<PAGE> 1
SEMI-ANNUAL REPORT
AS OF JUNE 30, 1998
PACIFIC INNOVATIONS TRUST
-------------------
NOT FDIC INSURED
-------------------
<PAGE> 2
(This page intentionally left blank)
<PAGE> 3
Dear Shareholders:
We are pleased to share with you the semi-annual report, dated June 30,
1998, for the Pacific Innovations Trust, which is the underlying fund for the
Pacific Innovations Variable Annuity (both "Pacific Innovations"). Offered by
Pacific Life Insurance Company, Pacific Innovations is a flexible premium
deferred variable annuity contract available to individuals as well as certain
tax-qualified retirement plans.
In addition to a Fixed Investment Option, seven Variable Investment Options
are currently available, each one investing in shares of a corresponding Fund of
the Pacific Innovations Trust. Five of the Funds are advised by Bank of America:
Money Market Fund, Capital Income Fund, Blue Chip Fund, Mid-Cap Equity Fund and
Aggressive Growth Fund. Two other funds, the Managed Bond Fund and the
International Fund, are sub-advised by Scudder Kemper Investments, Inc., and
Wellington Management Company, LLP, respectively.
Pacific Innovations finished the period with solid total returns in an
environment that continued to be favorable to stocks and reasonable to fixed
income securities. The broad U.S. stock market gained 17.71% and 30.18% for the
six and twelve month months ended June 30, 1998, respectively. Intermediate-term
U.S. bonds delivered total returns of 3.92% and 10.54% for the six months and
twelve months, respectively. Overseas, where economic conditions are mixed,
equity securities advanced 16.02% and 6.37% during the six and twelve month
periods, respectively*.
The U.S. securities market continues to benefit from low inflation, steady
economic growth and wage increases that are offset by productivity gains. These
conditions are favorable to business earnings and the performance of financial
assets, especially equities. Although year-over-year growth of corporate
earnings slowed, they grew at a higher than expected rate again during the past
one-year period. This gave investors reason to be optimistic about further
earnings gain.
This belief, along with the steady flow of capital flowing into mutual
funds and retirement vehicles, helped boost the prices of U.S. stock and bonds.
Another contributing factor was the reduced capital gains tax, which makes the
after-tax returns of investing in equity securities more attractive.
Since October of last year, the fixed income market has been uncertain as
to whether unemployment and strong domestic consumer demand would overheat the
economy. It has also been unclear as to what extent the Asian turmoil would slow
the U.S. economy down. This situation has left the Federal Reserve Board's
monetary policy unchanged. While overall interest rate volatility has remained
low, levels in the longer maturity range have declined and quality spreads have
widened. The upcoming quarters will most likely provide some answers as to which
outcome may prevail.
Thank you for your continued investment and support of Pacific Innovations.
We look forward to continued growth for the remainder of 1998 and beyond.
Sincerely,
/s/ Cornelius J. Pings
Dr. Cornelius J. Pings
* As measured by the Standard & Poor's 500 Index of Large-Cap Common Stocks; the
Lehman Brothers Aggregate Bond Index; and the Morgan Stanley Capital
International (MSCI) Europe, Australia and Far East (EAFE) Index from 7/1/97
through 6/30/98. These indices are representative of the large capitalization
U.S. equity, U.S. bond, and International markets, respectively. Each index
cannot be invested in directly.
<PAGE> 4
PACIFIC INNOVATIONS TRUST
RESULTS (UNAUDITED) OF SPECIAL SHAREHOLDER MEETING
HELD ON JUNE 26, 1998
On June 26, 1998, a special meeting of shareholders of Pacific Innovations
Trust (the "Trust") was held in order to vote on the following proposals:
(1) to elect seven Trustees to the Board of Trustees;
(2) to approve a new management agreement between the Trust and Bank
of America NT&SA;
(3) to approve a new sub-advisory agreement between Bank of America
NT&SA and Scudder Kemper Investments, Inc. (Managed Bond Fund
only);
(4) to approve a new sub-advisory agreement between Bank of America
NT&SA and Wellington Management Company, LLP (International Fund
only); and
(5) to approve the selection of Price Waterhouse LLP as the Trust's
independent auditors for the current fiscal year.
The voting results for each proposal are shown below:
<TABLE>
<CAPTION>
SHARES
OUTSTANDING AND
VOTE REPRESENTED ABSTAINED/
PROPOSAL BASIS* AT THE MEETING IN FAVOR OPPOSED WITHHELD
- -------- -------- --------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
PROPOSAL 1 by Trust 13,077,218.20
Edward S. Bottum................... 12,744,610.96 0 332,607.24
William P. Carmichael.............. 12,744,610.96 0 332,607.24
Thomas M. Collins.................. 12,744,610.96 0 332,607.24
Douglas B. Fletcher................ 12,744,610.96 0 332,607.24
Robert E. Greeley.................. 12,744,610.96 0 332,607.24
Harold T. Joanning................. 12,521,140.31 0 556,077.89
Cornelius J. Pings................. 12,744,610.96 0 332,607.24
PROPOSAL 2 by Fund
MMF 5,229,490.06 4,789,545.97 52,008.78 387,935.31
MBF 1,369,347.70 1,158,419.10 14,307.84 196,620.76
CIF 1,758,042.72 1,602,798.85 8,843.15 146,400.72
BCF 1,870,112.85 1,610,512.66 34,229.66 225,370.53
MCEF 965,313.12 835,715.70 24,773.95 104,823.47
AGF 936,846.04 898,961.08 7,367.65 30,517.31
IF 948,065.70 832,140.15 14,644.38 101,281.17
PROPOSAL 3 MBF 1,369,347.70 1,158,419.10 14,307.84 196,620.76
PROPOSAL 4 IF 948,065.70 830,588.59 16,195.94 101,281.17
PROPOSAL 5 by Trust 13,077,218.20 11,976,544.01 36,208.08 1,064,466.11
</TABLE>
- ---------------
* KEY:
Trust = Pacific Innovations Trust
MMF = Pacific Innovations Trust Money Market Fund
MBF = Pacific Innovations Trust Managed Bond Fund
CIF = Pacific Innovations Trust Capital Income Fund
BCF = Pacific Innovations Trust Blue Chip Fund
MCEF = Pacific Innovations Trust Mid-Cap Equity Fund
AGF = Pacific Innovations Trust Aggressive Growth Fund
IF = Pacific Innovations Trust International Fund
<PAGE> 5
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
---- ----- -----
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 62.8%
FEDERAL FARM CREDIT BANK -- 9.5%
Federal Farm Credit Bank Note
5.375%...................... 08/03/98 $ 402 $ 401,877
Federal Farm Credit Bank Note
6.08%....................... 08/03/98 100 100,047
----------
TOTAL FEDERAL FARM CREDIT BANK.......... 501,924
----------
FEDERAL HOME LOAN BANK -- 20.6%
Federal Home Loan Bank Note
5.85%....................... 07/03/98 15 15,000
Federal Home Loan Bank Note
5.23%....................... 07/13/98 45 44,996
Federal Home Loan Bank Note
5.01%....................... 07/29/98 100 99,961
Federal Home Loan Bank Note
6.17%....................... 07/29/98 20 20,010
Federal Home Loan Bank Note
5.235%...................... 08/20/98 355 354,752
Federal Home Loan Bank Note
6.11%....................... 08/27/98 50 50,041
Federal Home Loan Bank Note
6.91%....................... 09/01/98 50 50,098
Federal Home Loan Bank Note
5.715%...................... 09/24/98 150 149,993
Federal Home Loan Bank Note
4.78%....................... 10/15/98 150 149,613
Federal Home Loan Bank Note
5.905%...................... 10/23/98 25 25,019
Federal Home Loan Bank Note
9.25%....................... 11/25/98 50 50,716
Federal Home Loan Bank Note
5.08%....................... 12/28/98 25 24,933
Federal Home Loan Bank Note
5.265%...................... 12/30/98 50 49,907
----------
TOTAL FEDERAL HOME LOAN BANK............ 1,085,039
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 6.6%
Federal Home Loan Mortgage
Corp. Discount Note 5.57%... 07/08/98 148 147,840
Federal Home Loan Mortgage
Corp. Discount Note 5.42%... 07/17/98 200 199,518
----------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORPORATION........................... 347,358
----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
---- ----- -----
<S> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 19.4%
FannieMae 7.00%............... 07/13/98 $ 25 $ 25,012
FannieMae 5.10%............... 07/22/98 70 69,974
FannieMae 9.40%............... 08/10/98 300 301,141
FannieMae 7.85%............... 09/10/98 50 50,212
FannieMae 5.68%............... 10/23/98 52 52,018
FannieMae 5.77%............... 11/06/98 200 200,051
FannieMae 5.05%............... 11/10/98 100 99,789
FannieMae 5.66%............... 11/20/98 170 170,001
FannieMae 7.05%............... 12/10/98 50 50,322
----------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION........................... 1,018,520
----------
STUDENT LOAN MARKETING ASSOCIATION -- 6.7%
Student Loan Marketing
Association Note 5.79%...... 09/16/98 250 250,004
Student Loan Marketing
Association Note 5.74%...... 12/17/98 100 100,027
----------
TOTAL STUDENT LOAN MARKETING
ASSOCIATION........................... 350,031
----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $3,302,872)......................... 3,302,872
----------
REPURCHASE AGREEMENTS -- 36.4%
Goldman Sachs & Co.
6.25% dated 6/30/98,
repurchase price $700,122
(collateralized by $54,516,023
various U.S. Government
Obligations, 5.50%-16.00%,
8/1/98-3/1/28, market value
$714,000)..................... 07/01/98 700 700,000
HSBC Securities, Inc.
6.25% dated 6/30/98,
repurchase price $1,216,211
(collateralized by $1,200,000
Federal Farm Credit Bank,
5.89%, 1/6/03, market value
$1,241,438)................... 07/01/98 1,216 1,216,000
----------
TOTAL REPURCHASE AGREEMENTS
(COST $1,916,000)......................... 1,916,000
----------
TOTAL INVESTMENTS -- 99.2%
(COST $5,218,872)......................... 5,218,872
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.8%....................... 40,902
----------
NET ASSETS -- 100.0%........................ $5,259,774
==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
2
<PAGE> 6
MANAGED BOND FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
ASSET BACKED SECURITIES -- 13.3%
Advanta Series 1997-1
7.10%..................... 04/25/20 $ 250 $ 253,696
Carco Auto Loan Master
Trust, Series 1997-1
6.689%.................... 08/15/04 125 126,639
CIT RV Trust, Series 1996-A
5.40%..................... 12/15/11 36 35,689
Discover Card Master Trust
1, Series 1998-2, Class A
5.80%..................... 09/16/03 250 248,945
Green Tree Financial Corp.,
Series 1995-8
7.30%..................... 12/15/26 250 250,428
Green Tree Financial Corp.,
Series 1996-2
7.90%..................... 04/15/27 250 252,969
Green Tree Home Improvement
Loan Trust, Series 1997-A
6.75%..................... 08/15/23 150 150,797
The Money Store Home Equity
Trust, Series 1994-C
7.80%..................... 10/15/21 300 312,531
UCFC Home Equity Loan,
Series 1997-A1
6.975%.................... 04/15/16 150 151,745
Union Acceptance Corp.,
Series 1997-B
6.37%..................... 04/10/01 118 119,894
Western Financial, Series
1997-A
6.50%..................... 09/20/01 147 147,809
-----------
TOTAL ASSETS BACKED SECURITIES
(COST $2,022,041)....................... 2,051,142
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.7%
Merrill Lynch Trust Series
45
9.10%..................... 09/20/14 76 77,917
Nomura Asset Securities
Corp. Series 1994-1
6.625%.................... 01/25/09 274 275,758
Painewebber Mortgage, Series
1993-6
6.90%..................... 08/25/08 76 77,542
Residential Funding
Mortgage, Series 1996-S15
7.75%..................... 01/25/07 228 233,078
Residential Funding
Mortgage, Series 1997-S19
6.50%..................... 12/25/12 221 216,936
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $878,244)......................... 881,231
-----------
CORPORATE OBLIGATIONS -- 31.3%
BEVERAGES & FOOD -- 3.6%
Coca-Cola Enterprises Notes
6.375%.................... 08/01/01 250 253,125
McDonald's Corp. Notes
5.90%..................... 05/11/01 300 299,526
-----------
TOTAL BEVERAGES & FOOD................ 552,651
-----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
ENERGY -- 2.0%
Enterprise Oil Notes
6.50%..................... 05/01/05 $ 300 $ 304,500
-----------
FINANCIAL -- BANK & TRUST -- 5.5%
Capital One Bank Notes
6.15%..................... 06/01/01 200 199,750
Deutsche Bank Financial
Notes
7.50%..................... 04/25/09 250 272,500
Royal Bank of Scotland Notes
7.375%.................... 04/29/49 350 367,500
-----------
TOTAL FINANCIAL -- BANK & TRUST....... 839,750
-----------
FINANCIAL SERVICES -- 7.6%
Fleet Financial Group Notes
6.50%..................... 03/15/08 300 303,000
International Lease Finance
Corp. Notes
6.375%.................... 08/01/01 250 252,187
Merrill Lynch & Co. Notes
6.47%..................... 06/27/00 300 303,540
Morgan Stanley Dean Witter
Discover & Co.
