. Looking forward, the price
of gold will remain closely linked to the strength of the U.S. dollar against
other currencies. Events that may reverse negative market sentiments likely
would include the stability of the new European Central Bank; significant steps
taken by the government of Japan to revive its economy; and producers exhibiting
a willingness to curb forward sales.
- -42-
<PAGE>
PORTFOLIO OF INVESTMENTS JUNE 30, 1998
U.S. TREASURY SECURITIES CASH FUND
<TABLE>
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT
OBLIGATIONS 83.67% Coupon Maturity Principal
Rate Date Amount Value
United States Treasury Notes 83.67%
- --------------------------------------------------------------------------------
6.25% 07/31/98 $20,000,000 $20,013,609
4.75% 08/31/98 25,000,000 24,972,745
4.75% 09/30/98 25,000,000 24,961,080
6.00% 09/30/98 25,000,000 25,038,335
5.625% 11/30/98 30,000,000 30,037,255
- --------------------------------------------------------------------------------
Total United States Government Obligations 125,023,024
- --------------------------------------------------------------------------------
(cost $125,023,024)
REPURCHASE AGREEMENTS 38.53%
Joint Tri-Party Repurchase Agreements,
6/30/98, collateralized by
U.S. Treasury securities held in joint tri-
party repurchase accounts:
5.75%, Donaldson, Lufkin & Jenrette, Inc.,
repurchase price $25,003,993 5.75% 07/01/98 25,000,000 25,000,000
5.85%, Morgan Stanley, Dean Witter & Co.,
repurchase price $32,579,240 5.85% 07/01/98 32,573,947 32,573,947
- --------------------------------------------------------------------------------
Total Repurchase Agreements 57,573,947
- --------------------------------------------------------------------------------
(cost $57,573,947)
- --------------------------------------------------------------------------------
Total Investments 122.20% 182,596,971
- --------------------------------------------------------------------------------
(cost $182,596,971)
Other assets and liabilities, net (22.20)% (33,175,585)
-----------
NET ASSETS 100% $149,421,386
------------
</TABLE>
See notes to portfolios of investments.
- -43-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
<TABLE>
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS 99.28% Coupon Maturity Principal
Rate Date Amount Value
Federal Farm Credit Bank 6.50%
- --------------------------------------------------------------------------------
Discount Note:
Yield 4.99% 07/14/98 $2,000,000 $1,996,129
Variable Rates:
5.52% 08/11/98 500,000 499,928
5.51% 10/01/98 25,000,000 24,996,850
5.37% 11/02/98 17,000,000 16,994,588
Fixed Rate:
5.38% 03/02/99 5,000,000 4,989,499
---------
49,476,994
Federal Home Loan Bank 74.51%
- --------------------------------------------------------------------------------
Discount Notes:
Yield 5.53% 07/01/98 37,967,000 37,967,000
Yield 5.52% 07/08/98 10,000,000 9,989,734
Yield 5.10% 07/17/98 10,000,000 9,975,956
Yield 5.21% 07/23/98 5,000,000 4,983,959
Yield 5.27% 08/07/98 5,000,000 4,972,559
Yield 5.33% 08/25/98 5,000,000 4,959,437
Yield 5.37% 09/25/98 3,695,000 3,647,776
Variable Rates:
5.44% 07/02/98 20,000,000 19,999,962
5.45% 07/30/98 10,000,000 9,999,395
5.44% 08/18/98 50,000,000 49,995,465
10.00% 08/20/98 3,000,000 3,015,717
5.43% 09/17/98 20,000,000 19,996,638
5.36% 10/14/98 25,000,000 24,998,201
5.60% 10/20/98 25,000,000 25,000,000
5.57% 11/04/98 42,500,000 42,493,800
5.46% 12/03/98 25,000,000 24,990,376
5.48% 12/24/98 25,000,000 24,994,133
5.48% 03/10/99 5,000,000 4,995,872
5.57% 03/26/99 29,000,000 28,992,548
5.57% 04/01/99 10,000,000 9,994,908
5.59% 04/09/99 10,000,000 9,997,730
5.63% 06/02/99 25,000,000 24,982,001
Fixed Rates:
6.02% 07/06/98 2,000,000 2,000,107
5.22% 07/08/98 7,025,000 7,024,557
- -44-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
U.S. GOVERNMENT SECURITIES SAVINGS FUND
Coupon Maturity Principal
Rate Date Amount Value
Federal Home Loan Bank
- --------------------------------------------------------------------------------
Fixed Rates: (continued)
5.76% 07/08/98 $5,000,000 $5,000,128
5.24% 07/20/98 6,675,000 6,673,854
5.19% 08/26/98 150,000 149,854
5.80% 09/18/98 20,500,000 20,502,899
4.83% 09/21/98 1,000,000 998,134
5.04% 10/01/98 2,000,000 1,996,182
6.10% 10/07/98 2,000,000 2,002,682
5.63% 10/08/98 5,000,000 5,002,315
5.80% 10/27/98 5,000,000 5,005,878
5.80% 11/03/98 500,000 500,325
5.64% 11/09/98 310,000 310,000
5.71% 11/20/98 5,000,000 5,004,154
5.81% 11/20/98 5,000,000 4,999,894
9.25% 11/25/98 5,200,000 5,272,143
5.43% 12/14/98 5,000,000 4,995,635
5.74% 12/23/98 5,000,000 5,004,144
5.39% 01/22/99 5,000,000 4,994,069
5.67% 01/22/99 750,000 750,000
5.58% 01/26/99 5,000,000 4,996,773
5.44% 02/02/99 2,500,000 2,497,875
6.09% 02/05/99 1,000,000 1,003,051
5.42% 02/10/99 3,000,000 2,995,608
5.51% 02/16/99 1,700,000 1,698,845
5.37% 02/23/99 1,000,000 998,129
5.47% 02/24/99 5,000,000 5,000,000
5.43% 02/25/99 1,000,000 999,335
5.48% 02/26/99 5,000,000 4,998,363
5.53% 02/26/99 5,000,000 5,000,000
5.61% 03/02/99 5,000,000 5,000,000
5.58% 03/11/99 5,000,000 4,996,783
5.56% 03/16/99 5,000,000 4,999,863
5.50% 03/19/99 5,000,000 4,994,599
5.88% 03/19/99 470,000 471,139
5.72% 03/26/99 550,000 549,605
5.70% 04/15/99 5,000,000 4,998,754
5.75% 05/06/99 7,090,000 7,089,766
5.74% 05/07/99 1,050,000 1,049,808
- -45-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
U.S. GOVERNMENT SECURITIES SAVINGS FUND
Coupon Maturity Principal
Rate Date Amount Value
Federal Home Loan Bank
- --------------------------------------------------------------------------------
Fixed Rates: (continued)
5.75% 05/12/99 $5,000,000 $4,999,320
5.83% 05/18/99 3,930,000 3,930,000
5.73% 07/07/99 5,000,000 4,999,219
---------
567,396,956
Student Loan Marketing Association 18.27%
- --------------------------------------------------------------------------------
Variable Rates:
5.41% 08/20/98 25,000,000 25,000,000
5.32% 09/28/98 17,700,000 17,691,403
5.34% 01/13/99 4,000,000 3,996,632
5.56% 04/01/99 10,000,000 9,997,103
Fixed Rates:
5.60% 08/11/98 15,000,000 14,995,957
5.50% 09/03/98 4,250,000 4,247,516
5.78% 09/09/98 700,000 700,374
5.79% 09/16/98 5,000,000 4,999,470
5.32% 11/10/98 11,000,000 10,991,274
5.72% 11/20/98 5,000,000 5,004,832
5.89% 12/03/98 5,500,000 5,509,143
7.72% 01/25/99 1,000,000 1,011,216
5.56% 01/27/99 10,000,000 10,000,000
5.40% 02/10/99 10,000,000 9,994,099
5.63% 02/12/99 10,000,000 10,000,000
5.53% 03/04/99 5,000,000 5,000,000
---------
139,139,019
- --------------------------------------------------------------------------------
Total Investments 99.28% 756,012,969
- --------------------------------------------------------------------------------
(cost $756,012,969)
Other assets and liabilities, net 0.72% 5,504,609
---------
NET ASSETS 100% $761,517,578
============
</TABLE>
See notes to portfolios of investments.
- -46-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
NEAR-TERM TAX FREE FUND
<TABLE>
<S> <C> <C> <C> <C>
Coupon Maturity Principal
MUNICIPAL BONDS 94.70% Rate Date Amount Value
Arizona 6.89%
- --------------------------------------------------------------------------------
Yuma Arizona Refinancing, GO 4.55% 07/01/06 $550,000 $555,681
California 2.25%
- --------------------------------------------------------------------------------
West Hollywood Certificates
of Participation, Series A 12.00% 02/01/00 170,000 181,247
Connecticut 4.13%
- --------------------------------------------------------------------------------
Bridgeport Series A, GO 6.00% 03/01/06 300,000 332,625
Georgia 4.04%
- --------------------------------------------------------------------------------
Columbus Water & Sewer Revenue 6.65% 05/01/09 300,000 325,500
Illinois 2.09%
- --------------------------------------------------------------------------------
Chicago Water Revenue (ZCB) 0.00% 11/01/08 275,000 168,781
Iowa 4.00%
- --------------------------------------------------------------------------------
Finance Authority
Hospital Facility, Revenue 5.15% 07/01/04 310,000 322,788
Kansas 5.25%
- --------------------------------------------------------------------------------
Seward County School District #480 7.40% 09/01/03 370,000 423,650
Michigan 6.47%
- --------------------------------------------------------------------------------
State Housing Development Authority,
Revenue 5.88% 10/01/17 500,000 521,250
Nebraska 3.41%
- --------------------------------------------------------------------------------
Nebraska Public Power District,
Revenue 5.70% 01/01/05 255,000 274,762
Nevada 6.56%
- --------------------------------------------------------------------------------
Nevada State Municipal Bond
Bank Project #51,Series A,GO 5.10% 01/01/08 250,000 258,750
Washoe County Gas & Water
Facilities, Revenue 6.30% 12/01/14 250,000 270,313
-------
529,063
- -47-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
NEAR-TERM TAX FREE FUND
Coupon Maturity Principal
MUNICIPAL BONDS Rate Date Amount Value
New Jersey 3.90%
- --------------------------------------------------------------------------------
Washington Township
Board of Education, GO 5.10% 02/01/08 $300,000 $314,625
Ohio 7.18%
- --------------------------------------------------------------------------------
Akron Bath Copley Township Hospital
District, Series A 5.90% 11/15/02 400,000 422,500
Ohio State Building Authority 7.30% 03/01/02 150,000 156,470
-------
578,970
Oklahoma 2.79%
- --------------------------------------------------------------------------------
University of Oklahoma, Revenue 12.00% 03/01/00 200,000 225,000
Oregon 3.88%
- --------------------------------------------------------------------------------
Portland Water System, Revenue 4.80% 08/01/05 300,000 312,750
South Carolina 3.86%
- --------------------------------------------------------------------------------
Georgetown County Pollution Control
Facilities Revenue, Series A 7.38% 06/15/05 300,000 311,322
Texas 8.50%
- --------------------------------------------------------------------------------
Dallas Civic Center, Revenue 6.10% 01/01/08 195,000 195,000
Haltom City Tax Note: 4.50% 02/01/99 185,000 185,821
4.70% 02/01/00 195,000 196,950
Harris County, Revenue 10.00% 10/01/99 100,000 107,375
-------
685,146
Utah 7.88%
- --------------------------------------------------------------------------------
Municipal Finance COOP Local
Government, Revenue 6.40% 08/01/09 300,000 321,000
Weber County School District,
Series A, GO 5.15% 06/15/08 300,000 314,250
-------
635,250
Virgin Islands 3.75%
- --------------------------------------------------------------------------------
Virgin Islands Public Finance
Authority, Revenue 5.00% 10/01/03 300,000 302,250
- -48-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
NEAR-TERM TAX FREE FUND
Coupon Maturity Principal
MUNICIPAL BONDS Rate Date Amount Value
Virginia 1.30%
- --------------------------------------------------------------------------------
Lynchburg Development Authority,
Revenue 5.88% 09/01/13 $100,000 $104,750
Washington 3.98%
- --------------------------------------------------------------------------------
King County, Series A, GO,
Pre-Refunded 5.80% 12/01/06 40,000 42,950
King County, Series A, GO 5.80% 12/01/06 260,000 277,550
-------
320,500
Wisconsin 2.59%
- --------------------------------------------------------------------------------
State Health & Educational
Facilities, Revenue 5.20% 06/01/05 200,000 208,500
- --------------------------------------------------------------------------------
Total Municipal Bonds 7,634,410
- --------------------------------------------------------------------------------
(cost $7,503,801)
REPURCHASE AGREEMENT 3.60%
Joint Repurchase Tri-Party Agreement,
Morgan Stanley, Dean Witter & Co.,
6/30/98, 5.85%, repurchase price
$290,014, collateralized by U.S.
Treasury securities held in a
joint tri-party repurchase
account (cost $289,967) 5.85% 07/01/98 289,967 289,967
- --------------------------------------------------------------------------------
Total Investments 98.30% 7,924,377
- --------------------------------------------------------------------------------
(cost $7,793,768)
Other assets and liabilities, net 1.70% 137,082
-------
NET ASSETS 100% $8,061,459
==========
</TABLE>
See notes to portfolio of investments.
- -49-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
TAX FREE FUND
<TABLE>
<S> <C> <C> <C> <C>
Coupon Maturity Principal
MUNICIPAL BONDS 97.17% Rate Date Amount Value
Arizona 2.30%
- --------------------------------------------------------------------------------
Mesa Utility Services Revenue 4.90% 07/01/16 $500,000 $491,250
Connecticut 2.50%
- --------------------------------------------------------------------------------
Connecticut State Development
Authority Water Facility
Revenue, Refunding 7.25% 06/01/20 500,000 535,000
Florida 3.66%
- --------------------------------------------------------------------------------
Florida Board of Education Capital
Outlay GO Unlimited Tax,
Refunding, Series A 6.625% 06/01/07 700,000 784,000
Georgia 1.14%
- --------------------------------------------------------------------------------
Savannah Hospital Authority
Revenue 6.20% 07/01/23 230,000 242,938
Hawaii 1.98%
- --------------------------------------------------------------------------------
Hawaii State Department of
Budget and Finance 6.00% 07/01/19 400,000 423,000
Illinois 12.94%
- --------------------------------------------------------------------------------
Boone McHenry and Dekalb Counties
Community Unit School District
(ZCB) 0.00% 12/01/08 1,000,000 617,500
Illinois Development Financing
Authority Revenue, Series B 6.25% 09/01/17 250,000 270,000
Illinois Health Facility Authority
Revenue, Series A 6.80% 01/01/22 400,000 431,000
Illinois Regional Transportation
Authority Revenue, Series A 7.20% 11/01/20 250,000 319,688
Illinois State Sales Tax Revenue 5.10% 06/15/18 615,000 610,388
Lake County School District OH
Unlimited 5.375% 01/01/11 500,000 521,250
-------
2,769,826
Indiana 7.50%
- --------------------------------------------------------------------------------
Fort Wayne Water Works Revenue 4.75% 12/01/10 500,000 499,375
Indiana Health Facility Finance
Authority Revenue, Series A 5.75% 08/01/08 540,000 564,300
Warren Township Independant School
Building Corp., Series A 6.00% 07/15/12 500,000 541,875
-------
1,605,550
- -50-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
TAX FREE FUND
Coupon Maturity Principal
MUNICIPAL BONDS Rate Date Amount Value
Iowa 1.45%
- --------------------------------------------------------------------------------
Waterloo Iowa Revenue, Series A 7.10% 08/15/01 $300,000 $309,375
Massachusetts 2.53%
- --------------------------------------------------------------------------------
Massachusetts State Health &
Educational Facilities
Authority Revenue, Refunding
Issue A 7.10% 07/01/21 500,000 541,875
Michigan 9.06%
- --------------------------------------------------------------------------------
Allegan Public School District 5.10% 05/01/18 580,000 577,100
Belding Area Schools 5.00% 05/01/18 390,000 383,175
Michigan State Hospital
Finance Authority Revenue 4.90% 05/15/13 500,000 494,375
Wyoming Building Authority 5.25% 05/01/18 480,000 483,600
-------
1,938,250
Mississippi 1.93%
- --------------------------------------------------------------------------------
Vicksburg Leased Housing Corp.
