<PAGE> 1
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ANNUAL REPORT
[HOTCHKIS AND WILEY FUNDS LOGO]
800 WEST SIXTH STREET
FIFTH FLOOR
LOS ANGELES, CALIFORNIA 90017
800-236-4479
INVESTMENT ADVISOR
Hotchkis and Wiley
800 West Sixth Street
Fifth Floor
Los Angeles, California 90017
LEGAL COUNSEL
Gardner, Carton & Douglas
321 North Clark Street
Chicago, Illinois 60610
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
DISTRIBUTOR
Princeton Funds Distributor, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
ADMINISTRATOR
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
JUNE 30, 1998
[LOGO]
[HOTCHKIS AND WILEY FUNDS LOGO]
EQUITY INCOME FUND
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MID-CAP FUND
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SMALL CAP FUND
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INTERNATIONAL FUND
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GLOBAL EQUITY FUND
-------------------------------------------------------------
BALANCED FUND
-------------------------------------------------------------
TOTAL RETURN BOND FUND
-------------------------------------------------------------
LOW DURATION FUND
-------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
- --------------------------------------------------------------------------------
THIS MATERIAL SHOULD BE PRECEDED
OR ACCOMPANIED BY A PROSPECTUS. HOTCHKIS AND WILEY:
INVESTMENT ADVISOR
<PAGE> 2
[HOTCHKIS AND WILEY FUNDS LOGO]
EQUITY INCOME FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests primarily in domestic equity securities.
MID-CAP FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests primarily in stocks of domestic companies
with market capitalizations between $750 million and $5 billion.
SMALL CAP FUND
Seeks capital appreciation. The Fund invests primarily in stocks of domestic
companies with market capitalizations of $1 billion or less.
INTERNATIONAL FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests in international equity securities.
GLOBAL EQUITY FUND
Seeks to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests in domestic and international equity
securities.
BALANCED FUND
Seeks to preserve capital while producing a high total return. It is expected
that the Fund's assets will be allocated among equity securities, fixed-income
securities and money market obligations.
TOTAL RETURN BOND FUND
Seeks to maximize long-term total return. The Fund invests in a diversified
portfolio of fixed-income securities of varying maturities with a portfolio
duration of two to eight years.
LOW DURATION FUND
Seeks to maximize total return, consistent with preservation of capital. The
Fund invests in a diversified portfolio of fixed-income securities of varying
maturities with a portfolio duration of one to three years.
SHORT-TERM
INVESTMENT FUND
Seeks to maximize total return, consistent with preservation of capital. The
Fund invests in a diversified portfolio of fixed-income securities of varying
maturities with a portfolio duration of up to one year.
- --------------------------------------------------------------------------------
<PAGE> 3
[Hotchkis and Wiley Funds logo]
DEAR FELLOW SHAREHOLDERS:
We are pleased to present to you the annual report of Hotchkis and Wiley Funds
for the fiscal year ended June 30, 1998.
EQUITY INCOME FUND
The Equity Income Fund's total return for the fiscal year ended June 30, 1998
was 22.6% compared to the Standard & Poor's 500 Index ("S&P 500") return of
30.2%. In the first six months of the fiscal year, there was a dramatic rotation
in market leadership away from the narrow set of stocks that had been driving
performance over the past 2 1/2 years. Announcements by Coca-Cola, Microsoft and
Gillette tempered Wall Street's enthusiasm for earnings growth expectations,
prompting this rotation. In addition, concerns over the mounting Asian debt
crisis caused investors to become increasingly defensive. The portfolio was well
positioned to benefit from this breakdown of the market's mega-cap momentum run.
Many of the areas of the market where we have identified valuation opportunities
rebounded strongly as the market focused on the underlying intrinsic value of
companies. The Fund's total return for the six months ended December 31, 1997
was 14.4% compared to the S&P 500 return of 10.7%. However, beginning in
January, powered by cash-flow from domestic and international buyers, the market
again focused on the mega-cap, familiar names producing large returns for the
S&P 500 and a handful of companies. Sentiment again changed in April and
performance across industries became extremely mixed.
Returns in the Fund came from a variety of sources. Finance made the largest
contribution as merger activity continued to drive up valuations, followed by
utilities and consumer durables. In the utilities, both telephones and electrics
contributed. AT&T was a big winner as investors reassessed this company's
valuation and future prospects. Electric utilities stood out in the fourth
quarter of 1997, supported by favorable resolution on deregulatory issues, moves
toward consolidation, and investors' desire for stocks that are both isolated
from the international turmoil and offer strong valuation characteristics.
Within consumer durables, the best performers were autos and retailers. Autos
offer attractive valuations, strong cash flow and profitability, and are
unlocking value to shareholders through the spin-off of non-core businesses.
Retailers have reported robust earnings and are seen as one of the few industry
groups benefiting from the Asian financial crisis and subsequent currency
devaluation through reduced cost of goods. Industry groups with earnings
exposure to Asian markets were severely penalized. Basic materials companies,
especially paper and metals, held back the Fund's performance as they initially
rose on strong profits announcements and then sold off on worries of overseas
revenue exposure. Lack of exposure to technology and healthcare companies, the
two best performing sectors in the market, also hampered performance. These
stocks are trading at valuation levels far above the thresholds we are willing
to pay.
In keeping with our basic philosophy, we continue to focus on building
significant valuation support into our portfolios. On a relative basis, we think
the current portfolio is one of the cheapest in the history of the firm. Basic
materials companies now represent an exceptional valuation opportunity to buy
world class assets well below replacement costs. Furthermore, we think the
"Asian crisis" should be a long-term positive for many industries as new Asian
projects will only come on stream if they can earn a
<PAGE> 4
real return on capital. We also see considerable opportunity in the utility
sector and are convinced that avoiding the more speculative areas of technology
and healthcare is appropriate.
Looking forward, we believe money will flow to those stocks that have reasonable
earnings multiples and lower risk profiles as investors assess valuations
available in the current market. We believe the Equity Income Fund is well
positioned for the current uncertain economic and market environment. The Fund's
projected price-to-earnings ratio of 14.2X is 58% of the S&P 500. Similarly, the
Fund's 2.8% dividend yield is 197% greater than the S&P 500. We believe that
these key portfolio characteristics help control risk in a volatile market.
MID-CAP FUND
In a very challenging market environment, the Mid-Cap Fund posted a return of
15.0% for the fiscal year ended June 30, 1998 compared to 25.0% for the Russell
MidCap Index. The average market capitalization of stocks in the Mid-Cap Fund
has been much lower than that of the Russell MidCap Index. This discrimination
towards large cap issues has impacted the Fund to a greater degree than the
Index. Since the Asian financial market problems surfaced last October, large
cap stocks have outperformed mid-cap stocks. Whereas the initial advance in
large cap issues was broad based, the more recent advance was driven by strength
in a narrow band of "mega" cap stocks. This focus on the "mega" cap stocks
stemmed primarily from two prevailing trends. First, Asia's continued economic
problems exacerbated U.S. market volatility, leading to a further push for
liquidity. Second, the consistent, impressive performance of the large cap
indices over the last few years has spurred the popularity of indexing. While
these two conditions lifted the large cap indices higher, the relative
performance of mid-cap stocks continued to slide.
Recently, stocks seemed to be valued based on liquidity and momentum without
much regard for existing fundamentals. The hardest hit sectors in the Fund were
those that have exposure to global commodity pricing -- basic industry and
energy. These sectors have become very cheap, and we have built significant
positions in both. Although our research resulted in positive stock selections
in both energy and basic industry, the overweighting clearly hurt performance.
The Fund continues to have lower price-to-book and price-to-earnings multiples
than the Russell MidCap Index. We believe that in the long run, valuations will
re-align with their underlying fundamentals, such as strength in earnings
growth. We continue to see compelling values in our holdings and the Fund's
portfolio should benefit from such a re-alignment.
SMALL CAP FUND
For the fiscal year ended June 30, 1998, the Small Cap Fund outperformed the
Russell 2000 Index by 574 basis points with a return of 22.2% versus 16.5% for
the Russell 2000. Early in the fiscal year, the Fund exhibited strong relative
performance to large cap stocks as earnings growth from several widely held
large cap issues appeared to slow while holdings in the Fund provided attractive
growth potentials. However, this relative outperformance to larger issues was
cut short by the collapse of the Asian financial markets last October. Since
then, market capitalization has played an increasing role in a stock's
performance while fundamental valuation has been less of an influential factor.
This disconnection between a company's underlying value and its stock price has
been especially damaging to small cap stocks. Despite these adverse market
forces, the Fund has delivered healthy, positive returns for the year.
In recent months, the market has been dominated by a concentrated group of
"mega" cap stocks. For example, among the stocks that comprise the S&P 500, the
50 largest stocks contributed to most of the S&P 500's year-to-date return. The
strong demand for these stocks has considerably widened the relative performance
between large and small capitalization stocks. This degree of underperformance
by small cap stocks has happened only three other times in the last 20 years. We
believe two market forces are driving this performance divergence: fear and
indexing. Fear of the Asian economic turmoil unsettled U.S. markets and buoyed
investors' appetite for large cap stocks. In addition to economic concerns, the
popularity of indexing has concentrated buying into a relatively narrow group of
large cap stocks without regard for fundamental valuation. The combination of
fear and indexing has pushed the
<PAGE> 5
valuation of these stocks to unusually high levels and has left small cap stocks
at near historically low relative valuations.
While in the short-term small cap stocks continue to experience high volatility,
historically small cap stocks have provided superior returns over long periods
of time. This would imply that the valuation spread between small cap and large
cap stocks should narrow over time. While it is uncertain when this market
rotation will happen, current valuations point to opportunities in the small cap
universe.
INTERNATIONAL FUND
The defensive characteristics of the International Fund led to a modest
performance gain over the MSCI EAFE Index this past year. European markets,
specifically the 11 markets in the European Monetary Union (EMU), stormed ahead
of all other regions with a 44% return in U.S. dollars. In contrast, developed
Asian markets lost 34% of their value in dollar terms in the same period.
Countries slated to adopt the single European currency, the euro, have
experienced dramatic declines in bond yields and more competitive currencies. As
a result, investors have poured funds into European equities at an unprecedented
rate. Japan, the world's second largest economy, has been unable to fulfill its
historic role as the key driver of growth in the rest of Asia. Keizo Obuchi's
win as LDP leader should slowly lead to an improvement in the fiscal policy
plaguing Japan. With fiscal stimulus, loose monetary policy and financial system
reform, the Japanese economy may have turned the corner.
Only in Euroland is growth likely to accelerate this year as buoyant domestic
demand -- particularly in Spain, Italy, Portugal, and Ireland -- offsets the
deflationary impact of Asia. Nonetheless, we are wary of placing all our
investors' eggs in one basket, specifically Europe. The Asian crisis is starting
to have a measurable (and growing) impact on European exporters -- whether in
Germany, France, or Italy. German export orders are nearly unchanged from their
Q3 1997 level. As for the UK, we believe it may experience a slowdown in growth,
perhaps to as low as 1%, in 1999. The unbalanced state of UK output growth
persists, with the manufacturing sector in recession while the service sector
has expanded rapidly. However, there are now signs of a deceleration in service
sector growth and consumer spending should moderate considerably in response to
the lagged effect of higher interest rates.
Our emphasis on stock selection has led to an allocation that is overweighted in
the UK versus the EAFE Index, slightly underweighted in the EMU markets and
underweighted in Asia. The avalanche of liquidity that rolled into the European
markets in the past 12 to 18 months has led to some massive valuation
disparities. German equities, most notably, appear richly priced relative to
both the bond market and the Euroland average. The heavy exposure of the German
market to industrial cyclicals suggests that it should trade at a discount to
the Euroland average price-to-earnings ratio, not a premium. Furthermore, we
have noted the widening gap in stock market valuation between the largest cap
stocks in the UK and the rest of Europe. The largest stocks generally offer the
highest price-to-earnings ratios on prospective earnings and have delivered the
bulk of performance gains in their local markets. The UK market is especially
striking as only ten stocks (principally in healthcare and telecommunication)
gained over 8% in the latest quarter, leaving the other 128 stocks in the MSCI
UK Index down over 5%. As a result of this gap, we remain committed to our
strategy of emphasizing the most undervalued stocks in the UK and in Continental
Europe trading at levels that underestimate the prospective growth rates for
earnings and cash flows. In addition, the Japanese market offers a host of
opportunities, especially those related to the domestic economy. Near term
performance of these stocks will depend on signs that the recent reforms are
leading to economic stimulus and, in turn, driving returns higher.
GLOBAL EQUITY FUND
The Global Equity Fund has trailed the MSCI World Index this past year.
Industrial cyclical stocks, which dominate our value screens, have
underperformed their local markets in much of the developed world. While the
U.S. market performance dominated the Index at first from June to December of
1997, the winning markets in 1998 are all in Europe. European markets,
specifically the 11 markets in the European Monetary Union (EMU), stormed ahead
of all other regions with a 44% return in U.S. dollars in the year to June 30.
In contrast, developed Asian markets lost
<PAGE> 6
34% of their value in dollar terms in the same period. Countries slated to adopt
the single European currency, the euro, have experienced dramatic declines in
bond yields and more competitive currencies. As a result, investors have poured
funds into European equities at an unprecedented rate. Japan, the world's second
largest economy, has been unable to fulfill its historic role as the key driver
of growth in the rest of Asia. With fiscal stimulus, loose monetary policy and
financial system reform, the Japanese economy may have turned the corner.
Our emphasis on stock selection has led to an allocation that is overweighted in
the UK versus the MSCI World Index, underweighted in the USA and EMU markets and
overweighted in Asia. The avalanche of liquidity that rolled into the European
markets in the past 12 to 18 months has led to some massive valuation
disparities. Similar to patterns exhibited in the U.S. stock market, there is a
widening gap in stock market valuation between the largest cap stocks in the UK
and the rest of Europe. The largest stocks generally offer the highest price-
to-earnings ratios on prospective earnings and have delivered the bulk of
performance gains in their local markets. The UK market is especially striking
as only ten stocks (principally in healthcare and telecommunication) gained over
8% in the latest quarter, leaving the other 128 stocks in the MSCI UK Index down
over 5%. In all western markets, industry groups with earnings exposure to Asian
markets were severely penalized. Basic materials companies, especially paper and
metals, held back the Fund's performance as they initially rose on strong
profits announcements and then sold off on worries of overseas revenue exposure.
Lack of exposure to technology and healthcare companies, the two best performing
sectors in the global markets, also hampered performance. These stocks are
trading at valuation levels far above the thresholds we are willing to pay. In
keeping with our basic philosophy, we continue to focus on building significant
valuation support into our portfolios. Basic materials companies now represent
an exceptional valuation opportunity to buy world class assets well below
replacement costs. Furthermore, we think the Asian crisis should be a long-term
positive for many industries as new Asian projects will only come on stream if
they can earn a competitive return on capital.
BALANCED FUND
The Balanced Fund achieved a total return of 13.3% for the twelve months ended
June 30, 1998. The strategic asset allocation of fixed-income securities and
equities contributed to the positive returns and reduced price volatility in the
Fund.
The Balanced Fund benefited from a fixed-income strategy which allocated 57% of
total assets at June 30 to investment-grade securities having a slightly longer
duration than the 3.3 year duration of the Lehman Brothers Government/Corporate
Index. During the first two quarters of 1998, bond yields fell to their lowest
levels since 1977, and as a result, the market value of fixed-income securities
tended to increase. The fixed-income portfolio maintained an AAA average
quality. Equities, which represented 43% of the Fund's assets at June 30, were
allocated to a diversified portfolio of 82 common stocks in nine broad economic
sectors. Equity market returns varied in the first half of 1998; returns ranged
from 17.7% for the S&P 500 Index to 4.9% on the broader Russell 2000 Index.
Today, many companies trade at excessive valuation multiples (e.g., Price/
Earnings, Price/Sales, Price/Book, etc.) and may be particularly vulnerable to
downward earnings revisions. We continue to build significant valuation support
into our equity portfolio. In keeping with this philosophy, we currently favor
more defensive sectors such as utilities, finance, basic industries, and
consumer nondurables, while avoiding the more speculative areas of technology
and momentum-driven consumer stocks.
The following table provides a historical perspective on our asset allocation
strategy.
---------------------------------------------------------
ASSET ALLOCATION SUMMARY
<TABLE>
<CAPTION>
Asset Current Average Low Equity High Equity
Category 6/30/98 8/13/85-6/30/98 10/16/87 8/11/89
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equities 43% 46% 27% 59%
Fixed-Income 57% 54% 73% 41%
</TABLE>
<PAGE> 7
SHORT-TERM
INVESTMENT FUND
LOW DURATION FUND
TOTAL RETURN BOND FUND
The Fixed-Income Funds turned in another year of strong performance for the year
ended June 30, 1998.
<TABLE>
<S> <C>
- -----------------------------------------------
Short-Term Investment Fund............. 6.4%
Merill Lynch Six-Month U.S. Treasury
Bill Index........................... 5.5%
Low Duration Fund...................... 7.2%
Merrill Lynch 1-3 Year U.S. Treasury
Index................................ 6.8%
Total Return Bond Fund................. 11.0%
Lehman Brothers Aggregate Index........ 10.5%
- -----------------------------------------------
</TABLE>
What an exciting and tricky year it was! The theme of strong domestic growth
paired with low inflation carried over from the previous year. Interest rates
moved lower and fixed-income securities performed very well, at least until
October and the onset of the "Asian Contagion." Currency devaluations initiated
a series of economic crises throughout Asia, with the impact on Hong Kong and
South Korean markets, in particular, affecting U.S. markets. Fortunately, the
Fixed-Income Funds were well insulated from much of the resulting turmoil and
performed very well during this difficult period.
The Federal Reserve board kept the Fed Funds rate unchanged at 5.50% for the
year as the Asian crisis hit at just the right time to stave off a probable
interest rate hike. The deflationary pressures put on our economy by Asia
balanced a very tight labor market in our robust domestic economy and gave the
Fed the luxury of waiting on the sidelines. This balancing act continued through
the end of June, keeping interest rates in a tight range during the second half
of the Funds' fiscal year. After declining nearly 90 basis points during the
second half of 1997, the long bond yield bounced between 5.80% and 6.00% for the
majority of the first six months of 1998.
Sector allocation and security selection, two key components of our philosophy,
were the biggest drivers of performance for the Funds. At the end of 1997,
serious concerns regarding the prospect of extremely fast prepayments in
mortgage-backed securities contributed to our decision to reduce exposure to
this sector. We replaced most of those securities with asset-backed securities
that offered some protection from unscheduled prepayments. We also reduced
exposure to corporate bonds, reflecting our concern that problems in Asia would
affect corporate profits. Both of these moves had a positive impact on portfolio
returns during the year.
Looking forward, the balancing act seems likely to continue for some time.
Weakness in our trading partners in Asia has mitigated the robust growth in the
domestic economy. We believe it is probable that economic growth will moderate,
allowing interest rates to move somewhat lower. This does not bode well for most
mortgage-backed securities, therefore we anticipate remaining underweighted in
that sector. Corporate profits also remain a concern, leaving asset-backed
securities the sector of choice.
We appreciate your continued support and look forward to serving your investment
needs in the months and years ahead.
Cordially,
Nancy D. Celick sig
Nancy D. Celick
President
HOTCHKIS AND WILEY FUNDS
A description of the market indices referred to in this letter and in the
following pages is provided after the graphs.
The statements made in the foregoing commentary are as of June 30, 1998, and may
not accurately reflect opinions of Hotchkis and Wiley after that date. No
guarantee can be given regarding the accuracy of any opinions or predictions
made. Because the Funds are actively managed, any Fund specific information in
the commentary may no longer be accurate. The Funds may not continue to hold any
specific securities mentioned, and have no obligation to disclose purchases or
sales in such securities.
