<PAGE> 1
[METROPOLITAN WEST LOGO BLACK]
[METROPOLITAN WEST LOGO RED]
METROPOLITAN WEST FUNDS
TOTAL RETURN BOND FUND
LOW DURATION BOND FUND
ALPHATRAK 500 FUND
SEMI-ANNUAL REPORT
(Unaudited)
[DINGBAT]
September 30, 1999
<PAGE> 2
METROPOLITAN WEST FUNDS
Dear Shareholder:
We are pleased to enclose the semi-annual report for the Metropolitan West Low
Duration and Total Return Bond Funds and the Metropolitan West AlphaTrak 500
Fund, for the period ended September 30, 1999.
As the debt markets have stabilized and the liquidity crisis of 1998 eased in
the first half of 1999, the Funds have benefited from positive price performance
in the investment grade corporate and mortgages markets. All Funds were able to
outperform their individual benchmarks as well as rank near the top of their
respective peer groups.
Returns for the Funds, net of fees, were as follows:
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
PERIOD ENDED (ANNUALIZED) ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Low Duration Bond Fund +7.45% +7.38%
Merrill Lynch 1-3 Year US Treasury
Index* +3.23% +6.17%
Total Return Bond Fund +4.48% +9.20%
Lehman Aggregate Index* -0.37% +7.21%
AlphaTrak 500 Fund+ +30.93% +14.07%
S&P 500 Stock Index+* +27.80% +11.50%
</TABLE>
- ---------
* An unmanaged Index
+ AlphaTrak 500 Fund and S&P 500 Stock Index -- period from June 29, 1998
(inception of AlphaTrak 500 Fund) through September 30, 1999.
This period also included the first anniversary of our enhanced equity index
fund, the Metropolitan West AlphaTrak 500 Fund. Investors participating in this
Fund since its inception have outperformed the S&P 500 index by over 250 basis
points.
As you can see from the one year return of the Lehman Brothers Aggregate Index,
interest rate increases through September 30, 1999 have had a dramatic negative
impact on return. We are pleased by the relative performance our Funds have
achieved. By maintaining a long term disciplined approach to our investment
process, we believe our shareholders will continue to benefit from the
strategies employed.
- --------------------------------------------------------------------------------
1
<PAGE> 3
As always, our philosophy is to maintain open communication with our
shareholders. Feel free to contact us at (310) 966-8900 if you have any
comments, questions, or suggestions. We appreciate your support and confidence
in our investment style of fixed income management.
Sincerely,
/s/ Scott Dubchansky
Scott Dubchansky,
President and Trustee
Past performance is not indicative of future results. Share prices and returns
will fluctuate and when redeemed, shares may be worth more or less than their
original investment. Please read the prospectus carefully before you invest.
U.S. Treasury bonds unlike mutual funds are insured direct obligations of the
U.S. Government that offer a fixed rate of return.
The Metropolitan West Funds are distributed by First Data Distributors, Inc.
4400 Computer Drive, Westborough MA 01581.
To be preceded or accompanied by a prospectus. DFU 11/99
- --------------------------------------------------------------------------------
2
<PAGE> 4
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--96.96%
ASSET-BACKED $ 2,250,000 Atherton Franchisee Loan Funding
SECURITIES--12.96%(3) 1999-A E, 8.25%, 10/15/15(4) $ 1,466,719
1,250,000 Empire Funding Home Loan Owner
Trust 1999-1 M2, 9.00%, 05/25/30 1,183,790
1,000,000 Falcon Franchise Loan LLC 1999-1
D, 8.40%, 07/05/13(4) 912,187
1,000,000 Falcon Franchise Loan LLC 1999-1
E, 6.50%, 01/05/14(4) 556,562
2,615,577 First Union Home Equity Loan
Trust 1997-3 B, 7.39%, 03/25/29 2,548,553
1,000,000 Green Tree Financial Corp.
1996-9 A6, 7.69%, 01/15/28 1,024,218
1,000,000 Green Tree Home Equity Loan
Trust 1997-B M1, 7.65%, 04/15/27 1,017,745
3,000,000 Green Tree Home Equity Loan
Trust 1998-C B2, 8.06%, 07/15/29 2,691,105
2,000,000 Green Tree Home Improvement Loan
Trust 1997-E HEB2, 7.77%,
01/15/29 1,823,750
3,000,000 Green Tree Home Improvement Loan
Trust 1998-B HEB2, 8.49%,
11/15/29 2,844,375
1,979,083 Green Tree Recreational
Equipment & Consumer Trust
1998-A A4H, 8.26%, 05/15/29 1,972,522
2,000,000 Provident Bank Home Equity Loan
Trust 1997-4 A3, 6.91%, 01/25/29 1,979,450
------------
20,020,976
------------
CORPORATES--30.67%(2)
Banks--2.54% 1,000,000 Bergen Bank ASA (FRN), 6.00%,
08/29/49 741,650
1,085,000 MBNA Corp. (FRN) (MTN), 6.11%,
05/23/03 1,077,370
570,000 Midland Bank PLC (FRN), 5.75%,
06/29/49 452,523
400,000 Okobank (FRN) (MTN), 6.01%,
09/29/49 388,600
1,000,000 Republic New York Corp., 7.20%,
07/15/97 870,483
400,000 Skandinavinska Enskilda (FRN)
(MTN), 6.51%, 06/29/49 396,300
------------
3,926,926
------------
Brokerage Services 2,000,000 Bear Stearns Co., Inc.,
- --6.12% 7.25%, 10/15/06 1,976,726
750,000 Bear Stearns Co., Inc., 7.00%,
03/01/07 730,000
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 5
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
$ 2,200,000 Donaldson, Lufkin, Jenrette,
Inc., 6.88%, 11/01/05 $ 2,154,141
1,300,000 Lehman Brothers Holdings, Inc.,
7.38%, 01/15/07 1,280,042
1,500,000 Lehman Brothers Holdings, Inc.,
8.50%, 05/01/07 1,571,920
400,000 Merrill Lynch & Co., Inc.,
6.00%, 02/17/09 366,572
1,500,000 Merrill Lynch & Co., Inc.,
6.88%, 11/15/18 1,379,350
------------
9,458,751
------------
Electric Utilities 300,000 Alabama Power Co., 9.00%,
- --0.74% 12/01/24 308,672
800,000 Arkansas Power & Light Co.,
8.75%, 03/01/26 826,190
------------
1,134,862
------------
Finance--5.09% 2,250,000 American Financial Group, 7.13%,
04/15/09 2,106,366
400,000 AT&T Capital Corp. (FRN) (MTN),
6.26%, 12/05/00 399,393
500,000 Bankers Trust Institutional
Capital Trust, 7.75%,
12/01/26(4) 460,298
1,500,000 Crestar Capital Trust I, 8.16%,
12/15/26 1,539,333
1,300,000 Lumbermens Mutual Casualty Co.,
8.30%, 12/01/37(4) 1,145,962
1,500,000 Lumbermens Mutual Casualty Co.,
8.45%, 12/01/97(4) 1,248,199
1,000,000 Zurich Capital Trust I, 8.38%,
06/01/37(4) 971,383
------------
7,870,934
------------
Industrial--10.04% 390,000 Cemex S.A. (MTN), 8.50%,
08/31/00 394,524
4,750,000 Harcourt General, Inc., 7.30%,
08/01/97 3,953,434
5,100,000 Husky Oil Ltd., 8.90%, 08/15/28 4,954,088
1,500,000 Mississippi Chemical, 7.25%,
11/15/17 1,412,400
5,000,000 Waste Management, Inc., 6.13%,
07/15/01 4,796,235
------------
15,510,681
------------
Real Estate 500,000 Developers Diversified Realty
Investment Trust Corp. (MTN), 6.84%, 12/16/04 470,555
- --5.72% 1,000,000 Developers Diversified Realty
Corp. (MTN), 7.50%, 07/15/18 905,885
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 6
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
$ 1,000,000 Health & Retirement Properties
Trust, 7.50%, 10/01/03 $ 958,750
1,700,000 Highwoods Excersiable Put
Option, 7.19%, 06/15/04(4) 1,644,750
600,000 La Quinta Inns (MTN), 7.11%,
10/17/01 566,016
2,300,000 Rouse Co. (MTN), 8.09%, 05/16/05 2,339,401
2,000,000 United Dominion Realty Trust
(MTN), 7.67%, 01/26/04 1,956,630
------------
8,841,987
------------
Sovereign--0.42% 744,000 Republic of Argentina (FRN),
6.81%, 03/31/05 653,790
------------
TOTAL CORPORATES 47,397,931
------------
MORTGAGE-BACKED--44.44%(3)
Non-Agency 63,864 Blackrock Capital Finance L.P.
Mortgage-Backed 1997-R2 AP, 7.81%, 12/25/35(4) 66,259
- --27.27% 3,000,000 Blaylock Mortgage Capital Corp.
1997-A B1, 6.43%, 10/25/04(4) 2,863,125
2,913,434 Citicorp Mortgage Securities,
Inc. 1998-7 A4 (IO), 6.75%,
08/25/28(6) 390,292
215,935 CMC Securities Corp. III 1994-A
A19, 5.61%, 02/25/24 157,505
78,414 Collateralized Mortgage
Obligation Trust 57 D, 9.90%,
02/01/19 82,440
89,809,923 DLJ Commercial Mortgage Corp.