Housing Revenue, Refunding,
Series A 6.125% 02/15/22 400,000 413,500
Nevada 4.21%
- --------------------------------------------------------------------------------
Clark County Las Vegas Convention &
Visitors Authority, GO
Limited Tax 5.50% 07/01/17 870,000 901,537
North Carolina 3.36%
- --------------------------------------------------------------------------------
North Carolina Eastern Municipal
Power Agency Revenue,
Refunding, Series A 5.60% 01/01/10 675,000 718,031
Ohio 2.35%
- --------------------------------------------------------------------------------
Olentangy Local School District,
GO Limited Tax,Series A 6.25% 12/01/15 240,000 264,300
South Euclid Special Assessment,
GO Limited 6.70% 12/01/14 200,000 238,000
-------
502,300
- -52-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
TAX FREE FUND
Coupon Maturity Principal
MUNICIPAL BONDS Rate Date Amount Value
Pennsylvania 3.02%
- --------------------------------------------------------------------------------
Allegheny County Hospital
Development Authority
Revenue, Refunding 6.00% 05/01/20 $365,000 $388,269
Chester County Health &
Educational Facilities
Authority, Revenue 5.00% 05/15/08 250,000 257,500
-------
645,769
Rhode Island 4.88%
- --------------------------------------------------------------------------------
North Providence
GO Unlimited Tax, Series A 6.05% 07/01/13 500,000 554,375
Providence Public Building
Authority Revenue, Series B 7.25% 12/15/10 450,000 489,375
-------
1,043,750
South Carolina 2.26%
- --------------------------------------------------------------------------------
South Carolina Jobs Economic
Development Authority Revenue 5.00% 11/01/23 500,000 483,750
Tennessee 1.35%
- --------------------------------------------------------------------------------
State Development Authority
Revenue, Series 1992 7.00% 10/01/11 265,000 289,181
Texas 16.10%
- --------------------------------------------------------------------------------
Austin General Obligation 5.00% 09/01/16 565,000 557,231
Comal Independent School
District: 4.75% 02/01/99 230,000 231,536
4.90% 02/01/00 240,000 242,100
5.00% 02/01/01 255,000 258,506
Gulf Coast Water Systems
Authority 5.00% 08/15/17 500,000 495,000
Mercedes Independent School
District 5.00% 08/15/20 380,000 370,025
Pearland Certificates of
Obligation, Series 5.25% 03/01/13 305,000 310,719
State Water Development Board,
Revenue 5.00% 07/15/19 500,000 493,750
Victoria Independent School
District 5.00% 02/15/19 500,000 487,500
-------
3,446,367
Virginia 2.07%
- --------------------------------------------------------------------------------
State Housing Development
Authority Multifamily,
Revenue, Series E 5.90% 11/01/17 425,000 442,531
- -52-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
TAX FREE FUND
Coupon Maturity Principal
MUNICIPAL BONDS Rate Date Amount Value
Washington 1.51%
- --------------------------------------------------------------------------------
Seattle Indian Services,
Refunding Revenue 6.50% 11/01/17 $305,000 $324,063
West Virginia 7.37%
- --------------------------------------------------------------------------------
Berkeley County Hospital
Revenue, Refunding: 6.50% 11/01/09 115,000 122,762
6.50% 11/01/22 280,000 297,850
West Virginia Housing Development
Revenue, Series A 6.05% 05/01/27 790,000 841,350
West Virginia State Hospital
Finance Authority Revenue 6.10% 01/01/18 300,000 315,375
-------
1,577,337
Wyoming 1.70%
- --------------------------------------------------------------------------------
Wyoming Community Development
Authority Series A 6.10% 06/01/33 350,000 365,312
- --------------------------------------------------------------------------------
Total Municipal Bonds 20,794,492
- --------------------------------------------------------------------------------
(cost $20,039,755)
REPURCHASE AGREEMENT 1.40%
Joint Tri-Party Repurchase Agreement,
Morgan Stanley,Dean Witter & Co.,
6/30/98, 5.85%, repurchase price
$298,764, collateralized by U.S.
Treasury Securities held in a
joint tri-party repurchase
account (cost $298,715) 5.85% 07/01/98 298,715 298,715
- --------------------------------------------------------------------------------
Total Investments 98.57% 21,093,207
- --------------------------------------------------------------------------------
(cost $20,338,470)
Other assets and liabilities, net 1.43% 306,436
-------
NET ASSETS 100% $21,399,643
===========
</TABLE>
See notes to portfolios of investments.
- -53-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
INCOME FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS 82.71% Shares Value
Airlines 0.80%
- --------------------------------------------------------------------------------
Southwest Airlines Co. 3,000 $88,875
Business Services 1.86%
- --------------------------------------------------------------------------------
Cendant Corp. 3,000 62,625*
Dun & Bradstreet Corp. 4,000 144,000
-------
206,625
Chemical & Pharmaceuticals 2.18%
- --------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 3,000 138,375
Warner-Lambert Co. 1,500 104,063
-------
242,438
Communication Equipment 1.82%
- --------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 8,000 203,000
Eating & Drinking Places 0.63%
- --------------------------------------------------------------------------------
Luby's Cafeterias, Inc. 4,000 70,250
Electric Services 18.85%
- --------------------------------------------------------------------------------
American Electric Power, Inc. 4,000 181,500
Baltimore Gas & Electric Co. 3,000 93,187
Central & South West Corp. 5,000 134,375
DQE, Inc. 4,000 144,000
FPL Group, Inc. 3,000 189,000
Houston Industries 4,000 123,500
Illinova Corp. 10,000 300,000
Minnesota Power & Light Co. 3,000 119,250
PECO Energy Co. 10,000 291,875
Southern Co. 7,000 193,813
TNP Enterprises 2,000 61,750
Washington Water Power Co. 5,000 112,188
Western Resources, Inc. 4,000 155,250
-------
2,099,688
Financial Services 1.63%
- --------------------------------------------------------------------------------
Travelers Group, Inc. 3,000 181,875
- -54-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
INCOME FUND
COMMON STOCKS Shares Value
Food & Beverages 2.87%
- --------------------------------------------------------------------------------
H.J. Heinz Co. 3,500 $196,437
PepsiCo, Inc. 3,000 123,563
-------
320,000
Healthcare 0.67%
- --------------------------------------------------------------------------------
American Health Properties, Inc. 3,000 75,000
Instruments 2.31%
- --------------------------------------------------------------------------------
Baxter International, Inc. 2,000 107,625
Martin Industries, Inc. 30,000 150,000
-------
257,625
Manufacturing 2.07%
- --------------------------------------------------------------------------------
Ampco-Pittsburgh Corp. 15,000 230,625
Motor Vehicles 1.59%
- --------------------------------------------------------------------------------
Ford Motor Co. 3,000 177,000
Natural Gas Transmission & Distribution 8.29%
- --------------------------------------------------------------------------------
AGL Resources, Inc. 5,300 105,337
Consolidated Natural Gas Co. 3,000 176,625
Enron Corp. 3,500 189,219
MCN Energy Group, Inc. 4,000 99,500
New Jersey Resources Corp. 5,000 178,437
Peoples Energy 4,500 173,813
-------
922,931
Office Equipment 1.82%
- --------------------------------------------------------------------------------
Xerox Corp. 2,000 203,250
Petrochemical & Coal Products 2.17%
- --------------------------------------------------------------------------------
Lyondell Petrochemical Co. 7,923 241,156
Petroleum Refining 3.78%
- --------------------------------------------------------------------------------
Chevron Corp. 1,500 124,594
Exxon Corp. 2,000 142,625
Mobil Corp. 2,000 153,250
-------
420,469
- -55-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
INCOME FUND
COMMON STOCKS Shares Value
Real Estate Investment Trusts 4.82%
- --------------------------------------------------------------------------------
Equity Resident Property Trust 2,500 $118,594
Essex Property Trust, Inc. 3,000 93,000
Liberty Property Trust (Int'l) 4,000 102,250
Starwood Lodging Trust 2,000 96,625
Walden Residential Properties 5,000 126,875
-------
537,344
Steel 0.86%
- --------------------------------------------------------------------------------
LTV Corp. 10,000 95,625
Telecommunications 19.97%
- --------------------------------------------------------------------------------
AT&T Corp. 3,500 199,937
Bell Atlantic Corp. 5,304 241,995
C-Cube Microsystems, Inc. 2,000 37,125*
Century Telephone Enterprises 5,250 240,844
Frontier Corp. 6,500 204,750
GTE Corp. 3,500 194,687
Lucent Technologies, Inc. 3,000 249,562
SBC Communications, Inc. 4,000 160,000
Sprint Corp. 3,000 211,500
Telebras, ADR 1,000 109,188
Telefonica de Espana, S.A., ADR 1,000 139,063
US West, Inc. 5,000 235,000
-------
2,223,651
Tobacco 2.34%
- --------------------------------------------------------------------------------
Philip Morris, Inc. 3,000 118,125
RJR Nabisco Holdings Corp. 6,000 142,500
-------
260,625
Wholesale Food Supplies 1.38%
- --------------------------------------------------------------------------------
Sysco Corp. 6,000 153,750
- --------------------------------------------------------------------------------
Total Common Stocks 9,211,802
- --------------------------------------------------------------------------------
(cost $6,804,101)
- -56-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
INCOME FUND
PREFERRED STOCKS 6.67% Shares Value
Electric Services 2.25%
- --------------------------------------------------------------------------------
Duke Energy Capital Trust 7.2% 10,000 $251,300
Real Estate Investment Trusts 4.42%
- --------------------------------------------------------------------------------
First Industrial Realty, 7.9%, Series 5,000 119,400
Fleet Capital Trust, 7.05%, Series III 10,000 244,400
Public Storage, Inc., 8.875% Series G 5,000 128,125
-------
491,925
- --------------------------------------------------------------------------------
Total Preferred Stocks 743,225
- --------------------------------------------------------------------------------
(cost $750,000)
CONVERTIBLE SECURITIES 1.75% Principal
Amount
Gold and Silver Mining
- --------------------------------------------------------------------------------
Ashanti Capital, Ltd. Exchangeable Note,
5.50%, 03/15/03 exchangeable at maturity
into Shares or Global Depository Shares
of Ashanti Goldfields Company Limited $250,000 195,000
- --------------------------------------------------------------------------------
Total Convertible Securities 195,000
- --------------------------------------------------------------------------------
(cost $203,750)
CORPORATE BONDS 3.11%
Banks 2.15%
- --------------------------------------------------------------------------------
Korea Development Bank 7.00%, 7/15/99 250,000 239,062
Instruments 0.96%
- --------------------------------------------------------------------------------
Weirton Steel 10.75%, 6/1/05 100,000 106,750
- --------------------------------------------------------------------------------
Total Corporate Bonds 345,812
- --------------------------------------------------------------------------------
(cost $351,543)
- -57-
<PAGE>
PORTFOLIO OF INVESTMENTS
INCOME FUND
Principal Value
Amount
REPURCHASE AGREEMENT 4.66%
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $518,637, collateralized by U.S.
Treasury securities held in a joint tri-party
repurchase account (cost $518,553) $518,553 $518,553
- --------------------------------------------------------------------------------
Total Investments 98.90% 11,014,392
- --------------------------------------------------------------------------------
(cost $8,627,947)
Other assets and liabilities, net 1.10% 122,429
-------
NET ASSETS 100% $11,136,821
===========
</TABLE>
See notes to portfolios of investments.
- -58-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS 86.90% Shares Value
Aircraft & Aerospace 0.69%
- --------------------------------------------------------------------------------
AlliedSignal, Inc. 2,200 $97,625
The Boeing Co. 2,950 131,459
Raytheon Company, Class A 191 11,006
------
240,090
Banks 4.00%
- --------------------------------------------------------------------------------
Banc One Corp. 1,936 108,053
BankAmerica Corp. 5,000 432,187
Chase Manhattan Corp. 4,800 362,400
Citicorp 1,600 238,800
NationsBank Corp. 3,200 244,800
-------
1,386,240
Beverages 4.67%
- --------------------------------------------------------------------------------
Anheuser Busch Co. 2,000 94,375
Coca Cola Co. 13,000 1,111,500
PepsiCo, Inc. 10,000 411,875
-------
1,617,750
Broadcast/Media 1.34%
- --------------------------------------------------------------------------------
Liberty Media Group, Class A 1,237 48,011*
MediaOne Group, Inc. 1,800 79,087
Tele-Communications, Class A 6,500 249,844*
Viacom, Inc., Class A 1,500 87,750*
------
464,692
Business Services 1.38%
- --------------------------------------------------------------------------------
Billing Concepts Corp. 14,000 217,000
Cendant Corp. 9,000 187,875
Dun & Bradstreet Corp. 2,000 72,000
------
476,875
Chemicals 1.44%
- --------------------------------------------------------------------------------
Dow Chemical Co. 1,000 96,688
E.I. Du Pont de Nemours & Co. 5,400 402,975
-------
499,663
Communication Equipment 0.15%
- --------------------------------------------------------------------------------
InterVoice, Inc. 3,000 53,250*
- -59-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
COMMON STOCKS Shares Value
Computer & Office Equipment 4.93%
- --------------------------------------------------------------------------------
Apple Computer, Inc. 4,000 $114,750*
Cisco Systems, Inc. 4,500 414,281*
COMPAQ Computer Corp. 5,000 141,875
Hewlett-Packard Co. 4,000 239,500
IBM Corp. 5,600 642,950
Minnesota Mining & Manufacturing Co. 1,700 139,719
NCR Corp. 468 15,210*
------
1,708,285
Data Processing & Software 6.79%
- --------------------------------------------------------------------------------
Automatic Data Processing, Inc. 1,000 72,875
BISYS Group, Inc. 3,000 123,000*
ChoicePoint, Inc. 3,000 151,875
Computer Associates International 5,000 277,812
First Data Corp. 10,000 333,125
Microsoft Corp. 11,200 1,213,800*
Oracle Corp. 5,212 128,020*
Reynolds & Reynolds Co., Class A 3,000 54,563
------
2,355,070
Eateries 0.65%
- --------------------------------------------------------------------------------
McDonald's Corp. 2,800 193,200
Tricon Global Restaurants 1,000 31,688*
------
224,888
Electric Utility 0.15%
- --------------------------------------------------------------------------------
PG&E Corp. 1,700 53,656
Electronics & Components 3.00%
- --------------------------------------------------------------------------------
Emerson Electric Co. 1,800 108,675
Intel Corp. 8,400 622,650
Motorola, Inc. 3,000 157,688
SCI Systems, Inc. 4,000 150,500*
-------
1,039,513
Entertainment 1.49%
- --------------------------------------------------------------------------------
The Walt Disney Co. 3,700 388,731
Time Warner, Inc. 1,500 128,156
-------
516,887
- -60-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
COMMON STOCKS Shares Value
Financial Services 7.18%
- --------------------------------------------------------------------------------
American Express Co. 4,000 $456,000
Associates First Capital Corp., Class A 1,048 80,565
Conseco, Inc. 11,500 537,625
Fannie Mae 14,000 850,500
Freddie Mac 3,800 178,837
J.P. Morgan & Co., Inc. 700 81,988
Travelers Group, Inc. 5,000 303,125
-------
2,488,640
Food 0.87%
- --------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 2,315 44,853
H.J. Heinz Co. 1,500 84,187
Kellogg Co. 1,800 67,613
Sara Lee Corp. 1,900 106,281
-------
302,934
Funeral Services 0.35%
- --------------------------------------------------------------------------------
Equity Corp. International 5,000 120,000*
Healthcare & Equipment 4.24%
- --------------------------------------------------------------------------------
Allegiance Corp. 220 11,275
Columbia/HCA Healthcare Corp. 3,600 104,850
Guidant Corp. 704 50,204
Humana, Inc. 9,000 280,688
Johnson & Johnson Co. 9,000 663,750
Prime Medical Services, Inc. 5,000 46,875*
United Wisconsin Services 7,000 198,625
Veterinary Centers, Inc. 6,000 112,875*
-------
1,469,142
Household Appliances 3.67%
- --------------------------------------------------------------------------------
General Electric Co. 14,000 1,274,000
Household Products 2.39%
- --------------------------------------------------------------------------------
Colgate Palmolive 1,400 123,200
Gillette Co. 2,800 158,725
Proctor & Gamble Co. 6,000 546,375
-------
828,300
- -61-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
COMMON STOCKS Shares Value
Insurance 4.27%
- --------------------------------------------------------------------------------
Allstate Corp. 3,297 $301,882
American Annuity Group, Inc. 9,700 233,406
American International Group 4,600 671,600
Hartford Financial Services Group, Inc. 2,400 274,500
-------
1,481,388
Machinery 0.49%
- --------------------------------------------------------------------------------
Caterpillar, Inc. 3,200 169,200
Motor Vehicles & Parts 2.19%
- --------------------------------------------------------------------------------
Chrysler Corp. 4,130 232,829
Ford Motor Co. 4,000 236,000
General Motors Corp. 3,000 200,437
ITT Industries, Inc. 400 14,950
Lo-Jack Corp. 5,000 62,188*
Meritor Automotive, Inc. 600 14,400
------
760,804
Natural Gas Transmission & Distribution 0.31%
- --------------------------------------------------------------------------------
Enron Corp. 2,000 108,125
Office Equipment 0.35%
- --------------------------------------------------------------------------------
Xerox Corp. 1,200 121,950
Oil & Gas Extraction 0.27%
Atlantic Richfield Co. 1,200 93,750
Petroleum Refining 3.73%
- --------------------------------------------------------------------------------
AMOCO Corp. 3,400 141,525
Chevron Corp. 2,600 215,962
Exxon Corp. 5,800 413,613
Mobil Corp. 1,200 91,950
Phillips Petroleum Co. 1,100 53,006
Royal Dutch Petroleum 3,600 197,325
Texaco, Inc. 3,000 179,063
-------
1,292,444
- -62-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
COMMON STOCKS Shares Value
Pharmaceuticals 10.48%
- --------------------------------------------------------------------------------
Abbott Laboratories 6,000 $245,250
American Home Products 4,400 227,700
Baxter International, Inc. 1,100 59,194
Biogen, Inc. 2,000 98,000*
Bristol-Myers Squibb Co. 3,400 390,787
Eli Lilly & Co. 6,396 422,536
Merck & Co., Inc. 6,000 802,500
Pfizer, Inc. 6,800 739,075
Schering-Plough Corp. 4,800 439,800
Warner-Lambert Co. 3,000 208,125
-------
3,632,967
Photography 0.70%
- --------------------------------------------------------------------------------
Eastman Kodak Co. 3,300 241,106
Real Estate Investment Trusts 0.64%
- --------------------------------------------------------------------------------
Felcor Suite Hotels, Inc. 2,000 62,750
Weeks Corp. 5,000 158,125
-------
220,875
Retail 3.54%
- --------------------------------------------------------------------------------
Garden Ridge Corp. 4,000 77,500*
Home Depot, Inc. 4,200 348,862
OfficeMax, Inc. 5,000 82,500*
Sears, Roebuck & Co. 2,400 146,550
Toys "R" Us, Inc. 1,100 25,919*
Wal-Mart Stores, Inc. 9,000 546,750
-------
1,228,081
Sanitary Services 0.34%
- --------------------------------------------------------------------------------
Browning Ferris Industries, Inc. 1,600 55,600
Waste Management, Inc. 1,800 63,000
------
118,600
- -63-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
ALL AMERICAN EQUITY FUND
COMMON STOCKS Shares Value
Telecommunications 8.83%
- --------------------------------------------------------------------------------
360 Communications Co. 900 $28,800
AT&T Corp. 6,000 342,750
Airtouch Communications, Inc. 2,000 116,875*
Ameritech Corp. 4,000 179,500
Bell Atlantic Corp. 5,810 265,081
Bellsouth Corp. 3,600 241,650
GTE Corp. 6,000 333,750
Lucent Technologies, Inc. 6,000 499,125
MCI Communications Corp. 2,700 156,938
SBC Communications, Inc. 16,000 640,000
Sprint Corp. 2,400 169,200
US West, Inc. 1,849 86,903
------
3,060,572
Tobacco 1.38%
- --------------------------------------------------------------------------------
Philip Morris, Inc. 12,200 480,375
- --------------------------------------------------------------------------------
Total Common Stocks 30,130,112
- --------------------------------------------------------------------------------
(cost $15,633,414)
Principal
REPURCHASE AGREEMENT 12.20% Amount
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $4,230,053, collateralized by
U.S. Treasury securities held in a joint tri-party
repurchase account (cost $4,229,366) $4,229,366 4,229,366
- --------------------------------------------------------------------------------
Total Investments 99.10% 34,359,478
- --------------------------------------------------------------------------------
(cost $19,862,780)
Other assets and liabilities, net 0.90% 311,496
-------
NET ASSETS 100% $34,670,974
===========
</TABLE>
See notes to portfolios of investments.
