<PAGE>
Table of Contents
Shareholder Letter ............................. 2
Portfolios of Investments ...................... 20
Statement of Assets and Liabilities ............ 58
Statement of Operations ........................ 62
Statements of Changes in Net Assets ............ 64
Financial Highlights ........................... 68
Notes to Financial Statements .................. 72
Forward Funds are distributed by Provident Distributors, Inc. For more
complete information about Forward Funds, including obtaining a prospectus,
please visit our Web site at www.forwardfunds.com or call 1-800-999-6809. Read
it carefully before investing money.
<PAGE>
Dear Shareholders,
We are pleased to present the annual report for Forward Funds, Inc. for the
fiscal year ended December 31, 1999.
Forward Funds offers investment opportunities in U.S. and international
equities, global bonds, U.S. small capitalization stocks, real estate
investments and in a global asset allocation fund. We have selected the
following Advisor and Sub-Advisors to manage our Funds:
The Small Capitalization Equity Fund: Hoover Capital Management, LLC
The International Equity Fund: Templeton Investment Counsel, Inc.
The U.S. Equity Fund: Barclays Global Fund Advisors, Inc.
The Global Bond Fund: Pacific Investment Management Co.
(PIMCO)
The Real Estate Investment Fund: Uniplan, Inc.
The Global Asset Allocation Fund: Webster Investment Management Co., LLC
The Advisor and each of the Sub-Advisors have provided commentaries regarding
their investment advisory services on your behalf during the past year. We
believe that you will find this information to be of value.
Thank you for your interest in Forward Funds. Our primary objective is to
continue to serve our clients.
Sincerely,
Forward Funds, Inc.
Investment Advisor: Webster Investment Management Company, LLC,
San Francisco, CA
Note: The views expressed in this report reflect those of the Advisor and/or
Sub-Advisors only through the period of this report as stated on the cover.
Their views are subject to change at any time based on market and other
conditions.
<PAGE>
THE SMALL CAPITALIZATION EQUITY FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
Our small cap growth and value investing strategy rests on identifying companies
with growth in earnings and cash flow, primarily with a market capitalization
between $200 million to $1.5 billion at the time of investment. We look for
companies which possess a catalyst to propel accelerated earnings growth and
which also have one or more value parameters based on cash flow, earnings,
assets or other valuation metrics.
The bipolar markets of 1999 did not reward the prudent growth and value investor
during 1999. Stocks in the Russell 2000 Index ("Index") performed in inverse
relation to their value as measured by price-to-earnings ("P/E") calculations.
The following graph ranks stock contributions to Index performance by P/E
quintile. Stocks from the first four P/E quintiles (with median P/E ratios
ranging from 7.5 to 20.4) contributed a combined net decline of 2.93% to the
Index. Those in the fifth quintile (median P/E ratio of 51.6) and those without
earnings contributed 24.01% of the Index's performance, or greater than 100%.
1999 RETURNS BY P/E QUINTILE FOR THE RUSSELL 2000 INDEX
% INDEX 12/99 12/99 12/99
PORTFOLIO RETURN CONTRIBUTION WEIGHTS MEDIAN P/E HIGHEST P/E
- --------- ------ ------------ ------- ---------- -----------
Q1 -10.59 - 1.58 11.70 7.50 9.20
Q2 - 8.95 - 1.70 14.20 10.80 12.40
Q3 - 7.64 - 1.62 15.70 14.30 16.70
Q4 10.87 1.97 18.40 20.40 27.90
Q5 68.03 13.15 23.60 51.60 NM
85.34 10.86 16.40 NM NM
Negative Earnings
Russell 2000 Index 21.26 -- 100 14.2 NM
- ------------
Source: Frank Russell Company; Prudential Securities.
During the year we increased our technology holdings as concerns lessened over
Year 2000 ("Y2K") spending issues. We are invested in technology companies with
cash flow and earnings growth, such as the semiconductor and capital equipment
industries, where industry growth over the next two years is projected at 25%
and 40%, respectively. We have placed emphasis on companies that are suppliers
to the telecommunications industry. We also own other hardware and software
companies which are suppliers to the internet infrastructure. Our performance in
the quarter was helped by Apex, a manufacturer of switches for servers; Cypress
Semiconductor, whose products increasingly go to the telecommunication industry;
Varian Semiconductor, a supplier of capital equipment; and Wind River, a
developer of embedded software, as well as other technology stocks. In the
consumer sectors, stocks which helped our performance generally had a viable
internet strategy including: Lands End, (Web site sales); McClatchy, a newspaper
publisher (advertising revenue from dot coms); and Elcor, a supplier of
industrial products to the housing and cellular phone industries. In the capital
goods sector, Applied Power, Electro Scientific and United Stationers, all
technology related, contributed to the Fund's performance.
We believe the improvement in the relative strength of the small cap indexes
late in 1999, initially driven by a very narrow move of the most highly valued
companies, will benefit the small capitalization sector in 2000 as the breadth
of the market improves. Our constructive outlook is driven by our expectations
for: (1) continued global growth and low inflation, (2) profit growth beyond
technology in cyclical industries and small companies, (3) a reversal of the
current valuation disparity, (4) and investor relief over Y2K. Investors' huge
liquidity preference in 1999 was driven by the perception that U.S. profits were
peaking and was exacerbated by Y2K concerns. We believe recovering global growth
in 2000, combined with continued U.S. productivity gains, will sustain U.S.
non-inflationary growth above 3%. Against this economic backdrop, investors will
likely gain confidence in the growth of more cyclical, industrial, energy and
infrastructure related industries as well as the more volatile earnings of small
capitalization companies. In fact, earnings growth for small capitalization
stocks is projected to exceed that of large capitalization companies for the
first time since mid-1998.
Adoption of growth-enhancing internet strategies by corporate America may be one
of the investment themes of 2000. We intend to continue to invest in companies
which are using the internet to improve their competitive position, as well as
internet enablers and distributors. We are also invested in technology suppliers
to the internet infrastructure including Burr Brown, Apex, and Veeco
Instruments. Energy service and small cap exploration and production companies
should perform well into year 2000, as earnings comparisons will be strong. Our
selections include Nabors, Weatherford and Barrett Resources. Select financial
stocks are selling at reasonable valuations and could benefit from continued
consolidation in the sector, such as Greater Bay Bancorp and Waddell and Reed.
Certain health care service stocks are beginning to show stronger earnings not
yet reflected in their prices, including Mid Atlantic Medical, an HMO, and Renal
Care Group, a dialysis provider.
Never has the disparity been greater between overvalued momentum stocks and the
rest of the small capitalization universe as shown in this graph which uses the
price-to-sales valuation metric. This is not the time to chase momentum; rather,
this is the time to buy undervalued small capitalization stocks with a growth
catalyst.
"TECHNOLOGY - RELATIVE VALUATION OF MOMENTUM STOCKS"
[plot points to come]
WEIGHTINGS BY INDUSTRY AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 1999
Capital Goods and Construction 9.31%
Consumer Cyclical 17.43%
Consumer Staples 15.73%
Energy 13.78%
Finance 7.08%
Technology 27.29%
Net Other Assets and Liabilities 1.73%
Other Industries 7.65%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
Small Capitalization
Equity Fund Russell 2000 Index(1)
- --------------------------------------------------------------------------------
10/01/98 $10,000 $10,000
12/31/98 11,399 11,631
03/31/99 10,919 11,001
06/30/99 12,570 12,711
09/30/99 11,449 11,908
12/31/99 12,200 14,104
AVERAGE ANNUAL TOTAL RETURN:
1 Year 7.03%
Since Inception* 17.21%
* Past performance is not indicative of future performance.
Fund inception: 10/1/98.
(1) The Russell 2000 Index is unmanaged and investors cannot invest
directly in the index.
Small company stocks may be subject to a higher degree of market risk than the
securities of more established companies because they tend to be more volatile
and less liquid.
<PAGE>
THE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
1999 will go down as a year of contrasts. The year ushered in the introduction
of the Euro, currency devaluation in Brazil, worries of a slowdown in the United
States, Year 2000 ("Y2K") bug fears and a growing optimism in the Asian economy.
As we exit the year, unbridled optimism reigns in most markets inflation is well
under control, the internet is revolutionizing global economies, the Y2K bug is
rarely discussed and funds are flowing into the equity markets. Unfortunately
for value investors, the bulk of the money is pushing growth sectors such as
telecommunications and technology to unprecedented levels, bypassing (except for
a brief second quarter flurry) shares in economically sensitive companies.
The introduction of the Euro has proven to be disappointing due to worries over
the health of European economies and concerns of that government will continue
to interfere in the free market by bailing out struggling companies. The
currency weakness has benefited the operations of export-oriented companies, as
most commodity prices are U.S. dollar denominated. Consequently, the Fund was
helped by its holdings in oil, metals, paper and forest. With economic
indicators picking up across the continent, cyclical shares could perform well
in the first half of year 2000. The most significant hurdle for value investors
is the "internet fever" gripping European investors and the willingness to pay
seemingly high multiples to invest in shares of telecommunications and
technology companies. During the year the Fund was a net seller of European
equities, reducing its exposure from 58.0% to 54.2%.
Asian markets turned in strong performances as the region continued to rebound
from the 1997-1998 "Asian Crisis." Helped by strong exports to the developed
world, many companies have successfully restructured operations and repaired
their balance sheets. We initiated positions in a handful of Japanese companies,
which combined with strong performance, increased our Asian portfolio weighting
from 11.2% to 17.9%.
Latin America provided extreme volatility but generally strong performance in
the key markets of Mexico and Brazil. Aided by its proximity to the booming U.S.
economy, Mexico was the best performing market in the region. After months of
currency induced turmoil, Brazil recovered in the final months of the year as
interest rates finally stabilized. A combination of profit taking and Repsol's
purchase of YPF SA reduced our holdings in Latin America from 11.8% to 10.8%.
For the year, Fund performance tracked that of the unmanaged Morgan Stanley
Capital International Europe, Australasia, Far East Index. Strong performance by
our technology and telecommunications related names (Philips Electronics, Sony
Corporation, Nippon Telegraph and Telephone, Smartone Telecommunications and
Alcatel SA), and emerging markets (Telefonos de Mexico, Teva Pharmaceuticals,
Telebras, Embratel) were offset by poor performance in our interest rate
sensitive holdings (Scor SA, XL, Capital, Zurich Allied, National Power Plc, Ace
Ltd).
The strategies employed by the Fund are consistent with the methods used by the
Templeton organization for over 50 years. Our team of 35 analysts scours the
globe looking for out of favor securities trading at depressed levels relative
to long-term "normalized" earnings. To us, normalized represents what a company
can earn in the middle of a typical economic cycle and requires forecasting
earnings and cash flow out five years. We then purchase stocks that are cheap on
a five-year basis and on average hold them for the same period. We believe that
over the long term a bottom-up, value-based contrarian approach produces
superior returns.
We remain positively disposed towards the international markets on a longer-term
view but are concerned with short-term valuations. By purchasing out of favor
securities, trading at low valuations and maintaining a diversified fund
portfolio, we are attempting to reduce volatility.
WEIGHTINGS BY COUNTRY AS A PERCENTAGE OF THE PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1999
Mid-East/Africa 2.5%
North America 3.9%
Europe 54.2%
Other 3.5%
Asia 17.9%
Australia/New Zealand 7.2%
Latin America 10.8%
WEIGHTINGS BY INDUSTRY AS A PERCENTAGE OF THE PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1999
Energy 10.0%
Materials 16.9%
Capital Equipment 5.75
Consumer Goods 16.2%
Services 23.8%
Short Term & Other 3.5%
Finance 20.3%
Multi-Industry 3.6%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
International MSCI World
Equity Fund (ex. U.S.) Index(1)
- --------------------------------------------------------------------------------
10/01/98 $10,000 $10,000
12/31/98 11,323 12,111
03/31/99 11,654 12,543
06/30/99 12,736 13,142
09/30/99 12,606 12,947
12/31/99 14,170 15,131
AVERAGE ANNUAL TOTAL RETURN:
1 Year 25.15%
Since Inception* 32.10%
* Past performance is not indicative of future performance.
Fund inception: 10/1/98.
(1) The Morgan Stanley World (ex. U.S.) Index is unmanaged and investors cannot
invest directly in the index.
Investing in foreign securities may involve certain additional risks, including
exchange rate fluctuations, less liquidity, greater volatility and less
regulation. (See Note 7 to the Financial Statements).
<PAGE>
THE U.S. EQUITY FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
1999 was another challenging year for active managers. The market remained
volatile with interest rate speculation a persistent theme, as the domestic
economy edged closer to a record period of expansion. The narrowness of the
market was also reflected in the dramatic rise to prominence of internet-
related stocks, particularly in the first quarter. Throughout the year,
investors seemingly ignored the fundamentals as illustrated by the extreme
differential performance between growth and value indices, particularly in the
fourth quarter as strong momentum in technology stocks saw the NASDAQ finish the
year up over 80%.
In this hostile environment, the Fund's strategy of emphasizing companies
trading at attractive relative valuations detracted from performance relative to
its benchmark, the Russell 3000 Index. The significant out-performance of
relatively few names trading at high valuation multiples (e.g., Qualcomm)
detracted from the Fund's strategy to add-value. In spite of these challenges,
the Fund's broad diversification yielded positive gains across the industry
spectrum, including computer hardware and financial services, partially
offsetting below-average returns within banking and telecommunications
equipment.
While the market's near-term direction is always uncertain, we believe that our
systematic approach based on proven economic and financial principles will
identify undervalued securities likely to outperform the market.
WEIGHTINGS BY INDUSTRY AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 1999
Chemicals and Drugs 6.24%
Consumer Cyclicals 6.30%
Finance 13.31%
Retail 5.36%
Technology 23.02%
Telecommunications 12.46%
Utilities 3.95%
Other Industries 28.40%
Net Other Assets and Liabilities 0.96%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
U.S. Equity Fund Russell 3000 Index(1)
- --------------------------------------------------------------------------------
10/01/98 $10,000 $10,000
12/31/98 12,093 12,143
03/31/99 12,524 12,555
06/30/99 13,424 13,523
09/30/99 12,604 12,631
12/31/99 14,451 14,680
AVERAGE ANNUAL TOTAL RETURN:
1 Year 19.50%
Since Inception* 34.19%
* Past performance is not indicative of future performance.
Fund inception: 10/1/98.
(1) The Russell 3000 Index is unmanaged and investors cannot invest
directly in the index.
<PAGE>
THE GLOBAL BOND FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
Interest rates in most developed economies continued to move higher during the
fourth quarter in response to accelerating growth and increasing inflationary
prospects. The U.S. Federal Reserve, Bank of England and European Central Bank
all tightened as each took back a portion of the rate cuts that followed the
emerging market crises in the fall of 1998. The rise in U.S. interest rates
capped the worst year in the bond market since 1994, as investors anticipated
that additional Federal Reserve tightening would be necessary to prevent the
U.S. economy from overheating. More tightening is likely from global central
banks in response to improving world growth.
Lower relative growth and inflation in core Europe allowed European bonds to
outperform their U.S. counterparts during the quarter. An overweighting in the
short-end of the U.K. and Euro yield curves was negative for performance as
improving economic data raised fears of the central bank tightening. Also, an
overweighting in the Euro versus the dollar hurt returns as the dollar rallied
in response to the strong U.S. economy.
Japanese bonds were stable over the period, buoyed by continued domestic buying,
weak growth and prospects for low inflation. An underweighting in Japan was
negative as Japanese bonds continued to outperform. We continue to put less
emphasis on Japan due to high debt levels and prospects for increased bond
issuance.
WEIGHTINGS BY COUNTRY AS A PERCENTAGE OF TOTAL ASSETS
AS OF DECEMBER 31, 1999
Canada 2.62%
Greece 2.70%
Germany 7.33%
Cash & Cash Equivalents 7.02%
United States 42.09%
Italy 1.46%
United Kingdom 0.24%
Other 35.53%
WEIGHTINGS BY SECTOR AS A PERCENTAGE OF TOTAL ASSETS
AS OF DECEMBER 31, 1999
Supranationals 6.96%
Cash & cash Equivalents 19.99%
Government and Government Agency 49.09%
Corporate Bonds 23.96%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
Global Salomon Smith Barney
Bond World Government Bond Index
Fund (Dollar hedged)(1)
- --------------------------------------------------------------------------------
10/01/98 $10,000 $10,000
12/31/98 9,980 10,033
03/31/99 10,110 10,116
06/30/99 9,970 10,044
09/30/99 9,980 10,099
12/31/99 10,048 10,165
AVERAGE ANNUAL TOTAL RETURN:
1 Year 0.68%
Since Inception* 0.39%
* Past performance is not indicative of future performance.
Fund inception: 10/1/98.
(1) Salomon Smith Barney World Government Bond Index (Dollar hedged) is
unmanaged and investors cannot invest directly in the index.
Investing in foreign securities may involve certain additional risks, including
exchange rate fluctuations, less liquidity, greater volatility and less
regulation. (See Note 7 to the Financial Statements).
