MASON STREET
FUNDS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1998
SEPTEMBER 30, 1998
LETTER TO SHAREHOLDERS
(PHOTO)
JAMES D. ERICSON
In the two prior reports published since the Mason Street Funds(SM) were
launched, we have described the Funds' excellent results, while cautioning you
that the very high returns equities have produced in the past few years simply
cannot persist over the long term. Beginning in the summer of 1998, we have seen
a sharp correction in the stock market and turmoil in the markets for bonds of
all types. Reflecting market trends, total returns of seven of our nine Funds
were negative for the six months ended September 30, 1998.
In considering what has changed to rein in the roaring bull market, it is
helpful to remember that the performance of stocks - both individual issues and
the market as a whole - reflects what investors expect to happen in the future
much more than past or current performance. This is why the U.S. Department of
Commerce includes stock market performance among its "Leading Indicators," which
are considered useful in predicting future economic activity. What the market
seems to be telling us is that investors expect conditions in the near future to
be less positive than they are today.
The reasons for this relative pessimism can be traced mainly to problems in the
global economy. The Asian economic crisis began a year ago, and the bad news
from that part of the world continues. Serious structural problems in Asian
economies and markets indicate that growth will not resume any time soon.
Economic growth is slowing in other countries, most notably Latin American
nations that are big exporters of commodities, because of greatly reduced demand
from the formerly high-flying Asian countries. Russia's debt default and
devaluation of the ruble has sent tremors throughout the global banking system.
Even though these international problems are just beginning to have an impact on
the U.S. economy, in the form of reduced demand for some export items such as
cars and computer chips, just the possibility of a worldwide recession is highly
negative for investor sentiment.
The recent market volatility has understandably concerned many investors,
especially newer investors who have become accustomed to the extraordinary
returns of the last few years. While we share your disappointment in the returns
from stock and bond investments in recent months, we want to remind you that
market fluctuations are a reality of investing. Recent events do not change our
generally favorable view of the long-term prospects for the economy and
financial markets of the United States. However, we remind you that near-term
trends in both the economy and the markets are highly unpredictable.
If you are uncomfortable with the inevitable ups and downs of equity markets,
you may want to review the asset mix of your portfolio with your Baird
representative. Together you can make sure that the investments you hold are
consistent with your long-term financial goals and your personal tolerance for
risk.
The increased values resulting from the returns on equities in recent years have
left many investors with a high proportion of their total portfolios in stocks.
If your asset mix is now more concentrated in equities than you originally
planned, it might be an appropriate time to change the balance of your
portfolio. Weakness in both equity and corporate bond markets may present an
attractive buying opportunity for investors who were hesitant to commit
additional money when market valuations were much higher.
While equities historically carry higher risk in terms of volatility, they also
provide higher returns over time. Rather than avoiding equity risk, the best
approach for most people is to include stocks in a diversified portfolio that
encompasses a variety of investments, including stocks and bonds of various
types.
During periods of market volatility, many investors may be tempted to abandon
their long-term plans and retreat to the safety of insured or guaranteed
investments. However, even those traditionally safe investments carry some risk.
While income and principal may be assured, the returns may be so low that they
cannot outpace the combined long-term effects of inflation and taxes. The
portions of your portfolio meant to fund longer-term goals need to be in
investments such as equities or corporate bonds. While returns from these
securities may be more volatile in the interim, historically they have generated
sufficient returns as the economy grows to keep you ahead of inflation and
taxes.
Your Northwestern Mutual agent who is a Registered Representative of Robert W.
Baird & Co. Incorporated or other Baird representative can be a valuable
resource as you consider ways to reach your personal financial goals. They can
help you determine which of the Mason Street Funds(SM) may be most suitable for
you. We thank you for selecting the Mason Street Funds(SM), and we look forward
to continuing to act as your partner in reaching your financial goals.
Mason Street Funds(SM)
/s/ James D. Ericson
JAMES D. ERICSON
President
M A S O N S T R E E T F U N D S
TABLE OF CONTENTS
PERFORMANCE SUMMARY 3
- --------------------------------------------------------------------------------
OVERVIEW AND OUTLOOK 4
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND 6
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 10
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GROWTH STOCK FUND 14
- --------------------------------------------------------------------------------
GROWTH AND INCOME STOCK FUND 18
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INDEX 500 STOCK FUND 21
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ASSET ALLOCATION FUND 28
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HIGH YIELD BOND FUND 34
- --------------------------------------------------------------------------------
MUNICIPAL BOND FUND 39
- --------------------------------------------------------------------------------
SELECT BOND FUND 43
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FINANCIAL STATEMENTS 48
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 75
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS 79
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
For the Periods Ended September 30, 1998
CLASS A - WITHOUT INITIAL SALES CHARGE
Aggressive Growth and Asset
Total Return<F1> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/98) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
<C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -13.86% -22.47% 8.03% 0.12% 8.21% -0.31% -4.59% 8.34% 3.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 18.96% -14.72% 34.18% 27.75% 35.80% 19.23% 11.02% 16.74% 12.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 12.26% -10.06% 21.63% 17.72% 22.61% 12.43% 7.21% 10.86% 8.35%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A<F3> - WITH INITIAL SALES CHARGE
Aggressive Growth and Asset
Total Return<F1> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/98) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -17.96% -26.16% 2.90% -4.66% 3.11% -5.07% -9.14% 3.15% -1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 13.29% -18.78% 27.79% 21.67% 29.33% 13.55% 5.73% 11.18% 7.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 8.67% -12.94% 17.74% 13.96% 18.69% 8.83% 3.78% 7.32% 4.89%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - WITHOUT CONTINGENT DEFERRED SALES CHARGE
Aggressive Growth and Asset
Total Return<F1> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/98) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -14.43% -22.86% 7.37% -0.56% 7.51% -0.91% -5.24% 7.61% 3.02%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 17.83% -15.38% 32.93% 26.49% 34.50% 18.11% 9.87% 15.52% 11.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 11.54% -10.53% 20.87% 16.94% 21.82% 11.73% 6.47% 10.08% 7.62%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B<F4> - WITH CONTINGENT DEFERRED SALES CHARGE
Aggressive Growth and Asset
Total Return<F1> Growth International Growth Income Index 500 Allocation High Yield Municipal Select
(as of 9/30/98) Stock Fund Equity Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -17.71% -25.88% 3.37% -4.05% 3.51% -4.72% -8.56% 3.61% -0.66%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 13.83% -18.69% 28.93% 22.49% 30.50% 14.11% 6.16% 11.52% 7.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 9.01% -12.88% 18.44% 14.47% 19.40% 9.19% 4.06% 7.53% 5.11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<F1> Returns shown include fee waivers in effect and deductions for all Fund
expenses. In the absence of fee waivers, total return would be reduced.
Past performance is not predictive of future performance. Investment return
and principal value will fluctuate, so that your shares, when redeemed, may
be worth more or less than their original cost.
<F2> Inception date is March 31, 1997.
<F3> Class A performance reflects the maximum sales charge of 4.75%.
<F4> Class B performance reflects a contingent deferred sales charge (CDSC)
of 4%.
M A S O N S T R E E T F U N D S
OVERVIEW AND OUTLOOK
- ------------
THE ECONOMY
- ------------
At the end of the third calendar quarter of 1998, the U.S. economy remains
fairly strong but with increasing evidence of slowing growth. The Commerce
Department reports that the economy grew at a 1.8% annual rate in the second
quarter. While well below the 5.5% rate of the first quarter, this growth rate
is far from a recession, which is officially defined as two consecutive quarters
of negative real growth. Most economists are forecasting economic growth of
about 2% for the second half of the year.
The slowing rate of growth is most evident in the industrial sector, which has
been hit by a decline in demand from troubled Asian countries. A further problem
is a lack of pricing flexibility, created by price competition from imported
goods, while the high wages that result from a tight labor market are squeezing
margins. U.S. corporate profits actually declined on a year-to-year basis in the
second quarter, recording the first decline in a decade.
To date, consumers seem to have largely remained unscathed, except for the
negative wealth effect that has resulted from a falling stock market. The
Commerce Department reported that consumer confidence dropped in September for
the third straight month, after reaching a 29-year high in June. Consumer
spending, which accounts for two-thirds of total U.S. economic growth, remains
solid for now, but with this drop in confidence, analysts are watching closely
to see if less-confident consumers will stop buying cars, houses and other
goods. The most recent reports of retail sales, though still positive, suggest
that consumers may be slowing their spending.
ECONOMIC GROWTH AND INFLATION
% Change
--------
Year REAL GDP CPI-U
- ---- -------- -----
1988 3.8% 4.4%
1989 3.4% 4.6%
1990 1.3% 6.1%
1991 -1.0% 3.1%
1992 2.7% 2.9%
1993 2.3% 2.7%
1994 3.5% 2.7%
1995 2.0% 2.5%
1996 2.2% 3.3%
1997 3.7% 1.7%
1998 2.8% 1.8%
Source: U.S. Department of Commerce. Year-to-year percentage change in Real
Gross Domestic Product is used for real economic growth. December-to-December
percentage change in the Consumer Price Index - Urban is used for the inflation
rate. 1998 is the consensus forecast of a group of 55 economists surveyed by the
Wall Street Journal.
- ------------------
THE EQUITY MARKET
- ------------------
Mid-year 1998 marked a major turning point in the U.S. equity market. During the
second calendar quarter, which ended in June, the broad market continued its
seven-year upward trend. In July, stock prices began to fall; subsequent
sessions were characterized by extreme volatility and general downward pressure.
The weakness began with small-cap stocks during the second quarter and gradually
rolled through the market; by the end of September, even shares of the largest,
highest quality companies were well below their record highs earlier in the
year.
The third quarter represented the worst quarter in eight years for equity
markets: the S&P 500(R) Index produced a negative 9.97% total return for the
quarter, wiping out the positive return of the second quarter to produce a
negative return of 7.03% for the six months ended September 30, 1998. Smaller-
capitalization stocks performed even more poorly: total return for the Wilshire
Small Cap Index was a negative 22.31% in the third quarter and a negative 26.73%
for the six months ended September 30, 1998.
ANNUAL TOTAL RETURNS FROM S&P 500(R) INDEX
Calendar
Years
-----
1988 16.6%
1989 31.7%
1990 -3.1%
1991 30.5%
1992 7.6%
1993 10.1%
1994 1.2%
1995 37.4%
1996 22.8%
1997 33.4%
Source: Standard & Poor's
SEPTEMBER 30, 1998
- ----------------
THE BOND MARKET
- ----------------
The most striking trend in the bond market in recent months has been a dramatic
flight to quality. Investors around the world, concerned about defaults and
devaluations in Asia and Russia, flocked to dollar-based assets, most notably
U.S. Treasury securities. As a result, the values of these instruments soared,
while other bonds lagged, even in the face of declining interest rates. At the
end of September, the interest rate spread between Treasury securities and
corporate bonds of similar maturities was at the widest level in ten years.
In addition, there was a marked decline in prices of foreign bonds due to
continuing turmoil in Russia and Asia. A general lack of liquidity in the
corporate and mortgage bond markets made it difficult to execute trades and
further depressed stated prices of bonds, which are quoted at bid prices even if
no trade has occurred.
An interesting phenomenon was that investors' interest in U.S. Treasury
securities was concentrated in 30-year bonds, which, though quite secure with
regard to interest payments, are highly volatile because of their long
maturities. Significantly lower interest rates were negative for mortgage and
corporate bonds, which currently trade at near-record wide spreads relative to
Treasury securities.
ANNUAL TOTAL RETURNS FROM
MERRILL LYNCH DOMESTIC MASTER INDEX
Calendar
Years
-----
1988 8.0%
1989 14.2%
1990 9.1%
1991 15.9%
1992 7.6%
1993 10.0%
1994 -2.8%
1995 18.5%
1996 3.6%
1997 9.7%
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an unmanaged
market value weighted index comprised of U.S. Government, mortgage and
investment-grade corporate bonds.
M A S O N S T R E E T F U N D S
AGGRESSIVE GROWTH STOCK FUND
- -----------------------------
AGGRESSIVE GROWTH STOCK FUND
- -----------------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek long-term growth of capital primarily by investing in the
common stocks of companies that can be expected to increase their sales and
earnings at a pace that will exceed the growth rate of the U.S. economy over
an extended period.
PORTFOLIO: Primarily common stocks of small and medium-sized companies.
STRATEGY: To locate and invest in companies with above-average potential for
growth.
NET ASSETS: $37,302,442
- --------------------------------------------------------------------------------
The Aggressive Growth Stock Fund owns the stocks of emerging growth companies,
generally with market capitalizations of less than $3 billion. Since growth
stock portfolios tend to react strongly to changes in financial and economic
markets, as well as to changes in the prospects for individual companies,
returns of this Fund can vary considerably from time to time. A higher level of
risk (with risk defined as variability of returns over time) is accepted for the
potential of greater long-term returns.
The Fund's focus in stock selection is on the individual companies' ability to
generate revenue, expand profit margins and maintain solid balance sheets;
industry sector selection is of secondary importance. However, opportunities
tend to cluster in certain industry groups or sectors. The Fund is concentrated
in four sectors in which there are numerous companies with particularly
promising prospects for growth: technology, business services, consumer
cyclicals and healthcare.
The last six months have been a difficult period for all equity investors. The
market's drop was felt first and most strongly in the smaller-capitalization
stocks that are the focus of this Fund. A nervous market has responded very
negatively to downward revisions of earnings forecasts; large drops in the
stocks of several service companies in the Fund were major factors of the
overall negative return. Some good stock selections, including new positions in
two technology companies, Qlogic and Gemstar, partially offset drops in other
issues. In addition, some of the healthcare and retail stocks in the Fund
continued to perform well. At the end of September, the Fund had a 7% cash
position, plus modest holdings of S&P 500(R) Index futures.
SECTOR ALLOCATION
9/30/9
- ----------------------------------------------
Technology 26%
Consumer 22%
Business Services 16%
Healthcare 12%
Cash Equivalents 7%
Capital Goods 5%
Transportation 4%
Finance 4%
Energy 2%
Other Assets 1%
S&P 500(R) Index Futures 1%
TOP 10 HOLDINGS
9/30/98
Company % Net Assets
- ----------------------------------------------
Paychex, Inc. 2.6%
Quintiles Transnational Corp. 2.6%
O'Reilly Automotive, Inc. 2.5%
Metzler Group, Inc. 2.3%
Cardinal Health, Inc. 2.2%
Carriage Services, Inc. 2.1%
Cintas Corp. 2.1%
Concord EFS, Inc. 2.1%
Qlogic Corporation 2.0%
Patterson Dental Company 2.0%
SEPTEMBER 30, 1998
AGGRESSIVE GROWTH STOCK FUND
PERFORMANCE RELATIVE TO RELEVANT INDICES
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK FUND CLASS A 9,524 13,152 14,436 11,329
AGGRESSIVE GROWTH STOCK FUND CLASS B 10,000 13,770 15,059 11,783
AGGRESSIVE GROWTH STOCK FUND CLASS B REDEMPTION VALUE 11,383
WILSHIRE SMALL CAP INDEX 10,000 13,503 14,644 10,730
WILSHIRE NEXT 1750 INDEX 10,000 13,454 14,580 11,115
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- --------------------------------------------------------------------
Aggressive Growth Stock Fund
(Class A - without initial sales charge) -13.86% 12.26%
- --------------------------------------------------------------------
Wilshire Small Cap Index -20.53% 4.80%
- --------------------------------------------------------------------
Wilshire Next 1750 Index -17.38% 7.29%
- --------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
Since the Fund invests primarily in small and medium-capitalization issues, the
indices that best reflect the Fund's performance are the Wilshire Next 1750
Index and Wilshire Small Cap Index. The indices cannot be invested in directly
and do not include sales charges.
The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this
index are those stocks which are ranked 750 to 2500 by market capitalization in
the Wilshire 5000. The largest sectors represented in this index are materials
and services, consumer non-durables and finance. Its average market
capitalization is approximately $917.0 million as of September 30, 1998.
The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes
250 stocks chosen based upon their size, sector and liquidity characteristics.
Each stock is equally weighted in this unmanaged index. The average market
capitalization is approximately $999.0 million as of September 30, 1998. The
largest sector weightings include finance, utilities and technology.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
Stocks of smaller or newer companies, such as those held in this Fund, are more
likely to realize more substantial growth as well as suffer more significant
losses than larger or more established issuers. Investments in such companies
can be both more volatile and more speculative.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (90.8%)
BUSINESS SERVICES (14.7%)
<F1> Accustaff Corp. 18,900 $275,230
<F1> Administaff, Inc. 15,000 479,063
<F1> Carriage Services, Inc. 32,000 790,000
Cintas Corp. 15,600 781,950
<F1> Edutrek International, Inc. 23,200 162,400
<F1> Interim Services, Inc. 22,900 470,881
<F1> Metzler Group, Inc. 25,100 859,675
<F1> NOVA Corporation 10,000 306,875
<F1> Robert Half International, Inc. 11,950 516,091
<F1> SM&A Corporation 16,000 276,000
<F1> Steiner Leisure, Ltd. 21,800 340,625
Stewart Enterprises, Inc. 12,600 211,050
-------------------------------------------------------------------------
TOTAL 5,469,840
-------------------------------------------------------------------------
CAPITAL GOODS (4.4%)
<F1> Ivex Packaging Corporation 17,400 252,300
<F1> Jabil Circuit, Inc. 7,800 271,050
Kaydon Corporation 14,700 386,793
<F1> Kaynar Technologies, Inc. 6,400 86,400
<F1> Kellstrom Industries, Inc. 11,200 155,400
<F1> TriStar Aerospace, Co. 8,100 77,963
<F1> Triumph Group, Inc. 13,800 410,550
-------------------------------------------------------------------------
TOTAL 1,640,456
-------------------------------------------------------------------------
COMMUNICATION SERVICES (1.0%)
<F1> Crown Castle International Corp. 12,200 117,425
<F1> Pacific Gateway Exchange, Inc. 6,600 244,200
-------------------------------------------------------------------------
TOTAL 361,625
-------------------------------------------------------------------------
CONSUMER CYCLICAL (14.4%)
<F1> 99 Cents Only Stores 10,900 431,231
<F1> Dollar Tree Stores, Inc. 15,000 469,687
<F1> eBay, Inc. 4,600 207,287
Galileo International, Inc. 7,600 286,900
<F1> Getty Images, Inc. 18,800 326,650
<F1> Global Vacation Group, Inc. 5,800 41,687
<F1> Jones Apparel Group, Inc. 17,400 399,113
<F1> K&G Men's Center, Inc. 24,750 160,875
<F1> Kohl's Corporation 11,400 444,600
<F1> Michaels Stores, Inc. 17,400 443,700
<F1> O'Reilly Automotive, Inc. 25,200 913,500
<F1> Sonic Automotive, Inc. 21,100 418,044
<F1> Tower Automotive, Inc. 22,000 434,500
<F1> VWR Scientific Products Corporation 16,400 411,025
-------------------------------------------------------------------------
TOTAL 5,388,800
-------------------------------------------------------------------------
M A S O N S T R E E T F U N D S
AGGRESSIVE GROWTH STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
CONSUMER STAPLES (7.9%)
<F1> American Italian Pasta Company 18,200 $477,750
<F1> American Tower Corp. 7,200 183,600
<F1> Blyth Industries, Inc. 6,500 178,343
Cardinal Health, Inc. 7,800 805,350
<F1> Chancellor Media Corporation 8,000 267,000
<F1> Clear Channel Communications, Inc. 7,000 332,500
<F1> Golden State Vintners, Inc. 6,700 65,744
<F1> Lamar Advertising Company 22,900 641,200
-------------------------------------------------------------------------
TOTAL 2,951,487
-------------------------------------------------------------------------
ENERGY (1.6%)
<F1> Barrett Resources Corporation 5,000 100,937
Transocean Offshore Inc. 11,000 381,563
<F1> Weatherford International, Inc. 5,700 123,263
-------------------------------------------------------------------------
TOTAL 605,763
-------------------------------------------------------------------------
FINANCE (4.4%)
<F1> Affiliated Managers Group 17,300 311,400
ESG Re Limited 10,100 152,763
Investors Financial Services Corp. 10,700 524,300
<F1> Knight/Trimark Group, Inc. 21,400 176,550
<F1> Trammell Crow Company 18,500 471,750
-------------------------------------------------------------------------
TOTAL 1,636,763
-------------------------------------------------------------------------
HEALTHCARE (12.3%)
<F1> Lincare Holdings, Inc. 16,200 627,750
<F1> Patterson Dental Company 19,650 727,050
<F1> Pediatrix Medical Group, Inc. 4,800 215,400
<F1> Province Healthcare Company 14,100 480,281
<F1> PSS World Medical, Inc. 23,300 431,050
<F1> Quintiles Transnational Corp. 22,100 966,875
<F1> Quorum Health Group, Inc. 14,350 233,187
<F1> Sybron International Corporation 19,500 372,938
<F1> Wesley Jessen VisionCare, Inc. 24,900 529,125
-------------------------------------------------------------------------
TOTAL 4,583,656
-------------------------------------------------------------------------
TECHNOLOGY (25.8%)
<F1> Cambridge Technology Partners, Inc. 7,900 176,268
<F1> CBT Group Public Limited Company 9,400 126,900
<F1> Comverse Technology, Inc. 15,400 629,474
<F1> Concord EFS, Inc. 29,850 770,503
<F1> CSG Systems International, Inc. 13,600 601,800
<F1> Gemstar International Group Limited 10,300 477,663
General Cable Corporation 13,500 249,750
<F1> GeoCities 10,900 253,425
HBO & Company 18,400 531,300
<F1> Hyperion Solutions Corporation 10,000 216,875
<F1> IDT Corporation 14,600 335,800
Shares/Par Market Value
-------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> International Integration Incorporated 17,800 $278,125
<F1> J. D. Edwards & Company 11,100 532,800
Paychex, Inc. 19,000 979,688
<F1> PeopleSoft, Inc. 15,000 489,375
<F1> PMC-Sierra, Inc. 16,000 510,000
<F1> Qlogic Corporation 11,500 750,375
<F1><F2>Saville Systems PLC, ADR 8,100 117,450
<F1> Semtech Corporation 12,900 240,263
<F1> Tellabs, Inc. 6,600 262,763
<F1> Transaction Systems Architects, Inc. 8,700 308,850
<F1> Uniphase Corporation 11,400 467,400
<F1> World Access, Inc. 16,000 324,000
-------------------------------------------------------------------------
TOTAL 9,630,847
-------------------------------------------------------------------------
TRANSPORTATION (4.3%)
<F1> Coach USA, Inc. 13,800 340,687
<F1> Heartland Express, Inc. 18,400 303,600
<F1> Jevic Transportation, Inc. 32,900 234,413
<F1> Knight Transportation, Inc. 28,050 473,344
<F1> Swift Transportation Co., Inc. 15,250 264,969
-------------------------------------------------------------------------
TOTAL 1,617,013
-------------------------------------------------------------------------
TOTAL COMMON STOCK 33,886,250
=========================================================================
MONEY MARKET INVESTMENTS (8.6%)
FEDERAL GOVERNMENT AND AGENCIES (0.3%)
<F3> Federal Home Loan Bank,
5.20%, 10/9/98 100,000 $99,885
-------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (6.2%)
Associates Corp. of N.A.,
5.69%, 10/1/98 700,000 700,000
Chrysler Financial Corporation,
5.25%, 11/4/98 800,000 796,033
General Electric Capital Corporation,
5.36%, 10/21/98 800,000 797,618
-------------------------------------------------------------------------
TOTAL 2,293,651
-------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (2.1%)
Sears Roebuck Acceptance Corp.,
5.53%, 10/21/98 800,000 797,542
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 3,191,078
=========================================================================
TOTAL INVESTMENTS (99.4%)
(COST $36,644,421)<F4> 37,077,328
=========================================================================
OTHER ASSETS, LESS LIABILITIES (0.6%) 225,114
=========================================================================
TOTAL NET ASSETS (100.0%) $37,302,442
=========================================================================
SEPTEMBER 30, 1998
AGGRESSIVE GROWTH STOCK FUND
<F1> Non-Income Producing
<F2> ADR - American Depositary Receipt
<F3> Partially held by the custodian in a segregated account as collateral for
open futures positions. Information regarding open futures contracts as of
September 30, 1998 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Depreciation
-------------------------------------------------------------------------
S&P 500(R) Stock Index
(Total market value at
9/30/98, $513,000) 2 12/98 $21,856
<F4> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $36,644,421 and the net unrealized appreciation of
investments based on that cost was $432,907 which is comprised of
$5,574,241 aggregate gross unrealized appreciation and $5,141,334 aggregate
gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
INTERNATIONAL EQUITY FUND
- --------------------------
INTERNATIONAL EQUITY FUND
- --------------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek long-term appreciation of capital by investing primarily
in the common stocks of companies outside the U.S.
PORTFOLIO: Primarily common stocks of companies in foreign countries.
STRATEGY: To locate and invest in the undervalued stocks of foreign companies
offering the greatest discounts to their long-term values.
NET ASSETS: $25,912,962
- --------------------------------------------------------------------------------
The International Equity Fund offers investors the opportunity to participate in
the growth of companies in countries throughout the world. The Fund is managed
with a disciplined approach to long-term value, with special attention to
balance sheet quality. Investments are selected based mainly on the
attractiveness of individual securities and geographic regions; industry focus
is a secondary consideration.
International equity markets have been highly volatile in recent months. Asian
markets and economies continue to be quite weak, although there are signs of
incipient improvement in some parts of the region. Most markets in Europe were
strong through the first six months of 1998 and then began to tumble. Stocks of
financial services companies suffered especially large declines, as the default
on Russian debt and devaluation of the ruble accompanied continuing problems in
Asia and Latin America. Portfolio performance relative to the EAFE Index was
negatively affected by exposure to emerging markets. The EAFE Index does not
include emerging markets.
Over the last six months the Fund's investments in Europe have been reduced
gradually, with opportunities taken to realize significant gains in certain
European stocks. However, recent weakness has been used as an opportunity to
increase holdings such as Merita Limited, a bank in Finland, whose stock fell
after the Russian debacle, even though the company had minimal exposure to
Russia. At present, the exposure in Asia is being slowly increased, especially
in countries such as Korea, where the worst of the economic problems appear to
be in the past. As always, the focus is on careful selection of individual
securities that have the potential to perform better than the economies in which
they operate. On the positive side, holdings of utilities such as Hong Kong
Telecommunications contributed to performance, as investors sought the relative
safety of companies with steady earnings streams, solid balance sheets and
stable dividends.
The International Equity Fund is managed for Northwestern Mutual Investment
Services, LLC by Templeton Investment Counsel, Inc.