- -64-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
REAL ESTATE FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS 84.76% Shares Value
REAL ESTATE INVESTMENT TRUSTS 60.35%
Apartments 18.76%
- --------------------------------------------------------------------------------
Apartment Investment & Management Co. 16,500 $ 651,749
Berkshire Realty Co., Inc. 21,300 248,944
Equity Resident Property Trust 13,000 616,688
Merry Land & Investment Co., Inc. 29,200 615,025
-------
2,132,406
Diversified 9.55%
- --------------------------------------------------------------------------------
Entertainment Properties Trust 19,600 357,700
Glenborough Realty Trust, Inc. 13,500 356,063
Spieker Properties, Inc. 9,600 372,000
-------
1,085,763
Hotel/Restaurant 0.98%
- --------------------------------------------------------------------------------
Legacy Hotels 35,000 111,771
Manufactured Homes 1.55%
- --------------------------------------------------------------------------------
Manufactured Home Communities 7,300 176,113
Office Property Management 16.45%
- --------------------------------------------------------------------------------
Alexandria Real Estate Equities, Inc. 12,100 362,243
Boston Properties, Inc. 21,900 755,550
Equity Office Properties Trust 26,500 751,938
-------
1,869,731
Regional Malls 6.66%
- --------------------------------------------------------------------------------
Simon Debartolo Group, Inc. 23,300 757,250
Warehouse/Industrial 6.40%
- --------------------------------------------------------------------------------
H&R Real Estate Investment Trust 31,200 248,031
Reckson Associates Realty Corp. 20,300 479,588
-------
727,619
- -65-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
REAL ESTATE FUND
COMMON STOCKS Shares Value
OTHER REAL ESTATE 24.41%
Building Maintenance & Service 2.28%
- --------------------------------------------------------------------------------
ABM Industries, Inc. 9,300 $259,238
Diversified 2.42%
- --------------------------------------------------------------------------------
EdperBrascan Corp., Class A 16,400 275,237
Financial Services 3.50%
- --------------------------------------------------------------------------------
Capital Trust, Class A 41,400 398,475*
Hotel/Restaurant 3.91%
- --------------------------------------------------------------------------------
Hilton Hotels Corp. 15,600 444,600
Industrial Construction 1.30%
- --------------------------------------------------------------------------------
Flour City International, Inc. 20,000 147,500
Investment Companies 0.03%
- --------------------------------------------------------------------------------
Concord Pacific Group, Inc. 4,588 3,741*
Office Property Management 2.41%
- --------------------------------------------------------------------------------
Oxford Properties Group, Inc. 23,400 274,265
Real Estate Development 5.56%
- --------------------------------------------------------------------------------
Brookfield Properties Corp. 24,400 335,722
G. Accion S.A., ADR 19,900 139,300*
IRSA Inversiones y Representaciones S.A., GDR 5,100 148,538*
Reckson Service Industries, Inc. 2,424 8,030*
-----
631,590
Resorts 3.00%
- --------------------------------------------------------------------------------
Vail Resorts, Inc. 12,800 340,800*
- --------------------------------------------------------------------------------
Total Common Stocks 9,636,099
- --------------------------------------------------------------------------------
(cost $9,835,602)
- -66-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
REAL ESTATE FUND
Principal
REPURCHASE AGREEMENT 11.61% Amount Value
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $1,319,922, collateralized by
U.S. Treasury securities held in a joint tri-party
repurchase account (cost $1,319,708) $1,319,708 $1,319,708
- --------------------------------------------------------------------------------
Total Investments 96.37% 10,955,807
- --------------------------------------------------------------------------------
(cost $11,155,310)
Other assets and liabilities, net 3.63% 412,488
-------
NET ASSETS 100% $11,368,295
===========
</TABLE>
- -67-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS AND WARRANTS 88.58% Shares Value
Agriculture 0.68%
- --------------------------------------------------------------------------------
Shanghai Dajiang Co. Ltd., Group B 1,183,961 $132,604
Apparel 3.02%
- --------------------------------------------------------------------------------
Chaifa Holdings Ltd. 840,800 10,526
Giordano International Ltd. 299,000 60,587
Li & Fung Ltd. 266,000 429,143
Yue Yuen Industrial Holdings Ltd. 49,200 87,948
------
588,204
Banking/Financial Services 8.54%
- --------------------------------------------------------------------------------
HSBC Holdings Ltd. 67,749 1,661,372
Beverages 0.90%
- --------------------------------------------------------------------------------
Guangdong Brewery Holdings Ltd. 1,073,000 81,708*
Vitasoy International Holdings Ltd. 284,000 93,469
------
175,177
Chemicals & Allied Products 5.01%
- --------------------------------------------------------------------------------
Jilin Chemical Industrial Company Ltd., Class H 2,308,000 196,603
Shang Inner Mongolia Erdos Cashmere 337,700 81,723
Shanghai Chlor-Alkali Chemical Co., Group B 630,960 80,763
Shanghai Petrochemical, Class H 2,932,000 329,226
Tianjin Bohai Chemical, Class H 1,248,000 78,926
Yizheng Chemical Fibre, Class H 1,844,000 207,057*
-------
974,298
Computers & Office Equipment 3.57%
- --------------------------------------------------------------------------------
Acer, Inc., GDR 4,025 23,748*
Acer, Inc., GDR 144A 9,100 53,690*
Founder Hong Kong Ltd. 860,586 366,538
GVC Corp., GDR 88 352*
Vanda Systems & Communications Holdings Ltd. 1,384,000 250,077
-------
694,405
- -68-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
COMMON STOCKS AND WARRANTS Shares Value
Conglomerates 9.59%
- --------------------------------------------------------------------------------
China Vanke Co. Ltd. 66,380 $38,125
Citic Pacific Ltd. 228,200 407,921
First Pacific Company, Ltd. 635,230 266,455
Guangdong Investments 444,000 99,711
Guangzhou Investment Co. Ltd. 500,000 56,789
Hutchinson Whampoa 96,000 505,524
Shanghai Industrial Holdings Ltd. 129,000 303,853
Swire Pacific Ltd., Group A 50,000 188,758
-------
1,867,136
Construction Equipment 0.42%
- --------------------------------------------------------------------------------
Shanghai Jintai Machinery, Group B 1,194,550 81,707*
Credit & Financial Services 1.38%
- --------------------------------------------------------------------------------
Aeon Credit Service 994,000 152,667
Guoco Group, Ltd. 110,000 115,707
-------
268,374
Electric Generation 0.77%
- --------------------------------------------------------------------------------
Dongfang Electrical Machinery Co. Ltd., Class H 766,000 55,364
Harbin Power Equip Co. Ltd., Class H 1,042,000 94,140
------
149,504
Electronic Equipment 5.19%
- --------------------------------------------------------------------------------
ASM Pacific Technology Ltd. 686,000 292,179
GP Batteries Int'l Ltd. 30,000 54,869
Samsung Electronics, GDR 132 1,122
Samsung Electronics, GDR 144A 3,380 29,730
Varitronix International 317,000 634,164
Yageo Corporation 1 8*
-------
1,011,072
Furniture 0.22%
- --------------------------------------------------------------------------------
Lamex Holdings Ltd. 1,096,551 42,458
Glass & Cement Products 0.09%
- --------------------------------------------------------------------------------
Luoyang Glasswork, Class H 30,000 1,394*
Shanghai Yaohua Pilkington Glass Co. Ltd., Group B 125,750 16,347
------
17,741
- -69-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
COMMON STOCKS AND WARRANTS Shares Value
Groceries - Wholesale 3.09%
- --------------------------------------------------------------------------------
Guangnan Holdings Ltd. 540,000 $181,208
NG Fung Hong Ltd. 608,000 419,825
-------
601,033
Heavy Construction 0.73%
- --------------------------------------------------------------------------------
Road King Infrastructure Ltd. 180,000 141,714
Hotels 1.31%
- --------------------------------------------------------------------------------
Shanghai New Asia, Group B 1,198,560 254,095
Household Appliances 6.46%
- --------------------------------------------------------------------------------
Guangdong Kelon Electronics Holdings 1,086,000 876,032
Hualing Holdings Ltd. 1,344,000 45,101*
Hualing Holdings, Warrants 268,800 0*
Shanghai Shangling Electronics Appliance 363,360 61,771*
Shenzhen Konka Electronic Holdings, Group B 304,703 273,714
-------
1,256,618
Industrial/Commercial Machinery 1.94%
- --------------------------------------------------------------------------------
First Tractor Co. Ltd., Class H 198,000 51,749*
Shanghai Automation Instrumentation, Group B 1,777,148 263,018
Shanghai Diesel Engine Ltd., Group B 376,320 63,222*
------
377,989
Metal Industries 0.61%
- --------------------------------------------------------------------------------
Shanghai Steel Tubes, Group B 269,280 21,004*
Shenzhen Fangda Co. Ltd. 131,500 97,080
------
118,084
Motor Vehicles & Transportation 6.03%
- --------------------------------------------------------------------------------
Qingling Motors Co. Ltd., Class H 2,024,000 561,642
Shanghai Dazhong, Group B 1,121,502 612,340*
-------
1,173,982
Office Supplies 1.46%
- --------------------------------------------------------------------------------
China First Pencil Company Ltd. 919,165 148,905
Shanghai Hero Pen, Group B 763,378 134,354
-------
283,259
- -70-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
COMMON STOCKS AND WARRANTS Shares Value
Petroleum Refining 1.20%
- --------------------------------------------------------------------------------
Zhenhai Refining and Chemical Co. Ltd., Class H 1,815,000 $234,254
Pharmaceuticals 0.60%
- --------------------------------------------------------------------------------
Livzon Pharmaceutical, Group B 564,566 117,314*
Photography 0.32%
- --------------------------------------------------------------------------------
China HK Photo Products Holdings 450,000 63,307
Real Estate Developers 6.41%
- --------------------------------------------------------------------------------
Cheung Kong Holdings Ltd. 50,000 246,515
China Overseas Land & Investment 970,000 125,194
China Resources Enterprise Ltd. 184,000 189,985
Lai Sun Development Co. Ltd. 40,000 5,059
New World Development Co. 142,095 275,093
Shanghai Lujiazhui Finance, Group B 217,060 97,677*
Shum Yip Investment Ltd. 350,000 87,184
Silver Grant International Industries Ltd. 940,000 114,042
Sun Hung Kai Properties HK 25,000 106,802
-------
1,247,551
Retail 3.89%
- --------------------------------------------------------------------------------
Amway Asia Pacific Ltd. 13,000 169,812
China Everbright-IHD Pacific Ltd. 200,000 97,445*
China Everbright-IHD Pacific Ltd., Warrants 20,000 2,839*
Glorious Sun Enterprises Ltd. 984,000 182,881
Sa Sa International Holdings Ltd. 540,000 90,604
Shanghai Friendship & O/S Chinese, Group B 1,003,088 212,655
-------
756,236
Rubber & Plastics Products 0.11%
- --------------------------------------------------------------------------------
Shanghai Tyre & Rubber Co., Group B 133,000 21,546*
Security & Commodity Brokers 0.00%
- --------------------------------------------------------------------------------
Peregrine Investment Holdings Ltd. 640,000 0
Telecommunications 1.74%
- --------------------------------------------------------------------------------
Hong Kong Telecommunications Ltd. 87,540 163,827
Shanghai Post & Telecom, Group B 613,210 175,378
-------
339,205
- -71-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
COMMON STOCKS AND WARRANTS Shares Value
Textile Mill Products 1.77%
- --------------------------------------------------------------------------------
First Sign International Holdings 620,000 $20,805*
Shanghai Haixin Co., Group B 662,350 189,432
Shanghai Lian Hua Fibre, Group B 268,780 33,060*
Shanghai Sanmao Textile Class, Group B 967,670 101,025
-------
344,322
Traffic System Management 0.41%
- --------------------------------------------------------------------------------
Anhui Expressway Co. Ltd. 726,000 73,087
GZI Transport Ltd. 25,769 5,821
GZI Transport Ltd., Warrants 5,153 0*
------
78,908
Travel Services 0.66%
- --------------------------------------------------------------------------------
China Travel International Investment 500,000 64,533
Shanghai China International Travel, Group B 266,750 63,486
------
128,019
Unit Investment Trust 1.55%
- --------------------------------------------------------------------------------
Cathay Investment Fund 350,000 301,529
Utilities 4.85%
- --------------------------------------------------------------------------------
Guangdong Electric Power Development Co., Group B 205,400 76,349
Hong Kong & China Gas Co. 306,245 347,826
Hong Kong & China Gas Co., Warrants 13,920 952*
Huaneng Power International, Inc., ADR 20,000 268,750*
Shandong Huaneng Power Company Ltd., ADR 46,600 250,475
-------
944,352
Water Transportation & Services 4.06%
- --------------------------------------------------------------------------------
China International Marine Container, Group B 909,859 469,726
China Merchants Shekou Port Service Co. Ltd. 166,040 43,717*
Continental Mariner Investment 440,000 75,529
Cosco Pacific Ltd. 350,000 124,226
Guangzhou Shipyard International Co., Class H 424,000 32,561
Pacific Ports Co. Ltd. 300,000 42,204
Shenzhen Chiwan Wharf Holdings Ltd. 5,913 1,336
-----
789,299
- --------------------------------------------------------------------------------
Total Common Stocks and Warrants 17,236,668
- --------------------------------------------------------------------------------
(cost $31,182,585)
See notes to portfolios of investments.
- -72-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
CHINA REGION OPPORTUNITY FUND
Principal
REPURCHASE AGREEMENT 2.59% Amount Value
Joint Tri-Party Repurchase Agreement, Morgan Stanley
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $505,823, collateralized
by U.S. Treasury securities held in a joint
tri-party repurchase account (cost $505,741) $505,741 $505,741
- --------------------------------------------------------------------------------
Total Investments 91.17% 17,742,409
- --------------------------------------------------------------------------------
(cost $31,688,326)
Other assets and liabilities, net 8.83% 1,717,436
---------
NET ASSETS 100% $19,459,845
===========
</TABLE>
- -73-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GLOBAL RESOURCES FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS AND WARRANTS 84.28% Shares Value
Chemicals & Allied Products 9.01%
- --------------------------------------------------------------------------------
Brunswick Technologies, Inc. 36,000 $477,000*
Cytec Industries, Inc. 5,000 221,250*
Dow Chemical Co. 3,000 290,063
E.I. Du Pont de Nemours & Co. 3,800 283,575
IMC Global, Inc. 6,200 186,775
Rohm & Haas Co. 2,400 249,450
-------
1,708,113
Gold & Silver Mining 2.42%
- --------------------------------------------------------------------------------
Barrick Gold Corp. 6,400 122,800
Fischer Watt Gold, Inc. 200,000 20,000*
Goldbeam Resources Ltd. 300,000 0*+
Homestake Mining 4,000 41,500
Meridian Gold, Inc. 48,000 99,473*
Newmont Mining Corp. 300 7,088
Placer Dome, Inc. 5,000 58,750
Star Resources Corp. 944,100 109,052*
-------
458,663
Investment Advisors 1.67%
- --------------------------------------------------------------------------------
The Pioneer Group, Inc. 12,000 315,750
Manufacturing 0.15%
- --------------------------------------------------------------------------------
Kesoram Industries, GDR 62,500 28,891*
Metal Mining 5.47%
- --------------------------------------------------------------------------------
Aluminum Co. of America 2,000 131,875
Auspex Minerals Ltd. 250,000 56,055*
Osmium Holdings S.A. 104 59,280*
Pasminco Ltd. 300,000 229,057
Platexco, Inc. 50,000 174,962*
Reynolds Metals Co. 3,800 212,563
Zimasco Consolidated Enterprises Ltd. 40,000 173,360
-------
1,037,152
Mining Services 3.15%
- --------------------------------------------------------------------------------
Dynatec Corp. 2,000,000 529,981*
Major Drilling Group International, Inc. 12,000 67,267*
------
597,248
- -74-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GLOBAL RESOURCES FUND
COMMON STOCKS AND WARRANTS Shares Value
Natural Gas Production & Distribution 6.09%
- --------------------------------------------------------------------------------
Australian Gas & Light Co. 60,000 $376,175
El Paso Natural Gas Co. 6,200 237,150
Enron Corp. 10,000 540,625
-------
1,153,950
Oil & Gas Extraction 13.90%
- --------------------------------------------------------------------------------
Benz Energy Ltd. 105,000 96,314*
EEX Corp. 20,000 187,500*
Eurosov Energy plc 323,100 439,676*
Global Marine, Inc. 2,000 37,375*
Interaction Resources 250,000 59,453*
Ocean Energy, Inc. 10,000 195,625*
Reserve Royalty 60,000 130,457*
Santos Ltd. 75,000 232,781
Seven Seas Petroleum Corp. 10,000 202,500*
Sharpe Resources Corp. 1,031,250 581,578*
Transocean Offshore, Inc. 5,000 222,500
Woodside Petroleum Co. 50,000 250,163
-------
2,635,922
Oil & Gas Field Machinery 1.35%
- --------------------------------------------------------------------------------
CARBO Ceramics, Inc. 7,500 255,937
Oil & Gas Field Services 4.44%
- --------------------------------------------------------------------------------
Canadian Fracmaster Ltd. 20,000 126,380
Coflexip S.A., ADR 4,000 244,500
Diamond Offshore Drilling, Inc. 5,000 200,000
Ensco International, Inc. 2,000 34,750
Precision Drilling Corp. 12,000 236,045
-------
841,675
Paper Products 4.36%
- --------------------------------------------------------------------------------
International Paper Co. 4,500 193,500
Lafayette Paper Mills Ltd. 600,000 0*
Longview Fibre Co. 14,000 199,500
Potlatch Corp. 5,200 218,400
Temple-Inland, Inc. 4,000 215,500
-------
826,900
- -75-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GLOBAL RESOURCES FUND
COMMON STOCKS AND WARRANTS Shares Value
Petroleum Production & Refining 28.20%
- --------------------------------------------------------------------------------
Ashland, Inc. 5,500 $283,938
British Petroleum plc, ADR 8,000 706,000
Chevron Corp. 6,000 498,375
ELF Aquitane S.A., ADR 3,000 213,000
Exxon Corp. 11,700 834,356
Mobil Corp. 6,500 498,063
Royal Dutch Petroleum 7,300 400,131
Texaco, Inc. 8,500 507,344
Tosco Corp. 9,000 264,375
Total S.A., ADR 8,900 581,838
Ultramar Diamond Shamrock Corp. 9,000 284,062
USX-Marathon Group 8,000 274,500
-------
5,345,982
Precious Stone Mining 1.14%
- --------------------------------------------------------------------------------
SouthernEra Resources Ltd. 50,000 215,730*
Railroads 1.94%
- --------------------------------------------------------------------------------
Canadian National Railway 5,008 266,095
Railink Ltd., Class A 15,000 100,899*
-------
366,994
Steel Manufacturing 0.99%
- --------------------------------------------------------------------------------
USX-U.S. Steel Group, Inc. 5,700 188,100
- --------------------------------------------------------------------------------
Total Common Stocks and Warrants 15,977,007
- --------------------------------------------------------------------------------
(cost $19,741,999)
Principal
REPURCHASE AGREEMENT 14.63% Amount
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $2,775,304, collateralized
by U.S. Treasury securities held in a joint
tri-party repurchase account (cost $2,774,853) $2,774,853 2,774,853
- --------------------------------------------------------------------------------
Total Investments 98.91% 18,751,860
- --------------------------------------------------------------------------------
(cost $22,516,852)
Other assets and liabilities, net 1.09% 206,082
-------
NET ASSETS 100% $18,957,942
===========
</TABLE>
See notes to portfolios of investments.
