BOND FUNDS | MULTI-ASSET FUND | STOCK FUNDS
MASON STREET
FUNDS
ANNUAL REPORT
MARCH 31, 1999
<PAGE>
This report is submitted for the general information of shareholders of Mason
Street Funds/R. It is not authorized for distribution to prospective investors
unless accompanied or preceded by a current Prospectus for the Funds, which
contains more information concerning the Funds' investment policies, as well
as fees and expenses and other pertinent information. Read the Prospectus
carefully before investing.
<PAGE>
MARCH 31, 1999
LETTER TO SHAREHOLDERS
(PHOTO)
JAMES D. ERICSON
The last year has been a period of extremes, with very high returns in a few
favored market sectors and lackluster or poor performance in others. Returns
also varied significantly over time within the 12-month period. A period of
strength in both stock and bond markets in the first half of 1998 was followed
by a significant correction in the September quarter. The major equity averages
began to rise again in the last months of 1998, and this trend has continued in
the first quarter of 1999. Bond markets were unusually volatile during much of
1998, especially during the third quarter, when a barrage of concerns caused
liquidity to evaporate; calmer conditions have prevailed in the first quarter of
1999. For many long-term market observers, a worrisome aspect of the stock
market gains over the last year is that they are concentrated in a narrow group
of issues, notably high-tech issues and a few large-capitalization growth
stocks.
As expected, performance of the Mason Street Funds/R was affected by these
market trends, with the best performance delivered by the Funds that invest in
large-capitalization equities. Throughout this period of turbulence, each of the
Funds has remained true to its stated investment strategies.
In the economy, as in the stock and bond markets, the ongoing growth, though
encouraging, is narrowly based, driven almost entirely by U.S. consumers.
Consumer spending accounted for more than 80% of the economy's growth in 1998,
and consumers show no signs of slowing their pace of spending. With low
unemployment, negligible inflation, readily available credit, and increasing
wealth from rising stock prices, it is no surprise that consumer confidence is
strong and rising. Other areas of the economy that bear watching are foreign
trade and business investment. But none of these has as powerful an effect on
the economy as consumer spending, which accounts for two-thirds of the gross
domestic product.
A major message to be drawn from the continued positive trends is that the U.S.
economy and American investors are highly resilient. Throughout 1998, sagging
Asian economies held down demand for industrial goods, impacting earnings growth
of U.S. multinationals. Credit problems in Asia, Russia and Latin America
created problems for large international investors and multinational banks.
Forecasters warned of unpleasant possibilities, including inflation that would
drive up interest rates, or deflation that could lead to recession. Nonetheless,
consumers maintained their confident posture, maintaining economic growth by
continuing to buy houses, cars and a variety of other goods.
In the early months of 1999, external woes seem to be subsiding, as economies in
Asia and Latin America have begun to stabilize. Earnings reports for the first
quarter of 1999 are stronger than those for the last quarter, aided by
increasing productivity, which is very positive for long-term corporate
profitability. This year, as in the last three years, forecasters began the year
with expectations of a slowdown; early forecasts called for real growth of
around 2% for the year. With continued positive economic news and Federal
Reserve policy that seems to favor growth, forecasts are beginning to edge
upward. While it seems highly unlikely that last year's growth pace of more than
4% can be matched, early predictions now look overly pessimistic.
Stock and bond markets, however, are far more difficult to predict, especially
now that stock prices, especially in the technology sector, seem to be driven
more by excitement than by realistic earnings projections. We caution investors
not to expect that the huge returns enjoyed by investors in some market sectors
can continue indefinitely. Markets do fluctuate; this is a reality of investing.
With the economy and the stock market increasingly interdependent, a slump in
the equity market could have a significant negative effect on consumer spending
and therefore on overall economic growth. We continue to enjoy the current
favorable environment, while placing our major focus on investing the assets of
each Mason Street Fund for the long-term in line with its stated objectives. We
urge you to maintain a long-term view as well.
We thank you for selecting Northwestern Mutual's Mason Street Funds/R, and we
look forward to investing for you for many years.
Mason Street Funds/R
/s/James D. Ericson
JAMES D. ERICSON
President
<PAGE>
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 9
- ------------------------------------------------------------
GROWTH STOCK FUND 13
- ------------------------------------------------------------
GROWTH AND INCOME STOCK FUND 17
- ------------------------------------------------------------
INDEX 500 STOCK FUND 20
- ------------------------------------------------------------
ASSET ALLOCATION FUND 27
- ------------------------------------------------------------
HIGH YIELD BOND FUND 33
- ------------------------------------------------------------
MUNICIPAL BOND FUND 38
- ------------------------------------------------------------
SELECT BOND FUND 41
- ------------------------------------------------------------
FINANCIAL STATEMENTS 46
- ------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 73
- ------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 77
- ------------------------------------------------------------
DIRECTORS AND OFFICERS 78
- ------------------------------------------------------------
<PAGE>
MARCH 31, 1999
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
For the Periods Ended March 31, 1999
CLASS A - WITHOUT INITIAL SALES CHARGE
Aggressive International Growth and Asset
Total Return<F1> Growth Equity Growth Income Index 500 Allocation High Yield Municipal Select
(as of 3/31/99) Stock Fund Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -3.78% -8.85% 18.36% 11.09% 17.88% 6.41% -7.87% 6.42% 4.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 45.84% -1.38% 71.73% 57.64% 72.51% 36.74% 13.28% 18.91% 17.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 20.77% -0.69% 31.04% 25.55% 31.34% 16.94% 6.43% 9.04% 8.29%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A<F3> - WITH INITIAL SALES CHARGE
Aggressive International Growth and Asset
Total Return<F1> Growth Equity Growth Income Index 500 Allocation High Yield Municipal Select
(as of 3/31/99) Stock Fund Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -8.33% -13.20% 12.77% 5.82% 12.27% 1.39% -12.26% 1.33% -0.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 38.90% -6.08% 63.55% 50.13% 64.29% 30.23% 7.88% 13.24% 11.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 17.86% -3.09% 27.89% 22.53% 28.18% 14.12% 3.87% 6.42% 5.68%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B - WITHOUT CONTINGENT DEFERRED SALES CHARGE
Aggressive International Growth and Asset
Total Return<F1> Growth Equity Growth Income Index 500 Allocation High Yield Municipal Select
(as of 3/31/99) Stock Fund Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -4.35% -9.36% 17.66% 10.41% 17.17% 5.77% -8.58% 5.72% 3.91%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 44.04% -2.58% 69.58% 55.63% 70.42% 35.06% 11.61% 17.28% 15.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 20.02% -1.30% 30.22% 24.75% 30.55% 16.21% 5.65% 8.29% 7.56%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B<F4> - WITH CONTINGENT DEFERRED SALES CHARGE
Aggressive International Growth and Asset
Total Return<F1> Growth Equity Growth Income Index 500 Allocation High Yield Municipal Select
(as of 3/31/99) Stock Fund Fund Stock Fund Stock Fund Stock Fund Fund Bond Fund Bond Fund Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
One Year -8.12% -12.79% 13.66% 6.58% 13.17% 1.77% -11.83% 1.72% 0.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Since Inception<F2> 41.04% -5.29% 66.58% 52.63% 67.42% 32.06% 8.98% 14.28% 12.79%
- ------------------------------------------------------------------------------------------------------------------------------------
Annualized 18.76% -2.68% 29.06% 23.54% 29.39% 14.92% 4.39% 6.90% 6.20%
- ------------------------------------------------------------------------------------------------------------------------------------
</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% for One Year and 3% for Since Inception.
<PAGE>
M A S O N S T R E E T F U N D S
OVERVIEW AND OUTLOOK
- ------------
THE ECONOMY
- ------------
The current period of economic growth in the United States has now been in place
since 1991, and there are few signs that growth is abating. A 6.1% surge in the
gross domestic product in the fourth quarter pushed real growth for the full
year 1998 up to 4.3%. Highly encouraging is improving productivity, which
increased 4.5% for 1998. Productivity gains, which today are dependent largely
on technology, are especially beneficial because they enable profits to rise
without price increases.
Inflation reports reveal little in the way of pricing pressures. The Consumer
Price Index is up a remarkably low 1.6% in the last 12 months, and the Producer
Price Index is up only 0.5% since a year ago. Despite a recent surge in oil
prices, inflation should remain modest this year, and the Fed is not expected to
increase interest rates unless definitive signs of higher inflation appear.
Barring unexpected shocks, a year from now this expansion could surpass that of
the 1960s, when growth was fueled in part by the war in Vietnam and public
spending programs of the Great Society. If that happens, we will experience the
longest boom in the nation's history.
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 3.8% 1.9%
1998 4.3% 1.7%
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.
- ------------------
THE EQUITY MARKET
- ------------------
The equity market continued to rise during 1998 and early 1999. For the 12
months ended March 1999, total return from the Standard & Poor's 500/R Index was
18.37%. At the end of March 1999, the Dow Jones Industrial Average broke through
the symbolic 10,000 level.
These record-breaking market averages, which are perhaps overly prominent in the
news, mask the extreme narrowness of the market's strength. Large-capitalization
stocks in the "growth" category - rapidly expanding companies in technology and
a few other fields - continue to rise, while smaller-capitalization issues are
flat or lower. Seemingly cheap "value" stocks are also out of favor. According
to Morningstar, which tracks performance of mutual funds, funds with "growth and
income" objectives, which tend to use a value-oriented investment style, posted
returns averaging 6.82% over the last 12 months, less than half of the S&P 500/R
Index. Over the same period, the average small-cap fund had a negative 15.29%
return.
Besides the market's narrowness, another area for concern is its increasing
volatility. Both the Dow Jones Industrial Average and the S&P 500/R Index rose
or fell by 1% or more on approximately one-third of all trading days in 1998. In
the first quarter of 1999, volatility has become even more pronounced, matching
1974, which was the most volatile period since World War II. Historically, the
market has risen or fallen by 1% or more on an average of 20% of trading days,
as measured by the S&P 500/R Index in years after 1926 and the Dow Jones
Industrial Average back to 1887.
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%
1998 28.5%
Source: Standard & Poor's
<PAGE>
MARCH 31, 1999
- ----------------
THE BOND MARKET
- ----------------
The 12 months that ended in March 1999 were an extraordinary period for all
segments of the bond market. In the early months of 1998, low inflation and
continued strength in the domestic economy and stock markets were positive
influences on the bond market. Then, as economies in emerging markets weakened,
a move to the relative security of dollar-denominated assets helped drive
interest rates lower. In the late summer, a deluge of bad news from abroad
precipitated a sudden and dramatic flight to quality. The result was unusually
high returns on U.S. Treasury securities, while bonds with any risk languished.
In the last months of 1998, a series of interest rate cuts by the Federal
Reserve contributed to improved liquidity and better performance of investment-
grade corporate bonds. During the first calendar quarter of 1999, signs of
economic recovery in emerging markets and continued strength in the U.S. economy
led to a reversal of last year's flight to quality, making treasury securities
the worst performing class of bonds for the quarter. Investment-grade corporate
bonds have performed relatively well in recent months, despite a modest increase
in interest rates, as an expected economic slowdown failed to materialize and
inflation remained low.
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%
1998 8.9%
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.
<PAGE>
M A S O N S T R E E T F U N D S
- -----------------------------
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 medium- and small-sized companies.
STRATEGY: To identify and invest in companies with above-average potential
for growth.
NET ASSETS: $48.5 million
- ------------------------------------------------------------------------------
The Aggressive Growth Stock Fund owns the stocks of growth companies of medium-
and small-market capitalizations. 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 performance was disappointing over the last year, a period
characterized by extraordinarily narrow market leadership by large-company
stocks and technology issues. During this period, medium- and small-
capitalization stocks outside the technology sector have languished. The Fund
did perform better than the two Wilshire indices used as benchmarks, mainly
because of favorable stock selection.
The Fund's focus in stock selection is on the individual companies' ability to
generate revenue, expanding profit margins and solid balance sheets; industry
sector is of secondary importance. However, opportunities tend to cluster in
certain industry groups or sectors. The Fund's main concentration is in two
sectors in which there are numerous companies with particularly promising
prospects for growth, technology and consumer cyclicals. In the consumer area,
the largest holdings are in retail companies, which are benefiting from
continued strength in consumer spending. In technology, much of the focus has
been on semiconductor companies, in recognition of the fact that these chips are
included in nearly every new product created. Other holdings, such as Sanmina
and Uniphase, provide components to growing sectors in the technology category.
SECTOR ALLOCATION
3/31/99
Technology 39%
Consumer 23%
Healthcare 10%
Business Services 8%
Finance 6%
Energy 4%
Capital Goods 4%
Cash Equivalents 4%
Transportation 2%
TOP 10 HOLDINGS
3/31/99
Company % Net Assets
- -------------------------------------
Sanmina Corporation 2.9%
Linens 'N Things, Inc. 2.8%
Uniphase Corporation 2.8%
Comverse Technology, Inc. 2.8%
Bausch & Lomb, Inc. 2.7%
Jabil Circuit, Inc. 2.7%
Knight/Trimark Group, Inc. 2.7%
Synopsys, Inc. 2.4%
Microchip Technology, Inc. 2.4%
O'Reilly Automotive, Inc. 2.4%
<PAGE>
MARCH 31, 1999
PERFORMANCE RELATIVE TO RELEVANT INDICES
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH STOCK FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH STOCK FUND CLASS A 9,523 13,152 12,842 14,436 11,329 14,638 13,889
AGGRESSIVE GROWTH STOCK FUND CLASS B 10,000 13,770 13,421 15,059 11,782 15,199 14,403
AGGRESSIVE GROWTH STOCK FUND CLASS B REDEMPTION VALUE 14,103
WILSHIRE SMALL CAP INDEX 10,000 13,503 12,815 14,644 10,730 12,767 12,662
WILSHIRE NEXT 1750 INDEX 10,000 13,454 13,019 14,580 11,115 13,128 12,517
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- -------------------------------------------------------------------------------
Aggressive Growth Stock Fund
(Class A - without initial sales charge) -3.78% 20.77%
- -------------------------------------------------------------------------------
Wilshire Small Cap Index -13.53% 12.52%
- -------------------------------------------------------------------------------
Wilshire Next 1750 Index -14.14% 11.88%
- -------------------------------------------------------------------------------
<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 consumer
non-durables, materials and services, and technology. Its average market
capitalization is approximately $1.4 billion as of March 31, 1999.
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 $1.8 billion as of March 31, 1999. The largest
sector weightings include technology, finance and utilities.
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 One Year and 3% for
Since Inception.
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 (95.8%)
BUSINESS SERVICES (7.6%)
<F1> Carriage Services, Inc. 4,500 $68,063
Cintas Corp. 8,900 581,838
<F1> The Corporate Executive
Board Company 4,000 105,500
<F1> Interim Services, Inc. 22,900 343,500
<F1> Metzler Group, Inc. 16,900 530,237
<F1> NOVA Corporation 15,600 409,500
<F1> Robert Half International, Inc. 6,050 198,516
<F1> SM&A Corporation 23,800 273,700
Steiner Leisure, Ltd. 25,900 796,425
Stewart Enterprises, Inc. 23,000 369,437
- --------------------------------------------------------------------------------
TOTAL 3,676,716
- --------------------------------------------------------------------------------
CAPITAL GOODS (4.5%)
<F1> Ivex Packaging Corporation 18,300 277,931
<F1> Jabil Circuit, Inc. 31,800 1,287,900
Kaydon Corporation 11,600 335,675
<F1> Triumph Group, Inc. 11,100 260,850
- --------------------------------------------------------------------------------
TOTAL 2,162,356
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (0.5%)
<F1> Crown Castle International Co. 13,300 239,400
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (16.5%)
<F1> 99 Cents Only Stores 14,025 595,186
<F1> Abercrombie & Fitch Co. 5,900 542,800
<F1> Catalina Marketing Corporation 11,300 970,388
<F1> Dollar Tree Stores, Inc. 12,600 389,813
Galileo International, Inc. 18,400 890,100
<F1> Getty Images, Inc. 19,400 407,400
<F1> Kohl's Corporation 8,900 630,787
<F1> Linens 'N Things, Inc. 30,300 1,374,862
<F1> O'Reilly Automotive, Inc. 25,600 1,145,600
<F1> Sonic Automotive, Inc. 43,600 675,800
<F1> Tower Automotive, Inc. 22,800 424,650
- --------------------------------------------------------------------------------
TOTAL 8,047,386
- --------------------------------------------------------------------------------
CONSUMER STAPLES (6.1%)
<F1> American Italian Pasta Co. - Class A 19,000 475,000
<F1> American Tower Systems 8,000 196,000
<F1> Chancellor Media Corp. 9,100 428,838
<F1> Clear Channel Communications, Inc. 12,300 824,868
<F1> Infinity Broadcasting 6,700 172,525
<F1> Lamar Advertising, Co. 25,600 868,800
- --------------------------------------------------------------------------------
TOTAL 2,966,031
- --------------------------------------------------------------------------------
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
ENERGY (4.0%)
Santa Fe International Corp. 41,900 $783,006
Transocean Offshore Inc. 16,900 486,932
<F1> Weatherford International, Inc. 25,000 653,125
- --------------------------------------------------------------------------------
TOTAL 1,923,063
- --------------------------------------------------------------------------------
FINANCE (5.6%)
<F1> Affiliated Managers Group 17,300 449,800
Investors Financial Services Corp. 21,400 615,250
<F1> Knight/Trimark Group, Inc. 19,200 1,286,400
<F1> Trammell Crow Company 19,300 357,050
- --------------------------------------------------------------------------------
TOTAL 2,708,500
- --------------------------------------------------------------------------------
HEALTHCARE (9.7%)
<F1> Alza Corporation 7,200 275,400
Bausch & Lomb, Inc. 20,000 1,300,000
<F1> Patterson Dental Company 17,650 763,362
<F1> Pediatrix Medical Group, Inc. 4,400 123,750
<F1> Province Healthcare 16,900 312,650
<F1> PSS World Medical, Inc. 24,200 213,263
<F1> Quintiles Transnational Corp. 24,100 909,775
<F1> Sybron International Corporation 32,500 812,500
- --------------------------------------------------------------------------------
TOTAL 4,710,700
- --------------------------------------------------------------------------------
TECHNOLOGY (39.0%)
<F1> Acxiom Corporation 20,000 530,000
<F1> CBT Group Public Limited Company 1,100 12,581
<F1> CDW Computer Centers, Inc. 5,300 365,700
<F1> Complete Business Solutions, Inc. 3,200 62,800
<F1> Comverse Technology, Inc. 15,700 1,334,500
<F1> Concord EFS, Inc. 29,650 817,228
<F1> CSG Systems International, Inc. 27,800 1,096,363
<F1> DST Systems, Inc. 18,500 1,111,156
<F1> Etec Systems, Inc. 17,300 509,268
<F1> Fiserv, Inc. 13,500 723,937
Gemstar International Group Limited 13,600 1,023,400
<F1> Great Plains Software, Inc. 9,300 359,794
Infosys Technologies Limited 700 30,188
<F1> iVillage, Inc. 7,400 743,700
<F1> Microchip Technology, Inc. 33,800 1,170,325
<F1> Novellus Systems, Inc. 5,200 286,650
<F1> Onemain.com, Inc. 18,300 663,375
Paychex, Inc. 11,900 564,506
<F1> Peregrine Systems, Inc. 20,000 672,500
<F1> Qlogic Corporation 8,500 570,563
<F1> Sanmina Corporation 21,800 1,389,750
<F1> Semtech Corporation 17,100 545,063
<F1> Synopsys, Inc. 22,000 1,182,500
<F1> Tellabs, Inc. 5,900 576,725
Shares/Par Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> Transaction Systems Architects, Inc. 18,200 $655,200
<F1> Uniphase Corporation 11,800 1,358,475
Vignette Corporation 7,600 571,900
- --------------------------------------------------------------------------------
TOTAL 18,928,147
- --------------------------------------------------------------------------------
TRANSPORTATION (2.3%)
<F1> Heartland Express, Inc. 5,800 88,087
<F1> Jevic Transportation, Inc. 7,500 48,281
<F1> Knight Transportation, Inc. 29,050 562,844
<F1> Swift Transportation Co., Inc. 16,050 415,294
- --------------------------------------------------------------------------------
TOTAL 1,114,506
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK 46,476,805
================================================================================
MONEY MARKET INVESTMENTS (6.1%)
AIRCRAFT ENGINES AND ENGINE PARTS (2.4%)
General Electric Company,
4.84%, 4/29/99 1,200,000 1,195,483
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (0.2%)
Federal Home Loan Mortgage Corp.,
4.75%, 5/17/99 100,000 99,393
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (1.6%)
Quincy Capital Corporation,
4.889%, 4/16/99 800,000 798,370
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (1.9%)
Household Finance Company,
4.92%, 4/7/99 900,000 899,262
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,992,508
================================================================================
TOTAL INVESTMENTS (101.9%)
(COST $40,826,422)<F2> 49,469,313
================================================================================
OTHER ASSETS, LESS LIABILITIES (-1.9%) (933,628)
================================================================================
TOTAL NET ASSETS (100.0%) $48,535,685
================================================================================
<F1> Non-Income Producing
<F2> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $40,835,557 and the net unrealized appreciation of investments
based on that cost was $8,633,756 which is comprised of $11,207,375
aggregate gross unrealized appreciation and $2,573,619 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- --------------------------
INTERNATIONAL EQUITY FUND
- --------------------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek long-term appreciation of capital by investing primarily
in the common stocks of companies outside the United States.
PORTFOLIO: Primarily common stocks of companies in foreign countries.
STRATEGY: To identify and invest in the stocks of foreign companies offering
the greatest discounts to their long-term values.
NET ASSETS: $31.3 million
- --------------------------------------------------------------------------------
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.
The year just ended was challenging for international investors, especially
those with a value-based investment style such as Mason Street Funds'R
International Equity Fund. Latin American and Asian markets were quite weak
during most of 1998, reflecting economic problems in the areas, while most
European markets experienced low inflation, moderate growth and buoyant markets.
In Europe, as in the United States market, strong equity performance was
concentrated in a few high market capitalization issues with very high
multiples. While the Fund held many of these names at times, some were sold
before they reached their peaks, as the Fund maintained its discipline of
selling securities that appear overvalued. In a market environment that favored
growth stocks, the Fund's focus on value was the primary reason the portfolio
underperformed its benchmark.
The portfolio is concentrated in Europe, as it has been throughout the last
year, with the greatest percentage of holdings in the U.K. An important
contributor to performance was a large position in British Telecommunications.
However, the portfolio held a smaller percentage of total assets in European
stocks than the EAFE Index, and this hurt performance compared with the
benchmark. Asian exposure increased during the period, and now represents 18% of
total assets, compared with 12% a year ago. The greatest increase has been in
Japan, where selected issues appear to be very good values, especially as the
government and individual companies are beginning to adopt policies more
conducive to creating shareholder value. In industry focus, a change is an
increase in energy-related issues and utilities, while positions in more
expensive banks and financial services companies have been scaled back.
The International Equity Fund is managed for Northwestern Mutual Investment
Services, LLC by Templeton Investment Counsel, Inc.
