<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL REPORT
[HOTCHKIS AND WILEY FUNDS LOGO]
800 WEST SIXTH STREET
FIFTH FLOOR
LOS ANGELES, CALIFORNIA 90017
800-236-4479
INVESTMENT ADVISOR
Hotchkis and Wiley
800 West Sixth Street
Fifth Floor
Los Angeles, California 90017
LEGAL COUNSEL
Gardner, Carton & Douglas
321 North Clark Street
Chicago, Illinois 60610
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
JUNE 30, 1997
[LOGO]
[HOTCHKIS AND WILEY FUNDS LOGO]
EQUITY INCOME FUND
-------------------------------------------------------------
MID-CAP FUND
-------------------------------------------------------------
SMALL CAP FUND
-------------------------------------------------------------
INTERNATIONAL FUND
-------------------------------------------------------------
GLOBAL EQUITY FUND
-------------------------------------------------------------
BALANCED INCOME FUND
-------------------------------------------------------------
TOTAL RETURN BOND FUND
-------------------------------------------------------------
LOW DURATION FUND
-------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
- --------------------------------------------------------------------------------
THIS MATERIAL SHOULD BE PRECEDED
OR ACCOMPANIED BY A PROSPECTUS. HOTCHKIS AND WILEY:
INVESTMENT ADVISOR
<PAGE> 2
[HOTCHKIS AND WILEY FUNDS LOGO]
EQUITY INCOME FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests primarily in domestic equity securities.
MID-CAP FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests primarily in stocks of domestic companies
with market capitalizations between $750 million and $5 billion.
SMALL CAP FUND
Seeks capital appreciation. The Fund invests primarily in stocks of domestic
companies with market capitalizations of $1 billion or less.
INTERNATIONAL FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests in international equity securities.
GLOBAL EQUITY FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests in domestic and international equity
securities.
BALANCED INCOME FUND
Seeks to preserve capital while producing a high total return. It is expected
that the Fund's assets will be allocated among equity securities, fixed-income
securities and money market obligations.
TOTAL RETURN BOND FUND
Seeks to maximize long-term total return. The Fund invests in a diversified
portfolio of fixed-income securities of varying maturities with a portfolio
duration of two to eight years.
LOW DURATION FUND
Seeks to maximize total return, consistent with preservation of capital. The
Fund invests in a diversified portfolio of fixed-income securities of varying
maturities with a portfolio duration of one to three years.
SHORT-TERM
INVESTMENT FUND
Seeks to maximize total return, consistent with preservation of capital. The
Fund invests in a diversified portfolio of fixed-income securities of varying
maturities with a portfolio duration of up to one year.
- --------------------------------------------------------------------------------
<PAGE> 3
[HOTCHKIS AND WILEY FUNDS LOGO]
DEAR FELLOW SHAREHOLDERS:
We are pleased to report solid performance for the Hotchkis and Wiley Funds for
the fiscal year ended June 30, 1997. With dramatic volatility both on the upside
and the downside in financial markets over the past year, it has been another
exciting year for investors. While valuation factors in equity markets scrape
against all-time peaks, we continue to use our disciplines to guide us toward
unrealized values across all markets. In order for you to gain a better
understanding of our investing style and your fund, we encourage you to
carefully read your fund's summary (below) as well as its portfolio of
investments.
EQUITY INCOME FUND
The Equity Income Fund's total return for the fiscal year ended June 30, 1997
was 26.2%. As the markets continue to reach new highs, it becomes harder and
harder to find the underlying fundamental support for current price levels. This
is particularly true for a narrow group of stocks that have benefited the most
from the current bull market. Over the last three and a half years, the 50
largest capitalization stocks have consistently outperformed the balance of
stocks in the S&P 500. This outperformance has resulted in a concentrated market
in which the largest capitalization names sell at extreme values relative to the
broader market. In fact, the leadership in the market in 1996 was so narrow that
a small group of five stocks -- Intel, Microsoft, IBM, Coca-Cola, and General
Electric -- actually accounted for more than one fourth of the S&P 500's total
return. This concentration of performance has persisted into 1997.
Over the long-term, stocks will ultimately reflect intrinsic value. It is true
that sometimes it takes a change of psychology for this value to be realized,
but it inevitably takes place. With this in mind, we have positioned our
portfolio in those areas of the market where valuation opportunities still
exist. We continue to overweight the financials, basic materials, consumer
durables, and utility sectors of the market. Although our exposure to financials
remains above market, we have selectively been reducing this position as some of
these stocks have reached fair value.
Our disciplined style of value investing emphasizes buying financially strong
companies selling at a low price to earnings multiple, with above market
dividend yield. Since the firm's inception in 1980, this approach has tended to
keep pace with up markets and add significant outperformance during down
quarters. We think the portfolio, as currently constructed, represents strong
relative and absolute value with a projected price to earnings ratio of 12.9x
compared to 18.7x for the S&P 500 Index and a dividend yield of 3.2% compared to
the S&P 500 Index of 1.7%. We continue to manage the portfolio by adherence to
our investment disciplines which emphasize these lower risk characteristics. We
believe it is biased toward outperformance and expect that it will perform very
well when investors once again focus on rational valuation in the market place.
MID-CAP FUND
The Mid-Cap Fund began on January 2, 1997. Performance since inception for the
Fund is 17.2%
<PAGE> 4
compared to the Russell Mid-Cap Index return of 11.6%. Although mid cap stocks
lagged the strong performance of large cap stocks during this period, we believe
the relative value advantage of mid cap stocks provides a favorable investment
opportunity.
As the large cap market continues to outpace the mid cap market, we believe mid
cap stocks offer investors an attractive relative valuation. The superior return
of the S&P 500 was fueled by the largest capitalization stocks which happen to
have the highest share prices relative to earnings and asset values. As a
fundamental investor, we believe stocks will ultimately seek their intrinsic
value which will benefit stocks trading at a discount to their true earnings
potential. With this in mind, we continue to believe the mid cap market
represents an attractive relative value and solid investment opportunities exist
for value investors.
SMALL CAP FUND
The Small Cap Fund achieved a return of 29.7% for the fiscal year ended June 30,
1997. This was an exceptional return given the value orientation of the Fund.
The Fund outpaced the Russell 2000 Index return of 16.3% due to broad relative
gains across most Fund holdings. The year was turbulent for small cap issues
beginning with a sharp correction in July of 1996 followed by a strong recovery
and then another correction in March of 1997 followed by a strong recovery.
Given the unprecedented performance of large cap stocks relative to small cap
stocks, a substantial relative valuation gap has emerged that does not seem to
be warranted on fundamental valuation measures. We believe this valuation gap
sets the stage for a period of outperformance of small cap stocks.
We continue to see value in the small cap market and believe the portfolio is
well positioned for current market conditions. As in the past, we invest in
companies whose shares trade at a low multiple of normal earnings and have the
ability to grow earnings and asset values.
INTERNATIONAL FUND
The International Fund achieved another year of success, delivering a 21.6%
total return vs. 12.8% for the EAFE Index. In this 12-month period to June 30,
the Fund's emphasis on higher yielding, attractively valued stocks led to a
sustained divergence in country allocation relative to the Index. As a result,
the Fund was overweighted relative to the Index in some of the best performing
non-U.S. developed stock markets this year. Measured in $US, those top markets
include Finland, Spain, Sweden, the United Kingdom and Canada. Conversely, the
Fund had relatively modest investment in the worst performing international
stock markets, namely Singapore, Japan, Malaysia, Austria, and Italy.
The Fund significantly outperformed the EAFE Index in the first half of the
fiscal year, but found the market environment considerably less hospitable in
the latter half. Equity markets are being driven by domestic and international
liquidity. Stocks that we consider "undervalued" are in increasingly short
supply, even after allowance for the earnings upgrades that result from weaker
currencies. With valuations stretched in markets worldwide, the Fund appears
relatively attractive with a projected price to earnings ratio of 13.3x compared
to 28.0x for the EAFE Index; a dividend yield of 3.4% (vs. 1.9%), and a price to
book value ration of 2.0x (vs. 2.5x). We continue to believe that our
disciplines of high dividend yield, low P/E, and financial strength will guide
us to the best values in the international equity markets.
We are favoring stocks which have suffered from profit downgrades, yet have the
potential for dramatic restructuring and share price recovery. Some of the most
appealing candidates are in the United Kingdom, where industrial stocks have
given up competitive ground as a result of the strength of UK sterling. We are
also finding attractive stocks in France (consumer goods), Japan (automotive
sector), and Malaysia (consumer sector).
GLOBAL EQUITY FUND
The Global Equity Fund was launched January 2, 1997. During its first six
months, the Fund achieved a return of 12.3%. This was a strong performance given
the value orientation of the Fund and its accompanying lower than market risk
characteristics. However, it lagged the 15.6% return of the MSCI
<PAGE> 5
World Index. The Fund significantly outperformed the World Index in the first
quarter, but fell behind in the second quarter as cash poured into markets
worldwide, pushing markets to record levels. The Fund's relative underweighting
in the two largest markets (the U.S. and Japan) made it difficult to keep pace
with the World Index. Underweighting the resurging yen also hampered relative
performance.
Markets are being driven by domestic and international liquidity and value is in
increasingly short supply even after allowance for the earnings upgrades that
result from weaker currencies. The Fund's value characteristics are all the more
striking in this kind of environment; its projected price to earnings ratio of
12.9x represents a 45% discount to the World Index, while the Fund's dividend
yield of 3.1% is nearly twice that of the World Index. We have adhered to our
disciplines of high dividend yield, low P/E, and financial strength and are
confident that they remain the best way to achieve the Fund's underlying goal:
to earn superior returns with below market risk.
Our global portfolio continues to center on stocks which are currently out of
favor, but which have earnings power or hidden assets which will become apparent
to investors over time. We are finding many attractive stocks in the United
Kingdom, where well-established industrial companies are being penalized for
their exposure to the strength of UK sterling. In the U.S., we are investing in
the basic materials, consumer nondurables, and financial sectors of the market.
We are also finding good values in France, Japan, and Malaysia.
BALANCED INCOME FUND
The Balanced Income Fund achieved a total return of 8.3% during the first six
months of the year and 15.8% for the twelve months ended June 30, 1997. Exposure
to equities has been reduced to 37% of total Fund assets as the broad-based
increase in stock prices has blown through most expectations. We believe that
the current asset allocation lowers the risk profile and better positions the
Fund to weather volatile financial markets.
During the fiscal year, the equity portfolio benefited from an above-average
market weighting in financial sector stocks. Other sectors that contributed to
relative performance included consumer non-durables, capital spending, energy,
and healthcare. The lagging sector has been utilities, which includes electric,
telephone, and natural gas. We believe the sector represents compelling relative
value, and selective utility stocks have been added to the Fund's equity
portfolio during the past six months.
Fixed-income investments are broadly diversified and limited to investment-grade
securities. U.S. Treasury holdings have been increased to 34% of the
fixed-income portfolio, and as a result of narrowing yield spreads, corporate
issues have been reduced from 48% to 38% of the fixed-income portfolio since the
beginning of the year. Mortgages and asset-backed securities represent 26% of
the fixed-income portfolio. Average credit quality is AAA, and the portfolio
duration of 3.0 years is about equal to the benchmark, Lehman Intermediate
Govt/Corp Index.
The following table provides a historical perspective of our asset allocation
strategy.
---------------------------------------------------------
ASSET ALLOCATION SUMMARY
<TABLE>
<CAPTION>
Asset Current Average Low Equity High Equity
Category 6/30/97 8/13/85-6/30/97 10/16/87 8/11/89
------------------------------------------------------
<S> <C> <C> <C> <C>
Equities 37% 47% 27% 59%
Fixed-
Income 63% 53% 73% 41%
</TABLE>
Current income yield, derived from common stock dividends and fixed-income
security interest, is 5.0%. This compares to an income yield of 1.7% on the S&P
500 Index.
<PAGE> 6
SHORT-TERM INVESTMENT FUND
LOW DURATION FUND
TOTAL RETURN FUND
The Fixed-Income Funds performed extremely well for the year ended June 30,
1997.
<TABLE>
<S> <C>
- ----------------------------------------------
Short-Term Investment Fund............. 5.8%
Six-Month Treasury Bill Index.......... 5.7%
Low Duration Fund...................... 7.8%
Merrill Lynch 1-3 Year Index........... 6.6%
Total Return Bond Fund................. 10.5%
Lehman Aggregate Index................. 8.2%
- ----------------------------------------------
</TABLE>
The overriding themes in the fixed-income market during the year were low
inflation combined with healthy economic growth. CPI slowed to 2.3% over the
year from a 2.8% growth rate despite continued employment and economic
expansion. These opposing forces had the effect of holding the market to a
trading range, with a modest bias toward lower rates. The Federal Reserve was
able to stay on the sidelines, for the most part, and only raised rates once,
from 5.25% to 5.5%.
The tight trading range (ten year notes were confined in a 6.2% - 7.0% range)
led to a significant decline in market volatility. This low volatility
environment enabled spreads on both corporates and especially mortgages to
contract, benefiting the portfolios greatly.
We anticipate the economy will remain healthy and inflation contained, but the
Federal Reserve may have to raise short-term interest rates. Over the next few
quarters spreads in both mortgage-backed and corporate securities should remain
tight, thus we will remain overweighted in these sectors. In this type of low
volatility environment, duration management of the portfolios will take a back
seat to both sector and individual security selection.
Across all markets and asset classes, we continue to utilize the value-oriented
disciplines that have served Hotchkis and Wiley through our 22-year history. We
appreciate the trust you have placed in us, and look forward to helping you
reach your financial goals.
Cordially,
Nancy D. Celick sig
Nancy D. Celick
President
HOTCHKIS AND WILEY FUNDS
A description of the market indices referred to in this letter and in the
following graphs is provided on page 55.
<PAGE> 7
How a $ 10,000 Investment Has Grown:
The following charts show the growth of a $10,000 investment for each of the
Hotchkis and Wiley Funds as compared to the performance of representative
market indices. The tables below the charts show the average annual total
returns on an investment over various periods.
<TABLE>
<CAPTION>
SMALL CAP FUND
SEPTEMBER 20, 1985 - JUNE 30, 1997
1479-CUM R20-CUM
------------------------------
<S> <C> <C>
3Q85 10016.000 9877.000
4Q85 11518.000 11617.000
1Q86 12908.223 13261.967
2Q86 14489.480 13905.173
3Q86 12295.773 12203.180
4Q86 12471.602 12278.839
1Q87 15900.046 15263.825
2Q87 15435.764 15155.452
3Q87 16645.928 15790.465
4Q87 12266.384 11201.756
1Q88 13489.343 13337.931
2Q88 14518.580 14216.901
3Q88 13489.213 14083.262
4Q88 13361.065 13990.312
1Q89 13699.100 15067.566
2Q89 14399.124 16027.370
3Q89 16340.126 17109.218
4Q89 16106.462 16262.311
1Q90 16199.880 15902.914
2Q90 17358.171 16516.767
3Q90 12582.938 12463.552
4Q90 14655.348 13090.469
1Q91 18014.354 16983.574
2Q91 18331.406 16720.329
3Q91 19612.772 18083.036
4Q91 21725.067 19119.194
1Q92 23171.957 20553.133
2Q92 21821.032 19151.410
3Q92 21906.134 19701.055
4Q92 24707.928 22640.453
1Q93 25155.142 23607.200
2Q93 26141.223 24121.837
3Q93 27377.703 26230.085
4Q93 27818.484 26912.068
1Q94 28002.086 26185.442
2Q94 27139.622 25164.210
3Q94 27861.536 26900.540
4Q94 28129.006 26397.500
1Q95 29445.444 27614.425
2Q95 31150.335 30182.566
3Q95 33305.938 33164.604
4Q95 33312.600 33884.276
1Q96 32663.004 35622.539
2Q96 35583.076 37403.666
3Q96 36864.067 37553.280
4O96 38062.149 39506.051
1Q97 40018.544 37463.588
2Q97 46157.388 43570.153
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -----------------------------
<S> <C>
One Year 29.7%
- -----------------------------
Five Years 16.2%
- -----------------------------
Ten Years 11.6%
- -----------------------------
Since Inception 13.9%
(9/20/85)
- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME FUND
JUNE 24, 1987 - JUNE 30, 1997
1489-CUM SP-CUM
-------------------------------
<S> <C> <C>
2Q87 9992.0000 9861.0000
3Q87 10231.8080 10511.8260
4Q87 8334.8308 8136.1533
1Q88 9061.6280 8599.9141
2Q88 9707.7221 9158.9085
3Q88 9942.6490 9186.3852
4Q88 10096.7601 9461.9768
1Q89 10941.8589 10133.7771
2Q89 11840.1855 11015.4157
3Q89 13120.1095 12183.0498
4Q89 12486.4082 12426.7108
1Q90 11790.9153 12053.9095
2Q90 11792.0944 12801.2518
3Q90 9440.7508 11034.6791
4Q90 10231.8857 12016.7655
1Q91 12042.9295 13771.2133
2Q91 12611.3557 13729.8997
3Q91 13366.7759 14457.5843
4Q91 13774.4626 15672.0214
1Q92 14527.9257 15280.2209
2Q92 15043.6671 15570.5451
3Q92 14857.1256 16053.2320
4Q92 15696.5532 16855.8936
1Q93 16584.9781 17597.5529
2Q93 16800.5828 17667.9431
3Q93 17299.5601 18127.3096
4Q93 18171.4580 18544.2377
1Q94 17317.3994 17839.5567
2Q94 17372.8151 17910.9149
3Q94 18192.8120 18792.1320
4Q94 17528.7744 18794.0112
1Q95 19316.7093 20617.0303
2Q95 20939.3129 22575.6481
3Q95 22616.5519 24379.4424
4Q95 23568.7087 25827.5813
1Q96 24938.0507 27235.1845
2Q96 25137.5551 28471.6618
3Q96 25539.7560 29354.2834
4O96 27662.1097 31837.6557
1Q97 28071.5089 32671.8023
2Q97 31692.7336 38389.3677
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -----------------------------
<S> <C>
One Year 26.2%
- -----------------------------
Five Years 16.1%
- -----------------------------
Ten Years 12.3%
- -----------------------------
Since Inception 12.2%
(6/24/87)
- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
BALANCED INCOME FUND
AUGUST 13, 1985 - JUNE 30, 1997
CPI+4-CUM LB G/C-CU 1481-CUM SP-CUM
------------------------------------------------------------
<S> <C> <C> <C> <C>
3Q85 10083.0000 10127.0000 10072.0000 10049.0000
4Q85 10273.5687 10894.6266 11112.4376 11777.4280
1Q86 10333.1554 11823.9382 11991.4314 13426.2679
2Q86 10497.4526 11980.0142 12370.3606 14218.4177
3Q86 10675.9093 12222.0105 11990.5905 13223.1285
4Q86 10811.4933 12596.0040 12554.1483 13963.6237
1Q87 11076.3749 12782.4249 13446.7482 16937.8755
2Q87 11325.5933 12540.8371 13501.8799 17784.7693
3Q87 11581.5517 12175.8987 13699.0073 18958.5641
4Q87 11741.3771 12885.7536 13051.0443 14673.9286
1Q88 11970.3340 13347.0636 13787.1232 15510.3425
2Q88 12244.4546 13479.1995 14257.2641 16518.5148
3Q88 12554.2393 13731.2605 14625.1015 16568.0703
4Q88 12752.5963 13863.0806 14957.0913 17065.1124
1Q89 13070.1359 14015.5745 15529.9479 18276.7354
2Q89 13392.9683 15142.4267 16752.1548 19866.8114
3Q89 13624.6667 15284.7655 17634.9934 21972.6934
4Q89 13880.8104 15836.5455 17631.4664 22412.1473
1Q90 14305.5632 15654.4252 17389.9153 21739.7829
2Q90 14581.6606 16217.9845 17809.0123 23087.6494
3Q90 15042.4411 16316.9142 16327.3025 19901.5538
4Q90 15317.7178 17147.4451 17551.8502 21672.7921
1Q91 15608.7544 17610.4261 19356.1804 24837.0197
2Q91 15880.3467 17876.3435 19483.9312 24762.5086
3Q91 16178.8972 18904.2333 20444.4890 26074.9216
4Q91 16421.5807 19913.7194 21155.9572 28265.2150
1Q92 16750.0123 19615.0136 21701.7809 27558.5846
2Q92 17034.7625 20409.4217 22435.3011 28082.1977
3Q92 17341.3882 21407.4424 22641.7059 28952.7458
4Q92 17688.2160 21424.5684 23146.6159 30400.3831
1Q93 18077.3568 22420.8108 24287.7441 31738.0000
2Q93 18348.5172 23093.4351 24698.2070 31896.6900
3Q93 18623.7450 23857.8278 25765.1695 32726.0039
4Q93 18921.7249 23788.6401 26048.5864 33478.7020
1Q94 19281.2377 23044.0557 25444.2592 32206.5113
2Q94 19570.4563 22758.3094 25602.0136 32335.3373
3Q94 19942.2950 22872.1009 26580.0105 33919.7688
4Q94 20261.3717 22956.7277 26250.4184 33923.1608
1Q95 20686.8605 24099.9727 27956.6956 37213.7074
2Q95 21038.5371 25664.0609 29662.0540 40749.0096
3Q95 21345.6997 26154.2445 31435.8448 44004.8555
4Q95 21601.8481 27373.0323 32633.5505 46618.7439
1Q96 22126.7730 26732.5033 33658.2440 49159.4654
2Q96 22489.6521 26858.1461 34122.7278 51391.3051
3Q96 22871.9762 27330.8495 34634.5687 52984.4356
4O96 23217.3430 28167.1735 36459.8105 57466.9189
1Q97 23612.0378 27924.9358 36879.0983 58972.5522
2Q97 23909.5495 28941.4035 39497.5143 69292.7488
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -----------------------------
<S> <C>
One Year 15.8%
- -----------------------------
Five Years 12.1%
- -----------------------------
Ten Years 11.4%
- -----------------------------
Since Inception 12.3%
(8/13/85)
- -----------------------------
</TABLE>
Past performance is not predictive of future performance. The representative
market indices are unmanaged. The annual returns reflect the reinvestment of
all dividends and distributions, as well as the voluntary agreement of Hotchkis
and Wiley, the Funds' advisor, to assume fees and expenses in excess of certain
limits.