1999-CG2 S (IO), 0.46%,
06/10/24(6) 3,089,461
1,416,497 DLJ Mortgage Acceptance Corp.
1992-Q8 A2, 6.52%, 11/25/22 1,424,766
1,540,829 DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.86%,
05/25/24(6) 69,693
5,528,838 DLJ Mortgage Acceptance Corp.
1994-QE1 S (IO), 3.71%,
04/25/24(4) 307,265
1,628,195 DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO), 4.02%,
06/25/24(4,6) 99,646
10,183,238 DLJ Mortgage Acceptance Corp.
1995-Q7 SA (IO), 3.01%,
11/25/25(6) 513,490
2,513,129 DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO), 4.93%,
12/25/25(6) 175,668
6,355,312 DLJ Mortgage Acceptance Corp.
1996-Q5 SA (IO), 3.54%,
06/25/26(6) 381,160
6,966,804 DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.13%,
01/25/26(4,6) 333,814
5,530,351 DLJ Mortgage Acceptance Corp.
1996-QE3 SA (IO), 4.07%,
03/25/26(6) 343,783
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 7
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
$ 500,000 GE Capital Mortgage Services,
Inc. 1994-6 A11, 6.50%, 04/25/24 $ 434,113
259,628 Independent National Mortgage
Corp. 1995-N A5, 7.50%, 10/25/25 260,943
82,607,335 LB Commercial Conduit Mortgage
Trust 1998-C4 X (IO), 0.78%,
09/15/23 3,044,576
796,294 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%, 06/25/26 797,289
4,179,660 Nomura Asset Securities Corp.
1994-4A 2IO (IO), 0.98%,
09/25/24(6) 57,031
1,115,140 Norwest Asset Securities Corp.
1998-4 1A7, 9.00%, 02/25/28 1,137,791
2,989,143 Norwest Asset Securities Corp.
1999-16 A7, 6.40%, 06/25/29 2,861,172
1,050,000 Norwest Integrated Structured
Assets, Inc. 1999-2 1A2, 11.99%,
09/25/29 997,500
818,833 OCWEN Residential MBS Corp.
1998-R2 AP, 6.34%, 11/25/34(4) 799,099
163,955 Residential Funding Mortgage
Securities I 1993-S42 A10,
8.30%, 10/25/08 157,884
2,000,000 Residential Funding Mortgage
Securities I 1998-S2 A2, 7.00%,
01/25/28 1,952,950
3,550,000 Residential Funding Mortgage
Securities II 8.10%, 09/25/29 3,549,833
3,335,108 Resolution Trust Corp. 1994-C1
F, 8.00%, 06/25/26 3,300,713
136,787 Resolution Trust Corp. 1995-2
B6, 6.36%, 05/25/29 138,156
1,175,237 Resolution Trust Corp. 1995-C2
F, 7.00%, 05/25/27 1,147,148
192,881 Ryland Mortgage Securities Corp.
1991-18 4A, 14.00%, 11/25/31 207,456
762,875 Ryland Mortgage Securities Corp.
1994-5 M3, 6.37%, 10/25/23 560,237
6,500,000 Ryland Mortgage Securities Corp.
III 1992-A 1C, 8.26%, 03/29/30 6,442,150
150,000 Structured Asset Securities
Corp. 1995-3B 2A1, 6.50%,
01/28/24 139,021
3,000,000 Structured Asset Securities
Corp. 1995-C4 D, 7.00%, 06/25/26 2,970,939
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 8
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
$ 850,000 Structured Asset Securities
Corp. 1996-6 1A5, 7.50%,
08/25/26 $ 839,328
172,310 Structured Mortgage Asset
Residential Trust 1991-7 I (IO),
8.50%, 12/25/22(6) 37,167
------------
42,130,863
------------
U.S. Agency 71,752 Fannie Mae G94-12 B,
Mortgage-Backed 6.50%, 09/17/22 71,793
- --17.17% 195,917 Fannie Mae 1992-143 SH, 8.75%,
04/25/22 200,347
37,903 Fannie Mae 1992-200 MC, 7.50%,
08/25/22 37,453
484,103 Fannie Mae 1993-115 S, 3.80%,
07/25/23 300,903
268,291 Fannie Mae 1993-189 SB, 7.62%,
10/25/23 222,433
11,673,832 Fannie Mae 1993-199 SD (IO),
0.87%, 10/25/23 268,790
1,999,490 Fannie Mae 1993-208 SE, 8.11%,
11/25/23 1,828,284
259,925 Fannie Mae 1993-221 SD, 9.00%,
03/25/08 261,023
203,318 Fannie Mae 1993-251 C, 6.50%,
09/25/23 201,903
287,973 Fannie Mae 1994-41 SC, 6.74%,
03/25/24 247,139
1,352,583 Fannie Mae 1994-56 TA (IO),
6.50%, 04/25/17 55,150
381,396 Fannie Mae 1995-10 Z, 6.50%,
03/25/24 372,842
271,230 Fannie Mae 1997-34 SA, 24.90%,
10/25/23 587,384
5,250,000 Fannie Mae 1997-44 SB (IO),
2.50%, 06/25/08 296,269
1,105,826 Fannie Mae 1998-26 SD, 8.67%,
03/25/24 1,011,039
940,637 Fannie Mae 1999-4 SC, 5.09%,
01/25/24 846,573
269,271 Fannie Mae Pool 233672, 7.74%,
09/01/23 276,180
77,716 Fannie Mae Pool 308798, 6.73%,
04/01/25 79,472
230,577 Fannie Mae Pool 312155, 7.23%,
03/01/25 235,649
7,147 Freddie Mac 1164 O,
6.81%, 11/15/06 93,476
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 9
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
$ 197,898 Freddie Mac 1336 H,
7.75%, 01/15/21 $ 200,133
1,944,991 Freddie Mac 1499 G (IO),
7.00%, 02/15/19 31,900
283,829 Freddie Mac 1515 SA,
8.61%, 05/15/08 290,167
7,625 Freddie Mac 1541 JA,
5.00%, 12/15/22 7,317
898,928 Freddie Mac 1564 SA,
8.77%, 08/15/08 887,673
63,566 Freddie Mac 1564 SE,
9.10%, 08/15/08 64,638
1,636,000 Freddie Mac 1627 E,
6.00%, 02/15/23 1,542,442
6,000,000 Freddie Mac 1627 PN (IO),
6.00%, 09/15/22 1,481,101
1,744,889 Freddie Mac 1980 Z,
7.00%, 07/15/27 1,584,573
1,516,037 Freddie Mac 1985 SA,
10.19%, 08/17/27 1,417,494
145,472 Freddie Mac 2089 SA,
9.16%, 07/15/15 141,244
9,400,430 Freddie Mac 2097 PI (IO),
6.50%, 02/15/25 1,584,169
724,000 Freddie Mac 2098 TZ,
6.00%, 01/15/28 575,240
6,904,923 Freddie Mac 2136 PY (IO),
6.50%, 11/15/22 1,214,660
553,589 Freddie Mac 2136 ZA,
6.50%, 03/15/29 553,126
3,250,015 Freddie Mac 2149 KE (IO),
6.50%, 01/15/22 971,635
1,880,890 Freddie Mac 2156 S,
10.60%, 05/15/29 1,808,299
29,219,697 Freddie Mac 2156 SQ (IO),
2.27%, 05/15/29 1,677,211
2,000,000 Government National Mortgage
Association Pool 30508,
7.50%, 11/01/29 2,003,126
1,048,768 Government National Mortgage
Association Pool 470634,
6.50%, 07/15/29 1,003,425
------------
26,533,675
------------
TOTAL MORTGAGE-BACKED 68,664,538
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 10
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES--8.89%
$ 330,000 U.S. Strips, 0.00%, 11/15/05 $ 227,884
238,000 U.S. Treasury Notes, 7.00%,
07/15/06 249,974
280,000 U.S. Treasury Notes, 12.75%,
11/15/10 372,313
10,876,000 U.S. Treasury Notes, 8.13%,
08/15/19 12,881,263
------------
13,731,434
------------
TOTAL BONDS
(Cost $152,667,342) 149,814,879
------------
SHORT TERM INVESTMENTS--0.81%
Commercial Paper 500,000 AT&T Corp., 5.36%(5), 10/04/99 499,781
- --0.32% ------------
Money Market RIC 595,400 J.P. Morgan Institutional Prime
- --0.39% Money Market 595,400
------------
U.S. Treasury Bills 151,000 U.S. Treasury Bill,
- --0.10% 4.70% to 4.85%(5), 12/09/99 149,677
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,244,820) 1,244,858
------------
TOTAL INVESTMENTS--97.77%
(Cost $153,912,162)(1) 151,059,737
CASH AND OTHER ASSETS, LESS
LIABILITIES--2.23% 3,440,208
------------
NET ASSETS--100.00% $154,499,945
============
</TABLE>
FUTURES CONTRACTS: SHORT POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
(131) U.S. Treasury 2 Year Note, December 1999 $(32,750)
========
</TABLE>
Notes:
(1) Cost for Federal income tax purposes is $153,912,162 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 869,988
Gross unrealized depreciation (3,722,413)
-----------
Net unrealized depreciation $(2,852,425)
===========
</TABLE>
(2) Securities with a call or reset feature will have an effective maturity date
less than the stated maturity.
