<PAGE> 1
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
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
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996
LOGO
LOGO
EQUITY INCOME FUND
-------------------------------------------------------------
SMALL CAP FUND
-------------------------------------------------------------
INTERNATIONAL 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
DEAR FELLOW SHAREHOLDERS:
We are pleased to present to you the semi-annual report of the Hotchkis and
Wiley Funds for the six months ended December 31, 1996. As part of this report,
the portfolio managers have reviewed their Fund's performance and outlook.
EQUITY INCOME FUND
The Equity Income Fund's total return for the six months ended December 31, 1996
was 10.1% compared to the S&P 500 Index return of 11.8%. Stocks followed what
appeared to be an endless liquidity-driven advance, as record levels of inflows
poured into mutual fund investments. Large capitalization, growth/momentum
issues were the primary beneficiaries of these cash flows, which
indiscriminately elevated the valuations of many issues to questionable levels
(e.g., Intel +131%, IBM +68%). We are unsure as to how long the stampede will
continue, but one thing is certain, intrinsic value (what a company is worth)
has little to do with either liquidity or momentum. Furthermore, investors'
emphasis on these characteristics has created some opportunities from a
valuation perspective. For example, the relative dividend yield of the electric
utility sector is currently at a sixteen-year high. Additionally, there are some
well positioned global companies that are selling at very reasonable multiples
of the criteria that ultimately does determine value -- earnings and dividend
growth.
It is important to recognize that a bullish herd cannot run on forever at high
speed. When the momentum of this strong market dissipates or even reverses,
investors should once again focus on fundamentals. We believe the Fund's
portfolio is well-situated to take advantage of this type of market change. We
are paying less for earnings (12.9x vs. 17.3x) and receiving more in dividends
(3.3% vs. 2.0%) than the companies in the S&P 500 Index. These key portfolio
characteristics help to control risk in a volatile market and should provide a
platform for outperformance when investors refocus on fundamental value. We
continue to manage the portfolio by strict adherence to our investment
disciplines, which emphasize these lower risk characteristics.
SMALL CAP FUND
During the past six months ended December 31, 1996, the Small Cap Fund returned
7.0% versus the Russell 2000 Index return of 5.6%. Over the last two years,
large cap stocks have significantly outperformed small cap stocks and the past
six months was no exception.
There are a number of factors that, at different times, have contributed to this
disparity. In general, however, the record cash inflows into the market has
prompted investors to seek liquidity, which is widely associated with large cap
names. Moreover, corporate restructuring, downsizing and mergers have hyped
earnings, resulting in earnings gains at rates in excess of the traditionally
faster growing small caps.
In this time period, the technology sector has largely dominated performance.
Our value disciplines keep the Fund out of high multiple stocks. Nevertheless,
the Fund has done better than the Russell 2000 Index. Going forward into 1997,
we see the large cap market as fully valued. Small caps represent fair value
with their modest P/E ratios and relatively attractive P/E to expected growth
ratios. Accordingly, we will continue to focus on reducing portfolio volatility,
increasing current income and seeking companies whose earning prospects are not
fully recognized in the marketplace.
<PAGE> 3
INTERNATIONAL FUND
The Hotchkis and Wiley International Fund completed another successful six-month
period with a return of 10.3%, well in excess of the EAFE and Lipper
International Indices of 1.6% and 3.3%, respectively. During this half-year
period, the Fund benefited from its modest weighting in the Japanese market
relative to the EAFE Index. Furthermore, the Fund was also well served by an
aggressive allocation to several of the best performing international stock
markets. Measured in US dollars, these winners include Finland (+31%), the UK
(+24%), Spain (+23%), Sweden (+20%), Canada (+18%) and Hong Kong (+18%). The
worst market in the EAFE Index was Japan, measured in US dollars, with a -16%
return.
Further evidence of low inflation and weak growth in the Group of Seven
Countries set the stage for bond markets to rally in Europe, Japan, Australia
and Canada. Fiscal constraints required to achieve monetary union have led to
bond yield convergence within Europe. Equity markets in these regions reacted
favorably to declining bond yields. Given its approximate 30% weighting in
financial sector stocks (vs. 24% for the EAFE Index), the Fund's outperformance
reflected this interest rate sensitivity. Prospects for economic recovery in
Japan dimmed in the final quarter of 1996, with fiscal spending constraints
mounting rapidly. Capital outflows, seeking higher real returns, added to the
yen's weakness. This currency weakness, both in Japan and in Europe, should make
the export-oriented companies in these regions considerably more competitive vs.
their US dollar-based competitors.
BALANCED INCOME FUND
The Balanced Income Fund achieved a total return of 6.8% for the six months
ended December 31, 1996. The allocation to equities was 39% of total Fund
assets, down from 47% at the beginning of 1996. This reduction represented a
strategic decision to lower the Fund's exposure to risk in what may be described
as a frothy, highly volatile stock market. We continue to reposition the equity
portfolio into those areas representing fundamental value. Although an
above-market weighting in financial issues has been maintained, we have taken
profits and reduced exposure in this area. Conversely, utilities which were up
only 3.4% for the year, continued to substantially lag the S&P 500 Index. We
have taken this opportunity to increase our utility position as our conviction
to this sector strengthens and valuations become more compelling. Similarly,
based on our assessment of fundamental values, we've added to the portfolio in
technology, telephone communications, durable goods and chemicals.
Fixed income investments in the Fund are broadly diversified across fixed income
sectors and limited to investment-grade securities. The fixed income portfolio
ended the year with an average maturity of 5.3 years and duration of 3.2 years
which was near those of the benchmark Lehman Govt/Corp Intermediate Index. The
average credit quality of the Fund's fixed income holdings remained AA+. 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 12/31/96 8/13/85-12/31/96 10/16/87 8/11/89
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity 39% 47% 27% 59%
Fixed Income 61% 53% 73% 41%
</TABLE>
Current income yield, derived from common stock dividends and fixed income
security interest is 4.7%. This compares to a dividend yield of 2.0% on the S&P
500 Index.
SHORT-TERM INVESTMENT FUND
LOW DURATION FUND
TOTAL RETURN BOND FUND
All three of the Hotchkis and Wiley fixed income funds continued their record of
excellent performance during the last six months of 1996.
<TABLE>
<S> <C>
- ----------------------------------------------
Short-Term Investment Fund.............. 2.7%
Merrill Lynch 6-Month Treasury Bill
Index................................. 2.8%
Low Duration Fund....................... 4.0%
Merrill Lynch 1-3 Year Treasury Index... 3.6%
Total Return Bond Fund.................. 6.1%
Lehman Bros. Aggregate Index............ 4.9%
- ----------------------------------------------
</TABLE>
Continued modest growth in the economy combined with low inflation has allowed
the Federal Reserve to
<PAGE> 4
stay on the sidelines and hold short term interest rates steady. This, combined
with the passing of the presidential elections without any significant changes
to fiscal policy and the apparent rededication of Congress to balancing the
federal budget, has helped stabilize the bond market. The result has been a low
volatility market with a bias towards lower rates that has rewarded patience.
The Funds have taken advantage of these circumstances by remaining focused on
five value added strategies: (1) limited duration shifts, (2) active sector
rotation, (3) management of yield curve exposure, (4) detailed individual
security analysis, and (5) aggressive buy/sell negotiation. Of these strategies,
sector rotation and individual security analysis added strongly to performance
during the period. Specifically, our overweighting of spread sensitive products
in both the mortgage and corporate sectors benefited greatly from the lower
volatility environment. Also, several specific securities in the portfolios
experienced uniquely positive events that led to outperformance.
Looking forward, we anticipate the completion of a benign interest rate cycle.
We are in the late stages of an economic expansion and would expect to see the
Federal Reserve raise rates modestly. The major effect of this action should be
the flattening of the yield curve and the slowing of the economy. This should
set the stage for a nice bond market rally.
Should you have any questions regarding this report or your investment in the
Hotchkis and Wiley Funds, we would be delighted to speak with you. Your
continued support of the Hotchkis and Wiley Funds is greatly appreciated.
Cordially,
/s/Nancy D. Celick
Nancy D. Celick
President
HOTCHKIS AND WILEY FUNDS
<PAGE> 5
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SCHEDULE OF INVESTMENTS:
EQUITY INCOME FUND..................................... 1
SMALL CAP FUND......................................... 4
INTERNATIONAL FUND..................................... 6
BALANCED INCOME FUND................................... 10
TOTAL RETURN BOND FUND................................. 15
LOW DURATION FUND...................................... 18
SHORT-TERM INVESTMENT FUND............................. 22
STATEMENT OF ASSETS AND LIABILITIES...................... 24
STATEMENT OF OPERATIONS.................................. 26
STATEMENT OF CHANGES IN NET ASSETS....................... 28
NOTES TO FINANCIAL STATEMENTS............................ 32
FINANCIAL HIGHLIGHTS..................................... 37
SHAREHOLDERS MEETING RESULTS............................. 44
</TABLE>
LOGO
LOGO
<PAGE> 6
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.5% Shares Value
<S> <C> <C>
- ------------------------------------------------------------
AEROSPACE -- 1.1%
............................................................
Northrop Grumman Corporation 27,000 $ 2,234,250
- ------------------------------------------------------------
AUTO-RELATED -- 2.7%
............................................................
Dana Corporation 101,000 3,295,125
............................................................
PACCAR, Incorporated 33,000 2,244,000
............................................ -----------
5,539,125
- ------------------------------------------------------------
AUTOS & TRUCKS -- 7.4%
............................................................
Chrysler Corporation 60,000 1,980,000
............................................................
Ford Motor Company 176,000 5,610,000
............................................................
General Motors Corporation 133,000 7,414,750
............................................ -----------
15,004,750
- ------------------------------------------------------------
BANKS -- 8.3%
............................................................
BankAmerica Corporation 31,000 3,092,250
............................................................
The Chase Manhattan Corporation 15,000 1,338,750
............................................................
Corestates Financial Corp. 40,000 2,075,000
............................................................
First Chicago NBD Corporation 79,000 4,246,250
............................................................
Fleet Financial Group, Inc. 35,000 1,745,625
............................................................
KeyCorp 54,000 2,727,000
............................................................
NationsBank Corporation 10,000 977,500
............................................................
Signet Banking Corporation 24,300 747,225
............................................ -----------
16,949,600
- ------------------------------------------------------------
BEVERAGES -- 0.6%
............................................................
Anheuser-Busch Companies, Inc. 32,000 1,280,000
- ------------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 2.7%
............................................................
Georgia-Pacific Corporation 25,000 1,600,000
............................................................
Weyerhaeuser Company 80,000 3,790,000
............................................ -----------
5,590,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS -- 96.5% Shares Value
<S> <C> <C>
- ------------------------------------------------------------
CHEMICALS -- 2.9%
............................................................
The Dow Chemical Company 22,000 $ 1,724,250
............................................................
Eastman Chemical Company 12,000 663,000
............................................................
Goodrich (B.F.) Company 41,000 1,660,500
............................................................
Millennium Chemicals, Inc. 15,214 270,049
............................................................
Olin Corporation 44,000 1,655,500
............................................ -----------
5,973,299
- ------------------------------------------------------------
DIVERSIFIED -- 3.6%
............................................................
Hanson PLC ADR 213,000 1,437,750
............................................................
Ogden Corporation 100,000 1,875,000
............................................................
Tenneco, Inc. 90,000 4,061,250
............................................ -----------
7,374,000
- ------------------------------------------------------------
ENGINEERING AND CONSTRUCTION -- 0.8%
............................................................
Harsco Corporation 25,000 1,712,500
- ------------------------------------------------------------
FINANCIAL SERVICES -- 3.9%
............................................................
Beneficial Corporation 30,000 1,901,250
............................................................
Household International, Inc. 44,000 4,059,000
............................................................
Transamerica Corporation 24,000 1,896,000
............................................ -----------
7,856,250
- ------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 1.5%
............................................................
Whirlpool Corporation 67,000 3,123,875
- ------------------------------------------------------------
INSURANCE -- 6.7%
............................................................
Allstate Corporation 21,000 1,215,375
............................................................
Aon Corporation 97,500 6,057,187
............................................................
Lincoln National Corporation 40,000 2,100,000
............................................................
St. Paul Companies, Inc. 28,000 1,641,500
............................................................
USLIFE Corporation 80,000 2,660,000
............................................ -----------
13,674,062
- ------------------------------------------------------------
NATURAL GAS -- 1.7%
............................................................
Eastern Enterprises 95,000 3,360,625
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
1
<PAGE> 7
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
MACHINERY -- 2.5%
............................................................
Deere & Company 45,000 $ 1,828,125
............................................................
New Holland N.V. 155,000 3,235,625
............................................ -----------
5,063,750
- ------------------------------------------------------------
METALS & MINING -- 3.0%
............................................................
Aluminum Company of America 50,000 3,187,500
............................................................
Reynolds Metals Company 53,000 2,987,875
............................................ -----------
6,175,375
- ------------------------------------------------------------
OIL -- DOMESTIC -- 3.8%
............................................................
Ashland, Inc. 34,300 1,504,912
............................................................
Occidental Petroleum Corporation 115,000 2,688,125
............................................................
Sun Company, Inc. 129,000 3,144,375
............................................................
Ultramar Diamond Shamrock
Corporation 12,000 379,500
............................................ -----------
7,716,912
- ------------------------------------------------------------
OIL -- INTERNATIONAL -- 1.8%
............................................................
Amoco Corporation 27,000 2,173,500
............................................................
TransCanada Pipelines Ltd. 88,000 1,540,000
............................................ -----------
3,713,500
- ------------------------------------------------------------
PAPER -- 1.7%
............................................................
International Paper Company 42,000 1,695,750
............................................................
Union Camp Corporation 35,000 1,671,250
............................................ -----------
3,367,000
- ------------------------------------------------------------
POLLUTION CONTROL -- 2.8%
............................................................
Browning-Ferris Industries, Inc. 220,000 5,775,000
- ------------------------------------------------------------
PROFESSIONAL SERVICES -- 1.5%
............................................................
PHH Corporation 73,000 3,139,000
- ------------------------------------------------------------
RAILROADS -- 2.1%
............................................................
Conrail, Inc. 11,300 1,125,762
............................................................