8.10%..................... 06/24/02 300 321,000
-----------
TOTAL FINANCIAL SERVICES.............. 1,179,727
-----------
MULTI-INDUSTRY -- 1.0%
Tyco International Group
Notes
6.375%.................... 06/15/05 150 150,188
-----------
REAL ESTATE -- 6.6%
American Health Properties
Notes
7.05%..................... 01/15/02 200 204,000
Equity Residential
Properties Notes
6.55%..................... 11/15/01 300 303,000
Simon Debartolo Group Notes
6.875%.................... 11/15/06 300 301,875
Spieker Properties Notes
7.125%.................... 12/01/06 100 103,000
Taubman Realty Group Medium
Term Notes
7.22%..................... 06/15/01 100 102,000
-----------
TOTAL REAL ESTATE..................... 1,013,875
-----------
RETAIL & MERCHANDISING -- 3.1%
Federated Dept. Stores Notes
6.79%..................... 07/15/98 200 206,750
Wal-Mart Stores, Inc. Notes
8.625%.................... 04/01/01 250 267,187
-----------
TOTAL RETAIL & MERCHANDISING.......... 473,937
-----------
TELECOMMUNICATIONS -- 1.9%
US West Capital Funding,
Inc. Notes
6.125%.................... 07/15/02 300 299,250
-----------
TOTAL CORPORATE OBLIGATIONS
(COST $4,728,890)....................... 4,813,878
-----------
</TABLE>
3
<PAGE> 7
MANAGED BOND FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 10.1%
Federal Home Loan Mortgage
Corp., Pool 200057
9.00%..................... 11/01/01 $ 17 $ 17,972
Federal Home Loan Mortgage
Corp., Pool 218960
9.00%..................... 10/01/02 36 36,821
Federal Home Loan Mortgage
Corp., Pool 380061
9.00%..................... 12/01/04 40 41,172
Government National Mortgage
Assoc. Pool 286324
9.00%..................... 02/15/20 308 331,524
Government National Mortgage
Assoc. Pool 286405
9.00%..................... 04/15/20 83 88,873
Government National Mortgage
Assoc. Pool 780011
10.00%.................... 07/15/22 317 346,806
Government National Mortgage
Assoc. Pool 780081
10.00%.................... 02/15/25 309 338,718
Government National Mortgage
Assoc. Pool 780657
8.00%..................... 12/15/23 330 342,880
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $1,541,240)....................... 1,544,766
-----------
U.S. TREASURY OBLIGATIONS -- 36.9%
U.S. TREASURY BONDS -- 1.8%
U.S. Treasury Bond
6.625%.................... 02/15/27 50 56,454
U.S. Treasury Bond
6.375%.................... 08/15/27 200 219,844
-----------
TOTAL U.S. TREASURY BONDS............. 276,298
-----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
U.S. TREASURY NOTES -- 35.1%
U.S. Treasury Note
5.875%.................... 02/28/99 $ 500 $ 501,245
U.S. Treasury Note
5.625%.................... 10/31/99 750 750,840
U.S. Treasury Note
5.625%.................... 11/30/99 900 901,215
U.S. Treasury Note
6.25%..................... 08/31/02 750 769,027
U.S. Treasury Note
5.75%..................... 10/31/02 1,235 1,244,448
U.S. Treasury Note
6.50%..................... 05/15/05 350 369,355
U.S. Treasury Note
6.50%..................... 08/15/05 250 263,637
U.S. Treasury Note
6.125%.................... 08/15/07 575 598,012
-----------
TOTAL U.S. TREASURY NOTES............. 5,397,779
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $5,625,842)....................... 5,674,077
-----------
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS -- 1.6%
Temporary Investment Cash Fund........ 125,721 125,721
Temporary Investment Fund............. 125,721 125,721
-----------
TOTAL SHORT TERM INVESTMENTS
(COST $251,442)......................... 251,442
-----------
TOTAL INVESTMENTS -- 98.9%
(COST $15,047,699)...................... 15,216,536
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.1%..................... 161,771
-----------
NET ASSETS -- 100.0%...................... $15,378,307
===========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
4
<PAGE> 8
CAPITAL INCOME FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
---- ----- -----
<S> <C> <C> <C>
CONVERTIBLE BONDS -- 36.0%
AUTOMOTIVE MANUFACTURERS -- 1.1%
Mark IV Industries
4.75%................... 11/01/04 $ 40 $ 37,000
Mark IV Industries 144A
4.75%................... 11/01/04 235 217,375
-----------
TOTAL AUTOMOTIVE MANUFACTURERS...... 254,375
-----------
BASICS -- 1.4%
Agnico Eagle Mines, Ltd.
3.50%................... 01/27/04 400 266,000
Coeur D'Alene Mines Corp. 144A
7.25%................... 10/31/05 75 53,906
-----------
TOTAL BASICS........................ 319,906
-----------
CAPITAL GOODS -- 5.7%
EMCOR Group Inc.
5.75%................... 04/01/05 125 119,531
Kellstrom, Inds
5.50%................... 06/15/03 225 239,906
Thermo Electron Corp. 144A
4.25%................... 01/01/03 200 214,250
US Filter Corp.
4.50%................... 12/15/01 205 208,844
US Waste Services, Inc.
4.00%................... 02/01/02 200 249,500
WMX Technologies, Inc.
2.00%................... 01/24/05 260 256,750
-----------
TOTAL CAPITAL GOODS................. 1,288,781
-----------
CONSUMER CYCLICALS -- 10.3%
Clear Channel Corp.
2.63%................... 04/01/03 250 270,312
CUC International, Inc.
3.00%................... 02/15/02 100 97,625
CUC International, Inc.
144A
3.00%................... 02/15/02 100 97,625
Family Golf Centers, Inc.
144A
5.75%................... 10/15/04 140 169,750
Hilton Hotels
5.00%................... 05/15/06 170 176,587
Home Depot, Inc.
3.25%................... 10/01/01 115 211,312
Magna International 144A
4.88%................... 02/15/05 230 253,862
Omnicom Group, Inc. 144A
2.25%................... 01/06/13 180 219,375
Personnel Group
5.75%................... 07/01/04 70 85,400
Protection One Alarm
Monitoring
6.75%................... 09/15/03 100 115,750
Rite Aid Corp. 144A
5.25%................... 09/15/02 190 232,512
Saks Holdings, Inc.
5.50%................... 09/15/06 275 256,781
Tower Automotive, Inc.
5.00%................... 08/01/04 35 35,525
Tower Automotive, Inc.
144A
5.00%................... 08/01/04 135 137,025
-----------
TOTAL CONSUMER CYCLICALS............ 2,359,441
-----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
---- ----- -----
<S> <C> <C> <C>
ENERGY -- 2.3%
Loews Corp.
3.13%................... 09/15/07 $ 275 $ 249,562
Parker Drilling Corp.
5.50%................... 08/01/04 130 111,150
Seacor Holdings, Inc.
5.38%................... 11/15/06 90 99,675
Seacor Holdings, Inc. 144A
5.38%................... 11/15/06 50 55,375
-----------
TOTAL ENERGY........................ 515,762
-----------
FINANCIAL SERVICES -- 3.0%
Bank Atlantic Bancorp,
Inc.
5.63%................... 12/01/07 180 194,175
Berkshire Hathaway, Inc.
1.00%................... 12/02/01 130 236,762
Penn Treaty American Corp.
6.25%................... 12/01/03 185 235,412
Penn Treaty American
Corp. 144A
6.25%................... 12/01/03 15 18,863
-----------
TOTAL FINANCIAL SERVICES............ 685,212
-----------
HEALTH CARE -- 2.9%
Alza Corp.
5.00%................... 05/01/06 180 228,600
Dura Pharmaceuticals
3.50%................... 07/15/02 220 183,975
Healthsouth Corp.
3.25%................... 04/01/03 250 247,812
-----------
TOTAL HEALTH CARE................... 660,387
-----------
HEALTH CARE SERVICES -- 3.8%
American Retirement Corp.
5.75%................... 10/01/02 145 143,006
ARV Assisted Living
6.75%................... 04/01/06 130 114,887
Carematrix Corp. 144A
6.25 %.................. 08/15/04 160 171,600
NCS Healthcare, Inc.
5.75%................... 08/15/04 70 74,725
NCS Healthcare, Inc. 144A
5.75%................... 08/15/04 140 149,450
Omnicare, Inc. 144A
5.00%................... 12/01/07 180 207,900
-----------
TOTAL HEALTH CARE SERVICES.......... 861,568
-----------
TECHNOLOGY -- 4.5%
Adaptec, Inc.
4.75%................... 02/01/04 170 131,963
Adaptec, Inc. 144A
4.75%................... 02/01/04 20 15,525
Atmel Corp. 144A, 3.25%,
due 6/1/02; 8.25%,
beginning 6/1/00++...... 06/01/02 250 211,250
Itron, Inc.
6.75%................... 03/31/04 145 125,788
Itron, Inc. 144A
6.75%................... 03/31/04 30 26,025
Kent Electronics Corp.
4.50%................... 09/01/04 105 86,888
Photronics, Inc.
6.00%................... 06/01/04 75 83,250
</TABLE>
5
<PAGE> 9
CAPITAL INCOME FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000) VALUE
---- ----- -----
<S> <C> <C> <C>
Tel-Save Holdings, Inc.
144A
5.00%................... 12/15/04 $ 230 $ 185,725
Xilinx, Inc.
5.25%................... 11/01/02 175 165,375
-----------
TOTAL TECHNOLOGY.................... 1,031,789
-----------
UTILITIES -- 1.0%
Bell Atlantic Financial
Services 144A
5.75%................... 04/01/03 230 235,175
-----------
TOTAL CONVERTIBLE BONDS
(COST $8,054,581)..................... 8,212,396
-----------
CONVERTIBLE ZERO COUPON BONDS -- 4.9%
CONSUMER CYCLICALS -- 1.5%
Pep Boys, Inc.
4.44%+.................. 09/20/11 400 219,000
Times Mirror Co.
4.42%+ 04/15/17 300 134,250
-----------
TOTAL CONSUMER CYCLICALS............ 353,250
-----------
HEALTH CARE -- 1.8%
Roche Holdings, Inc.
5.71%+.................. 04/20/10 390 221,813
Roche Holdings, Inc. 144A
5.11%+.................. 05/06/12 390 189,638
-----------
TOTAL HEALTH CARE................... 411,451
-----------
TECHNOLOGY -- 0.7%
Motorola, Inc.