(3) Securities backed by mortgage or consumer loans where payment is
periodically made will have an effective maturity date less than the stated
maturity date.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The market value
of these securities at September 30, 1999 was $12,875,268 representing 8.33%
of total net assets.
(5) Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 11
METWEST TOTAL RETURN BOND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
(6) Securities determined to be illiquid by the Fund's Board of Trustees.
Information related to these securities is as follows:
<TABLE>
<CAPTION>
DATE OF % OF
SECURITY PURCHASE VALUE TNA
- -------- -------- ---------- ----
<S> <C> <C> <C>
Citicorp Mortgage Securities, Inc. 1998-7
A4 (IO), 6.75%, 08/25/28 09/21/99 $ 390,292 0.25%
DLJ Commercial Mortgage Corp. 1999-CG2 S
(IO), 0.46%, 06/10/24 08/01/99 3,089,461 2.00
DLJ Mortgage Acceptance Corp. 1994-Q8 IIS
(IO), 1.86%, 05/25/24 06/19/97 69,693 0.05
DLJ Mortgage Acceptance Corp. 1994-QE2 S
(IO), 4.02%, 06/25/24 01/06/99 99,646 0.06
DLJ Mortgage Acceptance Corp. 1995-Q7 SA
(IO), 3.01%, 11/25/25 10/20/98 513,490 0.33
DLJ Mortgage Acceptance Corp. 1995-QE11 SA
(IO), 4.93%, 12/25/25 03/30/99 175,668 0.11
DLJ Mortgage Acceptance Corp. 1996-Q5 SA
(IO), 3.54%, 06/25/26 11/02/98 381,160 0.25
DLJ Mortgage Acceptance Corp. 1996-QA S
(IO), 3.13%, 01/25/26 10/20/98 333,814 0.22
DLJ Mortgage Acceptance Corp. 1996-QE3 SA
(IO), 4.07%, 03/25/26 01/22/99 343,783 0.22
Nomura Asset Securities Corp. 1994-4A 2IO
(IO), 0.98%, 09/25/24 06/01/99 57,031 0.04
Structured Mortgage Asset Residential Trust
1991-7 I (IO), 8.50%, 12/25/22 06/25/97 37,167 0.02
---------- ----
$5,491,205 3.55%
========== ====
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at September
30, 1999.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE> 12
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--85.44%
ASSET-BACKED $ 1,205,980 Atherton Franchisee Loan
SECURITIES--18.51%(3) Funding 1999-A E, 8.25%,
10/15/15(4) $ 786,148
5,000,000 Cit Group Home Equity Loan
Trust 1997-1 M2, 7.10%,
07/15/27 4,901,275
29,740 Contimortgage Home Equity Loan
Trust 1994-4 A6, 8.27%,
12/15/24 30,282
772,868 Contimortgage Home Equity Loan
Trust 1997-2 A5, 6.97%,
10/15/13 772,540
2,000,000 Delta Funding Home Equity Loan
Trust 1996-2 A5, 8.01%,
10/25/27(6) 2,051,530
11,000,000 Empire Funding Home Loan Owner
Trust 1999-1 M2, 9.00%,
05/25/30 10,417,352
437,500 Falcon Franchise Loan LLC
1999-1 D, 8.40%, 07/05/13(4) 399,082
1,586,500 Falcon Franchise Loan LLC
1999-1 E, 6.50%, 01/05/14(4) 882,986
3,410,000 First Plus Home Loan Trust
1997-1 A6, 6.95%, 12/10/15 3,396,820
1,137,207 First Union Home Equity Loan
Trust 1997-3 B, 7.39%,
03/25/29 1,108,066
1,500,000 FirstCity Capital Home Equity
Funding Corporation 1998-1 A4,
6.72%, 06/25/28(4) 1,448,203
2,750,000 Green Tree Financial Corp.
1994-1 A5, 7.65%, 04/15/19 2,827,344
1,210,000 Green Tree Home Equity Loan
Trust 1997-B M1, 7.65%,
04/15/27 1,231,471
2,000,000 Green Tree Home Equity Loan
Trust 1998-C B2, 8.06%,
07/15/29 1,794,070
1,800,000 Green Tree Home Improvement
Loan Trust 1996-F HIM1,
7.30%, 11/15/27 1,781,667
5,000,000 Green Tree Home Improvement
Loan Trust 1998-B HEB2,
8.49%, 11/15/29 4,740,625
2,750,000 Green Tree Home Improvement
Loan Trust 1998-B HEM2,
7.33%, 11/15/29 2,658,475
3,126,951 Green Tree Recreational,
Equipment & Consumer Trust
1998-A A4H, 8.26%, 05/15/29 3,116,585
1,487,926 New York City Tax Lien 1998-2A
A, 7.98%, 07/25/06(4) 1,486,736
84,331 Olympic Automobile Receivables
Trust 1994-B A2, 6.85%,
06/15/01 84,421
5,951,494 Structured Settlements Fund
1999-A A, 7.25%, 12/20/15(4) 5,897,116
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE> 13
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONTINUED)
ASSET-BACKED $ 7,212,000 TMI Home Loan Trust 1998-A A4,
SECURITIES 7.56%, 05/25/18(4) $ 7,169,139
(CONTINUED) 85,095 UCFC Home Equity Loan
1994-B1 A4, 7.45%, 06/10/11 85,628
100,210 UCFC Home Equity Loan
1995-D1 A2, 6.20%, 03/10/14 100,132
------------
59,167,693
------------
CORPORATES--20.67%(2)
Banks--4.61% 1,100,000 Bergen Bank ASA (FRN),
6.00%, 08/29/49 815,815
500,000 Christiania Bank (FRN),
5.31%, 11/29/49 384,850
2,600,000 Den Norske Bank ASA (FRN),
6.09%, 08/29/49 1,933,560
800,000 MBNA Corp. (MTN),
6.50%, 09/15/00 797,514
400,000 MBNA Corp. (FRN) (MTN),
5.92%, 02/06/01 398,930
1,175,000 MBNA Corp. (FRN) (MTN),
5.83%, 09/13/01 1,167,403
3,400,000 MBNA Corp. (FRN) (MTN),
5.87%, 06/17/02 3,371,943
2,000,000 MBNA Corp. (FRN) (MTN),
5.98%, 09/09/02 1,984,146
510,000 Midland Bank PLC (FRN),
5.48%, 06/29/49 404,889
680,000 Midland Bank PLC (FRN),
6.25%, 09/29/49 539,753
1,300,000 Okobank (FRN) (MTN),
6.01%, 09/29/49 1,262,950
1,300,000 Skandinavinska Enskilda (FRN)
(MTN), 6.51%, 06/29/49 1,287,975
400,000 Skandinaviska Enskilda (FRN)
(MTN), 6.51%, 03/29/49 399,560
------------
14,749,288
------------
Brokerage 3,000,000 Bear Stearns Co., Inc. (FRN)
Services--7.59% (MTN), 5.63%, 06/26/04 2,993,925
1,800,000 Bear Stearns Co., Inc. (FRN)
(MTN), 5.89%, 03/18/05 1,800,157
5,000,000 Bear Stearns Co., Inc.,
7.25%, 10/15/06 4,941,814
3,000,000 Donaldson, Lufkin, Jenrette,
Inc., 6.88%, 11/01/05 2,937,465
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE> 14
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
Brokerage $ 550,000 Donaldson, Lufkin, Jenrette,
Services Inc. (MTN), 6.90%, 10/01/07 $ 534,298
(continued) 1,000,000 Donaldson, Lufkin, Jenrette,
Inc., 6.50%, 06/01/08 936,391
2,000,000 Goldman Sachs Group (MTN),
7.20%, 11/01/06(4) 1,986,012
200,000 Lehman Brothers Holdings,
Inc., 6.63%, 11/15/00 200,340
500,000 Lehman Brothers Holdings, Inc.
(FRN) (MTN), 6.12%, 03/17/07 488,650
4,000,000 Lehman Brothers Holdings,
Inc., 8.50%, 05/01/07 4,191,788
250,000 Lehman Brothers Holdings PLC
(FRN) (MTN), 5.98%, 02/20/01 249,950
3,000,000 Lehman Brothers Holdings PLC
(FRN) (MTN), 5.91%, 01/30/02 2,997,900
------------
24,258,690
------------
Electric 600,000 Arkansas Power & Light Co.,
Utilities--0.19% 8.75%, 03/01/26 619,642
------------
Finance--0.85% 100,000 American Bankers Insurance
Group, Inc. (FRN) (MTN),
5.96%, 04/12/00 100,232
1,500,000 AT&T Capital Corp. (FRN)
(MTN), 6.26%, 12/05/00 1,497,723
1,250,000 Lumbermens Mutual Casualty
Co., 8.30%, 12/01/37(4) 1,101,886
------------
2,699,841
------------
Industrial--2.01% 4,000,000 Harcourt General, Inc.,
7.30%, 08/01/97 3,329,208
3,000,000 Pennzoil Co., 10.63%, 06/01/01 3,090,065
------------
6,419,273
------------
Real Estate 4,000,000 EOP Operating L.P.,
Investment 6.38%, 02/15/03 3,877,336
Trust--5.42% 3,000,000 Highwoods Excersiable Put
Option, 7.19%, 06/15/04(4) 2,902,500
3,300,000 La Quinta Inns (MTN),
7.11%, 10/17/01 3,113,091
1,500,000 Rouse Co. (FRN) (MTN),
6.34%, 05/29/01 1,496,655
5,811,000 Rouse Co., 8.50%, 01/15/03 5,947,773
------------
17,337,355
------------
TOTAL CORPORATES 66,084,089
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE> 15
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED--44.23%(3)
Non-Agency $ 195,420 Bear Stearns Mortgage
Mortgage-Backed Securities, Inc. 1993-8 AS16,
- --34.63% 10.75%, 08/25/24 $ 189,344
255,458 Blackrock Capital Finance L.P.