- -76-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
WORLD GOLD FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS AND WARRANTS 73.28% Shares Value
Diamond Mining & Exploration 0.35%
- --------------------------------------------------------------------------------
Brazilian Resources, Inc., Units (RS) 1,200,000 $140,241*
SouthernEra Resources Ltd. 90,000 388,313*
-------
528,554
Diversified Operations 0.10%
- --------------------------------------------------------------------------------
Lonrho Africa plc 125,000 147,555*
Gold Exploration & Development 7.52%
- --------------------------------------------------------------------------------
Altoro Gold Corp. 100,000 18,006*
Ancash Resources, Special Warrants (RS) 800,000 366,910*+
Argosy Mining Corp. 1,372,867 214,547*
Armada Gold Corp. 450,000 76,440*
Atacama Minerals Corp. 976,000 610,104*
Aurizon Mines Ltd. 690,000 276,609*
Balaclava Mines Inc., Units (RS) 400,000 233,464*+
Bro-X Minerals Ltd. 30,000 0*
Cathedral Gold Corp. 570,000 108,442*
Chilean Gold Ltd. (RS) 500,000 254,162*+
Colony Pacific Explorations Ltd., Warrants 50,000 0*
Continental Precious Minerals, Inc. 200,000 86,971*
Cream Minerals Ltd., Units (RS) 200,000 136,300*
Crown Resources Corp. 550,000 2,406,250*+
Fischer Watt Gold Co., Inc. 940,600 94,060*+
Franc-Or Resources Corp. 647,900 132,067*
Glencar Mining plc 872,438 568,117*
Gold Corp. of Africa Ltd. (RS) 200,000 320,000*+
Great Basin Gold Ltd. 200,000 191,609*
Highlake Resources NL 4,257,565 105,715*+
Laguna Gold Co. 780,000 42,399*
Madison Enterprises Corp. (RS) 250,000 285,375*
Madison Enterprises Corp., Warrants (RS) 250,000 0*
Minefinders Corp., Ltd. 336,200 392,909*
Mink International Resources Corp. 380,000 67,131*
Minorca Resources, Inc. 182,500 74,401*
Minorca Resources, Inc., Special Warrants 25,000 0*
Miranda Mining (RS) 1,600,000 1,166,611*
Nevsun Resources 505,000 651,945*
- -77-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
WORLD GOLD FUND
COMMON STOCKS AND WARRANTS Shares Value
Opawica Explorations, Inc. 400,000 $100,561*+
Ormonde Mining plc 3,607,143 331,257*+
Orvana Minerals Corp. 240,000 195,685*
Otter Gold Mines Ltd. 500,000 325,894*
Otter Gold Mines Ltd. Warrants 50,000 3,259*
Pacific Island Gold NL 2,000,000 28,555*
Platinova A/S 63,300 20,645*
Platinova Resources Ltd., Special Shares 36,700 11,845*
Rea Gold Corp. 2,400,000 0*+
Romarco Minerals, Inc. 100,000 129,098*
Solitario Resources Corp. 459,522 624,457*
Star Resources Corp. (RS) 1,976,400 228,292*+
Tanganyika Gold NL 937,500 81,473*
Treminco Resources Ltd. 200,000 40,768*
Western Exploration & Development,
Special Warrants (RS) 600,000 255,000*+
-------
11,257,333
Intermediate Gold Producers 15.06%
- --------------------------------------------------------------------------------
Acacia Resources 1,000,000 1,067,690
Delta Gold, NL 7,478,261 9,191,418
Getchell Gold Corp. 263,360 4,049,160*
Greenstone Resources Ltd. 500,000 1,885,510*
Kinross Gold Corp. 105,000 341,250*
Lonrho plc 125,000 573,356
Meridian Gold, Inc. 2,060,000 4,269,067*
Resolute Ltd. 1,935,669 1,177,536*
---------
22,554,987
Investment Advisors 8.24%
- --------------------------------------------------------------------------------
The Pioneer Group, Inc. 469,200 12,345,826
Junior Gold Producers 8.12%
- --------------------------------------------------------------------------------
Bema Gold Corp. ADR 150,000 242,568*
Canyon Resources Corp. 1,066,183 799,637*
Canyon Resources Corp., Warrants 166,667 0*
Dayton Mining Corp. 688,000 444,097*
Geomaque Explorations Ltd. 145,800 198,131*
IAMGOLD International African Mining 1,242,500 3,165,874*
- -78-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
WORLD GOLD FUND
COMMON STOCKS AND WARRANTS Shares Value
IAMGOLD International African Mining, Warrants 333,330 $0*
IAMGOLD International African Mining, Warrants 60,000 0*
Macraes Mining Co. Ltd. 750,000 325,894
Randgold Resources Ltd., ADR 50,000 268,750*
Ranger Minerals NL 2,000,000 4,456,985*
RGC Ltd. 195,000 193,673
Ross Mining NL 1,660,248 793,562
Sutton Resources Ltd. 200,000 1,134,704*
Vista Gold Corp. 834,300 141,718*
-------
12,165,593
Metal Mining 2.54%
- --------------------------------------------------------------------------------
AMT International Mining Corp. 2,126,350 650,149*+
Osmium Holdings S.A. 891 507,870*
Platexco, Inc. 175,000 612,366*
Taseko Mines Ltd., Warrants 96,550 0*
Tenke Mining Corp. 385,000 510,107*
Zimasco Consolidated Enterprises Ltd. 350,000 1,516,900*
---------
3,797,392
Mining Finance 11.09%
- --------------------------------------------------------------------------------
Anglo American Platinum Corp. 50,000 543,845
Euro-Nevada Mining Corp. Ltd. 540,000 7,356,548
Euro-Nevada Mining Corp. Ltd.,
Warrants, Series B 35,000 332,937*
Franco-Nevada Mining Corp. Ltd. 410,000 8,120,605
Franco-Nevada Mining Corp. Ltd., Warrants 20,000 261,593*
-------
16,615,528
Mining Services 0.83%
- --------------------------------------------------------------------------------
Dynatec Corp. 2,000,000 529,981*
Major Drilling Group International, Inc. 126,700 710,226*
-------
1,240,207
- -79-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
WORLD GOLD FUND
COMMON STOCKS AND WARRANTS Shares Value
Senior Gold Producers 19.43%
- --------------------------------------------------------------------------------
Ashanti Goldfields Co. Ltd., GDR 622,319 $5,056,342
Ashanti Preference Stock 203,932 316,095
Barrick Gold Corp. 500,000 9,593,750
Freeport-McMoRan Copper & Gold, Inc., Class B 240,000 3,645,000*
Homestake Mining 135,000 1,400,625
Newmont Mining Corp. 165,000 3,898,124
Normandy Mining Ltd. 2,600,000 2,130,414
Placer Dome, Inc. 260,000 3,055,000
---------
29,095,350
- --------------------------------------------------------------------------------
Total Common Stocks and Warrants 109,748,325
- --------------------------------------------------------------------------------
(cost $132,641,469)
RIGHTS 0.00%
Resolute Ltd. 414,786 4,635
- --------------------------------------------------------------------------------
Total Rights 4,635
- --------------------------------------------------------------------------------
(cost $0)
PURCHASED OPTIONS 0.23% Contracts
Gold Index
- --------------------------------------------------------------------------------
Philadelphia Gold and Silver Index,
Call, Strike Price 65, Expiration July
1998 (premium $291,200) 400 310,000
Philadelphia Gold and Silver Index,
Put, Strike Price 65, Expiration July
1998 (premium $95,250) 500 28,125
- --------------------------------------------------------------------------------
Total Purchased Options 338,125
- --------------------------------------------------------------------------------
(cost $386,450)
See notes to portfolios of investments.
- -80-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
WORLD GOLD FUND
Principal
CONVERTIBLE SECURITIES 0.40% Amount Value
Gold Production
- --------------------------------------------------------------------------------
Dayton Mining Corp. ADR, 7%
Convertible Subordinated
Note, due 4/1/02 (cost $493,000) $750,000 $493,125
Macraes Mining Co. Ltd., 7% Convertible
Subordinated Note, due 9/15/98
(cost $ 527,803) 250,000 108,631
- --------------------------------------------------------------------------------
Total Convertible Securities 601,756
- --------------------------------------------------------------------------------
(cost $1,020,803)
REPURCHASE AGREEMENT 5.25%
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $7,863,021, collateralized by U.S.
Treasury securities held in a joint tri-party
repurchase account (cost $7,861,743) 7,861,743 7,861,743
- --------------------------------------------------------------------------------
Total Investments 79.16% 118,554,584
- --------------------------------------------------------------------------------
(cost $141,910,465)
Other assets and liabilities, net 20.84% 31,204,730
----------
NET ASSETS 100% $149,759,314
============
</TABLE>
- -81-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GOLD SHARES FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS AND WARRANTS 74.45% Shares Value
Gold Mining - Africa 10.58%
- --------------------------------------------------------------------------------
Anglogold Ltd. 35,966 $1,438,648
Anglogold Ltd., ADR 36,072 721,440
Ashanti Goldfields, GDR 105,346 855,936
Avgold Ltd. 707,468 433,321*
Goldfields South Africa 161,620 658,603
Harmony Gold Mining, ADR 80,000 325,000*
Western Areas Gold Mining, ADR 150,000 462,000
-------
4,894,948
Gold Mining - Australia 11.44%
- --------------------------------------------------------------------------------
Acacia Resources 400,000 427,076
Delta Gold NL 223,955 275,260
Great Central Mines 320,000 305,906
Lihir Gold Ltd. 900,000 1,111,763*
Normandy Mining Ltd. 2,220,369 1,819,348
Resolute Ltd., Rights 208,785 2,333
Resolute Resources Ltd. 179,900 109,439*
Sons of Gwalia Ltd. 500,000 1,241,500*
---------
5,292,625
Gold Mining - North America 42.02%
- --------------------------------------------------------------------------------
AMT International Mining Corp. 52,650 16,098*
Barrick Gold Corp. 107,500 2,062,656
Battle Mountain Gold Co. 75,000 445,313
Bema Gold Corp. 100,000 162,500*
Euro-Nevada Mining Corp. Ltd. 17,800 242,494
Franco-Nevada Mining Corp. Ltd. 35,000 693,222
Franco-Nevada Mining Corp. Ltd., Warrants 41,667 544,990*
Franco-Nevada Mining Corp. Ltd., ADR 125,000 2,475,794
Freeport-McMoRan Copper & Gold, Inc., Class B 150,000 2,278,125
Getchell Gold Corp. 15,400 236,775*
Homestake Mining 169,780 1,761,468
Kinross Gold Corp. 75,000 243,750*
- -82-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GOLD SHARES FUND
COMMON STOCKS AND WARRANTS Shares Value
Meridian Gold, Inc. 1,760,000 $3,647,359*
Newmont Mining Corp. 76,000 1,795,500
Placer Dome, Inc. 168,000 1,974,000
Prime Resource Group, Inc. 30,300 210,206
TVX Gold Corp. 210,000 643,125*
-------
19,433,375
Investment Advisors 7.40%
- --------------------------------------------------------------------------------
The Pioneer Group, Inc. 130,000 3,420,625
Mining Services 2.38%
- --------------------------------------------------------------------------------
Dynatec Corp. 2,000,000 529,981*
Major Drilling Group International 101,700 570,087*
-------
1,100,068
Other Mineral Mining 63%
- --------------------------------------------------------------------------------
Ocean Diamond Mining Holdings Ltd. 500,000 290,894*
- --------------------------------------------------------------------------------
Total Common Stocks and Warrants 34,432,535
- --------------------------------------------------------------------------------
(cost $49,232,063)
PURCHASED OPTIONS 1.75% Contracts
Gold Index
- --------------------------------------------------------------------------------
Philadelphia Gold and Silver Index, Call,
Strike Price 60, Expiration Sep. 1998
(premium $666,200) 500 693,750
Philadelphia Gold and Silver Index, Put,
Strike Price 60, Expiration Sep. 1998
(premium $168,350) 700 113,750
- --------------------------------------------------------------------------------
Total Purchased Options 807,500
- --------------------------------------------------------------------------------
(cost $834,550)
- -83-
<PAGE>
PORTFOLIO OF INVESTMENTS June 30, 1998
GOLD SHARES FUND
Principal
REPURCHASE AGREEMENT 4.34% Amount Value
Joint Tri-Party Repurchase Agreement, Morgan Stanley,
Dean Witter & Co., 6/30/98, 5.85%, due 7/1/98,
repurchase price $2,009,307, collateralized by
U.S.Treasury securities held in a joint tri-party
repurchase account (cost $2,008,981) $2,008,981 $2,008,981
- --------------------------------------------------------------------------------
Total Investments 80.54% 37,249,016
- --------------------------------------------------------------------------------
(cost $52,075,594)
Other assets and liabilities, net 19.46% 9,001,533
---------
NET ASSETS 100% $46,250,549
===========
</TABLE>
See notes to portfolios of investments.
- -84-
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS June 30, 1998
LEGEND
* Non-income producing security GO General Obligation Bond
+ Affiliated company RS Restricted Security
(see following) (see following)
ADR American Depository Receipt ZCB Zero Coupon Bond
GDR Global Depository Receipt
GENERAL
The yields reflect the effective yield from date of purchase.
Variable Rate Notes have periodic reset features which effectively shorten the
maturity dates and reset the interest rates as tied to various interest-bearing
instruments. Rates shown are current rates at 6/30/98.
Securities with a 144A designation are exempt from registration under Rule 144A
of the Securities Act of 1933.
JOINT TRI-PARTY REPURCHASE AGREEMENTS (SEE ALSO NOTE 1 TO FINANCIAL STATEMENTS.)
The terms of the repurchase agreements and the securities held as collateral in
the tri-party joint repurchase agreements at June 30, 1998 were:
Donaldson, Lufkin & Jenrette repurchase agreeement, 5.75%, 6/30/98, due 7/1/98:
(with a market value of $25,908,008)
$55,048,000 U.S. Treasury Bond, 0.00%, 08/15/13
$5,942,000 U.S. Treasury Bond. 0.00%, 05/15/12
Total principal amount: $25,000,000; Total repurchase value: $25,003,993
Morgan Stanley, Dean Witter & Co., repurchase agreement, 5.85%, 6/30/98, due
7/1/98:
(with a market value of $59,919,259)
$58,114,000 U.S. Treasury Bond, 6.125%, 11/15/27
Total principal amount: $52,381,574; Total repurchase value: $52,390,085
Other mutual funds managed by U.S. Global Investors, Inc. participate in the
tri-party joint repurchase agreements. Each owns an undivided interest in the
accounts.
- -85-
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS June 30, 1998
AFFILIATED COMPANIES - INDICATED IN PORTFOLIO OF INVESTMENTS AS "+"
The Investment Company Act of 1940 defines affiliates as companies in which the
Fund owns at least 5% of the outstanding voting securities. The following is a
summary of transactions with each affiliated company during the year ended June
30, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Shares of Affiliated Companies
June 30, 1997 Additions Reductions June 30, 1998
Global Resources
- --------------------------------------------------------------------------------
Goldbeam Resources Ltd. 300,000 --- --- 300,000
</TABLE>
At June 30, 1998, the value of investments in affiliated companies was $0 repre-
senting 0% of net assets, and the total cost was $765,345. Net realized gains on
transactions with affiliates were $0 and there was no income earned for the
year.
