MONTEREY
MUTUAL
FUND
SEMI-ANNUAL REPORT
MAY 31, 1998
<PAGE>
MONTEREY
OCM GOLD FUND
"GOLD IS MONEY YOU CAN TRUST."
SHAREHOLDER LETTER
SEMI-ANNUAL 1998
<PAGE>
"THE HISTORY OF ALL PAPER CURRENCIES IS ZERO."
DR. FRANZ PICK
Dear Fellow Shareholder:
Despite current low gold prices, one of the most important periods for investors
to own gold and gold related assets is at hand. The bull market in financial
assets (stocks and bonds) has reached incomparable heights by historic
valuations. The U.S. dollar, which has risen sharply versus other currencies
(and gold) over the past two years, is set for an uncertain future as Europe
introduces a competing world reserve currency unit in January '99. Japan, the
world's second largest economy, is mired in a deflationary recession that could
very well impact the United States. Financial leverage on the global economy
through the use of increasingly complex derivatives has reached an estimated $83
trillion. Meanwhile, the gold market is out of equilibrium relying on borrowed
gold to meet a growing supply and demand gap.
During the first six months of 1998, your Fund declined 4.6% versus an 11.5%
decline in the Lipper Gold Fund index. The price of gold continued to trade at
18-20 year lows over the period, closing June 30th at $296.30, up slightly from
the 1997 year-end closing price of $289.20. As of June 30th, Morningstar, Inc.
rated your Fund's three-year annualized return (before maximum sales load)
number one among funds in the gold sector.
GOLD MARKET INFLUENCING FACTORS:
- --------------------------------
- -- CENTRAL BANK ACTIVITY
The gold market remained focused on official sector
sales over the first half of the year. The new European Central Bank (ECB)
announced 15% of its reserves would be held in gold initially. While not the 20%
or higher reserve figure the gold market had hoped for, gold as a monetary
reserve asset was reaffirmed to the marketplace nonetheless. A number of
European central banks have since gone out of their way to declare they have no
intention to sell gold not transferred to the ECB. In the Bank of France's
annual report, it stated the main holders of gold had not changed their view
about the need for gold to make up a part of central bank reserves, as a
guarantee in the international financial system. "Neither the US Federal
Reserve, nor the German Bundesbank, nor the Bank of Italy, nor, of course, the
Bank of France plan to sell the precious metal," it said. Large-scale gold sales
by the official sector, in our opinion, are unlikely to occur.
-1-
<PAGE>
- -- U.S. DOLLAR
Confidence in Federal Reserve Chairman Alan Greenspan, the strength of the U.S.
economy and the financial crisis in Asia have all helped to boost the U.S.
dollar against other currencies (and gold). As a result, the current account
deficit with foreigners is ballooning, estimated to reach over $230 billion this
year. In its annual report released in June, the Bank for International
Settlements said: "the BIS is concerned that the markets will lose patience with
the accumulation of U.S. external debt and drive the dollar sharply lower." In
addition, the dollar is facing a threat as the world's reserve currency as
Europe introduces its euro currency in 1999. Unlike the United States, the
nations that make up the euro currency block have a balance of payments surplus.
Economist C. Fred Bergsten, director of the Institute for International
Economics, estimates the displacement of U.S. dollars for euros could reach well
over a trillion dollars, greatly impacting the dollar's value versus gold.
- -- STRONG U.S. FINANCIAL ASSET MARKETS
The U.S. stock market, which has risen 150% since the end of 1994 as measured by
the Standard and Poor's (S&P) composite index, continues to be divert investment
funds away from the gold market. Presently, it takes over 30 ounces of gold to
buy one unit of the Dow Jones, the highest level ever (see chart 1). Other high
extremes were in 1929 and 1965, preceding large declines in the stock market.
- -- INTERNATIONAL FINANCIAL RISK
The euphoria on Wall Street aside, Fed Chairman Alan Greenspan and Treasury
Secretary Robert Rubin are worried about a global market meltdown. The Southeast
Asian financial crisis has spread to Japan, Russia and parts of Latin America.
Currencies have collapsed and capital is fleeing while economies contract.
Competitive currency devaluation is now the order of the day. Attention is
presently focused on whether or not China will devalue, setting off another
round of devaluation in the region, exacerbating the Asian financial crisis.
Meanwhile, the International Monetary Fund has depleted its resources and is
seeking additional contributions from member countries in order to fulfill
recent commitments and maintain confidence.
Most worrisome is the acceleration of Japan's economic woes, the world's
second-largest economy. The country's banking system is frozen dealing with an
admitted $1 trillion plus in bad loans at a time when business confidence has
collapsed. The spill over effects to the United States economy are ominous. Not
only are U.S. corporate profits threatened, interest rates could rise as
Japanese repatriate U.S. investments in order to meet domestic capital needs. An
unwinding of the $83 trillion derivative market could ensue with potentially
disastrous consequences for the derivative market's largest players, the world's
major banks.
-2-
<PAGE>
- -- INFLATION/DEFLATION
The Federal Reserve has increased the money supply (M3) at a 10% annualized rate
over the past twelve months to fight deflationary forces of the Asian financial
crisis. The Bank of Japan has also pursued an aggressive monetary policy. Rather
than showing up in higher consumer prices, the monetary expansion is evident in
higher asset valuations, such as stocks and real estate. However, it remains
unclear whether the U.S. economy is entering an inflation or deflation cycle.
The Federal Reserve would prefer inflation to the risks of deflation and an
unraveling of the debt bubble. But, the Fed may lose control of the situation as
the sheer size of global markets dwarf central bank assets. In the event
deflation does materialize, credit quality becomes the biggest concern with gold
becoming the preferred monetary asset, as it is not someone else's liability.
- -- SUPPLY/DEMAND
Declining prices continue to spur strong demand for physical bullion. Demand for
gold is expected to outstrip newly mined gold and scrap supply for the eleventh
year in a row in 1998. The U.S. Mint reports sales of the American Eagle Gold
Coin are up 60% through the first part of this year, the strongest in ten years.
The supply and demand gap is not being met by central bank selling of gold, as
widely believed, but rather by central bank loaning of gold. Gold loans have
facilitated the "gold carry trade" popular with hedge funds, banks and brokerage
houses. The "gold carry trade" involves borrowing gold at around 1%, selling the
gold, and then investing the proceeds in U.S. Treasuries with a locked in yield
spread. The estimates of the amount of old borrowed range between 5,000 tons and
8,000 tons, or 2 to over 3 times annual world gold production. At the point
sentiment toward gold shifts, the borrowed gold will have to be bought back and
the Treasuries sold, a lethal combination for both markets.
-3-
<PAGE>
- -- POLITICAL UNCERTAINTY
President Clinton faces an uncomfortable challenge to his integrity over the
coming months from Special Prosecutor Kenneth Starr. In the event President
Clinton is found to have committed wrongdoing, financial asset markets may sink
in a cloud of uncertainty similar to the Nixon Watergate years of 1973-74 (Dow
Jones Industrial Average declined 44% from '72 to '74). Gold prices have
historically moved contra-cyclical to financial assets, as they did in 1973-74.
PRECIOUS METALS INDUSTRY/SHARES
- -------------------------------
The gold mining industry has settled in for the long winter, doing the best that
it can to slash costs and remain cash flow positive in the current low gold
price environment. The focus of the industry has shifted from quantity of ounces
produced to quality (low cost) of ounces produced. Senior North American gold
producers, such as Newmont Mining, Placer Dome, Barrick Gold and Homestake
Mining have done admirable jobs in reducing their cash costs per ounce. The cost
cutting efforts will significantly improve cash flow and earnings as gold prices
move higher.
There were other positive developments in the first half of the year. Meridian
Gold's persistence on its El Penon project in Chile was recently well rewarded
with a high-grade gold/silver discovery. Getchell Gold added additional reserves
at its property in Nevada and is making strides in its effort to ramp up
production. Placer Dome and Newmont Mining each successfully removed property
ownership clouds. Platinum/palladium producer, Stillwater Mining, benefited from
tight palladium supplies caused primarily by delays in Russian palladium
exports.
In South Africa, the major mining houses have been forced to restructure. Faced
with declining grades as the mines get deeper, South African mines have gone
from once the lowest cost operations in the world to the highest. In response,
Anglo American has restructured its gold mining operations into a new entity,
Anglogold, Ltd, creating the world's largest gold mining company. The junior
exploration and development sector is in crisis, as the odds of finding or
developing economic gold deposits at $290 gold become near impossible. As a
result, investment dollars have stopped flowing into the sector and share prices
have collapsed 80% to 90%. Gold prices will need to reach above $330 to breathe
life into the junior sector.
-4-
<PAGE>
INVESTMENT STRATEGY
- -------------------
We are taking advantage of depressed share price levels to increase your Fund's
exposure to high quality low cost senior North American producers, favoring
unhedged producers Newmont Mining and Homestake Mining. In a rising gold market,
unhedged producers tend to outperform producers that have sold gold forward. In
addition to the senior producers, we are adding to positions in growth oriented
companies exhibiting exploration success and increasing production profiles,
such as Getchell Gold, Meridian Gold and TVX Gold. It is our intention to
participate in the restructuring of South Africa's gold mining industry by
maintaining an approximate 5% position in South African shares. Overall, we
remain averse to high-level country risk in the portfolio. Exposure to the
junior exploration and development sector will be limited and selective in the
current environment.
Despite the flurry caused by Warren Buffet purchasing 120 million ounces of
silver bullion last year, silver prices have remained rather subdued. We
continue to be optimistic about silver's prospects and are maintaining a 5-7%
portfolio position in primary silver producers.
CONCLUSION
- ----------
The inherent risk of paper (fiat) currencies is being illustrated in one country
after another as financial troubles sweep the globe. No currency today bears any
resemblance to its predecessors from more than a century ago. The U.S. dollar is
the currency of choice at the moment. However, as the world's largest debtor
nation, the United States is not immune from today's heightened financial risks.
Ongoing calls by top financial policy makers to overhaul the global financial
system are unlikely to be heeded until crisis hits the U.S. dollar, which may
not be that far off if White House troubles escalate or the dollar loses reserve
status to the euro. In our opinion, the oversold gold market stands to benefit,
as sentiment shifts toward money people can trust.
While the past two years have been difficult for gold investors, we appreciate
your support and confidence in the Monterey OCM Gold Fund. From 11/30/97 to
7/30/98 the total number of shares outstanding of your Fund increased 398%. We
thank you and look forward to helping you meet your investment objectives.