<PAGE>
THE REAL ESTATE INVESTMENT FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
1999 proved in general to be a good year for the owners and operators of real
estate, but the performance of real estate related securities did not reflect
the positive operating environment of the real estate sector. The Fund commenced
operations on May 10, 1999, shortly after the noted value investor Warren Buffet
disclosed that he had made several investments in real estate investment trusts
(REITs). However, the positive effect of Mr. Buffet's investment was short lived
and after a brief rally, REIT's began a steady decline, which lasted until
year-end.
Our investment approach is one that seeks to create for our shareholders a broad
and diversified portfolio of real estate by investing in the securities of
companies that generate the majority of their income through the ownership,
operation and development of real estate. These securities tend to be equity
REITs.
We believe that the value of real estate is a function of the supply and demand
characteristics of the local market at a given time. Our portfolio approach
attempts to remain sector neutral to the National Association of Real Estate
Investments Trusts Equity Index ("NAREIT Index"). We believe the value added in
real estate investing is selecting the correct properties in the correct
geographic markets based on supply and demand.
Our current strategy has the portfolio investments focused on key east and west
coast metropolitan markets that are supply constrained and experiencing robust
economic growth, which is increasing local demand. During the six month period
ended December 31, 1999 the Fund returned -7.57% and the NAREIT Index returned
- -8.97%. We believe it is this supply and demand focus which helped the Fund
outperform its benchmark during the period.
The outlook for the year 2000 appears positive for the real estate community.
Continued economic growth provides good demand for real estate in most local
markets. Capital availability for real estate projects remains selective, and
when coupled with increasing demands on the part of local regulators, supply
growth in new real estate remains modest in most local markets. We anticipate
the real estate securities markets will reflect the positive operating
environment during the upcoming year.
WEIGHTINGS BY INDUSTRY AS A PERCENTAGE OF NET ASSETS
AS OF DECEMBER 31, 1999
Office 15.25%
Specialty 10.46%
Self Storage 3.20%
Health Care 2.46%
Industrial 17.63%
Retail 18.27%
Net Other Assets and Liabilities 10.51%
Residential 22.22%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
Real Estate NAREIT
Investment Fund Equity Index(1)
- --------------------------------------------------------------------------------
5/10/99 $10,000 $10,000
6/30/99 9,834 10,054
9/30/99 9,153 9,246
12/31/99 9,089 9,153
TOTAL RETURN:
Since Inception* (9.10)%
* Past performance is not indicative of future performance.
Fund inception: 5/10/99.
(1) The National Association of Real Estate Investment Trusts Equity Index
is unmanaged and investors cannot invest directly in the index.
REIT funds may be subject to a higher degree of market risk than diversified
funds because of concentration in a specific industry, sector or geographic
sector. Risks also include declines in the value of real estate, general and
economic conditions, changes in the value of the underlying property and
defaults by borrowers.
<PAGE>
THE GLOBAL ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
FUND COMMENTARY
Our investment approach remains strategic rather than tactical in nature. Unless
we expect markets or macroeconomic fundamentals to shift dramatically, we intend
to maintain an institutional asset allocation of approximately 70% in equity
funds (composed of 35% core, 25% international equities and 10% small cap)
approximately 25% in bonds and cash, and 5% in real estate investments.
During the second quarter of 1999, we added a real estate investment component
to the Fund's portfolio. In keeping the Fund's portfolio weightings consistent,
the actual percentages invested indirectly in each asset class will naturally
vary within a certain range of the target weighting.
INVESTMENT HOLDINGS AS OF DECEMBER 31, 1999
Small Cap Equity 9.99%
Real Estate 4.07%
U.S. Equity 36.15%
International Equity 23.14%
Global Bond 26.65%
GROWTH OF A $10,000 INVESTMENT IN THE FUND
Global Asset MSCI All Country
Allocation Fund World Index(1)
- --------------------------------------------------------------------------------
4/98 $10,000 $10,000
6/98 9,920 10,063
9/98 8,910 8,828
12/98 9,908 10,689
3/99 10,079 11,123
6/99 10,664 11,781
9/99 10,261 11,590
12/99 11,134 13,608
AVERAGE ANNUAL TOTAL RETURN:
1 Year 12.38%
Since Inception* 6.33%
* Past performance is not indicative of future performance.
Fund inception: 4/1/98.
(1) The Morgan Stanley All Country World Index is unmanaged and investors cannot
invest directly in the index.
Investing in foreign securities may involve certain additional risks, including
exchange rate fluctuations, less liquidity, greater volatility and less
regulation.
Small company stocks may be subject to a higher degree of market risk than the
securities of more established companies because they tend to be more volatile
and less liquid.
REIT funds may be subject to a higher degree of market risk than diversified
funds because of concentration in a specific industry, sector or geographic
sector. Risks also include declines in the value of real estate, general and
economic conditions, changes in the value of the underlying property and
defaults by borrowers.
<PAGE>
THE SMALL CAPITALIZATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
COMMON STOCKS - 98.27%
BASIC MATERIALS - 1.00%
31,000 Century Aluminum Co. .................................. $ 465,000
-----------
CAPITAL GOODS AND CONSTRUCTION - 9.31%
30,300 Applied Power, Inc. ................................... 1,113,525
24,250 Elcor Corp. ........................................... 730,531
25,400 Granite Construction, Inc. ............................ 468,313
27,400 Mobile Mini, Inc.* .................................... 589,100
8,300 Tecumseh Products Co., Class A ........................ 391,656
37,000 United Stationers, Inc. ............................... 1,056,812
-----------
4,349,937
-----------
CONSUMER CYCLICAL - 17.43%
15,900 Anchor Gaming* ........................................ 690,656
21,700 Apollo Group* ......................................... 435,356
50,000 Callaway Golf Co. ..................................... 884,375
28,550 Cost Plus, Inc.* ...................................... 1,017,094
46,100 Handleman Co.* ........................................ 616,588
45,600 Hollywood Entertainment Co.* .......................... 661,200
25,600 Insight Enterprises, Inc.* ............................ 1,040,000
19,100 McClatchy Co. ......................................... 826,075
18,300 Men's Wharehouse* ..................................... 537,563
16,100 Michaels Stores, Inc.* ................................ 458,850
78,600 Park Place Entertainment Corp.* ....................... 982,500
-----------
8,150,257
-----------
CONSUMER STAPLES - 15.73%
23,800 Ames Department Stores, Inc.* ......................... 685,738
15,850 CEC Entertainment, Inc.* .............................. 449,744
25,700 Celestial Seasonings, Inc.* ........................... 478,261
31,400 ITT Educational Services, Inc.* ....................... 484,738
55,500 Luby's, Inc. .......................................... 631,312
25,100 Mandalay Resort Group* ................................ 505,138
47,600 Rent-Way, Inc.* ....................................... 889,525
13,600 RSA Security, Inc.* ................................... 1,054,000
51,800 PETCO Animal Supplies, Inc.* .......................... 770,525
60,700 Taco Cabana, Class A* ................................. 493,187
19,800 Williams-Sonoma, Inc.* ................................ 910,800
-----------
7,352,968
-----------
ENERGY - 13.78%
16,200 Barrett Resources Corp.* .............................. 476,888
29,800 Basin Exploration, Inc.* .............................. 525,225
52,400 Brown (Tom), Inc.* .................................... 700,850
11,783 Devon Energy Corp., Class N ........................... 387,366
47,300 Forest Oil Corp.* ..................................... 623,769
56,700 Global Industries, Ltd.* .............................. 489,037
26,000 Nabors Industries, Inc.* .............................. 804,375
58,800 Newpark Resources, Inc.* .............................. 360,150
37,300 Tuboscope, Inc.* ...................................... 592,138
37,900 Varco International, Inc.* ............................ 386,106
27,400 Weatherford International, Inc.* ...................... 1,094,288
-----------
6,440,192
-----------
FINANCE - 7.08%
22,200 BancWest Corp. ........................................ 432,900
25,600 Fidelity National Insurance ........................... 368,000
16,500 Greater Bay Bancorp ................................... 707,437
15,400 Legg Mason, Inc. ...................................... 558,250
31,700 Waddell & Reed Financial, Inc., Class A ............... 859,862
13,700 Westamerica Bancorporation ............................ 382,744
-----------
3,309,193
-----------
HEALTH CARE - 4.03%
54,300 Mid Atlantic Medical Services, Inc.* .................. 451,369
23,600 Ocular Sciences, Inc.* ................................ 445,450
42,200 Renal Care Group, Inc.* ............................... 986,425
-----------
1,883,244
-----------
REAL ESTATE - 1.04%
19,500 Webb (Del E.) Corp. ................................... 486,281
-----------
TECHNOLOGY - 27.29%
33,900 Apex, Inc.* ........................................... 1,093,275
25,850 Burr Brown Corp.* ..................................... 933,831
10,500 Credence Systems Corp.* ............................... 908,250
29,600 Cypress Semiconductor Co.* ............................ 958,300
16,400 Electro Scientific Industries, Inc.* .................. 1,197,200
42,000 GaSonics International Corp.* ......................... 829,500
31,700 Integrated Device Technology, Inc.* ................... 919,300
11,250 Kronos, Inc.* ......................................... 675,000
35,000 Pericom Semiconductor Co.* ............................ 920,937
9,600 Rainbow Technologies, Inc.* ........................... 223,200
52,900 Varian, Inc.* ......................................... 1,190,250
41,600 Varian Semiconductor Equipment Associates, Inc.* ...... 1,414,400
15,700 Veeco Instruments, Inc.* .............................. 734,956
20,800 Wind River Systems, Inc.* ............................. 761,800
-----------
12,760,199
-----------
TRANSPORTATION - 1.58%
26,600 ABC-NACO, Inc.* ....................................... 219,450
18,600 Skywest, Inc. ......................................... 520,800
-----------
740,250
-----------
TOTAL COMMON STOCKS ................................... 45,937,521
(Cost $36,858,245) -----------
TOTAL INVESTMENTS - 98.27% ...................................... 45,937,521
(Cost $36,858,245) -----------
NET OTHER ASSETS AND LIABILITIES - 1.73% ........................ 810,434
-----------
NET ASSETS - 100.00% ............................................ $46,747,955
===========
- --------------------------
* Non-income producing security
<PAGE>
THE INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
COMMON STOCKS - 95.38%
ARGENTINA - 1.74%
42,194 Perez Companc SA, Class B .......................... $ 216,064
7,578 Telefonica de Argentina SA ......................... 233,970
-----------
450,034
-----------
AUSTRALIA - 6.34%
36,100 Australia & New Zealand Banking Group, Ltd. ........ 262,615
19,580 Broken Hill Proprietary Co., Ltd. .................. 257,098
152,152 HIH Insurance, Ltd. ................................ 152,828
22,880 Lend Lease Corp., Ltd. ............................. 320,542
57,062 Mayne Nickless, Ltd. ............................... 147,223
15,752 National Australia Bank, Ltd. ...................... 240,950
85,976 Pioneer International, Ltd., ADR ................... 258,219
-----------
1,639,475
-----------
AUSTRIA - 0.74%
2,880 VA Technologie AG .................................. 190,008
-----------
BELGIUM - 0.52%
3,445 Union Miniere SA ................................... 133,941
-----------
BERMUDA - 1.18%
7,617 Ace, Ltd. .......................................... 127,109
3,463 XL Capital, Ltd., Class A .......................... 179,643
-----------
306,752
-----------
BRAZIL - 3.95%
23,241 Banco Bradesco SA, ADR ............................. 182,300
13,115 Centrais Electricas Brasileiras SA
(Electrobras), ADR ................................ 144,265
10,005 Companhia Vale do Rio Doce, ADR .................... 255,128
9,540 Embratel Participacoes SA .......................... 259,965
7,400 Telesp Participacoes SA ............................ 180,838
-----------
1,022,496
-----------
CANADA - 2.70%
12,600 Barrick Gold Corp. ................................. 224,766
33,858 Methanex Corp. ..................................... 92,649
9,257 Newbridge Networks Corp.* .......................... 208,861
17,240 Renaissance Energy, Ltd.* .......................... 173,176
-----------
699,452
-----------
CHILE - 0.72%
6,525 Cia de Telecomunicaciones de Chile SA, ADR ......... 119,081
4,260 Gener SA, ADR ...................................... 66,030
-----------
185,111
-----------
DENMARK - 1.22%
4,485 Unidanmark A/S, Class A ............................ 315,636
-----------
EGYPT - 0.37%
5,673 Suez Cement Co., GDR (B) ........................... 94,529
-----------
FINLAND - 3.71%
23,030 Kemira Oyj ......................................... 140,342
51,055 MeritaNordbanken Oyj* .............................. 300,323
16,612 Metso Oyj* ......................................... 215,848
17,432 Stora Enso Oyj, R Shares ........................... 303,936
-----------
960,449
-----------
FRANCE - 7.64%
12,998 Alcatel SA ......................................... 584,910
3,074 Banque Nationale de Paris* ......................... 283,620
5,180 Rhone-Poulenc SA ................................... 301,053
5,790 Scor ............................................... 255,441
2,930 Sylea SA ........................................... 143,135
800 Thomson Multimedia* ................................ 43,110
5,301 Total Fina SA* ..................................... 367,094
-----------
1,978,363
-----------
GERMANY - 5.85%
6,269 BASF AG* ........................................... 322,037
3,557 Deutsche Bank AG* .................................. 300,417
1,972 Muenchener Rueckversicherungs-Gesellschaft AG
Registered Shares (A) ............................ 500,150
4,446 Veba AG, ADR ....................................... 222,578
14,982 Volkswagen AG, ADR ................................. 168,321
-----------
1,513,503
-----------
HONG KONG - 4.28%
26,100 Cheung Kong (Holdings), Ltd. ....................... 331,559
107,500 Hongkong Electric Holdings, Ltd. ................... 336,046
91,500 SmarTone Telecommunications Holdings, Ltd. ......... 441,403
-----------
1,109,008
-----------
ISRAEL - 1.84%
6,655 Teva Pharmaceutical Industries, Ltd., ADR .......... 477,080
-----------
ITALY - 1.20%
51,100 Telecom Italia SpA* ................................ 311,396
-----------
JAPAN - 12.93%
2595 Hitachi, Ltd., ADR* ................................ 420,066
15,000 Kurita Water Industries, Ltd. ...................... 238,426
121,000 Mitsubishi Paper Mills, Ltd. ....................... 162,249
12,064 Nintendo Co., Ltd. ................................. 250,620
4,833 Nippon Telegraph & Telephone Corp., ADR ............ 416,242
24,000 Nomura Securities Co., Ltd. ........................ 433,395
37,000 Seino Transportation Co., Ltd.* .................... 196,281
4,206 Sony Corp., ADR .................................... 1,197,659
7,000 Yamato Kogyo Co., Ltd. ............................. 31,585
-----------
3,346,523
-----------
KOREA - 0.69%
2,400 Korea Telecom Corp., ADR ........................... 179,400
-----------
MEXICO - 2.43%
175,542 Desc SA de CV* ..................................... 144,510
40,590 Industrias Penoles SA* ............................. 116,951
3,272 Telefonos de Mexico SA, ADR, Class L ............... 368,100
-----------
629,561
-----------
NETHERLANDS - 5.72%
6,856 Akzo Nobel NV, ADR ................................. 341,086
4,641 ING Groep NV ....................................... 280,198
4,402 Koninklijke (Royal) Philips Electronics NV* ........ 598,579
7,735 Wolters Kluwer NV, ADR* ............................ 261,780
-----------
1,481,643
-----------
NEW ZEALAND - 0.87%
86,018 Fletcher Challenge Energy .......................... 224,722
-----------
NORWAY - 0.54%
7,917 Kvaerner ASA, B Shares* ............................ 139,267
-----------
PERU - 0.94%
11,093 Credicorp, Ltd. .................................... 133,116
8,239 Telefonica del Peru S.A.A., ADR .................... 110,197
-----------
243,313
-----------
PORTUGAL - 2.91%
36,625 Portugal Telecom SA* ............................... 401,738
6,180 PT Multimedia - Servicos de Telecomunicacoes
E Multimedia, SGPS, SA* .......................... 351,515
-----------
753,253
-----------
SOUTH AFRICA - 0.36%
79,083 Illovo Sugar, Ltd. ................................. 94,437
-----------
SPAIN - 2.36%
16,007 Iberdrola SA ....................................... 221,853
16,834 Repsol SA .......................................... 390,328
-----------
612,181
-----------
SWEDEN - 4.34%
8,200 Autoliv, Inc., Swedish Depository Receipt .......... 239,986
9,474 Mo och Domsjoe AB (MoDo), B Shares ................. 341,857
26,014 Saab AB, B Shares .................................. 250,723
8,526 Volvo AB, A Shares ................................. 215,455
2,958 Volvo AB, B Shares ................................. 76,488
-----------
1,124,509
-----------
SWITZERLAND - 2.41%
565 Clariant AG* ....................................... 269,318
622 Zurich Allied AG ................................... 354,692
-----------
624,010
-----------
UNITED KINGDOM - 14.88%
3,570 British Airways, Plc, ADR .......................... 229,819
75,058 Caradon, Plc ....................................... 189,136
52,205 Hogg Robinson, Plc ................................. 204,492
11,094 Inchcape, Plc ...................................... 49,280
40,111 Invensys, Plc ...................................... 218,347
67,433 Laird Group, Plc ................................... 266,865
62,184 Marks & Spencer, Plc ............................... 296,064
29,886 McKechnie, Plc ..................................... 162,204
6,612 National Power, Plc, ADR ........................... 142,158
13,964 National Westminster Bank, Plc ..................... 299,995
16,398 Next, Plc .......................................... 157,337
52,700 Northern Foods, Plc ................................ 86,829
16,539 Peninsular and Oriental Steam Navigation Co. ....... 275,971
128,753 Pilkington, Plc .................................... 173,659
69,084 Safeway, Plc ....................................... 237,690
5,994 Shell Transport & Trading Co., ADR ................. 295,205
68,294 Storehouse, Plc .................................... 49,366
38,703 Tate & Lyle, Plc ................................... 253,819
73,755 The Weir Group, Plc ................................ 262,100
-----------
3,850,336
-----------
TOTAL COMMON STOCKS ................................ 24,690,388
(Cost $24,171,330) -----------
PREFERRED STOCK - 0.93%
BRAZIL - 0.93%
1,880 Telecomunicacoes Brasileiras SA (Telebras), ADR .... 241,580
-----------
TOTAL PREFERRED STOCK .............................. 241,580
(Cost $238,416) -----------
WARRANTS - 0.03%
FRANCE - 0.02%
1,378 Banque Nationale de Paris* ......................... 6,357
-----------
GERMANY - 0.01%
43 Muenchener Rueckversicherungs-Gesellschaft AG ...... 2,287
-----------
TOTAL WARRANTS ..................................... 8,644
-----------
(Cost $724)
PAR VALUE
- ---------
U.S. GOVERNMENT OBLIGATIONS - 1.40%
368,000 U.S. Treasury Bill, 5.32%, 4/27/00 ................. 361,828
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS .................. 361,828
-----------
(Cost $361,727)
TIME DEPOSIT - 2.07%
535,000 Chase Retail Repo, 5.00%, 01/03/00 ................. 535,000
-----------
TOTAL TIME DEPOSIT ................................. 535,000
-----------
(Cost $535,000)
TOTAL INVESTMENTS - 99.81% .................................... 25,837,440
-----------
(Cost $25,307,197)
NET OTHER ASSETS AND LIABILITIES - 0.19% ...................... 49,492
-----------
NET ASSETS - 100.00% .......................................... $25,886,932
===========
- --------------------------
* Non income producing security
(A) Ownership may only be transferred at the permission of the issuer.