<PAGE> 8
INTERNATIONAL FUND
DECEMBER 1, 1990 - JUNE 30, 1997
<TABLE>
<CAPTION>
1501-CUM EAFE-CUM
----------------------------
<S> <C> <C>
Dec90 9953.0000 10166.0000
1Q91 10542.2176 10931.4998
2Q91 10037.2454 10343.3851
3Q91 11303.9458 11239.1222
4Q91 11978.7914 11436.9308
1Q92 11788.3286 10088.5167
2Q92 12843.3840 10311.4729
3Q92 11961.0435 10476.4565
4Q92 11659.6552 10081.4941
1Q93 13044.7887 11299.3386
2Q93 13789.6461 12445.0915
3Q93 14741.1317 13278.9126
4Q93 16993.5766 13402.4065
1Q94 16291.7419 13879.5322
2Q94 16094.6118 14598.4920
3Q94 17100.5250 14621.8496
4Q94 16493.4564 14482.9420
1Q95 16791.9880 14763.9111
2Q95 17880.1088 14883.4988
3Q95 19020.8597 15516.0475
4Q95 19774.0857 16156.8603
1Q96 20626.3488 16635.1034
2Q96 21208.0118 16911.2461
3Q96 21547.3400 16894.3349
4Q96 23383.1734 17176.4703
1Q97 23595.9603 16920.5409
2Q97 25788.0250 19128.6715
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -------------------------------------------
<S> <C>
One Year 21.6%
- -------------------------------------------
Five Years 15.0%
- -------------------------------------------
Commencement of
Operations
(12/1/90) 15.2%
- -------------------------------------------
</TABLE>
LOW DURATION FUND
MAY 18, 1993 - JUNE 30, 1997
<TABLE>
<CAPTION>
1363-CUM ML Treasury
-----------------------------
<S> <C> <C>
2Q93 10053.0000 10058.0000
3Q93 10579.7772 10201.8294
4Q93 10713.0824 10262.0202
1Q94 10872.7073 10210.7101
2Q94 10961.8635 10218.8787
3Q94 11149.3114 10320.0456
4Q94 11274.1837 10320.4584
1Q95 11616.9189 10667.2258
2Q95 12083.9190 11009.6437
3Q95 12330.4309 11174.7884
4Q95 12711.4413 11456.3930
1Q96 12818.2174 11494.1991
2Q96 12988.6997 11610.2905
3Q96 13239.3816 11801.8603
4Q96 13502.8453 12026.0957
1Q97 13627.0714 12105.4679
2Q97 14000.4532 12371.7882
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -------------------------------------------
<S> <C>
One Year 7.8%
- -------------------------------------------
Three Years 8.5%
- ------------------------------------------
Since Inception
(5/18/93) 8.5%
- -------------------------------------------
</TABLE>
TOTAL RETURN BOND FUND
DECEMBER 6, 1994- JUNE 30, 1997
<TABLE>
<CAPTION>
1384-CUM LB aggregate
------------------------------
<S> <C> <C>
4Q94 10033.0000 10006.0000
1Q95 10497.5279 10510.3024
2Q95 11187.2155 11150.3798
3Q95 11555.2749 11368.9273
4Q95 12172.3266 11853.2436
1Q96 11882.6252 11643.4412
2Q96 11971.7449 11709.8088
3Q96 12311.7424 11926.4402
4Q96 12700.7935 12284.2334
1Q97 12754.1368 12215.4417
2Q97 13224.7645 12663.7484
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -------------------------------------------
<S> <C>
One Year 10.5%
- -------------------------------------------
Since Inception
(12/6/94) 11.5%
- -------------------------------------------
</TABLE>
SHORT-TERM INVESTMENT FUND
MAY 18, 1993 - JUNE 30, 1997
<TABLE>
<CAPTION>
136r-CUM ML Treasury
------------------------------
<S> <C> <C>
2Q93 10028.0000 10033.0000
3Q93 10272.6832 10121.2904
4Q93 10505.8731 10203.2729
1Q94 10650.8542 10271.6348
2Q94 10778.6644 10362.0252
3Q94 10870.2831 10476.0074
4Q94 10971.3767 10599.6243
1Q95 11216.0384 10786.1777
2Q95 11401.1030 10966.3069
3Q95 11591.5014 11122.0284
4Q95 11830.2864 11293.3077
1Q96 12047.9636 11428.8274
2Q96 12225.0687 11571.6877
3Q96 12354.6544 11734.8485
4Q96 12559.7417 11893.2690
1Q97 12711.7146 12046.6921
2Q97 12929.0849 12228.5972
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- -------------------------------------------
<S> <C>
One Year 5.8%
- -------------------------------------------
Three Years 6.3%
- ------------------------------------------
Since Inception
(5/18/93) 6.4%
- -------------------------------------------
</TABLE>
Past performance is not predictive of future performance. The representative
market indices are unmanaged. The annual returns reflect the reinvestment of
all dividends and distributions, as well as the voluntary agreement of Hotchkis
and Wiley, the Funds' advisor, to assume fees and expenses in excess of
certain limits.
<PAGE> 9
GLOBAL EQUITY FUND
JANUARY 2, 1997 - JUNE 30, 1997
<TABLE>
Global-Cum World-Cum
<S> <C> <C>
Jan 97 10030.0000 10122.2000
Feb 10339.9270 10240.3261
Mar 10219.9838 10039.5133
Apr 10050.3321 10369.4117
May 10660.3873 11011.2783
June 11232.8501 11562.2826
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- ---------------------------------------------
<S> <C>
Since Inception 12.3%
(1/2/97)
- ---------------------------------------------
</TABLE>
<TABLE>
MID-CAP FUND
JANUARY 2, 1997 - JUNE 30, 1997
<S> <C> <C>
Mid-Cap-Cum Rus-Cum
Jan 97 10440.0000 10374.1000
Feb 10699.9560 10358.3314
Mar 10290.1477 9918.1023
Apr 10309.6990 10164.8647
May 11129.3200 10906.4932
June 11714.7223 11263.3537
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/97
- ---------------------------------------------
<S> <C>
Since Inception 17.2%
(1/2/97)
- ---------------------------------------------
</TABLE>
Past performance is not predictive of future performance. The representative
market indices are unmanaged. The annual returns reflect the reinvestment of
all dividends and distributions, as well as the voluntary agreement of Hotchkis
and Wiley, the Funds' advisor, to assume fees and expenses in excess of certain
limits.
<PAGE> 10
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SCHEDULE OF INVESTMENTS:
EQUITY INCOME FUND..................................... 1
MID-CAP FUND........................................... 4
SMALL CAP FUND......................................... 7
INTERNATIONAL FUND..................................... 9
GLOBAL EQUITY FUND..................................... 13
BALANCED INCOME FUND................................... 16
TOTAL RETURN BOND FUND................................. 22
LOW DURATION FUND...................................... 24
SHORT-TERM INVESTMENT FUND............................. 28
STATEMENT OF ASSETS AND LIABILITIES...................... 31
STATEMENT OF OPERATIONS.................................. 33
STATEMENT OF CHANGES IN NET ASSETS....................... 35
NOTES TO FINANCIAL STATEMENTS............................ 39
FINANCIAL HIGHLIGHTS..................................... 45
REPORT OF INDEPENDENT ACCOUNTANTS........................ 54
MARKET INDICES........................................... 55
</TABLE>
LOGO
LOGO
<PAGE> 11
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 97.1% Shares Value
<S> <C> <C>
- ---------------------------------------------------------
AEROSPACE -- 2.6%
...........................................................
Northrop Grumman Corporation 32,000 $ 2,810,000
...........................................................
Rockwell International
Corporation 33,000 1,947,000
............................................
-----------
4,757,000
- ---------------------------------------------------------
APPAREL & TEXTILES -- 0.4%
...........................................................
Russell Corporation 22,000 651,750
- ---------------------------------------------------------
AUTO-RELATED -- 1.4%
...........................................................
Dana Corporation 67,000 2,546,000
- ---------------------------------------------------------
AUTOS & TRUCKS -- 7.4%
...........................................................
Chrysler Corporation 57,000 1,870,312
...........................................................
Ford Motor Company 162,000 6,115,500
...........................................................
General Motors Corporation 105,000 5,847,187
............................................
-----------
13,832,999
- ---------------------------------------------------------
BANKS -- 6.6%
...........................................................
CoreStates Financial Corporation 33,000 1,773,750
...........................................................
First Chicago NBD Corporation 60,000 3,630,000
...........................................................
Fleet Financial Group, Inc. 21,000 1,328,250
...........................................................
KeyCorp 32,000 1,788,000
...........................................................
NationsBank Corporation 17,000 1,096,500
...........................................................
Signet Banking Corporation 74,000 2,664,000
............................................
-----------
12,280,500
- ---------------------------------------------------------
BEVERAGES -- 0.6%
...........................................................
Anheuser-Busch Companies, Inc. 28,500 1,195,219
- ---------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 3.1%
...........................................................
Georgia-Pacific Corporation 24,000 2,049,000
...........................................................
Weyerhaeuser Company 73,000 3,796,000
............................................
-----------
5,845,000
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.4%
...........................................................
Hanson PLC ADR 26,625 665,625
- ---------------------------------------------------------
CHEMICALS -- 2.5%
...........................................................
The Dow Chemical Company 30,000 $ 2,613,750
...........................................................
Eastman Chemical Company 33,000 2,095,500
............................................
-----------
4,709,250
- ---------------------------------------------------------
CONGLOMERATES -- 1.8%
...........................................................
Tenneco, Inc. 76,000 3,434,250
- ---------------------------------------------------------
CONSUMER PRODUCTS -- 0.5%
...........................................................
Tupperware Corporation 22,800 832,200
- ---------------------------------------------------------
ENGINEERING AND CONSTRUCTION -- 1.0%
...........................................................
Harsco Corporation 44,000 1,782,000
- ---------------------------------------------------------
FINANCIAL SERVICES -- 4.5%
...........................................................
Beneficial Corporation 41,000 2,913,562
...........................................................
Household International, Inc. 31,000 3,640,563
...........................................................
Transamerica Corporation 20,000 1,871,250
............................................
-----------
8,425,375
- ---------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 2.0%
...........................................................
Whirlpool Corporation 68,500 3,737,531
- ---------------------------------------------------------
INSURANCE -- 5.7%
...........................................................
American General Corporation 58,000 2,769,500
...........................................................
Aon Corporation 35,000 1,811,250
...........................................................
Lincoln National Corporation 33,000 2,124,375
...........................................................
Safeco Corporation 36,400 1,699,425
...........................................................
St. Paul Companies, Inc. 25,000 1,906,250
...........................................................
TIG Holdings, Inc. 9,500 296,875
............................................
-----------
10,607,675
- ---------------------------------------------------------
LEISURE/TOYS -- 2.1%
...........................................................
Fortune Brands, Inc. 103,500 3,861,844
- ---------------------------------------------------------
MACHINERY -- 3.1%
...........................................................
Deere & Company 34,000 1,865,750
...........................................................
New Holland N.V. 145,000 3,969,375
............................................
-----------
5,835,125
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
1
<PAGE> 12
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
METALS & MINING -- 3.9%
...........................................................
Aluminum Company of America 46,000 $ 3,467,250
...........................................................
Reynolds Metals Company 52,000 3,705,000
............................................
-----------
7,172,250
- ---------------------------------------------------------
NATURAL GAS -- 0.9%
...........................................................
Eastern Enterprises 50,000 1,734,375
- ---------------------------------------------------------
OIL -- DOMESTIC -- 4.7%
...........................................................
Atlantic Richfield Company 25,000 1,762,500
...........................................................
Occidental Petroleum Corporation 160,000 4,010,000
...........................................................
Phillips Petroleum Company 22,000 962,500
...........................................................
Ultramar Diamond Shamrock
Corporation 59,000 1,924,875
............................................
-----------
8,659,875
- ---------------------------------------------------------
OIL -- INTERNATIONAL -- 2.4%
...........................................................
Amoco Corporation 22,000 1,912,625
...........................................................
Royal Dutch Petroleum Company
NYS 46,800 2,544,750
............................................
-----------
4,457,375
- ---------------------------------------------------------
PAPER -- 2.3%
...........................................................
International Paper Company 53,000 2,573,813
...........................................................
Union Camp Corporation 35,000 1,750,000
............................................
-----------
4,323,813
- ---------------------------------------------------------
POLLUTION CONTROL -- 2.1%
...........................................................
Browning-Ferris Industries, Inc. 120,000 3,990,000
- ---------------------------------------------------------
RAILROADS -- 1.8%
...........................................................
Norfolk Southern Corporation 33,000 3,324,750
- ---------------------------------------------------------
RETAIL -- 4.4%
...........................................................
Intimate Brands, Inc. 54,000 1,134,000
...........................................................
J.C. Penney Company, Inc. 56,000 2,922,500
...........................................................
May Department Stores Company 41,000 1,937,250
...........................................................
Sears, Roebuck & Company 40,000 2,150,000
............................................
-----------
8,143,750
- ---------------------------------------------------------
SAVINGS & LOANS -- 5.7%
...........................................................
Fannie Mae 41,000 $ 1,788,625
...........................................................
Great Western Financial
Corporation 71,000 3,816,250
...........................................................
H.F. Ahmanson & Company 115,000 4,945,000
............................................
-----------
10,549,875
- ---------------------------------------------------------
STEEL -- 5.0%
...........................................................
Allegheny Teledyne, Inc. 157,000 4,239,000
...........................................................
Lukens, Inc. 87,900 1,653,619
...........................................................
USX-U.S. Steel Group, Inc. 95,000 3,330,938
............................................
-----------
9,223,557
- ---------------------------------------------------------
TOBACCO -- 4.5%
...........................................................
Gallaher Group PLC ADR # 80,000 1,475,000
...........................................................
Philip Morris Companies, Inc. 123,000 5,458,125
...........................................................
UST, Inc. 52,500 1,456,875
............................................
-----------
8,390,000
- ---------------------------------------------------------
TRUCKING -- 1.0%
...........................................................
Ryder System, Inc. 57,000 1,881,000
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 7.2%
...........................................................
CMS Energy Corporation 86,000 3,031,500
...........................................................
Central & South West Corporation 33,000 701,250
...........................................................
DTE Energy Company 57,000 1,574,625
...........................................................
Energy Group PLC ADR 26,625 1,128,234
...........................................................
Illinova Corporation 130,000 2,860,000
...........................................................
PECO Energy Company 105,000 2,205,000
...........................................................
PacifiCorp 44,000 968,000
...........................................................
Public Service Enterprises
Group, Inc. 37,000 925,000
............................................
-----------
13,393,609
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
2
<PAGE> 13
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
UTILITY -- TELEPHONE -- 5.5%
...........................................................
AT&T Corporation 141,800 $ 4,971,862
...........................................................
Alltel Corporation 80,000 2,675,000
...........................................................
NYNEX Corporation 46,000 2,650,750
............................................
-----------
10,297,612
- ---------------------------------------------------------
Total common stocks
(cost $141,602,381) 180,541,184
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE RATE Principal
DEMAND NOTES* -- 6.4% Amount Value
<S> <C> <C>
- ---------------------------------------------------------
Lilly (Eli) & Co., 5.0949% $ 733 $ 733
............................................................
General Mills, Inc., 5.245% 3,196,466 3,196,466
............................................................
Pitney Bowes, Inc., 5.2551% 1,240,495 1,240,495
............................................................
Warner-Lambert Co., 5.226% 7,405,906 7,405,906
............................................
-----------
Total variable rate demand
notes
(cost $11,843,600) 11,843,600
- ---------------------------------------------------------
Total investments -- 103.5%
(cost $153,445,981) 192,384,784
............................................................
Liabilities in excess of other
assets -- (3.5)% (6,510,972)
............................................
-----------
Total net assets -- 100.0% $185,873,812
- ---------------------------------------------------------
</TABLE>
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
ADR -- American Depository Receipts.
NYS -- New York Shares.
# Non-income producing security.
See Notes to Financial Statements
3
<PAGE> 14
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 94.4% Shares Value
<S> <C> <C>
- ---------------------------------------------------------
APPAREL & TEXTILES -- 5.2%
...........................................................
Coats Viyella PLC ADR 5,000 $ 31,830
...........................................................
Polo Ralph Lauren Corporation # 200 5,475
...........................................................
Russell Corporation 2,200 65,175
............................................ ----------
102,480
- ---------------------------------------------------------
AUTO PARTS -- 1.4%
...........................................................
ITT Industries, Inc. 1,100 28,325
- ---------------------------------------------------------
AUTO-RELATED -- 4.7%
...........................................................
Dana Corporation 600 22,800
...........................................................
Echlin, Inc. 600 21,600
...........................................................
Lear Corporation # 1,100 48,812
............................................ ----------
93,212
- ---------------------------------------------------------
BANKS -- 7.0%
...........................................................
Compass Bancshares, Inc. 450 15,131
...........................................................
First Commerce Bancshares, Inc. 400 17,600
...........................................................
First Tennessee National
Corporation 200 9,600
...........................................................
Signet Banking Corporation 700 25,200
...........................................................
Union Planters Corporation 700 36,313
...........................................................
UnionBanCal Corporation 500 35,938
............................................ ----------
139,782
- ---------------------------------------------------------
BEVERAGES -- 0.8%
...........................................................
Pernod Ricard ADR 1,200 15,483
- ---------------------------------------------------------
CHEMICALS -- 4.4%
...........................................................
DSM N.V. ADR 1,000 24,919
...........................................................
Eastman Chemical Company 700 44,450
...........................................................
Wellman, Inc. 1,100 19,113
............................................ ----------
88,482
- ---------------------------------------------------------
COMMUNICATIONS & MEDIA -- 3.2%
...........................................................
Octel Communications Corporation
# 2,700 63,281
- ---------------------------------------------------------
COMPUTERS -- 1.3%
...........................................................
Exabyte Corporation # 2,000 25,625
- ---------------------------------------------------------
COMPUTER-RELATED -- 2.7%
...........................................................
Great Plains Software, Inc. # 2,000 $ 54,000
- ---------------------------------------------------------
CONSUMER PRODUCTS -- 3.1%
...........................................................
The Dial Corporation 1,200 18,750
...........................................................
Tupperware Corporation 1,200 43,800
............................................ ----------
62,550
- ---------------------------------------------------------
CONTAINERS -- 2.0%
...........................................................
Ball Corporation 1,300 39,081
- ---------------------------------------------------------
ELECTRIC PRODUCTS -- 1.8%
...........................................................
UCAR International, Inc. # 800 36,600
- ---------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
...........................................................
Pameco Corporation # 1,000 17,750
- ---------------------------------------------------------
ELECTRONICS -- 2.3%
...........................................................
Avnet, Inc. 400 23,000
...........................................................
EG&G, Inc. 1,000 22,500
............................................ ----------
45,500
- ---------------------------------------------------------
FOODS -- 1.0%
...........................................................
Dean Foods Company 500 20,188
- ---------------------------------------------------------
HEALTHCARE -- DRUGS -- 2.1%
...........................................................
Bergen Brunswig
Corporation -- Class A 1,250 34,844
...........................................................
McKesson Corporation 100 7,750
............................................ ----------
42,594
- ---------------------------------------------------------
HEALTHCARE SERVICES & SUPPLIES -- 0.8%
...........................................................
Apria Healthcare Group, Inc. # 900 15,975
- ---------------------------------------------------------
HOSPITAL/HEALTHCARE MANAGEMENT -- 1.8%
...........................................................
Foundation Health Systems,
Inc. -- Class A # 900 27,281
...........................................................
Medaphis Corporation # 800 8,050
............................................ ----------
35,331
- ---------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 2.5%
...........................................................
Whirlpool Corporation 900 49,106
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
4
<PAGE> 15
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
INSURANCE -- 6.1%
...........................................................
Harleysville Group, Inc. 900 $ 34,087
...........................................................