Sincerely,
/S/
- ----------------------
Gregory M. Orrell
PORTFOLIO MANAGER
July 29, 1998
-5-
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY AS OF JUNE 30, 1998
- --------------------------------------------------------------------------------
AVERAGE BEFORE AFTER MAXIMUM
ANNUAL SALES SALES CHARGE
TOTAL RETURN CHARGE 0F 4.50%
- --------------------------------------------------------------------------------
1 year -28.01 -31.25
3 year - 4.69 - 6.14
5 year -17.13 -17.89
Life (since 2/5/88) -11.33 -11.72
- --------------------------------------------------------------------------------
The performance data reflects past performance and is not indicative of future
results. Investment return and principal value of an investment in the Fund will
vary so that shares, when redeemed may be worth more or less than their original
cost.
SHAREHOLD SERVICES: 1-800-628-9402
FOR DAILY PRICES: 1-800-722-1980
TO CONTACT YOUR PORTFOLIO MANAGER:
(925) 461-4550
- --------------------------------------------------------------------------------
MONTEREY OCM GOLD FUND
6601 Koll Center Pkwy, Suite 132
Pleasanton, CA 94566
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by a prospectus which includes more
complete information, such as charges and expenses and the risks associated with
investing in this Fund. Distributed by Syndicated Capital, Inc.
-6-
<PAGE>
MURPHY INVESTMENT MANAGEMENT, INC.
A REGISTERED INVESTMENT ADVISER
2830 N. CABRILLO HIGHWAY
P. O. BOX 308
HALF MOON BAY, CALIFORNIA 94019
PHONE (650) 726-8495 FAX (650) 726-8494
MICHAEL MURPHY, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Dear Shareholder:
The semiannual report for the Murphy New World mutual funds, part of the
Monterey Funds group, is enclosed.
The first half of 1998 was an extremely difficult period for technology stocks.
The real effects of the economic decline in Asia were accentuated by perceived
problems in personal computer sales. June quarter PC sales were just reported up
10% versus last year, well above the typical expectation for poor or slow sales.
Very few sectors in the U.S. economy are growing in double digits, and we
believe the June quarter will prove to be the weakest one of the year.
Sequential growth in the September quarter, due to strength in Europe, and in
the December quarter, when 50% of all PCs are sold in the U.S., should lead to
substantial improvement in these stocks.
In February, G. E. Morgenthaler became the portfolio manager for the Murphy New
World Biotechnology Fund, and this has had a beneficial effect on the relative
performance. The biotech sector still is performing badly in absolute terms, and
the heavy weighting I have in the sector has dragged down the performance of the
Murphy New World Technology Fund and the Convertibles Fund. However, many of the
companies we hold are making excellent progress with new corporate partnering
deals, successful clinical trials, FDA filings, advisory committee
recommendations for approval, FDA "approvable" letters and final approvals. In
general, their progress is not reflected in their stock prices. We do not think
this state of affairs can last much longer, unless Wall Street is willing to
ignore successful drugs and substantial royalty flows.
Technology stocks usually do well in the first quarter of the year, but that was
muted by the Asian problems. The second quarter, just completed, often is the
weakest of the year. We are looking forward to the second half of the year with
confidence that the PC and communications markets will be strong, the number of
biotech drug approvals will accelerate, and the portfolios of your mutual funds
will start reflecting the fundamental progress of the companies we hold.
Although we still worry about the broad overvaluation in the general market, we
are not hedged with options or substantial short sales at this time. We do have
those tools available if the need arises.
Very truly yours,
/s/
------------------------
Michael Murphy
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
MURPHY NEW WORLD TECHNOLOGY CONVERTIBLES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS 6.59%
PHARMACEUTICALS 6.59%
<S> <C>
5,000 Cephalon Inc................................ $ 53,125
5,000 Dusa Pharmaceuticals Inc. .................. 34,688
-----------
87,813
-----------
TOTAL COMMON STOCKS
(cost $123,750)............................. 87,813
-----------
CONVERTIBLE BONDS 91.48%
BIOTECHNOLOGY 30.23%
426,000 Glycomed Inc. 7.50%, due 01/01/03........... 402,570
-----------
COMPUTER EQUIPMENT 22.33%
300,000 Convex Computer Corp. 6.00%, due 03/01/12... 297,375
-----------
COMPUTER PERIPHERALS 8.18%
70,000 Quantum Corp. 7.00%, due 08/01/04........... 70,088
55,000 Read Rite Corp. 6.50%, due 09/01/04......... 38,844
-----------
108,931
-----------
COMPUTER SOFTWARE 9.56%
75,000 Macneal-Schwendler Corp. 7.875%, due 08/18/04 76,500
60,000 System Software Associates 7.00%, due 09/15/02 50,775
-----------
127,275
-----------
DRUG DELIVERY 3.87%
60,000 Dura Pharmaceuticals Inc. 3.50%, due 07/30/97 51,525
-----------
SEMI CONDUCTORS 3.58%
55,000 Integrated Device 5.50%, due 06/01/02....... 47,644
-----------
SPECIALTY MATERIALS 4.68%
60,000 Hexcel Corp. 7.00%, due 08/01/11............ 62,325
-----------
TELECOMMUNICATIONS 5.00%
70,000 California Microwave 5.25%, due 12/15/03.... 66,588
-----------
TOTAL CONVERTIBLE BONDS
(cost $1,172,210)........................... 1,164,232
-----------
SHORT TERM INVESTMENTS 4.04%
53,809 Star Treasury Fund (cost $53,809)........... 53,809
-----------
TOTAL INVESTMENTS
(cost $1,349,769) 98.07% 1,305,854
OTHER ASSETS LESS LIABILITIES. 1.93% 25,663
------- -----------
TOTAL NET ASSETS 100.00% $ 1,331,517
======= ===========
</TABLE>
* Non income producing security
See notes to financial statements
-2-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
OCM GOLD FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS 87.21%
MAJOR GOLD PRODUCERS 42.21%
<S> <C>
30,000 Amax Gold Inc.*............................. $ 95,625
45,000 Anglogold Ltd. ADR.......................... 223,593
13,500 Barrick Gold Corp........................... 259,875
10,000 Barrick Gold Corp. I/R...................... 124,059
10,500 Drinfontein Consolidated ADR................ 65,625
40,000 Homestake Mining Co......................... 435,000
20,000 Kinross Gold Corp.* ........................ 77,500
25,000 Newmont Mining Corp......................... 623,438
40,000 Placer Dome Inc............................. 497,500
-----------
2,402,215
-----------
INTERMEDIATE GOLD PRODUCERS 6.16%
15,000 Ashanti Goldfields Co. Ltd.................. 138,750
33,000 Battle Mountain Gold Co. ................... 175,312
3,000 WMC Ltd. ADR ............................... 36,750
-----------
350,812
-----------
MID-TIER GOLD PRODUCERS 16.98%
15,000 Agnico Eagle Mines.......................... 97,500
9,000 Getchell Gold Corp.* ....................... 171,000
44,100 GoldCorp Inc. CL A*......................... 228,769
35,000 Meridian Gold Inc.* ........................ 105,000
12,500 Pegasus Gold Inc.*.......................... 2,250
100,000 TVX Gold Inc.* ............................. 325,000
25,000 Viceroy Resources Corp. .................... 36,943
-----------
966,462
-----------
JUNIOR GOLD PRODUCERS 6.09%
20,000 Alta Gold Co.*.............................. 40,625
10,000 Dayton Mining Inc.*......................... 12,028
30,000 Miramar Mining Corp.*....................... 44,331
55,000 Richmont Mines Inc.*........................ 151,207
10,000 River Gold Mines Ltd........................ 24,743
75,000 Vengold Inc................................. 73,712
-----------
346,646
-----------
EXPLORATION AND DEVELOPMENT COMPANIES 2.95%
20,000 Britannia Gold Corp.*....................... 2,749
10,000 Crown Resources Corp.*...................... 44,375
100,000 Franc-Or Resources Corp.* .................. 27,492
10,000 Golden Queen Mining Ltd.* .................. 5,017
185,500 New Guinea Gold Corp.*...................... 24,224
25,000 Omni Resources Inc.* ....................... 2,577
100,000 Silver Eagle Resources* .................... 10,310
7,500 Sutton Resources Ltd.*...................... 51,094
-----------
167,838
-----------
PRIMARY SILVER PRODUCERS 4.76%
5,800 Coeur D'Alene Mines Corp.* ................. 51,113
35,000 Hecla Mining Co.*........................... 177,188
5,000 Pan American Silver Corp.*.................. 42,813
-----------
271,114
-----------
PALTINUM/PALLADIUM PRODUCERS 1.70%
4,000 Stillwater Mining Co.*...................... 97,000
-----------
GOLD MINING ROYALTY COMPANIES 6.36%
17,000 Euro-Nevada Mining*......................... 271,657
4,100 Franco Nevada Mining........................ 89,893
-----------
361,550
-----------
TOTAL COMMON STOCKS (cost $5,848,597) 4,963,637
-----------
PREFERRED STOCKS 1.72%
7,500 Coeur D'Alene Mines Corp.................... 97,969
-----------
TOTAL PREFERRED STOCKS (cost $111,075) 97,969
-----------
SHORT TERM INVESTMENTS 10.54%
166,724 Star Treasury Fund.......................... 166,724
433,000 Star Bank Repurchase Agreement
4.80%, 06/01/98..................... 433,000
-----------
TOTAL SHORT TERM (cost $599,724)...................... 599,724
-----------
TOTAL INVESTMENTS
(cost $6,559,396) 99.47% 5,661,330
OTHER ASSETS LESS LIABILITIES 0.53% 30,068
-------- -----------
TOTAL NET ASSETS................................. 100.00% $ 5,691,398
======== ===========
</TABLE>
* Non income producing security
See notes to financial statements
-3-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
CAMBORNE GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
VALUE VALUE
- --------- -----
LONG TERM INVESTMENTS 96.55%
Asset Backed 11.95%
<S> <C>
$ 24,426 Prudential 1993-59 A5
7.125%, due 12/25/00..................... $ 24,594
85,000 W.R. Berkley, 9.875%, 5/15/08............... 106,029
-------------
130,623
-------------
CORPORATE 9.89%
100,000 Westvaco Corp., 10.125%,
due 06/01/19............................. 108,081
-------------
MORTGAGE BACKED SECURITIES 37.63%
145,000 FHR 1617 PN 6.50%, due 11/15/23............. 146,470
13,911 GNMA 9.50%, due 09/15/19.................... 15,225
35,455 GNMA ARM 6.00%, due 10/15/27 ............... 35,948
34,543 TMS 1 Z2 12.00%, due 03/01/14............... 39,454
162,605 FNMA CMO 11.00%, due 4/25/07 ............... 174,416
-------------
411,513
-------------
U.S. GOVERNMENT SECURITIES 37.08%
200,000 U.S. Treasury Notes 6.125%, due 11/15/27.... 209,000
150,000 U.S. Treasury Notes 6.375%, due 08/15/27.... 160,875
35,000 U.S. Treasury Notes 6.875%, due 07/31/99.... 35,502
-------------
405,377
-------------
TOTAL LONG TERM INVESTMENTS
(cost $1,000,967)........................... 1,055,594
-------------
SHORT TERM INVESTMENT 4.23%
46,272 Star Treasury Fund (cost $46,272)........... $ 46,272
-------------
TOTAL INVESTMENTS
(cost $1,047,239) 100.78% 1,101,866
LIABILITIES LESS OTHER ASSETS (0.78%) (8,502)
-------- -------------
TOTAL NET ASSETS 100.00% $ 1,093,364