(B) Security exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. This security may be resold, in
transactions exempt from registration, to qualified institutional buyers.
At December 31, 1999, this security amounted to $94,529, or 0.36% of net
assets.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
At December 31, 1999 sector diversification was as follows:
% OF THE
SECTOR DIVERSIFICATION PORTFOLIO VALUE
- ---------------------- --------- -----
Services ................................. 23.8% $ 6,157,163
Finance .................................. 20.3 5,254,529
Materials ................................ 16.9 4,355,647
Consumer Goods ........................... 16.2 4,189,782
Energy ................................... 10.0 2,589,224
Capital Equipment ........................ 5.7 1,469,921
Multi-Industry ........................... 3.6 915,702
Short-Term & Other Investments ........... 3.5 905,472
---- -----------
TOTAL INVESTMENTS ........................ 100.0% $25,837,440
===== ===========
<PAGE>
THE U.S. EQUITY FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
U.S. COMMON STOCKS - 99.02%
AEROSPACE / AIRLINES - 0.86%
1,000 Amtran, Inc.* ...................................... $ 19,375
1,711 AT&T Corp. Liberty ................................. 97,078
300 Cordant Technologies ............................... 9,900
2,800 Delta Air Lines, Inc. .............................. 139,475
200 General Dynamics Corp. ............................. 10,550
200 Goodrich (B.F.) Co. ................................ 5,500
1,600 Lockheed Martin Corp. .............................. 35,000
200 PMC Sierra Inc.* ................................... 32,063
-----------
348,941
-----------
AGRICULTURE - 0.42%
10,400 IMC Global, Inc. ................................... 170,300
-----------
AUTO REPAIR / AUTO PARTS - 0.71%
200 Arvin Industries, Inc. ............................. 5,675
1,398 Delphi Automotive Systems Corp. .................... 22,016
1,900 Eaton Corp. ........................................ 137,988
4,600 Meritor Automotive* ................................ 89,125
600 TRW, Inc. .......................................... 31,163
-----------
285,967
-----------
BASIC MATERIALS - 1.95%
1,100 ACX Technologies, Inc. ............................. 11,756
600 Alcoa, Inc. ........................................ 49,800
300 Commercial Metals Co. .............................. 10,181
3,300 Minnesota Mining and Manufacturing Co. ............. 322,988
200 Newmont Mining Corp. ............................... 4,900
2,600 NICOR, Inc. ........................................ 84,500
1,200 Quanex Corp. ....................................... 30,600
5,900 Timken Co. ......................................... 120,582
400 Union Carbide Corp. ................................ 26,700
3,200 Vulcan Materials Co. ............................... 127,800
-----------
789,807
-----------
BUSINESS SERVICES - 3.46%
6,900 America Online, Inc.* .............................. 520,519
200 Broadvision, Inc.* ................................. 34,013
7,300 Cendant Corp.* ..................................... 193,906
3,800 Donnelley (R.R.) & Sons Co. ........................ 94,288
100 Doubleclick Inc.* .................................. 25,306
100 Ebay Inc.* ......................................... 12,519
2,000 Electronic Data Systems Corp. ...................... 133,875
500 Exodus Communications* ............................. 44,406
2,200 FirstMerit Corp. ................................... 50,600
4,400 Newpark Resources, Inc. ............................ 26,950
300 Pride International, Inc.* ......................... 4,387
2,000 Sterling Software, Inc.* ........................... 63,000
7,600 SunGard Data Systems, Inc.* ........................ 180,500
100 TMP Worldwide Inc.* ................................ 14,200
-----------
1,398,469
-----------
CHEMICALS AND DRUGS - 6.24%
4,000 Abbott Laboratories ................................ 145,250
2,000 Albemarle Corp. .................................... 38,375
3,500 American Home Products Corp. ....................... 138,032
400 Andrx Corp. ........................................ 16,925
500 Bausch & Lomb, Inc. ................................ 34,219
1,200 Becton, Dickinson and Co. .......................... 32,100
8,200 Bristol-Myers Squibb Co. ........................... 526,337
900 Cambrex Corp. ...................................... 30,994
100 Dow Chemical Co. ................................... 13,363
1,200 duPont (E.I.) deNemours & Co. ...................... 79,050
3,000 Ferro Corp. ........................................ 66,000
100 FMC Corp. .......................................... 5,731
2,800 Grace (W.R.) & Co.* ................................ 38,850
2,100 Great Lakes Chemical Corp. ......................... 80,194
1,300 King Pharmaceuticals ............................... 72,881
5,300 Mallinckrodt, Inc. ................................. 168,606
7,400 Merck & Co., Inc. .................................. 496,262
400 Owens & Minor, Inc. ................................ 3,575
1,000 Pharmacia & Upjohn, Inc. ........................... 45,000
7,900 Philip Morris Cos., Inc. ........................... 183,181
5,700 Schering-Plough Corp. .............................. 240,469
4,400 Solutia, Inc. ...................................... 67,925
-----------
2,523,319
-----------
CONSTRUCTION - 0.40%
900 Centex Construction Products, Inc. ................. 35,100
300 Intervoice-Brite Inc.* ............................. 6,975
2,040 NVR, Inc.* ......................................... 97,410
500 USG Corp. .......................................... 23,563
-----------
163,048
-----------
CONSUMER CYCLICAL - 6.30%
2,500 ADVO, Inc.* ........................................ 59,375
200 Avon Products ...................................... 6,600
3,100 Best Buy Co., Inc.* ................................ 155,581
400 Brunswick Corp. .................................... 8,900
6,900 Coca-Cola Co. ...................................... 401,925
3,100 Darden Restaurants, Inc. ........................... 56,188
1,800 Earthgrains Co. .................................... 29,025
3,500 Flowers Industries ................................. 55,781
3,500 Ford Motor Co. ..................................... 187,031
2,000 General Motors Corp. ............................... 145,375
100 Hannaford Brothers Co. ............................. 6,931
1,400 Hormel Foods Corp. ................................. 56,875
2,000 Interstate Bakeries Corp. .......................... 36,250
2,000 McDonald's Corp. ................................... 80,625
3,200 Office Depot, Inc.* ................................ 35,000
2,100 PepsiCo, Inc. ...................................... 74,025
5,800 Procter & Gamble Co. ............................... 635,463
1,300 Ryan Family Steak Houses, Inc.* .................... 11,050
300 Sanderson Farms, Inc. .............................. 2,569
8,400 Sara Lee Corp. ..................................... 185,325
200 Sterling Commerce* ................................. 6,813
4,200 SUPERVALU, INC. .................................... 84,000
200 Suiza Foods Corp.* ................................. 7,925
2,300 Tricon Global Restaurants, Inc.* ................... 88,837
8,000 Tyson Foods Inc., Class A .......................... 130,000
-----------
2,547,469
-----------
CONSUMER PRODUCTS - 2.03%
2,500 Anheuser-Busch Cos., Inc. .......................... 177,188
1,700 CDI Corp.* ......................................... 41,012
2,600 Chattem, Inc. ...................................... 49,400
3,900 Chiquita Brands International, Inc. ................ 18,525
1,000 Colgate-Palmolive Co. .............................. 65,000
500 Dal-Tile International, Inc.* ...................... 5,062
4,700 Georgia-Pacific Group .............................. 238,525
2,700 Kimberly-Clark Corp. ............................... 176,175
1,800 Snap-On Inc. ....................................... 47,813
-----------
818,700
-----------
DURABLE GOODS - 0.37%
600 Caterpillar, Inc. .................................. 28,238
2,500 Maytag Corp. ....................................... 120,000
-----------
148,238
-----------
ELECTRONICS - 2.17%
200 Broadcom Corp., Class* ............................. 54,475
300 Credence Systems Corp.* ............................ 25,950
5,000 Integrated Device Technology, Inc.* ................ 145,000
300 LSI Logic Corp.* ................................... 20,250
100 Microchip Technology* .............................. 6,844
5,000 National Semiconductor Corp.* ...................... 214,062
500 RF Micro Devices Inc. .............................. 34,219
200 Sawtek Inc.* ....................................... 13,313
4,200 Teradyne Inc.* ..................................... 277,200
2,750 Vishay Intertechnology, Inc.* ...................... 86,968
-----------
878,281
-----------
ENERGY - 4.38%
100 Atlantic Richfield* ................................ 8,650
1,900 Catalytica Inc.* ................................... 25,769
1,200 Chevron Corp. ...................................... 103,950
1,900 ENSCO International, Inc. .......................... 43,463
12,812 Exxon Mobil Corp.* ................................. 1,032,167
1,400 Firstenergy Corp.* ................................. 31,763
500 Global Industries, Ltd.* ........................... 4,313
300 Global Marine, Inc. ................................ 4,988
500 Nabors Industries, Inc.* ........................... 15,469
1,200 Noble Affiliates, Inc. ............................. 25,725
500 Phillips Petroleum Co. ............................. 23,500
1,100 Stepan Chemical Co. ................................ 25,713
3,900 Sunoco, Inc. ....................................... 91,650
500 Texaco, Inc. ....................................... 27,156
1,100 Tidewater, Inc. .................................... 39,600
4,200 Tosco Corp. ........................................ 114,188
6,700 Ultramar Diamond Shamrock Corp. .................... 152,006
-----------
1,770,070
-----------
FINANCE - 13.31%
800 Allstate Corp. ..................................... 19,200
200 Ambac Financial Group, Inc. ........................ 10,438
800 American Express Co. ............................... 133,000
200 American Financial Group, Inc. ..................... 5,275
1,400 American General Corp. ............................. 106,225
5,800 American International Group, Inc. ................. 627,125
2,000 AMRESCO, INC. ...................................... 2,812
8,560 Bank of America Corp. .............................. 429,605
6,096 Bank One Corp. ..................................... 195,453
1,000 BankWest Corp. ..................................... 19,500
1,800 Capital One Financial Corp. ........................ 86,738
661 Charter One Financial, Inc. ........................ 12,642
4,800 Chase Manhattan Corp. .............................. 372,900
1,200 CIGNA Corp. ........................................ 96,675
12,125 Citigroup, Inc. .................................... 673,695
4,641 Conseco, Inc. ...................................... 82,958
800 ContiFinancial Corp. ............................... 188
600 Equifax, Inc. ...................................... 14,138
600 E*TRADE Group, Inc.* ............................... 15,675
2,900 Fannie Mae ......................................... 181,069
2,400 Fleet Boston Financial Co. ......................... 83,550
600 Firstar Corp. ...................................... 12,675
7,594 First Union Corp. .................................. 249,178
100 Franklin Resources, Inc. ........................... 3,206
600 Hartford Financial Services Group, Inc. ............ 28,425
1,500 Marsh & McLennan Cos., Inc. ........................ 143,531
800 Merrill Lynch & Co., Inc. .......................... 66,800
1,000 Metris Companies Inc.* ............................. 35,688
3,300 Morgan Stanley Dean Witter & Co. ................... 471,075
6,800 National City Corp. ................................ 161,075
708 Old Kent Financial Corp. ........................... 25,046
3,150 Old Republic International Corp. ................... 42,919
200 One Valley Bancorp, Inc. ........................... 6,125
4,000 PNC Bank Corp. ..................................... 178,000
500 Schwab (Charles) Corp. ............................. 19,188
1,100 SEI Investments Co. ................................ 130,917
800 SLM Holding Corp. .................................. 33,800
600 SouthTrust Corp. ................................... 22,687
4,200 St. Paul Cos., Inc. ................................ 141,488
1,650 The PMI Group, Inc. ................................ 80,541
800 Trustmark Corp. .................................... 17,287
800 United Bankshares, Inc. ............................ 19,100
400 Unumprovident Corp. ................................ 12,825
4,000 U.S. Bancorp ....................................... 95,250
5,498 Washington Mutual, Inc. ............................ 142,943
1,800 Wells Fargo Co. .................................... 72,788
-----------
5,381,418
-----------
HEALTH CARE - 4.49%
3,900 Allergan Inc. ...................................... 194,025
6,400 Amgen, Inc.* ....................................... 384,400
4,100 Apria Healthcare Group, Inc.* ...................... 73,544
1,700 HEALTHSOUTH Corp.* ................................. 9,138
1,700 Imclone Systems* ................................... 67,363
2,600 Invacare Corp. ..................................... 52,162
3,900 Johnson & Johnson .................................. 363,187
1,200 Lilly (Eli) and Co. ................................ 79,800
500 Magellan Health Services, Inc. ..................... 3,156
400 Pacificare Health Systems* ......................... 21,200
2,000 Pediatrix Medical Group, Inc.* ..................... 14,000
7,100 Pfizer, Inc. ....................................... 230,306
2,200 St. Jude Medical, Inc.* ............................ 67,513
600 Tenet Healthcare Corp.* ............................ 14,100
1,000 United Healthcare Corp. ............................ 53,125
2,300 Warner-Lambert Co. ................................. 188,457
-----------
1,815,476
-----------
LEISURE AND ENTERTAINMENT - 2.76%
12,500 Arctic Cat, Inc. ................................... 125,000
2,900 Argosy Gaming Co.* ................................. 45,131
500 Ascent Entertainment Group, Inc.* .................. 6,344
9,072 Disney (Walt) Co. .................................. 265,356
5,600 Galileo International .............................. 167,650
5,000 GTECH Holdings Corp.* .............................. 110,000
600 Harrah's Entertainment* ............................ 15,863
4,200 MediaOne Group, Inc.* .............................. 322,612
1,200 Metro-Goldwyn-Mayer, Inc.* ......................... 28,275
600 Zomax, Inc.* ....................................... 27,150
-----------
1,113,381
-----------
MANUFACTURING - 0.79%
3,200 Champion Enterprises* .............................. 27,400
1,300 Harsco Corp. ....................................... 41,275
800 Manitowoc Inc. ..................................... 27,200
500 Nucor Corp. ........................................ 27,406
1,100 Plantronics Inc.* .................................. 78,719
100 PPG Industries, Inc. ............................... 6,256
3,700 Trinity Industries, Inc. ........................... 105,218
300 Universal Corp.* ................................... 6,844
-----------
320,318
-----------
MEDIA - 0.62%
300 Gannett Co., Inc. .................................. 24,468
400 Tribune Co. ........................................ 22,025
2,000 Univision Communications, Inc.* .................... 204,375
-----------
250,868
-----------
MEDICAL PRODUCTS - 0.32%
1,100 Arrow International ................................ 31,900
200 Guidant Corp.* ..................................... 9,400
3,300 ICN Pharmaceuticals, Inc. .......................... 83,531
1,100 LCA-Vision, Inc. ................................... 5,156
-----------
129,987
-----------
PRINTING AND PUBLISHING - 0.95%
300 Banta Corp. ........................................ 6,769
2,800 Deluxe Corp. ....................................... 76,825
1,075 Dun & Bradstreet Corp. ............................. 31,713