1.45%+.................. 09/27/13 205 148,881
-----------
UTILITIES -- 0.9%
U.S. Cellular Corp. LYON
5.75%+.................. 06/15/15 560 212,100
-----------
TOTAL CONVERTIBLE ZERO COUPON BONDS
(COST $1,121,905)..................... 1,125,682
-----------
SHARES
---------
COMMON STOCK -- 11.1%
CONSUMER CYCLICALS -- 1.4%
Nordstrom, Inc. .................... 4,200 $ 324,450
-----------
CONSUMER STAPLES -- 2.3%
McDonald's Corp. ................... 4,400 303,600
Procter & Gamble Co. ............... 2,400 218,550
-----------
TOTAL CONSUMER STAPLES.............. 522,150
-----------
ENERGY -- 0.6%
Amoco Corp. ........................ 3,400 141,525
-----------
FINANCE -- 1.1%
Fleet Financial Group, Inc. ........ 3,000 250,500
-----------
FINANCIAL -- BANK & TRUST -- 2.1%
Sovereign Bancorp, Inc. ............ 12,931 211,341
U.S. Bancorp........................ 6,300 270,900
-----------
TOTAL FINANCIAL -- BANK & TRUST..... 482,241
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C> <C>
HEALTH CARE -- 2.8%
American Home Products Corp. ....... 4,400 $ 227,700
Lilly, (Eli) & Co. ................. 3,000 198,188
Pfizer, Inc. ....................... 2,000 217,375
-----------
TOTAL HEALTH CARE................... 643,263
-----------
UTILITIES -- 0.8%
AT&T Corp. ......................... 3,000 171,375
-----------
TOTAL COMMON STOCK (COST $2,211,045).... 2,535,504
-----------
CONVERTIBLE PREFERRED STOCK -- 35.0%
BASICS -- 2.3%
Cyprus AMAX Minerals................ 1,500 68,063
Freeport-Mcmoran, Inc. ............. 3,200 62,400
International Paper Co. ............ 4,000 193,500
Merrill Lynch & Co., Inc. .......... 6,400 201,600
-----------
TOTAL BASICS........................ 525,563
-----------
CAPITAL GOODS -- 0.7%
Elsag Baily......................... 4,100 173,738
-----------
CONSUMER CYCLICALS -- 7.3%
Fleetwood Capital Trust 144A........ 4,800 254,400
Houston Industries, Inc. ........... 3,700 275,650
Media One Group..................... 3,000 269,813
Owens-Illinois, Inc. ............... 4,400 229,350
Owens Corning Capital 144A.......... 4,800 256,200
Readers Digest Association.......... 8,600 221,450
Sealed Air Corp..................... 4,000 168,000
-----------
TOTAL CONSUMER CYCLICALS............ 1,674,863
-----------
CONSUMER STAPLES -- 2.2%
Newell Financial Trust I............ 4,300 251,013
Ralston Purina Co. ................. 4,000 254,000
-----------
TOTAL CONSUMER STAPLES.............. 505,013
-----------
ENERGY -- 3.5%
El Paso Energy Capital Trust I...... 4,600 243,800
EVI, Inc. .......................... 3,500 143,500
MCN Energy Group Inc. .............. 7,700 182,394
Unocal Corp. ....................... 4,200 226,275
-----------
TOTAL ENERGY........................ 795,969
-----------
FINANCIAL -- 10.2%
Ahmanson, H.F. ..................... 1,300 189,800
American Bankers Insurance Group,
Inc. ............................. 1,800 218,475
CNB Capital Trust I................. 8,000 210,000
Conseco Finance Trust IV............ 4,100 217,300
Frontier Insurance 144A............. 2,600 150,475
Golden State Bancorp................ 3,000 260,063
Life Re Capital Trust II............ 3,600 274,500
Penncorp Financial 144A............. 3,200 140,400
Philadelphia Consolidated Holding
Corp.*............................ 24,000 246,000
Proctective Life Corp. ............. 3,500 218,750
St. Paul Capital Corp. ............. 2,800 201,600
-----------
TOTAL FINANCIAL..................... 2,327,363
-----------
INSURANCE -- 1.0%
American Heritage Life Investment... 3,600 234,000
-----------
TECHNOLOGY -- 1.0%
Microsoft Corp. .................... 2,400 228,000
-----------
TELECOMMUNICATIONS -- 1.1%
TCI Communications, Inc. ........... 3,000 242,250
-----------
</TABLE>
6
<PAGE> 10
CAPITAL INCOME FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C> <C>
TRANSPORTATION -- 2.0%
CNF Transportation, Inc. ........... 3,400 $ 215,900
Union Pacific Capital Trust 144A.... 5,000 230,625
-----------
TOTAL TRANSPORTATION................ 446,525
-----------
UTILITIES -- 3.7%
Airtouch Communications Class C..... 3,000 247,500
Cal Energy Co., Inc. 6.25%.......... 1,200 55,950
Calenergy Capital Trust II 144A..... 2,500 116,563
Citizens Utilities Trust............ 4,500 212,625
Sprint Corp......................... 3,600 208,125
-----------
TOTAL UTILITIES..................... 840,763
-----------
TOTAL CONVERTIBLE PREFERRED STOCK
(COST $7,669,971)..................... 7,994,047
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C> <C>
SHORT TERM INVESTMENTS -- 10.0%
Temporary Investment Cash Fund...... 1,142,704 $ 1,142,704
Temporary Investment Fund........... 1,142,703 1,142,703
-----------
TOTAL SHORT TERM INVESTMENTS
(COST $2,285,407)................. 2,285,407
-----------
TOTAL INVESTMENTS -- 97.0%
(COST $21,342,909).................... 22,153,036
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 3.0%................... 686,617
-----------
NET ASSETS -- 100.0%.................... $22,839,653
===========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Rate shown is the effective yield at purchase date.
++ Step-up Bond.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 18.4% of net assets.
[LYON] -- Liquid Yield Option Note: Callable, zero coupon securities priced at a
deep discount from par. They include a "put" feature that enables
holders to redeem them at a specific date, at a specific price. Put
prices reflect fixed interest rates and therefore increase over time.
See Notes to Financial Statements.
7
<PAGE> 11
BLUE CHIP FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK -- 98.3%
AEROSPACE -- 1.6%
Goodrich (B.F.) Co. ................. 1,600 $ 79,400
United Technologies Corp. ........... 4,200 388,500
-----------
TOTAL AEROSPACE...................... 467,900
-----------
AIRLINES -- 0.7%
AMR Corp.*........................... 1,900 158,175
UAL Corp.*........................... 700 54,600
-----------
TOTAL AIRLINES....................... 212,775
-----------
APPAREL/TEXTILE -- 0.5%
Tommy Hilfiger Corp.*................ 2,400 150,000
-----------
AUTOMOTIVE -- 2.6%
Chrysler Corp. ...................... 3,800 214,225
Dana Corp. .......................... 2,000 107,000
Ford Motor Co. ...................... 7,800 460,200
-----------
TOTAL AUTOMOTIVE..................... 781,425
-----------
BANKS/SAVINGS & LOANS -- 9.6%
Banc One Corp. ...................... 4,300 239,994
BankBoston Corp. .................... 4,000 222,500
Chase Manhattan Corp. ............... 5,900 445,450
Citicorp............................. 1,600 238,800
First Union Corp. ................... 5,400 314,550
Fleet Financial Group, Inc. ......... 4,100 342,350
Mellon Bank Corp. ................... 3,600 250,650
National City Corp. ................. 1,700 120,700
NationsBank Corp. ................... 5,150 393,975
State Street Corp. .................. 4,100 284,950
-----------
TOTAL BANKS/SAVINGS & LOANS.......... 2,853,919
-----------
BEVERAGES -- 3.5%
Anheuser-Busch Cos., Inc. ........... 2,100 99,094
Coca-Cola Co. ....................... 6,800 581,400
PepsiCo, Inc. ....................... 9,000 370,687
-----------
TOTAL BEVERAGES...................... 1,051,181
-----------
BUILDING RELATED/APPLIANCE -- 0.4%
Centex Corp. ........................ 3,200 120,800
-----------
CHEMICALS -- 2.5%
Dow Chemical Co. .................... 1,300 125,694
Dupont, (E.I.) de Nemours & Co. ..... 5,100 380,587
P.P.G. Industries, Inc. ............. 1,700 118,256
Praxair, Inc. ....................... 2,500 117,031
-----------
TOTAL CHEMICALS...................... 741,568
-----------
COMMERCIAL SERVICES -- 0.5%
Fluor Corp. ......................... 3,000 153,000
-----------
COMMUNICATIONS -- 3.7%
Cisco Systems, Inc.*................. 4,250 391,266
Lucent Technologies, Inc. ........... 5,900 490,806
Tellabs, Inc.*....................... 3,000 214,875
-----------
TOTAL COMMUNICATIONS................. 1,096,947
-----------
COMPUTER HARDWARE -- 4.7%
Dell Computer Corp.*................. 7,000 649,688
EMC Corp.*........................... 6,600 295,762
Solectron Corp.*..................... 2,000 84,125
Sun Microsystems, Inc.*.............. 2,300 99,906
Xerox Corp. ......................... 2,700 274,387
-----------
TOTAL COMPUTER HARDWARE.............. 1,403,868
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMPUTER SOFTWARE -- 4.8%
HBO & Co. ........................... 10,600 $ 373,650
Microsoft Corp.*..................... 8,800 953,700
Oracle Corp.*........................ 3,900 95,794
-----------
TOTAL COMPUTER SOFTWARE.............. 1,423,144
-----------
COSMETICS & TOILETRIES -- 3.5%
Avon Products, Inc. ................. 4,100 317,750
Newell Co. .......................... 2,000 99,625
Procter & Gamble Co. ................ 4,300 391,569
Unilever NV.......................... 2,900 228,919
-----------
TOTAL COSMETICS & TOILETRIES......... 1,037,863
-----------
ELECTRIC -- 2.5%
Edison International................. 9,800 289,712
FPL Group, Inc. ..................... 7,100 447,300
-----------
TOTAL ELECTRIC....................... 737,012
-----------
ELECTRICAL EQUIPMENT -- 3.1%
General Electric Co. ................ 10,100 919,100
-----------
ENERGY RELATED -- 0.6%
Schlumberger, Ltd. .................. 2,500 170,781
-----------
ENTERTAINMENT -- 2.2%
Carnival Corp. ...................... 5,500 217,937
King World Productions, Inc.*........ 2,100 53,550
Walt Disney Co. ..................... 3,700 388,731
-----------
TOTAL ENTERTAINMENT.................. 660,218
-----------
FINANCIAL SERVICES -- 3.5%
Lehman Brothers Holdings, Inc. ...... 2,000 155,125
Morgan Stanley Dean Witter Discover &
Co. ............................... 7,400 676,175
Travelers Group, Inc. ............... 3,600 218,250
-----------
TOTAL FINANCIAL SERVICES............. 1,049,550
-----------
FOODS -- 2.3%
Campbell Soup Co. ................... 4,300 228,437
Pioneer Hi-Bred International,
Inc. .............................. 3,200 132,400
Quaker Oats Co. ..................... 3,800 208,762
SYSCO Corp. ......................... 4,700 120,437
-----------
TOTAL FOOD........................... 690,036
-----------
HOSPITAL MANAGEMENT -- 0.6%
United Healthcare Corp. ............. 2,900 184,150
-----------
HOSPITAL SUPPLY -- 2.8%
Abbott Laboratories.................. 6,000 245,250
Biomet, Inc. ........................ 5,100 168,619
Guidant Corp. ....................... 2,300 164,019
Johnson & Johnson Co. ............... 3,500 258,125
-----------
TOTAL HOSPITAL SUPPLY................ 836,013
-----------
INSURANCE -- 4.1%
Allstate Corp. ...................... 3,400 311,312
American General Corp. .............. 3,700 263,394
Conseco, Inc. ....................... 5,300 247,775
Equitable Cos., Inc. ................ 5,200 389,675
-----------
TOTAL INSURANCE...................... 1,212,156
-----------
MACHINERY -- 0.9%
Case Corp. .......................... 1,400 67,550
Deere & Co. ......................... 2,400 126,900
Parker Hannifin Corp. ............... 1,900 72,437
-----------
TOTAL MACHINERY...................... 266,887
-----------
</TABLE>
8
<PAGE> 12
BLUE CHIP FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
METALS & MINING -- 0.7%
Nucor Corp. ......................... 1,500 $ 69,000
USX-U.S. Steel Group, Inc. .......... 4,300 141,900
-----------
TOTAL METALS & MINING................ 210,900
-----------
MULTI-INDUSTRY -- 2.6%
Dover Corp. ......................... 4,900 167,825
Honeywell, Inc. ..................... 3,000 250,687
Tyco International Ltd. ............. 5,700 359,100
-----------
TOTAL MULTI-INDUSTRY................. 777,612
-----------
OIL (DOMESTIC) -- 1.5%
Phillips Petroleum Co. .............. 3,900 187,931
Sun Co., Inc. ....................... 2,200 85,388
USX -- Marathon Group................ 5,500 188,719
-----------
TOTAL OIL (DOMESTIC)................. 462,038
-----------
OIL (INTERNATIONAL) -- 5.1%
Chevron Corp. ....................... 4,200 348,863
Exxon Corp. ......................... 10,700 763,044
Mobil Corp. ......................... 5,300 406,113
-----------
TOTAL OIL (INTERNATIONAL)............ 1,518,020
-----------
PAPER & FOREST PRODUCTS -- 1.0%
Fort James Corp. .................... 4,800 213,600
Owens-Illinois, Inc.*................ 1,800 80,550
-----------
TOTAL PAPER & FOREST PRODUCTS........ 294,150
-----------
PHARMACEUTICALS -- 8.4%
Bristol-Meyers Squibb Co. ........... 6,600 758,588
Merck & Co., Inc. ................... 3,800 508,250
Pfizer, Inc. ........................ 5,500 597,781
Schering-Plough Corp. ............... 7,000 641,375
-----------
TOTAL PHARMACEUTICALS................ 2,505,994
-----------
PRINTING & PUBLISHING -- 1.6%
McGraw-Hill Cos., Inc. .............. 1,800 146,813
New York Times Co., Class A.......... 1,900 150,575
Viacom, Inc., Class B*............... 2,900 168,925
-----------
TOTAL PRINTING & PUBLISHING.......... 466,313
-----------
RESTAURANT/LODGING -- 0.4%
Mariott International, Inc., Class
A.................................. 3,700 119,787
-----------
RETAIL -- 4.4%
Bed, Bath & Beyond, Inc.*............ 4,700 243,519
Gap, Inc. ........................... 4,000 246,500
Home Depot, Inc. .................... 2,900 240,881
Lowe's Cos., Inc. ................... 5,200 210,925
TJX Cos., Inc. ...................... 14,800 357,050
-----------
TOTAL RETAIL......................... 1,298,875
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
RETAIL FOOD/DRUG -- 1.0%
Albertson's, Inc. ................... 2,200 $ 113,988
Safeway, Inc.*....................... 4,900 199,369
-----------
TOTAL RETAIL FOOD/DRUG............... 313,357
-----------
SEMI-CONDUCTORS/INSTRUMENTATION -- 1.7%
Harris Corp. ........................ 3,200 143,000
Intel Corp. ......................... 1,200 88,913
Linear Technology Corp. ............. 2,400 144,750
Maxim Integrated Products, Inc.*..... 4,500 142,594