<TABLE>
<S> <C> <C> <C> <C>
World Gold
- --------------------------------------------------------------------------------
AMT International Mining Corp. 2,650,000 --- (523,650) 2,126,350
Ancash Resources (RS) 800,000 --- --- 800,000
Balaclava Mines (RS) --- 400,000 --- 400,000
Chilean Gold Ltd.(RS) 500,000 --- --- 500,000(a)
Crown Resources Corp. 742,500 --- (192,500) 550,000(a)
Exploro Minerals Corp. Ltd. 1,000,000 --- (1,000,000) ---
Fischer-Watt Gold Co., Inc. 831,700 2,400,000 (2,291,100) 940,600(a)
Fischer-Watt Gold Co., Inc. (RS) 1,856,860 543,140 (2,400,000) ---
Gold Corp. of Africa (RS) 150,000 50,000 --- 200,000
Highlake Resources NL 2,857,565 1,400,000 --- 4,257,565
New Venoro Gold Corp., Class A --- 156,250 (156,250) ---
Opawica Exploration, Inc. 405,000 --- (5,000) 400,000
Ormonde Mining plc 2,750,000 857,143 --- 3,607,143
Rea Gold Corp. 2,500,000 --- (100,000) 2,400,000(a)
Star Resources Corp. 1,500,000 1,420,000 (943,600) 1,976,400
Star Resources Corp. (RS) 710,000 710,000 (1,420,000) ---
Venoro Gold Corp., Class A 900,000 350,000 (1,250,000) ---
Western Exploration &
Development Ltd. (RS) --- 600,000 --- 600,000
</TABLE>
At June 30, 1998, the value of investments in affiliated companies was
$5,345,820 representing 3.57% of net assets, and the total cost was $11,598,235.
Net realized losses on transactions with affiliates were ($2,781,088), and there
was no income for the year.
(a) At June 30, 1998, the company is no longer defined as an affiliate,
although it was an affiliated company during the year.
- -86-
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS June 30, 1998
Affiliated Companies (cont'd)
<TABLE>
<S> <C> <C> <C> <C>
Gold Shares
- --------------------------------------------------------------------------------
Sub Nigel Gold Mining Co. Ltd., ADR 1,354,600 --- (1,354,600) ---
</TABLE>
At June 30, 1998, the value of investments in affiliated companies was $0,
representing 0% of net assets, and the total cost was $0. Net realized losses on
transactions with affiliates were ($2,991,738). Income earned for the year was
$8,424. Restricted Securities - indicated in Portfolio of Investments as "RS"
- -87-
<PAGE>
NOTES TO PORTFOLIOS OF INVESTMENTS June 30, 1998
The following securities are subject to legal restrictions on their resale. The
issuer bears the cost of registration, if any, involved in the disposition of
these securities.
<TABLE>
<S> <C> <C>
Security Acquisition Cost per
Date Share
WORLD GOLD
- --------------------------------------------------------------------------------
Common Stock and Warrants
Chilean Gold Ltd. 01/17/97 $1.10
Gold Corp. of Africa 08/14/96-11/14/97 $2.00
Madison Enterprises Corp. 05/21/98 $1.31
Madison Enterprises Corp. Wts. 05/21/98 $0.00
Miranda Mining 03/25/96 $1.13
Special Warrants and Units
Ancash Resources 10/01/96 $0.73
Balaclava Mines, Inc. 06/10/98 $0.34
Brazilian Resources 03/03/97 $0.33
Cream Minerals, Ltd. 06/24/98 $0.61
Western Exploration & Development 08/14/97 $0.50
</TABLE>
At June 30, 1998, the total cost of restricted securities was $4,665,862, and
the total value was $3,158,063, representing 2.11% of net assets.
- -88-
<PAGE>
NOTES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -89-
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1998
<TABLE>
U.S. TREASURY U.S. GOVERNMENT
SECURITIES CASH SECURITIES SAVINGS
<S> <C> <C>
Investments, at identified cost ............................................... $ 182,596,971 $ 756,012,969
------------- -------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value:
Securities ........................................................... $ 125,023,024 $ 756,012,969
Repurchase Agreements ................................................ 57,573,947 --
Cash .......................................................................... -- 689
Receivables:
Investments sold ..................................................... -- --
Dividends ............................................................ -- --
Interest ............................................................. 1,750,437 7,738,409
Capital shares sold .................................................. 2,441,699 2,898,215
From manager ......................................................... -- 32,468
Other assets .................................................................. 236,501 73,214
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets .................................................................. 187,025,608 766,755,964
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Investments purchased ................................................ -- 4,999,219
Capital shares redeemed .............................................. 37,472,173 61,378
To manager and affiliates ............................................ 51,826 --
Dividends and distributions .......................................... 9,558 38,475
Accounts payable and accrued expenses ................................ 70,665 139,314
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities ............................................................. 37,604,222 5,238,386
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .................................................................... $ 149,421,386 $ 761,517,578
============= =============
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in capital ............................................................... $ 149,361,130 $ 761,637,061
Undistributed net investment income (loss) .................................... 46,687 1,650,857
Accumulated net realized gain (loss) on investments
and foreign currencies ............................................... 13,569 (1,770,340)
Net unrealized appreciation (depreciation) of
investments and other assets and liabilities
denominated in foreign currencies .................................... -- --
----------- ---------
Net assets applicable to capital shares outstanding $ 149,421,386 $ 761,517,578
============= =============
Capital shares outstanding, and unlimited number
of no par shares authorized ................................................. 149,416,580 761,615,664
----------- -----------
Net Asset Value, per share .................................................... $ 1.00 $ 1.00
============= =============
See accompanying notes to financial statements.
- -90-
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1998
<S> <C> <C> <C> <C>
Near-Term Tax Free Tax Free Income All American Equity
Investments, at identified cost ................... $ 7,793,768 $ 20,338,470 $ 8,627,947 $ 19,862,780
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value:
Securities ............................... $ 7,634,410 $ 20,794,492 $ 10,495,839 $ 30,130,112
Repurchase Agreements .................... 289,967 298,715 518,553 4,229,366
Cash .............................................. -- -- 706 --
Receivables:
Investments sold ......................... -- -- 99,529 261,566
Dividends ................................ -- -- 23,972 30,939
Interest ................................. 131,555 331,086 13,036 687
Capital shares sold ...................... 60 950 331 448,383
From manager ............................. 17,544 9,456 -- 13,199
Other assets ...................................... 5,939 6,156 6,005 9,361
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets ...................................... 8,079,475 21,440,855 11,157,971 35,123,613
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Investments purchased .................... -- -- -- 292,675
Capital shares redeemed .................. -- 7 -- 111,584
To manager and affiliates ................ -- -- 6,819 --
Dividends and distributions .............. 7,071 27,019 2,236 16,211
Accounts payable and accrued expenses .... 10,945 14,186 12,095 32,169
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities ................................. 18,016 41,212 21,150 452,639
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................ $ 8,061,459 $ 21,399,643 $ 11,136,821 $ 34,670,974
============ ============ ============ ============
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in capital ................................... $ 8,135,353 $ 20,707,842 $ 8,031,776 $ 19,400,261
Undistributed net investment income (loss) ........ 5,774 4,095 (2,236) (16,211)
Accumulated net realized gain (loss) on investments
and foreign currencies ....................... (210,277) (67,031) 720,836 790,226
Net unrealized appreciation (depreciation) of
investments and other assets and liabilities
denominated in foreign currencies ............ 130,609 754,737 2,386,445 14,496,698
------- ------- --------- ----------
Net assets applicable to capital shares outstanding $ 8,061,459 $ 21,399,643 $ 11,136,821 $ 34,670,974
============ ============ ============ ============
Capital shares outstanding, and unlimited number
of no par shares authorized .................. 757,416 1,753,631 726,866 893,573
======= ========= ======= =======
Net Asset Value, per share $ 10.64 $ 12.20 $ 15.32 $ 38.80
============ ============ ============ ============
- -91-
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1998
<S> <C> <C>
China Region
Real Estate Opportunity
Investments at identified cost ................................................... $ 11,155,310 $ 31,688,326
------------ ------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value:
Securities .............................................................. $ 9,636,099 $ 17,236,668
Repurchase Agreements ................................................... 1,319,708 505,741
Cash ............................................................................. 541,219 188,637
Receivables:
Investments sold ........................................................ -- 188,679
Dividends ............................................................... 48,238 198,570
Interest ................................................................ 214 82
Capital shares sold ..................................................... 1,385 1,364,044
From manager ............................................................ -- --
Other assets ..................................................................... 8,800 17,521
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets ..................................................................... 11,555,663 19,699,942
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Investments purchased ................................................... 155,626 188,635
Capital shares redeemed ................................................. 4,606 6,894
To manager and affiliates ............................................... 7,107 19,361
Dividends and distributions ............................................. 5,778 --
Accounts payable and accrued expenses ................................... 14,251 25,207
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities ................................................................ 187,368 240,097
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................... $ 11,368,295 $ 19,459,845
============ ============
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in capital .................................................................. $ 9,503,826 $ 38,328,159
Undistributed net investment income (loss) ....................................... (10,555) 119,508
Accumulated net realized gain (loss) on investments
and foreign currencies .................................................. 2,074,643 (5,041,984)
Net unrealized appreciation (depreciation) of
investments and other assets and liabilities
denominated in foreign currencies (199,619) (13,945,838)
-------- -----------
Net assets applicable to capital shares outstanding .............................. $ 11,368,295 $ 19,459,845
------------ ------------
Capital shares outstanding, and unlimited number
of no par shares authorized ............................................. 831,027 4,753,747
------- ---------
NET ASSET VALUE, PER SHARE ....................................................... $ 13.68 $ 4.09
============ ============
See accompanying notes to financial statements.
- -92-
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1998
<S> <C> <C> <C>
Global Resources World Gold Gold Shares
Investments, at identified cost ..................................... $ 22,516,852 $ 141,910,465 $ 52,075,594
------------- ------------- -------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value: .............................................. $ 15,977,007 $ 110,692,841 $ 35,240,035
Securities ................................................. 2,774,853 7,861,743 2,008,981
Repurchase Agreements ...................................... -- 20,052 309,551
Cash
Receivables:
Investments sold ........................................... 203,907 358,681 2,875,052
Dividends .................................................. 13,493 58,378 751
Interest ................................................... 451 15,564 326
Capital shares sold ........................................ 6,033 30,983,223 9,421,126
From manager ............................................... -- -- --
Other assets ........................................................ 17,318 53,874 42,559
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets ........................................................ 18,993,062 150,044,356 49,898,381
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Investments purchased ...................................... -- -- 2,291,415
Capital shares redeemed .................................... 50 43,964 1,213,559
To manager and affiliates .................................. 15,875 100,781 30,219
Dividends and distributions ................................ -- -- --
Accounts payable and accrued expenses ...................... 19,195 140,297 112,639
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities ................................................... 35,120 285,042 3,647,832
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS .......................................................... $ 18,957,942 $ 149,759,314 $ 46,250,549
============= ============= =============
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid in capital ..................................................... $ 26,353,835 $ 223,942,885 $ 254,505,359
Undistributed net investment income (loss) .......................... (50,365) (168,331) (177,162)
Accumulated net realized gain (loss) on investments
and foreign currencies ......................................... (3,579,924) (50,658,507) (193,216,313)
Net unrealized appreciation (depreciation) of
investments and other assets and liabilities
denominated in foreign currencies .............................. (3,765,604) (23,356,733) (14,861,335)
---------- ----------- -----------
Net assets applicable to capital shares outstanding ................. $ 18,957,942 $ 149,759,314 $ 46,250,549
------------- ------------- -------------
Capital shares outstanding, and unlimited number
of no par shares authorized .................................... 4,241,131 15,184,144 12,216,393
--------- ---------- ----------
Net Asset Value, per share .......................................... $ 4.47 $ 9.86 $ 3.79
============= ============= =============
</TABLE>
- -93-
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C> <C>
U.S.Treasury U.S. Government
Securities Cash Securities Savings
NET INVESTMENT INCOME
Income:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends ..................................................................... $ -- $ --
Foreign taxes withheld on dividends ........................................... -- --
--------- ----------
Net dividends ................................................................. -- --
Interest and other ............................................................ 10,028,533 40,541,839
---------- ----------
Total Income .................................................................. 10,028,533 40,541,839
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Management fee ................................................................ 906,071 3,021,408
Transfer agent fees and expenses .............................................. 373,440 786,760
Accounting service fees and expenses .......................................... 83,304 161,506
Legal and professional fees ................................................... 82,067 324,565
Custodian fees ................................................................ 153,548 140,961
Shareholder reporting ......................................................... 63,679 128,895
Registration fees ............................................................. 45,375 85,218
Trustee's fees and expenses ................................................... 23,251 61,263
Interest Expense .............................................................. -- --
Miscellaneous ................................................................. 72,962 184,690
------ -------
Total expenses before reductions .............................................. 1,803,697 4,895,266
Short-term trading fee ........................................................ -- --
Expenses offset ............................................................... (1,453) (22,002)
Expenses reimbursed ........................................................... -- (2,602,886)
--------- ----------
Net Expenses .................................................................. 1,802,244 2,270,378
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ........................................................... 8,226,289 38,271,461
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) from:
Securities .................................................................... 13,569 2,317
Foreign currency transactions ................................................. -- --
------ -----
Net realized gain (loss) ...................................................... 13,569 2,317
------ -----
Net change in unrealized appreciation (depreciation) of:
Investments ................................................................... -- --
Other assets and liabilities denominated in foreign currencies ................ -- --
------ -----
Net unrealized appreciation (depreciation) .................................... -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments ................................. 13,569 2,317
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................................................. $ 8,239,858 $ 38,273,778
============ ============
See accompanying notes to financial statements.
- -94-
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
Near-Term All American
Tax Free Tax Free Income Equity
Income:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends ...................................................... $ -- $ -- $ 331,220 $ 355,826
Foreign taxes withheld on dividends ............................ -- -- (1,224) (566)
Net dividends .................................................. -- -- 329,996 355,260
Interest and other ............................................. 374,262 1,104,891 50,382 218,438
------- --------- ------ -------
Total Income ................................................... 374,262 1,104,891 380,378 573,698
------- --------- ------- -------
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Management fee ................................................. 38,905 151,408 77,558 215,983
Transfer agent fees and expenses ............................... 10,212 32,203 39,911 83,096
Accounting service fees and expenses ........................... 38,595 41,495 44,074 45,701
Legal and professional fees .................................... 12,513 16,483 13,594 23,659
Custodian fees ................................................. 13,758 16,395 11,957 25,611
Shareholder reporting .......................................... 1,685 4,259 5,823 20,869
Registration fees .............................................. 14,672 15,126 13,214 26,653
Trustee's fees and expenses .................................... 6,890 7,863 8,578 8,241
Interest Expense ............................................... -- -- 108 834
Miscellaneous .................................................. 4,997 8,453 6,284 11,788
----- ----- ----- ------
Total expenses before reductions ............................... 142,227 293,685 221,101 462,435
Short-term trading fee ......................................... -- -- (108) (834)
Expenses offset ................................................ -- (318) (154) (665)
Expenses reimbursed ............................................ (88,120) (152,658) -- (182,729)
------- -------- --------
Net Expenses ................................................... 54,107 140,709 220,839 278,207
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ............................................ 320,155 964,182 159,539 295,491
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) from:
Securities ..................................................... 19,843 117,574 775,019 1,150,496
Foreign currency transactions .................................. -- -- -- --
------ ------- ------- ---------
Net realized gain (loss) ....................................... 19,843 117,574 775,019 1,150,496
------ ------- ------- ---------
Net change in unrealized appreciation (depreciation) of:
Investments .................................................... 111,972 407,090 1,282,975 5,567,709
Other assets and liabilities denominated in foreign currencies . -- -- -- --
------- ------- --------- ---------
Net unrealized appreciation (depreciation) ..................... 111,972 407,090 1,282,975 5,567,709
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments .................. 131,815 524,664 2,057,994 6,718,205
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations ............................................... $ 451,970 $ 1,488,846 $ 2,217,533 $ 7,013,696
=========== =========== =========== ===========
- -95-
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
Real Estate China Region
Opportunity
NET INVESTMENT INCOME
Income:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends .............................................................................. $ 544,043 $ 805,704
Foreign taxes withheld on dividends ........................................... (3,930) (6,490)
------ ------
Net dividends ................................................................. 540,113 799,214
Interest and other ............................................................ 40,269 144,912
------ -------
Total Income .................................................................. 580,382 944,126
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Management fee ................................................................ 108,227 385,682
Transfer agent fees and expenses .............................................. 55,825 181,088
Accounting service fees and expenses .......................................... 41,088 75,559
Legal and professional fees ................................................... 18,530 26,812
Custodian fees ................................................................ 16,586 68,148
Shareholder reporting ......................................................... 13,897 34,148
Registration fees ............................................................. 16,158 22,991
Trustee's fees and expenses ................................................... 8,930 10,981
Interest expense .............................................................. 3,493 240
Miscellaneous ................................................................. 7,178 16,677
----- ------
Total expenses before reductions .............................................. 289,912 822,326
Short-term trading fee ........................................................ (3,493) (240)
Expenses offset ............................................................... (2,210) (561)
Expenses reimbursed ........................................................... -- --
----- ------
Net Expenses .................................................................. 284,209 821,525
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ........................................................... 296,173 122,601
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) from:
Securities .................................................................... 2,415,288 (356,896)
Foreign currency transactions ................................................. (4,777) (296)
------ ----
Net realized gain (loss) ...................................................... 2,410,511 (357,192)
--------- --------
Net change in unrealized appreciation (depreciation) of:
Investments ................................................................... (2,358,338) (19,975,309)
Other assets and liabilities denominated in foreign currencies (116) 28,866
---- ------
Net unrealized appreciation (depreciation) .................................... (2,358,454) (19,946,443)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments ................................. 52,057 (20,303,635)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations .............................................................. $ 348,230 $(20,181,034)
============ ============
See accompanying notes to financial statements.