1,200 Houghton Mifflin Co. ............................... 50,625
3,000 Time Warner, Inc. .................................. 217,312
-----------
383,244
-----------
REAL ESTATE - 0.09%
3,400 Fairfield Communities, Inc.* ....................... 36,550
-----------
REAL ESTATE INVESTMENT TRUST - 0.77%
400 Apartment Investment & Management Co. .............. 15,925
200 CarrAmerica Realty Corp. ........................... 4,225
1,733 Equity Residential Properties Trust ................ 73,977
1,852 Host Marriott Corp. ................................ 15,279
800 Mack-Cali Realty Corp. ............................. 20,850
7,400 Public Storage, Inc. ............................... 167,887
550 Starwood Hotels & Resorts Worldwide, Inc. .......... 12,925
-----------
311,068
-----------
RETAIL - 5.36%
3,000 Abercrombie & Fitch Co., Class A* .................. 80,063
378 Albertson's, Inc. .................................. 12,191
3,000 Callaway Golf Co. .................................. 53,063
3,300 Federated Department Stores, Inc.* ................. 166,856
400 Footstar, Inc.* .................................... 12,200
400 Gap, Inc. (The) .................................... 18,400
1,300 Great Atlantic & Pacific Tea Company, Inc. ......... 36,238
7,100 Heilig-Meyers Co. .................................. 19,525
5,900 Hollywood Entertainment Corp.* ..................... 85,550
3,300 Home Depot, Inc. ................................... 226,256
3,600 Kroger Co. ......................................... 67,950
4,800 Lands End Inc.* .................................... 166,800
1,900 May Department Stores Co. .......................... 61,275
2,200 Musicland Stores Corp. ............................. 18,562
2,100 Payless Shoesource Inc.* ........................... 98,700
1,900 PETCO Animal Supplies, Inc. ........................ 28,262
800 Russell Corp. ...................................... 13,400
1,000 Sears Roebuck & Co.* ............................... 30,438
5,300 Sunglass Hut International, Inc.* .................. 59,625
3,000 Tandy Corp. ........................................ 147,562
300 TJX Cos., Inc. ..................................... 6,131
2,300 Toys "R" Us, Inc. .................................. 32,918
10,500 Wal-Mart Stores, Inc. .............................. 725,812
-----------
2,167,777
-----------
TECHNOLOGY - 23.02%
5,300 3 Com Corp. ........................................ 249,100
2,300 Adobe Systems Inc. ................................. 154,675
1,000 Advanced Digital Inf.* ............................. 48,625
900 Amazon.com, Inc.* .................................. 68,513
1,000 American Management Systems, Inc. .................. 31,375
400 At Home Corp., Series A* ........................... 17,150
1,500 Autodesk, Inc. ..................................... 50,625
2,964 Avant! Corp.* ...................................... 44,460
200 BEA System Inc.* ................................... 13,988
3,200 Boeing Co. ......................................... 133,000
300 CMGI, Inc.* ........................................ 83,063
200 CNET, Inc.* ........................................ 11,350
4,300 Computer Associates International, Inc. ............ 300,731
1,000 Computer Task Group, Inc. .......................... 14,812
1,500 Data Transmission Network Corp. .................... 25,875
10,400 Dell Computer Corp.* ............................... 530,400
900 EMC Corp. .......................................... 98,325
1,000 Gateway 2000, Inc.* ................................ 72,063
11,100 General Electric Corp. ............................. 1,717,725
100 Go2Net,Inc.* ....................................... 8,700
1,400 Hewlett-Packard Co. ................................ 159,513
200 Inktomi Corp.* ..................................... 17,750
11,700 Intel Corp. ........................................ 963,056
5,500 International Business Machines Corp. .............. 594,000
100 ISS Group Inc. ..................................... 7,113
800 Lexmark International Group, Inc., Class A* ........ 72,400
1,100 Lone Star Technology* .............................. 30,663
1,200 Mentor Graphics Corp.* ............................. 15,825
2,400 Micron Technology, Inc. ............................ 186,600
10,000 Microsoft Corp.* ................................... 1,167,500
200 MindSpring Enterprises, Inc.* ...................... 5,281
300 Motorola Inc. ...................................... 44,175
400 Network Appliance Inc.* ............................ 33,225
200 Northrop Corp.* .................................... 10,813
5,300 Oracle Corp.* ...................................... 593,931
400 Policy Management Systems* ......................... 10,225
400 PRI Automation Inc. ................................ 26,850
28 Psinet Inc.* ....................................... 1,735
100 Realnetworks Inc.* ................................. 12,031
1,100 Seagate Technology, Inc.* .......................... 51,218
2,000 Structural Dynamics Research Corp. ................. 25,500
7,300 Sun Microsystems, Inc.* ............................ 565,293
5,000 Sybase Inc.* ....................................... 85,000
2,100 Symantec Corp. ..................................... 123,112
3,900 Texas Instruments, Inc. ............................ 377,812
1,000 Unisys Corp.* ...................................... 31,937
2,200 United Technologies Corp. .......................... 143,000
200 Verisign Inc.* ..................................... 38,187
300 Xircom* ............................................ 22,500
500 Yahoo!, Inc.* ...................................... 216,343
-----------
9,307,143
-----------
TELECOMMUNICATIONS - 12.46%
400 ADC Telecommunications* ............................ 29,025
867 Adelphia Communications* ........................... 56,897
700 Advanced Fibre Communications* ..................... 31,281
1,340 Alltel Corp. ....................................... 110,801
500 Ancor Communications* .............................. 33,938
5,978 AT&T Corp. ......................................... 303,385
10,000 BellSouth Corp. .................................... 468,125
300 CBS Corp. .......................................... 19,181
700 Centennial Cellular* ............................... 58,013
100 Ciena Corp.* ....................................... 5,750
9,700 Cisco Systems, Inc.* ............................... 1,039,113
600 Comcast Corp., Class A* ............................ 30,338
369 Cox Communications, Inc.* .......................... 19,004
7,650 Digital Microwave Corp.* ........................... 179,297
1,200 Echostar, Class A* ................................. 117,000
400 General Instrument ................................. 34,000
4,100 GTE Corp. .......................................... 289,306
700 Harmonic Inc.* ..................................... 66,456
800 Level 3 Communications, Inc.* ...................... 65,500
8,353 Lucent Technologies, Inc. .......................... 624,908
100 Omnipoint Corp.* ................................... 12,063
5,100 Price Communication Corp.* ......................... 141,843
2,000 Qualcomm Inc.* ..................................... 352,250
1,464 Qwest Communications International, Inc.* .......... 62,952
7,969 SBC Communications, Inc. ........................... 388,488
2,100 Sprint Corp. ....................................... 141,356
400 Sprint PCS Group* .................................. $ 41,000
4,400 US WEST, Inc. ...................................... 316,800
-----------
5,038,070
-----------
TRANSPORTATION - 0.84%
2,600 Airborne Freight Corp. ............................. 57,200
5,500 Burlington Northern Santa Fe Corp. ................. 133,375
4,100 Ryder System, Inc. ................................. 100,193
800 US Freightways Corp. ............................... 38,300
700 Yellow Corp. ....................................... 11,768
-----------
340,836
-----------
UTILITIES - 3.95%
1,400 Allegheny Energy, Inc. ............................. 37,712
7,400 Bell Atlantic Corp. ................................ 455,562
7,200 Edison International ............................... 188,550
400 Florida Progress Corp. ............................. 16,925
3,500 FPL Group, Inc. .................................... 149,843
6,962 MCI WorldCom, Inc. ................................. 369,394
1,100 PG&E Corp. ......................................... 22,550
3,200 Pinnacle West Capital Corp. ........................ 97,800
4,400 Public Service Enterprise Group, Inc. .............. 153,175
300 Reliant Energy, Inc. ............................... 6,862
4,800 RGS Energy Group, Inc. ............................. 98,700
-----------
1,597,073
-----------
TOTAL U.S. COMMON STOCKS ........................... 40,035,818
(Cost $31,681,844) -----------
WARRANT - 0.02%
FINANCE - 0.02%
300 Regions Financial Co. .............................. 7,537
-----------
TOTAL WARRANT ...................................... 7,537
(Cost $9,159) -----------
TOTAL INVESTMENTS - 99.04% .................................... 40,043,355
(Cost $31,691,003) -----------
NET OTHER ASSETS AND LIABILITIES - 0.96% ...................... 388,349
-----------
NET ASSETS - 100.00% .......................................... $40,431,704
===========
- --------------------------
* Non-income producing security
<PAGE>
THE GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 29.18% (21.44%(1))
FEDERAL HOME LOAN BANK - 1.37% (1.00%(1))
USD 440,000 5.95%, 03/16/09, Series DX09 .............. $ 406,630
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 3.19% (2.35%(1))
GBP 190,000 6.88%, 06/07/02, EMTN ..................... 306,866
NZD 980,000 7.25%, 06/20/02 ........................... 512,929
AUD 200,000 6.50%, 07/10/02 ........................... 130,584
------------
950,379
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.68% (2.70%(1))
USD 321,163 6.63%, 08/20/23, Pool # 8269 .............. 324,540
USD 24,671 6.13%, 12/20/25, Pool # 8770 .............. 24,880
USD 41,660 6.13%, 11/20/26, Pool # 80010 ............. 42,070
USD 73,251 6.13%, 12/20/26, Pool # 80022 ............. 73,973
USD 620,000 7.00% 30 YR JAN (TBA) ..................... 599,073
USD 29,533 6.75%, 09/20/26, Pool # 008971 ............ 29,747
------------
1,094,283
------------
U.S. TREASURY INFLATION INDEX
SECURITIES - 20.94% (15.39%(1))
USD 6,290,160 3.63%, 07/15/02 ........................... 6,231,190
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS ........................ 8,682,482
(Cost $8,547,672) ------------
FOREIGN GOVERNMENT BONDS - 47.88% (35.19%(1))
AUSTRALIA - 0.71% (0.52%(1))
Australian Government Bond
AUD 290,000 8.75%, 08/15/08 ........................... 212,416
------------
CANADA - 3.66% (2.69%(1))
Canadian Government Bond
CAD 120,000 9.00%, 12/01/04 ........................... 92,629
CAD 740,000 6.00%, 06/01/08 ........................... 504,312
NZD 1,010,000 6.63%, 10/03/07 ........................... 490,811
------------
1,087,752
------------
FRANCE - 0.68% (0.50%(1))
Government of France, OAT (A)
EUR 105,429 3.00%, 07/25/09 ........................... 101,946
EUR 103,957 3.00%, 07/25/09 ........................... 100,522
------------
202,468
------------
GERMANY - 4.23% (3.11%(1))
Bundesrepublik Deutschland
EUR 116,000 4.50%, 07/04/09, Series 99 ................ 109,515
EUR 1,138,000 5.38%, 01/04/10, Series 99 ................ 1,148,085
------------
1,257,600
------------
ITALY - 2.30% (1.69%(1))
Buoni Poliennali del Tesoro
EUR 290,000 4.25%, 11/01/09 ........................... 263,360
EUR 400,000 6.50%, 11/01/27 ........................... 420,829
------------
684,189
------------
JAPAN - 21.12% (15.52%(1))
Japan (10 Year Issue)
JPY 71,000,000 4.10%, 12/22/03, Series 164 ............... 785,628
JPY 67,300,000 4.50%, 12/20/04, Series 175 ............... 772,465
JPY 72,000,000 3.30%, 06/20/06, Series 187 ............... 792,938
JPY 30,100,000 0.90%, 12/22/08, Series 207B .............. 270,950
JPY 104,000,000 3.00%, 09/20/05, Series 182 ............... 1,124,792
Japanese Government Bond
JPY 80,200,000 4.00%, 06/20/05, Series 179 ............... 906,660
JPY 109,000,000 3.40%, 06/20/05, Series 181 ............... 1,198,285
JPY 35,000,000 1.40%, 06/22/09 ........................... 327,014
JPY 10,000,000 2.90%, 12/20/06 ........................... 106,812
------------
6,285,544
------------
MEXICO - 1.95% (1.43%(1))
United Mexican States (E)
GBP 150,000 8.75%, 05/30/02, EMTN ..................... 242,295
USD 180,000 7.44%, 06/27/02 (B) (C) ................... 178,650
USD 100,000 9.88%, 04/07/04 (B) (C) ................... 102,750
EUR 100,000 10.38%, 01/29/03 .......................... 56,392
------------
580,087
------------
NEW ZEALAND - 3.60% (2.64%(1))
New Zealand Government Bond
NZD 1,440,000 10.00%, 03/15/02, Series 302 .............. 803,584
NZD 100,000 4.50%, 02/15/16, Series 216 (A) ........... 51,704
NZD 420,000 7.00%, 07/15/09, Series 709 ............... 214,921
------------
1,070,209
------------
PHILIPPINES - 0.76% (0.56%(1))
Republic of Philippines
EUR 150,000 8.00%, 09/17/04 .................. 156,376
USD 70,000 9.50%, 10/21/24 ........................... 70,875
------------
227,251
------------
PORTUGAL - 1.24% (0.92%(1))
EUR 420,000 Portugese Government
3.95%, 07/15/09 ........................... 370,376
------------
SINGAPORE - 0.61% (0.45%(1))
SGD 300,000 Singapore Government
4.38%, 10/15/05 ........................... 182,243
------------
SPAIN - 5.52% (4.05%(1))
Bonos y Oblig del Estado
EUR 138,002 6.00%, 01/31/29 ........................... 137,014
Spanish Government Bond
EUR 1,500,000 5.15%, 07/30/09 ........................... 1,504,076
------------
1,641,090
------------
SWEDEN - 1.50% (1.11%(1))
Swedish Government Bond
SEK 3,800,000 5.00%, 01/15/04, Series 1042 .............. 447,782
------------
TOTAL FOREIGN GOVERNMENT BONDS ............ 14,249,007
(Cost $14,273,648) ------------
ASSET-BACKED AND MORTGAGE-BACKED
SECURITIES - 19.68% (14.46%(1))
GERMANY - 0.26% (0.19%(1))
USD 77,504 Daimler-Benz Vehicle Trust, ABS
Series 1998-A, Class A2
5.23%, 12/20/01 ........................... 77,419
------------
JAPAN - 0.64% (0.47%(1))
USD 70,331 Nissan Auto Receivables Grantor Trust, ABS
Series 1998-A, Class A
5.45%, 04/15/04 ........................... 69,539
JPY 7,443,243 SHL (C) (B)
Series 1999-1, Class A1
0.54%, 12/25/24 ........................... 72,863
JPY 5,000,000 SHL (C) (B)
Series 1999-1, Class A2
0.79%, 12/25/24 ........................... 48,938
------------
191,340
------------
UNITED STATES - 18.78% (13.80%(1))
USD 293,689 Amresco Residential Securities
Mortgage Loan
Series 1999-1, Class A
6.95%, 06/25/02 ........................... 298,428
USD 700,000 ARG Funding Corp., ABS (C) (E) (B)
Series 1999-1A, Class A1
5.28%, 05/20/03 ........................... 700,319
USD 27,421 Banc One Auto Grantor Trust, ABS
Series 1997-A, Class A
6.27%, 11/20/03 ........................... 27,371
USD 500,000 CDC Securitization Corp (B)
Series 1999-FL1, Class A
6.91%, 12/14/07 ........................... 500,000
USD 14,525 Chase Manhattan Grantor Trust, ABS
Series 1996-B, Class A
6.61%, 09/15/02 ........................... 14,554
USD 163,063 Chase Mortgage Finance Corp., CMO
Series 1998-S4, Class A3
6.55%, 08/25/28 ........................... 161,541
Citicorp Mortgage Securities, Inc., CMO
USD 191,668 Series 1998-6, Class A1
6.50%, 07/25/28 ........................... 189,141
USD 10,000 Series 1999-1, Class A2
6.50%, 03/25/29 ........................... 8,975
USD 16,760 Comed Transitional Funding Trust, ABS
Series 1998-1, Class A1
5.38%, 03/25/02 ........................... 16,742
USD 316,467 Contimortgage Home Equity Loan Trust, CMO
Series 1999-1, Class A1
6.01%, 12/25/13 ........................... 314,512
USD 24,115 Emergent Home Equity Loan Trust, ABS
Series 1997-2, Class A2
6.75%, 05/15/12 ........................... 24,065
USD 338,734 EQCC Home Equity Loan Trust, CMO
5.82%, 03/20/29 ........................... 336,409
USD 500,603 First Security Auto Owner Trust, ABS
Series 1999-1, Class A2
5.31%, 04/15/02 ........................... 500,035
USD 26,709 Illinois Power Special Purpose Trust, ABS
Series 1998-1, Class A1
5.39%, 06/25/02 ........................... 26,654
USD 400,000 MLCC Mortgage Investors Inc.