-----------
TOTAL
SEMI-CONDUCTORS/INSTRUMENTATION.... 519,257
-----------
TOBACCO -- 1.3%
Philip Morris Cos., Inc. ............ 9,500 374,063
-----------
TRANSPORTATION -- 0.4%
Burlington Northern Santa Fe......... 1,200 117,825
-----------
UTILITIES -- GAS & PIPELINE -- 0.6%
Coastal Corp. ....................... 2,700 188,494
-----------
UTILITIES -- TELEPHONE -- 6.4%
Ameritech Corp. ..................... 7,000 314,125
AT&T Corp. .......................... 7,600 434,150
Bell Atlantic Corp. ................. 5,000 228,125
BellSouth Corp. ..................... 6,800 456,450
U.S. WEST, Inc. ..................... 4,400 206,800
WorldCom, Inc. *..................... 5,800 280,938
-----------
TOTAL UTILITIES -- TELEPHONE......... 1,920,588
-----------
TOTAL COMMON STOCK (COST $24,105,176).... 29,307,566
-----------
SHORT TERM INVESTMENTS -- 1.6%
Temporary Investment Cash Fund....... 242,067 242,067
Temporary Investment Fund............ 242,067 242,067
-----------
TOTAL SHORT TERM INVESTMENTS (COST
$484,134).............................. 484,134
-----------
TOTAL INVESTMENTS -- 99.9% (COST
$24,589,310)........................... 29,791,700
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%.................... 37,001
-----------
NET ASSETS -- 100.0%..................... $29,828,701
===========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
9
<PAGE> 13
MID-CAP EQUITY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK -- 95.2%
AEROSPACE -- 1.5%
Cordant Technologies Inc. ........... 2,600 $ 119,925
Sundstrand Corp. .................... 1,600 91,600
-----------
TOTAL AEROSPACE...................... 211,525
-----------
AIRLINE/FREIGHT -- 0.6%
Airborne Freight Corp. .............. 2,500 87,344
-----------
APPAREL/TEXTILE -- 1.3%
Jones Apparel Group, Inc.*........... 5,000 182,813
-----------
AUTOMOTIVE -- 1.3%
Arvin Industries, Inc. .............. 2,700 98,044
Lear Corp.*.......................... 1,600 82,100
-----------
TOTAL AUTOMOTIVE..................... 180,144
-----------
BANKS/SAVINGS & LOANS -- 7.8%
AmSouth Bancorporation............... 5,000 196,562
City National Corp. ................. 3,900 144,056
Old Kent Financial Corp. ............ 3,045 109,525
Pacific Century Financial Corp. ..... 7,600 182,400
Republic New York Corp. ............. 1,600 100,700
Southtrust Corp. .................... 5,200 226,200
Zions Bancorporation................. 2,500 132,812
-----------
TOTAL BANKS/SAVINGS & LOANS.......... 1,092,255
-----------
BEVERAGES -- 1.0%
Coca-Cola Enterprises, Inc. ......... 2,100 82,425
Coors, (Adolph) Co., Class B......... 1,700 57,800
-----------
TOTAL BEVERAGES...................... 140,225
-----------
BUILDING RELATED/APPLIANCE -- 2.4%
Hon Industries, Inc. ................ 2,300 78,200
Miller (Herman), Inc. ............... 4,200 102,112
Southdown, Inc. ..................... 2,300 164,162
-----------
TOTAL BUILDING RELATED/APPLIANCE..... 344,474
-----------
CHEMICALS -- 3.2%
Cabot Corp. ......................... 3,800 122,787
Cytec Industries, Inc.*.............. 2,100 92,925
Olin Corp. .......................... 2,600 108,388
Solutia, Inc. ....................... 4,500 129,094
-----------
TOTAL CHEMICALS...................... 453,194
-----------
COMMERCIAL SERVICES -- 4.0%
Accustaff, Inc.*..................... 3,400 106,250
ACNielsen Corp.*..................... 3,900 98,475
Jacobs Engineering Group, Inc.*...... 2,100 67,462
Omnicom Group, Inc. ................. 3,300 164,587
Robert Half International, Inc.*..... 2,300 128,512
-----------
TOTAL COMMERCIAL SERVICES............ 565,286
-----------
COMMUNICATIONS -- 1.0%
American Power Conversion Corp.*..... 4,500 135,000
-----------
COMPUTER HARDWARE -- 3.7%
Lexmark International Group, Inc.*... 3,100 189,100
SCI Systems, Inc.*................... 2,000 75,250
Storage Technology Corp.*............ 3,600 156,150
Symbol Technologies, Inc. ........... 2,700 101,925
-----------
TOTAL COMPUTER HARDWARE.............. 522,425
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMPUTER SOFTWARE -- 8.1%
BMC Software, Inc.*.................. 5,800 $ 301,237
Cadence Design Systems, Inc.*........ 5,700 178,125
Compuware Corp.*..................... 5,300 270,962
HBO & Co. ........................... 4,700 165,675
Network Associates, Inc.*............ 2,800 134,050
Parametric Technology Co.*........... 3,400 92,225
-----------
TOTAL COMPUTER SOFTWARE.............. 1,142,274
-----------
COSMETICS & TOILETRIES -- 1.0%
Dial Corp. .......................... 5,600 145,250
-----------
ELECTRIC -- 8.8%
BEC Energy........................... 4,400 182,600
CMS Energy Corp. .................... 2,300 101,200
Conectiv Inc. ....................... 7,900 161,950
DQE, Inc. ........................... 3,700 133,200
Energy East Corp. ................... 4,200 174,825
FirstEnergy Corp. ................... 6,100 187,575
NIPSCO Industries, Inc. ............. 5,600 156,800
Public Service Co. of New Mexico..... 6,300 142,931
-----------
TOTAL ELECTRIC....................... 1,241,081
-----------
ENERGY RELATED -- 2.7%
BJ Services Co.*..................... 2,400 69,750
EVI Weatherford, Inc.*............... 2,600 96,525
Input/Output, Inc.*.................. 1,600 28,500
Transocean Offshore, Inc. ........... 2,800 124,600
Varco International, Inc.*........... 3,300 65,381
-----------
TOTAL ENERGY RELATED................. 384,756
-----------
ENTERTAINMENT -- 0.3%
King World Productions, Inc.*........ 1,400 35,700
-----------
FINANCIAL SERVICES -- 2.9%
Bear Stearns Cos., Inc. ............. 4,500 255,937
Edwards (A.G.), Inc. ................ 3,600 153,675
-----------
TOTAL FINANCIAL SERVICES............. 409,612
-----------
FOODS -- 2.6%
Dean Foods Co. ...................... 1,500 82,406
Earthgrains Co. ..................... 1,000 55,875
Interstate Bakeries Corp. ........... 4,300 142,706
Ralcorp Holdings, Inc.*.............. 4,500 84,937
-----------
TOTAL FOODS.......................... 365,924
-----------
HOSPITAL MANAGEMENT -- 3.0%
Health Management Associates, Inc.,
Class A*........................... 4,900 163,844
Lincare Holdings, Inc.*.............. 2,400 100,950
Omnicare, Inc. ...................... 1,700 64,813
Wellpoint Health Networks, Inc.*..... 1,200 88,800
-----------
TOTAL HOSPITAL MANAGEMENT............ 418,407
-----------
HOSPITAL SUPPLY -- 2.5%
Allegiance Corp. .................... 2,700 138,375
Biomet, Inc. ........................ 3,200 105,800
Hillenbrand Industries, Inc. ........ 1,900 114,000
-----------
TOTAL HOSPITAL SUPPLY................ 358,175
-----------
INSURANCE -- 3.3%
AMBAC Financial Group................ 2,300 134,550
Old Republic International Corp. .... 6,000 175,875
SunAmerica, Inc. .................... 2,700 155,081
-----------
TOTAL INSURANCE...................... 465,506
-----------
</TABLE>
10
<PAGE> 14
MID-CAP EQUITY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
MACHINERY -- 2.9%
Aeroquip-Vickers, Inc. .............. 1,300 $ 75,888
AGCO, Inc. .......................... 2,800 57,575
Kaydon Corp. ........................ 2,100 74,156
Timken Co. .......................... 3,600 110,925
Trinity Industries, Inc. ............ 2,100 87,150
-----------
TOTAL MACHINERY...................... 405,694
-----------
METALS & MINING -- 1.2%
Martin Marietta Materials, Inc.*..... 3,800 171,000
-----------
MULTI-INDUSTRY -- 0.8%
Crane Co. ........................... 2,300 111,694
-----------
OIL (DOMESTIC) -- 1.9%
Ashland, Inc. ....................... 1,900 98,088
Pennzoil Co. ........................ 1,500 75,938
Valero Energy Corp.*................. 2,900 96,425
-----------
TOTAL OIL (DOMESTIC)................. 270,451
-----------
PAPER & FOREST PRODUCTS -- 2.7%
American Greetings Corp. ............ 2,900 147,719
Owens-Illinois, Inc.*................ 3,500 156,625
Potlatch Corp. ...................... 1,700 71,400
-----------
TOTAL PAPER & FOREST PRODUCTS........ 375,744
-----------
PHARMACEUTICALS -- 3.9%
Biogen, Inc.*........................ 2,700 132,300
Cardinal Health, Inc. ............... 900 84,375
Mylan Laboratories, Inc. ............ 3,700 111,231
Watson Pharmaceuticals Co.*.......... 4,600 214,763
-----------
TOTAL PHARMACEUTICALS................ 542,669
-----------
PRINTING & PUBLISHING -- 0.8%
Washington Post Co., Class B......... 200 115,200
-----------
RESTAURANTS/LODGING -- 2.3%
Applebee's International, Inc. ...... 3,700 82,788
Bob Evans Farms, Inc. ............... 2,800 59,325
Papa John's International, Inc.*..... 2,600 102,538
Promus Hotel Corp.*.................. 1,887 72,649
-----------
TOTAL RESTAURANTS/LODGING............ 317,300
-----------
RETAIL -- 6.8%
Best Buy Co., Inc.*.................. 5,100 184,238
OfficeMax, Inc.*..................... 8,300 136,950
Payless Shoesource, Inc.*............ 1,500 110,531
Ross Stores, Inc. ................... 3,300 141,900
Staples, Inc.*....................... 6,500 188,094
TJX Cos., Inc. ...................... 7,800 188,175
-----------
TOTAL RETAIL......................... 949,888
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
RETAIL FOOD/DRUG -- 0.3%
Hannaford Bros. Co. ................. 1,000 $ 44,000
-----------
SEMI CONDUCTORS/INSTRUMENTATION -- 3.3%
Harris Corp. ........................ 1,800 80,438
Linear Technology Corp. ............. 2,300 138,719
Maxim Integrated Products, Inc.*..... 4,300 136,256
Thomas & Betts Corp. ................ 1,200 59,100
Xilinx, Inc.*........................ 1,500 51,000
-----------
TOTAL SEMI
CONDUCTORS/INSTRUMENTATION......... 465,513
-----------
TOBACCO -- 0.3%
Universal Corp. ..................... 1,200 44,850
-----------
TRANSPORTATION -- 0.8%
Hunt (J.B.) Transport Services,
Inc. .............................. 3,100 110,438
-----------
UTILITIES -- GAS & PIPELINE -- 1.3%
MCN Corp. ........................... 3,100 77,113
NICOR, Inc. ......................... 2,600 104,325
-----------
TOTAL UTILITIES -- GAS & PIPELINE.... 181,438
-----------
UTILITIES -- TELEPHONE -- 2.9%
360 Communications Co.*.............. 1,600 51,200
Century Telephone Enterprises,
Inc. .............................. 3,200 146,800
Cincinnati Bell, Inc. ............... 1,800 51,525
Qwest Communications International,
Inc.*.............................. 1,632 56,916
Southern New England
Telecommunications Corp. .......... 1,500 98,250
-----------
TOTAL UTILITIES -- TELEPHONE......... 404,691
-----------
TOTAL COMMON STOCK
(COST $11,376,778)..................... 13,391,940
-----------
SHORT TERM INVESTMENTS -- 4.7%
Temporary Investment Cash Fund....... 329,632 329,632
Temporary Investment Fund............ 329,632 329,632
-----------
TOTAL SHORT TERM INVESTMENTS (COST
$659,264).............................. 659,264
-----------
TOTAL INVESTMENTS -- 99.9%
(COST $12,036,042)..................... 14,051,204
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%.................... 17,453
-----------
NET ASSETS -- 100.0%..................... $14,068,657
===========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
11
<PAGE> 15
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK -- 69.6%
AIRLINES -- 1.5%
Mesaba Holdings, Inc.*................ 7,575 $ 174,225
-----------
BUILDING RELATED/APPLIANCE -- 0.2%
Silverleaf Resorts, Inc.*............. 1,200 18,300
-----------
COMMERCIAL SERVICES -- 21.1%
Aaron Rents, Inc...................... 1,000 20,000
ACSYS, Inc.*.......................... 400 5,500
AXENT Technologies, Inc.*............. 2,200 67,375
Children's Comprehensive Services,
Inc.*............................... 2,050 30,494
DoubleClick, Inc.*.................... 2,600 129,187
Intelligroup, Inc.*................... 2,000 35,500
International Network Services*....... 3,500 143,500
International Telecommunications Data
Systems, Inc.*...................... 1,500 43,500
Mobius Management Systems, Inc.*...... 300 4,500
NCO Group, Inc.*...................... 5,300 116,600
Objective Systems Integrators,
Inc.*............................... 2,100 15,487
Pegasus Systems, Inc.*................ 4,400 112,750
Peregrine Systems, Inc.*.............. 1,700 48,450
Professional Staff PLC ADR*........... 7,950 109,312
Provant, Inc.*........................ 1,500 27,562
Rental Service Corp.*................. 3,300 110,963
Romac International, Inc.*............ 3,900 118,462
Select Appointments Holdings Public
Limited Co. ADR..................... 9,000 265,500
SOS Staffing Services, Inc.*.......... 8,300 145,769
StaffMark, Inc.*...................... 9,700 355,262
Steiner Leisure Ltd.*................. 5,100 154,275
Technology Solutions Co.*............. 4,700 148,931
TMP Worldwide, Inc.*.................. 4,900 170,887
Vantive Corp.*........................ 3,100 63,550
Verio, Inc.*.......................... 100 2,488
-----------
TOTAL COMMERCIAL SERVICES............. 2,445,804
-----------
COMMUNICATIONS -- 4.0%
Exodus Communications, Inc.*.......... 2,000 89,500
FileNET Corp.......................... 5,200 150,150
Saville Systems PLC*.................. 3,500 175,437
TranSwitch Corp.*..................... 3,700 50,875
-----------
TOTAL COMMUNICATIONS.................. 465,962
-----------
COMPUTER SOFTWARE -- 10.1%
BroadVision, Inc.*.................... 4,900 116,987
CIBER, Inc.*.......................... 1,200 45,600
Concord Communications, Inc.*......... 4,200 107,362
CPS, Inc.*............................ 6,800 41,225
ECsoft Group PLC*..................... 3,700 119,787
Education Management Corp.*........... 500 16,438
HNC Software, Inc.*................... 2,150 87,747
Information Management Resources,
Inc.*............................... 2,100 71,006
Inso Corp.*........................... 6,000 82,125
Micromuse, Inc.*...................... 2,200 89,787
Preview Travel, Inc.*................. 2,000 68,750
Tier Technologies, Inc.*.............. 5,750 102,422
TSI International Software Ltd.*...... 4,900 112,088