Norfolk Southern Corporation 36,000 3,150,000
............................................ -----------
4,275,762
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
RETAIL -- GENERAL -- 3.7%
............................................................
J.C. Penney Co., Incorporated 42,000 $ 2,047,500
............................................................
Kmart Corporation # 137,000 1,421,375
............................................................
May Department Stores Company 45,000 2,103,750
............................................................
Sears, Roebuck & Company 44,000 2,029,500
............................................ -----------
7,602,125
- ------------------------------------------------------------
SAVINGS & LOANS -- 3.5%
............................................................
Federal National Mortgage
Association 27,000 1,005,750
............................................................
Great Western Financial
Corporation 103,000 2,987,000
............................................................
H.F. Ahmanson & Company 95,000 3,087,500
............................................ -----------
7,080,250
- ------------------------------------------------------------
SHIPBUILDING -- 0.0%
............................................................
Newport News Shipbuilding, Inc. 300 4,500
- ------------------------------------------------------------
STEEL -- 6.4%
............................................................
Allegheny Teledyne, Inc. 300,000 6,900,000
............................................................
Lukens, Inc. 114,000 2,294,250
............................................................
USX-U.S. Steel Group, Inc. 122,000 3,827,750
............................................ -----------
13,022,000
- ------------------------------------------------------------
TOBACCO -- 7.3%
............................................................
American Brands, Inc. 157,000 7,791,125
............................................................
Philip Morris Companies, Inc. 45,000 5,068,125
............................................................
UST, Inc. 60,000 1,942,500
............................................ -----------
14,801,750
- ------------------------------------------------------------
TRUCKING -- 0.8%
............................................................
Ryder System, Inc. 56,636 1,592,888
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
2
<PAGE> 8
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 5.8%
............................................................
CMS Energy Corporation 95,000 $ 3,194,375
............................................................
DTE Energy Company 60,000 1,942,500
............................................................
Illinova Corporation 100,000 2,750,000
............................................................
Peco Energy Company 110,000 2,777,500
............................................................
Public Service Enterprises Group 41,000 1,117,250
............................................ -----------
11,781,625
- ------------------------------------------------------------
UTILITY -- TELEPHONE -- 5.9%
............................................................
Alltel Corporation 74,400 2,334,300
............................................................
AT&T Corporation 108,000 4,698,000
............................................................
Cincinnati Bell, Inc. 37,000 2,280,125
............................................................
NYNEX Corporation 54,000 2,598,750
............................................ -----------
11,911,175
- ------------------------------------------------------------
Total common stocks
(cost $161,073,910) 196,694,948
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE RATE Principal
DEMAND NOTES* -- 3.5% Amount
<S> <C> <C>
- ------------------------------------------------------------
General Mills, Inc., 5.495% $1,011,964 1,011,964
............................................................
Pitney Bowes, Inc., 5.5075% 1,155,111 1,155,111
............................................................
Sara Lee Corp., 5.4873% 2,420,041 2,420,041
............................................................
Southwestern Bell, 5.4873% 2,500,000 2,500,000
............................................ -----------
Total variable rate demand notes
7,087,116
(cost $7,087,116)
- ------------------------------------------------------------
Total investments -- 100.0%
(cost $168,161,026) 203,782,064
............................................................
Other assets in excess of
liabilities -- 0.0% 49,103
............................................ -----------
Total net assets -- 100.0% $203,831,167
- ------------------------------------------------------------
</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 December 31, 1996.
ADR -- American Depository Receipt.
# Non-income producing security.
See Notes to Financial Statements
3
<PAGE> 9
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 84.6% Shares Value
<S> <C> <C>
- ---------------------------------------------------------
APPAREL & TEXTILES -- 1.6%
...........................................................
Supreme International
Corporation # 20,000 $ 290,000
- -----------------------------------------------------------
BUILDING MATERIALS -- 4.1%
...........................................................
NCI Building Systems, Inc. # 21,000 724,500
- -----------------------------------------------------------
COMMUNICATIONS & MEDIA -- 5.5%
...........................................................
Century Communications
Corporation, Class A # 50,000 284,375
...........................................................
Teltrend, Inc. # 10,000 277,500
...........................................................
VTEL Corporation # 40,000 400,000
............................................ -----------
961,875
- -----------------------------------------------------------
COMPUTERS -- 1.0%
...........................................................
Key Tronic Corporation # 23,000 172,500
- -----------------------------------------------------------
COMPUTER-RELATED -- 2.6%
...........................................................
Applied Voice Technology, Inc. # 37,000 453,250
- -----------------------------------------------------------
COMPUTER SERVICES -- 1.1%
...........................................................
AMX Corporation # 32,000 188,000
- -----------------------------------------------------------
ELECTRONICS -- 4.7%
...........................................................
Channell Commercial Corporation # 30,000 371,250
...........................................................
FLIR Systems, Inc. # 28,000 385,000
...........................................................
Phoenix Gold
International, Inc. # 13,000 74,750
............................................ -----------
831,000
- -----------------------------------------------------------
FOODS -- 1.4%
...........................................................
Michael Foods, Inc. 20,000 255,000
- -----------------------------------------------------------
HEALTH CARE SERVICES & SUPPLIES -- 7.3%
...........................................................
Allegiance Corporation 15,000 414,375
...........................................................
Integrated Health Services, Inc. 20,000 487,500
...........................................................
Value Health, Inc. # 20,000 390,000
............................................ -----------
1,291,875
- -----------------------------------------------------------
HOMEBUILDERS -- 1.4%
...........................................................
Del Webb Corporation 15,000 245,625
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS -- 84.6% Shares Value
<S> <C> <C>
- -----------------------------------------------------------
HOSPITAL SUPPLIES & SERVICES -- 4.0%
...........................................................
Healthcare Services Group, Inc. # 70,000 $ 700,000
- -----------------------------------------------------------
INSURANCE -- 8.2%
...........................................................
FPIC Insurance Group, Inc. # 30,000 405,000
...........................................................
Omni Insurance Group, Inc. # 60,000 570,000
...........................................................
Philadelphia Consolidated Holding
Corporation # 20,000 465,000
............................................ -----------
1,440,000
- -----------------------------------------------------------
MACHINERY -- 3.3%
...........................................................
Special Devices, Inc. # 33,000 585,750
- -----------------------------------------------------------
METALS & MINING -- 1.7%
...........................................................
Northwest Pipe Company # 18,000 292,500
- -----------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES -- 1.3%
...........................................................
Open Plan Systems, Inc. # 26,000 227,500
- -----------------------------------------------------------
OIL -- DOMESTIC -- 7.0%
...........................................................
Abraxas Petroleum Corporation # 81,500 804,813
...........................................................
Tom Brown, Inc. # 20,000 417,500
............................................ -----------
1,222,313
- -----------------------------------------------------------
REAL ESTATE -- 10.3%
...........................................................
Brandywine Realty Trust 24,000 468,000
...........................................................
NHP, Inc. # 20,000 310,000
...........................................................
Redwood Trust, Inc. 27,500 1,024,375
............................................ -----------
1,802,375
- -----------------------------------------------------------
REPAIR SERVICES -- 1.9%
...........................................................
Greenwich Air Services, Inc.,
Class B 15,000 333,750
- -----------------------------------------------------------
SAVINGS & LOANS -- 9.3%
...........................................................
Coastal Bancorp, Inc. 25,000 571,875
...........................................................
First Republic Bancorp, Inc. # 35,000 586,250
...........................................................
Washington Federal, Inc. 18,450 488,925
............................................ -----------
1,647,050
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
4
<PAGE> 10
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- -----------------------------------------------------------
STEEL FABRICATOR -- 1.2%
...........................................................
Citation Corporation # 20,000 $ 205,000
- -----------------------------------------------------------
TOYS -- 1.9%
...........................................................
Toy Biz, Inc. # 17,000 331,500
- -----------------------------------------------------------
TRANSPORTATION -- AIR FREIGHT -- 1.5%
...........................................................
AirNet Systems, Inc. # 18,000 265,500
- -----------------------------------------------------------
TRANSPORTATION EQUIPMENT -- 2.3%
...........................................................
Gleason Corporation 12,000 397,500
- -----------------------------------------------------------
Total common stocks
(cost $12,879,602) 14,864,363
- -----------------------------------------------------------
VARIABLE RATE DEMAND NOTES* Principal
-- 15.4% Amount
- -----------------------------------------------------------
General Mills, Inc., 5.495% $415,000 415,000
...........................................................
Lilly (Eli) & Co., 5.4403% 500,000 500,000
...........................................................
Pitney Bowes, Inc., 5.5075% 455,630 455,630
...........................................................
Sara Lee Corp., 5.4873% 494,087 494,087
...........................................................
Southwestern Bell, 5.4873% 500,000 500,000
...........................................................
Warner-Lambert Co., 5.479% 340,965 340,965
............................................ -----------
Total variable rate demand notes
(cost $2,705,682) 2,705,682
- -----------------------------------------------------------
Total investments -- 100.0% (cost
$15,585,284) 17,570,045
...........................................................
Other assets in excess of
liabilities -- 0.0% 4,745
............................................ -----------
Total net assets -- 100.0% $17,574,790
- -----------------------------------------------------------
</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 December 31, 1996.
# Non-income producing security.
See Notes to Financial Statements
5
<PAGE> 11
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 94.3%
- ------------------------------------------------------------
AUSTRALIA 3.9% Shares Value
- ------------------------------------------------------------
BANKS -- 1.6%
............................................................
Australia and New Zealand
Banking Group, Ltd. 1,338,000 $ 8,427,306
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.0%
............................................................
Pioneer International, Ltd. 1,690,000 5,033,585
- ------------------------------------------------------------
INSURANCE -- 1.3%
............................................................
GIO Australia Holdings, Ltd. 1,791,583 4,581,970
............................................................
QBE Insurance Group, Ltd. 400,808 2,110,614
............................................ -----------
6,692,584
............................................ -----------
Total Australia 20,153,475
- ------------------------------------------------------------
AUSTRIA 1.0%
- ------------------------------------------------------------
STEEL -- 1.0%
............................................................
Boehler-Uddeholm AG 70,000 5,004,826
............................................ -----------
Total Austria 5,004,826
- ------------------------------------------------------------
CANADA 6.3%
- ------------------------------------------------------------
BANKS -- 2.4%
............................................................
Bank of Nova Scotia 152,038 5,085,851
............................................................
Canadian Imperial Bank of
Commerce 168,000 7,409,309
............................................ -----------
12,495,160
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 1.4%
............................................................
IMASCO, Ltd. 301,000 7,378,667
- ------------------------------------------------------------
METALS & MINERALS -- 1.0%
............................................................
Noranda, Inc. 248,000 5,527,580
- ------------------------------------------------------------
RAILROADS -- 1.5%
............................................................
Canadian National Railway 201,000 7,640,221
............................................ -----------
Total Canada 33,041,628
- ------------------------------------------------------------
FINLAND 1.5%
- ------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 1.5%
............................................................
UPM-Kymmene OY # 370,000 7,746,781
............................................ -----------
Total Finland 7,746,781
- ------------------------------------------------------------
FRANCE 5.8%
- ------------------------------------------------------------
BEVERAGES -- 1.8%
............................................................
Pernod-Ricard 164,000 9,053,736
- ------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS -- 1.5%
............................................................
LaFarge SA 127,208 7,617,205
- ------------------------------------------------------------
OIL & GAS -- 1.5%
............................................................
Elf Acquitaine 88,000 7,994,710
- ------------------------------------------------------------
STEEL -- 1.0%
............................................................
Unisor Sacilor 370,000 5,373,420
............................................ -----------
Total France 30,039,071
- ------------------------------------------------------------
GERMANY 4.0%
- ------------------------------------------------------------
BANKS -- 1.3%
............................................................
Commerzbank AG 260,000 6,596,548
- ------------------------------------------------------------
CHEMICALS -- 1.4%
............................................................
Bayer AG 185,000 7,496,712
- ------------------------------------------------------------
MANUFACTURING -- 1.3%
............................................................
Buderus AG 13,500 6,745,143
............................................ -----------
Total Germany 20,838,403
- ------------------------------------------------------------
HONG KONG 7.6%
- ------------------------------------------------------------
BANKS -- 1.5%
............................................................
HSBC Holdings, PLC 372,800 7,976,525
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 1.0%
............................................................
South China Morning Post
(Holdings), Ltd. 6,010,000 4,972,723
- ------------------------------------------------------------
RETAIL -- SPECIALTY -- 1.0%
............................................................
Dickson Concepts International,
Ltd. 1,140,000 4,274,080
............................................................
Harbour Ring International
Holdings 11,426,000 960,169
............................................ -----------
5,234,249
- ------------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 2.5%
............................................................
Hang Lung Development Co., Ltd. 1,955,000 4,296,705
............................................................
New World Development Co., Ltd. 1,305,000 8,815,291
............................................ -----------
13,111,996
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 12
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY -- TELECOMMUNICATIONS -- 1.6%
............................................................
Hong Kong Telecommunications
Ltd. 5,172,400 $ 8,325,327
............................................ -----------
39,620,820
Total Hong Kong
- ------------------------------------------------------------
IRELAND -- 1.5%
- ------------------------------------------------------------
PAPER -- 1.5%
............................................................
Jefferson Smurfit Group PLC 2,721,000 8,013,271
............................................ -----------
8,013,271
Total Ireland
- ------------------------------------------------------------
ITALY -- 1.0%
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.0%
............................................................
Danieli & Company 1,236,000 5,161,854
............................................ -----------
5,161,854
Total Italy
- ------------------------------------------------------------
JAPAN -- 12.8%
- ------------------------------------------------------------
AUTOS & TRUCKS -- 1.7%
............................................................
Bridgestone Corporation 165,000 3,127,423
............................................................
Suzuki Motor Corporation 647,000 5,908,676
............................................ -----------
9,036,099
- ------------------------------------------------------------
BUILDING MATERIAL & COMPONENTS -- 1.1%
............................................................
Sekisui Chemical Co., Ltd. 569,000 5,735,590
- ------------------------------------------------------------
CONSTRUCTION & HOUSING -- 1.0%
............................................................