1997-R2 AP, 7.81%, 12/25/35(4) 265,037
1,894,437 Chase Mortgage Finance Corp.
1999-AS2 2A1, 6.50%, 07/25/29 1,890,771
75,421 Citicorp Mortgage Securities,
Inc. 1988-16 A1, 10.00%,
11/25/18 78,939
116,360 Citicorp Mortgage Securities,
Inc. 1991-5 A, 5.75%, 05/25/21 90,506
253,150 Citicorp Mortgage Securities,
Inc. 1994-3 A12, 9.00%,
02/25/24 249,076
44,855 Collateralized Mortgage
Securities Corp. X 1, 7.00%,
06/01/06 44,664
391,643 Countrywide Funding Corp.
1993-11 A12, 8.50%, 02/25/09 377,507
100,000 Countrywide Funding Corp.
1994-7 A7, 6.50%, 03/25/24 94,565
3,202,920 Countrywide Mortgage Backed
Securities, Inc. 1993-D A12,
7.50%, 01/25/09 3,208,365
28,172 Countrywide Mortgage Backed
Securities, Inc. 1993-D A13,
6.00%, 01/25/09 28,099
160,659,973 DLJ Commercial Mortgage Corp.
1999-CG2 S (IO), 0.46%,
06/10/24(6) 5,526,703
583,937 DLJ Mortgage Acceptance Corp.
1993-Q18 SC (IO), 2.91%,
01/25/24(6) 8,963
1,483,796 DLJ Mortgage Acceptance Corp.
1994-QE1 A1, 7.27%,
04/25/24(4) 1,488,284
9,573,592 DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.86%,
05/25/24(6) 433,023
1,085,302 DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO),
4.93%, 12/25/25(6) 75,863
7,928,836 DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.13%,
01/25/26(4,6) 379,910
2,291,292 DLJ Mortgage Acceptance Corp.
1996-Q5 SA (IO), 3.54%,
06/25/26(6) 137,420
90,702 FDIC REMIC Trust 1994-C1 2A2,
7.85%, 09/25/25 90,986
2,556,797 GE Capital Mortgage Services,
Inc. 1992-12F F1, 7.00%,
10/25/07 2,553,204
105,986 GE Capital Mortgage Services,
Inc. 1993-10 A2, 9.00%,
09/25/23 108,038
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE> 16
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 959,775 GE Capital Mortgage Services,
Mortgage-Backed Inc. 1996-4 A5, 7.00%, 03/25/26 $ 918,500
(continued) 71,662 Guardian Savings & Loan
Association 1988-2 A,
6.51%, 09/25/18 70,463
28,041 Guardian Savings & Loan
Association 1988-5 A,
6.60%, 12/25/18 27,959
3,250,000 IMPAC Secured Assets CMN Owner
Trust 1998-1 M2, 7.77%,
07/25/25 3,200,236
432,713 Independent National Mortgage
Corp. 1995-N A5, 7.50%,
10/25/25 434,905
164,572,823 LB Commercial Conduit Mortgage
Trust 1998-C4 X (IO),
0.78%, 09/15/23 6,065,496
10,103,272 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%,
06/25/26 10,115,901
55,086 Norwest Asset Securities Corp.
1997-5 A2, 7.00%, 04/25/12 55,247
1,422,111 Norwest Asset Securities Corp.
1998-15 A15, 8.00%, 07/25/28 1,443,927
1,060,664 Norwest Asset Securities Corp.
1999-16 A7, 6.40%, 06/25/29 1,015,255
1,260,000 Norwest Integrated Structured
Assets, Inc. 1999-2 1A2,
11.99%, 09/25/29 1,197,000
247,925 Paine Webber Mortgage
Acceptance Corp. 1993-9 A6,
7.00%, 10/25/23 248,157
10,800,000 PNC Mortgage Securities Corp.
1999-9 2A1, 7.50%, 09/25/29 10,803,240
3,760,627 Prudential Home Mortgage
Securities 1995-A 2B,
8.68%, 03/28/25(4) 3,874,012
500,000 Residential Funding Mortgage
Securities I 1993-S26 A9,
7.50%, 07/25/23 501,678
166,351 Residential Funding Mortgage
Securities I 1996-S14 A11,
8.00%, 05/25/26 168,135
300,000 Residential Funding Mortgage
Securities I 1997-S12 A17,
7.25%, 08/25/27 298,442
2,000,000 Residential Funding Mortgage
Securities I 1998-S2 A2,
7.00%, 01/25/28 1,952,950
4,400,047 Resolution Trust Corp. 1994-C1
F, 8.00%, 06/25/26 4,354,669
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE> 17
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 783,952 Resolution Trust Corp. 1995-C1
Mortgage-Backed E, 6.90%, 02/25/27 $ 760,539
(continued) 1,935,684 Resolution Trust Corp. 1995-C2
F, 7.00%, 05/25/27 1,889,421
569,205 Ryland Acceptance Corp. IV 28
1, 11.50%, 12/25/16 593,752
187,500 Ryland Mortgage Securities
Corp. 1993-3 2E, 6.71%,
08/25/08 187,516
805,966 Ryland Mortgage Securities
Corp. III 1992-D 1A, 7.97%,
09/25/22 803,270
6,000,000 Ryland Mortgage Securities
Corp. III 1992-A 1C, 8.26%,
03/29/30 5,946,600
4,862,285 Sasco Floating Rate Commercial
Mortgage Trust 1998-C3A E,
6.13%, 06/25/01(4) 4,804,545
88,954 SLH Mortgage Trust 1990-1 G,
9.60%, 03/25/21 88,660
2,000,000 Structured Asset Securities
Corp. 1996-6 1A5, 7.50%,
08/25/26 1,974,890
5,000,000 Structured Asset Securities
Corp. 1996-CFL B, 6.30%,
02/25/28 4,974,225
24,577,563 Structured Asset Securities
Corp. 1997-C1 D, 5.98%,
08/25/00(4) 24,598,331
------------
110,687,188
------------
U.S. Agency 35,196 Fannie Mae 1990-14 H,
Mortgage-Backed 7.95%, 08/25/19 35,472
- --9.60% 328,954 Fannie Mae 1993-95 SB,
15.05%, 06/25/08 385,747
2,277,939 Fannie Mae 1993-189 SB,
7.43%, 10/25/23 1,888,581
176,000 Fannie Mae 1993-202 SJ,
9.00%, 11/25/23 169,651
2,695,474 Fannie Mae 1993-208 SE,
7.92%, 11/25/23 2,464,674
519,851 Fannie Mae 1993-221 SD,
9.00%, 03/25/08 522,046
295,866 Fannie Mae 1994-2 SB,
10.00%, 01/25/24 296,803
287,973 Fannie Mae 1994-41 SC,
6.74%, 03/25/24 247,139
15,000,000 Fannie Mae 1997-44 SB (IO),
2.44%, 06/25/08 846,483
2,270,707 Fannie Mae 1997-76 FS,
5.86%, 09/17/27 2,167,068
1,410,955 Fannie Mae 1999-4 SC,
5.09%, 01/25/24 1,269,860
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE> 18
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 8,875,269 Fannie Mae Strip 302 2 (IO),
Mortgage-Backed 6.00%, 06/01/29 $ 2,996,788
(continued) 7,147 Freddie Mac 1164 O,
681.25%, 11/15/06 93,476
7,500,000 Freddie Mac 1627 PN (IO),
6.00%, 09/15/22 1,846,688
200,000 Freddie Mac 1634 SE,
8.80%, 12/15/23 194,424
1,455,789 Freddie Mac 1967 BC,
0.00%, 06/17/27 1,207,889
145,472 Freddie Mac 2089 SA,
9.16%, 07/15/15 141,244
10,000,000 Freddie Mac 2097 PI (IO),
6.50%, 02/15/25 1,685,209
1,231,646 Freddie Mac 2149 JD (IO),
6.50%, 04/15/17 277,118
3,728,019 Freddie Mac 2149 KQ (IO),
6.50%, 08/15/18 836,283
48,699,495 Freddie Mac 2156 SQ (IO),
2.27%, 05/15/29 2,795,351
2,821,335 Freddie Mac 2156 S,
10.60%, 05/15/29 2,712,448
460,749 Freddie Mac Gold 21 SG,
9.39%, 10/25/23 467,253
1,577,844 Government National Mortgage
Association 1994-1 C (IO),
7.99%, 08/16/23 401,126
104,874 Government National Mortgage
Association Pool 1849,
8.50%, 08/20/24 108,498
200,667 Government National Mortgage
Association Pool 2020,
8.50%, 06/20/25 207,566
143,497 Government National Mortgage
Association Pool 2286,
8.50%, 09/20/26 148,348
752,286 Government National Mortgage
Association Pool 2487,
8.50%, 09/20/27 777,871
3,000,000 Government National Mortgage
Association Pool 30508,
7.50%, 11/01/29 3,004,689
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE> 19
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 524,317 Government National Mortgage
Mortgage-Backed Association Pool 422972,
(continued) 6.50%, 07/15/29 $ 501,649
------------
30,697,442
------------
TOTAL MORTGAGE-BACKED 141,384,630
------------
U.S. TREASURY NOTES--2.03%
6,189,000 U.S. Treasury Notes,
7.00%, 07/15/06 6,500,387
------------
TOTAL BONDS
(Cost $275,151,976) 273,136,799
------------
SHORT TERM INVESTMENTS--14.29%
Commercial 5,000,000 AT&T Corp., 5.36%(5), 10/04/99 4,997,808
Paper--14.09% 1,500,000 BellSouth Telecommunications,
Inc., 5.41%(5), 10/26/99 1,494,479
10,000,000 Coca-Cola Co., 5.38%(5),
10/21/99 9,970,778
10,000,000 Ford Motor Credit Co.,
5.39%(5), 10/14/99 9,980,933
9,000,000 General Motors Acceptance
Corp., 5.35% to 5.38%(5),
10/07/99 8,992,105
4,600,000 Kellogg Co., 5.35%(5),
10/01/99 4,600,000
5,000,000 Lucent Technologies, Inc.,
5.37%(5), 10/12/99 4,991,949
------------
45,028,052
------------
Money Market RIC 23,000 J.P. Morgan Institutional
- --0.01% Prime Money Market 23,000
------------
U.S. Treasury 607,000 U.S. Treasury Bill,
Bills--0.19% 4.70% to 4.85%(5), 12/09/99 601,683
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $45,652,575) 45,652,735
------------
TOTAL INVESTMENTS--99.73%
(Cost $320,804,551)(1) 318,789,534
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.27% 869,090
------------
NET ASSETS--100.00% $319,658,624
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE> 20
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
FUTURES CONTRACTS: SHORT POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
(179) U.S. Treasury 2 Year Note, December 1999 $ (44,750)
(243) U.S. Treasury 10 Year Note, December 1999 (66,586)
(13) U.S. Treasury Long Bond, March 2000 5,282
---------
$(106,054)
=========
</TABLE>
Notes:
(1) Cost for Federal income tax purposes is $320,804,551 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 1,649,779
Gross unrealized depreciation (3,664,796)
-----------
Net unrealized depreciation $(2,015,017)
===========
</TABLE>
(2) Securities with a call or reset feature will have an effective maturity date
less than the stated maturity.