IPC Holdings Limited 1,300 35,100
...........................................................
Ohio Casualty Corporation 500 22,000
...........................................................
St. Paul Companies, Inc. 400 30,500
............................................ ----------
121,687
- ---------------------------------------------------------
MACHINERY -- 2.2%
...........................................................
New Holland N.V. 1,600 43,800
- ---------------------------------------------------------
METALS & MINING -- 2.1%
...........................................................
Reynolds Metals Company 600 42,750
- ---------------------------------------------------------
NATURAL GAS -- 1.7%
...........................................................
Equitable Resources, Inc. 600 17,025
...........................................................
MCN Energy Group, Inc. 500 15,312
............................................ ----------
32,337
- ---------------------------------------------------------
OIL & GAS SERVICES -- 2.9%
...........................................................
Tidewater, Inc. 1,300 57,200
- ---------------------------------------------------------
PAPER -- 3.2%
...........................................................
Chesapeake Corporation 900 30,375
...........................................................
Consolidated Papers, Inc. 600 32,400
............................................ ----------
62,775
- ---------------------------------------------------------
PRINTING & PUBLISHING -- 1.7%
...........................................................
Readers Digest Association, Inc. 1,200 34,425
- ---------------------------------------------------------
PROFESSIONAL SERVICES -- 1.8%
...........................................................
Olsten Corporation 1,800 34,988
- ---------------------------------------------------------
RETAIL -- 3.6%
...........................................................
Family Dollar Stores, Inc. 1,300 35,425
...........................................................
Intimate Brands, Inc. 1,750 36,750
............................................ ----------
72,175
- ---------------------------------------------------------
RETAIL - SPECIALTY -- 1.5%
...........................................................
AutoZone, Inc. # 1,250 $ 29,453
- ---------------------------------------------------------
SAVINGS & LOANS -- 3.0%
...........................................................
Charter One Financial, Inc. 400 21,550
...........................................................
Washington Federal, Inc. 1,030 26,458
...........................................................
Washington Mutual, Inc. 200 11,950
............................................ ----------
59,958
- ---------------------------------------------------------
STEEL -- 3.2%
...........................................................
AK Steel Holding Corporation 800 35,300
...........................................................
USX-U.S. Steel Group, Inc. 800 28,050
............................................ ----------
63,350
- ---------------------------------------------------------
TOBACCO -- 1.6%
...........................................................
Universal Corporation 1,000 31,750
- ---------------------------------------------------------
TRANSPORTATION - AIR -- 2.0%
...........................................................
ASA Holdings, Inc. 1,400 40,075
- ---------------------------------------------------------
TRANSPORTATION - MARINE -- 2.1%
...........................................................
Teekay Shipping Corporation 1,200 41,475
- ---------------------------------------------------------
TRAVEL & RECREATION -- 2.5%
...........................................................
Royal Caribbean Cruises, Ltd. 1,400 48,913
- ---------------------------------------------------------
TRUCKING -- 1.7%
...........................................................
Ryder System, Inc. 1,000 33,000
- ---------------------------------------------------------
UTILITY-ELECTRIC -- 2.5%
...........................................................
DTE Energy Company 600 16,575
...........................................................
Illinova Corporation 1,500 33,000
............................................ ----------
49,575
- ---------------------------------------------------------
Total common stocks
(cost $1,680,835) 1,875,031
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 16
<TABLE>
<CAPTION>
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
MID-CAP FUND
VARIABLE RATE
DEMAND NOTES* Principal
-- 5.1% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
Pitney Bowes, Inc., 5.2551% $102,418 $ 102,418
............................................ ----------
Total variable rate demand notes 102,418
(cost $102,418)
- ---------------------------------------------------------
Total investments -- 99.5% (cost
$1,783,253) 1,977,449
...........................................................
Other assets in excess of
liabilities -- 0.5% 9,748
...........................................................
Total net assets -- 100.0% $ 1,987,197
- ---------------------------------------------------------
</TABLE>
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
ADR -- American Depository Receipts.
# Non-income producing security.
See Notes to Financial Statements
6
<PAGE> 17
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.5% Shares Value
<S> <C> <C>
- ---------------------------------------------------------
AUTO PARTS -- 1.4%
...........................................................
APS Holding Corporation -- Class
A # 43,000 $ 376,250
- ---------------------------------------------------------
BUILDING MATERIALS -- 4.3%
...........................................................
Giant Cement Holding, Inc. # 25,100 470,625
...........................................................
NCI Building Systems, Inc. # 21,700 702,538
............................................ ----------
1,173,163
- ---------------------------------------------------------
CHEMICALS -- 1.7%
...........................................................
The Carbide/Graphite Group, Inc.
# 20,000 465,000
- ---------------------------------------------------------
COMMUNICATIONS & MEDIA -- 9.9%
...........................................................
Century Communications
Corporation, Class A # 70,000 376,250
...........................................................
Groupe AB SA ADR # 142,500 1,211,250
...........................................................
Octel Communications Corporation
# 29,200 684,375
...........................................................
Teltrend, Inc. # 8,700 127,238
...........................................................
VTEL Corporation # 56,000 336,000
............................................ ----------
2,735,113
- ---------------------------------------------------------
COMMUNICATIONS EQUIPMENT/MANUFACTURERS -- 2.2%
...........................................................
Channell Commercial Corporation # 45,200 610,200
- ---------------------------------------------------------
COMPUTERS -- 6.9%
...........................................................
Applied Magnetics Corporation # 21,500 486,437
...........................................................
Exabyte Corporation # 41,700 534,281
...........................................................
Key Tronic Corporation # 23,000 112,125
...........................................................
MICROS Systems, Inc. # 18,100 760,200
............................................ ----------
1,893,043
- ---------------------------------------------------------
COMPUTER SERVICES -- 0.8%
...........................................................
AMX Corporation # 40,000 230,000
- ---------------------------------------------------------
COMPUTER SYSTEMS -- 2.2%
...........................................................
VLSI Technology, Inc. # 26,000 614,250
- ---------------------------------------------------------
HEALTHCARE -
MISCELLANEOUS -- 3.1%
...........................................................
Healthcare Services Group, Inc. # 70,000 840,000
- ---------------------------------------------------------
HEALTHCARE SERVICES & SUPPLIES -- 1.7%
...........................................................
Apria Healthcare Group, Inc. # 27,100 481,025
- ---------------------------------------------------------
HOMEBUILDERS -- 1.8%
...........................................................
Del Webb Corporation 30,000 $ 487,500
- ---------------------------------------------------------
HOSPITAL/HEALTHCARE MANAGEMENT -- 1.7%
...........................................................
Integrated Health Services, Inc. 12,000 462,000
- ---------------------------------------------------------
INSURANCE -- 7.0%
...........................................................
FPIC Insurance Group, Inc. # 36,100 812,250
...........................................................
Omni Insurance Group, Inc. # 35,000 437,500
...........................................................
Philadelphia Consolidated Holding
Corporation # 20,000 680,000
............................................ ----------
1,929,750
- ---------------------------------------------------------
MACHINERY -- 6.5%
...........................................................
Gleason Corporation 14,400 669,600
...........................................................
Special Devices, Inc. # 36,100 568,575
...........................................................
OmniQuip International, Inc. # 23,700 548,063
............................................ ----------
1,786,238
- ---------------------------------------------------------
METALS & MINING -- 1.9%
...........................................................
Northwest Pipe Company # 28,900 531,038
- ---------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 4.8%
...........................................................
Abraxas Petroleum Corporation # 57,800 742,369
...........................................................
Trico Marine Services, Inc. # 26,200 571,488
............................................ ----------
1,313,857
- ---------------------------------------------------------
OIL & GAS DRILLING -- 1.6%
...........................................................
Coho Energy, Inc. # 41,300 438,812
- ---------------------------------------------------------
OIL-SERVICES -- 2.3%
...........................................................
Stolt Comex Seaway, S.A. # FS 24,600 624,225
- ---------------------------------------------------------
REAL ESTATE -- 10.0%
...........................................................
Brandywine Realty Trust 35,500 718,875
...........................................................
MGI Properties, Inc. 36,100 796,456
...........................................................
Redwood Trust, Inc. 21,500 1,005,125
...........................................................
Vistana, Inc. # 15,000 232,500
............................................ ----------
2,752,956
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 18
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
RETAIL - FOOD CHAINS -- 3.1%
...........................................................
Dominick's Supermarkets, Inc. # 31,900 $ 849,337
- ---------------------------------------------------------
RETAIL - JEWELRY -- 3.3%
...........................................................
Friedman's, Inc. # 40,100 917,287
- ---------------------------------------------------------
SAVINGS & LOANS -- 6.8%
...........................................................
Coastal Bancorp, Inc. 25,000 743,750
...........................................................
Poughkeepsie Financial
Corporation 60,000 438,750
...........................................................
Washington Federal, Inc. 26,395 678,022
............................................ ----------
1,860,522
- ---------------------------------------------------------
STEEL FABRICATOR -- 3.0%
...........................................................
Citation Corporation # 48,410 829,021
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 2.4%
...........................................................
Applied Voice Technology, Inc. # 12,000 222,000
...........................................................
Celeritek, Inc. # 36,100 451,250
............................................ ----------
673,250
- ---------------------------------------------------------
TRANSPORTATION - AIR FREIGHT -- 1.3%
...........................................................
AirNet Systems, Inc. # 21,700 355,338
- ---------------------------------------------------------
TRANSPORTATION - MARINE -- 1.8%
...........................................................
Knightsbridge Tankers Ltd. 20,000 505,000
- ---------------------------------------------------------
Total common stocks (cost
$20,886,740) 25,734,175
- ---------------------------------------------------------
<CAPTION>
VARIABLE RATE
DEMAND NOTES* Principal
- -- 5.2% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
General Mills, Inc., 5.245% $440,000 $ 440,000
...........................................................
Pitney Bowes, Inc., 5.2551% 512,787 512,787
...........................................................
Warner-Lambert Co., 5.226% 482,329 482,329
............................................ ----------
Total variable rate demand notes 1,435,116
(cost $1,435,116)
- ---------------------------------------------------------
Total investments -- 98.7%
(cost $22,321,856) 27,169,291
...........................................................
Other assets in excess of
liabilities -- 1.3% 360,910
............................................ ----------
$27,530,201
Total net assets -- 100.0%
- ---------------------------------------------------------
</TABLE>
# Non-income producing security.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
FS -- Foreign Security.
ADR -- American Depository Receipts.
See Notes to Financial Statements
8
<PAGE> 19
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 92.5%
- ---------------------------------------------------------
AUSTRALIA -- 4.0% Shares Value
- ---------------------------------------------------------
BANKS -- 1.6%
............................................................
Australia and New Zealand
Banking Group, Ltd. 1,945,800 $ 14,431,095
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.7%
............................................................
Pioneer International, Ltd. 1,690,000 6,482,202
- ---------------------------------------------------------
INSURANCE -- 0.9%
............................................................
GIO Australia Holdings, Ltd. 1,791,583 5,502,838
............................................................
QBE Insurance Group, Ltd. 400,807 2,402,101
............................................ -----------
7,904,939
- ---------------------------------------------------------
RETAIL -- 0.8%
............................................................
Davids, Ltd. 7,567,476 6,576,199
............................................ -----------
35,394,435
Total Australia
- ---------------------------------------------------------
AUSTRIA -- 1.0%
- ---------------------------------------------------------
STEEL -- 1.0%
............................................................
Boehler-Uddeholm AG 117,000 9,074,863
............................................ -----------
9,074,863
Total Austria
- ---------------------------------------------------------
CANADA -- 5.5%
- ---------------------------------------------------------
BANKS -- 2.2%
............................................................
Bank of Nova Scotia 190,038 8,334,039
............................................................
Canadian Imperial Bank of
Commerce 458,180 11,557,798
............................................ -----------
19,891,837
- ---------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 1.3%
............................................................
Imasco, Ltd. 402,400 11,667,497
- ---------------------------------------------------------
METALS & MINERALS -- 1.0%
............................................................
Noranda, Inc. 395,790 8,535,157
- ---------------------------------------------------------
RAILROADS -- 1.0%
............................................................
Canadian National Railway
Company 201,000 8,771,064
............................................ -----------
48,865,555
Total Canada
- ---------------------------------------------------------
FINLAND -- 1.7% Shares Value
- ---------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.3%
............................................................
UPM-Kymmene Corporation OY 492,200 $ 11,371,022
- ---------------------------------------------------------
MACHINERY -- 0.4%
............................................................
The Rauma Group OY 168,950 3,870,631
............................................ -----------
15,241,653
Total Finland
- ---------------------------------------------------------
FRANCE -- 5.6%
- ---------------------------------------------------------
BEVERAGES -- 1.7%
............................................................
Pernod-Ricard SA 292,198 15,080,386
- ---------------------------------------------------------
BUILDING MATERIALS & COMPONENTS -- 1.3%
............................................................
LaFarge SA 178,280 11,098,968
- ---------------------------------------------------------
OIL & GAS -- 1.1%
............................................................
Elf Aquitaine SA 88,000 9,503,083
- ---------------------------------------------------------
STEEL -- 1.1%
............................................................
Usinor Sacilor SA 561,930 10,145,668
- ---------------------------------------------------------
TOBACCO -- 0.4%
............................................................
SEITA SA 122,335 3,875,754
............................................ -----------
49,703,859
Total France
- ---------------------------------------------------------
GERMANY -- 3.2%
- ---------------------------------------------------------
BANKS -- 1.6%
............................................................
Commerzbank AG 485,960 13,888,284
- ---------------------------------------------------------
CHEMICALS -- 0.8%
............................................................
Bayer AG 185,000 7,134,438
- ---------------------------------------------------------
MANUFACTURING -- 0.8%
............................................................
Buderus AG 13,500 7,499,423
............................................ -----------
28,522,145
Total Germany
- ---------------------------------------------------------
HONG KONG -- 7.5%
- ---------------------------------------------------------
BANKS -- 1.2%
............................................................
HSBC Holdings PLC 372,800 11,211,985
- ---------------------------------------------------------
PRINTING & PUBLISHING -- 0.7%
............................................................
South China Morning Post
(Holdings), Ltd. 6,010,000 5,895,746
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 20
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
RETAIL -- SPECIALTY -- 1.0%
............................................................
Dickson Concepts International,
Ltd. 2,375,000 $ 8,644,969
- ---------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 1.9%
............................................................
Hang Lung Development Company 4,888,000 8,959,221
............................................................
New World Development Co., Ltd. 1,305,000 7,782,214
............................................ ----------
16,741,435
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 1.7%
............................................................
China Light & Power Company,
Ltd. 2,718,000 15,401,558
- ---------------------------------------------------------
UTILITY -- TELECOMMUNICATIONS -- 1.0%
............................................................
Hong Kong Telecommunications,
Ltd. 3,807,200 9,091,344
............................................ -----------
66,987,037
Total Hong Kong
- ---------------------------------------------------------
IRELAND -- 1.4%
- ---------------------------------------------------------
PAPER -- 1.4%
............................................................
Jefferson Smurfit Group PLC 4,409,000 12,770,814
............................................ -----------
12,770,814
Total Ireland
- ---------------------------------------------------------
ITALY -- 1.9%
- ---------------------------------------------------------
ENGINEERING &
CONSTRUCTION -- 0.5%
............................................................
Danieli & Company 1,236,000 4,322,186
- ---------------------------------------------------------
OIL & GAS -- 1.4%
............................................................
ENI 2,311,750 13,077,045
............................................ -----------
17,399,231
Total Italy
- ---------------------------------------------------------
JAPAN -- 11.5%
- ---------------------------------------------------------
AUTOS & TRUCKS -- 1.3%
............................................................
Bridgestone Corporation 165,000 3,835,532
............................................................
Suzuki Motor Corporation 647,000 8,198,460
............................................ -----------
12,033,992
- ---------------------------------------------------------
BUILDING MATERIAL & COMPONENTS -- 1.4%
............................................................
Sekisui Chemical Co., Ltd. 1,198,000 12,144,364
- ---------------------------------------------------------
Shares Value
- ---------------------------------------------------------
ELECTRICAL MACHINERY -- 2.7%
............................................................
Nichicon Corporation 1,110,000 $ 15,035,389
............................................................
Sony Corporation 99,400 8,677,844
............................................ -----------
23,713,233
- ---------------------------------------------------------
ELECTRONIC COMPONENTS -- 1.7%
............................................................
Nintendo Co., Ltd. 184,400 15,470,065
- ---------------------------------------------------------
FINANCIAL SERVICES -- 1.8%
............................................................
Promise Company, Ltd. 279,700 16,034,532
- ---------------------------------------------------------
IRON/STEEL -- 1.0%
............................................................
Yodogawa Steel Works 1,398,000 8,551,951
- ---------------------------------------------------------
PHARMACEUTICALS -- 0.5%
............................................................
Terumo Corporation 259,000 4,956,828
- ---------------------------------------------------------
RESTAURANTS -- 0.6%
............................................................
MOS Food Services 269,000 4,983,657
- ---------------------------------------------------------
TRANSPORTATION EQUIPMENT -- 0.5%
............................................................
Koito Manufacturing Co., Ltd. 576,000 4,409,472
............................................ -----------
102,298,094
Total Japan
- ---------------------------------------------------------
MALAYSIA -- 2.7%
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.3%
............................................................
Kedah Cement Holdings Berhad 1,495,000 2,333,713
- ---------------------------------------------------------
FINANCIAL SERVICES -- 0.7%
............................................................
Arab Malaysia Finance Berhad 2,751,000 5,831,152
- ---------------------------------------------------------
TRAVEL & RECREATION -- 1.2%
............................................................
Genting Berhad 2,258,900 10,829,099
- ---------------------------------------------------------
TRUCKING & SHIPPING -- 0.5%
............................................................
Malaysia International Shipping
Berhad 1,838,000 4,769,763
............................................ -----------
23,763,727
Total Malaysia
- ---------------------------------------------------------
NETHERLANDS -- 7.0%
- ---------------------------------------------------------
BANKS -- 2.6%
............................................................
ABN Amro Holding N.V. 550,000 10,273,962
............................................................
ING Groep N.V. 281,250 12,990,782
............................................ -----------
23,264,744
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 21
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------
<S> <C> <C>
CHEMICALS -- 1.5%
............................................................
Akzo Nobel N.V. 96,275 $ 13,217,825
- ---------------------------------------------------------
CONSTRUCTION & HOUSING -- 1.0%
............................................................
Hollandsche Beton Groep N.V. 38,150 8,717,176
- ---------------------------------------------------------
INSURANCE -- 0.9%
............................................................
Fortis Amev N.V. 173,191 7,725,577
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 1.0%
............................................................
Koninklije PTT Nederland N.V. 238,700 9,380,745
............................................ -----------
62,306,067
Total Netherlands
- ---------------------------------------------------------
NEW ZEALAND -- 0.9%
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.9%
............................................................
Fletcher Challenge Building 2,542,500 7,633,453
- ---------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.0%
............................................................
Fletcher Challenge Forest 101,700 147,500
............................................ -----------
7,780,953
Total New Zealand
- ---------------------------------------------------------
NORWAY -- 2.4%
- ---------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.3%
............................................................
Kvaerner ASA - Class A 192,500 11,661,813
- ---------------------------------------------------------
PHARMACEUTICALS & HEALTHCARE -- 1.1%
............................................................
Nycomed ASA - Class B 667,789 9,532,290
............................................ -----------
21,194,103
Total Norway
- ---------------------------------------------------------
SINGAPORE -- 2.0%
- ---------------------------------------------------------
DIVERSIFIED INDUSTRIES -- 2.0%
............................................................
Jardine Matheson Holdings, Ltd. 2,436,600 17,299,860
............................................ -----------
17,299,860
Total Singapore
- ---------------------------------------------------------
SOUTH KOREA -- 0.6%
- ---------------------------------------------------------
BANKS -- 0.6%
............................................................
Cho Hung Bank Co., Ltd. GDR 742,500 5,383,125
............................................ -----------
5,383,125
Total South Korea
- ---------------------------------------------------------
SPAIN -- 3.8%
- ---------------------------------------------------------
BANKS -- 1.5%
............................................................
Banco Santander SA 423,000 13,057,858
- ---------------------------------------------------------
OIL -- INTERNATIONAL -- 1.4%
............................................................
Repsol SA 282,700 $ 11,975,388
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 0.9%
............................................................
Telefonica de Espana SA 290,000 8,400,078
............................................ -----------
33,433,324
Total Spain
- ---------------------------------------------------------
SWEDEN -- 1.1%
- ---------------------------------------------------------
APPLIANCES -- 0.4%
............................................................
Electrolux AB - Class B 42,480 3,065,530
- ---------------------------------------------------------
DIVERSIFIED -- 0.7%
............................................................
Marieberg Tidnings AB -- Class
A 263,000 6,530,460
............................................ -----------
9,595,990
Total Sweden
- ---------------------------------------------------------
SWITZERLAND -- 7.2%
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.6%
............................................................
Sarna Kunststoff Holding AG
"registered" 5,080 5,052,646
- ---------------------------------------------------------
FOOD PRODUCERS -- 1.6%
............................................................
