<PAGE> 1
[METROPOLITAN WEST LOGO]
METROPOLITAN WEST FUNDS
TOTAL RETURN BOND FUND
LOW DURATION BOND FUND
ALPHATRAK 500 FUND
ANNUAL REPORT
March 31, 2000
<PAGE> 2
METROPOLITAN WEST FUNDS
Dear Shareholder,
At the third anniversary of Metropolitan West Funds, we thank you for your
continued support!
We are pleased to enclose the March 31, 2000 Annual Report for the Metropolitan
West Low Duration and Total Return Bond Funds and the Metropolitan West
AlphaTrak 500 Fund.
In a difficult market environment characterized by rising interest rates and
heightened market volatility, the Funds enjoyed modest outperformance relative
to their respective benchmarks for the twelve months ended March 31, 2000. This
outperformance was achieved through our investment philosophy of strategic
diversification in which we seek to add value from our (1) duration decision,
(2) yield curve positioning, (3) sector selection, (4) issue selection, and (5)
execution. For the most recent time periods, the favorable performance was
attributable to maintaining durations which were defensive relative to the
indices and by emphasizing the corporate sector, which offered yield advantages
over Treasury securities.
Returns to the Funds, net of fees and expenses, were as follows:
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
PERIOD ENDED (ANNUALIZED) THROUGH
MARCH 31, 2000 MARCH 31, 2000
-------------- --------------------
<S> <C> <C>
Metropolitan West Low Duration Bond +6.22% +7.14%
Fund (Inception 3/31/97)
Merrill Lynch 1-3 Year US Treasury +3.74% +5.76%
Index*
Metropolitan West Total Return Bond +3.39% +8.56%
Fund (Inception 3/31/97)
Lehman Bros. Aggregate Index* +1.88% +6.70%
Metropolitan West AlphaTrak 500 Fund +19.28% +21.06%
(Inception 6/29/98)
S&P 500 Equity Index* +17.95% +18.50%
</TABLE>
- ---------
* An unmanaged index.
Another recent development at Metropolitan West Funds has been the addition of
institutionally priced share classes for the Total Return and Low Duration
Funds. These Class I shares will be managed with the exact investment philosophy
and process as the original (now known as Class M) shares. The Class I shares
require a minimum investment of $3 million.
Our enhanced S&P 500 Index strategy, the AlphaTrak 500 Fund can now be found
together with the Bond Funds in the business section of many daily newspapers.
- --------------------------------------------------------------------------------
1
<PAGE> 3
The family of Metropolitan West Funds now consists of the following:
<TABLE>
<CAPTION>
NASDAQ
FUND TICKER
- ---- ------
<S> <C>
Metropolitan West Total Return Fund (Class M) MWTRX
Metropolitan West Low Duration Fund (Class M) MWLDX
Metropolitan West Total Return Fund (Class I) MWTIX
Metropolitan West Low Duration Fund (Class I) MWLIX
Metropolitan West AlphaTrak 500 Fund MWATX
</TABLE>
Again, we thank you for your continued confidence and participation in
Metropolitan West Funds. For more information about our Funds, including the new
share class, or to obtain a prospectus, please feel free to contact us directly
at (310) 966-8900. Please read the prospectus carefully before you invest or
send money.
Sincerely,
/s/ Scott Dubchansky
Scott Dubchansky
President and Trustee
Past performance does not guarantee future results. Share prices and returns
will fluctuate and shares, when redeemed, may be worth more or less than their
original cost. Unlike a mutual fund, the performance of an unmanaged index
assumes no transaction costs, taxes, management fees, or other expenses. A
direct investment in an index is not possible. U.S. Treasury bonds, unlike
mutual funds, are insured direct obligations of the U.S. Government that offer a
fixed rate of return when held to maturity.
The Metropolitan West Funds are distributed by Provident Distributors, Inc.
3200 Horizon Drive, King of Prussia, PA 19406
To be preceded or accompanied by a prospectus. DFU 5/00
- --------------------------------------------------------------------------------
2
<PAGE> 4
METROPOLITAN WEST FUNDS
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
The graph below compares the increase in value of a $10,000 investment in the
Metropolitan West Total Return Bond Fund with the performance of the Lehman
Aggregate Index. The one year and average annual since inception total returns
for the Metropolitan West Total Return Bond Fund were 3.39% and 8.56%,
respectively. The graph assumes that distributions were reinvested.
METROPOLITAN WEST TOTAL RETURN BOND FUND
[Performance Chart] TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
TOTAL RETURN BOND LEHMAN AGGREGATE INDEX
----------------- ----------------------
<S> <C> <C>
Mar-97 10000.0 10000.0
10127.6 10150.0
10249.1 10246.0
Jun-97 10391.2 10368.0
10696.9 10648.0
10637.4 10558.0
Sep-97 10776.5 10714.0
10939.7 10869.0
11051.8 10919.0
Dec-97 11187.5 11030.0
11323.2 11171.0
11314.5 11162.0
Mar-98 11370.6 11200.0
11454.5 11258.1
11550.1 11365.1
Jun-98 11665.2 11461.7
11703.2 11485.7
11722.5 11673.0
Sep-98 11928.4 11946.1
12040.3 11882.8
12216.0 11950.5
Dec-98 12298.7 11986.4
12416.0 12071.5
12173.6 11860.2
Mar-99 12375.8 11925.5
12445.6 11963.6
12331.1 11858.3
Jun-99 12347.5 11820.4
12341.0 11770.8
12395.7 11764.9
Sep-99 12462.6 11901.3
12518.0 11945.4
12501.1 11944.2
Dec-99 12510.0 11886.9
12503.9 11847.6
12620.7 11991.0
Mar-00 12795.9 12149.3
</TABLE>
The graph below compares the increase in value of a $10,000 investment in the
Metropolitan West Low Duration Bond Fund with the performance of the Merrill
Lynch 1-3 Year U.S. Treasury Index. The one year and average annual since
inception total returns for the Metropolitan West Low Duration Fund were 6.22%
and 7.14%, respectively. The graph assumes that distributions were reinvested.
METROPOLITAN WEST LOW DURATION BOND FUND
[Performance Chart] TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
MERRILL LYNCH 1-3 YR. U.S. TREASURY
LOW DURATION BOND INDEX
----------------- -----------------------------------
<S> <C> <C>
Mar-97 10000.0 10000.0
10087.2 10082.0
10167.9 10151.0
Jun-97 10242.9 10221.0
10358.5 10333.0
10397.1 10342.0
Sep-97 10487.7 10421.0
10536.4 10498.0
10597.0 10524.0
Dec-97 10682.9 10596.0
10786.3 10699.0
10812.9 10708.0
Mar-98 10870.7 10751.0
10937.2 10801.7
11016.9 10859.0
Jun-98 11085.4 10915.5
11154.7 10966.5
11061.2 11104.4
Sep-98 11120.7 11251.5
11171.2 11306.8
11311.3 11296.9
Dec-98 11396.9 11336.8
11484.9 11381.7
11434.4 11326.2
Mar-99 11581.3 11404.9
11678.7 11441.6
11733.9 11434.3
Jun-99 11776.5 11469.9
11811.3 11506.3
11846.0 11539.5
Sep-99 11949.6 11614.6
11996.1 11645.9
12033.7 11667.9
Dec-99 12106.8 11684.3
12161.6 11680.0
12212.3 11758.2
Mar-00 12302.1 11831.1
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE> 5
METROPOLITAN WEST FUNDS
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
The graph below compares the increase in value of a $10,000 investment in the
Metropolitan West AlphaTrak 500 Fund with the performance of the S&P 500 Index.
The one year and average annual since inception total returns for the
Metropolitan West AlphaTrak 500 Fund were 19.28% and 21.06%, respectively. The
graph assumes that distributions were reinvested.
METROPOLITAN WEST ALPHATRAK 500 FUND
[Performance Chart] TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
ALPHATRAK 500 S&P 500 INDEX
------------- -------------
<S> <C> <C>
Jun-29-98 10000.00 10000.00
9960.00 9960.02
Jul-98 9880.00 9853.97
8290.00 8429.29
Sep-98 9010.00 8969.30
9801.96 9698.87
Nov-98 10487.50 10286.60
11079.80 10879.40
Jan-99 11594.10 11334.40
11141.50 10982.30
Mar-99 11727.90 11421.60
12162.30 11864.00
May-99 11922.00 11583.80
12559.40 12226.30
Jul-99 12188.70 11845.10
12114.50 11786.10
Sep-99 11796.60 11463.00
12575.40 12188.60
Nov-99 12812.50 12437.30
13577.00 13169.80
Jan-00 12871.80 12508.20
12707.20 12271.80
Mar-00 13988.50 13471.90
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE> 6
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--91.33%
ASSET-BACKED $ 2,250,000 Atherton Franchisee Loan Funding
SECURITIES--21.91%(3) 1999-A E, 8.25%, 10/15/15(4) $ 1,440,353
1,250,000 Empire Funding Home Loan Owner
Trust 1999-1 M2, 9.00%, 05/25/30 1,251,172
5,300,000 Ena Clo Trust I A2, 8.13%,
07/15/14(4) 5,228,784
1,000,000 Falcon Franchise Loan LLC 1999-1
D, 8.40%, 07/05/13(4) 924,687
1,000,000 Falcon Franchise Loan LLC 1999-1
E, 6.50%, 11/5/13(4) 572,187
2,155,721 First Union Home Equity Loan
Trust 1997-3 B, 7.39%, 03/25/29 2,067,808
1,000,000 Green Tree Financial Corp.