Travel Services International,
Inc.*............................... 3,400 111,775
-----------
TOTAL COMPUTER SOFTWARE............... 1,173,099
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COSMETICS/TOILETRIES -- 0.7%
French Fragrances, Inc.*.............. 4,900 $ 76,563
-----------
ENTERTAINMENT & LEISURE -- 2.0%
Emmis Broadcasting Corp. Class A*..... 1,100 52,594
Movado Group, Inc..................... 3,800 114,950
SFX Entertainment, Inc., Class A*..... 1,400 64,225
-----------
TOTAL ENTERTAINMENT................... 231,769
-----------
FINANCIAL SERVICES -- 6.5%
Affiliated Managers Group, Inc.*...... 2,000 74,250
Ameritrade Holding Corp. Class A*..... 800 21,600
Federated Investors, Inc.*............ 1,200 22,200
Franchise Mortgage Acceptance Co.*.... 7,150 186,347
HealthCare Financial Partners,
Inc.*............................... 2,300 141,019
Imperial Credit Industries, Inc.*..... 5,400 126,900
SEI Investments Co.................... 1,600 99,200
Willis Lease Finance Corp.*........... 3,850 88,069
-----------
TOTAL FINANCIAL SERVICES.............. 759,585
-----------
HEALTHCARE SERVICES -- 3.3%
Envoy Corp.*.......................... 3,650 172,919
Ocular Sciences, Inc.*................ 3,400 110,500
Wesley Jessen VisionCare, Inc.*....... 4,400 101,750
-----------
TOTAL HEALTHCARE SERVICES............. 385,169
-----------
HOSPITAL SUPPLY -- 0.8%
Endocardial Solutions, Inc.*.......... 1,000 10,500
ProMedCo Management Co.*.............. 3,250 33,313
Schick Technologies, Inc.*............ 3,600 55,575
-----------
TOTAL HOSPITAL SUPPLY................. 99,388
-----------
MACHINERY -- 0.6%
Metrika Systems Corp.*................ 4,200 70,350
-----------
PHARMACEUTICALS -- 2.1%
MedImmune, Inc.*...................... 2,200 137,225
NBTY, Inc.*........................... 6,100 112,088
-----------
TOTAL PHARMACEUTICALS................. 249,313
-----------
PRINTING & PUBLISHING -- 0.9%
Media Arts Group, Inc.*............... 5,300 102,025
-----------
RESTAURANTS/LODGING -- 0.5%
Four Seasons Hotels, Inc.............. 1,000 35,250
Royal Olympic Cruise Lines, Inc.*..... 2,900 29,000
-----------
TOTAL RESTAURANTS/LODGING............. 64,250
-----------
RETAIL -- 4.7%
1-800-Contacts, Inc.*................. 5,500 83,875
Fossil, Inc.*......................... 5,400 134,325
Gadzooks, Inc.*....................... 4,300 118,519
Quicksilver, Inc.*.................... 7,900 157,506
Stage Stores, Inc.*................... 1,050 47,513
-----------
TOTAL RETAIL.......................... 541,738
-----------
SEMI-CONDUCTORS/INSTRUMENTATION -- 6.8%
Cylink Corp.*......................... 4,400 52,800
Cymer, Inc.*.......................... 2,400 38,700
Digital Microwave Corp.*.............. 7,500 54,375
</TABLE>
12
<PAGE> 16
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
Gemstar International Group*.......... 7,100 $ 265,806
NeoMagic Corp.*....................... 2,400 37,200
Network Solutions, Inc.*.............. 3,600 162,000
PMC-Sierra, Inc.*..................... 3,800 178,125
-----------
TOTAL
SEMI-CONDUCTORS/INSTRUMENTATION..... 789,006
-----------
UTILITIES -- TELEPHONE -- 3.8%
Boston Communications Group, Inc.*.... 9,650 85,644
IDT Corp.*............................ 3,100 93,194
MGC Communications, Inc.*............. 1,000 15,250
Omnipoint Corp.*...................... 6,350 145,653
Skytel Communications, Inc.*.......... 4,300 100,647
-----------
TOTAL UTILITIES -- TELEPHONE.......... 440,388
-----------
TOTAL COMMON STOCK (COST $7,501,291)...... 8,086,934
-----------
SHORT TERM INVESTMENTS -- 10.0%
Temporary Investment Cash Fund........ 579,694 579,694
Temporary Investment Fund............. 579,693 579,693
-----------
TOTAL SHORT TERM INVESTMENTS (COST
$1,159,387)............................. 1,159,387
-----------
TOTAL INVESTMENTS -- 79.6% (COST
$8,660,678)............................. 9,246,321
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 20.4%.................... 2,363,537
-----------
NET ASSETS -- 100.0%...................... $11,609,858
===========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
13
<PAGE> 17
INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK -- 90.9%
ARGENTINA -- 0.4%
Telefonica de Argentina SA ADR....... 1,400 $ 45,500
-----------
AUSTRALIA -- 3.7%
AMP Limited*......................... 7,474 87,474
Australia & New Zealand Banking Group
Ltd. .............................. 12,872 88,797
CSR Ltd. ............................ 13,648 39,384
News Corp. Ltd. ..................... 17,148 139,957
Pasminco, Ltd. ...................... 34,080 25,958
WMC Ltd. ............................ 11,320 34,068
-----------
TOTAL AUSTRALIA...................... 415,638
-----------
BRAZIL -- 1.5%
Banco Itau S.A. 144A................. 75,400 42,700
Companhia Energetica de Minas
Gerais............................. 957,588 29,640
Companhia Energetica de Minas Gerais
ADR................................ 244 6,417
Companhia Brasileira de Distribuicao
Grupo Pao Acucar................... 432,600 9,463
Companhia Cervejaria Brahma.......... 36,100 22,332
Petroleo Brasileiro ADR.............. 200 3,718
Petroleo Brasileiro S.A. ............ 144,100 26,786
Telebras ADR......................... 301 32,865
-----------
TOTAL BRAZIL......................... 173,921
-----------
CANADA -- 1.0%
Canadian National Railway Co. ....... 1,000 53,125
Canadian Pacific, Ltd. .............. 2,100 59,588
-----------
TOTAL CANADA......................... 112,713
-----------
CHILE -- 0.2%
Compania de Telecomunicaciones de
Chile S.A. ADR..................... 1,200 24,300
-----------
DENMARK -- 2.3%
Novo-Nordisk A/S..................... 880 121,308
Unidanmark A/S....................... 1,590 142,885
-----------
TOTAL DENMARK........................ 264,193
-----------
FINLAND -- 1.9%
Metsa Serla-B Shares................. 9,000 86,941
Oy Nokia AB.......................... 1,320 97,079
Nokia Corp. ADR...................... 400 29,025
-----------
TOTAL FINLAND........................ 213,045
-----------
FRANCE -- 14.5%
Alcatel Alsthom...................... 900 183,244
Allianz-Bcvg Agf Assurance
Warrants*.......................... 31 180
Assurances Generales de France....... 727 41,136
Axa-UAP.............................. 1,170 131,590
Banque Nationale de Paris............ 2,272 185,637
Carrefour Supermarche................ 40 25,306
Compagnie de Saint Gobain............ 510 94,560
Compagnie Generale des Etablissements
Michelin........................... 2,310 133,342
Elf Aquitaine........................ 1,260 177,141
Rhone-Poulenc........................ 1,551 87,477
Societe Generale..................... 929 193,144
Total S.A............................ 960 124,803
Vivendi SA........................... 1,190 254,099
-----------
TOTAL FRANCE......................... 1,631,659
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
GERMANY -- 13.6%
Adidas AG............................ 250 $ 43,213
Bayer AG............................. 6,070 313,079
Dresdner Bank AG..................... 3,080 166,027
Henkel KGaA.......................... 880 87,511
Hoechst AG........................... 2,510 125,289
Hornbach Holdings AG................. 466 42,727
Karstadt AG.......................... 290 140,097
MAN AG............................... 320 124,452
Mannesmann AG........................ 1,500 154,153
Metallgesellschaft AG................ 1,410 28,903
SAP AG............................... 60 36,398
SAP AG 144A.......................... 100 67,977
Siemens AG........................... 1,170 71,171
VEBA AG.............................. 1,990 135,604
-----------
TOTAL GERMANY........................ 1,536,601
-----------
HONG KONG -- 0.7%
Cheung Kong Holdings Ltd. ........... 11,000 54,087
Hong Kong Telecommunications Ltd. ... 11,000 20,655
-----------
TOTAL HONG KONG...................... 74,742
-----------
HUNGARY -- 0.1%
Magyar Tavkozlesi Rt -- ADR.......... 200 5,888
-----------
IRELAND -- 1.7%
Allied Irish Banks PLC............... 9,462 139,609
Jefferson Smurfit Group PLC.......... 15,900 47,885
-----------
TOTAL IRELAND........................ 187,494
-----------
ITALY -- 0.9%
Telecom Italia SPA*.................. 14,100 103,794
-----------
JAPAN -- 11.7%
Advantest Corp. ..................... 640 34,401
Dai Nippon Printing Co., Ltd. ....... 3,000 47,880
Daiwa Securities Co., Ltd. .......... 18,000 77,429
Eisai Co., Ltd. ..................... 3,000 40,855
Fuji Machine Manufacturing Co. ...... 2,000 53,032
Fuji Photo Film Co. ................. 3,000 104,406
Fujisawa Pharmaceutical Co., Ltd. ... 3,000 28,058
JUSCO Co. Ltd. ...................... 5,000 91,689
Kao Corp. ........................... 2,000 30,839
Mabuchi Motor........................ 1,000 63,407
Matsumotokiyoshi..................... 1,700 59,776
Matsushita Electric Industrial Co.,
Ltd. .............................. 5,000 80,340
Nippon Telegraph & Telephone
Corp. ............................. 12 99,434
Olympus Optical Co. Ltd. ............ 6,000 52,138
Rohm Co., Ltd. ...................... 1,000 102,677
Sanwa Bank........................... 7,000 62,593
Shohkoh Fund & Co., Ltd. ............ 100 24,570
Sony Corp. .......................... 1,600 137,767
Square Co. Ltd. ..................... 100 2,666
Toshiba Corp. ....................... 17,000 69,453
Uni-Charm Corp. ..................... 1,300 48,146
-----------
TOTAL JAPAN.......................... 1,311,556
-----------
KOREA -- 0.2%
Pohang Iron & Steel Co., Ltd. ADR.... 1,540 17,710
SK Telecom Co., Ltd. ADR............. 1,560 8,678
-----------
TOTAL KOREA.......................... 26,388
-----------
</TABLE>
14
<PAGE> 18
INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
MEXICO -- 1.6%
Coca-Cola Femsa S.A. ................ 13,100 $ 22,917
Grupo Financiero Banamex Accival, SA
de CV.............................. 13,200 25,001
Grupo Televisa S.A.*................. 2,100 39,541
Kimberly Clark de Mexico, S.A. de
C.V. .............................. 13,500 46,873
Telefonos de Mexico S.A. ADR......... 900 43,088
-----------
TOTAL MEXICO......................... 177,420
-----------
NETHERLANDS -- 6.9%
Gucci Group N.V. -- New York
Registered Shares.................. 700 36,838
ING Groep NV......................... 2,738 179,283
Koninklijke KPN NV................... 1,600 61,586
Philips Electronics NV............... 2,700 226,967
Royal Dutch Petroleum Co. ........... 900 50,006
TNT Post Group NV.................... 1,600 40,900
Unilever NV.......................... 2,300 182,488
-----------
TOTAL NETHERLANDS.................... 778,068
-----------
NEW ZEALAND -- 0.4%
Telecom Corp. New Zealand Ltd. ADR... 827 26,929
Telecom Corp. of New Zealand Ltd. ... 3,287 13,548
Telecom Corp. of New Zealand Ltd. ... 2,400 5,133
-----------
TOTAL NEW ZEALAND.................... 45,610
-----------
NORWAY -- 0.4%
Saga Petroleum ASA................... 2,650 40,750
-----------
PHILIPPINES -- 0.2%
Ayala Land, Inc. .................... 25,200 7,252
Manila Electric Co. ................. 5,000 13,189
-----------
TOTAL PHILIPPINES.................... 20,441
-----------
RUSSIA -- 0.1%
Lukoil Holding ADR................... 350 11,701
-----------
SINGAPORE -- 0.3%
Overseas Union Bank Ltd. ............ 15,000 32,850
-----------
SOUTH AFRICA -- 0.4%
De Beers Consolidated Mines Ltd. .... 600 10,615
Liberty Life Association of Africa
Ltd. .............................. 808 15,858
South African Breweries Ltd. ........ 700 14,499
-----------
TOTAL SOUTH AFRICA................... 40,972
-----------
SPAIN -- 2.9%
Banco Santander...................... 2,000 51,277
Banco Popular........................ 460 39,302
Empresa Nacional de Electricad
S.A. .............................. 4,500 98,618
Telefonica S.A. ADR.................. 945 131,828
-----------
TOTAL SPAIN.......................... 321,025
-----------
SWEDEN -- 3.1%
Nordbanken Holding AB*............... 18,500 135,706
Pharmacia & Upjohn, Inc. ............ 1,260 57,984
Sparbanken Sverige AB, Swedbank...... 980 29,492
Volvo AB............................. 4,050 120,612
-----------
TOTAL SWEDEN......................... 343,794
-----------
SWITZERLAND -- 4.1%
Compagnie Financiere Richemont AG.... 20 26,173
Credit Suisse Group.................. 540 120,154
Holderbank Financiere Glarus AG...... 140 178,137
Nestle SA............................ 66 141,241
-----------
TOTAL SWITZERLAND.................... 465,705
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
TAIWAN -- 0.2%
Taiwan Semiconductor Manufacturing
Co., Ltd.*......................... 1,100 $ 18,631
-----------
THAILAND -- 0.1%
Bangkok Bank Public Co., Ltd. ....... 4,000 4,917
Thai Farmers Bank Public Co.,
Ltd. .............................. 2,900 2,554
-----------
TOTAL THAILAND....................... 7,471
-----------
UNITED KINGDOM -- 15.8%
Bass PLC............................. 5,360 100,432
B.A.T Industries PLC................. 9,000 90,099
BOC Group PLC........................ 2,837 38,649
British Petroleum Co. PLC*........... 9,657 140,825
British Telecommunications PLC....... 6,800 83,959
BTR PLC.............................. 6,037 17,124
Compass Group PLC.................... 8,200 94,404
Cookson Group PLC.................... 1,330 4,571
Diageo PLC........................... 9,532 112,920
Granada Group PLC.................... 1,700 31,314
Great Universal Stores PLC........... 6,400 84,359
HSBC Holdings PLC.................... 4,500 109,020
Lloyds TSB Group PLC................. 3,900 54,465
Marks & Spencer PLC.................. 2,900 26,395
Next PLC............................. 3,000 25,828
PowerGen PLC......................... 6,480 89,522
Reckitt & Colman PLC................. 6,300 120,252
Royal & Sun Alliance Group PLC....... 5,500 56,850
Royal Bank of Scotland Group......... 3,200 55,528
Siebe PLC............................ 1,200 24,006