Daiwa House Industry Co., Ltd. 418,000 5,365,900
- ------------------------------------------------------------
ELECTRONIC COMPONENTS -- 1.4%
............................................................
Nintendo Co., Ltd. 100,400 7,170,810
- ------------------------------------------------------------
ELECTRICAL MACHINERY -- 2.0%
............................................................
Nichicon Corporation 339,000 3,913,673
............................................................
Sony Corporation 99,400 6,499,922
............................................ -----------
10,413,595
- ------------------------------------------------------------
FINANCIAL SERVICES -- 1.7%
............................................................
Promise Company Ltd. 183,300 9,001,550
- ------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.2%
............................................................
Hokushin 152,400 1,032,019
- ------------------------------------------------------------
INSURANCE -- 0.9%
............................................................
Nippon Fire & Marine Insurance 1,060,000 4,794,520
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
IRON/STEEL -- 0.8%
............................................................
Yodogawa Steel Works 701,000 $ 4,257,818
- ------------------------------------------------------------
PHARMACEUTICALS -- 0.7%
............................................................
Terumo 259,000 3,503,317
- ------------------------------------------------------------
RESTAURANTS -- 0.7%
............................................................
MOS Food Services 190,000 3,764,969
- ------------------------------------------------------------
TRANSPORTATION EQUIPMENT -- 0.6%
............................................................
Koito Manufacturing Co., Ltd. 436,000 2,911,174
............................................ -----------
66,987,361
Total Japan
- ------------------------------------------------------------
SOUTH KOREA -- 1.3%
- ------------------------------------------------------------
BANKS -- 1.3%
............................................................
Cho Hung Bank Co. Ltd. GDR 874,600 6,559,500
............................................ -----------
6,559,500
Total South Korea
- ------------------------------------------------------------
MALAYSIA -- 2.7%
- ------------------------------------------------------------
BUILDING MATERIALS -- 0.6%
............................................................
Kedah Cement Holdings BHD 1,495,000 2,959,802
- ------------------------------------------------------------
FINANCIAL SERVICES -- 1.0%
............................................................
Arab Malaysia Finance Berhad 963,000 5,376,465
- ------------------------------------------------------------
TRUCKING & SHIPPING -- 1.1%
............................................................
Malaysian International
Shipping Corporation BHD 1,838,000 5,458,310
............................................ -----------
13,794,577
Total Malaysia
- ------------------------------------------------------------
NETHERLANDS -- 6.3%
- ------------------------------------------------------------
BANKING -- 1.2%
............................................................
ING Groep N.V. 179,998 6,472,585
- ------------------------------------------------------------
CHEMICALS -- 1.3%
............................................................
Akzo Nobel NV 50,500 6,890,061
- ------------------------------------------------------------
CONSTRUCTION & HOUSING -- 1.5%
............................................................
Hollandsche Beton Groep NV 38,150 7,893,614
- ------------------------------------------------------------
INSURANCE -- 1.2%
............................................................
Fortis AMEV NV 173,191 6,057,597
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 13
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.1%
............................................................
145,263 $ 5,534,267
KPN
............................................ -----------
32,848,124
Total Netherlands
- ------------------------------------------------------------
NEW ZEALAND -- 2.4%
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
............................................................
Fletcher Challenge Building 2,542,500 7,814,194
- ------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 0.9%
............................................................
Fletcher Challenge Paper 2,317,000 4,763,795
............................................ -----------
12,577,989
Total New Zealand
- ------------------------------------------------------------
NORWAY -- 3.3%
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.8%
............................................................
Kvaerner AS -- Class A 192,500 9,360,641
- ------------------------------------------------------------
PHARMACEUTICALS & HEALTH CARE -- 1.3%
............................................................
Nycomed ASA -- Class B 464,000 7,121,268
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 0.2%
............................................................
Hafslund ASA -- Class B 129,100 883,529
............................................ -----------
17,365,438
Total Norway
- ------------------------------------------------------------
SINGAPORE -- 1.9%
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIES -- 1.6%
............................................................
Jardine Matheson 1,294,200 8,541,720
- ------------------------------------------------------------
MACHINERY & ENGINEERING -- 0.3%
............................................................
Sembawang Corporation 291,000 1,539,440
............................................ -----------
10,081,160
Total Singapore
- ------------------------------------------------------------
SPAIN -- 4.2%
- ------------------------------------------------------------
BANKS -- 1.5%
............................................................
Banco Santander SA 122,500 7,826,060
- ------------------------------------------------------------
OIL -- INTERNATIONAL -- 1.4%
............................................................
Repsol SA 196,000 7,503,977
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.3%
............................................................
Telefonica De Espana 290,000 6,721,890
............................................ -----------
22,051,927
Total Spain
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
SWEDEN -- 1.2%
- ------------------------------------------------------------
DIVERSIFIED -- 1.2%
............................................................
Marieberg Tidnings AB -- Class
A 263,000 $ 6,432,460
............................................ -----------
6,432,460
Total Sweden
- ------------------------------------------------------------
SWITZERLAND -- 6.8%
- ------------------------------------------------------------
BUILDING MATERIALS -- 0.7%
............................................................
Sarna Kunststoff Holding AG
"registered" 3,750 3,532,935
- ------------------------------------------------------------
FOOD PRODUCERS -- 1.2%
............................................................
Nestle SA "registered" 6,125 6,555,061
- ------------------------------------------------------------
INSURANCE -- 1.4%
............................................................
Swiss Reinsurance Co.
"registered" 6,750 7,183,728
- ------------------------------------------------------------
MACHINERY & EQUIPMENT -- 2.7%
............................................................
Sig Schweizerische Industrie --
Gesellschaft Holding AG 2,675 6,753,632
............................................................
Sulzer Gebruder AG (P.C.) 13,750 7,332,121
............................................ -----------
14,085,753
- ------------------------------------------------------------
PHARMACEUTICALS & HEALTH CARE -- 0.8%
............................................................
Novartis AG 3,520 4,018,822
............................................ -----------
35,376,299
Total Switzerland
- ------------------------------------------------------------
UNITED KINGDOM -- 18.8%
- ------------------------------------------------------------
APPAREL & TEXTILES -- 1.5%
............................................................
Coats Viyella PLC 3,347,050 7,617,983
- ------------------------------------------------------------
BANKS -- 1.8%
............................................................
Abbey National PLC 395,309 5,175,166
............................................................
National Westminster Bank, PLC 367,500 4,311,128
............................................ -----------
9,486,294
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.5%
............................................................
Redland PLC 1,250,000 7,839,893
- ------------------------------------------------------------
BUSINESS SERVICES -- 0.8%
............................................................
Lex Service PLC 790,000 4,299,128
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 14
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 2.7%
............................................................
BTR PLC 1,950,000 $ 9,477,179
............................................................
Hanson, PLC 3,500,000 4,881,483
............................................ -----------
14,358,662
- ------------------------------------------------------------
FOOD PRODUCERS -- 1.3%
............................................................
Hillsdown Holdings, PLC 1,940,000 6,639,844
- ------------------------------------------------------------
HOUSING CONSTRUCTION -- 0.5%
............................................................
Barratt Developments PLC 562,500 2,430,581
- ------------------------------------------------------------
INSURANCE -- 1.5%
............................................................
Commercial Union, PLC 675,000 7,895,297
- ------------------------------------------------------------
RETAIL -- 1.7%
............................................................
Safeway PLC 1,250,000 8,642,065
- ------------------------------------------------------------
TOBACCO -- 1.9%
............................................................
BAT Industries, PLC 1,056,000 8,755,558
............................................................
Imperial Tobacco Group PLC # 175,000 1,129,030
............................................ -----------
9,884,588
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 1.4%
............................................................
Powergen ORD 770,000 $ 7,543,838
- ------------------------------------------------------------
UTILITY -- GAS -- 1.0%
............................................................
British Gas PLC 1,400,000 5,378,616
- ------------------------------------------------------------
UTILITY -- WATER -- 1.2%
............................................................
Hyder PLC 504,180 6,414,942
............................................ -----------
98,431,731
Total United Kingdom
- ------------------------------------------------------------
Total common stocks -- 94.3%
(cost $439,030,007) 492,126,695
............................................................
Other assets in excess of liabilities --5.7% 29,643,355
............................................ -----------
$521,770,050
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Non-income producing security.
P.C. -- Participation Certificates.
See Notes to Financial Statements
9
<PAGE> 15
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 39.0% Shares Value
<S> <C> <C>
- ------------------------------------------------------------
AEROSPACE -- 0.7%
............................................................
Northrop Grumman Corporation 2,200 $ 182,050
............................................................
Rockwell International
Corporation 5,100 310,463
............................................ -----------
492,513
- ------------------------------------------------------------
AUTO-RELATED -- 0.5%
............................................................
Dana Corporation 10,000 326,250
- ------------------------------------------------------------
AUTOS & TRUCKS -- 2.3%
............................................................
Ford Motor Company 30,100 959,438
............................................................
General Motors Corporation 12,200 680,150
............................................ -----------
1,639,588
- ------------------------------------------------------------
BANKS -- 2.2%
............................................................
BankAmerica Corporation 2,500 249,375
............................................................
The Chase Manhattan Corporation 3,480 310,590
............................................................
Comerica, Inc. 3,000 157,125
............................................................
First Chicago NBD Corporation 5,300 284,875
............................................................
First of America Bank
Corporation 3,200 192,400
............................................................
National City Corporation 5,500 246,813
............................................................
Signet Banking Corporation 2,500 76,875
............................................ -----------
1,518,053
- ------------------------------------------------------------
BEVERAGES -- 0.6%
............................................................
Anheuser-Busch Companies, Inc. 10,000 400,000
- ------------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 1.4%
............................................................
Georgia Pacific Corporation 5,000 360,000
............................................................
Weyerhaeuser Company 14,000 663,250
............................................ -----------
1,023,250
- ------------------------------------------------------------
CHEMICALS -- 1.4%
............................................................
The Dow Chemical Company 4,800 376,200
............................................................
Dupont (E.I.) De Nemours &
Company 4,800 453,000
............................................................
Eastman Chemical Company 2,000 110,500
............................................................
Millennium Chemicals, Inc. 2,142 38,021
............................................ -----------
977,721
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS -- 39.0% Shares Value
<S> <C> <C>
- ------------------------------------------------------------
DIVERSIFIED -- 1.2%
............................................................
Hanson PLC, ADR 30,000 $ 202,500
............................................................
Tenneco, Inc. 14,400 649,800
............................................ -----------
852,300
- ------------------------------------------------------------
FINANCIAL SERVICES -- 1.0%
............................................................
Beneficial Corporation 3,000 190,125
............................................................
Household International, Inc. 3,000 276,750
............................................................
Transamerica Corporation 3,000 237,000
............................................ -----------
703,875
- ------------------------------------------------------------
HEALTHCARE -- DRUGS -- 1.2%
............................................................
American Home Products
Corporation 5,000 293,125
............................................................
Bristol-Meyers Squibb Company 2,800 304,500
............................................................
Merck & Company, Inc. 3,600 285,300
............................................ -----------
882,925
- ------------------------------------------------------------
HEALTHCARE -- MEDICAL PRODUCTS -- 0.4%
............................................................
Baxter International, Inc. 6,200 254,200
- ------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 0.7%
............................................................
Whirlpool Corporation 10,000 466,250
- ------------------------------------------------------------
INSURANCE -- 1.2%
............................................................
Aon Corporation 6,500 403,812
............................................................
St. Paul Companies, Inc. 3,300 193,463
............................................................
USLIFE Corporation 7,700 256,025
............................................ -----------
853,300
- ------------------------------------------------------------
MACHINERY -- 1.1%
............................................................
Deere & Company 7,600 308,750
............................................................
New Holland N.V. 23,000 480,125
............................................ -----------
788,875
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 16
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
METALS & MINING -- 2.0%
............................................................
Aluminum Company of America 10,900 $ 694,875
............................................................
Phelps Dodge Corporation 6,000 405,000
............................................................
Reynolds Metals Company 5,000 281,875
............................................ -----------
1,381,750
- ------------------------------------------------------------
OIL-DOMESTIC -- 1.9%
............................................................
Atlantic Richfield Company 5,500 728,750
............................................................
Ultramar Diamond Shamrock
Corporation 2,500 79,063
............................................................
USX-Marathon Group, Inc. 22,500 537,188
............................................ -----------
1,345,001
- ------------------------------------------------------------
OIL-INTERNATIONAL -- 2.3%
............................................................
Chevron Corporation 6,000 390,000
............................................................
Exxon Corporation 4,000 392,000
............................................................
Mobil Corporation 2,000 244,500
............................................................
Royal Dutch Petroleum Company --
NYS 2,000 341,500
............................................................
TransCanada Pipelines Ltd. 14,000 245,000
............................................ -----------
1,613,000
- ------------------------------------------------------------
PAPER -- 1.2%
............................................................
International Paper Company 14,525 586,447
............................................................
Union Camp Corporation 6,000 286,500
............................................ -----------
872,947
- ------------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 0.3%
............................................................
Eastman Kodak Company 2,200 176,550
- ------------------------------------------------------------
POLLUTION CONTROL -- 0.7%
............................................................
Browning-Ferris Industries, Inc. 19,700 517,125
- ------------------------------------------------------------
RAILROADS -- 0.8%
............................................................
Conrail, Inc. 2,200 219,175
............................................................
Norfolk Southern Corporation 3,800 332,500
............................................ -----------
551,675
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
RETAIL-GENERAL -- 2.2%
............................................................
J.C. Penney Co., Inc. 13,000 $ 633,750
............................................................
May Department Stores Company 12,000 561,000
............................................................
Sears, Roebuck & Company 8,000 369,000
............................................ -----------
1,563,750
- ------------------------------------------------------------
SAVINGS & LOANS -- 1.5%
............................................................
Great Western Financial
Corporation 20,000 580,000
............................................................
H.F. Ahmanson & Company 14,000 455,000
............................................ -----------
1,035,000
- ------------------------------------------------------------
SHIPBUILDING -- 0.0%
............................................................
Newport News Shipbuilding, Inc. 1,180 17,700
- ------------------------------------------------------------
STEEL -- 0.4%
............................................................