1996-9 A6, 7.69%, 01/15/28 1,008,885
1,000,000 Green Tree Home Equity Loan
Trust 1997-B M1, 7.65%, 04/15/27 1,004,435
4,250,000 Green Tree Home Equity Loan
Trust 1998-C B2, 8.06%, 07/15/29 3,843,126
2,000,000 Green Tree Home Improvement Loan
Trust 1997-E HEB2, 7.77%,
01/15/29 1,806,562
3,000,000 Green Tree Home Improvement Loan
Trust 1998-B HEB2, 8.49%,
11/15/29 2,767,032
5,000,000 Green Tree Home Improvement Loan
Trust 1998-B HEM2, 7.33%,
11/15/29 4,791,405
1,675,961 Green Tree Recreational
Equipment & Consumer Trust
1998-A A4H, 8.26%, 05/15/29 1,654,081
6,000,000 Newbury Funding CBO Ltd. 2000-1
A1 (FRN), 6.47%, 02/15/05(4) 5,137,068
5,000,000 Norse CBO Ltd. 1A C1, 9.60%,
08/13/10(4) 4,221,485
2,000,000 Provident Bank Home Equity Loan
Trust 1997-4 A3, 6.91%, 01/25/29 1,958,685
2,583,000 Residential Asset Mortgage
Products, Inc. 2000-RZ1 A3,
8.27%, 10/25/29 2,618,498
3,550,000 Residential Funding Mortgage
Securities I 1999-HI6 AI7,
8.10%, 09/25/29 3,578,347
2,250,000 Residential Funding Mortgage
Securities I 2000-HI1 AI7,
8.29%, 02/25/25 2,292,538
1,000,000 Residential Funding Mortgage
Securities I 2000-HI2 AI5,
8.35%, 03/25/25 1,024,724
6,000,000 Signature 3 Ltd. 3A C, 4.67%,
08/27/13(4) 5,758,128
------------
54,949,990
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 7
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES--31.50%(2)
Banks--1.25% $ 500,000 Bergen Bank ASA (FRN), 6.50%,
08/29/49 $ 389,500
2,100,000 First Chicago Bank, 7.95%,
12/01/26(4) 1,966,782
400,000 Okobank (FRN) (MTN), 6.63%,
09/29/49 391,040
400,000 Skandinavinska Enskilda (FRN)
(MTN), 7.26%, 06/29/49 394,940
------------
3,142,262
------------
Brokerage Services 2,000,000 Bear Stearns Co., Inc., 7.25%,
- --3.92% 10/15/06 1,947,470
750,000 Bear Stearns Co., Inc., 7.00%,
03/01/07 721,159
2,200,000 Donaldson, Lufkin, Jenrette,
Inc., 6.88%, 11/01/05 2,111,892
2,000,000 Donaldson, Lufkin, Jenrette,
Inc., (MTN), 6.90%, 10/01/07 1,888,760
1,500,000 Lehman Brothers Holdings, Inc.,
8.50%, 05/01/07 1,544,713
1,300,000 Lehman Brothers Holdings, Inc.,
7.38%, 01/15/07 1,258,577
400,000 Merrill Lynch & Co., Inc.,
6.00%, 02/17/09 357,022
------------
9,829,593
------------
Electric Utilities 300,000 Alabama Power Co., 9.00%,
12/01/24 312,571
- --0.45% 800,000 Arkansas Power & Light Co.,
8.75%, 03/01/26 817,447
------------
1,130,018
------------
Finance--11.26% 3,250,000 American Financial Group, 7.13%,
04/15/09 2,961,413
400,000 AT&T Capital Corp. (FRN) (MTN),
7.12%, 12/05/00 400,849
500,000 Bankers Trust Institutional
Capital Trust B, 7.75%,
12/01/26(4) 460,641
7,400,000 Conseco Finance Trust III,
8.80%, 04/01/27 6,794,414
1,500,000 Crestar Capital Trust I, 8.16%,
12/15/26 1,461,763
4,900,000 Fairfax Financial Holdings,
7.38%, 03/15/06 4,421,985
2,500,000 Lumbermens Mutual Casualty Co.,
9.15%, 07/01/26(4) 2,537,155
1,300,000 Lumbermens Mutual Casualty Co.,
8.30%, 12/01/37(4) 1,100,738
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
6
<PAGE> 8
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
Finance (continued) $ 2,500,000 Lumbermens Mutual Casualty Co.,
8.45%, 12/01/97(4) $ 2,122,807
1,085,000 MBNA Corp. (FRN) (MTN), 6.84%,
05/23/03 1,081,669
4,000,000 Noble Aff/Atlantic Meth, 8.95%,
12/15/04(4) 3,937,560
1,000,000 Zurich Capital Trust I, 8.38%,
06/01/37(4) 958,944
------------
28,239,938
------------
Industrial--9.20% 390,000 Cemex S.A. (MTN), 8.50%,
08/31/00 392,496
5,250,000 Harcourt General, Inc., 7.30%,
08/01/97 4,261,067
6,100,000 Husky Oil Ltd. (FRN), 8.90%,
08/15/28 5,809,157
3,300,000 Lockheed Martin Corp., 7.95%,
12/01/05 3,284,166
1,500,000 Mississippi Chemical, 7.25%,
11/15/17 1,324,500
7,000,000 Waste Management, Inc., 6.13%,
07/15/01 6,691,880
1,400,000 Waste Management, Inc., 6.63%,
07/15/02 1,308,749
------------
23,072,015
------------
Real Estate 500,000 Developers Diversified Realty
Investment Trust Corp. (MTN), 6.84%, 12/16/04 461,581
(REIT)--5.42% 1,000,000 Developers Diversified Realty
Corp. (MTN), 7.50%, 07/15/18 905,198
1,000,000 Health & Retirement Properties
Trust, 7.50%, 10/01/03 939,688
2,000,000 Health & Retirement Properties
Trust, 6.70%, 02/23/05 1,853,006
1,700,000 Highwoods Excersiable Put
Option, 7.19%, 06/15/04(4) 1,624,933
600,000 La Quinta Inns (MTN), 7.11%,
10/17/01 564,938
2,300,000 Rouse Co. (MTN), 8.09%, 05/16/05 2,290,020
1,000,000 Simon Property Group, Inc.,
6.75%, 07/15/04 942,770
2,000,000 United Dominion Realty Trust
(MTN), 7.67%, 01/26/04 1,946,888
2,055,000 United Dominion Realty Trust,
8.50%, 09/15/24 2,053,177
------------
13,582,199
------------
TOTAL CORPORATES 78,996,025
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
7
<PAGE> 9
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED--32.20%(3)
Non-Agency $ 285,420 BA Mortgage Securities, Inc.
Mortgage-Backed 1998-2 2B3, 6.50%, 06/25/13(4) $ 237,612
- --22.19% 344,393 BA Mortgage Securities, Inc.
1998-3 2B3, 6.50%, 07/25/13(4) 286,761
362,277 BA Mortgage Securities, Inc.
1998-4 2B3, 6.50%, 08/25/13(4) 300,746
98,300 Bear Stearns Mortgage
Securities, Inc. 1997-7 4B4,
7.00%, 01/25/13(4) 83,201
119,159 Bear Stearns Mortgage
Securities, Inc. 1998-5 B4,
6.51%, 12/25/08(4) 103,370
2,094,330 Bear Stearns Structured
Products, Inc. 1999-1 D, 6.35%,
11/30/13(4) 1,689,207
6,000,000 BHN Mortgage Trust 2000-1 AF,
8.00%, 03/31/11(4) 5,620,386
55,421 Blackrock Capital Finance L.P.
1997-R2 AP, 8.55%, 12/25/35(4) 56,851
3,000,000 Blaylock Mortgage Capital Corp.
1997-A B1, 6.43%, 10/25/04(4) 2,806,407
2,000,000 Chase Mortgage Finance Corp.
2000-S1 A6, 7.25%, 02/25/30 1,862,950
2,629,993 Citicorp Mortgage Securities,
Inc. 1998-7 A4 (IO), 6.75%,
08/25/28(6) 329,867
215,935 CMC Securities Corp. III 1994-A
A19, 4.27%, 02/25/24 145,878
202,287 CMC Securities Corp. III 1998-1
2B4, 6.50%, 04/25/13(4) 163,537
68,145 Collateralized Mortgage
Obligation Trust 57 D, 9.90%,
02/01/19 71,403
3,810,068 Countrywide Alternative Loan
Trust 1999-2 B2, 7.50%, 01/25/29 3,432,631
524,639 Countrywide Home Loans 1998-14
B3, 6.50%, 09/25/13(4) 433,401
89,381,630 DLJ Commercial Mortgage
Acceptance Corp. 1999-CG2 S
(IO), 0.46%, 06/10/24(6) 2,858,603
1,165,272 DLJ Mortgage Acceptance Corp.
1992-Q8 A2, 7.28%, 11/25/22 1,169,628
1,304,334 DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.78%,
05/25/24(6) 54,730
5,046,604 DLJ Mortgage Acceptance Corp.
1994-QE1 S (IO), 3.60%,
04/25/24(4,6) 276,478
1,211,318 DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO), 4.07%,
06/25/24(4,6) 71,964
7,641,570 DLJ Mortgage Acceptance Corp.
1995-Q7 SA (IO), 3.05%,
11/25/25(6) 333,822
2,040,172 DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO), 4.95%,
12/25/25(6) 138,507
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 10
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 5,139,240 DLJ Mortgage Acceptance Corp.
Mortgage-Backed 1996-Q5 SA (IO), 3.33%,
06/25/26(6) $ 291,282
(continued) 6,213,521 DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.07%,
01/25/26(4,6) 255,842
3,996,856 DLJ Mortgage Acceptance Corp.
1996-QE3 SA (IO), 4.12%,
03/25/26(6) 242,769
399,510 First Boston Mortgage Securities
Corp. 1993-6 A2, 7.00%, 06/25/23 391,570
500,000 GE Capital Mortgage Services,
Inc. 1994-6 A11, 6.50%, 04/25/24 424,522
3,405,169 IMPAC Secured Assets CMN Owner
Trust 1999-2 A9 (IO),
9.00%, 01/25/30 825,754
365,256 Independent National Mortgage
Corp. 1994-Q B4, 7.50%,
09/25/14(4) 332,155
206,811 Independent National Mortgage
Corp. 1995-N A5, 7.50%, 10/25/25 204,583
82,149,340 LB Commercial Conduit Mortgage
Trust 1998-C4 X (IO), 0.56%,
09/15/23(6) 2,882,867
784,856 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%, 06/25/26 773,942
3,843,018 Nomura Asset Securities Corp.