<PAGE> 8
SMALL FUND CAP RUSSELL 200 INDEX
2Q86 14489.480 13905.173
2Q87 15435.764 15155.452
2Q88 14518.580 14216.901
2Q89 14399.124 16027.370
2Q90 17358.171 16516.767
2Q91 18331.406 16720.329
2Q92 21821.032 19151.410
2Q93 26141.223 24121.837
2Q94 27139.622 25164.210
2Q95 31150.335 30182.566
2Q96 35583.076 37403.666
2Q97 46157.388 43570.153
2Q98 56408.886 50736.545
Ended
6/30/98
---------------------
One Year 22.2%
---------------------
Five Years 16.6%
---------------------
Ten Years 14.5%
---------------------
Since Inception
(9/20/85) 14.5%
---------------------
Equity Income S&P 500
------------- ----------
2Q87 9992.0000 9861.0000
2Q88 9707.7221 9158.9085
2Q89 11840.1855 11015.4157
2Q90 11792.0944 12801.2518
2Q91 12611.3557 13729.8997
2Q92 15043.6671 15570.5451
2Q93 16800.5828 17667.9431
2Q94 17372.8151 17910.9149
2Q95 20939.3129 22575.6481
2Q96 25137.5551 28471.6618
2Q97 31703.9622 38389.3677
2Q98 38874.8201 50020.2611
Ended
6/30/98
---------------------
One Year 22.6%
---------------------
Five Years 18.3%
---------------------
Ten Years 14.9%
---------------------
Since Inception
(9/20/85) 13.1%
---------------------
GRAPH
CPI+4 LB G/C Balanced S&P 500
---------- ---------- ---------- ----------
2Q87 10083.0000 10127.0000 10072.0000 10049.0000
2Q88 10504.6418 11980.0142 12370.3606 14218.4177
2Q89 11331.0994 12540.8371 13501.8799 17784.7693
2Q90 12257.5613 13479.1995 14257.2641 16518.5148
2Q91 13417.7957 15142.4267 16752.1548 19866.8114
2Q92 14612.9757 16217.9845 17809.0123 23087.6494
2Q93 15917.5780 17876.3435 19483.9312 24762.5086
2Q94 17078.0449 20409.4217 22435.3011 28082.1977
2Q95 18304.9453 23093.4351 24698.2070 31896.6900
2Q96 19523.9321 22758.3094 25602.0136 32335.3373
2Q97 20930.5158 25664.0609 29662.0540 40749.0096
2Q98 22382.9523 26858.1461 34122.7278 51391.3051
23817.0428 28941.4035 39497.5143 69292.7488
25211.1371 32208.1170 44763.2355 90286.4932
Ended
6/30/98
---------------------
One Year 13.3%
---------------------
Five Years 12.7%
---------------------
Ten Years 12.2%
---------------------
Since Inception
(9/20/85) 12.4%
---------------------
Past performance is not predictive of future performance. The
representative market indices are unmanaged. The annual returns assume the
reinvestment of all dividends and distributions, as well as the voluntary
agreement of Hotchkis and Wiley, the Funds' advisor, to assume fees and
expenses in excess of certain limits. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
<PAGE> 9
[GRAPH]
INTERNATIONAL FUND
DECEMBER 1, 1990 - JUNE 30, 1998
INTERNATIONAL MSCI
FUND EAFE INDEX
2Q91 $ 10037.2454 $ 10343.3851
2Q92 $ 12843.3840 $ 10311.4729
2Q93 $ 13789.6461 $ 12445.0915
2Q94 $ 16094.6118 $ 14598.4920
2Q95 $ 17880.1088 $ 14883.4988
2Q96 $ 21208.0118 $ 16911.2461
2Q97 $ 25788.0250 $ 19128.6715
2Q98 $ 27795.0000 $ 20349.4494
Ended
6/30/98
One Year 7.8%
Five Years 15.1%
Commencement of
Operations 14.3%
(12/1/90)
[GRAPH]
LOW DURATION FUND
MAY 18, 1993 - JUNE 30, 1998
LOW DURATION FUND ML TREASURY
2Q93 $ 10053.0000 $ 10058.0000
2Q94 $ 10961.8635 $ 10218.8787
2Q95 $ 12083.9190 $ 11009.6437
2Q96 $ 12988.6997 $ 11610.2905
2Q97 $ 14000.4532 $ 12371.7882
2Q98 $ 15003.4631 $ 13213.8657
Ended
6/30/98
One Year 7.2%
Five Years 8.3%
Since Inception 8.2%
(5/18/93)
[GRAPH]
TOTAL RETURN BOND FUND
DECEMBER 6, 1994 - JUNE 30, 1998
TOTAL RETURN
BOND FUND LB AGGREGATE
2Q95 $ 11187.2155 $ 11150.3798
2Q96 $ 11971.7449 $ 11709.8088
2Q97 $ 13224.7645 $ 12663.7484
2Q98 $ 14686.7563 $ 13999.0621
Ended
6/30/98
One Year 11.0%
Three Years 9.5%
Since Inception 11.4%
(12/6/94)
[GRAPH]
SHORT-TERM INVESTMENT FUND
MAY 18, 1993 - JUNE 30, 1998
SHORT-TERM
INVESTMENT FUND ML TREASURY
2Q93 $ 10028.0000 $ 10033.0000
2Q94 $ 10778.6644 $ 10362.0252
2Q95 $ 11401.1030 $ 10966.3069
2Q96 $ 12225.0687 $ 11571.6877
2Q97 $ 12929.0849 $ 12228.5972
2Q98 $ 13757.0000 $ 12904.9756
Ended
6/30/98
One Year 6.4%
Five Years 6.5%
Since Inception 6.4%
(5/18/93)
Past performance is not predictive of future performance. The representative
market indices are unmanaged. The annual returns assume the reinvestment of all
dividends and distributions, as well as the voluntary agreement of Hotchkis and
Wiley, the Funds' advisor, to assume fees and expenses in excess of certain
limits. Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
<PAGE> 10
GRAPH
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
JANUARY 2, 1997 - JUNE 30, 1998
Global Equity Fund MCSI World Index
<S> <C> <C>
4Q96 10000.0000 10000.0000
2Q97 11232.8020 11563.0680
4Q97 10779.6883 11623.1784
2Q98 12087.1722 13582.3716
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/98
<S> <C>
One year 7.6%
Since Inception 13.5%
(1/2/97)
</TABLE>
GRAPH
<TABLE>
<CAPTION>
MID-CAP FUND
JANUARY 2, 1997 - JUNE 30, 1998
MID-CAP FUND RUSSELL MID-CAP INDEX
<S> <C> <C>
4Q96 10000.0000 10000.0000
2Q97 11714.1360 11262.8808
4Q97 13244.0415 12900.2117
2Q98 13469.5898 14078.8743
</TABLE>
<TABLE>
<CAPTION>
Ended
6/30/98
<S> <C>
One year 15.0%
Since Inception 22.0%
(1/2/97)
</TABLE>
Past performance is not predictive of future performance. The representative
market indices are unmanaged. The annual returns assume the reinvestment of
all dividends and distributions, as well as the voluntary agreement of Hotchkis
and Wiley, the Funds' advisor, to assume fees and expenses of certain limits.
Investment return and principal value of shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
<PAGE> 11
- --------------------------------------------------------------------------------
MARKET INDICES
The following are definitions for indices used in the performance summary charts
as of June 30, 1998. These indices are unmanaged and include the reinvestment of
all dividends, but do not reflect the payment of transaction costs and advisory
fees associated with an investment in the Funds. The securities that comprise
these indices may differ substantially from the securities in the Funds'
portfolios. Each index named is not the only index which may be used to
characterize performance of a specific Fund and other indices may portray
different comparative performance.
CONSUMER PRICE INDEX (CPI) is a measure of the average change in prices over
time in a fixed market basket of goods and services (e.g., food, clothing,
shelter, fuel, transportation fares, medical and other day-to-day services).
While not an objective of the Balanced Fund, the Advisor's current goal is a
return at least 4% greater than the rate of inflation as measured by the CPI.
LEHMAN BROTHERS AGGREGATE INDEX is a weighted index comprised of the
Government/Corporate Index, the Mortgage-Backed Securities Index, and the Asset-
Backed Securities Index. The index includes fixed-rate debt issues rated
investment grade or higher. All issues have at least one year to maturity and an
outstanding par value of at least $100 million for U.S. Government issues and
$50 million for all others.
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX (LB Govt/Corp) is a weighted index
comprised of publicly-traded intermediate and long-term government and corporate
debt with an average maturity of 11 years.
MERRILL LYNCH 1-3 YEAR U.S. TREASURY INDEX is an index of Treasury securities
with maturities ranging from one to three years.
MERRILL LYNCH 6 MONTH U.S. TREASURY BILL INDEX is an index of Treasury
securities with maturities of six months.
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(MSCI-EAFE) is an arithmetical average weighted by market value of the
performance of over 1,000 non-U.S. companies representing 18 stock markets in
Europe, Australia, New Zealand and the Far East.
MSCI WORLD INDEX is an arithmetical average weighted by market value of the
performance of over 1,400 companies listed on stock exchanges in the 22
countries that make up the MSCI Network Indices.
RUSSELL 2000 INDEX (Russell 2000) is a stock market index comprised of the 2,000
smallest U.S. domiciled publicly-traded common stocks that are included in the
Russell 3000 Index. These common stocks represent approximately 11% of the U.S.
equity market. The Russell 3000 Index is comprised of the 3,000 largest U.S.
domiciled publicly-traded common stocks by market capitalization representing
approximately 98% of the U.S. publicly-traded equity market.
RUSSELL MIDCAP INDEX measures the performance of the 800 smallest securities in
the Russell 1000 Index, which represent approximately 35% of the total market
capitalization. The Russell 1000 Index is comprised of the largest 1,000
companies in the Russell 3000.
STANDARD & POOR'S 500 INDEX (S&P 500) is a capital-weighted index, representing
the aggregate market value of the common equity of 500 stocks primarily traded
on the New York Stock Exchange.
<PAGE> 12
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SCHEDULE OF INVESTMENTS:
EQUITY INCOME FUND..................................... 1
MID-CAP FUND........................................... 4
SMALL CAP FUND......................................... 7
INTERNATIONAL FUND..................................... 9
GLOBAL EQUITY FUND..................................... 13
BALANCED FUND.......................................... 17
TOTAL RETURN BOND FUND................................. 22
LOW DURATION FUND...................................... 26
SHORT-TERM INVESTMENT FUND............................. 31
STATEMENT OF ASSETS AND LIABILITIES...................... 36
STATEMENT OF OPERATIONS.................................. 38
STATEMENT OF CHANGES IN NET ASSETS....................... 40
NOTES TO FINANCIAL STATEMENTS............................ 44
FINANCIAL HIGHLIGHTS..................................... 50
REPORT OF INDEPENDENT ACCOUNTANTS........................ 59
</TABLE>
TORCH
[HOTCHKIS AND WILEY FUNDS LOGO]
<PAGE> 13
(Intentionally Left Blank)
<PAGE> 14
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 99.2% Shares Value
- ----------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 4.0%
..........................................................
Lockheed Martin Corporation 12,000 $ 1,270,500
..........................................................
Northrop Grumman Corporation 40,729 4,200,178
..........................................................
Rockwell International
Corporation 32,721 1,572,653
..................... ..................... -----------
7,043,331
- ----------------------------------------------------------
APPAREL & TEXTILES -- 0.8%
..........................................................
Russell Corporation 46,000 1,388,625
- ----------------------------------------------------------
AUTO PARTS -- 1.7%
..........................................................
Dana Corporation 50,000 2,675,000
..........................................................
Meritor Automotive, Inc. 10,874 260,976
..................... ..................... -----------
2,935,976
- ----------------------------------------------------------
AUTOS & TRUCKS -- 6.9%
..........................................................
Ford Motor Company 106,000 6,254,000
..........................................................
General Motors Corporation 88,000 5,879,500
..................... ..................... -----------
12,133,500
- ----------------------------------------------------------
BANKS -- 6.6%
..........................................................
Banc One Corporation 16,000 893,000
..........................................................
First Chicago NBD Corporation 44,468 3,940,977
..........................................................
First Union Corporation 31,000 1,805,750
..........................................................
Fleet Financial Group, Inc. 31,000 2,588,500
..........................................................
KeyCorp 68,000 2,422,500
..................... ..................... -----------
11,650,727
- ----------------------------------------------------------
BEVERAGES -- 0.4%
..........................................................
Anheuser-Busch Companies, Inc. 16,500 778,594
- ----------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 2.4%
..........................................................
Georgia-Pacific (Timber Group) 50,710 1,169,499
..........................................................
Weyerhaeuser Company 64,000 2,956,000
..................... ..................... -----------
4,125,499
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Shares Value
<S> <C> <C>
CHEMICALS -- 2.8%
..........................................................
The Dow Chemical Company 32,700 $ 3,161,681
..........................................................
Eastman Chemical Company 28,000 1,743,000
..................... ..................... -----------
4,904,681
- ----------------------------------------------------------
CONGLOMERATES -- 1.8%
..........................................................
Tenneco, Inc. 83,000 3,159,188
- ----------------------------------------------------------
CONSUMER PRODUCTS -- 1.0%
..........................................................
Tupperware Corporation 64,000 1,800,000
- ----------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.1%
..........................................................
Harsco Corporation 40,195 1,841,433
- ----------------------------------------------------------
FINANCIAL SERVICES -- 4.3%
..........................................................
Associates First Capital
Corporation - Class A 29,000 2,229,375
..........................................................
Beneficial Corporation 17,000 2,604,188
..........................................................
Household International, Inc. 19,500 970,125
..........................................................
Transamerica Corporation 15,500 1,784,437
..................... ..................... -----------
7,588,125
- ----------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 2.4%
..........................................................
Whirlpool Corporation 62,000 4,262,500
- ----------------------------------------------------------
INSURANCE -- 6.2%
..........................................................
American General Corporation 44,000 3,132,250
..........................................................
Lincoln National Corporation 23,000 2,101,625
..........................................................
Safeco Corporation 57,900 2,627,212
..........................................................
St. Paul Companies, Inc. 42,000 1,766,625
..........................................................
TIG Holdings, Inc. 56,133 1,291,059
..................... ..................... -----------
10,918,771
- ----------------------------------------------------------
LEISURE/TOYS -- 1.1%
..........................................................
Fortune Brands, Inc. 48,200 1,852,687
- ----------------------------------------------------------
MACHINERY -- 1.6%
..........................................................
New Holland N.V. 143,300 2,812,263
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
1
<PAGE> 15
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
METALS & MINING -- 3.3%
..........................................................
Aluminum Company of America 38,000 $ 2,505,625
..........................................................
Phelps Dodge Corporation 14,300 817,781
..........................................................
Reynolds Metals Company 44,000 2,461,250
..................... ..................... -----------
5,784,656
- ----------------------------------------------------------
NATURAL GAS -- 1.0%
..........................................................
Eastern Enterprises 39,000 1,672,125
- ----------------------------------------------------------
OIL -- DOMESTIC -- 8.4%
..........................................................
Atlantic Richfield Company 38,457 3,004,453
..........................................................
Occidental Petroleum Corporation 157,000 4,239,000
..........................................................
Phillips Petroleum Company 84,500 4,071,844
..........................................................
USX-Marathon Group, Inc. 52,000 1,784,250
..........................................................
Ultramar Diamond Shamrock
Corporation 50,000 1,578,125
..................... ..................... -----------
14,677,672
- ----------------------------------------------------------
PAPER -- 2.7%
..........................................................
Georgia-Pacific Group 20,493 1,207,806
..........................................................
International Paper Company 47,500 2,042,500
..........................................................
Union Camp Corporation 29,000 1,439,125
..................... ..................... -----------
4,689,431
- ----------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 1.6%
..........................................................
Eastman Kodak Company 38,800 2,834,825
- ----------------------------------------------------------
POLLUTION CONTROL -- 2.7%
..........................................................
Browning-Ferris Industries, Inc. 47,000 1,633,250
..........................................................
Waste Management, Inc. 87,000 3,045,000
..................... ..................... -----------
4,678,250
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Shares Value
<S> <C> <C>
RAILROADS -- 1.9%
..........................................................
CSX Corporation 15,000 $ 682,500
..........................................................
Norfolk Southern Corporation 86,000 2,563,875
..................... ..................... -----------
3,246,375
- ----------------------------------------------------------
RETAIL -- 4.6%
..........................................................
Intimate Brands, Inc. 46,500 1,281,656
..........................................................
J.C. Penney Company, Inc. 35,000 2,530,937
..........................................................
May Department Stores Company 32,500 2,128,750
..........................................................
Sears, Roebuck & Company 34,400 2,100,550
..................... ..................... -----------
8,041,893
- ----------------------------------------------------------
SAVINGS & LOANS -- 4.2%
..........................................................
Fannie Mae 55,000 3,341,250
..........................................................
H.F. Ahmanson & Company 56,200 3,990,200
..................... ..................... -----------
7,331,450
- ----------------------------------------------------------
STEEL -- 2.3%
..........................................................
Allegheny Teledyne, Inc. 56,000 1,281,000
..........................................................
USX-U.S. Steel Group, Inc. 85,000 2,805,000
..................... ..................... -----------
4,086,000
- ----------------------------------------------------------
TOBACCO -- 3.9%
..........................................................
Philip Morris Companies, Inc. 151,825 5,978,109
..........................................................
UST, Inc. 30,000 810,000
..................... ..................... -----------
6,788,109
- ----------------------------------------------------------
TRUCKING -- 0.8%
..........................................................
Ryder System, Inc. 43,000 1,357,188
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
2
<PAGE> 16
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
UTILITY -- ELECTRIC -- 11.1%
..........................................................
CMS Energy Corporation 72,000 $ 3,168,000
..........................................................
Central & South West Corporation 75,000 2,015,625
..........................................................
DTE Energy Company 48,000 1,938,000
..........................................................
Entergy Corporation 33,800 971,750
..........................................................
GPU, Inc. 25,000 945,313
..........................................................
Illinova Corporation 120,000 3,600,000
..........................................................
PacifiCorp 48,121 1,088,738
..........................................................
PECO Energy Company 19,168 559,466
..........................................................
PP&L Resources, Inc. 60,000 1,361,250
..........................................................
Public Service Enterprises Group,
Inc. 59,000 2,031,813
..........................................................
SCANA Corporation 62,000 1,848,375
..................... ..................... -----------
19,528,330
- ----------------------------------------------------------
UTILITY -- TELEPHONE -- 5.6%
..........................................................
AT&T Corporation 74,700 4,267,238
..........................................................
ALLTEL Corporation 68,000 3,162,000
..........................................................
Bell Atlantic Corporation 54,000 2,463,750
..................... ..................... -----------
9,892,988
- ----------------------------------------------------------
Total common stocks
(cost $129,676,443) 173,805,192
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE RATE Principal
DEMAND NOTES * -- 0.4% Amount Value
- ------------------------------------------------------------
<S> <C> <C>
General Mills, Inc., 5.2651% $230,978 $ 230,978
............................................................
Pitney Bowes, Inc., 5.2651% 596,679 596,679
..................... ...................... -----------
Total variable rate demand notes 827,657
(cost $827,657)
- ------------------------------------------------------------
Total investments -- 99.6%
(cost $130,504,100) 174,632,849
............................................................
Other assets in excess of
liabilities -- 0.4% 621,736
..................... ...................... -----------
Total net assets -- 100.0% $175,254,585
- ------------------------------------------------------------
</TABLE>
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1998.
See Notes to Financial Statements
3
<PAGE> 17
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.7% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 1.9%
...........................................................
Northrop Grumman Corporation 1,400 $ 144,375
- -----------------------------------------------------------
APPAREL & TEXTILES -- 3.9%
...........................................................
Coats Viyella PLC ADR 24,600 91,118
...........................................................
Russell Corporation 6,700 202,256
...................... ...................... ----------
293,374
- -----------------------------------------------------------
AUTO PARTS -- 6.1%
...........................................................
Dana Corporation 1,800 96,300
...........................................................
Echlin, Inc. 1,800 88,312
...........................................................
ITT Industries, Inc. 3,500 130,812
...........................................................
Lear Corporation # 2,800 143,675
...................... ...................... ----------
459,099
- -----------------------------------------------------------
BANKS -- 7.2%
...........................................................
Compass Bancshares, Inc. 1,150 51,894
...........................................................
Colonial BancGroup, Inc. 2,000 64,500
...........................................................
First Midwest Bancorp, Inc. 2,000 87,937
...........................................................
Union Planters Corporation 1,600 94,100
...........................................................
UnionBanCal Corporation 2,500 241,250
...................... ...................... ----------
539,681
- -----------------------------------------------------------
BEVERAGES -- 1.7%
...........................................................
Pernod Ricard SA ADR 7,200 124,743
- -----------------------------------------------------------
CHEMICALS -- 3.9%
...........................................................
DSM N.V. ADR 3,500 89,813
...........................................................
Eastman Chemical Company 2,000 124,500
...........................................................
Lyondell Petrochemical Company 2,500 76,094
...................... ...................... ----------
290,407
- -----------------------------------------------------------
COMMUNICATION EQUIPMENT MANUFACTURERS -- 0.6%
...........................................................
Princeton Video Image, Inc. # 10,200 47,175
- -----------------------------------------------------------
COMMUNICATIONS & MEDIA -- 1.4%
...........................................................
Groupe AB SA ADR # 18,300 102,937
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
COMPUTERS -- 2.2%
...........................................................
Komag, Inc. # 5,600 $ 29,925
...........................................................
Quantum Corporation # 6,500 134,875
...................... ...................... ----------
164,800
- -----------------------------------------------------------
COMPUTER SOFTWARE & SERVICES -- 2.2%
...........................................................
Vanstar Corporation # 11,400 166,013
- -----------------------------------------------------------
CONSUMER NON-DURABLES -- MISCELLANEOUS -- 0.2%
...........................................................
The Dial Corporation 600 15,562
- -----------------------------------------------------------
CONSUMER PRODUCTS -- 1.9%
...........................................................
Tupperware Corporation 5,200 146,250
- -----------------------------------------------------------
CONTAINERS -- 2.7%
...........................................................
Crown Cork & Seal Company, Inc. 4,300 204,250
- -----------------------------------------------------------
ELECTRIC PRODUCTS -- 1.7%
...........................................................
UCAR International, Inc. # 4,500 131,344
- -----------------------------------------------------------
ELECTRONICS -- 2.8%
...........................................................
Avnet, Inc. 2,000 109,375
...........................................................
Silicon Valley Group, Inc. # 6,400 102,800
...................... ...................... ----------
212,175
- -----------------------------------------------------------
FOODS -- 1.2%
...........................................................
Dean Foods Company 1,700 93,394
- -----------------------------------------------------------
HEALTHCARE -- DRUGS -- 1.1%
...........................................................
Bergen Brunswig Corporation - Class
A 1,800 83,475
- -----------------------------------------------------------
HOSPITAL/HEALTHCARE MANAGEMENT -- 1.3%
...........................................................
Foundation Health Systems, Inc. -
Class A # 3,700 97,587
- -----------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 2.3%
...........................................................
Whirlpool Corporation 2,500 171,875
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
4
<PAGE> 18
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
INSURANCE -- 3.6%
...........................................................
Harleysville Group, Inc. 3,400 $ 70,550
...........................................................
IPC Holdings Limited 3,000 90,938
...........................................................
Ohio Casualty Corporation 1,200 53,100
...........................................................
St. Paul Companies, Inc. 1,400 58,888
...................... ...................... ----------
273,476
- -----------------------------------------------------------
MACHINERY -- 3.2%
...........................................................
EVI Weatherford, Inc. # 3,230 119,914
...........................................................
New Holland N.V. 6,100 119,713
...................... ...................... ----------
239,627
- -----------------------------------------------------------
METALS & MINING -- 1.5%
...........................................................
Reynolds Metals Company 2,000 111,875
- -----------------------------------------------------------
MISCELLANEOUS -- 3.3%
...........................................................
American Coin Merchandising, Inc. # 9,800 193,550
...........................................................
Zapata Corporation 5,300 52,338
...................... ...................... ----------
245,888
- -----------------------------------------------------------
NATURAL GAS -- 1.0%
...........................................................
Equitable Resources, Inc. 1,400 42,700
...........................................................
MCN Energy Group, Inc. 1,300 32,337
...................... ...................... ----------
75,037
- -----------------------------------------------------------
OIL -- DOMESTIC -- 4.7%
...........................................................
Murphy Oil Corporation 2,600 131,787
...........................................................
Phillips Petroleum Company 2,000 96,375
...........................................................
Valero Energy Corporation 3,800 126,350
...................... ...................... ----------
354,512
- -----------------------------------------------------------
OIL & GAS DRILLING -- 3.4%
...........................................................
Diamond Offshore Drilling, Inc. 1,500 60,000
...........................................................
Nuevo Energy Corporation # 3,000 96,375
...........................................................
Pioneer Natural Resources Company 4,300 102,663
...................... ...................... ----------
259,038
- -----------------------------------------------------------
OIL & GAS SERVICES -- 2.4%
...........................................................
Tidewater, Inc. 5,500 181,500
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
OIL WELL SERVICES -- 0.2%
...........................................................
Bayard Drilling Technologies, Inc.
# 1,000 $ 8,125
...........................................................
TransCoastal Marine Services, Inc.
# 1,800 10,856
...................... ...................... ----------
18,981
- -----------------------------------------------------------
PAPER -- 2.7%
...........................................................
Chesapeake Corporation 2,800 109,025
...........................................................
Consolidated Papers, Inc. 3,400 92,650
...................... ...................... ----------
201,675
- -----------------------------------------------------------
POLLUTION CONTROL -- 1.0%
...........................................................
Waste Management International PLC
# 7,100 77,213
- -----------------------------------------------------------
PROFESSIONAL SERVICES -- 0.9%
...........................................................
Olsten Corporation 6,200 69,362
- -----------------------------------------------------------
PUBLISHING -- 0.1%
...........................................................
Playboy Enterprises, Inc. - Class A
# 500 8,187
- -----------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 1.0%
...........................................................