ASSET ALLOCATION
9/30/98
- ----------------------------------------------
Europe 52%
Non-equity holdings 13%
Asia 12%
Latin America 9%
Australia/New Zealand 8%
North America 6%
TOP 10 HOLDINGS
9/30/98
Company % Net Assets
- ----------------------------------------------
Merita Limited "A" 2.1%
Unidanmark A/S, "A", Registered 2.0%
Hong Kong Telecommunications Ltd. 1.9%
Nycomed Amersham PLC 1.9%
Volvo Aktiebolaget, B Free 1.9%
Philips Electronics, Inc. 1.8%
PartnerRe Ltd. 1.8%
YPF S.A., ADR 1.8%
Zurich Versicherungs-Gesellschaft 1.7%
Enso Oy, A shares 1.7%
SEPTEMBER 30, 1998
PERFORMANCE RELATIVE TO EAFE INDEX
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C>
INTERNATIONAL EQUITY FUND CLASS A 9,524 10,476 10,304 8,122
INTERNATIONAL EQUITY FUND CLASS B 10,000 10,970 10,749 8,462
INTERNATIONAL EQUITY FUND CLASS REDEMPTION VALUE 8,131
EAFE INDEX 10,000 11,234 11,893 10,326
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- ---------------------------------------------------------------------
International Equity Fund
(Class A - without initial sales charge) -22.47% -10.06%
- ---------------------------------------------------------------------
EAFE Index -8.08% 2.16%
- ---------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
As depicted in the graph, the International Equity Fund is compared against the
Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index.
The index is composed of approximately 1,100 companies in 20 countries in Europe
and the Pacific Basin. The objective of the index is to reflect the movements of
stock markets in these countries by representing an unmanaged (indexed)
portfolio within each country. The indices are constructed so that companies
chosen represent about 60% of market capitalization in each market; industry
composition of the market is reflected; and a cross section of large-, medium-,
and small-capitalization stocks is included, taking into account liquidity
concerns. The index is calculated in U.S. dollars. The index cannot be invested
in directly and does not include sales charges.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
Investors should be aware of the risks of investments in foreign securities,
particularly investments in securities of companies in developing nations. These
include the risks of currency fluctuation, of political and economic instability
and of less well-developed government supervision and regulation of business and
industry practices, as well as differences in accounting standards.
SCHEDULE OF INVESTMENTS
Country Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (87.5%)
CAPITAL EQUIPMENT (7.7%)
Alcatel Fr. 1,500 $133,279
BTR, PLC A U.K. 136,012 245,608
Granges AB Swe. 7,700 93,369
Hong Kong
Aircraft & Engineering H.K. 135,000 160,289
<F3> Madeco S.A., ADR Chile 17,500 120,313
Nanjing Panda
Electronics Co., Ltd. China 868,000 34,167
New Holland NV Neth. 15,000 168,750
Philips Electronics, Inc. Neth. 8,600 463,065
Sirti SPA Italy 39,300 190,263
The Weir Group PLC U.K. 126,200 377,457
-------------------------------------------------------------------------
TOTAL 1,986,560
-------------------------------------------------------------------------
CONSUMER GOODS (13.9%)
Autoliv, Inc. Swe. 14,400 396,000
Fiat SPA Ord. Italy 84,920 216,867
<F3> Fila Holding SPA, ADR Italy 3,800 32,300
Fisher & Paykel
Industries Ltd. N.Z. 102,100 273,391
Medeva PLC U.K. 176,000 278,158
Northern Foods PLC U.K. 74,000 225,102
Nycomed Amersham PLC U.K. 75,525 482,624
Ono Pharmaceutical
Co., Ltd. Japan 9,000 216,867
Rolls-Royce PLC U.K. 20,000 68,996
Sony Corporation Japan 3,700 257,956
Tate & Lyle, PLC U.K. 34,500 189,373
<F3> Teva Pharmaceutical
Industries Ltd. Israel 7,400 280,275
The Oshawa Group
Ltd., Class A Can. 11,400 201,304
Volvo AB, B shares Swe. 19,600 480,337
-------------------------------------------------------------------------
TOTAL 3,599,550
-------------------------------------------------------------------------
ENERGY (13.8%)
Endesa S.A. Sp. 13,900 313,096
EVN Energie Versorgung Aus. 1,500 223,978
<F3> Gazprom, ADR (144A) Rus. 18,200 117,845
<F3> Gener S.A., ADR Chile 12,500 186,719
Hong Kong Electric
Holdings Ltd. H.K. 106,000 363,890
Iberdrola S.A. Sp. 18,700 311,963
<F3> Korea Electric Power
Corp., ADR Kor. 15,775 141,975
National Grid Group PLC U.K. 26,860 199,929
<F1> Northstar Energy
Corporation Can. 23,500 163,986
M A S O N S T R E E T F U N D S
INTERNATIONAL EQUITY FUND
Country Shares/Par Market Value
-------------------------------------------------------------------------
ENERGY (CONTINUED)
Petroleo Brasileiro
S.A. - Petrobras Braz. 1,339,000 $137,820
Ranger Oil Limited Can. 45,400 297,938
Repsol S.A. Sp. 5,800 244,958
Thames Water U.K. 21,083 419,916
<F3> YPF S.A., ADR Arg. 17,700 460,200
-------------------------------------------------------------------------
TOTAL 3,584,213
-------------------------------------------------------------------------
FINANCE (22.1%)
Australia & New Zealand
Bank Group Austrl. 61,000 325,759
AXA S.A. Fr. 4,400 402,726
Banco Bradesco S.A. Braz. 27,950,000 165,078
Banco Itau S.A. Braz. 94,000 44,414
Bangkok Bank Public
Company Limited Thai. 131,300 124,557
Banque Nationale de Paris Fr. 6,000 321,153
Compagnie Financiere
de Paribas Fr. 3,000 161,647
EXEL Limited Bermuda 5,500 346,500
Hang Lung Development H.K. 133,000 116,719
HSBC Holdings PLC U.K. 12,400 227,244
<F3> Industrial Credit & Inv.
Corp. of India (144A), GDR India 17,000 142,375
ING Groep N.V. Neth. 8,800 396,340
Merita Limited A Fin. 106,000 541,603
National Mutual Asia Ltd. H.K. 295,000 143,721
<F3> Nortel Inversora S.A., ADR Arg. 15,100 326,538
PartnerRe Ltd. Bermuda 11,500 460,719
Reinsurance Australia
Corporation Limited Austrl. 170,000 402,730
Unibanco Uniao de Bancos Braz. 1,579,000 45,697
Unidanmark A/S, A,
Registered Den. 7,000 506,688
Wing Hang Bank Ltd. H.K. 67,200 71,983
<F1> Zurich Versicherungs-
Gesellschaft Swtz. 880 436,726
-------------------------------------------------------------------------
TOTAL 5,710,917
-------------------------------------------------------------------------
MATERIALS (9.7%)
Agrium, Inc. Can. 22,700 192,950
Bayer AG Ger. 8,800 332,234
Boehler-Uddeholm AG Aus. 4,000 173,478
British Steel PLC U.K. 217,100 391,998
Enso Oy, A shares Fin. 61,000 431,553
Grupo Mexico, B shares Mex. 73,700 188,047
Country Shares/Par Market Value
-------------------------------------------------------------------------
MATERIALS (CONTINUED)
Hepworth PLC U.K. 58,200 $140,692
<F3> Minorco S.A., ADR Lux. 13,350 136,838
Pechiney S.A., A shares Fr. 9,300 321,571
Pioneer International Ltd. Austrl. 109,700 204,655
-------------------------------------------------------------------------
TOTAL 2,514,016
-------------------------------------------------------------------------
MULTI-INDUSTRY (5.0%)
Amer Group Ltd., A Fin. 13,000 171,167
Elementis PLC U.K. 68,280 92,828
Hicom Holdings Berhad Mly. 93,300 26,762
Jardine Matheson Holdings Sing. 62,500 128,125
Metro Pacific Corporation Phil. 2,660,000 37,088
Pilkington PLC U.K. 242,800 238,285
Scor Fr. 6,000 356,480
Swire-Pacific Limited,
A shares H.K. 36,000 113,364
Swire-Pacific Limited,
B shares H.K. 296,000 139,433
-------------------------------------------------------------------------
TOTAL 1,303,532
-------------------------------------------------------------------------
SERVICES (15.3%)
British Telecom U.K. 27,600 365,565
<F3> Compania Anonima Nacional
Telefonos de Venezuela Venz. 9,400 159,800
David Jones Ltd. Austrl. 77,500 72,521
<F1> Embratel Participacoes S.A. Braz. 4,578,500 38,244
Hitachi Zosen Corporation Japan 11,000 14,546
Hong Kong
Telecommunications Ltd. H.K. 252,400 495,126
Mayne Nickless Ltd. Austrl. 55,700 296,895
Moebel Walther AG PFD Ger. 5,056 195,119
News Corporation
Limited, Pfd. Austrl. 73,500 409,186
Osprey Maritime Ltd. Sing. 235,000 69,745
<F3> PT Indosat, ADR Indo. 11,200 59,500
Royal KPN NV Neth. 11,700 361,232
<F3> SK Telecom Co., Ltd., ADR Kor. 8,100 57,206
Somerfield PLC U.K. 40,000 283,800
South China Morning
Post Ltd. H.K. 133,000 52,352
Telecomunicacoes
Brasileiras S.A. Braz. 4,578,500 966
<F1> Tele Norte Leste
Participacoes S.A. Braz. 4,578,500 28,954
<F1> Tele Centro Sul
Participacoes S.A. Braz. 4,578,500 29,166
<F1> Telesp Celular
Participacoes S.A. Braz. 4,578,500 19,315
SEPTEMBER 30, 1998
INTERNATIONAL EQUITY FUND
Country Shares/Par Market Value
-------------------------------------------------------------------------
SERVICES (CONTINUED)
<F1> Telemig Celular
Participacoes S.A. Braz. 4,578,500 $2,569
<F1> Tele Celular Sul
Participacoes S.A. Braz. 4,578,500 3,477
<F1> Tele Centro Oeste Celular
Participacoes S.A. Braz. 4,578,500 2,434
<F1> Tele Norte Celular
Participacoes S.A. Braz. 4,578,500 966
<F1> Tele Nordeste Celular
Participacoes S.A. Braz. 4,578,500 1,970
<F1> Tele Sudeste Celular
Participacoes S.A. Braz. 4,578,500 7,726
<F1> Tele Leste Celular
Participacoes S.A. Braz. 4,578,500 1,275
<F1> Telesp Participacoes S.A. Braz. 4,578,500 71,853
<F2> Telefonica del Peru S.A.,
B shares, ADR Peru 17,500 214,375
The Peninsular & Oriental
Steam Navigation Company U.K. 23,000 218,883
Thorn PLC U.K. 88,699 375,707
Waste Management
International PLC U.K. 10,400 59,207
-------------------------------------------------------------------------
TOTAL 3,969,680
-------------------------------------------------------------------------
TOTAL COMMON STOCK 22,668,468
=========================================================================
BONDS (1.5%)
SBC Communications DECS,
3.071%, 3/15/01 U.S. 8,950 $379,256
-------------------------------------------------------------------------
TOTAL BONDS 379,256
=========================================================================
MONEY MARKET INVESTMENTS (9.2%)
PERSONAL CREDIT INSTITUTIONS (9.2%)
Associates Corporation of
N.A., 5.70%, 10/1/98 U.S. 1,200,000 $1,200,000
Chrysler Financial,
5.25%, 11/4/98 U.S. 600,000 597,025
General Electric Capital
Corporation,
5.36%, 10/21/98 U.S. 600,000 598,213
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,395,238
=========================================================================
TOTAL INVESTMENTS (98.2%)
(COST $32,236,869)<F4> 25,442,962
=========================================================================
OTHER ASSETS, LESS LIABILITIES (1.8%) 470,000
=========================================================================
TOTAL NET ASSETS (100.0%) $25,912,962
=========================================================================
<F1> Non-Income Producing
<F2> GDR - Global Depositary Receipt
<F3> ADR - American Depositary Receipt
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold
as transactions exempt from registration, normally to qualified institutional
buyers.
<F4> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $32,236,869 and the net unrealized depreciation of
investments based on that cost was $6,793,907 which is comprised of
$1,836,785 aggregate gross unrealized appreciation and $8,630,692 aggregate
gross unrealized depreciation.
INVESTMENT PERCENTAGES BY COUNTRY:
Australia 6.73%
Finland 4.50%
France 6.67%
Hong Kong 6.51%
Netherlands 5.46%
United Kingdom 19.19%
U.S. 10.90%
Other 40.04%
- -----------------------------------------------------
TOTAL 100.00%
- -----------------------------------------------------
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
GROWTH STOCK FUND
- ------------------
GROWTH STOCK FUND
- ------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek long-term growth of capital by investing in companies
believed to have above-average earnings growth potential; current income is
secondary.
PORTFOLIO: Diversified mix of high-quality growth stocks in medium and large
companies.
STRATEGY: To analyze economic trends to determine their impact on various
sectors and industries and to select high-quality stocks from industries with
the best earnings potential.
NET ASSETS: $38,901,583
- -------------------------------------------------------------------------------
The Growth Stock Fund is invested in high-quality companies of large- to medium-
capitalization with strong financial characteristics and the ability to generate
internal growth. A key factor in stock selection is the choice of industries
with good earnings potential, based on analysis of economic trends to determine
their impact on various sectors of the economy. Stock selection is made through
"top down" analysis: first industry and market sector choices are made based on
the economic environment, and then the most promising companies within each
sector are selected as holdings. The Fund remains close to fully invested, with
S&P 500(R) Index futures used at times to maintain the desired degree of market
exposure.
Like essentially all equity funds, the Growth Stock Fund recorded negative total
return for the six months ended September 30. The major negative impact on
performance came from several positions in market-sensitive financial stocks;
this category is now significantly underweighted relative to the S&P 500(R)
Index. The Fund remains overweighted in consumer stocks relative to the S&P
500(R); these stocks have performed better than the market as a whole and
should continue to do so if the economy weakens. In the healthcare sector, the
Fund benefited from performance of the major drug stocks and from a lack of
exposure to healthcare service companies.
SECTOR ALLOCATION
9/30/98
- ----------------------------------------------
Consumer Staples 19%
Technology 13%
Basic Materials/Capital Goods 10%
Consumer Cyclicals 11%
S&P 500(R) Index Futures 11%
Healthcare 8%
Other Industries 8%
CashEquivalents 7%
Finance 7%
Energy 6%
TOP 10 HOLDINGS
9/30/98
Company % Net Assets
- ----------------------------------------------
General Electric Company 2.9%
Fiserv, Inc. 2.8%
Walgreen Co. 2.7%
MCI WorldCom, Inc. 2.5%
Microsoft Corporation 2.4%
International Business
Machines Corporation 2.2%
Hershey Foods Corporation 2.1%
Kohl's Corporation 2.0%
Harley-Davidson, Inc. 1.7%
Cisco Systems, Inc. 1.6%
SEPTEMBER 30, 1998
GROWTH STOCK FUND
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
GROWTH STOCK FUND CLASS A 9,524 11,829 13,817 12,779
GROWTH STOCK FUND CLASS B 10,000 12,380 14,412 13,293
GROWTH STOCK FUND CLASS B REDEMPTION VALUE 12,893
S&P 500(R) INDEX 10,000 12,618 14,787 13,747
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- --------------------------------------------------------------------
Growth Stock Fund
(Class A - without initial sales charge) 8.03% 21.63%
- --------------------------------------------------------------------
S&P 500(R) Index 8.95% 23.61%
- --------------------------------------------------------------------
<F1> Fund inception date is 3/31/97. Returns are annualized.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks. The index cannot be invested in directly
and does not include sales charges.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (82.7%)
BASIC MATERIALS (2.4%)
Ecolab, Inc. 19,000 $540,312
Monsanto Company 7,100 400,263
-------------------------------------------------------------------------
TOTAL 940,575
-------------------------------------------------------------------------
CAPITAL GOODS (7.7%)
AlliedSignal, Inc. 7,300 258,237
Avery Dennison Corporation 13,800 602,888
General Electric Company 14,000 1,113,875
Republic Services, Inc. 10,900 212,550
Tyco International Ltd. 9,500 524,875
<F1> Waste Management, Inc. 5,700 273,956
-------------------------------------------------------------------------
TOTAL 2,986,381
-------------------------------------------------------------------------
COMMUNICATION SERVICES (4.6%)
AT&T Corporation 9,452 552,351
GTE Corporation 4,900 269,500
MCI WorldCom, Inc. 19,548 955,409
-------------------------------------------------------------------------
TOTAL 1,777,260
-------------------------------------------------------------------------
CONSUMER CYCLICAL (11.3%)
Borg-Warner Automotive, Inc. 7,600 281,675
<F1> Federated Department Stores, Inc. 7,300 265,537
Harley-Davidson, Inc. 23,100 678,562
<F1> Kohl's Corporation 19,700 768,300
Lennar Corporation 5,200 116,025
Mattel, Inc. 4,100 114,800
Servicemaster Co. 25,500 557,813
The New York Times Company 19,400 533,500
Tribune Company 9,400 472,938
Wal-Mart Stores, Inc. 11,000 600,875
-------------------------------------------------------------------------
TOTAL 4,390,025
-------------------------------------------------------------------------
CONSUMER STAPLES (18.9%)
Anheuser-Busch Cos., Inc. 6,300 340,200
<F1> Benckiser NV 8,100 403,481
Campbell Soup Company 6,500 326,219
Dial Corp. 15,600 321,750
Hershey Foods Corporation 11,700 800,719
Keebler Foods Company 22,700 590,200
McDonald's Corporation 7,300 435,719
Newell Co. 12,400 571,175
PepsiCo, Inc. 18,000 529,875
Philip Morris Companies, Inc. 9,600 442,200
Procter & Gamble Company 6,900 489,469
The Quaker Oats Company 8,300 489,700
Unilever NV 9,100 557,375
Walgreen Co. 24,100 1,061,906
-------------------------------------------------------------------------
TOTAL 7,359,988
-------------------------------------------------------------------------
M A S O N S T R E E T F U N D S
GROWTH STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
ENERGY (6.4%)
British Petroleum Company PLC 5,900 $514,775
Chevron Corporation 1,700 142,906
Diamond Offshore Drilling, Inc. 9,000 234,000
Exxon Corporation 5,800 407,087
Mobil Corporation 5,200 394,875
<F1> R&B Falcon Corporation 5,700 68,400
Schlumberger Limited 5,900 296,844
Tosco Corporation 12,500 268,750
Transocean Offshore Inc. 5,000 173,438
-------------------------------------------------------------------------
TOTAL 2,501,075
-------------------------------------------------------------------------
FINANCE (6.7%)
Associates First Capital Corporation 3,100 202,275
BankAmerica Corporation 3,800 228,475
Chase Manhattan Corporation 5,200 224,900
Citicorp 2,400 223,050
First Union Corporation 8,900 455,569
Franklin Resources, Inc. 11,500 345,000
Merrill Lynch & Co. 1,800 85,275
Morgan Stanley Dean Witter & Co. 7,700 331,581
The Bank of New York Company, Inc. 7,500 205,313
Travelers Group, Inc. 7,750 290,625
-------------------------------------------------------------------------
TOTAL 2,592,063
-------------------------------------------------------------------------
HEALTHCARE (8.4%)
Bristol-Myers Squibb Company 5,800 602,475
Eli Lilly and Company 6,000 469,875
Guidant Corporation 2,200 163,350
<F1> HEALTHSOUTH Corporation 11,894 125,630
Johnson & Johnson 4,500 352,125
Medtronic, Inc. 7,100 410,913
Merck & Co., Inc. 3,600 466,425
Pfizer, Inc. 4,100 434,344
Warner Lambert Company 3,300 249,150
-------------------------------------------------------------------------
TOTAL 3,274,287
-------------------------------------------------------------------------
TECHNOLOGY (13.0%)
<F1> Cisco Systems, Inc. 10,350 639,759
Compaq Computer Corporation 10,000 316,250
<F1> Fiserv, Inc. 23,550 1,084,772
Hewlett-Packard Company 5,200 275,275
Intel Corporation 5,600 480,200
International Business Machines
Corporation 6,800 870,400
Lucent Technologies, Inc. 6,600 455,813
<F1> Microsoft Corporation 8,600 946,538
-------------------------------------------------------------------------
TOTAL 5,069,007
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
TRANSPORTATION (3.3%)
<F1> AMR Corporation 3,800 $210,660
<F1> FDX Corporation 5,600 252,700
<F1> Midwest Express Holdings, Inc. 12,750 427,126
Southwest Airlines Co. 19,800 396,000
-------------------------------------------------------------------------
TOTAL 1,286,486
-------------------------------------------------------------------------
TOTAL COMMON STOCK 32,177,147
=========================================================================
MONEY MARKET INVESTMENTS (17.7%)
FEDERAL GOVERNMENT AND AGENCIES (0.8%)
Federal Home Loan Mortgage
Corporation, 5.44%, 10/9/98 100,000 $99,879
<F2> Federal Home Loan Mortgage
Corporation, 5.45%, 10/9/98 200,000 199,758
-------------------------------------------------------------------------
TOTAL 299,637
-------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (13.9%)
Associates Corp. of N.A.,
5.70%, 10/1/98 600,000 600,000
Chrysler Financial
Corporation, 5.25%, 11/4/98 1,200,000 1,194,050
<F2> General Electric Capital
Corporation, 5.36%, 10/21/98 1,200,000 1,196,427
<F2> Household Finance,
5.51%, 10/15/98 1,200,000 1,197,429
<F2> Variable Funding Capital Corp.,
5.54%, 10/7/98 1,200,000 1,198,892
-------------------------------------------------------------------------
TOTAL 5,386,798
-------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (3.0%)
<F2> Sears Roebuck Acceptance Corp.,
5.53%, 10/21/98 1,200,000 1,196,313
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 6,882,748
=========================================================================
TOTAL INVESTMENTS (100.4%)
(COST $33,522,954)<F3> 39,059,895
=========================================================================
OTHER ASSETS, LESS LIABILITIES (-0.4%) (158,312)
=========================================================================
TOTAL NET ASSETS (100.0%) $38,901,583
=========================================================================
SEPTEMBER 30, 1998
GROWTH STOCK FUND
<F1> Non-Income Producing
<F2> Partially held by the custodian in a segregated account as collateral for
open futures positions. Information regarding open futures contracts as of
September 30, 1998 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Appreciation
------------------------------------------------------------------------
S&P 500(R) STOCK INDEX
(Total market value at
9/30/98, $4,104,000) 16 12/98 $108,600
<F3> At September 30, 1998, the aggregate cost of securities for federal tax
purposes was $33,522,954 and the net unrealized appreciation of investments
based on that cost was $5,536,941 which is comprised of $6,901,595
aggregate gross unrealized appreciation and $1,364,654 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
GROWTH AND INCOME STOCK FUND
- -----------------------------
GROWTH AND INCOME STOCK FUND
- -----------------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek long-term growth of capital and income by investing
primarily in dividend-paying common stocks.
PORTFOLIO: Primarily common stocks of medium and large companies identified
as strong candidates for significant long-term returns.
STRATEGY: To actively manage a portfolio of selected equity securities with
a goal of out-performing the total return of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500(R) Index").
NET ASSETS: $38,846,628
- --------------------------------------------------------------------------------
The Growth and Income Stock Fund invests mainly in large-capitalization stocks,
with a focus on seeking the best values in the market based on long-term
earnings forecasts. A sector balance very close to that of the S&P 500(R) Index
is normally maintained, with the emphasis on undervalued stocks within each
sector; a valuation discipline mandates the sale of stocks regarded as
overvalued.
Like virtually all equity funds, the Growth and Income Stock Fund has shown a
negative total return over the last six months, as increasing concerns about the
international financial situation have driven markets down. The segment of the
equity market that is the focus of this Fund - value-oriented stocks, rather
than those expected to have the highest growth rates - has been especially weak,
as nervous investors have flocked to industry-leading companies that are
perceived to have the highest quality.
Among the weakest sectors were major banks and global manufacturing companies,
which are especially sensitive to financial and economic problems in Asia and
other emerging markets. Domestic utility and telephone companies have been among
the stronger segments because their income streams are relatively stable. Within
the Fund, the best performing stocks over the last six months have included
Anheuser-Busch and Philip Morris, both consumer-oriented companies whose
products have relatively stable demand. Other good performers were Warner-
Lambert, which benefited from the success of several new drugs, and the Federal
National Mortgage Association, which has no international exposure and benefits
from activity in the domestic mortgage market.
The Growth and Income Stock Fund is managed for Northwestern Mutual Investment
Services, LLC by J.P. Morgan Investment Management, Inc.