- -96-
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
Global Resources World Gold Gold Shares
Income:
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends .................................................................... $ 186,508 $ 1,200,201 $ 1,598,313
Foreign taxes withheld on dividends ................................. (5,094) (32,624) (17,112)
------ ------- -------
Net dividends ....................................................... 181,414 1,167,577 1,581,201
Interest and other .................................................. 77,060 427,577 948,843
------ ------- -------
Total Income ........................................................ 258,474 1,595,154 2,530,044
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Management fee ...................................................... 295,610 1,521,454 616,410
Transfer agent fees and expenses .................................... 207,617 647,285 1,015,249
Accounting service fees and expenses ................................ 63,670 166,194 86,568
Legal and professional fees ......................................... 29,278 94,186 57,334
Custodian fees ...................................................... 37,912 65,999 90,160
Shareholder reporting ............................................... 31,773 81,274 131,670
Registration fees ................................................... 18,931 39,792 43,810
Trustee's fees and expenses ......................................... 10,827 19,415 16,032
Interest expense .................................................... 2,118 3,523 163,315
Miscellaneous ....................................................... 20,707 89,293 34,525
------ ------ ------
Total expenses before reductions .................................... 718,443 2,728,415 2,255,073
Short-term trading fee .............................................. (2,118) (3,523) (163,315)
Expenses offset ..................................................... (10,028) (3,486) (4,635)
Expenses reimbursed ................................................. -- -- --
------ ------ ------
Net Expenses ........................................................ 706,297 2,721,406 2,087,123
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ................................................. (447,823) (1,126,252) 442,921
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) from:
Securities .......................................................... (383,372) (5,450,086) (51,656,162)
Foreign currency transactions ....................................... (50,365) (168,331) (244,552)
------- -------- --------
Net realized gain (loss) ............................................ (433,737) (5,618,417) (51,900,714)
-------- ---------- -----------
Net change in unrealized appreciation (depreciation) of:
Investments ......................................................... (8,934,752) (60,616,853) 18,658,835
Other assets and liabilities denominated in foreign currencies ...... (212) 55,190 (35,833)
---- ------ -------
Net unrealized appreciation (depreciation) .......................... (8,934,964) (60,561,663) 18,623,002
- -----------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments ....................... (9,368,701) (66,180,080) (33,277,712)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations .................................................... $ (9,816,524) $(67,306,332) $(32,834,791)
============ ============ ============
</TABLE>
- -97-
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
U.S. Treasury Securities Cash Fund
June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................................. $ 8,226,289 $ 6,979,897
Net realized gain (loss) ................................................. 13,569 --
Net unrealized appreciation (depreciation) ............................... -- --
------- -------
Net increase (decrease) in net assets from
investment operations .................................................... 8,239,858 6,979,897
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ............................................... (8,231,765) (6,979,895)
In excess of net investment income ....................................... -- --
From net capital gains ................................................... -- --
In excess of net capital gains ........................................... -- --
------- -------
Total distributions to shareholders ...................................... (8,231,765) (6,979,895)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold ................................................ 3,497,365,077 4,905,311,931
Distributions reinvested ................................................. 8,105,535 6,949,861
Paid-in capital portion of short-term trading fee ........................ -- --
------- -------
3,505,470,612 4,912,261,792
Cost of shares redeemed .................................................. (3,587,939,550) (4,869,223,284)
-------------- --------------
Net increase (decrease) in net assets
from capital share transactions .......................................... (82,468,938) 43,038,508
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .................................... (82,460,845) 43,038,510
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ........................................................ 231,882,231 188,843,721
- -----------------------------------------------------------------------------------------------------------------------------------
End of year .............................................................. $ 149,421,386 $ 231,882,231
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ......................... $ 46,687 $ 52,163
--------------- ---------------
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 3,497,366,478 4,905,311,902
Shares reinvested ........................................................ 8,105,535 6,949,861
Shares redeemed .......................................................... (3,587,939,550) (4,869,221,951)
-------------- --------------
Net share activity ....................................................... $ (82,467,537) $ 43,039,812
=============== ===============
See accompanying notes to financial statements.
- -98-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
U.S. Government Securities Savings Near-Term Tax Free Fund
June 30, 1998 June 30,1997 June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ........................... $ 38,271,461 $ 33,135,180 $ 320,155 $ 301,963
Net realized gain (loss) ............................... 2,317 9,340 19,843 9,354
Net unrealized appreciation (depreciation) ............. -- -- 111,972 52,103
------- ------- ------- ------
Net increase (decrease) in net assets from
investment operations .................................. 38,273,778 33,144,520 451,970 363,420
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ............................. (38,322,248) (33,144,634) (347,902) (301,300)
In excess of net investment income ..................... -- -- -- --
From net capital gains ................................. -- -- -- --
In excess of net capital gains ......................... -- -- -- --
------- ------- ------- ------
Total distributions to shareholders .................... (38,322,248) (33,144,634) (347,902) (301,300)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .............................. 714,492,554 649,752,926 3,145,125 4,278,905
Distributions reinvested ............................... 37,764,547 33,129,743 284,226 243,513
Paid-in capital portion of short-term trading fee ...... -- -- -- --
------- ------- ------- ------
752,257,101 682,882,669 3,429,351 4,522,418
Cost of shares redeemed ................................ (682,460,358) (579,521,813) (2,831,915) (3,769,377)
------------ ------------ ---------- ----------
Net increase (decrease) in net assets
from capital share transactions ........................ 69,796,743 103,360,856 597,436 753,041
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .................. 69,748,273 103,360,742 701,504 815,161
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ...................................... 691,769,305 588,408,563 7,359,955 6,544,794
- -----------------------------------------------------------------------------------------------------------------------------------
End of year ............................................ $ 761,517,578 $ 691,769,305 $ 8,061,459 $ 7,359,955
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ....... $ 1,650,857 $ 1,667,229 $ 5,774 $ 33,511
------------- ------------- ------------- -------------
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ............................................ 714,490,615 649,751,804 295,052 408,508
Shares reinvested ...................................... 37,764,547 33,129,743 26,711 23,316
Shares redeemed ........................................ (682,460,358) (579,521,813) (265,953) (360,674)
------------ ------------ -------- --------
Net share activity ..................................... 69,794,804 103,359,734 55,810 71,150
========== =========== ====== ======
- -99-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C>
Tax Free Fund
June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................................. $ 964,182 $ 941,518
Net realized gain (loss) ..................................................... 117,574 (38,538)
Net unrealized appreciation (depreciation) ................................... 407,090 534,837
------- -------
Net increase (decrease) in net assets from
investment operations ........................................................ 1,488,846 1,437,817
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ................................................... (997,172) (938,596)
In excess of net investment income ........................................... -- --
From net capital gains ....................................................... -- --
In excess of net capital gains ............................................... -- --
------- -------
Total distributions to shareholders .......................................... (997,172) (938,596)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .................................................... 9,840,352 9,028,653
Distributions reinvested ..................................................... 784,777 760,035
Paid-in capital portion of short-term trading fee ............................ -- --
------- -------
10,625,129 9,788,688
Cost of shares redeemed ...................................................... (8,044,567) (11,909,505)
---------- -----------
Net increase (decrease) in net assets
from capital share transactions .............................................. 2,580,562 (2,120,817)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ........................................ 3,072,236 (1,621,596)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ............................................................ 18,327,407 19,949,003
- -----------------------------------------------------------------------------------------------------------------------------------
End of year .................................................................. $ 21,399,643 $ 18,327,407
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ............................. $ 4,095 $ 37,085
------------ ------------
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................................. 808,610 768,737
Shares reinvested ............................................................ 64,542 64,725
Shares redeemed .............................................................. (661,154) (1,014,702)
-------- ----------
Net share activity ........................................................... 211,998 (181,240)
======= ========
See accompanying notes to financial statements.
- -100-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C> <C> <C>
Income Fund All American Equity Fund
June 30, 1998 June 30,1997 June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................... $ 159,539 $ 203,475 $ 295,491 $ 269,627
Net realized gain (loss) ................................... 775,019 1,752,977 1,150,496 281,397
Net unrealized appreciation (depreciation) ................. 1,282,975 (593,053) 5,567,709 4,872,127
--------- -------- --------- ---------
Net increase (decrease) in net assets from
investment operations ...................................... 2,217,533 1,363,399 7,013,696 5,423,151
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ................................. (182,284) (173,113) (294,531) (291,937)
In excess of net investment income ......................... -- -- (21,819) --
From net capital gains ..................................... (1,415,785) (1,400,898) (507,110) (511,031)
In excess of net capital gains ............................. -- -- -- --
--------- -------- --------- ---------
Total distributions to shareholders ........................ (1,598,069) (1,574,011) (823,460) (802,968)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .................................. 5,132,257 2,905,625 26,967,395 16,746,661
Distributions reinvested ................................... 1,417,432 1,473,596 770,612 759,303
Paid-in capital portion of short-term trading fee .......... 3,516 -- 12,410 113
----- ------ ------ ---
6,553,205 4,379,221 27,750,417 17,506,077
Cost of shares redeemed .................................... (5,650,697) (4,251,783) (24,748,051) (11,868,167)
---------- ---------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions ............................ 902,508 127,438 3,002,366 5,637,910
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ...................... 1,521,972 (83,174) 9,192,602 10,258,093
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year .......................................... 9,614,849 9,698,023 25,478,372 15,220,279
- -----------------------------------------------------------------------------------------------------------------------------------
End of year ................................................ $ 11,136,821 $ 9,614,849 $ 34,670,974 $ 25,478,372
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ........... $ (2,236) $ 20,508 $ (16,211) $ (960)
------------ ------------ ------------ ------------
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ................................................ 337,095 203,876 781,985 595,950
Shares reinvested .......................................... 104,459 110,120 22,147 28,750
Shares redeemed ............................................ (378,119) (299,586) (723,425) (431,873)
-------- -------- -------- --------
Net share activity ......................................... 63,435 14,410 80,707 192,827
====== ====== ====== =======
</TABLE>
- -101-
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C>
Real Estate Fund
June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................................. $ 296,173 $ 427,610
Net realized gain (loss) ..................................................... 2,410,511 1,242,646
Net unrealized appreciation (depreciation) ................................... (2,358,454) 1,659,405
---------- ---------
Net increase (decrease) in net assets from
investment operations ........................................................ 348,230 3,329,661
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ................................................... (407,325) (342,360)
In excess of net investment income ........................................... -- --
From net capital gains ....................................................... (368,775) --
In excess of net capital gains ............................................... -- --
---------- ---------
Total distributions to shareholders .......................................... (776,100) (342,360)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .................................................... 10,993,821 30,297,759
Distributions reinvested ..................................................... 739,094 324,421
Paid-in capital portion of short-term trading fee ............................ 127 3,697
--- -----
11,733,042 30,625,877
Cost of shares redeemed ...................................................... (13,833,733) (27,936,336)
----------- -----------
Net increase (decrease) in net assets
from capital share transactions .............................................. (2,100,691) 2,689,541
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ........................................ (2,528,561) 5,676,842
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ............................................................ 13,896,856 8,220,014
- -----------------------------------------------------------------------------------------------------------------------------------
End of year .................................................................. $ 11,368,295 $ 13,896,856
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ............................. $ (10,555) $ 105,364
============ ============
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................................. 709,555 2,314,927
Shares reinvested ............................................................ 49,283 23,230
Shares redeemed .............................................................. (904,995) (2,110,101)
-------- ----------
Net share activity ........................................................... (146,157) 228,056
======== =======
See accompanying notes to financial statements.
- -102-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C> <C> <C>
China Region Opportunity Fund Global Resources Fund
June 30, 1998 June 30,1997 June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................... $ 122,601 $ 243,278 $ (447,823) $ (214,044)
Net realized gain (loss) ................................... (357,192) 631,700 (433,737) 923,955
Net unrealized appreciation (depreciation) ................. (19,946,443) 7,293,867 (8,934,964) 3,708,651
----------- --------- ---------- ---------
Net increase (decrease) in net assets from
investment operations ...................................... (20,181,034) 8,168,845 (9,816,524) 4,418,562
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ................................. (207,619) (92,833) -- (142,583)
In excess of net investment income ......................... -- -- -- (3,778)
From net capital gains ..................................... -- -- (160,639) (3,293,334)
In excess of net capital gains ............................. -- -- (3,620,754) --
--------- --------- ---------- ---------
Total distributions to shareholders ........................ (207,619) (92,833) (3,781,393) (3,439,695)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .................................. 36,040,287 34,873,032 29,416,915 27,452,394
Distributions reinvested ................................... 198,979 89,879 3,469,677 3,089,881
Paid-in capital portion of short-term trading fee .......... 263,326 144,774 22,484 10,465
------- ------- ------ ------
36,502,592 35,107,685 32,909,076 30,552,740
Cost of shares redeemed .................................... (38,753,107) (22,051,958) (30,336,586) (26,082,216)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from capital share transactions ............................ (2,250,515) 13,055,727 2,572,490 4,470,524
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ...................... (22,639,168) 21,131,739 (11,025,427) 5,449,391
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year .......................................... 42,099,013 20,967,274 29,983,369 24,533,978
- -----------------------------------------------------------------------------------------------------------------------------------
End of year ................................................ $ 19,459,845 $ 42,099,013 $ 18,957,942 $ 29,983,369
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ........... $ 119,508 $ 204,822 $ (50,365) $ (212)
============ ============ ============ ============
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold ................................................ 5,562,694 4,590,966 3,859,064 3,747,347
Shares reinvested .......................................... 34,307 14,132 580,214 436,424
Shares redeemed ............................................ (5,740,651) (2,966,726) (4,286,561) (3,609,089)
---------- ---------- ---------- ----------
Net share activity ......................................... (143,650) 1,638,372 152,717 574,682
======== ========= ======= =======
</TABLE>
- -103-
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C>
World Gold Fund
June 30, 1998 June 30,1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ................................................. $ (1,126,252) $ (1,434,880)
Net realized gain (loss) ..................................................... (5,618,417) 9,541,590
Net unrealized appreciation (depreciation) ................................... (60,561,663) (58,479,164)
----------- -----------
Net increase (decrease) in net assets from
investment operations ........................................................ (67,306,332) (50,372,454)
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ................................................... -- (13,061,240)
In excess of net investment income ........................................... (1,637,556) --
From net capital gains ....................................................... -- --
In excess of net capital gains ............................................... -- --
----------- -----------
Total distributions to shareholders .......................................... (1,637,556) (13,061,240)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold .................................................... 735,521,254 525,463,040
Distributions reinvested ..................................................... 1,481,375 12,024,924
Paid-in capital portion of short-term trading
fee .......................................................................... 1,423,972 823,646
--------- -------
738,426,601 538,311,610
Cost of shares redeemed ...................................................... (707,189,284) (536,193,421)
------------ ------------
Net increase (decrease) in net assets
from capital share transactions .............................................. 31,237,317 2,118,189
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS ........................................ (37,706,571) (61,315,505)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ............................................................ 187,465,885 248,781,390
- -----------------------------------------------------------------------------------------------------------------------------------
End of year .................................................................. $ 149,759,314 $ 187,465,885
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ............................. $ (168,311) $ 500,641
============= =============
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................................. 61,013,502 26,738,670
Shares reinvested ............................................................ 132,859 627,606
Shares redeemed .............................................................. (57,712,475) (27,393,631)
----------- -----------
Net share activity ........................................................... 3,433,886 (27,355)
========= =======
See accompanying notes to financial statements.
- -104-
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED
<S> <C> <C>
Gold Shares fund
June 30, 1998 June 30, 1997
INCREASE (DECREASE) IN NET ASSETS
From investment operations:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) ............................................. $ 442,921 $ 4,191,765
Net realized gain (loss) ................................................. (51,900,714) (43,691,058)
Net unrealized appreciation (depreciation) ............................... 18,623,002 (23,588,796)
---------- -----------
Net increase (decrease) in net assets from
investment operations .................................................... (32,834,791) (63,088,089)
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income ............................................... (1,269,718) (5,265,799)
In excess of net investment income ....................................... (131,682) --
From net capital gains ................................................... -- --
In excess of net capital gains ........................................... -- --
---------- -----------
Total distributions to shareholders ...................................... (1,401,400) (5,265,799)
From capital share transactions:
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold ................................................ 2,855,272,222 4,140,600,024
Distributions reinvested ................................................. 1,265,832 4,884,235
Paid-in capital portion of short-term trading
fee ...................................................................... 6,755,275 9,317,558
--------- ---------
2,863,293,329 4,154,801,817
Cost of shares redeemed .................................................. (2,862,329,383) (4,160,764,515)
-------------- --------------
Net increase (decrease) in net assets
from capital share transactions .......................................... 963,946 (5,962,698)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS .................................... (33,272,245) (74,316,586)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of year ........................................................ 79,522,794 153,839,380
- -----------------------------------------------------------------------------------------------------------------------------------
End of year .............................................................. $ 46,250,549 $ 79,522,794
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income, end of year ......................... $ (177,162) $ 826,797
=============== ===============
Capital Share Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .............................................................. 441,295,800 289,710,280
Shares reinvested ........................................................ 222,076 412,569
Shares redeemed .......................................................... (437,784,893) (290,003,375)
------------ ------------
Net share activity ....................................................... 3,732,983 119,475
========= =======
</TABLE>
- -105-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
U.S. Global Investors Funds (the "Trust") is organized as a Massachusetts
business trust, consisting of eleven separate funds (the "Funds"), as follows:
U.S. Treasury Securities Cash, U.S. Government Securities Savings, Near-Term Tax
Free, Tax Free, Income, All American Equity, Real Estate, China Region Opportun-
ity, Global Resources, World Gold and Gold Shares. Prior to July 1, 1998, Near-
Term Tax Free, Tax Free, Income, All American Equity, Real Estate, Global
Resources, World Gold and Gold Shares were known as United Services Near-Term
Tax Free, U.S.Tax Free, U.S. Income, U.S. All American Equity, U.S. Real Estate,
U.S. Global Resources, U.S. World Gold and U.S. Gold Shares, respectively. The
Trust is a diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles.
A. SECURITY VALUATIONS
The Funds value investments traded on national or international securities
exchanges or over-the-counter at the last sales price reported by the security's
primary exchange at the time of daily valuation. Securities for which no sale
was reported are valued at the mean between the last reported bid and asked
prices or using quotes provided by principal market makers. Short-term
investments with effective maturities of sixty days or less at the date of
purchase and investments of U.S. Treasury Securities Cash and U.S. Government
Securities Savings Funds are valued at amortized cost, which approximates market
value. An independent pricing service values municipal securities and long-term
U.S. Government obligations using a system based on such factors as credit
rating, maturity, coupon and type of security to determine fair value.