Nestle SA "registered" 11,037 14,581,241
- ---------------------------------------------------------
INSURANCE -- 1.9%
............................................................
Swiss Reinsurance Co.
"registered" 11,900 16,855,987
- ---------------------------------------------------------
MACHINERY & EQUIPMENT -- 2.5%
............................................................
SIG Schweizerische Industrie --
Gesellschaft Holding AG 3,010 9,136,228
............................................................
Sulzer AG "registered" (P.C.) 14,750 12,647,049
............................................ -----------
21,783,277
- ---------------------------------------------------------
MEDICAL PRODUCTS -- 0.0%
............................................................
Sulzer Medica AG "registered"
rights # 14,750 0
- ---------------------------------------------------------
PHARMACEUTICALS & HEALTHCARE -- 0.6%
............................................................
Novartis AG "registered" 3,520 5,635,477
............................................ -----------
63,908,628
Total Switzerland
- ---------------------------------------------------------
UNITED KINGDOM -- 21.5%
- ---------------------------------------------------------
APPAREL & TEXTILES -- 1.6%
............................................................
Coats Viyella PLC 6,715,850 14,250,916
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 22
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------
<S> <C> <C>
BANKS -- 2.2%
............................................................
Abbey National PLC 395,309 $ 5,394,885
............................................................
National Westminster Bank PLC 1,081,300 14,531,831
............................................ -----------
19,926,716
- ---------------------------------------------------------
BUILDING MATERIALS -- 2.3%
............................................................
Hanson PLC 2,006,597 9,968,645
............................................................
Redland PLC 1,908,200 10,813,658
............................................ -----------
20,782,303
- ---------------------------------------------------------
BUSINESS SERVICES -- 1.0%
............................................................
Lex Service PLC 1,367,300 8,567,624
- ---------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 2.8%
............................................................
BTR PLC 4,424,000 15,130,684
............................................................
Harrisons & Crosfield PLC 5,114,900 9,449,128
............................................ -----------
24,579,812
- ---------------------------------------------------------
FOOD & BEVERAGES -- 1.7%
............................................................
Allied Domecq PLC 2,154,530 15,472,659
- ---------------------------------------------------------
FOOD PRODUCERS -- 1.3%
............................................................
Hillsdown Holdings PLC 3,015,500 8,481,597
............................................................
Tate & Lyle PLC 395,700 2,940,486
............................................ -----------
11,422,083
- ---------------------------------------------------------
INSURANCE -- 1.2%
............................................................
Commercial Union PLC 1,008,700 10,601,492
- ---------------------------------------------------------
RETAIL -- 1.4%
............................................................
Safeway PLC 2,148,250 12,424,280
- ---------------------------------------------------------
TOBACCO -- 1.6%
............................................................
B.A.T Industries PLC 1,560,000 13,955,156
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 2.1%
............................................................
Energy Group PLC 513,610 5,479,275
............................................................
Powergen PLC 1,080,000 12,851,725
............................................ -----------
18,331,000
- ---------------------------------------------------------
UTILITY -- GAS -- 0.6%
............................................................
BG PLC 1,400,000 5,149,344
- ---------------------------------------------------------
UTILITY -- WATER -- 1.7%
............................................................
Hyder PLC 1,129,000 $ 15,266,832
............................................ -----------
190,730,217
Total United Kingdom
............................................................
Total common stocks 821,653,680
(cost $699,164,546)
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
SHORT-TERM INVESTMENTS -- 7.6% Amount
- ---------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF
DEPOSIT -- 3.1%
- ---------------------------------------------------------
Structured Product Asset
Return Certificate Trust,
5.8375%, 7/28/97 $27,500,000 27,500,000
- ---------------------------------------------------------
COMMERCIAL PAPER -- 4.4%
- ---------------------------------------------------------
Levi Strauss, 5.80%, 7/09/1997 11,000,000 10,985,822
............................................................
Lockheed Martin Corporation,
5.82%, 7/01/1997 18,491,000 18,491,000
............................................................
Praxair, Inc., 5.68%,
7/01/1997 10,000,000 10,000,000
............................................
-----------
39,476,822
- ---------------------------------------------------------
MUTUAL FUNDS -- 0.1%
- ---------------------------------------------------------
Vista Institutional Prime
Money Market Fund 1,156,477 1,156,477
............................................
Total short-term investments
(cost $68,133,299) 68,133,299
- ---------------------------------------------------------
Total investments -- 100.1%
(cost $767,297,845) 889,786,979
............................................................
Liabilities in excess of other
assets -- (0.1)% (1,258,534)
............................................
-----------
Total net assets -- 100.0% $888,528,445
- ---------------------------------------------------------
</TABLE>
# Non-income producing security.
P.C. -- Participation Certificates.
GDR -- Global Depository Receipts.
See Notes to Financial Statements
12
<PAGE> 23
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 93.2%
- ---------------------------------------------------------
AUSTRALIA -- 0.9% Shares Value
- ---------------------------------------------------------
BANKS -- 0.9%
............................................................
Australia & New Zealand Banking
Group, Ltd. 4,690 $ 34,784
............................................ -----------
34,784
Total Australia
- ---------------------------------------------------------
CANADA -- 0.7%
- ---------------------------------------------------------
METALS & MINERALS -- 0.7%
............................................................
Noranda, Inc. 1,165 25,123
............................................ -----------
25,123
Total Canada
- ---------------------------------------------------------
FINLAND -- 2.5%
- ---------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.7%
............................................................
UPM-Kymmene Corporation OY 2,640 60,990
- ---------------------------------------------------------
MACHINERY -- 0.8%
............................................................
The Rauma Group OY 1,356 31,066
............................................ -----------
92,056
Total Finland
- ---------------------------------------------------------
FRANCE -- 3.9%
- ---------------------------------------------------------
BEVERAGES -- 2.0%
............................................................
Pernod-Ricard SA 1,440 74,319
- ---------------------------------------------------------
STEEL -- 0.9%
............................................................
Usinor Sacilor SA 1,830 33,041
- ---------------------------------------------------------
TOBACCO -- 1.0%
............................................................
SEITA SA 1,192 37,764
............................................ -----------
145,124
Total France
- ---------------------------------------------------------
GERMANY -- 1.2%
- ---------------------------------------------------------
BANKS -- 1.2%
............................................................
Commerzbank AG 1,500 42,869
............................................ -----------
42,869
Total Germany
- ---------------------------------------------------------
HONG KONG -- 4.7%
- ---------------------------------------------------------
FINANCIAL SERVICES -- 2.3%
............................................................
Manhattan Card Company, Ltd. 186,000 84,630
- ---------------------------------------------------------
UTILITY-ELECTRIC -- 1.5%
............................................................
China Light & Power Company,
Ltd. 10,000 56,665
- ---------------------------------------------------------
UTILITY -- TELECOMMUNICATIONS -- 0.9%
............................................................
Hong Kong Telecommunications,
Ltd. 14,800 $ 35,341
............................................ -----------
176,636
Total Hong Kong
- ---------------------------------------------------------
IRELAND -- 1.4%
- ---------------------------------------------------------
PAPER -- 1.4%
............................................................
Jefferson Smurfit Group PLC 18,000 52,138
............................................ -----------
52,138
Total Ireland
- ---------------------------------------------------------
ITALY -- 1.4%
- ---------------------------------------------------------
OIL & GAS -- 1.4%
............................................................
ENI 9,000 50,911
............................................ -----------
50,911
Total Italy
- ---------------------------------------------------------
JAPAN -- 12.7%
- ---------------------------------------------------------
BUILDING MATERIAL & COMPONENTS -- 2.7%
............................................................
Sekisui Chemical Co., Ltd. 10,000 101,372
- ---------------------------------------------------------
ELECTRICAL MACHINERY -- 2.2%
............................................................
Nichicon Corporation 6,000 81,272
- ---------------------------------------------------------
ELECTRONIC COMPONENTS -- 2.7%
............................................................
Nintendo Co., Ltd. 1,200 100,673
- ---------------------------------------------------------
FINANCIAL SERVICES -- 3.1%
............................................................
Promise Company, Ltd. 2,000 114,655
- ---------------------------------------------------------
RESTAURANTS -- 2.0%
............................................................
MOS Food Services 4,000 74,106
............................................ -----------
472,078
Total Japan
- ---------------------------------------------------------
MALAYSIA -- 2.6%
- ---------------------------------------------------------
FINANCIAL SERVICES -- 1.8%
............................................................
Public Finance Berhad 44,000 67,639
- ---------------------------------------------------------
TRAVEL & RECREATION -- 0.8%
............................................................
Genting Berhad 6,100 29,243
............................................ -----------
96,882
Total Malaysia
- ---------------------------------------------------------
NETHERLANDS -- 2.9%
- ---------------------------------------------------------
BANKS -- 1.3%
............................................................
ABN Amro Holding N.V. 2,565 47,914
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 24
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------
<S> <C> <C>
CHEMICALS -- 1.6%
............................................................
Akzo Nobel N.V. 450 $ 61,782
............................................ -----------
109,696
Total Netherlands
- ---------------------------------------------------------
NORWAY -- 1.9%
- ---------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.0%
............................................................
Kvaerner ASA -- Class A 598 36,227
- ---------------------------------------------------------
PHARMACEUTICALS & HEALTHCARE -- 0.9%
............................................................
Nycomed ASA -- Class B 2,400 34,259
............................................ -----------
70,486
Total Norway
- ---------------------------------------------------------
SINGAPORE -- 2.7%
- ---------------------------------------------------------
DIVERSIFIED -- 2.7%
............................................................
Jardine Matheson Holdings, Ltd. 14,000 99,400
............................................ -----------
99,400
Total Singapore
- ---------------------------------------------------------
SPAIN -- 1.9%
- ---------------------------------------------------------
OIL-INTERNATIONAL -- 1.9%
............................................................
Repsol SA 1,700 72,013
............................................ -----------
72,013
Total Spain
- ---------------------------------------------------------
SWEDEN -- 1.7%
- ---------------------------------------------------------
APPLIANCES -- 0.5%
............................................................
Electrolux AB -- Class B 240 17,319
- ---------------------------------------------------------
DIVERSIFIED -- 1.2%
............................................................
Marieberg Tidnings AB -- Class A 1,860 46,185
............................................ -----------
63,504
Total Sweden
- ---------------------------------------------------------
SWITZERLAND -- 6.9%
- ---------------------------------------------------------
BUILDING MATERIALS -- 1.6%
............................................................
Forbo Holding AG "registered" 135 58,339
- ---------------------------------------------------------
FOOD PRODUCERS -- 1.3%
............................................................
Nestle SA "registered" 38 50,203
- ---------------------------------------------------------
INSURANCE -- 2.6%
............................................................
Swiss Reinsurance Co.
"registered" 69 97,736
- ---------------------------------------------------------
MACHINERY & EQUIPMENT -- 1.4%
............................................................
Sulzer AG "registered" (P.C.) 60 51,446
- ---------------------------------------------------------
MEDICAL PRODUCTS -- 0.0%
............................................................
Sulzer Medica AG "registered"
rights # 60 $ 0
............................................ -----------
257,724
Total Switzerland
- ---------------------------------------------------------
UNITED KINGDOM -- 18.7%
- ---------------------------------------------------------
APPAREL & TEXTILES -- 1.6%
............................................................
Coats Viyella PLC 28,850 61,219
- ---------------------------------------------------------
BANKS -- 1.3%
............................................................
National Westminster Bank PLC 3,600 48,381
- ---------------------------------------------------------
BUILDING MATERIALS -- 2.2%
............................................................
Redland PLC 14,400 81,604
- ---------------------------------------------------------
BUSINESS SERVICES -- 1.8%
............................................................
Lex Service PLC 10,900 68,300
- ---------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 3.8%
............................................................
BTR PLC 23,675 80,972
............................................................
Harrisons & Crosfield PLC 32,000 59,116
............................................ -----------
140,088
- ---------------------------------------------------------
FOOD & BEVERAGES -- 1.7%
............................................................
Allied Domecq PLC 8,760 62,910
- ---------------------------------------------------------
FOOD PRODUCERS -- 0.8%
............................................................
Tate & Lyle PLC 4,190 31,136
- ---------------------------------------------------------
INSURANCE -- 1.1%
............................................................
Commercial Union PLC 4,000 42,040
- ---------------------------------------------------------
RETAIL -- 1.8%
............................................................
Safeway PLC 11,300 65,353
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 1.4%
............................................................
Powergen PLC 4,400 52,359
- ---------------------------------------------------------
UTILITY -- WATER -- 1.2%
............................................................
Hyder PLC 3,350 45,300
............................................ -----------
698,690
Total United Kingdom
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 25
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
UNITED STATES -- 24.5% Shares Value
- ---------------------------------------------------------
<S> <C> <C>
AUTOS & TRUCKS -- 1.0%
............................................................
General Motors Corporation 670 $ 37,311
- ---------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 1.0%
............................................................
Weyerhaeuser Company 700 36,400
- ---------------------------------------------------------
CHEMICALS -- 2.0%
............................................................
Eastman Chemical Company 1,200 76,200
- ---------------------------------------------------------
CONSUMER PRODUCTS -- 1.3%
............................................................
Tupperware Corporation 1,370 50,005
- ---------------------------------------------------------
ELECTRONICS -- 0.7%
............................................................
EG&G, Inc. 1,100 24,750
- ---------------------------------------------------------
FINANCIAL SERVICES -- 1.2%
............................................................
Beneficial Corporation 600 42,637
- ---------------------------------------------------------
INSURANCE -- 2.7%
............................................................
Safeco Corporation 700 32,681
............................................................
St. Paul Companies, Inc. 450 34,313
............................................................
TIG Holdings, Inc. 1,100 34,375
............................................ -----------
101,369
- ---------------------------------------------------------
MACHINERY -- 2.9%
............................................................
New Holland N.V. 3,900 106,763
- ---------------------------------------------------------
METALS & MINING -- 2.2%
............................................................
Aluminum Company of America 1,100 82,912
- ---------------------------------------------------------
OIL -- DOMESTIC -- 2.0%
............................................................
Occidental Petroleum
Corporation 2,950 $ 73,934
- ---------------------------------------------------------
RETAIL -- 2.4%
............................................................
Intimate Brands, Inc. 4,300 90,300
- ---------------------------------------------------------
SAVINGS & LOANS -- 1.4%
............................................................
Great Western Financial
Corporation 1,000 53,750
- ---------------------------------------------------------
TOBACCO -- 2.5%
............................................................
Philip Morris Companies, Inc. 2,100 93,188
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 1.2%
............................................................
Illinova Corporation 2,100 46,200
............................................ -----------
915,719
Total United States
- ---------------------------------------------------------
Total common stocks
(cost $3,176,072) 3,475,833
............................................................
Other assets in excess of
liabilities -- 6.8% 253,763
............................................ -----------
$ 3,729,596
Total net assets -- 100.0%
- ---------------------------------------------------------
</TABLE>
# Non-income producing security.
P.C. -- Participation Certificates.
See Notes to Financial Statements
15
<PAGE> 26
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 36.5% Shares Value
- ---------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 1.0%
............................................................
Northrop Grumman Corporation 6,200 $ 544,437
............................................................
Rockwell International Corporation 6,000 354,000
............................................. ----------
898,437
- ---------------------------------------------------------
APPAREL & TEXTILES -- 0.2%
............................................................
Russell Corporation 5,400 159,975
- ---------------------------------------------------------
AUTO-RELATED -- 0.5%
............................................................
Dana Corporation 12,400 471,200
- ---------------------------------------------------------
AUTOS & TRUCKS -- 1.9%
............................................................
Ford Motor Company 25,500 962,625
............................................................
General Motors Corporation 14,000 779,625
............................................. ----------
1,742,250
- ---------------------------------------------------------
BANKS -- 1.3%
............................................................
Comerica, Inc. 3,500 238,000
............................................................
CoreStates Financial Corporation 3,000 164,153
............................................................
National City Corporation 6,000 315,000
............................................................
Signet Banking Corporation 13,500 486,000
............................................. ----------
1,203,153
- ---------------------------------------------------------
BEVERAGES -- 0.2%
............................................................
Anheuser-Busch Companies, Inc. 5,000 209,687
- ---------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 0.9%
............................................................
Georgia Pacific Corporation 3,700 315,887
............................................................
Weyerhaeuser Company 10,000 520,000
............................................. ----------
835,887
- ---------------------------------------------------------
BUILDING MATERIALS -- 0.1%
............................................................
Hanson PLC ADR 5,000 125,000
- ---------------------------------------------------------
CHEMICALS -- 1.5%
............................................................
The Dow Chemical Company 6,300 $ 548,887
............................................................
duPont (E.I.) de Nemours & Company 4,600 289,225
............................................................
Eastman Chemical Company 7,200 457,200
............................................................
Millennium Chemicals, Inc. 2,142 48,731
............................................. ----------
1,344,043
- ---------------------------------------------------------
CONSUMER PRODUCTS -- 0.2%
............................................................
Tupperware Corporation 5,700 208,050
- ---------------------------------------------------------
CONGLOMERATES -- 0.5%
............................................................
Tenneco, Inc. 10,000 451,875
- ---------------------------------------------------------
FINANCIAL SERVICES -- 1.4%
............................................................
Beneficial Corporation 9,200 653,775
............................................................
Household International, Inc. 2,000 234,875
............................................................
Transamerica Corporation 4,000 374,250
............................................. ----------
1,262,900
- ---------------------------------------------------------
HEALTHCARE -- DRUGS -- 1.0%
............................................................
American Home Products Corporation 4,000 306,000
............................................................
Bristol-Meyers Squibb Company 3,600 291,600
............................................................
Merck & Company, Inc. 2,600 269,100
............................................. ----------
866,700
- ---------------------------------------------------------
HEALTHCARE -- MEDICAL PRODUCTS -- 0.3%
............................................................
Baxter International, Inc. 5,200 271,700
- ---------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 0.9%
............................................................
Whirlpool Corporation 15,000 818,438
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 27
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------
<S> <C> <C>
INSURANCE -- 1.9%
............................................................
American General Corporation 6,523 $ 310,911
............................................................
Aon Corporation 3,100 160,425
............................................................
Harleysville Group, Inc. 9,000 340,875
............................................................
Safeco Corporation 9,000 420,188
............................................................
St. Paul Companies, Inc. 5,000 381,250
............................................................
TIG Holdings, Inc. 2,300 71,875
............................................. ----------
1,685,524
- ---------------------------------------------------------
LEISURE/TOYS -- 0.7%
............................................................
Fortune Brands, Inc. 16,500 615,656
- ---------------------------------------------------------
MACHINERY -- 1.1%
............................................................
Deere & Company 3,600 197,550
............................................................
New Holland N.V. 27,400 749,359
............................................. ----------
946,909
- ---------------------------------------------------------
METALS & MINING -- 1.6%
............................................................
Aluminum Company of America 11,400 859,275
............................................................
Phelps Dodge Corporation 4,200 357,788
............................................................
Reynolds Metals Company 3,200 228,000
............................................. ----------
1,445,063
- ---------------------------------------------------------
OIL-DOMESTIC -- 2.1%
............................................................
Atlantic Richfield Company 11,000 775,500
............................................................
Occidental Petroleum Corporation 28,200 706,763
............................................................
USX-Marathon Group, Inc. 15,500 447,563
............................................. ----------
1,929,826
- ---------------------------------------------------------
OIL-INTERNATIONAL -- 1.9%
............................................................
Chevron Corporation 6,000 443,625
............................................................
Exxon Corporation 8,600 528,900
............................................................
Mobil Corporation 4,000 279,500
............................................................
Royal Dutch Petroleum Company NYS 8,000 435,000
............................................. ----------
1,687,025
- ---------------------------------------------------------
PAPER -- 1.2%
............................................................
International Paper Company 15,125 $ 734,508
............................................................
Union Camp Corporation 7,500 375,000
............................................. ----------
1,109,508
- ---------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 0.2%
............................................................
Eastman Kodak Company 2,200 168,850
- ---------------------------------------------------------
POLLUTION CONTROL -- 0.4%
............................................................
Browning-Ferris Industries, Inc. 10,000 332,500
- ---------------------------------------------------------
RAILROADS -- 0.8%
............................................................
Norfolk Southern Corporation 7,200 724,552
- ---------------------------------------------------------
RETAIL -- 2.2%
............................................................
Intimate Brands, Inc. 18,000 378,000
............................................................
J.C. Penney Company, Inc. 10,000 521,875
............................................................
May Department Stores Company 14,000 661,500
............................................................
Sears, Roebuck & Company 8,000 430,000
............................................. ----------
1,991,375
- ---------------------------------------------------------
SAVINGS & LOANS -- 1.7%
............................................................
Fannie Mae 6,000 261,750
............................................................
Great Western Financial Corporation 12,700 682,625
............................................................
H.F. Ahmanson & Company 14,000 602,000
............................................. ----------
1,546,375
- ---------------------------------------------------------
STEEL -- 0.7%
............................................................
USX-U.S. Steel Group, Inc. 19,000 666,188
- ---------------------------------------------------------
TOBACCO -- 1.1%
............................................................