(3) Pass through securities backed by mortgage securities where payment is
periodically made will have an effective maturity date less than the stated
maturity date.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The market value
of these securities at September 30, 1999 was $59,469,927 representing
18.60% of total net assets.
(5) Represents annualized yield at date of purchase.
(6) Securities determined to be illiquid by the Fund's Board of Trustees.
Information related to these securities is as follows:
<TABLE>
<CAPTION>
DATE OF % OF
SECURITY PURCHASE VALUE TNA
-------- -------- ---------- ----
<S> <C> <C> <C>
Delta Funding Home Equity Loan Trust 1996-2
A5, 8.01%, 10/25/27 11/13/98 $2,051,530 0.64%
DLJ Commercial Mortgage Corp. 1999-CG2 S
(IO), 0.46%, 06/10/24 08/01/99 5,526,703 1.73
DLJ Mortgage Acceptance Corp. 1993-Q18 SC
(IO), 2.91%, 01/25/24 09/30/97 8,963 0.00
DLJ Mortgage Acceptance Corp. 1994-Q8 IIS
(IO), 1.86%, 05/25/24 06/19/97 433,023 0.14
DLJ Mortgage Acceptance Corp. 1995-QE11 SA
(IO), 4.93%, 12/25/25 03/30/99 75,863 0.02
DLJ Mortgage Acceptance Corp. 1996-QA S
(IO), 3.13%, 01/25/26 10/20/98 379,910 0.12
DLJ Mortgage Acceptance Corp. 1996-Q5 SA
(IO), 3.54%, 06/25/26 01/04/99 137,420 0.04
---------- ----
$8,613,412 2.69%
========== ====
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at September
30, 1999.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE> 21
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--76.61%
ASSET-BACKED $ 231,135 First Alliance Mortgage Loan
SECURITIES--6.70%(3) Trust 1994-4 A1, 9.28%, 02/25/26 $ 231,578
250,000 Green Tree Home Improvement Loan
Trust 1998-B HEM2, 7.33%, 11/15/29 241,679
123,994 New York City Tax Lien 1998-2A A,
7.98%, 07/25/06(4) 123,895
15,155 Nationscredit Grantor Trust
1997-1 A, 6.75%, 08/15/13 15,193
8,174 Navistar Financial Corp. Owner
Trust 1996-B A3, 6.33%, 04/21/03 8,192
----------
620,537
----------
CORPORATES--48.76%
Banks--8.24% 200,000 Capital One Bank, 6.26%, 05/07/01 197,697
20,000 MBNA Corp. (FRN) (MTN),
5.87%, 06/17/02 19,835
250,000 Okobank (FRN), 6.76%,
10/29/49(2,4) 250,000
300,000 Republic New York Corp. (FRN),
5.25%, 10/28/02 295,860
----------
763,392
----------
Brokerage 20,000 Donaldson, Lufkin, Jenrette, Inc.
Services--6.56% (FRN) (MTN), 5.89%, 10/29/07 19,747
300,000 Lehman Brothers Holdings PLC
(FRN) (MTN), 5.66%, 07/30/04(2) 295,260
300,000 Paine Webber Group, Inc. (FRN)
(MTN), 5.91%, 08/18/04 292,884
----------
607,891
----------
Electric Utilities 150,000 Duquesne Light Co.,
- --1.65% 8.38%, 05/15/24(3) 153,338
----------
Finance--19.98% 30,000 American Bankers Insurance Group
(FRN) (MTN), 5.96%, 04/12/00 30,070
150,000 Developers Diversified Realty
Corp. (MTN), 7.38%, 09/18/01 149,727
300,000 EOP Operating L.P., 6.38%,
02/15/02 295,549
250,000 Golden State Holdings (FRN),
6.31%, 08/01/03(2) 247,961
300,000 Health & Retirement Properties
Trust, 7.50%, 10/01/03(2) 288,375
200,000 Liberty Property L.P. (MTN),
6.60%, 06/05/02 194,337
300,000 National Consumer Coop. Bank
(FRN) (MTN), 6.12%, 04/02/01 299,658
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE> 22
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
$ 100,000 Spieker Properties L.P. (MTN),
7.58%, 12/17/01 $ 101,134
250,000 United Dominion Realty Trust
(MTN), 7.67%, 01/26/04 244,579
----------
1,851,390
----------
Industrial--11.63% 250,000 CBS Corp. (MTN), 9.14%, 07/03/01 259,961
10,000 Cemex S.A. (MTN), 8.50%, 08/31/00 10,116
300,000 Columbia/HCA Healthcare (MTN),
6.88%, 07/15/01 292,470
25,000 Pennzoil Co., 10.63%, 06/01/01(2) 25,751
300,000 Rouse Co. (FRN) (MTN),
6.34%, 05/29/01 299,331
200,000 Waste Management, Inc.,
6.63%, 07/15/02 190,520
----------
1,078,149
----------
Sovereign--0.70% 74,400 Republic of Argentina (FRN),
6.81%, 03/31/05(2) 65,379
----------
TOTAL CORPORATES 4,519,539
----------
MORTGAGE-BACKED--17.92%
Non-Agency 254,321 DLJ Mortgage Acceptance Corp.
Mortgage-Backed 1992-Q4 A2, 6.57%, 07/25/22 254,579
- --14.21% 2,433,129 DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO),
4.02%, 06/25/24(4,6) 148,907
220,595 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%, 06/25/26 220,871
29,000 Ryland Mortgage Securities Corp.
Series III 1992-A 1C,
8.26%, 03/29/30 28,742
243,114 Sasco Floating Rate Commercial
Mortgage Trust 1998-C3A E,
6.13%, 06/25/01(4) 240,227
150,012 Structured Asset Securities Corp.