1994-4A 2IO (IO), 1.23%,
09/25/24(6) 30,721
977,698 Norwest Asset Securities Corp.
1998-4 1A7, 9.00%, 02/25/28 985,488
1,000,014 Norwest Integrated Structured
Assets, Inc. 1999-2 1A2, 8.66%,
09/25/29 921,888
662,034 OCWEN Residential MBS Corp.
1998-R2 AP, 6.62%, 11/25/34(4) 640,783
326,559 Residential Accredit Loans, Inc.
1998-QS16 B1, 6.50%, 11/25/13 257,727
2,254,643 Residential Asset Securitization
Trust 1999-A7, 7.50%, 10/25/29 2,028,475
163,955 Residential Funding Mortgage
Securities I 1993-S42 A10,
8.30%, 10/25/08 158,755
806,084 Residential Funding Mortgage
Securities I 1997-S16 M1, 6.75%,
10/25/12 712,125
2,000,000 Residential Funding Mortgage
Securities I 1998-S2 A2, 7.00%,
01/25/28 1,916,030
3,238,375 Resolution Trust Corp. 1994-C1
F, 8.00%, 06/25/26 3,186,257
120,839 Resolution Trust Corp. 1995-2
B6, 6.50%, 05/25/29 119,136
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE> 11
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 1,116,504 Resolution Trust Corp. 1995-C2
Mortgage-Backed F, 7.00%, 05/25/27 $ 1,087,475
(continued) 169,615 Ryland Mortgage Securities Corp.
1991-18 4A, 14.00%, 11/25/31 178,392
6,500,000 Ryland Mortgage Securities Corp.
III 1992-A 1C, 8.26%, 03/29/30 6,438,048
754,166 Ryland Mortgage Securities Corp.
1994-5 M3, 6.62%, 10/25/23 534,398
337,165 Structured Asset Mortgage
Investments, Inc. 1998-8 3B4,
6.74%, 07/25/13 274,473
150,000 Structured Asset Securities
Corp. 1995-3B 2A1, 6.50%,
01/28/24 135,245
1,829,126 Structured Asset Securities
Corp. 1995-C4 D, 7.00%, 06/25/26 1,797,930
850,000 Structured Asset Securities
Corp. 1996-6 1A5, 7.50%,
08/25/26 825,805
151,140 Structured Mortgage Asset
Residential Trust 1991-7 I (IO),
14.27%, 12/25/22(6) 31,392
4,448,951 Summit Mortgage Trust 2000-1 B1,
6.14%, 12/28/12(4) 4,229,978
------------
55,643,747
------------
U.S. Agency 2,890,000 Fannie Mae, 7.50%, 04/15/30 2,840,321
Mortgage-Backed 2,000,000 Fannie Mae, 8.50%, 04/15/30 2,041,250
- --10.01% 57,305 Fannie Mae G94-12 B, 6.50%,
09/17/22 56,817
195,917 Fannie Mae 1992-143 SH, 8.75%,
04/25/22 197,729
37,903 Fannie Mae 1992-200 MC, 7.50%,
08/25/22 36,164
484,103 Fannie Mae 1993-115 S, 1.60%,
07/25/23 272,544
261,005 Fannie Mae 1993-189 SB, 6.40%,
10/25/23 204,666
10,679,884 Fannie Mae 1993-199 SD (IO),
0.87%, 10/25/23 223,210
1,999,490 Fannie Mae 1993-208 SE, 6.93%,
11/25/23 1,828,284
259,925 Fannie Mae 1993-221 SD, 9.00%,
03/25/08 258,804
194,460 Fannie Mae 1993-251 C, 6.50%,
09/25/23 191,806
283,712 Fannie Mae 1994-41 SC, 3.70%,
03/25/24 201,860
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE> 12
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 861,709 Fannie Mae 1994-56 TA (IO),
Mortgage-Backed 6.50%, 04/25/17 $ 21,373
(continued) 329,916 Fannie Mae 1995-10 Z, 6.50%,
03/25/24 318,797
271,230 Fannie Mae 1997-34 SA, 27.20%,
10/25/23 625,180
5,250,000 Fannie Mae 1997-44 SB (IO),
2.10%, 06/25/08 314,475
994,677 Fannie Mae 1998-26 SD, 6.26%,
03/25/24 832,116
935,312 Fannie Mae 1999-4 SC, 2.79%,
01/25/24 747,957
249,766 Fannie Mae Pool 233672, 7.57%,
09/01/23 256,295
69,952 Fannie Mae Pool 308798, 7.72%,
04/01/25 72,020
183,842 Fannie Mae Pool 312155, 7.47%,
03/01/25 186,828
6,158 Freddie Mac 1164 O, 637.54%,
11/15/06 77,971
132,414 Freddie Mac 1336 H, 7.75%,
01/15/21 132,890
213,238 Freddie Mac 1499 G, 7.00%,
02/15/19 1,035
283,829 Freddie Mac 1515 SA, 8.61%,
05/15/08 281,279
3,948 Freddie Mac 1541 JA, 5.00%,
12/15/22 3,491
898,928 Freddie Mac 1564 SA, 7.91%,
08/15/08 828,439
59,951 Freddie Mac 1564 SE, 8.23%,
08/15/08 59,374
1,636,000 Freddie Mac 1627 E, 6.00%,
02/15/23 1,477,403
1,806,858 Freddie Mac 1980 Z, 7.00%,
07/15/27 1,595,133
1,349,763 Freddie Mac 1985 SA, 8.01%,
08/17/27 1,186,526
134,706 Freddie Mac 2089 SA, 6.25%,
07/15/15 121,263
731,258 Freddie Mac 2098 TZ, 6.00%,
01/15/28 576,829
28,152,301 Freddie Mac 2136 SG (IO), 1.65%,
03/15/29 1,438,583
1,664,440 Freddie Mac 2156 S, 7.48%,
05/15/29 1,429,857
75,880,000 Government National Mortgage
Association 1999-38 SP (IO),
0.25%, 05/16/26 447,692
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE> 13
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 1,042,557 Government National Mortgage
Mortgage-Backed Association Pool 470634, 6.50%,
(continued) 07/15/29 $ 983,939
3,000,000 Government National Mortgage
Association Pool, 6.00%,
04/15/15 2,744,065
------------
25,114,265
------------
TOTAL MORTGAGE-BACKED 80,758,012
------------
U.S. TREASURY NOTES--5.72%
13,716,000 U.S. Treasury Notes, 7.00%,
07/15/06 14,196,060
129,000 U.S. Treasury Notes, 8.13%,
08/15/19 156,816
------------
14,352,876
------------
TOTAL BONDS
(Cost $233,352,807) 229,056,903
------------
SHORT TERM INVESTMENTS--7.37%
Commercial Paper 9,000,000 Ford Motor Credit Co.,
- --5.57% 6.04%(5), 04/10/00 8,986,575
5,000,000 General Motors Acceptance Corp.,
6.17%(5), 04/24/00 4,980,801
------------
13,967,376
------------
Money Market RIC 4,350,400 J.P. Morgan Institutional Prime
- --1.73% Money Market 4,350,400
------------
U.S. Treasury Bills 162,000 U.S. Treasury Bill, 5.51% to
- --0.07% 5.72%(5), 06/08/00 160,310
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $18,478,133) 18,478,086
------------
TOTAL INVESTMENTS--98.70%
(Cost $251,830,940)(1) 247,534,989
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.30% 3,258,697
------------
NET ASSETS--100.00% $250,793,686
============
</TABLE>
FUTURES CONTRACTS: SHORT POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
(45) U.S. Treasury 10 Year Note, June 2000 $(102,404)
(31) U.S. Long Bond, June 2000 (106,375)
---------
$(208,779)
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE> 14
TOTAL RETURN BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
Notes:
(1) Cost for Federal income tax purposes is $251,856,552 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 2,308,564
Gross unrealized depreciation (6,630,127)
-----------
Net unrealized depreciation $(4,321,563)
===========
</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 March 31, 2000 was $55,580,931 representing 22.16% of
total net assets.
(5) Represents annualized yield at date of purchase.
(6) Securities determined to be illiquid under procedures approved by the Fund's
Board of Trustees. Information related to these securities is as follows:
<TABLE>
<CAPTION>
% OF
SECURITY DATE OF PURCHASE VALUE TNA
-------- ---------------- ---------- -----
<S> <C> <C> <C>
Citicorp Mortgage Securities, Inc.
1998-7 A4 (IO), 6.75%, 08/25/28 09/21/99 $ 329,867 0.13%
DLJ Commercial Mortgage Corp.
1999-CG2 S (IO), 0.46%, 06/10/24 08/01/99 2,858,603 1.14%
DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.86%, 05/25/24 06/19/97 54,730 0.02%
DLJ Mortgage Acceptance Corp.
1994-QE1 S (IO), 3.60%, 04/25/24 07/01/99 276,478 0.11%
DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO), 4.02%, 06/25/24 01/06/99 71,964 0.03%
DLJ Mortgage Acceptance Corp.
1995-Q7 SA (IO), 3.01%, 11/25/25 10/20/98 333,822 0.13%
DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO), 4.93%, 12/25/25 03/30/99 138,507 0.06%
DLJ Mortgage Acceptance Corp.
1996-Q5 SA (IO), 3.54%, 06/25/26 11/02/98 291,282 0.12%
DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.13%, 01/25/26 10/20/98 255,842 0.10%
DLJ Mortgage Acceptance Corp.
1996-QE3 SA (IO), 4.07%, 03/25/26 01/22/99 242,769 0.10%
LB Commercial Conduit Mortgage Trust
1998-C4 X (IO), 0.56%, 09/15/23 06/04/99 2,882,867 1.15%
Nomura Asset Securities Corp.