Series 1999-A, Class A
6.84%, 02/15/02 ........................... 400,000
USD 46,953 Premier Auto Trust, ABS
Series 1997-1, Class A3
6.25%, 08/06/01 ........................... 46,986
USD 80,000 PSB Lending Home Loan Owner Trust, CMO
Series 1997-3, Class A3
6.83%, 05/20/18 ........................... 79,435
USD 99,459 Salomon Brothers Mortgage Securities
Series 1999-AQ2, Class A1
5.82%, 11/15/29 ........................... 99,427
USD 199,164 Sasco Floating Rate Commercial Mortgage
Series 1999 - CA, Class A
6.86%, 11/20/01 ........................... 199,102
USD 1,028,588 SLMA, Student Loan Trust, ABS (E)
Series 1998-2, Class A1
6.14%, 04/25/07 ........................... 1,023,512
USD 158,142 Structured Asset Mortgage
Investments, Inc., ABS
Series 1999-1, Class 1A
6.58%, 03/25/29 ........................... 152,253
USD 467,993 United Panam Mortage Loan Asset Backed
Series 1999-2, Class A2
6.16%, 10/25/29 ........................... 467,476
------------
5,586,937
------------
TOTAL ASSET-BACKED AND
MORTGAGE-BACKED SECURITIES ................ 5,855,696
(Cost $5,859,659) ------------
BRADY BONDS - 0.68% (0.50%(1))
USD 60,000 Bulgaria Flt Brady
6.50%, 07/28/24 ........................... 48,075
USD 214,000 Bulgaria Frn Brady
3.00%, 07/28/12 ........................... 154,615
------------
TOTAL BRADY BONDS ......................... 202,690
(Cost $182,738) ------------
FOREIGN CORPORATE BONDS - 19.49% (14.33%(1))
AUSTRALIA - 0.66% (0.49%(1))
USD 200,000 Bankers Trust Australia
6.42%, 06/02/08 ........................... 197,670
------------
BERMUDA - 0.06% (0.04%(1))
USD 19,000 Flag, Ltd.
8.25%, 01/30/08 ........................... 17,575
------------
CANADA - 0.46% (0.34%(1))
CAD 170,000 Beneficial Canada, Inc.
6.35%, 04/01/02 ........................... 116,558
USD 19,000 Rogers Cantel, Inc.
8.30%, 10/01/07 ........................... 19,285
------------
135,843
------------
DENMARK - 1.02% (0.75%(1))
DKK 1,115,000 Danske Credit, Series ANN
5.00%, 10/01/29 ........................... 131,255
DKK 1,457,000 Unikredit Realkredit, Series ANN
5.00%, 10/01/29 ........................... 171,119
------------
302,374
------------
FRANCE - 0.78% (0.57%(1))
EUR 43,065 AXA Convertible Bond
2.50%, 01/01/14 ........................... 43,846
USD 200,000 Comp Fin (CIC)
6.89%, 10/29/49 ........................... 187,750
------------
231,596
------------
GERMANY - 7.03% (5.16%(1))
EUR 90,000 Allgemeine Hypobk AG Pfander
5.50%, 01/17/07 ........................... 91,047
EUR 100,000 Allgemeine Hypobk AG
5.00%, 09/02/09 ........................... 95,246
EUR 100,000 Depfa Pfandbriefbank
3.75%, 01/15/09 ........................... 87,530
EUR 1,030,000 Depfa Pfandbriefbank
5.50%, 01/15/10 ........................... 1,020,972
EUR 140,000 Hypothekenbk in Essen (B)
4.25%, 07/06/09 ........................... 125,387
EUR 130,000 Hypothekenbk in Essen
4.75%, 08/11/08 ........................... 122,929
EUR 220,000 Rheinsche Hypobk AG
5.00%, 04/16/08 ........................... 211,801
EUR 50,000 Rheinsche Hypobk AG
4.00%, 09/15/06 ........................... 46,520
EUR 260,000 Treuhandanstalt
7.50%, 09/09/04 ........................... 289,304
------------
2,090,736
------------
GREECE - 4.24% (3.11%)
USD 1,250,000 CSFP Credit Linked-Greece
5.28%, 11/19/04 ........................... 1,260,375
------------
JAPAN - 2.11% (1.55%(1))
JPY 10,000,000 Banco Nacional Com Ext, EMTN
5.30%, 09/21/00 ........................... 100,519
JPY 21,000,000 General Motors Acceptance Corp. (E)
0.34%, 07/26/02 ........................... 205,632
JPY 33,000,000 General Motors
1.25%, 12/20/04 ........................... 323,104
------------
629,255
------------
KOREA - 0.24% (0.17%(1))
KOREA DEVELOPMENT BANK
JPY 7,000,000 2.70%, 08/16/02 ........................... 70,086
------------
NETHERLANDS - 0.83% (0.61%(1))
EUR 250,000 KPNQWEST BV (C)
7.13%, 06/01/09 ........................... 247,255
------------
NEW ZEALAND - 0.70% (0.52%(1))
NZD 405,000 Export Development Corp
6.50%, 12/21/04 ........................... 209,232
------------
SOUTH KOREA - 0.99% (0.73%(1))
USD 300,000 Export-Import Bank of Korea
7.13%, 09/20/01 ........................... 295,755
------------
UNITED KINGDOM - 0.38% (0.28%(1))
USD 15,000 Orange, Plc
8.00%, 08/01/08 ........................... 15,174
EUR 100,000 Banque de Tunisie (B)
7.50%, 08/06/09 ........................... 98,721
------------
113,895
------------
TOTAL FOREIGN CORPORATE BONDS ............. 5,801,647
(Cost $5,825,226) ------------
COMMERCIAL PAPER (D) - 10.35% (7.61%(1))
UNITED STATES - 10.35% (7.61%(1))
USD 100,000 Deutsche Bank Financial
6.04%, 02/02/00 ........................... 99,463
USD 700,000 Florida Power
5.87%, 02/09/00 ........................... 695,488
USD 400,000 General Electric Cap Corp
5.94%, 02/17/00 ........................... 396,898
USD 200,000 General Electric Cap Corp
5.81%, 03/08/00 ........................... 197,838
USD 200,000 MCI Worldcom, Inc. 4-2
5.36%, 01/27/00 ........................... 199,226
USD 600,000 Oesterreich Kontbk
5.99%, 01/25/00 ........................... 597,604
USD 300,000 Southwestern Public Service
6.19%, 02/09/00 ........................... 297,988
USD 100,000 Textron Inc
6.09%, 01/14/00 ........................... 99,780
USD 300,000 U.S. West Capital Finance Corp.
6.25%, 02/08/00 ........................... 298,022
USD 200,000 U.S. West Capital Finance Corp.
5.96%, 03/24/00 ........................... 197,253
------------
TOTAL COMMERCIAL PAPER .................... 3,079,560
(Cost $3,079,560) ------------
DOMESTIC CORPORATE BONDS AND NOTES - 18.12% (13.31%(1))
USD 15,000 AES Corp.
10.25%, 07/15/06 .......................... 15,300
USD 300,000 Associates Corp. NA (E)
6.21%, 08/27/11 ........................... 299,901
USD 400,000 Bear Stearns Co., Inc., MTN (E)
6.41%, 05/06/02 ........................... 399,646
USD 16,000 Beckman Instruments, Inc.
7.10%, 03/04/03 ........................... 15,406
USD 15,000 Buckeye Technologies, Inc.
8.00%, 10/15/10 ........................... 13,969
USD 9,000 Building Materials Corp., Series C
8.00%, 10/15/07 ........................... 8,190
USD 9,000 Building Materials Corp., Series H
7.75%, 07/15/05 ........................... 8,235
USD 19,000 CMS Energy Corp.
8.13%, 05/15/02 ........................... 18,911
USD 19,000 CSC Holdings, Inc.
9.88%, 04/01/23 ........................... 19,950
USD 19,000 Calpine Corp.
7.88%, 04/01/08 ........................... 18,288
USD 19,000 Century Communications,
Senior Discount Note
0.00%, 03/15/03 ........................... 13,680
USD 40,000 Columbia, Republic of
9.75%, 04/23/09 ........................... 37,952
USD 290,000 Daimlerchrysler NA Holding
6.37%, 08/23/02 ........................... 290,700
USD 300,000 DG Funding Trust (B)
8.43%, 12/29/49 ........................... 299,718
USD 19,000 Echostar DBS Corp. (C)
9.25%, 02/01/06 ........................... 19,190
USD 12,000 Garden State Newspapers, Series B
8.75%, 10/01/09 ........................... 11,220
USD 720,000 General Motors Acceptance Corp. (E)
6.34%, 04/08/08 ........................... 718,263
USD 15,000 Hollinger International Publishing
8.63%, 03/15/05 ........................... 14,888
USD 150,000 Household Finance Corp (E)
6.51%, 08/06/02 ........................... 149,935
USD 19,000 Jones Intercable, Inc.
8.88%, 04/01/07 ........................... 19,487
USD 70,000 J.P. Morgan & Company (E)
3.36%, 02/15/12 ........................... 60,699
USD 19,000 K Mart Corp., Series 95K4
9.35%, 01/02/20 ........................... 19,639
USD 100,000 Kroger Co
7.06%, 10/01/10 ........................... 100,017
USD 573,000 Lehman Brothers (C) (E) (B)
5.82%, 11/30/06 ........................... 521,430
USD 19,000 McLoedUSA, Inc. (C)
8.13%, 02/15/09 ........................... 17,813
USD 370,000 Merrill Lynch & Co.
6.29%, 11/01/01 ........................... 369,516
USD 10,000 MGM Grand, Inc.
6.95%, 02/01/05 ........................... 9,302
USD 12,000 Navistar International
8.00%, 02/01/08 ........................... 11,460
USD 12,000 Polymer Group, Inc., Series B
9.00%, 07/01/07 ........................... 11,700
USD 816,000 Salomon Smith Barney Holdings
3.65%, 02/14/02 ........................... 798,252
USD 100,000 Sanwa Fin Aruba
8.35%, 07/15/09 ........................... 100,777
USD 12,000 Silgan Holdings, Inc.
9.00%, 06/01/09 ........................... 11,820
USD 30,000 Sprint Capital Corp.
5.88%, 05/01/04 ........................... 28,475
USD 500,000 Texas Utilities Co.
6.16%, 01/21/00 ........................... 498,392
USD 400,000 Texas Utilities FRN (B)
6.73%, 09/25/01 ........................... 399,661
USD 12,000 TV Guide, Inc. (C)
8.13%, 03/01/09 ........................... 12,030
USD 19,000 Unisys Corp.
12.00%, 04/15/03 .......................... 20,378
USD 7,000 World Color Press, Inc. (B)
8.38%, 11/15/08 ........................... 6,913
------------
TOTAL DOMESTIC CORPORATE BONDS AND NOTES .. 5,391,103
(Cost $5,370,365) ------------
SUPRANATIONAL AGENCIES - 10.92% (8.03%(1))
AUD 1,000,000 Asian Development Bank
5.38%, 09/15/03 ........................... 619,408
------------
European Investment Bank
GBP 200,000 7.00%, 12/08/03 ........................... 324,158
GBP 320,000 6.00%, 11/26/04 ........................... 501,053
------------
825,211
------------
Inter-American Development Bank
GBP 90,000 7.13%, 11/26/04 ........................... 147,492
------------
International Bank for Reconstruction
& Development
GBP 100,000 6.88%, 07/14/00, EMTN ..................... 161,780
NZD 300,000 7.00%, 09/18/00, EMTN ..................... 157,698
NZD 991,000 7.25%, 04/09/01 ........................... 520,878
GBP 100,000 7.00%, 06/07/02 ........................... 161,627
NZD 700,000 7.25%, 05/27/03, EMTN ..................... 363,117
------------
1,365,100
------------
International Credit Recovery
JPY 20,000,000 0.66%, 11/22/04 ........................... 195,752
JPY 10,000,000 0.76%, 11/22/04 ........................... 97,876
------------
293,628
------------
TOTAL SUPRANATIONAL AGENCIES .............. 3,250,839
(Cost $3,315,945) ------------
NUMBER OF EXPIRATION STRIKE VALUE
CONTRACTS DATE PRICE (NOTE 2)
--------- ---- ----- --------
OPTIONS PURCHASED - 0.66% (0.49%(1))
EUR 5,000 OTC ECAL DBR 4.75% ....... 1/18/00 $ 65.00 $ 93,009
GBP 2,400 OTC EPUT UKT 8% .......... 1/18/00 $170.00 104,450
------------
197,459
------------
TOTAL PURCHASED OPTIONS .. 197,459
(Cost $220,982) ------------
TOTAL INVESTMENTS - 156.96% (115.36%(1))......................... 46,710,483
------------
(Cost $46,675,795)
NET OTHER ASSETS AND LIABILITIES - (56.96%) ..................... (16,951,592)
------------
NET ASSETS - 100.00% ............................................ $ 29,758,891
============
(1) Amount represents a percentage of "Total Assets" which can be found in the
"Statement of Assets and Liabilities."
(A) Index linked (See Note 2)
(B) Security exempt from registration under 144A of the Securities
Act of 1933. This security may be resold, in transactions exempt from
registration, to qualified institutional buyers. On December 31, 1999 these
securities amounted to $3,055,350 or 10.27% of net assets.
(C) Private Placement
(D) Effective yield at time of purchase
(E) Variable rate security. Rate shown reflects rate currently in effect.
