<PAGE> 1
[undiscovered
managers(TM) LOGO]
UNDISCOVERED MANAGERS FUNDS
ANNUAL REPORT
Undiscovered Managers
Behavioral Growth Fund
Undiscovered Managers
Behavioral Value Fund
Undiscovered Managers
Behavioral Long/Short Fund
Undiscovered Managers
REIT Fund
Undiscovered Managers
Special Small Cap Fund
Undiscovered Managers
Small Cap Value Fund
Undiscovered Managers
Hidden Value Fund
Undiscovered Managers
All Cap Value Fund
Undiscovered Managers
Core Equity Fund
UM International Small Cap Equity Fund
UM International Equity Fund
2000
<PAGE> 2
[undiscovered
managers(TM) LOGO]
INVESTMENT ADVISER
Undiscovered Managers, LLC
700 North Pearl Street, Suite 1700
Dallas, Texas 75201
DISTRIBUTOR
Provident Distributors, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
TRANSFER AGENT
PFPC Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
CUSTODIANS
The Bank of New York
48 Wall Street
New York, New York 10286
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
The report and the financial statements contained herein are submitted for the
general information of the share holders of Undiscovered Managers Funds. The
report is not authorized for distribution to prospective investors in
Undiscovered Managers Funds unless preceded or accompanied by the current
prospectus.
<PAGE> 3
[undiscovered
managers(TM) LOGO]
Enclosed please find a copy of our third annual report, which details a period
of significant growth in our funds, our company and our commitment to maintain
the manner in which we manage our clients' money.
The market continued its general upward trend during the past 12 months, with
all major domestic benchmarks reporting positive performance. But significant
upheaval reigned from March to May, providing a brief opportunity to see how our
funds reacted during a down market.
The discipline of our sub-advisors was rewarded. Eight of our 11 funds
outperformed their respective benchmarks during those two months, helping them
continue their strong performance overall. As of August 31st, 2000, seven of our
funds had outperformed their respective benchmarks since their inception.
As a result of the sub-advisors' discipline, the continued support of the
shareholders and the efforts of our employees, total assets in the funds
increased from $189 million to $458 million during the fiscal year. Our seven
original funds will receive Morningstar ratings in early 2001, and we are also
taking steps to add several new funds to our family in the future.
This report includes financial statements for the funds during the past year and
includes a list of the securities owned in each of the Funds' portfolios as of
August 31, 2000. You will also find commentaries on the funds by each of their
respective sub-advisors, as well as an opinion from the funds' auditors,
Deloitte & Touche LLP.
Thank you for your continued interest and participation. If you have any
questions about this report or about the Funds, please do not hesitate to call
us at (888)-242-3514.
Sincerely,
/s/ MARK P. HURLEY
Mark P. Hurley
President and Chief Executive Officer
Undiscovered Managers, LLC
[PICTURE]
<PAGE> 4
BEHAVIORAL GROWTH FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's other classes would have been lower than the
Fund's Institutional Class performance shown since the Investor Class and the C
Class have higher expenses than the Institutional Class and the C Class is
subject to sales charges.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
BEHAVIORAL GROWTH RUSSELL 2500
FUND GROWTH INDEX
------------------ ------------
ONE YEAR
<S> <C> <C>
Institutional Class 42.19% 56.13%
Investor Class 41.76% --
C Class 40.77% --
With 2.00% maximum sales load(1) 37.95% --
SINCE INCEPTION
Institutional Class (Inception date: 12/31/97) 39.57% 24.78%
Investor Class (Inception date: 7/31/98) 41.08% 31.90%
C Class (Inception date: 6/21/99) 43.67% 44.83%
With 2.00% maximum sales load(1) 40.80% --
</TABLE>
(1) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
-------------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 2500 Growth Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
2
<PAGE> 5
BEHAVIORAL GROWTH FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The Behavioral Growth Fund underperformed during the fiscal year due to lack of
larger bio-technology/genomic names in the portfolio, which are driving the
mid-cap indexes relative to small-cap indexes. These stocks, for the most part,
do not have earnings and therefore are not included in our universe of potential
securities.
Growth stocks did suffer a massive, but temporary correction in March and April
that impacted many of the funds and benchmarks. Our outperformance in this time
period relative to the Russell 2500 Growth Index is due to our stock selection
process that does not emphasize the typical growth fund stocks. The Fund
continues to outperform its benchmark by a wide margin since its inception on
December 31, 1997.
PURCHASES
Aurora Biosciences Corporation (ABSC) - This provider of customized drug
discovery services was bought after a 265% earnings surprise in the company's
fiscal year second quarter. The company is realizing growth opportunities from
collaborations with a number of major drug companies.
Oakley Inc. (OO) - The trendy producer of sunglasses and shoes was purchased
after a second quarter surprise was reported. The company is seeing increasing
demand for sunglasses and the company's shoe business is now profitable and
winning placements in major shoe retailers.
Wireless Facilities Inc. (WFII) - This company provides outsourced services
related to planning, design, and deployment of wireless networks. The company
reported a large surprise in its fiscal year second quarter as demand for
wireless services continues to grow.
SALES
AutoDesk Inc. (ADSK) - This position was sold after the company gave lower
guidance on sales and earnings.
BJ Services Company (BJS) - This stock was sold after the company reported
earnings in line with expectations.
Jones Pharma (JMED) - This stock was sold when it was announced that it was
going to be acquired by King Pharmaceuticals.
3
<PAGE> 6
BEHAVIORAL VALUE FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
BEHAVIORAL VALUE RUSSELL 2000
FUND VALUE INDEX
---------------- ------------
<S> <C> <C>
ONE YEAR
Institutional Class 35.99% 13.70%
With 1.00% redemption fee (1) 34.63% --
SINCE INCEPTION
Institutional Class (Inception date: 12/28/98) 34.57% 9.52%
With 1.00% redemption fee (1) 33.22% --
</TABLE>
(1) Includes 1.00% redemption fee for shares sold in less than one year.
-----------------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 2000 Value Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
4
<PAGE> 7
BEHAVIORAL VALUE FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The Behavioral Value Fund significantly outperformed its benchmark index of
small-cap value stocks, the Russell 2000 Value Index, in the past fiscal year,
returning 35.99% while the index returned 13.70%. In general, the Fund has had
tendencies to approximately keep pace with the Index in strong periods of
performance for the overall value sector, as was the case during the last fiscal
quarter, and has had tendencies to have stronger relative performance in weaker
periods, as was the case in 1999 and the first six months of 2000. This strong
performance was due in part to a focus on value stocks that are not simply
selling at discounts to the market and their sectors with respect to valuation,
but which also have catalysts in their businesses which we believe are likely to
lead to significant improvement in operating fundamentals and stock prices.
PURCHASES
Epicor Software Corporation (EPIC) - was bought because of its successful
efforts to reduce operating costs and restructure its operations to reach cash
flow breakeven and weather the ongoing slump in the Enterprise Resource Planning
("ERP") software sector. Epicor has been able at the same time to significantly
upgrade the quality of its offerings to include internet and E-business
capabilities and new modules to fill out its product suite. In addition, the
company is improving its cash flow through improved collection efforts and
receivables management. We expect the company should have tremendous operating
leverage when the ERP sector does begin to recover.
Griffon Corporation (GFF) - this diversified manufacturer was bought because of
the combination of cost reduction efforts in its core garage door business and
new contract wins in its plastic films segment, as well as the potential for its
telecommunications segment to begin to grow outside of its legacy defense sector
presence. The company has the benefit of riding the coattails of Proctor &
Gamble as its largest customer in the plastic films business expands in Europe,
at the same time that Griffon pushes to overcome the slowing in garage doors
that has accompanied a slowdown in new housing starts here in the United States.
SALES
Hibernia Corporation (HIB) - was sold as a result of poor quality asset
management in its banking operations. Large corporate loans made by its
syndicated loan segment have continued to lead to deterioration of its balance
sheet and impact the outlook for future earnings. In addition, the company
failed to follow through on its pledges for stock repurchases or to seek a
merger partner to increase shareholder value.
5
<PAGE> 8
BEHAVIORAL LONG/SHORT FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
BEHAVIORAL SALOMON BROTHERS
LONG/SHORT FUND 3-MONTH TREASURY BILL INDEX
--------------- ----------------------------
<S> <C> <C>
ONE YEAR
Institutional Class (2.05)% 5.22%
With 1.00% redemption fee(1) (3.03)% --
SINCE INCEPTION
Institutional Class (Inception date: 12/28/98) (0.29)% 4.95%
With 1.00% redemption fee(1) (1.29)% --
</TABLE>
(1) Includes 1.00% redemption fee for shares sold in less than one year.
----------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Salomon Brothers 3-Month Treasury Bill Index is an unmanaged index. An
individual cannot invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
6
<PAGE> 9
BEHAVIORAL LONG/SHORT FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
Market conditions during the past quarter and much of the past fiscal year have
been difficult for the Behavioral Long/Short Fund. The primary reason for this
is that large-cap growth stocks have strongly outperformed large-cap value
stocks. As an example, the Russell 1000 Growth Index outperformed the Russell
1000 Value Index by more than 10% during the quarter ended August 31, 2000 and
by more than 29% during the year.
Because the Fund has a slight bias toward value, its performance was negative
during the quarter ended August 31, 2000 and the year. The Fund did post
positive returns in March and April, during the market correction, which can be
accounted for by the Fund's short positions.
During the year, we transitioned the Fund to more of a risk controlled approach.
This approach involves selecting long/short pairs of stocks from within the same
industry and with similar market caps.
PURCHASE AND SALE PAIRS INITIATED
Beckman Coulter Inc. (BEC) and Cytyc Corporation (CYTC) - One trade we initiated
during the quarter August 31, 2000 was to sell short Cytyc Corporation, and buy
long Beckman Coulter. Cytyc manufactures and sells a pap-smear system, and was
subject to high expectations, high valuation, insider selling and growing
competition. In contrast Beckman manufactures a variety of laboratory products,
and was given low expectations and valuations, despite small positive earnings
surprises. To date, the Fund has made positive returns from both sides of this
trade.
Sears Roebuck and Co. (S) and JC Penney Company Inc. (JCP) - We initiated a pair
consisting of a long position in Sears and a short position in JC Penney. Sears
pre-announced better than expected positive results driven by fewer markdowns at
department stores as well as improving credit card business. In contrast, JC
Penney had recent negative estimate revisions, and was also trading at a premium
to Sears.
PURCHASE AND SALE PAIRS TERMINATED
BMC Software Inc. (BMCS) and Computer Associates International Inc. (CA) - One
trade we terminated during the year was short BMCS and long Computer Associates.
This was done after Computer Associates preannounced that it would miss earnings
expectations. Subsequently, we have shorted Computer Associates and bought
Rational Software, which positively surprised.
7
<PAGE> 10
REIT FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's other classes would have been lower than the
Fund's Institutional Class performance shown since the Investor Class and the C
Class have higher expenses than the Institutional Class and the C Class is
subject to sales charges.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
MORGAN STANLEY
REIT FUND REIT INDEX
--------- --------------
ONE YEAR
<S> <C> <C>
Institutional Class 17.18% 12.71%
Investor Class 16.77% --
C Class 16.06% --
With 2.00% maximum sales load(1) 13.74% --
SINCE INCEPTION
Institutional Class (Inception date: 1/1/98) 2.78% (2.30)%
Investor Class (Inception date: 3/24/99) 19.29% 14.75%
C Class (Inception date: 8/3/99) 14.64% 11.16%
With 2.00% maximum sales load(1) 12.35% --
</TABLE>
(1) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
----------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Morgan Stanley REIT Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
8
<PAGE> 11
REIT FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
Despite recent signs of slowing in response to actions of the Federal Reserve
Board, the U.S. economy has continued to demonstrate surprising strength this
year. This has helped to absorb substantial supplies of new product in virtually
all real estate sectors, and has even created space shortages in selected
markets. As a result, occupancy rates remain high and same-property cash flow
growth has been easily exceeding inflation. While we can expect to see slightly
higher vacancy rates in the months ahead as the economy and employment growth
slow down a bit, we believe that this will be largely offset by a lower volume
of deliveries of new space, as speculative developments remain modest; we
believe that this will have a moderating impact on the slowing of REITs' cash
flow growth which should stabilize at a 7% -8% growth rate.
Relatively large positions in Spieker Properties and Boston Properties helped
the Fund to generate good relative and absolute returns. The REIT stock rally,
which began in March, can be attributed to the ridiculously low pricing of the
stocks at the end of 1999, as well as the desire of many investors to escape
from the volatility and high valuations of many tech stocks and to focus on
companies such as REITs which offer stable cash flows and high dividend yields.
Healthy real estate markets and strong cash flow growth have also encouraged new
investments in this sector. It's also been helpful that the REITs seem to be in
no hurry to raise additional equity at presently-prevailing prices. REIT stock
prices are still, on average, selling at discounts to their estimated net asset
values.
Undiscovered Managers REIT Fund continues to focus on those REITs where
management understands how to create shareholder value, where asset quality is
high and in which the balance sheet remains strong. We continue to believe that
focusing on the strongest and best-managed companies, when available at
attractive prices, will provide the best long-term total returns to shareholders
on a risk-adjusted basis.
PURCHASES
CenterPoint Properties Corporation (CNT) - During the last fiscal quarter the
Fund bought a 2% position in CenterPoint Properties, which is the largest owner
of industrial properties in the Greater Chicago area. CenterPoint has developed
a very impressive track record of creating value for shareholders by virtue of
its extensive knowledge of its local markets and its ability and willingness to
harvest profits on properties which have reached their potential and using the
proceeds for more lucrative opportunities. The most recent project -- the Joliet
Arsenal redevelopment -- is likely to create $7-8 per share in value for its
shareholders.
SALES
On the sell side, we eliminated our position in Prentiss Properties due to its
announced merger with Mack-Cali Realty. Prentiss agreed to be acquired for stock
in Mack-Cali, but without offering its shareholders any downside protection; the
proposed deal has not been well-received and the shares of both companies were
hammered. We have since re-taken a small position in Prentiss, as we believe
that the merger will be rejected - which should cause the stock to move close to
its estimated asset value of $29.
Nationwide Health Properties (NHP) - The Fund eliminated its position in
Nationwide Health Properties during the quarter ended August 31, 2000. While we
believe that it's likely that the worst has been seen in the healthcare sector
following the bankruptcy of four of the six largest operators of skilled nursing
homes, we also believe that cash flow growth for the owners of these facilities
will be difficult. This is due to their very high cost of equity capital, their
existing debt leverage and the fact that very few of the leases provide for any
meaningful rental growth. The shares of these companies, including Nationwide,
are essentially bond proxies and, while we have the utmost faith in the
integrity and capability of Nationwide's seasoned management team, we have
reluctantly concluded that the yield alone would be insufficient to generate the
kinds of total returns which are available elsewhere in the REIT sector on a
similar-risk basis.
9
<PAGE> 12
SPECIAL SMALL CAP FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
SPECIAL SMALL RUSSELL 2000
CAP FUND INDEX
------------- ------------
<S> <C> <C>
ONE YEAR
Institutional Class 9.82% 27.15%
SINCE INCEPTION
Institutional Class (Inception date: 12/30/97) 4.59% 10.31%
</TABLE>
----------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 2000 Index is an unmanaged index. An individual cannot invest
directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
10
<PAGE> 13
SPECIAL SMALL CAP FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The Special Small Cap Fund finished the fiscal year with a solid quarter,
gaining almost 5%. Growth stocks led the Russell 2000 Index to a gain of 13.25%
in the August 31st quarter, not quite offsetting the 17.33% loss in the previous
fiscal quarter. In contrast, our performance was a consistent positive 4% to 5%
in each period. The Fund returned 9.82% for the twelve month period ended August
31, 2000 versus the Fund's benchmark, the Russell 2000 Index which returned
27.15%. Our portfolio seems to have very low correlation with overall stock
market moves, which should work in our favor when the current excesses are
eventually wrung out of the technology sector. We are continuing to find some
good values, although the opportunities are not as numerous as they were in the
March/April timeframe.
PURCHASES
Interstate Bakeries Corporation (IBC) - This company has spent the past year
working through labor difficulties and an extended start-up of a new facility.
These problems have been mostly resolved, and Interstate is forecasting improved
margins in fiscal year 2001 (May). Noted brand names are Hostess, Dolly Madison,
and Wonder Bread. Interstate recently repurchased a large block of its stock
from Ralston Purina, which had been overhanging the market.
Wisconsin Central Transportation Corporation (WCLX) - This regional railroad
operator has made several substantial overseas transportation investments.
Initial efforts to improve railroad efficiency in Great Britain have been much
more difficult than anticipated, contributing to a 75% stock price decline.
Additionally, service disruptions resulting from CSX-Conrail combination have
hurt domestic earnings. Management is aggressively repurchasing stock at current
prices (approximately 9 times the $1.40 in earnings expected in 2001).
SALES
Justin Industries (JSTN) - Justin was acquired by Berkshire Hathaway at $22 per
share.
Varian, Inc. (VARI) - This spin-off from Varian Associates performed
spectacularly well since its debut near $10 in early 1999. Our sell discipline
was triggered when insiders sold this year as the stock approached $40.
Varian Medical Systems (VAR) - This stock was also a strong performer after its
spin-off from Varian Associates. Varian Medical's recent acquisition of IMPAC
Medical Systems for stock triggered our sell discipline.
11
<PAGE> 14
SMALL CAP VALUE FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's other classes would have been lower than the
Fund's Institutional Class performance shown since the Investor Class and the C
Class have higher expenses than the Institutional Class and the C Class is
subject to sales charges.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
SMALL CAP RUSSELL 2000 RUSSELL 2000
VALUE FUND INDEX VALUE INDEX
---------- ------------ ------------
<S> <C> <C> <C>
ONE YEAR
Institutional Class 12.08% 27.15% 13.70%
Investor Class 11.65% -- --
C Class 10.91% -- --
With 2.00% maximum sales load(1) 8.69% -- --
SINCE INCEPTION
Institutional Class (Inception date: 12/30/97) 7.76% 10.31% 2.58%
Investor Class (Inception date: 7/31/98) 5.93% 12.82% 3.39%
C Class (Inception date: 6/21/99) 6.75% 18.48% 7.42%
With 2.00% maximum sales load(1) 4.62% -- --
</TABLE>
(1) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
----------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 2000 Index and the Russell 2000 Value Index are unmanaged
indices. An individual cannot invest directly in any index. The Fund changed its
benchmark from the Russell 2000 Index to the Russell 2000 Value Index because it
better represents the Fund's investment holdings.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
12
<PAGE> 15
SMALL CAP VALUE FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The fiscal year ended with a combination of higher interest rates and higher
energy prices that worked together to dampen economic growth. This had a
negative effect on certain sectors of the economy, particularly capital spending
and consumer goods and services. However, our asset class (Small Cap Value) is
overweighed in energy and financial issues that benefited from this environment
and so the sector was very strong. Going forward we think conditions are
improving for both the broad market and our asset class.
During the fiscal year we underperformed our benchmark. As we mentioned above,
financial and energy sectors were strong while consumer sectors were weak.
Unfortunately, we were overweighed in consumer sectors and underweighed in
financials and this produced the underperformance.
PURCHASES
Rayovac Corporation (ROV) - During the quarter ended August 31, 2000, we
purchased a position in the nation's third largest battery company. Nationwide
the demand for batteries is skyrocketing as hand held electronic devices become
more and more prevalent. Rayovac is number one in discount batteries, which are
growing faster than full priced batteries. Despite this improvement in demand
for its product, Rayovac sells at a very low P/E multiple.
Houghton Mifflin Company (HTM) - We purchased shares in this elementary and high
school textbook publisher since we believe textbook purchases in some key states
will generate strong earnings acceleration over the next few years.
Diebold Inc. (DBD) - This is the nation's largest Automatic Teller Machine
("ATM") manufacturer. As banks prepare to compete in the fast growing e-commerce
business, they must upgrade the functionality of their ATM machines. This
creates a terrific growth opportunity for Diebold. As well, Latin America and
Europe are growth markets for ATMs and Diebold has been expanding rapidly in
these areas. Despite these opportunities, Diebold sells at only 11 times this
year's earnings, which is less than half the average market P/E multiple.
SALES
Pacific Gulf Properties Inc. (PAG) - This company was sold when the assets were
acquired by a larger organization.
13
<PAGE> 16
HIDDEN VALUE FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's Investor Class would have been lower than the
Fund's Institutional Class performance shown since the Investor Class has higher
expenses than the Institutional Class.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
HIDDEN VALUE RUSSELL MIDCAP
FUND VALUE INDEX
------------ --------------
<S> <C> <C>
ONE YEAR
Institutional Class 5.99% 6.26%
Investor Class 5.71% --
SINCE INCEPTION
Institutional Class (Inception date: 12/31/97) 2.81% 5.03%
Investor Class (Inception date: 7/31/98) 5.07% 4.56%
</TABLE>
----------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell Midcap Value Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
14
<PAGE> 17
HIDDEN VALUE FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The end of the fiscal year witnessed a combination of higher interest rates and
higher energy prices that worked together to dampen economic growth. This had a
negative effect on certain sectors of the economy, particularly capital spending
and consumer goods and services. However, our asset class (Midcap Value) is
overweighed in energy and financial issues that benefited from this environment
and so the sector was very strong. Going forward we think conditions are
improving for both the broad market and our asset class.
During the fiscal year we slightly underperformed our benchmark, the Russell
Midcap Value Index. As we mentioned above, financial and energy sectors were
strong while consumer sectors were weak. Unfortunately, we were overweighed in
consumer sectors and underweighed in financials and this produced the
underperformance.
PURCHASES
Outback Steakhouse Inc. (OSI) - We purchased stock in the nation's premier
upper/mid-priced restaurant chain. Despite it's large size, Outback has defied
the skeptics and continued to grow at a better than 15% annual rate. Also,
unlike most restaurant chains, Outback is a generator of significant free cash.
Despite these positive factors, we were able to purchase Outback at less than
half the market P/E.
Hasbro Inc. (HAS) - We purchased shares in Hasbro, the largest toy company in
the U.S. Hasbro's earnings are meeting expectations although the stock had moved
down in sympathy with Mattel, which is trying to cope with a poor acquisition
and senior management turmoil. We also believe Hasbro's Internet initiative will
enhance its position on a global basis.
Compuware Corporation (CPWR) - Compuware is a fast growing company in the system
software and data processing business. This company has grown at an annual rate
in excess of 30%. Yet we were able to purchase this stock at less than 15 times
earnings. Most technology companies have P/Es that are two to three times their
growth rates, yet Compuware has a P/E of less than half its growth rate.
SALES
Young & Rubicam (YNR) - We sold this position because the company was acquired
by a large organization.
Sovereign Bancorp Incorporated (SVRN) - This company was sold because it had
become a high risk holding due to its aggressive debt-laden expansion into New
England.
15
<PAGE> 18
ALL CAP VALUE FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's C Class would have been lower than the Fund's
Institutional Class performance shown since the C Class has higher expenses than
the Institutional Class and is subject to sales charges.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
ALL CAP RUSSELL 1000
VALUE FUND VALUE INDEX
---------- ------------
<S> <C> <C>
ONE YEAR
Institutional Class 2.79% 4.15%
C Class 1.72% --
With 2.00% maximum sales load(1) (0.31)% --
SINCE INCEPTION
Institutional Class (Inception date: 12/31/97) 9.50% 9.47%
C Class (Inception date: 5/27/99) (0.05)% (0.51)%
With 2.00% maximum sales load(1) (2.05)% --
</TABLE>
(1) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
--------------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 1000 Value Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
16
<PAGE> 19
ALL CAP VALUE FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
Most investors spent the summer months speculating whether or not the Federal
Reserve Board would raise interest rates one more time at their August meeting
prior to election season. This uncertainty kept pressure on all types of
interest-rate sensitive stocks - financials, consumer cyclicals, late-cycle
capital goods. In other words, value stocks.
In spite of the fact that the S&P 500 and the NASDAQ indexes continued to
outperform most value approaches, the market feels as if it is undergoing the
volatility one might expect in a sea-change shift in sentiment. In this case, a
shift away from the Nifty-Fifty mentality that has held sway for so long and
towards a more realistic earnings, cash flow, and valuation-based mentality.
Early September returns confirm this hunch. Although we do not expect investing
to be easy over the next twelve months, we expect it to be more sensible, which
makes our job easier!
The All Cap Value Fund slightly underperformed the Russell 1000 Value Index
during this fiscal period. The majority of the underperformance came during the
first fiscal quarter, when the Fund's technology stocks performed poorly. During
the final three quarters, the Fund performed virtually in line with the index.
PURCHASES
Banc One Corporation (ONE) - Jamie Dimon, once Sandy Weill's protege at
Citigroup, has assumed the CEO position at troubled Banc One. Following a decade
of acquisitions, Banc One had lost its executional focus and its competitive
edge. While the stock rebounded upon the announcement of Dimon's appointment, it
subsequently drifted lower while the new CEO spent his first six months
assessing the damage and not communicating much to the Street. Our purchase was
driven by the combination of low-risk valuation levels and our positive reaction
to the early changes Dimon has made to the management structure (particularly
the Board composition), his grasp of the executional details, and his own
personal investment of $5 million into the common stock.