SECTOR ALLOCATION
9/30/98
- ----------------------------------------------
Finance 17%
Technology 14%
Basic Materials/Capital Goods 13%
Consumer Staples 13%
Healthcare 10%
Communications Services 9%
Consumer Cyclicals 9%
Energy 8%
Other Industries 6%
Other Assets 1%
TOP 10 HOLDINGS
9/30/98
Company % Net Assets
- ----------------------------------------------
MCI WorldCom, Inc. 3.3%
SBC Communications, Inc. 3.2%
Monsanto Company 3.1%
Philip Morris Companies, Inc. 3.0%
Merck & Co., Inc. 3.0%
EMC Corporation 2.9%
Union Pacific Corporation 2.8%
Atlantic Richfield Company 2.8%
BankAmerica Corporation 2.7%
Sun Microsystems, Inc. 2.6%
SEPTEMBER 30, 1998
GROWTH AND INCOME STOCK FUND
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C>
GROWTH AND INCOME STOCK FUND CLASS A 9,524 12,152 13,514 12,167
GROWTH AND INCOME STOCK FUND CLASS B 10,000 12,720 14,096 12,649
GROWTH AND INCOME STOCK FUND CLASS B REDEMPTION VALUE 12,249
S&P 500 (R) INDEX 10,000 12,618 14,787 13,747
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- --------------------------------------------------------------------
Growth and Income Stock Fund
(Class A - without initial sales charge) 0.12% 17.72%
- --------------------------------------------------------------------
S&P 500(R) Index 8.95% 23.61%
- --------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks. The index cannot be invested in directly
and does not include sales charges.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (98.5%)
BASIC MATERIALS (5.7%)
Allegheny Teledyne, Inc. 10,400 $185,250
Monsanto Company 21,300 1,200,788
Rohm and Haas Company 20,400 567,375
<F1> Stone Container Corporation 31,800 274,275
-------------------------------------------------------------------------
TOTAL 2,227,688
-------------------------------------------------------------------------
CAPITAL GOODS (7.7%)
AlliedSignal, Inc. 20,400 721,650
<F1> Coltec Industries, Inc. 23,200 350,900
Cooper Industries, Inc. 9,300 378,975
General Electric Company 3,100 246,644
Johnson Controls Inc. 3,500 162,750
Republic Services 8,900 173,550
Waste Management, Inc. 19,605 942,265
-------------------------------------------------------------------------
TOTAL 2,976,734
-------------------------------------------------------------------------
COMMUNICATION SERVICES (8.5%)
Frontier Corporation 5,200 142,350
GTE Corporation 11,900 654,500
MCI WorldCom, Inc. 25,970 1,269,272
SBC Communications, Inc. 28,200 1,253,138
-------------------------------------------------------------------------
TOTAL 3,319,260
-------------------------------------------------------------------------
CONSUMER CYCLICAL (8.6%)
Cendant Corporation 20,900 242,963
<F1> Circuit City Stores, Inc. 9,500 316,469
Dayton Hudson Corporation 9,100 325,325
International Game Technology 14,000 259,875
<F1> Kmart Corporation 2,100 25,069
Mattel, Inc. 16,400 459,200
<F1> Mirage Resorts, Incorporated 29,900 500,825
Service Corporation International 16,100 513,188
The Gap, Inc. 3,000 158,250
The TJX Companies, Inc. 13,200 235,125
Wal-Mart Stores, Inc. 5,900 322,288
-------------------------------------------------------------------------
TOTAL 3,358,577
-------------------------------------------------------------------------
CONSUMER STAPLES (13.3%)
American Stores Company 16,100 518,219
Anheuser-Busch Companies, Inc. 13,300 718,200
Campbell Soup Company 7,800 391,463
Comcast Corporation 6,600 309,788
PepsiCo, Inc. 31,800 936,113
Philip Morris Companies, Inc. 25,400 1,169,988
Procter & Gamble Company 10,300 730,656
Ralston Purina Group 7,300 213,525
The Seagram Company Ltd. 5,300 152,044
-------------------------------------------------------------------------
TOTAL 5,139,996
-------------------------------------------------------------------------
M A S O N S T R E E T F U N D S
GROWTH AND INCOME STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
ENERGY (8.1%)
Amoco Company 13,000 $700,375
Atlantic Richfield Company 15,100 1,071,156
British Petroleum Company PLC 63 5,497
<F1> Input/Output, Inc. 55,300 438,944
Occidental Petroleum Corporation 500 10,750
Phillips Petroleum Company 9,000 406,125
Tosco Corporation 23,000 494,500
-------------------------------------------------------------------------
TOTAL 3,127,347
-------------------------------------------------------------------------
FINANCE (16.9%)
Astoria Financial Corporation 3,500 147,438
BankAmerica Corporation 17,200 1,034,150
Bankers Trust New York Corporation 2,900 171,100
Citicorp 5,700 529,744
Fannie Mae 12,300 790,275
First Union Corporation 4,896 250,614
KeyCorp 11,000 317,625
Long Island Bancorp, Inc. 2,700 129,938
Marsh & McLennan Companies, Inc. 6,800 338,300
MBIA, Inc. 8,800 472,450
Norwest Corporation 100 3,581
Starwood Hotels & Resorts 27,279 832,010
UNUM Corporation 12,300 611,156
Washington Mutual, Inc. 19,500 658,125
Wells Fargo & Company 800 284,000
-------------------------------------------------------------------------
TOTAL 6,570,506
-------------------------------------------------------------------------
HEALTHCARE (10.2%)
Bristol-Myers Squibb Company 4,700 488,213
<F1> Forest Laboratories 5,100 175,313
<F1> Genzyme 10,700 386,538
<F1> Humana, Inc. 31,300 512,538
Merck & Co., Inc. 8,900 1,153,106
Pfizer, Inc. 200 21,188
U.S. Surgical Corporation 21,600 900,450
Warner-Lambert Company 4,200 317,100
-------------------------------------------------------------------------
TOTAL 3,954,446
-------------------------------------------------------------------------
TECHNOLOGY (13.6%)
AutoDesk, Inc. 3,100 81,375
<F1> Cisco Systems, Inc. 9,725 601,127
<F1> EMC Corporation 19,400 1,109,438
Intel Corporation 7,000 600,250
International Business
Machines Corporation 7,000 896,000
<F1> Microsoft Corporation 4,300 473,269
<F1> Quantum Corporation 10,900 173,038
Shares/Par Market Value
-------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> Sun Microsystems, Inc. 20,200 $1,006,213
Texas Instruments, Incorporated 6,400 337,600
-------------------------------------------------------------------------
TOTAL 5,278,310
-------------------------------------------------------------------------
TRANSPORTATION (2.8%)
Union Pacific Corporation 25,700 1,095,463
-------------------------------------------------------------------------
UTILITIES (3.1%)
KN Energy 4,300 220,375
Northern States Power Company 9,800 275,013
PP & L Resources, Inc. 20,600 533,025
Wisconsin Energy Corporation 6,100 192,531
-------------------------------------------------------------------------
TOTAL 1,220,944
-------------------------------------------------------------------------
TOTAL COMMON STOCKS 38,269,271
=========================================================================
MONEY MARKET INVESTMENTS (2.1%)
PERSONAL CREDIT INSTITUTIONS (2.1%)
Associates Corp. of N.A. 800,000 $800,000
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 800,000
=========================================================================
TOTAL INVESTMENTS (100.6%)
(COST $42,449,295)<F2> 39,069,271
=========================================================================
OTHER ASSETS, LESS LIABILITIES (-0.6%) (222,643)
=========================================================================
TOTAL NET ASSETS (100.0%) $38,846,628
=========================================================================
<F1> Non-Income Producing
<F2> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $42,449,295 and the net unrealized depreciation of
investments based on that cost was $3,380,024 which is comprised of
$1,955,150 aggregate gross unrealized appreciation and $5,335,174 aggregate
gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
INDEX 500 STOCK FUND
- --------------------
INDEX 500 STOCK FUND
- --------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek investment results that approximate the performance of
the S&P 500(R) Index, by investing in stocks included in the S&P 500(R) Index.
Because the S&P 500(R) Index is an unmanaged index, its return does not reflect
the deduction of expenses that would exist with a mutual fund.
FOCUS: To capture broad market performance, at low cost, by investing in a
portfolio modeled after a broadly based stock index.
NET ASSETS: $55,303,536
- --------------------------------------------------------------------------------
The Index 500 Stock Fund is designed to achieve results that approximate the
performance of the Standard & Poor's 500 Composite Stock Price Index. This
composite of 500 stocks of large companies, compiled by Standard & Poor's
Corporation, is generally regarded as a good proxy for the overall U.S. equity
market. The Fund therefore enables investors to participate in overall
performance of the U.S. equity market. The Fund continues to achieve the
objective of matching the results of the S&P 500(R) before expenses.
SECTOR ALLOCATION
9/30/98
- ---------------------------------------------
Technology 16%
Finance 15%
Consumer Staples 14%
Healthcare 13%
Basic Materials/Capital Goods 12%
Other 12%
Consumer Cyclicals 8%
Energy 7%
S&P 500(R) Index Futures 2%
Other Assets 1%
TOP 10 HOLDINGS
9/30/98
Company % Net Assets
- ---------------------------------------------
Microsoft Corporation 3.3%
General Electric Company 3.1%
Exxon Corporation 2.1%
Merck & Co., Inc. 1.9%
Intel Corporation 1.8%
The Coca-Cola Company 1.7%
Pfizer, Inc. 1.7%
Wal-Mart Stores, Inc. 1.5%
International Business
Machines Corporation 1.5%
Philip Morris Companies, Inc. 1.3%
PERFORMANCE RELATIVE TO S&P 500(R) INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
INDEX 500 STOCK FUND CLASS A 9,524 11,952 13,938 12,933
INDEX 500 STOCK FUND CLASS B 10,000 12,510 14,544 13,450
INDEX 500 STOCK FUND CLASS B REDEMPTION VALUE 13,050
S&P 500(R) INDEX 10,000 12,618 14,787 13,747
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- -----------------------------------------------------------------------
Index 500 Stock Fund
(Class A - without initial sales charge) 8.21% 22.61%
- -----------------------------------------------------------------------
S&P 500(R) Index 8.95% 23.61%
- -----------------------------------------------------------------------
<F1> Fund inception date is 3/31/97. Returns are annualized.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks. The index cannot be invested in directly
and does not include sales charges.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
M A S O N S T R E E T F U N D S
INDEX 500 STOCK FUND
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (97.7%)
BASIC MATERIALS (3.7%)
Air Products & Chemicals, Inc. 1,600 $47,600
Alcan Aluminum Limited 1,500 35,156
Allegheny Teledyne, Inc. 1,300 23,156
Aluminum Co. of America 1,200 85,200
Archer Daniels Midland Company 3,991 66,849
<F1> Armco, Inc. 600 3,000
ASARCO, Inc. 300 5,738
Barrick Gold Corporation 2,500 50,000
Battle Mountain Gold Company 1,400 8,488
Bemis Company, Inc. 400 14,025
<F1> Bethlehem Steel Corporation 800 6,600
B. F. Goodrich Company 500 16,344
Boise Cascade Corporation 400 10,125
Champion International 600 18,788
Cyprus Amax Minerals Co. 600 7,950
Dow Chemical Company 1,500 128,156
E.I. du Pont de Nemours & Company 7,500 420,938
Eastman Chemical Company 500 25,219
Ecolab, Inc. 900 25,594
Engelhard Corp. 1,000 17,688
<F1> FMC Corporation 200 10,313
Freeport-McMoRan Copper & Gold, Inc. 1,200 14,250
Georgia-Pacific Group 600 27,375
Great Lakes Chemical 400 15,550
Hercules, Inc. 600 18,038
Homestake Mining Company 1,400 16,975
Inco Limited 1,100 11,275
International Flavors & Fragrances, Inc. 700 23,100
International Paper Company 2,000 93,250
Louisiana Pacific Corporation 700 14,263
Mead Corp. 700 20,606
Monsanto Company 4,000 225,500
Morton International, Inc. 900 19,688
Nalco Chemical Company 400 11,800
Newmont Mining Corporation 1,058 25,657
Nucor Corp. 600 24,375
Phelps Dodge Corporation 400 20,875
Pioneer Hi-Bred International 1,600 42,000
Placer Dome, Inc. 1,700 23,481
Potlatch Corporation 200 6,813
PPG Industries, Inc. 1,200 65,475
Praxair 1,000 32,688
Reynolds Metals Company 500 25,406
Rohm and Haas Company 1,200 33,375
Sigma-Aldrich Corp. 700 20,213
<F1> Stone Container Corporation 600 5,175
Shares/Par Market Value
-------------------------------------------------------------------------
BASIC MATERIALS (CONTINUED)
Temple-Inland, Inc. 400 $19,150
Union Camp Corporation 500 19,688
Union Carbide Corporation 900 38,813
USX - U.S. Steel Group, Inc. 600 14,325
W.R. Grace & Co. 500 6,219
Westvaco Corporation 700 16,800
Weyerhaeuser Company 1,300 54,844
Willamette Industries Inc. 700 20,081
Worthington Industries 600 7,500
-------------------------------------------------------------------------
TOTAL 2,061,550
-------------------------------------------------------------------------
CAPITAL GOODS (7.9%)
Aeroquip-Vickers, Inc. 200 5,750
AlliedSignal, Inc. 3,800 134,425
AMP, Inc. 1,500 53,625
Avery Dennison Corporation 800 34,950
Ball Corporation 200 7,050
Boeing Company 6,670 228,864
Briggs & Stratton Corporation 200 8,225
Browning-Ferris Industries, Inc. 1,200 36,300
Case Corporation 500 10,875
Caterpillar, Inc. 2,400 106,950
Cincinnati Milacron, Inc. 300 4,631
Cooper Industries, Inc. 800 32,600
Corning, Inc. 1,500 44,156
Crane Co. 450 10,575
Crown Cork & Seal Company, Inc. 800 21,400
Cummins Engine Company, Inc. 300 8,925
Deere & Company 1,600 48,400
Dover Corporation 1,500 46,313
Eaton Corporation 500 31,344
Emerson Electric Co. 2,900 180,525
Fluor Corporation 500 20,531
Foster Wheeler Corporation 200 2,750
General Dynamics Corporation 800 40,150
General Electric Company 21,700 1,726,506
General Signal Corporation 300 10,181
Harnischfeger Industries, Inc. 300 3,375
Honeywell, Inc. 800 51,250
Illinois Tool Works, Inc. 1,700 92,650
Ingersoll-Rand Company 1,050 39,834
Johnson Controls, Inc. 600 27,900
Lockheed Martin Corporation 1,300 131,056
McDermott International, Inc. 400 10,775
Millipore Corp. 300 5,719
Minnesota Mining & Manufacturing Co. 2,700 198,956
Moore Corporation Ltd. 503 5,313
SEPTEMBER 30, 1998
INDEX 500 STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
NACCO Industries, Inc. 100 $10,000
National Service Industries, Inc. 300 9,563
<F1> Navistar International Corp. 500 11,313
Northrop Grumman Corporation 400 29,200
<F1> Owens-Illinois, Inc. 1,000 25,000
PACCAR, Inc. 500 20,594
Pall Corporation 800 17,750
Parker-Hannifin Corporation 750 22,266
Pitney Bowes, Inc. 1,800 94,613
Raychem Corp. 600 14,625
Rockwell International Corporation 1,300 46,963
<F1> Sealed Air Corporation 514 16,384
Tenneco, Inc. 1,100 36,163
Textron, Inc. 1,100 66,688
<F1> Thermo Electron Corporation 1,000 15,063
Thomas & Betts Corporation 400 15,225
Timken Company 400 6,050
Tyco International Ltd. 3,900 215,475
United Technologies Corp. 1,500 114,656
Waste Management, Inc. 3,757 180,571
-------------------------------------------------------------------------
TOTAL 4,390,991
-------------------------------------------------------------------------
COMMUNICATION SERVICES (7.7%)
<F1> Airtouch Communications, Inc. 3,800 216,600
ALLTEL Corporation 1,800 85,275
Ameritech Corporation 7,300 345,838
AT&T Corp. 12,000 701,250
Bell Atlantic Corporation 10,270 497,453
BellSouth Corporation 6,600 496,650
Frontier Corporation 1,100 30,113
GTE Corporation 6,400 352,000
MCI WorldCom, Inc. 11,748 574,221
<F1> Nextel Communications, Inc. 1,800 36,338
SBC Communications, Inc. 12,232 543,560
Sprint Corporation 2,900 208,800
US WEST, Inc. 3,381 177,291
-------------------------------------------------------------------------
TOTAL 4,265,389
-------------------------------------------------------------------------
CONSUMER CYCLICAL (8.4%)
American Greetings Corp. 500 19,781
Armstrong World Industries, Inc. 300 16,050
<F1> AutoZone, Inc. 1,000 24,625
Black & Decker Corporation 600 24,975
Brunswick Corporation 600 7,763
<F1> Cendant Corporation 5,622 65,356
Centex Corporation 400 13,800
Chrysler Corporation 4,300 205,863
Circuit City Stores, Inc. 700 23,319
Shares/Par Market Value
-------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
<F1> Consolidated Stores Corporation 700 $13,738
Cooper Tire & Rubber Company 500 9,000
<F1> Costco Companies, Inc. 1,400 66,325
Dana Corporation 1,078 40,223
Dayton Hudson Corporation 2,900 103,675
Dillard's, Inc. 700 19,819
Dollar General Corp. 1,250 33,281
Dow Jones & Company, Inc. 600 27,900
Dun & Bradstreet Corporation 1,100 29,700
<F1> Federated Department Stores, Inc. 1,400 50,925
Fleetwood Enterprises, Inc. 300 9,056
Ford Motor Company 8,100 380,194
<F1> Fruit of the Loom, Inc. 500 7,531
Gannet Company, Inc. 1,900 101,769
General Motors Corp. 4,400 240,625
Genuine Parts Company 1,150 34,572
Goodyear Tire & Rubber Company 1,000 51,375
Harcourt General 500 24,188
<F1> Harrahs Entertainment 700 9,319
Hasbro, Inc. 900 26,550
Hilton Hotels Corporation 1,600 27,300
Home Depot, Inc. 9,800 387,100
H & R Block, Inc. 700 28,963
IMS Health, Inc. 1,100 68,131
Interpublic Group of Cos., Inc. 900 48,544
ITT Industries, Inc. 800 27,100
J.C. Penney Company, Inc. 1,700 76,394
Jostens, Inc. 200 4,150
Kaufman & Broad Home Corp. 300 7,031
<F1> Kmart Corporation 3,200 38,200
Knight-Ridder, Inc. 500 22,250
Kohl's Corporation 1,000 39,000
Laidlaw Transportation Limited 2,200 20,763
Liz Claiborne, Inc. 400 10,475
Lowe's Companies, Inc. 2,300 73,169
Marriott International 1,700 40,588
Masco Corporation 2,300 56,638
Mattel, Inc. 2,000 56,000
May Department Stores Company 1,500 77,250
Maytag Corporation 600 28,650
<F1> McGraw-Hill Companies Inc. 700 55,475
Meredith Corporation 400 12,800
Meyer Fred, Inc. 1,000 38,875
<F1> Mirage Resorts, Inc. 1,200 20,100
Nike, Inc. 1,900 69,944
Nordstrom, Inc. 1,000 24,750
Omnicom Group 1,100 49,500
Owens Corning 400 13,025
M A S O N S T R E E T F U N D S
INDEX 500 STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Pep Boys - Manny, Moe & Jack 400 $5,350
Pulte Corporation 300 7,369
<F1> Reebok International Ltd. 400 5,425
Russell Corp. 200 5,250
Sears, Roebuck and Co. 2,600 114,888
Service Corporation International 1,700 54,188
Sherwin-Williams Company 1,200 25,950
Snap-On, Inc. 400 12,325
Springs Industries, Inc. 100 3,475
Tandy Corporation 700 37,450
The Gap, Inc. 2,650 139,788
The Limited, Inc. 1,500 32,906
The New York Times Company 1,300 35,750
The Stanley Works 600 17,850
Times Mirror Company 600 31,875
TJX Companies, Inc. 2,100 37,406
<F1> Toys R Us 1,900 30,756
Tribune Company 800 40,250
TRW, Inc. 800 35,500
<F1> Venator Group, Inc. 800 6,950
VF Corporation 800 29,700
Wal-Mart Stores, Inc. 14,900 813,913
Whirlpool Corporation 500 23,500
-------------------------------------------------------------------------
TOTAL 4,651,276
-------------------------------------------------------------------------
CONSUMER STAPLES (14.0%)
Adolph Coors Co. 200 9,188
Alberto-Culver Company 400 9,350
Albertson's, Inc. 1,600 86,600
American Stores Co. 1,800 57,938
Anheuser-Busch Companies, Inc. 3,200 172,800
Avon Products, Inc. 1,800 50,513
BESTFOODS 1,900 92,031
Brown-Forman Corp. 500 30,000
Campbell Soup Company 3,000 150,563
Cardinal Health, Inc. 900 92,925
CBS Corporation 4,800 116,400
<F1> Clear Channel Communications, Inc. 1,600 76,000
Clorox Company 700 57,750
Colgate-Palmolive Co. 2,000 137,000
Comcast Corp. 2,500 117,344
Conagra, Inc. 3,200 86,200
CVS Corporation 2,600 113,913
Darden Restaurant, Inc. 900 14,400
Deluxe Corp. 500 14,219
Fort James Corporation 1,500 49,219
Fortune Brands, Inc. 1,100 32,588
General Mills, Inc. 1,100 77,000
Shares/Par Market Value
-------------------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
Giant Food, Inc. 300 $12,956
Great Atlantic & Pacific Tea Co., Inc. 300 7,275
Hershey Foods Corporation 1,000 68,438
H.J. Heinz Company 2,400 122,700
Kellogg Company 2,700 88,931
Kimberly-Clark Corporation 3,700 149,850
<F1> King World Productions, Inc. 500 13,063
Longs Drug Stores Corp. 300 12,056
McDonald's Corporation 4,600 274,563
<F1> MediaOne Group, Inc. 4,000 177,750
Newell Co. 1,100 50,669
PepsiCo, Inc. 9,900 291,431
Philip Morris Companies, Inc. 16,100 741,606
Procter & Gamble Company 8,900 631,344
Ralston Purina Group 2,100 61,425
Rite Aid Corporation 1,700 60,350
RJR Nabisco Holdings, Inc. 2,200 55,413
R.R. Donnelley & Sons Company 900 31,669
Rubbermaid, Inc. 1,000 23,938
Sara Lee Corporation 3,100 167,400
Supervalue Inc. 800 18,650
Sysco Corporation 2,200 51,838
<F1> Tele Communications, Inc. 3,409 133,377
The Coca-Cola Company 16,400 945,050
The Gillette Company 7,500 286,875
<F1> The Kroger Company 1,700 85,000
The Quaker Oats Company 900 53,100
The Seagram Company Ltd. 2,300 65,981
Time Warner, Inc. 3,900 341,494
<F1> Tricon Global Restaurants, Inc. 1,030 40,170
Tupperware 400 4,700
Unilever NV 4,300 263,375
UST, Inc. 1,200 35,475
<F1> Viacom, Inc. 2,400 139,200
Walgreen Co. 3,300 145,406
Walt Disney Company 13,600 344,250
Wendy's International, Inc. 900 19,969
Winn-Dixie Stores, Inc. 1,000 37,188
Wm. Wrigley Jr. Company 800 60,750
-------------------------------------------------------------------------
TOTAL 7,758,616
-------------------------------------------------------------------------
ENERGY (7.4%)
Amerada Hess Corporation 600 34,613
Amoco Company 6,400 344,800
Anadarko Petroleum Corporation 800 31,450
Apache Corporation 700 18,769
Ashland, Inc. 500 23,125
Atlantic Richfield Company 2,100 148,969
SEPTEMBER 30, 1998
INDEX 500 STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
ENERGY (CONTINUED)
Baker Hughes, Inc. 2,110 $44,178
Burlington Resource, Inc. 1,205 45,037
Chevron Corp. 4,300 361,469
Exxon Corporation 16,300 1,144,056
Halliburton Company 2,900 82,831
Helmerich & Payne, Inc. 300 6,300
Kerr-McGee Corporation 300 13,650
Mobil Corporation 5,200 394,875
Occidental Petroleum Corporation 2,400 51,600
<F1> ORYX Energy Company 700 9,056
Pennzoil Company 300 10,519
Phillips Petroleum Company 1,700 76,713
<F1> Rowan Companies, Inc. 600 6,713
Royal Dutch Petroleum Co., ADR 14,300 681,038
Schlumberger Limited 3,600 181,125
Sun Company, Inc. 600 19,200
Texaco, Inc. 3,600 225,675
Union Pacific Resource Group 1,700 20,931
Unocal Corp. 1,600 58,000
USX-Marathon Group 1,900 67,331
-------------------------------------------------------------------------
TOTAL 4,102,023
-------------------------------------------------------------------------
FINANCE (15.5%)
Aetna, Inc. 1,000 69,500
Allstate Corporation 5,600 233,450
American Express Company 3,100 240,638
American General Corporation 1,710 109,226
American International Group, Inc. 6,975 537,075
Aon Corporation 1,150 74,175
Associates First Capital Corporation 2,272 148,248
Banc One Corporation 4,680 199,485
BankAmerica Corporation 4,500 270,563
BankBoston Corporation 2,000 66,000
Bankers Trust New York Corporation 700 41,300
BB&T Corporation 1,900 56,881
Bear Stearns Cos., Inc. 800 24,750
Capital One 400 41,400
Charles Schwab Corporation 1,800 70,875
Chase Manhattan Corporation 5,700 246,525
CIGNA Corporation 1,400 92,575
Cincinnati Financial Corporation 1,100 33,825
Citicorp 3,000 278,813
Comerica, Inc. 1,050 57,553
Conseco, Inc. 2,033 62,134
Countrywide Credit Industries, Inc. 700 29,138
Fannie Mae 6,900 443,325
Federal Home Loan Mortgage Corp. 4,500 222,469
Fifth Third Bancorp 1,725 99,188
Shares/Par Market Value
-------------------------------------------------------------------------
FINANCE (CONTINUED)
First Chicago NBD Corporation 1,900 $130,150
First Union Corporation 6,420 328,624
Fleet Financial Group, Inc. 1,900 139,531
Franklin Resources, Inc. 1,700 51,000
General Re Corporation 500 101,500
Golden West Financial Corporation 400 32,725
Hartford Financial Services Group, Inc. 1,600 75,900
H.F. Ahmanson & Company 700 38,850
Household International, Inc. 3,219 120,713
Huntington Bancshares, Inc. 1,420 35,678
Jefferson-Pilot Corp. 700 42,350
J.P. Morgan & Company, Inc. 1,200 101,550
KeyCorp 2,900 83,738
Lehman Bros. Holdings, Inc. 800 22,600
Lincoln National Corporation 700 57,575
Loews Corp. 800 67,500
Marsh & McLennan Companies, Inc. 1,700 84,575
MBIA, Inc. 600 32,213
MBNA Corp. 3,300 94,463
Mellon Bank Corporation 1,700 93,606
Mercantile Bancorp 1,000 48,375
Merrill Lynch & Co. 2,300 108,963
MGIC Investment Corp. 800 29,500
Morgan Stanley Dean Witter & Co. 3,955 170,313
National City Corp. 2,200 145,063
NationsBank Corp. 6,387 341,705
Northern Trust Corp. 700 47,775
Norwest Corporation 5,000 179,063
PNC Bank Corp. 2,000 90,000
Progressive Corporation 500 56,375
Provident Cos., Inc. 900 30,375
Providian Financial Corporation 600 50,888
Regions Financial Corp. 1,400 50,750
Republic New York Corporation 700 27,650
SAFECO, Inc. 900 37,519
Slm Holding Corp. 1,100 35,681
State Street Corporation 1,100 60,019
St. Paul Companies, Inc. 1,582 51,415
Summit Bancorp 1,200 45,000
SunAmerica, Inc. 1,300 79,300
Suntrust Banks, Inc. 1,400 86,800
Synovus Financial Corp. 1,750 34,563
The Bank of New York Company, Inc. 5,000 136,875
The Chubb Corporation 1,100 69,300
Torchmark Corporation 900 32,344
Transamerica Corporation 400 42,400
Travelers Group, Inc. 7,597 284,888
UNUM Corporation 900 44,719
M A S O N S T R E E T F U N D S
INDEX 500 STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
FINANCE (CONTINUED)
U.S. Bancorp 4,959 $176,354
Wachovia Corporation 1,400 119,350
Washington Mutual, Inc. 2,610 88,088
Wells Fargo & Company 600 213,000
-------------------------------------------------------------------------
TOTAL 8,498,362
-------------------------------------------------------------------------
HEALTHCARE (12.5%)
Abbott Laboratories, Inc. 10,300 447,406
Allergan, Inc. 400 23,350
<F1> Alza Corporation 600 26,025
American Home Products Corporation 8,700 455,663
<F1> Amgen, Inc. 1,700 128,456
Bausch & Lomb, Inc. 400 15,750
Baxter International, Inc. 1,900 113,050
Becton, Dickinson & Company 1,600 65,800
Biomet, Inc. 700 24,281
<F1> Boston Scientific Corp. 1,300 66,788
Bristol-Myers Squibb Company 6,600 685,575
Columbia/HCA
Healthcare Corporation 4,300 86,269
C.R. Bard, Inc. 400 14,750
Eli Lilly and Company 7,400 579,513
Guidant Corporation 1,000 74,250
HCR Manor Care Inc. 400 11,725
<F1> HEALTHSOUTH Corporation 2,800 29,575
<F1> Humana, Inc. 1,100 18,013
Johnson & Johnson 8,900 696,425
Mallinckrodt, Inc. 500 10,156
Medtronic, Inc. 3,100 179,413
Merck & Co., Inc. 7,900 1,023,544
Pfizer, Inc. 8,700 921,656
Pharmacia & Upjohn, Inc. 3,400 170,638
Schering-Plough Corporation 4,900 507,456
<F1> St. Jude Medical, Inc. 600 13,875
<F1> Tenet Healthcare Corp. 2,000 57,500
<F1> United Healthcare Corp. 1,300 45,500
U.S. Surgical Corporation 500 20,844
Warner-Lambert Company 5,400 407,700
-------------------------------------------------------------------------
TOTAL 6,920,946
-------------------------------------------------------------------------
TECHNOLOGY (16.1%)
<F1> 3COM Corporation 2,400 72,150
Adobe Systems, Inc. 400 13,875
<F1> Advanced Micro Devices, Inc. 900 16,706
Alcatel 571 9,699
<F1> Andrew Corporation 600 7,950
<F1> Apple Computer, Inc. 900 34,313
<F1> Applied Materials, Inc. 2,400 60,600
<F1> Ascend Communications, Inc. 1,300 59,150
Autodesk, Inc. 300 7,875
Shares/Par Market Value
-------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Automatic Data Processing, Inc. 2,000 $149,500
<F1> Cabletron Systems, Inc. 1,100 12,375
<F1> Ceridian Corp. 500 28,688
<F1> Cisco Systems, Inc. 10,150 627,397
Compaq Computer Corporation 10,985 347,401
Computer Associates International, Inc. 3,600 133,200
<F1> Computer Sciences Corp. 1,000 54,500
<F1> Data General Corporation 300 3,263
<F1> Dell Computer Corp. 8,600 565,450
Eastman Kodak Company 2,100 162,356
EG&G, Inc. 300 6,788
Electronic Data Systems 3,300 109,519
<F1> EMC Corporation 3,300 188,719
Equifax, Inc. 1,000 35,688
First Data Corporation 3,000 70,500
<F1> Gateway 2000, Inc. 1,000 52,125
<F1> General Instrument Corporation 1,000 21,625
Harris Corporation 500 16,000
HBO & Company 2,900 83,738
Hewlett-Packard Company 6,900 365,269
Ikon Office Solutions 800 5,750
Intel Corporation 11,300 968,975
International Business
Machines Corporation 6,300 806,400
<F1> KLA-Tencor Corporation 600 14,925
<F1> LSI Logic Corp. 900 11,363
Lucent Technologies, Inc. 8,700 600,844
<F1> Micron Technology 1,400 42,613
<F1> Microsoft Corporation 16,400 1,804,972
Motorola, Inc. 4,000 170,750
<F1> National Semiconductor Corporation 1,000 9,688
Northern Telecom Limited 4,380 140,160
<F1> Novell, Inc. 2,300 28,175
<F1> Oracle Corporation 6,450 187,856
<F1> Parametric Technology Company 1,800 18,113
Perkin-Elmer Corporation 300 20,606
Polaroid Corporation 300 7,369
Raytheon Company Class B 2,300 124,056
Scientific-Atlanta, Inc. 500 10,563
<F1> Seagate Technology Inc. 1,600 40,100
Shared Medical Systems Corp. 200 10,638
<F1> Silicon Graphics 1,300 12,188
Sun Microsystems, Inc. 2,500 124,531
Tektronix, Inc. 300 4,650
<F1> Tellabs, Inc. 1,300 51,756
Texas Instruments, Inc. 2,600 137,150
<F1> Unisys Corporation 1,700 38,675
W.W. Grainger, Inc. 600 25,275
Xerox Corporation 2,200 186,450
-------------------------------------------------------------------------
TOTAL 8,921,010
-------------------------------------------------------------------------
SEPTEMBER 30, 1998
INDEX 500 STOCK FUND
Shares/Par Market Value
-------------------------------------------------------------------------
TRANSPORTATION (1.0%)
<F1> AMR Corporation 1,200 $66,525
Burlington Northern Santa Fe 3,100 99,200
CSX Corporation 1,500 63,094
Delta Air Lines, Inc. 500 48,625
<F1> FDX Corporation 960 43,320
Norfolk Southern Corporation 2,500 72,656
Ryder System, Inc. 500 12,438
Southwest Airlines Co. 2,225 44,500
Union Pacific Corporation 1,600 68,200
<F1> US Airways Group, Inc. 700 35,438
-------------------------------------------------------------------------
TOTAL 553,996
-------------------------------------------------------------------------
UTILITIES (3.5%)
<F1> Ameren Corporation 900 37,744
American Electric Power Co., Inc. 1,300 63,456
Baltimore Gas & Electric Co. 1,000 33,375
Carolina Power & Light Company 1,000 46,188
Central & South West Corporation 1,400 39,988
Cinergy Corporation 1,000 38,250
Coastal Corp. 1,400 47,250
Columbia Energy Group 550 32,244
<F1> Consolidated Edison Co. of New York 1,600 83,400
Consolidated Natural Gas Company 600 32,700
DTE Energy Company 1,000 45,188
Dominion Resources, Inc. 1,300 58,013
Duke Energy Corp. 2,431 160,902
Eastern Enterprises 100 4,213
Edison International 2,400 61,650
Enron Corp. 2,200 116,188
Entergy Corporation 1,600 49,200
FirstEnergy Corp. 1,500 46,594
FPL Group, Inc. 1,200 83,625
GPU, Inc. 800 34,000
Houston Industries, Inc. 1,973 61,410
<F1> Niagara Mohawk Power Corporation 1,200 18,450
Nicor, Inc. 300 12,431
Northern States Power Company 1,000 28,063
ONEOK, Inc. 200 6,800
PacifiCorp 2,000 38,375
PECO Energy Company 1,500 54,844
Peoples Energy Corporation 200 7,200
PG&E Corp. 2,500 79,844
P P & L Resources, Inc. 998 25,823
Public Service Enterprise Group, Inc. 1,500 58,969
<F1> Sempra Energy 1,551 40,423
Sonat Inc. 700 20,913
Southern Company 4,600 135,413
Texas Utilities Company 1,867 86,932
Shares/Par Market Value
-------------------------------------------------------------------------
UTILITIES (CONTINUED)
UNICOM Corp. 1,400 $52,326
Williams Companies, Inc. 2,800 80,500
-------------------------------------------------------------------------
TOTAL 1,922,884
-------------------------------------------------------------------------
TOTAL COMMON STOCK 54,047,043
=========================================================================
MONEY MARKET INVESTMENTS (1.8%)
FEDERAL GOVERNMENT AND AGENCIES (0.5%)
<F2> Federal Home Loan Mortgage
Corporation, 5.45%, 10/9/98 300,000 $299,637
-------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (1.3%)
<F2> Household Finance Company,
5.51%, 10/15/98 300,000 299,357
<F2> Variable Funding, 5.54%, 10/7/98 400,000 399,631
-------------------------------------------------------------------------
TOTAL 698,988
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 998,625
=========================================================================
TOTAL INVESTMENTS (99.5%)
(COST $47,320,193)<F3> 55,045,668
=========================================================================
OTHER ASSETS, LESS LIABILITIES (0.5%) 257,868
=========================================================================
TOTAL NET ASSETS (100.0%) $55,303,536
=========================================================================
ADR - American Depositary Receipt
<F1> Non-Income Producing
<F2> Partially held by the custodian in a segregated account as collateral for
open futures positions. Information regarding open futures contracts as of
September 30, 1998 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Depreciation
-----------------------------------------------------------------------
S&P 500(R) Stock Index
(Total market value at
9/30/98, $1,026,000) 4 12/98 $3,750
<F3> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $47,320,193 and the net unrealized appreciation of
investments based on that cost was $7,725,475 which is comprised of
$10,112,778 aggregate gross unrealized appreciation and $2,387,303
aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
ASSET ALLOCATION FUND
- ---------------------
ASSET ALLOCATION FUND
- ---------------------
- -------------------------------------------------------------------------------
OBJECTIVE: To seek to realize as high a level of total return, including
current income and capital appreciation, as is consistent with reasonable
investment risk. The Fund will follow a flexible policy for allocating assets
among common stocks, bonds and cash.