======== =============
PIA EQUITY FUND
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS 98.42%
BASIC MATERIALS 6.56%
3,700 Brush Wellman Inc........................... $ 90,188
2,220 Carpenter Technology........................ 117,660
1,800 Fuller (H.B.) Co............................ 112,950
-----------
320,798
-----------
CAPITAL GOODS - INDUSTRIAL 11.76%
3,300 AGCO Corp. ................................. 82,912
1,300 GATX Corp. ................................. 106,762
3,700 Gencorp Inc. ............................... 110,306
4,885 Mascotech Inc. ............................ 119,682
2,700 Precision Castparts Corp. .................. 155,588
-----------
575,250
-----------
CAPITAL GOODS - TECHNOLOGY 8.20%
3,700 ARR Corp.................................... 97,819
1,500 Dallas Semiconductor........................ 50,531
4,900 Danka Business System-ADR .................. 82,228
2,200 Tektronix Inc. ............................. 84,150
1,800 Varian Associates Inc....................... 86,512
-----------
401,240
-----------
CONSUMER CYCLICALS 10.65%
2,560 Arvin Industries............................ 94,880
1,700 Borg-Warner Automotive...................... 96,900
3,710 Kaufman & Broad Home Corp. ................. 95,301
4,000 Ross Stores Inc. ........................... 177,500
1,930 Standard Products Co. ..................... 56,694
-----------
521,275
-----------
CONSUMER STAPLES 7.84%
4,400 ICN Pharmaceuticals Inc. ................... 190,025
3,000 Interstate Bakeries......................... 96,750
2,500 Pittston Brink's Group...................... 96,719
-----------
383,494
-----------
</TABLE>
* Non income producing security
See notes to financial statements
-4-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
PIA EQUITY FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------ -----
CONSUMER SERVICES 14.54%
<S> <C>
3,700 Banta Corp. ................................ $ 117,128
4,690 Bob Evans Farms............................. 99,809
2,200 Central Newspapers Inc...................... 142,588
3,200 CKE Restaurants Inc. ....................... 101,600
3,240 Lee Enterprises Inc. ....................... 98,415
3,600 McClatchy Newspapers-CL A................... 106,875
1,200 National Data Corp. ....................... 45,000
-----------
711,415
-----------
FINANCIAL 17.87%
4,700 Arm Financial Group Inc.-CL A............... 96,056
2,200 Bank United Corp.-CL A. .................... 109,794
1,600 Capital Re Corp............................. 119,200
2,700 Fremont General Corp. ...................... 154,406
4,100 Frontier Insurance Group Inc. .............. 100,450
2,800 John Nuveen-CL A ........................... 105,000
3,520 Selective Insurance Group................... 92,180
3,500 Washington Federal Savings & Loan........... 97,125
-----------
874,211
-----------
FINANCIAL - REITs 11.77%
5,700 American Health Properties.................. 158,175
2,400 Developers Diversified Realty Corp. ........ 94,050
4,000 Duke Realty Investment Inc. ................ 90,500
1,500 Felcor Suites Hotels Inc. ................. 51,656
3,400 Macerich Company (The)...................... 91,800
3,500 Prentiss Properties Trust................... 89,469
-----------
575,650
-----------
TRANSPORTATION 4.41%
4,300 Roadway Express Inc. ....................... 80,625
4,300 USFreightways Corp. ....................... 135,181
-----------
215,806
-----------
UTILITIES 4.82%
2,230 Eastern Enterprises......................... 89,479
2,340 Public Service Co. of New Mexico............ 50,749
2,100 Wicor Inc................................... 96,075
-----------
236,303
-----------
TOTAL COMMON STOCKS
(cost $4,594,151)........................... 4,815,442
-----------
SHORT TERM INVESTMENTS 3.55%
173,829 Star Treasury Fund
(cost $173,829)............................. 173,829
-----------
TOTAL INVESTMENTS
(cost $4,767,980) 101.97% 4,989,272
LIABILITIES LESS OTHER ASSETS (1.97%) (96,549)
-------- -----------
TOTAL NET ASSETS 100.00% $ 4,892,723
======== ===========
</TABLE>
* Non income producing security
See notes to financial statements
-5-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
MURPHY NEW WORLD BIOTECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS 45.72%
BIOTECHNOLOGY 30.41%
<S> <C>
6,000 Ambi Inc.*.................................. $ 10,781
4,000 Alexion Pharmaceuticals Inc.*............... 47,750
3,000 Alkermes Inc.*.............................. 65,813
10,000 Alpha-Beta Technology Inc.*................. 26,563
8,000 Alteon Inc.* ............................... 29,750
3,000 Amgen Inc.*................................. 181,406
10,000 Amylin Pharmaceutical Inc.* ................ 42,656
14,200 Anergen Inc.* .............................. 32,394
7,045 Axys Pharmaceutical Inc.* .................. 54,379
10,000 Biomira Inc.*............................... 26,719
16,500 Cocensys Inc.* ............................. 51,047
10,000 Cortex Pharmaceuticals Inc.*................ 24,688
1,800 Corvas International Inc.* ................. 7,931
2,000 Geron Corp.* ............................... 22,063
15,000 Guilford Pharmaceuticals Inc.* ............. 272,813
10,000 La Jolla Pharmaceutical Inc.*............... 39,063
3,000 NPS Pharmaceuticals Inc.*................... 24,375
30,000 Neurobiological Technology* ................ 40,313
5,000 Nexstar Pharmaceuticals Inc.* .............. 50,625
1,000 Protein Design Labs Inc.*................... 25,219
2,000 Sibia Neurosciences Inc.* .................. 13,000
3,000 Texas Biotech Corp.*........................ 15,000
1,000 Transkaryotic Therapies Inc.* .............. 29,750
3,000 Vical Inc.*................................. 48,750
30,000 Xoma Corp.* ................................ 145,313
----------
1,328,157
----------
DRUG DELIVERY 1.73%
1,000 Dura Pharmaceuticals Inc.* ................. 26,156
10,000 Matrix Pharmaceutical Inc.* ................ 49,375
----------
75,531
----------
PHARMACEUTICALS 9.28%
30,000 Cephalon Inc.*.............................. 316,875
4,900 Chiron Corp.*............................... 88,353
----------
405,228
----------
RESEARCH EQUIPMENT 4.29%
1,000 Aurora Biosciences Corp.*................... 7,625
2,000 Incyte Pharmaceuticals*..................... 73,438
3,000 Molecular Dynamics Inc.* ................... 37,875
18,000 Trega Biosciences Inc.* .................... 68,625
----------
187,563
----------
TOTAL COMMON STOCKS
(cost $2,193,317)........................... 1,996,479
----------
SHORT TERM INVESTMENTS 4.99%
218,000 Star Treasury Fund
(cost $218,000)............................. 218,000
----------
TOTAL INVESTMENTS
(cost $2,411,317) 50.71% 2,214,479
Other assets less liabilities. 49.29% 2,152,524
------- ----------
TOTAL NET ASSETS 100.00% $4,367,002
======= ==========
</TABLE>
* Non income producing security
See notes to financial statements
-6-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
MURPHY NEW WORLD BIOTECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS 69.25%
BIOTECHNOLOGY 19.11%
<S> <C>
24,000 Amylin Pharmaceutical Inc. ................. $ 102,375
5,000 Anergen Inc.* .............................. 11,406
2,000 Cocensys Inc.* ............................. 6,188
3,000 Cor Therapeutics Inc.* ..................... 51,656
2,500 ISIS Pharmaceuticals* ...................... 34,922
1,500 Ligand Pharmaceuticals Inc. CL B* .......... 20,953
22,000 Neurobiological Technology*................. 28,563
----------
257,063
----------
DRUG DELIVERY 4.74%
19,000 InSite Vision Inc.*......................... 63,828
----------
MEDICAL RESEARCH EQUIPMENT 5.10%
18,000 Trega Biosciences Inc.*..................... 68,625
----------
MISCELLANEOUS 0.43%
400 H&Q Life Sciences Invstrs................... 5,775
----------
PHARMACEUTICALS 21.61%
23,900 Cephalon Inc.*.............................. 252,444
5,550 Dusa Pharmaceuticals Inc.................... 38,328
----------
290,772
----------
SEMI-CONDUCTORS 9.71%
500 Intel Corp. ............................... 35,703
2,000 LSI Logic Corp.* ........................... 42,625
25,000 Seeq Technology Inc.*....................... 52,344
----------
130,672
----------
SOFTWARE 8.55%
10,000 Informix Corp.*............................. 67,813
10,000 Ross Systems Inc.*.......................... 47,188
----------
115,000
----------
TOTAL COMMON STOCKS
(cost $1,082,677)........................... $ 931,734
----------
SHORT TERM INVESTMENTS 7.42%
99,821 Star Treasury Fund
(cost $99,821).............................. $ 99,821
----------
LONG OPTIONS 0.05%
50 Cirrus Logic Call Jun/12.50 (cost $3,587)... 625
----------
TOTAL INVESTMENTS
(cost $1,186,085) 76.72% 1,032,180
OTHER ASSETS LESS LIABILITIES. 23.28% 313,282
------- ----------
TOTAL NET ASSETS 100.00% $1,345,462
======= ==========
PIA SHORT TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
PRINCIPAL
VALUE VALUE
- --------- -----
LONG TERM INVESTMENTS 96.02%
ADJUSTABLE RATE SECURITIES 22.50%
293,294 FHLMC 609231, due 02/01/24.................. $ 300,627
506,056 FHLMC ARM 755204, due 08/01/15.............. 526,298
18,366 FHLMC CMO 1210 F, due 01/15/18.............. 18,347
27,189 FHLMC CMO 1492FD, due 03/15/23.............. 27,081
3,373,281 GNMA ARM 80013, due 11/20/26................ 3,445,368
687,380 GNMA ARM 80143, due 12/20/27................ 696,942
7,842,041 GNMA MAE 80154, due 01/20/28................ 7,951,280
------------
12,965,942
------------
ASSET BACKED 1.84%
1,000,000 Norwest Asset Securities Corp
7.00%, due 04/25/12...................... 1,009,195
52,358 Residential Asset Securitization Trust...... 52,721
------------
1,061,916
------------
</TABLE>
* Non income producing security
See notes to financial statements
-7-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
PIA SHORT TERM GOVERNMENT FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
VALUE VALUE
- --------- -----
CMO 2.46%
<S> <C>
1,401,874 Bear Stearns Mort. Secs. Inc. .............. $1,417,799
----------
COLLATERALIZED MTG. OBLIGATIONS 3.37%
33,698 FNMA 1991-91 F
5.80625%, due 07/25/98................ 33,744
26,135 FNMA 91-121 F
5.925%, due 09/25/98.................. 26,175
3,065 FNMA 92-143 G
6.75%, due 10/25/18................... 3,056
866,959 FNMA CMO #415842
11.00%, due 01/01/13.................. 930,627
133,035 FNMA CMO 91-113 F
5.189%, due 03/25/02.................. 132,561
802,102 FNMA FNR 1989-5 C
8.50%, due 12/25/17................... 815,979
----------
1,942,143
----------
MISCELLANEOUS 0.37%
23,463 FNMA4 91-79 6.025%, due 07/25/98............ 23,495
186,452 Prudential Home Ser 1993-59 A5
7.125%, due 12/25/20.................. 187,734
----------
211,228
----------
U.S. TREASURY OBLIGATIONS 65.48%
3,850,000 U.S. Treasury Note
5.50%, due 12/31/00................... $3,843,986
5,000,000 U.S. Treasury Note
5.875%, due 11/15/99.................. 5,525,784
750,000 U.S. Treasury Note
6.25%, due 08/31/02................... 768,047
8,600,000 U.S. Treasury Note
5.50%, due 03/31/03................... 8,573,134