The Boeing Company (BA) - Having been out of Boeing since the first quarter of
1998, we recently bought it back again for several reasons. First and foremost,
we felt that Debbie Hopkins, in her brief stay as Chief Financial Officer, had a
lasting impact on Boeing's business model. Having historically been a
sales-force driven company, with the stock price reacting primarily to backlog,
Ms. Hopkins introduced the concept of profitability and efficiency to a company
that clearly needed to change its focus. Second, the stock has languished for
almost three years, and is ripe for renewed interest. At current levels, we
believe the stock has 25-50% upside, which could come quickly should there be
some good news in terms of aircraft sales, but more likely will come slowly as
Boeing proves its profitability is more predictable over the next 18 to 24
months.
17
<PAGE> 20
CORE EQUITY FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's other classes would have been lower than the
Fund's Institutional Class performance shown since the Investor Class and the C
Class have higher expenses than the Institutional Class and the C Class is
subject to sales charges.
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
CORE EQUITY RUSSELL 1000
FUND INDEX
----------- ------------
<S> <C> <C>
ONE YEAR
Institutional Class (2.67)% 20.14%
Investor Class (3.02)% --
C Class (3.58)% --
With 2.00% maximum sales load(1) (5.51)% --
SINCE INCEPTION
Institutional Class (Inception date: 12/31/97) 7.10% 20.31%
Investor Class (Inception date: 7/31/98) 0.59% 17.43%
C Class (Inception date: 8/31/99) (3.58)% 19.77%
With 2.00% maximum sales load(1) (5.51)% --
</TABLE>
(1) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
---------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The Russell 1000 Index is an unmanaged index. An individual cannot invest
directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
18
<PAGE> 21
CORE EQUITY FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
The confluence of three events seems to be slowing the worldwide economy: (1)
significantly higher oil prices, (2) 130 central banks tightenings over the past
15 months, and (3) a slowing in the technology sector (witness Intel's revenue
shortfall announcement). The above, combined with the near 30% drop in the Euro
vis-a-vis the U.S. dollar, will undoubtedly cause some near-term pressure on
earnings. If this proves to be accurate, the Fed's next move may be to ease as
opposed to its current "tightening bias" and a neutral Fed is a positive for the
stock market. Sector rotation and market broadening has begun and we expect
value stocks to be beneficiaries of this change. Historically, on average, the
market has been 11% and 25% higher 6 and 12 months, respectively, after a peak
in rates (the yield on the 10-year note peaked on 1/20/00 at 6.67%).
The Core Equity Fund continues to lag the popular averages as it remains
underweighed in technology stocks and the capital good's sector has shown poor
company returns (specifically Avery-Dennison, and Ingersoll Rand).
PURCHASES
Alcoa Inc. (AA) - This stock is a play on the synchronized global economic
recovery, as well as a play on the tight aluminum market. The company has
demonstrated continuous cost cutting and well-chosen joint ventures and
acquisitions.
Safeway Inc. (SWY) - This company has excellent growth prospects as one of the
best consolidators in the supermarket industry. At a 70% relative P/E multiple
with a 140% relative return on equity, the company should do well in the next 12
months.
SALES
General Electric Company (GE) - This long-standing favorite was sold as it
reached our price target.
Chubb Corporation (CB) - While still finding value in the interest-rate
sensitive sector of the market, the Fund's only two complete position sales were
in this sector. We eliminated both Chubb and US Bancorp due to company specific
issues. We continue to be attracted to this market sector as we believe recently
enacted legislation on the overhaul of the Glass-Steagall Act will be positive
and lead to further industry consolidation.
19
<PAGE> 22
INTERNATIONAL SMALL CAP EQUITY FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
* The value of the above index is based on price only values (no reinvested
dividends are included).
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
INTERNATIONAL SMALL MSCI EAFE SMALL
CAP EQUITY FUND CAP INDEX
------------------- ---------------
<S> <C> <C>
ONE YEAR
Institutional Class 56.70% 3.24%
With 1.00% redemption fee(1) 55.13% --
SINCE INCEPTION
Institutional Class (Inception date: 12/30/98) 46.76% 13.38%
With 1.00% redemption fee(1) 45.29% --
</TABLE>
(1) Includes 1.00% redemption fee for shares sold in less than one year.
--------------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The MSCI EAFE Small Cap Index is an unmanaged index. An individual cannot
invest directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
20
<PAGE> 23
INTERNATIONAL SMALL CAP EQUITY FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
FUND PERFORMANCE
Positive performance contributors in the Fund have primarily been driven by
investments in companies that are focused on enabling technologies and services.
Electronic entertainment developers generally had a positive quarter. The Fund
has experienced value added from holdings in game developers: UK's Eidos PLC,
France's Infogrames Entertainment, and Japan's Konami. The fund's strongest
positive return contributor has been UK's electronic semiconductor wafer
supplier, IQE PLC. IQE PLC share prices rose sharply due to a dramatic increase
in earnings year-over-year. Another major performance contributor has been
Sweden's advanced Internet and wireless consulting service and solution company,
AU-System AB.
Investments are focused on companies able to offer world class products or
services on a global scale. We believe the Fund is well positioned to benefit
from the long-term thematic implications of structural change in Europe and the
Far East.
EUROPE
As expected, the European Central Bank raised the floor rate for two-week loans
to commercial banks by 25 basis points to 4.50% on August 30th. This is the
sixth time in 10 months that interest rates were raised in an attempt to slow
inflation. ECB officials have said they are concerned the Euro's slide is
fanning inflation by raising the cost of imports. Raising rates, however, could
backfire by choking economic growth. Such concerns pushed the Euro close to a
record low on August 29th against the USD, when it sank to 0.8872 USD, not far
from its record low of 0.8850 USD set May 19th, 2000.
We still expect the ECB to hike this rate by an additional 25-50 basis point
over the remainder of the next quarters to bring monetary policy fully into
neutral, or perhaps a bit above neutral, as the inflation ceiling of 2.0% has
been reached and since the ECB is a "young" central bank. Thereafter we expect
the ECB to be on hold, partly due to our view that structural change in Euroland
is inevitable, and partly due to uncertainty about whether a possible hard
landing in Europe is becoming more of a threat in Europe if the Euro continues
to weaken and oil prices remain high.
PURCHASES
Knowledge Management (United Kingdom) - We have added Knowledge Management to
the Fund's holdings based on the theme Mastering Information. Knowledge
Management develops and sells software tools that enable organizations to build
and maintain sophisticated internal data management systems. The software is
based on artificial intelligence and natural language processing technologies.
The software enables companies to improve the use of the knowledge stored within
their enterprises in customer support and many other business applications. This
helps reduce operating costs, improve customer relationship management and
competitiveness, and increase revenues. It's key product, "Descartes", provides
customers with an extensive knowledge database, which utilizes advanced neural
network and natural language processing technologies.
21
<PAGE> 24
INTERNATIONAL EQUITY FUND [undiscovered
managers(TM) LOGO]
[CHART]
Past performance is not predictive of future performance.
The performance of the Fund's C Class would have been lower than the Fund's
Institutional Class performance shown since the C Class has higher expenses than
the Institutional Class and is subject to sales charges.
* The value of the above index is based on price only values (no reinvested
dividends are included).
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 8/31/00
<TABLE>
<CAPTION>
INTERNATIONAL MSCI EAFE
EQUITY FUND INDEX
------------- ---------
<S> <C> <C>
ONE YEAR
Institutional Class 28.26% 8.24%
With 1.00% redemption fee(1) 26.98% --
SINCE INCEPTION
Institutional Class (Inception date: 12/30/98) 24.94% 8.82%
With 1.00% redemption fee(1) 23.69% --
C Class (Inception date: 9/27/99) 26.40% 7.86%
With 2.00% maximum sales load(2) 23.87% --
</TABLE>
(1) Includes 1.00% redemption fee for shares sold in less than one year.
(2) Includes 1.00% front-end load and 1.00% contingent deferred sales charge for
shares sold in less than 18 months.
------------------------------
1. Investment return and principal value of mutual funds will vary with market
conditions, so that shares, when redeemed, may be worth more or less than their
original cost. Return figures reflect fee waivers. If fee waivers were not in
effect, the Fund's returns would have been lower.
2. The MSCI EAFE Index is an unmanaged index. An individual cannot invest
directly in any index.
The illustration above compares a $10,000 investment made in Institutional Class
shares of a Fund on the date of the commencement of investment operations of
such Fund to a $10,000 investment made in a benchmark securities index on such
date. All index and Fund performance assumes reinvestment of distributions.
Total return information provided for the period beginning with the commencement
of investment operations of a Fund through 8/31/00. Past performance cannot
predict future results. Performance results reflect any voluntary limitations
and waivers of Fund expenses by Undiscovered Managers, LLC, the Fund's
Investment Advisor. Absent these expense limitations and waivers, performance
results would have been lower. Each index's performance has not been adjusted
for ongoing management, distribution and operating expenses and sales charges
applicable to mutual fund investments. It is not possible to invest directly in
an index.
22
<PAGE> 25
INTERNATIONAL EQUITY FUND [undiscovered
managers(TM) LOGO]
PORTFOLIO COMMENTARY
FUND PERFORMANCE
Positive performance contributors in the Fund have primarily been driven by
investments in companies that are focused on healthcare and enabling
technologies and services. Strong positive contributions to the Fund's
performance have come from France's mobile phone manufacturer, Alcatel,
Germany's software developer, SAP AG, and Denmark's pharmaceutical supplier,
Novo Nordisk AS. Novo Nordisk has benefited from increasing demand in the
diabetes care market. As the strongest net contributor to the quarter's positive
performance in the Fund, SAP AG has benefited from the Business to Business
theme by successfully branding and securing demand for its business software.
Investments are focused on companies able to offer world class products or
services on a global scale. We believe the fund is well positioned to benefit
from the long-term hematic implications of structural change in Europe and the
Far East.
JAPAN
Recent economic data suggests that the Japanese recession is ending and the
economy has entered into a recovery phase, although consumers are still showing
signs of restraint. Despite massive political resistance, the Bank of Japan has
abandoned its 18-month-old zero rate policy. The overnight call rate target was
raised to 25 basis points on August 11th, and the actual market rates increased
from 0.03% to 0.25%. The rate hike is the first in ten years and symbolizes
that, in the eyes of Bank of Japan, we have seen the end of Japan's most
prolonged recession in our time. The economic effects of a rate hike of this
size will normally be marginal and mostly psychological. Still, we believe that
the rate hike may cause the fragile recovery to come to a halt as the number of
bankruptcies and thus unemployment may begin to pick up again.
PURCHASES
Buhrmann NV (Netherlands) - Buhrmann NV distributes graphic paper and graphic
systems to the graphics, office products and services, and information systems
and services industries. During the past two quarters, Buhrmann has been making
acquisitions worldwide and expanding its already large operations throughout
Europe, North America, and Australia.
SALES
Benesse Corporation (Japan) - this is an education company in Japan that
provides instruction to children with an emphasis on language. The company has
been priced as a growth firm. We see signals that the company is no longer being
viewed within the growth category and may be revalued by the market.
23
<PAGE> 26
BEHAVIORAL GROWTH FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
COMMON STOCKS--97.17%
ADVERTISING--2.56%
105,600 TMP Worldwide, Inc.* ........................ $ 7,306,200
------------
BUILDING & CONSTRUCTION--1.65%
101,800 American Standard Companies, Inc.* .......... 4,714,612
------------
BUSINESS SERVICES--2.87%
249,800 Robert Half International, Inc.* ............ 7,946,762
16,100 Viant Corp.* ................................ 223,387
------------
8,170,149
------------
COMMERCIAL SERVICES--2.05%
77,800 Wireless Facilities, Inc.* .................. 5,835,000
------------
COMPUTER HARDWARE & SOFTWARE--15.85%
44,100 Alteon Websystems, Inc.* .................... 6,526,800
114,600 Aspen Technology, Inc.* ..................... 5,264,437
230,400 Edwards (J.D.) & Co.* ....................... 5,716,800
191,800 FileNET Corp.* .............................. 3,692,150
16,400 Hutchinson Technology, Inc.* ................ 389,500
173,800 Hyperion Solutions Corp.* ................... 5,496,425
169,500 Silicon Storage Technology, Inc.* ........... 5,561,719
59,500 SonicWALL, Inc.* ............................ 4,529,437
291,200 Sybase, Inc.* ............................... 7,989,800
------------
45,167,068
------------
CONSUMER PRODUCTS--2.31%
142,200 Church & Dwight Co., Inc. ................... 2,550,712
237,300 Oakley, Inc.* ............................... 4,019,269
------------
6,569,981
------------
ELECTRONICS--15.53%
113,900 Arrow Electronics, Inc.* .................... 4,143,113
239,100 AVX Corp. ................................... 7,158,056
153,000 Semtech Corp.* .............................. 18,120,938
106,100 TriQuint Semiconductor, Inc.* ............... 5,868,656
183,900 Varian, Inc.* ............................... 8,965,125
------------
44,255,888
------------
ENTERTAINMENT--1.45%
149,000 Westwood One, Inc.* ......................... 4,144,063
------------
HEALTH CARE SERVICES--4.91%
83,200 Quest Diagnostics, Inc.* .................... 10,296,000
71,400 Trigon Healthcare, Inc.* .................... 3,686,025
------------
13,982,025
------------
HOTELS & CASINOS--1.54%
127,608 MGM Mirage, Inc. ............................ 4,386,525
------------
MEDICAL PRODUCTS--7.07%
91,700 Allergan, Inc. .............................. 6,705,563
111,700 Universal Health Services, Inc., Class B .... 7,902,775
120,800 Varian Medical Systems, Inc.* ............... 5,549,250
------------
20,157,588
------------
METALS--2.23%
83,800 Precision Castparts Corp. ................... 6,368,800
------------
OIL, GAS & PETROLEUM--2.09%
75,000 Smith International, Inc.* .................. 5,962,500
------------
PUBLISHING--1.99%
91,500 McGraw-Hill Companies, Inc. ................. 5,667,281
------------
RESEARCH & DEVELOPMENT--1.32%
55,000 Aurora Biosciences Corp.* ................... 3,760,625
------------
RETAIL--4.07%
151,100 Michaels Stores, Inc.* ...................... 5,288,500
110,700 Too, Inc.* .................................. 2,725,988
96,900 Zale Corp.* ................................. 3,579,244
------------
11,593,732
------------
SEMICONDUCTORS--12.85%
131,300 Electroglas, Inc.* .......................... 2,946,044
237,300 ESS Technology, Inc.* ....................... 4,108,256
94,500 Fairchild Semiconductor Corp., Class A* ..... 3,756,375
72,100 GlobeSpan, Inc.* ............................ 8,683,544
263,400 ON Semiconductor Corp.* ..................... 4,477,800
111,600 QLogic Corp.* ............................... 12,666,600
------------
36,638,619
------------
TELECOMMUNICATIONS--14.83%
170,600 Andrew Corp.* ............................... 5,054,025
126,900 Anixter International, Inc.* ............... 4,441,500
65,200 Carrier Access Corp.* ....................... 3,121,450
72,400 Copper Mountain Networks, Inc.* ............. 4,339,475
86,900 Ditech Communications Corp.* ............... 5,127,100
154,100 Scientific-Atlanta, Inc. .................... 12,010,169
85,200 Turnstone Systems, Inc.* .................... 5,016,150
197,200 Westell Technologies, Inc., Class A* ........ 3,155,200
------------
42,265,069
------------
TOTAL COMMON STOCKS
(Cost $218,685,986)................................ 276,945,725
------------
TOTAL INVESTMENTS--97.17%
(Cost $218,685,986)................................ 276,945,725
------------
NET OTHER ASSETS AND LIABILITIES--2.83%............... 8,078,868
------------
NET ASSETS--100.00%................................... $285,024,593
============
</TABLE>
----------
* Non-income producing security
24 See Notes to Financial Statements
<PAGE> 27
BEHAVIORAL VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
COMMON STOCKS--91.42%
ADVERTISING--4.25%
15,200 ADVO, Inc. .................................. $ 622,250
44,700 Digital Generation Systems, Inc. * .......... 270,994
------------
893,244
------------
AIRLINES/AIR TRANSPORTATION--1.16%
16,700 America West Holdings Corp.* ............... 244,237
------------
AUTOMOBILE--1.56%
64,900 Titan International, Inc. ................... 328,556
------------
BROADCAST, RADIO & TV--1.54%
13,424 USA Networks, Inc.* ......................... 323,015
------------
BUSINESS SERVICES--2.24%
25,900 Edgewater Technology, Inc.* ................. 161,875
17,000 Harland (John H.) Co. ....................... 248,625
13,300 kforce.com, Inc.* ........................... 60,681
------------
471,181
------------
CHEMICALS--2.78%
52,900 Airgas, Inc.* ............................... 350,462
12,500 Engelhard Corp. ............................. 234,375
------------
584,837
------------
COMPUTER HARDWARE & SOFTWARE--6.88%
33,100 CompuCom Systems, Inc.* ..................... 115,850
109,600 Epicor Software Corp.* ...................... 441,825
30,700 Mentor Graphics Corp.* ...................... 579,463
5,200 Seagate Technology, Inc.* ................... 308,750
------------
1,445,888
------------
CONSUMER PRODUCTS--2.13%
17,800 Acclaim Entertainment, Inc.* ............... 33,375
33,800 Central Garden & Pet Co.* ................... 253,500
7,900 Tupperware Corp. ............................ 159,481
------------
446,356
------------
DISTRIBUTION--0.22%
11,600 CellStar Corp. * ............................ 46,400
------------
DIVERSIFIED--1.30%
35,100 Griffon Corp. * ............................. 272,025
------------
ELECTRONICS--9.59%
9,000 Checkpoint Systems, Inc.* ................... 72,000
23,100 Cirrus Logic, Inc.* ......................... 698,775
12,100 Digi International, Inc.* ................... 93,775
8,300 Integrated Device Technology, Inc.* ......... 728,325
12,700 Three-Five Systems, Inc.* ................... 422,275
------------
2,015,150
------------
ENTERTAINMENT--3.24%
19,300 Aldila, Inc.* ............................... 43,425
22,800 Callaway Golf Co. ........................... 329,175
39,100 The Topps Company, Inc.* .................... 307,913
------------
680,513
------------
FINANCIAL SERVICES--9.03%
8,400 Bank United Corp., Class A .................. 378,000
17,800 Doral Financial Corp. ....................... 264,775
23,200 First American Corp. ........................ 382,800
24,660 Republic Bancorp, Inc. ...................... 218,858
8,050 PMI Group (The), Inc. ....................... 499,100
17,100 Profit Recovery Group International, Inc.* .. 154,434
------------
1,897,967
------------
FOOD & BEVERAGE--0.34%
7,700 Lance, Inc. ................................. 71,706
------------
HEALTH CARE SERVICES--2.31%
43,200 Caremark Rx, Inc.* .......................... 423,900
10,900 US Oncology, Inc.* .......................... 60,972
------------
484,872
------------
MANUFACTURING--5.42%
38,900 Foamex International, Inc.* ................. 226,106
9,800 Lincoln Electric Holdings, Inc. ............. 143,325
45,900 RTI International Metals, Inc.* ............. 645,469
16,500 UNOVA, Inc.* ................................ 123,750
------------
1,138,650
------------
MEDICAL INFORMATION SYSTEMS--3.38%
59,500 Per-Se Technologies, Inc.* .................. 710,281
------------
MEDICAL PRODUCTS--7.04%
13,750 IVAX Corp. .................................. 476,094
31,900 Owens & Minor, Inc. ......................... 488,469
13,800 Perrigo Co.* ................................ 102,206
58,900 Sola International, Inc.* ................... 412,300
------------
1,479,069
------------
OIL, GAS & PETROLEUM--9.43%
62,800 Newpark Resources, Inc.* .................... 643,700
72,500 OMI Corp.* .................................. 543,750
14,300 Pennzoil-Quaker State Co. ................... 177,856
39,300 Seitel, Inc.* ............................... 616,519
------------
1,981,825
------------
RESTAURANTS--2.65%
31,100 Avado Brands, Inc. * ........................ 45,678
11,700 Darden Restaurants, Inc. .................... 206,944
10,800 RARE Hospitality International, Inc.* ....... 303,750
------------
556,372
------------
</TABLE>
See Notes to Financial Statements 25
<PAGE> 28
BEHAVIORAL VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
RETAIL--12.65%
7,800 Footstar, Inc.* ............................. $ 232,050
24,700 Gadzooks, Inc. * ............................ 370,500
51,400 OfficeMax, Inc.* ............................ 266,638
20,400 Paul Harris Stores, Inc.* ................... 24,225
65,200 PETsMART, Inc.* ............................. 301,550
52,900 Pier 1 Imports, Inc. ........................ 621,575
13,600 Saks, Inc.* ................................. 136,000
14,712 The Limited, Inc. ........................... 294,240
29,400 Venator Group, Inc. ......................... 411,600
------------
2,658,378
------------
SEMICONDUCTORS--1.26%
16,400 BE Aerospace * .............................. 265,475
------------
TRANSPORTATION--1.02%
7,300 Overseas Shipholding Group, Inc. ............ 214,894
------------
TOTAL COMMON STOCKS
(Cost $15,539,838) ................................ 19,210,891
------------
TOTAL INVESTMENTS--91.42%
(Cost $15,539,838) ................................ 19,210,891
------------
NET OTHER ASSETS AND LIABILITIES--8.58% .............. 1,804,024
------------
NET ASSETS--100.00% .................................. $ 21,014,915
============
</TABLE>
----------
* Non-income producing security
26 See Notes to Financial Statements
<PAGE> 29
BEHAVIORAL LONG/SHORT FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
COMMON STOCKS--90.35%
AIRLINES/AIR TRANSPORTATION--1.25%
1,100 Continental Airlines, Inc., Class B * ....... $ 52,937
------------
AUTOMOBILE--1.69%
1,200 Ford Motor Co. .............................. 29,025
1,000 PACCAR, Inc. ................................ 42,437
------------
71,462
------------
BANKS--2.77%
1,200 Bank of America Corp. ....................... 64,275
900 PNC Financial Services Group ................ 53,044
------------
117,319
------------
BROADCAST, RADIO & TV--1.43%
900 Cablevision Systems Corp., Class A * ........ 60,525
------------
CHEMICALS--1.33%
3,000 Engelhard Corp. ............................. 56,250
------------
COMPUTER HARDWARE & SOFTWARE--14.19%
200 Alteon Websystems, Inc.* .................... 29,600
2,400 Ceridian Corp. * ............................ 58,050
1,400 Cognos, Inc.* ............................... 60,462
1,600 Compaq Computer Corp. ....................... 54,500
4,800 Compuware Corp.* ............................ 50,700
1,800 Edwards (J.D.) & Co. * ...................... 44,662
400 Extreme Networks, Inc. * .................... 37,225
500 Foundry Networks, Inc. * .................... 46,532
1,100 Intuit, Inc.* ............................... 65,862
500 NVIDIA Corp.* ............................... 39,687
2,800 PSINet, Inc.* ............................... 49,175
500 Rational Software Corp. * ................... 64,344
------------
600,799
------------
CONSUMER PRODUCTS--3.40%
1,500 Avon Products, Inc. ......................... 58,781
1,900 Blyth, Inc. ................................. 44,531
800 Colgate-Palmolive Co. ....................... 40,750
------------
144,062
------------
DIVERSIFIED--2.32%
100 Corning, Inc. ............................... 32,794
400 SPX Corp. * ................................. 65,600
------------
98,394
------------
ELECTRONICS--5.18%
700 Altera Corp.* ............................... 45,369
2,000 AVX Corp. ................................... 59,875
1,000 SCI Systems, Inc.* .......................... 61,750
1,300 Vishay Intertechnology, Inc.* ............... 52,406
------------
219,400
------------
ENERGY & UTILITIES--1.30%
1,900 PG&E Corp. .................................. 54,981
------------
ENGINEERING--0.99%
1,400 Fluor Corp. ................................. 41,912
------------
ENTERTAINMENT--1.37%
3,100 Brunswick Corp. ............................. 58,125
------------
FINANCIAL SERVICES--4.26%
1,500 Associates First Capital Corp., Class A ..... 42,187
900 Household International, Inc. ............... 43,200
400 Merrill Lynch & Co., Inc. ................... 58,000
600 PMI Group (The), Inc. ....................... 37,200
------------
180,587
------------
FOOD & BEVERAGE--4.94%
3,700 IBP, Inc. ................................... 59,431
1,800 Pepsi Bottling Group, Inc. .................. 57,150
800 Quaker Oats Co. ............................. 54,350
900 Sysco Corp. ................................. 38,081
------------
209,012
------------
HEALTH CARE SERVICES--3.74%
700 Cardinal Health, Inc. ....................... 57,269
400 Quest Diagnostics, Inc.* .................... 49,500
1,300 St. Jude Medical, Inc.* ..................... 51,512
------------
158,281
------------
HOTELS & CASINOS--3.68%
4,000 Hilton Hotels Corp. ......................... 40,000
1,700 MGM Mirage, Inc. ............................ 58,437
1,800 Starwood Hotels & Resorts Worldwide, Inc. ... 57,600
------------
156,037
------------
INSURANCE--1.51%
1,600 Nationwide Financial Services, Inc., Class A 63,800
------------
MANUFACTURING--3.83%
1,300 Caterpillar, Inc. ........................... 47,775
600 Minnesota Mining & Manufacturing Co. ........ 55,800
1,600 Nucor Corp. ................................. 58,800
------------
162,375
------------
MEDICAL PRODUCTS--4.56%
1,100 Abbott Laboratories ......................... 48,125
700 Beckman Coulter, Inc. ....................... 53,287
1,400 IVAX Corp. * ................................ 48,475
1,900 Sybron International Corp. * ............... 43,225
------------
193,112
------------
PUBLISHING--1.93%
700 Knight-Ridder, Inc. ......................... 38,238
700 McGraw-Hill Companies, Inc. ................. 43,357
------------
81,595
------------
</TABLE>
See Notes to Financial Statements 27
<PAGE> 30
BEHAVIORAL LONG/SHORT FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
SHARES VALUE
PAR (NOTE 2)
------ ------------
<S> <C> <C>
RESTAURANTS--2.48%
2,800 Darden Restaurants, Inc. .................... $ 49,525
1,900 Tricon Global Restaurants, Inc. * ........... 55,338
------------
104,863
------------
RETAIL--13.15%
2,600 Barnes & Noble, Inc.* ....................... 45,013
1,300 CVS Corp. ................................... 48,263
2,500 Limited (The), Inc. ......................... 50,000
1,000 Lowe's Companies, Inc. ...................... 44,813
2,100 May Department Stores Co. ................... 48,169
7,300 Office Depot, Inc.* ......................... 53,382
3,200 Ross Stores, Inc. ........................... 48,400
1,600 Sears, Roebuck & Co. ........................ 49,900
900 Talbots, Inc. ............................... 60,244
3,800 Venator Group, Inc. * ....................... 53,200
1,500 Zale Corp.* ................................. 55,406
------------
556,790
------------
SEMICONDUCTORS--1.08%
2,700 ON Semiconductor Corp. * .................... 45,900
------------
TELECOMMUNICATIONS--5.67%
1,400 BellSouth Corp. ............................. 52,238
700 Nortel Networks Corp. ....................... 57,094
500 Telephone and Data Systems, Inc. ............ 58,000
700 Tellabs, Inc.* .............................. 39,331
300 Tollgrade Communications, Inc.* ............. 33,356
------------
240,019
------------
TRANSPORTATION--1.33%
1,400 FedEx Corp.* ................................ 56,490
------------
TRAVEL SERVICES--0.97%
2,200 Galileo International, Inc. ................. 40,975
------------
TOTAL COMMON STOCKS
(Cost $3,581,502) ................................. 3,826,002
------------
REPURCHASE AGREEMENTS--6.68%
$283,004 Bear Stearns, 6.62%, due 09/01/00+ .......... 283,004
------------
(Cost $283,004)
TOTAL INVESTMENTS--97.03%
(Cost $3,864,506) ................................. 4,109,006
------------
TOTAL SECURITIES SOLD SHORT--(88.02%)
See schedule following ............................ (3,727,383)
------------
(Proceeds $3,811,277)
NET OTHER ASSETS AND LIABILITIES--90.99% ............. 3,853,149
------------
NET ASSETS--100.00% .................................. $ 4,234,772
============
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
SECURITIES SOLD SHORT
COMMON STOCKS
(900) ADC Telecommunications, Inc. * .............. $ (36,843)
(4,400) ATI Technologies, Inc. * .................... (42,212)
(1,600) AT&T Corp. .................................. (50,400)
(1,700) Albertson's, Inc. ........................... (36,550)
(1,300) Amazon.com, Inc. * .......................... (53,950)
(2,500) American Power Conversion Corp.* ............ (59,531)
(1,100) Bausch & Lomb, Inc. ......................... (39,325)
(1,700) Block (H&R), Inc. ........................... (60,987)
(1,700) Brinker International, Inc.* ............... (53,975)
(1,900) Campbell Soup Co. ........................... (48,212)
(700) Capital One Financial Corp. ................. (42,218)
(1,900) CenturyTel, Inc. ............................ (54,744)
(200) CIENA Corp. * ............................... (44,338)
(3,100) Coca-Cola Enterprises, Inc. ................. (57,737)
(1,700) CommScope, Inc.* ............................ (42,394)
(1,700) Computer Associates International, Inc. ..... (53,975)
(1,200) Cytyc Corp.* ................................ (55,950)
(1,000) DaimlerChrysler AG .......................... (52,063)
(1,700) Dana Corp. .................................. (41,969)
(1,400) Deere & Co. ................................. (46,112)
(1,150) Dollar Tree Stores, Inc.* ................... (46,647)
(1,300) Dun & Bradstreet Corp. ...................... (42,900)
(800) Dycom Industries, Inc.* ..................... (42,400)
(2,600) Edison International ........................ (53,788)
(1,200) Estee Lauder Companies, Inc., Class A ....... (49,125)
(800) Exodus Communications, Inc. * ............... (54,750)
(500) Four Seasons Hotels, Inc. ................... (37,875)
(1,700) Gap, Inc. ................................... (38,143)
(800) Gateway, Inc.* .............................. (54,480)
(1,700) Great Lakes Chemical Corp. .................. (57,375)
(1,700) Harmonic, Inc. * ............................ (56,950)
(2,000) Harrah's Entertainment, Inc. * .............. (56,750)
(1,000) Home Depot, Inc. ............................ (48,063)
(1,500) Honeywell International, Inc. ............... (57,844)
(1,000) Jabil Circuit, Inc. * ....................... (63,813)
(300) Juniper Networks, Inc.* ..................... (64,125)
(900) Kohl's Corp. * .............................. (50,400)
(1,400) Lucent Technologies, Inc. ................... (58,538)
(1,200) MBNA Corp. .................................. (42,375)
(700) MGIC Investment Corp. ....................... (41,169)
(1,400) Marriott International, Inc., Class A ....... (55,300)
(2,200) McKesson HBOC, Inc. ......................... (54,863)
(2,000) MicroStrategy, Inc. * ....................... (55,750)
(2,000) Mylan Laboratories, Inc. .................... (53,125)
(3,100) Nordstrom, Inc. ............................. (53,475)
</TABLE>
----------
All investments in common stocks are held in a segregated account with the
broker as collateral for securities sold short.