USX-U.S. Steel Group, Inc. 10,000 313,750
- ------------------------------------------------------------
TOBACCO -- 2.7%
............................................................
American Brands, Inc. 16,000 794,000
............................................................
Philip Morris Companies, Inc. 9,700 1,092,463
............................................ -----------
1,886,463
- ------------------------------------------------------------
TRUCKING -- 0.6%
............................................................
Ryder System, Inc. 15,000 421,875
- ------------------------------------------------------------
UTILITY-ELECTRIC -- 3.2%
............................................................
Central & South West Corporation 4,900 125,562
............................................................
CMS Energy Corporation 20,000 672,500
............................................................
DTE Energy Company 7,500 242,812
............................................................
Edison International 19,300 383,587
............................................................
Illinova Corporation 5,900 162,250
............................................................
New York State Electric & Gas
Corporation 9,000 194,625
............................................................
Peco Energy Company 12,000 303,000
............................................................
Public Service Enterprises
Group, Inc. 7,000 190,750
............................................ -----------
2,275,086
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 17
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY-GAS PIPELINE -- 0.7%
............................................................
Nicor, Inc. 6,000 $ 214,500
............................................................
Peoples Energy Corporation 7,500 254,063
............................................ -----------
468,563
- ------------------------------------------------------------
UTILITY-TELEPHONE -- 2.6%
............................................................
Alltel Corporation 10,500 329,437
............................................................
AT&T Corporation 17,500 761,250
............................................................
NYNEX Corporation 5,000 240,625
............................................................
Pacific Telesis Group 5,000 183,750
............................................................
US West, Inc. 10,000 322,500
............................................ -----------
1,837,562
- ------------------------------------------------------------
Total common stocks (cost
$23,281,132) 27,456,897
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
- -- 28.8% Amount
<S> <C> <C>
- ------------------------------------------------------------
AUTOS & TRUCKS -- 1.4%
............................................................
Ford Motor Company (Global),
7.00%, 9/25/2001 $1,000,000 1,016,717
- ------------------------------------------------------------
BANKS -- 12.7%
............................................................
KeyCorp Instit Capital-A
(Acquired 12/19/1996, Cost
$630,084) r, CLB 12/01/2006,
7.826%, 12/01/2026 825,000 804,870
............................................................
MBNA Corporation, 5.89375%,
6/21/2001 2,500,000 2,506,140
............................................................
Mellon Capital I, Class A, CLB
12/01/2006, 7.72%, 12/01/2026 825,000 813,543
............................................................
Midland Bank PLC, 5.725%,
6/29/2049 # 500,000 430,000
............................................................
Nordbanken, 6.13125%,
10/29/2049 # 2,000,000 1,995,586
............................................................
Okobank, 7.25%, 9/27/2049 # 1,500,000 1,537,065
............................................................
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
- -- 28.8% Amount
<S> <C> <C>
- ------------------------------------------------------------
Wells Fargo Capital I, CLB
12/15/2006, 7.96%, 12/15/2026 $ 825,000 $ 824,934
............................................ -----------
8,912,138
- ------------------------------------------------------------
FINANCIAL SERVICES -- 3.0%
............................................................
Salomon, Inc.:
5.65%, 2/10/1998 500,000 496,992
............................................................
6.06%, 12/01/1998 # 500,000 500,521
............................................................
6.292%, 4/05/1999 # 1,100,000 1,093,849
............................................ -----------
2,091,362
- ------------------------------------------------------------
OIL -- DOMESTIC -- 1.4%
............................................................
Husky Oil Ltd., 6.875%,
11/15/2003 1,000,000 995,844
- ------------------------------------------------------------
REAL ESTATE -- 2.1%
............................................................
Taubman Realty Group, 6.00%,
11/03/1997 # 1,500,000 1,498,674
- ------------------------------------------------------------
SAVINGS & LOANS -- 0.7%
............................................................
Federal Home Loan Mortgage
Corporation, CLB 6/27/1997,
7.15%, 6/27/2000 500,000 503,466
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 3.3%
............................................................
Southern New England Telephone,
8.70%, 8/15/2031 750,000 800,893
............................................................
Tele Communications, Inc., CLB
9/15/1997, 6.18516%,
9/15/2003 # 1,500,000 1,507,090
............................................ -----------
2,307,983
- ------------------------------------------------------------
TRANSPORTATION -- 2.1%
............................................................
Delta Air Lines ETC, 9.90%,
1/02/2002 150,000 167,476
............................................................
USAir, Inc., 6.76%, 4/15/2008 1,314,951 1,283,229
............................................ -----------
1,450,705
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 18
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 2.1%
............................................................
CTC Mansfield Funding Corp.,
CLB 3/13/1997, 11.125%,
9/30/2016 $1,400,000 $ 1,508,500
- ------------------------------------------------------------
Total corporate bonds (cost
$20,180,950) 20,285,389
- ------------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 8.1%
- ------------------------------------------------------------
ASSET-BACKED SECURITY -- 1.4%
............................................................
Student Loan Marketing
Association,
1996-4 A1, 5.53%, 7/25/2004 # 1,000,000 999,334
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.3%
............................................................
Federal Home Loan Mortgage
Corporation: 1316 Z, 8.00%,
6/15/2022 701,493 709,303
............................................................
1393 J, 6.50%, 10/15/2007 1,670,376 1,546,651
............................................................
1759 Z, 8.50%, 10/15/2024 901,077 907,384
............................................................
Federal National Mortgage
Association,
1993-202 VS, 9.75%,
2/25/2023# 599,328 564,707
............................................ -----------
3,728,045
- ------------------------------------------------------------
GOVERNMENT AGENCY NOTES -- 1.4%
............................................................
Federal Home Loan Bank, 6.44%,
12/21/2000 1,000,000 994,097
- ------------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $5,717,391) 5,721,476
- ------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES -- 8.5%
- ------------------------------------------------------------
ASSET-BACKED SECURITIES -- 3.3%
............................................................
Bridgestone/Firestone Master
Trust, 1996-1 A, 6.17%,
7/01/2003 1,400,000 1,389,220
............................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Premier Auto Trust, 1996-4 A3,
6.20%, 11/06/2000 $ 950,000 $ 954,170
............................................ -----------
2,343,390
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.9%
............................................................
Citicorp Mortgage Securities,
Inc., 1991-7 M, 8.75%,
5/25/2021 500,652 507,661
............................................................
Independent National Mortgage
Corporation, 1996-D A2,
7.00%, 5/25/2026 700,000 700,973
............................................................
PNC Mortgage Securities
Corporation, 1996-1 A11,
Class Z, 7.50%, 6/25/2026 1,648,207 1,517,537
............................................ -----------
2,726,171
- ------------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.0%
............................................................
Citicorp Mortgage Securities,
Inc., 1987-14 A1, 9.50%,
9/25/2002 24,868 25,220
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 1.3%
............................................................
Donaldson, Lufkin & Jenrette:
1993-Q16 IS (IO), 3.74723%,
11/25/2023 # 271,887 18,787
............................................................
1993-Q16 IIS (IO), 2.17115%,
11/25/2023 # 7,028,066 287,096
............................................................
GE Capital Mortgage Services,
Inc.,
1993-1 G (IO), 657.2504%,
2/25/2022 # 24,917 323,901
............................................................
Greenwich Capital Acceptance, Inc.,
1992-LB8 (IO), 2.52476%,
2/25/2023 # 2,021,129 54,773
............................................................
</TABLE>
See Notes to Financial Statements
13
<PAGE> 19
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Structured Mortgage Asset
Residential Trust:
1991-1 I (IO), 1000%,
6/25/2022 $ 2,571 $ 41,148
............................................................
1991-7 I (IO), 14221.59%,
12/25/2022 602 159,049
............................................ -----------
884,754
- ------------------------------------------------------------
Total non-agency mortgage-
backed securities (cost
$5,676,196) 5,979,535
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 14.3%
- ------------------------------------------------------------
U.S. TREASURY NOTES:
............................................................
5.375%, 5/31/1998 1,300,000 1,290,657
............................................................
5.875%, 8/15/1998 4,350,000 4,345,924
............................................................
6.75%, 4/30/2000 400,000 407,750
............................................................
7.25%, 5/15/2004 755,000 794,874
............................................................
6.50%, 5/15/2005 3,200,000 3,224,003
............................................ -----------
Total U.S. Treasury obligations 10,063,208
(cost $10,023,796)
- ------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.6%
- ------------------------------------------------------------
Lilly (Eli) & Co., 5.4403% 198,488 198,488
............................................................
Sara Lee Corp., 5.4873% 26,688 26,688
............................................................
Southwestern Bell, 5.4873% 235,352 235,352
............................................ -----------
Total variable rate demand 460,528
notes (cost $460,528)
- ------------------------------------------------------------
Total investments -- 99.3%
(cost $65,339,993) 69,967,033
............................................................
Other assets in excess of
liabilities -- 0.7% 492,792
............................................ -----------
$ 70,459,825
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of December 31, 1996.
* 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 December 31, 1996.
IO -- Interest Only.
ETC -- Equipment Trust Certificate.
ADR -- American Depository Receipt.
CLB -- Callable.
r -- Restricted Security.
NYS -- New York Shares.
See Notes to Financial Statements
14
<PAGE> 20
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
CORPORATE BONDS AND Principal
NOTES -- 50.4% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
BANKS -- 15.5%
............................................................
First USA Bank, 5.84297%,
9/17/1997 # $ 650,000 $ 650,407
............................................................
Keycorp Instit Capital-A
(Acquired 12/19/96, Cost
$630,084) r, CLB 12/01/2006,
7.826%, 12/01/2026 650,000 634,140
............................................................
Okobank, 7.25%, 9/27/2049 800,000 819,768
............................................................
MBNA Corporation, 5.85125%,
9/13/2001 # 1,000,000 1,002,330
............................................................
Mellon Capital I, Class A, CLB
12/01/2006, 7.72%, 12/01/2026 600,000 591,668
............................................................
Wells Fargo Capital I, CLB
12/15/2006, 7.96%, 12/15/2026 600,000 599,952
............................................. ----------
4,298,265
- ------------------------------------------------------------
FINANCIAL SERVICES -- 6.4%
............................................................
Salomon, Inc.: 6.39375%,
4/01/1997 # 600,000 600,972
............................................................
6.00%, 7/28/1998 250,000 248,684
............................................................
6.06%, 12/01/1998 # 150,000 150,156
............................................................
6.292%, 4/05/1999 # 600,000 596,645
............................................................
5.85%, 5/20/1999 # 200,000 198,302
............................................. ----------
1,794,759
- ------------------------------------------------------------
INDUSTRIAL -- 0.9%
............................................................
Westinghouse Electric
Corporation,
8.93%, 6/22/1999 250,000 260,837
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 4.8%
............................................................
Valassis Inserts,
9.375%, 3/15/1999 1,300,000 1,333,175
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
SAVINGS & LOAN -- 1.8%
............................................................
Western Financial Savings,
8.50%, 7/01/2003 $ 500,000 $ 514,671
- ------------------------------------------------------------
SOVEREIGN -- 4.3%
............................................................
Government of Mexico,
11.25%, 7/21/1997 # 850,000 872,313
............................................................
Republic of Argentina,
5.25%, 3/31/2023 # 500,000 315,312
............................................. ----------
1,187,625
- ------------------------------------------------------------
TRANSPORTATION -- 4.4%
............................................................
Delta Air Lines ETC,
9.90%, 1/02/2002 250,000 279,126
............................................................
USAir, Inc., Class A,
6.76%, 4/15/2008 974,038 950,540
............................................. ----------
1,229,666
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 5.1%
............................................................
Tele Communications, Inc., CLB
9/15/1997,
6.18516%, 9/15/2003 # 1,400,000 1,406,618
- ------------------------------------------------------------
TRUCKING -- 2.1%
............................................................
TNT Transport PLC/TNT USA, CLB
4/15/1999,
11.50%, 4/15/2004 500,000 575,625
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 5.1%
............................................................
Greece Public Power Corporation,
7.25%, 11/15/2000 1,400,000 1,421,784
- ------------------------------------------------------------
Total corporate bonds and notes
(cost $13,814,612) 14,023,025
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 21
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 31.2% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 31.2%
............................................................
Federal Home Loan Mortgage
Corporation:
1261 J, 8.00%, 7/15/2021 $ 576,465 $ 571,946
............................................................
1316 Z, 8.00%, 6/15/2022 572,647 579,023
............................................................
1393 J, 6.50%, 10/15/2007 1,113,584 1,031,101
............................................................
1468 S, 11.883%, 2/15/2023 # 449,224 398,309
............................................................
1564 SE, 8.3655%, 8/15/2008 # 353,637 313,056
............................................................
1759 Z, 8.50%, 10/15/2024 810,969 816,646
............................................................
1761 Z, 8.50%, 11/15/2024 1,192,986 1,116,904
............................................................
Federal National Mortgage
Association:
G93-27 SB, 6.66677%, 8/25/2023
# 115,176 73,760
............................................................
1993-37 SB, 6.95624%,
3/25/2023 # 224,549 158,529
............................................................
1993-45 SA, 9.009%, 6/25/2022
# 550,360 439,232
............................................................
1993-202 VS, 9.75%, 2/25/2023
# 998,878 941,176
............................................................
X-10B Z, 6.50%, 3/25/2024 1,108,091 953,270
............................................................
TBA, 8.00%, 1/25/2027 1,250,000 1,273,829
............................................. ----------
Total government agency
mortgage-backed securities 8,666,781
(cost $8,583,507)
- ------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES -- 16.6%
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.3%
............................................................
CMC Securities Corporation,
1994-G, 7.00%, 9/25/2024 200,000 185,672
............................................................
Citicorp Mortgage Securities,
Inc.,
1990-D A1, 9.50%, 10/25/2005 217,177 219,964
............................................................
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 31.2% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Collateralized Mortgage
Obligations Trust, 57-D,
9.90%, 2/01/2019 $ 584,217 $ 633,102
............................................................
Countrywide Funding Corporation,
1994-2 A12T, 9.00%, 2/25/2009
# 465,685 456,091
............................................................
GE Capital Mortgage Services,
Inc., 1994-24 A4, 7.00%,
7/25/2024 169,843 158,085
............................................................