1994-4A 2IO (IO), 1.23%, 09/25/24 06/01/99 30,721 0.01%
Structured Mortgage Asset
Residential Trust 1991-7 I (IO),
8.50%, 12/25/22 06/25/97 31,392 0.01%
---------- ---
$7,798,844 3.11%
--------- ---
--------- ---
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at March 31,
2000.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE> 15
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--85.19%
ASSET-BACKED $ 1,205,980 Atherton Franchisee Loan
SECURITIES--26.36%(3) Funding 1999-A E, 8.25%,
10/15/15(4) $ 772,017
5,000,000 Cit Group Home Equity Loan
Trust 1997-1 M2, 7.10%,
07/15/27 4,863,425
26,345 Contimortgage Home Equity Loan
Trust 1994-4 A6, 8.27%,
12/15/24 26,500
2,000,000 Delta Funding Home Equity Loan
Trust 1996-2 A5, 8.01%,
10/25/27(6) 2,020,030
11,000,000 Empire Funding Home Loan Owner
Trust 1999-1 M2, 9.00%,
05/25/30 11,010,318
6,840,460 Equicredit Funding Trust
1996-A A3, 7.35%, 11/15/19 6,852,259
437,500 Falcon Franchise Loan LLC
1999-1 D, 8.40%, 07/05/13(4) 404,551
1,586,500 Falcon Franchise Loan LLC
1999-1 E, 6.50%, 01/05/14(4) 907,775
2,500,000 Firstcity Capital Home Equity
Funding Corp. 1998-1 A4,
6.72%, 06/25/28(4) 2,374,217
937,270 First Union Home Equity Loan
Trust 1997-3 B, 7.39%,
03/25/29 899,047
2,750,000 Green Tree Financial Corp.
1994-1 A5, 7.65%, 04/15/19 2,779,648
1,210,000 Green Tree Home Equity Loan
Trust 1997-B M1, 7.65%,
04/15/27 1,215,366
7,000,000 Green Tree Home Equity Loan
Trust 1998-C B2, 8.06%,
07/15/29 6,329,855
1,800,000 Green Tree Home Improvement
Loan Trust 1996-F HIM1, 7.30%,
11/15/27 1,765,323
5,000,000 Green Tree Home Improvement
Loan Trust 1998-B HEB2, 8.49%,
11/15/29 4,611,720
6,750,000 Green Tree Home Improvement
Loan Trust 1998-B HEM2, 7.33%,
11/15/29 6,468,397
4,600,000 Green Tree Home Improvement
Loan Trust 1999-E M2, 9.45%,
10/15/24 4,820,657
2,648,018 Green Tree Recreational,
Equipment & Consumer Trust
1998-A A4H, 8.26%, 05/15/29 2,613,448
3,250,000 IMPAC Secured Assets CMN Owner
Trust 1998-1 M2, 7.77%,
07/25/25 3,117,806
6,800,000 Newbury Funding CBO Ltd.
2000-1 A3 (FRN), 8.85%,
02/15/30(4) 6,783,680
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE> 16
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONTINUED)
ASSET-BACKED $ 427,234 New York City Tax Lien 1998-2A
SECURITIES A, 7.98%, 07/25/06(4) $ 422,363
(CONTINUED) 49,165 Olympic Automobile Receivables
Trust 1994-B A2, 6.86%,
06/15/01 49,204
9,000,000 Pegasus Aviation Lease
Securitization 2000-1 B1,
8.08%, 03/25/30(4) 8,777,232
2,602,826 Residential Funding Mortgage
Securities I 2000-HI1 AII,
8.11%, 02/25/25 2,603,641
2,000,000 Signature 3 Ltd. 3A C, 4.67%,
08/27/13(4) 1,919,376
5,582,730 Structured Settlements Fund
1999-A A, 7.25%, 12/20/15(4) 5,450,140
7,212,000 TMI Home Loan Trust 1998 A4,
7.56%, 05/25/18(4) 7,088,040
54,847 UCFC Home Equity Loan 1994-B1
A4, 7.45%, 06/10/11 54,898
------------
97,000,933
------------
CORPORATES--27.98%(2)
Banks--3.13% 2,100,000 AB Spintab (FRN), 8.03%,
12/29/49(4) 2,022,447
500,000 Christiania Bank (FRN), 6.25%,
11/29/49 394,025
4,000,000 Okobank (FRN) (MTN), 6.63%,
09/29/49 3,910,400
400,000 Skandinavinksa Enskilda (FRN)
(MTN), 7.28%, 03/29/49 394,320
1,300,000 Skandinavinksa Enskilda (FRN)
(MTN), 7.26%, 06/29/49 1,283,555
3,500,000 Wells Fargo Bank (FRN), 6.78%,
05/02/05 3,499,300
------------
11,504,047
------------
Brokerage 7,270,000 Bear Stearns Capital Trust I
Services--8.45% (FRN), 7.00%, 01/15/27 7,132,044
3,000,000 Bear Stearns Co., Inc. (FRN)
(MTN), 6.38%, 06/26/04 2,996,631
1,800,000 Bear Stearns Co., Inc. (FRN)
(MTN), 6.57%, 03/18/05 1,801,273
5,000,000 Bear Stearns Co., Inc., 7.25%,
10/15/06 4,868,674
3,000,000 Donaldson, Lufkin, Jenrette,
Inc., 6.88%, 11/01/05 2,879,852
550,000 Donaldson, Lufkin, Jenrette,
Inc. (MTN), 6.90%, 10/01/07 519,409
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE> 17
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
Brokerage Services $ 1,000,000 Donaldson, Lufkin, Jenrette,
(continued) Inc., 6.50%, 06/01/08 $ 916,546
2,000,000 Goldman Sachs Group (MTN),
7.20%, 11/01/06(4) 1,939,722
200,000 Lehman Brothers Holdings,
Inc., 6.63%, 11/15/00 199,371
250,000 Lehman Brothers Holdings, Inc.
(FRN) (MTN), 6.61%, 02/20/01 250,175
3,000,000 Lehman Brothers Holdings, Inc.
(FRN) (MTN), 6.64%, 01/30/02 2,989,800
500,000 Lehman Brothers Holdings, Inc.
(FRN) (MTN), 6.77%, 03/17/07 496,600
4,000,000 Lehman Brothers Holdings,
Inc., 8.50%, 05/01/07 4,119,236
------------
31,109,333
------------
Electric 600,000 Arkansas Power & Light Co.,
Utilities--0.17% 8.75%, 03/01/26 613,085
------------
Finance--6.95% 1,500,000 AT&T Capital Corp. (FRN)
(MTN), 7.12%, 12/05/00 1,503,184
7,000,000 Fairfax Financial Holdings,
7.38%, 03/15/06 6,317,121
1,250,000 Lumbermens Mutual Casualty,
8.30%, 12/01/37(4) 1,058,402
6,000,000 Noble Aff/Atlantic Meth,
8.95%, 12/15/04(4) 5,906,339
10,892,049 Queens Funding Ltd., 7.48%,
09/22/01 10,780,950
------------
25,565,996
------------
Industrial--5.66% 4,000,000 Harcourt General, Inc., 7.30%,
08/01/97 3,246,528
3,950,000 Husky Oil Ltd., 8.90%,
08/15/28 3,761,667
6,575,000 USA Waste Services, 6.50%,
12/15/02 6,110,147
2,035,000 Waste Management, Inc., 6.00%,
05/15/01 1,956,066
6,500,000 Waste Management, Inc., 4.00%,
02/01/02 5,749,900
------------
20,824,308
------------
Real Estate 3,000,000 Highwoods Exercisable Put
Investment Trust Option, 7.19%, 06/15/04(4) 2,867,529
(REIT)--3.62%
3,300,000 La Quinta Inns (MTN), 7.11%,
10/17/01 3,107,158
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE> 18
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
Real Estate $ 1,500,000 Rouse Co. (FRN) (MTN), 6.95%,
Investment Trust 05/29/01 $ 1,498,369
(continued) 5,811,000 Rouse Co., 8.50%, 01/15/03 5,838,665
------------
13,311,721
------------
TOTAL CORPORATES 102,928,490
------------
MORTGAGE-BACKED--30.80%(3)
Non-Agency 195,420 Bear Stearns Mortgage
Mortgage-Backed Securities, Inc. 1993-8 AS16,
- --23.90% 10.75%, 08/25/24 184,764
9,000,000 BHN Mortgage Trust 2000-1 AF,
8.00%, 03/31/11(4) 8,430,579
221,683 Blackrock Capital Finance L.P.
1997-R2 AP, 8.55%, 12/25/35(4) 227,403
218,789 Chemical Mortgage Securities,
Inc. 1993-2 A1, 6.95%,
07/25/08 217,961
68,325 Citicorp Mortgage Securities,
Inc. 1988-16 A1, 10.00%,
11/25/18 71,124
95,682 Citicorp Mortgage Securities,
Inc. 1991-5 A, 5.90%, 05/25/21 72,973
253,150 Citicorp Mortgage Securities,
Inc. 1994-3 A12, 9.00%,
02/25/24 243,697
18,565 Collateralized Mortgage
Securities Corp. X 1, 7.00%,
06/01/06 18,451
391,643 Countrywide Funding Corp.
1993-11 A12, 8.50%, 02/25/09 377,752
100,000 Countrywide Funding Corp.
1994-7 A7, 6.50%, 03/25/24 92,255
3,184,381 Countrywide Mortgage Backed
Securities, Inc. 1993-D A12,
7.50%, 01/25/09 3,158,348
159,893,804 DLJ Commercial Mortgage Corp.
1999-CG2 S (IO), 0.46%,
06/10/24(6) 5,113,724
367,654 DLJ Mortgage Acceptance Corp.
1993-Q18 SC (IO), 2.81%,
01/25/24(6) 4,985
1,318,690 DLJ Mortgage Acceptance Corp.