2,700,000 U.S. Treasury Note
7.75%, due 02/15/01................... 2,845,970
1,500,000 U.S. Treasury Note
6.00%, due 08/15/00................... 1,513,595
$1,700,000U.S. Treasury Note
6.25%, due 02/28/02................... 1,737,189
3,500,000 U.S. Treasury Note
6.625%, due 04/30/02.................. 3,625,783
1,450,000 U.S. Treasury Note
5.625%, due 02/28/01.................. 1,452,720
2,600,000 U.S. Treasury Note
6.00%, due 08/15/99................... 2,613,003
5,250,000 U.S. Treasury Note
5.00%, due 02/15/99................... 5,231,956
-----------
37,731,167
-----------
TOTAL BONDS (cost $55,096,845)........................ 55,330,196
-----------
SHORT TERM INVESTMENTS 3.31%
1,906,284 Star Tresury Fund (cost $1,906,284)......... 1,906,284
-----------
TOTAL INVESTMENTS
(cost $57,003,129) 99.33% 57,236,480
Other assets less liabilities .0.67% 385,247
------- -----------
TOTAL NET ASSETS 100.00% $57,621,726
======= ===========
</TABLE>
* Non income producing security
See notes to financial statements
-8-
<PAGE>
MONTEREY MUTUAL FUND
SCHEDULES OF INVESTMENTS - MAY 31, 1998
(UNAUDITED)
PIA GLOBAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
VALUE** VALUE
- --------- -----
LONG TERM INVESTMENTS 97.52%
FOREIGN GOVERNMENT
OBLIGATIONS 19.7%
GREECE
<S> <C>
1,200,000 Hellenic Republic Bond 6.95%, due 03/04/08.. $ 100,901
GERMANY
1,400,000 Bundes Obligation 114, 6.50%, due 03/15/00.. 818,346
800,000 Bundes Republic Deutschland,
6.00%, due 07/04/07.................... 484,858
----------
1,303,204
----------
1,404,105
----------
U.S. GOVERNMENT AGENCIES 13.18%
$105,000 FHLMC CMO, 6.50%, due 11/15/23.............. 106,064
300,000 FNR 97-27 A, 7.00%, due 09/18/21............ 303,152
550,000 FNMA TBA 30yr, 7.00%, due 06/01/28.......... 556,187
----------
965,403
----------
U.S. GOVERNMENT SECURITIES 65.17%
425,000 U.S. Treasury Note, 6.00%,
due 08/15/00........................... 428,852
400,000 U.S. Treasury Note, 6.25%
due 01/31/02........................... 408,625
250,000 U.S. Treasury Note, 5.75%,
due 11/30/02........................... 251,484
450,000 U.S. Treasury Note, 5.875%,
due 11/15/05........................... 1,469,939
445,000 U.S. Treasury Note, 6.125%,
due 08/15/07........................... 459,462
1,220,000 U.S. Treasury Note, 5.50%,
due 02/15/08........................... 1,212,375
520,000 U.S. Treasury Bond, 6.125%,
due 11/15/27........................... 543,401
----------
4,774,138
----------
TOTAL LONG TERM INVESTMENTS
(cost 7,147,252)............................ 7,143,646
----------
SHORT TERM INVESTMENTS 8.70%
$ 38,069 Star Treasury Fund.......................... 38,009
300,000 General Motors Commercial Paper,
5.48%, due 6/10/98.................... 299,589
300,000 Merrill Lynch Commercial Paper,
5.52%, due 6/10/98.................... 299,586
----------
TOTAL SHORT TERM INVESTMENTS
(cost $637,244)............................. 637,244
----------
TOTAL INVESTMENTS
(cost $7,784,496) 106.22% 7,780,890
Liabilities less other assets (6.22%) (455,679)
------- ----------
TOTAL NET ASSETS 100.00% $7,325,211
======= ==========
</TABLE>
* Non income producing security
**Currency of Country indicated
See notes to financial statements
-9-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF ASSETS AND LIABILITIES - MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MURPHY
NEW WORLD CAMBORNE
TECHNOLOGY OCM GOVERNMENT PIA
CONVERTIBLES GOLD INCOME EQUITY
------------ ---- ------ ------
ASSETS
<S> <C> <C> <C> <C>
Investments in securities, at value
(See Note 5) .................................. $ 1,305,854 $ 5,661,330 $ 1,101,866 $ 4,989,272
Cash ............................................. 1,357 249 0 0
Receivable for securities sold ................... 0 13,011 0 0
Receivable for fund shares sold .................. 50 36,295 0 3,712
Income receivable ................................ 28,427 6,111 13,487 5,371
Due from investment advisor ...................... 11,378 0 0 0
Prepaid expenses and other ....................... 8,788 9,090 8,183 21,147
---------- ---------- ---------- ----------
Total Assets ................................ 1,355,852 5,726,084 1,123,536 5,019,502
---------- ---------- ---------- ----------
LIABILITIES
Payable for securities purchased ................. 0 0 0 99,671
Payable for fund shares redeemed ................. 0 0 2,742 0
Accrued expenses and other ....................... 24,335 33,477 25,426 25,093
Dividends payable ................................ 0 0 1,798 0
Due to investment advisor ........................ 0 1,209 206 2,015
---------- ---------- ---------- ----------
Total Liabilities ........................ 24,335 34,686 30,172 126,779
---------- ---------- ---------- ----------
NET ASSETS
Capital stock, no par value; unlimited shares
authorized; shares outstanding ................ 2,223,215 8,828,001 1,347,399 4,435,991
Undistributed net investment income (loss) ....... 27,061 (18,210) 499 (730)
Accumulated net realized gain (loss) on
investments and foreign currencies ............ (874,844) (2,220,328) (309,161) 236,171
Net unrealized appreciation (depreciation)
on investments and foreign currencies ......... (43,915) (898,065) 54,627 221,291
---------- ---------- ---------- ----------
Net Assets ....................................... $1,331,517 $5,691,398 $1,093,364 $4,892,723
========== ========== ========== ==========
CALCULATION OF MAXIMUM OFFERING PRICE
Net asset value and redemption price per share ... $ 25.66 $ 5.37 $ 14.02 $ 20.07
Maximum sales charge (4.50% of offering price
for Camborne Government Income,
OCM Gold, PIA Equity) ......................... 0.00 0.25 0.66 0.95
---------- ---------- ----------- ----------
Offering price to public ........................ $ 25.66 $ 5.62 $ 14.68 $ 21.02
========== ========== ========== ==========
Shares Outstanding ............................... 51,896 1,060,643 77,978 243,795
</TABLE>
See notes to financial statements
-10-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF ASSETS AND LIABILITIES - MAY 31, 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PIA
MURPHY MURPHY SHORT TERM
NEW WORLD NEW WORLD GOVERNMENT PIA
BIOTECHNOLOGY TECHNOLOGY SECURITIES GLOBAL BOND
------------- ---------- ---------- -----------
ASSETS
<S> <C> <C> <C> <C>
Investments in securities, at value
(See Note 5) ..................................... $ 2,214,479 $ 1,032,180 $57,236,480 $7,780,920
Cash ..................................................... 2,199,390 256,827 0 0
Receivable for securities sold ........................... 0 128,971 0 0
Receivable for fund shares sold .......................... 20,000 2,000 1,024,121 0
Income receivable ........................................ 829 281 579,960 102,413
Due from investment advisor .............................. 894 10,616 0 1,962
Prepaid expenses and other ............................... 4,405 12,569 19,259 4,522
----------- ----------- ------------ -----------
Total Assets ........................................ 4,439,997 1,443,444 58,859,820 7,889,817
----------- ----------- ------------ -----------
LIABILITIES
Payable for securities purchased ......................... 41,875 80,344 0 556,188
Payable for fund shares redeemed ......................... 18,052 0 190,000 0
Accrued expenses and other ............................... 13,067 17,638 19,023 8,418
Dividends payable ........................................ 0 0 27,331 0
Due to investment advisor ................................ 0 0 1,741 0
----------- ----------- ----------- ----------
Total Liabilities ................................ 72,995 97,982 238,095 564,606
----------- ----------- ----------- ----------
NET ASSETS
Capital stock, no par value; unlimited shares
authorized; shares outstanding ........................ 4,637,900 1,506,355 58,236,978 7,350,326
Undistributed net investment income (loss) ............... (32,428) (15,380) 0 6,119
Accumulated net realized gain (loss) on
investments and foreign currencies .................... (41,631) 8,392 151,397 (27,659)
Net unrealized appreciation (depreciation)
on investments and foreign currencies ................. (196,839) (153,905) 233,351 (3,577)
----------- ----------- ------------ -----------
Net Assets ............................................... $ 4,367,002 $ 1,345,462 $58,621,726 $ 7,325,210
=========== =========== ============ ===========
CALCULATION OF MAXIMUM OFFERING PRICE
Net asset value and redemption price per share ........... $ 7.28 $ 15.28 $ 10.27 $ 20.37
Maximum sales charge (4.50% of offering price
for Camborne Government Income,
OCM Gold, PIA Equity) ............................ 0.00 0.00 0.00 0.00
----------- ----------- ------------ -----------
Offering price to public ................................. $ 7.28 $ 15.28 $ 10.27 $ 20.37
=========== =========== ============ ===========
Shares Outstanding ....................................... 599,532 88,062 5,706,607 359,623
</TABLE>
See notes to financial statements
-11-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF OPERATIONS - FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
MURPHY
NEW WORLD CAMBORNE
TECHNOLOGY OCM GOVERNMENT PIA
CONVERTIBLES GOLD INCOME EQUITY
-------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest ............................................... $ 45,990 $ 22,454 $ 40,173 $ 2,699
Dividends .............................................. 2,588 15,945 0 44,033
Other income ........................................... 0 0 0 0
--------- --------- -------- ---------
Total Investment Income ........................ 48,578 38,399 40,173 46,733
--------- --------- -------- ---------
EXPENSES
Distribution fees (Note 4) ............................. 1,760 22,968 555 5,187
Adviser & sub-adviser fees (Note 3) .................... 4,434 23,200 2,220 20,746
Transfer agent fees .................................... 7,892 7,943 7,858 7,875
Administrative fees (Note 3) ........................... 8,435 8,447 8,339 8,361
Custodian fees ......................................... 1,105 1,105 1,105 1,105
Audit fees ............................................. 4,560 4,326 3,631 4,092
Legal fees ............................................. 4,593 4,634 4,634 4,634
Registration fees ...................................... 15,600 3,727 3,608 1,189
TrusteesO fees ......................................... 972 1,034 970 971
Printing expense ....................................... 2,185 2,192 2,073 2,131
Amortization of deferred organization expenses ......... 0 0 0 0
Postage expense ........................................ 556 557 537 543
Other expenses ......................................... 2,376 2,379 2,354 2,362
--------- --------- -------- ---------
Total expenses ......................................... 54,468 82,512 37,884 59,195
Less: Expense reimbursement from adviser and
sub-adviser .................................... (37,295) (25,903) (31,778) (11,732)
--------- --------- -------- ---------