1993-C1 C, 6.60%, 10/25/24 146,989
278,976 Structured Settlements Fund
1999-A A,
7.25%, 12/20/15(4) 276,427
----------
1,316,742
----------
U.S. Agency 57,118 Fannie Mae G-36 ZB,
Mortgage-Backed 7.00%, 11/25/21 57,051
- --3.71% 23,196 Fannie Mae 1993-95 SB,
15.05%, 06/25/08 27,201
71,658 Fannie Mae 1999-1 S,
10.25%, 07/25/23 74,037
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE> 23
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,263,200 Freddie Mac 1543 TH (IO),
3.90%, 01/15/19 $ 26,968
3,668 Freddie Mac 1584 S,
6.78%, 09/15/23 3,305
20,000 Freddie Mac 2012 SD,
6.70%, 11/15/27 14,170
100,000 Freddie Mac 2051 E,
7.00%, 09/15/27 96,647
43,109 Freddie Mac Gold 2 L,
8.00%, 11/25/22 44,750
----------
344,129
----------
TOTAL MORTGAGE-BACKED 1,660,871
----------
U.S. TREASURY NOTES--3.23%
295,000 U.S. Treasury Notes,
6.25%, 02/15/03 298,964
----------
TOTAL BONDS
(Cost $7,126,126) 7,099,911
----------
COMMON STOCK--2.81%
2,029 S&P 500 Depositary Receipt 260,536
----------
TOTAL COMMON STOCK
(Cost $267,980) 260,536
----------
SHORT TERM INVESTMENTS--18.22%
Commercial 350,000 Bellsouth Telecommunications,
Paper--11.84% Inc., 5.39%(5), 10/19/99 349,076
500,000 Ford Motor Credit Co.,
5.39%(5), 10/14/99 499,047
250,000 General Motors Acceptance Corp.,
5.40%(5), 10/20/99 249,302
----------
1,097,425
----------
Money Market RIC 43,500 J.P. Morgan Institutional Prime
- --0.47% Money Market 43,500
----------
U.S. Treasury Bills 553,000 U.S. Treasury Bill,
- --5.91% 4.52% to 4.85%(5), 12/09/99 548,156
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,688,914) 1,689,081
----------
TOTAL INVESTMENTS--97.64%
(Cost $9,083,020)(1) 9,049,528
CASH AND OTHER ASSETS,
LESS LIABILITIES--2.36% 218,575
----------
NET ASSETS--100.00% $9,268,103
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE> 24
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
FUTURES CONTRACTS: LONG POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
27 S&P 500 Index, December 1999 $(451,763)
5 S&P Mini, December 1999 (16,053)
=========
$(467,816)
=========
</TABLE>
Notes:
(1) Cost for Federal income tax purposes is $9,083,020 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 40,610
Gross unrealized depreciation (74,102)
--------
Net unrealized depreciation $(33,492)
========
</TABLE>
(2) Securities with a call or reset feature will have an effective maturity date
less than the stated maturity.
(3) Securities backed by mortgage or consumer loans where payment is
periodically made will have an effective maturity date less than the stated
maturity date.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The market value
of these securities at September 30, 1999 was $1,039,456 representing 11.22%
of total net assets.
(5) Represents annualized yield at date of purchase.
(6) Securities determined to be illiquid by the Fund's Board of Trustees.
Information related to these securities is as follows:
<TABLE>
<CAPTION>
DATE OF % OF
SECURITY PURCHASE VALUE TNA
- -------- -------- -------- ----
<S> <C> <C> <C>
DLJ Mortgage Acceptance Corp. 1994-QE2 S
(IO), 4.02%, 06/25/24 07/01/99 $148,907 1.61%
======== ====
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at September
30, 1999.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE> 25
METROPOLITAN WEST FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN LOW DURATION ALPHATRAK 500
BOND FUND BOND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$153,912,162, $320,804,551 and
$9,083,020 respectively) (Note 2) $151,059,737 $318,789,534 $9,049,528
Cash and cash equivalents (Note 2) 820 8,720 1,547
Dividends and interest receivable 2,070,787 2,646,155 99,840
Receivable for securities sold 8,823,333 8,104,590 399,968
Receivable for capital stock sold 3,136,742 125,772 0
Deferred unamortized
organizational costs (Note 2) 18,936 18,936 14,412
Variation margin (Note 3) 8,188 34,768 0
Other assets 7,718 19,695 411
------------ ------------ ----------
Total assets 165,126,261 329,748,170 9,565,706
============ ============ ==========
LIABILITIES:
Payable for securities purchased 9,544,849 8,009,606 255,605
Payable for capital stock redeemed 0 95,745 0
Variation margin (Note 3) 0 0 3,501
Due to Adviser (Note 5) 53,856 104,143 10,474
Accrued expenses 77,446 125,248 28,023
Distributions payable 950,165 1,754,804 0
------------ ------------ ----------
Total liabilities 10,626,316 10,089,546 297,603
------------ ------------ ----------
Net assets $154,499,945 $319,658,624 $9,268,103
============ ============ ==========
NET ASSETS CONSIST OF:
Common stock, unlimited shares
authorized, $0.01 par value,
15,116,065, 31,595,710 and
832,706 shares outstanding,
respectively $158,690,183 $320,393,496 $8,818,705
Accumulated undistributed net
investment income 0 0 153,378
Accumulated undistributed net
realized (loss) gain on
investments (1,305,063) 1,386,200 797,328
Net unrealized depreciation on
investments (2,885,175) (2,121,072) (501,308)
------------ ------------ ----------
$154,499,945 $319,658,624 $9,268,103
============ ============ ==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $10.22 $10.12 $11.13
===== ===== =======
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE> 26
METROPOLITAN WEST FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN LOW DURATION ALPHATRAK 500
BOND FUND BOND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 0 $ 0 $ 1,790
Interest 5,339,112 10,149,097 329,325
----------- ----------- ---------
Total investment income 5,339,112 10,149,097 331,115
----------- ----------- ---------
EXPENSES:
Investment advisory fees (Note 5) 364,774 654,069 24,245
Transfer agent fees 13,779 13,976 10,172
Administration fees 46,243 94,297 3,940
Registration and filing fees 25,358 44,892 8,947
Reports to shareholders 3,605 8,744 654
Custodian fees 19,633 40,642 10,666
Accounting services 23,342 30,885 11,803
Pricing fees 1,188 1,842 552
Legal fees 5,628 10,811 1,003
Insurance expenses 5,008 9,961 357
Trustees' fees and expenses 7,709 7,709 7,704
Auditing and tax consulting fees 11,192 11,257 8,023
Amortization of organizational
expenses (Note 2) 3,795 3,795 1,929
Miscellaneous expenses 1,385 860 379
----------- ----------- ---------
Total operating expenses 532,639 933,740 90,374
Expenses waived and reimbursed
(Note 5) (101,543) (143,406) (56,408)
----------- ----------- ---------
Net expenses 431,096 790,334 33,966
----------- ----------- ---------
Net investment income 4,908,016 9,358,763 297,149
----------- ----------- ---------
REALIZED AND UNREALIZED (LOSS) GAIN
ON INVESTMENTS:
Net realized (loss) gain on
investments and futures contracts (1,260,971) 1,006,558 433,431
Net change in unrealized
depreciation on investments (2,620,632) (2,059,125) (69,936)
Net change in unrealized
depreciation on futures contracts (32,750) (106,054) (652,949)
----------- ----------- ---------
Net realized and unrealized loss on
investments (3,914,353) (1,158,621) (289,454)
----------- ----------- ---------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 993,663 $ 8,200,142 $ 7,695
=========== =========== =========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE> 27
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TOTAL RETURN
BOND FUND
-----------------------------
SIX MONTHS
ENDED YEAR
SEPTEMBER 30, ENDED
1999 MARCH 31,
(UNAUDITED) 1999
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,908,016 $ 4,119,546
Net realized (loss) gain on investments (1,260,971) 831,877
Net change in unrealized depreciation on
investments (2,620,632) (326,594)
Net change in unrealized depreciation on
futures contracts (32,750) 0
------------ ------------
Net increase in net assets resulting from
operations 993,663 4,624,829
------------ ------------
DISTRIBUTIONS:
Dividends to shareholders from net
investment income (4,908,016) (4,119,546)
Distributions to shareholders from net
realized gains on investments 0 (1,102,035)
------------ ------------
Net decrease in net assets resulting from
distributions (4,908,016) (5,221,581)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 57,359,721 95,874,744
Shares issued in reinvestment of dividends
and distributions 3,680,457 4,389,756
Cost of shares redeemed (17,859,038) (9,417,607)
------------ ------------
Net increase in net assets resulting from
capital share transactions 43,181,140 90,846,893
------------ ------------
Net increase in net assets 39,266,787 90,250,141
Net assets at beginning of period $115,233,158 $ 24,983,017
============ ============
Net assets at end of period (including
undistributed net investment income of $0
and $0, respectively) $154,499,945 $115,233,158
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE> 28
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LOW DURATION
BOND FUND
-----------------------------
SIX MONTHS
ENDED YEAR
SEPTEMBER 30, ENDED
1999 MARCH 31,
(UNAUDITED) 1999
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 9,358,763 $ 12,792,817
Net realized gain on investments 1,006,558 380,876
Net change in unrealized depreciation on
investments (2,059,125) (274,087)
Net change in unrealized depreciation on
futures contracts (106,054) 0
------------ ------------
Net increase in net assets resulting from
operations 8,200,142 12,899,606
------------ ------------
DISTRIBUTIONS:
Dividends to shareholders from net
investment income (9,358,763) (12,792,817)
Distributions to shareholders from net
realized gains on investments 0 (204,074)
------------ ------------
Net decrease in net assets resulting from
distributions (9,358,763) (12,996,891)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 123,324,630 234,531,692
Shares issued in reinvestment of dividends
and distributions 7,527,127 12,586,415
Cost of shares redeemed (45,371,697) (146,996,632)
------------ ------------
Net increase in net assets resulting from
capital share transactions 85,480,060 100,121,475
------------ ------------
Net increase in net assets 84,321,439 100,024,190
Net assets at beginning of period $235,337,185 $135,312,995
============ ============
Net assets at end of period (including
undistributed net investment income of $0
and $0, respectively) $319,658,624 $235,337,185
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE> 29
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ALPHATRAK 500
FUND
---------------------------
SIX MONTHS
ENDED PERIOD
SEPTEMBER 30, ENDED
1999 MARCH 31,
(UNAUDITED) 1999*
------------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 297,149 $ 179,291
Net realized gain on investments 433,431 364,745
Net change in unrealized (depreciation)
appreciation on investments (69,936) 36,444
Net change in unrealized (depreciation)
appreciation on futures contracts (652,949) 185,133
---------- ----------
Net increase in net assets resulting from
operations 7,695 765,613
---------- ----------
DISTRIBUTIONS:
Dividends to shareholders from net investment
income (270,469) (53,441)
Distributions to shareholders from net
realized gains on investments 0 0
---------- ----------
Net decrease in net assets resulting from
distributions (270,469) (53,441)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 1,806,631 7,484,039
Shares issued in reinvestment of dividends and
distributions 270,281 53,410
Cost of shares redeemed (649,960) (145,696)
---------- ----------
Net increase in net assets resulting from
capital share transactions 1,426,952 7,391,753
---------- ----------
Net increase in net assets 1,164,178 8,103,925
Net assets at beginning of period 8,103,925 0
========== ==========
Net assets at end of period (including
undistributed net investment income of
$153,378 and $126,698, respectively) $9,268,103 $8,103,925
========== ==========
</TABLE>
* The AlphaTrak 500 Fund commenced operations on June 29, 1998.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE> 30
METROPOLITAN WEST FUNDS
FINANCIAL HIGHLIGHTS
THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD PRESENTED.