Housing Securities, Inc.:
1994-1 AB2, 6.50%, 3/25/2009 525,542 365,830
............................................................
1994-2 B1, 6.50%, 7/25/2009 267,344 214,838
............................................................
Independent National Mortgage
Corporation:
1995-F A5, 8.25%, 5/25/2010 1,000,000 1,029,204
............................................................
1995-M A4, 7.50%, 9/25/2025 1,000,000 990,500
............................................. ----------
4,253,286
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 1.3%
............................................................
Ryland Mortgage Securities
Corporation, 42 2X1 (IO),
3503.299%, 6/25/2023 # 7,320 351,339
- ------------------------------------------------------------
Total non-agency mortgage-backed
securities (cost $4,378,811) 4,604,625
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 2.4%
- ------------------------------------------------------------
U.S. Treasury Bonds:
8.125%, 8/15/2019 375,000 433,477
............................................................
8.75%, 8/15/2020 185,000 227,839
............................................. ----------
Total U.S. Treasury obligations
661,316
(cost $659,340)
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 22
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 2.6%
- ------------------------------------------------------------
General Mills, Inc., 5.495% $ 15,000 $ 15,000
............................................................
Southwestern Bell, 5.4873% 234,471 234,471
............................................................
Pitney Bowes, Inc., 5.5075% 490,151 490,151
............................................. ----------
Total variable rate demand notes 739,622
(cost $739,622)
- ------------------------------------------------------------
Total investments -- 103.2%
(cost $28,175,892) 28,695,369
............................................................
Liabilities in excess of other
assets -- (3.2%) (896,133)
............................................. ----------
$27,799,236
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Variable Rate Security. The rate listed as of December 31, 1996.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rate changes periodically on specified dates. The
rate is as of December 31, 1996.
IO -- Interest Only.
CLB -- Callable.
r -- Restricted Security.
ETC -- Equipment Trust Certificate.
See Notes to Financial Statements
17
<PAGE> 23
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 42.7% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
BANKING -- 9.8%
............................................................
Chase Capital I,
7.67%, 12/01/2026 $2,800,000 $ 2,760,937
............................................................
MBNA Corporation, 5.85125%,
9/13/2001 # 3,125,000 3,132,281
............................................................
Nordbanken, CLB 10/25/2001,
6.13125%, 10/29/2049 # 5,830,000 5,817,133
............................................................
Skandinavinska Enskilda Banken,
CLB 6/29/2003, 6.59375%,
6/29/2049 # 3,500,000 3,537,100
............................................................
Wells Fargo Capital I, CLB
12/15/2006, 7.96%, 12/15/2026 1,450,000 1,449,884
............................................ -----------
16,697,335
- ------------------------------------------------------------
CHEMICALS -- 2.9%
............................................................
W.R. Grace & Co.,
6.88%, 6/23/1997 5,000,000 5,025,794
- ------------------------------------------------------------
FINANCIAL SERVICES -- 8.4%
............................................................
American Reinsurance Corp.,
10.875%, 9/15/2004 3,915,000 4,217,958
............................................................
Lehman Brothers, Inc.:
9.50%, 6/15/1997 800,000 812,517
............................................................
7.36%, 12/15/2003 # 3,300,000 3,342,576
............................................................
Salomon, Inc.:
8.67%, 2/14/1997 400,000 401,254
............................................................
5.65%, 2/10/1998 200,000 198,797
............................................................
5.70%, 2/11/1998 2,000,000 1,988,974
............................................................
9.43%, 3/15/1998 1,000,000 1,036,133
............................................................
6.125%, 5/15/1998 315,000 314,301
............................................................
6.06%, 12/01/1998 # 1,500,000 1,501,564
............................................................
5.85%, 5/20/1999 # 500,000 495,754
............................................ -----------
14,309,828
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 42.7% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
HEALTH -- 0.1%
............................................................
Health & Rehabilitation
Property Trust, CLB
4/13/1997,
6.2825%, 7/13/1999 # $ 200,000 $ 197,865
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 4.0%
............................................................
Valassis Inserts,
9.375%, 3/15/1999 6,600,000 6,768,425
- ------------------------------------------------------------
REAL ESTATE -- 2.7%
............................................................
Taubman Realty Group, Ltd.,
6.5171%, 7/26/1999 # 4,550,000 4,552,425
- ------------------------------------------------------------
RETAIL -- 2.2%
............................................................
Tyco Toys, Inc., CLB 8/15/1997,
10.125%, 8/15/2002 3,500,000 3,666,250
- ------------------------------------------------------------
SOVEREIGN -- 0.6%
............................................................
Republic of Argentina,
5.25%, 3/31/2023 # 1,550,000 977,469
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 3.3%
............................................................
Illinois Bell Telephone Co.,
CLB 3/17/1997,
7.625%, 4/01/2006 300,000 302,812
............................................................
Tele Communications, Inc., CLB
9/15/1997,
6.1851%, 9/15/2003 # 5,315,000 5,340,123
............................................ -----------
5,642,935
- ------------------------------------------------------------
TRANSPORTATION -- NON RAIL -- 1.3%
............................................................
TNT Transport PLC/TNT USA, CLB
4/15/1999,
11.50%, 4/15/2004 2,000,000 2,302,500
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 24
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 7.4%
............................................................
Cleveland Electric Illum,
9.25%, 7/29/1999 $1,900,000 $ 1,982,971
............................................................
CTC Mansfield Funding Corp.,
CLB 3/13/1997, 11.125%,
9/30/2016 350,000 377,125
............................................................
Gulf States Utilities, CLB
3/17/1997, 6.75%, 10/01/1998 700,000 699,676
............................................................
Public Service Company of
Colorado, 6.66%, 10/30/1997 4,500,000 4,530,707
............................................................
Texas Utilities, CLB 5/01/1997,
5.8906%, 5/01/1999 # 5,000,000 5,015,134
............................................ -----------
12,605,613
- ------------------------------------------------------------
Total corporate bonds and notes
(cost $72,043,572) 72,746,439
- ------------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 14.5%
- ------------------------------------------------------------
ASSET -- BACKED SECURITY -- 1.5%
............................................................
Student Loan Marketing
Association, 1996-4 A1,
5.53%, 7/25/2004 # 2,500,000 2,498,335
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.6%
............................................................
Federal Home Loan Mortgage
Corporation:
1081 1, 7.00%, 12/15/2019 306,152 308,396
............................................................
1096 D, 7.00%, 6/15/2020 61,666 62,003
............................................................
1194 G, 6.50%, 10/15/2006 500,000 496,250
............................................................
1201 D, 7.00%, 10/15/2020 500,649 502,307
............................................................
1262 F, 7.50%, 3/15/2015 500,000 504,606
............................................................
1267 O, 7.25%, 12/15/2005 90,713 91,718
............................................................
1336 H, 7.75%, 1/15/2021 400,000 408,408
............................................................
1358 F, 6.75%, 1/15/2019 600,000 603,150
............................................................
1521 B, 5.80%, 7/15/2000 2,032,041 2,033,077
............................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
1543 KE, 9.45438%, 9/15/2022
# $1,046,602 $ 725,359
............................................................
1617 D, 6.50%, 11/15/2023 71,000 64,219
............................................................
1759 Z, 8.50%, 10/15/2024 4,205,026 4,234,461
............................................................
1761 Z, 8.50%, 11/15/2024 1,192,986 1,116,904
............................................................
Federal National Mortgage
Association:
1988-26 C, 7.50%, 7/25/2018 129,843 131,598
............................................................
1990-112 E, 8.50%, 7/25/2019 115,434 117,629
............................................................
1991-147 K, 7.00%, 1/25/2021 5,000 5,007
............................................................
1991-153 N, 7.50%, 2/25/2007 300,000 305,803
............................................................
G92-9 K, 7.00%, 1/25/2020 165,108 165,431
............................................................
1992-138 O, 7.50%, 7/25/2022 72,827 70,939
............................................................
1992-158 Z, 7.75%, 3/25/2021 1,397,596 1,365,161
............................................................
1992-163 E, 6.75%, 9/25/2022 500,000 499,730
............................................................
1993-45 SB, 9.122%, 4/25/2023
# 1,500,000 1,208,922
............................................................
1994-60 D, 7.00%, 4/25/2024 30,000 28,265
............................................................
Government National Mortgage
Association,
1995-2 G, 8.50%, 3/20/2020 1,300,000 1,332,564
............................................ -----------
16,381,907
- ------------------------------------------------------------
GOVERNMENT AGENCY NOTES -- 1.4%
............................................................
Federal Home Loan Bank:
CLB 1/30/1997, 6.52%,
7/30/1998 1,000,000 1,000,486
............................................................
6.44%, 12/21/2000 1,500,000 1,491,145
............................................ -----------
2,491,631
- ------------------------------------------------------------
PASS-THROUGH SECURITIES -- 1.9%
............................................................
Federal Home Loan Mortgage
Corporation,
255452, 8.50%, 2/01/2008 661,913 690,508
............................................................
</TABLE>
See Notes to Financial Statements
19
<PAGE> 25
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Federal National Mortgage
Association:
21130, 8.00%, 9/01/2000 $ 10,102 $ 10,097
............................................................
308798, 7.306%, 4/01/2025 # 1,782,392 1,838,854
............................................................
312155, 7.318%, 3/01/2025 # 625,412 634,918
............................................ -----------
3,174,377
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.1%
............................................................
Federal National Mortgage
Association,
1993-97 L (IO), 7.50%,
5/25/2023 2,030,571 231,445
............................................ -----------
Total government agency
mortgage-backed securities 24,777,695
(cost $24,430,552)
- ------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES -- 14.8%
- ------------------------------------------------------------
ASSET-BACKED SECURITIES -- 4.1%
............................................................
Bridgestone/Firestone Master Trust,
1996-1 A, 6.17%, 7/01/2003 3,000,000 2,976,900
............................................................
First Chicago Master Trust II,
1996-R A, 5.5832%,
7/15/2001 # 1,400,000 1,396,518
............................................................
Premier Auto Trust,
1996-4 A3, 6.20%, 11/06/2000 2,500,000 2,510,975
............................................................
Western Financial Grantor
Trust,
1992-3, 4.70%, 1/01/1998 101,462 101,473
............................................ -----------
6,985,866
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.4%
............................................................
Capstead Securities Corp.,
1992-2 C, 7.80%, 2/25/2022 300,938 301,800
............................................................
Chemical Mortgage Securities,
Inc., 1993-3 A1, 7.125%,
7/25/2023 386,078 387,870
............................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Citicorp Mortgage Securities, Inc.:
1987-9 A1, 9.00%,
7/25/2002 $ 643,412 $ 653,477
............................................................
1989-8 A1, 10.50%, 6/25/2019 583,769 627,497
............................................................
1990-D A1, 9.50%,
10/25/2005 434,355 439,927
............................................................
1993-13 A6, 8.50%,
11/25/2008 # 285,000 252,766
............................................................
Countrywide Funding Corp.,
1994-17 A9, 8.00%, 7/25/2024 4,000 4,084
............................................................
First Bank Systems, 1993 AT T2,
8.25%, 3/25/2023 352,355 354,825
............................................................
Housing Securities, Inc.:
1992-B3, 8.00%, 7/25/2021 2,462,583 2,495,132
............................................................
1994-2 B1, 6.50%, 7/25/2009 239,331 192,326
............................................................
Independent National Mortgage
Corporation:
1995-A4, 8.75%, 3/25/2025 18,000 18,606
............................................................
1995-M A4, 7.50%, 9/25/2025 1,000,000 990,500
............................................................
1996-D A2, 7.00%, 5/25/2026 3,000,000 3,004,170
............................................................
Prudential Home Mortgage
Securities, Co.,
1993-36 A10, 7.25%,
10/25/2023 500,000 495,595
............................................................
Residential Asset
Securitization Trust,
1996-A10 A1, 7.5%, 11/25/2011 3,388,104 3,406,484
............................................................
Residential Funding Corp.,
1993-S9 A8, 8.89583%,
2/25/2008 # 125,305 95,357
............................................................
Residential Funding Mortgage,
Securities, Inc., 1992-S5 A5,
7.50%, 2/25/2007 1,263,883 1,260,609
............................................................
</TABLE>
See Notes to Financial Statements
20
<PAGE> 26
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- -------------------------------------------------------------
Structured Mortgage Asset
Residential Trust:
1991-1H, 8.25%, 6/25/2022 $ 309,916 $ 298,852
.............................................................
1992-3 A, 8.00%, 10/25/2007 243,304 248,428
.............................................................
1993-5A AA, 6.94541%,
6/25/2024 # 427,494 421,633
............................................. -----------
15,949,938
- -------------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.1%
.............................................................
Citicorp Mortgage Securities, Inc.:
1987-5, 8.50%, 4/25/2017 30,247 30,167
.............................................................
1987-14, 9.50%, 9/25/2002 49,737 50,440
.............................................................
1988-16 A1, 10.00%, 11/25/2018 54,884 58,536
............................................. -----------
139,143
- -------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 1.3%
.............................................................
Donaldson, Lufkin & Jenrette:
1993-Q16 IS (IO),
3.74723%, 11/25/2023 # 782,368 54,062
.............................................................
1993-Q16 IIS (IO), 2.17115%,
11/25/2023 # 3,836,210 156,709
.............................................................
1994-Q8 IIS (IO),
1.90666%, 5/25/2024 # 21,567,315 786,668
.............................................................
Nomura Asset Securities
Corporation,
1994-5A 1 (IO),
1.11249%, 11/25/2024 # 42,447,438 678,098
.............................................................
Residential Funding Corp.,
1992-S2 A16 (IO), 0.50%,
1/25/2022 33,534,266 408,045
.............................................................
Structured Mortgage Asset
Residential Trust, 1991-2 I
(IO), 33.50898%,
6/25/2022 # 44,056 56,943
............................................. -----------
2,140,525
- -------------------------------------------------------------
Total non-agency mortgage-backed
securities (cost $24,632,534) 25,215,472
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
- -------------------------------------------------------------
U.S. TREASURY NOTES -- 12.5%
- -------------------------------------------------------------
U.S. Treasury Notes:
5.375%, 11/30/1997 $4,000,000 $ 3,981,252
............................................................