Net expenses ........................................... 17,173 56,609 6,106 47,463
--------- --------- -------- ---------
Net Investment Income (Loss) ........................... 31,405 (18,210) 34,067 (730)
--------- --------- -------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments
and foreign currencies ......................... (39,134) (138,855) 12,110 226,743
Net Change in Unrealized Appreciation on
Investments and foreign currencies ............. (21,016) 354,008 (7,983) 81,805
--------- --------- -------- ---------
Net Gain (Loss) on Investments ......................... (60,150) 215,153 4,127 308,548
--------- --------- -------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations ...................... $ (28,745) $ 196,943 $ 38,194 $ 307,818
========= ========= ======== =========
</TABLE>
See notes to financial statements
-12-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF OPERATIONS - FOR THE SIX MONTHS ENDED MAY 31, 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
PIA
MURPHY MURPHY SHORT-TERM
NEW WORLD NEW WORLD GOVERNMENT PIA
BIOTECHNOLOGY TECHNOLOGY SECURITIES GLOBAL BOND
--------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest .............................................. $ 3,489 $ 1,630 $ 1,587,841 $ 174,615
Dividends ............................................. 0 50 0 0
Other income .......................................... 118 0 0 0
----------- ----------- ----------- -----------
Total Investment Income 3,607 1,680 1,587,841 174,615
----------- ----------- ----------- -----------
EXPENSES
Distribution fees (Note 4) ............................ 3,692 1,748 13,439 0
Adviser & sub-adviser fees (Note 3) ................... 14,768 6,992 53,757 13,245
Transfer agent fees ................................... 7,919 7,877 4,144 7,480
Administrative fees (Note 3) .......................... 8,435 8,385 20,599 6,798
Custodian fees ........................................ 1,105 1,105 13,439 3,591
Audit fees ............................................ 2,690 2,691 2,691 2,493
Legal fees ............................................ 4,634 4,634 4,634 3,740
Registration fees ..................................... 21,329 17,378 8,301 2,992
Trustees' fees ........................................ 971 971 939 748
Printing expense ...................................... 2,187 2,131 2,065 748
Amortization of deferred organization expenses ........ 1,014 1,014 0 120
Postage expense ....................................... 555 546 539 124
Other expenses ........................................ 2,376 2,376 2,463 1,695
----------- ----------- ----------- -----------
Total expenses ........................................ 71,675 57,846 127,010 43,774
Less: Expense reimbursement from adviser and
sub-adviser ........................................ (35,640) (40,786) (45,935) (26,413)
----------- ----------- ----------- -----------
Net expenses........................................... 36,035 17,060 81,075 17,361
----------- ----------- ----------- -----------
Net Investment Income (Loss)........................... (32,428) (15,380) 1,506,766 157,254
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investments
and foreign currencies ............................. 63,867 (24,095) 156,333 8,566
Net Change in Unrealized Appreciation on
Investments and foreign currencies.................. (293,669) (33,954) (26,256) 11,856
----------- ----------- ----------- -----------
Net Gain (Loss) on Investments...................... (229,802) (58,049) 130,077 20,422
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations...................... $ (262,230) $ (73,429) $ 1,636,843 $ 177,676
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
-13-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MURPHY NEW CAMBORNE
WORLD TECHNOLOGY OCM GOVERNMENT
CONVERTIBLES GOLD INCOME
----------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED MAY 31, NOV. 30, ENDED MAY 31, NOV. 30, ENDED MAY 31, NOV. 30,
1998 1997 1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
-----------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ................ $ 31,405 $ 11,556 $ (18,210) $ (27,596) 34,067 $ 63,513
Net realized gain (loss) on
investments and foreign currencies .. (39,134) 336,435 (138,855) 19,533 12,110 (10,449)
Net change in unrealized appreciation
on investments and foreign currencies (21,016) (351,081) 354,008 (1,008,814) (7,983) 33,537
---------- --------- ---------- ---------- ------- ----------
Net increase (decrease) in net assets
resulting from operations ........... (28,745) (3,090) 196,943 (1,016,877) 38,194 86,601
---------- --------- ---------- ---------- ------- ----------
Net equalization (debits) credits ........... 0 0 0 0 428 (755)
---------- --------- ---------- ---------- ------- ----------
DIVIDENDS PAID TO SHAREHOLDERS
Dividends from net investment income ........ (16,073) 0 0 0 (36,578) (60,248)
Dividends from capital gain ................. 0 0 0 0 0 0
---------- --------- ---------- ---------- ------- ----------
(16,073) 0 0 0 (36,578) (60,248)
---------- --------- ---------- ---------- ------- ----------
FUND SHARE TRANSACTIONS
Net proceeds from shares sold ............... 29,734 153,112 3,915,703 2,054,956 179,492 24,703
Dividends reinvested ........................ 15,073 0 0 0 27,830 55,980
Payment for shares redeemed ................. (103,068) (274,985) (48,568) (941,627) (77,100) (437,944)
---------- --------- ---------- ---------- ------- ----------
Net increase (decrease) in net assets
from fund share transactions ........ (58,261) (121,873) 3,867,135 1,113,329 130,222 (357,261)
---------- --------- ---------- ---------- ------- ----------
Net increase (decrease) in net assets ....... (103,079) (124,963) 4,064,078 96,452 132,266 (331,663)
NET ASSETS, BEGINNING OF PERIOD ............. 1,434,596 1,559,559 1,627,320 1,530,868 961,098 1,292,761
---------- --------- ---------- ---------- ------- ----------
NET ASSETS, END OF PERIOD ................... $1,331,517 $1,434,596 $5,691,398 $1,627,320 $1,093,364 $ 961,098
========== ========== ========== ========== ========== ===========
CHANGES IN SHARES OUTSTANDING
Shares sold ................................. 1,122 5,719 749,983 279,147 12,886 1,837
Shares issued on reinvestment
of dividends ........................ 581 0 0 0 1,989 4,103
Shares redeemed ............................. (3,911) (10,154) (9,297) (143,814) (5,562) (32,396)
---------- --------- ---------- ---------- ------- ----------
Net Increase (decrease) in
shares outstanding .................. (2,208) (4,435) 740,686 135,333 9,313 (26,456)
========== ========== ========== ========== ========== ===========
</TABLE>
See notes to financial statements
*Commencement of operations
-14-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MURPHY MURPHY
PIA NEW WORLD NEW WORLD
EQUITY BIOTECHNOLOGY TECHNOLOGY
------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS
ENDED MAY 31, NOV. 30, ENDED MAY 31, NOV. 30, ENDED MAY 31,
1998 1997 1998 1997 1998
UNAUDITED (UNAUDITED) (UNAUDITED)
------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C> <C>
Net investment income (loss) .................... $ (730) $ (899) $ (32,428) $ (22,562) (15,380)
Net realized gain (loss) on
investments and foreign currencies ...... 226,743 325,095 63,867 (41,445) (24,095)
Net change in unrealized appreciation
on investments and foreign currencies ... 81,805 (125,645) (293,669) 136,885 (33,954)
---------- ---------- --------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations ............... 307,818 198,551 (262,230) 72,878 (73,429)
---------- ---------- --------- ----------- ----------
Net equalization (debits) credits ............... 0 0 0 0 0
---------- ---------- --------- ----------- ----------
DIVIDENDS PAID TO SHAREHOLDERS
Dividends from net investment income ............ 0 0 0 0 0
Dividends from capital gain ..................... (320,265) (22,842) 0 0 (190,274)
---------- ---------- --------- ----------- ----------
(320,265) (22,842) 0 0 (190,274)
---------- ---------- --------- ----------- ----------
FUND SHARE TRANSACTIONS
Net proceeds from shares sold ................... 2,004,321 2,289,022 2,601,221 2,665,166 386,454
Dividends reinvested ............................ 238,717 21,270 0 0 171,796
Payment for shares redeemed ..................... (114,817) (424,338) (324,978) (616,300) (388,107)
---------- ---------- --------- ----------- ----------
Net increase (decrease) in net assets
from fund share transactions ............ 2,128,221 1,885,954 2,276,243 2,048,866 170,143
---------- ---------- --------- ----------- ----------
Net increase (decrease) in net assets ....... 2,115,774 2,061,663 2,014,013 2,121,744 (93,560)
NET ASSETS, BEGINNING OF PERIOD ............. 2,776,949 715,286 2,352,989 231,245 1,439,022
---------- ---------- --------- ----------- ----------
NET ASSETS, END OF PERIOD ................... $4,892,723 $2,776,949 $4,367,002 $2,352,989 $1,345,462
CHANGES IN SHARES OUTSTANDING
Shares sold ..................................... 103,095 118,526 351,869 342,349 24,489
Shares issued on reinvestment
of dividends ............................ 12,705 1,195 0 0 12,431
Shares redeemed ................................. (5,594) (22,574) (43,925) (82,922) (23,870)
---------- ---------- --------- ----------- ----------
Net Increase (decrease) in
shares outstanding ...................... 110,205 97,147 307,944 259,427 13,050
========== ========== ========= =========== ==========
</TABLE>
See notes to financial statements
-15-
<PAGE>
MONTEREY MUTUAL FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
PIA
SHORT-TERM
GOVERNMENT PIA
SECURITIES GLOBAL BOND
FOR THE PERIOD
YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS MAY 31, 1997
NOV. 30, ENDED MAY 31, NOV. 30, ENDED MAY 31, TO NOV. 30,
1997 1998 1997 1998 1997
(UNAUDITED) (UNAUDITED)
-----------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C> <C>
Net investment income (loss) ..................... $ (24,615) $ 1,506,766 $ 1,770,843 $ 157,254 125,165
Net realized gain (loss) on
investments and foreign currencies........ 220,579 156,333 48,409 8,566 (23,939)
Net change in unrealized appreciation
on investments and foreign currencies .... (230,396) (26,256) 164,144 11,856 (15,432)
------------ ------------ ------------ ------------ ---------
Net increase (decrease) in net assets
resulting from operations ................ (34,432) 1,636,843 1,983,396 177,676 85,794
------------ ------------ ------------ ------------ ---------
Net equalization (debits) credits ................ 0 0 0 0 0
------------ ------------ ------------ ------------ ---------
DIVIDENDS PAID TO SHAREHOLDERS
Dividends from net investment income ............. 0 (1,506,766) (1,770,843) (167,514) (121,071)
Dividends from capital gain ...................... (25,966) (49,445) (19,653) 0 0
------------ ------------ ------------ ------------ ---------
(25,966) (1,556,211) (1,790,496) (167,514) (121,071)