ABS Asset-backed security
CMO Collateralized Mortgage Obligation
SLMA Student Loan Marketing Association
MTN Medium-term Note
EMTN Euro Medium-term Note
AUD Australian Dollar
CAD Canadian Dollar
DKK Danish Kroner
EUR Euro
GBP British Pound
JPY Japanese Yen
NZD New Zealand Dollar
SEK Swedish Kroner
SGD Singapore Dollar
USD United States Dollar
<PAGE>
LONG FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING:
CONTRACTS TO RECEIVE UNREALIZED
--------------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- --------- --------------------- -------- ----------- --------------
02/10/00 AUD 131,000 87,069 86,055 $(1,014)
02/17/00 AUD 167,000 110,527 109,711 (816)
01/20/00 CAD 420,000 284,450 291,096 6,646
01/11/00 DKK 1,893,000 273,220 256,364 (16,856)
01/18/00 DKK 353,000 51,093 47,830 (3,263)
01/27/00 DKK 596,000 84,828 80,810 (4,018)
02/03/00 DKK 1,333,000 188,160 180,825 (7,335)
02/10/00 DKK 1,664,000 231,362 225,831 (5,531)
01/18/00 EUR 300,000 303,207 302,586 (621)
01/24/00 EUR 1,163,000 1,215,458 1,173,625 (41,833)
02/09/00 HKD 1,700,000 218,766 218,666 (100)
01/18/00 JPY 33,800,000 330,203 331,807 1,604
02/22/00 JPY 11,759,000 115,787 116,113 326
01/20/00 GBP 163,000 264,298 263,308 (990)
02/08/00 NKK 263,000 33,589 32,815 (774)
02/02/00 SGD 369,000 222,957 222,005 (952)
02/16/00 SGD 402,000 243,873 242,133 (1,740)
04/20/01 MXP 270,000 22,001 24,222 2,221
10/19/00 MXP 180,000 15,776 17,118 1,342
10/20/00 MXP 180,000 15,824 17,112 1,288
01/10/00 PLZ 180,000 44,301 43,393 (908)
01/18/00 PLZ 90,000 22,157 21,627 (530)
01/19/00 PLZ 180,000 44,527 43,237 (1,290)
01/26/00 PLZ 222,000 55,528 53,176 (2,352)
02/03/00 PLZ 110,000 27,479 26,278 (1,201)
02/04/00 PLZ 40,000 9,852 9,553 (299)
02/09/00 PLZ 90,000 21,868 21,465 (403)
02/10/00 PLZ 40,000 9,735 9,537 (198)
02/11/00 PLZ 100,000 24,304 23,837 (467)
02/14/00 PLZ 100,000 24,435 23,817 (618)
03/10/00 PLZ 130,000 30,541 30,750 209
03/16/00 PLZ 80,000 18,641 18,892 251
03/17/00 PLZ 80,000 18,501 18,887 386
03/21/00 PLZ 40,000 9,335 9,433 98
04/06/00 PLZ 30,000 7,003 7,043 40
04/19/00 PLZ 100,000 23,354 23,390 36
--------
$(79,662)
--------
<PAGE>
SHORT FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING:
CONTRACTS TO RECEIVE UNREALIZED
------------------------------------------------- APPRECIATION/
EXPIRATION VALUE IN IN EXCHANGE (DEPRECIATION)
DATE LOCAL CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- --------- --------------------- -------- ----------- --------------
01/25/00 AUD (309,000) (199,021) (202,944) $ (3,923)
02/03/00 AUD (565,000) (370,428) (371,127) (699)
02/24/00 AUD (580,000) (376,391) (381,059) (4,668)
03/08/00 AUD (169,000) (108,044) (111,047) (3,003)
01/19/00 CAD (185,000) (125,737) (128,217) (2,480)
01/11/00 DKK (1,362,000) (196,821) (184,452) 12,369
01/18/00 DKK (3,666,000) (525,045) (496,732) 28,313
01/27/00 DKK (1,358,000) (197,657) (184,127) 13,530
02/03/00 DKK (1,171,000) (166,695) (158,849) 7,846
02/10/00 DKK (924,000) (130,540) (125,401) 5,139
01/10/00 EUR (224,000) (233,185) (225,778) 7,407
01/18/00 EUR (10,000) (10,327) (10,086) 241
01/19/00 EUR (20,000) (20,758) (20,174) 584
01/24/00 EUR (1,456,000) (1,549,227) (1,469,302) 79,925
01/26/00 EUR (30,000) (31,939) (30,279) 1,660
01/31/00 EUR (881,000) (901,317) (889,566) 11,751
02/03/00 EUR (15,000) (16,235) (15,149) 1,086
02/04/00 EUR (6,000) (6,481) (6,060) 421
02/09/00 EUR (13,000) (14,210) (13,135) 1,075
02/10/00 EUR (6,000) (6,547) (6,063) 484
02/11/00 EUR (14,000) (15,175) (14,147) 1,028
02/14/00 EUR (14,000) (15,240) (14,150) 1,090
03/10/00 EUR (16,000) (17,195) (16,201) 994
03/16/00 EUR (10,000) (10,530) (10,130) 400
03/17/00 EUR (10,000) (10,482) (10,131) 351
03/21/00 EUR (5,000) (5,268) (5,067) 201
04/19/00 EUR (12,000) (13,220) (12,185) 1,035
02/09/00 HKD (1,700,000) (217,664) (218,666) (1,002)
02/17/00 HKD (2,100,000) (268,601) (270,112) (1,511)
02/18/00 HKD (4,200,000) (537,624) (540,223) (2,599)
02/23/00 HKD (2,500,000) (320,119) (321,558) (1,439)
09/18/00 HKD (4,200,000) (535,373) (538,539) (3,166)
09/27/00 HKD (2,105,000) (268,543) (269,857) (1,314)
10/26/00 HKD (2,780,000) (354,759) (356,164) (1,405)
01/18/00 GBP (112,000) (180,951) (180,922) 29
01/20/00 GBP (832,000) (1,390,118) (1,344,002) 46,116
01/18/00 JPY (41,034,000) (403,560) (402,821) 739
02/14/00 JPY (66,428,000) (638,671) (655,111) (16,440)
02/22/00 JPY (53,922,000) (520,661) (532,448) (11,787)
04/20/01 MXP (270,000) (23,547) (24,222) (675)
10/19/00 MXP (180,000) (16,686) (17,118) (432)
10/20/00 MXP (180,000) (16,678) (17,112) (434)
02/04/00 NZD (356,000) (183,525) (186,130) (2,605)
02/11/00 NZD (2,479,000) (1,269,496) (1,296,207) (26,711)
03/10/00 NZD (1,565,000) (806,883) (818,528) (11,645)
02/08/00 NKK (243,000) (31,505) (30,320) 1,185
02/15/00 SGD (824,000) (490,133) (495,752) (5,619)
02/09/00 SGD (269,000) (159,266) (161,933) (2,667)
--------
$118,775
--------
Net Unrealized Appreciation of Forward Foreign
Currency Contracts ........................................... $ 39,113
========
AUD Australian Dollar JPY Japanese Yen
CAD Canadian Dollar MXP Mexican Peso
DKK Danish Kroner NKK Norwegian Kroner
EUR Euro PLZ Poland Zloty
GBP British Pound NZD New Zealand Dollar
HKD Hong Kong Dollar SGD Singapore Dollar
See Notes to Financial Statements
<PAGE>
THE REAL ESTATE INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
REITS AND COMMON STOCKS - 89.49%
RESIDENTIAL - 22.22%
3,800 Apartment Investment & Management Co. ............ $ 151,287
4,400 Avalonbay Communities, Inc. ...................... 150,975
3,400 Chateau Communities, Inc. ........................ 88,187
3,000 Equity Residential Properties Trust .............. 128,062
5,900 Home Properties of New York, Inc. ................ 161,881
6,300 New Plan Excel Realty Trust ...................... 99,619
4,600 Pacific Gulf Properties, Inc. .................... 93,150
4,400 Sun Communities, Inc. ............................ 141,625
------------
1,014,786
------------
RETAIL - 18.27%
2,900 Chelsea GCA Realty, Inc. ......................... 86,275
4,000 General Growth Properties, Inc. .................. 112,000
5,000 JDN Realty Corp. ................................. 80,625
3,800 Kimco Realty Corp. ............................... 128,725
6,000 Simon Property Group, Inc. ....................... 137,625
4,700 Vornado Realty Trust ............................. 152,750
3,500 Weingarten Realty Investors ...................... 136,281
------------
834,281
------------
INDUSTRIAL - 17.63%
5,300 Alexandria Real Estate Equities, Inc. ............ 168,606
2,800 CenterPoint Properties Corp. ..................... 100,450
9,000 Duke-Weeks Realty Corp. .......................... 175,500
3,700 First Industrial Realty Trust, Inc. .............. 101,519
4,300 Liberty Property Trust ........................... 104,275
20,000 Mission West Properties, Inc. .................... 155,000
------------
805,350
------------
OFFICE - 15.25%
4,500 Boston Properties, Inc. .......................... 140,063
5,000 CarrAmerica Realty Corp. ......................... 105,625
7,000 Equity Office Properties Trust ................... 172,375
10,000 Great Lakes REIT, Inc. ........................... 143,750
3,700 Spieker Properties, Inc. ......................... 134,819
------------
696,632
------------
SPECIALTY - 10.46%
7,700 Capital Automotive ............................... 93,844
5,000 Entertainment Properties Trust ................... 65,938
4,000 Golf Trust of America, Inc. ...................... 67,750
5,600 Hospitality Properties Trust ..................... 106,750
6,300 PS Business Parks, Inc. .......................... 143,325
------------
477,607
------------
SELF STORAGE -3.20%
4,400 Public Storage, Inc. ............................. 99,825
2,000 Shurgard Storage Centers, Inc. ................... 46,375
------------
146,200
------------
HEALTH CARE - 2.46%
7,200 Healthcare Realty Trust, Inc. .................... 112,500
------------
TOTAL REITS AND COMMON STOCKS .................... 4,087,356
------------
(Cost $4,712,208)
TOTAL INVESTMENTS - 89.49% .................................... 4,087,356
(Cost $4,712,208) ------------
NET OTHER ASSETS AND LIABILITIES - 10.51%...................... 480,183
------------
NET ASSETS - 100.00% .......................................... $ 4,567,539
============
- -------------------
REIT Real Estate Investment Trust
<PAGE>
THE GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (NOTE 2)
- ------ --------
INVESTMENT COMPANIES - 100.04%
2,804,512 Forward Funds - The U.S. Equity Fund ............. $ 40,328,876
3,107,267 Forward Funds - The Global Bond Fund ............. 29,736,550
1,853,047 Forward Funds - The International Equity Fund .... 25,812,952
914,213 Forward Funds - The Small Capitalization
Equity Fund ...................................... 11,144,256
517,037 Forward Funds - The Real Estate Investment Fund .. 4,544,753
TOTAL INVESTMENT COMPANIES........................ 111,567,387
------------
(Cost $102,759,232)
TOTAL INVESTMENTS - 100.04%.................................... 111,567,387
------------
(Cost $102,759,232)
NET OTHER ASSETS AND LIABILITIES - (0.04%) .................... (43,580)
------------
NET ASSETS - 100.00%........................................... $111,523,807
============
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
SMALL
CAPITALIZATION
EQUITY FUND
----------------
ASSETS:
Investments
Investments at cost (Note 2) ....................... $ 36,858,245
Net unrealized appreciation/(depreciation) on
investments ...................................... 9,079,276
-------------
Total investments at value ....................... 45,937,521
Cash ............................................... 852,043
Foreign currency, at value (cost $591,417) ......... --
Receivable from investment adviser ................. --
Receivable for investments sold .................... 8,240
Receivable for shares sold ......................... 11,988
Interest and dividend receivable ................... 21,022
Organizational costs ............................... --
Prepaid expenses ................................... 1,113
Net unrealized appreciation on forward foreign
currency contracts ............................... --
Other assets ....................................... 6,185
-------------
Total Assets ..................................... 46,838,112
-------------
LIABILITIES:
Payable for investments purchased .................... --
Interest rate swap payable ........................... --
Payable for shares redeemed .......................... 1,509
Payable to custodian ................................. 5,654
Advisory fee payable ................................. 4,332
Payable to Administrator ............................. 7,674
Directors" fees and expenses payable (Note 3) ........ 21
Accrued expenses and other payables .................. 70,967
-------------
Total Liabilities ................................ 90,157
-------------
NET ASSETS ............................................. $ 46,747,955
=============
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE GLOBAL ASSET
INTERNATIONAL U.S. EQUITY GLOBAL INVESTMENT ALLOCATION
EQUITY FUND FUND BOND FUND FUND FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 25,307,197 $ 31,691,003 $ 46,675,795 $ 4,712,208 $ 102,759,232
530,243 8,352,352 34,688 (624,852) 8,808,155
------------- ------------- ------------- ------------- -------------
25,837,440 40,043,355 46,710,483 4,087,356 111,567,387
29,154 360,560 325,542 465,463 --
-- -- 595,800 -- --
7,469 -- 38,698 10,599 1,245
-- 47,474 1,240,342 -- --
-- -- -- -- --
73,578 35,035 443,532 34,503 --
-- -- -- -- 54,910
659 1,069 892 -- 2,877
-- -- 39,113 -- --
687 2,404 12 91 25,292
------------- ------------- ------------- ------------- -------------
25,948,987 40,489,897 49,394,414 4,598,012 111,651,711
------------- ------------- ------------- ------------- -------------
-- -- 19,458,946 -- --
-- -- 70,360 -- --
-- -- -- -- --
13,956 8,104 57,299 354 58,101
-- 2,063 -- -- --
4,150 6,556 5,039 559 11,386
3 16 129 58 553
43,946 41,454 43,750 29,502 57,864
------------- ------------- ------------- ------------- -------------
62,055 58,193 19,635,523 30,473 127,904
------------- ------------- ------------- ------------- -------------
$ 25,886,932 $ 40,431,704 $ 29,758,891 $ 4,567,539 $ 111,523,807
============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
SMALL
CAPITALIZATION
EQUITY FUND
----------------
NET ASSETS CONSIST OF:
Paid-in capital ...................................... $ 41,559,135
Undistributed/(distributions in excess of) net
investment income ...................................... --
Accumulated net realized gain/(loss) on investments
sold ................................................... (3,890,456)
Net unrealized appreciation/(depreciation) of
investments and assets and liabilities denominated
in foreign currency ................................ 9,079,276
-------------
TOTAL NET ASSETS ....................................... $ 46,747,955
=============
SHARES OF BENEFICIAL INTEREST OUTSTANDING .............. 3,833,680
=============
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) .................... $ 12.19
=============
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE GLOBAL ASSET
INTERNATIONAL U.S. EQUITY GLOBAL INVESTMENT ALLOCATION
EQUITY FUND FUND BOND FUND FUND FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 25,723,472 $ 32,098,174 $ 30,889,685 $ 5,177,610 $ 102,714,736
-- 1,072 (39,269) 14,623 916
(363,392) (19,894) (1,121,708) 158 --
526,852 8,352,352 30,183 (624,852) 8,808,155
------------- ------------- ------------- ------------- -------------
$ 25,886,932 $ 40,431,704 $ 29,758,891 $ 4,567,539 $ 111,523,807
============= ============= ============= ============ =============
1,857,854 2,812,270 3,108,386 519,666 10,259,722
============= ============= ============= ============ =============
$ 13.93 $ 14.38 $ 9.57 $ 8.79 $ 10.87
============= ============= ============= ============ =============
</TABLE>
See Notes to Financial Statements
<PAGE>
Statement of Operations
SMALL
CAPITALIZATION
EQUITY FUND
----------------
INVESTMENT INCOME:
Interest ............................................. $ 177,287
Dividends ............................................ 238,973
Less net foreign taxes withheld ...................... --
------------
Total investment income ............................ 416,260
------------
EXPENSES:
Investment advisory fee .............................. 480,061
Administration fee ................................... 91,440
Custodian fee ........................................ 47,440
Fund accounting fee .................................. 34,633
Legal and audit fee .................................. 46,024
Transfer agent fee ................................... 27,376
Directors" fees and expenses ......................... 3,071
Registration/filing fees ............................. 29,460
Shareholder reports fees ............................. 11,695
Distribution and service fees ........................ 113,038
Insurance expense .................................... 6,094
Amortization of organizational costs ................. 14,551
Miscellaneous ........................................ 7,339
------------
Total expenses before waiver ....................... 912,222
Less fees waived/reimbursed by investment advisor .... (249,280)
------------
Total expenses net of waiver ......................... 662,942
------------
NET INVESTMENT INCOME/(LOSS) ......................... (246,682)
------------
Net realized gain/(loss) on investments sold ......... (3,268,065)
Net realized gain/(loss) on forward foreign currency
transactions and foreign currency holdings ......... --
Net change in unrealized appreciation/(depreciation)
of assets and liabilities (excluding investments)
denominated in foreign currencies .................. --
Net change in unrealized appreciation/(depreciation)
of investments ..................................... 6,452,529
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND NET OTHER ASSETS 3,184,464
----------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ........................................... $ 2,937,782
============
- ----------------------
(1) The Fund commenced operations on May 10, 1999.
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE GLOBAL ASSET
INTERNATIONAL U.S. EQUITY GLOBAL INVESTMENT ALLOCATION
EQUITY FUND FUND BOND FUND FUND FUND
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
------------- ------------- ------------- ------------- -------------
$ 8,400 $ 9,842 $ 1,631,815 $ 15,756 $ 936
849,231 504,844 -- 208,120 1,948,114
(89,768) -- (24,229) -- --
------------- ------------- ------------- ------------- -------------
767,863 514,686 1,607,586 223,876 1,949,050
------------- ------------- ------------- ------------- -------------
224,592 232,611 181,581 30,087 51,988
47,246 74,436 60,527 4,512 142,715
80,129 47,587 245,105 2,292 32,630
60,455 41,052 61,451 23,612 2,074
44,828 47,290 51,185 15,279 82,336
20,151 26,110 21,239 9,017 51,760
1,254 2,606 2,344 275 8,309
13,657 13,747 14,301 22,400 13,844
5,597 10,279 7,426 1,969 35,580
26,386 27,030 26,749 10,528 34,387
4,179 6,620 5,623 -- 18,063
11,088 11,088 11,088 -- 22,293
2,156 2,207 2,212 1,086 9,768
------------- ------------- ------------- ------------- -------------
541,718 542,663 690,831 121,057 505,747
(163,751) (21,615) (267,141) (66,901) (5,839)
------------- ------------- ------------- ------------- -------------
377,967 521,048 423,690 54,156 499,908
------------- ------------- ------------- ------------- -------------
389,896 (6,362) 1,183,896 169,720 1,449,142
------------- ------------- ------------- ------------- -------------
255,677 1,122,327 (1,470,596) -- 333,682
(27,733) -- 770,680 -- --
(8,199) -- (175,565) -- --
4,978,998 5,647,372 (83,962) (624,852) 10,542,401
------------- ------------- ------------- ------------- -------------
5,198,743 6,769,699 (959,443) (624,852) 10,876,083
------------- ------------- ------------- ------------- -------------
$ 5,588,639 $ 6,763,337 $ 224,453 $ (455,132) $ 12,325,225
============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SMALL CAPITALIZATION
EQUITY FUND(1)
-----------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ....................... $ 31,837,506 $ --
------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income/(loss) .......................... (246,682) 7,584
Net realized gain/(loss) on investments sold .......... (3,268,065) (622,391)
Net realized gain/(loss) on forward foreign currency
contracts and foreign currency holdings ............. -- --
Net change in unrealized appreciation/(depreciation) of
investments and assets and liabilities in denominated
foreign currency (Note 8) ........................... 6,452,529 2,626,747
------------ ------------
Net increase/(decrease) in net assets resulting from
operations .......................................... 2,937,782 2,011,940
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ............................ (2,175) (7,584)
In excess of net investment income .................... (94) (15,269)
From net realized gains on investments ................ -- --
In excess of net realized gain on investments, forward
foreign currency contracts and foreign currency
holdings ............................................ -- --
Tax return of capital ................................. -- --
------------ ------------
Total dividends ....................................... (2,269) (22,853)
------------ ------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares ..................... 26,008,448 30,557,799
Issued in exchange for certain net assets of The Global
Asset Allocation Fund (Note 8) ...................... -- --
Issued to shareholders in reinvestment of distributions 25,061 --
Cost of shares repurchased ............................ (14,058,573) (709,380)
------------ ------------
Net increase/(decrease) from share transactions ....... 11,974,936 29,848,419
------------ ------------
Net increase/(decrease) in net assets ................. 14,910,449 31,837,506
------------ ------------
NET ASSETS AT END OF PERIOD ............................. $ 46,747,955 $ 31,837,506
============ ============
Undistributed/(distributions in excess of) net investment
income ................................................ $ -- $ 2,175
============ ============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold .................................................. 2,274,534 2,856,891
Issued in exchange for certain net assets of The Global
Asset Allocation Fund (Note 8) ...................... -- --
Issued to shareholders in reinvestment of distributions 2,188 --
Repurchased ........................................... (1,235,401) (64,532)
------------ ------------
Net increase/(decrease) in shares outstanding ......... 1,041,321 2,792,359
============ ============
- ----------------------
(1) The Fund commenced operations on October 1, 1998.