Redwood Trust, Inc. 4,400 77,275
- -----------------------------------------------------------
RETAIL -- 1.1%
...........................................................
Family Dollar Stores, Inc. 4,300 79,550
- -----------------------------------------------------------
RETAIL -- SPECIALTY -- 0.8%
...........................................................
AutoZone, Inc. # 2,000 63,875
- -----------------------------------------------------------
SAVINGS & LOANS -- 2.2%
...........................................................
Charter One Financial, Inc. 2,500 84,219
...........................................................
Washington Federal, Inc. 3,003 82,958
...................... ...................... ----------
167,177
- -----------------------------------------------------------
STEEL -- 3.3%
...........................................................
AK Steel Holding Corporation 7,200 128,700
...........................................................
USX-U.S. Steel Group, Inc. 3,600 118,800
...................... ...................... ----------
247,500
- -----------------------------------------------------------
TOBACCO -- 3.9%
...........................................................
RJR Nabisco Holdings Corp. 9,000 213,750
...........................................................
Universal Corporation/VA 2,200 82,225
...................... ...................... ----------
295,975
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 19
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- AIR -- 0.7%
...........................................................
ASA Holdings, Inc. 1,000 $ 49,625
- -----------------------------------------------------------
TRUCKING -- 0.8%
...........................................................
Ryder System, Inc. 1,800 56,813
- -----------------------------------------------------------
UTILITY -- ELECTRIC -- 5.6%
...........................................................
GPU, Inc. 4,000 151,250
...........................................................
Montana Power Company 1,600 55,600
...........................................................
PacifiCorp 4,900 110,863
...........................................................
PP&L Resources, Inc. 4,700 106,631
...................... ...................... ----------
424,344
- -----------------------------------------------------------
Total common stocks
(cost $7,428,386) 7,067,021
- -----------------------------------------------------------
VARIABLE RATE
DEMAND NOTES* Principal
- -- 6.8% Amount
- -----------------------------------------------------------
General Mills, Inc., 5.2651% $200,000 200,000
...........................................................
Pitney Bowes, Inc., 5.2651% 200,000 200,000
...........................................................
Warner-Lambert Co., 5.2660% 111,047 111,047
............................................. ----------
Total variable rate demand notes 511,047
(cost $511,047)
- -----------------------------------------------------------
Total investments -- 100.5%
(cost $7,939,433) 7,578,068
...........................................................
Liabilities in excess of other
assets -- (0.5)% (38,888)
...................... ...................... ----------
Total net assets -- 100.0% $ 7,539,180
- -----------------------------------------------------------
</TABLE>
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1998.
ADR -- American Depository Receipts.
# -- Non-income producing security.
See Notes to Financial Statements
6
<PAGE> 20
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
COMMON STOCKS-- 96.1% Shares Value
- ------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 3.8%
............................................................
AVTEAM, Inc. # 337,700 $ 3,630,275
- ------------------------------------------------------------
AUTO PARTS -- 3.5%
............................................................
Stoneridge, Inc. # 157,600 2,876,200
............................................................
Titan International, Inc. 26,500 450,500
...................... ...................... ----------
3,326,700
- ------------------------------------------------------------
APPLIANCE & HOUSEHOLD FURNITURE -- 2.2%
............................................................
Hussman International, Inc. 110,800 2,056,725
- ------------------------------------------------------------
BANK & BANK HOLDING COMPANIES -- 2.0%
............................................................
Banknorth Group, Inc. 9,200 340,400
............................................................
First Midwest Bancorp Inc. 19,700 866,184
............................................................
Hubco, Inc. 18,000 644,625
...................... ...................... ----------
1,851,209
- ------------------------------------------------------------
CHEMICALS -- 3.2%
............................................................
The Carbide/Graphite Group, Inc.
# 110,600 3,076,063
- ------------------------------------------------------------
COMMERCIAL SERVICES -- 2.3%
............................................................
FirstService Corporation # 173,100 2,207,025
- ------------------------------------------------------------
COMMUNICATION EQUIPMENT/MANUFACTURERS -- 0.4%
............................................................
Princeton Video Image, Inc.# 73,800 341,325
- ------------------------------------------------------------
COMMUNICATIONS & MEDIA -- 2.0%
............................................................
Groupe AB SA ADR # 338,900 1,906,312
- ------------------------------------------------------------
COMPUTERS -- 1.6%
............................................................
Hutchinson Technology, Inc. # 19,500 531,375
............................................................
MICROS Systems, Inc. # 29,300 969,647
...................... ...................... ----------
1,501,022
- ------------------------------------------------------------
COMPUTER SYSTEMS -- 4.0%
............................................................
Radisys Corporation # 174,600 3,753,900
- ------------------------------------------------------------
ELECTRONICS -- 2.1%
............................................................
Hadco Corporation # 41,900 976,794
............................................................
Silicon Valley Group, Inc. # 60,900 978,206
...................... ...................... ----------
1,955,000
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT -- 2.1%
............................................................
Alliance Communications
Corporation Class B # 116,000 $ 2,001,000
- ------------------------------------------------------------
FINANCE -- MISCELLANEOUS -- 3.2%
............................................................
Executive Risk, Inc. 41,700 3,075,375
- ------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- 3.4%
............................................................
J & J Snack Foods Corporation # 154,300 3,221,012
- ------------------------------------------------------------
HEALTHCARE -- MISCELLANEOUS -- 5.0%
............................................................
HealthPlan Services Corporation 273,400 4,784,500
- ------------------------------------------------------------
INSURANCE -- 10.4%
............................................................
ESG Re Limited 284,200 6,145,825
............................................................
FPIC Insurance Group, Inc. # 36,100 1,213,862
............................................................
Stirling Cooke Brown Holdings
Limited 88,900 2,500,313
...................... ...................... ----------
9,860,000
- ------------------------------------------------------------
MACHINERY -- 4.8%
............................................................
Denison International PLC ADR # 183,000 3,614,250
............................................................
Hawk Corporation Class A # 56,100 988,763
...................... ...................... ----------
4,603,013
- ------------------------------------------------------------
METALS & MINING -- 0.3%
............................................................
Northwest Pipe Company # 12,900 303,150
- ------------------------------------------------------------
MISCELLANEOUS -- 12.5%
............................................................
American Coin Merchandising,
Inc. # 347,000 6,853,250
............................................................
Mac-Gray Corporation # 17,400 221,850
............................................................
Ralcorp Holdings, Inc. # 155,000 2,925,625
............................................................
Zapata Corporation 190,300 1,879,212
...................... ...................... ----------
11,879,937
- ------------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 2.2%
............................................................
Abraxas Petroleum Corporation # 83,100 758,288
............................................................
Trico Marine Services, Inc. # 100,100 1,370,119
...................... ...................... ----------
2,128,407
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 21
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
OIL & GAS DRILLING -- 2.2%
............................................................
Coho Energy, Inc. # 134,000 $ 904,500
............................................................
Nuevo Energy Company # 36,000 1,156,500
...................... ...................... ----------
2,061,000
- ------------------------------------------------------------
PUBLISHING -- 3.9%
............................................................
Playboy Enterprises, Inc. Class
A # 35,500 581,313
............................................................
Playboy Enterprises, Inc. # 177,900 3,157,725
...................... ...................... ----------
3,739,038
- ------------------------------------------------------------
RETAIL -- FOOD CHAINS -- 3.7%
............................................................
Dominick's Supermarkets, Inc. # 79,700 3,551,631
- ------------------------------------------------------------
RETAIL -- JEWELRY -- 4.7%
............................................................
Finlay Enterprises, Inc. # 30,000 723,750
............................................................
Friedman's, Inc. # 223,600 3,703,375
...................... ...................... ----------
4,427,125
- ------------------------------------------------------------
SAVINGS & LOANS -- 1.2%
............................................................
Coastal Bancorp, Inc. 48,750 1,194,375
- ------------------------------------------------------------
SECURITY SERVICES -- 0.9%
............................................................
Wackenhut Corporation - Class B 39,000 838,500
- ------------------------------------------------------------
SOFTWARE -- 3.9%
............................................................
Vanstar Corporation # 251,600 3,663,925
- ------------------------------------------------------------
STEEL FABRICATOR -- 0.8%
............................................................
Citation Corporation # 24,010 480,200
............................................................
WHX Corporation # 19,400 249,775
...................... ...................... ----------
729,975
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Shares Value
<S> <C> <C>
TRANSPORTATION -- AIR FREIGHT -- 2.4%
............................................................
AirNet Systems, Inc. # 140,000 $ 2,257,500
- ------------------------------------------------------------
TRANSPORTATION -- AIRLINES -- 0.7%
............................................................
Aviall, Inc. # 48,000 657,000
- ------------------------------------------------------------
TRUCKING -- 0.7%
............................................................
Allied Holdings, Inc. # 31,200 657,150
- ------------------------------------------------------------
Total common stocks
(cost $90,573,759) 91,239,169
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE CORPORATE BONDS Principal
- -- 1.7% Amount Value
- ------------------------------------------------------------
<S> <C> <C>
Hutchinson Technology, (Acquired
3/13/98, cost $1,380,000),
6.0%, 3/15/2005 r $1,380,000 $ 1,593,900
- ------------------------------------------------------------
Total investments -- 97.8%
(cost $91,953,759) 92,833,069
............................................................
Other assets in excess of
liabilities -- 2.2% 2,080,207
...................... ...................... ----------
$94,913,276
Total net assets -- 100.0%
- ------------------------------------------------------------
</TABLE>
ADR -- American Depository Receipts.
# -- Non-income producing security.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
See Notes to Financial Statements
8
<PAGE> 22
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
COMMON STOCKS -- 93.2%
- ------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 2.5% Shares Value
- ------------------------------------------------------------
BANKS -- 1.8%
............................................................
Australia and New Zealand
Banking Group, Ltd. 3,751,475 $ 25,879,227
- ------------------------------------------------------------
BUILDING MATERIALS -- 0.7%
............................................................
Pioneer International, Ltd. 4,578,810 10,916,349
.................... ..................... -------------
Total Australia 36,795,576
- ------------------------------------------------------------
AUSTRIA -- 0.6%
- ------------------------------------------------------------
STEEL -- 0.6%
............................................................
Boehler-Uddeholm AG 132,640 8,763,278
.................... ..................... -------------
Total Austria 8,763,278
- ------------------------------------------------------------
CANADA -- 3.8%
- ------------------------------------------------------------
BANKS -- 1.5%
............................................................
Canadian Imperial Bank of
Commerce 705,092 22,679,292
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 1.0%
............................................................
Imasco, Ltd. 804,800 14,858,685
- ------------------------------------------------------------
METALS & MINERALS -- 1.3%
............................................................
Noranda, Inc. 1,067,399 18,436,695
.................... ..................... -------------
Total Canada 55,974,672
- ------------------------------------------------------------
DENMARK -- 0.7%
- ------------------------------------------------------------
BANKS -- 0.7%
............................................................
BG Bank A/S 162,505 10,064,796
.................... ..................... -------------
Total Denmark 10,064,796
- ------------------------------------------------------------
FINLAND -- 2.5%
- ------------------------------------------------------------
FOREST PRODUCTS & PAPER -- 2.1%
............................................................
Metra OYJ ABP 336,011 11,023,812
............................................................
UPM-Kymmene OYJ 732,430 20,158,067
.................... ..................... -------------
31,181,879
- ------------------------------------------------------------
MACHINERY -- 0.4%
............................................................
Rauma Group OYJ 251,930 5,165,807
.................... ..................... -------------
Total Finland 36,347,686
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
FRANCE -- 8.4%
- ------------------------------------------------------------
BANKS -- 2.1%
............................................................
Societe Generale 150,880 $ 31,368,715
- ------------------------------------------------------------
BEVERAGES -- 1.2%
............................................................
Pernod-Ricard SA 263,778 18,280,260
- ------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS -- 1.9%
............................................................
Lafarge SA 271,572 28,073,385
- ------------------------------------------------------------
OIL -- INTERNATIONAL -- 1.8%
............................................................
Elf Aquitaine SA 181,500 25,516,748
- ------------------------------------------------------------
TOBACCO -- 1.4%
............................................................
SEITA SA 455,293 20,633,424
.................... ..................... -------------
Total France 123,872,532
- ------------------------------------------------------------
GERMANY -- 4.8%
- ------------------------------------------------------------
BANKS -- 1.3%
............................................................
Commerzbank AG 485,960 18,495,747
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.9%
............................................................
Friedrich Grohe AG 33,208 11,222,437
............................................................
Dyckerhoff AG 45,200 17,653,961
.................... ..................... -------------
28,876,398
- ------------------------------------------------------------
CHEMICALS -- 0.7%
............................................................
Bayer AG 189,886 9,825,495
- ------------------------------------------------------------
CONSUMER DURABLES -- MISCELLANEOUS -- 0.9%
............................................................
Buderus AG 27,795 13,860,282
.................... ..................... -------------
Total Germany 71,057,922
- ------------------------------------------------------------
HONG KONG -- 7.2%
- ------------------------------------------------------------
BANKS -- 1.4%
............................................................
HSBC Holdings PLC 880,400 21,531,153
- ------------------------------------------------------------
METALS & MINING -- 0.3%
............................................................
Yanzhou Coal Mining Co., Ltd.
# 21,746,000 4,153,547
- ------------------------------------------------------------
PRINTING & PUBLISHING -- 1.0%
............................................................
South China Morning Post
(Holdings), Ltd. 32,175,000 15,467,598
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 23
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
RETAIL -- GENERAL MERCHANDISE -- 0.2%
............................................................
Dickson Concepts
(International), Ltd. 2,208,000 $ 3,077,520
- ------------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 1.5%
............................................................
Hang Lung Development Company 8,150,000 8,098,906
............................................................
New World Development Co.,
Ltd. 7,124,000 13,790,919
.................... ..................... -------------
21,889,825
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 2.3%
............................................................
CLP Holdings Limited 4,540,000 20,682,765
............................................................
Swire Pacific Ltd. - Class A 3,419,800 12,909,357
.................... ..................... -------------
33,592,122
- ------------------------------------------------------------
UTILITY -- TELECOMMUNICATIONS -- 0.5%
............................................................
Hong Kong Telecommunications,
Ltd. 3,807,200 7,149,024
.................... ..................... -------------
Total Hong Kong 106,860,789
- ------------------------------------------------------------
IRELAND -- 2.3%
- ------------------------------------------------------------
FOOD PRODUCERS -- 0.6%
............................................................
Greencore Group PLC 1,546,416 8,412,277
- ------------------------------------------------------------
PAPER -- 1.7%
............................................................
Jefferson Smurfit Group PLC 8,482,255 25,200,756
.................... ..................... -------------
Total Ireland 33,613,033
- ------------------------------------------------------------
ITALY -- 1.7%
- ------------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 1.7%
............................................................
ENI SPA 3,783,924 24,799,703
.................... ..................... -------------
Total Italy 24,799,703
- ------------------------------------------------------------
JAPAN -- 9.4%
- ------------------------------------------------------------
AUTO PARTS -- 0.5%
............................................................
Koito Manufacturing Co., Ltd. 1,414,000 6,979,068
- ------------------------------------------------------------
AUTOS & TRUCKS -- 0.4%
............................................................
Suzuki Motor Corporation 647,000 5,873,977
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
ELECTRONIC COMPONENTS -- 1.7%
............................................................
Nintendo Co., Ltd. 263,800 $ 24,425,043
- ------------------------------------------------------------
ELECTRONICS -- 3.0%
............................................................
Kyocera Corporation 466,900 22,809,249
............................................................
Nichicon Corporation 1,165,000 13,011,131
............................................................
Sony Corporation 99,400 8,558,777
.................... ..................... -------------
44,379,157
- ------------------------------------------------------------
FINANCIAL SERVICES -- 1.2%
............................................................
Promise Company, Ltd. 442,400 18,201,562
- ------------------------------------------------------------
IRON/STEEL -- 0.6%
............................................................
Yodogawa Steel Works 1,911,000 8,936,404
- ------------------------------------------------------------
LEISURE -- TOYS -- 1.5%
............................................................
NAMCO, Ltd. 963,300 22,488,681
- ------------------------------------------------------------
REAL ESTATE INVESTMENT & MANAGEMENT -- 0.5%
............................................................
Daito Trust Construction Co.,
Ltd. 949,000 7,179,810
.................... ..................... -------------
Total Japan 138,463,702
- ------------------------------------------------------------
NETHERLANDS -- 8.4%
- ------------------------------------------------------------
BANKS -- 1.7%
............................................................
ABN AMRO Holding N.V. 1,043,725 24,422,757
- ------------------------------------------------------------
CHEMICALS -- 1.6%
............................................................
Akzo Nobel N.V. 109,074 24,246,745
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.5%
............................................................
Hollandsche Beton Groep N.V. 381,500 7,951,738
- ------------------------------------------------------------
INSURANCE -- 0.9%
............................................................
Fortis Amev N.V. 242,471 14,196,236
- ------------------------------------------------------------
INSURANCE -- MULTI-LINE -- 2.2%
............................................................
ING Groep N.V. 490,381 32,109,941
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 0.9%
............................................................
Koninklijke KPN NV 331,530 12,761,045
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 24
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION SERVICES -- 0.6%
............................................................
TNT Post Group N.V. # 331,530 $ 8,474,768
.......................................... -------------
Total Netherlands 124,163,230
- ------------------------------------------------------------
NEW ZEALAND -- 0.3%
- ------------------------------------------------------------
BUILDING MATERIALS -- 0.3%
............................................................
Fletcher Challenge Building 3,788,279 4,719,467
.......................................... -------------
Total New Zealand 4,719,467
- ------------------------------------------------------------
NORWAY -- 1.7%
- ------------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.6%
............................................................
Kvaerner ASA - Class A 267,545 9,065,139
- ------------------------------------------------------------
PHARMACEUTICALS & HEALTHCARE -- 1.1%
............................................................
Nycomed Amersham 2,172,315 16,136,225
.......................................... -------------
Total Norway 25,201,364
- ------------------------------------------------------------
SINGAPORE -- 1.0%
- ------------------------------------------------------------
BANKS -- 0.5%
............................................................
Development Bank of
Singapore, Ltd. 1,443,370 7,987,957
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIES -- 0.5%
............................................................
Jardine Matheson Holdings,
Ltd. 2,780,600 7,507,620
.......................................... -------------
Total Singapore 15,495,577
- ------------------------------------------------------------
SPAIN -- 3.8%
- ------------------------------------------------------------
BANKS -- 1.5%
............................................................
Banco Santander SA 846,000 21,690,179
- ------------------------------------------------------------
OIL -- INTERNATIONAL -- 1.3%
............................................................
Repsol SA 353,375 19,504,986
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 1.0%
............................................................
Telefonica de Espana SA 316,363 14,651,600
.......................................... -------------
Total Spain 55,846,765
- ------------------------------------------------------------
SWEDEN -- 1.5%
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.5%
............................................................
Electrolux AB - Class B 1,313,650 22,566,925
.......................................... -------------
Total Sweden 22,566,925
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
SWITZERLAND -- 9.6%
- ------------------------------------------------------------
BANKS -- 1.3%
............................................................
Credit Suisse Group 84,448 $ 18,790,199
- ------------------------------------------------------------
BUILDING MATERIALS -- 0.6%
............................................................
Sarna Kunststoff Holding AG
"registered" 5,080 8,875,194
- ------------------------------------------------------------
FOOD PRODUCERS -- 1.8%
............................................................
Nestle SA "registered" 12,189 26,084,639
- ------------------------------------------------------------
INSURANCE -- 1.7%
............................................................
Swiss Reinsurance Co.
"registered" 10,090 25,517,493
- ------------------------------------------------------------
MACHINERY & EQUIPMENT -- 2.7%
............................................................
SIG Schweizerische Industrie-
Gesellschaft Holding 21,432 17,450,099
............................................................
Sulzer AG "registered" (P.C.) 28,680 22,632,970
.......................................... -------------
40,083,069
- ------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.5%
............................................................
Novartis AG "registered" 13,633 22,685,535
.......................................... -------------
Total Switzerland 142,036,129
- ------------------------------------------------------------
UNITED KINGDOM -- 23.0%
- ------------------------------------------------------------
APPAREL & TEXTILES -- 0.6%
............................................................
Coats Viyella PLC 7,665,850 9,400,992
- ------------------------------------------------------------
AUTOS -- 0.8%
............................................................
Lex Service PLC 1,367,300 11,292,628
- ------------------------------------------------------------
BANKS -- 2.9%
............................................................
Abbey National PLC 1,022,349 18,166,648
............................................................
National Westminster Bank PLC 1,401,031 25,035,901
.......................................... -------------
43,202,549
- ------------------------------------------------------------
BUILDING MATERIALS -- 1.7%
............................................................
Hanson PLC 4,012,587 24,386,532
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 25
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED -- 1.4%
............................................................
Cookson Group PLC 6,214,560 $ 21,360,117
- ------------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 3.5%
............................................................
BTR PLC 5,819,190 16,505,834
............................................................
Elementis PLC 1,813,920 4,600,317
............................................................
Tomkins PLC 5,529,083 30,005,193
.......................................... -------------
51,111,344
- ------------------------------------------------------------
ENERGY -- MISCELLANEOUS -- 0.5%
............................................................
BG PLC 1,235,294 7,141,667
- ------------------------------------------------------------
FOOD & BEVERAGES -- 1.6%
............................................................
Allied Domecq PLC 2,578,004 24,216,869
- ------------------------------------------------------------
FOOD PRODUCERS -- 1.9%
............................................................
Hillsdown Holdings PLC 8,384,145 22,801,971
............................................................
Tate & Lyle PLC 666,200 5,282,661
.......................................... -------------
28,084,632
- ------------------------------------------------------------
INSURANCE -- 1.9%
............................................................
CGU PLC 1,514,885 28,258,394
- ------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.0%
............................................................
Medeva PLC 5,075,970 14,397,729
- ------------------------------------------------------------
RETAIL -- FOOD CHAINS -- 1.1%
............................................................
Safeway PLC 2,502,850 16,390,813
- ------------------------------------------------------------
TOBACCO -- 1.9%
............................................................
B.A.T Industries PLC 2,787,129 27,901,936
- ------------------------------------------------------------
UTILITY -- ELECTRIC -- 1.0%
............................................................
Powergen PLC 1,080,000 14,920,388
- ------------------------------------------------------------
UTILITY -- WATER -- 1.2%
............................................................
Hyder PLC 1,129,000 17,688,278
.......................................... -------------
Total United Kingdom 339,754,868
............................................................
Total common stocks
(cost $1,183,166,225) 1,376,398,014
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS
- -- 6.7%
- -----------------------------------------------------------
Principal
COMMERCIAL PAPER -- 6.4% Amount Value
- -----------------------------------------------------------
<S> <C> <C>
Centex Corporation
7.00%, 7/01/1998 $20,000,000 $ 20,000,000
...........................................................
International Lease Finance
Corporation
5.51%, 7/07/1998 30,000,000 29,972,450
...........................................................