Smithkline Beecham PLC............... 15,416 187,639
Standard Chartered PLC............... 4,200 47,723
WPP Group PLC........................ 11,900 78,329
Zeneca Group PLC..................... 2,300 98,702
-----------
TOTAL UNITED KINGDOM................. 1,772,915
-----------
TOTAL COMMON STOCKS (COST $9,250,925).... 10,204,785
-----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR
DATE (000)
-------- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 8.1%
Goldman Sachs & Co., 5.75% dated
6/30/98, repurchase price
$912,146 (collateralized by
$895,000 U.S. Treasury
Notes, 7.875%, 11/15/99,
market value $921,850) (Cost
$912,000)................... 07/01/98 $912 912,000
-----------
U.S. TREASURY OBLIGATIONS -- 0.3%
U.S. TREASURY BILLS
5.01%....................... 08/13/98 20 19,883
5.05%....................... 08/20/98 10 9,933
5.07%....................... 08/20/98 10 9,933
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$39,740)................................ 39,749
-----------
TOTAL INVESTMENTS -- 99.3% (COST
$10,202,665)............................ 11,156,534
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.7%..................... 74,632
-----------
NET ASSETS -- 100.0%...................... $11,231,166
===========
</TABLE>
15
<PAGE> 19
INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
Foreign currency exchange contracts outstanding at June 30, 1998:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED
FORWARD FOREIGN SETTLEMENT SETTLEMENT CURRENT APPRECIATION/
CURRENCY CONTRACTS DATE DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASE CONTRACTS:
Canadian Dollar 09/17/98 $142,715 $143,020 $ 305
French Franc 07/31/98 3,753 3,731 (22)
French Franc 07/31/98 59,043 59,186 143
German Marks 07/01/98 15,976 16,040 64
Swiss Francs 07/01/98 26,139 26,310 171
UK Pounds 07/02/98 6,861 6,845 (16)
UK Pounds 07/07/98 12,420 12,427 7
-------- -------- -----
$266,907 $267,559 $ 652
======== ======== =====
SALE CONTRACTS:
French Franc 07/31/98 $ 587 $ 590 $ (3)
French Franc 07/31/98 473 472 1
French Franc 07/31/98 630 632 (2)
Mexican Peso 07/01/98 1,856 1,863 (7)
UK Pounds 07/01/98 8,430 8,432 (2)
UK Pounds 07/03/98 39,058 39,224 (166)
UK Pounds 07/06/98 35,757 35,823 (66)
-------- -------- -----
$ 86,791 $ 87,036 $(245)
======== ======== =====
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
144A -- Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers. At the end of the period, these securities
amounted to 1.0% of net assets.
ADR -- American Depository Receipt.
See Notes to Financial Statements.
16
<PAGE> 20
THIS PAGE INTENTIONALLY LEFT BLANK
17
<PAGE> 21
PACIFIC INNOVATIONS TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET MANAGED
FUND BOND FUND
-----------------------------------
<S> <C> <C>
ASSETS
Investments in securities at value(a)..................... $5,218,872 $15,216,536
Cash...................................................... 77 21
Receivable for:
Securities sold........................................ -- --
Dividends and interest................................. 52,171 172,780
Fund shares sold....................................... -- 15,452
Due from Pacific Mutual................................... 8,659 --
Prepaid expense........................................... 657 2,073
Unrealized appreciation on foreign currency exchange
contracts.............................................. -- --
---------- -----------
Total Assets...................................... 5,280,436 15,406,862
---------- -----------
LIABILITIES
Cash overdraft............................................ -- --
Payable for:
Securities purchased................................... -- --
Accrued investment advisory fees....................... -- 682
Accrued shareholder servicing and transfer agent
fees.................................................. -- 1,052
Accrued expenses....................................... 19,900 26,821
Accrued dividends...................................... 762 --
Variation margin payable on futures contracts.......... -- --
---------- -----------
Total Liabilities................................. 20,662 28,555
---------- -----------
Net Assets.................................................. $5,259,774 $15,378,307
========== ===========
COMPONENTS OF NET ASSETS
Common stock (unlimited number of shares authorized, $.001
par value per share)...................................... $ 5,260 $ 1,512
Additional paid-in capital.................................. 5,254,514 15,253,060
Undistributed net investment income (loss).................. -- --
Accumulated net realized gain (loss) on investments,
futures, and foreign currency transactions................ -- (45,102)
Accumulated net unrealized appreciation on investments,
futures, foreign currency transactions, and forward
currency contracts........................................ -- 168,837
---------- -----------
Net Assets.................................................. $5,259,774 $15,378,307
========== ===========
Shares outstanding.......................................... 5,259,774 1,512,123
Net asset value, offering and redemption price per share.... $ 1.00 $ 10.17
========== ===========
(a) Cost:................................................... $5,218,872 $15,047,699
========== ===========
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 22
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL
INCOME BLUE CHIP MID-CAP AGGRESSIVE INTERNATIONAL
FUND FUND EQUITY FUND GROWTH FUND FUND
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$22,153,036 $29,791,700 $14,051,204 $ 9,246,321 $11,156,534
638,886 -- -- 2,370,796 1,054
-- 147,021 -- -- 118,162
134,143 39,625 10,901 4,569 48,296
45,614 68,465 35,021 11,504 29,468
-- -- -- 2,215 27,167
3,500 4,461 2,017 1,685 1,450
-- -- -- -- 407
----------- ----------- ----------- ----------- -----------
22,975,179 30,051,272 14,099,143 11,637,090 11,382,538
----------- ----------- ----------- ----------- -----------
-- 3,338 -- -- --
91,375 166,149 -- -- 150,028
3,129 3,786 1,248 -- --
4,942 5,128 1,993 -- --
36,080 44,170 27,245 27,232 1,045
-- -- -- -- --
-- -- -- -- 299
----------- ----------- ----------- ----------- -----------
135,526 222,571 30,486 27,232 151,372
----------- ----------- ----------- ----------- -----------
$22,839,653 $29,828,701 $14,068,657 $11,609,858 $11,231,166
=========== =========== =========== =========== ===========
$ 1,976 $ 2,077 $ 1,038 $ 1,004 $ 996
21,672,546 24,190,746 11,595,828 10,612,337 10,310,152
330,663 86,688 18,506 (35,885) 90,586
24,341 346,800 438,123 446,758 (255,955)
810,127 5,202,390 2,015,162 585,644 1,085,387
----------- ----------- ----------- ----------- -----------
$22,839,653 $29,828,701 $14,068,657 $11,609,858 $11,231,166
=========== =========== =========== =========== ===========
1,976,208 2,077,410 1,038,127 1,004,301 996,238
$ 11.56 $ 14.36 $ 13.55 $ 11.56 $ 11.27
=========== =========== =========== =========== ===========
$21,342,909 $24,589,310 $12,036,042 $ 8,660,678 $10,202,665
=========== =========== =========== =========== ===========
</TABLE>
19
<PAGE> 23
PACIFIC INNOVATIONS TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET MANAGED BOND
FUND FUND
------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $166,929 $437,892
Dividends................................................. -- --
Less Foreign withholding taxes......................... -- --
-------- --------
Total Investment Income........................... 166,929 437,892
-------- --------
EXPENSES
Investment advisory fees.................................. 6,496 24,778
Shareholder servicing fees................................ 4,724 10,715
Accounting fees........................................... 2,805 6,362
Custodian fees............................................ 15,107 9,201
Professional fees......................................... 7,432 13,351
Reports to shareholders................................... 4,328 7,252
Trustees' fees and expenses............................... 1,486 3,443
Insurance fees............................................ 1,949 2,448
Miscellaneous expenses.................................... 4,267 6,655
-------- --------
Total Expenses.................................... 48,594 84,205
Less: Advisory fee waivers and expense
reimbursements.................................. (30,878) (33,979)
-------- --------
Net Expenses...................................... 17,716 50,226
-------- --------
Net Investment Income (Loss)................................ 149,213 387,666
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investments, futures, and foreign currency transactions... -- 8,239
Net change in unrealized appreciation on investments,
futures, foreign currency transactions, and forward
currency contracts........................................ -- 10,454
-------- --------
Net Realized and Unrealized Gain on Investments and Foreign
Currency Transactions..................................... -- 18,693
-------- --------
Net Increase in Net Assets from Operations.................. $149,213 $406,359
======== ========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
20
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL
INCOME BLUE CHIP MID-CAP AGGRESSIVE INTERNATIONAL
FUND FUND EQUITY FUND GROWTH FUND FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$242,921 $ 33,938 $ 8,707 $ 16,428 $ 31,751
173,395 167,238 68,703 1,896 126,575
-- -- -- (219) (5,594)
-------- ---------- -------- -------- ----------
416,316 201,176 77,410 18,105 152,732
-------- ---------- -------- -------- ----------
47,306 65,008 33,215 31,975 33,256
15,752 19,488 10,027 8,387 8,062
9,353 11,571 5,954 4,980 4,787
12,390 27,786 16,209 27,483 84,704
18,666 22,746 12,814 10,790 10,433
10,049 9,597 4,865 4,078 3,996
5,452 6,550 3,211 2,641 2,404
2,805 3,138 2,308 2,044 2,149
8,846 10,413 6,414 5,685 5,409
-------- ---------- -------- -------- ----------
130,619 176,297 95,017 98,063 155,200
(44,966) (61,805) (36,107) (44,073) (92,719)
-------- ---------- -------- -------- ----------
85,653 114,492 58,910 53,990 62,481
-------- ---------- -------- -------- ----------
330,663 86,684 18,500 (35,885) 90,251
-------- ---------- -------- -------- ----------
172,149 463,345 452,289 522,663 (36,409)
329,060 3,330,864 392,350 314,197 1,326,848
-------- ---------- -------- -------- ----------
501,209 3,794,209 844,639 836,860 1,290,439
-------- ---------- -------- -------- ----------
$831,872 $3,880,893 $863,139 $800,975 $1,380,690
======== ========== ======== ======== ==========
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE> 25
PACIFIC INNOVATIONS TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND MANAGED BOND FUND CAPITAL INCOME FUND
------------------------------ ------------------------------ ------------------------------
FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1) (UNAUDITED) 1997(1) (UNAUDITED) 1997(1)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income
(loss)..................... $ 149,213 $ 242,852 $ 387,666 $ 375,805 $ 330,663 $ 269,863
Net realized gain (loss) on
investments, futures, and
foreign currency
transactions............... -- -- 8,239 (53,341) 172,149 201,215
Net change in unrealized
appreciation (depreciation)
on investments, futures,
foreign exchange
transactions, and forward
currency contracts......... -- -- 10,454 158,383 329,060 481,067
----------- ----------- ----------- ----------- ----------- -----------
Net Increase
(Decrease) in Net
Assets from
Operations.......... 149,213 242,852 406,359 480,847 831,872 952,145
----------- ----------- ----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Distributions to shareholders
from net investment
income..................... (149,213) (242,852) (387,666) (375,805) -- (269,863)
Distributions to shareholders
from net capital gains..... -- -- -- -- -- (201,215)
Distributions to shareholders
in excess of net capital
gains...................... -- -- -- -- -- (147,808)
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends and
Distributions to
Shareholders........ (149,213) (242,852) (387,666) (375,805) -- (618,886)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.... 1,244,974 8,826,079 3,438,710 11,287,631 4,514,989 16,728,404
Reinvestment of dividends and
distributions.............. 149,470 241,833 387,666 375,804 -- 618,884
Cost of shares redeemed...... (2,833,207) (2,469,315) (225,154) (10,095) (177,822) (9,943)
----------- ----------- ----------- ----------- ----------- -----------
Increase/(Decrease) in Net
Assets from Capital Share
Transactions............. (1,438,763) 6,598,597 3,601,222 11,653,340 4,337,167 17,337,345
----------- ----------- ----------- ----------- ----------- -----------
Total
Increase/(Decrease)
in Net Assets....... (1,438,763) 6,598,597 3,619,915 11,758,382 5,169,039 17,670,604
NET ASSETS
Beginning of Period.......... 6,698,537 99,940 11,758,392 10 17,670,614 10
----------- ----------- ----------- ----------- ----------- -----------
End of Period................ $ 5,259,774 $ 6,698,537 $15,378,307 $11,758,392 $22,839,653 $17,670,614
=========== =========== =========== =========== =========== ===========
SHARES ISSUED AND REDEEMED
Shares sold.................. 1,244,974 8,826,079 337,289 1,122,477 393,906 1,542,652
Shares issued in reinvestment
of dividends and
distributions.............. 149,470 241,833 38,190 37,311 -- 56,129
Shares redeemed.............. (2,833,207) (2,469,315) (22,147) (998) (15,600) (880)
----------- ----------- ----------- ----------- ----------- -----------
Net
Increase/(Decrease)
in Shares
Outstanding......... (1,438,763) 6,598,597 353,333 1,158,790 378,307 1,597,901
=========== =========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
See Notes to Financial Statements.