B. FAIR VALUED SECURITIES
Securities for which market quotations are not readily available or which are
subject to legal restrictions are valued at their fair value as determined in
good faith under consistently applied procedures under the general supervision
of the Board of Trustees. The following factors are considered in determining
fair value: nature and duration of restrictions, trading volume, market values
of unrestricted shares of the same or similar class, investment management's
judgment regarding the market experience of the issuer, financial status and
other operational and market factors affecting the issuer, issuer's management,
quality of the underlying property based on review of independent geological
studies, the extent of the Fund's investment in the trading securities of the
issuer; and other relevant matters. The fair values may differ from what would
have been used had a broader market for these securities existed.
- -106-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
C. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Realized gains and losses
from security transactions are determined on an identified-cost basis. Dividend
income is recorded on the ex-dividend date or, for certain foreign securities,
when the information becomes available to the Funds. Interest income, which may
include original issue discount, is recorded on an accrual basis. Discounts and
premiums on securities purchased are accreted and amortized, respectively, on
the same basis as used for federal tax reporting.
The Funds may purchase securities on a when-issued or delayed-delivery basis and
segregate on their books liquid assets to collateralize the obligation until
settlement. The investment is accounted for in the same manner as marketable
portfolio securities.
D. REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with recognized financial
institutions or registered broker-dealers and, in all instances, hold, as
collateral underlying securities with a value exceeding the total repurchase
price, including accrued interest. The Funds use joint tri-party repurchase
agreements with other Funds under common management where uninvested cash is
collectively invested in repurchase agreements, and each participating Fund owns
an undivided interest in the account.
E. OPTIONS
Some Funds may write or purchase options on securities to manage their exposure
to stock or commodity markets as well as fluctuations in interest and currency
conversion rates. Written options include a risk of loss in excess of the option
premium. The use of options carries the risks of a change in value of the
underlying instruments, an illiquid secondary market, or that the counterparty
fails to perform its obligations. The option premium is the basis for
recognition of unrealized or realized gain or loss on the option. The cost of
securities acquired or the proceeds from securities sold through the exercise of
the option is adjusted by the amount of the premium.
<TABLE>
<S> <C> <C> <C> <C>
World Gold Fund Gold Shares Fund
- --------------------------------------------------------------------------------
Number of Premiums Number of Premiums
Contracts Paid Contracts Paid
Options outstanding at
July 1, 1997 -- -- -- --
Options purchased .... 591,400 $ 7,449,876 103,300 $7,003,700
Options sold ......... (539,500) (6,340,800) (102,100) (6,169,150)
Options expired ...... (51,000) (722,626) -- --
------- -------- ------- --------
Options outstanding at
June 30, 1998 900 $ 386,450 1,200 $ 834,550
--- ----------- ----- ----------
</TABLE>
- -107-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
F. FOREIGN CURRENCY TRANSACTIONS
Some Funds may invest in securities of foreign issuers. The accounting records
of these Funds are maintained in U.S. dollars. At each net asset value determin-
ation date, the value of assets and liabilities denominated in foreign
currencies are translated into U.S. dollars using the current exchange rate.
Security transactions, income and expenses are converted to U.S. dollars at the
prevailing rate of exchange on the date of the event. The effect of changes in
foreign exchange rates on foreign denominated securities is included with the
net realized and unrealized gain or loss on securities. Other foreign currency
gains or losses are reported separately.
G. FEDERAL INCOME TAXES
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of their taxable income to shareholders. Accordingly, no provision for federal
income taxes is required.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Funds record dividends and distributions to shareholders on the ex- dividend
date. Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. Accordingly,
periodic reclassifications are made within the Funds' capital accounts to
reflect income and gains available for distribution under income tax
regulations. Reclassifications were made within the equity accounts of the funds
to reflect permanent differences between financial and tax accounting. The
permanent differences were primarily the result of expiration of capital loss
carry forwards, classification of gains from passive foreign investment
companies, treatment of partnership investments, utilization of net operating
loss and other tax characteristics of earnings or distributions.
The Funds make distributions at least annually. The U.S. Treasury Securities
Cash and U.S. Government Securities Savings Funds accrue dividends, including
short-term gains or losses, on a daily basis with payment monthly. Tax Free and
Near-Term Tax Free pay monthly dividends. All American Equity and Income pay
quarterly dividends. Dividends and distributions payable at period end were
processed for reinvestment on the following business day.
I. EXPENSES
Each Fund bears expenses incurred specifically on its behalf plus an allocation
of its share of Trust level expenses. Short-term trading fees collected from
temporary investors in the Funds are applied as a reduction of expenses to the
extent of such related costs; any excess is credited as paid-in capital. Expense
offset arrangements have been made with the Funds' custodian so the custodian
fees are paid indirectly by credits earned on the Funds' cash balances. Such
deposit arrangements are an alternative to overnight investments.
- -108-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
J. USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contin-
gent assets and liabilities at the date of the financial statements and the re-
ported amounts of income and expenses during the reporting period.Actual results
could differ from those estimates.
NOTE 2: RELATED PARTY TRANSACTIONS
U.S. Global Investors, Inc. (the "Manager"), under an investment advisory
agreement with the Trust in effect through October 31, 1998, furnishes
management and investment advisory services and, subject to the supervision of
the Trustees, directs the investments of each Fund according to its investment
objectives, policies and limitations. The Manager also furnishes all necessary
office facilities, business equipment and personnel for administering the
affairs of the Trust. Frank E. Holmes, a trustee of the Funds, is the
controlling owner of the Manager.
For the services of the Manager, each Fund pays a management fee based upon its
net assets. Fees are accrued daily and paid monthly. The contractual management
fee for each Fund is:
<TABLE>
<S> <C>
Annual Percentage of
Fund Average Daily Net Assets
- --------------------------------------------------------------------------------
Gold Shares, All American .75% of the first $250,000,000 and
Equity, Income, Tax Free and .50% of the excess
Real Estate
U.S. Treasury Securities Cash and .50% of the first $250,000,000 and
U.S. Government Securities Savings .375% of the excess
World Gold and Global Resources 1% of the first $250,000,000 and
.50% of the excess
Near-Term Tax Free .50%
China Region Opportunity 1.25%
</TABLE>
The Manager has voluntarily agreed to reimburse specific Funds so that their
total operating expenses will not exceed certain annual percentages of average
net assets. The expenses for the year ended June 30, 1998, were voluntarily
limited as follows: All American Equity at 1.00%, Tax Free and Near-Term Tax
Free at .70% and U.S. Government Securities Savings at .40%.
- -109-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
United Shareholder Services, Inc. ("USSI"), a wholly-owned subsidiary of the
Manager, is transfer agent for the Funds. Each Fund pays an annual fee based on
number of shareholder accounts for transfer agency services. Certain account
fees are paid directly by shareholders to the transfer agent, which, in turn,
reduces its charges to the Funds. For maintaining the books and records of the
Funds and calculating the daily net asset values, USSI was paid a fee based on
Fund net assets subject to a minimum fee. For the period from July 1, 1997 to
October 31, 1997, USSI was paid $353,796 for performing such accounting duties.
Effective, November 1, 1997, the Funds changed to Brown Brothers Harriman & Co.
as the new custodian, fund accounting and administration service agent with a
fee structure based on average net assets. Additionally, the Manager is
reimbursed at cost for in-house legal services pertaining to each fund.
During the year ended June 30, 1998, A & B Mailers, Inc., a wholly-owned
subsidiary of the Manager, was paid $439,812 for mailing services provided to
the Funds.
The five independent Trustees receive $16,000 annually as compensation for
serving on the Board, plus $2,000 per meeting. The Chairman and members of
special committees receive additional compensation ranging from $1,500 to
$14,000. Trustees are also reimbursed for out-of-pocket expenses incurred while
attending meetings.
NOTE 3: INVESTMENT ACTIVITY
Purchases and sales of long-term securities for the year ended June 30, 1998 are
summarized as follows:
<TABLE>
<S> <C> <C>
Fund Purchases Sales
- --------------------------------------------------------------------------------
Near-Term Tax Free ..................... $ 4,655,747 $ 2,843,595
Tax Free ............................... 13,185,980 9,760,411
Income ................................. 2,821,634 3,183,050
All American Equity .................... 8,291,736 5,952,387
Real Estate ............................ 12,815,962 17,102,763
China Region Opportunity ............... 6,203,383 4,716,213
Global Resources ....................... 53,160,097 59,629,307
World Gold ............................. 63,191,324 75,189,968
Gold Shares ............................ 157,342,517 174,082,178
</TABLE>
U.S. Treasury Securities Cash and U.S. Government Securities Savings held only
short-term investments. The Funds neither purchased nor sold long-term U.S.
government securities during the year.
- -110-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
Investments in foreign issuers as a percent of total investments at June 30,
1998 were: 14% of Real Estate, 97% of China Region Opportunity, 38% of Global
Resources, 73% of World Gold and 60% of Gold Shares.
The following table presents the income tax basis of the securities owned at
June 30, 1998 and the tax basis components of net unrealized appreciation or
depreciation:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross Net unrealized
Aggregate unrealized unrealized appreciation
Fund cost appreciation depreciation (depreciation)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities Cash .................... $182,596,971 $ -- $ -- $ --
U.S. Government Securities Savings ............... 756,012,969 -- -- --
Near-Term Tax Free ............................... 7,793,768 137,475 (6,866) 130,609
Tax Free ......................................... 20,338,470 776,579 (21,842) 754,737
Income ........................................... 8,651,105 2,461,766 (98,479) 2,363,287
All American Equity .............................. 19,875,047 14,619,408 (134,977) 14,484,431
Real Estate ...................................... 11,157,475 177,142 (378,810) (201,668)
China Region Opportunity ......................... 31,983,221 747,471 (14,988,283) (14,240,812)
Global Resources ................................. 22,520,735 462,745 (4,231,620) (3,768,875)
World Gold ....................................... 148,281,022 17,801,541 (47,527,979) (29,726,438)
Gold Shares ...................................... 53,825,379 -- (16,576,363) (16,576,363)
</TABLE>
Net realized capital loss carryforwards, for federal income tax purposes, may be
used to offset current or future capital gains until expiration. The loss
carryforwards and related expiration dates for each Fund, as of June 30, 1998,
are as follows:
<TABLE>
<S> <C> <C>
Loss Expiration
Fund Carryforwards Date
- --------------------------------------------------------------------------------
U.S. Government Securities Savings .......... $ 1,770,341 1999-2005
Near-Term Tax Free .......................... 210,277 2003-2004
Tax Free .................................... 67,031 2003-2005
China Region Opportunity .................... 4,414,198 2004-2005
World Gold .................................. 38,427,707 1999-2001
Gold Shares ................................. 150,363,949 1999-2006
</TABLE>
Gold Shares and Global Resources had post-October 31, 1997 capital losses of
$41,112,377 and $4,520,984 and currency loss deferral of $244,552 and $50,365,
respectively which, in accordance with tax rules, are deemed to have occurred on
July 1, 1998.
- -111-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
NOTE 4: RISKS OF CONCENTRATIONS
China Region Opportunity may be exposed to risks not typically associated with
investments in the United States, due to investments in foreign issuers in the
region. These investments present risks resulting from disruptive political or
economic conditions and the possible imposition of adverse governmental laws or
currency exchange restrictions affecting the area.
NOTE 5: CAPITAL STOCK
On May 22, 1998, the Trustees declared a 1-for-10 reverse stock split with an
effective date of July 1, 1998 for the shareholders of the Gold Shares Fund. All
capital share activity and per share data for the Gold Shares Fund have been
restated to reflect the reverse stock split.
NOTE 6: REVOLVING DEMAND NOTES
On November 6, 1997. each of the Funds entered into revolving demand notes with
Brown Brothers Harriman & Co. as denoted below subject to the borrowing limits
as set forth in the Funds' registration statement. These notes are
collateralized by any or all of the securities held by Brown Brothers Harriman &
Co. as the Funds' custodian. Borrowings under these notes will be charged
interest at the current overnight Federal Funds Rate plus 1.75%. There were no
borrowings under the revolving demand notes at June 30, 1998.
<TABLE>
<S> <C>
Fund Amount Available Under Revolving Demand Note
- --------------------------------------------------------------------------------
U.S. Treasury Securities Cash ........................... $ 30,000,000
U.S. Government Security Savings ........................ 30,000,000
Near-Term Tax Free ...................................... 5,000,000
Tax Free ................................................ 5,000,000
Income .................................................. 5,000,000
All American Equity ..................................... 5,000,000
Real Estate ............................................. 5,000,000
China Region Opportunity ................................ 5,000,000
Global Resources ........................................ 5,000,000
World Gold .............................................. 15,000,000
Gold Shares ............................................. 100,000,000
</TABLE>
- -112-
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
NOTE 7: SHARES OF BENEFICIAL INTEREST
At June 30, 1998, individual shareholders holding more than 5% of outstanding
shares comprised 19.27% of the Near-Term Tax Free Fund.
NOTE 8: Litigation
In April 1998,a single investor who purchased shares of China Region Opportunity
Fund filed a suit against the Trust alleging that their investment in the Fund
was not processed at the correct net asset value per share resulting in damages
to the investor. The Trust denies the allegations in the complaint and intends
to vigorously defend the lawsuit. The probability of an unfavorable outcome of
this matter to the Trust and range of potential loss is not determinable
as this matter is still under investigation.
- -113-
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. TREASURY SECURITIES CASH FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income ..................... .04 .04 .04 .04 .02
Net realized and unrealized gain (loss) ... -- -- -- -- --
-------------------------------------------------------------------------------
Total from investment activities .......... .04 .04 .04 .04 .02
-------------------------------------------------------------------------------
Distributions
From net investment income ................ (.04) (.04) (.04) (.04) (.02)
From net realized gains ................... -- -- -- -- --
-------------------------------------------------------------------------------
Total distributions ....................... (.04) (.04) (.04) (.04) (.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) .............. 4.55% 4.35% 4.54% 4.43% 2.38%
Ratios to Average Net Assets (a):
Net investment income ..................... 4.37% 4.22% 4.42% 4.32% 2.38%
Total expenses ............................ .96% 1.04% 1.03% .97% .96%
Expenses reimbursed or offset ............. -- -- -- -- (.03)%
Net expenses .............................. .96% 1.04% 1.03% .97% .93%
Net assets, end of year (in thousands) ............. $ 149,421 $ 231,882 $ 188,844 $ 190,373 $ 164,708
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -114-
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES SAVINGS FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income .................. .05 .05 .05 .05 .03
Net realized and unrealized gain (loss) -- -- -- (.01) --
-------------------------------------------------------------------------------
Total from investment activities ....... .05 .05 .05 .04 .03
-------------------------------------------------------------------------------
Distributions
From net investment income ............. (.05) (.05) (.05) (.05) (.03)
From net realized gains ................ -- -- -- -- --
-------------------------------------------------------------------------------
Total distributions .................... (.05) (.05) (.05) (.05) (.03)
Capital contribution by manager ................. -- -- -- .01 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ........... 5.38% 5.27% 5.34% 5.09%(b) 3.34%
Ratios to Average Net Assets(a):
Net investment income ........................... 5.25% 5.13% 5.28% 5.03% 3.34%
Total expenses ......................... .67% .70% .71% .68% .71%
Expenses reimbursed or offset .......... (.36)% (.41)% (.45)% (.45)% (.55)%
Net expenses ........................... .31% .29% .26% .23% .16%
Net assets, end of year (in thousands) .......... $ 761,518 $ 691,769 $ 588,409 $ 529,372 $ 610,229
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
(b) Total return includes the effect of a voluntary capital contribution by the
Manager; otherwise the return would have been 4.19%.
See accompanying notes to financial statements.