* Non-income producing security
+ Collateralized by $350,000 par value, 4.81%, due 01/15/24, value $288,676
Federal Agency Obligations.
28 See Notes to Financial Statements
<PAGE> 31
BEHAVIORAL LONG/SHORT FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
SECURITIES SOLD SHORT
COMMON STOCKS
(4,000) Novell, Inc. * .............................. $ (49,000)
(1,900) Outback Steakhouse, Inc.* ................... (43,581)
(1,800) Patterson Dental Co.* ....................... (42,750)
(1,350) Paychex, Inc. ............................... (60,244)
(1,000) Payless ShoeSource, Inc. * .................. (53,375)
(3,000) Penney (J.C.) Co., Inc. ..................... (42,000)
(1,300) PeopleSoft, Inc.* ........................... (41,925)
(700) Procter & Gamble Co. ........................ (43,269)
(1,400) Sabre Holdings Corp. * ...................... (39,025)
(1,100) Schering-Plough Corp. ....................... (44,137)
(1,400) Schwab (Charles) Corp. ...................... (53,463)
(3,700) Six Flags, Inc. * ........................... (55,269)
(3,650) Staples, Inc. * ............................. (56,119)
(1,200) Stryker Corp. ............................... (53,775)
(2,500) Thomas & Betts Corp. ........................ (46,875)
(1,400) Tiffany & Co. ............................... (58,275)
(2,100) Torchmark Corp. ............................. (58,931)
(1,100) Tribune Co. ................................. (39,256)
(6,300) Tyson Foods, Inc., Class A .................. (57,881)
(1,000) UAL Corp. ................................... (47,750)
(2,800) USX-U.S. Steel Group ........................ (48,650)
(900) United Parcel Service, Inc., Class B ........ (49,894)
(1,200) Univision Communications, Inc., Class A * ... (52,950)
(600) Vitesse Semiconductor Corp. * ............... (53,287)
(1,000) Wachovia Corp. .............................. (57,312)
(1,800) Walgreen Co. ................................ (59,175)
(1,300) Wells Fargo & Co. ........................... (56,144)
(500) Xilinx, Inc. * .............................. (44,438)
(2,800) Yankee Candle Co., Inc.* .................... (55,125)
------------
TOTAL SECURITIES SOLD SHORT ................. $ (3,727,383)
============
(Proceeds $3,811,277)
</TABLE>
See Notes to Financial Statements 29
<PAGE> 32
REIT FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ------------
<S> <C> <C>
COMMON STOCKS--98.73%
APARTMENTS--19.59%
56,100 Archstone Communities Trust ................... $ 1,381,462
70,500 Avalonbay Communities, Inc. ................... 3,150,469
18,600 Equity Residential Properties Trust ........... 892,800
39,400 Home Properties of New York, Inc. ............. 1,169,687
35,600 Post Properties, Inc. ......................... 1,506,325
18,900 Smith (Charles E.) Residential Realty, Inc. ... 777,262
------------
8,878,005
------------
DIVERSIFIED--7.92%
32,300 Duke-Weeks Realty Corp. ....................... 767,125
51,700 Spieker Properties, Inc. ...................... 2,824,112
------------
3,591,237
------------
HOTELS, LODGING & RESTAURANTS--6.22%
85,400 Host Marriott Corp. ........................... 912,712
32,500 LaSalle Hotel Properties ...................... 467,187
44,900 Starwood Hotels and Resorts Worldwide, Inc. ... 1,436,800
------------
2,816,699
------------
INDUSTRIAL--13.60%
87,400 AMB Property Corp. ............................ 2,113,987
26,700 CenterPoint Properties Corp. .................. 1,169,794
13,000 Prentiss Properties Trust ..................... 316,062
85,300 ProLogis Trust ................................ 1,951,238
23,200 PS Business Parks, Inc. ....................... 614,800
------------
6,165,881
------------
MANUFACTURED HOMES--5.04%
17,000 Chateau Communities, Inc. ..................... 442,000
77,900 Manufactured Home Communities, Inc. ........... 1,840,388
------------
2,282,388
------------
NEIGHBORHOOD SHOPPING CENTERS--7.82%
20,900 Kimco Realty Corp. ............................ 849,063
72,800 Vornado Realty Trust .......................... 2,693,600
------------
3,542,663
------------
OFFICE PROPERTIES--20.46%
26,000 Alexandria Real Estate Equities, Inc. ......... 910,000
68,700 Boston Properties, Inc. ....................... 2,778,056
39,200 CarrAmerica Realty Corp. ...................... 1,139,250
25,800 Cousins Properties, Inc. ...................... 1,061,025
80,800 Equity Office Properties Trust ................ 2,333,100
42,200 Kilroy Realty Corp. ........................... 1,049,725
------------
9,271,156
------------
OUTLET CENTERS--3.18%
43,000 Chelsea GCA Realty, Inc. ...................... 1,443,188
------------
REGIONAL MALLS--9.99%
32,100 General Growth Properties, Inc. ............... 1,031,213
49,200 Macerich Co. .................................. 1,030,125
98,600 Taubman Centers, Inc. ......................... 1,078,438
39,700 Urban Shopping Centers, Inc. .................. 1,387,019
------------
4,526,795
------------
STORAGE--4.91%
47,300 Shurgard Storage Centers Inc., Class A ........ 1,126,331
36,500 Storage USA, Inc. ............................. 1,099,563
------------
2,225,894
------------
TOTAL COMMON STOCKS
(Cost $39,653,071) .................................. 44,743,906
------------
TOTAL INVESTMENTS--98.73%
(Cost $39,653,071) .................................. 44,743,906
------------
NET OTHER ASSETS AND LIABILITIES--1.27% ................ 577,445
------------
NET ASSETS--100.00% .................................... $ 45,321,351
============
</TABLE>
30 See Notes to Financial Statements
<PAGE> 33
SPECIAL SMALL CAP FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--100.61%
ADVERTISING--0.61%
8,700 Ventiv Health, Inc.* ........................ $ 116,362
----------
AUTOMOBILE--8.10%
35,800 Midas, Inc. ................................. 608,600
6,500 Strattec Security Corp.* .................... 225,062
32,200 TBC Corp.* .................................. 179,112
76,800 Tenneco Automotive, Inc. .................... 547,200
----------
1,559,974
----------
BANKS--1.10%
10,900 First BanCorp ............................... 212,550
----------
BUILDING & CONSTRUCTION--0.32%
1,600 Jacobs Engineering Group, Inc.* ............. 60,800
----------
BUSINESS SERVICES--0.72%
139,400 Lanier Worldwide, Inc.* ..................... 139,400
----------
CAPITAL GOODS--7.37%
15,800 Hardinge, Inc. .............................. 173,800
15,800 Lawson Products, Inc. ....................... 398,950
31,900 Royal Appliance Manufacturing Co.*........... 217,319
49,400 U.S. Industries, Inc. ....................... 629,850
----------
1,419,919
----------
CHEMICALS--3.11%
8,200 NCH Corp. ................................... 305,962
34,000 Octel Corp.* ................................ 293,250
----------
599,212
----------
CONSUMER PRODUCTS--7.07%
37,400 Interstate Bakeries Corp. ................... 670,863
63,200 Wolverine World Wide, Inc. .................. 691,250
----------
1,362,113
----------
DATA PROCESSING--0.14%
3,800 Information Resources, Inc.* ................ 25,887
----------
DISTRIBUTION--4.81%
28,600 United Stationers, Inc.* .................... 927,713
----------
ELECTRONICS--5.06%
12,200 ESCO Technologies, Inc.* .................... 224,938
5,400 Franklin Electric Co., Inc. ................. 352,350
37,500 MagneTek, Inc.* ............................. 398,438
----------
975,726
----------
ENERGY & UTILITIES--4.71%
36,900 Castle Energy Corp. ......................... 268,678
47,600 El Paso Electric Co.* ....................... 639,625
----------
908,303
----------
ENTERTAINMENT--0.85%
13,200 Handleman Co.* .............................. 163,350
----------
FINANCIAL SERVICES--7.02%
25,618 ADVANTA Corp., Class A ..................... 333,034
33,400 PFF Bancorp, Inc. .......................... 668,000
13,344 Queens County Bancorp, Inc. ................ 351,948
----------
1,352,982
----------
HEALTH CARE SERVICES--2.69%
14,500 CorVel Corp.* .............................. 391,500
4,100 First Health Group Corp.* .................. 127,356
----------
518,856
----------
HOUSEHOLD PRODUCTS--0.43%
2,500 Libbey, Inc. ............................... 82,031
----------
INSURANCE--9.32%
27,200 FPIC Insurance Group, Inc.* ................ 413,100
26,300 Horace Mann Educators Corp. ................ 401,075
25,200 Penn-America Group, Inc. ................... 185,850
19,200 Presidential Life Corp. .................... 290,400
3,100 White Mountains Insurance Group, Inc. ...... 505,300
----------
1,795,725
----------
MACHINERY--1.80%
22,500 Milacron, Inc. ............................. 347,344
----------
OIL, GAS & PETROLEUM--1.83%
18,400 Nuevo Energy Co.* .......................... 353,050
----------
PAPER & RELATED PRODUCTS--1.73%
37,600 Wausau-Mosinee Paper Corp. ................. 333,700
----------
REAL ESTATE DEVELOPMENT--1.23%
12,300 Avatar Holding, Inc.* ...................... 236,775
----------
REAL ESTATE INVESTMENT TRUST--9.23%
20,600 Highwoods Properties, Inc. ................. 495,688
10,200 Koger Equity, Inc. ......................... 174,675
15,500 Mid-America Apartment Communities, Inc. .... 374,906
22,000 New Plan Excel Realty Trust ................ 303,875
20,400 Tanger Factory Outlet Centers, Inc. ........ 429,675
----------
1,778,819
----------
RETAIL--7.35%
25,500 Dress Barn, Inc.* .......................... 543,469
74,200 Stein Mart, Inc.* .......................... 871,850
----------
1,415,319
----------
TEXTILES--0.69%
38,200 Guilford Mills, Inc. ....................... 133,700
----------
TRANSPORTATION--13.32%
46,800 Arnold Industries, Inc. .................... 728,325
20,500 Landstar Systems, Inc.* .................... 1,045,500
29,800 Wisconsin Central Transportation Corp.*..... 398,575
8,900 XTRA Corp.* ................................ 394,938
----------
2,567,338
----------
</TABLE>
See Notes to Financial Statements 31
<PAGE> 34
SPECIAL SMALL CAP FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
TOTAL COMMON STOCKS
(Cost $18,907,673)................................... $ 19,386,948
------------
TOTAL INVESTMENTS--100.61%
(Cost $18,907,673)................................... 19,386,948
------------
NET OTHER ASSETS AND LIABILITIES--(0.61%) .............. (118,490)
------------
NET ASSETS--100.00%..................................... $ 19,268,458
============
</TABLE>
----------------------------------------
* Non-income producing security
32 See Notes to Financial Statements
<PAGE> 35
SMALL CAP VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--93.19%
ADVERTISING--1.35%
10,100 True North Communications, Inc. ........ $ 468,387
-----------
AIRLINES/AIR TRANSPORTATION--2.23%
31,000 Airborne Freight Corp................... 463,063
12,000 Alaska Air Group, Inc.*................. 312,000
-----------
775,063
-----------
BASIC INDUSTRIES--1.10%
40,000 RPM, Inc............................... 382,500
-----------
BASIC MATERIALS--5.19%
32,000 AptarGroup, Inc........................ 746,000
70,000 Intermet Corp.......................... 542,500
25,000 Reliance Steel & Aluminum Co. ......... 515,625
-----------
1,804,125
-----------
BUILDING & CONSTRUCTION--1.52%
30,000 NCI Building Systems, Inc.*............ 528,750
-----------
CAPITAL GOODS--1.74%
17,100 Graco, Inc............................. 605,981
-----------
CHEMICALS--2.43%
18,000 Cambrex Corp........................... 844,875
-----------
COMPUTER HARDWARE & SOFTWARE--3.22%
12,200 Adaptec, Inc.*......................... 298,900
20,000 Printronix, Inc.*...................... 228,125
43,300 Progress Software Corp.*............... 592,669
-----------
1,119,694
-----------
CONGLOMERATES--4.34%
13,000 Lancaster Colony Corp.................. 299,812
45,000 Stewart & Stevenson Services, Inc...... 725,625
30,000 United Dominion Industries, Ltd........ 481,875
-----------
1,507,312
-----------
CONSUMER PRODUCTS--2.51%
25,000 Coachmen Industries, Inc............... 278,125
33,500 Rayovac Corp.*......................... 594,625
-----------
872,750
-----------
ELECTRONICS--18.73%
25,000 Arrow Electronics, Inc.*............... 909,375
1,900 Black Hills Corp. ..................... 48,450
20,900 C&D Technologies, Inc.................. 1,154,725
30,000 Diebold, Inc........................... 847,500
60,000 Innovex, Inc.*......................... 900,000
30,000 Park Electrochemical Corp.............. 1,205,625
40,000 Quixote Corp........................... 640,000
29,000 Silicon Valley Group, Inc.*............ 808,375
-----------
6,514,050
-----------
FINANCIAL SERVICES--7.46%
17,000 Centura Banks, Inc..................... 600,313
25,000 FirstMerit Corp. ..................... 582,812
20,000 National Data Corp..................... 587,500
25,000 Prosperity Bancshares, Inc............. 410,938
46,646 Republic Bancorp, Inc.................. 413,983
-----------
2,595,546
-----------
FOOD & BEVERAGE--5.81%
30,000 Corn Products International, Inc....... 753,750
42,000 Ralcorp Holdings, Inc.*................ 567,000
14,000 Suiza Foods Corp.*..................... 700,000
-----------
2,020,750
-----------
FURNITURE--3.14%
19,500 Ethan Allen Interiors, Inc............. 525,281
21,000 Hon Industries, Inc.................... 565,688
-----------
1,090,969
-----------
INSURANCE--2.20%
16,000 RenaissanceRe Holdings, Ltd............ 766,000
-----------
MACHINERY--2.86%
32,000 Kulicke & Soffa Industries, Inc.*...... 582,000
18,000 Manitowoc Co., Inc..................... 412,875
-----------
994,875
-----------
MEDICAL PRODUCTS--5.30%
20,000 DENTSPLY International, Inc............ 667,500
25,000 Lincare Holdings, Inc.*................ 637,500
30,000 Ocular Sciences, Inc.*................. 322,500
23,700 Spacelabs Medical, Inc.*............... 214,781
-----------
1,842,281
-----------
OIL, GAS & PETROLEUM--6.30%
54,500 Key Production Co., Inc.*.............. 981,000
40,000 Trico Marine Services, Inc.*........... 580,000
30,000 Vintage Petroleum, Inc................. 630,000
-----------
2,191,000
-----------
PAPER & RELATED PRODUCTS--1.00%
39,000 Wausau-Mosinee Paper Corp.............. 346,125
-----------
PUBLISHING--4.99%
20,000 Houghton Mifflin Co.................... 983,750
26,000 Valassis Communications, Inc.*......... 750,750
-----------
1,734,500
-----------
RESTAURANTS--2.89%
25,000 Applebee's International, Inc.......... 567,188
54,000 Ryan's Family Steak Houses, Inc.*...... 438,750
-----------
1,005,938
-----------
</TABLE>
33
See Notes to Financial Statements
<PAGE> 36
SMALL CAP VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
RETAIL--2.75%
25,000 Group 1 Automotive, Inc.*............. $ 275,000
45,000 Ross Stores, Inc...................... 680,625
-------------
955,625
-------------
TECHNOLOGY--0.78%
45,000 MAPICS, Inc.*......................... 270,000
-------------
TELECOMMUNICATIONS--2.62%
22,000 CommScope, Inc.*...................... 548,625
40,000 World Access, Inc.*................... 362,500
-------------
911,125
-------------
TRANSPORTATION--0.73%
5,000 Landstar Systems, Inc.* .............. 255,000
-------------
TOTAL COMMON STOCKS
(Cost $31,032,097).......................... 32,403,221
-------------
TOTAL INVESTMENTS--93.19%
(Cost $31,032,097).......................... 32,403,221
-------------
NET OTHER ASSETS AND LIABILITIES--6.81% 2,366,451
-------------
NET ASSETS--100.00%............................ $ 34,769,672
=============
</TABLE>
-------------------------------
* Non-income producing security
34
See Notes to Financial Statements
<PAGE> 37
HIDDEN VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--96.06%
ADVERTISING--2.57%
3,000 True North Communications, Inc. ............... $ 139,125
-------------
AEROSPACE & DEFENSE--2.27%
3,000 Goodrich (B.F.) Co. ........................... 122,437
-------------
AUTOMOBILE--2.74%
6,000 Dana Corp. .................................... 148,125
-------------
BASIC MATERIALS--1.87%
2,500 PPG Industries, Inc. .......................... 101,250
-------------
BUILDING MATERIALS--2.67%
2,300 Southdown, Inc. ............................... 144,325
-------------
BUSINESS SERVICES--2.51%
7,500 Reynolds & Reynolds Co., Class A .............. 135,937
-------------
CAPITAL GOODS--0.93%
2,000 Crane Co. ..................................... 50,250
-------------
COMPUTER HARDWARE & SOFTWARE--4.60%
9,000 Compuware Corp.* .............................. 95,062
1,400 Seagate Technology, Inc.* ..................... 83,125
5,400 Unisys Corp.* ................................. 70,200
-------------
248,387
-------------
CONGLOMERATES--2.11%
2,500 TRW, Inc. ..................................... 114,219
-------------
CONSUMER PRODUCTS--5.03%
10,000 Hasbro, Inc. .................................. 123,125
3,900 Maytag Corp. .................................. 148,687
-------------
271,812
-------------
ELECTRONICS--12.05%
4,200 Arrow Electronics, Inc.* ...................... 152,775
5,500 Diebold, Inc. ................................. 155,375
4,500 Rockwell International Corp. .................. 181,969
4,000 Vishay Intertechnology, Inc.* ................. 161,250
-------------
651,369
-------------
FINANCIAL SERVICES--16.20%
4,000 Block (H&R), Inc. ............................. 143,500
6,000 Charter One Financial, Inc. ................... 142,500
3,000 FleetBoston Financial Corp. ................... 128,062
5,000 Knight Trading Group, Inc.* ................... 156,875
5,000 Mercantile Bankshares Corp. ................... 172,422
4,700 SouthTrust Corp. .............................. 132,481
-------------
875,840
-------------
FOOD & BEVERAGE--1.86%
5,500 ConAgra, Inc. ................................. 100,719
-------------
INSURANCE--3.00%
3,400 St. Paul Companies, Inc. ...................... 161,925
-------------
MEDICAL PRODUCTS--5.27%
4,400 Becton, Dickinson and Co. ..................... 132,550
1,200 DENTSPLY International, Inc. .................. 40,050
4,400 Lincare Holdings, Inc.* ....................... 112,200
-------------
284,800
-------------
OFFICE PRODUCTS--0.59%
2,000 Xerox Corp. ................................... 32,125
-------------
OIL, GAS & PETROLEUM--6.58%
2,500 Kerr-McGee Corp. .............................. 157,969
2,000 Tidewater, Inc. ............................... 80,750
3,500 Unocal Corp. .................................. 116,813
-------------
355,532
-------------
PUBLISHING--10.29%
5,000 Dun & Bradstreet Corp. ........................ 165,000
2,000 Gannett Co., Inc. ............................. 113,250
3,500 Knight-Ridder, Inc. ........................... 191,188
3,000 Valassis Communications, Inc.* ................ 86,625
-------------
556,063
-------------
REAL ESTATE INVESTMENT TRUST--2.23%
4,600 Mack-Cali Realty Corp. ........................ 120,463
-------------
RESTAURANTS--2.38%
5,600 Outback Steakhouse, Inc.* ..................... 128,450
-------------
RETAIL--3.93%
3,500 BJ's Wholesale Club, Inc.* .................... 118,563
6,200 Ross Stores, Inc. ............................. 93,775
-------------
212,338
-------------
TELECOMMUNICATIONS--2.32%
800 Andrew Corp.* ................................. 23,700
11,200 World Access, Inc.* ........................... 101,500
-------------
125,200
-------------
TRAVEL SERVICES--2.06%
4,000 Sabre Holdings Corp.* ......................... 111,500
-------------
TOTAL COMMON STOCKS
(Cost $5,237,609) ..................................... 5,192,191
-------------
TOTAL INVESTMENTS--96.06%
(Cost $5,237,609) ..................................... 5,192,191
-------------
NET OTHER ASSETS AND LIABILITIES--3.94% ................... 212,979
-------------
NET ASSETS--100.00% ....................................... $ 5,405,170
=============
</TABLE>
----------
* Non-income producing security.