22
<PAGE> 26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BLUE CHIP FUND MID-CAP EQUITY FUND AGGRESSIVE GROWTH FUND
------------------------------ ------------------------------ ------------------------------
FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED MONTHS ENDED ENDED MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31, JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1) (UNAUDITED) 1997(1) (UNAUDITED) 1997(1)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 86,684 $ 89,822 $ 18,500 $ 41,537 $ (35,885) $ (30,687)
463,345 (70,076) 452,289 52,690 522,663 713,648
3,330,864 1,871,526 392,350 1,622,812 314,197 271,447
----------- ----------- ----------- ----------- ----------- ----------
3,880,893 1,891,272 863,139 1,717,039 800,975 954,408
----------- ----------- ----------- ----------- ----------- ----------
-- (89,818) -- (41,531) -- --
-- -- -- (52,690) -- (713,648)
-- (46,469) -- (14,166) -- (75,905)
----------- ----------- ----------- ----------- ----------- ----------
-- (136,287) -- (108,387) -- (789,553)
----------- ----------- ----------- ----------- ----------- ----------
6,335,299 18,044,143 2,150,546 9,438,459 1,441,636 8,472,849
-- 136,293 -- 108,384 -- 789,552
(297,952) (24,970) (93,409) (7,124) (38,086) (21,933)
----------- ----------- ----------- ----------- ----------- ----------
6,037,347 18,155,466 2,057,137 9,539,719 1,403,550 9,240,468
----------- ----------- ----------- ----------- ----------- ----------
19,910,451 2,920,276 11,148,371 2,204,525 9,405,323
9,918,240
19,910,461 10 11,148,381 10 9,405,333 10
----------- ----------- ----------- ----------- ----------- ----------
$29,828,701 $19,910,461 $14,068,657 $11,148,381 $11,609,858 $9,405,333
=========== =========== =========== =========== =========== ==========
473,726 1,617,145 163,646 873,294 129,256 803,673
-- 11,153 -- 8,794 -- 76,507
(22,507) (2,108) (7,034) (574) (3,315) (1,821)
----------- ----------- ----------- ----------- ----------- ----------
451,219 1,626,190 156,613 881,514 125,942 878,359
=========== =========== =========== =========== =========== ==========
<CAPTION>
INTERNATIONAL FUND
------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
------------------------------
<S> <C> <C>
$ 90,251 $ 79,329
(36,409) (54,792)
1,326,848 (241,461)
----------- ----------
1,380,690 (216,924)
----------- ----------
-- (78,994)
-- --
-- (164,754)
----------- ----------
-- (243,748)
----------- ----------
980,320 9,263,921
-- 243,745
(165,875) (10,973)
----------- ----------
814,445 9,496,693
----------- ----------
2,195,135 9,036,021
9,036,031 10
----------- ----------
$11,231,166 $9,036,031
=========== ==========
90,016 898,502
-- 25,045
(16,283) (1,043)
----------- ----------
73,734 922,504
=========== ==========
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE> 27
PACIFIC INNOVATIONS TRUST
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 1.00 $ 1.00
------ ------
Net investment income....................................... 0.03 0.04
Net realized and unrealized gain on investments............. 0.00 0.00
------ ------
Total from investment operations............................ 0.03 0.04
------ ------
Dividends from net investment income........................ (0.03) (0.04)
------ ------
Net Asset Value, end of period.............................. $ 1.00 $ 1.00
====== ======
Total return................................................ 2.53% 4.22%
====== ======
Net assets, end of period (in thousands).................... $5,260 $6,699
====== ======
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 0.60%* 0.60%*
====== ======
Before fee waivers and reimbursements..................... 1.64%* 1.47%*
====== ======
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 5.05%* 5.00%*
====== ======
Before fee waivers and reimbursements..................... 4.01%* 4.13%*
====== ======
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
24
<PAGE> 28
PACIFIC INNOVATIONS TRUST
MANAGED BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 10.15 $ 10.00
------- --------
Net investment income....................................... 0.29 0.49
Net realized and unrealized gain on investments............. 0.02 0.15
------- --------
Total from investment operations............................ 0.31 0.64
------- --------
Dividends from net investment income........................ (0.29) (0.49)
------- --------
Net Asset Value, end of period.............................. $ 10.17 $ 10.15
======= ========
Total return................................................ 3.06% 6.59%
======= ========
Net assets, end of period (in thousands).................... $15,378 $ 11,758
======= ========
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 0.75%* 0.75%*
======= ========
Before fee waivers and reimbursements..................... 1.26%* 1.39%*
======= ========
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 5.79%* 6.12%*
======= ========
Before fee waivers and reimbursements..................... 5.28%* 5.48%*
======= ========
Portfolio turnover rate..................................... 14.59% 104.36%
======= ========
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
25
<PAGE> 29
PACIFIC INNOVATIONS TRUST
CAPITAL INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 11.06 $ 10.00
------- -------
Net investment income....................................... 0.17 0.17
Net realized and unrealized gain on investments............. 0.33 1.30
------- -------
Total from investment operations............................ 0.50 1.47
------- -------
Dividends from net investment income........................ -- (0.17)
Distributions from net capital gains........................ -- (0.14)
Distributions in excess of net capital gains................ -- (0.10)
------- -------
Total distributions......................................... -- (0.41)
------- -------
Net Asset Value, end of period.............................. $ 11.56 $ 11.06
======= =======
Total return................................................ 4.52% 14.75%
======= =======
Net assets, end of period (in thousands).................... $22,840 $17,671
======= =======
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 0.87%* 0.87%*
======= =======
Before fee waivers and reimbursements..................... 1.33%* 1.52%*
======= =======
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 3.36%* 3.24%*
======= =======
Before fee waivers and reimbursements..................... 2.90%* 2.59%*
======= =======
Portfolio turnover rate..................................... 26.92% 44.98%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
26
<PAGE> 30
PACIFIC INNOVATIONS TRUST
BLUE CHIP FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 12.24 $ 10.00
------- -------
Net investment income....................................... 0.04 0.06
Net realized and unrealized gain on investments............. 2.08 2.27
------- -------
Total from investment operations............................ 2.12 2.33
------- -------
Dividends from net investment income........................ -- (0.06)
Distributions from net capital gains........................ -- --
Distributions in excess of net capital gains................ -- (0.03)
------- -------
Total distributions......................................... -- (0.09)
------- -------
Net Asset Value, end of period.............................. $ 14.36 $ 12.24
======= =======
Total return................................................ 17.32% 23.27%
======= =======
Net assets, end of period (in thousands).................... $29,829 $19,910
======= =======
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 0.94%* 0.94%*
======= =======
Before fee waivers and reimbursements..................... 1.45%* 1.53%*
======= =======
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 0.71%* 1.00%*
======= =======
Before fee waivers and reimbursements..................... 0.20%* 0.41%*
======= =======
Portfolio turnover rate..................................... 29.17% 44.93%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
27
<PAGE> 31
PACIFIC INNOVATIONS TRUST
MID-CAP EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 12.65 $ 10.00
-------- --------
Net investment income....................................... 0.02 0.05
Net realized and unrealized gain on investments............. 0.88 2.73
-------- --------
Total from investment operations............................ 0.90 2.78
-------- --------
Dividends from net investment income........................ -- (0.05)
Distributions from net capital gains........................ -- (0.06)
Distributions in excess of net capital gains................ -- (0.02)
-------- --------
Total distributions......................................... -- (0.13)
-------- --------
Net Asset Value, end of period.............................. $ 13.55 $ 12.65
======== ========
Total return................................................ 7.11% 27.80%
======== ========
Net assets, end of period (in thousands).................... $ 14,069 $ 11,148
======== ========
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 0.94%* 0.94%*
======== ========
Before fee waivers and reimbursements..................... 1.52%* 1.62%*
======== ========
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 0.30%* 0.66%*
======== ========
Before fee waivers and reimbursements..................... (0.28)%* (0.02)%*
======== ========
Portfolio turnover rate..................................... 40.70% 55.74%
======== ========
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
28
<PAGE> 32
PACIFIC INNOVATIONS TRUST
AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 10.71 $ 10.00
-------- -------
Net investment (loss)....................................... (0.04) (0.03)
Net realized and unrealized gain on investments............. 0.89 1.76
-------- -------
Total from investment operations............................ 0.85 1.73
-------- -------
Dividends from net investment income........................ -- --
Distributions from net capital gains........................ -- (0.92)
Distributions in excess of net capital gains................ -- (0.10)
-------- -------
Total distributions......................................... -- (1.02)
-------- -------
Net Asset Value, end of period.............................. $ 11.56 $ 10.71
======== =======
Total return................................................ 7.94% 17.65%
======== =======
Net assets, end of period (in thousands).................... $ 11,610 $ 9,405
======== =======
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 1.03%* 1.03%*
======== =======
Before fee waivers and reimbursements..................... 1.87%* 1.73%*
======== =======
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... (0.68%)* (0.53%)*
======== =======
Before fee waivers and reimbursements..................... (1.52%)* (1.23%)*
======== =======
Portfolio turnover rate..................................... 129.51% 99.05%
======== =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
29
<PAGE> 33
PACIFIC INNOVATIONS TRUST
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997(1)
---------------------------------
<S> <C> <C>
Net Asset Value, beginning of period........................ $ 9.80 $ 10.00
------- -------
Net investment income....................................... 0.09 0.09
Net realized and unrealized gain (loss) on investments and
foreign currency transactions............................. 1.38 (0.01)
------- -------
Total from investment operations............................ 1.47 0.08
------- -------
Dividends from net investment income........................ -- (0.09)
Distributions from net capital gains........................ -- --
Distributions in excess of net capital gains................ -- (0.19)
------- -------
Total distributions......................................... -- (0.28)
------- -------
Net Asset Value, end of period.............................. $ 11.27 $ 9.80
======= =======
Total return................................................ 15.24% 0.56%
======= =======
Net assets, end of period (in thousands).................... $11,231 $ 9,036
======= =======
Ratio of expenses to average net assets:
After fee waivers and reimbursements...................... 1.24%* 1.24%*
======= =======
Before fee waivers and reimbursements..................... 3.08%* 3.19%*
======= =======
Ratio of net investment income to average net assets:
After fee waivers and reimbursements...................... 1.79%* 1.39%*
======= =======
Before fee waivers and reimbursements..................... (0.05%)* (0.56%)*
======= =======
Portfolio turnover rate..................................... 69.64% 53.23%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Commenced operations on March 1, 1997.