(2) The Fund commenced operations on April 1, 1998.
(3) The Fund commenced operations on May 10, 1999.
(A) Amount represents initial seed money. Initial seed shares issued were 10,000.
</TABLE>
<PAGE>
INTERNATIONAL U.S.
EQUITY FUND(1) EQUITY FUND(1)
- ---------------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
- ---------------------- ---------------- ---------------- ---------------
$ 23,169,618 $ -- $ 36,406,766 $ --
------------ ------------ ------------ ------------
389,896 48,557 (6,362) 21,146
255,677 (558,084) 1,122,327 (988,587)
(33,369) 1,072 -- --
4,976,435 3,210,719 5,647,372 7,526,957
------------ ------------ ------------ ------------
5,588,639 2,702,264 6,763,337 6,559,516
------------ ------------ ------------ ------------
(355,734) (48,557) (2,278) (21,146)
(7,124) (18,968) (243) (18,322)
-- -- (152,188) --
-- -- (1,885) --
-- -- -- --
------------ ------------ ------------ ------------
(362,858) (67,525) (156,594) (39,468)
------------ ------------ ------------ ------------
565,825 12,276 32,620 71,683
-- 20,522,689 -- 36,820,117
430,339 -- 196,063 --
(3,504,631) (86) (2,810,488) (7,005,082)
------------ ------------ ------------ ------------
(2,508,467) 20,534,879 (2,581,805) 29,886,718
------------ ------------ ------------ ------------
2,717,314 23,169,618 4,024,938 36,406,766
------------ ------------ ------------ ------------
$ 25,886,932 $ 23,169,618 $ 40,431,704 $ 36,406,766
============= ============ ============ ============
$ -- $ 2,176 $ 1,072 $ 2,278
============= ============ ============ ============
43,956 184 2,697 6,288
-- 2,052,269 -- 3,682,012
32,120 -- 14,187 --
(270,667) (8) (217,449) (675,465)
------------ ------------ ------------ ------------
(194,591) 2,052,445 (200,565) 3,012,835
============= ============ ============ ============
See Notes to Financial Statements
<PAGE>
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
GLOBAL BOND FUND(1)
----------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ....................... $ 29,744,226 $ --
------------ ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income/(loss) .......................... 1,183,896 337,679
Net realized gain/(loss) on investments sold and option
contracts written ................................... (1,470,596) 940,421
Net realized gain/(loss) on forward foreign currency
contracts and foreign currency ...................... 770,680 (1,607,126)
Net change in unrealized appreciation/(depreciation) of
investments, option contracts written and assets and
liabilities in denominated foreign currency (Note 7) .. (259,527) 161,835
------------ ------------
Net increase/(decrease) in net assets resulting from
operations .......................................... 224,453 (167,191)
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ............................ (1,183,896) --
In excess of net investment income .................... (235,013) --
From net realized gains on investments ................ -- --
In excess of net realized gain on investments, forward
foreign currency contracts and foreign currency ..... -- --
Tax return of capital ................................. (18,541) --
------------ ------------
Total dividends ....................................... (1,437,450) --
------------ ------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares ..................... 597,908 159,528
Issued in exchange for certain net assets of The Global
Asset Allocation Fund (Note 8) ...................... -- 32,251,889
Issued to shareholders in reinvestment of distributions 1,437,450 --
Cost of shares repurchased ............................ (807,696) (2,500,000)
------------ ------------
Net increase/(decrease) from share transactions ....... 1,227,662 29,911,417
------------ ------------
Net increase/(decrease) in net assets ................. 14,665 29,744,226
------------ ------------
NET ASSETS AT END OF PERIOD ............................. $ 29,758,891 $ 29,744,226
============ ============
Undistributed/(distributions in excess of) net investment
income ................................................ $ (39,269) $ (72,293)
============ ============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold .................................................. 59,467 11,724
Issued in exchange for certain net assets of The Global
Asset Allocation Fund (Note 8) ...................... -- 3,225,189
Issued to shareholders in reinvestment of distributions . 149,045 --
Repurchased ........................................... (81,154) (255,885)
------------ ------------
Net increase/(decrease) in shares outstanding ......... 127,358 2,981,028
============ ============
</TABLE>
<PAGE>
REAL ESTATE
INVESTMENT FUND(3) GLOBAL ASSET ALLOCATION FUND(2)
----------------- ----------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1998
------------ -------------- -------------
$ -- $ 98,387,850 $ 100,000(A)
------------ -------------- -------------
169,720 1,449,142 1,252,669
-- 333,682 80,493
-- -- (594,857)
(624,852) 10,542,401 (1,734,247)
------------ -------------- -------------
(455,132) 12,325,225 (895,942)
------------ -------------- -------------
(147,244) (1,448,226) (692,930)
-- -- --
-- (333,682) --
(7,695) -- --
-- -- (80,493)
------------ -------------- -------------
(154,939) (1,781,908) (773,423)
------------ -------------- -------------
-- -- (2,589)
5,022,671 53,914 100,257,316
-- -- --
154,939 2,557,875 --
-- (19,149) (197,512)
------------ -------------- -------------
5,177,610 2,592,640 100,059,804
------------ -------------- -------------
4,567,539 13,135,957 98,287,850
------------ -------------- -------------
$ 4,567,539 $ 111,523,807 $ 98,387,850
============ ============== =============
$ 14,623 $ 916 $ --
============ ============== =============
502,591 5,339 10,026,011
-- -- --
17,075 242,868 --
-- (1,844) (22,652)
------------ -------------- -------------
519,666 246,363 10,003,359
============ ============== =============
See Notes to Financial Statements
<PAGE>
Financial Highlights
For a Share outstanding throughout the periods presented.
<TABLE>
<CAPTION>
SMALL CAPITALIZATION EQUITY FUND(1)
----------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 11.40 $ 10.00
------------ ------------
Income (loss) from Investment Operations:
Net investment income/(loss) .......................... (0.07) 0.00+
Net realized and unrealized gain/(loss) on investments . 0.86 1.41
------------ ------------
Total from Investment Operations .................... 0.79 1.41
------------ ------------
Less Dividends:
From net investment income ............................ (0.00)+ (0.00)+
In excess of net investment income .................... (0.00)+ (0.01)
From capital gains .................................... -- --
Tax return of capital ................................. -- --
------------ ------------
Total Dividends ..................................... (0.00) (0.01)
------------ ------------
Net increase/(decrease) in net asset value .............. 0.79 1.40
------------ ------------
Net Asset Value, End of Period .......................... $ 12.19 $ 11.40
============ ============
Total Return (A) ........................................ 7.03% 13.99%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 46,748 $ 31,838
Ratios to average net assets:
Net investment income/(loss) including
reimbursement/waiver ................................ (0.54)% 0.21%*
Operating expenses including
reimbursement/waiver ................................ 1.45% 1.45%*
Operating expenses excluding
reimbursement/waiver ................................ 2.00% 3.19%*
Portfolio turnover rate ................................. 134% 23%
- ----------------------
* Annualized
+ Amount represents less than $0.01 per share
(1) The Fund commenced operations on October 1, 1998.
(2) The Fund commenced operations on April 1, 1998.
(3) The Fund commenced operations on May 10, 1999.
(A) Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions,
a complete redemption of the investment at the net asset value at the end of the period.
</TABLE>
<PAGE>
INTERNATIONAL
EQUITY FUND(1) U.S. EQUITY FUND(1)
- ----------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
- ------------ ------------ ------------ ------------
$ 11.29 $ 10.00 $ 12.08 $ 10.00
- ------------ ------------ ------------ ------------
0.21 0.02 0.00+ 0.01
2.63 1.30 2.36 2.08
- ------------ ------------ ------------ ------------
2.84 1.32 2.36 2.09
- ------------ ------------ ------------ ------------
(0.20) (0.02) (0.00) (0.01)
-- (0.01) -- 0.00+
-- -- (0.06) --
-- -- -- --
- ------------ ------------ ------------ ------------
(0.20) (0.03) (0.06) (0.01)
- ------------ ------------ ------------ ------------
2.64 1.29 2.30 2.08
- ------------ ------------ ------------ ------------
$ 13.93 $ 11.29 $ 14.38 $ 12.08
============ ============ ============ ============
25.15% 13.23% 19.50% 20.93%
$ 25,887 $ 23,170 $ 40,432 $ 36,407
1.65% 0.87%* (0.02)% 0.24%*
1.60% 1.60% 1.40% 1.40%*
2.30% 2.46% 1.46% 1.60%
31% 8% 30% 26%
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
GLOBAL BOND FUND(1)
---------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period .................... $ 9.98 $ 10.00
------------ ------------
Income/(loss) from Investment Operations:
Net investment income (A) ............................. 0.40 0.11
Net realized and unrealized gain/(loss) on investments (0.33) (0.13)
------------ ------------
Total from Investment Operations .................... 0.07 (0.02)
------------ ------------
Less Dividends:
From net investment income (A) ........................ (0.40) --
In excess of net investment income .................... (0.08) --
From capital gains .................................... -- --
Tax return of capital ................................. -- --
------------ ------------
Total Dividends ..................................... (0.48) --
------------ ------------
Net increase/(decrease) in net asset value .............. (0.41) (0.02)
------------ ------------
Net Asset Value, End of Period .......................... $ 9.57 $ 9.98
============ ============
Total Return (B) ........................................ 0.68% (0.20)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 29,759 $ 29,744
Ratios to average net assets:
Net investment income/(loss) including
reimbursement/waiver ................................ 3.91% 4.48%*
Operating expenses including
reimbursement/waiver ................................ 1.40% 1.40%*
Operating expenses excluding
reimbursement/waiver ................................ 2.28% 1.89%*
Portfolio turnover rate ................................. 666% 209%
</TABLE>
<PAGE>
REAL ESTATE GLOBAL ASSET
FUND(3) ALLOCATION FUND(2)
- ---------------------- ------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1998
- -------------------- ---------------- ----------------
$ 10.00 $ 9.83 $ 10.00
- ----------- ---------- ----------
0.41 0.14 0.13
(1.24) 1.07 (0.22)
- ----------- ---------- ----------
(0.83) 1.21 (0.09)
- ----------- ---------- ----------
(0.38) (0.14) (0.07)
-- -- --
-- (0.03) (0.01)
-- -- 0.00+
- ----------- ---------- ----------
(0.38) (0.17) (0.08)
- ----------- ---------- ----------
(1.21) 1.04 (0.17)
- ----------- ---------- ----------
$ 8.79 $ 10.87 $ 9.83
=========== ========== ==========
(9.10)% 12.38% (1.55)%
$ 4,568 $ 111,524 $ 98,388
5.64%* 1.40% 1.73%*
1.80%* 0.50% 1.02%*
4.02%* 0.49% 1.24%*
0% 6% 154%
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Forward Funds, Inc. (the "Company"), a Maryland Corporation, is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
diversified management investment company, except Asset Allocation. At December
31, 1999, the Company offered five managed and one fund-of-fund investment
portfolios. The accompanying financial statements and financial highlights are
those of The Small Capitalization Equity Fund ("Small Cap"), The International
Equity Fund ("International Equity"), The U.S. Equity Fund ("U.S. Equity"), The
Global Bond Fund ("Global Bond"), The Real Estate Investment Fund ("Real
Estate") and The Global Asset Allocation Fund ("Asset Allocation") (formerly The
Global Fund)(collectively the "Funds").
International Equity, U.S. Equity and Asset Allocation Funds seek capital
appreciation and income. Real Estate Fund seeks income with capital
appreciation, Global Bond Fund seeks total return consistent with preservation
of capital and Small Cap seeks total return. Small Cap Fund seeks its objective
by investing primarily in equity securities of companies having small market
capitalization that offer future growth. U.S. Equity Fund seeks its objective by
investing primarily in equity securities of companies located in the United
States. International Equity Fund seeks its objective by investing primarily in
equity securities of companies located outside the United States. Global Bond
Fund seeks its objective by investing primarily in debt securities of companies
and governments located throughout the world. Real Estate Fund seeks its
objective by investing in equity securities of real-estate focused companies
including REITs. Asset Allocation Fund seeks its objective by investing in a
portfolio of shares of the other Funds.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of the
significant accounting policies consistently followed by the Funds in the
preparation of its financial statements. These policies are in conformity with
generally accepted accounting principles.
PORTFOLIO VALUATION: Portfolio securities which are traded on a national
securities exchange or on NASDAQ are valued at the last sale price on the
securities exchange on which such securities are primarily traded, or in the
event that no sale has occurred, at the average of the bid and ask price. Other
securities traded on over-the-counter markets are valued at the average of the
last bid and ask price. Portfolio securities, which are primarily traded on
foreign securities exchanges are valued at the most recent closing values of
such securities on their respective exchanges. Investments in short-term
obligations that mature in 60 days or less are valued at amortized cost, which
approximates fair value. All other securities and other assets are appraised at
their fair value as determined in good faith by or under the direction of the
Board of Directors. The Funds generally value their holdings including fixed
income securities through the use of independent pricing agents, except for
securities for which a ready market does not exist, which are valued under the
direction of the Board of Directors or which are valued by the Sub-Advisors
using methodologies approved by the Board of Directors.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements,
it is the Fund's policy that its custodian take possession of the underlying
collateral securities, the fair value of which exceeds the principal amount of
the repurchase transaction, including accrued interest, at all times. If the
seller defaults, and the fair value of the collateral declines, realization of
the collateral by the Funds may be delayed or limited.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income,
adjusted for accretion of discounts and amortization of premiums, is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as the Funds
are informed of the ex-dividend date, if the ex-dividend date has passed.
OPTIONS: Premiums received by a Fund upon writing options are recorded as an
asset with a corresponding liability which is subsequently adjusted to the
current market value of the option with changes in the market value reflected as
unrealized gain/(loss) in the Statement of Operations. When an option expires,
is exercised, or is closed, a Fund realizes a gain or loss equal to the
difference between the premium received and the amount paid on effecting a
closing transaction, and the liability is eliminated. The Fund as writer of an
option bears the market risk of an unfavorable change in the price of the
security underlying the written option.
INTEREST-RATE SWAP CONTRACTS: The Funds may use interest-rate swap contracts to
help manage interest-rate risk. Interest-rate swaps represent an agreement
between counterparties to exchange cash flows based on the difference between
two interest rates, applied to a notional principal amount for a specified
period. The most common type of interest-rate swap involves the exchange of
fixed-rate cash flows for variable-rate cash flows. Interest-rate swaps do not
involve the exchange of principal between the parties. A Fund will not enter
into interest-rate swap contracts unless the unsecured commercial paper,
unsecured senior debt or the claims-paying ability of the counterparty is rated
either AA or A or better by Standard & Poor's Corporation, or Aa or P-1 or
better by Moody's Investors Service, Inc. (or is otherwise acceptable to either
agency) at the time of entering into such a transaction. If the counterparty to
the swap transaction defaults, the Fund's recourse will be limited to
contractual remedies pursuant to the agreements governing the transaction. There
is no assurance that interest-rate swap contract counterparties will be able to
meet their obligations under the swap contracts or that, in the event of
default, a Fund will succeed in pursuing contractual remedies. A Fund may thus
assume the risk that payments owed a Fund under a swap contract will be delayed,
or not received at all. Should interest rates move unexpectedly, a Fund may not
achieve the anticipated benefits of the interest-rate swaps, and may realize a
loss. A Fund recognizes gains and losses under interest-rate swap contracts as
realized gains or losses on investments upon sale or settlement of the swap
contracts.
As of December 31, 1999, the Global Bond Fund had one open interest-rate swap
contract. The interest rate swap contract is recorded at its fair value plus the
current net interest payable/receivable on the contract. The Global Bond Fund
has agreed to pay a fixed rate and receive a floating rate. The floating rate on
the contract resets quarterly and is the three-month London Inter-Bank Offered
Rate ("LIBOR"). No collateral is required under these contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Funds may enter into forward
foreign currency exchange contracts whereby a Fund agrees to buy or sell a
specific currency at a specified price at a future date in an attempt to hedge
against fluctuations in the value of the underlying currency of certain
portfolio instruments. Forward foreign currency exchange contracts may also be
used to enhance the Fund's returns. Forward foreign currency exchange contracts
are valued at the daily exchange rate of the underlying currency. Purchases and
sales of forward foreign currency exchange contracts having the same settlement
date and broker are offset and presented on a net basis in the "Statements of
Assets and Liabilities" herein. Gains or losses on the purchase or sale of
forward foreign currency exchange contracts having the same settlement date and
broker are recognized on the date of offset, otherwise gains or losses are
recognized on the settlement date. The use of forward contracts involves the
risk that anticipated currency movements will not be accurately predicted. A
forward contract would limit the risk of loss due to a decline in the value of a
particular currency; however, it also would limit any potential gain that might
result should the value of the currency increase instead of decrease. These
contracts may involve market risk in excess of the unrealized gain or loss
reflected in the Statement of Assets and Liabilities. In addition, a Fund could
be exposed to risks if counterparties of the contracts are unable to meet the
terms of their contracts. The counterparty risk exposure is, therefore, closely
monitored and contracts are only executed with high credit quality financial
institutions.