PORTFOLIO: The normal range of investments is 50-70% stocks, 25-35% bonds and
0-15% cash equivalents. Up to 50% of the stock allocation may be invested in
foreign stocks.
STRATEGY: To adjust the mix between asset sectors to capitalize on the
changing financial markets and economic conditions.
NET ASSETS: $37,282,205
- -------------------------------------------------------------------------------
The Asset Allocation Fund invests in seven categories of assets: large-
capitalization stocks, small-capitalization stocks, foreign stocks, investment-
grade bonds, below investment-grade bonds, convertible securities and cash
equivalents. The proportion of the Fund in each category is adjusted as
appropriate to take advantage of market trends and opportunities, and securities
within each category are actively managed.
During its first year of operation, which ended in March 1998, the Fund was
focused largely on equities, which represented approximately 60% of the Fund's
value during most of that year. In April, a strategic decision was made to
reduce exposure to equities, which appeared to be somewhat overvalued. Since
that time, the proportion of the Fund invested in equities has ranged between
50% and 57%, with equities added during market corrections and sold during
periods of strength. S&P 500(R) Index futures have been used to a limited
degree to facilitate this strategy.
Over the last six months, performance has benefited from a defensive posture
with regard to both credit risk and interest rate risk in the bond segment of
the Fund. At the end of September, 40% of the bond position was in either U.S.
Treasury securities or cash equivalents. A 9% cash position at September 30
mitigates exposure to risk in the stock and bond markets, while providing the
flexibility to take advantage of market downturns.
SECTOR ALLOCATION
9/30/98
- ---------------------------------------------
Large-Cap Stocks 31%
Investment Grade Bonds 27%
Foreign Stocks 11%
Small-Cap Stocks 10%
Cash Equivalents 9%
Below Investment-Grade Bonds 8%
Preferred Stock 4%
SEPTEMBER 30, 1998
ASSET ALLOCATION FUND
PERFORMANCE RELATIVE TO RELEVANT INDICES
<TABLE>
<CAPTION
3/31/97 9/30/97 3/31/98 9/30/98
- -----------------------------------------------------------------------------------------
<C> <C> <C> <C>
ASSET ALLOCATION STOCK FUND CLASS A 9,524 11,390 12,239 11,355
ASSET ALLOCATION STOCK FUND CLASS B 10,000 11,920 12,769 11,811
ASSET ALLOCATION STOCK FUND CLASS B Redemption Value 11,411
S&P 500(R) INDEX 10,000 12,618 14,787 13,747
MERRILL LYNCH DOMESTIC MASTER INDEX 10,000 10,712 11,205 11,955
MERRILL LYNCH 91-DAY TREASURY BILL 10,000 10,272 10,536 10,824
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- ------------------------------------------------------------------------
Asset Allocation Fund
(Class A - without initial sales charge) -0.31% 12.43%
- ------------------------------------------------------------------------
S&P 500(R) Index 8.95% 23.61%
- ------------------------------------------------------------------------
Merrill Lynch Domestic Master Index 11.61% 12.63%
- ------------------------------------------------------------------------
Merrill Lynch 91-Day Treasury Bill 5.36% 5.41%
- ------------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
In the graph, the Fund is compared against three indices representing the three
major components of the Fund: equities, fixed income and cash equivalent
investments. The indices cannot be invested in directly and do not include sales
charges.
The Merrill Lynch Domestic Master Index is an unmanaged market value weighted
index comprised of U.S. government, mortgage and investment-grade corporate
bonds. The index measures the income provided by, and the price changes of, the
underlying securities.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
Investors should be aware of the risks of investments in foreign securities,
particularly investments in securities of companies in developing nations. These
include the risks of currency fluctuation, of political and economic instability
and of less well-developed government supervision and regulation of business and
industry practices, as well as differences in accounting standards. Small-cap
stocks also may carry additional risk. Smaller or newer issuers are more likely
to realize more substantial growth as well as suffer more significant losses
than larger or more established issuers. Investments in such companies can be
both more volatile and more speculative.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK (44.6%)
DOMESTIC COMMON STOCK (34.0%)
SMALL CAP COMMON STOCK (9.6%)
BUSINESS SERVICES (1.4%)
<F1> Administaff, Inc. 1,000 $31,937
Carriage Services, Inc. 1,900 46,906
<F1> Interim Services, Inc. 1,700 34,956
<F1> Metzler Group, Inc. 1,250 42,813
<F1> O'Reilly Automotive Inc. 3,600 130,500
<F1> Robert Half International, Inc. 3,500 151,156
Service Corporation International 900 28,687
<F1> Steiner Leisure Ltd. 2,250 35,156
Stewart Enterprises, Inc. 800 13,400
-------------------------------------------------------------------------
TOTAL 515,511
-------------------------------------------------------------------------
CAPITAL GOODS (0.6%)
<F1> Ivex Packaging Corporation 2,200 31,900
Kaydon Corporation 3,200 84,200
<F1> Kellstrom Industries, Inc. 700 9,712
Omniquip International, Inc. 3,600 33,750
<F1> TriStar Aerospace Co. 1,800 17,325
<F1> Triumph Group, Inc. 1,200 35,700
-------------------------------------------------------------------------
TOTAL 212,587
-------------------------------------------------------------------------
CONSUMER CYCLICAL (0.7%)
Galileo International, Inc. 1,300 49,075
Industrial Distribution Group, Inc. 1,100 6,944
<F1> Jones Apparel Group, Inc. 4,200 96,338
<F1> K&G Men's Center, Inc. 2,600 16,900
<F1> Michaels Stores, Inc. 2,700 68,850
<F1> VWR Scientific Products Corporation 1,600 40,100
-------------------------------------------------------------------------
TOTAL 278,207
-------------------------------------------------------------------------
CONSUMER STAPLES (0.6%)
<F1> Blyth Industries, Inc. 2,500 68,594
Cardinal Health, Inc. 1,300 134,225
<F1> Golden State Vinters, Inc. 800 7,850
<F1> Lamar Advertising Company 900 25,200
-------------------------------------------------------------------------
TOTAL 235,869
-------------------------------------------------------------------------
ENERGY (0.9%)
<F1> Barrett Resources Corporation 600 12,112
<F1> BJ Services Company 3,600 58,500
<F1> Global Industries, Ltd. 4,300 49,719
<F1> Marine Drilling Companies, Inc. 1,700 19,550
<F1> Nabors Industries, Inc. 2,800 42,525
<F1> Pride International, Inc. 2,200 17,600
Transocean Offshore, Inc. 2,600 90,187
<F1> Weatherford International, Inc. 1,700 36,763
-------------------------------------------------------------------------
TOTAL 326,956
-------------------------------------------------------------------------
M A S O N S T R E E T F U N D S
ASSET ALLOCATION FUND
Shares/Par Market Value
-------------------------------------------------------------------------
FINANCE (1.1%)
Arcadia Financial Ltd., warrants 500 $1,250
ESG Re Limited 2,000 30,250
Financial Security Assurance
Holdings Ltd. 2,200 107,250
Headlands Mortgage Co. 2,900 46,400
Investors Financial Services Corp. 2,400 117,600
<F1> Knight/Trimark Group, Inc. 2,600 21,450
<F1> Trammell Crow Company 2,200 56,100
Waddell & Reed Financial, Inc. 1,600 30,400
-------------------------------------------------------------------------
TOTAL 410,700
-------------------------------------------------------------------------
HEALTHCARE (1.7%)
American HomePatient, Inc. 1,100 2,062
<F1> Lincare Holdings, Inc. 2,800 108,500
NCS HealthCare, Inc. 900 15,863
<F1> Patterson Dental Company 3,350 123,950
<F1> Pharmerica, Inc. 6,800 36,975
Province Healthcare Company 1,800 61,313
<F1> PSS World Medical, Inc. 2,300 42,550
<F1> Quorum Health Group, Inc. 3,950 64,187
<F1> Sybron International Corporation 4,200 80,325
<F1> Wesley Jessen VisionCare, Inc. 3,700 78,625
-------------------------------------------------------------------------
TOTAL 614,350
-------------------------------------------------------------------------
TECHNOLOGY (1.9%)
<F1> Cambridge Technology Partners, Inc. 2,400 53,550
<F1> CBT Group Public Limited Company 1,300 17,550
<F1> Computer Horizons Corporation 1,500 37,406
<F1> Cotelligent Group, Inc. 900 15,806
<F1> GaSonics International Corporation 4,400 18,700
HBO & Company 2,600 75,075
Integrated Process Equipment Corp. 1,700 12,750
KMC Telecommunications Hldgs. 250 125
<F1> PMC-Sierra, Inc. 900 28,688
<F1> Qlogic Corporation 800 52,200
<F1> Semtech Corporation 900 16,762
<F1> Sterling Software, Inc. 2,600 71,662
<F1> Stoneridge, Inc. 3,600 58,275
Teleflex, Inc. 2,300 80,500
<F1> Tellabs, Inc. 900 35,831
<F1> Transaction Systems
Architects, Inc. Cl A 1,300 46,150
<F1> Trident International, Inc. 3,600 33,750
<F1> Uniphase Corporation 1,400 57,400
<F1> World Access, Inc. 700 14,175
-------------------------------------------------------------------------
TOTAL 726,355
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
TRANSPORTATION (0.7%)
<F1> Coach USA, Inc. 1,000 $24,688
<F1> Heartland Express, Inc. 3,500 57,750
<F1> Jevic Transportation, Inc. 3,800 27,075
<F1> Knight Transportation, Inc. 3,450 58,219
Mark VII, Inc. 4,600 70,725
<F1> Swift Transportation Co., Inc. 2,300 39,962
-------------------------------------------------------------------------
TOTAL 278,419
-------------------------------------------------------------------------
TOTAL SMALL CAP COMMON STOCK 3,598,954
-------------------------------------------------------------------------
LARGE CAP COMMON STOCK (24.4%)
BASIC MATERIALS (0.7%)
Ecolab, Inc. 5,400 153,563
Monsanto Company 2,100 118,387
-------------------------------------------------------------------------
TOTAL 271,950
-------------------------------------------------------------------------
CAPITAL GOODS (2.2%)
AlliedSignal, Inc. 1,700 60,137
Avery Dennison Corporation 3,800 166,013
General Electric Company 4,000 318,250
Tyco International Ltd. 3,400 187,850
Waste Management, Inc. 1,600 76,900
-------------------------------------------------------------------------
TOTAL 809,150
-------------------------------------------------------------------------
COMMUNICATION SERVICES (1.3%)
AT&T Corporation 2,397 140,075
GTE Corporation 1,400 77,000
MCI WorldCom, Inc. 5,585 272,967
-------------------------------------------------------------------------
TOTAL 490,042
-------------------------------------------------------------------------
CONSUMER CYCLICAL (2.7%)
Borg-Warner Automotive, Inc. 2,200 81,538
Harley-Davidson, Inc. 6,500 190,938
<F1> Kohl's Corporation 5,600 218,400
Lennar Corporation 1,600 35,700
The New York Times Company Cl A 5,600 154,000
Tribune Company 2,800 140,875
Wal-Mart Stores, Inc. 3,100 169,337
-------------------------------------------------------------------------
TOTAL 990,788
-------------------------------------------------------------------------
CONSUMER STAPLES (5.8%)
Anheuser-Busch Companies, Inc. 1,800 97,200
<F1> Benckiser NV 2,200 109,587
Campbell Soup Company 1,100 55,206
Hershey Foods Corporation 3,300 225,844
Keebler Foods Company 6,500 169,000
McDonald's Corporation 2,100 125,344
Newell Co. 3,600 165,825
PepsiCo, Inc. 5,100 150,131
Philip Morris Companies, Inc. 2,700 124,369
Procter & Gamble Company 2,000 141,875
SEPTEMBER 30, 1998
ASSET ALLOCATION FUND
Shares/Par Market Value
-------------------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
The Dial Corporation 4,300 $88,687
The Quaker Oats Company 1,700 100,300
The ServiceMaster Company 7,350 160,781
Unilever NV 2,600 159,250
Walgreen Co. 6,800 299,625
-------------------------------------------------------------------------
TOTAL 2,173,024
-------------------------------------------------------------------------
ENERGY (1.9%)
British Petroleum Company PLC 1,600 139,600
Chevron Corporation 1,000 84,063
Diamond Offshore Drilling, Inc. 2,500 65,000
Exxon Corporation 1,600 112,300
Mobil Corporation 1,500 113,906
<F1> R&B Falcon Corporation 1,700 20,400
Schlumberger Limited 1,700 85,531
Tosco Corporation 3,600 77,400
-------------------------------------------------------------------------
TOTAL 698,200
-------------------------------------------------------------------------
FINANCE (2.1%)
Associates First Capital Corporation 1,000 65,250
BankAmerica Corporation 1,100 66,138
Chase Manhattan Corporation 1,400 60,550
Citicorp 600 55,762
Concord EFS, Inc. 2,000 51,625
First Union Corporation 2,500 127,969
Franklin Resources, Inc. 3,300 99,000
Morgan Stanley Dean Witter & Co. 2,200 94,737
The Bank of New York Company, Inc. 3,200 87,600
Travelers Group, Inc. 2,400 90,000
-------------------------------------------------------------------------
TOTAL 798,631
-------------------------------------------------------------------------
HEALTHCARE (2.7%)
Bristol-Myers Squibb Company 1,700 176,588
Eli Lilly and Company 1,800 140,962
Guidant Corporation 900 66,825
<F1> HEALTHSOUTH Corporation 3,351 35,394
Johnson & Johnson 1,300 101,725
Medtronic, Inc. 2,000 115,750
Merck & Co., Inc. 1,000 129,562
Pfizer, Inc. 1,500 158,906
Warner-Lambert Company 900 67,950
-------------------------------------------------------------------------
TOTAL 993,662
-------------------------------------------------------------------------
TECHNOLOGY (3.9%)
<F1> Cisco Systems, Inc. 2,850 176,166
Compaq Computer Corporation 2,700 85,387
<F1> Fiserv, Inc. 6,750 310,922
Hewlett-Packard Company 1,300 68,819
Intel Corporation 1,700 145,775
Shares/Par Market Value
-------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
International Business Machines
Corporation 2,000 $256,000
Lucent Technologies, Inc. 1,800 124,312
<F1> Microsoft Corporation 2,500 275,156
-------------------------------------------------------------------------
TOTAL 1,442,537
-------------------------------------------------------------------------
TRANSPORTATION (1.1%)
<F1> AMR Corporation 1,000 55,439
<F1> FDX Corporation 1,400 63,175
<F1> Midwest Express Holdings, Inc. 3,750 125,625
Republic Services, Inc. 3,100 60,450
Southwest Airlines Co. 5,700 114,000
-------------------------------------------------------------------------
TOTAL 418,689
-------------------------------------------------------------------------
TOTAL LARGE CAP COMMON STOCK 9,086,673
-------------------------------------------------------------------------
TOTAL DOMESTIC COMMON STOCK 12,685,627
-------------------------------------------------------------------------
Country Shares/Par Market Value
-------------------------------------------------------------------------
FOREIGN COMMON STOCK (10.6%)
CAPITAL GOODS (0.7%)
British Aerospace U.K. 35,600 215,980
City Development Sing. 23,000 50,513
-------------------------------------------------------------------------
TOTAL 266,493
-------------------------------------------------------------------------
COMMUNICATION SERVICES (0.9%)
KPN NV Neth. 5,000 154,370
Philippines Long Distance
Telephone Company Phil. 6,600 133,650
Telecomunicacoes Brasileiras
S.A. Telebras, ADR Braz. 400,000 59,413
-------------------------------------------------------------------------
TOTAL 347,433
-------------------------------------------------------------------------
CONSUMER CYCLICAL (1.9%)
Electrolux AB Swe. 12,250 161,050
La Rinascente SpA Italy 26,000 228,508
Nintendo C., Inc. Japan 2,800 264,120
-------------------------------------------------------------------------
TOTAL 653,678
-------------------------------------------------------------------------
CONSUMER STAPLES (0.6%)
Nestle S.A. Switz. 120 238,732
-------------------------------------------------------------------------
ENERGY (1.0%)
British Energy PLC U.K. 26,500 259,622
Elf Aquitaine Fr. 1,050 129,451
-------------------------------------------------------------------------
TOTAL 389,073
-------------------------------------------------------------------------
M A S O N S T R E E T F U N D S
ASSET ALLOCATION FUND
Country Shares/Par Market Value
-------------------------------------------------------------------------
FINANCE (0.6%)
Banque Nationale de Paris Fr. 2,900 $155,224
HSBC Holdings PLC U.K. 3,500 64,141
-------------------------------------------------------------------------
TOTAL 219,365
-------------------------------------------------------------------------
HEALTHCARE (1.5%)
Glaxo Wellcome U.K. 10,900 316,751
Novartis Ag-Reg Shs. Switz. 160 256,474
-------------------------------------------------------------------------
TOTAL 573,225
-------------------------------------------------------------------------
MISCELLANEOUS (1.1%)
Getronics NV Neth. 4,800 217,710
Schneider S.A. Fr. 3,500 182,344
-------------------------------------------------------------------------
TOTAL 400,054
-------------------------------------------------------------------------
TECHNOLOGY (1.1%)
Ericsson LM B Swe. 10,000 188,907
Philips Electronics, Inc. Neth. 4,300 231,534
-------------------------------------------------------------------------
TOTAL 420,441
-------------------------------------------------------------------------
TRANSPORTATION (1.2%)
Railtrack Group PLC U.K. 12,000 345,862
TNT Post Group NV Neth. 4,000 101,853
-------------------------------------------------------------------------
TOTAL 447,715
-------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCK 3,956,209
-------------------------------------------------------------------------
TOTAL COMMON STOCK 16,641,835
=========================================================================
PREFERRED STOCK (2.8%)
Primedia, Inc. 5,000 $510,000
Sinclair Capital 5,000 517,500
-------------------------------------------------------------------------
TOTAL 1,027,500
-------------------------------------------------------------------------
FOREIGN PREFERRED STOCK (1.2%)
Porsche AG Ger. 85 148,502
Sixt AG Ger. 2,200 302,748
-------------------------------------------------------------------------
TOTAL 451,250
-------------------------------------------------------------------------
TOTAL PREFERRED STOCK 1,478,750
=========================================================================
BONDS (34.7%)
INVESTMENT-GRADE BONDS (27.1%)
FEDERAL GOVERNMENT AND AGENCIES (16.5%)
Federal National Mortgage
Association, 6%, 5/1/11 $1,229,406 $1,241,700
Government National Mortgage
Association, 8.0%, 10/15/26 566,245 592,286
Government National Mortgage
Association, 8.0%, 8/15/26 222,060 232,272
Government National Mortgage
Association, 8.0%, 7/15/27 132,237 137,779
Shares/Par Market Value
-------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
US Treasury, 0.00%, 2/15/19 PO $1,200,000 $402,072
US Treasury, 6.125%, 8/15/07 1,000,000 1,119,688
US Treasury, 5.625%, 12/31/02 500,000 524,219
US Treasury, 5.375%, 02/15/01 250,000 255,625
US Treasury, 5.375%, 06/30/03 500,000 522,969
US Treasury, 5.50%, 02/29/00 1,100,000 1,114,438
-------------------------------------------------------------------------
TOTAL 6,143,048
-------------------------------------------------------------------------
AUTO RELATED (0.4%)
Team Fleet Financing Co.,
7.35%, 5/15/03, 144A 125,000 132,059
-------------------------------------------------------------------------
COMMERCIAL MORTGAGES (10.2%)
Asset Securitization Corporation,
1.25%, 11/13/26 IO 16,631,507 633,993
Blackrock Capital Finance, Class
B3, 7.25%, 11/25/28 (144A) 190,575 191,394
EMAC Owner Trust,
1.378%, 1/15/23 (144A) IO 6,967,818 521,193
Merrill Lynch Mortgage Investors,
7.12%, 6/18/29 1,500,000 1,578,780
Merrill Lynch Mortgage Investors,
8.10%, 6/25/22 (144A) 500,000 552,530
Midland Realty Acceptance Corp.,
1.389%, 1/25/29 IO (144A) 4,654,260 341,390
-------------------------------------------------------------------------
TOTAL 3,819,280
-------------------------------------------------------------------------
TOTAL INVESTMENT-GRADE BONDS 10,094,387
-------------------------------------------------------------------------
BELOW INVESTMENT-GRADE BONDS (7.6%)
BASIC MATERIALS (0.3%)
Pindo Deli Fin Mauritius,
10.75%, 10/1/07 (144A) 250,000 105,625
-------------------------------------------------------------------------
BROADCASTING (0.6%)
<F2> Fox/Liberty Networks LLC,
9.75%, 8/15/07 350,000 229,250
-------------------------------------------------------------------------
CABLE TELEVISION (0.4%)
<F2> CTI Holdings S.A.,
11.5%, 4/15/08 (144A) 425,000 163,625
-------------------------------------------------------------------------
ENERGY (0.5%)
Gothic Production Corp.,
11.125%, 5/1/05 250,000 180,000
-------------------------------------------------------------------------
SEPTEMBER 30, 1998
ASSET ALLOCATION FUND
Shares/Par Market Value
-------------------------------------------------------------------------
FINANCE COMPANIES (1.1%)
Atcadia Financial Ltd.,
11.50%, 3/15/07 $250,000 $180,000
BF Saul Real Estate,
9.75%, 4/1/08 250,000 220,000
-------------------------------------------------------------------------
TOTAL 400,000
-------------------------------------------------------------------------
FOODS/FOOD SERVICES (0.4%)
Compania Alimentos Fargo,
13.25%, 8/1/08 (144A) 250,000 147,500
-------------------------------------------------------------------------
HEALTHCARE (0.5%)
Vencor Operating, Inc.,
9.875%, 5/1/05 250,000 196,250
-------------------------------------------------------------------------
LEISURE RELATED (1.2%)
Trump Atlantic, 11.25%, 5/1/06 250,000 206,250
Venitian Casino/LV Sands,
12.25%, 11/15/04 250,000 225,000
-------------------------------------------------------------------------
TOTAL 431,250
-------------------------------------------------------------------------
PROFESSIONAL SERVICES (0.4%)
<F2> Decisionone Holdings,
11.50%, 8/1/08 400,000 160,000
-------------------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
<F2> Hyperion Telecommunications,
13.00%, 4/15/03 350,000 239,750
<F2> KMC Telecommunications Hldgs,
12.50%, 2/15/08 250,000 115,000
-------------------------------------------------------------------------
TOTAL 354,750
-------------------------------------------------------------------------
TRANSPORT SERVICES (1.2%)
Navigator Gas Transport,
10.5%, 6/30/07 (144A) 250,000 236,250
Stena Line AB, 10.625%, 6/1/09 250,000 225,000
-------------------------------------------------------------------------
TOTAL 461,250
-------------------------------------------------------------------------
TOTAL BELOW INVESTMENT-GRADE BONDS 2,829,500
-------------------------------------------------------------------------
TOTAL BONDS 12,923,887
=========================================================================
MONEY MARKET INVESTMENTS (16.3%)
FEDERAL GOVERNMENT AND AGENCIES (0.5%)
<F3> Federal Home Loan Mortgage
Corporation, 5.44%, 10/9/98 100,000 $99,879
<F3> Federal Home Loan Mortgage
Corporation, 5.449%, 10/9/98 100,000 99,879
-------------------------------------------------------------------------
TOTAL 199,758
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (12.6%)
Chrysler Financial Corporation,
5.249%, 11/4/98 1,100,000 $1,094,546
General Electric Capital
Corporation, 5.359%, 10/21/98 1,200,000 1,196,427
<F3> General Motors Acceptance
Corp., 5.52%, 10/7/98 1,200,000 1,198,896
<F3> Household Finance
Company, 5.529%, 10/15/98 1,200,000 1,197,429
-------------------------------------------------------------------------
TOTAL 4,687,298
-------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (3.2%)
<F3> Sears Roebuck Acceptance
Corp., 5.529%, 10/21/98 1,200,000 1,196,313
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 6,083,369
=========================================================================
TOTAL INVESTMENTS (99.6%)
(COST $35,744,061)<F4> 37,127,842
=========================================================================
OTHER ASSETS, LESS LIABILITIES (0.4%) 154,363
=========================================================================
TOTAL NET ASSETS (100.0%) $37,282,205
=========================================================================
ADR - American Depositary Receipt
IO - Interest Only Security
PO - Principal Only Security
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold as
transactions exempt from registration, normally to qualified institutional
buyers.