Gallaher Group PLC ADR # 12,500 230,469
............................................................
Philip Morris Companies, Inc. 17,000 754,375
............................................. ----------
984,844
- ---------------------------------------------------------
TRUCKING -- 0.4%
............................................................
Ryder System, Inc. 10,600 349,800
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 28
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ---------------------------------------------------------
UTILITY-ELECTRIC -- 3.3%
............................................................
CMS Energy Corporation 6,600 $ 232,650
............................................................
Central & South West Corporation 14,700 312,375
............................................................
DTE Energy Company 10,400 287,300
............................................................
Edison International 19,300 480,087
............................................................
Energy Group PLC ADR 3,900 165,262
............................................................
Illinova Corporation 30,000 660,000
............................................................
PECO Energy Company 13,000 273,000
............................................................
PacifiCorp 18,300 402,600
............................................................
Public Service Enterprises Group,
Inc. 7,000 175,000
............................................. ----------
2,988,274
- ---------------------------------------------------------
UTILITY-GAS PIPELINE -- 0.6%
............................................................
Nicor, Inc. 6,000 215,250
............................................................
Peoples Energy Corporation 7,500 280,781
............................................. ----------
496,031
- ---------------------------------------------------------
UTILITY-TELEPHONE -- 2.7%
............................................................
AT&T Corporation 26,700 936,169
............................................................
Alltel Corporation 15,500 518,281
............................................................
NYNEX Corporation 8,000 461,000
............................................................
SBC Communications, Inc. 3,657 226,277
............................................................
US West Communications Group 7,000 263,813
............................................. ----------
2,405,540
- ---------------------------------------------------------
Total common stocks (cost
$26,541,243) 32,943,135
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
- -- 21.4% Amount
- ---------------------------------------------------------
<S> <C> <C>
AUTOS & TRUCKS -- 1.1%
............................................................
Ford Motor Company (Global),
7.00%, 9/25/2001 $ 1,000,000 1,010,450
- ---------------------------------------------------------
BANKS -- 5.7%
............................................................
Associates First Capital
Corporation, Putable
5/15/1999, 5.96%, 5/15/2037 $ 1,000,000 $ 1,002,185
............................................................
KeyCorp Instit Capital-A
(Acquired 12/19/1996, Cost
$799,722), CLB 12/01/2006,
7.826%, 12/01/2026 r 825,000 802,397
............................................................
MBNA Corporation, 6.13125%,
6/17/2002 # 1,500,000 1,501,009
............................................................
MBNA Corporation (Global),
6.65938%, 2/01/2027 # 1,000,000 991,604
............................................................
Mellon Bank Corporation, Class
A, CLB 12/01/2006, 7.72%,
12/01/2026 825,000 801,629
............................................. ----------
5,098,824
- ---------------------------------------------------------
BUSINESS MACHINES & SOFTWARE -- 1.1%
............................................................
Oracle Corporation, 6.91%,
2/15/2007 1,000,000 987,191
- ---------------------------------------------------------
CONSUMER PRODUCTS -- 0.9%
............................................................
The Stop & Shop Companies,
Inc., 9.75%, 2/01/2002 700,000 773,811
- ---------------------------------------------------------
EUROBANKS -- 6.6%
............................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 6.53125%,
12/29/2049 # 2,000,000 2,012,800
............................................................
Midland Bank PLC, 6.0375%,
6/29/2049 # 500,000 445,425
............................................................
Nordbanken, CLB 10/25/2001,
6.43984%, 10/29/2049 # 2,000,000 2,002,590
............................................................
Okobank, 7.375%, 9/27/2049 # 1,500,000 1,527,300
............................................. ----------
5,988,115
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 29
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ---------------------------------------------------------
FINANCIAL SERVICES -- 1.1%
............................................................
Salomon, Inc.:
5.65%, 2/10/1998 $ 500,000 $ 499,238
............................................................
6.70%, 12/01/1998 # 500,000 501,595
............................................. ----------
1,000,833
- ---------------------------------------------------------
PAPER -- 0.8%
............................................................
Fort Howard Corporation,
11.00%, 1/02/2002 700,442 742,329
- ---------------------------------------------------------
REAL ESTATE -- 1.7%
............................................................
Taubman Realty Group, Ltd.,
6.33984%, 11/03/1997 # 1,500,000 1,500,433
- ---------------------------------------------------------
SAVINGS & LOANS -- 0.5%
............................................................
Federal Home Loan Mortgage
Corporation, CLB 7/01/1997,
7.15%, 6/27/2000 500,000 500,000
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 1.7%
............................................................
Tele Communications, Inc., CLB
9/15/1997, 6.4625%, 9/15/2003
# 1,500,000 1,504,017
- ---------------------------------------------------------
TRANSPORTATION -- 0.2%
............................................................
Delta Air Lines ETC, 9.90%,
1/02/2002 150,000 165,108
- ---------------------------------------------------------
Total corporate bonds (cost
$19,169,785) 19,271,111
- ---------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 7.2%
- ---------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.0%
............................................................
Student Loan Marketing
Association, 1996-4 A1,
5.55%, 7/25/2004 # 887,143 885,896
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 3.0%
............................................................
Federal National Mortgage
Association: 1995-3 Z, 8.25%,
7/25/2024 $ 691,844 $ 696,962
............................................................
TBA, 8.00%, 7/25/2027 2,000,000 2,045,000
............................................. ----------
2,741,962
- ---------------------------------------------------------
PASS-THROUGH SECURITIES -- 1.7%
............................................................
Government National Mortgage
Association, TBA, 8.00%,
7/15/2027 1,500,000 1,535,157
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED
SECURITIES -- 1.5%
............................................................
Federal Home Loan Mortgage
Corporation:
1860 SA (Inverse IO),
8.79317%, 2/15/2024 # 2,500,000 837,653
............................................................
1965 SA (Inverse IO), 2.05%,
3/15/2024 # 3,050,000 475,611
............................................. ----------
1,313,264
- ---------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $6,438,120) 6,476,279
- ---------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES -- 7.6%
- ---------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.6%
............................................................
Bridgestone/Firestone Master
Trust, 1996-1 A, 6.17%,
7/01/2003 1,400,000 1,390,606
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 30
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 2.8%
............................................................
Citicorp Mortgage Securities,
Inc., 1991-7 M, 8.75%,
5/25/2021 $ 245,166 $ 247,361
............................................................
Independent National Mortgage
Corporation, 1996-D A2,
7.00%, 5/25/2026 696,985 697,911
............................................................
PNC Mortgage Securities
Corporation, 1996-1 A11,
Class Z, 7.50%, 6/25/2026 1,710,972 1,610,435
............................................. ----------
2,555,707
- ------------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.0%
............................................................
Citicorp Mortgage Securities,
Inc., 1987-14 A1, 9.50%,
9/25/2002 21,496 21,567
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED
SECURITIES -- 3.2%
............................................................
Chase Commercial Mortgage
Securities Corporation,
1997-1 X (IO), 1.39762%,
4/19/2015 # 23,495,137 2,009,657
............................................................
Donaldson, Lufkin & Jenrette,
(Acquired 4/25/1997, Cost
$607,931), 1997-CF1 S (IO),
1.0969%, 3/15/2017 # r 9,250,000 620,037
............................................................
GE Capital Mortgage Services,
Inc., 1993-1 G (IO),
657.2504%, 2/25/2022 22,089 289,011
............................................. ----------
2,918,705
- ------------------------------------------------------------
Total non-agency
mortgage-backed securities
(cost $6,545,920) 6,886,585
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS
- -- 1.1% Shares
- ---------------------------------------------------------
<S> <C> <C>
Home Ownership Funding 2,
(Acquired 2/20/1997, Cost
$1,000,000) r 1,000 971,622
- ---------------------------------------------------------
Total preferred stocks
(cost $1,000,000) 971,622
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY OBLIGATIONS Principal
- -- 19.4% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bonds:
8.75%, 5/15/2017 $ 750,000 $ 902,578
6.50%, 11/15/2026 1,550,000 1,486,064
............................................. ----------
2,388,642
- ---------------------------------------------------------
U.S. Treasury Notes:
............................................................
5.375%, 5/31/1998 375,000 373,711
............................................................
5.875%, 8/15/1998 4,350,000 4,350,004
............................................................
6.375%, 5/15/1999 6,000,000 6,031,877
............................................................
6.50%, 5/31/2001 3,000,000 3,017,814
............................................................
6.50%, 5/15/2005 1,300,000 1,298,376
............................................. ----------
15,071,782
- ---------------------------------------------------------
Total U.S. Treasury obligations
(cost $17,437,255) 17,460,424
- ---------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.6%
- ---------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 1.1%
............................................................
Structured Product Asset Return
Certificate Trust, 5.8375%,
7/28/1997 1,000,000 1,000,000
- ---------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 5.5%
............................................................
Lilly (Eli) & Co., 5.0949% 933,217 933,217
............................................................
General Mills, Inc., 5.245% 1,512,928 1,512,928
............................................................
Pitney Bowes, Inc. 5.2551% 967,965 967,965
............................................................
Warner-Lambert Co., 5.226% 1,560,910 1,560,910
............................................. ----------
4,975,020
- ---------------------------------------------------------
Total short-term investments
(cost $5,975,020) 5,975,020
- ---------------------------------------------------------
Total investments -- 99.8%
(cost $83,107,343) 89,984,176
............................................................
Other assets in excess of
liabilities -- 0.2% 174,338
............................................. ----------
$90,158,514
Total net assets -- 100.0%
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 31
# Variable rate security. The rate listed is as of June 30, 1997.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
IO -- Interest Only.
ETC -- Equipment Trust Certificate.
ADR -- American Depository Receipts.
CLB -- Callable.
NYS -- New York Shares.
TBA -- To Be Announced. Security purchased on a delayed delivery basis.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
See Notes to Financial Statements
21
<PAGE> 32
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
CORPORATE BONDS AND Principal
NOTES -- 26.1% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
BANKS -- 6.9%
............................................................
First Chicago NBD Corporation,
CLB 2/01/2007,
6.40938%, 2/01/2027# $ 500,000 $ 489,859
............................................................
MBNA Corporation, 6.13125%,
6/17/2002 # 500,000 500,336
.............................................
----------
990,195
- ---------------------------------------------------------
FINANCIAL SERVICES -- 4.2%
............................................................
Associates First Capital
Corporation, Putable
5/15/1999, 5.96%, 5/15/2037 250,000 250,546
............................................................
Salomon, Inc.:
6.70%, 12/01/1998 # 150,000 150,479
............................................................
6.40%, 5/20/1999 # 200,000 198,712
.............................................
----------
599,737
- ---------------------------------------------------------
INDUSTRIAL -- 1.8%
............................................................
Westinghouse Electric
Corporation, 8.93%, 6/22/1999 250,000 258,247
- ---------------------------------------------------------
SAVINGS & LOAN -- 3.6%
............................................................
Western Financial Savings,
8.50%, 7/01/2003 500,000 509,197
- ---------------------------------------------------------
SOVEREIGN -- 3.2%
............................................................
Government of Mexico, 11.00781%,
7/21/1997 # 450,000 450,196
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 4.5%
............................................................
Summit Communications Group,
Inc., CLB 4/15/1999,
10.50%, 4/15/2005 600,000 646,500
- ---------------------------------------------------------
TRANSPORTATION -- 1.9%
............................................................
Delta Air Lines ETC, 9.90%,
1/02/2002 250,000 275,180
- ---------------------------------------------------------
Total corporate bonds and notes
(cost $3,694,837) 3,729,252
- ---------------------------------------------------------
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 22.9% Amount Value
---------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 16.0%
............................................................
Federal Home Loan Mortgage
Corporation: 1261 J, 8.00%,
7/15/2021 $ 599,911 $ 618,045
............................................................
1468 S, 11.934%, 2/15/2023 # 449,224 447,024
............................................................
1564 SE, 8.40233%, 8/15/2008 # 353,637 322,878
............................................................
Federal National Mortgage Association:
G93-27 SB, 6.71922%, 8/25/2023
# 115,176 73,635
............................................................
1993-37 SB, 6.95624%,
3/25/2023 # 224,549 164,680
............................................................
1995-3 Z, 8.25%, 7/25/2024 661,763 666,659
.............................................
----------
2,292,921
- ---------------------------------------------------------
PASS-THROUGH SECURITIES -- 3.9%
............................................................
Government National Mortgage
Association, 8974, 7.125%,
5/20/2022 # 543,828 561,176
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 3.0%
............................................................
Federal Home Loan Mortgage
Corporation:
1860 SA (Inverse IO),
8.79317%, 2/15/2024 # 800,000 268,049
............................................................
1965 SA (Inverse IO),
2.05%, 3/15/2024 # 1,000,000 155,938
.............................................
----------
423,987
- ---------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $3,024,074) 3,278,084
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 33
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
NON-AGENCY MORTGAGE- BACKED Principal
SECURITIES -- 32.8% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 28.8%
............................................................
Blackrock Capital Finance L.P.
(Acquired 6/23/1997, Cost
$496,953), 1997-R2 AP,
4.427%, 12/25/2035 # r $ 500,000 $ 495,903
............................................................
CMC Securities Corporation,
1994-G, 7.00%, 9/25/2024 200,000 187,102
............................................................
Citicorp Mortgage Securities,
Inc., 1990-D A1, 9.50%,
10/25/2005 175,914 183,012
............................................................
Collateralized Mortgage
Obligations Trust, 57-D,
9.90%, 2/01/2019 521,617 563,604
............................................................
Countrywide Funding Corporation,
1994-2 A12T, 9.00%, 2/25/2009
# 465,685 469,783
............................................................
GE Capital Mortgage Services,
Inc.: 1994-24 A4, 7.00%,
7/25/2024 169,843 159,478
............................................................
1997-5 A7, 7.50%, 6/25/2027 417,236 415,802
............................................................
Housing Securities, Inc.: 1994-1
AB2, 6.50%, 3/25/2009 512,748 383,997
............................................................
1994-2 B1, 6.50%, 7/25/2009 259,560 218,312
............................................................
Independent National Mortgage
Corporation, 1995-F A5, 8.25%,
5/25/2010 1,000,000 1,035,405
.............................................
----------
4,112,398
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 4.0%
............................................................
Chase Commercial Mortgage
Securities Corporation, 1997-1
X (IO), 1.39762%, 4/19/2015 # 6,737,000 576,249
- ---------------------------------------------------------
Total non-agency mortgage-backed
securities (cost $4,558,172) 4,688,647
- ---------------------------------------------------------
<CAPTION>
PREFERRED STOCK -- 6.8% Shares Value
- ---------------------------------------------------------
<S> <C> <C>
Home Ownership Funding 2,
(Acquired 2/20/1997, Cost
$500,000) r 500 $ 485,811
............................................................
Kenwood Properties, Inc.,
(Acquired 2/26/1997,
Cost $500,000) r 500 491,317
............................................................
Total preferred stock (cost
$1,000,000) 977,128
- ---------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- Principal
10.1% Amount
- ---------------------------------------------------------
Lilly (Eli) & Co., 5.0949% $ 3,849 3,849
............................................................
Pitney Bowes, Inc., 5.2551% 1,359,671 1,359,671
............................................................
Warner-Lambert Co., 5.226% 81,380 81,380
.............................................
----------
Total variable rate demand notes
(cost $1,444,900) 1,444,900
- ---------------------------------------------------------
Total investments -- 98.7% (cost
$13,721,983) 14,118,011
............................................................
Other assets in excess of
liabilities -- 1.3% 189,102
.............................................
----------
Total net assets -- 100.0% $14,307,113
- ---------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1997.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
IO -- Interest Only.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
ETC -- Equipment Trust Certificate.
See Notes to Financial Statements
23
<PAGE> 34
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 44.4% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
BANKS -- 9.9%
............................................................
Barnett Capital Trust III,
(Acquired 2/06/1997, Cost
$2,437,250), CLB 2/01/2007,
6.48438%, 2/01/2027 # r $2,500,000 $ 2,444,035
............................................................
Chase Capital II,
6.35938%, 2/01/2027 # 2,100,000 2,042,901
............................................................
First Chicago NBD Corporation,
CLB 2/01/2007, 6.40938%,
2/01/2027# 3,000,000 2,939,153
............................................................
First Maryland Capital II,
CLB 2/01/2007, 6.70938%,
2/01/2027 # 4,000,000 3,996,955
............................................................
MBNA Corporation,
6.13125%, 6/17/2002 # 1,125,000 1,125,757
............................................................
MBNA Global Capital Securities,
CLB 2/01/2007, 6.65938%,
2/01/2027 # 2,000,000 1,983,208
............................................................
Old Kentucky Capital Trust I
(Acquired 2/06/1997,
Cost $2,485,000),
6.65938%, 2/01/2027 # r 2,500,000 2,487,857
............................................ -----------
17,019,866
- ---------------------------------------------------------
EUROBANKS -- 8.4%
............................................................
Foreningsbanken Kredit AB,
CLB 12/18/2001, 6.53125%,
12/29/2049# 5,000,000 5,032,000
............................................................
Nordbanken, CLB 10/25/2001,
6.43984%, 10/29/2049 # 5,830,000 5,837,549
............................................................
Skandinavinska Enskilda Banken,
CLB 6/28/2003, 6.78125%,
6/29/2049 # 3,500,000 3,553,200
............................................ -----------
14,422,749
- ---------------------------------------------------------
FINANCIAL SERVICES -- 7.0%
............................................................
Ford Motor Credit,
6.10%, 2/15/1999 # $4,400,000 $ 4,391,454
............................................................
General Motors Acceptance
Corporation,
5.8125%, 12/09/1999 # 1,000,000 998,915
............................................................
Heller Financial,
5.8875%, 9/03/1999 # 1,000,000 1,001,677
............................................................
Salomon, Inc.:
5.65%, 2/10/1998 200,000 199,695
............................................................
5.70%, 2/11/1998 2,000,000 1,997,504
............................................................
9.43%, 3/15/1998 1,000,000 1,023,304
............................................................
6.125%, 5/15/1998 315,000 315,182
............................................................
6.70%, 12/01/1998 # 1,500,000 1,504,786
............................................................
6.40%, 5/20/1999 # 500,000 496,779
............................................ -----------
11,929,296
- ---------------------------------------------------------
HEALTH -- 0.1%
............................................................
Health & Retirement Property
Trust, CLB 7/13/1997,
6.53641%, 7/13/1999 # 200,000 200,053
- ---------------------------------------------------------
PAPER -- 1.7%
............................................................
Fort Howard Corporation,
11.00%, 1/02/2002 2,801,770 2,969,316
- ---------------------------------------------------------
REAL ESTATE -- 2.7%
............................................................
Taubman Realty Group, Ltd.,
6.68125%, 7/26/1999 # 4,550,000 4,559,063
- ---------------------------------------------------------
TELECOMMUNICATIONS -- 7.6%
............................................................
Continental Cablevision, Inc.,
CLB 6/01/1999, 11.00%,
6/01/2007 4,000,000 4,502,856
............................................................
Illinois Bell Telephone Co.,
CLB 8/13/1997, 7.625%,
4/01/2006 300,000 303,478
............................................................
Summit Communications Group, Inc.,
CLB 4/15/1999, 10.50%,
4/15/2005 2,700,000 2,909,250
............................................................
</TABLE>
See Notes to Financial Statements
24
<PAGE> 35
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------
<S> <C> <C>
Tele Communications, Inc.,
CLB 9/15/1997, 6.4625%,
9/15/2003 # $5,315,000 $ 5,329,233
............................................ -----------
13,044,817
- ---------------------------------------------------------
TRANSPORTATION -- 1.3%
............................................................
Delta Air Lines, 10.50%,
4/30/2016 1,750,000 2,161,223
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 5.7%
............................................................
Cleveland Electric Illum, CLB
8/14/1997, 9.375%, 3/01/2017 3,500,000 3,643,069
............................................................
CTC Mansfield Funding Corp.,
CLB 8/14/1997, 11.125%,
9/30/2016 350,000 372,225
............................................................
Gulf States Utilities, CLB
8/19/1997, 6.75%, 10/01/1998 700,000 700,479
............................................................
Texas Utilities, CLB
11/01/1997, 6.25781%,
5/01/1999 # 5,000,000 5,007,195
............................................ -----------
9,722,968
- ---------------------------------------------------------
Total corporate bonds and notes
(cost $75,614,363) 76,029,351
- ---------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 19.0%
- ---------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.3%
............................................................
Student Loan Marketing
Association,
1996-4 A1, 5.55%, 7/25/2004 # 2,217,857 2,214,739
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.7%
............................................................
Federal Home Loan Mortgage
Corporation:
1081 I, 7.00%, 12/15/2019 226,095 227,529
............................................................
1096 D, 7.00%, 6/15/2020 34,486 34,604
............................................................
1194 G, 6.50%, 10/15/2006 500,000 495,675
............................................................
1201 D, 7.00%, 10/15/2020 290,278 291,013
............................................................
1206 GA, 7.00%, 3/15/2018 3,910,000 3,938,973
............................................................
1262 F, 7.50%, 3/15/2015 436,505 440,311
............................................................