Lockheed Martin Corporation
5.67%, 7/06/1998 44,750,000 44,714,759
.......................................... -------------
94,687,209
- -----------------------------------------------------------
CASH EQUIVALENTS -- 0.3%
- -----------------------------------------------------------
Vista Institutional Prime
Money Market Fund 4,826,689 4,826,689
- -----------------------------------------------------------
Total short-term investments
(cost $99,513,898) 99,513,898
- -----------------------------------------------------------
Total investments -- 99.9%
(cost $1,282,680,123) 1,475,911,912
...........................................................
Other assets in excess of
liabilities -- 0.1% 893,472
.......................................... -------------
Total net assets -- 100.0% $1,476,805,384
- -----------------------------------------------------------
</TABLE>
# Non-income producing security.
P.C. -- Participation Certificates.
See Notes to Financial Statements
12
<PAGE> 26
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 99.4%
- -----------------------------------------------------------
AUSTRALIA -- 2.9% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
BANKS -- 1.6%
...........................................................
Australia & New Zealand Banking
Group, Ltd. 16,940 $ 116,859
- -----------------------------------------------------------
DIVERSIFIED COMPANIES -- 1.3%
...........................................................
Reinsurance Australia Corporation 37,170 94,878
...................... ...................... ---------
Total Australia 211,737
- -----------------------------------------------------------
CANADA -- 2.9%
- -----------------------------------------------------------
BANKS -- 1.6%
...........................................................
Canadian Imperial Bank of Commerce 3,710 119,332
- -----------------------------------------------------------
METALS & MINERALS -- 1.3%
...........................................................
Noranda, Inc. 5,415 93,531
...................... ...................... ---------
Total Canada 212,863
- -----------------------------------------------------------
FINLAND -- 2.7%
- -----------------------------------------------------------
FOREST PRODUCTS & PAPER -- 2.7%
...........................................................
UPM-Kymmene Corporation OYJ 4,035 111,052
...........................................................
Metra OYJ ABP 2,651 86,974
...................... ...................... ---------
Total Finland 198,026
- -----------------------------------------------------------
FRANCE -- 6.4%
- -----------------------------------------------------------
BANKS -- 2.0%
...........................................................
Societe Generale 725 150,731
- -----------------------------------------------------------
BEVERAGES -- 1.1%
...........................................................
Pernod-Ricard SA 1,200 83,162
- -----------------------------------------------------------
BUILDING MATERIALS & COMPONENTS -- 1.9%
...........................................................
Lafarge SA 1,327 137,177
- -----------------------------------------------------------
TOBACCO -- 1.4%
...........................................................
SEITA SA 2,235 101,288
...................... ...................... ---------
Total France 472,358
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GERMANY -- 2.7% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
BANKS -- 1.3%
...........................................................
Commerzbank AG 2,500 $ 95,151
- -----------------------------------------------------------
MEDICAL PRODUCTS -- 1.4%
...........................................................
Draegerwerk AG 4,185 99,928
...................... ...................... ---------
Total Germany 195,079
- -----------------------------------------------------------
HONG KONG -- 3.7%
- -----------------------------------------------------------
BANKS -- 0.6%
...........................................................
Dao Heng Bank Group, Ltd. 30,000 42,588
- -----------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 0.9%
...........................................................
New World Development Co., Ltd. 33,000 63,883
- -----------------------------------------------------------
RETAIL -- SPECIALTY -- 0.5%
...........................................................
Dickson Concepts International, Ltd. 28,000 39,027
- -----------------------------------------------------------
UTILITY -- ELECTRIC -- 1.3%
...........................................................
CLP Holdings Limited 22,000 100,225
- -----------------------------------------------------------
UTILITY -- TELECOMMUNICATIONS -- 0.4%
...........................................................
Hong Kong Telecommunications, Ltd. 14,800 27,791
...................... ...................... ---------
Total Hong Kong 273,514
- -----------------------------------------------------------
IRELAND -- 1.7%
- -----------------------------------------------------------
PAPER -- 1.7%
...........................................................
Jefferson Smurfit Group PLC 41,620 123,653
...................... ...................... ---------
Total Ireland 123,653
- -----------------------------------------------------------
ITALY -- 1.1%
- -----------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 1.1%
...........................................................
ENI SPA 12,000 78,648
...................... ...................... ---------
Total Italy 78,648
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 27
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
JAPAN -- 9.9% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
AUTO PARTS -- 0.9%
...........................................................
NIFCO, Inc. 8,000 $ 63,407
- -----------------------------------------------------------
ELECTRONIC COMPONENTS -- 1.8%
...........................................................
Nintendo Co., Ltd. 1,400 129,625
- -----------------------------------------------------------
ELECTRONICS -- 3.0%
...........................................................
Kyocera Corporation 2,500 122,131
...........................................................
Nichicon Corporation 9,000 100,515
...................... ...................... ---------
222,646
- -----------------------------------------------------------
FINANCIAL SERVICES -- 1.4%
...........................................................
Promise Company, Ltd. 2,550 104,914
- -----------------------------------------------------------
FOODS -- 0.8%
...........................................................
MOS Food Services 5,000 59,444
- -----------------------------------------------------------
LEISURE/TOYS -- 2.0%
...........................................................
NAMCO, Ltd. 6,300 147,076
...................... ...................... ---------
Total Japan 727,112
- -----------------------------------------------------------
NETHERLANDS -- 7.3%
- -----------------------------------------------------------
BANKS -- 1.7%
...........................................................
ABN AMRO Holding N.V. 5,335 124,837
- -----------------------------------------------------------
CHEMICALS -- 1.8%
...........................................................
Akzo Nobel N.V. 605 134,489
- -----------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 1.8%
...........................................................
Hollandsche Beton Groep N.V 6,415 133,710
- -----------------------------------------------------------
INSURANCE -- MULTI-LINE -- 2.0%
...........................................................
ING Groep N.V. 2,165 141,763
...................... ...................... ---------
Total Netherlands 534,799
- -----------------------------------------------------------
NEW ZEALAND -- 1.2%
- -----------------------------------------------------------
BUILDING MATERIALS -- 1.2%
...........................................................
Fletcher Challenge Building 69,015 85,979
...................... ...................... ---------
Total New Zealand 85,979
- -----------------------------------------------------------
NORWAY -- 1.2%
- -----------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.4%
...........................................................
Kvaerner ASA - Class A 960 32,527
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
JAPAN -- 9.9% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
MEDICAL PRODUCTS & SUPPLIES -- 0.8%
...........................................................
Nycomed Amersham PLC -- Class B 7,805 $ 57,977
...................... ...................... ---------
Total Norway 90,504
- -----------------------------------------------------------
SINGAPORE -- 0.5%
- -----------------------------------------------------------
DIVERSIFIED -- 0.5%
...........................................................
Jardine Matheson Holdings, Ltd. 14,000 37,800
...................... ...................... ---------
Total Singapore 37,800
- -----------------------------------------------------------
SPAIN -- 1.3%
- -----------------------------------------------------------
OIL -- INTERNATIONAL -- 1.3%
...........................................................
Repsol SA 1,700 93,834
...................... ...................... ---------
Total Spain 93,834
- -----------------------------------------------------------
SWEDEN -- 1.6%
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.6%
...........................................................
Electrolux AB - Class B 6,675 114,668
...................... ...................... ---------
Total Sweden 114,668
- -----------------------------------------------------------
SWITZERLAND -- 8.2%
- -----------------------------------------------------------
BANKS -- 0.8%
...........................................................
Credit Suisse Group 257 57,184
- -----------------------------------------------------------
BUILDING MATERIALS -- 1.5%
...........................................................
Forbo Holding AG "registered" 224 114,008
- -----------------------------------------------------------
FOOD PRODUCERS -- 1.1%
...........................................................
Nestle SA "registered" 38 81,321
- -----------------------------------------------------------
INSURANCE -- 1.8%
...........................................................
Swiss Reinsurance Co. "registered" 52 131,507
- -----------------------------------------------------------
MACHINERY & EQUIPMENT -- 1.4%
...........................................................
SIG Schweizerische
Industrie-Gesellschaft Holding AG 128 104,219
- -----------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.6%
...........................................................
Novartis AG 70 116,481
...................... ...................... ---------
Total Switzerland 604,720
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 28
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------
UNITED KINGDOM -- 18.0% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
APPAREL & TEXTILES -- 1.0%
...........................................................
Coats Viyella PLC 59,050 $ 72,416
- -----------------------------------------------------------
AUTOS -- 1.2%
...........................................................
Lex Service PLC 10,900 90,024
- -----------------------------------------------------------
BANKS -- 1.2%
...........................................................
National Westminster Bank PLC 4,900 87,561
- -----------------------------------------------------------
BUILDING MATERIALS -- 2.0%
...........................................................
Hanson PLC 24,100 146,468
- -----------------------------------------------------------
DIVERSIFIED INDUSTRIALS -- 6.0%
...........................................................
BTR PLC 32,417 91,950
...........................................................
Cookson Group PLC 27,000 92,802
...........................................................
Elementis PLC 47,400 120,212
...........................................................
Tomkins PLC 25,432 138,014
...................... ...................... ---------
442,978
- -----------------------------------------------------------
FOOD & BEVERAGES -- 1.3%
...........................................................
Allied Domecq PLC 9,860 92,621
- -----------------------------------------------------------
INSURANCE -- 1.6%
...........................................................
CGU PLC 6,340 118,265
- -----------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES -- 1.0%
...........................................................
Medeva PLC 25,878 73,402
- -----------------------------------------------------------
TOBACCO -- 1.9%
...........................................................
B.A.T. Industries PLC 14,000 140,154
- -----------------------------------------------------------
UTILITY -- ELECTRIC -- 0.8%
...........................................................
Powergen PLC 4,400 60,787
...................... ...................... ---------
Total United Kingdom 1,324,676
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
UNITED STATES -- 26.1% Shares Value
- -----------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 1.5%
...........................................................
Northrop Grumman Corporation 1,100 $ 113,438
- -----------------------------------------------------------
AUTOS & TRUCKS -- 2.2%
...........................................................
Ford Motor Company 1,100 64,900
...........................................................
General Motors Corporation 1,400 93,538
...................... ...................... ---------
158,438
- -----------------------------------------------------------
BANKS -- 2.4%
...........................................................
Bankers Trust Corporation 500 58,031
...........................................................
First Chicago NBD Corporation 1,300 115,212
...................... ...................... ---------
173,243
- -----------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 1.3%
...........................................................
Weyerhaeuser Company 2,000 92,375
- -----------------------------------------------------------
CONGLOMERATES -- 0.8%
...........................................................
Tenneco, Inc. 1,600 60,900
- -----------------------------------------------------------
FINANCIAL SERVICES -- 0.8%
...........................................................
Associates First Capital Corporation 1 71
...........................................................
Beneficial Corporation 400 61,275
...................... ...................... ---------
61,346
- -----------------------------------------------------------
INSURANCE -- 2.0%
...........................................................
Safeco Corporation 1,800 81,675
...........................................................
TIG Holdings, Inc. 2,800 64,400
...................... ...................... ---------
146,075
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 29
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Value
- -----------------------------------------------------------
<S> <C> <C>
MACHINERY -- 1.1%
...........................................................
New Holland N.V. 4,200 $ 82,425
- -----------------------------------------------------------
METALS & MINING -- 0.9%
...........................................................
Aluminum Company of America 1,000 65,937
- -----------------------------------------------------------
OIL -- DOMESTIC -- 2.4%
...........................................................
Occidental Petroleum Corporation 2,300 62,100
...........................................................
Phillips Petroleum Company 2,400 115,650
...................... ...................... ---------
177,750
- -----------------------------------------------------------
PHOTOGRAPHY & OPTICAL -- 1.3%
...........................................................
Eastman Kodak Company 1,300 94,981
- -----------------------------------------------------------
POLLUTION CONTROL -- 1.1%
...........................................................
Waste Management, Inc. 2,400 84,000
- -----------------------------------------------------------
RAILROADS -- 0.9%
...........................................................
Norfolk Southern Corporation 2,300 68,569
- -----------------------------------------------------------
RETAIL -- SPECIALTY APPAREL -- 0.8%
...........................................................
Abercrombie & Fitch Co. # 1,290 56,760
- -----------------------------------------------------------
STEEL -- 0.7%
...........................................................
USX-U.S. Steel Group, Inc. 1,600 52,800
- -----------------------------------------------------------
TOBACCO -- 1.4%
...........................................................
Philip Morris Companies, Inc. 2,600 102,375
- -----------------------------------------------------------
UTILITY -- ELECTRIC -- 2.3%
...........................................................
Illinova Corporation 2,100 63,000
...........................................................
PacifiCorp 1,200 27,150
...........................................................
PP&L Resources, Inc. 3,400 77,138
...................... ...................... ---------
167,288
- -----------------------------------------------------------
UTILITY -- TELEPHONE -- 2.2%
...........................................................
ALLTEL Corporation 1,800 83,700
...........................................................
AT&T Corp. 1,300 74,262
............................................. ---------
157,962
............................................. ---------
Total United States 1,916,662
- -----------------------------------------------------------
Total common stocks
(cost $6,771,625) 7,296,632
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
CASH EQUIVALENTS -- 1.8% Amount Value
- -----------------------------------------------------------
<S> <C> <C>
Chase Bank Domestic Liquidity Fund
(cost $135,816) $135,816 $ 135,816
- -----------------------------------------------------------
Total investments -- 101.2%
(cost $6,907,441) 7,432,448
...........................................................
Liabilities in excess of other
assets -- (1.2)%
.............................................. (87,163)
---------
Total net assets -- 100.0% $7,345,285
- -----------------------------------------------------------
</TABLE>
# Non-income producing security.
See Notes to Financial Statements
16
<PAGE> 30
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
COMMON STOCKS -- 43.0% Shares Value
- ----------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 2.0%
..........................................................
Lockheed Martin Corporation 5,700 $ 603,487
..........................................................
Northrop Grumman Corporation 10,200 1,051,875
..........................................................
Rockwell International Corporation 9,000 432,563
..................... ...................... ----------
2,087,925
- ----------------------------------------------------------
APPAREL & TEXTILES -- 0.5%
..........................................................
Russell Corporation 15,800 476,963
- ----------------------------------------------------------
AUTO PARTS -- 0.6%
..........................................................
Dana Corporation 11,000 588,500
..........................................................
Meritor Automotive, Inc. 2,000 48,000
..................... ...................... ----------
636,500
- ----------------------------------------------------------
AUTOS & TRUCKS -- 2.6%
..........................................................
Ford Motor Company 25,000 1,475,000
..........................................................
General Motors Corporation 18,600 1,242,713
..................... ...................... ----------
2,717,713
- ----------------------------------------------------------
BANKS -- 2.2%
..........................................................
Banc One Corporation 4,200 234,413
..........................................................
Comerica, Inc. 2,100 139,125
..........................................................
First Chicago NBD Corporation 9,800 868,525
..........................................................
First Union Corporation 12,100 704,825
..........................................................
National City Corporation 4,500 319,500
..................... ...................... ----------
2,266,388
- ----------------------------------------------------------
BEVERAGES -- 0.5%
..........................................................
Anheuser-Busch Companies, Inc. 10,000 471,875
- ----------------------------------------------------------
BUILDING & FOREST PRODUCTS -- 0.9%
..........................................................
Georgia-Pacific (Timber Group) 11,400 262,912
..........................................................
Weyerhaeuser Company 15,000 692,813
..................... ...................... ----------
955,725
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
CHEMICALS -- 1.6%
..........................................................
The Dow Chemical Company 9,500 $ 918,531
..........................................................
Eastman Chemical Company 11,400 709,650
..........................................................
Millennium Chemicals, Inc. 2,142 72,560
..................... ...................... ----------
1,700,741
- ----------------------------------------------------------
CONGLOMERATES -- 0.8%
..........................................................
Tenneco, Inc. 21,800 829,763
- ----------------------------------------------------------
CONSUMER PRODUCTS -- 0.5%
..........................................................
Tupperware Corporation 17,200 483,750
- ----------------------------------------------------------
ENGINEERING & CONSTRUCTION -- 0.4%
..........................................................
Harsco Corporation 10,000 458,125
- ----------------------------------------------------------
FINANCIAL SERVICES -- 1.5%
..........................................................
Associates First Capital
Corporation -- Class A 6,552 503,685
..........................................................
Beneficial Corporation 4,200 643,387
..........................................................
Transamerica Corporation 3,600 414,450
..................... ...................... ----------
1,561,522
- ----------------------------------------------------------
HEALTHCARE -- DRUGS -- 0.2%
..........................................................
American Home Products Corporation 800 41,400
..........................................................
Bristol Myers Squibb Company 1,600 183,900
..................... ...................... ----------
225,300
- ----------------------------------------------------------
HEALTHCARE -- MEDICAL PRODUCTS -- 0.1%
..........................................................
Baxter International, Inc. 2,800 150,675
- ----------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES -- 0.9%
..........................................................
Whirlpool Corporation 13,700 941,875
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 31
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
INSURANCE -- 3.0%
..........................................................
American General Corporation 10,700 $ 761,706
..........................................................
Harleysville Group, Inc. 18,000 373,500
..........................................................
Lincoln National Corporation 5,000 456,875
..........................................................
Safeco Corporation 14,200 644,325
..........................................................
St. Paul Companies, Inc. 14,200 597,288
..........................................................
TIG Holdings, Inc. 13,900 319,700
..................... ...................... ----------
3,153,394
- ----------------------------------------------------------
LEISURE/TOYS -- 0.5%
..........................................................
Fortune Brands, Inc. 12,500 480,469
- ----------------------------------------------------------
MACHINERY -- 0.7%
..........................................................
Deere & Company 1,500 79,312
..........................................................
New Holland N.V. 34,000 667,250
..................... ...................... ----------
746,562
- ----------------------------------------------------------
METALS & MINING -- 1.9%
..........................................................
Aluminum Company of America 13,300 876,969
..........................................................
Phelps Dodge Corporation 9,000 514,687
..........................................................
Reynolds Metals Company 9,900 553,781
..................... ...................... ----------
1,945,437
- ----------------------------------------------------------
OIL -- DOMESTIC -- 3.6%
..........................................................
Atlantic Richfield Company 10,700 835,938
..........................................................
Occidental Petroleum Corporation 31,000 837,000
..........................................................
Phillips Petroleum Company 22,600 1,089,038
..........................................................
USX-Marathon Group, Inc. 18,000 617,625
..........................................................
Ultramar Diamond Shamrock
Corporation 14,000 441,875
..................... ...................... ----------
3,821,476
- ----------------------------------------------------------
PAPER -- 1.4%
..........................................................
Georgia-Pacific Group 6,700 394,881
..........................................................
International Paper Company 16,000 688,000
..........................................................
Union Camp Corporation 7,500 372,188
..................... ...................... ----------
1,455,069
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
PHOTOGRAPHY & OPTICAL -- 0.7%
..........................................................
Eastman Kodak Company 9,700 $ 708,706
- ----------------------------------------------------------
POLLUTION CONTROL -- 1.1%
..........................................................
Browning-Ferris Industries, Inc. 11,918 414,150
..........................................................
Waste Management, Inc. 20,900 731,500
..................... ...................... ----------
1,145,650
- ----------------------------------------------------------
RAILROADS -- 1.0%
..........................................................
CSX Corporation 8,000 364,000
..........................................................
Norfolk Southern Corporation 23,000 685,687
..................... ...................... ----------
1,049,687
- ----------------------------------------------------------
RETAIL -- 1.8%
..........................................................
Intimate Brands, Inc. 13,200 363,825
..........................................................
J.C. Penney Company, Inc. 7,500 542,344
..........................................................
May Department Stores Company 8,000 524,000
..........................................................
Sears, Roebuck & Company 8,200 500,713
..................... ...................... ----------
1,930,882
- ----------------------------------------------------------
SAVINGS & LOAN -- 1.5%
..........................................................
Fannie Mae 13,500 820,125
..........................................................
H.F. Ahmanson & Company 11,000 781,000
..................... ...................... ----------
1,601,125
- ----------------------------------------------------------
STEEL -- 0.7%
..........................................................
USX-U.S. Steel Group, Inc. 23,000 759,000
- ----------------------------------------------------------
TOBACCO -- 1.4%
..........................................................
Philip Morris Companies, Inc. 36,000 1,417,500
- ----------------------------------------------------------
TRUCKING -- 0.2%
..........................................................
Ryder System, Inc. 5,600 176,750
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 32
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Shares Value
- ----------------------------------------------------------
<S> <C> <C>
UTILITY -- ELECTRIC -- 4.9%
..........................................................
CMS Energy Corporation 5,600 $ 246,400
..........................................................
Central & South West Corporation 14,700 395,063
..........................................................
DTE Energy Company 12,000 484,500
..........................................................
Edison International 19,300 570,556
..........................................................
Entergy Corporation 7,700 221,375
..........................................................
GPU, Inc. 5,700 215,531
..........................................................
Illinova Corporation 27,000 810,000
..........................................................
PacifiCorp 18,300 414,038
..........................................................
PECO Energy Company 14,000 408,625
..........................................................
PP&L Resources, Inc. 20,600 467,362
..........................................................
Public Service Enterprises Group,
Inc. 7,100 244,506
..........................................................
SCANA Corporation 14,700 438,244
..........................................................
Texas Utilities Company 5,538 230,519
..................... ...................... ----------
5,146,719
- ----------------------------------------------------------
UTILITY -- GAS PIPELINE -- 0.5%
..........................................................
Nicor, Inc. 6,000 240,750
..........................................................
Peoples Energy Corporation 8,500 328,312
..................... ...................... ----------
569,062
- ----------------------------------------------------------
UTILITY -- TELEPHONE -- 2.8%
..........................................................
AT&T Corporation 16,400 936,850
..........................................................
ALLTEL Corporation 16,100 748,650
..........................................................
Bell Atlantic Corporation 12,288 560,640
..........................................................
SBC Communications, Inc. 17,314 692,560
..................... ...................... ----------
2,938,700
- ----------------------------------------------------------
Total common stocks (cost
$36,671,272) 45,011,028
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
- -- 19.2% Amount Value
- ----------------------------------------------------------
<S> <C> <C>
BANKS -- 2.3%
..........................................................
MBNA Corporation, 6.0375%,
6/17/2002 # $ 1,500,000 $ 1,494,529
..........................................................
MBNA Global Capital Securities,
CLB 2/01/2007, 6.51875%,
2/01/2027 # 1,000,000 932,881
..................... ...................... ----------
2,427,410
- ----------------------------------------------------------
EUROBANKS -- 5.8%
..........................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 6.4375%,
12/29/2049 # 2,500,000 2,509,500
..........................................................
Nordbanken, CLB 10/25/2001,
6.2875%, 10/29/2049 # 2,000,000 2,006,922
..........................................................
Okobank, CLB 9/27/1999,
7.23828%, 9/29/2049 # 1,500,000 1,498,007
..................... ...................... ----------
6,014,429
- ----------------------------------------------------------
FINANCIAL SERVICES -- 6.8%
..........................................................