1994-QE1 A1, 8.06%,
04/25/24(4) 1,316,745
8,104,183 DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.78%,
05/25/24(6) 340,052
890,875 DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO), 4.95%,
12/25/25(6) 60,482
7,160,325 DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.07%,
01/25/26(4,6) 294,826
1,852,859 DLJ Mortgage Acceptance Corp.
1996-Q5 SA (IO), 3.33%,
06/25/26(6) 105,016
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE> 19
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 599,265 First Boston Mortgage
Mortgage-Backed Securities Corp. 1993-6 A2,
(continued) 7.00%, 06/25/23 $ 587,355
2,279,210 GE Capital Mortgage Services,
Inc. 1992-12F F1, 7.00%,
10/25/07 2,240,885
80,053 GE Capital Mortgage Services,
Inc. 1993-10 A2, 9.00%,
09/25/23 80,876
953,284 GE Capital Mortgage Services,
Inc. 1996-4 A5, 7.00%,
03/25/26 898,656
59,559 Guardian Savings & Loan
Association 1988-2 A, 6.62%,
09/25/18 59,127
14,336 Guardian Savings & Loan
Association 1988-5 A, 6.52%,
12/25/18 14,283
344,686 Independent National Mortgage
Corp. 1995-N A5, 7.50%,
10/25/25 340,972
163,660,393 LB Commercial Conduit Mortgage
Trust 1998-C4 X (IO), 0.56%,
09/15/23(6) 5,743,334
9,958,151 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%,
06/25/26 9,819,673
6,000,000 Merrill Lynch Mortgage
Investors, Inc. 1994-M1 E,
8.44%, 06/25/22(4) 5,929,410
41,662 Norwest Asset Securities Corp.
1997-5 A2, 7.00%, 04/25/12 41,462
1,327,716 Norwest Asset Securities Corp.
1998-15 A15, 8.00%, 07/25/28 1,330,909
1,200,016 Norwest Integrated Structured
Assets, Inc. 1999-2 1A2,
8.66%, 09/25/29 1,106,265
245,831 Paine Webber Mortgage
Acceptance Corp. 1993-9 A6,
7.00%, 10/25/23 242,302
4,452,269 PNC Mortgage Securities Corp.
1999-9 2A1, 7.50%, 09/25/29 4,411,642
3,727,012 Prudential Home Mortgage
Securities 1995-A 2B, 8.68%,
03/28/25(4) 3,788,590
500,000 Residential Funding Mortgage
Securities I 1993-S26 A9,
7.50%, 07/25/23 493,047
147,205 Residential Funding Mortgage
Securities I 1996-S14 A11,
8.00%, 05/25/26 147,461
300,000 Residential Funding Mortgage
Securities I 1997-S12 A17,
7.25%, 08/25/27 290,162
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE> 20
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
Non-Agency $ 2,000,000 Residential Funding Mortgage
Mortgage-Backed Securities I 1998-S2 A2,
(continued) 7.00%, 01/25/28 $ 1,916,030
4,272,426 Resolution Trust Corp. 1994-C1
F, 8.00%, 06/25/26 4,203,666
161,118 Resolution Trust Corp. 1995-2
B6, 6.50%, 05/25/29 158,848
767,830 Resolution Trust Corp. 1995-C1
E, 6.90%, 02/25/27 721,895
1,838,948 Resolution Trust Corp. 1995-C2
F, 7.00%, 05/25/27 1,791,135
511,255 Ryland Acceptance Corp. IV 28
1, 11.50%, 12/25/16 525,554
187,500 Ryland Mortgage Securities
Corp. 1993-3 2E, 6.71%,
08/25/08 186,128
6,000,000 Ryland Mortgage Securities
Corp. III 1992-A 1C, 8.26%,
03/29/30 5,942,814
700,031 Ryland Mortgage Securities
Corp. III 1992-D 1A, 7.98%,
09/25/22 697,241
2,548,081 Sasco Floating Rate Commercial
Mortgage Trust 1998-C3A E,
6.30%, 02/25/28(4) 2,525,493
4,801,137 Sasco Floating Rate Commercial
Mortgage Trust 1998-C3A E,
6.88%, 06/25/01(4) 4,734,665
79,585 SLH Mortgage Trust 1990-1 G,
9.60%, 03/25/21 79,271
2,000,000 Structured Asset Securities
Corp. 1996-6 1A5, 7.50%,
08/25/26 1,943,070
2,249,000 Structured Asset Securities
Corp. 1996-C3 D, 8.00%,
06/25/30(4) 2,251,460
1,423,377 Structured Asset Securities
Corp. 1996-C3 E, 8.39%,
06/25/30(4) 1,414,261
990,155 Summit Mortgage Trust 2000-1
B1, 6.14%, 12/28/12(4) 941,420
------------
87,930,499
------------
U.S. Agency 18,666 Fannie Mae 1990-14 H, 7.95%,
Mortgage-Backed 08/25/19 18,665
- --6.90%
328,954 Fannie Mae 1993-95 SB, 15.05%,
06/25/08 389,893
2,216,083 Fannie Mae 1993-189 SB, 6.19%,
10/25/23 1,737,734
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE> 21
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 176,000 Fannie Mae 1993-202 SJ, 9.00%,
Mortgage-Backed 11/25/23 $ 176,655
(continued) 2,695,474 Fannie Mae 1993-208 SE, 6.93%,
11/25/23 2,464,674
519,851 Fannie Mae 1993-221 SD, 9.00%,
03/25/08 517,608
295,866 Fannie Mae 1994-2 SB, 10.00%,
01/25/24 311,593
283,712 Fannie Mae 1994-41 SC, 3.70%,
03/25/24 201,860
15,000,000 Fannie Mae 1997-44 SB (IO),
2.10%, 06/25/08 898,500
2,086,538 Fannie Mae 1997-76 FS, 6.51%,
09/17/27 1,991,492
1,402,968 Fannie Mae 1999-4 SC, 2.79%,
01/25/24 1,121,935
825,000 Fannie Mae, 7.50%, 04/15/30 810,818
6,158 Freddie Mac 1164 O, 6.66%,
11/15/06 77,971
200,000 Freddie Mac 1634 SE, 8.80%,
12/15/23 203,874
952,656 Freddie Mac 1967 BC, 0.00%,
06/17/27 695,911
134,706 Freddie Mac 2089 SA, 6.25%,
07/15/15 121,263
47,496,213 Freddie Mac 2136 SG (IO),
1.65%, 03/15/29 2,427,056
1,231,646 Freddie Mac 2149 JD (IO),
6.50%, 04/15/17 252,286
3,728,019 Freddie Mac 2149 KQ (IO),
6.50%, 08/15/18 761,157
2,496,660 Freddie Mac 2156 S, 7.48%,
05/15/29 2,144,786
460,749 Freddie Mac Gold 21 SG, 9.39%,
10/25/23 515,553
2,858,374 Freddie Mac Pool 786781,
6.88%, 08/01/29 2,844,855
1,437,257 Government National Mortgage
Association 1994-1 C (IO),
7.99%, 08/16/23 433,132
85,480 Government National Mortgage
Association Pool 1849, 8.50%,
08/20/24 87,342
171,736 Government National Mortgage
Association Pool 2020, 8.50%,
06/20/25 175,310
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE> 22
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED (CONTINUED)
U.S. Agency $ 123,642 Government National Mortgage
Mortgage-Backed Association Pool 2286, 8.50%,
(continued) 09/20/26 $ 126,107
646,448 Government National Mortgage
Association Pool 2487, 8.50%,
09/20/27 659,407
521,160 Government National Mortgage
Association Pool 422972,
6.50%, 07/15/29 491,671
3,000,000 Government National Mortgage
Association Pool, 6.00%,
04/15/15 2,744,064
------------
25,403,172
------------
TOTAL MORTGAGE-BACKED 113,333,671
------------
U.S. TREASURY NOTES--0.05%
199,000 U.S. Treasury Notes, 7.00%,
07/15/06 205,965
------------
TOTAL BONDS
(Cost $317,434,509) 313,469,059
------------
SHORT TERM INVESTMENTS--10.97%
Commercial Paper 2,800,000 Coca-Cola Co., 6.02%(5),
- --9.90% 04/20/00 2,791,340
10,000,000 Ford Motor Credit Co.,
5.85%(5), 04/05/00 9,993,589
14,000,000 General Motors Acceptance
Corp., 6.13%(5), 04/11/00 13,976,900
9,700,000 IBM Credit Corp., 5.99%(5),
04/18/00 9,673,295
------------
36,435,124
------------
Money Market RIC 3,000,000 J.P. Morgan Institutional
- --0.82% Prime Money Market 3,000,000
------------
U.S. Treasury Bills 931,000 U.S. Treasury Bill, 5.51% to
- --0.25% 5.89%(5), 06/08/00 921,288
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $40,356,597) 40,356,412
------------
TOTAL INVESTMENTS--96.16%
(Cost $357,791,106)(1) 353,825,471
CASH AND OTHER ASSETS,
LESS LIABILITIES--3.84% 14,117,561
------------
NET ASSETS--100.00% $367,943,032
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE> 23
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
FUTURES CONTRACTS: SHORT POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
(38) U.S. Treasury 2 Year Note, June 2000 $ (9,438)
(32) U.S. Treasury 5 Year Note, June 2000 (24,000)
(497) U.S. Treasury 10 Year Note, June 2000 (1,377,371)
(134) U.S. Long Bond, June 2000 (452,250)
-----------
$(1,863,059)
===========
</TABLE>
Notes:
(1) Cost for Federal income tax purposes is $357,793,862 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 2,336,965
Gross unrealized depreciation (6,305,356)
-----------
Net unrealized depreciation $(3,968,391)
===========
</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 March 31, 2000 was $80,548,682 representing 21.89% of
total net assets.
(5) Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE> 24
LOW DURATION BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
(6) Securities determined to be illiquid under procedures approved by the Fund's
Board of Trustees. Information related to these securities is as follows:
<TABLE>
<CAPTION>
SECURITY DATE OF PURCHASE VALUE % OF TNA
- -------- ---------------- ----------- --------
<S> <C> <C> <C>
Delta Funding Home Equity Loan
Trust 1996-2 A5, 8.01%,
10/25/27 11/13/98 $ 2,020,030 0.55%
DLJ Commercial Mortgage Corp.