1267 O, 7.25%, 12/15/2005 73,555 74,342
............................................................
1336 H, 7.75%, 1/15/2021 $ 400,000 $ 409,222
............................................................
1358 F, 6.75%, 1/15/2019 484,319 486,576
............................................................
1521 B, 5.80%, 7/15/2000 1,063,780 1,063,993
............................................................
1543 KE, 9.52875%,
9/15/2022 # 1,046,602 850,036
............................................................
1617 D, 6.50%, 11/15/2023 71,000 64,960
............................................................
Federal National Mortgage
Association:
1988-26 C, 7.50%, 7/25/2018 111,253 112,370
............................................................
1990-112 E, 8.50%, 7/25/2019 85,113 86,490
............................................................
1991-6 K, 7.50%, 4/25/2014 2,823,919 2,832,815
............................................................
1991-147 K, 7.00%, 1/25/2021 5,000 5,007
............................................................
1991-153 N, 7.50%, 2/25/2007 300,000 303,963
............................................................
G92-9 K, 7.00%, 1/25/2020 55,326 55,271
............................................................
1992-138 O, 7.50%, 7/25/2022 66,658 65,583
............................................................
1992-163 E, 6.75%, 9/25/2022 500,000 499,900
............................................................
1993-45 SB, 9.156%,
4/25/2023 # 1,500,000 1,264,767
............................................................
1994-60 D, 7.00%, 4/25/2024 30,000 28,070
............................................................
1995-3 Z, 8.25%, 7/25/2024 3,308,817 3,333,295
............................................................
Government National Mortgage
Association,
1995-2 G, 8.50%, 3/20/2020 1,300,000 1,331,253
............................................ -----------
18,296,018
- ---------------------------------------------------------
PASS-THROUGH SECURITIES -- 4.9%
............................................................
Federal Home Loan Mortgage
Corporation, 255452, 8.50%,
2/01/2008 610,030 636,243
............................................................
Federal National Mortgage
Association:
21130, 8.00%, 9/01/2000 7,648 7,823
............................................................
308798, 7.359%, 4/01/2025 # 1,408,070 1,456,437
............................................................
312155, 7.318%, 3/01/2025 # 621,308 632,398
............................................................
</TABLE>
See Notes to Financial Statements
25
<PAGE> 36
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------
<S> <C> <C>
Government National Mortgage
Association:
8956, 7.125%, 4/20/2022 # $4,426,940 $ 4,568,158
............................................................
8974, 7.125%, 5/20/2022 # 1,030,010 1,062,867
............................................ -----------
8,363,926
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 2.1%
............................................................
Federal Home Loan Mortgage Corporation:
1860 SA (Inverse IO),
8.79317%,
2/15/2024 # 5,261,274 1,762,849
............................................................
1965 SA (Inverse IO), 2.05%,
3/15/2024 # 10,500,000 1,637,349
............................................................
Federal National Mortgage Association,
1993-97 L (IO), 7.50%,
5/25/2023 1,713,940 162,110
............................................ -----------
3,562,308
- ---------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $31,729,189) 32,436,991
- ---------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES -- 20.5%
- ---------------------------------------------------------
ASSET-BACKED SECURITIES -- 7.1%
............................................................
BHN II Mortgage Trust (Acquired
4/30/1997, Cost $2,500,000),
1997-1 A1, 7.1375%,
3/25/2011 # r 2,457,568 2,459,519
............................................................
Bridgestone/Firestone Master
Trust, 1996-1 A, 6.17%,
7/01/2003 3,000,000 2,979,870
............................................................
First Chicago Master Trust II,
1996-R A, 5.7575%, 7/15/2001# 1,400,000 1,401,344
............................................................
Western Financial Grantor
Trust, 1992-3, 4.70%,
1/01/1998 38,460 38,480
............................................................
World Omni Wholesale Master Trust,
1996-2 B, 5.9575%, 10/25/2001
# 5,250,000 5,250,000
............................................ -----------
12,129,213
............................................................
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.8%
............................................................
Blackrock Capital Finance L.P.
(Acquired 6/23/1997, Cost
$2,733,242), 1997-R2 AP,
4.427%, 12/25/2035 # r $2,750,000 $ 2,727,467
............................................................
Capstead Securities Corp.,
1992-2 C, 7.80%, 2/25/2022 215,243 216,007
............................................................
Chemical Mortgage Securities,
Inc., 1993-3 A1, 7.125%,
7/25/2023 339,116 340,208
............................................................
Citicorp Mortgage Securities,
Inc., 1990-D A1, 9.50%,
10/25/2005 351,828 366,024
............................................................
Countrywide Funding
Corporation, 1994-17 A9,
8.00%, 7/25/2024 4,000 4,112
............................................................
First Bank Systems, 1993 AT T2,
8.25%, 3/25/2023 254,255 256,589
............................................................
Housing Securities, Inc.:
1992-B3, 8.00%, 7/25/2021 1,893,625 1,913,742
............................................................
1994-2 B1, 6.50%, 7/25/2009 232,362 195,437
............................................................
Independent National Mortgage
Corporation:
1995-A4, 8.75%, 3/25/2025 18,000 18,708
............................................................
1996-D A2, 7.00%, 5/25/2026 2,987,077 2,991,049
............................................................
Prudential Home Mortgage
Securities, Co., 1993-36 A10,
7.25%, 10/25/2023 500,000 496,605
............................................................
Residential Asset
Securitization Trust,
1996-A10 A1, 7.50%,
11/25/2011 2,238,893 2,250,132
............................................................
Residential Funding Corp.,
1993-S9 A8, 8.16667%,
2/25/2008# 125,305 104,473
............................................................
Residential Funding Mortgage
Securities, Inc., 1992-S5 A5,
7.50%, 2/25/2007 1,132,645 1,129,723
............................................................
</TABLE>
See Notes to Financial Statements
26
<PAGE> 37
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------
<S> <C> <C>
Structured Mortgage Asset
Residential Trust:
1991-1H, 8.25%, 6/25/2022 $ 286,292 $ 284,804
............................................................
1992-3 A, 8.00%, 10/25/2007 228,144 232,732
............................................................
1993-5A AA, 6.93501%,
6/25/2024 # 381,499 377,836
............................................................
Walsh Acceptance (Acquired
3/06/1997, Cost $3,023,438),
1997-2 A, 6.75%, 3/01/2027# r 2,831,962 2,852,352
............................................ -----------
16,758,000
- ---------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.7%
............................................................
Citicorp Mortgage Securities,
Inc.:
1987-5, 8.50%, 4/25/2017 27,014 26,945
............................................................
1987-9 A1, 9.00%, 7/25/2002 535,986 539,738
............................................................
1987-14, 9.50%, 9/25/2002 42,991 43,133
............................................................
1988-16 A1, 10.00%,
11/25/2018 48,156 51,242
............................................................
1989-8 A1, 10.50%, 6/25/2019 555,073 597,309
............................................ -----------
1,258,367
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 2.9%
............................................................
Chase Commercial Mortgage
Securities Corporation,
1997-1 X (IO), 1.39762%,
4/19/2015 # 26,000,000 2,223,910
............................................................
Donaldson, Lufkin & Jenrette,
(Acquired 4/25/1997, Cost
$2,339,174), 1997-CF1 S (IO),
1.0969%, 3/15/2017 # r 35,600,000 2,386,304
............................................................
Residential Funding Corp.,
1992-S2 A16 (IO), 0.50%,
1/25/2022 31,563,874 335,366
............................................ -----------
4,945,580
- ---------------------------------------------------------
Total non-agency
mortgage-backed securities
(cost $34,647,130) 35,091,160
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK -- 2.0% Shares Value
- ---------------------------------------------------------
<S> <C> <C>
Home Ownership Funding 2 (Acquired
2/20/1997, Cost $1,500,000) r 1,500 $1,457,433
............................................................
Kenwood Properties, Inc. (Acquired
2/26/1997 and 4/18/1997, Cost
$1,000,000 and $992,070,
respectively) r 2,000 1,965,268
- ---------------------------------------------------------
Total preferred stock (cost
$3,492,070) 3,422,701
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY OBLIGATIONS Principal
- -- 5.0% Amount
- ---------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes:
7.875%, 4/15/1998 $2,500,000 2,541,407
............................................................
5.375%, 5/31/1998 6,000,000 5,979,377
............................................ -----------
Total U.S. Treasury obligations 8,520,784
(cost $8,484,097)
- ---------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.1%
- ---------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 2.9%
............................................................
Structured Product Asset Return
Certificate Trust, 5.8375%,
7/28/1997 5,000,000 5,000,000
- ---------------------------------------------------------
DISCOUNT NOTES -- 1.2%
............................................................
McDonnell Douglas Corp. 4(2),
5.73%, 7/03/1997 2,000,000 1,999,363
- ---------------------------------------------------------
Total short-term investments
(cost $6,999,363) 6,999,363
- ---------------------------------------------------------
Total investments -- 95.0%
(cost $160,966,212) 162,500,350
............................................................
Other assets in excess of
liabilities -- 5.0% 8,713,681
............................................ -----------
$171,214,031
Total net assets -- 100.0%
- ---------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1997.
IO -- Interest Only.
CLB -- Callable.
r Restricted Security. Purchased in a private placement transaction; resale to
the public may require registration or may extend only to qualified
institutional buyers.
4(2) -- Restricted securities requiring resale to institutional investors.
See Notes to Financial Statements
27
<PAGE> 38
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
CORPORATE BONDS AND Principal
NOTES -- 39.9% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
BANKS -- 2.3%
............................................................
MBNA Corporation,
6.13125%, 6/17/2002 # $ 500,000 $ 500,337
- ---------------------------------------------------------
EUROBANKS -- 8.6%
............................................................
Foreningsbanken Kredit AB, CLB
12/18/2001,
6.53125%, 12/29/2049# 500,000 503,200
............................................................
Nordbanken, CLB 10/25/2001,
6.43984%, 10/29/2049 # 550,000 550,712
............................................................
Skandinavinska Enskilda Banken,
CLB 6/28/2003,
6.78125%, 6/29/2049# 800,000 812,160
............................................. ----------
1,866,072
- ---------------------------------------------------------
FINANCIAL SERVICES -- 7.8%
............................................................
Caterpillar Finance,
6.20%, 4/05/1999 # 550,000 547,996
............................................................
General Motors Acceptance
Corporation,
5.8125%, 12/09/1999 # 750,000 749,186
............................................................
Salomon, Inc.,
6.70%, 12/01/1998 # 400,000 401,276
............................................. ----------
1,698,458
- ---------------------------------------------------------
REAL ESTATE -- 2.6%
............................................................
Taubman Realty Group, Ltd.,
6.68125%, 7/26/1999 # 550,000 551,095
- ---------------------------------------------------------
SOVEREIGN -- 2.5%
............................................................
Government of Mexico,
11.00781%, 7/21/1997 # 550,000 550,239
............................................................
TELECOMMUNICATIONS -- 14.7%
............................................................
Continental Cablevision, Inc.,
CLB 6/01/1999,
11.00%, 6/01/2007 $ 700,000 $ 788,000
............................................................
GTE Corporation, CLB 9/15/1997,
10.75%, 9/15/2017 750,000 795,517
............................................................
Illinois Bell Telephone Co., CLB
8/13/1997,
7.625%, 4/01/2006 150,000 151,739
............................................................
Summit Communications Group,
Inc., CLB 4/15/1999,
10.50%, 4/15/2005 800,000 862,000
............................................................
Tele Communications, Inc., CLB
9/15/1997,
6.4625%, 9/15/2003 # 600,000 601,607
............................................. ----------
3,198,863
- ---------------------------------------------------------
UTILITY -- ELECTRIC -- 1.4%
............................................................
Gulf States Utilities, CLB
8/13/1997,
6.75%, 10/01/1998 300,000 300,205
- ---------------------------------------------------------
Total corporate bonds and notes
(cost $8,656,547) 8,665,269
- ---------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 17.6%
- ---------------------------------------------------------
ASSET-BACKED SECURITIES -- 2.0%
............................................................
Student Loan Marketing
Association, 1996-4 A1, 5.55%,
7/25/2004 # 443,571 442,948
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
28
<PAGE> 39
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.4%
............................................................
Federal Home Loan Mortgage
Corporation:
16 B, 10.00%, 10/15/2019 $ 1,535 $ 1,537
............................................................
1081 I, 7.00%, 12/15/2019 92,982 93,571
............................................................
1206 GA, 7.00%, 3/15/2018 750,000 755,557
............................................................
1521 B, 5.80%, 7/15/2000 244,547 244,596
............................................................
Federal Housing Authority
Project,
7.43%, 2/01/2023 137,143 137,198
............................................................
Federal National Mortgage
Association:
1991-6 K, 7.50%, 4/25/2014 992,784 995,911
............................................................
1992-43 B, 7.50%, 11/25/2018 264,934 265,459
............................................................
1995-3 Z, 8.25%, 7/25/2024 421,122 424,238
............................................. ----------
2,918,067
- ---------------------------------------------------------
GOVERNMENT AGENCY NOTES -- 1.8%
............................................................
Federal Home Loan Bank, CLB
9/16/1997,
5.33%, 3/16/1999 # 400,000 397,076
- ---------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.1%
............................................................
Government National Mortgage
Association,
103695, 11.50%, 9/15/1998 9,321 9,498
- ---------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.3%
............................................................
Federal National Mortgage
Association,
1993-97 L (IO), 7.50%,
5/25/2023 632,105 59,786
- ---------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $3,785,291) 3,827,375
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-AGENCY MORTGAGE- Principal
BACKED SECURITIES -- 16.2% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 8.0%
............................................................
BHN II Mortgage Trust (Acquired
4/30/1997, Cost $491,514),
1997-1 A1, 7.1375%, 3/25/2011
# r $ 491,514 $ 491,904
............................................................
World Omni Wholesale Master
Trust, 1996-2 B,
5.9575%, 10/25/2001 # 1,250,000 1,250,000
............................................. ----------
1,741,904
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.2%
............................................................
Citicorp Mortgage Securities,
Inc.:
1990-D A1, 9.50%, 10/25/2005 175,914 183,012
............................................................
1991-7 M, 8.75%, 5/25/2021 27,241 27,485
............................................................
GE Capital Mortgage Services,
Inc., 1997-5 A7, 7.50%,
6/25/2027 417,236 415,802
............................................................
Prudential Home Mortgage
Securities, Inc., 1993-1 A1,
7.50%, 2/25/2023 193,344 194,448
............................................................
Residential Asset Securitization
Trust,
1996-A10 A1,
7.50%, 11/25/2011 319,842 321,447
............................................................
Structured Mortgage Asset
Residential Trust, 1992-11B
BH,
7.80%, 8/25/2021 145,915 147,375
............................................................
Walsh Acceptance (Acquired
3/06/1997, Cost $475,681)
1997-2 A, 6.75%, 3/01/2027# r 471,994 475,392
............................................. ----------
1,764,961
- ---------------------------------------------------------
Total non-agency mortgage-backed
securities
(cost $3,498,370) 3,506,865
- ---------------------------------------------------------
<CAPTION>
PREFERRED STOCKS -- 1.1% Shares
- ---------------------------------------------------------
<S> <C> <C>
Kenwood Properties, Inc.,
(Acquired 4/18/1997, Cost
$248,017) r 250 245,658
- ---------------------------------------------------------
Total preferred stocks
(cost $248,017) 245,658
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements
29
<PAGE> 40
Schedule of Investments -- June 30, 1997
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
U.S. TREASURY Principal
OBLIGATIONS -- 3.2% Amount Value
- ---------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes:
5.625%, 1/31/1998 $ 600,000 $ 600,001
5.875%, 8/15/1998 100,000 100,000
............................................. ----------
Total U.S. Treasury obligations 700,001
(cost $697,556)
- ---------------------------------------------------------
SHORT-TERM INVESTMENTS -- 15.5%
- ---------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 4.6%
............................................................
Structured Product Asset Return
Certificate Trust,
5.8375%, 7/28/1997 1,000,000 1,000,000
- ---------------------------------------------------------
DISCOUNT NOTES -- 10.3%
............................................................
Conagra Inc.,
5.75%, 7/16/1997 250,000 249,401
............................................................
HD Real Estate 4(2),
5.55%, 7/07/1997 1,000,000 999,075
............................................................
Lockheed Martin Corporation
4(2),
5.82%, 7/01/1997 1,000,000 1,000,000
............................................. ----------
2,248,476
- ---------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.6%
............................................................
Pitney Bowes, Inc., 5.2551% 121,149 121,149
- ---------------------------------------------------------
Total short-term investments
(cost $3,369,625) 3,369,625
- ---------------------------------------------------------
Total investments -- 93.5%
(cost $20,255,406) 20,314,793
............................................................
Other assets in excess of
liabilities -- 6.5% 1,401,975
............................................. ----------
$21,716,768
Total net assets -- 100.0%
- ---------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1997.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1997.
IO -- Interest Only.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
4(2) -- Restricted securities requiring resale to institutional investors.
See Notes to Financial Statements
30
<PAGE> 41
Financial Statements -- June 30, 1997
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
EQUITY
INCOME MID-CAP SMALL
FUND FUND CAP FUND
---------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value*................................ $192,384,784 $1,977,449 $27,169,291
Foreign currency**.................................... -- -- --
Cash.................................................. 2,907,362 -- --
Dividends and interest receivable..................... 459,357 2,609 40,251
Receivable from Advisor............................... -- -- --
Receivable for investments sold....................... 108,657 -- 217,180
Receivable for Fund shares sold....................... 135,260 -- 132,241
Prepaid expenses...................................... 14,538 26,351 7,765
------------ ---------- -----------
Total assets..................................... 196,009,958 2,006,409 27,566,728
------------ ---------- -----------
LIABILITIES:
Payable to Advisor.................................... 120,244 4,168 5,727
Payable for investments purchased..................... 206,390 -- --
Payable for forward currency exchange contracts....... -- -- --
Payable for Fund shares repurchased................... 9,687,256 -- 3,098
Dividends payable..................................... 31 -- --
Accrued expenses and other liabilities................ 122,225 15,044 27,702
------------ ---------- -----------
Total liabilities................................ 10,136,146 19,212 36,527
------------ ---------- -----------
Net assets....................................... $185,873,812 $1,987,197 $27,530,201
============ ========== ===========
NET ASSETS CONSIST OF:
Paid in capital....................................... $125,042,417 $1,785,070 $21,218,539
Undistributed (distributions in excess of) net
investment income.................................. 88,433 1,699 18,067
Undistributed net realized gain (loss) on securities
and foreign currency transactions.................. 21,804,159 6,232 1,446,160
Net unrealized appreciation of securities and
foreign currency................................... 38,938,803 194,196 4,847,435
------------ ---------- -----------
Net assets....................................... $185,873,812 $1,987,197 $27,530,201
============ ========== ===========
CALCULATION OF NET ASSET VALUE PER SHARE:
Shares outstanding (unlimited shares of
no par value authorized)........................... 8,749,053 170,600 1,155,117
Net asset value per share (offering and redemption
price)............................................. $ 21.25 $ 11.65 $ 23.83
============ ========== ===========
*Cost of Investments................................... $153,445,981 $1,783,253 $22,321,856
============ ========== ===========
**Cost of Foreign Currency.............................. $ -- $ -- $ --
============ ========== ===========
</TABLE>
See Notes to Financial Statements
31
<PAGE> 42
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED TOTAL LOW SHORT-TERM
INTERNATIONAL GLOBAL EQUITY INCOME RETURN BOND DURATION INVESTMENT
FUND FUND FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$889,786,979 $ 3,475,833 $89,984,176 $14,118,011 $162,500,350 $20,314,793
2,473 -- -- -- -- --
6,947,320 119,647 -- 105,799 76,411 77,266
6,160,160 30,948 679,609 155,145 1,555,860 185,929
-- -- -- 38,540 -- 15,943
-- 6,180 3,746,241 123 8,081,585 1,221,587
2,292,118 150,000 650 -- 114,400 24,750
25,144 26,351 10,313 7,942 10,825 9,381
------------ ------------- ----------- ----------- ------------ -----------
905,214,194 3,808,959 94,420,989 14,425,560 172,339,431 21,849,649
------------ ------------- ----------- ----------- ------------ -----------
346,479 9,571 55,678 -- 51,391 --
15,022,022 55,044 4,031,897 -- -- --
28,811 26 -- -- -- --
330,918 -- -- -- 42,745 5
472 -- -- 92,956 932,482 106,235
957,047 14,722 174,900 25,491 98,782 26,641
------------ ------------- ----------- ----------- ------------ -----------
16,685,749 79,363 4,262,475 118,447 1,125,400 132,881
------------ ------------- ----------- ----------- ------------ -----------
$888,528,445 $ 3,729,596 $90,158,514 $14,307,113 $171,214,031 $21,716,768
============ ============ =========== =========== ============ ===========
$768,594,656 $ 3,407,376 $79,125,332 $13,881,097 $168,510,943 $21,799,695
(1,195,950) (453) 50,696 105,637 446,351 (17,486)
(1,438,171) 22,434 4,105,653 (75,649) 722,599 (124,828)
122,567,910 300,239 6,876,833 396,028 1,534,138 59,387
------------ ------------- ----------- ----------- ------------ -----------
$888,528,445 $ 3,729,596 $90,158,514 $14,307,113 $171,214,031 $21,716,768
============ ============ =========== =========== ============ ===========
36,754,324 336,191 4,651,745 1,097,438 16,738,345 2,140,042
$ 24.17 $ 11.09 $ 19.38 $ 13.04 $ 10.23 $ 10.15
============ ============ =========== =========== ============ ===========
$767,297,845 $ 3,176,072 $83,107,343 $13,721,983 $160,966,212 $20,255,406
============ ============ =========== =========== ============ ===========
$ 2,482 $ -- $ -- $ -- $ -- $ --
============ ============ =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements
32
<PAGE> 43
Financial Statements -- Year Ended June 30, 1997 (except as noted)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
EQUITY SMALL
INCOME MID-CAP CAP
FUND FUND** FUND
-------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income*
Dividends.......................................... $ 6,150,497 $ 17,578 $ 157,723
Interest........................................... 202,417 1,778 43,373
----------- -------- ----------
Total income.................................. 6,352,914 19,356 201,096
----------- -------- ----------
Expenses
Advisory fee....................................... 1,411,861 5,049 137,271
Legal and auditing fees............................ 40,149 550 8,987
Custodian fees and expenses........................ 40,563 6,107 7,829
Accounting and transfer agent fees and expenses.... 51,151 18,441 33,700
Administration fee................................. 59,557 265 6,485
Trustees' fees and expenses........................ 13,108 6,000 13,437
Reports to shareholders............................ 15,456 -- 4,106
Registration fees.................................. 20,509 17,202 22,977
Other expenses..................................... 2,977 1,999 2,594
----------- -------- ----------
Total expenses................................ 1,655,331 55,613 237,386
Less, expense reimbursement........................ -- (48,881) (54,357)
----------- -------- ----------
Net expenses.................................. 1,655,331 6,732 183,029
----------- -------- ----------
Net investment income................................. 4,697,583 12,624 18,067
----------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on securities and foreign
currency transactions............................ 34,935,223 6,232 1,503,738
Net change in unrealized appreciation
(depreciation) of securities and foreign
currency......................................... 4,211,108 194,196 3,726,110
----------- -------- ----------
Net gain (loss) on investments........................ 39,146,331 200,428 5,229,848
----------- -------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $43,843,914 $213,052 $5,247,915