7.875%, 4/15/1998 2,500,000 2,559,377
............................................................
5.375%, 5/31/1998 10,000,000 9,928,129
............................................................
5.875%, 8/15/1998 4,800,000 4,795,502
............................................ -----------
Total U.S. Treasury notes (cost 21,264,260
$21,208,552)
- -------------------------------------------------------------
DISCOUNT NOTES -- 14.1%
- -------------------------------------------------------------
Archer Daniels Midland Co.,
6.25%, 1/06/1997 5,000,000 4,995,660
............................................................
Hertz Corp., 5.73%, 1/09/1997 5,500,000 5,492,997
............................................................
Houston Industries, Inc.,
5.65%, 1/02/1997 5,000,000 4,999,215
............................................................
Tyson Foods, Inc., 5.85%,
1/06/1997 8,500,000 8,493,094
............................................ -----------
Total discount notes (cost 23,980,966
$23,980,966)
- -------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.8%
- -------------------------------------------------------------
General Mills, Inc., 5.495% 100,000 100,000
............................................................
Lilly (Eli) & Co., 5.4403% 1,000,000 1,000,000
............................................................
Pitney Bowes, Inc., 5.5075% 90,544 90,544
............................................................
Sara Lee Corp., 5.4873% 200,000 200,000
............................................ -----------
Total variable rate demand 1,390,544
notes (cost $1,390,544)
- -------------------------------------------------------------
Total investments -- 99.4%
(cost $167,686,720) 169,375,376
............................................................
Other assets in excess of
liabilities -- 0.6% 960,888
............................................ -----------
$170,336,264
Total net assets -- 100.0%
- -------------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of December 31, 1996.
* 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 December 31, 1996.
IO -- Interest Only.
CLB -- Callable.
See Notes to Financial Statements
21
<PAGE> 27
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Principal
CORPORATE BONDS -- 29.5% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
BANKS -- 9.0%
............................................................
MBNA Corp.,
5.85125%, 9/13/2001 # $ 500,000 $ 501,165
............................................................
Nordbanken, CLB 10/25/2001,
6.13125%, 10/29/2049 # 550,000 548,786
............................................................
Swedbank,
7.38281%, 10/29/2049 # 500,000 511,975
............................................. ----------
1,561,926
- ------------------------------------------------------------
FINANCIAL SERVICES -- 2.3%
............................................................
Salomon, Inc.,
6.06%, 12/01/1998 # 400,000 400,417
- ------------------------------------------------------------
INDUSTRIAL -- 2.4%
............................................................
Westinghouse Electric
Corporation,
9.30%, 6/07/1999 400,000 419,400
- ------------------------------------------------------------
REAL ESTATE -- 3.2%
............................................................
Taubman Reality Group, Ltd.,
6.51719%, 7/26/1999 # 550,000 550,293
- ------------------------------------------------------------
SOVEREIGN -- 3.3%
............................................................
Government of Mexico,
11.25%, 7/21/1997 # 550,000 564,437
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 4.4%
............................................................
Illinois Bell Telephone Co., CLB
3/17/1997,
7.625%, 4/01/2006 150,000 151,406
............................................................
Tele Communications, Inc., CLB
9/15/1997,
6.18516%, 9/15/2003 # 600,000 602,836
............................................. ----------
754,242
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 4.9%
............................................................
Gulf States Utilities, CLB
3/17/1997,
6.75%, 10/01/1998 300,000 299,861
............................................................
Public Service Company of
Colorado,
6.66%, 10/30/1997 550,000 553,753
............................................. ----------
853,614
- ------------------------------------------------------------
Total corporate bonds
(cost $5,082,902) 5,104,329
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 11.4% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.8%
............................................................
Federal Home Loan Mortgage
Corporation:
16-B, 10.00%, 10/15/2019 $ 17,408 $ 17,520
............................................................
1081 I, 7.00%, 12/15/2019 125,905 126,828
............................................................
1521 B, 5.80%, 7/15/2000 467,136 467,374
............................................................
1722 PB, 6.50%, 2/15/2009 63,197 63,219
............................................................
Federal Housing Authority
Project, 7.43%, 2/01/2023 138,564 134,851
............................................................
Federal National Mortgage
Association:
1992-43 B, 7.50%, 11/25/2018 463,960 465,904
............................................................
1992-185 VA, 5.10%, 5/25/1997 103,835 103,532
............................................................
Student Loan Marketing
Association,
1996-4 A1, 5.53%,
7/25/2004 # 500,000 499,667
............................................. ----------
1,878,895
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.6%
............................................................
Federal National Mortgage
Association, 1993-97 L (IO),
7.50%, 5/25/2023 748,879 85,357
............................................................
Government National Mortgage
Association, 103695,
11.50%, 9/15/1998 12,930 13,461
............................................. ----------
98,818
- ------------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $1,946,696) 1,977,713
- ------------------------------------------------------------
</TABLE>
22
<PAGE> 28
Schedule of Investments -- December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Principal
DISCOUNT NOTES -- 31.8% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.7%
............................................................
Citicorp Mortgage Securities,
Inc.:
1990-D A1, 9.50%, 10/25/2005 $ 217,177 $ 219,964
............................................................
1991-7 M, 8.75%, 5/25/2021 55,628 56,407
............................................................
Premier Auto Trust,
1996-4 A3, 6.20%, 11/06/2000 500,000 502,195
............................................................
Prudential Home Mortgage
Securities, Inc.,
1993-1 A1, 7.50%, 2/25/2023 240,601 242,092
............................................................
Residential Asset Securitization
Trust, 1996-A10 A1,
7.50%, 11/25/2011 484,015 486,641
............................................................
Structured Mortgage Asset
Residential Trust,
1992-11B BH, 7.80%, 8/25/2021 178,744 180,865
............................................. ----------
1,688,164
- ------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 0.2%
............................................................
Donaldson, Lufkin & Jenrette,
1993-Q16 IS (IO), 3.74723%,
11/25/2023 # 454,994 31,440
- ------------------------------------------------------------
Total non-agency mortgage-backed
securities
(cost $1,713,863) 1,719,604
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 10.4%
- ------------------------------------------------------------
U.S. Treasury Notes:
5.625%, 1/31/1998 600,000 598,126
............................................................
5.375%, 5/31/1998 1,000,000 992,813
............................................................
5.875%, 8/15/1998 200,000 199,813
............................................. ----------
Total U.S. Treasury obligations
1,790,752
(cost $1,783,688)
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
DISCOUNT NOTES -38.1% Amount Value
<S> <C> <C>
- ------------------------------------------------------------
Archer Daniels Midland Co.,
6.25%, 1/06/1997 $ 500,000 $ 499,566
............................................................
Bridgestone/Firestone, Inc.,
7.10%, 1/02/1997 750,000 749,852
............................................................
Cox Enterprises, Inc.,
6.15%, 1/09/1997 1,000,000 998,633
............................................................
CSX Corp.,
5.67%, 1/03/1997 1,000,000 999,685
............................................................
Daimler-Benz North America
Corp.,
6.50%, 1/10/1997 600,000 599,025
............................................................
Ford Credit Europe PLC,
5.41%, 1/02/1997 500,000 499,925
............................................................
Hertz Corp.,
5.48%, 1/02/1997 1,000,000 999,848
............................................................
Houston Industries, Inc.,
5.65%, 1/02/1997 500,000 499,922
............................................................
Tyson Foods, Inc.,
5.85%, 1/06/1997 750,000 749,391
............................................. ----------
Total discount notes
6,595,847
(cost $6,595,846)
- ------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.4%
- ------------------------------------------------------------
Pitney Bowes, Inc., 5.5075% 38,916 38,916
............................................................
Sara Lee Corp., 5.4873% 36,953 36,953
............................................. ----------
Total variable rate demand notes
75,869
(cost $75,869)
- ------------------------------------------------------------
Total investments -- 99.7%
(cost $17,198,864) 17,264,114
............................................................
Other assets in excess of
liabilities -- 0.3% 44,936
............................................. ----------
$17,309,050
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of December 31, 1996.
* 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 December 31, 1996.
IO -- Interest Only.
CLB -- Callable.
23
<PAGE> 29
Financial Statements -- December 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SMALL
INCOME CAP
FUND FUND
-------------------------------
<S> <C> <C>
ASSETS:
Investments, at value*.................................... $203,782,064 $17,570,045
Foreign currency**........................................ 0 0
Cash...................................................... 0 0
Dividends and interest receivable......................... 591,924 20,030
Receivable from Advisor................................... 0 0
Receivable for investments sold........................... 103,801 0
Receivable for Fund shares sold........................... 8,100 8,872
Prepaid expenses.......................................... 6,304 13,567
------------ -----------
Total assets......................................... $204,492,193 $17,612,514
------------ -----------
LIABILITIES:
Payable to Advisor........................................ 129,889 5,402
Payable for investments purchased......................... 309,210 0
Payable for Fund shares repurchased....................... 20,554 0
Dividends payable......................................... 0 0
Accrued expenses and other liabilities.................... 201,373 32,322
------------ -----------
Total liabilities.................................... 661,026 37,724
------------ -----------
Net assets........................................... $203,831,167 $17,574,790
============ ===========
NET ASSETS CONSIST OF:
Paid in capital........................................... $166,533,486 $15,432,110
Undistributed net investment income (loss)................ (11,362) (9,637)
Undistributed net realized gain (loss) on securities
and foreign currency transactions...................... 1,688,005 167,556
Net unrealized appreciation of securities and foreign
currency............................................... 35,621,038 1,984,761
------------ -----------
Net assets........................................... $203,831,167 $17,574,790
============ ===========
CALCULATION OF NET ASSET VALUE PER SHARE:
Shares outstanding (unlimited shares of
no par value authorized)............................... 10,868,225 894,557
Net asset value per share (offering and redemption
price)................................................. $ 18.75 $ 19.65
============ ===========
*Cost of Investments....................................... $168,161,026 $15,585,284
============ ===========
**Cost of Foreign Currency.................................. $ 0 $ 0
============ ===========
</TABLE>
See Notes to Financial Statements
24
<PAGE> 30
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED TOTAL LOW SHORT-TERM
INTERNATIONAL INCOME RETURN BOND DURATION INVESTMENT
FUND FUND FUND FUND FUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$492,126,695 $69,967,033 $28,695,369 $169,375,376 $17,264,114
8,809,145 0 0 0 0
35,903,204 0 173,173 37,176 0
1,402,076 559,175 324,464 1,752,045 134,388
0 0 38,893 0 5,206
0 25,770 19,875 82,580 5,682
1,909,393 3,200 0 135,274 0
6,967 15,280 12,108 30,077 16,601
------------ ----------- ---------- ------------ -----------
540,157,480 70,570,458 29,263,882 171,412,528 17,425,991
------------ ----------- ---------- ------------ -----------
311,354 44,707 0 48,633 0
17,505,414 0 1,286,727 0 0
141,527 13,739 0 93,616 0
5,709 10 153,019 865,682 79,773
423,426 52,177 24,900 68,333 37,168
------------ ----------- ---------- ------------ -----------
18,387,430 110,633 1,464,646 1,076,264 116,941
------------ ----------- ---------- ------------ -----------
$521,770,050 $70,459,825 $27,799,236 $170,336,264 $17,309,050
============ =========== =========== ============ ===========
$469,071,461 $64,118,670 $27,398,370 $168,395,525 $17,371,422
(123,787) (134,301) 0 290,149 0
(263,434) 1,848,416 (118,611) (38,066) (127,622)
53,085,810 4,627,040 519,477 1,688,656 65,250
------------ ----------- ----------- ------------ -----------
$521,770,050 $70,459,825 $27,799,236 $170,336,264 $17,309,050
============ =========== =========== ============ ===========
23,509,819 3,844,630 2,143,480 16,728,518 1,705,094
$ 22.19 $ 18.33 $ 12.97 $ 10.18 $ 10.15
============ =========== =========== ============ ===========
$439,030,007 $65,339,993 $28,175,892 $167,686,720 $17,198,864
============ =========== =========== ============ ===========
$ 8,701,658 $ 0 $ 0 $ 0 $ 0
============ =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements
25
<PAGE> 31
Financial Statements -- Six Months Ended December 31, 1996
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
EQUITY SMALL
INCOME CAP
FUND FUND
------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income*
Dividends.............................................. $ 3,175,047 $ 61,142
Interest............................................... 103,557 8,733
----------- -----------
Total income...................................... 3,278,604 69,875
----------- -----------
Expenses
Advisory fee........................................... 697,751 59,612
Legal and auditing fees................................ 26,882 6,062
Custodian fees and expenses............................ 27,763 2,920
Accounting and transfer agent fees and expenses........ 35,786 17,435
Administration fee..................................... 30,679 3,022
Trustees' fees......................................... 5,929 5,929
Reports to shareholders................................ 4,469 1,460
Registration fees...................................... 11,098 7,538
Other expenses......................................... 13,514 2,160
----------- -----------
Total expenses.................................... 853,871 106,138
Less, expense reimbursement............................ 0 (26,655)
----------- -----------