Countrywide Home Loans, Inc.,
6.84%, 10/22/2004 2,500,000 2,564,855
..........................................................
Florida Windstorm (Acquired
7/31/1997, cost $998,883),
6.85%, 8/25/2007 r 1,000,000 1,037,516
..........................................................
Lehman Brothers, Inc., 6.50%,
4/15/2008 2,000,000 2,007,506
..........................................................
URSA Major Rated Limited
(Acquired 1/28/1998,
cost $1,483,505), 5.90%,
1/06/2003 r 1,500,000 1,504,261
..................... ...................... ----------
7,114,138
- ----------------------------------------------------------
PAPER -- 1.8%
..........................................................
Fort Howard Corporation,
11.00%, 1/02/2002 1,828,480 1,868,381
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 33
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
TRANSPORTATION -- 2.5%
..........................................................
Delta Air Lines ETC:
9.90%, 1/02/2002 $ 150,000 $ 165,603
10.50%, 4/30/2016 750,000 1,011,934
..........................................................
Northwest Airlines, Inc.,
11.30%, 12/21/2012 1,078,338 1,427,613
..................... ...................... ----------
2,605,150
- ----------------------------------------------------------
Total corporate bonds (cost
$19,813,501) 20,029,508
- ----------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 11.4%
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.7%
..........................................................
Federal Home Loan Mortgage
Corporation,
1189 K, 9.570629%, 1/15/2021# 858,708 875,526
..........................................................
2067 PD, 6.50%, 9/15/2026 2,900,000 2,922,733
..........................................................
Federal National Mortgage
Association:
G93-31 SD, 10.30143%,
12/25/2022 # 486,770 476,508
..........................................................
0.00%, 10/09/2019 3,025,000 869,024
..........................................................
1998-34 2, 7.00%, 6/18/2028 866,728 851,424
..................... ...................... ----------
5,995,215
- ----------------------------------------------------------
PASS-THROUGH SECURITIES -- 3.0%
..........................................................
Government National Mortgage
Association,
8404, 7.00%, 9/20/2018 # 948,904 973,755
..........................................................
8919, 6.875%, 2/20/2022 # 1,182,161 1,211,632
..........................................................
8247, 7.00%, 7/20/2023 # 919,357 942,442
..................... ...................... ----------
3,127,829
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
STRIPPED MORTGAGE-BACKED SECURITIES -- 2.7%
..........................................................
Federal Home Loan Mortgage
Corporation:
1627 PN (IO), 6.00%,
9/15/2022 $ 3,100,000 $ 933,852
..........................................................
1965 SA (Inverse IO),
2.049999%, 3/15/2024 # 3,050,000 408,194
..........................................................
Federal National Mortgage
Association:
1997-65 A (PO), 0.00%,
9/25/2000 1,585,179 1,466,200
..................... ...................... ----------
2,808,246
- ----------------------------------------------------------
Total government agency
mortgage-backed securities
(cost $11,868,698) 11,931,290
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-AGENCY MORTGAGE-
BACKED SECURITIES
- -- 19.5%
- ------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED
SECURITIES -- 16.5%
............................................................
Aesop Funding II LLC (Acquired
7/23/97, cost $2,200,000),
1997-1 A1, 6.22%, 10/20/2001r 2,200,000 2,220,735
............................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
2/24/1998, cost $1,195,453),
1998-1 A1, 7.45%, 3/15/2006 r 1,195,453 1,197,879
............................................................
Ditech Home Loan Owner Trust,
1997-1 A3, 6.71%, 8/15/2018 1,750,000 1,782,296
............................................................
Firstplus Home Loan Owner
Trust, 1998-1 A4, 6.20%,
3/10/2015 1,500,000 1,505,542
............................................................
Green Tree Financial
Corporation, 1996-5 B2,
8.45%, 7/15/2027 1,549,754 1,634,990
............................................................
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$1,399,872), 1998-1A A,
6.125%, 1/20/2007 r 1,400,000 1,398,412
............................................................
IMC Home Equity Loan Trust,
1996-4 A4, 7.11%, 8/25/2014 1,250,000 1,290,967
............................................................
</TABLE>
See Notes to Financial Statements
20
<PAGE> 34
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ------------------------------------------------------------
<S> <C> <C>
Nomura Asset Securities
Corporation:
1995-MD3 A1B, 8.15%,
3/04/2020 1,000,000 1,102,813
............................................................
1998-D6 A1B, 6.59%, 3/17/2028 2,500,000 2,572,162
............................................................
Chase Commercial Mortgage
Securities Corporation,
1997-1 X (IO), 1.3965%,
4/19/2015 # 23,240,320 1,856,506
............................................................
Donaldson, Lufkin & Jenrette
(Acquired 4/25/1997, cost
$732,279), 1997-CF1 S (IO),
1.09368%, 3/15/2017 # r 11,859,874 733,830
...................... ...................... ----------
17,296,132
- ------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0%
............................................................
GE Capital Mortgage Services,
Inc., 1995-8 A5, 7.50%,
10/25/2025 896,719 894,192
............................................................
Independent National Mortgage
Corporation, 1996-D A2,
7.00%, 5/25/2026 380,084 381,249
............................................................
PNC Mortgage Securities
Corporation, 1996-1 A11,
Class Z, 7.50%, 6/25/2026 1,843,801 1,878,505
...................... ...................... ----------
3,153,946
- ------------------------------------------------------------
Total non-agency mortgage-backed securities
(cost $20,161,367) 20,450,078
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS
- -- 0.9% Shares
- ----------------------------------------------------------
<S> <C> <C>
Home Ownership Funding 2,
(Acquired 2/20/1997, Cost
$1,000,000) r 1,000 953,750
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY OBLIGATIONS Principal
- -- 5.1% Amount Value
- -----------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bonds:
7.50%, 11/15/2016 $ 1,500,000 $ 1,801,408
...........................................................
6.50%, 11/15/2026 750,000 833,203
...........................................................
6.375%, 8/15/2027 750,000 824,063
...........................................................
6.125%, 11/15/2027 750,000 803,907
..................... ...................... -----------
4,262,581
- -----------------------------------------------------------
U.S. Treasury Notes:
...........................................................
6.625%, 5/15/2007 1,000,000 1,075,001
- -----------------------------------------------------------
Total U.S. Treasury obligations
(cost $5,199,250) 5,337,582
- -----------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.4%
- -----------------------------------------------------------
VARIABLE RATE DEMAND
NOTES* -- 2.4%
...........................................................
General Mills, Inc., 5.2651% 1,621,420 1,621,420
...........................................................
Sara Lee, Corp., 5.2562% 878,922 878,922
..................... ...................... -----------
Total short-term investments 2,500,342
(cost $2,500,342)
- -----------------------------------------------------------
Total investments -- 101.5%
(cost $97,214,430) 106,213,578
...........................................................
Liabilities in excess of other
assets -- (1.5)% (1,618,165)
..................... ...................... -----------
$104,595,413
Total net assets -- 100.0%
- -----------------------------------------------------------
</TABLE>
# Variable rate security. The rate listed is as of June 30, 1998.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1998.
IO -- Interest Only.
PO-- Principal Only.
ETC -- Equipment Trust Certificate.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
See Notes to Financial Statements
21
<PAGE> 35
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
CORPORATE BONDS AND Principal
NOTES -- 25.3% Amount Value
- -------------------------------------------------------------
<S> <C> <C>
APPAREL -- 0.8%
.............................................................
La Petite Holdings, CLB 8/01/1998,
9.625%, 8/01/2001 $ 350,000 $ 360,500
- -------------------------------------------------------------
BANKS -- 3.3%
.............................................................
The Hertz Corporation, 6.625%,
5/15/2008 1,000,000 1,011,861
.............................................................
MBNA Corporation, 6.0375%,
6/17/2002 # 500,000 498,176
................. .................
----------
1,510,037
- -------------------------------------------------------------
EUROBANKS -- 2.0%
.............................................................
Fokus Bank A/S, CLB 9/29/1999,
6.90%, 9/29/2004 # 500,000 503,919
.............................................................
Hong Kong & Shanghai Bank, CLB
8/26/1998, 6.00%, 8/29/2049 # 555,000 412,143
................. .................
----------
916,062
- -------------------------------------------------------------
FINANCIAL SERVICES -- 6.9%
.............................................................
Newcourt Credit Group,
5.91%, 10/24/2000 # 500,000 501,505
.............................................................
Countrywide Home Loans, Inc.,
6.2225%, 3/16/2005 # 750,000 751,632
.............................................................
General Motors Acceptance Corp.,
8.25%, 3/01/2005 1,000,000 1,113,549
.............................................................
Lehman Brothers, Inc.,
6.50%, 4/15/2008 750,000 752,815
................. .................
----------
3,119,501
- -------------------------------------------------------------
INDUSTRIAL -- 0.6%
.............................................................
Westinghouse Electric Corporation,
8.93%, 6/22/1999 250,000 255,462
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
OIL & GAS (DOMESTIC) -- 1.0%
.............................................................
Harcor Energy, Inc., CLB 7/15/1999,
14.875%, 7/15/2002 $ 400,000 $ 475,000
- -------------------------------------------------------------
SAVINGS & LOAN -- 1.1%
.............................................................
Western Financial Savings, CLB
7/1/2000, 8.50%, 7/01/2003 500,000 492,423
- -------------------------------------------------------------
TELECOMMUNICATIONS -- 6.5%
.............................................................
Comcast Cable Communications, Inc.,
8.375%, 5/01/2007 500,000 562,470
.............................................................
Teleport Communications, CLB
7/01/2001, 0.00%, 7/01/2007+ 1,150,000 1,000,500
.............................................................
TKR Cable, Inc., CLB 10/30/1999,
10.50%, 10/30/2007 500,000 547,873
.............................................................
Worldcom, Inc., CLB 1/15/2001,
8.875%, 1/15/2006 775,000 842,813
................. .................
----------
2,953,656
- -------------------------------------------------------------
TRANSPORTATION -- 2.1%
.............................................................
Delta Air Lines ETC:
9.90%, 1/02/2002 250,000 276,005
.............................................................
10.50%, 4/30/2016 500,000 674,622
................. .................
----------
950,627
- -------------------------------------------------------------
UTILITY -- 1.0%
.............................................................
Calenergy Co., Inc., CLB 1/15/1999,
10.25%, 1/15/2004 400,000 431,000
- -------------------------------------------------------------
Total corporate bonds and notes
(cost $11,349,464) 11,464,268
- -------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
22
<PAGE> 36
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 16.5% Amount Value
- -------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.4%
.............................................................
Federal Home Loan Mortgage
Corporation:
1573 GC, 9.617275%, 1/15/2023 # $1,272,812 $ 1,237,639
.............................................................
1261 J, 8.00%, 7/15/2021 649,703 680,489
.............................................................
2067 PD, 6.50%, 9/15/2026 1,500,000 1,511,758
.............................................................
1468 S, 11.691%, 2/15/2023 # 449,224 473,348
.............................................................
2043 SC, 10.12813%, 4/15/2028 # 399,363 396,272
.............................................................
1564 SE, 8.226833%, 8/15/2008 # 353,637 356,257
.............................................................
2036 Z, 7.00%, 3/15/2028 109,020 108,679
.............................................................
2055 ZA, 6.50%, 5/15/2013 1,005,417 974,611
.............................................................
Federal National Mortgage
Association:
G93-27 SB, 6.46933%, 8/25/2023 # 115,176 98,845
.............................................................
1993-37 SB, 7.02916%, 3/25/2023 # 224,549 215,169
................. .................
----------
6,053,067
- -------------------------------------------------------------
PASS-THROUGH SECURITIES -- 1.1%
.............................................................
Government National Mortgage
Association, 8247, 7.00%,
7/20/2023 # 459,678 471,221
- -------------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 2.0%
.............................................................
Federal Home Loan Mortgage
Corporation, 1965 SA (Inverse
IO), 2.049999%, 3/15/2024 # 1,000,000 133,834
.............................................................
Federal National Mortgage
Association (PO): 1997-76 B,
0.00%, 6/25/2018 685,025 671,730
0.00%, 10/09/2019 400,000 114,912
................. .................
----------
920,476
- -------------------------------------------------------------
Total government agency mortgage-
backed securities (cost
$7,068,743) 7,444,764
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-AGENCY MORTGAGE- Principal
BACKED SECURITIES -- 31.7% Amount Value
- -------------------------------------------------------------
- -------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 13.8%
.............................................................
Associates Manufactured Housing
Pass-Through Certificates, 1996-2
A4, 6.60%, 6/15/2027 $ 500,000 $ 511,772
.............................................................
Commercial Financial Services
Securitized Multiple Asset Rated
Trust (Acquired 9/24/1997, cost
$376,613), 1997-5 A1, 7.72%,
6/15/2005 r 376,613 378,790
.............................................................
Commercial Financial Services
Securitized Multiple Asset Rated
Trust (Acquired 2/24/1998, cost
$170,779), 1998-1 A1, 7.45%,
3/15/2006 r 170,779 171,126
.............................................................
CPS Auto Trust 1998-1 A, 6.00%,
8/15/2003 480,628 480,553
.............................................................
Ditech Home Loan Owner Trust,
1997-1 A3, 6.71%, 8/15/2018 600,000 611,073
.............................................................
Firstplus Home Loan Trust, 1996-2
A4, 7.35%, 10/20/2009 499,852 505,758
.............................................................
Firstplus Home Loan Owner Trust,
1998-1 A4, 6.20%, 3/10/2015 400,000 401,478
.............................................................
Green Tree Financial Corporation:
1995-4 A4, 6.75%, 6/15/2025 400,000 406,334
.............................................................
1996-5 B2, 8.45%, 7/15/2027 749,881 791,124
.............................................................
Green Tree Recreational, Equipment
& Consumer Trust, 1996-B CTFS,
7.70%, 7/15/2018 450,000 449,016
.............................................................
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$499,954), 1998-1A A, 6.125%,
1/20/2007 r 500,000 499,433
.............................................................
IMC Home Equity Loan Trust, 1996-4
A4, 7.11%, 8/25/2014 1,000,000 1,032,773
................. .................
----------
6,239,230
- -------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
23
<PAGE> 37
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- -------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 17.9%
.............................................................
Blackrock Capital Finance L.P.
(Acquired 6/23/1997, cost
$276,801), 1997-R2 AP, 7.04398%,
12/25/2035 # r $ 278,498 $ 293,173
.............................................................
CMC Securities Corporation, 1994-G,
7.00%, 9/25/2024 200,000 203,959
.............................................................
Citicorp Mortgage Securities, Inc.:
1990-D A1, 9.50%, 10/25/2005 129,518 129,432
.............................................................
1997-3 A2, 6.92%, 8/25/2027 323,265 324,718
.............................................................
Collateralized Mortgage Obligations
Trust, 57-D, 9.90%, 2/01/2019 396,972 428,616
.............................................................
Commercial Mortgage Acceptance
Corporation (Acquired 3/13/1998,
cost $433,589), 1996-C2 A2,
6.8516%, 9/15/2023 r 428,831 430,034
.............................................................
The C.S. First Boston Mortgage
Securities Corp. Commercial
Mortgage Pass-Through
Certificates, Series, 1998-C1
A1B, 6.48%, 5/17/2008 1,000,000 1,017,666
.............................................................
GE Capital Mortgage Services, Inc.,
1994-24 A4, 7.00%, 7/25/2024 169,843 172,910
.............................................................
Housing Securities, Inc.:
(Acquired 3/03/1995, cost
$314,978), 1994-1 AB2, 6.50%,
3/25/2009 r 477,239 390,501
.............................................................
(Acquired 1/19/1995, cost
$183,274)
1994-2 B1, 6.50%, 7/25/2009 r 243,554 219,945
.............................................................
Independent National Mortgage
Corporation, 1995-F A5, 8.25%,
5/25/2010 1,000,000 1,036,980
.............................................................
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Principal
Amount Value
<S> <C> <C>
Nomura Asset Securities
Corporation:
1995-MD3 A1B, 8.15%, 3/04/2020 $ 750,000 $ 827,110
.............................................................
1998-D6 A1B, 6.59%, 3/17/2028 1,050,000 1,080,308
.............................................................
Ocwen Residential MBS Corp.
(Acquired 6/18/1998, cost
$998,750), 1998-R2 AP, 4.9739%,
11/25/2034 r # 1,000,000 999,061
.............................................................
Resolution Trust Corporation,
1994-C2 G, 8.00%, 4/25/2025 540,366 545,389
................. .................
----------
8,099,802
- -------------------------------------------------------------
Total non-agency mortgage-backed
securities (cost $14,101,007) 14,339,032
- -------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 20.5%
- -------------------------------------------------------------
U.S. Treasury Bonds:
7.50%, 11/15/2016 2,500,000 3,002,345
.............................................................
6.375%, 8/15/2027 2,375,000 2,609,533
.............................................................
6.125%, 11/15/2027 775,000 830,704
.............................................................
U.S. Treasury Notes:
6.25%, 2/15/2003 750,000 772,032
.............................................................
5.875%, 11/15/2005 500,000 509,844
.............................................................
6.625%, 5/15/2007 500,000 537,500
.............................................................
5.625%, 5/15/2008 1,000,000 1,014,063
- -------------------------------------------------------------
Total U.S. Treasury obligations
(cost $9,081,048) 9,276,021
- -------------------------------------------------------------
PREFERRED STOCK -- 1.1% Shares
- -------------------------------------------------------------
Home Ownership Funding 2, (Acquired
2/20/1997, cost $500,000) r 500 476,875
- -------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
24
<PAGE> 38
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
VARIABLE RATE DEMAND Principal
NOTES* -- 3.3% Amount Value
- -------------------------------------------------------------
<S> <C> <C>
General Mills, Inc., 5.2651% $ 240,255 $ 240,255
.............................................................
Pitney Bowes, Inc., 5.2651% 935,320 935,320
.............................................................
Sara Lee Corp., 5.2562% 326,435 326,435
................. .................
----------
Total variable rate demand notes
(cost $1,502,010) 1,502,010
- -------------------------------------------------------------
Total investments -- 98.4%
(cost $43,602,272) 44,502,970
.............................................................
Other assets in excess of
liabilities -- 1.6% 744,831
................. .................
----------
Total net assets -- 100.0% $45,247,801
- -------------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1998.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1998.
IO -- Interest Only.
PO -- Principal Only.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
ETC -- Equipment Trust Certificate.
+ -- Deferred interest security that receives no coupon payments until a
predetermined date.
See Notes to Financial Statements
25
<PAGE> 39
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
CORPORATE BONDS Principal
AND NOTES -- 35.2% Amount Value
- ----------------------------------------------------------
<S> <C> <C>
APPAREL -- 1.4%
..........................................................
La Petite Holdings, CLB
8/01/1998, 9.625%, 8/01/2001 $ 3,500,000 $ 3,605,000
- ----------------------------------------------------------
BANKS -- 3.0%
..........................................................
Chase Capital II, CLB 2/1/2007
6.21875%, 2/01/2027 # 2,100,000 2,062,101
..........................................................
MBNA Corporation,
6.0375%, 6/17/2002 # 1,125,000 1,120,897
..........................................................
MBNA Global Capital
Securities,
CLB 2/01/2007, 6.51875%,
2/01/2027 # 2,000,000 1,865,762
..........................................................
Old Kentucky Capital Trust I,
6.51875%, 2/01/2027 # 2,500,000 2,497,272
..................... ..................... -----------
7,546,032
- ----------------------------------------------------------
EUROBANKS -- 9.7%
..........................................................
Fokus Bank A/S, CLB 9/29/1999,
6.90%, 9/29/2004 # 4,000,000 4,031,352
..........................................................
Foreningsbanken Kredit AB,
CLB 12/18/2001, 6.4375%,
12/29/2049 # 5,750,000 5,771,850
..........................................................
Hong Kong & Shanghai Bank, CLB
8/26/1998, 6.00%, 8/29/2049# 3,500,000 2,599,100
..........................................................
Nordbanken, CLB 10/25/2001,
6.2875%, 10/29/2049 # 5,830,000 5,850,177
..........................................................
Okobank, CLB 9/09/2002,
6.1875%, 9/29/2049 # 2,750,000 2,746,345
..........................................................
Skandinavinska Enskilda
Banken, CLB 6/28/2003,
6.6875%, 6/29/2049 # 3,500,000 3,529,470
..................... ..................... -----------
24,528,294
- ----------------------------------------------------------
FINANCIAL SERVICES -- 4.7%
..........................................................
Newcourt Credit Group, 5.91%,
10/24/2000 # 2,750,000 2,758,280
..........................................................
Countrywide Home Loans, Inc.,
6.2225%, 3/16/2005 # 5,000,000 5,010,879
..........................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
Florida Windstorm (Acquired
7/31/1997, cost $3,496,092),
6.85%, 8/25/2007 r $ 3,500,000 $ 3,631,305
..........................................................
General Motors Acceptance
Corporation,
8.25%, 3/01/2005 500,000 556,774
..................... ..................... -----------
11,957,238
- ----------------------------------------------------------
MISCELLANEOUS -- 1.6%
..........................................................
URSA Major Rated Limited
(Acquired 1/28/1998, cost
$3,956,013), 5.90%,
1/06/2003 r 4,000,000 4,011,364
- ----------------------------------------------------------
OIL & GAS (DOMESTIC) -- 2.2%
..........................................................
Harcor Energy, Inc., CLB
7/15/1999, 14.875%,
7/15/2002 4,636,000 5,505,250
- ----------------------------------------------------------
PAPER -- 1.1%
..........................................................
Fort Howard Corporation,
11.00%, 1/02/2002 2,696,375 2,755,216
- ----------------------------------------------------------
REAL ESTATE -- 2.4%
..........................................................
Taubman Realty Group, L.P.,
6.7375%, 7/30/2001 # 6,000,000 6,101,207
- ----------------------------------------------------------
TELECOMMUNICATIONS -- 5.7%
..........................................................
Continental Cablevision, Inc.,
CLB 6/01/1999, 11.00%,
6/01/2007 4,000,000 4,350,080
..........................................................
Illinois Bell Telephone Co.,
CLB 9/11/1998, 7.625%,
4/01/2006 300,000 302,577
..........................................................
</TABLE>
See Notes to Financial Statements
26
<PAGE> 40
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
Teleport Communications, CLB
7/01/2001, 0.00%,
7/01/2007+ $ 5,215,000 $ 4,537,050
..........................................................
TKR Cable, Inc., CLB
10/30/1999, 10.50%,
10/30/2007 4,675,000 5,122,612
..................... ..................... -----------
14,312,319
- ----------------------------------------------------------
UTILITY -- ELECTRIC -- 3.4%
..........................................................
Calenergy Co., Inc., CLB
1/15/1999, 10.25%, 1/15/2004 3,350,000 3,609,625
..........................................................
Long Island Lighting Co., CLB
9/11/1998, 8.90%, 7/15/2019 4,800,000 5,090,956
..................... ..................... -----------
8,700,581
- ----------------------------------------------------------
Total corporate bonds and notes (cost
$88,719,210) 89,022,501
- ----------------------------------------------------------
GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 11.6%
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.1%
..........................................................