=========== ======== ==========
*Net of Foreign Taxes Withheld.......................... $ 37,188 $ 403 $ --
=========== ======== ==========
**Period January 2, 1997 (commencement of operations) through June 30, 1997.
</TABLE>
See Notes to Financial Statements
33
<PAGE> 44
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BALANCED TOTAL LOW SHORT-TERM
INTERNATIONAL EQUITY INCOME RETURN BOND DURATION INVESTMENT
FUND FUND** FUND FUND FUND FUND
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 17,714,989 $ 54,441 $ 1,117,942 $ 39,597 $ 118,793 $ 3,052
2,300,188 5,130 3,197,223 2,106,796 11,423,589 1,142,906
------------ -------- ----------- ----------- ----------- -----------
20,015,177 59,571 4,315,165 2,146,393 11,542,382 1,145,958
------------ -------- ----------- ----------- ----------- -----------
4,086,051 9,920 562,261 153,519 767,825 72,568
130,073 750 18,432 10,926 43,631 7,369
917,624 950 26,451 9,350 45,235 9,094
230,515 21,163 47,236 37,805 104,491 39,988
194,177 517 25,312 18,447 58,935 6,363
13,884 6,000 13,884 13,870 13,892 13,870
206,902 -- 12,084 985 26,728 1,240
69,977 17,268 26,942 18,771 37,911 23,077
5,554 2,008 1,726 882 4,364 2,024
------------ -------- ----------- ----------- ----------- -----------
5,854,757 58,576 734,328 264,555 1,103,012 175,593
(391,595) (45,349) -- (83,124) (134,885) (88,511)
------------ -------- ----------- ----------- ----------- -----------
5,463,162 13,227 734,328 181,431 968,127 87,082
------------ -------- ----------- ----------- ----------- -----------
14,552,015 46,344 3,580,837 1,964,962 10,574,255 1,058,876
------------ -------- ----------- ----------- ----------- -----------
953,040 21,267 4,518,798 (42,063) 1,057,714 (46,704)
105,727,351 300,239 3,306,702 978,811 764,193 (5,502)
------------ -------- ----------- ----------- ----------- -----------
106,680,391 321,506 7,825,500 936,748 1,821,907 (52,206)
------------ -------- ----------- ----------- ----------- -----------
$121,232,406 $367,850 $11,406,337 $2,901,710 $12,396,162 $1,006,670
============ ======== =========== ============ =========== ============
$ 2,209,857 $ 6,306 $ 11,972 $ -- $ -- $ --
============ ======== =========== ============ =========== ============
</TABLE>
See Notes to Financial Statements
34
<PAGE> 45
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY INCOME FUND
---------------------------------
Year Ended Year Ended
June 30, 1997 June 30, 1996
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................. $ 4,697,583 $ 4,217,031
Net realized gain on securities and foreign currency
transactions......................................... 34,935,223 6,697,177
Net change in unrealized appreciation (depreciation)
of securities and foreign currency................... 4,211,108 17,517,007
------------- -------------
Net increase in net assets resulting from
operations...................................... 43,843,914 28,431,215
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income.................................. (4,609,150) (5,190,178)
Net realized gain on securities transactions........... (18,088,501) (9,231,395)
------------- -------------
Total dividends and distributions................. (22,697,651) (14,421,573)
------------- -------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold.......................... 42,695,225 71,541,636
Shares issued in connection with payment of dividends
and distributions.................................... 21,727,110 13,515,453
Cost of shares redeemed................................ (82,232,891) (43,625,015)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions.............................. (17,810,556) 41,432,074
------------- -------------
Total increase (decrease) in net assets..................... 3,335,707 55,441,716
NET ASSETS:
Beginning of period.................................... 182,538,105 127,096,389
------------- -------------
End of period*......................................... $ 185,873,812 $ 182,538,105
============ ============
*Including undistributed (distributions in excess of) net
investment income of: $ 88,433 $ --
============ ============
CHANGES IN SHARES OUTSTANDING:
Shares sold............................................ 2,183,683 3,846,201
Shares issued in connection with payment of dividends
and distributions.................................... 1,142,942 743,944
Shares redeemed........................................ (4,228,482) (2,311,587)
------------- -------------
Net increase (decrease)........................... (901,857) 2,278,558
============ ============
** Commencement of operations
</TABLE>
See Notes to Financial Statements
35
<PAGE> 46
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
SMALL CAP FUND INTERNATIONAL FUND -------------------
------------------------------- ------------------------------- January 2, 1997**
Year Ended Year Ended Year Ended Year Ended through June 30,
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996 1997
MID-CAP FUND
---------------------
January 2, 1997**
through June 30, 1997
--------------------- ------------------------------- ------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
$ 12,624 $ 18,067 $ 51,304 $ 14,552,015 $ 4,130,521 $ 46,344
6,232 1,503,738 3,242,921 953,040 1,311,404 21,267
194,196 3,726,110 (1,035,528) 105,727,351 14,489,301 300,239
--------------------- ------------- ------------- ------------- ------------- -------------------
213,052 5,247,915 2,258,697 121,232,406 19,931,226 367,850
--------------------- ------------- ------------- ------------- ------------- -------------------
(10,925) (56,310) -- (15,060,247) (3,924,997) (45,630)
-- (2,033,874) (3,229,051) (3,759,354) (911,877) --
--------------------- ------------- ------------- ------------- ------------- -------------------
(10,925) (2,090,184) (3,229,051) (18,819,601) (4,836,874) (45,630)
--------------------- ------------- ------------- ------------- ------------- -------------------
2,380,798 21,595,726 9,973,586 655,854,799 324,232,058 3,368,545
10,844 1,901,255 2,737,936 17,244,335 4,533,313 44,743
(606,572) (15,605,197) (15,737,773) (217,976,937) (64,341,082) (5,912)
--------------------- ------------- ------------- ------------- ------------- -------------------
1,785,070 7,891,784 (3,026,251) 455,122,197 264,424,289 3,407,376
--------------------- ------------- ------------- ------------- ------------- -------------------
1,987,197 11,049,515 (3,996,605) 557,535,002 279,518,641 3,729,596
-- 16,480,686 20,477,291 330,993,443 51,474,802 --
--------------------- ------------- ------------- ------------- ------------- -------------------
$ 1,987,197 $ 27,530,201 $ 16,480,686 $ 888,528,445 $ 330,993,443 $ 3,729,596
================ ============ ============ ============= ============ ===================
$ 1,699 $ 18,067 $ 56,471 $ (1,195,950) $ 503,115 $ (453)
================ ============ ============ ============= ============ ===================
226,865 998,558 444,190 29,673,741 16,283,849 332,759
942 97,400 137,516 739,904 227,114 4,002
(57,207) (713,459) (760,129) (9,851,367) (3,226,302) (571)
--------------------- ------------- ------------- ------------- ------------- -------------------
170,600 382,499 (178,423) 20,562,278 13,284,661 336,190
================ ============ ============ ============= ============ ===================
</TABLE>
See Notes to Financial Statements
36
<PAGE> 47
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED INCOME FUND
---------------------------------
Year Ended Year Ended
June 30, 1997 June 30, 1996
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income................................... $ 3,580,837 $ 2,647,524
Net realized gain (loss) on securities transactions..... 4,518,798 2,948,927
Net change in unrealized appreciation (depreciation) of
securities............................................ 3,306,702 587,322
------------- -------------
Net increase in net assets resulting from
operations....................................... 11,406,337 6,183,773
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income................................... (3,999,551) (2,554,681)
Net realized gain on securities transactions............ (2,410,169) (55,137)
Return of capital....................................... -- --
------------- -------------
Total dividends and distributions.................. (6,409,720) (2,609,818)
------------- -------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold........................... 39,290,919 43,038,215
Shares issued in connection with payment of dividends
and distributions..................................... 6,071,836 2,406,463
Cost of shares redeemed................................. (30,799,051) (10,483,447)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions............................... 14,563,704 34,961,231
------------- -------------
Total increase (decrease) in net assets...................... 19,560,321 38,535,186
NET ASSETS:
Beginning of period..................................... 70,598,193 32,063,007
------------- -------------
End of period*.......................................... $ 90,158,514 $ 70,598,193
============ ============
*Including undistributed (distributions in excess of) net
investment income of: $ 50,696 $ 80,910
============ ============
CHANGES IN SHARES OUTSTANDING:
Shares sold............................................. 2,119,226 2,395,366
Shares issued in connection with payment of dividends
and distributions..................................... 325,867 134,345
Shares redeemed......................................... (1,658,360) (580,252)
------------- -------------
Net increase (decrease)............................ 786,733 1,949,459
============ ============
</TABLE>
See Notes to Financial Statements
37
<PAGE> 48
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN BOND FUND LOW DURATION FUND SHORT-TERM INVESTMENT FUND
------------------------------ ------------------------------ ------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,964,962 $ 2,033,756 $ 10,574,255 $ 11,380,643 $ 1,058,876 $ 1,157,444
(42,063) 386,435 1,057,714 302,726 (46,704) 17,041
978,811 (1,233,325) 764,193 (603,922) (5,502) 72,725
------------- ------------- ------------- ------------- ------------- -------------
2,901,710 1,186,866 12,396,162 11,079,447 1,006,670 1,247,210
------------- ------------- ------------- ------------- ------------- -------------
(1,964,962) (2,033,756) (10,574,255) (11,385,745) (1,058,876) (1,150,687)
(241,973) (239,612) (176,195) (680,292) -- --
-- -- -- -- -- (6,473)
------------- ------------- ------------- ------------- ------------- -------------
(2,206,935) (2,273,368) (10,750,450) (12,066,037) (1,058,876) (1,157,160)
------------- ------------- ------------- ------------- ------------- -------------
14,661,662 31,603,393 191,220,600 187,622,316 39,041,151 14,567,153
1,802,150 1,813,318 10,052,581 10,272,786 570,013 634,339
(46,271,666) (4,198,498) (220,866,044) (131,067,667) (36,567,972) (16,377,951)
------------- ------------- ------------- ------------- ------------- -------------
(29,807,854) 29,218,213 (19,592,863) 66,827,435 3,043,192 (1,176,459)
------------- ------------- ------------- ------------- ------------- -------------
(29,113,079) 28,131,711 (17,947,151) 65,840,845 2,990,986 (1,086,409)
43,420,192 15,288,481 189,161,182 123,320,337 18,725,782 19,812,191
------------- ------------- ------------- ------------- ------------- -------------
$ 14,307,113 $ 43,420,192 $ 171,214,031 $ 189,161,182 $ 21,716,768 $ 18,725,782
============ =========== ============ ============= ============ ============
$ 105,637 $ 79,541 $ 446,351 $ 290,152 $ (17,486) $ --
============ =========== ============ ============= ============ ============
1,130,467 2,396,355 18,787,386 18,411,897 3,847,758 1,435,371
139,510 138,416 990,060 1,008,556 56,209 62,521
(3,568,847) (319,560) (21,739,355) (12,866,489) (3,605,096) (1,613,876)
------------- ------------- ------------- ------------- ------------- -------------
(2,298,870) 2,215,211 (1,961,909) 6,553,964 298,871 (115,984)
============ =========== ============ ============= ============ ============
</TABLE>
See Notes to Financial Statements
38
<PAGE> 49
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1.
ACCOUNTING POLICIES. Hotchkis and Wiley Funds (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Trust was organized as a Massachusetts business trust on
August 22, 1984 and consists of ten series of shares comprising the Balanced
Income Fund, the Small Cap Fund, the Equity Income Fund, the International Fund,
the Total Return Bond Fund, the Low Duration Fund, the Short-Term Investment
Fund, the Mid-Cap Fund, the Global Equity Fund and the Equity Fund for Insurance
Companies (collectively, the "Funds"), the assets of which are invested in
separate, independently managed portfolios. The accompanying financial
statements exclude financial information for the Equity Fund for Insurance
Companies; financial statements for that Fund are reported on separately.
Investment operations of the Funds began on August 13, 1985 (the Balanced Income
Fund), September 20, 1985 (the Small Cap Fund), June 24, 1987 (the Equity Income
Fund), October 1, 1990 (the International Fund), January 29, 1993 (the Equity
Fund for Insurance Companies), May 18, 1993 (the Low Duration Fund and the
Short-Term Investment Fund), December 6, 1994 (the Total Return Bond Fund), and
January 2, 1997 (the Mid-Cap Fund and the Global Equity Fund).
The Balanced Income Fund seeks to preserve capital while producing a high total
return. The Small Cap Fund seeks capital appreciation. The Equity Income Fund
seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The International Fund seeks to provide current income and
long-term growth of income, accompanied by growth of capital. The Total Return
Bond Fund seeks to maximize long-term total return. The Low Duration Fund seeks
to maximize total return, consistent with preservation of capital. The
Short-Term Investment Fund seeks to maximize total return, consistent with
preservation of capital. The Mid-Cap Fund seeks to provide current income and
long-term growth of income, accompanied by growth of capital. The Global Equity
Fund seeks to provide current income and long-term growth of income, accompanied
by growth of capital. The following is a summary of significant accounting
policies followed by the Funds in the preparation of the financial statements.
SECURITY VALUATION: Portfolio securities that are listed on a securities
exchange (whether domestic or foreign) or the NASDAQ National Market System
("System") are valued at the last sale price as of 4:00 p.m., Eastern time, or,
in the absence of recorded sales, at the average of readily available closing
bid and asked prices on such exchange or such System. Unlisted securities that
are not included in such System are valued at the average of the quoted bid and
asked price in the over-the-counter market. Fixed income securities are normally
valued on the basis of quotes obtained from brokers and dealers or pricing
services. Certain fixed income securities for which daily market quotations are
not readily available may be valued pursuant to guidelines established by the
Board of Trustees, with reference to fixed income securities whose prices are
more readily obtainable or an appropriate matrix
39
<PAGE> 50
- --------------------------------------------------------------------------------
utilizing similar factors. As a broader market does not exist, the proceeds
received upon the disposal of such securities may differ from quoted values
previously furnished by such market makers. Securities for which market
quotations are not otherwise available are valued at fair value as determined in
good faith by Hotchkis and Wiley (the "Advisor") under procedures established by
the 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 value), if their original maturity was 60 days or
less, or by amortizing the values as of the 61st day prior to maturity, if their
original term to maturity exceeded 60 days. Investments quoted in foreign
currency are valued daily in U.S. dollars on the basis of the foreign currency
exchange rate prevailing at the time of valuation.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements with banks
or broker-dealers that meet credit guidelines established by the Board of
Trustees. In connection with transactions in repurchase agreements, it is the
Funds' policy that the custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. If the seller defaults, and the value
of the collateral declines, realization of the collateral by the Funds may be
delayed or limited.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are maintained
in U.S. dollars. For the International Fund and the Global Equity Fund, foreign
currency transactions are translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the daily
rates of exchange, and (ii) purchases and sales of investment securities,
dividend and interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions. The International Fund
and the Global Equity Fund do not isolate and treat as ordinary income that
portion of the results of operations arising as a result of changes in the
exchange rate from the fluctuations arising from changes in the market prices of
securities held during the period. However, for federal income tax purposes, the
International Fund and the Global Equity Fund do isolate and treat as ordinary
income the effect of changes in foreign exchange rates arising from actual
foreign currency transactions and the effect of changes in foreign exchange
rates arising from trade date and settlement date differences.
FORWARD CURRENCY EXCHANGE CONTRACTS: The International Fund and the Global
Equity Fund utilize forward currency exchange contracts for the purpose of
hedging foreign currency risk on unsettled trades. Under these contracts, they
are obligated to exchange currencies at specific future dates. Risks arise from
the possible inability of counter-parties to meet the terms of their contracts
and from movements in currency values. At June 30, 1997, the International and
Global Equity Funds had open forward currency receivables of $15,022,023 and
$55,045, respectively. Net unrealized losses of $28,811 and $26 have been
recorded on these open forwards at June 30, 1997 for the International and
Global Equity Funds, respectively.
40
<PAGE> 51
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
FEDERAL INCOME TAXES: It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and each Fund
intends to distribute investment company net taxable income and net capital
gains to shareholders. Therefore, no federal income tax provision is required.
EXPENSE ALLOCATION: Common expenses incurred by the Funds are allocated among
the Funds based upon (i) relative average net assets, (ii) as incurred on a
specific identification basis, or (iii) evenly among the Funds, depending on the
nature of the expenditure.
RESTRICTED SECURITIES: The Balanced Income, Total Return, Low Duration and
Short-Term Investment Funds own investment securities which are unregistered and
thus restricted as to resale. These securities are valued by the Funds after
giving due consideration to pertinent factors including recent private sales,
market conditions and the issuer's financial performance. Where future
disposition of these securities requires registration under the Securities Act
of 1933 the Funds have the right to include these securities in such
registration, generally without cost to the Funds. The Funds have no right to
require registration of unregistered securities. The Balanced Income, Total
Return Bond, Low Duration, and Short-Term Investment Funds had restricted
securities with an aggregate market value of $2,394,056, $1,473,031,
$20,779,598, and $3,212,029, respectively, representing 2.7%, 10.3%, 12.1%, and
14.8% of the net assets of each Fund, respectively.
WHEN-ISSUED SECURITIES: The Funds may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Fund records purchases of when-issued securities and
reflects the values of such securities in determining net asset value in the
same manner as other portfolio securities. The Fund segregates and maintains at
all times cash, cash equivalents, or other high-quality liquid debt securities
in an amount at least equal to the amount of outstanding commitments for
when-issued securities.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
OTHER: Security and shareholder transactions are recorded on trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Dividend income and dividends and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recognized
on the accrual basis. Generally accepted accounting principles require that
permanent financial reporting and tax differences relating to shareholder
distributions be reclassified to paid in capital.
41
<PAGE> 52
- --------------------------------------------------------------------------------
NOTE 2.
INVESTMENT ADVISORY AGREEMENTS. Each Fund has an investment advisory agreement
with the Advisor. The Advisor receives a fee, computed daily and payable
monthly, at the annual rates presented below as applied to each Fund's daily net
assets. The Advisor has voluntarily agreed to pay all operating expenses in
excess of the annual rates presented below as applied to each Fund's daily net
assets. For the period ended June 30, 1997, the Advisor waived the following
fees:
<TABLE>
<CAPTION>
Equity Income Mid-Cap Small Cap International Global Equity Balanced
Fund Fund Fund Fund Fund Income Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL ADVISORY RATE.... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
ANNUAL CAP ON
EXPENSES.............. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
FEES WAIVED............. $0 $48,881 $54,357 $391,595 $45,349 $0
</TABLE>
<TABLE>
<CAPTION>
Total Return Low Duration Short-Term
Bond Fund Fund Investment Fund
---------------------------------------------------
<S> <C> <C> <C>
ANNUAL ADVISORY RATE............................ 0.55% 0.46% 0.40%
ANNUAL CAP ON EXPENSES.......................... 0.65% 0.58% 0.48%
FEES WAIVED..................................... $83,124 $134,885 $88,511
</TABLE>
NOTE 3.