ASSET ALLOCATION
3/31/99
Europe 37%
United Kingdom 19%
Asia 18%
Latin America 11%
Australia/New Zealand 7%
North America 5%
Non-equity Holdings 3%
TOP 10 HOLDINGS
3/31/99
COMPANY % NET ASSETS
- -------------------------------------
Philips Electronics, Inc. 2.2%
Nycomed Amersham PLC 2.1%
Stora Enso Oyj 2.0%
Merita Limited A 1.9%
YPF S.A., ADR 1.8%
Unidanmark A/S, A, Registered 1.8%
AXA S.A. 1.8%
Autoliv, Inc. 1.8%
Zurich Versicherungs-
Gesellschaft 1.7%
Volvo AB, B Shares 1.6%
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO EAFE INDEX
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND CLASS A 9,523 10,476 9,368 10,304 8,122 9,267 9,391
INTERNATIONAL EQUITY FUND CLASS B 10,000 10,970 9,789 10,749 8,462 9,623 9,742
INTERNATIONAL EQUITY FUND CLASS B REDEMPTION VALUE 9,471
EAFE INDEX 10,000 11,234 10,362 11,893 10,326 12,468 12,651
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
International Equity Fund
(Class A - without initial sales charge) -8.85% -0.69%
- --------------------------------------------------------------------------------
EAFE Index 6.36% 12.47%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
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 AND PREFERRED STOCK (96.2%)
CAPITAL EQUIPMENT (9.6%)
Alcatel, ADR France 11,400 $260,063
Alcatel France 1,500 172,466
BTR, PLC A United Kingdom 72,494 327,676
Granges AB Sweden 7,700 116,113
Hong Kong Aircraft
& Engineering Hong Kong 135,000 198,592
Philips Electronics, Inc. Netherlands 8,600 700,520
New Holland NV Netherlands 15,000 153,750
Rolls-Royce PLC United Kingdom 77,700 331,765
Sirti SPA Italy 39,300 233,356
The Weir Group PLC United Kingdom 126,200 502,181
- --------------------------------------------------------------------------------
TOTAL 2,996,482
- --------------------------------------------------------------------------------
CONSUMER GOODS (12.2%)
Autoliv, Inc. Sweden 14,400 540,900
Fiat SPA Ord. Italy 84,920 280,540
Fisher & Paykel
Industries Ltd. New Zealand 57,100 188,799
Medeva PLC United Kingdom 176,000 350,884
Nycomed Amersham PLC United Kingdom 75,525 644,949
Ono Pharmaceutical
Co., Ltd. Japan 9,000 363,253
Sony Corporation Japan 3,700 342,101
Tate & Lyle, PLC United Kingdom 34,500 231,684
Teva Pharmaceutical
Industries Ltd., ADR Israel 7,400 351,038
Volvo AB, B shares Sweden 19,600 513,657
- --------------------------------------------------------------------------------
TOTAL 3,807,805
- --------------------------------------------------------------------------------
ENERGY (13.6%)
Elf Aquitaine SA France 2,800 380,278
Endesa S.A. Spain 13,900 350,851
EVN Energie Versorgung Austria 1,500 195,057
Gener S.A., ADR Chile 12,500 229,687
Hong Kong Electric
Holdings Ltd. Hong Kong 106,000 320,754
Iberdrola S.A. Spain 31,000 459,175
Korea Electric Power
Corp., ADR Republic of Korea 12,800 308,786
National Power PLC United Kingdom 60,400 464,849
Petroleo Brasileiro
S.A. - Petrobras Brazil 1,339,000 185,820
<F1> Ranger Oil Limited Canada 45,400 181,600
Repsol S.A. Spain 5,800 298,682
Thames Water United Kingdom 21,083 320,608
YPF S.A., ADR Argentina 17,700 558,656
- --------------------------------------------------------------------------------
TOTAL 4,254,803
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Country Shares/Par Market Value
- --------------------------------------------------------------------------------
FINANCE (22.8%)
Australia & New Zealand
Bank Group Australia 61,000 $441,071
Axa China Region
Limited Hong Kong 295,000 207,464
AXA S.A. France 4,100 543,557
Banco Bradesco S.A. Brazil 27,950,000 149,936
Banco Itau S.A. Brazil 94,000 47,959
Bangkok Bank Public
Company Limited Thailand 131,300 269,136
Banque Nationale de Paris France 3,500 304,555
Compagnie Financiere
de Paribas France 3,000 334,892
Deutsche Bank AG Germany 5,700 293,225
Hang Lung Development Hong Kong 133,000 161,326
HSBC Holdings PLC Hong Kong 12,400 390,423
Industrial Credit & Inv.
Corp. of India
(144A), GDR India 17,000 105,825
ING Groep N.V. Netherlands 8,800 485,000
Merita Limited A Finland 106,000 567,611
The Nomura Securities
Co., Ltd. Japan 38,000 397,872
PartnerRe Ltd. Bermuda 11,500 465,750
<F2> Peregrine Investments
Holdings Limited Hong Kong 66,000 0
Reinsurance Australia
Corporation Limited Australia 170,000 199,680
Scor France 6,000
301,856
Unibanco Uniao de Bancos Brazil 1,579,000 61,687
Unidanmark A/S, A,
Registered Denmark 8,100 552,981
XL Capital Ltd. Bermuda 5,500 334,125
Zurich Versicherungs-
Gesellschaft Switzerland 820 524,654
- --------------------------------------------------------------------------------
TOTAL 7,140,585
- --------------------------------------------------------------------------------
MATERIALS (9.8%)
Agrium, Inc. Canada 22,700 208,556
Akzo Nobel N.V. Netherlands 7,400 274,024
Bayer AG Germany 8,800 329,667
Boehler-Uddeholm AG Austria 4,584 220,522
British Steel PLC United Kingdom 217,100 443,338
Grupo Mexico, B shares Mexico 73,700 252,217
Hepworth PLC United Kingdom 58,200 157,370
Minorco S.A., ADR Luxembourg 850 14,450
Pechiney S.A., A shares France 9,300 336,349
Pioneer International Ltd. Australia 109,700 216,832
Stora Enso Oyj Finland 61,000 605,872
- --------------------------------------------------------------------------------
TOTAL 3,059,197
- --------------------------------------------------------------------------------
Country Shares/Par Market Value
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (6.2%)
Amer Group Ltd., A Finland 13,000 $174,031
Elementis PLC United Kingdom 68,280 102,509
Hicom Holdings Berhad Malaysia 53,300 14,026
Hutchinson Whampoa
Limited Hong Kong 38,000 299,114
Jardine Matheson
Holdings Hong Kong 62,500 188,750
Pilkington PLC United Kingdom 290,500 389,232
Swire-Pacific Limited,
A shares Hong Kong 36,000 167,236
Swire-Pacific Limited,
B shares Hong Kong 296,000 204,347
VEBA AG Germany 7,700 404,839
- --------------------------------------------------------------------------------
TOTAL 1,944,084
- --------------------------------------------------------------------------------
SERVICES (22.0%)
British Airways PLC United Kingdom 49,000 341,517
British Telecom United Kingdom 19,240 314,629
<F1> Cable & Wireless Optus
Limited Australia 116,160 269,213
Compania Anonima
Nacional Telefonos de
Venezuela Venezuela 9,400 170,963
Cia. de Telecomunicaciones
de Chile S.A., ADR Chile 13,100 308,669
David Jones Ltd. Australia 77,500 70,475
Hong Kong
Telecommunications Ltd. Hong Kong 252,400 496,687
KPN NV Netherlands 11,700 465,464
Laidlaw Inc. Canada 46,965 272,984
Marks & Spencer PLC United Kingdom 51,800 339,500
Mayne Nickless Ltd. Australia 72,600 238,404
Moebel Walther AG PFD Germany 5,056 86,789
News Corporation
Limited, Pfd. Australia 73,500 503,141
Nippon Telegraph &
Telephone Corporation
(NTT) Japan 35 342,819
The Peninsular and
Oriental Steam
Navigation Company United Kingdom 23,000 335,274
Philippine Long
Distance Telephone
Company, ADR Philippines 6,000 155,250
Pt Indostat, ADR Indonesia 11,200 144,900
SK Telecom Co.,
Ltd., ADR Republic of Korea 12,875 156,914
Somerfield PLC United Kingdom 40,000 205,016
<PAGE>
M A S O N S T R E E T F U N D S
Country Shares/Par Market Value
- --------------------------------------------------------------------------------
SERVICES (CONTINUED)
South China Morning
Post Ltd. Hong Kong 133,000 $75,085
<F1> Swisscom AG Switzerland 515 201,115
Telecommunicacoes
Brasileiras S.A. Brazil 4,200 338,625
Telefonica de Argentina
S.A., ADR Argentina 10,500 317,625
Telefonica del Peru S.A.,
B shares, ADR Peru 17,500 223,125
Telefonos de Mexico
SA, ADR Mexico 7,600 497,800
- --------------------------------------------------------------------------------
TOTAL 6,871,983
- --------------------------------------------------------------------------------
TOTAL COMMON AND
PREFERRED STOCK 30,074,939
================================================================================
MONEY MARKET INVESTMENTS (1.6%)
PERSONAL CREDIT INSTITUTIONS (1.6%)
Household Finance Company,
4.92%, 4/7/99 United States 500,000 500,000
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 500,000
================================================================================
TOTAL INVESTMENTS (97.8%)
(COST $32,304,254) <F3> 30,574,939
================================================================================
OTHER ASSETS, LESS LIABILITIES (2.2%) 686,735
================================================================================
TOTAL NET ASSETS (100.0%) $31,261,674
================================================================================
<F1> Non-Income Producing
<F2> Defaulted Security
GDR - Global Depository Receipt
ADR - American Depository 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.
<F3> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $32,304,254 and the net unrealized depreciation of investments
based on that cost was $1,729,315 which is comprised of $3,362,108
aggregate gross unrealized appreciation and $5,091,423 aggregate gross
unrealized depreciation.
INVESTMENT PERCENTAGES BY COUNTRY:
Australia 6.20%
Finland 4.31%
France 8.43%
Hong Kong 8.67%
Japan 4.63%
Netherlands 6.65%
United Kingdom 18.56%
Other 42.55%
- -------------------------------------
TOTAL 100.00%
=====================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- ------------------
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: A 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: $52.6 million
- --------------------------------------------------------------------------------
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. Thorough analysis of the economy is used to identify industries
likely to benefit from current and emerging trends. Stock selection is made
through "top down" analysis, beginning with industry and market sector choices.
Within the sectors identified as having strong prospects for growth, the most
promising companies are selected as holdings. The Fund remains close to fully
invested, with S&P 500/R Index futures contracts used at times to maintain the
desired degree of market exposure.
The Growth Stock Fund has performed quite well over the past year, in part
because of its overall emphasis on the large-capitalization growth companies
that have led the equity market's continued rise. Relative to the S&P 500/R
Index, the Fund is overweighted in consumer staple and consumer cyclical stocks,
especially retailers, which have performed well as optimistic consumers have
used expanding disposable income to maintain their spending spree. An increase
in technology holdings over the last six months has contributed to performance,
as this sector has continued its explosive growth. Several recent new holdings
have been in the communication services industry, which is experiencing growth
as a result of increased data traffic over the Internet.
Shareholders of the Fund have also benefited from its relatively low turnover of
holdings, which helps them avoid paying capital gains taxes. Over the last year,
the Fund's turnover has been 32%, compared with turnover of more than 100% for
the universe of large-cap growth stock funds analyzed by Morningstar.
SECTOR ALLOCATION
3/31/99
Consumer Staples 16%
Technology 16%
S&P 500/R Index Futures 13%
Consumer Cyclical 12%
Healthcare 8%
Basic Materials/Capital Goods 8%
Finance 7%
Cash Equivalents 6%
Communication Services 5%
Other Industries 5%
Energy 4%
TOP 10 HOLDINGS
3/31/99
Company % Net Assets
- -------------------------------------
Microsoft Corporation 2.9%
MCI WorldCom, Inc. 2.7%
General Electric Company 2.6%
Walgreen Co. 2.6%
Fiserv, Inc. 2.4%
International Business
Machines Corporation 2.3%
Kohl's Corporation 2.2%
Cisco Systems, Inc. 2.2%
Harley-Davidson, Inc. 1.9%
Wal-Mart Stores, Inc. 1.9%
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO S&P 500/R INDEX
<TABLE>
<CAPTION>
GROWTH STOCK FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
GROWTH STOCK FUND CLASS A 9,523 11,828 12,239 13,817 12,778 15,602 16,354
GROWTH STOCK FUND CLASS B 10,000 12,308 12,779 14,412 13,292 16,203 16,957
GROWTH STOCK FUND CLASS B REDEMPTION VALUE 16,657
S&P 500 INDEX 10,000 12,618 12,977 14,787 13,747 16,675 17,503
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Growth Stock Fund
(Class A - without initial sales charge) 18.36% 31.04%
- --------------------------------------------------------------------------------
S&P 500/R Index 18.37% 32.30%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (81.3%)
BASIC MATERIALS (1.3%)
Ecolab, Inc. 19,000 $674,500
- --------------------------------------------------------------------------------
CAPITAL GOODS (7.0%)
AlliedSignal, Inc. 7,300 359,068
Avery Dennison Corporation 13,800 793,500
General Electric Company 12,400 1,371,750
<F1> Republic Services, Inc. 10,900 176,444
Tyco International Ltd. 9,500 681,625
Waste Management, Inc. 7,200 319,500
- --------------------------------------------------------------------------------
TOTAL 3,701,887
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (5.2%)
AT&T Corp. 11,952 953,918
GTE Corporation 6,500 393,250
<F1> MCI WorldCom, Inc. 15,748 1,394,682
- --------------------------------------------------------------------------------
TOTAL 2,741,850
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (11.8%)
Borg-Warner Automotive, Inc. 3,600 172,124
Centex Corporation 4,900 163,538
Dayton Hudson Corporation 7,500 499,688
Ford Motor Company 6,800 385,900
Harley-Davidson, Inc. 17,700 1,017,750
<F1> Kohl's Corporation 16,400 1,162,350
Lennar Corporation 5,200 116,350
The New York Times Company 19,400 552,900
Servicemaster Co. 25,500 517,969
Tribune Company 9,400 615,113
Wal-Mart Stores, Inc. 11,000 1,014,063
- --------------------------------------------------------------------------------
TOTAL 6,217,745
- --------------------------------------------------------------------------------
CONSUMER STAPLES (16.3%)
Anheuser-Busch Companies, Inc. 7,400 563,787
Benckiser N.V. 5,800 322,625
Campbell Soup Company 6,500 264,469
The Dial Corporation 15,200 522,500
<F1> Keebler Foods Company 22,700 828,550
McDonald's Corporation 17,600 797,500
Newell Rubbermaid, Inc. 11,100 527,250
PepsiCo, Inc. 18,000 705,375
<F1> The Pepsi Bottling Group, Inc. 16,900 366,519
Philip Morris Companies, Inc. 9,600 337,800
Procter & Gamble Company 6,900 675,769
The Quaker Oats Company 5,900 369,119
Unilever, N.V. 9,100 604,581
Walgreen Co. 48,200 1,361,650
The Walt Disney Company 10,000 311,250
- --------------------------------------------------------------------------------
TOTAL 8,558,744
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
ENERGY (4.4%)
BP Amoco PLC 5,900 $595,530
Chevron Corporation 1,700 150,344
Conoco, Inc. 14,500 356,156
Exxon Corporation 5,800 409,263
Mobil Corporation 3,100 272,800
Schlumberger Limited 2,500 150,469
Tosco Corporation 9,400 233,238
Transocean Offshore Inc. 5,000 144,063
- --------------------------------------------------------------------------------
TOTAL 2,311,863
- --------------------------------------------------------------------------------
FINANCE (6.7%)
Ambac Financial Group, Inc. 4,500 243,000
Associates First Capital Corporation 6,200 279,000
The Bank of New York Company, Inc. 12,700 456,406
BankAmerica Corporation 3,000 211,875
Chase Manhattan Corporation 8,400 683,025
Citigroup, Inc. 4,950 316,181
Fifth Third Bancorp 6,700 441,781
First Union Corporation 1,800 96,188
Morgan Stanley Dean Witter & Co. 7,700 769,519
- --------------------------------------------------------------------------------
TOTAL 3,496,975
- --------------------------------------------------------------------------------
HEALTHCARE (8.3%)
Bristol-Myers Squibb Company 10,800 694,574
Eli Lilly & Company 5,200 441,350
<F1> Guidant Corporation 6,000 363,000
Johnson & Johnson 5,800 543,388
Medtronic, Inc. 9,200 660,100
Merck & Co., Inc. 7,200 577,350
Pfizer, Inc. 4,100 568,875
Pharmacia & Upjohn, Inc. 3,700 230,788
Warner-Lambert Company 4,400 291,225
- --------------------------------------------------------------------------------
TOTAL 4,370,650
- --------------------------------------------------------------------------------
TECHNOLOGY (16.0%)
<F1> America Online, Inc. 2,000 292,000
<F1> Cisco Systems, Inc. 10,350 1,133,972
Electronic Data Systems Corporation 8,800 428,450
<F1> EMC Corporation 1,700 217,175
<F1> Fiserv, Inc. 23,550 1,262,869
Hewlett-Packard Company 5,200 352,625
Intel Corporation 5,200 619,450
International Business
Machines Corporation 6,800 1,205,300
Lucent Technologies, Inc. 4,600 495,650
<F1> Microsoft Corporation 17,200 1,541,550
Northern Telecom Limited 4,200 260,925
<F1> Sun Microsystems, Inc. 2,000 249,875
W.W. Grainger, Inc. 8,500 366,031
- --------------------------------------------------------------------------------
TOTAL 8,425,872
- --------------------------------------------------------------------------------
Shares/Par Market Value
- --------------------------------------------------------------------------------
TRANSPORTATION (2.9%)
<F1> AMR Corporation 3,800 $222,538
<F1> FDX Corporation 3,700 343,406
<F1> Midwest Express Holdings, Inc. 12,750 374,531
Southwest Airlines Co. 19,800 598,950
- --------------------------------------------------------------------------------
TOTAL 1,539,425
- --------------------------------------------------------------------------------
UTILITIES (1.4%)
Enron Corporation 11,000 706,750
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK 42,746,261
================================================================================
MONEY MARKET INVESTMENTS (19.4%)
AIRCRAFT ENGINES AND ENGINE PARTS (2.5%)
General Electric Company,
4.85%, 4/29/99 1,300,000 1,295,096
- --------------------------------------------------------------------------------
CAPTIVE FINANCE COMPANY (3.2%)
<F2> Daimler-Chrysler N.A. Holding,
4.84%, 4/21/99 1,200,000 1,196,773
<F2> Ford Motor Credit Company,
4.85%, 4/7/99 500,000 499,596
- --------------------------------------------------------------------------------
TOTAL 1,696,369
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (9.1%)
<F2> Federal Farm Credit, 4.80%, 4/1/99 4,400,000 4,400,000
<F2> Federal Home Loan Mortgage Corp.,
4.75%, 5/17/99 400,000 397,572
- --------------------------------------------------------------------------------
TOTAL 4,797,572
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.3%)
Quincy Capital Corporation,
4.89%, 4/16/99 1,200,000 1,197,555
- --------------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (2.3%)
<F2> Sears Roebuck Acceptance Corp.,
4.87%, 4/7/99 1,200,000 1,199,026
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 10,185,618
================================================================================
TOTAL INVESTMENTS (100.7%)
(COST $37,971,331) <F3> 52,931,879
================================================================================
OTHER ASSETS, LESS LIABILITIES (-0.7%) (370,574)
================================================================================
TOTAL NET ASSETS (100.0%) $52,561,305
================================================================================
<PAGE>
M A S O N S T R E E T F U N D S
<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
March 31, 1999 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Depreciation
- --------------------------------------------------------------------------------
S&P 500/R Stock Index
(Total notional value at
3/31/99, $6,905,963) 21 6/99 $116,137
<F3> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $37,971,331 and the net unrealized appreciation of investments
based on that cost was $14,960,548 which is comprised of $15,489,768
aggregate gross unrealized appreciation and $529,220 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- -----------------------------
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: $49.9 million
- --------------------------------------------------------------------------------
The Growth and Income 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. More
focus is placed on capital appreciation and dividend growth than on current
dividends. The portfolio is normally fully invested in equity securities.
The last two years have been a challenging time for the value-oriented
management style that characterizes this Fund, as a small number of growth
stocks have been the major force in driving the equity market to record heights.
The Fund's practice of matching S&P 500/R Index weightings in industries such as
capital goods and utilities hurt performance, as these groups languished.
BankAmerica, a high-quality and growing U.S. company with a valuable franchise,
was among the Fund's best performing stocks over the past year. Another long-
term core position is MCI WorldCom, which provides infrastructure for global
telecommunications and electronic commerce; this well-managed company with solid
global assets should be able to sustain long-term growth in a variety of
economic conditions. Major technology names also contributed to the Fund's
performance. These include Microsoft, in which the Fund has a position that
matches that of the S&P 500/R Index, and Cisco Systems, in which the Fund is
overweighted. After an extended period of weakness, energy stocks began to
recover in the early months of 1999; the Fund benefited from its large position
in Shell, where management is taking steps to improve profitability.
The Growth and Income Stock Fund is managed for Northwestern Mutual Investment
Services, LLC by J. P. Morgan Investment Management, Inc.
SECTOR ALLOCATION
3/31/99
Finance 17%
Technology 17%
Basic Materials/Capital Goods 17%
Consumer Cyclical 12%
Healthcare 10%
Communications Services 8%
Energy 8%
Consumer Staples 6%
Other 5%
TOP 10 HOLDINGS
3/31/99
Company % Net Assets
- -------------------------------------
Microsoft Corporation 4.1%
BankAmerica Corporation 3.8%
MCI WorldCom, Inc. 3.5%
Shell Transport & Trading
Company, ADR 3.3%
Tyco International Ltd. 3.2%
Union Pacific Corporation 3.1%
American Home Products
Corporation 2.6%
Forest Laboratories, Inc. 2.5%
Cisco Systems, Inc. 2.5%
Bristol-Myers Squibb Company 2.4%
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO S&P 500/R INDEX
<TABLE>
<CAPTION>
GROWTH & INCOME STOCK FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
GROWTH & INCOME STOCK FUND CLASS A 9,523 12,152 12,101 13,514 12,167 14,774 15,012
GROWTH & INCOME STOCK FUND CLASS B 10,000 12,720 12,637 14,096 12,648 15,339 15,563
GROWTH & INCOME STOCK FUND CLASS B REDEMPTION VALUE 15,263
S&P 500 INDEX 10,000 12,618 12,977 14,787 13,747 16,675 17,503
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Growth and Income Stock Fund
(Class A - without initial sales charge) 11.09% 25.55%
- --------------------------------------------------------------------------------
S&P 500/R Index 18.37% 32.30%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
SCHEDULE OF INVESTMENTS
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (99.4%)
BASIC MATERIALS (7.1%)
Albemarle Corporation 4,500 $94,217
Allegheny Teledyne, Inc. 16,300 308,681
Monsanto Company 15,600 716,625
Rohm and Haas Company 21,600 724,950
<F1> Smurfit-Stone Container Corporation 43,202 834,339
Temple-Inland Inc. 4,000 251,000
USEC Inc. 48,000 654,000
- --------------------------------------------------------------------------------
TOTAL 3,583,812
- --------------------------------------------------------------------------------
CAPITAL GOODS (10.1%)
AlliedSignal, Inc. 11,100 545,981
<F1> Coltec Industries, Inc. 26,700 485,606
Cooper Industries, Inc. 10,400 443,300
<F1> Republic Services, Inc. 34,000 550,375
Tenneco Inc. 7,700 215,119
Tyco International Ltd. 22,428 1,609,209
Waste Management, Inc. 26,405 1,171,722
- --------------------------------------------------------------------------------
TOTAL 5,021,312
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (7.5%)
AT&T Corp 6,128 489,091
Bell Atlantic Corporation 12,100 625,419
GTE Corporation 7,400 447,700
<F1> Level 3 Communications, Inc. 3,600 262,125
<F1> MCI WorldCom, Inc. 19,870 1,759,737
SBC Communications, Inc. 3,600 169,650
- --------------------------------------------------------------------------------
TOTAL 3,753,722
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (12.3%)
<F1> Autozone, Inc. 7,400 224,775
<F1> Cendant Corporation 25,500 401,625
Dayton Hudson Corporation 7,600 506,350
<F1> Federated Department Stores, Inc. 6,700 268,838
<F1> Fred Meyer, Inc. 10,900 641,737
<F1> Fruit of the Loom, Inc. 25,800 267,675
International Game Technology 20,900 304,356
<F1> Lear Corporation 4,600 196,363
Mattel, Inc. 28,700 713,913
<F1> Mirage Resorts, Incorporated 8,900 189,125
The News Corporation Limited 8,100 238,950
Service Corporation International 21,700 309,225
Starwood Hotels & Resorts
Worldwide, Inc. 28,679 819,144
TJX Companies, Inc. 13,900 472,600
Wal-Mart Stores, Inc. 6,100 562,344
- --------------------------------------------------------------------------------
TOTAL 6,117,020
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares Market Value
- --------------------------------------------------------------------------------
CONSUMER STAPLES (5.5%)
Kimberly-Clark Corporation 6,900 $330,768
PepsiCo, Inc. 16,800 658,350
Philip Morris Companies, Inc. 18,200 640,413
Procter & Gamble Company 11,300 1,106,694
- --------------------------------------------------------------------------------
TOTAL 2,736,225
- --------------------------------------------------------------------------------
ENERGY (7.6%)
<F1> Input/Output, Inc. 58,700 370,544
Mobil Corporation 13,400 1,179,200
Shell Transport & Trading
Company ADR 40,100 1,629,063
Tosco Corporation 23,900 593,018
- --------------------------------------------------------------------------------
TOTAL 3,771,825
- --------------------------------------------------------------------------------
FINANCE (17.4%)
Ambac Financial Group, Inc. 3,600 194,400
Astoria Financial Corporation 7,205 360,250
BankAmerica Corporation 26,663 1,883,074
The CIT Group, Inc. 13,100 400,369
Citigroup, Inc. 3,950 252,306
Dime Bancorp, Inc. 9,600 222,600
First Union Corporation 21,600 1,154,250
KeyCorp 14,200 430,438
Marsh & McLennan Companies, Inc. 9,500 704,781
MBIA, Inc. 3,200 185,600
Newcourt Credit Group Inc. 35,500 960,719
Provident Companies, Inc. 6,800 235,025
UNUM Corporation 17,700 841,856
Washington Mutual, Inc. 21,000 858,375
- --------------------------------------------------------------------------------
TOTAL 8,684,043
- --------------------------------------------------------------------------------
HEALTHCARE (10.1%)
<F1> Alza Corporation 2,200 84,150
American Home Products Corporation 19,900 1,298,475
Bristol-Myers Squibb Company 18,700 1,202,644
<F1> Forest Laboratories, Inc. 22,100 1,245,888
<F1> HEALTHSOUTH Corporation 71,300 739,737
Warner-Lambert Company 7,100 469,931
- -----------------------------------------------------------------------------
TOTAL 5,040,825
- -----------------------------------------------------------------------------
TECHNOLOGY (17.4%)
<F1> Ascend Communications, Inc. 3,000 251,063
<F1> Cisco Systems, Inc. 11,225 1,229,839
<F1> EMC Corporation 5,500 702,625
<F1> Genzyme Corporation (General Division) 8,800 443,850
Intel Corporation 7,900 941,088
International Business
Machines Corporation 5,800 1,028,050
Shares Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> Microsoft Corporation 22,600 $2,025,525
<F1> Oracle Corporation 20,150 531,456
<F1> Quantum Corporation 16,400 295,200
<F1> Sun Microsystems, Inc. 5,800 724,637
Texas Instruments, Incorporated 5,400 535,950
- --------------------------------------------------------------------------------
TOTAL 8,709,283
- --------------------------------------------------------------------------------
TRANSPORTATION (3.1%)
Union Pacific Corporation 29,200 1,560,375
- --------------------------------------------------------------------------------
UTILITIES (1.3%)
P P & L Resources, Inc. 12,600 311,850
Wisconsin Energy Corporation 13,700 357,913
- --------------------------------------------------------------------------------
TOTAL 669,763
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS 49,648,205
================================================================================
TOTAL INVESTMENTS (99.4%)
(COST $46,395,132)<F2> 49,648,205
================================================================================
OTHER ASSETS, LESS LIABILITIES (0.6%) 286,013
================================================================================
TOTAL NET ASSETS (100.0%) $49,934,218
================================================================================
<F1> Non-Income Producing
ADR - American Depository Receipt
<F2> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $46,984,313 and the net unrealized appreciation of investments
based on that cost was $2,663,892 which is comprised of $6,859,677
aggregate gross unrealized appreciation and $4,195,785 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
- ---------------------
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: $87.8 million
- --------------------------------------------------------------------------------
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. In its second year of operation, the Fund
achieved the objective of matching the results of the S&P 500/R before expenses.