Federal Home Loan Mortgage Corporation:
1081 I, 7.00%, 12/15/2019 20,402 20,375
..........................................................
1194 G, 6.50%, 10/15/2006 500,000 503,607
..........................................................
1206 GA, 7.00%, 3/15/2018 2,177,324 2,178,162
..........................................................
1267 O, 7.25%, 12/15/2005 30,176 30,323
..........................................................
1336 H, 7.75%, 1/15/2021 400,000 409,683
..........................................................
1543 KE, 9.17437%,
9/15/2022 # 1,046,602 1,028,965
..........................................................
1617 D, 6.50%, 11/15/2023 71,000 69,665
..........................................................
1944 SB, 10.5625%,
3/15/2027 # 132,077 133,107
..........................................................
2036 Z, 7.00%, 3/15/2028 320,758 319,755
..........................................................
2039 Z, 6.50%, 3/15/2013 1,014,920 1,008,577
..........................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
2043 SC, 10.12813%,
4/15/2028 # $ 1,597,452 $ 1,585,087
..........................................................
2055 ZA, 6.50%, 5/15/2013 2,312,458 2,241,604
..........................................................
Federal National Mortgage Association:
1988-26 C, 7.50%, 7/25/2018 71,972 72,736
..........................................................
1990-112 E, 8.50%, 7/25/2019 10,457 10,444
..........................................................
1991-147 K, 7.00%, 1/25/2021 5,000 5,042
..........................................................
1991-153 N, 7.50%, 2/25/2007 207,422 212,698
..........................................................
1992-138 O, 7.50%, 7/25/2022 42,947 42,854
..........................................................
1992-163 E, 6.75%, 9/25/2022 307,392 307,670
..........................................................
1993-23 SH, 9.75053%,
3/25/2023 # 2,260,872 2,212,707
..........................................................
1993-45 SB, 8.994%,
4/25/2023 # 1,500,000 1,449,982
..........................................................
1994-60 D, 7.00%, 4/25/2024 30,000 30,512
..........................................................
1997-76 FT, 6.0875%,
9/17/2027 # 1,583,947 1,544,734
..................... ..................... -----------
15,418,289
- ----------------------------------------------------------
PASS-THROUGH SECURITIES -- 3.8%
..........................................................
Federal Home Loan Mortgage
Corporation, 255452, 8.50%,
2/01/2008 481,445 501,103
..........................................................
Federal National Mortgage
Association,
21130, 8.00%, 9/01/2000 4,388 4,544
..........................................................
Government National Mortgage Association:
8067, 7.00%, 11/20/2022 # 1,302,650 1,335,920
..........................................................
8247, 7.00%, 7/20/2023 # 919,357 942,442
..........................................................
8898, 6.875%, 1/20/2022 # 3,327,950 3,410,916
..........................................................
8956, 7.375%, 4/20/2022 # 3,310,761 3,411,110
..................... ..................... -----------
9,606,035
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
27
<PAGE> 41
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
STRIPPED MORTGAGE-BACKED SECURITIES -- 1.7%
..........................................................
Federal Home Loan Mortgage Corporation,
1965 SA (Inverse IO),
2.049999%, 3/15/2024 # $10,500,000 $ 1,405,258
..........................................................
Federal National Mortgage Association:
1993-72 J (IO), 6.50%,
12/25/2006 1,023,636 74,201
..........................................................
1993-97 L (IO), 7.50%,
5/25/2023 1,095,099 71,879
..........................................................
1997-65 A (PO), 0.00%,
9/25/2000 2,642,135 2,443,823
..........................................................
1997-7 SP (IO), 2.60%,
04/18/2015 22,993,118 472,332
........................................... -----------
4,467,493
- ----------------------------------------------------------
Total government agency mortgage-backed
securities (cost $28,694,791) 29,491,817
- ----------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES -- 36.2%
- ----------------------------------------------------------
ASSET-BACKED SECURITIES -- 25.3%
..........................................................
Asset-Backed Securities
Investment Trust (Acquired
8/08/1997, cost $4,000,000),
1997-D A, 6.79%, 8/17/2003 r 4,000,000 4,009,836
..........................................................
Champion Auto Grantor Trust
(Acquired 3/18/1998, cost
$2,206,222), 1998-A A,
6.11%, 10/15/2002 r 2,206,256 2,210,737
..........................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
09/24/1997, cost
$2,353,829), 1997-5 A1,
7.72%, 6/15/2005 r 2,353,829 2,367,437
..........................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
2/24/1998, Cost $2,927,640),
1998-1 A1, 7.45%,
3/15/2006 r $ 2,927,640 $ 2,933,580
..........................................................
Commercial Mortgage Acceptance
Corporation (Acquired
3/13/1998, cost $1,858,238),
1996-C2 A2, 6.8516%,
9/15/2023 r 1,837,850 1,843,001
..........................................................
CPS Auto Trust, 1998-1 A,
6.00%, 8/15/2003 1,922,513 1,922,213
..........................................................
Ditech Home Loan Owner Trust,
1997-1 A3, 6.71%, 8/15/2018 3,280,000 3,340,532
..........................................................
Firstplus Home Loan Owner
Trust:
1996-2 A4, 7.35%, 10/20/2009 3,998,814 4,046,060
..........................................................
1998-1 A4, 6.20%, 3/10/2015 2,456,000 2,465,075
..........................................................
1998-4 A4, 6.32%, 3/10/2017 5,000,000 5,015,000
..........................................................
First Tennessee Auto Grantor
Trust (Acquired 4/17/1998,
cost $3,284,803), 1998-A A,
6.134%, 4/15/2003 r 3,284,803 3,285,316
..........................................................
Green Tree Financial
Corporation:
1995-4 A4, 6.75%, 6/15/2025 5,435,000 5,521,063
..........................................................
1996-5 B2, 8.45%, 7/15/2027 4,145,001 4,372,976
..........................................................
Green Tree Recreational,
Equipment & Consumer Trust,
1996-B CTFS, 7.70%,
7/15/2018 2,250,000 2,245,079
..........................................................
Heilig-Meyers Master Trust
(Acquired 2/20/1998, cost
$4,099,626), 1998-1A A,
6.125%, 1/20/2007 r 4,100,000 4,095,351
..........................................................
</TABLE>
See Notes to Financial Statements
28
<PAGE> 42
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
Long Beach Acceptance Auto
Grantor Trust (Acquired
1/29/1998, cost $2,225,348),
1998-1 A, 6.19%, 1/25/2004 r $ 2,225,373 $ 2,226,070
..........................................................
The Money Store Residential
Trust, 1998-I A2, 6.20%,
3/15/2008 2,250,000 2,252,813
..........................................................
Nomura Asset Securities
Corporation, 1995-MD3 A1B,
8.15%, 3/04/2020 2,750,000 3,032,736
..........................................................
Resolution Trust Corporation,
1994-C1 F, 8.00%, 6/25/2026 2,075,145 2,088,704
..........................................................
Trust Investment Enhanced
Return Securities, 1997-7 A,
CLB 2/15/1999, 6.688%,
11/15/2003 4,700,000 4,723,298
..................... ..................... -----------
63,996,877
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.0%
..........................................................
Blackrock Capital Finance L.P.
(Acquired 6/23/1997, Cost
$1,522,404), 1997-R2 AP,
7.04398%, 12/25/2035 # r 1,531,738 1,612,450
..........................................................
Chemical Mortgage Securities,
Inc., 1993-3 A1, 7.125%,
7/25/2023 172,517 173,142
..........................................................
Citicorp Mortgage Securities,
Inc.: 1990-D A1, 9.50%,
10/25/2005 259,037 258,865
..........................................................
1997-3 A2, 6.92%, 8/25/2027 2,747,752 2,760,103
..........................................................
Countrywide Funding
Corporation, 1994-17 A9,
8.00%, 7/25/2024 4,000 4,243
..........................................................
GE Capital Mortgage Services,
Inc., 1995-8 A5, 7.50%,
10/25/2025 2,391,252 2,384,511
..........................................................
Housing Securities, Inc.,
1994-2 B1, 6.50%, 7/25/2009 218,034 196,899
..........................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
Independent National Mortgage
Corporation:
1995-A A4, 8.75%, 3/25/2025 $ 18,000 $ 18,578
..........................................................
1996-D A2, 7.00%, 5/25/2026 1,628,932 1,633,924
..........................................................
Ocwen Residential MBS Corp.
(Acquired 6/18/1998, cost
$4,993,750), 1998-R2 AP,
4.9739%, 11/25/2034 # r 5,000,000 4,995,305
..........................................................
Prudential Home Mortgage
Securities, Co., 1993-36
A10, 7.25%, 10/25/2023 500,000 507,357
..........................................................
Residential Funding Mortgage
Securities Inc.: 1993-S9 A8,
8.166665%, 2/25/2008 # 125,305 125,069
..........................................................
1992-S5 A5, 7.50%, 2/25/2007 690,553 693,173
..........................................................
Salomon Brothers Mortgage
Securities VII, 1994-6 AI,
7.0105%, 5/25/2004 # 2,512,040 2,536,821
..........................................................
Structured Mortgage Asset
Residential Trust:
1991-1H, 8.25%, 6/25/2022 180,613 181,396
..........................................................
1992-3 A, 8.00%, 10/25/2007 173,063 178,479
..........................................................
1993-5A AA, 6.9367%,
6/25/2024 # 272,916 268,960
..........................................................
Walsh Acceptance (Acquired
3/06/1997, cost $1,750,106),
1997-2 A, 6.6875%,
3/01/2027 # r 1,736,539 1,736,402
..................... ..................... -----------
20,265,677
- ----------------------------------------------------------
PASS-THROUGH SECURITIES -- 0.2%
..........................................................
Citicorp Mortgage Securities,
Inc.:
1988-16 A1, 10.00%,
11/25/2018 37,210 39,807
..........................................................
1989-8 A1, 10.50%, 6/25/2019 367,994 397,248
..................... ..................... -----------
437,055
- ----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
29
<PAGE> 43
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 2.7%
..........................................................
<S> <C> <C>
Asset Securitization
Corporation, 1997-D5, PSI
(IO), 1.37804%, 2/14/2041 # $14,885,789 $ 1,617,267
..........................................................
Chase Commercial Mortgage
Securities Corporation,
1997-1 X (IO), 1.3965%,
4/19/2015 # 25,691,230 2,052,293
..........................................................
CS First Boston Mortgage
Securities Corporation
(Acquired 8/14/1997, cost
$1,362,985), 1995-WF1 AX
(IO), 1.487257%,
12/21/2027 # r 20,702,711 1,093,372
..........................................................
Donaldson, Lufkin & Jenrette,
(Acquired 4/25/1997, Cost
$2,154,921), 1997-CF1 S
(IO), 1.09368%, 3/15/2017 #r 35,184,294 2,177,028
..................... ..................... -----------
6,939,960
- ----------------------------------------------------------
Total non-agency mortgage-backed securities
(cost $91,608,401) 91,639,569
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK -- 0.5% Shares
- -----------------------------------------------------------
<S> <C> <C>
Home Ownership Funding 2, (Acquired
2/20/1997, cost $1,500,000) r 1,500 1,430,625
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY OBLIGATIONS Principal
- -- 8.3% Amount
- ----------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bonds:
7.500%, 11/15/2016 $ 4,300,000 5,164,033
..........................................................
6.375%, 8/15/2027 2,000,000 2,197,502
..........................................................
6.125%, 11/15/2027 3,250,000 3,483,597
..........................................................
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ----------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes:
5.875%, 11/15/1999 $ 500,000 $ 502,344
..........................................................
6.25%, 2/15/2003 2,000,000 2,058,752
..........................................................
5.875%, 11/15/2005 2,250,000 2,294,298
..........................................................
6.50%, 10/15/2006 4,925,000 5,232,817
..................... ..................... -----------
Total U.S. Treasury
obligations (cost 20,933,343
$20,683,031)
- ----------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.9%
- ----------------------------------------------------------
DISCOUNT NOTES -- 6.5%
..........................................................
CSX Corp., 5.69%, 7/13/1998
4(2) 500,000 499,052
..........................................................
Centex Corp., 7.00%, 7/01/1998 7,000,000 7,000,000
..........................................................
International Lease Finance
Corp., 5.51%, 7/07/1998 9,000,000 8,991,734
..................... ..................... -----------
Total discount notes 16,490,786
- ----------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 0.4%
..........................................................
General Mills, Inc., 5.2651% 965,517 965,517
- ----------------------------------------------------------
Total short-term investments
(cost $17,456,303) 17,456,303
- ----------------------------------------------------------
Total investments -- 98.7% (cost
$248,661,736) 249,974,158
..........................................................
Other assets in excess of
liabilities -- 1.3% 3,176,377
..................... ..................... -----------
Total net assets -- 100.0% $253,150,535
- ----------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1998.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rate listed is as of June 30, 1998.
IO -- Interest Only.
PO -- Principal Only.
CLB -- Callable.
r Restricted Security. Purchased in a private placement transaction; resale to
the public may require registration or may extend only to qualified
institutional buyers.
4(2) -- Restricted security requiring resale to institutional investors.
+ -- Deferred interest security that receives no coupon payments until a
predetermined date.
See Notes to Financial Statements
30
<PAGE> 44
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
CORPORATE BONDS AND Principal
NOTES -- 33.0% Amount Value
- -----------------------------------------------------------
APPAREL -- 1.3%
...........................................................
<S> <C> <C>
La Petite Holdings, CLB
8/01/1998, 9.625%, 8/01/2001 $ 350,000 $ 360,500
- -----------------------------------------------------------
BANKS -- 1.8%
...........................................................
MBNA Corporation, 6.0375%,
6/17/2002 # 500,000 498,176
- -----------------------------------------------------------
EUROBANKS -- 9.7%
...........................................................
Fokus Bank A/S, CLB 9/29/1999,
6.90%, 9/29/2004 # 600,000 604,703
...........................................................
Foreningsbanken Kredit AB, CLB
12/18/2001, 6.4375%,
12/29/2049 # 750,000 752,850
...........................................................
Nordbanken, CLB 10/25/2001,
6.2875%, 10/29/2049 # 550,000 551,903
...........................................................
Skandinavinska Enskilda Banken,
CLB 6/28/2003, 6.6875%,
6/29/2049 # 800,000 806,736
..................... ...................... ----------
2,716,192
- -----------------------------------------------------------
FINANCIAL SERVICES -- 4.5%
...........................................................
Newcourt Credit Group, 5.91%,
10/24/2000 # 500,000 501,505
...........................................................
Countrywide Home Loans, Inc.,
6.2225%, 3/16/2005 # 750,000 751,632
..................... ...................... ----------
1,253,137
- -----------------------------------------------------------
OIL & GAS (DOMESTIC) -- 2.7%
...........................................................
Harcor Energy, Inc., CLB
7/15/1999, 14.875%, 7/15/2002 650,000 771,875
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------
PAPER & FOREST PRODUCTS -- 1.7%
...........................................................
<S> <C> <C>
Fort Howard Corporation, 11.00%,
1/02/2002 $ 463,440 $ 473,553
- -----------------------------------------------------------
TELECOMMUNICATIONS -- 7.3%
...........................................................
Continental Cablevision, Inc.,
CLB 6/01/1999, 11.00%,
6/01/2007 700,000 761,264
...........................................................
Illinois Bell Telephone Co., CLB
9/11/1998, 7.625%, 4/01/2006 150,000 151,288
...........................................................
Teleport Communications, CLB
7/01/2001, 0.00%, 7/01/2007 + 750,000 652,500
...........................................................
TKR Cable, Inc., CLB 10/30/1999,
10.50%, 10/30/2007 450,000 493,086
..................... ...................... ----------
2,058,138
- -----------------------------------------------------------
UTILITY -- ELECTRIC -- 4.0%
...........................................................
Calenergy Co., Inc., CLB
1/15/1999, 10.25%, 1/15/2004 500,000 538,750
...........................................................
Long Island Lighting Co., CLB
9/11/1998, 8.90%, 7/15/2019 550,000 583,339
..................... ...................... ----------
1,122,089
- -----------------------------------------------------------
Total corporate bonds and notes
(cost $9,253,774) 9,253,660
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
31
<PAGE> 45
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
GOVERNMENT AGENCY
MORTGAGE-BACKED Principal
SECURITIES -- 21.3% Amount Value
- -----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.5%
...........................................................
<S> <C> <C>
Federal Home Loan Mortgage
Corporation:
1081 I, 7.00%, 12/15/2019 $ 8,390 $ 8,379
...........................................................
1206 GA, 7.00%, 3/15/2018 417,645 417,806
...........................................................
1988 SD, 10.25%, 9/15/2027 # 975,610 981,636
...........................................................
2036 Z, 7.00%, 3/15/2028 79,287 79,039
...........................................................
2043 SC, 10.12813%, 4/15/2028 # 285,259 283,051
...........................................................
2055 ZA, 6.50%, 5/15/2013 603,250 584,766
...........................................................
Federal National Mortgage
Association:
1992-39 SD, 22.9866%,
7/25/2019 # 38,319 39,257
..................... ...................... ----------
2,393,934
- -----------------------------------------------------------
GOVERNMENT AGENCY NOTES -- 1.4%
...........................................................
Federal Home Loan Bank, CLB
9/16/1998, 4.69%, 3/16/1999 # 400,000 398,130
- -----------------------------------------------------------
PASS-THROUGH SECURITIES -- 7.5%
...........................................................
Federal Housing Authority
Project, 7.43%, 2/01/2023 135,150 137,382
...........................................................
Government National Mortgage
Association,
8067, 7.00%, 11/20/2022 # 521,060 534,368
...........................................................
8346, 7.00%, 12/20/2023 # 1,071,298 1,098,198
...........................................................
8570, 7.00%, 10/20/2019 # 313,313 321,500
..................... ...................... ----------
2,091,448
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------
STRIPPED MORTGAGE-BACKED SECURITIES -- 3.9%
...........................................................
<S> <C> <C>
Federal National Mortgage
Association, 1993-129 J (IO),
6.50%, 2/25/2007 $ 970,629 $ 90,208
...........................................................
1993-97 L (IO), 7.50%,
5/25/2023 403,875 26,509
...........................................................
1997-65 A (PO), 0.00%,
9/25/2000 337,818 312,463
...........................................................
1997-76 B (PO), 0.00%,
6/25/2018 685,025 671,730
..................... ...................... ----------
1,100,910
- -----------------------------------------------------------
Total government agency mortgage-backed
securities (cost $5,948,740) 5,984,422
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
32
<PAGE> 46
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
NON-AGENCY MORTGAGE-
BACKED SECURITIES -- Principal
16.9% Amount Value
- -----------------------------------------------------------
ASSET-BACKED SECURITIES -- 11.3%
...........................................................
<S> <C> <C>
Asset-Backed Securities
Investment Trust (Acquired
8/08/1997, cost $500,000),
1997-D A, 6.79%, 8/17/2003 r $ 500,000 $ 501,229
...........................................................
Champion Auto Grantor Trust
(Acquired 10/28/1997, cost
$168,851), 1997-D A, 6.27%,
9/15/2002 r 168,851 169,325
...........................................................
Commercial Financial Services
Securitized Multiple Asset
Rated Trust (Acquired
9/24/1997, cost $376,613),
1997-5 A1, 7.72%, 6/15/2005 r 376,613 378,790
...........................................................
First Tennessee Auto Grantor
Trust (Acquired 4/17/1998,
cost $887,785), 1998-A A,
6.134%, 4/15/2003 r 887,785 887,923
...........................................................
Long Beach Acceptance Auto
Grantor Trust (Acquired
1/29/1998, cost $447,795),
1998-1 A, 6.19%, 1/25/2004 r 447,800 447,940
...........................................................
The Money Store Home Equity
Trust, 1994-C A3, 7.40%,
3/15/2018 278,553 280,089
...........................................................
Trust Investment Enhanced Return
Securities, 1997-7A, CLB
2/15/1999, 6.688%, 11/15/2003 500,000 502,478
..................... ...................... ----------
3,167,774
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.6%
...........................................................
<S> <C> <C>
American Housing Trust, XD,
8.60%, 11/25/2015 $ 429,321 $ 429,856
...........................................................
Citicorp Mortgage Securities,
Inc., 1990-D A1, 9.50%,
10/25/2005 129,518 129,432
...........................................................
Resolution Trust Corporation,
1994-C2 G, 8.00%, 4/25/2025 360,244 363,593
...........................................................
Salomon Brothers Mortgage
Securities VI, 1986-1 A,
6.00%, 12/25/2011 373,786 370,918
...........................................................
Walsh Acceptance (Acquired
3/06/1997, cost $291,684),
1997-2 A, 6.6875%, 3/01/2027 #
r 289,423 289,401
..................... ...................... ----------
1,583,200
- -----------------------------------------------------------
Total non-agency mortgage-backed securities
(cost $4,748,668) 4,750,974
- -----------------------------------------------------------
U.S. TREASURY
OBLIGATIONS -- 3.6%
- -----------------------------------------------------------
U.S. Treasury Notes, 5.875%,
3/31/1999 (cost $1,002,185) 1,000,000 1,003,126
- -----------------------------------------------------------
SHORT-TERM INVESTMENTS -- 26.7%
- -----------------------------------------------------------
DISCOUNT NOTES -- 24.9%
...........................................................
CSX Corp., 0.00%, 7/13/1998 4(2) 1,500,000 1,497,155
...........................................................
Exxon Asset Management, 5.54%,
7/01/1998 4(2) 1,500,000 1,500,000
...........................................................
Lockheed Martin Corp.:
5.67%, 7/06/1998 4(2) 1,250,000 1,249,016
...........................................................
5.70%, 7/21/1998 4(2) 1,500,000 1,495,250
...........................................................
Tyson Foods, Inc., 5.67%,
7/06/1998 1,250,000 1,249,016
..................... ...................... ----------
Total discount notes 6,990,437
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements
33
<PAGE> 47
Schedule of Investments -- June 30, 1998
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- -----------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 1.8%
...........................................................
<S> <C> <C>
General Mills, Inc., 5.2651% $ 957 $ 957
...........................................................
Pitney Bowes, Inc., 5.2651% 488,381 488,381
..................... ...................... ----------
Total variable rate demand notes 489,338
- -----------------------------------------------------------
Total short-term investments
(cost $7,479,775) 7,479,775
- -----------------------------------------------------------
Total investments -- 101.5%
(cost $28,433,142) 28,471,957
...........................................................
Liabilities in excess of other
assets -- (1.5)% (433,479)
..................... ...................... ----------
Total net assets -- 100.0% $28,038,478
- -----------------------------------------------------------
</TABLE>
# Variable rate security. Rate listed is as of June 30, 1998.
* Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates. The
rates listed are as of June 30, 1998.
IO -- Interest Only.
PO -- Principal Only.
CLB -- Callable.
r -- Restricted Security. Purchased in a private placement transaction; resale
to the public may require registration or may extend only to qualified
institutional buyers.