------------ ------------ ------------ ------------ ---------
FUND SHARE TRANSACTIONS
Net proceeds from shares sold .................... 1,284,920 8,654,418 34,947,791 157,301 5,400,000
Dividends reinvested ............................. 24,991 1,611,838 1,549,280 1,572,860 120,164
Payment for shares redeemed ...................... (696,855) (4,637,448) (4,241,857) 0 0
------------ ------------ ------------ ------------ ---------
Net increase (decrease) in net assets
from fund share transactions ............. 613,056 5,628,808 32,255,214 1,730,161 5,520,164
------------ ------------ ------------ ------------ ---------
Net increase (decrease) in net assets ........... 552,658 5,709,440 32,448,114 1,740,323 5,484,887
NET ASSETS, BEGINNING OF PERIOD ................. 886,364 52,912,286 20,464,172 5,584,887 100,000
------------ ------------ ------------ ------------ ---------
NET ASSETS, END OF PERIOD ....................... $ 1,439,022 $ 58,621,726 $ 52,912,286 $ 7,325,210 $ 5,584,887
============ ============ ============ ============ ============
CHANGES IN SHARES OUTSTANDING
Shares sold ...................................... 64,714 842,108 3,418,519 77,101 263,772
Shares issued on reinvestment
of dividends ............................. 1,245 156,893 151,712 7,762 5,988
Shares redeemed .................................. (34,173) (451,609) (414,658) 0 0
------------ ------------ ------------ ------------ ---------
Net Increase (decrease) in
shares outstanding........................ 31,786 547,392 3,155,573 84,863 269,760
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements
-15-
<PAGE>
MONTEREY MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 1998
(UNAUDITED)
NOTE 1. ORGANIZATION
Monterey Mutual Fund (the "Fund"), formerly Monitrend Mutual Fund, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund was organized as a Massachusetts
business trust on January 6, 1984 and consists of eight series of shares: the
PIA Short Term Government Securities Series, the Camborne Government Income
Series (formerly Government Income), the OCM Gold Series (formerly Gold), the
PIA Equity Series (formerly Growth), the Murphy New World Biotechnology Series
(formerly Gaming and Leisure), the Murphy New World Technology Series (formerly
Technology), the Murphy New World Technology Convertibles Series (formerly
Growth & Income), and the PIA Global Bond Series (collectively the "Series"),
each of which has separate assets and liabilities and differing investment
objectives. The investment objective for each of the series are: (1) the PIA
Short-Term Government Securities Series, (the "Short-Term Government Series"),
to provide investors a high level of current income, consistent with low
volatility of principal through investing in short term, adjustable rate and
floating rate securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (2) the Camborne Government Income Series, (the
"Government Series"), growth of capital, whether over the short or long-term,
income and preservation of capital; (3) the OCM Gold Series, (the "Gold
Series"), long-term growth of capital through investing primarily in equity
securities of domestic and foreign companies engaged in activities related to
gold and precious metals; (4) the PIA Equity Series, (the "Equity Series"),
long-term growth of capital; (5) the Murphy New World Biotechnology Series, (the
"Biotechnology Series"), long-term growth of capital through investing primarily
in equity securities of companies that its investment adviser believes can
produce products or services that provide or benefit from advances in
biotechnology; (6) the Murphy New World Technology Series, (the "Technology
Series"), long-term growth of capital through investing primarily in equity
securities of companies that its investment adviser believes can produce
products or services that provide or benefit from advances in technology; (7)
the Murphy New World Technology Convertibles Series (the "Convertibles Series"),
to maximize total return through a combination of capital appreciation and
income; and (8) the PIA Global Bond Series, (the "Global Bond Series"), to
provide a high level of current income through investing in bonds denominated in
U.S. dollars and other currencies.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Series in the preparation of their financial statements.
SECURITY VALUATION--Portfolio securities that are listed on the national
securities exchanges are valued at the last sale price as of the close of such
securities exchanges, Eastern time, or, in the absence of recorded sales, at the
average of readily available closing bid and asked prices on such exchanges.
Unlisted securities are valued at the average of the quoted bid and asked prices
in the over-the-counter market. Securities and other assets for which market
quotations are not readily available are valued at fair market value as
determined in good faith by the Adviser under procedures established by and
under the general supervision and responsibility of the Fund's Board of
Trustees. Short-term investments which mature in less than 60 days are valued at
amortized cost (unless the Board of Trustees determines that this method does
not represent fair market value). Short-term investments which mature after 60
days are valued at market. Stock Index Futures, which are traded on commodities
exchanges, are valued at their last sales price as of the close of such
commodities exchanges.
OPTIONS--When a call is written, an amount equal to the premium received is
included in the Statement of Assets and Liabilities as an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the option written. If an option which was written
either expires on its stipulated expiration date, or a closing purchase
transaction is entered into, a gain is realized (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished. If a written call
option is exercised, a capital gain or loss is realized from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.
The premium paid for the purchase of a call or a put option is included in
the asset section of the Statement of Assets and Liabilities as an investment
and is subsequently adjusted to the current market value of the option. If a
purchased option expires on its stipulated expiration date, a loss is realized
in the amount of the cost of the option. If a closing sale transaction is
entered into, a gain or loss will be realized depending on whether the sales
proceeds from the closing sale transaction are greater or less than the cost of
the option. If a put option is exercised, a gain or loss will be realized from
the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. If a call option is exercised, the
cost of the security purchased upon exercise will be increased by the premium
originally paid.
FUTURES CONTRACTS--The Equity Series, the Biotechnology Series, the
Technology Series, the Convertibles Series, the Government Series, and the
Global Bond Series may from time to time enter into futures contracts as a hedge
to provide protection against adverse movements in the prices of securities in
the portfolio. When a Series enters a futures contract, it is required to pledge
to the clearing broker an amount of cash and/or securities equal to
approximately 5% of the contract amount. This amount is known as the "initial
margin". Pursuant to the futures contract, the Series agrees to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the value at the close of the day and the price at which the
futures contract was originally struck. Such payments, known as the "variation
margin", are recorded by the Series as unrealized gains or losses. When the
futures contract expires or is closed by the Series, it realizes a gain or loss.
-16-
<PAGE>
MONTEREY MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 1998 (CONTINUED)
(UNAUDITED)
FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK--Futures contracts
involve elements of market risk and credit risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The contract amounts of
these futures contracts reflect the extent of exposure to off balance sheet
risk.
The predominant market risk is that movements in the prices of the Fund's
portfolio securities being hedged may not correlate perfectly with the movement
in the prices of the future contracts. The lack of correlation could render the
Fund's hedging strategy unsuccessful and could result in a loss to the Fund.
Futures contracts are purchased only on exchanges. The exchange acts as the
counterparty to the Fund's futures transactions; therefore the Fund's credit
risk is limited to the failure of the exchange.
Subsequent market fluctuations of securities sold short may require a Fund
to purchase securities at prices which exceed the value reflected on the
Statement of Assets and Liabilities.
FEDERAL INCOME TAXES--It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable net income to its shareholders. Therefore the
Series paid no Federal Income taxes and no Federal income tax provision was
required. At November 30, 1997, Convertibles had a capital loss carry forward of
$835,710 expiring as follows: $78,279 in 1998, $739,182 in 1999, and $18,249 in
2002. Gold had a capital loss carryover of $2,080,045 expiring as follows:
$173,743 in 1998, $95,110 in 1999, $335,282 in 2000, $348,419 in 2001,
$1,039,696 in 2002 and $87,795 in 2003. Government had a capital loss carry
forward of $314,800 expiring as follows: $281,460 in 1998, $12,593 in 2003,
$16,768 in 2004 and $3,979 in 2005. The Biotechnology Series had a capital loss
carry forward of $105,498 expiring as follows: $2,547 in 2002 and $61,506 in
2003 and $41,445 in 2005.
ORGANIZATIONAL COSTS--These costs have been capitalized and are being
amortized using the straight-line method over a period of sixty months beginning
on commencement of operations.
OTHER--Securities transactions are recorded no later than the first
business day after the trade date. Discounts and premiums on securities
purchased are amortized over the life of the respective security. Realized gains
and losses on sales of securities are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on an accrual basis.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
NOTE 3. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The Convertibles Series has an investment advisory agreement with Murphy
Investment Management, Inc. ("Murphy"). The Convertibles Series pays Murphy a
fee computed daily and payable monthly, at the following annual rate based upon
daily net assets:
ASSETS FEE RATE
------ --------
0 to $150 million................ 0.625%
$150 million to $250 million..... 0.500%
Over $250 million................ 0.375%
The Biotechnology Series and Technology Series also have an investment
advisory agreement with Murphy. Each Series pays Murphy a fee, computed daily
and payable monthly, at an annual rate of 1.00% of their respective net assets.