SECTOR ALLOCATION
3/31/99
Technology 19%
Finance 16%
Consumer Staples 13%
Other Industries 12%
Healthcare 11%
Basic Materials/Capital Goods 11%
Consumer Cyclical 10%
Energy 5%
S&P 500/R Index Futures
and Other Assets 3%
TOP 10 HOLDINGS
3/31/99
Company % Net Assets
- -------------------------------------
Microsoft Corporation 4.1%
General Electric Company 3.3%
Wal-Mart Stores, Inc. 1.9%
Intel Corporation 1.8%
Merck & Co., Inc. 1.7%
Pfizer, Inc. 1.6%
AT&T Corporation 1.6%
Cisco Systems, Inc. 1.6%
Exxon Corporation 1.6%
International Business
Machines Corporation 1.5%
PERFORMANCE RELATIVE TO S&P 500/R INDEX
<TABLE>
<CAPTION>
INDEX 500 STOCK FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
INDEX 500 STOCK FUND CLASS A 9,523 11,952 12,266 13,938 12,933 15,666 16,429
INDEX 500 STOCK FUND CLASS B 10,000 12,510 12,821 14,544 13,449 16,274 17,042
INDEX 500 STOCK FUND CLASS B REDEMPTION VALUE 16,742
S&P 500/R INDEX 10,000 12,618 12,977 14,787 13,747 16,675 17,503
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Index 500 Stock Fund
(Class A - without initial sales charge) 17.88% 31.34%
- --------------------------------------------------------------------------------
S&P 500/R Index 18.37% 32.30%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
<PAGE>
MARCH 31, 1999
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
- --------------------------------------------------------------------------------
COMMON STOCK (96.0%)
BASIC MATERIALS (2.9%)
Air Products & Chemicals, Inc. 1,900 $65,075
Alcan Aluminum Limited 1,800 46,462
Alcoa Inc. 3,000 123,562
Allegheny Teledyne, Inc. 1,600 30,300
Archer Daniels Midland Company 4,791 70,368
ASARCO, Inc. 300 4,125
B. F. Goodrich Company 600 20,588
Barrick Gold Corporation 3,000 51,187
Battle Mountain Gold Company 1,600 4,400
Bemis Company, Inc. 400 12,425
<F1> Bethlehem Steel Corporation 900 7,425
Boise Cascade Corporation 500 16,125
Champion International 800 32,850
Cyprus Amax Minerals Co. 700 8,487
Dow Chemical Company 1,800 167,737
E.I. du Pont de Nemours & Co. 9,100 528,368
Eastman Chemical Company 600 25,238
Ecolab, Inc. 1,000 35,500
Engelhard Corp. 1,200 20,325
<F1> FMC Corporation 300 14,813
<F1> Freeport-McMoRan Copper & Gold, Inc. 1,200 13,050
Georgia Pacific Corp. 700 51,975
Great Lakes Chemical 500 18,375
Hercules Inc. 800 20,200
Homestake Mining Company 1,900 16,388
Inco Limited 1,300 17,306
International Flavors & Fragrances, Inc. 900 33,806
International Paper Company 2,500 105,469
Louisiana Pacific Corporation 800 14,900
Mead Corp. 800 24,600
Monsanto Company 5,000 229,688
Morton International, Inc. 1,000 36,750
Nalco Chemical Company 500 13,281
Newmont Mining Corporation 1,358 23,765
Nucor Corp. 700 30,844
Phelps Dodge Corporation 500 24,625
Pioneer Hi-Bred International 1,900 71,488
Placer Dome Inc. 2,000 22,375
Potlatch Corporation 200 6,788
PPG Industries, Inc. 1,400 71,750
Praxair 1,300 46,881
Reynolds Metals Company 500 24,156
Rohm and Haas Company 1,300 43,631
Sigma-Aldrich Corp. 800 23,400
Temple-Inland Inc. 400 25,100
Union Camp Corporation 600 40,275
Union Carbide Corporation 1,100 49,706
Shares/Par Market Value
- --------------------------------------------------------------------------------
BASIC MATERIALS (CONTINUED)
USX-U.S. Steel Group, Inc. 700 $16,450
<F1> W.R. Grace & Co. 500 6,063
Westvaco Corporation 800 16,800
Weyerhaeuser Company 1,600 88,800
Willamette Industries, Inc. 900 33,975
Worthington Industries 700 8,225
- --------------------------------------------------------------------------------
TOTAL 2,556,245
- --------------------------------------------------------------------------------
CAPITAL GOODS (7.6%)
Aeroquip-Vickers Inc. 200 11,462
AlliedSignal, Inc. 4,500 221,344
AMP Incorporated 1,808 97,067
Avery Dennison Corporation 900 51,750
Ball Corporation 200 9,387
Boeing Company 8,070 275,389
Briggs & Stratton Corporation 200 9,862
Browning-Ferris Industries, Inc. 1,400 53,987
Case Corporation 600 15,225
Caterpillar, Inc. 2,900 133,219
Cooper Industries, Inc. 800 34,100
Corning, Inc. 1,900 114,000
Crane Co. 550 13,303
Crown Cork & Seal Company, Inc. 1,000 28,562
Cummins Engine Company, Inc. 300 10,669
Danaher Corporation 1,100 57,475
Deere & Company 1,900 73,387
Dover Corporation 1,800 59,175
Eaton Corporation 600 42,900
Emerson Electric Co. 3,500 185,281
Fluor Corporation 600 16,200
Foster Wheeler Corporation 300 3,637
General Dynamics Corporation 1,000 64,250
General Electric Company 26,300 2,909,437
Harnischfeger Industries, Inc. 300 1,706
Honeywell, Inc. 1,000 75,813
Illinois Tool Works, Inc. 2,000 123,750
Ingersoll-Rand Company 1,350 66,994
Johnson Controls, Inc. 700 43,663
Lockheed Martin Corporation 3,200 120,600
McDermott International, Inc. 500 12,656
Milacron Inc. 300 4,725
Millipore Corp. 300 7,238
Minnesota Mining & Manufacturing Co. 3,200 226,400
Moore Corporation Ltd. 603 5,955
NACCO Industries, Inc. 100 7,406
National Service Industries, Inc. 300 10,219
<F1> Navistar International Corporation 500 20,094
Northrop Grumman Corporation 600 35,925
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
<F1> Owens-Illinois, Inc. 1,200 $30,000
Paccar Incorporated 600 24,713
Pall Corporation 900 14,906
Parker-Hannifin Corporation 850 29,113
Pitney Bowes, Inc. 2,200 140,250
Raychem Corp. 600 13,538
Rockwell International Corp. 1,500 63,656
<F1> Sealed Air Corporation 714 35,120
<F1> Solectron Corporation 1,900 92,269
Tenneco Inc. 1,400 39,113
Textron Inc. 1,300 100,588
<F1> Thermo Electron Corporation 1,300 17,631
Thomas & Betts Corporation 500 18,781
Timken Company 500 8,125
Tyco International Ltd. 5,180 371,665
United Technologies Corp. 1,800 243,788
Waste Management, Inc. 4,657 206,654
- --------------------------------------------------------------------------------
TOTAL 6,704,122
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (8.2%)
<F1> Airtouch Communications Inc. 4,600 444,475
ALLTEL Corporation 2,200 137,225
Ameritech Corporation 8,900 515,088
AT&T Corporation 17,954 1,432,954
Bell Atlantic Corporation 12,470 644,543
Bellsouth Corporation 15,700 628,981
Frontier Corporation 1,400 72,625
GTE Corporation 7,800 471,900
<F1> MCI WorldCom, Inc. 14,748 1,306,120
<F1> Nextel Communications, Inc. 2,300 84,237
SBC Communications, Inc. 15,732 741,371
Sprint Corporation 3,500 343,438
<F1> Sprint PCS 3,550 157,308
US West Communications, Inc. 4,081 224,710
- --------------------------------------------------------------------------------
TOTAL 7,204,975
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS (9.5%)
American Greetings Corp. 600 15,225
Armstrong World Industries Inc. 300 13,556
<F1> Autozone, Inc. 1,200 36,450
Black & Decker Corporation 700 38,806
Brunswick Corporation 700 13,344
Carnival Corporation 4,800 233,100
<F1> Cendant Corporation 6,822 107,446
Centex Corporation 500 16,688
Circuit City Stores, Inc. 800 61,300
<F1> Consolidated Stores Corporation 900 27,280
Cooper Tire & Rubber Company 600 11,025
Shares/Par Market Value
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
<F1> Costco Companies, Inc. 1,700 $155,656
Dana Corporation 1,378 52,364
Dayton Hudson Corporation 3,500 233,187
Dillard's, Inc. 900 22,838
Dollar General Corp. 1,450 49,300
Dow Jones & Company, Inc. 800 37,750
Dun & Bradstreet Corporation 1,300 46,312
Eastman Kodak Company 2,600 166,075
<F1> Federated Department Stores, Inc. 1,600 64,200
Fleetwood Enterprises, Inc. 300 8,588
Ford Motor Company 9,700 550,475
<F1> Fred Meyer, Inc. 1,200 70,650
Fruit of the Loom, Inc. 500 5,187
Gannet Company Inc. 2,300 144,900
Gap, Inc. 4,675 314,686
General Motors Corp. 5,300 460,438
Genuine Parts Company 1,450 41,778
Goodyear Tire & Rubber Company 1,300 64,755
H & R Block, Inc. 800 37,900
Harcourt General 600 26,588
<F1> Harrahs Entertainment 1,000 19,063
Hasbro, Inc. 1,550 44,853
Hilton Hotels Corporation 2,100 29,531
Home Depot, Inc. 11,900 740,775
Ikon Office Solutions 1,200 15,375
IMS Health Incorporated 2,600 86,125
Interpublic Group of Cos. Inc. 1,100 85,662
ITT Industries, Inc. 800 28,300
J.C. Penney Company, Inc. 2,000 81,000
Jostens, Inc. 300 6,375
Kaufman & Broad Home Corp. 400 9,025
<F1> Kmart Corporation 4,000 67,250
Knight-Ridder, Inc. 600 30,000
<F1> Kohl's Corporation 1,300 92,137
Laidlaw Transportation Limited 2,700 15,694
The Limited, Inc. 1,800 71,325
Liz Claiborne, Inc. 500 16,313
Lowe's Companies, Inc. 2,800 169,400
Marriott International 2,000 67,250
Masco Corporation 2,700 76,275
Mattel, Inc. 2,300 57,213
May Department Stores Company 2,850 111,506
Maytag Corporation 700 42,262
McGraw-Hill Companies Inc. 1,600 87,200
Meredith Corporation 400 12,575
<F1> Mirage Resorts, Incorporated 1,400 29,750
The New York Times Company 1,500 42,750
Nike, Inc. 2,300 132,681
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Nordstrom, Inc. 1,200 $49,050
Omnicom Group Inc. 1,400 111,913
Owens Corning 400 12,725
Pep Boys - Manny, Moe & Jack 400 6,100
Polaroid Corporation 300 6,019
Pulte Corporation 300 6,244
<F1> Reebok International Ltd. 400 6,350
Russell Corp. 300 6,038
Sears, Roebuck & Co. 3,100 140,081
Service Corporation International 2,200 31,350
Sherwin-Williams Company 1,400 39,375
Snap-On, Inc. 500 14,500
Springs Industries, Inc. 100 2,706
The Stanley Works 700 17,938
<F1> Staples, Inc. 3,800 124,925
Tandy Corporation 800 51,050
Times Mirror Company 600 32,438
TJX Companies, Inc. 2,600 88,400
<F1> Toys "R" Us, Inc. 2,100 39,506
Tribune Company 1,000 65,438
TRW, Inc. 1,000 45,500
VF Corporation 1,000 47,188
Wal-Mart Stores, Inc. 18,100 1,668,594
Whirlpool Corporation 600 32,625
Xerox Corporation 5,300 282,888
- --------------------------------------------------------------------------------
TOTAL 8,324,453
- --------------------------------------------------------------------------------
CONSUMER STAPLES (13.0%)
Adolph Coors Co. 300 16,200
Alberto-Culver Company 400 9,350
Albertson's, Inc. 2,000 108,625
American Stores Co. 2,200 72,600
Anheuser-Busch Companies, Inc. 3,800 289,513
Avon Products, Inc. 2,100 98,831
BESTFOODS 2,300 108,100
Brown-Forman Corporation 600 34,575
Campbell Soup Company 3,600 146,475
Cardinal Health, Inc. 2,150 141,900
CBS Corporation 5,700 233,343
<F1> Clear Channel Communications, Inc. 2,100 140,831
Clorox Company 900 105,469
Coca Cola Enterprises Inc. 3,200 96,800
The Coca-Cola Company 19,800 1,215,224
Colgate-Palmolive Co. 2,400 220,800
Comcast Corporation 3,000 188,813
Conagra, Inc. 3,900 99,694
CVS Corporation 3,100 147,250
Darden Restaurant, Inc. 1,100 22,688
Shares/Par Market Value
- --------------------------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
Deluxe Corp. 600 $17,475
Fort James Corporation 1,800 57,038
Fortune Brands, Inc. 1,400 54,163
General Mills, Inc. 1,200 90,675
Gillette Company 8,900 528,993
Great Atlantic & Pacific Tea Co., Inc. 300 9,000
H.J. Heinz Company 2,900 137,388
Hershey Foods Corporation 1,200 67,200
Kellogg Company 3,300 111,581
Kimberly-Clark Corporation 4,400 210,925
<F1> King World Productions, Inc. 600 18,338
<F1> Kroger Company 2,100 125,737
Longs Drug Stores Corp. 300 9,131
McDonald's Corporation 10,900 493,905
McKesson HBOC, Inc. 2,221 146,586
<F1> MediaOne Group, Inc. 4,900 311,150
Newell Rubbermaid Inc. 2,246 106,683
PepsiCo, Inc. 11,800 462,413
Philip Morris Companies, Inc. 19,600 689,675
Procter & Gamble Company 10,700 1,047,930
The Quaker Oats Company 1,100 68,819
R.R. Donnelley & Sons Company 1,100 35,406
Ralston Purina Group 2,500 66,719
Rite Aid Corporation 2,100 52,500
RJR Nabisco Holdings Corp. 2,600 65,000
<F1> Safeway Inc. 3,900 200,119
Sara Lee Corporation 7,300 180,675
The Seagram Company Ltd. 3,200 160,000
Supervalue Inc. 900 18,563
Sysco Corporation 2,700 71,044
Time Warner Inc. 9,900 703,519
<F1> Tricon Global Restaurants, Inc. 1,230 86,408
Tupperware 400 7,200
Unilever, N.V. 5,100 338,831
UST Incorporated 1,500 39,188
Viacom, Inc. 2,800 235,025
Walgreen Co. 8,000 226,000
The Walt Disney Company 16,500 513,562
Wendy's International, Inc. 1,000 28,438
Winn-Dixie Stores, Inc. 1,200 44,850
Wm. Wrigley Jr. Company 900 81,394
- --------------------------------------------------------------------------------
TOTAL 11,416,327
- --------------------------------------------------------------------------------
ENERGY (5.4%)
Amerada Hess Corporation 700 35,219
Anadarko Petroleum Corporation 1,000 37,750
Apache Corporation 800 20,850
Ashland, Inc. 600 24,563
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
Atlantic Richfield Company 2,600 $189,800
Baker Hughes, Inc. 2,610 63,455
Burlington Resource, Inc. 1,405 56,112
Chevron Corporation 5,200 459,875
Exxon Corporation 19,500 1,375,968
Halliburton Company 3,500 134,750
Helmerich & Payne, Inc. 400 9,075
Kerr-McGee Corporation 695 22,805
Mobil Corporation 6,300 554,400
Occidental Petroleum Corporation 2,800 50,400
Phillips Petroleum Company 2,000 94,500
<F1> Rowan Companies, Inc. 600 7,613
Royal Dutch Petroleum Co., ADR 17,200 894,400
Schlumberger Limited 4,400 264,825
Sunoco, Inc. 800 28,850
Texaco Inc. 4,300 244,025
Union Pacific Resource Group 2,000 23,750
Unocal Corp. 1,900 69,944
USX-Marathon Group 2,500 68,750
- --------------------------------------------------------------------------------
TOTAL 4,731,679
- --------------------------------------------------------------------------------
FINANCE (15.6%)
Aetna, Inc. 1,100 91,300
Allstate Corporation 6,600 244,613
American Express Company 3,600 423,000
American General Corporation 2,010 141,705
American International Group, Inc. 9,957 1,201,062
AMSOUTH BANCORPORATION 1,000 45,500
Aon Corporation 1,350 85,388
Associates First Capital Corporation 5,844 262,980
Banc One Corporation 9,458 520,781
The Bank of New York Company, Inc. 6,100 219,219
BankAmerica Corporation 13,879 980,203
BankBoston Corporation 2,400 103,950
Bankers Trust New York Corporation 800 70,600
The Bear Stearns Companies, Inc. 940 42,006
BB&T Corporation 2,500 90,469
Capital One Financial Corporation 500 75,500
Chase Manhattan Corporation 6,800 552,925
The Chubb Corporation 1,300 76,131
CIGNA Corporation 1,700 142,481
Cincinnati Financial Corporation 1,300 47,369
Citigroup, Inc. 18,297 1,168,720
Comerica, Inc. 1,250 78,047
Conseco, Inc. 2,533 78,206
Countrywide Credit Industries, Inc. 900 33,750
Federal Home Loan Mortgage Corp. 5,500 314,188
Federal National Mortgage Association 8,300 574,774
Fifth Third Bankcorp 2,125 140,117
Shares/Par Market Value
- --------------------------------------------------------------------------------
FINANCE (CONTINUED)
First Union Corporation 7,920 $423,224
Firstar Corporation 1,800 161,100
Fleet Financial Group, Inc. 4,600 173,075
Franklin Resources, Inc. 2,000 56,250
Golden West Financial Corporation 500 47,750
Hartford Financial Services Group, Inc. 1,900 107,944
Household International, Inc. 3,919 178,804
Huntington Bancshares, Inc. 1,720 53,213
J.P. Morgan & Company, Inc. 1,400 172,725
Jefferson-Pilot Corp. 900 60,975
KeyCorp 3,700 112,156
Lehman Brothers Holdings, Inc. 900 53,775
Lincoln National Corporation 800 79,100
Loews Corp. 900 67,163
Marsh & McLennan Companies, Inc. 2,100 155,794
MBIA, Inc. 800 46,400
MBNA Corp. 6,450 153,994
Mellon Bank Corporation 2,100 147,788
Mercantile Bancorp 1,300 61,750
Merrill Lynch & Co. 2,900 256,469
MGIC Investment Corp. 900 31,556
Morgan Stanley Dean Witter & Co. 4,655 465,209
National City Corp. 2,700 179,213
Northern Trust Corp. 900 79,931
PNC Bank Corp. 2,400 133,350
Progressive Corporation 600 86,100
Provident Companies, Inc. 1,100 38,019
Providian Financial Corporation 1,100 121,000
Regions Financial Corporation 1,800 62,325
Republic New York Corporation 900 41,513
SAFECO, Inc. 1,100 44,481
Schwab Charles Corp New 3,200 307,600
SLM Holding Corporation 1,300 54,275
SouthTrust Corporation 1,300 48,506
St. Paul Companies, Inc. 1,882 58,460
State Street Corporation 1,300 106,844
Summit Bancorp. 1,400 54,600
SunTrust Banks, Inc. 2,600 161,850
Synovus Financial Corp. 2,150 43,941
Torchmark Corporation 1,100 34,788
Transamerica Corporation 1,000 71,000
Union Planters Corporation 1,100 48,331
UNUM Corporation 1,100 52,319
U.S. Bancorp 5,859 199,572
Wachovia Corporation 1,600 129,900
Washington Mutual, Inc. 4,786 195,628
Wells Fargo & Company 13,000 455,813
- --------------------------------------------------------------------------------
TOTAL 13,680,557
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
HEALTHCARE (11.0%)
Abbott Laboratories Inc. 12,200 $571,112
Allergan 500 43,938
<F1> Alza Corporation 800 30,600
American Home Products Corporation 10,600 691,650
Bausch & Lomb, Inc. 500 32,500
Baxter International, Inc. 2,300 151,800
Becton, Dickinson & Company 2,000 76,625
Biomet, Inc. 900 37,743
<F1> Boston Scientific Corp. 3,200 129,800
Bristol-Myers Squibb Company 16,000 1,029,000
Columbia/HCA Healthcare Corporation 5,200 98,475
C.R. Bard, Inc. 400 20,175
Eli Lilly & Company 8,800 746,900
<F1> Guidant Corporation 2,400 145,200
<F1> HCR Manor Care Inc. 900 20,531
<F1> HEALTHSOUTH Corporation 3,400 35,275
<F1> Humana, Inc. 1,300 22,425
Johnson & Johnson 10,800 1,011,824
Mallinckrodt, Inc. 600 15,975
Medtronic, Inc. 4,700 337,225
Merck & Co., Inc. 19,100 1,531,581
Pfizer, Inc. 10,400 1,443,000
Pharmacia & Upjohn, Inc. 4,100 255,738
Schering-Plough Corporation 11,800 652,688
<F1> St. Jude Medical, Inc. 700 17,063
<F1> Tenet Healthcare Corp. 2,500 47,344
United Healthcare Corp. 1,500 78,938
Warner-Lambert Company 6,600 436,838
- --------------------------------------------------------------------------------
TOTAL 9,711,963
- --------------------------------------------------------------------------------
TECHNOLOGY (19.4%)
<F1> 3COM Corporation 2,900 67,606
Adobe Systems, Inc. 500 28,375
<F1> Advanced Micro Devices, Inc. 1,200 18,600
<F1> America Online, Inc. 7,100 1,036,600
<F1> Amgen, Inc. 4,100 306,987
<F1> Andrew Corporation 600 7,387
<F1> Apple Computer, Inc. 1,100 39,531
<F1> Applied Materials, Inc. 3,000 185,062
<F1> Ascend Communications, Inc. 1,700 142,269
Autodesk, Inc. 500 20,219
Automatic Data Processing, Inc. 4,900 202,737
<F1> BMC Software, Inc. 1,700 63,006
<F1> Cabletron Systems, Inc. 1,200 9,825
<F1> Ceridian Corp. 1,200 43,875
<F1> Cisco Systems, Inc. 12,650 1,385,966
Compaq Computer Corporation 13,685 433,643
Computer Associates International, Inc. 4,300 152,919
<F1> Computer Sciences Corp. 1,300 71,744
Shares/Par Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
<F1> Compuware Corporation 3,000 $71,625
<F1> Data General Corporation 300 3,037
<F1> Dell Computer Corp. 20,500 837,937
EG&G, Inc. 300 7,913
Electronic Data Systems Corporation 4,000 194,750
<F1> EMC Corporation 4,000 511,000
Equifax, Inc. 1,200 41,250
First Data Corporation 3,600 153,900
<F1> Gateway 2000, Inc. 1,300 89,131
<F1> General Instrument Corporation 1,300 39,406
Harris Corporation 600 17,175
Hewlett-Packard Company 8,300 562,844
Intel Corporation 13,400 1,596,275
International Business
Machines Corporation 7,500 1,329,375
<F1> KLA-Tencor Corporation 700 33,994
<F1> LSI Logic Corp. 1,100 34,306
Lucent Technologies, Inc. 10,600 1,142,150
<F1> Micron Technology 2,000 96,500
<F1> Microsoft Corporation 40,000 3,585,000
Motorola, Inc. 4,800 351,600
<F1> National Semiconductor Corporation 1,200 11,175
Northern Telecom Limited 5,280 328,020
<F1> Novell, Inc. 2,800 70,525
<F1> Oracle Corporation 11,675 307,928
<F1> Parametric Technology Company 2,200 43,450
Paychex, Inc. 1,300 61,669
<F1> Peoplesoft, Inc. 1,900 27,788
Perkin-Elmer Corporation 400 38,825
Raytheon Company- Class B 2,700 158,288
Scientific-Atlanta, Inc. 600 16,350
<F1> Seagate Technology Inc. 2,000 59,125
Shared Medical Systems Corp. 200 11,138
<F1> Silicon Graphics 1,500 25,031
<F1> Sun Microsystems, Inc. 3,100 387,306
Tektronix, Inc. 300 7,575
<F1> Tellabs, Inc. 1,600 156,400
Texas Instruments, Incorporated 3,100 307,675
Unisys Corporation 2,100 58,144
W.W. Grainger, Inc. 800 34,450
- --------------------------------------------------------------------------------
TOTAL 17,026,381
- --------------------------------------------------------------------------------
TRANSPORTATION (0.9%)
<F1> AMR Corporation 1,500 87,844
Burlington Northern Santa Fe 3,800 124,925
CSX Corporation 1,800 70,088
Delta Air Lines, Inc. 1,100 76,450
<F1> FDX Corporation 1,160 107,663
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
TRANSPORTATION (CONTINUED)
Norfolk Southern Corporation 3,000 $79,124
Ryder System, Inc. 600 16,575
Southwest Airlines Co. 2,725 82,431
Union Pacific Corporation 2,000 106,875
US Airways Group, Inc. 700 34,169
- -----------------------------------------------------------------------------
TOTAL 786,144
- -----------------------------------------------------------------------------
UTILITIES (2.5%)
<F1> The AES Corporation 1,400 52,150
Ameren Corporation 1,100 39,806
American Electric Power Company, Inc. 1,500 59,531
Baltimore Gas & Electric Co. 1,200 30,450
Carolina Power & Light Company 1,200 45,375
Central & South West Corporation 1,700 39,844
Cinergy Corporation 1,300 35,750
Coastal Corp. 1,700 56,100
Columbia Energy Group 650 33,963
Consolidated Edison Co. of New York 1,900 86,094
Consolidated Natural Gas Company 800 38,950
Dominion Resources, Inc. 1,600 59,100
DTE Energy Company 1,200 46,125
Duke Energy Corp. 2,931 160,106
Eastern Enterprises 200 7,275
Edison International 2,800 62,300
Enron Corp. 2,700 173,475
Entergy Corporation 2,000 55,000
FirstEnergy Corp. 1,900 53,080
FPL Group, Inc. 1,500 79,875
GPU, Inc. 1,000 37,313
New Century Energies, Inc. 900 30,656
<F1> Niagra Mohawk Power Corporation 1,500 20,156
Nicor, Inc. 400 14,375
Northern States Power Company 1,200 27,825
ONEOK, Inc. 200 4,950
PacifiCorp 2,400 41,400
PECO Energy Company 1,800 83,250
Peoples Energy Corporation 300 9,694
PG&E Corp. 3,100 96,293
P P & L Resources, Inc. 1,198 29,651
Public Service Enterprise Group, Inc. 1,800 68,738
Reliant Energy, Inc. 2,273 59,240
Sempra Energy 1,951 37,435
Sonat Inc. 900 27,000
Southern Company 5,600 130,550
Texas Utilities Company 2,267 94,506
UNICOM Corp. 1,700 62,156
Williams Companies, Inc. 3,400 134,300
- --------------------------------------------------------------------------------
TOTAL 2,223,837
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK 84,366,683
================================================================================
Shares/Par Market Value
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENTS (3.2%)
AIRCRAFT ENGINES AND ENGINE PARTS (1.1%)
<F2> General Electric Company,
4.84%, 4/29/99 1,000,000 $996,236
- --------------------------------------------------------------------------------
CAPTIVE FINANCE COMPANY (1.3%)
<F2> Daimler-Chrysler N.A. Holding,
4.84%, 4/21/99 400,000 398,924
<F2> Ford Motor Credit Company,
4.85%, 4/7/99 700,000 699,434
- --------------------------------------------------------------------------------
TOTAL 1,098,358
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (0.3%)
<F2> Federal Home Loan Mortgage
Corporation, 4.75%, 5/17/99 300,000 298,179
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (0.5%)
<F2> Household Finance Company,
4.92%, 4/7/99 400,000 399,672
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 2,792,445
================================================================================
TOTAL INVESTMENTS (99.2%)
(COST $65,174,364)<F3> 87,159,128
================================================================================
OTHER ASSETS, LESS LIABILITIES (0.8%) 677,472
================================================================================
TOTAL NET ASSETS (100.0%) $87,836,600
================================================================================
ADR - American Depository 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
March 31, 1999 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Depreciation
- --------------------------------------------------------------------------------
S&P 500/R Stock Index
(Total notional value at
3/31/99, $2,640,250) 8 6/99 $53,650
<F3> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $65,192,258 and the net unrealized appreciation of investments