1999-CG2 S (IO), 0.46%,
06/10/24 08/01/99 5,113,724 1.39%
DLJ Mortgage Acceptance Corp.
1993-Q18 SC (IO), 2.81%,
01/25/24 09/30/97 4,985 0.00%
DLJ Mortgage Acceptance Corp.
1994-Q8 IIS (IO), 1.78%,
05/25/24 06/19/97 340,052 0.09%
DLJ Mortgage Acceptance Corp.
1995-QE11 SA (IO), 4.95%,
12/25/25 03/30/99 60,482 0.02%
DLJ Mortgage Acceptance Corp.
1996-QA S (IO), 3.07%,
01/25/26 10/20/98 294,826 0.08%
DLJ Mortgage Acceptance Corp.
1996-Q5 SA (IO), 3.33%,
06/25/26 01/04/99 105,016 0.03%
LB Commercial Conduit Mortgage
Trust 1998-C4 X (IO), 0.56%,
09/15/23 07/01/99 5,743,334 1.56%
----------- ----
$13,682,449 3.72%
=========== ====
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at March 31,
2000.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE> 25
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS--47.85%
ASSET-BACKED $ 194,417 First Alliance Mortgage Loan
SECURITIES--4.61%(3) Trust 1994-4 A1, 9.28%, 02/25/26 $ 193,675
250,000 Green Tree Home Improvement Loan
Trust 1998-B HEM2, 7.33%,
11/15/29 239,570
13,392 Nationscredit Grantor Trust
1997-1 A, 6.75%, 08/15/13 13,191
5,013 Navistar Financial Corp. Owner
Trust 1996-B A3, 6.33%, 04/21/03 5,014
500,000 Newbury Funding CBO Ltd. 2000-1
A3 (FRN), 8.85%, 02/15/30(4) 498,800
35,603 New York City Tax Lien 1998-2A
A, 7.98%, 07/25/06(4) 35,197
261,690 Structured Settlements Fund
1999-A A, 7.25%, 12/15/00(4) 255,475
-----------
1,240,922
-----------
CORPORATES--37.72%(2)
Banks--5.86% 200,000 Capital One Bank, 6.26%,
05/07/01 197,582
300,000 National Consumer Coop. Bank
(FRN) (MTN), 7.04%, 04/02/01 299,827
200,000 Providian National Bank, 6.25%,
05/07/01 196,488
200,000 Providian National Bank, 6.75%,
03/15/02 194,947
300,000 Republic New York Corp. (FRN),
5.98%, 10/28/02 296,076
400,000 Skandinavinska Enskilda, 5.66%,
03/29/49 393,480
-----------
1,578,400
-----------
Brokerage 20,000 Donaldson, Lufkin, Jenrette,
Services--2.24% Inc. (FRN) (MTN), 6.53%,
10/29/07 19,759
300,000 Lehman Brothers Holdings, PLC
(FRN) (MTN), 6.39%, 07/30/04 298,560
300,000 Paine Webber Group, Inc. (FRN)
(MTN), 6.60%, 10/22/07 287,010
-----------
605,329
-----------
Finance--9.25% 300,000 Conseco, Inc., 6.40%, 06/15/01 289,641
500,000 Conseco, Inc., 8.50%, 10/15/02 488,500
375,000 Gatx Leasing Corp. (MTN),
10.00%, 03/21/01 382,639
750,000 Golden State Holdings (FRN),
7.05%, 08/01/03 745,800
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE> 26
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATES (CONTINUED)
Finance (continued) $ 273,441 Queens Funding Ltd., 7.50%,
09/22/01 $ 270,651
300,000 Trizec Finance Ltd., 10.88%,
10/15/05 313,875
-----------
2,491,106
-----------
Industrial--5.69% 10,000 Cemex S.A. (MTN), 8.50%,
08/31/00 10,064
300,000 Columbia/HCA Healthcare (MTN),
6.88%, 07/15/01 291,682
350,000 Shoppers Food Warehouse Corp.,
9.75%, 06/15/04 367,500
200,000 Softkey International, 5.50%,
11/01/00 194,880
600,000 Waste Management, Inc., 4.00%,
02/01/02 530,760
150,000 Waste Management, Inc., 6.63%,
07/15/02 141,315
-----------
1,536,201
-----------
Real Estate 350,000 Developers Diversified Realty
Investment Trust Corp. (MTN), 7.38%, 09/18/01 345,249
(REIT)--12.97%
300,000 EOP Operating L.P., 6.38%,
02/15/02 292,342
615,000 Health & Retirement Properties
Trust, 7.50%, 10/01/03 577,908
455,000 Health Care Properties, 6.00%,
10/01/03 444,194
300,000 HRPT Properties Trust, 7.50%,
10/01/03 281,906
200,000 Liberty Property L.P. (MTN),
6.60%, 06/05/02 193,613
415,000 Meditrust Corp., 8.54%, 07/01/00 411,804
300,000 Rouse Co. (FRN) (MTN), 6.95%,
05/29/01 299,674
100,000 Spieker Properties L.P. (MTN),
7.58%, 12/17/01 99,249
300,000 United Dominion Realty Trust,
8.63%, 03/15/03 302,820
250,000 United Dominion Realty Trust
(MTN), 7.67%, 01/26/04 243,361
-----------
3,492,120
-----------
Utilities--1.71% 150,000 Duquesne Light Co., 8.38%,
05/15/24 157,555
300,000 El Paso Energy Corp., 12.00%,
12/15/00 302,193
-----------
459,748
-----------
TOTAL CORPORATES 10,162,904
-----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE> 27
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED--5.24%(3)
Non-Agency $46,055,227 BA Mortgage Securities, Inc.
Mortgage-Backed 1998-3 1X2 (IO), 0.05%, 07/25/28 $ 54,115
- --4.06%
213,891 DLJ Mortgage Acceptance Corp.
1992-Q4 A2, 7.53%, 07/25/22 214,088
1,863,566 DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO), 4.07%,
06/25/24(4,6) 110,714
1,386 Financial Asset Securitization,
Inc. 1997-NAM1 FXA4, 7.50%,
05/25/27 1,386
89,645 IMPAC Secured Assets CMN Owner
Trust 1999-2 A9, 9.00%, 01/25/30 21,739
217,427 Lehman Structured Securities
Corp. 1996-1 E2, 8.00%, 06/25/26 214,403
120,922 Resolution Trust Corp. 1991-6
B6, 8.74%, 03/25/21 120,443
29,000 Ryland Mortgage Securities Corp.
III 1992-A 1C, 8.26%, 03/29/30 28,724
240,057 Sasco Floating Rate Commercial
Mortgage Trust 1998-C3A E,
6.88%, 06/25/01(4) 236,733
108,281 Summit Mortgage Trust 2000-1 B5,
6.14%, 12/28/12(4) 91,210
-----------
1,093,555
-----------
U.S. Agency 49,808 Fannie Mae G-36 ZB, 7.00%,
Mortgage-Backed 11/25/21 48,685
- --1.18%
23,196 Fannie Mae 1993-95 SB, 15.05%,
06/25/08 27,493
70,714 Fannie Mae 1999-1 S, 10.25%,
07/25/23 76,521
656,352 Freddie Mac 1543 TH (IO), 3.50%,
01/15/19 7,824
3,549 Freddie Mac 1584 S, 5.12%,
09/15/23 2,908
20,000 Freddie Mac 2012 SD, 4.67%,
11/15/27 13,170
100,000 Freddie Mac 2051 E, 7.00%,
09/15/27 92,447
44,862 Freddie Mac Gold 2 L, 8.00%,
11/25/22 47,402
-----------
316,450
-----------
TOTAL MORTGAGE-BACKED 1,410,005
-----------
U.S. TREASURY NOTES--0.28%
75,000 U.S. Treasury Notes, 6.25%,
02/15/03 74,625
-----------
TOTAL BONDS
Cost ($12,948,541) 12,888,456
-----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE> 28
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT ISSUES VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK--2.11%
$ 3,776 S&P 500 Depository Receipt $ 568,524
-----------
TOTAL COMMON STOCK
(Cost $550,695) 568,524
-----------
SHORT TERM INVESTMENTS--48.28%
Agency Discount 3,350,000 FC Discount Note, 04/12/00 3,343,930
Note--12.42% -----------
Commercial 1,300,000 Bellsouth Telecommunications,
Paper--30.75% Inc., 6.13% to 6.24%(5),
04/19/00 1,296,088
1,300,000 Campbell Soup Co., 6.12%(5),
04/14/00 1,297,183
1,300,000 Ford Motor Credit Co., 5.85%(5),
04/05/00 1,299,142
1,300,000 General Motors Acceptance Corp.,
6.12%(5), 04/20/00 1,295,883
500,000 GTE Funding, Inc., 6.12%(5),
04/18/00 498,567
300,000 IBM Credit Corp., 5.99%(5),
04/18/00 299,174
1,000,000 Merrill Lynch & Co., 6.21%(5),
04/12/00 998,130
1,300,000 Pitney Bowes, Inc., 6.06%(5),
04/19/00 1,296,100
-----------
8,280,267
-----------
U.S. Treasury 1,390,000 U.S. Treasury Bill, 5.51% to
Bills--5.11% 5.87%(5), 06/08/00 1,375,500
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $12,999,740) 12,999,697
-----------
TOTAL INVESTMENTS--98.24%
(Cost $26,498,976)(1) 26,456,677
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.76% 474,242
-----------
NET ASSETS--100.00% $26,930,919
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE> 29
ALPHATRAK 500 FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
MARCH 31, 2000
FUTURES CONTRACTS: LONG POSITIONS
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- --------- ------------
<C> <S> <C>
70 S&P 500 Index, June 2000 $1,130,549
2 S&P 500 Mini, June 2000 5,068
----------
$1,135,617
==========
</TABLE>
Notes:
(1) Cost for Federal income tax purposes is $26,498,976 and net unrealized
depreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 130,197
Gross unrealized depreciation (172,496)
---------
Net unrealized depreciation $ (42,299)
=========
</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 March 31, 2000 was $1,672,323 representing 6.21% of
total net assets.