Net expenses...................................... 853,871 79,483
----------- -----------
Net investment income (loss).............................. 2,424,733 (9,608)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on securities and foreign
currency transactions................................ 14,819,086 225,153
Net change in unrealized appreciation of securities and
foreign currency..................................... 893,343 863,436
----------- -----------
Net gain (loss) on investments............................ 15,712,429 1,088,589
----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $18,137,162 $ 1,078,981
=========== ===========
*Net of Foreign Taxes Withheld.............................. $ 11,818 $ 0
=========== ===========
</TABLE>
See Notes to Financial Statements
26
<PAGE> 32
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED TOTAL LOW SHORT-TERM
INTERNATIONAL INCOME RETURN BOND DURATION INVESTMENT
FUND FUND FUND FUND FUND
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4,699,727 $ 536,663 $ 0 $ 0 $ 0
739,702 1,493,603 1,331,662 5,653,963 488,691
----------- ---------- ------------ ----------- ------------
5,439,429 2,030,266 1,331,662 5,653,963 488,691
----------- ---------- ------------ ----------- ------------
1,487,449 260,187 95,308 377,536 31,439
42,174 11,218 7,215 22,938 4,964
184,306 11,858 5,363 20,706 2,920
88,753 24,936 18,725 42,933 18,918
56,904 12,276 6,132 26,687 3,007
5,929 5,929 5,929 5,929 5,929
52,237 2,920 566 7,389 730
46,560 6,505 8,874 8,446 4,921
23,975 5,249 2,070 6,816 1,545
----------- ---------- ------------ ----------- ------------
1,988,287 341,078 150,182 519,380 74,373
(55,638) (417) (37,545) (43,356) (36,646)
----------- ---------- ------------ ----------- ------------
1,932,649 340,661 112,637 476,024 37,727
----------- ---------- ------------ ----------- ------------
3,506,780 1,689,605 1,219,025 5,177,939 450,964
----------- ---------- ------------ ----------- ------------
2,831,154 1,873,234 (190,662) 140,850 (42,680)
36,255,023 1,056,909 1,102,259 918,711 361
----------- ---------- ------------ ----------- ------------
39,086,177 2,930,143 911,597 1,059,561 (42,319)
----------- ---------- ------------ ----------- ------------
$42,592,957 $4,619,748 $2,130,622 $ 6,237,500 $ 408,645
=========== ========== ============ =========== ============
$ 533,984 $ 5,532 $ 0 $ 0 $ 0
=========== ========== ============ =========== ============
</TABLE>
See Notes to Financial Statements
27
<PAGE> 33
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY INCOME FUND
---------------------------------------
<S> <C> <C>
Six Months Ended
December 31, 1996 Year Ended
(unaudited) June 30, 1996
---------------------------------------
OPERATIONS:
Net investment income (loss)......................... $ 2,424,733 $ 4,217,031
Net realized gain on securities and foreign currency
transactions....................................... 14,819,086 6,697,177
Net change in unrealized appreciation (depreciation)
of securities and foreign currency................. 893,343 17,517,007
-------------- ------------
Net increase in net assets resulting from
operations.................................... 18,137,162 28,431,215
-------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income................................ (2,436,096) (5,190,178)
Net realized gain on securities transactions......... (18,088,501) (9,231,395)
-------------- ------------
Total dividends and distributions............... (20,524,597) (14,421,573)
-------------- ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold........................ 33,007,620 71,541,636
Shares issued in connection with payment of dividends
and distributions.................................. 19,864,892 13,515,453
Cost of shares redeemed.............................. (29,192,015) (43,625,015)
-------------- ------------
Net increase (decrease) in net assets from Fund
share transactions............................ 23,680,497 41,432,074
-------------- ------------
Total increase (decrease) in net assets................... 21,293,062 55,441,716
NET ASSETS:
Beginning of period.................................. 182,538,105 127,096,389
-------------- ------------
End of period*....................................... $203,831,167 $182,538,105
============== ============
*Including undistributed net investment income (loss) of: $ (11,362) $ 0
============== ============
CHANGES IN SHARES OUTSTANDING:
Shares sold.......................................... 1,693,180 3,846,201
Shares issued in connection with payment of dividends
and distributions.................................. 1,051,822 743,944
Shares redeemed...................................... (1,527,687) (2,311,587)
-------------- ------------
Net increase (decrease)......................... 1,217,315 2,278,558
============== ============
</TABLE>
See Notes to Financial Statements
28
<PAGE> 34
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP FUND INTERNATIONAL FUND
--------------------------------- ---------------------------------
Six Months Ended Six Months Ended
December 31, 1996 Year Ended December 31, 1996 Year Ended
(unaudited) June 30, 1996 (unaudited) June 30, 1996
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
$ (9,608) $ 51,304 $ 3,506,780 $ 4,130,521
225,153 3,242,921 2,831,154 1,311,404
863,436 (1,035,528) 36,255,023 14,489,301
-------------- ----------- -------------- ------------
1,078,981 2,258,697 42,592,957 19,931,226
-------------- ----------- -------------- ------------
(56,499) 0 (4,133,682) (3,924,997)
(2,040,700) (3,229,051) (3,759,354) (911,877)
-------------- ----------- -------------- ------------
(2,097,199) (3,229,051) (7,893,036) (4,836,874)
-------------- ----------- -------------- ------------
4,447,659 9,973,586 208,538,818 324,232,058
1,908,270 2,737,936 7,119,242 4,533,313
(4,243,607) (15,737,773) (59,581,374) (64,341,082)
-------------- ----------- -------------- ------------
2,112,322 (3,026,251) 156,076,686 264,424,289
-------------- ----------- -------------- ------------
1,094,104 (3,996,605) 190,776,607 279,518,641
16,480,686 20,477,291 330,993,443 51,474,802
-------------- ----------- -------------- ------------
$17,574,790 $16,480,686 $521,770,050 $330,993,443
============== =========== ============== ============
$ (9,637) $ 56,471 $ (123,787) $ 503,115
============== =========== ============== ============
220,143 444,190 9,848,833 16,283,849
97,760 137,516 325,084 227,114
(195,964) (760,129) (2,856,144) (3,226,302)
-------------- ----------- -------------- ------------
121,939 (178,423) 7,317,773 13,284,661
============== =========== ============== ============
</TABLE>
See Notes to Financial Statements
29
<PAGE> 35
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED INCOME FUND
---------------------------------------
Six Months Ended
December 31, 1996 Year Ended
(unaudited) June 30, 1996
---------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income................................. $ 1,689,605 $ 2,647,524
Net realized gain (loss) on securities transactions... 1,873,234 2,948,927
Net change in unrealized appreciation (depreciation)
of securities....................................... 1,056,909 587,322
-------------- ------------
Net increase in net assets resulting from
operations..................................... 4,619,748 6,183,773
-------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income................................. (1,904,816) (2,554,681)
Net realized gain on securities transactions.......... (2,410,340) (55,137)
Return of capital..................................... 0 0
-------------- ------------
Total dividends and distributions................ (4,315,156) (2,609,818)
-------------- ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold......................... 14,615,053 43,038,215
Shares issued in connection with payment of dividends
and distributions................................... 4,095,672 2,406,463
Cost of shares redeemed............................... (19,153,685) (10,483,447)
-------------- ------------
Net increase (decrease) in net assets from Fund
share transactions............................. (442,960) 34,961,231
-------------- ------------
Total increase (decrease) in net assets.................... (138,368) 38,535,186
NET ASSETS:
Beginning of period................................... 70,598,193 32,063,007
-------------- ------------
End of period*........................................ $ 70,459,825 $ 70,598,193
============== ============
*Including undistributed net investment income of: $ (134,301) $ 80,910
============== ============
CHANGES IN SHARES OUTSTANDING:
Shares sold........................................... 793,917 2,395,366
Shares issued in connection with payment of dividends
and distributions................................... 222,591 134,345
Shares redeemed....................................... (1,036,890) (580,252)
-------------- ------------
Net increase (decrease).......................... (20,382) 1,949,459
============== ============
</TABLE>
See Notes to Financial Statements
30
<PAGE> 36
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN BOND FUND LOW DURATION FUND SHORT-TERM INVESTMENT FUND
--------------------------------- --------------------------------- ---------------------------------
Six Months Ended Six Months Ended Six Months Ended
December 31, 1996 Year Ended December 31, 1996 Year Ended December 31, 1996 Year Ended
(unaudited) June 30, 1996 (unaudited) June 30, 1996 (unaudited) June 30, 1995
--------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,219,025 $ 2,033,756 $ 5,177,939 $ 11,380,643 $ 450,964 $ 1,157,444
(190,662) 386,435 140,850 302,726 (42,680) 17,041
1,102,259 (1,233,325) 918,711 (603,922) 361 72,725
-------------- ----------- -------------- ------------- -------------- ------------
2,130,622 1,186,866 6,237,500 11,079,447 408,645 1,247,210
-------------- ----------- -------------- ------------- -------------- ------------
(1,219,025) (2,033,756) (5,177,939) (11,385,745) (450,964) (1,150,687)
(241,973) (239,612) (176,195) (680,292) 0 0
0 0 0 0 0 (6,473)
-------------- ----------- -------------- ------------- -------------- ------------
(1,460,998) (2,273,368) (5,354,134) (12,066,037) (450,964) (1,157,160)
-------------- ----------- -------------- ------------- -------------- ------------
10,260,939 31,603,393 122,240,644 187,622,316 17,114,592 14,567,153
1,285,055 1,813,318 5,087,957 10,272,786 224,315 634,339
(27,836,574) (4,198,498) (147,036,885) (131,067,667) (18,713,320) (16,377,951)
-------------- ----------- -------------- ------------- -------------- ------------
(16,290,580) 29,218,213 (19,708,284) 66,827,435 (1,374,413) (1,176,459)
-------------- ----------- -------------- ------------- -------------- ------------
(15,620,956) 28,131,711 (18,824,918) 65,840,845 (1,416,732) (1,086,409)
43,420,192 15,288,481 189,161,182 123,320,337 18,725,782 19,812,191
-------------- ----------- -------------- ------------- -------------- ------------
$ 27,799,236 $43,420,192 $170,336,264 $ 189,161,182 $ 17,309,050 $ 18,725,782
============== =========== ============== ============= ============== ============
$ 0 $ 79,541 $ 290,149 $ 290,152 $ 0 $ 0
============== =========== ============== ============= ============== ============
789,467 2,396,355 12,003,288 18,411,897 1,686,548 1,435,371
99,542 138,416 501,521 1,008,556 22,118 62,521
(2,141,838) (319,560) (14,476,545) (12,866,489) (1,844,743) (1,613,876)
-------------- ----------- -------------- ------------- -------------- ------------
(1,252,829) 2,215,211 (1,971,736) 6,553,964 (136,077) (115,984)
============== =========== ============== ============= ============== ============
</TABLE>
See Notes to Financial Statements
31
<PAGE> 37
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1996
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 eight 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 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), and December 6, 1994 (the
Total Return Bond 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 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 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.
32
<PAGE> 38
- --------------------------------------------------------------------------------
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, 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 does 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 does 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 from the fluctuations arising from trade date and settlement date
differences.
FORWARD CURRENCY EXCHANGE CONTRACTS: The International Fund utilizes forward
currency exchange contracts for the purpose of hedging foreign currency risk on
unsettled trades. Under these contracts, it is 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.
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.
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
33
<PAGE> 39
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1996
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 no later than the
first business day after the 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.
NOTE 2.
INVESTMENT ADVISORY AGREEMENT. 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 six months ended December 31, 1996, the Advisor waived the
following fees:
<TABLE>
<CAPTION>
Equity Income Small Cap International Balanced
Fund Fund Fund Income Fund
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL ADVISORY RATE.................. 0.75% 0.75% 0.75% 0.75%
ANNUAL CAP ON EXPENSES................ 1.00% 1.00% 1.00% 1.00%
FEES WAIVED........................... $0 $26,655 $55,638 $417
</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..................................... $37,545 $43,356 $36,646
</TABLE>
34
<PAGE> 40
- --------------------------------------------------------------------------------
NOTE 3.
SECURITIES TRANSACTIONS. Purchases and sales of investment securities, other
than short-term investments, for the six months ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------- ----------------------------------
Fund U.S. Government Other U.S. Government Other
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND......... -- $ 51,512,486 -- $ 52,653,911
SMALL CAP FUND............. -- 6,006,889 -- 8,126,291
INTERNATIONAL FUND......... -- 163,260,456 -- 20,066,700
BALANCED INCOME FUND....... $12,084,042 19,495,416 $12,054,224 19,302,929
TOTAL RETURN BOND FUND..... 16,985,413 11,956,713 19,859,903 22,893,102
LOW DURATION FUND.......... 85,477,012 82,371,769 86,064,544 128,036,437
SHORT-TERM INVESTMENT
FUND..................... 2,001,259 4,645,227 3,735,378 7,375,418
</TABLE>
As of December 31, 1996, 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............................. $35,580,275 $39,545,450 $ (3,965,175)
SMALL CAP FUND................................. 1,984,760 2,566,376 (581,616)
INTERNATIONAL FUND............................. 53,096,688 70,035,441 (16,938,753)
BALANCED INCOME FUND........................... 4,623,517 5,295,613 (672,096)
TOTAL RETURN BOND FUND......................... 515,031 727,138 (212,107)
LOW DURATION FUND.............................. 1,686,494 2,118,474 (431,980)
SHORT-TERM INVESTMENT FUND..................... 65,250 81,082 (15,832)
</TABLE>
35
<PAGE> 41
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1996
At December 31, 1996, the cost of investments for federal income tax purposes
was $168,201,789, $15,585,285, $439,030,007, $65,343,516, $28,180,338,
$167,688,882 and $17,198,864 for the Equity Income, Small Cap, International,
Balanced Income, Total Return Bond, Low Duration and Short-Term Investment
Funds, respectively.
At June 30, 1996, the Short-Term Investment Fund had accumulated net realized
capital loss carryovers of $19,570 expiring in 2003 and $63,545 expiring in
2004. To the extent the Short-Term Investment Fund realizes future net capital
gains, taxable distributions to its shareholders will be offset by any unused
capital loss carryover.