- -115-
<PAGE>
FINANCIAL HIGHLIGHTS
NEAR-TERM TAX FREE FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ...................... $ 10.49 $ 10.38 $ 10.47 $ 10.39 $ 10.74
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income .......................... .43 .48 .47 .45 .43
Net realized and unrealized gain (loss) ........ .19 .12 (.09) .06 (.21)
-------------------------------------------------------------------------------
Total from investment activities ............... .62 .60 .38 .51 .22
-------------------------------------------------------------------------------
Distributions
From net investment income ..................... (.47) (.49) (.47) (.43) (.44)
In excess of net investment income ............. -- -- -- -- (.07)
From net realized gains ........................ -- -- -- -- --
In excess of net realized gains ................ -- -- -- -- (.06)
-------------------------------------------------------------------------------
Total distributions ............................ (.47) (.49) (.47) (.43) (.57)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ............................ $ 10.64 $ 10.49 $ 10.38 $ 10.47 $ 10.39
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ................... 6.02% 5.85% 3.68% 5.02% 2.03%
Ratios to Average Net Assets (a):
Net investment income .......................... 4.12% 4.67% 4.41% 4.25% 4.34%
Total expenses ................................. 1.83% 1.92% 1.75% 1.62% 1.80%
Expenses reimbursed or offset .................. (1.13)% (1.52)% (1.23)% (1.42)% (1.80)%
Net expenses ................................... .70% .40% .52% .20% --
Portfolio turnover rate ................................. 39% 103% 83% 53% 69%
Net assets, end of year (in thousands) .................. $ 8,061 $ 7,360 $ 6,545 $ 7,128 $ 9,190
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -116-
<PAGE>
FINANCIAL HIGHLIGHTS
TAX FREE FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ...................... $ 11.89 $ 11.58 $ 11.55 $ 11.40 $ 12.16
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income .......................... .57 .59 .59 .64 .67
Net realized and unrealized gain (loss) ........ .33 .31 .01 .18 (.56)
-------------------------------------------------------------------------------
Total from investment activities ............... .90 .90 .60 .82 .11
-------------------------------------------------------------------------------
Distributions
From net investment income ..................... (.59) (.59) (.57) (.64 (.68)
In excess of net investment income ............. -- -- -- (.03 (.06)
From net realized gains ........................ -- -- -- -- (.06)
In excess of net realized gains ................ -- -- -- -- (.07)
-------------------------------------------------------------------------------
Total distributions ............................ (.59) (.59) (.57) (.67) (.87)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ............................ $ 12.20 $ 11.89 $ 11.58 $ 11.55 $ 11.40
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ................... 7.71% 7.93% 5.25% 7.51% .75%
Ratios to Average Net Assets (a):
Net investment income .......................... 4.77% 5.00% 5.06% 5.62% 5.68%
Total expenses ................................. 1.45% 1.46% 1.44% 1.49% 1.46%
Expenses reimbursed or offset .................. (.75)% (1.06)% (1.08) (1.27)% (1.46)%
Net expenses ................................... .70% .40% .36% .22% --
Portfolio turnover rate ................................. 49% 87% 69% 22% 51%
Net assets, end of year (in thousands) .................. $ 21,400 $ 18,327 $ 19,949 $ 18,613 $ 18,656
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -117-
<PAGE>
FINANCIAL HIGHLIGHTS
INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ....................... $ 14.49 $ 14.94 $ 13.35 $ 12.57 $ 14.06
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income ........................... .23 .31 .35 .35 .31
Net realized and unrealized gain (loss) ......... 2.84 1.77 1.84 .79 (1.06)
-------------------------------------------------------------------------------
Total from investment activities ................ 3.07 2.08 2.19 1.14 (.75)
-------------------------------------------------------------------------------
Distributions
From net investment income ...................... (.28) (.27) (.35) (.34) (.31)
In excess of net investment income .............. -- -- -- -- (.03)
From net realized gains ......................... (1.96) (2.26) (.25) (.02) (.01)
In excess of net realized gains ................. -- -- -- -- (.39)
-------------------------------------------------------------------------------
Total distributions ............................. (2.24) (2.53) (.60) (.36) (.74)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ............................. $ 15.32 $ 14.49 $ 14.94 $ 13.35 $ 12.57
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) .................... 23.92% 15.58% 16.60% 9.31% (5.83)%
Ratios to Average Net Assets (a):
Net investment income ........................... 1.54% 2.18% 2.45% 2.59% 2.27%
Total expenses .................................. 2.14% 2.20% 2.10% 2.01% 1.79%
Expenses reimbursed or offset ................... -- (.01)% (.02)% (.03)% (.05)%
Net expenses .................................... 2.14% 2.19% 2.08% 1.98% 1.74%
Portfolio turnover rate .................................. 29% 88% 51% 7% 7%
Net assets, end of year (in thousands) ................... $ 11,137 $ 9,615 $ 9,698 $ 10,230 $ 11,865
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -118-
<PAGE>
FINANCIAL HIGHLIGHTS
ALL AMERICAN EQUITY FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of the year .................. $ 31.34 $ 24.55 $ 20.08 $ 19.52 $ 20.60
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income .......................... .38 .38 .41 .44 .44
Net realized and unrealized gain (loss) ........ 8.06 7.64 4.44 2.68 (.75)
-------------------------------------------------------------------------------
Total from investment activities ............... 8.44 8.02 4.85 3.12 (.31)
-------------------------------------------------------------------------------
Distributions
From net investment income ..................... (.37) (.43) (.38) (.39) (.44)
In excess of net investment income ............. (.03) -- -- -- (.02)
From net realized gains ........................ (.58) (.80) -- -- (.31)
In excess of net realized gains ................ -- -- -- (2.17) --
-------------------------------------------------------------------------------
Total distributions ............................ (.98) (1.23) (.38) (2.56) (.77)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ............................ $ 38.80 $ 31.34 $ 24.55 $ 20.08 $ 19.52
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ................... 27.31% 33.68% 24.31% 17.98% (1.67)%
Ratios to Average Net Assets (a):
Net investment income .......................... 1.03% 1.51% 1.84% 2.33% 2.11%
Total expenses ................................. 1.61% 1.81% 1.90% 2.17% 2.08%
Expenses reimbursed or offset .................. (.64)% (1.14)% (1.22)% (1.47)% (1.47)%
Net expenses ................................... .97% .67% .68% .70% .61%
Portfolio turnover rate ................................. 24% 7% 16% 97% 117%
Net assets, end of year (in thousands) .................. $ 34,671 $ 25,478 $ 15,220 $ 11,931 $ 10,227
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -119-
<PAGE>
FINANCIAL HIGHLIGHTS
REAL ESTATE FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998* 1997 1996 1995 1994
Net asset value, beginning of year ........................ $ 14.22 $ 10.97 $ 9.80 $ 9.86 $ 10.96
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income ............................ .27 .40 .42 .23 .22
Net realized and unrealized gain (loss) .......... .03 3.15 1.27 (.13) (1.05)
-------------------------------------------------------------------------------
Total from investment activities ................. .30 3.55 1.69 .10 (.83)
-------------------------------------------------------------------------------
Distributions
From net investment income ....................... (.39) (.30) (.39) (.16) (.22)
In excess of net investment income ............... -- -- -- -- (.02)
From net realized gains .......................... (.45) -- -- -- --
Tax return of capital ............................ -- -- (.13) -- (.03)
-------------------------------------------------------------------------------
Total distributions .............................. (.84) (.30) (.52) (.16) (.27)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .............................. $ 13.68 $ 14.22 $ 10.97 $ 9.80 $ 9.86
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ..................... 1.39% 32.44% 17.34% 1.09% (7.70)%
Ratios to Average Net Assets (a):
Net investment income ............................ 2.05% 3.19% 3.63% 2.22% 1.96%
Total expenses ................................... 2.01% 1.82% 2.27% 1.95% 1.62%
Expenses reimbursed or offset .................... (.04)% (.02)% (.01)% (.03)% (.03)%
Net expenses ..................................... 1.97% 1.80% 2.26% 1.92% 1.59%
Portfolio turnover rate ................................... 95% 118% 108% 48% 145%
Net assets, end of year (in thousands) .................... $ 11,368 $ 13,897 $ 8,220 $ 9,169 $ 14,597
</TABLE>
* Effective May 1, 1998, the Fund changed to a new sub-adviser, Goodman & Co.
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -120-
<PAGE>
FINANCIAL HIGHLIGHTS
CHINA REGION OPPORTUNITY FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994* 1994**
Net asset value, beginning of period ........... $ 8.60 $ 6.43 $ 6.67 $ 7.75 $ 10.00 $ 9.92
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income ................. .03 .05 .08 .10 .04 .04
Net realized and unrealized gain (loss) (4.49) 2.15 (.22) (1.09) (2.25) (2.17)
-------------------------------------------------------------------------------
Total from investment activities ...... (4.46) 2.20 (.14) (.99) (2.21) (2.13)
-------------------------------------------------------------------------------
Distributions
From net investment income ............ (.05) (.03) (.08) (.09) (.04) (.04)
In excess of net investment income .... -- -- (.02) -- -- --
From net realized gains ............... -- -- -- -- -- --
-------------------------------------------------------------------------------
Total distributions ................... (.05) (.03) (.10) (.09) (.04) (.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................. $ 4.09 $ 8.60 $ 6.43 $ 6.67 $ 7.75 $ 7.75
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) .......... (52.06)% 34.38% (2.07)% (12.79)% (22.11)% (21.48)%
Ratios to Average Net Assets (a):
Net investment income ................. .39% .87% 1.24% 1.53% 1.51% 1.33%
Total expenses ........................ 2.60% 2.54% 2.60% 2.51% 3.10% 3.26%
Expenses reimbursed or offset ......... -- (.32)% (.45)% (.56)% (1.48)% (1.38)%
Net expenses .......................... 2.60% 2.22% 2.15% 1.95% 1.62% 1.88%
Portfolio turnover rate ........................ 17% 24% 37% 54% 13% 13%
Net assets, end of period (in thousands) ....... $ 19,460 $ 42,099 $ 20,967 $ 19,022 $ 7,655 $ 7,655
</TABLE>
a) Expenses reimbursed or offset reflect reductions to total expenses, as dis-
cussed in the notes to the financial statements.Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* For the period January 10, 1994, commencement of operations, through June 30,
1994.
** For the period February 10, 1994, effective date of registration and public
offering, through June 30, 1994.
See accompanying notes to financial statements.
- -121-
<PAGE>
FINANCIAL HIGHLIGHTS
GLOBAL RESOURCES FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ...................... $ 7.33 $ 6.98 $ 5.76 $ 5.74 $ 6.10
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment loss ............................ (.01) (.05) (.01) (.03) (.02)
Net realized and unrealized gain (loss) ........ (1.95) 1.34 1.31 .36 (.18)
-------------------------------------------------------------------------------
Total from investment activities ............... (1.96) 1.29 1.30 .33 (.20)
-------------------------------------------------------------------------------
Distributions
From net investment income ..................... -- (.04) -- -- --
In excess of net investment income ............. -- -- (.01) -- (.01)
From net realized gains ........................ (.04) (.90) (.07) -- (.15)
In excess of net realized gains ................ (.86) -- -- (.31) --
-------------------------------------------------------------------------------
Total distributions ............................ (.90) (.94) (.08) (.31) (.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ............................ $ 4.47 $ 7.33 $ 6.98 $ 5.76 $ 5.74
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ................... (29.79)% 18.96% 22.80% 5.94% (3.73)%
Ratios to Average Net Assets (a):
Net investment income .......................... (1.51)% (.76)% (.13)% (.60)% (.34)%
Total expenses ................................. 2.42% 2.34% 2.58% 2.51% 2.44%
Expenses reimbursed or offset .................. (.04)% (.04)% (.01)% (.02)% (.01)%
Net expenses ................................... 2.38% 2.30% 2.57% 2.49% 2.43%
Portfolio turnover rate ................................. 192% 52% 117% 50% 58%
Net assets, end of year (in thousands) .................. $ 18,958 $ 29,983 $ 24,534 $ 21,452 $ 21,620
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -122-
<PAGE>
FINANCIAL HIGHLIGHTS
WORLD GOLD FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ................. $ 15.95 $ 21.12 $ 15.81 $ 15.63 $ 14.59
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income (loss) .............. (.05) (.12) (.08) (.12) (.09)
Net realized and unrealized gain (loss) ... (5.90) (3.94) 5.39 .33 1.13
-------------------------------------------------------------------------------
Total from investment activities .......... (5.95) (4.06) 5.31 .21 1.04
-------------------------------------------------------------------------------
Distributions
From net investment income ................ -- (1.11) -- -- --
In excess of net investment income ........ (.14) -- -- (.03) --
From net realized gains ................... -- -- -- -- --
-------------------------------------------------------------------------------
Total distributions ....................... (.14) (1.11) -- (.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ....................... $ 9.86 $ 15.95 $ 21.12 $ 15.81 $ 15.63
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) .............. (37.41)% (20.10)% 33.59% 1.36% 7.13%
Ratios to Average Net Assets (a):
Net investment income ..................... (.72)% (.60)% (.40)% (.66)% (.66)%
Total expenses ............................ 1.74% 1.54% 1.53% 1.58% 1.57%
Expenses reimbursed or offset ............. -- (.02)% (.02)% (.03)% (.04)%
Net expenses .............................. 1.74% 1.52% 1.51% 1.55% 1.53%
Portfolio turnover rate ............................ 43% 40% 26% 28% 20%
Net assets, end of year (in thousands) ............. $ 149,759 $ 187,466 $ 248,781 $ 181,473 $ 202,819
</TABLE>
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -123-
<PAGE>
FINANCIAL HIGHLIGHTS
GOLD SHARES FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
For a capital share outstanding during each year ended June 30,
1998 1997 1996 1995 1994
Net asset value, beginning of year ................... $ 9.40 $ 18.40 $ 21.40 $ 24.80 $ 24.90
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income ....................... .01 .40 .50 .60 .70
Net realized and unrealized gain (loss) ..... (5.50) (8.90) (3.00) (3.30) (.20)
-------------------------------------------------------------------------------
Total from investment activities ............ (5.49) (8.50) (2.50) (2.70) .50
-------------------------------------------------------------------------------
Distributions
From net investment income .................. (.11) (.50) (.50) (.60) (.60)
In excess of net investment activities ...... (.01) -- -- (.10) --
From net realized gains ..................... -- -- -- -- --
-------------------------------------------------------------------------------
Total distributions ......................... (.12) (.50) (.50) (.70) (.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ......................... $ 3.79 $ 9.40 $ 18.40 $ 21.40 $ 24.80
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (excluding account fees) ................ (58.83)% (46.49)% (11.73)% (11.21)% 1.85%
Ratios to Average Net Assets (a):
Net investment income ....................... .53% 2.68% 1.81% 2.47% 2.61%
Total expenses .............................. 2.67% 1.84% 1.58% 1.47% 1.52%
Expenses reimbursed or offset ............... (.20)% (.04)% (.04)% (.05)% (.06)%
Net expenses ................................ 2.47% 1.80% 1.54% 1.42% 1.46%
Portfolio turnover rate .............................. 220% 44% 24% 33% 29%
Net assets, end of year (in thousands) ............... $ 46,251 $ 79,598 $ 153,839 $ 211,171 $ 263,827
</TABLE>
The values shown above for the current period and prior periods have been
adjusted to reflect the 1-for-10 reverse stock split which was effective on
July 1, 1998.
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
See accompanying notes to financial statements.
- -124-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of U.S. Global Investors Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting U.S.
Global Investors Funds (the "Funds") at June 30, 1998, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
Our examinations were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial highlights for China Region
Opportunity Fund for the period February 10, 1994 through June 30, 1994 are
presented for purposes of additional information required by the Securities and
Exchange Commission. Such information has been subjected to the auditing
procedures applied in the examination of the basic financial statements and, in
our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
PricewaterhouseCoopers LLP
Houston, Texas
August 21, 1998
- -125-
<PAGE>
FINANCIAL HIGHLIGHTS
Additional Federal Tax Information
(Unaudited)
The percentage of tax-exempt dividends paid by the Funds for the year ended
June 30, 1998, was:
Near-Term Tax Free 92.21%
Tax Free 89.33%
The percentage of ordinary income dividends paid by the Funds during the year
ended June 30, 1998, which qualify for the Dividends Received Deduction
available to corporate shareholders was:
Income 100.00%
All American Equity 100.00%
Real Estate 2.95%
China Region Opportunity ---
Global Resources ---
World Gold ---
Gold Shares 41.07%
The Funds hereby designate the following approximate amounts as capital gain
dividends for the purpose of the dividends paid deduction:
Income $1,279,686
All American Equity 345,544
Real Estate 317,457
China Region Opportunity ---
Global Resources 3,510,427
World Gold ---
Gold Shares ---
In January 1999, the Funds will report on Form 1099 the tax status of all
distributions made during the calendar year 1998. Shareholders should use the
information on Form 1099 for their income tax returns.
- -126-
<PAGE>
NOTES
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- -127-
<PAGE>
NOTES
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- -128-
<PAGE>
[blank page]
- -129-
<PAGE>
[BACK COVER PAGE]
[Graphics: USGI Logo]
PO Box 781234
San Antonio, Texas 78278-1234
1-800-US-FUNDS
- -130-
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Jul-01-1997
<PERIOD-END> Jun-30-1998
<INVESTMENTS-AT-COST> 19862780
<INVESTMENTS-AT-VALUE> 34359478
<RECEIVABLES> 754774
<ASSETS-OTHER> 9361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35123613
<PAYABLE-FOR-SECURITIES> 292675
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 159964
<TOTAL-LIABILITIES> 452639
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19400261
<SHARES-COMMON-STOCK> 893573
<SHARES-COMMON-PRIOR> 812866
<ACCUMULATED-NII-CURRENT> (16211)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 790226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14496698
<NET-ASSETS> 34670974
<DIVIDEND-INCOME> 355260
<INTEREST-INCOME> 218438
<OTHER-INCOME> 0
<EXPENSES-NET> 278207
<NET-INVESTMENT-INCOME> 295491
<REALIZED-GAINS-CURRENT> 1150496
<APPREC-INCREASE-CURRENT> 5567709
<NET-CHANGE-FROM-OPS> 7013696
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (316350)
<DISTRIBUTIONS-OF-GAINS> (507110)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26979805
<NUMBER-OF-SHARES-REDEEMED> (24748051)
<SHARES-REINVESTED> 776612
<NET-CHANGE-IN-ASSETS> 9192602
<ACCUMULATED-NII-PRIOR> (960)
<ACCUMULATED-GAINS-PRIOR> 152579
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 215983
<INTEREST-EXPENSE> 834
<GROSS-EXPENSE> 462435
<AVERAGE-NET-ASSETS> 28680071
<PER-SHARE-NAV-BEGIN> 31.34
<PER-SHARE-NII> .38
<PER-SHARE-GAIN-APPREC> 8.06
<PER-SHARE-DIVIDEND> (.40)
<PER-SHARE-DISTRIBUTIONS> (.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 38.80
<EXPENSE-RATIO> .97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Jul-01-1997
<PERIOD-END> Jun-30-1998
<INVESTMENTS-AT-COST> 31688326
<INVESTMENTS-AT-VALUE> 17742409
<RECEIVABLES> 1751375
<ASSETS-OTHER> 206158
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19699942
<PAYABLE-FOR-SECURITIES> 188635
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51462
<TOTAL-LIABILITIES> 240097
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38328159
<SHARES-COMMON-STOCK> 4753747
<SHARES-COMMON-PRIOR> 4897397
<ACCUMULATED-NII-CURRENT> 119508
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5041984)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13945838)
<NET-ASSETS> 19459845
<DIVIDEND-INCOME> 799214
<INTEREST-INCOME> 144912
<OTHER-INCOME> 0
<EXPENSES-NET> 821525
<NET-INVESTMENT-INCOME> 122601
<REALIZED-GAINS-CURRENT> (357192)
<APPREC-INCREASE-CURRENT> (19946443)
<NET-CHANGE-FROM-OPS> (20181034)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (207619)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36303613
<NUMBER-OF-SHARES-REDEEMED> (38753107)
<SHARES-REINVESTED> 198979
<NET-CHANGE-IN-ASSETS> (22639168)
<ACCUMULATED-NII-PRIOR> 204822
<ACCUMULATED-GAINS-PRIOR> (4685088)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 385682
<INTEREST-EXPENSE> 240
<GROSS-EXPENSE> 822326
<AVERAGE-NET-ASSETS> 31597315
<PER-SHARE-NAV-BEGIN> 8.60
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> (4.49)
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
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</LEGEND>
<MULTIPLIER> 1
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
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</LEGEND>
<MULTIPLIER> 1
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
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</LEGEND>
<MULTIPLIER> 1
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
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<TABLE> <S> <C>
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<LEGEND>
This finanical data schedule contains summary financial information extracted
from the Annual Report to Shareholders for the fiscal year ended June 30, 1998,
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</LEGEND>
<MULTIPLIER> 1
<S> <C>
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