INDEXED SECURITIES: The Global Bond Fund may invest in indexed securities whose
values are linked to changes in interest rates, indices, or other underlying
instruments. The Global Bond Fund uses these securities to increase or decrease
its exposure to different underlying instruments and to gain exposure to markets
that might be difficult to invest in through conventional securities. Indexed
securities are shown at market value. Indexed securities may be more volatile
than their underlying instruments, but any loss is limited to the amount of the
original investment and there is a limit to the potential appreciation of the
investment.
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are maintained
in U.S. dollars. Investment valuations and other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars based upon
exchange rates prevailing on the respective dates of such transactions. That
portion of realized and unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are declared and
paid annually for the Small Cap, International Equity, U.S. Equity, and Asset
Allocation Funds, quarterly for the Real Estate Fund and for the Global Bond
Fund. Net realized capital gains, if any, are distributed at least annually.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations, which may differ from generally accepted accounting
principles. Therefore, the source of the Funds' distributions may be shown in
the accompanying financial statements as either from or in excess of net
investment income or net realized gain, or from paid-in-capital, depending upon
the type of book/tax differences that may exist. The primary book to tax
differences at December 31, 1999 are due to amortization of certain capitalized
costs and wash sales.
FEDERAL INCOME TAXES: The company treats each Fund as a separate entity for
federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Fund will not be subject to federal
income taxes to the extent that it distributes substantially all of its taxable
or tax-exempt income, if any, for its tax year ending December 31. In addition,
by distributing in each calendar year substantially all of its net investment
income, capital gains and certain other amounts, if any, each Fund will not be
subject to a federal excise tax. Therefore, no provision is made by the Funds
for federal income or excise taxes. Withholding taxes on foreign dividends have
been paid or provided for in accordance with the applicable country's tax rules
and rates.
ORGANIZATION COSTS: The Funds bear all costs in connection with their
organization, including the fees and expenses of registering and qualifying
their initial shares for distribution under federal and state securities laws.
Such costs for the Asset Allocation Fund are being amortized using the
straight-line method over a period of five years beginning with the commencement
of its operations. The organization costs for the Small Cap, International
Equity, U.S. Equity, Global Bond and Real Estate Funds have been expensed as
incurred.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS: The Funds may purchase securities
on a when-issued or delayed-delivery basis. A Fund will engage in when-issued
and delayed-delivery transactions only for the purpose of acquiring portfolio
securities consistent with its investment objective and policies, not for
investment leverage. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than that available in the market when delivery takes place. A Fund will not pay
for such securities or start earning interest on them until they are received.
When a Fund agrees to purchase securities on a when-issued basis, the custodian
will set aside cash or liquid securities equal to the amount of the commitment
in a segregated account. Securities purchased on a when-issued basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. In when-issued and delayed-delivery
transactions, a Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause the Fund to miss an advantageous price or
yield.
3. INVESTMENT ADVISORY, ADMINISTRATION AND OTHER FEES The Company has entered
into an investment advisory agreement with Webster Investment Management
Company, LLC ("Webster," or the "Advisor") pursuant to which Webster provides
investment advisory services to the Funds and is entitled to receive a fee
calculated daily and payable monthly at the following annual rates based on each
Fund's average daily net assets: Asset Allocation, 0.05%; Small Cap, 1.05%;
International Equity, 0.95% for the first $25 million, 0.80% for the next $25
million, 0.75% for the next $50 million, 0.65% for the next $150 million, 0.60%
for the next $250 million, and 0.55% on net assets over $500 million; U.S.
Equity, 0.625% for the first $100 million, 0.55% for the next $400 million, and
0.50% on net assets over $500 million; Global Bond, 0.60% for the first $200
million and 0.55% on net assets over $200 million; Real Estate Fund, 1.00% for
the first $100 million, 0.85% for the next $400 million, and 0.70% on net assets
over $500 million.
Webster has entered into investment sub-advisory agreements with Barclays Global
Fund Advisors ("BGI") for the U.S. Equity Fund; Templeton Investment Counsel,
Inc. ("Templeton") for the International Equity Fund; Hoover Capital Management,
LLC ("Hoover") for the Small Cap Fund; Pacific Investment Management Company
("PIMCO") for the Global Bond Fund; and Uniplan, Inc. ("Uniplan") for the Real
Estate Fund (each, a "Sub-Advisor"). Pursuant to these agreements, the
Sub-Advisers provide investment sub-advisory services to the Funds and are
entitled to receive a fee from Webster calculated daily and payable monthly at
the following annual rates based on each Fund's average daily net assets as
follows: Small Cap, 0.80% for the first $500 million and 0.70% on net assets
over $500 million; International Equity, 0.70% for the first $25 million, 0.55%
for the next $25 million, 0.50% for the next $50 million, 0.40% for the next
$150 million, 0.35% for the next $250 million, and 0.30% on net assets over $500
million; U.S. Equity, 0.375% for the first $100 million, 0.30% for the next $400
million, and 0.25% on net assets over $500 million; Global Bond, 0.35% for the
first $200 million and 0.30% on net assets over $200 million; Real Estate Fund,
0.60% for the first $100 million, 0.55% on net assets over $100 million and up
to $500 million, and 0.45% on net assets over $500 million. Asset Allocation
Fund does not have a sub-advisor.
Prior to October 1, 1998, BGI, Templeton and PIMCO each served as investment
advisors to Asset Allocation (then known as "The Global Fund"). BGI advised the
Fund's investments in U.S. equities; Templeton advised the Fund's investments in
foreign equities; and PIMCO advised the Fund's investments in fixed income and
other debt securities. Each sub-advisor received fees calculated daily and
payable monthly based on The Global Fund's net assets over which they had
investment management responsibility, at the same rates as they currently
receive in their capacity as sub-advisors of International Equity, U.S. Equity
and Global Bond, respectively.
Also prior to October 1, 1998, Sutton Place Management Co., Inc. ("Sutton")
served as Business Manager to the Global Fund and provided certain general
administrative functions now performed by Webster. Pursuant to an agreement with
the Company, Sutton received business management fees, calculated daily and
payable monthly, at the annual rate of 0.30% of the Fund's daily net assets.
The Fund's have a Distribution Plan pursuant to which up to 0.25% of the Fund's
average daily net assets may be used to pay shareholder servicing and
distribution fees. The Distribution Plan in part replaced a Shareholder
Servicing Plan pursuant to which up to 0.35% of the Fund's average net assets
could be used to pay shareholder servicing fees. The Shareholder Servicing Plan
continued at an annual rate of up to 0.10% of the Fund's average net assets. The
expenses of the Distribution and Shareholder Servicing Plan are reflected as
distribution and service fees in the statement of operations.
The Company has entered into an administration agreement with PFPC Inc. (the
"Administrator," an indirect wholly-owned subsidiary of PNC Bank Corp.) The
Administrator also serves as the Company's transfer agent and dividend paying
agent. Prior to December 1, 1999, the services described above were provided by
First Data Investor Services Group, Inc., a wholly-owned subsidiary of First
Data Corporation.
Provident Distributors, Inc. (the "Distributor"), an affiliate of the
administrator, serves as the Funds' distributor. The Distributor acts as an
agent for the Funds and the distributor of their shares. Prior to December 1,
1999, First Data Distributors, Inc. acted as the Distributor of the Funds'
shares.
4. WAIVER OF FEES
The Adviser (and prior to October 1, 1998 the Business Manager) has agreed to
voluntarily waive a portion of its fees and/or reimburse certain expenses. These
voluntary waivers and/or reimbursements will continue until at least February
25, 2000. As a result of such waivers, the aggregate net expenses (as a
percentage of net assets) for the period ended December 31, 1999 have been
limited to 1.60%, 1.40%, 1.40%, 1.80%, 0.50% and 1.45%, for the International
Equity, U.S. Equity, Global Bond, Real Estate, Asset Allocation and Small Cap
Funds, respectively. For the period ended December 31, 1999, the fee waivers
and/or reimbursements were as follows:
FEES FEES
WAIVED BY REIMBURSED
FUND ADVISOR BY ADVISOR TOTAL
- ------------ ------------- -------------- ---
Small Cap $114,377 $134,903 $249,280
International Equity 59,076 104,675 163,751
U.S. Equity 21,615 -- 21,615
Global Bond 75,655 191,486 267,141
Real Estate 7,520 59,381 66,901
Asset Allocation 5,302 537 5,839
5. SHARES OF BENEFICIAL INTEREST
The Company's Articles of Incorporation authorize the Directors to issue an
unlimited number of shares of beneficial interest. All the Funds except for the
Small Cap Fund currently offer a single class of shares. The Small Cap Fund
offers both an Investor and Institutional class of shares. There were no
Institutional shares outstanding during the period ended December 31, 1999. Each
share represents an equal proportionate interest in the Fund with other shares
of the Fund, and each is entitled to such dividends and distributions out of the
income earned on the assets belonging to the Fund as are declared at the
discretion of the Directors.
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding U.S.
Government and short-term investments, for the period ended December 31, 1999
were as follows:
FUND PURCHASES SALES
- ------------ ---------------- ----------------
Small Cap $ 70,561,464 $ 55,147,063
International Equity 7,137,946 10,194,994
U.S. Equity 11,075,235 13,986,012
Global Bond 222,278,992 212,676,391
Real Estate 4,712,208 0
Asset Allocation 7,216,713 5,904,560
The cost of purchases and proceeds from sales of long-term U.S. Government
securities for the period ended December 31, 1999 were as follows:
FUND PURCHASES SALES
- ------------ ---------------- ----------------
Global Bond $ 70,190,893 $ 79,792,769
At December 31, 1999 the aggregate cost of investments, gross unrealized
appreciation and depreciation and net unrealized appreciation/(depreciation) for
federal tax purposes was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------ --- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Small Cap $ 36,953,635 $10,440,203 $(1,360,927) $9,079,276
International Equity 25,322,930 4,721,317 (4,191,074) 530,243
U.S. Equity 31,699,484 11,651,368 (3,299,016) 8,352,352
Global Bond 46,749,888 650,969 (616,281) (34,688)
Real Estate 4,712,208 17,943 (642,795) (624,852)
Asset Allocation 102,759,232 10,633,448 (1,825,293) 8,808,155
</TABLE>
At December 31, 1999 the following Funds had capital loss carryforwards:
FUND AMOUNT EXPIRATION
- ------------ ----- -------
Small Cap $ 402,268 2006
2,643,446 2007
International Equity 304,243 2006
43,416 2007
Global Bond 913,478 2007
7. FOREIGN SECURITIES
Each Fund (except the Asset Allocation Fund) may directly purchase securities of
foreign issuers. Investing in securities of foreign issuers involves special
risks not typically associated with investing in securities of U.S. issuers. The
risks include possible revaluation of currencies, less complete financial
information about companies and possible future adverse political and economic
developments. Moreover, securities of many foreign issuers and their markets may
be less liquid and their prices more volatile than those of securities of
comparable U.S. issuers.
On January 1, 1999, the European Monetary Union ("EMU") introduced a new single
currency, the Euro, which will replace the national currencies of the
participating member countries. Until 2002, the national currencies will
continue to exist, but exchange rates will be tied to the Euro. The introduction
of the Euro affects all stages of the investment process, including trading,
foreign exchange and accounting. Because this change to a single currency is
new, the introduction of the Euro may result in market volatility and may affect
the business or financial conditions of European issuers or of a portfolio
investing in European issuers. In addition, while the conversion will eliminate
currency risk among the participating nations, currency risk between the Euro
and the U.S. dollar remains a factor.
8. REORGANIZATION
Effective October 1, 1998, Asset Allocation (formerly known as The Global Fund)
reorganized as a fund-of-funds, and three new funds, International Equity, U.S.
Equity and Global Bond (the "New Funds"), were established by the Company with
the assets of The Global Fund.
This tax free reorganization was accomplished with each New Fund acquiring the
net assets of Asset Allocation which corresponded to its investment strategy in
exchange for shares of the New Funds. The number and value of shares issued by
the New Funds are presented in the "Statement of Changes in Net Assets" herein.
Net assets and unrealized appreciation/(depreciation) as of the date of
recognization were as follows:
NEW FUND
NET ASSETS NET ASSETS ACQUIRED
OF FUND OF FUND UNREALIZED
PRIOR TO AFTER APPRECIATION/
FUND CONVERSION CONVERSION (DEPRECIATION)
- ------------ ---------------- ------------------- ---------------
International Equity $ -- $20,522,689 $(7,660,302)
U.S. Equity -- 36,820,117 (4,821,977)
Global Bond -- 32,251,889 127,875
Asset Allocation 89,198,478 89,198,478 --
9. RISK FACTORS OF THE ASSET ALLOCATION FUND
Investing in the Small Cap, International Equity, U.S. Equity, Global Bond and
Real Estate Funds (the "Underlying Funds") through the Asset Allocation Fund
involves certain additional expenses that would not be present in a direct
investment in the Underlying Funds.
The officers and Directors of the Company also serve as officers and Directors
of both the Underlying Funds and the Asset Allocation Fund. Conflicts may arise
as the officers and directors seek to fulfill their fiduciary responsibilities
to both the Asset Allocation Fund and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by
the Asset Allocation Fund may experience relatively large investments or
redemptions due to reallocations or rebalancings by the Asset Allocation Fund as
recommended by Webster. These transactions will affect the Underlying Funds,
since the Underlying Funds that experience redemptions as a result of the
reallocations or rebalancings may have to sell portfolio securities and the
Underlying Funds that receive additional cash will have to invest such cash.
While it is impossible to predict the overall impact of these transactions over
time, there could be adverse effects on portfolio management to the extent that
the Underlying Funds may be required to sell securities or invest cash at times
when they would not otherwise do so. These transactions could also have tax
consequences if sales of securities resulted in gains and could also increase
transaction costs. Webster, representing the interests of the Underlying Funds,
is committed to minimizing the impact of the Asset Allocation Fund's
transactions on the Underlying Funds to the extent it is consistent with
pursuing the investment objectives of the Asset Allocation Fund. Webster may,
nevertheless, face conflicts in fulfilling its responsibilities to both the
Asset Allocation Fund and the Underlying Funds.
10. RISK FACTORS OF THE REAL ESTATE FUND
Because the Real Estate Fund may invest a substantial portion of its assets in
real estate investment trusts (REITs), the Real Estate Fund may be subject to
certain risks associated with direct investments in REITs. REITs may be affected
by changes in the value of their underlying properties and by defaults by
borrowers or tenants. REITs depend generally on their ability to generate cash
flow to make distributions to shareowners, and certain REITs have
self-liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income under the Internal Revenue Code or its failure to
maintain exemption from registration under the Investment Company Act of 1940.
11. SUBSEQUENT EVENTS
The Board of Directors of the Company has voted to liquidate the Global Bond
Fund and the Global Asset Allocation Fund. The Global Bond Fund and the Global
Asset Allocation Fund were liquidated on February 8, 2000 and February 10, 2000,
respectively, and shareholders received liquidating distributions. On February
8, 2000, $23,550,003 in cash was distributed to shareholders from the Global
Bond Fund upon dissolution. On February 10, 2000 the Asset Allocation Fund was
liquidated and an in-kind distribution of Asset Allocation's investments in the
Underlying Funds was made to shareholders on a pro-rata basis.
In addition, on January 27, 2000, the Board of Directors of the Company approved
to change the sub-advisors for the U.S. Equity and the International Equity
Funds to Garzarelli Investment Management, LLC and Hansberger Global Investors,
Inc., respectively, subject to shareholder approval at the February 29, 2000
special shareholder meeting.
12. SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
A special meeting of shareholders of the Small Cap Fund was held on July 27,
1999 to vote on the proposals listed below. The results were as follows:
PROPOSAL 1: Approval of a 12b-1 Distribution Plan for the Investor class shares
of the Fund.
VOTES FOR VOTES AGAINST
-------------- -----------------
1,958,141 311,957
PROPOSAL 2: Approval of an arrangement for the Small Cap Fund's investment
adviser to hire or terminate sub-advisers for the Fund without shareholder
approval.
VOTES FOR VOTES AGAINST
-------------- -----------------
1,892,396 310,714
Proposals 1 and 2 were approved by shareholders of the Small Cap Fund.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Forward Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of Forward Funds Inc. (comprising The Small
Capitalization Fund, The International Equity Fund, The U.S. Equity Fund, The
Global Bond Fund, The Real Estate Investment Fund and The Global Asset
Allocation Fund) (the Funds), as of December 31, 1999, and the related
statements of operations, changes in net assets and financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Funds' 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 audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 by correspondence with the custodian.
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
Funds as of December 31, 1999, the results of their operations and changes in
their net assets and the financial highlights for each of the periods presented
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
February 18, 2000