<F1> Non-Income Producing
<F2> Deferred interest security that presently receives no coupon payments. At a
predetermined date the stated coupon rate becomes effective.
<F3> Partially held by the custodian in a segregated account as collateral for
open futures positions. Information regarding open futures contracts as of
September 30, 1998 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Appreciation
-------------------------------------------------------------------------
S&P 500(R) Stock Index
(Total market value at
9/30/98, $2,565,000) 10 12/98 $76,263
<F4> At September 30, 1998, the aggregate cost of securites for federal income
tax purposes was $35,744,061 and the net unrealized appreciation of
investments based on that cost was $1,383,781 which is comprised of
$3,788,426 aggregate gross unrealized appreciation and $2,404,645 aggregate
gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
HIGH YIELD BOND FUND
- --------------------
HIGH YIELD BOND FUND
- --------------------
- -------------------------------------------------------------------------------
OBJECTIVE: To seek high current income and capital appreciation by
investing primarily in fixed income securities that are rated below
investment-grade by the major rating agencies.
PORTFOLIO: Diversified mix of below investment-grade fixed income
securities, commonly known as "junk bonds."
STRATEGY: To identify attractive investment opportunities through rigorous
industry and credit analysis and to generate superior performance by
selecting companies with stable or improving credit fundamentals.
NET ASSETS: $36,171,386
- -------------------------------------------------------------------------------
Investing in a portfolio of high yield bonds provides investors who can accept a
moderate level of risk with a high level of current income, coupled with the
opportunity for capital gains. Holdings of particular interest include solid
investments in entities that have the possibility of a positive event, such as a
significant improvement in credit rating or earnings or a change in ownership.
In a high yield portfolio, some defaults over time are inevitable; high coupons
and diversification across many holdings mitigate the impact of defaults on the
total portfolio.
The turmoil in global securities markets in recent months has created
significant weakness in trading levels of high yield bonds. A series of negative
events in emerging markets, capped by Russia's devaluation of the ruble and
subsequent debt default, have inspired a dramatic global flight to quality. In
fixed income markets, the result has been an extraordinarily wide yield spread
between U.S. Treasury securities (the ultimate quality instrument) and corporate
securities of all types, especially smaller and/or more leveraged high yield
issues. High yield bonds have traded in sympathy with equities, particularly
small-cap and international stocks, whose prices have dropped sharply.
The performance of medium-quality bonds suffered further when highly-leveraged
hedge funds that had made big bets on Russia and emerging markets had to raise
cash quickly to cover losses and meet redemptions. As there was no ready market
for the securities that had suffered the greatest losses, the Funds were forced
to sell higher quality holdings. This situation created an ironic inversion, in
which many higher quality domestic securities traded down very quickly.
In this environment, the Mason Street High Yield Bond Fund has been positioned
somewhat defensively, with good asset quality, moderate credit risk, and above-
average seniority. Although market values have dropped for holdings of many
individual securities, particularly media and telecommunications bonds, the Fund
has had no defaults, and interest payments are current throughout the portfolio.
There is little exposure to highly cyclical industries and only modest exposure
to emerging markets, with no Russian exposure.
Investors should remember that, although the Fund's total return (defined as
income plus change in market value) has been negative for the last six months,
interest payments have continued to provide steady cash flow. As of 9/30/98 the
average market yield of the bonds in the portfolio underlying the Fund was
nearly 14%. This is in a market environment characterized by U.S. Treasury
security yields of less than 5% and stock yields below 2%. The Fund's 30-day SEC
yield at quarter end was 11.91% for Class A (with sales load) and 11.83%
for Class B. In addition, investors in bonds have the issuer's pledge that the
bond will be paid-off at face value at maturity; in contrast, equity investors
are buying participation in future earnings streams, with no guarantees at all.
For investors who want income and are willing to accept some price volatility,
this may be an opportune time to consider investing in high yield securities.
SECTOR ALLOCATION
9/30/98
- ---------------------------------------------
Telecommunications 20%
Broadcasting Media 15%
Consumer Healthcare 14%
Leisure 11%
Basic Materials/Energy 9%
Cable TV 8%
Transportation 6%
Finance 5%
Other 5%
Cash Equivalents 4%
Professional Services 3%
SEPTEMBER 30, 1998
HIGH YIELD BOND FUND
PERFORMANCE RELATIVE TO LEHMAN BROTHERS
HIGH YIELD INTERMEDIATE MARKET INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
HIGH YIELD BOND FUND CLASS A 9,524 11,082 11,710 10,573
HIGH YIELD BOND FUND CLASS B 10,000 11,595 12,209 10,987
HIGH YIELD BOND FUND CLASS B REDEMPTION VALUE 10,616
LEHMAN BROTHERS HIGH YIELD INTERMEDIATE
INDEX MARKET 10,000 10,886 11,447 10,992
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- -----------------------------------------------------------------------
High Yield Bond Fund
(Class A - without initial sales charge) -4.59% 7.21%
- -----------------------------------------------------------------------
Lehman Brothers High Yield
Intermediate Market Index 0.97% 6.50%
- -----------------------------------------------------------------------
<F1> Fund inception date is 3/31/97. Returns are annualized.
The total return performance for the High Yield Bond Fund is shown in comparison
with the Lehman Brothers High Yield Intermediate Market Index. The Lehman
Brothers index is an appropriate measure of portfolio performance since it has a
quality and maturity profile that resembles the High Yield Bond Fund. The index
cannot be invested in directly and does not include sales charges.
The Lehman Brothers High Yield Intermediate Market Index is made up of dollar
denominated, nonconvertible, SEC publicly registered fixed rate noninvestment-
grade issues. The bonds will have remaining maturities of between one and ten
years and have an outstanding par value of at least $100 million. Yankee and
global bonds (SEC registered) of issuers in G-7 countries are included. Original
issue zero coupon bonds and step-up coupon structures are also included;
however, the index excludes pay-in kind (PIK) bonds. Each bond must be rated Ba1
or lower by Moody's Investor Service. If a Moody's rating is unavailable, the
bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if an S&P
rating is unavailable. A few unrated bonds are included in the index; to be
eligible they must have previously held a high yield rating or have been
associated with a high yield issuer. The index is an unmanaged market value
weighted index and measures the income provided by, and the price changes of,
the underlying securities.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
Bonds and other debt obligations are affected by changes in interest rates and
the creditworthiness of their issuers. High yield bonds generally have greater
price swings and higher default risks than investment-grade bonds.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
BONDS (77.6%)
BASIC MATERIALS (1.9%)
PAPER (0.7%)
Indah Kiat Fin Mauritius Ltd.,
10.00%, 7/1/07 $200,000 $87,000
Pindo Deli Fin Mauritius,
10.75%, 10/1/07 350,000 147,875
Tjiwi Kimia Intl Fin Co BV,
13.25%, 8/1/01 65,000 32,500
-------------------------------------------------------------------------
TOTAL 267,375
-------------------------------------------------------------------------
STEEL (1.2%)
Renco Steel Holdings, Inc.,
10.875%, 2/1/05 500,000 425,000
-------------------------------------------------------------------------
TOTAL BASIC MATERIALS 692,375
-------------------------------------------------------------------------
BROADCASTING/MEDIA (4.8%)
BROADCASTING (4.1%)
<F3> Big City Radio, Inc.,
11.25%, 3/15/05 1,200,000 828,000
<F3> Fox Family Worldwide, Inc.,
10.25%, 11/1/07 1,050,000 661,500
-------------------------------------------------------------------------
TOTAL 1,489,500
-------------------------------------------------------------------------
PRINTING AND PUBLISHING (0.7%)
<F3> Diva System Corp.,
12.625%, 3/1/08 750,000 247,500
-------------------------------------------------------------------------
TOTAL BROADCASTING/MEDIA 1,737,000
-------------------------------------------------------------------------
Cable Television (4.1%)
<F3> CTI Holdings, S.A.,
11.50%, 4/15/08 (144A) 325,000 125,125
<F3> NTL, Inc., 9.75%, 4/1/08 (144A) 1,750,000 1,058,750
Supercanal Holdings S.A.,
11.50%, 5/15/05 (144A) 500,000 300,000
-------------------------------------------------------------------------
TOTAL CABLE TELEVISION 1,483,875
-------------------------------------------------------------------------
CONSUMER RELATED (10.8%)
CONSUMER STAPLES (2.0%)
North Atlantic Trading, Inc.,
11.00%, 6/15/04 500,000 470,000
<F3> SF Holdings Group, Inc.,
12.75%, 3/15/08 550,000 242,000
-------------------------------------------------------------------------
TOTAL 712,000
-------------------------------------------------------------------------
FOODS/FOOD SERVICES (6.8%)
Compania De Alimentos Fargo,
13.25%, 8/1/08 (144A) 500,000 295,000
Favorite Brands Int'l, Inc.,
10.75%, 5/15/06 (144A) 850,000 624,750
M A S O N S T R E E T F U N D S
HIGH YIELD BOND FUND
Shares/Par Market Value
------------------------------------------------------------------------
FOODS/FOOD SERVICES (CONTINUED)
Global Health Sciences, Inc.,
11.0%, 5/1/08 (144A) $500,000 $450,000
Iowa Select Farms L.P.,
10.75%, 12/1/05 (144A) 1,000,000 880,000
Planet Hollywood,
12.00%, 4/1/05 400,000 224,000
-------------------------------------------------------------------------
TOTAL 2,473,750
-------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.3%)
<F3> Diamond Brands,
12.875%, 4/15/09 (144A) 250,000 112,500
-------------------------------------------------------------------------
SOAPS & TOILETRIES (1.7%)
AKI, Inc.,
10.50%, 7/1/08 (144A) 250,000 240,000
Styling Technologies,
10.875%, 7/1/08 (144A) 400,000 374,000
-------------------------------------------------------------------------
TOTAL 614,000
-------------------------------------------------------------------------
TOTAL CONSUMER RELATED 3,912,250
-------------------------------------------------------------------------
ENERGY RELATED (6.3%)
OIL AND GAS INDEPENDENT (5.3%)
Belden & Blake Corp.,
9.875%, 6/15/07 800,000 664,000
Chesapeake Energy,
9.625%, 5/1/05 550,000 484,000
Gothic Production Corp.,
11.125%, 5/1/05 1,050,000 756,000
-------------------------------------------------------------------------
TOTAL 1,904,000
-------------------------------------------------------------------------
OIL FIELD SERVICES (1.0%)
Bayard Drilling Technologies,
11.00%, 6/30/05 400,000 356,000
-------------------------------------------------------------------------
TOTAL ENERGY RELATED 2,260,000
-------------------------------------------------------------------------
FINANCE (4.0%)
FINANCE COMPANIES (2.6%)
Arcadia Financial, Ltd.,
11.50%, 3/15/07 750,000 540,000
BF Saul Real Estate,
9.75%, 4/1/08 450,000 396,000
-------------------------------------------------------------------------
TOTAL 936,000
-------------------------------------------------------------------------
INSURANCE (1.4%)
Superior Nat'l Capital Trust I,
10.75%, 12/1/17 500,000 490,000
-------------------------------------------------------------------------
TOTAL FINANCE 1,426,000
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
HEALTHCARE (3.6%)
Magellan Health Services, Inc.,
9.0%, 2/15/08 (144A) $350,000 $297,500
Vencor, Inc., 9.875%, 5/1/05 1,300,000 1,020,500
-------------------------------------------------------------------------
TOTAL HEALTHCARE 1,318,000
-------------------------------------------------------------------------
LEISURE (9.9%)
GAMING (4.3%)
Trump Atlantic, 11.25%, 5/1/06 500,000 412,500
Trump Hotels & Casino Resorts,
15.50%, 6/15/05 500,000 470,000
Venitian Casino/LV Sands,
12.25%, 11/15/04 750,000 675,000
-------------------------------------------------------------------------
TOTAL 1,557,500
-------------------------------------------------------------------------
LEISURE RELATED (1.8%)
<F3> Hedstrom Holdings Inc.,
12.00%, 6/1/09 1,110,000 654,900
-------------------------------------------------------------------------
MOVIE THEATERS (3.8%)
Clearview Cinemas,
10.875%, 6/1/08 (144A) 500,000 528,750
Hollywood Theaters, Inc.,
10.625%, 8/1/07 300,000 273,000
Silver Cinemas,
10.50%, 4/15/05 (144A) 600,000 576,750
-------------------------------------------------------------------------
TOTAL 1,378,500
-------------------------------------------------------------------------
TOTAL LEISURE 3,590,900
-------------------------------------------------------------------------
OTHER INDUSTRIES (3.5%)
AUTO RELATED (0.5%)
Exide Corporation,
2.90%, 12/15/05 (144A) 400,000 198,500
-------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS, APPLIANCES (3.0%)
Albecca Inc.,
10.75%, 8/15/08 (144A) 100,000 96,000
Corning Consumer Products Co.,
9.625%, 5/1/08 (144A) 500,000 407,500
Renter's Choice,
11.0%, 8/15/08 (144A) 600,000 580,500
-------------------------------------------------------------------------
TOTAL 1,084,000
-------------------------------------------------------------------------
TOTAL OTHER INDUSTRIES 1,282,500
-------------------------------------------------------------------------
SEPTEMBER 30, 1998
Shares/Par Market Value
-------------------------------------------------------------------------
SERVICES (3.2%)
PROFESSIONAL SERVICES (3.2%)
<F3> AP Holdings Inc.,
11.25%, 3/15/08 $250,000 $121,250
<F3> Decisionone Holdings,
11.50%, 8/1/08 750,000 300,000
Decisionone Holdings,
9.75%, 8/1/07 450,000 279,000
Federal Data Corp.,
10.125%, 8/1/05 500,000 465,000
-------------------------------------------------------------------------
TOTAL SERVICES 1,165,250
-------------------------------------------------------------------------
TELECOMMUNICATIONS (18.5%)
Arch Communications,
12.75%, 7/1/07 (144A) 1,400,000 1,386,000
<F3> Bestel S.A. De C V,
12.75%, 5/15/05 550,000 319,000
Comtel Brasileira Ltd.,
10.75%, 9/26/04 (144A) 200,000 136,500
<F3> E Spire Communications, Inc.,
10.625%, 7/1/08 (144A) 300,000 153,000
<F3> Firstworld Communications,
13.00%, 4/15/08 (144A) 250,000 76,250
<F3> GST Network Funding, Inc.,
10.50%, 5/1/08 (144A) 1,000,000 480,000
Hyperion Telecommunications,
12.25%, 9/1/04 870,000 852,600
<F3> KMC Telecommunication Hldgs.,
12.50%, 2/15/08 1,750,000 805,000
<F3> Metronet Communications,
10.75%, 11/1/07 550,000 334,126
<F3> Metronet Communications,
9.95%, 6/15/08 1,000,000 550,000
Northeast Optic Network, Inc.,
12.75%, 8/15/08 600,000 558,000
Splitrock Services, Inc.,
11.75%, 7/15/08 (144A) 250,000 227,500
<F3> 21st Century Telecom,
12.25%, 2/15/08 (144A) 500,000 220,000
<F3> Viatel, Inc., 12.50%, 4/15/08 (144A) 500,000 252,500
Viatel, Inc., 11.50%, 4/15/08 (144A) 200,000 179,000
Winstar Equipment,
12.50%, 3/15/04 200,000 182,000
-------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 6,711,476
-------------------------------------------------------------------------
TRANSPORTATION (5.6%)
TRUCKING AND SHIPPING (5.6%)
Greyhound Lines, Inc.,
11.50%, 4/15/07 400,000 424,000
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
TRUCKING AND SHIPPING (CONTINUED)
Navigator Gas Trans PLC,
12.00%, 6/30/07 (144A) $200,000 $209,000
Navigator Gas Trans PLC,
10.50%, 6/30/07 (144A) 400,000 378,000
Stena AB, 8.75%, 6/15/07 250,000 233,750
Stena Line AB, 10.625%, 6/1/08 850,000 765,000
-------------------------------------------------------------------------
TOTAL TRANSPORTATION 2,009,750
-------------------------------------------------------------------------
UTILITIES (1.4%)
Companhia De Saneamento
Basico, 10%, 7/28/05 (144A) 532,000 275,310
Conproca S.A. De C V,
12.00%, 6/16/10 (144A) 250,000 215,000
-------------------------------------------------------------------------
TOTAL UTILITIES 490,310
-------------------------------------------------------------------------
TOTAL BONDS 28,079,686
=========================================================================
PREFERRED STOCK (17.0%)
BROADCASTING/MEDIA (10.4%)
BROADCASTING (7.6%)
<F2> Citadel Broadcasting Co. PIK 2,839 $322,227
Cumulus Media, Inc. 10,860 1,118,580
Sinclair Capital 12,500 1,293,750
-------------------------------------------------------------------------
TOTAL 2,734,557
-------------------------------------------------------------------------
PRINTING AND PUBLISHING (2.8%)
Primedia, Inc. 10,000 1,020,000
-------------------------------------------------------------------------
TOTAL BROADCASTING/MEDIA 3,754,557
-------------------------------------------------------------------------
CABLE TELEVISION (3.7%)
<F2> CSC Holdings, Inc. PIK 11,894 1,332,127
-------------------------------------------------------------------------
ENERGY RELATED (0.4%)
GAS UTILITY (0.4%)
Petroleum Heat & Power Inc. 7,500 161,250
-------------------------------------------------------------------------
FINANCE (0.6%)
BANKS (0.6%)
California Fed Pfd. Capital 8,000 204,500
-------------------------------------------------------------------------
LEISURE RELATED (0.3%)
<F2> Samsonite Corp. PIK (144A) 1,280 96,000
-------------------------------------------------------------------------
TELECOMMUNICATIONS (1.6%)
<F2> Hyperion Telecommunications PIK 3,674 312,290
<F2> Viatel, Inc. PIK 350 17,413
<F2> 21st Century Telecom PIK 3,210 256,800
-------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 586,503
-------------------------------------------------------------------------
TOTAL PREFERRED STOCK 6,134,937
=========================================================================
M A S O N S T R E E T F U N D S
HIGH YIELD BOND FUND
Shares/Par Market Value
-------------------------------------------------------------------------
COMMON STOCK AND WARRANTS (0.3%)
CONSUMERSTAPLES (0.0%)
<F1> SF Holdings Group, Inc. (144A) $1,100 $2,200
-------------------------------------------------------------------------
FINANCE (0.0%)
FINANCE COMPANIES (0.0%)
<F1> Arcadia Financial, Ltd. 1,000 2,500
-------------------------------------------------------------------------
LEISURE (0.3%)
LEISURE RELATED (0.3%)
<F1> Hedstrom Holdings, Inc. (144A) 67,324 84,155
<F1> Samsonite Corp. 1,250 3,750
-------------------------------------------------------------------------
TOTAL LEISURE RELATED 87,905
-------------------------------------------------------------------------
TELECOMMUNICATIONS (0.0%)
<F1> KMC Telecom Holdings, Inc. 1,750 875
<F1> 21st Century Telecom (144A) 3,000 16,500
-------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 17,375
-------------------------------------------------------------------------
TOTAL COMMON STOCK AND WARRANTS 109,985
=========================================================================
MONEY MARKET INVESTMENTS (3.6%)
PERSONAL CREDIT INSTITUTIONS (3.6%)
Associates Corp. of N.A.,
5.7002%, 10/1/98 800,000 $800,000
Chrysler Financial Corp.,
5.25%, 11/4/98 500,000 497,521
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 1,297,521
=========================================================================
TOTAL INVESTMENTS (98.5%)
(COST $40,036,454)<F4> 35,622,129
=========================================================================
OTHER ASSETS, LESS LIABILITIES (1.5%) 549,257
=========================================================================
TOTAL NET ASSETS (100.0%) $36,171,386
=========================================================================
<F1> Non-Income Producing
<F2> PIK - Payment in Kind
<F3> Deferred interest security that presently receives no coupon payments. At a
predetermined date the stated coupon rate becomes effective.
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold as
transactions exempt from registration, normally to qualified institutional
buyers.
<F4> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $40,036,454 and the net unrealized depreciation of
investments based on that cost was $4,414,325 which is comprised of
$496,158 aggregate gross unrealized appreciation and $4,910,483 aggregate
gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
MUNICIPAL BOND FUND
- -------------------
MUNICIPAL BOND FUND
- -------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek a high level of current income exempt from federal income
taxes, consistent with preservation of capital, by investing primarily in
investment-grade municipal obligations.
PORTFOLIO: Diversified investment-grade bonds, with the ability to invest up
to 20% of assets in lower-rated securities.
STRATEGY: To actively manage the portfolio to take advantage of changes in
interest rates, quality, sector and maturity of fixed income securities.
NET ASSETS: $30,493,027
- --------------------------------------------------------------------------------
The Municipal Bond Fund is managed with balanced focus on income, total return,
quality of securities, and avoidance of federal income taxes. There are five
major classes of securities in the Fund: revenue bonds, general obligation
bonds, pre-refunded bonds, insured bonds, and money market investments, which
are cash equivalents. For revenue bonds, interest and principal is paid from
revenue from a specific source which the bonds fund, such as a tollway system or
a municipal power agency. General obligation bonds are secured by the general
credit of the issuing municipality, which can generally raise taxes as necessary
to meet obligations. Insured bonds are guaranteed by insurance companies such as
Municipal Bond Individual Assurance Corporation (MBIA) or the Financial Guaranty
Insurance Company (FGIC).<F1> Pre-refunded bonds are backed by an escrow of
securities, usually U.S. Treasury securities. The securities in the escrow are
selected to meet the interest payments and to pay off the pre-refunded bonds on
their first call date. As indicated in the accompanying chart, the quality of
securities held in the Fund is quite high, with 72% of total market value
invested in bonds that are either insured or have been pre-refunded.
The last six months have been a challenging time for managers of municipal bond
funds, as technical factors, specifically near record supply and lackluster
demand, have dominated performance in this segment of the bond market. Although
municipal bonds have been cheap relative to taxable bonds, there has been little
retail demand, as individual investors have demonstrated a preference for stocks
over low-yielding municipal bonds. The demand for municipal bonds may increase
in the months ahead, as investors respond to the losses recorded in their equity
portfolios during the third quarter of the year by increasing bond holdings.