4(2) -- Restricted security requiring resale to institutional investors.
+ -- Deferred interest security that receives no coupon payments until a
predetermined date.
See Notes to Financial Statements
34
<PAGE> 48
(Intentionally Left Blank)
<PAGE> 49
Financial Statements -- June 30, 1998
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
EQUITY
INCOME MID-CAP SMALL
FUND FUND CAP FUND
---------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value*................................ $174,632,849 $7,578,068 $92,833,069
Foreign currency**.................................... -- -- --
Cash.................................................. 729 11,515 107,585
Dividends and interest receivable..................... 406,212 10,436 33,074
Receivable from Advisor............................... -- -- --
Receivable for investments sold....................... 569,635 -- 1,877,318
Receivable for Fund shares sold....................... 28 -- 226,577
Prepaid expenses...................................... 12,990 6,635 15,966
------------ ---------- -----------
Total assets..................................... 175,622,443 7,606,654 95,093,589
------------ ---------- -----------
LIABILITIES:
Payable for forward currency exchange contracts....... -- -- --
Payable to Advisor.................................... 108,182 674 59,838
Payable for investments purchased..................... 176,612 45,039 14,613
Payable for Fund shares repurchased................... 3,310 -- 84,061
Dividends payable..................................... -- -- --
Accrued expenses and other liabilities................ 79,754 21,761 21,801
------------ ---------- -----------
Total liabilities................................ 367,858 67,474 180,313
------------ ---------- -----------
Net assets....................................... $175,254,585 $7,539,180 $94,913,276
============ ========== ===========
NET ASSETS CONSIST OF:
Paid in capital....................................... $110,271,920 $7,095,188 $87,939,585
Undistributed (distributions in excess of) net
investment income.................................. 52,825 -- --
Undistributed net realized gain (loss) on
securities......................................... 20,801,091 805,357 6,094,381
Net unrealized appreciation (depreciation) of
securities and foreign currency.................... 44,128,749 (361,365) 879,310
------------ ---------- -----------
Net assets....................................... $175,254,585 $7,539,180 $94,913,276
============ ========== ===========
CALCULATION OF NET ASSET VALUE PER SHARE:
Shares outstanding (unlimited shares of no par value
authorized)........................................ 7,958,305 583,725 3,584,579
Net asset value per share (offering and redemption
price)............................................. $ 22.02 $ 12.92 $ 26.48
============ ========== ===========
*Cost of Investments................................... $130,504,100 $7,939,433 $91,953,759
============ ========== ===========
**Cost of Foreign Currency.............................. $ -- $ -- $ --
============ ========== ===========
</TABLE>
See Notes to Financial Statements
36
<PAGE> 50
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL LOW SHORT-TERM
INTERNATIONAL GLOBAL EQUITY BALANCED RETURN BOND DURATION INVESTMENT
FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1,475,911,912 $7,432,448 $106,213,578 $44,502,970 $249,974,158 $28,471,957
2,226 81,127 -- -- -- --
51,741 -- -- 2,559 -- --
6,622,150 17,969 715,502 465,168 2,585,770 256,143
-- 675 -- -- -- 2,517
5,413,808 -- 180,507 135 230,810 4,711
11,822,254 -- -- 550,326 2,271,181 479,019
46,064 6,604 8,818 6,402 15,589 9,791
-------------- ---------- ------------ ----------- ------------ -----------
1,499,870,155 7,538,823 107,118,405 45,527,560 255,077,508 29,224,138
-------------- ---------- ------------ ----------- ------------ -----------
1,323,573 6,070 -- -- -- --
900,305 -- 64,706 3,245 54,871 --
4,878,853 32,817 2,379,308 -- -- --
14,974,451 102,078 -- 15,180 380,331 1,002,871
-- -- -- 227,308 1,293,755 136,991
987,589 52,573 78,978 34,026 198,016 45,798
-------------- ---------- ------------ ----------- ------------ -----------
23,064,771 193,538 2,522,992 279,759 1,926,973 1,185,660
-------------- ---------- ------------ ----------- ------------ -----------
$1,476,805,384 $7,345,285 $104,595,413 $45,247,801 $253,150,535 $28,038,478
============== ========== ============ =========== ============ ===========
$1,288,778,487 $6,831,129 $ 91,283,788 $44,088,113 $251,083,806 $28,184,516
(6,410,587) (24,779) 1,426 34,272 -- (72,392)
1,162,718 13,165 4,311,051 224,718 754,307 (112,461)
193,274,766 525,770 8,999,148 900,698 1,312,422 38,815
-------------- ---------- ------------ ----------- ------------ -----------
$1,476,805,384 $7,345,285 $104,595,413 $45,247,801 $253,150,535 $28,038,478
============== ========== ============ =========== ============ ===========
58,310,329 645,500 5,272,538 3,362,189 24,826,266 2,767,981
$ 25.33 $ 11.38 $ 19.84 $ 13.46 $ 10.20 $ 10.13
============== ========== ============ =========== ============ ===========
$1,282,680,123 $6,907,441 $ 97,214,430 $43,602,272 $248,661,736 $28,433,142
============== ========== ============ =========== ============ ===========
$ 2,229 $ 80,372 $ -- $ -- $ -- $ --
============== ========== ============ =========== ============ ===========
</TABLE>
See Notes to Financial Statements
37
<PAGE> 51
Financial Statements -- Year Ended June 30, 1998
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
EQUITY SMALL
INCOME MID-CAP CAP
FUND FUND FUND
---------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income*
Dividends......................................... $ 5,351,735 $ 103,729 $ 298,766
Interest.......................................... 76,780 14,269 162,805
----------- --------- -----------
Total income................................. 5,428,515 117,998 461,571
----------- --------- -----------
Expenses
Advisory fee...................................... 1,424,185 40,200 491,489
Legal and auditing fees........................... 29,751 5,882 12,064
Custodian fees and expenses....................... 33,355 5,920 12,319
Accounting and transfer agent fees and expenses... 52,938 41,133 40,976
Administration fee................................ 72,478 1,758 14,624
Trustees' fees and expenses....................... 6,323 7,247 5,964
Reports to shareholders........................... -- 1,281 3,480
Registration fees................................. 20,915 38,504 30,824
Other expenses.................................... 12,331 4,200 4,231
----------- --------- -----------
Total expenses............................... 1,652,276 146,125 615,971
Less, expense reimbursement....................... -- (92,525) --
----------- --------- -----------
Net expenses................................. 1,652,276 53,600 615,971
----------- --------- -----------
Net investment income (loss)......................... 3,776,239 64,398 (154,400)
----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on securities and foreign
currency transactions........................... 29,878,073 928,847 9,968,991
Net change in unrealized appreciation
(depreciation) of securities and foreign
currency........................................ 5,189,945 (555,561) (3,968,125)
----------- --------- -----------
Net gain (loss) on investments....................... 35,068,018 373,286 6,000,866
----------- --------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $38,844,257 $ 437,684 $ 5,846,466
=========== ========= ===========
*Net of Foreign Taxes Withheld......................... $ 42,115 $ 2,179 $ --
=========== ========= ===========
</TABLE>
See Notes to Financial Statements
38
<PAGE> 52
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL TOTAL LOW SHORT-TERM
INTERNATIONAL EQUITY BALANCED RETURN BOND DURATION INVESTMENT
FUND FUND FUND FUND FUND FUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 33,083,711 $ 169,316 $ 1,313,683 $ 99,707 $ 313,046 $ 6,962
4,377,102 1,778 4,194,926 1,581,652 13,763,729 1,616,135
------------ --------- ----------- ---------- ----------- ----------
37,460,813 171,094 5,508,609 1,681,359 14,076,775 1,623,097
------------ --------- ----------- ---------- ----------- ----------
8,732,479 44,469 761,196 126,038 918,112 94,570
157,845 6,272 23,172 14,041 42,101 12,980
558,256 16,173 23,265 7,573 54,713 12,358
384,869 50,442 65,557 46,902 121,796 53,464
237,374 2,193 35,806 6,098 76,301 9,050
5,517 7,194 5,492 5,762 5,155 5,286
106,270 1,411 249 -- 22,600 5,617
165,981 38,638 23,332 27,899 48,168 23,424
38,339 4,144 7,723 1,160 12,981 2,335
------------ --------- ----------- ---------- ----------- ----------
10,386,930 170,936 945,792 235,473 1,301,927 219,084
-- (111,644) -- (86,499) (144,309) (105,600)
------------ --------- ----------- ---------- ----------- ----------
10,386,930 59,292 945,792 148,974 1,157,618 113,484
------------ --------- ----------- ---------- ----------- ----------
27,073,883 111,802 4,562,817 1,532,385 12,919,157 1,509,613
------------ --------- ----------- ---------- ----------- ----------
3,289,299 121,357 5,754,835 318,597 1,052,667 (42,539)
70,706,856 225,531 2,122,314 504,670 (221,716) (20,572)
------------ --------- ----------- ---------- ----------- ----------
73,996,155 346,888 7,877,149 823,267 830,951 (63,111)
------------ --------- ----------- ---------- ----------- ----------
$101,070,038 $ 458,690 $12,439,966 $2,355,652 $13,750,108 $1,446,502
============ ========= =========== ========== =========== ==========
$ 3,609,869 $ 13,148 $ 7,242 $ -- $ -- $ --
============ ========= =========== ========== =========== ==========
</TABLE>
See Notes to Financial Statements
39
<PAGE> 53
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY INCOME FUND MID-CAP FUND
------------------------------ --------------------------------------
Year Ended Year Ended Year Ended January 2, 1997**
June 30, 1998 June 30, 1997 June 30, 1998 through June 30, 1997
------------------------------ --------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).......... $ 3,776,239 $ 4,697,583 $ 64,398 $ 12,624
Net realized gain (loss) on securities
and foreign currency transactions... 29,878,073 34,935,223 928,847 6,232
Net change in unrealized appreciation
(depreciation) of securities and
foreign currency.................... 5,189,945 4,211,108 (555,561) 194,196
------------ ------------ ----------- ----------
Net increase in net assets
resulting from operations...... 38,844,257 43,843,914 437,684 213,052
------------ ------------ ----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income................. (3,812,071) (4,609,150) (66,341) (10,925)
Net realized gain on securities
transactions........................ (26,619,074) (18,088,501) (129,478) --
------------ ------------ ----------- ----------
Total dividends and
distributions.................. (30,431,145) (22,697,651) (195,819) (10,925)
------------ ------------ ----------- ----------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold......... 23,627,560 42,695,225 6,338,383 2,380,798
Shares issued in connection with
payment of dividends and
distributions....................... 29,778,874 21,727,110 194,620 10,844
Cost of shares redeemed............... (72,438,773) (82,232,891) (1,222,885) (606,572)
------------ ------------ ----------- ----------
Net increase (decrease) in net
assets from Fund share
transactions................... (19,032,339) (17,810,556) 5,310,118 1,785,070
------------ ------------ ----------- ----------
Total increase (decrease) in net assets... (10,619,227) 3,335,707 5,551,983 1,987,197
NET ASSETS:
Beginning of period................... 185,873,812 182,538,105 1,987,197 --
------------ ------------ ----------- ----------
End of period*........................ $175,254,585 $185,873,812 $ 7,539,180 $1,987,197
============ ============ =========== ==========
*Including undistributed (distributions in
excess of) net investment income of: $ 52,825 $ 88,433 $ -- $ 1,699
============ ============ =========== ==========
CHANGES IN SHARES OUTSTANDING:
Shares sold........................... 1,065,609 2,183,683 489,941 226,865
Shares issued in connection with
payment of dividends and
distributions....................... 1,451,197 1,142,942 15,545 942
Shares redeemed....................... (3,307,554) (4,228,482) (92,361) (57,207)
------------ ------------ ----------- ----------
Net increase (decrease).......... (790,748) (901,857) 413,125 170,600
============ ============ =========== ==========
** Commencement of operations
</TABLE>
See Notes to Financial Statements
40
<PAGE> 54
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP FUND INTERNATIONAL FUND GLOBAL EQUITY FUND
------------------------------ ------------------------------- --------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended January 2, 1997**
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 through June 30, 1997
------------------------------ ------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (154,400) $ 18,067 $ 27,073,883 $ 14,552,015 $ 111,802 $ 46,344
9,968,991 1,503,738 3,289,299 953,040 121,357 21,267
(3,968,125) 3,726,110 70,706,856 105,727,351 225,531 300,239
------------ ------------ -------------- ------------- ----------- ----------
5,846,466 5,247,915 101,070,038 121,232,406 458,690 367,850
------------ ------------ -------------- ------------- ----------- ----------
(111,869) (56,310) (32,976,929) (15,060,247) (175,171) (45,630)
(5,072,568) (2,033,874) -- (3,759,354) (91,582) --
------------ ------------ -------------- ------------- ----------- ----------
(5,184,437) (2,090,184) (32,976,929) (18,819,601) (266,753) (45,630)
------------ ------------ -------------- ------------- ----------- ----------
140,132,855 21,595,726 1,292,839,186 655,854,799 4,309,902 3,368,545
5,017,869 1,901,255 29,643,512 17,244,335 263,932 44,743
(78,429,678) (15,605,197) (802,298,868) (217,976,937) (1,150,082) (5,912)
------------ ------------ -------------- ------------- ----------- ----------
66,721,046 7,891,784 520,183,830 455,122,197 3,423,752 3,407,376
------------ ------------ -------------- ------------- ----------- ----------
67,383,075 11,049,515 588,276,939 557,535,002 3,615,689 3,729,596
27,530,201 16,480,686 888,528,445 330,993,443 3,729,596 --
------------ ------------ -------------- ------------- ----------- ----------
$ 94,913,276 $ 27,530,201 $1,476,805,384 $ 888,528,445 $ 7,345,285 $3,729,596
============ ============ ============== ============= =========== ==========
$ -- $ 18,067 $ (6,410,587) $ (1,195,950) $ (24,779) $ (453)
============ ============ ============== ============= =========== ==========
5,096,875 998,558 52,830,892 29,673,741 388,720 332,759
207,693 97,400 1,253,628 739,904 25,235 4,002
(2,875,106) (713,459) (32,528,515) (9,851,367) (104,646) (571)
------------ ------------ -------------- ------------- ----------- ----------
2,429,462 382,499 21,556,005 20,562,278 309,309 336,190
============ ============ ============== ============= =========== ==========
</TABLE>
See Notes to Financial Statements
41
<PAGE> 55
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED FUND
-----------------------------------
Year Ended Year Ended
June 30, 1998 June 30, 1997
-----------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................. $ 4,562,817 $ 3,580,837
Net realized gain (loss) on securities transactions.... 5,754,835 4,518,798
Net change in unrealized appreciation (depreciation) of
securities........................................... 2,122,314 3,306,702
------------ ------------
Net increase in net assets resulting from
operations...................................... 12,439,966 11,406,337
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income.................................. (4,563,299) (3,999,551)
Net realized gain on securities transactions........... (5,598,223) (2,410,169)
------------ ------------
Total dividends and distributions................. (10,161,522) (6,409,720)
------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from shares sold.......................... 34,493,608 39,290,919
Shares issued in connection with payment of dividends
and distributions.................................... 9,851,285 6,071,836
Cost of shares redeemed................................ (32,186,438) (30,799,051)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions.............................. 12,158,455 14,563,704
------------ ------------
Total increase (decrease) in net assets..................... 14,436,899 19,560,321
NET ASSETS:
Beginning of period.................................... 90,158,514 70,598,193
------------ ------------
End of period*......................................... $104,595,413 $ 90,158,514
============ ============
*Including undistributed (distributions in excess of) net
investment income of: $ 1,426 $ 50,696
============ ============
CHANGES IN SHARES OUTSTANDING:
Shares sold............................................ 1,728,761 2,119,226
Shares issued in connection with payment of dividends
and distributions.................................... 508,237 325,867
Shares redeemed........................................ (1,616,205) (1,658,360)
------------ ------------
Net increase (decrease)........................... 620,793 786,733
============ ============
</TABLE>
See Notes to Financial Statements
42
<PAGE> 56
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN BOND FUND LOW DURATION FUND SHORT-TERM INVESTMENT FUND
----------------------------- ----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,532,385 $ 1,964,962 $ 12,919,157 $ 10,574,255 $ 1,509,613 $ 1,058,876
318,597 (42,063) 1,052,667 1,057,714 (42,539) (46,704)
504,670 978,811 (221,716) 764,193 (20,572) (5,502)
----------- ------------ ------------ ------------- ------------ ------------
2,355,652 2,901,710 13,750,108 12,396,162 1,446,502 1,006,670
----------- ------------ ------------ ------------- ------------ ------------
(1,622,000) (1,964,962) (13,340,819) (10,574,255) (1,509,613) (1,058,876)
-- (241,973) (1,045,647) (176,195) -- --
----------- ------------ ------------ ------------- ------------ ------------
(1,622,000) (2,206,935) (14,386,466) (10,750,450) (1,509,613) (1,058,876)
----------- ------------ ------------ ------------- ------------ ------------
33,566,256 14,661,662 182,933,522 191,220,600 50,189,024 39,041,151
1,101,255 1,802,150 12,908,812 10,052,581 894,623 570,013
(4,460,475) (46,271,666) (113,269,472) (220,866,044) (44,698,826) (36,567,972)
----------- ------------ ------------ ------------- ------------ ------------
30,207,036 (29,807,854) 82,572,862 (19,592,863) 6,384,821 3,043,192
----------- ------------ ------------ ------------- ------------ ------------
30,940,688 (29,113,079) 81,936,504 (17,947,151) 6,321,710 2,990,986
14,307,113 43,420,192 171,214,031 189,161,182 21,716,768 18,725,782
----------- ------------ ------------ ------------- ------------ ------------
$45,247,801 $ 14,307,113 $253,150,535 $ 171,214,031 $ 28,038,478 $ 21,716,768
=========== ============ ============ ============= ============ ============
$ 34,272 $ 105,637 $ -- $ 446,351 $ (72,392) $ (17,486)
=========== ============ ============ ============= ============ ============
2,516,857 1,130,467 17,898,633 18,787,386 4,944,329 3,847,758
82,830 139,510 1,263,801 990,060 88,164 56,209
(334,936) (3,568,847) (11,074,513) (21,739,355) (4,404,554) (3,605,096)
----------- ------------ ------------ ------------- ------------ ------------
2,264,751 (2,298,870) 8,087,921 (1,961,909) 627,939 298,871
=========== ============ ============ ============= ============ ============
</TABLE>
See Notes to Financial Statements
43
<PAGE> 57
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1.
ACCOUNTING POLICIES. Hotchkis and Wiley Funds (the "Trust") is registered under
the Investment Company Act of 1940 as a diversified, open-end, management
investment company. The Trust was organized as a Massachusetts business trust on
August 22, 1984 and consists of ten series of shares comprising the Balanced
Fund (formerly named the Balanced Income Fund), the Small Cap Fund, the Equity
Income Fund, the International Fund, the Total Return Bond Fund, the Low
Duration Fund, the Short-Term Investment Fund, the Mid-Cap Fund, the Global
Equity Fund and the Equity Fund for Insurance Companies (collectively, the
"Funds"), the assets of which are invested in separate, independently managed
portfolios. The accompanying financial statements exclude financial information
for the Equity Fund for Insurance Companies; financial statements for that Fund
are reported on separately. Investment operations of the Funds began on August
13, 1985 (the Balanced Fund), September 20, 1985 (the Small Cap Fund), June 24,
1987 (the Equity Income Fund), October 1, 1990 (the International Fund), January
29, 1993 (the Equity Fund for Insurance Companies), May 18, 1993 (the Low
Duration Fund and the Short-Term Investment Fund), December 6, 1994 (the Total
Return Bond Fund), and January 2, 1997 (the Mid-Cap Fund and the Global Equity
Fund).
The Balanced Fund seeks to preserve capital while producing a high total return.
The Small Cap Fund seeks capital appreciation. The Equity Income Fund seeks to
provide current income and long-term growth of income, accompanied by growth of
capital. The International Fund seeks to provide current income and long-term
growth of income, accompanied by growth of capital. The Total Return Bond Fund
seeks to maximize long-term total return. The Low Duration Fund seeks to
maximize total return, consistent with preservation of capital. The Short-Term
Investment Fund seeks to maximize total return, consistent with preservation of
capital. The Mid-Cap Fund seeks to provide current income and long-term growth
of income, accompanied by growth of capital. The Global Equity Fund seeks to
provide current income and long-term growth of income, accompanied by growth of
capital. The following is a summary of significant accounting policies followed
by the Funds in the preparation of the financial statements.
SECURITY VALUATION: Portfolio securities that are listed on a securities
exchange (whether domestic or foreign) or The Nasdaq Stock Market ("NSM") 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 NSM. Unlisted securities that are not included in NSM
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
44
<PAGE> 58
- --------------------------------------------------------------------------------
exist, the proceeds received upon the disposal of such securities may differ
from quoted values previously furnished by such market makers. Securities for
which market quotations are not otherwise available are valued at fair value as
determined in good faith by Hotchkis and Wiley (the "Advisor") under procedures
established by the Board of Trustees. Short-term investments which mature in
less than 60 days are valued at amortized cost (unless the Board of Trustees
determines that this method does not represent fair value), if their original
maturity was 60 days or less, or by amortizing the values as of the 61st day
prior to maturity, if their original term to maturity exceeded 60 days.
Investments quoted in foreign currency are valued daily in U.S. dollars on the
basis of the foreign currency exchange rate prevailing at the time of valuation.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are maintained
in U.S. dollars. For the International Fund and the Global Equity Fund, foreign
currency transactions are translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the daily
rates of exchange, and (ii) purchases and sales of investment securities,
dividend and interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions. The International Fund
and the Global Equity Fund do not isolate and treat as ordinary income that
portion of the results of operations arising as a result of changes in the
exchange rate from the fluctuations arising from changes in the market prices of
securities held during the period. However, for federal income tax purposes, the
International Fund and the Global Equity Fund do isolate and treat as ordinary
income the effect of changes in foreign exchange rates arising from actual
foreign currency transactions and the effect of changes in foreign exchange
rates arising from trade date and settlement date differences.
FORWARD CURRENCY EXCHANGE CONTRACTS: The International Fund and the Global
Equity Fund utilize forward currency exchange contracts for the purpose of
hedging foreign currency risk. At June 30, 1998 all of the open forward
contracts are hedging foreign currency risk on unsettled trades. Under these
contracts, they are obligated to exchange currencies at specific future dates.
Risks arise from the possible inability of counter-parties to meet the terms of
their contracts and from movements in currency values.
FEDERAL INCOME TAXES: It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and each Fund
intends to distribute investment company net taxable income and net capital
gains to shareholders. Therefore, no federal income tax provision is required.
EXPENSE ALLOCATION: Common expenses incurred by the Funds are allocated among
the Funds based upon (i) relative average net assets, (ii) as incurred on a
specific identification basis, or (iii) evenly among the Funds, depending on the
nature of the expenditure.