based on that cost was $21,966,870 which is comprised of $23,774,512
aggregate gross unrealized appreciation and $1,807,642 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- ----------------------
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 among asset sectors to capitalize on the
changing financial markets and economic conditions.
NET ASSETS: $46.1 million
- --------------------------------------------------------------------------------
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.
While the proportions of the various asset classes are not significantly
different from those at the mid-year report, some significant changes have been
made during the last six months. The Fund took advantage of weakness in equity
markets during the fall of 1998 to increase stock holdings to more than 60% of
total assets, with emphasis on domestic large-cap holdings. This proved to be a
successful strategy, as these issues recovered rapidly to reach new heights in
late 1998 and early 1999. Exposure was adjusted from time to time as suggested
by market valuations; at the end of March, equity holdings in total represented
51% of the Fund's assets. Bond investments have been concentrated in high-
quality issues, with exposure to bonds increased in the early months of 1999, as
higher interest rates pushed prices down. An 8% cash position at the end of
March will make it possible to take advantage of new investment opportunities
that may arise.
SECTOR ALLOCATION
3/31/99
Investment-Grade Bonds 32%
Large-Cap Stocks 29%
Small-Cap Stocks 11%
Foreign Stocks 11%
Cash Equivalents 8%
Below Investment-Grade Bonds 7%
Convertible Securities 2%
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO RELEVANT INDICES
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUND CLASS A 9,523 11,390 11,295 12,239 11,354 12,887 13,023
ASSET ALLOCATION FUND CLASS B 10,000 11,920 11,811 12,769 11,811 13,385 13,505
ASSET ALLOCATION FUND CLASS B REDEMPTION VALUE 13,205
S&P 500 INDEX 10,000 12,618 12,977 14,787 13,747 16,675 17,503
MERRILL LYNCH DOMESTIC MASTER INDEX 10,000 10,712 11,027 11,205 11,955 12,005 11,934
MERRILL LYNCH 91-DAY TREASURY BILL 10,000 10,272 10,400 10,536 10,824 10,946 11,061
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Asset Allocation Fund
(Class A - without initial sales charge) 6.41% 16.94%
- --------------------------------------------------------------------------------
S&P 500/R Index 18.37% 32.30%
- --------------------------------------------------------------------------------
Merrill Lynch Domestic Master Index 6.51% 9.24%
- --------------------------------------------------------------------------------
Merrill Lynch 91-Day Treasury Bill 4.98% 5.17%
- --------------------------------------------------------------------------------
<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.
The Merrill Lynch 91-Day Treasury Bill index is comprised of a single issue
purchased at the beginning of each month and held for a full month. The issue
selected at each month-end rebalancing is the outstanding Treasury Bill that
matures closest to, but not beyond, three months from the rebalancing date.
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 One Year and 3% for
Since Inception.
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 AND WARRANTS (47.8%)
DOMESTIC COMMON STOCK AND WARRANTS (37.5%)
SMALL CAP COMMON STOCK AND WARRANTS (11.2%)
BASIC MATERIALS (0.1%)
<F1> Ivex Packaging Corporation 3,300 $50,119
- --------------------------------------------------------------------------------
CAPITAL GOODS (1.0%)
Kaydon Corporation 3,800 109,962
<F1> Qlogic Corporation 1,400 93,975
<F1> Sanmina Corporation 100 6,375
<F1> Stoneridge, Inc. 4,500 62,438
Teleflex 2,700 91,969
<F1> TriStar Aerospace Co. 5,300 48,363
<F1> Triumph Group, Inc. 1,400 32,900
- --------------------------------------------------------------------------------
TOTAL 445,982
- --------------------------------------------------------------------------------
COMMUNICATIONS SERVICES (0.7%)
Philippine Long Distance
Telephone Company ADR 6,600 170,775
Telefonos de Mexico SA 2,500 163,750
- --------------------------------------------------------------------------------
TOTAL 334,525
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (2.2%)
<F1> Carriage Services, Inc. 300 4,537
<F1> Catalina Marketing Corporation 1,000 85,875
<F1> CDW Computer Centers, Inc. 400 27,600
Centex Corporation 1,400 46,725
<F1> Coach USA Inc 1,400 38,500
<F1> The Corporate Executive
Board Company 400 10,550
Galileo International, Inc. 2,300 111,262
<F1> Getty Images, Inc. 1,600 33,600
<F1> Interim Services, Inc. 2,600 39,000
<F1> Jones Apparel Group, Inc. 2,300 64,256
<F1> Lamar Advertising, Co. 1,400 47,513
<F1> Michaels Stores, Inc. 3,700 91,344
<F1> O'Reilly Automotive 3,500 156,625
<F1> Onemain.com, Inc. 1,700 61,625
Steiner Leisure, Ltd. 3,450 106,087
Stewart Enterprises, Inc. 2,200 35,338
<F1> Webtrends Corporation 1,000 48,625
- --------------------------------------------------------------------------------
TOTAL 1,009,062
- --------------------------------------------------------------------------------
CONSUMER STAPLES (0.3%)
Cardinal Health, Inc. 700 46,200
<F1> Golden State Vintners, Inc. 1,800 21,488
<F1> Metzler Group, Inc. 1,650 51,769
- --------------------------------------------------------------------------------
TOTAL 119,457
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
ENERGY (0.6%)
<F1> Barrett Resources Corporation 1,600 $40,100
<F1> BJ Services Company 4,300 100,781
<F1> Global Industries, Ltd. 4,300 43,537
<F1> Nabors Industries 2,800 50,925
<F1> Weatherford International, Inc. 1,700 44,413
- --------------------------------------------------------------------------------
TOTAL 279,756
- --------------------------------------------------------------------------------
FINANCE (1.0%)
Arcadia Financial Ltd. 500 500
Financial Security Assurance
Holdings Ltd. 2,700 133,988
Investors Financial Services Corp. 4,600 132,250
<F1> Knight/Trimark Group, Inc. 2,300 154,100
<F1> Trammell Crow Company 2,700 49,950
- --------------------------------------------------------------------------------
TOTAL 470,788
- --------------------------------------------------------------------------------
HEALTHCARE (1.6%)
Bausch & Lomb, Inc. 800 52,000
<F1> Lincare Holdings, Inc. 3,900 109,688
NCS HealthCare, Inc. 1,900 22,800
<F1> Patterson Dental Company 3,350 144,888
<F1> Pediatrix Medical Group, Inc. 1,000 28,125
<F1> Pharmerica, Inc. 6,800 34,000
Province Healthcare Company 2,600 48,100
<F1> PSS World Medical, Inc. 3,400 29,963
<F1> Quorum Health Group, Inc. 2,650 26,500
<F1> Sybron International Corporation 4,800 120,000
<F1> Wesley Jessen VisionCare, Inc. 4,100 113,006
- --------------------------------------------------------------------------------
TOTAL 729,070
- --------------------------------------------------------------------------------
TECHNOLOGY (3.1%)
Autobytel.com Inc. 100 4,188
<F1> Brooks Automation, Inc. 1,900 42,512
<F1> Computer Horizons Corporation 1,900 20,781
<F1> Comverse Technology, Inc. 1,000 85,000
<F1> Etec Systems, Inc. 1,000 29,437
<F1> GaSonics International Corporation 6,900 75,900
<F1> Great Plains Software, Inc. 700 27,081
<F1> iVillage, Inc. 300 30,150
KMC Telecom Holdings, Inc. 250 625
<F1> Microchip Technology, Inc. 900 31,163
<F1> PMC-Sierra, Inc. 1,000 71,188
<F1> Semtech Corporation 1,800 57,375
<F1> Sterling Software, Inc. 1,800 42,750
<F1> Synopsys, Inc. 1,000 53,750
<F1> Tellabs, Inc. 800 78,200
<F1> Transaction Systems Architects, Inc. 1,600 57,600
<F1> Uniphase Corporation 1,500 172,688
VeriSign, Inc. 100 15,400
Shares/Par Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Vignette Corporation 7,400 $556,850
- --------------------------------------------------------------------------------
TOTAL 1,452,638
- --------------------------------------------------------------------------------
TRANSPORTATION (0.6%)
<F1> Heartland Express, Inc. 1,500 22,781
<F1> Jevic Transportation, Inc. 5,900 37,981
<F1> Knight Transportation, Inc. 3,550 68,781
Mark VII, Inc. 4,600 64,400
<F1> Swift Transportation Co., Inc. 3,100 80,213
- --------------------------------------------------------------------------------
TOTAL 274,156
- --------------------------------------------------------------------------------
TOTAL SMALL CAP COMMON STOCK
AND WARRANTS 5,165,553
- --------------------------------------------------------------------------------
LARGE CAP COMMON STOCK (26.3%)
BASIC MATERIALS (0.4%)
Ecolab, Inc. 5,400 191,700
- --------------------------------------------------------------------------------
CAPITAL GOODS (2.3%)
AlliedSignal, Inc. 1,700 83,619
Avery Dennison Corporation 3,800 218,500
General Electric Company 3,500 387,188
<F1> Republic Services, Inc. 3,100 50,181
Tyco International Ltd. 3,400 243,950
Waste Management, Inc. 2,000 88,750
- --------------------------------------------------------------------------------
TOTAL 1,072,188
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (1.7%)
AT&T Corp. 3,397 271,123
GTE Corporation 1,800 108,900
<F1> MCI WorldCom, Inc. 4,585 406,059
- --------------------------------------------------------------------------------
TOTAL 786,082
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (3.7%)
<F1> Concord EFS, Inc. 2,400 66,150
Dayton Hudson Corporation 2,100 139,912
Ford Motor Company 2,000 113,500
Harley-Davidson, Inc. 4,200 241,500
<F1> Kohl's Corporation 4,700 333,113
Lennar Corporation 1,600 35,800
The New York Times Company 5,600 159,600
Servicemaster Co. 7,350 149,297
Tribune Company 2,800 183,225
Wal-Mart Stores, Inc. 3,100 285,781
- --------------------------------------------------------------------------------
TOTAL 1,707,878
- --------------------------------------------------------------------------------
CONSUMER STAPLES (4.9%)
Anheuser-Busch Companies, Inc. 2,100 159,994
Benckiser NV 1,700 94,563
Campbell Soup Company 1,100 44,756
The Dial Corporation 4,200 144,375
<F1> Keebler Foods Company 6,500 237,250
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
CONSUMER STAPLES (CONTINUED)
McDonald's Corporation 5,000 $226,563
Newell Rubbermaid, Inc. 3,200 152,000
PepsiCo, Inc. 5,100 199,856
<F1> The Pepsi Bottling Group, Inc. 4,700 101,931
Procter & Gamble Company 2,000 195,875
The Quaker Oats Company 1,700 106,356
Unilever NV 2,600 172,738
Walgreen Co. 10,600 299,450
The Walt Disney Company 2,900 90,262
- --------------------------------------------------------------------------------
TOTAL 2,225,969
- --------------------------------------------------------------------------------
ENERGY (1.6%)
BP Amoco PLC 1,600 161,500
Chevron Corporation 700 61,906
Conoco Inc. 4,200 103,162
Exxon Corporation 1,600 112,900
Mobil Corporation 1,000 88,000
Schlumberger Limited 700 42,131
Tosco Corporation 2,800 69,475
Transocean Offshore Inc. 3,000 86,438
- --------------------------------------------------------------------------------
TOTAL 725,512
- --------------------------------------------------------------------------------
FINANCE (2.4%)
Ambac Financial Group, Inc. 1,300 70,200
Associates First Capital Corporation 2,000 90,000
The Bank of New York Company, Inc. 3,800 136,562
BankAmerica Corporation 844 59,607
Chase Manhattan Corporation 2,400 195,150
Citigroup Inc. 1,500 95,813
Fifth Third Bankcorp 1,900 125,281
First Union Corporation 500 26,719
Greenpoint Financial Corp. 2,542 88,335
Morgan Stanley Dean Witter & Co. 2,200 219,863
- --------------------------------------------------------------------------------
TOTAL 1,107,530
- --------------------------------------------------------------------------------
HEALTHCARE (2.8%)
Bristol-Myers Squibb Company 3,100 199,369
Eli Lilly and Company 1,600 135,800
<F1> Guidant Corporation 1,600 96,800
Johnson & Johnson 1,700 159,269
Medtronic, Inc. 2,600 186,550
Merck & Co., Inc. 2,000 160,375
Pfizer, Inc. 1,500 208,125
Pharmacia & Upjohn, Inc. 1,100 68,613
Warner-Lambert Company 1,200 79,425
- --------------------------------------------------------------------------------
TOTAL 1,294,326
- --------------------------------------------------------------------------------
TECHNOLOGY (5.2%)
<F1> America Online, Inc. 400 58,400
<F1> Cisco Systems, Inc. 2,850 312,253
Shares/Par Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Electronic Data Systems Corporation 2,500 $121,718
<F1> EMC Corporation 500 63,875
<F1> Fiserv, Inc. 6,750 361,969
Hewlett-Packard Company 1,300 88,156
Intel Corporation 1,500 178,688
International Business
Machines Corporation 2,000 354,500
Lucent Technologies, Inc. 1,400 150,850
<F1> Microsoft Corporation 5,000 448,125
Northern Telecom Limited 1,200 74,550
<F1> Sun Microsystems Inc. 600 74,963
W.W. Grainger, Inc. 2,600 111,963
- --------------------------------------------------------------------------------
TOTAL 2,400,010
- --------------------------------------------------------------------------------
TRANSPORTATION (0.9%)
<F1> AMR Corporation 1,000 58,562
<F1> FDX Corporation 900 83,531
<F1> Midwest Express Holdings, Inc. 3,750 110,156
Southwest Airlines Co. 5,700 172,425
- --------------------------------------------------------------------------------
TOTAL 424,674
- --------------------------------------------------------------------------------
UTILITIES (0.4%)
Enron Corporation 3,100 199,175
- --------------------------------------------------------------------------------
TOTAL LARGE CAP COMMON STOCK 12,135,044
- --------------------------------------------------------------------------------
TOTAL DOMESTIC COMMON STOCK
AND WARRANTS 17,300,597
- --------------------------------------------------------------------------------
Country Shares/Par Market Value
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCK (10.3%)
CAPITAL GOODS (0.5%)
British Aerospace United Kingdom 35,839 239,519
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES (2.9%)
KPN NV Netherlands 5,000 198,913
Nokia Oyj Finland 1,600 259,100
NTT Mobile Communication
Network, Inc. Japan 5 246,981
Sonera Group Oyj Finland 10,000 166,040
Telecom Italia SpA Italy 30,000 318,725
Telefonica S.A. Spain 3,000 127,250
- --------------------------------------------------------------------------------
TOTAL 1,317,009
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (0.5%)
Porsche AG Germany 85 209,682
- --------------------------------------------------------------------------------
CONSUMER STAPLES (0.9%)
PrimaCom AG Germany 2,500 86,367
Sixt AG Germany 6,600 342,011
- --------------------------------------------------------------------------------
TOTAL 428,378
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Country Shares/Par Market Value
- --------------------------------------------------------------------------------
ENERGY (0.9%)
British Energy United Kingdom 26,500 $254,535
Elf Aquitaine France 1,050 142,602
- --------------------------------------------------------------------------------
TOTAL 397,137
- --------------------------------------------------------------------------------
FINANCE (1.5%)
Bank Sarasin & Cie Switzerland 65 109,347
Banque Nationale de Paris France 3,400 295,849
Christiania Bank Og
Kreditkasse Norway 50,000 195,381
HSBC Holdings Plc. United Kingdom 3,500 109,748
- --------------------------------------------------------------------------------
TOTAL 710,325
- --------------------------------------------------------------------------------
HEALTHCARE (0.8%)
Novartis Ag-Reg Shs. Switzerland 160 259,542
SmithKline Beecham PLC United Kingdom 7,500 108,239
- --------------------------------------------------------------------------------
TOTAL 367,781
- --------------------------------------------------------------------------------
TECHNOLOGY (1.4%)
Creative Technology
Limited Singapore 10,000 116,287
Philips Electronics, Inc. Netherlands 4,300 350,255
Navision Software A/S Denmark 10,000 194,412
- --------------------------------------------------------------------------------
TOTAL 660,954
- --------------------------------------------------------------------------------
TRANSPORTATION (0.9%)
Railtrack Group PLC United Kingdom 12,134 278,344
TNT Post Group NV Netherlands 4,000 120,481
- --------------------------------------------------------------------------------
TOTAL 398,825
- --------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCK 4,729,610
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK AND WARRANTS 22,030,207
================================================================================
PREFERRED STOCK (2.4%)
Primedia, Inc. 5,000 517,500
Sinclair Capital 5,000 558,750
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK 1,076,250
================================================================================
BONDS (39.1%)
INVESTMENT-GRADE BONDS (32.3%)
FEDERAL GOVERNMENT AND AGENCIES (19.5%)
Federal National Mortgage
Association, 6%, 5/1/11 1,062,189 1,056,968
Government National Mortgage
Association, 8.0%, 8/15/26 183,417 190,979
Government National Mortgage
Association, 8.0%, 10/15/26 424,964 442,485
Government National Mortgage
Association, 8.0%, 7/15/27 92,805 96,637
Shares/Par Market Value
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
US Treasury, 0.00%, 2/15/19 PO 1,200,000 $364,199
US Treasury, 4.75%, 2/15/04 1,250,000 1,230,860
US Treasury, 5.00%, 2/28/01 1,250,000 1,249,610
US Treasury, 5.25%, 2/15/29 120,000 113,550
US Treasury, 5.375%, 2/15/01 250,000 251,563
US Treasury, 5.50%, 2/29/00 300,000 301,594
US Treasury, 5.625%, 12/31/02 500,000 507,032
US Treasury, 6.125%, 8/15/07 2,000,000 2,091,250
US Treasury, 6.5%, 5/15/05 1,000,000 1,060,313
- --------------------------------------------------------------------------------
TOTAL 8,957,040
- --------------------------------------------------------------------------------
COMMERCIAL MORTGAGES (11.8%)
Asset Securitization Corporation,
1.25%, 11/13/26 IO 15,243,185 522,384
Blackrock Capital Finance,
Class B3, 7.25%, 11/25/28 (144A) 189,148 165,240
Commercial Mortgage Asset Trust,
7.35%, 8/17/13 500,000 495,705
Comed Transitional Trust,
5.74%, 12/25/10 250,000 242,263
Criimi Mae Commercial Mortgage
Trust, 7.00%, 11/2/11 339,000 269,505
EMAC Owner Trust, 1.378%,
1/15/23 (144A) IO 6,865,637 495,613
Kmart CMBS Financing, Inc.,
5.338%, 3/1/07 1,000,000 982,790
Peco Energy Transition Trust,
6.13%, 2/25/08 700,000 695,702
Polaris Commercial Loan Master
Trust, 5.22%, 3/15/04 750,000 749,883
Merrill Lynch Mortgage Investors,
8.10%, 6/25/22 (144A) 500,000 498,115
Midland Realty Acceptance Corp.,
1.389%, 1/25/29 IO (144A) 4,621,092 300,093
- --------------------------------------------------------------------------------
TOTAL 5,417,293
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.0%)
AT&T Corp., 5.625%, 3/15/04 500,000 497,647
- --------------------------------------------------------------------------------
TOTAL INVESTMENT-GRADE BONDS 14,871,980
- --------------------------------------------------------------------------------
BELOW INVESTMENT-GRADE BONDS (6.8%)
BASIC MATERIALS (0.9%)
Pindo Deli Fin Mauritius,
10.75%, 10/1/07 250,000 137,500
Tembec Industries Inc.,
8.625%, 6/30/09 250,000 254,063
- --------------------------------------------------------------------------------
TOTAL 391,563
- --------------------------------------------------------------------------------
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (0.4%)
Corning Consumer Product,
9.625%, 5/1/08 250,000 $197,500
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.0%)
Loewen Group International,
7.75%, 10/15/01 150,000 81,750
Loewen Group International,
8.25%, 10/15/03 300,000 160,500
Total Renal Care, 7.0%, 5/15/09 250,000 189,375
Vencor Operating, Inc.,
9.875%, 5/1/05 250,000 40,000
- --------------------------------------------------------------------------------
TOTAL 471,625
- --------------------------------------------------------------------------------
ENERGY (2.1%)
Chesapeake Energy, 9.625%, 5/1/05 250,000 208,125
Gothic Production Corp.,
11.125%, 5/1/05 250,000 193,750
Grey Wolf Inc., 8.875%, 7/1/07 250,000 196,250
Pride International Inc.,
9.375%, 5/1/07 150,000 144,750
R&B Falcon Corp.,
9.5%, 12/15/08 (144A) 250,000 225,000
- --------------------------------------------------------------------------------
TOTAL 967,875
- --------------------------------------------------------------------------------
FINANCE COMPANIES (0.9%)
Arcadia Financial Ltd.,
11.50%, 3/15/07 250,000 195,000
BF Saul Real Estate, 9.75%, 4/1/08 250,000 231,250
- --------------------------------------------------------------------------------
TOTAL 426,250
- --------------------------------------------------------------------------------
MISCELLANEOUS (0.5%)
Crescent Real Estate, 7.0%, 9/15/02 250,000 234,676
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES (0.0%)
<F2> Decisionone Holdings,
11.50%, 8/1/08 400,000 2,000
- --------------------------------------------------------------------------------
TECHNOLOGY (0.3%)
TV Azteca, 10.125%, 2/15/04 150,000 127,125
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.3%)
<F2> KMC Telecommunications Hldgs,
12.50%, 2/15/08 250,000 138,125
- --------------------------------------------------------------------------------
TRANSPORT SERVICES (0.4%)
Stena Line AB, 10.625%, 6/1/08 250,000 189,375
- --------------------------------------------------------------------------------
TOTAL BELOW INVESTMENT-GRADE BONDS 3,146,114
- --------------------------------------------------------------------------------
TOTAL BONDS 18,018,094
================================================================================
Shares/Par Market Value
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENTS (10.6%)
FEDERAL GOVERNMENT AND AGENCIES (0.4%)
<F3> Federal Home Loan Mortgage
Corporation, 4.75%, 5/17/99 200,000 $198,786
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.6%)
Quincy Capital Corporation,
4.89%, 4/16/99 1,200,000 1,197,555
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (5.0%)
<F3> Ford Motor Credit Corp,
4.85%, 4/7/99 1,000,000 999,192
General Electric Capital
Corporation, 4.85%, 4/29/99 1,300,000 1,295,096
- --------------------------------------------------------------------------------
TOTAL 2,294,288
- --------------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (2.6%)
<F3> Sears Roebuck Acceptance
Corp., 4.87%, 4/7/99 1,200,000 1,199,026
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 4,889,655
================================================================================
TOTAL INVESTMENTS (99.9%)
(COST $40,464,372)<F4> 46,014,206
================================================================================
OTHER ASSETS, LESS LIABILITIES (0.1%) 61,312
================================================================================
TOTAL NET ASSETS (100.0%) $46,075,518
================================================================================
ADR - American Depository 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 until
a predetermined date at which 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
March 31, 1999 is summarized below:
Number of Expiration Unrealized
Issuer Contracts Date Depreciation
- --------------------------------------------------------------------------------
S&P 500/R Stock Index
(Total notional value at
3/31/99, $1,315,562) 4 6/99 $22,262
<F4> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $40,466,460 and the net unrealized appreciation of investments
based on that cost was $5,547,746 which is comprised of $7,155,268
aggregate gross unrealized appreciation and $1,607,522 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- ---------------------
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: $42.1 million
- --------------------------------------------------------------------------------
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 mitigate the impact on the total portfolio over time.