See Notes to Financial Statements 35
<PAGE> 38
ALL CAP VALUE FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--95.93%
AEROSPACE & DEFENSE--5.67%
350 Boeing Co. ................................... $ 18,769
500 Honeywell International, Inc. ................ 19,281
-------------
38,050
-------------
AUTOMOBILE--2.52%
699 Ford Motor Co. ............................... 16,907
-------------
BANKS--6.27%
600 Bank One Corp. ............................... 21,150
375 Chase Manhattan Corp. ........................ 20,953
-------------
42,103
-------------
BASIC MATERIALS--2.97%
600 Alcoa, Inc. .................................. 19,950
-------------
BROADCAST, RADIO & TV--2.51%
700 USA Networks, Inc.* .......................... 16,844
-------------
COMPUTER HARDWARE & SOFTWARE--9.41%
190 International Business Machines Corp. ........ 25,080
300 Sun Microsystems, Inc.* ...................... 38,081
-------------
63,161
-------------
CONSUMER PRODUCTS--7.32%
700 Avon Products, Inc. .......................... 27,431
600 Clorox Co. ................................... 21,712
-------------
49,143
-------------
CONSUMER SERVICES--2.24%
800 TJX Companies, Inc. .......................... 15,050
-------------
ELECTRONICS--8.34%
400 Advanced Micro Devices* ...................... 15,050
500 American Power Conversion Corp.* ............. 11,906
150 General Electric Co. ......................... 8,803
500 Rockwell International Corp. ................. 20,219
-------------
55,978
-------------
FINANCIAL SERVICES--12.50%
450 American Express Co. ......................... 26,606
401 Citigroup, Inc. .............................. 23,389
400 FleetBoston Financial Corp. .................. 17,075
400 Freddie Mac .................................. 16,850
-------------
83,920
-------------
HEALTH CARE SERVICES--3.23%
400 American Home Products Corp. ................. 21,675
-------------
INSURANCE--6.53%
700 Allstate Corp. ............................... 20,344
400 MGIC Investment Corp. ........................ 23,525
-------------
43,869
-------------
MEDICAL PRODUCTS--3.16%
400 Bristol-Myers Squibb Co. ..................... 21,200
-------------
OIL, GAS & PETROLEUM--8.40%
700 BP Amoco Plc, ADR ............................ 38,675
450 Burlington Resources, Inc. ................... 17,691
-------------
56,366
-------------
RETAIL--6.05%
300 CVS Corp. .................................... 11,138
1,300 Kroger Co.* .................................. 29,494
-------------
40,632
-------------
TECHNOLOGY--4.67%
500 Motorola, Inc. ............................... 18,031
300 National Semiconductor Corp.* ................ 13,350
-------------
31,381
-------------
TELECOMMUNICATIONS--4.14%
300 Tellabs, Inc.* ............................... 16,856
300 WorldCom, Inc.* .............................. 10,950
-------------
27,806
-------------
TOTAL COMMON STOCKS
(Cost $556,978) ...................................... 644,035
-------------
TOTAL INVESTMENTS--95.93%
(Cost $556,978) ...................................... 644,035
-------------
NET OTHER ASSETS AND LIABILITIES--4.07% .................. 27,321
-------------
NET ASSETS--100.00% ...................................... $ 671,356
=============
</TABLE>
----------
* Non-income producing security
ADR American Depository Receipt
36 See Notes to Financial Statements
<PAGE> 39
CORE EQUITY FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--91.61%
AIRLINES/AIR TRANSPORTATION--1.49%
1,700 Delta Air Lines, Inc. ......................... $ 84,150
-------------
AUTOMOBILE--4.97%
2,537 Delphi Automotive Systems Corp. ............... 41,702
3,300 General Motors Corp. .......................... 238,219
-------------
279,921
-------------
BANKS--12.60%
5,100 Bank of America Corp. ......................... 273,169
4,700 Bank of New York Co., Inc. .................... 246,456
4,400 Wells Fargo & Co. ............................. 190,025
-------------
709,650
-------------
BASIC MATERIALS--2.36%
4,000 Alcoa, Inc. ................................... 133,000
-------------
COMPUTER HARDWARE & SOFTWARE--3.30%
3,500 Compaq Computer Corp. ......................... 119,219
2,100 Computer Associates International, Inc. ....... 66,675
-------------
185,894
-------------
CONSUMER PRODUCTS--7.97%
2,300 Hershey Foods Corp. ........................... 98,181
4,500 Kimberly-Clark Corp. .......................... 263,250
2,300 Whirlpool Corp. ............................... 87,400
-------------
448,831
-------------
DIVERSIFIED--4.78%
3,700 American General Corp. ........................ 269,406
-------------
FINANCIAL SERVICES--3.91%
4,100 Fannie Mae .................................... 220,375
-------------
HEALTH CARE SERVICES--3.95%
4,100 American Home Products Corp. .................. 222,169
-------------
INSURANCE--4.51%
2,850 American International Group, Inc. ............ 254,006
-------------
MACHINERY--3.32%
4,100 Ingersoll-Rand Co. ............................ 186,806
-------------
MANUFACTURING--3.49%
2,600 Caterpillar, Inc. ............................. 95,550
1,800 Illinois Tool Works, Inc. ..................... 100,913
-------------
196,463
-------------
OFFICE PRODUCTS--3.17%
3,300 Avery Dennison Corp. .......................... 178,406
-------------
OIL, GAS & PETROLEUM--4.49%
3,100 Exxon Mobil Corp. ............................. 253,038
-------------
RETAIL--15.25%
7,500 Costco Wholesale Corp.* ....................... 258,281
9,100 May Department Stores Co. ..................... 208,731
3,700 Safeway, Inc.* ................................ 182,456
9,000 Target Corp. .................................. 209,250
-------------
858,718
-------------
SEMICONDUCTORS--7.04%
1,300 Applied Materials, Inc.* ...................... 112,206
3,800 Intel Corp. ................................... 284,525
-------------
396,731
-------------
TELECOMMUNICATIONS--5.01%
3,000 AT&T Corp. .................................... 94,500
4,300 Verizon Communications ........................ 187,588
-------------
282,088
-------------
TOTAL COMMON STOCKS
(Cost $4,987,633) ..................................... 5,159,652
-------------
TOTAL INVESTMENTS--91.61%
(Cost $4,987,633) ..................................... 5,159,652
-------------
NET OTHER ASSETS AND LIABILITIES--8.39% ................... 472,443
-------------
NET ASSETS--100.00% ....................................... $ 5,632,095
=============
</TABLE>
----------
* Non-income producing security
See Notes to Financial Statements 37
<PAGE> 40
INTERNATIONAL SMALL CAP EQUITY FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--97.06%
AUSTRIA--4.11%
9,800 BWT AG ........................................ $ 328,821
2,200 Pankl Racing Systems AG (Berlin)* ............. 56,632
3,000 Pankl Racing Systems AG (EASDAQ)* ............. 74,829
30,000 Uproar, Ltd.* ................................. 191,732
2,380 Yline Internet Business Services AG* .......... 211,261
-------------
863,275
-------------
BELGIUM--0.79%
3,250 Creyf's N.V. .................................. 84,411
10,000 Internoc Holding N.V.* ........................ 12,871
3,900 Xeikon N.V. ADR* .............................. 67,762
-------------
165,044
-------------
CZECH REPUBLIC--1.33%
6,200 Ceske Radiokomunikace-GDR* .................... 278,070
-------------
DENMARK--0.80%
670 NKT Holding A/S ............................... 167,562
-------------
FRANCE--7.02%
1,570 Belvedere SA .................................. 79,436
18,000 Elior* ........................................ 194,928
10,890 Infogrames Entertainment SA* .................. 317,062
8,000 Jet Multimedia ................................ 446,666
1,110 Publicis SA ................................... 434,514
-------------
1,472,606
-------------
GERMANY--4.19%
2,320 Boewe Systec AG ............................... 49,424
10,400 QIAGEN N.V.* .................................. 496,658
3,300 Rhoen-Klinikum AG ............................. 141,775
10,670 Vossloh AG .................................... 190,466
-------------
878,323
-------------
GREECE--0.08%
1,800 Ideal Group SA* ............................... 16,212
-------------
HONG KONG--1.25%
90,000 Asia Satellite Telecommunications
Holdings, Ltd. ............................ 263,104
-------------
ITALY--2.26%
5,900 Banca Popolare Commercio e Industria Scrl ..... 137,684
23,750 Brembo S.p.A .................................. 223,466
13,500 Carraro S.p.A ................................. 39,904
21,475 Ferretti S.p.A* ............................... 73,771
-------------
474,825
-------------
JAPAN--32.37%
47,000 Asia Securities Printing Co., Ltd.............. 608,101
13,200 Aucnet, Inc. .................................. 642,303
2,000 Colin Corp. ................................... 135,008
39,000 Daifuku Co., Ltd. ............................. 421,226
3,100 Dentsu Tec, Inc. .............................. 337,146
5,000 Diamond Computer Service Co., Ltd. ............ 59,301
6,000 Doutor Coffee Co., Ltd. ....................... 458,466
3,500 Drake Beam Morin-Japan, Inc. .................. 426,589
14,500 Happinet Corp. ................................ 322,192
2,000 Konami Co., Ltd. .............................. 165,385
4,000 Lasertec Corp. ................................ 82,505
6,000 Meitec Corp. .................................. 277,330
7,000 Mimasu Semiconductor Industry Co., Ltd. ....... 118,198
19,000 Ministop Co., Ltd. ............................ 422,183
4,000 Moshi Moshi Hotline, Inc. ..................... 365,648
12,400 Paltek Corp. .................................. 430,152
3,510 Paris Miki, Inc. .............................. 193,830
12,000 Secom Techno Service Co., Ltd. ................ 299,269
6,000 Ushio, Inc. ................................... 153,853
12,500 Wilson Learning Worldwide, Inc. ............... 351,584
25,000 Woodland Corp. ................................ 520,345
-------------
6,790,614
-------------
NETHERLANDS--8.41%
7,940 Fugro N.V. .................................... 444,020
4,235 Koninklijke Frans Maas Groep N.V. ............. 92,852
8,000 Landis Group N.V.* ............................ 139,184
10,700 Pharming Group N.V.* .......................... 125,372
9,300 Prolion Holding N.V.* ......................... 198,124
16,600 Scala Business Solutions N.V.* ................ 34,627
11,100 Tele Atlas BV* ................................ 216,764
22,000 Unique International N.V....................... 512,618
-------------
1,763,561
-------------
POLAND--0.37%
3,100 Prokom Software SA ............................ 77,500
-------------
SINGAPORE--1.40%
590,000 Informatics Holdings, Ltd. .................... 293,097
-------------
SPAIN--0.92%
5,200 Funespana SA .................................. 37,619
12,820 Prosegur, CIA de Seguridad SA ................. 156,471
-------------
194,090
-------------
SWEDEN--3.26%
29,350 AU-System AB* ................................. 264,358
19,000 IBS AB* ....................................... 72,481
10,000 Nobel Biocare AB .............................. 227,827
8,000 Semcon AB ..................................... 119,530
-------------
684,196
-------------
</TABLE>
38 See Notes to Financial Statements
<PAGE> 41
INTERNATIONAL SMALL CAP EQUITY FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
SWITZERLAND--12.96%
2,650 Charles Voegele Holding AG .................... $ 489,839
530 Gretag-Macbeth Holding AG ..................... 297,250
440 PubliGroupe SA ................................ 348,565
900 Selecta Group ................................. 229,908
960 SEZ Holding AG ................................ 789,162
1,000 Swisslog Holding AG ........................... 563,146
-------------
2,717,870
-------------
UNITED KINGDOM--15.54%
8,100 Autonomy Corp. Plc* ........................... 459,675
81,000 Cordiant Communications Group Plc ............. 400,138
60,316 Corporate Services Group Plc* ................. 88,819
29,100 Eidos Plc* .................................... 208,980
9,971 Filtronic Plc ................................. 175,761
7,700 Granger Telecom Plc-GDR* ...................... 29,260
4,500 International Quantum Epitaxy Plc* ............ 472,500
63,600 Knowledge Management Software Plc* ............ 202,073
20,000 Psion Plc ..................................... 255,341
56,000 Saatchi & Saatchi Plc ......................... 404,193
106,000 Scoot.com Plc* ................................ 195,691
3,100 SurfControl Plc* .............................. 317,750
5,200 Torridon Plc* ................................. 50,700
-------------
3,260,881
-------------
TOTAL COMMON STOCKS
(Cost $17,156,568) .................................... 20,360,830
-------------
TOTAL INVESTMENTS--97.06%
(Cost $17,156,568) .................................... 20,360,830
-------------
NET OTHER ASSETS AND LIABILITIES--2.94% ................... 616,352
-------------
NET ASSETS--100.00% ....................................... $ 20,977,182
=============
</TABLE>
----------
* Non-income producing security
ADR American Depository Receipt
GDR Global Depository Receipt
See Notes to Financial Statements 39
<PAGE> 42
INTERNATIONAL EQUITY FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
COMMON STOCKS--94.80%
BELGIUM--0.74%
4,000 Fortis ........................................ $ 121,466
-------------
BRAZIL--1.00%
4,500 Telesp Celular Participacoes SA ADR ........... 165,375
-------------
DENMARK--1.28%
1,045 Novo Nordisk A/S, Class B ..................... 212,188
-------------
FINLAND--3.53%
9,170 Nokia Oyj ..................................... 401,860
5,460 Sonera Oyj .................................... 182,231
-------------
584,091
-------------
FRANCE--13.46%
5,500 Alcatel ....................................... 449,395
5,510 Aventis SA .................................... 413,285
1,100 Cap Gemini SA ................................. 229,458
4,850 CNP Assurances ................................ 152,831
925 Compagnie de Saint-Gobain ..................... 122,997
320 Essilor International SA ...................... 88,623
1,000 Sidel SA ...................................... 68,083
2,879 Total Fina Elf SA ............................. 427,031
3,379 Vivendi SA .................................... 275,942
-------------
2,227,645
-------------
GERMANY--5.95%
500 AXA Colonia Konzern AG ........................ 46,424
3,335 Deutsche Telekom AG ........................... 128,774
750 Fresenius AG .................................. 176,420
900 SAP AG ........................................ 228,481
1,900 Siemens AG .................................... 306,106
3,800 Volkswagen AG ................................. 98,831
-------------
985,036
-------------
HONG KONG--0.49%
5,750 Hutchison Whampoa, Ltd. ....................... 81,098
-------------
ITALY--5.39%
8,900 Alleanza Assicurazioni ........................ 109,898
17,250 San Paolo-IMI S.p.A. .......................... 305,933
21,000 Telecom Italia S.p.A. ......................... 257,987
42,300 UniCredito Italiano S.p.A. .................... 218,527
-------------
892,345
-------------
JAPAN--23.15%
4,300 Asatsu-DK, Inc. ............................... 160,857
300 Bellsystem24, Inc. ............................ 144,290
3,000 Canon, Inc. ................................... 134,165
5,300 FamilyMart Co., Ltd. .......................... 158,016
2,000 Fuji Machine Manufacturing. Co., Ltd. ......... 93,193
4,000 Honda Motor Co., Ltd. ......................... 146,259
2,000 Hoya Corp. .................................... 191,262
3,000 Matsushita Communication Industrial Co., Ltd... 414,870
13,000 Mitsui Fudosan Co., Ltd. ...................... 140,774
1,500 Murata Manufacturing Co., Ltd. ................ 227,405
11,000 NEC Corp. ..................................... 314,551
10,000 Nomura Securities Co., Ltd. ................... 233,921
10 NTT DoCoMo, Inc. .............................. 264,392
9,000 Sanwa Bank, Ltd. .............................. 85,140
3,000 Secom Co., Ltd. ............................... 218,545
4,000 Shin-Etsu Chemical Co., Ltd. .................. 196,512
2,900 Sony Corp. .................................... 323,551
9,000 Sumitomo Bank, Ltd. ........................... 111,382
4,000 Tokio Marine & Fire Insurance Co., Ltd. ....... 40,615
9,000 Ushio, Inc. ................................... 230,780
-------------
3,830,480
-------------
NETHERLANDS--8.10%
3,875 Buhrmann N.V. ................................. 109,897
1,450 Gucci Group N.V. .............................. 150,590
3,734 ING Groep N.V. Coupons ........................ 2,310
3,734 ING Groep N.V. ................................ 249,912
3,000 Koninklijke Numico N.V. ....................... 151,522
10,224 Koninklijke (Royal) Philips Electronics N.V. .. 497,319
7,690 TNT Post Group N.V. ........................... 179,593
-------------
1,341,143
-------------
SINGAPORE--0.91%
12,500 DBS Group Holdings, Ltd. ...................... 151,066
-------------
SWEDEN--4.37%
11,800 ForeningsSparbanken AB (Swedbank) ............. 175,681
2,775 NetCom AB, Class B* ........................... 146,440
19,800 Skandia Forsakrings AB ........................ 400,742
-------------
722,863
-------------
SWITZERLAND--6.83%
38 Compagnie Financiere Richemont AG, Class A .... 107,608
1,035 Credit Suisse Group ........................... 216,269
95 Nestle SA ..................................... 204,724
21 Roche Holding AG .............................. 188,060
200 Selecta Group ................................. 51,091
50 SEZ Holding AG ................................ 41,102
2,210 UBS AG ........................................ 321,604
-------------
1,130,458
-------------
</TABLE>
40 See Notes to Financial Statements
<PAGE> 43
INTERNATIONAL EQUITY FUND [undiscovered
Portfolio of Investments .....August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
UNITED KINGDOM--19.60%
15,800 British Sky Broadcasting Group Plc* ........... $ 256,963
14,800 British Telecommunications Plc ................ 187,879
25,000 Cadbury Schweppes Plc ......................... 143,629
5,400 Glaxo Wellcome Plc ............................ 155,198
15,740 Granada Compass Plc* .......................... 193,760
38,000 Invensys Plc .................................. 148,301
40,050 Lloyds TSB Group Plc .......................... 376,517
33,000 National Grid Group Plc ....................... 270,023
37,000 Shell Transport & Trading Co. Plc ............. 315,636
21,000 SmithKline Beecham Plc ........................ 273,439
154,916 Vodafone Group Plc ............................ 625,373
20,900 WPP Group Plc ................................. 296,546
-------------
3,243,264
-------------
TOTAL COMMON STOCKS
(Cost $14,858,328) .................................... 15,688,518
-------------
TOTAL INVESTMENTS--94.80%
(Cost $14,858,328) .................................... 15,688,518
-------------
NET OTHER ASSETS AND LIABILITIES--5.20% ................... 860,018
-------------
NET ASSETS--100.00% ....................................... $ 16,548,536
=============
</TABLE>
----------
* Non-income producing security
ADR American Depository Receipt
See Notes to Financial Statements 41
<PAGE> 44
STATEMENTS OF ASSETS AND LIABILITIES [undiscovered
........................August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL
BEHAVIORAL BEHAVIORAL LONG/SHORT REIT
GROWTH FUND VALUE FUND FUND FUND
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost ........................................... $218,685,986 $ 15,539,838 $ 3,864,506 $ 39,653,071
Net unrealized appreciation (depreciation) .................... 58,259,739 3,671,053 244,500 5,090,835
------------ ------------ ----------- ------------
Total investments at value ................................. 276,945,725 19,210,891 4,109,006 44,743,906
Cash ............................................................. 7,294,681 2,244,371 -- 312,603
Deposit with broker for securities sold short .................... -- -- 3,960,787 --
Foreign currencies, at value (1) ................................. -- -- -- --
Receivables:
Investments sold .............................................. 1,024,077 -- 531,247 335,559
Fund shares sold .............................................. 772,521 40,551 -- 63,200
Dividends and interest ........................................ 45,361 8,366 7,152 69,454
Organization costs ............................................... 14,855 -- -- 14,872
Prepaid expenses and other assets ................................ 31,035 7,156 7,739 1,212
------------ ------------ ----------- ------------
Total Assets ............................................... 286,128,255 21,511,335 8,615,931 45,540,806
------------ ------------ ----------- ------------
LIABILITIES:
Payables:
Investments purchased ......................................... 382,386 446,638 578,396 93,869
Fund shares redeemed .......................................... 302,133 1,053 -- 53,325
Securities sold short, at value (Proceeds $3,811,277) ......... -- -- 3,727,383 --
Dividends ..................................................... -- -- 4,305 --
Investment advisory fees - net ................................ 216,548 17,511 5,646 41,754
Service and distribution fees ................................. 7,568 -- -- 425
Administration fees ........................................... 57,640 4,194 917 9,899
Accrued expenses and other payables ........................... 137,387 27,024 64,512 20,183
------------ ------------ ----------- ------------
Total Liabilities .......................................... 1,103,662 496,420 4,381,159 219,455
------------ ------------ ----------- ------------
NET ASSETS .......................................................... $285,024,593 $ 21,014,915 $ 4,234,772 $ 45,321,351
============ ============ =========== ============
NET ASSETS CONSIST OF:
Paid-in capital (no par value) ................................... $217,815,852 $ 17,723,494 $ 4,191,317 $ 41,387,151
Undistributed net investment income (loss) ....................... -- (443) 82,706 833,913
Accumulated net realized gain (loss) on investments, securities
sold short and foreign currency ............................... 8,949,002 (379,189) (367,645) (1,990,548)
Net unrealized appreciation (depreciation) on investments,
securities sold short and foreign currency .................... 58,259,739 3,671,053 328,394 5,090,835
------------ ------------ ----------- ------------
TOTAL NET ASSETS .................................................... $285,024,593 $ 21,014,915 $ 4,234,772 $ 45,321,351
============ ============ =========== ============
SHARES OF BENEFICIAL INTEREST
Institutional Class:
Net Assets ....................................................... $263,267,679 $ 21,014,915 $ 4,234,772 $ 44,557,643
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 8,659,556 1,067,712 350,481 3,571,931
------------ ------------ ----------- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 30.40 $ 19.68 $ 12.08 $ 12.47
============ ============ =========== ============
Investor Class:
Net Assets ....................................................... $ 19,076,614 N/A N/A $ 388,450
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 631,485 N/A N/A 31,234
------------ ------------ ----------- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 30.21 N/A N/A $ 12.44
============ ============ =========== ============
C Class:
Net Assets ....................................................... $ 2,680,300 N/A N/A $ 375,258
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 89,409 N/A N/A 30,375
------------ ------------ ----------- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 29.98 N/A N/A $ 12.35
============ ============ =========== ============
MAXIMUM OFFERING PRICE PER SHARE (NAV/99%) ....................... $ 30.28 N/A N/A $ 12.47
============ ============ =========== ============
</TABLE>
(1) Cost of foreign currencies for International Small Cap Equity Fund and
International Equity Fund is $425,699 and $345, respectively.