<TABLE>
<CAPTION>
TOTAL RETURN
BOND FUND
-------------------------------------
SIX MONTHS
ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED
1999 MARCH 31, MARCH 31,
(UNAUDITED) 1999 1998
------------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.53 $10.49 $10.00
-------- ------ ------
Income from Investment Operations:
Net investment income 0.38 0.71 0.73
Net realized and unrealized (loss) gain
on investments (0.31) 0.19 0.60
-------- ------ ------
Total from Investment Operations 0.07 0.90 1.33
-------- ------ ------
Less Distributions:
Dividends from net investment income (0.38) (0.71) (0.73)
Distributions from net capital gains on
investments 0.00 (0.15) (0.11)
-------- ------ ------
Total Distributions (0.38) (0.86) (0.84)
-------- ------ ------
Net Asset Value, End of Period $10.22 $10.53 $10.49
======== ====== ======
Total Return (not annualized) 0.70% 8.84% 13.71%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $154,500 $115,233 $24,983
Ratio of Expenses to Average Net Assets
Before expense reimbursement 0.80%# 0.97% 1.99%
After expense reimbursement 0.65%# 0.65% 0.65%
Ratio of Net Income to Average Net
Assets
Before expense reimbursement 7.25%# 6.60% 6.05%
After expense reimbursement 7.40%# 6.92% 7.39%
Portfolio Turnover Rate 81% 136% 235%
</TABLE>
# Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE> 31
METROPOLITAN WEST FUNDS
FINANCIAL HIGHLIGHTS
THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD PRESENTED.
<TABLE>
<CAPTION>
LOW DURATION
BOND FUND
-------------------------------------
SIX MONTHS
ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED
1999 MARCH 31, MARCH 31,
(UNAUDITED) 1999 1998
------------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.15 $10.18 $10.00
-------- ------ ------
Income from Investment Operations:
Net investment income 0.35 0.66 0.65
Net realized and unrealized (loss) gain
on investments (0.03) (0.02) 0.19
-------- ------ ------
Total from Investment Operations 0.32 0.64 0.84
-------- ------ ------
Less Distributions:
Dividends from net investment income (0.35) (0.66) (0.65)
Distributions from net capital gains on
investments 0.00 (0.01) (0.01)
-------- ------ ------
Total Distributions (0.35) (0.67) (0.66)
-------- ------ ------
Net Asset Value, End of Period $10.12 $10.15 $10.18
======== ====== ======
Total Return (not annualized) 3.18% 6.54% 8.71%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $319,659 $235,337 $135,313
Ratio of Expenses to Average Net Assets
Before expense reimbursement 0.68%# 0.70% 0.93%
After expense reimbursement 0.58%# 0.58% 0.58%
Ratio of Net Income to Average Net
Assets
Before expense reimbursement 6.75%# 6.49% 6.37%
After expense reimbursement 6.85%# 6.61% 6.72%
Portfolio Turnover Rate 74% 73% 102%
</TABLE>
# Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE> 32
METROPOLITAN WEST FUNDS
FINANCIAL HIGHLIGHTS
THE TABLE BELOW SETS FORTH FINANCIAL DATA FOR ONE SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD PRESENTED.
<TABLE>
<CAPTION>
ALPHATRAK 500
FUND
--------------------------
SIX MONTHS
ENDED PERIOD
SEPTEMBER 30, ENDED
1999 MARCH 31,
(UNAUDITED) 1999*
------------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period $11.40 $10.00
------ ------
Income from Investment Operations:
Net investment income 0.37 0.44
Net realized and unrealized (loss) gain on
investments (0.29) 1.22
------ ------
Total from Investment Operations 0.08 1.66
------ ------
Less Distributions:
Dividends from net investment income (0.35) (0.26)
Distributions from net capital gains on
investments 0.00 0.00
------ ------
Total Distributions (0.35) (0.26)
------ ------
Net Asset Value, End of Period $11.13 $11.40
====== ======
Total Return (not annualized) 0.59% 17.28%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $9,268 $8,104
Ratio of Expenses to Average Net Assets
Before expense reimbursement 1.81%# 3.39%#
After expense reimbursement 0.68%# 0.72%#
Ratio of Net Income to Average Net Assets
Before expense reimbursement 4.82%# 4.14%#
After expense reimbursement 5.95%# 6.81%#
Portfolio Turnover Rate 93% 74%
</TABLE>
* The AlphaTrak 500 Fund commenced operations on June 29, 1998.
# Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE> 33
METROPOLITAN WEST FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. SUMMARY OF ORGANIZATION
The Metropolitan West Funds (the "Trust") is an open-end management investment
company organized as a Delaware business trust on December 9, 1996 under the
Investment Company Act of 1940, as amended. The Trust currently consists of
four separate diversified portfolios (each a "Fund" and collectively, the
"Funds"): Metropolitan West Total Return Bond Fund (the "Total Return Bond
Fund"), Metropolitan West Low Duration Bond Fund (the "Low Duration Bond
Fund"), Metropolitan West AlphaTrak 500 Fund (the "AlphaTrak 500 Fund") and
the Metropolitan West Short-Term Investment Fund (the "Short-Term Investment
Fund"). The Total Return Bond Fund and Low Duration Bond Fund commenced
investments operations on March 31, 1997. The AlphaTrak 500 Fund commenced
investment operations on June 29, 1998. The Short-Term Investment Fund was not
operational at September 30, 1999.
The Total Return Bond Fund seeks to maximize long-term total return. This Fund
invests in a diversified portfolio of fixed-income securities of varying
maturities with a portfolio duration of two to eight years. The
dollar-weighted average maturity will exceed its portfolio duration.
The Low Duration Bond Fund seeks to maximize current income, consistent with
preservation of capital. Capital appreciation is a secondary consideration of
the Fund. This Fund invests in a diversified portfolio of fixed-income
securities of varying maturities with a portfolio duration of one to three
years. The dollar-weighted average maturity for this Fund will exceed its
portfolio duration.
The AlphaTrak 500 Fund seeks to achieve a total return that exceeds the total
return of the Standard & Poor's 500 Index ("S&P 500 Index"). The Fund invests
in S&P 500 Index futures contracts backed by a diversified portfolio of fixed
income securities of varying maturities with a portfolio duration of up to
three years. The Fund's dollar-weighted average maturity will exceed its
portfolio duration.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds:
SECURITY VALUATION:
Fixed-income securities which are traded on a national securities exchange
will be valued at the last sale price or, if there was no sale on such day, at
the average of readily available closing bid and asked prices on such
exchange. However, securities with a demand feature exercisable within one to
seven days are valued at par. Prices for fixed-income securities may be based
on quotations
- --------------------------------------------------------------------------------
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
received from one or more market-makers in the securities, or on evaluations
from pricing services. Debt securities which mature in less than 60 days are
valued at amortized cost (unless the Board of Trustees determines that this
method does not represent fair value) if their original maturity was 60 days
or less, or by amortizing the value as of the 61st day prior to maturity, if
their original term to maturity exceeded 60 days. S&P 500 futures contracts
are valued at the first sale price after 4 p.m. EST on the Chicago Mercantile
Exchange. All other futures contracts are valued at the official settlement
price of the exchange which it is traded. Equity securities, including
depositary receipts, are valued at the last reported sale price on the
exchange or market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where equity securities are traded on
more than one exchange, the securities are valued on the exchange or market
determined by the investment adviser to be the broadest and most
representative market, which may be either a securities exchange or the
over-the-counter market. Securities and other assets for which market
quotations are not readily available are valued at their fair value as
determined by the Adviser under guidelines established by and under the
general supervision and responsibility of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Cost is determined and gains and losses are
based on the first-in-first-out method for both financial statement and
Federal income tax purposes. Dividend income is recorded on the ex-dividend
date. Interest income is accrued daily.