RESTRICTED SECURITIES: The Small Cap, Balanced, Total Return Bond, Low Duration,
and Short-Term Investment Funds own investment securities which are unregistered
and thus restricted as to resale.
45
<PAGE> 59
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
These securities are valued by the Funds after giving due consideration to
pertinent factors including recent private sales, market conditions and the
issuer's financial performance. Where future disposition of these securities
requires registration under the Securities Act of 1933, the Funds have the right
to include these securities in such registration, generally without cost to the
Funds. The Funds have no right to require registration of unregistered
securities. At June 30, 1998, the Small Cap, Balanced, Total Return Bond, Low
Duration and Short-Term Investment Funds had restricted securities with an
aggregate market value of $1,593,900, $9,046,383, $3,858,938, $44,158,231, and
$8,416,029, respectively, representing 1.7%, 8.6%, 8.5%, 17.4%, and 30.0% of the
net assets of each Fund, respectively. Of these amounts, the Balanced, Total
Return Bond, Low Duration and Short-Term Investment Funds had restricted
securities that were determined to be illiquid pursuant to guidelines adopted by
the Board of Trustees with an aggregate market value of $3,435,970, $1,883,569,
$17,774,634 and $668,191, respectively, representing 3.3%, 4.2%, 7.0% and 2.4%
of the net assets of each Fund, respectively, for the year ended June 30, 1998.
WHEN-ISSUED SECURITIES: The Funds may purchase securities on a when-issued or
delayed delivery basis. Although the payment and interest terms of these
securities are established at the time the purchaser enters into the agreement,
these securities may be delivered and paid for at a future date, generally
within 45 days. The Funds record purchases of when-issued securities and reflect
the values of such securities in determining net asset value in the same manner
as other portfolio securities. The Funds segregate and maintain at all times
cash or other liquid assets in an amount at least equal to the amount of
outstanding commitments for when-issued securities.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income are declared
daily and paid monthly for the Total Return Bond, Low Duration and Short-Term
Investment Funds, declared and paid quarterly for the Balanced and Equity Income
Funds, declared and paid semi-annually for the Mid-Cap, International and Global
Equity Funds and declared and paid annually for the Small Cap Fund.
Distributions of net realized capital gains, if any, will be declared at least
annually. Effective July 1, 1998, the Total Return Bond, Low Duration and
Short-Term Investment Funds will declare and pay dividends monthly.
OTHER: Security and shareholder transactions are recorded on trade date.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Dividend income and dividends and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recognized
on the accrual basis. Generally accepted accounting
46
<PAGE> 60
- --------------------------------------------------------------------------------
principles require that permanent financial reporting and tax differences
relating to shareholder distributions be reclassified to paid in capital.
NOTE 2.
INVESTMENT ADVISORY AGREEMENTS. Each Fund has an investment advisory agreement
with the Advisor. The Advisor receives a fee, computed daily and payable
monthly, at the annual rates presented below as applied to each Fund's daily net
assets. The Advisor has voluntarily agreed to pay all operating expenses in
excess of the annual rates presented below as applied to each Fund's daily net
assets. For the year ended June 30, 1998, the Advisor reimbursed the following
expenses:
<TABLE>
<CAPTION>
Equity Income Mid-Cap Small Cap International Global Equity Balanced
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL ADVISORY RATE........ 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
ANNUAL CAP ON EXPENSES...... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
EXPENSES REIMBURSED......... $0 $92,525 $0 $0 $111,644 $0
</TABLE>
<TABLE>
<CAPTION>
Total Return Low Duration Short-Term
Bond Fund Fund Investment Fund
-----------------------------------------------------
<S> <C> <C> <C>
ANNUAL ADVISORY RATE............................ 0.55% 0.46% 0.40%
ANNUAL CAP ON EXPENSES.......................... 0.65% 0.58% 0.48%
EXPENSES REIMBURSED............................. $86,499 $144,309 $105,600
</TABLE>
The Equity Income, International and Global Equity Funds paid commissions on
Fund transactions to an affiliated broker in the amounts of $12,468, $302,055
and $414, respectively, during the year ended June 30, 1998.
As permitted under Rule 10f-3 of the Investment Company Act of 1940, the Board
of Trustees of the Funds have adopted procedures which allow the Funds, under
certain conditions described in the Rule, to acquire newly-issued securities
from a member of an underwriting group in which an affiliated underwriter
participates.
47
<PAGE> 61
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 3.
SECURITIES TRANSACTIONS. Purchases and sales of investment securities, other
than short-term investments, for the year ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------- ----------------------------------
Fund U.S. Government Other U.S. Government Other
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND......... -- $ 42,665,881 -- $ 84,469,892
MID-CAP FUND............... -- 8,425,310 -- 3,617,487
SMALL CAP FUND............. -- 114,673,692 -- 53,477,227
INTERNATIONAL FUND......... -- 701,629,674 -- 219,348,442
GLOBAL EQUITY FUND......... -- 6,535,691 -- 3,046,569
BALANCED FUND.............. $ 63,339,502 69,212,096 $71,097,502 49,069,258
TOTAL RETURN BOND FUND..... 38,451,939 34,721,822 25,479,793 18,148,362
LOW DURATION FUND.......... 116,290,995 184,158,820 98,926,814 123,128,398
SHORT-TERM INVESTMENT
FUND..................... 13,194,366 14,060,334 10,630,619 13,361,625
</TABLE>
As of June 30, 1998, unrealized appreciation (depreciation) for federal income
tax purposes was as follows:
<TABLE>
<CAPTION>
Net Appreciation Appreciated Depreciated
Fund (Depreciation) Securities Securities
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY INCOME FUND........................... $ 44,075,639 $ 46,310,456 $ (2,234,817)
MID-CAP FUND................................. (363,736) 420,412 (784,148)
SMALL CAP FUND............................... 606,223 9,237,435 (8,631,212)
INTERNATIONAL FUND........................... 174,358,554 283,091,074 (108,732,520)
GLOBAL EQUITY FUND........................... 441,254 957,282 (516,028)
BALANCED FUND................................ 8,999,148 9,951,376 (952,228)
TOTAL RETURN BOND FUND....................... 884,791 1,021,401 (136,610)
LOW DURATION FUND............................ 1,270,207 2,311,092 (1,040,885)
SHORT-TERM INVESTMENT FUND................... 38,815 76,043 (37,228)
</TABLE>
At June 30, 1998, the cost of investments for federal income tax purposes was
$130,557,210, $7,941,804, $92,226,846, $1,301,553,358, $6,991,194, $97,214,430,
$43,618,179, $248,703,951 and $28,433,142 for the Equity Income, Mid-Cap, Small
Cap, International, Global Equity, Balanced,
48
<PAGE> 62
- --------------------------------------------------------------------------------
Total Return Bond, Low Duration and Short-Term Investment Funds, respectively.
Any differences between book and tax are due primarily to wash sale losses and
REIT return of capital distributions. In addition, the cost basis differences in
the International Fund and Global Equity Fund are due to mark-to-market
adjustments for passive foreign investment companies.
At June 30, 1998, the Short-Term Investment Fund deferred, on a tax basis,
post-October losses of $6,520. Such amounts may be used to offset future capital
gains. Tax basis post-October losses from foreign currency related transactions
of $1,933,868 and $9,545 for the International and Global Equity Funds,
respectively, are not recognized for federal income tax purposes until fiscal
1999.
At June 30, 1998, the Short-Term Investment Fund had accumulated net realized
capital loss carryovers of $3,422 expiring in 2003, $63,545 expiring in 2004 and
$38,974 expiring in 2005. The Total Return Bond and Short-Term Investment Funds
utilized capital loss carryovers of $82,785 and $16,148, respectively, in 1998.
To the extent the Short-Term Investment Fund realizes future net capital gains,
those gains will be offset by any unused capital loss carryover.
NOTE 4.
FEDERAL TAX DISCLOSURE (UNAUDITED). For the year ended June 30, 1998, the
following percent of ordinary distributions paid qualifies for the dividend
received deduction available to corporate shareholders: Equity Income Fund 91%,
Mid-Cap Fund 15%, Small Cap Fund 3%, Global Equity Fund 17%, Balanced Fund 25%,
Total Return Bond Fund 5%, and Low Duration Fund 2%.
During the year ended June 30, 1998, the International Fund generated
$35,906,512 of foreign source income and paid $3,609,869 of foreign taxes. The
Fund elects to pass foreign taxes through to the Fund's shareholders for their
1998 tax returns. Updated data will be sent with 1998 Forms 1099-DIV to enable
shareholders to have information to claim either a foreign tax credit or to take
a foreign tax deduction on their 1998 income tax returns.
During the year ended June 30, 1998, the following Funds paid capital gain
dividends (taxable as long-term capital gains).
<TABLE>
<CAPTION>
% of
Capital Gain
Distribution at
Maximum Rate
Per Share of 20%
--------- ---------------
<S> <C> <C>
EQUITY INCOME FUND... $2.9033 37.44%
SMALL CAP FUND....... $0.8879 39.22%
BALANCED FUND........ $0.9877 62.45%
LOW DURATION FUND.... $0.0369 92.65%
</TABLE>
Information regarding these distributions was provided with the 1997 Forms
1099-DIV sent to shareholders in January 1998.
49
<PAGE> 63
Financial Highlights
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year................ $21.25 $18.91 $17.24 $15.07 $15.50
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income........................ 0.46 0.49 0.45(1) 0.49 0.46
Net realized and unrealized gain on
investments................................ 4.02 4.15 2.89 2.48 0.10
------ ------ ------ ------ ------
Total from investment operations............. 4.48 4.64 3.34 2.97 0.56
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)....... (0.46) (0.48) (0.57) (0.44) (0.46)
Distributions (from realized gains).......... (3.25) (1.82) (1.10) (0.36) (0.53)
------ ------ ------ ------ ------
Total distributions.......................... (3.71) (2.30) (1.67) (0.80) (0.99)
------ ------ ------ ------ ------
Net Asset Value, End of Year...................... $22.02 $21.25 $18.91 $17.24 $15.07
====== ====== ====== ====== ======
Total Return...................................... 22.60% 26.15% 20.04% 20.49% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)................ $175.3 $185.9 $182.5 $127.1 $87.2
Ratio of expenses to average net assets:
Before expense reimbursement................. 0.87% 0.88% 0.98% 1.02% 1.05%
After expense reimbursement.................. 0.87% 0.88% 0.98% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement................. 1.99% 2.49% 2.56% 3.11% 2.85%
After expense reimbursement.................. 1.99% 2.49% 2.56% 3.14% 2.90%
Portfolio turnover rate........................... 23% 44% 24% 50% 36%
</TABLE>
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
See Notes to Financial Statements
50
<PAGE> 64
Financial Highlights
- --------------------------------------------------------------------------------
MID-CAP FUND
<TABLE>
<CAPTION>
Year Ended January 2, 1997*
June 30, through
1998 June 30, 1997
---------- ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $11.65 $10.00
------ ------
Income from Investment Operations:
Net investment income.................................. 0.13 0.07
Net realized and unrealized gain on investments........ 1.60 1.64
------ ------
Total from investment operations....................... 1.73 1.71
------ ------
Less Distributions:
Dividends (from net investment income)................. (0.14) (0.06)
Distributions (from realized gains).................... (0.32) --
------ ------
Total distributions.................................... (0.46) (0.06)
------ ------
Net Asset Value, End of Period.............................. $12.92 $11.65
====== ======
Total Return................................................ 15.00% 17.15%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........................ $7.5 $2.0
Ratio of expenses to average net assets:
Before expense reimbursement........................... 2.72% 8.26%+
After expense reimbursement............................ 1.00% 1.00%+
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement........................... (0.52)% (5.39)%+
After expense reimbursement............................ 1.20% 1.87%+
Portfolio turnover rate..................................... 71% 23%++
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
51
<PAGE> 65
Financial Highlights
- --------------------------------------------------------------------------------
SMALL CAP FUND
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year................. $23.83 $21.33 $21.53 $19.53 $19.88
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income (loss).................. (0.06)(1) 0.03 0.05(1) (0.06) (0.01)
Net realized and unrealized gain on
investments................................. 5.13 5.62 2.80 2.84 0.78
------ ------ ------ ------ ------
Total from investment operations.............. 5.07 5.65 2.85 2.78 0.77
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)........ (0.05) (0.09) -- -- (0.20)
Distributions (from realized gains)........... (2.37) (3.06) (3.05) (0.78) (0.92)
------ ------ ------ ------ ------
Total distributions........................... (2.42) (3.15) (3.05) (0.78) (1.12)
------ ------ ------ ------ ------
Net Asset Value, End of Year....................... $26.48 $23.83 $21.33 $21.53 $19.53
====== ====== ====== ====== ======
Total Return....................................... 22.24% 29.74% 14.24% 14.79% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)................. $94.9 $27.5 $16.5 $20.5 $13.1
Ratio of expenses to average net assets:
Before expense reimbursement.................. 0.94% 1.30% 1.21% 1.49% 1.65%
After expense reimbursement................... 0.94% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement.................. (0.23)% (0.20)% 0.03% (0.82)% (0.71)%
After expense reimbursement................... (0.23)% 0.10% 0.24% (0.34)% (0.06)%
Portfolio turnover rate............................ 85% 88% 119% 81% 44%
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
See Notes to Financial Statements
52
<PAGE> 66
Financial Highlights
- --------------------------------------------------------------------------------
INTERNATIONAL FUND
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............. $ 24.17 $20.44 $17.70 $16.79 $14.63
-------- ------ ------ ------ ------
Income from Investment Operations:
Net investment income..................... 0.59 0.59(1) 0.56(1) 0.28 0.26
Net realized and unrealized gain on
investments............................. 1.23 3.78 2.51 1.52 2.19
-------- ------ ------ ------ ------
Total from investment operations.......... 1.82 4.37 3.07 1.80 2.45
-------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income).... (0.66) (0.48) (0.14) (0.44) (0.14)
Distributions (from realized gains)....... -- (0.16) (0.19) (0.45) (0.15)
-------- ------ ------ ------ ------
Total distributions....................... (0.66) (0.64) (0.33) (0.89) (0.29)
-------- ------ ------ ------ ------
Net Asset Value, End of Year................... $ 25.33 $24.17 $20.44 $17.70 $16.79
======== ====== ====== ====== ======
Total Return................................... 7.77% 21.59% 18.61% 11.08% 16.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)............. $1,476.8 $888.5 $331.0 $51.5 $26.0
Ratio of expenses to average net assets:
Before expense reimbursement.............. 0.89% 1.07% 1.11% 1.39% 1.61%
After expense reimbursement............... 0.89% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement.............. 2.32% 2.59% 2.67% 2.45% 2.01%
After expense reimbursement............... 2.32% 2.66% 2.78% 2.83% 2.62%
Portfolio turnover rate........................ 20% 18% 12% 24% 23%
</TABLE>
(1) Net investment income per share represents net investment income divided by
the average shares outstanding throughout the year.
See Notes to Financial Statements
53
<PAGE> 67
Financial Highlights
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
Year Ended January 2, 1997*
June 30, through
1998 June 30, 1997
------------ ----------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $11.09 $10.00
------ ------
Income from Investment Operations:
Net investment income.................................. 0.28 0.14
Net realized and unrealized gain on investments........ 0.51 1.09
------ ------
Total from investment operations....................... 0.79 1.23
------ ------
Less Distributions:
Dividends (from net investment income)................. (0.32) (0.14)
Distributions (from realized gains).................... (0.18) --
------ ------
Total distributions.................................... (0.50) (0.14)
------ ------
Net Asset Value, End of Period.............................. $11.38 $11.09
====== ======
Total Return................................................ 7.61% 12.32%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)........................ $7.3 $3.7
Ratio of expenses to average net assets:
Before expense reimbursement........................... 2.88% 4.43%+
After expense reimbursement............................ 1.00% 1.00%+
Ratio of net investment income to average net assets:
Before expense reimbursement........................... 0.00% 0.07%+
After expense reimbursement............................ 1.88% 3.50%+
Portfolio turnover rate..................................... 54% 18%++
</TABLE>
* Commencement of operations.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
54
<PAGE> 68
Financial Highlights
- --------------------------------------------------------------------------------
BALANCED FUND
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $19.38 $ 18.27 $ 16.74 $15.71 $16.69
------ ------- ------- ------ ------
Income from Investment Operations:
Net investment income...................... 0.89 0.90(1) 0.94 0.89 0.89
Net realized and unrealized gain (loss) on
investments.............................. 1.58 1.86 1.53 1.53 (0.27)
------ ------- ------- ------ ------
Total from investment operations........... 2.47 2.76 2.47 2.42 0.62
------ ------- ------- ------ ------
Less Distributions:
Dividends (from net investment income)..... (0.90) (0.99) (0.92) (0.80) (0.94)
Distributions (from realized gains)........ (1.11) (0.66) (0.02) (0.57) (0.66)
Return of capital.......................... -- -- -- (0.02) --
------ ------- ------- ------ ------
Total distributions........................ (2.01) (1.65) (0.94) (1.39) (1.60)
------ ------- ------- ------ ------
Net Asset Value, End of Year.................... $19.84 $ 19.38 $ 18.27 $16.74 $15.71
====== ======= ======= ====== ======
Total Return.................................... 13.29% 15.75% 15.04% 16.40% 3.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).............. $104.6 $90.2 $70.6 $32.1 $36.0
Ratio of expenses to average net assets:
Before expense reimbursement............... 0.93% 0.98% 1.06% 1.19% 1.20%
After expense reimbursement................ 0.93% 0.98% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets:
Before expense reimbursement............... 4.49% 4.77% 5.20% 5.44% 5.04%
After expense reimbursement................ 4.49% 4.77% 5.26% 5.63% 5.24%
Portfolio turnover rate......................... 121% 117% 92% 51% 97%
</TABLE>
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
See Notes to Financial Statements
55
<PAGE> 69
Financial Highlights
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
<TABLE>
<CAPTION>
Year Ended June 30, December 6, 1994*
------------------------------ through
1998 1997 1996 June 30, 1995
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $13.04 $12.78 $12.94 $12.00
------ ------ ------ ------
Income from Investment Operations:
Net investment income.......................... 0.89 0.99 0.84(1) 0.46
Net realized and unrealized gain on
investments.................................. 0.50 0.30 0.06 0.94
------ ------ ------ ------
Total from investment operations............... 1.39 1.29 0.90 1.40
------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)......... (0.97) (0.92) (0.93) (0.46)
Distributions (from realized gains)............ -- (0.11) (0.13) --
------ ------ ------ ------
Total distributions............................ (0.97) (1.03) (1.06) (0.46)
------ ------ ------ ------
Net Asset Value, End of Period...................... $13.46 $13.04 $12.78 $12.94
====== ====== ====== ======
Total Return........................................ 11.04% 10.48% 7.05% 11.88%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions)................ $45.2 $14.3 $43.4 $15.3
Ratio of expenses to average net assets:
Before expense reimbursement................... 1.02% 0.95% 0.98% 2.93%+
After expense reimbursement.................... 0.65% 0.65% 0.68% 0.80%+
Ratio of net investment income to average net
assets:
Before expense reimbursement................... 6.28% 6.78% 6.86% 4.92%+
After expense reimbursement.................... 6.65% 7.08% 7.16% 7.05%+
Portfolio turnover rate............................. 195% 173% 51% 68%++
</TABLE>
* Commencement of operations.
(1) Net investment income per share is calculated using ending balances prior to
consideration of adjustments for permanent book and tax differences.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements
56
<PAGE> 70
Financial Highlights
- --------------------------------------------------------------------------------
LOW DURATION FUND
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.................... $10.23 $10.12 $10.15 $ 9.93 $10.00
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income............................ 0.66 0.66 0.68 0.75 0.77
Net realized and unrealized gain on
investments.................................... 0.05 0.10 0.06 0.23 0.11
------ ------ ------ ------ ------
Total from investment operations................. 0.71 0.76 0.74 0.98 0.88
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)........... (0.68) (0.64) (0.72) (0.75) (0.77)
Distributions (from realized gains).............. (0.06) (0.01) (0.05) (0.01) (0.18)
------ ------ ------ ------ ------
Total distributions.............................. (0.74) (0.65) (0.77) (0.76) (0.95)
------ ------ ------ ------ ------
Net Asset Value, End of Year.......................... $10.20 $10.23 $10.12 $10.15 $ 9.93
====== ====== ====== ====== ======
Total Return.......................................... 7.19% 7.79% 7.47% 10.23% 9.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions).................... $253.2 $171.2 $189.2 $123.3 $36.5
Ratio of expenses to average net assets:
Before expense reimbursement..................... 0.65% 0.66% 0.60% 0.75% 1.10%
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..................... 6.39% 6.26% 7.07% 7.43% 6.82%
After expense reimbursement...................... 6.46% 6.34% 7.09% 7.61% 7.34%
Portfolio turnover rate............................... 119% 202% 50% 71% 254%
</TABLE>
See Notes to Financial Statements
57
<PAGE> 71
Financial Highlights
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT FUND
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year..................... $10.15 $10.17 $10.12 $10.21 $10.00
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income............................. 0.63 0.58 0.66 0.66 0.53
Net realized and unrealized gain (loss) on
investments..................................... 0.00 (0.01) 0.05 (0.09) 0.21
------ ------ ------ ------ ------
Total from investment operations.................. 0.63 0.57 0.71 0.57 0.74
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income)............ (0.65) (0.59) (0.66) (0.66) (0.53)
Return of capital................................. -- -- (0.00) -- --
------ ------ ------ ------ ------
Total distributions............................... (0.65) (0.59) (0.66) (0.66) (0.53)
------ ------ ------ ------ ------
Net Asset Value, End of Year........................... $10.13 $10.15 $10.17 $10.12 $10.21
====== ====== ====== ====== ======
Total Return........................................... 6.37% 5.77% 7.23% 5.78% 7.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions)..................... $28.0 $21.7 $18.7 $19.8 $10.5
Ratio of expenses to average net assets:
Before expense reimbursement...................... 0.92% 0.96% 0.88% 1.26% 2.06%
After expense reimbursement....................... 0.48% 0.48% 0.48% 0.48% 0.48%
Ratio of net investment income to average net assets:
Before expense reimbursement...................... 5.92% 5.34% 6.15% 5.74% 4.16%
After expense reimbursement....................... 6.36% 5.82% 6.55% 6.52% 5.74%
Portfolio turnover rate................................ 121% 154% 60% 81% 135%
</TABLE>
See Notes to Financial Statements
58
<PAGE> 72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Hotchkis and Wiley Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Equity Income Fund, the Mid-Cap
Fund, the Small Cap Fund, the International Fund, the Global Equity Fund, the
Balanced Fund, the Total Return Bond Fund, the Low Duration Fund and the
Short-Term Investment Fund (nine of the ten portfolios of Hotchkis and Wiley
Funds, the "Funds") at June 30, 1998, the results of each of their operations,
the changes in each of their net assets and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, WI
August 12, 1998
59