The Gold Series has an advisory agreement with Orrell Capital Management, a
division of Orrell and Company, Inc. ("Orrell"). Under the agreement, the Gold
Series pays Orrell a fee computed daily and payable monthly, at the following
annual rates based upon daily net assets:
ASSETS FEE RATE
------ --------
0 to $50 million................. 1.000%
$50 million to $75 million....... 0.875%
$75 million to $100 million...... 0.750%
$100 million to $150 million..... 0.625%
$150 million to $250 million..... 0.500%
Over $250 million................ 0.375%
The Equity Series has an investment advisory agreement with Pacific Income
Advisors, Inc. ("PIA"). Equity pays PIA a fee computed daily and payable
monthly, at the following annual rate based upon daily net assets:
-17-
<PAGE>
MONTEREY MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS - MAY 31, 1998 (CONTINUED)
(UNAUDITED)
ASSETS FEE RATE
------ --------
0 to $50 million................. 1.000%
$50 million to $75 million....... 0.875%
$75 million to $100 million...... 0.750%
$100 million to $150 million..... 0.625%
$150 million to $250 million..... 0.500%
Over $250 million................ 0.375%
The Short-Term Government Series and Global Bonds Series each has an
investment advisory agreement with PIA. Each Series pays PIA a fee, computed
daily and payable monthly, at an annual rate of 0.20% and 0.40%, respectively,
of their net assets.
The Government Series has both an investment advisory agreement and a
sub-advisory agreement with PIA. Under the agreements, Government pays PIA fees,
computed daily and payable monthly, at an annual rate of 0.40% of the Government
Fund's daily net assets; and PIA pays Camborne Advisors, Inc. a fee computed
daily and paid monthly at an annual rate of 0.20% of the Government Fund's daily
net assets.
During the six months ended May 31, 1998 the advisers agreed to reimburse
the series for expenses in excess of 2.44% of average net assets (for the Gold,
Biotechnology, Technology and Convertibles Series), 1.80% of average net assets
for the Equity Series (2.44% until March 31, 1998), 1.10% of average net assets
for the Government Series, 0.51% of average net assets of the Global Bond Series
and 0.30% of average net assets of the Short-Term Government Series. The amounts
reimbursed by the advisers in 1998 are set forth in the Statement of Operations.
The Fund has a fund accounting and administrative agreement with American
Data Services, Inc. ("ADS"). ADS receives a fee, computed daily and payable
monthly, at an annual rate of 0.1% of average daily net assets, subject to a
monthly minimum.
NOTE 4. DISTRIBUTION AGREEMENT AND PLAN
Syndicated Capital, Inc. serves as the Distributor of each Series's shares.
The President and sole shareholder of the Distributor is also the Chairman and
minority shareholder of PIA, as well as a trustee of the Fund.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan authorizes each Series,
exept the Global Bond Series, to reimburse the Distributor for marketing
expenses incurred in distributing shares of each Series, including the cost of
printing sales material and making payments to dealers in each Series shares, in
any fiscal year, subject to a limit of 0.99% for the Gold, 0.25% for the Equity
Series, Biotechnology, Technology and Convertibles Series, 0.10% for the
Government Series, and 0.05% for the Short-Term Government Series. Distribution
fees incurred by each Series are set forth in the Statement of Operations.
NOTE 5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and sales of investment securities (other than
short-term investments) for the six months ended May 31, 1998, were as follows:
PURCHASES SALES
--------- -----
Convertibles Series.............. $ 677,719 $ 151,337
Gold Series...................... 3,439,312 34,558
Government Series................ 782,417 702,791
Equity Series.................... 3,747,745 1,971,263
Biotechnology Series............. 2,819,930 2,224,161
Technology Series................ 1,144,330 1,327,858
Short-Term Government Series..... 54,737,293 48,149,189
Global Bond Series............... 12,430,422 9,558,169
Unrealized appreciation and depreciation on investments at May 31, 1998
based on cost for Federal income taxes, are as follows:
Unrealized Unrealized
Appreciation Depreciation Net
------------ ------------ ---
Convertibles Series............ $029,172 ($0073,087) ($043,915)
Gold Series.................... 148,202 (1,046,267) (898,065)
Government Series.............. 57,033 (2,406) 54,627
Equity Series.................. 353,985 (132,694) 221,291
Biotechnology Series........... 25,074 (221,913) (196,839)
Technology Series.............. 47,083 (200,988) (153,905)
Short-Term Government Series... 285,234 (51,883) 233,351
Global Bond Series............. 39,982 (43,588) (3,606)
-18-
<PAGE>
MONTEREY MUTUAL FUND MURPHY NEW WORLD TECHNOLOGY CONVERTIBLES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30,
1998 1997* 1996 1995 1994 1993
--------------------------------------------------------------------------------------
(UNAUDITED)
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C>
of period .................................. $ 26.52 $ 26.64 $ 21.42 $ 16.67 $ 17.20 $ 18.53
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ......................... 0.58 0.21 0.01 0.02 0.09 0.07
Net realized and unrealized gain (loss)
on investments ............................. (1.14) (0.33) 5.23 4.82 (0.58) (1.22)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .............. (0.56) (0.12) 5.24 4.84 (0.49) (1.15)
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income .......... (0.30) 0.00 (0.02) (0.09) (0.04) (0.18)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ........................... (0.30) 0.00 (0.02) (0.09) (0.04) (0.18)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................ $ 25.66 $ 26.52 $ 26.64 $ 21.42 $ 16.67 $ 17.20
========== ========== ========== ========== ========== ==========
Total return** ................................ (2.12%) (.45%) 24.49% 29.19% (2.86%) (6.26%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ................................. 1,331 1,435 1,560 1,377 1,573 2,538
Ratio of expenses to average
net assets# ................................ 2.44%+ 2.44% 2.26% 2.44% 2.44% 2.44%
Ratio of net investment income
(loss) to average net assets ............... 3.04%+ .76% 0.04% 0.10% 0.46% 0.21%
Portfolio turnover rate ....................... 11.75% 85.91% 80.93% 151.86% 0% 1.59%
<FN>
** Excluding sales charge.
# Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratios of expenses to average net assets would have been 7.74%,
6.83%, 5.11%, 6.08%, 5.46% and 4.39%, respectively.
* On 12/31/96 Murphy Investment Management, Inc. became the Fund's investment
adviser. From 2/1/95 to 12/31/96 MidCap Associates, Inc. was the Fund's
investment adviser. Prior to 2/1/95, Monitrend Investment Management, Inc.,
was the Fund's investment adviser.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
-19-
<PAGE>
MONTEREY MUTUAL FUND, OCM GOLD
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30,
1998 1997++ 1996 1995 1994 1993
-----------------------------------------------------------------------------------
(UNAUDITED)
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C>
of period ....................................... $ 5.09 $ 8.29 $ 5.91 $ 5.87 $ 11.94 $ 9.84
---------- ---------- ---------- -------- --------- ---------
Income from investment operations
Net investment income ........................... (0.02) (0.09) (0.15) (0.09) (0.15) (0.09)
Net realized and unrealized gain (loss)
on investments .................................. 0.30 (3.11) 2.53 0.13 (5.92) 2.20
---------- ---------- ---------- -------- --------- ---------
Total from investment operations ................ 0.28 (3.20) 2.38 0.04 (6.07) 2.11
---------- ---------- ---------- -------- --------- ---------
Less distributions
Dividends from net investment
income .......................................... 0.00 0.00 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- -------- --------- ---------
Total distributions ............................. 0.00 0.00 0.00 0.00 0.00 (0.01)
---------- ---------- ---------- -------- --------- ---------
Net asset value, end of period .................. $ 5.37 $ 5.09 $ 8.29 $ 5.91 $ 5.87 $ 11.94
========== ========== ========== ======== ========= =========
Total return** .................................. 5.50% (38.60%) 40.27% 0.68% (50.84%) 21.47%
Ratios/supplemental data
Net assets, end of period
(in 000's) ...................................... 5,691 1,627 1,531 421 1,274 3,147
Ratio of expenses to average
net assets# ..................................... 2.44%+ 2.44% 2.37% 2.44% 2.45% 2.43%
Ratio of net investment income
(loss) to average net assets .................... (0.78%) (1.60%) (1.72%) (1.57%) (1.26%) (0.84%)
Portfolio turnover rate ......................... .77% 17.68% 35.70% 15.57% 229% 969%
<FN>
* Based on average shares outstanding.
** Excluding sales charge.
# Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratios of expenses to average net assets would have been 3.54%,
5.78%, 6.15%, 12.52%, 5.58% and 4.55%, respectively.
++ On 12/13/96 Orrell and Company, Inc. became the Fund's investment adviser.
Prior to 12/31/96 Monitrend Investment Management, Inc. was the Fund's
investment adviser except during the period between February 1, 1991 to
August 17, 1994 when the investment adviser was Kensington Capital
Management Inc.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
-20-
<PAGE>
MONTEREY MUTUAL FUND
CAMBORNE GOVERNMENT INCOME
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30,
1998 1997++ 1996 1995 1994 1993
-----------------------------------------------------------------------------------
(UNAUDITED)
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C>
of period ....................................... $ 14.00 $ 13.59 $ 13.88 $ 12.76 $ 14.16 $ 13.13
---------- ---------- ---------- -------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................... 0.43 0.89 0.73 0.81 0.87 0.72
Net realized and unrealized gain (loss)
on investments .................................. 0.08 0.38 (0.28) 1.12 (1.39) 1.08
---------- ---------- ---------- -------- ---------- ----------
Total from investment operations ................ 0.51 1.27 0.45 1.93 (0.52) 1.80
---------- ---------- ---------- -------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment
income .......................................... (0.49) (0.86) (0.74) (0.81) (0.81) (0.77)
---------- ---------- ---------- -------- ---------- ----------
Total distributions ............................. (0.49) (0.86) (0.74) (0.81) (0.81) (0.77)
---------- ---------- ---------- -------- ---------- ----------
Net asset value, end of period .................. $ 14.02 $ 14.00 $ 13.59 $ 13.88 $ 12.76 $ 14.16
========== ========== ========== ======== ========== ==========
Total return** .................................. 5.50% (38.60%) 40.27% 0.68% (50.84%) 21.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ...................................... 1,093 961 1,293 947 882 1,280
Ratio of expenses to average
net assets# ..................................... 1.10%+ 1.10% 1.07% 1.10% 1.10% 1.10%
Ratio of net investment income
(loss) to average net assets .................... 6.13%+ 6.53% 5.35% 6.04% 6.47% 5.14%
Portfolio turnover rate ......................... 62.29%+ 111.26% 129.17% 91.03% 66.36% 118%
<FN>
** Excluding sales charge.
# Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratios of expenses to average net assets would have been 6.82%,
6.98%, 5.68%, 5.73%, 5.52% and 3.66%, respectively.
++ On 12/13/96 Camborne Investment Corp. became the Fund's sub-adviser.