In this market environment, the Mason Street Municipal Bond Fund has performed
in line with the Lehman Brothers Municipal Bond Index and better than the
majority of similar funds over the last six months. The Fund was helped by
overweightings in three bond categories that performed well: insured bonds,
bonds subject to the alternative minimum tax, and New York bonds, which were
purchased during a period of heavy supply. Partially offsetting these positive
factors were an overweighting in revenue bonds relative to general obligation
bonds, a defensive posture with regard to interest rates (which hurt performance
as rates dropped), and the fact that there has been little change in the spread
between yields of high-quality versus lower-quality municipal bonds. The Fund
remains concentrated in high-quality bonds, which should perform well if the
economy slows substantially in the coming months.
<F1> Insurance applies only to the prompt payment of principal and interest of
the bonds in the Fund and does not remove the market risks associated with
your investment. There is also no guarantee that the insurer will be able
to meet its commitments.
PERCENTAGE HOLDINGS
9/30/98
- ---------------------------------------------
Insured Bonds 50%
Revenue Bonds 28%
Money Market Investments 8%
Pre-refunded Bonds 7%
General Obligation Bonds 7%
M A S O N S T R E E T F U N D S
MUNICIPAL BOND FUND
PERFORMANCE RELATIVE TO LEHMAN BROTHERS
MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
MUNICIPAL BOND FUND CLASS A 9,524 10,263 10,641 11,118
HIGH YIELD BOND FUND CLASS B 10,000 10,735 11,093 11,552
HIGH YIELD BOND FUND CLASS B REDEMPTION VALUE 11,152
LEHMAN BROTHERS MUNICIPAL BOND INDEX 10,000 10,656 11,071 11,584
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- ------------------------------------------------------------------------
Municipal Bond Fund
(Class A - without initial sales charge) 8.34% 10.86%
- ------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index 8.71% 10.29%
- ------------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
The total return performance for the Municipal Bond Fund is shown in comparison
with the Lehman Brothers Municipal Bond Index. The Lehman Brothers index is an
appropriate measure of portfolio performance since it has a quality and maturity
profile that resembles the Municipal Bond Fund. The index cannot be invested in
directly and does not include sales charges.
The Lehman Brothers Municipal Bond Index includes municipal bonds that have: a
minimum credit rating of Baa; been issued as part of an issuance of at least $50
million; a maturity value of at least $3 million; a maturity of at least one
year; and been issued after December 31, 1990. Recently the index included
46,311 issues totaling over $672 billion par amount. The index represents
approximately 30% of the municipal bond market capitalization.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
MUNICIPAL BONDS (92.6%)
CALIFORNIA (3.5%)
California Housing Financing
Agency, 5.75%, 2/1/29 RB,
MBIA, AMT $1,000,000 $1,055,230
-------------------------------------------------------------------------
COLORADO (3.8%)
Douglas County, Colorado School
District RE.1, 6.5%, 12/15/16
GO, PR, MBIA 1,000,000 1,153,820
-------------------------------------------------------------------------
DISTRICT OF COLUMBIA (3.4%)
District of Columbia, 5.1%, 6/1/03
GO, AMBAC 1,000,000 1,048,330
-------------------------------------------------------------------------
FLORIDA (7.3%)
Dade County, Florida,
Water & Sewer, 5.25%,
10/1/26 RB, FGIC 1,000,000 1,034,230
Dade County, Florida,
Seaport, 6.2%, 10/1/10
RB, MBIA 1,000,000 1,182,370
-------------------------------------------------------------------------
TOTAL 2,216,600
-------------------------------------------------------------------------
ILLINOIS (14.5%)
Chicago, Illinois Board of
Education, 6.75%, 12/1/09
GO, AMBAC 1,000,000 1,221,910
Chicago, Illinois O'Hare
International Airport, 5.7%,
1/1/08 RB, MBIA, AMT 1,000,000 1,078,130
Illinois State Sales Tax,
6.375%, 6/15/17 RB 1,000,000 1,138,220
Metropolitan Fair & Exposition
Authority, 5.0%, 6/1/15 RB, BIGI
Insurance purchased by MBIA 1,000,000 1,000,080
-------------------------------------------------------------------------
TOTAL 4,438,340
-------------------------------------------------------------------------
KENTUCKY (3.8%)
Louisville & Jefferson County,
Kentucky Regional Airport
Authority, 6.5%, 7/1/17
RB, MBIA, AMT 1,000,000 1,155,660
-------------------------------------------------------------------------
SEPTEMBER 30, 1998
MUNICIPAL BOND FUND
Shares/Par Market Value
-------------------------------------------------------------------------
MICHIGAN (7.4%)
Nice Community School District,
Michigan, Marquette & Baraga
Counties, 5.25%, 5/1/16
GO, MBIA $1,000,000 $1,036,160
Pinckney Michigan Community
Schools, 7.25%, 5/1/06
GO, FGIC 1,000,000 1,207,170
-------------------------------------------------------------------------
TOTAL 2,243,330
-------------------------------------------------------------------------
MAINE (3.7%)
Regional Waste System Inc.,
ME Solid Waste Res Recovery
Rev, 6.25%, 7/1/11 RB, AMT 1,000,000 1,119,080
-------------------------------------------------------------------------
MINNESOTA (2.8%)
Northern Municipal Power Agency,
Electric Systems, 7.25%,
1/1/16 RB, PR 825,000 849,313
-------------------------------------------------------------------------
NEBRASKA (3.5%)
Nebraska Investment Finance
Authority, Single Family Housing,
6.25%, 3/1/21 RB, AMT, GNMA,
FNMA, FHLMC 990,000 1,066,467
-------------------------------------------------------------------------
NEVADA (3.7%)
Clark County, Nevada, Sanitation
District, 6.8%, 7/1/12 RB, PR 1,000,000 1,115,330
-------------------------------------------------------------------------
NEW YORK (24.7%)
Metropolitan Transportation
Authority, 5.625%,
7/1/25 RB, MBIA 1,000,000 1,082,040
New York City Municipal Water
Finance Authority, 5.75%,
6/15/29 RB 1,000,000 1,086,530
New York State Local Government
Assistance Corporation,
7.0%, 4/1/16 RB, PR 1,000,000 1,099,350
New York St. Dormitory Authority,
5.125%, 2/15/08 RB 1,000,000 1,062,660
New York St. Medical Care
Facility Financing Agency,
5.375%, 2/15/25 RB, FHA 1,000,000 1,027,490
Port Authority of New York and
New Jersey, 5.75%, 12/1/25
RB, AMT, MBIA 1,000,000 1,075,490
The City of New York,
6.0%, 4/15/09 GO 1,000,000 1,120,910
-------------------------------------------------------------------------
TOTAL 7,554,470
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
TEXAS (6.9%)
Brazos, Texas, Higher Education
Authority, 5.5%, 6/1/02
RB, AMT, GTD STD LNS $965,000 $1,012,208
Hays, Texas, Consolidated
Independent School District,
5.875%, 8/15/22 GO PSF 1,000,000 1,102,310
-------------------------------------------------------------------------
TOTAL 2,114,518
-------------------------------------------------------------------------
WASHINGTON (3.6%)
Washington State Public Power
Supply System, 6.5%, 7/1/15
RB, PR 1,000,000 1,112,200
-------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS 28,242,688
-------------------------------------------------------------------------
MONEY MARKET INVESTMENTS (9.5%)
Greensboro, NC, 3.15%, 4/1/10 CP 100,000 $100,000
Greensboro, NC, 2.95%, 4/1/11 CP 200,000 200,000
Greensboro, NC, 3.6%, 4/1/12 CP 100,000 100,000
Greensboro, NC, 3.15%, 4/1/14 CP 900,000 900,000
Harris County, TX Industrial
Development Corporation,
3.15%, 3/1/24 RB 300,000 300,000
Lincoln County, WY
Pollution Control,
3.00%, 7/1/17 RB 300,000 300,000
Missouri State Health,
3.9%, 6/1/15 RB 1,000,000 1,000,000
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,900,000
=========================================================================
TOTAL INVESTMENTS (102.1%)
(COST $29,257,206)<F1> 31,142,688
=========================================================================
OTHER ASSETS, LESS LIABILITIES (-2.1%) (649,661)
=========================================================================
TOTAL NET ASSETS (100.0%) $30,493,027
=========================================================================
<F1> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $29,257,206 and the unrealized appreciation of investments
based on that cost was $1,885,482.
(continued on next page.)
M A S O N S T R E E T F U N D S
MUNICIPAL BOND FUND
CP = Commercial Paper
RB = Revenue Bond
GO = General Obligation
PR = Pre-refunded security will be called on the first call date
(with certainty)
AMT = Subject to the Alternative Minimum Tax
Scheduled principal and interest payments are guaranteed by:
MBIA (Municipal Bond Insurance Organization)
AMBAC (AMBAC Indemnity Corporation)
FGIC (Financial Guaranty Insurance Company)
BIGI (Bond Investors Guarantee Insurance)
GNMA (Government National Mortgage Association)
FNMA (Federal National Mortgage Association)
FHLMC (Federal Home Loan Mortgage Corporation)
FHA (Federal Housing Authority)
GTD STD LNS (Guaranteed Student Loans)
PSF (Permanent School Fund, State of Texas)
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
SELECT BOND FUND
- ----------------
SELECT BOND FUND
- ----------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek high income and capital appreciation, consistent with
preservation of capital.
PORTFOLIO: Diversified investment-grade corporate, Treasury and government
agency bonds, with maturities generally exceeding one year.
STRATEGY: To actively manage the portfolio to take advantage of changes in
interest rates, quality and maturity of fixed income securities.
NET ASSETS: $33,168,643
- --------------------------------------------------------------------------------
The Select Bond Fund invests in high-quality debt securities, primarily
government bonds, corporate bonds and mortgage-backed securities. Exposure to
market sectors is adjusted as yield spreads change among the various classes of
securities. Duration and maturities are altered with moderate adjustments in
recognition or anticipation of interest rate changes.
In recent months the Select Bond Fund has underperformed its benchmark partly
because of a defensive posture on interest rates. This position was adopted
early in 1998 in order to preserve capital, based on the belief that rates were
likely to rise; however, interest rates have continued to decline. Recent
increases in commodity prices, housing costs and medical care costs suggest that
inflation is increasing modestly. The resultant rise in interest rates would be
a negative for bond prices. The portfolio, therefore remains in a defensive
position relative to interest rate risk.
The Fund also suffered from its modest exposure to foreign bonds. Although these
holdings represent a minor portion of the portfolio, dramatic drops in value
have had a pronounced negative impact on the portfolio.
At the end of September, the Fund is overweighted in corporate bonds and
mortgage-backed securities, which are perceived as being undervalued relative to
Treasury bonds. Treasury bonds have experienced dramatic price increases in
recent months as investors sought liquidity. Holdings of corporate bonds were
low, following the sale of some issues which had maintained value as stock
prices declined. This action made a positive contribution to the Fund's
performance. However, recently corporate bond holdings have been increased at
price levels that represent long-term value.
PERCENTAGE HOLDINGS
9/30/98
- ---------------------------------------------
Mortgage-Backed and
Asset-Backed Securities 42%
Government and Government Agencies 36%
Money Market Investments 12%
Corporate Bonds 10%
The Corporate Bonds sector includes bonds of companies headquartered outside the
United States. The Government and Government Agencies category includes taxable
bonds of domestic and foreign governments. Consistent with the Fund's stated
parameters, no more than 15% of the portfolio is invested in foreign securities,
and no more than 15% is invested in high yield securities.
M A S O N S T R E E T F U N D S
SELECT BOND FUND
PERFORMANCE RELATIVE TO
MERRILL LYNCH DOMESTIC MASTER INDEX
<TABLE>
<CAPTION>
3/31/97 9/30/97 3/31/98 9/30/98
- --------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECT BOND FUND CLASS A 9,524 10,358 10,677 10,743
SELECT BOND FUND CLASS B 10,000 10,838 11,134 11,165
SELECT BOND FUND CLASS B REDEMPTION VALUE 10,778
MERRILL LYNCH DOMESTIC MASTER INDEX 10,000 10,712 11,205 11,955
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended September 30, 1998 Year Inception<F1>
- -----------------------------------------------------------------------
Select Bond Fund
(Class A - without initial sales charge) 3.72% 8.35%
- -----------------------------------------------------------------------
Merrill Lynch
Domestic Master Index 11.61% 12.63%
- -----------------------------------------------------------------------
<F1>Fund inception date is 3/31/97. Returns are annualized.
Since the Fund invests broadly in U.S. government, mortgage and corporate bonds,
the graph depicts an appropriate comparison to the Merrill Lynch Domestic Master
Index. The index is an unmanaged market value weighted index comprised of U.S.
government, mortgage and investment-grade corporate bonds. The index measures
the income provided by, and the price changes of, the underlying securities. The
index cannot be invested in directly and does not include sales charges.
This graph assumes an initial investment of $10,000 made in Class A and Class B
shares, with all sales charges on March 31, 1997 (commencement of operations).
Returns shown include fee waivers and deductions for all Fund expenses. In the
absence of fee waivers, total return would be reduced. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Returns on p. 3 reflect the maximum sales charge for Class
A and a 4% contingent deferred sales charge for Class B.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
-------------------------------------------------------------------------
BONDS (87.8%)
CORPORATE BONDS (9.9%)
BANK HOLDING COMPANIES (1.7%)
NationsBank Lease Pass
Thru Trust, Class 1, 7.442%,
1/10/11 (144A) $500,000 $551,485
-------------------------------------------------------------------------
ELECTRIC SERVICES (0.8%)
Comed Financing II, 8.5%, 1/15/27 250,000 280,411
-------------------------------------------------------------------------
FINANCE (2.3%)
<F3> Tokai Preferred Capital Co.
LLC, 9.98%, 12/29/49 (144A) 1,000,000 752,016
-------------------------------------------------------------------------
INDUSTRIAL (1.5%)
<F3> CSC Holdings Inc.,
7.25%, 7/15/08 500,000 496,250
-------------------------------------------------------------------------
INSURANCE (1.6%)
Prudential Insurance Co.,
6.375%, 7/23/06 (144A) 500,000 518,714
-------------------------------------------------------------------------
RETAILERS (1.6%)
LB Mortgage Trust, Class A3,
8.396%, 1/20/17 430,750 516,939
-------------------------------------------------------------------------
TEXTILES (0.4%)
<F2><F3>Polysindo International Finance,
11.375%, 6/15/06 800,000 140,000
-------------------------------------------------------------------------
TOTAL CORPORATE BONDS 3,255,815
-------------------------------------------------------------------------
GOVERNMENT BONDS
(DOMESTIC AND FOREIGN)
AND AGENCY BONDS (35.5%)
FEDERAL GOVERNMENT BONDS (6.7%)
<F1> Hellenic Republic, 8.8%, 6/19/07 150,000,000 532,022
Peru-Flirb Reduction Bond,
3.25%, 3/7/17 1,000,000 462,500
Republic of Argentina Float,
6.187%, 3/31/05 470,000 380,465
Republic of Korea,
8.875%, 4/15/08 1,000,000 859,077
-------------------------------------------------------------------------
TOTAL 2,234,064
-------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (28.8%)
<F2> Federal Home Loan Bank,
6.5%, 1/7/08 450,000 451,792
Federal Home Loan Mortgage
Corporation, 7.5%, 10/1/27 1,550,122 1,597,633
SEPTEMBER 30, 1998
SELECT BOND FUND
Shares/Par Market Value
-------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Federal National Mortgage
Association, 6.22%, 2/1/06 $487,233 $515,852
Federal National Mortgage
Association, 6.39%, 4/1/08 496,897 535,441
Federal National Mortgage
Association, 6.96%, 10/1/07 297,645 331,406
Federal National Mortgage
Association, 7.36%, 4/1/11 486,313 560,893
Federal National Mortgage
Association, 10%, 10/1/17 58,463 65,135
Federal National Mortgage
Association, 11%, 12/1/17 135,501 155,187
Federal National Mortgage
Association, 11%, 12/1/12 54,846 61,017
Federal National Mortgage
Association, 11%, 9/1/17 396,839 453,421
Federal National Mortgage
Association, 11%, 2/1/18 157,195 176,108
Federal National Mortgage
Association, 11.50%, 4/1/18 235,560 267,288
Federal National Mortgage
Association, 12%, 12/1/12 79,856 90,974
Federal National Mortgage
Association, 12%, 12/1/17 113,594 130,421
Federal National Mortgage
Association, 12%, 2/1/18 152,735 175,360
Federal National Mortgage
Association, 12%, 10/1/17 191,214 218,403
Federal National Mortgage
Association, 12%, 9/1/12 418,193 473,997
Federal National Mortgage
Association, 12%, 9/1/17 137,685 157,262
Federal National Mortgage
Association, 12.25%, 1/1/18 77,336 91,604
Federal National Mortgage
Association, 12.50%, 4/1/18 114,476 133,079
Federal National Mortgage
Association, 13%, 12/1/17 83,970 97,747
Federal National Mortgage
Association, 13%, 2/1/18 212,301 247,166
Federal National Mortgage
Association, 13%, 11/1/12 68,220 78,837
Federal National Mortgage
Association, 13%, 11/1/07 260,483 304,765
Federal National Mortgage
Association, 14%, 12/1/17 57,286 68,019
Government National Mortgage
Association, 7.5%, 6/15/28 395,359 409,569
Shares/Par Market Value
-------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage
Association, 8.0%, 12/15/26 $566,093 $592,128
Government National Mortgage
Association, 8.0%, 7/15/27 354,002 368,839
Vendee Mortgage Trust,
Class E, 6.5%, 3/15/29 750,000 755,156
-------------------------------------------------------------------------
TOTAL 9,564,499
-------------------------------------------------------------------------
TOTAL GOVERNMENT AND AGENCY BONDS 11,798,563
-------------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES (42.4%)
COMMERCIAL MORTGAGES (26.3%)
Asset Securitization Corporation,
Class CS1, 1.257%, 11/13/26 IO 16,631,507 633,993
<F3> Chase Commercial Mortgage
Securities Corp., Class A2,
6.60%, 12/12/29 500,000 519,120
<F3> Chase Commercial Mortgage
Securities Corp., Class B,
6.60%, 12/12/29 500,000 519,780
Credit Suisse First Boston Mortgage
Securities Corp., Class B, 9.591%,
4/25/25 (144A) 457,000 554,524
Credit Suisse First Boston Mortgage
Securities Corp., Class A2, 7.26%,
6/20/29 (144A) 244,936 261,198
<F3> Credit Suisse First Boston
Mortgage Securities Corp., Class B,
7.28%, 6/20/29 (144A) 250,000 266,875
<F3> Credit Suisse First Boston Mortgage
Securities Corp., Class D, 7.46%,
6/20/29 (144A) 500,000 533,085
<F3> Criimi Mae Commercial Mortgage
Trust, Class A1, 7.0%, 11/2/06 500,000 508,010
<F3> Commercial Mortgage Acceptance
Corporation, Class B,
6.647%, 12/15/30 500,000 517,400
DLJ Mortgage Acceptance Corp.,
Class S, .3571%, 10/15/17
(144A) IO 29,741,730 786,529
DLJ Mortgage Acceptance Corp.,
Class S, .718%, 2/15/31
(144A) IO 9,951,859 447,336
Merrill Lynch Mortgage
Investors, Inc., Class E,
7.12%, 6/18/29 500,000 505,745
Merrill Lynch Mortgage
Investors, Inc., Class E,
8.097%, 6/25/22 (144A) 500,000 552,530
M A S O N S T R E E T F U N D S
SELECT BOND FUND
Shares/Par Market Value
-------------------------------------------------------------------------
COMMERCIAL MORTGAGES (CONTINUED)
Midland Realty Acceptance Corp.,
Class AEC, 1.389%, 1/25/29
(144A) IO $9,308,520 $682,780
<F3> Nomura Asset Securities Corp.,
6.769%, 3/15/30 200,000 220,726
<F3> Nomura Asset Securities Corp.,
7.349%, 3/15/30 600,000 666,066
<F3> Red Mountain Funding LLC,
Class E, 7.365%, 1/15/19 (144A) 176,000 179,339
<F3> Red Mountain Funding LLC,
Class F, 7.471%, 1/15/19 (144A) 400,000 381,476
-------------------------------------------------------------------------
TOTAL 8,736,512
-------------------------------------------------------------------------
CREDIT CARD ASSET-BACKED (0.8%)
<F3> Iroquois Trust, Class A, 6.752%,
6/25/07 (144A) 250,000 257,752
-------------------------------------------------------------------------
FRANCHISE LOAN RECEIVABLES (5.6%)
EMAC Owner Trust, 1.378%,
1/15/23 (144A) IO 13,935,636 1,042,386
EMAC Owner Trust, Class A2,
6.38%, 4/15/07 (144A) 400,000 404,750
Global Franchise Trust, Class A1,
6.349%, 4/10/04 (144A) 396,042 400,622
-------------------------------------------------------------------------
TOTAL 1,847,758
-------------------------------------------------------------------------
HOME EQUITY LOAN (0.9%)
Amresco Residential Securities,
Class A2, 6.245%, 4/25/22 300,000 302,784
-------------------------------------------------------------------------
MANUFACTURED HOUSING (2.0%)
Mid-State Trust VI, Class A3,
7.54%, 7/1/35 625,413 652,369
-------------------------------------------------------------------------
OTHER ASSET-BACKED (4.3%)
FMAC Loan Receivables Trust
98-A, 6.2%, 9/15/20 281,756 285,454
Harley-Davidson Eaglemark Trust,
Class A2, 5.87%, 4/15/04 300,000 305,062
<F3> Heilig Meyers Master Trust,
6.125%, 1/20/07 500,000 519,930
Newcourt Equipment, Class B,
6.764%, 9/20/04 (144A) 317,777 319,544
-------------------------------------------------------------------------
TOTAL 1,429,990
-------------------------------------------------------------------------
Shares/Par Market Value
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGES (2.5%)
BCF LLC Mortgage Pass Thru
Certificate, Class B3, 7.75%,
3/25/37 (144A) $328,793 $337,483
Blackrock Capital Finance, Class B3,
7.25%, 11/25/28 (144A) 491,119 493,231
-------------------------------------------------------------------------
TOTAL 830,714
-------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES 14,057,879
-------------------------------------------------------------------------
TOTAL BONDS 29,112,257
=========================================================================
MONEY MARKET INVESTMENTS (15.5%)
FEDERAL GOVERNMENT AND AGENCIES (5.0%)
<F2> Federal Home Loan Mortgage
Corporation, 5.449%, 10/9/98 200,000 199,758
U.S. Treasury Bill, 4.475%, 4/1/99 1,500,000 1,467,165
-------------------------------------------------------------------------
TOTAL 1,666,923
------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (10.5%)
<F2> American Express Credit
Corporation, 5.249%, 10/29/98 500,000 497,958
Associates Corp. of N.A.,
5.699%, 10/1/98 1,000,000 1,000,000
<F2> Chrysler Financial Corporation,
5.25%, 11/4/98 1,000,000 995,042
<F2> General Electric Capital
Corporation, 5.359%, 10/21/98 1,000,000 997,022
-------------------------------------------------------------------------
TOTAL 3,490,022
-------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 5,156,945
=========================================================================
TOTAL INVESTMENTS (103.3%)
(COST $34,637,255)<F4> 34,269,202
=========================================================================
OTHER ASSETS, LESS LIABILITIES (-3.3%) (1,100,559)
=========================================================================
TOTAL NET ASSETS (100.0%) $33,168,643
=========================================================================
SEPTEMBER 30, 1998
SELECT BOND FUND
IO - Interest Only Security
144A after the name of a security represents a security exempt from
registration under Rule 144A of the Securities Act of 1933. These securities
may be resold as transactions exempt from registration, normally to qualified
institutional buyers.
<F1> Foreign security denominated in Greek Drachma.