* On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
42 See Notes to Financial Statements
<PAGE> 45
<TABLE>
<CAPTION>
SPECIAL SMALL SMALL CAP HIDDEN ALL CAP
CAP FUND VALUE FUND VALUE FUND VALUE FUND*
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Investments at cost ........................................... $18,907,673 $ 31,032,097 $ 5,237,609 $ 556,978
Net unrealized appreciation (depreciation) .................... 479,275 1,371,124 (45,418) 87,057
----------- ------------ ----------- ---------
Total investments at value ................................. 19,386,948 32,403,221 5,192,191 644,035
Cash ............................................................. 275,724 2,331,370 341,723 22,722
Deposit with broker for securities sold short .................... -- -- -- --
Foreign currencies, at value (1) ................................. -- -- -- --
Receivables:
Investments sold .............................................. 245,297 817,123 -- --
Fund shares sold .............................................. -- 76,134 -- --
Dividends and interest ........................................ 22,178 28,180 13,874 1,435
Organization costs ............................................... 14,837 14,837 14,855 14,855
Prepaid expenses and other assets ................................ 1,788 9,717 1,516 180
----------- ------------ ----------- ---------
Total Assets ............................................... 19,946,772 35,680,582 5,564,159 683,227
----------- ------------ ----------- ---------
LIABILITIES:
Payables:
Investments purchased ......................................... 515,603 854,898 142,615 --
Fund shares redeemed .......................................... 48,983 1,774 -- --
Securities sold short, at value (Proceeds $3,811,277) ......... -- -- -- --
Dividends ..................................................... -- -- -- --
Investment advisory fees - net ................................ 21,361 30,969 4,204 404
Service and distribution fees ................................. -- 1,778 7 14
Administration fees ........................................... 8,216 7,344 1,117 139
Accrued expenses and other payables ........................... 84,151 14,147 11,046 11,314
----------- ------------ ----------- ---------
Total Liabilities .......................................... 678,314 910,910 158,989 11,871
----------- ------------ ----------- ---------
NET ASSETS .......................................................... $19,268,458 $ 34,769,672 $ 5,405,170 $ 671,356
=========== ============ =========== =========
NET ASSETS CONSIST OF:
Paid-in capital (no par value) ................................... $17,684,859 $ 32,800,363 $ 5,334,252 $ 624,433
Undistributed net investment income (loss) ....................... 82,643 (4,098) 29,031 6,103
Accumulated net realized gain (loss) on investments, securities
sold short and foreign currency ............................... 1,021,681 602,283 87,305 (46,237)
Net unrealized appreciation (depreciation) on investments,
securities sold short and foreign currency .................... 479,275 1,371,124 (45,418) 87,057
----------- ------------ ----------- ---------
TOTAL NET ASSETS .................................................... $19,268,458 $ 34,769,672 $ 5,405,170 $ 671,356
=========== ============ =========== =========
SHARES OF BENEFICIAL INTEREST
Institutional Class:
Net Assets ....................................................... $19,268,458 $ 29,170,754 $ 5,380,703 $ 654,212
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 1,367,918 1,949,113 430,497 42,293
----------- ------------ ----------- ---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 14.09 $ 14.97 $ 12.50 $ 15.47
=========== ============ =========== =========
Investor Class:
Net Assets ....................................................... N/A $ 5,178,623 $ 24,467 N/A
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... N/A 347,860 1,961 N/A
----------- ------------ ----------- ---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... N/A $ 14.89 $ 12.48 N/A
=========== ============ =========== =========
C Class:
Net Assets ....................................................... N/A $ 420,295 N/A $ 17,144
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... N/A 28,439 N/A 1,116
----------- ------------ ----------- ---------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... N/A $ 14.78 N/A $ 15.36
=========== ============ =========== =========
MAXIMUM OFFERING PRICE PER SHARE (NAV/99%) ....................... N/A $ 14.93 N/A $ 15.52
=========== ============ =========== =========
<CAPTION>
INTERNATIONAL INTERNATIONAL
CORE SMALL CAP EQUITY
EQUITY FUND EQUITY FUND FUND
----------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments:
Investments at cost ........................................... $ 4,987,633 $ 17,156,568 $ 14,858,328
Net unrealized appreciation (depreciation) .................... 172,019 3,204,262 830,190
----------- ------------ ------------
Total investments at value ................................. 5,159,652 20,360,830 15,688,518
Cash ............................................................. 523,430 1,381,725 1,336,977
Deposit with broker for securities sold short .................... -- -- --
Foreign currencies, at value (1) ................................. -- 419,106 326
Receivables:
Investments sold .............................................. -- -- --
Fund shares sold .............................................. 43,893 9,247 22,187
Dividends and interest ........................................ 14,061 14,366 38,394
Organization costs ............................................... 14,855 -- --
Prepaid expenses and other assets ................................ 3,396 15,082 4,815
----------- ------------ ------------
Total Assets ............................................... 5,759,287 22,200,356 17,091,217
----------- ------------ ------------
LIABILITIES:
Payables:
Investments purchased ......................................... 112,275 1,173,529 504,580
Fund shares redeemed .......................................... 257 -- --
Securities sold short, at value (Proceeds $3,811,277) ......... -- -- --
Dividends ..................................................... -- -- --
Investment advisory fees - net ................................ 3,488 19,547 12,618
Service and distribution fees ................................. 275 -- 97
Administration fees ........................................... 1,176 4,266 3,333
Accrued expenses and other payables ........................... 9,721 25,832 22,053
----------- ------------ ------------
Total Liabilities .......................................... 127,192 1,223,174 542,681
----------- ------------ ------------
NET ASSETS .......................................................... $ 5,632,095 $ 20,977,182 $ 16,548,536
=========== ============ ============
NET ASSETS CONSIST OF:
Paid-in capital (no par value) ................................... $ 5,481,679 $ 16,990,292 $ 14,996,714
Undistributed net investment income (loss) ....................... 38,270 (8,138) (8,138)
Accumulated net realized gain (loss) on investments, securities
sold short and foreign currency ............................... (59,873) 791,431 728,493
Net unrealized appreciation (depreciation) on investments,
securities sold short and foreign currency .................... 172,019 3,203,597 831,467
----------- ------------ ------------
TOTAL NET ASSETS .................................................... $ 5,632,095 $ 20,977,182 $ 16,548,536
=========== ============ ============
SHARES OF BENEFICIAL INTEREST
Institutional Class:
Net Assets ....................................................... $ 4,788,265 $ 20,977,182 $ 16,427,194
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 324,204 894,197 919,175
----------- ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 14.77 $ 23.46 $ 17.87
=========== ============ ============
Investor Class:
Net Assets ....................................................... $ 784,479 N/A N/A
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 53,243 N/A N/A
----------- ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 14.73 N/A N/A
=========== ============ ============
C Class:
Net Assets ....................................................... $ 59,351 N/A $ 121,342
Shares of beneficial interest outstanding (unlimited shares
authorized, no par value) ..................................... 4,047 N/A $ 6,851
----------- ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ......... $ 14.66 N/A $ 17.71
=========== ============ ============
MAXIMUM OFFERING PRICE PER SHARE (NAV/99%) ....................... $ 14.81 N/A $ 17.89
=========== ============ ============
</TABLE>
See Notes to Financial Statements 43
<PAGE> 46
STATEMENTS OF OPERATIONS [undiscovered
For the year ended August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL
BEHAVIORAL BEHAVIORAL LONG/SHORT REIT
GROWTH FUND VALUE FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................... $ 265,493 $ 73,803 $ 37,733 $ 1,769,672
Foreign taxes withheld on dividend income ................... -- -- -- --
Interest .................................................... 417,285 40,609 252,806 31,445
------------- ------------- ------------- -------------
Total investment income .................................. 682,778 114,412 290,539 1,801,117
============= ============= ============= =============
EXPENSES:
Investment advisory fees .................................... 1,971,850 113,164 81,981 319,695
Administration fees ......................................... 519,561 26,969 13,229 76,076
Custodian fees .............................................. 50,500 24,273 7,904 18,238
Professional fees ........................................... 172,584 38,194 29,878 38,868
Transfer agent fees ......................................... 140,673 27,397 25,534 80,456
Trustees' fees .............................................. 21,575 1,099 517 4,118
Reports to shareholders ..................................... 7,227 821 97 734
Amortization of organization costs .......................... 6,398 -- -- 6,398
Offering costs .............................................. 79,409 17,127 11,310 25,928
Service and distribution fees - Investor Class .............. 39,297 -- -- 1,629
Service and distribution fees - C Class ..................... 11,832 -- -- 1,929
Other fees .................................................. 24,329 1,461 2,918 10,175
Dividends on securities sold short .......................... -- -- 36,334 --
------------- ------------- ------------- -------------
Total expenses before waiver/reimbursement ............... 3,045,235 250,505 209,702 584,244
Less: Waiver/reimbursement ............................... (294,092) (99,517) (67,548) (154,769)
------------- ------------- ------------- -------------
Total expenses net of waiver/reimbursement ............... 2,751,143 150,988 142,154 429,475
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ................................... (2,068,365) (36,576) 148,385 1,371,642
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS :
Net realized gain (loss) on:
Investments sold ......................................... 11,963,438 (228,222) 2,583,922 (736,398)
Securities sold short .................................... -- -- (2,474,385) --
Foreign currency related transactions .................... -- -- -- --
------------- ------------- ------------- -------------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................. 34,607,040 3,719,370 (488,059) 4,899,188
Securities sold short .................................... -- -- 137,224 --
Foreign currency translations ............................ -- -- -- --
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......... 46,570,478 3,491,148 (241,298) 4,162,790
------------- ------------- ------------- -------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ...................................... $ 44,502,113 $ 3,454,572 $ (92,913) $ 5,534,432
============= ============= ============= =============
</TABLE>
----------
* On December 22, 1999, the All Cap Value Fund ceased offering Investor
Class shares and on December 28, 1999, all remaining shares were
redeemed.
See Notes to Financial Statements
44
<PAGE> 47
[undiscovered
managers(TM) LOGO]
<TABLE>
<CAPTION>
SMALL CAP HIDDEN ALL CAP
SPECIAL SMALL VALUE VALUE VALUE
CAP FUND FUND FUND FUND*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 269,668 $ 295,807 $ 67,067 $ 11,908
Foreign taxes withheld on dividend income ................. -- -- -- --
Interest .................................................. 26,388 85,257 11,879 1,821
------------- ------------- ------------- -------------
Total investment income ................................ 296,056 381,064 78,946 13,729
============= ============= ============= =============
EXPENSES:
Investment advisory fees .................................. 117,614 293,588 33,672 6,121
Administration fees ....................................... 45,236 69,873 8,872 2,071
Custodian fees ............................................ 8,945 9,097 8,220 7,485
Professional fees ......................................... 26,544 35,404 19,496 18,333
Transfer agent fees ....................................... 23,786 78,985 48,988 55,691
Trustees' fees ............................................ 1,733 3,774 341 82
Reports to shareholders ................................... 732 787 124 16
Amortization of organization costs ........................ 6,398 6,398 6,398 6,398
Offering costs ............................................ 12,698 25,963 18,451 15,332
Service and distribution fees - Investor Class ............ -- 9,215 3,594 61
Service and distribution fees - C Class ................... -- 1,650 -- 365
Other fees ................................................ 8,902 10,387 964 388
Dividends on securities sold short ........................ -- -- -- --
------------- ------------- ------------- -------------
Total expenses before waiver/reimbursement ............. 252,588 545,121 149,120 112,343
Less: Waiver/reimbursement ............................. (34,542) (143,105) (99,400) (103,777)
------------- ------------- ------------- -------------
Total expenses net of waiver/reimbursement ............. 218,046 402,016 49,720 8,566
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ................................. 78,010 (20,952) 29,226 5,163
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS :
Net realized gain (loss) on:
Investments sold ....................................... 1,612,080 927,821 127,383 (32,022)
Securities sold short .................................. -- -- -- --
Foreign currency related transactions .................. -- -- -- --
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ 86,505 2,413,972 25,682 27,622
Securities sold short .................................. -- -- -- --
Foreign currency translations .......................... -- -- -- --
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....... 1,698,585 3,341,793 153,065 (4,400)
------------- ------------- ------------- -------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................................... $ 1,776,595 $ 3,320,841 $ 182,291 $ 763
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
CORE SMALL CAP INTERNATIONAL
EQUITY EQUITY EQUITY
FUND FUND FUND
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................................. $ 80,499 $ 71,451 $ 151,563
Foreign taxes withheld on dividend income ................. -- (9,566) (18,399)
Interest .................................................. 18,725 69,308 35,097
------------- ------------- -------------
Total investment income ................................ 99,224 131,193 168,261
============= ============= =============
EXPENSES:
Investment advisory fees .................................. 35,610 158,914 111,269
Administration fees ....................................... 12,028 34,564 29,294
Custodian fees ............................................ 7,340 20,381 20,788
Professional fees ......................................... 19,407 39,150 35,688
Transfer agent fees ....................................... 72,962 28,529 50,758
Trustees' fees ............................................ 411 1,329 1,117
Reports to shareholders ................................... 111 451 697
Amortization of organization costs ........................ 6,398 -- --
Offering costs ............................................ 22,755 15,153 24,067
Service and distribution fees - Investor Class ............ 2,144 -- --
Service and distribution fees - C Class ................... 159 -- 655
Other fees ................................................ 2,407 3,128 2,862
Dividends on securities sold short ........................ -- -- --
------------- ------------- -------------
Total expenses before waiver/reimbursement ............. 181,732 301,599 277,195
Less: Waiver/reimbursement ............................. (131,795) (80,494) (106,705)
------------- ------------- -------------
Total expenses net of waiver/reimbursement ............. 49,937 221,105 170,490
------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ................................. 49,287 (89,912) (2,229)
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS :
Net realized gain (loss) on:
Investments sold ....................................... (27,517) 1,019,256 750,614
Securities sold short .................................. -- -- --
Foreign currency related transactions .................. -- (45,111) (41,022)
Net change in unrealized appreciation (depreciation) on:
Investments ............................................ (148,999) 2,339,339 332,069
Securities sold short .................................. -- -- --
Foreign currency translations .......................... -- (791) 1,183
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ....... (176,516) 3,312,693 1,042,844
------------- ------------- -------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................................... $ (127,229) $ 3,222,781 $ 1,040,615
============= ============= =============
</TABLE>
See Notes to Financial Statements 45
<PAGE> 48
STATEMENT OF CASH FLOWS [undiscovered
For the year ended August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL LONG/SHORT FUND
---------------------------------------
<S> <C> <C>
NET INCREASE IN CASH:
Cash flows from operating activities:
Interest and dividends received...................................... $ 261,468
Operating expenses paid ............................................. (91,235)
Purchases of long-term securities ................................... (9,124,614)
Net purchases of short-term securities .............................. (6,177)
Proceeds from sales of long-term securities ......................... 12,958,954
--------------
Net cash provided by operating activities ................................ $ 3,998,396
Cash flows from financing activities:
Net shareholder subscriptions and redemptions ....................... (1,610,407)
Cash distributions paid ............................................. (4,258)
Proceeds from securities sold short ................................. 9,188,763
Purchases of securities sold short .................................. (13,062,494)
Decrease in deposit with broker for securities sold short ........... 1,490,000
--------------
Net cash used in financing activities .................................... (3,998,396)
--------------
Net increase in cash ..................................................... 0
Cash - beginning of year ................................................. 0
--------------
Cash - end of year ....................................................... $ 0
==============
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations ..................... $ (92,913)
Decrease in investments, net ........................................ 4,069,459
Decrease in dividends and interest receivable ....................... 2,958
Increase in prepaid expenses and other assets ....................... (6,377)
Decrease in investment advisory fee payable ......................... (2,269)
Increase in accrued expenses and other payables ..................... 27,538
--------------
Total adjustments ................................................... 4,091,309
--------------
Net cash provided by operating activities ................................ $ 3,998,396
==============
</TABLE>
See Notes to Financial Statements
46
<PAGE> 49
[undiscovered
managers(TM) LOGO]
This page intentionally left blank.
<PAGE> 50
STATEMENTS OF CHANGES IN NET ASSETS [undiscovered
managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL GROWTH FUND BEHAVIORAL VALUE FUND (1)
---------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ........................ $ 98,849,739 $ 5,294,388 $ 3,651,462 $ --
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss) ........................... (2,068,365) (291,498) (36,576) (3,435)
Net realized gain (loss) on investments and securities
sold short ........................................... 11,963,438 (2,841,027) (228,222) 79,254
Net change in unrealized appreciation (depreciation)
on investments and securities sold short ............. 34,607,040 24,604,678 3,719,370 (48,317)
------------- ------------- ------------- -----------
Net increase (decrease) in net assets resulting from
operations ........................................... 44,502,113 21,472,153 3,454,572 27,502
------------- ------------- ------------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ............................... -- -- (17,602) --
Net realized gains .................................. -- -- (193,512) --
Investor Class Shares:
Net investment income ............................... -- -- -- --
Net realized gains .................................. -- -- -- --
C Class Shares:
Net investment income ............................... -- -- -- --
Net realized gains .................................. -- -- -- --
------------- ------------- ------------- -----------
Total distributions to shareholders .................... -- -- (211,114) --
------------- ------------- ------------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ......................... 191,671,083 74,149,825 14,524,973 3,656,376
Issued to shareholders in reinvestment of
distributions ..................................... -- -- 144,132 --
Cost of Shares redeemed ............................. (65,206,556) (6,080,995) (549,110) (32,416)
------------- ------------- ------------- -----------
Increase in net assets derived from Institutional
Class Share transactions .......................... 126,464,527 68,068,830 14,119,995 3,623,960
------------- ------------- ------------- -----------
Investor Class Shares:
Proceeds from Shares issued ......................... 15,557,962 4,233,947 N/A N/A
Issued to shareholders in reinvestment of
distributions ..................................... -- -- N/A N/A
Cost of Shares redeemed ............................. (2,662,763) (397,454) N/A N/A
------------- ------------- ------------- -----------
Increase in net assets derived from Investor Class
Share transactions ................................ 12,895,199 3,836,493 N/A N/A
------------- ------------- ------------- -----------
C Class Shares:
Proceeds from Shares issued ......................... 2,445,636 177,875 N/A N/A
Issued to shareholders in reinvestment of
distributions ..................................... -- -- N/A N/A
Cost of Shares redeemed ............................. (132,621) -- N/A N/A
------------- ------------- ------------- -----------
Increase in net assets derived from C Class Share
transactions ...................................... 2,313,015 177,875 N/A N/A
------------- ------------- ------------- -----------
Increase (decrease) in net assets derived from capital
share transactions ..................................... 141,672,741 72,083,198 14,119,995 3,623,960
------------- ------------- ------------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. 186,174,854 93,555,351 17,363,453 3,651,462
------------- ------------- ------------- ---------
NET ASSETS AT END OF PERIOD .............................. $ 285,024,593 $ 98,849,739 $ 21,014,915 $ 3,651,462
============= ============= ============= ===========
Undistributed net investment income (loss) ............... $ -- $ -- $ (443) $ 17,026
------------- ------------- ------------- -----------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Institutional Class Shares:
Sold ................................................ 6,530,648 4,306,126 849,074 243,753
Issued to shareholders in reinvestment of
distributions ..................................... -- -- 9,065 --
Redeemed ............................................ (2,271,918) (348,452) (32,083) (2,097)
------------- ------------- ------------- -----------
Total Institutional Class transactions ........... 4,258,730 3,957,674 826,056 241,656
------------- ------------- ------------- -----------
Investor Class Shares:
Sold ................................................ 508,619 233,173 N/A N/A
Issued to shareholders in reinvestment of
distributions ..................................... -- -- N/A N/A
Redeemed ............................................ (92,477) (21,222) N/A N/A
------------- ------------- ------------- -----------
Total Investor Class transactions ................ 416,142 211,951 N/A N/A
------------- ------------- ------------- -----------
C Class Shares:
Sold ................................................ 85,243 8,687 N/A N/A
Issued to shareholders in reinvestment of
distributions ..................................... -- -- N/A N/A
Redeemed ............................................ (4,521) -- N/A N/A
------------- ------------- ------------- -----------
Total C Class transactions ....................... 80,722 8,687 N/A N/A
------------- ------------- ------------- -----------
Net increase in capital shares ........................... 4,755,594 4,178,312 826,056 241,656
============= ============= ============= ===========
</TABLE>
----------
(1) The Fund commenced investment operations on December 28, 1998.