The last year has been a challenging time for high yield investors, especially
during the last months of 1998. Markets became extraordinarily volatile, largely
because sharp declines in emerging market bonds diminished the solvency of
domestic hedge funds. The result was an abrupt global flight to quality. While
equity and investment-grade bond markets recovered fairly quickly, high yield
markets lagged during a period of excess supply and very limited liquidity.
In this difficult environment, the Fund underperformed its major benchmarks for
three major reasons. First, the Fund began the year with a meaningful exposure
to emerging markets. That exposure has been systematically reduced over the last
year. Second, there were several credit disappointments in recent months.
Occasional credit problems are expected in a high yield portfolio, but recently
the timing was more concentrated than usual. The third reason for
underperformance was adherence to a long-term value-based approach to investment
management, with a focus on fundamentally cheap issues that have potential for
long-term appreciation. As with equities, this approach to management has not
been rewarded in recent months, as performance has been concentrated in a select
group of securities.
We begin the new year with a strategy consistent with our long-term value
orientation, with active management of credit risk, a focus on less cyclical
industries and opportunistic trading. The conditions of the last year provide a
reminder that high yield bonds are intermediate risk assets that can be more
volatile than investment-grade bonds. The High Yield Bond Fund is therefore
suitable for investors who seek a higher level of current income and have a long
investment horizon.
SECTOR ALLOCATION
3/31/99
Telecommunications 16%
Basic Materials/Energy 14%
Broadcasting/Media 13%
Cash Equivalents 11%
Consumer/Healthcare 10%
Cable TV 10%
Finance 9%
Other 6%
Leisure 6%
Transportation 4%
Professional Services 1%
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO LEHMAN BROTHERS HIGH YIELD INTERMEDIATE MARKET INDEX
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND FUND CLASS A 9,523 11,081 11,218 11,710 10,573 11,005 10,788
HIGH YIELD BOND FUND CLASS B 10,000 11,594 11,704 12,209 10,986 11,404 11,161
HIGH YIELD BOND FUND CLASS B REDEMPTION VALUE 10,898
LEHMAN BROTHERS HIGH YIELD
INTERMEDIATE MARKET INDEX 10,000 10,886 11,063 11,447 10,992 11,229 11,449
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
High Yield Bond Fund
(Class A - without initial sales charge) -7.87% 6.43%
- --------------------------------------------------------------------------------
Lehman Brothers High Yield
Intermediate Market Index 0.01% 7.00%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
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 (74.2%)
BASIC MATERIALS (2.5%)
METALS & MINING (0.2%)
Great Central Mining Co.,
8.875%, 4/1/08 100,000 $97,250
- --------------------------------------------------------------------------------
PAPER (1.4%)
Pindo Deli Fin Mauritius,
10.75%, 10/1/07 350,000 192,500
Tembec Industries, 8.625%, 6/30/09 400,000 406,500
- --------------------------------------------------------------------------------
TOTAL 599,000
- --------------------------------------------------------------------------------
STEEL (0.9%)
Renco Steel Holdings, Inc.,
10.875%, 2/1/05 400,000 352,000
- --------------------------------------------------------------------------------
TOTAL BASIC MATERIALS 1,048,250
- --------------------------------------------------------------------------------
BROADCASTING/MEDIA (4.7%)
BROADCASTING (3.2%)
<F3> Big City Radio, Inc.,
11.25%, 3/15/05 1,200,000 840,000
<F3> Fox Family Worldwide, Inc.,
10.25%, 11/1/07 800,000 514,000
- --------------------------------------------------------------------------------
TOTAL 1,354,000
- --------------------------------------------------------------------------------
PRINTING AND PUBLISHING (1.5%)
Marvel Enterprises,
12.00%, 6/15/09 (144A) 600,000 609,000
- --------------------------------------------------------------------------------
TOTAL BROADCASTING/MEDIA 1,963,000
- --------------------------------------------------------------------------------
CABLE TELEVISION (4.3%)
<F3> Diva System Corp., 12.625%, 3/1/08 750,000 247,500
<F3> NTL, Inc., 9.75%, 4/1/08 1,250,000 850,000
NTL, Inc., 11.50%, 10/1/08 (144A) 250,000 281,875
Supercanal Holdings S.A.,
11.50%, 5/15/05 (144A) 500,000 225,000
<F3> 21st Century Telecom,
12.25%, 2/15/08 500,000 190,000
- --------------------------------------------------------------------------------
TOTAL CABLE TELEVISION 1,794,375
- --------------------------------------------------------------------------------
CONSUMER RELATED (3.5%)
CONSUMER STAPLES (0.3%)
<F3> SF Holdings Group, Inc.,
12.75%, 3/15/08 475,000 125,875
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
FOODS/FOOD SERVICES (2.8%)
Global Health Sciences, Inc.,
11.0%, 5/1/08 (144A) 500,000 $325,000
Iowa Select Farms L.P.,
10.75%, 12/1/05 (144A) 1,000,000 801,250
Planet Hollywood, 12.00%, 4/1/05 250,000 65,000
- --------------------------------------------------------------------------------
TOTAL 1,191,250
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.1%)
<F3> Diamond Brands, 12.875%, 4/15/09 250,000 57,813
- --------------------------------------------------------------------------------
SOAPS & TOILETRIES (0.3%)
Styling Technologies,
10.875%, 7/1/08 150,000 145,500
- --------------------------------------------------------------------------------
TOTAL CONSUMER RELATED 1,520,438
- --------------------------------------------------------------------------------
ENERGY RELATED (11.4%)
OIL AND GAS INDEPENDENT (6.8%)
Belden & Blake Corp.,
9.875%, 6/15/07 1,050,000 666,750
Chesapeake Energy, 9.625%, 5/1/05 975,000 811,688
Forest Oil Corp., 10.50%, 1/15/06 500,000 510,000
Gothic Production Corp.,
11.125%, 5/1/05 550,000 426,250
Pioneer Natural Resources, Inc.,
8.875%, 4/15/05 200,000 192,751
Pioneer Natural Resources, Inc.,
8.250%, 8/15/07 100,000 92,084
Pioneer Natural Resources, Inc.,
6.50%, 1/15/08 200,000 165,040
- --------------------------------------------------------------------------------
TOTAL 2,864,563
- --------------------------------------------------------------------------------
OIL FIELD SERVICES (3.6%)
Grey Wolf Industries, Inc.,
8.875%, 7/1/07 100,000 78,500
Pride Pete Services, Inc.,
9.375%, 5/1/07 525,000 506,625
R & B Falcon Corp.,
9.5%, 12/15/08 (144A) 700,000 630,000
RBF Finance Co.,
11.00%, 3/15/06 (144A) 185,000 192,863
RBF Finance Co.,
11.375%, 3/15/09 (144A) 115,000 120,463
- --------------------------------------------------------------------------------
TOTAL 1,528,451
- --------------------------------------------------------------------------------
REFINING (1.0%)
PDV America, Inc., 7.875%, 8/1/03 450,000 423,412
- --------------------------------------------------------------------------------
TOTAL ENERGY RELATED 4,816,426
- --------------------------------------------------------------------------------
Shares/Par Market Value
- --------------------------------------------------------------------------------
FINANCE (8.7%)
BANKS (1.0%)
B.F. Saul Real Estate, 9.75%, 4/1/08 450,000 $416,250
- --------------------------------------------------------------------------------
FINANCE COMPANIES (5.7%)
Arcadia Financial Ltd.,
11.50%, 3/15/07 1,350,000 1,053,000
Metris Companies, Inc.,
10.%, 11/1/04 650,000 653,250
PDV S.A. Finance,
9.75%, 2/15/10 (144A) 700,000 695,268
- --------------------------------------------------------------------------------
TOTAL 2,401,518
- --------------------------------------------------------------------------------
INSURANCE (2.0%)
Superior National Capital Trust I,
10.75%, 12/1/17 850,000 850,000
- --------------------------------------------------------------------------------
TOTAL FINANCE 3,667,768
- --------------------------------------------------------------------------------
HEALTHCARE (5.9%)
Columbia/HCA Healthcare, Inc.,
7.25%, 5/20/08 400,000 361,613
Loewen Group, Inc., 8.25%, 10/15/03 200,000 107,000
Loewen Group, Inc., 7.6%, 6/1/08 600,000 315,000
Magellan Health Services, Inc.,
9.0%, 2/15/08 500,000 430,000
Total Renal Canal, 7.0%, 5/15/09 1,400,000 1,060,500
Vencor, Inc., 9.875%, 5/1/05 1,300,000 208,000
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE 2,482,113
- --------------------------------------------------------------------------------
LEISURE (5.8%)
GAMING (1.2%)
Circus Circus Enterprise,
9.25%, 12/1/05 300,000 312,750
Trump Hotels & Casino Resorts,
15.50%, 6/15/05 200,000 208,000
- --------------------------------------------------------------------------------
TOTAL 520,750
- --------------------------------------------------------------------------------
LEISURE RELATED (1.0%)
<F3> Hedstrom Holdings Inc.,
12.00%, 6/1/09 1,110,000 410,700
- --------------------------------------------------------------------------------
LODGING/RESORTS (2.4%)
HMH Properties, Inc.,
8.45%, 12/1/08 300,000 298,500
John Q Hammon, Inc.,
8.875%, 2/15/04 100,000 93,000
ITT Corp., 6.75%, 11/15/05 100,000 89,811
ITT Corp., 7.375%, 11/15/15 600,000 517,522
- --------------------------------------------------------------------------------
TOTAL 998,833
- --------------------------------------------------------------------------------
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
MOVIE THEATERS (1.2%)
Hollywood Theaters, Inc.,
10.625%, 8/1/07 550,000 $385,000
Silver Cinemas, 10.50%, 4/15/05 200,000 108,000
- --------------------------------------------------------------------------------
TOTAL 493,000
- --------------------------------------------------------------------------------
TOTAL LEISURE 2,423,283
- --------------------------------------------------------------------------------
OTHER INDUSTRIES (6.6%)
AUTO RELATED (0.5%)
Exide Corporation,
2.90%, 12/15/05 (144A) 400,000 222,000
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION (0.7%)
United Rentals, Inc.,
9.25%, 1/15/09 (144A) 300,000 300,000
- --------------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS, APPLIANCES (3.1%)
Corning Consumer Products Co.,
9.625%, 5/1/08 1,000,000 790,000
Renter's Choice, 11.0%, 8/15/08 500,000 521,250
- --------------------------------------------------------------------------------
TOTAL 1,311,250
- --------------------------------------------------------------------------------
REAL ESTATE (2.3%)
Crescent Real Estate, 7.00%, 9/15/02 650,000 610,158
Crescent Real Estate, 7.50%, 9/15/07 400,000 350,643
- --------------------------------------------------------------------------------
TOTAL 960,801
- --------------------------------------------------------------------------------
TOTAL OTHER INDUSTRIES 2,794,051
- --------------------------------------------------------------------------------
SERVICES (1.3%)
Decisionone Holdings,
9.75%, 8/1/07 325,000 22,750
<F3> Decisionone Holdings,
11.50%, 8/1/08 750,000 3,750
Decisionone Holdings,
7.94%, 8/7/05 27,617 10,218
Decisionone Holdings,
7.98%, 8/7/05 39,769 14,714
Decisionone Holdings,
8.29%, 8/7/05 7,612 2,816
Federal Data Corp.,
10.125%, 8/1/05 500,000 490,625
- --------------------------------------------------------------------------------
TOTAL SERVICES 544,873
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (14.9%)
Arch Communications,
12.75%, 7/1/07 1,400,000 1,260,000
<F3> Bestel S.A. de CV, 12.75%, 5/15/05 350,000 213,500
<F3> Call-Net Enterprises, 8.94%, 8/15/08 250,000 166,250
Shares/Par Market Value
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
<F3> GST Network Funding, Inc.,
10.50%, 5/1/08 (144A) 500,000 $262,500
Hyperion Telecommunications,
12.25%, 9/1/04 1,000,000 1,085,000
<F3> Intermedia Communications,
11.25%, 7/15/07 700,000 530,250
<F3> KMC Telecommunication Hldgs,
12.50%, 2/15/08 1,550,000 856,375
Northeast Optic Network, Inc.,
12.75%, 8/15/08 800,000 832,000
Splitrock Services, Inc.,
11.75%, 7/15/08 450,000 429,750
Verio Inc., 11.25%, 12/1/08 (144A) 400,000 451,000
Viatel, Inc., 11.50%, 4/15/08 200,000 203,500
- --------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 6,290,125
- --------------------------------------------------------------------------------
TRANSPORTATION (4.4%)
Greyhound Lines, Inc.,
11.50%, 4/15/07 400,000 460,000
Navigator Gas Trans PLC,
10.50%, 6/30/07 (144A) 300,000 220,500
Navigator Gas Trans PLC,
12.00%, 6/30/07 (144A) 200,000 126,000
Stena AB, 8.75%, 6/15/07 300,000 276,750
Stena AB 10.50%, 12/15/05 150,000 150,000
Stena Line AB, 10.625%, 6/1/08 800,000 606,000
- --------------------------------------------------------------------------------
TOTAL TRANSPORTATION 1,839,250
- --------------------------------------------------------------------------------
UTILITIES (0.2%)
Monterrey Power Co.,
9.625%, 11/15/09 (144A) 100,000 82,500
- --------------------------------------------------------------------------------
TOTAL BONDS 31,266,452
================================================================================
PREFERRED STOCK (15.7%)
BROADCASTING/MEDIA (8.5%)
BROADCASTING (6.3%)
<F2> Cumulus Media, Inc. 10,200 1,147,500
Sinclair Capital 13,500 1,508,625
- --------------------------------------------------------------------------------
TOTAL 2,656,125
- --------------------------------------------------------------------------------
PRINTING AND PUBLISHING (2.2%)
Primedia, Inc. 9,000 931,500
- --------------------------------------------------------------------------------
TOTAL BROADCASTING/MEDIA 3,587,625
- --------------------------------------------------------------------------------
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
CABLE TELEVISION (4.8%)
<F2> CSC Holdings, Inc. 12,602 $1,452,381
<F2> NTL Inc. 3,090 351,488
<F2> 21st Century Telecom 3,430 205,800
- --------------------------------------------------------------------------------
TOTAL CABLE TELEVISION 2,009,669
- --------------------------------------------------------------------------------
BANKS (0.5%)
California Fed Pfd Capital 8,000 212,000
- --------------------------------------------------------------------------------
HEALTHCARE (0.6%)
Fresenius Medical, 7.875%, 2/1/08 250,000 245,625
- --------------------------------------------------------------------------------
LEISURE RELATED (0.2%)
<F2> Samsonite Corp. 1,360 94,520
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.1%)
<F2> Hyperion Telecommunications 4,080 375,360
<F2> Viatel, Inc. 366 78,690
- --------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 454,050
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCK 6,603,489
- --------------------------------------------------------------------------------
COMMON STOCK AND WARRANTS (0.6%)
CABLE TELEVISION (0.1%)
<F1> Diva System Corp. 2,250 29,250
<F1> 21st Century Telecom 3,000 6,000
- --------------------------------------------------------------------------------
TOTAL CABLE TELEVISION 35,250
- --------------------------------------------------------------------------------
CONSUMER STAPLES (0.0%)
<F1> SF Holdings Group, Inc. (144A) 950 1,900
- --------------------------------------------------------------------------------
FINANCE COMPANIES (0.0%)
<F1> Arcadia Financial, Ltd. 1,000 1,000
- --------------------------------------------------------------------------------
LEISURE (0.2%)
<F1> Hedstrom Holdings, Inc. (144A) 67,324 67,324
<F1> Samsonite Corp. 1,250 3,750
- --------------------------------------------------------------------------------
TOTAL LEISURE 71,074
- --------------------------------------------------------------------------------
OIL & GAS INTERNATIONAL (0.2%)
Star Gas 6,030 84,420
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES (0.0%)
<F1> Decisionone Holdings 750 8
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.1%)
<F1> Bestel S.A. de C.V. 350 350
<F1> KMC Telecom Holdings, Inc. 1,750 4,375
<F1> Splitrock Services, Inc. 450 27,000
- --------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 31,725
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK AND WARRANTS 225,377
================================================================================
Shares/Par Market Value
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENTS (10.7.%)
FEDERAL GOVERNMENT & AGENCIES (4.0%)
Federal Farm Credit, 4.80%, 4/1/99 1,700,000 $1,700,000
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.4%)
Quincy Capital Corp.,
4.89%, 4/16/99 1,000,000 997,963
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (2.9%)
Household Finance Corp.,
4.92%, 4/7/99 1,200,000 1,199,016
- --------------------------------------------------------------------------------
SHORT-TERM BUSINESS CREDIT (1.4%)
Sears Roebuck Acceptance Corp.,
4.87%, 4/7/99 600,000 599,513
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 4,496,492
================================================================================
TOTAL INVESTMENTS (101.2%)
(COST $47,220,788)<F4> 42,591,810
================================================================================
OTHER ASSETS, LESS LIABILITIES (-1.2%) (493,575)
================================================================================
TOTAL NET ASSETS (100.0%) $42,098,235
================================================================================
<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 March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $47,270,202 and the net unrealized depreciation of investments
based on that cost was $4,678,392 which is comprised of $1,388,733
aggregate gross unrealized appreciation and $6,067,125 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
- --------------------
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: $33.5 million
- --------------------------------------------------------------------------------
The Municipal Bond Fund is managed with a 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 Corporation (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 58% of total market value invested in bonds that are
either insured or have been pre-refunded. In addition, 72% of the Fund's assets
are invested in bonds rated AAA, the highest quality rating assigned by the
major rating services.
Throughout most of 1998, municipal bonds were quite cheap relative to taxable
bonds, as municipalities taking advantage of low interest rates to refinance old
debt created a huge supply of bonds. The wave of refinancings has diminished,
but there is still a substantial supply of newly issued bonds coming to market,
and municipal bonds still appear to represent good value. This relative
cheapness of municipal bonds should be considered by investors who may be making
a choice between a municipal fund and a taxable bond fund.
For the fiscal year just ended and since inception, Mason Street Funds'/R
Municipal Bond Fund has outperformed the Lehman Brothers Municipal Bond Index
(which includes no sales charges). Upgrades of some issues in the portfolio and
favorable positioning relative to interest rates have been key factors in this
strong performance, especially over the last year.