Prior to 12/13/96, Pacific Income Advisers, Inc. was the Fund's
investment adviser.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
-21-
<PAGE>
MONTEREY MUTUAL FUND, PIA EQUITY
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30,
1998 1997++ 1996* 1995* 1994 1993
---------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 20.79 $ 19.63 $ 15.36 $ 11.12 $ 13.35 $ 13.59
---------- ---------- -------- -------- ------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment (loss) ............................... 0.00 (1.21) (0.37) (0.24) (0.52) (0.20)
Net realized and unrealized gain (loss)
on investments .................................... 1.68 3.05 4.64 4.48 (1.71) (0.04)
---------- ---------- -------- -------- ------- --------
Total from investment operations .................... 1.68 1.84 4.27 4.24 (2.23) (0.24)
---------- ---------- -------- -------- ------- --------
LESS DISTRIBUTIONS
Dividends from net investment income ................ 0.00 0.00 0.00 0.00 0.00 0.00
Dividends from capital gains ........................ (2.40) (0.68) 0.00 0.00 0.00 0.00
---------- ---------- -------- -------- ------- --------
Total distributions ................................. (2.40) (0.68) 0.00 0.00 0.00 0.00
---------- ---------- -------- -------- ------- --------
Net asset value, end of period ...................... $ 20.07 $ 20.79 $ 19.63 $ 15.36 $ 11.12 $ 13.35
========== ========== ======== ======== ======= =========
Total return** ...................................... 8.87% 9.96% 27.80% 38.13% (16.70%) (1.77%)
Ratios/supplemental data
Net assets, end of period (in 000's) ................ 4,893 2,777 715 526 610 1,261
Ratio of expenses to average net assets# ............ 2.28%+ 2.43% 2.25% 2.44% 2.44% 2.44%
Ratio of net investment income (loss) to average
net assets ........................................ (0.04%)+ (0.06%) (2.07%) (2.21%) (2.22%) (2.02%)
Portfolio turnover rate ............................. 46.99% 139.57% 41.2 23.75% 26.57% 26%
<FN>
* Based on average shares outstanding.
** Excluding sales charge.
# Net of expense reimbursement. If the expense reimbursement had not
been in effect, the ratio of expenses to average net assets would have been
2.85%, 6.71%, 11.73%, 11.44%, 8.52% and 6.44%, respectively.
++ On 12/13/96 Pacific Income Advisers, Inc. became the Fund's investment
adviser. Prior to 12/13/96, Monitrend Investment Management, Inc. was the
Fund's investment adviser.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
-22-
<PAGE>
MONTEREY MUTUAL FUND
MURPHY NEW WORLD BIOTECHNOLOGY
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30, OCT. 21 THRU NOV. 30
1998 1997++ 1996* 1995* 1994 1993
------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 8.07 $ 7.19 $ 6.74 $ 6.12 $ 7.99 $ 8.00
---------- ---------- -------- -------- -------- --------
Income from investment operations
Net investment (loss) ............................... (0.08) (0.16) (0.17) (0.15) (0.08) (0.01)
Net realized and unrealized gain
on investments ...................................... (0.71) 1.04 0.62 0.77 (1.79) 0.00
---------- ---------- -------- -------- -------- --------
Total from investment operations .................... (0.79) 0.88 0.45 0.62 (1.87) (0.01)
---------- ---------- -------- -------- -------- --------
Less distributions
Dividends from net investment income ................ 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- -------- -------- -------- --------
Total distributions ................................. 0.00 0.00 0.00 0.00 0.00 0.00
---------- ---------- -------- -------- -------- --------
Net asset value, end of period ...................... $ 7.28 $ 8.07 $ 7.19 $ 6.74 $ 6.12 $ 7.99
========== ========== ======== ======== ======== ========
Total return** ...................................... (9.79%) 12.24% 6.67% 10.13% (23.40%) (0.13%)
Ratios/supplemental data
Net assets, end of period (in 000's) ................ 4,367 2,353 231 400 824 634
Ratio of expenses to average net assets # ........... 2.44%+ 2.47% 2.65% 2.89% 2.89% 2.70%+
Ratio of net investment income (loss) to average
net assets .......................................... (2.19%)+ (1.98%) (2.31%) (2.18%) (1.18%) (2.03%)+
Portfolio turnover rate ............................. 106.78% 15.09% 02.79% 36.89% 26.58% 0%
<FN>
* Based on average shares outstanding.
** Excluding sales charge.
# Net of expense reimbursement. If the expense reimbursement had not
been in effect, the ratio of expenses to average net assets would have been
4.84%, 8.58%, 15.28%, 9.96%, 6.40% and 5.19%, respectively.
++ On 12/20/96 Murphy Investment Management became the Fund's investment
adviser. Prior to 12/20/96, Monitrend Investment Management, Inc. was the
Fund's investment adviser.
+ Annualized.
</FN>
</TABLE>
See notes to financial statements
-23-
<PAGE>
MONTEREY MUTUAL FUND
MURPHY NEW WORLD TECHNOLOGY
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30, OCT. 21 THRU NOV. 30
1998 1997++ 1996* 1995* 1994 1993
--------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 19.18 $ 20.51 $ 17.81 $ 14.35 $ 14.82 $ 15.00
------------ ------------ ------------ ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment (loss) .......................... (0.17) (0.33) (0.40) (0.32) (0.18) (0.01)
Net realized and unrealized (loss)
on investments ................................. (1.27) (0.40) 4.86 4.19 (0.29) (0.17)
------------ ------------ ------------ ---------- ---------- ----------
Total from investment operations ............... (1.44) (0.73) 4.46 3.87 (0.47) (0.18)
------------ ------------ ------------ ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income ........... 0.00 0.00 0.00 0.00 0.00 0.00
Dividends from Capital Gains ................... (2.46) (0.60) (1.76) (0.41) 0.00 0.00
------------ ------------ ------------ ---------- ---------- ----------
Total distributions ............................ (2.46) (0.60) (1.76) (0.41) 0.00 0.00
------------ ------------ ------------ ---------- ---------- ----------
Net asset value, end of period ................. $ 15.28 $ 19.18 $ 20.51 $ 17.81 $ 14.35 $ 14.82
============ ============ ============ ========== ========== ==========
Total return** ................................. (6.15%) (3.69%) 26.32% 26.95% (3.17%) (1.20%)
RATIOS/SUPPLEMENTAL DATA 1,345 1,439 886 281 283 38
Ratio of expenses to average net assets# ....... 2.44%+ 2.44% 2.34% 2.44% 2.44% 1.70%+
Ratio of net investment income (loss) to average
net assets ..................................... (2.20%)+ (1.96%) (2.06%) (1.97%) (1.79%) (1.63%)+
Portfolio turnover rate ........................ 87.09% 57.01% 17.33% 40.77% 29.26% 0%
<FN>
+ Annualized.
* Based on average shares outstanding.
** Excluding sales charge. Not annualized for periods less than a year.
# Net of expense reimbursement. If the expense reimbursement had not
been in effect, the ratio of expenses to average net assets would have been
8.28%, 8.13%, 10.44%, 18.74%, 11.19% and 30.48%, respectively.
++ On 12/13/96 Murphy Investment Management became the Fund's investment
adviser. Prior to 12/13/96, Monitrend Investment Management Inc. was the
Fund's investment adviser.
</FN>
</TABLE>
See notes to financial statements
-24-
<PAGE>
MONTEREY MUTUAL FUND
PIA SHORT-TERM GOVERNMENT SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 31, FOR THE YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
---------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 10.26 $ 10.21 $ 10.12 $ 9.98 $ 10.00
-------- -------- --------- ------- --------
Income from investment operations
Net investment (loss) ........................ 0.29 .61 0.56 0.57 0.27
Net realized and unrealized gain
on investments ............................... 0.02 0.06 0.19 0.14 (0.02)
-------- -------- --------- ------- --------
Total from investment operations ............. 0.31 0.67 0.75 0.71 0.25
-------- -------- --------- ------- --------
Less distributions
Dividends from net investment income ......... (0.29) (0.61) (0.56) (0.57) (0.27)
Dividends from capital gains ................. (0.01) (0.01) (0.10) 0 0
-------- -------- --------- ------- --------
Total distributions .......................... (0.30) (0.62) (0.66) (0.57) (0.27)
-------- -------- --------- ------- --------
Net asset value, end of period ............... $ 10.27 $ 10.26 $ 10.21 $ 10.12 $ 9.98
======== ======== ========= ======= ========
Total return** ............................... 3.03% 6.56% 7.68% 7.50% 2.50%
Ratios/supplemental data
Net assets, end of period (in 000's) ......... 58,622 52,912 20,464 3,405 2,041
Ratio of expenses to average net assets# ..... 0.30%+ 0.30% 0.44% 0.46% 0.44%+
Ratio of net investment income (loss) to average
net assets 5.60%+ 5.77% 5.51% 5.71% 4.68%+
Portfolio turnover rate 88.27% 63.08% 21.54% 163.55% 209.94%
<FN>
+ Annualized.
# Net of expense reimbursement. If the expense reimbursement had not
been in effect, the ratio of expenses to average net assets would have been
.47%, .55%, 1.19%, 2.01% and 3.46%, respectively.
* Based on average shares outstanding
</FN>
</TABLE>
See notes to financial statements
-25-
<PAGE>
MONTEREY MUTUAL FUND, PIA GLOBAL BOND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 1, 1997
MAY 31, (COMMENCEMENT OF
1998 OPERATIONS)
THROUGH
NOV. 30, 1997
-------------- --------------
(UNAUDITED)
Net asset value, beginning
<S> <C> <C>
of period ................................. $ 20.33 $ 20.00
------------ ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........................ 0.52 0.50
Net realized and unrealized gain (loss)
on investments and foreign currencies ..... 0.04 0.32
------------ ----------
Total from investment operations ............. 0.56 0.82
------------ ----------
LESS DISTRIBUTIONS
Dividends from net investment income ......... (0.52) (0.49)
------------ ----------
Total distributions .......................... (0.52) (0.49)
------------ ----------
Net asset value, end of period ............... $ 20.37 $ 20.33
============ ==========
Total return** ............................... 2.80% 4.15%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ................................ 7,325 5,585
Ratio of expenses to average
net assets ................................ 0.51%+ 0.51%+
Ratio of net investment income
(loss) to average net assets .............. 4.74%+ 4.71%+
Portfolio turnover rate ...................... 139.01% 82.47%
<FN>
+ Annualized
# Net of expense reimbursement. If the expense reimbursement had not been in
effect, the ratio of expenses to average net assets would have been 1.32% and
2.05%, respectively.
** Not annualized for periods less than a year.
</FN>
</TABLE>
See notes to financial statements
-26-
<PAGE>
THIS PAGE LEFT BLANK
<PAGE>
Monterey Mutual Funds
Distributed by:
Syndicated Capital, Inc.
1299 Ocean Avenue, Suite 210
Santa Monica, CA 90401