36
<PAGE> 42
Financial Highlights
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
1996 ------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $18.91 $17.24 $15.07 $15.50 $14.51 $12.53
---------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income........... 0.25(1) 0.45(1) 0.49 0.46 0.44 0.40
Net realized and unrealized gain
on investments................ 1.66 2.89 2.48 0.10 1.21 1.99
---------- ------ ------ ------ ------ ------
Total from investment
operations.................... 1.91 3.34 2.97 0.56 1.65 2.39
---------- ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)....................... (0.25) (0.57) (0.44) (0.46) (0.43) (0.41)
Distributions (from realized
gains)........................ (1.82) (1.10) (0.36) (0.53) (0.23) --
---------- ------ ------ ------ ------ ------
Total distributions............. (2.07) (1.67) (0.80) (0.99) (0.66) (0.41)
---------- ------ ------ ------ ------ ------
Net Asset Value, End of Period....... $18.75 $18.91 $17.24 $15.07 $15.50 $14.51
========== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Total return......................... 10.07%++ 20.04% 20.49% 3.40% 11.67% 19.28%
Net assets, end of period
(millions)......................... $203.8 $182.5 $127.1 $87.2 $86.7 $71.6
Ratio of expenses to average net
assets:
Before expense reimbursement.... 0.92%+ 0.98% 1.02% 1.05% 1.02% 1.02%
After expense reimbursement..... 0.92%+ 0.98% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 2.60%+ 2.56% 3.11% 2.85% 2.97% 2.93%
After expense reimbursement..... 2.60%+ 2.56% 3.14% 2.90% 2.99% 2.95%
Portfolio turnover rate.............. 28% 24% 50% 36% 25% 32%
Average commission rate paid......... $0.0479
</TABLE>
(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
37
<PAGE> 43
Financial Highlights
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
1996 ------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $21.33 $21.53 $19.53 $19.88 $18.10 $17.30
----------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income (loss)..... 0.00(2) 0.05(1) (0.06) (0.01) 0.27 0.09
Net realized and unrealized gain
on investments................. 1.46 2.80 2.84 0.78 3.18 3.09
----------- ------ ------ ------ ------ ------
Total from investment
operations..................... 1.46 2.85 2.78 0.77 3.45 3.18
----------- ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)........................ (0.08) -- -- (0.20) (0.04) (0.13)
Distributions (from realized
gains)......................... (3.06) (3.05) (0.78) (0.92) (1.63) (2.25)
----------- ------ ------ ------ ------ ------
Total distributions.............. (3.14) (3.05) (0.78) (1.12) (1.67) (2.38)
----------- ------ ------ ------ ------ ------
Net Asset Value, End of Period........ $19.65 $21.33 $21.53 $19.53 $19.88 $18.10
=========== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Total return.......................... 6.98%++ 14.24% 14.79% 3.77% 19.80% 19.04%
Net assets, end of period
(millions).......................... $17.6 $16.5 $20.5 $13.1 $10.8 $8.8
Ratio of expenses to average net
assets:
Before expense reimbursement..... 1.34%+ 1.21% 1.49% 1.65% 1.40% 1.45%
After expense reimbursement...... 1.00%+ 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement..... (0.46)%+ 0.03% (0.82)% (0.71)% 1.03% (0.06)%
After expense reimbursement...... (0.12)%+ 0.24% (0.34)% (0.06)% 1.42% 0.40%
Portfolio turnover rate............... 39% 119% 81% 44% 20% 26%
Average commission rate paid.......... $0.0478
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(2) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
+ Annualized.
++ Not annualized.
38
See Notes to Financial Statements
<PAGE> 44
Financial Highlights
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
1996 ------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $20.44 $17.70 $16.79 $14.63 $13.97 $12.56
---------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income........... 0.13(2) 0.56(1) 0.28 0.26 0.23 0.22
Net realized and unrealized gain
on investments................ 1.96 2.51 1.52 2.19 0.74 3.09
---------- ------ ------ ------ ------ ------
Total from investment
operations.................... 2.09 3.07 1.80 2.45 0.97 3.31
---------- ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)....................... (0.18) (0.14) (0.44) (0.14) -- (0.61)
Distributions (from realized
gains)........................ (0.16) (0.19) (0.45) (0.15) (0.31) (1.29)
---------- ------ ------ ------ ------ ------
Total distributions............. (0.34) (0.33) (0.89) (0.29) (0.31) (1.90)
---------- ------ ------ ------ ------ ------
Net Asset Value, End of Period....... $22.19 $20.44 $17.70 $16.79 $14.63 $13.97
========== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Total return......................... 10.27%++ 18.61% 11.08% 16.71% 7.36% 27.48%
Net assets, end of period
(millions)......................... $521.8 $331.0 $51.5 $26.0 $6.6 $4.0
Ratio of expenses to average net
assets:
Before expense reimbursement.... 1.00%+ 1.11% 1.39% 1.61% 2.44% 4.19%
After expense reimbursement..... 0.97%+ 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 1.61%+ 2.67% 2.45% 2.01% 1.14% 0.42%
After expense reimbursement..... 1.64%+ 2.78% 2.83% 2.62% 2.58% 3.61%
Portfolio turnover rate.............. 5% 12% 24% 23% 24% 88%
Average commission rate paid......... $0.0181
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
(2) 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
39
<PAGE> 45
Financial Highlights
- --------------------------------------------------------------------------------
BALANCED INCOME FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
1996 ------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $18.27 $16.74 $15.71 $16.69 $16.35 $15.23
---------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income........... 0.47(1) 0.94 0.89 0.89 0.77 0.79
Net realized and unrealized gain
(loss) on investments......... 0.77 1.53 1.53 (0.27) 0.82 1.45
---------- ------ ------ ------ ------ ------
Total from investment
operations.................... 1.24 2.47 2.42 0.62 1.59 2.24
---------- ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)....................... (0.52) (0.92) (0.80) (0.94) (0.74) (0.76)
Distributions (from realized
gains)........................ (0.66) (0.02) (0.57) (0.66) (0.51) (0.36)
Return of capital............... -- -- (0.02) -- -- --
---------- ------ ------ ------ ------ ------
Total distributions............. (1.18) (0.94) (1.39) (1.60) (1.25) (1.12)
---------- ------ ------ ------ ------ ------
Net Asset Value, End of Period....... $18.33 $18.27 $16.74 $15.71 $16.69 $16.35
========== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Total return......................... 6.84%++ 15.04% 16.40% 3.60% 10.10% 15.10%
Net assets, end of period
(millions)......................... $70.5 $70.6 $32.1 $36.0 $30.3 $16.7
Ratio of expenses to average net
assets:
Before expense reimbursement.... 0.98%+ 1.06% 1.19% 1.20% 1.15% 1.27%
After expense reimbursement..... 0.98%+ 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 4.87%+ 5.20% 5.44% 5.04% 4.62% 4.64%
After expense reimbursement..... 4.87%+ 5.26% 5.63% 5.24% 4.77% 4.90%
Portfolio turnover rate.............. 48% 92% 51% 97% 155% 36%
Average commission rate paid......... $0.0401
</TABLE>
(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
40
<PAGE> 46
Financial Highlights
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Six Months Ended December 6, 1994*
December 31, 1996 Year Ended through
(unaudited) June 30, 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........................ 0.44(1) 0.84(1) 0.46
Net realized and unrealized gain on
investments................................ 0.33 0.06 0.94
-------------- ----------- ---------------
Total from investment operations............. 0.77 0.90 1.40
-------------- ----------- ---------------
Less Distributions:
Dividends (from net investment income)....... (0.47) (0.93) (0.46)
Distributions (from realized gains).......... (0.11) (0.13) --
-------------- ----------- ---------------
Total distributions.......................... (0.58) (1.06) (0.46)
-------------- ----------- ---------------
Net Asset Value, End of Period.................... $12.97 $12.78 $12.94
============== =========== ===============
RATIOS/SUPPLEMENTAL DATA:
Total return...................................... 6.09%++ 7.05% 11.88%
Net assets, end of period (millions).............. $27.8 $ 43.4 $15.3
Ratio of expenses to average net assets:
Before expense reimbursement................. 0.87%+ 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................. 6.85%+ 6.86% 4.92%+
After expense reimbursement.................. 7.07%+ 7.16% 7.05%+
Portfolio turnover rate........................... 91% 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
41
<PAGE> 47
Financial Highlights
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30, May 18, 1993*
1996 ------------------------ through
(unaudited) 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.................... 0.32(1) 0.68 0.75 0.77 0.05
Net realized and unrealized gain on
investments............................ 0.08 0.06 0.23 0.11 0.00
--------- ------ ------ ------ -----------
Total from investment operations......... 0.40 0.74 0.98 0.88 0.05
--------- ------ ------ ------ -----------
Less Distributions:
Dividends (from net investment income)... (0.33) (0.72) (0.75) (0.77) (0.05)
Distributions (from realized gains)...... (0.01) (0.05) (0.01) (0.18) (0.00)
--------- ------ ------ ------ -----------
Total distributions...................... (0.34) (0.77) (0.76) (0.95) (0.05)
--------- ------ ------ ------ -----------
Net Asset Value, End of Period................ $10.18 $10.12 $10.15 $ 9.93 $10.00
========= ====== ====== ====== ===========
RATIOS/SUPPLEMENTAL DATA:
Total return.................................. 3.96%++ 7.47% 10.23% 9.02% 4.36%+
Net assets, end of period (millions).......... $170.3 $189.2 $123.3 $36.5 $7.6
Ratio of expenses to average net assets:
Before expense reimbursement............. 0.63%+ 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.............. 6.31%+ 7.09% 7.61% 7.34% 6.28%+
Portfolio turnover rate....................... 120% 50% 71% 254% 34%
</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
42
<PAGE> 48
Financial Highlights
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30, May 18, 1993*
1996 ------------------------ through
(unaudited) 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.................... 0.29(1) 0.66 0.66 0.53 0.03
Net realized and unrealized
gain (loss) on investments............. (0.02) 0.05 (0.09) 0.21 --
--------- ------ ------ ------ -----------
Total from investment operations......... 0.27 0.71 0.57 0.74 0.03
--------- ------ ------ ------ -----------
Less Distributions:
Dividends (from net investment income)... (0.29) (0.66) (0.66) (0.53) (0.03)
Return of capital........................ -- (0.00) -- -- --
--------- ------ ------ ------ -----------
Total distributions...................... (0.29) (0.66) (0.66) (0.53) (0.03)
--------- ------ ------ ------ -----------
Net Asset Value, End of Period................ $10.15 $10.17 $10.12 $10.21 $10.00
========= ====== ====== ====== ===========
RATIOS/SUPPLEMENTAL DATA:
Total return.................................. 2.74%++ 7.23% 5.78% 7.47% 2.30%+
Net assets, end of period (millions).......... $17.3 $ 18.7 $19.8 $10.5 $.003
Ratio of expenses to average net assets:
Before expense reimbursement............. 0.95%+ 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............. 5.27%+ 6.15% 5.74% 4.16% (56.99)%+
After expense reimbursement.............. 5.74%+ 6.55% 6.52% 5.74% 2.32%+
Portfolio turnover rate....................... 70% 60% 81% 135% 0%
</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
43
<PAGE> 49
- --------------------------------------------------------------------------------
SHAREHOLDERS MEETING RESULTS
A special meeting of shareholders of the Hotchkis and Wiley Funds was held on
September 27, 1996. The following matters were voted on at the meeting:
1. The shareholders of the Trust elected the following nominees to the Board of
Trustees:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Robert L. Burch III
Affirmative.......... 35,976,972.658 66.485% 98.955%
Withhold............. 379,792.636 .702% 1.045%
TOTAL................ 36,356,765.294 67.187% 100.000%
John A.G. Gavin
Affirmative.......... 35,954,199.018 66.443% 98.893%
Withhold............. 402,566.276 .744% 1.107%
TOTAL................ 36,356,765.294 67.187% 100.000%
Joe Grills
Affirmative.......... 35,584,248.256 65.760% 97.875%
Withhold............. 772,517.038 1.427% 2.125%
TOTAL................ 36,356,765.294 67.187% 100.000%
John F. Hotchkis
Affirmative.......... 35,963,907.659 66.461% 98.919%
Withhold............. 392,857.635 .726% 1.081%
TOTAL................ 36,356,765.294 67.187% 100.000%
Robert B. Hutchinson
Affirmative.......... 35,941,772.988 66.420% 98.859%
Withhold............. 414,992.306 .767% 1.141%
TOTAL................ 36,356,765.294 67.187% 100.000%
</TABLE>
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Michael L. Quinn
Affirmative.......... 35,525,492.957 65.651% 97.714%
Withhold............. 831,272.337 1.536% 2.286%
TOTAL................ 36,356,765.294 67.187% 100.000%
Merle T. Welshans
Affirmative.......... 35,941,635.914 66.420% 98.858%
Withhold............. 415,129.380 .767% 1.142%
TOTAL................ 36,356,765.294 67.187% 100.000%
Richard R. West
Affirmative.......... 35,897,399.581 66.338% 98.737%
Withhold............. 459,365.713 .849% 1.263%
TOTAL................ 36,356,765.294 67.187% 100.000%
</TABLE>
2. The shareholders of the Equity Income Fund approved a new investment advisory
agreement on substantially the same terms as the current agreement as follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 6,782,158 73.597% 99.315%
Against.............. 20,719 .225% .303%
Abstain.............. 26,085 .283% .382%
</TABLE>
3. The shareholders of the Small Cap Fund approved a new investment advisory
agreement on
44
<PAGE> 50
- --------------------------------------------------------------------------------
SHAREHOLDERS MEETING RESULTS
substantially the same terms as the current agreement as follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 503,442 65.485% 99.128%
Against.............. 2,684 .349% .528%
Abstain.............. 1,745 .227% .344%
</TABLE>
4. The shareholders of the International Fund approved a new investment advisory
agreement on substantially the same terms as the current agreement as follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 10,341,025 61.952% 95.567%
Against.............. 315,871 1.892% 2.920%
Abstain.............. 163,762 .981% 1.513%
</TABLE>
5. The shareholders of the Balanced Income Fund approved a new investment
advisory agreement on substantially the same terms as the current agreement as
follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 2,804,350 74.034% 97.462%
Against.............. 13,582 .359% .472%
Abstain.............. 59,448 1.569% 2.066%
</TABLE>
6. The shareholders of the Total Return Bond Fund approved a new investment
advisory agreement on substantially the same terms as the current agreement as
follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 1,436,280 48.025% 86.639%
Against.............. 168,590 5.637% 10.170%
Abstain.............. 52,920 1.769% 3.191%
</TABLE>
7. The shareholders of the Low Duration Fund approved a new investment advisory
agreement on substantially the same terms as the current agreement as follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 10,479,464 60.308% 95.808%
Against.............. 299,332 1.723% 2.736%
Abstain.............. 159,247 .916% 1.456%
</TABLE>
8. The shareholders of the Short-Term Investment Fund approved a new investment
advisory agreement on substantially the same terms as the current agreement as
follows:
<TABLE>
<CAPTION>
% of % of
No. of Shares Outstanding Shares Shares Voted
- ------------------------------------------------------------------------
<S> <C> <C> <C>
For.................. 879,150 60.322% 97.451%
Against.............. 15,527 1.066% 1.721%
Abstain.............. 7,469 .512% .828%
</TABLE>
45