<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
3/31/99
Insured Bonds 47%
Revenue Bonds 34%
Pre-refunded Bonds 11%
General Obligation Bonds 7%
Other Assets 1%
<PAGE>
MARCH 31, 1999
PERFORMANCE RELATIVE TO LEHMAN BROTHERS
MUNICIPAL BOND INDEX
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL BOND FUND CLASS A 9,523 10,262 10,521 10,641 11,118 11,221 11,324
MUNICIPAL BOND FUND CLASS B 10,000 10,734 10,985 11,093 11,551 11,639 11,727
MUNICIPAL BOND FUND CLASS B REDEMPTION VALUE 11,427
LEHMAN BROTHERS MUNICIPAL BOND INDEX 10,000 10,656 10,945 11,071 11,584 11,654 11,758
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Municipal Bond Fund
(Class A - without initial sales charge) 6.42% 9.04%
- --------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index 6.20% 8.43%
- --------------------------------------------------------------------------------
<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
49,335 issues totaling over $741 billion in market value. The index represents
approximately 50% 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 One Year and 3% for
Since Inception.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (98.6%)
ALABAMA (2.5%)
Jefferson County, Alabama Sewer,
5.125%, 2/1/39 RB, FGIC 850,000 $834,360
- --------------------------------------------------------------------------------
CALIFORNIA (3.1%)
California Housing Financing
Agency, 5.75%, 2/1/29
RB, MBIA, AMT 1,000,000 1,045,090
- --------------------------------------------------------------------------------
COLORADO (3.4%)
Douglas County, Colorado School
District RE.1, 6.5%, 12/15/16
GO, PR, MBIA 1,000,000 1,140,630
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA (3.1%)
District of Columbia, 5.1%, 6/1/03
GO, AMBAC 1,000,000 1,042,750
- --------------------------------------------------------------------------------
FLORIDA (6.5%)
Dade County, Florida, Seaport,
6.2%, 10/1/10 RB, MBIA 1,000,000 1,154,730
Dade County, Florida, Water &
Sewer, 5.25%, 10/1/26 RB, FGIC 1,000,000 1,021,460
- --------------------------------------------------------------------------------
TOTAL 2,176,190
- --------------------------------------------------------------------------------
GEORGIA (7.9%)
Cartersville Development Authority
Water & Waste Facility, 7.4%,
11/1/10 RB, AMT 1,000,000 1,222,610
Fulton County Georgia Water &
Sewer, 4.75%, 1/1/28 RB, FGIC 1,500,000 1,420,065
- --------------------------------------------------------------------------------
TOTAL 2,642,675
- --------------------------------------------------------------------------------
ILLINOIS (14.8%)
Chicago, Illinois Board of
Education, 6.75%, 12/1/09
GO, AMBAC 1,000,000 1,190,280
Chicago, Illinois O'Hare
International Airport, 5.7%,
1/1/08 RB, MBIA, AMT 1,000,000 1,071,690
Illinois State Sales Tax,
6.375%, 6/15/17 RB 1,000,000 1,128,710
Metropolitan Fair & Exposition
Illinois, 5.0%, 6/01/15 RB, BIGI
Insurance purchased by MBIA 1,000,000 999,380
Metropolitan Pier & Exposition,
Dedicated State Tax, 0.0%,
12/15/12 RB, MBIA 1,140,000 586,769
- --------------------------------------------------------------------------------
TOTAL 4,976,829
- --------------------------------------------------------------------------------
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
KENTUCKY (3.4%)
Louisville & Jefferson County,
Kentucky Regional Airport
Authority, 6.5%, 7/1/17
RB, MBIA, AMT 1,000,000 $1,133,620
- --------------------------------------------------------------------------------
MAINE (3.3%)
Regional Waste System Inc., Maine
Solid Waste Res Recovery
Rev, 6.25%, 7/1/11 RB, AMT 1,000,000 1,104,570
- --------------------------------------------------------------------------------
MICHIGAN (6.6%)
Nice Community School District,
Michigan, Marquette & Baraga
Counties, 5.25%, 5/1/16
GO, MBIA 1,000,000 1,018,590
Pinckney Michigan Community
Schools, 7.25%, 5/1/06 GO, FGIC 1,000,000 1,183,940
- --------------------------------------------------------------------------------
TOTAL 2,202,530
- --------------------------------------------------------------------------------
NEBRASKA (3.1%)
Nebraska Investment Financial
Authority, Single Family Housing,
6.25%, 3/1/21 RB, AMT, GNMA,
FNMA, FHLMC 990,000 1,056,815
- --------------------------------------------------------------------------------
NEW YORK (22.3%)
Metropolitan Transportation
Authority, 5.625%, 7/1/25
RB, MBIA 1,000,000 1,060,690
New York City Municipal Water
Finance Authority, 5.75%,
6/15/29 RB 1,000,000 1,074,180
New York St. Dormitory Authority,
5.125%, 2/15/08 RB 1,000,000 1,038,950
New York St. Medical Care Facility
Financing Agency, 5.375%,
2/15/25 RB, FHA 1,000,000 1,016,580
Port Authority of New York and
New Jersey, 5.75%, 12/1/25
RB, AMT, MBIA 1,000,000 1,060,450
The City of New York, 6.0%,
4/15/09 GO 1,000,000 1,099,760
Tribourough Bridge & Tunnel
Authority, 5.0%, 1/1/07 RB 1,080,000 1,128,147
- --------------------------------------------------------------------------------
TOTAL 7,478,757
- --------------------------------------------------------------------------------
PENNSYLVANIA (5.0%)
Allegheny County Hospital Dev
Authority, 7.50%, 8/1/13 RB 1,690,000 1,673,100
- --------------------------------------------------------------------------------
Shares/Par Market Value
- --------------------------------------------------------------------------------
TEXAS (10.3%)
Brazos, Texas, Higher Education
Authority, 5.5%, 6/1/02
RB, AMT, GTD STD LNS 965,000 $1,009,940
Hays, Texas, Consolidated
Independent School District,
5.875%, 8/15/22 GO, PSF 1,000,000 1,089,370
Odessa Texas Junior College
District, 8.125%, 12/1/18 RB 1,100,000 1,349,337
- --------------------------------------------------------------------------------
TOTAL 3,448,647
- --------------------------------------------------------------------------------
WASHINGTON (3.3%)
Washington State Public Power
Supply System, 6.5%, 7/1/15
RB, PR 1,000,000 1,102,850
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS 33,059,413
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%)
(COST $31,542,240)<F1> 33,059,413
================================================================================
OTHER ASSETS, LESS LIABILITIES (1.4%) 482,143
================================================================================
TOTAL NET ASSETS (100.0%) $33,541,556
================================================================================
<F1> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $31,609,965 and the net unrealized appreciation of
investments based on that cost was $1,449,448 which is comprised of
$1,535,015 aggregate gross unrealized appreciation and $85,567 aggregate
gross unrealized depreciation.
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)
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)
FGIC (Financial Guaranty Insurance Company)
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
- -----------------
SELECT BOND FUND
- -----------------
- --------------------------------------------------------------------------------
OBJECTIVE: To seek high income and capital appreciation, consistent with
preservation of capital.
PORTFOLIO: Diversified investment-grade corporate, mortgage-backed, 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: $33.9 million
- --------------------------------------------------------------------------------
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.
For the fiscal year ended March 31, 1999, the Select Bond Fund has
underperformed its benchmark, Merrill Lynch Domestic Master Index. However,
performance has been in line with that of similar bond funds and has been good
in the last six months. The major reason for the underperformance relative to
the benchmark was the maintenance of a defensive posture on interest rates
during the first three quarters of the fiscal year in the expectation that
interest rates would rise; instead, rates declined. In the early months of 1999,
continued strength in the U.S. economy and signs of improving conditions in
emerging markets have enabled investment-grade bonds to recover from their
weakness late in 1998. The Fund's performance benefited from positions taken in
these securities during the period of weakness in the last months of 1998.
At the end of March, the Fund was concentrated in high-quality issues that are
expected to retain their value in a market that may be volatile. The posture on
interest rates remains defensive, as rates are now near historic lows.
PERCENTAGE HOLDINGS
3/31/99
Mortgage-Backed and
Asset-Backed Securities 48%
Government and Government
Agencies 37%
Corporate Bonds 12%
Money Market Investments 3%
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.
<PAGE>
M A S O N S T R E E T F U N D S
PERFORMANCE RELATIVE TO
MERRILL LYNCH DOMESTIC MASTER INDEX
<TABLE>
<CAPTION>
SELECT BOND FUND
3/31/97 9/30/97 12/31/97 3/31/98 9/30/98 12/31/98 3/31/99
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
SELECT BOND FUND CLASS A 9,523 10,357 10,546 10,677 10,742 11,145 11,167
SELECT BOND FUND CLASS B 10,000 10,837 11,016 11,134 11,165 11,564 11,568
SELECT BOND FUND CLASS B REDEMPTION VALUE 11,279
MERRILL LYNCH DOMESTIC
MASTER INDEX 10,000 10,712 11,027 11,205 11,955 12,005 11,934
</TABLE>
TOTAL RETURN Average
Annual
One Since
For the periods ended March 31, 1999 Year Inception<F1>
- --------------------------------------------------------------------------------
Select Bond Fund
(Class A - without initial sales charge) 4.60% 8.29%
- --------------------------------------------------------------------------------
Merrill Lynch
Domestic Master Index 6.51% 9.24%
- --------------------------------------------------------------------------------
<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 One Year and 3% for
Since Inception.
SCHEDULE OF INVESTMENTS
Shares/Par Market Value
- --------------------------------------------------------------------------------
BONDS (95.1%)
CORPORATE BONDS (12.2%)
BANK HOLDING COMPANIES (1.5%)
NationsBank Lease Pass Thru Trust,
Class 1, 7.442%, 1/10/11 (144A) 500,000 $516,950
- --------------------------------------------------------------------------------
COMMUNICATIONS (1.5%)
AT&T Corporation, 5.625%, 3/15/04 500,000 497,647
- --------------------------------------------------------------------------------
ELECTRIC SERVICES (3.1%)
Comed Financing II, 8.5%, 1/15/27 250,000 269,917
PECO Energy Transition Trust,
Class A7, 6.13%, 3/1/09 800,000 795,088
- --------------------------------------------------------------------------------
TOTAL 1,065,005
- --------------------------------------------------------------------------------
ENERGY (1.4%)
Pemex Finance Ltd,
9.15%, 11/15/18 (144A) 500,000 470,999
- --------------------------------------------------------------------------------
FINANCE (2.6%)
<F2> Tokai Preferred Capital Co. LLC,
9.98%, 12/29/49, (144A) 1,000,000 890,000
- --------------------------------------------------------------------------------
RETAILERS (1.5%)
LB Mortgage Trust - Class A3,
8.396%, 1/20/17 441,632 498,806
- --------------------------------------------------------------------------------
TEXTILES (0.6%)
<F1><F2> Polysindo International Finance,
11.375%, 6/15/06 800,000 200,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS 4,139,407
- --------------------------------------------------------------------------------
GOVERNMENT BONDS
(DOMESTIC AND FOREIGN)
AND AGENCY BONDS (36.0%)
FOREIGN GOVERNMENT BONDS (5.3%)
<F3> Hellenic Republic, 7.5%, 5/20/13 150,000,000 554,330
<F3> Hellenic Republic, 8.8%, 6/19/07 150,000,000 576,012
Republic of Argentina,
11.75%, 4/7/09 700,000 680,400
- --------------------------------------------------------------------------------
TOTAL 1,810,742
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (30.7%)
Federal Home Loan Mortgage
Corporation, 7.5%, 10/1/27 1,169,151 1,199,411
Federal National Mortgage
Association, 5.97%, 10/1/08 397,308 393,439
Federal National Mortgage
Association, 6.07%, 10/1/08 248,840 248,088
Federal National Mortgage
Association, 6.22%, 2/1/06 484,389 487,839
<PAGE>
MARCH 31, 1999
Shares/Par Market Value
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Federal National Mortgage
Association, 6.265%, 10/1/08 248,883 $251,110
Federal National Mortgage
Association, 6.39%, 4/1/08 493,052 501,419
Federal National Mortgage
Association, 6.96%, 10/1/07 296,289 311,242
Federal National Mortgage
Association, 7.36%, 4/1/11 480,776 520,324
Federal National Mortgage
Association, 10%, 10/1/17 57,909 61,667
Federal National Mortgage
Association, 11%, 12/1/12 49,375 53,706
Federal National Mortgage
Association, 11%, 9/1/17 323,358 351,745
Federal National Mortgage
Association, 11%, 12/1/17 97,687 106,406
Federal National Mortgage
Association, 11%, 2/1/18 128,551 139,995
Federal National Mortgage
Association, 11.50%, 4/1/18 196,561 217,213
Federal National Mortgage
Association, 12%, 9/1/12 344,749 383,944
Federal National Mortgage
Association, 12%, 12/1/12 65,199 72,873
Federal National Mortgage
Association, 12%, 9/1/17 116,422 130,395
Federal National Mortgage
Association, 12%, 10/1/17 147,075 164,727
Federal National Mortgage
Association, 12%, 12/1/17 90,297 101,200
Federal National Mortgage
Association, 12%, 2/1/18 119,793 134,227
Federal National Mortgage
Association, 12.25%, 1/1/18 69,488 77,607
Federal National Mortgage
Association, 12.50%, 4/1/18 87,515 98,434
Federal National Mortgage
Association, 13%, 11/1/07 217,414 247,948
Federal National Mortgage
Association, 13%, 11/1/12 49,627 56,398
Federal National Mortgage
Association, 13%, 12/1/17 64,411 73,437
Federal National Mortgage
Association, 13%, 2/1/18 168,616 192,282
Federal National Mortgage
Association, 14%, 12/1/17 45,599 53,444
Government National Mortgage
Association, 7.5%, 6/15/28 325,180 334,733
Shares/Par Market Value
- --------------------------------------------------------------------------------
FEDERAL GOVERNMENT AND AGENCIES (CONTINUED)
Government National Mortgage
Association, 8.0%, 12/15/26 403,391 $420,022
Government National Mortgage
Association, 8.0%, 7/15/27 248,443 258,701
Government National Mortgage
Association, 11%, 1/15/18 434,691 488,904
US Treasury, 4.50%, 1/31/01 100,000 99,063
US Treasury, 4.75%, 11/15/08 1,000,000 963,125
US Treasury, 5.25%, 2/15/29 210,000 198,713
US Treasury, 5.50%, 8/15/28 200,000 191,250
Vendee Mortgage Trust,
.495%, 6/15/23 IO 33,037,620 579,480
Vendee Mortgage Trust, Class E,
6.5%, 3/15/29 250,000 246,272
- --------------------------------------------------------------------------------
TOTAL 10,410,783
- --------------------------------------------------------------------------------
TOTAL GOVERNMENT AND AGENCY BONDS 12,221,525
- --------------------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES (46.9%)
COMMERCIAL MORTGAGES (32.1%)
Asset Securitization Corporation,
Class CS1, 1.257%, 11/13/26 IO 15,243,185 522,384
Asset Securitization Corporation,
Class A3, 6.371%, 2/14/41 450,000 439,029
<F2> Chase Commercial Mortgage
Securities Corp., Class A2, 6.60%,
12/12/29 500,000 507,740
<F2> Chase Commercial Mortgage
Securities Corp., Class B,
6.60%, 12/12/29 500,000 504,720
Credit Suisse First Boston Mortgage
Securities Corp., Class B,
9.591%, 4/25/25 (144A) 457,000 509,509
Credit Suisse First Boston Mortgage
Securities Corp., Class A2,
7.26%, 6/20/29 (144A) 242,601 251,279
<F2> Credit Suisse First Boston Mortgage
Securities Corp., Class B,
7.28%, 6/20/29 (144A) 250,000 259,620
<F2> Criimi Mae Commercial Mortgage
Trust, Class A1, 7.0%, 11/2/06 500,000 486,075
Criimi Mae Commercial Mortgage
Trust, Class B, 7.0%, 11/2/11 600,000 477,000
Comed Transitional Funding Trust,
Class A7, 5.74%, 12/25/10 750,000 726,788
<F2> Commercial Mortgage Acceptance
Corporation, Class B,
6.413%, 12/15/30 500,000 501,855
Commercial Mortgage Asset Trust,
Class C, 7.35%, 8/17/13 750,000 743,558
<PAGE>
M A S O N S T R E E T F U N D S
Shares/Par Market Value
- --------------------------------------------------------------------------------
COMMERCIAL MORTGAGES (CONTINUED)
DLJ Mortgage Acceptance Corp.,
Class S, .3571%, 10/15/17
(144A) IO 29,576,173 $649,289
DLJ Mortgage Acceptance Corp.,
Class S, .718%, 2/15/31
(144A) IO 20,089,256 818,838
DLJ Mortgage Acceptance Corp.,
Class A1, 8.1%, 6/18/04 317,260 339,548
DLJ Mortgage Acceptance Corp.,
Class A2, 8.1%, 6/18/04 350,000 375,231
Merrill Lynch Mortgage
Investors, Inc., Class E,
8.336%, 6/25/22 (144A) 500,000 498,115
Morgan Stanley Capital, Class A3,
7.3875%, 8/15/06 400,000 425,732
Midland Realty Acceptance Corp.,
Class AEC, 1.389%, 1/25/29
(144A) IO 9,242,185 600,187
<F2> Nomura Asset Securities Corp.,
6.326%, 3/15/30 200,000 199,936
<F2> Nomura Asset Securities Corp.,
6.906%, 3/15/30 600,000 574,674
<F2> Red Mountain Funding L. L. C.,
Class E, 7.365%, 1/15/19 (144A) 176,000 154,206
<F2> Red Mountain Funding L. L. C.,
Class F, 7.471%, 1/15/19 (144A) 400,000 311,856
- --------------------------------------------------------------------------------
TOTAL 10,877,169
- --------------------------------------------------------------------------------
CREDIT CARD ASSET-BACKED (0.7%)
<F2> Iroquois Trust, Class A,
6.752%, 6/25/07 (144A) 250,000 251,840
- --------------------------------------------------------------------------------
FRANCHISE LOAN RECEIVABLES (5.0%)
EMAC Owner Trust, 1.378%,
1/15/23 (144A) IO 13,731,274 991,226
EMAC Owner Trust, Class A2,
6.38%, 4/15/07 (144A) 400,000 393,548
Global Franchise Trust, Class A1,
6.349%, 4/10/04 (144A) 301,212 300,377
- --------------------------------------------------------------------------------
TOTAL 1,685,151
- --------------------------------------------------------------------------------
HOME EQUITY LOAN (0.9%)
Amresco Residential Securities,
Class A2, 6.245%, 4/25/22 300,000 301,317
- --------------------------------------------------------------------------------
MANUFACTURED HOUSING (1.8%)
Mid-State Trust VI, Class A3,
7.54%, 7/1/35 589,162 605,764
- --------------------------------------------------------------------------------
Shares/Par Market Value
- --------------------------------------------------------------------------------
OTHER ASSET-BACKED (4.2%)
FMAC Loan Receivables Trust 98-A,
6.2%, 9/15/20 261,950 $259,495
Harley-Davidson Eaglemark Trust,
Class A2, 5.87%, 4/15/04 300,000 301,455
Health Care Rec. Securitization
Program, 6.25%, 2/1/03 125,000 124,805
<F2> Heilig Meyers Master Trust,
6.125%, 1/20/07 500,000 503,330
Newcourt Equipment - Class B,
6.764%, 9/20/04 (144A) 237,572 236,384
- --------------------------------------------------------------------------------
TOTAL 1,425,469
- --------------------------------------------------------------------------------
RESIDENTIAL MORTGAGES (2.2%)
BCF LLC Mortgage Pass Thru
Certificate, Class B3, 7.75%,
3/25/37 (144A) 326,249 308,590
Blackrock Capital Finance, Class B3,
7.25%, 11/25/28 (144A) 487,444 425,831
- --------------------------------------------------------------------------------
TOTAL 734,421
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES 15,881,131
- --------------------------------------------------------------------------------
TOTAL BONDS 32,242,063
================================================================================
WARRANTS (0.0%)
FOREIGN GOVERNMENT (0.0%)
Republic of Argentina 600 1,500
- --------------------------------------------------------------------------------
MONEY MARKET INVESTMENTS (4.4%)
FEDERAL GOVERNMENT AND AGENCIES (1.2%)
<F2> Federal Home Loan Mortgage
Corporation, 4.75%, 5/17/99 400,000 397,572
- --------------------------------------------------------------------------------
PERSONAL CREDIT INSTITUTIONS (3.2%)
Household Finance Company,
4.919%, 4/7/99 1,100,000 1,099,098
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET INVESTMENTS 1,496,670
================================================================================
TOTAL INVESTMENTS (99.5%)
(COST $34,959,371)<F4> 33,740,233
================================================================================
OTHER ASSETS, LESS LIABILITIES (0.5%) 163,637
================================================================================
TOTAL NET ASSETS (100.0%) $33,903,870
================================================================================
<PAGE>
MARCH 31, 1999
IO - Interest Only Security
<F1> Defaulted 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.
<F2> Partially held by the custodian in a segregated account as collateral for
open futures and forward positions. Information regarding open futures
contracts as of March 31, 1999 is summarized below:
Unrealized
Number of Expiration Appreciation/
Issuers Contracts Date (Depreciation)
- --------------------------------------------------------------------------------
U.S. Treasury Bond Futures
(Total notional value at
3/31/99, $3,613,125) 30 6/99 ($3,750)
90 Day Euro Futures
(Total notional value at
3/31/99, $2,614,950) 11 9/99 $5,337
<F3> Foreign security denominated in Greek Drachma.