SECURITIES TRANSACTIONS. Purchases and sales of investment securities, other
than short-term investments, for the period ended June 30, 1997 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------------------------- ---------------------------------
Fund U.S. Government Other U.S. Government Other
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND......... -- $ 80,039,960 -- $120,769,051
MID-CAP FUND............... -- 1,946,560 -- 271,957
SMALL CAP FUND............. -- 20,260,380 -- 15,651,230
INTERNATIONAL FUND......... -- 497,829,831 -- 91,711,214
GLOBAL EQUITY FUND......... -- 3,573,904 -- 420,265
BALANCED INCOME FUND....... $ 40,702,890 52,666,377 $ 33,436,179 50,004,667
TOTAL RETURN BOND FUND..... 21,751,376 21,930,159 30,732,567 41,286,660
LOW DURATION FUND.......... 105,053,819 189,029,399 110,764,396 208,543,912
SHORT-TERM INVESTMENT
FUND..................... 4,178,817 17,152,671 5,588,137 13,229,307
</TABLE>
42
<PAGE> 53
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
As of June 30, 1997, unrealized appreciation (depreciation) for federal income
tax purposes was as follows:
<TABLE>
<CAPTION>
Appreciated Depreciated
Fund Net Appreciation Securities Securities
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY INCOME FUND............................ $ 38,887,880 $ 41,872,813 $ (2,984,933)
MID-CAP FUND.................................. 194,196 221,325 (27,129)
SMALL CAP FUND................................ 4,818,533 5,496,083 (677,550)
INTERNATIONAL FUND............................ 113,730,659 132,900,329 (19,169,670)
GLOBAL EQUITY FUND............................ 215,436 299,666 (84,230)
BALANCED INCOME FUND.......................... 6,876,833 7,480,292 (603,459)
TOTAL RETURN BOND FUND........................ 396,028 445,027 (48,999)
LOW DURATION FUND............................. 1,531,976 1,752,750 (220,774)
SHORT-TERM INVESTMENT FUND.................... 59,387 72,553 (13,166)
</TABLE>
At June 30, 1997, the cost of investments for federal income tax purposes was
$153,496,904, $1,783,253, $22,350,758, $776,056,320, $3,260,397, $83,107,343,
$13,721,983, $160,968,374 and $20,255,406 for the Equity Income, Mid-Cap, Small
Cap, International, Global Equity, Balanced Income, Total Return Bond, Low
Duration and Short-Term Investment Funds, respectively.
At June 30, 1997, the International and Short-Term Investment Funds deferred, on
a tax basis, post-October losses of $1,438,171 and $2,739, respectively. Such
amounts may be used to offset future capital gains. Tax basis post-October
losses from foreign currency related transactions of $279,685 and $1,174 for the
International and Global Equity Funds, respectively, are not recognized for
federal income tax purposes until fiscal 1998.
At June 30, 1997, the Short-Term Investment Fund had accumulated net realized
capital loss carryovers of $19,570 expiring in 2003, $63,545 expiring in 2004
and $38,974 expiring in 2005 and the Total Return Bond Fund had accumulated net
realized capital loss carryovers of $82,785 expiring in 2005. To the extent the
Short-Term Investment and Total Return Bond Funds realize future net capital
gains, taxable distributions to its shareholders will be offset by any unused
capital loss carryover.
For the year ended June 30, 1997, the following percent of ordinary
distributions paid qualifies for the dividend received deduction available to
corporate stockholders: Equity Income Fund 77%, Mid-Cap Fund 87%, Small Cap Fund
10%, Global Equity Fund 6%, and Balanced Income Fund 25%.
During the fiscal year ended June 30, 1997, the International Fund generated
$15,624,491 of foreign source income and paid $2,330,423 of foreign taxes. The
Fund elects to pass foreign taxes through to the Fund's shareholders for their
1997 tax returns. Updated data will be sent with 1997 Form 1099s to enable
shareholders to have information to claim
43
<PAGE> 54
- --------------------------------------------------------------------------------
either a foreign tax credit or to take a foreign tax deduction on their 1997
income tax returns.
During the year ended June 30, 1997, the following Funds paid capital gain
dividends (taxable as long-term capital gains).
<TABLE>
<CAPTION>
Per Share
---------
<S> <C>
EQUITY INCOME FUND.................. $1.76
SMALL CAP FUND...................... $1.78
INTERNATIONAL FUND.................. $0.12
BALANCED INCOME FUND................ $0.61
TOTAL RETURN BOND FUND.............. $0.03
</TABLE>
44
<PAGE> 55
Financial Highlights
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 18.91 $17.24 $15.07 $15.50 $14.51
----------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income..................... 0.49 0.45(1) 0.49 0.46 0.44
Net realized and unrealized gain on
investments............................. 4.15 2.89 2.48 0.10 1.21
----------- ------ ------ ------ ------
Total from investment operations.......... 4.64 3.34 2.97 0.56 1.65
----------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income).... (0.48) (0.57) (0.44) (0.46) (0.43)
Distributions (from realized gains)....... (1.82) (1.10) (0.36) (0.53) (0.23)
----------- ------ ------ ------ ------
Total distributions....................... (2.30) (1.67) (0.80) (0.99) (0.66)
----------- ------ ------ ------ ------
Net Asset Value, End of Year................... $ 21.25 $18.91 $17.24 $15.07 $15.50
======== ====== ====== ====== ======
Total Return................................... 26.15% 20.04% 20.49% 3.40% 11.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)............. $185.9 $182.5 $127.1 $87.2 $86.7
Ratio of expenses to average net assets:
Before expense reimbursement.............. 0.88% 0.98% 1.02% 1.05% 1.02%
After expense reimbursement............... 0.88% 0.98% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement.............. 2.49% 2.56% 3.11% 2.85% 2.97%
After expense reimbursement............... 2.49% 2.56% 3.14% 2.90% 2.99%
Portfolio turnover rate........................ 44% 24% 50% 36% 25%
Average commission rate per share.............. $0.0472 N/A N/A N/A N/A
</TABLE>
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
See Notes to Financial Statements
45
<PAGE> 56
Financial Highlights
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
January 2, 1997*
through
June 30, 1997
----------------
<S> <C>
Net Asset Value, Beginning of Period............................................... $10.00
--------
Income from Investment Operations:
Net investment income......................................................... 0.07
Net realized and unrealized gain on investments............................... 1.64
--------
Total from investment operations.............................................. 1.71
--------
Less Distributions:
Dividends (from net investment income)........................................ (0.06)
Distributions (from realized gains)........................................... --
--------
Total distributions........................................................... (0.06)
--------
Net Asset Value, End of Period..................................................... $11.65
============
Total Return....................................................................... 17.15%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)............................................... $2.0
Ratio of expenses to average net assets:
Before expense reimbursement.................................................. 8.26%+
After expense reimbursement................................................... 1.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement.................................................. (5.39)%+
After expense reimbursement................................................... 1.87%+
Portfolio turnover rate............................................................ 23%
Average commission rate per share.................................................. $0.0330
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
46
<PAGE> 57
Financial Highlights
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $ 21.33 $21.53 $19.53 $19.88 $18.10
----------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income (loss)............... 0.03 0.05(1) (0.06) (0.01) 0.27
Net realized and unrealized gain on
investments.............................. 5.62 2.80 2.84 0.78 3.18
----------- ------ ------ ------ ------
Total from investment operations........... 5.65 2.85 2.78 0.77 3.45
----------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)..... (0.09) -- -- (0.20) (0.04)
Distributions (from realized gains)........ (3.06) (3.05) (0.78) (0.92) (1.63)
----------- ------ ------ ------ ------
Total distributions........................ (3.15) (3.05) (0.78) (1.12) (1.67)
----------- ------ ------ ------ ------
Net Asset Value, End of Year.................... $ 23.83 $21.33 $21.53 $19.53 $19.88
========== ====== ====== ====== ======
Total Return.................................... 29.74% 14.24% 14.79% 3.77% 19.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).............. $27.5 $16.5 $20.5 $13.1 $10.8
Ratio of expenses to average net assets:
Before expense reimbursement............... 1.30% 1.21% 1.49% 1.65% 1.40%
After expense reimbursement................ 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement............... (0.20)% 0.03% (0.82)% (0.71)% 1.03%
After expense reimbursement................ 0.10% 0.24% (0.34)% (0.06)% 1.42%
Portfolio turnover rate......................... 88% 119% 81% 44% 20%
Average commission rate per share............... $0.0460 N/A N/A N/A N/A
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
See Notes to Financial Statements
47
<PAGE> 58
Financial Highlights
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 20.44 $17.70 $16.79 $14.63 $13.97
------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income..................... 0.59(1) 0.56(1) 0.28 0.26 0.23
Net realized and unrealized gain on
investments............................. 3.78 2.51 1.52 2.19 0.74
------- ------ ------ ------ ------
Total from investment operations.......... 4.37 3.07 1.80 2.45 0.97
------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income).... (0.48) (0.14) (0.44) (0.14) --
Distributions (from realized gains)....... (0.16) (0.19) (0.45) (0.15) (0.31)
------- ------ ------ ------ ------
Total distributions....................... (0.64) (0.33) (0.89) (0.29) (0.31)
------- ------ ------ ------ ------
Net Asset Value, End of Year................... $ 24.17 $20.44 $17.70 $16.79 $14.63
======= ====== ====== ====== ======
Total Return................................... 21.59% 18.61% 11.08% 16.71% 7.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)............. $888.5 $331.0 $51.5 $26.0 $6.6
Ratio of expenses to average net assets:
Before expense reimbursement.............. 1.07% 1.11% 1.39% 1.61% 2.44%
After expense reimbursement............... 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement.............. 2.59% 2.67% 2.45% 2.01% 1.14%
After expense reimbursement............... 2.66% 2.78% 2.83% 2.62% 2.58%
Portfolio turnover rate........................ 18% 12% 24% 23% 24%
Average commission rate per share.............. $0.0147 N/A N/A N/A N/A
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
See Notes to Financial Statements
48
<PAGE> 59
Financial Highlights
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
January 2, 1997*
through
June 30, 1997
----------------
<S> <C>
Net Asset Value, Beginning of Period............................................... $10.00
----------------
Income from Investment Operations:
Net investment income......................................................... 0.14
Net realized and unrealized gain on investments............................... 1.09
----------------
Total from investment operations.............................................. 1.23
----------------
Less Distributions:
Dividends (from net investment income)........................................ (0.14)
Distributions (from realized gains)........................................... --
----------------
Total distributions........................................................... (0.14)
----------------
Net Asset Value, End of Period..................................................... $11.09
============
Total Return....................................................................... 12.32%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)............................................... $3.7
Ratio of expenses to average net assets:
Before expense reimbursement.................................................. 4.43%+
After expense reimbursement................................................... 1.00%+
Ratio of net investment income to average net assets:
Before expense reimbursement.................................................. 0.07%+
After expense reimbursement................................................... 3.50%+
Portfolio turnover rate............................................................ 18%
Average commission rate per share.................................................. $ 0.0144
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
49
<PAGE> 60
Financial Highlights
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $ 18.27 $16.74 $15.71 $16.69 $16.35
------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income...................... 0.90(1) 0.94 0.89 0.89 0.77
Net realized and unrealized gain (loss) on
investments.............................. 1.86 1.53 1.53 (0.27) 0.82
------- ------ ------ ------ ------
Total from investment operations........... 2.76 2.47 2.42 0.62 1.59
------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)..... (0.99) (0.92) (0.80) (0.94) (0.74)
Distributions (from realized gains)........ (0.66) (0.02) (0.57) (0.66) (0.51)
Return of capital.......................... -- -- (0.02) -- --
------- ------ ------ ------ ------
Total distributions........................ (1.65) (0.94) (1.39) (1.60) (1.25)
------- ------ ------ ------ ------
Net Asset Value, End of Year.................... $ 19.38 $18.27 $16.74 $15.71 $16.69
======= ====== ====== ====== ======
Total Return.................................... 15.75% 15.04% 16.40% 3.60% 10.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).............. $90.2 $70.6 $32.1 $36.0 $30.3
Ratio of expenses to average net assets:
Before expense reimbursement............... 0.98% 1.06% 1.19% 1.20% 1.15%
After expense reimbursement................ 0.98% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement............... 4.77% 5.20% 5.44% 5.04% 4.62%
After expense reimbursement................ 4.77% 5.26% 5.63% 5.24% 4.77%
Portfolio turnover rate......................... 117% 92% 51% 97% 155%
Average commission rate per share............... $0.0392 N/A N/A N/A N/A
</TABLE>
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
See Notes to Financial Statements
50
<PAGE> 61
Financial Highlights
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Year Ended June 30, December 6, 1994*
---------------------- through
1997 1996 June 30, 1995
---------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 12.78 $12.94 $12.00
----------- ------ --------
Income from Investment Operations:
Net investment income................................. 0.99 0.84(1) 0.46
Net realized and unrealized gain on investments....... 0.30 0.06 0.94
----------- ------ --------
Total from investment operations...................... 1.29 0.90 1.40
----------- ------ --------
Less Distributions:
Dividends (from net investment income)................ (0.92) (0.93) (0.46)
Distributions (from realized gains)................... (0.11) (0.13) --
----------- ------ --------
Total distributions................................... (1.03) (1.06) (0.46)
----------- ------ --------
Net Asset Value, End of Period............................. $ 13.04 $12.78 $12.94
======== ====== ==============
Total Return............................................... 10.48% 7.05% 11.88%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)....................... $14.3 $ 43.4 $15.3
Ratio of expenses to average net assets:
Before expense reimbursement.......................... 0.95% 0.98% 2.93%+
After expense reimbursement........................... 0.65% 0.68% 0.80%+
Ratio of net investment income to average net assets:
Before expense reimbursement.......................... 6.78% 6.86% 4.92%+
After expense reimbursement........................... 7.08% 7.16% 7.05%+
Portfolio turnover rate.................................... 173% 51% 68%
</TABLE>
* Commencement of operations.
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
51
<PAGE> 62
Financial Highlights
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Year Ended June 30, May 18, 1993*
----------------------------------------- through
1997 1996 1995 1994 June 30, 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.12 $10.15 $ 9.93 $10.00 $ 10.00
----------- ------ ------ ------ -------------
Income from Investment Operations:
Net investment income..................... 0.66 0.68 0.75 0.77 0.05
Net realized and unrealized gain on
investments............................. 0.10 0.06 0.23 0.11 0.00
----------- ------ ------ ------ -------------
Total from investment operations.......... 0.76 0.74 0.98 0.88 0.05
----------- ------ ------ ------ -------------
Less Distributions:
Dividends (from net investment income).... (0.64) (0.72) (0.75) (0.77) (0.05)
Distributions (from realized gains)....... (0.01) (0.05) (0.01) (0.18) (0.00)
----------- ------ ------ ------ -------------
Total distributions....................... (0.65) (0.77) (0.76) (0.95) (0.05)
----------- ------ ------ ------ -------------
Net Asset Value, End of Period................. $ 10.23 $10.12 $10.15 $ 9.93 $ 10.00
======== ====== ====== ====== ===========
Total Return................................... 7.79% 7.47% 10.23% 9.02% 4.36%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........... $171.2 $189.2 $123.3 $36.5 $7.6
Ratio of expenses to average net assets:
Before expense reimbursement.............. 0.66% 0.60% 0.75% 1.10% 4.94%+
After expense reimbursement............... 0.58% 0.58% 0.58% 0.58% 0.58%+
Ratio of net investment income to average net
assets:
Before expense reimbursement.............. 6.26% 7.07% 7.43% 6.82% 1.93%+
After expense reimbursement............... 6.34% 7.09% 7.61% 7.34% 6.28%+
Portfolio turnover rate........................ 202% 50% 71% 254% 34%
</TABLE>
* Commencement of operations.
+ Annualized.
See Notes to Financial Statements
52
<PAGE> 63
Financial Highlights
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Year Ended June 30, May 18, 1993*
----------------------------------------- through
1997 1996 1995 1994 June 30, 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.17 $10.12 $10.21 $10.00 $ 10.00
----------- ------ ------ ------ -------------
Income from Investment Operations:
Net investment income..................... 0.58 0.66 0.66 0.53 0.03
Net realized and unrealized
gain (loss) on investments.............. (0.01) 0.05 (0.09) 0.21 --
----------- ------ ------ ------ -------------
Total from investment operations.......... 0.57 0.71 0.57 0.74 0.03
----------- ------ ------ ------ -------------
Less Distributions:
Dividends (from net investment income).... (0.59) (0.66) (0.66) (0.53) (0.03)
Return of capital......................... -- (0.00) -- -- --
----------- ------ ------ ------ -------------
Total distributions....................... (0.59) (0.66) (0.66) (0.53) (0.03)
----------- ------ ------ ------ -------------
Net Asset Value, End of Period................. $ 10.15 $10.17 $10.12 $10.21 $ 10.00
======== ====== ====== ====== ===========
Total Return................................... 5.77% 7.23% 5.78% 7.47% 2.30%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........... $21.7 $18.7 $19.8 $10.5 $.003
Ratio of expenses to average net assets:
Before expense reimbursement.............. 0.96% 0.88% 1.26% 2.06% 57.02%+
After expense reimbursement............... 0.48% 0.48% 0.48% 0.48% 0.48%+
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement.............. 5.34% 6.15% 5.74% 4.16% (56.99)%+
After expense reimbursement............... 5.82% 6.55% 6.52% 5.74% 2.32%+
Portfolio turnover rate........................ 154% 60% 81% 135% 0%
</TABLE>
* Commencement of operations.
+ Annualized.
See Notes to Financial Statements
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Hotchkis and Wiley Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Equity Income Fund, the Mid-Cap
Fund, the Small Cap Fund, the International Fund, the Global Equity Fund, the
Balanced Income Fund, the Total Return Bond Fund, the Low Duration Fund and the
Short-Term Investment Fund (nine of the ten separately managed portfolios of
Hotchkis and Wiley Funds, the "Funds") at June 30, 1997, the results of each of
their operations, the changes in each of their net assets and their financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1997 by
correspondence with the custodian and the application of alternative procedures,
provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Milwaukee, WI
August 8, 1997
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MARKET INDICES
The following are definitions for indices used in the performance summary charts
as of June 30, 1997. These indices are unmanaged and include the reinvestment of
all dividends, but do not reflect the payment of transaction costs and advisory
fees associated with an investment in the Funds. The securities that comprise
these indices may differ substantially from the securities in the Funds'
portfolios. Each index named is not the only index which may be used to
characterize performance of a specific Fund and other indices may portray
different comparative performance.
CONSUMER PRICE INDEX (CPI) is a measure of the average change in prices over
time in a fixed market basket of goods and services (e.g., food, clothing,
shelter, fuel, transportation fares, medical and other day-to-day services).
While not an objective of the Balanced Income Fund, the Advisor's current goal
is a return at least 4% greater than the rate of inflation as measured by the
CPI.
LEHMAN BROTHERS AGGREGATE INDEX is a weighted index comprised of the
Government/Corporate Index, the Mortgage-Backed Securities Index, and the Asset-
Backed Securities Index. The index includes fixed-rate debt issues rated
investment grade or higher. All issues have at least one year to maturity and an
outstanding par value of at least $100 million for U.S. Government issues and
$50 million for all others.
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX (LB Govt/Corp) is a weighted index
comprised of publicly-traded intermediate and long-term government and corporate
debt with an average maturity of 11 years.
MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an index of Treasury securities with
maturities ranging from one to three years.
MERRILL LYNCH 6 MONTH TREASURY BILL INDEX is an index of Treasury securities
with maturities of six months.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(MSCI-EAFE) is an arithmetical average weighted by market value of the
performance of over 1,000 non-U.S. companies representing 18 stock markets in
Europe, Australia, New Zealand and the Far East.
MSCI WORLD INDEX is an arithmetical average weighted by market value of the
performance of over 1,400 companies listed on stock exchanges in the 22
countries that make up the MSCI Network Indices.
RUSSELL 2000 INDEX (Russell 2000) is a stock market index comprised of the 2,000
smallest U.S. domiciled publicly-traded common stocks that are included in the
Russell 3000 Index. These common stocks represent approximately 11% of the U.S.
equity market. The Russell 3000 Index is comprised of the 3,000 largest U.S.
domiciled publicly-traded common stocks by market capitalization representing
approximately 98% of the U.S. publicly-traded equity market.
RUSSELL MIDCAP INDEX measures the performance of the 800 smallest securities in
the Russell 1000 Index, which represent approximately 35% of the total market
capitalization. The Russell 1000 Index is comprised of the largest 1,000
companies in the Russell 3000.
STANDARD & POOR'S 500 INDEX (S&P 500) is a capital-weighted index, representing
the aggregate market value of the common equity of 500 stocks primarily traded
on the New York Stock Exchange.
55