(5) Represents annualized yield at date of purchase.
(6) Securities determined to be illiquid under procedures approved by the Fund's
Board of Trustees. Information related to these securities is as follows:
<TABLE>
<CAPTION>
SECURITY DATE OF PURCHASE VALUE % OF TNA
- -------- ---------------- -------- --------
<S> <C> <C> <C>
DLJ Mortgage Acceptance Corp.
1994-QE2 S (IO), 4.07%, 06/25/24 07/01/99 $110,714 0.41%
======== ====
</TABLE>
(FRN): Floating rate note -- The rate disclosed is that in effect at March 31,
2000.
(IO): Interest only
(MTN): Medium term note
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE> 30
METROPOLITAN WEST FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<CAPTION>
TOTAL RETURN LOW DURATION ALPHATRAK 500
BOND FUND BOND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$251,830,940, $357,791,106 and
$26,498,976, respectively) (Note
2) $247,534,989 $353,825,471 $26,456,677
Cash and cash equivalents (Note 2) 10,015,018 5,590,938 1,448,763
Dividends and interest receivable 3,451,532 3,058,227 224,056
Receivable for capital stock sold 15,686,994 49,585,989 26,424
Deferred unamortized
organizational costs (Note 2) 15,099 15,140 12,462
Variation Margin (Note 3) 0 0 225,519
Other assets 17,513 48,115 25
------------ ------------ -----------
Total assets 276,721,145 412,123,880 28,393,926
------------ ------------ -----------
LIABILITIES:
Payable for securities purchased 9,624,317 3,552,469 1,400,210
Payable for capital stock redeemed 16,002,940 40,081,230 10,727
Variation margin (Note 3) 27,474 205,344 0
Due to Adviser (Note 5) 79,725 111,717 24,268
Accrued expenses 71,975 107,012 27,802
Distributions payable 118,660 123,076 0
Other Liabilities 2,368 0 0
------------ ------------ -----------
Total liabilities 25,927,459 44,180,848 1,463,007
------------ ------------ -----------
Net assets $250,793,686 $367,943,032 $26,930,919
============ ============ ===========
CLASS M SHARES:
Net assets (Applicable to
23,348,746, 32,868,832 and
2,262,671 shares of beneficial
interest issued and outstanding,
respectively, unlimited number
of shares authorized with a
$0.01 par value) $235,417,932 $328,418,498 $26,930,919
============ ============ ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER CLASS M SHARE $10.08 $9.99 $11.90
====== ===== ======
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE> 31
<TABLE>
<CAPTION>
TOTAL RETURN LOW DURATION ALPHATRAK 500
BOND FUND BOND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
CLASS I SHARES*:
Net assets (Applicable to
1,525,372, 3,956,410 and 0
shares of beneficial interest
issued and outstanding,
respectively, unlimited number
of shares authorized with a
$0.01 par value) $ 15,375,754 $ 39,524,534 N/A
============ ============ ===========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER CLASS I SHARE $10.08 $9.99 N/A
====== ===== ======
NET ASSETS CONSIST OF:
Capital paid-in $256,931,856 $372,545,558 $25,700,780
Accumulated undistributed net
investment income 0 0 229,444
Accumulated undistributed net
realized (loss) gain on
investments (1,633,440) 1,226,168 (92,623)
Net unrealized (depreciation)
appreciation on investments (4,504,730) (5,828,694) 1,093,318
------------ ------------ -----------
$250,793,686 $367,943,032 $26,930,919
============ ============ ===========
</TABLE>
* Class I shares commenced operations on March 31, 2000.
N/A -- Not Applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE> 32
METROPOLITAN WEST FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
TOTAL RETURN LOW DURATION ALPHATRAK 500
BOND FUND BOND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 0 $ 0 $ 3,375
Interest 13,463,233 23,205,481 770,845
----------- ----------- ----------
Total investment income 13,463,233 23,205,481 774,220
----------- ----------- ----------
EXPENSES:
Investment advisory fees (Note 5) 895,646 1,429,895 49,994
Transfer agent fees 32,518 35,147 20,714
Administration fees 103,891 192,373 7,092
Registration and filing fees 48,271 54,355 20,137
Reports to shareholders 7,509 25,841 1,599
Custodian fees 43,166 74,067 18,372
Accounting services 49,368 63,456 25,001
Legal fees 14,614 30,103 620
Insurance expenses 9,801 19,942 744
Trustees' fees and expenses 16,047 23,429 8,522
Auditing and tax consulting fees 18,627 19,120 14,183
Amortization of organizational
expenses (Note 2) 7,632 7,591 3,879
Miscellaneous expenses 0 381 944
----------- ----------- ----------
Total operating expenses 1,247,090 1,975,700 171,801
Expenses waived and reimbursed (Note
5) (191,678) (242,609) (100,284)
----------- ----------- ----------
Net expenses 1,055,412 1,733,091 71,517
----------- ----------- ----------
Net investment income 12,407,821 21,472,390 702,703
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS:
Net realized (loss) gain on
investments and futures contracts (1,380,470) 2,297,075 362,951
Net change in unrealized
(depreciation) on investments (4,064,158) (4,009,742) (78,743)
Net change in unrealized
(depreciation) appreciation on
futures contracts (208,779) (1,863,059) 950,484
----------- ----------- ----------
Net realized and unrealized (loss)
gain on investments and futures
contracts (5,653,407) (3,575,726) 1,234,692
----------- ----------- ----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 6,754,414 $17,896,664 $1,937,395
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE> 33
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TOTAL RETURN
BOND FUND
----------------------------
YEAR YEAR
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,407,821 $ 4,119,546
Net realized (loss) gain on investments and
futures contracts (1,380,470) 831,877
Net change in unrealized (depreciation) on
investments (4,064,158) (326,594)
Net change in unrealized (depreciation) on
futures contracts (208,779) 0
------------ ------------
Net increase in net assets resulting from
operations 6,754,414 4,624,829
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income:
Class M (12,407,821) (4,119,546)
Class I 0 N/A
Realized gains on investments:
Class M (208,878) (1,102,035)
Class I 0 N/A
------------ ------------
Net decrease in net assets resulting from
distributions (12,616,699) (5,221,581)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Class M:
Proceeds from sale of shares 188,704,317 95,874,744
Shares issued in reinvestment of dividends
and distributions 11,676,678 4,389,756
Cost of shares redeemed (74,333,936) (9,417,607)
------------ ------------
Total class M shares 126,047,059 90,846,893
------------ ------------
Class I:
Proceeds from sale of shares 15,375,754 N/A
Shares issued in reinvestment of dividends
and distributions 0 N/A
Cost of shares redeemed 0 N/A
------------ ------------
Total class I shares 15,375,754 N/A
------------ ------------
Net increase in net assets resulting from
capital share transactions 141,422,813 90,846,893
------------ ------------
Net increase in net assets 135,560,528 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) $250,793,686 $115,233,158
============ ============
</TABLE>
N/A -- Not Applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE> 34
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LOW DURATION
BOND FUND
------------------------------
YEAR YEAR
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 21,472,390 $ 12,792,817
Net realized gain on investments and
futures contracts 2,297,075 380,876
Net change in unrealized (depreciation) on
investments (4,009,742) (274,087)
Net change in unrealized (depreciation) on
futures contracts (1,863,059) 0
------------- -------------
Net increase in net assets resulting from
operations 17,896,664 12,899,606
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income:
Class M (21,472,390) (12,792,817)
Class I 0 N/A
Realized gains on investments:
Class M (1,450,548) (204,074)
Class I 0 N/A
------------- -------------
Net decrease in net assets resulting from
distributions (22,922,938) (12,996,891)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Class M:
Proceeds from sale of shares 370,849,753 234,531,692
Shares issued in reinvestment of
dividends and distributions 22,013,940 12,586,415
Cost of shares redeemed (294,756,105) (146,996,632)
------------- -------------
Total class M shares 98,107,588 100,121,475
------------- -------------
Class I:
Proceeds from sale of shares 39,524,533 N/A
Shares issued in reinvestment of
dividends and distributions 0 N/A
Cost of shares redeemed 0 N/A
------------- -------------
Total class I shares 39,524,533 N/A
------------- -------------
Net increase in net assets resulting from
capital share transactions 137,632,121 100,121,475
------------- -------------
Net increase in net assets 132,605,847 100,024,190
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) $ 367,943,032 $ 235,337,185
============= =============
</TABLE>
N/A -- Not Applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE> 35
METROPOLITAN WEST FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ALPHATRAK 500
FUND
-------------------------
YEAR PERIOD
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999*
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 702,703 $ 179,291
Net realized gain on investments and futures
contracts 362,951 364,745
Net change in unrealized (depreciation)
appreciation on investments (78,743) 36,444
Net change in unrealized appreciation on futures
contracts 950,484 185,133
----------- ----------
Net increase in net assets resulting from
operations 1,937,395 765,613
----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (599,957) (53,441)
Realized gains on investments (819,471) 0
----------- ----------
Net decrease in net assets resulting from
distributions (1,419,428) (53,441)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 17,630,992 7,484,039
Shares issued in reinvestment of dividends and
distributions 1,419,042 53,410
Cost of shares redeemed (741,007) (145,696)
----------- ----------
Net increase in net assets resulting from
capital share transactions 18,309,027 7,391,753
----------- ----------
Net increase in net assets 18,826,994 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
$229,444, and $126,698, respectively) $26,930,919 $8,103,925
=========== ==========
</TABLE>
* The AlphaTrak 500 Fund commenced operations on June 29, 1998.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE> 36
METROPOLITAN WEST FUNDS
FINANCIAL HIGHLIGHTS
THE TABLES BELOW SET FORTH FINANCIAL DATA FOR ONE SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD PRESENTED.