ORGANIZATION COSTS:
Organization costs are being amortized on a straight-line basis over five
years from each Fund's respective commencement of operations.
DISTRIBUTIONS TO SHAREHOLDERS:
The Funds (except the AlphaTrak 500 Fund) expect to declare dividends daily
and pay them monthly to shareholders. The AlphaTrak 500 Fund expects to
declare and pay dividends to shareholders quarterly. Distributions of net
capital gains, if any, will be made at least annually. The Board of Trustees
may determine to declare dividends and make distributions more or less
frequently.
FEDERAL INCOME TAXATION:
It is the Funds' policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
CASH AND CASH EQUIVALENTS:
The Funds have defined cash and cash equivalents as cash in interest bearing
and non-interest bearing accounts.
- --------------------------------------------------------------------------------
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USE OF ESTIMATES:
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. PORTFOLIO INVESTMENTS
The Funds may invest in mortgage pass-through securities which represent
interests in pools of mortgages in which payments of both principal and
interest on the securities are generally made monthly, in effect "passing
through" monthly payments made by borrowers on the residential or commercial
mortgage loans which underlie the securities (net of any fees paid to the
issuer or guarantor of the securities). Mortgage pass-through securities
differ from other forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates.
Payment of principal and interest on some mortgage-related securities (but not
the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed
by GNMA) or by agencies or instrumentalities of the U S. Government (in the
case of securities guaranteed by FNMA or the FHLMC, which are supported only
by the discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage pass-through securities created by non-governmental
issuers (such as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers) may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance, and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers.
The Funds may also invest in Collateralized Mortgage Obligations (CMOs). CMOs
are debt obligations collateralized by residential or commercial mortgage
loans or residential or commercial mortgage pass-through securities. Interest
and principal are generally paid monthly. CMOs may be collateralized by whole
mortgage loans or private mortgage pass-through securities but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC or FNMA. The issuer of a series of CMOs may elect to
be treated for tax purposes as a Real Estate Mortgage Investment Conduit
("REMIC"). CMOs are structured into multiple classes, each bearing a different
stated maturity. Monthly payment of principal received from the pool of
underlying mortgages, including prepayments, is first returned to investors
holding the shortest maturity class. Investors holding the longer maturity
classes usually receive principal only after shorter classes have been
- --------------------------------------------------------------------------------
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
retired. An investor may be partially protected against a sooner than desired
return of principal because of the sequential payments.
The Funds may invest in stripped mortgage-backed securities issued by the U.S.
Government, its agencies and instrumentalities. Stripped mortgage-backed
securities are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. In certain cases, one class will receive all of the interest (the
interest-only or "IO" class), while the other class will receive all of the
principal (the principal-only or "PO" class). During the period ended
September 30, 1999, certain interest only securities were held as part of the
overall mortgage portfolio holdings. The yield to maturity on IOs is sensitive
to the rate of principal repayments (including prepayments) on the related
underlying mortgage assets, and principal payments may have a material effect
on yield to maturity. If the underlying mortgage assets experience greater
than anticipated prepayments of principal, a Fund may not fully recoup its
initial investment in IOs. Such securities will be considered liquid only if
so determined in accordance with guidelines established by the Trustees. The
Funds also may invest in stripped mortgage-backed securities that are
privately issued. These securities will be considered illiquid for purposes of
each Fund's limit on illiquid securities.
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a security index at a specified future date at
a specified price. The Funds may use futures contracts to manage exposure to
the stock and bond markets or changes in interest rates and currency values,
or for gaining exposure to markets. Risks of entering into futures contracts
include the possibility that there may be an illiquid market at the time the
advisor to the Fund may be attempting to sell some or all the Fund holdings or
that a change in the value of the contract may not correlate with changes in
the value of the underlying securities. Upon entering into a futures contract,
the Fund is required to deposit either cash or securities (initial margin).
Subsequent payments (variation margin) are made or received by the Fund,
generally on a daily basis. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains or
losses. The Funds recognize a realized gain or loss when the contract is
closed or expires. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts.
In addition to the securities listed above, the AlphaTrak 500 Fund may invest
all of its assets in the following equity derivative instruments: S&P 500
Index futures contracts, Mini S&P 500 Index futures contracts, options on the
S&P 500 Index and S&P futures, and swap agreements involving the S&P 500
Index. When the above listed S&P Index derivatives appear to be overvalued
relative to the S&P 500 Index, the Fund may invest up to 100% in the common
stocks that comprise the S&P 500 Index. The Fund may also invest
- --------------------------------------------------------------------------------
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
up to 25% of its total assets in these stocks indirectly by purchasing
interests in one or more mutual funds, asset pools or trusts that invest in
such stocks.
4. SECURITIES TRANSACTIONS
PURCHASES AND SALES:
Investment transactions for the period ended September 30, 1999, excluding
temporary short-term investments, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Total Return Bond Fund $189,541,577 $136,765,829
Low Duration Bond Fund 290,440,868 215,263,246
AlphaTrak 500 Fund 10,530,768 7,970,580
</TABLE>
5. INVESTMENT ADVISORY SERVICES
Under the Investment Advisory Agreement relating to the Funds, Metropolitan
West Asset Management, LLC (the "Adviser"), a registered investment adviser,
provides the Funds with investment management services. As compensation for
these services, the Adviser charges the Total Return Bond Fund and the Low
Duration Bond Fund a fee, computed daily and payable monthly, at an annual
rate of 0.55% and 0.48%, respectively, of each Fund's average daily net
assets. The Adviser charges the AlphaTrak 500 Fund a basic fee of 0.35% of the
Fund's average daily net assets. The basic fee may be adjusted upward or
downward (by up to 0.35% of the Fund's average daily net assets), depending on
whether, and to what extent, the investment performance of the AlphaTrak 500
Fund, for the relevant performance period, exceeds or is exceeded by, the
performance of the S&P 500 Index over the same period. Certain officers and
trustees of the Funds are also officers and directors of the Adviser. Such
officers and trustees serve without direct compensation from the Funds.
Investment advisory fees and other transactions with affiliates, for six
months ended September 30, 1999, were as follows:
<TABLE>
<CAPTION>
INVESTMENT VOLUNTARY
ADVISORY EXPENSE
FEE RATE LIMITATION
----------- -----------
<S> <C> <C>
Total Return Bond Fund 0.55% 0.65%
Low Duration Bond Fund 0.48 0.58
AlphaTrak 500 Fund 0.00 - 0.70 0.20 - 0.90
</TABLE>
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36
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL SHARE TRANSACTIONS:
Each Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.01 per share. Transactions in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
TOTAL RETURN BOND FUND LOW DURATION BOND FUND ALPHATRAK 500 FUND
-------------------------- --------------------------- -------------------------
PERIOD PERIOD PERIOD
ENDED YEAR ENDED YEAR ENDED PERIOD
SEPTEMBER 30, ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ENDED
1999 MARCH 31, 1999 MARCH 31, 1999 MARCH 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
------------- ---------- ------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase in Fund
shares:
Shares outstanding
at beginning of
period 10,941,629 2,381,576 23,175,723 13,289,111 711,012 0
Shares sold 5,539,663 9,034,372 12,146,732 23,153,600 155,428 719,869
Shares issued
through
reinvestment of
dividends 357,219 413,999 742,616 1,240,285 23,203 5,327
Shares redeemed (1,722,446) (888,318) (4,469,361) (14,507,273) (56,937) (14,184)
---------- ---------- ---------- ----------- ------- -------
Net increase in Fund
shares 4,174,436 8,560,053 8,419,987 9,886,612 121,694 711,012
---------- ---------- ---------- ----------- ------- -------
Shares outstanding at
end of period 15,116,065 10,941,629 31,595,710 23,175,723 832,706 711,012
========== ========== ========== =========== ======= =======
</TABLE>
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37
<PAGE> 39
BOARD OF TRUSTEES
Scott B. Dubchansky
Keith T. Holmes
Martin Luther King III
Laird R. Landmann
James M. Lippman
Daniel D. Villanueva
OFFICERS
Scott B. Dubchansky
Chairman of the Board, President and
Principal Executive Officer
Richard H. Schweitzer
Treasurer, Principal Accounting and Financial Officer
Lara Mulpagano
Secretary and Assistant Treasurer
James E. Menvielle
Assistant Treasurer
<TABLE>
<S> <C>
ADVISER: AUDITORS:
Metropolitan West Asset Management, LLC Deloitte & Touche LLP
11766 Wilshire Boulevard, Suite 1580 1000 Wilshire Boulevard, Suite 1500
Los Angeles, CA 90025 Los Angeles, CA 90017
CUSTODIAN: DISTRIBUTOR:
The Bank of New York First Data Distributors, Inc.
90 Washington Street 4400 Computer Drive
New York, NY 10286 Westboro, MA 01581
TRANSFER AGENT: LEGAL COUNSEL:
First Data Investor Services Group, Inc. Paul, Hastings, Janofsky & Walker LLP
P.O. Box 61503 345 California Street, 29th Floor
King of Prussia, PA 19406 San Francisco, CA 94104
</TABLE>
[MetWstLg Logo]
For Additional Information about the
Metropolitan West Funds call:
(310) 966-8900 or
(800) 241-4671 (toll-free)
This report is submitted for general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