* Annualized.
See Notes to Financial Statements.
30
<PAGE> 34
PACIFIC INNOVATIONS TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Pacific Innovations Trust (the "Trust"), was organized under the laws of the
State of Delaware on September 25, 1996, as a "Delaware Business Trust". The
Trust is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Trust commenced operations on March
1, 1997 and operates as a series company comprising seven funds (collectively
referred to as the "Funds"): the Money Market Fund, Managed Bond Fund, Capital
Income Fund, Blue Chip Fund, Mid-Cap Equity Fund, Aggressive Growth Fund and
International Fund.
The Trust is the funding vehicle for variable annuity contracts offered by
Pacific Life Insurance Company (formerly named Pacific Mutual Life Insurance
Company). Bank of America National Trust and Savings Association, a subsidiary
of BankAmerica Corporation, serves as the Funds' investment advisor. Scudder
Kemper Investments, Inc. and Wellington Management Company, LLP serve as
sub-advisors to the Managed Bond Fund and the International Fund, respectively.
Pursuant to consent received from the California Department of Insurance on
September 1, 1997, Pacific Mutual Life Insurance Company ("Pacific Mutual")
implemented a plan of conversion to form a mutual holding company structure (the
"Conversion"). The Conversion created Pacific Mutual Holding Company ("PMHC"), a
mutual holding company and Pacific LifeCorp, an intermediate stock holding
company. Pacific Mutual was converted to a stock life insurance company and
renamed Pacific Life Insurance Company ("Pacific Life"). Under their respective
charters, PMHC must always own at least 51% of the outstanding voting stock of
Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock
of Pacific Life. Owners of Pacific Life's annuity contracts and life insurance
policies have certain membership interests in PMHC, consisting principally of
the right to vote on the election of the Board of Directors of PMHC and on other
matters, and certain rights upon liquidation or dissolution of PMHC.
The following is a summary of the significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principals.
Security Valuation
Portfolio securities listed on an exchange and over the counter securities
quoted on the NASDAQ system are valued at the close of regular trading on each
business day the New York Stock Exchange ("NYSE") is open. Securities are valued
at the last sale price on the securities exchange or securities market in which
such securities are primarily traded. Securities not listed on an exchange or
securities market, or securities for which there were no transactions, are
valued at the mean between the current bid and asked prices. Fixed income
securities are valued by using market quotations, or independent pricing
services, approved by the board of trustees. Any securities or other assets for
which recent market quotations are not readily available are valued as
determined in good faith by or at the direction of the Board of Trustees.
Short-term obligations which mature in sixty days or less are valued at
amortized cost. Short-term obligations with more than sixty days to maturity are
valued at current market value until the sixtieth day prior to maturity, and
thereafter are valued on an amortized cost basis based on the value on such
date.
The Money Market Fund values investments utilizing the amortized cost valuation
technique permitted in accordance with Rule 2a-7 under the Investment Company
Act of 1940, which requires the Fund to comply with certain conditions. This
technique involves valuing a portfolio security initially at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium.
Investment Transactions and Investment Income
Security transactions are accounted for on the trade date. Realized gains and
losses from security transactions are recognized on the specific identification
basis. Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Corporate actions, including dividends, on
foreign securities are recorded as soon as reliable information is available
from the Trust's sources. All premium and discount amortization/accretions are
determined by the effective yield method.
31
<PAGE> 35
- --------------------------------------------------------------------------------
Foreign Currency Translation and Foreign Currency Exchange Contracts
The books and records of the Funds are maintained in U.S. dollars. All assets
and liabilities of a fund that are initially expressed in foreign currencies are
translated into U.S. dollars each business day using the current exchange rates
determined prior to the close of the NYSE. Purchases and sales of foreign
securities and income and expenses relating to the foreign securities are
converted into U.S. dollars based upon currency exchange rates prevailing on the
respective date of such transactions. Gains and losses attributable to changes
in foreign currency exchange rates are included for financial statement purposes
in the net realized gains and losses on investments and foreign currency
transactions.
A forward foreign currency exchange contract ("forward contract") is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate. The International Fund generally enters into forward contracts
as a hedge, in connection with the purchase or sale of a security denominated in
a foreign currency. Forward contracts are valued daily based on the effective
exchange rate and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss upon the closing or settlement of the forward
transaction. Risks of entering into forward contracts include the potential
inability of the counter party to meet the terms of the contract and the fund
giving up opportunity for profit.
There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks involve foreign
currency exchange rate fluctuations, adverse political and economic
developments, and the imposition of unfavorable foreign governmental laws and
regulations.
Futures
A futures contract is an agreement to purchase or sell a specified quantity of
an underlying instrument at a specified future date, or to make or receive a
cash payment based on the value of a securities index. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" such contract on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Such unrealized gains and losses are included in the caption "Accumulated net
unrealized appreciation (depreciation) on investment foreign futures, foreign
currency transactions, and forward currency contracts" in the Statement of
Assets and Liabilities. A fund agrees to receive from or pay to the broker an
amount of "variation margin" which is included as a payable or receivable in the
Statement of Assets and Liabilities. When the futures contract is closed, the
fund records a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transaction and the Fund's basis in the
contract. The International Fund has entered into futures contracts to hedge a
portion of its portfolio.
The use of futures contracts involves, to varying degrees, elements of market
risk. Risks arise from the possible imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets, and
the possible inability of counterparties to meet the terms of their contracts.
However, the fund's activities in futures contracts are conducted through
regulated exchanges which minimize counterparty credit risks.
The International Fund had the following open futures contracts at June 30,
1998:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF CONTRACT EXPIRATION APPRECIATION/
CONTRACTS VALUE DATE (DEPRECIATION)
------------ -------- ---------- --------------
<S> <C> <C> <C> <C>
Purchased:
Toronto Index
(Canada)............... 500 $2,095 09/17/98 $(140)
</TABLE>
Dividends and Distributions to Shareholders
The Funds record dividends and distributions to shareholders on the ex-date.
Each Fund, with the exception of the Money Market Fund and the Managed Bond Fund
declare and pay dividends arising from net investment income gains on an annual
basis. Dividends from net investment income are declared and paid daily by the
Money Market Fund, and declared and paid monthly by the Managed Bond Fund.
Distributions from net realized capital gains, if any, are declared and paid on
an annual basis, for each of the Funds.
The amount of distributions from net investment income and net realized capital
gains, if any, are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Key differences
include the treatment of short-term capital gains, the deferral of post October
losses,
32
<PAGE> 36
- --------------------------------------------------------------------------------
wash sales, and the treatment of foreign currencies. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment. Distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as distributions in
excess of net investment income or net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital. Permanent
differences in the Aggressive Growth Fund which amount to $30,687 were
reclassified from undistributed net income to additional paid-in capital in
accordance with these policies.
Repurchase Agreements
Under a repurchase agreement a fund may acquire securities from financial
institutions, subject to the sellers agreement to repurchase such securities at
a mutually agreed upon time and price. The resale price is in excess of the
purchase price and reflects an agreed upon interest rate for the period of time
the agreement is outstanding. The Funds' custodian takes possession of the
collateral pledged for investments in repurchase agreements on behalf of the
Funds. It is the policy of the Funds to value the underlying collateral daily on
a mark to market basis to determine that the value, including accrued interest,
is at least equal to the repurchase price. If the counter party to the agreement
defaults, a fund might incur a loss or delay in the realization of proceeds if
the value of the collateral securing the repurchase agreement declines or incur
disposition costs in liquidating the collateral.
Use of Estimates
Management of the Funds has made certain estimates and assumptions relating to
the reporting of assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
2. INVESTMENT MANAGEMENT AGREEMENTS,
INVESTMENT SUB-ADVISORY AGREEMENTS
AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into a Management Agreement with Bank of America National
Trust and Savings Association ("Manager") which provides that the Manager will
furnish each Fund with investment advisory and administrative services. The
Manager receives a fee computed daily and paid monthly based on annual rates of
0.22%, 0.37%, 0.48%, 0.53%, 0.53%, 0.61%, and 0.66% of the average daily net
assets of the Money Market Fund, Managed Bond Fund, Capital Income Fund, Blue
Chip Fund, Mid-Cap Equity Fund, Aggressive Growth Fund, and International Fund,
respectively.
The Manager has engaged Scudder Kemper Investments, Inc. and Wellington
Management Company, LLP to serve as sub-advisors for the Managed Bond Fund and
International Fund, respectively. The sub-advisors receive a fee from the
Manager computed daily and paid monthly based on an annual rate of 0.20% and
0.40% of the average daily net assets of the Managed Bond Fund and International
Fund, respectively.
The Management Agreement provides that the Manager will reimburse each Fund to
prevent its expenses from exceeding a specific percentage limit. During the
period ended June 30, 1998, the Manager reimbursed all of the Funds for expenses
pursuant to those provisions.
The Manager and Pacific Life have jointly agreed to waive fees and reimburse
Fund expenses, excluding interest, taxes, brokerage, and other portfolio
transactions costs, so that the expenses will not exceed 0.60%, 0.75%, 0.87%,
0.94%, 0.94%, 1.03%, and 1.24% of the average net assets on an annual basis of
the Money Market Fund, Managed Bond Fund, Capital Income Fund, Blue Chip Fund,
Mid-Cap Equity Fund, Aggressive Growth Fund, and International Fund,
respectively.
PNC Bank, N.A. ("PNC Bank") serves as custodian for the Funds. As custodian of
the Trust's assets, PNC Bank performs a variety of custodial services including
maintaining a separate account for each Fund, holding and disbursing portfolio
securities, receiving and disbursing money, and collecting income and other
payments and distributions on account of the portfolio securities.
33
<PAGE> 37
- --------------------------------------------------------------------------------
PFPC serves as accounting agent for the Funds. Under the Sub-Administration and
Accounting Services Agreement, PFPC has agreed to provide certain accounting,
bookkeeping, pricing, dividend distribution calculation, and disbursing services
with respect to the Trust. PNC Bank and PFPC are affiliates of PNC Bank Corp.
Pacific Life is the transfer agent for the Trust and also provides shareholder
support services.
Certain officers and/or Trustees of the Trust are also officers and/or directors
of the sub-administrator and accounting agent. During the period ended June 30,
1998, the Trust made no direct payments to its officers or Trustees, who were
affiliates of the Manager.
3. PURCHASES AND SALES OF SECURITIES
The cost of securities purchased and proceeds from securities sold, excluding
short-term obligations, during the period ended June 30, 1998 were: $5,975,109
and $1,883,716 for Managed Bond Fund; $10,491,927 and $4,694,856 for Capital
Income Fund; $12,960,625 and $6,856,204 for Blue Chip Fund; $6,459,465 and
$5,019,684 for Mid-Cap Equity Fund; $12,207,855 and $13,871,176 for Aggressive
Growth Fund; and $7,662,360 and $6,347,605 for International Fund, respectively.
4. TAX MATTERS
It is the Trust's policy to comply with the requirements of the Internal Revenue
Code pertaining to regulated investment companies and to distribute all of its
taxable income, as well as any net realized gains, to its shareholders.
Therefore, no federal income or excise tax provision has been made. Foreign
taxes have been provided for on dividend and interest income earned on foreign
investments in accordance with the applicable country's tax rates and, to the
extent unrecoverable, are recorded as a reduction of investment income.
Tax Cost of Investments
At June 30, 1998, the net unrealized appreciation or depreciation based on the
cost of investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
TAX GROSS GROSS NET UNREALIZED
COST OF UNREALIZED UNREALIZED APPRECIATION
INVESTMENTS APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Money Market Fund..... $ 5,218,872 $ 0 $ 0 $ 0
Managed Bond Fund..... 15,050,325 176,096 (9,885) 166,211
Capital Income Fund... 21,348,442 1,675,639 (871,045) 804,594
Blue Chip Fund........ 24,598,061 5,444,823 (251,184) 5,193,639
Mid-Cap Equity Fund... 12,036,042 2,389,618 (374,456) 2,015,162
Aggressive Growth
Fund................. 8,664,098 1,102,747 (520,523) 582,224
International Fund.... 10,218,475 1,307,645 (369,585) 938,060
</TABLE>
34
<PAGE> 38
SEMI-ANNUAL REPORT
AS OF JUNE 30, 1998
PACIFIC INNOVATIONS TRUST
478-8A 7/98
Pacific Life Insurance Company --------------
Variable Annuity Department BULK RATE
P.O. Box 7187 U.S. POSTAGE
Newport Beach, California 92660-7187 PAID
PACIFIC LIFE
Address Service Requested 92799
--------------