<F4> At March 31, 1999, the aggregate cost of securities for federal income tax
purposes was $35,035,547 and the net unrealized depreciation of investments
based on that cost was $1,295,314 which is comprised of $2,202,622
aggregate gross unrealized appreciation and $3,497,936 aggregate gross
unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
FINANCIAL STATEMENTS
AGGRESSIVE GROWTH STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $37,833,914) $46,476,805
Money Market Investments (cost $2,992,508) 2,992,508
- --------------------------------------------------------------------------------
49,469,313
- --------------------------------------------------------------------------------
Cash 16,183
Due from Sale of Securities 321,356
Due from Sale of Fund Shares 12,906
Unamortized Organizational Costs 12,398
Dividends and Interest Receivable 6,542
- --------------------------------------------------------------------------------
TOTAL ASSETS 49,838,698
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 1,243,007
Other Accrued Liabilities 35,162
Due on Redemption of Fund Shares 8,791
Accrued Shareholder Servicing Fees 6,099
Accrued Distribution Expense 4,187
Accrued Administrative Fees 3,514
Due to Investment Advisor 2,253
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,303,013
- --------------------------------------------------------------------------------
NET ASSETS $48,535,685
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,538,371 shares outstanding) $38,075,593
Undistributed Accumulated Net
Realized Gain on Investments 1,817,201
Net Unrealized Appreciation of
Investment Securities 8,642,891
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,538,371
SHARES OUTSTANDING $48,535,685
================================================================================
Per Share of Class A (Based on 3,192,576
Shares Issued and Outstanding):
OFFERING PRICE $14.41
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $13.73
================================================================================
Per Share of Class B (Based on 345,795
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $13.58
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $182,050
Dividends 30,227
- --------------------------------------------------------------------------------
TOTAL INCOME 212,277
- --------------------------------------------------------------------------------
Expenses
Management Fees 327,894
Shareholder Servicing Fees 109,298
Transfer Agent Fees 86,748
Distribution Fees:
Class A 40,381
Class B 25,032
Other Expenses 52,843
Administrative Fees 43,719
Registration Fees 25,234
Custody Fees 20,459
- --------------------------------------------------------------------------------
TOTAL EXPENSES 731,608
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (4,905)
Expenses Reimbursed by Affiliates (141,566)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 585,137
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (372,860)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on:
Investment Securities 2,388,192
Futures Contracts 158,149
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 2,546,341
- --------------------------------------------------------------------------------
Net Change in Unrealized Depreciation of
Investment Securities (3,477,719)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (931,378)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,304,238)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Loss $(372,860) $(332,166)
Net Realized Gain on Investments 2,546,341 1,864,006
Net Change in Unrealized Appreciation (Depreciation) of Investments (3,477,719) 12,120,610
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (1,304,238) 13,652,450
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Realized Gain on Investments (700,361) (1,513,217)
Distributions to Class B Shareholders from Net Realized Gain on Investments (69,963) (45,705)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (770,324) (1,558,922)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 416,459 and 2,757,475 Shares 5,382,644 28,325,850
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(50,009 and 121,508 shares, respectively) 699,202 1,511,566
Payments for 145,127 and 8,348 Shares Redeemed (1,845,647) (110,997)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (321,341 and 2,870,635 shares, respectively) 4,236,199 29,726,419
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 241,417 and 126,434 Shares 3,182,223 1,647,644
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(5,009 and 3,678 shares, respectively) 69,331 45,607
Payments for 30,203 and 1,140 Shares Redeemed (387,831) (14,873)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (216,223 and 128,972 shares, respectively) 2,863,723 1,678,378
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 5,025,360 43,498,325
NET ASSETS
Beginning of Year 43,510,325 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR $48,535,685 $43,510,325
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $14.50 $10.00 $14.43 $10.00
Income from Investment Operations:
Net Investment Loss<F1> (0.11) (0.12) (0.19) (0.21)
Net Realized and Unrealized Gains on Investments (0.43) 5.18 (0.43) 5.18
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.54) 5.06 (0.62) 4.97
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income 0.00 0.00 0.00 0.00
Distributions from Realized Gains on Investments (0.23) (0.56) (0.23) (0.54)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.23) (0.56) (0.23) (0.54)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.73 $14.50 $13.58 $14.43
================================================================================================================================
TOTAL RETURN<F2> (3.78)% 51.57% (4.35)% 50.59%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $43,840,289 $41,640,193 $4,695,396 $1,870,132
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.62% 1.64% 2.27% 2.29%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30% 1.30% 1.95% 1.95%
================================================================================================================================
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS (0.80)% (0.96)% (1.45)% (1.61)%
================================================================================================================================
PORTFOLIO TURNOVER RATE 84.46% 64.91% 84.46% 64.91%
================================================================================================================================
</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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $31,804,254) $30,074,939
Money Market Investments (cost $500,000) 500,000
- --------------------------------------------------------------------------------
30,574,939
- --------------------------------------------------------------------------------
Due from Sale of Securities 935,405
Dividends Receivable 164,312
Due from Foreign Currency Contracts 81,385
Due from Purchase of Fund Shares 73,603
Unamortized Organizational Costs 12,387
- --------------------------------------------------------------------------------
TOTAL ASSETS 31,842,031
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 394,125
Due on Foreign Currency Contracts 81,432
Due to Investment Advisor 53,508
Other Accrued Liabilities 36,738
Accrued Administrative Fees 8,923
Accrued Shareholder Servicing Fees 3,085
Accrued Distribution Expense 2,546
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 580,357
- --------------------------------------------------------------------------------
NET ASSETS $31,261,674
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,441,986 shares outstanding) $34,067,715
Undistributed Net Investment Income 72,169
Undistributed Accumulated Net
Realized Loss on Investments (1,147,704)
Net Unrealized Appreciation (Depreciation) of:
Investment Securities (1,732,310)
Foreign Currency Transactions 1,804
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,441,986
SHARES OUTSTANDING $31,261,674
================================================================================
Per Share of Class A (Based on
3,140,837 Shares Issued and Outstanding):
OFFERING PRICE $9.54
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $9.09
================================================================================
Per Share of Class B (Based on 301,149
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $9.03
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $78,116) $854,799
Interest 173,842
- --------------------------------------------------------------------------------
TOTAL INCOME 1,028,641
- --------------------------------------------------------------------------------
Expenses
Management Fees 252,599
Shareholder Servicing Fees 74,294
Transfer Agent Fees 66,942
Custody Fees 46,635
Distribution Fees:
Class A 27,608
Class B 15,819
Administrative Fees 29,718
Registration Fees 23,725
Audit Fees 19,628
Shareholder Reporting Expenses 11,297
Other Expenses 5,424
Directors Fees 5,034
Professional Fees 1,564
- --------------------------------------------------------------------------------
TOTAL EXPENSES 580,287
- --------------------------------------------------------------------------------
Less:
Expenses Reimbursed by Affiliates (75,948)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 504,339
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 524,302
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Loss on:
Investment Securities (118,418)
Foreign Currency Transactions (46,803)
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON INVESTMENTS
FOR THE YEAR (165,221)
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities (3,154,158)
Foreign Currency Transactions 2,492
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION (3,151,666)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (3,316,887)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(2,792,585)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $524,302 $636,372
Net Realized Gain (Loss) on Investments (165,221) 181,411
Net Change in Unrealized Appreciation (Depreciation) of Investments and
Foreign Currency Transactions (3,151,666) 1,421,161
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (2,792,585) 2,238,944
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (488,292) (575,912)
Distributions to Class A Shareholders from Net Realized Gain on Investments (1,103,595) -
Distributions to Class B Shareholders from Net Investment Income (34,474) (18,152)
Distributions to Class B Shareholders from Net Realized Gain on Investments (101,379) -
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (1,727,740) (594,064)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 268,605 and 2,746,325 Shares 2,576,879 27,522,507
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(177,719 and 59,873 shares, respectively) 1,588,807 575,381
Payments for 88,775 and 23,510 Shares Redeemed (830,681) (244,631)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (357,549 and 2,782,688 shares, respectively) 3,335,005 27,853,257
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 173,803 and 141,383 Shares 1,643,961 1,436,283
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(15,136 and 1,897 shares, respectively) 134,559 18,150
Payments for 24,956 and 6,714 Shares Redeemed (228,283) (67,813)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (163,983 and 136,566 shares, respectively) 1,550,237 1,386,620
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 364,917 30,884,757
NET ASSETS
Beginning of Year 30,896,757 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$72,169 AND $115,120, RESPECTIVELY) $31,261,674 $30,896,757
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $10.58 $10.00 $10.53 $10.00
Income from Investment Operations:
Net Investment Income 0.19<F1> 0.24<F2> 0.14<F1> 0.10<F2>
Net Realized and Unrealized Gains on Investments (1.13) 0.56 (1.13) 0.63
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.94) 0.80 (0.99) 0.73
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.17) (0.22) (0.13) (0.20)
Distributions from Realized Gains on Investments (0.38) 0.00 (0.38) 0.00
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.55) (0.22) (0.51) (0.20)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $9.09 $10.58 $9.03 $10.53
================================================================================================================================
TOTAL RETURN<F2> (8.85)% 8.19% (9.36)% 7.49%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $28,543,601 $29,451,833 $2,718,073 $1,444,924
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.91% 2.13% 2.56% 2.78%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.65% 1.65% 2.30% 2.30%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.34% 2.34% 1.69% 1.69%
================================================================================================================================
PORTFOLIO TURNOVER RATE 198.46% 10.07% 198.46% 10.07%
================================================================================================================================
</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> Calculated prior to adjustment for certain book and tax income differences.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
GROWTH STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $27,785,713) $42,746,261
Money Market Investments (cost $10,185,618) 10,185,618
- --------------------------------------------------------------------------------
52,931,879
- --------------------------------------------------------------------------------
Cash 31,208
Due from Sale of Securities 126,111
Dividends and Interest Receivable 37,114
Due from Sale of Fund Shares 31,277
Unamortized Organizational Costs 12,398
- --------------------------------------------------------------------------------
TOTAL ASSETS 53,169,987
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 427,715
Futures Variation Margin 117,600
Other Accrued Liabilities 34,874
Due to Investment Advisor 10,787
Due on Redemption of Fund Shares 7,740
Accrued Distribution Expense 4,073
Accrued Administrative Fees 3,967
Accrued Registration Fees 1,926
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 608,682
- --------------------------------------------------------------------------------
NET ASSETS $52,561,305
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,316,769 shares outstanding) $36,269,315
Undistributed Net Investment Income 31,661
Undistributed Accumulated Net
Realized Gain on Investments 1,415,918
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 14,960,548
Index Futures Contracts (116,137)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,316,769
SHARES OUTSTANDING $52,561,305
================================================================================
Per Share of Class A (Based on
3,093,172 Shares Issued and Outstanding):
OFFERING PRICE $16.65
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $15.86
================================================================================
Per Share of Class B (Based on 223,597
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $15.73
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $401,017
Dividends (less foreign dividend tax of $4,630) 349,620
- --------------------------------------------------------------------------------
TOTAL INCOME 750,637
- --------------------------------------------------------------------------------
Expenses
Management Fees 328,924
Shareholder Servicing Fees 109,642
Transfer Agent Fees 70,694
Distribution Fees:
Class A 41,978
Class B 14,087
Administrative Fees 43,857
Registration Fees 24,837
Other Expenses 23,736
Shareholder Reporting Expenses 19,639
Custody Fees 17,842
Directors Fees 5,019
Professional Fees 2,369
- --------------------------------------------------------------------------------
TOTAL EXPENSES 702,624
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (3,470)
Expenses Reimbursed by Affiliates (120,279)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 578,875
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 171,762
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on:
Investment Securities 1,681,853
Index Futures Contracts 826,034
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 2,507,887
- --------------------------------------------------------------------------------
Net Change in Unrealized
Appreciation (Depreciation) of:
Investment Securities 5,368,923
Index Futures Contracts (165,106)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 5,203,817
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 7,711,704
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $7,883,466
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $171,762 $90,829
Net Realized Gain on Investments 2,507,887 1,966,059
Net Change in Unrealized Appreciation of Investments 5,203,817 9,640,593
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 7,883,466 11,697,481
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (164,011) (134,147)
Distributions to Class A Shareholders from Net Realized Gain on Investments (2,145,824) (787,500)
Distributions to Class B Shareholders from Net Investment Income (1,201) (1,034)
Distributions to Class B Shareholders from Net Realized Gain on Investments (114,146) (10,555)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (2,425,182) (933,236)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 259,874 and 2,643,059 Shares 3,785,341 26,708,776
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(151,179 and 75,479 shares, respectively) 2,303,970 921,596
Payments for 29,649 and 7,370 Shares Redeemed (440,425) (90,416)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (381,404 and 2,711,168 shares, respectively) 5,648,886 27,539,956
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 169,083 and 56,279 Shares 2,461,603 707,826
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(7,480 and 951 shares, respectively) 113,195 11,573
Payments for 10,793 and 3 Shares Redeemed (156,222) (41)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (165,770 and 57,227 shares, respectively) 2,418,576 719,358
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 13,525,746 39,023,559
NET ASSETS
Beginning of Year 39,035,559 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$31,661 AND $23,034, RESPECTIVELY) $52,561,305 $39,035,559
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $14.10 $10.00 $14.03 $10.00
Income from Investment Operations:
Net Investment Income (Loss) 0.04 0.04<F1> (0.01) (0.05)<F1>
Net Realized and Unrealized Gains on Investments 2.52 4.41 2.46 4.41
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.56 4.45 2.45 4.36
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.06) (0.05) (0.01) (0.03)
Distributions from Realized Gains on Investments (0.74) (0.30) (0.74) (0.30)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.80) (0.35) (0.75) (0.33)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.86 $14.10 $15.73 $14.03
================================================================================================================================
TOTAL RETURN<F2> 18.36% 45.08% 17.66% 44.12%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $49,045,112 $38,224,386 $3,516,193 $811,173
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.57% 1.63% 2.22% 2.28%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30% 1.30% 1.95% 1.95%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS 0.42% 0.29% (0.23)% (0.36)%
================================================================================================================================
PORTFOLIO TURNOVER RATE 32.00% 37.52% 32.00% 37.52%
================================================================================================================================
</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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
GROWTH AND INCOME STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $46,395,132) $49,648,205
- --------------------------------------------------------------------------------
Cash 218,654
Due from Sale of Securities 833,736
Dividends and Interest Receivable 46,796
Due from Sale of Fund Shares 41,034
Unamortized Organizational Costs 12,398
- --------------------------------------------------------------------------------
TOTAL ASSETS 50,800,823
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 771,252
Due on Redemption of Fund Shares 47,114
Other Accrued Liabilities 33,955
Accrued Shareholder Servicing Fees 6,441
Accrued Administrative Fees 3,765
Due to Investment Advisor 2,044
Accrued Registration Fees 2,034
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 866,605
- --------------------------------------------------------------------------------
NET ASSETS $49,934,218
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 4,180,038 shares outstanding) $44,455,680
Undistributed Accumulated Net
Realized Gain on Investments 2,225,465
Net Unrealized Appreciation of
Investment Securities 3,253,073
- --------------------------------------------------------------------------------
NET ASSETS FOR 4,180,038
SHARES OUTSTANDING $49,934,218
================================================================================
Per Share of Class A (Based on
3,815,853 Shares Issued and Outstanding):
OFFERING PRICE $12.56
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $11.96
================================================================================
Per Share of Class B (Based on 364,185
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $11.85
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends $556,470
Interest 43,910
- --------------------------------------------------------------------------------
TOTAL INCOME 600,380
- --------------------------------------------------------------------------------
Expenses
Management Fees 281,475
Shareholder Servicing Fees 108,260
Transfer Agent Fees 76,180
Distribution Fees:
Class A 40,386
Class B 21,884
Administrative Fees 43,304
Custody Fees 27,897
Registration Fees 25,744
Shareholder Reporting Expense 19,052
Audit Fee Expense 17,175
Other Expenses 6,852
Directors Fees 5,020
Professional Fees 2,694
- --------------------------------------------------------------------------------
TOTAL EXPENSES 675,923
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (3,684)
Expenses Reimbursed by Affiliates (137,303)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 534,936
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 65,444
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net Realized Gain on Investments 6,155,592
Net Change in Unrealized Depreciation
of Investments (1,313,276)
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 4,842,316
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $4,907,760
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $65,444 $116,137
Net Realized Gain on Investments 6,155,592 6,264,818
Net Change in Unrealized Appreciation (Depreciation) of Investments (1,313,276) 4,566,349
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 4,907,760 10,947,304
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (117,640) (152,006)
Distributions to Class A Shareholders from Net Realized Gain on Investments (5,828,791) (3,768,242)
Distributions to Class B Shareholders from Net Investment Income (1,006) (2,604)
Distributions to Class B Shareholders from Net Realized Gain on Investments (483,341) (92,540)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (6,430,778) (4,015,392)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 330,443 and 2,700,758 Shares 4,055,376 27,377,915
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(507,846 and 366,764 shares, respectively) 5,942,527 3,917,041
Payments for 60,751 and 29,807 Shares Redeemed (731,924) (358,157)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (777,538 and 3,037,715 shares, respectively) 9,265,979 30,936,799
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 237,668 and 116,172 Shares 2,839,000 1,379,764
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(38,833 and 8,931 shares, respectively) 450,878 95,020
Payments for 35,912 and 2,107 Shares Redeemed (428,239) (25,877)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (240,589 and 122,996 shares, respectively) 2,861,639 1,448,907
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 10,604,600 39,317,618
NET ASSETS
Beginning of Year 39,329,618 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$0 AND $28,998, RESPECTIVELY) $49,934,218 $39,329,618
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $12.44 $10.00 $12.37 $10.00
Income from Investment Operations:
Net Investment Income (Loss) 0.01 0.04<F1> (0.03) (0.03)<F1>
Net Realized and Unrealized Gains on Investments 1.33 3.90 1.28 3.88
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 1.34 3.94 1.25 3.85
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.04) (0.06) (0.00) (0.04)
Distributions from Realized Gains on Investments (1.78) (1.44) (1.77) (1.44)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.82) (1.50) (1.77) (1.48)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.96 $12.44 $11.85 $12.37
================================================================================================================================
TOTAL RETURN<F2> 11.09% 41.90% 10.41% 40.96%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $45,619,789 $37,800,412 $4,314,429 $1,529,206
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.52% 1.57% 2.17% 2.22%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.20% 1.20% 1.85% 1.85%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET ASSETS 0.20% 0.37% (0.45)% (0.28)%
================================================================================================================================
PORTFOLIO TURNOVER RATE 156.92% 140.29% 156.92% 140.29%
================================================================================================================================
</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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
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
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Common Stocks (cost $62,381,919) $84,366,683
Money Market Investments (cost $2,792,445) 2,792,445
- --------------------------------------------------------------------------------
87,159,128
- --------------------------------------------------------------------------------
Cash 48,605
Due from Sale of Fund Shares 676,355
Dividends and Interest Receivable 87,148
Unamortized Organizational Costs 12,398
Due from Investment Advisor 12,397
- --------------------------------------------------------------------------------
TOTAL ASSETS 87,996,031
- --------------------------------------------------------------------------------
LIABILITIES
Other Accrued Liabilities 55,560
Futures Variation Margin 44,800
Due on Redemption of Fund Shares 33,676
Accrued Shareholder Servicing Fees 11,291
Accrued Registration Fees 7,478
Accrued Administrative Fees 6,626
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 159,431
- --------------------------------------------------------------------------------
NET ASSETS $87,836,600
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 5,238,253 shares outstanding) $64,583,452
Undistributed Net Investment Income 347,027
Undistributed Accumulated Net
Realized Gain on Investments 975,007
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 21,984,764
Index Futures Contracts (53,650)
- --------------------------------------------------------------------------------
NET ASSETS FOR 5,238,253
SHARES OUTSTANDING $87,836,600
================================================================================
Per Share of Class A (Based on
4,168,765 Shares Issued and Outstanding):
OFFERING PRICE $17.64
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $16.80
================================================================================
Per Share of Class B (Based on 1,069,488
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $16.65
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends (less foreign dividend tax of $5,051) $818,200
Interest 256,306
- --------------------------------------------------------------------------------
TOTAL INCOME 1,074,506
- --------------------------------------------------------------------------------
Expenses
Management Fees 187,008
Shareholder Servicing Fees 155,840
Distribution Fees:
Class A 52,347
Class B 74,922
Transfer Agent Fees 100,444
Administrative Fees 62,336
Custody Fee Expense 45,374
Registration Fees 31,849
Shareholder Reporting Expenses 28,138
Other Expenses 19,341
Audit Fees 17,009
Directors Fees 5,020
Professional Fees 2,391
- --------------------------------------------------------------------------------
TOTAL EXPENSES 782,019
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (4,504)
Expenses Reimbursed by Affiliates (187,230)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 590,285
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 484,221
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on:
Investment Securities 528,076
Index Futures Contracts 710,652
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 1,238,728
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities 10,025,787
Index Futures Contracts (302,425)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 9,723,362
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 10,962,090
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $11,446,311
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $484,221 $354,941
Net Realized Gain on Investments 1,238,728 535,402
Net Change in Unrealized Appreciation of Investments 9,723,362 12,207,752
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 11,446,311 13,098,095
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (228,819) (300,021)
Distributions to Class A Shareholders from Net Realized Gain on Investments (492,288) (183,740)
Distributions to Class B Shareholders from Net Investment Income (17,026) (17,018)
Distributions to Class B Shareholders from Net Realized Gain on Investments (111,777) (11,318)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (849,910) (512,097)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 1,243,043 and 3,001,056 Shares 19,256,340 31,280,916
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(44,680 and 39,415 shares, respectively) 716,707 482,830
Payments for 138,873 and 21,156 Shares Redeemed (2,128,916) (254,109)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (1,148,850 and 3,019,315 shares, respectively) 17,844,131 31,509,637
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 814,757 and 311,242 Shares 12,206,936 3,901,288
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(7,919 and 2,318 shares, respectively) 126,087 28,306
Payments for 49,118 and 18,230 Shares Redeemed (751,091) (223,093)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (773,558 and 295,330 shares, respectively) 11,581,932 3,706,501
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 40,022,464 47,802,136
NET ASSETS
Beginning of Year 47,814,136 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$347,027 AND $106,574, RESPECTIVELY) $87,836,600 $47,814,136
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ----------- ----------- ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $14.43 $10.00 $14.35 $10.00
Income from Investment Operations:
Net Investment Income 0.10 0.13<F1> 0.03 0.05<F1>
Net Realized and Unrealized Gains on Investments 2.47 4.48 2.43 4.47
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.57 4.61 2.46 4.52
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.06) (0.11) (0.02) (0.10)
Distributions from Realized Gains on Investments (0.14) (0.07) (0.14) (0.07)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.20) (0.18) (0.16) (0.17)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $16.80 $14.43 $16.65 $14.35
================================================================================================================================
TOTAL RETURN<F2> 17.88% 46.35% 17.17% 45.44%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $70,034,287 $43,567,584 $17,802,313 $4,246,552
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.15% 1.30% 1.80% 1.95%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 0.85% 0.85% 1.50% 1.50%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.88% 1.04% 0.23% 0.39%
================================================================================================================================
PORTFOLIO TURNOVER RATE 3.83% 2.47% 3.83% 2.47%
================================================================================================================================
</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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
ASSET ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $18,705,530) $18,018,094
Common Stocks (cost $12,044,216) 17,300,597
Money Market Investments (cost $4,889,655) 4,889,655
Foreign Common Stock (cost $3,847,470) 4,729,610
Preferred Stock (cost $977,500) 1,076,250
- --------------------------------------------------------------------------------
46,014,206
- --------------------------------------------------------------------------------
Cash 104,307
Due from Securities Sold 1,011,689
Due from Sale of Foreign Currency 375,385
Dividends and Interest Receivable 284,114
Due from Sale of Fund Shares 37,755
Unamortized Organizational Costs 12,398
- --------------------------------------------------------------------------------
TOTAL ASSETS 47,839,854
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 1,316,687
Due on Purchase of Foreign Currency 373,510
Other Accrued Liabilities 34,790
Futures Variation Margin 22,400
Accrued Shareholder Servicing Fees 5,881
Accrued Distribution Expense 4,281
Accrued Administrative Fees 3,403
Due on Redemption of Fund Shares 2,398
Due to Investment Advisor 986
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,764,336
- --------------------------------------------------------------------------------
NET ASSETS $46,075,518
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,693,789 shares outstanding) $39,205,596
Undistributed Net Investment Income 311,695
Undistributed Accumulated Net
Realized Gain on Investments 1,030,091
Net Unrealized Appreciation (Depreciation) of:
Investment Securities 5,549,835
Futures Contracts (22,262)
Foreign Currency Transactions 563
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,693,789
SHARES OUTSTANDING $46,075,518
================================================================================
Per Share of Class A (Based on
3,223,425 Shares Issued and Outstanding):
OFFERING PRICE $13.11
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $12.49
================================================================================
Per Share of Class B (Based on 470,364
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $12.39
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $1,408,783
Dividends (less foreign dividend tax of $10,709) 289,575