<F2> Defaulted Security
<F3> Partially held by the custodian in a segregated account as collateral for
open futures and forward positions. Information regarding open futures
contracts as of September 30, 1998 is summarized below:
Number of Expiration Unrealized
Issuers Contracts Date Depreciation
-----------------------------------------------------------------------
U.S. Treasury Bond Futures
(Notional Value of
$100,000 per Contract) 60 12/98 $269,253
Forward contracts outstanding at September 30, 1998:
Principal Amount
Covered by Expiration Unrealized
Type Contract Date Depreciation
-----------------------------------------------------------------------
FNMA 1,200,000 10/98 $8,625
<F4> At September 30, 1998, the aggregate cost of securities for federal income
tax purposes was $34,637,255 and the net unrealized depreciation of
investments based on that cost was $368,053 which is comprised of $627,646
aggregate gross unrealized appreciation and $995,699 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
AGGRESSIVE GROWTH STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- -------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $33,453,343) $33,886,250
Money Market Investments (cost $3,191,078) 3,191,078
- --------------------------------------------------------------------------------
37,077,328
- --------------------------------------------------------------------------------
Due from Sale of Securities 565,428
Due from Sale of Fund Shares 21,285
Unamortized Organizational Costs 14,459
Dividends and Interest Receivable 1,616
- --------------------------------------------------------------------------------
TOTAL ASSETS 37,680,116
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 266,878
Due to Investment Advisor 42,322
Accrued Shareholder Servicing Fees 31,595
Other Accrued Liabilities 30,866
Accrued Administrative Fees 5,940
Due on Redemption of Fund Shares 73
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 377,674
- --------------------------------------------------------------------------------
NET ASSETS $37,302,442
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,279,402 shares outstanding) $35,203,207
Undistributed Net Investment Loss (198,092)
Undistributed Accumulated Net
Realized Gain on Investments 1,886,276
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 432,907
Index Futures Contracts (21,856)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,279,402
SHARES OUTSTANDING $37,302,442
================================================================================
Per Share of Class A (Based on 3,014,189
Shares Issued and Outstanding):
OFFERING PRICE $11.95
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.38
================================================================================
Per Share of Class B (Based on 265,213
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.29
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $71,429
Dividends 14,398
- --------------------------------------------------------------------------------
TOTAL INCOME 85,827
- --------------------------------------------------------------------------------
Expenses
Management Fees 160,540
Shareholder Servicing Fees 53,513
Distribution Fees:
Class A 20,072
Class B 10,002
Transfer Agent Fees 28,980
Administrative Fees 21,405
Other Expenses 21,226
Custody Fees 11,978
Registration Fees 1,284
- --------------------------------------------------------------------------------
TOTAL EXPENSES 329,000
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (3,018)
Expenses Reimbursed by Affiliates (42,063)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 283,919
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (198,092)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on Investments 1,845,093
Net Change in Unrealized Depreciation of:
Investment Securities (11,687,704)
Index Futures Contracts (21,856)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (11,709,560)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (9,864,467)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(10,062,559)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
AGGRESSIVE GROWTH STOCK FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Loss $(198,092) $(332,166)
Net Realized Gain on Investments 1,845,093 1,864,006
Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period (11,709,560) 12,120,610
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (10,062,559) 13,652,450
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Realized Gain on Investments _ (1,513,217)
Distributions to Class B Shareholders from Net Realized Gain on Investments _ (45,705)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders _ (1,558,922)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 202,060 and 2,757,479 Shares 2,745,045 28,325,850
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 121,508 shares) _ 1,511,566
Payments for 59,106 and 8,348 Shares Redeemed (728,604) (110,997)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (142,954 and 2,870,635 shares) 2,016,441 29,726,419
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 144,188 and 126,434 Shares 1,940,327 1,647,644
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 3,678 shares) _ 45,607
Payments for 8,547 and 1,140 Shares Redeemed (102,092) (14,873)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (135,641 and 128,972 shares) 1,838,235 1,678,378
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,207,883) 43,498,325
NET ASSETS
Beginning of Period 43,510,325 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT LOSS OF $198,092 AND $0) $37,302,442 $43,510,325
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
AGGRESSIVE GROWTH STOCK FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $14.50 $14.43 $10.00 $10.00
Income from Investment Operations:
Net Investment Loss<F1> (0.06) (0.09) (0.12) (0.21)
Net Realized and Unrealized Gains
(Losses) on Investments (3.06) (3.05) 5.18 5.18
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (3.12) (3.14) 5.06 4.97
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 0.00 0.00
Distributions from Realized Gains on Investments 0.00 0.00 (0.56) (0.54)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (0.56) (0.54)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.38 $11.29 $14.50 $14.43
===================================================================================================================================
TOTAL RETURN<F2> (21.52)% (21.76)% 51.57% 50.59%
===================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
===================================================================================================================================
NET ASSETS, END OF PERIOD $34,307,872 $2,994,570 $41,640,193 $1,870,132
===================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30%<F3> 1.95%<F3> 1.30% 1.95%
===================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.64%<F3> 2.29%<F3> 1.64% 2.29%
===================================================================================================================================
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS (0.88)% <F3> (1.53)% <F3> (0.96)% (1.61)%
===================================================================================================================================
PORTFOLIO TURNOVER RATE 39.03% 39.03% 64.91% 64.91%
===================================================================================================================================
AVERAGE COMMISSION RATE $0.0461 $0.0461 $0.0548 $0.0548
===================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $29,384,733) $22,668,468
Money Market Investments (cost $2,395,238) 2,395,238
Bonds (cost $456,898) 379,256
- --------------------------------------------------------------------------------
25,442,962
- --------------------------------------------------------------------------------
Cash 89,907
Due from Foreign Currency Contracts 1,504,544
Due from Sale of Securities 964,837
Dividends Receivable 146,456
Unamortized Organizational Costs 14,447
Due from Sale of Fund Shares 6,227
- --------------------------------------------------------------------------------
TOTAL ASSETS 28,169,380
- --------------------------------------------------------------------------------
LIABILITIES
Due on Foreign Currency Contracts 1,512,927
Due on Purchase of Securities 603,538
Other Accrued Liabilities 69,264
Due to Investment Advisor 37,815
Accrued Shareholder Servicing Fees 21,761
Accrued Administrative Fees 10,780
Due on Redemption of Fund Shares 333
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 2,256,418
- --------------------------------------------------------------------------------
NET ASSETS $25,912,962
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,108,027 shares outstanding) $31,190,527
Undistributed Net Investment Income 491,488
Undistributed Accumulated Net
Realized Gain on Investments 1,030,655
Net Unrealized Depreciation of:
Investment Securities (6,793,908)
Foreign Currency Transactions (5,800)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,108,027
SHARES OUTSTANDING $25,912,962
================================================================================
Per Share of Class A (Based on
2,872,412 Shares Issued and Outstanding):
OFFERING PRICE $8.76
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $8.34
================================================================================
Per Share of Class B (Based on 235,615
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $8.29
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $44,385) $531,878
Interest 98,516
- --------------------------------------------------------------------------------
TOTAL INCOME 630,394
- --------------------------------------------------------------------------------
Expenses
Management Fees 127,836
Custody Fees 46,378
Shareholder Servicing Fees 37,599
Transfer Agent Fees 26,869
Distribution Fees:
Class A 14,142
Class B 6,734
Administrative Fees 15,040
Audit Fees 9,074
Shareholder Reporting Expenses 6,654
Other Expenses 3,000
Directors Fees 2,550
Professional Fees 2,067
Registration Fees 365
- --------------------------------------------------------------------------------
TOTAL EXPENSES 298,308
- --------------------------------------------------------------------------------
Less:
Expenses Reimbursed by Affiliates (44,282)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 254,026
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 376,368
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on:
Investment Securities 1,005,194
Foreign Currency Transactions (50,227)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 954,967
- --------------------------------------------------------------------------------
Net Change in Unrealized Depreciation of:
Investment Securities (8,215,757)
Foreign Currency Transactions (5,112)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (8,220,869)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (7,265,902)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(6,889,534)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $376,368 $636,372
Net Realized Gain on Investments 954,967 181,411
Net Unrealized Appreciation (Depreciation) of Investments and
Foreign Currency Transactions for the Period (8,220,869) 1,421,161
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (6,889,534) 2,238,944
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income - (575,912)
Distributions to Class B Shareholders from Net Investment Income - (18,152)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders - (594,064)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 150,227 and 2,746,325 Shares 1,523,149 27,522,507
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 59,873 shares) - 575,381
Payments for 61,101 and 23,510 Shares Redeemed (583,529) (244,631)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (89,126 and 2,782,688 shares) 939,620 27,853,257
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 109,963 and 141,383 Shares 1,071,985 1,436,283
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 1,897 shares) - 18,150
Payments for 11,517 and 6,714 Shares Redeemed (105,866) (67,813)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (98,446 and 136,566 shares) 966,119 1,386,620
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,983,795) 30,884,757
NET ASSETS
Beginning of Period 30,896,757 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $491,488 AND $115,120) $25,912,962 $30,896,757
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.58 $10.53 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.13 0.08 0.24 0.10
Net Realized and Unrealized Gains (Losses) on Investments (2.37) (2.32) 0.56 0.63
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (2.24) (2.24) 0.80 0.73
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 (0.22) (0.20)
Distributions from Realized Gains on Investments 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (0.22) (0.20)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.34 $8.29 $10.58 $10.53
====================================================================================================================================
TOTAL RETURN<F2> (21.17)% (21.27)% 8.19% 7.49%
====================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $23,960,358 $1,952,604 $29,451,833 $1,444,924
====================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.65%<F3> 2.30%<F3> 1.65% 2.30%
====================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 2.09%<F3> 2.74%<F3> 2.13% 2.78%
====================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.55%<F3> 1.90%<F3> 2.34% 1.69%
====================================================================================================================================
PORTFOLIO TURNOVER RATE 131.84% 131.84% 10.07% 10.07%
====================================================================================================================================
AVERAGE COMMISSION RATE $0.0223 $0.0223 $0.0016 $0.0016
====================================================================================================================================
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
GROWTH STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $26,640,206) $32,177,147
Money Market Investments (cost $6,882,748) 6,882,748
- --------------------------------------------------------------------------------
39,059,895
- --------------------------------------------------------------------------------
Cash 13,958
Dividends and Interest Receivable 30,309
Unamortized Organizational Costs 14,459
Due from Sale of Fund Shares 8,842
- --------------------------------------------------------------------------------
TOTAL ASSETS 39,127,463
- --------------------------------------------------------------------------------
LIABILITIES
Futures Variation Margin 126,000
Due to Investment Advisor 45,193
Accrued Shareholder Servicing Fees 31,141
Accrued Registration Fees 8,905
Other Accrued Liabilities 8,581
Accrued Administrative Fees 6,060
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 225,880
- --------------------------------------------------------------------------------
NET ASSETS $38,901,583
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,984,087 shares outstanding) $31,273,548
Undistributed Net Investment Income 104,469
Undistributed Accumulated Net
Realized Gain on Investments 1,878,025
Net Unrealized Appreciation of:
Investment Securities 5,536,941
Index Futures Contracts 108,600
- --------------------------------------------------------------------------------
NET ASSETS FOR 2,984,087
SHARES OUTSTANDING $38,901,583
================================================================================
Per Share of Class A (Based on
2,854,891 Shares Issued and Outstanding):
OFFERING PRICE $13.69
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $13.04
================================================================================
Per Share of Class B (Based on 129,196
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $12.94
================================================================================
Statement of Operations
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $182,296
Dividends (less foreign dividend tax of $2,748) 168,117
- --------------------------------------------------------------------------------
TOTAL INCOME 350,413
- --------------------------------------------------------------------------------
Expenses
Management Fees 153,750
Shareholder Servicing Fees 51,250
Distribution Fees:
Class A 19,856
Class B 4,833
Transfer Agent Fees 23,457
Administrative Fees 20,500
Other Expenses 10,901
Custody Fees 9,225
Shareholder Reporting Expenses 5,953
Directors Fees 2,472
Professional Fees 1,590
Registration Fees 945
- --------------------------------------------------------------------------------
TOTAL EXPENSES 304,732
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (1,712)
Expenses Reimbursed by Affiliates (34,042)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 268,978
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 81,435
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 1,196,212
Futures Contracts (486,192)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 710,020
- --------------------------------------------------------------------------------
Net Change in Unrealized
Appreciation (Depreciation) of:
Investment Securities (4,054,683)
Index Futures Contracts 59,631
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (3,995,052)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (3,285,032)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(3,203,597)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
GROWTH STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $81,435 $90,829
Net Realized Gain on Investments 710,020 1,966,059
Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period (3,995,052) 9,640,593
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (3,203,597) 11,697,481
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income - (134,147)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (787,500)
Distributions to Class B Shareholders from Net Investment Income - (1,034)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (10,555)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders - (933,236)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 156,203 and 2,643,059 Shares 2,246,695 26,708,776
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 75,479 shares) - 921,596
Payments for 13,080 and 7,370 Shares Redeemed (185,730) (90,416)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (143,123 and 2,711,168 shares) 2,060,965 27,539,956
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 77,525 and 56,279 Shares 1,094,915 707,826
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 951 shares) - 11,573
Payments for 6,156 and 3 Shares Redeemed (86,259) (41)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (71,369 and 57,227 shares) 1,008,656 719,358
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (133,976) 39,023,559
NET ASSETS
Beginning of Period 39,035,559 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$104,469 AND $23,034) $38,901,583 $39,035,559
====================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
GROWTH STOCK FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $14.10 $14.03 $10.00 $10.00
Income from Investment Operations:
Net Investment Income (Loss)<F1> 0.03 (0.01) 0.04 (0.05)
Net Realized and Unrealized Gains (Losses) on Investments (1.09) (1.08) 4.41 4.41
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.06) (1.09) 4.45 4.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 (0.05) (0.03)
Distributions from Realized Gains on Investments 0.00 0.00 (0.30) (0.30)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (0.35) (0.33)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.04 $12.94 $14.10 $14.03
===================================================================================================================================
TOTAL RETURN<F2> (7.52)% (7.77)% 45.08% 44.12%
===================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $37,230,152 $1,671,431 $38,224,386 $811,173
===================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30%<F3> 1.95%<F3> 1.30% 1.95%
===================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.59%<F3> 2.24%<F3> 1.63% 2.28%
===================================================================================================================================
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS 0.42%<F3> (0.23)%<F3> 0.29% (0.36)%
===================================================================================================================================
PORTFOLIO TURNOVER RATE 15.53% 15.53% 37.52% 37.52%
===================================================================================================================================
AVERAGE COMMISSION RATE $0.0534 $0.0534 $0.0510 $0.0510
===================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
GROWTH AND INCOME STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $41,649,295) $38,269,271
Money Market Investments (cost $800,000) 800,000
- --------------------------------------------------------------------------------
39,069,271
- --------------------------------------------------------------------------------
Due from Sale of Securities 655,003
Dividends and Interest Receivable 59,810
Due from Sale of Fund Shares 16,932
Unamortized Organizational Costs 14,459
- --------------------------------------------------------------------------------
TOTAL ASSETS 39,815,475
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 871,677
Due to Investment Advisor 38,385
Accrued Shareholder Servicing Fees 30,556
Other Accrued Liabilities 12,768
Accrued Registration Fees 9,543
Accrued Administrative Fees 5,918
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 968,847
- --------------------------------------------------------------------------------
NET ASSETS $38,846,628
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,472,005 shares outstanding) $36,147,684
Undistributed Net Investment Income 94,085
Undistributed Accumulated Net
Realized Gain on Investments 5,984,883
Net Unrealized Depreciation of
Investment Securities (3,380,024)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,472,005
SHARES OUTSTANDING $38,846,628
================================================================================
Per Share of Class A (Based on
3,220,598 Shares Issued and Outstanding):
OFFERING PRICE $11.76
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.20
================================================================================
Per Share of Class B (Based on 251,407
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.10
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends $283,693
Interest 31,564
- --------------------------------------------------------------------------------
TOTAL INCOME 315,257
- --------------------------------------------------------------------------------
Expenses
Management Fees 132,587
Shareholder Servicing Fees 50,995
Distribution Fees:
Class A 19,274
Class B 8,431
Transfer Agent Fees 24,222
Administrative Fees 20,398
Custody Fees 16,229
Audit Fee Expense 8,023
Shareholder Reporting Expense 5,962
Other Expenses 3,225
Directors Fees 2,472
Professional Fees 1,592
Registration Fees 1,170
- --------------------------------------------------------------------------------
TOTAL EXPENSES 294,580
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (1,919)
Expenses Reimbursed by Affiliates (42,491)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 250,170
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 65,087
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net Realized Gain on Investments 3,580,847
Net Change in Unrealized Depreciation
of Investments for the Period (7,946,373)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (4,365,526)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(4,300,439)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
GROWTH AND INCOME STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $65,087 $116,137
Net Realized Gain on Investments 3,580,847 6,264,818
Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period (7,946,373) 4,566,349
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (4,300,439) 10,947,304
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income - (152,006)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (3,768,242)
Distributions to Class B Shareholders from Net Investment Income - (2,604)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (92,540)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders - (4,015,392)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 201,476 and 2,700,758 Shares 2,513,320 27,377,915
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 366,764 shares) - 3,917,041
Payments for 19,193 and 29,807 Shares Redeemed (240,696) (358,157)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (182,283 and 3,037,715 shares) 2,272,624 30,936,799
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 139,696 and 116,172 Shares 1,685,115 1,379,764
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 8,931 shares) _ 95,020
Payments for 11,885 and 2,107 Shares Redeemed (140,290) (25,877)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (127,811 and 122,996 shares) 1,544,825 1,448,907
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (482,990) 39,317,618
NET ASSETS
Beginning of Period 39,329,618 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $94,085 AND $28,998) $38,846,628 $39,329,618
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
GROWTH AND INCOME STOCK FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $12.44 $12.37 $10.00 $10.00
Income from Investment Operations:
Net Investment Income (Loss)<F1> 0.02 0.01 0.04 (0.03)
Net Realized and Unrealized Gains
(Losses) on Investments (1.26) (1.28) 3.90 3.88
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.24) (1.27) 3.94 3.85
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 (0.06) (0.04)
Distributions from Realized Gains on Investments 0.00 0.00 (1.44) (1.44)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (1.50) (1.48)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.20 $11.10 $12.44 $12.37
===================================================================================================================================
TOTAL RETURN<F2> (9.97)% (10.27)% 41.90% 40.96%
===================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $36,056,429 $2,790,199 $37,800,412 $1,529,206
===================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.20%<F3> 1.85%<F3> 1.20% 1.85%
===================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.54%<F3> 2.19%<F3> 1.57% 2.22%
===================================================================================================================================
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS 0.35%<F3> (0.30)% <F3> 0.37% (0.28)%
===================================================================================================================================
PORTFOLIO TURNOVER RATE 98.53% 98.53% 140.29% 140.29%
===================================================================================================================================
AVERAGE COMMISSION RATE $0.042 $0.042 $0.0440 $0.0440
===================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
INDEX 500 STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- -------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $46,321,568) $54,047,043
Money Market Investments (cost $998,625) 998,625
- -------------------------------------------------------------------------------
55,045,668
- -------------------------------------------------------------------------------
Cash 160,037
Due from Sale of Fund Shares 136,596
Dividends and Interest Receivable 78,806
Unamortized Organizational Costs 14,459
Due from Sale of Securities 58
- -------------------------------------------------------------------------------
TOTAL ASSETS 55,435,624
- -------------------------------------------------------------------------------
LIABILITIES
Accrued Shareholder Servicing Fees 41,854
Futures Variation Margin 31,500
Due to Investment Advisor 21,361
Other Accrued Liabilities 16,353
Accrued Registration Fees 12,702
Accrued Administrative Fees 8,318
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 132,088
- -------------------------------------------------------------------------------
NET ASSETS $55,303,536
===============================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 4,136,499 shares outstanding) $46,984,572
Undistributed Net Investment Income 382,817
Undistributed Accumulated Net
Realized Gain on Investments 214,421
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 7,725,476
Index Futures Contracts (3,750)
- -------------------------------------------------------------------------------
NET ASSETS FOR 4,136,499
SHARES OUTSTANDING $55,303,536
===============================================================================
Per Share of Class A (Based on
3,465,354 Shares Issued and Outstanding):
OFFERING PRICE $14.06
===============================================================================
NET ASSET VALUE AND REDEMPTION PRICE $13.39
===============================================================================
Per Share of Class B (Based on 671,145
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $13.27
===============================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $4,374) $368,329
Interest 157,804
- -------------------------------------------------------------------------------
TOTAL INCOME 526,133
- -------------------------------------------------------------------------------
Expenses
Management Fees 80,981
Shareholder Servicing Fees 67,484
Distribution Fees:
Class A 23,513
Class B 26,102
Transfer Agent Fees 27,964
Administrative Fees 26,994
Custody Fees 23,375
Other Expenses 8,617
Shareholder Reporting Expenses 8,596
Audit Fees 7,521
Registration Fees 3,632
Directors Fees 2,472
Professional Fees 1,592
- -------------------------------------------------------------------------------
TOTAL EXPENSES 308,843
- -------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (2,177)
Expenses Reimbursed by Affiliates (56,776)
- -------------------------------------------------------------------------------
TOTAL NET EXPENSES 249,890
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 276,243
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 193,042
Index Futures Contracts (318,966)
- -------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS
FOR THE PERIOD (125,924)
- -------------------------------------------------------------------------------
Net Change in Unrealized Depreciation of:
Investment Securities (4,233,501)
Index Futures Contracts (252,525)
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (4,486,026)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (4,611,950)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(4,335,707)
===============================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
INDEX 500 STOCK FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $276,243 $354,941
Net Realized Gain (Loss) on Investments (125,924) 535,402
Net Change in Unrealized Appreciation (Depreciation) of Investments and
Foreign Currency Transactions for the Period (4,486,026) 12,207,752
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (4,335,707) 13,098,095
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income - (300,021)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (183,740)
Distributions to Class B Shareholders from Net Investment Income - (17,018)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (11,318)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders - (512,097)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 477,485 and 3,001,056 Shares 6,913,321 31,280,916
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 39,415 shares) - 482,830
Payments for 32,046 and 21,156 Shares Redeemed (448,831) (254,109)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (445,439 and 3,019,315 shares) 6,464,490 31,509,637
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 389,930 and 311,242 Shares 5,562,067 3,901,288
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 2,318 shares) - 28,306
Payments for 14,715 and 18,230 Shares Redeemed (201,450) (223,093)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (375,215 and 295,330 shares) 5,360,617 3,706,501
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 7,489,400 47,802,136
NET ASSETS
Beginning of Period 47,814,136 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $382,817 AND $106,574) $55,303,536 $47,814,136
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
INDEX 500 STOCK FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $14.43 $14.35 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.08 0.03 0.13 0.05
Net Realized and Unrealized Gains
(Losses) on Investments (1.12) (1.11) 4.48 4.47
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.04) (1.08) 4.61 4.52
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 (0.11) (0.10)
Distributions from Realized Gains on Investments 0.00 0.00 (0.07) (0.07)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (0.18) (0.17)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.39 $13.27 $14.43 $14.35
==================================================================================================================================
TOTAL RETURN<F2> (7.21)% (7.53)% 46.35% 45.44%
==================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $46,394,902 $8,908,634 $43,567,584 $4,246,552
==================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 0.85%<F3> 1.50%<F3> 0.85% 1.50%
==================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.24%<F3> 1.89%<F3> 1.30% 1.95%
==================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.11%<F3> 0.46%<F3> 1.04% 0.39%
==================================================================================================================================
PORTFOLIO TURNOVER RATE 1.66% 1.66% 2.47% 2.47%
==================================================================================================================================
AVERAGE COMMISSION RATE $0.0219 $0.0219 $0.0255 $0.0255
==================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
ASSET ALLOCATION FUND
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $11,204,718) $12,685,627
Bonds (cost $13,094,386) 12,923,887
Foreign Common Stock (cost $3,878,468) 3,956,209
Money Market Investments (cost $6,083,369) 6,083,369
Preferred Stock (cost $1,483,122) 1,478,750
- --------------------------------------------------------------------------------
37,127,842
- --------------------------------------------------------------------------------
Cash 182,853
Dividends and Interest Receivable 251,686
Due from Securities Sold 57,770
Due from Sale of Fund Shares 25,275
Unamortized Organizational Costs 14,459
- --------------------------------------------------------------------------------
TOTAL ASSETS 37,659,885
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 192,062
Futures Variation Margin 78,750
Due to Investment Advisor 38,962
Other Accrued Liabilities 31,407
Accrued Shareholder Servicing Fees 28,910
Accrued Administrative Fees 5,662
Due on Redemption of Fund Shares 1,927
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 377,680
- --------------------------------------------------------------------------------
NET ASSETS $37,282,205
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,265,390 shares outstanding) $33,999,485
Undistributed Net Investment Income 786,213
Undistributed Accumulated Net
Realized Gain on Investments 1,035,597
Net Unrealized Appreciation of:
Investment Securities 1,383,781
Futures Contracts 76,263
Foreign Currency Transactions 866
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,265,390
SHARES OUTSTANDING $37,282,205
================================================================================
Per Share of Class A (Based on
2,918,218 Shares Issued and Outstanding):
OFFERING PRICE $12.00
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.43
================================================================================
Per Share of Class B (Based on 347,172
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.34
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $658,628
Dividends (less foreign dividend tax of $7,603) 159,549
- --------------------------------------------------------------------------------
TOTAL INCOME 818,177
- --------------------------------------------------------------------------------
Expenses
Management Fees 133,121
Shareholder Servicing Fees 47,543
Distribution Fees:
Class A 17,613
Class B 10,533
Transfer Agent Fees 23,129
Administrative Fees 19,017
Custody Fees 17,473
Shareholder Reporting Expenses 7,130
Audit Fees 8,023
Other Expenses 6,657
Directors Fees 2,472
Professional Fees 1,916
Registration Fees 1,217
- --------------------------------------------------------------------------------
TOTAL EXPENSES 295,844
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (2,847)
Expenses Reimbursed by Affiliates (29,981)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 263,016
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 555,161
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 744,337
Futures Contracts (172,832)
Foreign Currency Transactions (334)
- --------------------------------------------------------------------------------
NET REALIZED GAIN FOR THE PERIOD 571,171
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities (4,093,195)
Future Contracts 66,896
Foreign Currency Transactions 896
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (4,025,403)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (3,454,232)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(2,899,071)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $555,161 $811,940
Net Realized Gain on Investments 571,171 1,137,243
Net Change in Unrealized Appreciation (Depreciation) of Investments and
Foreign Currency Transactions for the Period (4,025,403) 5,486,313
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (2,899,071) 7,435,496
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income - (627,696)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (650,292)
Distributions to Class B Shareholders from Net Investment Income - (20,006)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (22,525)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders - (1,320,519)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 151,542 and 2,700,842 Shares 1,853,365 27,348,582
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 112,592 shares) - 1,276,794
Payments for 39,742 and 7,616 Shares Redeemed (484,955) (91,176)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (111,800 and 2,805,818 shares) 1,368,410 28,534,200
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 226,789 and 127,870 Shares 2,770,836 1,480,265
Proceeds from Shares Issued on Reinvestment of Distributions Paid (0 and 3,763 shares) - 42,525
Payments for 7,643 and 4,206 Shares Redeemed (91,220) (50,717)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (219,145 and 127,427 shares) 2,679,616 1,472,073