48 See Notes to Financial Statements
<PAGE> 51
STATEMENTS OF CHANGES IN NET ASSETS [undiscovered
managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL LONG/SHORT FUND (1) REIT FUND
---------------------------------- --------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $ 5,942,350 $ -- $ 22,884,294 $ 9,122,042
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss) ........................... 148,385 83,033 1,371,642 841,893
Net realized gain (loss) on investments and
securities sold short ................................ 109,537 (477,182) (736,398) (1,172,811)
Net change in unrealized appreciation (depreciation)
on investments and securities sold short ............. (350,835) 679,229 4,899,188 1,508,354
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations ........................................... (92,913) 285,080 5,534,432 1,177,436
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ............................... (169,173) -- (1,058,795) (363,218)
Net realized gains .................................. -- -- -- --
Investor Class Shares:
Net investment income ............................... -- -- (24,421) --
Net realized gains .................................. -- -- -- --
C Class Shares:
Net investment income ............................... -- -- (6,162) --
Net realized gains .................................. -- -- -- --
------------ ------------ ------------ ------------
Total distributions to shareholders .................... (169,173) -- (1,089,378) (363,218)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ......................... 405,779 5,936,333 28,756,491 15,763,544
Issued to shareholders in reinvestment of
distributions ..................................... 164,915 -- 1,052,208 362,073
Cost of Shares redeemed ............................. (2,016,186) (279,063) (11,987,367) (3,695,055)
------------ ------------ ------------ ------------
Increase in net assets derived from Institutional
Class Share transactions .......................... (1,445,492) 5,657,270 17,821,332 12,430,562
------------ ------------ ------------ ------------
Investor Class Shares:
Proceeds from Shares issued ......................... N/A N/A 183,770 498,714
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 24,421 --
Cost of Shares redeemed ............................. N/A N/A (360,556) (1,253)
------------ ------------ ------------ ------------
Increase in net assets derived from Investor Class
Share transactions ................................ N/A N/A (152,365) 497,461
------------ ------------ ------------ ------------
C Class Shares:
Proceeds from Shares issued ......................... N/A N/A 340,594 20,011
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 1,819 --
Cost of Shares redeemed ............................. N/A N/A (19,377) --
------------ ------------ ------------ ------------
Increase in net assets derived from C Class Share
transactions ...................................... N/A N/A 323,036 20,011
------------ ------------ ------------ ------------
Increase (decrease) in net assets derived from capital
share transactions ..................................... (1,445,492) 5,657,270 17,992,003 12,948,034
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. (1,707,578) 5,942,350 22,437,057 13,762,252
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD .............................. $ 4,234,772 $ 5,942,350 $ 45,321,351 $ 22,884,294
============ ============ ============ ============
Undistributed net investment income (loss) ............... $ 82,706 $ 103,494 $ 833,913 $ 547,016
------------ ------------ ------------ ------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Institutional Class Shares:
Sold ................................................ 32,614 492,681 2,546,421 1,440,463
Issued to shareholders in reinvestment of
distributions ..................................... 13,663 -- 109,719 29,824
Redeemed ............................................ (163,763) (24,714) (1,081,570) (330,562)
------------ ------------ ------------ ------------
Total Institutional Class transactions ........... (117,486) 467,967 1,574,570 1,139,725
------------ ------------ ------------ ------------
Investor Class Shares:
Sold ................................................ N/A N/A 16,631 45,642
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 2,549 --
Redeemed ............................................ N/A N/A (33,476) (112)
------------ ------------ ------------ ------------
Total Investor Class transactions ................ N/A N/A (14,296) 45,530
------------ ------------ ------------ ------------
C Class Shares:
Sold ................................................ N/A N/A 29,941 1,788
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 190 --
Redeemed ............................................ N/A N/A (1,544) --
------------ ------------ ------------ ------------
Total C Class transactions ....................... N/A N/A 28,587 1,788
------------ ------------ ------------ ------------
Net increase in capital shares ........................... (117,486) 467,967 1,588,861 1,187,043
============ ============ ============ ============
<CAPTION>
SPECIAL SMALL CAP FUND SMALL CAP VALUE FUND
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $ 16,077,580 $ 11,286,389 $ 21,111,171 $ 13,879,749
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss) ........................... 78,010 (82,457) (20,952) (21,511)
Net realized gain (loss) on investments and
securities sold short ................................ 1,612,080 (196,115) 927,821 47,095
Net change in unrealized appreciation (depreciation)
on investments and securities sold short ............. 86,505 3,226,443 2,413,972 3,182,571
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations ........................................... 1,776,595 2,947,871 3,320,841 3,208,155
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ............................... -- -- -- (23,442)
Net realized gains .................................. -- -- (316,055) (71,791)
Investor Class Shares:
Net investment income ............................... -- -- -- (30)
Net realized gains .................................. -- -- (13,704) (182)
C Class Shares:
Net investment income ............................... -- -- -- --
Net realized gains .................................. -- -- (1,741) --
------------ ------------ ------------ ------------
Total distributions to shareholders .................... -- -- (331,500) (95,445)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ......................... 10,896,679 12,234,293 20,851,672 14,233,391
Issued to shareholders in reinvestment of
distributions ..................................... -- -- 309,357 93,248
Cost of Shares redeemed ............................. (9,482,396) (10,390,973) (14,640,199) (11,202,241)
------------ ------------ ------------ ------------
Increase in net assets derived from Institutional
Class Share transactions .......................... 1,414,283 1,843,320 6,520,830 3,124,398
------------ ------------ ------------ ------------
Investor Class Shares:
Proceeds from Shares issued ......................... N/A N/A 5,308,760 1,731,869
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 13,704 211
Cost of Shares redeemed ............................. N/A N/A (1,458,753) (858,334)
------------ ------------ ------------ ------------
Increase in net assets derived from Investor Class
Share transactions ................................ N/A N/A 3,863,711 873,746
------------ ------------ ------------ ------------
C Class Shares:
Proceeds from Shares issued ......................... N/A N/A 283,302 120,568
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 1,317 --
Cost of Shares redeemed ............................. N/A N/A -- --
------------ ------------ ------------ ------------
Increase in net assets derived from C Class Share
transactions ...................................... N/A N/A 284,619 120,568
------------ ------------ ------------ ------------
Increase (decrease) in net assets derived from capital
share transactions ..................................... 1,414,283 1,843,320 10,669,160 4,118,712
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. 3,190,878 4,791,191 13,658,501 7,231,422
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD .............................. $ 19,268,458 $ 16,077,580 $ 34,769,672 $ 21,111,171
============ ============ ============ ============
Undistributed net investment income (loss) ............... $ 82,643 $ -- $ (4,098) $ (415)
------------ ------------ ------------ ------------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Institutional Class Shares:
Sold ................................................ 841,704 1,068,414 1,510,449 1,109,410
Issued to shareholders in reinvestment of
distributions ..................................... -- -- 23,742 5,981
Redeemed ............................................ (726,528) (900,945) (1,064,704) (906,129)
------------ ------------ ------------ ------------
Total Institutional Class transactions ........... 115,176 167,469 469,487 209,262
------------ ------------ ------------ ------------
Investor Class Shares:
Sold ................................................ N/A N/A 378,995 131,580
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 1,055 18
Redeemed ............................................ N/A N/A (102,944) (63,698)
------------ ------------ ------------ ------------
Total Investor Class transactions ................ N/A N/A 277,106 67,900
------------ ------------ ------------ ------------
C Class Shares:
Sold ................................................ N/A N/A 19,685 8,652
Issued to shareholders in reinvestment of
distributions ..................................... N/A N/A 102 --
Redeemed ............................................ N/A N/A -- --
------------ ------------ ------------ ------------
Total C Class transactions ....................... N/A N/A 19,787 8,652
------------ ------------ ------------ ------------
Net increase in capital shares ........................... 115,176 167,469 766,380 285,814
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements 49
<PAGE> 52
STATEMENTS OF CHANGES IN NET ASSETS [undiscovered
managers(TM) LOGO]
<TABLE>
<CAPTION>
HIDDEN VALUE FUND
--------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD .................................................. $ 3,294,923 $ 964,979
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss) ..................................................... 29,226 7,651
Net realized gain (loss) on investments and foreign currency transactions ........ 127,383 104,786
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions .............................................. 25,682 309,551
----------- -----------
Net increase (decrease) in net assets resulting from operations .................. 182,291 421,988
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ......................................................... (8,111) (8,960)
Net realized gains ............................................................ (63,114) (13,732)
Investor Class Shares:
Net investment income ......................................................... (5,550) (318)
Net realized gains ............................................................ (73,839) (488)
C Class Shares:
Net investment income ......................................................... -- --
Net realized gains ............................................................ -- --
----------- -----------
Total distributions to shareholders .............................................. (150,614) (23,498)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ................................................... 4,653,476 1,862,645
Issued to shareholders in reinvestment of distributions ....................... 70,718 22,692
Cost of Shares redeemed ....................................................... (952,210) (1,586,895)
----------- -----------
Increase in net assets derived from Institutional Class Share transactions .... 3,771,984 298,442
----------- -----------
Investor Class Shares:
Proceeds from Shares issued ................................................... 258,341 3,396,388
Issued to shareholders in reinvestment of distributions ....................... 79,388 806
Cost of Shares redeemed ....................................................... (2,031,143) (1,764,182)
----------- -----------
Increase in net assets derived from Investor Class Share transactions ......... (1,693,414) 1,633,012
----------- -----------
C Class Shares:
Proceeds from Shares issued ................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Cost of Shares redeemed ....................................................... N/A N/A
----------- -----------
Increase in net assets derived from C Class Share transactions ................ N/A N/A
----------- -----------
Increase (decrease) in net assets derived from capital share transactions .......... 2,078,570 1,931,454
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ 2,110,247 2,329,944
----------- -----------
NET ASSETS AT END OF PERIOD ........................................................ $ 5,405,170 $ 3,294,923
=========== ===========
Undistributed net investment income (loss) ......................................... $ 29,031 $ 8,896
----------- -----------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Institutional Class Shares:
Sold .......................................................................... 371,345 162,951
Issued to shareholders in reinvestment of distributions ....................... 6,133 2,035
Redeemed ...................................................................... (77,440) (129,289)
----------- -----------
Total Institutional Class transactions ..................................... 300,038 35,697
----------- -----------
Investor Class Shares:
Sold .......................................................................... 21,219 269,258
Issued to shareholders in reinvestment of distributions ....................... 6,885 72
Redeemed ...................................................................... (160,000) (139,609)
----------- -----------
Total Investor Class transactions .......................................... (131,896) 129,721
----------- -----------
C Class Shares:
Sold .......................................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Redeemed ...................................................................... N/A N/A
----------- -----------
Total C Class transactions ................................................. N/A N/A
----------- -----------
Net increase in capital shares ..................................................... 168,142 165,418
=========== ===========
<CAPTION>
ALL CAP VALUE FUND (2)
--------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD .................................................. $ 1,039,432 $ 329,619
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss) ..................................................... 5,163 3,377
Net realized gain (loss) on investments and foreign currency transactions ........ (32,022) (3,137)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions .............................................. 27,622 119,489
----------- -----------
Net increase (decrease) in net assets resulting from operations .................. 763 119,729
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ......................................................... (8,824) (5,967)
Net realized gains ............................................................ -- --
Investor Class Shares:
Net investment income ......................................................... (594) (839)
Net realized gains ............................................................ -- --
C Class Shares:
Net investment income ......................................................... (172) --
Net realized gains ............................................................ -- --
----------- -----------
Total distributions to shareholders .............................................. (9,590) (6,806)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ................................................... 153,625 716,676
Issued to shareholders in reinvestment of distributions ....................... 8,746 5,967
Cost of Shares redeemed ....................................................... (450,796) (160,519)
----------- -----------
Increase in net assets derived from Institutional Class Share transactions .... (288,425) 562,124
----------- -----------
Investor Class Shares:
Proceeds from Shares issued ................................................... -- --
Issued to shareholders in reinvestment of distributions ....................... 594 840
Cost of Shares redeemed ....................................................... (53,690) --
----------- -----------
Increase in net assets derived from Investor Class Share transactions ......... (53,096) 840
----------- -----------
C Class Shares:
Proceeds from Shares issued ................................................... 55,926 33,926
Issued to shareholders in reinvestment of distributions ....................... 172 --
Cost of Shares redeemed ....................................................... (73,826) --
----------- -----------
Increase in net assets derived from C Class Share transactions ................ (17,728) 33,926
----------- -----------
Increase (decrease) in net assets derived from capital share transactions .......... (359,249) 596,890
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (368,076) 709,813
----------- -----------
NET ASSETS AT END OF PERIOD ........................................................ $ 671,356 $ 1,039,432
=========== ===========
Undistributed net investment income (loss) ......................................... $ 6,103 $ 5,897
----------- -----------
OTHER INFORMATION:
SHARE TRANSACTIONS:
Institutional Class Shares:
Sold .......................................................................... 10,390 47,852
Issued to shareholders in reinvestment of distributions ....................... 598 443
Redeemed ...................................................................... (31,234) (10,829)
----------- -----------
Total Institutional Class transactions ..................................... (20,246) 37,466
----------- -----------
Investor Class Shares:
Sold .......................................................................... -- --
Issued to shareholders in reinvestment of distributions ....................... 41 62
Redeemed ...................................................................... (3,629) --
----------- -----------
Total Investor Class transactions .......................................... (3,588) 62
----------- -----------
C Class Shares:
Sold .......................................................................... 4,012 2,170
Issued to shareholders in reinvestment of distributions ....................... 12 --
Redeemed ...................................................................... (5,077) --
----------- -----------
Total C Class transactions ................................................. (1,053) 2,170
----------- -----------
Net increase in capital shares ..................................................... (24,887) 39,698
=========== ===========
</TABLE>
----------
(1) The Fund commenced investment operations on December 30, 1998.
(2) On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
50 See Notes to Financial Statements
<PAGE> 53
<TABLE>
<CAPTION>
CORE EQUITY FUND
--------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
<S> <C> <C>
NET ASSETS at beginning of period .................................................. $ 5,146,986 $ 1,338,493
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss) ..................................................... 49,287 39,086
Net realized gain (loss) on investments and foreign currency transactions ........ (27,517) (29,336)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions .............................................. (148,999) 501,435
----------- -----------
Net increase (decrease) in net assets resulting from operations .................. (127,229) 511,185
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ......................................................... (41,681) (20,802)
Net realized gains ............................................................ -- --
Investor Class Shares:
Net investment income ......................................................... (4,711) (281)
Net realized gains ............................................................ -- --
C Class Shares:
Net investment income ......................................................... (34) --
Net realized gains ............................................................ -- --
----------- -----------
Total distributions to shareholders .............................................. (46,426) (21,083)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ................................................... 1,337,113 3,793,601
Issued to shareholders in reinvestment of distributions ....................... 41,681 20,801
Cost of Shares redeemed ....................................................... (1,008,696) (1,050,831)
----------- -----------
Increase in net assets derived from Institutional Class Share transactions .... 370,098 2,763,571
----------- -----------
Investor Class Shares:
Proceeds from Shares issued ................................................... 700,648 611,946
Issued to shareholders in reinvestment of distributions ....................... 4,711 281
Cost of Shares redeemed ....................................................... (471,810) (62,423)
----------- -----------
Increase in net assets derived from Investor Class Share transactions ......... 233,549 549,804
----------- -----------
C Class Shares:
Proceeds from Shares issued ................................................... 55,363 5,016
Issued to shareholders in reinvestment of distributions ....................... 34 --
Cost of Shares redeemed ....................................................... (280) --
----------- -----------
Increase in net assets derived from C Class Share transactions ................ 55,117 5,016
----------- -----------
Increase (decrease) in net assets derived from capital share transactions .......... 658,764 3,318,391
----------- -----------
Total increase (decrease) in net assets ............................................ 485,109 3,808,493
----------- -----------
NET ASSETS AT END OF PERIOD ........................................................ $ 5,632,095 $ 5,146,986
=========== ===========
Undistributed net investment income (loss) ......................................... $ 38,270 $ 30,776
----------- -----------
OTHER INFORMATION:
Share transactions:
Institutional Class Shares:
Sold .......................................................................... 90,651 261,172
Issued to shareholders in reinvestment of distributions ....................... 2,731 1,431
Redeemed ...................................................................... (66,877) (66,490)
----------- -----------
Total Institutional Class transactions ..................................... 26,505 196,113
----------- -----------
Investor Class Shares:
Sold .......................................................................... 46,674 38,348
Issued to shareholders in reinvestment of distributions ....................... 309 19
Redeemed ...................................................................... (31,598) (3,899)
----------- -----------
Total Investor Class transactions .......................................... 15,385 34,468
----------- -----------
C Class Shares:
Sold .......................................................................... 3,737 328
Issued to shareholders in reinvestment of distributions ....................... 2 --
Redeemed ...................................................................... (20) --
----------- -----------
Total C Class transactions ................................................. 3,719 328
----------- -----------
Net increase in capital shares ..................................................... 45,609 230,909
=========== ===========
<CAPTION>
INTERNATIONAL
SMALL CAP EQUITY FUND (1)
---------------------------------
YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
NET ASSETS at beginning of period .................................................. $ 6,768,075 $ --
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss) ..................................................... (89,912) (7,385)
Net realized gain (loss) on investments and foreign currency transactions ........ 974,145 (25,685)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions .............................................. 2,338,548 865,049
----------- ----------
Net increase (decrease) in net assets resulting from operations .................. 3,222,781 831,979
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ......................................................... -- --
Net realized gains ............................................................ (91,237) --
Investor Class Shares:
Net investment income ......................................................... -- --
Net realized gains ............................................................ -- --
C Class Shares:
Net investment income ......................................................... -- --
Net realized gains ............................................................ -- --
----------- ----------
Total distributions to shareholders .............................................. (91,237) --
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ................................................... 13,311,075 6,095,840
Issued to shareholders in reinvestment of distributions ....................... 91,237 --
Cost of Shares redeemed ....................................................... (2,324,749) (159,744)
----------- ----------
Increase in net assets derived from Institutional Class Share transactions .... 11,077,563 5,936,096
----------- ----------
Investor Class Shares:
Proceeds from Shares issued ................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Cost of Shares redeemed ....................................................... N/A N/A
----------- ----------
Increase in net assets derived from Investor Class Share transactions ......... N/A N/A
----------- ----------
C Class Shares:
Proceeds from Shares issued ................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Cost of Shares redeemed ....................................................... N/A N/A
----------- ----------
Increase in net assets derived from C Class Share transactions ................ N/A N/A
----------- ----------
Increase (decrease) in net assets derived from capital share transactions .......... 11,077,563 5,936,096
----------- ----------
Total increase (decrease) in net assets ............................................ 14,209,107 6,768,075
----------- ----------
NET ASSETS AT END OF PERIOD ........................................................ $20,977,182 $6,768,075
=========== ==========
Undistributed net investment income (loss) ......................................... $ (8,138) $ (10,574)
----------- ----------
OTHER INFORMATION:
Share transactions:
Institutional Class Shares:
Sold .......................................................................... 536,334 459,420
Issued to shareholders in reinvestment of distributions ....................... 4,762 --
Redeemed ...................................................................... (94,150) (12,169)
----------- ----------
Total Institutional Class transactions ..................................... 446,946 447,251
----------- ----------
Investor Class Shares:
Sold .......................................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Redeemed ...................................................................... N/A N/A
----------- ----------
Total Investor Class transactions .......................................... N/A N/A
----------- ----------
C Class Shares:
Sold .......................................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Redeemed ...................................................................... N/A N/A
----------- ----------
Total C Class transactions ................................................. N/A N/A
----------- ----------
Net increase in capital shares ..................................................... 446,946 447,251
=========== ==========
<CAPTION>
INTERNATIONAL EQUITY FUND (1)
--------------------------------
YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ---------------
NET ASSETS at beginning of period .................................................. $ 5,565,655 $ --
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss) ..................................................... (2,229) 31,844
Net realized gain (loss) on investments and foreign currency transactions ........ 709,592 (26,492)
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions .............................................. 333,252 498,215
------------ -------------
Net increase (decrease) in net assets resulting from operations .................. 1,040,615 503,567
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Institutional Class Shares:
Net investment income ......................................................... (101,488) --
Net realized gains ............................................................ (4) --
Investor Class Shares:
Net investment income ......................................................... -- --
Net realized gains ............................................................ -- --
C Class Shares:
Net investment income ......................................................... (326) --
Net realized gains ............................................................ -- --
------------ -------------
Total distributions to shareholders .............................................. (101,818) --
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares issued ................................................... 10,741,738 5,163,208
Issued to shareholders in reinvestment of distributions ....................... 101,492 --
Cost of Shares redeemed ....................................................... (922,088) (101,120)
------------ -------------
Increase in net assets derived from Institutional Class Share transactions .... 9,921,142 5,062,088
------------ -------------
Investor Class Shares:
Proceeds from Shares issued ................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Cost of Shares redeemed ....................................................... N/A N/A
------------ -------------
Increase in net assets derived from Investor Class Share transactions ......... N/A N/A
------------ -------------
C Class Shares:
Proceeds from Shares issued ................................................... 122,736 N/A
Issued to shareholders in reinvestment of distributions ....................... 326 N/A
Cost of Shares redeemed ....................................................... (120) N/A
------------ -------------
Increase in net assets derived from C Class Share transactions ................ 122,942 N/A
------------ -------------
Increase (decrease) in net assets derived from capital share transactions .......... 10,044,084 5,062,088
------------ -------------
Total increase (decrease) in net assets ............................................ 10,982,881 5,565,655
------------ -------------
NET ASSETS AT END OF PERIOD ........................................................ $ 16,548,536 $ 5,565,655
============ =============
Undistributed net investment income (loss) ......................................... $ (8,138) $ 43,419
------------ -------------
OTHER INFORMATION:
Share transactions:
Institutional Class Shares:
Sold .......................................................................... 570,188 401,990
Issued to shareholders in reinvestment of distributions ....................... 5,728 --
Redeemed ...................................................................... (50,730) (8,000)
------------ -------------
Total Institutional Class transactions ..................................... 525,186 393,990
------------ -------------
Investor Class Shares:
Sold .......................................................................... N/A N/A
Issued to shareholders in reinvestment of distributions ....................... N/A N/A
Redeemed ...................................................................... N/A N/A
------------ -------------
Total Investor Class transactions .......................................... N/A N/A
------------ -------------
C Class Shares:
Sold .......................................................................... 6,839 N/A
Issued to shareholders in reinvestment of distributions ....................... 18 N/A
Redeemed ...................................................................... (7) N/A
------------ -------------
Total C Class transactions ................................................. 6,850 N/A
------------ -------------
Net increase in capital shares ..................................................... 532,036 393,990
============ =============
</TABLE>
See Notes to Financial Statements 51
<PAGE> 54
FINANCIAL HIGHLIGHTS [undiscovered
For a Share Outstanding Throughout the Periods managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL GROWTH FUND
---------------------------------------------------
INSTITUTIONAL CLASS (1)
-------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.38 $ 11.86 $ 12.50
Income from Investment Operations:
Net investment income (loss) (0.28) (0.13) (0.02)
Net realized and unrealized gain (loss)
on investments and securities sold short 9.30 9.65 (0.62)
----------- ----------- -----------
Total Income (Loss) from Investment
Operations 9.02 9.52 (0.64)
----------- ----------- -----------
Less Distributions:
Dividends from net investment income 0.00 0.00 0.00
Distributions from capital gains 0.00 0.00 0.00
----------- ----------- -----------
Total Distributions 0.00 0.00 0.00
----------- ----------- -----------
Net increase (decrease) in net asset value 9.02 9.52 (0.64)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 30.40 $ 21.38 $ 11.86
=========== =========== ===========
TOTAL RETURN** 42.19% 80.27% (5.12)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 263,268 $ 94,075 $ 5,254
Ratios to average net assets (+):
Net investment income (loss)
including reimbursement (0.97)% (0.72)% (0.35)%*
Operating expenses
including reimbursement 1.30% 1.30% 1.30%*
Portfolio turnover rate** 90% 72% 67%
(+) The operating expenses may reflect a reduction of the adviser fee, an
allocation of expenses to the Investment Adviser, or both. Had such actions not
been taken, the ratios would have been as follows:
Net investment income (loss) (1.11)% (1.26)% (5.08)%*
Operating expenses 1.44% 1.84% 6.03%*
<CAPTION>
BEHAVIORAL GROWTH FUND
-----------------------------------------------
INVESTOR CLASS (7)
-----------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.31 $ 11.85 $ 14.74
Income from Investment Operations:
Net investment income (loss) (0.38) (0.20) 0.00(A)
Net realized and unrealized gain (loss)
on investments and securities sold short 9.28 9.66 (2.89)
----------- ----------- -----------
Total Income (Loss) from Investment
Operations 8.90 9.46 (2.89)
----------- ----------- -----------
Less Distributions:
Dividends from net investment income 0.00 0.00 0.00
Distributions from capital gains 0.00 0.00 0.00
----------- ----------- -----------
Total Distributions 0.00 0.00 0.00
----------- ----------- -----------
Net increase (decrease) in net asset value 8.90 9.46 (2.89)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 30.21 $ 21.31 $ 11.85
=========== =========== ===========
TOTAL RETURN** 41.76% 79.83% (19.61)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 19,077 $ 4,590 $ 40
Ratios to average net assets (+):
Net investment income (loss)
including reimbursement (1.32)% (1.09)% (0.35)%*
Operating expenses
including reimbursement 1.65% 1.65% 1.30%*
Portfolio turnover rate** 90% 72% 67
(+) The operating expenses may reflect a reduction of the adviser fee, an
allocation of expenses to the Investment Adviser, or both. Had such actions not
been taken, the ratios would have been as follows:
Net investment income (loss) (1.49)% (1.77)% (5.43)%*
Operating expenses 1.82% 2.33% 6.38 %*
</TABLE>
----------
* Annualized
** For periods less than one year, percentages are not annualized.
(1) The Fund's Institutional Class commenced investment operations on
December 31, 1997.
(2) The Fund commenced investment operations on December 28, 1998.
(3) The Fund's Investor Class commenced investment operations on March 24,
1999.
(4) The Fund's Institutional Class commenced investment operations on
January 1, 1998.
(5) The Fund's Institutional Class commenced investment operations on
December 30, 1997.
(6) The Fund's Institutional Class commenced investment operations on
December 30, 1998.
(7) The Fund's Investor Class commenced investment operations on July 31,
1998.
(8) The Fund's C Class commenced investment operations on June 21, 1999.
(9) The Fund's C Class commenced investment operations on August 3, 1999.
(10) The Fund's C Class commenced investment operations on May 27, 1999.
(11) The Fund's C Class commenced investment operations on August 31, 1999.
(12) The Fund's C Class commenced investment operations on September 28,
1999.
(A) Represents less than $0.005 per share.
(B) The Fund incurred dividend expense on securities sold short for the year
ended August 31, 2000 and the period ended August 31, 1999. If the
dividend expense had not been incurred, the ratio of operating expenses
including reimbursement to average net assets for the year ended August
31,2000 would have been 2.00%. The ratio for the period ended August 31,
1999 would be unchanged.
(C) On December 22, 1999, the All Cap Value Fund ceased offering Investor
Class shares and on December 28, 1999, all remaining shares were
redeemed.
PER SHARE DATA IS CALCULATED BASED UPON THE AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
52 See Notes to Financial Statements
<PAGE> 55
[undiscovered
managers(TM) LOGO]
<TABLE>
<CAPTION>
BEHAVIORAL GROWTH FUND BEHAVIORAL VALUE FUND
------------------------------- --------------------------------
C CLASS (8) INSTITUTIONAL CLASS (2)
------------------------------- --------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.28 $ 19.44 $ 15.11 $ 12.50
Income from Investment Operations:
Net investment income (loss) (0.58) (0.07) (0.06) (0.03)
Net realized and unrealized gain (loss)
on investments and securities sold short 9.28 1.91 5.33 2.64
---------- ---------- ---------- ----------
Total Income (Loss) from Investment
Operations 8.70 1.84 5.27 2.61
---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income 0.00 0.00 (0.06) 0.00
Distributions from capital gains 0.00 0.00 (0.64) 0.00
---------- ---------- ---------- ----------
Total Distributions 0.00 0.00 (0.70) 0.00
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 8.70 1.84 4.57 2.61
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 29.98 $ 21.28 $ 19.68 $ 15.11
========== ========== ========== ==========
TOTAL RETURN** 40.77% 9.52% 35.99% 20.88%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) 2,680 $ 185 $ 21,015 $ 3,651
Ratios to average net assets (+):
Net investment income (loss)
including reimbursement (1.98)% (1.66)%* (0.35)% (0.35)%*
Operating expenses
including reimbursement 2.30% 2.25%* 1.40% 1.40%*
Portfolio turnover rate** 90% 72% 54% 58%
(+) The operating expenses may reflect a reduction of the adviser fee, an
allocation of expenses to the Investment Adviser, or both. Had such actions not
been taken, the ratios would have been as follows:
Net investment income (loss) (2.22)% (2.62)%* (1.26)% (6.84)%*
Operating expenses 2.54% 3.21%* 2.31% 7.89%*
<CAPTION>
BEHAVIORAL LONG/SHORT FUND REIT FUND
--------------------------------- -------------------------------
INSTITUTIONAL CLASS (2) INSTITUTIONAL CLASS (4)
--------------------------------- -------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.70 $ 12.50 $ 11.19 $ 10.64
Income from Investment Operations:
Net investment income (loss) 0.35 0.20 0.51 0.53
Net realized and unrealized gain (loss)
on investments and securities sold short (0.61) 0.00(A) 1.26 0.30
---------- ---------- ---------- ----------
Total Income (Loss) from Investment
Operations (0.26) 0.20 1.77 0.83
---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income (0.36) 0.00 (0.49) (0.28)
Distributions from capital gains 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
Total Distributions (0.36) 0.00 (0.49) (0.28)
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.62) 0.20 1.28 0.55
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 12.08 $ 12.70 $ 12.47 $ 11.19
========== ========== ========== ==========
TOTAL RETURN** (2.05)% 1.60% 17.18% 7.84%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 4,235 $ 5,942 $ 44,558 $ 22,355
Ratios to average net assets (+):
Net investment income (loss)
including reimbursement 2.81% 2.56%* 4.51% 4.86%
Operating expenses
including reimbursement 2.69%(B) 2.00%*(B) 1.40% 1.40%
Portfolio turnover rate** 242% 128% 64% 67%
(+) The operating expenses may reflect a reduction of the adviser fee, an
allocation of expenses to the Investment Adviser, or both. Had such actions not
been taken, the ratios would have been as follows:
Net investment income (loss) 1.53% 0.77%* 4.01% 4.28%
Operating expenses 3.97% 3.79%* 1.90% 1.98%
</TABLE>
See Notes to Financial Statements 53
<PAGE> 56
FINANCIAL HIGHLIGHTS [undiscovered
Fot a Share Outstanding Throughout the Periods managers (TM) LOGO]
<TABLE>
<CAPTION>
REIT FUND
------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS (4) INVESTOR CLASS (3) C CLASS (9)
----------------------- ---------------------------------- -------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 1998 AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
----------------------- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.50 $ 11.18 $ 10.13 $ 11.17 $ 11.19
Income from Investment Operations:
Net investment income (loss) 0.20 0.48 0.20 0.42 0.04
Net realized and unrealized gain (loss)
on investments (2.06) 1.25 0.85 1.23 (0.06)
--------- --------- --------- --------- ---------
Total Income (Loss) from Investment
Operations (1.86) 1.73 1.05 1.65 (0.02)
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from net investment income 0.00 (0.47) 0.00 (0.47) 0.00
Distributions from capital gains 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- ---------
Total Distributions 0.00 (0.47) 0.00 (0.47) 0.00
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value (1.86) 1.26 1.05 1.18 (0.02)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.64 $ 12.44 $ 11.18 $ 12.35 $ 11.17
========= ========= ========= ========= =========
TOTAL RETURN** (14.88)% 16.77% 10.37% 16.06% (0.18)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 9,122 $ 388 $ 509 $ 375 $ 20
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 4.85%* 4.38% 3.97%* 3.71% 4.57%*
Operating expenses
including reimbursement 1.40%* 1.75% 1.75%* 2.40% 2.21%*
Portfolio turnover rate** 52% 64% 67% 64% 67%
+ The operating expenses may reflect a
reduction of the adviser fee, an
allocation of expenses to the
Investment Adviser, or both. Had such
actions not been taken, the ratios
would have been as follows:
Net investment income (loss) 1.63%* 3.75% 3.26%* 2.85% 3.68%*
Operating expenses 4.62%* 2.38% 2.46%* 3.26% 3.10%*
</TABLE>
----------
* Annualized
** For periods less than one year, percentages are not annualized.
(1) The Fund's Institutional Class commenced investment operations on December
31, 1997.