- --------------------------------------------------------------------------------
TOTAL INCOME 1,698,358
- --------------------------------------------------------------------------------
Expenses
Management Fees 281,460
Shareholder Servicing Fees 100,521
Distribution Fees:
Class A 36,364
Class B 28,839
Transfer Agent Fees 64,990
Custody Fees 40,519
Administrative Fees 40,209
Registration Fees 25,436
Other Expenses 17,976
Audit Fees 17,815
Shareholder Reporting Expenses 16,180
Directors Fees 5,020
Professional Fees 1,764
- --------------------------------------------------------------------------------
TOTAL EXPENSES 677,093
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (5,649)
Expenses Reimbursed by Affiliates (109,283)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 562,161
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,136,197
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 1,002,281
Futures Contracts 571,429
Foreign Currency Transactions (202)
- --------------------------------------------------------------------------------
NET REALIZED GAIN 1,573,508
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities 72,859
Futures Contracts (31,629)
Foreign Currency Transactions 593
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS 41,823
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 1,615,331
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,751,528
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $1,136,197 $811,940
Net Realized Gain on Investments 1,573,508 1,137,243
Net Change in Unrealized Appreciation of Investments and Foreign
Currency Transactions 41,823 5,486,313
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 2,751,528 7,435,496
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (947,806) (627,696)
Distributions to Class A Shareholders from Net Realized Gain on Investments (889,863) (650,292)
Distributions to Class B Shareholders from Net Investment Income (109,624) (20,006)
Distributions to Class B Shareholders from Net Realized Gain on Investments (118,298) (22,525)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (2,065,591) (1,320,519)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 347,269 and 2,700,842 Shares 4,216,962 27,348,582
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(148,053 and 112,592 shares, respectively) 1,822,522 1,276,794
Payments for 78,315 and 7,616 Shares Redeemed (958,017) (91,176)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (417,007 and 2,805,818 shares, respectively) 5,081,467 28,534,200
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 347,283 and 127,870 Shares 4,226,850 1,480,265
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(17,717 and 3,763 shares, respectively) 216,682 42,525
Payments for 22,663 and 4,206 Shares Redeemed (268,668) (50,717)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (342,337 and 127,427 shares, respectively) 4,174,864 1,472,073
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 9,942,268 36,121,250
NET ASSETS
Beginning of Year 36,133,250 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$311,695 AND $231,052, RESPECTIVELY) $46,075,518 $36,133,250
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
----------- ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $12.32 $10.00 $12.26 $10.00
Income from Investment Operations:
Net Investment Income 0.32 0.31<F1> 0.24 0.23<F1>
Net Realized and Unrealized Gains on Investments 0.46 2.50 0.46 2.50
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.78 2.81 0.70 2.73
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.31) (0.24) (0.27) (0.22)
Distributions from Realized Gains on Investments (0.30) (0.25) (0.30) (0.25)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.61) (0.49) (0.57) (0.47)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.49 $12.32 $12.39 $12.26
================================================================================================================================
TOTAL RETURN<F2> 6.41% 28.51% 5.77% 27.69%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $40,249,915 $34,564,169 $5,825,603 $1,569,081
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.62% 1.67% 2.27% 2.32%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.35% 1.35% 2.00% 2.00%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.89% 2.67% 2.24% 2.02%
================================================================================================================================
PORTFOLIO TURNOVER RATE 79.71% 65.67% 79.71% 65.67%
================================================================================================================================
</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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
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
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $36,002,135) $31,266,452
Preferred Stock (cost $6,282,778) 6,603,489
Money Market Investments (cost $4,496,492) 4,496,492
Common Stock and Warrants (cost $439,383) 225,377
- --------------------------------------------------------------------------------
42,591,810
- --------------------------------------------------------------------------------
Cash 122,251
Dividends and Interest Receivable 922,393
Due from Sale of Securities 196,915
Due from Sale of Fund Shares 141,484
Unamortized Organizational Costs 12,398
- --------------------------------------------------------------------------------
TOTAL ASSETS 43,987,251
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 1,426,046
Income Dividend Payable 390,470
Other Accrued Liabilities 36,489
Due on Redemption of Fund Shares 24,198
Accrued Shareholder Servicing Fees 5,231
Due to Investment Advisor 3,474
Accrued Administrative Fees 3,108
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,889,016
- --------------------------------------------------------------------------------
NET ASSETS $42,098,235
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 4,803,342 shares outstanding) $47,945,343
Undistributed Net Investment Income 63,116
Undistributed Accumulated Net
Realized Loss on Investments (1,280,132)
Net Unrealized Depreciation of
Investment Securities (4,630,092)
- --------------------------------------------------------------------------------
NET ASSETS FOR 4,803,342
SHARES OUTSTANDING $42,098,235
================================================================================
Per Share of Class A (Based on
4,268,613 Shares Issued and Outstanding):
OFFERING PRICE $9.20
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $8.77
================================================================================
Per Share of Class B (Based on 534,729
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $8.76
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $3,848,166
Dividends 719,211
- --------------------------------------------------------------------------------
TOTAL INCOME 4,567,377
- --------------------------------------------------------------------------------
Expenses
Management Fees 290,039
Shareholder Servicing Fees 96,680
Distribution Fees:
Class A 35,513
Class B 23,688
Transfer Agent Fees 59,707
Administrative Fees 38,672
Registration Fees 27,719
Custody Fees 25,999
Audit Fees 18,679
Other Expenses 17,342
Shareholder Reporting Expenses 16,002
Directors Fees 5,020
Professional Fees 1,765
Total Expenses 656,825
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (649)
Expenses Reimbursed by Affiliates (133,561)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 522,615
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,044,762
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net Realized Loss on Investments (1,280,132)
Net Change in Unrealized Depreciation
of Investments (5,811,136)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (7,091,268)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(3,046,506)
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $4,044,762 $2,756,345
Net Realized Gain (Loss) on Investments (1,280,132) 1,974,379
Net Change in Unrealized Appreciation (Depreciation) of Investments (5,811,136) 1,181,044
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations (3,046,506) 5,911,768
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (3,730,343) (2,730,612)
Distributions to Class A Shareholders from Net Realized Gain on Investments (741,685) (1,131,057)
Distributions to Class B Shareholders from Net Investment Income (314,419) (31,293)
Distributions to Class B Shareholders from Net Realized Gain on Investments (79,109) (22,530)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (4,865,556) (3,915,492)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
CLASS A
Proceeds from Sale of 1,028,931 and 2,716,144 Shares 9,935,472 27,328,578
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (439,864 and 336,168 shares, respectively) 4,226,546 3,598,592
Payments for 241,682 and 11,412 Shares Redeemed (2,317,174) (122,333)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (1,227,113 and 3,040,900 shares, respectively) 11,844,844 30,804,837
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 405,492 and 121,471 Shares 3,957,486 1,315,485
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(34,096 and 4,331 shares, respectively) 322,079 46,162
Payments for 31,028 and 233 Shares Redeemed (286,353) (2,519)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (408,560 and 125,569 shares, respectively) 3,993,212 1,359,128
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 7,925,994 34,160,241
NET ASSETS
Beginning of Year 34,172,241 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$63,116 AND $61,039, RESPECTIVELY) $42,098,235 $34,172,241
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $10.79 $10.00 $10.79 $10.00
Income from Investment Operations:
Net Investment Income 1.00 1.01<F1> 0.93 0.93<F1>
Net Realized and Unrealized Gains (Losses)
on Investments (1.82) 1.19 (1.83) 1.20
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (0.82) 2.20 (0.90) 2.13
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (1.02) (1.00) (0.95) (0.93)
Distributions from Realized Gains on Investments (0.18) (0.41) (0.18) (0.41)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.20) (1.41) (1.13) (1.34)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $8.77 $10.79 $8.76 $10.79
================================================================================================================================
TOTAL RETURN<F2> (7.87)% 22.95% (8.48)% 22.09%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $37,414,394 $32,811,316 $4,683,841 $1,360,925
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.65% 1.66% 2.30% 2.31%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 1.30% 1.30% 1.95% 1.95%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 10.51% 9.30% 9.86% 8.65%
================================================================================================================================
PORTFOLIO TURNOVER RATE 178.63% 178.61% 178.63% 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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $31,542,240) $33,059,413
- --------------------------------------------------------------------------------
Cash 93,746
Interest Receivable 512,509
Unamortized Organizational Costs 12,398
Due from Sale of Fund Shares 9,522
Due from Investment Advisor 6,973
- --------------------------------------------------------------------------------
TOTAL ASSETS 33,694,561
- --------------------------------------------------------------------------------
LIABILITIES
Income Dividend Payable 122,472
Other Accrued Liabilities 21,780
Accrued Shareholder Servicing Fees 4,235
Accrued Administrative Fees 2,469
Accrued Distribution Expense 2,049
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 153,005
- --------------------------------------------------------------------------------
NET ASSETS $33,541,556
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,154,434 shares outstanding) $31,854,993
Undistributed Net Investment Income 29,775
Undistributed Net
Realized Gain on Investments 139,615
Net Unrealized Appreciation of
Investment Securities 1,517,173
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,154,434
SHARES OUTSTANDING $33,541,556
================================================================================
Per Share of Class A (Based on
3,074,553 Shares Issued and Outstanding):
OFFERING PRICE $11.16
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $10.63
================================================================================
Per Share of Class B (Based on 79,881
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $10.63
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest $1,535,471
- --------------------------------------------------------------------------------
Expenses
Management Fees 91,899
Shareholder Servicing Fees 76,583
Transfer Agent Fees 43,127
Distribution Fees:
Class A 29,914
Class B 5,396
Administrative Fees 30,633
Registration Fees 23,863
Audit Fees 18,615
Shareholder Reporting Expenses 12,348
Other Expenses 12,124
Custody Fees 10,542
Directors Fees 5,020
Professional Fees 2,354
- --------------------------------------------------------------------------------
TOTAL EXPENSES 362,418
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (4,703)
Expenses Reimbursed by Affiliates (97,331)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 260,384
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,275,087
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 559,411
Futures Contracts (11,656)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 547,755
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation of
Investment Securities 78,672
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION 78,672
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 626,427
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,901,514
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $1,275,087 $1,193,269
Net Realized Gain on Investments 547,755 332,018
Net Change in Unrealized Appreciation of Investments 78,672 1,441,157
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 1,901,514 2,966,444
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (1,249,869) (1,219,558)
Distributions to Class A Shareholders from Net Realized Gain on Investments (386,253) (341,287)
Distributions to Class B Shareholders from Net Investment Income (25,191) (10,261)
Distributions to Class B Shareholders from Net Realized Gain on Investments (10,382) (4,893)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (1,671,695) (1,575,999)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 286,927 and 2,536,893 Shares 3,057,973 25,381,407
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (150,658 and 139,366 shares, respectively) 1,602,959 1,460,157
Payments for 34,207 and 5,684 Shares Redeemed (365,717) (59,865)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (403,378 and 2,670,575 shares, respectively) 4,295,215 26,781,699
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 79,084 and 44,580 Shares 840,371 464,616
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(2,266 and 601 shares, respectively) 24,127 6,340
Payments for 46,259 and 991 Shares Redeemed (492,568) (10,508)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (35,091 and 44,190 shares, respectively) 371,930 460,448
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 4,896,964 28,632,592
NET ASSETS
Beginning of Year 28,644,592 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES UNDISTRIBUTED NET INVESTMENT INCOME OF
$29,775 AND $29,346, RESPECTIVELY) $33,541,556 $28,644,592
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CABLE>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ----------- ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $10.55 $10.00 $10.55 $10.00
Income from Investment Operations:
Net Investment Income 0.42 0.46<F1> 0.36 0.38<F1>
Net Realized and Unrealized Gains on Investments 0.25 0.69 0.23 0.70
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.67 1.15 0.59 1.08
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.45) (0.47) (0.37) (0.40)
Distributions from Realized Gains on Investments (0.14) (0.13) (0.14) (0.13)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.59) (0.60) (0.51) (0.53)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.63 $10.55 $10.63 $10.55
================================================================================================================================
TOTAL RETURN<F2> 6.42% 11.73% 5.72% 10.93%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $32,692,209 $28,172,205 $849,347 $472,387
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.17% 1.24% 1.82% 1.89%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 0.85% 0.85% 1.50% 1.50%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.18% 4.38% 3.53% 3.73%
================================================================================================================================
PORTFOLIO TURNOVER RATE 344.11% 169.37% 344.11% 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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
SELECT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Bonds (cost $33,461,051) $32,242,063
Money Market Investments (cost $1,496,670) 1,496,670
Warrants (cost $1,650) 1,500
- --------------------------------------------------------------------------------
33,740,233
- --------------------------------------------------------------------------------
Cash 15,767
Due from Sale of Securities 601,900
Interest Receivable 371,467
Futures Variation Margin 32,462
Due from Sale of Fund Shares 22,621
Due from Investment Advisor 12,456
Unamortized Organizational Costs 12,398
- --------------------------------------------------------------------------------
TOTAL ASSETS 34,809,304
- --------------------------------------------------------------------------------
LIABILITIES
Due on Purchase of Securities 683,452
Dividend Payable 186,601
Other Accrued Liabilities 28,629
Accrued Shareholder Servicing Fees 4,273
Accrued Administrative Fees 2,479
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 905,434
- --------------------------------------------------------------------------------
NET ASSETS $33,903,870
================================================================================
REPRESENTED BY:
Aggregate Paid-in Capital
(300,000,000 shares authorized, $.001 par
value; 3,511,516 shares outstanding) $35,043,839
Overdistributed Net Investment Income (10,530)
Undistributed Accumulated Net
Realized Gain on Investments 91,244
Net Unrealized Appreciation (Depreciation) of:
Investment Securities (1,219,138)
Futures Contracts 1,587
Foreign Currency Transactions (3,132)
- --------------------------------------------------------------------------------
NET ASSETS FOR 3,511,516
SHARES OUTSTANDING $33,903,870
================================================================================
Per Share of Class A (Based on
3,260,345 Shares Issued and Outstanding):
OFFERING PRICE $10.14
================================================================================
NET ASSET VALUE AND REDEMPTION PRICE $9.66
================================================================================
Per Share of Class B (Based on 251,171
Shares Issued and Outstanding):
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE $9.66
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended March 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest (less foreign withholding tax of $5,271) $2,518,209
- --------------------------------------------------------------------------------
Expenses
Management Fees 96,407
Shareholder Servicing Fees 80,339
Other Expenses 57,407
Transfer Agent Fees 51,915
Distribution Fees:
Class A 30,466
Class B 12,521
Administrative Fees 32,136
Custody Fees 29,208
Registration Fees 24,475
- --------------------------------------------------------------------------------
TOTAL EXPENSES 414,874
- --------------------------------------------------------------------------------
Less:
Custodian Fees Paid Indirectly (7,852)
Expenses Reimbursed by Affiliates (130,792)
- --------------------------------------------------------------------------------
TOTAL NET EXPENSES 276,230
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,241,979
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on:
Investment Securities 272,135
Futures Contracts (42,649)
Foreign Currency Transactions (141,287)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS 88,199
- --------------------------------------------------------------------------------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities (937,329)
Futures Contracts (29,226)
Foreign Currency Transactions 91,798
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION (874,757)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (786,558)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,455,421
================================================================================
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income $2,241,979 $1,899,991
Net Realized Gain on Investments 88,199 1,497,301
Net Change in Unrealized Depreciation of Investments and
Foreign Currency Transactions (874,757) (345,926)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations 1,455,421 3,051,366
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Distributions to Class A Shareholders from Net Investment Income (2,097,576) (1,894,078)
Distributions to Class A Shareholders from Net Realized Gain on Investments (275,628) (1,304,159)
Distributions to Class B Shareholders from Net Investment Income (102,222) (11,475)
Distributions to Class B Shareholders from Net Realized Gain on Investments (17,034) (12,480)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Distributions to Shareholders (2,492,460) (3,222,192)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Class A
Proceeds from Sale of 440,741 and 2,608,995 Shares 4,312,671 26,123,497
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (239,883 and 295,732 shares, respectively) 2,354,967 3,008,696
Payments for 289,128 and 36,478 Shares Redeemed (2,825,781) (363,818)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class A Fund Share Transactions (391,496 and 2,868,249 shares, respectively) 3,841,857 28,768,375
- --------------------------------------------------------------------------------------------------------------------------------
Class B
Proceeds from Sale of 209,025 and 64,092 Shares 2,055,500 653,842
Proceeds from Shares Issued on Reinvestment of Distributions Paid
(10,850 and 2,037 shares, respectively) 106,236 20,537
Payments for 33,197 and 2,236 Shares Redeemed (323,437) (23,175)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Class B Fund Share Transactions (186,678 and 63,893 shares, respectively) 1,838,299 651,204
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 4,643,117 29,248,753
NET ASSETS
Beginning of Year 29,260,753 12,000
- --------------------------------------------------------------------------------------------------------------------------------
END OF YEAR (INCLUDES (OVER) UNDISTRIBUTED NET INVESTMENT INCOME OF
$(10,530) AND $68,879, RESPECTIVELY) $33,903,870 $29,260,753
================================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
M A S O N S T R E E T F U N D S
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A CLASS A CLASS B CLASS B
------------ ------------ ------------ ------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
(For a share outstanding throughout the year) March 31, 1999 March 31, 1998 March 31, 1999 March 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Year $9.98 $10.00 $9.98 $10.00
Income from Investment Operations:
Net Investment Income 0.61 0.71<F1> 0.56 0.66<F1>
Net Realized and Unrealized Gains (Losses)
on Investments (0.16) 0.46 (0.18) 0.44
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 0.45 1.17 0.38 1.10
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Distributions from Net Investment Income (0.68) (0.71) (0.61) (0.64)
Distributions from Realized Gains on Investments (0.09) (0.48) (0.09) (0.48)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.77) (1.19) (0.70) (1.12)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $9.66 $9.98 $9.66 $9.98
================================================================================================================================
TOTAL RETURN<F2> 4.60% 12.11% 3.91% 11.34%
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
NET ASSETS, END OF YEAR $31,478,811 $28,617,421 $2,425,059 $643,332
================================================================================================================================
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS 1.26% 1.29% 1.91% 1.94%
================================================================================================================================
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS 0.85% 0.85% 1.50% 1.50%
================================================================================================================================
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.03% 6.93% 6.38% 6.28%
================================================================================================================================
PORTFOLIO TURNOVER RATE 252.44% 362.32% 252.44% 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.
The Accompanying Notes are an Integral Part of the Financial Statements.
<PAGE>
MARCH 31, 1999
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 Funds/R 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 Funds/R; $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 for financial reporting purposes 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 underly-
<PAGE>
M A S O N S T R E E T F U N D S
ing securities or due to an illiquid secondary market. Futures contracts 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 similar manners. Income dividends are
declared daily, paid monthly. Capital gain dividends are declared and
distributed annually for all 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 year ended March 31, 1999,
transactions in securities other than money market investments were:
<TABLE>
<CAPTION>
Total U.S. Gov't. Total U.S. Gov't.
Security Security Security Security
Fund Purchases Purchases Sales/Maturities Sales/Maturities
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH STOCK FUND $40,442,850 - $34,611,457 -
- ------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND 66,458,233 - 60,292,380 -
- ------------------------------------------------------------------------------------------------------------------
GROWTH STOCK FUND 13,141,168 - 11,686,438 -
- ------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME STOCK FUND 73,344,793 - 66,968,386 -
- ------------------------------------------------------------------------------------------------------------------
INDEX 500 STOCK FUND 32,729,342 - 2,229,723 -
- ------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION FUND 35,040,385 13,200,070 27,179,713 9,403,889
- ------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND FUND 75,239,540 - 65,145,179 -
- ------------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUND 107,173,846 - 103,070,272 -
- ------------------------------------------------------------------------------------------------------------------
SELECT BOND FUND 85,328,280 27,062,985 76,943,667 25,868,395
- ------------------------------------------------------------------------------------------------------------------
</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>
MARCH 31, 1999
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 $686,563 of dealer allowances, Northwestern Mutual received
$286,959 of underwriting concessions from Class A sales charges and Northwestern
Mutual received $63,278 of contingent deferred sales charges from Class B shares
for the year ended March 31, 1999.
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.
Certain 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 year ended March 31,
1999:
Distribution Fees
------------------
Fund Class A Class B Other Total
- -------------------------------------------------------------------------------
AGGRESSIVE GROWTH
STOCK FUND - $1,350 $140,216 $141,566
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND $3,543 - 72,405 75,948
- -------------------------------------------------------------------------------
GROWTH STOCK FUND - 1,248 119,031 120,279
- -------------------------------------------------------------------------------
GROWTH AND INCOME
STOCK FUND - 1,108 136,195 137,303
- -------------------------------------------------------------------------------
INDEX 500 STOCK FUND - 2,986 184,244 187,230
- -------------------------------------------------------------------------------
ASSET ALLOCATION FUND - 1,830 107,453 109,283
- -------------------------------------------------------------------------------
HIGH YIELD BOND FUND - 1,198 132,363 133,561
- -------------------------------------------------------------------------------
MUNICIPAL BOND FUND 836 - 96,495 97,331
- -------------------------------------------------------------------------------
SELECT BOND FUND 1,619 594 128,579 130,792
- -------------------------------------------------------------------------------
TOTAL $5,998 $10,314 $1,116,981 $1,133,293
- -------------------------------------------------------------------------------
The Aggressive Growth Stock Fund, Growth Stock Fund, Growth and Income Stock
Fund and Asset Allocation Fund paid commissions on Fund transactions to an
affiliated broker in the amount of $2,406, $510, $516 and $582, respectively,
during the year ended March 31, 1999.
As permitted under Rule 10f-3 of the Investment Company Act of 1940, the Board
of Directors of the Funds has adopted a plan which will allow the Funds, under
certain conditions described in the Rule, to acquire newly-issued securities
from syndicates in which the Distributor is a member.
<PAGE>
M A S O N S T R E E T F U N D S
- ------
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.
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 deferred 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.
After October 31, 1998, the International Equity Fund, High Yield Bond Fund and
Select Bond Fund had losses in the amounts of $1,160,491, $575,353 and $224,058,
respectively. These amounts are deferred and deemed to have occurred in the next
fiscal year. The High Yield Bond Fund also has a capital loss carryforward in
the amount of $640,754. This amount can be used to offset realized gains in
future years, and will expire in the fiscal year ended March 31, 2007.
DISTRIBUTIONS (UNAUDITED)
Dividends distributed during the twelve months which were derived from interest
on U.S. government securities which is generally exempt from state income tax
are as follows:
- -----------------------------------------
AGGRESSIVE GROWTH STOCK FUND 0.0%
- -----------------------------------------
INTERNATIONAL EQUITY FUND 2.7%
- -----------------------------------------
GROWTH STOCK FUND 2.1%
- -----------------------------------------
GROWTH AND INCOME STOCK FUND 0.6%
- -----------------------------------------
INDEX 500 STOCK FUND 0.6%
- -----------------------------------------
ASSET ALLOCATION FUND 13.2%
- -----------------------------------------
HIGH YIELD BOND FUND 0.1%
- -----------------------------------------
MUNICIPAL BOND FUND 0.0%
- -----------------------------------------
SELECT BOND FUND 3.6%
- -----------------------------------------
Under IRC 854(b)(2) of the Internal Revenue Code, the Funds hereby designate the
following percentages of ordinary income dividends (including short-term capital
gain distributions) paid by each Fund as income qualifying for the dividends
received deduction for the year ended March 31, 1999.
- -----------------------------------------
AGGRESSIVE GROWTH STOCK FUND 2.1%
- -----------------------------------------
INTERNATIONAL EQUITY FUND 0.0%
- -----------------------------------------
GROWTH STOCK FUND 22.9%
- -----------------------------------------
GROWTH AND INCOME STOCK FUND 8.9%
- -----------------------------------------
INDEX 500 STOCK FUND 77.4%
- -----------------------------------------
ASSET ALLOCATION FUND 17.8%
- -----------------------------------------
HIGH YIELD BOND FUND 17.2%
- -----------------------------------------
MUNICIPAL BOND FUND 0.0%
- -----------------------------------------
SELECT BOND FUND 0.0%
- -----------------------------------------
The International Equity Fund elects to pass foreign taxes through to the Fund's
shareholders. During the year ended March 31, 1999, the amount was $78,006. In
addition, for the year ended March 31, 1999, gross income derived from sources
within foreign countries amounted to $673,358 for the International Equity Fund.
The following distributions through the year ended March 31, 1999 are designated
as long-term capital gains:
- -----------------------------------------
Fund
- -----------------------------------------
AGGRESSIVE GROWTH STOCK FUND $729,139
- -----------------------------------------
INTERNATIONAL EQUITY FUND 811,338
- -----------------------------------------
GROWTH STOCK FUND 956,942
- -----------------------------------------
GROWTH AND INCOME STOCK FUND 1,827,423
- -----------------------------------------
INDEX 500 STOCK FUND 312,745
- -----------------------------------------
ASSET ALLOCATION FUND 588,260
- -----------------------------------------
MUNICIPAL BOND FUND 156,081
- -----------------------------------------
SELECT BOND FUND 35,519
- -----------------------------------------
The data is informational only. Every year in January, shareholders are sent a
Form 1099-DIV representing their portion of the capital gain distributions on a
calendar year basis to be reported on their income tax return.
<PAGE>
MARCH 31, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Mason Street Funds/R, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of 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 Select Bond Fund (constituting Mason Street Funds, Inc., hereafter
referred to as the "Fund") at March 31, 1999, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and the financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmations of the securities at March 31, 1999 by correspondence with the
custodians and brokers provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers LLC
Milwaukee, Wisconsin
April 29, 1999
<PAGE>
M A S O N S T R E E T F U N D S
DIRECTORS AND OFFICERS
- ----------
DIRECTORS
- ----------
JAMES D. ERICSON
President and Chief Executive Officer
Northwestern Mutual, Milwaukee
MARTIN F. STEIN
Founder
Stein Optical, Milwaukee
JOHN K. MACIVER
Senior Partner
Michael Best & Friedrich LLC, Milwaukee
STEPHEN N. GRAFF
Retired Partner
Arthur Andersen LLP, Milwauke
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>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
MASON STREET FUNDS/R
P.O. BOX 419419
KANSAS CITY, MO 64141-6419
1-888-MASONST (1-888-627-6678)
WWW.MASONSTREETFUNDS.COM
94-1001
Robert W. Baird & Co. Incorporated, Distributor 5/98 (Rev. 5/99)