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,148,955 36,121,250
NET ASSETS
Beginning of Period 36,133,250 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $786,213 AND $231,052) $37,282,205 $36,133,250
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $12.32 $12.26 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.18 0.11 0.31 0.23
Net Realized and Unrealized Gains
(Losses) on Investments (1.07) (1.03) 2.50 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.89) (0.92) 2.81 2.73
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 (0.24) (0.22)
Distributions from Realized Gains on Investments 0.00 0.00 (0.25) (0.25)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.00 0.00 (0.49) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.43 $11.34 $12.32 $12.26
====================================================================================================================================
TOTAL RETURN<F2> (7.22)% (7.50)% 28.51% 27.69%
====================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period $33,346,733 $3,935,472 $34,564,169 $1,569,081
====================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.35%<F3> 2.00%<F3> 1.35% 2.00%
====================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.65%<F3> 2.31%<F3> 1.67% 2.32%
====================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.97%<F3> 2.32%<F3> 2.67% 2.02%
====================================================================================================================================
PORTFOLIO TURNOVER RATE 23.17% 23.17% 65.67% 65.67%
====================================================================================================================================
AVERAGE COMMISSION RATE $0.0260 $0.0260 $0.0621 $0.0621
====================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $32,387,169) $28,079,686
Preferred Stock (cost $6,085,941) 6,134,937
Money Market Investments (cost $1,297,521) 1,297,521
Common Stock (cost $265,823) 109,985
- --------------------------------------------------------------------------------
35,622,129
- --------------------------------------------------------------------------------
Cash 184,703
Dividends and Interest Receivable 912,695
Due from Sale of Securities 290,267
Due from Sale of Fund Shares 55,548
Unamortized Organizational Costs 14,459
- --------------------------------------------------------------------------------
TOTAL ASSETS 37,079,801
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 433,669
Income Dividend Payable 365,382
Other Accrued Liabilities 39,040
Due to Investment Advisor 36,877
Accrued Shareholder Servicing Fees 27,958
Accrued Administrative Fees 5,489
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 908,415
- --------------------------------------------------------------------------------
NET ASSETS $36,171,386
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,904,825 shares outstanding) $39,762,585
Undistributed Net Investment Income 61,039
Undistributed Accumulated Net
Realized Gain on Investments 762,087
Net Unrealized Depreciation of
Investment Securities (4,414,325)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,904,825
SHARES OUTSTANDING $36,171,386
================================================================================
Per Share of Class A (Based on
3,575,426 Shares Issued and Outstanding):
OFFERING PRICE $9.72
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $9.26
================================================================================
Per Share of Class B (Based on 329,399
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $9.26
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $1,740,890
Dividends 345,228
- --------------------------------------------------------------------------------
TOTAL INCOME 2,086,118
- --------------------------------------------------------------------------------
Expenses
Management Fees 138,247
Shareholder Servicing Fees 46,083
Transfer Agent Fees 21,707
Registration Fees 1,630
Distribution Fees:
Class A 17,234
Class B 8,991
Administrative Fees 18,433
Custody Fees 9,767
Audit Fees 8,524
Shareholder Reporting Expenses 6,771
Other Expenses 6,150
Directors' Fees 2,472
Professional Fees 2,256
- --------------------------------------------------------------------------------
TOTAL EXPENSES 288,265
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (1,299)
Expenses Reimbursed by Affiliates (40,844)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 246,122
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,839,996
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net Realized Loss on Investments (58,705)
Net Change in Unrealized Depreciation
of Investments for the Period (5,595,369)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (5,654,074)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(3,814,078)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $1,839,996 $2,756,345
Net Realized Gain (Loss) on Investments (58,705) 1,974,379
Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period (5,595,369) 1,181,044
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (3,814,078) 5,911,768
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (1,726,340) (2,730,612)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (1,131,057)
Distributions to Class B Shareholders from Net Investment Income (113,656) (31,293)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (22,530)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (1,839,996) (3,915,492)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 503,489 and 2,716,144 Shares 5,135,426 27,328,578
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (151,816 and 336,168 shares) 1,592,530 3,598,592
Payments for 121,379 and 11,412 Shares Redeemed (1,196,003) (122,333)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (533,926 and 3,040,900 shares) 5,531,953 30,804,837
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 202,986 and 121,471 Shares 2,116,537 1,315,485
Proceeds from Shares Issued on Reinvestment of Distributions Paid (8,298 and 4,331 shares) 86,374 46,162
Payments for 8,054 and 233 Shares Redeemed (81,645) (2,519)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (203,230 and 125,569 shares) 2,121,266 1,359,128
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,999,145 34,160,241
NET ASSETS
Beginning of Period 34,172,241 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $61,039 AND $61,039) $36,171,386 $34,172,241
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.79 $10.79 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.50 0.40 1.01 0.93
Net Realized and Unrealized Gains
(Losses) on Investments (1.51) (1.44) 1.19 1.20
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.01) (1.04) 2.20 2.13
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.52) (0.49) (1.00) (0.93)
Distributions from Realized Gains on Investments 0.00 0.00 (0.41) (0.41)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.52) (0.49) (1.41) (1.34)
====================================================================================================================================
NET ASSET VALUE, END OF PERIOD $9.26 $9.26 $10.79 $10.79
====================================================================================================================================
TOTAL RETURN<F2> (9.70)% (10.01)% 22.95% 22.09%
====================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $33,120,402 $3,050,984 $32,811,316 $1,360,925
====================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30%<F3> 1.95%<F3> 1.30% 1.95%
====================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.66%<F3> 2.31%<F3> 1.66% 2.31%
====================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 10.02%<F3> 9.37%<F3> 9.30% 8.65%
====================================================================================================================================
PORTFOLIO TURNOVER RATE 96.29% 96.29% 178.61% 178.61%
====================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
MUNICIPAL BOND FUND
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $26,357,206) $28,242,688
Money Market Investments (cost $2,900,000) 2,900,000
- --------------------------------------------------------------------------------
31,142,688
- --------------------------------------------------------------------------------
Cash 135,240
Interest Receivable 456,919
Due from Sale of Fund Shares 19,831
Unamortized Organizational Costs 14,459
- --------------------------------------------------------------------------------
TOTAL ASSETS 31,769,137
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 1,104,920
Income Dividend Payable 106,955
Other Accrued Liabilities 24,104
Accrued Shareholder Servicing Fees 22,273
Due to Investment Advisor 13,385
Accrued Administrative Fees 4,473
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,276,110
- --------------------------------------------------------------------------------
NET ASSETS $30,493,027
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 2,825,225 shares outstanding) $28,345,272
Undistributed Net Investment Income 29,373
Undistributed Net
Realized Gain on Investments 232,900
Net Unrealized Appreciation of
Investment Securities 1,885,482
- --------------------------------------------------------------------------------
NET ASSETS FOR 2,825,225
SHARES OUTSTANDING $30,493,027
================================================================================
Per Share of Class A (Based on
2,755,061 Shares Issued and Outstanding):
OFFERING PRICE $11.33
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $10.79
================================================================================
Per Share of Class B (Based on 70,164
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $10.79
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $751,044
- --------------------------------------------------------------------------------
Expenses
Management Fees 44,107
Shareholder Servicing Fees 36,756
Transfer Agent Fees 20,430
Distribution Fees:
Class A 14,385
Class B 2,382
Administrative Fees 14,702
Audit Fees 8,524
Other Expenses 5,741
Shareholder Reporting Expenses 5,732
Custody Fees 4,996
Professional Fees 2,807
Directors Fees 2,472
Registration Fees 107
- --------------------------------------------------------------------------------
TOTAL EXPENSES 163,141
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (2,742)
Expenses Reimbursed by Affiliates (36,080)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 124,319
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 626,725
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 256,061
Futures Contracts (11,656)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS
FOR THE PERIOD 244,405
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation of
Investment Securities 446,981
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS FOR THE PERIOD 446,981
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 691,386
- --------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $1,318,111
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
M A S O N S T R E E T F U N D S
MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $626,725 $1,193,269
Net Realized Gain on Investments 244,405 332,018
Net Change in Unrealized Appreciation of Investments for the Period 446,981 1,441,157
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 1,318,111 2,966,444
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (615,320) (1,219,558)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (341,287)
Distributions to Class B Shareholders from Net Investment Income (11,405) (10,261)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (4,893)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (626,725) (1,575,999)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 35,529 and 2,536,893 Shares 371,122 25,381,407
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (57,701 and 139,366 shares) 609,959 1,460,157
Payments for 8,744 and 5,684 Shares Redeemed (92,134) (59,865)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (84,486 and 2,670,575 shares) 888,947 26,781,699
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 66,919 and 44,580 Shares 703,784 464,616
Proceeds from Shares Issued on Reinvestment of Distributions Paid (655 and 601 shares) 6,925 6,340
Payments for 41,600 and 991 Shares Redeemed (442,607) (10,508)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (25,974 and 44,190 shares) 268,102 460,448
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 1,848,435 28,632,592
NET ASSETS
Beginning of Period 28,644,592 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $29,373 AND $29,346) $30,493,027 $28,644,592
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
SEPTEMBER 30, 1998
MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.55 $10.55 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.23 0.17 0.46 0.38
Net Realized and Unrealized Gains on Investments 0.24 0.26 0.69 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.47 0.43 1.15 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.23) (0.19) (0.47) (0.40)
Distributions from Realized Gains on Investments 0.00 0.00 (0.13) (0.13)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.23) (0.19) (0.60) (0.53)
====================================================================================================================================
Net Asset Value, End of Period $10.79 $10.79 $10.55 $10.55
====================================================================================================================================
TOTAL RETURN<F2> 4.48% 4.13% 11.73% 10.93%
====================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $29,735,740 $757,287 $28,172,205 $472,387
====================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 0.85%<F3> 1.50%<F3> 0.85% 1.50%
====================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.21%<F3> 1.86%<F3> 1.24% 1.89%
====================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.27%<F3> 3.62%<F3> 4.38% 3.73%
====================================================================================================================================
PORTFOLIO TURNOVER RATE 124.12% 124.12% 169.37% 169.37%
====================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
SELECT BOND FUND
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $29,481,415) $29,112,257
Money Market Investments (cost $5,155,840) 5,156,945
- --------------------------------------------------------------------------------
34,269,202
- --------------------------------------------------------------------------------
Due from Sale of Securities 5,670,444
Interest Receivable 512,893
Due from Sale of Fund Shares 31,349
Unamortized Organizational Costs 14,459
- --------------------------------------------------------------------------------
TOTAL ASSETS 40,498,347
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 6,909,924
Income Dividend Payable 187,137
Futures Variation Margin 165,281
Other Accrued Liabilities 28,090
Accrued Shareholder Servicing Fees 23,523
Due to Investment Advisor 11,011
Accrued Administrative Fees 4,738
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 7,329,704
- --------------------------------------------------------------------------------
NET ASSETS $33,168,643
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,424,118 shares outstanding) $34,167,005
Undistributed Net Investment Income 68,879
Undistributed Accumulated Net
Realized Loss on Investments (421,740)
Net Unrealized Appreciation (Depreciation) of:
Investment Securities (368,053)
Futures Contracts (277,878)
Foreign Currency Transactions 430
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,424,118
SHARES OUTSTANDING $33,168,643
================================================================================
Per Share of Class A (Based on
3,243,581 Shares Issued and Outstanding):
OFFERING PRICE $10.17
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $9.69
================================================================================
Per Share of Class B (Based on 180,537
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $9.69
================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest (less withholding tax of $2,291) $1,223,833
- --------------------------------------------------------------------------------
Expenses
Management Fees 46,359
Shareholder Servicing Fees 38,633
Other Expenses 25,704
Transfer Agent Fees 20,308
Distribution Fees:
Class A 14,785
Class B 5,013
Custody Fees 16,062
Administrative Fees 15,453
Registration Fees 590
- --------------------------------------------------------------------------------
TOTAL EXPENSES 182,908
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (4,872)
Expenses Reimbursed by Affiliates (47,134)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 130,902
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,092,932
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 65,779
Futures Contracts (518,329)
Foreign Currency Transactions (141,287)
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS
FOR THE PERIOD (593,837)
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities (86,243)
Futures Contracts (342,485)
Foreign Currency Transactions 95,360
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION
OF INVESTMENTS FOR THE PERIOD (333,368)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (927,205)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $165,727
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
(Prepared from Unaudited Figures)
SEPTEMBER 30, 1998
SELECT BOND FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Six
Months Ended For the Twelve
September 30, 1998 Months Ended
(Unaudited) March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $1,092,932 $1,899,991
Net Realized Gain (Loss) on Investments (593,837) 1,497,301
Net Change in Unrealized Depreciation of Investments and
Foreign Currency Transactions for the Period (333,368) (345,926)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 165,727 3,051,366
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (1,050,603) (1,894,078)
Distributions to Class A Shareholders from Net Realized Gain on Investments - (1,304,159)
Distributions to Class B Shareholders from Net Investment Income (42,329) (11,475)
Distributions to Class B Shareholders from Net Realized Gain on Investments - (12,480)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (1,092,932) (3,222,192)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 276,659 and 2,608,995 Shares 2,703,733 26,123,497
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (105,478 and 295,732 shares) 1,046,370 3,008,696
Payments for 6,805 and 36,478 Shares Redeemed (66,968) (363,818)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (375,732 and 2,868,249 shares) 3,683,135 28,768,375
- -----------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 124,569 and 64,092 Shares 1,229,978 653,842
Proceeds from Shares Issued on Reinvestment of Distributions Paid (3,584 and 2,037 shares) 35,500 20,537
Payments for 11,509 and 2,236 Shares Redeemed (113,518) (23,175)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (116,644 and 63,893 shares) 1,151,960 651,204
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 3,907,890 29,248,753
NET ASSETS
Beginning of Period 29,260,753 12,000
- -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF $68,879 AND $68,879) $33,168,643 $29,260,753
===================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
M A S O N S T R E E T F U N D S
SELECT BOND FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS A CLASS B
-------- -------- -------- --------
For the Six For the Six
Months Ended Months Ended For the Twelve For the Twelve
September 30, 1998 September 30, 1998 Months Ended Months Ended
(For a share outstanding throughout the period) (Unaudited) (Unaudited) March 31, 1998 March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $9.98 $9.98 $10.00 $10.00
Income from Investment Operations:
Net Investment Income<F1> 0.34 0.26 0.71 0.66
Net Realized and Unrealized Gains
(Losses) on Investments (0.28) (0.23) 0.46 0.44
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.06 0.03 1.17 1.10
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.35) (0.32) (0.71) (0.64)
Distributions from Realized Gains on Investments 0.00 0.00 (0.48) (0.48)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.35) (0.32) (1.19) (1.12)
===================================================================================================================================
NET ASSET VALUE, END OF PERIOD $9.69 $9.69 $9.98 $9.98
===================================================================================================================================
TOTAL RETURN<F2> 0.62% 0.28% 12.11% 11.34%
===================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period $31,419,828 $1,748,815 $28,617,421 $643,332
===================================================================================================================================
Ratio of Net Expenses to Average Net Assets 0.85%<F3> 1.50%<F3> 0.85% 1.50%
===================================================================================================================================
Ratio of Gross Expenses to Average Net Assets 1.30%<F3> 1.95%<F3> 1.29% 1.94%
===================================================================================================================================
Ratio of Net Investment Income to Average Net Assets 7.10%<F3> 6.45%<F3> 6.93% 6.28%
===================================================================================================================================
Portfolio Turnover Rate 149.73% 149.73% 362.32% 362.32%
===================================================================================================================================
</TABLE>
<F1> Calculated based on average shares outstanding.
<F2> Total return includes deductions for management and other Fund expenses;
excludes deductions for sales loads and contingent deferred sales charges.
Returns include fee waivers in effect. In the absence of fee waivers, total
return would be reduced.
<F3> Computed on an annualized basis.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
NOTE 1
Mason Street Funds, Inc. was incorporated under the laws of the state of
Maryland on August 30, 1996 as an open-end investment company under the
Investment Company Act of 1940. Mason Street FundsSM consist of the Aggressive
Growth Stock Fund, International Equity Fund, Growth Stock Fund, Growth and
Income Stock Fund, Index 500 Stock Fund, Asset Allocation Fund, High Yield Bond
Fund, Municipal Bond Fund and the Select Bond Fund, collectively known as "the
Funds." The Funds commenced operations on March 31, 1997 at $10.00 per share
with 1,200 shares in each of the Funds owned by Northwestern Mutual Life
Insurance Company ("Northwestern Mutual"). On April 1, 1997, Northwestern
Mutual invested an additional $225 million in Mason Street FundsSM; $25 million
in the Class A shares in each of the Funds.
Each Fund offers two classes of shares: Class A shares with an initial sales
charge up to 4.75% and Class B shares with contingent deferred sales charge of
5.0% to 0% over a period of up to six years. Each class of shares has equal
rights with respect to voting privileges.
Organizational costs and initial registration expenses are being deferred and
amortized over the period of benefit, but not to exceed 60 months from the
Funds' commencement of operations. These costs, totaling $417,215, were
advanced by Northwestern Mutual and were reimbursed by the Funds equally.
NOTE 2
The preparation of the 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principal accounting policies are summarized in the following Notes.
NOTE 3
Bonds are valued on the basis of prices furnished by a service which determines
prices for normal institutional size trading units of bonds, without regard to
exchange or over-the-counter prices. When quotations are not readily available,
bonds are valued using procedures approved by the Board of Directors. Stocks
listed on a national or foreign stock exchange are valued at the final sale
price, or final bid price in absence of a sale. Stocks not listed on a national
or foreign stock exchange are valued at the closing bid price on the over-the-
counter market. Money market investments with maturities exceeding 60 days but
generally not exceeding one year are valued by marking to market on the basis of
an average of the most recent bid prices or yields. Money market investments
with maturities of 60 days or less are valued on an amortized cost basis or, if
the current market value differs substantially from the amortized cost, by
marking to market.
NOTE 4
Securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollar amounts on the date of valuation. Purchases and
sales of securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. When the International Equity Fund, Asset Allocation Fund and
Select Bond Fund purchase or sell a foreign security they may enter into a
foreign exchange currency contract to minimize market risk from the trade date
to the settlement date of such transaction. Such foreign exchange currency
contracts are marked to market daily.
The Funds may enter into forward foreign currency contracts to hedge against
exchange rate risk arising from investments in securities denominated in foreign
currencies. Contracts are valued at the contractual forward rate and are marked
to market daily, with the change in market value recorded as an unrealized gain
or loss. When the contracts are closed, a realized gain or loss is incurred.
Risks may arise from changes in market value of underlying instruments and from
the possible inability of counter parties to meet the terms of their contracts.
The International Equity Fund, Asset Allocation Fund and Select Bond Fund do not
separately report the results of operations due to changes in foreign exchange
rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized or
unrealized gain or loss from investments.
Net realized and unrealized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade date and
the settlement date on security transactions, and the differences between the
amounts of dividends and foreign withholding taxes recorded on the Funds' books
and the U.S. dollar equivalent of the amounts actually received or paid.
NOTE 5
The Aggressive Growth Stock Fund, Growth Stock Fund, Index 500 Stock Fund, Asset
Allocation Fund, Municipal Bond Fund and the Select Bond Fund invest in futures
contracts as an alternative to investing in individual securities. The
Aggressive Growth Stock Fund, Growth Stock Fund, Index 500 Stock Fund, Asset
Allocation Fund, Municipal Bond Fund and the Select Bond Fund could be exposed
to market risk due to changes in the value of the underlying securities or due
to an illiquid secondary market. Futures con-
<PAGE>
M A S O N S T R E E T F U N D S
tracts are marked to market daily based upon quoted settlement prices. The
Funds receive from or pay to brokers an amount of cash equal to the daily
fluctuation in the value of the contracts. Such receipts or payments, known as
the "variation margin," are recorded by the Funds as unrealized gains or losses.
When the contract is closed, the Funds record a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
For federal income tax purposes, net unrealized appreciation (depreciation) on
open futures contracts is generally required to be treated as realized gains
(losses).
NOTE 6
Income, Fund expenses, realized and unrealized gains and losses are allocated
daily to each class of shares based on the value of shares outstanding for the
Aggressive Growth Stock Fund, International Equity Fund, Growth Stock Fund,
Growth and Income Stock Fund, Index 500 Stock Fund and Asset Allocation Fund.
Dividends and other distributions are calculated in a similar manner and are
declared and distributed to shareholders annually for these Funds. For the High
Yield Bond Fund, Municipal Bond Fund and Select Bond Fund, income and Fund
expenses are allocated daily to each class of shares based on the value of
settled shares. Realized and unrealized gains and losses are allocated daily to
each class of shares based on the value of shares outstanding. Dividends and
other distributions are calculated in a similar manner. Income dividends are
declared daily, paid monthly. Capital gain dividends are declared and
distributed annually for these Funds.
- --------------------------------------------------------------------------------
NOTE 7
Interest income and discounts earned are recorded daily on the accrual basis and
dividend income is recorded on the ex-dividend date or as soon as information
from foreign issuers is available. Where applicable, dividends are recorded net
of foreign dividend tax. Discounts on securities purchased in the Funds are
amortized over the life of the respective securities using the effective
interest method. Premiums for the Municipal Bond Fund are amortized to the
remaining life or earlier call date, whichever is earlier. Securities
transactions are accounted for on trade date. The basis for determining cost on
sale of securities is identified cost. For the six months ended September 30,
1998, transactions in securities other than money market investments were:
<TABLE>
<CAPTION>
Total Security U.S. Gov't. Security Total Security U.S. Gov't. Security
Fund Purchases Purchases Sales/Maturities Sales/Maturities
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK FUND $17,317,115 _ $15,323,129 _
- ----------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 37,324,582 _ 34,180,212 _
- ----------------------------------------------------------------------------------------------------------
GROWTH STOCK FUND 6,067,358 _ 5,272,509 _
- ----------------------------------------------------------------------------------------------------------
GROWTH AND INCOME STOCK FUND 42,932,642 _ 38,733,295 _
- ----------------------------------------------------------------------------------------------------------
INDEX 500 STOCK FUND 15,574,668 _ 800,314 _
- ----------------------------------------------------------------------------------------------------------
ASSET ALLOCATION FUND 9,385,394 $1,495,887 7,511,239 $1,020,958
- ----------------------------------------------------------------------------------------------------------
HIGH YIELD BOND FUND 39,830,903 _ 34,038,157 _
- ----------------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUND 35,225,675 _ 35,507,483 _
- ----------------------------------------------------------------------------------------------------------
SELECT BOND FUND 48,230,370 15,246,348 43,500,248 13,414,286
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8
Northwestern Mutual Investment Services, LLC ("NMIS") serves as investment
advisor to each of the Funds, with certain of the Funds also being served by a
subadvisor. Each Fund pays NMIS an annual fee for investment advisory services
based on average daily net assets of the Fund according to the following
schedule:
Fund Fee
- ------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND 0.75%
- ------------------------------------------------
INTERNATIONAL EQUITY FUND 0.85%
- ------------------------------------------------
GROWTH STOCK FUND 0.75%
- ------------------------------------------------
GROWTH AND INCOME STOCK FUND 0.65%
- ------------------------------------------------
INDEX 500 STOCK FUND 0.30%
- ------------------------------------------------
ASSET ALLOCATION FUND 0.70%
- ------------------------------------------------
HIGH YIELD BOND FUND 0.75%
- ------------------------------------------------
MUNICIPAL BOND FUND 0.30%
- ------------------------------------------------
SELECT BOND FUND 0.30%
- ------------------------------------------------
<PAGE>
SEPTEMBER 30, 1998
J.P. Morgan Investment Management Inc. ("J.P. Morgan") and Templeton Investment
Counsel, Inc. ("Templeton") have been retained under investment subadvisory
agreements to provide investment advice and, in general, to conduct the
management investment program of the Growth and Income Stock Fund and the
International Equity Fund, respectively. Of the amounts received from the
Growth and Income Stock Fund, NMIS pays J.P. Morgan 0.45% on the first $100
million of the combined net assets for all funds managed for Northwestern Mutual
by J.P. Morgan, 0.40% on the next $100 million, 0.35% on the next $200 million
and 0.30% on the combined net assets in excess of $400 million. Of the amounts
received from the International Equity Fund, NMIS pays Templeton 0.50% on the
first $100 million of the combined net assets for all funds managed for
Northwestern Mutual by Templeton and 0.40% on the combined net assets in excess
of $100 million.
Robert W. Baird & Co. Incorporated ("Baird") serves as the Distributor of the
Funds. Baird is an affiliate of Northwestern Mutual and NMIS. The Funds have a
12b-1 distribution plan and shareholder services agreement with Baird pursuant
to which a 0.35% and a 1.00% annual fee for Class A and Class B, respectively,
is calculated based on daily net assets.
The 0.35% fee for Class A is comprised of a 0.25% shareholder servicing fee and
a 0.10% distribution fee paid to Baird for various distribution expenses. The
1.00% fee for Class B is comprised of a 0.25% shareholder servicing fee and a
0.75% distribution fee.
Of the 1.00%, 0.35% is paid to Baird for distribution and shareholder servicing
expenses; the remaining 0.65% is paid to Northwestern Mutual for reimbursement
of commissions paid to agents. Baird received $339,641 of dealer allowances,
Northwestern Mutual received $108,164 of underwriting concessions from Class A
sales charges and Northwestern Mutual received $19,682 of contingent deferred
sales charges from Class B shares for the six months ended September 30, 1998.
Each Fund also pays the administrator, Northwestern Mutual, a monthly fee at an
annual rate of 0.10% plus costs for pricing securities. This administration fee
is for services including recordkeeping, preparation of reports and fund
accounting (except for the International Equity Fund). For the International
Equity Fund, Northwestern Mutual waives a portion of its fee equal to the fund
accounting fee paid to Brown Brothers Harriman & Co.
In addition, each Fund pays transfer agent and custodian fees, outside
professional and auditing fees, registration fees, trademark fees,
organizational costs, insurance premiums, Directors' fees and expenses, and the
printing and mailing costs of sending reports and other information to existing
shareholders.
The Funds pay a portion of their custodian fees indirectly through expense
offset arrangements. Custodian fees are reduced for maintaining compensating
balances in non-interest bearing accounts. The Funds could have invested the
assets used to pay for the custodian fees, had the assets not been used in the
expense offset arrangements. NMIS and affiliates have agreed to waive their
fees and absorb certain other operating expenses to the extent necessary so
that Total Operating Expenses will not exceed the following amounts:
Fund Class A Class B
- ------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND 1.30% 1.95%
- ------------------------------------------------
INTERNATIONAL EQUITY FUND 1.65% 2.30%
- ------------------------------------------------
GROWTH STOCK FUND 1.30% 1.95%
- ------------------------------------------------
GROWTH AND INCOME STOCK FUND 1.20% 1.85%
- ------------------------------------------------
INDEX 500 STOCK FUND 0.85% 1.50%
- ------------------------------------------------
ASSET ALLOCATION FUND 1.35% 2.00%
- ------------------------------------------------
HIGH YIELD BOND FUND 1.30% 1.95%
- ------------------------------------------------
MUNICIPAL BOND FUND 0.85% 1.50%
- ------------------------------------------------
SELECT BOND FUND 0.85% 1.50%
- ------------------------------------------------
NMIS and affiliates have waived the following fees for the six months ended
September 30, 1998:
Distribution Fees
-----------------
Fund Class A Class B Other Total
- ----------------------------------------------------------------
Aggressive Growth
Stock Fund _ $112 $41,951 $42,063
- ----------------------------------------------------------------
International Equity Fund $819 _ 43,463 44,282
- ----------------------------------------------------------------
Growth Stock Fund _ 28 34,014 34,042
- ----------------------------------------------------------------
Growth and Income
Stock Fund _ 86 42,405 42,491
- ----------------------------------------------------------------
Index 500 Stock Fund _ 94 56,682 56,776
- ----------------------------------------------------------------
Asset Allocation Fund _ 166 29,815 29,981
- ----------------------------------------------------------------
High Yield Bond Fund 1,900 _ 38,944 40,844
- ----------------------------------------------------------------
Municipal Bond Fund 2,408 _ 33,672 36,080
- ----------------------------------------------------------------
Select Bond Fund 1,824 _ 45,310 47,134
- ----------------------------------------------------------------
TOTAL $6,951 $486 $366,256 $373,693
- ----------------------------------------------------------------
The Aggressive Growth Stock Fund, Growth Stock Fund and Asset Allocation Fund
paid commissions on Fund transactions to an affiliated broker in the amounts of
$2,406, $510 and $318, respectively, during the six months ended September 30,
1998.
NOTE 9
Each Fund intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of income and capital gains to its shareholders sufficient to
relieve it from all or substantially all federal income taxes. Accordingly, no
provisions have been made for federal taxes.
<PAGE>
SEPTEMBER 30, 1998
DIRECTORS AND OFFICERS
DIRECTORS
- ------------
JAMES D. ERICSON
President and Chief Executive Officer
Northwestern Mutual, Milwaukee
MARTIN F. STEIN
Chairman of the Board
EyeCare One Corporation, Milwaukee
JOHN K. MACIVER
Partner
Michael Best & Friedrich, Attorneys at Law, Milwaukee
STEPHEN N. GRAFF
Retired Partner
Arthur Andersen LLP, Milwaukee
WILLIAM J. BLAKE
Chairman
Blake Investment Corp., Milwaukee
WILLIAM A. MCINTOSH
Retired Division Head - U.S. Fixed Income
Salomon Brothers, Chicago
OFFICERS
- ------------
JAMES D. ERICSON
President
MARK G. DOLL
Vice President and Treasurer
MERRILL C. LUNDBERG
Secretary
BARBARA E. COURTNEY
Controller
<PAGE>
M A S O N S T R E E T F U N D S
Taxable distributions from net investment income and realized capital gains in
the Funds differ from book amounts earned during the period due to differences
in the timing of capital recognition, and due to the reclassification of certain
gains or losses from capital to income. The differences between cost amounts
for book purposes and tax purposes are due to treatment of passive foreign
investment companies and deferred wash losses.
It is the policy of the Fund to reclassify the net effect of permanent
differences between book and taxable income to capital accounts on the
statements of assets and liabilities.
<PAGE>
This page intentionally left blank.
MASON STREET FUNDS(SM)
P.0. BOX 419419
KANSAS CITY, MO 64141-6419
1-888-MASONST (1-888-627-6678)
WWW.MASONSTREETFUNDS.COM
Robert W. Baird & Co. Incorporated, Distributor
94-1002
11/97 (Rev. 11/98)
---------------
BULK RATE
U.S. POSTAGE
PAID
KANSAS CITY, MO
PERMIT NO. 2891
---------------