(2) The Fund commenced investment operations on December 28, 1998.
(3) The Fund's Investor Class commenced investment operations on March 24,
1999.
(4) The Fund's Institutional Class commenced investment operations on January
1, 1998.
(5) The Fund's Institutional Class commenced investment operations on December
30, 1997.
(6) The Fund's Institutional Class commenced investment operations on December
30, 1998.
(7) The Fund's Investor Class commenced investment operations on July 31, 1998.
(8) The Fund's C Class commenced investment operations on June 21, 1999.
(9) The Fund's C Class commenced investment operations on August 3, 1999.
(10) The Fund's C Class commenced investment operations on May 27, 1999.
(11) The Fund's C Class commenced investment operations on August 31, 1999.
(12) The Fund's C Class commenced investment operations on September 28, 1999.
(A) Represents less than $0.005 per share.
(B) The Fund incurred dividend expense on securities sold short for the year
ended August 31, 2000 and the period ended August 31, 1999. If the dividend
expense had not been incurred, the ratio of operating expenses including
reimbursement to average net assets for the year ended August 31,2000 would
have been 2.00%. The ratio for the period ended August 31, 1999 would be
unchanged.
(C) On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
PER SHARE DATA IS CALCULATED BASED UPON THE AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
54 See Notes to Financial Statements
<PAGE> 57
[undiscovered
managers (TM) LOGO]
<TABLE>
<CAPTION>
SPECIAL SMALL CAP FUND
----------------------------------------------------
INSTITUTIONAL CLASS (5)
----------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.83 $ 10.40 $ 12.50
Income from Investment Operations:
Net investment income (loss) 0.06 (0.06) (0.03)
Net realized and unrealized gain (loss)
on investments 1.20 2.49 (2.07)
---------- ---------- ----------
Total Income (Loss) from Investment
Operations 1.26 2.43 (2.10)
---------- ---------- ----------
Less Distributions:
Dividends from net investment income 0.00 0.00 0.00
Distributions from capital gains 0.00 0.00 0.00
---------- ---------- ----------
Total Distributions 0.00 0.00 0.00
---------- ---------- ----------
Net increase (decrease) in net asset value 1.26 2.43 (2.10)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 14.09 $ 12.83 $ 10.40
========== ========== ==========
TOTAL RETURN** 9.82% 23.37% (16.80)%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S) $ 19,268 $ 16,078 $ 11,286
RATIOS TO AVERAGE NET ASSETS(+):
Net investment income (loss)
including reimbursement 0.44% (0.52)% (0.51)%*
Operating expenses
including reimbursement 1.20% 1.66% 1.70%*
Portfolio turnover rate** 60% 42% 9%
+ The operating expenses may reflect a
reduction of the adviser fee, an
allocation of expenses to the
Investment Adviser, or both. Had such
actions not been taken, the ratios
would have been as follows:
Net investment income (loss) 0.24% (0.70)% (3.13)%*
Operating expenses 1.40% 1.84% 4.32%*
<CAPTION>
SMALL CAP VALUE FUND
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS (5) INVESTOR CLASS (7)
---------------------------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.54 $ 10.90 $ 12.50 $ 13.52 $ 10.91
Income from Investment Operations:
Net investment income (loss) 0.00(A) (0.01) 0.00(A) (0.06) (0.07)
Net realized and unrealized gain (loss)
on investments 1.61 2.72 (1.60) 1.61 2.74
---------- ---------- ---------- ---------- ----------
Total Income (Loss) from Investment
Operations 1.61 2.71 (1.60) 1.55 2.67
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income 0.00 (0.02) 0.00 0.00 (0.01)
Distributions from capital gains (0.18) (0.05) 0.00 (0.18) (0.05)
---------- ---------- ---------- ---------- ----------
Total Distributions (0.18) (0.07) 0.00 (0.18) (0.06)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 1.43 2.64 (1.60) 1.37 2.61
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 14.97 $ 13.54 $ 10.90 $ 14.89 $ 13.52
========== ========== ========== ========== ==========
TOTAL RETURN** 12.08% 24.89% (12.80)% 11.65% 24.51%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000S) $ 29,171 $ 20,038 $ 13,849 $ 5,179 $ 957
RATIOS TO AVERAGE NET ASSETS(+):
Net investment income (loss)
including reimbursement 0.00% (0.11)% 0.15%* (0.48)% (0.50)%
Operating expenses
including reimbursement 1.40% 1.40% 1.40%* 1.75% 1.75%
Portfolio turnover rate** 58% 56% 10% 58% 56%
+ The operating expenses may reflect a
reduction of the adviser fee, an
allocation of expenses to the
Investment Adviser, or both. Had such
actions not been taken, the ratios
would have been as follows:
Net investment income (loss) (0.50)% (0.85)% (3.32)%* (1.10)% (1.43)%
Operating expenses 1.90% 2.14% 4.87%* 2.37% 2.68%
</TABLE>
See Notes to Financial Statements 55
<PAGE> 58
FINANCIAL HIGHLIGHTS [undiscovered
For a Share Outstanding Throughout the Periods managers(TM) LOGO]
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
---------------------------------------------------------
INVESTOR CLASS (7) C CLASS (8)
------------------ -----------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 1998 AUGUST 31, 2000 AUGUST 31, 1999
------------------ --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.45 $ 13.51 $ 13.86
Income from Investment Operations:
Net investment income (loss) 0.00(A) (0.17) (0.03)
Net realized and unrealized gain (loss)
on investments (2.54) 1.62 (0.32)
------------- ------------- -------------
Total Income (Loss) from Investment
Operations (2.54) 1.45 (0.35)
------------- ------------- -------------
Less Distributions:
Dividends from net investment income 0.00 0.00 0.00
Distributions from capital gains 0.00 (0.18) 0.00
------------- ------------- -------------
Total Distributions 0.00 (0.18) 0.00
------------- ------------- -------------
Net increase (decrease) in net asset value (2.54) 1.27 (0.35)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 10.91 $ 14.78 $ 13.51
============= ============= =============
TOTAL RETURN** (18.88)% 10.91% (2.53)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 31 $ 420 $ 117
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 0.15%* (1.23)% (0.97)%*
Operating expenses
including reimbursement 1.40%* 2.40% 2.31%*
Portfolio turnover rate** 10% 58% 56%
+ The operating expenses may reflect
a reduction of the adviser fee, an
allocation of expenses to the Investment
Adviser, or both. Had such actions not been
taken, the ratios would have been as follows:
Net investment income (loss) (3.67)%* (2.08)% (2.19)%*
Operating expenses 5.22%* 3.25% 3.53%*
<CAPTION>
HIDDEN VALUE FUND
---------------------------------------------------------
INSTITUTIONAL CLASS (1)
---------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.48 $ 9.76 $ 12.50
Income from Investment Operations:
Net investment income (loss) 0.11 0.06 0.03
Net realized and unrealized gain (loss)
on investments 0.58 2.86 (2.77)
------------- ------------- -------------
Total Income (Loss) from Investment
Operations 0.69 2.92 (2.74)
------------- ------------- -------------
Less Distributions:
Dividends from net investment income (0.08) (0.08) 0.00
Distributions from capital gains (0.59) (0.12) 0.00
------------- ------------- -------------
Total Distributions (0.67) (0.20) 0.00
------------- ------------- -------------
Net increase (decrease) in net asset value 0.02 2.72 (2.74)
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.50 $ 12.48 $ 9.76
============= ============= =============
TOTAL RETURN** 5.99% 30.11% (21.92)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 5,381 $ 1,628 $ 925
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 1.10% 0.45% 0.58%*
Operating expenses
including reimbursement 1.30% 1.30% 1.30%*
Portfolio turnover rate** 112% 74% 74%
+ The operating expenses may reflect
a reduction of the adviser fee, an
allocation of expenses to the Investment
Adviser, or both. Had such actions not been
taken, the ratios would have been as follows:
Net investment income (loss) (1.45)% (4.18)% (15.16)%*
Operating expenses 3.85 % 5.93% 17.04%*
</TABLE>
----------
* Annualized
** For periods less than one year, percentages are not annualized.
(1) The Fund's Institutional Class commenced investment operations on December
31, 1997.
(2) The Fund commenced investment operations on December 28, 1998.
(3) The Fund's Investor Class commenced investment operations on March 24,
1999.
(4) The Fund's Institutional Class commenced investment operations on January
1, 1998.
(5) The Fund's Institutional Class commenced investment operations on December
30, 1997.
(6) The Fund's Institutional Class commenced investment operations on December
30, 1998.
(7) The Fund's Investor Class commenced investment operations on July 31, 1998.
(8) The Fund's C Class commenced investment operations on June 21, 1999.
(9) The Fund's C Class commenced investment operations on August 3, 1999.
(10) The Fund's C Class commenced investment operations on May 27, 1999.
(11) The Fund's C Class commenced investment operations on August 31, 1999.
(12) The Fund's C Class commenced investment operations on September 28, 1999.
(A) Represents less than $0.005 per share.
(B) The Fund incurred dividend expense on securities sold short for the year
ended August 31, 2000 and the period ended August 31, 1999. If the dividend
expense had not been incurred, the ratio of operating expenses including
reimbursement to average net assets for the year ended August 31,2000 would
have been 2.00%. The ratio for the period ended August 31, 1999 would be
unchanged.
(C) On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
PER SHARE DATA IS CALCULATED BASED UPON THE AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
See Notes to Financial Statements 56
<PAGE> 59
<TABLE>
<CAPTION>
HIDDEN VALUE FUND ALL CAP VALUE FUND (C)
--------------------------------------------------- ----------------------
INVESTOR CLASS (7) INSTITUTIONAL CLASS (1)
--------------------------------------------------- ----------------------
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 2000
--------------- --------------- --------------- ----------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.46 $ 9.76 $ 12.09 $ 15.22
Income from Investment Operations:
Net investment income (loss) 0.07 0.03 0.01 0.10
Net realized and unrealized gain (loss)
on investments 0.59 2.87 (2.34) 0.32
----------- ----------- ----------- -----------
Total Income (Loss) from Investment
Operations 0.66 2.90 (2.33) 0.42
----------- ----------- ----------- -----------
Less Distributions:
Dividends from net investment income (0.05) (0.08) 0.00 (0.17)
Distributions from capital gains (0.59) (0.12) 0.00 0.00
----------- ----------- ----------- -----------
Total Distributions (0.64) (0.20) 0.00 (0.17)
----------- ----------- ----------- -----------
Net increase (decrease) in net asset value 0.02 2.70 (2.33) 0.25
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.48 $ 12.46 $ 9.76 $ 15.47
=========== =========== =========== ===========
TOTAL RETURN** 5.71% 29.90% (19.27)% 2.79%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 24 $ 1,667 $ 40 $ 654
Ratios to average net assets(+):
Net investment income (loss) 0.14% 0.18% 0.58%* 0.67%
including reimbursement
Operating expenses
including reimbursement 1.65% 1.63% 1.30%* 0.99%
Portfolio turnover rate** 112% 74% 74% 92%
+a reduction of the adviser fee, an
allocation of expenses to the Investment
Adviser, or both. Had such actions not been
taken, the ratios would have been as follows:
Net investment income (loss) (3.13)% (4.45)% (15.51)%* (11.35)%
Operating expenses 4.92% 6.26% 17.39%* 13.01%
<CAPTION>
ALL CAP VALUE FUND (C)
---------------------------------------------------------------------------
INSTITUTIONAL CLASS (1) C CLASS (10)
--------------------------------------------------- ----------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ----------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.53 $ 12.50 $ 15.18 $ 15.45
Income from Investment Operations:
Net investment income (loss) 0.08 0.06 (0.05) 0.00(A)
Net realized and unrealized gain (loss)
on investments 3.85 (1.03) 0.31 (0.27)
------------- ------------- ------------- -------------
Total Income (Loss) from Investment
Operations 3.93 (0.97) 0.26 (0.27)
------------- ------------- ------------- -------------
Less Distributions:
Dividends from net investment income (0.24) 0.00 (0.08) 0.00
Distributions from capital gains 0.00 0.00 0.00 0.00
------------- ------------- ------------- -------------
Total Distributions (0.24) 0.00 (0.08) 0.00
------------- ------------- ------------- -------------
Net increase (decrease) in net asset value 3.69 (0.97) 0.18 (0.27)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 15.22 $ 11.53 $ 15.36 $ 15.18
============= ============= ============= =============
TOTAL RETURN** 34.33% (7.76)% 1.72% (1.75)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 952 $ 289 $ 17 $ 33
Ratios to average net assets(+):
Net investment income (loss) 0.51% 0.95%* (0.33)% 0.03%*
including reimbursement
Operating expenses
including reimbursement 0.99% 0.99%* 1.99% 1.88%*
Portfolio turnover rate** 61% 36% 92% 61%
+a reduction of the adviser fee, an
allocation of expenses to the Investment
Adviser, or both. Had such actions not been
taken, the ratios would have been as follows:
Net investment income (loss) (15.02)% (41.18)%* (24.48)% (30.36)%*
Operating expenses 16.52% 43.12%* 26.14% 32.27%*
</TABLE>
See Notes to Financial Statements 57
<PAGE> 60
FINANCIAL HIGHLIGHTS [undiscovered
managers(TM) LOGO]
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
<TABLE>
<CAPTION>
CORE EQUITY FUND
-------------------------------------------------------
INSTITUTIONAL CLASS(1)
-------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.33 $ 12.75 $ 12.50
Income from Investment Operations:
Net investment income (loss) 0.16 0.14 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency transactions (0.56) 2.52 0.20
--------------- --------------- ---------------
Total Income (Loss) from Investment
Operations (0.40) 2.66 0.25
--------------- --------------- ---------------
Less Distributions:
Dividends from net investment income (0.16) (0.08) 0.00
Distributions from capital gains 0.00 0.00 0.00
--------------- --------------- ---------------
Total Distributions (0.16) (0.08) 0.00
--------------- --------------- ---------------
Net increase (decrease) in net asset value (0.56) 2.58 0.25
--------------- --------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.77 $ 15.33 $ 12.75
=============== =============== ===============
TOTAL RETURN** (2.67)% 20.92% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 4,788 $ 4,562 $ 1,295
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 1.08% 0.90% 1.18%*
Operating expenses
including reimbursement 0.99% 0.99% 0.99%*
Portfolio turnover rate** 34% 15% 46%
+ The operating expenses may reflect a
reduction of the adviser fee, an
allocation of expenses to the Investment
Adviser, or both. Had such actions not
been taken, the ratios would have been
as follows:
Net investment income (loss) (1.54)% (1.25)% (16.23)%*
Operating expenses 3.61% 3.14% 18.40%*
<CAPTION>
CORE EQUITY FUND
----------------------------------------------------
INVESTOR CLASS(7)
----------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.31 $ 12.75 $ 14.75
Income from Investment Operations:
Net investment income (loss) 0.11 0.08 0.01
Net realized and unrealized gain (loss)
on investments and foreign currency transactions (0.57) 2.56 (2.01)
--------------- --------------- ---------------
Total Income (Loss) from Investment
Operations (0.46) 2.64 (2.00)
--------------- --------------- ---------------
Less Distributions:
Dividends from net investment income (0.12) (0.08) 0.00
Distributions from capital gains 0.00 0.00 0.00
--------------- --------------- ---------------
Total Distributions (0.12) (0.08) 0.00
--------------- --------------- ---------------
Net increase (decrease) in net asset value (0.58) 2.56 (2.00)
--------------- --------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.73 $ 15.31 $ 12.75
=============== =============== ===============
TOTAL RETURN** (3.02)% 20.76% (13.56)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 784 $ 580 $ 43
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 0.72% 0.53% 1.18%*
Operating expenses
including reimbursement 1.34% 1.28% 0.99%*
Portfolio turnover rate** 34% 15% 46%
+ The operating expenses may reflect a reduction
of the adviser fee, an allocation of expenses
to the Investment Adviser, or both. Had such
actions not been taken, the ratios would have
been as follows:
Net investment income (loss) (2.82)% (6.22)% (16.58)%*
Operating expenses 4.88% 8.03% 18.75%*
</TABLE>
---------------------------------
* Annualized
** For periods less than one year, percentages are not annualized.
(1) The Fund's Institutional Class commenced investment operations on December
31, 1997.
(2) The Fund commenced investment operations on December 28, 1998.
(3) The Fund's Investor Class commenced investment operations on March 24,
1999.
(4) The Fund's Institutional Class commenced investment operations on January
1, 1998.
(5) The Fund's Institutional Class commenced investment operations on December
30, 1997.
(6) The Fund's Institutional Class commenced investment operations on December
30, 1998.
(7) The Fund's Investor Class commenced investment operations on July 31, 1998.
(8) The Fund's C Class commenced investment operations on June 21, 1999.
(9) The Fund's C Class commenced investment operations on August 3, 1999.
(10) The Fund's C Class commenced investment operations on May 27, 1999.
(11) The Fund's C Class commenced investment operations on August 31, 1999.
(12) The Fund's C Class commenced investment operations on September 28, 1999.
(A) Represents less than $0.005 per share.
(B) The Fund incurred dividend expense on securities sold short for the year
ended August 31, 2000 and the period ended August 31, 1999. If the dividend
expense had not been incurred, the ratio of operating expenses including
reimbursement to average net assets for the year ended August 31,2000 would
have been 2.00%. The ratio for the period ended August 31, 1999 would be
unchanged.
(C) On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
PER SHARE DATA IS CALCULATED BASED UPON THE AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
58 See Notes to Financial Statements
<PAGE> 61
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
CORE EQUITY FUND CAP EQUITY FUND
--------------------------------- ---------------------------------
C CLASS(11) INSTITUTIONAL CLASS(6)
--------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.21 $ 15.31 $ 15.13 $ 12.50
Income from Investment Operations:
Net investment income (loss) 0.06 0.00(A) (0.15) (0.02)
Net realized and unrealized gain (loss)
on investments and foreign currencey transactions (0.51) (0.10) 8.68 2.65
--------------- --------------- --------------- ---------------
Total Income (Loss) from Investment
Operations (0.45) (0.10) 8.53 2.63
--------------- --------------- --------------- ---------------
Less Distributions:
Dividends from net investment income (0.10) 0.00 0.00 0.00
Distributions from capital gains 0.00 0.00 (0.20) 0.00
--------------- --------------- --------------- ---------------
Total Distributions (0.10) 0.00 (0.20) 0.00
--------------- --------------- --------------- ---------------
Net increase (decrease) in net asset value (0.55) (0.10) 8.33 2.63
--------------- --------------- --------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 14.66 $ 15.21 $ 23.46 $ 15.13
=============== =============== =============== ===============
TOTAL RETURN** (3.58)% (0.65)% 56.70% 21.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 59 $ 5 $ 20,977 $ 6,768
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement 0.42% (0.88)%* (0.65)% (0.22)%*
Operating expenses
including reimbursement 1.99% 1.99%* 1.60% 1.60%*
Portfolio turnover rate** 34% 15% 20% 52%
--------------- --------------- --------------- ---------------
+ The operating expenses may reflect a reduction of the adviser fee, an allocation of expenses to the Investment Adviser, or both.
Had such actions not been taken, the ratios would have been as follows:
(4.82)% (1.84)%* (1.23)% (2.35)%*
7.23% 2.95%* 2.18% 3.73%*
<CAPTION>
INTERNATIONAL
EQUITY FUND
---------------------------------------------------
INSTITUTIONAL CLASS(6) C CLASS(12)
--------------------------------- ---------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.13 $ 12.50 $ 14.21
Income from Investment Operations:
Net investment income (loss) 0.00(A) 0.09 (0.14)
Net realized and unrealized gain (loss)
on investments and foreign currencey transactions 3.99 1.54 3.89
--------------- --------------- ---------------
Total Income (Loss) from Investment
Operations 3.99 1.63 3.75
--------------- --------------- ---------------
Less Distributions:
Dividends from net investment income (0.25) 0.00 (0.25)
Distributions from capital gains 0.00 0.00 0.00
--------------- --------------- ---------------
Total Distributions (0.25) 0.00 (0.25)
--------------- --------------- ---------------
Net increase (decrease) in net asset value 3.74 1.63 3.50
--------------- --------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 17.87 $ 14.13 $ 17.71
=============== =============== ===============
TOTAL RETURN** 28.26% 13.04% 26.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000s) $ 16,427 $ 5,566 $ 121
Ratios to average net assets(+):
Net investment income (loss)
including reimbursement (0.02)% 1.08%* (0.83)%*
Operating expenses
including reimbursement 1.45% 1.45%* 2.45%*
Portfolio turnover rate** 24% 10% 24%
--------------- --------------- ---------------
+ The operating expenses may reflect a reduction of the adviser fee, an allocation of expenses to the Investment Adviser, or both.
Had such actions not been taken, the ratios would have been as follows:
(0.92)% (1.07)%* (2.37)%*
2.35% 3.60%* 3.99%*
</TABLE>
---------------------------------
* Annualized
** For periods less than one year, percentages are not annualized.
(1) The Fund's Institutional Class commenced investment operations on December
31, 1997.
(2) The Fund commenced investment operations on December 28, 1998.
(3) The Fund's Investor Class commenced investment operations on March 24,
1999.
(4) The Fund's Institutional Class commenced investment operations on January
1, 1998.
(5) The Fund's Institutional Class commenced investment operations on December
30, 1997.
(6) The Fund's Institutional Class commenced investment operations on December
30, 1998.
(7) The Fund's Investor Class commenced investment operations on July 31, 1998.
(8) The Fund's C Class commenced investment operations on June 21, 1999.
(9) The Fund's C Class commenced investment operations on August 3, 1999.
(10) The Fund's C Class commenced investment operations on May 27, 1999.
(11) The Fund's C Class commenced investment operations on August 31, 1999.
(12) The Fund's C Class commenced investment operations on September 28, 1999.
(A) Represents less than $0.005 per share.
(B) The Fund incurred dividend expense on securities sold short for the year
ended August 31, 2000 and the period ended August 31, 1999. If the dividend
expense had not been incurred, the ratio of operating expenses including
reimbursement to average net assets for the year ended August 31,2000 would
have been 2.00%. The ratio for the period ended August 31, 1999 would be
unchanged.
(C) On December 22, 1999, the All Cap Value Fund ceased offering Investor Class
shares and on December 28, 1999, all remaining shares were redeemed.
PER SHARE DATA IS CALCULATED BASED UPON THE AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
59
See Notes to Financial Statements
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS [undiscovered
............August 31, 2000 managers(TM) LOGO]
1. ORGANIZATION
Undiscovered Managers Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
As of August 31, 2000, the Trust consisted of eleven separately managed
portfolios advised by Undiscovered Managers, LLC (the "Adviser"). The
accompanying financial statements and financial highlights are those of
Undiscovered Managers Behavioral Growth Fund ("Behavioral Growth Fund"),
Undiscovered Managers Behavioral Value Fund ("Behavioral Value Fund"),
Undiscovered Managers Behavioral Long/Short Fund ("Behavioral Long/Short Fund"),
Undiscovered Managers REIT Fund ("REIT Fund"), Undiscovered Managers Special
Small Cap Fund ("Special Small Cap Fund"), Undiscovered Managers Small Cap Value
Fund ("Small Cap Value Fund"), Undiscovered Managers Hidden Value Fund ("Hidden
Value Fund"), Undiscovered Managers All Cap Value Fund ("All Cap Value Fund"),
Undiscovered Managers Core Equity Fund ("Core Equity Fund"), UM International
Small Cap Equity Fund ("International Small Cap Equity Fund") and UM
International Equity Fund ("International Equity Fund"), each a "Fund", and
collectively, the "Funds". Each Fund is a diversified fund except for Special
Small Cap Fund and REIT Fund, which are non-diversified.
Behavioral Growth Fund, REIT Fund, Small Cap Value Fund and Core Equity Fund are
authorized to issue three classes of shares (Institutional Class shares,
Investor Class shares and C Class shares). Behavioral Value Fund, Behavioral
Long/Short Fund, Special Small Cap Fund and International Small Cap Equity Fund
are authorized to issue only Institutional Class shares. Hidden Value Fund
offers only Institutional and Investor Class shares, and All Cap Value Fund and
International Equity Fund offer only Institutional and C Class shares. Each
share of a particular Fund represents an interest in the assets of the relevant
Fund and has identical dividend, liquidation and other rights as the other
shares of the Fund. Each share of a Fund has one vote, with fractional shares
voting proportionally. All Trust shares are entitled to vote and will vote
together irrespective of Fund or class. When the right of a particular Fund or
class would be adversely affected by the vote, a separate vote of that Fund or
class will be required to decide the question. Each class of shares bears its
own proportional share of fund level expenses with the Investor Class and C
Class shares bearing a service and distribution fee.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures .
Actual results could differ from those estimates. The following is a summary of
the significant accounting policies consistently followed by each Fund in the
preparation of its financial statements.
Portfolio Valuation: Domestic and foreign investments in securities (including
securities sold short) which are traded on a recognized stock exchange or on the
NASDAQ National Market System are normally valued at their last sale price on
the exchange where primarily traded or, if there is no reported sale during the
day, or in the case of over-the-counter securities not traded on a recognized
stock exchange or on the NASDAQ National Market System, at the last bid price
(last ask price for securities sold short). Short-term obligations that mature
in sixty days or less are valued at amortized cost, which approximates market
value. All other securities for which market quotations are not readily
available (including restricted securities, if any) and all other assets are
appraised at their fair value as determined in good faith by the Board of
Trustees of the Trust (the "Board"), although the actual calculations may be
made by persons acting pursuant to the direction of the Board.
Securities Sold Short: The Behavioral Long/Short Fund may enter into short
sales. A short sale involves selling a security which the Fund does not own.
This requires the borrowing of shares from a broker. The proceeds received for
60
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
short sales are recorded as liabilities and the Fund records an unrealized gain
or loss to the extent of the difference between the proceeds received and the
value of the open short position on the day of determination. The Fund records a
realized gain or loss when the short position is closed out. By entering into a
short sale, the Fund bears the market risk of an unfavorable change in the price
of the security sold short. Dividends on short sales are recorded as an expense
by the Fund on the ex-dividend date.
The Fund is required to establish a margin account with the broker lending the
security short. While the short sale is outstanding, the broker retains the
proceeds of the short sale. This interest-bearing amount is shown as a deposit
with the broker for securities sold short in the financial statements. As
collateral for the securities sold short, the Fund must maintain an account
consisting of cash and/or securities having a value at least equaling the
current market value of such securities sold short.
Foreign Currency Translation: The books and records of each Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities for the International Small Cap Equity Fund and
International Equity Fund are translated into U.S. dollars at the exchange rates
prevailing at the end of each business day, and purchases and sales of
investment securities, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. Unrealized gains and
losses on investments, which result from changes in foreign exchange rates
and/or changes in market prices of securities, have been included in net
unrealized appreciation/(depreciation) on investments. Net realized and
unrealized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses occurring between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of each Fund and the amounts actually received. The
portion of foreign currency gains and losses related to fluctuation in exchange
rates between the initial trade date and subsequent sale trade date is included
in realized gain/(loss) on investments.
Forward Foreign Currency Exchange Contracts: The International Small Cap Equity
Fund and International Equity Fund may participate in forward currency exchange
contracts, but such participation will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging involves the
purchase or sale of foreign currency with respect to specific receivables or
payables of a Fund generally arising in connection with the purchase or sale of
its portfolio securities. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and is generally limited to the amount of unrealized gain on the contracts, if
any, at the date of the default. Risk may also arise from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Contracts are marked-to-market daily and the change in market value is recorded
as unrealized appreciation or depreciation. Realized gains or losses arising
from such transactions are included in net realized gains or losses from foreign
currency transactions.
Security Transactions and Investment Income: Security 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 on the date that security is sold.
Interest income is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date.
Federal Income Taxes: Each Fund intends to qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code and to
distribute substantially all of its net investment income. Accordingly, no
provisions for federal income taxes have been made in the accompanying financial
statements. The Funds intend to utilize provisions of the federal income tax
laws which allow them to carry a realized capital loss forward for eight years
following the year of the loss and offset such losses against any future
realized capital gains.
61
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
Classes: For each Fund, any class-specific expenses are borne by the relevant
class. Income, non-class specific expenses and realized and unrealized gains
(losses) are allocated to the respective classes on the basis of relative net
assets.
Expenses: The Trust accounts separately for the assets, liabilities, and
operations of each Fund. Expenses directly attributable to a Fund are charged to
that Fund, while expenses which are attributable to more than one Fund are
allocated based upon the relative net assets of each Fund.
Cash: The Funds' uninvested cash balances are swept daily into interest-bearing
accounts at the custodial bank.
Organization Costs: Organization costs are being amortized on a straight-line
basis over five years for Behavioral Growth Fund, REIT Fund, Special Small Cap
Fund, Small Cap Value Fund, Hidden Value Fund, All Cap Value Fund and Core
Equity Fund.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, a Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal to 102% of the total amount of the repurchase obligations, including
interest. In the event of counterparty default, the Fund has the right to use
the collateral to satisfy the terms of the repurchase agreement. However, there
could be potential loss to the Fund in the event the Fund is delayed or
prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the collateral
securities during the period while the Fund seeks to assert its rights. The
value of the collateral is monitored daily.
3. INVESTMENT ADVISORY, SUB-ADVISORY, ADMINISTRATION AND OTHER FEES
For each Fund, the Trust and the Adviser are parties to a management agreement
under which the Adviser provides services for a fee, computed daily and paid at
least quarterly, at the following annual percentage rates based on the average
daily net assets of each Fund: 0.95% for the Behavioral Growth Fund, 1.05% for
the Behavioral Value Fund, 1.55% for the Behavioral Long/Short Fund, 1.05% for
the REIT Fund, 0.65% to 1.65% (depending on the investment performance of the
Fund) for the Special Small Cap Fund, 1.05% for the Small Cap Value Fund, 0.95%
for the Hidden Value Fund, 0.74% for the All Cap Value Fund, 0.74% for the Core
Equity Fund, 1.15% for the International Small Cap Equity Fund and 0.95% for the
International Equity Fund; provided however, with respect to the Special Small
Cap Fund, prior to December 30, 1998, its annual advisory fee rate was 1.15%.
After December 29, 1998, the advisory fee rate for the Special Small Cap Fund
began to vary depending on the investment performance of the Fund. The
applicable fee rate is determined by adding to (or subtracting from) 1.15%,
one-fifth of the number of basis points by which the total return of the Fund
(excluding expenses) during the one-year period ending at the end of a calendar
quarter exceeds (or falls short of) the total return of the Russell 2000 Index
during the one-year period ending at the end of such quarter. The advisory fee
rate will not exceed the annual rate of 1.65% nor be less than the annual rate
of 0.65%. For the year ended August 31, 2000, the advisory fee was accrued at
the rate of 0.65%.
The Adviser has contractually agreed to reduce its management fees and pay the
expenses of each Fund's Institutional Class, Investor Class and C Class shares
in order to limit such class's expenses (exclusive of brokerage costs, interest,
taxes, dividends on securities sold short, if any, and extraordinary expenses)
to the following annual percentage rates of the average daily net assets of such
Fund's Institutional Class, Investor Class and C Class shares, respectively,
subject to
62
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
the obligation of each class of a Fund to repay the Adviser such class's
deferred fees and expenses in future years, if any, when such class's expenses
(exclusive of brokerage costs, interest, taxes, dividends on securities sold
short, if any, and extraordinary expenses), fall below the stated percentage
rate, but only to the extent that such repayment would not cause such class's
expenses (exclusive of brokerage costs, interest, taxes, dividends payable with
respect to securities sold short, if any, and extraordinary expenses) in any
such future year to exceed the stated percentage rate, and provided that such
class is not obligated to repay any such deferred fees and expenses more than
three years after the end of the fiscal year in which they were incurred (for
expenses incurred prior to December 28, 1999, the Fund's repayment obligations
extended until two years after the end of the fiscal year in which the expenses
were incurred): 1.30%, 1.65% and 2.30% for the Behavioral Growth Fund's
Institutional Class, Investor Class and C Class shares, respectively; 1.40% for
the Behavioral Value Fund's Institutional Class shares; 2.00% for the Behavioral
Long/Short Fund's Institutional Class shares; 1.40%, 1.75% and 2.40% for the
REIT Fund's Institutional Class, Investor Class and C Class shares,
respectively; the sum of 0.55% plus the advisory fee rate for the year in
question for the Special Small Cap Fund's Institutional Class shares; 1.40%,
1.75% and 2.40% for the Small Cap Value Fund's Institutional Class, Investor
Class and C Class shares, respectively; 1.30% and 1.65% for the Hidden Value
Fund's Institutional Class and Investor Class shares, respectively; 0.99% and
1.99% for the All Cap Value Fund's Institutional Class and C Class shares,
respectively; 0.99%, 1.34% and 1.99% for the Core Equity Fund's Institutional
Class, Investor Class and C Class shares, respectively; 1.60% for the
International Small Cap Equity Fund's Institutional Class shares; and 1.45% and
2.45% for the International Equity Fund's Institutional Class and C Class
shares, respectively. Prior to December 29, 1998, the Special Small Cap Fund's
maximum stated percentage rate was 1.70%.
For the year ended August 31, 2000, the Adviser reduced its fees and bore
expenses pursuant to this contractual obligation in the aggregate amounts of
$78,563, $26,346, $22,108, $28,694, $17,981, $29,174, $21,693, $30,120, $30,071,
$25,140 and $27,066 for the Behavioral Growth Fund, the Behavioral Value Fund,
the Behavioral Long/Short Fund, the REIT Fund, the Special Small Cap Fund, the
Small Cap Value Fund, the Hidden Value Fund, the All Cap Value Fund, the Core
Equity Fund, the International Small Cap Equity Fund and the International
Equity Fund, respectively, of which such amounts are subject to recoupment
through the end of the Trust's fiscal year ending August 31, 2002. The Adviser
also reduced its fees and bore expenses pursuant to this contractual obligation
in the aggregate amounts of $215,529, $73,171, $45,440, $126,075, $16,561,
$113,931, $77,707, $73,657, $101,724, $55,354, and $79,639 for the Behavioral
Growth Fund, the Behavioral Value Fund, the Behavioral Long/Short Fund, the REIT
Fund, the Special Small Cap Fund, the Small Cap Value Fund, the Hidden Value
Fund, the All Cap Value Fund, the Core Equity Fund, the International Small Cap
Equity Fund and the International Equity Fund, respectively, of which such
amounts are subject to recoupment through the end of the Trust's fiscal year
ending August 31, 2003.
The Adviser has entered into various sub-advisory agreements pursuant to which
the Adviser shall pay each sub-adviser an annual fee at the following rates:
<TABLE>
<CAPTION>
FEE RATE AS % OF FUND'S
FUND SUB-ADVISER AVERAGE DAILY NET ASSETS
---- ----------- ------------------------
<S> <C> <C>
Behavioral Growth Fund Fuller & Thaler Asset 0.60% of the first $200 million
Management, Inc. 0.55% of the next $100 million
0.50% in excess of $300 million
Behavioral Value Fund Fuller & Thaler Asset 0.70% of the first $200 million
Management, Inc. 0.65% of the next $100 million
0.60% in excess of $300 million
</TABLE>
63
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
<TABLE>
<CAPTION>
FEE RATE AS % OF FUND'S
FUND SUB-ADVISER AVERAGE DAILY NET ASSETS
---- ----------- ------------------------
<S> <C> <C>
Behavioral Long/Short Fund Fuller & Thaler Asset 1.20% of the first $200 million
Management, Inc. 1.15% of the next $100 million
1.10% in excess of $300 million
REIT Fund Bay Isle Financial Corporation 0.70% of the first $200 million
0.65% of the next $100 million
0.60% in excess of $300 million
Special Small Cap Fund Kestrel Investment 0.30% - 1.30%*
Management Corporation
Small Cap Value Fund J.L. Kaplan Associates, LLC 0.70% of the first $200 million
0.65% of the next $100 million
0.60% in excess of $300 million
Hidden Value Fund J.L. Kaplan Associates, LLC 0.60% of the first $200 million
0.55% of the next $100 million
0.50% in excess of $300 million
All Cap Value Fund E.R. Taylor Investments, Inc. 0.40% of the first $200 million
0.35% of the next $100 million
0.30% in excess of $300 million
Core Equity Fund Waite & Associates, LLC 0.40% of the first $200 million
0.35% of the next $100 million
0.30% in excess of $300 million
International Small Cap Unibank Securities, Inc. 0.80% of the first $200 million
Equity Fund 0.75% of the next $100 million
0.70% in excess of $300 million
International Equity Fund Unibank Securities, Inc. 0.60% of the first $200 million
0.55% of the next $100 million
0.50% in excess of $300 million
</TABLE>
* Sub-advisory fee rate for the Special Small Cap Fund varies depending on the
investment performance of the Fund. Prior to December 30, 1998, however, the
annual fee rate was 0.80%.
64
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
The Trust and the Adviser have entered into an Administrative Services
Agreement, pursuant to which the Adviser has agreed to provide each Fund all
administrative services. Under the Administrative Services Agreement, each Fund
pays the Adviser a monthly fee at the annual rate of 0.25% of the Fund's average
net asset value.
The Trust has adopted a Service and Distribution Plan with respect to its
Investor Class shares pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Investor Class 12b-1 Plan"). Under the Investor Class 12b-1 Plan, the
Trust may pay fees as compensation for any or all of the following: (i) engaging
in activities or bearing expenses primarily intended to result in the sale of
Investor Class shares of the Trust, (ii) providing services relating to the
Investor Class shares of the Trust (which would be in addition to any general
services provided to a Fund as a whole) and (iii) providing additional personal
services to the Trust's Investor Class shareholders and/or for the maintenance
of Investor Class shareholder accounts. On an annual basis, the aggregate amount
of fees under the Investor Class 12b-1 Plan with respect to each Fund authorized
to issue Investor Class shares will not exceed 0.35% of the Fund's average daily
net assets attributable to its Investor Class shares.
The Trust has also adopted a Service and Distribution Plan with respect to its C
Class shares pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "C Class 12b-1 Plan"). Under the C Class 12b-1 Plan, the Trust may pay fees
as compensation for any or all of the following: (i) engaging in activities or
bearing expenses primarily intended to result in the sale of C Class shares of
the Trust and (ii) providing additional personal services to the Trust's C Class
shareholders and/or for the maintenance of C Class shareholder accounts. On an
annual basis, the aggregate amount of fees under the C Class 12b-1 Plan with
respect to each Fund authorized to issue C Class shares will not exceed 1.00% of
the Fund's average daily net assets attributable to its C Class shares.
Prior to its implementation of the Investor Class 12b-1 Plan, each Fund
authorized to issue Investor Class shares, except the REIT Fund, had a
Shareholder Servicing Plan relating to such shares (the "Shareholder Servicing
Plan"). Pursuant to the Shareholder Servicing Plan, the Trust, on behalf of the
Investor Class shares of each Fund, paid to the Adviser, as the shareholder
servicing agent of the Investor Class shares of the Funds, or such other entity
as from time to time acts as the shareholder servicing agent of such Investor
Class shares (the "Servicing Agent"), a fee for services rendered and expenses
borne by the Servicing Agent in connection with the provision of certain
services provided to Investor Class shareholders, at an annual rate not to
exceed 0.35% of a Fund's average daily net assets attributable to such Fund's
Investor Class shares.
The Bank of New York is the custodian for all the Funds except for the
Behavioral Long/Short Fund. The Behavioral Long/Short Fund's custodian is
Custodial Trust Company. Provident Distributors, Inc. acts as the distributor
for the Funds. Prior to November 30, 1999, the distributor for the Funds was
First Data Distributors, Inc.
For the year ended August 31, 2000, International Small Cap Equity Fund and
International Equity Fund executed portfolio transactions through an affiliate
of the Sub-Adviser to the Funds, however, no commissions were paid.
4. DIVIDENDS FROM NET INVESTMENT INCOME AND DISTRIBUTIONS OF CAPITAL GAINS
With respect to all Funds, dividends from net investment income, if any, are
distributed annually and net realized capital gains from investment
transactions, if any, are normally distributed to shareholders annually, but
may, to the extent permitted by law, be made more frequently as deemed advisable
by the Trustees of the Trust. Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends and capital gain distributions are
determined in accordance with income tax requirements which may differ from
generally accepted accounting principles. To the extent the differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment. These reclassifications have no
effect upon net assets or net asset values.
65
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
For the year ended August 31, 2000, differences in book and tax accounting have
been reclassified to undistributed net investment income, accumulated realized
gain (loss) and paid-in capital as follows:
<TABLE>
<CAPTION>
INCREASE/ INCREASE/(DECREASE) INCREASE/(DECREASE)
(DECREASE) UNDISTRIBUTED NET ACCUMULATED
FUND PAID-IN-CAPITAL INVESTMENT INCOME REALIZED GAIN/(LOSS)
---- --------------- ------------------- -------------------
<S> <C> <C> <C>
Behavioral Growth Fund $ (2,068,365) $ 2,068,365 --
Behavioral Value Fund -- 36,709 $ (36,709)
Behavioral Long/Short Fund -- -- --
REIT Fund (4,633) 4,633 --
Special Small Cap Fund (4,633) 4,633 --
Small Cap Value Fund (9,328) 17,269 (7,941)
Hidden Value Fund (4,633) 4,570 63
All Cap Value Fund (4,633) 4,633 --
Core Equity Fund (4,633) 4,633 --
International Small Cap
Equity Fund -- 92,348 (92,348)
International Equity Fund (86,091) 52,486 33,605
</TABLE>
5. TRUSTEES' COMPENSATION
Certain officers of the Trust are also officers and directors of the Adviser.
The Trust does not compensate its officers or its Trustees who are affiliated
with the Adviser. The Trust pays each unaffiliated trustee an annual retainer of
$10,000. Each unaffiliated Trustee may elect not to receive such fees on a
current basis but to receive in a subsequent period an amount equal to the value
that would have resulted had the fees been invested in one or more of the Funds
(selected in advance by the Trustee) on the normal payment date for such fees.
The Trust did not compensate any officer of the Trust during the Trust's year
ended August 31, 2000.
6. INVESTMENT TRANSACTIONS
Aggregate purchases and proceeds from sales of investment securities (other than
U.S. Government Obligations and short-term investments) for the year ended
August 31, 2000 were:
<TABLE>
<CAPTION>
FUND AGGREGATE PURCHASES PROCEEDS FROM SALES
---- ------------------- -------------------
<S> <C> <C>
Behavioral Growth Fund $ 315,691,945 $ 177,224,098
Behavioral Value Fund 17,687,839 5,452,231
Behavioral Long/Short Fund 9,372,000 13,289,558
Behavioral Long/Short Fund - Short Sales 13,337,707 9,144,247
REIT Fund 37,333,583 19,143,547
Special Small Cap Fund 12,975,283 10,527,190
Small Cap Value Fund 25,671,558 15,036,764
Hidden Value Fund 5,662,521 3,676,490
All Cap Value Fund 718,121 951,551
Core Equity Fund 1,926,416 1,542,151
International Small Cap Equity Fund 12,674,847 2,439,026
International Equity Fund 11,594,818 2,671,594
</TABLE>
66
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
The aggregate gross unrealized appreciation and depreciation and net unrealized
appreciation (depreciation) for all securities, net of securities sold short, as
computed on a federal income tax basis, at August 31, 2000, for each Fund were
as follows:
<TABLE>
<CAPTION>
FUND TAX COST APPRECIATION (DEPRECIATION) NET APP. (DEP)
---- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Behavioral Growth Fund $ 219,571,094 $ 71,078,731 $ (13,704,100) $ 57,374,631
Behavioral Value Fund 15,638,714 4,728,156 (1,155,979) 3,572,177
Behavioral Long/Short Fund 7,687,247(1) 846,103 (529,173) 316,930
REIT Fund 40,029,447 4,953,372 (238,913) 4,714,459
Special Small Cap Fund 18,907,673 2,395,857 (1,916,582) 479,275
Small Cap Value Fund 31,032,097 4,956,999 (3,585,875) 1,371,124
Hidden Value Fund 5,336,143 316,526 (460,478) (143,952)
All Cap Value Fund 558,084 108,462 (22,511) 85,951
Core Equity Fund 4,987,633 646,086 (474,067) 172,019
International Small Cap Equity Fund 17,156,568 4,950,580 (1,746,318) 3,204,262
International Equity Fund 14,858,328 1,926,049 (1,095,859) 830,190
</TABLE>
----------
(1) Includes securities cost basis of $3,875,970 and securities sold short
cost basis of $3,811,277.
7. CONCENTRATION OF RISK
Small Companies: All of the Funds may invest in companies with relatively small
market capitalizations. Several of the Funds will invest primarily in such
companies. Investments in companies with relatively small market capitalizations
may involve greater risk than is usually associated with stocks of larger
companies. These securities may have limited marketability and may be subject to
more abrupt or erratic movements in price than securities of companies with
larger capitalizations.
Real Estate Investment Trusts: The REIT Fund invests primarily in shares of
companies in the real estate sector. While the Fund will not invest in real
estate directly, the Fund may be subject to risks similar to those associated
with direct ownership of real estate. These risks may include, but are not
limited to, price movement as a result of interest rate fluctuations, general
and local economic conditions, and heavy cash flow dependency, in addition to
securities market risks.
Foreign Securities: The International Equity and International Small Cap Equity
Funds invest primarily in foreign securities. Investments in foreign securities
present risks not typically associated with investments in comparable securities
of U.S. issuers. These risks include re-valuation of currencies and future
adverse political and economic developments. These risks are heightened for
investments in emerging market countries. Additionally, there may be less
available information about a foreign corporate or government issuer, securities
of many foreign companies, governments and their markets may be less liquid and
their prices more volatile than those of securities of comparable U.S. companies
and the U.S. government.
67
<PAGE> 70
NOTES TO FINANCIAL STATEMENTS(CONTINUED) [undiscovered
............August 31, 2000 managers(TM) LOGO]
8. CAPITAL LOSS CARRYFORWARDS
For federal income tax purposes, the Funds indicated below have capital loss
carryforwards as of August 31, 2000, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
FUND LOSSES DEFERRED YEAR OF EXPIRATION
---- --------------- ------------------
<S> <C> <C>
Behavioral Long/Short Fund $ 356,181 2008
REIT Fund 343,192 2007
1,071,379 2008
All Cap Value Fund 11,129 2007
34,002 2008
Core Equity Fund 7,491 2007
52,381 2008
</TABLE>
9. SUBSEQUENT EVENTS
On August 2, 2000, the Trustees approved a resolution that actions be taken to
cease the sale of Investor Class Shares of Hidden Value Fund. On September 14,
2000, the Trustees approved a resolution that actions be taken to cease the sale
of shares of All Cap Value Fund and the investment activity of the Fund.
Effective October 20, 2000, Investor Class of Shares of Core Equity Fund were no
longer offered.
10. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The Funds designated the following as long-term capital gain dividends during
the fiscal year ended August 31, 2000.
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
FUND GAINS DESIGNATED
---- -----------------
<S> <C>
Behavioral Growth Fund $ 9,834,109
Behavioral Value Fund 40,609
Hidden Value Fund 40,170
International Equity Fund 728,497
International Small Cap Equity Fund 173,957
Small Cap Value Fund 391,627
Special Small Cap Fund 1,021,681
</TABLE>
68
<PAGE> 71
[undiscovered
managers(TM) LOGO]
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<PAGE> 72
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders of
Undiscovered Managers Funds:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Undiscovered Managers Behavioral Growth Fund,
Undiscovered Managers Behavioral Value Fund, Undiscovered Managers Behavioral
Long/Short Fund, Undiscovered Managers REIT Fund, Undiscovered Managers Special
Small Cap Fund, Undiscovered Managers Small Cap Value Fund, Undiscovered
Managers Hidden Value Fund, Undiscovered Managers All Cap Value Fund,
Undiscovered Managers Core Equity Fund, UM International Small Cap Equity Fund,
and UM International Equity Fund (the "Funds") of Undiscovered Managers Funds
(the "Trust"), as of August 31, 2000, and the related statements of operations
for the year then ended, the statements of changes in net assets and financial
highlights for the periods presented, and the statement of cash flows for
Undiscovered Managers Behavioral Long/Short Fund for the year ended August 31,
2000. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2000, by correspondence with the custodians
and brokers; where replies were not received, we performed other auditing
procedures. 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 August 31, 2000, the results of their operations for the year then
ended, the changes in their net assets and their financial highlights for the
periods presented, and the cash flows of Undiscovered Managers Behavioral
Long/Short Fund for the year ended August 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New York, New York
October 23, 2000
<PAGE> 73
[undiscovered
managers(TM) LOGO]
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<PAGE> 74
[undiscovered
managers(TM) LOGO]
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<PAGE> 75
[undiscovered
managers(TM) LOGO]
HOW TO REACH
[undiscovered managers(TM) LOGO]
BY PHONE
CLIENT SERVICES,
GENERAL INFORMATION OR
TO OBTAIN A PROSPECTUS....................(888) 242-3514 (toll-free)
ACCOUNT INFORMATION.......................(800) 667-1224 (toll-free)
A REGISTERED REPRESENTATIVE OF UNDISCOVERED MANAGERS CAN BE
REACHED FROM 7:30 AM - 7:00 PM CT
BY FAX.................................... (214) 999-7201
BY MAIL...................... 700 NORTH PEARL STREET, SUITE 1700
DALLAS, TX 75201
BY E-MAIL.................... [email protected]
WWW.UNDISCOVEREDMANAGERS.COM
<PAGE> 76
UNDISCOVERED MANAGERS FUNDS
700 NORTH PEARL STREET
SUITE 1700
DALLAS, TEXAS 75201
(888) 242-3514
www.undiscoveredmanagers.com