<TABLE>
<CAPTION>
TOTAL RETURN
BOND FUND
---------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
2000 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 0.78 0.71 0.73
Net realized and unrealized (loss) gain on
investments and futures contracts (0.44) 0.19 0.60
------ ------ ------
Total from Investment Operations 0.34 0.90 1.33
------ ------ ------
Less Distributions:
Dividends from net investment income (0.78) (0.71) (0.73)
Distributions from net capital gains on
investments (0.01) (0.15) (0.11)
------ ------ ------
Total Distributions (0.79) (0.86) (0.84)
------ ------ ------
Net Asset Value, End of Period $10.08 $10.53 $10.49
====== ====== ======
Total Return 3.39% 8.84% 13.71%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $250,794 $115,233 $ 24,983
Ratio of Expenses to Average Net Assets
Before expense reimbursement 0.77% 0.97% 1.99%
After expense reimbursement 0.65% 0.65% 0.65%
Ratio of Net Income to Average Net Assets
Before expense reimbursement 7.56% 6.60% 6.05%
After expense reimbursement 7.68% 6.92% 7.39%
Portfolio Turnover Rate 128% 136% 235%
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE> 37
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
---------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
2000 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 0.72 0.66 0.65
Net realized and unrealized (loss) gain on
investments and futures contracts (0.11) (0.02) 0.19
------ ------ ------
Total from Investment Operations 0.61 0.64 0.84
------ ------ ------
Less Distributions:
Dividends from net investment income (0.72) (0.66) (0.65)
Distributions from net capital gains on
investments (0.05) (0.01) (0.01)
------ ------ ------
Total Distributions (0.77) (0.67) (0.66)
------ ------ ------
Net Asset Value, End of Period $9.99 $10.15 $10.18
====== ====== ======
Total Return 6.22% 6.54% 8.71%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $367,943 $235,337 $135,313
Ratio of Expenses to Average Net Assets
Before expense reimbursement 0.66% 0.70% 0.93%
After expense reimbursement 0.58% 0.58% 0.58%
Ratio of Net Income to Average Net Assets
Before expense reimbursement 7.14% 6.49% 6.37%
After expense reimbursement 7.22% 6.61% 6.72%
Portfolio Turnover Rate 126% 73% 102%
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE> 38
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*
----------------------
YEAR PERIOD
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999*
--------- ---------
<S> <C> <C>
Net Asset Value, Beginning of Period $11.40 $10.00
------ -------
Income from Investment Operations:
Net investment income 0.63 0.44
Net realized and unrealized gain on investments and
futures contracts 1.43 1.22
------ -------
Total from Investment Operations 2.06 1.66
------ -------
Less Distributions:
Dividends from net investment income (0.70) (0.26)
Distributions from net capital gains on investments (0.86) 0.00
------ -------
Total Distributions (1.56) (0.26)
------ -------
Net Asset Value, End of Period $11.90 $11.40
====== =======
Total Return 19.28% 17.28%
Ratios/Supplemental Data:
Net Assets, end of period (in thousands) $26,931 $8,104
Ratio of Expenses to Average Net Assets
Before expense reimbursement 1.59% 3.39%#
After expense reimbursement 0.66% 0.72%#
Ratio of Net Income to Average Net Assets
Before expense reimbursement 5.56% 4.14%#
After expense reimbursement 6.49% 6.81%#
Portfolio Turnover Rate 280% 74%
</TABLE>
* The AlphaTrak 500 Fund commenced operations on June 29, 1998.
# Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE> 39
METROPOLITAN WEST FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
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 and
registered 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. Effective March 31, 2000,
the Low Duration Bond Fund and the Total Return Bond Fund offered two classes
of shares: Class M (existing shares) and Class I shares. The AlphaTrak 500
Fund commenced investment operations on June 29, 1998. The Short-Term
Investment Fund was not operational at March 31, 2000.
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.
- --------------------------------------------------------------------------------
38
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 each Fund's 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.
- --------------------------------------------------------------------------------
39
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS:
The Funds have defined cash and cash equivalents as cash in interest bearing
and non-interest bearing accounts.
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
- --------------------------------------------------------------------------------
40
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 March
31, 2000, 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
- --------------------------------------------------------------------------------
41
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 March 31, 2000, excluding
temporary short-term investments, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -------------
<S> <C> <C>
Total Return Bond Fund............... $379,248,513 $239,889,004
Low Duration Bond Fund............... 491,632,573 335,615,657
AlphaTrak 500 Fund................... 33,176,989 24,005,791
</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. Under this agreement,
the basic fee was increased by 0.11% resulting in $49,994 of total management
fees, for the year ended March 31, 2000. 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
- --------------------------------------------------------------------------------
42
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
advisory fees and other transactions with affiliates, for the period ended
March 31, 2000, 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>
Effective April 1, 2000, investment advisory fees and other transactions with
affiliates, were as follows:
<TABLE>
<CAPTION>
INVESTMENT VOLUNTARY
ADVISORY EXPENSE
FEE RATE LIMITATION
--------------------- ---------------------
CLASS M CLASS I CLASS M CLASS I
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Total Return Bond Fund 0.35% 0.35 % 0.65% 0.44 %
Low Duration Bond Fund 0.30 0.30 0.58 0.39
AlphaTrak 500 Fund 0.00 - 0.70 N/A 0.20 - 0.90 N/A
</TABLE>
6.The Trust has begun to charge distribution fees pursuant to Rule 12b-1 under
the 1940 Act with respect to the Class M shares of the Total Return Bond Fund
and the Low Duration Bond Fund. Effective April 1, 2000, under the Plan, the
Trust reimburses the Adviser, the Trust's distribution coordinator, at an
annual rate equal to 0.21% (Total Return Bond Fund) and 0.19% (Low Duration
Bond Fund) of the value of the average daily net assets attributable to the
Class M shares of each Portfolio for certain distribution expenses for the
purpose of financing any activity intended to result in the sale of Class M
shares. Rule 12b-1 fees currently are waived for the AlphaTrak 500 Fund.
- --------------------------------------------------------------------------------
43
<PAGE> 45
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. 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
----------------------------------------
CLASS M CLASS I
------------------------ ------------
YEAR ENDED YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
---------- ---------- ------------
<S> <C> <C> <C>
Increase in Fund shares:
Shares outstanding at beginning of period 10,941,629 2,381,576 0
Shares sold 18,600,711 9,034,372 1,525,372
Shares issued through reinvestment of
dividends 1,150,223 413,999 0
Shares redeemed (7,343,817) (888,318) 0
---------- ---------- ---------
Net increase in Fund shares 12,407,117 8,560,053 1,525,372
---------- ---------- ---------
Shares outstanding at end of period 23,348,746 10,941,629 1,525,372
========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
LOW DURATION BOND FUND ALPHATRAK 500 FUND
---------------------------------------- -------------------------
CLASS M CLASS I
------------------------- ------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 2000 1999
----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Increase in Fund
shares:
Shares outstanding at
beginning of period 23,175,723 13,289,111 0 711,012 0
Shares sold 36,878,034 23,153,600 3,956,410 1,492,158 719,869
Shares issued through
reinvestment of
dividends 2,185,904 1,240,285 0 124,121 5,327
Shares redeemed (29,370,829) (14,507,273) 0 (64,620) (14,184)
----------- ----------- --------- --------- -------
Net increase in Fund
shares 9,693,109 9,886,612 3,956,410 1,551,659 711,012
----------- ----------- --------- --------- -------
Shares outstanding at
end of period 32,868,832 23,175,723 3,956,410 2,262,671 711,012
=========== =========== ========= ========= =======
</TABLE>
- --------------------------------------------------------------------------------
44
<PAGE> 46
METROPOLITAN WEST FUNDS
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of the Metropolitan West Funds:
We have audited the accompanying statement of assets and liabilities of the
Metropolitan West Funds comprised of the Metropolitan West Total Return Bond
Fund ("Total Return"), the Metropolitan West Low Duration Bond Fund ("Low
Duration"), and the Metropolitan West AlphaTrak(TM) 500 Fund ("AlphaTrak"),
including the schedules of portfolio investments, as of March 31, 2000 and the
related statement of operations for the year then ended; the statements of
changes in net assets for each of the two years in the period then ended for
Total Return and Low Duration and for the year ended March 31, 2000 and for the
period from June 29, 1998 (commencement of operations) to March 31, 1999 for
AlphaTrak; and the financial highlights for each of the three years in the
period then ended for Total Return and Low Duration and for the year ended March
31, 2000 and for the period from June 29, 1998 (commencement of operations) to
March 31, 1999 for AlphaTrak. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 2000 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Metropolitan West Total Return Bond Fund, the Metropolitan West Low Duration
Bond Fund, and the Metropolitan West AlphaTrak(TM) 500 Fund as of March 31,
2000, the results of their operations for the year then ended, and the changes
in their net assets and financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
May 5, 2000
- --------------------------------------------------------------------------------
45
<PAGE> 47
BOARD OF TRUSTEES
Scott B. Dubchansky
Keith T. Holmes
Laird R. Landmann
Martin Luther King III
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
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ADVISER: AUDITORS:
Metropolitan West Asset Management, LLC Deloitte & Touche LLP
11766 Wilshire Boulevard, Suite 1580 350 South Grand Avenue, Suite 200
Los Angeles, CA 90025 Los Angeles, CA 90071
CUSTODIAN: DISTRIBUTOR:
The Bank of New York Provident Distributors, Inc.
90 Washington Street 3200 Horizon Drive
New York, NY 10286 King of Prussia, PA 19406
TRANSFER AGENT: LEGAL COUNSEL:
PFPC Inc. Paul, Hastings, Janofsky & Walker LLP
P.O. Box 61503 345 California Street, 29th Floor
King of Prussia, PA 19406 San Francisco, CA 94104
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[Metropolitan West Asset Management 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.
